Filed Under:Markets, Personal Lines

The Hanover Posts $55M Q4 Loss; Cincinnati Financial, Selective Fare Better

The Hanover posted a fourth-quarter net loss of $55 million primarily due to the impact of Superstorm Sandy, while two other regional insurers—Cincinnati Financial and Selective—managed more positive results.

The Hanover reported Q4 catastrophe losses of more than $132 million—which includes $128.8 million related to the superstorm that wreaked havoc on New Jersey and New York on Oct. 29, producing an estimated industrywide loss of $25 billion.

“While Sandy had significant impact on our bottom line, we expect losses from this storm will be substantially lower than our market share would indicate, validating the effectiveness of our exposure-management actions and underscoring the quality of our underwriting,” CEO Frederick H. Eppinger says in a statement.

The Hanover’s Q4 loss compares to net income of $50 million for the same period in 2011. Net premiums written increased $57 million for the quarter to $1.03 billion.

For the year, the Worcester, Mass.-based insurer’s net income was up $19 million to $56 million. Revenues rose $775 million to $4.4 billion.

“The pricing momentum we experienced through the first three quarters of the year continued in the fourth quarter, as demonstrated by pricing increases of 8 percent in both Core Commercial and Personal Lines, and over 10 percent specialty,” Eppinger adds.

Another regional insurer with significant market in the States hit by Sandy was Branchville, N.J.-based Selective Insurance, whose Q4 net income dropped 93 percent from the prior year but saw a jump in its overall year-over-year net income.

“Hurricane Sandy was the most significant event in company history, yet we still ended the quarter with positive income,” Chairman, President and CEO Gregory E. Murphy says in a statement.

Selective’s Q4 2012 net income stood at $1.3 million, a drop of $17 million from the same period in 2011. Total revenues increased 12 percent, or $49 million, to $449 million. Those results translated into an 11.7-point increase in its statutory combined ratio to 110.4.

For the year, the insurer’s net income rose 72 percent, or $16 million, to $38 million. Total revenues were up 9 percent, or $137 million, to $1.7 billion.

Those results were aided by a $3 million year-over-year increase in investment income to $26 million, and pricing boosts in commercial lines of 6.7 percent for the quarter and 6.2 percent for the year.

Selective says it closed 85 percent of its approximate 8,000 personal lines claims and 62 percent of its approximate 5,000 commercial lines claims.

While other insurers have reported heavy losses from Sandy, Cincinnati Financial’s President and CEO Steven J. Johnston calls his company’s Sandy losses “relatively modest.” The company announced in November that its losses from Sandy stemmed from exposures in Cleveland, Ohio and Pennsylvania; the claims were primarily from wind damage or water damage due to drain back-ups or roofs that leaked after unusually heavy rains.

The total impact of catastrophes on the Cincinnati-based insurer in Q4 was $30 million, including Sandy.

Cincinnati reported net income of $192 million for Q4—up $58 million (or 43 percent) from the prior year. Revenues increased 12 percent ($115 million) to $1.07 billion.

The company ended the year on a high note, with net income jumping 157 percent (or $257 million) to $421 million. Revenues rose 8 percent ($308 million), to $4.1 billion.

Johnston credited the company’s increase in income in part to a 3 percent increase in investments from stock dividends, offsetting the low-interest bonds in which insurers typically invest.

The company’s bottom line also benefited from improved P&C insurance underwriting profit, which rose  to $160 million in Q4 2012 from $99 million for the prior year and to $137 million for the year after a $278-million loss in 2011.

The underwriting results produced a Q4 combined ratio of 81.9, a 5.6 point improvement, and 96.1 for the year, an improvement of 13.2 points.

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