The Hanover Insurance Group Inc. reported net income of $53.4 million for the 2013 second quarter, an increase of 157 percent compared to $20.8 million net income during the same period a year ago.
The net income for the first six months of 2013 was $119.6 million, up 70 percent compared to $70.5 million net income a year ago.
The Worcester, Mass.-based Hanover said it sees a continuation of “a strong pricing environment.” Hanover also benefited from smaller catastrophe losses compared to a year ago. The Chaucer unit, which Hanover acquired in 2011, also posted higher operating income for the latest quarter.
Hanover’s net premiums written for the second quarter were $1.243 billion, up 3.76 percent compared to $1.198 billion a year ago. Net premiums written for the first six months of 2013 were $2.320 billion, up 4.73 percent from $2.214 billion a year ago.
The overall combined ratio for the second quarter improved to 98.4 percent (including 5.5 points of catastrophe losses) compared to 103.1 percent (including 7.1 points of catastrophe losses) a year ago. The combined ratio for the first six months of 2013 improved to 97.3 percent (including 3.7 points of catastrophe losses), falling from 100.6 percent (including 5.5 points of catastrophe losses) a year ago.
Net investment income fell slightly to $67.9 million for the quarter, falling 0.88 percent from $68.5 million a year ago. Net investment income for the first six months of 2013 was $135.2 million, down 1.52 percent from $137.3 million a year ago.
“We are pleased with our earnings this quarter as each of our businesses generated improved results,” said CEO Frederick Eppinger.
Eppinger added, “We continued to operate in a strong pricing environment, yielding increases of 8 percent in Core Commercial and 9 percent in Personal Lines in the quarter.”
“In a quarter marked by an elevated level of industry catastrophe activity, we believe our exposure management efforts helped moderate our overall catastrophe losses,” Eppinger said.
Eppinger said Chaucer delivered strong earnings in the latest quarter. “We continue to be pleased with the earnings diversification Chaucer provides, along with its ability to navigate the current market environment and capture market opportunities as they emerge,” he said.
The following are Hanover’s second-quarter operating results by business lines:
Commercial Lines
In Commercial Lines, operating income before taxes was $26.2 million in the second quarter, improving from a loss of $9.4 million a year ago. The Commercial Lines combined ratio was 101.8 percent in the quarter, compared to 109.7 percent in the prior-year quarter.
Catastrophe losses were $15.1 million, compared to $38.4 million in the prior-year quarter.
Second quarter results also reflected net unfavorable prior-year reserve development of $0.5 million, compared to net unfavorable development of $14.5 million in the second quarter of 2012.
Net premiums written were $521.5 million in the second quarter, up 5.0 percent from the prior-year quarter, driven by growth in Core Commercial Lines, including continued renewal price gains.
Personal Lines
Personal Lines operating income before taxes was $19.9 million in the second quarter, compared to $12.3 million in the prior-year quarter. The Personal Lines combined ratio was 99.3 percent in the quarter, improving from 102.0 percent a year ago. Catastrophe losses were $32.2 million, compared to $32.4 million in the prior-year quarter.
Current quarter results also reflected net unfavorable prior-year reserve development of $2.8 million, compared to net unfavorable reserve development of $7.8 million a year ago.
Net written premiums were $370.6 million in the second quarter, consistent with the prior-year quarter. Continuing rate increases in the auto and homeowners lines were offset by continued and planned exposure management actions related to certain geographic areas.
Chaucer
Chaucer’s operating income before taxes was $36.9 million in the second quarter, compared to $29.8 million in the prior-year quarter. The Chaucer combined ratio was 89.6 percent, compared to 91.9 percent a year ago.
Catastrophe losses were $12.5 million, compared to $3.3 million in the same period last year. Current quarter results also reflected net favorable prior-year reserve development of $30.7 million, compared to net favorable reserve development of $5.1 million a year ago. Favorable reserve development in the current quarter was mostly driven by favorable resolution of certain Energy claims, better-than-expected experience in the Casualty and Property lines, and a favorable impact of foreign currency movements.
Net premiums written were $350.5 million in the second quarter, up 6.3 percent over the prior-year quarter, mostly due to additional retained premiums at Syndicate 1084, partially offset by a reduction in estimated premiums in the Energy line.
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