The Hartford Insurance Group, Inc.

Good morning. My name is Alyssa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hartford's fourth quarter 2019 financial results conference call-in webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Susan Spivak, Head of Investor Relations. Ms. Spivak, you may begin your conference.

Thanks, Alyssa. Good morning, and thank you for joining us today for our call on fourth quarter and year-end 2019 earnings. We reported our results yesterday afternoon and posted all the earnings-related materials on our website. For the call today, our speakers are Chris Swift, Chairman and CEO of the Hartford, Doug Elliott, President, and Beth Costello, Chief Financial Officer. Following their prepared remarks, we will have a Q&A period. Just a few final comments before Chris begins. Today's call includes forward-looking statements as defined under the private securities litigation Reform Act of 1995. These statements are not guarantees of future performance and actual results could be materially different. We do not assume any obligation to update information or forward-looking statements provided on this call. Investors should also consider the risks and uncertainties that could cause actual results to differ from these statements. A detailed description of those risks and uncertainties can be found in our SEC filings. Our commentary today includes non-GAAP financial measures. Explanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filings as well as in the news release and financial supplement. Finally, please note that no portion of this call can be reproduced or rebroadcast in any form without the Hartford's prior written consent. Replays of this webcast and an official transcript will be available on the Hartford's website for one year. I'll now turn the call over to Chris.

Good morning and thank you for joining us today. 2019 was an excellent year and a pivotal year for the Hartford. We set ambitious goals and delivered on strategic objectives while achieving strong financial results. Fourth quarter core earnings were $522 million, or $1.43 per diluted share, an 84% increase over prior year driven by significantly lower catastrophe losses, exceptional results in group benefits, and strong investment performance. For the year, core earnings were $2.1 billion, or $5.65 per diluted share, up 31% from 2018. Book value per diluted share XAOCI rose to $43.71, an 11% increase for the year. And the 12-month core earnings ROE was 13.6%, an impressive result in the current market environment. Hard work by talented employees across the Hartford enabled us to perform at this high level. Turning to our results, In commercial lines, the underlying combined ratio of 94 is a strong result, particularly in a year where we have incorporated navigators. Just as impressive has been the speed with which the two organizations have come together as a focused team, able to strongly position the Hartford in the marketplace and capture new business opportunities in firming market conditions. As the integration progresses, We are seeing more opportunities to improve underwriting profitability, cross-sell products, improve claim processes, and leverage all the capabilities of the Hartford platform. These activities, coupled with continued rigorous execution on renewal pricing and retention, will contribute to our goal of achieving $200 million of incremental core earnings from the acquisition. In commercial lines, I am pleased with achieved rate increases across the portfolio with a focus on margin improvement. In middle market, renewal pricing excluding workers' compensation accelerated through each quarter of the year, culminating with a 7.1% increase during the fourth quarter. Personal line score earnings improved to $285 million as we benefited from much lower catastrophe losses with an underlying combined ratio of 91.9. New sales for auto and home are up 36% over prior year, with improving retentions, all contributing towards the goal of future net written premium growth. Group benefits had an outstanding year, with core earnings of $539 million, up $112 million from 2018, with a core earnings margin of 8.9%. This performance was largely due to a three-point loss ratio improvement over prior year, reflecting continued favorable disability incidence trends and strong disability claim recoveries partially offset by elevated life severity experienced earlier in the year. On the top line, fully insured ongoing premiums were flat to prior year. Fully insured ongoing sales for 2019 or $647 million, down $57 million as prior year included first-year sales related to the new paid family leave product in New York. Persistency, as expected, was slightly below historical trends as we adjust pricing on targeted segments of the Aetna book. Overall, earned premium on the Aetna book is in line with our deal assumptions, and case conversions continue to go well from both a platform and pricing perspective. We are very pleased with the operational execution, integration, and financial performance of group benefits. Looking ahead to 2020, we are expecting a core earnings margin in the range of 6.5% to 7.5%, which assumes moderate premium growth over 2019, driven by sales and improved persistency. a lower expected investment yield driven by a 7% limited partnership return assumption, and normalized claim incidence rates and recovery trends in long-term disability. January sales were solid in a competitive market, but were down slightly from 2019 due to fewer large-case sales. Before turning the call over to Doug, I'll provide my perspective on a couple Macro themes. First, social inflation continues to dominate industry conversations as the current hot topic. Last quarter, I said that social inflation was not a new phenomenon. A quarter later, my view hasn't changed, but there are a few points to make. I expect some level of social inflation will be felt by many carriers, if not all across the industry. However, the impact on loss costs will vary by company. Variation depends on several factors, including the line of business and coverage limits, type of coverage, such as primary, umbrella, or excess, specific contractual terms, and reinsurance programs. Each company's ability to react to social inflation will be impacted by the quality of data and analytics supporting product pricing, and loss reserve estimates. At the Hartford, I feel confident that our analytical capabilities, along with our talented claims and legal professionals, have allowed us to build a track record of making timely adjustments to loss cost assumptions reflected in our financial results over the past four to five years. The second topic is interest rates. For several quarters, we have discussed the impact of a persistent low interest rate environment on the ability to grow net investment income. Currently, our portfolio continues to perform well, but it is clear that the interest rate environment is becoming more challenging. This will impact the investment returns on new cash flows, reinvestment rates, and our overall portfolio yield. The implication is that net investment income will likely become a headwind to core earnings growth, requiring higher levels of underwriting income to support earnings in ROE. This, coupled with lost cost trends, leads me to believe the firming cycle we are experiencing will likely continue for the next 18 to 24 months. In closing, when I look out to 2020 and beyond, Think about how far our businesses have evolved over the past decade and how well positioned the Hartford is as a market leader. We have expanded underwriting capabilities and provide a broad range of products delivered through multiple distribution channels to meet customer needs in a dynamic market environment. We are focused on execution, integration, innovation, and maximizing our enhanced capabilities to organically grow the business. In small commercial, we are a top industry player and have demonstrated consistent financial performance and innovation over the years with a focus on the customer experience. We are growth-orientated with a multi-channel distribution strategy and expansive underwriting appetite to serve more classes of business. In middle and large commercial, we aim to improve margins and leverage new product breadth. Pricing is improving. and we have identified attractive opportunities to cross-sell specialty products. In global specialty, we are newly positioned with a broader product portfolio and expanded distribution. In the wholesale and Lloyd's market, we will focus on integration and improving margins. In our personalized business, we have enjoyed a unique relationship with AARP for over 35 years. We continue to look for opportunities to drive top line growth. And finally, in group benefits, we are nearing the completion of integration activities. Our focus now is on future growth stemming from new products and services designed to complement existing risk products while improving the customer experience. We entered 2020 well positioned in the market. Moreover, we remain committed to making a sustainable and positive impact on society as an essential element of our ongoing success. Across the Hartford, we're making this happen by always doing the right thing, fostering a workplace where everyone is welcome and respected, using our resources and influence to address the challenge of changing climate, and helping to make our communities where we live and work be safer and more successful. I'm very proud that these sustainability efforts are widely recognized as industry leading. In summary, I'm confident our enhanced capabilities in a farming market combined with ongoing capital management provide the opportunity for the Hartford to enhance value for all our stakeholders. Now I'll turn the call over to Doug.