Hello and welcome to The Hartford Q1 Earnings Release and Webcast Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note today's event is being recorded. I would now like to turn the conference over to Susan Spivak, please go ahead.

Good morning and thank you for joining us today for our call and webcast on first quarter 2020 earnings. We reported our results yesterday afternoon and posted all of the earnings-related materials on our website. For the call today, our speakers are Chris Swift, Chairman and CEO of The Hartford; Doug Elliot, President; and Beth Costello, Chief Financial Officer. Following their prepared remarks, we will have a Q&A period.Just a few final comments before Chris begins. Today's call includes forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and actual results could be materially different. We do not assume any obligation to update information or forward-looking statements provided on this call. Investors should also consider the risks and uncertainties that could cause actual results to differ from these statements. A detailed description of those risks and uncertainties can be found in our SEC filings.Our commentary today includes non-GAAP financial measures. Explanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filings as well as in the news release and financial supplement. Finally, please note that no portion of this conference call maybe reproduced or rebroadcast in any form without The Hartford's prior written consent. Replays of this webcast and an official transcript will be available on The Hartford's website for 1 year. I'll now turn the call over to Chris.

Good morning and welcome to our first quarter earnings call. While The Hartford started 2020 with significant momentum, since our last call on February 4th all aspects of society and the global economy have been fundamentally changed by COVID-19. In light of that I plan to spend the bulk of my time today focused on the pandemic including how we are responding and how we are preparing for what comes next. I want to begin by recognizing the human toll the pandemic is taking on behalf of The Hartford and are more than 19,000 employees. My heart goes out to those who are affected by the virus. I pray for a full recovery for those who are sick and extend my deepest gratitude to the healthcare professionals caring for them, along with all the other workers on the frontline of this crisis.I also want to acknowledge the millions of people who are struggling in other ways, including those who have lost jobs and livelihoods, those who are trying to balance working from home with child care and home schooling, and those already vulnerable or suffering from the isolation brought about by physical distancing. People in businesses are facing circumstances they've never encountered before. Now, more than ever, they seek strong leadership at all levels across all sectors of our society to navigate through this crisis in a way that protects public health and safety and steer us towards economic and social recovery. At the Hartford, we are committed to doing our part.The company took quick and appropriate action in response to the pandemic. Our first priority was to ensure the health and safety of our employees and their families. Thanks to the investments we've made in our capabilities over the past several years and the extraordinary recent work of our…

Thank you, Chris and good morning everyone. I echo your sentiment for those individuals and families impacted by COVID-19, as well as our deep appreciation for frontline workers who are protecting and supporting all of us. Against that backdrop let me share a commentary on the first quarter as well as perspective on our business in the face of this pandemic. Property and Casualty had a solid first quarter. Core earnings were slightly better than both last year and our expectations. I'm pleased with the continued pricing momentum that is critical to improving the financial performance of both middle market and global specialty.Let me get right into our business results. Commercial lines first quarter combined ratio was 99.1, increasing 3 points versus 2019. The underlying combined ratio was 94.9 increasing 2.2 points. The deterioration was primarily due to expected compression and workers compensation margins in small commercial, higher expenses and the inclusion of Navigator's partially offset by favorable non-CAT property results. For the quarter with no written pricing in standard commercial lines was 3.8%, up 30 basis points from fourth quarter. Excluding worker's compensation, pricing was 7.4%, up nearly a point over fourth quarter, including incremental monthly progress over the past three months.In middle market, renewal written pricing in the U.S., excluding workers compensation, increased 9.4%, up 180 basis points from fourth quarter and 570 basis points from first quarter of 2019. Both property and general liability pricing improved over 2 points since the fourth quarter and are now each in the high single-digits. In middle market, excluding workers compensation we've now achieved incremental pricing gains for five consecutive quarters.On our last call I provided quite a bit of texture to the pricing story in global specialty. Let me provide a few updates. We continue to experience strong pricing gains…

