Hartford Financial Services Group Stock

Okay. Good morning. We are going to do our best to stay on schedule today. I'm very excited to kick off day 2 of the conference with Beth Costello, CFO of The Hartford. Thank you very much for joining us. I usually start off asking if there are opening comments or anything that you wanted to hit on before we get started.

Yes. Well, thank you. First of all, I love being here. Very happy to be here. today. And I'll just make a few comments, which are very consistent with comments that Chris and I have made in the past, which is we feel really good about how the Hartford is performing, how we started the year, the first half of the year, I think our results speak for themselves, very strong.

We continue to focus on delivering high ROEs for our shareholders. deploying our excess capital. And when we look at all of our businesses, really happy with how each one is performing and the outlook going forward. So again, happy to be here.

Okay. Fantastic. I'm going to start maybe counterintuitively on the employee benefit side rather than P&C just because you've got this recent acquisition coming from Equitable.

And two questions. One, I was hoping you could elaborate on the technology because in the press release, you called that out, like what does that provide? And then the second, maybe more mundane part of the question, legacy Hartford's employee benefits results seem to have been better than Equitable. What's the pathway to getting them to Hartford-level returns?

Yes.Well, great question. Well, first of all, we're very excited about this acquisition and excited about the people that will be coming with it. And as you point out, the technology is something that we found very intriguing. So we've talked before that when we look at our Employee Benefits business, obviously, a very strong national accounts player. But getting into the under 500 lives and below has been an area of focus for us.

And technology is a really important part of that. And so the technology platform that comes with this acquisition, we feel really, will position us well in that marketplace. And I would have you think about the technology as sort of as underwriting platform. So it's from quote to buying, to installing the cases and so forth, access from a digital perspective for employers and employees being able to access the information. So it just really is a full suite.

And as I said, to really compete in that part of the marketplace, we felt that, that technology was really important, also comes with a dental and vision product set, which again, when you get into the lower part of the market and Employee Benefits, those product lines are very important.

So team is really excited about it. And as I said, we've talked about this being an area of focus. So it really was a way for us to accelerate that strategic focus that we have.

As far as overall profitability, I mean, obviously, bringing it into our ecosystem, applying our claims, tools, our efficiency initiatives that we have, all of that will put us in a place to bring the profitability of that business up over time. So the team is really excited about it. And as I said, really excited about the employees that will be joining us as well.

Okay. Fantastic. You mentioned some of the ancillary products that they have. Can you talk a little bit about the cross-sell prospects, whether it's with the current employee benefits group or maybe even on the P&C side, how those new product sets can be disseminated more broadly?

Yes. So as it relates to the acquisition itself, cross-sell was not a big part of the equation as we thought about it. But more broadly, and again, as we think about going into the smaller end of the employee benefits market, coupled with, obviously, our strong presence in small business on the P&C side; we see some natural synergies there over time.

Nothing sort of immediate, but again, over time, when you think about us competing for small business on the P&C side and being able to offer this product set on the employee benefit side, we would see some benefits to that over

Okay. Do you have a sense in terms of client overlap with the current small business on the P&C side?

We do not. So again, until we close, as you know, like a lot of times you don't get that level of information, so once we close, obviously, we'll have a better insight into that. But again, as we think about the growth potential over time, we would see that there should be some overlap there.

Okay. Fantastic. And then this question is going to come up later also. But in terms of employee benefits, how do you think about scale? Obviously, this helps a little bit and giving you another customer segment to target. But fundamentally, where are you relative to competitors in terms of adequate scale and what's next?

Yes. Well, if you step back and you look at our Employee Benefits business and where we rank overall, so from a disability -- fully insured disability, family lead perspective, we're number one. All in, when you add in all product sets, we're #3. So we definitely have scale in employee benefits.

As I said, the -- our market set tends to skew to national accounts. And so this opportunity and sort of the -- what we call priority business, which would be less than 500 lives, is definitely an area of focus for us.

So we feel very good about the scale that we have. It has allowed us to, I think, develop very strong capabilities kind of across the board. It's allowed us to invest in the platforms, which, again, as we've talked about before, is really important, especially in today's world as technology becomes more and more important.

So again, overall, I feel very good about our ability to compete in this space. And we see ourselves as a market leader.

That's helpful. I'm going to move to P&C now, but I want to make sure that everyone in the room has the opportunity to ask whatever questions they want. So if you do have a question, please raise your hand, and we'll get a microphone to you.

Switching to P&C, one of the goals of our conference this year is to really concretize what leading companies are doing in the realm of artificial intelligence, both in terms of to the extent that you're comfortable, specifics about how things are changing operationally and where those of us on the outside -- maybe I'll say where and when, those of us on the outside are actually going to see financial results that could not or would not have been achieved without these investments. So it's a very broad question.

That's a very broad question. We have...

So we can take the next hour or 2 to go through that.

Yes. So there's a lot in that question. So if I don't get all the pieces, you'll go back to me and remind me. But stepping back from it, when I think about the question on how are the benefits of AI going to show up or where they're going to show up, my view is it's going to show up across the board.

So we've talked about before that when we think about and we focus on our AI investments, it's in three areas: Underwriting, claims and operations. So broadly. And we have a very robust invest agenda across all of those areas. So we're continuing to invest in this technology.

On the underwriting side, first of all, remind people that when you talk about AI, and there's lots of ways to define it, but I would point to our small business platform if you want proof of our ability to execute.

So as you know, 75% of new business quotes that come through in our small business business are quoted on the glass, no human touch. We've been doing that for years. that is powered by AI. And we've done that and achieved phenomenal profitability.

So as a proof point of like where can you see it, you can see our growth rates in small business. and you can see our underlying profitability, all of that being fueled by these engines, and we think that we have the ability to continue to improve that quote ratio, and focus on that.

We've talked about kind of bringing some of that automation into the middle and large business. And you've heard Mo talk about initiatives that we have there, where we're automating parts of the underwriting process.

What are the benefits that we'll see with that and what are the benefits that we are seeing? Well, one, it will improve underwriter productivity. Two, it also allows us to provide quotes back to indications of of price back to agents and brokers more timely. And we can see in our data that the faster that you're able to respond, your hit ratios are higher. So we'll see that over time.

And we also think that when you can automate parts of the underwriting process, you also have the opportunity to reduce what we've often referred to as leakage in the process. So what do I mean by that?

An underwriter doing a lot of different things we're supposed to be doing steps 1 through 12, people are people. Something gets missed that might result in us binding a risk that otherwise maybe we wouldn't want it to or someone's bias may get into the mix and have them look at a particular risk and decide not to quote it because of prior experiences, so we have a missed opportunity.

And Mo has spoken about in the past that we've looked at this leakage concept and believe that if we can automate processes, we would reduce that. So where will that show up? It can show up in top line, it can show up in outcomes on claims if you're better able to match price with risk. And so we're implementing these tools as well.

Also frees up time for our underwriters, so they can spend more time working with brokers and working with agents to produce additional opportunities. So we think that, that will also increase throughput over time. So it shows up in the top line, it shows up in the claims process and also in that example, would show up in an expense ratio because you can have more business done per underwriter, and so that improves operating leverage. So a definite focus there. And those are just a couple of examples on the underwriting side.

On the claims side, things that we again can do to automate intake of claims information. provide quicker responses to first notice of loss and things of that sort, we think will, over time, improve outcomes, also will improve productivity on the claims side. So same thing. There's a component of the loss ratio. That's the claims handling expense. And so again, if you can get more throughput done, you'll see -- we'll see benefits there as well.

