8-K
HANOVER INSURANCE GROUP, INC. (THG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2023
THE HANOVER INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 1-13754 | 04-3263626 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
| 440 Lincoln Street, Worcester, Massachusetts<br><br>(Address of principal executive offices) | 01653<br><br>(Zip Code) | |
| (508) 855-1000<br><br>Registrant’s telephone number, including area code: |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.01 par value | THG | New York Stock Exchange |
| 7 5/8% Senior Debentures due 2025 | THG | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
The following information is being furnished under Item 2.02 – Results of Operations and Financial Condition. Such information, including the exhibits attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.
On May 2, 2023, The Hanover Insurance Group, Inc. (the Company) issued a press release announcing its financial results for the quarter ended March 31, 2023. The release is furnished as Exhibit 99.1 hereto. Additionally, on May 2, 2023, the Company made available on its website unaudited financial information contained in its Financial Supplement for the period ended March 31, 2023. The supplement is furnished as Exhibit 99.2 hereto.
Item 9.01 Financial Statements and Exhibits.
| (a) | Not applicable. |
|---|---|
| (b) | Not applicable. |
| --- | --- |
| (c) | Not applicable. |
| --- | --- |
| (d) | Exhibits. |
| --- | --- |
The following exhibits are furnished herewith.
| Exhibit 99.1 | Press Release, dated May 2, 2023, announcing the Company’s financial results for the quarter ended March 31, 2023. |
|---|---|
| Exhibit 99.2 | The Hanover Insurance Group, Inc. Unaudited Financial Supplement for the period ended March 31, 2023. |
| Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
Exhibit Index
| Exhibit 99.1 | Press Release, dated May 2, 2023, announcing the Company’s financial results for the quarter ended March 31, 2023. |
|---|---|
| Exhibit 99.2 | The Hanover Insurance Group, Inc. Unaudited Financial Supplement for the period ended March 31, 2023. |
| Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| The Hanover Insurance Group, Inc.<br><br>(Registrant) | ||
|---|---|---|
| Date: May 2, 2023 | By: | /s/ Jeffrey M. Farber |
| Jeffrey M. Farber | ||
| Executive Vice President and<br><br>Chief Financial Officer |
EX-99
Exhibit 99.1
The Hanover Reports First Quarter Results
First Quarter Highlights
• Combined ratio of 104.4%; combined ratio, excluding catastrophes(1), of 91.7%
• Catastrophe losses of $175.0 million, or 12.7 points of the combined ratio, driven by severe freeze events in the Northeast and Midwest, as well as widespread wind and tornadic activity across the U.S.
• Net premiums written increase of 8.3%*, with contributions from each segment
• Renewal price change(2) of 11.5% in Core Commercial, 12.6% in Specialty, as well as 12.7% in Personal Lines, driven by homeowners renewal price change of 18.9%
• Rate increases(2) of 7.8% in Core Commercial, 7.4% in Specialty and 7.6% in Personal Lines
• Current accident year loss and loss adjustment expense (LAE) ratio, excluding catastrophes(3), of 61.2%, was generally in line with the company’s expectation for the first quarter of 2023
• Net investment income of $78.7 million, up 2.3% from the prior-year quarter, driven by higher bond reinvestment rates and the continued investment of operational cashflows, partially offset by lower partnership income
• Book value per share of $66.89, up 2.0% from December 31, 2022, primarily driven by an increase in the fair value of fixed maturity investments
WORCESTER, Mass., May 2, 2023 - The Hanover Insurance Group, Inc. (NYSE: THG) today reported a net loss of $12.0 million, or $(0.34) per basic share, in the first quarter of 2023, compared to net income of $104.9 million, or $2.90 per diluted share, in the prior-year quarter. Operating income(4) was $4.6 million, or $0.13 per diluted share, in the first quarter of 2023, compared to $117.7 million, or $3.26 per diluted share, in the prior-year quarter. The difference between net loss and operating income in the first quarter of 2023 was primarily due to losses on intent to sell fixed income securities and a decrease in the fair value of equity securities during the period.
“The drastic catastrophe losses sustained by the industry in the first quarter reaffirm our efforts to mitigate the impact of very volatile weather,” said John C. Roche, president and chief executive officer at The Hanover. “In particular, we are taking steps to address the significant negative impact of winter and severe convective storms through refined underwriting, increased pricing, and enhanced loss prevention actions. We expect these and other measures should enable us to effectively manage our mix and impact of weather on our results, consistent with our success in managing catastrophe exposure over the past decade.”
*Unless otherwise stated, net premiums written growth and other growth comparisons are to the same period of the prior year
(1) See information about this and other non-GAAP measures and definitions used throughout this press release on the final pages of this document.
The Hanover Insurance Group, Inc. may also be referred to as “The Hanover” or “the company” interchangeably throughout this press release.
“Our underlying results in the first quarter reflect strong performance across our Specialty, Core Commercial, and Personal Lines segments, with robust price increases across our book helping to drive top-line growth and advance our margin recapture plan,” said Roche. “In the quarter, we increased Personal Lines pricing by 12.7%, up 2.6 points over the fourth quarter, with strong retention. We achieved Core Commercial pricing of 11.5%, as we further increased both insured values and rate. We continue to see substantial opportunity to grow and expand our Specialty segment and are again very pleased with the exceptional performance in this business in the quarter, which delivered a combined ratio of 89.9% and printed a renewal price change of 12.6%, including 16.8% in property offerings. With the ongoing support of our deep agency relationships and talented team, we continue to have confidence in our ability to deliver superior returns to our valued shareholders.”
“We are pleased to have generated a first quarter combined ratio, excluding catastrophes(1), of 91.7%, in line with our expectations,” said Jeffrey M. Farber, executive vice president and chief financial officer at The Hanover. “Additionally, we achieved a first quarter expense ratio(5) of 30.7%, keeping us on track to achieve our target for the full year 2023. Despite recent turbulence in the financial markets, our confidence in the strength of our investment portfolio is bolstered by its high quality and effective diversification. Furthermore, we expect the current high interest rate environment to provide a meaningful, accumulating benefit to investment income, thus enabling us to reinvest at attractive market yields. We are fully committed to being strong stewards of our capital and we remain focused on the ongoing execution of our long-term strategic and business priorities.”
| Three months ended | |||||
|---|---|---|---|---|---|
| March 31 | |||||
| ( in millions, except per share data) | 2023 | 2022 | |||
| Net premiums written | 1,421.5 | $ | 1,312.3 | ||
| Growth | 8.3 | % | 9.7 | % | |
| Net premiums earned | 1,380.0 | $ | 1,263.8 | ||
| Current accident year loss and LAE ratio, excluding catastrophes(3) | 61.2 | % | 59.2 | % | |
| Prior-year development ratio | (0.2) | % | (0.5) | % | |
| Catastrophe ratio | 12.7 | % | 3.6 | % | |
| Expense ratio | 30.7 | % | 31.1 | % | |
| Combined ratio | 104.4 | % | 93.4 | % | |
| Combined ratio, excluding catastrophes | 91.7 | % | 89.8 | % | |
| Current accident year combined ratio,excluding catastrophes(1) | 91.9 | % | 90.3 | % | |
| Net income (loss) | (12.0) | $ | 104.9 | ||
| per diluted (basic) share | (0.34) | 2.90 | |||
| Operating income | 4.6 | 117.7 | |||
| per diluted share | 0.13 | 3.26 | |||
| Book value per share | 66.89 | $ | 79.53 | ||
| Ending shares outstanding (in millions) | 35.7 | 35.6 |
All values are in US Dollars.
First Quarter Operating Highlights
Core Commercial
Core Commercial operating income before income taxes was $11.2 million in the first quarter of 2023, compared to $67.5 million in the first quarter of 2022. The Core Commercial combined ratio was 104.7%, compared to 93.0% in the prior-year quarter. Catastrophe losses in the first quarter of 2023 were $63.9 million, or 12.6 points of the combined ratio, compared to $19.7 million, or 4.1 points, in the prior-year quarter.
First quarter 2023 results included net unfavorable prior-year reserve development, excluding catastrophes, of $3.5 million, or 0.7 points. This compared to net favorable prior-year reserve development, excluding catastrophes, of $6.4 million, or 1.3 points, in the prior-year quarter.
Core Commercial current accident year combined ratio, excluding catastrophes, increased 1.2 points to 91.4% in the first quarter of 2023, from 90.2% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, of 58.5%, increased 1.1 points from the prior-year quarter, primarily driven by higher property loss severity in commercial auto. However, the Core Commercial underlying loss ratio was in line with the company’s expectations for the first quarter of 2023.
Net premiums written were $565.3 million in the quarter, up 7.3% from the prior-year quarter, driven by growth of 9.9% in small commercial and 4.3% in middle market. In the first quarter, Core Commercial renewal price increases averaged 11.5%, while average rate increases were 7.8%.
The following table summarizes premiums and the components of the combined ratio for Core Commercial:
| Three months ended | |||||
|---|---|---|---|---|---|
| March 31 | |||||
| ( in millions) | 2023 | 2022 | |||
| Net premiums written | 565.3 | $ | 526.6 | ||
| Growth | 7.3 | % | 9.6 | % | |
| Net premiums earned | 507.4 | 474.7 | |||
| Operating income before income taxes | 11.2 | 67.5 | |||
| Loss and LAE ratio | 71.8 | % | 60.2 | % | |
| Expense ratio | 32.9 | % | 32.8 | % | |
| Combined ratio | 104.7 | % | 93.0 | % | |
| Prior-year development ratio | 0.7 | % | (1.3) | % | |
| Catastrophe ratio | 12.6 | % | 4.1 | % | |
| Combined ratio, excluding catastrophes | 92.1 | % | 88.9 | % | |
| Current accident year combined ratio, excluding catastrophes | 91.4 | % | 90.2 | % |
All values are in US Dollars.
Specialty
Specialty operating income before income taxes was $48.3 million in the first quarter of 2023, compared to $50.0 million in the first quarter of 2022. The Specialty combined ratio was 89.9%, compared to 87.7% in the prior-year quarter. Catastrophe losses in the first quarter of 2023 were $21.5 million, or 6.9 points of the combined ratio, compared to $7.6 million, or 2.7 points, in the prior-year quarter.
First quarter 2023 results included net favorable prior-year reserve development, excluding catastrophes, of $18.1 million, or 5.8 points, driven primarily by lower-than-expected losses in claims-made management liability lines, and to a lesser extent, healthcare and surety. This compared to net favorable prior-year reserve development, excluding catastrophes, of $13.2 million, or 4.7 points, in the prior-year quarter.
Specialty current accident year combined ratio, excluding catastrophes, decreased 0.9 points to 88.8% in the first quarter of 2023, from 89.7% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, decreased by 0.8 points to 53.5%, primarily driven by lower-than-expected losses in marine, as well as the benefit of rate increases earning in.
Net premiums written were $324.3 million in the quarter, up 7.1% from the prior-year quarter, driven primarily by renewal price change. In the first quarter, Specialty renewal price increases averaged 12.6%, while average rate increases were 7.4%.
The following table summarizes premiums and the components of the combined ratio for Specialty:
| Three months ended | |||||
|---|---|---|---|---|---|
| March 31 | |||||
| ( in millions) | 2023 | 2022 | |||
| Net premiums written | 324.3 | $ | 302.8 | ||
| Growth | 7.1 | % | 9.4 | % | |
| Net premiums earned | 311.7 | 283.8 | |||
| Operating income before income taxes | 48.3 | 50.0 | |||
| Loss and LAE ratio | 54.6 | % | 52.3 | % | |
| Expense ratio | 35.3 | % | 35.4 | % | |
| Combined ratio | 89.9 | % | 87.7 | % | |
| Prior-year development ratio | (5.8) | % | (4.7) | % | |
| Catastrophe ratio | 6.9 | % | 2.7 | % | |
| Combined ratio, excluding catastrophes | 83.0 | % | 85.0 | % | |
| Current accident year combined ratio, excluding catastrophes | 88.8 | % | 89.7 | % |
All values are in US Dollars.
Personal Lines
Personal Lines operating loss before income taxes was $46.6 million in the first quarter of 2023, compared to operating income before income taxes of $36.3 million in the first quarter of 2022. The Personal Lines combined ratio was 112.2%, compared to 97.1% in the prior-year quarter. Catastrophe losses in the first quarter of 2023 were $89.6 million, or 16.0 points of the combined ratio, compared to $18.2 million, or 3.6 points of the combined ratio, in the prior-year quarter.
First quarter 2023 results included net unfavorable prior-year reserve development of $11.6 million, or 2.1 points, driven primarily by personal auto, which was impacted by higher-than-expected loss activity in property damage coverage, including delayed reporting of third-party claims in the second half of 2022. This compared to net unfavorable prior-year reserve development, excluding catastrophes, of $13.6 million, or 2.7 points, in the first quarter of 2022, primarily driven by the company’s homeowners business.
