The Hartford Insurance Group - Q2 2024
July 26, 2024
Transcript
Operator (participant)
Thank you for standing by, and welcome to The Hartford Second Quarter 2024 Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question, again, press the star one. Thank you. I'd now like to turn the call over to Susan Spivak, Senior Vice President, Investor Relations. You may begin.
Susan Spivak (SVP of Investor Relations)
Good morning, and thank you for joining us today for our call and webcast on second quarter 2024 earnings. Yesterday, we reported results and posted all of the earnings-related materials on our website. Now, I'd like to introduce our speaker. To start, we have Chris Swift, Chairman and Chief Executive Officer, followed by Beth Costello, our Chief Financial Officer.
After their prepared remarks, we will begin taking your questions. Also, to assist us with your questions are several members of our management team. 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 measures are included in our SEC filings, as well as in the news release and financial supplement.
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.
Christopher Swift (Chairman and CEO)
Good morning, and thank you for joining us today. The Hartford second quarter results were outstanding, contributing to excellent financial performance in the first half of the year. These results reflect the effectiveness of our strategy and ongoing investments to differentiate The Hartford in the marketplace. We remain focused on disciplined underwriting and pricing execution, expanding product and distribution breadth, developing exceptional talent, and delivering a superior customer experience.
Highlights from the second quarter include top-line growth in commercial lines of 11%, with strong renewal written pricing increases and an underlying combined ratio of 87.4. Personal lines top-line growth of 14% with improving margins, an exceptional group benefits core earnings margin of 10%, and solid performance in our investment portfolio. All of these items contributed to an outstanding and industry-leading trailing twelve-month core earnings ROE of 17.4%.
I'm also pleased to announce that with continued strong capital generation from our businesses, the board of directors approved a new share repurchase authorization of $3.3 billion. We will continue to balance growth, investing in our businesses, and returning excess capital to shareholders through repurchases and dividends. Now, let me share a few details from the quarter. Commercial lines produced exceptional results with double-digit top-line growth and an underlying combined ratio below 90 for the 13th straight quarter.
We are using our industry-leading underwriting tools, pricing expertise, and data science advancements to drive profitable double-digit new business growth. Retention was steady and the broader economic environment remains conducive for growth. In small commercial, with our unique and superior market position, industry-leading products, unmatched customer experience, and unrivaled pricing accuracy, we continue to deliver exceptional results, including strong top-line growth and outstanding margins.
New business premium was a record, up 23% in the quarter, in part driven by a 36% increase in quotes and nearly 90% growth in E&S binding, where we continue to see tremendous opportunity. With another quarter of exceptional results and relentless advancement of our capabilities, I remain incredibly bullish on the outlook for our small commercial business. Moving to middle and large commercial, second quarter performance was excellent, including double-digit top-line growth paired with a strong underlying margin.
We continue to take advantage of elevated submission flow, driven in part by investments made to expand our product capabilities and the efficiency of the broker and agent experience. Written premium growth reflects strong renewal rate execution, along with double-digit new business growth, primarily in property and liability coverages.
We have built a track record of delivering meaningful growth while consistently maintaining underlying margins, a result we expect to sustain going forward. In global specialty, for the first time, we achieved over $1 billion in quarterly written premium and maintained underlying margins in the mid-1980s. Our double-digit top-line growth reflects our competitive position, diverse product offerings, and solid renewal pricing.
Written premium growth was propelled by a 38% increase in global reinsurance, a 14% increase in our wholesale business, with significant contributions from primary and excess casualty lines, and double-digit growth in commercial and construction surety. We are particularly pleased with wholesale construction projects bound in the quarter, as well as overall increased submission flow, both meaningful drivers of new business growth.
The global specialty business, with our expanding position in the wholesale and reinsurance market, our broadened product portfolio, and enhanced risk selection tools, has developed into a meaningful, profitable growth engine for The Hartford. As I've highlighted in the past, we continue to focus on property across commercial lines with written premium growth of approximately 20% in the quarter. We are capitalizing on favorable market conditions with a disciplined approach, including a stable and consistent catastrophe risk appetite.
Turning to pricing, commercial lines renewal written pricing accelerated to 6.6% in the quarter, 9.5% excluding workers' compensation. Low teens pricing in auto and high single digits in general liability, including 14% in excess and umbrella, is responding to societal trends. Overall, commercial property pricing has begun to moderate, but was strong in the low double digits.
All in, ex-comp renewal, written pricing in commercial lines remain comfortably above loss cost trends. Workers' compensation pricing remains slightly positive in the quarter. Before moving to personal lines, let me share a few comments we received at our recent annual agent summit. Our broadened product portfolio, increased cross-selling opportunities, and exceptional talent are resonating with the agent community, opening up new business opportunities.
