Hello, and welcome to today's The Hartford First Quarter 2022 Financial Results Webcast. My name is Bailey, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. I would now like to pass the conference over to Susan Spivak, Senior Vice President of Investor Relations. Susan, please go ahead.

Good morning. And thank you for joining us today for our call and webcast on first quarter 2022 earnings. Yesterday, we reported results and posted all of the earnings-related materials on our website. For the call today, our speakers are Chris Swift, Chairman and CEO of The Hartford; Beth Costello, Chief Financial Officer; and Doug Elliot, President. Following their prepared remarks, we will have a Q&A period. Just a few comments before Chris begins. Today's call includes forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, and actual results could be materially different. We do not assume any obligation to update information or forward-looking statements provided on this call. Investors should also consider the risks and uncertainties that could cause actual results to differ from these statements. A detailed description of those risks and uncertainties can be found in our SEC filings. Our commentary today includes non-GAAP financial measures. Explanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filings as well as in the news release and financial supplements. Finally, please note that no portion of this conference call may be reproduced or rebroadcast in any form without The Hartford’s prior written consent. Replays of this webcast and an official transcript will be available on The Hartford’s website for one year. I'll now turn the call over to Chris.

Good morning, and thank you for joining us today. Last April at our first quarter earnings call, I mentioned that I had never been more excited about the future of The Hartford and was extremely bullish about our prospects for growth and further margin expansion. Since then, we have demonstrated our ability to deliver on these commitments through exceptional execution quarter after quarter. We continued that momentum in the first quarter with core earnings of $561 million or $1.66 per diluted share, up from $203 million or $0.56 per diluted share in the prior quarter. Book value per diluted share, excluding AOCI, was $51.42, and our 12-month core earnings ROE was 14.8%. During the quarter, we were pleased to return $530 million to shareholders through share repurchases and common dividends. These results and actions demonstrate our commitment to long-term value creation through consistent profitable growth, continued investment in our business and return of capital to shareholders. We delivered these results during a very dynamic period, which is likely to continue with ongoing challenges from COVID, the secondary impacts of the Ukraine conflict and the anticipated Fed actions to raise interest rates while shrinking its balance sheet to address historically high levels of inflation. And yet, there are reasons for optimism. Unemployment remains very low, at 3.6% at the end of March. US consumers are historically holding low levels of debt with healthy savings. Home prices have appreciated 17% on average over the past year, providing a valuable source of equity for homeowners. Corporations have strong balance sheets and healthy earnings profiles, while new US business applications are up 65% from pre-pandemic levels, a trend that is expected to continue. We view the economic environment as favorable to our business where growth is fueled by higher employment levels, rising wages, new business start-ups and commercial exposure expansion. I remain confident that The Hartford is well positioned to perform across its portfolio of businesses to deliver on our goals, maximizing value for our stakeholders. Now let's turn to the highlights from the quarter, which illustrate how our strategy translates into consistent and sustainable financial performance. Overall, Commercial Lines results outperformed with double-digit top line growth and expanding margins in all businesses. In Small Commercial, we hold a clear leadership position with our innovative products, digital platform and data analytics, setting us apart from the competition. Last year, we delivered record growth, eclipsing $4 billion in annual premium, and in the first quarter, we continued this positive momentum with very strong new business and increased premium retention. Middle and large commercial results are benefiting from sustained investments in underwriting capabilities, broader product offerings, as well as innovative digital and data science tools. In Global Specialty, we continue to maximize our expertise to gain market share while expanding margins with overall profitability improvement, up more than 10 points from the second half of 2019. As it relates to the Ukraine conflict, first, let me say we share the world's outreach at the tragic and senseless death, suffering and destruction and pray for an end to this needless violence. From The Hartford's perspective, we have very modest direct exposure within the region, which is meaningfully reinsured. We have a definite amount of premium there and have actively controlled our exposure in the run-up to the conflict and subsequent to the start of the hostilities. Beth will cover the financial impacts to the quarter. In Personal Lines, results were in line with expectations and reflect our transformative work and our unique AARP relationship. I am pleased with the progress we are making as we roll out Prevail, our innovative and cloud-based platform that provides a simplified digital customer experience and uses data science to drive new business growth in the profitable 50-plus age segment. Turning to Group Benefits, as expected, we continue to be impacted by the pandemic. However, our underlying performance was solid and continues to demonstrate our market leadership position. Fully insured ongoing premium was up 5% in the quarter and reflects both increased premium from existing customers and a full point improvement in persistency over the prior year. Favorable employment trends and rising wages also contributed to premium growth. Sales for the current quarter are down year-over-year as the first quarter of 2021 benefited from the expansion of paid family medical leave products in several states. Adjusting for that one-time lift, sales are comparable to the prior year across our life, disability and supplemental health products. Through the first three months of the year, our long-term disability book is performing as expected, with a modestly higher incident rate reflected in our future pricing and was anticipated when we set forth our margin expectations for 2022. Modestly higher expenses in the quarter reflect higher staffing costs to manage elevated short-term disability claims and accelerated investments in capabilities, including digital administrative platforms. We expect the full year 2022 expense ratio to be generally consistent with first quarter results. During the quarter, the number of U.S. COVID cases were at their highest levels of the pandemic and thus were elevated. However, both cases and deaths have rapidly declined in March and April. Clearly, the past two years have shown that predicting the pandemic impacts is impossible. But with cases and testing at their current levels, we are cautiously optimistic about the remaining quarters of 2022. In conclusion, The Hartford is off to a strong start in 2022. We are optimistic about the macro factors impacting our business, including improving pandemic outcomes and the potential for easing of inflationary pressures. We continue to manage our investment portfolio prudently and expect the portfolio yield to benefit from the rising interest rate environment over time. And we are continuing to proactively manage our capital. All these factors underpin my confidence that we will generate a 13% to 14% core earnings ROE in 2022 and 2023. Our strategy and the investments we've made in our business have established The Hartford as a proven performer with consistent results. We are competitively positioned with a complementary and a well-performing portfolio of businesses and a winning formula to consistently achieve superior risk-adjusted returns. Now I'll turn the call over to Beth.

