• Core Earnings: $865 million for the quarter, $2.94 per diluted share.
• Full-Year Core Earnings ROE: 16.7%.
• Commercial Lines Written Premium Growth: 6% for the quarter.
• Commercial Lines Underlying Combined Ratio: 87.1% for the quarter.
• Small Commercial Written Premium Growth: 9% for the quarter.
• Small Commercial Underlying Combined Ratio: 86.7% for the quarter.
• Middle and Large Commercial Underlying Combined Ratio: 90.2% for the quarter.
• Global Specialty Underlying Combined Ratio: 83.6% for the quarter.
• Personal Lines Core Earnings: $155 million for the quarter.
• Personal Lines Underlying Combined Ratio: 90.2% for the quarter.
• Auto Written Pricing Increases: 19.1% for the quarter.
• Homeowners Written Pricing Increases: 13.9% for the quarter.
• Group Benefits Core Earnings Margin: 7.8% for the quarter.
• Net Investment Income: $714 million for the quarter.
• Share Repurchases: 3.4 million shares for $400 million during the quarter.

• Warning! GuruFocus has detected 6 Warning Sign with STEL.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Hartford Financial Services Group Inc (NYSE:HIG) reported strong top-line growth in Commercial Lines, with a 6% increase for the quarter and 9% for the year.
• Personal Lines achieved significant improvement, with a 9.3-point enhancement in the underlying combined ratio for the quarter.
• Group Benefits delivered an impressive core earnings margin of 7.8% for the quarter and 8.2% for the year.
• The investment portfolio continues to generate solid performance, contributing to a core earnings ROE of 16.7% for the year.
• The company achieved a record-breaking written premium of $5.5 billion in Small Commercial, maintaining a sub-90 underlying combined ratio for the 18th consecutive quarter.

Negative Points

• The Hartford Financial Services Group Inc (NYSE:HIG) strengthened its general liability reserves by $130 million before tax due to increased settlement costs and higher attorney representation rates.
• The Personal Lines expense ratio increased by 1.9 points, driven by higher direct marketing costs, staffing costs, and commissions.
• The company faced a net unfavorable prior accident year development of $97 million before tax, primarily due to asbestos and environmental development.
• The Group Benefits disability loss ratio increased to 66.9%, driven by higher loss ratios in paid family and medical leave products.
• The company is closely monitoring potential losses from the California wildfires, which could impact its reinsurance programs.

Q & A Highlights

Q: Could you break out the mix of the $130 million prior year development in general liability between the '15 to '18 underwriting years and the more recent accident years? How confident are you that further charges won't be necessary? A: Christopher Swift, CEO: The reserve strengthening is roughly split half and half between older and more recent years. The older years relate to increased costs post-COVID, while recent years are more about social inflation. We have adjusted our severity assumptions and incorporated these trends into our pricing models. I am confident that we have addressed the necessary adjustments.

Q: How sustainable is the growth in Small Commercial and Middle & Large Commercial lines? A: Christopher Swift, CEO: We feel good about our growth and execution in capturing market share. We aim to grow with disciplined underwriting and proper pricing. Mo Tooker, Head of Commercial Lines, added that Small Commercial had a strong year with strategic advantages in technology and data, while Middle & Large Commercial remains competitive but disciplined.

Q: Can you provide more details on the underlying loss ratio in commercial lines and any impact from non-CAT property losses? A: Christopher Swift, CEO: The general liability line had a 1-point true-up for the year, with non-CAT property experience about 0.9 points better than the prior year. Beth Costello, CFO, noted that underwriting actions in 2023 on the property book are expected to continue benefiting results.

Q: What is The Hartford's exposure to the L.A. wildfires, and will it impact your CAT reinsurance programs? A: Christopher Swift, CEO: We have less than 1% market share in personal lines in California, but a larger share in middle market and small commercial. Beth Costello, CFO, explained that the first layer of reinsurance protection is likely to be triggered, but it's unclear if the second layer will be needed.

Q: How much of the increase in the disability loss ratio was driven by paid family and medical leave versus higher LTD incidents? A: Christopher Swift, CEO: Paid family and medical leave trends contributed 3 points to the increase, while long-term disability incidents added 1 point. Favorable recoveries offset some of the increase.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.