The Hanover’s Q4 2016 Financial Results

3 February 2017

The Hanover’s Q4 2016 Financial Results

WORCESTER, Mass., February 2, 2017 - The Hanover Insurance Group, Inc. (NYSE: THG) today reported a net loss of $13.5 million, or $0.32 per diluted share, for the fourth quarter of 2016. This compared to net income of $77.6 million, or $1.76 per diluted share, in the prior-year quarter. Operating loss was $19.7 million, or $0.46 per diluted share, for the fourth quarter of 2016, inclusive of strengthening domestic prior-year loss and loss adjustment expense reserves of $174.1 million ($113.2 million after taxes), compared to operating income of $80.3 million, or $1.82 per diluted share, in the prior-year quarter. Net income for the full year of 2016 was $155.1 million, or $3.59 per diluted share. This compared to net income of $331.5 million, or $7.40 per diluted share, in the full year of 2015. Operating income was $184.4 million, or $4.27 per diluted share, in 2016, compared to operating income of $280.0 million, or $6.25 per diluted share, in 2015.

“The fundamentals of our business are very strong, and we are pleased with the underlying results in the quarter and for the full year,” said Joseph M. Zubretsky, president and chief executive officer at The Hanover. “The reserve review we conducted during the quarter confirmed that the reserve development was related to business issues we believe we have successfully addressed in the recent past and gave us even greater confidence in the composition of our existing business portfolio. Our underlying performance during the quarter and full year, including the underlying quality of growth, strong retention and underwriting and pricing discipline, reaffirms our confidence in the foundation on which we are building our company. We look forward to sharing our go-forward strategy at our Investor Day later this month, where we will discuss our plan to deliver superior value for our partners, customers and shareholders.” “We have every reason to be optimistic about our current book of business and momentum,” said Jeffrey Farber, executive vice president and chief financial officer. “Excluding catastrophe losses, Commercial and Personal Lines reported full year current accident year combined ratios(3) of 92.5% and 88.8%, respectively, or 91.1% for domestic lines combined(4), an improvement of 1.7 points over 2015. Our overall results also reflected a modest level of catastrophe losses, and strong results at Chaucer. We were pleased with controlled topline growth, including strong momentum in Personal Lines, thoughtful balancing of pricing and retention in Commercial Lines, and our disciplined approach to navigating the soft market at Chaucer.”

Fourth Quarter and Full Year Highlights

  • Strengthened domestic prior-year loss and loss adjustment expense reserves by $174.1 million before taxes in the fourth quarter
  • Combined ratio of 107.7% in the fourth quarter and 98.6% in the full year, including 1.4 and 2.7 points of catastrophe losses and 12.3 and 3.0 points of unfavorable prior-year development, respectively
  • Current accident year combined ratio, excluding catastrophes, of 94.0% in the fourth quarter and 92.9% in the full year, improved from 94.3% and 93.8%, respectively
  • Net premiums written(5) up 3.4% in the fourth quarter and 1.6% in the full year, excluding the impact of the UK motor sale on June 30, 2015
  • Continued price increases in Commercial and Personal Lines
  • Net investment income of $74.2 million in the fourth quarter, up 6.0%, and $279.4 million for the year, consistent with full year 2015
  • Book value per share of $67.40, up 1.8% from December 31, 2015; book value per share excluding net unrealized gains on investments(6) of $63.01, up 0.5%
  • During 2016, repurchased approximately 1.3 million shares of common stock for $105.6 million, at an average price of $80.58 per share
  • On December 6, 2016, the Board of Directors increased the quarterly dividend on common shares by 9%, to $0.50 per common share

The Hanover’s Q4 2016 Financial Results


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