The Hanover Insurance Group has recorded a net loss of $69.2 million in the second quarter of 2023, compared to net income of $22.7 million in the prior-year quarter.
Operating loss for the quarter was $68.3 million, compared to operating income of $83.9 million in the previous year’s quarter.
At the same time, The Hanover reported a combined ratio of 111.3% for Q2, as well as a combined ratio, excluding catastrophes of 92.8%
According to the company, cat losses of $261.6 million, or 18.5 points of the combined ratio were driven by several convective storms across multiple states, with hail damage representing the majority of reported losses and primarily impacting Personal Lines.
Meanwhile, The Hanover recorded a net investment income of $87.6 million for Q2, up 24.3% from the prior-year quarter, primarily due to higher bond reinvestment rates and the continued investment of operational cashflows, as well as the benefit of higher non-recurring partnership income.
Within Personal Lines, operating loss before income taxes was $194.1 million in the quarter, compared to operating income before income taxes of $2.8 million in the second quarter of 2022.
The Personal Lines combined ratio was 138.0%, compared to 103.2% in the prior-year quarter, while cat losses in Q2 were $219.2 million, or 38.0 points of the combined ratio, driven primarily by hail damage that significantly impacted the company’s homeowners book of business, particularly in Michigan. This compared to cat losses of $53.0 million, or 10.2 points of the combined ratio, in the prior-year quarter.
Net premiums written (NPW) within Personal Lines were $634.6 million, an increase of 10.1% from the prior-year quarter, driven primarily by renewal price change.
In addition, Specialty operating income before income taxes was $54.4 million in Q2, a solid increase compared to $45.2 million in Q222.
The Specialty combined ratio was 88.4%, compared to 89.4% in the prior-year quarter. Cat losses in Q2 were $9.1 million, or 2.8 points of the combined ratio, compared to $6.6 million, or 2.2 points, in the prior-year quarter.
NPW for Specialty were $325.4 million in Q2, representing a 7.6% rise from the prior-year quarter, with The Hanover noting that this was driven primarily by renewal price change, led by the firm’s specialty industrial and marine businesses.
“With elevated storm activity presenting challenges for our industry, we are focused on advancing our margin recapture plan and our proven strategy, leveraging innovative tools and deep underwriting expertise to address the substantial volatility we are experiencing,” said John C. Roche, president and chief executive officer at The Hanover.
“We are pleased with the progress we have made to date and have every confidence we can build on our strong market position and capitalize on our diversified portfolio to drive long-term, sustainable profitable growth.”
He continued: “Our Specialty business continued to deliver exceptional results, generating an 88.4% combined ratio and solid premium growth of 7.6% in the second quarter. Our Core Commercial business significantly reduced ex-CAT large losses and posted an improvement in the loss ratio compared to the second quarter last year, while increasing pricing by 11.3%, demonstrating the effectiveness of our margin recapture plan.
“We are laser focused on leveraging every opportunity available to us to restore profitability in Personal Lines as quickly as possible, and we believe the current hard market represents a substantial tailwind. Personal Lines renewal pricing continues to track above our original expectations, as demonstrated by average price increases of 21.7% in homeowners and 12.0% in auto. Our successful pricing actions, in combination with expected changes to product terms and conditions in homeowners coming online starting in the third quarter, foreshadow meaningful improvement in this business. We have a long and successful history effectively navigating challenging environments and we are confident in our ability to do so again.”
Jeffrey M. Farber, executive vice president and chief financial officer at The Hanover, added: “We achieved solid underlying performance in the second quarter, generating an ex-CAT combined ratio of 92.8%, while growing our premiums by 8.6%, primarily driven by pricing increases.
“Additionally, we posted a second quarter expense ratio of 30.6%, keeping us on track to achieve our savings target for the full year 2023. Our high quality, diversified investment portfolio provides a strong stream of income, and we continue to benefit from attractive reinvestment yields, which should bolster our future returns. We remain focused on the ongoing execution of our long-term strategic and business priorities, and on delivering value for our shareholders, agents, customers, and other stakeholders.”
