Good morning, and welcome to CNA's Discussion of its 2019 Third Quarter Financial Results. CNA's third quarter earnings release, presentation and financial supplement were released this morning and are available via its Website, www.cna.com. Speaking today will be Dino Robusto, CNA's Chairman and Chief Executive Officer; and James Anderson, CNA's Chief Financial Officer. Following their prepared remarks, we will open the lines for questions. Today's call may include forwarding-looking statements and references to non-GAAP financial measures. Any forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made during the call. Information concerning those risks is contained in its earnings release and in CNA's most recent 10-K on file with the SEC. In addition, the forward-looking statements speak only as of today Monday, October 28, 2019. CNA expressively disclaims any obligation to update or revise any forward-looking statements made during this call. Regarding the non-GAAP measures, reconciliations to the most comparable GAAP measures and other information have been provided in the financial supplement. This call is being recorded and webcast. During the next week, the call may be accessed on CNA's Website. With that, I will turn the call over to CNA's Chairman and CEO, Dino Robusto. Please go ahead, sir.

Thank you, Cody. Good morning, everyone. I'm pleased to share our third quarter results with you today, which reflect continued good underwriting performance, accelerated price increases and strong growth across our U.S. operation. Core income for the third quarter was $102 million or $0.37 per share, inclusive of $170 million or $0.63 per share after tax charge related to the unlocking of our long-term care active life reserves, driven by our decision to reset our assumptions on the discount rate. James will provide further detail on the unlocking as well as on the favorable $44 million after-tax outcome of our annual long-term care claims reserves review, The fourth year in a row of a favorable claim outcome. For the quarter, the P&C Underlying Combined Ratio was 94.6%, a slight improvement to last year’s third quarter result. Strong underlying performance in commercial and specialty offset a normal three point deterioration in international. In International, we remain confident in our belief that we are doing all the right things and have already seen some improvement in our results, including a strong underlying loss ratio of 61.4% through the first three quarters of this year which is in line with our overall company results to 61.1% through three quarters. In addition, our underwriting efforts have significantly reduced our international catastrophe exposure which allowed us to avoid catastrophe losses in Asia due to the recent events there. The higher underlying loss ratio this quarter is driven by lines of business. We began non-renewing late last year, validating our previous re-underwriting decisions. Obviously during this process the improvement won't be a quarter-over-quarter straight line. The P&C all in combined ratio of 97.6% included 1.8 points of catastrophes and 1.2 points of unfavorable prior period development principally related to a block of commercial legacy mass-stored accounts…

Thanks Dino and good morning everyone. Our property and casualty operations produce core income of $241 million in the third quarter. Pre-tax underwriting profit was $42 million and underlying underwriting profit was $95 million. Moving to each of our P&C business units. Specialty’s third quarter underlying combined ratio was 92.1% and its underlying loss ratio was 60.1% in the quarter, consistent with both the third quarter of 2018, as well as the first half of this year. Specialty’s overall combined ratio was 89.8% included 2.8 points of favorable prior period development. This favorable development was primarily an accident year’s 2017 and prior, driven by surety and management liability and partially offset by healthcare being adverse. With a significant rate, we're now achieving in healthcare along with considerable underwriting efforts. We are confident that we're getting this book back under control. Nonetheless, as Dino just highlighted, we will be cautious regarding the recognition of margin improvement until we see the benefits of rate manifest themselves in our actuarial analysis. Specialties gross written premium ex third-party captives grew a healthy 9% in the quarter. Our commercial segments underlying combined ratio was 93.8% in the quarter, and its underlying loss ratio was 61.5% which is a point higher than the third quarter of last year, but a slight improvement compared with the first half of this year. The third quarter overall combined ratio was commercial -- in commercial was 101.6% including three points of catastrophe losses and 4.8 points of adverse prior period development. As Dino mentioned, the majority of the prior period reserved charge in commercial, infact $35 million of the $40 million came from a block of legacy accounts from accident years 2009 and prior, and are unrelated to the New York revival statute legislation. This adverse change was primarily driven…

Thanks James. Before we move to the question-and-answer portion of the call, let me leave you with some more arching thoughts on the quarter. Our actions on long-term care reflect our continued prudent management of this portfolio. Underlying P&L loss ratio was 61.7% for the quarter and 61.1% year to-date, while expense ratio improved to 32.5%. U.S net written premium grew 9%. We achieved six points of rate in the quarter, two points higher than the second quarter. And based on the current momentum we believe rate increases will persist above our long-run loss cost trends throughout 2020. And with that, we'd be glad to take your questions.

Thank you. [Operator Instructions]. And we'll take our first question from Jay Cohen with Bank of America.

