Q1 2025 The Hartford Insurance Group Inc Earnings Call
Good morning and welcome to the Hartford Insurance Group's first quarter 2025 Odin's College webcast.
All participants are to listen only mode. After the speakers remarks, we'll conduct a question and answer session. To ask a question at this time you'll need to press star followed by the number one on your telephone keypad. You'll need to press star followed by the number one on your telephone keypad.
As a reminder, this conference call is being recorded. I would now like to turn a call over to Susan to Steve Ack, Senior Vice President of Investor Relations. Thank you, please go ahead.
Speaker Change: Good morning and thank you for joining us today for our first quarter 2025 earnings call and webcast. Yesterday we reported results and posted all earnings related materials on our website. Before we begin, please note that our presentation includes forward-looking statements which are not guarantees of future performance and may differ materially from actual results.
We do not assume any obligations to update these statements.
Speaker Change: Investors should consider the risks and uncertainties detailed in our recent SEC filing, news release and financial supplement which are available on the investor-relation section of the Hartford.com
Speaker Change: Our commentary includes non-GAAP financial measures with explanations and gap reconciliation available in our recent SEC filings, news release and financial supplement.
Speaker Change: And now I'd like to introduce our speakers, Chris Swift, Chairman and Chief Executive Officer, and Beth Costello, Chief Financial Officer.
Chris Swift: After their remarks, you will take your questions assisted by several members of our management team, and now I'll turn the call over to Chris.
Chris Swift: Good morning, and thank you for joining us today. The Hartford is off to a strong start in 2025, sustaining the momentum we have built over the past few years.
Chris Swift: We are operating in dynamic times, however, as an underwriting centric organization specializing in managing risk we are well equipped to navigate this evolving environment.
Chris Swift: Our teams are closely monitoring trends.
Chris Swift: And are already taking action to address the impacts of this complex and dynamic policy landscape.
Chris Swift: With solid fundamentals.
Chris Swift: Durable investment portfolio.
Chris Swift: And our balance sheet that is stronger than ever we remain steadfast in our commitment to delivering strong returns for our shareholders.
Chris Swift: Now, let's transition to first quarter results as I mentioned, the Hartford had a strong start to the year even in the face of the most destructive wildfires in U S history.
Chris Swift: Disciplined underwriting and pricing execution exceptional talent and innovative customer centric technology continue to drive our performance.
Chris Swift: Highlights from the first quarter include topline growth and business insurance of 10% with a very strong underlying combined ratio of 88 four.
Chris Swift: And underlying combined ratio of 89.7 in personal insurance, representing a six four point improvement over prior year, including over eight points in auto.
Chris Swift: A core earnings margin of seven 6% and employee benefits.
Chris Swift: Which continue to outperform.
Chris Swift: Competitive environment.
Chris Swift: And continued solid performance in.
Chris Swift: Our investment portfolio.
Chris Swift: All these items contributed to a trailing 12 month core earnings ROE of 16, 2%.
Chris Swift: As I dive into the details let me start with P&C current accident year catastrophe losses.
Chris Swift: Which totaled $467 million before tax, including $325 million related to the January California wildfires.
Chris Swift: Catastrophe risk management strategies in reinsurance structure effectively contained exposure.
Chris Swift: Keeping it well within our market share.
Chris Swift: While we are pleased with the performance of our overall book of business and risk management program. The losses were significant to first quarter results.
Speaker Change: In times like these I am, especially proud of the Hartford's claims handlers adjusters and leaders.
Speaker Change: Excluding catastrophe losses, our businesses sustained strong performance.
Speaker Change: In line with or exceeding expectations.
Speaker Change: Turning to business insurance results were excellent driven by our industry, leading underwriting tools pricing expertise and data science advancements.
Speaker Change: New business growth remained strong within small and middle market, where the environment continues to be conducive for growth.
Speaker Change: As the leading small business carrier, our digital capabilities offer exceptional functionality and ease of use providing us with a significant competitive advantage in the market.
Speaker Change: We have successfully leverage these strengths to enhance the middle market and global specialty businesses.
Speaker Change: Yeah.
Speaker Change: We are going to market as one unified organization to serve diverse needs of customers and partners with a consistent and top tier experience.
Speaker Change: In small business first quarter financial performance was excellent with record breaking quarterly written premium and double digit new business growth.
Speaker Change: Extending a 19 quarter trend of sub 90 underlying combined ratios.
Speaker Change: New business growth was driven in part by strong quote flow and modestly higher average premium as well as a 29% increase in E&S finding premium.
Speaker Change: A business, where we continue to see tremendous opportunity.
Speaker Change: In short small business continues to deliver excellent results with industry, leading products and digital capabilities.
Speaker Change: We are on track to surpassed 6 billion in annual written premium in 2025.
Speaker Change: Moving to middle and large we are pleased with first quarter performance, including excellent top line growth paired with a strong underlying margin in line with our expectations.
Speaker Change: New business growth remained strong with contributions from multiple lines and market sectors.
Speaker Change: We continue to take advantage of healthy submissions driven in part by investments made to expand product capabilities.
Speaker Change: And the efficiency of the broker and agent experience.
Speaker Change: Written premium growth reflects strong renewal rate execution across most lines, including double digit increases in liability and auto.
Speaker Change: Shifting to global specialty results were outstanding with sustained underlying margins in the mid eighties.
Speaker Change: And over $1 billion of quarterly written premium.
Speaker Change: This impressive top line performance reflects our strong competitive position.
Speaker Change: Product offerings, and solid renewal written pricing, including double digit pricing and wholesale casualty.
Speaker Change: Our wholesale business saw an 11% increase in gross written premium with significant contributions from U S inland Marine auto and casualty lines in the global reinsurance business also grew at a double digit clip.
Speaker Change: With a diverse product set and a generally healthy pricing environment, we remain excited about the growth prospects and global specialty.
Speaker Change: Across business insurance combined emphasis on property expansion has resulted in written premium growth of approximately 15% this quarter.
Speaker Change: We are capitalizing on the favorable market conditions in the SME space with a disciplined approach and no change in our catastrophe risk appetite.
