CNA Financial Corporation (NYSE:CNA) Q4 2018 Earnings Conference Call Transcript
Feb 11, 2019 • 10:00 am ET
Good morning and welcome to CNA's discussion of its 2018 Fourth Quarter Financial Results. CNA's fourth 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 line for questions. Today's call may include forward-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 the earnings release and CNA's most recent 10-K on file with the SEC. In addition, the forward-looking statements speak only as of today, Monday, February 11th, 2019. CNA expressly disclaims any obligation to update or revise any forward-looking statements made during this call. Regarding 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.
Dino E. Robusto
Thank you, Greg. Good morning, everyone. As referenced in our press release and earnings slide this morning, our fourth quarter core loss was driven principally by higher catastrophe losses and lower limited partnership investment performance. We also had some pressure on our underlying results. I'll provide some context on each of these drivers in a moment. But first, I want to highlight that for the full year, we continued to make progress towards our goal of top quartile performance. P&C underwriting profit grew 22% to $226 million and overall combined ratio of 96.7% and our underlying underwriting profit grew to $315 million, a 12% increase over 2017 as the underlying combined ratio improved slightly to 95.4%. Both Specialty and Commercial improved their underlying combined ratios by approximately 1 point in 2018. As well, we achieved 4% net written premium growth and are continuing to achieve meaningful rate across our P&C portfolio.
Now back to the fourth quarter where catastrophe losses of $146 million added 8.6 points to the combined ratio. This compares with $38 million in the prior-year fourth quarter driving a $91 million after-tax expense or $0.33 per share. The losses included $88 million from Hurricane Michael and $47 million from the California wildfires. Hurricane Michael's impact was quite unique In that we only had a relatively small number of losses from the event. Indeed, 27 losses generated over 90% of the total. So even when effectively managing exposures in higher cat-prone areas as we do, what was essentially a Cat 5 hurricane will cause significant damage. For the full year, the impact was more muted. Catastrophe losses added 3.7 points to the combined ratio, which is only slightly higher than our five-year average.
The quarter was also materially affected by the investment performance of our limited partnership