Third Quarter Highlights
- Combined ratio of 104.4%; combined ratio, excluding
catastrophes(1), of 90.7%
- Catastrophe losses of $195.8
million, or 13.7 points of the combined ratio, driven by
severe convective storm activity in the Midwestern United States,
with hail and wind damage representing the majority of reported
losses and primarily impacting Personal Lines
- Net premiums written increase of 6.0%*, with contributions from
each segment
- Renewal price increases(2) of 18.0% in Personal
Lines, including 23.4% in homeowners, as well as increases of 12.9%
in Specialty and 11.8% in Core Commercial
- Rate increases(2) of 10.7% in Personal Lines, 9.2%
in Core Commercial and 8.4% in Specialty
- Loss and loss adjustment expense (LAE) ratio of 74.2%, 3.6
points above the prior-year quarter, driven by higher catastrophe
losses
- Current accident year loss and LAE ratio, excluding
catastrophes(3), of 60.6%, 3.5 points below the
prior-year quarter and slightly better than the company's
expectations
- Net investment income of $84.2
million, up 15.3% from the prior-year quarter, primarily due
to higher bond reinvestment rates and the continued investment of
operational cashflows
- Book value per share of $59.21,
down 5.4% from June 30, 2023,
primarily due to a decrease in the fair value of fixed maturity
investments
WORCESTER, Mass., Nov. 1, 2023
/PRNewswire/ -- The Hanover Insurance Group, Inc. (NYSE: THG) today
reported net income of $8.6 million,
or $0.24 per diluted share, in the
third quarter of 2023, compared to net income of $0.5 million, or $0.01 per diluted share, in the prior-year
quarter. Operating income(4) was $6.8 million, or $0.19 per diluted share, in the third quarter of
2023, compared to operating income of $35.7
million, or $0.99 per diluted
share, in the prior-year quarter.
"While severe weather adversely impacted third quarter results
for us and the industry, we are pleased with our underlying
performance, which demonstrates the inherent strengths of our
business and the effectiveness of our margin recapture plan," said
John C. Roche, president and chief
executive officer at The Hanover.
"Our positive momentum is reflective of our enhanced underlying
margins in Core Commercial, the continuing strength of our
Specialty franchise and improvements in personal auto. These
achievements give us even greater confidence in our ability to
dramatically enhance performance in Personal Lines and the company
overall. The personal lines market remains exceptionally firm,
positioning us to achieve additional price increases, reshape our
book of business and reach our target profitability
objectives."
"We also have taken decisive action to respond to elevated
catastrophe loss trends," said Roche. "We introduced increased
all-peril as well as wind and hail deductibles on targeted new
business in the third quarter, and are on track to deliver these
adjustments on renewals in early 2024."
"Our 90.7% third quarter combined ratio, excluding catastrophes,
represented an improvement of 3.5 points, compared to the third
quarter of 2022, and an improvement of two points sequentially,"
said Jeffrey M. Farber, executive
vice president and chief financial officer at The Hanover. "This result was driven by markedly
improved property loss experience in Core Commercial, as well as
exceptional performance in our Specialty segment, which delivered
an ex-CAT combined ratio of 81.3%. We achieved personal auto and
home renewal price changes of 14% and 23%, respectively. In
addition, we delivered net investment income of $84.2 million in the quarter, driven by an
approximate 19% increase in net investment income in our fixed
maturity portfolio. We expect the higher interest rate environment
to help drive additional growth in net investment income in the
future, adding significant earnings power to our business. Looking
ahead, we are well-positioned in the market, with a proven business
strategy, broad and innovative capabilities, tremendous
distribution partners, strong balance sheet, and exceptional
talent, which will enable us to execute on our long-term targets
while delivering increased value for our shareholders."
