Hartford三季度核心EPS表面超预期但承保边际转弱，股价盘中下跌约1.7%

The Hartford Insurance Gr (NYSE:HIG) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
View the webcast at https://events.q4inc.com/attendee/104141810
Summary
The Hartford Insurance Group reported third-quarter core earnings of $956 million, translating to $3.50 per diluted share, with a trailing 12-month core earnings ROE of 17.9%.
The company achieved strong premium growth across various segments, with Business Insurance premiums growing 6%, Small Business 7%, and Global Specialty 7%.
The Hartford Insurance Group maintained its leadership in digital capabilities for small businesses, with 78% of submissions being bindable straight through.
A 12% increase in the common quarterly dividend was announced, effective January 2027, reflecting strong earnings and capital generation.
The company closed the acquisition of Equitable’s Employee Benefits business, expected to be modestly dilutive in 2027 but strategic for growth in the small and mid-sized employer segment.
Management highlighted the broad-based increase in workers’ compensation claims frequency, attributed partly to healthcare cost dynamics.
Despite a competitive market, the company is optimistic about continuing profitable growth, supported by strategic investments in technology and AI.
Full Transcript
Christopher Swift (Chief Executive Officer)
2015. He has strengthened our underwriting and has expanded our products and risk appetite. More recently, as president, he has successfully led business performance, strategy, and enterprise-wide execution. Mo is the right leader for The Hartford Insurance Gr’s next chapter. This was a thoughtful, planned succession, and The Hartford Insurance Gr’s strategy, priorities, and commitment to disciplined execution are unchanged. I remain fully engaged as CEO and look forward to supporting Mo and the entire team to ensure a seamless transition.
As I reflect on the last 13 years, The Hartford Insurance Gr broadened its capabilities by investing in transformative technology while expanding product offerings and geographic footprint. Growth and innovation have been central to The Hartford Insurance Gr’s transformation. Over this time, we modernized core platforms, moved applications and data to the cloud, and built the foundation that now allows us to embed AI in underwriting, claims, and service across the businesses.
It is no coincidence that over the same period The Hartford Insurance Gr has become a company that consistently delivers outstanding returns. We have the scale to keep investing, with a significant share of our spend directed to strategic initiatives. Small business is where that work is most visible. Agents and customers want speed and simplicity, and our digital capabilities continue to outpace competitors by a wide margin. Today, 78% of small business submissions are bindable straight through. In addition, Keynova recently shared with us that The Hartford Insurance Gr ranked first for small business digital experience for the eighth year in a row, with a 20-point lead over the next carrier.
This is translating into performance, with small business growth at twice industry levels combined with excellent margins. We have extended those same strengths across the enterprise, making it easier for agents, brokers, and employers to do business with U.S. customers. Buying habits will continue to evolve and we are ready. Combining the speed of technology with the underwriting expertise and advice customers value, we are well positioned to compete, grow, and deliver attractive returns as the market changes.
With that, let me share a few details from the quarter. Business Insurance delivered strong written premium growth of 6% with an underlying combined ratio of 90.1. In Personal Insurance, the underlying combined ratio improved 2.9 points year over year, with growth impacted by a competitive market. Employee Benefits had another quarter of strong premium growth with a core earnings margin of 6.4%. The investment portfolio generated excellent net investment income, and earnings and capital generation supported a 12% increase in the common quarterly dividend effective January 2027.
All these factors contributed to core earnings of 956 million and an outstanding core earnings ROE of 17.9% over trailing twelve months. Let’s take a closer look at third quarter performance. Business Insurance delivered a solid quarter, and Small Business written premium grew 7% with an underlying combined ratio of 85.2, which outperformed our long-term average. Growth was led by Package, our largest product line, and E&S binding, which is on pace for 500 million by year end, up from less than 100 million five years ago. Deep underwriting expertise combined with market-leading service capabilities positioned Small Business to continue generating profitable growth.
Moving to Middle and Large, written premium growth was 3%, driven by solid growth in Middle Market, partially offset by lower written premium in National Accounts. The underlying combined ratio of 99.5 reflected higher non-cat property and workers’ compensation loss ratios. The team is actively managing the book in a competitive market with thoughtful risk selection and pricing. Turning to Global Specialty, results remained strong with written premium growth of 7% driven by Global Re and an underlying combined ratio in the mid-80s. The diversity of the Global Specialty products and underwriting capabilities enables us to capitalize on business opportunities and pursue profitable growth across the portfolio in changing market conditions.
Turning to pricing, Business Insurance renewal written pricing excluding workers’ compensation declined by 40 basis points to 5.3% in the quarter. Pricing in commercial auto remained strong and above loss trend. General liability, including primary umbrella and excess, continued to generate some of the highest price increases across the portfolio, although down from the prior quarter and slightly below loss trend. In property, aggregate pricing in Small Business Package and Middle Market general industries remained relatively stable in the mid-single-digit range, and price decreases in large property and E&S binding eased modestly.