Personal Lines current accident year combined ratio, excluding catastrophe losses, increased 3.3 points to 94.1% in the first quarter of 2023, from 90.8% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, increased 4.4 points to 68.0%, driven by inflationary pressure on personal auto and homeowners property lines, as well as higher loss frequency in personal auto as compared to the relatively low level of claims experienced in the first quarter of 2022. Relative to the company’s expectations, the underlying loss ratio in Personal Lines was approximately one point higher, primarily reflecting the higher cost of parts and labor in auto, as well as elevated large fire losses in home.
The expense ratio decreased by 1.1 points to 26.1% in the first quarter of 2023, compared to the prior-year quarter, primarily attributable to fixed cost leverage from premium growth and lower performance-based agency compensation.
Net premiums written were $531.9 million in the quarter, up 10.1% from the prior-year quarter, driven primarily by renewal price changes. In the first quarter, Personal Lines renewal price increases averaged 12.7%, while average rate increases were 7.6%.
The following table summarizes premiums and components of the combined ratio for Personal Lines:
| Three months ended | |||||
|---|---|---|---|---|---|
| March 31 | |||||
| ( in millions) | 2023 | 2022 | |||
| Net premiums written | 531.9 | $ | 482.9 | ||
| Growth | 10.1 | % | 10.1 | % | |
| Net premiums earned | 560.9 | 505.3 | |||
| Operating (loss) income before income taxes | (46.6) | 36.3 | |||
| Loss and LAE ratio | 86.1 | % | 69.9 | % | |
| Expense ratio | 26.1 | % | 27.2 | % | |
| Combined ratio | 112.2 | % | 97.1 | % | |
| Prior-year development ratio | 2.1 | % | 2.7 | % | |
| Catastrophe ratio | 16.0 | % | 3.6 | % | |
| Combined ratio, excluding catastrophes | 96.2 | % | 93.5 | % | |
| Current accident year combined ratio, excluding catastrophes | 94.1 | % | 90.8 | % |
All values are in US Dollars.
Investments
Net investment income was $78.7 million for the first quarter of 2023, above the prior-year quarter by $1.8 million, primarily due to higher bond reinvestment rates and the continued investment of operational cashflows, partially offset by lower income from partnerships. Total pre-tax earned yield on the investment portfolio for the first quarter 2023 was 3.34%, down from 3.52% in the prior-year quarter, primarily due to lower partnership income. The average pre-tax earned yield on fixed maturities was 3.27% for the first quarter of 2023, up from 2.95% in the first quarter of 2022.
Net realized and unrealized investment losses before income taxes recognized in earnings were $23.0 million in the first quarter of 2023, primarily driven by losses on intent to sell fixed income securities and credit-related impairments of $14.8 million, and a decrease in the fair value of equity securities of $7.1 million. This compared to net realized and unrealized investment losses before taxes recognized in earnings of $15.9 million in the first quarter of 2022.
The company held $8.9 billion in cash and invested assets on March 31, 2023. Fixed maturities and cash represented approximately 88% of the investment portfolio. Approximately 95% of the company’s fixed maturity portfolio is rated investment grade. Net unrealized losses on the fixed maturity portfolio as of March 31, 2023, were $695.0 million before income taxes, an increase in fair value of $117.7 million since December 31, 2022.
Shareholders’ Equity and Capital Actions
On March 31, 2023, book value per share was $66.89, up 2.0% from December 31, 2022, primarily driven by an increase in the fair value of fixed maturity investments. During the quarter, the company did not repurchase any shares of common stock in the open market. The company has approximately $330 million of remaining capacity under its existing share repurchase program.
On March 31, 2023, statutory capital and surplus was $2.7 billion, in line with December 31, 2022.
Earnings Conference Call
The company will host a conference call to discuss its first quarter results on Wednesday, May 3, at 10:30 a.m. E.T. A PowerPoint slide presentation will accompany the prepared remarks and has been posted on The Hanover’s website. Interested investors and others can listen to the call and access the presentation through The Hanover's website, located in the “Investors” section at www.hanover.com. Investors may access the conference call by dialing 1-844-413-3975 in the U.S. and 1-412-317-5458 internationally. Webcast participants should go to the website 15 minutes early to register, download and install any necessary audio software. A re-broadcast of the conference call will be available on The Hanover’s website approximately two hours after the call.
About The Hanover
The Hanover Insurance Group, Inc. is the holding company for several property and casualty insurance companies, which together constitute one of the largest insurance businesses in the United States. The company provides exceptional insurance solutions through a select group of independent agents and brokers. Together with its agent partners, the company offers standard and specialized insurance protection for small and mid-sized businesses, as well as for homes, automobiles, and other personal items. For more information, please visit hanover.com.
Contact Information
| Investors:<br><br>Oksana Lukasheva<br><br>olukasheva@hanover.com<br><br>1-508-525-6081 | Media:<br><br>Michael F. Buckley<br><br>mibuckley@hanover.com<br><br>1-508-855-3099 | Emily P. Trevallion<br><br>etrevallion@hanover.com<br><br>1-508-855-3263 |
|---|
Definition of Reported Segments
Continuing operations include four operating segments: Core Commercial, Specialty, Personal Lines and Other. The Core Commercial segment includes commercial multiple peril, commercial automobile, workers’ compensation and other commercial lines coverages provided to small and mid-sized businesses. The Specialty segment includes four divisions of business: professional and executive lines, specialty property and casualty, marine, and surety and other. Specialty P&C includes coverages such as program business (provides commercial insurance to markets with specialized coverage or risk management needs related to groups of similar businesses), specialty industrial and commercial property, excess and surplus lines, and specialty general liability coverage. The Personal Lines segment markets automobile, homeowners and ancillary coverages to individuals and families. The “Other” segment includes Opus Investment Management, Inc., which provides investment management services to institutions, pension funds and other organizations, and the operations of the holding company, as well as a block of run-off voluntary assumed property and casualty pools business in which the company has not actively participated since 1995, and run-off direct asbestos and environmental business.
Financial Supplement
The Hanover's first quarter news release and financial supplement are available in the “Investors” section of the company’s website at hanover.com.
| The Hanover Insurance Group, Inc. | |||
|---|---|---|---|
| Consolidated Statements of Income | Three months ended | ||
| March 31 | |||
| ( in millions) | 2023 | 2022 | |
| Revenues | |||
| Premiums earned | 1,380.0 | $ | 1,263.8 |
| Net investment income | 78.7 | 76.9 | |
| Net realized and unrealized investment gains (losses): | |||
| Net realized gains (losses) from sales and other | (1.1) | 3.0 | |
| Net change in fair value of equity securities | (7.1) | (18.0) | |
| Impairments on investments: | |||
| Credit-related impairments | (4.5) | (0.6) | |
| Losses on intent to sell securities | (10.3) | (0.3) | |
| (14.8) | (0.9) | ||
| Total net realized and unrealized investment losses | (23.0) | (15.9) | |
| Fees and other income | 8.0 | 5.9 | |
| Total revenues | 1,443.7 | 1,330.7 | |
| Losses and expenses | |||
| Losses and loss adjustment expenses | 1,017.4 | 787.5 | |
| Amortization of deferred acquisition costs | 288.8 | 262.9 | |
| Interest expense | 8.5 | 8.5 | |
| Other operating expenses | 146.5 | 141.8 | |
| Total losses and expenses | 1,461.2 | 1,200.7 | |
| Income (loss) from continuing operations before income taxes | (17.5) | 130.0 | |
| Income tax expense (benefit) | (5.5) | 24.7 | |
| Income (loss) from continuing operations | (12.0) | 105.3 | |
| Discontinued operations (net of taxes): | |||
| Loss from discontinued life businesses | - | (0.4) | |
| Net income (loss) | (12.0) | $ | 104.9 |
All values are in US Dollars.
Condensed Financial Statements and Reconciliations
| The Hanover Insurance Group, Inc. | |||
|---|---|---|---|
| Condensed Consolidated Balance Sheets | |||
| March 31 | December 31 | ||
| ( in millions) | 2023 | 2022 | |
| Assets | |||
| Total investments | 8,708.0 | $ | 8,509.8 |
| Cash and cash equivalents | 181.5 | 305.0 | |
| Premiums and accounts receivable, net | 1,600.4 | 1,601.4 | |
| Reinsurance recoverable on paid and unpaid losses and unearned premiums | 1,972.7 | 1,964.5 | |
| Other assets | 1,541.7 | 1,530.3 | |
| Assets of discontinued businesses | 87.4 | 84.1 | |
| Total assets | 14,091.7 | $ | 13,995.1 |
| Liabilities | |||
| Loss and loss adjustment expense reserves | 7,143.4 | $ | 7,012.6 |
| Unearned premiums | 2,969.2 | 2,954.2 | |
| Debt | 782.6 | 782.4 | |
| Other liabilities | 694.8 | 802.0 | |
| Liabilities of discontinued businesses | 112.7 | 110.2 | |
| Total liabilities | 11,702.7 | 11,661.4 | |
| Total shareholders’ equity | 2,389.0 | 2,333.7 | |
| Total liabilities and shareholders’ equity | 14,091.7 | $ | 13,995.1 |
All values are in US Dollars.
The following is a reconciliation from operating income to net income (loss)(6):
| The Hanover Insurance Group, Inc. | ||||||
|---|---|---|---|---|---|---|
| ($ in millions, except per share data) | Amount | Per Share* | Amount | Per Share (Diluted) | ||
| Operating income (loss) | ||||||
| Core Commercial | ||||||
| Specialty | ||||||
| Personal Lines | ||||||
| Other | ||||||
| Total | ||||||
| Interest expense | ||||||
| Operating income before income taxes | $ | 0.13 | $ | 4.04 | ||
| Income tax expense on operating income | - | (0.78) | ||||
| Operating income after income taxes | 0.13 | 3.26 | ||||
| Non-operating items: | ||||||
| Net realized gains (losses) from sales and other | (0.03) | 0.08 | ||||
| Net change in fair value of equity securities | (0.20) | (0.50) | ||||
| Impairments on investments: | ||||||
| Credit-related impairments | (0.13) | (0.01) | ||||
| Losses on intent to sell securities | (0.29) | (0.01) | ||||
| (0.42) | (0.02) | |||||
| Other non-operating items | 0.02 | - | ||||
| Income tax benefit on non-operating items | 0.16 | 0.09 | ||||
| Income (loss) from continuing operations,<br><br>net of taxes | (0.34) | 2.91 | ||||
| Discontinued operations (net of taxes): | ||||||
| Loss from discontinued life businesses | - | (0.01) | ||||
| Net income (loss) | $ | (0.34) | $ | 2.90 | ||
| Dilutive weighted average shares outstanding | 36.1 | 36.1 | ||||
| Basic weighted average shares outstanding | 35.6 | 35.5 |
All values are in US Dollars.
* Operating income metrics are calculated using diluted shares outstanding; non-operating items, loss from continuing operations, net of taxes and net loss metrics are calculated using basic shares outstanding due to antidilution.
Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements
Certain statements in this document and comments made by management may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as, but not limited to, “believes,” “anticipates,” “expects,” “may,” “projects,” “projections,” “plan,” “likely,” “potential,” “targeted,” “forecasts,” “should,” “could,” “continue,” “outlook,” “guidance,” “modeling,” “target profitability”, “target margins”, “moving forward”, “confident”, “will”, and other similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. The company cautions investors that any such forward-looking statements are estimates, beliefs, expectations and/or projections that involve significant judgment, and that historical results, trends and forward-looking statements are not guarantees and are not necessarily indicative of future performance. Actual results could differ materially from those anticipated.
