WORCESTER, Mass., Feb. 2, 2022 /PRNewswire/ -- The Hanover
Insurance Group, Inc. (NYSE: THG) today reported net income of
$163.5 million, or $4.53 per diluted share, in the fourth quarter of
2021, compared to $164.6 million, or
$4.43 per diluted share, in the
prior-year quarter. Operating income(7) was
$122.1 million, or
$3.38 per diluted share, for the
fourth quarter of 2021. This compared to operating income of
$112.0 million, or $3.02 per diluted share, in the prior-year
quarter. The difference between net and operating income in the
fourth quarter of 2021 was primarily due to the after-tax increase
in the fair value of equity securities of $42.0 million, or $1.16 per fully diluted share, which is excluded
from operating income.
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Net income for the full year 2021 was $418.7 million, or $11.49 per diluted share. This compares to net
income of $358.7 million, or
$9.42 per diluted share, in the prior
year. Operating income was $318.3
million, or $8.73 per diluted
share, in 2021, compared to operating income of $355.0 million, or $9.32 per diluted share, in the prior year.
"2021 was an exceptional year for our company, as we enhanced
our competitive position, continued our positive financial momentum
and advanced our unique culture," said John
C. Roche, president and chief executive officer at The
Hanover. "We delivered strong
performance in the fourth quarter, with record operating earnings
of $3.38 per diluted share, as well
as net premiums written growth of 9.2%. Our performance in the
quarter and the year underscores the effectiveness of our
distinctive strategy, the relevancy of our product and service
offerings, and the strength of our agency partnerships. At the same
time, we made important progress across all of our businesses
throughout the year. In Personal Lines, our thoughtful pricing
strategy, combined with continued strong performance, has
positioned us to deliver sustained, profitable growth and value
creation in the year ahead. In Commercial Lines, robust rate
increases generated meaningful margin expansion, particularly in
our specialty business, while our focus on innovative products and
technology advancements continued to drive impressive growth. Our
ability to generate broad-based profitability, along with our
superior underwriting and advanced data and analytics capabilities,
proved to be more critical than ever in 2021, as we navigated
extremely dynamic market conditions and challenges. We begin 2022
with a proven strategy and a talented, committed team, eager to
build on our unique competitive advantage and position us for even
greater success."
"We are very pleased with the outstanding financial results we
delivered this year," said Jeffrey M.
Farber, executive vice president and chief financial officer
at The Hanover. "Our fourth
quarter results reflect a sub-90s ex-CAT combined ratio and an
excellent operating return on equity(8) of 16.8%,
providing an incredibly strong ending to an already successful
year. We delivered a full-year operating return on equity of 11.2%,
despite significant catastrophe activity and increasing severity
trends. Furthermore, our business is delivering underlying
profitability above pre-pandemic levels, which speaks to the
sustainability of our strong financial performance. In line with
prior guidance, we achieved a 30-basis-point improvement in our
full-year expense ratio, reflecting the benefit of growth and
operational efficiencies generated by our investments in technology
and data analytics. We continued to be responsible stewards of our
capital and deliver value to our shareholders in 2021, returning
$265 million through dividends and
share repurchases. We start the new year with great optimism and
enthusiasm, in an excellent financial position, supported by a
strong balance sheet and a high-quality investment portfolio."
|
Three months
ended
|
|
Year ended
|
|
|
December
31
|
|
December
31
|
|
($ in
millions, except per share data)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net premiums
written
|
$1,214.9
|
|
$1,112.1
|
|
$4,993.4
|
|
$4,598.5
|
|
Net income
|
163.5
|
|
164.6
|
|
418.7
|
|
358.7
|
|
per diluted
share
|
4.53
|
|
4.43
|
|
11.49
|
|
9.42
|
|
Operating
income
|
122.1
|
|
112.0
|
|
318.3
|
|
355.0
|
|
per diluted
share
|
3.38
|
|
3.02
|
|
8.73
|
|
9.32
|
|
Net investment
income
|
79.5
|
|
70.2
|
|
310.7
|
|
265.1
|
|
Book value per
share
|
$88.59
|
|
$87.96
|
|
$88.59
|
|
$87.96
|
|
Ending shares
outstanding (in millions)
|
35.5
|
|
36.4
|
|
35.5
|
|
36.4
|
|
Combined
ratio
|
92.9 %
|
|
92.4 %
|
|
97.0 %
|
|
94.4 %
|
|
Prior year development
ratio
|
(1.2)%
|
|
(0.5)%
|
|
(1.2)%
|
|
(0.3)%
|
|
Catastrophe
ratio
|
3.1 %
|
|
3.0 %
|
|
8.4 %
|
|
6.3 %
|
|
Combined ratio,
excluding catastrophes
|
89.8 %
|
|
89.4 %
|
|
88.6 %
|
|
88.1 %
|
|
Current accident year
combined ratio, excluding
catastrophes(1)
|
91.0 %
|
|
89.9 %
|
|
89.8 %
|
|
88.4 %
|
|
|
(1) See information
about this and other non-GAAP measures and definitions used
throughout this press release on the final pages of this
document.
The Hanover Insurance Group, Inc. may also be referred to as "The
Hanover" or "the Company" interchangeably throughout this press
release.
|
|
*Unless otherwise
stated, net premiums written growth and other growth comparisons
are to the same period of the prior year
|
Fourth Quarter Operating
Highlights
Commercial Lines
Commercial Lines operating income
before taxes was $120.9 million in
the fourth quarter of 2021, compared to $103.2 million in the fourth quarter of 2020. The
Commercial Lines combined ratio was 90.7%, compared to 91.5% in the
prior-year quarter. Catastrophe losses in the fourth quarter of
2021 were $15.5 million, or 2.1
points of the combined ratio. This compares to catastrophe losses
of $10.0 million, or 1.5 points of the combined ratio, in the
prior-year quarter.
Fourth quarter 2021 results included $11.4 million, or 1.5 points, of net favorable
prior-year reserve development, driven primarily by continued
favorability in workers' compensation. This compared to net
favorable prior-year reserve development of $6.3 million, or 0.9 points, in the fourth
quarter of 2020.
Commercial Lines current accident year combined ratio, excluding
catastrophes, decreased 0.8 points to 90.1% in the fourth quarter
of 2021, from 90.9% in the prior-year quarter. The current accident
year loss and LAE ratio, excluding catastrophes, decreased by 0.4
points to 55.9%, primarily driven by earning-in rate increases,
most notably in other commercial lines, where most of the specialty
business is reported.
The expense ratio(9) decreased 0.4 points to
34.2% in the fourth quarter of 2021, compared to the prior-year
period, primarily attributable to fixed cost leverage from premium
growth.
Net premiums written were $712.7
million in the quarter, up 9.6% from the prior-year quarter,
driven primarily by rate and exposure increases. Core commercial
average base rate increased 6.3% for the fourth quarter, while
pricing(2) increases averaged 9.5%.