All in, Business Insurance renewal written pricing declined 40 basis points to 4%, with workers’ compensation pricing improving slightly and remaining positive. Shifting to Personal Insurance, the underlying combined ratio was excellent at 87.1, reflecting earned pricing that continues to exceed loss trend in both auto and homeowners. The team remains focused on matching price with risk and maintaining target margins. Competition for new business in auto remained intense and impacted overall premium growth. In homeowners, new business growth of 20% reflects the positive reaction to the rollout of our new product to the agency channel.
Agency is an important lever for profitable growth, and we are building on deep relationships developed over many years across the enterprise. Before moving on to Employee Benefits, I’d like to briefly touch upon the Council of Insurance Agents and Brokers Insurance Leadership Forum earlier this month. Overall, feedback continued to emphasize the importance of our investments in digital and AI-enabled capabilities and highlighted the strength of The Hartford Insurance Gr’s position as the market continues to evolve. In addition, conversations increasingly expanded beyond P&C to include Employee Benefits and broader enterprise capabilities, reinforcing the value of a more connected enterprise approach.
Turning to Employee Benefits, the core earnings margin was 6.4% within our long-term range of 6 to 7% as underlying business trends revert to historical levels. Fully insured premiums grew 4%, supported by strong year-to-date sales growth and book persistency in excess of 90%, all while maintaining pricing and underwriting discipline. At the same time, continued investments in technology and service are strengthening the business, allowing us to meet evolving customer needs.
Earlier this month, we closed the acquisition of Equitable’s Employee Benefits business, which complements our already leading franchise and accelerates growth in the small and mid-sized employer segment, which represents a significant portion of the overall Employee Benefits market. The acquired business brings approximately $500 million in annual premium and expands the product portfolio to include dental and vision. We are excited about the modern integrated technology that we are acquiring, making it easier for employers and brokers to do business with us in the small and midsize employer market.
Over time, we see opportunities to bring more of The Hartford Insurance Gr to these customers. In terms of capital management, yesterday we announced a 12% increase in the common quarterly dividend, continuing a track record of annual dividend increases supported by earnings power and strong capital generation. In closing, third quarter results demonstrate the continued momentum and execution of our strategy. In Business Insurance, a diversified portfolio, strong distribution relationships, disciplined underwriting, and technology-enabled execution continue to drive profitable growth at attractive returns. In Personal Insurance, the focus remains on thoughtful expansion in the mature market, supported by the continued rollout of our modern platform in the agency channel.
Employee Benefits remains a high-quality, accretive business enabled by differentiated technology and a leadership position in the absence and leave marketplace. These strengths position us well at the large end of the market, while the recent acquisition expands our ability to serve small and mid-sized customers. Investment income continues to be supported by a diversified and durable portfolio, and higher reinvestment rates will benefit net investment income going forward.
With another strong quarter, I am confident in The Hartford Insurance Gr’s ability to continue delivering outstanding ROEs and attractive returns for shareholders. Now I’ll turn the call over to Beth to provide more detailed commentary on the quarter.
Beth Costello (Chief Financial Officer)
Thank you, Chris. Before I begin, I want to thank Chris for his leadership and partnership. The company we are today reflects his vision and discipline, and I look forward to continuing our work together through the transition and supporting Mo as we begin our next chapter. Third quarter core earnings were 956 million, or $3.50 per diluted share, with a trailing 12-month core earnings ROE of 17.9%. Book value per share excluding AOCI of $82.47 increased 12% from year end and 16% from a year ago, reflecting the earnings power of our businesses and disciplined approach to capital management. In addition, the trailing twelve-month net income ROE was 25%, which include earnings from Hartford Funds. As it relates to the sale of Hartford Funds, we are progressing towards closing, which could occur as early as December 1, subject to standard regulatory and fund approvals.
And as a reminder, once we close, distributions from Hartford Funds will occur quarterly and will be recorded in realized gains within net income. Moving to results in Business Insurance, core earnings were $731 million, with written premium growth of 6% and an underlying combined ratio of 90.1. Small Business continues to deliver excellent results, with written premium growth of 7% and an underlying combined ratio of 85.2. The underlying combined ratio improved 4.6 points from the prior year, primarily due to lower non-cat property losses and a lower expense ratio. Middle and Large Business delivered written premium growth of 3%, including 5% in Middle Market, with an underlying combined ratio of 99.5.
The underlying combined ratio increased from prior year, equally impacted by higher loss ratios from non-cat property and workers’ compensation. Non-cat property losses reflect low volatility, with a few large fire and non-weather water losses this quarter. Increase in workers’ compensation relates to a broad-based uptick in claim frequency, which we have been observing and reacting to throughout the course of the year. Global Specialty’s third quarter was strong, with written premium growth of 7% and an underlying combined ratio of 86.1, which is relatively consistent with the prior year. The Business Insurance expense ratio of 30 improved 1.1 points from the prior year, driven by the impact of earned premium growth and lower staffing costs, partially offset by higher technology costs.
In Personal Insurance, core earnings were 105 million, with an underlying combined ratio of 87.1. Written premium declined 4%, with a 9% decline in auto and 6% growth in home. The underlying combined ratio improved 2.9 in the quarter, driven by earned pricing increases outpacing loss cost trends in both auto and home. The Personal Insurance expense ratio of 26 was relatively flat compared with 25.8 in third quarter 2025. Turning to reserves, favorable prior year development of $594 million before tax included a $497 million benefit from the impact of commuting the A&E adverse development cover. This benefit is not included in core earnings. Core favorable prior year development was 97 million, driven by reserve reductions in workers’ compensation, commercial property, and Personal Insurance, with respect to catastrophes.
