The operator welcomes participants to the Third Quarter 2023 The Hartford Financial Results Webcast and introduces the speakers. The call includes forward-looking statements and non-GAAP financial measures, and investors should consider the risks and uncertainties outlined in SEC filings.

The Hartford's conference call may not be reproduced without written consent. Replays and transcripts will be available on their website. Chris Swift, CEO, discusses the company's strong third quarter performance, with top-line growth in Commercial Lines and Group Benefits, strong pricing, and solid investment performance. The U.S. economy remains supportive of the company's businesses. Small Commercial had written premiums of $1.2 billion with 16% growth in new business and a sub-90 underlying margin.

The company's Spectrum package product has performed well, with a 20% increase in new business premium. The Small Commercial division has also had strong results, with expected written premium of over $5 billion. Middle & Large Commercial saw a 5% increase in written premiums, with growth in general industries and large property. The company is taking a disciplined approach to growing property premium while managing CAT exposure. The advancements in data science, pricing, and underwriting tools have contributed to exceptional margins in the Middle & Large Commercial division. Global Specialty also had strong results, with an 11% increase in net written premiums driven by new business growth and strong renewal pricing. Submission flow in the U.S. and international markets also saw growth.

The company has seen strong momentum in the wholesale access market, with property pricing above 20% and international casualty above 10%. Their expansive product portfolio and underwriting discipline have led to targeted market share gains and a strong combined ratio. In Commercial Lines, renewal written pricing was flat with the previous quarter, but rose to 8% when excluding workers' compensation. Pricing in property, auto, and general liability is above 10%, while public D&O remains pressured. In Personal Lines, the company achieved nearly 20% renewal written price increases in auto and is focused on responding to elevated loss costs. They expect this trend to continue into the fourth quarter.

The fifth consecutive quarter of double-digit pricing increases in Homeowners insurance is attributed to the company's focus on the preferred market and its modern and digitally enhanced offering. The company expects to achieve Auto new business rate adequacy in over half the states and is confident in its pricing actions to return the business to targeted profitability by 2025. In Group Benefits, premium growth and earnings were outstanding, driven by focused execution, improved mortality trends, and strong disability results. The company's commitment to outstanding customer experience through data and technology has solidified its leadership position. At the recent Council of Insurance Agents and Brokers Annual Conference, the company received consistent acknowledgement of the strength of its franchise.

In the sixth paragraph, the company's partners praised their digital tools, product set, innovation agenda, and consistent execution of strategy. They expressed a desire to grow their business with the company and view their team as best-in-class. This confirms the company's leading position in the market. Core earnings for the quarter were $708 million, with strong results from Commercial Lines, Small Commercial, and Middle & Large Commercial. Global Specialty also had a strong underlying margin.

The financial lines in the company have been affected by public D&O rate pressure and marine losses, but there have been higher policyholder dividends in bonds due to strong profitability. In Personal Lines, the core loss was $8 million with a combined ratio of 99. Homeowners' combined ratio was in line with expectations, while Auto's combined ratio was consistent with the second quarter. The company is pursuing rate increases to offset loss cost trends. Written premium in Personal Lines increased by 8%, driven by successful rate actions. The expense ratio improved due to lower marketing spend. CAT losses were in line with expectations, and there was net favorable prior year development.

In the third quarter, the company had strong core earnings of $170 million and a core earnings margin of 9.8%. The Group Disability and Group Life segments both showed improved loss ratios, and the expense ratio also improved. Fully insured ongoing sales and premium growth also saw growth. The investment portfolio had a net income of $597 million, with a 4.1% yield before tax. The company expects further improvement in yield and investment income in the future. The limited partnerships had a return of 6.3% in the quarter, and the overall credit quality of the portfolio remains high.

The company's maturity valuation decreased due to higher interest rates, but net credit losses and impairments remain insignificant. The allowance for credit losses on the mortgage loan portfolio increased by $5 million, and all mortgage loans are current on payments. The company repurchased 4.8 million shares and increased its quarterly dividend by 11%. The company's franchise continues to deliver consistent, sustained industry-leading results. During the Q&A session, a question was asked about the slowdown in premium growth in the Commercial Lines segment, particularly in the Middle Market and Small Commercial areas. The company's CEO and CFO responded, but did not provide any specific reasons for the slowdown.

The company has seen positive growth in written premiums and new sales in the small and middle markets. The management team is focused on remaining disciplined in pricing and underwriting and will let go of business if the terms are not satisfactory. Exposure growth is still positive but has moderated compared to earlier in the year. The underwriting team has tools to help them make decisions, but occasionally the market may be more aggressive than the company is willing to be. The team is closely monitoring the situation.

The speaker is responding to a question about medical cost inflation in workers' comp. They state that their workers' comp is a highly profitable line of business and they have not made any changes to their frequency or medical assumptions. While medical severity may be slightly up from last year, it is still within their predicted range. They have measures in place to deal with any potential increases in the future.

In the paragraph, Brian Meredith asks Chris Swift about the impact of loss control on the company's performance. Swift confirms that their loss control capabilities, along with being the second largest rider in the industry, have helped them. Elyse Greenspan asks about competitive forces in July and Mo Tooker responds that they were mostly felt in the larger account segment. Beth Costello mentions favorable development in comp and adverse development in GL, but nothing significant to note. Mike Ward then asks his question.

