Third Quarter 2026 The Hartford Financial Results Webcast - HARTFORD INSURANCE GROUP INC

Financial Performance:

• Reported core earnings of $956 million ($3.50 per diluted share), with a trailing 12-month core earnings ROE of 17.9%.
• Net investment income reached $850 million, a 13% increase year-over-year, driven by higher limited partnership returns (10.2% annualized) and strong alternative investments.
• Book value per share (excluding AOCI) increased 12% to $82.47, reflecting disciplined capital management and earnings power.
• Total combined ratio performance: Business Insurance underlying combined ratio was 90.1 (Small Business: 85.2; Middle & Large: 99.5); Personal Insurance underlying combined ratio was 87.1; Employee Benefits core earnings margin was 6.4%.
• Catastrophe losses for the quarter were $198 million (4.2 points), primarily due to tornado, wind, and hail events.
• Favorable prior year development of $594 million pre-tax ($97 million core), largely driven by workers' compensation, commercial property, and personal insurance, including a $497 million benefit from the asbestos and environmental insurance (A&E) adverse development cover (excluded from core earnings).

Guidance and Future Outlook:

• Maintained long-term guidance for Employee Benefits core earnings margin at 6% to 7%, despite modest 2027 dilution from the Equitable acquisition integration and intangible amortization.
• Anticipate a "step change" in workers' compensation frequency in 2026, driven by healthcare cost shifts, but expect the elevated frequency to normalize or stabilize by 2027.
• Expect investment yields to benefit from higher reinvestment rates in the coming years.
• Projected 2027 performance for Business Insurance will depend on market evolution in pricing for General Liability and Workers' Compensation; growth in Middle Market and Global segments will be disciplined and selective.
• Confirmed intention to close the sale of Hartford Funds, potentially by December 1st, with quarterly distributions from the proceeds.

Business Segments and Product Lines:

• Business Insurance: Delivered 6% written premium growth; Small Business grew 7% with exceptional margins, while Middle & Large grew 3% (5% in Middle Market). Global Specialty grew 7% with an underlying combined ratio in the mid-80s.
• Personal Insurance: Experienced a 4% decline in written premium (Auto -9%, Homeowners +6%); improved underlying combined ratio due to earned pricing exceeding loss trends.
• Employee Benefits: Reported 4% growth in fully insured premiums with persistency exceeding 90%; closed acquisition of Equitable's employee benefits business adding ~$500 million in annual premium, expanding into dental and vision.
• Digital & Tech: 78% of small business submissions are now bindable straight-through, a record high, with Kinova ranking Hartford first for small business digital experience for the eighth consecutive year.
• Acquisitions: Completed the Equitable employee benefits acquisition, expected to be accretive over the long term despite initial 2027 core earnings dilution from integration costs and amortization.

Market and Competitive Landscape:

• Observes increasing competitiveness in the small business sector, evidenced by non-positive new business growth for the first time in decades, though the company remains disciplined.
• Small business market remains buoyant with strong business formation rates; management sees potential for an "AI-enabled small business revival."
• Market pricing trends: General Liability continues to see high price increases; Commercial Auto pricing remains strong above loss trends; Workers' Compensation pricing remains positive but modest; Property pricing in small business and middle market remains stable in the mid-single digits.
• Competitors are increasingly diverging on stability views; The Hartford maintains a differentiated technology advantage with a 20-point lead over the next carrier in small business digital experience.

Risks and Challenges:

• Workers' Compensation: Facing a broad-based uptick in claim frequency attributed to healthcare costs, ACA subsidy expirations, and general affordability challenges, leading to higher loss ratios.
• Disability Claims: Elevated loss ratios in Group Life and Disability driven by higher claim incidence, behavioral health issues, and utilization of Paid Family and Medical Leave (PFML); short-term disability ratios slightly above expectations.
• Property Volatility: Increased non-catastrophe property losses (fire and non-weather water) and higher workers' compensation frequency in Middle and Large segments.
• Competitive Pressure: Intensifying competition in new business for auto and small commercial segments, requiring strict underwriting discipline.
• Acquisition Integration: Initial costs related to the Equitable deal, including $30 million in annual intangible amortization and $30-40 million in integration expenses, may dilute core earnings in 2027.

Management Commentary and Tone:

• Leadership Transition: Chris Swift announces the end of his 13-year tenure as CEO (formerly CFO), expressing full confidence in successor Mo Cusick, who will lead the company's next chapter. Transition is described as thoughtful and seamless with unchanged strategy.
• Confidence: Management maintains a confident tone regarding the company's technology stack, underwriting discipline, and ability to deliver attractive returns despite near-term headwinds in workers' compensation.
• Strategic Focus: Emphasis on "disciplined execution," embedding AI in underwriting and claims, and leveraging digital capabilities to improve customer and agent experiences.

Analyst Questions and Answers:

• Workers' Compensation & Middle Market: Analysts asked about the 200bps underlying combined ratio deterioration in Business Insurance; Management attributed ~100bps to workers' comp frequency and ~100bps to mix/other factors, viewing the frequency increase as a step change likely to persist through year-end 2026 but normalize by 2027.
• Disability Loss Ratios: Clarified that Group Disability loss ratio increases are driven by broader economic factors, higher wage earners, and behavioral health trends; PFML utilization is rising, prompting mid-double-digit rate increases in that product line.
• Reserves: Confirmed no reserve adjustments were made for Commercial Auto or General Liability in the quarter, indicating confidence in current reserving levels.
• Small Business Sustainability: Analysts questioned the sustainability of the 85.2 small business combined ratio; Management cited digital leadership (78% straight-through binding) as a key differentiator supporting margins.
• Competitive Landscape: Acknowledged incremental competitiveness in small commercial new business but highlighted strong retention on renewals and the ability to select profitable risks in Middle and Global segments.

Other Key Points:

• Dividend increase: Announced a 12% increase in the common quarterly dividend to $0.67 per share, effective January 2027, continuing a decade-long trend of ~11% average annual increases.
• Share Repurchases: Repurchased 3.4 million shares for $475 million during the quarter; $4.37 billion remains under authorization as of September 30.
  Capital Management: Holding company resources totaled $1.5 billion; the company continues to prioritize capital generation and shareholder returns.
• Hartford Funds Sale: Progressing toward closing the sale of Hartford Funds, with distributions to be recorded in realized gains.
• AI Strategy: Management monitors agentic AI trends (e.g., Meta's Muse) but notes no immediate shift in small business purchasing channels or risk sourcing, maintaining reliance on the agent/advisor model.