Thank you, Chris. Core earnings for the quarter of $561 million or $1.66 per diluted share reflect excellent P&C underwriting results, a significant contribution from the investment portfolio, and reduced pandemic-related impacts and group benefits. As Chris commented, this is related to the Russia-Ukraine exposure, which had a modest impact on results. We recorded $27 million of net catastrophe losses, primarily related to political violence and terrorism, including aviation war and credit and political risk insurance. As a result of incurred losses covered by our reinsurance treaties, we recorded a provision for ceded reinstatement premium of $11 million. The company's direct investment exposure is limited to corporate bonds issued by Russian entities with an amortized cost of $16 million, and we recorded an allowance for credit losses of $9 million in the quarter. We do not have any investments in Belarus or Ukraine. Moving on to the business line results. In Commercial Lines, core earnings were $456 million, up $351 million from the prior first quarter, primarily driven by the reserve increase in the 2021 period for Boy Scouts and a stronger top line and lower catastrophes in the current period. Commercial Lines reported 12% written premium growth, reflecting an increase in new business in small commercial, strong policy retention, written pricing increases, and exposure growth. The underlying combined ratio of 88.3% improved 2.9 points from the first quarter of 2021, due to COVID losses in the prior year and a lower expense ratio and slightly improved margins across several product lines in 2022. In Personal Lines, core earnings were $84 million, and the underlying combined ratio of 88.5% reflects increased auto loss costs as anticipated. I would note that, from a seasonality perspective, the first quarter typically has lower loss costs in the balance of the year. As Doug will comment upon, we are making progress in getting more rate into the book given the impact of inflation on loss costs. Although our yield inflation impact is a bit higher than where we were a quarter ago, we expect to be within the underlying combined ratio guidance of 90% to 92% for the full year, albeit at the high end. P&C current accident year catastrophes in the first quarter were $98 million before tax, which included the $27 million related to Russia and Ukraine exposures that I just mentioned. P&C prior accident year reserve development was a net favorable $36 million, with workers' compensation being the largest contributor. Turning to Group Benefits, core earnings of $8 million compares to a core loss of $3 million in the first quarter of 2021. Core earnings reflect a lower level of excess mortality losses in group life, partially offset by a higher disability loss ratio and an increase in the expense ratio. All cost excess mortality in the quarter was $96 million before tax compared to $185 million in the prior year quarter. The $96 million included 122 million with days of loss in the first quarter, which was partially offset by favorable deployment on prior quarters. The disability loss ratio increased by 4.8 points over the prior year period, primarily due to less favorable prior and current year development in long-term disability, as the 2021 loss ratio benefited from low incident levels from earlier in the pandemic. The long-term disability loss ratio in the quarter was in line with our expectations, which included an assumption for increased incidents relative to the past couple of years. Long-term disability claim recoveries remain strong and are consistent with the prior year. Lastly, the expense ratio for Group Benefits increased by 0.6 points. Consistent with expectations, the expense ratio was impacted by higher staffing costs to handle elevated short-term disability claims and increased investments in technology partially offset by incremental Hartford next expense savings and effective earned premium growth. The four excess mortality in COVID short-term disability loss, the Group Benefits core earnings margin was 5.7%. From a seasonality perspective, we experienced higher underlying loss costs in the first quarter, so we would expect the margin to be lower than our full year estimate. We remain confident in our guidance of a 6% to 7% core earnings margin for the full year 2022, excluding COVID impact. Turning to Hartford Funds, due to equity market declines in higher interest rates, AUM decreased during the quarter to $148 billion, resulting in a sequential quarterly decrease in core earnings, though core earnings were up 11% compared to the first quarter of 2021. Our investment portfolio delivered another strong quarter, net investment income was $509 million, benefiting from very strong annualized limited partnership returns of 14.6% driven by relatively balanced contributions from our private equity and real estate equity investments. The total annualized portfolio yield, excluding limited partnerships, was 2.9% before tax. With the increase in interest rates and wider credit spreads, the portfolio's reinvestment rate was 3.3%, which compares favorably to the average sales maturity yield of 3%. Not surprisingly, the portfolio value was also impacted by higher interest rates and wider credit spreads. The portfolio moved from an unrealized gain position of $2.1 billion at year-end to an unrealized loss of approximately $300 million. Additionally, the portfolio had a net realized loss of $145 million, which includes $107 million of mark to market losses on the public equity portfolio, reflecting the decline in equity markets in the quarter. While it is still early, as we look ahead to the second quarter, we anticipate the limited partnership annualized return will be in the 8% to 10% range. Both private equity and real estate equity investments contribute to our LP return, and this diversification has proven to be beneficial. So while interest rates and capital markets may remain volatile, we are confident that our high-quality and well-diversified portfolio will continue to support our financial goals and objectives. The confidence we have in our business is also evidenced by our capital management actions. As of March 31, approximately $900 million of share repurchase authorization remains for 2022. From April 1 through April 27, we repurchased approximately 1.9 million common shares for $139 million. On April 15, we redeemed 600 million of hybrid securities with a rate of 7.875%. We have pre-funded this redemption with the issuance of $600 million of 2.9% senior notes last September, which will result in net annual after-tax savings of approximately $24 million. In summary, our first quarter financial performance demonstrates the positive results that building and investing in our businesses have yielded. Combined with prudent capital management, we are positioned to deliver on our goals. I will now turn the call over to Doug.