The following table summarizes premiums and the components of
the combined ratio for Commercial Lines:
|
Three months
ended
|
|
Year ended
|
|
|
December
31
|
|
December
31
|
|
($ in
millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net premiums
written
|
$712.7
|
|
$650.1
|
|
$2,983.7
|
|
$2,733.1
|
|
Net premiums
earned
|
745.9
|
|
683.7
|
|
2,840.8
|
|
2,683.3
|
|
Operating income
before taxes
|
120.9
|
|
103.2
|
|
269.9
|
|
275.4
|
|
Loss and LAE
ratio
|
56.5%
|
|
56.9%
|
|
63.8%
|
|
61.4%
|
|
Expense
ratio
|
34.2%
|
|
34.6%
|
|
33.8%
|
|
34.4%
|
|
Combined
ratio
|
90.7%
|
|
91.5%
|
|
97.6%
|
|
95.8%
|
|
Prior-year development
ratio
|
(1.5)%
|
|
(0.9)%
|
|
(1.2)%
|
|
(0.7)%
|
|
Catastrophe
ratio
|
2.1 %
|
|
1.5 %
|
|
8.0 %
|
|
4.9 %
|
|
Combined ratio,
excluding catastrophes
|
88.6 %
|
|
90.0 %
|
|
89.6 %
|
|
90.9 %
|
|
Current accident year
combined ratio, excluding
catastrophes
|
90.1 %
|
|
90.9 %
|
|
90.8 %
|
|
91.6 %
|
|
Personal Lines
Personal Lines operating income before
taxes was $40.9 million in the fourth
quarter of 2021, compared to $50.8
million in the fourth quarter of 2020. The Personal Lines
combined ratio was 96.2%, compared to 93.4% in the prior-year
quarter. Catastrophe losses in the fourth quarter of 2021 were
$23.5 million, or 4.7 points of the
combined ratio, compared to $25.1
million, or 5.3 points of the combined ratio, in the
prior-year quarter.
Fourth quarter 2021 results included net favorable prior-year
reserve development of $3.0 million,
or 0.6 points, compared to no net impact in the fourth quarter of
2020.
Personal Lines current accident year combined ratio, excluding
catastrophe losses, increased by 4.0 points to 92.1% in
the fourth quarter, from 88.1% in the prior-year quarter. The
current accident year loss and LAE ratio, excluding catastrophes,
increased by 5.1 points to 64.8% in the fourth quarter of
2021, compared to the fourth quarter of 2020, attributable to
increased property severity and auto loss frequency, although loss
frequency in auto remains below pre-pandemic levels.
The expense ratio decreased by 1.1 points to 27.3% in the fourth
quarter of 2021, primarily attributable to lower performance-based
agency compensation and higher net premiums earned.
Net premiums written were $502.2
million in the fourth quarter of 2021, up 8.7% from the
prior-year quarter, driven by higher new business. Personal Lines
average rate increases in the fourth quarter of 2021 were 2.0%.
The following table summarizes premiums and components of the
combined ratio for Personal
Lines:
|
Three months
ended
|
|
Year ended
|
|
|
December
31
|
|
December
31
|
|
($ in
millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net premiums
written
|
$502.2
|
|
$462.0
|
|
$2,009.7
|
|
$1,865.4
|
|
Net premiums
earned
|
496.7
|
|
470.3
|
|
1,929.4
|
|
1,844.1
|
|
Operating income
before taxes
|
40.9
|
|
50.8
|
|
158.5
|
|
212.5
|
|
Loss and LAE
ratio
|
68.9%
|
|
65.0%
|
|
68.5%
|
|
64.7%
|
|
Expense
ratio
|
27.3%
|
|
28.4%
|
|
27.7%
|
|
27.7%
|
|
Combined
ratio
|
96.2%
|
|
93.4%
|
|
96.2%
|
|
92.4%
|
|
Prior-year development
ratio
|
(0.6)%
|
|
-
|
|
(1.2)%
|
|
-
|
|
Catastrophe
ratio
|
4.7 %
|
|
5.3 %
|
|
9.1 %
|
|
8.4 %
|
|
Combined ratio,
excluding catastrophes
|
91.5 %
|
|
88.1 %
|
|
87.1 %
|
|
84.0 %
|
|
Current accident year
combined ratio, excluding
catastrophes
|
92.1 %
|
|
88.1 %
|
|
88.3 %
|
|
84.0 %
|
|
Full Year Operating Highlights
Operating income before income taxes and interest expense was
$432.3 for the full year of 2021,
with a combined ratio of 97.0%. In 2020, operating income before
income taxes and interest expense was $484.7
million, with a combined ratio of 94.4%.
Catastrophe losses were $402.6
million, or 8.4 points of the combined ratio in 2021,
compared to $286.7 million, or 6.3
points, in the prior year. Net favorable prior-year reserve
development, excluding catastrophes, was $56.1 million, or 1.2 points, in 2021. For 2020,
net favorable prior-year reserve development, excluding
catastrophes, was $15.5 million, or
0.3 points.
The current accident year combined ratio, excluding catastrophe
losses, was 89.8% in 2021, compared to 88.4% in 2020, driven by an
increase in the current accident year loss and LAE ratio, primarily
due to higher property severity and auto loss frequency, though
loss frequency in auto remains below pre-pandemic levels. Relative
to the comparative period of 2019, the underlying loss experience
remains favorable. Partially offsetting the increase in the loss
ratio was a 0.3-point improvement in the expense ratio, primarily
due to fixed cost leverage from premium growth.
Total net premiums written were $5.0
billion in 2021, up 8.6% from 2020, including Commercial
Lines growth of 9.2%, reflecting strong contributions from the
specialty business, and Personal Lines growth of 7.7%.
Commercial Lines operating income before taxes was $269.9 million in 2021, which included
$227.3 million, or 8.0 points, of
catastrophe losses, and $34.0
million, or 1.2 points, of net favorable prior-year reserve
development. In 2020, Commercial Lines operating income before
taxes was $275.4 million, which
included $132.2 million, or 4.9
points, of catastrophe losses, and $19.0
million, or 0.7 points, of net favorable prior-year reserve
development.
The Commercial Lines current accident year combined ratio,
excluding catastrophe losses, was 90.8%, compared to 91.6% in the
prior year, driven by an improvement in the current accident year
loss and LAE ratio, which benefited from rate increases earning-in
and a decrease in the expense ratio.
Personal Lines operating income before taxes was $158.5 million, which included $175.3 million, or 9.1 points, of catastrophe
losses, and $23.1 million, or 1.2
points, of net favorable prior-year reserve development. In 2020,
Personal Lines operating income before taxes was $212.5 million, which included $154.5 million, or 8.4 points, of catastrophe
losses, and immaterial favorable prior-year reserve
development.
