The Hartford Insurance Group, Inc. (HIG) Q3 2026 Earnings Call Transcript

Operator: Hello everyone. Thank you for joining us. And welcome to The Hartford Third Quarter 26 Financial Results Webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Kate Jorens, senior vice president Treasurer and Head of Investor Relations. Kate? Please go ahead.

Kate Jorens: Good morning, and thank you for joining us today for the Hartford Third Quarter 26 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, are available on the 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 would like to introduce our speakers, Christopher Jerome Swift, Chairman and Chief Executive Officer and Beth A. Costello, Chief Financial Officer. After their remarks, we will take your questions assisted by several members of our management team. And now I will turn the call over to Christopher.

Christopher Jerome Swift: Good morning, and thank you for joining us today. The Hartford delivered another quarter of strong results reflecting disciplined execution across the enterprise. Before turning to results, I would like to say a few words about the leadership transition we announced last month. It has been an honor to serve this iconic company, first as CFO, and then as CEO for nearly 13 years. Over that time, what the team has accomplished together reflects the talent and commitment of our employees and the trust that we have built with our agents, brokers, and customers. I have tremendous confidence in Adin's leadership. Since joining The Hartford in 2015, he has strengthened our underwriting and has expanded our products and risk appetite. More recently, As President, he has successfully led business performance, strategy, and enterprise wide execution. Adin is the right leader for The Hartford's next chapter. This was a thoughtful planned succession, and The Hartford strategy, priorities, and commitment to disciplined execution, are unchanged. I remain fully engaged as CEO and look forward to supporting Adin and the entire team to ensure a seamless transition. As I reflect on the last 13 years, Hartford broadened its capabilities by investing in transformative technology while expanding product offerings and geographic footprint. Growth and innovation have been central to The Hartford's transformation. Over this time, we modernized core platforms, moved applications and data to the cloud, and built the foundation that now allows us to embed AI in underwriting, claims, and service across the businesses. It is no coincidence that over the same period, The Hartford has become a company that consistently delivers outstanding returns. We have the scale to keep investing with a significant share of our spend directed to strategic initiatives Small business is where that work is most visible. Agents and customers want speed and simplicity, and our digital capabilities continue to outpace competitors by a wide margin. Today, 78% of small business submissions are bindable straight through. In addition, Kinova recently shared with us that the Hartford ranked first for small business digital experience for the 8th year in a row with a 20-point lead over the next carrier. This is translating into performance with small business growth at twice industry levels combined with excellent margins. We have extended those same strengths across the enterprise making it easier for agents, brokers, and employers to do business with us. Customers buying habits will continue to evolve and we are ready. Combining the speed of technology, with the underwriting expertise, and advice customers value. We are well positioned to compete, grow, and deliver attractive returns as the market changes. With that, let me share a few details from the quarter. Business insurance delivered strong written premium growth of 6% with an underlying combined ratio of 90.1. In Personal Insurance, the underlying combined ratio improved 2.9-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 6.4%. The investment portfolio generated excellent net investment income and earnings and capital generation supported a 12% increase in the common quarterly dividend effective January 2027. All these factors contributed to core earnings of $956 million and an outstanding core earnings ROE of 17.9% over the trailing 12 months. Let's take a closer look at third quarter performance. Business insurance delivered a solid quarter. In small business, written premium grew 7% with an exceptional underlying combined ratio of 85.2. Which outperformed our long term average. Growth was led by package our largest product line, and ENS binding, which is on pace to reach $500 million by year end up from less than $100 million 5 years ago. Deep underwriting expertise combined with market leading service capabilities positions Small Business to continue generating profitable growth. Moving to middle and large, written premium growth was 3% driven by solid growth in middle market, partially offset by lower written premium in national accounts. The underlying combined ratio of 99.5 reflected higher non-cat property and workers' compensation loss ratios. The team is actively managing the book in a competitive market with thoughtful risk selection and pricing. Turning to global specialty. Results remained strong, with written premium growth of 7% driven by Global Re and an underlying combined ratio in the mid eighties. The diversity of the global specialty products and underwriting capabilities enables us to capitalize on business opportunities and pursue profitable growth across the portfolio in changing market conditions. Turning to pricing, business insurance renewal written pricing excluding workers' compensation declined by 40 basis points to 5.3% in the quarter. Pricing in commercial auto remained strong and above loss trend. General liability, including primary umbrella and excess continued to generate some of the highest price increases across the portfolio although down from the prior quarter, and slightly below loss trend. In property, aggregate pricing in small business package and middle market general industries remained relatively stable in the mid single digit range and price decreases in large property and E and S binding eased modestly. All in business insurance renewal written pricing declined 40 basis points to 4%. With workers' compensation pricing improving slightly and remaining positive. Shifting to personal insurance, underlying combined ratio was excellent at 87.1 reflecting earned pricing that continues to exceed loss trend in both auto and homeowners The team remains focused on matching price with risk and maintaining target margins. Competition for new business in auto remain intense and impacted overall premium growth. In homeowners, new business growth of 20% reflects the positive reaction to the rollout of our new product to the agency channel. Agency is an important lever for profitable growth we are building on deep relationships developed over many years across the enterprise. Before moving on to employee benefits, I would like to briefly touch upon the Council of Insurance Agents and Brokers Insurance Leadership Forum earlier this month. Overall, feedback continue to emphasize the importance of our investments in digital and AI enabled capabilities and highlighted the strength of the Hartford's position as the market continues to evolve. In addition, conversations increasingly expanded beyond P&C to include employee benefits, and broader enterprise capabilities reinforcing the value of a more connected enterprise approach. Turning to Employee Benefits, the core earnings margin was 6.4%, within our long term range of 6% to 7% as underlying business trends revert to historical levels. Fully insured premiums grew 4%, supported by strong year to date sales growth and book persistency in excess of 90% all while maintaining pricing and underwriting discipline. At the same time, continued investments in technology and service are strengthening the business allowing us to meet evolving customer needs. Earlier this month, we closed the acquisition of Equitable's employee benefits business which complements our already leading franchise and accelerates growth in the small and mid sized employer segment which represents a significant portion of the overall employee benefits market. The acquired business brings approximately $500 million in annual premium and expands the product portfolio to include dental and vision. We are excited about the modern integrated technology that we are acquiring making it easier for employers and brokers to do business with us in the small and mid sized employer market. Over time, we see opportunities to bring more of the Hartford to these customers. In terms of capital management, yesterday, we announced a 12% increase in the common quarterly dividend continuing a track record of annual dividend increases supported by earnings power and strong capital generation. In closing, third quarter results demonstrate the 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, the focus remains on thoughtful expansion in the mature market, supported by the continued rollout of our modern platform in the agency channel. Employee Benefits remains a high quality accretive business enabled by differentiated technology, and a leadership position in the absence and leave marketplace. These strengths position us well at the large end of the market while the recent acquisition expands our ability to serve small and midsized customers. Investment income continues to be supported by a diversified and durable portfolio and higher reinvestment rates will benefit net investment income going forward. With another strong quarter, I am confident in The Hartford's ability to continue delivering outstanding ROEs and attractive returns for shareholders. Now, I will turn the call over to Beth to provide more detailed commentary on the quarter.

