Worcester, MA – The Hanover Insurance Group, Inc. (NYSE: THG) recently reported net income of $45.2 million, or $1.05 per diluted share, for the first quarter of 2017, compared to $78.2 million, or $1.80 per diluted share, in the prior-year quarter. Operating income was $40.8 million, or $0.95 per diluted share, for the first quarter of 2017, compared to $71.5 million, or $1.64 per diluted share, in the prior-year quarter.
First Quarter Highlights
- Catastrophe losses of $84.1 million before taxes, or 7.1% of earned premiums, primarily from domestic catastrophe events in the Midwest; this compared to $31.2 million, or 2.7%, in the prior-year quarter
- Combined ratio, excluding catastrophes(2) of 92.4%, in line with the first quarter of 2016
- No domestic prior-year loss reserve development
- Net premiums written up 3.7%, driven by growth in domestic businesses
- Continued price increases in Personal and Commercial Lines
- Net investment income of $71.1 million in the first quarter, up 4.1% compared to the prior-year period
- Book value per share of $68.44, up 1.5% from December 31, 2016; book value per share excluding net unrealized gains on investments(3) of $63.62, up 1.0%
“We are pleased with our solid operating earnings in the face of higher-than-expected catastrophe losses in our domestic business,” said Joseph M. Zubretsky, president and chief executive officer at The Hanover. “Underlying trends were stable across each of our business segments and in line with our expectations, which reflect our disciplined approach to pricing and risk selection. We are also pleased with our responsible top-line growth of 3.7%, driven by continued strong momentum in Personal Lines, pricing and retention strategies in Commercial Lines, and thoughtful management of our international specialty business. Given our position with our agency partners and sustained strong results, we are well prepared to deliver on the 2017 business performance we presented at our Investor Day in February, subject to the uncertainty of catastrophe losses.”
“We are excited about our current book of business and our continued momentum,” said Jeffrey M. Farber, executive vice president and chief financial officer. “Domestic results, excluding catastrophes, were in line with our expectations, which incorporate normal first quarter seasonality. Chaucer delivered a strong combined ratio, at 93.5%, with low current year large loss experience offset by increased estimates in a number of prior-year large claims. We remain confident in the strength of Chaucer’s underwriting expertise and business fundamentals. Our businesses are well positioned to capitalize on profitable growth opportunities, strengthen our competitive position and deliver value to our shareholders.”
First Quarter Operating Highlights
Commercial Lines operating income before taxes was $37.4 million, compared to operating income before taxes of $42.7 million in the first quarter of 2016. The Commercial Lines combined ratio was 100.2%, compared to 99.2% in the prior-year quarter. Catastrophe losses were $36.4 million, or 6.2 points of the combined ratio, compared to $18.9 million, or 3.3 points, in the prior-year quarter. First quarter 2017 results included no impact from prior-year loss reserve development, compared to net unfavorable prior-year loss reserve development of $20.1 million, or 3.5 points of the combined ratio, in the first quarter of 2016.
Commercial Lines current accident year combined ratio, excluding catastrophe losses(4), increased by 1.6 points to 94.0%, compared to 92.4% in the prior-year quarter. The difference reflects the unusually low level of first quarter 2016 property large losses and non-catastrophe weather related losses in the Commercial Multiple Peril line (“CMP”). Also contributing to the unfavorable comparison in CMP is the higher casualty loss ratio, which is consistent with historical performance, but above the reported first quarter 2016 ratio. This increase in CMP was partially offset by improvement in all other lines, as a result of continued pricing and underwriting initiatives.
Net premiums written were $625.3 million in the quarter, up 3.5% from the prior-year quarter, driven by continued pricing increases, strong retention and targeted new business expansion. Core commercial(5) business pricing increases averaged 3.2% for the first quarter, consistent with the fourth quarter of 2016.
The complete results release is available here: The Hanover First Quarter 2017 Results
Source: The Hanover