Hartford Insurance Group, Inc. Q2 FY2025 Earnings Call

Hello, and thank you for joining us. My name is Lacy, and I will be your conference operator today. I would like to welcome everyone to the Second Quarter 2025 Financial Results Webcast for The Hartford Insurance Group. Thank you. I will now turn the call over to Kate Jorens, Senior Vice President, Treasurer and Head of Investor Relations. You may proceed.

Good morning, and thank you for joining us today for our second quarter 2025 earnings call and webcast. Yesterday, we reported results and posted all earnings-related materials on our website. Before we begin, please note that our presentation includes forward-looking statements, which are not guarantees of future performance and may differ materially from actual results. We do not assume any obligation to update these statements. Investors should consider the risks and uncertainties detailed in our recent SEC filings, news release and financial supplement, which are available on the Investor Relations section of thehartford.com. Our commentary includes non-GAAP financial measures, with explanations and GAAP reconciliations available in our recent SEC filings, news release and financial supplement. Now I'd like to introduce our speakers. Chris Swift, Chairman and Chief Executive Officer; and Beth Costello, Chief Financial Officer. After their remarks, we will take your questions, assisted by several members of our management team. And now I'll turn the call over to Chris.

Good morning, and thank you for joining us today. The Hartford's second quarter results were outstanding, with core earnings reaching nearly $1 billion. This performance reflects the effectiveness of our strategy and consistency of execution that drives our momentum. We are expanding our market presence and growing with purpose. Our strategic investments are advancing innovation across the organization to benefit customers and distribution partners. We are pleased with our year-to-date performance as we have successfully capitalized on market opportunities while maintaining strong margins. With that, let's take a closer look at second quarter performance. Highlights include top line growth in Business Insurance of 8%, with an outstanding underlying combined ratio of 88. In Personal Insurance, an underlying combined ratio of 88, with 8.7 points of improvement over the prior year, an exceptional core earnings margin of 9.2% in Employee Benefits and continued solid performance in our investment portfolio. All these items contributed to an outstanding trailing 12-month core earnings ROE of 17%. Turning to Business Insurance. Results were excellent, driven by industry-leading underwriting tools, pricing expertise and data science advancements. Small Business delivered an excellent underlying combined ratio with record-breaking quarterly net new business premium. Strong written premium growth was fueled in part by double-digit increases in auto and in our industry-leading package product as well as a 35% increase in E&S binding premium. We are on a clear trajectory to exceed $6 billion in annual written premium in 2025. Growth in small is fueled by technology and data science advancements, which provide significant and unrivaled competitive advantages. For example, our best-in-class quoting platform is powered by intelligent automation, real-time decisioning and proprietary pricing models, differentiated by our rich historical data. Over the years, we have streamlined the submission process with intuitive workflows and advanced prefill of customer data. Our AI-driven underwriting logic suggests coverages based on business type and reflects the judgment of our most experienced underwriters. All of this delivers a seamless and efficient experience, allowing 75% of all quotes across all admitted lines of business to be bound within minutes. This provides a durable competitive advantage for us with our distribution partners. As we continue to invest in AI, we expect bindability to increase further, driving enhanced efficiency, greater scalability and sustained profitable growth. Turning to Middle & Large Business. Underlying results were excellent with solid growth. We are focused on maintaining margins and making appropriate risk decisions using enhanced underwriting tools. Middle & Large continues to advance the vision of an automated AI-driven underwriting process to enhance productivity and accelerate speed to market. Our strategic investments leverage strength in Small Business and extend those advantages to Middle Market. Over time, we believe this positions us well to capture additional market share in this