The Hartford's First Quarter 2024 Financial Results
The Hartford Financial Services Group, Inc. | April 25, 2024
SAFE HARBOR STATEMENT
Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about The Hartford's future results of operations. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ, including those discussed in The Hartford's news release issued on April 25, 2024, The Hartford's Quarterly Reports on Form 10-Q, The Hartford's 2023 Annual Report on Form 10-K, and other filings we make with the U.S. Securities and Exchange Commission. We assume no obligation to update this presentation, which speaks as of today's date.
The discussion in this presentation of The Hartford's financial performance includes financial measures that are not derived from generally accepted accounting principles (GAAP). Information regarding these non-GAAP financial measures is provided in the appendix to this presentation, the news release issued on April 25, 2024 and The Hartford's Investor Financial Supplement for first quarter 2024 which is available at the Investor Relations section of The Hartford's website at https://ir.thehartford.com.
From time to time, The Hartford may use its website and/or social media channels to disseminate material company information. Financial and other important information regarding The Hartford is routinely accessible through and posted on our website at https://ir.thehartford.com. In addition, you may automatically receive email alerts and other information about The Hartford when you enroll your email address by visiting the "Email Alerts" section at https://ir.thehartford.com.
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THE HARTFORD
Diversified insurer with core strengths and market leadership
Market leader in desirable segments with high return characteristics
Delivering consistently strong results across diversified businesses with significant contribution from investment portfolio
Leveraging core strengths of underwriting excellence, risk management, claims, products and distribution
Investing in differentiating capabilities to strengthen competitive advantage to enable profitable growth
Ethics, people and performance driven culture
Hartford Funds | Other |
4% | 1% |
Personal
Lines
14%
Revenue | |
Contribution Across | |
Commercial Lines | |
Our Segments1,2 | |
53% | |
Group Benefits
28%
Unique portfolio of complementary underwriting businesses all contributing to our success.
1 Revenue contribution is for the trailing 12-months for the period ended March 31, 2024 | 3 |
2 "Other" includes revenue of $67 million for Property & Casualty Other Operations and $123 million for Corporate
FIRST QUARTER 2024 - DISCIPLINED EXECUTION
The Hartford delivered…
Growth:
P&C net written premium growth of 9%, including 8% in Commercial Lines and 13% in Personal Lines
Group Benefits fully insured ongoing premium growth of 2%
Profitability:
Commercial Lines combined ratio of 90.1 and underlying combined ratio1 of 88.4
Group Benefits core earnings margin1 of 6.1%
Balance sheet & capital management:
Proactive capital management - repurchased $350 million of shares and paid $141 million in common stockholder dividends
Superior risk-adjusted returns:
16.6% core earnings return on equity (ROE)1,3
High Quality Investment Portfolio:
A+ overall average credit rating with net investment income of $593 million, before tax, benefiting from the impact of reinvesting at higher rates, a higher level of invested assets and a higher yield on variable-rate securities
Maximizing Value Creation for All Stakeholders
Book Value Per Diluted Share
(ex AOCI)1,2
$60 | $58.83 | $60.18 | |
$55 | $53.66 | ||
$50.87 | |||
$50 | |||
$45 | |||
$40 | |||
2021 | 2022 | 2023 | 1Q24 |
Core Earnings ROE1,3
16.6% | |||
15.8% | |||
14.5% | |||
12.7% | |||
2021 | 2022 | 2023 | 1Q24 |
1 Denotes financial measure not calculated based on GAAP
2 | Accumulated other comprehensive income | 4 |
3 | ROE based on trailing 12-month average common equity, ex. AOCI and trailing 12-month core earnings |
1Q24 CORE EARNINGS1 OF $709 MILLION, EPS1,2 OF $2.34, ROE1,3 OF 16.6%