|
|
Three months
ended
|
|
|
|
Nine months
ended
|
|
|
|
|
September 30
|
|
|
|
September 30
|
|
|
($ in millions,
except per share data)
|
|
2023
|
|
|
|
2022
|
|
|
|
2023
|
|
|
|
2022
|
|
|
Net premiums
written
|
$
|
1,596.4
|
|
|
$
|
1,505.4
|
|
|
$
|
4,464.7
|
|
|
$
|
4,150.5
|
|
|
Growth
|
|
6.0
|
%
|
|
|
9.5
|
%
|
|
|
7.6
|
%
|
|
|
9.8
|
%
|
|
Net premiums
earned
|
$
|
1,431.1
|
|
|
$
|
1,331.2
|
|
|
$
|
4,222.8
|
|
|
$
|
3,888.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
loss and
LAE ratio, excluding
catastrophes(3)
|
|
60.6
|
%
|
|
|
64.1
|
%
|
|
|
61.4
|
%
|
|
|
61.2
|
%
|
|
Prior-year development
ratio
|
|
(0.1)
|
%
|
|
|
(0.3)
|
%
|
|
|
(0.2)
|
%
|
|
|
(0.5)
|
%
|
|
Catastrophe
ratio
|
|
13.7
|
%
|
|
|
6.8
|
%
|
|
|
15.0
|
%
|
|
|
5.5
|
%
|
|
Expense
ratio(5)
|
|
30.2
|
%
|
|
|
30.4
|
%
|
|
|
30.5
|
%
|
|
|
30.8
|
%
|
|
Combined
ratio
|
|
104.4
|
%
|
|
|
101.0
|
%
|
|
|
106.7
|
%
|
|
|
97.0
|
%
|
|
Combined ratio,
excluding catastrophes
|
|
90.7
|
%
|
|
|
94.2
|
%
|
|
|
91.7
|
%
|
|
|
91.5
|
%
|
|
Current accident year
combined ratio,
excluding catastrophes
|
|
90.8
|
%
|
|
|
94.5
|
%
|
|
|
91.9
|
%
|
|
|
92.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
8.6
|
|
|
$
|
0.5
|
|
|
$
|
(72.6)
|
|
|
$
|
128.1
|
|
|
per diluted (basic)
share
|
|
0.24
|
|
|
|
0.01
|
|
|
|
(2.03)
|
|
|
|
3.54
|
|
|
Operating income
(loss)
|
|
6.8
|
|
|
|
35.7
|
|
|
|
(56.9)
|
|
|
|
237.3
|
|
|
per diluted (basic)
share
|
|
0.19
|
|
|
|
0.99
|
|
|
|
(1.59)
|
|
|
|
6.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
$
|
59.21
|
|
|
$
|
64.84
|
|
|
$
|
59.21
|
|
|
$
|
64.84
|
|
|
Ending shares
outstanding (in millions)
|
|
35.8
|
|
|
|
35.6
|
|
|
|
35.8
|
|
|
|
35.6
|
|
|
|
*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.
|
Third Quarter Operating Highlights
Core Commercial
Core Commercial operating income
before income taxes was $43.1 million
in the third quarter of 2023, compared to $25.2 million in the third quarter of 2022. The
Core Commercial combined ratio was 98.7%, compared to 101.3% in the
prior-year quarter. Catastrophe losses in the third quarter of 2023
were $44.6 million, or 8.6 points of
the combined ratio, driven primarily by hail and wind damage in the
Midwestern United States. This compared to catastrophe losses of
$32.7 million, or 6.6 points, in the
prior-year quarter.
Third quarter 2023 results included net unfavorable prior-year
reserve development, excluding catastrophes, of $2.7 million, or 0.5 points, primarily driven by
commercial auto and commercial multiple peril. This compared to
$1.3 million, or 0.3 points, in the
third quarter of 2022.
Core Commercial current accident year combined ratio, excluding
catastrophes, decreased 4.8 points to 89.6% in the
third quarter of 2023, from 94.4% in the prior-year quarter,
primarily driven by a lower underlying loss ratio. The current
accident year loss and LAE ratio, excluding catastrophes, of 56.3%,
decreased 5.4 points from the prior-year quarter, driven by the
benefit of earned pricing above loss trends and consistently lower
large losses in commercial multiple peril middle market business
following the execution of underwriting actions.
The expense ratio increased by 0.6 points to 33.3% in the third
quarter of 2023, compared to the prior-year quarter, primarily due
to continued strategic business investments, as well as timing of
certain expenses in the prior-year quarter, which were partially
offset by fixed cost leverage from premium growth.
Net premiums written were $589.4
million in the quarter, up 4.2% from the prior-year quarter,
consisting of 6.8% growth in small commercial and 1.7% in middle
market. In the third quarter, Core Commercial renewal price
increases averaged 11.8%, while average rate increases were
9.2%.
The following table summarizes premiums and the components of
the combined ratio for Core Commercial:
|
|
Three months
ended
|
|
|
|
Nine months
ended
|
|
|
|
|
September 30
|
|
|
|
September 30
|
|
|
($ in
millions)
|
|
2023
|
|
|
|
2022
|
|
|
|
2023
|
|
|
|
2022
|
|
|
Net premiums
written
|
$
|
589.4
|
|
|
$
|
565.9
|
|
|
$
|
1,641.5
|
|
|
$
|
1,546.7
|
|
|
Growth
|
|
4.2
|
%
|
|
|
5.9
|
%
|
|
|
6.1
|
%
|
|
|
7.6
|
%
|
|
Net premiums
earned
|
$
|
517.4
|
|
|
$
|
492.7
|
|
|
$
|
1,540.4
|
|
|
$
|
1,447.5
|
|
|
Operating income
before taxes
|
|
43.1
|
|
|
|
25.2
|
|
|
|
114.4
|
|
|
|
159.6
|
|
|
Loss and LAE
ratio
|
|
65.4
|
%
|
|
|
68.6
|
%
|
|
|
66.6
|
%
|
|
|
63.1
|
%
|
|
Expense
ratio
|
|
33.3
|
%
|
|
|
32.7
|
%
|
|
|
33.1
|
%
|
|
|
32.7
|
%
|
|
Combined
ratio
|
|
98.7
|
%
|
|
|
101.3
|
%
|
|
|
99.7
|
%
|
|
|
95.8
|
%
|
|
Prior-year development
ratio
|
|
0.5
|
%
|
|
|
0.3
|
%
|
|
|
0.4
|
%
|
|
|
(0.5)
|
%
|
|
Catastrophe
ratio
|
|
8.6
|
%
|
|
|
6.6
|
%
|
|
|
9.2
|
%
|
|
|
4.8
|
%
|
|
Combined ratio,
excluding catastrophes
|
|
90.1
|
%
|
|
|
94.7
|
%
|
|
|
90.5
|
%
|
|
|
91.0
|
%
|
|
Current accident year
combined ratio,
excluding catastrophes
|
|
89.6
|
%
|
|
|
94.4
|
%
|
|
|
90.1
|
%
|
|
|
91.5
|
%
|
|
Specialty
Specialty operating income before income
taxes was $70.3 million in the third
quarter of 2023, compared to $46.9
million in the third quarter of 2022. The Specialty combined
ratio was 83.4%, compared to 89.2% in the prior-year quarter.