Feedback confirms that the marketplace and our top agents recognize our evolution and strength. They appreciate our strong culture and capability to solve customer problems as a unified commercial lines team, particularly with small business customers, where we are taking advantage of disruption and engaging more than ever with our largest partners to drive efficiency. Our investments and pace in technology were described as compelling and industry-leading, and our talent strategy and succession planning was also complimented.
Our exceptional commercial lines first half results and feedback from our partners makes it clear that we have the team, tools, and momentum to capitalize on market opportunities. Turning to personal lines, our second quarter financial performance demonstrates continued progress toward target margin improvement. Auto renewal written price increases remain very strong at nearly 24%. While below peak levels from last quarter, they remain consistent with our view of moderating loss trends for the remainder of the year.
As I have mentioned, we expect auto renewal written price increases for the year to be approximately 20%. In homeowners, renewal written pricing of 15% during the quarter, comprised of net rate and insured value increases, outpaced underlying loss cost trends.Investments in personal lines continued with the launch of dynamic pricing inside our TrueLane Telematics offering earlier this month, an enhanced price-to-risk matching capability aligned with our Prevail product offering.
As we return personal auto to profitability in 2024, capabilities like this, along with enhanced risk segmentation, near-term pricing gains, and moderating loss trend, position personal lines to reach target margins in 2025. Turning to group benefits, our core earnings margin was 10% for the quarter and 8.1% for the first half of the year.
These stellar results included a lower life loss ratio versus the prior year and continued strong long-term disability execution. Fully insured ongoing premium growth of 2%, consistent with the first quarter, reflects strong book persistency, still above 90%, and sales of $546 million in the first half of the year.
Moving to investments, the portfolio continues to support The Hartford's financial and strategic goals, performing well across a range of asset classes and market conditions. Beth will provide more details. From a macroeconomic standpoint, the US environment continues to be supportive of The Hartford's businesses.
The labor market has been resilient and with continued relatively low unemployment and wage rate growth still in the 4% range, both of which positively affect our two largest and strongest performing lines, workers' compensation and disability. In summary, The Hartford delivered an outstanding quarter with sustained momentum heading into the second half of the year, a testament to our execution, strategy, talent, and the impact of ongoing investments in our business.
As I said before, we continue to build on our market-differentiating capabilities and broad product offering, all while becoming more efficient.Our disciplined underwriting and pricing execution, exceptional talent, and innovative customer-centric technology are expected to sustain superior results, and we continue to proactively manage our excess capital.
All these factors contribute to my excitement and confidence about the future of The Hartford and our ability to extend our track record of delivering industry-leading financial performance. Now I'll turn the call over to Beth to provide more detailed commentary on the quarter.
Beth Costello (EVP and CFO)
Thank you, Chris. Core earnings for the quarter were $750 million, or $2.50 per diluted share, with a trailing 12-month core earnings ROE of 17.4%. Commercial lines had an exceptional quarter, with core earnings of $551 million, written premium growth of 11%, and an underlying combined ratio of 87.4. Small commercial continues to deliver excellent results, with written premium growth of 8% and an underlying combined ratio of 86.8, further building on its impressive track record of delivering an underlying combined ratio below 90.
Favorable non-cat property losses contributed to the strong results. Middle and large commercial also delivered outstanding results, with 13% written premium growth.The strong underlying combined ratio of 89.6 reflects the positive impact of premium leverage, industry-leading pricing and segmentation analytics, and exceptional talent that continue driving profitable growth.
Global Specialty's written premium growth of 14% was driven by accelerating renewal written price increases and strong new business growth, including quarterly net written premium growth of 14% in our wholesale channel. The underlying combined ratio was an exceptional 85.2, relatively flat to the prior year. Written premium and personal lines increased 14% over the prior year, driven by rate execution.
In auto, we achieved written pricing increases of 23.5% and earned pricing increases of 22.1%. In homeowners, written pricing increases were 14.9% for the quarter and 14.6% on an earned basis.In personal lines, the underlying combined ratio of 96.7 improved by five points from the prior year. Homeowners had another strong quarter, with an underlying combined ratio of 77.8. We are very pleased with the improvement we are seeing in our auto results.
Through June 30th, our underlying combined ratio of 104.7 was in line with our expectations and is 3.8 points lower than the prior year period, almost entirely due to improvement in the loss ratio. We remain on track to achieve the 5-6 point full-year improvement in the auto underlying loss ratio, as we have previously discussed. The total personal lines expense ratio increased by 0.7 points, driven by higher direct marketing costs as anticipated.
We have achieved new business rate adequacy in states representing approximately 80% of new business, and our contemporary business model enables us to efficiently allocate marketing resources for growth in those states. With respect to catastrophes, P&C current accident year cats were $280 million before tax, or 7.1 combined ratio points, which compares to $226 million, or 6.2 points, on the combined ratio in 2023.
