President at The Hartford Financial Services Group
Thanks, Beth, and good morning.
The strength of The Hartford's Property & Casualty business was once again evident in the second quarter. Despite inflationary pressures and lower GDP, our broad product portfolio and specialized underwriting expertise positively impacted the quarter's financial results. Those two factors, combined with our distribution footprint and deep talent base, position us well to maintain strong performance going forward.
In Commercial Lines, we achieved double-digit written premium growth for the fifth consecutive quarter. Underwriting results were excellent with underlying margin improvement in Small Commercial and Global Specialty.
Diving deeper into growth, Commercial Lines pricing was fairly consistent with expectations. Written pricing, excluding workers' compensation, was 6.1%, about 1 point lower than first quarter, but continuing to exceed loss cost trends across most products. Workers' compensation pricing remained positive, but declined slightly. Global Specialty pricing markets were more competitive with written price at 5.5%, off about 2.5 points compared to quarter one. However, pricing in our wholesale book actually ticked up remaining in the high-single digits.
Notable contributions to an excellent Commercial topline quarter include: strong policy retention across markets; our largest new business quarter ever for Small Commercial at $201 million; solid new business levels and middle and Global Specialty, despite increasing signs of a more competitive market; and strong audit premium from robust customer payroll growth.
In total, I'm pleased with our growth profile across these components and confident we will continue our disciplined execution.
Turning to the loss cost. Trends were largely in line with expectations. We continue to watch severity across our book, including social inflation, wage growth, supply chain pressures and commodity pricing. All in, our Commercial book posted a very strong quarter and first half of 2022.
Our Small Commercial team recorded an outstanding underlying combined ratio of 86.9 for the quarter. Since the first quarter of 2013, Small Commercial has achieved a sub-90 underlying combined ratio in every quarter except two. Global Specialty's underlying combined ratio for the quarter was a stellar 83.1, their best result since the acquisition, and Middle & Large Commercial delivered a solid 92.9.
There certainly has been a fair amount of discussion concerning the impact of future economic conditions on our industry, particularly workers' compensation. From a topline perspective, the data we watch are employment levels and wage growth, which together determine the payroll base for workers' compensation.
Shifting to the loss ratio, we're focused on the following key metrics: wage growth, which acts as a form of pricing with indemnity payment offsets; changes in worker tenure, which can impact claim frequency; and the impact of inflation on medical severity. With respect to medical severity, we believe our long-term view of 5% in both pricing and reserving is sufficient to cover the potential for increased severity above the benign trend we've experienced the past few years.
We are well positioned to address these trends head on. Our workers' compensation accident year performance has been excellent over the past several years, and the balance sheet is strong. We have also built sophisticated pricing and risk segmentation tools and expanded data analytics within the organization to successfully underwrite through different economic cycles.
Let's switch gears and move to Personal Lines. Our second quarter underlying combined ratio of 94.1 reflects auto physical damage pressure driven by supply chain related inflation, elevated used car prices, and wage increases. In the second quarter, these auto severity trends were higher than we initially anticipated. Combined with normal seasonality in our book, the second quarter auto accident year loss ratio increased 5.7 points from the first quarter of this year. The physical damage increase was 2.5 points, with the remaining delta normal seasonality.
As Beth noted, we expect a continuation of inflation pressure in the back half of '22 and have moved our original guidance up accordingly. We are pleased that our pricing actions initiated over the past few quarters are starting to take hold. Auto written premium price increases recorded in the quarter eclipsed 4%. Rate actions taken across 39 states in the first half of the year averaged 5.7%.
In Home, overall loss costs were in line with both the first quarter and our expectations. Non-CAT weather frequency, although higher than the prior year, continues to run favorable to long-term averages, offsetting elevated large fire losses and material and labor costs, which remain at historically high levels. We are also taking pricing actions in Home with written pricing at 9% for the quarter. Given all these factors, I remain pleased with both our year-to-date current accident year Home loss ratio of 63.3 and combined ratio of 94.2.
Turning to production. Written premium growth was nearly flat with steady retention and new business growth of 5.6% in the quarter. We're seeing a significant increase in responses, driven by our digital marketing programs and increased consumer shopping in the 50-plus age cohort.
With that said, I would characterize our Personal Lines growth attitude as cautiously optimistic based on the current risk profile of the segment and the opportunities available in the market.
Prevail is currently available in 16 states, including launches of Florida in January, Texas in April, and three more states this month. We have also launched expanded self-service capabilities, demonstrating our digital customer commitment in this space. Year-to-date Prevail new business premium was $36 million, with conversion rates at expectations and we continue to be pleased with the quality of our new business. In addition, our redesign telematic offering is available in 16 states and will be launched in additional states as Prevail rolls out. Our initial results, including consumer interest, online adoption and enrollment are all trending ahead of expectations.
Summarizing the strong results for Property & Casualty. Our Commercial Lines business maintained a double-digit growth rate with exceptional operating margins. And in Personal Lines, while auto severity is pressuring loss ratios, pricing actions are getting stronger, and increasing contributions from Prevail add to our momentum.
As I wrap up my comments today, let me step back and provide a bit of perspective from my operating seat here at The Hartford. Neither we nor our competitors can control the external forces or economic trends that will occur in the future. However, we can control our preparation and our response to various likely or possible scenarios. I firmly believe The Hartford has never been better positioned to aggressively take advantage of opportunities while mitigating the downside risks.
My confidence comes from our broadened product portfolio, responsive to solving broker and customer needs, the enhanced underwriting and deep analytic capabilities that deliver competitive advantages and lead to outstanding financial results, strengthened technology and digital tools that have improved our competitiveness over the past 10 years, and an invest agenda that is cutting edge and as forward-leaning as anything I see in the marketplace.
In short, we have transformed the small business marketplace with our innovative and industry-leading capabilities, and we are well on our way to achieving the same in middle market space. Global Specialty is producing excellent results and will increasingly leverage the competitive tools built within our walls. And finally Personal Lines is off to a good start with our cloud-based product Prevail, which will be pivotal to our future. For these reasons and more, I am bullish about our ability to demonstrate strong execution capabilities in the years ahead. I look forward to our next update in 90 days.
Let me now turn the call back to Susan.