Hanover Insurance Group Inc · NYSE:THG
Hanover Insurance — The Hanover Insurance Group — Credit Suisse Financial Services Forum 2021
36 slides from Hanover Insurance's conference presentation, Feb 25, 2021
Slide 1: The Hanover Insurance Group, Inc. (NYSE: THG)
The Hanover Insurance Group, Inc. (NYSE: THG) Credit Suisse Financial Services Forum February 25, 2021
Slide 2: The Hanover Insurance Group Overview
The Hanover Insurance Group Overview Diversified U.S. P&C franchise with strong growth opportunities and track record of success $4.2B $4.6B Market 2020 Capitalization* NPW 13.1% “A” 2020 Operating Financial Strength** ROE(1) (1) See information about this and other non-GAAP measures and definitions
Slide 3: Evolution to Today's Diversified Franchise
Evolution to Today’s Diversified Franchise 2005 2020 Regional, personal lines driven Balanced, small/middle market focused carrier with property concentration commercial and personal lines carrier • Transformed to a more balanced, differentiated Personal Lines Specialty P&C franchise 63% 21% Special
Slide 4: Our Investor Value Proposition
Our Investor Value Proposition Well-positioned for above industry growth and top-quartile profitability Differentiated strategy and product offerings Delivering value to our stakeholders 4
Slide 5: Our Vision
Our Vision To be the premier P&C franchise in the independent agent channel and help agents transform the way customers value and experience insurance AGENCY CARRIER OF CHOICE LEADING GROWTH SPECIALIZED THROUGH CAPABILITIES INNOVATION ENABLERS Build an Advance Drive organization of technology outsta
Slide 6: Unique Agency Distribution Approach Creates Competitive Advantage
Unique Agency Distribution Approach Creates Competitive Advantage 2,100 of the best U.S. independent The Hanover agents in the U.S. Targeted agency market focus distribution 7% average agency # of # of The market share Segment agents target Hanover in U.S. agents share 1. Top 3 brokers 3 Limited Bro
Slide 7: Leading Specialized Capabilities Drive Broad-Based Profitability
Leading Specialized Capabilities Drive Broad-Based Profitability Core Commercial Specialty Personal Lines Industry Account specialization Robust and offering for and unique relevant specialty customers operating offerings with complex model needs 2020 NPW $1.7B $1.0B $1.9B 3-yr avg. CR 95.7% 95.0% 9
Slide 8: Partner with Agents to Deliver Holistic, Customer-Centric Solutions
Partner with Agents to Deliver Holistic, Customer-Centric Solutions Focusing on meeting Differentiates our franchise in an customer needs… increasingly fragmented market U.S. Middle Market premium mix by number of lines written with one carrier 3+ lines Specialized/ Account focus: 41% niche products
Slide 9: Our Investor Value Proposition
Our Investor Value Proposition Well-positioned for above industry growth and top-quartile profitability Differentiated strategy and product offerings Delivering value to our stakeholders 9
Slide 10: Well-Positioned For Long-Term, Above Industry Growth and Top-Quartile Profitability
Well-Positioned For Long-Term, Above Industry Growth and Top-Quartile Profitability Increased penetration and targeted agency additions Agency Growth Agency Insight informs growth opportunities Leveraging account relationships across businesses Expanding Business Unit Focused product and industry ap
Slide 11: Agency Growth Strategy Driven by Penetration
Agency Growth Strategy Driven by Penetration Next 5-year Demonstrated success growth drivers increasing depth of relationship Success in expanding breadth and depth % of premium by relationship size • Ample headroom with nearly $100 billion market opportunity • Focus on achieving top 3 status $4.9B
Slide 12: Business Unit - Core Commercial
Business Unit - Core Commercial Diversified portfolio, providing industry focused solutions… Professional and Fin. Services Growth drivers 7% Wholesale & Retail Technology 12% 9% Manufacturing • Deepen agency partnerships, 12% leveraging market insights Contractors, Transp. and $1.7B Maint. Services
Slide 13: Business Unit - Specialty
Business Unit - Specialty Growth drivers >$1 billion diversified retail specialty business highly relevant to agents • Expanding product capabilities focused on agent needs: 5% Excess & Surplus 7% Healthcare – Financial Institutions 6% Surety 10-year CAGR – Retail E&S platform ~ 7% 8% Specialty Indu
Slide 14: Business Unit - Personal Lines
Business Unit - Personal Lines Moving upstream toward a more value- Growth Drivers oriented and growing customer segment… • Leveraging agent-centric distribution High net worth and strategy and state-of-the-art TAP Sales Coverage A CAT exposed Thresholds platform to gain share Homeowners $3.0M • Suc
Slide 15: Pulling Technology Levers to Drive Growth Through Ease of Use and Efficiency
Pulling Technology Levers to Drive Growth Through Ease of Use and Efficiency Re-platformed our organization over the past four years, paving the way into digital innovation Upgraded or replaced nearly entire technology stack, including: • New small commercial and Personal Lines platforms • Additiona
Slide 16: Driven by Leading Management Team with Depth of Experience
Driven by Leading Management Team with Depth of Experience Years of Selected P&C Executive Leader experience experience Jack Roche St. Paul, 35+ President and CEO Travelers Executive Strong culture and Leaders Jeff Farber 35 AIG clear strategy Chief Financial Officer attract top talent Ann Tripp Chi
Slide 17: Our Investor Value Proposition
Our Investor Value Proposition Well-positioned for above industry growth and top-quartile profitability Differentiated strategy and product offerings Delivering value to our stakeholders 17
Slide 18: Platform Positioned to Deliver Consistent Profitability
