Good morning. My name is James and I will be your conference operator today. At this time, I’d like to welcome everyone to The Hartford’s Third Quarter 2018 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I’d now like to turn the call over to the Head of Investor Relations, Sabra Purtill. Please go ahead.

Thank you. Good morning and thank you all for joining us today. Today's webcast covers our third quarter financial results which were released yesterday afternoon. The news release, investor financial supplement, slides and 10-Q for the quarter are all available on our Web site. Our speakers today include Chris Swift, Chairman and CEO of The Hartford; Doug Elliot, President; and Beth Bombara, CFO. Following their prepared remarks, we will have time for Q&A. 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 on 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, which are also available on our Web site. Our commentary today includes non-GAAP financial measures. Explanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filings and 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 Web site for at least one year. I'll now turn the call over to Chris.

Good morning and thank you for joining us today. The Hartford had a great quarter with excellent financial results and significant progress on our strategic goals. Third quarter core earnings were $1.15 per diluted share, up significantly from $0.35 last year. Year-to-date, The Hartford’s core earnings are $3.55 per share compared with $1.94 in 2017. The higher level of earnings this quarter and for the year were driven by several items, including better underwriting results in property and casualty, increased Group Benefits in Mutual Funds earnings and a lower U.S. corporate tax rate. Let me share some details on these items. P&C underwriting margins, which Doug will cover in more details, improved with a third quarter combined ratio of 97.3 and 95.4 for the nine months. The underlying combined ratio was 93.2 and 91.3, respectively, each better by nearly a point over last year. Group Benefits earnings for the quarter and year-to-date were up 50% and 74%, respectively, due to the acquisition and lower tax rates. Margins remain very strong with the core earnings margin for the first nine months of 6.4%, including the amortization of acquisition-related intangibles. Excluding intangibles, the core earnings margin was 7.5% compared with 6.1% last year. And Mutual Funds core earnings were up more than 50% for the quarter and year-to-date with continued growth in assets under management. Book value per diluted share, excluding AOCI, grew 11% since December 31st and the annualized year-to-date core earnings ROE was 12.7%. Looking at earnings and returns for both the quarter and the year, I’m very pleased with our overall results. This quarter, we made continued progress on important strategic and operational goals. In August, we announced the agreement to acquire The Navigators Group. This acquisition advances several of our key objectives. It enhances our Commercial Lines presence…

Thank you, Chris, and good morning, everyone. We posted strong results this quarter in property and casualty and Group Benefits. In Commercial Lines, we’re pleased with our performance and returns, particularly as markets remain competitive and workers’ compensation rates are increasingly under pressure. In Personal Lines, auto loss trends remained favorable and new business growth rates improved. And in Group Benefits margins remain very strong as we continue to execute on our integration plans. It was another active quarter for catastrophes, but losses were well below third quarter 2017. This year, Hurricane Florence was the single largest event of the quarter but there were also a number of wind, hail and wildfire events contributing to losses. Current year cat losses in the quarter totaled 169 million, 183 million less than a year ago. Before I cover results for our business units, I’d like to comment briefly on workers’ compensation trends updating my observations from our second quarter earnings call. The market remains competitive as industry returns have been strong over the last five years. Loss cost trends over the same period have been quite moderate with low severity and negative frequency trends, driven by favorable economic fundamentals as we emerged from the Great Recession. With the economy at or near full employment, our frequency in small commercial and middle market has turned positive this year. Based on our business and economic analysis, we view this trend as broader than just our book of business. With the unemployment rate below 4% for the last six months, the ratio of unemployed workers compared to open jobs has continued to decline. This ratio is now below 1 for the first time since 2001, the first year this metric was tracked. Many businesses are struggling to find qualified employees and beginning to add more…

