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HARTFORD FINANCIAL SERVICES GROUP, INC. (HIG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong GAAP results (Net income $848M, $2.88 diluted EPS) with total revenues of $6.88B; core earnings were $865M ($2.94), down year-over-year on A&E reserve actions, while Personal Lines posted its first underwriting gain in two years .
  • Commercial Lines remained highly profitable (combined ratio 87.4; underlying 87.1) with ex‑workers’ comp renewal pricing at 9.7%, comfortably above loss cost trends; Personal auto underlying combined ratio improved 10.5 points YoY and homeowners was exceptional (57.8 combined) .
  • Management strengthened general liability reserves by ~$130M pre‑tax, completed the annual A&E study (net core impact $141M), and exhausted the A&E ADC treaty limit; Navigators ADC amortization benefited GAAP income ($58M in Q4) and is expected to contribute ~$64M in FY25 .
  • 2025 outlook: Commercial underlying margins “consistent with 2024” (87.9% CL underlying combined), auto targeted to mid‑90s underlying combined, Group Benefits 6–7% core margin; investment income excluding LPs and yields expected marginally higher; catastrophe reinsurance renewed at ~10% lower risk‑adjusted cost .
  • Capital returns remain a catalyst: Q4 buybacks $400M; common dividend held at $0.52 per share (declared Feb-19) amid strong ROEs (19.9% GAAP, 16.7% core) .

What Went Well and What Went Wrong

What Went Well

  • Personal Lines profitability inflection: combined ratio fell to 85.8; auto underlying combined improved to 103.0 (−10.5 pts YoY) and homeowners combined hit 57.8 with double‑digit earned pricing and lower frequency .
  • Commercial Lines profitability and pricing discipline: underlying combined 87.1; ex‑comp renewal pricing 9.7% remains above loss trends (“comfortably above”) .
  • Investment income tailwind: consolidated NII $714M (+9% YoY) on higher invested assets and yields; NII ex‑LPs +11% YoY .
    • Quote: “Our investment portfolio continues to generate solid performance.” – CEO Swift .

What Went Wrong

  • Reserve actions dampened core earnings: net unfavorable PYD in core ($97M) driven by A&E ($141M core impact) and $130M strengthening in general liability severity assumptions .
  • Group Benefits margin compressed in Q4: net income margin 7.1% (−2.8 pts YoY) and core margin 7.8% (−2.0 pts YoY), with higher PFML loss ratio and LTD incidence normalizing .
  • Expense ratio pressure: higher staffing, commissions, and direct marketing in Personal Lines; increased tech investments in Group Benefits .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$6,486 $6,751 $6,879
Diluted EPS (GAAP) ($)$2.44 $2.56 $2.88
Core EPS ($)$2.50 $2.53 $2.94
P&C Combined Ratio (%)93.6 93.7 92.1
P&C Underlying Combined Ratio (%)89.5 89.7 87.8

Segment Performance (key metrics):

Segment MetricQ2 2024Q3 2024Q4 2024
Commercial Lines Written Premiums ($MM)$3,540 $3,275 $3,174
Commercial Lines Combined / Underlying Combined (%)89.8 / 87.4 92.2 / 88.6 87.4 / 87.1
Personal Lines Written Premiums ($MM)$913 $970 $871
Personal Lines Combined / Underlying Combined (%)107.4 / 96.7 102.5 / 93.7 85.8 / 90.2
Group Benefits Net Income Margin / Core Margin (%)9.7 / 10.0 8.8 / 8.7 7.1 / 7.8
Hartford Funds Net Income ($MM)$44 $54 $49
Hartford Funds Total AUM ($MM)$135,518 $142,439 $139,598

KPIs and operating drivers:

KPIQ2 2024Q3 2024Q4 2024
P&C CAY CAT Losses ($MM)$280 $247 $80
Net Investment Income ($MM)$602 $659 $714
CL Renewal Written Pricing ex‑WC (%)9.5% 9.5% 9.7%
Auto Renewal Written Price Increase (%)23.5% 20.8% 19.1%
Homeowners Renewal Written Price Increase (%)14.9% 15.2% 13.9%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Commercial Lines underlying combined ratioFY 2025N/A“Consistent with 2024” (CL underlying 87.9%) Qualitative target introduced
Personal Lines auto underlying combined ratioFY 2025N/AMid‑90s expected in 2025 New numeric target
Group Benefits core earnings marginLong‑termN/A6–7% expected; recent years exceeded targets Reaffirmation of long‑term margin range
Net investment income (ex‑LPs) and yieldsFY 2025N/ANII ex‑LPs higher; yields marginally higher than 2024 Positive outlook
Cat reinsurance program1/1/2025 renewalN/A~10% decrease in cost (risk‑adjusted), occurrence cover to $1.5B; aggregate attaches $750M; wildfire coverage attaches $200M Improved protection/cost
Share repurchasesQ1 2025$3.3B authorization (7/25/2024) ~$400M expected in Q1 Maintained buyback cadence
DividendQ1 2025$0.52 declared Q3’24 $0.52 per common share declared Feb-19 Maintained payout level

