The Hartford P&C CR improves to 92.1% despite $141mn A&E reserve increase

By Michael Loney

Jan 30 - (The Insurer) - The Hartford has reported a Q4 earnings beat in results that included the property casualty combined ratio improving 1.6 points, with a worsening in commercial lines and marked improvement in personal lines.

The Connecticut-based company reported core earnings of $865mn for the fourth quarter, down 7 percent from $935mn in the same period of 2023.

The $2.94 core earnings per diluted share in the quarter beat the $2.64 consensus estimate of 23 analysts as per MarketWatch, but was down from $3.06 in Q4 2023.

Core earnings from property casualty operations fell 6 percent to $714mn in the fourth quarter compared to the same period in 2023, while core earnings from group benefits fell 20 percent to $139mn and increased 20 percent from Hartford Funds to $51mn.

The property casualty combined ratio improved 1.6 points to 92.1 percent, while the underlying combined ratio improved 1.4 points to 87.8 percent.

The quarter included net unfavourable prior accident year development (PYD) in core earnings of $97mn compared with net favourable PYD of $102mn in core earnings in Q4 2023.

The unfavourable PYD in Q4 2024 was primarily driven by an increase of $141mn related to asbestos and environmental (A&E) reserves after reinsurance related to an adverse development cover (ADC) for Navigators.

The Hartford recorded a $203mn overall increase in A&E reserves before ADC reinsurance, including $167mn for asbestos and $36 for environmental. The company ceded to the A&E ADC $62mn, which is accounted for as a deferred gain on retroactive reinsurance.

Excluding the A&E reserve development, prior accident year reserve development was favourable by $44mn and included reserve reductions in workers’ compensation, catastrophes, bond, professional liability, and personal auto, partially offset by reserve increases in general liability and commercial auto liability.

Commercial lines CR worsens, personal lines improves

The commercial lines combined ratio worsened 2.7 points to 87.4 percent from 84.7 percent. This included 2.1 points of less favourable PYD – including 1.8 points of favourable development related to the amortization of the deferred gain – and a 0.6 point increase in the expense ratio.

The underlying combined ratio of 87.1 percent compared with 86.6 percent in the fourth quarter of 2023.

Commercial lines current accident year catastrophe losses of $67mn before tax in Q4 2024 included $55mn from Hurricane Milton as well as net reductions for cats incurred earlier in the year of $7mn.

This was up from cat losses of $60mn before tax in Q4 2023.

The personal lines combined ratio improved 15.4 points to 85.8 percent, from 101.2 percent in Q4 2023. The underlying personal lines combined ratio improved to 90.2 percent from 99.5 percent in Q4 2023.

The personal lines segment included current accident year cat losses of $13mn, down from $21mn in the same period of 2023. The Q4 2204 cat losses included $13mn of Milton losses as well as net reductions for cats incurred earlier in the year of $11mn.

In the personal lines segment, the auto combined ratio of 98.3 percent improved 15.4 points from 113.7 percent in Q4 2023, while the homeowners combined ratio of 57.8 percent improved 14.9 points from 72.7 percent.

The Hartford cited the impact of double-digit earned pricing increases as well as lower claim frequency for both lines.

Written premium up 6% in commercial lines

Overall property casualty written premiums increased by 7 percent in Q4 2024 to $4.0bn, compared to the same period in 2023.

Commercial lines written premiums increased 6 percent to $3.2bn, with increases across the segment, strong double-digit new business growth in small commercial, and the effect of renewal written price increases.

The Hartford said that excluding workers’ compensation, renewal written price increases of 9.7 percent in the quarter was up 40 basis points from Q3 2024. Workers' compensation renewal written pricing between Q4 and Q3 was “slightly down”, it added.

Personal lines written premiums increased 12 percent to $871mn in the fourth quarter.

The Hartford reported renewal written price increase in auto of 19.1 percent in Q4 compared to 20.7 percent in Q3 2024, and in homeowners of 13.9 percent in Q4 compared to 15.1 percent in Q3.

It also noted an increase in new business in both homeowners and auto from Q4 2023, with homeowners more than doubling to $59mn and auto increasing by 18 percent to $77mn.

For the full year, The Hartford’s combined ratio improved 1.7 points to 93.2 percent while written premiums grew 10 percent to $16.9bn.

“The Hartford delivered an outstanding year with a core earnings ROE of 16.7 percent,” said chairman and CEO Christopher Swift.

“Results were driven by sustained momentum in commercial lines, which once again generated strong top-line growth at highly profitable margins, significant progress in personal Lines toward restoring target profitability in auto, continued strong margins in group benefits, and a higher investment portfolio yield,” he added.