Thank you, Doug. I’m going to cover investment results, mutual funds and corporate earnings as well as book value and ROEs. In addition, I have a few updates on The Navigators acquisition and holding company resources. Starting with investments, net investment income totaled 444 million, up 10% over the prior year quarter due a 9% increase in invested assets primarily as a result of the higher level of invested assets in Group Benefits from last year’s acquisitions. Limited partnership income did not meaningfully impact the compares into 2017 as third quarter LP income was 45 million for tax, down 3 million compared with third quarter 2017. Excluding LPs, the annualized portfolio yield was 3.7%, down slightly from 3.8% in third quarter 2017 due to the impact of the acquired Group Benefits assets being reported at market yields and the higher level of holding company resources held largely in short-term investments. The P&C investment yield was up modestly to 3.8% primarily due to higher interest rates. For the consolidated investment portfolio, the average new money rate in the quarter exceeded the average yield on sales and maturities by about 20 basis points. This reflected higher interest rates as well as a roughly 400 million reduction during the quarter, an exposure to municipal given favorable after tax yields on comparable taxable investments. The credit performance on the investment portfolio remains very strong. Net impairments in the quarter totaled 1 million, flat with third quarter 2017. Turning to mutual funds. Third quarter core earnings were 41 million, up nearly 60% from last year due to both higher assets under management and a lower tax rate. Total mutual fund and ETP assets under management, which excludes assets related to Talcott Resolution, was 106 billion at the end of the quarter, up 10%. This growth…

[Operator Instructions]. Your first question comes from the line of Randy Binner from B. Riley FBR. Please go ahead.

Good morning. Thanks. I guess the question and what seems to be driving the stock today I think is the commentary around high loss picks and workers’ comp. And I appreciate the straightforward way that you communicated it. And so the question I have is what kind of claims are we talking about here? So you have a pretty broad book. Is it kind of basic slip and falls, is it auto accidents, is it something else? You are addressing it and you are making a higher loss pick. So it will be helpful I think for me and others to understand what kind of losses are hurting you with less experience workers?

Randy, it’s Chris. I’ll start and Doug will add his commentary. I think the context on the whole discussion hopefully you sensed from our commentary is we’re starting in a very good position. This is a product line that is performing well. It’s a large product line for us where we have great data and insights across the country. So as we’re trying to ascribe when we see a little pressure in the context of a particularly small and middle market, it is an overall manageable trend line through adjustments in pricing, through adjustments in underwriting as Doug would say. So I would like you and our investors to understand that the starting point is strong, it’s healthy and this is not a runaway train situation with loss cost trends and frequency. So, Doug, can you add some color on the types of claims we’re seeing?

I will. So, Randy, when I think about injury types and I look across and we have spent time looking across fractures, sprains, contusions, slips and falls, et cetera, we see general uptick in frequency across all those injury types. So as I’ve described to you, we are looking deeply in the book. We’re seeing some of those trends in both small and middle. But I can’t sit here today based on the data and the reviews we’ve done and suggest here it’s only a couple of injury types. It looks a bit more broad-based and a bit more elevated in the experience worker defined by workers in position less than one year.

And then the follow up I have there is that if those were kind of I guess higher frequency, lower severity type workers’ comp claims, is that having inflation from trial attorneys and medical costs or is it more just kind of a frequency thing?

We certainly feel like right now our severity is in pretty good shape. We’re watching that carefully. This looks to us like numbers of accidents are up which is inside that frequency ratio and it looks isolated there. And I don’t feel the external litigation as a factor. I feel injury and experience as a driving factor.

All right. Thank you.

Your next question comes from the line of Amit Kumar from Buckingham Research. Go ahead, please. Your line is open.

Thanks and good morning. Thanks for the color on workers’ compensation. I had a follow up on that and this ties back to Randy’s question. Would it be possible to remind us either what the top NCCI hazard classes are or even talk what are the top classes which make up your workers’ compensation book?

Amit, let me try to just share a profile of our book of business. I’ll let you do the work of NCCI. So obviously our middle market book is extensive classes; so construction, manufacturing, retail, wholesale. Essentially we’re in the entire middle market space with very few exceptions. So it’s broad based and certainly that would be the case for our small commercial market as well. We offer pretty extensive product and there are a very few sectors of the economy that we don’t touch. So it’s not like we’re sitting here talking about a specialty based market that is lasered into two or three SIC Code. That’s not indeed the case with our book.

