CNA Financial Corp. Stock

[ The transcript was presubmitted by CNA Financial Corporation. No live call was conducted for the Q2 2026 earnings call. ]

We had a strong second quarter, achieving disciplined growth, excellent investment income and high-quality underwriting results underpinned by prudent loss ratio selections, further reinforcing the resilience of our balance sheet. Net written premium was up 4%, with new business growing by 11% as we continue to be deliberate about how and where we grow. We maintained the underlying loss ratio we established last quarter, and our expense ratio was below 30% even as we continue to invest in talent, technology and artificial intelligence (AI).

Core income was $324 million in the second quarter, with net investment income of $701 million up 6% compared to the prior year quarter. Core income was impacted by unfavorable development of $77 million after-tax in the Corporate segment largely associated with legacy mass tort abuse claim activity and the ongoing effects of social inflation.

The P&C all-in combined ratio was 96.5% in the quarter, including 2.3 points, or $60 million, of catastrophe impacts, which was consistent with the prior year quarter. Catastrophes were primarily driven by severe convective storm activity. There was no prior period development impact in the quarter. The P&C underlying combined ratio was 94.2% compared to 91.7% in the prior year quarter. The expense ratio was 29.7%, consistent with the prior year quarter. The P&C underlying loss ratio was 64.1%, consistent with the first quarter, and up 2.6 points compared to the prior year quarter. Long run cost trend assumptions were unchanged in the quarter, supporting our belief that it is appropriate to maintain the higher degree of conservatism that underlies our loss picks and assumptions. Our targeted strategic underwriting actions in specific areas have shown positive early signals. However, as casualty classes take time to mature, we intend to remain disciplined in our assumptions and recognize beneficial impacts only once they become more evident.

Net written premium growth was 4% in the aggregate compared to the prior year quarter and record new business of $718 million was up 11%. P&C renewal premium change was slightly above 2% and rate change was flat. The results reflect substantial variation by class, with larger rate decreases in areas like national accounts property and international more than offsetting substantial rate increases in social inflation impacted casualty lines and higher rate in the Specialty segment. We still see tremendous opportunity in various areas across our portfolio where we can write accounts for the right price, terms and conditions, and mix of portfolio to achieve appropriate risk-adjusted returns. However, as we have done historically, there are also areas where we have pulled back and will remain cautious due to the competitive environment. As an example, new business was down 50% in our national accounts property book as we walked away when we could not write accounts for appropriate price, terms and conditions. As rates soften in many classes, we will continue to readjust our strategies and will not compromise our underwriting discipline for growth.

Turning to each of the three P&C operating segments, in Commercial, the all-in combined ratio was 96.5% compared to 94.8% in the prior year quarter. Catastrophe impacts were $53 million, or 3.7 points on the combined ratio. There was no prior period development impact. The underlying combined ratio was 92.8% compared to 90.6% in the prior year quarter. The underlying loss ratio was 65.8%, consistent with the first quarter, and up 2.9 points compared to the prior year quarter, as we maintain the philosophy discussed in the first quarter. The expense ratio improved by 0.6 points to 26.6% and is now below 27% for the fourth consecutive quarter.

In Commercial, net written premium grew 5% and new business growth was 6%. Retention in the quarter was 81% with significant variation by business unit and class, similar to last quarter. As an example, retention in commercial auto was 79%, the fifth consecutive quarter below 80%. On a year to date basis, commercial auto is a lower proportion of our Commercial gross written premium writings despite double digit rate increases as we continue to optimize that portfolio. Net written premium also declined significantly in national accounts property, where we see a substantial amount of undisciplined market behavior and we remain selective about which accounts to pursue. On the other hand, we are seeing attractive opportunities in areas such as data centers, where we achieved significant new business growth. Importantly, while we see this as a strong opportunity, we are also actively managing terms and conditions as well as aggregations of exposure to these hyperscale projects.

Commercial segment rate change was flat in the quarter from continued rate decrease in national accounts property, which was a couple points more negative than last quarter, as well as continued low single digit negative rate change in workers’ compensation. Excluding workers’ compensation and national accounts property, rate was up 6% and renewal price change was up 8%. Rate in casualty classes most impacted by social inflation remains strong.

For Specialty, the all-in and underlying combined ratio was 96.5% compared to 93.6% in the prior year quarter. There was no prior period development in the aggregate. The underlying loss ratio was 62.8%, consistent with the first quarter, and up 2.7 points compared to the prior year quarter for the reasons we discussed last quarter. The expense ratio was in line with the prior year quarter.

In Specialty, net written premium grew 5% in the quarter. Surety net written premium grew 7%, reversing the decline in premium seen last quarter; it is not unusual to see some quarterly fluctuation in surety premium growth, which is influenced by the timing of project starts. Rate increased in the quarter by 4% on a written basis, up a point from the prior quarter. Rate improved by a point to 9% in our healthcare business and remained steady in affinity business and financial and management liability lines at 3% and 1% respectively. Retention was 85%, fairly consistent with recent quarters.

For Specialty overall, new business grew 43% to $175 million in the quarter. Importantly, the market continues to be highly nuanced at a granular level -- in certain pockets within healthcare and financial lines, we have leaned in where market conditions have become more attractive and we can achieve the price and terms and conditions for an appropriate risk adjusted return. We significantly capitalized on opportunities in those areas in the quarter. In other areas within those portfolios, we continue to take a much more cautious approach because there are fewer opportunities where price and terms and conditions will support an appropriate risk adjusted return. These dynamics are all taking place at a granular level within the portfolio -- and we will continue to leverage our specialized expertise in each of the areas to write opportunities that are accretive to the portfolio and walk away when they are not.

For International, the all-in combined ratio was 96.9% with 2.2 points of catastrophe losses. The underlying combined ratio was 94.7%, similar to the first quarter. The underlying loss ratio of 59.8% and expense ratio of 34.9% were each consistent with the first quarter.

International net written premium declined 2% in the quarter, or 3% excluding currency fluctuation. New business declined 6% in the quarter and retention was 87%. Rates were down 5% in the quarter and renewal price change was down 2%. The environment continues to be highly competitive. Despite the competitive environment and some of the volatility it can cause, there are still strong opportunities in our international business. It remains an important contributor to our overall operation and we continue to see tremendous potential there going forward.

Similar to the treaties that renewed in the first quarter, we had successful renewals of our property reinsurance treaties in the second quarter, which were all oversubscribed. We achieved favorable terms and conditions, and pricing consistent with our experience leading to a reinsurance program that enables us to manage our portfolio to an appropriate return. Overall, we are pleased with our June 1st renewals where the economics continue to be accretive to us as an organization.

CNA's second quarter core income was $324 million compared to $335 million in the prior year quarter, resulting in a second quarter core return on equity of 10.5%. The decrease in core income primarily reflects the continued impact of the increase in the current accident year loss ratio from actions taken in the prior quarter partially offset by higher net investment income.

