Hartford Financial Services Group Aktie

Good morning, and welcome to The Hartford's First Quarter 2026 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Kate Jorens, Senior Vice President, Treasurer, and Head of Investor Relations. Thank you. Please go ahead.

Good morning, and thank you for joining us today for The Hartford's First Quarter 2026 Earnings Call and Webcast. Yesterday, we reported results and posted all earnings-related materials on our website. Before we begin, please note that our presentation includes forward-looking statements, which are not guarantees of future performance and may differ materially from actual results.

We do not assume any obligation to update these statements. Investors should consider the risks and uncertainties detailed in our recent SEC filings, news release and financial supplement, which are available on the Investor Relations section of thehartford.com. Our commentary includes non-GAAP financial measures with explanations and GAAP reconciliations available in our recent SEC filings, news release and financial supplement.

Now I'd like to introduce our speakers, Chris Swift, Chairman and Chief Executive Officer; and Beth Costello, Chief Financial Officer. After their remarks, we will take your questions assisted by several members of our management team.

And now I'll turn the call over to Chris.

Good morning, and thank you for joining us today. Hartford's first quarter 2026 results were strong, building on continued momentum from the past few years. Our broad portfolio of complementary market-leading businesses continues to generate superior returns for shareholders. The strength of our businesses, the breadth and depth of distribution relationships and our customer-centric focus position us to navigate a dynamic environment.

Against the backdrop of geopolitical and economic uncertainty and rapid technological change, we continue to execute with discipline and advance our strategic priorities. Looking forward, our foundation is strong and our strategy is clear, reflecting who we are at the core, an underwriting company that consistently delivers with discipline and innovates with purpose. Among the quarter's highlights, Business Insurance delivered strong written premium growth of 6% with an underlying combined ratio of 89.2%.

In Personal Insurance, the underlying combined ratio improved 4.7 points year-over-year with growth impacted by a competitive market. Employee Benefits core earnings margin was 6.9%, driven by outstanding life and strong disability performance, along with excellent new business sales growth. And the investment portfolio continued to generate strong net investment income. All these factors contributed to core earnings of $866 million and an outstanding core earnings ROE of 20.3% over the trailing 12 months.

Let's take a closer look at the first quarter performance. Business Insurance delivered another strong quarter, reflecting excellent execution across all lines. The current market reinforces the importance of underwriting discipline, pricing rigor and risk selection, areas where we continue to differentiate ourselves.

Increasingly, our underwriting decisions benefit from real-time insights embedded directly into workflows, supporting smarter risk selection and more accurate pricing. Leveraging deep agent relationships, we are growing where price, terms and conditions appropriately compensate for risk. This is clearly reflected in our quarterly results as we continued to outpace the market in small business and remained selective in certain middle market and specialty lines.

Focusing on Small Business, results again demonstrated the strength of our industry-leading franchise. Written premium growth of 8% and an underlying combined ratio of 89.4% were driven by excellent execution across our core offerings with double-digit growth in package and commercial auto. Our small business strategy is supported by a flexible multichannel go-to-market model. Customers have multiple ways to engage, whether it's through agents directly or via embedded capabilities such as payroll providers. All channels provide consistent service capabilities, underwriting and pricing. An important component of our strategy is the expansion of our market-leading small business ecosystem across multiple dimensions, including size, risk, product and segment.

By size, we are increasingly working across Business Insurance to target the small end of middle market and growing with customers as their businesses scale, leveraging the breadth of our underwriting expertise and product offerings. By risk profile, we move seamlessly from admitted into E&S where appropriate, allowing us to support customers as exposures become more complex.

By product, we are combining our specialty products with our unmatched small business distribution to deliver more tailored and complete solutions. And by business segment, we are launching efforts in the small and midsized market within employee benefits, leveraging our small business expertise. Moving to Middle & Large. Written premium growth was solid at 5% with an underlying combined ratio of 91.3%.

The team remains focused on disciplined underwriting and selecting opportunities that deliver attractive risk-adjusted returns in an increasingly competitive market. We are continuing to transform underwriting workflows, including through an AI assistant that augments key components of the underwriting process. Turning to Global Specialty. Results remain solid with another quarter of underlying margins in the mid-80s. Written premium growth of 3% reflected economic conditions, including fewer construction projects within our core area of focus.

Global Re delivered premium growth of 11%, driven by growth in lines with strong risk-adjusted returns. Across Global Specialty, we are continuing to invest in the automation of lower complexity risk and enhancing underwriting workflows in more complex areas. Turning to pricing. Business Insurance renewal written pricing, excluding workers' compensation, remained relatively consistent at 6% in the quarter.

Pricing in commercial auto and liability, including umbrella and excess remained strong and above loss trend. Property continues to remain highly profitable and an attractive area for growth, though pricing moderated in the quarter. Pricing within small business package and middle market general industries was fairly steady in the mid-single digits and represents 60% of our property book.

Shifting to Personal Insurance. First quarter results reflected solid execution amid a competitive market backdrop. In auto, where annual policies are over 70% of the book, renewal pricing reflects actions taken to date and are expected to moderate further in 2026. The market remains dynamic with competitors aggressively positioning renewal rate decreases, increasing marketing spend and introducing new business discounts.

We remain disciplined and expect direct auto growth to remain challenged in the near term. In Home, results were outstanding, supported by consistent underwriting with low double-digit pricing. Within the agency channel, new product rollout continues to progress as planned with very positive agent feedback. Our agency offering is now live in 15 states with 30 states planned by early 2027.

We are committed to our long-term objective in personal insurance to expand market share thoughtfully and deliberately with sustained profitability at target levels in our direct and agency channels.

Moving on to Employee Benefits. Our earnings margin of 6.9% was driven by outstanding life and strong disability results. Persistency remained strong in the low 90s and fully insured premium increased 3% year-over-year. We were pleased with the excellent sales this quarter, supported by disciplined pricing and underwriting execution. Results were driven by a double-digit increase in quote activity, strong sales management and continued investments in technology that are translating into stronger value propositions for customers and brokers.

Sales also benefited from 2 states with Paid Family and Medical Leave coming online in the quarter. Additionally, we continue to enhance our digital capabilities and deepen API connectivity with HR and benefits administration platforms, driving greater ease of doing business and a more seamless customer experience. These benefits are most pronounced in the large account segment, where our leadership is anchored by differentiated absence and leave solutions that tightly integrate disability, paid family and medical leave and supplemental products. At the same time, expanding our presence in the under 500 lives segment remains a key strategic priority, including broadening product offerings such as dental and vision for small and midsized employers.

In closing, first quarter results demonstrate continued momentum and execution of our strategy. In Business Insurance, a diversified portfolio, strong distribution relationships, disciplined underwriting and technology-enabled execution continue to drive profitable growth at attractive returns. In Personal Insurance, our focus remains on thoughtful market share expansion, supported by continued progress in the agency channel.

Employee Benefits remains a high-quality accretive business where our leadership in absence and leave positions us well at the large end of the market and ongoing investments will enable us to extend those capabilities to small and midsized customers. Investment income remains strong, supported by a diversified and durable portfolio. Taken together, I am confident in the Hartford's ability to continue delivering strong financial results and superior risk-adjusted returns for shareholders.

Now I'll turn the call over to Beth to provide more detailed commentary on the quarter.

Thank you, Chris. Core earnings for the quarter were $866 million or $3.09 per diluted share with a trailing 12-month core earnings ROE of 20.3%. In Business Insurance, core earnings were $551 million with written premium growth of 6% and an underlying combined ratio of 89.2%. Small Business continues to deliver excellent results with written premium growth of 8% and an underlying combined ratio of 89.4%. Middle & Large Business had another strong quarter with written premium growth of 5% and an underlying combined ratio of 91.3%.

Global Specialty's first quarter was solid with written premium growth of 3% and an underlying combined ratio of 86.1%. The Business Insurance expense ratio of 31.6% is generally consistent with the prior year with staffing costs and investments in our business being partially offset by the impact of earned premium growth. In Personal Insurance, core earnings were $141 million with an underlying combined ratio of 85%. The underlying combined ratio improved 4.7 points in the quarter with improvements in both auto and home.

The Personal Insurance expense ratio of 27% remained flat to the prior year. Written premium in Personal Insurance declined 6% with a 10% decrease in auto, partially offset by 4% growth in home. Agency growth remained strong at 9% over the prior year. Renewal written pricing increases were 6.8% in auto and 11.8% in home and effective policy count retention was relatively stable. We expect retention to improve as pricing continues to moderate.

Turning to reserves. Favorable prior year development was driven by reserve reductions in workers' compensation, homeowners and personal auto. General liability reserves related to sexual abuse and molestation exposures from the 1970s and 1980s were increased by $70 million, which included a provision for a settlement in principle in one bankruptcy proceeding involving a religious institution.

Excluding the impact of the increases in general liability reserves, total net favorable PYD impacting core earnings was $75 million. With respect to catastrophes, P&C current accident year losses were $230 million before tax or 5.1 combined ratio points. Business Insurance catastrophe losses of $171 million were primarily driven by winter storms. In small business, losses from winter storms were $73 million this quarter compared with $8 million in the prior year quarter.

Historically, freeze-driven winter storms like Storm Fern tend to impact small business customers to a greater degree. Personal Insurance catastrophe losses of $59 million were primarily from tornado, wind and hail events across the Midwest. Moving to Employee Benefits. Core earnings of $127 million and a core earnings margin of 6.9% reflect outstanding group life and strong disability performance. The group life loss ratio of 73.2% improved 6.7 points, reflecting lower mortality in term life and accidental death products.

The group disability loss ratio of 72.7% increased by 3.7 points, driven by less favorable long-term disability loss trends as well as higher short-term disability claim incidents, including in paid family and medical leave where we continue to take pricing actions to reflect the increased utilization of these products. The employee benefits expense ratio of 26.7% increased 1.3 points compared with 25.4% in first quarter 2025, driven by higher staffing costs and higher technology costs.

Turning to investments. Our diversified portfolio continues to produce strong results. For the quarter, net investment income was $739 million, an increase of $83 million from the first quarter of 2025, driven by higher income from limited partnerships and other alternative investments, a higher level of invested assets and reinvesting at higher rates.

The quality of the Hartford's portfolio remains strong across public and private credit and equity. Private credit covers a range of subsectors, including traditional private placements, commercial mortgage loans, private asset-backed credit and direct lending to corporate issuers and business development companies. Investments related to direct lending and business development companies have been topical of late. The Hartford's investments in this sector represent approximately 2% of our invested assets.

Investments are largely focused on well-capitalized companies with sound business models and platforms with multiple sources of liquidity. These investments have attractive yields and are expected to continue to contribute positively to our portfolio's performance. The total annualized portfolio yield, excluding limited partnerships, was 4.5% before tax, up 10 basis points year-over-year and down 10 basis points from the fourth quarter.

The decline from the fourth quarter was primarily due to lower returns on public equity-related fund investments, reflecting broader market declines and a modestly lower yield on variable rate securities. First quarter annualized limited partnership returns were 5.1% before tax materially higher year-over-year, but lower than the fourth quarter, reflecting reduced returns in the private equity and real estate portfolios.

Geopolitical volatility and economic uncertainty may lead to this trend continuing in the near term. For full year 2026, with the current backdrop, we expect net investment income to increase, supported by continued growth in invested assets with overall portfolio yields expected to be generally in line with 2025.

Turning to capital management. Holding company resources totaled $1.8 billion at quarter end. During the quarter, we repurchased 3.3 million shares under our share repurchase program for $450 million, and we expect to remain at that level of repurchases in the second quarter. As of March 31, we had $1.1 billion remaining on our share repurchase authorization through December 31, 2026. In summary, we are very pleased with our strong performance for the first quarter and believe we are well positioned to continue to enhance value for our stakeholders.

I will now turn the call back to Kate.

Thank you, Beth. We will now take your questions. Operator, please repeat the instructions for asking a question.

[Operator Instructions] Our first question comes from Andrew Kligerman from TD Cowen.

My first question is around pricing. And I thought it was great to see that in Business Insurance, you really ex workers' comp didn't have much deceleration in renewal written pricing. And one of your competitors, I'd say, was closer to 100 basis points of deceleration. So my question is, particularly in the small business area, could you talk a little bit about the resilience of pricing there? Is this a line of business that could hold rate increases, maybe a little bit of deceleration, but maybe it holds in for the long haul? Or do you see this coming under a lot of pressure as we've seen large accounts and upper middle in particular?

Andrew, thank you for the question and joining us. Let me -- just make some overall commentary and maybe give you a little bit of data. And then between Mo and myself, we could share our views on small commercial and how resilient it most likely can be. So in my prepared remarks, I think we talked quite a bit about commercial auto and liability, including umbrella and excess and that overall property continues to be a growth area for us.

And our property book is 60% concentrated in small business package and middle market general industries. As you noted, the quarter, we were basically ex comp at 6%, down 10 basis points from fourth quarter of 2025. So we feel really good about the team's ability to execute and keep margins, and that's no small feat. So really, really, really proud of the team. I would -- as I normally do, Andrew, I'll give you some GL pricing because we talk internally. Anything liability, we just really need to be disciplined.

So for the quarter, GL pricing was up to 9.7%, 50 basis points up from the fourth quarter at 9.2%. And I would say with the primary lines in the high single digits and then anything sort of excess umbrella in the low double digits that have been generally consistent with the fourth quarter or up a little slightly. Within small, I would give you an ex comp number of 7.2%, which was down 50 basis points from 7.7% in the fourth quarter, mostly due to auto.

But again, still an overall strong component, particularly whether it be the property component or the E&S binding component. Middle market, I would just share was down 53% ex comp or down to 5.3% from 6.2%. And then in Global Specialty, actually, Global Specialty executed very well and increased pricing up to 4.8% from 4.1%. So I think all that indicates, again, a real discipline by the team, a real focus. And when you really talk about small business, I think our ability to be very consistent and steady with price increases, both on the auto side, both on the property side or the GL side has been a key component of just reliability that our agents look for.

So we try to be thoughtful. We try to take little bites at the apple on a state-by-state basis. And I think there is a level of durability that if you don't shock and surprise customers and agents with modest increases, your retention will hold and you can maintain your margins. But Mo, what would you add?

I like your response. I think the only thing I'd add, Andrew, is that in the small business space, I would ask you just to think about our maneuvers quarter-to-quarter really about execution and rate adequacy as a starting point. We're really not responding to competitive pressures. What you see is trying to make sure we maintain margins and find the growth that we think is there. And that's in comp, especially in our BOP package spectrum, auto, even in the E&S side.

So really, I think it's really about execution from a great, great starting point on our small business side. And then the only other thing I would add is on the small -- excuse me, on the middle and global side, as we talked about in previous quarters, it really depends on how the market holds up. So we're really proud of how well the team executed maintaining margins in what is a moderating market. And the market will really determine the growth rates for us in Middle and Global going forward.

Yes. I think that just spoke volumes that you could do that with 6% written premium growth and maintain some rate. So the follow-up is related. Chris, I appreciated your prepared remarks about how -- particularly in small, you're able to go to many places, specialty, direct, et cetera. And when I think about the Hartford, I think about the best-in-class in small mid. And lately, I've been hearing a lot of companies are making a big push to small mid. They feel that AI is enabling them. So maybe a little more elaboration on The Hartford's competitive moat amidst this AI expansion among a lot of your players. Will it be easier for them to look like Hartford and do things that Hartford does? Or why is that moat so strong even amidst AI?

Yes. Well, thank you for noticing. Yes, we're really proud of our capabilities in the SME space broadly defined. That doesn't mean we can't play in the larger end of the market, but we're thoughtful about competing there. But in sort of SME land, I think we have some strong capabilities. We've been at it for a long time. We've had a technology orientation going back decades. We've had a partnership with agents and brokers, but primarily agents that really care about the SME space. We know what's important to them from a service side.

And we're one of the digital leaders in small business and increasingly in middle, particularly the small end of middle. So we're going to continue investing in those capabilities, I think, to differentiate ourselves and make us an easier company to do business with and know our customers. So when you put it all together, I do believe that there is a moat that we got to constantly defend because there is a lot of good competition out there and a lot of good brands that agents and people recognize.

But we are in a good position. We will continue to defend and invest to differentiate ourselves over a longer period of time. What happens with AI and agents and distribution in general, I think, is still a play that's going to evolve over time. But we have deep partnerships with all our distribution partners. We have capabilities that if markets move on a direct or a more embedded basis, as I said, we'll be ready. But we have partners that we do a lot of good servicing for and taking care of sort of our joint customers in a true partnership mindset. So we feel good about that. But Mo, what would you add?

No, you mentioned it quickly, but I think what we're finding, Andrew, is that all of the capabilities we've built over 30 years in small really matter a lot in middle. And those same capabilities, we believe, can help us grow profitably in the middle space because the agents, there's a margin pressure they're feeling as well and as much help as we can give them helps grow their margins in the middle market space as well.

Our next question comes from Elyse Greenspan from Wells Fargo.

My first question was on Business Insurance and specifically on the expense ratio. If you could just help us think about the seasonality and just trajectory from here. I know last quarter, you guys laid out a target below 30%. And I know that's for the end of '27. But given, right, that the expense ratio was higher this Q1, just trying to get a sense of like the trajectory from here.

Elyse, thanks for joining us. So I would say with expenses overall, -- there is a little bit of seasonality in the first quarter, just coming off year-end and all the first quarter activities that happened primarily from a compensation and benefit side. So not surprising. Our expense targets by business are right on plan for the first quarter. So there's no new news there.

I would say I reaffirm everything that we've talked about last call and the targets that we're aiming for at the end of '27. So nothing's changed, absolutely nothing in our ability, I believe, to deliver on expense improvements over the next 7 quarters. I would say incrementally, we do expect improvement in '26. So I think you will see a decline in all the major businesses segments of an expense ratio decline in '26 with continued improvement in '27.

And then my second question, also sticking within Business Insurance, right? I think in your prepared remarks and in response to the first question, right, you guys were pointing to more of a stable pricing environment away from comp. And obviously, pretty good premium growth within BI in the quarter, Business Insurance driven by small. And so when you guys think about the current market, does it feel like you can maintain premium growth within small commercial kind of in this 8-ish percent range just based on forward views on pricing, et cetera?

Yes. It's hard to forecast. I can tell you, the team has, I think, distinctive capabilities, offerings. We talked about it from a technology side, relationships. But we've got to compete. Market will tell us if we can remain competitive and thoughtful, particularly from a pricing side. So I think the overarching point I would just say, Elyse, is, yes, we'd like to grow. We plan to grow. But we got to maintain margins and be thoughtful about sort of the trade-off between profitability and growth. I think we are well positioned to do that to make those trades. So we'll just have to see how the market plays out over a longer period of time. And Mo, what would you add?

Maybe just one point. Elyse, the additional piece I would give you is the flows continue to be really strong, i.e., submissions into both the retail, i.e., the admitted part of our small business franchise and the non-admitted. And that flow and our hit rates are relatively flat. So we feel really good about this -- the continued flow that we're getting from our agents, which demonstrates to us the strength and position we have with them.

Our next question comes from Brian Meredith from UBS.

First one, Chris, you've got some good E&S capabilities. Maybe you can talk a little bit about what you're seeing in the market as far as, is business kind of flowing back to the standard markets from the E&S markets at this point in the cycle? Are we kind of heading in that position? And then maybe also talk a little bit about what you're seeing about with the MGA's competitive competition out there.

Brian, I'm going to let Mo answer that just because he's the principal architect of a lot of our growth strategies in the marketplace. But I would just say, I feel a level of stability. And I don't sense a lot of movement one way or the other. But Mo, what would you really say?

Yes, Brian, maybe I'll tell it in 2 different ways. One, in our binding business, which sits in small commercial, as I said, the flow continues to be really strong. We don't feel the admitted market taking much back in that space, as we talked about, pricing is down a little bit, but our starting point is really good. So we're excited about the binding opportunities. We don't feel MGA impact in the binding space. If I shift into our Global Specialty space, where it's more of a brokerage model, again, flow continues to be really strong there in just about every single product for us.

We do feel a little bit more flow back to the admitted in the larger risk space. There is a little bit of a competitive nature there. But as Chris talked about, our pricing improved in that book. We continue to -- the casualty lines, we're getting the pricing we need. And broadly in our specialty book, and that's admitted and non-admitted, we do feel the MGA is having an impact. In any place, we're really trying to build capacity or our brokers are trying to build capacity. We do feel that impact. And I don't feel that changed in the quarter, but it's been pretty persistent over the past several quarters.

Great. And then second question, I was hoping to chat a little bit about workers' comp. Kind of where are we with respect to -- I mean, it's still a competitive market out there. I know you're kind of expecting some margin deterioration this year in comp. Where are we as far as profitability? Are we getting to the point where maybe we're going to see some leveling out in comp and maybe some improvement?

No, just bluntly. I think our pricing was relatively flat in the first quarter, Brian, to fourth quarter. If I look at activity broadly defined in the marketplace, there's people still putting through negative rates in various states. California is sort of the outlier. We always talk about comp ex California. I think we're proud though of being sort of the top carrier in that area. I think we've been disciplined and thoughtful. I think the underlying trends are still relatively stable. If I look at severity, particularly on the medical side, a level of stability, still well within our 5% pricing and reserving assumption. I think severity would say probably is running in the 3%, 3.5% range. So it's behaving. I feel good about the market. We still got to be disciplined, but I don't see a price increase coming anytime soon because, quite honestly, the book is behaving pretty well. But Mo, what would you say?

Brian, the only thing I would add is that it's basically right on expectations for us, both top line and bottom line. And I don't think you should expect us to see the book grow dramatically. There's parts of the book that are really competitive that we're pulling back on. For example, white collar in middle is really competitive, and we're just not able to grow that at the pace we'd like to. But broadly, think about top and bottom line on budget and basically we're -- relative to our expectations, exactly where we thought we'd be.

Our next question comes from Mike Zaremski from BMO Capital Markets.

I guess just kind of hammering in on kind of the market level of competition. I know you've -- I'm not trying to obsess about it, but Chris, you spoke to increasing competition a number of times in your prepared remarks. I don't think it's that surprising to folks given the excellent profitability levels you and many of your peers also throw off. I guess you guys have lived through many hard and soft cycles. Do you feel that HIG's operating strategy would kind of pivot or change materially to the extent the market continues to soften materially over the coming year or 2?

No, I think, again, I appreciate the question and acknowledge that the market is competitive. Markets are always competitive. So you got to know what you're good at and know what you could do well. I don't see our business model strategy changing dramatically for market cycles. I think it's a discipline that we have. So if there are conducive aspects of the market, as I said in my prepared remarks that we could get the price we need, the terms and conditions and generate good returns on our invested capital, we'll feel good about growing that or not growing if we can't. So I don't know if I'm really answering your question or getting what you're really asking for, but yes, we know how to run a business in various cycles.

No, you did. We just get a lot of questions from investors about that seem a bit worried about the pricing cycle. And I think we're trying to remind folks that the sky is not falling. So I'm just kind of pivoting just for specifically to Global Specialty since you called out pricing being up a bit. Just curious what caused that, if it's worth talking about.

Yes. I would say, Mo, and you can add your color. I would say wholesale, particularly on the primary liability side and a little excess casualty, where the team is really being disciplined and focused on getting rate as I said, with anything with liability in the product line, we are super focused on getting the needed rate. But Mo, any color?

No, I think that's the key point. I think the rest of the book is fairly stable, Mike. If you think financial lines, it is where it's been. We didn't feel a dramatic change. Marine is the same. We have a lot of lines within that global specialty book, but I think the standout in the quarter was the rate coming back up in wholesale casualty lines.

Our next question comes from David Motemaden from Evercore ISI.

I was hoping you guys could unpack some of the movement in the underlying loss ratio in Business Insurance this quarter? And maybe just talk a little bit about how much of a headwind workers' comp is within there and some of the other moving pieces? And maybe just given the pricing environment, how you're thinking about that for the rest of the year?

Yes. I'd first say, as I said earlier, it's -- there's no surprises. I think our picks, obviously, 1 quarter in are holding. I think we've used the phraseology that the setup for 2026 was similar to 2025 with some modest comp pressure. So I think that continues just based on math. I think property is moderating, but still highly profitable. And what I would say, David, is we closed 2025 with a little over $3.3 billion in property premium. We think we could grow that 10% this year, again, with good margins, good returns.

Certain lines in the property world are still positive. As I said, the Spectrum component of BOP, the property component there is up, I think, 6.3% in the first quarter. I think GI property, general industries property is up 4%. So there's always going to be sort of puts and takes. But as we sort of look out, I still think '26 will play out largely like '25 with some very modest headwinds. But Beth, Mo, would you add anything?

Yes. The only thing that I'll add to that is if you look at the underlying loss and loss adjustment expense ratio in Business Insurance, it moved very modestly from first quarter of last year to first quarter of this year. And when I look at sort of the underlying lines of business within there, there's no big moves one way or the other. It's really just very small moves kind of across the book. So it's not as if there was some amount of big favorability that was being offset by a large amount of deterioration, and that's in line with what we would have expected.

Got it. That's helpful color. And then maybe just pivoting to group benefits and specifically group disability, that's been deteriorating a bit over the last several quarters. I know some of that is just the long-term disability sort of normalizing. But could you just talk about maybe some of the short-term disability trends and how you're thinking about the disability loss ratio throughout the rest of the year as some of the pricing actions you guys have been taking maybe starts to show up?

Yes. Again, I appreciate the comment because you've done your homework, right? I mean the disability line has long-term STD and now increasingly a larger percentage of our paid family and paid medical books. The latter 2, STD and paid family, paid medical, obviously, are short-cycling businesses, I'd like to say, generally with 1- to 2-year rate guarantees. I would say that the incident rate in particularly paid family and medical is higher than we anticipated, but we're taking, again, the appropriate pricing actions in the marketplace because it's a benefit people are actually really, really using, and we can adjust rates appropriately. I think we've -- I said in my prepared remarks, we got 3 states coming online, 2 came online first quarter in Paid Family and Medical.

And I think Maine comes online May 1 of this year. So I would say that those are the components. LTD is up a little bit. And I would characterize that as just a little bit of a reversion to the mean. LTD has been performing so exceptionally well over really the last 2, 3 years. Our pricing assumptions and our reserving assumptions are a little bit back to the mean, both on incidences primarily. And terminations have always been strong, and we've got a great claims department that will get people back to health and work. So I would say those are the components. But Mike Fish, what would you add any additional color on?

Yes. I would just add, in the quarter for Paid Family Leave, the new states that Chris referenced, generally, when we see new state programs come online, there is a pent-up demand element, meaning we see high utilization in that first 1 or 2 months of the year that those programs go live. So we expect to see that moderate through the year. And again, second, just adding on the rate increases we've been putting in place in Paid Family Leave, double-digit again this year, and we're maintaining persistency in the upper 80% range. So very pleased with our ability to place rate, and we'll continue to do that as utilization moderates through the year.

Our next question comes from Katie Sakys from Autonomous Research.

I want to shift back to the BI reserve for a moment. I think excluding the legacy charge this quarter, the core general liability book still looks quite strong with no net adverse development for several quarters now. How is loss emergence in GL tracking versus your original expectations? And does what you're seeing today reinforce your confidence in current casualty loss picks going forward?

Yes, I'll start with that. Yes. I mean, we feel very good about our loss picks in the GL book, both from the standpoint of prior year reserves and the loss trend that we've embedded in our 2026 picks. We look at the reserves every quarter. We look at them by accident year, by product line. There are obviously, quarter-to-quarter can be small movements kind of within that. But overall, no change in our net GL reserves, excluding the legacy item that we discussed. And we feel good about what we're seeing and what that means relative to our loss position.

Okay. And then, Beth, you mentioned in prepared remarks that direct lending and BDC exposure is about 2% of invested assets. Can you help us understand how much of that exposure is to software or adjacent borrowers?

Yes. So as I said, our investments in sort of direct lending and BDCs is about 2%. If we look at just the BDC portion, it's less than 1%. And I'd have you think about our investments in those groups of assets as being very diversified. So there obviously is a software component. But as we look through the underlying exposure and the underlying loans, we feel very good about the exposure there. And as I said, we continue to see these investments performing well for us.

Our next question comes from Gregory Peters from Raymond James.

So I'm going to go back to the benefits business on the sales side for my first question. And Chris, you mentioned numerous times through your prepared remarks and the Q&A, how disciplined you are regarding growth and maintaining price discipline. And it looks like you had a really strong first quarter in sales. And I generally view that market as being pretty competitive. So maybe you could unpack -- and maybe it was embedded in that answer about pricing, but maybe you could unpack the results you reported for the first quarter in terms of sales.

Yes. I'll remind you of the numbers and then ask Mike Fish to add his commentary. So yes, I think -- the 53% increase in sales growth is a meaningful number. I would say if you exclude the 3 states that paid family and paid medical leave are coming online, which are new, that increase drops to about 40%, but still meaningful. But I would say that the market conditions, I think, were primed for us to take advantage of opportunities. And I think more quotes were out, Mike. I think we improved our sales management and sort of bidding concepts of where we wanted to start where we came out with initial quotes.

I think our capabilities, particularly at the national account level are being recognized more and more by our agents and brokers. So it was almost like the perfect combination of a lot of things that we've been working on to have these results. Obviously, we look at pricing very closely from a management side. And I would tell you, in aggregate, the cohort that we put on will generate returns in line with our targets. So I put all that together and say, yes, it feels good, feels disciplined, and we're going to try to keep it going. But Mike, what would you add?

Yes. Just a couple of items. First of all, on that pipeline development. So we started early last year, really working hard within our sales and across our sales team, essentially investing in our sales footprint as well as market analytics to do a much better job engaging at the local level. So we saw that, as Chris noted, coming through in higher activity, quote activity. So a good component of what we saw in the sales in the quarter was really just driven off of, I'd say, sales execution at the local level.

So very, very pleased with that. And then second, we've been very clear in talking about our investments, our technology investments in the benefits business. And that's across absence, across our HR technology integrations that we have. And those are really paying off. So when our sales team is out engaging with brokers and ultimately, when we're getting to that moment in front of a customer in a finalist meeting, and that would be on the larger end of the market, we just have a phenomenal story to tell. So I think all those items came together to produce a really nice sales result in the quarter. And again, just reinforcing, we're maintaining our underwriting discipline. We haven't changed that, and we will not do that.

Fair enough. I'll pivot over to the Personal Lines business since it hasn't really been asked of yet. You talked about 70%, I think, was the comment about 70% of your business being annual policies. I know you're in process of rolling out Prevail, which I presume is 6-month policies. But maybe you could spend a minute and give us some more detail about how you expect the Hartford to perform beyond just a couple of quarters with the rollout of Prevail and how the -- considering how competitive the marketplace is. Just curious what your view on the outlook there is.

Yes. I would summarize, Greg, what I tried to say in our comments is I think we have our strategy and objectives very clear. I think we've invested heavily in, as you said, our new product and platform, particularly in the direct channel. We're rolling out the same product and platform in essence, in the agency channel, which, again, the independent agent channel is a great strength of ours. And I think getting back into that in a more meaningful way with a more modern product is being well received and will continue to drive incremental growth.

I think the balancing act in all this is we worked so hard to get back to target margins. And we're really loath to give back any pricing or cut rates just to grow. So we're going to continue to find our niches, our pockets, whether it be through AARP or through agents. And as we roll out more states for agents, I think we'll obviously have a higher growth rate. But yes, it's a balancing act. But we don't want to give up everything we work so hard on. But I'll ask Mo or Melinda if they'd like to add any color.

Yes. Thank you. What I would just add is that agency is growing today, a function of the investments we've made there, smaller base, direct will take certainly more time. But the investments that we've made in product, technology, customer experiences, things that we are doing with AI, they're all aimed at customer experiences that are about supporting the long-term growth. So we'll navigate the current market cycle and play for the long term.

Our next question comes from Rob Cox from Goldman Sachs.

Just a question just to go back to the CATs, just a little higher than we thought this quarter, but it sounds like it was driven by your exposure to small business and freeze-related losses. Just curious how the CATs in the quarter compare to your own internal expectations. Any updated thoughts on how you're thinking about diversification into property from a broader perspective and if you're now lined up to see any recoveries on your aggregate reinsurance treaty.

Yes, I'll take that, Rob. So I would say, overall, when we look at our CAT losses for the quarter compared to what our original expectations would be, it's probably about $30 million higher. So it's not a significant change from what we would have expected. And as I said, it really was focused in the small business area where we just tend to see with freeze activity, higher losses there.