Yes. Thank you. A couple of questions. I guess first on the international side. When would you expect the earned premium to kind of fully reflect the actions you took to get out of certain lines of business, when will that stuff be kind of off your books?

Well, so we started the non-renewal, Jay, it's Dino, sort on late 2018, and so you non-renew them as their renewal dates come out, that plays out the course of the year, but as we indicate in some of the prepared remarks, it's a dynamic process and there's some additional business that were non-renewing and which is normal for the process when we see something and we don't think we're going to get the right terms and conditions. We’re going to non-renew it. So we think the non-renewal of account is going to take through sort of the end of the second quarter of next year and that obviously has to earn it itself which is probably sometime through 2021. And then just keep in mind; we've mentioned that before there are certain lines we exited like; political risk and large project construction engineering risks that have a multiyear tail. So some of those, Jay, effectively can stay on the portfolio. So, I think you're looking at 2021.

Yes. That makes sense. Okay. And the second question, I think I know the answer to this, but just to double-check. The accident year loss ratio, was there any material, current year catch-up that you reassess the first half results in any segment that might have influenced the current quarter reported accident year loss ratio?

No. Jay, when you look at accident year commercial, underlying loss ratio and you're comparing it Q3 to Q3, keep in mind that in Q4 of last year we increased the international – we increase the umbrella and we also increase the property and that's obviously played itself up because it was in the Q4. So you're seeing it elevated against Q3 which was a quarter before we made those changes.

That makes sense.

We made this in specialty, Jay just around aging services as you know, it's reflecting there earlier.

Got it. Got it. Now that makes sense. Great. Thanks for pointing that out.

Thank you. We'll now take our next question from Josh Shanker with Deutsche Bank.

Good morning everybody.

Good morning.

I want to go back some of the Dino's prepared remarks. First of all, on the 2.5% loss cost -- long-term loss cost for an estimation. If I look over the past decade, obviously it's been a decade of lower than long-term loss cost trend. How does that 2.5% stack up against history, I guess?

Pretty consistently, keep in mind and I think we went through it or James did on the last calls, keeping in mind, because overall it can see below that 2.5, but we have a large portfolio, the professional E&O Affinity portfolio that had run probably over the full decade, a long run loss cost trend that were slightly under 1%, it might be little slightly higher than history because of work comp which had been particularly lower in the recent years. But you put those two things together and you got some pretty consistent long run loss cost trends.

Is the last decade a good decade to use as the base of assumption?

I guess, Josh, I would say, the last decade is the best decade that we have to use for assumptions. Going back further than that the market was quite a bit different than it is today.

And so was our book.

Yes.

That's more of the part of the issue.

So I think we're going to consistently look at this every quarter to see if there's anything that's changing and as reflecting in this remarks we're going to tweak specific line items and specific lines of business as we see them change, but certainly the trend has been holding for quite some time.

And that was the other part of my question. So you talk about that the fact that the negative pricing over the past few years had not resulted in deterioration, but it’s a combination of the exposure action like rate and I guess the remanicuring or I don't know what you want to call, the changing of the mix in your portfolio. And is it going forward those things will still be an issue, so you won't have a dollar-for-dollar impact. Are you saying that you expect the GAAP between rate and loss cost trend will be reflected by even higher loss ratio – even lower loss ratios because then you'll layer on top of that business mix and exposure? I was just trying to understand the dollar-for-dollar. You can get more than your bang for the buck for these rate increases?

So, the comments on go forward was a comment on symmetry that, it hadn't necessarily been and loss cost trends are going to be what they're going to be actual. And so you might not end up with exactly the dollar-for-dollar, but the point being that often on these calls there is a lot of conversation of the -- what I consider to be the oversimplified correlation of rate and long run loss cost trends and I was just simply suggesting that there are so many vectors that influences including judicial regulatory and you know you play all of that out. And so we're going to be cautious in how we move the margin. It is in that vein that I was referring to it.

And look long-term you're always improving the portfolio and you're always hopefully getting exposure increases that act like rate. Over the long run should you always expect to have better margin than the rate over loss cost trend would indicate?

I'm not sure if I'm following that exactly, Josh.

Josh, I don't think that we would expect that per se. I think and just going back to the first part of the question, I think part of what we were trying to get across in that messaging and on the dollar-for-dollar margin is that -- with all the moving pieces we're actually going to be cautious just as Dino said. And so we're not going to take margin improvement as soon as we see sustained rate above, our earned rate above our loss cost trend. So it's actually likely to play out slower in terms of margin improvement rather than faster.

Okay, okay. That answers my question. Thank you very much.

Sure.

Thank you. Now we'll hear now from Gary Ransom with Dowling & Partners.

