Hanover Q3 Profit Increases 42% to $78M

By | October 29, 2015

The Hanover Insurance Group Inc. reported $78.3 million net income for its 2015 third quarter, a 42.6 percent increase from $54.9 million net income reported a year earlier.

The Worcester, Massachusetts-based insurer said the latest quarterly results were helped by lower catastrophe losses, as compared to the prior-year quarter.

The Hanover also announced that its former executive vice president and chief financial officer, Eugene M. Bullis, has rejoined the company to serve as interim chief financial officer. Bullis will assume the role previously held by David B. Greenfield, who passed away earlier this month, while the company searches for a permanent successor.

Bullis served as executive vice president and CFO at The Hanover from 2007 to 2010, and served on public and private company boards since. Prior to joining The Hanover, Bullis served as chief financial officer of CNO Financial Group (formerly known as Conseco) and Wang Laboratories, among others.

On its 2015 third-quarter results, The Hanover said its combined ratio for the quarter was 94.9 percent, improving from 98.2 percent a year earlier. Net premiums written for this year’s third quarter fell slightly to $1.20 billion, down 3.6 percent from $1.24 billion a year earlier, due to the effect of exiting the U.K. motor business.

Net investment income for the 2015 third quarter was $68.3 million, up 1.2 percent from $67.5 million a year earlier.

The Hanover said it continued to have price increases in commercial and personal Lines. “Price increases in the quarter were 5.4 percent for Core Commercial lines, and 5 percent for Personal Lines,” CEO Fred Eppinger said.

Commercial Lines

The Hanover’s third-quarter Commercial Lines operating income before taxes was $47.1 million, up from $43.1 million a year earlier. The Commercial Lines combined ratio was 98.3 percent, improving from 98.7 percent a year earlier. Catastrophe losses were $13.8 million, or 2.5 points of the combined ratio, compared to $20.4 million, or 3.9 points, in the prior-year quarter. Third-quarter results also reflected net unfavorable prior-year reserve development of $11.8 million, or 2.1 points of the combined ratio, compared to $1.1 million, or 0.2 points, in the third quarter of 2014.

The company said the unfavorable prior-year loss reserve development in the current quarter was primarily driven by auto, recorded in both the commercial auto and other commercial lines, as well as development in the commercial multiple peril line, partially offset by favorable development in the workers’ compensation line.

The third-quarter net premiums written were $617.6 million, up 7.1 percent from the prior-year quarter, driven by pricing increases, as well as improved retention and targeted new business growth, the company announced.

Personal Lines

The third-quarter Personal Lines operating income before taxes was $37.2 million, compared to $6.7 million a year earlier. The Personal Lines combined ratio was 94.2 percent for the quarter, improving from 102.8 percent a year earlier. Catastrophe losses were $20.1 million, or 5.6 points of the combined ratio, compared to $51.6 million, or 14.6 points, in the prior-year quarter. Third-quarter results also reflected net favorable prior-year reserve development of $2.5 million, or 0.7 points of the combined ratio, compared to $0.7 million, or 0.2 points, a year ago.

Net premiums written were $383.3 million in the quarter, up 1.1 percent, compared to the prior-year quarter, primarily due to rate increases.

Chaucer

The London-based Chaucer unit’s operating income before taxes was $41.2 million in the quarter, compared to $39.4 million a year ago. Chaucer’s combined ratio was 87.2 percent, improving from 91.8 percent a year ago. Catastrophe losses were $11.9 million, or 5.1 points of the combined ratio, compared to $16.1 million, or 5.2 points, in the prior-year quarter. Third-quarter results also reflected net favorable prior-year reserve development of $32.1 million, or 13.9 points of the combined ratio, compared to $22.6 million, or 7.3 points, a year ago.

Net premiums written were $198.7 million in the quarter, down 31.3 percent over the prior-year quarter, mostly due to the exit from the U.K. motor business. Excluding the effect of the U.K. motor exit, net premiums written declined by 5.7 percent, driven by lower writings in the energy and property lines, and to a lesser extent, due to foreign exchange movements, partially offset by growth in casualty and marine, the company said.

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