Good morning and welcome to CNA's discussion of its 2021 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 Larry Haefner, CNA's Interim Chief Financial Officer. Following their prepared remarks, we will open the line for questions. Today's call may include forward-looking statements and reference to non-GAAP financial measures. Any forward-looking statements involve risk 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, November 1, 2021. CNA expressly disclaims any obligation to update or revise any forward-looking statements made during the 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. If you are reading a transcript of this call, please note that the transcript may not be reviewed for accuracy, thus it may contain transcript 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. Please go ahead sir.

Thank you, Jennifer. And good morning, everyone. CNA performed extremely well in the third quarter with core income up 23% year-over-year, despite the elevated catastrophe activity. In the third quarter, core income was $237 million or $0.87 per share driven by improved underlying underwriting performance and favorable life and group results. Net income for the quarter was $256 million or $0.94 per share. Gross written premium excluding our captive business grew by 10% this quarter, fueled by excellent new business growth and continued strong price increases. And importantly, momentum continued to build throughout the quarter. As we expected, the transactional capability limitations that we mentioned last quarter following the cybersecurity incidents are now behind us. Earned rate was 11% in the quarter and written rate was 8%, which remains well above loss cost trends and which we believe portends continued progress towards building margin as the written premium earns in over a third renewal cycle in 2022. Additionally, the tighter terms and conditions we have been able to secure during the hard market persists with no early signs of pressure to relax them. I'll have more to say about production performance in a moment. The all-in combined ratio was 100% this quarter, but a point lower than the third quarter of 2020 which included elevated catastrophes in both periods. In the third quarter of 2021, pretax catastrophe losses were $178 million or 9.2 points of the combined ratio, which included $114 million for Hurricane Ida. The P&C underlying combined ratio was 91.1%, a 1.5 point improvement over last year's third quarter results. This is a record low for the third consecutive quarter. After adjusting for the impacts of COVID and last year's third quarter, the improvement in our underlying combined ratio is actually 2.1 points. The underlying loss ratio in…

Thank you for that, Dino. I must say it has been both a professional and personal pleasure working with the CNA executive team once again these past two months. Good morning, everyone. As Dino highlighted, the 23% increase in core income for the third quarter produced a core ROE of 7.7%. Before providing more information on the financials, I will first discuss Life & Group. As you know, each year in the third quarter, we complete our annual reserve reviews for Life & Group. These reviews include our long-term care active life reserves, which we refer to as gross premium valuation, or GPV, as well as our long-term care and structured settlements claim reserves. Before going over the results of these reviews, I will point you to slides 12 through 14 of our earnings presentation. Slide 12 contains key demographic information about both our individual and group long-term care blocks. As a reminder, both blocks are closed with no new policies issued for individual since 2004 and no new group certificates since 2016. As a result, the average attained age for the individual block is 80 years old and the group block is 67. While the group block is less mature in age, you can see from the table in the top right of slide 12 that the benefit features on average for the group block are less rich. As we have discussed on past calls, we have proactively reduced risk in both blocks, while obtaining meaningful rate increases and using a prudent approach to setting assumptions in our reserve analysis both for active life and claim reserves. One clear result of our efforts is the 35% reduction in policy counts since 2015, which is shown on the bottom left graph on slide 12. As we continue to push for…

Thanks, Larry. Before opening the call to the Q&A session, I'd like to offer a few comments about how we see the marketplace that we compete in evolving. Most importantly, we see the market remain very favorable throughout 2022. We continue to build momentum in new business growth, and retention and rate increases should remain above long run loss cost trends for most of 2022 in light of the headwinds of social inflation, elevated cat activity, low interest rates and the additional headwind of economic inflation emanating from the protracted supply chain dynamics. Although rates have moderated from the high watermark of the fourth quarter of last year, it is premature to assume it will continue down in a straight line due to the uncertainty of the strength of the headwinds. In the third quarter, we saw pricing inflections as a response to pressure on those headwinds. As an example, momentum on cat-exposed property pricing picked up immediately after Hurricane Ida. And the supply chain issues creating higher costs of labor and materials are partially offsetting the benefit of the price increases, leading to a greater awareness that additional rate is required in property for a longer period of time. Similarly, notices of seemingly outsized jury awards in the industry reminds us social inflation was merely obfuscated during the pandemic and by no means extinguished, which should allow continued strong pricing in most casualty lines. Indeed, we are seeing similar strength in our price increases early in the fourth quarter. Bottom line, we believe written rate increases will persist above loss cost trends in 2022, leading to earned rates above loss cost trends for a third year in a row, which portends well for a margin build all else equal. And we remain very bullish about our ability to increasingly take advantage of the opportunities this continuing favorable marketplace affords us. And with that, we'd be happy to take your questions.

[Operator Instructions]. And we'll go first to Josh Shanker with Bank of America.

I was curious about the hospitalization and medical business you decided to non-renew given the pricing. It feels like you've been taking huge rate increases on that. And finally, in 3Q, you just decided it wasn't worth it anymore. What does that mean for the business you wrote last quarter and the last few years?

We've been at this game of medical malpractice for a couple of decades. And over the last few years, with the impact of, in particular, social inflation, we talked about how it increased our loss cost ends. We started a process of getting rate increases well before anyone else did. And we've been making some excellent headway. However, in the quarter, that was a portion of hospital portfolio, an excess liability portion that we just didn't see an ability to be able to get to the required return, as well as some of the others. We've seen marked improvements in areas like our aging services, and we didn't in this. And a good portion of it, because of how it's written, came up in the quarter and we just decided that we were going to non-renew it. But in general, Josh, look, we remain committed to medical malpractice. And clearly, with all the activity we've taken not only in the pricing, but terms and conditions and reunderwriting, it is getting better. But we're going to make the decisions we need to make on portions of the portfolio, like we just did in the third quarter. And it's really isolated to that.

