WORCESTER, Mass., Jan. 19,
2023 /PRNewswire/ -- The Hanover Insurance Group,
Inc. (NYSE: THG) today announced a preliminary estimate for fourth
quarter catastrophe losses of approximately $190 million, before taxes, or 13.9 points of net
earned premiums. The estimate is approximately $137 million above the company's pre-tax fourth
quarter catastrophe assumption, driven by the effects of
Winter Storm Elliott, which
accounted for approximately $165
million, before taxes, of overall catastrophe losses in the
quarter and primarily impacted the company's core commercial
business.
![The Hanover Insurance Group, Inc. Logo. (PRNewsFoto/The Hanover Insurance Group, Inc.) (PRNewsfoto/The Hanover Insurance Group, In) The Hanover Insurance Group, Inc. Logo. (PRNewsFoto/The Hanover Insurance Group, Inc.) (PRNewsfoto/The Hanover Insurance Group, In)](https://mma.prnewswire.com/media/511273/The_Hanover_Insurance_Group_Logo.jpg)
"Winter Storm Elliott battered
the majority of the United States,
bringing blizzard conditions with heavy snow, freezing rain,
dangerous winds, and well below-freezing temperatures, resulting in
significant damage to commercial and residential property during
the December holiday season," said John C.
Roche, president and chief executive officer at The
Hanover. "We believe the
unfortunate timing of the storm, occurring when many were away from
their homes and businesses, likely delayed the discovery and
remediation of water damage, increasing losses in our core
commercial lines. We are working swiftly and diligently to process
claims in the wake of this storm, intent on helping our
policyholders recover as much and as quickly as possible, and we
are grateful for the tireless work of our dedicated team."
"We have a robust track record of successful catastrophe
exposure management, risk modeling and portfolio diversification
initiatives, as demonstrated by our relatively low catastrophe
losses from hurricanes and other traditional perils in the recent
years. And, we are confident in our ability to address winter
weather and water-related events through pricing, risk management
and other innovative tools effectively," said Roche. "Looking
beyond catastrophes, we successfully advanced our action plans
towards recapturing target margins in property lines, achieving
double digit renewal price increases in all three business segments
in the fourth quarter."
The Hanover expects its fourth
quarter combined ratio, excluding catastrophes(1), to be
94.1%. As a result, the company expects its full year combined
ratio, excluding catastrophes, to be 92.1%, consistent with the
outlook range of 92.0% to 92.5% provided on its third quarter
earnings call. Taking this and other currently available
information into account, The Hanover expects to report an after-tax net
loss per share of $(0.33) and
operating loss per share(2) of $(1.05) for the fourth quarter.
|
|
|
Three months
ended
December 31,
2022
|
|
|
Year ended
December 31,
2022
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
(GAAP)
|
|
108.0 %
|
|
|
99.8 %
|
|
|
Less: Catastrophe
ratio
|
|
13.9 %
|
|
|
7.7 %
|
|
|
Combined ratio,
excluding catastrophe losses (non-GAAP)
|
|
94.1 %
|
|
|
92.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
2022
|
|
|
Year ended
December 31,
2022
|
|
|
Loss and LAE ratio
(GAAP)
|
|
77.1 %
|
|
|
69.0 %
|
|
|
Less: Catastrophe
ratio
|
|
13.9 %
|
|
|
7.7 %
|
|
|
Less: Prior-year
development ratio
|
|
(0.1) %
|
|
|
(0.4) %
|
|
|
Current accident year
loss and LAE ratio, excluding catastrophes (non-GAAP)
|
|
63.3 %
|
|
|
61.7 %
|
|
|
|
|
|
|
|
|
|
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 Hanover 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.
Contacts:
|
|
Investors:
|
Media:
|
Oksana Lukasheva
|
Emily P.
Trevallion
|
(508)
525-6081
|
508)
855-3263
|
Email:
olukasheva@hanover.com
|
Email:
etrevallion@hanover.com
|
Forward-Looking Statements
The Hanover Insurance Group, Inc.'s ("the company") estimate of
catastrophe losses, and preliminary fourth quarter 2022 results,
including, but not limited to, combined ratio, excluding
catastrophes, combined ratio, excluding catastrophes and prior-year
reserve development, current accident year loss and LAE ratio,
excluding catastrophes, expense ratio, net income per share, and
operating loss per share are based on estimates and projections
that are subject to revision and uncertainty. Certain statements
made in this document may be forward-looking statements. All
statements, other than statements of historical facts, may be
forward-looking statements. Such estimates and statements
are forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. Words such as, but not
limited to, "believes," "anticipates," "expects," "may,"
"projects," "projections," "plan," "likely," "potential,"
"targeted," "forecasts," "confident," "should," "could,"
"continue," "outlook," "guidance," "target profitability",
"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.