space. Shifting to Global Specialty. Results were outstanding with sustained underlying margins in the mid-80s and record quarterly gross written premium of $1.3 billion. Our strong competitive position, broad product portfolio and disciplined renewal pricing drove this performance. Gross written premium in the wholesale business grew 8%, supported by growth in casualty, auto and inland marine. Global Reinsurance gross written premium grew 15%, driven by strong growth in both U.S. property and specialty casualty lines. With a diverse product portfolio and a constructive pricing environment, we remain confident in the growth potential of Global Specialty. As for pricing, Business Insurance renewal pricing, excluding workers' compensation, is strong at 8.1% and is still comfortably above the overall loss trend. Pricing execution remains highly disciplined with low double-digit increases in auto and general liability, including mid-teens increases in umbrella and excess lines. In workers' compensation, although pricing is modestly down from the first quarter, it remains within expectations. Across Business Insurance, focused expansion in property has driven 12% growth with written premium of $1 billion in the quarter. In Small Business, property pricing within our package product remained strong as we achieved 15% renewal written price increases. In general industries property, pricing is solid and above loss trends. Large property and wholesale pricing declined from the first quarter by 4 and 8 points, respectively. However, both of these lines have adequate margins and account for less than 10% of total Business Insurance property. As we continue to grow the property book, we are maintaining a consistent catastrophe risk appetite and in another active CAT quarter, our CAT losses remain below our market share. Turning to Personal Insurance. Results improved significantly over the prior year. Homeowners had an outstanding quarter, highlighted by 17% written premium growth and a low 70s underlying combined ratio. Renewal written pricing of 12.7%, driven by net rate and insured value increases continue to support healthy margins and reinforces a strong position in the market. Auto underlying results improved by 9.7 points to a mid-90s underlying combined ratio. We are now well positioned to profitably grow in both auto and home. This month, we introduced our Prevail offering, inclusive of auto, home and umbrella, to the agency channel, unlocking additional opportunities with preferred market customers. We expect to be in 6 states by the end of the year and an additional 15 to 20 states next year. Agents are energized by the enhanced efficiency of Prevail and have expressed strong commitment to promoting these improved offerings as new states come online. More broadly, agents and brokers at our annual summit in May conveyed a clear eagerness to deepen their partnership with us across the enterprise. They continue to recognize our ability to deliver fast, accurate solutions as a key differentiator in the market. With our ongoing investments in AI, digital tools, and overall ease of doing business, we are well positioned to grow alongside our distribution partners and strengthen our collaborative success. Moving on to Employee Benefits. Core earnings margin of 9.2% was exceptional, driven by excellent life and disability results. Persistency remained strong in the low 90s, while fully insured premium growth was flat, reflecting a competitive market. Looking ahead, we are particularly excited about our recent partnership with Nayya, which brings AI-powered personalization through benefits enrollment. This collaboration enhances digital capabilities and simplifies the benefits experience for employees through seamless integration with leading HR platforms. Improving benefit utilization enhances employee satisfaction and in turn, helps employers retain their workers. This is another example of how we are advancing our innovation strategy and delivering meaningful value to both employers and their employees. In summary, second quarter results reflect the strength of our businesses and the impact of ongoing strategic investments. It is an exciting time at The Hartford as we advance our innovation agenda. We are prioritizing practical, high-impact AI applications that augment human talent and drive productivity to better serve customers and distribution partners. Looking ahead, we are confident in our ability to capture additional market share, deliver profitable growth, and capitalize on the opportunities ahead. Now I'll turn the call over to Beth to provide more detailed commentary on the quarter.

