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    HIG
    Earnings call· Mar 2025(Q1 FY25)

    HARTFORD INSURANCE GROUP, INC. HIG

    Apr 25, 2025 Source

    Executive summary

    The Hartford Insurance Group, Inc. Q1 FY25 — Strong Start Despite Cat Losses, Driven by Underwriting Discipline and Pricing Execution

    The Hartford delivered a strong Q1 FY25, overcoming significant catastrophe losses through disciplined underwriting and pricing execution. The company demonstrated robust performance across Business Insurance, Personal Insurance, and Employee Benefits, with a focus on technology investments and strategic growth initiatives, while maintaining a strong balance sheet. Management expressed confidence in achieving profitability targets and continued market share gains.

    Highlights

    5

    • Business Insurance achieved 10% topline growth with a very strong underlying combined ratio of 88.4%.

    • Personal Insurance's underlying combined ratio improved by 6.4 points year-over-year to 89.7%, including over 8 points in auto.

    • Employee Benefits core earnings margin reached 7.6%, surpassing the long-term target of 6%-7% by 1.5 points.

    • Small Business delivered record-breaking quarterly written premium and double-digit new business growth, extending a 19-quarter trend of sub-90 underlying combined ratios.

    • The company reported a trailing 12-month core earnings ROE of 16.2%.

    Concerns

    3

    • P&C current accident year catastrophe losses totaled $467 million before tax, including $325 million related to the January California wildfires.

    • The Personal Insurance expense ratio increased by 1.7 points year-over-year to 27%, primarily due to higher direct marketing costs.

    • A slight increase in long-term disability incidents was noted compared to the prior year, though incidence rates remain favorable to historical averages.

    Guidance & targets

    5
    CategoryTargetConfidence
    Small Business Annual Written Premium
    Surpass $6 billion
    medium materiality
    High
    Personal Auto Profitability
    Target profitability
    high materiality
    High
    Full Year 2025 Net Investment Income (excluding LPs)
    Higher than 2024
    medium materiality
    Medium
    Full Year 2025 Portfolio Yield (excluding LPs)
    Generally in line with 2024
    medium materiality
    Medium
    Share Repurchases
    $400 million
    high materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Business Insurance
    Excellent results driven by underwriting tools, pricing expertise, and data science. Strong new business growth in small and middle market. Combined emphasis on property expansion resulted in significant written premium growth.
    Renewal written pricing (ex-WC): 9.9% (+20bps QoQ)Property expansion written premium growth: ~15%GL/Auto liability pricing: low double-digitsOverall GL, including excess and umbrella lines pricing: 10.5% increase
    		—10%—Core earnings $471M; Underlying combined ratio 88.4%
    Small Business
    Excellent financial performance with record-breaking quarterly written premium. Strong quote flow and modestly higher average premium contributed to new business growth. Optimistic about pricing holding up outside of workers' compensation.
    New business growth: double-digitUnderlying combined ratio: sub-90 (19-quarter trend)E&S binding premium increase: 29%Property pricing (package product): 18% increasesPricing (ex-WC): 12.9%
    		—9%—Underlying combined ratio 89.4%
    Middle & Large Business
    Solid profitability and excellent topline growth. New business growth from multiple lines and market sectors. Strong renewal rate execution across most lines, including double-digit increases in liability and auto.
    New business: $188M (record quarterly)
    		—9%—Underlying combined ratio 90.6%
    Global Specialty
    Outstanding results with sustained underlying margins in the mid-80s. Impressive topline performance reflects strong competitive position, diverse product offerings, and solid renewal written pricing.
    Written premium: $1B (record first quarter)Written pricing: 6.2%Wholesale gross written premium: 11% increaseWholesale casualty pricing: double-digit
    		—11%—Underlying combined ratio 84%
    Personal Insurance
    Margins continue to improve, achieving an underlying combined ratio in the 80s for the first time in 3 years. Focused on balancing profitability and a pivot to growth. Expense ratio increased to 27% (1.7 pt YoY) due to higher direct marketing costs.
    Auto underlying combined ratio: 96.1% (8.3 pt improvement YoY)Homeowners underlying combined ratio: 75.1%Auto written pricing: 15.8%Auto earned pricing: 20%Homeowners written pricing: 12.3%Homeowners earned pricing: 14.4%Homeowners policy count: growingAuto policy count: decreased (as expected)Policy retention (Homeowners & Auto): flat
    		—8%—Core earnings $6M; Underlying combined ratio 89.7% (6.4 pt improvement YoY)
    Employee Benefits
    Core earnings margin exceeded long-term target. Excellent group life and disability performance. Modest premium growth reflects competitive environment and strong book persistency. Ongoing technology investments focused on customer experience and growth.
    Disability loss ratio: 69% (improved from 70.1% in Q1 2024)Life loss ratio: 79.9% (improved 2.7 pts)Paid family and medical leave product loss ratio: improved nearly 20 pointsFully insured ongoing sales: $381MBook persistency: above 90%Integrations with HR technology partners: over 160 (servicing over 2/3 of book)
    		Fully insured ongoing premiums growth 2%——Core earnings $136M; Core earnings margin 7.6% (1.5 pt improvement YoY)

