The Hanover CEO 'pleased' with Q2 results as profit rises
The Hanover Insurance Group improved its profit and combined ratio in the second quarter of 2020 despite elevated catastrophe loss experience. The company stated that its COVID-19-related loss activity was "limited" and future exposure is "manageable".
The property/casualty insurer reported a net profit of $115.2 million in Q2 2020, up from a net income of $74 million in the prior-year quarter. However, the net profit for the first half declined to $75.2 million from $196.4 million in H1 2020.
The company's net premiums written was $1.08 billion in Q2 2020, compared with $1.137 billion in Q2 2019. For the first six months of 2020, the net premiums written was $2.217 billion, down from $2.235 billion in H1 2020.
The combined ratio for the quarter stood at 96.2 percent, a slight change from 96.1 percent in Q2 2020.
The Hanover's catastrophe losses for the quarter were $147.8 million.
"We're very pleased with our performance in the second quarter, particularly in light of the elevated catastrophe loss experience for us and across the industry," said John Roche, president and chief executive officer at The Hanover. "We delivered operating earnings per share of $1.63 and a solid operating ROE of 9.5%, demonstrating our ability to operate successfully even in the most challenging of environments.
"In light of our diverse and high-quality underwriting mix, COVID-19-related loss activity remains limited and we believe future exposure is manageable. Although our second quarter net premiums written were down 5%, impacted by the significant and sudden slowdown in economic activity and premium returns, we saw flat premium growth in the month of June, and we began to see growth resume in July.
"Our underlying production metrics are strong, with rate increases of 5.1% and 4.8% in Core Commercial and Personal Lines, respectively. We are confident we will reestablish and even ultimately improve upon our strong, pre-pandemic growth trajectory, driving our company forward in this dynamic, rapidly changing environment, creating value for our agents and customers, while delivering improved underwriting performance, top-quartile growth and superior returns in the long term."
"We reported an all-in combined ratio of 96.2% and 82.7%, excluding catastrophes(6) in the second quarter," said Jeffrey M. Farber, executive vice president and chief financial officer. "Our underlying loss performance reflected the temporary benefit of lower frequency, particularly in short-tail lines, while we maintained a prudent reserving approach to liability coverages in light of potential future uncertainty. At the same time, we continue to maintain a rigorous focus on our expenses, delivering an expense ratio(7) of 31.3%, as we further optimize operating expenses to yield efficiencies and invest in strategic and innovative capabilities."
Roche concluded: "Our book value per share increased 12.6% to $81.10 during the quarter, as a result of net income and the increase in unrealized gains on our fixed income portfolio. We believe our carefully constructed and diversified book of business, strong financial foundation, and high-quality investment portfolio position us well moving forward."