Thank you, Doug. I will review results for the investment portfolio, Hartford funds, and corporate and cover a few other items before turning the call over to Q&A. Before I begin with a discussion of our investment results, I'd like to point out that we have included new supplemental information on our investment portfolio this quarter in the appendix of our earnings slide presentation. Our investment portfolio is broadly diversified and high quality, with an overall average credit rating of A Plus. As the business cycle aged over the last couple of years we were active in reducing the risk profile of the portfolio and as a result have relatively small allocations to below investment grade securities, equities, and limited partnerships.The fixed maturity portfolio is 96% investment grade with nearly three quarters of that rated A or better. The corporate exposure to higher risk industries including energy, leisure, and entertainment and airlines is very manageable and largely investment grade with a significant percentage and private placements that offer covenants to better protect our investment. We deliberately seek to diversify our corporate and municipal risk through our allocations to structured products and commercial mortgage loans. Our structured product holdings are very high quality with an average rating of AA Plus and 95% rated single A or higher. Our commercial mortgage loan portfolio is diversified with a loan to value ratio of 52% and debt service coverage of about 2.5 times coming into this crisis with no exposure to hospitality or retail malls.In addition since the end of March we reduced our equity exposure taking advantage of the bounce in equities to further reduce risk investing the proceeds primarily in high quality fixed income investments. Net investment income was 459 million for the quarter down 44 million from the fourth quarter of…

Thank you Beth. We have about 30 minutes for questions. I'd ask if you could please repeat the instructions operator for asking a question.

Absolutely. [Operator Instructions]. And today's first question comes from Brian Meredith with UBS.

Yeah, thank you. A couple of questions here; first, Chris and Doug could you perhaps comment on the business interruption to coverages and specifically how much of your business in the property and kind of that business has a virus endorsement on it, so where your exposure there is? And then additionally could you comment on what percentage of your policy actually has a specific virus exclusion with respect to the business interruption coverage?

Brian, thank you. Hope you're well. So, I would say a couple things one, I was -- confident in our underwriting and contractual terms and we've really done an exhaustive review over last six to seven weeks of all our policies including Navigators. And I would just tell you straight up that the vast, vast majority of our contracts do have a virus exclusion. And that there could be a handful of occasions where in essence we've offered business interruption coverage without tied to a physical damage or property loss. But again a handful and those policies actually came from our Navigators acquisitions. So I think we've got our arms around our policies, our exposures, our teams have really scrubbed everything over and over. But Doug that's what I would I would share with Brian.

I think that's a good summary Chris.

Did you book those ones with the endorsement in the quarter?

You know what I would say when we closed out the quarter, obviously we booked what we know. And that's why we have took the actions that you saw where we did from a receivable side, a credit side, from the group benefit side. And that's what we booked. We booked what we saw, what we were aware of. And, I would say specifically no, there was no specific provision for the handful of those policies that I referred to that do have BI but relatively I will call it modest in totality.

Got you and then second question, could you comment on the impact of the expanded it's going to cover we're seeing in workers' comp in various states. Lots of numbers being thrown out there by some of the kind of industry and CCI, etc, etc. What are your thoughts on that, what's the potential impact on The Hartford, etc?

Yeah, well it's as you said it's been active. And again as I said in my prepared comments I understand that people are trying to take care of people in their states, employees, and things like that. But if you really studied the history of the worker's comp environment over the last 50 years it's a well functioning, well understood business activity that I think fairly compensates people that have been injured or obviously get sick at work. And we've had some prior experience with this particularly with Ebola. So I think the rules of the road are generally understood and to expand presumptions, to relax documentation that sort of change the equation, I think as you see could be very disruptive to the industry. That said I guess I do have some personal sensitivities and for help frontline health care workers and those that are treating the sick out of this virus and maybe there's a combinations or things that we could do there. But broad based presumptions for many classes of business Brian just doesn't make sense to me.

Brian the only thing I would add is that several states are talking about this presumption dynamics to workers comp. I'm not sure there are any two states that are the same so it's a variety across states. And secondly we're working with our trade to come together as a group to try to figure out responsible answers as we step forward in this crisis.

Great, thank you.

Thank you. And the next question comes from Meyer Shields with KBW.

Thanks, a couple of questions. One big one, Doug in your prepared remarks you mentioned that there is some I guess misinformed commentary, I was hoping you could talk about what commentary you are seeing out there that doesn't match your perception?

