For 2007, Hanover Reports P/C Earnings Up 20%; Premiums Up 5%

January 29, 2008

The Hanover Insurance Group Inc. in Worcester, Mass. reported a rise in earnings for the fourth quarter and last year overall while its chief executive officer expressed confidence the company has “momentum leading into 2008.”

The company managed to grow its total property/casualty premiums at a time when insurers are cutting prices.

Fourth quarter net income for the Worcester, Mass.-based insurer was $75.8 million, or $1.44 per share, compared with $45.5 million, or 88 cents per share, for the same period a year earlier.

Hanover’s operations include The Hanover Insurance Co. in Worcester and Citizens Insurance Co. of America in Howell, Mich.

For all of 2007, Hanover reported net income of $253.1 million, or $4.83 per share. In 2006, it reported net income of $170.3 million, or $3.27 per share. Net income for the year included the $12.9 million tax benefit while net income for 2006 included an after-tax loss of $29.8 million, or 57 cents per share

Hanover said total pre-tax property and casualty segment income was $102.9 million in the quarter, up 5.6 percent, compared to $97.4 million for the fourth quarter of 2006.

For the year, the company reported total property and casualty segment income of $394.7 million, up 20.3 percent from $328.1 million in 2006.

For the quarter, net premiums written rose 5.6 percent, to $561.6 million. The company had $2.4 billion in net premiums written last year, up 4.7 percent from 2006.

The 2007 combined ratio was 94.4 percent, an improvement from 2006 when its combined ratio was 96.7 percent.

“The Hanover achieved strong results for the quarter and the full year of 2007,” said Frederick H. Eppinger, chief executive officer of The Hanover Insurance Group, Inc. “Underwriting results were solid with 20 percent improvement in our property and casualty segment earnings. At the same time, we improved our market position, growing premium profitably at almost 5 percent for the year and surpassing the industry growth rate. I am pleased with our momentum leading into 2008, gaining even greater confidence that the effectiveness of our strategy will continue to successfully differentiate us in the marketplace.”

Personal lines
The company reported these highlights in its personal lines operation:

Net premiums written were $350.8 million in the fourth quarter of 2007, compared to $342.3 million in the fourth quarter of 2006, an increase of 2.5 percent. Net premiums written for the full-year 2007 were $1,480.8 million, compared to $1,427.8 million in 2006, or up 3.7 percent year over year.

New business net premiums written were $59.8 million in the fourth quarter of 2007, representing a decrease of 16.5 percent compared to $71.6 million in the fourth quarter of 2006. New business net premiums written for the full year were $270.1 million in 2007, representing a decrease of 3.4 percent compared to $279.5 million in 2006.

The personal lines GAAP combined ratio was 93.2 percent in the fourth quarter of 2007, compared to 94.8 percent in the prior-year quarter. Both quarters combined ratios included 1.4 points of catastrophe related losses. The GAAP combined ratio for the full year of 2007 was 94.5 percent, compared to 95.1 percent in 2006. Catastrophe related losses contributed 1.8 points to the combined ratio in 2007, compared to 2.6 points in 2006.

Favorable development of prior-year loss and loss adjustment expense reserves was $15.6 million in the current quarter, compared to $9.9 million in the fourth quarter of 2006, improving the personal lines combined ratio by 4.2 points and 2.8 points, respectively. The full-year favorable development of prior-year reserves was $69.2 million in 2007, compared to $48.1 million in 2006, improving the combined ratio by 4.7 points and 3.5 points, respectively.

Commercial lines
Among commercial lines highlights, Hanover cited:

Net premiums written were $210.8 million in the fourth quarter of 2007, compared to $189.5 million in the fourth quarter of 2006, representing an increase of 11.2 percent. Net premiums written for the full year 2007 were $934.2 million, compared to $879.0 million in 2006, which represents a net written premium growth of 6.3 percent for the full year of 2007.

New business net premiums written were $77.0 million in the fourth quarter of 2007, representing an increase of 8.8 percent over $70.8 million in the fourth quarter of 2006. New business net premiums written for the full year were $319.6 million in 2007, representing an increase of 4.4 percent compared to $306.2 million in 2006.

The commercial lines GAAP combined ratio was 94.2 percent in the fourth quarter of 2007 compared to 93.5 percent in the prior-year quarter. Catastrophe related losses contributed 2.6 points to the fourth quarter ratio in 2007, compared to 5.3 points in the prior-year quarter. The full year GAAP combined ratio was 93.9 percent in 2007, compared to 98.9 percent for the prior-year. Catastrophe related losses added 4.2 points to the combined ratio in 2007, compared to 8.5 points in 2006.

Favorable development of prior-year loss and loss adjustment expense reserves was $18.6 million in the fourth quarter of 2007, compared to favorable development of $28.2 million in the fourth quarter of 2006; improving the commercial lines combined ratio by 7.9 points and 13.1 points, respectively. The full-year favorable development of prior-year reserves was $87.2 million in 2007, compared to favorable development of $82.7 million in 2006, improving the combined ratio by 9.6 points and 10.0 points, respectively.

Source: The Hanover Insurance Group Inc.
www.hanover.com.

Topics Trends Profit Loss Property Casualty Pricing Trends

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