Worcester, MA – The Hanover Insurance Group, Inc. (NYSE: THG) recently reported net income of $120.7 million, or $2.68 per diluted share, for the second quarter of 2015, compared to net income of $82.6 million, or $1.84 per diluted share, in the prior-year quarter. Operating income was $70.4 million, or $1.56 per diluted share, in the second quarter of 2015, compared to $58.4 million, or $1.30 per diluted share, in the prior-year quarter.
Second Quarter Highlights
- Combined ratio of 95.7%; combined ratio excluding catastrophes(2) of 91.8%
- Operating income up 20.5% and up 6.3% excluding catastrophes(3)
- Net premiums written(4) of $1.3 billion, up 1.3%, led by growth in domestic businesses of 3.9%; excluding the impact of foreign exchange movements, growth was 2.5%
- Continued price increases in Commercial and Personal Lines
- Net investment income of $70.7 million, up 5.5% from the prior-year quarter
- Completed the transfer of the U.K. motor business, which resulted in a net gain of $40.3 million
- Book value per share of $66.28, up 0.5% from March 31, 2015, and up 2.2% from December 31, 2014; book value per share excluding net unrealized gains on investments and derivatives of $60.96, up 4.3% and 5.1%, respectively
- Repurchased approximately 213,000 shares of common stock for $15.0 million during the second quarter
“We are pleased to report another quarter of very strong financial performance, generating operating income of $1.56 per share, up 20% compared to the prior-year quarter,” said Frederick H. Eppinger, president and chief executive officer of The Hanover. “Our capabilities, strong business mix, as well as underwriting leadership in preferred segments, allow us to successfully compete in the current market environment.
“Our domestic businesses grew by 4%, led by Commercial Lines, and reflected pricing increases in the quarter of 5.5% for Core Commercial, and 5.2% for Personal Lines. Our combined ratio excluding catastrophes decreased by nearly a point, underscoring our consistent trajectory of underwriting improvement,” Eppinger said.
“Chaucer once again delivered strong results, showcasing the strength and depth of its underwriting team. With significant competition in the Lloyd’s environment, we will continue to focus on profitability in this business,” said Eppinger.
“Our book value per share increased to $66.28, up 2% all-in since December 31, 2014, and 5% excluding the movement in net unrealized gains on investments and derivatives. We also generated a 10.7% operating ROE in the quarter and 9.8% year-to-date, giving us a clear line of sight to our financial goals as we progress toward top-quartile performance,” Eppinger said.
Second Quarter Operating Highlights
Commercial Lines
Commercial Lines operating income before taxes was $48.2 million, compared to $44.2 million in the second quarter of 2014. The Commercial Lines combined ratio was 98.3%, compared to 98.4% in the prior-year quarter. Catastrophe losses were $23.2 million, or 4.2 points of the combined ratio, compared to $17.0 million, or 3.3 points, in the prior-year quarter. Second quarter 2015 results also reflected net unfavorable prior-year reserve development of $6.0 million, or 1.1 points of the combined ratio, compared to $1.8 million, or 0.3 points, in the second quarter of 2014.
Commercial Lines current accident year combined ratio, excluding catastrophe losses(5), improved by 1.8 points to 93.0%, compared to 94.8% in the prior-year quarter, due to lower loss ratio and, to a lesser extent, expense ratio. The loss ratio declined in all major lines, driven by rate and business mix improvement.
Net premiums written were $569.1 million in the quarter, up 5.2% from the prior-year quarter, driven by pricing increases, as well as improved retention and targeted new business growth.
The complete earnings release is available here: The Hanover Second Quarter 2015 Results