Worcester-Mass.-based Hanover Insurance Group Inc. posted a $61.8 million quarterly net loss, as like other insurers it felt the pain of storm and investment losses, but the CEO said his company remains in excellent financial condition.
The company reported a third quarter net loss of $61.8 million compared to a profit of $53.9 million for the same quarter last year. The net loss included net realized investment losses of $52.8 million. These losses included previously disclosed impairments related to Lehman Brothers and Washington Mutual holdings of $36.7 million.
Total property/ casualty pre-tax segment income fell to $31.8 million compared to $88.3 million in last year’s third quarter. The third quarter of 2008 included significantly higher catastrophe losses of $98.2 million pre-tax, compared to $25.1 million pre-tax in the prior-year quarter. Excluding the pre-tax net impact of catastrophes, property/casualty pre-tax segment income would have been $112.0 million in the third quarter of 2008, compared to $113.4 million in the third quarter of 2007.
Net premiums written of $651.6 million, compared to $621.8 million in the prior-year quarter, represented an increase of 4.8 percent.
“While our third quarter results reflect the pre-announced impacts of extreme storm activity and the recent turmoil in the financial markets, we expect to generate very solid results for the year,” said Frederick H. Eppinger, chief executive officer at The Hanover. “Through the first three quarters, we have produced strong results in our core business, with positive underlying trends. Our combined ratio, excluding catastrophe losses, has improved year-over-year, we are maintaining our margins and we are generating continued favorable loss reserve development, indicative of our disciplined underwriting practices. At the same time, our year-to-date growth, at 4 percent, is in line with our expectations and ahead of industry averages.
“In spite of all of the challenges facing the industry,” Eppinger continued, “our company is in excellent financial condition, as underscored by our board of directors’ decision last week to increase our common stock dividend for the fourth consecutive year.”
Net premiums written in personal lines were $397.5 million in the third quarter of 2008, compared to $392.9 million in the third quarter of 2007.
The personal lines combined ratio was 103.7 percent in the third quarter of 2008, compared to 95.7 percent in the prior-year quarter. Catastrophe related losses were $39.7 million, or 10.8 points of the third quarter combined ratio in 2008, compared to $5.2 million, or 1.4 points in the prior-year quarter.
Commercial lines net premiums written were $254.1 million in the third quarter of 2008, compared to $228.9 million in the third quarter of 2007, representing an increase of 11.0 percent.
The commercial lines combined ratio was 115.3 percent, compared to 96.0 percent in the prior-year quarter. Catastrophe related losses were $58.5 million or 23.2 points of the third quarter combined ratio in 2008, compared to $19.9 million, or 8.8 points in the prior-year quarter.
The Hanover said it continues to have no direct exposure to investment in subprime mortgages or subprime mortgage-backed securities, nor does it currently own any collateralized debt or loan obligations or invest in credit derivatives.
Source: The Hanover
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