Hartford Insurance Group Inc (HIG) 2025 Q4 法說會逐字稿

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 Investor 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 filing, 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 reported outstanding fourth-quarter and full-year 2025 earnings. As we look back on the results, the enterprise performed at a high level. The effectiveness of our strategy and investments and 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% 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, strengthened 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 in workflows with an AI-first mindset. It is a multi-year 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 where 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 three 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 OneHartford, 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 number one 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 & 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 & 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 Specialty's 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 in 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 counts 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, a resilient economy, favorable group life mortality trends, and continued strong disability performance. Our Employee Benefits 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-lives segments remains a key strategic priority. This includes expanding product offerings, such as dental and vision, to small and mid-sized employers. So far in 2026, quota 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 remains strong, supported by a diversified and 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 package product will stabilize. The liability component of package was in the high single-digits and is expected to stay firm.

Middle & 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 Specialty's 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 in 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 as the impact of earned premium leverage offset increases in technology costs and higher incentive compensation. Written premium in Personal Insurance declined 2%, so 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 on 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 environmental reserves was mainly due to higher environmental site cleanup and monitoring costs and higher legal expenses.

With respect to catastrophes, P&C CATs 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, CATs came in under budget at 4.2 points. We continued 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, are per occurrence catastrophe cover was renewed with favorable terms and conditions, delivering a reduction in cost 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 multi-year stability, and complement 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%, reflect excellent group life and strong disability performance. The group life loss ratio of 76.9%, improved three points, reflecting lower mortality in 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, incidents remained 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 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% from fourth quarter 2024, driven by increased limited partnership yield, 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, 2025 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)

Andrew Kligerman, 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, six-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, 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.

Elyse Greenspan, 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 three 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.

Brian Meredith, 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 two 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 two 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 two 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 two 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.

Gregory Peters, 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 three 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.

David Motemaden, 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 million, $3.7 million 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.

Yaron Kinar, 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, Beth 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. .

Mike Zaremski, 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 two 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.

Rob Cox, 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.

Katie Sakys, 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, 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 five 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.