I don't think it's appropriate for me to comment Meyer about specifics. We treat each and every claim on its own merits or look at all the claims as they come in. We've been responsive, we're working through all the variety of lines and coverages, etc so, I think our claim group has done an outstanding job that just frustrates me at times when I feel like sometimes the press looks at us and doesn't give us the credit that I believe we deserve for what we do and how we support the marketplace.

Okay, understood. The second question, can you give us some insight in terms of changes to commercial auto claim frequency that you've seen over the last six weeks or so?

We have. I will say this, our claim counts have been down both across personal and commercial. When it was clear by the end of March that they were down for that two week period and expected to continue into the second quarter, Beth and I and Stephanie Bush our entire group sat and worked through and ended up with the 15% refund for April and May that approximates $50 million plus or minus in money going back to customers. And in commercial we've also seen to a lesser degree but we've also seen fewer claim notices. We will watch that carefully, we're discussing and debating our commercial book as we speak, and as we come to any conclusions we will certainly share with you and all other parties.

Okay, fair enough, and thank you for all the clarification this morning.

Thanks Meyer.

Thank you and the next question comes from David Motemaden with Evercore.

Hi, thank you. Good morning. Just a question for Chris and Doug, I guess just wanted to dig in a little bit just thinking about the potential reserves that you may need to take heading into next quarter, is there any way you can help size the limit at risk in Navigators for the policies that don't require the property damage from the virus? And then in your 10-Q it sounds like you do expect to get reinsurance coverage on the occurrence treaties but it sounds like you expect limited recoveries given your current estimates of losses, should I take that to mean that you expect the losses in 2Q to be under $150 million?

David thanks for joining us. I think what you're reading and interpreting in the Q is really off base, just fundamentally off base. I think how we've always prepared our Qs is. I mean we try to describe risk factors, we try to describe conditions so that there is a level of clarity. You should not read anything in the Q as predicting a loss, an attachment point, a session that we expect at this point in time. I think all we were pointing out though is like any property loss we do have certain levels of reinsurance on an aggregate and per risk basis but do not interpret that as a loss limit or as trying to signal anything, that's just good disclosure.Second, call it the Navigators piece Doug, again we're not going to get into the specifics but all I would say again handful of policies. There's aggregate limits in all of them for BI. We knew it said -- we knew about the program, it's a program geared towards the entertainment industry and once we come up with a final estimates we will tell you when we book them in the second quarter.

I would just add to that Chris, when I think about the Navigator property book it is very insignificant compared to the size of our overall property book, so less than one half of 1% relative to policy count. And their book is both primary and excess and their primary book generally they do not have virus exclusions. But across our entire property base, again I go back to the vast majority of our policies have the virus exclusion and we will work through those claims during the course of the second and third quarters and come to our estimates as we close out next quarter.

Yeah, the only thing that I'll add to the first part of the question and I agree with Chris's comments as it relates to things that we commented on in our risk factors, I think you may have been asking specifically about our property catastrophe treaty. And we did specifically say that pandemic is not excluded from that treaty and obviously given the level of losses that would have to be in order for us to hit that, we see that as very unlikely. So I think that that was the specific disclosure that you were may have been referring to.

Yes, that's right. Beth, thank you for clarifying. I appreciate that. And then I appreciate the response of everyone and I just wanted to also follow up just on putting the new money yields into cash or new money into cash. I guess how long do you expect this to continue and what are you specifically looking for, what do you need to see to start deploying that back into appropriate duration bonds?

David thanks. I would just say or give you the context of what we did and why. It really is just a classic crisis playbook, right. I mean you have to admit we're in the midst of a crisis and when we started looking at things late February or early March so our spreads were going in the markets. Just game theory, other conditions we wanted is much liquidity and flexibility as possible. So we decided and took the action to not reinvest principal and interest coming off the portfolio into the new credit exposures at that time because you saw, the Fed didn't act until at least two to three weeks later and it was just a defensive cautionary position. And I think what I really want to do is tell you what we did, why, and the potential impacts on our run rate yield or NII from managing your expectations Beth. But that's what I would say.