So that is definitely what drove that. And then as far as the aggregate treaty, what I'll just say to that is, as you know, our aggregate treaty kicks in when subject losses reached $750 million. Again, it doesn't include our Global Re CAT. And so through first quarter, we're at $204 million. And so we'll have to see how the rest of the year progresses as to whether or not we would hit that aggregate.

Okay. That's helpful. And I just want to follow up on the distribution discussion here. I think, Chris, you mentioned strong [indiscernible] distribution relationships, which is clearly part of the firm's competitive advantage. There's some industry discussion on whether or not distribution costs are too high and will come down over time. So just curious on your views in that debate. And in particular, any thoughts on magnitude or time frame?

Yes. That's like being a Red Sox fan or a Yankees fan. So there's always going to be discussion and debate who's got the better club. So yes, what I would say is speaking for us and our ability to sort of manage costs really proud of what the team has been able to do to sort of keep our overall cost to acquire new business relatively flat over the last 3 or 4 years. And Mo's led that effort with the team. I mean it's still a significant amount of money on a percentage basis or dollar level.

But I think we've been able to complement our distribution partners with technology, with service, with making their life easier. And we try to impress upon them, the more that we could do business together, I think the more money they would make in our relationship compared to everyone else. That's not unusual to sort of say, but it's really actually true with our capabilities.

But I think you're really alluding to the future, and I tried to allude it to a little bit in a response. I'm not sure what AI is going to do in the agent world. And that's why we've been talking more about sort of our multimodal capabilities, whether it be through agents and advice channels, whether it be direct, whether it be embedded, whether it be other technologies. And not every product line is created equal, right?

You can make the argument that the simpler product line today of auto is maybe most primed to be impacted by AI and how that happens. And you have other complex lines that really people need advice. They need to make sure that -- they understand the various features in a product and what's in, what's out. So I think advice will always be needed, and we'll continue to partner in the best way possible with our distribution partners to figure out how consumers want to consume advice and where they want to go for advice as a first step. But Mo, what would you add anything else?

I liked where you went in terms of the partnership model. A lot of our digital investments, our service centers in small and middle are really about that partnership with the agents. So the compensation becomes less of a conversation because of the service we're providing to support the upfront customer. And in many situations, we are providing that service for our agents. So that partnership is a really key model for that discussion longer term.

Our last question today will come from Yaron Kinar from Mizuho Americas.

Just want to start with personal auto. Just given the changes in the competitive environment today, do you expect that to continue now with the Strait of Hormuz situation? And on the one hand, maybe you have better frequency coming out of lower gasoline prices. On the other hand, you have maybe supply chain issues driving severity up. So do you see any impact on the competitive environment with all that?

Yes. Yaron, I would say a couple of things top of mind. One, price of gas, price of oil and miles driven isn't really correlated that much. I mean people will still have to commute to offices. Obviously, the trend of work from home has changed sort of driving patterns. Maybe there's a slight decrease in summertime driving. But generally, all our models say price of fuel is not really indicative of miles driven.

I think the whole war situation creates a lot of uncertainty that we're going to have to watch closely and see how it plays out. That said, I don't see a direct line into the U.S. here from our cost of goods sold and in products, but our derivative impacts and second-degree impacts of chemicals, fertilizers, plastics, all have an element of petroleum in it. So there could be some minor effects there. But I would say when we picked our loss picks for the year, I think we have a margin for adverse deviation for these types of items and events. And we still feel good as we sit here today where our picks are for the full year, particularly in Personal Lines.

That's helpful. And then maybe circling back to the last line of questions around AI and the intermediaries. Is there a risk that the Hartford's negotiating power with intermediaries in small commercial would diminish if larger brokers are able to use AI to move down market and infringe on a space that's really been dominated by smaller agents?

Well, you might be really referring to agent consolidation and what happens and if consolidation continues to play out. I think when Mo and I think about it strategically, we still think it's a net benefit to us because carriers, I think, will -- particularly the large national account carriers that have broad-based capabilities particularly as all these agents and brokers are trying to simplify their business model and do business with less carriers. I think it's still a net positive for us over the long term. But Mo, what would you add?

Yes. Chris alluded to it before. I think what we're finding is actually the opposite. The large carriers are consolidating to those who have the most capabilities to help them create additional margin in the small business space. So they're looking to fewer people who have better capabilities. So actually, we feel like the large market for small business, large brokers are actually coming our way in terms of the momentum in terms of flow and long-term capabilities and commitments, we think we win in that space.

But I understand that you may see more flow, but ultimately, don't they have stronger negotiating position when they try to determine the terms of the actual contract or policy.

Yes. I think this is where the balance of power is actually really equal because of all the capabilities we bring. There's very few people who can bring what we bring in the small business space, and I can prove to any agent and broker how we can make $0.01 or $0.02 more in every dollar for them that leads to some really productive conversations.

And we are out of time for questions. I would like to turn the call back to Kate Jorens for any closing remarks.

Thanks for joining us today. As always, feel free to follow up with any additional questions, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Here at the Bank of America U.S. Financial Services Conference. This session is Hartford Insurance. We're really blessed to have Chris Swift, CEO; and Beth Costello, CFO, here to talk to us about the company.

I wanted to make an observation that we've seen this decoupling of the markets with the [ Mag 7 ] whatnot. And maybe the S&P 500 Equal Weight Index is the right way to consider things. It's about 255% over the last 10 years. Which is almost identical to the performance of Travelers, Chubb, CNA, Cincinnati Financial. Hartford over that same period of time is about 355%. So a question about what sell-side research analysts do, we pick stocks and maybe we're just writing about stuff that doesn't actually do anything and move stocks and everything ends up in the same place. Hartford does not end up in the same place. Something different is going on there. And that's a testament to execution and success, and you should be proud of it. I know you are.

And so it might be a good place to start in talking about that decoupling between the markets and what software is doing yesterday, insurance as a sector was down a lot with insurance brokers down particularly. And Hartford is making a lot of investments in software and artificial intelligence and all these sort of things. And -- what is different at -- the Hartford? And what have you been investing in? And how does that plot a trajectory for the future that's very different from what others can offer?

We only have 38 minutes left, and that's about a 40-minute...

Thats -- it's the most important slide.

So I'll try the best we can between Beth and myself. But first, thank you for always inviting us to be with you at the conference here in Miami. It's great. It's always good dialogue.

I didn't know the exact numbers that you said over that 10-year period of time because we're keeping our heads down and just trying to create value for all our stakeholders. And it's a team effort top to bottom, and I'm really, really proud of the team. But as you think about sort of the future, whether it be software, whether it be AI, I think it's important to maybe lay a foundation of really what have we been doing in the last 10, 15 years since Beth and I started working together as Chief Executive and Chief Financial Officer.

And I would say it's been a thoughtful rebuild of core platforms. And after we decided coming out of the financial crisis to really focus on P&C benefits and mutual funds, we had some things that we needed to accomplish. And the easiest way to describe it is we had a lot of green screens and old systems and multiple systems. So it was a consolidation of claim platforms. It was a rollout of a new admin system by Guidewire. We had new billing capabilities. We had to use Guidewire in claims as one central claims function. And slowly, but surely, we sort of built up our capabilities.

Maybe the last major event that we did was with Duck Creek and our personal lines business, where we made basically a $250 million investment. So that foundation element, we thought we just needed to compete in a world where we had a lot of good competitors. I would tell you, we weren't talking at AI at the time. We were talking of how can we make the customer experience maybe a little better, how do we reduce our cost? How do we make our lives easier for our employees and interacting with our agents and brokers and obviously, one another.

And I think largely, we've accomplished that mission. I would say from a platform side, what's still left to go over the next 18 months is some platforms in group benefits, think of billing primarily. And then in Global Specialty, we have some platform to do a little bit with claims, a little bit with administration to round out all our products basically on one system. So I feel good we're there.

I think the fortuitous nature of where we are today is if we hadn't really made those investments in platform to organize our data better, we wouldn't be in the position we are today in rolling out AI in various parts of the organization because as you all know, AI is driven by large language models, but on your data also. So you have to array your data in a way that customers can understand and interact with it.

So you put it going forward, AI for us isn't at experimentation. We've been doing it for 2 years in thoughtful ways. And you can even say some of our capabilities in small business are AI-based. I would say advanced data, data science and analytics, but there is a lot of predictive capabilities sort of hard coded into a lot of the things we do with small business, particularly through ICON.

So I mean this isn't anything new, but I would say that the 2 main themes I would leave with the audience is we're approaching AI from 2 fundamental perspectives, personal productivity tools, and maybe that's the easy part. But when you say easy, adoption is never easy. Change is never easy. You really have to focus. But we really want our people using personal productivity tools to make their lives easier. And our tool of choice right now is Microsoft 365. And then when we think about AI, it is really an end-to-end process transformation where we want to put AI first in our processes. Again, ultimately, augmenting our human talent. We want a better customer experience, the person that uses our product and its advisers and agents. That's important.

And then I would ultimately say we know there's productivity gains that will come long term. So that's at the high level. I'd be happy to go deep with you in any particular area. But it's a brand-new world, and we have a foundation that I think is going to allow us to go faster than most.

One thing I remember, it might have been the last time you did an Investor Day in Hartford. I remember Sabre was still running the IR department. So it was a while ago. And it was the first time in the concept of Hartford making a lot of investments in technology. You said that you had really been making investments in neural nets. I don't even know what a neural net is even today, but it sounds like it's pretty cutting edge from like 10 years ago technology based. So I mean, I think it's not as new, the foundation was built a while ago. And in terms of like if we want to say like how far along what you envision to be have you brought the claims department versus distribution versus where are the fruits being most harvested right now in terms of what's possible through these technological innovations?

I would, again, give you another foundation is we are a micro -- excuse me, Amazon shop as it relates to cloud. So we've also been on a journey not only with platforms, but moving all our applications, platforms, data to the cloud. And I would say we'll probably be 80% done by the end of 75% done by the end of 2027. And then we got a couple of little things to do. But ultimately, it's to be cloud native with our data and apps to encourage development, experimentation, putting sort of the customer first.

So I think really where we're at, where the manifestation of all this work is beginning to come through is, I think, our consistent growth rates. I think we're capturing more market share in small, middle, large Global Specialty because of our capabilities to be a little faster than maybe most, to be more customer orientated and at least in my judgment. So I think the growth rates -- and then I think the overall equation is going to be, I think retention will be higher. People that want to do business. I think we'll capture more market share, particularly in the small end of the market, say, from middle -- that small end to middle to obviously what we do today, particularly as agents and brokers consolidate, speed, accuracy, predictability, consistency is more and more going to be valued. And I think we have all those in spades.

And then as I said, we talked a little bit about in our earnings calls. I think there are productivity lifts, whether it be from increased scale and leverage, as Beth always talks about, or just leveraging our existing workforce to be able to do more.

Does the R&D tech infrastructure spend ever decline? Do we ever -- has there been any like we needed to make some investments -- and we have the foundation. And obviously, we need to upkeep of those investments. But do we see like the amount of money needing to put to work changes over time and becomes a tailwind on the expense ratio?

Do you want to give them the history of just where we've been and where we are today?

Yes. So when we think about our invest spend, if you go back 5 years, 6 years, we were probably averaging that $300 million, $350 million a year. Now we're a bit over $500 million a year. And we've been able to fund that additional spend, some through productivity gains that we've gotten along the way. And I think as we look out over the near-term horizon, we don't see that decreasing. There's plenty of areas for us to continue to invest. And I think that, that will allow us to continue to gain more efficiencies. But that invest spend, I think, is really important for us to focus on and the opportunity set to do all the things that Chris just said, I think, is really important. And I think that's why when we think about scale and why scale matters is I think to be able to be successful long term, you're going to need to be able to kind of be able to put those kinds of dollars into your R&D, as you called it, we call it our invest spend to continue to make progress.

Is there a point in time where the offering is so entrenched at the company that the add to the company we just want you to price compare. We just want -- you should go -- not your own customers, but any customer, you should be asking yourself, am I getting a deal in Hartford invariably aims to be the most accurate in price. But when they do the most accurate, usually wins among because you have more efficiencies than other companies and you've made the investment to the point where you can be more price competitive at a higher margin than other companies.

Yes. I would say the philosophy there, particularly in the small end of the market is, I mean, we want people to have a product that covers a wide range of issues, outcomes, risk. We don't want to sort of just [indiscernible] down a product and just have a cheap version of something. And you could look at it from our property coverages, our business interruption coverages. You could look at some of the things we're doing with cyber and cross-selling other specialty products because we want to take care of, particularly as small business owners, all their needs and give them some comfort that they're covered. They're covered. So if that's what you mean...

Covered at a price that Hartford is actually cheaper for more coverage and better service.

Exactly. I mean it might not be the sort of the cheapest price for a product because when you really dissect the product, as I just said, you're going to have more from us. But we want to make sure our agents and our customers really feel safe and secure. And I think we can deliver the most value per dollar or per unit of risk, just given our scale, given our experiences and sort of our orientation to be sort of customer orientated. And I think you see it in the Keynova report. I think I always mention it every year for the seventh consecutive year, we are the #1 digital carrier, which is a testament to the team and their vision, but the ability to build and execute at scale. And those things are important to build customer trust and confidence over a long term.

If I'm a business owner, I'm a florist, I have 6 employees, a delivery van, I have a store in a strip mall. How should I be buying my insurance? What -- should I be talking to an agent? Should I be talking to you directly? What is the best way for me to get coverage right now?

Well, I would say, as a small business owner, it's where they feel comfortable, right? Do they have the time to invest to understand coverages, risk exposures? Do they get smart online and then talk to an agent and broker to help them close and maybe do a little comparison shopping. So we pride ourselves on being sort of multichannel. We want to meet the customers where they want to be met at. And I would say that's changing. I mean the search game used to be tell me something. The search game is now morphing into do something for me with Agentic.

So we want to respond to customers in the way they want to interact with us. And we have channels through agents, brokers. We have direct to the consumer channels. We use payroll companies and certain product sets to distribute our products. We have strategic relationships with some of our friends in the industry, personal line companies that don't manufacture certain products and their agents bump into small business owners. We provide them capabilities. So I feel good that we're in the marketplace and have the ability to reach customers, the real customer that's going to use our product in any way, shape or form they want.

Is there a different price if I reach out to you directly versus go to you through an agent?

Not today.

Not today. And so in the end, I should use the agent ultimately because it saves me time, probably. But in the future that there would be an advantage to doing the work myself?

Yes, it's hard to predict where the future is going to go. But again, right now, we have a price per risk is basically same in any channel. I can't predict what's...

But you have to pay a commission if someone comes to you directly, there's no commission on it.

Well, you could say we built a direct capability with all the technology. So it's an internal allocation of acquisition cost or marketing costs that we generally spend. So I'm comfortable with where we're doing today. But I think your question is the $100 question of what is the future really going to entail? And I can tell you, we want to be able to show up in the new search in an effective way, representing our product capabilities and things that customers should know.

By the way, anyone can ask a question. I'll just keep asking questions, but if you want to just raise your hand at any time, and I'm happy to see the microphone to you.

Along those lines, do you -- I've talked to other C-suites who are surprised that the direct-to-consumer commercial experience isn't bigger than it is right now, that if you ask them 10 years ago or 5 years ago, where we'd be along that adoption rate, generally, there's a surprise that it has not occurred with the size that would be expected if you were just hypothetically spinning a yarn here. Is that true from your experience as well?

Not necessarily. I would say I don't want to sound like a broken record that insurance is special. It's unique, it's different. But I think it's a complicated technical product when you get outside of sort of a required product like auto. Home, I mean, is usually a person's largest asset in their portfolio. And how they think about that, how they want to protect it, the things that they need to be smart on, it's not surprising people go for a little advice.

And again, right now, the advice channel that we support the most is our agents. We love the relationships we have there. We want to support them, helping to, call it, the common shared customer. But we'll have to see how things evolve in the future. But I think some type of advice again, either in person or some form digitally or it could be a hybrid. You could see hybrid models developing over the near term also where it's just not direct to the consumer. It's how do you pull in agents at the right time to help fulfill. And so there's a lot of thinking that we're doing from the customer experience side. But right now, we're pretty comfortable with working through our agents and everything they bring to the table and serving customers.

And please correct me if I misrepresent anything here. When I think about an average insurance agency, I tend to think about that Hartford and Travelers and Progressive all want to be there in that agency. And oftentimes, that agent has a carrier who isn't everywhere, who is asking them for a very large proportion of their business where they'll pay a higher commission rate than industry standard. And that seems to be whether it be a Cincinnati or Selective or Hanover or something like this. Is that model changing? And is Hartford at an advantage when there's a higher commission payer out there within the same agency network that Hartford is trying to win share in?

Yes. I think what agents really value, particularly from us, but there's a lot of other good competitors is that consistency, showing up every day, being accurate, timely, timely responses are critical to be able to sort of get a piece of business off agent's desk and get it bound. So I think the game for us is being one on the ultimate experience for the agent and the customer. And look, we've talked to agents and shown them the math that if you could place more of your business with us, we could save you pennies on the dollar that add to your margin. So it might not be sort of in the commission line, but it will show up in the productivity line of their agency when they work with us with our digital toolkits, all the capabilities that we have to allow them to do business in the most efficient, speed, accurate way. That's where the game is at.

Is anything changing about commissions as a general sense in the last couple of years -- are you paying the same amount, paying more, paying less as are other carriers paying more or less? Or is that pretty stable?

Yes. For us, I would say it's pretty stable. I think over the last 5 to 7 years, if I benchmark where our all-in acquisition costs are for agents, it's been very steady in that 14%, 14.5% range. I don't know what our competitors are doing day-to-day on the sort of battlefield every day. But for us, it's stable across middle. It's stable across small. And again, we're trying to incent agents to do more business with for, in essence, revenue share or profit share. And just not paying them more stock rack rates. Everyone runs some specials now and again, depending on the channel and the agent or what you're trying to do. So I'm not saying we don't run specials with an agent or a broker or 2. But by and large, we're trying to keep the economics of the cost to acquire business flat in our organization.

I think Mo said at one point that I can't remember the numbers, but there's maybe 100 agents that really matter or maybe 30 agents. I can't remember what number he used, but it was a very small number that because of all the consolidation that in the end, like what was a highly fragmented marketplace really isn't as fragmented as it looks today. And so maybe these cellphone [indiscernible] agencies can have a different relationship with you than the Gallagher network or whatnot.

Yes. I would say consolidation is -- I think, is a benefit for us as a national carrier with capabilities all across the country. And I think a lot of our agents and brokers want to do business with fewer companies, again, from an efficiency side and a scale side. And I think that's the opportunity we have to continue to take market share.

Among other things, the industrial logic behind what was so long ago now, the Navigators acquisition was to be the complete shelf that we have every product that our distributors might need. But one product that you didn't really have was personal lines. Personal lines you're selling directly, but you were not selling through the agencies. Is the Prevail launch is there an industrial not only are we going to be good at it and makes sense for us to do. But two, your distributors want you to be there for them in the personal lines category as well?

Yes, I think you're exactly right. I would just tweak just going back because I've been with -- the Hartford now 16 years. And when I joined the Hartford, I think we had an agency premium base of maybe $2 billion. So it wasn't large, but I mean, we were in the agency business.

Yes, definitely.

We sort of didn't execute very well. Analyze it consciously is we had a failed growth strategy on some of the things we were trying to do with agents. So we doubled down with AARP. We wanted to extend that relationship another 10, 15 years with them. We agreed to make some investments in product technology. They agreed to make some changes in the way that the program was really structured. As you really know, 6-month policies, no guaranteed renewability, but still support sort of that mature segment of the market in other tangible ways.

Fast forward, we had always envisioned the opportunity to sort of use what we built for AARP and sort of purpose it in the agency channel. And that's exactly what we did. It's the same platform, modified for agents and some of the connection points you need to make in their shops and through comparative raters. We need to build obviously a commission structure into the filings. So we're in 10 states today, going to 30 by the early 2027. And the real strategy there is that there's probably 100 agents in the personal lines area that really matter because they know us from small business, they know us from middle market.

I've had many executives in the distribution network say, we're so glad you're back principally because I think that home offering that agents lead with is more important than ever these days, given weather change, given buyers, given some shortages and capabilities, some affordability issues. So I think they're looking for a carrier that is committed to it, has a good brand, good reputation, has good claims capabilities to interface with the customers. And they are willing to not give us a shot, but do business with us and grow that book in personal lines, just like we're growing it in small.

And in the way you report, we don't really have granularity on Prevail versus the legacy direct personal lines products. Is there anything you can tell us about the success rate that we could understand like the take-up and how well it's going if we can decouple it from the AARP business?

Well, I think the best metric to look at is just look at our new business flows today. We do break it out between direct and agency. So you could begin to see -- I would say we're in 10 states right now. So give us a little grace to at least get into 30 over the next 3 or 4 quarters, and we'll talk about it, honestly and transparently like we always do. But I'm still encouraged based on all the feedback we're getting from our agency partners.

If we can pivot to the economy, it's -- I think it's still.

Just -- I think you know it, Josh, one last point. We call it sort of front book, new business is Prevail. The back book, we're still keeping on the old chassis. So we're not doing a conversion of the back book into...

But not all new business is Prevail. The direct is still...

No, all new business, going forward is Prevail.

Even if it's direct-to-consumer business, it's still Prevail?

Yes, direct-to-consumer is AARP, that's Prevail. And it's where we started.

It's still -- because the change terms are Prevail. Like I mean I feel like Prevail is like the -- what is the difference between a legacy AARP policy and an AARP policy today?

Principally lifetime guarantee.

Okay. So anything that has the 6-month policy and the guaranteed renewal is legacy and anything that has now 6 months and the right to cancel is Prevail.

Just think in terms of all our new business activity in the AARP channel is Prevail. We're migrating to all our new business activity in agency as Prevail.

I've been using Prevail as a term for the agency offering within the personal lines, but it's really any...

We call agency Prevail and Prevail direct.

There's still a little bit that's the old and the new, but Chris is right that the majority of what you see in our new business is Prevail. And as you said, we're not converting that book. And then as you said, in agency, we'll start to roll that out into various stages.

Is there any -- taking a legacy policy and saying, you want to become a Prevail policy? Is there any reason why someone would want to get on to the platform who is a current customer? Or is the terms are so much better for the previous they'd rather just stay with what they have?

Yes. I think that's -- the strategy is just keep them where they're at. They have a good product, a good coverage. Let's not create more questions and disruption in that back book, and we'll just run it off over time.

Makes sense. So pivoting to the economy, there's way too much news flow. It makes it crazy all the time. But we're still in mostly a full employment economy. You are a dominant workers' comp writer. You're a dominant writer of disability insurance that's measured in lives. How should we think about the economic cyclicality of Hartford's business given how much it's tied into employment?

Yes. I'd say, and I'll ask Beth to add her commentary. Where we are at today and what we see in sort of the near term is encouraging. It's positive. You could look at unemployment rates still being relatively low. GDP still strong, maybe in the 3% range here, fourth quarter, we'll see what the numbers show. I think the consumer is still alive and well, maybe a little stretched in certain areas. But generally, it's a conducive economic environment. Everyone is going to obviously watch what the Fed does with a new leader over a longer period of time. But I don't feel like we're facing a wall of headwind coming at us from an economic perspective.

We are employment-centric, particularly with being the largest workers' comp writer and then the second largest or first largest disability. But I think those are strengths. I think those are strengths for our franchise. I think it's something we lead with, something that people know us for. And we'll have to watch. But as we said in the fourth quarter call, I mean, there's been headlines, primarily tech companies reducing employment. But on a broad basis, we don't see a lot of reduction in our in-force covered lives. from the East Coast to the West Coast to the north to the south. But there are pockets of rebalancing that people are doing with certain classes of jobs. Beth, do you want to...

So one other thing which I find somewhat interesting. So people are very quick to say that the cycle has peaked for personal lines. There's just talk about affordability, and I can go at the history, and it's true that the auto and home companies are making profits that are at the peak of the cycle, but they're not so different from the previous peak of the cycle. It's within the realm of normalcy of what the cycle looks like. There's going to be a period of time of over-earnings. There's going to be a period of time of under earning. Over the last 5 years and even longer, people have talked about social inflation in commercial lines and personal also to some sense, but it's a problem. When I go look at the underwriting margins of commercial lines, I don't think it's ever been better. Maybe I can go back to the 1950s or something and find a time and some people are ever talk about how the market is getting soft. I mean you can say that, but the profitability is outstanding right now.

Is it possible for the markets to continue to enjoy this level of profitability? And is the fear of social inflation, does it show up in the numbers because things seem really quite good right now.

Yes. Social inflation is showing up in the numbers.

Okay. I'll -- talk about that a little bit.

No, let me start on personal lines. I -- the overall statement, everyone knows this. Our insurance model works on a lag. Right? I mean it's usually lag 12 to 18 months and you make adjustments going forward for past trends or past activities. Regulators want basically availability in their states, but also affordability. But I think in the personal line space right now, most, I think, legislatures are more worried about availability because there's some lessons learned in California, what not to do.

Even if there's political posturing to the otherwise.

Right, right. I mean it's all about availability. And then they want to value. They want to make sure that carriers are responding to trend and know more. And that system has worked pretty well for a long time. You get into -- and so I'm not going to comment upon peak, but just normal lags of pricing increases, severity and frequencies, you got to say, in the personal lines, where we're behaving this year. Catastrophes were relatively calm except for the devastating fires in California. So you put all the components together. And yes, the personal lines organizations with scale are making good money. We'll see what happens going forward, but there most likely be some reversion to the mean, particularly when I look at rate filings and some of the reductions in rates people are proposing in various parts of the country.

I would say the commercial insurance might be slightly different in the fact that property is sort of leading the way on softening, and that's real. It's one of the lines of business where capital could come in, flow out, people compete on a global basis. And the starting point for rate reductions is strong still. I mean we're earning good ROEs in our property book today. So by definition, you can afford to give back some points and still feel good that it's accretive for shareholders.

On social inflation, it's -- all I could say is real and remain as calm as I can because there are good reforms that have happened in certain states, particularly here in Florida. And I would say I feel like there's more momentum between industry groups, legislatures, governors to really get at the root cause of some of the affordability issues in our products. And at the heart of that is higher claim payments due to, I wouldn't say, abusing the legal system, but there are just trends where awards are getting more expensive to settle. There's more lawyers involved earlier on. All the metrics that we follow as far as rep rates, litigation rates, the trend is not going down. If it's anything, it's steady to increasing in certain areas.

One question that I have not asked you before, but you mentioned that it was a generally benign catastrophe environment before the wildfires last year. Obviously, you are not a terribly cat-exposed company relative to some of your peers, but you do have the exposure. Can you preview at all for us what you know about the last 4 weeks in terms of -- is it going to -- is 1Q going to be a large cat quarter for the industry?

No, I don't -- I mean, we get our claims reports weekly. I would say for us right now, I mean, it's an event. It's not small. It's not major. It's -- there's a lot of people that were without power and homes, particularly in Texas and Tennessee and sort of the Mid-Atlantic. But I don't think it's going to be a terribly devastating catastrophe, but the industry will respond appropriately.

Of course, I was trying to get a picture of that. So we have 2 more minutes. I can open it up for questions if anyone wants -- again, or we can finish very shy audience, I can tell. And so let's just talk about capital return. Obviously, you guys can use the capital you're generating and grow. You can return -- how do you rank the order preference? And so what is the value of a dollar being put to work in the business versus a dollar being taken out of the balance sheet?

I'll start.

You got it.

Yes. Well, I think the story on how we think about capital, Josh, is exactly how you said it. We start with where we can invest in our businesses and support the growth that we see. And we've been very pleased with the growth that we've achieved, and we think that we're on a good foundation as we look forward. And then we always look to maintain a very competitive dividend. We're really pleased to increase our dividend again this past year by 15%. And then we still see returning capital to shareholders through share repurchases as an effective use. We've talked about before that from an M&A perspective that that's a low priority for us when we look at the capabilities that we have in-house and our ability to execute. Don't feel that we have a hole that we need to fill. And so we think we have the right balance there.

And we've been increasing our quarterly share repurchases over the years. And given the dividends that we expect from our operating companies in 2026, we indicated on our earnings call 2 weeks ago that we expect our quarterly cadence to step up to $450 million a quarter. So I think we have a nice balance on all of those aspects.

To the extent that 15% increase in dividend, that's a very sizable hike. And congratulations on that. There might be some people would say, well, I'd rather you buy back your shares or whatnot. Does such an extreme hike in the dividend signal that we understand that we don't know -- we're not good at figuring out what our own stock price. So we're just going to -- does that help make decisions on capital return for you...

The way I would think about it is that, to me, the dividend and how we think about the dividend is reflective of the fact that our earnings generation has increased. And we just look to maintain a nice payout ratio and dividend yield. So it really -- that step-up is really more reflective of -- if you look back at how our earnings have increased over the years and the stability that we see there, felt that, that was the right decision to make.

And so we can say in sum that your view of the attractiveness of the stock has not changed in the past year.

Well, thank you very much for being here. I appreciate your time. Thank you. I hope you have a wonderful day. Thank you all for being here.

Excellent. Thank you.

Thank you.

Excellent. Thanks, everybody, for joining us. I'm Brian Meredith. I'm the property casualty insurance analyst here at UBS. It gives me great pleasure to have The Hartford as our next fireside chat here. We've got Chris Swift, the Chairman and CEO; Beth Costello, the Chief Financial Officer. Hartford has been one of the best-performing stocks over the last probably 24 months, at least 36 months. We finally got some re-rating, which is great. I'd like to see that. And I guess a lot of the questions are how are you going to continue to keep doing it, right? So -- particularly in this current marketplace.

So I figured the way we kind of start off is big picture, think -- tell us about kind of key strategic priorities for The Hartford for 2026 and over the next couple of years as we're kind of facing maybe a different type of a marketplace.

Great. Well, first, Brian, it's always a pleasure to be with you at your conference here. Beth and I always look forward to that and all our discussions and questions you have. So I would say, if I look out over the next couple of years, there's probably 3 or 4 or 5 things that we're really focused on. I would say, one, you just mentioned it, we're going to continue to invest in our capabilities, primarily tech-enabled, AI-enabled to better the customer experience and ultimately to augment human talent.

I would say the second priority for us, and it's been a consistent priority over the last couple of years is we want to be a bigger property underwriter. Even in the face of softening property prices, we still think the starting point is good. The returns are great. We have about $3.3 billion of property underwritings across all our business units. And I still think we can grow that double digits into 2026.

I would say then the third area is agency Prevail. I think we talked about it in our earnings call, we're planning on being in 30 states with our Prevail agency chassis by early 2027. We see good growth opportunities there. And really, it's, again, part of the extension of our strategy of trying to do more business with all our agents and brokers, which really means supplying them with product capabilities, underwriting appetite that we've built or acquired over the years.

And I'm really pleased where we're at today. But property for agency, particularly home and auto, I think, is an important segment for the U.S. population. It's a preferred market we would target. I would say the other sort of business-related growth item is employee benefits. We enjoy a top 3 market position. We're known more as a national carrier, and we want to defend that area and obviously grow it. And one of the key strategies there is to fill out all our absence capabilities, whether it be paid family leave, medical leave, supplemental products into that channel. So that's -- it's a growth and defensive type strategy.

And then the new offensive strategy, if you could characterize it as that, is employers below 500 lives, where we need really a dental and vision capability. We need more supplemental capabilities. We needed a little more technology enabled in that smaller end of the market. And we found it. We found it with a partner. We're live with dental and vision capabilities, coupled with all our core products, including then supplemental health. So I feel really good about where that business is today. And I would say that's probably the good top 4.

Terrific. That's great. So the first one you identified and you talked about was continue to invest in the business. AI, that's obviously a really, really hot topic right now. So maybe we can first start on that topic with where are you investing? Where have you been investing over the last couple of years? I know that you're probably a little bit ahead of the curve with respect to the industry, I think, as far as your investments you're making. Obviously, you had some success at it. So maybe talk about where the investments are? What areas of the business? Is it efficiencies? Is it data science? And then the second thing maybe you can -- sorry, a long-winded question, you can throw into that is.

No, we're used to it. Don't worry.

Good. It's a long-winded question, but KPIs. I'm sitting here as an investor and analyst and everybody love to talk about all these wonderful AI capabilities and stuff. But how do we know what the ROI is on this? How do we -- how should we think of it as investors?

Yes. I mean, how much time do we have? So I would start by always reminding people where we came from and where we are today. I think you know well, we've been on a journey to modernize our platforms for at least the last 10, 12 years. And I think that foundational element is pretty key to what I think is the next phase of where technology is going. So whether it be claim platforms, administrative platforms, whether it be cloud-based or on-prem, I think we have a pretty good foundation to grow from here.

