The Hartford Insurance Group, Inc.

Good morning, everyone, and welcome to the Hartford Financial Services Group Incorporated fourth quarter 2020 financial results webcast. All participants will be in a listen-only mode. Should you need assistance, please send to 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 and then one. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Susan Spivak, Senior Vice President of Investor Relations. Ma'am, please go ahead.

Thank you, Jamie. Good morning, and thank you for joining us today for our call and webcast on fourth quarter and year-end 2020 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 supplements. Finally, please note that no portion of this conference call may be reproduced or rebroadcast in any form without the Hartford's prior written consent. Replays of this call 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. Let me start by saying we have been through one of the most turbulent years in recent history. which has been shaped by extraordinary set of circumstances, including the worst pandemic in more than 100 years, and in its wake, devastating economic and emotional fallout, a collective reckoning with racial inequality that continues to challenge America, and the increasingly vivid reminders that our climate is changing. Despite these challenges, the Hartford continued to deliver strong results with core earnings OF $636 MILLION, OR $1.76 PER DELUDED SHARE, FOR THE FOURTH QUARTER, AND A TRAILING 12-MONTH CORE EARNINGS ROE OF 12.7. FOR THE YEAR, CORE EARNINGS WERE 2.1 BILLION, OR $5.78 PER DELUDED SHARE, AND BOOK VALUE PER DELUDED SHARE, EXCLUDING AOCI, WAS $47.16, UP 8% FROM 2019. The Hartford's performance reflects the strength of our businesses, our execution on strategic priorities, and builds a solid foundation for our company's future sustainable success. I want to thank all my colleagues across the Hartford. I am incredibly proud of the resiliency demonstrated by our employees and their commitment to our stakeholders during this unusual time, while balancing the demands of work and family. Now, turning to the business and 2021 outlook. Property and casualty underlying underwriting results significantly improved in both the fourth quarter and for the full year 2020, with strong performances in both commercial and personal lines. Excluding the impact of COVID, commercial lines underlying margins expanded by 6.5 points in the fourth quarter and 1.6 points in 2020, with improvement coming from all businesses. These results were in line or better than the guidance we provided a year ago and were driven by higher pricing, adherence to our underwriting disciplines, and operating efficiencies. In commercial lines, pricing and momentum continues across nearly all lines, excluding workers' compensation. And we expect pricing increases to continue as additional rate is needed to offset pressure from social inflation, more frequent catastrophe events, and the persistent low interest rate environment. In commercial lines, our teams are executing strongly on a number of fronts. In global specialty, the strategic transaction to acquire navigators is on track. The integration is proceeding well. and it is providing us with expanded product breadth in middle market and global specialty. In 2020, we have met our goal of improving financial performance in the business compared to the second half of 2019, and the acquisition was well-timed from a market perspective. Small commercial results remain excellent. We continue to strengthen our competitive advantages and market leadership position. The launch earlier in the year of our new business owner's policy raised the bar for customer experience in buying and managing coverage. Going forward, we have a robust strategy to grow through product innovation and will continue to invest to maintain our industry-leading digital experience. I am excited about what we will continue to accomplish in this business. In middle and large commercial, We completed year one of a three-year plan to transform the underwriting process, provide a differentiated customer experience, and grow our specialized verticals. In the fourth quarter, underlying margins improved by 4.4 points compared to prior year, primarily due to lower expense ratio. In addition, our broader and deeper product set and enhanced analytics will drive further growth AND IMPROVED MARGINS. MOVING IN PERSONAL LINES, UNDERLYING MARGINS IMPROVED IN BOTH THE FOURTH QUARTER AND THE YEAR, BENEFITING FROM CONTINUED FAVORABLE AUTO FREQUENCY, LOWER NON-CAT INCURRED PROPERTY LOSSES, AND REDUCED EXPENSES. IN 2020, WE EXTENDED OUR AARP RELATIONSHIP WITH A NEW CONTRACT THAT RUNS THROUGH THE END OF 2032, SOLIDIFYING our unique value proposition for the 50 and over demographic. We are also investing in a new digital platform to administer and market our products. Doug will provide more detail and I am excited about the new auto and home products we will launch in the next six months. So in summary for PNC, 2020 performance was strong despite challenges of the pandemic and COVID losses. In 2021, we expect continued modest COVID losses in workers' compensation and financial lines. And while we are encouraged that the vaccine rollout has begun, we are learning it will take more time than initially projected to achieve protection across the broader population. With this outlook, we are expecting our commercial lines underlying combined ratio excluding the impact of COVID in both years to improve by approximately three points from 2020 results to a range of 88.5 to 90.5. The margin expansion alone is significant. When coupled with our business mix, it's an ambitious but achievable outcome. In personal lines, our outlook for 2021 incorporates an assumption that driving patterns begin to return to more normal levels and property results are more in line with historical trends. The result is an expected underlying combined ratio in the range of 87 to 89. I am very bullish about our growth potential and expect to increase our top line at a faster rate than we have experienced over the