While catastrophe losses were significantly elevated for the industry, our results were only slightly higher than expectations. We continue to actively manage our cat exposure through aggregation management and underwriting discipline, especially in certain higher-risk states.
Total net favorable prior accident year development within core earnings was $78 million, primarily due to reserve reductions in workers' compensation, catastrophes, personal lines, and bond, which were partially offset by reserve increases in general liability, assumed reinsurance, and commercial auto liability. The increase to general liability reserves of $32 million was primarily related to accident years 2015-2019, with some modest increases in more recent years.
We recorded $37 million before tax in deferred gain amortization related to the Navigators ADC, which positively impacted net income with no impact on core earnings. We have provided additional information in the appendix of our earnings slide deck on both this ADC and the A&E ADC for your reference. Turning to group benefits, core earnings margin of 10% was exceptional. Results reflect strong group life and disability performance, as well as fully insured premium growth....
The group life loss ratio of 74.9 was 9.2 points lower than prior year due to lower claim severity. The group disability loss ratio of 67.1 was essentially flat with 2023, driven by lower long-term disability claim incidents and a higher New York Paid Family Leave risk adjustment benefit, offset primarily by a higher loss ratio in paid family and medical leave products.
Fully insured ongoing premium growth of 2% was consistent with first quarter and reflects positive exposure growth, albeit at a lower rate than in 2023 and strong book persistency at over 90%. Turning to investments, our diversified portfolio continues to produce solid results. The overall credit quality of the portfolio remains high, with an average credit rating of A+, and net credit losses remain insignificant.
For the quarter, net investment income was $602 million. The total annualized portfolio yield, exclude limited partnerships, was 4.4% before tax, slightly above first quarter. We continue to benefit from higher rates, as evidenced by the second quarter reinvestment yield of 6.4%, up 30 basis points from our reinvestment rate in the first quarter and up 110 basis points from the year ago period. As expected, our annualized LP returns of 1.3% were consistent with the first quarter.
Although we anticipate LP returns to be somewhat stronger in the second half of 2024, the full year is likely to be below 2023 results. However, we remain confident that over the long term, LPs will generate returns consistent with historical levels.Turning to capital, yesterday, the board of directors approved a new share repurchase authorization of $3.3 billion, which is 10% higher than the 2022 authorization, reflecting the strong capital generation of our businesses.
This authorization, effective August 1, 2024, through December 31, 2026, is in addition to the existing authorization, which, as of June 30, had approximately $650 million remaining. Over the last several quarters, our share repurchase activity has been very consistent at $350 million per quarter. With our new authorization in place, we would expect quarterly share repurchase activity to be closer to $400 million, beginning with the third quarter.
In summary, we are very pleased with our excellent financial performance through the first six months, and these results demonstrate consistent execution in delivering profitable growth, contributing to industry-leading returns, thereby enhancing value for all stakeholders. I will now turn the call back to Susan.
Susan Spivak (SVP of Investor Relations)
Thank you, Beth. We now will take your questions. Operator, can you please repeat the instructions for asking a question?
Operator (participant)
Certainly. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Elyse Greenspan from Wells Fargo. Your line is open.
Elyse Greenspan (Managing Director and Senior Equity Analyst)
Hi, thanks. Good morning. My first question is on the commercial pricing environment. Chris, you said, you know, rates improved sequentially, and I think you attribute it to GL as well as excess and umbrella, responding to, you know, societal issues. Given, right, that we've seen, right, reserving issues, you know, emerge across the industry, would you expect that your pricing trends would just, you know, continue on an upward trend from here?
Christopher Swift (Chairman and CEO)
Thank you for the question, Elise. I would say, in general, you know, we're very pleased with our pricing. As we quoted, 6.6%, up 30 basis points, 9.5, up about 20 basis points. Even, you know, with some moderating, you know, property pricing, which you could talk about, but property still remains double digit, but it's moderating.
So that leaves, obviously, the liability lines, you know, which again, I'm very proud of our team and their ability to execute and get the needed rate to keep up with, and in most cases, you know, stay ahead of our loss cost trends. So that's a very important mission guidance that we talk to the team about, you know, monthly and quarterly.I'm looking at Mo. I don't know if you would add anything special, Mo, but your team's doing a great job getting the needed rate, given the environment.
A. Morris Tooker (President)
No, I would echo that, Chris. The only additional data point I would give you, Elyse, is that our excess and umbrella rates were up 160 basis points quarter over quarter, so second quarter over the first quarter. So we continue to work really hard at getting enough rate into the book to respond to the trends that we're seeing.
Christopher Swift (Chairman and CEO)
So Elyse, I don't, I don't think the environment's gonna let up, so you should expect us to continue to be disciplined in risk selection and disciplined in pushing for rate, you know, in the book, and whether that's at an increasing or a consistent pace, I'm not gonna quibble with you, but, we're gonna be disciplined.