That’s actually very helpful. But the other sort of unrelated question and this might be for Chris or someone else. You talked a bit about Navigators and on the last call we had talked about harmonizing the reserves. Is there any update whatsoever on that process? And obviously you spent a quarter now or a few months. Do you feel any differently versus what you might have looked at that time? Thanks.

Yes, as I said in my prepared commentary, we’re beginning the integration planning process and I think it would be realistic to assume that we’ll look at what Navigators does between now and closing with any reserve positions and may our adjustments at closing. So there is really nothing that we can comment upon now until we own the property.

Thanks for the answers.

Your next question comes from the line of Elyse Greenspan from Wells Fargo. Go ahead, please. Your line is open.

Hi. Good morning. Sorry, I also had a couple of questions on workers’ comp. Doug, I appreciate the disclosure. You’ve kind of tried to say we’re back to where you guys were in 2016. Yet you guys are attributing this to pretty low unemployment levels, obviously more inexperience workers in the workplace. So the unemployment rate is obviously lower than what it was in 2016. So when you guys look at your book and what you’re seeing out there, how do we know that this will not get worse?

Elyse, I guess I can’t promise or suggest that I know exactly how the world’s going to play out in 2019. What we do think we have a good handle on is how 2018 is playing out. I would say to you that we’ll have a great sense of where frequency lands for the 2018 accident year within a quarter or two into '19. These are not long developing estimates on the frequency side. It’s claims in the door. The first quarter is relatively mature right now from '18. Second quarter is maturing as we speak. And so it’s a fast line to measure. The work we’re doing in terms of trying to predict and make our best assessment of '19 is going on as we speak which is why we’ll bring it altogether in February when we talk and give you our predictions for 2019.

Okay. And then you guys have often said and others in the industry as well just given the very strong possibility of comp that’s where we’ve seen a lot of rate declines. Can this higher frequency give you the ability to get actuarial justified rate increases, or do you still think just given that the margins still seem to be even this uptick in frequency still pretty attractive that we will still see price declines in the business from here?

Elyse, you’re right. The absolute level of performance across comp across multiple sectors is very healthy right now and certainly our book demonstrates that as well. The other fact is that as rates are worked on across the industry and loss cost trends are filed by the NCCI and carriers like ourselves are adopting multipliers and dropping our own experience over the top, they’re using prior experience periods. So as I look out across the various states and I think about the various effective dates for the changes dropping into '19, they’re still looking back at prior years which are very healthy. So we’re balancing that. We’re obviously working levers in our own underwriting machines trying to make sure that our underwriters have the greatest sense of where we sense trends are. We’re adjusting based on experience to the account, what we know about the class, et cetera, et cetera, and bringing all that to bear and making choices to either write, renew or to not offer a quote when we feel like the price won’t match our fundamental economic goals.

Okay, great. And then one last question. Overall prices for small and middle market did decelerate away from comp. Can you just give us a sense of what’s going on broadly in the Commercial Lines market and would the Q3 pricing levels be what you would expect to continue into the fourth quarter?

Yes, I see a pretty stable environment non-comp across all the other lines and I expect to see that into the fourth quarter. So I don’t see any drivers of change with the one exception that we continue to see weather in certain parts of the country and I expect to see a bit of tightening maybe in terms and also in pricing on the property side geography based.

Okay. Thank you very much.

Your next question comes from the line of Mike Phillips from Morgan Stanley. Go ahead, please. Your line is open.

Yes. Thank you. Good morning, everybody. First question kind of to follow up on Elyse’s last question there, I guess more at a higher level if you could talk about. Your margins in the small commercial are clearly better and have been than the middle market. So if you could just at a higher level the difference in the competitive landscape between the two if you see any shifts in more competitive environment in general for small book versus the middle market book?

Relative to small what I would say is we have been a focused small business carrier for a long time. It’s a combination of underwriting acumen, platform, speed automation, retail relationships, et cetera, and that formula continues although in this new digital age we are refreshing that for a world where customers who want to reach out 24/7 and be serviced in different ways. So that is the formula. I think that’s driven our success and we clearly think that’s a great foundation going forward with adjustments we will continue to make. In the middle, it’s been slightly more competitive. I think that has at least been the case in my career that the cycles have had a bit more maybe amplitude to them over time. We see a lot of – we do see competition there. I think we’ve been successful. We are clearly in the last five to seven years growing our product breadth. Chris has talked to you about what The Navigators will add to our dimension. I think our underwriting acumen continues to improve. Yes, it’s a challenging environment but I think we’ve got great upside and I see us as a key player in that market for the long term. So I’m excited about our prospects. What’s happening now? I see these as kind of shorter-term challenges that we’ll work our way through but I love what we’re doing in middle and I think we’re going to be a terrific player there.