These statements include, but are not limited to, the company’s statements regarding:
• The company’s outlook and its ability to achieve components or the sum of the respective period guidance on its future results of operations including: the combined ratio, excluding catastrophe losses; catastrophe losses; net investment income; growth of net premiums written and/or net premiums earned in total or by line of business; expense ratio; operating return on equity; interest rate assumptions, renewal price change, rate, and/or the effective tax rate;
• The company’s ability to deliver on expectations set forth related to target margins, target returns and/or return to target profitability in total or by line of business;
• The company’s ability to deliver on its long-term targets, including but not limited to, return on equity;
• The lingering impacts of the global pandemic (“Pandemic”) and general economic and sociopolitical conditions on the company’s operating and financial results, including, but not limited to, the impact on the company’s investment portfolio, changes in claims frequency as a result of fluctuations in economic activity, and/or severity from higher cost of repairs due to, among other things, supply chain disruptions and inflation;
• Uses of capital for share repurchases, special or ordinary cash dividends, business investments or growth, or otherwise, and outstanding shares in future periods as a result of various share repurchase mechanisms, capital management framework, especially in the current environment, and overall comfort with liquidity and capital levels;
• Variability of catastrophe losses due to risk concentrations, changes in weather patterns including climate change, and severe weather including wildfires, hurricanes, terrorism, civil unrest, winter storms, tornados, riots or other events, as well as the complexity in estimating losses from large catastrophe events due to delayed reporting of the existence, nature or extent of losses or where “demand surge,” regulatory assessments, litigation, coverage and technical complexities or other factors may significantly impact the ultimate amount of such losses;
• Current accident year losses and loss selections (“picks”), excluding catastrophes, and prior accident year loss reserve development patterns, particularly in complex “longer-tail” liability lines, as well as the inherent variability in short-tail property and non-catastrophe weather losses;
• Changes in frequency and loss severity trends in Core Commercial, Specialty and/or Personal Lines;
• Ability to manage the impact of inflationary pressures, as a result of and following the Pandemic, global market disruptions, geopolitical events or otherwise, including, but not limited to, supply chain disruptions, labor shortages, and increases in cost of goods, services, labor, and materials;
• The confidence or concern that the current level of reserves is adequate and/or sufficient for future claim payments, whether due to losses that have been incurred but not reported, circumstances that delay the reporting of losses, business complexity, adverse judgments or developments with respect to case reserves, the difficulties and uncertainties inherent in projecting future losses from historical data, changes in replacement and medical costs, as well as complexities related to the Pandemic, including legislative, regulatory or judicial actions that expand the intended scope of coverages, or other factors;
• Characterization of some business as being “more profitable” in light of inherent uncertainty of ultimate losses incurred, especially for “longer-tail” liability businesses;
• Efforts to manage expenses, including the company’s long-term expense savings targets, while allocating capital to business investment, which is at management’s discretion;
• Risks and uncertainties with respect to our ability to retain profitable policies in force and attract profitable policies and to increase rates commensurate with, or in excess of, loss trends;
• Mix improvement, underwriting initiatives, coverage restrictions, non-renewals, and pricing segmentation, among others, to grow businesses believed to be more profitable or reduce premiums attributable to products or lines of business believed to be less profitable; balance rate actions and retention; offset long-term and/or short-term loss trends due to increased frequency; increased “social inflation” from a more litigious environment and higher average cost of resolution, increased property replacement costs, and/or social movements;
• The ability to generate growth in targeted segments through new agency appointments; rate increases (as a result of its market position, agency relationships or otherwise), retention improvements or new business; expansion into new geographies; new product introductions; or otherwise; and
• Investment returns and the effect of macro-economic interest rate trends and overall security yields, including the macro-economic impact of the Pandemic, inflationary pressures and corresponding governmental and/or central banking initiatives taken in response thereto, and geopolitical circumstances on new money yields and overall investment returns.
Additional Risks and Uncertainties
Investors are further cautioned and should consider the risks and uncertainties in the company’s business that may affect such estimates and future performance that are discussed in the company’s most recently filed reports on Form 10-K and Form 10-Q and other documents filed by The Hanover Insurance Group, Inc. with the Securities and Exchange Commission (“SEC”) and that are also available at www.hanover.com under “Investors.” These risks and uncertainties include, but are not limited to:
• Changes in regulatory, legislative, economic, market and political conditions, particularly with respect to rates, the use of data, technology and artificial intelligence, policy terms and conditions, payment flexibility, and regions where the company has geographical concentrations;
• Heightened volatility, fluctuations in interest rates (which have a significant impact on the market value of our investment portfolio and thus our book value), inflationary pressures, default rates and other factors that affect investment returns from the investment portfolio;
• Recessionary economic periods that may inhibit the company’s ability to increase pricing or renew business, or otherwise impact the company’s results, and which may be accompanied by higher claims activity in certain lines;
• Data security and privacy incidents, including, but not limited to, those resulting from a malicious cyber security attack on the company or its business partners and service providers, or intrusions into the company’s systems, including cloud-based data storage, or data sources;
• Adverse claims experience, including those driven by large or increased frequency and/or severity of catastrophe events, including those related to wildfires, winter storms, hurricanes, terrorism, civil unrest, riots or other severe weather;
• The limitations and assumptions used to model non-catastrophe property and casualty losses (particularly with respect to products with longer-tail liability lines, such as casualty and bodily injury claims, or involving emerging issues related to losses incurred as the result of new lines of business, such as cyber or financial institutions coverage, or reinsurance contracts and reinsurance recoverables), leading to potential adverse development of loss and loss adjustment expense reserves;
• Changes in weather patterns and severity, whether as a result of global climate change, or otherwise, causing a higher level of losses from weather events to persist;
• Litigation and the possibility of adverse judicial decisions, including those which expand policy coverage beyond its intended scope and/or award “bad faith” or other non-contractual damages, and the impact of “social inflation” affecting judicial awards and settlements;
• The ability to increase or maintain insurance rates in line with anticipated loss costs and/or governmental action, including mandates by state departments of insurance to either raise or lower rates, or provide credits or return premium to insureds;
• Investment impairments, which may be affected by, among other things, the company’s ability and willingness to hold investment assets until they recover in value, as well as credit and interest rate risk, and general financial and economic conditions;
• Disruption of the independent agency channel, including the impact of competition and consolidation in the industry and among agents and brokers;
• Competition, particularly from competitors who have resource and capability advantages;
• The global macroeconomic environment, including actions taken in response to the Pandemic, inflation, recessionary effects, global trade disputes, war, energy market disruptions, equity price risk, and interest rate fluctuations, which, among other things, could result in reductions in market values of fixed maturities and other investments;
• Adverse state and federal regulation, legislative and/or regulatory actions (including significant revisions to Michigan’s automobile personal injury protection system and related litigation, and various regulations, orders and proposed legislation related to business interruption and workers’ compensation coverages, premium grace periods and returns, and rate actions);
• Financial ratings actions, in particular, downgrades to the company’s ratings;
• Operational and technology risks and evolving technological and product innovation, including risks created by remote work environments, and the risk of cyber-security attacks on or breaches of the company’s systems and/or impacting our outsourcing relationships and third-party operations, or resulting in claim payments (including from products not intended to provide cyber coverage);
• Uncertainties in estimating indemnification liabilities recorded in conjunction with obligations undertaken in connection with the sale of various businesses and discontinued operations;
• The ability to collect from reinsurers, reinsurance pricing, reinsurance terms and conditions, and the performance of the run-off voluntary property and casualty pools business (including those in the Other segment or in discontinued operations); and,
• Continuing risks and uncertainties associated with the impact of the Pandemic and related general economic conditions
Investors should not place undue reliance on forward-looking statements, which speak only as of the date they are made and should understand the risks and uncertainties inherent in or particular to the company’s business. The company does not undertake the responsibility to update or revise such forward-looking statements, except as required by law.
Non-GAAP Financial Measures
As discussed on page 38 of the company’s Annual Report on Form 10-K for the year ended December 31, 2022, the company uses non-GAAP financial measures as important measures of its operating performance, including operating income (loss), operating income (loss) before interest expense and income taxes, operating income (loss) per share, and components of the combined ratio, both excluding and/or including catastrophe losses, prior-year reserve development and the expense ratio. Management believes these non-GAAP financial measures are important indications of the company’s operating performance. The definition of other non-GAAP financial measures and terms can be found in the 2022 Annual Report on pages 63-66.
Operating income (loss) and operating income (loss) per share are non-GAAP measures. They are defined as net income (loss) excluding the after-tax impact of net realized and unrealized investment gains (losses), gains and/or losses on the repayment of debt, other non-operating items, and results from discontinued operations. Net realized and unrealized investment gains (losses), which include changes in the fair value of equity securities still held, are excluded for purposes of presenting operating income, as they are, to a certain extent, determined by interest rates, financial markets and the timing of sales. Operating income also excludes net gains and losses from disposals of businesses, gains and losses related to the repayment of debt, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes, and certain other items. Operating income is the sum of the segment income from: Core Commercial, Specialty, Personal Lines, and Other, after interest expense and income taxes. In reference to one of the company’s four segments, “operating income (loss)” is the segment income (loss) before both interest expense and income taxes. The company also uses “operating income per share” (which is after both interest expense and income taxes). Operating income per share is calculated by dividing operating income by the weighted average number of diluted shares of common stock. Operating loss per share is calculated by dividing operating loss by the weighted average number of basic shares of common stock due to antidilution. The company believes that metrics of operating income (loss) and operating income (loss) in relation to its four segments provide investors with a valuable measure of the performance of the company’s continuing businesses because they highlight the portion of net income (loss) attributable to the core operations of the business. Income (loss) from continuing operations is the most directly comparable GAAP measure for operating income (loss) (and operating income before income taxes) and measures of operating income that exclude the effects of catastrophe losses and/or prior-year reserve development should not be misconstrued as substitutes for income (loss) from continuing operations or net income (loss) determined in accordance with GAAP. A reconciliation of operating income (loss) to income (loss) from continuing operations and net income (loss) for the relevant periods is included on page 10 of this news release and in the Financial Supplement.
The company may provide measures of operating income and combined ratios that exclude the impact of catastrophe losses (which in all respects include prior accident year catastrophe loss development). A catastrophe is a severe loss, resulting from natural or manmade events, including, but is not limited to, hurricanes, tornados, windstorms, earthquakes, hail, severe winter weather, freeze events, fire, explosions, civil unrest and terrorism. Due to the unique characteristics of each catastrophe loss, there is an inherent inability to reasonably estimate the timing or loss amount in advance. The company believes a separate discussion excluding the effects of catastrophe losses is meaningful to understand the underlying trends and variability of earnings, loss and combined ratio results, among others.
Prior accident year reserve development, which can either be favorable or unfavorable, represents changes in the company’s estimate of costs related to claims from prior years. Calendar year loss and loss adjustment expense (“LAE”) ratios determined in accordance with GAAP, excluding prior accident year reserve development, are sometimes referred to as “current accident year loss ratios.” The company believes a discussion of loss and combined ratios, excluding prior accident year reserve development, is helpful since it provides insight into both estimates of current accident year results and the accuracy of prior-year estimates.
The loss and combined ratios in accordance with GAAP are the most directly comparable GAAP measures for the loss and combined ratios calculated excluding the effects of catastrophe losses and/or prior-year reserve development. The presentation of loss and combined ratios calculated excluding the effects of catastrophe losses and/or prior-year reserve development should not be misconstrued as substitutes for the loss and/or combined ratios determined in accordance with GAAP.
Endnotes
(1) Combined ratio, excluding catastrophes, and current accident year combined ratio, excluding catastrophes, are non-GAAP measures. The combined ratio (which includes catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. This and other non-GAAP measures are used throughout this document. See the disclosure on the use of this and other non-GAAP measures under the heading “Forward-Looking Statements and Non-GAAP Financial Measures.” A reconciliation of the GAAP combined ratio to the combined ratio, excluding catastrophes, and to the current accident year combined ratio, excluding catastrophes, is shown below.
| Three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | ||||||||
| Core Commercial | Specialty | Personal Lines | Total | |||||
| Total combined ratio (GAAP) | 104.7 | % | 89.9 | % | 112.2 | % | 104.4 | % |
| Less: Catastrophe ratio | 12.6 | % | 6.9 | % | 16.0 | % | 12.7 | % |
| Combined ratio, excluding catastrophes (non-GAAP) | 92.1 | % | 83.0 | % | 96.2 | % | 91.7 | % |
| Less: Prior-year reserve development ratio | 0.7 | % | (5.8) | % | 2.1 | % | (0.2) | % |
| Current accident year combined ratio, excluding catastrophes (non-GAAP) | 91.4 | % | 88.8 | % | 94.1 | % | 91.9 | % |
| March 31, 2022 | ||||||||
| Total combined ratio (GAAP) | 93.0 | % | 87.7 | % | 97.1 | % | 93.4 | % |
| Less: Catastrophe ratio | 4.1 | % | 2.7 | % | 3.6 | % | 3.6 | % |
| Combined ratio, excluding catastrophes (non-GAAP) | 88.9 | % | 85.0 | % | 93.5 | % | 89.8 | % |
| Less: Prior-year reserve development ratio | (1.3) | % | (4.7) | % | 2.7 | % | (0.5) | % |
| Current accident year combined ratio, excluding catastrophes (non-GAAP) | 90.2 | % | 89.7 | % | 90.8 | % | 90.3 | % |
(2) Renewal price changes in Core Commercial and Specialty represent the average change in premium on renewed policies caused by the estimated net effect of base rate changes, discretionary pricing, specific inflationary changes or changes in policy level exposure or insured risks. Rate increases in Core Commercial and Specialty represent the average change in premium on renewed policies caused by the base rate changes, discretionary pricing, and inflation, excluding the impact of changes in policy level exposure or insured risks. Renewal price change in Personal Lines represents the average change in premium on policies charged at renewal caused by the net effects of filed rate, inflation adjustments or other changes in policy level exposure or insured risks, regardless of whether or not the policies are retained for the duration of their contractual terms. Rate change in Personal Lines is the estimated cumulative premium effect of approved rate actions applied to policies at renewal, regardless of whether or not policies are actually renewed. Accordingly, rate changes do not represent actual increases or decreases realized by the company. Personal Lines rate changes do not include inflation or changes in policy level exposure or insured risks.
