The Hanover Insurance returns to profit in Q2’24 with net income of $40.5m

The Hanover Insurance Group, Inc. has reported net income of $40.5 million for Q2 2024, compared to a net loss of $69.2 million in the prior-year quarter, as the company’s combined ratio came down from 111.3% to 99.2% amid lower year-on-year catastrophe losses.

For the second quarter of 2024, catastrophe losses totalled $157.1 million, or 10.7 points of the combined ratio, so down from the $261.6 million, or 18.5 points of the combined ratio seen in Q2 2023. In total, the loss and loss adjustment expense ratio of 68.4% came in 12.3 points below the prior-year quarter.

The lower cat ratio, flat expense ratio, and the impact of prior year development, has led to a combined ratio of 99.2% for the quarter, which is a significant improvement on the 111.3% reported in Q2 2023, reflecting a better underwriting performance.

Group-wide, net premiums written increased to $1.5 billion from $1.4 billion, and net earned premiums grew from $1.4 billion to $1.5 billion.

Net investment income reached $90.4 million, up 3.2% from the prior-year quarter.

As well as net income of $40.5 million, The Hanover has also reported Q2 2024 operating income of $68.1 million, compared with an operating loss of $68.3 million a year earlier.

A look at the underwriting and wider performance by segment, core commercial operating income before taxes was $83.2 million for Q2 2024, compared to $60.1 million in Q2 2023. The combined ratio was 91.8%, compared to 95.8% in the prior year quarter. Catastrophe losses in Q2 2024 were $16.4 million compared to Q2 2023’s $33.3 million.

In specialty, the operating income before taxes was $42.6 million for Q2 2024, compared to $54.4 million in Q2 2023, and the combined ratio was 93.1%, compared to 88.4% in the prior-year quarter. The segment’s catastrophe losses were $22.1 million in Q2 2024 compared to $9.1 million in the prior-year quarter.

In personal lines, operating income for Q2 2024 before income taxes was $30.4 million, compared to an operating loss before income taxes of $194.1 million in Q2 2023. The combined ratio was 109.1%, compared to 138% in the prior-year quarter. Catastrophe losses hit $118.6 million in Q2 2024, compared to catastrophe losses of $219.2 million in the prior year quarter.

John C. Roche, President and Chief Executive Officer, commented, “We are very pleased with our second quarter results. Our 9% operating return on equity for the second quarter, and 12% year-to-date, are a testament to the progress we have made on our margin improvement initiatives and the resiliency of our business in the face of weather volatility. We delivered an ex-CAT combined ratio of 88.5%, an excellent improvement over the prior-year quarter, led by outstanding underlying loss ratio improvement in Personal Lines, very strong profitability in Specialty and solid underlying margin gains in Core Commercial.

“Our steadily improving growth demonstrates the strength of our market position and distinctive distribution strategy that allows us to effectively operate in a rapidly changing market and loss environment. We achieved over 8% growth in both our Small Commercial and Specialty businesses, which continue to be a source of high-quality new business and strong pricing. While we remain focused on leveraging our foundational capabilities for margin expansion in the short-term, we also continue to invest in the long-term by deploying digital APIs to our independent agents and brokers, using advanced analytics for pricing sophistication and risk selection, and increasing the use of AI for operational efficiencies.”

Jeffrey M. Farber, Executive Vice President and Chief Financial Officer, added: “In this dynamic environment, financial discipline remains the utmost priority. We are extremely encouraged by the execution on our catastrophe risk management actions to-date, including the roll-out of updated terms and conditions in Personal Lines that began in April, and substantial catastrophe exposure reductions and deductible changes in the Commercial Lines portfolio. We are maintaining our robust reserving process and doubling down on data and analytics tools to inform pricing and underwriting given the current casualty market dynamics. At the same time, we remain diligent with our investment portfolio. Net investment income increased approximately 20%, excluding partnerships, in the second quarter; and together with our new external manager, we will continue to seek attractive investment opportunities in the future.”

“Looking ahead to the next 12 to 18 months, we are confident our positive trajectory will continue. We expect underwriting margins to continue to improve as past and current rate increases earn-in, and we further execute against our catastrophe exposure initiatives. Furthermore, we expect the current interest rate environment to continue to provide an accumulating benefit of higher investment yields. We couldn’t be more excited about our prospects, and remain committed to delivering value to our stakeholders through sustainable, profitable growth and top-tier performance,” Farber concluded.

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