The Personal Lines current accident year combined ratio,
excluding catastrophes, increased to 88.3% from 84.0% in the prior
year, driven primarily by an increase in the personal auto current
accident year loss and LAE ratio from increasing severity and
decelerating, but still favorable, loss frequency benefits. The
company's Personal Lines current accident year loss and LAE ratio
remains below the pre-pandemic 2019 ratio by 2.1 points.
Investments
Net investment income was $79.5 million for the fourth quarter of 2021,
compared to $70.2 million in the
prior-year quarter. The increase was driven by unusually high
income from limited partnerships, and to a lesser degree, continued
investment of higher operating cash flow, partially offset by lower
new money yields. The average pre-tax earned yield on fixed
maturities was 2.90% and 3.15% for the quarters ended December 31, 2021, and 2020, respectively. Total
pre-tax earned yield on the investment portfolio for the quarter
ended December 31, 2021, was 3.69%,
up from 3.45% in the prior-year quarter.
Net realized and unrealized investment gains recognized in
earnings were $50.4 million in the
fourth quarter of 2021 and $65.2
million in the fourth quarter of 2020, primarily consisting
of changes in the fair value of equity securities.
Net investment income was $310.7
million for the full year 2021, compared to $265.1 million in 2020. The increase was driven
by unusually high income from limited partnerships, and to a lesser
degree, continued investment of higher operating cash flow,
partially offset by lower new money yields. The average pre-tax
earned yield on fixed maturities was 2.99% and 3.33% for the years
ended December 31, 2021, and 2020,
respectively. Total pre-tax earned yield on the investment
portfolio for the year ended December 31,
2021, was 3.70%, up from 3.35% in 2020.
Net realized and unrealized investment gains were $123.0 million in 2021 compared to $5.0 million in 2020. This increase was primarily
due to changes in the fair value of equity securities.
The company held $9.4 billion in
cash and invested assets on December
31, 2021. Fixed maturities and cash represented
approximately 85% of the investment portfolio. Approximately 95% of
the company's fixed maturity portfolio is rated investment grade.
Net unrealized gains on the fixed maturity portfolio as of
December 31, 2021, were $209.1 million before taxes, a decrease in fair
value of $89.7 million since
September 30, 2021, due to higher
interest rates and wider credit spreads, and a decrease in fair
value of $299.7 million since
December 31, 2020, due to higher
interest rates.
Shareholders' Equity and Capital
Actions
On December 31, 2021, book value per
share was $88.59, up 1.8% from
September 30, 2021, and up 0.7% from
December 31, 2020. The increase was
primarily driven by net income, partially offset by a decrease in
unrealized gains on fixed income securities. Excluding net
unrealized gains on fixed maturity investments, net of tax, book
value per share increased 4.4% from September 30, 2021, and 9.4% from December 31, 2020.
During the quarter, the company repurchased approximately
154,000 shares of common stock in the open market for $20.0 million. In 2021, the company repurchased
approximately 1.2 million shares of common stock in the open market
for $162.6 million. Additionally,
through February 1, the company
repurchased approximately 49,000 shares of common stock in the open
market for $6.6 million. The company
has approximately $354 million of
remaining capacity under its existing share repurchase program.
Additionally, in the fourth quarter, the Board of Directors
approved an increase to the quarterly dividend of 7.1% to
$0.75 per common share. The company
paid ordinary dividends of $26.6
million in the fourth quarter and $102.2 million in the year.
Earnings Conference Call
The company will host a
conference call to discuss its fourth quarter and full year results
on Thursday, February 3, at 10:00
a.m. E.T. A PowerPoint slide presentation will
accompany the prepared remarks and has been posted on The
Hanover's website.
Interested investors and others can listen to the call and access
the presentation through The Hanover's website, located at www.hanover.com,
in the "Investors" section. Investors may access the conference
call by dialing 1-844-413-3975 in the U.S. and 1-412-317-5458
internationally. Web-cast participants should go to the website 15
minutes early to register, download and install any necessary audio
software. A re-broadcast of the conference call will be available
on The Hanover's website
approximately two hours after the call.
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
independent agents and brokers. Together with its agent partners,
the company offers standard and specialized insurance protection
for small and mid-sized businesses, as well as for homes,
automobiles, and other personal items. For more information, please
visit hanover.com.
Contact Information
Investors:
|
Media:
|
|
|
Oksana
Lukasheva
|
Michael F.
Buckley
|
Emily P.
Trevallion
|
|
Email:
olukasheva@hanover.com
|
Email:
mibuckley@hanover.com
|
Email:
etrevallion@hanover.com
|
|
1-508-525-6081
|
|
1-508-855-3099
|
|
1-508-855-3263
|
|
|
|
|
|
|
|
|
|
|
Definition of Reported Segments
Continuing operations include three operating segments: Commercial
Lines, Personal Lines and Other. The Commercial Lines segment
offers a suite of products targeted at the small to mid-size
business markets, which include commercial multiple peril,
commercial automobile, workers' compensation and other commercial
coverages such as management and professional liability, marine,
Hanover Programs, specialty industrial and commercial property,
monoline general liability, surety and other commercial lines. The
Personal Lines segment markets automobile, homeowners and ancillary
coverages to individuals and families. The "Other" segment
includes Opus Investment Management, Inc., which provides
investment management services to institutions, pension funds and
other organizations, the operations of the holding company, as well
as a block of run-off voluntary property and casualty pools
business in which we have not actively participated since 1995.
Financial Supplement
The Hanover's fourth quarter and full-year
earnings news release and financial supplement are available in the
"Investors" section of the company's website at hanover.com.
Condensed
Financial Statements and Reconciliations
|
|
The Hanover
Insurance Group, Inc.