Thanks, Beth, and good morning everyone. The Hartford's Property & Casualty strong first quarter results showcase the significant progress we've made in expanding our product offerings, advancing technology and data science, enhancing our distribution network, and improving the customer experience. These achievements are supported by our talented team, positioning us well for profitable growth. In Commercial Lines, I'm pleased with our underwriting performance across products and the improving expense ratio. Written premium growth was robust this quarter, sustaining the momentum we built last year. As growth accelerates, year-over-year comparisons will become more challenging in the coming quarters, but we believe we can exceed our initial growth target of 4% to 5%. Regarding pricing, in January, we outlined our 2022 Commercial Lines guidance, which anticipated moderated renewal pricing, and the first quarter largely aligned with those expectations. Excluding workers' compensation, commercial written pricing increased by 7.1%, moderating by about a point from the fourth quarter yet exceeding loss cost trends across most products. This moderation was mainly noticed in the middle market and global specialty segments. Workers' compensation pricing saw a slight decline, which we anticipated. We expect the dynamics of higher average wages, partially balanced by unfavorable filed rates, to remain throughout 2022. In Small Commercial, new written premium rose by 6% thanks to Spectrum, with retention improving by two points from last year. Our top-rated digital customer experience, excellent product capabilities, and increasing ease of use are attracting business to The Hartford as customers appreciate our consistent pricing and underwriting approach, driving higher sales and strong retention. Middle market pricing, excluding workers' compensation, started the year strongly at 6.5%. Retention improved by four points compared to the same quarter last year, while new business premium was roughly unchanged. Strong exposure growth also contributed to a 10% increase in our quarterly top line. Pricing in global specialty remains robust at 8.3%, with U.S. wholesale pricing just over 9%. Premium retention was stable, and our reinsurance business showed significant growth. We are encouraged by our growing momentum, wider product offering, and enhanced underwriting. In terms of loss costs, our 2022 guidance reflects our disciplined approach to loss trend selection, factoring in the anticipated effects of supply chain inflation in our auto and property lines, as well as social and economic challenges in other areas. Overall loss trends and ratios for the quarter align with our expectations, with some fluctuations. To summarize for Commercial, I’m very satisfied with the strong performance across all our businesses, and I believe we will meet our underlying full-year guidance of 86.5 to 88.5. Small Commercial recorded another sub-90 underlying combined ratio quarter, marking our best first quarter since 2014. At 91.5, Middle and Large Commercial achieved four consecutive quarters of strong underlying performance, with this quarter's results being the best first quarter in over ten years. Global Specialty's underlying combined ratio of 88.2 is notable as well, reflecting the strong pricing environment and improved underwriting following recent actions since the acquisition. These results illustrate our ability to balance rate and retention while maintaining disciplined underwriting and effectively utilizing risk segmentation tools to promote profitable growth. Turning to Personal Lines, we are pleased with the first quarter underlying combined ratios of 88.5, taking into account typical first quarter seasonality and industry loss cost challenges. We have focused on maintaining profitability in our legacy book while developing the new product, Prevail. Consequently, over the years, we have selectively adjusted pricing. In Personal Lines Auto, loss costs rose due to higher-than-expected severity, especially in physical damage. We have been affected by supply chain and inflation pressures and, in response, have initiated over 50 auto filings in recent months, achieving an average rate increase of 6.2%. This will impact about half of our book moving forward. Additionally, we are recalibrating Prevail pricing to account for these elevated loss trends and believe our rate execution, combined with prudent increases from the past few years, will support our auto book’s profitable growth. In Home, overall loss costs matched those of the first quarter of 2021. Non-catastrophic weather frequency remains favorable compared to long-term averages, although high material and labor costs are pressuring severity. Pricing actions are similarly being taken in Home, and our current accident year home loss ratio of 47.3% is quite solid. In terms of Personal Lines production, retention held steady, and we experienced new business growth during the quarter. Our responses and conversion rates align with expectations. Prevail is now available in 13 states, including new launches in Florida and Texas, which are some of our larger markets. We are actively managing our new business flow through enhanced metrics and analytics, and are pleased with the quality of the new business we are writing. In conclusion, the first quarter marked a strong start to 2022 across property casualty, providing clear evidence that we are on track to meet our strategic goals. Our Commercial Lines business grew significantly with excellent operating margins, while Personal Lines is seeing the benefits of pricing actions alongside emerging new business growth from Prevail. The integration of our products, technology, analytics, distribution, and talent is driving our marketplace success. The momentum is obvious, our results are strong, and the future appears bright. I look forward to our next update in 90 days. Let me now turn the call back to Susan.