Speaker Change: As for pricing business insurance renewal written pricing, excluding workers' compensation of nine 9% increased 20 basis points from the fourth quarter.
Speaker Change: Our pricing execution remained strong, including low double digit increases in general liability and auto with liability pricing continuing to rise.
Speaker Change: The team hit the ground running on one one renewals exceeding liability pricing targets, which are comfortably above loss cost trends.
Speaker Change: In business insurance property pricing remains healthy in the low double digits, driven by 18% pricing increases within our small business packaged product.
Speaker Change: In personal insurance.
Speaker Change: <unk> continued to improve achieving an underlying combined ratio in the $80 for the first time in three years.
Speaker Change: We expect target profitability in auto by mid 2025, consistent with our expectations.
Having navigated a challenging loss cost environment personal insurance is now focused on balancing profitability and a pivot to growth in a competitive environment.
Speaker Change: Our homeowners business had a strong underlying quarter highlighted by a mid seventies underlying combined ratio.
Speaker Change: Renewal written pricing of 12, 3% driven by net rate and insured value increases continues to support healthy margins, while reinforcing our strong position in the market.
Speaker Change: Yeah.
Speaker Change: Moving on to employee benefits core earnings margin of seven 6% exceeded prior year by one five points, surpassing our long term target of 6% to 7%.
Speaker Change: Group life and disability, both delivered excellent results.
Speaker Change: The disability loss ratio reflected nearly 20 points of improvement in paid family and medical leave products.
Speaker Change: In the life loss ratio continued to improve.
Speaker Change: Modest fully insured ongoing premium growth reflects the competitive environment and strong book persistency, which is above 90%.
Speaker Change: Sales were largely in line with expectations for the quarter.
Speaker Change: Yeah.
Speaker Change: I wanted to take a moment to highlight ongoing technology investments in employee benefits focused on superior customer experience and enabling growth.
Speaker Change: An absence and disability, we recently launched our patented leave lens platform.
Speaker Change: <unk> employees to confidently plan further leave of absence.
Speaker Change: For a comprehensive view of their benefits available time and prospective pay while away from work.
Speaker Change: We also recently delivered a new absence dashboard tool, which gives employers dynamic reporting capabilities regarding their employees leaves of absence.
Speaker Change: These market differentiating tools in conjunction with recent investments in life claim digital intake provide a holistic suite of new digital capabilities for customers.
Speaker Change: Additionally, we continue to focus on enhancing data exchanges and integration connections with benefit administration and human resource platforms to drive future growth.
Speaker Change: We now have over 160 integrations with HR technology partners servicing over two thirds of our book.
Speaker Change: And we continue to build our leadership position in this space.
Speaker Change: For example, we have deepened our partnership with Workday to co design their new workday wellness platform, which will deliver faster integration comprehensive implementation support and real time data exchange.
Speaker Change: With these capabilities and continued investment in the benefits business, we expect to retain our number one disability position and our top five life position, while delivering an outstanding user experience for customers and their employees.
Speaker Change: Moving to investments the portfolio continues to support the Hartford's financial and strategic goals performing well across a range of asset classes and market conditions.
Beth: Beth will provide more details.
Speaker Change: The performance in the quarter.
Speaker Change: Alongside strong financial results the fourth quarter also marked the launch of our new brand.
Speaker Change: As we further establish ourselves as the innovative and growth oriented industry leader our strategy is intentionally centered on customers and their evolving needs.
The new brand celebrates the Hartford strength built on centuries of trust from businesses workers and individuals we support every day.
Speaker Change: As CEO I remain honored to lead a company with such a rich legacy and bright future driven by exceptional employees and their unwavering commitment to our customers.
Speaker Change: Looking ahead, we are expanding digital capabilities, leveraging AI, enhancing our product offering and entering new markets to better serve customers.
Speaker Change: All these factors contribute to my excitement and confidence about the future of the Hartford as we continue delivering industry leading financial performance.
Speaker Change: It is an exciting time at the Hartford for our employees.
Speaker Change: Customers distribution partners and all stakeholders.
Speaker Change: Together, we will navigate this dynamic environment.
Speaker Change: Seize the opportunities ahead.
Beth: Now I'll turn the call over to Beth to provide more detailed commentary on the quarter.
Thank you Chris core earnings for the quarter were $639 million or $2 20.
Beth: <unk> share with a trailing 12 month core earnings ROE of 16, 2%.
Beth: Although results were impacted by elevated catastrophe activity, including the January California, wildfire event underlying P&C results and employee benefits results were excellent.
Beth: In business insurance core earnings were $471 million with written premium growth of 10% and an underlying combined ratio of $88 four.
Beth: Small business continues to deliver industry, leading results with written premium growth of 9% double digit new business growth and an underlying combined ratio of $89 four.
Beth: Middle and large business had another quarter of solid profitability with an underlying combined ratio of 96, and written premium growth of 9%, including record quarterly new business of $188 million.
Beth: Global specialties first quarter was outstanding with an underlying combined ratio of 84 and a record first quarter written premium of $1 billion.
Beth: Written premium growth of 11% in the quarter reflect strong growth across much of the book and solid renewal execution, including written pricing increases of six 2%.
Beth: In personal insurance core earnings for the quarter were $6 million with an underlying combined ratio of $89 seven driven by an improvement of eight one points and the underlying loss and loss adjustment expense ratio over the prior year.
Beth: The first quarter auto underlying combined ratio of $96. One improved eight three points from the 2024 period and homeowners produced a strong underlying combined ratio of 75 one.
Beth: Written premium and personal insurance increased 8% in the first quarter in part driven by steady and successful rate actions.
Beth: In auto we achieved written pricing increases of 15, 8% and earned pricing increases of 20%.
Beth: And homeowners written pricing increases were 12, 3% and 14, 4% on an earned basis.
Beth: Additionally, new business growth continues to be robust in both homeowners and auto.
Beth: Homeowners policy count continued to grow while auto decrease as expected.
Beth: Effective policy count retention for both homeowners and auto remained flat due to strong, but moderating renewal written pricing increases.
