The operator introduces the conference call and webcast for The Hartford Financial Second Quarter 2024 Results. Susan Spivak introduces the speakers, Chris Swift (Chairman and CEO) and Beth Costello (CFO), and mentions that there will be a question-and-answer session. She also reminds listeners of the forward-looking statements and non-GAAP financial measures discussed during the call. The Hartford's prior written consent is required for any reproduction or rebroadcast of the call.

The Hartford's second quarter results were excellent and reflect the effectiveness of their strategy and investments. Highlights include top line growth in Commercial Lines and Personal Lines, strong performance in Group Benefits and investments, and a new share repurchase authorization. Commercial Lines had exceptional results with double-digit top line growth and an underlying combined ratio below 90 for the 13th straight quarter. The company is using underwriting tools, pricing expertise, and data science advancements to drive profitable growth, while retention and the economic environment also contribute to their success.

In the Small Commercial sector, the company has seen strong growth and margins due to their unique market position, industry-leading products, and excellent customer experience. In the Middle & Large Commercial sector, the company has also seen double-digit growth and maintained strong margins, thanks to investments in product capabilities and efficient broker and agent experience. In Global Specialty, the company achieved over $1 billion in quarterly written premium and maintained strong margins, driven by growth in global reinsurance, wholesale business, and construction surety. The company is pleased with their performance and expects to sustain growth and margins in the future.

The Global Specialty business has become a profitable growth engine for The Hartford, with a focus on property and disciplined approach to favorable market conditions. Commercial Lines renewal written pricing has accelerated, with strong pricing in auto and general liability. Personal Lines has received positive feedback at the annual agent summit, with recognition of the company's evolution, strength, and investments in pace and technology. The company's talent strategy and succession planning were also praised.

The company's Commercial Lines division had a successful first half of the year, with positive feedback from partners and a strong team. Personal Lines also showed improvement, with strong auto renewal written price increases and investments in new capabilities. Group Benefits had a 10% core earnings margin for the quarter and the portfolio is performing well. The U.S. economic environment is also favorable for the company's businesses.

The labor market has remained strong, leading to positive results for the Hartford in the second quarter. The company's two largest lines, workers' compensation and disability, have been performing well due to low unemployment and wage rate growth. The Hartford's success is attributed to their execution, strategy, talent, and investments in their business. They continue to focus on broad product offerings and efficiency, while also maintaining disciplined underwriting and pricing, exceptional talent, and customer-centric technology. The company's excess capital is being proactively managed, leading to confidence in their future performance. Beth Costello then provides more detailed commentary on the quarter, highlighting the exceptional results of Commercial Lines with strong written premium growth and low underlying combined ratios.

The company's strong underlying combined ratio of 89.6 reflects positive factors such as premium leverage, pricing and segmentation analytics, and talented employees, leading to profitable growth. Global Specialties written premium grew by 14%, driven by renewal price increases and new business growth. The underlying combined ratio for Personal Lines improved by five points compared to the previous year, with homeowners having a strong quarter and auto results showing improvement. The company remains on track to achieve a five to six-point improvement in the auto underlying loss ratio. The total Personal Lines expense ratio increased slightly due to higher direct marketing costs, but the company has achieved new business rate adequacy in most states. Catastrophes had a significant impact on the company's current accident year caps, but it remains in line with the previous year.

The insurance industry saw elevated catastrophe losses, but the company's results were only slightly higher than expected due to active management of exposure and underwriting discipline. Net favorable prior accident year development was $78 million, with reserve reductions in various areas offset by increases in others. The Group Benefits segment had exceptional core earnings, with strong performance in Group life and disability and premium growth. The investment portfolio also produced solid results.

The company's credit quality remains high with minimal net credit losses and a strong investment income for the quarter. The reinvestment yield has increased and LP returns are expected to improve in the second half of the year. The Board of Directors has approved a new share repurchase authorization, reflecting strong capital generation. The company is pleased with their financial performance and is focused on delivering profitable growth and enhancing value for stakeholders. The call is now open for questions.

During the question-and-answer session, Elyse Greenspan from Wells Fargo asks about the commercial pricing environment. Chris Swift, the operator, and Morris Tooker discuss the company's pricing trends and their efforts to stay ahead of loss cost trends. They are pleased with their pricing and have seen improvements in rates across various lines, including excess and umbrella. They expect to continue being disciplined in risk selection and pushing for rate increases.

In summary, the speaker acknowledges that the pace of growth may vary, but they will remain disciplined. They also mention their strong earnings and increased authorization for buybacks, which reflects their confidence in their capital generation. The speaker then moves on to discuss their specialty business, which is diversified but primarily focused on wholesale, with strong rates and new distribution relationships.