Catastrophe losses in the third quarter of 2023 were $6.9 million, or 2.1 points of the combined
ratio, compared to $8.6 million, or
2.8 points, in the prior-year quarter.
Third quarter 2023 results included net favorable prior-year
reserve development, excluding catastrophes, of $5.0 million, or 1.6 points, driven primarily by
lower-than-expected losses in our professional and executive lines
claims-made business. This compared to $5.1
million, or 1.7 points, in the prior-year quarter.
Specialty current accident year combined ratio, excluding
catastrophes, decreased 5.2 points to 82.9% in the third quarter of
2023, from 88.1% in the prior-year quarter. The current accident
year loss and LAE ratio, excluding catastrophes, decreased 5.8
points to 47.8% in the third quarter of 2023, driven by the benefit
of earned pricing above loss trends, lower incidence of large
losses in our Hanover specialty
industrial business and lower-than-expected losses in Marine.
The expense ratio increased by 0.6 points to 35.1% in the third
quarter of 2023, compared to the prior-year quarter, primarily due
to continued strategic business investments, as well as timing of
certain expenses in the prior-year quarter, which were partially
offset by fixed cost leverage from premium growth.
Net premiums written were $338.7
million in the quarter, up 2.9% from the prior-year quarter,
inclusive of the non-renewal of certain programs within Specialty
property and casualty due to lower-than-expected performance. In
the third quarter, Specialty renewal price increases averaged
12.9%, while average rate increases were 8.4%.
The following table summarizes premiums and the components of
the combined ratio for Specialty:
|
|
Three months
ended
|
|
|
|
Nine months
ended
|
|
|
|
|
September 30
|
|
|
|
September 30
|
|
|
($ in
millions)
|
|
2023
|
|
|
|
2022
|
|
|
|
2023
|
|
|
|
2022
|
|
|
Net premiums
written
|
$
|
338.7
|
|
|
$
|
329.1
|
|
|
$
|
988.4
|
|
|
$
|
934.2
|
|
|
Growth
|
|
2.9
|
%
|
|
|
12.6
|
%
|
|
|
5.8
|
%
|
|
|
12.0
|
%
|
|
Net premiums
earned
|
$
|
321.7
|
|
|
$
|
303.3
|
|
|
$
|
953.2
|
|
|
$
|
880.6
|
|
|
Operating income
before taxes
|
|
70.3
|
|
|
|
46.9
|
|
|
|
173.0
|
|
|
|
142.1
|
|
|
Loss and LAE
ratio
|
|
48.3
|
%
|
|
|
54.7
|
%
|
|
|
52.0
|
%
|
|
|
53.7
|
%
|
|
Expense
ratio
|
|
35.1
|
%
|
|
|
34.5
|
%
|
|
|
35.2
|
%
|
|
|
35.1
|
%
|
|
Combined
ratio
|
|
83.4
|
%
|
|
|
89.2
|
%
|
|
|
87.2
|
%
|
|
|
88.8
|
%
|
|
Prior-year development
ratio
|
|
(1.6)
|
%
|
|
|
(1.7)
|
%
|
|
|
(3.7)
|
%
|
|
|
(2.2)
|
%
|
|
Catastrophe
ratio
|
|
2.1
|
%
|
|
|
2.8
|
%
|
|
|
3.9
|
%
|
|
|
2.6
|
%
|
|
Combined ratio,
excluding catastrophes
|
|
81.3
|
%
|
|
|
86.4
|
%
|
|
|
83.3
|
%
|
|
|
86.2
|
%
|
|
Current accident year
combined ratio,
excluding catastrophes
|
|
82.9
|
%
|
|
|
88.1
|
%
|
|
|
87.0
|
%
|
|
|
88.4
|
%
|
|
Personal Lines
Personal Lines operating loss before
income taxes was $100.4 million in
the third quarter of 2023, compared to operating loss before income
taxes of $18.8 million in the third
quarter of 2022. The Personal Lines combined ratio was 120.8%,
compared to 107.3% in the prior-year quarter. Catastrophe losses in
the third quarter of 2023 were $144.3
million, or 24.4 points of the combined ratio, driven
primarily by hail and wind damage in the Midwestern United States
that significantly impacted the company's homeowners book of
business. This compared to catastrophe losses of $48.8 million, or 9.1 points of the combined
ratio, in the prior-year quarter.