Beth: The personal insurance first quarter expense ratio of 27 increase from the prior year by one seven points, primarily driven by higher direct marketing costs and to a lesser extent, a higher commission ratio, partially offset by the impact of higher earned premium.
Beth: With respect to catastrophes P&C current accident year losses were $467 million before tax or 11, one combined ratio points, including $325 million net of reinsurance related to the January California wildfire event as well.
Beth: As tornado wind and hail events, primarily in the Midwest and south regions in the month of March.
Beth: We are pleased with our robust and comprehensive reinsurance program on both a per occurrence and aggregate basis.
Beth: As a reminder, the aggregate treaty provides $200 million of coverage when subject losses and expenses exceed $750 million.
Beth: Total P&C net favorable prior accident year development within core earnings was $90 million before tax primarily due to reserve reductions in workers' compensation homeowners and personal auto.
Beth: There were no increases in prior year reserves for general liability and commercial auto.
Beth: The actions we took in the fourth quarter of 2024 positions us well for 2025, both in terms of the overall adequacy of our general liability and commercial auto reserves and equally important incorporating these trends into our pricing models.
Beth: We recorded $32 million before tax of deferred gain amortization related to the navigators ADC, which positively impacted net income with no impact on core earnings.
Beth: Based on our estimate of payment patterns, we expect the remaining balance of $32 million to be amortized in the second quarter.
Beth: Moving to employee benefits, we achieved core earnings of 136 million for the quarter.
Beth: The core earnings margin of seven 6% reflects excellent group life and disability performance.
Beth: The group disability loss ratio of 69 improved from 71 in the first quarter of 2024, driven by improvement in the paid family and medical leave product loss ratio and continued strong claim recoveries.
Beth: The improvement was partially offset by a slight increase in long term disability incidents compared to the prior year. However, incidence rates remain favorable to long term historical averages and to our expectations.
Beth: The group life loss ratio of $79 nine for the quarter improved two seven points, reflecting lower mortality.
Beth: Fully insured ongoing sales in the quarter of 381 million combined with increased exposure on existing accounts and excellent persistency above 90% resulted in a 2% growth and fully insured ongoing premiums.
Beth: For the quarter net investment income was $656 million the.
Beth: The total annualized portfolio yield excluding limited partnerships was four 4% before tax 10 basis points above the year ago period, and 20 basis points below the fourth quarter.
Beth: The decline from the fourth quarter was primarily due to lower equity dividends.
Beth: Lower returns and public equity related fund investments and a modestly lower yields on variable rate securities.
Beth: Our first quarter annualized LP return of three 1% before tax were higher than the year ago period, Although returns were lower than the fourth quarter, including lower returns in our real estate portfolio and other funds.
Beth: We continue to strategically manage the portfolio balancing risks, while pursuing accretive trading opportunities and in the quarter reinvested at 70 basis points above sales and maturity yield.
Beth: Full year 2025, net investment income excluding Lps is expected to be higher in 2024, driven by invested asset growth.
Beth: We expect the 2025 yield X L PS to be generally in line with the yield earned in 2024 as lower yields on variable rate securities are expected to offset increases from reinvesting at higher rates.
Beth: Turning to capital management, holding company resources totaled $1 3 billion at quarter end.
Beth: During the quarter, we repurchased three 5 million shares under our share repurchase program for $400 million and we expect to remain at that level of repurchases in the second quarter.
Beth: As of March 31st we had $2 75 billion remaining on our share repurchase authorization through December 31 2026.
Beth: In summary, we are very pleased with our strong financial performance for the first quarter and believe we are well positioned to continue to enhance value for our stakeholders I will now turn the call back to Kate.
Kate: Thank you Beth we will now take your questions operator, please repeat the instructions for asking a question.
Speaker Change: As a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: In the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.
Speaker Change: Our first question will come from Gregory Peters from Raymond James. Please go ahead. Your line is open.
Gregory Peters: Great. Good morning, everyone. So the first question.
Gregory Peters: I'm going to ask just competitive market conditions and the business insurance segment.
Speaker Change: Looking at your statistical supplement it looks like new business, both in small and middle market.
Gregory Peters: Up nicely in the quarter.
Speaker Change: Retention dropped a little bit so just curious how are you.
Speaker Change: Looking at your position in the marketplace and your outlook for growth.
Speaker Change: Greg Thanks for joining US today, you are right where are proud of all our business segments, whether it be small middle global specialty and they're all performing.
Speaker Change: I think exceptionally well.
Speaker Change: Just going to ask mode or just commented specifically on retention.
Speaker Change: Yeah, Greg what are you seeing in the ISS is really just a reminder, it's for our guaranteed cost lines in middle and large.
Speaker Change: And what we're feeling in the quarter and we've talked about in prior quarters was some pressure on the workers' compensation specifically.
Speaker Change: I'm really proud of how the teams navigated theyre, just making choices on renewals, but overall, we just feel like this is a competitive market in middle and large and also what you saw in the quarter was really nice growth overall with a with a nine.
Speaker Change: Sent in middle and large.
Speaker Change: I think what Youre feeling is we have the diversification that we've built over the past decade in middle and large so that when retention is down in workers comp and workers comp is really competitive we have the ability to grow in other areas and still maintain the topline that we're chasing.
Speaker Change: Alright, good thanks for the detail.
Speaker Change: I guess part of your your opening comments you talked about technology.
Speaker Change: You talked about the digital integration or data integration with workday talked about digital.
Speaker Change: One of your peers.
Speaker Change: Peers came out with a pretty robust.
Speaker Change: Technology presentation as part of their Investor day, several weeks ago.
Speaker Change: And so I'm just curious about how youre looking at your technology.
Speaker Change: <unk>.
Speaker Change: Progress and help us on the outside sort of.
Speaker Change: Reconcile what what's legacy maintenance stocks versus new initiatives that are game changing.
Speaker Change: Yes happy to try I mean, that's probably like a.
Speaker Change: Our discussion Greg but.
Speaker Change: What I would just share with you and I think we've said it consistently before.
Speaker Change: As you know we've been on a journey over the last 10 15 years of just making basic.
Speaker Change: Improvements to our core platforms.
Speaker Change: In our core platforms in all businesses.