Beth A. Costello: Thank you, Christopher. Before I begin, I want to thank Christopher for his leadership and partnership. The company we are today reflects his vision and discipline. And I look forward to continuing our work together through the transition and supporting Adin as we begin our next chapter. Third quarter core earnings were $956 million or $3.50 per diluted share with a trailing 12 month core earnings ROE of 17.9%. Book value per share, excluding AOCI, of $82.47 increased 12% from year end and 16% from a year ago. Reflecting the earnings power of our businesses and disciplined approach to capital management. In addition, the trailing 12 month net income ROE was 25% which includes earnings from Hartford Funds. As it relates to the sale of Hartford Funds, we are progressing towards closing which could occur as early as December 1st, subject to standard regulatory and fund approvals. And as a reminder, once we close, distributions from Hartford Funds will occur quarterly and will be recorded in realized gains within net income. Moving to results. In business insurance, core earnings were $731 million with written premium growth of 6% and an underlying combined ratio of 90.1. Small business continues to deliver excellent results with written premium growth of 7% and an underlying combined ratio of 85.2. The underlying combined ratio improved 4.6-points from the prior year primarily due to lower non-cat property losses and a lower expense ratio. Middle and large business delivered written premium growth of 3%, including 5% in middle market, with an underlying combined ratio of 99.5. The underlying combined ratio increased from prior year equally impacted by higher loss ratios from non-cat property and workers' compensation. Non cat property losses reflect normal volatility with a few large fire and non weather water losses this quarter. The increase in workers' compensation relates to a broad based uptick in claim frequency, which we have been observing and reacting to throughout the course of the year. Global Specialty's third quarter was strong with written premium growth of 7% and an underlying combined ratio of 86.1 is relatively consistent with the prior year. The business insurance expense ratio of 30.0 improved 1.1-points from the prior year, driven by the impact of earned premium growth and lower staffing costs partially offset by higher technology costs. In personal insurance, core earnings were $105 million with an underlying combined ratio of 87.1. Written premium declined 4%, with a 9% decline in auto, and 6% growth in home. The underlying combined ratio improved 2.9-points in the quarter driven by earned pricing increases outpacing loss cost trends in both auto and home. The personal insurance expense ratio of 26.0 was relatively flat compared with 25.8 in the third quarter of 2025. Turning to reserves. Favorable prior year development of $594 million before tax included a $497 million benefit from the impact of commuting the A&E adverse development cover. This benefit is not included in core earnings. Core favorable prior year development was $97 million driven by reserve reductions in workers' compensation, commercial property, and personal insurance. With respect to catastrophes, PNC current accident year losses were $198 million before tax or 4.2-points, primarily from tornado, wind, and hail events. This compares with $70 million or 1.6-points in the third quarter of 2025 which was a historically light catastrophe quarter. Moving to employee benefits, core earnings of $120 million and a core earnings margin of 6.4%, reflect higher group life and disability loss ratios partially offset by an improved expense ratio and higher net investment income. Fully insured ongoing premium grew 4% reflecting strong new business sales, increased exposure on existing accounts and book persistency above 90%. The group life loss ratio of 77.8 increased 3.6-points as compared to an unusually favorable prior year period. The group disability loss ratio of 76.3 increased 5.7-points driven by higher claim incidents across short and long term disability and less favorable long term disability recoveries. Long term disability loss ratios while elevated on a year over year basis, remained within expectations while short term disability loss ratios were slightly above expectations. The employee benefits expense ratio of 25.4 improved 1.3-points driven by lower staffing costs and the impact of earned premium growth partially offset by higher technology costs. As Chris mentioned, we closed the acquisition of Equitable's employee benefits business earlier this month and expect $500 million in annual premium across Group Life, disability, and other supplemental products, including dental and vision. Consistent with the smaller end of employee benefits, we expect loss ratios for this business to be lower than our existing book though offset by a higher expense ratio due in part to approximately $30 million of annual intangible asset amortization. Excluding the amortization, we expect the core earnings impact of the acquisition to be modestly dilutive in 2027 and to improve each year as the business integrates and scales. Turning to investments. Our diversified portfolio delivered strong results in the third quarter. Net invested income was $850 million, up $95 million or 13% from the third 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 4.6% before tax. Annualized limited partnership returns were 10.2% before tax and 7.8% year-to-date. Results benefited from particularly strong performance in and energy transition funds. Turning to capital management. Holding company resources totaled $1.5 billion at quarter end. As Chris mentioned, we increased our common quarterly dividend by 12% to $0.67 per share payable on 01/05/2027. Over the past decade, our annual dividend increases have averaged approximately 11% demonstrating our confidence in the sustained earnings power and capital generation of the organization. During the quarter, we repurchased 3.4 million shares under our share repurchase program for $475 million As of September 30th, we had $4.37 billion remaining on our share repurchase authorization. In summary, we are very pleased with our strong performance for the third quarter and believe we are well positioned to continue to enhance value for our stakeholders. I will now turn the call back to Kate.

