Good day, everyone, and welcome to the CNA Financial Corporation Quarterly Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. James Anderson. Please go ahead, sir.

Thank you, Evan. Good morning and welcome to CNA's discussion of our 2017 fourth quarter and full year financial results. By now, hopefully all of you have seen our earnings release, financial supplement and presentation slides. If not, you may access these documents on our website, www.cna.com. With us on this morning's call are Dino Robusto, our Chairman and Chief Executive Officer; and Craig Mense, our Chief Financial Officer. Following Dino and Craig's remarks about our quarterly results, we will open it up for your questions. Before turning it over to Dino, I would like to advise everyone that during this call there may be forward-looking statements made 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 in CNA's most recent 10-Q and 10-K on file with the SEC. In addition, the forward-looking statements speak only as of today, Monday, February 12, 2018. 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 also been provided in the financial supplement. This call is being recorded and webcast. During the 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.

Thank you, James. Good morning, everyone. I’m pleased to share our fourth quarter results with you today, which continue to reflect our ongoing underwriting improvements. Our fourth quarter P&C underlying combined ratio was 2.5 points better than a year ago, driven by our improvement in our underlying accident year loss ratio. Our after tax catastrophe losses of $24 million in the quarter that included significant industry losses due to the California wild fires is a good outcome. We had strong favorable prior period loss development in the quarter and the full year’s impact was essentially the same as 2016. We are also encouraged by the trajectory of the price increases we are able to secure in the fourth quarter. After one year at CNA, I like the progress that we have made across our value chain and the execution by our teams across the globe which has built up a momentum that will continue to fuel improvement. For the full year, CNA produced #919 million of core income, the most since 2009. A year ago, I told you that our goal was to grow underwriting profits. And in 2017, our underlying underwriting profit more than doubled the $282 million and we produced the full-year underlying combined ratio of 95.5% the lowest for CNA in the past 10 years. These results reflect the actions CNA has taken over the past several years and strengthened by our heightened underwriting focus in 2017. Attracting new talent to the organization and developing existing talent has been a major priority of mine and I have commented on our success in past calls. These efforts are ongoing as we continue to attract the great new underwriting talent that CNA over the past three months, especially in our property and management liability teams including Mike Nigella [ph]…

Thanks, Dino. Good morning everyone. In the fourth quarter, we produced net income of $223 million, which included an $83 million charge related to the passage of The Tax Cuts and Job Act of 2017, a charge that results from revaluing our net deferred tax assets as of the enactment date using the new 21% tax rate. This charge is reflected on the tax expense line increasing our effective tax rate from 25% to 46%. We are very optimistic about the long-term impact of corporate tax reform and believe it will be good for the economy, good for our policyholders and good for CNA. In recent years, our effective corporate tax rate has been running around 25%. We expect our effective tax will be somewhere in the mid-to-high teens in 2018. Our property and casualty operations produced core income of $263 million in the quarter, up 21% from the prior year quarters $17 million. The improvement was underwriting driven, with just over, just under a six point improvement in the combined ratio, including a calendar year loss ratio of 58.9 that compares to 65 in Q4 a year ago. Our improving underwriting discipline is also evident in our PNC underwriting loss ratio of 60.7, which is 2.7 points better than the fourth quarter 2016. For the year, the underlying loss ratio improved 1.8.points to 61. In addition, we benefited from $71 million of favorable prior period loss development in the fourth quarter. Each of our PNC operating segments contributed to this positive result. Our net pre tax catastrophe losses were $38 million, which included $44 million of pre tax losses from the October and December wildfires, offset by $6 million of favorable movement in our loss estimates from the prior quarter cat events, predominantly from the Q3 hurricanes. Our expense…

