The Hanover Insurance Group, Inc. has announced a preliminary estimate for Q2 catastrophe losses of approximately $262 million, before taxes, with the firm expecting to report a Q2 2023 combined ratio of 111.3%.
These losses were driven primarily by the 19 convective storms across multiple states, with hail damage representing the majority of reported losses and primarily impacting the company’s Personal Lines business.
John C. Roche, President and Chief Executive Officer at The Hanover commented, “We experienced significant catastrophe losses in the second quarter, which according to industry estimates, is expected to be the worst second quarter for U.S. catastrophe losses since 2011, and potentially the industry’s costliest quarter for hail losses in history.
“Our CAT losses reflect the impact of severe weather, notably the prevalence and severity of hailstorms in Michigan, where we have our largest Personal Lines presence. Excluding catastrophes, our second quarter results are in line with our expectations, due to solid net investment income and strong results in our Specialty and Core Commercial businesses, partially offset by the continuing impact of inflationary trends in Personal Lines.”
Taking catastrophe loss estimates and other currently available information into account, the insurer projects to report a second-quarter combined ratio of 111.3%, and a combined ratio, excluding catastrophes of 92.8%.
Hanover expects to report an after-tax net loss per basic share of $1.94 and an operating loss per basic share of $1.91 for the second quarter of 2023.
The insurer projected a loss and LAE ratio (with GAAP) of 80.7%, meanwhile, the current accident year loss and LAE ratio excluding catastrophes (non-GAAP) stands at 62.3%.
Roche added, “Despite the recent and prevailing environmental challenges, we have every confidence in our ability to achieve our long-term strategic and financial goals, and deliver for all of our stakeholders.”
The insurer is intently focused on the effective execution of its margin recapture plan and is determined to continue adjusting its underwriting and risk management strategies to address increasingly severe weather trends and evolving risks.
Reportedly, these measures include taking steps to further improve insurance-to-value ratios, building on risk mitigation and prevention initiatives, as well as implementing changes to product terms and conditions, in particular in homeowners, some of which are expected to come into effect as soon as the third quarter of 2023.
Roche concluded, “The execution of our plan to date has resulted in property pricing outpacing our expectations in many lines, particularly in homeowners where we achieved renewal price increases of 22% on average in the second quarter. Additionally, the effectiveness of our planned Core Commercial property non-renewals executed last year is evidenced by lower-than-expected ex-CAT property losses in this business in the first half of 2023. We were also pleased that the progress we made through our margin recovery plan helped us achieve successful July 1 property reinsurance renewals, allowing us to secure per-risk and catastrophe occurrence treaty structures consistent with the expiring treaties, while at the same time increasing our catastrophe reinsurance limits at a reasonable price.”