Kate Jorens: Thank you, Beth. We will now take your questions. Operator, please repeat the instructions for asking a question.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question. To allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.

Brian Meredith: Yes. Thank you. Yes, thank you. I guess my question, I was hoping to unpack the underlying combined ratio a little bit on the middle market. And particularly, what was the impact of the unusual losses on an underlying loss ratio in the quarter, for the total business insurance? And then maybe talk a little bit about what you are doing with comp in order to kind of fix some of this increased frequency and underwriting that you are doing there?

Christopher Jerome Swift: Brian, thanks for joining us. I am going to ask Beth to sort of break down and give an attribution of combined ratios for the 2 items that we called out. right? I mean, non-CAT weather. was a little elevated. I could give you the quarterly impacts and the year to date impacts after she's done. But I think that the comp we have been watching very closely, you know, here in 2026. As far as the emerging trend of higher frequency. So, Beth, would you break down those components?

Beth A. Costello: Yeah. I will. And, Brian, I am going to take some time and just go through the various components as it relates to MLC and then the impact just when we think of total BI. But as I said in my prepared remarks, when we look at the underlying combined ratio, for MLC for the quarter, We definitely saw a little bit of improvement in expense, so think of that about a point kind of consistent with what we are seeing in small commercial. And then the rest relates to loss ratio movements And so the 2 items that we called out, comp and non-CAT property I would say both contributed a little less than 4 points to the change from the prior year. And, again, all my comments are related to the prior year. In addition, similar to what we have seen during the course of the year, although we did not call it out because it was not as large as those 2 items, we continue to see a little less than a point related to mix I think we have talked about that before as some of the growth that we saw in national accounts has earned into the book. And then like a lot of other things that make up the difference there. Going back to the 2 items, comp and non-CAT property, non-CAT property, what I would say, and I said this in my remarks, is as we look at the results there, we see this as normal volatility. It is another quarter of seeing an uptick there. But if you go back and look over several quarters, we have had more quarters where non-CAT property has been favorable in ML than unfavorable. So we do see that as normal volatility. And then on the comp side, as I said, we have been seeing an increase in frequency during the course of the year. Increases in frequency, quarter-to-quarter can happen, so you do not react to that. But as we evaluated where we were year to date, felt that was appropriate to increase the loss ratio there. So a component of just under 4 points of underlying combined loss ratio points this quarter, a little bit of that does relate to prior quarters, just to put that in context. So then when you go to the all in business insurance and what the impact of all of that is, I would say non-CAT property, it is really not a driver. We have favorability in small, and that offset the unfavorability that we saw in, middle. And then the comp piece pulling that through to the all in BI loss ratio is a little over a point. And then, again, we have some small sort of, you know, items as it relates to mix and other things. And then more importantly, if I look at things on a year to date basis, we are probably a little under a point off to where we were year to date last year for all in BI. The comp piece that I referenced is a little less than half a point. And then, the remainder of the items are things like mix some of the other things that I discussed. So when I step back from all of it, looking at where middle came out, how small performed, the contribution to the total, where we are year to date, I feel really good about the overall performance in business insurance as we continue to perform, I think, in a competitive marketplace. But. And I can stop there. Brian, if you have any questions, then I was going to turn it to Adin to talk about some of the actions that we have been taking.