Also, we've talked about this before as well that we've done a lot as it relates to ingestion of claims information, specifically, we've talked about medical records and being able to ingest those, summarize what can sometimes be pages and pages of medical records to again help focus the claims handler on what is most important, which ultimately will result in better outcomes for our insureds and ultimately, we believe better loss outcomes.

Also, we use AI to evaluate on medical bills as well that we're being charged what we should be charged. Especially in the workers' comp area on the medical side. the fee schedules are very complicated, differ state by state, what is covered and what the costs are.

So again, having an ability to automate that to ensure that we're paying the appropriate price we've seen benefits on that as well, where we've talked about before that for every dollar that comes in from a medical spend, we're probably spending $0.30 to $0.40. So all of those pieces show up in the result on the claims side.

And then finally, on the operations side, so where we can continue to digitize the way that our customers do business with us. You could look at it as self-service, but you can also look at it as being able to get customers answers faster, improving the customer experience. We've just put in AWS what we call customer experience platform, so how customers come to us, whether by phone or digitally.

And again, that improves the customer experience, it proves productivity. All of those things, I think, again, will show up in retention, will show up in expense ratio. So it's a long way of saying. It has been showing up in a lot of different ways. It will continue to show up in our results.

And I believe that companies that have the ability to invest like we do, will ultimately have greater success because it's just going to continue to improve the overall process. And I think make agents make brokers, make ultimate customers want to do business with us.

And I have one more thing to -- sorry. So we talk a lot about the spend that we have. And so our IT invest spend a little over $500 million a year. But even in that spend, we are getting efficiencies. So what we can do with $500 million today is much more than we could have done with $500 million 3, 4 years ago.

So we're investing in the productivity of our technology as well, which is allowing us to do more and not have to increase the dollars as much as we would have had to in the past to get some of these results.

Okay. I'm glad there was a long answer, honestly, because I think it's important to like highlight all of the details. And again, really, I think we're at the point where you're seeing enough success from what you're doing that we can actually talk about is no longer this theoretical contract for sometime in the...

It is. And I think the caution is like as I said, it's not going to be one particular area that you see it. To me, it's the whole ecosystem that we're looking at relative to our business model. So the benefits that we're going to see are going to show up across the board and I believe will ultimately position us for success. .

Conceptually, just as a follow-up, is there any way of -- I mean, I guess, there are a couple of indications. But how do you think about compared -- and you made a point that's really important, and that is companies with the resources and probably the data systems to invest in this are going to pull ahead.

How do you track that? In other words, the premise of the question is you have a lot of smaller competitors, they're not public, we don't see them here. But from my perspective, there's no way they can keep up. How do you see that in terms of the easiest wins? Because they are -- I don't mean this is a personal criticism, but they're weak competitors.

Yes. I mean, I think, ultimately, where it's going to show up is an increase in market share. And again, I'll go back to our our Small Business division where you can see the gains that we continue to have there and the growth that we have there. And I continue to believe that, that comes from the execution that we have, the ease of doing business with us.

We've talked about that before that that's so important in that segment of the market. And again, their overall results are just outstanding. So I think that's why we will see it over time.

Okay. I'm going to be moving away from AI because while it touches everything, there are other things to talk about, but I wanted to see whether there are questions in the room on that. And if not, I'm going to move to the reserve side because that was an area of a modest disappointment in the second quarter.

You talked about being a few instances on the other liability current side. I was hoping we could get a little more detail on what you saw and more importantly, your confidence in it being addressed.

So yes, so I would say, and I think I characterized this when we reported our results is we had some modest adjustments that we made in general liability and all of it in commercial auto. And I think in the context of the overall reserve base, very modest for those lines. And then obviously, when you look in total, our reserves continue to be in a very good place.

And yes, I mean, we've talked about this before. I mean we're continuing to watch trends and liability lines as it relates to what is characterized as social inflation. In the liability area, on the occurrence side, which is most of where our general liability reserves are; was really in the excess and umbrella areas where we were just seeing elevated activity.

And when we do our reserve reviews, we're doing our reserve reviews on our liability lines by subline. And so we look at the excess lines, we look at the umbrella lines, we look at it by the various segments, we're kind of doing our grounds up. And as we evaluated it and we looked at just some of the increases we were seeing in multiple areas, multiple lines, we felt it was prudent to make some adjustments.

I think I said these words on the earnings call that these are lines we're going to be cautious about. And there are modest adjustments and felt it was the appropriate to do and looking at the trends that we saw and incorporating that into what we view going forward.

On the commercial auto side, there again, that was in the more recent years. When we looked at the severity associated with some of the claims that we were seeing was that claims that in the past had settled for lower amounts, we're creeping up on the severity side. So again, we felt it appropriate to take some actions there.

And we continue our process. It's not just our actuaries. We've got our claims folks in the room as well. We've got our business leaders in the room as well because we want to make sure we're incorporating anything that we're seeing then into what they're -- what the underwriting side is doing as they're in the marketplace and again, making sure that we're getting the rate that we need to offset the trends that we're seeing.

So it really is a cycle that we go through to look at all of the pieces and ask ourselves the questions on okay, what is our expectation going forward? How do we incorporate that, and we took the actions that we did?

This is a process question in terms of a follow-up. No one wants to go through this more than once, so want to go through it at all. What questions do you ask the actuaries and the claims folks just to make sure that the strength in the second quarter covers it and this topic goes away?

Yes. I mean that's the question that we have, is what are we seeing? What do we expect to see in the future? How do we increase our loss picks accordingly? And we review our reserves every quarter for a reason because activity comes in and we evaluate it. And again, you're always trying to make that determination of what you're seeing today, how is that going to manifest itself in the future? And we do that in lines like this every quarter, where we will look at them and make adjustments accordingly, if needed, up or down. .

Okay. Fantastic. On the topic of social inflation, obviously, you have claims data, you have internal data. What external data do you look at to see whether perhaps social inflation is abating. We've had a couple of states with some level of tort reform. There's certainly some companies out there that have said we think it's stabilizing. We think rates are fine.

I'll leave my own personal views on that. But I'm more interested in the internal process. What is it that you look at besides your internal claims information just to get a sense of what the broader outside world looks like?

Yes. I mean, obviously, we're looking at a lot of different trends that are out there. We're looking at what's happening from a jury awards perspective and what we're seeing there. We obviously continue to see a lot of advertisement that plaintiff attorneys continue to do. So we look at that. We look at it by jurisdiction. Some of the reforms that you're talking about, we're watching those closely.

Again, we don't want to be premature in incorporating a significant change there into our views, whether it's in reserves or in pricing. We want to see it come through, but we're encouraged by it.

And yes, it's triangulating on a lot of different things that we're seeing within the environment. Our government affairs group continues to be very active in pursuing reforms across the country because we think that it is important because it is a cost that everyone is bearing as we look at some of these awards.

I'm very curious. With that, is there receptivity on the part of, I guess, what would be legislators or maybe the regulators also but legislators to this idea? Because I agree fundamentally with the premise that everything you buy is going to be influenced by the cost of liability insurance. but voters have to see that before some people will actually do anything about it. And I was hoping you talked about that level of receptive...

Yes. I think it varies. I think there's some that maybe are more than others. Obviously, we've a lot of different constituents that are also on the other side, that are putting forth their point of view on that.

Again, I think the fact that you've seen some states take action is a very positive sign and shows that there are -- there is receptivity to that and the impact that it can have. But I don't my personal view is I'm not sure that you're going to see something that's going to change dramatically overnight.

