The Hartford Insurance Group, Inc.

Good morning, ladies and gentlemen. Thank you for attending today's fourth quarter 2022, the Hartford Financial Results webcast. My name is Alex and I'll be the moderator for today's call. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you'd like to withdraw your question, you may press star two. 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 fourth quarter 2022 earnings. Yesterday, we reported results and posted all of the earnings-related materials on our website. For the call, our participants today are Chris List, Chairman and CEO of the Hartford, Beth Costello, Chief Financial Officer, Jonathan Bennett, Group Benefits, Stephanie Bush, Small Commercial and Personal Lines, and Mo Tucker, Middle and Large Commercial and Global Specialty. Just a few comments to cover before Chris begins. Today's call includes forward-looking statements as defined under the Private Security 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 filing. Our commentary today includes non-GAAP financial measures. Explanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filing, 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 today. Today, I will start with a summary of our fourth quarter in full year 2022 results. and accomplishments. Then I will turn the call over to Beth to dive deeper into our financial performance and key metrics, after which I will close our prepared remarks with a review of expectations for 2023. We will then be joined by our business leaders as we move into Q&A. So let's get started. So Hartford is pleased to report an excellent fourth quarter. capping an outstanding year of financial performance in progress against our strategic objectives. Quarter after quarter, we are delivering strong financial results, demonstrating the power of the franchise and the depth of our distribution relationships. Our commitment to superior customer experience, the benefits of significant investments made over the last few years, and superb execution by our 19,000 employees drive our success. These competitive advantages helped us deliver exceptional results in 2022, including core earnings growth of 14%, with core EPS growth of 23%, top line growth in commercial lines of 11%, with an underlying combined ratio of 88.3%, group benefits fully insured premium growth of 6%, with a core earnings margin of 6.5%. Strong investment results with excellent limited partnership returns and increasing fixed income portfolio yields and core earnings ROE of 14.4% while returning 2.1 billion of excess capital to shareholders. Looking forward with strong momentum across all lines, I am confident we can continue to deliver superior results. Now let me share a few highlights from each of our businesses. In commercial lines, written premium growth for the year was driven by strong exposure growth, pricing increases, higher policy retention, and continued strong new business. Underlying margins improved by nearly a point, driven by earned pricing, exceeding lost cost trends across most lines, in growing expense leverage driven in large part by our Hartford NEXT program. Across commercial lines, our brand depth of distribution and enhanced underwriting capabilities combined with excellent customer experience have positioned us well to capture market share while maintaining or improving already strong margins. Small commercial results continue to be exceptional consistently producing sub-90 underlying combined ratios with industry-leading products and digital capabilities, all of which drove record-breaking written premium and new business levels in 2022. Going forward, small commercial will remain a growth engine for the Hartford. For example, beyond our traditional product lines, we will continue to expand our addressable market with capabilities in the excess and surplus binding lines. This portion of the E&S business is in about an $8 billion market, serving small business owners, property, and liability exposures. With current written premiums exceeding $100 million and the evolving innovative capabilities within our broker quoting platform, we expect to become a leading destination for E&S binding opportunities and a strong complement to our existing admitted retail offering. In middle and large commercial, our team has done a tremendous job improving underlying margins by approximately seven points since 2019, with a written premium compounded growth rate of 6% over the same period. In 2022, written premiums grew 10% for the year with improved policy retention and solid new business. advancements in data science capabilities, industry-leading pricing segmentation analytics, and exceptional talent have delivered healthy margins, which I believe positions us well to continue driving profitable growth in this business. In global specialty, I'm extremely pleased with the team's accomplishments since the strategic acquisition in 2019. Their tireless efforts have enabled us to meaningfully increase the size and scale of our specialty business to 3.6 billion of gross written premium, including over 800 million of E&S premium. We are leveraging the global specialty franchise to further grow and expand our capabilities across commercial lines in this $82 billion E&S market. Global specialty results in 2022 were outstanding with an underlying margin of 84.6, improving over four points from prior year and over 11 points from 2019, demonstrating our execution tenacity, enhanced underwriting tools, and the expertise of the team. Our competitive position, breadth of products, and solid renewal of written pricing drove a 9% increase in gross written premium for the year, including 41% in our global reinsurance business, 19% in ocean marine, and 27% in international casualty. Turning to pricing, commercial lines renewal written price increases from the quarter were 4.9%, flat compared to the third quarter. Underneath, U.S. standard commercial lines renewal written pricing excluding workers' compensation accelerated from the third quarter to 7.9%, up one point, primarily driven by auto and property lines. Workers' compensation pricing remained positive, benefiting from average wage growth. Within global specialty, excluding public company D&O, renewal written pricing remained stable in the mid-single digits, and an aggregate in line with lost cost trends. Wholesale property, auto, primary casualty all saw higher pricing increases over the third quarter, as did U.S. and international marine. Additionally, the public B&O market continues to be competitive with rate pressures, which requires new business discipline and a focus on retaining profitable current accounts. Moving to personal lines, pricing is accelerated across auto and home, resulting in written premium growth of 4% for the fourth quarter and 2% for the full year. Like others in the industry, auto underlying combined ratios remain elevated as we continue to experience inflationary pressure. We have been actively responding with rate filings throughout the year. In the fourth quarter, filed auto rates averaged 8.3% increase, up 3.4 points from the third quarter. In homeowners, we have kept pace with lost cost trends through net rate and insured value increases reflected in renewal written pricing of 10.7% for the year and 13.3% for the fourth quarter. Turning to group benefits, the core earnings margin of 8.3 for the quarter and 6.5% for the full year represent significant increases from last year as excess mortality has materially declined. Meanwhile, long-term disability trends are stable and within our expectations for incident rates and recoveries. Fully insured sales for 2022 were 801 million, up 5%, and employer group persistency was approximately 92%, a strong result for the year. First quarter is off to an excellent start with persistency, modestly higher, and outstanding new sales results. We expect the group benefits marketplace to remain dynamic as digital transformation, product innovation, and customer demands accelerate. As a result, we are making significant investments today and have a clear roadmap for the future that I am confident will only strengthen our market leadership position going forward. Now I will turn the call over to Beth to provide more detailed commentary on the quarter.