Adin Morris Tooker: Okay. Yeah. Brian, just to build on where Beth was. I think as we have looked at frequency throughout the year, I think it is really important to understand we see it across the book in all segments. it is not specific to any industry. it is not specific to any geography. it is not specific to size or risk. No in. Specific injury type. Really what we are seeing we think is a broad based move and frequency that is not unique to our book. And we really. And when we look at the contributing factors, we are looking at the increase in health care costs in this country, the expiration of the ACA subsidies, and broadly, just thinking about the affordability challenge for many workers across this country, and we feel like some of those losses that might have been in the health care costs are coming back into the workers' compensation which is why we feel it is so broad based. And to your point on underwriting, As Beth talked about on the property side, we really do not think there is anything going on in our book As Beth said, 8 of the past 10 quarters, we have been better than expected on property losses in Middle and Large. So we really feel like this is just a second quarter of adverse results relative to expectations. And on the workers' compensation side, we have been working on it all year. We are making sure the quality of the new business is strong, the new business pricing. We are pulling the levers that we can in terms of segmentation. And certainly, we are working to get price increases into our filings for 2027. So just think of a broad based underwriting reaction to all that we just described.

Brian Meredith: Great. that is really helpful. Very thorough. Appreciate it. And then maybe just my next question, switching over to the disability loss ratio. Thanks for some description. But I know Mike last quarter mentioned a couple of things going on with long and short term disability. I wonder if those are continuing, I e, maybe the Family Medical Leave Act, maybe some mental health you are seeing coming through?

Christopher Jerome Swift: Yeah. Well, I will ask Mike to add his color.

Michael Fish: Yeah. So, Brian, I think similar to what I discussed last quarter, both those items you pointed out, so we are seeing a bit of elevation in behavioral health. We are seeing that both in short and long term disability products in addition to sort of that from a diagnosis perspective, we are also seeing some higher claims with higher wage earners. So I think the individuals who are going out on claim we are seeing in terms of a little bit on the higher end of the salary level. I would say those are a couple of underlying trends within the short and long term disability lines. Paid family leave in the quarter was modest. Modestly improved. Oh, I should say modestly improved relative to 3 q of 25, but on a year-to-date basis, still elevated And I would say. I would just end with saying we continue to put rate into the paid family and medical leave product line. We have been successful, through the year. So mid. Think mid double digit rate increases we are putting into that book. We are seeing utilization continue to trend up So, again, as long as that utilization level continues to rise, we will put rate increases in that product line. Perfect. Thank you.

Operator: Your next question comes from the line of Andrew Kligerman with TD Cowen. Your line is open. Please go ahead.

Andrew Kligerman: Hey. Thanks a lot. Adin, congratulations on the well deserved new role. And Chris, spare me 30 seconds. I have covered this company throughout your tenure. So before my question, I just wanna say congratulations on an exceptional run. You made some bold, unpopular calls. From acquiring Aetna benefits and navigators to reportedly rejecting a $65 offer in 2021. And your conviction proved right. Underwriting has excelled. The stock has nearly quadrupled since you became CEO. And most importantly, you restored The Hartford to its place as an iconic industry leader, only better that is an incredible legacy, Christopher, and I just want to congratulate you on that. And now I will shift into my questions. First 1, Beth, you did not call out any on general liability and commercial auto in the reserve adjustments. So I just went through the Q. I went through the queue. I did not see anything in there. Just wanna make sure I understand that right or if there were some big moves in prior accident years. And generally, just how are you thinking about the reserves going forward? For commercial auto and GL?

Beth A. Costello: Yeah, Andrew. So your review is correct. We did conduct our reserve review during the quarter. And we did not adjust our booked reserves as we looked at the activity. It was consistent with the actions that we had previously taken. So we did not make any adjustments there.

