The Hartford Financial Services Group, Inc. Q2 FY2026 earnings call

• Overall Corporate Strategy

  • The Hartford delivered strong Q2 2026 results, with core earnings of $945 million and a trailing 12-month core earnings ROE of 18.7%
  • Announced an agreement to sell non-core Hartford Funds to Wellington Management, monetizing a long-term non-core investment
  • Board of Directors approved a new $4.2 billion share repurchase authorization, and will continue balancing business investment, growth, and returning excess capital to shareholders
  • The company remains well-positioned to deliver strong returns across property and casualty and employee benefits segments

• Business Insurance

  • Double-digit growth in small business package and ENS binding, driven by investments in automation and digital quoting capabilities that attract brokers consolidating business with fewer underwriting partners
  • AI-enabled underwriting tools are improving workflow speed, productivity, and risk insight access, with underwriters retaining final decision control
  • Renewal pricing (excluding workers' compensation) was 5.8%, with commercial auto and general liability pricing remaining strong above loss trend, and umbrella/excess achieving the highest rate increases; pricing moderated for large property but held steady in mid single digits for small business and middle market property

• Personal Insurance

  • Auto earned pricing continues to exceed loss trend, driving combined ratio improvement; home results are strong supported by consistent underwriting and low double-digit pricing
  • Elevated new business competition is impacting overall growth; the new contemporary agency product offering is now live in 23 states, on track for full rollout
  • The direct channel (via the AARP partnership) focuses on improving customer acquisition and retention for the mature market

• Employee Benefits

  • Strong fully insured premium growth driven by excellent sales execution, low 90s persistency, and ongoing technology investment, maintained pricing and underwriting discipline
  • High demand for integrated absence and leave management solutions, which differentiates the company's platform in the market; the firm is extending these capabilities from large enterprise clients to more small and mid-sized customers

1. Business Insurance: Core earnings of $695 million, 5% overall written premium growth, and an underlying combined ratio of 89.3. It contributed 73.5% of total core earnings. Breakdown by sub-segment:
   • Small business: 7% written premium growth, 86.5 underlying combined ratio (improved 2.5 points year-over-year)
   • Middle and large business: 4% written premium growth, 95.3 underlying combined ratio
   • Global specialty: 4% written premium growth, 85.8 underlying combined ratio
2. Personal Insurance: Core earnings of $128 million, 7% year-over-year written premium decline, and an underlying combined ratio of 86.3 (improved 1.7 points year-over-year). It contributed 13.5% of total core earnings. Breakdown:
   • Auto: 10% written premium decline, 1.9 point year-over-year underlying combined ratio improvement, 5.5% renewal pricing increase
   • Home: flat written premium growth, 10.4% renewal pricing increase, strong results
   • Agency channel: 7% year-over-year growth
3. Employee Benefits: Core earnings of $139 million, 7.4% core earnings margin. It contributed 14.7% of total core earnings. Breakdown:
   • Group life: 74.2% loss ratio (flat year-over-year)
   • Group disability: 74.8% loss ratio (up 6.3 points year-over-year)
   • 25.2 expense ratio (improved 0.5 points year-over-year)
4. Investments: Net investment income of $800 million, up 22% year-over-year. Annualized portfolio yield (excluding limited partnerships) was 4.7% before tax, up 20 basis points from Q1 2026. Annualized limited partnership returns were 7.6% before tax, up from 5.1% in Q1 2026.

• Full year 2026 net investment income is expected to increase year-over-year, supported by growing invested assets, with overall portfolio yields expected to remain broadly in line with 2025 levels
• Limited partnership returns for the second half of 2026 are expected to remain generally consistent with the first half 2026 average annualized return
• The company expects to increase quarterly share repurchases to $475 million for the remainder of 2026
• Middle and large business full year 2026 underlying combined ratio is expected to be roughly 1 point better than the year-to-date 93.3 level, as non-catastrophe property losses are expected to even out in the second half
• The company remains on track to hit its 2027 year-end expense ratio targets for business insurance and employee benefits; hitting the 2027 personal insurance expense target is a substantially higher bar due to competitive and growth dynamics, but the team remains focused on achieving it
• Small commercial growth and margins are expected to remain strong, supported by differentiated digital and underwriting capabilities

• General liability saw adverse reserve development across multiple accident years, driven by elevated frequency of large losses in excess casualty and umbrella lines; commercial auto saw adverse reserve development for 2023 and 2024 accident years driven by higher severity than previously estimated, linked to increasing attorney involvement in claims that were historically lower-severity
• Group disability loss ratio increased 6.3 points year-over-year, driven by higher claim incidence across short and long term disability, lower recoveries compared to a strong prior year, and higher utilization of paid family medical leave (PFML) in both newly launched and existing state programs
• Elevated competition in middle market commercial lines, particularly for general liability and workers' compensation, is expected to impact growth in the second half of 2026
• The personal insurance segment faces strong competitive pressure, particularly in the direct channel, which creates headwinds for growth and hitting 2027 expense targets
• Non-catastrophe property losses experienced normal quarter-to-quarter volatility, with a few large fire losses elevating middle and large business results in Q2; further geopolitical and economic volatility could impact limited partnership returns in the second half of 2026

Q: Reserve increases for general liability and commercial auto this quarter: are these one-time adjustments or a chronic issue, and what is the current reserve adequacy for these lines?

A: Adjustments were modest relative to the overall $6.5 billion GL reserve base. GL reserve increases reflected elevated large loss activity across multiple accident years, while commercial auto increases stem from higher attorney involvement in historically smaller claims driving higher severity for recent accident years. Workers' compensation continues to see consistent favorable reserve development, and underlying performance of prior year reserves remains strong overall.

Q: Group disability's higher loss ratio: will this stay within long-term targets or trend higher over time, and what loss trends are you observing?

A: Disability performance over the last two years exceeded long-term expectations, and current results remain within the 6-7% long-term margin target. Higher short-term disability incidence is being seen across all diagnoses, with a notable uptick in behavioral health claims that carry higher severity. Higher PFML utilization is occurring in both new and existing state programs, but pricing is being adjusted to match trends, and the business continues to generate strong double-digit returns on tangible equity.

Q: How is pricing holding up across commercial lines segments, and should we expect deceleration in small commercial pricing going forward?

A: Overall pricing has held up better than expected across most segments the company participates in. Small commercial renewal pricing held steady at 7% quarter-over-quarter, with mid-single digit pricing for small and middle market property, which remains profitable and attractive for growth. Pricing deceleration is concentrated in the large property segment, where the Hartford has relatively low exposure, and competitive pressure is only starting to increase modestly in the middle market space.

Q: How does the Hartford Funds sale impact the new $4.2 billion share repurchase authorization, and is the size of the program consistent with your capital strategy?

A: Expected proceeds from the Hartford Funds transaction were incorporated into sizing the new repurchase program, which represents a 27% increase over the prior authorization. Approximately 15% of the incremental authorization comes from Hartford Funds sale proceeds above regular dividend income the firm previously received, with the remaining 12% coming from organic business growth. The program balances returning excess capital to shareholders while supporting ongoing organic investment in core insurance operations.