Thank Craig. Before we move to the question-and-answer portion of the call, let me leave you with some summary thoughts on the year's performance. Our 2017 core income of $919 million was 12% higher than 2016 despite the significant industry catastrophe losses. The full-year underlying combined ratio of 95.5% improved 2.4 points from 2016 and is the best in a decade. We had favorable prior price loss development of $308 million on a pretax basis, which was slightly higher than 2016. Our long-term care business has margin in the active life reserves consistent with the prior year. Our 2015 core return on equity is 7.5%. We increased our regular quarterly dividend during the year to $0.30 per share and we once again declared a special dividend of $2 per share returning 840 million in dividends to our shareholders. I am encouraged by the trajectory of our pricing achievement and anticipate increasingly effective rate retention dynamics throughout the year. With that, we will be glad to take your questions.

[Operator Instructions] Our first question comes from Josh Shanker from Deutsche Bank. Please go ahead.

Yes. Good morning, everybody. I was interested in your commentary about rate. You talk about how Lloyd was up on the back of property and Marine. Can you to talk a little bit what's going on longer tail lines and how you think that dovetails with the potential for higher interest rate environment, whether you think we’re actually going to see increased pricing over time for the industry and casualty?

So, as I indicated, Josh, property was the big issue in our Hardy portfolio and that’s what we had anticipated. First, I’ll just – I’ll get your casualty in a second and just get little bit more detail on the property. We had expected sort of broke itself up, right and what was cat exposed and had losses. What cat exposed and had losses. So, cat exposed losses about 20% up, cat exposed no losses about 10% flat for not cat exposed. In the casualty, we did start to see a little bit moment on casualty, although flat just slightly up, but there’s lot more talk about casualty in the London marketplace including from reinsurers. So we’re going to continue doing what we’re doing, push pretty hard on the rate retention trade-off and its clearly not only focused on property, right. We’re going do it pretty well on every line. The healthcare examples I gave you, right, was on the professional E&O. And even if you take a look broader, so you’d ask a Hardy, but just a little bit more detail D&O in the quarter for overall was down sort low single-digits, but they went to flat in January. So, look, good signs but as I say, it’s a rate retention trade-off and the underwriters make these decisions and I think we saw some good action on the part of the underwriters on how to trade-off. We support them. And so we think we’ll be able to effectively take advantage of the market going forward throughout 2018 and pretty well outlined.

And can you just add a layer on that on the interest rate outlook and what that mean for pricing?

I think that -- this is Craig, Josh, and I think it need to parse the difference between interest rates and inflation, right, so what we’re most focused is inflation. There is some correlation obviously, but we have and we seen some improvement in you say in exposures, but we haven't seen any pickup in underwriting loss cost inflation. So that’s the bigger, that’s really the bigger issue. And we are watching it carefully. We've actually stepped up the frequency of our reviews for inflation to make sure we’re not missing an inflection point.

And you mentioned the seasonally high expenses due to incentive compensation. Can you remind us what that seasonal pickup was in 4Q, 2016?

It was an added eight tense of a point to the expense ratio in the fourth quarter for P&C overall.

Fourth quarter of 2016 I believe, right, Josh, which was zero?

Yes. There’s where I’m trying to compare.

Yes, zero.

Okay. Zero in 2016. Sorry, misunderstood.

Okay. Thank you.

Our next question comes from Bob Glasspiegel for Janney. Please go ahead.

Good morning, Dino. I would curious how your results on your long-term care review are so much favorable than what GE said. Obviously you have more actuaries in primary, but maybe you could highlight just the difference between what they're saying and what you’re seeing?

Bob, I appreciate the question, but we don't really have any insight in the GE’s long-term-care book other than what we understand from their disclosure that is predominately a reinsurance book. Remember ours is the primary book. So we directly manage the claims and we directly manage the decisions to produce -- pursuit policy over the rate increases.

Yes. I’m aware of both of those, but just wondered if you could comment further, but sounds like no. Second question is, did you go with the outside more conservative, more liberal or more of favorable analysis of reserves and LTC? Or you stick with your own?