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Income Statements
|
|
Three months
ended
|
|
Year ended
|
|
|
|
December
31
|
|
December
31
|
|
($ in
millions)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Premiums
earned
|
|
$1,242.6
|
|
$1,154.0
|
|
$4,770.2
|
|
$4,527.4
|
|
Net investment
income
|
|
79.5
|
|
70.2
|
|
310.7
|
|
265.1
|
|
Net realized and
unrealized investment gains (losses):
|
|
|
|
|
|
|
|
|
|
Net realized
gains (losses) from sales and other
|
|
(2.2)
|
|
5.8
|
|
4.6
|
|
17.9
|
|
Net change in
fair value of equity securities
|
|
53.2
|
|
57.8
|
|
119.1
|
|
13.4
|
|
Impairment recoveries (losses) on investments
|
|
(0.6)
|
|
1.6
|
|
(0.7)
|
|
(26.3)
|
|
Total net realized and
unrealized investment gains
|
|
50.4
|
|
65.2
|
|
123.0
|
|
5.0
|
|
Fees and other
income
|
|
6.0
|
|
6.4
|
|
23.9
|
|
27.3
|
|
Total
revenues
|
|
1,378.5
|
|
1,295.8
|
|
5,227.8
|
|
4,824.8
|
|
Losses and
expenses
|
|
|
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
|
763.8
|
|
695.3
|
|
3,134.2
|
|
2,845.2
|
|
Amortization of
deferred acquisition costs
|
|
254.2
|
|
239.1
|
|
982.7
|
|
951.0
|
|
Interest
expense
|
|
8.5
|
|
8.5
|
|
34.0
|
|
37.1
|
|
Loss from repayment of
debt
|
|
-
|
|
-
|
|
-
|
|
6.2
|
|
Other operating
expenses
|
|
147.2
|
|
145.9
|
|
555.6
|
|
540.5
|
|
Total losses and
expenses
|
|
1,173.7
|
|
1,088.8
|
|
4,706.5
|
|
4,380.0
|
|
Income from continuing
operations before income taxes
|
|
204.8
|
|
207.0
|
|
521.3
|
|
444.8
|
|
Income tax
expense
|
|
42.0
|
|
41.1
|
|
101.3
|
|
82.8
|
|
Income from continuing
operations
|
|
162.8
|
|
165.9
|
|
420.0
|
|
362.0
|
|
Discontinued
operations (net of taxes):
|
|
|
|
|
|
|
|
|
|
Income from Chaucer
business
|
|
1.2
|
|
0.4
|
|
1.2
|
|
0.4
|
|
Loss from discontinued
life businesses
|
|
(0.5)
|
|
(1.7)
|
|
(2.5)
|
|
(3.7)
|
|
Net income
|
|
$163.5
|
|
$164.6
|
|
$418.7
|
|
$358.7
|
|
The Hanover
Insurance Group, Inc.
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
December
31
|
|
December
31
|
|
($ in
millions)
|
|
2021
|
|
2020
|
|
Assets
|
|
|
|
|
|
Total
investments
|
|
$9,152.6
|
|
$8,846.1
|
|
Cash and cash
equivalents
|
|
230.9
|
|
120.6
|
|
Premiums and accounts
receivable, net
|
|
1,469.5
|
|
1,339.3
|
|
Reinsurance
recoverable on paid and unpaid losses and unearned
premiums
|
|
1,907.3
|
|
1,874.3
|
|
Other
assets
|
|
1,386.9
|
|
1,153.2
|
|
Assets of discontinued
businesses
|
|
107.1
|
|
110.2
|
|
Total
assets
|
|
$14,254.3
|
|
$13,443.7
|
|
Liabilities
|
|
|
|
|
|
Loss and loss
adjustment expense reserves
|
|
$6,447.6
|
|
$6,024.0
|
|
Unearned
premiums
|
|
2,734.9
|
|
2,482.7
|
|
Debt
|
|
781.6
|
|
780.8
|
|
Other
liabilities
|
|
1,023.6
|
|
833.2
|
|
Liabilities of
discontinued businesses
|
|
121.7
|
|
120.8
|
|
Total
liabilities
|
|
11,109.4
|
|
10,241.5
|
|
Total shareholders'
equity
|
|
3,144.9
|
|
3,202.2
|
|
Total liabilities
and shareholders' equity
|
|
$14,254.3
|
|
$13,443.7
|
|
The following is a reconciliation from operating income to net
income(10):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Hanover
Insurance Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31
|
|
Year ended December
31
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
($ in millions,
except per share data)
|
|
$
Amount
|
|
Per Share
(Diluted)
|
$
Amount
|
|
Per Share
(Diluted)
|
|
$
Amount
|
|
Per Share
(Diluted)
|
|
$
Amount
|
|
Per Share
(Diluted)
|
|
Operating income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Lines
|
|
$120.9
|
|
|
|
$103.2
|
|
|
|
$269.9
|
|
|
|
$275.4
|
|
|
|
Personal
Lines
|
|
40.9
|
|
|
|
50.8
|
|
|
|
158.5
|
|
|
|
212.5
|
|
|
|
Other
|
|
1.1
|
|
|
|
(3.7)
|
|
|
|
3.9
|
|
|
|
(3.2)
|
|
|
|
Total
|
|
162.9
|
|
|
|
150.3
|
|
|
|
432.3
|
|
|
|
484.7
|
|
|
|
Interest
expense
|
|
(8.5)
|
|
|
|
(8.5)
|
|
|
|
(34.0)
|
|
|
|
(37.1)
|
|
|
|
Operating income
before income
taxes
|
|
154.4
|
|
$4.27
|
|
141.8
|
|
$3.82
|
|
398.3
|
|
$10.93
|
|
447.6
|
|
$11.75
|
|
Income tax expense on
operating
income
|
|
(32.3)
|
|
(0.89)
|
|
(29.8)
|
|
(0.80)
|
|
(80.0)
|
|
(2.20)
|
|
(92.6)
|
|
(2.43)
|
|
Operating income after
income taxes
|
|
122.1
|
|
3.38
|
|
112.0
|
|
3.02
|
|
318.3
|
|
8.73
|
|
355.0
|
|
9.32
|
|
Non-operating
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains
(losses) from sales and other
|
|
(2.2)
|
|
(0.06)
|
|
5.8
|
|
0.16
|
|
4.6
|
|
0.13
|
|
17.9
|
|
0.47
|
|
Net change in fair
value of equity
securities
|
|
53.2
|
|
1.47
|
|
57.8
|
|
1.56
|
|
119.1
|
|
3.27
|
|
13.4
|
|
0.35
|
|
Impairment recoveries
(losses) on investments
|
|
(0.6)
|
|
(0.02)
|
|
1.6
|
|
0.04
|
|
(0.7)
|
|
(0.02)
|
|
(26.3)
|
|
(0.69)
|
|
Loss from repayment of
borrowings
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(6.2)
|
|
(0.16)
|
|
Other non-operating
items
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1.6)
|
|
(0.05)
|
|
Income tax benefit
(expense) on
non-operating items
|
|
(9.7)
|
|
(0.26)
|
|
(11.3)
|
|
(0.31)
|
|
(21.3)
|
|
(0.59)
|
|
9.8
|
|
0.26
|
|
Income from
continuing
operations, net of taxes
|
|
162.8
|
|
4.51
|
|
165.9
|
|
4.47
|
|
420.0
|
|
11.52
|
|
362.0
|
|
9.50
|
|
Discontinued
operations (net of
taxes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Chaucer
business
|
|
1.2
|
|
0.03
|
|
0.4
|
|
0.01
|
|
1.2
|
|
0.03
|
|
0.4
|
|
0.01
|
|
Loss from discontinued
life
businesses
|
|
(0.5)
|
|
(0.01)
|
|
(1.7)
|
|
(0.05)
|
|
(2.5)
|
|
(0.06)
|
|
(3.7)
|
|
(0.09)
|
|
Net income
|
|
$163.5
|
|
$4.53
|
|
$164.6
|
|
$4.43
|
|
$418.7
|
|
$11.49
|
|
$358.7
|
|
$9.42
|
|
Dilutive weighted
average shares
outstanding
|
|
|
|
36.1
|
|
|
|
37.1
|
|
|
|
36.4
|
|
|
|
38.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-Looking Statements and Non-GAAP Financial
Measures
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 such as, but not limited to, "believes,"
"anticipates," "expects," "may," "projects," "projections," "plan,"
"likely," "potential," "targeted," "forecasts," "should," "could,"
"continue," "outlook," "guidance," "modeling," "moving forward" and
other similar expressions are intended to identify forward-looking
statements. Forward-looking statements by their nature address
matters that are, to different degrees, uncertain. The company
cautions investors that any such forward-looking statements are
estimates, beliefs, expectations and/or projections that involve
significant judgment, and that historical results, trends and
forward-looking statements are not guarantees and are not
necessarily indicative of future performance. Actual results could
differ materially from those anticipated.