P&C current accident year losses were $198 million before tax, or 4.2 points, primarily from tornado, wind, and hail events. This compares with $70 million, or 1.6 points, in the third quarter of 2025, which was a historically light catastrophe quarter. Moving to Employee Benefits, core earnings of $120 million and a core earnings margin of 6.4% reflect higher group life and disability loss ratios, partially offset by an improved expense ratio and higher net investment income.
Fully insured ongoing premium grew 4%, reflecting strong new business sales, increased exposure on existing accounts, and book persistency above 90%. The group life loss ratio of 77.8 increased 3.6 points as compared to an unusually favorable prior-year period. The disability loss ratio of 76.3 increased 5.7 points, driven by higher claim incidence across short- and long-term disability and less favorable long-term disability recoveries. Long-term disability loss ratios, while elevated on a year-over-year basis, remained within expectations, while short-term disability loss ratios were slightly above expectations. The Employee Benefits expense ratio of 25.4 improved 0.3 points due to lower staffing costs and the impact of earned premium growth, partially offset by higher technology costs.
As Chris mentioned, we closed the acquisition of Equitable’s employee benefits business earlier this month and expect $500 million in annual premium across group life, disability, and other supplemental products, including dental and vision. Consistent with the smaller end of Employee Benefits, we expect loss ratios for business to be in our existing book, though offset by a higher expense ratio due in part to approximately $30 million of annual intangible asset amortization.
Excluding the amortization, we expect the core earnings impact of the acquisition to be modestly dilutive in 2017 and to improve each year as the business integrates and scales. Turning to investments, our diversified portfolio delivered strong results in the third quarter. Net investment income was $850 million, up $95 million, or 13%, from the third quarter of 2025, driven by higher income from limited partnerships and other alternative investments and a higher level of invested assets. Excluding limited partnerships, the annualized portfolio yield was 4.6% before tax. Annualized limited partnership returns were 10.2% before tax and 7.8% year to date.
Results benefited from particularly strong performance in infrastructure and energy transition funds. Turning to capital management, holding company resources totaled $1.5 billion at quarter end. As Chris mentioned, we increased our common quarterly dividend by 12% to $0.67 per share payable on January 5, 2027. Over the past decade, our annual dividend increases have averaged approximately 11%, demonstrating our confidence in the sustained earnings power and capital generation of the organization.
During the quarter, we repurchased 3.4 million shares for $475 million. As of September 30, we had $4.37 billion remaining on our share repurchase authorizations. In summary, we are very pleased with our strong performance for the third quarter and believe we are well positioned to continue to enhance value for our stakeholders. I will now turn the call back to Kate.
Kate Jorence (Investor Relations)
Thank you, Beth. We will now take your questions. Operator, please repeat the instructions for asking a question.
OPERATOR
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brian Meredith with UBS.
Your line is open. Please go ahead.
Brian Meredith (Analyst at UBS)
Yeah, thank you. I guess, first question. I was hoping to unpack the underlying combined ratio a little bit on the middle market and particularly what was the impact of the unusual losses on an underlying loss ratio in the quarter for the total Business Insurance, and then maybe talk a little bit about what you’re doing with comp in order to kind of fix some of this increased frequency and underwriting that you’re doing there.
Christopher Swift (Chief Executive Officer)
Brian, thanks for joining us. I might ask Beth to sort of break down and give an attribution of the combined ratios for the two items that we called out. Right, I mean non-cat weather was a little elevated. I could give you the quarterly impacts and the year-to-date impacts after she’s done. But I think the comp we’ve been watching very closely here in ’26 as far as the emerging trend of higher frequency. So Beth, would you break down those components?
Beth Costello (Chief Financial Officer)
Yeah, I will. And Brian, I’m going to take some time and just go through the various components as it relates to MLC and then the impact when we think of total BI. But as I said in my prepared remarks, when we look at the underlying combined ratio for MLC for the quarter, we definitely saw a little bit of improvement in expense. So think of that about a point, kind of consistent with what we’re seeing in Small Commercial. And then the rest relates to loss ratio movements.
And so the two items that we called out, comp and non-cat property, I would say both contributed a little less than four points to the change from the prior year. And again, all my comments are related to the prior year. In addition, similar to what we’ve seen during the course of the year, although we didn’t call it out because it was not as large as those two items, we continue to see a little less than a point related to mix. And I think we’ve talked about that before as some of the growth that we saw in National Accounts has earned into the book. And then, like a lot of other things that make up the difference there, going back to the two items, comp and non-cat property: on non-cat property, what I would say, and I said this in my remarks, is as we look at the results there, we see this as normal volatility.
It is another quarter of seeing an uptick there, but if you go back and look over several quarters, we’ve had more quarters where non-cat property has been favorable in MLC than unfavorable. So we do see that as normal volatility. And then on the comp side, as I said, we’ve been seeing an increase in frequency during the course of the year. Increases in frequency, quarter to quarter, can happen, so you don’t necessarily react to that. But as we evaluated where we were year to date, we felt that it was appropriate to increase the loss ratio there.
