Hanover Insurance Group (THG) Tops Q3 EPS by 35c, Revenues Miss

Hanover Insurance Group (NYSE: THG) reported Q3 EPS of $2.46, $0.35 better than the analyst estimate of $2.11. Revenue for the quarter came in at $1.25 billion versus the consensus estimate of $1.26 billion.

Third Quarter Highlights

• Current accident year loss and loss adjustment expense ("LAE") ratio, excluding catastrophes(2), of 56.8%, which included favorable loss frequency in short-tail coverages, primarily personal auto, while maintaining prudent reserves in longer-tail liability lines
• COVID-19 ultimate loss expectation remains unchanged with limited losses incurred to date
• Catastrophe losses of $65.9 million, or 5.8 points of the combined ratio, including favorable development on prior-year catastrophes of $9.6 million
• Net premiums written growth of 2.1%*, compared to a decline of 2.3% adjusted for non-recurring premium returns in the second quarter(3)
• Rate increases of 5.7% in core commercial lines(4) and 4.7% in Personal Lines(5)
• Net investment income of $67.6 million, slightly below prior-year, primarily due to lower new money yields
• Book value per share of $84.32, up 4.0% from June 30, 2020 and up 11.0% from December 31, 2019, driven by net income and increases in the fair value of fixed income securities

"We're very pleased with our performance in the third quarter, delivering a strong operating ROE(6) of 13.8%, while making strategic gains that position us to continue to deliver sustainable growth and returns going forward," said John C. Roche, president and chief executive officer at The Hanover. "Despite industry headwinds and weather challenges, we are driving robust and consistent earnings, enabled by the effectiveness of our exposure and risk management actions taken over the last several years and our outstanding distribution capability. We generated record net premiums written of $1.3 billion and overall growth of 2.1%, rebuilding the momentum across our business since the onset of the pandemic. We continued to experience an increasingly hardening market in Commercial Lines, with core commercial rate increases of 5.7% and upper-single-digits in Specialty. We are successfully navigating the dynamic and competitive market in Personal Lines, achieving rate increases of 4.7%. The strength of our agency partnerships, specialized capabilities and innovative solutions will continue to enhance our growth trajectory moving forward. We are better positioned today than ever to deliver for our stakeholders and achieve our goal of establishing The Hanover as the premier property and casualty franchise in the independent agency channel."

Commenting on the company's third quarter results, Jeffrey M. Farber, executive vice president and chief financial officer, said, "We reported an all-in combined ratio of 94.2%, and 88.4%, excluding catastrophes(7). Our strong underlying loss performance was helped by the benefit of lower claims frequency, particularly in personal auto, while we maintained a prudent reserving approach to liability coverages. Our expense ratio(8), though slightly elevated in the quarter due to timing of certain expenses, improved by 20 basis points on a year-to-date basis, as we maintained our focus on deliberate expense planning and discipline."

"The $100 million ASR agreement announced today reinforces our commitment to effectively manage our capital. This agreement further underscores the strength in our company's earnings power and ability to consistently generate excess capital," Farber said. "We enter the final quarter of the year in an excellent financial position, supported by a strong balance sheet and robust business prospects. We are confident in our ability to continue driving top-and bottom-line growth across our business."

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

You May Also Be Interested In

• Gilead Sciences (GILD) Misses Q1 EPS by 288c
• Phillips Edison & Company (PECO) Reports In-Line Q1 EPS, provides guidance
• Alphabet (GOOGL) soars 16% on Q1 results beat, first-ever dividend