The Hartford Q3 2026: EPS up 28% to $4.82 on a $497M one-off gain while core EPS fell 3%

The Hartford's net income available to common stockholders rose 23% to $1,317 million in Q3 2026 (quarter ended September 30), and diluted EPS rose 28% to $4.82 from $3.77. Most of that gain is a one-off. On September 23 the company ended a reinsurance contract with Berkshire Hathaway's National Indemnity that covered its old asbestos and environmental claims, which settled the arbitration over those payments. Unwinding the contract produced a $497 million pre-tax gain. Without it, profit fell. Core earnings, the company's own measure that leaves out that gain, investment gains and losses and the Hartford Funds business being sold, fell 6% to $956 million. Core EPS fell 3% to $3.50. Catastrophe losses nearly tripled, commercial pricing slowed again, and disability claims rose.

Key metrics

Terms used here:

• Net written premiums are the premiums on policies sold in the quarter, after the share passed to reinsurers. They measure growth.
• The loss ratio (in full, the loss and loss adjustment expense ratio) is claims plus the cost of handling them, as a share of premiums earned.
• The combined ratio adds operating expenses to the loss ratio.
• The underlying combined ratio leaves out the current year's catastrophes and changes to estimates of older years' claims (prior-year reserve development), so it shows the basic pricing-versus-claims trend.

The combined and loss ratios above cover the property and casualty (P&C) business only: Business Insurance, Personal Insurance and the run-off P&C Other Operations unit. Employee Benefits is the group life and disability business sold through employers. It is measured by its own loss ratio and earned $120 million of core earnings this quarter, about 13% of the total.

The one-off: ending Berkshire's asbestos cover

The Hartford had bought an adverse development cover (ADC) from National Indemnity, a Berkshire Hathaway subsidiary. An ADC is reinsurance that pays if old claims turn out more expensive than reserved. This one covered asbestos and environmental (A&E) claims from before 2016, up to $1.5 billion. Because the contract covered past claims, accounting rules required The Hartford to defer the expected benefit as a liability (a "deferred gain") and recognise it slowly. The deferred gain stood at $850 million at the end of 2025.

In early 2026 National Indemnity stopped paying under the contract and the dispute went to arbitration, a risk our Q2 report flagged. According to the 10-Q, on September 23 the two sides signed a commutation agreement that ended the contract. National Indemnity paid $1.12 billion in cash on September 25 in place of the $1.437 billion The Hartford had recorded as recoverable. The company wrote the recoverable down by $317 million, released what was left of the deferred gain, and booked a $497 million net gain. It now carries $1.298 billion of A&E reserves itself, with no reinsurance behind them.

The gain sits in P&C Other Operations, which earned $406 million after tax this quarter against $12 million a year ago, while its core earnings were $16 million. The company leaves the gain out of core earnings, along with $116 million of pre-tax realized investment losses (mostly on interest-rate derivatives, against $17 million a year ago) and $61 million of after-tax income from Hartford Funds.

Business Insurance: 6% growth, weaker margins in mid-sized and large accounts

Business Insurance, The Hartford's largest segment, grew written premiums 6% to $3,772 million. Small Business and Global Specialty each grew 7% and Middle & Large Business grew 3%. Core earnings rose 1% to $731 million, but only because investment income in the segment rose to $589 million from $519 million. The underwriting gain (premiums minus claims and expenses, before investment income) fell 18% to $327 million.

The segment's results are split:

• Small Business improved. Its underlying ratio fell 4.6 points on lower non-catastrophe property losses and a lower expense ratio.
• Middle & Large Business lost money on underwriting for a second straight quarter (101.7, after 101.9 in Q2). Its underlying ratio rose 8.1 points to 99.5. The release cites "a higher loss ratio in workers' compensation and higher non-CAT property losses". Workers' compensation insures employees' on-the-job injuries and has been one of the industry's most reliable profit sources.
• Pricing slowed again. Renewal written price increases (how much more existing customers pay when they renew) were 3.2% in middle market, down from 5.5% a year ago and 3.5% in Q2, and 4.4% in small business, down from 5.4%. The 10-Q says workers' compensation pricing was only "slightly positive", and large property pricing was negative.

The segment's expense ratio improved 1.1 points to 30.0 on lower staffing costs, which kept the total combined ratio rise to 2.5 points despite 1.7 points of higher catastrophe losses.

Personal Insurance: better underlying margins, still shrinking, hit by storms

Home and auto insurance moved in two directions. The underlying combined ratio improved 2.9 points to 87.1, which the release credits to "earned pricing increases outpacing loss cost trends." Tornado, wind and hail losses rose to $92 million from $31 million, which pushed the reported combined ratio up 4.5 points to 93.2. The homeowners combined ratio jumped to 94.7 from 81.2, all of it from catastrophes (17.0 points). Core earnings fell 27% to $105 million.

The business is still shrinking. Written premiums fell 4% to $950 million, auto earned premiums fell 8%, and auto policies in force dropped to 967,000 from 1,091,000 a year ago (990,000 at the end of Q2). Renewal price increases slowed to 5.1% in auto and 7.9% in homeowners. Homeowners new business grew 20%, which offsets part of the auto decline. The 10-Q also notes the auto loss trend "continues to recognize higher attorney representation rates".

Employee Benefits: disability claims again

Fully insured ongoing premiums grew 4% to $1,662 million, but core earnings fell 19% to $120 million and the core earnings margin fell to 6.4% from 8.3%. The group disability loss ratio rose 5.7 points to 76.3 on "increased claim incidence across short and long-term disability products and less favorable long-term disability claim recoveries". This is the same cause given in Q2, so it has now run for two quarters. The group life loss ratio rose 3.6 points to 77.8, but most of that comes from the comparison: last year's quarter included a release from earlier quarters.