Our P&C expense ratio for the second quarter was 29.7%, essentially flat with the prior year quarter, reflecting continued operating discipline across the organization, even as we continue to invest in talent, technology and AI capabilities. While there is always a degree of quarter-to-quarter variability in this ratio, we continue to believe an expense ratio around 30% represents a reasonable run-rate for the full year 2026.

The P&C net prior period development impact on the combined ratio was flat in the current and prior year quarters. Development in the quarter included unfavorable development in professional liability, excess casualty and general liability that was offset by favorable development in workers' compensation, property and surety lines.

The P&C paid-to-incurred ratio remained stable at 76% in the quarter, which is about flat with the first quarter of 2026, and 6 points lower than the full year 2025 at 82%. Paid losses can vary from quarter to quarter based on claim settlement activity and other factors; however, we continue to see paid loss trends generally consistent with our expectations and reflective of portfolio growth over time.

The Life & Group segment produced a core loss of $10 million for the quarter compared with core income of $1 million in the prior year quarter. The decrease reflects slightly lower net investment income. Net policy benefits and expenses were generally in line with expectations. We also note that, consistent with historical practice, we perform our annual assumption updates for our Life & Group segment during the third quarter.

The Corporate segment produced a core loss of $92 million compared with $114 million in the prior year quarter. As a reminder, 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 a $77 million after-tax charge related to unfavorable prior period development largely associated with legacy mass tort abuse claim activity and the ongoing effects of social inflation, compared with an $88 million after-tax charge in the prior year quarter. The current quarter also includes an increase of $13 million after-tax associated with the amortization of the deferred gain related to the asbestos & environmental pollution (A&EP) Loss Portfolio Transfer (LPT). We also note that, consistent with historical practice, we intend to review our asbestos & environmental reserves within the Corporate segment in the fourth quarter.

Net investment income was $701 million in the second quarter compared with $662 million in the prior year quarter, an increase of 6%. The increase was primarily driven by higher returns in our limited partnership and common stock portfolios.

Fixed income and other investments generated $570 million of income, up modestly compared with the prior year quarter. Our A-rated fixed income portfolio continues to provide consistent contributions to core income and continues to benefit from a growing asset base and favorable reinvestment rates. Reinvestment rates continue to be above our P&C portfolio effective income yield of 4.5% and are fairly in line with our Life & Group portfolio effective income yield of 5.7%. Other investment income was lower compared to the prior year quarter due to lower interest income on short-term investments and cash.

The effective duration of our fixed income portfolio stands at 6.4 years as of June 30th and reflects an increase in the duration of the Life & Group portfolio from 9.5 to 10.0 years. This increase reflects opportunistic actions to redeploy shorter duration holdings towards longer-dated higher quality securities, at yields exceeding our long-term reserving assumptions. As a result, the duration of our Life & Group fixed income portfolio approximates the duration of future policy benefit reserves at the end of the second quarter.

Looking ahead, based on the current interest rate environment, we expect income from fixed income and other investments to be about $575 million in the third quarter. For the full year, we expect income from fixed income and other investments to be about $2,300 million, or a 2% increase as compared to the full year 2025.

Our limited partnership and common stock portfolios returned a $131 million gain, or 4.3%, in the quarter compared with a $100 million gain, or 3.6%, in the prior year quarter. The higher return was driven by our hedge fund and common stock portfolios, whose strong returns were in line with the broader public equity market performance. While our private equity portfolio results were lower year over year, they remained a positive contributor to income for the quarter. As a reminder, private equity funds, which comprise the majority of our limited partnership portfolio, generally report on a quarter lag, so results this quarter were primarily reflective of performance from the first quarter of 2026.

At quarter-end, our balance sheet remained very strong. Stockholders' equity excluding accumulated other comprehensive income (AOCI) was $12.4 billion, or $45.83 per share. Including AOCI, stockholders' equity was $11.2 billion, or $41.34 per share. Statutory capital and surplus in the combined Continental Casual Companies remained strong at $11.2 billion and our debt-to-capital ratio excluding AOCI was 19.3%, reflecting the continued strength of our capital position.

Operating cash flow for the first half of the year was $1,042 million compared with $1,200 million in the prior year six month period. Cash flows reflect higher paid losses for the year reflecting portfolio growth partially offset by strong premium collections.

The effective tax rate on core income for the quarter was 20.9%, consistent with our expectations for the full year.

Finally, we are pleased to announce our regular quarterly dividend of $0.48 per share payable September 3, 2026 to stockholders of record on August 17, 2026.

Overall, we produced $324 million of core income while maintaining our philosophy of prudent assumptions in our loss picks and recognizing a legacy mass tort related charge in our Corporate segment of $77 million after-tax. We achieved excellent investment results in both our fixed income and alternative investments portfolios. Our expense ratio is consistent with the prior year quarter and remains below 30% as we have continued to investment in talent, technology and AI. We have AI solutions deployed and embedded into the core workflows of our employees across the organization. The momentum, in both efficiency and effectiveness, we are gaining from our investments continues to grow. We are well positioned to capitalize on the market going forward with strong specialization in the areas where we do business.

[ The transcript was presubmitted by CNA Financial Corporation. No live call was conducted for the fourth quarter earnings call. ]

In the first quarter we continued to successfully drive our underwriting strategies to generate consistently profitable returns as we navigate this challenging market. The fundamentals of our business remain strong as we execute specialized and deliberate strategies to achieve profitable growth. We grew certain pockets of our portfolio that offer accretive returns and scaled back in other areas where the market can't earn an acceptable return. We took prudent actions this quarter to strengthen both our prior accident year reserves as well as our current accident year loss ratio. Catastrophe impacts in the quarter were consistent with our five-year average.

Core income was $225 million in the first quarter, with net investment income of $610 million which was up slightly compared with the prior year quarter. Higher earnings from the fixed income portfolio were modestly offset by a market decline in common stocks.

The P&C all-in combined ratio was 102.2% in the quarter, including 3.6 points or $97 million of catastrophe impacts, which was consistent with the prior year quarter. Catastrophe impacts were driven by severe convective storms, more than half of which were driven by a significant winter storm in January and a severe hail event in March. Prior period development for P&C overall was unfavorable by $106 million, or 4.1 points of the combined ratio, and was driven by reserve strengthening primarily in recent accident years in our excess casualty and affinity professional errors and omissions (E&O) classes. The P&C underlying combined ratio was 94.5%, up 2.4 points compared to the prior year quarter. The expense ratio was 29.9%, down 0.3 points from the prior year, while the P&C underlying loss ratio was 64.1%, up 2.6 points from the prior year quarter.

The higher underlying loss ratio reflects our belief that a higher degree of conservatism in our loss pick is appropriate given the continuation of uncertainties around longer tailed classes of business. Further, across the P&C portfolio in aggregate, earned rate has been trailing our estimate of loss cost trend. This dynamic puts upward pressure on the underlying loss ratio of a stable portfolio, all else equal. We have implemented targeted underwriting actions to address the underlying headwinds, but these actions will take time to translate into results.