We stuck with our own.

Okay. And last question. What’s your average age of cover in your LTC book?

Well, that would be different by individual and group, so the average age of the individuals in the high 70s, like 78, 79 and the groups are in the mid-50s.

Okay. So weighted average overall would be in the 60s somewhere?

Probably, but I wouldn't – yes, I think that – I wouldn't be – don’t be distracted by that because those are two different books, two different policy benefit levels, a lot different durations, I guess much more important to look at the two separately then try to come with some composite numbers. I just caution you against that.

Appreciate all the cautions. One last question, do you think with the current pricing environment you're in a position to be able to achieve moderate premium growth in 2018? Would you be inclined to maybe start to grow a little bit faster with or rates not quite where they need to be?

Yes. So it’s a good question, Bob. As I said on prior calls and I think I also on the some of the period remarks clearly our engagement with the distribution network throughout the year has consistently improved, obviously fourth quarter was a little bit higher and in fact January was a good month for us in growth and new business production. So when you combine all our efforts with the fact that we’re getting some pricing and we’re getting So now we’re at a point exposure increases so that renewal premium changes in the couple of points. I think its all right pointing in the right direction for some growth in 2018.

Thank you for all your answers.

Thanks.

Our next question comes from Jeff Schmitt from William Blair. Please go ahead.

Hi. Good morning everyone.

Good morning.

Looking at the healthcare book retention was down quite a bit to 76. Was that all from and it sounds like was it four out of 11. Is it large accounts that needed quite a bit rate that you lost? Was that’s the main driver there?

Those were large – all 11 of them were very large, right. So I use that example because they were all large. That’s a meaningful rate retention decision when you’re going after big rate increases and prepared to let go sort of seven figure accounts. That affect it, but they were smaller account of the same E&O exposures which we also had rate retention, but those were significant.

And is E&O, product for line with in there that's sort of the most competitive and is the most rate? Or is there other lines as well?

Yes. And you know there’s a -- its combined D&O sort of GL on aging services, hospitals, so it’s that combination of the primary, so yes, that’s mainly it.

Okay. And then looking at both the commercial and specialty obviously underlying loss ratios were down quite a bit for the year and it seems I mean, there wasn't a big change in rate of retention, so could you maybe speak to that? And is it related to that much better frequency severity that you’re seeing there?

So, that’s really underwriting driven, Jeff, underwriting driven improvements recall that we are. So it not just a rate driven. We are getting rate in areas like Dino was saying where we needed it recall what I said in my remarks that we’re getting very good rate in auto and excess liabilities. So we’re getting rates kind of consistent with the trends we’re saying. But I would say it's really more an underwriting risk retention, risk selection driven continuous improvement that you’re seeing across both specialty and commercial and international.

And renew and new business.

Okay. Thank you.

Thanks.

Next question comes from Jay Cohen from Bank of America/Merrill Lynch. Please go ahead.

Yes. Thanks. Just I guess the follow-up on that last question. In the fourth quarter was there any sort of current year catch-up in those loss ratios that may or made that look little bit better than you might have expect on its own?

No. There’s variability quarter-to-quarter like we talked to you before but no catch ups in the fourth quarter.

That's great. Thank Craig.

You’re welcome.

Next question comes from Gary Ransom from Dowling & Partners. Please go ahead.

Good morning. I wanted to ask a question on investment strategy with the tax law change whether you were planning or thinking about or analyzing how you might restructure the portfolio with the new tax rate?

Gary, it’s Craig. So we’re making relative value adjustments of course all the time. I would tell you that, the taxes [Indiscernible] big part of our portfolio because not only the tax equivalent yields have been attractive on a relative basis there, but also the duration and the credit quality of that portfolio. So as we’re removing – as we move forward given all those characteristics I would -- you shouldn't expect we’re going to make any abrupt changes in our portfolio particularly long-term care. Now as we move along the continuum we’re going continue to look at that relative value dynamic will also be factoring in as I said duration and credit quality, so that outcomes could be slightly different in our long-term care portfolio as the P&C portfolios as we move forward but nothing abrupt and I guess, if that’s the response to what you're asking.