Prior-year reserve development was immaterial in the third
quarter of both the current and prior years.
Personal Lines current accident year combined ratio, excluding
catastrophe losses, decreased 1.8 points to 96.4% in the
third quarter of 2023, from 98.2% in the prior-year quarter
primarily driven by a lower current accident year loss and LAE
ratio, excluding catastrophes, and expense ratio.
The current accident year loss and LAE ratio, excluding
catastrophes, decreased 0.8 points from the prior-year
quarter to 71.5%. On a sequential basis, the current accident year
loss and LAE ratio, excluding catastrophes, decreased 1.0 point
from the second quarter of 2023, driven by the benefit of earned
pricing outpacing loss trends in personal auto. Homeowners current
accident year loss and LAE ratio, excluding catastrophes, remained
elevated in the third quarter of 2023, as the benefit of earned
pricing was offset by prudent ultimate severity assumptions due to
recent volatility of loss patterns in the line.
The expense ratio decreased by 1.0 point to 24.9% in the third
quarter of 2023, compared to the prior-year quarter, primarily due
to lower variable agency compensation and fixed cost leverage from
premium growth.
Net premiums written were $668.3
million in the quarter, up 9.5% from the prior-year quarter,
driven primarily by renewal price change. Personal Lines renewal
price increases averaged 18.0%, while average rate increases were
10.7%. Policies in force in the third quarter were
relatively flat compared to the second quarter of 2023.
The following table summarizes premiums and components of the
combined ratio for Personal Lines:
|
|
Three months
ended
|
|
|
|
Nine months
ended
|
|
|
|
|
September 30
|
|
|
|
September 30
|
|
|
($ in
millions)
|
|
2023
|
|
|
|
2022
|
|
|
|
2023
|
|
|
|
2022
|
|
|
Net premiums
written
|
$
|
668.3
|
|
|
$
|
610.4
|
|
|
$
|
1,834.8
|
|
|
$
|
1,669.6
|
|
|
Growth
|
|
9.5
|
%
|
|
|
11.3
|
%
|
|
|
9.9
|
%
|
|
|
10.8
|
%
|
|
Net premiums
earned
|
$
|
592.0
|
|
|
$
|
535.2
|
|
|
$
|
1,729.2
|
|
|
$
|
1,560.7
|
|
|
Operating income
(loss) before taxes
|
|
(100.4)
|
|
|
|
(18.8)
|
|
|
|
(341.1)
|
|
|
|
20.3
|
|
|
Loss and LAE
ratio
|
|
95.9
|
%
|
|
|
81.4
|
%
|
|
|
98.1
|
%
|
|
|
76.0
|
%
|
|
Expense
ratio
|
|
24.9
|
%
|
|
|
25.9
|
%
|
|
|
25.6
|
%
|
|
|
26.6
|
%
|
|
Combined
ratio
|
|
120.8
|
%
|
|
|
107.3
|
%
|
|
|
123.7
|
%
|
|
|
102.6
|
%
|
|
Prior-year development
ratio
|
|
-
|
|
|
|
-
|
|
|
|
1.2
|
%
|
|
|
0.5
|
%
|
|
Catastrophe
ratio
|
|
24.4
|
%
|
|
|
9.1
|
%
|
|
|
26.2
|
%
|
|
|
7.7
|
%
|
|
Combined ratio,
excluding catastrophes
|
|
96.4
|
%
|
|
|
98.2
|
%
|
|
|
97.5
|
%
|
|
|
94.9
|
%
|
|
Current accident year
combined ratio,
excluding catastrophes
|
|
96.4
|
%
|
|
|
98.2
|
%
|
|
|
96.3
|
%
|
|
|
94.4
|
%
|
|
Investments
Net investment income was $84.2 million for the third quarter of 2023, an
increase of $11.2 million compared to
the prior-year quarter, primarily due to higher bond reinvestment
rates and continued investment of operational cashflows. Total
pre-tax earned yield on the investment portfolio for the third
quarter 2023 was 3.55%, up from 3.21% in the prior-year quarter.
The average pre-tax earned yield on fixed maturities was 3.37% for
the third quarter of 2023, up from 3.02% in the prior-year
quarter.
Net realized and unrealized investment losses recognized in
earnings were $6.1 million in the
third quarter of 2023, primarily driven by the change in fair value
of equity securities. This compared to net realized and unrealized
investment losses recognized in earnings of $44.9 million in the third quarter of 2022.
The company held $8.9 billion in
cash and invested assets on September 30,
2023. Fixed maturities and cash represented approximately
89% of the investment portfolio. Approximately 95% of the company's
fixed maturity portfolio is rated investment grade. As of
September 30, 2023, net unrealized
losses on the fixed maturity portfolio were $917.2 million before income taxes, a decrease in
fair value of $139.7 million since
June 30, 2023.