These statements include, but are not limited to, the company's
statements regarding:
- The company's outlook and its ability to achieve components or
the sum of the respective period guidance on its future results of
operations including: the combined ratio, excluding or including
both prior-year reserve development and/or catastrophe losses;
catastrophe losses; net investment income; growth of net premiums
written and/or net premiums earned in total or by line of business;
expense ratio; operating return on equity; and/or the effective tax
rate;
- The continued impacts of the global pandemic ("Pandemic") and
related economic conditions on the company's operating and
financial results, including, but not limited to, the impact on the
company's investment portfolio, changes in claims frequency as a
result of fluctuations in economic activity, severity from higher
cost of repairs due to, among other things, supply chain
disruptions, inflation, declines in premium as a result of, among
other things, credits or returns to the company's customers, lower
submissions, changes in renewals and policy endorsements, public
health guidance, and the impact of government orders and
restrictions in the states and jurisdictions in which the company
operates;
- Uses of capital for share repurchases, special or ordinary cash
dividends, business investments or growth, or otherwise, and
outstanding shares in future periods as a result of various share
repurchase mechanisms, capital management framework, especially in
the current environment, and overall comfort with liquidity and
capital levels;
- Variability of catastrophe losses due to risk concentrations,
changes in weather patterns including climate change, wildfires,
severe storms, hurricanes, terrorism, civil unrest, riots or other
events, as well as the complexity in estimating losses from large
catastrophe events due to delayed reporting of the existence,
nature or extent of losses or where "demand surge," regulatory
assessments, litigation, coverage and technical complexities or
other factors may significantly impact the ultimate amount of such
losses;
- Current accident year losses and loss selections ("picks"),
excluding catastrophes, and prior accident year loss reserve
development patterns, particularly in complex "longer-tail"
liability lines, as well as the inherent variability in short-tail
property and non-catastrophe weather losses;
- Changes in frequency and loss severity trends;
- Ability to manage the impact of inflationary pressures, as a
result of the Pandemic or otherwise, including, but not limited to,
supply chain disruptions, labor shortages, and increases in cost of
goods, services, and materials;
- The confidence or concern that the current level of reserves is
adequate and/or sufficient for future claim payments, whether due
to losses that have been incurred but not reported, circumstances
that delay the reporting of losses, business complexity, adverse
judgments or developments with respect to case reserves, the
difficulties and uncertainties inherent in projecting future losses
from historical data, changes in replacement and medical costs, as
well as complexities related to the Pandemic, including
legislative, regulatory or judicial actions that expand the
intended scope of coverages, or other factors;
- Characterization of some business as being "more profitable" in
light of inherent uncertainty of ultimate losses incurred,
especially for "longer-tail" liability businesses;
- Efforts to manage expenses, including the company's long-term
expense savings targets, while allocating capital to business
investment, which is at management's discretion;
- Mix improvement, underwriting initiatives, coverage
restrictions and pricing segmentation actions, among others, to
grow businesses believed to be more profitable or reduce premiums
attributable to products or lines of business believed to be less
profitable; balance rate actions and retention; offset long-term
and/or short-term loss trends due to increased frequency; increased
"social inflation" from a more litigious environment and higher
average cost of resolution, increased property replacement costs,
and/or social movements;
- The ability to generate growth in targeted segments through new
agency appointments; rate increases (as a result of its market
position, agency relationships or otherwise), retention
improvements or new business; expansion into new geographies; new
product introductions; or otherwise; and
- Investment returns and the effect of macro-economic interest
rate trends and overall security yields, including the
macro-economic impact of the Pandemic, inflationary pressures and
corresponding governmental and/or central banking initiatives taken
in response thereto, and geopolitical circumstances on new money
yields and overall investment returns.
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 documents filed by The
Hanover Insurance Group, Inc. with the Securities and Exchange
Commission ("SEC") and that are also available at www.hanover.com
under "Investors." These risks and uncertainties include, but are
not limited to:
- The severity, duration and long-term impact related to the
Pandemic, including, but not limited to, actual and possible
government responses, legislative, regulatory and judicial actions,
changes in frequency and severity of claims in both Commercial and
Personal Lines, impacts to distributors (including agent partners),
and the possibility of additional premium adjustments, including
credits and returns, for the benefit of insureds;
- Changes in regulatory, legislative, economic, market and
political conditions, particularly in response to COVID-19 and the
Pandemic (such as legislative or regulatory actions that would
retroactively require insurers to cover business interruption or
other types of claims irrespective of terms, exclusions or other
conditions included in the contractual terms of the policies that
would otherwise preclude coverage, mandatory returns and other
rate-related actions, as well as presumption legislation in regards
to workers' compensation);
- Heightened investment market volatility, fluctuations in
interest rates (which have a significant impact on the market value
of the investment portfolio and thus book value), U.S. Federal
Reserve actions, inflationary pressures, default rates, prolonged
global market conditions and other factors that affect investment
returns from the investment portfolio;
- Data security incidents, including, but not limited to, those
resulting from a malicious cyber security attack on the company or
its business partners and service providers, or intrusions into the
company's systems or data sources;
- Adverse claims experience, including those driven by large or
increased frequency of catastrophe events (including those related
to terrorism, riots and civil unrest), and severe weather;
- The uncertainty in estimating weather-related losses or the
long-term impacts of the Pandemic, and the limitations and
assumptions used to model other property and casualty losses
(particularly with respect to products with longer-tail liability
lines, such as casualty and bodily injury claims, or involving
emerging issues related to losses incurred as the result of new
lines of business, such as cyber or financial institutions
coverage, or reinsurance contracts and reinsurance recoverables),
leading to potential adverse development of loss and loss
adjustment expense reserves;
- Litigation and the possibility of adverse judicial decisions,
including those which expand policy coverage beyond its intended
scope and/or award "bad faith" or other non-contractual damages,
and the impact of "social inflation" affecting judicial awards and
settlements;
- The ability to increase or maintain insurance rates in line
with anticipated loss costs and/or governmental action, including
mandates by state departments of insurance to either raise or lower
rates or provide credits or return premium to insureds;
- Investment impairments, which may be affected by, among other
things, the company's ability and willingness to hold investment
assets until they recover in value, as well as credit and interest
rate risk and general financial and economic conditions;
- Disruption of the independent agency channel, including the
impact of competition and consolidation in the industry and among
agents and brokers;
- Competition, particularly from competitors who have resource
and capability advantages;
- The global macroeconomic environment, including actions taken
in response to the Pandemic, inflation, global trade wars, energy
market disruptions, equity price risk, and interest rate
fluctuations, which, among other things, could result in reductions
in market values of fixed maturities and other investments;
- Adverse state and federal regulation, legislative and/or
regulatory actions (including recent significant revisions to
Michigan's automobile personal
injury protection system and related litigation, and various
regulations, orders and proposed legislation related to business
interruption and workers' compensation coverages, premium grace
periods and returns, and rate actions);
- Financial ratings actions, in particular, downgrades to the
company's ratings;
- Operational and technology risks and evolving technological and
product innovation, including risks created by remote work
environments, and the risk of cyber-security attacks on or breaches
of the company's systems and/or impacting our outsourcing
relationships and third-party operations, or resulting in claim
payments (including from products not intended to provide cyber
coverage);
- Uncertainties in estimating indemnification liabilities
recorded in conjunction with obligations undertaken in connection
with the sale of various businesses and discontinued operations;
and
- The ability to collect from reinsurers, reinsurance pricing,
reinsurance terms and conditions, and the performance of the
run-off voluntary property and casualty pools business (including
those in the Other segment or in Discontinued operations).