We've been working hard on organizing our data and feel that there's probably a little more work to be done primarily here in '26. But you put it all together, we can go faster now in the AI area because if you know anything about AI, it's really -- it's fueled by data, whether it be the Internet data, your own data, customer-centric industries. So you need to have your own data organized to interplay with large language models or small language models.

So I would say from there, we think in terms of 2 main bodies of work in the organization. Some of it, you could call it personal productivity tools. And then you would call it reinventing workflows on an end-to-end basis throughout most of the organization to basically have that better experience. I think our primary goal in all this work, though, is to augment human talent. We're not trying to take it out and actually needs to be in the loop from a governance side and then ultimately have a better customer experience, faster, less friction, more intuitive. And I would put the agents and brokers into that customer category because they're advising the customers on the end product.

So that's sort of the premise. And in the personal productivity tools, you could think of Microsoft Copilot, you could think of Notebook by Google. We've, I think, trained and licensed over 6,000 people in our organization to start to use those productivity tools in their own daily work. That's not industrial strength, but it is providing a lift to people, I think, quite a bit. From there then, when we say the end-to-end and sort of reinventing workflows with an AI-first mindset, that's primarily centered in underwriting, operations and claims.

I think you've heard me say before, I'm not going to go into too many details because we think what we're doing is pretty cool, and you want to have an element of confidentiality with it. But I would just say, look, we're not trying to replace underwriters. This really isn't an expense play. I think a lot of the things that I just said for the end-to-end, it is really a growth, a customer retention orientation. And then obviously, there will be some levels of productivity and leverage that comes with -- as we grow, we just need less people to support our businesses.

But we're not in a mindset of having mass layoffs. We talk to our employees very clearly and adult like as far as what we're trying to achieve, and we'll keep them posted. But those are the dimensions of how we're going about it. And we're going about it by business unit, by product line, in an organized fashion, probably over the next 3 years. I mean this isn't something you're just going to snap in. Some of this is working with Google as our preferred partner in this particular area of building out the AI tools specific to our workflows and operations.

And I think on your question on KPIs that come up a lot. As Chris described it, it really is focused on all aspects of our business. So it's hard to say a particular KPI that will say, okay, that's where the AI benefit shows up. It's really kind of across the value chain. So we believe that over time, it's going to show up from a growth rate perspective on the top line and what we're able to achieve there. There definitely should be some productivity that we would see from just operating leverage. There's also going to be a component that will impact how we think about our loss costs, both from the standpoint of if we can be better selectors of risk, obviously, that will have an impact. But then also just the productivity that we'll see from the claims area as well. So it's not as if it's one particular KPI. We really see it as impacting kind of all aspects of our business over time.

And I think the early evidence, particularly in small and middle is quite encouraging, particularly with growth rates and opportunities. And those are -- particularly in small, it's a business we've invested in heavily, particularly in data science, the digital, the customer experience. So it's not a stretch to add on a little more true AI activities to that business unit today. But I would tell you, we're using middle and large as the test case for the organization in underwriting.

We think there's more -- actually more opportunities because it's pretty self-evident. We talk about 75% of all our small business customer, new business is processed on the glass today. So that's years of investment in technology, that's years of investment in data, segmentation, everything you need to be able to do that and produce the margins that we do. We think the real step change is more in the middle market, and that's why we started there with heavy investments.

Got you. I mean have you seen it in number of submissions that underwriters can handle, all those types of things, and that's sort of we're hearing a lot in the industry.

That's part of the goal orientation we have. So we do have some KPIs that will go undisclosed today to you that try to capture what we think is real. And some of this is -- this is brand-new stuff. So we're making our best estimates based on early test cases and activities that we tried out 18 months ago. So as we roll it around to more product lines completely to the organization in all parts of the country, we should see a lift.

As Chris said, you can look at what we've achieved in small business, and we're kind of leveraging some of those learnings as we bring it to middle and large and so forth. And we've talked about this many times in our small business division, over 75% of quotes are on the glass, no human touch. And that business unit has a goal of increasing that metric. But I think it just shows the leverage that can be created and how you can get more submissions per underwriter and so forth as you kind of think about that moving up kind of within our other business units.

I think the other area that I just talk a little bit about is claims, right? Some people think claims pretty mundane. But obviously, from a customer side, claims is very important because that's usually some of the first times customers really interact with us. So you got to get that right. But also our 2 largest product lines, both workers' compensation and disability involve medical records, how people are injured or how people are disabled and the treatments they seek or the treatments that are directed by a carrier to get someone back healthy are all summarized in medical records.

So we've been able to ingest medical records into an AI capability that summarizes pages and pages. Like you're going to have medical records that are 1,000 pages. Two hours later, you would have something summarized for a claim person to begin to get their arms around what is a covered event, what is a noncovered event and then begin to think in terms of what is the next step that the claim person would recommend to a medical officer. So again, real tangible lift because when -- instead of reading a file for 2 weeks, 2 hours later, you could start to actually interact and try to get someone back to work sooner, which cuts down on lost time. Hopefully, it cuts down on medical expenses, too.

That's interesting. So all of this AI costs money and it takes time and it takes data, right? So I'm just curious, your perspective on what this could mean for the industry over the next, let's call it, 5 to 10 years.

Well, you're right. I mean your premise is it's not just a snap in. I mean it's sustained investment for at least my judgment at least 3 years. So we have our 3-year road map that we've allocated capital to various activities, invest capital and feel good about what we could do with that allocation of invest capital, still within a balance of expense ratios and ROEs, everything we still want to try to achieve. And then there's just a bandwidth issue, too. I mean we always challenge ourselves of if we had more money, can we do it? And a lot of times, it just comes back to bandwidth and you can't have 6 to 10 major projects going on in your operation and expect to execute it well.

So we have some natural limits we put on ourselves, and it's just not financial. So then if you play this out, again, at least according to -- at least the vision that I have, I think they're going to be a have and a have-not category. And we're going to be in the have category for sure. And I think that will allow us to continue to grow at above market rates, capture more market share, endear our agents and brokers to us even more because we're doing more with them. They're making theoretically more money, particularly from contingent commissions and profit commissions.

So it's a decent picture for those that invest and those that don't, I think it will be a slow, my words, consolidation. It's sort of like the life insurance industry, I said on our earnings call. If you look back over the last 20, 30 years, the top 20 control about 80% of the flows. That's ex the benefits business. So -- and really, you didn't have a lot of life company consolidation that happened. And you might have some old books and carve-out things. But from the main platforms, I think they've been performing well.

And I think our P&C industry probably could use a little bit of that because I think there'll be a little better discipline than for shareholders. I think there's more predictability, more relevancy, better growth rates, more integration with agents and brokers. So yes, 3 to 4 years from now, I think it could be a positive environment for those that really embrace it.

Great. That's helpful. Let's pivot over to the Commercial Lines pricing environment, right? And what's been going on. It's a topic I'm getting a lot of questions on. So if we look at your renewal written price increases, right, ex comp went up 6.1% in Commercial Lines that moderated from 7.3% in the third quarter. It's the lowest actually it's been since the first quarter of 2021, right, when things obviously got a little better there. So maybe talk a little bit about where you see the pricing environment heading into 2026. And as investors, what should we be thinking about and prepared for?

Yes. I don't want to just reprise what we said on the earnings call. So -- but I would point out, pricing is a function of what you view your loss cost to be and what you're trying to execute to within a competitive market situation. And that's why I think we talked about as far as where we see trend in an aggregate portfolio basis compared to 6.1%, loss trend is probably a couple of tenths of a point, 0.3%, 0.4%, 0.5% higher than that. So that's one reference point.

So second reference point that I will repeat is we have open dialogue with our underwriters across the organization, working through our team structure, and we're asking them to hold on to margins the best way they can. Third, outside of property, property is probably the area that is softening the fastest. But I would also say that 60% of our property book is in small and middle, which is tending to hold up just a little bit better. And I would say then at the highest levels. Everything else, particularly liability remains robust because trends are in the high single digits for liability, whether it be commercial auto, whether it be primary, whether it be GL, excess umbrella, you put it all together, and that's still a hard market because the views have lost trends.

So I don't know if I answered your question completely, but I still feel like it is a good time to be a P&C carrier. I think there's many opportunities. I think the starting point matters and it's still relatively healthy. And there's not one cycle that I feel right now. I think there's micro cycles in comp, property, liability and then you could put all the specialties, including E&O and D&O together in there. You could put London in there. So there's really 4 micro environments that you really got to track and manage.

Yes. Let's just go back to the back. I mean, one of your key priorities you said is growing the property business, right? But you just said that's one of the most competitive marketplaces. How are you navigating that kind of desire to kind of grow market share then in a more competitive market? It's a specific area you're like, listen, returns are great, it's fine, 5% to 10% lower.

Yes. I would say, again, that's why I gave you the point, 60% of our book is in small to middle. That's the focus. You'll see us pulling back in E&S, you see us pulling back in large. We're really not a big Sheraton layer player. So it's really in our sweet spot that, again, we could build a diversified national book with our great distribution. We could take on incrementally minor catastrophe risk or incremental casualty -- excuse me, catastrophe risk. But we're really going after the fire perils more than anything in the strategy.

Makes a lot of sense. Another one just pivot to on that topic of the cycle, you're the industry leader in small commercial lines. So maybe you can kind of talk to us a little bit about how that line typically kind of goes through the cycles, right? Is it as volatile? How should we be thinking about pricing in that line, margins in that line as you kind of -- as we kind of think about this over the next -- as we head into a softening market?

Yes. Again, I'm going to break it down and bifurcate it by some of the categories I just gave, the big product line and small is comp. Comp has its own cycle that we've talked about. We probably face whether it be in small or middle, just a little headwind pressure. But severities, medical severities are behaving. We're not getting a lot of rate. Frequencies are still negative or positive, depending on how you want to view negative, which is a positive. So we see just an element of consistency there, but just maybe slight headwinds.

And then our BOP, second biggest product is both the property component and the liability component. I think what you're seeing in some of your questions is the property component of BOP is actually slowing down because we're rate adequate now on a national book basis. That wasn't the case over the last 2 years. We had to work hard to get rate into the book, particularly in California and some of the Western states, we have done that. And then I think what will still come through is that overall elevated liability trend that we're going to stay on top of from a pricing side. Commercial auto, we are selective there, but that's been a growing book for us over the last couple of years. Again, trend there is probably high single digits, low double digits, and we need to keep up with that trend. And then I would say E&S binding is sort of the other category that we talk about. And I just want to make sure we don't confuse numbers. E&S binding, again, is composed of both a property book and a liability book, could be individual or can be combined. That overall book of liability and property and E&S binding and small is about $425 million at the end of this year.

So sometimes when I talk in earnings calls about binding, I'm really reflecting the property component, which is about $300 million at the end of the year. And then we still think we could grow that in the 10% range next year, too, both the liability component and the property component. So we still like the binding business. We've got great partners that know our risk appetite and sort of adhere to our rules of the road. And I think we've been able to grow that with strong profitability.

I think the only thing I'll just add as it relates to small business. I mean we do talk about this a lot that a key focus of how we manage that book is we want ease, speed and accuracy. And that has been over multi years. And we've talked about before that we have been sub-90% on an underlying basis in small business for many, many, many years. And that's indicative of just how the team is operating, how they think about it. We definitely want to manage that book in such a way that we're always trying to keep up with loss trend so that we're not putting big increases or big decreases into the marketplace. You kind of want that to be steady. And that, I think, is a big part of why we're able to achieve what we do in that area of the market.

Got you. On the topic of the MGAs delegated authority, I've been doing this for 30 years, and MGA was a bad word for a long time, right, particularly when it came to the carriers just because you see the conflict of interest and they want to grow in a soft market. Are we different today? How do you manage that? How do you think about that as we are heading into a softening market?

No, you still got it right. There's a lot to worry about, a lot to think about from a risk side. I would say from a pure MGA side, it's not that big for us. I'm making a little distinction on the binding business because we actually set the risk appetite and someone executes that to us. MGAs are usually a little different. They usually want more flexibility to grow and they have usually third-party capital and usually a claims TPA, which we just don't think is a value proposition for us and what we stand for. And I think you've heard me, Brian, and I get a little strong in our views here. I mean we're underwriters. We pay claims and we manage our investments. And anything that comes close to sort of disintermediating that, we're not going to have the best reaction.

Makes sense. I just remind anybody if you got a question, 2 ways to do it. We can -- just I guess, on your computers, you can log one in. We'll also have a microphone if anybody has got a question. I've got a lot of them, but anybody in the room right now? No, we keep going.

So another thing that I think -- it's been interesting with The Hartford over the last 10 years that has been following you and maybe you can talk a little bit about it is kind of how the company has changed. And one thing that's been really interesting to me is just the fact that if I look at your written premium growth in your Commercial Lines business, it's exceeded peers by more than 100 basis points over the last 4 years. So really, really strong growth while maintaining that terrific profitability. Maybe you can talk about how The Hartford's competitive positioning has been changed over the last 5 to 10 years and what puts you in that great position to continue to drive industry-leading growth.

Do you want to tag team?

There you go.

So I would say it's not one thing. It's probably a multitude of things. So I mean if you look at the heart of it, I think the biggest change that we've made is we've added more product capabilities, expanded our underwriting appetite, added E&S capabilities and broader specialty capabilities. Some of that was organic. Some of it was M&A. Second, even sort of the depths of the crisis, I would say that our agency force just remained very loyal. When I joined The Hartford in March 2010, we felt firsthand their loyalty, but they're also nervous at that time, which was obvious.

So again, deep, deep relationships where they like doing business with us. They want to do more business with us because they're incented to. And I think through, again, a lot of team effort across the entire organization, I mean we put ourselves in a position today where we have more to offer, we could cross-sell. We have a One Hartford mindset where we're representing all the business insurance units in the marketplace with focus on the segments within BI. We've added bulk in our Group Benefits business with the acquisition of Aetna. We've done other small little things along the way.

But at the core, we reinvented our product capabilities, our risk appetite and renewed our distribution relationships. And again, it didn't happen overnight, but again, with sustained effort and commitment from the team and a great attitude and a great culture, well, here we are.

That's great. I want to pivot back also to one of the initial things you said about investing in Prevail and kind of growing your Personal Lines. This is something that we've had discussions with over the years. So I'm just kind of curious, maybe talk about growing your Personal Lines presence in the independent agency system. And on that topic, maybe in the perspective that this is a really competitive marketplace. There are some amazing providers out there already with very low expense ratios that do it really, really well. How are you going to find your place in that independent agency market?

Well, again, that's a great question. It's the question we work hard every day to make sure we're relevant, particularly as we roll out new states, right? We're in about 10 states right now. We'll be in 30 early 2027. So I'm asking for a little grace. Let's see how we do. But as primarily an agency company in all our product lines, particularly in small and middle, it's not a leap of faith that our agents that are close to us that do business in those lines would also want to do business with us in Personal Lines, principally because they lead with a home product where we have capacity.

We have -- obviously, we worked hard on a Prevail product, which is both home and auto. So we -- I think we have better roof scores. We have better imagery we use. We have better underwriting tools, catastrophe management tools. So again, you put all that we have done from the product side together with loyal distribution that leads with home, and we have capacity to deliver it, it's pretty good. And then we'll account round and bundle with auto. So we still want an auto capability in agency. But again, I think there's probably 100 to 150 national agents or regional agents that want to turn us on in their system. Okay. So just give us a little grace. And when we're back here next time, you can really test us.

We'll do. I promise that. So on the topic of Personal Lines, we're hearing some pushback or media news and stuff about regulators putting in excess profit legislation, all sorts of things is becoming a consumer affordability issue. Curious kind of how you see this playing out within the industry? And how does The Hartford think about it, number one. And then the second thing I think about with your small commercial business, is this an area that they could potentially spill over into?

Yes. So I have a lot of empathy for all of us as consumers of insurance products, but particularly Personal Lines. I mean, costs have been up. The cost of the product is up. But I think sometimes when you get into the economic political discussions, things don't really get talked about very clearly because, as I said, price is the afterthought for the predicate of what is your loss trends. And it's certainly true in Personal Lines, too, whether it be auto inflationary used car price, whether it be catastrophe events, whether it be flood that is obviously a separate policy. But there's a lot that goes into the equation.

But again, the bottom line, the customers feel it and the politicians are trying to be thoughtful. And we, as an industry, I could speak for our trade group that tries to educate people is, I mean, there's education that needs to be more clearly understood. So again, there's a lot of inflationary pressure in a lot of our products, whether it be economic, whether it be social inflation and some of the things that we've been talking about for a longer period of time. But it's gotten to the point where I think it's on everyone's mind because everyone is feeling it more and more.

My only hope is because you had a great case study, both in Florida and California of what not to do. And let's not make mistakes in the other 48 states of what not to do and trying to control price because the regulator's job in the insurance industry is to have affordable product and available product. And that did not happen in California. There's a lot of commotion in Florida here until Governor DeSantis really reformed the industry and a lot of these dimensions that was creating inflationary pressure. So I hope others have taken the lesson from a couple of big states of what not to do and then how to fix it in real terms.

Got you. That's helpful. Let's talk -- pivot over to your Group Benefits business, something that I think probably doesn't get talked about enough with The Hartford and has got a pretty good -- great earnings over many, many years. Maybe you can talk about -- you've got this guidance you're always giving us about what your after-tax margins to be. You consistently are beating it, right? So maybe talk a little bit about why you're consistently beating it and why it's going to go back to the target margins.

Well, thank you for acknowledging that, the Benefits business is a fit for us strategically. And for 2 primary reasons. One, it's an underwriting business. It's a mortality and morbidity underwriting business. And secondly, you've heard me talk at least 3 occasions of how important our distribution partners to us. All our distribution partners have a Benefits business, whether it be medical or whether it be sort of our core products, and it's very complementary. And it's fact, we try to do more and more, and we haven't found the secret sauce yet for true cross-selling.

But from a relationship side, it helps represent one another in the marketplace, full stop. 6% to 7% is our long-term guidance. We've worked hard to outperform it. I can't predict what's going to happen in the future. But I would say being responsive to your question is, at least in my view, Beth, is we've outperformed our incidence assumptions. And we continue to have stronger recoveries, meaning getting people back to work in a more timely fashion than our 6 to 7 calibration model is today. And if that continues, great.

That's great. On that topic, I want to pivot back a little bit to the AI discussion. And one of the things I think about, too, and [ herd ] talked about is, yes, there's all sorts of benefits to the insurance industry. But what are the risks here that we should be thinking about, both in the commercial P&C Personal Lines as well as Group Benefits business that new emerging risk that could happen as a result of AI? And how are you thinking about that?

Yes. It's clearly a watch area for our team and our emerging risk group, part of our overall risk management group. I think there's parallels to other industries and other activities that we sort of try to triangulate impacts. But all I could say is it's an emerging area. I'm not here to sort of cry wolf and sky is falling, but you got to be thoughtful. We look at -- and remember, the underwriting leader reports to Beth from a segregation of duties perspective.

So we got a lot of trust and confidence in MO and all the underwriters, but we split that up to really sort of test theory, test words, terms and conditions and policies and make sure we're regularly refreshing our views of what are acceptable terms and conditions, and that's how we manage it. But I'm not going to try to predict what could go wrong with AI because we've seen it. And I can tell you, just personally, we spend a lot of time out in Silicon Valley with our senior team every year.

This year, we went to Google's campus for 2 days. And Beth and I had the opportunity to drive in a Waymo. It was like Nirvana. I was in the back seat and Beth was in the front seat. But why it was so revealing to me is because if you really understand how Google approached that product or that project, however you want to say it, it was very cautious, right? I mean they have radar, LiDAR, they have cameras. They have had 9 accidents since they've been driving these things on the road.

They limited to sort of urban areas that don't go on highways yet, although they're getting used to. And what just struck me was sort of their really do no harm mentality and caution in how they wanted to deploy this product technology to consumers. You could see others have different strategies. Others have different strategies of just how much risk they're willing to take as an organization and/or with any one particular product.

Got you. So perfect from a timing perspective. So I asked this last year, I'm going to ask it again. You have 60 seconds or less. Tell us why as an investor, Hartford is a good investment today for the next 12 to 24 months, 24 months.

Yes. I would say -- I can't remember, you asked this last year...

I did ask it last year. I've got it right here and see if you can answer the same.

So what I want to say this year is I think even compared to last year, we're a more consistent, predictable organization that values underwriting and underwriting discipline to produce the margins. Second, I think we're going to grow faster than the market and consolidate and capture more market share. Third, we generate superior, superior ROEs, and we're generating excess capital and our preferred strategy for excess capital, at least currently is dividend increases and buybacks. So I think that's a powerful equation for a highly valued organization.

Pretty compelling. Thank you. I appreciate both of your time. That was great.

Thank you.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter 2025 the Hartford Insurance Group Financial Results Webcast. [Operator Instructions] It is now my pleasure to turn the call over to Kate Jorens, Senior Vice President, Treasurer and Head of Relations. You may begin.

Good morning, and thank you for joining us today for The Hartford's Fourth Quarter and Full Year 2025 Earnings Call and Webcast. Yesterday, we reported results and posted all earnings related materials on our website. Before we begin, please note that our presentation includes forward-looking statements, which are not guarantees of future performance and may differ materially from actual results.

We do not assume any obligation to update these statements. Investors should consider the risks and uncertainties detailed in our recent SEC filings, news release and financial supplement, which are available on the Investor Relations section of hartford.com, our commentary is Non-GAAP financial measures, exclamation by GAAP reconciliations available in our recent SEC filings, news release and financial supplement. Now I'd like to introduce our speakers Chris Swift, Chairman and Chief Executive Officer; and Beth Costello, Chief Financial Officer. After their remarks, we will take your questions assisted by several members of our management team. And now I'll turn the call over to Chris.

Good morning, and thank you for joining us today. The Hartford reported outstanding fourth quarter and full year 2025 earnings. As we look back on results, the enterprise performed at a high level. The effectiveness of our strategy and investments in innovation are strengthening our competitive position and ability to generate superior returns for shareholders.

Among the year's highlights, Business Insurance delivered robust top line growth of 8% with excellent underlying margins. In Personal Insurance, 2025 was a pivotal year as auto achieved targeted profitability and home continued to produce outstanding results. Employee Benefits reported an impressive core earnings margin of 8.2% and led by strong life and disability results, and the investment portfolio continues to generate solid performance.

All these items contributed to outstanding core earnings of $3.8 billion with core earnings ROE of 19.4% in 2025. I want to thank our employees. Their commitment to excellence makes these achievements possible. We are united behind a customer-centric mindset and a commitment to working together to deliver exceptional results.

We have a distinctive culture shaped by strong ethics and collaboration that drives decisions and turns innovation into impact. It is what makes the Hartford, the Hartford. Before we review business results, I want to briefly highlight our continued progress on technology and innovation.

Over the past decade, we have modernized core platforms, strength in data and analytics, and advanced digital tools across the enterprise. As we've discussed previously, this includes building out our data science capabilities, migrating application and data sets to the cloud and exiting data centers. With the foundational work across platforms, data and cloud largely complete, we have moved to the next phase of our innovation agenda, reimagining our processes and workflows with an AI-first mindset.

It is a multiyear journey, and we have allocated investment spend to accelerate our progress. The team is executing well, and we are already seeing early positive results in claims where AI is accelerating medical record summarization. In underwriting, or it is providing more consistent, data-rich insights with greater precision and in operations where the deployment of Amazon's call center technology is enhancing customer interactions with multimodal capabilities.

More recently, generative AI has expanded the way we think about value creation across our business. especially within claims, underwriting and operations. Our approach remains focused on practical high-impact applications that augment human talent, and drive improved experience for customers, employees and distribution partners.

All this positions the Hartford to be well situated as the insurance industry continues to evolve. Let's turn to 2025 results. In Business Insurance, written premium growth was strong across all 3 units, driven by strong new business, stable retention and pricing increases in most lines. The underlying margin of 88.5% for 2025 was excellent and reflected disciplined underwriting in a dynamic environment.

The company's approach to operating as one unified team known as One Hartford, enables us to collaborate across business insurance to meet a wide range of customer needs. This strategic alignment, combined with consistent execution, continues to resonate with agents and brokers. We are advancing underwriting capabilities to drive faster, better, and more consistent underwriting decisions while delivering superior agent, broker and customer experiences.

Moving into each business insurance unit Small business continues to be the industry leader with written premium of $6 billion and an underlying combined ratio of 88.9% in 2025. I am pleased to share that for the seventh consecutive year, Keynova Group has ranked the Hartford as the #1 carrier for small business digital capabilities.

Keynova reported that the Hartford holds a double-digit lead in all categories. This recognition reflects exceptional functionality, ease of use and support for agents and customers. Building on another year of outstanding results and advancement of AI-driven capabilities, I am highly confident that we will capture additional market share while maintaining strong profitability in small business.

Turning to middle and large, growth was excellent with solid underlying margins. The team remains focused on disciplined underwriting, and selecting opportunities that deliver attractive risk-adjusted returns. Investments in middle and large are replicating our industry-leading small business capabilities.

Whether you describe that as AI, automation, speed, accuracy or leveraging rich data assets, these investments are enabling a more efficient underwriting process while delivering seamless agent broker and customer experiences. Global Specialty had an excellent year, maintaining underlying margins in the low to mid-80s.

Our competitive position and breadth of products drove excellent growth, including in wholesale, international and Global Re. We remain excited about the unique ability to combine global specialties deep product expertise with the advanced technology and broad distribution of the small business platform.

This allows agents and customers to quote and bind comprehensive products in a single unified experience, a key differentiator in the market. Moving to pricing. Business Insurance, renewal written pricing excluding workers' compensation, was 6.1% for the quarter. While property pricing continued to moderate this quarter, the line remains highly profitable and an attractive area for growth for the organization.

Casualty, including commercial auto and general liability, remain firm and above loss trend supported by rate increases in proactive underwriting actions focused on segmentation, limits management and geographic optimization. Excess and umbrella pricing increased further into the double digits. Commercial auto remains stable in the low double digits and general liability primary lines remained in the high single-digit range.

As we enter 2026, our priority is to sustain industry-leading ROEs through disciplined underwriting and risk selection. That approach supported by the focus on the SME segment enables us to execute through the next phase of the cycle. Turning to Personal Insurance. 2025 was a pivotal year with premium growth and strong underwriting profit. In addition to restoring targeted margins in auto, homeowners delivered strong underlying margins and policy count growth.

Personal Insurance continues to benefit from advanced underwriting capabilities in the modern platform of Prevail. Beginning in the third quarter, these next-generation capabilities were extended to the retail channel. Prevail Agency is now live in 10 states with approximately 30 state launches planned by early 2027.

We are excited by the momentum in the agency channel as we leverage the exceptional retail distribution relationships held across the Hartford, our position as a bundled provider resonates and is supporting account growth. In 2026, we expect to grow policy count for both auto and home in the agency channel. Within the direct channel, given market competitiveness, policy count growth will remain challenged.

The long-term objective is to expand market share while sustaining targeted profitability. Shifting to employee benefits the outstanding core earnings margin in 2025 reflected focused execution, the resilient economy, favorable group life mortality trends and continued strong disability performance.

Our employee benefit strategy is supported by continued investments in technology and digital solutions to simplify the administration process and enhance the benefits experience for our customers. At the same time, expanding presence in the under 500 live segments remain a key strategic priority.

This includes expanding product offerings such as dental and vision to small and midsized employers. So far in 2026, quote activity in known sales are trending meaningfully above prior year. We are confident that investments in technology and customer-facing tools position the business to extend its market leadership.

In closing, across the enterprise, innovation and execution drove another year of profitable growth and leave us well prepared for the opportunities ahead. In Business Insurance, our diversified portfolio with a significant concentration in the SME market, along with excellent underlying margins and long-term distribution relationships will enable us to differentiate and capture additional market share.

In Personal Insurance, having achieved profitability levels we are now targeting expansion across the direct and agency channels. Employee Benefits continues to be a highly attractive and accretive business delivering strong core earnings margins, and we expect to sustain our industry-leading position.

Investment income remained strong, supported by a diversified in durable portfolio, and our businesses continue to generate excess capital, which will be deployed to drive long-term shareholder value.

Taken together, these advantages reinforce our competitive standing and ability to generate superior returns for our shareholders. Now I'd like to turn the call over to Beth to provide more detailed commentary on the quarter.

Thank you, Chris. Core earnings for the quarter were $1.1 billion or $4.06 per diluted share, with full year core earnings ROE of 19.4%. In Business Insurance, core earnings were $915 million with written premium growth of 7% and an underlying combined ratio of 88.1.

Small Business continues to deliver excellent results with written premium growth of 9% and an underlying combined ratio of 87.3. Renewal written pricing for the quarter was 4.3% all-in or 7.7%, excluding workers' compensation. This is down from the third quarter primarily due to pricing within the property components of the package product and E&S.

Those lines continue to be highly profitable and we expect that as we move into 2026, property pricing and our packaged product will stabilize. The liability component of package was in the high single digits and is expected to stay firm. Middle and Large business had another strong quarter with written premium growth of 5% and an underlying combined ratio of 89.4.

Renewal written pricing for the quarter was 4.5% all-in or 6.2% excluding workers' compensation. Global Specialties fourth quarter was solid with written premium growth of 5% and an underlying combined ratio of 87.6. Renewal written pricing for the quarter was 3.9% and remained flat to the third quarter.

The business insurance expense ratio of 31.8% increased 1 point from the prior year quarter as the impact of earned premium leverage was more than offset by increases in technology costs and higher incentive compensation due to overall financial performance.

In Personal Insurance, core earnings were $214 million with an underlying combined ratio of 84.3. The underlying combined ratio improved 5.9 points in the quarter, primarily due to improvement in the underlying loss and loss adjustment expense ratio in auto and homeowners.

Auto underlying results improved by 4.1 points and remain in line with expectations, reflecting typical seasonality as the year progresses. The Personal Insurance fourth quarter expense ratio of 26.2% improved from 26.5% in fourth quarter 2024 and as the impact of earned premium leverage offset increases in technology costs and higher incentive compensation.

Written premium in Personal Insurance declined 2% and though agency premium grew 15% over the prior year. We achieved written pricing increases of 10.4% in auto and 11.9% in homeowners. Total P&C net favorable prior accident year development, excluding A&E, was $177 million before tax, primarily due to reserve reductions in workers' compensation bond, catastrophes and personal auto.

We completed our A&E reserve study in the quarter, resulting in an increase in reserves of $165 million compared to $203 million last year. Of the increase, $122 million was for asbestos and $43 million for environmental. The increase in asbestos reserves was primarily due to higher-than-expected frequency an increase in claim settlement rates and higher settlement values for a subset of accounts.

The increase in environmental reserves was mainly due to higher environmental site cleanup and monitoring costs and higher legal expenses. With respect to catastrophes, P&C cat were a benefit of $1 million in the quarter and include $54 million of favorable prior quarter development primarily from tornado, wind and hail events across several regions. For the year, CAPS came in under budget at 4.2 points.

We continue to actively manage our catastrophe exposure through disciplined underwriting and aggregation control, supported by a robust reinsurance program with both per occurrence and aggregate protection. At January 1, 2026, our per occurrence catastrophe cover was renewed with favorable terms and conditions, delivering a reduction in costs on a risk-adjusted basis. In addition, we renewed our aggregate treaty at $200 million excess of $750 million, achieving a decrease in cost on a risk-adjusted basis.

We continued our strategy of combining traditional reinsurance with our catastrophe bond platform, Foundation Re, and on January 1 issued a new catastrophe bond increasing the total per occurrence program for peak perils to $1.9 billion. This strategic addition enhances our capital strength, provides multiyear stability and complements our traditional reinsurance placements, supporting growth in property underwriting.

Moving to Employee Benefits. Core earnings of $138 million and a core earnings margin of 7.6% reflects excellent group life and strong disability performance. The group life loss ratio of 76.9% improved 3 points, reflecting lower mortality and term life products. The group disability loss ratio of 70.5% increased 3.6 points from the prior year, driven by increases in the short-term and long-term disability loss trends.

Partially offset by improvement in paid family and medical leave products. In the short-term disability, we are seeing increased incidents, particularly among higher average wage earners. In long-term disability, instance remains lower than longer-term expectations but has been increasing from the very favorable levels experienced in recent years, and claim recoveries remained strong, but less favorable than in the prior year quarter.

The employee benefits expense ratio of 27.5% increased 0.8 points compared with fourth quarter 2024 and driven by higher staffing costs, including increased incentive compensation and benefits as well as higher technology costs.

Turning to investments. Our diversified portfolio continues to produce strong results. Net investment income of $832 million increased $118 million or 17% and from fourth quarter 2024, driven by increased limited partnership yields, a higher level of invested assets and reinvesting at higher interest rates, partially offset by a lower yield on variable rate securities.

