Hanover Insurance Group Inc · NYSE:THG
Hanover Insurance — Q1 2023 Earnings Presentation
25 slides from Hanover Insurance's earnings presentation, May 3, 2023
Slide 1: The Hanover Insurance Group, Inc. First Quarter 2023 Results
The Hanover Insurance Group, Inc. First Quarter 2023 Results May 3, 2023 To be read in conjunction with the press release dated May 2, 2023, and conference call scheduled for May 3, 2023
Slide 2: First Quarter 2023 Operating Highlights
First Quarter 2023 Operating Highlights • Combined ratio of 104.4%; combined ratio, excluding catastrophes(1), of 91.7% • Catastrophe losses of $175.0 million, or 12.7 points of the combined ratio, driven by severe freeze events and widespread wind and tornadic activity • Net premiums written increa
Slide 3: Consolidated Financial Results
Consolidated Financial Results Three months ended ($ in millions, except per share amounts) March 31, March 31, 2022 2023 Net income (loss) $104.9 ($12.0) Per diluted/(basic) share $2.90 ($0.34) (4) Operating income before interest expense and income taxes $154.4 $13.2 Operating income after income
Slide 4: Solid Operating Results
Solid Operating Results • First quarter 2023 combined ratio of 104.4%, increased 11.0 points from the prior-year ($ in millions) Net Premiums Written and Growth quarter, driven by catastrophe losses from severe freeze events in February and widespread wind and tornado activity in mid- ↑ 9.5% to-late
Slide 5: Core Commercial Underwriting Highlights
Core Commercial Underwriting Highlights Three months ended • First quarter 2023 current accident year March 31 combined ratio, ex-CAT, of 91.4%, ($ in millions) 2022 2023 increased 1.2 points from the prior-year Net premiums written $526.6 $565.3 quarter Growth 9.6% 7.3% Net premiums earned $474.7 $
Slide 6: Core Commercial Growth Highlights
Core Commercial Growth Highlights ($ in millions) Net Premiums Written and Growth • Net premiums written growth of 7.3% in the first quarter of 2023, driven by: ↑ 7.3% $565.3 − Growth of 9.9% in small commercial, $526.6 propelled by strong pricing $242.9 $253.4 − Growth of 4.3% in middle market, ref
Slide 7: Specialty Underwriting Highlights
Specialty Underwriting Highlights Three months ended • First quarter 2023 current accident year March 31 combined ratio, ex-CAT, of 88.8%, ($ in millions) 2022 2023 improved 0.9 points from the prior-year Net premiums written $302.8 $324.3 quarter Growth 9.4% 7.1% Net premiums earned $283.8 $311.7 •
Slide 8: Specialty Growth Highlights
Specialty Growth Highlights ($ in millions) Net Premiums Written and Growth • Net premiums written growth of 7.1% in ↑7.1% $324.3 the first quarter 2023, driven by strong $302.8 pricing and ongoing traction to gain $17.5 $17.1 market share supported by a prudent $94.1 $84.3 growth strategy $90.4 $10
Slide 9: Personal Lines Underwriting Highlights
Personal Lines Underwriting Highlights Three months ended • First quarter 2023 current accident year combined March 31 ratio, ex-CAT, of 94.1%, increased 3.3 points from the ($ in millions) 2022 2023 prior-year quarter, primarily due to the continuing Net premiums written $482.9 $531.9 impact of inf
Slide 10: Personal Lines Growth Highlights
Personal Lines Growth Highlights ($ in millions) Net Premiums Written and Growth • First quarter 2023 net premiums written growth of 10.1%, propelled by robust pricing ↑ 10.1% increases • Renewal price change* of 12.7% in Personal $531.9 $482.9 Lines, including 18.9% in homeowners and 8.9% in auto,
Slide 11: Successfully Executing on Pricing Levers
Successfully Executing on Pricing Levers Achieving Highest Property Renewal Price Change in Years Core CL Specialty Property Property Offerings Homeowners 20.0% 18.9% 16.8% Renewal Price Change 15.0% 11.4% 10.0% 5.0% 0.0% 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2017 201
Slide 12: Managing Catastrophe Trends
Managing Catastrophe Trends Deploying a broad set of tools to counter changing weather patterns • Strong track record of proactively addressing and adapting our exposure to prevailing catastrophe trends over the last ten years, leading to: ─ Lower exposure to hurricanes and coastal risks ─ Much lowe
Slide 13: Net Investment Income Trends