(3) Current accident year loss and LAE ratio, excluding catastrophe losses, is a non-GAAP measure, which is equal to the loss and LAE ratio (“loss ratio”), excluding prior-year reserve development and catastrophe losses. The loss ratio (which includes losses, LAE, catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. A reconciliation of the GAAP loss ratio to the current accident year loss ratio, excluding catastrophe losses, is shown in the following table.
| Three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | ||||||||
| Core Commercial | Specialty | Personal<br><br>Lines | Total | |||||
| Total loss and LAE ratio | 71.8 | % | 54.6 | % | 86.1 | % | 73.7 | % |
| Less: | ||||||||
| Prior-year reserve development ratio | 0.7 | % | (5.8) | % | 2.1 | % | (0.2) | % |
| Catastrophe ratio | 12.6 | % | 6.9 | % | 16.0 | % | 12.7 | % |
| Current accident year loss and LAE ratio, excluding catastrophes | 58.5 | % | 53.5 | % | 68.0 | % | 61.2 | % |
| March 31, 2022 | ||||||||
| Total loss and LAE ratio | 60.2 | % | 52.3 | % | 69.9 | % | 62.3 | % |
| Less: | ||||||||
| Prior-year reserve development ratio | (1.3) | % | (4.7) | % | 2.7 | % | (0.5) | % |
| Catastrophe ratio | 4.1 | % | 2.7 | % | 3.6 | % | 3.6 | % |
| Current accident year loss and LAE ratio, excluding catastrophes | 57.4 | % | 54.3 | % | 63.6 | % | 59.2 | % |
(4) Operating income (loss) and operating income (loss) per diluted share are non-GAAP measures. Operating income (loss) before income taxes, as referenced in the results of the business segments, is defined as, with respect to such segment, operating income (loss) before interest expense and income taxes. The reconciliation of operating income (loss) and operating income (loss) per diluted share to the closest GAAP measures, income (loss) from continuing operations and income (loss) from continuing operations per diluted (basic) share, respectively, is provided on the preceding pages of this news release.
(5) Here, and later in this document, the expense ratio is reduced by installment and other fee revenues for purposes of the ratio calculation.
(6) The separate financial information of each operating segment is presented consistent with the way results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Management evaluates the results of the aforementioned operating segments without consideration of interest expense on debt and on a pre-tax basis.
EX-99
Exhibit 99.2
FINANCIAL SUPPLEMENT FIRST QUARTER 2023
| THE HANOVER INSURANCE GROUP | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| FINANCIAL SUPPLEMENT | |||||||||
| TABLE OF CONTENTS | |||||||||
| Segment Descriptions.................................................................................................... | 1 | ||||||||
| Financial Highlights......................................................................................................... | 2 | ||||||||
| Consolidated Financial Statements | |||||||||
| Income Statements............................................................................................................. | 3 | ||||||||
| Balance Sheets................................................................................................................... | 4 | ||||||||
| Pre-tax Operating Results and Related Metrics | |||||||||
| Consolidated....................................................................................................................... | 5-6 | ||||||||
| Core Commercial............................................................................................................... | 7-8 | ||||||||
| Specialty.............................................................................................................................. | 9-10 | ||||||||
| Personal Lines.................................................................................................................... | 11-13 | ||||||||
| Investments | |||||||||
| Net Investment Income and Yields..................................................................................... | 14 | ||||||||
| Investment Portfolio............................................................................................................. | 15 | ||||||||
| Credit Quality and Duration of Fixed Maturities............................................................... | 16 | ||||||||
| Top 25 Corporate and Municipal Fixed Maturity Holdings............................................. | 17 | ||||||||
| Reconciliation of Operating Income to Net Income (Loss)................................... | 18 | ||||||||
| Other Information | |||||||||
| Non-GAAP Financial Measures........................................................................................ | 19 | ||||||||
| Premium Related Metric Definitions................................................................................. | 20 | ||||||||
| Corporate Information......................................................................................................... | 21 | ||||||||
| Market and Dividend Information...................................................................................... | 21 | ||||||||
| Financial Strength and Debt Ratings................................................................................ | 21 | ||||||||
| THE HANOVER INSURANCE GROUP | |||||||||
| --- | --- | --- | |||||||
| BASIS OF PRESENTATION | |||||||||
| SEGMENT DESCRIPTIONS | |||||||||
| CORE COMMERCIAL | |||||||||
| Sub-segment | Customer and business type | Primary lines of business | |||||||
| Small Commercial | Coverage to small businesses, with annual premiums of $50,000 or less; <br>Products are tailored to specific industry segments as needed. | ● Business owners' policy/commercial multiple peril<br>● Commercial automobile<br>● Workers' compensation<br>● Other (general liability, commercial umbrella, monoline <br> property) | |||||||
| Middle Market | Coverage to mid-sized businesses with annual premiums starting at $50,000, focusing on those between $50,000 and $250,000. Products are tailored to certain specific industry segments, including technology, manufacturing, human services, retail, real estate, among others. | ● Commercial multiple peril<br>● Commercial automobile<br>● Workers' compensation<br>● Other (general liability, commercial umbrella, monoline <br> property) | |||||||
| SPECIALTY | |||||||||
| Sub-segment | Customer and business type | Primary lines of business | |||||||
| Professional and Executive Lines | Coverage to small to mid-sized non-public companies, including lawyer, engineer, accountant, and various other professional and advisory firms including healthcare; provide protection for directors, officers and employees against actual or alleged errors, negligence or bad faith, employment practices. | ● Professional liability<br>● Management liability<br>● Fidelity and crime<br>● Other property and liability lines for healthcare firms | |||||||
| Specialty Property & Casualty | Program business - coverage to markets with specialty or risk management needs related to groups of similar businesses; <br>Hanover Specialty Industrial (HSI) - coverage to small and medium chemical, paint, solvent and other manufacturers and distributors; <br>Excess & Surplus - non-admitted general liability and property coverage to risks outside of the appetite of standard commercial lines;<br>Specialty General Liability - admitted coverage for higher-hazard liability risks | ● Commercial multiple peril<br>● Commercial automobile<br>● Workers' compensation<br>● Other (general liability, commercial umbrella, monoline <br> property) | |||||||
| Marine | Includes coverage for inland and ocean marine, and insures against physical losses to property, such as contractor's equipment, builders' risk and goods in transit. Also covers jewelers block, fine art and other valuables. | ● Inland/ocean marine<br>● Ancillary lines of business written through marine agents | |||||||
| Surety and Other | Provides coverage for construction and other firms, as well as sole proprietors in the event of claims for non-performance or non-payment, and commercial surety coverage related to fiduciary or regulatory obligations. | ● Bond | |||||||
| PERSONAL LINES | |||||||||
| Sub-segment | Customer and business type | Primary lines of business | |||||||
| Personal Automobile | Includes coverage for individuals against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured's vehicle, and property damage to other vehicles and other property. | ● Personal automobile | |||||||
| Homeowners and Other | Includes coverage for individuals for losses to their residences and personal property, such as those caused by fire, wind, hail, water damage (excluding flood), theft and vandalism, and against third-party liability claims. | ● Homeowners<br>● Personal umbrella<br>● Inland Marine (jewelry, art, etc.)<br>● Other (fire, personal watercraft, other miscellaneous) | |||||||
| OTHER | |||||||||
| Included in Other are Opus, which provides investment advisory services to affiliates and also manages assets for unaffiliated institutions such as insurance companies, retirement plans and foundations; earnings on holding company assets; holding company and other expenses; and our run-off voluntary assumed property and casualty pools and run-off direct asbestos and environmental businesses. | |||||||||
| THE HANOVER INSURANCE GROUP | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| FINANCIAL HIGHLIGHTS | |||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | |||||
| (In millions, except earnings per share) | 2022 | 2022 | 2022 | 2022 (1) | 2023 (2) | ||||
| PREMIUMS | |||||||||
| Gross premiums written | 1,470.1 | $ | 1,473.9 | $ | 1,660.3 | $ | 1,476.5 | $ | 1,577.3 |
| Net premiums written | 1,312.3 | 1,332.8 | 1,505.4 | 1,326.0 | 1,421.5 | ||||
| Net premiums earned | 1,263.8 | 1,293.8 | 1,331.2 | 1,363.5 | 1,380.0 | ||||
| EARNINGS | |||||||||
| Operating income (loss) before interest and taxes | 154.4 | $ | 115.0 | $ | 53.9 | $ | (38.2) | $ | 13.2 |
| Operating income (loss) after taxes | 117.7 | 83.9 | 35.7 | (37.4) | 4.6 | ||||
| Income (loss) from continuing operations | 105.3 | 22.8 | 0.6 | (11.9) | (12.0) | ||||
| Net income (loss) (3) | 104.9 | 22.7 | 0.5 | (12.1) | (12.0) | ||||
| PER SHARE DATA (DILUTED) | |||||||||
| Operating income (loss) after taxes | 3.26 | $ | 2.32 | $ | 0.99 | $ | (1.05) | $ | 0.13 |
| Income (loss) from continuing operations | 2.91 | 0.63 | 0.02 | (0.33) | (0.34) | ||||
| Net income (loss) (3) | 2.90 | 0.63 | 0.01 | (0.34) | (0.34) | ||||
| Dilutive weighted average shares outstanding | 36.1 | 36.1 | 36.1 | 36.1 | 36.1 | ||||
| Basic weighted average shares outstanding | 35.5 | 35.6 | 35.6 | 35.6 | 35.6 | ||||
| BALANCE SHEET | |||||||||
| March 31 | June 30 | September 30 | December 31 | March 31 | |||||
| (In millions, except per share data) | 2022 | 2022 | 2022 | 2022 | 2023 | ||||
| Total assets (3) | 13,847.7 | $ | 13,599.7 | $ | 13,743.6 | $ | 13,995.1 | $ | 14,091.7 |
| Total loss and loss adjustment expense reserves | 6,512.2 | 6,606.9 | 6,774.0 | 7,012.6 | 7,143.4 | ||||
| Total shareholders' equity (3) | 2,830.9 | 2,576.2 | 2,304.9 | 2,333.7 | 2,389.0 | ||||
| Total shareholders' equity, excluding net unrealized appreciation | |||||||||
| (depreciation) on fixed maturity investments, net of tax (3) | 3,032.0 | 3,035.5 | 3,007.2 | 2,971.1 | 2,934.2 | ||||
| Property and Casualty Companies | |||||||||
| Statutory surplus | 2,809.6 | $ | 2,693.5 | $ | 2,681.8 | $ | 2,690.4 | $ | 2,674.5 |
| Premium to surplus ratio | 1.82:1 | 1.94:1 | 2.00:1 | 2.03:1 | 2.09:1 | ||||
| Book value per share (3) | 79.53 | $ | 72.33 | $ | 64.84 | $ | 65.61 | $ | 66.89 |
| Book value per share, excluding net unrealized appreciation | |||||||||
| (depreciation) on fixed maturity investments, net of tax (3) | 85.17 | $ | 85.22 | $ | 84.60 | $ | 83.53 | $ | 82.16 |
| Tangible book value per share (total book value excluding goodwill | |||||||||
| and intangibles) (3) | 74.04 | $ | 66.85 | $ | 59.36 | $ | 60.13 | $ | 61.44 |
| Shares outstanding | 35.6 | 35.6 | 35.6 | 35.6 | 35.7 | ||||
| Total debt/equity (3) | 27.6 % | 30.4 % | 33.9 % | 33.5 % | 32.8 % | ||||
| Total debt/total capital (3) | 21.6 % | 23.3 % | 25.3 % | 25.1 % | 24.7 % | ||||
| (1) Operating loss after income taxes, loss from continuing operations, net of taxes, and net loss metrics are calculated using basic shares outstanding due to antidilution. | |||||||||
| (2) Operating income metrics are calculated using diluted shares outstanding; loss from continuing operations, net of taxes and net loss metrics are calculated using basic shares outstanding due to antidilution. | |||||||||
| (3) Effective January 1, 2023, in accordance with the implementation of Accounting Standards Updated 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, the Company has revised the prior period metrics, which includes a benefit of approximately 4.1 million to the January 1, 2022 beginning balance of retained earnings. |
All values are in US Dollars.