Thank you. We have about 30 minutes for questions. Operator, could you please repeat the instructions for asking a question.

Thank you. Our first question today comes from Brian Meredith from UBS. Brian, please go ahead. Your line is now open.

Yeah. Thank you. A couple of questions here. First, Beth, I'm just curious, could you give us what the current new money yield that you're actually getting or new money rate that you're getting right now in your portfolio? And how does that compare to what your book yield is? And then how much of your portfolio kind of turns every 12 months? And then on that also, Chris, why 13 – why consistent ROE 22% to 23% given the rise in interest rates?

Sure, Brian, I'll start. So yeah, as we look today, the new money rate is probably closer to 3.8% compared to the 3.3% average that we had for the quarter. Obviously, it compares very favorably to the Folio yield, so you may recall a quarter ago when we were talking about our expectations for yield for 2022, I mentioned that we expected to see a slight decline from where we were in 2021. Given where we are today, we'd expect 2022 to be relatively consistent with 2021 and then see increases as we go into 2023.

Yeah. And Brian, on the range question, 13% to 14% is obviously what we've been talking about for the last year. As you heard my confidence and optimism today, I believe we will achieve that in both those years. And you should not view the 14% as a limit; we will try to achieve it. If the conditions are appropriate, particularly as Beth said, we'll have to see how the portfolio lift really plays out over a longer period of time. But that could be meaningful, particularly as you get into 2023.