Okay, great. Thanks. Let me switch over if I could to Personal Lines side, in personal auto specifically. You’re still getting a pretty decent rate there, maybe down a bit sequentially. But the core margins, core combines 96 or so maybe plus a little a bit. Are you where you where you want to be with profitability in personal auto? And maybe throwing kind of what you’re kind of seeing from the competitive landscape. And on that line your drop-in pits [ph], what that means by your competitive position. Thanks.

From a profit perspective, we’re very pleased about where we are; pleased about our performance, pleased about the trends we see in our book. So just an aggregate performance comment that yes, we’re very pleased about today. The other side is we’d like to be growing a bit more. And so as we have gone through, made changes to get the health back in the profitability piece, we know we’ve got to continue to adjust to get our new business stimulated. So we are keenly aware of that, focused on that, working every side of that as I have talked in prior quarters about what we’re doing inside our sales engine. What we’re working on the actuarial front and I’ve now seen progress as I’ve evidenced through the numbers I’ve shared with our direct auto ARP growth on new over the last couple of quarters. I expect that to continue and we’re working hard to make that happen.

Doug, I think you really pointed out too that we are spending more to stimulate response – responses are up, conversions are up, new business period-over-period is up. We’re working with ARP differently about how we can begin to market to their membership base. The partnerships’ never been stronger or more vibrant in my particular point of view. And I think '19 growth will start to kick in, in a more meaningful way that you’ll be able to see, Mike.

Okay, great. Thanks.

Your next question comes from the line of Ryan Tunis from Autonomous Research. Go ahead, please. Your line is open.

Hi. Thanks. Good morning. First one for Doug. Just trying to get some confidence that next quarter we’re not going to be taking another charge for workers’ comp, you brought this up second quarter and then there’s another charge this quarter. So just trying to understand what are you assuming – what exactly needs to happen for you to have to take up your loss pick again? Are you assuming positive frequency now? Where exactly are we?

Ryan, our accident year 2018 pick for comp, we feel very solid about it across all our lines of business and we’re assuming that our estimate of trends in those assumptions is solid and it will repeat itself in Q4. So that’s about all I can share. I feel like we’re on top of what we need to. I don’t expect any surprises but I also don’t think we’re going to see a world return to negative frequency in the next three months.

Got you, okay. And the other one is really just for Chris and it’s more just about – it’s I guess the stock price underperformance year-to-date, you guys gave guidance in February and I think you’re going to exceed guidance in basically every single segment. You’ve deployed capital. And I guess when you just kind of look at how the stock has been working, is there anything you think that you could be doing differently over the next 12 months that you plan on doing that Hartford could do better or differently that you think could maybe be helpful? Thanks.

Sure. I’m just going to tag onto Doug’s last comment on the prior question on fourth quarter and basically heading into '19. Remember the frequency numbers we quote is a rate of change. It’s not an absolute I’ll call it numeric level of frequency. So my noneconomic analysis is we should not see a continued rate of change increase even at low employment levels given time does help with training or job skills. So as long as employment doesn’t lag down to, say, in the 2.5% range I think there is a general level of stability in the workforce education training in the sectors that Doug mentioned. But again, it’s something to watch which again with our advanced data and analytics we’re all over. I think your commentary on the stock price, we share your frustration, if I could read between the lines. We think we’re doing the right things to create shareholder value over a longer period of time and we’re going to continue to do what we believe is right. And the only thing that Beth and I will particularly do is just spend a little bit more time with investors communicating, being crystal clear on priorities, execution going forward. So that’s probably the big thing that I see that we could do at this point in time.

So I take that to mean that you think the market is reading too much into this workers’ comp issue as a material problem at Hartford?