Thank you, Chris. Core earnings for the quarter were $981 million or $3.41 per diluted share with a trailing 12-month core earnings ROE of 17%. In Business Insurance, core earnings were $697 million with written premium growth of 8% and an underlying combined ratio of 88. Small Business continues to deliver industry-leading results with written premium growth of 9% and an underlying combined ratio of 89. Middle & Large Business had another quarter of strong profitability with an underlying combined ratio of 89.1 and written premium growth of 5%. Global Specialty second quarter was outstanding with an underlying combined ratio of 84.8 and written premium growth of 9%. The Business Insurance expense ratio of 30.6 improved 0.5 points from the second quarter 2024, primarily driven by the impact of higher earned premium. In Personal Insurance, core earnings for the quarter were $94 million with an underlying combined ratio of 88. The auto underlying combined ratio of 95.2 improved 9.7 points from the 2024 period, and homeowners produced an excellent underlying combined ratio of 72.7, which improved 5.1 points. Written premium in Personal Insurance increased 7% in the second quarter, in part driven by steady and successful rate actions. We achieved written pricing increases of 14% in auto and 12.7% in homeowners. Additionally, new business growth continues to be robust in homeowners at 47% over the prior year. Homeowners' policy count continued to grow, while auto decreased as expected. We continue to expect that auto policy count will pivot to growth in 2026. The Personal Insurance second quarter expense ratio of 25.1 improved from the prior year by 1.3 points, primarily driven by the impact of higher earned premium, partially offset by a higher commission ratio due to business mix. With respect to catastrophes, P&C current accident year losses were $212 million before tax or 4.9 combined ratio points, primarily related to tornado, wind and hail events largely concentrated in the South and Midwest regions. As a reminder, we have a $200 million aggregate catastrophe cover, which attaches when the subject losses and expenses exceed $750 million. Through June 30, losses subject to the treaty were approximately $690 million, leaving $60 million before we reach the attachment point. The aggregate cover does not include losses from the Global Reinsurance business, which purchases its own retrocessional coverage. Total P&C net favorable prior accident year development within core earnings was $163 million before tax, primarily due to reserve reductions in workers' compensation, catastrophes, bond, commercial property, and across Personal Insurance. We recorded $24 million before tax of deferred gain amortization related to the Navigator's ADC, which positively impacted net income with no impact on core earnings. We expect the remaining balance of $8 million to be amortized in the third quarter. Moving to Employee Benefits. We achieved core earnings of $163 million for the quarter. The core earnings margin of 9.2% reflects excellent group life and disability performance. The group disability loss ratio of 68.5 increased 1.4 points from the prior year, driven by short-term disability and a slight increase in long-term disability incidents partially offset by strong claim recoveries. However, long-term disability incidence rates continue to remain favorable to historical averages and to our expectations. The group life loss ratio of 74.3 for the quarter improved 0.6 points, reflecting lower mortality, primarily driven by the accidental death product. The Employee Benefits expense ratio of 25.7 increased 1.3 points compared with 24.4 in the second quarter 2024, primarily due to higher technology costs and higher staffing costs. Fully insured ongoing sales in the quarter of $107 million increased from $101 million in the second quarter 2024, reflecting higher group disability sales. Turning to investments. Net investment income of $664 million increased from the second quarter 2024, primarily driven by a higher level of invested assets and reinvesting at higher interest rates, partially offset by a lower yield on variable rate securities. The total annualized portfolio yield, excluding limited partnerships, was 4.6% before tax, 20 basis points above the first quarter 2025. We continue to strategically manage the portfolio, balancing risk while pursuing accretive trading opportunities, and in the quarter, reinvested at 130 basis points above the sales and maturity yield. Our second quarter annualized LP returns of 1% before tax were down from first quarter. Returns have been muted due to market uncertainty stemming from a combination of interest rates and tariff policy, which has limited valuation and sale activity in our private equity and real estate portfolios. However, with stronger public equity performance in the second quarter, we expect limited partnership returns to improve in the second half of the year, with full year 2025 returns modestly exceeding 2024. Turning to capital management. Holding company resources totaled $1.3 billion at quarter end. During the quarter, we repurchased 3.2 million shares under our share repurchase program for $400 million, and we expect to remain at that level of repurchases in the third quarter. As of June 30, we had $2.35 billion remaining on our share repurchase authorization through December 31, 2026. In summary, we are very pleased with our outstanding performance for the second quarter and believe we are well positioned to continue to enhance value for our stakeholders. I will now turn the call back to Kate.