Elyse Greenspan (Managing Director and Senior Equity Analyst)
Thanks. Then my second question is on the new authorization. You know, Beth, and I appreciate you gave us, right, the new quarterly kind of run rate on buybacks... Is the, you know, incremental uplift, is that all being driven by dividends out of your property casualty entities? Or I guess, how should we think about the incremental cash flow over the next couple of years?
Beth Costello (EVP and CFO)
Yeah, I would say it's really across our businesses. As we said, the fact that the authorization was increased from the previous authorization really is reflective of just the strong earnings generation. As you know, dividends, you know, quarter to quarter and year to year can fluctuate a bit as we manage the various legal entities that we have. But we feel very good about the capital generation that we're seeing, and we would expect to see our dividends reflect that.
Elyse Greenspan (Managing Director and Senior Equity Analyst)
Thank you.
Operator (participant)
Your next question comes from the line of Andrew Kligerman from TD Cowen. Your line is open.
Andrew Kligerman (Managing Director)
Hey, good morning. First question is around specialty. Terrific 85.2 underlying combined and 14% growth. Wondering if you could share with us where you're growing, and particularly I'm interested in the reinsurance area, too. What lines of business you're looking at there, too?
Christopher Swift (Chairman and CEO)
You know, Andrew, you know, thank you for joining us today. You know, I would say, you know, our specialty business is quite, you know, diversified. But if I look at, you know, its biggest component, it's wholesale. You know, E&S, you know, wholesale, which, again, uses the, you know, the full, you know, range of our liability and, you know, property, you know, products. So, you know, feel good about, you know, what we're doing there.
You know, rates, you know, are strong. You know, we've been increasing, you know, the rate that we're seeking on, you know, various aspects of that book, particularly the liability books.So again, new distribution relationships, we're expanding, you know, the wholesale distribution relationships, and I as I said, it culminated in, you know, the first time ever, you know, going above $1 billion in written premiums, so we feel really good about that. I'll make a comment on reinsurance and then ask Mo if he wants to add anything.
But, you know, our reinsurance business, you know, I would say on a global basis, is growing about 18%. I would say 45% of that global reinsurance business is property, you know, which is growing at 24%, and then our non-property casualty lines is growing at 12%. I think I've characterized this before.
You know, Andrew, this is, you know, gonna be a run rate business for us of about $850 million this year. So it's, it's something that we're proud of. It's being very disciplined and taking advantage of this location in the marketplace and producing outstanding, superior risk-adjusted returns.
A. Morris Tooker (President)
Andrew, maybe I'll just add a little bit more on the wholesale in global specialty, and I think overall flow continues to be really strong in every product line. We're continuing to invest in the teams. The teams are executing really well. We are known for our construction casualty prowess. We are underweight in the other parts of wholesale, and we're pushing into certainly property on a wider spread, marine. So just know that we said there's more upside there.
Andrew Kligerman (Managing Director)
Yeah, that's, that's pretty impressive for a business that had a lot of doubters five years ago when you acquired it. So my, my next question... Actually, you know what? Let me, let me just sneak something in unless I get bounced out. That rate that you're talking, the pricing of 9.5% ex-workers comp, is that pure rate, or is that also inclusive of exposure in terms of conditions and, and, and conditions?
Christopher Swift (Chairman and CEO)
Yeah, what we typically comment upon, if there's a question, is, we call it the exposure, that acts as rate. I would say of the 95 is about 2.2%, you know, this quarter. Fairly consistent with, you know, prior quarters.
Andrew Kligerman (Managing Director)
Got it. I just wanted to make sure on that. And then my, my other question is, I guess reading about the reserves, you know, focusing on the more difficult adverse, $32 million in GL, that was all 2016-2019, and I think it said in the Q, modest 2021-2023. So that doesn't seem like an impact. Commercial auto was $10 million adverse in the quarter, but that was 2022. Anything we should read into that, Chris, or, you know, you feel pretty good about your reserving on the casualty lines and, you know, the commercial auto? Yeah.
Christopher Swift (Chairman and CEO)
Yeah. I'll let Beth, you know, add, you know, some detailed commentary, Andrew, but from my chair, you know, knowing our management mechanisms quarterly, you know, what we've debated, how we've picked, I think, a very, very appropriate loss trends over a five-year, six-year period of time, the resulting, you know, balance sheet, I think, is very healthy, high confidence.
So yeah, you know, these are the things that you work on, you know, every quarter and every planning cycle, and we pride ourselves on trying to be realistic and get it right, because if you don't, it has a cumulative effect of you're gonna be, you know, chasing your tail, as they would say. But, Beth, what would you add, any further detailed commentary?
Beth Costello (EVP and CFO)
Yes, well, I agree, you know, overall with your comments, Chris, as it relates specifically to the reserve increases that we took in commercial auto, really related to a couple of accounts, and feel really good that we've already taken action on those accounts. So, you know, as you know, we look at our reserves in detail by sub-line, and where we think we see the need to make an adjustment, we will. But again, I'll echo Chris's comments. When we step back and look at it in total, we do feel very good about where we are.