Yeah, I think that's a good summary and again I think if you go back and look over what's happened over the last couple of months as Chris said, when we looked at this beginning of March it was really more reaction of the fact that we saw markets and specifically credit markets were feeling stress and we didn't want to be investing into that. As we go through March and then we get towards the end March into April we have more shelter in place orders and so forth and some of the actions that we're taking to provide relief to our customers. And the receipt of premium payments cause us to continue to want to build liquidity and so our view is as we go through the second quarter and we start to see some stability in what we're seeing relative to top line and those receipts we look to start then reinvesting again. But I really characterize this as moving from creating a position of strength rather than any sign of weakness as it relates to our overall balance sheet.

Okay, thanks for the clarification, I appreciate it.

Thank you. And the next question comes from Elyse Greenspan with Wells Fargo.

Hey guys, good morning. My first question, I was hoping within your workers comp you can break down of the exposure to healthcare and other front line workers and then maybe more on peripheral industries like supermarkets, etc, and just give us a sense of the areas and the exposure within your book that you most likely to see losses within that line from COVID?

Elyse, I think the only detail I'm comfortable sharing with you is for our small commercial and middle market book how you would define healthcare or how we would define healthcare which excludes dentist and optometrist that we would ensure. Our healthcare exposure to those on the frontline basis is less than 5% of our premium. But that's the only data point I'd like to give you at this point in time and I am not going to break down our entire book of business for you and give all our competitors opportunities to cherry pick it. So again very little minor frontline healthcare worker exposure in our book of business.

Okay, that's helpful and then my second question in terms of Navigators, a couple of questions, can you comment on what accident years development that was ceded to the agency came from in the quarter? And then second question related to Navigators, can you just comment on how the margin was in Q1 relative to the 5 to 6 points of improvement that you guys have laid out that you had expected for 2020?

I am just waiting for the team to respond.

Yeah so on the Navigator's piece, we really are looking at 2018 and prior and I can't remember the exact year that was involved but it's in that bucket obviously that's covered by the ADC.

At least as far as the improvement, I will look to Doug to add his color too but I'm pleased with the trajectory, the improvements. Again we talked about that 5 to 6 points of combined ratio improvement and I'm extremely confident we will achieve that in the timeframes that we've talked about. But Doug I thought we had good progress.

We did. So if you look at our numbers into the first quarter and compare them to a more normalized run rate which Beth and I keep looking back at, I would say the improvement is in the 3.5 range, 3.5 towards 4 what we see into 2020. I would also say to you that I'm very encouraged by our pricing progress and some of our book management programs as well. So as we work our way through 2020 into 2021 I feel like those goals are certainly attainable and I feel like we've made really good strides down that path Elyse.

Okay, and then one last question, I know you guys and others in the industry have mentioned by right the desire right not to have but you have to change it to policy language, we've also heard a lot of chatter about potential prospective plan government backstop to provide pandemic coverage on a go forward basis. Do you have any thoughts there and I guess do you think that that's in terms of a time frame, is that something, I know there's a lot?

Yeah Elyse as I alluded to in my prepared comments, we are working with our trade group and across the industry to develop if we can a consensus view on options and solutions for the future. So I think it's premature to comment upon anything right now other than the desire to contribute to a solution going forward from the industry perspective. And I think I've talked quite a bit of my peers in the industry and there is a desire to at least think creatively and come up with options and potential solutions.

And then Elyse just to follow up I was able to find the accident years, it is 17 and 18 is related to those marine losses.

Thank you and the next question comes from Mike Zaremski with Credit Suisse.

Hey, good morning, thanks. First question, I know we've talked about workers comp a lot already maybe dig in a little bit more, if you can elaborate on your comments regarding the potential for elevated claims in that line, maybe any fraud comments on how this recession could maybe play out differently than the last. I know there was one commercial carrier which said last week that maybe change the reserving cost a little bit and they released less reserves to be a little more conservative, if they can do accounts, that's the last recession kind of surprised them a little bit on the back end, which I believe may have also kind of happened to industry wide and to Hartford as well? Thanks.

Mike, good morning. Let me start with a few comments to frame this. I'd start by saying that, our accounts are down. But as you know, we are also working day by day on exposure changes with our policyholders. So until we get that exposure base where it needs to be, it's very difficult to predict frequency. But I expect over the short-term we'll see improvements and claim counts. If nothing else, we understand across our manufacturing book we'll see more experienced workers as people thinned their ranks. What we will tend to see would be more experienced workers on those lines. And as such, they will get injured less frequently. We're watching careful medical severity. We think there will be a little bit of pressure on duration. And also medical severity is an awful lot of medical attention this country right now dealing with COVID-19 and as such, we're slightly concerned that maybe all the people that need medical attention for other job related injuries are stacking up in the queue. So there are assortment of things relative to workers compensation we're keeping our eye on, some good and some pressure points to watch, even putting the presumption discussion to the side.