In light of the current rate and trend dynamics, we believe this conservative approach is appropriate, and we remain focused on sustainable performance. In addition, we increased our loss cost trends modestly, which are now slightly above 7% for the P&C portfolio overall. The increase in loss cost trend was minor and mostly driven by the two classes of business that drove our prior accident year reserve strengthening. We do not anticipate social inflation abating, and the continued impacts of increased attorney involvement and lengthening development patterns have been reflected in our prior accident year reserves and current accident year loss ratio.

In the quarter, net written premium growth was 1% in the aggregate, but similar to last quarter there is significant variation by segment and class of business unique to the competitive environment in each area. New business of $581 million was up 3% with similar variation by segment and class. P&C rate change was 2%, consistent with the fourth quarter, and renewal premium change was 3%. In each of our segments, we are growing where we see quality opportunities and being disciplined where we do not, which is a result of the current competitive environment and is reflected in our retention levels.

Turning to each of the three P&C operating segments, in Commercial, the all-in combined ratio was 103.5% compared to 101.1% in the prior year quarter. Catastrophe impacts were $93 million or 6.4 points on the combined ratio. Unfavorable prior period development of $56 million added 4.0 points to the combined ratio. The loss development in the quarter was wholly driven by excess casualty in the recent accident years where we continue to see the potential for higher claim frequency and severity from the ongoing impacts of social inflation.

The underlying combined ratio was 93.1% compared to 91.0% in the prior year quarter. The underlying loss ratio increased to 65.8%, from 63.4% in the fourth quarter and 62.9% in the prior year quarter. This was driven by an increase in our excess casualty underlying loss ratio, reflecting both the trends the industry is experiencing, and substantial additional prudence on our part. Even with the higher excess casualty loss ratio, we continue to believe the margins and opportunities in this class are attractive. In addition to excess casualty, we also increased the workers' compensation loss ratio in the current accident year given the ongoing significant negative rate in that line coupled with our mid-single digit longrun loss cost trend assumptions. The expense ratio improved by nearly a point to 26.7% and is now below 27% for the third consecutive quarter.

In Commercial, net written premium declined 1% and new business growth was flat. Retention in the quarter was 81% with significant variation by business unit and class. The level of net written premium growth varies significantly based on how we are reacting to the current dynamics in the market. For example, net written premium growth was 13% in middle market with new business up 17% as we still see good opportunities there. Within middle market, workers' compensation net written premium was up 22%, as we still see pockets to grow profitably while being more selective in certain geographies and accounts. On the other hand, net written premium declined 14% in national accounts property where we are seeing a significant amount of undisciplined market behavior, and net written premium declined 9% in construction where certain classes and geographies continue to be substantively impacted by social inflation and, as a result, we are executing on underwriting actions in segments of that portfolio.

We are cognizant of the fact that the underlying causes of social inflation have not abated and are not benign, and so we are being disciplined in how we transact the business. In areas like national accounts property, there are still pockets where we see rate adequacy and opportunity despite the higher level of competition, but we will not pursue growth at the expense of profit dollars. Rate change was 2% in the quarter, down about a point compared to the fourth quarter. Similar to the growth, rate was also bifurcated, with rates in commercial auto and excess casualty remaining in double-digits, whereas rate was down double-digits in national accounts property. Workers' compensation rates continue to be down low single-digit. Excluding workers' compensation and national accounts property where we see that heightened level of competition, rate was up 7%.

For Specialty, the all-in combined ratio was 102.7% compared to 95.1% in the prior year quarter. Prior period development was unfavorable by $50 million or 5.9 points of the combined ratio. The prior period development was driven by reserve strengthening in recent accident years for our affinity professional E&O class where we are reacting to signs of slightly higher severity. The underlying combined ratio was 96.8% compared to 93.8% in the prior year quarter. The underlying loss ratio was 62.8%, up from 60.6% in the fourth quarter and 60.1% in the prior year quarter. Earned rate continues to lag overall long-run loss cost trends, and we have been prudent in reflecting the recent accident year reserve pressure in our underlying loss ratio. As further evidence of our prudent approach, we are not yet reflecting the potential beneficial impact of underwriting strategies and rather waiting to see how it bears out over time. The expense ratio was 33.6% compared to 33.4% in the prior year quarter.

In Specialty, net written premium declined 1% in the quarter, heavily influenced by volatility in surety where premiums declined 9%. This is off of a large base that grew 12% in the prior year quarter and reflects fewer jumbo bond opportunities in the quarter. Our construction clients have plenty of backlogged projects but the timing of the start of those projects will result in quarterly premium volatility. Specialty growth excluding surety was up 2%.

For Specialty overall, new business was up 13% in the quarter and retention was 86%, fairly consistent with recent quarters. Rate remained consistent this quarter at 3% with renewal premium change up a point to 5%. Rate change has been consistent at 3% for the past five quarters with some variation by class. Rate was up a point to 1% in financial and management liability lines in the aggregate, with the continuation of low to mid-single digit rates in public company directors and officers (D&O) and cyber. Rate remained strong in healthcare at 8% and stable in affinity business at 3%.

For International, the all-in combined ratio was 95.9% with 1.2 points of catastrophe losses. The underlying combined ratio was 94.7%. The underlying loss ratio was 59.8% compared to 58.5% in the prior year quarter. The increase in the underlying loss ratio was due to the continued soft market conditions across the segment. The expense ratio was 34.9% compared to 33.3% in the prior year quarter.

International net written premium grew 16% in the quarter, or 7% excluding currency fluctuation. New business grew 2% in the quarter and retention was 85%. Rates were down 4% in the quarter as the environment continues to be highly competitive. Despite this heightened level of competition, we continue to find excellent opportunities in Canada, Continental Europe and the U.K. regions that are still at strong levels of rate adequacy in specific lines and geographies.

CNA's first quarter core income was $225 million compared to $281 million in the prior year quarter, resulting in a first quarter core return on equity of 7.2% and a trailing twelve-month core return on equity excluding accumulated other comprehensive income (AOCI) of 10.6%. The decrease in core income reflects prudent actions to strengthen prior year loss reserves in excess casualty and professional E&O lines for recent accident years as well as an increase in the current accident year loss ratios.

Our P&C expense ratio for the first quarter was 29.9%, an improvement of 0.3 points compared with the prior year quarter. Our expense ratio improvement this quarter reflects favorable acquisition costs and continued operating discipline, even as we continue to increase investment in our technology, digital and artificial intelligence (AI) capabilities. While there is always a degree of quarter-to-quarter variability in this ratio, we continue to believe an expense ratio around 30% represents a reasonable run-rate for the full year 2026.

The P&C net prior period development impact on the combined ratio was 4.1 points in the current quarter, compared with 2.5 points in the prior year quarter. In the Specialty segment, prior period development was $50 million unfavorable, primarily driven by professional E&O business in recent accident years. In the Commercial segment, prior period development was $56 million unfavorable driven by excess casualty in recent accident years.