Andrew Kligerman (Managing Director)
Awesome. Thanks.
Operator (participant)
Your next question comes from the line of Brian Meredith from UBS Financial. Your line is open.
Brian Meredith (Managing Director and Senior Equity Research Analyst)
Thanks. First question, just quickly. So Chris, and Mo, there was some legislation, I think, recently passed in Florida talking about increasing Medicare reimbursements for doctors, and I know that a lot of kind of workers' comp reimbursement schedules is kind of predicated on that. Can you talk a little bit about what the potential impact is on workers' comp, call it severity trend here going forward? Are there offsetting factors? Maybe give us a little bit of explanation on that.
Christopher Swift (Chairman and CEO)
Yeah, Brian, it's Chris. I would say, you know, you know, first, what, what did they pass? They passed a law that, you know, is sort of effective, January 1, 2025. So, it does have some applicability for, the back book, so we, we think that's relatively modest, you know, for us. But as you said, it's, it's really physician services, across a, a broad range of services that, you know, they're getting a, a basically a, a pay, increase and a pay - a pay, you know, rate. So I don't think it really, you know, moves the, the needle on anything materially in Florida.
You know, what we then need to do is obviously work with the rating bureaus to make sure that these loss estimates are getting into their guidance, and obviously then, you know, making the appropriate rate filings and, you know, getting paid for that. So it's a little bit of a lag, but I wouldn't say it's gonna change anything from an underwriting appetite or execution. We just need to sort of make sure it gets into the filings that the bureaus approve into our pricing, and we'll be off to the races.
Brian Meredith (Managing Director and Senior Equity Research Analyst)
Great. Thanks for the answer. And then I, I guess my second question, Chris, you made this comment in response to one of Elyse's question: Did property still seeing double-digit rate? It'd be helpful maybe if you talk about, you know, what it looks like from property rate, you know, large account all the way down to small account, because we've heard a lot more that large account is kind of flat to getting more competitive right now. So it was a little surprising when I heard, you say double digit rate.
Christopher Swift (Chairman and CEO)
Yeah, I would. I'm gonna resist giving you competitive intel, but I still wanna, you know, address your question, Brian. So I would say again, last quarter, first quarter, in aggregate, our Global Reinsurance property business, you know, we had rates going up 14.1%.
This quarter, on a same-to-same basis, like-to-like, it's 12.4. And I would say that the highest rate increase that we're seeing across our portfolio is in our top product for small commercial, our E&S binding division within small commercial, and then I would say everything else is sort of in the high single digits. So again, I think quite disciplined, quite appropriate, in those lines of business. So I think that, again, as I said, the team is executing well. But Mo, what would you add?
A. Morris Tooker (President)
No, Brian, I would just say, we don't have a lot that we do in the shared and layered space, but in, we have a little bit in our middle and large commercial book of shared and layered and a little bit in our wholesale property in global specialty, and that's the place we're seeing the most competition. Where we write 100% and we're kind of the middle market writings, it's hanging in really well.
Brian Meredith (Managing Director and Senior Equity Research Analyst)
Great. Thank you.
Operator (participant)
Your next question comes from a line of Gregory Peters from Raymond James. Your line is open.
Gregory Peters (Managing Director)
Well, good morning, everyone. So, for the first question, I think I'm going to focus on the personal lines business. Chris, in your comments, you said that you expect to hit the target margins in personal lines by 2025. Is that like end of the year 2025, or is it the beginning of the year or for the full year?
And I guess the reason why I'm thinking about this is on slide 17 of your investor deck, we're looking at the sequential trends in the auto underlying and the homeowners underlying combined ratio, and it looked like it ticked up a little bit sequentially from the March quarter. So any color there on how you see that cadence developing over the next 18 months would be helpful.
Christopher Swift (Chairman and CEO)
Yeah, happy to comment there. I would say just a couple of things, just context. Your sequential trend is primarily impacted by expense. I think we were pretty clear in our statements that particularly now that we're on a countrywide basis, a new business rate adequate, and we've turned back on marketing in a holistic, you know, way, whether that be you know, TV, whether it be print, whether it be paid, you know, whether it be advertising in AARP.
So that I would say is reverting back to normal. I would say, again, context, we ended 2023 with a loss cost trends in sort of the mid-teens, and we do expect, and we've said, you know, loss cost trends are moderating.You know, but in essence, on a full year basis, you know, we still think they're gonna be low double digits, and that's what we're recording in our financial statements. And then all I would say is, you know, from a target margin perspective, we still see 2025, and I would say mid-2025, we could get back to our target margins.