Yes, I do. If I think about intrinsic value, if I think about cash flows, if I think about starting points on ROEs and margins, this is a modest pull back in a margin or a loss ratio point or two particularly as we head in '19. The fundamentals of our business are broad based business isn’t really changing. If I look at benefits in the numbers we’ve been putting up there, if I look at all the organic product lines that we’ve been building that will add meaningfully to earnings going forward, again, I still believe we’re doing all the right long-term things and can’t control short-term mark-to-markets and fluctuations and people’s views. All we’re going to try to do is to be as consistent as possible in producing the results that shareholders expect.

Thanks, Chris.

Your next question comes from the line of Mike Zaremski from Credit Suisse. Go ahead, please. Your line is open.

Thanks. Good morning. First question is on the Group Benefits. It feels like it’s been running ahead of expectations. I know there were some prepared remarks about maybe things were better development than expected. I just wanted to kind of get a sense for whether the loss ratio is trending more favorably and we shouldn’t take that as kind of a run rate level?

Yes. I’ll take that. So yes, we have seen on our disability book continued favorable experience and sitting here today we’d expect from a loss ratio perspective to see some continuation of that. Again, if you look at our development there it definitely has been higher than we would have expected. But again a lot of that is related to more recent experience, so you so sort of expect that experience to continue in the short term. It’s sort of different then when you think of longer-term P&C type liabilities where you’re making adjustments on very old accident years that maybe don’t indicate kind of current trends. So we’re very pleased with how that book is performing overall and like the momentum that we see.

That’s helpful, Beth. Switching gears to homeowners; we’ve had a couple peers saw deterioration in the underlying, you guys didn’t. But some of those peers also mentioned kind of trends that were negatively impacting the – they think the broader space in terms of more water and fire losses. Are you guys seeing any of that in your book?

Mike, our homeowners’ book has been running really sound this year. We’ve worked on that for the last three to four years. So as we rebuilding auto both in the financial health and the product, we were also doing a lot of work at homeowner. So I attribute our strong performance, number one, to the underwriting actions, the earned pricing actions over the last couple of years. And then there’s always volatility and this is a pretty good quarter. So I’m not going to suggest that we’re not going to ever have volatility again in line but I feel pretty good about our homeowners’ line. And our ex-cat weather is running very favorable at the moment.

Okay. If I can sneak one last one in for Beth. It sounds like Talcott from the prepared remarks had some benefit from capital markets and that could be choppy going forward and this might not be the run rate. Is that the right way to categorize that?

Yes, again, if you go back and look at when we owned 100% of Talcott and again look at the net income numbers, because again oftentimes people focus on core earnings which are a little bit more predictable. But we’ll be picking up our share of their total net income which would include any impact of hedging. And we pointed it just could be volatile period-to-period, so I wouldn’t want someone to take $2 million for one month and assume that that’s sort of the run rate.

I appreciate it. Thanks.

Your next question comes from the line of Josh Shanker from Deutsche Bank. Go ahead, please. Your line is open.

Thank you. Two questions. The first one is a quick one and you might have said it. I’m looking at my notes for the dollar value number of the 3Q reset in workers’ comp versus the 2Q reset. I don’t know if you’ve said that. But if you haven’t, if would be great.

Josh, I don’t have that. What I did say is that our accident year '18 number in middle market is up 3.5 points over the '17 accident year number, that’s 3.5. We did move that in the quarter. A couple of points. I don’t have the dollar component of that but it’s just math. So it’s 1 million not tens of millions.

And that’s all workers’ comp?

That was the workers’ comp I’m talking about what we did.

Okay. And the second question, maybe I’ll dig in a little bit. With the sale of Talcott, it looks like the mutual fund business still is producing the same type of earnings power. With that loss, are you going to continue? Is there any risk that those funds go away I guess? And that kind of dovetails into very strong corporate results, which I think there’s a lot of moving pieces and I think it’s mostly Talcott related if you can sort of talk about what the going forward earnings power is I guess of the corporate segment and the mutual fund business post Talcott?