The P&C paid-to-incurred ratio was 77% this quarter, below the low-to-mid 80% average of the past four years, primarily reflecting the reserve strengthening taken during the quarter. P&C paid losses naturally vary from quarter-to-quarter, and while individual quarters may move up or down, the underlying trend in paid losses has increased over time, consistent with portfolio growth and higher loss costs.

The Life & Group segment produced a core loss of $9 million for the quarter with underwriting results broadly in line with expectations, compared to a $6 million gain in the prior year quarter which reflected modestly favorable persistency experience.

The Corporate segment produced a core loss of $14 million in the first quarter compared to a $36 million loss in the prior year quarter. The prior year quarter included a $17 million after-tax charge related to unfavorable prior period development largely associated with legacy mass tort abuse claim activity. As a reminder, we conduct our comprehensive review of legacy mass tort exposures in the second quarter of each year.

Net investment income was $610 million in the first quarter compared with $604 million in the prior year quarter, an increase of 1%. The increase was driven by our fixed income and other investments, partially offset by lower returns in our limited partnership and common stock portfolios.

Fixed income and other investments generated $568 million of income, up 3% 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 a growing asset base. The effective income yield of our consolidated fixed income portfolio was 4.9% in the first 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 fairly in line with 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 $575 million in the second quarter. For the full year, we expect income from fixed income and other investments to be about $2,300 million, or a 2% increase as compared to the full year 2025.

Our limited partnership and common stock portfolio returned a $42 million gain, or 1.4%, in the current quarter compared to a $54 million gain, or 2.0%, in the prior year quarter. The lower return was primarily due to our hedge fund and common stock portfolios, whose returns were in line with the broader public equity market performance.

As a reminder, private equity funds, which represent about 90% of our limited partnership portfolio, generally report to us on a quarter lag, so results this quarter were primarily reflective of performance from the fourth quarter of 2025. Given the recent volatility in public equity markets, we believe we may see similar volatility in our limited partnership and common stock portfolio results in the near term.

At quarter-end, our balance sheet remained very strong. Stockholders' equity excluding AOCI was $12.2 billion, or $45.12 per share. Including AOCI, stockholders' equity was $10.9 billion, or $40.13 per share. Statutory capital and surplus in the combined Continental Casualty Companies was $11.1 billion at quarter-end, reflecting the continued strength of our capital position.

Operating cash flow for the quarter was $393 million as compared to $638 million in the prior year first quarter. The decrease includes approximately $100 million of payments related to specific reinsurance treaties, which occurred in the first quarter of this year but were paid in the second quarter of last year. Outside of this timing difference, operating cash flow reflects higher paid losses compared with the prior year first quarter, as a result of normal quarter-to-quarter paid loss variability and portfolio growth in prior years, while remaining well supported by strong investment results and steady premium collections. The effective tax rate on core income for the quarter was 21.1%, consistent with our expectations for the full year.

Finally, we are pleased to announce our regular quarterly dividend of $0.48 per share, payable on June 4, 2026 to shareholders of record on May 18, 2026.

Overall, we produced $225 million of core income despite taking actions to continue to increase the prudence in our underlying loss ratio and long-tailed lines reserves for recent accident years. These longtailed excess casualty and professional lines will play out over time; however, as we demonstrated last year on primary commercial auto, our philosophy is to respond quickly to any early adverse loss trend signals and market pricing pressure to address potential uncertainty. At the same time we continue to be measured on the anticipated benefits of our underwriting actions. This gives us what we believe to be an appropriately conservative position on our reserves and underlying loss ratio. In summary, we will not jeopardize our long term value creation by not recognizing market trends and adjusting underwriting strategies. We are executing our strategies with precision and nuance, growing substantially in some areas where we see opportunity while maintaining strong discipline in others that are subject to an irrational level of competition.

Our expense ratio is down, and as we have gained efficiency we have continued to place investments in technology and AI, which have started to benefit us through a well-structured and evolving strategy. This includes over 100 separate AI initiatives executed across different areas of the organization, ranging from the use of AI to intake and triage submissions, to summarization of claims documents and generation of actionable insights. We are also using AI to analyze accounts within our risk control area, perform advanced analytics to gain insights on exposure to loss at a depth never before possible and support a variety of other initiatives covering virtually every functional area in our organization.

Looking ahead to the rest of the year, we will continue to operate with strong discipline, and we remain committed to tightening our execution in the marketplace as we execute detailed underwriting strategies to optimize our portfolio in the current environment.

[ The transcript was presubmitted by CNA Financial Corporation. No live call was conducted for the fourth quarter earnings call. ]

In the fourth quarter, we produced excellent results, achieving another quarter of underlying underwriting gain above $200 million and higher levels of investment income. Net written premium was up 2%, retention improved by three points from last quarter, and renewal premium change was 4%, consistent with last quarter. For the full year, we achieved record levels of core and net income. Our underlying combined ratio was below 92% for the fifth consecutive year and our underlying underwriting gain was $855 million, which is the best on record.

Core income was $317 million in the fourth quarter with P&C core income of $449 million. Net investment income increased to $653 million, with continued strong performance in our fixed income portfolio more than offsetting lower, but still strong, limited partnership and common stock returns.

The P&C all-in combined ratio was 93.8%, an increase of 0.7 points compared to the prior year quarter. The increase is principally from a higher underlying loss ratio of 61.9% compared to 61.1% in the prior year quarter. As we have stated previously, in light of pricing pressures in pockets of the portfolio, we will remain prudent in our loss ratio picks, even as we continue underwriting actions in order to optimize our position in the current marketplace.

Catastrophe losses of $40 million added 1.5 points to the combined ratio.

The P&C underlying combined ratio was 92.3% in the quarter, 0.9 points higher than the prior year quarter. The underlying underwriting gain was once again strong at $207 million. The expense ratio of 30.1% was roughly consistent with the prior year quarter, and it was adversely impacted by 0.5 points from a non recurring technology charge in Specialty.

In the quarter, net written premium growth was 2% in aggregate, which varied significantly across the different areas of our portfolio. P&C rate change was 2% and renewal premium change was 4%, with differences by class of business.

New business was roughly flat compared to the prior year quarter, as we lean into profitable opportunities while being highly selective in pockets where the market will not support the rate, terms and conditions to achieve an appropriate risk adjusted return.

Retention was 84% this quarter, up three points compared to last quarter. Similar to last quarter, we saw significant differentiation in retention as we execute strategies in a highly granular fashion in this diversified market.

Turning to the quarterly results in our three operating segments, in Commercial, the all-in combined ratio was 92.5%, roughly in line with last year. The all-in underwriting gain of $109 million was the best on record. Catastrophe losses of $35 million added 2.4 points to the combined ratio. The underlying combined ratio was 90.2%, only slightly higher than last year' s record low of 90.0%. The underlying underwriting gain was $142 million and the underlying loss ratio was 63.4%, consistent with last quarter but 0.9 points higher than the prior year quarter. The expense ratio was 26.4%, the second consecutive quarter below 27%. The Commercial expense ratio has improved about ten points since 2016. Prior period development in the quarter was negligible.