Core Earnings (loss) By Segment ($ in millions, except per share amounts) | 1Q24 | 1Q23 | Change4 |
Commercial Lines | $546 | $436 | 25% |
Personal Lines | 33 | - | NM |
P&C Other Operations | 7 | 8 | (13)% |
Property & Casualty Total | 586 | 444 | 32% |
Group Benefits | 107 | 90 | 19% |
Hartford Funds | 41 | 37 | 11% |
Sub-total | 734 | 571 | 29% |
Corporate | (25) | (35) | 29% |
Core earnings | 709 | 536 | 32% |
Net realized gains (losses), before tax | 30 | (7) | NM |
Restructuring and other costs, before tax | (1) | - | NM |
Integration and other non-recurring M&A costs, before tax | (2) | (2) | -% |
Change in deferred gain on retroactive reinsurance, before tax | 24 | - | NM |
Income tax benefit (expense) | (12) | 3 | NM |
Net income available to common stockholders | 748 | 530 | 41% |
Add back: Preferred stock dividends | 5 | 5 | -% |
Net Income | $753 | $535 | 41% |
Core earnings per diluted share | $2.34 | $1.68 | 39% |
Net income available to common stockholders per diluted share | $2.47 | $1.66 | 49% |
Wtd. avg. diluted shares outstanding | 302.6 | 318.6 | (5)% |
Common shares outstanding and dilutive potential common shares | 301.3 | 316.4 | (5)% |
Book value per diluted share | $50.23 | $44.27 | 13% |
Book value per diluted share (excluding AOCI)1 | $60.18 | $54.55 | 10% |
Net income ROE, last 12 months | 18.5% | 12.8% | 5.7 pts |
Core earnings ROE, last 12 months | 16.6% | 14.3% | 2.3 pts |
1 Denotes financial measure not calculated based on GAAP | |
2 Core earnings per diluted share (EPS) | 5 |
3 Core earnings ROE | |
4 The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as | "NM" or not meaningful |
1Q24 KEY BUSINESS HIGHLIGHTS VS. 1Q23
PROPERTY & CASUALTY
Strong contribution from Commercial Lines with growth across the segment
Written premiums | Combined ratio (%) | Underlying combined ratio1 (%) | |||||
$4.2B | 9% | 92.921.8 | 2.9 pts | 90.1 | 0.3 pts | ||
Commercial Lines | $3.4B | 8% | 90.1 | 2.6 pts. | 88.4 | 0.1 pts. |
Small Commercial | $1.4B | 8% | 89.0 | 1.8 pts. | 89.6 | 0.1 pts. |
Middle & Large Commercial | $1.0B | 9% | 94.0 | 3.6 pts. | 89.2 | 0.7 pts. |
Global Specialty | $907M | 8% | 87.8 | 0.9 pts. | 85.3 | 0.1 pts. |
Personal Lines | $844M | 13% | 101.6 | 4.5 pts. | 96.1 | 0.9 pts. |
Auto2 | $600M | 13% | 103.9 | 6.3 pts. | 104.4 | 0.7 pts. |
Homeowners | $244M | 12% | 96.2 | 0.6 pts. | 77.0 | 1.9 pts |
Group Benefits
Core earnings margin1 of 6.1% and an increase in premiums deliver profitable growth
Fully Insured Ongoing Premiums | Core earnings margin | Life loss ratio (%) | Disability loss ratio (%) | ||||
$1.6B | 2% | 6.1% | 0.9 pts. | 82.6% | 4.1 pts. | 70.1% | 0.3 pts. |
1 | Denotes financial measure not calculated based on GAAP | 6 |
2 | Taking into consideration the adverse accident year development that was booked in the second quarter of 2023 for the first quarter of 2023, the first quarter underlying combined ratio of 105.1 would be 3.0 points higher |
COMMERCIAL LINES
Strong contributions from each business continue to deliver profitable growth
Written premiums of $3.4 billion in 1Q24 were up 8% from 1Q23 with increases across the segment, strong double-digit growth in new business, and the effect of renewal written price increases
Excluding workers' compensation, renewal written price increases of 9.0% is up 70 bps from 4Q23. Workers' compensation renewal written pricing between 1Q24 and 4Q23 was relatively flat
Combined ratio of 90.1 in 1Q24 compared to 92.7 in 1Q23 and underlying combined ratio1 of 88.4 in 1Q24 compared to 88.5 in 1Q23
Expense ratio of 31.5 improved 0.2 points from 1Q23, driven by the impact of higher earned premium
Commercial Lines Combined Ratio3 | ||||
92.7 | 91.2 | 90.2 | 84.7 | 90.1 |
CAY CATs and PYD
Expense Ratio
CAY Losses and
LAE4 Before CATs
- Denotes financial measure not calculated based on GAAP
- Excludes Middle Market loss sensitive and programs businesses, Global Re, offshore energy policies, credit and political risk insurance policies, political violence and terrorism policies, and any business under which the managing agent of our Lloyd's Syndicate 1221 delegates underwriting authority to coverholders and other third parties