And the 5-6 point improvement that we talked about this year, I think we're on track, you know, for it, particularly as we continue to our earn in rate and as, you know, loss costs continue to moderate in the second half of the year. But, Beth, what would you say?
Beth Costello (EVP and CFO)
Yeah, I agree with everything that you said, Chris. One thing that I would point out when you look at the sequential underlying combined ratio in auto is just keep in mind that first quarter is typically our lowest loss ratio quarter, and we typically see a couple points every quarter as we go through the year.
So when you put that into the mix, combined with what Chris said about the, you know, little, maybe less than one point of expense increase because of turning marketing on, I think that shows you that we are making progress relative to that trend. You just have to take in the seasonality into consideration.
Gregory Peters (Managing Director)
That makes sense. Okay, for my follow-up question, I'm gonna pivot to the benefits business. And I know you called out the 10%, core margin result for the, for the second quarter. Is, is that, is that how we should think about what your objective is in that business over the course of the year? And then related to that, you know, I was looking at some of the sales stats, in your supplement. It looks like, at least for this, the June quarter, sales were a little bit down on a year-over-year basis. So, some color on the benefits business would be helpful.
Christopher Swift (Chairman and CEO)
Sure. You know, I would just start by saying we're very pleased with the 10% core margin and sort of 8.1 through the six months range, which is, you know, above our 6-7 guide on a long-term basis. But I've always reminded people, Brian, or excuse me, Greg, that, you know, that guide is based on making rate guarantees over the next, you know, 3-4 years in certain cases for our products.
So you want to be, you know, thoughtful about what can happen, you know, over that period of time. You know, but that said, you know, we did call out, you know, mortality really improved, you know, this quarter, and that's great to see, particularly coming out of the, you know, the pandemic.
But we still believe we're sort of in an endemic state, that mortality will be a little higher over the next couple of years. But I would say we had an outsized benefit this time in the mortality. But everything else is performing well. You know, disability, you know, continues to be very steady and a consistent, you know, performer.
So, I would expect for the remainder of the year for us to continue to outperform our long-term, you know, guidance, and obviously end the year above the 6-7, but I'm not gonna comment on any specifics or any numbers at that point in time. And we'll see then what holds for 2025.
On the top line in sales, I'd like, you know, Jonathan to comment, particularly on market conditions, which I generally describe, and when he and I, you know, talk on a monthly and quarterly basis. I mean, the market is competitive, and I think that there's some impacts on our sales and top line there that we could talk about. But, Jonathan, what would you add on premium and top line?
Jonathan Bennett (Head of Group Benefits)
Those are the right comments, Chris. When we think about competition right now, I would say it is heightened. We got in our marketplace a number of capable competitors, some of them relatively new entrants, and any one of them can have different business objectives based on their strategy. I can't speculate on that. And there's always room for reasonable people to have differing views on future loss trend.
But you know, our customers are quite sophisticated. Their needs are vast and differentiated. We compete on far more than price. We have absence management capabilities, digital tools, and deep customer focus are all things that distinguish The Hartford. So when we put it all together, we think we're navigating the market quite well.
We're adapting to competitive situations, competing for the business that we believe we want to obtain. We're maintaining underwriting and pricing discipline, which is crucial. We'd always like to be growing faster, but we're focused on the fundamentals of the business.
Gregory Peters (Managing Director)
Got it. Thanks for the detail.
Operator (participant)
Your next question comes from a line of Josh Shanker from Bank of America. Your line is open.
Josh Shanker (Managing Director and Senior Equity Research Analyst)
Yes, thank you very much. So maybe not so surprising or maybe it is for some, workers' comp continues to be favorable. Does that mean that when you think about the going forward margins, you are making changes to your current view of margin in workers' comp, and the loss picks are coming down on current years?
Or maybe you're just skeptical that this favorability can last forever? How do you think about that actuarially, and how does that play into the stability or actually improvement in your commercial loss picks overall for compared to a year ago?
Christopher Swift (Chairman and CEO)
Yeah. Josh, Beth and I will tag team here. I would generally say, again, when we entered this year to where we are today, we're virtually right on where we thought. And remember, we did make some commentary that we thought we would experience some modest margin contraction, you know, heading into 2024.
And I would say, you know, that continues to be maybe less modest or more modest, depending on how you want to say it. But, you know, the... You know, it's obviously a line that, you know, we know well and, you know, know the components. So I think it's all working as expected.
I'm sure between Beth and I, we could tell you that our frequency and severity assumptions are holding, our wage inflation assumptions were probably a little light, and we're outperforming, you know, there. So you put it all together, and it works. It's working. It's still a highly profitable line, you know, of business for us that contributes meaningfully.
And yeah, we're watching all the, you know, the drivers of loss cost trends very, very closely, as you would expect a company of our expertise and skills in this area. But, Beth, what would you add?