So a component of, you know, just under four points of underlying combined loss ratio points this quarter, a little bit of that does relate to prior quarters, just to put that in context. So then when you go to the all-in Business Insurance and what the impact of all of that is, I would say on non-cat property, it’s really not a driver. We had favorability in Small, and that offset the unfavorability that we saw in Middle. And then the comp piece, pulling that through to the all-in BI loss ratio, is a little over a point. And then again we have some small items as it relates to mix and other things. And then, more importantly, if I look at things on a year-to-date basis, we’re probably a little under a point off to where we were year to date last year for all-in BI; the comp piece that I referenced is a little less than half a point. And then the remainder of the items are things like mix and some of the other things that I discussed.
So when I step back from all of it, looking at where Middle came out, how Small performed, the contribution to the total, where we are year to date, I feel really good about the overall performance in Business Insurance as we continue to perform, I think, in a competitive marketplace. And I can stop there, Brian, if you have any questions. Then I was going to turn it to Mo to talk about some of the actions that we’ve been taking.
Morris Tooker (President)
Yeah, Brian, just to build on where Beth was. I think as we’ve looked at the frequency throughout the year, I think it’s really important to understand we see it across the book in all segments. It’s not specific to any industry, it’s not specific to any geography, it’s not specific to size of risk, no specific injury types. So really we think it’s a broad-based move in frequency that’s not unique to our book. And we really, when we look at the contributing factors, we are looking at the increase in healthcare costs in this country, the expiration of the ACA subsidies, and broadly just thinking about the affordability challenge for many workers across this country. And we feel like some of those losses that might have been in the healthcare costs are coming back into the workers’ compensation system, which is why we feel it’s so broad based. And to your point on underwriting, as Beth talked about on the property side, we really don’t think there’s anything going on in our book.
As Beth said, eight of the past 10 quarters we’ve been better than expected on property losses in Middle and Large. So we really feel like this is just a second quarter of adverse results relative to expectations. Now on the workers’ compensation side, we’ve been working on it all year. We’re making sure the quality of the new business is strong, and in new business pricing, we’re pulling all the levers that we can in terms of segmentation, and certainly we’re working price increases into our filings for ’27.
So just think of a broad-based underwriting reaction to all that we just described.
Brian Meredith (Analyst at UBS)
Great, that’s really helpful. Very thorough answer. I appreciate it. And then maybe just my next question, switching over to the disability loss ratio. Thanks for some description, but I know Mike last quarter mentioned a couple of things going on with long- and short-term disability, and one of those are continuing, that is maybe the Family Medical Leave Act, maybe some mental health claims you’re seeing coming through.
Christopher Swift (Chief Executive Officer)
Yeah. We’ll ask Mike to add his color. Yeah.
Mike Fish (Head of Employee Benefits)
So Brian, I think similar to what I discussed last quarter, both those items you pointed out. So we’re seeing a bit of elevation in behavioral health. We’re seeing that both in short- and long-term disability products. In addition to that, from a diagnosis perspective, we’re also seeing some higher claims with higher wage earners. So think the individuals who are going out on claim, we’re seeing, in terms of a little bit on the higher end of the salary level.
So I’d say those are a couple of unders within the short-term disability lines. Family leave in quarter was just modestly improved—I should say modestly improved relative to 3Q of ’25—but on a year-to-date basis, still elevated. And I’d say I’d just end with saying we do continue to put rate into the Paid Family and Medical Leave product line. We’ve been successful through the year, so think mid–double-digit rate increases we’re putting into that book.
We are seeing utilization continue to trend up. So again, as long as that utilization level continues to rise, we’ll put rate increases in that product line.
Brian Meredith (Analyst at UBS)
Perfect. Thank you.
OPERATOR
Your next question comes from the line of Andrew Kleiderman with TD Cowen. Your line is open. Please go ahead.
Andrew Kleiderman (Analyst at TD Cowen)
Hey, thanks a lot, Mo. Congratulations on the well deserved new role. And Chris, spare me 30 seconds. I’ve covered this company throughout your tenure. So before my question, I just want to say congratulations on an exceptional run. You made some bold unpopular calls from acquiring Aetna Benefits and Navigators to reportedly rejecting a $65 offer in 2021. And your conviction proved right. Underwriting has excelled, the stock has nearly quadrupled since you became CEO.
And most importantly, you restored The Hartford Insurance Gr to its place as an iconic industry leader, only better. That’s an incredible legacy, Chris, and I just want to congratulate you on that. And now I’ll shift into my questions. First one, Beth, you didn’t call out anything on general liability and commercial auto in the reserve adjustments. So I just, you know, I went through the queue, I didn’t see anything in there. Just want to make sure I understand that right. Or if there were some big moves in prior accident years and generally just, you know, how are you thinking about the reserves going forward for commercial auto and GL?
Beth Costello (Chief Financial Officer)
Yeah. Andrew, so your review is correct. We did conduct our reserve review during the quarter and we did not adjust our booked reserves. As we looked at the activity, it was, you know, with the actions that we had previously taken, so [no need] to make any adjustments there.