Got you. And then my second question is, I guess, more Doug and Chris, Russia-Ukraine, what was your gross loss? It seems like you had a fairly – the reinstatement premium, obviously, you had some reinsurance recoveries. And then also on that topic, Russia-Ukraine, maybe a little more details as far as where your exposures are? And where could there potentially be some more losses coming from Russia-Ukraine?

Sure. Doug will add his commentary. Most of our exposures have come through our syndicate in London, primarily from the political violence and credit and political risk book. We have about $45 million of net written premium in those lines, which, as mentioned in our prepared remarks, is heavily reinsured. The situation with the war is still evolving, and the loss picks we've established are very prudent and carefully considered regarding our exposure. To provide some insight, we’ve only received two notices of loss, one of which we denied. Thus, the entirety is nearly all IBNR at this point. That’s all I can share with you for now, given that it’s an ongoing situation. We utilized a lot of data and intelligence, including satellite imagery, to assess the properties that were at risk, and we feel confident about the decisions we have made so far. Doug, do you have anything else to add?

No, I think you nailed it, Chris. We – Brian, have a very good handle on the risks located in those countries. I think we understand our book well. And this process has been deliberate and prudent, and I think Beth and I feel really good about the call we made in the quarter for what we know.

Great. Thank you.

Thank you. The next question today comes from Elyse Greenspan from Wells Fargo. Elyse, please go ahead. Your line is now open.

Thanks. Good morning. My first question, I noticed in your prepared remarks, you gave us a sense of where you might fall within that personal lines underlying margin guide. So what about within commercial, right, 86.5% to 88.5%, I know we're only one quarter in. But given how things have come together in the quarter as well as your view on pricing and loss trends for the balance of the year, do you have a sense of where you might fall within that range within commercial lines?

Elyse, we haven't changed our view. So as I said, we expect to be by that range, but there's no nuance there. I don't think our view is any different than it was 90 days ago. So we clearly have our sights set and believe we'll achieve inside that range.

Okay. And then my second question is on the group business. I'm just looking to get some more color on how you think disability trends, especially within your long-term disability book could be impacted as we potentially enter into recession and how that's kind of embedded within the guide for this year given perhaps thoughts beyond this year into 2023?

I'm pleased to provide some insights, Elyse. First, our baseline expectation is that economic activity will not enter a recession in 2022 or 2023. There are still uncertainties, but we believe the Federal Reserve will carefully manage growth and inflation to arrive at a favorable outcome. Regarding disability trends, I can tell you that last year we experienced more favorable developments, especially from the initial COVID year of 2020, than we are seeing this year. In our comments, we also mentioned seasonality; long-term disability claims tend to be higher in the first quarter under normal circumstances. However, after two years of the pandemic, nothing feels normal, yet those are the fundamental trends we observe. As of now, we remain confident in achieving our margin target of 6% to 7% for the year. Additionally, we are implementing price increases in both our life and disability insurance models as we move forward. Specifically, we anticipate price hikes of 2% to 3% for life insurance and approximately 1% to 2% for disability insurance. Currently, our incidence trends appear to have stabilized. Although there were some concerns in the fourth quarter about them rising more quickly than anticipated, that has not been the case. This is the information I can share with you at this time, Elyse.

Great. That’s helpful. Thanks for the color.

Thank you. The next question today comes from Greg Peters of Raymond James. Greg, please go ahead. Your line is now open.

Great. Good morning, everyone. So the first question I wanted to ask was around employee retention and recruiting. One of the other publicly traded brokers had mentioned on their call that they were seeing elevated turnover of underwriters at the carrier level. And I'm just curious about what The Hartford is seeing and what their perspective is around recruiting and retention in very difficult employment markets?

I'll start and then Doug can add his thoughts. Thank you for being here today. Retaining talent is crucial for any business; you need a high-quality team to compete effectively, which we've managed well for a long time. However, we haven't been unaffected by increased employee turnover, especially as many organizations allowed remote work flexibility. For 2021, our turnover rates were likely higher, ranging from three to five percentage points depending on the business unit or function. That said, we have seen this stabilize in the first quarter. We took a careful approach regarding bonuses and salary increases, and we're actively addressing retention. The best strategy to keep our employees is to ensure our leaders and managers are attentive to their team's needs, aspirations, and career goals, providing clear feedback and fostering a sense of belonging in their development. This is part of our cultural strength. Doug, what are your thoughts on the specific situation of underwriters spread across the country?