Investors should not place undue reliance on forward-looking
statements, which speak only as of the date they are made, and
should understand the risks and uncertainties inherent in or
particular to the company's business. The company does not
undertake the responsibility to update or revise such
forward-looking statements.
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, 2020,
the company uses non-GAAP financial measures as important measures
of its operating performance, including operating income, operating
income before interest expense and income taxes, operating income
per share, and components of the combined ratio, both excluding
and/or including, catastrophe losses, prior-year reserve
development and the expense ratio. Management believes these
non-GAAP financial measures are important indications of the
company's operating performance. The definition of other non-GAAP
financial measures and terms can be found in the 2020 Annual Report
on pages 67-70.
Operating income and operating income per share are non-GAAP
measures. They are defined as net income excluding the after-tax
impact of net realized and unrealized investment gains (losses),
gains and/or losses on the repayment of debt, other non-operating
items, and results from discontinued operations. Net realized and
unrealized investment gains (losses), which include changes in the
fair value of equity securities still held, are excluded for
purposes of presenting operating income, as they are, to a certain
extent, determined by interest rates, financial markets and the
timing of sales. Operating income also excludes net gains and
losses from disposals of businesses, gains and losses related to
the repayment of debt, costs to acquire businesses, restructuring
costs, the cumulative effect of accounting changes and certain
other items. Operating income is the sum of the segment income
from: Commercial Lines, Personal Lines, and Other, after interest
expense and income taxes. In reference to one of the company's
three segments, "operating income" is the segment income before
both interest expense and income taxes. The company also uses
"operating income per share" (which is after both interest expense
and income taxes). It is calculated by dividing operating income by
the weighted average number of diluted shares of common stock. The
company believes that metrics of operating income and operating
income in relation to its three segments provide investors with a
valuable measure of the performance of the company's continuing
businesses because they highlight the portion of net income
attributable to the core operations of the business. Income from
continuing operations is the most directly comparable GAAP measure
for operating income (and operating income before income taxes) and
measures of operating income that exclude the effects of
catastrophe losses and/or reserve development should not be
misconstrued as substitutes for income from continuing operations
or net income determined in accordance with GAAP. A reconciliation
of operating income (loss) to income from continuing operations and
net income for the relevant periods is included on page 11 of this
news release and in the Financial Supplement.
The company may also provide measures of operating income and
combined ratios that exclude the impact of catastrophe losses
(which in all respects include prior accident year catastrophe loss
development). A catastrophe is a severe loss, resulting from
natural or manmade events, including, but is not limited to,
hurricanes, tornadoes, windstorms, earthquakes, hail, severe winter
weather, freeze events, fire, explosions, civil unrest and
terrorism. Due to the unique characteristics of each catastrophe
loss, there is an inherent inability to reasonably estimate the
timing or loss amount in advance. The company believes a separate
discussion excluding the effects of catastrophe losses is
meaningful to understand the underlying trends and variability of
earnings, loss and combined ratio results, among others.
Prior accident year reserve development, which can either be
favorable or unfavorable, represents changes in the company's
estimate of costs related to claims from prior years. Calendar year
loss and loss adjustment expense ("LAE") ratios determined in
accordance with GAAP, excluding prior accident year reserve
development, are sometimes referred to as "current accident year
loss ratios." The company believes a discussion of loss and
combined ratios, excluding prior accident year reserve development,
is helpful since it provides insight into both estimates of current
accident year results and the accuracy of prior-year estimates.
The loss and combined ratios in accordance with GAAP are the
most directly comparable GAAP measures for the loss and combined
ratios calculated excluding the effects of catastrophe losses
and/or reserve development. The presentation of loss and combined
ratios calculated excluding the effects of catastrophe losses
and/or reserve development should not be misconstrued as
substitutes for the loss and/or combined ratios determined in
accordance with GAAP.
Endnotes
|
|
(1)
|
Combined ratio,
excluding catastrophes, and current accident year combined ratio,
excluding catastrophes, are non-GAAP measures. These measures are
used throughout this document. See the disclosure on the use of
this and other non-GAAP measures under the heading "Forward-Looking
Statements and Non-GAAP Financial Measures." The combined ratio
(which includes catastrophe losses and prior-year loss reserve
development) is the most directly comparable GAAP measure. A
reconciliation of the GAAP combined ratio to the combined ratio,
excluding catastrophes, and to the current accident year combined
ratio, excluding catastrophes, is shown below.