Andrew Kligerman: And you are feeling good going forward?

Beth A. Costello: Yes. We are feeling good going forward. You know, obviously, we do our reserve review every quarter, and if we felt that we needed to increase our reserves, we would have. Again, our reserve review substantiated where we stood relative to our book reserves. Yeah.

Andrew Kligerman: And on small business, the 85.2 underlying was quite exceptional and certainly materially stronger than your other business insurance segment. So I just want to get a sense. You know, historically, have you always done much better in small business? And you know, how do you feel about the sustainability of that combined ratio amidst pricing pressures?

Beth A. Costello: Yeah. I will start, and if Adin or Christopher wanna add anything, I think we have consistently talked about the strong performance in small business, which has been there quarter after quarter and year after year. Obviously, quarter, printing the combined ratio that we did was impacted by favorable non-cat property as we called out. So, obviously, that can move around from period to period, but when we look at the underlying performance, feel very good. So the question maybe where would we expect fourth quarter to be? it is a little bit of kind of what happens with non-cat property. But again, I think the performance of small business stands on its own.

Christopher Jerome Swift: Andrew, I would just add you know, we are very proud as, obviously, as I called out in our prepared commentary that, you know, Kinova is recognized as, again, for the eighth consecutive year of leading our with digital capabilities. And I think that just reflects our mindset of continuing to invest in small commercial to be easier to interface with faster make lives easier for our agents and brokers and customers. So, yes, we are going to continue investing in this franchise to differentiate it as the world changes going forward. But Adin, what would you add?

Adin Morris Tooker: Maybe just 1 more anecdote. Andrew. The 78% straight through on the entire portfolio that Christopher called out that is an all time high for us and we think it is probably 5 to 10 points better than our leading competitor, let alone our average competitor. So expect that 78% with all the technology investments we are making including AI to continue to improve and that just creates a better experience for our agents and brokers. Thanks a lot.

Operator: Your next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open. Please go ahead.

Elyse Greenspan: Hi. Thanks. Good morning. My first question is going back to the discussion on workers' comp. So I think you said you guys gave a lot of color on the impact of middle and large. But then said, right, it was around a point, right, on overall BI in the quarter. So just given it sounds like you can you expect perhaps this elevated frequency to persist, should we continue to think about like an ongoing, you know, 1 point drag from comp on BI for at least in the near term?

Christopher Jerome Swift: Yeah. I would say not necessarily, and Beth can add her point of view. obviously, we are focused on 2026 trends and finishing the year strong. Obviously, we will talk about 2027 at the right time and give you any additional color. But again, I think this is a step change given some of the activities Noah talked about particularly, you know, health care. And we will see, how it is going to play out beyond this year end. But I think this is a year of sort of, as I said, a step change and hopefully, then things at least, you know, calm down a little bit. But, Beth, what would you say?

Beth A. Costello: The only thing I would point out Elyse is when we talked about the impact on comp for the quarter being little over a point. That is for the quarter, which included a bit of a true up for first and second quarter. So when I think more of the run rate and I kind of look at the 9 months kind of where we are year to date, the impact on comp from that perspective is about a half a point. So again, I do not want to lose sight of the fact that there is a bit of a true up that happens in the quarter if you just look at the quarterly number.

Elyse Greenspan: Thanks. And then my second question is on employee benefits. You guys gave some guidance, you know, on just bringing on the Equitable deal. Also, it sounds like maybe some normalization, right, and disability should persist. So as we think about those 2 forces, right, bringing on Equitable, which at least, right, you said will be dilutive, right, in 2027. Can you guys. Do you still expect to be within the 6% to 7% margin guide for benefits with all those factors taken into consideration?

Christopher Jerome Swift: Yeah. it is a great question. I would say yes. Still think in terms of this business as 6% to 7%. But I would point out there are 3 moving parts here that you and apparently you know, 1, obviously, we have got to integrate. And we are gonna spend some money on integrating, probably in the $30 million-ish range, maybe $40 million. That Those costs will be sort of below the line on non-core, so it is excluded core, like we have done all our deals. We also, you know, called out that there is probably $30 million of annual intangible amortization that will be part of core earnings. So. And then we are gonna obviously continue to be as efficient as possible and continue to invest in the business. But when you put it all together, we still see this business as the 6% to 7%. We called out that there is going to be a modest dilution in 2027. Particularly as we scale. I mean, this is the technology acquired is really actually very, very good and industry leading in our judgment. it is gonna take some time to sort of scale and get all the things moving forward. But when we get to the. That point, and if you really think about the moving parts, 6% to 7% is still our long-term view Thank you.

Operator: Your next question comes from the line of Taylor Scott with Barclays. Your line is open. Please go ahead.