Takeaway: Two items made the quarter look strong: a one-time $497 million gain from settling the Berkshire reinsurance dispute and a 4% smaller share count. On a core basis earnings fell 6%. The weak spots are workers' compensation and property claims in Middle & Large Business (a 99.5 underlying combined ratio) and disability claims in Employee Benefits, while commercial price increases have slowed to 3–4%. The settlement also leaves The Hartford with $1.3 billion of asbestos and environmental reserves it now carries alone.

What the headline numbers hide

• One-off gain. The $497 million pre-tax commutation gain is $1.82 a share before tax, and roughly $390 million after tax based on P&C Other Operations' net income versus its core earnings. Without it, net income would be about $925 million, roughly 14% lower than a year ago instead of 23% higher.
• Catastrophes versus reserves. P&C catastrophe losses of $198 million against $70 million cost about 2.7 more points of combined ratio (4.2 points against 1.6). Excluding the commutation, prior-year reserve releases were steady at $97 million versus $95 million. There was no reserve increase in general liability or commercial auto this quarter, after $72 million in Q2.
• The investment boost was again partly one-off. Net investment income rose 13% to $850 million, but $156 million came from limited partnerships and alternative investments (against $91 million), "primarily driven by higher returns on infrastructure and energy transition funds" and sales within real estate joint ventures. Excluding those, investment income rose 5% to $694 million because the company had more money invested. That makes $694 million the better quarterly run-rate.
• Buybacks. Diluted shares fell 4.2% to 273.1 million after $475 million of repurchases in the quarter and $1.4 billion over nine months. That is why core EPS fell only 2.5% while core earnings fell 6.5%, and why GAAP EPS growth (28%) beat net income growth (23%).
• Tax worked against the quarter. The effective tax rate on continuing operations was about 20% against 18% a year ago, when Corporate booked the release of an uncertain-tax-position provision.
• Cash conversion is fine. Nine-month operating cash flow was $5.19 billion. Excluding the $1.12 billion settlement payment, it was about $4.07 billion against $4.11 billion a year ago, and above nine-month net income of $3.48 billion.
• Book value fell during the quarter. Book value per diluted share dropped to $68.31 from $70.28 at June 30, because higher interest rates cut the market value of the bond portfolio (unrealized losses held in AOCI, a part of equity). Excluding AOCI it rose 16% from a year ago to $82.47. That figure shows the earnings building up, but it also includes the one-off gain.

On balance the quarter is flattered: EPS rose 28% while core EPS fell 3%. A one-time $497 million settlement gain and a 4% lower share count did the work, and underwriting profit excluding the gain declined.

Did last time's read hold up?

Our Q2 report said Business Insurance margins would keep drifting worse as price increases slowed while liability claim costs rose. That held: the underlying combined ratio rose to 90.1 from 89.3 in Q2, Middle & Large Business stayed above 100, and middle-market pricing slowed further to 3.2%. The trouble came from workers' compensation and property, though, not the general liability and commercial auto lines that had needed more reserves in Q2.

We said investment income without the partnership surge looked closer to about $686 million than the $800 million headline. That held too: the figure was $694 million, and partnerships again lifted the headline to $850 million.

On Personal Insurance, underlying margins kept improving and premiums kept shrinking, though more slowly (-4% after -7%). The arbitration we flagged is now settled, for $317 million less than the recoverable on the books.

Outlook

Neither the 10-Q nor the earnings release gives numerical earnings or combined-ratio guidance. Management's stated capital plans:

• the 12% dividend increase to $0.67 a share, payable January 5, 2027;
• $4.37 billion of buyback authorization remaining at September 30, with "the vast majority" of the new $4.2 billion program expected to be used in 2027 and 2028;
• a further $126 million of repurchases from October 1 to 23.

The Hartford Funds sale is still expected to close before the end of Q1 2027, with an estimated after-tax loss of about $150 million at closing. Mo Tooker succeeds Christopher Swift as CEO on March 1.

Our read for Q4 and 2027:

• The core issue is Middle & Large Business. Its underlying ratio of 99.5 leaves no underwriting profit, and pricing of 3.2% is unlikely to cover a workers' compensation loss ratio that the company says is rising. Whether Q4 pricing holds above 3% and whether this unit's underlying ratio gets back below 95 are the two numbers to watch.
• Without the Berkshire cover, any future rise in asbestos or environmental reserves now hits The Hartford's earnings directly. The company added $165 million to those reserves in Q4 2025, so the Q4 2026 figure is the first test without reinsurance behind it.
• Disability claims have now run high for two quarters. A third would suggest a trend rather than noise in a segment that management still calls "in line with long-term expectations."
• Core EPS will keep getting about 4 points a year of help from buybacks. That makes a flat core EPS line a sign of a shrinking underlying profit pool, not a stable one.

Source: The Hartford Insurance Group, Inc. Form 10-Q for the quarter ended September 30, 2026, filed October 26, 2026, plus the Q3 2026 earnings release (Form 8-K Exhibit 99.1) and Investor Financial Supplement filed the same day. Core earnings, core EPS, underlying combined ratios, book value ex-AOCI and investment income excluding limited partnerships are non-GAAP measures reconciled in those filings. The combined ratio excluding the commutation gain is our own calculation: $497 million divided by $4,689 million of P&C earned premiums, about 10.6 points, added back to the reported 81.1.