- Combined ratio includes policyholder dividends ratio
- Loss adjustment expense (LAE)
- Commercial Lines written premiums include immaterial amounts from Other Commercial
Commercial Lines Renewal Written Pricing %
Commercial Lines2 | Commercial Lines, ex. Workers' Comp2 |
Commercial Lines Written Premiums5
($ in millions)
Small Commercial | Middle & Large Commercial | Global Specialty | 7 | |
PERSONAL LINES
Double-digit rate actions being taken to address higher auto claim loss costs
Written premiums of $844 million increased by 13% compared to 1Q23
Renewal written price increase in auto of 25.7% in 1Q24 compared to 21.8% in 4Q23, and in home, 15.2% in 1Q24 compared to 14.6% in 4Q23
Combined ratio of 101.6 in 1Q24 improved from 106.1 in 1Q23, primarily due to a change from unfavorable PYD of 2.7 points in 1Q23 to favorable PYD of 0.9 points in 1Q24 as well as a 0.9 point improvement in the underlying combined ratio
Underlying combined ratio of 96.1 improved from 97.0 in 1Q23 primarily due to a
1.2 point improvement in the expense ratio and a lower non-CAT CAY homeowners loss ratio
Personal Lines Combined Ratio | |||
106.1 | 114.9 | 107.9 | |
101.6 | |||
101.2 |
CAY CATs and PYD
Expense Ratio
CAY Losses and LAE
Before CATs
Personal Lines Renewal Written Price Increase %
Homeowners
Auto
Written Premiums
($ in millions)
Homeowners
Auto
8
1 Denotes financial measure not calculated based on GAAP
GROUP BENEFITS
Solid margins in 1Q24
Core earnings margin1 of 6.1% compared with 5.2% in 1Q23 reflecting improved life results, continued strong long-term disability results and higher net investment income
The loss ratio of 73.5% improved 1.7 points from 1Q23 driven by improved mortality trends in group life and continued strong long-term disability claim recoveries, largely offset by higher incidence in Paid Family Leave and short-term disability products
1Q24 fully insured ongoing premiums increased 2%, including an increase in exposure on existing accounts, new business sales and strong but lower persistency compared to a year ago
Expense ratio of 25.4% increased 0.7 points from 1Q23 primarily due to higher staffing costs, increased investments in technology, and higher commission expense, partially offset by the effect of higher earned premiums
Loss Ratio
Core Earnings1 and Core Earnings Margin
($ in millions)
Fully Insured Ongoing Premiums & Growth
($ in millions)
9
1 Denotes financial measure not calculated based on GAAP
HARTFORD FUNDS
High return, fee generating business
Total AUM4
($ in billions)
Core earnings1 of $41 million in 1Q24 increased from $37 million in 1Q23 with an increase in fee income net of variable expenses, driven by higher daily average Hartford Funds AUM
Mutual fund and Exchange-traded funds (ETF) net outflows of $2.5 billion in 1Q24, compared with net outflows of $1.2 billion in 1Q23
51% of overall funds are outperforming peers on a 1-year basis3, 47% on a 3-year basis3, 54% on a 5-year basis3 and 68% on a 10-year basis3
42% of funds are rated 4 or 5 stars by Morningstar as of March 31, 2024
- 83% are rated 3 stars or better
Mutual Fund and ETF Net Flows2
($ in millions)
Mutual Fund and ETF AUM
Third-Party Life and Annuity Separate Account AUM5
- Denotes financial measure not calculated based on GAAP
- Includes Mutual fund AUM (mutual funds sold through retail, bank trust, registered investment advisor and 529 plan channels) and ETFs. Excludes third-party Life and Annuity Separate Account
- Hartford Funds (non HLS) and ETFs on Morningstar net of fees basis at March 31, 2024
4 Includes Mutual Fund, ETF and third-party life and annuity separate account AUM as of end of period | 10 |
5 Represents AUM of the life and annuity business sold in May 2018 that are still managed by Hartford Funds
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Disclaimer
Hartford Financial Services Group Inc. published this content on 25 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 April 2024 20:42:19 UTC.