The Hanover Insurance Group Inc. reported net income of $66.2 million for its 2013 first quarter, up 33.2 percent compared to $49.7 million income reported during the first quarter of 2012.
Operating income for the first quarter was $59.9 million, up 30 percent compared to $46.0 million one year ago. Net premiums written for the first quarter was $1.1 billion, up 6 percent, primarily driven by higher share of premiums retained at Chaucer, the London-based specialist insurer underwriting at Lloyd’s acquired by Hanover in 2011.
The combined ratio was 96.1 percent, improving from 98.1 percent a year ago. Net investment income was $67.3 million, down slightly from $68.8 million a year ago.
The Worcester, Mass.-headquartered company also said it is seeing continued improvement in commercial and personal lines pricing trends.
“We are pleased to start 2013 with strong earnings and positive momentum on all of our strategic priorities,” said CEO Frederick Eppinger.”Underlying profitability in our domestic operations is expanding.”
Eppinger said the company achieved pricing increases of 9 percent in both core commercial and personal lines during the quarter, “and we are seeing even greater increases in our specialty businesses.”
“Chaucer made another strong contribution to our earnings, benefiting from lower-than-expected losses, and once again demonstrating its strong underwriting expertise,” he said. “Our annualized ROE was 10 percent, a solid improvement. We remain committed to continue to grow shareholders’ equity and returns.”
Commercial lines operating income before taxes was $33.0 million in the first quarter, compared to $33.9 million in the first quarter of 2012. The commercial lines combined ratio was 100.5 percent in the current quarter, compared to 100.3 percent a year ago. First quarter 2013 results also reflected unfavorable prior-year loss reserve development of $0.2 million, having no material impact on the first quarter combined ratio, compared to unfavorable development of $0.5 million, or 0.1 points of the first quarter combined ratio in the first quarter of 2012. Net written premiums were $483.6 million, up 3.1 percent from the prior-year quarter, driven by continued renewal price gains.
Personal lines operating income before taxes was $30.5 million, compared to $27.5 million one year ago. The insurer’s personal lines combined ratio was 96.5 percent, compared to 98.0 percent a year ago. Current quarter results also reflected unfavorable prior-year reserve development of $5.6 million, or 1.5 points of the first quarter combined ratio, compared to unfavorable reserve development of $3.8 million, or 1.0 point, in the first quarter of 2012. Net premiums written were $341.6 million, down 1.7 percent from the first quarter of 2012. Continuing rate increases in all lines were more than offset by continued and planned exposure management actions related to certain geographies, the company said.
Chaucer’s operating income before taxes was $40.9 million in the first quarter, compared to $25.5 million one year ago. Catastrophe losses were $2.6 million, or 1.0 point of the combined ratio, compared to $6.5 million, or 2.7 points, in the same period last year. Prior-year favorable reserve development was $13.3 million, or 5.3 points of the combined ratio, compared to $21.7 million, or 9.2 points in the prior-year quarter. Favorable reserve development in the quarter was driven by better-than-expected loss experience, primarily in the property line, that was partially offset by the impact of foreign currency movements.
Chaucer’s current accident year underwriting, excluding catastrophes, resulted in a combined ratio of 91.0 percent, compared to 100.3 percent a year ago. The company said this improvement was primarily due to a lower incidence of losses in most classes in the first quarter of this year. The underwriting results this quarter also benefited from a lower expense ratio driven by foreign currency movements, which partially offset the above-mentioned impact on reserves.
Chaucer’s net premiums written were $251.5 million, up 25.6 percent over the prior-year quarter, primarily due to additional retained premiums at Syndicate 1084, as a result of the company’s decision not to renew certain quota-share agreements effective Jan 1, 2013.
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