Yahoo Finance CNA Financial Corp (CNA) (Q1 2024) Earnings Call Transcript Highlights: Record Core Income and ...
Core Income: Increased by $30 million to $355 million, highest first quarter core income on record.
Net Investment Income: $609 million pretax, up $84 million year-over-year.
All-in Combined Ratio: 94.6%, with pretax catastrophe losses of $88 million.
Pretax P&C Underlying Underwriting Gain: Over $200 million, with a P&C underlying combined ratio of 91%.
Underlying Loss Ratio: 60.5%, expense ratio at 30.1%.
Gross Written Premium Ex Captives: 8% growth, net written premium up 6%.
Renewal Premium Change: Overall was 6%, rate change up 0.5 point to 4%, exposure also up 0.5 point.
New Business: Up 5% to $529 million.
P&C Retention: High at 85%.
Commercial Underlying Combined Ratio: Record low at 90.8%, with an underlying underwriting gain of $111 million.
Specialty All-in Combined Ratio: 90.7%, with underlying combined ratio at 91.3%.
International All-in Combined Ratio: 93.3%, underlying combined ratio at 91.3%.
Effective Tax Rate: On core income for the first quarter was 20.9%.
Quarterly Dividend: Announced at $0.44 per share, payable on June 6, 2024.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
CNA Financial Corp reported a core income increase of $30 million in Q1 2024, reaching $355 million, marking the highest first quarter core income on record.
Net investment income rose by $84 million year-over-year to $609 million, with significant contributions from both the alternatives portfolio and the fixed income portfolio.
The company achieved a robust top line growth with an 8% increase in gross written premium excluding captives and a 6% growth in net written premium.
CNA Financial Corp maintained strong retention across all segments, with P&C retention at 85%, consistent with the previous quarter.
The P&C underlying combined ratio improved to 91%, marking the 13th consecutive quarter it has been below 92%, demonstrating effective cost management and underwriting discipline.
Negative Points
The all-in combined ratio was adversely affected by pretax catastrophe losses of $88 million, which increased from $52 million in the same quarter last year.
The underlying loss ratio slightly increased by more than 0.5 point compared to the most recent four-quarter average, mainly due to a mix shift within the Commercial segment.
Gross written premium for the Specialty segment saw a decline of 1% this quarter, indicating challenges in certain lines of business.
International operations experienced a decrease in gross written premiums by 6% and net written premiums by 4%, partly due to strategic decisions to reduce exposure in certain areas.
The company anticipates additional office consolidation charges and expects an expense ratio closer to 30.7%, indicating potential increases in operational costs.
Q & A Highlights
Q: If I can go back in a time machine 20 years ago, 2004, there might have been some conservatism on the margins, but you probably should have just written every single piece of business that was out there. It was that good of a market. And things are more mixed today. Are they more mixed or less mixed than they were, let's say, in 2021? How good of a market is it out there? A: Dino Ennio Robusto - CNA Financial Corporation - Chairman & CEO: Josh, it's Dino. We agree with you that the market is favorable, and we continue to take advantage of it. But you also highlighted that it's a nuanced, almost a mini-cycle approach. And that is indeed the issue and very, very different than prior cycles, without a doubt. And so we navigate each one accordingly.
Q: And is it -- do you have the ability to capture as much business as you want where you want it? Or if your appetite increased, would that affect price? A: Dino Ennio Robusto - CNA Financial Corporation - Chairman & CEO: So what I would say is, Josh, over the years, in particular the last 6, 7 years, we've talked extensively about our migration from a generalist commercial underwriter to a specialist underwriter. And we focus on those specialties and we penetrate them quite successfully.
Q: And in terms of, Scott, you mentioned a warning -- or not a warning, as [that evolved more] completely, but just a guidance that we should expect that as usual, in 2Q, we're going to see the legacy mass torts review. Is that asbestos and environmental? Or are there other mass torts that get reviewed in 2Q? A: Scott Robert Lindquist - CNA Financial Corporation - Executive VP & CFO: So yes, thanks, Josh. It's Scott here. So if you take a look at historically, it's been kind of general mass tort. A couple of years ago, archdiocese cases, abuse cases over the past few years. I hate to predict what's going to happen this quarter. The team is still doing the work on that. But I would just kind of take a look at the history over the past few years and what we've done in the second quarter.
Q: This is [Jane] on for Meyer. I just had a question on reserves. Do you see any changes in patterns within reserves for recent years for casualty lines? Can you please share some like view on that, please? A: Dino Ennio Robusto - CNA Financial Corporation - Chairman & CEO: It's Dino. We've been highly transparent over the last several years, and we have outlined in considerable detail all the actions we have done to strengthen our reserves, in particular, in the block of 2015 to 2019. And the biggest trend that we commented on and is still significant, albeit maybe more expected than a few years back, was social inflation, which really put severity pressure on our loss cost trends and in quite a few casualty classes actually doubling them over the last 5 years.
Q: Got it. My second question is on the International operations, you mentioned expecting contributing to overall profitability. Just curious your strategy there, can you please add more color on that? A: Dino Ennio Robusto - CNA Financial Corporation - Chairman & CEO: So on the International, we also, over the years, have described all of the underwriting actions that we have taken, in particular, relative to our syndicate to reduce the catastrophe exposure. It has been profitable for quite a few quarters now. As we've indicated, we had some pressure on growth in the first quarter for the reasons that I also indicated in my prepared remarks, being that of being prudent on management liability and a decision to remove from political violence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