Net Investment Income Trends ($ in millions) Net Investment Income* • Net investment income of $78.7 million in the quarter, $1.8 million higher than the prior-year $76.9 $75.9 $78.7 quarter, helped by higher bond reinvestment $70.5 $73.0 $10.4 rates and the continued investment of $21.1 $12.7 $10.3
Slide 14: Investment Portfolio – Total Invested Assets and Cash of $8.9 Billion
Investment Portfolio – Total Invested Assets and Cash of $8.9 Billion As of March 31, 2023 High quality, well-diversified investment portfolio Fixed Maturities: $7.7 Billion Equities, Cash and Other: $1.2 Billion 5% 1% Marketable 6% Industrials 15% Securities 11% 28% 17% ETFs 2% Financials 32% 15% 1
Slide 15: Fixed Income Portfolio: Financials
Fixed Income Portfolio: Financials As of March 31, 2023 Financials Finance $864 million bank portfolio is comprised of highly rated Companies banking institutions with an average rating of “A-” 1% Market Value % of Invested Brokerage ($M) Assets 8% Morgan Stanley $33.4 0.38% Bank of New York Mellon
Slide 16: Fixed Income Portfolio: Commercial Real Estate
Fixed Income Portfolio: Commercial Real Estate As of March 31, 2023 Commercial Real Estate Fixed Income Commercial Mortgage-Backed Securities Carry % of Total • ~10% of total invested assets Value Invested ($M) Assets • Average overall rating of “AAA” • Significant structural protections from losses
Slide 17: About The Hanover
About The Hanover The Hanover Insurance Group, Inc. is the holding company for several property and casualty insurance companies, which together constitute one of the largest insurance businesses in the United States. The company provides exceptional insurance solutions through a select group of ind
Slide 18: Forward-Looking Statements
Forward-Looking Statements Certain statements in this document and comments made by management may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words s
Slide 19: Additional Risks and Uncertainties
Additional Risks and Uncertainties Investors are further cautioned and should consider the risks and uncertainties in the company’s business that may affect such estimates and future performance that are discussed in the company’s most recently filed reports on Form 10-K and Form 10-Q and other docu
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Non-GAAP Financial Measures As discussed on page 38 of the company’s Annual Report on Form 10-K for the year ended December 31, 2022, the company uses non-GAAP financial measures as important measures of its operating performance, including operating income (loss), operat
Slide 21: End notes
End notes (1) Combined ratio, excluding catastrophes, and current accident year combined ratio, excluding catastrophes, are non-GAAP measures. The combined ratio (which includes catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. This and other n
Slide 22: End notes continued
End notes continued (3) Current accident year loss and LAE ratio, excluding catastrophe losses, is a non-GAAP measure, which is equal to the loss and LAE ratio (“loss ratio”), excluding prior-year reserve development and catastrophe losses. The loss ratio (which includes losses, LAE, catastrophe los
Slide 23: End notes continued
End notes continued (4) Operating income (loss) and operating income (loss) per diluted (basic) share are non-GAAP measures. The following table provides the reconciliation of operating income (loss) and operating income (loss) per diluted (basic) share to the most directly comparable GAAP measures,
Slide 24: End notes continued
End notes continued (5) Book value per share, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is a non-GAAP measure. Book value per share is the most directly comparable GAAP measure and is reconciled in the table below. Period ended March 31 March 31
Slide 25: End notes continued
End notes continued (6) Operating return on average equity (“operating ROE”) is a non-GAAP measure. Operating ROE is calculated by dividing annualized operating income (loss) after tax for the applicable period (see end note (4)), by average shareholders’ equity, excluding unrealized appreciation (d
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