Ladies and gentlemen, good day and welcome to the CNA First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. At this time, I'd like to turn the call over to Ralitza Todorova, VP of Investor Relations & Rating Agencies, for opening remarks and introduction of today's speakers. Please go ahead.

Thank you, Jamie. Good morning, and welcome to CNA's discussion of our first quarter 2024 financial results. Our first quarter earnings press release, presentation and financial supplement were released this morning and are available on the Investor Relations section of our website, www.cna.com. Speaking today will be Dino Robusto, Chairman and Chief Executive Officer; and Scott Lindquist, 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 press release and in CNA's most recent SEC filings. In addition, the forward-looking statements speak only as of today, Monday, May 6, 2024. CNA expressly disclaims any obligation to update or revise any forward-looking statements made during this call. Regarding the non-GAAP measures, reconciliations to the most comparable GAAP measures and other information have been provided in our earnings press release, financial supplement and other filings with the SEC. This call is being recorded and webcast. A replay of the call may be accessed on our 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 our Chairman and CEO, Dino Robusto.

Thank you, Ralitza, and good morning all. In the first quarter, we produced very strong results with excellent profitability, higher investment income, robust top line growth and accelerating rate achievement in our commercial casualty lines as well as strong retention in all segments. Core income increased by $30 million in the first quarter to $355 million, our highest first quarter core income on record. The last 2 quarters have produced the largest volume of core income on record for our organization, a testament to our underwriting performance, strong investment returns and overall profitable growth. Net investment income of $609 million pretax increased $84 million year-over-year, with our alternatives portfolio and our fixed income portfolio contributing almost equally to the increased income. The all-in combined ratio was 94.6%, with pretax catastrophe losses of $88 million or 3.8 points of the combined ratio compared to the relatively benign first quarter last year with $52 million or 2.4 points. This year was more in line with our first quarter average of 3.7 points over the last 5 years. Prior period development for P&C overall was favorable by 0.2 points on the combined ratio. Our pretax P&C underlying underwriting gain was over $200 million for the fourth successive quarter with a P&C underlying combined ratio of 91%. This is the 13th consecutive quarter with an underlying combined ratio below 92%. The underlying loss ratio was 60.5%, and the expense ratio was 30.1% in the quarter. The underlying loss ratio was up a little more than 0.5 point compared to the most recent 4-quarter average. This slight increase was driven mainly by a mix shift within the Commercial segment, which had greater growth in national accounts in recent quarters where the casualty lines carry a higher underlying loss ratio. The remainder is from several puts…

Thank you, Dino, and good morning, everyone. Core income of $355 million is up 9% compared to the first quarter of last year, leading to a core return on equity of 11.5% and reflects another quarter of strong underwriting and investment results. Our P&C expense ratio for the first quarter was 30.1% compared to 30.0% (sic) [ 30.7% ] last year, reflecting higher net earned premium. We tend to have a certain amount of variability quarter-to-quarter in this ratio. For the balance of 2024, we expect higher spend on technology and talent as compared to the quarter just ended. Accordingly, we believe an expense ratio closer to last year's first quarter ratio of 30.7% is a reasonable run rate for the full year. The P&C net prior period development impact on the combined ratio was 0.2 points favorable in the current quarter. Favorable development in the Specialty segment was driven by surety and was partially offset by unfavorable development in warranty. In auto warranty, higher labor rates and car part costs are driving an increase in severity, while higher car prices and interest rates are resulting in lengthier durations of car ownership, which leads to higher frequency of warranty claims. This same dynamic is impacting claims cost in our noninsurance auto warranty business, which were up 3%, while related revenues are flat as compared to 2023 first quarter. You can see these line items in the Specialty results of operations in our financial supplement. For Life & Group, we had core income of $5 million for the first quarter compared to a $3 million core loss for the prior year quarter, reflecting higher earnings from limited partnership investments. Active in-force management risk-mitigation activities continue, including rate filings, benefit-reduction offers and policy buyouts. The current quarter results include a $4 million…

Thanks, Scott. CNA is off to an excellent start in 2024 with strong levels of core income driven by substantial net investment income and strong underwriting performance. We achieved high single-digit growth in gross written premium ex captives, and our retention remains very strong at 85%. The market remains rational in most classes of business with rates reflective of the individual dynamics impacting the various lines of business. In the commercial casualty classes in the U.S., rates continue to improve. And then property rates, although off from their high watermark in 2023, continue to offer great new business opportunities. And so we remain optimistic about our ability to successfully navigate the favorable market dynamics and continue to grow the company profitably as well as build our investment returns. With that, we will be happy to take your questions.