Yes. I think that is -- that is I just -- I wanted to see if there’s going to be any changes this year for example, it sounds like it will gradual if any.

Yes.

I wanted to ask about another thing in the corporate and other and maybe you said something on your prepared remarks that there’s this $8 million shift in unallocated loss adjustment expenses. What is that?

That just the reduction in the expenses; we have about $200 million of P&C runoff reserves in the corporate and other related mainly to the old CNA Re and a few other little discontinued businesses and our expense are running at all for much less than we had originally anticipated. So that’s what that related to?

Though it’s just generally the run-off it’s getting smaller, so it’s getting less…

Yes.

Okay. And then one more on the example, Dino, that you gave about the healthcare though you lost some of these accounts, the ones you kept had 35% rate increase, the ones you lost, presumably you had something similar. Is it a reasonable conclusion that these ones you lost could not understand why they needed a big rate increase? Or did they find something else and they went somewhere presumably? But I’m just trying to understand what’s the difference -- what’s going on between the two groups?

Yes. I think in all of them the case is essentially the same. I mean obviously each one has its own nuances, management control and historical loss ratio, but all of them needed significant rate and some of them I think it was three of them, we’re able to find competitive quotes that were sort of close to expiring. One was actually lower. So, look that’s going to happen in a competitive marketplace. The more important aspect of it which I know you know Gary, is so how do we react to that. Our reaction is, look, its got go, we work closer with the brokers and they understand and sometimes clients going to make a decision if they can get relatively substantial. And I mean I think it had been close, it wouldn't have, but when you’re going in about 35 somewhere at expiring one as I said was even less than expiring, just happen. And so, it’s what we do about it in the face of that which is really critical. And so I used it because we watch these things and support the underwriters. This is what we want them to learn.

Right. That’s a great example. One last thing on the engagement with the agents, do you have any metrics that measure where you stand in the agents or whether this engagement kind of move you up and how you’re allocated inside the agencies?

Yes. Sure. I mean, we don’t – you can’t see the insight, you just ask them, right, and they are more than happy to tell you whether you’re in a top three or you’re in the top five, you’re in the Top 10. I mean, you’re going to be in clearly in the sort of Top 10, but there’s some brokers for which a lot of the type of business we want and those you want to go from a Top 10 to sort of Top five. Now look to make those kinds of movements it's going to take some time. So, what you first try to understand is, are you getting access to some of the better business that’s in their offices. And that’s the first sign and that the first step that you need. We can tell that or host them different ways. I think I may have referenced it even in the past. Its three ways essentially, right, you have risk control that’s being used more prospectively. We’ve engaged in a significant upgrade to our auditing process of new business, because we knew we were going to be engaging. We knew we’re going to see more, so you want to try to track the call. So the audit process picks it up and then the other part is when you know you hire talent from the industry or within the industry in different companies for many years they’ve seen business, they know. And as I’ve said and I believe I may have actually said to you Gary, this it is an efficient marketplace, the P&C marketplace. In that people know which ones are the best accounts and the best accounts are the ones that get the best terms and conditions. So, we see the flow in general relatively the same which is good. We weren’t out there to just get flow, in other words submission flow [ph]. It’s more about the quality and I think if we look across those three we’re happier, we’re going to continue to push on it and clearly we do want to move up an importance in some of these key middle market type brokers and happy to continue talk about it overtime and tell you whether we are moving.

Well, thank you for all those answers.

Okay. Thank you.

[Operator Instructions] Our next question comes from Christopher Campbell from KBW. Please go ahead.

Yes. Hi. Good morning.

Good morning.

