CNA Financial Corporation (NYSE:CNA) Q2 2020 Earnings Conference Call - Final Transcript

Aug 03, 2020 • 09:00 am ET


CNA Financial Corporation (NYSE:CNA) Q2 2020 Earnings Conference Call - Final Transcript


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Good morning and welcome to CNA's discussion of its 2020 Second Quarter Financial Results. CNA's second quarter earnings release, presentation and financial supplement were released this morning and are available via its website, Speaking today will be Dino Robusto, CNA's Chairman and Chief Executive Officer; and Al Miralles, 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 the 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 in CNA's most recent SEC filings.

In addition, the forward-looking statements speak only as of today, Monday, August 3, 2020. 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 its financial supplements.

This call is being recorded and webcast. During the next weeks, the call may be accessed on CNA's website. If you are reading a transcript of this call, please note that the transcript may not be reviewed for accuracy, thus it may contain transcription errors that could materially alter the intent or meaning of the statements.

With that, I will turn the call over to CNA's Chairman and CEO, Dino Robusto.

Dino E. Robusto

Thank you, Deanna. Good morning. It is very good to be with you today, and I hope you and your families are coping well in these unprecedented times. The second quarter has been a challenging one as the pandemic continues to impact the lives of all of us. For CNA, those challenges have been multifaceted and have impacted our underwriting results considerably, as we disclosed in our pre-announcement on July 15.

Before Al and I provide more detail on the impacts of COVID-19 and other catastrophes in the quarter, I wanted to start by commenting on our underlying business, which performed extremely well in the quarter. Starting with pricing, rate increases continued to accelerate as we achieved plus 11% in P&C overall, up 3 points from the first quarter. And the 11% is inclusive of workers' comp, which had slightly negative rate. Importantly, increases were broad-based as each business unit achieved higher rate.

In light of our written rate increases over the last four quarters, our earned rate increases are now 7%. They are clearly above our long run loss cost trend of around 4%. But as I've said before, we need to sustain this gap over several quarters before we would favorably adjust our current accident year selections because we experienced almost four years of rate changes below long run loss cost trends prior to this hardening market. And as I have highlighted on prior calls, we experienced rising severity trends during that period in several product lines like aging services, and primary and excess auto liability.

In terms of growth, gross written