[Operator Instructions] And our first question today comes from Josh Shanker from Bank of America.

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? I know -- and that maybe things have gotten so granular and sophistication has gotten to a point that there will never be a universally hard market. But -- and indulge me for a second, some competitors didn't grow it all this quarter and some did, and it leaves a -- how good is that market that's out there right now?

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. On casualty, we continue to get very strong rate increases, and I expect they will continue. And that will continue to give us good opportunities as we saw in national accounts, also casualty as well as middle market. On property, when you think about all of the cumulative rate, you think about the valuation changes, the terms and conditions, see favorable opportunities there. Management liability, notwithstanding that we still have a cumulative 50% to maybe 60% of rate increase since the start of the hard market, the reality is some of the competition, in particular from new entrants, as it has been expressed by others also, is too aggressive. And so we are fine to wait on the sidelines and pursue those areas so we can still have a good growth rate as we do, whether that be it in surety, be it in health care on the Specialty side or, as I just talked about, in the Commercial. So I think it gets down to your point of a very nuanced mini-cycle market, and you have to act accordingly. But overall, I'd consider it a favorable market, and it's going to continue in '24.

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?

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. But as I've indicated before, our market share in a lot of those areas remains relatively small. So there is plenty of opportunity, and we're going to continue to go after it. It is one of the reasons, as Scott indicated, you're going to see additional investments, technology, talent. And then we're going to divert that to continue to penetrate our specialties. So we see plenty of opportunity.

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?

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. And we've done some refreshes in the fourth quarter, too, the past couple of years. But that's probably all I'd say at this point.

And one mass tort that gets a lot of press, but there's not a lot of detail on or a lot of news per se, certainly, is PFAS. Is there anything that you can tell us about your thoughts on how you think about it?

Yes -- oh, go ahead.

No, no, go ahead.

No, I was going to say, I mean I have no specific comments on that other than what we see out there is in our reserves right now. And I have nothing else really to say on that.

Totally agree with Scott. It's early and limited information. What we have, as Scott points out, is in the reserves.

[Operator Instructions] Our next question comes from Meyer Shields from KBW.

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?

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. So that's the main essence of what we've seen.

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?

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. But going forward, we expect it to continue to contribute profitable growth to the organization. We feel very, very good about our International operations, in particular, when you consider that on some segments, the starting point is very good even before the hard market segments like middle market in the U.K. and Canada, we're already very profitable. We got additional cumulative rate. We added improved terms and conditions. So as you can tell, we are quite bullish on our International operation going forward.

And ladies and gentlemen, that will now conclude today's question-and-answer session. I'd like to turn the floor back over to Dino Robusto for closing remarks.

Thanks very much. I do have some this time around. In closing, I'd like to give an update as to future earnings calls for CNA. In light of reduced analyst participation in recent years, in future quarters, we will simply post the transcript in place of hosting a live call. The transcript we post will continue to include the level of detail you are accustomed to hearing in our earnings call remarks. The transcript will also incorporate select Q&As that are intended to address timely and topical focus areas for CNA and our industry as well as answers to questions -- and we will answer questions that are submitted to us in advance. We are, of course, committed to remaining as transparent as we have always been. And as always, if you ever need any further clarification, we encourage you to reach out to our Investor Relations team. Finally, we look forward to attending industry investor conferences in the future as we have done in the past, and we look forward to continuing the dialogue with the investor and analyst community. And thank you all for joining us today.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.