| THE HANOVER INSURANCE GROUP | |||||
|---|---|---|---|---|---|
| CONSOLIDATED INCOME STATEMENTS | |||||
| Three Months ended March 31 | |||||
| (In millions) | 2023 | 2022 | % Change | ||
| Premiums earned | $ | 1,380.0 | $ | 1,263.8 | 9.2 |
| Net investment income | 78.7 | 76.9 | 2.3 | ||
| Net realized and unrealized investment gains (losses): | |||||
| Net realized gains (losses) from sales and other | (1.1) | 3.0 | N/M | ||
| Net change in fair value of equity securities | (7.1) | (18.0) | (60.6) | ||
| Impairments on investments: | |||||
| Credit-related impairments | (4.5) | (0.6) | N/M | ||
| Losses on intent to sell securities | (10.3) | (0.3) | N/M | ||
| (14.8) | (0.9) | N/M | |||
| Total net realized and unrealized investment losses | (23.0) | (15.9) | 44.7 | ||
| Fees and other income | 8.0 | 5.9 | 35.6 | ||
| Total revenues | 1,443.7 | 1,330.7 | 8.5 | ||
| LOSSES AND EXPENSES | |||||
| Losses and loss adjustment expenses | 1,017.4 | 787.5 | 29.2 | ||
| Amortization of deferred acquisition costs | 288.8 | 262.9 | 9.9 | ||
| Interest expense | 8.5 | 8.5 | - | ||
| Other operating expenses | 146.5 | 141.8 | 3.3 | ||
| Total losses and expenses | 1,461.2 | 1,200.7 | 21.7 | ||
| Income (loss) from continuing operations before income taxes | (17.5) | 130.0 | N/M | ||
| Income tax expense (benefit) | (5.5) | 24.7 | N/M | ||
| Income (loss) from continuing operations | (12.0) | 105.3 | N/M | ||
| Discontinued operations (net of taxes): | |||||
| Loss from discontinued life businesses | - | (0.4) | N/M | ||
| Net income (loss) | $ | (12.0) | $ | 104.9 | N/M |
| THE HANOVER INSURANCE GROUP | |||||
| --- | --- | --- | --- | --- | |
| CONSOLIDATED BALANCE SHEETS | |||||
| March 31 | December 31 | ||||
| (In millions, except per share data) | 2023 | 2022 | % Change | ||
| ASSETS | |||||
| Investments: | |||||
| Fixed maturities, at fair value (amortized cost of 8,373.2 and 8,294.5) | 7,678.2 | $ | 7,481.8 | 2.6 | |
| Equity securities, at fair value | 234.8 | 241.9 | (2.9) | ||
| Other investments | 795.0 | 786.1 | 1.1 | ||
| Total investments | 8,708.0 | 8,509.8 | 2.3 | ||
| Cash and cash equivalents | 181.5 | 305.0 | (40.5) | ||
| Accrued investment income | 53.9 | 54.5 | (1.1) | ||
| Premiums and accounts receivable, net | 1,600.4 | 1,601.4 | (0.1) | ||
| Reinsurance recoverable on paid and unpaid losses and unearned premiums | 1,972.7 | 1,964.5 | 0.4 | ||
| Deferred acquisition costs | 597.8 | 604.8 | (1.2) | ||
| Deferred income tax asset | 181.0 | 199.2 | (9.1) | ||
| Goodwill | 178.8 | 178.8 | - | ||
| Other assets | 530.2 | 493.0 | 7.5 | ||
| Assets of discontinued businesses | 87.4 | 84.1 | 3.9 | ||
| Total assets | 14,091.7 | $ | 13,995.1 | 0.7 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| LIABILITIES | |||||
| Loss and loss adjustment expense reserves | 7,143.4 | $ | 7,012.6 | 1.9 | |
| Unearned premiums | 2,969.2 | 2,954.2 | 0.5 | ||
| Expenses and taxes payable | 618.6 | 731.7 | (15.5) | ||
| Reinsurance premiums payable | 76.2 | 70.3 | 8.4 | ||
| Debt | 782.6 | 782.4 | - | ||
| Liabilities of discontinued businesses | 112.7 | 110.2 | 2.3 | ||
| Total liabilities | 11,702.7 | 11,661.4 | 0.4 | ||
| SHAREHOLDERS' EQUITY | |||||
| Preferred stock, par value 0.01 per share; | |||||
| 20.0 million shares authorized; none issued | - | - | - | ||
| Common stock, par value 0.01 per share; 300.0 million shares | |||||
| authorized; 60.5 million shares issued | 0.6 | 0.6 | - | ||
| Additional paid-in capital | 1,913.6 | 1,913.1 | - | ||
| Accumulated other comprehensive loss | (607.7) | (701.5) | 13.8 | ||
| Retained earnings | 2,951.6 | 2,992.9 | (1.4) | ||
| Treasury stock at cost (24.8 million and 24.9 million shares) | (1,869.1) | (1,871.4) | (0.1) | ||
| Total shareholders' equity | 2,389.0 | 2,333.7 | 2.4 | ||
| Total liabilities and shareholders' equity | 14,091.7 | $ | 13,995.1 | 0.7 |
All values are in US Dollars.
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS | ||||||||||||||||||||
| CONSOLIDATED | ||||||||||||||||||||
| Three Months ended March 31 | ||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
| Core | Personal | Core | Personal | |||||||||||||||||
| (In millions, except percentage data) | Commercial | Specialty | Lines | Other | Total | Commercial | Specialty | Lines | Other | Total | ||||||||||
| Gross premiums written | $ | 634.1 | $ | 392.5 | $ | 550.7 | $ | - | $ | 1,577.3 | $ | 591.9 | $ | 379.1 | $ | 499.1 | $ | - | $ | 1,470.1 |
| - | - | - | - | |||||||||||||||||
| Net premiums written | $ | 565.3 | $ | 324.3 | $ | 531.9 | $ | - | $ | 1,421.5 | $ | 526.6 | $ | 302.8 | $ | 482.9 | $ | - | $ | 1,312.3 |
| - | - | - | - | |||||||||||||||||
| Net premiums earned | $ | 507.4 | $ | 311.7 | $ | 560.9 | $ | - | $ | 1,380.0 | $ | 474.7 | $ | 283.8 | $ | 505.3 | $ | - | $ | 1,263.8 |
| - | - | - | - | |||||||||||||||||
| Losses and LAE: | ||||||||||||||||||||
| - | - | - | - | |||||||||||||||||
| Current year, excluding catastrophe losses | 296.9 | 166.8 | 381.7 | - | 845.4 | 272.6 | 154.0 | 321.4 | - | 748.0 | ||||||||||
| - | - | - | ||||||||||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | 3.5 | (18.1) | 11.6 | - | (3.0) | (6.4) | (13.2) | 13.6 | - | (6.0) | ||||||||||
| - | - | - | ||||||||||||||||||
| Current year catastrophe losses | 64.6 | 25.8 | 84.6 | - | 175.0 | 19.7 | 7.6 | 18.2 | - | 45.5 | ||||||||||
| - | - | - | ||||||||||||||||||
| Prior year unfavorable (favorable) catastrophe development | (0.7) | (4.3) | 5.0 | - | - | - | - | - | - | - | ||||||||||
| - | - | - | ||||||||||||||||||
| Total losses and LAE | 364.3 | 170.2 | 482.9 | - | 1,017.4 | 285.9 | 148.4 | 353.2 | - | 787.5 | ||||||||||
| - | - | - | ||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses | 167.9 | 110.8 | 150.2 | - | 428.9 | 156.6 | 101.5 | 139.8 | - | 397.9 | ||||||||||
| - | - | - | ||||||||||||||||||
| GAAP underwriting profit (loss) | (24.8) | 30.7 | (72.2) | - | (66.3) | 32.2 | 33.9 | 12.3 | - | 78.4 | ||||||||||
| - | - | - | ||||||||||||||||||
| Net investment income | 36.1 | 17.0 | 22.6 | 3.0 | 78.7 | 35.4 | 16.2 | 22.6 | 2.7 | 76.9 | ||||||||||
| - | - | - | ||||||||||||||||||
| Other income | 1.2 | 1.8 | 4.3 | 0.7 | 8.0 | 1.0 | 1.3 | 2.8 | 0.8 | 5.9 | ||||||||||
| - | - | |||||||||||||||||||
| Other operating expenses | (1.3) | (1.2) | (1.3) | (3.4) | (7.2) | (1.1) | (1.4) | (1.4) | (2.9) | (6.8) | ||||||||||
| - | - | - | ||||||||||||||||||
| Operating income (loss) before income taxes | $ | 11.2 | $ | 48.3 | $ | (46.6) | $ | 0.3 | $ | 13.2 | $ | 67.5 | $ | 50.0 | $ | 36.3 | $ | 0.6 | $ | 154.4 |
| Loss and LAE ratio: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 58.5 % | 53.5 % | 68.0 % | N/M | 61.2 % | 57.4 % | 54.3 % | 63.6 % | N/M | 59.2 % | ||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | 0.7 % | (5.8)% | 2.1 % | N/M | (0.2)% | (1.3)% | (4.7)% | 2.7 % | N/M | (0.5)% | ||||||||||
| Current year catastrophe losses | 12.7 % | 8.3 % | 15.1 % | N/M | 12.7 % | 4.1 % | 2.7 % | 3.6 % | N/M | 3.6 % | ||||||||||
| Prior year unfavorable (favorable) catastrophe development | (0.1)% | (1.4)% | 0.9 % | N/M | - | - | - | - | N/M | - | ||||||||||
| Total loss and LAE ratio | 71.8 % | 54.6 % | 86.1 % | N/M | 73.7 % | 60.2 % | 52.3 % | 69.9 % | N/M | 62.3 % | ||||||||||
| Expense ratio | 32.9 % | 35.3 % | 26.1 % | N/M | 30.7 % | 32.8 % | 35.4 % | 27.2 % | N/M | 31.1 % | ||||||||||
| Combined ratio | 104.7 % | 89.9 % | 112.2 % | N/M | 104.4 % | 93.0 % | 87.7 % | 97.1 % | N/M | 93.4 % | ||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| GAAP UNDERWRITING INFORMATION AND RELATED RATIOS | ||||||||||||||||||||
| CONSOLIDATED | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except percentage data) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Gross premiums written | $ | 1,470.1 | $ | 1,473.9 | $ | 1,660.3 | $ | 1,476.5 | $ | 1,577.3 | ||||||||||
| Net premiums written | $ | 1,312.3 | $ | 1,332.8 | $ | 1,505.4 | $ | 1,326.0 | $ | 1,421.5 | ||||||||||
| Net premiums earned | $ | 1,263.8 | $ | 1,293.8 | $ | 1,331.2 | $ | 1,363.5 | $ | 1,380.0 | ||||||||||
| . | ||||||||||||||||||||
| Losses and LAE: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 748.0 | 777.3 | 853.5 | 862.6 | 845.4 | |||||||||||||||
| Prior year favorable development, excluding catastrophe losses | (6.0) | (9.2) | (4.0) | (1.4) | (3.0) | |||||||||||||||
| Current year catastrophe losses | 45.5 | 89.4 | 90.1 | 189.6 | 175.0 | |||||||||||||||
| Prior year favorable catastrophe development | - | (12.0) | - | - | - | |||||||||||||||
| Total losses and LAE | 787.5 | 845.5 | 939.6 | 1,050.8 | 1,017.4 | |||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses | 397.9 | 403.6 | 410.0 | 426.8 | 428.9 | |||||||||||||||
| GAAP underwriting profit (loss) | 78.4 | 44.7 | (18.4) | (114.1) | (66.3) | |||||||||||||||
| Net investment income | 76.9 | 70.5 | 73.0 | 75.9 | 78.7 | |||||||||||||||
| - | ||||||||||||||||||||
| Other income | 5.9 | 6.5 | 7.0 | 7.1 | 8.0 | |||||||||||||||
| - | ||||||||||||||||||||
| Other operating expenses | (6.8) | (6.7) | (7.7) | (7.1) | (7.2) | |||||||||||||||
| - | ||||||||||||||||||||
| Operating income (loss) before income taxes | $ | 154.4 | $ | 115.0 | $ | 53.9 | $ | (38.2) | $ | 13.2 | ||||||||||
| Loss and LAE ratio: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 59.2 % | 60.1 % | 64.1 % | 63.3 % | 61.2 % | |||||||||||||||
| Prior year favorable development, excluding catastrophe losses | (0.5)% | (0.7)% | (0.3)% | (0.1)% | (0.2)% | |||||||||||||||
| Current year catastrophe losses | 3.6 % | 6.9 % | 6.8 % | 13.9 % | 12.7 % | |||||||||||||||
| Prior year favorable catastrophe development | - | (0.9)% | - | - | - | |||||||||||||||
| Total loss and LAE ratio | 62.3 % | 65.4 % | 70.6 % | 77.1 % | 73.7 % | |||||||||||||||
| Expense ratio | 31.1 % | 30.8 % | 30.4 % | 30.9 % | 30.7 % | |||||||||||||||
| Combined ratio | 93.4 % | 96.2 % | 101.0 % | 108.0 % | 104.4 % | |||||||||||||||