In Commercial, net written premium growth was 4%. New business was 5% lower than the prior year quarter and retention was 82%. We continue to be selective in areas we are growing based on the dynamics taking place in those marketplaces. For example, new business was down 22% in commercial auto compared to the prior year quarter, but up 19% in workers' compensation. Rate change in the fourth quarter was slightly more than one point below the third quarter, rounding to 3% all-in or 5% excluding workers' compensation. Rates in commercial auto and excess casualty were once again double-digit. The market continues to be very competitive in national accounts property with rates down low double-digit. Workers' compensation rates were down low to mid single-digit consistent with the historical profitability of that line, offset by some exposure increase. Exposure change was 1% for Commercial this quarter. In areas such as general liability and workers' compensation, we continue to see the benefit of exposure change that acts like rate in the low to mid single-digit range.

For Specialty, the all-in combined ratio was 99.0% in the fourth quarter. Prior period development was unfavorable by 3.0 points driven by professional and management liability. Notably, this reserve increase is consistent with our philosophy, where we react swiftly to potential areas of pressure and more slowly to potential pockets of favorability. The reserve strengthening this quarter was concentrated in accident years 2023 and 2024, with favorability in accident years 2022 and prior. The underlying combined ratio was 96.0% and the underlying loss ratio was 60.6%, consistent with last quarter and up 0.5 points from the prior year quarter. The expense ratio was 35.1%, up 1.7 points compared to the prior year quarter. Absent the non recurring technology charge referenced earlier, the expense ratio was largely consistent with the prior year quarter.

In Specialty, net written premium declined 2% as we remain cautious in financial and management liability lines after multiple years of rate decreases. We continue to see growth in other parts of our portfolio such as affinity programs and surety. Retention was strong at 85% for the quarter. Rate remained consistent this quarter at 3% with renewal premium change of 4%. Rate remained strong in healthcare at 8%. We achieved rate increases of 3% in our affinity business, up one point over last quarter. Rates were flat overall in our financial and management liability lines in aggregate, but importantly, rates were up low to mid single-digits in both public company directors and officers (D&O) and in cyber.

For International, the all-in combined ratio was 85.3% in the quarter with 1.6 points of catastrophe losses and 7.5 points of favorable prior period development. Favorable prior period development was driven by property and marine lines. The underlying combined ratio was 91.2%. The underlying loss ratio was 58.5%, and the expense ratio was 32.7%.

International net written premiums grew 1% in the quarter. New business grew 20% as we capitalized on profitable opportunities in areas that are still rate adequate despite the recent market softening. Retention was 88%, and overall renewal premium change declined 1% with rates down 5%, a slight improvement from last quarter as we continue to see competitive pressure across the various geographies. Despite the competitive pressure, we continue to see strong opportunities in many geographies and products within this segment. This business continues to be an important part of our go-forward strategy and has consistently contributed to our overall results.

For the full year, we achieved record core income of $1,342 million. This is the third consecutive year of record core income as we continue to build on the momentum of all our business segments. The increase in core income was reflective of record high P&C core income of $1,664 million, which included record high underlying underwriting gain of $855 million.

The P&C all-in combined ratio was 94.7% and catastrophes were 2.3 points of the combined ratio or $240 million. For the P&C segment, the impact of prior period development was slightly unfavorable for the year. We had unfavorable development in the commercial casualty and professional and management liability lines, which was partially offset with favorable development in our workers' compensation and surety classes of business. The underlying combined ratio was 91.8% for the year and the expense ratio improved 0.5 points to 29.7%, the lowest since 2008, benefiting from higher net earned premiums while we continue to invest in the business. The underlying loss ratio was 61.7%, up 0.8 points compared to the prior year, as we continue to prudently establish our underlying loss ratios.

All three operating segments produced very strong all-in and underlying combined ratios again in 2025. For Commercial, the all-in combined ratio was a record low of 95.2%, benefiting from a record best underlying combined ratio of 90.5% and a lower level of catastrophes. Specialty produced an all-in combined ratio of 95.3% and an underlying combined ratio of 94.2%. For International, the all-in combined ratio was 91.2%, down 2.8 points compared to the prior year as prior period development was favorable by 1.9 points. The underlying combined ratio was 91.3%, consistent with last year.

Turning to production for the year, P&C net written premium growth was 5% and net earned growth was 7%. New business grew by 4% to a record high of $2,348 million. Retention was down slightly at 83%, as we continue to be selective in the various products and geographies where we do business. Rates for the year were up 3%, and renewal premium change was 4%. A majority of our third-party treaties came up for renewal on January 1st. All of the renewals were successful. Most treaties were oversubscribed and renewed with favorable terms. The economics of our reinsurance coverage and ceding commission remain very favorable on these lines of business.

CNA' s fourth quarter core income of $317 million is down 7% compared to the prior year quarter of $342 million but continues to reflect strong underwriting and investment results. Full year 2025 core income of $1,342 million is a best on record leading to a core return on equity of 10.6%. This result reflects a P&C underwriting gain of $551 million and record high net investment income of $2,557 million, which is 2% higher than 2024.

Our P&C expense ratio was 30.1% for the fourth quarter and 29.7% for the full year. The expense ratio for the fourth quarter includes a half point non-recurring technology charge while both periods benefited from higher net earned premiums. While there is always a certain amount of variability quarter to quarter, we currently believe an expense ratio close to 30.0% is a reasonable run-rate heading into 2026.

The P&C net prior period development impact on the combined ratio was neutral in the current quarter. In the Specialty segment, prior period development was $27 million unfavorable primarily from other professional and management liability. In the Commercial segment, prior period development was negligible overall with favorable development in workers' compensation, offset by unfavorable development in commercial auto and general liability. For the International segment, prior period development was $25 million favorable primarily from property and marine.

The paid to incurred ratio for our P&C segments was 0.88 for the fourth quarter. We do see some fluctuations quarter to quarter, so we tend to take a longer view of this metric. The paid to incurred ratio was 0.82 for the full year of 2025 and has been quite stable between 0.80 and 0.83 for each of the last four full years.

Our Corporate segment produced a core loss of $103 million in the fourth quarter compared to a $91 million loss in the fourth quarter of 2024. The loss this quarter includes the results of our annual fourth quarter asbestos and environmental pollution (A&EP) reserve review resulting in additional cessions of $185 million to the $4 billion loss portfolio transfer (LPT), which was incepted in 2010. This strengthening of reserves is associated with higher defense and indemnity costs on existing claims. This review resulted in a non economic, after-tax charge of $67 million as compared to a $35 million charge in the prior year quarter.

Following this review, our cumulative incurred losses of $3.9 billion dollars remain within the $4 billion LPT limit while cumulative paid losses are $2.8 billion.