Okay. Is it too simple to say red state, blue state?

I'm not going to go there.

Okay. Fair enough. Let me ask a question where hopefully, there is more comfort. Does the social inflation experience vary between small commercial, middle market and specialty?

It's there across the board, maybe not to the same degree, just given size of limits and things of that sort. But Yes, as we look across, we see pockets of it across the board. And you see it in personal insurance, too.

Yes. We'll definitely get back to that because I think it's an important question. One more on the reserving side, though, there seems to be a pattern of reserve releases, workage compensation, it's consistent perfectly consistent with what we've seen for reserving for the Hartford and beyond.

We see every other quarter, there are, and this is just the outcome, not the inputs, reserve releases in bond, reserve releases on the catastrophe side. So I was hoping two questions. The less important one is, what does that tell us about the schedule? And the more important one is, what does that tell us about Hartford's reserving for these lines of business?

Yes. So some lines of business, we don't look at every quarter in great detail. And bond and our cat reserves are two of those lines. And we still, as you point out, we are on a 6-month review.

On the off quarter, we'll look just to see if something dramatic has happened. But assuming not, then we do the more detailed reviews every 6 months. And we have seen releases in both of those lines pretty consistently. And a couple of things I'd point to.

So on the bond side, really there, obviously, we make our initial loss picks. But we've just seen very favorable experience, especially on the contractor side where you haven't seen a lot of contractors go bankrupt, projects have been completed.

And so as you evaluate all of that, as those things happen, then we reduce reserves. But obviously, you're putting up -- when you put out those limits today, you have to take into consideration a variety of outcomes. And so we've seen very favorable results there.

On the catastrophe side, what we've seen there, a couple of things. One area as it relates to hail activity. And if you go back several years, we had seen much higher hail-like severity from a loss perspective. And so our -- when we book our catastrophes, again, you're booking it based on the information that you have; our estimates reflected that activity.

Now we've done some things as it relates to our claims practices, as when there are hail storms to be more proactive in reaching out to claimants to make sure like do they have, for example, roof damage from hail.

Sometimes you can have a hailstorm, someone has roof damage. They don't know that they have damage, and then that becomes the cause of loss. And if it's not taken care of, you can end up with a much more severe loss because the roof doesn't improve with age, if you have damage.

So being more proactive to understand where hailstorm activity happened and reaching out to our insureds to get on those claims more quickly. we believe, has resulted in less large hail claim activity. And so some of that has come through.

Same thing with other storms where large loss activity has just been a bit muted. But again, we want to be thoughtful when we put up our initial estimates, and we've seen those benefits come through, as you pointed out. And those are just a couple of examples of what's been happening on the cat line.

Okay. That's very helpful. You mentioned hail, which has been the locus of a fair amount of fraud. Do you have any sense in terms of whether -- or let me ask this differently, what experience have you seen in terms of the ability to identify and combat that?

Well, we do from an underwriting side and roof scoring has become, obviously, more important in more recent years to really understand condition of roof before you place a risk. So I think that, that has also helped.

And again, not that I would say that, that's necessarily always fraud. But obviously, depending on where a home or a business is located, the condition of the roof matters, especially as you think about some of the storm activity.

So definitely being more proactive on the front end relative to the roof scoring and then on the back end from a claims handling perspective, using our claim adjusters to really evaluate the exposure and get some of these this damage address more quickly.

Okay. And then one final follow-up on the hail question, if you will. Has your coverage changed? Talk about restoring. There are some insurers that have said, okay, if your roof is damaged, we'll pay you what it was worth before the damage instead of buying a new roof.

Yes. I guess on that specific, I'm sure there are some things like that, that we've done but not anything that I would point to kind of of wholesale. I know the teams from an underwriting side or constantly looking at what levers can be pulled as we think about those exposures. So I'm sure there's some of that going on, but I can't really comment on how broadly. .

Okay. And again, if there are questions in the room, please raise your hand, and we'll get the microphone to you.

I wanted to dig a little bit -- it's not a huge line of business, but global reinsurance. Reinsurance is a huge category. I was hoping you could nail down for us or describe what you're writing, what you're attracted to, what you think prospects are going forward?

So it's a nice business for us. The coverages that we provide, think property, some specialty casualty, CPRI, political risk type exposures. And I think the nice part about this business, as you can see from our side, we're not a big reinsurer. So it really does allow us to be very selective in where we place limits, allows us to really have a very deep understanding of the insurers that we're providing the reinsurance to.

And I think that the way that, that team has managed that book kind of shows up in their results. And it allows us to be very flexible. So it's a nice little business for us is how I characterize it.

Okay. I was at Monte Carlo earlier this week. There's a lot of capacity for reinsurance, even on the casualty side. What is the selling point to the global reseatings? Like what is it that they get from Hartford that they wouldn't get elsewhere?

Yes. I mean some of it is sort of our ability, as I said, to sort of be very selective and develop relationships with insureds and allow us to participate in that market. Again, we're not looking to be broad-based and be everything to everybody. But we've just -- we have a very sort of niche business, and we're able to kind of fill in protection for insure that need it and feel good about how we're deploying the capital that we put to that line.

Okay. Fantastic. I want to make sure I get this right. Within the financial supplement, you talk about global specialty having Lloyd's and other international markets. And I'm very curious as to what the other international markets are? Like where it is hard for that we don't necessarily think of?

Yes. It's relatively small. So think of it, we have a U.K. branch, we have a Canadian branch. So very small activity like that. It could be an area over time that you might see more in, but it's really in those particular areas right now.

Okay. And we should think of those as being the specialty products that would also be done in Lloyd's and elsewhere.

I want to spend a little bit of time on Personal Lines. First, the fundamental question. And this is a bad question because you've already got the AARP business. So you're not starting from scratch. What are the ambitions and scale required in the agency side?

Yes. So we are starting from a position, obviously, of having the AARP business. And as you know and as we've talked about for several years now, we've done a lot to upgrade the platform that, that business is on. So from the technology that we have, the pricing sophistication that we have kind of across the board, and we've talked about that and rolling that out on the direct side.

On the agency side, we are then now taking that product to the agency segment of the market. And I think it's important to remember that we're also not starting from scratch there. We have a very strong agent relationships on our business insurance side. And we've heard from agents that they would like to have a personal insurance product that they could sell from the Hartford.

So we're leveraging that distribution relationships we already have to bring in this product. And again, still very much focused on a similar profile to what we have in AARP. We're not looking to be the insurer for everybody kind of being in our sweet spot. So we believe that we have the pricing sophistication to be able to compete in that marketplace.

I mean, obviously, agency is different than direct. Agency oftentimes leads with the home product. So part of being able to launch into the agency market was improving our home capabilities and products and the things we were just talking about as it relates to roof scores and things like that. So definitely is a focus there.

And we've been very pleased with the rollout so far. We're in 23 states and continuing that rollout, getting very favorable feedback from agents and happy that we have the product that they want.

So it's -- I look at it as -- we're leveraging our relationships that we have on the business insurance side, and we're leveraging the capabilities that we have from the direct market and bringing that into the personal insurance agency market.

Is it reasonable -- you talked about the agency overlap, and I think that makes perfect sense. Hartford is the crown jewel of small commercial. Is there overlap -- potential overlap in the customers?

Yes, potentially. Yes, absolutely. We could look to see that because, again, as you think about an agent who is working with a small business owner, looking to then provide the personal insurance side; we think that there definitely could be some overlap there.

