Regarding non-GAAP measures, reconciliations to the most comparable GAAP measures have also been provided in our most recent 10-K and 10-Q, as well as in the financial supplement.This call is being recorded and webcast. During the next week, the call may be accessed on CNA's website. Now I will turn the call over to CNA's Chairman and CEO, Tom Motamed. Thomas F. Motamed Thank you, Marie. Good morning, everyone, and thank you for joining us today. Before Craig reviews our first quarter financial results, I would like to share a few highlights. We are pleased to report improved net operating income of $226 million, up from $213 million in 2011. The improvement in our first quarter results was driven by lower catastrophe losses and strong investment income. First quarter net income improved to $250 million from $220 million in 2011. Our Specialty business continues to deliver solid underwriting results with a first quarter combined ratio of 97.3%. We are pleased by Specialty's 4% growth, which was driven by improved rate and solid retention, as well as the new to loss business ratio of 1.5:1. Rates in Specialty increased 3% with retention holding steady at 87%. Specialty hit ratios were down 1% reflecting our continuing focus on selective underwriting, increase in rates and disciplined new business pricing. In fact, new business pricing is stronger than on our renewals. In Commercial, our first quarter combined ratio was 106.2%, an improvement of nearly 2 points over the prior year period due to lower catastrophe losses. Commercials non-cat accident year loss ratio improved modestly from 2011 full-year results, a reflection of ongoing improvements in both earned rate and risk selection. Commercial's combined ratio excluding catastrophes and development was 105.4%, up 2.8 points from the prior year period. The unfavorable period-over-period comparison is due to a large insurance receivable recovery in the 2011 period which significantly decreased the expense ratio.
As with Specialty, we are encouraged by Commercial's rate increases and premium growth. Commercial rates increased 5% with renewal retention down 1 point to 78%. The rate gains were broad-based with some lines achieving substantially higher rate gains. As we have said on previous calls, we are willing to accept lower retention to improve our margins and are pleased with the trade-off as well as the differentiated mix.We have now had positive rate increases for 6 consecutive quarters in Commercial. In addition, rate increases accelerated over the course of the first quarter. Excluding the impact of the sale of First Insurance Company of Hawaii in last year's fourth quarter, Commercial net written premiums grew 6%. Commercial new business was strong with a new to loss ratio of 1.3:1, our pricing on new business is consistent with our renewal pricing. Commercial's first quarter submission activity increased 13%. Hit ratios increased 1% overall in Commercial. We believe this is indicative of improved appetite clarity with our agents and brokers. Last week we were delighted when the shareholders of Hardy Underwriting Bermuda approved our proposed acquisition of Hardy. We expect the transaction to close by the end of the second quarter, subject to regulatory approvals. Acquiring Hardy brings us deep expertise in specialized markets. We will also be gaining a proven management team whose underwriting philosophy is similar to ours. We are very pleased that Hardy's senior leadership will continue to manage Hardy's operations. Craig will have a few more comments about Hardy in his remarks. With that, I will turn it over to Craig. D. Craig Mense Thanks, Tom. Good morning, everyone. We had a solid first quarter from a financial and operating perspective. Earnings improved, our core P&C business demonstrated steady progress and we moved ahead on important acquisitions. First quarter net operating income was $226 million, an operating return on equity of 8.1%. Operating income available to common shareholders was $0.84 per share. Period-over-period comparisons were favorable primarily as a result of lower catastrophe losses and increased investment income. Read the rest of this transcript for free on seekingalpha.com