The total annualized portfolio yield, excluding limited partnerships, was 4.6% before tax, consistent with the third quarter. Fourth quarter annualized LP returns were 11.4% before tax, up significantly from third quarter, reflecting solid performance from our private equity portfolio and the improving M&A environment. Looking ahead to 2026, we expect net investment income to increase, supported by higher invested assets from continued growth and improved LP returns.

Turning to capital. As of December 31, holding company resources totaled $1.5 billion. For 2026, we expect net dividends from the operating companies of approximately $2.9 billion, a 16% increase over 2025. During the quarter, we repurchased approximately 3 million shares under our share repurchase program for $400 million. Given our strong capital generation, beginning with the first quarter, we expect to increase quarterly share repurchases to $450 million, subject to market conditions and capacity remaining under our share repurchase authorization, which as of year-end was $1.55 billion through December 31, 2026.

To wrap up on 25 business performance was outstanding, and we are well positioned to continue delivering industry-leading returns and enhancing value for all stakeholders. I will now turn the call back to Kate.

Thank you, Beth. We will now take your questions. Operator, please repeat the instructions for asking a question.

[Operator Instructions] Our first question comes from the line of Andrew Kligerman with TD Cowen.

First question is around pricing and business insurance. The 6% ex workers' comp increase in rates is terrific, and I see you've gotten more in small business. So the question is, how long do you think you can sustain favorable renewal premium changes in small business?

Is this something that you think would be resilient for a number of years or kind of it gets infected by the same pressures that you're seeing in large. And then Beth made a comment about property package pricing stabilizing. I would love a little more color on that.

Andrew, let me start, and I'll ask Mo to add his color. I think the context of your question should be framed in terms of we have built a wonderful smooth running machine that is differentiated in the marketplace. I mentioned the Keynova accolades that we get for our digital capabilities. We have, obviously, a workers' comp, a world-class BOP product.

We have E&S capabilities that will be embedded in our workflow. So I think the opportunity for us is really sky's the limit. I see this business continuing to grow at really healthy levels. You saw the performance this year. because I think I know we have differentiated ourselves.

We got long-standing agent and broker relationships. And I think the broad market is willing to do business with fewer carriers that meet all their needs. So I think this is a structural strategic shift in some of those activities that we're going to be a clear beneficiary of.

Maybe, Andrew, just to build on Chris' point on from a pricing perspective. We've talked a lot about the starting point really matters. We've got a very sophisticated filing strategy. We watch competitive filings closely. We did feel some decelerating property to best comments, both E&S and in the package policy.

We expect that to -- in the packaged portion to flatten out here relatively shortly. We're watching the E&S space closely, but the GL portion of the BOP is still accelerating. So that's an important piece of it. And then when we look at -- just again, to full circle,-- all of the products in the small business space are meeting target margins and highly profitable. So we really feel good about the starting point.

And just more from a long-term perspective, though, do you think that the small business area is resilient enough to kind of continue to sustain rate increases? Or do you think that the competitive pressures will ultimately come after that segment of the business?

Well, I think the important thing, Andrew, is you don't shock a small business customer, right? So if you have sort of steady bites at the apple as one of our competitors would say in the personal lines area I think small businesses can manage it from a budget side.

But if you fall behind in your rate plans and your rate filings, and you need 30 points of rate, that shock to a small business customer would not be helpful. And I think we're keeping up with trend very, very well now. I don't Mo...

There's an agency angle. I think in the small business space, our brokers and agents can't afford to touch the small business very much so they want to put it in a home that's predictable, consistent, and that's what we're finding is we are that predictable, consistent home right now.

And in fact, by putting business with us, we're proving to agents and brokers, they can save $0.01 or $0.02 on every dollar they put with us relative to competitors.

Got it. And then just lastly on Prevail. So you mentioned you're in 10 states now. And likely to be in 30 by the end of 2027. I know Prevail is kind of a small component right now of your overall premium. Do you envision that being as big as the AARP direct-to-consumer in the not-too-distant future? Or will it be very gradual and over a long period of time?

Yes. I would say, Andrew, just to remind everyone is that, I mean, prevail, the product and the platform is used in new business in the direct channel and now in the agency channel. And you referred to it, we're in 10 agency states right now. We're on track to be in 30 by early 2027, so I mean the Prevail platform is the chassis for all new business going forward in all its modern segmentation, its digital capabilities, 6-month auto policies and I think we've said this before, on the back book, we're not converting it to prevail.

We're going to let the sort of the back book run off over time. It's highly profitable. We don't want to create disruption. So all new business activities, both direct and agency are focused would prevail and then the back book of runoff over time. Melinda, would you add any color?

Thank you, Chris. I think I would just reiterate, Agent, prevail does present a meaningful growth opportunity, and our reputation with agents is exceptional as an app price and it's ensuring us the opportunity to compete more broadly with our agency partners.

We do see upside with our agency partners to grow the book. Today, it's -- you can see in the premium is about 20% of the total. It would take time to grow it to be the size of ARP's book, but we do feel optimistic about the opportunity.

Next question comes from the line of Elyse Greenspan with Wells Fargo.

My first question is on capital. Beth, you upped the buyback pace by $50 million a quarter, right? So that's $200 million for the full year yet like the dividends out of P&C right, are going up by $500 million.

So is it just to have telco flexibility or when you reduce the authorization, maybe then the pace could go higher? I'm just trying to understand why you wouldn't just up the buyback by the full $500 million that's going up to parent.

Yes. So a couple of things. First, the overall dividend increase years is about $400 million, $2.5 million last year to $2.9 million this year. I'll also remind you that we did just increase our dividend back in October, and that obviously factors in as well.

And I think as you would expect, we're thoughtful when we think about increasing our share buyback levels with a goal of being consistent. So I think it's a pretty balanced approach to what we're seeing in the overall increase in capital coming to the holding company.

And then my second question is on business insurance. Just given overall pricing as well as loss trend, I would assume you might see some deterioration within the accident year loss ratio in 2016. I was hoping to just get some thoughts and color there.

And I know -- in the past, you guys have provided color more on an all-in basis, right, for the full exit your combined ratio. So whichever way you want to take it, but I was hoping to get a sense of just how you see BI underlying margins transpiring in 2016?

Yes. I think what I would share with you, Elyse, is we're going to refrain from any specific numbers or ranges. And maybe just talk qualitative with you and give you a couple of data points that will help you make those judgments.

But as Mo said, our starting position, I think, is very strong. We had a 88.5% underlying combined ratio this year. up slightly from the prior year. I think we're still growth in innovative mine, as I said in my commentary. But we're also a disciplined underwriting company, and we just don't want to chase growth for growth's sake and it needs to obviously contribute to the overall enterprise.

So we've instructed our underwriters to try to hold on to margins to the extent possible, be disciplined and try to grow if it makes sense. And if it doesn't, we'll accept the outcome of lower top line. But I think relative to the top line this year, I still see and very optimistic about our ability to grow at an above rate from a market perspective, given everything we've invested in over a longer period of time.

And then I would say it's obvious property is -- will continue to soften. Workers' comp is sort of in the same position of sort of slightly a slight headwind. I think where we're most disciplined and most firm with is anything that has liability association with it.

Whether it be commercial, whether it be GL. And then I would just give you a last data point. I think our 61 renewal written pricing ex comp, is within a couple of tenths of loss cost trends. So I think we're keeping up with trend recently. We might be, again, just a little short in the 0.2 to 0.3 range. And we'll have to see how the market plays out in 2026, but we want to be disciplined, but we also I have built great long-term relationships with our agency partners and brokers that they want to do more business with us, just given our capabilities and our customer centricity.

So that's what I would say. I don't know, Mo, if you would add anything else?

No, I mean, I think there's a little bit of a nuance when we get down below into the 3 business units within Business Insurance. I think small business Again, we've talked a lot about the tailwind we have, the capabilities we built the support we have from the agency base. So we're very confident about our ability to grow and the margins just maintain there. I think in global and middle, it's a little bit more dependent on the marketplace.

Again, I think that's where we're really going to go margin drive the decisions. I think our underwriters in 2025 did a superb job making those choices, holding margins and getting a reasonable growth. I think the growth in middle and global will be much more dependent on market conditions, and we're watching that very closely.

Thank you. next question is from the line of Brian Meredith with UBS.

First one, I want to dig into the expense ratio a little bit. It's remained relatively stable the last couple of years. And I know you've been making a lot of investments in technology and data and analytics really enhance your businesses.

I'm just curious, as I look forward, heading into a soft market, your expense ratios a couple of hundred basis points higher than your big peers. When are we going to start seeing some of that technology stuff manifests itself and maybe a better expense ratio that could be helpful in a softening market?

Brian, thanks for joining in the question. I would say, when I think about sort of expense ratio, I still feel like we're in a good place. And I'll say for 2 different reasons.

One, I think we are going to continue to capture more market share. So our growth rate will continue to be benefited or the expense ratio be benefited by, I think, our higher growth rate, so we'll earn into that. And we have high conviction in the sort of technology and era that we face that we want to lead there and create something unique, differentiated and durable for the future.

And so those 2 things sort of drive our calculus. But when I would put it all together, I would say in the business insurance, I mean, I could see it getting below 30% over the next 2 years or by the end of '27. I think our personal insurance expense ratio can get to below 25%.

And again, that same time period. And we're making continued investments in our group benefit chassis, particularly on the lives down. So we're investing capabilities there. We're taking a lot of data sets and applications and employee benefits to the cloud.

So I could see them getting into the 25-point range. And in 2 years. So again, we're going to live into what we believe we still need to build and create to differentiate, to compete over a longer period of time, while managing, I think, an expense ratio that is competitive. It allows us to do the preceding investments that I just said.

Really helpful. And a follow-up question here on Group Benefits, particularly ability here. Thinking about the massive layoffs that we're hearing about some of these large corporations driven by AI and stuff, what impact do you think that could potentially have as unemployment picture looks a little bit more challenging here going forward on group disability loss ratios as we look forward in the next couple of years?

Yes. I'm going to let Mike add his commentary. But I would say right now, we see the headlines, but when you really look at the data, unemployment is still decent, and it's actually projected to come down.

So more jobs could be created. We got a big national book that is comprised of all different types of industries, industries like health care that are growing rapidly its workforce and technology.

We have a good presence there. So I'm not refuting your point on sort of the headlines you see but it's not that widespread. But Mike, what would you say you feel and see in the book?

Yes, Chris, I would just add, first of all, we've got a very experienced pricing and underwriting team and so I'm pretty confident in their ability to manage through any economic cycle. We've done that in the past, and we'll do that going forward if things were to change.

Again, we also are renewing -- this year, we're renewing about 40% of our book of business. So as we take a look at the experience and what we think prospectively what could change in the future, we'll reflect that in our pricing. But again, I've got real confidence in the team, and I think we're going to manage through any cycle should it present itself.

Our next question comes from the line of Gregory Peters with Raymond James.

I think I'd like to focus my first question, just going back to the Benefits business. The margins are quite strong for your company. And I'm just curious about how you think about the margin outlook, considering some of the pressures you talked about, especially the short and long-term disability loss trends that you highlighted during your comments.

Greg, I would say we remain very bullish on this business. It's been a consistent performer. As I said in my opening comments. It's got strong ROEs. If you look at it on a tangible basis, it's probably 16% tangible ROEs.

It's been steady, predictable. I think the opportunity we've had is maybe to grow and capture more market share. I think we've improved some of the things that we needed to, particularly our capabilities in the lives below market with a build-out of a capability there that's just really coming online 1/12 I alluded to in my commentary, and I'll give you a little more insights of what we call it as known sales right now through January, which is a big national account renewal basis.

But our known sales are up meaningfully. And if I look at the numbers, I think they're up almost 45%, 50% compared to last year. So that tells me that people still want to do business with us. They still like our products, our capabilities, particularly bundling more supplemental products into with our core products.

So really confident that the team is going to be able to grow thoughtfully with good margins. So that's what I would put all together, Mike, and I don't know if you would add anything else.

Chris, I think you covered that well. I guess I would just add -- maybe one thing on top of that, as I said earlier, in terms of how we think about pricing and underwriting and the discipline that we've managed through. And again, we'll continue to do that going forward. Sales were certainly soft in '25. So coming into 2026, as Chris said, feel really good about how the pipeline is looking right now.

And I'd say that's a couple of things in that. One, we've talked about the investments we've made in the business. And so those investments are coming through our customers really appreciating the new capabilities we're bringing to market.

So that's giving us really an added hook in terms of getting those customers online. And second, there are 3 new state programs for paid family leave that are going into effect this year, and so we'll benefit with some meaningful premium as those states go live in 2016.

Great. I guess the other question I'm going to ask is I recognize it's just an investment for you, but it's producing good results for your company.

And I'm talking about the Hartford Funds. Do you have any updated perspective on how that business -- the outlook for that business this year and how you're reviewing your investment? And just any comments on the performance of that business because it's continuing to generate nice returns for our company.

Yes. I think you hit it perfectly. I don't even need to respond. I was just going to say exactly what you said, right? Yes, I mean it's a good investment. It's grown nicely. It's got after maybe a period of sluggish growth, I think we're getting back to the ability to have positive net flows.

Markets are robust. We still got great sub-advisers, world-class sub-advisers with Arlington and Schroders. So yes, Beth, it's a good business. as a healthy dividend, strong ROEs in the just a lot to like.

Our next question comes from the line of David Motemaden with Evercore ISI.

I just wanted to ask a question on BI. So the mix to property there has been a great story. I think you guys are calling out $3.3 billion for 2025. It sounds like you guys hit that. So that's been a good story with the mix shift there being able to offset the workers' comp pricing pressure over the last few years.

I guess how are you thinking about that ability to sort of shift your mix in 20 just given a softening property environment.

Yes, I would say, David, maybe just a slight nuance. Workers' comp is still highly profitable for us, both on an accident year basis and a calendar year basis. So I mean, it is contributing meaningfully to our ROEs. That said, I like what we did with property this year. I think we finished with $3.3 billion of property across the enterprise.

It's about a 12% growth rate I think we could get that to 3.6, 3.7 next year, which would be a 10-ish 11-inch type growth rate. Still, again, with good margins and contributions to our ROE focus.

So yes, it's still part of our strategy. I still think we have room to mix in more property from just a balanced portfolio side. And Mo, I don't know if you want to add any color.

Yes. Just I would say that we're watching. I said this last call too, but they were watching the E&S and the shared layer space. That's the only place where we're really concerned about the rate levels, and we're watching that closely.

And I think we said it before, but 60% of the BI property book is in the middle and small space, which we feel like we can compete through recycle. We've built, I think, market-leading tools, and we're pretty confident about our ability to grow in the small and middle space, and we'll just have to see what happens in the E&S when I shared the later.

Got it. And then just a follow-up. So I know -- just looking at the 4.3% all-in price, I know that includes both pure rate and exposure that acts like rate. So I'm wondering if you could just talk about the moving pieces there? How much of that was exposure that acts like rate, how much is pure rate?

And then, I guess, just as we think about employment, which is solid, but like, I guess, employment growth is slowing a little bit. How does that impact your outlook for that exposure piece in 2026?

Great. Thanks for the question. Yes, 4.3 is all in. I think we quoted in my commentary ex comp that 6.1 and I would say the exposure of the exit rate compared to that 6.1 is 1.8 or roughly 70, 30 generally, that's been pretty consistent. It could bounce around maybe just a little bit from quarter-to-quarter. But again, I'm still optimistic David, on just where the economic forecasts are conditions.

I think internally, we talk about maybe a 2.75% to 3% growth rate employment maybe actually even coming down or unemployment coming down. So yes, I think '26, I think we feel is still a wonderful year, great year being the P&C business, the employee benefits business.

So yes, we're optimistic we could manage to different outcomes depending on what happens with tariffs, what happens with weather or inflation broadly defined. So that's what I would say.

Your next question comes from the line of Yaron Kinar with Mizuho.

My first question circles back to the potential impact of AI on the workforce. And maybe one possible counterpoint that I've heard is that maybe we actually see some increase in start-up activity in small businesses emerging to support AI capabilities.

And I realize I may be asking you to put a crystal ball here. But would that counterpoint kind of resonate with you? Do you think that with larger weighting for the small account space, Hartford could actually be a net winner here?

I believe so. I think we have the brand, the capabilities, the reputation, sort of a tech forward mindset. Obviously, a significant presence in Silicon Valley. So Tech is an important part of our book today. It's an important part of middle. It's an important part of employee benefits.

So I think the real question you might be asking is just what is the pace of new business formation and development, which is another probably a discussion we should have it at a different time. But yes, I think we can take advantage of broadly defined in our SME orientation today.

And then my follow-up, I just wanted to get your initial thoughts on winter storms fern and the potential impact to the industry and the Hartford specifically?

I would say, Buzz kill give you more details, but a relatively minor event at this point.

Yes. I mean obviously, it's very early. And as we compare what we're seeing for claim activity to some other recent storms over the last several years, the activity is less obviously, we'll continue to watch it.

I mean, one thing to keep in mind is when we think about what really impacts claim activity, it's not so much the snow, it's the ice and power outages. So that's obviously what we're watching.

But as Chris said, overall, feel that it's a very manageable event for us.

So not really comparable to URI back in 2021?

Not from what we're seeing to date in the claims activity that we've had. .

Your next question comes from the line of Mike Zaremski with BMO Capital Markets.

Great. Happy Friday. First question on favorable non-cat property experience. Just curious, directionally, if you'd be willing to kind of size up more than 1 point less than 1 point, maybe this quarter and for the full year?

Yes. I would say, for the full year, because quarter it could be a little bouncy. But we were probably 1 point ahead of expectations, Beth. I don't know if you want to add any color?

Yes. I would say that that's probably in line. I mean, again, from the prior year, maybe a little less than that on a year-over-year compare because we saw that favorable non-cat property in '24 as well.

But obviously, we've been very pleased with how the property book has been performing overall.

That's helpful. And my follow-up, just kind of going along with the technology theme this morning and for many quarters now. kind of curious Hartford has clearly been on the front foot of adoption, and you can see in your growth.

So just curious, bigger picture, stepping back, do you think technology. The AI revolution, you said the AI first mindset, will this cause technology to be a much bigger differentiator than in the past? And if yes, could it cause M&A or just more differentiation over time? Or is it too soon to tell?

Yes, in. And really, what I mean is I think it is a game changer. And I think scale matters then to invest over a multiyear period of time to sort of reinvent your workflows and your customer experiences and have that digital-first mentality.

It's easy to say, but I can tell you 2 years into sort of our journey here, and there's been a lot of learnings on of change management that needs to occur. And Yes, I think you could see maybe the analogy I would give you, Mike, is the life insurance industry really didn't go through an M&A consolidation, but the really control 80%, 90% of the flows. I could see something similar in the P&C business.

The benefits business is already there with the top 10. But I definitely can see have to have not type of opportunity. Mo, what would you add?

Just say, Mike, where we compete in the business insurance space on the small and middle end and that speed, ease accurate, we talk a lot about. We think this is a game changer and you're actually going to set the bar at a different place as we think about serving agents and brokers in that space.

Our next question comes from the line of Rob Cox with Goldman Sachs.

I just wanted to ask about the E&S binding growth this quarter and how that fits into plans for next year. Do you still think that taking share in E&S binding can help continue to have strong growth in small commercial?

Well, Rob, thanks for joining us in the question. Yes, E&S binding and small is a strong business for us with great growth I would tell you sort of fourth quarter over fourth quarter growth is plus 30%. I think for the year, you get closer to 35%. That could be a $300-plus million business premium in 2026 for us. Margins are strong, pricing is softening. But as Bill said in his commentary, starting point matters, right? So just because pricing is softening. The ROEs are still strong of what we hold ourselves accountable to. But Mo, what would you add? .

I just said that the flow to us submission flow remains really strong in the E&S finding space, and we don't want to see that changing. And I think the reason why the flow continues to be so good is we are bringing all of the tools from a retail agency experience into the wholesale space and we're finding that it is changing the experience and we're helping our wholesale brokers make a bit more money on each transaction relative to our peers .

And I just wanted to follow up on casualty. It seems like there's been a little bit of a divergence in views amongst carriers. Some are highlighting greater stability in trend in recent quarters, but then some are talking about increasing trend and taking charges.

So I don't know if you have a view -- any views on what could be driving the difference in opinion. And within that, -- is there any chance we could get some broadly reemerging casualty caution in 2026 similar to what happens in 2024? Or is there just too much capital chasing risk at that point?

Yes, I'm not going to comment upon others and what they say or what they think or how they operate. I can tell you, Rob, is that for us, this is the highest focus of execution we have. We know trends are elevated. We don't see them retreating so that elevation will require discipline with rate in the primary side, the umbrella side, the excess side, particularly the commercial auto side.

So it's probably the biggest main event that we have here that we watch from month to month, but that's what I would say. Mo, anything?

Yes, I just -- I think this is a place where we actually think the market is holding up pretty well. It feels stable. I know there's a little bit of movement here and there, but whether it's the GL, the umbrella the excess or the auto space, we feel like the market is fairly disciplined, and we don't expect that to change in 2026.

We have time for one final question. Our final question comes from the line of Katie Seki with Autonomous Research.

I just wanted to shift to the other side of the house with personal lines. I think you guys have previously talked about sort of rightsizing profitability there and really getting that book to a point where you're comfortable with the margins.

Thinking about how competitive the broader marketplace has become over the last several quarters. How are you guys thinking about growth efforts going into 2026 and how that might translate to your margin profile on both the personal auto and homeowners business.

Katie, thank you for the question, and joining us. I would say we are growth focused. I mean we've pivoted to growth probably in third quarter, fourth quarter last year, everyone else has, too. So everyone, I think, has -- their margins have been restored as is ours.

Ours probably took a little longer just given we had 12-month policies. But I would say homes performed well for the last 5 years. but we needed to improve our auto capability. I think you saw roughly an 11% or 10.5% price increase this quarter. I think for 26, you'll probably see that sort of harmonize or average out into the 6%, 7% range.

So I think consumers will feel less need for rate, which should help new business growth and ultimately retention. But growth is the focus, but just because it's a focus, it doesn't mean it's going to happen.

But as I said in my prepared remarks, and I'll ask Melinda to add her commentary, I think we see good growth opportunities in Agency where in the direct channel, it just might be a little tougher. But Melinda, what would you add?

Yes. I think you hit on it, the drivers of growth, certainly, retention and new business are required to change the trajectory there. And Nevada rate continues to moderate -- we do expect less downward pressure on our retention.

We've also implemented a number of initiatives to stimulate new business, inclusive of marketing rate, non-rate levers, -- it is a competitive environment, though. The other thing I would maybe add is growing today an agency. We are growing home on a year-over-year basis.

We are oriented on it but are doing so judiciously and appropriately so smart growth, bundled growth willing to spend a little bit more to get it, but also manage within our expense overall.

Certainly, and I can appreciate the strategic approach here. I guess, dialing a little bit further into the retention discussion. I think we've started to see that improve in auto in late 2025.

And do you guys think you've seen the bottom of retention in the homeowners business with improvement possible in 2026?

Yes. Again, as we think about the bundled dynamic, I think that auto and home are definitely linked, but we do feel good about the upward trajectory on retention overall.

Thank you. I will now hand the call back over to Kate for closing remarks.

Thanks for joining us today. As always, feel free to follow up with any additional questions, and have a great day.

I think in the interest of time, we're going to go ahead and get started here. So very happy to be joined by Chris Swift, Chairman and CEO of The Hartford. Chris is always very gracious with his time and joining us here at the GS Financials Conference, and he's been CEO for over 10 years. So thanks, Chris, for joining us.

Thank you for inviting us, Rob.

Yes, absolutely. And so just to kick it off, how about you level set for us? How has the Hartford been performing? And what are your key priorities as we head into 2026?

Sure. But as I said, it's a pleasure to be here, always at the Goldman Sachs conference and right next to your world headquarters. If you haven't noticed, Beth Costello, our CFO, is ill and could not make a trip. I think she was with investors in Europe last week and maybe caught a bug there, but she sends her regards.

So as we think about performance in 2026, Rob, I would say I think we're performing and executing at a high level, particularly if you judge it from an overall metric perspective of generating 18.4% core earnings ROE on a trailing 12-month basis. If you look at our growth, if you look at our margins, if you look how we're using our excess capital to reinvest in the organization, particularly in our technology, I'm really pleased where we're at. If I just dive into the business lines just on a maybe more granular basis, businesses. Insurance, obviously, is very big and very important to us. During the third quarter call, I guided to 88.6% underlying combined ratio that I thought we could outperform that, which was the 9-month year-to-date number. And I still feel that we can.

Sitting here today, I know we're executing well. We're getting the rate that we need in the books, and I'm still optimistic of closing that gap compared to prior year. So by any measure, again, that's an outstanding result, sort of in that 88% range. Anywhere in 88%, I feel very good about the returns that we're generating there. But if then if you look at sort of growth, I think our growth has been phenomenal. You've heard me always describe us as more of an SME-orientated firm. We do have some larger businesses and global accounts and relationships around the world.

But our bread and butter is SME, which I think is outperforming the broader market. Even if there is a little softening that is occurring or maybe more that will come, I still think that segment of the market where people want, in essence, 100% risk transfer product is a profitable segment to focus on, coupled with our ability to differentiate ourselves, particularly with our technology. I'm really bullish and optimistic about our continued growth in anything in the SME segments, whether it be small, middle or even our global specialty business has an SME orientation.

So feeling confident and very good there. If I look at our property capabilities, property was a big focus of ours. We'll finish the year pretty close to $3.3 billion of property exposure, which we still want to continue to grow because I still think on a risk-adjusted basis, returns in property will matter. If you look at pricing overall, we could talk more about it, but I see very similar trends as we were here last year at this time. Property is probably the main exemption. But workers' comp, I think, is going to do what it does. I don't see any trend -- difference compared to where we were at this time. So negative rates are reality. There might be some margin compression, but we're really trying to give our underwriters guidance and the tools to maintain the margins where they're at today.

And then if I go into the Group Benefits business, is generating superior returns in that 8%, 8.5%, 9% range. We still price our products for margins in the 6% to 7%, but we feel really good. And that outperformance is primarily contributed by disability and then both terminating and getting people back to work and incidences have been continue almost at historic lows. So that business sets up well. I alluded to in the third quarter call that first quarter sales is trending very favorably. Retentions are trending favorably. We've made adjustments to our life mortality pricing, which we took out an endemic load in our pricing that was there last year that really hurt some of our competitiveness.

We're investing in our technology stack there, taking all our data and analytics to the cloud. and just feel very good about where that business stands. And then personal lines really gives me great pride to sort of say we fixed it. And the industry fixed it, right? And we had a lot of fixing to do over the years. But we're at target margins. It's go mode, it's growth mode. A lot of other good competitors are in that area. So PIF count is probably -- is still going to be dampened this year, just given the competitive nature of the market. But the good news is the market is fixed. Our AARP channel continues to be really relevant, and we've launched Prevail for agents, which is exciting because if you really think about one of the Hartford's core strengths is our distribution.

I mean we have close to 15,000 distribution relationships that are looking for, particularly in personal lines, a quality firm, a brand they know and trust with good products and good capabilities, good service, a claims paying capability that is empathetic. And that's a sweet spot to maximize our distribution that way where, again, whether it be small, middle, large specialty, we're bringing another product set to those agents that want to represent the Hartford on multiple levels. And again, I'm optimistic that we'll be able to grow our agency channel. So that's a long-winded way. I don't know if I went 5 or 7 minutes, but I hope you can feel our excitement because I think we're still poised to outperform even into 2026 and beyond.

Yes. That was awesome. You touched on a lot of stuff there. I want to dive into a lot of that. Maybe one more high-level question. I mean you touched on it a little bit, but a 3-year average core ROE sort of in the high teens here. Are you outperforming your own expectations? Or is this a situation where given that the market is still in a good place, you have a lot of good positioning in certain products and the investment portfolio is doing quite well. So is this level somewhat sustainable? Or how would you think about it?

Yes. We're really proud, as I said, of the 18.4% ROE. I think we'll close out the year in great fashion, and we'll see what the numbers ultimately tally. But I do think it's sustainable. I really do. Again, given our market focus and as I said, on the SME market, given the tools that we've built for our underwriters, how we're improving profitability and growth in personal lines, getting back to a growth orientated in group benefits, I think will all contribute to an earnings and an ROE profile that is generally consistent with where we sit here today. So I do believe it's sustainable. As I even said, even in a softening market. And I would give you the context of if property continues to soften, which is sort of the headline, as I said, 60% of our standard commercial book is in small and middle, which is actually holding up better than the large account, the E&S, the [ Sheraton Lay ] or anything in London. So again, at the margin, I think we'll -- where our focus is, I think we'll outperform particularly on property.

Great. And so let's...

The investment portfolio, again, if we look at it this year, I would give you one data point is that our reinvestment rate compared to sales and maturity was about 80 basis points higher. I think generally, where we are right now, mindset-wise, there's a lot of cross currents on what is the Fed going to do, cut interest rates, where are spreads, where is risk. So as we sit here today, I think the portfolio yield will be very consistent with 2025 and 2026 with maybe a little bit of upside. But then when you add in our alternative portfolio, particularly our limited partnerships, we do believe that will get back to sort of a normal 7, 8, 9 points of return range so that the overall portfolio from a yield side, including alternatives, should be greater in 2026 compared to 2025.

Okay. Great. Upward trajectory. And so Business Insurance, underlying margins are very strong, but you mentioned we're seeing some pricing deceleration, particularly in property. Can you talk about where you think we are in the insurance cycle? And what does that mean for growth in 2026?

Well, I think from a cycle perspective, I always like to remind people, you got to understand where you are today to understand the impacts of any trends that you would project going forward. So the starting point is still robust from a margin, profitability and ROE. So I think the industry is -- I would say, fairly rational across most product lines. I mean you could always point to a product line or 2 that might be acting irrationally, but I still think there is a level of rationality. I think people's memories and scarring is real given what the industry has faced in the liability area, particularly over the last 3 or 4 years.

So there's an element of cautiousness, prudence, discipline that I still think is out there in the market. So again, that, again, points to sort of my optimism and generally that we could sort of manage through any cycle. And ultimately, as you think about a capital allocator, if you don't like the returns you're getting, we pulled back. We pulled back from lines of business over the years that weren't generating adequate and had to ride the volumes down, had to make all the tough decisions on expenses, and we're prepared to do that. But I don't see any huge outliers at this point in time from a product side.

Okay. Got you. And so underwriting profitability, the combined ratio, which you mentioned is in the high 80s, which is better than Hartford long-term averages. You had some gradual normalization in the underlying combined ratio this year. Is that how we should be thinking about it for 2026? And what are some of the key puts and takes as you think about bridging the gap to next year?

Yes. Well, again, where we're starting from is healthy, as I just said, we're going to refrain from giving you any additional numbers just because their estimates or views at this point in time. But if I just sort of go around the horn, if we're at 88.6% or south of it for the full year basis, it's realistic to assume that workers' comp is still going to be in a negative price. And depending on your trends for frequency and severities, there's going to be probably some modest pressure in workers' compensation going forward. Property, we just talked about, and I don't need to talk to it again. I think the specialty product sets that we have in Global Specialty will, by and large, hold up with trend. There might be exceptions in E&O, D&O, cyber and some of those specialty-orientated products where pricing is probably still coming down compared to long-term cost trends.

And then you get into sort of the standard line world. And really what you're left with is the liability lines, which need utmost care, discipline, focus on making sure you're keeping up with trend. I think you know we've made adjustments to our -- some of our loss trends in P&Cs in '24. They're holding in '25 generally. And as we head into 2026, we know we need to keep up with those trends. And generally, I would say anything liability related is probably in the high single digits. Primary is probably 7, 8-ish from a trend side, if you get into the umbrella. In excess lines, you're probably in the low double digits from a trend side. So you need pricing that's keeping up with that. So you don't obviously deteriorate margins, and that's our mission. That's our goal. It's our objective and everyone knows it. And we got to execute to it. And if we can't get those rates that we want on a particular account or any particular quarter, and you've seen some lumpiness sometimes in our sales and activity, that's us just being disciplined and stepping away.

Yes. And that sounds different from the last cycle a little bit. I don't think we had high single-digit casualty loss trend during the last cycle. Does that change your view at all on where the bottom might be for this cycle?

Well. Yes. I just always come down to -- and that's why I break it down because each product has its own little mini cycle, you could say, or trends that we're facing. But high singles from a trend in pricing side. So is that different? No, just because the industry just needs to continue to be disciplined and make sure we're keeping up with trend, given everything we've talked about over the years from social inflation to nuclear verdicts, I mean, all those trends are still alive and well.