Does that mean a three quarter forward drag as well? Because not all of it renews in the third quarter. Or is this one chunk only written in the third quarter?

There will be some additional in future quarters, but the significant portion of it was – occurred in the third quarter, July dates.

A question on the discount rate on the LTC reserves. Clearly, your formula – I just want to think about philosophically what GAAP advises, what you think internally, when it comes to bonds. When you take a bond law, you mark it to market, but when that bond recovers, you amortize the gain over time and don't take it upfront. Given your view of being very conservative about good news, how does that factor into your thoughts on the discount rate in the long term care book?

Josh, it certainly goes back to the approach that we take. And as we discussed, we do you look at the forward rate for the first three years compared to the normative rate going forward and how it rises up to that. And if you think about what's happened over the past year, last year, at the time, the forward rates were below 1%, significantly below 1%. And in the assumptions that we put in and we locked in last year, we did not assume that the forward rates would get above 1% until 2023. They're currently running about 1.5%. That difference is what drives the improvement in the margin that we have. In terms of bonds, we're looking at investing longer term and the return, so we're buying to hold and we're looking towards that as part of our investment decisions.

So, every third quarter, we should expect them mark to market on the discount rate, whether favorable or adverse?

Well, longer term, obviously, the long duration accounting will change that, but that's not until 2023. But third quarter next year will be the next time that we take a look at it. Yes.

One more quick one, if I may. It would seem that in the – you called out some frequency benefits in the loss ratio from 3Q 2020, which you're not alone in doing that. Everything about for 4Q 2020 and 1Q 2021, are there frequency benefits in the underlying numbers that we should be thinking about as we forecast our loss ratio expectations for the next couple of quarters?

Really, the biggest impact was the second quarter of last year and third quarter a little bit, but really incidental in the fourth quarter and forward.

We'll go next to Meyer Shields with KBW.

A couple of quick questions, if I can. One, I think you mentioned higher property loss trends assumed in the third quarter. Is that just for the quarter or did that also apply to prior quarters in 2021, prior year's reserves for property?

This is Larry. We made the change in terms of our long run loss cost trend assumptions, so we incorporate that into our pricing and our reserving. Obviously, this is property. So, it's relatively short tailed from a reserving perspective, but we have incorporated those higher cost assumptions going forward.

I'm going to get the details wrong, but I think you've talked about lower medical costs than anticipated within long-term care. Broadly speaking, are you seeing any signs of accelerating medical cost inflation in terms of at school, I guess, claim payments, and that's long term care and the medical costs in the P&C book.

I'll start with the long-term care piece. There's a couple of things going on that we've seen. We are beginning to see a little bit of evidence of higher cost in, particularly, facility care. However, there's a countervailing – that is the impact of people being more willing to take care of people at home. So in-home care is becoming more prominent, and that's significantly lower than facility care. So, while we're seeing some evidence of higher costs in facilities, in particular, and a little bit home care, the shift has actually been a favorable force overall. And then, healthcare in our medical cost book, we had – that was a book of business, parts of it that were impacted by social inflation. We have incorporated our assumptions into that. We've talked about that in the past, and we've made no revision. We're not seeing that accelerate really in the quarter.

[Operator Instructions]. We'll go next to Tom Gallagher with Evercore ISI.

Just a follow-up on long-term care. I heard your comment, Larry, about the shift away from facility care to home health care and that being a positive? Can you comment on how big of a change that's been? Maybe you have numbers around proportion of total claims that, in the past, were home health care and what they are now? Like, how big has that change in trend been?

Tom, I wouldn't say it's dramatic. But we're probably seeing somewhere in the 5% to 10% kind of shifts in those – in that mix, which, as I mentioned, is helping us overall in severity.

Are you guys considering risk transfer on this block? And if so, what are your overall thoughts for what you're seeing in the market?

The market is still not conducive, we don't believe, to doing a transaction. And clearly, we'd want to do something that we could be comfortable with that didn't come back to us. So, our focus has been managing this business extremely well, which we think we do, reducing risk wherever we can. We think that's the right thing to do in managing the book of business. Obviously, that will help with any potential buyer in the future. So we look, we're a P&C company. That's our focus going forward. So we do look in the market to see, but we feel comfortable with how we're managing the book, we feel comfortable with the reserves. So, we'll see what happens as market conditions change. Do you know anything you'd add to that?

No, I think you captured it perfectly. Our derisking at the policy level is having a meaningful impact.

One final follow-up, if I could. Your reserving claim counts declined pretty meaningfully in 2021, down 6.5%. And I know you mentioned that. That's COVID driven. Or I believe you said that's COVID driven. Is your book old enough where we should – how would you see that playing out if COVID normalizes? Would you expect that to go back up? Or based on the age of your block, at some point, I presume that's going to decline.

Tom, I don't think I've said specifically, but we do prescribe or believe that COVID has had an impact on the reduction in the claim counts because we would not have expected that degree of decline. And the individual book, we're coming in close to peak claim time period within a year or so. So, we would expect that to have been flattening out. On the group book, obviously, that's a younger book of business, and so we would expect those to – once we're through COVID, that that would start to climb a little bit again, but that is the smaller portion of the book.

And at this time, there are no further questions. I will turn the call back to Dino Robusto for any additional or closing remarks.

That's great. Thank you very much, Jennifer, and thank you all for your questions. We look forward to chatting with you again in a quarter. Thank you.

This does conclude today's conference. We thank you for your participation.