Worcester, MA -(PRNewswire)- The Hanover Insurance Group, Inc. (NYSE: THG) recently reported net income of $61.3 million, or $1.37 per diluted share, for the third quarter of 2013, compared to $40.4 million, or $0.89 per diluted share, in the third quarter of 2012. Operating income was $60.9 million, or $1.36 per diluted share, in the third quarter of 2013, compared to $32.5 million, or $0.72 per diluted share, in the third quarter last year.
Third Quarter Highlights
- Combined ratio of 96.0%, including 2.7 points of catastrophe losses and 2.1 points of net favorable prior-year reserve development
- Net premiums written of $1.18 billion, up 5.5%, primarily driven by a higher share of premiums retained at Chaucer and growth in Commercial Lines
- Continued strong price increases in both Commercial and Personal Lines
- Net investment income of $65.7 million
- Repurchased 115,000 common shares for $6 million; year-to-date, repurchased 1.6 million common shares for $78 million, at an average price of $48.26 per share
- Book value per share, excluding net unrealized gains(2), was $54.64 at September 30, 2013, up 5.3% from December 31, 2012 and 1.9% from June 30, 2013; including net unrealized gains, book value per share was $58.43, in line with December 31, 2012, and up 1.8% from June 30, 2013
“We are pleased with our strong results this quarter, represented by operating earnings per share of $1.36 and growth in book value of 2%,” said Frederick H. Eppinger, president and chief executive officer at The Hanover. “Our annualized operating ROE of 10% this quarter reflected lower catastrophe losses year-over-year, as well as our pricing and portfolio management actions, which are becoming more meaningful to our returns.
“We executed our strategy well during the quarter,” he said. “We continue to prudently manage our domestic property exposure and business mix to achieve a more balanced quality portfolio capable of delivering consistent and higher returns. We achieved pricing increases of 10% in Personal and 9% in core Commercial Lines, and maintained strong retention, when considering targeted policy reductions.
“We also built on the momentum we have in the marketplace, as our broad and innovative product offering, underwriting expertise, and selective distribution strategy continue to resonate with our partners,” said Eppinger. “Chaucer enjoyed solid top-line lift despite softening market conditions, as our knowledge of the market and underwriting expertise allows us to find attractive business opportunities. In core Commercial Lines, new business is accelerating, while voluntary attrition is at historical lows, and we continue to shift our mix towards more desirable account business in Personal Lines.
“With continued strong performance across our organization, we have confidence in our ability to generate improved earnings going forward and achieve our financial goals and target returns.”
Commercial Lines operating income before taxes was $38.5 million this quarter, compared to $8.1 million in the prior-year quarter. The Commercial Lines combined ratio was 99.2% this quarter, compared to 105.8% for the prior-year quarter. Catastrophe losses were $8.5 million, or 1.7 points of the current quarter combined ratio, compared to $17.0 million, or 3.7 points, in the prior-year quarter. Third quarter 2013 results also reflected net unfavorable prior-year reserve development of $2.3 million, or 0.5 points of the combined ratio, compared to net unfavorable development of $4.4 million, or 1.0 point, in the third quarter of 2012.
Commercial Lines current accident year underwriting, excluding catastrophes(4), generated a combined ratio of 97.0%, compared to 101.1% in the prior-year quarter and 99.9% in the full-year 2012. The improvement over the full-year 2012 was driven by increased profitability in most businesses from rate and mix management actions, while the quarter also benefited from a lower incidence of large losses in the commercial multi-peril line.
Net premiums written were $530.5 million in the current quarter, up 6.1% from the prior-year quarter, driven by growth in core Commercial Lines, including continued renewal price gains and increased new business flow.
The complete earnings release is available here: The Hanover Third Quarter 2013 Results