Got it. So yes, and thanks for mentioning Small Commercial earlier. Can you just go over some of those competitive advantages that you guys have built in Small Commercial over a long period of time and kind of what you're doing today to extend those advantages? And then if I could tack on a third question, 10% growth in 2025 was really strong. How are you thinking about that going forward?

Yes. So there's a lot to unpack there. I think the simplest way to sort of describe it is our intense focus for many, many decades on small. Probably -- that focus probably goes back at least 40 years of an orientation, a mindset, a team orientation of what does it mean to serve a small business customer, what do they need? How do they want to interact with us? How do they want to interact with agents. So again, intense focus. Second point would be clearly technology. That's the product line, the business line that we've probably invested the most in my 15 years with The Hartford to continue to differentiate ourselves. And you could think of it as digital, you could think of it as data, you could think of it as analytics. But when we're able to process 75% of admitted lines business, not just comp, not just auto, not just property, but all admitted lines of business, 75% without human touch, and we have a goal to get to 90% over the next couple of years.

It's that intense focus on how do we -- just how do we get better? How do we -- ultimately, it's about speed, accuracy and consistency. And when you demonstrate that to your distribution relationships, whether it be on a $2,000 policy or all the way up to a $100,000 policy, you earn their right and trust to do more business with them. And I think really, that's what's been happening over the last 3 years, 4 years specifically is we are earning more right to capture more of their market share, and we're gaining market share accordingly. And then you add in the new segment that we've attacked the E&S, particularly the binding business, which is up to about $300 million or growing 40-plus percent. I think those trends, particularly in the E&S market where that market is still going to be relevant.

There might be a little slowdown and flow back to the admitted lines, but it's a new market that we're having great success in. And then you look to the outside world, Keynova which is one of the, I'll call it, firms that evaluates people's capabilities for 6 straight years, we've been the #1 digital carrier that is known for its ease of use and speed. So it's not one thing. It's the multiple of things that we've added to, and we're going to continue to innovate, particularly in the E&S space. So there's more to come out of our small business, I'll call it, innovative mindset, particularly in E&S. So we'll talk more about that next year at this time.

Okay. Awesome. And maybe just on that E&S space, like what are your views broadly on business flow back and forth between admitted? Do you think that's something that we're going to see here in the near term? Are you already seeing it? How do you see that playing out?

I'll break it down is that I think submission flow between the admitted market and the E&S market continues to be high or increasing sort of for our numbers. We're responding to more quotes, but there is increased competition. So our hit ratio is basically flattish. But submissions quotes are all up across all lines. I do think there is a little bit of softening, particularly in the property side of the E&S market, obviously from a price side, but a little bit of activity is dropping at least in our data. I don't think it's an alarming trend. It's probably just a little bit of a natural migration.

But again, remaining healthy. And that's really what our ultimate mission is, is to try to serve more of our insureds and agents' needs with competitive products, expanded risk appetite, things that we've been doing for a number of years, but there's a compounding effect when you focus on it, focus on it every year, you're getting the results that we are. So 10% is great result. I think that can be generally consistent going into next year, and we'll see.

How about back to the admitted market, workers' comp. The business has been performing exceptionally. You mentioned likely some continued price decreases there. I think you guys have said you're booking medical severity in that 5% range, but you're actually seeing severity that's less than that. Can you tell us why workers' comp isn't seeing the same pressures as sort of broader health care cost inflation? And what's your outlook for this line of business?

Yes. So yes, I'll confirm everything you said is correct, right? So we've been very disciplined, particularly on medical severity because you never want to get caught short with medical severity assumptions in your back book and then obviously going forward. So we've been very disciplined there. I think frequencies are behaving. I think the actual emerged sort of medical trend that we're observing in our claims book is in that 3%, 3.5% range, well within sort of our expectation as far as pricing and reserving because those go hand in hand. And there's a lot of different theories on why.

But again, the workers' comp system is ultimately fixing injured workers and getting them back to work and back to healthy. It's not treating broad-based medical conditions that might have higher pharmaceutical uses that might be using GLP-1s more these days or gene therapies, all these advanced medical conditions and therapies are really exciting, but they're not cheap. They don't give them away. So I think that is probably the #1 basis difference between getting an injured worker back to work. And you do have some really, really severe injuries, burns, disabilities. But a lot of times, it's lost time wages or simple medical procedures that getting someone back to work after an accident or incident. So I think it's just a basis difference between the population broad-based and a workers' population.

Got it.

And you have medical fee schedules, you have networks that you manage and sort of have guaranteed payments and where you're trying to control your cost and control your outcomes. So there's a lot of factors that go into it, Rob, that's all expense.

Yes. No, it makes sense. I did want to ask you about personal lines. So you mentioned PIF count might still be a little dampened in 2026. How do we think about the competitive environment there? And could you talk about the new Prevail agency program?

Yes. So when you think about PIF count, I think primarily of auto. The auto market continues to be really competitive. People are spending more, trying to generate more responses. If I look at trends, we'll probably end 2025 with a severity trend probably in the 9% range on a trailing 12-month basis. I suspect that will get into the mid to upper single digits next year, probably closer to mid. So we have an opportunity then to be responsive with pricing or less pricing increases. I think retentions across the industry are still at all-time lows. And no matter what side of the equation you come from agency or direct, people are shopping more. They're looking for the best deals out there. And it's a competitive environment where everyone wants to grow given that we're back to targeted profitability.

So when I put it together, I think we could grow our home count, both in direct and agency. And I think our agency PIF count will grow just because it's a low number. But if I look at the direct book of business, primarily the AARP endorsed book, we're probably going to be under pressure from a PIF count there. So I think you put it all together, we expect a modest increase in PIF count primarily coming from homeowners on an overall book of basis. If I can just update you on Prevail agency, there's really no major updates.

We continue to roll out states. We're going to be in 30 states by early 2027. Agency reaction has been very positive, particularly those agents who use the home as the primary product where the home is a significant assets or net worth of a lot of individuals. So to have a company like ours with our brand, our reputation back in the home market, we're attracting attention in a positive way. And obviously, we want to account around the auto and whether we do that with the home or pick it up next cycle, that's ultimately our goal.

Got it. That's helpful. And so how about on the expense ratio? If we think about P&C business broadly, I think the expense ratio at Hartford has hovered around 31% since 2023. Are you seeing any opportunities to harvest efficiency gains there? Or how should we think about that trending?

I might quibble with you on the 31% publicly. I'll send you a note later. I think it's closer to 30%, but your question still stands. I think the philosophy that we've had for a long time is we needed to build capabilities within The Hartford going back 15 years. And those capabilities were both product, underwriting appetite and technology. And so we view that as a form of capital allocation that I think has actually worked out pretty well for us. So we're always trying to be mindful of expense initiatives and efficiencies, and we've had all of that. But the real benefit that we've generated in our -- at least expense ratio, my judgment is from the operating leverage, capturing more market share, differentiating ourselves. And that philosophy will continue.

I think I said in the third quarter call, we run a technology budget of about $1.3 billion. $500 million of that is on the invest side. Some of that is principally targeted AI and all the emerging technologies. Some of that is taking all our data and applications to the cloud. Some of it is pure data organization analytics. So it's a form of capital that we allocate to basically grow our business. And I think we've made the right trade-off. I'm not here going to predict where the expense ratio is going over the years. But clearly, there will be operating leverage that we'll have choices to what to do to reinvest more, harvest some of it drop to the bottom line. I think we're still competitive in all our major product lines with the expense ratios that we have today, maybe with the exception of personal lines, we're not at scale there. So that might be a combination of harvesting expense gains while we grow.

Great. And if we could zoom in on artificial intelligence specifically, what is Hartford doing in that realm? And how do you see that impacting the business in near term and long term?

Well, I think we've been pretty consistent the last 2, 3 quarters of talking about our agenda in the AI area is primarily focused on where we have the most people, claims, underwriting and operations. All the corporate functions have their experiments and activities that they're using. I would say the way we've approached it is sort of rethinking our processes from an end-to-end basis with having an AI-first mentality and we're executing to sort of our 3-year road map, and we'll see what we could do. I think the other important aspect of AI, and I wouldn't underestimate it just personally, is the personal productivity tools that are out there that allow people to be more efficient, summarizing mass quantities of data using LLM models and Google Notebook or all the ChatGPT's capabilities are real from a personal productivity time. So we're both investing in people to improve their productivity, and we're investing in workflows with an AI mindset first.

So to me, this is a once-in-a-generation type of activity, and we want to capture as many benefits as possible. But I think the real benefit and mentality we have is we want to augment our human talent. We don't necessarily want to remove human talent from the loop. We still think it's a business where people want to interact with people or at least given the choice. So that philosophy is front and center on how we will invest in our workforce for the future to make them very productive. And I think our views right now are -- who knows what's going to happen to headcount because headcounts are going to be driven by how quickly you could really scale all these technologies. But over the long term, I think we just will create an operating model that has more leverage into it. So if we're going to grow $1 of premium, we will need less people most likely going forward.

A lot to think about there. How about capital deployment? At those ROE levels that we talked about, the company is generating a good amount of excess capital, and it sounds like maybe organic growth opportunities are decelerating a little bit. Should we think about something stronger than the repurchase rate that you guys have been at for a little bit? And can you walk us through the preferences on capital deployment?

Yes. I think if Beth were here, we would say -- she would say that we're going to be consistent. We've had a pretty consistent capital management philosophy where we want to fund growth and fund technology as a form of capital. M&A continues to be a low priority for us, a robust dividend that one that grows with earnings, and you've seen the 15% dividend increase that we did this year. We're buying back our stock. We have our authorization. We'd like to be steady and consistent in the marketplace in purchasing our shares. So there's really nothing that's changing materially. I was really, really pleased to get Moody's and S&P upgrade to AA, AA- on our financial strength ratings of our OpCos. We always thought for the last 5 years, we were operating at the AA level, but it was nice to get the recognition. So yes, I think we have everything in balance. Our leverage is good. So there really isn't anything new of how we're going to approach things going forward.

Good. Stable. Awesome. Well, I think we're out of time. So Chris, thanks so much for being here with us and sharing your perspectives. Always really appreciate it. And hope to talk again soon.

All right. Thank you, Rob.

Awesome.

Good morning, and welcome to the Hartford Insurance Group's Third Quarter 2025 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Kate Jorens, Senior Vice President and Head of Investor Relations. Thank you. Please go ahead.

Good morning, and thank you for joining us today for our third quarter 2025 earnings call and webcast.

Yesterday, we reported results and posted all earnings-related materials on our website.

Before we begin, please note that our presentation includes forward-looking statements, which are not guarantees of future performance and may differ materially from actual results. We do not assume any obligation to update these statements. Investors should consider the risks and uncertainties detailed in our recent SEC filings, news release and financial supplement, which are available on the Investor Relations section of the hartford.com. Our commentary includes non-GAAP financial measures with explanations, GAAP reconciliations available in our recent SEC filings, news release and financial supplement.

Now I'd like to introduce our speakers, Chris Swift, Chairman and Chief Executive Officer; and Beth Costello, Chief Financial Officer. After their remarks, we will take your questions assisted by several members of our management team.

And now I'll turn the call over to Chris.

Good morning, and thank you for joining us today.

The Hartford delivered outstanding third quarter results with core earnings of $1.1 billion or $3.78 per diluted share, both records for the company. These results reflect the strength of our franchise and disciplined execution of our strategy. We continue to grow top line while maintaining strong margins in a dynamic environment, supported by investments that advance our underwriting discipline, while deepening relationships with customers and distribution partners.

Highlights in the quarter include written premium growth in Business Insurance of 9% with an underlying combined ratio of 89.4%. In Personal Insurance, an underlying combined ratio of 90%, a 3.7 point improvement over prior year and employee benefits, an outstanding core earnings margin of 8.3% and continued solid performance in the investment portfolio. All these items contributed to an outstanding trailing 12-month core earnings ROE of 18.4%.

Let's take a closer look at third quarter performance. In Business Insurance, third quarter results reflect excellent growth with strong underlying margins, sustaining momentum from the first half of the year. Our small business franchise continues to set the standard for growth and profitability in the industry, delivering record-breaking new business premium with strong underlying combined ratios. Written premium growth of 11% was fueled by double-digit increases in our industry-leading package product and auto. E&S binding also delivered exceptional results with written premium up 47%, reaching over $100 million in the quarter. These results reflect the power of our underwriting expertise, AI-driven capabilities and strong digital platforms built on years of strategic investments. Written premium is expected to exceed $6 billion in 2025, representing 10% growth over prior year.

Turning to middle and large business. Growth was outstanding with solid underlying margins. Written premium increased 10%, underscoring the strength of our diversified portfolio. This performance was fueled by robust new business generation, strong retention levels and solid pricing execution across the lines. Our underwriting approach continues to guide us towards opportunities that deliver attractive risk-adjusted returns while ensuring we remain selective and disciplined.

Shifting to Global Specialty. Results were excellent with another quarter of underlying margins in the mid-80s. This performance reflects targeted growth strategies alongside strong risk and pricing fundamentals. Net written premium grew by 5% driven by U.S. financial lines, bond and across international, partially offset by a 3% dip in wholesale, primarily due to a decline in new construction projects. Within Global Specialty, we are taking advantage of innovative solutions that combine our specialized underwriting expertise with advanced technology and broad distribution of our small business franchise.

Through our One Hartford approach, agents and customers can seamlessly quote and bind comprehensive coverages in a single unified experience. For example, this approach is resonating with small and midsized business customers who require professional and management liability coverage, not addressed by the standard package product. We remain focused on helping all business customers succeed by using digital capabilities, leveraging our broad distribution network and offering a comprehensive product suite that meets more of their needs.

Moving to pricing. Business Insurance renewal written pricing excluding workers' compensation was 7.3%, above overall loss trend. Pricing execution remains highly disciplined. General liability remained firm and above loss trend, supported by rate increases and proactive underwriting actions focused on segmentation, limits management and geographic optimization. Excess and umbrella lines delivered double-digit pricing increases and primary lines moderated slightly, while still in the high single digits. Despite modest easing this quarter, auto pricing remained near 11%, while workers' compensation pricing was slightly up from the second quarter. Across business insurance, property written premium grew 11% to $800 million with expectations for full year premium to reach $3.3 billion over the past 3 years through the team's thoughtful and disciplined strategy, including CAT management, the business insurance property book grew 50%. In small business, property pricing within the package product remained strong, achieving 12% renewal written price increases. In general industries, property pricing was relatively consistent with the second quarter and above loss trend. Other property lines, primarily EMS and large representing approximately 20% of the property book, achieved renewal pricing increases of 1.2%, up nearly 2 points from the second quarter.

Turning to Personal Insurance. Results continued to improve over prior year. Homeowners had a strong quarter, highlighted by 10% written premium growth in mid-70s underlying combined ratio. Renewal written pricing remained flat to the second quarter at 12.6%, driven by net rate and insured value increases. Auto underlying results improved by 3.6 points in the quarter with a year-to-date underlying combined ratio in the mid-90s. While personal insurance underlying margins are at targeted levels, total PIF growth continues to be impacted by a highly competitive market. We are pleased with growth in Agency, where policies in force grew 17% over prior year, including 4% in auto. In the third quarter, we introduced prevail to retail distribution, bringing new product, technology and experiences to our agency partners. We are now live in 6 states, and we'll continue to roll out Prevail Agency over time with 30 state launches planned by early 2027. Initial results are positive, with agents excited about our improved performance in competitive positioning with preferred market customers. Prevail represents a meaningful investment in our businesses, now benefiting both direct and retail channels.

Earlier this month, the Hartford senior leadership team attended the CIAB Insurance Leadership Forum, a premier property and casualty industry event. We met with more than 50 key distributors and reinforced our commitment to consistent execution and strategic alignment. Brokers and agents recognize our industry-leading digital capabilities, as clear differentiators. We left the forum with increased confidence in the strength of our independent distribution relationships, positioning us to capture additional market share over time.

Moving on to employee benefits. The core earnings margin of 8.3% was driven by excellent life and strong disability results. Persistency remained strong in the low 90s, while fully insured premium and sales were flat year-over-year, reflecting a competitive market and lower large case sales in 2025. [ Quote ] activity and known sales for 2026 are trending very favorably as recent investments in technology and customer-facing tools gain traction in the marketplace.

In terms of capital management, yesterday, we announced a 15% increase in the common quarterly dividend, continuing a track record of annual dividend increases supported by earnings power and strong capital generation. In addition, we are pleased that both S&P and Moody's upgraded the debt and financial strength ratings of the Hartford. Commentary from the agencies highlighted our effective risk selection and sophisticated pricing strategies, which have positively impacted underwriting performance across business cycles, with expectations for continued strength, supported by well-diversified revenues and earnings.

In closing, as we enter the final quarter of 2025, our financial strength disciplined execution and strategic investments position the company to sustain strong results by leveraging industry-leading tools, underwriting expertise and advanced data science, we are confident in our ability to continue to navigate a dynamic market cycle and deliver superior returns for our shareholders.

Now I'll turn the call over to Beth to provide more detailed commentary on the quarter.

Thank you, Chris.

Core earnings for the quarter were $1.77 billion or $3.78 per diluted share with a trailing 12-month core earnings ROE of 18.4%. In Business Insurance, core earnings were $723 million with written premium growth of 9% and an underlying combined ratio of 89.4%. Small business continues to deliver excellent results with written premium growth of 11% and an underlying combined ratio of 89.8%. Middle and Large business had another strong quarter with written premium growth of 10% and an underlying combined ratio of 91.4%.

Global Specialties third quarter was solid with written premium growth of 5% and an underlying combined ratio of 85.8%. The business insurance expense ratio of 31.1% was relatively flat from the 2024 period, however, increased sequentially as the impact of earned premium leverage was offset by higher incentive compensation and benefit costs.

In Personal Insurance, core earnings were $143 million with an underlying combined ratio of 90%. Homeowners delivered an underlying combined ratio of 74.4%, a 1-point improvement over the prior year. Auto underlying results improved by 3.6 points in the quarter and remain in line with expectations, reflecting typical seasonality as the year progresses. The Personal Insurance third quarter expense ratio of 25.8% was relatively flat from the 2024 period. Written premium in Personal Insurance increased 2% in the third quarter. We achieved written pricing increases of 11.3% in auto and 12.6% in homeowners.

With respect to catastrophes, P&C current accident year losses were $70 million before tax for 1.6 combined ratio points, which included $37 million of favorable prior quarter development. Through September 30th, we have reached the $750 million attachment point for our aggregate property catastrophe treaty, which means that CAT losses of up to $200 million in the fourth quarter would be covered by the treaty. As a reminder, the aggregate cover does not include losses from the global reinsurance business, which purchases its own retrocessional coverage. Total P&C net favorable prior accident year development within core earnings was $95 million before tax, primarily due to reserve reductions in workers' compensation and personal auto liability and physical damage. We recorded $8 million of deferred gain amortization related to the Navigators ADC, which has now been fully amortized. As a reminder, the A&E ADC cover was exhausted in 2024, so any development from the fourth quarter A&E study will impact core earnings.

Moving to Employee Benefits. Core earnings of $149 million and a core earnings margin of 8.3% reflect excellent group life and strong disability performance. The group life loss ratio of 74.2, improved 3.3 points, reflecting lower mortality across both term and accidental life products. The group disability loss ratio of 70.6% increased 2.7 points from the prior year. Last year included a benefit of 2.2 points related to the long-term disability recovery rate assumption update, while current year long-term disability trends were slightly higher as expected. This was partially offset by pricing increases earning into our paid family and medical leave products. The employee benefits expense ratio of 26.7% increased 1.4 points, primarily driven by higher staffing costs, including increased incentive compensation and benefits, increased investments in technology and a higher commission ratio due to premium mix.

Turning to investments. Our diversified portfolio continues to produce solid results. Net investment income of $759 million increased $100 million from third quarter 2024 due to income from limited partnerships and other alternative investments, a higher level of invested assets and reinvesting at higher interest rates, partially offset by a lower yield on variable rate securities. The total annualized portfolio yield, excluding limited partnerships, was 4.6% before tax, consistent with the second quarter. We continue to strategically manage the portfolio, balancing risk while pursuing accretive trading opportunities. In the quarter, we reinvested at 50 basis points above the sales and maturity yield reflecting increased call and paydown activity on higher-yielding corporate bonds and certain structured securities. We remain focused on our ability to reinvest above the current portfolio yield. As expected, our third quarter annualized LP returns of 6.7% before tax were higher than the first half of the year, reflecting increased returns from our private equity portfolio. While still early, we anticipate fourth quarter results to be in a similar range to third quarter.

Turning to capital management. As Chris mentioned, we increased our common quarterly dividend by 15% to $0.60 per share, payable on January 5, 2026. Over the past decade, we have delivered dividend increases averaging approximately 11% per year. The step-up in our dividend demonstrates our confidence in the sustained earnings power and capital generation of the organization. Holding company resources totaled $1.3 billion at quarter end. During the quarter, we repurchased 3.1 million shares under our share repurchase program for $400 million, and we expect to remain at that level of repurchases in the fourth quarter. As of September 30th, we had $1.95 billion remaining on our share repurchase authorization through December 31, 2026.

In summary, we are pleased with our outstanding performance for the third quarter and first 9 months of the year. We believe we are well positioned to continue to deliver industry-leading returns and enhance value for all stakeholders.

I will now turn the call back to Kate.

Thank you, Beth. We will now take your questions. Operator, please repeat the instructions for asking a question.

[Operator Instructions] Our first question will come from Brian Meredith from UBS.

Chris, I wonder if you could talk a little bit about workers' comp. It looks like we're starting to see some price increases there, which is great. Do you expect that trend to continue here? And do you think there will be at a point here in the next, call it, 12 to 18 months where maybe rate there is in line with trend. And where are we right now rate versus trend?

Yes. Thanks for the question and joining us. I would say the workers' comp market remains consistent. When we talked about pricing this quarter, it was really up 4 times from a slight negative to a slight positive. So that's really not a meaningful move. And if you look at sort of state filings and regulatory activity across all the states, I don't see much rate increases set up for 2026 at this point in time, primarily because as you know, Brian, I mean, it's a highly profitable line is still behaving pretty well. Loss trends are stable and predictable, and it doesn't set itself up for meaningful rate increases. I think you're aware of 1 state at a fairly meaningful rate increase in California because their loss trends were a little outsized compared to others. So I would say it's steady as she goes, and we feel good about the profitability. The overall profitability of the book, whether it be on an accident year basis or calendar year, particularly when you look at our reserve releases, over the last 3 years have been pretty steady and predictable.

Makes sense. And then I wonder if you could just dig in a little bit more into the underlying loss ratio in business return to commercial insurance. So I understand that most of the year overview deterioration is is due to the workers' comp. But if I think about the other lines of business, you talk about rate has been in excess of trend on pricing has been as trend for a long time. Are you holding those [ pics ] kind of constant right now, given where we are with port inflation and maybe potential impacts of tariffs, or are we actually seeing improvement there, and they're just being more than offset by comp?

Yes. I think what I'd like to do, and I know you've studied our data, but let's look at the 9-month year-over-year underlying combined ratio. Currently, it's running 88.6% versus 88.1%. And I would say within those numbers, comp is performing as we expected. So there is no change in sort of anything that we've done with comp in this accident year. And obviously, prior accident years continued to develop favorably. I think what -- if I really attribute the difference in run rates through 9 months is really incentive compensation, so an expense component, not a loss component is higher than we planned, just given overall strong ROEs that we're generating and overall profitability. So if you sort of back that out, we're within a few [ tenths ] of what we think would be sort of a consistent -- generally consistent expectation at that 88.1%. And then I would even add further attribution if we really look at the book. We mixed in property at a good level. You saw the 10% growth. But we did mix in more national account business, which tends to have a higher underlying combined ratio, both for comp and GL, that obviously impacted another few [ tenths. ] And then if I really want to quibble and look at it even more on a refined basis, we probably had a slightly more favorable non-cat property experience last year compared to this year. So you put that all together, and you're dealing with sort of 0.5 point. And I would even share with you, as I think about the fourth quarter and the full year, I think we'll come in slightly below 88.6%, and call it a very productive, high-quality year and feel very good.

Our next question comes from Andrew Kligerman from TD Cowen.

So I'd like to start out with terrific new business growth of 11% and 20% in small and then mid and large, respectively. Those are phenomenal numbers in this environment. I know you touched on property a little bit, but maybe you could talk to the lines that were most strong in each of those 2 segments. And why you're able to see that kind of growth in somewhat softening market?

Thank you, Andrew, for the question. I'll give some highlights, but I'd let Mo to cover his point of view as too. But besides the major segments, you can see those growth numbers. If you pull back our Spectrum product in small commercial, it was up 13% in the quarter. Global Re was up 14%, Business Insurance, auto, was up 10%. I referenced national accounts before, which was up 17% in the quarter, really pleased with how that book is performing. And or more importantly, our reputation in the marketplace in that national account area. So I would say it was broad-based. I would even say our excess liability line was up 20%. And workers' comp, I think, grew 3% year-over-year. So I would say it was just broad-based strong performance by the team. And Andrew, you've heard us and myself and Mo talk, I mean, we've asked the team to focus on margins and maintain those margins as we head into -- as we executed here in 2025. And I really feel like the team is executing flawlessly. They know how to draw lines in the sand and say no, and move on, but also our capabilities, our digital capabilities, all the investments that we've made across all our business segments, Mo, I think, are performing well.

And maybe I'll just add a couple of pieces, Chris. Yes, I think flow, Andrew, remains really good in both businesses, both in small and middle in small, that's admitted and not admit the flow we're seeing, and you saw that Chris quoted a plus 47% growth in the E&S lines binding and small business. the flow in admitted and non-admitted channels remain really strong and small. And I think that's just a sign of how well the technology we're creating efficiency for our agents, and we see further opportunity for consolidation in the small business space. And then in the middle space, I think Chris referenced it. But again, we've got real specialization we've built. The technology we have in small is we're taking it into middle to make that process more efficient for agents. However, I think the middle results will be more lumpy. We showed a plus 5% in Q2. We're showing, as you saw, plus 10% in Q3. I think we're really making decisions there that we just add them up at the end of the quarter and sometimes it's going to be a great number. Sometimes this is going to be an okay number. So we feel really confident about the small and the consistency of the growth there. I just feel like the middle may be a little bit more choppy and more dependent on market conditions.

That was super helpful. Shifting over to Personal Lines. The auto line came in at a 97.9, and I know there's a lot of seasonality there. But maybe you could talk about where you'd like that to kind of center? Like what would be the kind of range where you'd be very comfortable, and now that you've got the prevailed chassis kind of rolling out, do you see the policy count starting to pick up in the near future?

Andrew, what I would say, as I said in my prepared remarks, we're at target margins today and feel good with what Melinda and the team have done to sort of restore our our margins. As you know, we have a 12-month policy. So there's a little bit of a lag that we have to manage. So -- and I would say -- and I think we've talked about it in the past, if for an auto book, if we can run an underlying combined that 95 with 2 points of CAT, I feel good, and we're then in go mode to grow, which we are now. We are pivoting to growth, particularly in '26. The real opportunity, I think for growth will be our new agency offering, which is -- as I said, we're in 6 states now and 40 by early '27, which will add to incremental growth, particularly in addition to our response. But a lot of our good competition is also pivoting to growth. So it's not going to be a layup. We're going to have to break a sweat and differentiate ourselves. But when we think about growing, we think about bundling auto and home, and we still need to maintain sort of the loss cost environment that where we see loss cost going. So all I would say is I think it's balanced. I'm pleased where we're at. Melinda, I don't know if you would add any additional color.

Chris, I think that's all accurate. And I would just add that in addition to the new business efforts and the competitive environment we're experiencing there. No retention certainly is another dynamic influencing growth, and we still have double-digit renewal price change being felt by our customers. So as that into single digits in the fourth quarter and continues to moderate in '26 that will help alleviate pressure on the retention and top line dynamics.

And then Andrew, it's Beth. The only other thing that I would just add is, when we talk about being at an underlying combined ratio in auto of 95%, that would be for the full year. And I just want to remind you, again, that we see seasonality in our auto results under normal conditions where it increases roughly 2 to 3 points over the course of the year. So it's not as if every quarter would be at 95%, we'd expect the first half of the year to be lower in the second half of the year to be higher when we think about that in total.

Our next question comes from Gregory Peters from Raymond James.

So the first question on pricing, you mentioned in your press release and the comments the 7.3% benefit in the quarter. And I guess there's been a lot of growing chatter around increasing price competition. Maybe it's not as relevant in the small market, but maybe you can talk about some pressure points you're seeing on price, maybe from your distribution partners as it relates to the middle or large business or maybe it's even sitting inside the global specialty.

Yes, Greg, thanks for joining us. You're right. The 7.3% we called out this quarter is ex workers' comp in our, we'll call it, standard insurance businesses if you're interested, I would say, in small business, ex comp, it's 9.3%, middle and large ex comp 7.3%, and roughly, that's down 1-point-or-so from prior quarters sequentially. And some of that is to be expected, just given the overall performance of certain lines, particularly led led by property. But I would say, and I'm going to ask Mo to add his color is that the real discipline that we have, and it is still needed, is there anything liability related. You could think in commercial auto. You could think of primary GL excess umbrella. And I think I gave you some of those rates. But overall, from a GL basis, we're in high single digits. Access in umbrellas low double digits, a little bit of a sequential drop, but still double digits and commercial auto is holding up in that 10% range. So I think those are the highlights that I would just point out to you and ask Mo to add his color.

Greg, I'd just say that we still feel like the market is pretty fairly priced really and especially in the smaller end of our -- of each of our books in that small, middle and in the global books. And I think it's also really important to make sure that you understand our starting point. We have not been fixing anything here for 2 or 3 years. And we know that -- again, when we look at some of our peers, there's some higher rate action coming through, but I think that's relative to their starting point. over the past couple of years. And so I just -- I feel confident in our ability to grow. We've given tools to the underwriters that I think are market leading, the data science, the actuarial tools. So -- and I think the underwriters are really executing well in each of the BI segments. And we've given leaders, I think, booked management tools that, again, I think are second to none in the industry. So I think all in all, we're executing really well. Just to your point on where we've seen competition. I think we've talked to you before about the public D&O market. I think we've proven that when the margins aren't there, we'll pull back. I think we've been patient on workers' comp just trying to pick our spots there, knowing that market has been competitive, but the returns are good. And the most recent example, Greg, that I'll point to is our large property book in middle and large -- that segment. We've been pulling back just especially on some of the larger accounts in that segment, we've seen the market really get hungry for the large premium in that segment. And then the only other thing I'll call out for you is we are watching the London market closely. The rate movement in the quarter was something that we kept our eye on. And I think we'll pick our spots internationally as well.

Thanks for that additional color, Mo. I'm going to pivot to my favorite topic that I'd like to ask you guys about from time to time, which is technology. During the third quarter, a couple of your peers came out with statements about the potential benefits of technology whether it's in production or in cost savings through headcount reduction. And it's certainly consuming a lot of oxygen in the industry. So I'd like to go back and maybe can you give us a sense of how your tech budget looks for the upcoming year? And maybe how you're allocating it to sustaining legacy systems versus new initiatives to sort of give us a state of the union on your tech outlook?

Yes. Happy to provide that, Greg. I would say to your first point on sort of the impacts here. I think we're early on in this baseball game. I don't know if it will be in [ '18, ] any baseball game for those of you that watched it last night. But it's early. And I think for us, our guiding principles on any technology, whether you want to call it a data science or artificial intelligence or general intelligence is really to sort of augment our human talent, not necessarily to replace it. And ultimately, what the objective is, is to create a more frictionless experience for our customers, for our agents and brokers, where we can be fast, accurate and really differentiate ourselves on a just to ease of business. I think when that happens, I think we'll retention will go up, I think will attract more business, capture more market share as we've been saying. So that's the first premise. And the premise of where we ought to go from a process side is generally 3 major areas: claims, underwriting and operations. And so that's what we're focused on. It's -- we're trying to go as fast as we can. We've allocated substantial resources to looking at our processes and fundamentally improving them, redesigning them with sort of a tech AI focus from the get-go. So that's what I would say from an outlook side, what we're trying to do, just to give you numbers, we run basically $1.3 billion all-in IT run in an invest budget. And I would say a little over $500 million is sort of the invest side of that. And it's in various projects, some that you might be interested in. We're still taking all our data and applications to the cloud, which we're in our fourth year of a 6-year journey to get that done. We are rolling out some pretty cool stuff, particularly in the call center activity. We're rolling out AWS Connect, which everyone in the organizational product lines service centers will use. We expect that to be completed in the first half of '26. And the list can go on. But I do want to try to refrain from giving too much detail because some of this is proprietary. It's competitive. We're trying to get a first-mover advantage. And I know you'll respect that philosophy that I have. But Beth, what would you add from...