Thank you, Beth. We will now take your questions.

Your first question comes from Andrew Kligerman with TD Cowen.

I saw another impressive quarter with Global Specialty premium growing 9%, combined was again, under 90. Could you remind me of the mix of in-force business in Global Specialty? And coupled with that, where are you seeing the growth? Is it small, mid, large? And what product areas?

Andrew, thanks for joining us. I'll give you a high level and then Mo can maybe give you a little more details. But yes, it's a broad-based U.S. and international organization. The international organization is our syndicate in Lloyd's that is focused primarily on casualty lines, energy, marine, and you get into the U.S., the major product lines are E&O, D&O, bond. There's some specialty lines in there like cyber and EPLI. So it's quite diverse. And yes, thanks for noticing how well it's been performing over the last couple of years. But Mo, would you add anything?

Also in that line, Andrew, is just short of $1 billion in our Global Reinsurance business, which is a good mixture of property and casualty globally. But the opportunity set in Global Specialty, broadly, I think we're excited about the Global Re opportunity. We continue to be rather opportunistic in that space, trying to grow when the market is there, and we feel the market in the reinsurance space is fairly supportive. The wholesale space in there, again, we feel it's very supportive. I think we've talked about in the past, we have a predominantly construction casualty book, and we look to grow the other lines, including property in the marine. So we feel good growth there. And then you push into markets like Lloyd's, and there's good opportunity for us as we double down on the specialty areas we're in. And I think the last thing, which I think is fairly unique to our specialty business is the idea that we are driving specialty products into our small and middle customer base, and that's a large part of the effort of that entire team is to make sure that we are selling every specialty product that we have to as many small and middle customers as we can.

That was very helpful. And maybe just shifting over to Personal Lines. I mean it was pretty much strong everywhere, but in Personal Lines, it sounds like you've kind of gotten to the profitability levels that you need. But I want to get a little clarity on when you want to grow. I think, Chris, maybe in the opening remarks, it seemed like you're ready now, but then Beth kind of mentioned 2026. So when do you think you can really start growing in a meaningful way? And during this year, do you expect, in both auto and home, to see double-digit rate continue in the coming two quarters?

Yes, Andrew, I would say both Beth and I and Melinda and working with Mo, now is the time to grow in Personal Lines. We worked hard to sort of get back to target margins that we wanted in this book. Everyone else in the marketplace is pivoting to growth also. So there will be competitive dynamics. But I think we have some differentiated capabilities, both in auto and home, both in our direct channel, which is our primary business, but also as we roll out our new Prevail offering and package and technology to independent agents. So I think we're feeling good. You could see we're growing our home PIF count responsibly with good discipline and not taking on too much CAT risk. And I expect, from a pure number side, to be able to begin to add PIF count in 2026, just given sort of the competitive dynamics in the rest of this year. And if I forgot part of your question, Andrew, ask it again.

Yes. Just the rate. Do you think for the balance of the year, you'll still need double-digit rate in auto and home?

Yes, I think what I would foreshadow is, yes, double-digit rates in the third quarter in auto. We'll probably get to maybe high singles in the fourth quarter. And then home, just given sort of the inflationary pressures and insured value increases that we need to keep up with, yes, I would expect sort of low double-digit rates in home going forward.

Your next question comes from the line of Elyse Greenspan with Wells Fargo.

My first question is on Business Insurance. Chris, at the start of the year, you laid out guidance for consistent margins for the year. Halfway through, we're looking at a 30 basis points deceleration. We can perhaps call that consistent. So I guess I just want to get a sense of where we sit halfway through the year and just, if there's any changes to your full year guidance for the underlying combined ratio within Business Insurance?

Yes. Thank you, Elyse. I would say six months into this year, I'm pretty satisfied. The team is executing, I think, exceptionally well. We made a point of emphasis on trying to hold on to margins and keeping up with trend. I think we've done that wonderfully. And I appreciate you of all people. Let's not quibble over 30 basis points. And I think we're pretty consistent with what are expected. And we still got six months to go to continue to perform strongly and maybe even outperform. So that's what I would share with you.

And then my second question, within Employee Benefits, but just on the life business. Can you just expand on what drove the strong results in the quarter? And I'm particularly interested just in more color on what you're seeing with mortality?

Yes. I think Mike Fish and I will tag team here. Yes, I thought it was a strong quarter, 9.2% that's strong margins. Obviously, it's above our long-term guidance, principally driven by continued strong recoveries in LTD. We put a little bit more rate into our leave book and some of our short-term products that's contributing. And life mortality is behaving very, very nicely for us. So putting it all together, yes, really, really pleased. I think the only thing we're focused on, and it's self-evident, so we may as well talk about it, is our top line is a little flat. And I'll give you a perspective that I ultimately made the decision on was, if you look back sort of two years ago, really, when we were pricing 1/1/25 business, which is the big national account season, we probably, in hindsight, took a more conservative view on mortality trends. I thought we were still going to be in an endemic state, and we were pretty disciplined in trying to get additional rate into the book. I think that had the consequences of suppressing our life sales, particularly 1/1. Disability sales, I think, are holding up well. We're always going to be disciplined there, just given how quickly morbidity trends could change on you in the multiyear guarantees. But as I look at the second half of this year and into '26, I'm exceedingly optimistic about returning to a growth orientation, Mike, and I don't know if you would add anything to that color, but I'm pretty optimistic that I think we got our pricing where it needs to be, particularly post pandemic.