| Combined ratio, excluding catastrophe losses | 89.8 % | 90.2 % | 94.2 % | 94.1 % | 91.7 % | |||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses | 90.3 % | 90.9 % | 94.5 % | 94.2 % | 91.9 % | |||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS | ||||||||||||||||||||
| CORE COMMERCIAL | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except percentage data) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Gross premiums written | $ | 591.9 | $ | 525.6 | $ | 638.7 | $ | 520.1 | $ | 634.1 | ||||||||||
| Net premiums written | $ | 526.6 | $ | 454.2 | $ | 565.9 | $ | 453.2 | $ | 565.3 | ||||||||||
| Net premiums earned | $ | 474.7 | $ | 480.1 | $ | 492.7 | $ | 503.0 | $ | 507.4 | ||||||||||
| Losses and LAE: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 272.6 | 273.6 | 304.2 | 302.7 | 296.9 | |||||||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | (6.4) | (2.8) | 1.3 | (2.4) | 3.5 | |||||||||||||||
| Current year catastrophe losses | 19.7 | 28.7 | 34.1 | 128.5 | 64.6 | |||||||||||||||
| Prior year favorable catastrophe development | - | (10.9) | (1.4) | (5.0) | (0.7) | |||||||||||||||
| Total losses and LAE | 285.9 | 288.6 | 338.2 | 423.8 | 364.3 | |||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses | 156.6 | 157.2 | 162.2 | 166.7 | 167.9 | |||||||||||||||
| GAAP underwriting profit (loss) | 32.2 | 34.3 | (7.7) | (87.5) | (24.8) | |||||||||||||||
| 0 | ||||||||||||||||||||
| Net investment income | 35.4 | 32.6 | 33.4 | 34.8 | 36.1 | |||||||||||||||
| 0 | ||||||||||||||||||||
| Other income | 1.0 | 0.9 | 1.0 | 1.1 | 1.2 | |||||||||||||||
| 0 | ||||||||||||||||||||
| Other operating expenses | (1.1) | (0.9) | (1.5) | (1.1) | (1.3) | |||||||||||||||
| 0 | ||||||||||||||||||||
| Operating income (loss) before income taxes | $ | 67.5 | $ | 66.9 | $ | 25.2 | $ | (52.7) | $ | 11.2 | ||||||||||
| - | ||||||||||||||||||||
| Loss and LAE ratio: | ||||||||||||||||||||
| - | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 57.4 % | 57.0 % | 61.7 % | 60.2 % | 58.5 % | |||||||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | (1.3)% | (0.6)% | 0.3 % | (0.5)% | 0.7 % | |||||||||||||||
| Current year catastrophe losses | 4.1 % | 6.0 % | 6.9 % | 25.6 % | 12.7 % | |||||||||||||||
| Prior year favorable catastrophe development | - | (2.3)% | (0.3)% | (1.0)% | (0.1)% | |||||||||||||||
| Total loss and LAE ratio | 60.2 % | 60.1 % | 68.6 % | 84.3 % | 71.8 % | |||||||||||||||
| Expense ratio | 32.8 % | 32.5 % | 32.7 % | 32.9 % | 32.9 % | |||||||||||||||
| Combined ratio | 93.0 % | 92.6 % | 101.3 % | 117.2 % | 104.7 % | |||||||||||||||
| Combined ratio, excluding catastrophe losses | 88.9 % | 88.9 % | 94.7 % | 92.6 % | 92.1 % | |||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses | 90.2 % | 89.5 % | 94.4 % | 93.1 % | 91.4 % | |||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| PREMIUMS WRITTEN AND RELATED METRICS | ||||||||||||||||||||
| CORE COMMERCIAL | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except percentage data) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Written Premium | ||||||||||||||||||||
| Gross | $ | 591.9 | $ | 525.6 | $ | 638.7 | $ | 520.1 | $ | 634.1 | ||||||||||
| Ceded | (65.3) | (71.4) | (72.8) | (66.9) | (68.8) | |||||||||||||||
| Net | $ | 526.6 | $ | 454.2 | $ | 565.9 | $ | 453.2 | $ | 565.3 | ||||||||||
| Growth | 9.6% | 7.7% | 5.9% | 5.9% | 7.3% | |||||||||||||||
| Net premiums written by segment | ||||||||||||||||||||
| Small Commercial | $ | 283.7 | $ | 272.8 | $ | 273.4 | $ | 260.1 | $ | 311.9 | ||||||||||
| Middle Market | 242.9 | 181.4 | 292.5 | 193.1 | 253.4 | |||||||||||||||
| Total | $ | 526.6 | $ | 454.2 | $ | 565.9 | $ | 453.2 | $ | 565.3 | ||||||||||
| - | ||||||||||||||||||||
| Net premiums written by line of business | ||||||||||||||||||||
| Commercial Multiple Peril | $ | 256.0 | $ | 224.0 | $ | 300.2 | $ | 231.3 | $ | 277.8 | ||||||||||
| Commercial Automobile | 96.1 | 82.5 | 95.7 | 78.8 | 100.3 | |||||||||||||||
| Workers' Compensation | 113.0 | 92.6 | 98.2 | 91.0 | 123.2 | |||||||||||||||
| Other Core Commercial | 61.5 | 55.1 | 71.8 | 52.1 | 64.0 | |||||||||||||||
| Total | $ | 526.6 | $ | 454.2 | $ | 565.9 | $ | 453.2 | $ | 565.3 | ||||||||||
| Related Metrics | ||||||||||||||||||||
| Premium Retention | 86.2% | 84.2% | 85.6% | 85.0% | 84.0% | |||||||||||||||
| Renewal Price Change | 9.7% | 11.0% | 11.2% | 10.2% | 11.5% | |||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS | ||||||||||||||||||||
| SPECIALTY | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except percentage data) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Gross premiums written | $ | 379.1 | $ | 354.6 | $ | 392.3 | $ | 374.1 | $ | 392.5 | ||||||||||
| Net premiums written | $ | 302.8 | $ | 302.3 | $ | 329.1 | $ | 309.5 | $ | 324.3 | ||||||||||
| Net premiums earned | $ | 283.8 | $ | 293.5 | $ | 303.3 | $ | 308.4 | $ | 311.7 | ||||||||||
| Losses and LAE: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 154.0 | 153.5 | 162.3 | 158.8 | 166.8 | |||||||||||||||
| Prior year favorable development, excluding catastrophe losses | (13.2) | (1.2) | (5.1) | - | (18.1) | |||||||||||||||
| Current year catastrophe losses | 7.6 | 9.7 | 10.2 | 13.9 | 25.8 | |||||||||||||||
| Prior year favorable catastrophe development | - | (3.1) | (1.6) | (4.0) | (4.3) | |||||||||||||||
| Total losses and LAE | 148.4 | 158.9 | 165.8 | 168.7 | 170.2 | |||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses | 101.5 | 104.3 | 105.5 | 111.2 | 110.8 | |||||||||||||||
| GAAP underwriting profit | 33.9 | 30.3 | 32.0 | 28.5 | 30.7 | |||||||||||||||
| Net investment income | 16.2 | 14.8 | 15.2 | 15.9 | 17.0 | |||||||||||||||
| Other income | 1.3 | 1.5 | 1.4 | 1.2 | 1.8 | |||||||||||||||
| Other operating expenses | (1.4) | (1.4) | (1.7) | (1.7) | (1.2) | |||||||||||||||
| Operating income before income taxes | $ | 50.0 | $ | 45.2 | $ | 46.9 | $ | 43.9 | $ | 48.3 | ||||||||||
| Loss and LAE ratio: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 54.3% | 52.3 % | 53.6 % | 51.5 % | 53.5 % | |||||||||||||||
| Prior year favorable development, excluding catastrophe losses | (4.7)% | (0.4)% | (1.7)% | - | (5.8)% | |||||||||||||||
| Current year catastrophe losses | 2.7% | 3.3 % | 3.3 % | 4.5 % | 8.3 % | |||||||||||||||
| Prior year favorable catastrophe development | - | (1.1)% | (0.5)% | (1.3)% | (1.4)% | |||||||||||||||
| Total loss and LAE ratio | 52.3 % | 54.1 % | 54.7 % | 54.7 % | 54.6 % | |||||||||||||||
| - | ||||||||||||||||||||
| Expense ratio | 35.4 % | 35.3 % | 34.5 % | 35.8 % | 35.3 % | |||||||||||||||
| - | ||||||||||||||||||||
| Combined ratio | 87.7 % | 89.4 % | 89.2 % | 90.5 % | 89.9 % | |||||||||||||||
| Combined ratio, excluding catastrophe losses | 85.0 % | 87.2 % | 86.4 % | 87.3 % | 83.0% | |||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses | 89.7 % | 87.6 % | 88.1 % | 87.3 % | 88.8% | |||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| PREMIUMS WRITTEN AND RELATED METRICS | ||||||||||||||||||||
| SPECIALTY | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except percentage data) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Written Premiums | ||||||||||||||||||||
| Gross | $ | 379.1 | $ | 354.6 | $ | 392.3 | $ | 374.1 | $ | 392.5 | ||||||||||
| Ceded | (76.3) | (52.3) | (63.2) | (64.6) | (68.2) | |||||||||||||||
| Net | $ | 302.8 | $ | 302.3 | $ | 329.1 | $ | 309.5 | $ | 324.3 | ||||||||||
| Growth | 9.4% | 14.0% | 12.6% | 8.7% | 7.1% | |||||||||||||||
| Net premiums written by segment | ||||||||||||||||||||
| Professional and Executive Lines | $ | 111.0 | $ | 94.6 | $ | 105.8 | $ | 99.1 | $ | 111.0 | ||||||||||
| Specialty Property & Casualty | 90.4 | 98.5 | 102.4 | 110.8 | 101.7 | |||||||||||||||
| Marine | 84.3 | 91.2 | 100.3 | 84.4 | 94.1 | |||||||||||||||
| Surety and Other | 17.1 | 18.0 | 20.6 | 15.2 | 17.5 | |||||||||||||||
| Total | $ | 302.8 | $ | 302.3 | $ | 329.1 | $ | 309.5 | $ | 324.3 | ||||||||||
| Related Metrics | ||||||||||||||||||||
| Premium Retention | 84.2% | 83.5% | 82.6% | 83.1% | 82.5% | |||||||||||||||
| Renewal Price Change | 12.6% | 12.0% | 12.4% | 13.2% | 12.6% | |||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS | ||||||||||||||||||||
| PERSONAL LINES | ||||||||||||||||||||
| Three Months ended March 31 | ||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
| (In millions, except percentage data) | Auto | Home and Other | Total | Auto | Home and Other | Total | ||||||||||||||
| Net premiums written | $ | 323.0 | $ | 208.9 | $ | 531.9 | $ | 298.4 | $ | 184.5 | $ | 482.9 | ||||||||
| Net premiums earned | $ | 330.8 | $ | 230.1 | $ | 560.9 | $ | 307.7 | $ | 197.6 | $ | 505.3 | ||||||||
| - | ||||||||||||||||||||
| Losses and LAE: | ||||||||||||||||||||
| - | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 250.8 | 130.9 | 381.7 | 216.5 | 104.9 | 321.4 | ||||||||||||||
| - | ||||||||||||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | 7.9 | 3.7 | 11.6 | (0.2) | 13.8 | 13.6 | ||||||||||||||
| - | ||||||||||||||||||||
| Current year catastrophe losses | 3.9 | 80.7 | 84.6 | 0.4 | 17.8 | 18.2 | ||||||||||||||
| - | ||||||||||||||||||||
| Prior year unfavorable (favorable) catastrophe development | (0.2) | 5.2 | 5.0 | (0.4) | 0.4 | - | ||||||||||||||
| - | ||||||||||||||||||||
| Total losses and LAE | 262.4 | 220.5 | 482.9 | 216.3 | 136.9 | 353.2 | ||||||||||||||
| - | ||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses | 150.2 | 139.8 | ||||||||||||||||||
| - | ||||||||||||||||||||
| GAAP underwriting profit (loss) | (72.2) | 12.3 | ||||||||||||||||||
| - | ||||||||||||||||||||
| Net investment income | 22.6 | 22.6 | ||||||||||||||||||
| - | ||||||||||||||||||||
| Other income | 4.3 | 2.8 | ||||||||||||||||||
| - | ||||||||||||||||||||
| Other operating expenses | (1.3) | (1.4) | ||||||||||||||||||
| - | ||||||||||||||||||||