Speaker Change: Those platforms would be defined as claim systems.
Speaker Change: Schrader systems.
Speaker Change: Billing.
And remittance type type systems.
Speaker Change: And then recently we've.
Speaker Change: <unk> launched a multi year project to the seven year project to take all our data and applications to the cloud.
Speaker Change: I think personally we have the best platform in all of our businesses.
Speaker Change: For personal lines, we have a modern.
Speaker Change: SaaS based.
Speaker Change: That form a group benefits we've modernized.
Speaker Change: All of our platforms, there and taking that to the cloud and Guidewire continues to be our preferred vendor both for <unk>.
Speaker Change: Administration and.
Speaker Change: Commercial insurance as well as claims so.
Speaker Change: And we spent a lot of money doing that thoughtfully, but we knew we needed to do it to really have the flexibility.
Speaker Change: Our products and to ultimately drive down our cost.
Speaker Change: What we've been doing of late.
Speaker Change: Kind of latest let's say over more of the last five six years is really organizing our data more effectively.
Speaker Change: We've had more consumer and customer centric digital capabilities I mentioned, all the things that we were doing it in group benefits because sometimes.
Speaker Change: There's a little bit of misinformation out there that I felt needed to be corrected.
Speaker Change: And so again, we're investing in our customer experience, we've invested in and core capabilities and benefits and then.
Speaker Change: Of late you know everyone's been talking about AI and I'm not going to talk about it in great detail, but we got three main areas. We're focused on claims underwriting and operations and we will lead we will lead.
Speaker Change: AI.
Paul: Limitation for the industry and Paul I'd ask you to do is just stay tuned.
Speaker Change: Makes sense thanks for the answers.
Paul: Okay.
Speaker Change: Our next question comes from Brian Meredith from UBS. Please go ahead. Your line is open.
Brian Meredith: Hey, Thanks, a couple of them here for you first.
Brian Meredith: First Chris could you talk a little bit about what tariffs could potentially mean for loss costs. As you think about it in auto insurance in any year and commercial insurance Youre thinking about.
Brian Meredith: Yeah.
Brian Meredith: I'd be happy to try [laughter] Brian.
Brian Meredith: As you know I mean this is.
Brian Meredith: You know as I said in my prepared remarks, a fairly dynamic environment and Theres a lot of unknowns and uncertainties. So if you take that as sort of the foundation too.
Brian Meredith: My comments I think.
Brian Meredith: Our views right now are that the tariffs probably will affect the price.
Brian Meredith: Of automobiles parts building materials and supplies.
Brian Meredith: And if you think about it.
Brian Meredith: Others have commented upon it.
Brian Meredith: That should be a onetime event.
Brian Meredith: Step step change and then a normal trend would hopefully continue from there.
Brian Meredith: I think in personal.
Speaker Change: In commercial auto I believe our loss picks for 2025, where prudent.
Speaker Change: Which meant we have a level of conservatism in there that will hopefully allow us the opportunity to minimize any tariff related increases most likely in the second half of the year.
Speaker Change: As it relates to home and commercial property.
Speaker Change: All I would say is I think our reaction function there is tight and we can react timely.
Speaker Change: And obviously make any adjustments.
Speaker Change: Pricing, particularly in those products.
Speaker Change: Equally in our personal.
Speaker Change: Auto liability I think we've worked on our rate filings.
Know how to file rates, but more importantly, we're going to we've worked on our reaction time, there to sort of have a faster cycle time.
Speaker Change: We've talked about it in the past I think about 45% of our.
Speaker Change: States that we operate in require prior approval, but 55% zone. So we can react.
Speaker Change: In due course once once we know what's going to happen and obviously some of the data and the Flushing Harry pressures start to show up in our.
Speaker Change: In our data that the regulators expect to see so I think overall.
Speaker Change: Overall, we are well positioned to navigate this isn't.
Speaker Change: Anything terribly new as far as monitoring loss cost trends, but it is an emerging policy tariff environment. So it is somewhat unique in that respect.
Speaker Change: I think thats, what I would say it Brian.
Speaker Change: Okay terrific that was great and then just one really quick one here.
Speaker Change: Renewal written price increases in small business the jump around a little bit, but we saw it go from seven 4% to six two is that a mix issue or is there something else going on there.
Speaker Change: I think I think I might ask <unk> to comment, but that's mostly comp.
Speaker Change: More heavily weighted.
Speaker Change: In the first quarter, but.
Speaker Change: Ex comp.
Speaker Change: Small business I think was up our pricing was up 12%.
Speaker Change: The 12, 9% so it's still very very robust, Brian, but little a sequentially down due to comp I think Bob the only other impact in there Brian was our E&S binding was marginally down so everything else is really strong.
Speaker Change: Bob There's really strong auto is really strong. So we're really optimistic about the pricing that we're feeling in small business and general management comp tightly and I think youll see in our numbers really strong growth in the E&S finding we feel like that's been a really healthy place and we'll continue to push into that space.
Speaker Change: Terrific. Thank you.
Speaker Change: Our next question comes from Andrew <unk> from TD Securities. Please go ahead. Your line is open.
Andrew: Hey, Thanks, and good morning, maybe.
Andrew: Maybe just following up on Brian's question with respect to the pricing as I look at the underlying combined in business insurance.
Andrew: An outstanding 88, 4% underlying combined it looked like the.
Andrew: Mid large kind of.
Sorry.
Andrew: Combined go up by one four points and then it was helped by small and.
Andrew: And specialty.
Speaker Change: Yeah, maybe maybe elaborate a little more on the pricing environment.
Andrew: Do you see more pressure in.
Andrew: Mid and large going forward.
Andrew: Given the resilience you just touched on with small mid and specialty.
Andrew: No.
Andrew: That remained strong and then net net are you are you confident in your.
Andrew: Your line combined kind of holding in this in this vicinity going forward. So.
Andrew: Maybe a little more on pricing and how it's affecting both areas and then secondly.
Andrew: How is it.
Andrew: How is it going to hold up over time with this underlying combined.
Speaker Change: Yes, I would say Andrew first thanks for joining US yes, what we talked about last quarter and what our objectives were for 2025 I remain highly confident.