Beth Costello (EVP and CFO)
Yeah, again, Chris, I, I agree with how you characterized it, and what I would say, Josh, is, you know, we take into consideration this is a long-tailed line. So when we make our picks relative to loss trend, we take that into consideration. We obviously look at what's happening in the near term, but, you know, one of the areas I know we've talked about in the past is medical inflation.
We still are holding that 5% trend in our reserves and our pricing. We've seen, you know, some continue to see some frequency benefit, and we build some of that in as well. But our philosophy is we just need to be steady as we think about those, those loss trends. And then, obviously, we've been talking about what we're seeing on the rate side, so that's why we're feeling a little bit of that compression.But, we again understand this is a long-tailed line, and we want to be very thoughtful with our loss picks.
Josh Shanker (Managing Director and Senior Equity Research Analyst)
Just to synthesize the two things you said, so the pick is slightly higher, but that's pricing driven. Is that right?
Christopher Swift (Chairman and CEO)
You know, I would say it's loss cost driven, impacted by the rate environment. So when we said we're expecting some margin compression, our loss trends, which are generally, you know, consistent, are impacting. You know, have the rate effect of pricing. So when pricing is, you know, continues to be sort of less than positive and, you know, is not covering your cost of goods sold on an assumption basis, you're gonna have some slight margin compression, and that's what we're feeling.
Josh Shanker (Managing Director and Senior Equity Research Analyst)
Okay. So that's actually where I'm gonna go. So, but obviously, the numbers are getting better. So if we in general liability, and I guess traditional property, are the initial picks improving at the backdrop of a little bit more caution on the workers' comp picks? I'm just trying to look at the moving pieces on where the trend is. Are things getting better right now? I ask this because, arguably, some of your competitors might have said things before you reported the quarter that give people the impression that things are getting worse. And
Christopher Swift (Chairman and CEO)
Yeah
Josh Shanker (Managing Director and Senior Equity Research Analyst)
... I'm trying to figure out if that's right or wrong.
Christopher Swift (Chairman and CEO)
Well, you're smart, you'll figure it out. But, again, from a pure comp line, I would say it's steady.
Josh Shanker (Managing Director and Senior Equity Research Analyst)
And then the non-cap longer tail lines?
Christopher Swift (Chairman and CEO)
Now, again, those are very detailed conversations by product line. But I would characterize at least our, you know, views of where we're at and how we're executing. My view is, I think we have appropriate and compelling loss trends baked into our picks going back five years, and our ability to execute on a rate side consistently and in those, you know, strong, you know, double digits, particularly in the liability lines, over an extended period of time, puts us in a good place.
Because I always comment every quarter that I think we're staying ahead of trend, loss trend, with our pricing. So I'll look at Beth and/or Mo, if they want to add anything additional.
Beth Costello (EVP and CFO)
Yeah, I'll just add a couple points. So again, on the liability lines, as you know, Chris has said, we feel very good about the loss trend that we've been building into our picks, and pricing has been above that, as well as the fact that we've been taking underwriting actions for a number of years, which also has the effect of sort of stabilizing those loss picks. So all that feel very good.
And then the one area that we called out relative to performing slightly better than our expectations this quarter was in the non-cat property line, primarily in small commercial. And that line, you know, quarter to quarter, we, you know, you can see, you know, some just normal volatility in that.Overall, I would say when you look at all of our loss picks and what we anticipated at the beginning of the year, things are in line with that.
Josh Shanker (Managing Director and Senior Equity Research Analyst)
Thank you very much. I appreciate the detail in the face of my questions.
Operator (participant)
... Your next question comes from the line of Yaron Kinar from Jefferies. Your line is open.
Yaron Kinar (Managing Director and Senior Equity Research Analyst)
Thank you. Good morning. Maybe staying on workers' comp for a second. I don't know if you'd be willing to share maybe one level deeper here on in a public forum, but I was curious to hear more about maybe each of the severity and frequency trends that you're seeing there and expectations there. I know that overall loss trends maybe moved up a little bit, but are still remaining below the long-term expectation, but would love to peel the onion a little bit if we could.
Christopher Swift (Chairman and CEO)
Yeah, I think we said it pretty clearly, Yaron. I don't know what to say, you know, other than, you know, you know our 5% long-term medical inflation trend, or below that. We've said in the past that, you know, maybe medical trend is ticked up just a little bit from, you know, 2%-ish to maybe 3%-ish, which I think, you know, still applies. We never talked about frequency trends just because we don't. So sorry to disappoint you, but I think we've given you enough.
Yaron Kinar (Managing Director and Senior Equity Research Analyst)
Okay. No, I figured it would be worth a try. And then maybe moving to group benefits, and I know I asked about this last quarter, so I apologize if it sounds like I'm harping on this. I don't mean to. I do think that as underwriters, obviously, the art is balancing between margin and growth.