Okay. Fantastic. I am going to scan the room again to see if there are questions. I want to spend a little time on personal auto because I've been spending a lot of time actually on ISO data, which shows almost surprisingly low levels of frequency.

Again, this is for the industry as a whole, for the 50-odd percent of companies that report to ISO, where frequency for most auto sublines is back down towards or approximating COVID levels, which surprises people because there's a lot more driving going on now. I don't know whether that matches every individual company. I was hoping you could talk about that. And then I want to follow up on the severity side.

Yes. So for our data from a frequency perspective, we are definitely still a bit below pre-Covid levels, but I would say we're a little bit above COVID levels. So we're kind of like in between. So maybe that's a little different than what you might be referring to. But when we sort of see if that's kind of where our data puts us.

Right. Okay. And on the severity side, and again, recognizing that it may well be a perfect mapping. Severity -- other than bodily injury, which to me is the auto subline facing social inflation, we're also not seeing much in the way of severity, which -- that's lagging information. But does that match what you're seeing in your more specific customer segment?

Yes. When we think about -- from a physical damage perspective, severity, what we've seen from severities come in a little bit better than we would have anticipated. Now again, some of that we were anticipating probably a little bit more impact from tariffs and things like that, which hasn't really manifest itself.

But yes, from a physical damage severity perspective, that definitely has been coming in a bit favorable to what we would have thought. To your point, on the bodily injury side, then we've been watching that and severity there being a bit

Okay. Perfect. Last reserve-ish question is on asbestos, which is impossible to do. How are you approaching that as best as issue? Because we're at the point now where the liabilities are back on your balance sheet. Is that -- how is that changing your approach? How are you thinking about asbestos in a world where broadly speaking, if we look at the industry, there seems to be sort of annual strengthening?

Yes. So we do our annual study. So that's one of our reserve reviews that's done on an annual basis, and we do asbestos and environmental in the fourth quarter. And I would say that our philosophy there hasn't changed, even when we have the reinsurance cover.

When we do the review each year, a big part of the review is grounds up. So we're looking at the large accounts that we have that we now have exposure, and we're doing very specific reviews of those accounts because you can imagine, it gets very complicated, right? You have an account but asbestos coverage and exposure can go over multiple years.

And it kind of depends on what years were you on, where is the exposure, and it's -- they have complicated charts like this big, big paper to look at all of that. So it's a very detailed review going account by account, thinking about what we would expect to see for new cases coming in.

And asbestos, I'm going to been around this for a long time now. And if you go back 20 years, people would have thought that there wouldn't be any new asbestos claims coming in. But that hasn't -- the dip hadn't served to happen the way people thought. We have to see some indications of declines, but then you get health exposures come in with asbestos. So it's -- there's a mix there.

And so our view is every year using the best data that we have, evaluate the accounts, evaluate the exposures that we have and make any adjustments. Sometimes those adjustments are from settlements that we reach. so we have a particular account, and we decide that we're going to basically buy back the coverage. And so that can affect the results as well.

So there really are a lot of pieces that go into that. Environmental, same thing. We can have in any particular year, maybe the cost for a specific site cleanup is more elevated than we thought. Sometimes things come in better than we thought, so that moves around as well.

But it's why we take a year to do the study. It's not as if we start it in the fourth quarter. It's a lengthy review. And again, when we're making our best calls across multiple years, multiple coverages, multiple insurers.

Okay. We have time for one more question. So if there's one in the room, we'll take it. If not, I want to talk about the changing distribution world, and I don't want to lead the witness by saying that I think that it's a great opportunity that the big brokers are coming into middle market and small account. How are you thinking about that?

Yes. I think given where we are positioned in those markets, given how we're positioned with the larger brokers, net, we see it as very constructive for us and our ability to continue to get market share. And so we obviously watch all that consolidation very closely. But net-net, I would agree with how you led the witness that it's a positive.

When do those conversations happen? In other words, there is theoretical mindset that I have where you can go to [ Aon ] and say, it makes sense for you to do more business with us through our...

Our team is actively engaging with our top brokers and agents all the time. and having those conversations and having them as a conversation across our various lines of business.

One thing that we're very proud of is that when we show up with our brokers and agents, we're showing up as the Hartford. We're not showing up a small business, middle and large, global specialty. And it's really important to us to make sure that our distribution partners understand the full suite of things that we can do.

Okay. Fantastic. With that, we have come to the end of our session. Beth, this was fantastic, as always. Thank you so much.

Thank you.

Hello, everyone. Thank you for joining us, and welcome to the Hartford Second Quarter 2026 Financial Results Webcast. [Operator Instructions]

I will now hand the conference over to Kate Jorens, Senior Vice President, Treasurer and Head of Investor Relations. Kate, please go ahead.

Good morning, and thank you for joining us today for the Hartford Second 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. The Hartford delivered another quarter of strong results, reflecting the strength of our franchise, the depth of our distribution relationships and our commitment to a superior customer experience. Supported by market-leading positions and differentiated capabilities across Property & Casualty and employee benefits, The Hartford remains well positioned to continue delivering outstanding returns.

During the quarter, we announced an agreement to sell The Hartford Funds to Wellington Management, strategically monetizing a non-core long-term investment. I'm also pleased to announce that our Board of Directors approved a new share repurchase authorization of $4.2 billion, reflecting strong capital generation from our businesses as well as expected cash proceeds from The Hartford Funds sale. We will continue to balance growth, investing in our businesses and returning excess capital to shareholders through repurchases and dividends.

Now let me share a few details from the quarter. Business Insurance delivered strong written premium growth of 5% with an underlying combined ratio of 89.3%. In Personal Insurance, the underlying combined ratio improved 1.7 points year-over-year with growth impacted by a competitive market. Employee Benefits had another quarter of strong premium growth, with a core earnings margin of 7.4%, and the investment portfolio continued to generate strong net investment income. All these factors contributed to core earnings of $945 million and an outstanding core earnings ROE of 18.7% over the trailing 12 months.

Let's take a closer look at second quarter performance. Business Insurance delivered another strong quarter, reflecting excellent execution across our portfolio. The current market conditions highlight the importance of underwriting discipline, pricing rigor and risk selection, areas where we continue to differentiate ourselves. This was evident in our performance during the quarter, as we continue to outpace the market in Small Business while remaining disciplined and selective across Middle & Large and Specialty lines, demonstrating our ability to perform well across cycles.

Small Business results were excellent with written premium growth of 7% and an underlying combined ratio of 86.5%. Growth was driven by double-digit increases in both package and E&S binding.

Our investments in automation and digital service, which have driven speed, ease and accuracy of quoting also position us well as wholesale and retail brokers seek to consolidate business with a smaller number of underwriting partners. These market-leading capabilities will continue to drive meaningful growth in 2026 and beyond.

Moving to Middle & Large. Written premium growth was solid at 4% with an underlying combined ratio of 95.3%, which included normal quarter-to-quarter volatility in non-CAT property losses. The team remains focused on disciplined underwriting and selecting opportunities that deliver attractive risk-adjusted returns in an increasingly competitive environment. We continue to invest in AI-enabled capabilities that enhance underwriting effectiveness by providing faster access to risk insights directly in our underwriting workflows. For example, in Middle & Large, early results are encouraging with underwriting activities being completed in a fraction of the time, increasing productivity and enabling underwriters to spend more time expanding agent and broker relationships to drive increased submission flow.

Our underwriters continue to own the decision leveraging AI-enabled capabilities that provide deeper insights and enhance underwriting consistency.