I’ll let Beth talk about the corporate segment. But on mutual funds, again I think you can see the Talcott AUM roughly 16 million-ish – billion, excuse me, been pretty stable. So there should just by our ownership change to new owners and in and by itself that will not going to change that relationship. Those funds inside the VAs are still managed by Wellington. So the only thing, Josh, there is just your views on how quickly has that block run off and what happens to the AUM if there’s any changes in market conditions and performance. But I don’t see much change right now. It should be pretty stable. Beth, can you add your color on --

Yes, so on the corporate piece, again, as you pointed out there were a couple of moving pieces this quarter. I think the biggest one really I think is the reduction in interest expense when you kind of think about that from an ongoing perspective. A lot of the Talcott balances that I referenced, some of those kind of net out with the revenue versus the cost that we have. So when I look at the quarter, a 45 million loss for Q3, I kind of see that run rate going forward of being around 50-ish is kind of probably a safe place to be. And obviously that will change depending on what happens with debt cost and then as I said what the actual income pickup we get quarter-to-quarter from the Talcott piece, because again this quarter it was 2 million. I would expect that to bounce around a bit.

Okay. Thank you for the answers.

Your next question comes from the line of Tom Gallagher from Evercore. Go ahead, please. Your line is open.

Good morning. Doug, just to comeback with a few workers’ comp questions. The pickup in frequency that you saw, was that just most pronounced in middle market or do you also see that in small commercial?

Tom, we also saw the pickup in small commercial as well, yes.

Got it. And when you mentioned it went from negative to positive frequency, can you quantify that a bit? Was it a small negative to a small positive or a bit wider, the band?

The frequency trend’s really going back five, six, seven years, but even longer than that have generally been favorable and negative. So that’s the overall industry and certainly our book has performed equally as well. So we’re talking single digit minuses going back in time. That did move to this moderate single digits, small-single digits, mid-single digits as we moved into 2018 accident year.

Got it. And then just on the severity side, I think that’s been coming in favorably for a while. Has that trend really been claimed durations or is that lack of wage inflation and would you still expect that to develop favorably on the severity side?

Tom, when we think about severity we separate the medical from the non-medical and both parts of severity look pretty much in check. So we are aggressively managing with our claim resources and talented medical executives inside the claim – the medical side and feel good about that, feel good about our workers’ compensation networks, feel good about our strategies and I think are doing a lot to control the medical costs inside our workers’ compensation environment. On the non-medical, our expectation and what we’re seeing in our trends is very moderated. So pleased about those trends, right in line with expectations and as an all-in basis the severity estimates are pretty much on top of what we’re seeing. So I feel good about the severity end of the story.

Okay. Thanks.

Your next question comes from the line of Brian Meredith from UBS. Go ahead, please. Your line is open.

Yes. Thank you. A couple of quick questions here. First, aside from workers’ comp you guys are still getting some reasonable rate and I know Doug you talked a little bit about some concerns about maybe GL claims inflation and you haven’t said it this call. I’m curious what your views are going forward. But as I look going forward as that earned rate comes through, is there perhaps some offsets here with the rest of the commercial book on your kind of underlying loss picks versus what’s happening with comp?

Brian, I look across and we’re spending time on our loss trends across all the lines. And yes, I have talked about liability in the past and we’re watchful of that. We’ve seen a little bit across the industry not just in our book but others have talked about product, others have talked about D&O. It’s a watchful area for us. But in general our loss trends across the non-workers’ comp line is basically in line with our expectations for the year.

And then are you seeing rate in excess of trend right now aside from workers’ comp?

I would say it’s more about equal to trend in the aggregate. And again, there is a property story off to the side of this with cat that we all have to come to grips with, right. We’re disappointed in our cat results and have some work to do in our cat pricing, in our cat underwriting, et cetera. But that aside, generally I think we’re holding serve relative to our margins and our non-comp lines.

Great. And then one other just quick question, is there any kind of read through on sort of what’s going on with comp over to the Group Benefits area, perhaps maybe the lower incidence has something to maybe do with the real good employment situation. Do you think about it that way?

Good question. We actually obviously watch for that carefully. Our incidence trends and group disability continue to run very strong, but we are watchful. But we don’t see anywhere near or anything like what we’re seeing in workers’ comp but know that we’re on that as well in our group business.

