Hanover Insurance Group (THG) Tops Q1 EPS by 20c, Revenues Miss

Hanover Insurance Group (NYSE: THG) reported Q1 EPS of $2.23, $0.20 better than the analyst estimate of $2.03. Revenue for the quarter came in at $1.06 billion versus the consensus estimate of $1.15 billion.

First Quarter Operating Highlights

• Operating income of $2.23 per diluted share, up 13.8% from the prior-year quarter
• First quarter combined ratio of 95.2%, improved from 95.8% in the first quarter 2019; combined ratio, excluding catastrophes(2) of 91.9%, improved from 92.2%
• Current accident year loss and loss adjustment expense (\"LAE\") ratio, excluding catastrophes(3), was impacted by favorability in personal auto from benign weather and lower miles driven, offset by elevated property loss experience and COVID-19-related reserves in Commercial Lines
• Net premiums written increase of 3.5%** primarily reflected growth in most profitable businesses
• Price increases of 5.9% in Core Commercial Lines (4) and 5.1% in Personal Lines (5)
• Net investment income of $69.6 million, down 0.9% from the prior-year quarter
• Completion of the previously announced $150 million accelerated share repurchase (\"ASR\") agreement, repurchasing approximately 1.1 million shares of common stock, as well as the subsequent repurchase of approximately 350,000 shares of common stock in the open market
• Book value per share of $72.05, down 5.1% from December 31, 2019, driven primarily by the after-tax decrease in the fair value of fixed income and equity securities, partially offset by net operating income

"In these unprecedented times defined by the COVID-19 global pandemic, our thoughts are with our employees, partners, customers, shareholders and our communities," said John C. Roche, president and chief executive officer at The Hanover. "I am incredibly proud of our outstanding team of 4,300 employees, which has demonstrated tremendous resiliency and flexibility during this uncertain time. We seamlessly transitioned to a remote work environment, while continuing to provide the highest quality service. I am equally proud of our robust and compassionate response to support all of our stakeholders, through our extensive customer relief program, financial and operational support to our agents and customers, and commitments to local communities, including multiple charitable donations.

From a financial perspective, our company remains very strong, as demonstrated by our strong results in the quarter. Our insurance book of business is built on thoughtful and conservative underwriting practices, a diversified, carefully constructed product portfolio and broad-based profitability. We believe these elements, combined with our solid balance sheet and ample liquidity, will allow us to successfully manage through the impacts of COVID-19, while continuing to deliver superior industry results. I have confidence the industry will respond and perform where contractual business interruption insurance exists, but that the sanctity of the contract will prevail in policies where coverage is excluded."

"We are very pleased with our performance in the first quarter, highlighted by a 13.1% operating return on equity(6), operating income of $2.23 per diluted share and a combined ratio, excluding catastrophes, of 91.9%," said Jeffrey M. Farber, executive vice president and chief financial officer. "Our earnings benefited from favorable catastrophe and expense results, while Commercial Lines property losses were slightly elevated, primarily due to one large fire loss and the establishment of COVID-19-related reserves in our Commercial Lines portfolio.

Our high-quality well-laddered investment portfolio is well positioned to withstand the current market volatility and economic disruption. Our decision in recent years to meaningfully reduce our exposure to more volatile industry classes and transition away from below investment grade assets is serving us well. We will continue to manage our business thoughtfully and conservatively, delivering value to our shareholders and other stakeholders."

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

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