Andrew Kleiderman (Analyst at TD Cowen)
And you’re feeling good going forward?
Beth Costello (Chief Financial Officer)
Yes, we’re feeling good going forward. You know, obviously we do our reserve review every quarter and if we felt that we needed to increase our reserves, we would have in our reserve review where we stood relative to our book reserves.
Andrew Kleiderman (Analyst at TD Cowen)
Yeah. And on small business, the 85.2 underlying was exceptional and certainly materially stronger than your other business interest segments. So I just want to get a sense, historically, have you always done much better in small business? And how do you feel about sustainability of that line ratio amidst pricing pressures?
Beth Costello (Chief Financial Officer)
I’ll start, and if Mo or Chris want to add anything. I think we’ve consistently talked about the strong performance in small business, which has been there quarter after quarter and year after year at this core underwriting. The combined ratio that we did was impacted by favorable non-cat property as we called out. And so obviously that can move around from period to period. But when we look at the underlying performance, feel very good. So the question may be where would we expect fourth quarter to be? It’s a little bit of what happens with non-cat property. But again, I think the performance of small business stands on its own.
Christopher Swift (Chief Executive Officer)
Andrew, I would just add, you know, we’re very proud as obviously as I called out in our prepared commentary, that Kinova is recognized as again for the eighth consecutive year of leading with digital capabilities. And I think that just reflects our mindset of continuing to invest in small commercial to be easier to interface with, faster, make lives easier for our agents and brokers and customers. So yeah, we’re going to continue investing in this franchise to differentiate it as the world changes going forward.
But Mo, what would you add?
Morris Tooker (President)
Maybe just one more anecdote, Andrew. The 78% straight through on the entire portfolio that Chris called out, that’s an all-time high for us and we think it’s probably 5 to 10 points better than our leading competitor, let alone our average competitor. So we expect that 78%, with all the technology investments we’re making, including AI, to continue to improve and that just creates a better experience for our agents and brokers.
Andrew Kleiderman (Analyst at TD Cowen)
Thanks a lot.
OPERATOR
Your next question comes from the line of Elise Greenspan with Wells Fargo. Your line is open. Please go ahead.
Elise Greenspan (Analyst at Wells Fargo)
Hi, thanks. Good morning. My first question is going back to the discussion on workers comp. So I think you said you guys, you know, gave a lot of color on the impact of middle and large, but then said, right, it was around a point, right, on overall BI in the quarter. So just given it sounds like you expect perhaps this elevated frequency to persist, should we continue to think about like an ongoing, you know, one point drag from comp on BI for, you know, at least in the near term?
Christopher Swift (Chief Executive Officer)
I would say not necessarily. And Beth can add her point of view. You know, obviously we’re focused on 2026 trends and finishing the year strong. Obviously we’ll talk about 2027 at the right time and give you any additional color. But again, I think this is a step change given some of the activities Mo talked about, particularly health care. And we’ll see how it’s going to play out beyond this year-end. But I think this is a year of sort of, as I said, a step change and hopefully then things at least calm down a little bit.
But Beth, what would you say?
Beth Costello (Chief Financial Officer)
Yeah, the only thing I would point out, Elise, is when we talked about the impact on comp for the quarter being a little over a point, that is for the quarter, which included a bit of a true-up for first and second quarter. So when I think more of the run rate and I kind of look at the nine months, kind of where we are year to date, the impact on that perspective is about a half. So again, just the fact that there is a bit of a true-up that happens in the quarter if you just look at the quarterly number.
Elise Greenspan (Analyst at Wells Fargo)
Thanks. And then my second question is on employee benefits. You guys gave some guidance on just bringing on the Equitable deal. Also it sounds like maybe some normalization in disability should persist. So as we think about those two forces when you run Equitable, which you said will be dilutive, right, and in 27, can you guys still expect to be within the 6 to 7% margin guide for benefits with all those factors taken into consideration?
Christopher Swift (Chief Executive Officer)
Yeah, it’s a great question. I would say yes, we still think in terms of this business as 6 to 7%. But I would point out there’s three moving parts that you would. One, obviously we got to integrate and we’re going to spend money on integrating, probably in the million-ish range, maybe $40. Those costs will be sort of below the line on core, so it’s excluded from core, like we’ve done all our deals. We also called out that there’s probably $30 million of annual intangible amortization that will be part of core earnings.
So, and then we’re going to obviously continue to be as efficient as possible and continue to invest in the business. But when you put it, you know, all together, we still see this business as the six to seven. We called out that, you know, there’s going to be a modest dilution in 27, particularly as we scale. I mean, you know, the technology we’re acquiring is really actually very, very good and industry-leading in our judgment. But it’s going to take some time to sort of scale and get all the things moving forward.
But when we get to that point and if you really think about the moving parts, six to seven is still our long-term view.
Elise Greenspan (Analyst at Wells Fargo)
Thank you.
OPERATOR
Your next question comes from the line of Alex Scott with Barclays. Your line is open. Please go ahead.
Alex Scott (Analyst at Barclays)
Hey, good morning. Wanted to see if you could give us a better sense of what to expect out of the core margin in Group Benefits. I know you probably don’t want to give guidance for 27 and that kind of thing, but just given there’s some more moving parts there around the acquisition and disability and maybe even paid family medical leave, I just wanted to see if you’d help us out with thinking through that.
