Chairman & Chief Executive Officer at The Hartford Financial Services Group
Good morning, and thank you for joining us. The Hartford produced a strong third quarter with core earnings of $471 million or $1.44 per diluted share, which includes the impact of Hurricane Ian and the ongoing effects of a dynamic macroeconomic environment. Before discussing our results in detail, I wanted to extend our thoughts and prayers to all those impacted by Hurricane Ian, a powerful and devastating storm. It is in moments like this that I am especially proud of our Hartford's claims team. Today we have inspected at approximately 95% of all claims submitted and issued initial payments on 50% of those claims. Over the coming months, our team will continue to work tirelessly to help all our customers affected by the storm.
Nearly a year-ago at our Investor Day, we told you how confident I was in our portfolio, capabilities, expertise, talent and our ability to deliver consistent and sustainable returns. As we look back, the clearest proof point that our strategy is working is our financial performance. In the first nine months of 2022, we delivered core earnings growth of 18% and core EPS growth of 27%, top line growth in Commercial Lines of 12% and Commercial underlying combined ratio of 88.6, Group Benefits core earnings margin of 5.9%. We returned approximately $1.6 billion to shareholders and yesterday announced a 10% dividend increase. And we also produced a trailing 12-month core earnings ROE of 14.3%. These are terrific results that reflect the Hartford's performance-based culture and demonstrate why despite the continued headwinds of inflation and economic uncertainty, we are confident in our ability to continue to execute at a high-level.
In Commercial Lines, we remain disciplined and prudent in establishing loss picks. We continue to have approximately 100 basis points of spread between renewal written pricing and loss trends, excluding workers' compensation. Our small commercial results continue to be exceptional. Next-gen Spectrum, our market-leading business owners product is feeling much of our new business success as we gain market share at very favorable margins.
The digital customer experience we provide in Small Commercial is a significant competitive advantage for customers, agents and brokers as it provides a fast, intuitive, and efficient platform for doing business. The most recent Small Commercial Keynova study ranks us number-one in digital capabilities for the fourth consecutive year. Our score climbed four points and we are now 20 points higher than our closest competitor.
Middle and large commercial is benefiting tremendously from the combination of deep industry specialization in product breadth leading to new business growth and improving loss and retention ratios. We are confident that our data science pricing-segmentation and claims execution will continue to support underwriting discipline.
In Global Specialty, results are outstanding. Underwriting margins have improved materially over the last three years. Execution has never been stronger and the enhanced underwriting expertise we bring to the market is strengthening in our competitive position and driving market-share gains. In personal lines, we continue to take pricing actions as higher inflation impacts results.
As Doug will describe, we will continue to file for increasing rate changes across our book to restore profitability. Overall, I am confident we have the right strategy and execution in personal lines.
Turning to Group Benefits, in the quarter, core earnings were $117 million with a margin of 7.2% reflecting lower excess mortality and strong disability results. Long-term disability trends are stable and within our expectations for incident rates and recoveries. Modestly higher expenses reflect increased investments in capabilities, including digital, claims automation and administrative platforms.
Fully-insured ongoing premiums were up 6% compared with the third quarter of 2021, driven by an increase in exposure on existing accounts as well as strong persistency in sales. Fully-insured ongoing sales were $106 million in the quarter, up 29% with increases in both group disability and group life. In many ways, the fundamentals of the Group Benefits business are stronger than prior to the pandemic. Product requiredness [Phonetic] is greater as both employers and employees are highly engaged on benefit offerings with growing demand for supplemental products. This is an opportunity for us to deliver higher value and create a differentiated experience for our customers.
And lastly investment results were healthy in the quarter and are beginning to reflect the rising rate environment, which will earn in more meaningfully in 2023. Taking a step back, I want to touch upon some overarching themes. First the impact of inflationary pressures and changing weather patterns on pricing and loss costs. Second, the positive impacts of the current interest-rate environment. And third, the importance of our healthy and balanced insurance regulatory system that ensures stability and predictability for all.
As we have discussed over the last several quarters across the industry, carriers are dealing with elevated inflation related to goods services and most components used in manufacturing. These inflationary pressures are likely to remain as the fed continues to tighten monetary policy and despite some early signs of reduced demand and economic output. At the same time, changing weather patterns continue to drive increased frequency of events and associated claim severity. There are no silver bullet to fix this problem.
Ongoing efforts to build more resilient homes, communities and commercial properties, is to be an ongoing focus of policymakers, insurers, agents and carriers. Taken together, these trends point to the need to maintain underwriting discipline and ensure pricing keeps pace with loss trends and reserving assumptions.
As long as these trends continue, rates will need to rise and in some cases, we will reaccelerate pricing increases over the near to-medium term. The Hartford is committed to maintaining price discipline and we have clearly communicated to all our underwriters the need to expand or maintain margins, ex workers' comp, while prudently growing our book of business.
Because interest rates are expected to remain elevated, we anticipate our portfolio yield excluding limited partnerships will increase by approximately 50 to 60 basis points in 2023, compared to full-year 2022, which will benefit earnings.
Finally on the regulatory front, our state-based system of Insurance Regulation has generally served customers and the industry well, although at times has experienced instability in certain jurisdictions and across certain product lines. At its core, the mission of Insurance Regulation is to protect consumers while ensuring a stable market, one that fosters market competition and safeguards carrier solvency. Balancing these two aspects of the regulatory mission is critical to ensuring widely available and affordable insurance.
Recently, we have seen instances where regulation has become politicized creating instability in the market and upsetting the balance the regulatory system is designed to achieve. Recall on policy makers to respect the insurance regulatory framework, take the necessary steps to address rising legal system abuse, rate Inadequacy and persistent underinsured exposures while working with the industry to support a well-functioning marketplace where insureds get the coverage they need and carrier secure an appropriate return for the risk they undertake. As a company, whose purpose is to underwrite human achievement. Hartford stands ready to engage on these issues actively and constructively.
Before I close, last month, we announced the retirement of Doug Elliot as the Hartford's President at the end-of-the year. Beth and I have worked together with Doug and the entire Hartford team over the past decade to transform the Hartford and build the foundation for our company's future success. Doug was instrumental in expanding our product -- suite of products, developing industry-specific verticals within our property and casualty business, overseeing the integration of the Navigators Group and elevating our underwriting excellence..
Thanks to Doug's strong leadership, the Hartford is well-positioned for profitable growth in the years ahead as we build-on the momentum created to best serve all of our agents and brokers and customers. I want to thank Doug for his many contributions to our company. Thank you, Doug. Doug Elliot did have many guests [Phonetic] including a seasoned group of executives who are going to continue our high-level performance. I have tremendous confidence in the talents, skills and focus of this leadership team.
In closing, let me leave you with some concluding thoughts. These results demonstrate our strategy and the investments we have made in our businesses have established the Hartford as a proven and consistent performer. We had outstanding execution capabilities, and exceptional talent that drives my confidence in our ability to continue to produce superior returns. We are managing the investment portfolio prudently and all holdings are well-balanced across diversified asset classes and we are proactively managing our excess capital to be accretive for shareholders. All these factors underpin my confidence that we will continue to meet or exceed our core earnings ROE objectives.
Now, I'll turn the call over to Beth.