Andrew: And achieving.
Andrew: The goals that we set out was basically sort of consistent underlying combined ratios in business insurance between years.
Andrew: Improvement in personal auto and then.
Andrew: Group benefits, we were really focused on.
Andrew: Getting additional rate into the paid family leave products that you can see the results. This quarter. So I'm going to give you just a couple of high level comments and I'm, just going to ask <unk> to add anything.
Andrew: John.
Business insurance, and then Mike efficient anything on.
Andrew: Group benefits, but.
Andrew: The SMB space, which broadly defined I think we're in.
Andrew: Industry leader.
Andrew: Continues to hold up very well.
Andrew: If you look at our overall <unk>.
Andrew: This increase ex comp because comps got its own dynamics, we increased to 20 basis points to 99.
Andrew: And even if I look at.
Andrew: The property within the SME space were up 18%.
Andrew: In property pricing.
Andrew: Overall, GL, including excess and umbrella lines are achieved.
Andrew: 10, 5% increase this quarter.
Andrew: I gave you sort of an ex comp.
Andrew: Small business pricing number that's up 12, 9%.
Andrew: Feel really good about global specialty.
Andrew: $6 two in pricing, so, giving you just some highlights.
Andrew: To sort of demonstrate that we're executing well.
Andrew: The SME market, even in the aspects of global specialty where we play is holding up better tends to be the more profitable segment.
Andrew: We are one of the leaders in so.
Speaker Change: When you add and then Mike Fisher I'll ask you to add some no that was a fulsome response, the only thing I would add Andrew is.
Speaker Change: It's a competitive market and we talk about it from quarter to quarter, but we are asking the underwriters to really right to make the right choices and I think we again felt the middle team.
Speaker Change: Really I think really strong on the decisions that we're making on workers' comp I think we've pointed to our specialty team, making the <unk>.
Speaker Change: Our strong decisions on public D&O that book is less than $100 million. So they have managed that down so I think where the pricing is not holding up to what we do our underwriters are making the right choices and I'm really proud of the way, they're executing I think what we're moving into is an underwriters market, where as the market moves and maybe moves a little bit more dynamically the best.
Speaker Change: <unk> will win and we hope to be in that population that will continue to outperform.
Speaker Change: Hey, Andrew This is Mike I would just maybe add a couple of comments on the benefit side. So overall, we feel really good about where we're writing business. Both on the new sort of new sales front and the renewal front in terms of the pricing. So again holding onto margin in particular, we've seen strong disability experience emerge.
Speaker Change: And so that's a.
Speaker Change: Some favorable experience, we have coming into our book, but again on the other side. We've got some pressure on paid family leave that we've talked about two or three quarters in a row and you saw in the quarter with a nice improvement at 20 point improvement on paid family leave really driven by rate that we put into the book, we put double digit rate increases into that book of business.
Speaker Change: About $260 million, so not a large book, but we put some nice rate action and Theyre in persistency held up strong in the high 80, so very pleased with that outcome.
Speaker Change: And then just as a follow up.
Speaker Change: Very helpful.
Speaker Change: You just mentioned underwriters market.
Speaker Change: Trying to contrast, a little bit with net written premium being up an excellent 10% in the quarter for business insurance overall and it looks like across all the different areas.
Chris Swift: Okay Chris.
Speaker Change: The degree of confidence.
Speaker Change: So we're pretty robust net written premium growth trajectory or could that underwriters market.
Speaker Change: It moves talking about start to.
Speaker Change: Good luck.
Speaker Change: Is it about both Andrew not to cut you off but I feel positive on Baldwin feel positive that we can continue to grow in.
Capture market share market share with our product sets with our distribution, while being disciplined as Mel said from a from an underwriting side.
Speaker Change: The strongest evidence of that as you know we're shrinking our comp book right now as we speak.
Speaker Change: Just because we're not getting the right across the board that we want but yes.
Speaker Change: Yes.
Speaker Change: Rob I would say that conflicting data no not at all I would say Andrew in this marketplace with how much that we have built and in some places we are.
Speaker Change: I think sub scale to what we want to be.
Speaker Change: We certainly the flow continues to be strong we continue to enjoy really strong.
Speaker Change: Partnerships with our distribution, we have I think I'm very rare network of distribution partners that few can match.
Speaker Change: And we feel those partners wanting to consolidate to fewer markets. So we are enjoying that as well so the growth opportunities that are out there against subject to the market holding up we will take advantage of the flow that we see coming through and where the rates aren't where they need to be as I said a minute ago, we'll pull back and I think that's really what I'm asking you to think about us.
Speaker Change: We can and do believe we can do both manage the market and grow and I think thats, what the best underwriters in the market will do over time.
Speaker Change: Awesome. Thank you.
Operator: Our next question comes from Elyse Greenspan from Wells Fargo. Please go ahead. Your line is open.
Hi, Thanks. Good morning, My first question on the commercial line side can.
Operator: Can you just.
Operator: Provide some color just on <unk>.
Operator: Their loss trend is across your book.
Operator: And I'm, particularly interested if you saw if you made any changes to your loss trend assumptions.
Operator: In the first quarter.
Operator: At least I would say we made no changes.
Operator: Obviously, well well.
Operator: The changes we made in 'twenty, four and how that affected the 25 pricing.
Operator: You can see what we've talked about from an achieve rate.
Operator: And I think across the board or achieving.
Operator: Pricing ahead of loss cost trends and feel good where we're at.
Operator: Where we're at right now.
Operator: Excluding workers' compensation, which has its own ecosystem.
Operator: I think in personal lines. If you well you asked a question, but personal lines has its own strong dynamics of getting that book back to profitability. So yes.
Speaker Change: Yes, Phil feel really good one quarter in.
Operator: We are executing and feel very confident.
Operator: As I think about the <unk>.
Operator: Next three quarters.
Speaker Change: Yeah.
Speaker Change: Thanks, and then my follow up is on.
Speaker Change: Personal lines.
Speaker Change: In response to an earlier question you were talking about the makeup of your book per.
Speaker Change: For states that were following us versus prior approval, which you know to be indicated.
