The Hartford Insurance Group, Inc. — 2024 Q1

Happy to, Andrew. Welcome. Yes, we did call out a little lighter sales volume during the quarter. I'm looking at Jonathan Bennett, he could give you additional color also.

Yes, Chris, I agree with everything you've said. And I think, Andrew, just reinforced the importance of us having our point of view and executing on that in the marketplace. If you think about where we are in the group life cycle, we're looking to the future, we're seeing improvements. When you look back at your trends, which is where you start and thinking about your pricing philosophy, a lot of that data is loaded with excess mortality and COVID losses.

Yes, Andrew, I'll start and I'll let Mo and Beth add their commentary. But yes, I'm not going to speak to competitors because everyone is just slightly different, but the confidence that we have particularly in our current loss picks are very, very high. And I think the context that I think Mo and Beth will explain to you is that we've been hard at work in sort of improving our underwriting our book, reunderwriting it, looking at different classes of business, changing terms and conditions, and Mo will give you more color. Beth can talk about the actuarial analysis that we do on a quarterly basis, which is very robust and gives us a high degree of confidence in our picks, particularly for the most recent years.

So I'll start, and then I'll let Mo provide some color and just add on to what Chris indicated. But as you noted, Andrew, in the general liability reserves, the prior year development that we recorded this quarter was related to the 2016 to 2019 years since some large loss activity. And as Chris said, we do evaluate these reserves quarter-to-quarter and when we see activity, we do react to it.

Yes, Andrew, maybe three themes just to build on Beth's point about actions we've taken over that time period. So first is, obviously, we've put significant rate in each of those years since 2019 in each of the three books, and that is well in excess of some healthy trend.

Elyse, thank you for the question and joining us. We're pretty pleased with the start on Personal Lines in totality. You saw the metrics that we've talked about, 25.7% written rate increase for auto, 15-ish in home, and I think the team is executing very, very well.

Yes. Just a couple of things. Also, I'd point out that we did see some favorable development on the '23 accident year primarily coming out of the fourth quarter for auto physical damage. So we see that as an important proof point, too. I just want to clarify on Chris' comment on the book loss trend, mid-teens.

Yes. I'll add my color, and then Mo will add his. But I hope you felt it in our tone, Elyse, we're really pleased. The team is working hard from an execution side, to have ex-comp. Our written renewal rate increased, increased to 70 basis points, I thought it was healthy. That does include an element of exposure to that excess rate, which we call out in the general 2.3 points range or 25% exposure, 75% rate base.

Yes, Elyse, I would say it's competitive but generally supportive because we talked about properties moderating a little bit outside of our BOP, and the BOP is still accelerating just in terms of what we're able to get there in terms of rate. The excess in umbrella is accelerating again, and auto is accelerating again. So broadly, I just -- I think we feel like the market is being fairly disciplined, fairly disciplined, and supportive of what we're trying to get done for the year.

Well, cat profile versus risk appetite, I'd see a little difference. I mean, we're not increasing our property cat appetite per se. We've always said that we're willing to write property if it comes with some incremental small elements of cat, in which I think we've been managing perfectly and Mo could give you more colors.

spectrum, E&S binding, our general industries properties.

Yes, Greg, I would just say that there are a couple of cat metrics that the team were really focused on. And for example, a, also annual aggregate loss to premium ratios trying to keep those flat. So as premium goes up, obviously, we would like the AAL to stay relatively flat.

Yes. It's a competitive market. And I would say, especially in the larger end of each of our segments, so the larger end of small, we are finding more competitive, the larger end of middle is more competitive, and the larger end of the specialty business. So anything with a lot of premium on the slip typically has a little more competition to it.

Looking at the rate that you're pushing through on auto, in particular, obviously, it's sizable. Year-over-year, the policy count is down is around about 5%, which -- that might be a good outcome given how much rate you're pushing through. One of your probably the largest direct competitor in the market, they raised prices not as much as you over the last couple of years have lost 20% of their business.

Josh, thank you for joining us. Yes, that's the trade-off we're making right now, lower retention for a more profitable cohort to get us back to that targeted profitability. So I don't think it's outside of the range of expectations that we've had as far as that trade-off.

I don't mean to belabor the point, but I'm just curious if the customers are giving you a chance to retain them, are they calling up and asking what can we do to help me? Or are you just getting a notification that they've left to a competitor?

I think it's more of the latter. I don't think we're having very many negotiations over the phone as far as our product and our offer. And we're being empathetic when we talk to our customers, particularly the mature customers, but there's not a negotiation.

Mike, when you say puts and takes, compared to prior year, what do you have in mind? What are you trying to get at?

Yes. I would just share with you. From an expectation side, everything is pretty much right on line. I mean if you -- obviously, you could see we improved slightly on a loss ratio basis. From prior year our non-cat property is pretty consistent with prior year and maybe even slightly ahead of our expectations. So I don't want to avoid -- I don't want you to feel like we're avoiding a question, but there's nothing to call out.

