The Hanover Insurance Group reported $49.7 million net income for its 2012 first quarter, up 70 percent from $29.3 million reported during the same period one year ago. Profit continues to get a boost from its London-based Chaucer unit, which Hanover acquired in July 2011. That unit contributed pre-tax segment income of $25.5 million for the first quarter.
Total underwriting income for the quarter was $16 million, improving from the $9.5 million underwriting loss during the same quarter in 2011. The combined ratio was 98.1 percent (94.2 percent, ex-cat), improving from 100.7 percent (94.2 percent, ex-cat) reported one year ago.
Overall net premiums written for the first quarter were $1.017 billion, up 36 percent from $749.9 million reported one year ago. The Chaucer unit added $200.2 million in net premiums written. The company also said its commercial lines net premiums written grew 14.8 percent, driven by both core commercial and specialty businesses.
Hanover said the first quarter represented the sixth consecutive quarter of accelerating rate increases across core commercial lines.
Net investment income for the first quarter was $68.8 million, up 14 percent from $60.4 million reported one year ago.
“I’m pleased with our results for the first quarter as we continue to see favorable trends in our business and overall results were in line with the outlook we shared with you earlier in the year,” CEO Frederick Eppinger said.
The Worcester, Mass.-based Hanover Insurance Group, which is celebrating 160 years of history this year, has been growing from a regional insurer into a national player with global reach in the last several years.
Looking at individual segments, commercial lines pre-tax segment income was $33.9 million, compared to $18.2 million in the first quarter of 2011. The commercial lines GAAP combined ratio was 100.3 percent, compared to 103.7 percent in the prior-year quarter. Net premiums written for commercial lines were $468.9 million, up 14.8 percent from the prior-year quarter, driven by growth in core commercial and specialty businesses. Net written premium growth in core commercial lines reflected increased retention, continued renewal price gains and a stronger new business flow.
Personal Lines pre-tax segment income was $27.5 million, compared to $30.3 million in the prior-year quarter. The personal lines GAAP combined ratio was 98.0 percent, compared to 97.5 percent in the prior-year quarter. Net premiums written were $347.4 million, up from $341.4 million in the first quarter of 2011, primarily driven by rate increases in the homeowners and auto lines.
Chaucer’s pre-tax segment income was $25.5 million, resulting in a combined ratio of 93.8 percent. Net premiums written and earned were $200.2 million and $237.0 million, respectively.
CEO Eppinger said during an earnings call Tuesday that, in the commercial lines, the insurer’s 12 percent growth in small, commercial and middle market was driven by price increases of around 6 percent, “strong retention in the mid-80s” and “notable new business” growth. “Pricing accelerated as the months progressed — with middle market pricing standing at 8 percent in March. We expect to see a continuing trend in the second quarter,” he said.
In person lines, Eppinger said, the filed rate increases were over 4 percent in auto and over 7 percent in homeowners. “We also achieved strong retention, which at 81 percent was a two-point improvement over the prior-year quarter. “We expect greater rate increases in both lines of business in the second quarter.” Eppinger said.