Taylor Scott: Hey. Good morning. Wanted to see if you could give us a better sense of what to expect out of the core margin in benefit. I know you probably do not want to give guidance for 2027 and that kind of thing. But just given the more moving parts there around the acquisition and disability and maybe even paid family medical leave. I just wanted to see if you would help us out with thinking through that.

Christopher Jerome Swift: Yeah. You are you are right. We are not gonna give you guidance on 27. that is what I tried to do a little bit just on the prior question of just the acquisition you know, impacts. I still think this is a 6% to 7% business for us. it is gonna, you know, take maybe just a little bit of time to scale and sort of earn into the activities that we expect. But $500 million of premium, and if we could grow that at a healthy rate, you know, we will get to where we want to be. But And that is why I said in my prepared remarks, Alex, that it is still a highly accretive business, you know, for us, particularly when you look at it on a tangible return on equity basis. You know, that is. it is in the 15% to 16% return on tangible. If you look at margin on a on a 9 month basis, I think it is 6.9. Compared to the 4 for the quarter. So it is it is contributing, you know, meaningfully. And as we alluded to, particularly with their technology, you know, bringing more of the Hartford to that small to mid sized customer base in benefits, would be a strategic objective. Adin and the team have. that is all helpful.

Taylor Scott: Thanks. Second question I had is on growth in BI. You know, as we look at small commercial, could you talk a bit about the competitive landscape you are seeing there? Do you expect to be able to sustain these levels of growth even as the market continues to get more competitive? And are you seeing any of your competitors that are maybe more geared towards the larger market influencing things in the small market.

Christopher Jerome Swift: I am going to let Sorry, Alex. I stepped on you. I am going to let Adin add, but again, I think all our businesses fit together well. We constructed the portfolio here of small, middle, large specialty, international, EB, personal lines. So it is it is it is actually a diversified portfolio that all the businesses are contributing to our overall results. Both from a growth side and a profitability side. But, Moe, what would you add?

Adin Morris Tooker: Yeah. Let me just make a little layer below that for you. So I think the messaging is being fairly consistent with what we have talked about in prior quarters. In small, we are very confident about our ability to grow at a similar pace. And I think what we are bringing to the marketplace, the digital and technology capabilities continue to make a real impact for our agents and brokers. I think I cited the 78% straight through, which is which is nowhere near our competitors. And obviously, Christopher talked about Kinova That being said, there was an incremental step change in the competitiveness in small in the quarter. You will see our new business went negative for the first time in probably in 20 something quarters. it is the first time we did not grow our new business. So there is a competitiveness. That team is staying very disciplined and making good choices. In middle and global, again, we have talked about it. That is incrementally more competitive as well and we are really trying to pick our spots And I talked about it last quarter about having an increasingly divergent view from some of our competitors who are talking about stability. Not necessarily feeling stability. We are feeling it incrementally more competitive and that is coming through in the new business numbers that we show in the supplement and both middle and global. So on those businesses, we are gonna continue to make choices that are really dependent on what the market's doing from a rate perspective. are protecting our renewals. You can see that in the retention numbers. So our growth in middle and global as we talked about last quarter will be very dependent on how market conditions evolve, especially in the general liability and workers' compensation space. Thank you.

Operator: Your next question comes from the line of Gregory Peters with Raymond James. Your line is open. Please go ahead.

Gregory Peters: Well, good morning, everyone. And congrats, Christopher, and congrats to you, Adin, as well. Can we concern the strong levels of profitability inside business insurance, can you speak for a second on the impact of contingent commissions on your expense ratio Just curious, as we look forward, you know, it seems like the outlook for your business remains really strong. So seems like there could be the potential for some elevated pressure there going forward just on contingents alone, but maybe you could talk about a little bit about policy acquisition costs.

Adin Morris Tooker: Yeah. Gregory, it is Adin. I. We expect a lot of stability there. We have worked really hard with our partners to make sure that we have got equitable deals I. Deals that are equitable on both the benefits and the P&C side. As we look forward, we do not anticipate any significant change there.

Gregory Peters: Okay. I guess since it has not come up yet, at least in the Q&A, I will pivot to the personal insurance business. Where your results have recovered quite nicely. But growth is becoming an issue. So I am just curious how you think about your price competitiveness both in auto and home and then both in agency and direct, as we think about potential for growth going forward?

Christopher Jerome Swift: Yeah. I would ask Melinda to add her color, but I am overall pleased to see where we are at. Obviously, in this business, we have worked hard to restore margins and profitability. Both in auto and home. We are keeping up with the trend We are growing home, particularly in our agency. But yes, the auto market is, as I said in my prepared comments, intense. And I think it will continue to be that way with still elevated shopping. But, Melinda, what would you add?

