Christopher J. Swift
Chairman and Chief Executive Officer at The Hartford Financial Services Group
Good morning and thank you for joining us today. In 2021, The Hartford delivered strong financial performance across the organization as we continued to execute on our strategy and realize the growing benefits of investing in our businesses. At our Investor Day in November, we shared our roadmap for maximizing shareholder value and demonstrated how we are executing in a more consistent and sustainable way. Our targeted priorities will continue to produce results that drive profitable growth, enable market-leading ROEs, and deliver consistent capital generation, while at the same time sustaining our top quartile ESG performance.
As evidence of our ability to drive profitable growth, core earnings were up 10% in the fourth quarter to $697 million and full-year core earnings grew to $2.2 billion. Book value per diluted share, excluding AOCI, was up 8% from year end 2020, and the core earnings ROE of 12.7%, flat for the second consecutive year. During the quarter, we also returned $620 million to shareholders through share repurchases and common dividends, bringing total capital return for 2021 to $2.2 billion. These strong results are the product of an extremely attractive portfolio of businesses and targeted investments over the last several years to generate strong, sustainable cash flow. Going forward, we will continue to prioritize investments for future organic growth along with dividends and share repurchases in our capital allocation decisions.
The Hartford's businesses have distinct advantages of their own and complement each other extremely well, sharing deep underwriting and risk management expertise, tools, insights, and distribution. Across the portfolio of businesses, we will continue to invest in claims, analytics, data science, and digital capabilities to ensure superior performance. All the businesses possess exceptional talent that fully embrace The Hartford's winning behaviors and passion for execution. I am incredibly proud of the resiliency demonstrated by our team especially over the last two years. This speaks to our character, focus on continuous improvement, and commitment to all our stakeholders.
Let's now turn to highlights from the quarter, which illustrate how our business strategy translates into financial performance. In Commercial Lines, the positive momentum continued with stellar margins and double-digit top-line growth, reflecting higher new business levels, continued strong retention, and solid renewal price increases. Looking ahead to 2022, we expect strong growth and earned pricing to continue to exceed loss cost trends in most lines resulting in further margin improvement.
Personal Lines delivered solid operating performance in a dynamic market environment. I am pleased with the progress being made as we advance the rollout of our new Prevail product and platform that provides a more contemporary experience to our unique AARP customers in the 50-plus age segment. We are closely watching the impact of inflation on loss costs and responding with underwriting and pricing actions. We anticipate slightly higher underlying combined ratio in 2022.
Turning to Group Benefits. Earnings continue to be impacted by the ongoing pandemic with elevated life and disability claims. Despite pandemic headwinds, performance across Group Benefits remain solid, and key business metrics demonstrate our market leadership position. Fully insured ongoing premium was up 5% in the quarter, reflecting increased sales as well as growth in new premium from existing customers. Persistency was above 90% and increased 1 point over prior year. In 2021, our sales growth benefited from the initial expansion of paid family and medical leave in several states. Adjusting for that one-time lift, we are off to a good start with January '22 sales being on par with prior year. For the full year, we are expecting premium growth in the 2% range compared to 2021.
Within our long-term disability book, claim recoveries remain strong. Claim incidence in short-term disability is highly elevated due to COVID, while long-term disability incidence rates have shown modest signs of increases, as we have been experiencing, and in turn will be incorporated into future pricing assumptions. The Omicron variant has driven the most recent surge in cases. Initial effects of Omicron are more impactful for short-term disability, but the lag between infection and death makes it challenging to predict future mortality. Estimates of expected cases vary widely as do perspectives on the final resolution of COVID as an endemic virus.
For 2022, we are estimating between $125 million and $225 million of pre-tax losses due to the broad effects of the pandemic, including short-term disability and excess mortality, which we expect to impact results primarily in the first part of the year. Our excess mortality estimates are based on the best data we can gather regarding COVID trends and reflect our optimism for the remainder of the year. This optimism is principally due to the population continuing to get boosted and the Omicron being less lethal. In addition, as advanced therapeutics make their way to the market and into the hands of the medical community, there is an expectation of fewer deaths for those who contract the virus. Though uncertainty remains, I am encouraged as we progress through 2022 the pandemic will shift to a regional endemic state with more treatment options available. Excluding any pandemic-related effects for both life and disability, we expect the core earning margins to be between 6% and 7%, consistent with our long-term margin outlook for this business.
Turning to the macroeconomic environment for 2022. I am optimistic the business environment will be one in which The Hartford will prosper. We expect that consumer capacity to spend will remain strong which will drive economic growth. The U.S. unemployment rate has fallen to 3.9% and is likely to fall below pre-pandemic levels of 3.5% by year-end, and we are seeing signs of increases to workforce participation. In 2022, we expect inflation to be challenging in the first half of the year. However, as supply chains gradually improve, consumption transitions from goods to services, and interest rates rise, we believe core inflation in the second half of the year will decline to the 3% range. Lower unemployment and mid-single-digit GDP growth is supportive of our employment-centric workers' compensation and group benefits businesses. An expanding economy is also a catalyst for growth across commercial lines, particularly in small commercial, with higher new business formation. While monetary policy normalization may lead to volatility in the capital markets, our well-diversified and high-quality investment portfolio is constructed to withstand this market dynamic. With a favorable macroeconomic backdrop, profitable growth, expanding margins in P&C and Group Benefits, and proactive capital management, we are well positioned based on our current pandemic assumptions to generate a 13% to 14% core earnings ROE in 2022 and continuing into 2023.
Before I close, I want to speak to our ESG achievements and our commitment going forward. We have been consistently recognized for our efforts and progress setting us apart from our competitors. Most recently, The Hartford was named the number one insurer and 14th overall on America's Most Just Companies list. The recognition we continue to receive is a testament to our longstanding commitment to sustainability and the dedication and hard work of our teams that make these priorities core to who we are. ESG leadership remains a critical component of our value-creation strategy as we continue to deliver strong financial results alongside positive outcomes for all stakeholders.
In closing, we begin 2022 in a very strong competitive position with sustainable advantages and a winning formula to consistently achieve superior, risk-adjusted returns. This is a direct result of our performance-driven culture and the significant investments we have made to transform the organization into one with exceptional underwriting tools and expertise, expanded product depth and breadth, and industry-leading digital capabilities complemented by a talented and dedicated employee base. We will continue investing for the long term to become an even more differentiated competitor, all while producing financial results. I am confident that The Hartford has never been in a better position to continue to deliver on our financial objectives and enhance value for all stakeholders.
Now I'll turn the call over to Beth.