You will recall from previous years' reviews that under retroactive reinsurance accounting, there is a timing difference with respect to recognizing the benefit of the cover relative to incurred losses as we can only do so in proportion to the paid losses recovered under the treaty. As such, holding all else constant, the loss recognized today will be recaptured over time through the amortization of the deferred accounting gain as paid losses ultimately catch up with the losses incurred. As of year-end 2025, we have $470 million of deferred gain that will be recaptured over time.

Finally, there was no prior period development associated with legacy mass tort abuse reserves in the fourth quarter, compared to a $17 million after-tax charge in the prior year quarter.

As we have noted in prior calls, we perform our annual review of A&EP reserves during the fourth quarter, and we evaluate all other corporate segment reserves primarily in the second quarter.

For the Life & Group segment, we had a core loss of $29 million in the fourth quarter as compared to a core loss of $18 million in the prior year quarter, reflecting unfavorable persistency experience. Life & Group full year core loss of $44 million is a larger loss than the 2024 core loss of $23 million due to lower investment income. The full year 2025 underwriting result is about flat with 2024, with both full year results being broadly in-line with expectations. Finally, inforce management actions including the pursuit of rate and policy buyouts are ongoing. Since we launched our buyout program in 2020, we have bought out approximately 12,000 policies releasing nearly $400 million of statutory reserves.

Turning to investments, net investment income was $653 million in the fourth quarter compared with $644 million in the prior year quarter, an increase of 1%. The increase was driven by our fixed income and other investments, partially offset by lower, albeit solid, returns in our limited partnership and common stock portfolios.

Fixed income and other investments generated $576 million of income, up 5% 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 fourth 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 fairly in line with our Life & Group portfolio effective income yield of 5.7%.

Our limited partnership and common stock portfolio returned a $77 million gain, or 2.7%, in the current quarter compared to a $94 million gain, or 3.5%, in the prior year quarter.

Total net investment income was a best on record of $2,557 million for the full year 2025 compared with $2,497 million in 2024, an increase of 2%. Similar to the quarterly results, the increase was driven by our fixed income and other investments, partially offset by lower, but still strong, returns in our limited partnership and common stock portfolios.

Fixed income and other investments generated $2,255 million of income for the year, up 4% compared to the prior year. Limited partnerships and common stocks generated $302 million of income representing a 11.1% return compared to $320 million of income representing a return of 13.3% in the prior year. Looking ahead to 2026, based on the current interest rate environment we expect income from fixed income and other investments to be about $575 million in the first quarter, which is about flat compared to the fourth quarter of 2025 given what we expect to be limited reinvestment activity. For the full year, we expect income from fixed income and other investments to be about $2,325 million, or a 3% increase as compared to the full year 2025.

At quarter end, our balance sheet continues to be very solid with stockholders' equity excluding accumulated other comprehensive income (AOCI) of $12.7 billion, or $46.99 per share, an increase of 10% from year-end 2024 adjusting for dividends. Stockholders' equity including AOCI was $11.6 billion or $42.93 per share. With the decline in interest rates in 2025, the net unrealized investment loss in our fixed income portfolio decreased to $1.2 billion as of year-end, roughly half the level at year-end 2024. Finally, we ended 2025 with statutory capital and surplus in the combined Continental Casualty Companies of $11.6 billion, which is a record high and is up from $11.2 billion at the end of 2024.

We continue to maintain a conservative capital structure with a low leverage ratio and a well-balanced debt maturity schedule. We are especially pleased with the fourth quarter action taken by AM Best who upgraded CNA' s financial strength rating to A+ with a comparable upgrade to CNA' s debt ratings - both with stable outlooks. We view AM Best' s actions as recognition of the significant progress we have made in the performance of the business in recent years.

Operating cash flow for the year was strong once again at $2.5 billion, which reflects continued strong underwriting and investment results.

Turning to taxes, the effective tax rate on core income for the fourth quarter was 20.4% and reflects a benefit for tax-exempt investment income, somewhat offset by state income taxes. The full year 2025 effective tax rate on core income was 21.1%, which is consistent with a 21% effective tax rate we expect for 2026, although there will be a certain amount of variability quarter-to-quarter.

Finally, given the company' s strong underwriting and investment performance, we are pleased to announce we are increasing our regular quarterly dividend by 4% from $0.46 per share to $0.48 per share. In addition, we are declaring a special dividend of $2.00 per share - both dividends will be paid on March 12, 2026, to shareholders of record on February 23, 2026. Using this past Friday' s closing price, CNA shares have a very attractive dividend yield of approximately 8%, inclusive of the $2.00 special dividend.

We closed the year with a strong fourth quarter leading to record levels of core income, growth in investment income and strong cash flow for the year. Our P&C operations continue to perform very well with record high levels of underlying underwriting gain, and we lowered our expense ratio by a half point even while continuing to invest in talent, technology and artificial intelligence (AI).

AI is becoming part of the fabric of how we run CNA. Our approach is pragmatic and driven by the return on investment. We automate what matters, equip our people with better tools, and improve broker and customer experience. Over the past year, we' ve deployed a number of AI solutions across underwriting, claims and the back office, and we' ve rolled out generative AI tools to every CNA employee across the company. We' re seeing faster triage, better submission responsiveness and measurable time savings for our teams. At this point, we' re very happy with where we are and we' ll continue to invest in AI in those areas where we believe AI implementation improves risk selection, service quality and efficiency.

Finally, we are pleased with our 2025 financial performance, anchored by our commitment to disciplined underwriting and highlighted by record core income. We believe AM Best' s recent upgrade of our financial strength rating to A+ is reflective of our consistently strong performance and productive underwriting culture. Looking forward, we believe we are well positioned to work with our distribution partners to take advantage of the many opportunities we see in the marketplace.

[ The transcript was presubmitted by CNA Financial Corporation. No live call was conducted for the third quarter earnings call. ]

We are pleased with our third quarter results, which produced record core income of $409 million, driven by very strong underwriting gain and higher net investment income. On a year to date basis through September, core income exceeded $1 billion for the first time on record. Underwriting income was particularly strong this quarter at $194 million, nearly triple the prior year quarter as we benefited from benign catastrophe losses. We achieved record underlying underwriting gain of $235 million, the tenth consecutive quarter of underlying underwriting gain above $200 million. We grew net written premiums 3% as we continue to capitalize on pockets of excellent opportunities for growth while maintaining strong underwriting discipline across our operations. Operating cash flow remained strong this quarter, and net investment income of $638 million increased $12 million year over year, driven by higher fixed income results.

The P&C all-in combined ratio was 92.8% in the third quarter, including $41 million or 1.5 points of catastrophe losses. The catastrophe loss ratio was substantially lower than our third quarter average over the past five years. Prior period development was negligible in the quarter. The P&C underlying combined ratio was 91.3%. The underlying loss ratio was 61.9%, 0.8 points higher than the third quarter of 2024 and 0.4 points higher than the first half of 2025, as we continue to maintain our prudent philosophy on our underlying loss ratio based on the market conditions around pricing and loss cost trends. We continue to manage our expense ratio effectively, which was 29.1% in the quarter.