Yes, I would say generally, our views on loss trends from '23 have increased modestly and that's obviously reflected in what we're trying to execute from a written rate side and the discipline we have there. And again, that the guidance that we try to give our underwriters with appropriate discretion, but yes, I would say loss trend is up modestly in '24 compared to '23.

Yes. I was hoping, could you give us what your kind of E&S growth was in the quarter in your Commercial Lines space? And just maybe your thoughts, is that a market that you continue to expect to grow at a pretty healthy rate here going forward?

Yes, Brian, I'll look to Mo to add any of his color. But I would -- there's two E&S components I'd have you think about. One is in Small, right? Our E&S binding business, which we've called out and we'd like to try to get to that $300 million level. And then, obviously, all our E&S capabilities within Global Specialty, whether it be property or casualty, that is an important component of what we're trying to do in the marketplace.

Brian, I would say we're excited about the flow in both of the channels that Chris talks about, both in that binding, which is the Small Commercial and the flow into our brokerage that continues to grow nicely. We saw -- we continue to see the growth, as Chris called out in his prepared remarks on the binding side. And we're seeing really good growth in the brokerage side, which sits in our Global Specialty business in both primary casualty, excess casualty, that rate environment continues to accelerate, as I talked about earlier.

Great. That's helpful. And then second question, Chris, bigger picture question here. Looking at your Personal Lines business and understanding that the last couple of years have been challenging from inflation stuff, but if I look at your homeowners business, it's been close to a decade since you've grown unit volume there. In auto it's probably 6, 7 years, maybe a blip here and there. I'm just curious, maybe what kind of was going on during that period? And is the Prevail product kind of the answer to that now, where maybe at some point here, we'll see [indiscernible] start to grow unit in the Personal Lines space?

Brian, I appreciate the question. I'm going to spare the torture going back 7, 8 years for everyone on what didn't go right. But I think more importantly, and we've talked about it in the various settings that, the Prevail product and platform does give us a step-change in our abilities to effectively compete in our core market, which is a mature preferred segment through an AARP endorsement that will allow us to be more competitive in auto, in home, and as much as I said, we do continue to expect PIF count, particularly in auto to decline this year by 4%.

Got you. And on the homeowners, the geographic constraints, just given where a lot of your customers maybe as far as growth?

No. I mean, we're obviously in all 50 states on minute basis. You know we paused our new homeowners in California, which is a writing new homeowners business until the regulatory reforms get enacted to allow us to match price and risk appropriately. So that's the only self-imposed constraint we had. There's no other constraint besides our long-standing not writing any new homeowners business in Florida since 15, 16 years -- almost 20 years ago, I bet.

Did you comment on what drove the pricing increases in Commercial? I think it came from Global Specialty. Any color there, if that's a trend or just maybe something this mix one-off?

Ask the question again, Michael, I don't think I understood you.

Sorry, the Commercial pricing, renewal written pricing increased ex comp from 8.3 to 9, I think that was driven by the Global Specialty segment. Could you comment kind of if there's a trend there that's causing pricing to move north?

Yes, I would say that the components that are driving that is primarily global. Global had a good quarter. I'm looking at through my sheets and all the casualty lines, property lines, international rebounded in a good way. So that's what I would call out.

No. I think we are continuing to see moderation in the negative rates on public D&O. We're certainly seeing a shift in our portfolio towards more of the management and professional liability. So there's a mix coming through there, that's a part of it. I don't want to get too nuanced on you, but just that's the only additional detail I would give to Chris' comments.

The only other thing I would add to that is when you look at the Small Commercial side, ex comp, definitely saw rate increase there coming from the Spectrum product. So again, obviously, workers' comp is a large portion of Small Commercial. But if you ex that out, that contributed to the ex comp growth as well.

Okay. That's helpful color. And I guess lastly, just not trying to nitpick, but the -- you mentioned in the prepared -- or in your comments, Chris, that a larger end of, I think, Small, more competitive, yet you're successfully accelerating growth on the business in Small Commercial. So any kind of color you'd want to offer there on those dynamics?

Well, the only thing I'll say before Mo jumps in is, our Small Commercial franchise is world-class.

Hard to build on that, but I will try. I think the nuance we're trying to strike for you is that there are competitive spots in the marketplace, and we're just really proud of how well our underwriters are navigating what is increased flow, and that increased flow doesn't come as all business that we want to write, and that's the same in Small, Middle and Global. The flow is up significantly in all three businesses, and we're just trying to get underwriters to really pick our spots, and that's what we're trying to call out, Mike. Thanks.

And I guess just is the Small -- you brought up E&S many times and there's different levels or different types of E&S, but it's been in your prepared remarks for a number of quarters. Is part of the E&S growth off of your Small Commercial chassis, which is kind of the world-class product? Or is it just -- is it totally separate type of underwrite platform?