Shareholders' Equity and Capital
Actions
On September 30, 2023, book value per
share was $59.21, down 5.4% from
June 30, 2023, primarily due to a
decrease in the fair value of fixed maturity investments and to a
lesser extent, the quarterly ordinary dividend. Book value per
share, excluding net unrealized depreciation on fixed maturity
investments, net of tax(6), was $79.38 at September 30,
2023, compared to $79.68 at
June 30, 2023. During the quarter,
the company did not repurchase any shares of common stock. The
company has approximately $330
million of remaining capacity under its existing share
repurchase program.
On September 30, 2023, operating
subsidiary's statutory capital and surplus was $2.50 billion. This compared to statutory capital
and surplus of $2.51 billion on
June 30, 2023.
Earnings Conference Call
The company will host a
conference call to discuss its third quarter results on
Thursday, November 2, at 10:00 a.m.
E.T. A 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:
|
Media:
|
|
|
Oksana
Lukasheva
|
Michael F.
Buckley
|
Emily P.
Trevallion
|
|
olukasheva@hanover.com
|
mibuckley@hanover.com
|
etrevallion@hanover.com
|
|
1-508-525-6081
|
|
1-508-855-3099
|
|
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 ("Specialty P&C"), 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 third 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 Income
Statements
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
|
|
September 30
|
|
September 30
|
|
($ in
millions)
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Premiums
earned
|
|
$
|
1,431.1
|
$
|
1,331.2
|
$
|
4,222.8
|
$
|
3,888.8
|
|
Net investment
income
|
|
|
84.2
|
|
73.0
|
|
250.5
|
|
220.4
|
|
Net realized and
unrealized investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
Net realized losses
from sales and other
|
|
|
(0.9)
|
|
(0.1)
|
|
(1.9)
|
|
(16.3)
|
|
Net change in fair
value of equity securities
|
|
|
(5.2)
|
|
(29.1)
|
|
(13.4)
|
|
(106.1)
|
|
Impairments on
investments:
|
|
|
|
|
|
|
|
|
|
|
Credit-related
impairments
|
|
|
-
|
|
(1.4)
|
|
(6.2)
|
|
(1.5)
|
|
Losses on intent to
sell securities
|
|
|
-
|
|
(14.3)
|
|
(10.3)
|
|
(14.8)
|
|
|
|
|
-
|
|
(15.7)
|
|
(16.5)
|
|
(16.3)
|
|
Total net realized and
unrealized investment losses
|
|
|
(6.1)
|
|
(44.9)
|
|
(31.8)
|
|
(138.7)
|
|
Fees and other
income
|
|
|
7.4
|
|
7.0
|
|
23.2
|
|
19.4
|
|
Total
revenues
|
|
|
1,516.6
|
|
1,366.3
|
|
4,464.7
|
|
3,989.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and
expenses
|
|
|
|
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
|
|
1,061.5
|
|
939.6
|
|
3,218.8
|
|
2,572.6
|
|
Amortization of
deferred acquisition costs
|
|
|
296.6
|
|
277.1
|
|
878.1
|
|
809.3
|
|
Interest
expense
|
|
|
8.5
|
|
8.5
|
|
25.6
|
|
25.5
|
|
Other operating
expenses
|
|
|
150.9
|
|
140.6
|
|
451.3
|
|
423.8
|
|
Total losses and
expenses
|
|
|
1,517.5
|
|
1,365.8
|
|
4,573.8
|
|
3,831.2
|
|
Income (loss) from
continuing operations before income taxes
|
|
|
(0.9)
|
|
0.5
|
|
(109.1)
|
|
158.7
|
|
Income tax expense
(benefit)
|
|
|
(9.1)
|
|
(0.1)
|
|
(35.3)
|
|
30.0
|
|
Income (loss) from
continuing operations
|
|
|
8.2
|
|
0.6
|
|
(73.8)
|
|
128.7
|
|
Discontinued
operations (net of taxes):
|
|
|
|
|
|
|
|
|
|
|
Income from
discontinued Chaucer business
|
|
|
0.4
|
|
-
|
|
1.2
|
|
-
|
|
Loss from discontinued
life businesses
|
|
|
-
|
|
(0.1)
|
|
-
|
|
(0.6)
|
|
Net income
(loss)
|
|
$
|
8.6
|
$
|
0.5
|
$
|
(72.6)
|
$
|
128.1
|
|
|
|
|
|
|
|
|
|
|
|
|
The Hanover
Insurance Group, Inc.