| Operating income (loss) before income taxes | $ | (46.6) | $ | 36.3 | ||||||||||||||||
| Loss and LAE ratio: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 75.8 % | 56.9 % | 68.0 % | 70.4% | 53.1 % | 63.6 % | ||||||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | 2.4 % | 1.6 % | 2.1 % | (0.1)% | 7.0 % | 2.7 % | ||||||||||||||
| Current year catastrophe losses | 1.2 % | 35.0 % | 15.1 % | 0.1 % | 9.0 % | 3.6 % | ||||||||||||||
| Prior year unfavorable (favorable) catastrophe development | (0.1)% | 2.3 % | 0.9 % | (0.1)% | 0.2 % | - | ||||||||||||||
| Total loss and LAE ratio | 79.3 % | 95.8 % | 86.1 % | 70.3 % | 69.3 % | 69.9 % | ||||||||||||||
| Expense ratio | 26.1 % | 27.2 % | ||||||||||||||||||
| Combined ratio | 112.2 % | 97.1 % | ||||||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| GAAP UNDERWRITING INFORMATION AND RELATED RATIOS | ||||||||||||||||||||
| PERSONAL LINES | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except percentage data) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Gross premiums written | $ | 499.1 | $ | 593.7 | $ | 629.3 | $ | 582.3 | $ | 550.7 | ||||||||||
| Net premiums written | $ | 482.9 | $ | 576.3 | $ | 610.4 | $ | 563.3 | $ | 531.9 | ||||||||||
| Net premiums earned | $ | 505.3 | $ | 520.2 | $ | 535.2 | $ | 552.1 | $ | 560.9 | ||||||||||
| Losses and LAE: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 321.4 | 350.2 | 387.0 | 401.1 | 381.7 | |||||||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | 13.6 | (5.2) | (0.2) | (0.2) | 11.6 | |||||||||||||||
| Current year catastrophe losses | 18.2 | 51.0 | 45.8 | 47.2 | 84.6 | |||||||||||||||
| Prior year unfavorable catastrophe development | - | 2.0 | 3.0 | 9.0 | 5.0 | |||||||||||||||
| - | ||||||||||||||||||||
| Total losses and LAE | 353.2 | 398.0 | 435.6 | 457.1 | 482.9 | |||||||||||||||
| - | ||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses | 139.8 | 142.1 | 142.3 | 148.9 | 150.2 | |||||||||||||||
| - | ||||||||||||||||||||
| GAAP underwriting profit (loss) | 12.3 | (19.9) | (42.7) | (53.9) | (72.2) | |||||||||||||||
| - | ||||||||||||||||||||
| Net investment income | 22.6 | 20.6 | 21.4 | 22.2 | 22.6 | |||||||||||||||
| Other income | 2.8 | 3.4 | 3.9 | 4.0 | 4.3 | |||||||||||||||
| Other operating expenses | (1.4) | (1.3) | (1.4) | (1.4) | (1.3) | |||||||||||||||
| Operating income (loss) before income taxes | $ | 36.3 | $ | 2.8 | $ | (18.8) | $ | (29.1) | $ | (46.6) | ||||||||||
| Loss and LAE ratio: | ||||||||||||||||||||
| Current year, excluding catastrophe losses | 63.6 % | 67.3 % | 72.3 % | 72.6 % | 68.0 % | |||||||||||||||
| 0 | ||||||||||||||||||||
| Prior year unfavorable (favorable) development, excluding catastrophe losses | 2.7 % | (1.0)% | - | - | 2.1 % | |||||||||||||||
| - | ||||||||||||||||||||
| Current year catastrophe losses | 3.6 % | 9.8 % | 8.5 % | 8.6 % | 15.1 % | |||||||||||||||
| - | ||||||||||||||||||||
| Prior year unfavorable catastrophe development | - | 0.4 % | 0.6 % | 1.6 % | 0.9 % | |||||||||||||||
| - | ||||||||||||||||||||
| Total loss and LAE ratio | 69.9 % | 76.5 % | 81.4 % | 82.8 % | 86.1 % | |||||||||||||||
| - | ||||||||||||||||||||
| Expense ratio | 27.2 % | 26.7 % | 25.9 % | 26.3 % | 26.1 % | |||||||||||||||
| 0 | ||||||||||||||||||||
| Combined ratio | 97.1 % | 103.2 % | 107.3 % | 109.1 % | 112.2 % | |||||||||||||||
| 0.1 | ||||||||||||||||||||
| Combined ratio, excluding catastrophe losses | 93.5 % | 93.0 % | 98.2 % | 98.9 % | 96.2 % | |||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses | 90.8 % | 94.0 % | 98.2 % | 98.9 % | 94.1 % | |||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| PREMIUMS WRITTEN AND RELATED METRICS | ||||||||||||||||||||
| PERSONAL LINES | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except percentage data) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Written Premiums | ||||||||||||||||||||
| Gross | $ | 499.1 | $ | 593.7 | $ | 629.3 | $ | 582.3 | $ | 550.7 | ||||||||||
| Ceded | (16.2) | (17.4) | (18.9) | (19.0) | (18.8) | |||||||||||||||
| Net | $ | 482.9 | $ | 576.3 | $ | 610.4 | $ | 563.3 | $ | 531.9 | ||||||||||
| Growth | 10.1% | 10.7% | 11.3% | 12.2% | 10.1% | |||||||||||||||
| Net premiums written by line of business | ||||||||||||||||||||
| Personal Automobile | $ | 298.4 | $ | 340.2 | $ | 354.0 | $ | 324.6 | $ | 323.0 | ||||||||||
| Homeowners and Other | 184.5 | 236.1 | 256.4 | 238.7 | 208.9 | |||||||||||||||
| Total | $ | 482.9 | $ | 576.3 | $ | 610.4 | $ | 563.3 | $ | 531.9 | ||||||||||
| Related Metrics | ||||||||||||||||||||
| Renewal Price Change | ||||||||||||||||||||
| Personal Automobile | 2.4% | 2.9% | 4.1% | 6.7% | 8.9% | |||||||||||||||
| Homeowners | 7.7% | 9.3% | 12.1% | 15.5% | 18.9% | |||||||||||||||
| Total (1) | 4.3% | 5.4% | 7.3% | 10.1% | 12.7% | |||||||||||||||
| Policy Retention | ||||||||||||||||||||
| Personal Automobile | 88.5% | 88.4% | 87.3% | 85.7% | 84.5% | |||||||||||||||
| Homeowners | 89.2% | 89.7% | 88.1% | 87.0% | 85.6% | |||||||||||||||
| Total (1) | 88.8% | 89.1% | 87.7% | 86.4% | 85.0% | |||||||||||||||
| PIF change from prior year period | ||||||||||||||||||||
| Personal Automobile | 8.0 % | 8.0% | 7.1% | 5.8% | 4.5% | |||||||||||||||
| Homeowners | 7.5 % | 7.6% | 6.8% | 5.6% | 4.6% | |||||||||||||||
| Total (1) | 7.8 % | 7.8% | 7.0% | 5.7% | 4.6% | |||||||||||||||
| (1) Related metrics exclude Other Personal Lines. | ||||||||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| NET INVESTMENT INCOME AND YIELDS | ||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
| (In millions, except yields) | 2022 | 2022 | 2022 | 2022 | 2023 | |||||||||||||||
| Net Investment Income | ||||||||||||||||||||
| Fixed maturities | $55.8 | $57.6 | $60.3 | $65.6 | $68.3 | |||||||||||||||
| Limited partnerships | 15.2 | 7.8 | 7.5 | 5.2 | 5.3 | |||||||||||||||
| Mortgage loans | 4.4 | 4.0 | 4.0 | 3.7 | 4.0 | |||||||||||||||
| Equity securities | 3.6 | 3.1 | 3.1 | 2.2 | 1.9 | |||||||||||||||
| Other investments | 0.8 | 0.8 | 1.0 | 2.0 | 2.5 | |||||||||||||||
| Investment expenses | (2.9) | (2.8) | (2.9) | (2.8) | (3.3) | |||||||||||||||
| Total | $76.9 | $70.5 | $73.0 | $75.9 | $78.7 | |||||||||||||||
| Pre-tax Yields | ||||||||||||||||||||
| Fixed maturities | 2.95% | 2.97% | 3.02% | 3.20% | 3.27% | |||||||||||||||
| Total | 3.52% | 3.19% | 3.21% | 3.26% | 3.34% | |||||||||||||||
| Pre-tax yields represent annualized net investment income for the period divided by the monthly average invested assets at amortized cost or cost, which excludes accumulated changes in fair value for fixed maturities and equity securities. | ||||||||||||||||||||
| THE HANOVER INSURANCE GROUP | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | |||||||||||||||
| INVESTMENT PORTFOLIO | ||||||||||||||||||||
| March 31, 2023 | ||||||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Change in | ||||||||||||||||||||
| Amortized | Net | Net | ||||||||||||||||||
| Cost | Fair Value / | % of | Unrealized | Unrealized | ||||||||||||||||
| Investment Type | or Cost (1) | Carry Value | Total | Loss | YTD | |||||||||||||||
| Fixed maturities: | ||||||||||||||||||||
| U.S. Treasury and government agencies | $484.0 | $432.9 | 4.9% | $(51.1) | $7.6 | |||||||||||||||
| Foreign government | 2.2 | 2.2 | - | - | 0.1 | |||||||||||||||
| Municipals: | ||||||||||||||||||||
| Taxable | 1,237.5 | 1,105.8 | 12.4% | (131.7) | 31.0 | |||||||||||||||
| Tax-exempt | 20.5 | 20.0 | 0.2% | (0.5) | 0.2 | |||||||||||||||
| Corporate: | ||||||||||||||||||||
| NAIC 1 | 1,599.3 | 1,506.8 | 16.9% | (92.5) | 14.6 | |||||||||||||||
| NAIC 2 | 2,077.5 | 1,898.3 | 21.4% | (179.2) | 32.2 | |||||||||||||||
| NAIC 3 and below | 384.1 | 374.8 | 4.2% | (9.3) | 6.6 | |||||||||||||||
| Total corporate | 4,060.9 | 3,779.9 | 42.5% | (281.0) | 53.4 | |||||||||||||||
| Asset-backed: | ||||||||||||||||||||
| Residential mortgage-backed | 1,278.0 | 1,153.1 | 13.0% | (124.9) | 16.6 | |||||||||||||||
| Commercial mortgage-backed | 925.9 | 842.5 | 9.5% | (83.4) | 4.3 | |||||||||||||||
| Other asset-backed | 364.2 | 341.8 | 3.9% | (22.4) | 4.5 | |||||||||||||||
| Total fixed maturities | 8,373.2 | 7,678.2 | 86.4% | (695.0) | 117.7 | |||||||||||||||
| Limited partnerships and other investments | 410.3 | 410.3 | 4.6% | - | - | |||||||||||||||
| Mortgage and other loans | 384.7 | 384.7 | 4.3% | - | - | |||||||||||||||
| Equity securities | 234.8 | 234.8 | 2.7% | - | - | |||||||||||||||
| Total investments | 9,403.0 | 8,708.0 | 98.0% | (695.0) | 117.7 | |||||||||||||||
| Cash and cash equivalents | 181.5 | 181.5 | 2.0% | - | - | |||||||||||||||
| Total | $9,584.5 | $8,889.5 | 100.0% | $(695.0) | $117.7 | |||||||||||||||
| (1) Net of allowance for credit losses of 9.6 million. |
All values are in US Dollars.
| THE HANOVER INSURANCE GROUP | ||||||||
|---|---|---|---|---|---|---|---|---|
| CREDIT QUALITY AND DURATION OF FIXED MATURITIES | ||||||||
| March 31, 2023 | ||||||||
| (In millions) | ||||||||
| CREDIT QUALITY OF FIXED MATURITIES | ||||||||
| Rating Agency | % of Total | |||||||
| NAIC Designation | Equivalent Designation | Fair Value | ||||||
| 1 | Aaa/Aa/A | 5,821.1 | 5,328.0 | 69.4 | % | |||
| 2 | Baa | 2,168.0 | 1,975.4 | 25.7 | % | |||
| 3 | Ba | 165.5 | 162.5 | 2.1 | % | |||
| 4 | B | 187.1 | 182.0 | 2.4 | % | |||
| 5 | Caa and lower | 14.9 | 14.5 | 0.2 | % | |||
| 6 | In or near default | 16.6 | 15.8 | 0.2 | % | |||
| Total fixed maturities | 8,373.2 | 7,678.2 | 100.0 | % | ||||
| DURATION OF FIXED MATURITIES | ||||||||
| % of Total | ||||||||
| Fair Value | ||||||||
| 1,773.9 | 1,739.7 | 22.7 | % | |||||
| 2,247.5 | 2,143.5 | 27.9 | % | |||||
| 2,075.6 | 1,906.1 | 24.8 | % | |||||
| 1,938.9 | 1,619.6 | 21.1 | % | |||||
| 217.3 | 174.8 | 2.3 | % | |||||
| 120.0 | 94.5 | 1.2 | % | |||||
| Total fixed maturities | 8,373.2 | 7,678.2 | 100.0 | % | ||||
| Weighted Average Duration | 4.2 | |||||||
| (1) Net of allowance for credit losses of 2.4 million. |
All values are in US Dollars.