The area is a top three item for us across our leadership ranks. We're talking about it. We're working on it. And the other thing I would share, Chris, is we've had some very significant hires ourselves in the past 90 days. So I feel really good about some of the talent that has joined The Hartford. I like where we are. We've worked hard at it, and I think it will continue to be an asset for us as we compete forward.

Got it. And the second question, I wanted to pivot, Doug, I think in your comments, you talked about how in the Commercial Lines area, your reserving has contemplated the loss cost trends, the social inflation, the supply chain issues, et cetera. And there's rhetoric in the marketplace right now. I'm not sure if it's going to come in the past, but there could be further disruptions in the supply chain as we move through the balance of the year. And I'm just curious from your perspective, how you look at data as you see that? And do you make changes now, or do you wait until it materializes? Just some granularity with respect to your approach on that.

Greg. Let me just start, and then I'll ask Doug. So as I tried to say in my commentary, we're optimistic that some of the supply chain shock due to demand, the demand side of the equation is starting to ease, particularly as we head into the second half of the year. Now the other shock, obviously, on the supply chain from manufacturing and the war in Ukraine and China's lockdown are new factors that will continue to impact just our overall view of cost of goods sold through our supply chain. So those are the dynamics. But at least from what we could see right now, there's a level of optimism that a lot of this is going to work through the system, maybe not as quick as we initially expected. But I think beginning in the fourth quarter heading into 2023, we could be in a different position. Doug?

The only other item I would add is that I did comment that we had adjusted primarily in auto physical damage for supply chain loss trends around severity. So our expectation in December and our reality in March were slightly different. We made those adjustments. Lastly, I'd point out, we make very specific quarterly calls in both our planning and our reserving. So know this is a quarterly March every 90 days, as we close our books, we make sure that everything we can see in our results and anticipate and the risks around this, we built into those calls. But the machine is finally tuned to have a 90-day period-by-period March. And so yes, if we feel more pressure in the back half of the year, we will deal with it. But right now, we're hoping for some easing, as we move July through December.

Got it. Thank you for the answers.

Thank you. The next question today comes from David Motemaden from Evercore ISI. David, please go ahead. Your line is now open.

Hi. Good morning. It's sort of a related question for Doug. Just a question on the loss cost trends. Doug, you had mentioned some puts and some takes, but net-net came in, in line with your expectations. Wondering if you could just elaborate a bit more on what you're seeing by line?

Well, I'd start with just my last comments, which is one of those puts was a little bit more pressure and water filled in. So we adjusted for supply chain. Generally, our frequency is holding. So I feel good about our frequency calls and what we're seeing with experience. And we're watching medical carefully. But so far, we feel pretty good about what we're seeing in the medical front. So all in, as we go through, and you know we've got probably close to 40 lines that we're looking at on a quarterly basis. I'd say largely, our calls are holding and other than a few adjustments, first quarter came in as expected.

Got it. Okay. And then switching gears to the Benefits business. Chris, I hear your comments about your expense ratio coming in around $26 million for the year. I guess, I'm wondering within that. It sounds like you're having higher staffing for the short-term disability claims. Is there a rule of thumb that you can give us? – for example, for every $10 million of short-term disability claims, it's an extra $1 million or $2 million in extra claims handling expenses. And I guess, how should we think about that as we enter into a more endemic state of – with COVID?

Yeah. I don't have a metric that I can give you today. I think the surge that we really felt beginning in late third quarter into the fourth quarter and then early 2000s was sort of unprecedented as far as volume. We did build some new digital claim intake tools that helped relieve some of the call center pressure, but we still had to process thousands and thousands of claims. So just know that, we – as much as we had some elevation of expenses, our Hartford next objectives for this business are still being met. We did, as I said in my prepared remarks, take the opportunity to look at investing maybe a little faster than we thought. So that will drive that. And as I said, that's mostly in the digital area and continuing in claims. So – but all that is still contemplated, David, in achieving our 6% to 7% margin for the year. So top line is growing a little faster now than we thought after a little slow start. So when you put the overall equation together of top line loss cost trends coming down, particularly as the pandemic in the second half of the year here seems to be less severe in mortality and achieving a 6% to 7%. which translates into strong ROEs on our capital. I think that equation is somewhat – is what we like. And your expense ratio point, expense ratio will come down just a little longer. It will take just a little longer than we initially thought.