Turning to Global Specialty. Underlying margins remain strong in the mid-80s, demonstrating disciplined underwriting and active portfolio management. Written premium growth of 4% reflected continued momentum across several lines of business led by wholesale excess casualty and auto, bond and financial lines. Market conditions vary across businesses, and we remain focused on deploying capital where we see attractive risk-adjusted returns. The breadth of our Global Specialty platform and underwriting capabilities enables us to adjust to changing market conditions and pursue profitable growth across the portfolio.

Turning to pricing. Business Insurance renewal written pricing excluding workers' compensation, remained relatively consistent at 5.8% in the quarter. Pricing in commercial auto and general liability remained strong and above loss trend with umbrella, in excess achieving some of the highest rate increases across the portfolio. Property continues to remain highly profitable and an attractive area for growth though pricing moderated during the quarter, driven primarily by large property. Importantly, aggregate property pricing for small business package and middle-market general industries, remained fairly steady in the mid-single digits.

Shifting to Personal Insurance, the underlying combined ratio was strong at 86.3%. In Auto, the underlying combined ratio improved 1.9 points year-over-year as earned pricing continues to exceed loss trend. Home results remained strong supported by consistent underwriting execution and low double-digit pricing. Competition for new business remained elevated and continued to impact growth.

Within agency, following our July rollout, our contemporary product offering is now available in 23 states and progressing as planned. In direct, with the AARP relationship, we are focused on strengthening customer acquisition and retention. Across Personal Insurance, we continue to invest in strategic capabilities required to compete effectively and sustainably, including competitive pricing, seamless customer experiences, in products and services targeting the mature market.

Before moving on to employee benefits, I'd like to briefly touch upon our annual P&C Agent Summit held in May. Discussions with key distribution partners reinforce The Hartford's differentiated claims and risk engineering capabilities. A key theme at the Summit was the importance of risk mitigation as customers increasingly look for insights and expertise to help prevent losses.

Our focus is on practical scalable solutions that help customers operate more safely. By combining claims insights, risk engineering expertise and technology-enabled tools, we help customers identify risk earlier, take action sooner and improve outcomes over time.

Moving on to Employee Benefits. Core earnings margin of 7.4% was driven by excellent life and solid disability results. We were pleased with another strong quarter of fully insured premium growth, benefiting from excellent sales execution, persistency in the low 90s and continued investments in technology. We were able to achieve these results while maintaining our pricing and underwriting discipline.

Demand for solutions that help improve workforce productivity, and simplify absence and leave management remains high. We believe our integrated benefits platform differentiates us in the market, and together with strong persistency and disciplined execution, positions employee benefits to continue generating attractive growth and margins.

In closing, second 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 our ongoing investments will enable us to extend those capabilities to more small and midsized customers. Investment income remained strong, supported by a diversified and durable portfolio. With another strong quarter, I am confident in The Hartford's ability to continue delivering outstanding ROEs and attractive returns for our shareholders.

Now let me turn the call over to Beth to provide more detailed commentary on the quarter.

Thank you, Chris. Core earnings for the quarter were $945 million or $3.42 per diluted share with a trailing 12-month core earnings ROE of 18.7%. Book value per share, excluding AOCI, of $78.91 increased 7% from year-end and 15% from a year ago reflecting the earnings power of our businesses and disciplined approach to capital management.

In Business Insurance, core earnings were $695 million with written premium growth of 5% and an underlying combined ratio of 89.3%. Small business continues to deliver excellent results with written premium growth of 7% and an underlying combined ratio of 86.5%. The underlying combined ratio improved 2.5 points from the prior year, primarily due to lower non-CAT property losses and improved operating leverage.

Middle & Large business had a solid quarter, with written premium growth of 4% and an underlying combined ratio of 95.3%. Underlying results include elevated non-CAT property losses due to a few large fire losses and a shift in business mix towards national accounts and commercial auto.

Global Specialty second quarter was strong with written premium growth of 4% and an underlying combined ratio of 85.8%. The underlying combined ratio increased from the prior year primarily due to an increase in the international loss ratio and a higher expense ratio driven by technology costs. The business insurance expense ratio of 30.7% was generally consistent with the prior year and in line with our expectations. We remain on track to achieve our 2027 year-end targets.

In Personal Insurance, core earnings were $128 million with an underlying combined ratio of 86.3%. The underlying combined ratio improved 1.7 points in the quarter, with improvement in the underlying loss and loss adjustment expense ratio in both auto and home. The Personal Insurance expense ratio of 26.3% increased from 25.1% in second quarter 2025, primarily driven by the impact of lower earned premiums and higher commissions due to an increasing mix of agency business.

Written premium in Personal Insurance declined 7% with a 10% decline in auto and flat growth in home. Agency growth remained strong at 7% over the prior year. Renewal written pricing increases were 5.5% in auto and 10.4% in home, and effective policy count retention improved slightly in auto and remained relatively stable in home.

Turning to reserves. Favorable prior year development was driven by reserve reductions in workers' compensation, catastrophes, bond and personal insurance, partially offset by an increase in general liability and commercial auto liability reserves. General liability reserves were increased in the quarter primarily to reflect a higher frequency of large losses in excess casualty and umbrella lines across multiple accident years. Commercial auto liability reserves were increased primarily due to adverse loss development within accident years 2023 and 2024, driven by higher severity than previously estimated. This activity reflects increasing attorney representation and time limit demand, which have been incorporated into our reserve estimates.

With respect to catastrophes, P&C current accident year losses were $222 million before tax, up from $212 million in the prior year while the catastrophe ratio remained unchanged at 4.9% combined ratio points.

Moving to Employee Benefits. Core earnings of $139 million and a core earnings margin of 7.4% reflect excellent group life and solid disability performance. The group life loss ratio of 74.2% was relatively flat to the prior year and the group disability loss ratio of 74.8% increased by 6.3 points. Disability results were partially driven by increased claim incidence across short- and long-term disability. In addition, long-term disability claim recoveries were in line with long-term expectations although were less favorable than the prior year, which benefited from particularly strong recovery.

The Employee Benefits expense ratio of 25.2% improved 0.5 points compared with 25.7% in second quarter 2025, driven by the impact of earned premium growth and a lower commission ratio, partially offset by higher technology costs.

Turning to investments. Our diversified portfolio delivered strong results in the second quarter. Net investment income was $800 million, up $142 million or 22% from the second quarter of 2025, driven by higher income from limited partnerships and other alternative investments and a higher level of invested assets. Excluding limited partnerships, the annualized portfolio yield was 4.7% before tax, up 20 basis points from the first quarter. We continue to strategically manage the portfolio, balancing risk and pursuing accretive trading opportunities.

Annualized limited partnership returns were 7.6% before tax, up from 5.1% in the first quarter. Results benefited from multiple real estate joint venture sales and strong performance from infrastructure and energy transition funds. Looking ahead to the second half of 2026, we expect limited partnership returns to remain generally consistent with the average annualized return achieved in the first half of the year, although further geopolitical and economic volatility could affect results.

For full year 2026, given the current market conditions, we continue to expect net investment income to increase, supported by growth in invested assets with overall portfolio yields expected to remain broadly in line with 2025.

Yesterday, the Board of Directors approved a new share repurchase authorization of $4.2 billion effective through December 2028, reflecting the strong capital generation of our businesses, as well as expected cash proceeds from The Hartford Funds transaction. This authorization is in addition to the existing authorization, which as of June 30, had approximately $650 million remaining. During the quarter, we repurchased 3.4 million shares for $450 million. We expect to increase our quarterly repurchases to $475 million through the remainder of 2026.