Mike, I would just give you a larger picture perspective in that. I mean, if you're looking back to the Great Recession or other recessions that the U.S. economy has experienced, it is true that obviously unemployment and GDP is going to shrink. But one of those other recessions were caused by structural issues, whether it be credit overextended or imbalances in the economy. Remember, this was a shock to our to our U.S. economy. And the real hope and belief, at least I have, is with the great advances in the medical community and in some of the things that everyone's talking about and working on, we can remove the shock factor and go back to a structurally sound, consumer orientated economy that isn't stretched financially. It isn't out of balance in any way, shape or form. So -- but it's true, that might take some time to get the medical advancements necessary to relieve the shock that the economy is experiencing.

Great, that's helpful. My last question is regarding more broadly commercial pricing. Do you feel -- have you been seeing kind of pricing industry wide continue to move lot higher given the kind of uncertainty surrounding a lot of issues or our top line contraction is causing more broadly kind of pricing to move downwards a bit. And I'm speaking specifically to commercial pricing. But if you have the views on also personal lines pricing, given that seems to be a good area to be at, I'd be open to those as well? Thank you.

Tackle commercial first. I would suggest that the early look at April, April is not complete yet, it will be tonight. But the early look suggests consistency with what we saw in March. So the early part of the second quarter, I think, will exhibit similar patterns to what finished quarter one. And we'll obviously continue to watch this and manage this on a month to month basis as we move into quarter two. Personal lines, I think there are a lot of things going on in personal lines, including the fact that there's a fair amount of customer premium refunding going on in Q2 and a lot happening based on miles driven, but also now the potential turn on, turn back on of the economy. And one of the things we've debated amongst ourselves is, I think we expect to see potentially a bounce back in miles driven over the course of the summer. As people return to more normal living conditions we expect miles driven to go up as a result. Maybe fewer airline miles traveled, but more within their car. So those are all thoughts over the ensuing three to four months. But at the moment, yes, miles are down and we expect that to change.

Okay, great. Thank you so much and we all hope you're right about return to normalcy in the coming months. Thanks.

Thank you. And the next question comes from Ryan Tunis with Autonomous Research.

Thanks. I had a question for Doug and a group benefits question, which I guess might also be for Doug. But I just recovered the property tax stuff on reinsurance, could you give us some indication of how some of the per risk reinsurance of the quota share or where might not respond to any potential COVID losses?

Well, you're right we do have per risk insurance inside our core property book. And obviously that would be on a risk by risk basis so it would depend on severity of risk. And those plans are in place and there are no virus exclusions attached to those programs. So that stands as is. There are also an assortment of other programs, including Navigators has a quota share program across their property book, heavily reinsured. So it almost needs a specific circumstance of the loss, Ryan to figure out how it applies. But number one, I would say I believe we've got sound underwriting on our primary book. And number two, I think we've got a well thought out reinsurance program that will respond if indeed it's called to.

And the other thing I wanted to hit on I guess was in group benefits. It seems like the short term disability kind of dwarfs the impact of worker's comp, even though that's what everyone's been talking about. Is it safe to think that if conditions remain like this, that 60 million for half a month would have that type of proportional impact I guess in ensuing quarters?