past five years. While some of this growth reflects a positive pricing environment, we see the increasing opportunity to utilize our brand, people, enhanced underwriting capabilities, and excellence in customer service to capture market share. Before moving to group benefits, I want to briefly comment upon the business interruption lawsuits brought against the Hartford and the industry. While we are extremely sympathetic to the difficulties faced by our insureds, and all businesses dealing with the pandemic, the claims against us are outside the scope of our policies. All of our property policies subject to litigation plainly require direct physical loss or damage to trigger coverage, and the COVID-19 virus clearly does not cause such loss or damage. Although it is still early in the lifecycle of some of these cases, we are pleased the overwhelming majority of decisions to date by federal and state courts across the country have held in favor of the insurance carriers and recognized that the presence of the virus does not meet the direct physical loss or damage trigger for coverage. Given the number of lawsuits, it's not surprising that some initial rulings have gone against the industry. Where appropriate, these cases have been or will likely be appealed and I am confident appellate courts will properly consider the growing body of precedent in favor of the industry. Nevertheless, a few unfavorable trial court rulings does not change our view of this exposure or the strength of our coverage arguments. We remain highly confident in our contract language and coverage positions. Finally, there has been some commentary about the number of lawsuits filed against the Hartford versus other industry players. We do not believe simply comparing the number of lawsuits is a useful way to assess exposure and more appropriate ways to analyze coverage defenses, limit profiles, portfolio mix, and other variables. Since the initial outside wave of lawsuits against the company The pace of new cases against the Hartford has slowed significantly and is now in line with peers. In the meantime, pending case counts against us have been reduced by approximately 25% to date through a combination of motions and withdrawals. Turning to group benefits, core earnings were down in both the fourth quarter and full year as we experienced excess mortality rates which we believe is attributable to the ongoing impacts of the pandemic. Obviously, mortality has been impacted by deaths directly attributable to COVID, but there is also an indirect effect, which is most likely the result of patients deferring regular treatments for chronic conditions or individuals tolerating warning signs of a health problem for too long before seeking care. All-cause excess mortality amounted to $152 million before tax in the quarter and included $22 million of claims related to prior quarters. The full-year impact of excess mortality was $239 million, which reduced our full-year core earnings margin by 3.1 points to 6.4%. In disability... OUR FOURTH QUARTER LOSS RATIO WAS 65.1, WAS 3.1 POINTS HIGHER THAN PRIOR YEAR, AS THE FOURTH QUARTER OF 2019 RESULTS INCLUDED HIGHER FAVORABLE PRIOR YEAR DEVELOPMENT. FOR THE FULL YEAR 2020, THE LOSS RATIO IMPROVED BY 1.2 POINTS TO 66.1, BENEFITING FROM STRONG RECOVERIES AND TO A LESSER EXTENT FAVORABLE INCIDENTS. ON THE TOP LINE, Fully insured ongoing premiums were down 2% in the quarter and for the full year as our clients responded to the pandemic-driven economic pressures by reducing their workforce and associated payrolls. 2020 fully insured ongoing sales driven by strong national accounts were up 11% to $717 million, and persistency was slightly favorable at approximately 89%. Sales are off to a solid start in 2021, with 1-1 effective dated sales exceeding prior year by more than 10%. Looking into 2021, we expect the group benefits marketplace to remain dynamic as digital transformation, product innovation, and customer demands accelerate. Our competitive advantages and future investment roadmap will strengthen our market leadership. That said, many questions still surround the pandemic and its effect on mortality and the economy. Therefore, we are basing our loss picks heavily on total mortality trends in the near term, rather than trying to isolate COVID-related deaths only. Based on historical mortality expectations, Excluding any pandemic-related effects, we expect the core earnings margin to be between 6% and 7%. The decrease in expected margin from 2020 actual ex-COVID results primarily relates to lower expected favorable prior period development on LTD reserves and life waiver claims and lower net investment income. Taking into account the uncertainties surrounding the mortality impacts of the pandemic, we expect core earnings margins to be reduced by 2.3 points given the continued higher rates of all-cause excess mortality. Actual mortality rates will be impacted by the vaccine rollout pace, mutations of the virus, and the broader population returning to more routine medical care. In addition, WE EXPECT TO A MUCH SMALLER DEGREE ELEVATED SHORT-TERM DISABILITY CLAIMS COMPARED TO HISTORIC NORMS. LASTLY, WE EXPECT THESE HIGHER MORTALITY AND SHORT-TERM DISABILITY CLAIMS TO IMPACT OUR RESULTS PREDOMINANTLY IN THE FIRST HALF OF 2021. AS WE CLOSE THE BOOKS ON 2020, I AM OPTIMISTIC ABOUT THE FUTURE. AT THE HARTFORD UNDERWRITING HUMAN ACHIEVEMENT is at the heart of what we do. We are committed to making a sustainable and positive impact on society as an essential element of our ongoing success. Across the Hartford, we are making this happen by always doing the right thing, fostering a workplace where everyone is welcome and respected, using our resources and influence to help mitigate the challenge of changing climate patterns, and helping to make our communities where we live and work safer and more successful, which has never been as important as it is today. Heading into 2021, I am confident in our business portfolio, people, and our strategy to deliver value for all our stakeholders. Now I'll turn the call over to Doug.