In summary, we are very pleased with our strong 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 appreciate the granularity in the Q on loss reserve development and Beth's additional remarks about more frequency in GL and severity in commercial auto. So I'd like to just zero in on 3 numbers in that table. The $110 million favorable in workers' comp, the $116 million adverse in general liability and the $26 million in commercial auto. Could you share some thoughts on whether you feel this is? Is it onetime or is it something that could become chronic? How are you thinking about these lines and the reserve adequacy going forward?

Andrew, it's Chris. Thanks for your question, and I appreciate your commentary on transparency and granularity. I think as you know, loss reserving is both science and art. And I think we've combined them pretty well over a long-term period and have had great stability. But this quarter required some changes, and I'll let Beth just give a little bit more color on what drove some of those changes.

Sure. So again, the number that you're referring to, Andrew, I think, as you know, are 6-month numbers. So the numbers for the quarter, a bit smaller than that. So if I start with general liability, again, there, we increased prior year reserves by $46 million. And again, as it says in the commentary, that was across multiple accident years. We saw some elevated large loss activity. And these are lines that we want to be very cautious about. So we reacted to that. And I think a very modest increase when you think about the reserve base being a little bit under $6.5 billion.

Commercial auto there, we saw activity in more recent years, again, large -- higher frequency of large losses. And really, what we're seeing there is more attorney involvement in accidents that in the past would have probably been more minor in nature and minor injuries. So again, looked at that and made the adjustments that you referenced.

And then on workers' comp, that -- we continue to see favorability there. We look at those reserves every quarter. I don't like predictions about the future, but the underlying book as it relates to prior years continues to perform very well.

Excellent. Very helpful. And then kind of along the same lines with the employee benefits business rolling in on the group disability loss ratio at 74.8%, which was up a fair amount year-over-year. You made the comment, I think, on this call and then in the release that it's in line with long-term expectations. We're hearing a little bit about some of your competitors and seeing that line kind of tick up as well. Do you think it kind of stays in line with your target? Or do you think this is something that's going to start driving up over time? And maybe share a little bit on the backdrop, what you're seeing in that product area from a loss standpoint.

Yes. Thanks for the question, again, Andrew. I'll start and just give some context and sort of my views and then I'll ask Mike Fish to add his. So this is a very good business for us. It's been a strong performer over a long period of time. And you could actually make the argument that its performance over the last couple of years probably exceeded expectations, and we're sort of at the high end of expectations. But our 6% to 7% long-term margin has always been the view. And as I said, we've outperformed it of late. But through the first 6 months of this year, we are still operating at the high end of that margin, although down a little bit from prior year.

So I don't think there's anything fundamentally changing of the business other than when you're dealing particularly with national accounts and big employers, some of that favorability has been reflected back in pricing. And how that works its way through the P&L is a higher generally current accident year loss ratio, that's really still in pick. We haven't come out from any actual experience because a lot of these policies have 6 months of seasoning required before we'll make any adjustments. And then, obviously, there's generally some lower prior year development because you're just -- you're picking the initial loss ratio closer to the expected long-term trend. So that's maybe too much technical on sort of the nuts and bolts, but I think the key message, at least from my perspective is, it is still performing within expectations.

We always look hard at pricing on cycles. Generally, these are still 3-year policies. Mike will probably comment upon LTD, STD and paid family leave some of the incidences that we're seeing there. But it's a business we still like. And at that 6% to 7% margin, we're still generating 15-plus tangible ROEs.

Yes. So Andrew, I would just add that in the loss ratio for disability, think about half of that premium is long-term disability. The remainder is in the short-tail lines, including PFML. So as Chris noted, for LTD specifically in the quarter, again, recoveries, very pleased with the overall results continue to be a bit above our pricing expectations, but just on a quarter-to-quarter basis from 2Q '25 you saw, and we talked about a little bit of a decline there in recoveries, but -- and we'll continue to monitor that. I would say on the shorter tail lines, again, we're seeing higher incidence in the quarter and on a year-to-date basis. A bit coming through across, I'd say, all diagnoses, although behavioral health claims are up a bit relative to the other claims. And those claims tend to have a bit more severity in those short-tail lines like short-term disability. So again, we're sort of seeing a bit of that developed.

And then lastly, paid family medical leave, PFML. And we talked about that last quarter. So in the year-to-date results from a sales and premium perspective, we're benefiting on the top line with 3 new states coming online. As I talked about last quarter, we do see higher utilization in early periods when new states go live. So we're seeing that a bit. But I would also add, we're seeing utilization up in the states that have been out in force for a number of years. And so as we've talked about, we'll continue to put rate on top of that book. And we'll see where that develops. But again, we feel really good in general about where our pricing is coming in, in total.

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

Chris, Beth, I'm just curious, is it possible to unpack the underlying loss ratio in commercial lines a little bit? Maybe give us what the impact of the fire losses were year-over-year so we can get kind of a baseline what the actual underlying kind of loss ratio deterioration was in the quarter?

Yes. Beth, you want to break that down?

Yes. I'm not going to go into all the puts and takes that are within that line. As we said, non-CAT property was a significant contributor to the performance kind of year-to-year. But maybe the way to help you frame it, Brian, is that if I look at MLC and their year-to-date underlying combined ratio of 93.3%. And I think about what we expect for the second half of the year and assuming non-CAT property kind of evens out a bit. We expect the full year to probably come in roughly a point better than that. So it gives you some sense of just some of the elevation that we see kind of in the first half that we wouldn't expect to see in the second half.

Makes sense. And then my second question, and maybe I was just -- the way I heard it was a little confusing. So Beth, I think you made a comment about the underlying loss ratio up because of more commercial auto and national accounts in the mix. Have you been leaning more into the commercial auto area? Or is that simply just higher losses coming in? And if so, maybe it's a different area of commercial auto. I was a little confused by that.

Brian, I'm going to let Mo answer that.

Yes, Brian. We -- the commercial auto premium has been up. I wouldn't say it's a change in strategy. It's just been, I think, a way we think we add things up as just we bind business. But the commercial auto premium was up in the first half of the year. The other piece that's in there is national accounts. And we've mixed a little bit more in middle and large towards our national accounts. And what I would just want to be clear on the national accounts is our national accounts business is a little bit different than some of our peers, and I just want to make sure that everybody understands that, which is -- it's really adjacent to our middle market business, i.e., it's loss picks, i.e., less than $5 million. We have an occasional account that gets up to $10 million, but it really is our way to follow middle-market customers into a loss sensitive structure, but it does run at a higher combined ratio based on the excess casualty lines, and we just end up booking a little bit higher.

Yes. And I'll just make a fine point on that. So again, it really is about the mixing into those -- that business rather than a change in view of the loss trend for those particular lines.

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

Okay. Great. It's probably an easy yes or no based on what was just said. But it sounds like there was kind of no meaningful change to expected forward loss trend, especially in casualty lines based on kind of all the great color you gave in the Q on this call so far. Is that correct? That's impacting the underlying maybe forward basis that we should be considering?

Yes, very, very minor impact. Obviously, whenever we have prior year development, we always look at the more current year to see if that changes our view on loss trend. And we didn't call it out because it did not have a significant impact year-over-year. It's tenths of basis points.