Got it. And appreciate the investments and capabilities, the accelerated investments that you had mentioned. So if I could just follow-up on your comments there. Could you size how much that was during the quarter? And so we could just sort of think about thing about – and I guess, maybe think about how much more on those accelerated investment we should think about?

I tried to give you an overview for the full year. So just keep in mind the full year expense ratio guide I have for you, and we’ll discuss 2023 and beyond at the appropriate time, but we’re not prepared to do that right now, David.

Thank you. The next question today comes from Michael Phillips from Morgan Stanley. Michael, please go ahead. Your line is now open.

Thanks. Good morning everybody. Doug, you mentioned in personal auto, 6.2 rate; and I think you said about half of your premium that you write in personal lines. I’m wondering, is what’s needed from here in auto just taking rate in the other half, or is there more needed on top of what you're already taking in that current half of 6.2?

Mike, it's an ongoing matter, right? So we're continuing to assess loss causes and assess our rate accuracy state by state. As you know, this is a rolling state program. So, as I mentioned, not half of our book now has achieved file increases over the past three or four months. We've got second quarter rolling right now. So I've got expectations for second quarter; I've got expectations for third quarter. I can tell you that based on the loss cause coming in the last week; we probably adjusted our third quarter view in the last seven days. So it is active real time, and we will continue to manage to make sure we've got enough rate in that book based on all of the tools available to us.

Okay. Thanks. And then just a quick one here. You had some favorable development in small commercial loan; if you can talk about what drove that?

The favorable development is mainly due to workers' compensation, particularly from accident years 2017 and earlier. Our portfolio remains strong in those accident years, and our actuaries may release a significant amount in the workers' compensation segment.

As you said, they are just holding steady on the…

Correct.

Thank you. The next question today comes from Alex Scott from Goldman Sachs. Alex, please go ahead. Your line is now open.

Thanks. First one I had is just on the P&C side. I guess in small commercial, there is, I think, favorable non-cat weather called out a little bit in home, too, it sounded like I think marine was called out global especially. I was just wondering, if you could help us quantify some of those items to help us take through the impact on the loss ratios?

When you roll it up, Alex, at a commercial level, the non-cat inside commercial is probably about a point. So the good weather non-cat, the other line, a little pressure on a marine loss, but the other lines are cancer points that add up to good news. So in general, on commercial, when we started the year, we forecasted a couple of points of underlying improvement, about half of that coming from loss and the other half coming from expense.

90-day then?

Basically right on that. So we feel good about the start to the year; I think it’s right on our expectation.

Got it. Thanks for that. And then maybe one more question I grouped for you. I guess when you think about COVID hospital utilizations declining and as you've sort of seen that progress through the first quarter and into April. Are there lagged impacts that we should consider for disability, or should those claims come down pretty real-time with what's going on in the environment for COVID?

Yes, I’m not sure if you’re referring to short-term disability or long COVID, but I will assume you’re talking about long COVID, which has a significant lag. We have discussed this in previous conversations. We are seeing a modest amount of claims for long COVID that qualify as long-term disability. This is influencing some of the pricing expectations, prompting adjustments to get more rates in place to cover those claims. Long COVID is indeed a reality, and we are working to manage it effectively from both the claims and economic perspectives.

Got it. Okay. Thank you.

Thank you. The next question today comes from Andrew Kligerman from Credit Suisse. Andrew, please go ahead. Your line is now open.

Hey, good morning. I just want to get a little more granular on some of the earlier questions. Doug, on the personal lines, you talked about half the book having achieved filing and that your real time on rates. I'm just kind of interested, particularly in the auto line with a 2.9% rate increase in the quarter. That's about 70% of the premium that you write in personal lines. Do you need that kind of 2.9% for the next few quarters as you look out? Again, I understand its real time, but to stay in that 90% to 92% underlying, is it going to be a while before you can take your foot off the pedal?

I believe our rate needs align more closely with the rate we achieved in the first quarter, which was around 6% to 7%. Specifically, I mentioned 6.2% in my script. For the second quarter, I anticipate the rate will fall within the 5% to 6% range, and we can provide further updates in 90 days regarding the third quarter. However, I want to emphasize that a 2.9% increase will not suffice to cover our current loss costs, which is why our filings are above 5%.

Got it. Very helpful. And then with regards to work comp, Doug, you mentioned a slight decrease in pricing. I'm going to assume that means 1% or less. And then with that, could you give a little color on the lost cost in that particular line? How much are they up?