No, that's the beauty of the model, Mike. We're taking all of the strengths that we've had in the retail channel and applying the same business model to the wholesale channel, and that's why we're so excited.

I think in your prepared comments and also in response to an earlier question, you talked about some of the pressure that you're seeing in the group life sales, just given your mortality expectations. That said, I think we're also seeing some slowdown in disability and voluntary. Can you maybe talk about the drivers for that slowdown?

Yes. I'll just give you my point of view, and then I'll ask Jonathan to add. I don't think -- I think disability is performing exceptionally well, whether it be claim recoveries and terminations and getting people back to work. I think growth has been solid. I'd say, I'm just wondering levels are behaving...

I was referring specifically to the top line, to the [ NPE ].

Yes. I'm giving you all the good stuff, and then I'll get to that. So again, I want you to feel like the book is healthy. And the top line, as I tried to address in my commentary, is a little challenged. Some of that is exceptional 2023 we had, but some of it is challenged, as we mentioned, due to our views on life insurance and how we're going to be disciplined there.

So Yaron, just a couple of things on there. In terms of the top line, '23, of course, was pretty exceptional on all the key metrics, the drive result. But I think we are seeing really strong results here even in the first quarter of 2024 comparatively speaking.

And my second question, I want to make sure I heard, Chris, your comment correctly with regards to loss trends in personal auto. Did you say that they're currently in the low-teens or you expect them to be in the low-teens for '24?

I was trying to do, compared to '23 to '24. Mid-teens in '23, low double digits in '24, or for the full year whatever I was just trying to say is that it bounces around from quarter-to-quarter. So I'd rather have you see the bigger picture trend that going from mid-teens down to even high double-digits is a pretty meaningful move.

And I guess the reason I'm asking this is it does seem to be a little bit higher than what we're seeing industry-wide right now? Is there something unique to the AARP book or to the policies that you're writing that, that would keep the loss trend a bit above maybe mid- to high single digits?

I would just say our judgment and prudence is leading us to call that number where we sit today. And if it changes during the year, we'll let you know.

I just had one question. I was hoping you could give us some guidance on how to think about how much lower the current Personal Lines expense ratio is compared to when you're in normal growth mode?

So I would say on the expense ratio, I would have you think of the full year '23 compared to the full year '24 about being the same.

Yes, I would agree with that. As we go through '24, you might see a slight uptick in Q2 because as we said, we are turning on marketing. And again, as the rate continues to earn into the book, that will start to level off. But our overall expectation right now for Personal Lines expense ratio, as Chris said, full year this year to full year last year will be relatively flat.

Okay. Is it fair to think of it as being a little bit depressed just because of, I guess, the states where growth is, it doesn't make sense at?

I don't think I understood the question. It was just hard to hear you.

I'm sorry. No, I was trying to get a sense as to whether we should expect, we look out to whenever personal auto is normalized, that the expense ratio should be a little bit higher than where it's been running for the past couple of years.

Not necessarily, right? I mean there's a volume issue, dollars and then a rate. So again, with the amount of rate we're getting the book, I think it's helping keep the ratio the same. We might actually be increasing dollars, which we are sort of in a J-curve model this year. But from a ratio side, that's why I tried to give you that full year number to sort of manage your expectation.

Just a question on the expense ratio in Commercial Lines. 20 basis points year-over-year improvement, obviously, following a strong year last year. I was wondering, is there anything one-off or anything that prevented us from seeing more expense ratio improvement year-over-year?

So if you're looking at just quarter 1 to where we ended last year, I'll just remind you that in first quarter, we tend to see a higher expense ratio just because of some expense items that hit more heavily in Q1.

Just maybe a follow-up on reserving. I think this is for rather Beth or Mo. When we think about the favorable reserving in workers' comp, just curious if there's a dollar amount that you can give us in terms of how favorable it was and how adverse general liability was?

Sure. I'll take that. We actually have very detailed disclosures in our 10-Q and our IFS on that. So for workers' compensation, releases were about $67 million, and then we always have the workers discount accretion that comes in for 12 that goes offset against that.

Yes, sorry for that. I must [indiscernible] so that's totally my fault. So maybe just a follow-up on that. Can you maybe talk about the current reserving environment for workers' comp in terms of as we now 3 years out from COVID, are there's still quite a bit of favorable uplift, so to speak, post-COVID or do you think the workers' comp book from a reserving perspective is likely to kind of normalize back down to more of a pre-2019 environment?

Yes. It's a complicated question, but I would say I think it's normalized. Obviously, during COVID, there were a lot of assumptions made as far as where trends were that obviously turned out to be prudent, but sort of 2 years out from sort of the official end of workers' comp, I think trends are behaving as we would expect.

Thank you all for joining us today. And as always, please reach out with any additional questions. Have a great day.