Speaker Change: Starting to see an impact of the tariffs have you guys would go the route of looking to take price offset that is that a decision that you've made.
Speaker Change: But you can go try to take price.
Speaker Change: Or.
Speaker Change: Any color that you could provide there.
Speaker Change: About the potential tariff impacts NEPA priced right and you guys talked about getting back to target margins in the book.
Speaker Change: Yes.
Speaker Change: It's a good question, obviously facts and circumstances will present themselves more clearly as far as.
Speaker Change: The options opportunities I think I think the nuance I want you to make sure you hear is that we said loss cost trends.
Speaker Change: And picks.
Speaker Change: At the beginning of the year that we thought were very prudent.
Speaker Change: Portfolio and provided a range of outcomes.
Speaker Change: And we have obviously the ability then to absorb.
Speaker Change: Some level of inflationary tariff type pressure, but beyond that.
Speaker Change: Yes, I mean, our goal is to keep up with loss cost trends.
Speaker Change: On a risk adjusted an adequate risk adjusted return on our capital deployed so by definition if.
Speaker Change: If we exhaust all other options and we're going to have to go back in and.
Speaker Change: Tweak rates.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Meyer Shields from <unk>. Please go ahead. Your line is open.
Speaker Change: Okay.
Speaker Change: Hi, Keith.
Speaker Change: Thank you for taking my question.
Speaker Change:
Speaker Change: Okay.
Speaker Change: Quick follow up on the macro economy.
Speaker Change: It environment.
Speaker Change: Tom You mentioned in your prepared remark that you are already taking action to address the impact I know you mentioned some like quick.
Speaker Change: We actually on time or things like that.
Speaker Change: Cycle time anything you wanted to add besides that.
Speaker Change: <unk> been taking action. Thank you.
Speaker Change: Yes, I would say its targeted action in certain lines.
Speaker Change: Yes, primarily the commercial.
Speaker Change: Auto and commercial property lines so.
Speaker Change: That's all I'll say.
Speaker Change: Okay got it.
Speaker Change: And then.
Speaker Change: Another follow up question is on small commercial.
Speaker Change:
Speaker Change: <unk> growth is very strong at 9% double digit.
Speaker Change: This increase just curious.
Speaker Change: The rates decelerating, how sustainable do you believe this business will be if we enter a more competitive pricing environment.
Speaker Change: Yes, I would say this is more I would say that the small business market is holding up really well, we don't see any signs of outside of workers' compensation in the admitted space that the pricing environment is changing dramatically, we still see combined ratios for the industry that need improvement so broadly in the small business space, where we're really optimistic about the way the pricing will hold up and our ability.
Speaker Change: To grow market share.
Speaker Change: Ex workers' comp ex workers' comp, yes. Thank you.
Speaker Change: Okay got it thank you.
Speaker Change: Yeah.
Speaker Change: Our next question comes from David Mathematics from Evercore ISI. Please go ahead. Your line is open.
David Mathematics: Hey, good morning.
David Mathematics: I had a question just following up on workers' comp.
David Mathematics: And just wondering so you spoke about just the pricing pressure on comp.
David Mathematics: Across <unk> customer sizes and.
David Mathematics: How youre shrinking that book now.
David Mathematics: Could you just elaborate on how much worse the pricing is commenting coming in versus your original expectations for the year.
David Mathematics: And what was built into your loss picks.
David Mathematics: Yeah, David what I would say is.
David Mathematics: Hmm.
Speaker Change: It's actually it might be slightly favorable to what we thought.
David Mathematics: But still slightly favorable is negative.
Speaker Change: Sure.
Speaker Change: Compared to what we planned for in the system.
Speaker Change: The first quarter.
Speaker Change: We've talked about it before our severity picks.
Speaker Change: We talk about generically frequency, which generally continues to be.
Speaker Change: Positive.
Speaker Change: But I've got to say from our expectations and maybe maybe just slightly slightly more positive from a pricing side model what would you add.
Speaker Change: No I don't think theres anything going on in the marketplace, it's surprising us on comp right now.
Speaker Change: Our retentions are basically on plan across Pi our rates as.
Chris Swift: Chris that are slightly better than expectations.
Chris Swift: Our trends are holding up well, but profitability is holding up well I just think it's a competitive market I wouldn't say that anything youre seeing coming through our numbers is unexpected and surprising us.
Chris Swift: Okay.
Chris Swift: Okay, great. Thanks for clarifying that and then.
Chris Swift: Just just a follow up just on business insurance I was a little surprised we didn't get more expense ratio improvement.
Chris Swift: Just given how the growth has been coming in better I know it takes a little bit for that to earn in.
Chris Swift: But is that something you think we can see pick up from here just sort of expense ratio improvement just given the growth that you guys have been saying.
Beth: Hey, David It's Beth I think you know that.
Chris Swift: Answered this question before on the expense ratio that.
Beth: Over time, we would expect to see.
Beth: Some improvement come through from an operating leverage perspective.
Beth: Not expecting some dramatic or significant step change I think it will be gradual and also as we've also talked about in the past. We also look very closely at the <unk>.
Beth: Things that we wanted to invest in our businesses.
Beth: And using those expense dollars appropriately and that investment is going to help drive our top line helped drive our loss cost and then ultimately helped drive efficiency.
Beth: I think it's a longer term journey relative to the expense ratio and overall I feel very good about where we are today.
Yeah.
Beth: Great. Thank you.
Speaker Change: Our next question comes from Mike Zaremski from BMO. Please go ahead. Your line is open.
Mike Zaremski: Hey, good morning. Thanks.
Speaker Change: Maybe just focusing specifically on the.
Speaker Change: Lawsuit kind of social inflation, all lines of business I know in the.
Speaker Change: Okay.
Speaker Change: The press release, you talked about liability pricing continuing to rise, which we can kind of tease out with the data you gave us I also know that Harper.
Speaker Change: Hartford.
And the minority of picking some of it.
Speaker Change: Embedding some loss picks in there that assume kind of low double digit inflation as well.
Speaker Change: Do.
Speaker Change: Do you feel that.
Speaker Change: We're going to continue to see.
Speaker Change: Pricing kind of move north on that line of business, which could.