| TOP 25 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | ||||||||
| (In millions, except percentage data) | ||||||||
| Issuer | Amortized Cost | Fair Value | As a Percent of Invested Assets | Ratings (1) | ||||
| Minnesota Housing Finance Agency | $45.9 | $40.3 | 0.45% | AAA | ||||
| Morgan Stanley | 35.9 | 33.4 | 0.38% | A- | ||||
| Colorado Housing & Finance Authority | 35.7 | 34.8 | 0.39% | AAA | ||||
| State of Ohio | 34.2 | 27.7 | 0.31% | AA+ | ||||
| Bank of New York Mellon | 32.2 | 30.9 | 0.35% | A | ||||
| Mitsubishi Financial Group | 31.1 | 29.4 | 0.33% | A- | ||||
| Citizens Financial Group | 30.9 | 26.7 | 0.30% | BBB+ | ||||
| Massachusetts School Building Authority | 30.8 | 25.7 | 0.29% | AA+ | ||||
| Capital One Financial | 29.9 | 26.7 | 0.30% | BBB | ||||
| US Bancorp | 28.9 | 27.4 | 0.31% | A | ||||
| JPMorgan Chase | 28.0 | 26.1 | 0.29% | A- | ||||
| Goldman Sachs | 28.0 | 25.7 | 0.29% | BBB+ | ||||
| State of Oregon | 27.2 | 22.9 | 0.26% | AA+ | ||||
| District of Columbia | 27.0 | 22.5 | 0.25% | AAA | ||||
| Westpac Banking | 27.0 | 25.5 | 0.29% | A | ||||
| Citigroup | 26.1 | 24.5 | 0.28% | BBB+ | ||||
| Truist Financial | 26.1 | 24.8 | 0.28% | A- | ||||
| CVS Health | 25.9 | 24.5 | 0.28% | BBB | ||||
| PNC Financial | 25.7 | 24.2 | 0.27% | A- | ||||
| Bank of America | 25.7 | 24.7 | 0.28% | A- | ||||
| California State University | 25.0 | 20.3 | 0.23% | AA- | ||||
| Charles Schwab | 24.6 | 22.2 | 0.25% | A | ||||
| UBS Group | 24.1 | 21.8 | 0.24% | A- | ||||
| Cigna | 23.6 | 21.6 | 0.24% | A- | ||||
| Huntington Bancshares | 23.1 | 20.8 | 0.23% | BBB+ | ||||
| Top 25 Corporate and Municipal | $722.6 | $655.1 | 7.37% | |||||
| (1) - Represents nationally recognized rating agency sources. | ||||||||
| THE HANOVER INSURANCE GROUP | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| RECONCILIATION OF OPERATING INCOME TO NET INCOME (LOSS) | ||||||||
| Three Months ended March 31 | ||||||||
| 2023 | 2022 | |||||||
| (In millions, except per share data) | $ | Per<br>Share (1) | $ | Per<br>Share (Diluted) | ||||
| OPERATING INCOME | ||||||||
| Core Commercial | $ | 11.2 | $ | 67.5 | ||||
| Specialty | 48.3 | 50.0 | ||||||
| Personal Lines | (46.6) | 36.3 | ||||||
| Other | 0.3 | 0.6 | ||||||
| Total | 13.2 | 154.4 | ||||||
| Interest expense | (8.5) | (8.5) | ||||||
| Operating income before income taxes | 4.7 | $ | 0.13 | 145.9 | $ | 4.04 | ||
| Income tax expense on operating income | (0.1) | - | (28.2) | (0.78) | ||||
| - | ||||||||
| Operating income after income taxes | 4.6 | 0.13 | 117.7 | 3.26 | ||||
| - | ||||||||
| Non-operating items: | ||||||||
| Net realized gains (losses) from sales and other | (1.1) | (0.03) | 3.0 | 0.08 | ||||
| Net change in fair value of equity securities | (7.1) | (0.20) | (18.0) | (0.50) | ||||
| Impairments on investments: | ||||||||
| Credit-related impairments | (4.5) | (0.13) | (0.6) | (0.01) | ||||
| Losses on intent to sell securities | (10.3) | (0.29) | (0.3) | (0.01) | ||||
| (14.8) | (0.42) | (0.9) | (0.02) | |||||
| Other non-operating items | 0.8 | 0.02 | - | - | ||||
| Income tax benefit on non-operating items | 5.6 | 0.16 | 3.5 | 0.09 | ||||
| Income (loss) from continuing operations, net of taxes | (12.0) | (0.34) | 105.3 | 2.91 | ||||
| - | ||||||||
| Discontinued operations (net of taxes): | - | |||||||
| - | ||||||||
| Loss from discontinued life businesses | - | - | (0.4) | (0.01) | ||||
| NET INCOME (LOSS) | $ | (12.0) | $ | (0.34) | $ | 104.9 | $ | 2.90 |
| (1) Operating income metrics are calculated using diluted shares outstanding; non-operating items, loss from continuing operations, net of taxes and net loss metrics are calculated using basic shares outstanding due to antidilution. | ||||||||
| THE HANOVER INSURANCE GROUP | ||||||||
| --- | ||||||||
| Non-GAAP Financial Measures | ||||||||
| The Hanover uses non-GAAP financial measures as important measures of the Company’s operating performance, which we believe provide investors with additional information regarding management’s evaluation of our results of operations and financial performance. The Company's non-GAAP measures include operating income (loss) before interest expense and income taxes, total operating income (loss) after income taxes, total operating income (loss) after income taxes per share, total book value per share, total book value per share excluding net unrealized gains and losses related to fixed maturity investments and market risk, net of tax, tangible book value per share and measures of operating income (loss) and combined ratios excluding catastrophe losses (catastrophe losses as discussed here and in all other measures include catastrophe loss development) and reserve development. | ||||||||
| Operating income before interest expense and income taxes is net income, excluding interest expense on debt, income taxes and net realized and unrealized investment gains and losses, which includes changes in the fair value of equity securities still held because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Operating income before interest expense and income taxes also excludes net gains and losses on disposals of businesses, discontinued operations, restructuring costs, the cumulative effect of accounting changes and certain other items. Operating income before interest expense and income taxes is the sum of the operating income from: Core Commercial, Specialty, Personal Lines, and Other. After-tax operating income EPS (sometimes referred to as “after-tax operating income per share”) is also a non-GAAP measure. It is defined as net income excluding the after-tax impact of net realized and unrealized investment gains (losses), as well as results from discontinued operations and other non-operating items for a period divided by the average number of diluted shares of common stock. The Hanover believes that measures of operating income before interest expense and income taxes provide investors with a valuable measure of the performance of the Company’s ongoing businesses because they highlight net income attributable to the core operations of the business. | ||||||||
| Book value per share is total shareholders’ equity divided by the number of common shares outstanding. Book value per share excluding net unrealized gains and losses related to fixed maturity investments, net of tax, is total shareholders’ equity excluding the after-tax effect of unrealized investment gains and losses on fixed maturities and market risk divided by the number of common shares outstanding. Tangible book value per share is total shareholders' equity, excluding goodwill and intangible assets, divided by the number of common shares outstanding. | ||||||||
| The Hanover also provides measures of operating income and loss ratios that exclude the effects of catastrophe losses. A catastrophe is a severe loss, resulting from natural or manmade events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, severe winter weather, fire, explosions and terrorism. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance. The Hanover believes that providing certain financial metrics and trends excluding the effects of catastrophes is meaningful for investors to understand the variability of periodic earnings and loss ratios. | ||||||||
| Prior year reserve development, which can be favorable or unfavorable, represents changes in our estimate of the costs to pay claims from prior years. We believe that a discussion of operating income excluding prior year reserve development is helpful to investors since it provides insight into both our estimate of current year accident results and changes to prior-year reserve estimates. | ||||||||
| Operating income before and after interest expense and income taxes and measures of operating income that exclude the effects of catastrophe losses or reserve development should not be construed as substitutes for net income determined in accordance with GAAP. A reconciliation of income from continuing operations to operating income before interest expense and income taxes and income from continuing operations per share to operating income after taxes per share for the three months ended March 31, 2023 and 2022 is set forth on page 18 of this document. The presentation of loss ratios calculated excluding the effects of reserve development and/or catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP. | ||||||||
| Additional reconciliations are provided in the press release relating to the current period(s) financial results, which is available on the Company's website, www.hanover.com. | ||||||||
| THE HANOVER INSURANCE GROUP | ||||||||
| --- | --- | |||||||
| PREMIUM RELATED METRIC DEFINITIONS | ||||||||
| Renewal Price Change | ||||||||
| ● | Core Commercial and Specialty: Represents the average change in premium on renewed policies caused by the estimated net effect of base rate changes, discretionary pricing, specific inflationary changes or changes in policy level exposure or insured risks. | |||||||
| ● | Personal Lines: Represents the average change in premium on policies charged at renewal caused by the net effects of filed rate, inflation adjustments or other changes in policy level exposure or insured risks. Actual written price changes may differ, as not all policies are retained. | |||||||
| Rate | ||||||||
| ● | Core Commercial and Specialty: Represents the average change in premium on renewed policies caused by the base rate changes, discretionary pricing, and inflation, excluding the impact of changes in policy level exposure or insured risks. | |||||||
| ● | Personal Lines: Represents the estimated cumulative premium effect of approved rate actions applied to policies at renewal. Actual written rate changes may differ, as not all policies are retained. Personal Lines rate changes do not include inflation or changes in policy level exposure or insured risks. | |||||||
| Retention | ||||||||
| ● | Core Commercial and Specialty: Represents the ratio of net retained premium for the noted period to the premium available to renew over the same period. | |||||||
| ● | Personal Lines: Represents the ratio of net retained policies for the noted period to those policies available to renew over the same period and includes policies that were canceled and rewritten. | |||||||
| Policies in Force (PIF) Change | ||||||||
| ● | Represents the change in the number of policies in force at the end of a given period from the end of the same period in the prior year. | |||||||
| CORPORATE OFFICES AND | TRANSFER AGENT | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |
| PRINCIPAL SUBSIDIARIES | ||||||||
| THE HANOVER INSURANCE GROUP, INC. | A.M. | Computershare Investor Services | ||||||
| 440 Lincoln Street | Best | S&P Global | Moody's | PO Box 43006 | ||||
| Worcester, MA 01653 | Providence, RI 02940-3006 | |||||||
| A | A | A2 | 1-800-317-4454 | |||||
| The Hanover Insurance Company | ||||||||
| 440 Lincoln Street | A | A | - | |||||
| Worcester, MA 01653 | ||||||||
| COMMON STOCK | ||||||||
| Citizens Insurance Company of America | A.M. | |||||||
| 808 North Highlander Way | Best | S&P Global | Moody's | Common stock of The Hanover Insurance Group, Inc. is traded | ||||
| Howell, MI 48843 | on the New York Stock Exchange under the symbol "THG". | |||||||
| bbb+ | BBB | Baa2 | ||||||
| bbb- | BB+ | Baa3 | ||||||
| MARKET AND DIVIDEND INFORMATION | INQUIRIES | |||||||
| The following tables set forth the high and low closing | Oksana Lukasheva | |||||||
| sales prices of our common stock and quarterly cash | Senior Vice President | |||||||
| dividends for the periods indicated: | Corporate Finance | |||||||
| olukasheva@hanover.com | ||||||||
| Quarter Ended | 2023 | |||||||
| Price Range | Dividends | |||||||
| High | Low | Per Share | ||||||
| March 31 | $148.20 | $121.57 | 0.810 | |||||
| Quarter Ended | 2022 | |||||||
| Price Range | Dividends | |||||||
| High | Low | Per Share | ||||||
| March 31 | $150.95 | $131.19 | 0.750 | |||||
| June 30 | $154.28 | $136.34 | 0.750 | |||||
| September 30 | $148.36 | $124.89 | 0.750 | |||||
| December 31 | $147.47 | $131.27 | 0.810 |
All values are in US Dollars.