The company is pleased with their recent success, including reaching over $1 billion in rent premium for the first time ever. Their reinsurance business is growing at 18%, with property and non-property casualty lines growing at 24% and 12%, respectively. The company is proud of their niche in the market and their disciplined approach to taking advantage of opportunities. The wholesale and Global Specialty teams are performing well and are seeing strong flow in all product lines. The company's rate of 9.5% excludes workers' comp and includes a 2.2% exposure rate.

The speaker asks a question about the impact of reserves on the company's financials and the reserving process. The CEO and CFO express confidence in their management mechanisms and the health of their balance sheet. The CFO adds that reserve increases in commercial auto were related to specific accounts and have already been addressed. The next question is about recent legislation in Florida regarding Medicare reimbursements for doctors.

Chris Swift responds to a question about the potential impact of a recently passed law on workers' compensation reimbursement schedules. He explains that the law will not have a significant effect on the company's operations, but they will need to work with rating bureaus to adjust their pricing accordingly. He also mentions that property rates are still seeing double-digit increases, but declines to provide further information on competitiveness in the market.

The speaker discusses the company's performance in the past quarter, noting a 14.1% increase in rates, with the highest increase in the Small Commercial division. They also mention disciplined and appropriate execution by the team. Another speaker adds that there is competition in the shared and layered space, but rates are holding up well. The next question focuses on the Personal Lines business and the speaker mentions hitting target margins by 2025. They also mention a slight increase in auto and homeowners underlying combined ratios in the past quarter and provide context for their response.

The company's sequential trend is primarily impacted by expenses related to marketing efforts. They expect loss cost trends to moderate and aim to reach their target margins by mid-2025. In the Benefits business, they achieved a 10% core margin for the second quarter.

The speaker is discussing the company's performance in the Benefits business and mentions that they are pleased with the 10% core margin and 8.1% through the six months. He also mentions that mortality improved this quarter, but they believe it will be higher in the next few years. The speaker expects the company to continue to outperform their long-term guidance for the rest of the year. He also mentions that the market is competitive and this may be impacting sales and the top line.

The speaker discusses the competition in their marketplace and how they are navigating it successfully by focusing on more than just price. They mention their absence management capabilities, digital tools, and customer focus as key differentiators. The speaker also mentions that workers' comp continues to be favorable and they are maintaining underwriting and pricing discipline. They are not making any significant changes to their current view of margins in workers' comp, but they are aware that the favorability may not last forever. They are generally on track with their expectations for the year.

The company is experiencing some margin contraction in their insurance business, but it is still highly profitable. They are closely monitoring loss cost trends and have seen some benefits in frequency and severity assumptions, but wage inflation has been higher than expected. They also take into consideration the long-tailed nature of the business when making loss trend picks. The compression in margin is due to a combination of loss cost and rate environment.

The speaker discusses the impact of pricing on margin compression and how it is affecting their loss trends. They also mention that their competitors may have different views on the matter but they believe they have appropriate and compelling loss trends. The speaker also mentions that their pricing has been consistently strong and they are staying ahead of loss trends. A colleague adds that they feel good about the loss trend they have built into their picks for liability lines.

The speaker discusses the company's pricing and underwriting actions, which have helped stabilize loss picks. They also mention that the non-cap property line, specifically in Small Commercial, has performed better than expected. They do not provide specific details on workers' comp trends, but state that medical trend has slightly increased. The speaker then moves on to discuss Group Benefits, acknowledging that they have asked about it before.

The speaker discusses the balancing act between margin and growth in underwriting, specifically in the life insurance sector. They mention the importance of maintaining discipline and caution in setting pricing, as these contracts often have long-term commitments. They also mention the diligence and effort put into competing for cases and the willingness to walk away if necessary. Overall, they are focused on sustainable outperformance rather than short-term gains.

The company will continue to focus on trend and profitability while also shifting their mix towards property, which has a lower loss ratio compared to workers' comp. This shift is expected to help improve margins and they have invested in tools and capabilities to compete in this area. They are on track to reach $3 billion in written premiums this year, a 20% increase from previous years.

The speaker discusses the company's success in a complex and disruptive environment, attributing it to their investments, skills, and talented employees. They also mention the growth in their national accounts business, but caution that the comparison to the previous quarter may not be accurate due to different renewal dates. They express confidence in the disciplined underwriting process and mention winning new business. The call concludes with a reminder to contact them with any further questions.

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