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
December 31
|
|
($ in
millions)
|
|
|
2023
|
|
|
2022
|
|
Assets
|
|
|
|
|
|
|
|
Total
investments
|
|
$
|
8,559.7
|
|
$
|
8,509.8
|
|
Cash and cash
equivalents
|
|
|
294.5
|
|
|
305.0
|
|
Premiums and accounts
receivable, net
|
|
|
1,771.4
|
|
|
1,601.4
|
|
Reinsurance
recoverable on paid and unpaid losses and unearned
premiums
|
|
|
1,992.2
|
|
|
1,964.5
|
|
Other
assets
|
|
|
1,616.6
|
|
|
1,530.3
|
|
Assets of discontinued
businesses
|
|
|
80.6
|
|
|
84.1
|
|
Total
assets
|
|
$
|
14,315.0
|
|
$
|
13,995.1
|
|
Liabilities
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense reserves
|
|
$
|
7,329.8
|
|
$
|
7,012.6
|
|
Unearned
premiums
|
|
|
3,188.1
|
|
|
2,954.2
|
|
Debt
|
|
|
783.0
|
|
|
782.4
|
|
Other
liabilities
|
|
|
791.4
|
|
|
802.0
|
|
Liabilities of
discontinued businesses
|
|
|
106.4
|
|
|
110.2
|
|
Total
liabilities
|
|
|
12,198.7
|
|
|
11,661.4
|
|
Total shareholders'
equity
|
|
|
2,116.3
|
|
|
2,333.7
|
|
Total liabilities
and shareholders' equity
|
|
$
|
14,315.0
|
|
$
|
13,995.1
|
|
The following is a reconciliation from operating income (loss)
to net income (loss)(4)(7):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Hanover
Insurance Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30
|
|
|
Nine months ended
September 30
|
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
($ in millions,
except per share data)
|
|
$
Amount
|
|
Per Share
(Diluted)
|
|
$
Amount
|
|
Per Share
(Diluted)
|
|
$
Amount
|
|
Per
Share*
|
|
$
Amount
|
|
Per Share
(Diluted)
|
|
Operating income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Commercial
|
|
$
|
43.1
|
|
|
|
|
$
|
25.2
|
|
|
|
|
$
|
114.4
|
|
|
|
|
$
|
159.6
|
|
|
|
|
Specialty
|
|
|
70.3
|
|
|
|
|
|
46.9
|
|
|
|
|
|
173.0
|
|
|
|
|
|
142.1
|
|
|
|
|
Personal
Lines
|
|
|
(100.4)
|
|
|
|
|
|
(18.8)
|
|
|
|
|
|
(341.1)
|
|
|
|
|
|
20.3
|
|
|
|
|
Other
|
|
|
0.7
|
|
|
|
|
|
0.6
|
|
|
|
|
|
1.2
|
|
|
|
|
|
1.3
|
|
|
|
|
Total
|
|
|
13.7
|
|
|
|
|
|
53.9
|
|
|
|
|
|
(52.5)
|
|
|
|
|
|
323.3
|
|
|
|
|
Interest
expense
|
|
|
(8.5)
|
|
|
|
|
|
(8.5)
|
|
|
|
|
|
(25.6)
|
|
|
|
|
|
(25.5)
|
|
|
|
|
Operating income
(loss) before income taxes
|
|
|
5.2
|
|
$
|
0.15
|
|
|
45.4
|
|
$
|
1.26
|
|
|
(78.1)
|
|
$
|
(2.18)
|
|
|
297.8
|
|
$
|
8.24
|
|
Income tax benefit
(expense) on operating income (loss)
|
|
|
1.6
|
|
|
0.04
|
|
|
(9.7)
|
|
|
(0.27)
|
|
|
21.2
|
|
|
0.59
|
|
|
(60.5)
|
|
|
(1.67)
|
|
Operating income
(loss) after income taxes
|
|
|
6.8
|
|
|
0.19
|
|
|
35.7
|
|
|
0.99
|
|
|
(56.9)
|
|
|
(1.59)
|
|
|
237.3
|
|
|
6.57
|
|
Non-operating
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized losses
from sales and other
|
|
|
(0.9)
|
|
|
(0.03)
|
|
|
(0.1)
|
|
|
-
|
|
|
(1.9)
|
|
|
(0.06)
|
|
|
(16.3)
|
|
|
(0.45)
|
|
Net change in fair
value of equity securities
|
|
|
(5.2)
|
|
|
(0.14)
|
|
|
(29.1)
|
|
|
(0.81)
|
|
|
(13.4)
|
|
|
(0.38)
|
|
|
(106.1)
|
|
|
(2.93)
|
|
Impairments on
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-related
impairments
|
|
|
-
|
|
|
-
|
|
|
(1.4)
|
|
|
(0.04)
|
|
|
(6.2)
|
|
|
(0.17)
|
|
|
(1.5)
|
|
|
(0.04)
|
|
Losses on intent to
sell securities
|
|
|
-
|
|
|
-
|
|
|
(14.3)
|
|
|
(0.39)
|
|
|
(10.3)
|
|
|
(0.29)
|
|
|
(14.8)
|
|
|
(0.42)
|
|
|
|
|
-
|
|
|
-
|
|
|
(15.7)
|
|
|
(0.43)
|
|
|
(16.5)
|
|
|
(0.46)
|
|
|
(16.3)
|
|
|
(0.46)
|
|
Other non-operating
items
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.8
|
|
|
0.02
|
|
|
(0.4)
|
|
|
(0.01)
|
|
Income tax benefit on
non-operating items
|
|
|
7.5
|
|
|
0.21
|
|
|
9.8
|
|
|
0.27
|
|
|
14.1
|
|
|
0.40
|
|
|
30.5
|
|
|
0.84
|
|
Income (loss) from
continuing operations, net of taxes
|
|
|
8.2
|
|
|
0.23
|
|
|
0.6
|
|
|
0.02
|
|
|
(73.8)
|
|
|
(2.07)
|
|
|
128.7
|
|
|
3.56
|
|
Discontinued
operations (net of taxes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Chaucer
business
|
|
|
0.4
|
|
|
0.01
|
|
|
-
|
|
|
-
|
|
|
1.2
|
|
|
0.04
|
|
|
-
|
|
|
-
|
|
Loss from discontinued
life businesses
|
|
|
-
|
|
|
-
|
|
|
(0.1)
|
|
|
(0.01)
|
|
|
-
|
|
|
-
|
|
|
(0.6)
|
|
|
(0.02)
|
|
Net income
