Massachusetts-based property and casualty insurer The Hanover has reported a net income of $115.2 million in the second quarter, up from from $74 million in the prior year quarter.
The company has also updated its full-year 2020 outlook, including an improved combined ratio, excluding catastrophes, of between 89.5% and 90.5%, compared to the prior outlook of 91% to 92%.
Operating income was $62.7 million, compared to $77.7 million in the prior-year quarter.
The difference between net and operating income in the quarter was primarily due to an after-tax increase in the fair value of equity securities.
The company has increased COVID-19 loss reserves by $6 million to now include Workers’ Compensation, bringing the total ultimate loss expectation to $19 million.
Catastrophe losses for the quarter hit $147.8 million, including favourable development on prior-year catastrophes of $7 million
Net premiums written decreased 5%, primarily due to the impact of the Personal Auto premium returns, lower new business, and exposure reductions within Commercial Lines
Core Commercial Lines rates increased 5.1%, while Personal Lines increased 4.8%.
Net investment income decreased to $57.7 million primarily due to the decrease in the fair value of limited partnerships, which are reported on a quarter lag.
“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 C. Roche, president and chief executive officer at The Hanover.
“We delivered operating earnings per share of $1.63 and a solid operating ROE(5) 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.
“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.”