One of Hartford Financial Services Group Inc.'s top priorities after closing its purchase of Navigators Group Inc. is taking advantage of what executives see as a brightening picture in the specialty space.
The Hartford completed its acquisition of Navigators in May, and the integration process was a central theme of discussion during the company's second-quarter earnings call.
President Douglas Elliot said The Hartford's combined ratios in its small and middle-market commercial auto lines are "still not acceptable," though progress is being made as pricing is improving. The insurer's middle and large commercial lines book saw its underlying combined ratio tick up 3.8 points year over year to 100.9%.
Elliot said adding monoline auto business was not a top priority for The Hartford, but with a new specialty auto division from Navigators, some new doors may open.
"They've got terrific instincts, they've got great data and they'll be thoughtful about their opportunities," he said.
Executives were upbeat on specialty lines overall. Elliot said in his prepared remarks that the market was "rapidly improving" as underwriting strengthens and prices rise. Financial results have dictated the need for pricing and underwriting action in the specialty space as development has been unfavorable in several specialty lines, according to Elliot.
"Our outlook is for favorable renewal pricing trends exceeding expected loss trends," he said, adding that with the Navigators deal now closed, the company's top priority is improving margin performance.
Chairman and CEO Christopher Swift expects a "smooth integration" of Navigators and said he is encouraged by recent firming in commercial lines pricing in general, "particularly in global specialty, which is better than anticipated when we first announced the acquisition."
"We expect to generate good returns on this investment, reaching approximately $200 million in core earnings ... within the next 4 to 5 years," he added.
The Hartford reported net income for the second quarter of $372 million, down 36% from $582 million reported last year. The decline was attributable, in part, to after-tax charges incurred from the Navigators purchase.