|
|
|
|
|
Three months
ended
|
|
|
|
December 31,
2021
|
|
|
|
Commercial
Lines
|
|
Personal
Lines
|
|
Total
|
|
Total combined ratio
(GAAP)
|
|
90.7 %
|
|
96.2 %
|
|
92.9 %
|
|
Less: Catastrophe
ratio
|
|
2.1 %
|
|
4.7 %
|
|
3.1 %
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
88.6 %
|
|
91.5 %
|
|
89.8 %
|
|
Less: Prior-year
reserve development ratio
|
|
(1.5)%
|
|
(0.6)%
|
|
(1.2)%
|
|
Current accident year
combined ratio, excluding catastrophe losses
(non-GAAP)
|
|
90.1 %
|
|
92.1 %
|
|
91.0 %
|
|
|
|
|
|
|
|
December 31,
2020
|
|
Total combined ratio
(GAAP)
|
|
91.5 %
|
|
93.4 %
|
|
92.4 %
|
|
Less: Catastrophe
ratio
|
|
1.5 %
|
|
5.3 %
|
|
3.0 %
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
90.0 %
|
|
88.1 %
|
|
89.4 %
|
|
Less: Prior-year
reserve development ratio
|
|
(0.9)%
|
|
-
|
|
(0.5)%
|
|
Current accident year
combined ratio, excluding catastrophe losses
(non-GAAP)
|
|
90.9 %
|
|
88.1 %
|
|
89.9 %
|
|
|
|
Year ended
|
|
|
|
December 31,
2021
|
|
Total combined ratio
(GAAP)
|
|
97.6 %
|
|
96.2 %
|
|
97.0 %
|
|
Less: Catastrophe
ratio
|
|
8.0 %
|
|
9.1 %
|
|
8.4 %
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
89.6 %
|
|
87.1 %
|
|
88.6 %
|
|
Less: Prior-year
reserve development ratio
|
|
(1.2)%
|
|
(1.2)%
|
|
(1.2)%
|
|
Current accident year
combined ratio, excluding catastrophe losses
(non-GAAP)
|
|
90.8 %
|
|
88.3 %
|
|
89.8 %
|
|
|
|
|
|
|
|
December 31,
2020
|
|
Total combined ratio
(GAAP)
|
|
95.8 %
|
|
92.4 %
|
|
94.4 %
|
|
Less: Catastrophe
ratio
|
|
4.9 %
|
|
8.4 %
|
|
6.3 %
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
90.9 %
|
|
84.0 %
|
|
88.1 %
|
|
Less: Prior-year
reserve development ratio
|
|
(0.7)%
|
|
-
|
|
(0.3)%
|
|
Current accident year
combined ratio, excluding catastrophe losses
(non-GAAP)
|
|
91.6 %
|
|
84.0 %
|
|
88.4 %
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Price increases in
Commercial Lines represent the average change in premium on renewed
policies caused by the estimated net effect of base rate changes,
discretionary pricing, inflation or changes in policy level
exposure or insured risks. Rate increases in Commercial Lines
represent the average change in premium on renewed policies caused
by the base rate changes, discretionary pricing, and inflation,
excluding the impact of changes in policy level exposure or insured
risks. Renewal price change in Personal Lines represents the
average change in premium on policies available to renew caused by
the net effects of filed rate, inflation adjustments or other
changes in policy level exposure or insured risks, regardless of
whether or not the policies are retained for the duration of their
contractual terms. Rate change in Personal Lines is the estimated
cumulative premium effect of approved rate actions applied to
policies available for renewal, regardless of whether or not
policies are actually renewed. Accordingly, rate changes do not
represent actual increases or decreases realized by the company.
Personal Lines rate changes do not include inflation or changes in
policy level exposure or insured risks.
|
|
|
(3)
|
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 $250,000, primarily through the
commercial multiple peril, commercial auto and workers'
compensation lines of business, as reported on pages 8 and 9 of the
Fourth Quarter 2021 Financial Supplement.
|
|
|
|
|
Three months
ended
|
|
Three months
ended
|
|
|
|
December 31,
2021
|
|
December 31,
2020
|
|
($ in
millions)
|
|
Core
Commercial
|
|
Other
Commercial
|
|
Total
Commercial
|
|
Core
Commercial
|
|
Other
Commercial
|
|
Total
Commercial
|
|
Net premiums
written
|
|
$387.1
|
|
$325.6
|
|
$712.7
|
|
$367.9
|
|
$282.2
|
|
$650.1
|
|
Net premiums
earned
|
|
$421.8
|
|
$324.1
|
|
$745.9
|
|
$398.6
|
|
$285.1
|
|
$683.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
December 31,
2021
|
|
December 31,
2020
|
|
($ in
millions)
|
|
Core
Commercial
|
|
Other
Commercial
|
|
Total
Commercial
|
|
Core
Commercial
|
|
Other
Commercial
|
|
Total
Commercial
|
|
Net premiums
written
|
|
$1,682.3
|
|
$1,301.4
|
|
$2,983.7
|
|
$1,578.0
|
|
$1,155.1
|
|
$2,733.1
|
|
Net premiums
earned
|
|
$1,643.6
|
|
$1,197.2
|
|
$2,840.8
|
|
$1,561.6
|
|
$1,121.7
|
|
$2,683.3
|
|
|
|
(4)
|
Specialty lines, a
major component of Other Commercial Lines, consist of products such
as marine, surety, specialty industrial property, excess and
surplus, professional liability, management liability and program
business. When discussing net premiums written and other financial
measures of our specialty businesses, we may include non-specialty
premiums that are written as part of the entire account.
|
|
|
(5)
|
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 losses and
prior-year loss reserve development) is the most directly
comparable GAAP measure. A reconciliation of the GAAP loss ratio to
the current accident year loss ratio, excluding catastrophe losses,
is shown on the following page.