Yes. The only thing I would add, and maybe just to point out the language that you used, Greg, when you said how much do you spend on legacy business -- legacy systems versus invest, and Chris gave you the breakout between [ run ] and invest. But I wouldn't have you think that, that [ run ] is all about legacy systems. We've been on a path for several years now of modernizing our core platforms. So those [ run ] costs are related to more modern systems, which really sets us up very well to be able to spend the dollars that we're talking about from the invest side to make the strides that Chris talked about. So I just wanted to just clarify that a little bit when you think about our platforms and what we've been doing over the last 10 years.

Our next question comes from Alex Scott from Barclays.

I wanted to go back to personal lines and just some of the comments you made about retention. And as you're kind of getting into 4Q and you're starting to lap some of the bigger rate increases, are you seeing shopping rates come down at all for the policies where you're not taking as much price. I'm just trying to get a sense of how much is that being driven by the rate you're taking versus maybe the environment also still kind of just getting competitive with price decreases in some pockets and particularly direct-to-consumer and so forth.

Yes. Alex, I'll let Melinda add her color, but I would say shopping is still elevated across just across the business, whether it be auto or home. I think people have been somewhat conditioned to shop, and obviously, digital makes it a lot easier. You saw our price increases in auto this quarter. I would say, as you get into the fourth quarter and early '26, I think by the fourth quarter, those loss -- or those pricing numbers will probably drop into the high single -- single digits, and we'll continue then to moderate in early '26 and throughout which gives us, again, the opportunity to be competitive and try to grow our PIF count. But Melinda, what would you add?

Thank you, Chris. No, I don't think that shopping behavior in our book is any different than the broader industry. And I would say switching behavior has been higher driven by the multiple cycles of rate that, again, the industry has put in not anything specific to the Hartford. But I would point out [ nerve ] retention is stable, and we're certainly reflective of the environment. And we implemented a number of initiatives to really focus on policyholder education and experiences, things to help them think about coverage counseling adjustments that they can make, billing reminders and other assistance. So we do a lot to try to create seamless experiences and a lot of connection with our customer as we navigate this period of time with more accelerated switching behavior.

Helpful. Next thing I wanted to touch on was the capital position of the company. And I was just interested in the bigger increase in the common dividend in particular. And I wanted to get your thinking around what gives you the confidence on that. What are you seeing in the business? Is it the growth environment is slowing, or do you feel like kind of the capital position is strong enough that you can sort of do both in terms of increasing your capital distributions while still continuing to get kind of growth to get this quarter?

Yes, Alex, I'll take that. And it really is about the fundamentals we see in our businesses and the earnings power that we have. We've been very focused through the years and looking to maintain a competitive dividend. And when we look at where our earnings growth has been, we felt very comfortable increasing it by the 15%. And again, I think it just speaks to the strength of our underlying businesses. It still provides us plenty of opportunity to continue to invest for growth. So I wouldn't look at the change as any sort of signal and change in focus, and how we think about the prospects for our underlying businesses.

Our next question comes from Elyse Greenspan from Wells Fargo.

My first question, I want to start on Personal Auto again. I just is curious if you guys saw any impact of tariffs on results in the quarter? And then is there any expectation that you'll see an impact going forward, right, when you point is that embedded within your expectation that you guys are now back at target margins?

I would say a very negligible this quarter and really for the whole year, I think as we discussed in prior calls, Elyse, and then as we turn the clock into 2026, we'll make the appropriate trend picks for our loss costs, giving due credence to any tariff pressure, particularly in property or physical damage coverages. But at this point, I don't think they'll be significant. And I think we will know how to make the appropriate estimates and judgments. So I don't think there's anything unusual here. Just another factor that we'll have to consider in our loss trends.

And then my follow-up was also on capital, but I guess on the different side. Buyback, right, has been kind of within this $400 million quarterly level, right, for more than a year. As you know, earnings growth are strong and the capital levels are strong at the company, what would you need to see, I guess, to increase from that $400 million baseline? And would that be, I guess, when do you think through that? Is that with the capital plan when you'll update us next quarter for next year potentially just coming off the $400 million?

Yes. Elyse, I'll let Beth add her perspective. You've heard us talk before, we like to be steady, predictable, and yes, any changes, we would have to contemplate. But I feel good about really what we're doing with our excess capital that we're generating. Our companies are well capitalized, obviously, recognized by Moody's and S&P. We're funding meaningful growth, which we want to continue to do. again, with the right margins, with the right mindset on profitable growth and then you see our healthy dividend that Beth commented upon. And you put it all together, it's still a good use of excess capital. And if we change the numbers or amounts, we'll let you know when we make those decisions. But we haven't made any of those decisions.

Our next question comes from Ryan Tunis from Cantor Fitzgerald.

I guess just taking a look at the supplement, in case value sort of looks like any type of underlying combined ratio pressure we had in business insurance this quarter was in middle market. Not sure if I'm thinking about that right, but just some commentary, I guess, on the underlying combined ratio deterioration there.

Ryan, if you're looking at sort of sequential, I would just call out, we had a strong national accounts quarter that put some pressure on the booking ratio there tends to be a little higher just given it's a long duration. And I don't know if it was any favorable or is there any property impact, no, I'm looking at you. But yes, I would just call out the national account mix that we had a strong quarter in national accounts.

Yes, there's some slight favorability in property, but it was pretty minor overall non-cat property.

Okay. And then I guess just in group disability, sound like there was some paid family comp stuff. But I'm just curious if any new trends worth pointing out there?

Well, the trends in sort of just the lead product in totality, paid family or medical, I think, are encouraging. People want these products I think it's a fairly straightforward product to sort of price and understand. We've -- after we've seen people use them just a little bit more, and that's making some of the profit actions and pricing actions that we're taking there. But it's a fast cycling business, generally 1- or 2-year rate guarantees. So we think we could be reactive. And that book is a little over $500 million for us today, Mike Fish. And so I don't know if you would call anything out on leave, but I think the main difference, as we talked about in the quarter for was the basis study that we did last year that didn't reoccur. And generally, LTD is behaving. Maybe we saw a little tick up in severity this quarter. So the people that went out on on LTD tended to be a little more higher salaried folks. But that can bounce around from quarter-to-quarter, so -- but Mike, what would you add?

Yes, Chris, I think I'd just maybe add a couple of points. I think on the lease side, as you noted, we're seeing some increase in utilization of those benefits. So we're pricing that in both when cases come up for renewal as well as our new business price pick. So again, we'll continue to do that. And we do expect utilization to level out probably in the next couple of years. But again, as employees, you see the value of those benefits we're making sure we're including that increased utilization in our premium rates. And then, Chris, as you noted on the overall long-term disability book of business, we're very pleased with the performance there. So again, even though loss ratio up a bit quarter-over-quarter. I'd say, in total, we're still performing well within pricing expectations. Just we saw some very -- and we've talked about this in past quarters, some very favorable incidence trends back last year and prior end '23. So I'd almost characterize it as a bit more of a normalization as we expected to see in the loss ratio this year.

Our next question comes from Mike Zaremski from BMO Capital Markets.

Focusing on the smaller commercial end. Mo made some comments about further opportunity for consolidation in that space. If you could elaborate, that would be great. And just related, I'm curious is there -- if you look at the last 3-, 4-, 5-year trend, I think it's fair to assume that some players, maybe just you all you can correct me, have taken a lot of market share there. Is there a level of market share in small commercial, where you start to see some some kind of friction where you just have a good issue just too much market share with some of your agency partners.

Yes, our market share today Mike, is less than 5% in the small business space. So I don't think we felt that in any way so far. But to give you a little bit more context on what we're feeling, the -- I think coming out of CIB, that Chris referenced in October, earlier this month, there was some really terrific feedback. Just again, the continued themes of how good our technology is. How much time it saves relative to our competitors. Also once a small business placement is with us, our appetite has been consistent for years. So we're not pushing it back into the market. As there's been some disruption in that space, so there's a consistency of appetite that again keeps an agent from having to touch that policy again. I think we get feedback on the service capabilities that we built. We actually take time out of the agency's office, and we do that servicing for them so that we're saving them a couple of dollars on every policy. So I can keep going here. But I think broadly, our digital, our service, our placement capabilities in small and the feedback that we get, just -- it's a better experience all around. So we expect to be able to continue to grow at a reasonable pace in that small business space and to take market share.

Got it. And my follow-up is more high level on the pricing power levels in small to mid commercial. I guess the increasing questions we get, I'm sure you get to is where will pricing go? It seems to be a consensus that pricing will continue to decelerate. Would you say folks in our seat might be focusing a bit too much on the ROE of the industry being healthy, whereas loss cost trend appears to be much more elevated than it has historically? Any kind of insights you want to add into how we should think about kind of the forward trajectory, what's impacting pricing?

Yes. I would say, Mike, again, honestly, selfishly, I mean I think the industry ROEs are good, are healthy. But if you look at other financial services companies, I mean, to generate really, really high ROEs compared to us. You look at banks or others that participate in that side of the business. I mean, our business is one of taking risk. We're taking long-term risk. We have a lot of variability in our loss cost trends. So there's margins and prudence that we try to price into our products. So if you put it all together, I think we're earning a fair return and as you've heard us Mo and I talk along with Beth, I mean we're trying to maintain these margins and keep up with loss cost trends. And that sounds simple. I know it's hard to do in a competitive environment. But if we could do that and compound that over a longer period of time, that's a win for our shareholders. So do I feel like you're focused on the wrong things? No, I think you're focused on the right question on trend and growth and sort of that balancing equation. But as Mo just said, it all depends where you start, right? And if you have lines like workers' comp, where -- are producing good returns and results just because you're getting a lower price increase there. That's not necessarily a bad thing because that's a product that everyone needs. It's a lead product that we use then to account around and sell other products. So it's all part of the equation of pricing your products individually, but also keeping an eye on accounts, and what you're trying to do for agents, brokers and customers.

Our next question comes from Rob Cox from Goldman Sachs.

Yes, I was just hoping you guys could remind us where you're trending some of the bigger lines of business to the extent you could share and I appreciate the comments on the national accounts, but also just curious if you touched up any of the loss trend assumptions across business insurance this quarter.

I think -- I mean, I think the trends that we talked about, Rob, that worth repeating is the liability trends are still elevated, you could judge by what we're doing from a pricing there. I think the overall point though, I'll just emphasize it again, particularly ex comp. We feel like we're on top of loss cost trends as we sit here today, and we'll try to maintain that on top position going forward. There's nothing really new in comp, particularly on severity trends are behaving at least compared to our assumptions. So I don't think there's a new piece of data that we could share with you that we haven't already talked about. But Mo or Beth, would you add anything?

No, I would just say the trends are relatively stable. And I think what we're -- especially on the liability line, so think anything [ GO, ] anything Auto. The teams are keeping rates above loss cost, and I think that's going to be continued for some time. We are really pushing hard to make sure that we don't fall behind on those lines, knowing how the trend has been elevated over the past couple of years, and we intend to stay ahead of that.

Okay. Perfect. And just as a follow-up, I was just curious on the component of your 5.2% all-in pricing or 7.3% ex comp, the exposure-related portion of that. How has that been trending versus the pure renewal rate? Are you guys still getting a solid contribution there from the exposure component?

Yes. the quarter, I would call it at 1.8%, and it's been sort of consistent of 75% rate and 25% exposure as we break that down. So just to be clear, that's at the 7.3% ex comp rate that I quoted before.

We are out of time for questions today. I would like to turn the call back over to Kate Jorens for closing remarks.

Thank you for joining us today. Please reach out with any additional questions, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

All right. We'll go ahead and get this kicked off as people are still coming in. First, I'd like to say welcome, and thank you for being here. We have Chris Swift, CEO, The Hartford Group, and Beth Costello, CFO. So I'm very excited to jump into it.

I think from first question standpoint, I'm sensing a lot of anxiety from investors just around the P&C pricing cycle broadly. And so I wanted to see if you could discuss what you're seeing in Hartford's markets? And any views you might be able to offer up around softening and how will it play out, how impactful is it for your business versus some of the things you all are doing to compound book value in the meantime regardless.

Yes. Well, I'll just start off by saying, thank you for inviting Beth and I to be with you. We always enjoy being with you, Alex. And the environment, I just -- would still say is generally conducive. I mean, there's always sort of sub cycles in different product lines, particularly, and I think that's -- you might be referring to property, but if you look back and step back for us, particularly with our small to middle market enterprise orientation, we tend to operate from a sweet spot side at that middle market to lower end of the market. That doesn't mean we don't have national accounts and larger property writings. We're pretty well diversified, but our real bread and butter is that middle to small end of the market, which I think is holding up pretty well from a variety of different reasons, which we could talk about.

But if I sort of go across the board, Alex, property is probably the one headline area that's softening. But as I said on the second quarter earnings call, large property for us and E&S property is only 10% of our book. And again, most of that book, 60-plus percent is in that small commercial or middle market line of business, which generally is holding up pretty well. And I would remind investors is that, given over the last 3, 4 years, I mean, the rate increases in property, in general, including home, have been quite substantial. So the starting point for any softening in property I think you got to put in context.

And we still feel good about writing business in all types of property. And eyes wide open, we've got to make sure terms and conditions are right and things along those lines. But we're still bullish on being able to make money in property, particularly. And then we could talk about liability. We could talk about comps separately, E&O, cyber, some of our specialty lines. But you put it all together, and I'll just point to the evidence that through 6 months in 2025, our underlying combined ratio was 88.2%, which is generally consistent with last year, which we sort of guided to. And I don't really see anything as we sit here today that I think is going to disrupt that trend for the rest of '25. '26, we're not going to talk about here. We'll talk about '26 at the right time, but now is not the right time.

Understood. So I wanted to dig into the small commercial orientation that you all have. And just this dynamic where there's been a bit of a divergence between how stable pricing has been at the small end versus some of the things that have happened at the large end of the market. I wanted to see if you could dig into what is the dynamic that allows that to exist? And I think there's some concern that, well, maybe it's just lagged, like maybe it eventually does come to small commercial, like what are the moats that allow it to be more stable over time?

Yes. I think that stability for us is something Beth and I talk about quite a bit with our business leaders is it's really ease, accuracy, speed that people value in that side of the market because when you're dealing with, I'll call it, premiums, say, under $15,000, you don't have -- agents don't have a lot of time to touch the business, to shop it. They're looking for a quick, accurate, bindable quote and we're doing 70% of new business binding on the glass, which means there's no human touch. So all the data and analytics and AI investments that we've made in the organization over the past decade plus that it goes even back even further, I think it's generating real competitive advantage in a market where people want first dollar coverage. They want a fairly robust coverage, and they want to know that there's a good brand behind it with a good claims paying organization.

And they're not going to, sort of my words, quibble over a couple of points of rate as long as you could give them finality quickly and accurately. Agents and customers will move on and bind it. And I think you could see that in our historic retention rates in small commercial, they're pretty strong, which is an indication that most people, once you sell them on our capabilities, they'll stick with this for a good number of years.

Next, can we talk about what you're seeing with loss cost trend, I guess, more broadly in the business. Maybe touching on casualty. I'd be interested in any update there on what you're seeing in some of those trends, but also just -- we have a little bit more of an uncertain environment in terms of inflation in the macro. So how do you navigate that and your approach to pricing?

Well, I could say flippantly very carefully. But I would say thoughtfully with deep analytics and data that help guide us. And I'll ask Beth to add her point given that the actuarial reserving and pricing function reports to her. But I do really believe that competitive advantage with data, with listening posts does help us make sure we're staying on top of trend, right? Because trend then dictates what you do with pricing and sort of the cycle goes from there. So I feel good about what we do. We're not immune from obviously, some of those conditions that existed in prior years, and we've had to make some adjustments in our reserving.

But all the adjustments we made, I think, are holding up well. I think we hit the ground running and executing on a higher level of price in '25 than we sort of maybe anticipated last year at this time. But again, performing well and feeling good about getting our arms around all our loss cost trends.

Yes. And what I would just add to that is, Chris touched on it is the feedback mechanism that we have within the organization so that what we're seeing on the claims side is real time being discussed with our pricing actuaries, our reserving actuaries, our underwriters so that we can respond accordingly if we start to see trends. And that's, I think, really important especially on some of the lines that you mentioned, especially as we start to think about inflationary pressures, regardless of where they might be coming from.

So those quick feedback loops so that we can react because you're reacting on all fronts, right? You're reacting to the current business you're writing, you're reacting to looking at what it means for reserves on the balance sheet. And as Chris said, it's just so important that we get that trend right.

That's very helpful. So next, I want to move to workers' comp, similar kind of question, but the trends there have been a bit different over the last 10 years. There's some signs of medical inflation that we see at a high level with the health insurers, but it doesn't always correlate to worker's comp. And I always struggle to figure out exactly how to interpret some of the things we see from health insurers and what that means for workers' comp.

So maybe you could touch on that. And this is also an important time of year for pricing for '26, so if you're seeing anything there, I'd be interested in an update as well.

Well, I think the context for workers' comp this year for us, it's basically right on where we thought it would be. From a high level, frequency continues to behave I think medical severity, I think we've been pretty clear for a long, long time that we price and reserve for a 5% medical trend and the actual emerged trend line is well below that. So we feel good about that, which means we feel good about very prudent reserves that we have up for our workers' comp line. Where we've been able to release reserves pretty consistently over the last 2-plus years, 3 years. That feels good.

I think what you're really -- your point on where is trend going, particularly given maybe tangential information or noise coming out of the medical community is a question mark. As we sit here today, I still think that is contained within the medical community or the hospital community principally because the utilization of medical services feels to me to be elevated. And just because utilization is elevated in that segment of the market, that's not a translate into our market.

We're -- really, we're trying to get working age people back healthy after an accident or an incident and direct medical reimburse for any medical cost and get people working again. So I know intellectually, you know it's different, but I'm confirming, it is different. And we got to be always watchful and thoughtful as we are. But as I said, the trend line for us is still well below that 5% trend line, which I think is sort of the so what of everything when you put it together.

Where '26 pricing is going to come out, it's still a little bit of unknown. You're right, sort of third and fourth quarter when rate filings get updated and you have a better indication of where things are going to be in '26. But as I would sit here to say, I don't see anything dramatically different one way or the other. I don't see another leg down in rates but I don't see a leg up in rates because if you really look at sort of the emerged accident year trends over the last 6, 7 years, I mean, they've still been pretty solid, and that will put a natural governor on rate action.

But there could be states like California, which has its own unique ecosystem where I think they got about 8.7 into an approved rate through the commissioner. So that's healthy. But on the other hand, it's because they need it and sort of the uniqueness of particularly the cumulative trauma claims that California is dealing with. So we'll have to see how the rest of the market plays out.

That's helpful. So before we move off to Business Insurance, I have to ask about social inflation. Hopefully, at some point over the next few years or so come -- a topic that doesn't come up as much in these conversations. But what are you seeing from this verdict and settlement inflation? You guys had what I would consider to be a pretty modest adjustment in 4Q, and it seems like we've moved on from that, but I would be interested to know just how things have played out relative to your assumptions following that as well.

Yes, Beth, if we tag team. All I would say from a context side is, yes, the legal system abuse continues. And obviously, that's my perspective, but it's mine. I own it. I see it in the data. I see it in the settlements. I see it in the nuclear verdicts. I see it in some of the games that various participants play like time-limited demands where they're trying to jam someone. So all those trends still continue.

Yes...

So I better stop before I get too agitated.

Yes. No, I'd agree. I mean, those are the things that we're looking at and monitoring. And continue to see attorney rep rates and as Chris said, time limit demands and so forth. And we watch all those trends very carefully. As you pointed out, we made adjustments last year to increase the loss trend that we saw and that increased sort of our jumping off point going into '25, and we'll continue to monitor those trends. Responding in pricing, as Chris indicated, when you look at the book and we look at those lines, we're very good about the pricing that we're getting to cover those loss trends, but it will continue to be an area of focus for us.

Yes. I would just expand just on 2 points. The trend that we're observing and then obviously, the pricing increase that will go, we said in our first -- our second quarter earnings call, all general liabilities in that 9% to 10% range with primary casualty in the 9-ish and then you work into your umbrella and excess coverages in sort of the mid-teens range, and that's evidence of the need to continue to stay ahead.

Second, I'm an optimist at heart and always will be. I do think the industry broadly defined as underwriters, carriers, insurance brokers and other interested constituencies are -- have more of a -- national awareness of what's happening with some of these trends. And it's not going to change overnight, but I think there's more coalition building that has happened to try to make real change at the state level or federal level, particularly as it relates to disclosure, transparency into funding sources, maybe even limits on demands, maybe changing tax rules on how these settlements get taxed for the capital providers.

So there's an array of exploration on what could be done to help improve the environment, but it's not going to change overnight, Alex.

I mentioned with Business Insurance, I do have one more question. You mentioned some of the tech investments that you've made, the artificial intelligence. I just want to see if you could dig into that a bit. And I'm particularly interested in, in your market, it's a small commercial end of the market where maybe the volume submission is higher, you got to be able to handle a bit more. What have you done to separate yourself there in terms of helping distributors?

Yes. Again, context, I think you go back 15 years when Beth and I started working together, we had some major investments to make in just our core platforms. And I start there because those are building blocks for future AI. I mean I think everything we're doing nowadays, just the context of AIs probably in the data science area. But there are some early use cases that we're using, really the cutting edge of AI today.

But the foundational elements were really administrative platforms. I always like to tell the story that when we arrived, we had 8 or 9 claims systems. So we consolidated all our claims systems into Guidewire. We had numerous administrative platforms that administer policy issuance, but there's also a heavy layer of data within those policy admin systems.

And I think we had a lot of green screens as we like to say at that time. And so we needed to modernize that, went to Guidewire. And then the other big modernization that we needed to do was in our personal lines business. So we made our investments in platforms, which we call Prevail, which is also a product. So it's sort of dual added. But we went to Duck Creek there and sort of built out a world-class chassis to administer all our personal lines. So that's a lot of work over many years, and there's other things that we did with our data, and we're 4 years into a 7-year project to take all our data and applications to the cloud now.

And so we're at that phase of really being able to leverage a lot of those investments and be sort of cloud native with a lot of our activities and thinking. But you're right, the next phase of AI could be very, very, very powerful for the industry, and we think it will have a huge impact for us. But again, the focus of AI for us is ultimately augmenting human talent, improving our customer centricity and improving our agent speed and interaction and be able to get back to them in a very rapid time compared to where we are today. And those are the sort of the focal points or the outcomes that we want and as you would expect, the 3 big areas for us that we're deploying AI today is claims, operations and underwriting.

So we can go more into it, but I'm going to be a little bit limited on what I say in certain areas here just to protect some of the trade secrets that we think we're building and really be able to be a first mover and take advantage of the opportunity. So we know there's a lot of other companies that are working on it and all sides of financial services, including insurance. But I'm pretty pleased with what our focus is over the next 3 to 4 years where we're going to invest heavily in AI.

So I won't ask you for any details. I would be interested in just your reaction to I think one of your competitors actually mentioned that they could see it making the underwriting decisions in the next 5 years, which I was a little surprised at the speed that, that could have. I mean, would be interested in just how you view that and...

Well, that's not too far fetched in that, as I said, our small business franchise today, 70% is machine-based decisions. Now that's at the smaller end of the market. As I said, usually, policy is less than $15,000 in premium. So yes, and there's a lot of homogeneity in some of those risks that allows that. But could you see AI advancing to the future where it is making recommendations? Maybe. I can see recommendations, particularly in middle and large exposures as opposed to just letting that go by itself. But I think that's the power of data and how it can be brought together in a way that could analyze and make recommendations. Yes. I could see that.

The only thing I'd add to that, just as a proof point because oftentimes, people ask well, how will we know if it's working. But going back to the example that Chris gave on Small Commercial, where again, 75% of all quotes are bindable on the glass. But the proof point that we know what we're doing and can make the right decisions is that small commercial consistently delivers underlying combined ratio is below 90%. You can do a lot of quoting straight through, but if it doesn't show up with profitable business, that's on a good equation. So I think that proof point and being able to build on those expertise that's a lot, I think what Chris is talking about.

I'll break my rule for you just because I like you. I'll give you 2 examples in, I'll call it, our operations area and then our claims areas. We are -- we have rolled out AWS Connect, which is really a state-of-an-art customer contact center type of information compared to an old, old antiquated system that we have that will really actually, again, augment human talent as we interface with customers that have questions on billings, have questions on renewals. We could do sentiment analysis to recommend a different line of questioning, maybe to some of our handlers. It will help with workflows, it will help with containing things in a digital channel versus a voice channel.

So you might say, well, that's not AI. I think it is. I think anything that really augments human talent and coaches them and provides them real-time feedback or data or information at their fingertips is really what we're going to try to do.

And then I would say in the claims area, we're the second largest player in workers' comp. So what happens in workers' comp, we have the ability to sort of direct and guide medical treatment. Obviously, the doctors and clinical staff administer it, but -- so we need to understand medical histories and how you do that is through medical records.

And depending on a person's medical history, I mean, you could have a 1,000-page medical document history that you need to understand and make sure you're paying only for the compensation related to the injury at hand. So documents could be a 1,000 pages, 1,500. And again, with AI and the summary functions that we've built and train models, we could summarize a 1,000-page medical record in basically 2 or 3 hours. Old days, that was 2 weeks of claim handler work to really get your arms around that. So yes, it's -- AI is real. And again, augmenting human talent, making the customer experience better, making our agents more productive and doing things more quickly for them, that's our mission.

Great. So moving over to Personal Lines. I know you guys have a strategy to sort of pivot a little bit more to higher growth. And I wanted to see if you outline some of the initiatives there. Would also just be interested if you're changing risk appetite or anything like that to try to spur some of it. I think there's been a lot of I guess, moving out of certain cat areas and so forth as reinsurance costs were high. So are you able to use lower reinsurance costs to help aid some of that expansion?

You want to tag team? I would say, again, context, we made our investment in Prevail, the product and the chassis, primarily for our AARP direct channel, where we have a contractual relationship through 2033 now. That was sort of the recommitment to that channel for us and AARP made certain commitments we did, and one of it was building a more modern platform. So that platform for the direct channel of home and auto through AARP on a direct basis is up and running and performing well. We've done a lot of work, obviously, to improve the auto components. But home has been a steady contributor and a steady grower of our capabilities in that area.

So we had always thought that if we do that well and can get AARP growing again, we might have the opportunity to take the Prevail chassis, modify it for the independent agent channel, which is really commissions and maybe a couple of other tweaks. But use the sophistication in that chassis, which is multi-variant pricing, detailed segmentation like you never had before and apply it to the independent agent channel. And our view right now is we're operating in 2 states or testing it and the demand for a high-quality brand as ours with a fairly robust policy coverage, meaning not sort of cheap bare bones, but meaningful coverage targeted at the mature market that might have useful drivers and maybe a larger home size is the sweet spot that we're going to try to grow in going forward.

And the principal reason that I think we're going to be successful is because our distribution wants us. We have rich distribution relationships already. And a lot of our distribution partners obviously have business insurance more and more are having benefit insurance. And there's a certain segmentation of agents, even national brokers that are focused on Personal Lines, and they want us to reenter the market with our brand and capabilities, given that they're selling our benefits and business insurance products. So we're quite excited. I think we believe we could be in 6 states by the end of the year. So that's 3, 4 months from now, and that's realistic, and we could be in 30 states by the end of 2026. And yes, we want to grow. And I know a lot of other carriers are turned to growth after multiple years of trying to fix the auto line, but ours is fixed, where [we're at] our targeted margins.

Home has always been a profitable component for us. And we're appointing some new agents. We're refreshing some agent relationships that might have go on stale in Personal Lines. And actually, we're quite excited about the opportunity.

And the only thing I'll add is that from a risk appetite perspective, I would say nothing has really changed for us. And part of what we've seen over the last several years is, as Chris said, has been more reaction to just a lot of rate that had to go into the auto book more than a change in view of risk appetite. So your question on reinsurance availability that has not been a factor as we thought about Personal Lines where we want to grow and how we think about it. For the 2 areas that we've said that we don't have appetite for and that hasn't changed is new homeowners in Florida and new homeowners in California.

And reinsurance strategy for us is not going to change that view. It really needs to be around the core economics of those states and those products. So as Chris said, I think that we're poised well from having returned the book to profitability on the auto side, home in good shape. We launched Prevail with agents, we see that as the mechanism for growth.

Maybe one more on Personal Lines. Broadly, how are you seeing the competitive environment? I mean, it's obviously been very disciplined in getting margin back into the product over the last few years. Is that -- is it going to be a more violent pivot towards a bunch of the industry trying to grow? Or are you seeing more discipline just given the experience that we've had over the last several years?

Yes, I would say, I think, as I said, the market is competitive. Everyone knows it's a good time to grow because of the profitability embedded in their books. My sense though is that, well, you could compete, no one wants to go back to where we were coming out of COVID and sort of the shock to the system there. So I believe there will be an element of discipline, but margins are pretty good right now.

And being able to sort of capture some market share is on a lot of people's mind from the mass market to specialty markets along those lines. But we're equally committed to at least trying to compete with some of our larger players. Again, with our brand, with our capability, with distribution relationships that are already strong and active and we really want to expand to another line of business with them.

Great. Moving on to Group Benefits. This year, I think you've produced some really nice margins. How are you viewing the sustainability of that? And what do you see in terms of the growth as you sort of move through some of these investments you've been making in the business?

Well, I won't put words in your mouth, but I think that was a compliment that we're producing strong margins through 6 months. Is that what you mean?

I said that pretty explicitly.

Okay. All right. I want to make sure I heard it correctly. Yes. It's above our 6% to 7% long-term target. That's the way we price product, obviously, with a view of we're making multiyear rate guarantees. So I always like to say is we just need to be really thoughtful about where we see trend going. So we always have a mean reversion to incidences and terminations, which, again, over the last 2, 3 years, we've been outperforming, which feels good. But even at the 6% to 7% margin, I always like to remind people, 6% to 7% margin and benefit translates roughly into a 14%, 15% tangible ROE for that business, which I think is healthy. It's accretive to us over a long term. And obviously, we always play to outperform that those targets in the medium term.

I think benefits -- I would make 2 points, Alex. One, coming out of the pandemic, we had a certain view on mortality trends that would be -- remain elevated. That turned out not to be the case. And really what happened there was we weren't that competitive in life insurance. And you could see that in our trends. So the good news is we made the adjustments. We no longer see an endemic state for mortality, and I think we're going to be more competitive, particularly with 1/1/26, which is happening right now and then into the rest of 2026. I think the investments that you're referring to, I would refer you back to what I said on group Business Insurance, meaning sort of a platform refresh. We're in the final phases of platform refresh in group benefits, mostly sort of our homegrown technology where we've had strong claims systems that we're really proud of.

And then we needed to tidy up a little bit some of our administration capabilities and our data sets there. But from there, I would say we're focused on our down market, we call it there, say under 500 lives. 67%, 70% of our business is in the 5,000 in lives up. So it's like really national account, jumbo type of accounts. And we feel like there's an opportunity for us and our brand to be more competitive in the below 500 lives. To do that, we've partnered with a company called Beam in Columbus, Ohio to use their administrative platform, their technology with our products and then with their dental and vision products, and we're going to go to market that way. So excited about that.

So we're going to continue to invest in that benefits experience, but I'm pleased with where we stand from a digital side, from an employer side, getting them data. We have some products called Leave Lens. We're making big investments in absence management, which is to help administer all the leave programs that these various states have out there. So benefits is becoming sort of table stakes. How can you help me manage absence, give me data, help me administratively and then you wrap around your risk products. And we feel, particularly in the above 500 lives. I mean we are poised to compete there very, very well.

Great. On capital management, could you discuss your current capital position, how you're approaching redeployment of capital as we think through the next few years?

You want me to take that?

Yes. It's your balance sheet?

What I would say on that is consistent with where we've been. I mean, obviously, we first start with making sure that we have well-capitalized operating companies and really pleased with some of the ratings progress that we've seen from rating agencies in that regard, which I think speaks to the fact that we do have well-capitalized operating companies, allows them to invest in the various businesses and some of the things that Chris discussed. We're always focused on maintaining a healthy dividend.

And been steadily increasing our dividend as our earnings per share has also been growing. And then we still see share repurchases as a good use of excess capital. Even though our valuation has improved, we still think that it is -- has further improvement to go. And so buying our shares at these levels, we still see as providing us a good return. We've talked about M&A in the past. And again, it's a low priority. It's not to say that we're not always wanting to understand what's going on within the marketplace. But if we decided to deploy capital in M&A, it would have to be something that obviously strategically made sense but also hit a high financial hurdle for us as well. So overall, I would say, sort of kind of steady deployment of capital across all of those areas.