Christopher Swift (Chief Executive Officer)
Yeah, you’re right. We’re not going to give you guidance on 27. That’s what I tried to do a little bit just on the prior question of just, you know, the acquisition impacts. I still think this is a six to seven business for us. It’s going to, you know, take maybe just a little bit of time to scale and sort of earn into, you know, the activities that we spec. But, you know, 500 million of premium, and if we could grow that at a healthy rate, you know, we’ll get to, you know, where we want to be.
But, you know, and that’s why I said in my prepared remarks, Alex, that this is still a highly accretive business, you know, for us, particularly when you look at it on a tangible return on equity basis. You know, it’s in the 15, 16% return on tangible. If you look at margin on a nine-month basis, I think it’s 6.9 compared to the 6.4 for the quarter. So it’s contributing meaningfully and, as we alluded to, particularly with their technology, bringing more of The Hartford Insurance Gr to that small to mid-size customer base in benefits would be a strategic objective.
I know Mo and the team have.
Alex Scott (Analyst at Barclays)
That’s all helpful, thanks. Second question I had is on growth in BI. You know, as we look at small commercial, could you talk a bit about the competitive landscape you’re seeing there? You know, do you expect to be able to sustain these levels of growth even as the market continues to get more competitive? And are you seeing any of your competitors that are maybe even geared toward the larger market influencing things in the small?
Christopher Swift (Chief Executive Officer)
I’m going to let Mo—sorry, Alex, I stepped on you—I’m going to let Mo add. But again, I think all our businesses fit together well. We constructed the portfolio here of small, middle, large, specialty, international, EB, personal lines. So it’s actually a diversified portfolio that is, all the businesses are contributing to our overall results both from a growth side and a profitability side. But Mo, what would you add?
Morris Tooker (President)
Alex, let me just make a layer below that for you. So I think the messaging is going to be fairly consistent with what we’ve talked about in prior quarters. In small, we’re very confident about our abilities to grow at a similar pace. I think what we’re bringing to the marketplace, the digital and technology capabilities continue to make a real impact for our agents and brokers. I think I cited the 78% straight through, which is nowhere near our competitors, and obviously Chris talked about Kinova.
That being said, there was an incremental step change in the competitiveness in small in the quarter. You’ll see our new business went negative or non-positive for the first time in probably 20-something quarters. It’s the first time we didn’t grow our new business. There is a competitiveness that team is staying very disciplined in making good choices. In middle and global, again we talked about it, that is incrementally more competitive and we’re really trying to pick our spots. And I talked about it last quarter about having increasingly divergent view from some of our competitors. We’re talking about stability. We’re not necessarily feeling stability. We’re feeling incrementally more competitive and that’s coming through in the new business numbers that we show in the supplement in both middle and global.
So on those businesses we are going to continue to make choices that are really dependent on what the market’s doing from a rate perspective. We are protecting our renewals. You can see that in retention numbers. So our growth in middle and global, as we talked about last quarter, will be very dependent on how market conditions evolve, especially in the general liability and workers compensation space.
Alex Scott (Analyst at Barclays)
Thank you.
OPERATOR
Your next question comes from the line of Gregory Peters with Raymond James. Your line is open. Please go ahead.
Gregory Peters (Analyst at Raymond James)
Well, good morning everyone and congrats, Chris. And congrats to you, Mo, as well. Considering the strong levels of profitability inside Business Insurance, can you speak for a second on the impact of, you know, contingent commissions on your expense ratio? Just curious. You know, as we look forward, it seems like the outlook for your business remains really strong. So seems like there could be the potential for some elevated pressure there going forward just on contingents alone.
But maybe you could talk a little bit about policy acquisition costs.
Morris Tooker (President)
Yeah, Greg, it’s Mo. We expect a lot of stability there. We’ve worked really hard with our partners to make sure that we’ve got equitable deals, that is, deals that are equitable on both the benefits and the P&C side. As we look forward, we don’t anticipate any significant change there.
Gregory Peters (Analyst at Raymond James)
Okay. I guess since it hasn’t come up yet, at least in the Q and A, I’ll pivot to the personal insurance business, you know, where your results have recovered quite nicely. But growth is becoming an issue. So I’m just curious how you think about your price competitiveness both in auto and home and then both in agency and direct as we think about potential for growth going forward.
Christopher Swift (Chief Executive Officer)
Yeah, I would ask Melinda to add her color, but I’m overall pleased where we’re at. Obviously, in this business we’ve worked hard to restore margins and profitability both in auto and home and keeping up with the trend. We’re growing in home, particularly in our agency. But yeah, the auto market is, as I said in my prepared comments, intense and continues to be that way with still elevated shopping. But Melinda, what would you add?
Melinda
Yeah, I would say our growth trajectory has been improving as retention benefits from lower rate and through the customer experience efforts that we have been deploying in market. You can see that clearly in our retention up year over year and sequentially. Agency, as Chris mentioned, is scaling, which is also supporting top line. And other than that, I would just say, Greg, we’re going to be disciplined. We’re not trying to manufacture a growth crossover as much as we are trying to be thoughtful about making sure that we are, you know, in the market growing in a disciplined and appropriate way.
