• Operating Return on Equity (ROE): 9% in the second quarter, 12% through the first half of the year.

• Ex-CAT Combined Ratio: 88.5%, improved from 92.8% year over year.

• Written Premium Growth: 5.1% in the second quarter.

• Specialty Segment Growth: 8.2% top line growth, retention at 83%, renewal pricing momentum at 11.7%.

• Core Commercial Net Written Premium Growth: 5.5%, driven by an 8.5% increase in small commercial.

• Personal Lines Net Written Premium Growth: 3.3% in the quarter.

• Combined Ratio: 99.2% for the second quarter, including 10.7 points of catastrophe losses.

• Expense Ratio: 30.8% for the quarter.

• Net Investment Income: $90.4 million in the second quarter, a 3% increase from the prior year quarter.

• GAAP Book Value Per Share: Increased 1.1% sequentially to $70.96 per share.

• Warning! GuruFocus has detected 6 Warning Sign with THG.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Hanover Insurance Group Inc (NYSE:THG) reported a strong operating return on equity of 9% for the second quarter and 12% for the first half of the year.

• The company achieved significant improvement in underlying margins for personal lines, with an ex-cat combined ratio of 88.5% compared to 92.8% year over year.

• Specialty segment experienced top-line growth of 8.2%, driven by strong retention and double-digit new business growth.

• Core commercial segment delivered solid net written premium growth of 5.5%, with an 8.5% increase in small commercial.

• The company successfully renewed its property reinsurance treaties with favorable market responses, maintaining a consistent structure and securing full capacity across its catastrophe reinsurance program.

Negative Points

• The Hanover Insurance Group Inc (NYSE:THG) faced significant catastrophe losses, with a combined ratio of 99.2% including 10.7 points of catastrophe losses.

• Personal lines experienced pressure from elevated personal umbrella losses stemming from auto bodily injury coverage.

• The company noted a slowdown in claims emergence in workers' compensation, which merits caution in current year loss selections.

• The expense ratio increased by 20 basis points year-over-year, reflecting talent and technology investments as well as increased variable compensation.

• The company continues to face challenges from social inflation and evolving liability trends, requiring ongoing vigilance and proactive management.

Q & A Highlights

Q: Given your core margins in Personal Lines, specifically homeowners, are doing well, do you expect your rates to accelerate from here, or have they peaked? A: John Roche, President and CEO, explained that they are coming off the peak of significant insurance to value enhancement and increased rates. The company is pleased with its ability to meet and lead the market. Rates are expected to remain stable, but they will continue to monitor weather patterns and market conditions. Jeffrey Farber, CFO, added that while written rates will be consistent, earned rates will increase due to higher written rates in recent quarters.