The Hartford Insurance Group, Inc.

Good morning, ladies and gentlemen. Thank you for attending today's The Hartford Third Quarter Earnings Call. My name is Alex, and I'll be your moderator for today's call. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I would now like to pass the conference over to your host, Susan Spivak, with The Hartford Group. Susan, please go ahead.

Good morning and thank you for joining us today for our call and webcast on third quarter 2022 earnings. Yesterday we reported results and posted all of the earnings-related materials on our website. For the call today, our speakers are Chris Swift, Chairman and CEO of the Hartford, Beth Costello, Chief Financial Officer, and Doug Elliott, President. Following their prepared remarks, we will have a Q&A period. Just a final few 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 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. Hartford produced a strong third quarter with core earnings of $471 million, or $1.44 per diluted share, which includes the impact of Hurricane Ian and the ongoing effects of a dynamic macroeconomic environment. Before discussing our results in detail, I wanted to extend our thoughts and prayers to all those impacted by Hurricane Ian a powerful and devastating storm. It is in moments like this that I am especially proud of our Hartford claims team. To date, we have inspected approximately 95% of all claims submitted and have issued initial payments on 50% of those claims. Over the coming months, our team will continue to work tirelessly to help all our customers affected by the storm. Nearly a year ago at our investor day, I told you how confident I was in our portfolio, capabilities, expertise, talent, and our ability to deliver consistent and sustainable returns. As we look back, the clearest proof point that our strategy is working is our financial performance. In the first nine months of 2022, we delivered core earnings growth of 18%. and core EPS growth of 27 percent, top line growth in commercial lines of 12 percent, a commercial underlying combined ratio of 88.6, a group benefits core earnings margin of 5.9 percent. We returned approximately $1.6 billion to shareholders and yesterday announced a 10 percent dividend increase and We also produced a trailing 12-month core earnings ROE of 14.3%. These are terrific results that reflect our Hartford's performance-based culture and demonstrate why, despite the continued headwinds of inflation and economic uncertainty, we are confident in our ability to continue to execute at a high level. In commercial lines, we remain disciplined and prudent in establishing loss picks. We continue to have approximately 100 basis points of spread between renewal written pricing and loss trends, excluding workers' compensation. Our small commercial results continue to be exceptional. NextGen Spectrum, our market-leading business owners' product, is fueling much of our new business success as we gain market share at very favorable margins. The digital customer experience we provide in small commercial is a significant competitive advantage for customers, agents, and brokers as it provides a fast, intuitive, and efficient platform for doing business. The most recent small commercial Kinova study ranks as number one in digital capabilities for the fourth consecutive year. Our score climbed four points and we are now 20 points higher than our closest competitor. Middle and large commercial is benefiting tremendously from the combination of deep industry specialization and product breadth, leading to new business growth and improving loss and retention ratios. We are confident that our data science, pricing segmentation, and claims execution will continue to support underwriting discipline. In global specialty, results are outstanding. Underwriting margins have improved materially over the last three years. Execution has never been stronger, and the enhanced underwriting expertise we bring to the market is strengthening our competitive position and driving market share gains. In personal lines, we continue to take pricing actions as higher inflation impacts results. As Doug will describe, we continue to file for increasing rate changes across our book to restore profitability. Overall, I am confident we have the right strategy in execution in personal lines. Turning to group benefits, in the quarter, core earnings were $117 million, with a margin of 7.2%, reflecting lower excess mortality and strong disability results. Long-term disability trends are stable and within our expectations for incidence rates and recoveries. Modestly higher expenses reflect increased investments and capabilities, including digital, claims automation, and administrative platforms. Fully insured ongoing premiums were up 6% compared with the third quarter of 2021, driven by an increase in exposure on existing accounts as well as strong persistency in sales. Fully insured ongoing sales were $106 million in the quarter, up 29% with increases in both group disability and group life. In many ways, the fundamentals of the group benefits business are stronger than prior to the pandemic. Product awareness is