Gregory Peters (Analyst at Raymond James)
Got it. Thanks for the detail.
OPERATOR
Your next question comes from the line of Rob Cox with Goldman Sachs. Your line is open. Please go ahead.
Rob Cox (Analyst at Goldman Sachs)
Hey, thanks. Good morning. Yeah, thanks for the comments on small commercial. You know, noting that you said it’s getting a little bit more competitive there, but we just noticed, you know, continues to be strong policy additions in small commercial, and just curious if there’s any, you know, particular parts of the economy or, you know, geographically where you’re seeing the growth there, or is it pretty broad based?
Morris Tooker (President)
Rob? It’s Mo. I would say very broad based. When we look across industries, the small business formations, when you look at the government data, is still very strong. We’re actually really optimistic, as in a world of AI-enabled businesses that actually it’s going to be a small business revival in some ways, and we think that more and more entrepreneurs will be equipped and able to start up companies with AI than more so in the past. We actually think the capabilities from a technology perspective are coming towards us in small business, and it’s one of the reasons we’re so excited about the Equitable transaction, because we’re going to bring the same speed and ease of transaction that we’ve got on the P&C side to the benefits side. And we just feel like we are the full-service firm for every small business in this country.
Rob Cox (Analyst at Goldman Sachs)
Thank you. Just follow up on the expense ratio. You guys highlighted increase in staff costs across the business. Maybe you could just help us unpack really what’s going on there and where you’re driving some of those efficiencies.
Beth Costello (Chief Financial Officer)
Yeah, I would say it’s sort of broad based. Obviously we’re continuing to invest in our franchise, but we do have expectations on returns and efficiency gain, continuous improvement. So it’s just not one thing. I think it’s everything sort of working in concert. And as we talked about at the beginning of the year, we thought the back half of 26 here we would start to demonstrate the efficiencies and we called up, in essence, salaries and overall total compensation.
But that’s what it means. Our overall cost per head is coming down.
Rob Cox (Analyst at Goldman Sachs)
Thank you.
OPERATOR
Your next question comes from the line of David Mota Madan with Evercore. Your line is open. Please go ahead.
David Mota Madan (Analyst at Evercore ISI)
Hey, thanks. Good morning. I was hoping Chris and Mo, you guys could maybe elaborate a little bit more on pricing in the workers comp book. I heard you guys say that it improved a little bit this quarter and remained positive. But I’m wondering how you’re thinking about putting price through the book now just given the frequency increase that you guys are now assuming in your loss picks.
Christopher Swift (Chief Executive Officer)
Yeah, I know Mo will add his color. I would say there is a California dynamic and then another 49-state dynamic where the other 49, as much as we’re saying it’s positive, it’s slightly positive. So I wouldn’t say there’s a step change in the economics that’s emerging yet in our book. And then California has its own ecosystem. Mo, so maybe you add your overall point of view. Yeah, please.
Morris Tooker (President)
Yeah. David, I would say a couple things. One, we are constrained by the marketplace. That comes through more in the small business space where we just see the filings as a more important part of the pricing process. But just know that in small business we feel like the frequency improvement, or the frequency change we’ve seen, is within our loss pick, and we feel like we can cater for what we’re seeing within the pricing parameters we have today.
In small business, when you get to middle and large, we have much more flexibility in terms of the day-to-day decisions from our underwriters. So think about segmentation, think about book mix shifts. And we’ve been working on that all year. So the team is working really hard to pull all the levers from an underwriting perspective. Think less about pricing and more on underwriting to make sure that we can shape the book in response to the frequency changes we’re seeing in middle and large.
David Mota Madan (Analyst at Evercore ISI)
Got it. Okay, thanks. That makes sense. And then maybe just for Beth. So just on the underlying loss ratio in business insurance, the roughly 200 basis points deterioration year on year, 100 of that coming from the workers comp changes, but then 100 basis points from mix and a few other small items, I guess. Could you sort of unpack those mix and other small items that contributed to, I guess, 100 basis points of the 200 basis points deterioration?
And, you know, should we think about those? I would think that the mix dynamic would just continue as written premium earns in. But interested in how we should think about that going forward.
Beth Costello (Chief Financial Officer)
Yeah. So one thing just to correct in what you said is that if we’re talking about total business insurance, the mix piece would be, you know, less than 5, 10 of a point. The point, roughly less than a point, was what I meant with middle and large. So again, if you earn total BI piece, I’d say it’s, you know, more in the 0.3, 0.4 range. And then the other items that make up the difference really is just a lot of little tenths of points here and there kind of across the various lines, which I think is more just reflective of a little bit of the pricing environment.
So, you know, you feel a little bit in financial lines, which we talked about in the past, and some of the other things. So not any one large item that I would point to. And I’m sorry, the last question you had on mix, I would expect some of that mix to continue as we continue to see the higher written premiums that we saw in national accounts continue to earn into the book.
David Mota Madan (Analyst at Evercore ISI)
Got it. And that’s a 30 to 40 basis points just on all-in underlying loss ratio in BI.
Beth Costello (Chief Financial Officer)
All in. Yes.