Our worker’s comp is a line that’s gone through a lot in the last three years with the pandemic. As we look at it today, no question that we are focused on filings as we work our way into this year and anticipate another round for 2023. There is headwind in the filing space. As you know, we essentially have negative filed rates across the marketplace that we are working to selectively underwrite our way through. Very pleased with what we’ve done to date, but I can’t argue that there aren’t headwinds in front of us and things will be effective as we work our way through. Are signs relative to loss trend right now, we're still sitting on our long-term trends, right? So we still look at medical in that mid-single-digit range and then to be a little bit less than that. Frequently, as I mentioned before, has been largely in check. And then I would add to you that we’re getting a little bit of benefit from wages, so we're seeing increased wages in our payroll. And as I've noted before, increased wages is a positive force as we think about our role for loss ratio. So a lot of work to be done, continued progress on the audit premium front, so positive audit. So yes, there are some puts and takes in workers' comp. I think our performance in the quarter was outstanding, and we'll manage our way to the headwinds as they come at us over the next 18 months.

Great. Thanks for that. And if I could just sneak one quick one in on Group. 5.7% at core margin, excluding pandemic-related being a little beneath that 6 to 7, is there any non-COVID mortality that's exceeding your expectation? Are you seeing any pressures there from a mortality standpoint non-COVID?

Andrew, first point, 6 to 7, we will achieve that this year. So as we said in our prepared remarks, and we addressed one question, there is a little bit of seasonality in our the LCD picks in the first quarter generally normalized be able to see that. So I think that's impacting the 5 7. I would also say though that we probably had on a pre-tax basis, $15 million to $20 million of elevated mortality claims in our AD&D book and waiver book that we're just random events; accidents are particularly motor vehicle accidents. So, unfortunately, there's a number of other actions that are occurring. So I would say those two things probably put the most pressure on that 5 7 number, but we’re still confident in the 6 to 7 range for the full year.

Great. Thanks a lot.

Thank you. The next question today comes from Derek Han from KBW. Derek, please go ahead. Your line is now open.

Good morning. Thanks. I had a question on the commercial premium growth. Obviously, it was strong in the quarter. The new business premiums within the middle market on the Global Specialty segment slowed a little bit. Is there anything meaningful in that? I'm just kind of curious if there was any cross-sell impact within those segments?

I would characterize the quarter as reasonably strong for both Global Specialty and Middle, Large Commercial. Although flat in middle and large, still a very strong quarter. And we're being thoughtful about workers' comp and our aligned product strategy. So I look at our bottom and top line performance across all of our markets and feel really good about the start to the year.

Got it. That's helpful. My second question is for Doug. You mentioned that personal auto frequency is holding up well. When looking at the underlying factors driving that, are you noticing any increases in distracted driving? I understand your customer mix is different from your peers, but I'm curious if you're seeing any impact from that.

We have statistics that we've reviewed, and our numbers align with that, but I cannot claim that our data alone would account for all those statistics. I won't assert that our telematics data is strong enough to suggest otherwise. We are monitoring driving behaviors, speed, time of day, and all the factors that impact our loss costs, and I believe we have made suitable provisions this quarter.

Okay. Thank you.

Thank you. The next question today comes from Tracy Benguigui from Barclays. Please go ahead. Your line is now open.

Good morning. My first question is on exposure growth. I recognize you disclosed policies and ports just for your small commercial segment, but it will be good to get a more general sense of the contribution from audit premium. You did mention lead inflation or any other type of linkage to GDP type of growth. And where I'm going with this, and I just want to better understand the contribution of exposure growth to overall commercial premium. And I'm also curious if you think there's a component of exposure that acts like rate?

Let me address the first question. In our growth across mid, large, and small commercial segments, roughly half of that is attributed to auto premium growth, which reflects strong audit premium in our workers' compensation book for those segments. As you're aware, we do not have any workers' compensation in our global specialty line. These segments are therefore influenced by the 7.1% pricing rate I mentioned, which covers all commercial lines excluding workers' compensation, with approximately 1.5 points related to exposure. The remainder can be attributed to underlying performance and freight. Doug, do you have anything to add?

Thank you. There are no additional questions waiting at this time. So I'd like to pass the conference over to Susan Spivak for closing remarks. Please go ahead.

Thank you very much for joining us today. As always, please reach out with any follow-up questions.

That concludes The Hartford First Quarter 2022 Financial Results Webcast. Thank you for your participation. You may now disconnect your lines.