Perfect. And I guess my follow-up is just kind of stepping back and thinking about the competitive environment in commercial lines, specifically, I think there's a lot of focus on pricing, and we've seen a lot of competitors show their pricing KPIs, decelerate. We're teasing out that it's more so or maybe only coming from the large account space. But -- can you maybe just talk about whether you all have been surprised by the stability in kind of the especially on the smaller end in terms of pricing? Or would you expect given healthy returns and interest rates there to be a bit of a decel or downwards trend in the coming year?

Mike, it's Chris. I'm going to give you some data, at least on the quarter that might help. But I would say, generally, through the first 6 months of the year, there are really no surprises. Obviously, other than the normal volatility that Beth just talked about in some of our non-CAT property exposure. But I would say the market, at least the segments we participate in active are in are holding up fairly well. I mean you could see what we've been able to do with commercial auto and general liability pricing, which we think we're strong there and keeping up with loss trend, particularly with umbrella and excess achieving some of the highest rates of increase across the portfolio.

I would say property pricing continues to moderate. But again, still a highly profitable line for us, an attractive -- and still an attractive area for growth. I think the metric I would give you there is that the aggregate pricing for small business package and middle market general industry, property book was fairly steady in the mid-single digits on an aggregate basis.

I gave my commentary on pricing in aggregate in Business Insurance at 5.8, down 30 basis points from the first quarter. But again, still an excellent result and our underwriters are really executing well in the marketplace. I would say, again, specifically on general liability, we're at 9.9%, up 30 basis points from the last quarter. Excess and umbrella lines were still in the low double digit and improved 70 basis points from last quarter. If I look at small renewal written pricing of 7% was flat compared to the first quarter. Middle market ex comp was down 130 basis points to 4.4% with declines across most lines, but still healthy in auto and GLs. And Global Specialty pricing improved 60 basis points to 5.5. So you put it all together, I'm still feeling good about our ability to execute, the ability to generate attractive risk-adjusted returns on individual accounts and where we can, we'll step away.

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

I was going to pivot to the Personal Lines, but I just can't help myself on the pricing commentary and the answers you provided so far. And maybe you can help frame it for me in a different way because I -- the areas that have come under scrutiny are the really large property schedules. And I just don't think you have a lot of exposure in that area of the market. So when I see the growth in your middle and large business, it's really not skewing to this area that's gotten -- that's under a microscope for all the substantial rate decreases. But maybe you can help frame that for me.

I think you framed it well. I mean our large property book is relatively small. It's about $200 million, would you say, Mo, on a full year basis. Our E&S book, again, is relatively small, maybe 300, particularly in small commercial. So -- yes, the markets that -- the activity in the markets where the most pressure is, is generally our smallest exposure. And our Spectrum product which is a small business product and our general industry properties, our two biggest lines. And as I said, Greg, we're holding in sort of that mid-single-digit range as far as price increases, which again, we think is keeping up with trend. We're probably not going to grow at the rate that we thought when we started the year. But I still think we can grow our overall property book in the mid-single digits through the end of the year. But -- Mo, would you add anything?

Let me just add a couple of points, just as evidence to Chris' point on the large property. We had a fairly substantial shared and layered book within our large property segment in Middle & Large. That's now less than $25 million. So we really have shrunk that just because that is the part of the market, as you referenced, that is falling quicker, and it just doesn't meet our benchmarks anymore. The second thing I would point to is, we are watching the middle and large states really closely. So yes, the large end is where we see mostly the most competition. But we did feel increasing pressure in the second quarter and potentially a divergent view from some of our competitors, especially on GL and workers' compensation. So we've always talked about our middle market book being subject to market conditions. We're watching closely in that space because we did feel the competition pick up in that space, and that will impact our growth in the second half of the year if that competitive pressure maintains.

Thank you for indulging me on that topic, and I appreciate the detail. Let's pivot to the personal lines business. Obviously, that's a pretty intense marketplace. It looks like your agency business is doing fine. The direct business might be a little challenged. And Chris, I think you mentioned the contemporary product offering that's rolling out. As we look forward, maybe you can help reconcile how we should be thinking about growth in the context of just the intensity of competition in the market.

Yes. I let Melinda add her commentary. But I would say generally, we're trying to complete the rollout of agency as quickly as we can. We expect to be in 30 states by the beginning, early '27. So we feel good about that. And that's, again, the same product we're using in the direct channel. I would say the direct channel, I think, is going to continue to come under pressure. I think shopping is going to remain elevated. Obviously, competition is going to remain strong. But again, we're going to continue to try to improve retention, improve obviously, the customer experience and see if there is some value added that we could create for the mature market. So I would say we expect a little bit of headwinds, particularly in direct as we head into '27. But Melinda, I don't know, what would you add?

I think you summed it up very well, Chris. We certainly want to find and win and keep more customers. So all 3 components of that important in our growth strategy, and we want to do that while we maintain our target profitability, and it will be bifurcated, I would say, near-term in the channel dynamics. We're very encouraged by everything we are seeing on the agency side, very strong execution by our teams and excellent progress toward our long-term growth objectives.

And Greg, it goes without saying, obviously, auto has a story, but home has a unique story, too, where home, I think, is performing well. We've been able to continue to get rate in that book to kind of keep up with trend. And for the agency channel, having a competitive home product is going to be very, very important. We feel good about how we're positioned.

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

Wanted to see if you could dig a bit more into the capital management strategy just in light of The Hartford Funds transaction and some flexibility but obviously coming in over time. And just how you'll approach sort of replacing the dilution initially from that transaction?

I'll let Beth talk to the specifics of the capital management plan that we just announced. But I'd just like to make a comment, but -- so that everyone sort of understands my views that monetizing this long-term held investment, noncore investment, I thought was a priority over the last couple of years. Just given the sort of the changing dynamics in the asset management, wealth business. Obviously, we've enjoyed a 40-year relationship with Wellington. And I think combining Wellington capabilities with our distribution platform, I think it's just going to be an added benefit to continue to reach more clients through various channels with differentiated investment capabilities, particularly in the wealth management market here in the U.S.

So I thought it was an excellent transaction, unique -- structured uniquely, which really allows us to participate in the upside as the 2 combined organizations come together and I think create additional value in the marketplace. But Beth, what would you say on the capital management?

Yes. So we obviously took the expected proceeds over the next couple of years from the funds transaction into consideration in sizing our new share repurchase authorization. So again, I remind you that our previous one was at $3.3 billion. So this is a $900 million increase or 27% increase over the prior authorization. And the way I think about that is about 15% comes from the cash that we're getting from Hartford Funds above sort of what we would normally have received from Hartford Funds. I think you have to keep in mind that with the $3.3 billion authorization, there were dividends that we were already getting from Hartford Funds. When we think about the incremental, put that towards the authorization, and then the remaining 12% coming from the growth in our business. So I think it's a nice balance. And obviously, as the combined entity performs over the next several years, we'll continue to see those cash flows and view it as excess capital to be deployed.

Follow-up question, I just wanted to circle back on prior year development. If I go back and think about 2023 and 2024, there is sort of a consistency, if you will, to some of the unfavorable in the lines that you took unfavorable on this quarter. And is there anything different about this time? I mean I think there's some of the underlying drivers like attorney representation. So I mean, is there anything about the review you did this quarter that we should think about being different from the way it was being reviewed in '23 and '24?