David Mota Madan (Analyst at Evercore ISI)
Great. Thank you.
OPERATOR
Your next question comes from the line of Katie Sechis with Autonomous Research. Your line is open. Please go ahead.
Katie Sechis (Analyst at Autonomous Research)
Thanks. Good morning. I wanted to ask one more question on the workers comp book. We’ve talked a lot about the change you have observed in claims frequency. I wanted to sort of ask about claim severity. I think earlier this year you guys described that as trending around 3 to 3.5% and still within your 5% pricing and reserving assumption. Has that changed as the year has progressed? And is there any impact from a shift in claim severity embedded in your changed loss picks this quarter?
Beth Costello (Chief Financial Officer)
Yeah, so our starting point still, as we think about severity, and I think you’re referring to the medical severity, still starts with that 5%, and that still continues to be our starting point. And no real change I would highlight relative to kind of what we’ve been observing. Obviously, as frequency changes that obviously can have some impact on how it pulls through. But the starting point of the 5% has not changed.
Katie Sechis (Analyst at Autonomous Research)
Okay, thank you, Beth. And then perhaps shifting over to the small commercial business, we saw a lot of hubbub from the launch of Meta’s museum product in September. I guess more broadly, how are you guys thinking about the impact of agentic AI on your small commercial business, and wondering if you could update us on your views about the way that you source risks there as agentic AI becomes more commonplace?
Morris Tooker (President)
Yeah, Katie, it’s Mo. I would say it’s very early days. We’re monitoring adoption, privacy, security. I mean, there’s lots of issues that go on with this technology that we’re monitoring closely, and we haven’t seen any real changes of real note, and we see continued strong customer engagement through our existing channels. So we’re just not seeing the shift at the moment. That being said, our technology agenda—we’re prepared for wherever the market goes.
As a reminder, we’ve talked about it publicly: 3% of our small business book is direct today. That number has been fairly static for years now, and again we don’t see a change there. We still find that our small business customers really value an agent in the transaction that they don’t spend a lot of time on throughout the course of the year. So the advice and trusted advisor continues to be a really important feedback when we go to small business owners and ask them for their feedback.
So we’re ready, the technology is on the shelf. We’re ready to go, but we just haven’t seen any real adoption coming through today.
Katie Sechis (Analyst at Autonomous Research)
Thanks for the color, Mo.
OPERATOR
Your next question comes from the line of Ryan Tunis with Cantor. Your line is open. Please go ahead.
Ryan Tunis (Analyst at Cantor Fitzgerald)
Thanks. So you guys shared your assessment—I guess your early assessment—on the incidence tick as a one-stop function. I guess my concern is, coming from the perspective—and correct me if I’m wrong—we’re at pretty low absolute frequency levels in both group disability and workers comp. I guess my concern would be just from an absolute perspective there could be quite a bit harder for that to mean-reverse. So just, I guess, you know, just interested in your thoughts on that and where we are in absolute terms on that frequency variable in both businesses.
Mike Fish (Head of Employee Benefits)
Yeah, I would say on both comp and disability, particularly in disability we’ve enjoyed some strong results going back four or five years. So I think it’s, in my language, it’s mean reverting now. You know, our customer base is very sophisticated, so they know how their book has performed. We’ve basically kept pricing flat to maybe slightly negative over the last couple years. So I still think it is a profitable book. There are some dynamics particularly related to mental health, related to paid family leave where utilization tends to be higher.
So all those things that we could eventually price for and get back to profitability. I think on the comp side it’s a little different. Right. It’s less mental health, maybe more, as we said, the environment related to healthcare, ACA, that’s driving. I do think it is. Right now our belief is it’s a one-time step change here in 2026. We’ll have to see how things play out in 2027, but we’re not expecting sort of another year of elevated frequency in ’27 as we sit here today.
But that’s what I would say, Ryan. So hopefully I scratched your itch.
Ryan Tunis (Analyst at Cantor Fitzgerald)
Yeah, that’s helpful. I’m just curious. Obviously when we’ve had incidents of frequency increases in the past, it can be somewhat economically correlated. It sounds like there might have been a little bit of that. I think Mo mentioned more white-collar, knowledge-economy-type claims. Are you seeing anything rhyming, you know, between the increase in incidence and disability and frequency in workers’ comp? Is there anything rhyming in terms of the type of claims that are coming in?
Christopher Swift (Chief Executive Officer)
No, I don’t think Mo mentioned white collar at all, so maybe there was another call you’re multitasking on. But yeah, I think the only thing we’ll say again is there is a premise on healthcare-related activities, the cost, high-deductible plans, and when we’ve seen spikes in frequency in the past, it tends to be economic shocks more than anything. Maybe you could say that the healthcare system is a minor adjustment or a minor disruptor that’s creating some of the frequency issues.
Time will tell, but we’ll continue to use all our data and analytics and AI power to really try to uncover what exactly is happening in our 50 states.
OPERATOR
We have reached the end of the question and answer session. I will now turn the call back to Kate Jorence for closing remarks.
Kate Jorence (Investor Relations)
Thanks for joining us today. As always, feel free to follow up with any additional questions. And have a nice day.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
© 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.