Net written premiums grew 3% in the quarter, and gross written premiums excluding captives grew 2%. Similar to last quarter, growth was impacted by lower retentions in certain segments within the Commercial and Specialty portfolios as we execute tailored renewal strategies to optimize our portfolio. In certain small pockets within individual lines and geographies, we believe the external loss cost environment is not being appropriately reflected. When our underwriters can't obtain pricing, terms and conditions appropriate to the risk, we will not trade bottom line profit for growth and will walk away. P&C rate increase was 3% in the quarter, consistent with last quarter, and renewal premium change was 4%. In both our Commercial and Specialty segments in the U.S., the rate and renewal price change was the same as the prior quarter, while rates declined two points in International. P&C new business was up slightly at $549 million, and we continue to capitalize on opportunities within each of our segments.

Turning to our three operating segments, in Commercial, the all-in combined ratio was 92.7%, a 7.5 point improvement from the prior year quarter. Catastrophe losses were $39 million, representing 2.7 points on the combined ratio, a 6.9 point improvement from the prior year quarter. Prior period development was negligible. The underlying combined ratio was 90.0%, a record low, and represents the seventh straight quarter at 91% or below. The expense ratio was 26.1%, an improvement of 1.6 points year over year and the first quarter on record below 27%. Partially offsetting the improvement in the expense ratio was the underlying loss ratio of 63.4%, up 0.9 points year over year and up 0.5 points compared to the first half of 2025. We have continued our prudent reserving philosophy, particularly in the lines most impacted by social inflation. Because of the higher loss cost trends we have seen over the last several years, we are not lowering the underlying loss ratios for those social inflation impacted lines despite rates being at or above long-run loss cost trend over time, and we continue to react to areas where the rate and trend dynamic is less favorable. The dynamics underpinning social inflation have not abated, and we believe our prudence continues to be warranted as we establish our underlying loss ratios.

Commercial segment net written premium growth was 2% in the quarter, and gross written premiums excluding captives grew by 1%. New business was $324 million in the quarter. Lower new business was driven by the continuation of prudent underwriting in pockets of our commercial auto portfolio, where terms and conditions on many account opportunities did not provide the rate of return we believe appropriate. Rate increase for the Commercial segment was 5% in the quarter, and renewal premium change was 6%, consistent with the prior quarter. We have continued to see rate reductions in national accounts property, where rate was down a point compared to the second quarter. However, national accounts property continues to achieve an appropriate return overall, and we continue to capitalize on many favorable opportunities despite the recent decline. Property rates, excluding national accounts, are still strong at high single-digit. Excess casualty rate remained low double-digit in the quarter, and commercial auto rate was consistently high at 17%. Primary general liability rates are still in the mid single-digit range, and workers' compensation rate was improved in the quarter, but still negative, while renewal premium change was positive due to a 4% exposure increase, a substantive portion of which can act like rate. Retention in the Commercial segment was 79% in the third quarter. The lower retention is largely due to efforts that began earlier this year to reposition the commercial auto portfolio in construction and middle market given the reality of the marketplace trajectory and the granular underlying loss drivers in specific areas. As a result of those efforts, the commercial auto retention was again several points lower than the overall average, whereas in workers' compensation, which has been very profitable for us, retention was several points higher than the average.

Within Specialty, the all-in and underlying combined ratios were 93.3%. The expense ratio was 32.5%, and the underlying loss ratio was 60.6%. The underlying loss ratio is 0.5 points higher than the third quarter of 2024 and the first half of 2025 and is impacted by the continuation of flat to negative rate in the financial institutions and management liability portfolio. We continue to leverage our deep specialization in the Specialty portfolio to execute nuanced underwriting strategies to optimize our book in the current competitive environment. However, in line with our prudent reserving philosophy, we believe reacting to the current market dynamics in areas like financial institutions and management liability remains appropriate, and we will continue to make adjustments based on what we see over time.

Specialty segment net written premiums grew by 1%, and gross written premiums excluding captives growth was 3%. Rate increased by 3%, consistent with the past two quarters. New business was $131 million in the quarter. Retention was strong at 86%, consistent with the second quarter.

The small underlying loss ratio adjustments in Commercial and Specialty this quarter compared to the first half of 2025 reflect our best estimate of the impacts for the latter half of accident year 2025. In each case, this is a reflection of our prudent philosophy across our portfolio where long-run loss cost trends, while unchanged from prior quarters, are still at elevated levels, pricing levels are declining for certain classes and these slightly higher loss ratios provide for some level of uncertainty as the accident year matures.

In International, the all-in combined ratio was 91.8% in the quarter, including $2 million or 0.6 points of catastrophe loss compared to 5.1 points in the prior year quarter. The underlying combined ratio was 91.2%. The underlying loss ratio was 58.5%, up 0.4 points compared to the same quarter last year, but consistent with the first half of 2025. The expense ratio was 32.7%, 0.9 points lower than last year.

International segment net written premiums were up 15% and 12% excluding currency fluctuations. Gross written premiums were up 6% and 3% excluding currency fluctuations. The net written premium was favorably impacted by a true-up on reinsurance costs for prior treaty terms. New business was $94 million, up 29%, as we continue to capitalize on several niche opportunities. Rates declined by 6% as competition continues to escalate. Our retention was 83% as we hold on to the parts of our portfolio that have been consistently profitable, leading to twenty-one consecutive quarters of underwriting profitability in the segment. We believe International will continue to contribute meaningfully to both the top and bottom line going forward, as we navigate through the softer market conditions to capitalize on favorable opportunities.

CNA's third quarter core income of $409 million is up from $293 million in the prior year, leading to a trailing twelve-month core return on equity of 10.9%. These results reflect another quarter of strong underlying underwriting results, lower catastrophe losses and excellent investment results.

Our P&C expense ratio was 29.1% for the third quarter and 29.7% for year to date 2025. These results reflect higher net earned premiums and a lower acquisition expense ratio. Recognizing the expense ratio can vary quarter to quarter, we currently expect a fourth quarter 2025 expense ratio somewhere in the range of where it has been for the two most recent quarters.

The P&C net prior period development impact on the combined ratio was flat in the current quarter across each of our segments. In the Specialty segment, prior period development was neutral overall, and this was attributable to favorable development in surety offset by unfavorable development in other professional liability and management liability from the professional errors and omissions business.

Our Corporate segment produced a core loss of $25 million in the third quarter, compared to a $44 million loss in the prior year quarter. The prior year quarter included a $17 million after-tax charge related to unfavorable prior period development largely associated with legacy mass tort abuse reserves. We also note that, as has been the case in recent years, we intend to review our asbestos & environmental reserves within the Corporate segment in the fourth quarter.