No, I wouldn't call out anything being different. I mean we look at our reserves every quarter. And as we saw, as I said earlier, some of this elevated activity in GL, primarily in our excess and umbrella lines, we felt it was appropriate to make some modest adjustments. And on commercial auto, same thing, we saw some trends there that we felt we should reflect. But nothing that changes overall, how we look at the reserves, the review that we do, the very tight alignment that we have between our claims team, our actuarial teams. And then most importantly, our underwriters to understand what's being seen. And as Chris said, we feel very good about the pricing that we're getting in those lines, feel very good about all the underwriting actions that we've taken over the past many years in that. So feel good about where we are as we ended the quarter.

Your next question comes from the line of Katie Sakys with Autonomous Research.

First, I wanted to circle back to your comments, Beth, on the expense ratio. I think you mentioned in your prepared remarks, you expect to still be able to hit exit year 2027 guidance. Last quarter, I think you guys had talked about seeing some opportunity for incremental improvement in the expense ratios across the 3 business segments here in 2026. Do you still have a line of sight on that?

Katie, thank you for the question. I would just rephrase your commentary a little bit. We're not providing guidance. These are goals that we've set for the organization. We're not in the guidance game. And as we sit here today, and as I said in my prepared remarks, I think we'll see improvement in '26. And I continue to be optimistic in business insurance and employee benefits of hitting the goals that we set for ourselves. I would say there is increasing pressure in Personal Insurance to hit the goals there. We're not giving up. But that is, I would say, a substantially higher bar to achieve right now just given growth dynamics, the competitive marketplace, but I know Melinda and team are not giving up, and we'll see what we could do. But I would say that's my update for the quarter.

I appreciate the color there. And then I wanted to shift to Small Commercial. I mean I think the growth there continues to impress. But given some of the commentary from some of your competitors about identifying better growth opportunities further down market. Curious to see how you guys are thinking about competition there and the trends from increased activity from either traditional carriers or maybe more technology-enabled entrants.

Yes. I'll let Mo add his color. But I would say, Katie, remember, I think we're in a competitive market across all our lines. But of all our lines, I'm most impressed, most proud of our capabilities that are differentiated in the marketplace in small commercial that I think will allow us to continue to capture additional market share. But Mo, I know you and I talk about things quite a bit, but what would you say?

Katie, just to build on Chris' comments with a little bit more granularity. Flow for our small business team in both the retail and the wholesale channels remains really strong. Chris referenced our growth in spectrum. He referenced our growth in E&S binding. The technology and the advantages we have with the retail brokers, and Chris mentioned the session we have with our VIP brokers in May. We continue to get incredible feedback about the differentiated experience that these agents enjoy when they use our technology and how much efficiency it creates for them. So -- yes, there's lots of competition, but I really feel confident about our ability to maintain margins and grow at a similar pace going forward here just based on all the capabilities and the feedback we're getting today.

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

Just following up on the adverse development in general liability this quarter. I was wondering if you could just talk a little bit more about the accident year mix. I know you said multiple accident years. But just wondering, specifically, if you just talk about which accident years primarily were impacted. And if you had added any to accident year '25?

Yes. So it is multiple years. So if you go back, it's -- we saw some activity in 2017, '18, '19, a little bit and also in '22, '23. We did not add anything to '25. So it really was spread across, and again, focused on excess and umbrella lines, as I said in my previous remarks.

Got it. And Beth, last year, I think you had spoken about having about 1 point better than expected non-CAT property experience within the loss ratio in BI. And it sounds like it was elevated this quarter. So I just wanted to be clear, was it elevated but also worse than expected this quarter? And how should we think about just that 1 point of favorable non-CAT property experience within the loss ratio? Like, is that going to normalize? Is that potentially more durable just because of changes in terms and conditions, just wondering how you're thinking about that going forward?

Yes. I would say, David, it really does move a bit quarter-to-quarter. I would say overall for this quarter to expectations, non-CAT property came in a little bit under (sic) [ underperforming ] what we would have anticipated. Again, favorable and small unfavorable in middle to net unfavorable affecting the overall business insurance ratio. So it's hard to predict what the points of improvement could be quarter-to-quarter because there is just inherent some volatility, as I indicated, pointed to a couple of large fire losses in middle and large this quarter that contributed to that. Nothing that we see in our underwriting that would say that these weren't good risk for us to place. And that's why we say there's some just normal volatility. And it's also why I provided on the response to an earlier question, some of our views on how we think MLC could end the year based on things kind of returning to more normal.

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

My first question, we heard one of your peers in the quarter talking about an LAE improvement, right, just driven off of some AI and some claims-driven efficiencies, it did benefit their commercial lines underlying loss ratio. I just wanted to get a sense like how you guys are thinking about AI efficiencies and the potential to benefit you guys on the LAE side?

Yes. I would say, Elyse, just to remind you, again, the big areas that we're sort of focused with our AI initiatives, building on, I'll call it, our strong excellent platform is underwriting operations, which we define as customer-facing activities, call centers, billing, audit premiums and claims. Claims has some, I would say, most, some exciting activities they're exploring, whether it be a sort of custom built AI or some vendor-related activities. So that is an area of focus for us to get more efficient and ultimately, just better outcomes in total. But -- Mo, what would you add?

Yes. Elyse, I would just add that we've got some really exciting use cases. We haven't disclosed any KPIs on either the claims or the underwriting side, and we won't today. But just trust that we are making significant investments in all 3 areas that Chris referenced, and we think that will improve LAE and expense ratios generally.

And then my follow-up question, just going back to the capital discussion. You guys obviously upped the buyback today, and we did see like the funds transaction, that does give you more capital. But -- it sounds like given the increase in the buyback program, right, there's probably less of a focus on M&A right now. But Chris, would just be great to get your current views there.

Yes. Yes, I would say, obviously, you saw what we're planning to do for the next 2 years, as we've always commented, we're aware of marketplace activities. But we're equally committed to an organic plan. We think that's ultimately a safer way to grow and protect margins and manage, but we're aware, and there's nothing, obviously, to announce today. But again, we'd like to grow organically and invest in new products, new capabilities, expanding our underwriting appetite. And that's what I would say our primary focus is.

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

I just wanted to ask about retention in the middle and large commercial book. I noticed it slipped a little bit. So just curious if there is any pruning related to the GL and auto reserve additions that contributed to retention slipping or if that is just more market-driven?

Rob, it's Mo. No, it's entirely market-driven. There was nothing specific that we were doing on GL or auto in the quarter. It's just a team making good decisions. It does reference back to a comment I made to a couple of questions ago, where we're just feeling increasing competition in the middle and large space. And as we've talked about for a number of quarters, we're going to continue to make choices and not grow if we see the competitive dynamic going too far. And those 3 points of retention would be evidence of that.

Okay. Great. That makes sense. And just following up on Global Specialty, pricing acceleration there in the quarter. Obviously, there's been widespread discussion on property, which -- it seems like there's not as much exposure to as peers. But just curious what's driving that. It seemed like maybe in the 10-Q, it was implied that it was U.S. wholesale potentially driving that acceleration?

Rob, it's Mo again. I would say a couple of things. We have less negative rates internationally. We've got a fairly large book of financial lines in our Lloyd's syndicate, which was less negative, which is helping us out there. Similarly, our financial lines book improved the rate it was positive -- moderately positive. It's moving slightly more positive. So that's helping the mix in that rate calculation. And then wholesale overall, our rate on the entire wholesale book ticked up nicely. And it's an important one just as we watch the complexity of that book and making sure we're getting adequate rates on our wholesale book and the entire Global Specialty portfolio.

We have reached the end of the question-and-answer session. I will now turn the call back to Kate Jorens for closing remarks.

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

This concludes today's call. Thank you for attending. You may now disconnect.

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.