We are pleased with our exceptional second quarter results driven by strong investment income and excellent underwriting gain. Our underwriting gain of $150 million was up 21% from the same period last year. The underlying underwriting gain of $213 million marks the ninth consecutive quarter with gains of $200 million or more. We experienced a 5% increase in gross written premiums, excluding captives, while upholding strong underwriting discipline, and our catastrophe losses were lower year over year. We achieved higher net investment income and solid top-line growth, with stable rates in the U.S., including double-digit increases in our commercial casualty classes that continue to surpass loss cost trends. Core income reached $335 million, rising by $9 million compared to the previous year. However, it was impacted by an $88 million after-tax charge related to unfavorable prior period development linked to legacy mass tort abuse reserves, including the expected agreement in principle concerning the Diocese of Rochester. Net investment income amounted to $662 million, showing a year-over-year increase of $44 million, driven equally by our fixed income portfolio, which benefited from growth in both book yield and invested asset base, as well as robust performance in limited partnerships and common stocks. The Property and Casualty (P&C) combined ratio was 94.1% in the second quarter, incorporating $62 million or 2.4 points of catastrophe losses, which is more than a point lower than our average for the second quarter over the last five years. Prior period development was minimal during the quarter, with an underlying combined ratio for P&C at 91.7%. The underlying loss ratio stood at 61.5%, consistent with the first quarter, while the expense ratio improved to 29.8%, the lowest since 2008. We witnessed a 5% growth in gross written premiums excluding captives and a 6% increase in net written premiums during the quarter. This growth was affected by lower retentions in certain isolated segments within our Commercial and Specialty portfolios, reflecting portfolio underwriting actions on specific accounts where our underwriters could not secure suitable pricing, terms, and conditions. We execute our strategies with a nuanced approach; while the overall market remains rational, there are specific small areas within individual lines and regions where we believe the external loss cost environment is not accurately represented. In such areas, we will prioritize bottom line profit over growth. We continue to capitalize on attractive opportunities within our areas of specialty, as demonstrated by our new business growth of 8% this quarter, reaching $645 million, with positive growth across all three operating segments. The P&C rate increase was 3% this quarter, with a renewal premium change of 5%, both down one point from last quarter. The drop was primarily driven by International, which has remained profitable for several years, and pricing pressures in national accounts property. In the U.S., rates, significantly affected by social inflation, remained consistent with the last quarter at 5%. In the Commercial segment, the all-in combined ratio improved to 94.8%, a 2.2 point enhancement compared to the same quarter last year. Catastrophe losses were $57 million, or 4.2 points, a reduction of 1.9 points from the prior year quarter, with negligible prior period development. The underlying combined ratio stood at 90.6%, and our expense ratio improved by 1.3 points year over year to 27.2%, staying below 28% for the fourth consecutive quarter. The underlying loss ratio was 62.9%, consistent with the first quarter. Gross written premiums, excluding captives, increased by 6%, and net written premium growth was 7%. New business reached $420 million, a 4% rise from the previous quarter. Growth in new business was lower this quarter compared to recent periods due to our cautious underwriting practices in commercial auto, where many account opportunities did not meet the rate of return we deem appropriate for that line. Rate increases for the Commercial segment were 5% this quarter, while renewal premium change was 6%, each down one point compared to the first quarter. We observed significant rate reductions in national accounts property, which was five points lower than in the first quarter. Property rates, excluding national accounts, remained in the high single-digit range, while excess casualty rates were low double-digit this quarter, commercial auto rates were at 20%, and primary general liability rates remained in the mid single-digit range. For Commercial, excluding national accounts property, the rate increase in the first half of the year was the highest since the peak of the hard market in the first quarter of 2021. Overall exposure change was 1%, with variation by line; it was 3% in workers' compensation and 4% in primary general liability, where exposure trends behave more like rates. Exposure change decreased by 2% in excess casualty as we continue to strategically reposition attachment points and limits given the ongoing effects of social inflation. Retention stood at 81% in the second quarter, with commercial auto retention several points lower than the overall average, while workers' compensation, which has been quite profitable for us, showed retention a few points higher. In Specialty, both the all-in and underlying combined ratios were 93.6%. The expense ratio was at 33.2%, and the underlying loss ratio was consistent with recent quarters at 60.1%. Gross written premiums, excluding captives, climbed by 3%, and net written premiums increased by 4%. Rate increased by 3%, consistent with the first quarter when rates peaked at their highest since 2022. In financial institutions and management liability, we achieved a cumulative rate increase of 1%, marking the first quarter with positive rate after ten consecutive quarters of negative rates. Notably, we saw positive rates in both public directors and officers (D&O) and cyber this quarter, similar to last quarter. New business grew 3% to $122 million in the quarter, with retention remaining strong at 86%, although it fell by three points compared to last quarter. In financial institutions and management liability, retention dropped by five points as we continue to refine our strategies against the backdrop of a prolonged soft pricing environment. In International, the all-in combined ratio stood at 92.8% this quarter, which included $5 million or 1.4 points of catastrophe loss compared to 2.0 points in the same quarter of the previous year. The underlying combined ratio was at 91.4%, with the underlying loss ratio remaining at 58.5%, consistent with the first quarter, and the expense ratio at 32.9%. We have successfully improved our International portfolio and are focused on seizing opportunities in this sector as it significantly contributes positively to our overall results. Gross written premiums increased by 5% and 4% when excluding currency fluctuations. Net written premiums rose by 9% and 7% excluding currency fluctuations. New business amounted to $103 million, reflecting a 43% increase as we continue to pursue opportunities in our target specialties. Although competition continues to impact rates, our retention remains strong at 86% as we maintain our portfolio, which has consistently been profitable and has generated twenty consecutive quarters of underwriting profitability. Additionally, I would like to mention our recent launch of Cardinal E&S, a CNA Brand, which underscores our commitment to serving the excess and surplus (E&S) market. This strategic expansion reinforces CNA's dedication to delivering specialized solutions. Cardinal E&S will collaborate with our wholesale brokers through dedicated underwriting teams focused on casualty, property, healthcare, and financial lines, emphasizing deep expertise, quick response times, and tailored solutions. In the second quarter, we successfully renewed our property reinsurance treaties on June 1st, securing favorable terms, conditions, and pricing that align with our experience and prudent management of catastrophe risk. We structured our treaty renewals based on our operating portfolios' scale, opting for arrangements where the economics were most beneficial for us as an organization. This outstanding outcome exemplifies the strength of our portfolio.