I think Chris addressed that very well. I would like to add a couple of points. In this quarter, particularly concerning the life sector and the loss ratio, we experienced some unexpectedly favorable conditions, especially in AD&D, which positively impacted our loss ratio for the quarter. As Chris mentioned, I believe we will be intensely focused on the next six months to ensure a strong finish for 2025. Looking ahead to the January 1, 2026 selling cycle, I feel confident. We have developed excellent capabilities and made significant investments in technology for our offerings, including absence and leave and digital features for our life book. Overall, I feel good about the current market conditions and remain cautiously optimistic about the upcoming 6 to 9 months.

Your next question comes from the line of Brian Meredith with UBS.

So Chris and Mo, I'm just curious, I wanted to talk a little bit about the commercial property markets. You all are seeing some good strong growth in that market. There's been a lot of discussion on calls already this quarter about big price decreases, 10%, 15%. It doesn't necessarily mean it's unprofitable down 10%, 15%. But maybe you can talk a little bit about what you're seeing in that marketplace? Are you in different areas where maybe you're not seeing the level of competition and kind of the growth you're putting on there?

Yes, Brian, it's Chris. I'll begin and then ask Mo to share his thoughts. Overall, we're satisfied with our property book and its growth. We've achieved approximately 15% growth. In terms of pricing, excluding Global Re for the second quarter, the pricing increase was 7.9%, down from 11.8% last quarter. The large property market and wholesale property market are mainly responsible for these declines. For Spectrum, our BOP product, the property component increased by 14.7%, while our general industry properties showed a 6.1% growth, which we believe aligns with loss cost trends. Our team is performing well. Not all properties are the same; our focus on small to midsized businesses is proving effective, and we are executing strongly. Mo?

Yes, Brian, I would say the rates are generally holding up well. They are trending down but still remain strong, as Chris mentioned. In our core small and mid-sized segment, I believe there are still opportunities and a solid starting point. As we discussed in the opening remarks, there is some pressure, particularly in the larger property and wholesale segments, where the starting point is good but is being monitored closely.

Great. And then a follow-up question. I'm just curious, obviously, a big admitted market, but you also have some E&S type businesses. Maybe talk a little bit about the dynamics between those two. Are you seeing a little more appetite admitted versus E&S? And then also on that topic, we've been hearing some complaints about some MGAs out there and kind of what's your perspective on that and using MGAs?

Yes, Brian, I wouldn't say there's a significant influx into the admitted space. We do observe it, but overall, our flow into our E&S offerings is robust. As a reminder, we have offerings in Small Business, which is our binding area, and we also have the wholesale brokerage in our Global Specialty segment. The flows remain strong, and I wouldn't describe them as dramatically different from the past few quarters. This includes property and liability coming into the E&S sector, particularly regarding submission volume. We haven't noticed a major shift or change in that flow. We are optimistic about the opportunities available, and in both the Small Business and Global Specialty areas, we are confident in our growth potential and have a solid foundation. I may have missed the second part of your question, Brian.

MGAs, right? We've heard some complaints about MGAs.

Yes. There are some areas within our business where we don’t see a significant impact from MGAs in the core admitted retail, small, and middle market segments, which is our focus. However, we do notice some issues in financial lines and certain specialty lines where we agree with the commentary regarding overcapacity and disruptions caused by MGAs, but this does not affect us greatly in our core market.

Your next question comes from the line of Mike Zaremski with BMO Capital Markets.

Back to the comments and disclosures on the investment portfolio, the annualized investment yield ex LPs, the spread there versus the reinvestment yield, obviously, a very bullish kind of spread there. So I'm just curious, that annualized investment yield ex LPs has kind of drifted in the mid-4s for over a year now despite the reinvestment yields being meaningfully higher. So I just want to make sure I'm not missing something. Over time, if the yield curve stays the same, would the annualized investment yield ex LPs kind of glide path up to that 5.9% range that's in the slide deck? Or am I missing something because it's just a very healthy spread, much more so than your peers, kind of for the investment yield to glide path up over time.

