The Hanover Insurance Group Inc. reported net income of $61.3 million for its 2013 third quarter, an increase of 51.7 percent compared to $40.4 million profit during the same period a year ago.
The Worcester, Mass.-based Hanover said it sees continued strong price increases in both commercial and personal lines.
Operating income for the third quarter was $60.9 million, up 87.3 percent from $32.5 million a year ago.
Net premiums written for the latest quarter increased to $1.182 billion, up 5.5 percent from $1.120 billion a year ago. The net written premium growth in the quarter reflected premium increases in the Chaucer unit of 23 percent, a 6 percent growth in commercial lines and a 5 percent decline in personal lines as The Hanover continues to implement its strategy of exposure management and profitability improvement actions in the domestic businesses.
The overall combined ratio for the quarter improved to 96.0 percent (including 2.7 points of catastrophe losses) compared to 100.2 percent (including 4.8 points of catastrophe losses) a year ago.
Net investment income was $65.7 million for the quarter, a 5.1 percent decline from $69.2 million a year ago.
“Our annualized operating ROE of 10 percent 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,” President and CEO Frederick H. Eppinger said.
“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.”
Eppinger said his company is assuming that the increased frequency and severity of the weather over the last several years is here to stay. “For that reason,” he said, “we continue to pursue targeted actions to reduce our property concentrations that will reduce our volatility and improve our profitability over time.”
Commenting on prices during the third quarter, Eppinger said the company achieved pricing increases of 10 percent in personal and 9 percent in core commercial lines, and maintained strong retention, when considering targeted policy reductions.
In core commercial, middle market workers’ comp showed the most strength where prices increased by almost 12 percent, Eppinger said.
‘We Believe We Will Continue to See Solid Price Increases’
“We bolstered the other lines hovering around 9 percent. We always approach our pricing strategy in a very targeted way with the objective of improving the overall quality of our products,” he said.
“As importantly,” Eppinger said, “we believe we will continue to see solid price increases going into 2014.”
“We remain convinced that positive rate is needed broadly in the market, given the persistency of low investment yields and active weather,” he said. “With that said, rate increases in our personal auto book will likely moderate from the current high-water mark of 9 percent, as we begin to clearly see the cumulative benefit of past pricing actions on loss trends.”
“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,” he said. “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.”