CNA’s core income of $335 million is up from $326 million in the prior year quarter, leading to a core return on equity of 11.0%, and reflects another quarter of strong underwriting and investment results. Our P&C expense ratio for the second quarter was 29.8% compared to 30.7% in the prior year quarter, reflecting higher net earned premiums and a favorable acquisition ratio. While we tend to have a certain amount of variability quarter to quarter, we do expect the expense ratio to continue to track at approximately 30% for the balance of 2025. The P&C net prior period development impact on the combined ratio was flat in the current quarter. In the Specialty segment, favorable development in surety was offset by unfavorable development in other professional liability and management liability. In the Commercial segment, favorable development in workers' compensation was offset by unfavorable development in general liability. For Life & Group, we recorded core income of $1 million for the second quarter compared to a $1 million core loss for the prior year quarter, with both underwriting and investment results being generally in line with the prior year quarter. Results for the quarter benefited from favorable persistency, somewhat offset by lower investment income. We also note that, consistent with historical practice, we intend to perform our annual assumption updates for our Life & Group segment during the third quarter. Our Corporate segment produced a core loss of $114 million in the second quarter, compared to a $53 million loss in the prior year quarter. As a reminder and as we stated previously, we conduct a comprehensive review of mass tort reserves in the second quarter of each year. As a result of this quarter’s comprehensive review, the Corporate segment results include an $88 million after-tax charge related to unfavorable prior period development largely associated with legacy mass tort abuse claim activity, the ongoing effects of social inflation and the anticipated agreement in principle with regards to the Diocese of Rochester. We also note that, consistent with historical practice, we intend to review our asbestos and environmental reserves within the Corporate segment in the fourth quarter. Net investment income was $662 million in the second quarter compared with $618 million in the prior year quarter, an increase of 7%. The increase was driven by fixed income investments and our limited partnership and common stock portfolios. Fixed income and other investments generated $562 million of income, up 4% compared to the prior year quarter. Our A-rated fixed income portfolio continues to provide consistent contributions to core income, which have been steadily increasing because of favorable reinvestment rates and strong cash flow from operations. The effective income yield of our consolidated fixed income portfolio was 4.9% in the second quarter, up from 4.8% in the prior year quarter. Reinvestment rates continue to be above our P&C portfolio effective income yield of 4.4% and are slightly above our Life & Group portfolio effective income yield of 5.7%. Looking ahead, based on the current interest rate environment we expect income from fixed income and other investments to be about $565 million in the third quarter. For the full year, we expect income from fixed income and other investments to be about $2,250 million, or a 3% increase as compared to the full year 2024. Our limited partnership and common stock portfolio returned a $100 million gain, or 3.6%, in the current quarter compared to a $78 million gain, or 3.1%, in the prior year’s quarter. This quarter’s 3.6% return was primarily driven by our hedge fund limited partnerships and common stock portfolio (both of which are generally reported real-time), where performance reflected the broader public equity market’s strong performance during the quarter. Net investment losses were $36 million in the second quarter, compared with net investment losses in the prior year quarter of $9 million, and were driven primarily by fixed maturity disposals arising from normal course portfolio management activities. At quarter-end, our balance sheet continues to be very solid with stockholders' equity excluding accumulated other comprehensive income (AOCI) of $12.3 billion, or $45.31 per share, an increase of 4% from year-end 2024 adjusting for dividends. Stockholders' equity including AOCI was $10.7 billion or $39.45 per share. With the decline in interest rates during the first half of the year, the net unrealized investment loss in our fixed income portfolio decreased to $1.9 billion as of quarter-end. Finally, we ended the quarter with statutory capital and surplus in the combined Continental Casualty Companies of $11.2 billion. Operating cash flow was strong at $1.2 billion for the first six months of 2025, which is up 7% as compared to the first six months of 2024. The higher cash flow reflects continued strong underwriting and investing results. Turning to taxes, the effective tax rate on core income for the second quarter was 21.4%, which is in line with our full year 2025 expectations. Finally, we are pleased to announce our regular quarterly dividend of $0.46 per share to be paid on September 4, 2025 to stockholders of record on August 18, 2025.
