Hanover Insurance Group Sees A Third Quarter Profit

NU Online News Service, Nov. 3, 12:51 p.m. EST

The Hanover Insurance Group, Inc. reported a third quarter profit of $49.7 million, compared to a third quarter loss last year of $61.8 million.

Management noted premiums written were up 5.7 percent and catastrophe losses were far lower than the comparable quarter when the company results were impacted by two hurricanes and investment losses.

On a per share basis, the quarterly profit translated as 97 cents per share, compared with a loss of $1.21 per share, in the third quarter of the prior year.

The Worcester, Mass.-based company said last year's third quarter included $52.8 million of realized losses on investments, or $1.04 per share, and a loss from discontinued operations of $18.3 million, or 36 cents per share.

Hanover reported the company saw $3.1 million, or 6 cents per share, of federal income tax benefit on non-segment income related to a release of a tax valuation allowance associated with realized investment losses recorded earlier in 2009.

Third quarter property and casualty pre-tax segment income was $73.6 million, compared to $13.8 million in the 2008.

Hanover noted "significantly lower" pre-tax catastrophe losses of $24.7 million compared to $98.2 million in the prior-year quarter.

Frederick H. Eppinger, Hanover chief executive officer, said in a statement that, "Our core business continues to demonstrate strong fundamentals and we are pleased with the momentum we have in all of our strategic initiatives."

He added that, "Our growth for the quarter of 6 percent, which was driven by our increasingly specialized commercial business, is ahead of industry averages and is notable given contractions in the economy. We also achieved growth in book value per share of 10 percent during the quarter."

"Our company is in excellent financial condition," said Mr. Eppinger, "and our balance sheet is extremely strong, as underscored by our board of directors' decision two weeks ago to increase our common stock dividend by 67 percent and move to a quarterly dividend schedule next year."

He said that the company's recent decision to increase its share repurchase authorization by $100 million also "highlights the strength of our capital position."

For personal Lines, third quarter, pre-tax segment income was $27.4 million, compared to $18.1 million in the third quarter of 2008.

Personal lines combined ratio was close to breaking even at 100.2, compared to 102.8 in the prior-year quarter. The pre-tax net impact of catastrophes was $15.4 million or 4.2 points of the combined ratio in the third quarter, compared to $39.7 million, or 10.8 points in the third quarter of 2008.

A year-over-year decline in ex-catastrophe earnings was attributed primarily to the result of higher expenses, lower favorable development of prior-year loss reserves, lower net investment income and an increase in our ex-catastrophe current accident year losses, driven by elevated non-catastrophe weather losses in the homeowners line.

Net premiums written were $396.7 million, compared to $397.5 million in the third quarter of 2008. A reduction in the average written premium per policy, offset by improved pricing, drove relatively flat year-over-year results, Hanover explained

It said the lower average written premium per policy is primarily the result of planned changes in the business mix towards more desirable account business.

Commercial Lines pre-tax segment income was $38.7 million, compared to a loss of $6.6 million in the third quarter of 2008. Combined ratio for 2009 third quarter was 97.8 compared to 115.1 in the third quarter of 2008.

Net premiums written were $292.1 million in the third quarter of 2009, compared to $254.1 million in the third quarter of 2008. Growth in the company's specialty businesses, including AIX Holdings, Inc., which was acquired in November 2008, commercial niches, marine and Hanover Professionals accounted for the year-over-year growth in net written premium.