greater as both employers and employees are highly engaged on benefit offerings with growing demand for supplemental products. This is an opportunity for us to deliver higher value and create a differentiated experience for our customers. And lastly, investment results were healthy in the quarter and are beginning to reflect the rising rate environment, which will earn in more meaningfully in 2023. Taking a step back, I want to touch upon some overarching themes. The impact of inflationary pressures and changing weather patterns on pricing and loss costs. Second, the positive impacts of the current interest rate environment. And third, the importance of a healthy and balanced insurance regulatory system that ensures stability and predictability for all. As we have discussed over the last several quarters, across the industry, carriers are dealing with elevated inflation, related to goods, services, and most components used in manufacturing. These inflationary pressures are likely to remain as the Fed continues to tighten monetary policy and despite some early signs of reduced demand and economic output. At the same time, changing weather patterns continue to drive increased frequency of events and associated claims severity. while there is no silver bullet to fix this problem, ongoing efforts to build more resilient homes, communities, and commercial properties needs to be an ongoing focus of policymakers, insurers, agents, and carriers. Taken together, these trends point to the need to maintain underwriting discipline and ensure pricing keeps pace with lost trends and reserving assumptions. As long as these trends continue, Rates will need to rise, and in some cases, will re-accelerate pricing increases over the near to medium term. Hartford is committed to maintaining price discipline, and we have clearly communicated to all our underwriters the need to expand or maintain margins ex-workers comp while prudently growing our book of business. Because interest rates are expected to remain elevated, anticipate our portfolio yield, excluding limited partnerships, will increase by approximately 50 to 60 basis points in 2023 compared to full year 2022, which will benefit earnings. Finally, on the regulatory front, our state-based system of insurance regulation has generally served customers and the industry well, although at times has experienced instability in certain jurisdictions and across certain product lines. At its core, the mission of insurance regulation is to protect consumers while ensuring a stable market, one that fosters market competition and safeguards carrier solvency. Balancing these two aspects of the regulatory mission is critical to ensuring widely available and affordable insurance. Recently, we have seen instances where regulation has become politicized, creating instability in the market and upsetting the balance the regulatory system is designed to achieve. We call on policymakers to respect the insurance regulatory framework, take the necessary steps to address rising legal system abuse, rate inadequacy, and persistent underinsured exposures, while working with the industry to support a well-functioning marketplace where insureds get the coverage they need and carriers secure an appropriate return for the risk they undertake. As a company whose purpose is to underwrite human achievement, Hartford stands ready to engage on these issues actively and constructively. Before I close, last month we announced the retirement of Doug Elliott, as the Hartford's president at the end of the year. Beth and I have worked together with Doug and the entire Hartford team over the past decade to transform the Hartford and build the foundation for our company's future success. Doug was instrumental in expanding our product suite of products, developing industry-specific verticals within our property casualty business, overseeing the integration of the navigators group, and elevating our underwriting excellence. Thanks to Doug's strong leadership, the Hartford is well positioned for profitable growth in the years ahead as we build on the momentum created to best serve all of our agents and brokers and customers. I want to thank Doug for his many contributions to our company. Thank you, Doug. Doug leaves us many gifts, including a seasoned group of executives who are going to continue our high-level performance. I have tremendous confidence in the talents, skills, and focus of this leadership team. In closing, let me leave you with some concluding thoughts. These results demonstrate our strategy and the investments we have made in our businesses have established the Hartford as a proven and consistent performer. We have outstanding execution capabilities and exceptional talent, that drives my confidence in our ability to continue to produce superior returns. We are managing the investment portfolio prudently and all holdings are well balanced across diversified asset classes. And we are proactively managing our excess capital to be accretive for shareholders. All these factors underpin my confidence that we will continue to meet or exceed our core earnings ROE objectives. Now I'll turn the call over to Beth.