Mike, I'll let Beth add her commentary. I think what's important to know is we haven't changed philosophically our asset allocation models, our model portfolio. You've seen duration being pretty consistent at 4 within the P&C business, 5 in Group Benefits. So I'll let Beth get into maybe any special securities that we're adding into the portfolio. But generally, it's steady as she goes and no major changes to our balance sheet philosophy.

Yes. The only thing I'll add, Mike, as you think about the overall yield and comparing that is, as I referenced in my prepared remarks, we obviously have felt the impact of lower yields on variable rate securities. So that obviously puts a little bit of pressure on that overall yield, we need to take that into consideration. And then we also sometimes have other investments, not LP investments, that can also have a little bit of volatility that you can see quarter-to-quarter. But as Chris said, nothing significant that I would point to as a change in our philosophy. Our yield this quarter on our purchases being above the sales and maturity yield. Some of that is also just the average life of the securities we purchased was a bit longer than the ones that we sold. So that impacted a little bit as well. But again, as Chris said, I wouldn't point to anything significant change overall.

Okay, I understand your point about the floating rate, but I need to consider it further. Regarding Business Insurance, specifically the retention levels for policy counts in Small Business and Middle Market, is it reasonable to suggest that over a long-term period, the goal is to reach mid-80s retention levels instead of the lower 80s we see today? Or does it vary based on the environment? You provide us with details on new business sales and other metrics, but is there anything we should consider regarding the current retention levels and their potential trends?

Mike, it's Mo. I would say there is a distinction between small and middle markets. In the small sector, our historical numbers are in the mid-80s. There is a dynamic in the small space with small businesses closing, which has a greater impact there. In the middle market, we experience slightly more churn, so we anticipate a bit lower retention in this area. However, I believe what you see in the IFS aligns well with our plans, and I don't foresee any significant changes in the future.

Your next question comes from the line of Gregory Peters with Raymond James.

First, in your opening comments, you talked about data science advancements. I think with the Small Business, you referred to the usage of AI leading to a 75% buying ratio within minutes. So when you discuss these points, does the 75% represent the final destination? Or is there some sort of aspirational target you're considering? Are you also thinking about applying this technology to your Middle Market business? I'd appreciate some more insights on your comments regarding the technology.

Yes, I believe the point you've made is crucial. Small has been at the forefront of many innovations, such as AI, automation, speed, and accuracy, leveraging our extensive data sets. We are working to replicate that success in the Middle Market and certain areas of Global Specialty. That's our approach. While I could suggest a goal of 100%, I think it's realistic to expect that there will always be some need for human input, especially as we move into larger scale and more significant accounts in the small segment. Nonetheless, I am very satisfied with our progress. It's a significant advantage for us. We are dedicated to leading in AI, particularly in underwriting, claims, and overall operations. Mo, do you have anything to add?

Greg, I'd just add from an underwriting perspective. In the space that we compete in the small and middle space, speed really, really matters to get an efficient answer back to our agents. So we are finding that the speed that we've accomplished in small, that's 75% of everything we quote, and getting that closer to 90% over time is a hugely competitive space to be in, just because that time is real money because people are just trying to get through submissions and maintain the margins that are hard to get in the small space. And again, we think that speed is equally as important in the middle space. So we think this is a competitive advantage in both segments today that we'll look to grow in the future.

Thanks for the clarification. I understand that you've utilized all of the adverse cover concerning the annual reserve review and asbestos. Although I usually steer clear of modeling inquiries, it feels relevant now that we're approaching a year-end review. Perhaps you could consider how you want us to frame the reserve review as we enter the second half of the year and what we should keep in mind for our models?

I'm not going to provide exact guidance, but I want to highlight a few points. We track recoveries from any ADC in our net income rather than core earnings, which makes it important to differentiate between the two, especially concerning some of the runoff blocks. We haven't offered a timeline for expected recoveries on the A&E ADC, but they will occur at some point. Although I don't have this year's study data, I anticipate that our findings won't be significantly different from previous years. There are still lawyers advocating for higher settlements and ongoing environmental issues, including talc and mesothelioma claims in the marketplace. So, I don't have much to add, Greg; I don't anticipate significant changes.

Your next question comes from the line of Alex Scott with Barclays.