    Operational metrics

    13
    P&C current accident year catastrophe losses
    $467M
    Q1 FY25

    before tax

    P&C current accident year catastrophe losses (combined ratio points)
    11.1
    Q1 FY25
    California wildfire losses
    $325M
    Q1 FY25

    net of reinsurance

    Deferred gain amortization (Navigators ADC)
    $32M
    Q1 FY25

    before tax, positively impacted net income with no impact on core earnings

    Remaining deferred gain amortization (Navigators ADC)
    $32M
    Q2 FY25

    expected to be amortized in the second quarter

    Holding company resources
    $1.3B
    Q1 FY25
    Shares repurchased
    3.5M
    Q1 FY25

    under share repurchase program

    Variable rate securities exposure
    $6B
    Q1 FY25
    Prevail platform coverage
    44
    Q1 FY25
    Prevail new business contribution
    75
    Q1 FY25

    primarily in the direct channel

    Prevail in-force book
    25
    Q1 FY25
    Homeowners book bundled with auto
    75
    Q1 FY25
    Paid family leave rate increases
    double-digit
    Q1 FY25

    put into the book, about $260 million book size

    Industry KPIs

    10
    MetricValueDetails
    Combined ratio88.4%%
    Capital returns$400MUSD
    ROE operating ROE16.2%%
    Catastrophe losses$467MUSD
    Net investment income$656MUSD
    Retention persistencyabove 90%%
    Life specific when present69%%
    Net premiums written earned10%%
    Renewal rate change pricing9.9%%
    Prior year reserve development$90MUSD

    Product announcements

    3
    ProductTypeDetails
    Leave Lens platformlaunch
    Absence dashboard toollaunch
    Life claim digital intakeupdate

    Deals & partnerships

    1
    WorkdayCo-designing new Workday wellness platform

    Deepened partnership to enhance data exchanges and integration connections with HR technology partners.

    Risks & headwinds

    6
    Elevated catastrophe activityQ1 FY25

    $467 million before tax, or 11.1 combined ratio points; $325 million net of reinsurance from January California wildfires.

    Mitigation: Robust and comprehensive reinsurance program on both a per occurrence and aggregate basis, providing $200 million of coverage when subject losses and expenses exceed $750 million.

    Competitive environment in Employee Benefits

    Modest 2% fully insured ongoing premium growth.

    Mitigation: Ongoing technology investments focused on superior customer experience and enabling growth; strong book persistency above 90%.

    Increased direct marketing costs in Personal InsuranceQ1 FY25

    Contributed to a 1.7 point increase in the expense ratio to 27%.

    Mitigation: Implied by the pivot to growth and new business initiatives, including increased marketing spend.

    Social inflation in casualty linesOngoing

    Discussed as an ongoing problem, taxing and constraining innovation.

    Mitigation: Continued fight for necessary reforms at the state level (e.g., Georgia win); ensuring rate in excess of trend for GL and auto lines.

    Potential tariff impacts on loss costsMost likely in H2 2025

    Expected to affect prices of automobiles, parts, and building materials.

    Mitigation: Prudent 2025 loss picks for commercial auto to absorb some impact; quick reaction function for home/commercial property pricing; faster cycle time for personal auto liability rate filings.