(loss)
|
|
$
|
8.6
|
|
$
|
0.24
|
|
$
|
0.5
|
|
$
|
0.01
|
|
$
|
(72.6)
|
|
$
|
(2.03)
|
|
$
|
128.1
|
|
$
|
3.54
|
|
Dilutive weighted
average shares outstanding
|
|
|
|
|
|
36.1
|
|
|
|
|
|
36.1
|
|
|
|
|
|
36.1
|
|
|
|
|
|
36.1
|
|
Basic weighted average
shares outstanding
|
|
|
|
|
|
35.8
|
|
|
|
|
|
35.6
|
|
|
|
|
|
35.7
|
|
|
|
|
|
35.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Per share data is
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, changes in terms and conditions, 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 or repair 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 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 across the country related to
business interruption and workers' compensation coverages, premium
grace periods and returns, changes to terms and conditions, 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 diluted (basic) 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 diluted
(basic) 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 (loss), as they are, to a certain extent,
determined by interest rates, financial markets and the timing of
sales. Operating income (loss) 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 (loss) is the sum of the segment
income (loss) 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 (loss) per diluted
(basic) 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 (loss) before income
taxes) and measures of operating income (loss) 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 (loss) 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.
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.
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
|
|
|
|
|
|
September 30,
2023
|
|
|
|
|
|
Core
Commercial
|
|
Specialty
|
|
Personal
Lines
|
|
Total
|
|
|
Total combined ratio
(GAAP)
|
|
98.7
|
%
|
|
83.4
|
%
|
|
120.8
|
%
|
|
104.4
|
%
|
|
|
Less: Catastrophe
ratio
|
|
8.6
|
%
|
|
2.1
|
%
|
|
24.4
|
%
|
|
13.7
|
%
|
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
90.1
|
%
|
|
81.3
|
%
|
|
96.4
|
%
|
|
90.7
|
%
|
|
|
Less: Prior-year
reserve development ratio
|
|
0.5
|
%
|
|
(1.6)
|
%
|
|
-
|
|
|
(0.1)
|
%
|
|
|
Current accident year
combined ratio, excluding
catastrophe losses
(non-GAAP)
|
|
89.6
|
%
|
|
82.9
|
%
|
|
96.4
|
%
|
|
90.8
|
%
|
|
|
|
|
September 30,
2022
|
|
|
|
Total combined ratio
(GAAP)
|
|
101.3
|
%
|
|
89.2
|
%
|
|
107.3
|
%
|
|
101.0
|
%
|
|
|
Less: Catastrophe
ratio
|
|
6.6
|
%
|
|
2.8
|
%
|
|
9.1
|
%
|
|
6.8
|
%
|
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
94.7
|
%
|
|
86.4
|
%
|
|
98.2
|
%
|
|
94.2
|
%
|
|
|
Less: Prior-year
reserve development ratio
|
|
0.3
|
%
|
|
(1.7)
|
%
|
|
-
|
|
|
(0.3)
|
%
|
|
|
Current accident year
combined ratio, excluding
catastrophe losses
(non-GAAP)
|
|
94.4
|
%
|
|
88.1
|
%
|
|
98.2
|
%
|
|
94.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
|
|
|
|
|
|
September 30,
2023
|
|
|
|
|
|
Core
Commercial
|
|
Specialty
|
|
Personal
Lines
|
|
Total
|
|
|
Total combined ratio
(GAAP)
|
|
99.7
|
%
|
|
87.2
|
%
|
|
123.7
|
%
|
|
106.7
|
%
|
|
|
Less: Catastrophe
ratio
|
|
9.2
|
%
|
|
3.9
|
%
|
|
26.2
|
%
|
|
15.0
|
%
|
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
90.5
|
%
|
|
83.3
|
%
|
|
97.5
|
%
|
|
91.7
|
%
|
|
|
Less: Prior-year
reserve development ratio
|
|
0.4
|
%
|
|
(3.7)
|
%
|
|
1.2
|
%
|
|
(0.2)
|
%
|
|
|
Current accident year
combined ratio, excluding
catastrophe losses
(non-GAAP)
|
|
90.1
|
%
|
|
87.0
|
%
|
|
96.3
|
%
|
|
91.9
|
%
|
|
|
|
|
September 30,
2022
|
|
|
|
Total combined ratio
(GAAP)
|
|
95.8
|
%
|
|
88.8
|
%
|
|
102.6
|
%
|
|
97.0
|
%
|
|
|
Less: Catastrophe
ratio
|
|
4.8
|
%
|
|
2.6
|
%
|
|
7.7
|
%
|
|
5.5
|
%
|
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
91.0
|
%
|
|
86.2
|
%
|
|
94.9
|
%
|
|
91.5
|
%
|
|
|
Less: Prior-year
reserve development ratio
|
|
(0.5)
|
%
|
|
(2.2)
|
%
|
|
0.5
|
%
|
|
(0.5)
|
%
|
|
|
Current accident year
combined ratio, excluding
catastrophe losses
(non-GAAP)
|
|
91.5
|
%
|
|
88.4
|
%
|
|
94.4
|
%
|
|
92.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 below.