One I had was on Small Business. I guess the underlying combined ratio, while still very good at 89, it went up 2.2 points. For the Middle & Large improved by 0.5 point. I guess that was just maybe directionally a little different than I would have guessed, given I think the Small Business pricing is more definitively in excess of loss cost trend versus Middle & Large at this point. Any help you can provide us in just thinking through like the year-over-year in those areas of Business Insurance?

Yes, I'll start and Mo can add. I think it's pretty simple. Last year, I think in small, we experienced a real non-CAT weather benefit that didn't reoccur this year. And if I look at our sort of actual results to assumptions on property, we're right on expectations of where we are, maybe 2/10 ahead with non-weather CAT benefit. But I think it's just a compare in both middle and small, I think, are performing really well with our property books.

Yes. We're right on expectations in terms of where we want to be.

Yes, I understand. My question is primarily about the comparisons. I’d like to know how the workers' compensation aspects are trending. Is there any impact from California that we should consider, and will we see some relief when the pricing adjusts next year? I want to determine if this has created a challenge in the Business Insurance sector that I need to keep in mind. Additionally, I recall that the comments about pricing excluding workers' comp indicated that they are comfortably ahead of the loss trend. Can you confirm if that remains the case when including workers' comp?

We always exclude workers' compensation because it operates within its own ecosystem with unique dynamics. I want to clarify that California is actually a strong state for us in terms of workers' comp. You shouldn't view California as a problem area for our business there. California has its unique characteristics, but our performance in that market is exceptional. The trends I mentioned regarding pricing from the first to the second quarter are solely related to pricing. We haven't adjusted our loss estimates for any of our product lines compared to our initial expectations. While there may be slight fluctuations in compensation pricing, it hasn't impacted our loss estimates. In the first quarter, we indicated an overall pricing increase of three-tenths of a point, which likely turned negative this quarter to about half a point. Nevertheless, our reported results remain unaffected because we made prudent overall loss estimates and assumptions that continue to hold true. That's the only additional information I would provide, but I'll turn it over to Mo to see if there's anything else he would like to add for Alex.

I would say, again, I think it's important to note that pricing in comp in both small and middle is right on expectations as well. So there's nothing going on in the quarter that's out of pattern for what we expected to have. And in terms of California, again, we are in great shape from a profitability in California. And we've been watching the cumulative trauma for some time. So I don't think anything is terribly surprising there either.

Your next question comes from the line of Wes Carmichael with Autonomous Research.

On Employee Benefits, Chris, I wanted to follow up on your comments to a prior question that I thought were interesting in terms of pivoting towards a focus for growth and maybe 2026 in the life product. I guess if I think about that in the context of your margins today being pretty well in excess of the targeted range, I'm just wondering if you're happy to sacrifice a bit of margin in order to get some growth in EB, and if you think that should come back to your 6% to 7% target range fairly quickly.

Thanks for the question, Wes. It's hard for us to think like that. So I'll just be honest. I mean we're pricing products with the 6% to 7% view of, I'll call it, prudent assumptions that obviously has a range around it from an outcome perspective. And you would say, the last 3, 4 years, we've been on the benefit side of the range of outcome. So remember, particularly in life products, I mean, we're making 4-, 5-, 6-year guarantees and that's a long-term commitment with potentially a lot of variability around mortality outcomes. So what I alluded to, though, is that when we looked hard at our endemic pricing coming out of COVID, we've stripped that out now, so I would say we're pretty clean from a historical trend side. And I think that will allow us to be equally competitive, maybe if not more, while not just sacrificing price and rate. But Mike Fish, what would you add?

Yes, Wes, I’d like to add a couple of points. When we examine our product offerings, we have some strong products in our supplemental health line that are experiencing low double-digit growth, and we will continue to focus on expanding that segment of our business, even though it is relatively small for us. Additionally, regarding pricing, it's important to consider the margins we are achieving. In our renewal business, we are dedicated to maintaining those higher margins. We are satisfied with our results, particularly with persistency in the low 90s. The profitability of our in-force book is very favorable. Looking ahead, we plan to compete aggressively in new business, feeling confident about our selections in both the life and disability sectors. Lastly, we have discussed the paid family medical leave product line, in which we have implemented over 20 points of rate adjustments in the first and second quarters, while also maintaining strong persistency. We will closely monitor utilization rates. Overall, I am optimistic about our growth outlook for the next 12 months.

