Hanover Insurance Group (THG) Tops Q1 EPS by 22c, Revenues Beat

Hanover Insurance Group (NYSE: THG) reported Q1 EPS of $1.96, $0.22 better than the analyst estimate of $1.74. Revenue for the quarter came in at $1.22 billion versus the consensus estimate of $1.13 billion.

First Quarter Highlights

• Catastrophe losses of $39.4 million, or 3.6 points, including current year losses of $52.9 million, or 4.8 points, and favorable development on prior-year catastrophes of $13.5 million, or 1.2 points
• Net premiums written increase of 2.7%, which reflects growth in more profitable segments, partially offset by specific underwriting initiatives
• Continued price increases in both Commercial and Personal Lines, with an increase of 5.2% in Core Commercial(2) Lines and 5.0% in Personal Lines(3)
• Net investment income of $70.2 million, up 6.4% from the prior-year quarter, driven by the investment of cash flows from operations and deployable equity related to the sale of Chaucer
• Book value per share of $71.95, up 3.1% from December 31, 2018

"We delivered strong first-quarter results, including operating income of $1.96 per diluted share and an adjusted operating ROE of 13%(6)," said John C. Roche, president and chief executive officer at The Hanover. "We are very pleased with our performance in the current market, as demonstrated by pricing increases of 5% or more in each of our businesses: Personal, Core Commercial and Specialty lines. We posted an overall written premium growth of 2.7%, delivering on our strategy to focus on our most profitable segments, while executing targeted underwriting initiatives in Commercial Auto and our Program Business. Excluding these two areas, we increased premiums by 4.3%(7), maintaining growth momentum in Personal Lines, Small Commercial and most of our specialty businesses. Our strong agency partnerships and increased investments in innovative product and service solutions give us confidence in our ability to continue to sustain strong profitable growth going forward."

"Our underwriting results and the combined ratio of 95.8% for the quarter were in line with our expectations." said Jeffrey M. Farber, executive vice president and chief financial officer. "We continued to benefit from the leverage on our fixed expenses from growth, while operating efficiencies enabled us to increase business investments. Despite an active catastrophe quarter in our geographic footprint, our catastrophe losses were not significantly elevated – validating the effectiveness of our prior underwriting initiatives. Our loss ratios remain in line with our expectations, as we achieve meaningful price increases and actively manage our business mix. Net investment income increased 6%, driven by increasing operating cash flows and the investment of capital from the Chaucer sale in the fourth quarter of 2018. These results, together with our continued focus on effective capital management, position us well to continue to deliver industry-leading returns."

For earnings history and earnings-related data on Hanover Insurance Group (THG) click here.

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