Platform Positioned to Deliver Consistent Profitability Franchise repositioning delivers Improved domestic performance generated top-quartile ROEs by lower expense and loss ratios 105.2 100.1 Top 100% 98.0 95.6 94.4 Quartile* 31.3 80 34.8 33.2 31.6 2020 31.6 Second 13.1% Quartile Operating 60 2015 R
Slide 19: Targeted Management of Property Aggregation Reduces Volatility
Targeted Management of Property Aggregation Reduces Volatility Our catastrophe management and corporate reinsurance philosophy is grounded in risk analytics, and the group’s earnings and financial strength Domestic Catastrophe Experience Compared to Industry ~4pts* below industry Hurricanes Hurrican
Slide 20: Ambitious and Achievable Long-Term Goals
Ambitious and Achievable Long-Term Goals Strong financial platform for profitable growth ROE improvement to come from expense leverage; insurance rate increases to offset investment yield pressure 13%+ target operating ROE Financial Targeted Stable/ Rigor and Profitable Improving Expense Growth Loss
Slide 21: Backed by Financial Discipline and Strong Balance Sheet
Backed by Financial Discipline and Strong Balance Sheet Investment • Balance sheet supported by diversified Portfolio business profile and lower severity focus Strength • Broadly diversified, high-quality ~$9 billion investment portfolio is well-positioned in Disciplined the current market Reserving
Slide 22: High Quality Diversified Investment Portfolio
High Quality Diversified Investment Portfolio Total invested assets and capital of $9.0 billion As of December 31, 2020 Fixed Maturities: $7.5 billion Equities, Cash and Other: $1.5 billion U.S. Municipals Government (Tax-exempt) Cash and cash Other 5% 1% equivalents 1% 8% Utilities 6% Exchange trad
Slide 23: Clear Priorities Have Driven Consistent Return of Capital
Clear Priorities Have Driven Consistent Return of Capital Annual Return of Excess Capital Return as Capital ($MMs) % of Net Income 2020 $312 87.1% 2019 $111 26.2% Maintain strong capitalization 2018 $152 38.9% and adequate liquidity 2017 $124 66.6% 2016 $186 119.9% 2015 $202 60.8% 2014 $87 Organic a
Slide 24: Diverse Board Focused on Delivering Stakeholder Value Through Strong Governance
Diverse Board Focused on Delivering Stakeholder Value Through Strong Governance Board member Selected experience Collective expertise Cynthia Egan Chair of the Board T. Rowe Price, Fidelity Depth and breadth of P&C Insurance industry experience Kevin Bradicich McKinsey Financial Services 55% gender,
Slide 25: Committed to Social Responsibility
Committed to Social Responsibility Environment Social Governance • Promoting sustainability • Advancing an inclusive • Strong corporate through: and diverse culture through: governance structure and − Investments in green − Employee-led business principles technology resource groups − Diverse Board
Slide 26: The Hanover Awards and Recognitions
The Hanover Awards and Recognitions $1.4M 100% score on Raised through Human Rights Women United Way Corporate on Boards Award Campaign Equality Index (2016, 2019, 2020) (2018, 2019, 2020, (2019) 2021) Over 95% Say- Top Gun Award Joined CEO on-PayApproval Action for Diversity Since 2014 for Rating A
Slide 27: Valuation Perspectives
Valuation Perspectives 26.5x 12.3x 13.8x 15.1x 11.7x • Strong competitive Price/NTM position Earnings THG Peer National Regional Specialty Median* • Broad-based profitability 24% • Top-quartile ROE 18% 17% 11% 13% 17% 11% 7% 5% 0% • Strong track record of earnings improvement Annualized Total Return
Slide 28: Our Investor Value Proposition
Our Investor Value Proposition Well-positioned for above industry growth and top-quartile profitability Differentiated strategy and product offerings Delivering value to our stakeholders 28
Slide 29: Forward-Looking Statements and Additional Risks and Uncertainties
Forward-Looking Statements and Additional Risks and Uncertainties 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 statemen
Slide 30: Additional Risks and Uncertainties (continued)
Additional Risks and Uncertainties (continued) 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 re
Slide 31: 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, 2019, the company uses non-GAAP financial measures as important measures of its operating performance, including operating income, operating inc
Slide 32: End notes
End notes* (1) Operating Return on Average Equity (“Operating ROE”) is a non-GAAP measure. Operating ROE is calculated by dividing annualized operating income after taxes for the applicable period (see under the heading in this presentation “Non-GAAP Financial Measures” and end note (5)), by the ave
Slide 33: End notes continued
End notes continued (2) Core commercial business provides commercial property and casualty coverages to small and mid-sized businesses in the U.S., generally with annual premiums per policy up to $250,000, primarily through the commercial multiple peril, commercial auto and workers’ compensation lin
Slide 34: End notes continued
End notes continued* (4) Tangible book value per share is a non-GAAP measure. Book value per share is the most directly comparable GAAP measure and is reconciled in the table below. Tangible book value per share is total shareholders' equity, excluding goodwill and intangible assets, divided by the
Slide 35: End Notes
End Notes End notes continued (5) Operating income (loss) is a non-GAAP measure. Operating income (loss) before taxes, as referenced in the results of the three business segments (for year ended December 31, 2015, which also included Chaucer), is defined as, with respect to such segment, operating i
Slide 36: End notes continued
End notes continued (6) Total shareholders’ equity, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is a non-GAAP measure. Total shareholders’ equity is the most directly comparable GAAP measure and is reconciled in the table below. For the calculation
The Hanover Insurance Group — Credit Suisse Financial Services Forum 2021 on 6ix