I want to give a shout out to Kate Jorens, our Treasurer and Head of IR, who for the last 6 years, has worked tirelessly to convince the rating agencies, we should be a AA company. Thank you, Kate.

So I had one more for you just as we have a few minutes left. Reinsurance, we're hearing about price going down. What kind of an impact does that have at the Hartford? Will it be a noticeable impact as we look at the financials and business insurance, you have that? And does it impact at all the small amount of reinsurance business that you have is...

Yes. I think those are the 2 points of how much reinsurance do we purchase, and what is it due to our small reinsurance operation. I don't think the amount of reinsurance we purchased, whether prices go up or prices go down is a material effect on our overall core earnings or bottom line or anything to do with our strategic product orientation. It's just not that big.

Now every penny matters from an EPS side. So we always will try to maximize our reinsurance purchase. But as we sit here today, it's not top of mind to do something differently if prices decrease. I would say from our reinsurance business, which is almost is going to be $1 billion premium operation by the end of this year. It's a little bit of a forecast. Likewise, it is a diversified small to midsized reinsurer that focus on property, casualty and sort of specialty lines.

The property book we'd like to do on a proportional basis. The casualty book, we tend to do on an excess basis. And then some of the specialty coverages for surety, terrorism, trade credit, we do on a proportional basis also. So again, good diversification in there. I wouldn't expect us to -- it wouldn't have a material impact on our returns or earnings again because I don't really see a rapid decline or a material step change in prices downward. I see this continuing drift just a little lower. But I don't have to tell anyone in this crowd. It's September 9, and we still got 6 weeks, 8 weeks to go on hurricane season.

Yes. Well, thank you very much for being here. Very much appreciate it. Thank you to the audience. It's a great conversation.

All right. Thank you.

Thank you .

Appreciate it. Thank you.

Thank you.

Yes. Thanks.

Okay. Good morning. We are going to get started. I'm very pleased to welcome Chris Swift, CEO; and Beth Costello, CFO of The Hartford. I imagine that most people are familiar with The Hartford.

But I wanted to start off with an overview question. When you look at the businesses that constitute The Hartford, how do you see it as distinctive from key competitors in the marketplace.

Well, it's great to be back with you, Meyer. I always appreciate the invitation to be with you. I think we've been talking about it for a little bit now. I think The Hartford's a great strategic competitive advantages is our small to midsized enterprise focused and we can put revenues around that, our employees around it.

But from a P&C side, that small SME orientation, I think, is very strong and very powerful for us, particularly because it's consistent. People want basically 100% risk transfer products in those markets. We have agents and brokers that serve that market and managing agents and agency force is different than just managing a broker relationship. So we have a lot of years of experience there. So that, I think, is simply our advantage. But then you overlay a specialty orientation with our specialty business, which is about $3.5 billion of written premium.

You overlay then our employee benefits business, which tends to skew larger and that's the real opportunity for us then to be on the smaller side, paired up with our property casualty organization and then a restored and growing personal lines business. I think you put all those pieces together and you get high returns, stability, good growth, and we got distribution partners that will continue to want to do business with us long term.

To follow up that, one point that I make frequently when discussing The Hartford is that I think the consistency of its results reflects technological capabilities that are underappreciated by the marketplace. Just, I think, to succeed in a small business where you've got a large group of largely homogeneous risks, obviously, with some variation. Data and analytics are a key component of that. I was hoping you could talk a little bit more about the actual investments that you've made and you're making right now to sustain that, I'll call it, competitive advantage in terms of the consistency and strength of results.

Sure. Maybe the context of that question, Meyer, is what we just talked about our profile, that SME orientation. Particularly in our small business franchise, which is almost a $6 billion business on a run rate basis today. I mean, we've consistently invested in that business for many, many, many years, many decades. And you could look at our platform, what we call it ICON, where most of our agents go, you can look at what we've done with some of our other platforms.

It's just sort of that continual mindset at least over the last 15 years, I think has been very powerful, and it's compounding our capabilities. But specifically to your question, I would just remind everyone that we -- we've worked on things, I think, in a good sequence, in the right sequence, from a foundational side. And we had a lot of old platforms out there, whether it be claim systems, administration systems, benefit systems that were just sort of old and tired.

And I would say, over the last 10 years, 12 years specifically, I mean we've methodologically gone through the organization and sort of freshened up and gone to sort of modern platforms. And I'll give you more examples that I think I've shared with this group before where when I came to The Hartford, I think we had 7 or 8 claims systems. And now we have one with Guidewire. We had old administration systems that were different between business units.

Now we have Guidewire that's really our commercial platform across the board. Personal lines the same way. Recently, we've invested over $300 million in a personal lines platform sponsored by Duck Creek to really modernize our Prevail product and offerings through AARP and now we're going to go back into the independent agent channel in a more meaningful way. So that was sort of like foundational type of activities that we needed to do. And it's not very sexy, but it really gave us, I think, the data advantages that we are seeing today. And that's sort of the last phase that we've been in data analytics, data science, using our data, particularly in small commercial, where 75% of all new business goes through our machinery, you can say AI machinery and without a human touch.

And we're going to continue to do that in various aspects of our specialty business. And then if you think in claims, the claims side have been data-rich that allows us, once we've organized our data better there to do some of the AI stuff we're doing. And I would say as it relates specifically, I think, to our technological advantages going forward is there's still -- there's still -- they need to play out, right? I mean we have a big invest agenda over the next 5 years that we'll oversee, but I think the foundational elements are there, the data science and data analytics are there.

And I think, if you think in terms of really using AI to augment human talent, to better the customer experience, to have agents be able to do business with us in a more timely fashion that it's less costly for them to interact with us, that makes margin, I think that's what we're poised to do.

And the 3 big areas that we're poised to, and are making bigger investments is claims, underwriting and operations. And I'll go in reverse order. In operations, we're rolling out AWS Connect, which is the next version of a call center technology, but really deeply embedded with AI to understand customer sentiment to help with faster turnarounds, help more directly with self-service, a big investment that we should finish early 2026 with the full rollout. Another example in the claims area, we're doing medical record summarization with AI. We're able to read a 1,000-page medical record, summarize it basically in a couple of hours, to, again, augment our human talent that is still managing claims.

And I use that word twice now intentionally because I don't see AI replacing people. I see it enhancing capabilities and the human touch and obviously improving productivity so that maybe we need people in the future, but it is still an augmentation approach. And then the underwriting side, there's some top secret stuff going on, so I'm not going to talk about it.

Okay. Do you want to talk about the top secret stuff?

No, I don't. But I want to add to something that Chris talked about with our small business results because a lot of times, we get questions on, you can talk about use of technology and AI, but how -- what's the proof point that it actually is benefiting you. And Chris kind of did that, 75% of quotes that come into small business go straight through on the glass.

And that -- you could do that, but what really is the proof is, okay, what are your results? And when you look at the results in our small business, with an underlying combined ratio consistently below 90. That shows that, yes, we're doing it fast, but we're doing it accurately. And you need to have both of those. And we're looking to build upon those capabilities in other areas of our business, but that's a proof point that I just wanted to share.

No, that's perfect. And for me, as a non-technological person, knowing how these things play out is tremendously helpful. So thank you for that. I want to spend a little bit of time on the business segment. Starting off with your position. And I was hoping you could talk about the advantages and disadvantages about being a leader in small commercial. On the one hand, data. On the other hand, and I'm hoping you'll address this, is there a reluctance among your agents to put even more business with one of the companies that's already one of the biggest on their shelves?

Yes. I think the simple answer there, there's only advantages. I don't feel any disadvantages in our small business capabilities. And as I said, we're on our way to almost $6 billion of premium, we still have about 4% market share. I still think there's major opportunities in other E&S capabilities. We've built out our binding capabilities. But there, I think we can do more with the E&S on a direct written basis through our machinery. So yes, I still think that is the fastest growing business segment for us, with the strongest consistent margins over a longer period of time. So that's small.

Then if you look at middle, again, what I think middle's SME orientation is very similar to small, a little different just because there's more underwriting required in some of those lines of business. But everything that we've learned in small over the last 25 years, we're going to try to implement from a process side, a workflow side, a data and analytics side. We're using more AI in that business unit today from an underwriting side than most. So that's the business unit that's going to lead sort of our AI underwriting activities.

And we've really worked hard on diversifying our product offerings and underwriting appetite in sort of that middle to large segment. So I think, again, we will be able to serve our agents and their customers, our shared customers in a more holistic fashion because our premise is and if Mo were here, he would say it eloquently, that as agents and brokers continue to consolidate, they're going to deal with fewer carriers. And those fewer carriers need to serve more of their holistic needs. That's exactly what we've been working on for the last 10 years. And then...

No, I was just going to say, the other thing I would add to that, and especially as it relates to the small business aspect is we already talked about speed and accuracy, but the third component that we talk about quite often is consistency. And that to the point that you made on would agents or brokers not want to concentrate with certain insurers, if you're not consistent, they're not going to want to do that. And so that's a really important part of the strategy that the small business unit has.

So just in terms of a follow-up there. So you've talked about, obviously, the analytical relevance. The relevance of analytics to small commercial and a little bit more underwriting when you get to the middle market. If you would continue on the spectrum to Global Specialty. Is it reasonable to just say, okay, that's the same idea, a little bit more underwriting but still will benefit from the analytical investments that you've made?

Yes. Yes, totally. And I would say, again, there's 2 bifurcations or 2 components of when we think of Global Specialty. Global Specialty has small business small orientation too. Again, there's -- everything we have done and continue to do in small commercial, Global Specialty for their small E&S direct written capabilities are going to use some of their own proprietary technologies, not ICON, not Guidewire that we have the administrative platform, but they do have something similar that, again, I think has been very effective in the marketplace and is getting accolades as far as speed and ease, and accuracy, that Beth talked about.

And then some of their other products just have a little bit more of a specialty orientation, and I'll give you examples there that do involve a little bit more underwriting, but again, with middle market sort of leading the way from the AI side, Global Specialty will do a fast follow with some of that underwriting knowledge, and how we could apply it to AI. But if you look at Global Specialty, Global Specialty is about a $3.5 billion written premium business for us. And I think in terms of Global Specialty of what do they really do and some of it's products, some of it's industry verticals, some of it's international, some of it's tech and cyber.

So it is a very diversified book of business that we've built up over the years on our own organic basis and then obviously with some acquisition activity over the past couple of years. But that business now is running pretty consistently in sort of the mid-90s from an underlying combined ratio basis with strong margins and again, a very good growth potential. And it's really diversifying, right? Because there's product lines like ocean marine in there, or surety or political violence and terrorism, trade credit, E&O, D&O. And then you have some of our industry concentrations in verticals of construction where we have excess casualty products.

And then everything we're doing in the energy space, particularly in London and opening up a Singapore office. So I'm just trying to give you sort of that excitement or that orientation of we're going to continue to find profitable pockets of business to underwrite either on the small side or the large side with our Global Specialty business.

And I think on Global Specialty, you said mid-90s, but I think you meant to say mid-80s underlying, so just to clarify.

Mid-80s, yes.

Even better. Okay. I want to follow up. Chris and I before we went live we're chatting about the fact that it's important not to confuse peak pricing with peak profitability. And probably the best example of that has been workers' compensation over the last several years, where profitability has held up despite the fact that there has been little in the way of rate increase. And I was hoping just for an update, what's the current state of workers' compensation? You've done a great job of diversifying so that it's a smaller percentage, but it's still an important line of business.

Yes. No, it's our largest individual product line along with disability in our benefits business. So I would say, simply, it's still performing well. We've been able to manage selection and rate and use our proprietary approach from a portfolio side of how we manage pricing and regulators. So -- but I think the biggest component that we've always talked about is we still price for and reserve for medical severity at a 5%, and that trend is holding up.

And in fact, maybe it's ticked up over the last year since we've been here, but it's under 5% for sure. And again, as long as it's under 5%, the economics of that business for us still holds up very, very well. If you particularly look at it sort of on an accident year basis than on a calendar year basis as far as with all the reserve releases. And some of that is a curse and a benefit at the same time.

The curse is regulators won't approve pricing because they don't see the need to it on an accident year basis, but that still benefits us. And to the extent that medical trend is under 5%, that means we're putting up margin in our reserves to absorb any potential future shocks. We don't see any of those on the horizon, but it's always nice to have prudence in your reserves to observe any unknown trend that might emerge. But I don't know if you would add anything, Beth?

Okay. Fantastic. If we can shift to another line of business that's been getting a lot of attention, commercial auto. How is Hartford's commercial auto book playing out? It's been tough for the industry.

Again, the context I would give you, you don't realize just what compounding rate increases of 15%, 20% every year does. And that's about $1.2 billion book for us today, spread amongst small SME businesses, whether it be small commercial or middle market. We do have some commercial auto orientation in our Global Specialty operations, which is relatively small, but -- so it's a $2.5 billion -- excuse me, $1.2 billion book. I think it's performing well. We had to make some reserve adjustments last year in 2024 that put our combined ratios, I think, a little above 100%.

But as we sit here today, we're running below 100%. I wouldn't say we're at complete target margins and target margins here to produce a 15% or even a higher ROE. We still have some work to do, but we've been getting rate. I think we've made adjustments on trends from the loss reserve side. Beth can add her color. And it's a product line that we just can't avoid. We have to price it for individual product line profitability, but we also need to think about it from an overall relationship and account basis of, again, trying to do more with our agents and distribution partners to serve their customer needs, that philosophy is alive and well, particularly for the auto line of business. But Beth, would you want to add anything?

No, I think you covered it well. I mean it is a combination of both rate we're getting, looking very closely at the trend that we put into our loss cost estimates as well as then the work that we do on the underwriting side as far as size of fleet, deductibles, limits, all of those things kind of together point to improving profitability in commercial auto.

Okay. Is it a line that you're looking to grow at this point in time other than through rate?

Yes. We want to participate in the line, particularly when we account round other products. You would not expect us to be a monoline commercial auto writer.

Okay. Fair enough. Moving along this line of business discussion, this is a tough question because I can ask why didn't this thing happen? But most -- a lot of competitors have really struggled with general liability reserves, and Hartford has not. So I have my own thesis in terms of why you've done a pretty good job of that. I was hoping you could flesh it out. Is that what you underwrite, the size of accounts, analytics, or anything you want to add?

I'm going to sit back. You tell us. No, I would say, honestly, we haven't been pristine. We made some adjustments last year, and we needed to. Our trends and certain assumptions, particularly for the slip and fall activity that I think we described in certain real estate-related activities or malls or foot traffic was a little higher. Those slip and fall claims just got more and more expensive to settle, and we needed to take our adjustments.

I think the good news for everyone in this room and listening is that '25 is holding up. So the recalibration of our trends is holding. We feel good about that. It's a line that it's getting the strongest rate across our portfolio. And when we think about it, I've always talked in terms of sort of primary GL umbrella and then obviously, our excess capabilities. But in aggregate, we're probably 9%, 10% rate for all 3 of those products. And then the excess line, we're probably in the 15%, 16% rate area.

So -- and I expect that will continue for the foreseeable future, just given trends, social inflation, legal system abuse, everything that agitates me. I promise not to go off. But those trends are still live and well until there's more national-wide reform in certain areas. So -- but I think to answer your question, it's a little bit of price. It's a little bit of avoiding certain classes of business. It's a little bit of terms and conditions, knowing where not to write umbrellas, particularly in states with auto fleets and things along those lines.

So again, I think our underwriters, again, led by Mo, if you were here, I think he's doing -- and the team is doing a great job on risk selection, participating where we want to, getting the rate where we want to and again, solving customers and agents' distribution needs. I think we're balancing all those equations pretty well. Beth, what would you add?

The only other thing I would add is that throughout that process, there's very tight alignment between the underwriters, the claim folks, the actuarial folks. So as claim activity changes, our actuaries are responding to that and our underwriters are responding to that as well. So it's a very tight loop because ultimately, if you start to see that activity, you got to respond with pricing and you've got to do that quickly. And so even though we did have to make adjustments last year, we were real time also adjusting our views on pricing need so that we could get that into the marketplace.

Great. And we touched on this earlier...

Does that match up with your thesis?

It does. It has a few more details than I put in there, but I was hoping you'd know more about it than I do. So I think we're good there. When you talk to your distribution about growth in Global Specialty, can you talk a little bit more about which product lines you're looking for?

Yes. So I tried to allude to some of our product lines, but I would say from the industry specialization, energy is in there. So energy would be one of both carbon and noncarbon-based energy. It's a global product line the way we manage now, particularly with our U.S. resources, but our strong resources in London. So there's an orientation there. I mentioned surety, both contract and construction-related surety activities, which has been a very profitable line in Global Specialty there.

We're top 10, top 7 maybe in Global Specialty in surety, but it's a product line we'd like to continue to grow. I mentioned everything we do in our construction vertical on an E&S basis is in this line of business, and that's close to $1 billion of premium across the country. I mentioned ocean marine, particularly led here in the U.S., but the contributions from our London operations. Our E&O, D&O practices, again, is a global product line, strong capabilities here in the U.S. led by that team, but also equally strong capabilities in London. And then I would say London rounds out Global Specialty with a casualty, a liability orientation in various segments, industry segments in various economies that bring those needs to the London market.

So I think that's sort of the highlight. And I would put cyber in there. Cyber, I think this group knows, is a product line that we didn't have a lot of appetite for, but I think that's changed over the last 2 years. We built, I'll just call it, a new chassis that involves a lot more upfront risk management, detection, avoidance, sustainability in sort of those products and then with a full suite of recovery capabilities and vendors.

So again, that's a small mid-market orientation with that product, but that's a product managed by Global Specialty, and then we use distribution in small and middle market agents.

Great. Fantastic. My takeaway is both diversification and the growth opportunities in having all of these product sets. I just want to take a second and say, if there are questions in the room, please -- well, I guess you could have your phone ring or raise your hand, and we'll get the mic to you right away. But moving along, you mentioned this earlier. I wanted to dig into this a little bit more, re-entering the independent agency market for personal lines. What's the medium- and long-term goal? What is it that you want to achieve?

Yes. I think the context -- and we've alluded to when we struck a new 10-year deal with AARP that we were going to make an investment in that direct response chassis. I was actually in D.C. last night -- or yesterday, had dinner with the new AARP CEO and just really, really excited about, I think AARP's rebranding and some of their digital efforts and sort of modernizing their membership and thinking about value differently. So I'm so glad that we have that relationship with that contract that I think goes through 2033, somewhere in there.

But the whole premise of making that investment in the AARP direct response business was then to be able to use the same technology, maybe different class plans to come back into the agency channel. And after 3, 4 years of rolling out to AARP, we're ready to use, again, that same chassis and products, Prevail, to our direct -- to our independent agents. And I think the benefit for us is a lot of our independent agents, particularly in small and middle, know us. They know what we stand for. They know our product sets. They know our reputation and always doing things in the right way.

So turning back on an agency -- independent agency orientation commercial -- auto and home, I think, will be relatively straightforward. We have our experiments going right now, our initial rollouts in 2 states, I think Illinois and Arizona. We'll be in 6 states by the end of the year, and we hope to be in 30 states by the end of 2026. I kind of forget what year I'm in.

It keeps changing.

And so you say, the goal. I think the goal is, look, we're not going to try to be the absolute leader in personal lines. But to have a growth orientation with a mature market segment orientation with our brand, products that stand for quality, products that really step into exposures when people need it. We're not a bare minimum company, right? There's a lot of organizations out there that just sell basic $10,000 liability policies so that someone can check the box. That's not us.

We actually want to protect our policyholders. They could be small business policyholders that give us then the opportunity to do their home and auto. And look, if we're able to grow that business from, say, $4 billion of premium today to $7 billion over the next 5 years or so, I think that would be a reasonable goal. It's not growth at any cost. It's growth at profitable levels with key agents that represent our brand and our customers in the way that we would want it. So that's sort of the mission.

Okay. That's very helpful and very thorough. I think the personal auto industry has gotten past the last couple of years of really sustained, really elevated claim cost inflation. Right now, the current risk is tariffs where there's some uncertainty. And I was hoping to just get a sense as to how quickly if and when we get certainty on tariffs, you can implement those pricing changes.

I'm going to ask Beth to answer that. But we've said before, particularly for '25 here, the tariff impact is going to be pretty modest. I think it's -- as we said, it's -- it can be contained within our loss cost picks for the full year where we have a certain amount of prudence. So we'll have to see then how things ultimately play out in '26 and beyond. You guys follow the news like we do. There's still a lot of debate on tariffs, the legality, what levels, how it's all going to work and get implemented. So we'll have to see how that plays out. But I feel like we got the right listening post and right abilities to react pretty quickly.

Yes. I mean I think our teams are ready to react. And there's always a little bit of lag with the way pricing works. I mean in some states, you can obviously implement faster than others. But I think unlike some of the trends that we saw several years ago, which were just like building upon building upon building, like it was hard to get ahead of that. We really see the tariff impacts as sort of a step change, and we'll react to that and then move forward. So I would expect the lag to be contained. And as Chris said, manageable, especially as we think about the loss trends that we're picking to incorporate the fact that we could see some pressure on some of those types of costs.

Okay. Fantastic. And I apologize for not knowing this, but the independent agency auto product, is that a 6-month or 12-month term?

6-month. 12-month home, 6-month auto.

Okay. I want to spend a little time on employee benefits. What are the -- and you've talked about how there's price competition there, and these are multiyear policies. So to the extent that there may be loss trend, it can take longer to be able to respond to that. What are the impediments to changing that and issuing 1-year policies?

I don't think I've ever gotten that question, Meyer.

I'd like to be creative.

Yes. It's very creative. I think the honest answer is customers, particularly the large national account customers want a level of certainty on their costs -- their employee cost and benefits. So, as you know, most of our disability products both short term and long term generally have 3-year rate guarantees. And 3-year rate guarantee doesn't mean the client can't test the market after or any period in there, right? So it's not like it's locked down. But there's a level of certainty from a price side that we've communicated to a client for that 3-year rate guarantee. The life component, you can even get longer and sort of the 5-, 7-year trends, and that's why we've always talked about being prudent with the assumptions over those guarantee periods because you really have to be thoughtful and prudent to give a price that you're willing to accept for that period of time that meets your profitability and your return characteristic.

So, I think, we've done pretty well in getting that right. As I said in the last earnings call, I think our life insurance assumptions particularly coming out of the pandemic were probably too conservative in hindsight. We were getting -- we were pushing for too much rate, that had the impact of slower new business because there was alternatives. I think we've recalibrated at least through '26 and the next couple of years after that, mortality trends that I think will be more competitive. But more importantly still realistic of what's happening from a trend side. And the endemic state that we anticipated is no longer in our assumptions.

Fantastic. And again, if there are questions in the room, please raise your hand. But I was hoping within employee benefits, if you could talk about the various tools you have. And I'm thinking, again, primarily technology tools that enable you to control loss costs to sustain the really good results that we've been seeing.

I would say, Meyer, we have -- we've built a lot of great tools, both in our claims systems, our digital portals, how we interface with employees and employers from an absence size. We've got a new leave lens product that we put out there, which is sort of the new trends, absence management or leave in general. And again, really proud of the capabilities that we've built there and continue to roll out to various parts of the country.

I think the question you're getting at from a technical side of what tools do you have that helps manage claims in benefits, I would say it's that we have a unified claims system. So that's important. We have good data, we have good collaboration with the workers' comp side of the business, particularly in the disability product line where again there's a layer of management that sits on top of both. There's layers of data and analysis that we do on both. But if you really think about it, from the disability and life insurance side, I don't mean to be callous, but life mortality, it's not too sophisticated. It's getting the death certificate and you just got to make sure it's a covered claim.

On the disability side, again, different than the workers' comp side, remember, workers' comp, we actually direct medical care. We don't provide it. It's obviously, we have provider networks, but we're ultimately responsible for directing and paying to get a person that is injured back to work. In disability, whether it be short term or long term, we're replacing income, lost income due to the inability to work, a disabling condition. And again, relatively straightforward, but there's always opportunities to challenge diagnoses, always opportunities to maybe suggest different treatments. So those are all the skills that we have and it's really based in, I think, over 300 nurses that we have embedded in the organization. It's the consultation we get with our medical staff, with our frontline claims capabilities in addition to having a modest claims platform for this disability.

That claims platform, as I understand, is integrated with workers' compensation on the business side?

Yes.

Okay, perfect.

Customers that use our product line in comp and disability get increased capabilities from insights and -- just insights on what's happening with their employee base.

I want to move to Hartford funds and ask because this question doesn't come up a lot, I don't know if it's never been asked. But operationally what's the strategy to maximize this unit's earnings?

I would say, again, just so everyone understands. Hartford funds is '40 Act-based organization that sells mutual funds through independent financial planners and we have 2 sub-advisors. So the sort of the machinery of actually choosing the investments is done by Wellington and Schroders, 2 long-term partners. So the value proposition there is performance matters. They've had a rich history of performing very strongly, both domestically and internationally. They have strong fixed income capabilities and strong equity capabilities in various flavors of equity.

So it is ultimately perform and compete for mind share of the independent financial planner that needs still to use mutual funds in their business. We've morphed some of our mutual fund product into ETFs that tend to be more tax efficient, easier to administer, a little cheaper. But that's just part of a general trend that is happening in the advisory businesses. So to me, it's getting our brand out there, representing Wellington and Schroders' capabilities and performance and solving again for customer needs through their independent financial planner.

Great. And then we've got time for one more question. So I'm going to direct this to Beth, and I'm making the argument for inconsistency sort of. Your share repurchases have been very, very consistent. So you don't really see much of a change when, let's say, the market has been very sour on P&C. And I was hoping you could talk us through that approach and why not be more aggressive when the market is less optimistic.

Yes. I mean, if you look at how we've executed on our share repurchase activities through the years, which have been increasing as our cash flows have increased from our businesses. But quarter-to-quarter, as far as allocating funds are pretty consistent. We think that there is value there within a given quarter. The activity that we're doing within a quarter, the way we set up our plans, they do respond to changes in price, and there is an incentive for our trading partner to outperform what the average share price is. So I think we balance it both ways, but we have felt that having that consistent approach, it's consistent.

You also don't see that when large events happen, we also don't pull back on our program. So if you look at what happened in the first quarter with the California wildfires. I mean, again, the way we're balancing our excess capital feel very good about our ability to still be in the market. And I think that, that has served us well.

Yes. And to be fair, it's easy to model.

Well, we like that, too. Yes.

All right. With that, we have come to the end of our session. Please join me in thanking Chris and Beth for a very informative session.

Hello, and thank you for standing by. My name is Lacy, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2025, The Hartford Insurance Group Financial Results Webcast. [Operator Instructions]

I would now like to turn the call over to Kate Jorens, Senior Vice President, Treasurer and Head of Investor Relations. You may go ahead.

Good morning, and thank you for joining us today for our second quarter 2025 earnings call and webcast. Yesterday, we reported results and posted all earnings-related materials on our website.

Before we begin, please note that our presentation includes forward-looking statements, which are not guarantees of future performance and may differ materially from actual results. We do not assume any obligation to update these statements. Investors should consider the risks and uncertainties detailed in our recent SEC filings, news release and financial supplement, which are available on the Investor Relations section of thehartford.com.

Our commentary includes non-GAAP financial measures, with explanations and GAAP reconciliations available in our recent SEC filings, news release and financial supplement.

Now I'd like to introduce our speakers: Chris Swift, Chairman and Chief Executive Officer; and Beth Costello, Chief Financial Officer. After their remarks, we will take your questions, assisted by several members of our management team.

And now I'll turn the call over to Chris.

Good morning, and thank you for joining us today. The Hartford second quarter results were outstanding, with core earnings reaching nearly $1 billion. This performance reflects the effectiveness of our strategy and consistency of execution that drives our momentum. We are expanding our market presence and growing with purpose. Our strategic investments are advancing innovation across the organization to benefit customers and distribution partners. We are pleased with our year-to-date performance as we have successfully capitalized on market opportunities while maintaining strong margins.

With that, let's take a closer look at second quarter performance. Highlights include top line growth in Business Insurance of 8%, with an outstanding underlying combined ratio of 88%. In Personal Insurance, an underlying combined ratio of 88%, with 8.7 points of improvement over prior year, an exceptional core earnings margin of 9.2% in Employee Benefits and continued solid performance in our Investment Portfolio. All these items contributed to an outstanding trailing 12-month core earnings ROE of 17%.

Turning to Business Insurance. Results were excellent, driven by industry-leading underwriting tools, pricing expertise and data science advancements. Small business delivered an excellent underlying combined ratio with record breaking quarterly net new business premium. Strong written premium growth was fueled in part by double-digit increases in auto and in our industry-leading packaged product as well as a 35% increase in E&S binding premium. We are on a clear trajectory to exceed $6 billion in annual written premium in 2025.

Growth in small is fueled by technology and data science advancements, which provides significant and unrivaled competitive advantages. For example, our best-in-class quoting platform is powered by intelligent automation, real-time decisioning and proprietary pricing models, differentiated by our rich historical data.

Over the years, we have streamlined the submission process with intuitive workflows and advanced prefill of customer data. Our AI-driven underwriting logic suggests coverages based on business type and reflects the judgment of our most experienced underwriters. All of this delivers a seamless and efficient experience, allowing 75% of all quotes across all admitted lines of business to be bound within minutes. This provides a durable competitive advantage for us with our distribution partners. As we continue to invest in AI, we expect [ bindability ] to increase further, driving enhanced efficiency, greater scalability and sustained profitable growth.

Turning to middle and large business. Underlying results were excellent with solid growth. We are focused on maintaining margins and making appropriate risk decisions using enhanced underwriting tools. Middle and large continues to advance the vision of an automated AI-driven underwriting process to enhance productivity and accelerate speed to market. Our strategic investments leverage strength in small business and extend those advantages to middle market. Over time, we believe this positions us well to capture additional market share in this space.

Shifting to Global Specialty. Results were outstanding with sustained underlying margins in the mid-80s and record quarterly gross written premium of $1.3 billion. Our strong competitive position, broad product portfolio and disciplined renewal pricing drove this performance. Gross written premium in the wholesale business grew 8%, supported by growth in casualty, auto and inland marine. Global reinsurance gross written premium grew 15%, driven by strong growth in both U.S. property and specialty casualty lines. With a diverse product portfolio and a constructive pricing environment, we remain confident in the growth potential of Global Specialty.

As for pricing, business insurance renewal pricing, excluding workers' compensation, is strong at 8.1% and is still comfortably above the overall loss trend. Pricing execution remains highly disciplined with low double-digit increases in auto and general liability, including mid-teens increases in umbrella and excess lines. In workers' compensation, although pricing is modestly down from the first quarter, it remains within expectations.

Across Business Insurance, focused expansion in property has driven 12% growth with written premium of $1 billion in the quarter. In small business, property pricing within our package product remained strong as we achieved 15% renewal written price increases. In general industries property, pricing is solid and above loss trends. Large property and wholesale pricing declined from the first quarter by 4 and 8 points, respectively. However, both of these lines have adequate margins and account for less than 10% of total business insurance property. As we continue to grow the property book, we are maintaining a consistent catastrophe risk appetite and in another active CAT quarter, our CAT losses remain below our market share.

Turning to Personal Insurance. Results improved significantly over prior year. Homeowners had an outstanding quarter, highlighted by 17% written premium growth in low 70s underlying combined ratio. Renewal written pricing of 12.7%, driven by net rate and insured value increases continue to support healthy margins and reinforces a strong position in the market. Auto underlying results improved by 9.7 points to a mid-90s underlying combined ratio.

We are now well positioned to profitably grow in both auto and home. This month, we introduced our [ prevail ] offering, inclusive of auto, home and umbrella to the agency channel, unlocking additional opportunities with preferred market customers. We expect to be in 6 states by the end of the year and an additional 15 to 20 states next year. Agents are energized by the enhanced efficiency of prevail, and have expressed strong commitment to promoting these improved offerings as new states come online. More broadly, agents and brokers at our annual summit in May conveyed a clear eagerness to deepen their partnership with us across the enterprise. They continue to recognize our ability to deliver fast, accurate solutions as a key differentiator in the market. With our ongoing investments in AI, digital tools, in overall ease of doing business, we are well positioned to grow alongside our distribution partners and strengthen our collaborative success.

Moving on to Employee Benefits. Core earnings margin of 9.2% was exceptional, driven by excellent life and disability results. Persistency remained strong in the low 90s, while fully insured premium growth was flat, reflecting a competitive market.