Investors should consider the risks and uncertainties in the
company's business that may affect such estimates, including (i)
the inherent difficulties in arriving at such estimates; (ii)
variation in the company's current estimates that may change as the
company finalizes its financial results; (iii) the impact of the
COVID-19 global pandemic and related economic conditions, as well
as the significant inflationary environment, on the company's
financial and operating results; (iv) legislative and regulatory
actions, as well as litigation and the possibility of adverse
judicial decisions; and (v) other risks and uncertainties that are
discussed in readily available documents, including the company's
latest annual report on Form 10-K, quarterly reports on Form 10-Q,
and other documents filed by the company with the Securities and
Exchange Commission, which are also available on hanover.com under
"Investors – Financials." The difficulties at arriving at estimates
with regard to catastrophes related to rain, wind, flooding, hail,
winter storms, and other losses may be caused by several factor,
including difficulties policyholders may experience when reporting
claims, The Hanover's ability to
adjust claims because of the devastation encountered or late
discovery of damages; difficulties accessing loss locations; the
challenge of making final estimates to repair or replace properties
during the early stages of examining damaged properties; applicable
cause of loss for certain policies; the effect of higher cost of
repairs due to, among other things, "demand surge" and supply chain
disruptions; potential latent damages, which are not discovered
until later; potential business interruption claims, the extent of
which cannot be known at the time, especially for customers who
have not fully resumed their operations; the inherent uncertainty
of estimating loss and loss adjustment reserves; uncertainties
related to litigation and policy interpretation; and other
factors.
Non-GAAP Financial Measures
As discussed on page 37 of the company's Annual Report on Form
10-K for the year ended December 31,
2021, the company uses non-GAAP financial measures as
important measures of its operating performance, including
operating income (loss), operating income (loss) before interest
expense and income taxes, operating income (loss) 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 2021 Annual Report on pages 63-66.
The company may also provide measures of operating income (loss)
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, is a non-GAAP
measure. 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, is shown on
preceding pages. Additionally, current accident year loss and LAE
ratio, excluding catastrophes, 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 catastrophes, is
also shown on preceding pages.
(2) Operating income (loss) and operating income (loss)
per share are non-GAAP measures. They are defined as net income
(loss) 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 (loss), as they are, to a certain extent,
determined by interest rates, financial markets and the timing of
sales. Operating income (loss) 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 (loss) is the sum of the segment
income (loss) from: Core Commercial, Specialty, Personal Lines, and
Other, after interest expense and income taxes. In reference to one
of the company's four segments, "operating income (loss)" is the
segment income (loss) before both interest expense and income
taxes. The company also uses "operating income (loss) per share"
(which is after both interest expense and income taxes). Operating
income per share is calculated by dividing operating income by the
weighted average number of diluted shares of common stock.
Operating loss per share is calculated by dividing the operating
loss by the weighted average number of basic shares of common stock
due to antidilution. The company believes that metrics of operating
income (loss) and operating income (loss) per share in relation to
its four segments provide investors with a valuable measure of the
performance of the company's continuing businesses because they
highlight the portion of net income (loss) attributable to the core
operations of the business. Income (loss) from continuing
operations is the most directly comparable GAAP measure for
operating income (loss) (and operating income before income taxes)
and measures of operating income (loss) that exclude the effects of
catastrophe losses and/or reserve development should not be
misconstrued as substitutes for income (loss) from continuing
operations or net income (loss) determined in accordance with
GAAP. The reconciliation of operating loss and operating loss
per basic share to the closest GAAP measures, loss from continuing
operations and loss from continuing operations per basic share,
respectively, are provided on the following page.
The Hanover
Insurance Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
2022
|
|
($ in millions,
except per share data)
|
|
$ Amount
|
|
Per Basic
Share
|
|
|
Operating loss after
income taxes
|
|
|
(37.4)
|
|
|
(1.05)
|
|
|
Non-operating
items:
|
|
|
|
|
|
|
|
|
Net realized losses
from sales and other
|
|
|
(10.2)
|
|
|
(0.29)
|
|
|
Net change in fair
value of equity securities
|
|
|
42.8
|
|
|
1.20
|
|
|
Impairments on
investments:
|
|
|
|
|
|
|
|
|
Credit-related
impairments
|
|
|
(0.4)
|
|
|
(0.01)
|
|
|
|
|
|
(0.4)
|
|
|
(0.01)
|
|
|
Other non-operating
items
|
|
|
(0.1)
|
|
|
-
|
|
|
Income tax expense on
non-operating items
|
|
|
(6.6)
|
|
|
(0.18)
|
|
|
Loss from continuing
operations, net of taxes
|
|
|
(11.9)
|
|
|
(0.33)
|
|
|
Discontinued
operations (net of taxes):
|
|
|
|
|
|
|
|
|
Income from
discontinued life businesses
|
|
|
0.3
|
|
|
-
|
|
|
Net loss
|
|
$
|
(11.6)
|
|
$
|
(0.33)
|
|
|
Basic weighted average
shares outstanding
|
|
|
|
|
|
35.6
|
|
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/the-hanover-estimates-fourth-quarter-catastrophe-losses-full-year-combined-ratio-excluding-catastrophes-in-line-with-guidance-301725960.html
SOURCE The Hanover Insurance Group, Inc.