The speaker discusses the growth in property and how it will affect non-CAT property volatility in the future. They mention an increase in commercial property premium and their successful execution in growth and pricing. They also mention their strategy to build a national book of property exposure and getting paid for the incremental volatility. The speaker adds that non-CAT commercial property losses were at expectations and better than the previous year, with elevated losses in small commercial offset by lower losses in Middle & Large. They also mention the company's talent base and improving tool set, with opportunities for rates and terms and conditions.

The executives of the company are optimistic about their ability to compete in the market. They have taken rate increases to stay ahead of loss trends in their property products, and have seen growth and profitability in their E&S binding business. In Personal Lines, they expect the fourth quarter to be higher in auto, but more favorable in home.

The speaker agrees with the listener's concerns about the profitability of the business and mentions that the NCCI is projecting a 5% loss cost trend. However, they state that they cannot discuss next year's plans yet and that there will likely be continued pressure from pricing. They also mention that they have been able to outperform their rate plan this year and that the ROE range is currently at the upper end, with Personal Lines expected to start making money again and investment income being a bigger contributor next year.

Chris Swift, CEO of a company, discusses the company's long-term ROE guide with analysts. He clarifies that the guide is not a limit and the company will strive to outperform it. He also mentions that the company is becoming more consistent and predictable in all its businesses, but Personal Lines is currently facing challenges. Swift adds that the company is aware of potential rate fatigue in the marketplace, but believes the industry is still in a good position with rising yields and investment returns. Overall, the company aims to exceed the ROE target and continue to educate customers and agents on the importance of rate discipline. An analyst, Alex Scott, thanks Swift for his explanation and asks another question.

Greg Peters asks about the economic sensitivity of the Group Benefits business and if there were any unusual factors that contributed to the 13.8% ROE in the third quarter. Chris Swift responds by mentioning the positive impact of mortality trends and the team's success in increasing rates. He also highlights the strong earnings power and investment performance of the business, as well as its growth in line with economic conditions. He also mentions the addition of new capabilities, such as voluntary products and paid family leave options.

Jonathan and Chris both agree that the LTD business is undervalued and has strong economic drivers. The current low unemployment rates are contributing to the business's performance, and even if they were to increase, it would not have a significant negative impact. Net investment income was solid in the third quarter, and there has been a sequential improvement in mortality rates. The disability side of the business is also performing well, with low incidence levels and a strong claims team.

The Hartford has a strong understanding of medical management in both workers' compensation and long-term disability, which has contributed to their successful performance. They will continue to monitor and adapt as needed. In terms of Personal Lines, they did not make any adjustments to prior accident years in the third quarter, unlike other companies experiencing adverse development. They did make some adjustments in the first half of the year, but these were offset by releases for previous years. Overall, The Hartford has reacted to trends in the market and their loss picks for prior accident years remained unchanged in the third quarter. Some have noted that their auto results have improved year-over-year.

The speaker explains that the company has seen an improvement in GEICO's margins and has also churned a significant portion of their book of business. They are looking to improve profitability in the AARP business by non-renewing customers who shouldn't renew, in addition to achieving through rate alone. However, the in-force business still has lifetime continuity agreements in place, which limits their ability to cancel customers. The company is pushing for rate increases in order to offset this.

Stephanie and her team have been successful in responding to the loss trend environment, as seen in their rate actions and deployment of Prevail products. However, it will take time for the rate to earn in, and the focus is on bringing the book back to profitability. The rate increases for new business are similar to those for the in-force book, and more than half of the states are expected to be new business rate adequate by the end of the year. This gives the company confidence in continuing to market and drive in new business.

In a recent conference call, an unidentified analyst asked about the competitive environment for commercial insurance and whether there has been a surprise in the continued increase in pricing, excluding workers' comp. CEO Chris Swift responded that there is no surprise and that the company will continue to be disciplined in their pricing approach, working with distribution partners and customers to explain the reasons behind the increases. He also mentioned that the reinsurance market is stable and predictable, and that the company is looking to grow responsibly. Another analyst from Barclays asked about the definition of pricing, whether it is based on pure rate or exposure to act like rate.

The speaker praises the company for achieving a 19.7% pricing increase in personal auto, which is not commonly seen among their peers. They ask for clarification on whether exposure is included in this rate and how it affects auto rate. The CEO explains that the 8% renewal written pricing in commercial includes exposure, which acts like rate. The speaker then asks about the stability of Group Benefits and if the company could be more competitive on pricing at one-one renewals due to low disability incidence and favorable claims recovery. The speaker is specifically interested in personal auto and the CEO explains that the rate increase is due to strong execution and supportable loss results, while homeowners' rate increase is a combination of rate and inflationary factors.

The competitive and efficient market does not require a conscious decision to be more competitive on price. The company's targets and disability trends will impact pricing, but there is no change in the mindset for 2024. The company's approach to competition remains the same and they prioritize profitable growth and client satisfaction. The expected reversion to the mean will impact pricing, but the company cannot predict when it will occur.

The speaker discusses the potential for a reversion to the mean in economic conditions and the need to be prepared for it. They also mention their pricing methodology and how it takes into account a multiyear view of trend. When asked about reserve commentary, they mention that they have taken small increases in GL lines in recent quarters, particularly in accident years '16 through '19. They consider this experience when setting loss picks and pricing for those lines.

The speaker discusses the back and forth of loss picks and how they tend to hold them longer on their current years. They also mention seeing some improvement in the 2020 year, but nothing significant. The speaker is unable to provide specific numbers on the U.S. casualty book and suggests reaching out for more information. The call concludes and the participants are thanked for their participation.

This summary was generated with AI and may contain some inaccuracies.