Hanover Insurance Group (THG) Tops Q1 EPS by 74c, Revenues Beat

Hanover Insurance Group (NYSE: THG) reported Q1 EPS of $1.66, $0.74 better than the analyst estimate of $0.92. Revenue for the quarter came in at $1.28 billion versus the consensus estimate of $1.17 billion.

First Quarter Highlights

• Operating income (1) was $61.4 million, or $1.66 per diluted share, for the first quarter of 2021
• Net premiums written increase of 5.2%**, reflecting growth in all segments
• Combined ratio of 98.8%; combined ratio, excluding catastrophes(2) of 87.3%
• Consistent with the pre-announcement, catastrophe losses of $133.3 million, or 11.5% of net premiums earned, primarily due to freeze events in Texas and surrounding states
• Rate increases of 6.1% in core commercial lines(3) and 3.1% in Personal Lines(4)
• Improved current accident year loss and loss adjustment expense ("LAE") ratio, excluding catastrophes(5), of 56.4%, due to continued favorable loss frequency, particularly in personal and commercial auto
• Net investment income of $76.8 million, up 10.3% from the prior-year quarter, primarily from higher partnership income
• Book value per share of $84.21, down 4.3% from December 31, 2020, primarily driven by a decrease in net unrealized gains on fixed maturity investments, net of tax, partially offset by net income. Excluding net unrealized gains on fixed maturity investments, net of tax, book value per share(6) increased 1.7% from December 31, 2020

"We are very pleased with our strong financial performance in the first quarter, in light of the unprecedented catastrophe activity," said John C. Roche, president and chief executive officer at The Hanover. "We delivered net premiums written growth of 5.2%, exceeding our original first quarter expectations and demonstrating our ability to capitalize on attractive market opportunities in this dynamic environment. In Commercial Lines, our growth surpassed pre-COVID levels, as we benefitted from our deep agency relationships, rate increases, and an improvement in the overall economic environment. The Commercial Lines rate environment continues to be robust, as evidenced by average rate increases of 6.1% in our core commercial business and further rate acceleration in most of our specialty businesses. We believe the commercial pricing environment will remain strong moving forward. In Personal Lines, we accelerated our top-line momentum throughout the quarter, improving retention and delivering strong new business results, providing further validation of the effectiveness of our customer-centric strategy. As we look ahead, we are focused on driving profitable growth across our portfolio, enabling us to continue to invest in our company and deliver increasing value for our shareholders, agents, customers and other stakeholders."

Commenting on the company's first quarter results, Jeffrey M. Farber, executive vice president and chief financial officer, said, "We reported strong underlying underwriting performance, as demonstrated by a combined ratio, excluding catastrophes, of 87.3%, largely the result of mix improvement, earning-in of rate increases, and the continuing benefit of lower loss frequency, primarily in auto lines. Although our expense ratio in the quarter was slightly elevated compared to the first quarter 2020, due to the timing of certain expenses in the year-ago quarter, we remain on track to deliver a 30-basis point improvement in 2021. Our high-quality investment portfolio performed exceptionally well, generating $76.8 million of pre-tax income in the quarter, and we continued to thoughtfully manage our capital, returning $110 million to our shareholders through April 27, including $84 million through share repurchases."

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

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