Hartford Financial Services Group Inc. experienced significantly higher profit in the first quarter of 2018 amid solid underwriting results and lower income taxes due to U.S. corporate tax reform, but reported some pricing pressures in its workers compensation business.

The Hartford, Connecticut-based insurer reported after-tax net income from continuing operations in the first quarter of 2018 of $428 million, up 41% compared with the first quarter 2017, amid higher commercial lines and personal lines property and casualty underwriting results, lower catastrophe losses and favorable prior-year development, and increased consolidated net investment income, according to its earnings report released on Thursday.

In addition, income tax expense declined despite an increase in income from continuing operations before income taxes due to the reduction in the U.S. corporate tax rate from 35% to 21%, which took effect on Jan. 1, according to the report. Due to the insurer’s municipal bond investments, which are subject to a lower 5.25% tax rate, the effective tax rate on income from continuing operations in the first quarter of 2018 was 17.5% compared with 24% in the same quarter last year, according to the report. The reduction in the corporate tax rate favorably impacted net income and core earnings in the commercial lines, personal lines, group benefits and mutual funds segments, according to the report.

“Our results were excellent, with solid underwriting and investment performance,” Christopher Swift, chairman and CEO, said in the insurer’s earnings conference call on Friday. “Higher pretax results were the primary driver of earnings growth, with the added benefit of lower tax rates.”

“All of our markets remain competitive, but that said, we are confident in our ability to execute and grow in this environment,” he continued. “In commercial lines, the pricing trend is mostly positive, and we achieved higher rates in property (and) in liability. However, workers compensation premium renewal rates are generally flat to down, reflecting the favorable loss experience of the last several years.”

Net income for the first quarter of 2018 was $597 million, up 58%, when factoring in the insurer’s sale of Talcott Resolution, its run-off life and annuity businesses, to an investor group, which was announced in December and is expected to close by June 30.

In 2017, the Hartford acquired Aetna’s U.S. group life and disability business for cash consideration of $1.45 billion, with Mr. Swift reporting that the company is “really pleased with its performance.”

“However, acquisitions are often expensive, especially in today’s market and they have execution risks that need to be clearly understood,” he said. “Currently, our primary focus is in the commercial lines space where we are building broader risk and underwriting expertise organically. We will consider financially accretive acquisitions that accelerate these goals.”

“There are, however, certain product lines or businesses such as reinsurance that we do not currently view as strategic,” he added. “That should not imply we would never buy a company that has a minor or small reinsurance portfolio, but it does mean that the majority of the business would need to align with or complement our commercial lines strategies and it has to meet our financial objectives, meaning that we expect an acquisition to deliver returns above our cost of equity capital in a reasonable period of time.”

Net income for the insurer’s property and casualty segment rose 40% to $404 million in the first quarter of 2018 compared to the same period last year, according to the earnings report.

“I expect further positive rate movement in the quarters ahead for property and (general liability) and continued strong pricing for auto – the lines most in need of margin improvement,” President Doug Elliot said during the call. “Our middle market business still needs more rate and I suspect that we are not unique in that regard. We believe the appropriate path is to continue pushing for rate increases consistently with long-term, loss costs trends and to maintain underwriting discipline even though retention has come under pressure.”

Company officials were “a bit disappointed” with the insurer’s January performance on pricing, but made some adjustments and is “very pleased” with how the first quarter ended from a pricing perspective and expects that progress to continue into the second quarter, Mr. Elliott said.

For workers comp, there has been in a slight uptick in claims frequency and inflationary pressures, he said.

“When I put them together, yes I think there are some things that probably will cause some compression in the workers comp line, but relative to where we are, I feel like we are working our levers, being thoughtful about our territories and doing everything we can to understand the dynamics of the line and make good choices going forward,” he said.

“I look at the last three or four years of comp experience and I see how favorable the aggregate environment has been for comp as a line, and I think that’s the real fuel that’s driving this loss cost trend that is dropping through these filings,” he continued. “I wouldn’t sit here today and suggest to you that there isn’t downward pressure on pricing in workers comp. There is. There are a number of competing dynamics, but the line in total had a good first quarter for us. We’re watching our trends, but it wouldn’t surprise me if there is some compression in the line over the latter half of the year into (20)19.”