Speaker Change: For some potential growth opportunities for Hartford or kind of how are you are you thinking about the dynamics on the on the social inflation lines.
Speaker Change: Yeah.
Speaker Change: Yes, I think youre, referring to just broad based casualty lines.
Speaker Change: Which I would tell you.
Speaker Change: <unk> side.
Speaker Change: Obviously, we made our adjustments last year, but there is nothing fundamentally changing.
Speaker Change: Right now.
Speaker Change: On an overall trend side that would change our view of that.
Speaker Change: Social inflation is going to continue to be a problem for society is going to continue to tax.
Speaker Change: Constrain innovation in my judgment.
Speaker Change: We need as an industry to continue to fight.
Speaker Change: The necessary reforms.
Speaker Change: In place.
At a state level.
Speaker Change: Good when the industry had a good win in Georgia.
Speaker Change: Some of it.
Speaker Change: Reforms that the governor put into place. So we feel good about that but overall, Mike I don't see any changing trends do you Mo.
Speaker Change: Just to build on Chris's point in terms of what we're seeing from a rate perspective, and what we're driving from a rate perspective geo accelerated in the quarter. So that's the primary GL umbrella was strong and roughly flat and then our excess lines again admitted and non admitted continue to be really strong.
Speaker Change: The teams are making sure that on all the GL lines.
Speaker Change: In the auto lines that we are getting rate in excess of trend and that's a key goal for the year.
Speaker Change: Got it Thats helpful.
Speaker Change: Switching.
Speaker Change: Here's a bit to E&S.
Speaker Change: I feel like.
Speaker Change: You all have been taking a lot of share and E&S for a while I know, it's a small line of business.
Speaker Change: You mentioned, 29%.
Speaker Change: Growth.
Speaker Change: Tremendous opportunity I think was the exact wording you used in the prepared remarks.
Speaker Change: Uh huh.
Speaker Change: <unk>.
Speaker Change: How you know what it is.
Speaker Change: Is it you know.
Speaker Change: We're kind of using relationships like <unk>.
Speaker Change: Program is relationships with some of the big E&S carriers or that's kind of is there any kind of a secret sauce or underlying kind of drivers that's causing that the.
Speaker Change: The markets are taking.
Speaker Change: Yes, we do have secret sauce, but I'm not going to talk about it.
Speaker Change: So what would you say.
Speaker Change: And I would break it into two pieces, Mike one in the small business E&S binding space I think really the secret sauce is.
Speaker Change: Taking all of the technology and tools that have made us so successful in the retail market into the wholesale market. So that is what we continue to do.
Speaker Change: And we continue to open up locations with our wholesale partners. So we are not open we basically do it by location by location by partner.
Speaker Change: And I think the growth that youre seeing is not only the flow is strong, but we are continuing to open up locations with new wholesale locations and so again I think the summary, and the binding E&S space as we continue to be really optimistic about our growth there and again predicated on just we're making it easier for our partners to do business with us relative to peers.
Speaker Change: Okay.
Speaker Change: In the global specialty space, where we think it is just a brokerage play.
Speaker Change: Again, the flow continues to be strong we grew 12% in the quarter in that space as Chris referenced in his opening remarks.
Speaker Change: There too we are a very very strong construction market and a key partner to the wholesalers and.
Speaker Change: And construction liability primarily what we are doing in that space is more about building out the other lines inland marine the non construction casualty lines property and just because of the partnership we've established on the construction side I think we can continue to continue to grow share in the brokerage space as well. So we're really optimistic about E&S overall.
Speaker Change: And the continued growth in that space.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Alex Scott from Barclays. Please go ahead. Your line is open.
Alex Scott: Hey, good morning.
Alex Scott: First one I have is on the personal lines business I mean, it sounded like a bit more focus on growth.
Alex Scott: Moving forward and just wanted to hear about some of the things you're doing if there's anything specific.
Alex Scott: No you were targeting for us to think about it.
Alex Scott: Yes, I would say Alex I mean, the first priority remains the same getting the overall book back to targeted margins, which we think we're well on track of achieving.
Alex Scott: By mid by mid year, particularly.
Alex Scott: Particularly in personal auto.
Alex Scott: Homeowners I think has actually performed very well consistently for a number of quarters now is the team keeps.
Alex Scott: It keeps pace with loss cost trends there.
Alex Scott: Elevated frequency I think our underlying was sort of in the mid 75 ish, which is.
Alex Scott: Which is very very.
Alex Scott: Strong.
Alex Scott: As.
Alex Scott: As we sort of alluded to.
Alex Scott: Trying to pivot to growth, particularly as profitability is.
Alex Scott: As has improved we do want to grow our home and auto business.
Alex Scott: I think we have the platform to do it which we talked about was prevail.
Alex Scott: <unk> in 44 States right now prevail makes up 75% of our new business, primarily in the direct channel.
Alex Scott: And our overall from an overall enforce book prevails now it's up to 25%.
Alex Scott: And the other statistic maybe that we don't talk about that frequently is about 75% of our homeowners book is bundled with auto which I think is a high.
Alex Scott: A high percentage and we're proud of it.
Alex Scott: Sales.
Alex Scott: Our sales agents I think are doing a good job so.
Alex Scott: I'll look to Melinda to add any other color at this point in time.
Alex Scott: Yes. Thank you I the only thing I would add is that as you know rate moderates, we certainly expect the pressure on retention to moderate as well, which would lift both premium and policy count growth.
Alex Scott: And then we've also implemented a number of new business initiatives to stimulate growth as well so increased marketing spend both rate and non rate levers to support that and then as Chris mentioned that prevail platform to enable it.
Speaker Change: That's not really helpful.
Alex Scott: <unk>.
Alex Scott: Second question I had is on workers' comp reserves and so.
Alex Scott: One of the things I've noticed is just your post COVID-19 accident your workers comp reserves.
Alex Scott: Generally.
Alex Scott: Just stayed in place for some of the peers, who may be recognized some of the frequency benefits.
Alex Scott: And so.
Alex Scott: I get the severity takes longer and maybe there is some.
Alex Scott: Some conservatism there but I.