Looking ahead, we are particularly excited about our recent partnership with Nayya, which brings AI-powered personalization through benefits enrollment. This collaboration enhances digital capabilities and simplifies the benefits experience for employees through seamless integration with leading HR platforms. Improving benefit utilization enhances employee satisfaction and in turn, helps employers retain their workers. This is another example of how we are advancing our innovation strategy and delivering meaningful value to both employers and their employees.

In summary, second quarter results reflect the strength of our businesses and the impact of ongoing strategic investments. It is an exciting time at The Hartford as we advance our innovation agenda. We are prioritizing practical, high-impact AI applications that augment human talent and drive productivity to better serve customers and distribution partners. Looking ahead, we are confident in our ability to capture additional market share, deliver profitable growth and capitalize on the opportunities ahead.

Now I'll turn the call over to Beth to provide more detailed commentary on the quarter.

Thank you, Chris. Core earnings for the quarter were $981 million or $3.41 per diluted share with a trailing 12-month core earnings ROE of 17%. In Business Insurance, core earnings were $697 million with written premium growth of 8% and an underlying combined ratio of 88%. Small business continues to deliver industry-leading results with written premium growth of 9% and an underlying combined ratio of 89%. Middle and large business had another quarter of strong profitability with an underlying combined ratio of 89.1% and written premium growth of 5%.

Global Specialties second quarter was outstanding with an underlying combined ratio of 84.8% and written premium growth of 9%. The Business Insurance expense ratio of 30.6 improved 0.5 points from second quarter 2024, primarily driven by the impact of higher earned premium.

In Personal Insurance, core earnings for the quarter were $94 million with an underlying combined ratio of 88%. The auto underlying combined ratio of 95.2% improved 9.7 points from the 2024 period, and homeowners produced an excellent underlying combined ratio of 72.7%, which improved 5.1 points. Written premium in Personal Insurance increased 7% in the second quarter, in part driven by steady and successful rate actions. We achieved written pricing increases of 14% in auto and 12.7% in homeowners. Additionally, new business growth continues to be robust in homeowners at 47% over the prior year.

Homeowners policy count continued to grow, while auto decreased as expected. We continue to expect that auto policy count will pivot to growth in 2026. The Personal Insurance second quarter expense ratio of 25.1 improved from the prior year by 1.3 points, primarily driven by the impact of higher earned premium, partially offset by a higher commission ratio due to business mix.

With respect to catastrophes, P&C current accident year losses were $212 million before tax or 4.9 combined ratio points, primarily related to tornado, wind and hail events largely concentrated in the South and Midwest regions. As a reminder, we have a $200 million aggregate catastrophe cover, which attaches when the subject losses and expenses exceed $750 million. Through June 30, losses subject to the treaty were approximately $690 million, leaving $60 million before we reach the attachment point. The aggregate cover does not include losses from the global reinsurance business, which purchases its own retrocessional coverage.

Total P&C net favorable prior [ accident ] year development within core earnings was $163 million before tax, primarily due to reserve reductions in workers' compensation, catastrophes, bond, commercial property and across personal insurance. We recorded $24 million before tax of deferred gain amortization related to the Navigators ADC, which positively impacted net income with no impact on core earnings. We expect the remaining balance of $8 million to be amortized in the third quarter.

Moving to Employee Benefits. We achieved core earnings of $163 million for the quarter. The core earnings margin of 9.2% reflects excellent group life and disability performance. The group disability loss ratio of 68.5% increased 1.4 points from the prior year, driven by short-term disability and a slight increase in long-term disability incidents partially offset by strong claim recoveries. However, long-term disability incidence rates continue to remain favorable to historical averages and to our expectations.

The group life loss ratio of 74.3% for the quarter improved 0.6 points, reflecting lower mortality, primarily driven by the accidental death product. The employee benefits expense ratio of 25.7 increased 1.3 points compared with 24.4 in second quarter 2024, primarily due to higher technology costs and higher staffing costs. Fully insured ongoing sales in the quarter of $107 million increased from $101 million in second quarter 2024, reflecting higher group disability sales.

Turning to investments. Net investment income of $664 million increased from second quarter 2024, primarily driven by a higher level of invested assets and reinvesting at higher interest rates, partially offset by a lower yield on variable rate securities. The total annualized portfolio yield, excluding limited partnerships, was 4.6% before tax, 20 basis points above first quarter 2025. We continue to strategically manage the portfolio, balancing risk while pursuing accretive trading opportunities, and in the quarter, we invested at 130 basis points above the sales and maturity yield.

Our second quarter annualized LP returns of 1% before tax were down from first quarter. Returns have been muted due to market uncertainty stemming from a combination of interest rates and tariff policy, which has limited valuation and sale activity in our private equity and real estate portfolios. However, with stronger public equity performance in the second quarter, we expect limited partnership returns to improve in the second half of the year, with full year 2025 returns modestly exceeding 2024.

Turning to capital management. Holding company resources totaled $1.3 billion at quarter end. During the quarter, we repurchased 3.2 million shares under our share repurchase program for $400 million, and we expect to remain at that level of repurchases in the third quarter. As of June 30, we had $2.35 billion remaining on our share repurchase authorization through December 31, 2026.

In summary, we are very pleased with our outstanding performance for the second quarter and believe we are well positioned to continue to enhance value for our stakeholders.

I will now turn the call back to Kate.

Thank you, Beth. We will now take your questions. Operator, please repeat the instructions for asking a question.

[Operator Instructions] Your first question comes from the line of Andrew Kligerman with TD Cowen.

I saw another impressive quarter with Global Specialty premium grew 9%, combined was again, under 90. Could you remind me of the mix of in-force business in Global Specialty? And coupled with that, where are you seeing the growth? Is it small, mid, large? And what product areas?

Andrew, thanks for joining us. I'll give you a high level and then Mo can maybe give you a little more detail. But yes, it's a broad-based U.S. and international organization, right? The international organization is -- are syndicated [ Lloyds ] that is focused primarily on casualty lines, energy, marine, and you get into the U.S., the major product lines are [ DNO ] bond. There's some specialty lines in there like cyber and EPLI. So it's quite diverse.

And yes, thanks for noticing how well it's been performing over the last couple of years. But Mo, would you add anything?

Also in that line, Andrew, is just short of $1 billion in our global reinsurance business, which is a good mixture of property and casualty globally. But the opportunity set in global especially, broadly, I think we're excited about the global re opportunity. We continue to be rather opportunistic in that space, trying to grow when the market is there, and we feel the market and the reinsurance space is fairly supportive.

The wholesale space in there, again, we feel it's very supportive. I think we've talked about in the past, we have a predominantly construction casualty book, and we look to grow the other lines, including property in the marine. So we feel good growth there. And then you push into markets like [ Lloyds ], and there's good opportunity for there as we double down on the specialty areas we're in.

And I think the last thing, which I think is fairly unique to our specialty business is the idea that we are driving specialty products into our small and middle customer base, and that's a large part of the effort of that entire team is to make sure that we are selling every specialty product that we have to as many small and middle customers as we can.

That was very helpful. And maybe just shifting over to personal lines. I mean it was pretty much strong everywhere, but in personal lines, it sounds like you've kind of gotten to the profitability levels that you need. But I want to get a little clarity on when you want to grow. I think, Chris, maybe in the opening remarks, it seemed like you're ready now, but then Beth kind of mentioned 2026. So when do you think you can really start growing in a meaningful way? And during this year, do you expect, in both auto and home, to see double-digit rate continue in the coming 2 quarters?

Yes, Andrew, I would say both Beth and I and Melinda and working with Mo, now is the time to grow in personal lines. We worked hard to sort of get back to target margins that we wanted in this book. Everyone else in the marketplace is pivoting to growth also. So there will be competitive dynamics. But I think we have some differentiated capabilities, both in auto and home, both in our direct channel, which is our primary business, but also as we roll out our new prevail offering and package and technology to independent agents.

So think we're feeling good. You could see we're growing our home PIF count responsibly with good discipline and not taking on too much CAT risk. And I expect, from a pure number side, to be able to begin to add PIF count in 2026 just given sort of the competitive dynamics in the rest of this year.

And if I forgot part of your question, Andrew, ask it again.

Yes. Just the rate. Do you think for the balance of the year, you'll still need double-digit rate in auto and home?

Yes, I think what I would foreshadow is yes, double-digit rates in the third quarter in auto. We'll probably get to maybe high singles in the fourth quarter. And then home, just given sort of the inflationary pressures and ensure value increases we need to keep up with you, I would expect sort of low double-digit rates in home going forward.

Your next question comes from the line of Elyse Greenspan with Wells Fargo.

My first question is on business insurance. Chris, at the start of the year, you laid out guidance for consistent margins for the year. Halfway through, we're looking like 30 basis points deceleration. We can perhaps call that consistent. So I guess I just want to get a sense of where we sit halfway through the year and just, if there's any changes to your full year guidance for the underlying combined ratio within business insurance?

Yes. Thank you, Elyse. I would say 6 months into this year, I'm pretty satisfied the team is executing, I think exceptionally well. We made a point of emphasis on trying to hold on to margins and keeping up with trend. I think we've done that wonderfully. And I appreciate you of all people. Let's not quibble over 30 basis points, and I think we're pretty consistent with what are expected. And we still got 6 months to go to continue to perform strongly and maybe even outperform. So that's what I would share with you.

And then my second question, within Employee Benefits, which is on the life business. Can you just expand on what drove the strong results in the quarter? And I'm particularly interested just in more color on what you're seeing with mortality.

Yes. I think Mike and -- Mike Fish and I will tag team here. Yes, I thought it was a strong quarter, [ 9 2 ]. That's strong margins. Obviously, it's above our long-term guidance, principally driven by continued strong recoveries in LTD. We put a little bit more rate into our leave book and some of our short-term products that's contributing. And life mortality is behaving very, very nicely for us. So putting it all together, yes, really pleased.

I think the only thing we're focused on, and it's self-evident, so we may as well talk about it, is our top line is a little flat. And I'll give you a perspective that I ultimately made the decision on was, if you look back sort of 2 years ago, really, when we were pricing [ 1 1 25 ] business, which is the big national account season, we probably, in hindsight, took a more conservative view on mortality trends. I thought we were still going to be an endemic state, and we were pretty disciplined in trying to get additional rate into the book. I think that had the consequences of suppressing our life sales, particularly [ 1 1 ].

[indiscernible] of these sales, I think, are holding up well. We're always going to be disciplined there, just given how quickly morbidity trends could change on you in the multiyear guarantees. But as I look at the second half of this year and into '26, I'm exceedingly optimistic about returning to a growth orientation, Mike. And I don't know if you would add anything to color, but I'm pretty optimistic that I think we got our pricing where it needs to be, particularly post pandemic.

Right, Chris. I think you covered that really well. I would just add maybe a couple of things. In the quarter, for life, in particular for the loss ratio, right? And we called out AD&D was we just saw some unusually favorable experience in the quarter, so that ended up being a nice contribution to the loss ratio for the quarter.

And then as Chris noted, going forward, I think we're competing hard for the next 6 months, certainly of this year to finish strong for '25. And then as we turn the corner for the [ 1 1 26 ] selling cycle, I feel really optimistic. We've got a great set of capabilities. We've invested quite a bit from a technology perspective on our offering, whether it's on the absence and lease side or even digital capabilities for our life book. So again, feel good about what we're seeing in market right now and optimistic -- cautiously optimistic as I look forward over the next 6 to 9 months.

Your next question comes from the line of Brian Meredith with UBS.

So Chris, I'm just curious, I wanted to talk a little bit about the commercial property markets. You all are seeing some good strong growth in that market. There's been a lot of discussion on calls already this quarter about big price decreases, 10%, 15%. Doesn't necessarily mean it's unprofitable down 10%, 15%, but maybe you can talk a little bit about what you're seeing in that marketplace? Are you in different areas where maybe you're not seeing the level of competition and kind of the growth you're putting on there?

Yes. Brian, it's Chris. I'll start, and then I'll ask Mo to add his insights. We're overall pleased where we are with our property book, both from a growth side. I think you've seen we put up about 15% growth pricing.

I think in the aggregate, I'll give you some numbers that might satisfy you. I think ex Global Re, for second quarter, pricing was 6.8% compared to -- excuse me, 7.9% compared to 11.8% last quarter. And as you would expect, the large property market and the wholesale property market are primarily driving those decreases.

If I look at Spectrum, our [ BOP ] product, the property component in there, that's up 14.7%, and our general industry properties is at 6.1%, which we think is keeping pace with launch cost trends.

So I think the team is executing well. Not all properties created equal. Our sort of small to midsize orientation, I think, is holding up well, and I think we're executing very strongly, Mo.

Yes, Brian, the I just said, the rates are generally holding up well. Yes, it's trending down but still strong, as Chris talked about. I think, in our core small and middle, I think we still see opportunity. We still see a solid starting point. And as we talked about in the opening script, there is a bit of pressure -- a bit of a larger pressure in larger property in the wholesale lines, where, again, the starting point is good, but we're watching those spaces closely.

Great. And then a follow-up question. I'm just curious, obviously, a big admitted market, but you also have some E&S type businesses. Maybe talk a little bit about the dynamics between those 2. Are you seeing a little more appetite admitted versus E&S? And then also on that topic, we've been hearing some complaints about some MGAs out there and kind of what's your perspective on that in using MGAs?

Yes. Brian, I wouldn't say that there's incredible flow back into the [indiscernible] space. We see it, but I think broadly, our flow into our E&S offerings is strong. And as a reminder, we have the offering in small business, which is our binding space. And then obviously, we have the wholesale brokerage in our Global Specialty segment. And the flows continue to be really strong, I wouldn't say dramatically different than the past couple of quarters. So -- and that's property and liability coming into the E&S space, just in terms of submission volume. So we haven't seen a huge pivot back or that flow has changed.

And then the opportunity set, I think we still feel really good about. And our -- again, in both small business and the Global Specialty case, our ability to grow into those, we feel good about and a pretty broad based.

And maybe the second part of your question, Brian?

MGAs, right? We've heard about MGAs.

Yes. There are some pockets of our business. It's not a major -- we don't feel the MGAs in the core admitted retail, small and middle space, which is obviously where we're at. We don't feel strongly there. But we do feel pockets in financial lines and some of the other specialty lines that are -- I would agree with some of the other commentary that's out there. There is an overcapacity, and there is some disruption that those MGAs are creating, but it's not a huge impact for us in the core space.

Your next question comes from the line of Mike Zaremski with BMO Capital Markets.

Back to the comments and disclosures on the investment portfolio, the annualized investment yield XLPs, the spread there versus the reinvestment yield, obviously, a very bullish kind of spread there. So I'm just curious, the -- that annualized investment yield XLP has kind of drifted in the mid-4s for over a year now despite the reinvestment yields being meaningfully higher. So I just want to make sure I'm not missing something. Over time, it's yield curve stays the same, would the annualized investment yield XLPs kind of glide path up to that [ 5 9% ] range that's in the slide deck or -- or am I missing something because it's just a very healthy spread, much more so than your peers kind of for the investment [indiscernible] over time.

Mike, I'll let Beth add her commentary. I think what's important to know is we haven't changed philosophically our asset allocation models, our model portfolio. You've seen duration be pretty consistent at 4 within the P&C business, 5 in group benefits.

So I'll let Beth get into maybe any special securities that we're adding into the portfolio. But generally, it's steady as she goes and no major changes to our balance sheet philosophy.

Yes. The only thing I'll add, Mike, as you think about the overall yield and comparing that is, as I referenced in my prepared remarks, we obviously felt the impact of lower yields on variable rate securities. So that obviously puts a little bit of pressure on that overall yield to take that into consideration.

And then we also sometimes have other investments, not LTE investments that also can have a little bit of volatility that you can see quarter-to-quarter. But as Chris said, nothing significant that I would point to as a change in our philosophy. Our yield this quarter on our purchases being above the sales and maturity yield, some of that is also just the average life of the securities we purchased were a bit longer than the ones that we sold. So that impacted a little bit as well, again, as Chris said, I wouldn't point to anything significant change overall.

Okay. Got it. A good point maybe on the floating rate, but I need to need to think through more. My follow-up, just pivoting to business insurance. In terms of policy count retention levels in small business and small markets, I just want to -- maybe don't think about it this way, but is it fair to say that over long periods of time, you're kind of trying to hit kind of a mid-80s versus the lower 80s today? Or is that just not -- it just depends on the environment and there's lots -- you obviously give us new business sales and everything else. But is there anything we should be thinking about there in terms of their retention levels currently and how those could trend?

Mike, it's Mo. I would say it's a little bit different between small and middle. In small, you can see our numbers historically in the mid-80s. We do have a dynamic of which is different than the middle space where we have small businesses just going out of business, that's a higher impact in the small space, but -- and we do feel a little bit more churn in the in the middle space. So we do expect an incrementally lower retention in the middle space. But I would say what you see in the IFS is pretty much on plan with where we want to be, and I wouldn't expect anything dramatically different in the future.

Your next question comes from the line of Gregory Peters with Raymond James.

First, in your opening comments, you talked about data science advancements. I think with the small business, you referred to the usage of leading to a 75% buy-in ratio within minutes. So I guess just when you talk about these things, would -- does the 75% represent the final destination or is this some sort of a -- is there some sort of aspirational target in the background you're thinking about? Or maybe perhaps you're thinking about using this technology and spin it over into your middle market business? Just some more color on the technology comments, please?

Yes. I think the last point you made is the key point, I would share is that small has led the way in a lot of innovation, whether it be you want to call it AI, automation, speed, accuracy, using our rich data sets, and we're -- we are working on emulating that in middle market in certain aspects of Global Specialty. So that is the playbook.

I would say beyond 75% -- look, I could be flippant and just put out 100% would be a good number, too. But I think it's realistic that there always will be some deviation that will require human intervention, particularly as maybe you go up from a larger scale, a larger account side in small. But again, very pleased where we're at. Obviously, it's a key differentiator. And just now, we're committed to leading the way in AI, particularly as we think about underwriting, claims and overall operations.

But Mo, what would you add?

Greg, just to add from an underwriting perspective. In the space that we compete in the small and middle space speed really, really matters to get an efficient answer back to our agents. So we are finding that the speed that we've accomplished in small, that's 75% of everything we quote, and getting that closer to 90 over time is a hugely competitive space to be in, just because that time is real money because people are just trying to get through submissions and maintain the margins that are hard to get in the small space. And again, we think that speed is equally as important into the middle space. So we think this is a competitive advantage in both segments today that we'll look to grow in the future.

Okay. I know the adverse cover you used all of it as it relates to the annual reserve review in the [indiscernible] and tried to shy away from modeling questions, but it seems appropriate given that you're going to have a year-end review and maybe it might be appropriate for you to revisit how you want us to -- or how you would like to frame up the reserve review as we go into the second half of the year and what we should be thinking about in our models?

I'm going to refrain from exact guidance, but I would say a couple of points. Obviously, you know the bookkeeping that we do on any ADC that we begin to get recoveries from, which goes through net income as opposed to core. So the toggle between core and net income on some of these runoff blocks, I think, will be important. We're not projecting -- we have not given you a time frame when we expect any recoveries on the [indiscernible], the ADC, but they will come at some point in the future.

And I would say, without knowing the data in this year's study, I suspect we're not going to see anything dramatically different than we've experienced in the past. There's still lawyers out there that are pressing for higher settlements. They're still environmental exposures. There's [indiscernible], there's [indiscernible] still happening in the marketplace. So I don't know what to say, Greg, other than I don't see a lot of change.

Your next question comes from the line of Alex Scott with Barclays.

One I had was on small business. I guess the underlying combined ratio was still very good at 89. It went up 2.2 points for the middle and large improved by 0.5 point. I guess that was just maybe directionally a little different than I would have guessed, given I think the small business pricing is more definitively in excess of loss cost trend versus middle and large at this point. Any help you can provide us in just thinking through like the year-over-year in those areas of business insurance?

Yes, I'll start and Mo can add. I think it's pretty simple. Last year, I think in small, we experienced a real non-CAT weather benefit that didn't reoccur this year. And if I look at our sort of actual results to assumptions on property, we're right on expectations of where we are, maybe [ 2/10 ] ahead with nonweather CAT benefit. But I think it's just a compare in both middle and small, I think, are performing really well with our property books.

Yes. Actually, we're right on expectations in terms of where we want to be.

Yes. Understood. It was more the comps on. Second question I have on workers' comp. I just wanted to get a feel for how things are trending there? If there's any kind of impact embedded from California and hopefully, we get some relief from that as the pricing comes in next year. So I'm just trying to understand if that has been a headwind sort of embedded in business insurance that I should think through.

And just also, like I think the comments on pricing ex workers' comp were that they were comfortably ahead of loss trend. But just wondering if you can say the same including workers' comp.

Well, I think we always exclude workers comp because it's sort of its own ecosystem and its own dynamics. I would just clarify, California is actually a very good state for us [indiscernible]. So you should not be thinking of California as a problem for our book in California. California, again, is unique in a lot of ways. But our book is performing exceedingly well there.

I think the trends that I spoke to first to second quarter is pricing only. And we have not changed our loss picks in any of our product lines compared to where we thought we would be. So as much as pricing deviates maybe a little bit in comp here, it hasn't affected our pick. So the first quarter, we talked about all-in sort of pricing up 0.3 point, probably turned negative this quarter in about 0.5 point range. But again, unaffected any reported results because we have a -- we made prudent overall loss picks and assumptions that are still holding.

So that's the only additional data point I would give to you, but I'll look to Mo and say anything else you want to share with Alex?

I would say, again, I think it's important to note that pricing in comp in both small and middle is right on expectations as well. So there's nothing going on in the quarter that's out of pattern for what we expected to have. And in terms of California, again, we are in great shape to Chris' point from a profitability in California. And we've been watching the cumulative trauma for some time. So I don't think anything is terribly surprising there either.

Your next question comes from the line of [ Wes Carmichael ] with Autonomous Research.

On employee benefits, Chris, I wanted to follow up on your comments to a prior question that I thought were interesting in terms of pivoting towards a focus for growth and maybe 2026 in the life product. I guess if I think about that in the context of your margins today being pretty well in excess of the targeted range, I'm just wondering if you're happy to sacrifice a bit of margin in order to get some growth in EB, and if you think that should come back to your 6% to 7% target range fairly quickly?

Thank you for the question, Wes. It's hard for us to think like that. So I'll just be honest. I mean we're pricing products with the 6 to 7 view of, I'll call it, prudent assumptions that obviously has a range around it from an outcome perspective. And you would say, the last 3, 4 years, we've been on the benefit side of the range of outcome.

So remember, particularly in life products, I mean, we're making 4-, 5-, 6-year guarantees and that's a long-term commitment with potentially a lot of variability around mortality outcomes. So what I alluded to, though, is that when we looked hard at our endemic pricing coming out of COVID, we've stripped that out now, so I would say we're pretty clean from a historical trend side. And I think that will allow us to be equally competitive, maybe if not more, while not just sacrificing price and rate. But Mike Fish, what would you add?

Yes, Wes, I would just add maybe just a couple of points there. I'd say when you look at our product set, we've also -- we don't talk about it a lot, but we've got some nice products in our supplemental health line, and we're seeing nice low double-digit growth in those lines, and we'll continue to work hard at growing that book of business. It is a smaller book of business for us. But again, we'll push hard into that market.

And then secondly, as Chris noted on the pricing front, have you think, too, about where our margins are coming in. When we look at our renewal business, in other words, in-force and what we're doing right there, versus new, right? So on renewal, we're really working hard to maintain those higher margins. So obviously, we're pleased with the results. We've got persistency that's in the low 90s, so when we're putting that together with the profitability of that in-force book very, very favorable. And then Chris noted going forward on new business, we're going to compete aggressively. We feel really good about where our picks are on both the life side as well as disability.

And then lastly, I would just add, we've talked a bit about the paid family medical leave product line and we've put a little over 20 points of rate into that product line in the first and second quarter, and we've maintained strong persistency there as well. So we'll keep a close watch on utilization rates. But when I put that all together, I feel really optimistic about our growth outlook for the next 12 months or so.

Great. No, that's really helpful color. I guess pivoting to personal auto. There's been a couple of headlines again over the past few days around tariffs. Just wondering if there's any updates on your thoughts on tariffs and I guess, relatedly, if the AARP relationship, does that have -- is that cohort or demographic influence how tariffs might impact The Hartford relative to peers in personal auto?

What I would say, Wes, is actually I'm feeling a little better about tariffs and particularly on auto parts and new cars, given what the administration was able to agree with Japan and Europe. So everything that we've talked about last time is sort of being a modest impact for 2025 and any tariff increases that can be absorbed in our loss picks there and are relatively minor, I think it's holding.

Obviously, watch area for the industry is just what happens in '26 and sort of beyond. But I'm feeling actually a little more optimistic about the impact on at least a auto tariffs just given the recent agreements.

Your next question comes from the line of Rob Cox with Goldman Sachs.

So the expense ratio improved meaningfully in the quarter across both business insurance and personal insurance. Is that just operating leverage? And how should we be thinking about the sustainability of that, noting that you guys might have some ramping of the personal lines marketing spend?

Yes, I think you got it right. I mean it's good operating leverage with the earned premiums that's coming through, given all the rate that we put into the book. I would say just on personal lines, if there's a call out, we probably front-loaded advertising a little bit in the first half of the year, but we're still planning on a 10% increase in our overall marketing spend in personal lines this year. So there's nothing really dramatic that's changing there. And I think the continuous improvement mindset that the organization has that has been led by Beth is producing efficiency gains across the organization. So I feel pretty good about where we're at expense-wise.

Got it. That makes sense. Just pivoting to the small commercial growth, the $6 billion in premium for 2025. It looks like growth would need to accelerate just a little bit in the second half to get there. Are there certain product lines where you think there might be a stronger opportunity for growth in the second half?

Right. It's Mo. I would not say there's a different story for the second half of the year. I think we got still really favorable about the small business space in total. We continue to bid our time on comp. As you can feel, that's relatively flat for us. But outside of that, our package business owner product, the auto, E&S binding, we're still very favorable on the growth prospects across small business.

Your next question comes from the line of David Motemaden with Evercore.

I just had a question on workers' comp and medical severity. I know you guys haven't changed the 5% severity assumption that you guys are embedding in the [ picks ]. But I think about a year ago, you had talked about observing an uptick from about 2% to 3%. So I'm wondering what you guys are observing now? Any sort of uptick or just an update there would be helpful.

Yes. I think you got it right, David. It's in that 3% range. Still, again, well within our 5% picks. I don't -- I know there's always discussion on medical -- broad-based medical inflation. But again, we continue to -- and you know the workers' comp industry is somewhat insulated from broad-based medical inflation. So feel comfortable. It's always a watch area. We got our listening post. We've got our data analysis. We'll take corrective action if need be. But I think it's fairly well under control.

Got it. Helpful. And then maybe just a follow-up just for Business Insurance as a whole. I know last year, you guys spoke about having -- I think it was about 1.5 points of favorable non-CAT property experience versus plan. It sounds like that continues to come in maybe a touch better than your expectation. I guess, are you guys -- I guess, how do you think about that sort of non-CAT weather plan? And how do you consider changes that you guys have made in terms of terms and conditions and other factors that maybe means that, that could be a little bit more durable?

Yes. Maybe -- maybe we weren't clear before or I wasn't clear. But I would say there is no, through 6 months, major favorability in non-CAT weather, maybe a small amount, I think I mentioned [ 2/10 ]. So I think we're right on our plans across, again, BI with our property underwriting results.

But Mo, would you add anything?

Maybe a little bit of texture, David. I think middle is a little bit better than expectations and small is right on expectations. And I think what gives us hope is where you went. The terms and conditions broadly from our season in our portfolio, the terms and conditions are really holding up well, deductibles across the space. So I think we feel -- again, I don't know if it's durable or not, but it bounces around a little bit and -- but the terms and conditions that give me hope that, again, our expectations should be within reach.

Your next question comes from the line of Paul Newsome with Piper Sandler.

Just maybe one additional question. If you have any thoughts broadly on the whole social inflation issue and litigation finance challenges? A lot of your peers talking about this quarter. And wondering if you have any thoughts yourself?

Yes, Paul, I think we spoke about it equally in the past. It's still a fact of life, still a tax. It's still a burden. It's not fair. It's not what our court system was intended to. But I'm also equally optimistic that more and more people across the industry and businesses are getting involved and trying to take a legislative corrective action.

We work through our trade group and a lot of those discussions, but there's individual contributions and discussions. So it's still alive and well. And I think the overall trends of sort of the tactics involved are continuing. I don't see any real differences in our trends, whether it be time bar demands, whether it be earlier representation with lawyers on sort of simple claims.

So yes, but there has been progress in certain states, particularly in the Southeast that have enacted reforms that have been signed by their governors, and we'll continue to sort of fight the good fight and really highlight this.

I think it's getting a little bit more national attention, particularly in D.C. and I was really actually encouraged by former Attorney General Barr's comments on the need just to put some limits on these injury claims, including noneconomic limits. So it's getting the attention and hopefully, legislation will come because that's what's needed to enact it at a state and/or a federal level.

Do you have any sense of any way that you or anybody else could measure the impact of litigation finance?

Are you being serious? You measure. I mean, it's showing up in our loss trends. I mean showing up in our allocated loss expenses. I mean we're spending more time and money on something that turned our judicial system into a gambling system. Are you serious?

No, I apologize. What I mean is this, there's obviously some underlying social inflation issues that come from court changes and other things. And then there's pieces that are coming from the litigation part in particular. And I was wondering if there's any ways to sort of bifurcate what's purely because of the litigation finance stuff or from other sources? That's the question.

Okay. I hear you. Point taken. Yes, there's a lot of lawyers inflating sort of average cost and then there's sort of the nuclear verdicts change. I think we have -- and I know the industry has got measurements on both. I don't have them in front of me, but both are contributing to the problem, Paul.

Your final question comes from the line of Bob Huang with Morgan Stanley.

All my questions on BI have asked, so I'm going to shift a little bit to the personal line a little bit. You talked about growth. You clearly have a very strong combined ratio in the mid-90s core combined ratio in the high 80s. Under any historical environment, you certainly are very well positioned to grow.

But I just want to understand -- get a better understanding of your competitive environment. It feels like multiple carriers in the personal line also have similar underwriting profile at this time. Can you maybe just help us think about, as you pivot into growth, what is the competitive dynamic looks like for homeowner and for auto? Is it easier for you to grow right now given your combined ratio? Or is it actually not that easy? Just curious your view on that.

Yes. Thank you, Bob. I'm going to have my point of view, but I'd like Melinda Thompson to add hers who runs personal lines. I think it's not that easy to grow or else we would have been growing maybe at a faster historical rate because there is good competition.

Our primary channel right now is still the AARP endorsement with the direct response models, which we think does give us competitive advantage to really helping mature customer with policy decisions, with limit discussions, with how claims would be handled. So that's important to that cohort.

But we're taking sort of the chassis that we rebuilt in that area and trying to apply it through independent agents, particularly with a similar sort of mature market approach. And we're quite confident with our independent agents, just given our historical relationship with distribution partners that sell both personal and commercial, particularly small insurance.

So again, we think from a relationship side there, we think our product is competitive and has the right features and benefits that customers would like over a longer period of term but it is still a competitive environment. But Melinda, what would you add?

Thank you, Chris. I would agree with you. The environment is healthy and a number of competitors are aggressively positioning for new business in the marketplace. And so certainly, as we think about our overall position, growth is going to require 2 things. One is retention improvement and then new business. And so as I think about moderating rate that is -- that we will experience throughout '25 and into '26, that pressure on retention will also moderate.

And then we have been implementing a number of initiatives to stimulate new business. Chris mentioned the agency and what we are doing there, the reengagement efforts have meaningful in our new business. And on top of that, we've implemented some rate and non-rate levers, the marketing spend. So all of those things together are really about supporting growth.

Got it. Really appreciate that. But maybe just a follow-up on that point. Would you say that maybe auto and like -- is there a significant difference between auto and home in terms of the competitive environment? Or would you say kind of similar in terms of being both a competitive environment today?

I would acknowledge some differences there. Certainly, home comes with capacity constraints. And so there is, I would say, some dynamics that are a little bit different than auto that play out. We are growing home. We feel very good about how we underwrite that book, how we performed over a sustained period of time and how we are positioned. So we are growing that line. And the challenge certainly on auto, the amount of rate that has come through auto is what's pressuring the retention there a little bit differently.

That concludes our Q&A session. I will now turn the conference back over to Kate Jorens for closing remarks.

Thanks for joining us today. Please reach out with any additional questions, and have a nice day.

This concludes today's conference call. You may now disconnect.