Ryan, it's Chris. I would say no, I would not do that and I will tell you why. If you sort of break down what we though 10 million was for paid family leave, 6 million was for STD. I would say when we booked and made our estimates for the quarter, we had a claim count estimate, a duration estimate, and then it's simple math from there. The claim count that actually emerged and again, New York paid family leave primarily is our risk product there. It is just significantly down from what we expected. So it's not to say it can't come back, it's not to say it couldn't spike as people look at all the benefits that are available to them, but that claim count projection was off by a factor of at least 50%. And STD, I would share with you the view that we had, again, is changed a little bit as we got into April and the impact that we booked was for increased COVID-19 STDs.And to remind you, there is usually a seven day elimination period. And again, then if someone goes on STD because of COVID-19, generally what we're seeing is a 10 day to two week benefit. But there again the data that emerged in April is that, yeah, the COVID-19 claims are up, but everything else is down quite substantially. So the normal STD claims are the planned absence, STD claims. Everyone is sort of delaying normal activities as it could be related to STD coverages. So net-net the total claim projection or claims of how they're emerging in April is basically flat to slightly down with historical trends. Now that two could reverse but as it reverses, I think we would have less COVID-19 claims going forward. So I would not project it on a runway basis and we'll give you transparency into what we do in the second quarter. But at least right now there's offsetting factors that should mitigate losses.

Got it. And I guess the one follow-up I had is kind of a mechanical one, probably for Doug as well. Actually these comp studies we're seeing where -- whether it is the NCCI where you are coming up with a gross worker's comp loss estimate. What are some of the things we should be thinking about in terms of how deductible -- in reality, how that makes its way through a lawsuit in the insurance company, like the impact that a company deductible might have to mitigate that or the fact that it might not even make it to worker's comp, right. I guess it could become a short term disability claim or maybe health insurance might cover it. I'm just trying to understand, like trying to net that down to those gross numbers, what are some things we should be thinking about?

Just a few comments. It is so hard to project here. But yes, the national account customer segment, Fortune 2000 plus many have some form of loss responsive program where there's is either a deductible attached, some kind of retention arrangement. So yes, that would not at all just flow directly into comp losses. In terms of Main Street America, much of middle market America, I think those contracts are largely guaranteed costs. So there's a risk transfer programs. And again, this is going to be a state by state dynamic. But I would think much of that content change would show up in the P&L of insurers over time. Then the last thought I have for you is that, the fundamental way we run this business is that we take historical losses and we run them through our actual role model and then we develop rates going forward based on all the risks we're taking. And I fully expect whether we're talking worker's comp or property as we come out of this COVID-19 experience, we'll be doing exactly that with those losses paid.

Thank you.

Thank you. And the next question comes from Michael Phillips of Morgan Stanley.

Thank you and good morning everybody. Just Chris, is it simply that it was just too early, I'm just curious I guess the rationale for not putting out any kind of expected number, both on the P&C side for COVID losses written?

Again, we reacted to what we know, what we saw. If you really think about it, it was two weeks of the month and really what I'd like you to take away from it is there isn't any big surprises out there that we don't see or understand. Meaning we're not in certain lines of business that people put up a lot of reserves. I mean, we're not in the event cancellation business, we don't have a material trade credit exposures or anything along those lines. We don't have a travel business. So we have our core products and our core capabilities and yeah, I mean, two weeks for -- the virus to sort of make any type of adjustment. And the accounting is I mean, we can't book second quarter events in the first quarter, right. I mean, it's got to be sort of a known and exposed to a first quarter event. So we'll see what develops here in the second quarter. But we're not sitting on anything big in my judgment.

Okay, no, thanks. Appreciate that. And then I guess lastly, any thoughts you could share on expectations for earnings for the rest of the year for the top level?

Yeah, well let's get through the crisis and the immediate events here. I mean, we're not going to reproject or give new guidance at this point in time.

Which were you asking for.

Guidance for the rest of the year.

Talcott he said. Excuse me.

So, yeah so that's hard to predict. Obviously, as we said we record Talcott earnings on a quarter lag. So we typically get their financial statements 45-50 days after quarter. And I'd expect that given their -- the hedging profile of that entity, that we're likely to see gains from the first quarter. And I'd point you to look at first quarter of 2019 when they recorded the impact of the fourth quarter of 2018 and the impact of hedging gains that we saw there. And then as far as predicting dividends, I mean, that gets difficult to do. We were pleased to get a dividend last year and we know that their plan is to continue to pay dividends. But, until we get the cash in the door, we don't count it. It is not included in any of our holding company projections of cash flows.

Okay, thank you guys. Appreciate it guys.

Thank you. And that concludes the question-and-answer session. So I would like to turn the floor to Susan Spivak for any closing comments.

Thank you. We appreciate all of you joining us this morning. Please don't hesitate to contact us if you have any follow up questions.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.