Melinda Thompson: Yeah. I would say our growth trajectory has been improving as retention benefits from lower rate and through the customer experience efforts that we have been deploying in market. You can see that clearly in our retention up year over year and sequentially. Agency, as Christopher mentioned, is scaling, which is also supporting top line. And other than that, I would just say, Gregory, we are going to be disciplined. We are not trying to manufacture a gross crossover as much as we are trying to be thoughtful about making sure that we are in the market growing in a disciplined and appropriate way. Got it. Thanks for the detail.

Operator: Your next question comes from the line of Robert Cox with Goldman Sachs. Your line is open. Please go ahead.

Robert Cox: Hey. Thanks. Good morning. Yeah. Thanks for the comments on small commercial. You know, noting that you said it is getting a little bit more competitive there. But we just noticed, you know, continues to be strong policy addition in small commercial, and just curious if there is any particular parts of the economy or geographically where you are seeing the growth there, or is it pretty broad based?

Adin Morris Tooker: Robert, it is Adin. I would say very broad based. When we look across industries, the small business formations, when you look at the government data is still very strong. Actually really optimistic as in a world of AI enabled businesses that actually it is going to be a small business revival in some ways and we think that more and more entrepreneurs will be equipped and able to start up companies with AI than more of those. So in the past, we actually think the capabilities in the technology perspective are coming towards us in small business. And it is 1 of the reasons we are so excited about the Equitable transaction because we are going to bring this same speed ease of transaction that we have gotten the PNC side to the benefit side and just feel like we are the full service firm for every small business in this country. Thank you.

Robert Cox: Just a follow-up on the expense ratio. You guys highlighted a decrease in staffing costs across the business. Maybe you could just help us unpack really what is going on there and you are driving some of those efficiencies.

Christopher Jerome Swift: Yeah. I would say, Robert, it is sort of broad based. I mean, obviously, we are continuing to invest in our franchise, but we do have expectations on returns and efficiency gains there and continuous improvement. So it. it is just not 1 thing. I think it is everything sort of working in concert. And, you know, as we talked about at the beginning of the year, we thought the back half of 2026 here, we would start to demonstrate the efficiencies and yeah, we called out in essence, salaries and overall total compensation, but that is that is what it means. it is just our overall I will call it, cost per head is coming down. Thank you.

Operator: Your next question comes from the line of David Motemaden with Evercore. Your line is open. Please go ahead.

David Motemaden: Hey. Thanks. Good morning. I was hoping, Christopher and Adin, you guys can maybe elaborate a little bit more on pricing in the workers' comp book I heard you guys say that it improved a little bit this quarter and remained positive. But I am wondering how you are thinking about putting price through the book now just given the frequency increase that you guys are now assuming in your loss picks?

Christopher Jerome Swift: Yeah. Adin will add his color. I would say there is a California dynamic and then other 49 states dynamic where the other 49 is. As much as we are saying, it is positive. it is slightly positive. So I would not say there is a step change in the economics that is emerging yet. In our book. And then California has its own ecosystem, Adin. So maybe you add the overall point. Yes. Please.

Adin Morris Tooker: Yeah. David, I would say a couple things. 1, we are constrained by the marketplace. That comes through more in the small business space where we just see the filings as a more important part of the pricing process. But just know that in the small business, we feel like the frequency improvement we have. Or the frequency change we have seen is within our loss pick, and we feel like we can cater for what we are seeing within the pricing parameters we have today in small business. When you get to middle and large, we have much more flexibility in terms of the day to day decisions from our underwriters. So think about segmentation, think about, book mix shift, we have been working on that all year. So the team is working really hard to pull all the levers from an underwriting perspective, think less about pricing and more in underwriting. To make sure that we can shape the book in response to the frequency changes we are seeing in middle and large. Got it.

David Motemaden: Okay. Thanks. That makes sense. And then maybe just for Beth, So it just on the underlying loss ratio in business insurance, the roughly 200-basis-point deterioration year on year, 100 of that coming from, the workers' comp changes, but then 100 basis points from mix and a few other small items. I guess, could you sort of unpack those mix and other small items that contributed to, I guess, 100 basis points of the 200 basis points deterioration And you know, should we think about those? I would think that the mix dynamic would just continue as written premium earns in, but interested in how we should think about that going forward.

Beth A. Costello: Yeah. So 1 thing just to correct in what you said is that if we are talking about total business insurance, the mix piece would be, you know, less than 5 tenths of a point. The point. Roughly less than a point was what I meant with middle and large. Again, if you earn the total BI piece, I would say it is you know, more in the 0.3-0.4 range. And then the other items that make up the difference really is just a lot of little tens of points here and there. Kind of across the various lines, which I think is more just of a little bit of the pricing environment. So, you know, you feel a little bit in financial lines, which we talked about in the past, and some of the other things. So not any 1 big A large item, that I would point to and I am sorry. The last question you had on mix, I would expect some of that mix to continue as we continue to see that the higher written premiums that we saw in national accounts continue to earn into the book. Got it. And that is at 30- to 40-basis-points just on all in underlying loss ratio and BI. All in. Yes. Great. Thank you.