Generally, Brian, injuries versus true disabilities are uncorrelated except in high unemployment scenarios.

Got you. Thank you.

Your next question comes from the line of Jay Cohen from Bank of America Merrill Lynch. Go ahead, please. Your line is open.

Thank you. Two questions on workers’ compensation. The first is and maybe correct me if I’m wrong. I thought you said that you changed your loss pick in middle market but you did not change the loss pick in small commercial. Did I hear that right?

That is correct, Jay.

But you just told somebody else you are seeing increased frequency in small commercial as well as middle market.

Yes, our loss pick in total in small as we estimated trends and pricing in the year all-in contains everything we’re seeing including a little uptick in frequency in the first nine months of the year.

Got it. And then secondly on the claims system, you sort of suggested that because of the investments you’ve made in claims, you’ve identified trends quicker than you might have in the past. Can you give us a sense of how that actually worked? What specifically – what changes did you make that allowed you to pick up those trends?

We’ll try to do this in five or six sentences or less. It’s a much longer conversation. But essentially we have now installed a new claim platform over our 5,000 desk throughout claim. And the ability to access what I’ll call structured data and to slice and dice and be on top of it and to look at your metrics and watch your trends is much advanced from where we were five years ago. And so we have monthly and weekly discussions but we’re sitting on top of trends that candidly five years ago were very manual in nature to try to get our arms around and they were slower than we’d like to them to be. And so it’s a completely different environment and one that I think is leading to outstanding claim performance.

It’s an interesting topic. I’ll follow-up offline on that topic later, but thanks for the insight.

Thanks, Jay. I think we have two more questioners in the queue and so we’ll finish those up. I know we’re running past a little bit on our time and there’s a 10 o’clock call, but we will finish up the queue.

Thank you. Your next question comes from the line of Bob Glasspiegel from Janney Montgomery Scott. Go ahead, please.

Good morning, Hartford, and thank you for squeezing me in. On the year-to-date catch up on comp in middle market, it seems like your deterioration was overstated sequentially year-over-year by Q1, Q2 adjustments. So any way that you can do it – the 300 basis points plus sequential increase, how much of that was catch up for comp?

So, Bob, the 3.5 points of change occurred over the three quarters, primarily the last two quarters because Q1 didn’t change much. And essentially half of that change was in Q2 and half of it in Q3. So in our Q3 change of a couple of points, two thirds of that change would have related to the first two quarters of the year in terms of impact in the quarter.

Okay. And that’s just within comp. So overall you take – comp was 75% of the deterioration I think you said.

I don’t know if I said that. I’ll go back and think about that math. But I did say that our other lines are essentially holding and comp is the only line that we’ve made an adjustment to in the current accident year primarily. Beth?

Great. I’ll follow up with Sean afterwards. Thank you.

Your next question comes from the line of Sean Reitenbach from KBW. Go ahead, please. Your line is open.

Hi. Thank you. How well can you incorporate the trend of inexperienced workers into workers’ comp underwriting and pricing going forward?

Good question. We certainly can ask the questions of our prospective clients and renewable clients how fast they’re growing on the payroll side, how many new workers do they expect? So you can get a sense by looking at their payroll and their sales projections, et cetera. Sean, we’re trying to do all that and more today as we speak kind of leaning into this environment trying to understand where those sectors and those clients are that need a little more rate if they’ve got a lot of inexperienced at the desk level or at the machinery level.

Okay. Thanks. That’s helpful. My second question on the Personal Lines other agency book, is that something you guys are looking to turn around growth in or should we expect that book to keep shrinking?

Yes, I think it’s the latter, Sean. It’s a book we have. We don’t want to call it runoff or discontinued per se but it’s probably – AARP has got 100% plus of our attention in energy going forward.

Okay. Thank you very much.

Thank you. And with that, I’d like to turn the call back to Sabra Purtill for some closing remarks.

Thank you. We appreciate that you all joined us today and we look forward to seeing you in the future. If you have any additional questions, please don’t hesitate to follow up with the Investor Relations team. Thank you and have a good day.

This concludes today’s conference call. You may now disconnect.