The Hanover Insurance Group, Inc. reported a net loss of $12.0 million in the first quarter of 2023, compared to net income of $104.9 million, as its pre-announced $175.0 million in catastrophe losses resulted in a combined ratio of 104.4 percent.
Group-wide, operating income also decreased from $117.7 million in Q1 2022 to $4.6 million in Q1 2023.
The difference between net loss and operating income in the first quarter of 2023 was primarily due to losses on intent to sell fixed income securities and a decrease in the fair value of equity securities during the period, the insurer noted.
The cat losses were driven by severe freeze events in the Northeast and Midwest, as well as widespread wind and tornadic activity across the US.
The carrier also recorded premium growth in the quarter when compared with the comparable prior year, as net premiums written (NPW) spiked to $1.42 billion and net premiums earned (NPE) rose to $1.38 billion.
The company’s Q1 2023 results show premium expansion in all business segments, including in core commercial where NPW increased to $565.3 million and NPE to $507.4 million.
Within the firm’s specialty unit, NPW rose to $324.3 million as NPE hit $311.7 million. In personal lines, NPW increased to $531.9 million as NPE expanded to $560.9 million.
Across the company, the Hanover’s catastrophe ratio deteorated significantly, year-on-year, from 3.6% to 12.7%. At the same time, the expense ratio was 30.7% compared with 31.1% in Q1 2022.
As a result, The Hanover has produced a combined ratio of 104.4% in the first-quarter of 2023, weakening from the 93.4% reported a year earlier.
Net investment income in Q1 2023 rose 2.3% from the prior year quarter to $78.7 million, driven by higher bond reinvestment rates and the continued investment of operational cashflows, partially offset by lower partnership income.
“The drastic catastrophe losses sustained by the industry in the first quarter reaffirm our efforts to mitigate the impact of very volatile weather,” said John Roche, president and CEO at The Hanover.
“In particular, we are taking steps to address the significant negative impact of winter and severe convective storms through refined underwriting, increased pricing, and enhanced loss prevention actions. We expect these and other measures should enable us to effectively manage our mix and impact of weather on our results, consistent with our success in managing catastrophe exposure over the past decade.”
“Our underlying results in the first quarter reflect strong performance across our Specialty, Core Commercial, and Personal Lines segments, with robust price increases across our book helping to drive top-line growth and advance our margin recapture plan,” said Roche.
“Despite recent turbulence in the financial markets, our confidence in the strength of our investment portfolio is bolstered by its high quality and effective diversification. Furthermore, we expect the current high interest rate environment to provide a meaningful, accumulating benefit to investment income, thus enabling us to reinvest at attractive market yields. We are fully committed to being strong stewards of our capital and we remain focused on the ongoing execution of our long-term strategic and business priorities,” Roche concluded.