I guess, my first question is just going back to the active life reserve review. I think Craig, thanks for all the extra details, makes a lot of sense, the change in morbidity. But I was just looking at the premium rate actions; that was about 350 million. It was boosting the margin last year and then that’s down by about 200 million. Can we get some color on what's happening with the rates that you expect to achieve in that book?

Well, the additional that you see this year end is simply we are getting additional rate on top of what we assumed last year. So there really no new programs we’ve – well launched it one new program in 2017 but those are – and those are playing out more positively than we thought. So I don’t look at it as relative comparison, it really is just an additional boost from what our expectations were. Maybe if I go on just to remind you that we only – we have active programs underway with pretty much every piece of our long-term care book. Some of them like the group started in 2015. Some of them like most recent individual started in 2017. They usually go through somewhere between two or three separate rounds as we’re moving forward through them and then we’re launching new ones as we kind of come to the end. So we probably launching a new group one sometime in the next couple of years and we continue working those others. So that’s all just more positive.

Okay. So it would be better to look at that as an incremental or 157 million beyond which you thought you’re thought you’re going to get last year?

That’s exactly you’re right. And I think maybe its also worth pointing out that stay regulators are more and more receptive and do recognize indeed for rate increases in long-term care and many of the states that have been recalcitrant and reluctant to get in the path have given us rate increases over the past year and up significant amount. So, think all that momentum on the rate side is pretty large positive.

And then, Craig, I think Craig, this is another one for you I think. I think you’d mentioned in your specialty script about CNA release in professional liability reserves, and it sounded like some of those included more recent years like accident year of 2016. Can we just get some extra color on why CNA feels comfortable releasing such a -- those such a recent accident year so early in the development cycle?

Really just because those are – we’re seeing much lower frequency and we’re seeing much lower severity which is driven by legal costs and legal expenses, so it’s a continuation of the trends before – maybe also remind you that we’re doing reserve reviews. We’re comparing the actuals against to our longer term assumptions all the time and we don’t always change our long-term assumptions which maybe more conservative. This is just a comparison to what actually is coming through against longer-term, which is a continuation of that favorable trend we been matching about professional for some time now.

Okay, great. And then just kind of backing up on the high level question and I think there was a slide in the presentation that shows how the core loss ratios I mean, it improves significantly year-over-year across all segments. How much runway do you think for where you’re at now? How low can those ratios go in terms of life? I know you can’t specifically give a target, but like have you reach to that that kind of lower bound that they can go? Or do you see more opportunity?

Look, it’s an important question, but also sort of hard to be able to know exactly where that can go. I think I can only reiterate what we've been saying during the course of the year. Just take it back. We set a target. We said you want to be against our competitor’s top quartile. That implied about the combined ratio of couple of three points loss ratio, couple three points expense ratio. Now the underlying loss ratio of 61 is relatively strong, but keep in mind the target we were using that’s a multiyear average. So you got to sustain that strong result. So I think what you can’t count on is that we’re going to remain really vigilant and building that sort of enduring culture and we think that we'll continue to positively impact the performance. An expense ratio, down about a point in the year, its good progress given the fact that we’ll continue to make investments in talent and tech, but we see additional operational efficiencies that we’re going to take advantage of as we continue to make some investments while we talk about that expense ratio overtime. But when you combined with some of the other things we just said like the engagement in marketplace execution seeing some momentum on our growth, you add with it a little bit of the pricing, little bit of exposure increases, you’re going to get the denominator now starting to help you out on the expense ratio also. So, I think we are going to stick with how we look at that goal on a relative basis and we’re going to work on and are optimistic about continuing to improve that combined ratio. That really honestly the best we can say is an attempt to trying to sort of stay away from a specific number.

Craig, thanks for all the answers. Best of luck in 2018.

Thanks. Thank you.

And there appears to be no other questions at this time. I’ll then turn it back over to our management for any additional or closing remarks.

Great, thank you. We’ll see you next quarter.