Hanover Insurance Reports Q2 Net Loss with Sale of Life Business

August 1, 2008

The Hanover Insurance Group, Inc. in Worcester, Mass. reported a net loss for the second quarter of 2008 of $10.2 million, compared to an income of $59.8 million in the second quarter of the prior year.

Net income for the second quarter of 2008 included a net loss of $58.1 million from the results of discontinued operations, compared to $3.0 million in income in the prior-year quarter. The net loss from discontinued operations included an estimated after-tax loss of $66.1 million related to the pending sale of the life insurance business of FAFLIC business, partially offset by a gain of $11.1 million, resulting from the sale of the premium financing business AMGRO that closed in June 2008.

Additionally, net income in the current quarter also included an after-tax net realized loss on investments of $7.6 million.

Total property and casualty pre-tax segment income was $94.2 million in the second quarter of 2008, compared to $96.4 million in the second quarter of the prior year. Second quarter of 2008 included significantly higher catastrophe losses of $38.1 million pre-tax, compared to $14.5 million pre-tax in the prior-year quarter. Excluding the pre-tax net impact of catastrophes, property and casualty pre-tax segment income would have been $132.3 million in the second quarter of 2008, up $21.4 million, compared to $110.9 million in the second quarter of 2007.

“Solid underwriting performance in our property and casualty business enabled us to withstand the losses resulting from high catastrophe activity observed industry wide in the second quarter,” said Frederick H. Eppinger, chief executive officer.

Second quarter results showed:
Segment income after tax of $55.5 million compared to $56.7 million in the prior-year quarter.

GAAP combined ratio of 95.5% in the second quarter of 2008, compared to 94.4% in the prior-year quarter, including pre-tax catastrophes losses of 6.2 points and 2.5 points, respectively.

Net premiums written of $640.6 million, compared to $619.9 million in the prior-year quarter, an increase of 3.3%.

Personal lines highlights:
Net premiums written were $373.5 million in the second quarter of 2008, compared to $370.8 million in the second quarter of 2007, an increase of 0.7%.

Net premiums earned were $369.5 million in the second quarter of 2008, compared to $364.4 million in the second quarter of 2007, an increase of 1.4%.

New business net premiums written were $66.5 million in the second quarter of 2008, compared to $67.8 million in the second quarter of 2007, and $58.8 million in the first quarter of 2008.

The personal lines GAAP combined ratio was 98.4% in the second quarter of 2008, compared to 93.9% in the prior-year quarter. Catastrophe related losses were $24.6 million, or 6.7 points of the second quarter combined ratio in 2008, compared to $9.2 million, or 2.5 points in the prior-year quarter.

Commercial Lines
Net premiums written were $266.9 million in the second quarter of 2008, compared to $248.8 million in the second quarter of 2007, representing an increase of 7.3%.

Net premiums earned were $249.5 million in the second quarter of 2008, compared to $226.0 million in the second quarter of 2007, an increase of 10.4%.

New business net premiums written were $80.8 million in the second quarter of 2008, compared to $84.0 million in the second quarter of 2007, and $78.7 million in the first quarter of 2008.

The commercial lines GAAP combined ratio was 91.7% in the second quarter of 2008, compared to 94.8% in the prior-year quarter. Catastrophe related losses were $13.5 million, or 5.4 points of the second quarter combined ratio in 2008, compared to $5.3 million, or 2.3 points in the prior-year quarter.

Source: The Hanover

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