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
December 31,
2021
|
|
|
|
|
Commercial
Lines
|
|
Personal
Lines
|
|
Total
|
|
|
Total loss and LAE
ratio
|
|
56.5 %
|
|
68.9 %
|
|
61.5 %
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
(1.5)%
|
|
(0.6)%
|
|
(1.2)%
|
|
|
Catastrophe
ratio
|
|
2.1 %
|
|
4.7 %
|
|
3.1 %
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
55.9 %
|
|
64.8 %
|
|
59.6 %
|
|
|
|
|
December 31,
2020
|
|
|
Total loss and LAE
ratio
|
|
56.9 %
|
|
65.0 %
|
|
60.3 %
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
(0.9)%
|
|
-
|
|
(0.5)%
|
|
|
Catastrophe
ratio
|
|
1.5 %
|
|
5.3 %
|
|
3.0 %
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
56.3 %
|
|
59.7 %
|
|
57.8 %
|
|
|
|
|
December 31,
2019
|
|
|
Total loss and LAE
ratio
|
|
61.8 %
|
|
69.3 %
|
|
64.8 %
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
(1.7)%
|
|
2.2 %
|
|
(0.1)%
|
|
|
Catastrophe
ratio
|
|
4.1 %
|
|
1.6 %
|
|
3.1 %
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
59.4 %
|
|
65.5 %
|
|
61.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
December 31,
2021
|
|
|
|
|
Commercial
Lines
|
|
Personal
Lines
|
|
Total
|
|
|
Total loss and LAE
ratio
|
|
63.8 %
|
|
68.5 %
|
|
65.7 %
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
(1.2)%
|
|
(1.2)%
|
|
(1.2)%
|
|
|
Catastrophe
ratio
|
|
8.0 %
|
|
9.1 %
|
|
8.4 %
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
57.0 %
|
|
60.6 %
|
|
58.5 %
|
|
|
|
|
December 31,
2020
|
|
|
Total loss and LAE
ratio
|
|
61.4 %
|
|
64.7 %
|
|
62.8 %
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
(0.7)%
|
|
-
|
|
(0.3)%
|
|
|
Catastrophe
ratio
|
|
4.9 %
|
|
8.4 %
|
|
6.3 %
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
57.2 %
|
|
56.3 %
|
|
56.8 %
|
|
|
|
|
December 31,
2019
|
|
|
Total loss and LAE
ratio
|
|
60.6 %
|
|
68.9 %
|
|
64.0 %
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Prior-year reserve
development ratio
|
|
(1.1)%
|
|
1.5 %
|
|
-
|
|
|
Catastrophe
ratio
|
|
3.1 %
|
|
4.7 %
|
|
3.8 %
|
|
|
Current accident year
loss and LAE ratio, excluding
catastrophes
|
|
58.6 %
|
|
62.7 %
|
|
60.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Book value per share,
excluding net unrealized appreciation 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31
|
|
December
31
|
|
|
September
30
|
|
December
31
|
|
|
|
|
|
2020
|
|
2021
|
|
|
2021
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
|
$87.96
|
|
$88.59
|
|
|
$87.04
|
|
$88.59
|
|
|
Less: Net unrealized
appreciation on fixed
maturity investments,
net of tax
|
|
11.76
|
|
5.21
|
|
|
7.20
|
|
5.21
|
|
|
Book value per share,
excluding net unrealized
appreciation on fixed maturity investments, net of tax
|
|
$76.20
|
|
$83.38
|
|
|
$79.84
|
|
$83.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in book value
per share
|
|
|
|
0.7 %
|
|
|
|
|
1.8 %
|
|
|
Change in book value
per share, excluding net unrealized
appreciation on fixed maturity investments, net of tax
|
|
|
|
9.4 %
|
|
|
|
|
4.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
Operating income and
operating income per diluted share are non-GAAP measures. Operating
income (loss) before income taxes, as referenced in the results of
the business segments, is defined as, with respect to such segment,
operating income (loss) before interest expense and income taxes.
These measures are used throughout this document. The
reconciliation of operating income and operating income per diluted
share to the closest GAAP measures, income from continuing
operations and income from continuing operations per diluted share,
respectively, is provided on the preceding pages of this news
release.
|
|
|
(8)
|
Operating return on
average equity ("operating ROE") is a non-GAAP measure. Operating
ROE is calculated by dividing annualized operating income after tax
for the applicable period (see under the heading in this news
release "Non-GAAP Financial Measures" and end note (7)), by average
shareholders' equity, excluding unrealized appreciation
(depreciation) on fixed maturity investments, net of tax, for the
period presented. Total shareholders' equity, excluding net
unrealized appreciation (depreciation) on fixed maturity
investments, net of tax, is also a non-GAAP measure. Total
shareholders' equity is the most directly comparable GAAP measure,
and is reconciled below. For the calculation of operating ROE, the
average of beginning and ending shareholders' equity, excluding net
unrealized appreciation (depreciation) on fixed maturity
investments, net of tax, is used for the period as shown and
reconciled on the following page.
|
|
|
|
|
|
|
|
|
|
($ in
millions)
|
December
31
|
|
March 31
|
|
June 30
|
|
September
30
|
|
December
31
|
|
|
|
2020
|
|
2021
|
|
2021
|
|
2021
|
|
2021
|
|
|
Total shareholders'
equity (GAAP)
|
$3,202.2
|
|
$3,046.8
|
|
$3,154.0
|
|
$3,102.3
|
|
$3,144.9
|
|
|
Less: net unrealized
appreciation
on fixed maturity
investments, net of tax
|
428.1
|
|
242.6
|
|
304.7
|
|
256.8
|
|
184.9
|
|
|
Total shareholders'
equity, excluding net
unrealized
appreciation
on fixed maturity
investments, net of tax
|
$2,774.1
|
|
$2,804.2
|
|
$2,849.3
|
|
$2,845.5
|
|
$2,960.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
Average shareholders'
equity (GAAP)
|
|
|
|
|
|
|
|
|
$3,123.6
|
|
|
Average shareholders'
equity, excluding net unrealized appreciation
on fixed maturity
investments, net of tax
|
|
|
|
|
|
|
|
|
$2,902.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
Average shareholders'
equity (GAAP)
|
|
|
|
|
|
|
|
|
$3,130.0
|
|
|
Average shareholders'
equity, excluding net
unrealized appreciation
on fixed maturity
investments, net of tax
|
|
|
|
|
|
|
|
|
$2,846.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in
millions)
|
Three months
ended
|
|
|
Year ended
|
|
|
|
|
December
31
|
|
|
December
31
|
|
|
|
Net Income
ROE
|
2021
|
|
|
2021
|
|
|
|
Net income
(GAAP)
|
$
|
163.5
|
|
|
$
|
418.7
|
|
|
|
Annualized net
income*
|
$
|
654.0
|
|
|
|
|
|
|
|
Average shareholders'
equity (GAAP)
|
$
|
3,123.6
|
|
|
$
|
3,130.0
|
|
|
|
Return on
equity
|
|
20.9
|
%
|
|
|
13.4
|
%
|
|
|
Operating Income
ROE (non-GAAP)
|
|
|
|
|
|
|
|
|
|
Operating income
after taxes
|
$
|
122.1
|
|
|
$
|
318.3
|
|
|
|
Annualized operating
income, net of tax*
|
$
|
488.4
|
|
|
|
|
|
|
|
Average shareholders'
equity, excluding net unrealized
appreciation (depreciation)
on fixed maturity
investments, net of
tax
|
$
|
2,902.8
|
|
|
$
|
2,846.6
|
|
|
|
Operating return on
equity
|
|
16.8
|
%
|
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
*Net income and
operating income after income taxes are calculated by taking three
months ended December 31, 2021, net income and operating income
after income taxes, respectively, and multiplying by
four.
|
|
|
(9)
|
Here, and later in
this document, the expense ratio is reduced by installment and
other fee revenues for purposes of the ratio
calculation.
|
|
|
(10)
|
The separate
financial information of each operating segment is presented
consistent with the way results are regularly evaluated by the
chief operating decision maker in deciding how to allocate
resources and in assessing performance. Management evaluates the
results of the aforementioned operating segments without
consideration of interest expense on debt and on a pre-tax
basis.
|
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SOURCE The Hanover Insurance Group, Inc.