Earnings Call Themes & Trends

TopicQ2 2024 (Prior‑2)Q3 2024 (Prior‑1)Q4 2024 (Current)Trend
Pricing discipline (ex‑WC)9.5% ex‑WC; above loss trends 9.5% ex‑WC; above loss trends 9.7% ex‑WC; “comfortably above” loss trends Strengthening
Personal auto profitabilityULCR 104.9; significant earned pricing; severity elevated ULCR 101.5; continued improvement Target mid‑90s ULCR in 2025 Improving
Homeowners performanceULCR 77.8; strong pricing, lower frequency ULCR 75.4; improved Combined 57.8; ULCR 61.7 (best in a decade) Strong
GL severity/reservesFavorable PYD overall; some GL increases Less favorable GL PYD; higher underlying GL $130M reserve strengthening; higher severity assumptions Cautious
A&E reservesNo update notedNo update notedA&E study: $203M increase; ADC exhausted; $141M core impact One‑time action
Investment incomeNII $602M; yields up NII $659M; yields up NII $714M; ex‑LPs up; 2025 yields marginally higher Tailwind
Cat reinsurance——~10% lower risk‑adjusted occurrence cost; wildfire attach $200M Improved terms
Property expansion—CL property mix shift Property GWP +16% in 2024; continuing in 2025 Growth

Management Commentary

  • “Commercial Lines once again generated strong top-line growth at highly profitable margins, significant progress in Personal Lines toward restoring target profitability in auto… and a higher investment portfolio yield.” – CEO Swift (press release) .
  • “We strengthened our general liability reserves by $130 million before tax… we have adjusted our ultimate losses accordingly.” – CEO Swift (call) .
  • “Personal Lines achieved 9.3 points of underlying combined ratio improvement in the quarter, including over 10 points in auto.” – CFO commentary (press release) .
  • “We expect continued underlying combined ratio improvement to reach the mid‑90s during 2025” (auto) – CEO Swift (call) .
  • “Our expiring core per occurrence catastrophe protection was renewed at an approximate 10% decrease in cost on a risk‑adjusted basis… occurrence program provides protection up to a gross loss event of $1.5 billion.” – CFO Bombara (call) .
  • “Looking forward to 2025, we expect net investment income, excluding LPs, to be higher… and anticipate yields to be marginally higher than 2024.” – CFO Bombara (call) .

Q&A Highlights

  • GL reserve strengthening: ~$130M split roughly half legacy (2015–2018) construction defect inflation and half recent social inflation; severity assumptions increased for unsettled/unreported claims and carried into 2024 accident year and pricing models .
  • LA wildfires exposure: event likely hits first per‑occurrence layer; wildfire coverage attaches at $200M, next layer at $350M with 25% retention; Global Re retrocession attaches at $60M; potential aggregate treaty inclusion up to $350M .
  • Group Benefits disability: PFML drove ~3 pts of loss ratio increase; LTD incidence normalizing after historically low levels; recoveries offset ~1 pt .
  • Commercial lines 2025 margins: Management targets CL underlying combined “consistent with 2024” (87.9%), with pricing models updated for elevated loss cost trends .
  • A&E trend: Frequency declining (e.g., mesothelioma) but severity rising; ADC for A&E exhausted; ongoing management focus .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable due to data request limits at the time of retrieval. As a result, beat/miss versus Street cannot be assessed here. Values are typically retrieved from S&P Global.

Key Takeaways for Investors

  • Personal Lines has turned the corner: homeowners exceptionally strong and auto tracking to mid‑90s underlying combined ratio in 2025, supported by double‑digit earned pricing and moderating PD severity .
  • Commercial Lines remains best‑in‑class on underwriting and pricing discipline with underlying combined ~87% and ex‑comp renewal pricing above loss trends; 2025 margin consistency is the target .
  • Reserve and A&E actions reduce tail risk but weighed on core; Navigators ADC amortization supports GAAP in 2025 (~$64M remaining), while A&E ADC is exhausted .
  • Investment income is a structural tailwind with higher reinvestment rates and larger asset base; 2025 yields expected marginally higher .
  • Reinsurance program improved: ~10% lower risk‑adjusted cost and robust occurrence/aggregate protection; wildfire attach at $200M mitigates event risk .
  • Capital return cadence sustained: $400M repurchases in Q4, $0.52 dividend declared; strong ROEs (GAAP 19.9%, core 16.7%) support returns .
  • Near‑term trading lens: watch for updates on LA wildfires losses, GL severity trends, and continued Personal Lines margin improvement—key narrative drivers for the stock .