Alex Scott: I just wanted to understand I guess like what's your approach to.
Alex Scott: Those reserves.
Alex Scott: I get the question, sometimes as the weather, maybe there's something more problematic there or something like that.
Alex Scott: Get the feeling that's the case, but I just wanted to sort of dig into that a little bit and understand the way you all his approach.
Alex Scott: Does it work with Congress.
Speaker Change: Alex I'll, let Beth at her color, but let me just state and federally Theres no problems.
Alex Scott: There is no thing problematic theres nothing.
Speaker Change: You should worry about.
Alex Scott: And we feel good about the balance sheet because it's.
Alex Scott: We've worked hard to put the balance sheet in the position it is today.
Alex Scott: Yes.
Speaker Change: Echo what Chris just said.
Speaker Change: Given just the nature of of that line of business.
Speaker Change: Cautious just to see those reserve season and.
Speaker Change: Take the appropriate action.
Speaker Change: When we feel comfortable so the releases that we did this quarter and our 2020 and prior we look at our reserves every quarter and evaluate anything that we might need to adjust but again as you know those those reserves stay on the balance sheet for a long period of time and we just.
Speaker Change: We want to be cautious as we think about the more recent years.
Speaker Change: How do we get it thank you.
Speaker Change: Our next question comes from Rob Cox from Goldman Sachs. Please go ahead. Your line is open.
Rob Cox: Hey, Thanks for taking my question.
I'm just thinking about the investment portfolio I appreciate the commentary for variable rate decreases to offset higher investment yields could you give us a sense of the fixed versus floating breakdown in your investment portfolio.
Rob Cox: Sure. So our variable are securities that will be exposed to variable rates are about 6 billion. So think about that as roughly 10% I would say that if we looked at that over the last couple of years, that's come down a bit.
Rob Cox: But that's the relative magnitude.
Rob Cox: Okay.
Rob Cox: Okay Awesome, that's very helpful. And then I just wanted to ask a follow up on the competition in small commercial.
Speaker Change: Clearly you all have some competitive advantages in that space, but I just wonder if there any noticeable difference in some of your larger peers getting more interested in the market and just the competitive dynamics.
Rob Cox: Yeah, I think a lot.
Rob Cox: A lot of people are interested in it but no interest doesn't translate to execution doesn't translate to history and experience in <unk>.
Rob Cox: How so.
Rob Cox: It's still a competitive market, but there's a lot of good competitors Mel but.
Speaker Change: We have been able to be distinctive for many many years and I just I would say Rob to build on Chris's comment is the level of investments that we continue to put in every year into the technology the tools the agent and customer experience, it's really hard to replicate and so once you get that advantage and you keep investing we expect that.
Rob Cox: Vantage to continue for a very long time.
Rob Cox: Okay.
Rob Cox: Awesome. Thank you.
Speaker Change: Our last question today will come from Josh Shanker from Bank of America. Please go ahead. Your line is open.
Speaker Change: Thank you very much for fitting me in.
Speaker Change: Couple of questions about agent receptivity on the homeowners product or the home in auto product for that matter.
Speaker Change: Given your great relationships on the commercial side.
Speaker Change: It is the pickup swift.
Speaker Change: Or.
Speaker Change: There is a work in progress.
Speaker Change: Yeah.
Speaker Change: Josh I'm, not even going to respond to that.
Speaker Change: <unk>.
Speaker Change: So yes.
Speaker Change: Thanks.
Speaker Change: Yes, okay very good.
Speaker Change: I would say, yes, we're pleased.
Speaker Change: With the agent channel as it exists today.
Speaker Change: We've seen nice growth on a bundled basis primarily.
Speaker Change: And we are turning back on broad based relationships.
Speaker Change: That might have been a little dormant.
Speaker Change: A little.
Speaker Change:
Speaker Change: Just dormant so yes, I'm encouraged about that and I was just going to ask Melinda.
Speaker Change: Our own color because she's the principal architect of getting back into the agency side of the business in a more meaningful way.
Speaker Change: Yes couple of things I would offer.
Speaker Change: Certainly we have had an opportunity as profitability has come back online to Reengage agents and there has been a fair amount of marketplace disruption and so those two things in combination with the Hartford retail brand or certainly an opportunity and a strategic advantage for the Hartford. So we're excited about what we've been able to do in the growth that we're posting on a relative.
Speaker Change: Lee small base today.
Speaker Change: And then as we think about it.
Speaker Change: <unk> pivot there is an opportunity to capitalize on our new platform.
Speaker Change: Prevail and it brings with it and.
Speaker Change: An exceptional product or platform and customer experience says that we do believe can be leveraged more broadly. So as you think about the segmentation and transferable capabilities coming to the agency channel over time, we think that that is an opportunity and we've earned the right to compete more and more meaningfully in personal lines in the channel.
Speaker Change: <unk>.
Speaker Change: So is it really that means Josh is we have some pilots that began in two states really in the second half of the year and we'll see how all that goes and keep you posted.
Speaker Change: And given that.
Speaker Change: Policy count in.
Speaker Change: Home is growing.
Speaker Change: Auto continues to decline.
Speaker Change: But that will hopefully will stop is is there any risk.
Speaker Change: Risks in writing Mono line home.
Speaker Change: That attractive product.
It's not our preferred approach.
Speaker Change: It happens, but it doesn't happen very frequently.
Yes.
Chris Swift: Yes, again as Chris shared the vast majority of our business is written on a bundled basis and.
Speaker Change: Home in the direct space and a growing percentage of our <unk>.
Speaker Change: Agency business as well I would say that our homeowners business has performed very well, we're very thoughtful about our growth and how we think about it on a state basis. So we look at how we want to grow home when we do so in our and our track record is very strong we generated a combined ratio in the low ninety's over a long period of time to Alaska.
Speaker Change: Eight or so and that compares very favorable to the industry.
Speaker Change: Thank you very much for taking my question I have a great day.
Speaker Change: We have no further questions in queue I'll turn the call back over to Keith <unk> for closing remarks.
Speaker Change: Thank you all so much for joining us today, please feel free to reach out with any additional questions and have a nice day.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.