Your next question comes from the line of Paul Newsome with Piper Sandler.

Just maybe one additional question. If you have any thoughts broadly on the whole social inflation issue and litigation finance challenges. A lot of your peers talking about it this quarter. And I wondered if you had any thoughts yourself.

Yes, Paul, I think we spoke about it equally in the past. It's still a fact of life, still a tax. It's still a burden. It's not fair. It's not what our court system was intended to. But I'm also equally optimistic that more and more people across the industry and businesses are getting involved and trying to take a legislative corrective action. We work through our trade group in a lot of those discussions, but then there's individual contributions and discussions. So it's still alive and well. And I think the overall trends of sort of the tactics involved are continuing. I don't see any real differences in our trends, whether it be time bar demands, whether it be earlier representation with lawyers on sort of simple claims. So yes, but there has been progress in certain states, particularly in the Southeast that have enacted reforms that have been signed by their governors, and we'll continue to sort of fight the good fight and really highlight this. I think it's getting a little bit more national attention, particularly in D.C., and I was really actually encouraged by former Attorney General Barr's comments on the need just to put some limits on these injury claims, including noneconomic limits. So it's getting the attention and hopefully, legislation will come because that's what's needed to enact it at a state and/or federal level.

Do you have any sense of any way that you or anybody else could measure the impact of litigation finance?

Are you being serious? You measure. I mean, it's showing up in our loss trends. I mean, showing up in our allocated loss expenses. I mean we're spending more time and money on something that turned our judicial system into a gambling system. Are you serious?

No, I apologize. What I mean is this, there's obviously some underlying social inflation issues that come from court changes and other things. And then there's pieces that are coming from the litigation part in particular. And I was wondering if there are any ways to sort of bifurcate what's purely because of the litigation finance stuff or from other sources? That's the question.

I understand your point. There are indeed many lawyers inflating the average costs, and the increase in significant verdicts is also a factor. I believe we have measurements for both issues, though I don't have the specifics at the moment. Both of these factors are contributing to the problem, Paul.

Your final question comes from the line of Bob Huang with Morgan Stanley.

All my questions about BI have been addressed, so I will now focus on the Personal Line. You mentioned growth, and it’s clear that you have a robust combined ratio in the mid-90s and a core combined ratio in the high 80s. Given any historical context, you seem well-prepared for growth. However, I would like to gain a clearer perspective on your competitive landscape. It appears that several carriers in the Personal Line currently have similar underwriting profiles. Could you provide insight into how you see the competitive dynamics for homeowner and auto insurance as you aim for growth? Is it easier for you to expand right now because of your combined ratio, or is it actually challenging? I’m interested in your perspective on this.

Yes. Thank you, Bob. I'm going to add my point of view, but I'd like Melinda Thompson to add hers, who runs Personal Lines. I think it's not that easy to grow, or else we would have been growing maybe at a faster historical rate because there is good competition. Our primary channel right now is still the AARP endorsement with the direct response models, which we think does give us a competitive advantage to really help a mature customer with policy decisions, with limit discussions, with how claims would be handled. So that's important to that cohort. But we're taking sort of the chassis that we rebuilt in that area and trying to apply it through independent agents, particularly with a similar sort of mature market approach. And we're quite confident with our independent agents, just given our historical relationship with distribution partners that sell both personal and commercial, particularly small insurance. So again, we think from a relationship side there, we think our product is competitive and has the right features and benefits that customers would like over a longer period of term but it is still a competitive environment. But Melinda, what would you add?

Thank you, Chris. I would agree with you. The environment is healthy and a number of competitors are aggressively positioning for new business in the marketplace. And so certainly, as we think about our overall position, growth is going to require two things. One is retention improvement and then new business. And so as I think about moderating rate that we will experience throughout '25 and into '26, that pressure on retention will also moderate. And then we have been implementing a number of initiatives to stimulate new business. Chris mentioned the agency and what we are doing there, the reengagement efforts have been meaningful in our new business. And on top of that, we've implemented some rate and non-rate levers, the marketing spend. So all of those things together are really about supporting growth.

That concludes our Q&A session. I will now turn the conference back over to Kate Jorens for closing remarks.

Thanks for joining us today. Please reach out with any additional questions, and have a nice day.

This concludes today's conference call. You may now disconnect.