In the Life & Group segment, we recorded a core loss of $22 million for the third quarter compared to a $9 million core loss for the prior year quarter. Life & Group investment income decreased by $14 million pretax compared to the prior year quarter, driven by lower earnings from limited partnership investments. In addition, both periods were impacted by our annual reserve assumption updates – a $7 million unfavorable after-tax impact in 2025 and a $5 million unfavorable impact in 2024.

Each year in the third quarter, we undertake our reserve reviews for Life & Group, which includes the analysis of reserving assumptions underlying our Long-Term Care (LTC) and structured settlement reserves. Taken together, the third quarter reserve reviews resulted in an essentially neutral impact on reserves for Life & Group. The results of our annual reviews are highlighted on slide 13 of our earnings presentation.

The assumption update for LTC involves a thorough review of all our reserving assumptions including cost of care inflation, morbidity, persistency and premium rate actions. Notably for this year's assumption update, we revised morbidity assumptions reflecting unfavorable incidence and claim closures, and we strengthened our near-term cost of care inflation assumptions. In addition, we outperformed rate increase assumptions reflecting rate approvals across a number of states. The net impact of all LTC assumption updates was slightly favorable.

Under Long Duration Targeting Improvements (LDTI) accounting, the net premium ratio can defer favorable or unfavorable results into future periods – depending on which policy year cohort is impacted. For this assumption update, $12 million of favorable assumption updates have been deferred for recognition in future periods over the remaining life of the respective impacted policy year cohorts. After the deferral of favorable assumption updates, the result was a $7 million unfavorable adjustment to LTC reserves.

Updates to best-estimate assumptions also impact our LTC margin under statutory accounting practices. These assumption revisions increased our statutory margin to $1.5 billion, up from $1.4 billion a year ago.

Finally, the annual structured settlement reserve review resulted in a $2 million unfavorable adjustment to GAAP reserves.

Slide 14 of our earnings presentation provides an update on our LTC business. We believe our proactive approach to managing this portfolio, combined with the higher interest rate environment over the last four years, has considerably improved the outlook for this business.

Our Individual block has been closed since 2004, and our Group block has been closed since 2016. We have achieved substantial reduction in policy exposure in each block since these respective dates, while at the same time obtaining substantive rate increases and benefit reductions via our active inforce management, inclusive of our ongoing policy buyout program. On the investment side, the favorable interest rate environment since early 2022 has improved the underlying economics of this business, as we have been able to lock in high quality, longer duration securities at attractive coupons to support the underlying liabilities of the business - essentially achieving appropriately matching asset and liability durations. This is reflected in the statutory margin which has grown to $1.5 billion, up from $1.1 billion in 2022.

Slide 15 of the earnings presentation provides details on the Individual block characteristics. This block is more mature, with an average attained age of 83 years, and generally features richer benefits, including inflation riders on most policies and lifetime benefits on some policies. The de-risking of this block continues through inforce initiatives, with policy counts down by 50% since 2015 and stable open claim counts. Going forward, we currently expect policy counts to decline by 65% from the current level over the next ten years. We believe the Individual LTC reserves have hit an inflection point and have begun to decline using locked-in discount rate assumptions.

Slide 16 of the earnings presentation provides details on the Group block characteristics. The attained age is 70 years, and, compared to the Individual block, the Group block features less rich policy benefits. Only 1% of Group policies feature lifetime benefit periods, and the block has a relatively modest exposure to inflation. As is the case with the Individual block, the de-risking of the group block continues through inforce initiatives, with policy counts down by 48% since 2015 and stable open claim counts. Going forward, we currently expect policy counts to decline by 25% from the current level over the next ten years. We currently believe Group LTC reserves will peak in the mid-2030s and at a substantially lower level relative to the Individual block primarily due to lower benefit features.

In summary, we believe the financial risk from the LTC block is contained as we believe we are past peak reserves in the larger Individual LTC block, our policy count is half what it was ten years ago, we have demonstrated continued progress executing on inforce and investment portfolio actions and we believe we maintain prudent reserving assumptions.

Turning to our investments results, net investment income was $638 million in the third quarter compared with $626 million in the prior year quarter, an increase of 2%.

Fixed income and other investments generated $567 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 4.8% in the third quarter. Reinvestment rates continue to be above our P&C portfolio effective income yield of 4.4% and are fairly in line with 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 $570 million for the fourth quarter.

Our limited partnership and common stock portfolio returned a $71 million gain, or 2.5%, in the current quarter compared to a $80 million gain, or 3.1%, in the prior year quarter.

At quarter-end, our balance sheet continues to be very solid with stockholders' equity excluding accumulated other comprehensive income (AOCI) of $12.5 billion, or $46.30 per share, an increase of 8% from year-end 2024 adjusting for dividends. Stockholders' equity including AOCI was $11.3 billion or $41.83 per share. With the decline in interest rates during the year, the net unrealized investment loss in our fixed income portfolio decreased to $1.2 billion as of quarter-end, roughly half the level at year-end 2024. Finally, we ended the quarter with statutory capital and surplus in the Combined Continental Casualty Companies of $11.5 billion, which is the highest on record.

We continue to maintain a conservative capital structure with a low leverage ratio and a well-balanced debt maturity schedule. During the third quarter, we issued $500 million of senior notes in advance of our next debt maturity in the first quarter of 2026.

Operating cash flow was $720 million for the quarter as compared to $748 million for the prior year quarter, while year to date operating cash flow is up 3% to $1,920 million. These results reflect continued strength in our underwriting and investment results.

The effective tax rate on core income was 21.3% for the third quarter, and 21.4% for the year to date period, which is in line with our full year 2025 expectations. 4 Finally, we are pleased to announce our regular quarterly dividend of $0.46 per share to be paid on December 4, 2025 to stockholders of record on November 17, 2025.

CNA has produced record levels of core income for the quarter and year to date on the foundation of excellent underwriting gains and continued growth in net investment income. Both our underlying and all-in combined ratios are improved in the quarter compared to last year, and our expense ratio is below 30% for the quarter and year to date. We are managing our expense ratio effectively while continuing to increase our investment in talent and technology, including the use of artificial intelligence in certain parts of our business. Our underwriters work closely with our clients and brokers to tailor insurance solutions to meet the needs of our clients. We are balancing all of the market dynamics well, growing in areas where we can achieve an appropriate return, while pulling back and retrenching in other areas. We continue to capitalize on multiple opportunities in the excess and surplus (E&S) lines market through our Cardinal E&S offering. As E&S continues to be a larger proportion of the overall P&C market and as CNA continues to scale and grow our E&S operations, we expect it will represent a growing portion of our business as we capitalize on many attractive opportunities. Our underwriters are in the market working closely with our brokers and clients, and we look forward to closing out the year in strong fashion.

As we near the end of the year and Dino Robusto's term as Executive Chairman, I also want to express deep gratitude to Dino on behalf of the organization for his vast contributions to CNA. Dino's leadership and vision over the last nine years has created lasting value for all stakeholders.