Cat losses almost triple at The Hanover in Q1
US-based property/casualty insurer The Hanover Insurance Group reported a jump in its first quarter 2017 catastrophe losses impacting results.
Catastrophe losses were $84.1 million before taxes, or 7.1 percent of earned premiums, compared to $31.2 million, or 2.7 percent, in the prior-year quarter. The increase was primarily driven by domestic catastrophe events in the Midwest.
The combined ratio deteriorated to 99.5 percent in the first quarter compared to 95.0 percent a year ago. Operating income fell to $40.8 million compared to $71.5 million. Net income dropped to $45.2 million compared to $78.2 million over the period.
"We are pleased with our solid operating earnings in the face of higher-than-expected catastrophe losses in our domestic business," said Joseph Zubretsky, president and CEO at The Hanover. "Underlying trends were stable across each of our business segments and in line with our expectations, which reflect our disciplined approach to pricing and risk selection. We are also pleased with our responsible top-line growth of 3.7 percent, driven by continued strong momentum in Personal Lines, pricing and retention strategies in Commercial Lines, and thoughtful management of our international specialty business.”
Commercial Lines, which targets the small to mid-size business markets, recorded operating income before taxes of $37.4 million, compared to operating income before taxes of $42.7 million in the first quarter of 2016. The Commercial Lines combined ratio was 100.2 percent, compared to 99.2 percent in the prior-year quarter. Catastrophe losses were $36.4 million, or 6.2 points of the combined ratio, compared to $18.9 million, or 3.3 points, in the prior-year quarter.
Chaucer, which represents The Hanover's international business written through Lloyd's of London, recorded operating income before taxes of $24.9 million in the quarter, compared to $33.7 million in the first quarter of 2016. Chaucer's combined ratio was 93.5 percent, compared to 89.8 percent in the prior-year quarter. Catastrophe losses were $7.3 million, or 3.5 points of the combined ratio, compared to $0.5 million, or 0.2 points, in the prior-year quarter.
Personal Lines operating income before taxes was $9.9 million in the quarter, compared to $47.1 million in the first quarter of 2016. The Personal Lines combined ratio was 101.6 percent, compared to 91.4 percent in the prior-year quarter. Catastrophe losses were $40.4 million, or 10.6 points of the combined ratio, compared to $11.8 million, or 3.3 points, in the prior-year quarter.