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
|
September 30,
2023
|
|
|
|
|
|
Core
Commercial
|
|
Specialty
|
|
Personal
Lines
|
|
Total
|
|
|
Total loss and LAE
ratio
|
|
65.4
|
%
|
|
48.3
|
%
|
|
95.9
|
%
|
|
74.2
|
%
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
0.5
|
%
|
|
(1.6)
|
%
|
|
-
|
|
|
(0.1)
|
%
|
|
|
Catastrophe
ratio
|
|
8.6
|
%
|
|
2.1
|
%
|
|
24.4
|
%
|
|
13.7
|
%
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
56.3
|
%
|
|
47.8
|
%
|
|
71.5
|
%
|
|
60.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
|
|
Total loss and LAE
ratio
|
|
68.6
|
%
|
|
54.7
|
%
|
|
81.4
|
%
|
|
70.6
|
%
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
0.3
|
%
|
|
(1.7)
|
%
|
|
-
|
|
|
(0.3)
|
%
|
|
|
Catastrophe
ratio
|
|
6.6
|
%
|
|
2.8
|
%
|
|
9.1
|
%
|
|
6.8
|
%
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
61.7
|
%
|
|
53.6
|
%
|
|
72.3
|
%
|
|
64.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
|
|
|
|
|
|
September 30,
2023
|
|
|
|
|
|
Core
Commercial
|
|
Specialty
|
|
Personal
Lines
|
|
Total
|
|
|
Total loss and LAE
ratio
|
|
66.6
|
%
|
|
52.0
|
%
|
|
98.1
|
%
|
|
76.2
|
%
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
0.4
|
%
|
|
(3.7)
|
%
|
|
1.2
|
%
|
|
(0.2)
|
%
|
|
|
Catastrophe
ratio
|
|
9.2
|
%
|
|
3.9
|
%
|
|
26.2
|
%
|
|
15.0
|
%
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
57.0
|
%
|
|
51.8
|
%
|
|
70.7
|
%
|
|
61.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
|
|
Total loss and LAE
ratio
|
|
63.1
|
%
|
|
53.7
|
%
|
|
76.0
|
%
|
|
66.2
|
%
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
(0.5)
|
%
|
|
(2.2)
|
%
|
|
0.5
|
%
|
|
(0.5)
|
%
|
|
|
Catastrophe
ratio
|
|
4.8
|
%
|
|
2.6
|
%
|
|
7.7
|
%
|
|
5.5
|
%
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
58.8
|
%
|
|
53.3
|
%
|
|
67.8
|
%
|
|
61.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
Operating income (loss)
and operating income (loss) per diluted (basic) 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 (basic) 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)
|
Book value per share,
excluding net unrealized appreciation (depreciation) on fixed
maturity investments, net of tax, is a non-GAAP measure. Book value
per share is the most directly comparable GAAP measure and is
reconciled in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended
|
|
|
|
|
|
June 30
|
|
September 30
|
|
|
|
|
|
2023
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
|
$62.62
|
|
$59.21
|
|
|
Less: Net unrealized
appreciation (depreciation) on fixed
maturity investments,
net of tax, per share
|
|
(17.06)
|
|
(20.17)
|
|
|
Book value per share,
excluding net unrealized appreciation
(depreciation) on fixed maturity investments, net of tax
|
|
$79.68
|
|
$79.38
|
|
|
|
|
|
|
|
|
|
|
Change in book value
per share
|
|
|
|
|
(5.4) %
|
|
|
Change in book value
per share, excluding net unrealized appreciation
(depreciation) on fixed maturity investments, net of tax
|
|
|
|
(0.4) %
|
|
|
|
(7)
|
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.
|
View original content to download
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SOURCE The Hanover Insurance Group, Inc.