    Pressure on workers' compensation pricingQ1 FY25 and ongoing

    Pricing environment is competitive, leading to disciplined choices on renewals and strategic shrinking of the book.

    Mitigation: Underwriters making disciplined choices to pull back where pricing is not adequate; diversification of business segments to offset.

    What to watch in Q2 FY25

    5

    Personal Auto profitability

    Mid-2025
    CurrentUnderlying combined ratio 96.1% in Q1 FY25
    TargetTarget profitability

    Why it matters

    Achieving target profitability in Personal Auto is crucial for the overall recovery and growth strategy of the Personal Insurance segment.

    We expect target profitability in auto by mid-2025, consistent with our expectations.

    Q&A highlights

    7

    How are competitive market conditions impacting Business Insurance, particularly the slight drop in Middle & Large retention, and what is the outlook for growth?

    The retention drop in Middle & Large is primarily due to pressure on workers' compensation, where the company is making disciplined choices on renewals. However, diversification built over the past decade allows for growth in other areas, maintaining topline targets. Strong distribution partnerships and market consolidation continue to present growth opportunities.

    “what you're seeing in the IFS is really just a reminder, it's for our guaranteed cost lines in Middle & Large. And what we were feeling in the quarter, and we've talked about it in prior quarters, was some pressure on the workers' compensation specifically.”

    asked by Gregory Peters · answered by Adin Tooker

    2 min read7 chapters

    Detailed Narrative

    01

    Macroeconomic Environment & Risk Management

    The Hartford is operating in dynamic times, but as an underwriting-centric organization, it is well-equipped to navigate the evolving environment. Teams are closely monitoring trends and taking action to address impacts of the complex policy landscape. The company maintains solid fundamentals, a durable investment portfolio, and a strong balance sheet, remaining committed to delivering strong shareholder returns.

    02

    Technology and Digital Transformation

    The company has been on a 10-15 year journey of basic improvements to core platforms across all businesses, including claims, administrative, billing, and remittance systems. A multiyear, 7-year project is underway to migrate all data and applications to the cloud. Recent focus includes consumer-centric digital capabilities, new digital tools in Employee Benefits like the Leave Lens platform and absence dashboard, and a strategic focus on AI implementation in claims, underwriting, and operations.

    03

    Brand Launch and Strategic Vision

    Q1 FY25 marked the launch of a new brand aimed at establishing The Hartford as an innovative and growth-oriented industry leader. The strategy centers on customers and their evolving needs, celebrating the company's strengths and legacy. Future plans include expanding digital capabilities, leveraging AI, enhancing product offerings, and entering new markets to better serve customers and drive industry-leading financial performance.

    04

    P&C Catastrophe Management

    P&C current accident year catastrophe losses totaled $467 million before tax, including $325 million net of reinsurance related to the January California wildfires. Despite these significant losses, the company's robust and comprehensive reinsurance program effectively contained exposure, keeping it well within market share. The aggregate treaty provides $200 million of coverage when subject losses and expenses exceed $750 million.

    05

    Workers' Compensation Dynamics

    The workers' compensation market is competitive, leading to some pressure on retention in guaranteed cost lines within Middle & Large Business. The company is making disciplined choices on renewals and is strategically shrinking its workers' comp book where pricing does not meet targets. Despite this, overall Business Insurance growth remains strong due to diversification and robust performance in other lines.

    06

    Potential Tariff Impact on Loss Costs

    Management believes tariffs will likely affect the price of automobiles, parts, and building materials, expecting a one-time📎 step change. The company's prudent 2025 loss picks for commercial auto include conservatism to absorb some tariff-related increases, likely in the second half of the year. For home, commercial property, and personal auto liability, management expects to react timely with pricing adjustments due to tight reaction functions and faster cycle times for rate filings.

    07

    Agent Channel Expansion in Personal Lines

    The company is pleased with the agent channel's performance, seeing nice growth on a bundled basis. There is an ongoing effort to re-engage broad-based relationships that were previously dormant. Pilots for expanding the agency side of the Personal Lines business began in two states in the second half of 2024, leveraging the Prevail platform's product, platform, and customer experiences.

    AI-generated summary of the company’s earnings call. Not investment advice.