And considering just what seems to be, like, sustainable outperformance on the margin side, I would be curious to hear more about maybe why not give a little bit more on the pricing in order to achieve more growth? And I know that last quarter you talked about taking the life pricing up a bit because of the endemic expectations, but are you overshooting there?
Christopher Swift (Chairman and CEO)
No.
Yaron Kinar (Managing Director and Senior Equity Research Analyst)
No.
Christopher Swift (Chairman and CEO)
You know, and again, I'm looking at Jonathan too. Again, I understand, and we do, you know, art and science, but you know, remember, particularly, you know, in this, you know, life area, you know, generally these contracts are 4-6 year with rate guarantees. So, you know, the margin for error there is really, really tight, and we don't wanna have any errors. We don't wanna have any whoopsies.
So, you know, that discipline is there. You know, the disabilities, you know, generally, you know, three year rate guarantees, so a little different than, you know, sort of short tail P&C businesses, which you get to reprice every six or 12 months.So that's where the, you know, the additional caution and mechanisms, you know, come into play when you're making those medium-term commitments. But Jonathan, what would you add?
Jonathan Bennett (Head of Group Benefits)
Chris, only that, I'd like it to be more like a dial, and I could turn it two clicks, and I could trigger something to that effect. But, Yaron, it doesn't really work that way, so we get into this, in particular, when you're in some of the larger market. You know, the cases do have data credibility. We get a lot of information. We pore through that, and you know, we position ourselves to compete hard.
So there is no shortage of work on our part to be digging into that environment and to win those cases, and we'll keep at it. If we find ourselves off by more than we feel comfortable with, then we feel like the discipline of walking away is the right answer, and we'll continue to exercise that prudence.
But make no mistake about it, we're interested in competing hard for the growth, and we will continue to work at that, staying true to our outlook on trend and our expectations and requirements for profitability as well.
Yaron Kinar (Managing Director and Senior Equity Research Analyst)
Thank you. And here's to no whoopsies.
Operator (participant)
Your next question comes from the line of Peter Knudsen from Evercore ISI. Your line is open.
Peter Knudsen (President of Equity Research)
Good morning. Thanks for taking my question. Just following up on comments in the prepared remarks about, you know, The Hartford's continued mix shift to property, and maybe, you know, versus, you know, a prior comment about some pressure from workers' comp on commercial margins. Could you talk a little bit about how that mix shift might help those margins and if, you know, that's potentially enough to offset any of that pressure?
Christopher Swift (Chairman and CEO)
Yeah, I would share with you, Peter, obviously, it depends on your view of loss picks, but, you know, generally, property is gonna have a lower loss ratio, combined ratio than comp, given its long tail, you know, duration. So that's just the obvious. If you mix more of that in, you know, the overall portfolio of underlying combined ratio particularly will go down.
I think we've talked about it, you know, in the past that, you know, we are willing to grow in property, principally because we've made so many investments that allow us to compete thoughtfully and earn, you know, good returns with good risk management tools, with a diversified portfolio that doesn't, you know, have outsized cat to it.
So again, it's just, it's just not just because we want to grow. I mean, we have to have the capabilities to, and we have worked really, really hard and invested a lot of time and energy over the last five years to put ourselves in a position to compete today, to earn good, you know, risk-adjusted returns.
So I think that's an important, you know, component. I think the other component I'll just give you is, I, I think we're on track to, to come close to $3 billion of written premium, you know, this year, which would be up from $2 billion, you know, a couple years back, and, you know, growing nicely in sort of that 20% range, I think I said in my prepared remarks. So you put it all together, and it's...
We're competing well in an environment where there's a lot of disruption and a lot of, you know, complexity, but we're able to navigate it because of the investments and skills and talented people we have in the building today.
Peter Knudsen (President of Equity Research)
Okay, great. Thank you. Just following up on a prior question, I know we talked about, you know, national account pricing, so I won't get into that. But, you know, national accounts did see large growth this quarter, decent acceleration from the first quarter. So I'm wondering if maybe you guys could just talk a little bit about the opportunity you're seeing there, you know, and what was driving that?
A. Morris Tooker (President)
Yeah, Peter, it's Mo. The national accounts business, which is really our large casualty business with deductibles, I think the quarter-over-quarter compare, so the sequential quarter is a hard compare because the renewal dates really differ. That business has chunky renewal dates, so I would think the year-over-year quarter compare is a better one. But overall, we feel incredibly good about the national accounts book.
That is a disciplined underwriting process. The teams are doing well. We want to grow it. We did win some new business in the second quarter, but I think the best compare is the second quarter of last year.
Operator (participant)
We have now reached the end of our question-and-answer session. I will now turn the call over to Susan Spivak for closing remarks.
Susan Spivak (SVP of Investor Relations)
Thank you all for joining us today. As always, please reach out with any additional questions. Have a great day.
Operator (participant)
This concludes today's conference call. Thank you for your participation. You may now disconnect.