Yes. Good morning. I wanted to dig in on some of the loss cost trends also. You mentioned in healthcare the number is something like 11%. And I -- and we've heard a lot of anecdotes about how aggressive the plaintiff bar's been. I wonder if you have any thoughts specifically about how some of the external effects like litigation funding and medical financing companies may have been at least a partial driver of those trends? And that's all part of a question of you think its 11 today; but maybe it's 15, and that's a sort of what I'm kind of driving at what gives us -- we see all these things, but what gives us comfort that we're kind of in the right place on these loss trends?

Gary, it's Dino and then I'll start and James may want to jump in also. So, we're not really seeing in the portfolio the effects of legal funding. But let -- you do see its impact from a few different areas. First of all, the plaintiff bar has really targeted this industry. You can see it in the sort of ad campaigns and the marketing. And so inviting, if you will, more claimants to come forward and that is happening. Keep in mind, Gary, we been there for over two decades, so we can see the difference. Also there have been some larger jury awards, and although a lot of the cases never make it to court. What it does is embolden the plaintiff bar based on what they seen in some of these jury awards not to settle upfront for what was potentially a lower amount for a similar type case in the past. And intriguingly it also affects the adjusters and the defense attorneys who are also going to incorporate if you will the higher verdicts into their settlement calculus. And so, as I indicated we're seeing a little bit of less frequency, but we're going to wait. Some of that is a function of obviously all that we underwriting that we have done. And then, we'll watch to see how the long-run lost cost trend and whether that's sustain itself, so slight improvement we're seeing on frequency. But keep in mind; you've got some very significant rate increases which eventually will be also sort of factored in. And so we feel good about the actions we are taking. How we're leading the market. It's combination of underwriting actions, the deductibles, wording changes, tightening wording and then also getting a lot of rate. And then you play this forward and quarter-for-quarter we take a look at this thing. And as I tried to suggest we've acted consistently and we will act up and down as this moves forward. But I'm not really sure what also I could sort of add to give even more clarity.

That's helpful. I realize it's mostly anecdotal. Another question on the legacy reserve charge, I'm not sure I understood James what you're saying about the -- it was a reinsurance recoverable that you had somehow taken down? Is that – did I say that right?

That's right, Gary. So, as part of the reserve review not only we're look at our open claim inventory, but we're also looking at the ceded recoverables that we had on older claims. And it turned out. We just overestimated those ceded recoverables on some of the older claims. That's what came through.

Was there anything about these – was there anything consistent about these claims? Were they from some class of business that was similar? Or were they just scattered randomly?

No. They were – I mean, these were all -- the review was really old product liability cases with multi-claimants involved, things like public nuisance and food additive, which is really what's in that bucket of claims. The reserve review focused around as I said both the claim reserves as well as the recoverables.

Okay. And is there any – I can't remember if you do an A&E charges well at this point that might affect the accounting with…?

No. We will do at our annual asbestos and environmental review next quarter.

Next quarter, okay. Thanks.

We look at fourth [ph] quarter from the first quarter.

All right. Thank you very much.

Thanks.

[Operator Instructions] We'll hear now from Meyer Shields with KBW.

Great. Thank you very much. Good morning and thank you for all the detail you've provided loss trends. That was very helpful. Can you walk us through what you're seeing now in terms of rates and loss trends for workers' compensation?

So, I would say, it's been pretty steady. The rates in worker's comp continues to be kind of mid single digit negative. It was slightly better in the third quarter but not materially. When we look at trends, severity trends continue to be benign and stable as we mentioned last quarter, and frequency flattened comparative to what it was during the last several years which again the same as it was last quarter, so no real change quarter over quarter.

Okay. Perfect. And I was hoping you could sort of outline the exposure that the Affinity book has to these worsening trends. It sounds like you're not seeing anything deteriorate. But is there exposure if the trial bar settles on sort of this E&O pocket?

Our Affinity book really is not -- I mean there's kinds of risks that are inside there are much smaller. Those are -- they tend to be in a pretty homogeneous account, but many, many small accounts and don't fall into the types of coverages where we've seen the plaintiff bar attack [ph].

And also our risk control, I mean, it's by six decades as we've indicated before, and all that makes a difference. Also it doesn't have because of the professionally at the medical costs exposures that you would see on comps, some of the auto-related umbrella. So that makes a difference given the medical undertones and some of the others, Meyer.

Okay, perfect. Thank you so much.

Thank you. And that does conclude today's question-and-answer session. I'd like to turn the conference back over to Mr. Robusto for any additional or closing remarks.

Great. Thank you very much for attending, and thanks for your questions.

Thank you. And that does conclude today's conference. Thank you all for your participation. You may now disconnect.