Operator: Your next question comes from the line of Katie Sakis with Autonomous Research. Your line is open. Please go ahead.

Analyst: Thanks. Good morning. I wanted to ask 1 more on the workers' comp book. We talked a lot about the change you have observed in claims frequency. I wanted to sort of ask about claim severity. I think earlier this year, you guys described that as trending around 3%, 3.5% and still within your 5% pricing and reserving assumption, has that changed as the year has progressed? And is there any impact from a shift in claim severity embedded in your changed loss picks this quarter?

Beth A. Costello: Yeah. So our starting point still is, as we think about, you know, severity and you are referring to the medical severity, still starts with that 5%. And, you know, that still continues to be our starting point, and no real change. I would highlight relative to kind of what we have been observing. You know, obviously, as frequency changes, you know, that obviously can have some impact on how it pulls through. But the starting point of the 5% has not changed. Okay. Thank you, Beth.

Analyst: And then perhaps shifting over to the small commercial business. We saw a lot of hubbub from the launch of Meta's Muse product in September. Guess, more broadly, how are you guys thinking about the impact of agentic AI on your small commercial business and wondering if you could update us on your views about the way that you source risks there as agentic AI becomes more commonplace.

Adin Morris Tooker: Yeah. Katie, it is Adin. I would say it is very early days. We are monitoring adoption privacy, security. I mean, there is lots of issues that go on with this technology that we are monitoring closely. We have not seen any real changes, like a real note. And we see continued strong customer engagement through our existing channels. So we are just not seeing the shift at the moment. That being said, our technology agenda, we are prepared for wherever the market goes. As a reminder, we have talked about it publicly 3% of our small business book is direct today. That number has been fairly static for years now. And we do not see a change there. We still find that our small business customers really value an agent in the transaction that they do not spend a lot of time on throughout the course of the year. They value the advice and trusted adviser continues to be a really important feedback when we go to small business owners and ask them for their feedback. So we are ready. The technology is on the shelf. We are ready to go. But we just have not seen any real adoption coming through today. Thanks for the color, Adin.

Operator: Your next question comes from the line of Ryan Tunis with Cantor. Your line is open. Please go ahead.

Ryan Tunis: Thanks. So you guys shared your assessment I guess, early assessment on the incidence, this is on a step function. I guess my concern is coming from the perspective, And correct me if I am wrong, we are at pretty low absolute frequency levels in both group disability and workers' comp. I guess my concern would be just from an absolute perspective, there could be quite a bit harder for that to mean revert. So just, I guess, interested in your thoughts on that and, you know, where we are in absolute terms on that frequency variable in both businesses.

Christopher Jerome Swift: Yeah. And I would I would say on both comp and disability, you know, we have. Particularly in disability, we have enjoyed some strong results going back 4 or 5 years. So I think it is. In my language, it is mean-reverting now. You know, our customer base is very sophisticated, so they know how their book is performed. We have basically kept pricing flat to slightly negative over the last couple years. So I still think it is a profitable book. There are some dynamics, particularly related to mental health. Related to paid family leave, you know, where utilization tends to be higher. So all those things that we could eventually price for and get back to, you know, the profitability. I think on the comp side, it is a little different. Right? it is less mental health, maybe more as we said, the environment related to health care, ACA that is driving. I do think it is a-- right now, our belief is it is a 1-time step change here in 2026, and we will have to see how things play out in 2027. But we are not expecting sort of another year of elevated frequency in 2027 as we sit here today. But that is what I would say, Ryan. So, hopefully, I scratched your itch.

Ryan Tunis: Yeah. that is helpful and just curious. You know, obviously, the. When we have had incidents of frequency increases in the past, it could be somewhat economically correlated. It sounds like there might have been a little bit of that. I think Adin mentioned you know, more white collar knowledge economy type claims. Are you seeing anything rhyming between the increase in incidence and disability and frequency and workers' comp, is there anything rhyming in terms of the type of claims that are coming in? Thanks.

Christopher Jerome Swift: No. No. And I do not think Adin mentioned white collar at all. So maybe there was another call. You are multitasking on. But I think the only thing I will say again is there is a premise on health care related activities, the cost. High deductible plans, And if you have seen. When we have seen spikes in frequency in the past, it tended to be economic shock. More than anything. Maybe you could say that, you know, the health care system is a minor adjustment or a minor disruptor that is creating some of the frequency issues. Time will tell, but we will continue to use all our data and analytics and AI power to really try to uncover what is exactly happening. In our 50 states.

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

Kate Jorens: Thanks for joining us today. As always, feel free to follow-up with any additional questions, and have a nice day.

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