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The Hanover Insurance (THG) Rising Since Q4 Earnings Beat

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The Hanover Insurance Group (THG - Free Report) reported adjusted fourth-quarter 2021 earnings of $3.38 per share, which beat the Zacks Consensus Estimate by 35.2%. Moreover, the bottom line increased 12% year over year.

The company’s results reflected higher net premiums written as well as an increase in net investment income, partly offset by higher expenses.

Shares gained 4.6% in the last two days trading session, reflecting the outperformance.

Full-Year Highlights

In 2021, The Hanover Insurance delivered an operating income of $8.73 per share, which improved 6.3% year over year.

Total operating revenues of $5.1 billion increased 5.9% year over year.

Quarterly Operational Update

Total operating revenues of $1.3 billion outpaced the Zacks Consensus Estimate by 0.9%. The top line also rose 7.8% year over year on higher net premiums earned and net investment income.

Net premiums written increased 9.2% year over year to about $1.2 billion, largely driven by higher premiums in the Commercial Lines segment and the Personal Lines segment.

Net investment income increased 13.2% year over year to nearly $79.5 million, primarily due to unusually high income from limited partnerships, and to a lesser degree, continued investment of higher operating cash flow. The upside was partially offset by lower new money yields.

Total expenses in the quarter under review increased 7.8% year over year to $1.2 billion, attributable to higher losses and loss adjustment expenses, amortization of deferred acquisition costs and other operating expenses.

The combined ratio deteriorated 50 basis points (bps) to 92.9%.

Segment Results

Commercial Lines: Net premiums written improved 9.6% year over year to $712.7 million, driven primarily by rate and exposure increases.

The combined ratio improved 80 basis points year over year to 90.7%. Catastrophe losses increased 55% to $15.5 million.

Personal Lines: Net premiums written improved 8.7% year over year to $502.2 million, driven primarily by increased new business.

The combined ratio deteriorated 280 basis points year over year to 96.2%. Catastrophe losses decreased 6.4% to $23.5 million.

Financial Update

The Hanover Insurance exited 2021 with cash and cash equivalents of $230.9 million, up 91.4% over the level at 2020 end.

Debts were $781.6 million at 2021 end, up 0.1% from 2020-end level.

Book value per share increased 0.7% year over year to $88.59 as of Dec 31, 2021. The increase was driven by net income, partially offset by a decline in unrealized gains in the company’s fixed income portfolio.

Operating return on equity totaled 16.8% in the fourth quarter.

Dividend Update

The Hanover Insurance announced a dividend of 75 cents per share in the reported quarter, which represents an increase of 7.1%. The company paid ordinary dividends of $102.2 million over the past year.

Zacks Rank

The Hanover Insurance currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players who have reported fourth-quarter results so far, The Travelers Companies (TRV - Free Report) , RenaissanceRe Holdings Ltd. (RNR - Free Report) and The Progressive Corporation (PGR - Free Report) beat the Zacks Consensus Estimate for earnings.

Travelers’ core income of $5.20 per share surpassed the Zacks Consensus Estimate of $3.86 and increased 6% year over year. Total revenues rose 7% to about $9 billion and beat the Zacks Consensus Estimate of $8.7 billion.

Travelers’ net written premiums increased 10% year over year to a record $8 billion. The combined ratio deteriorated 130 bps year over year to 88.

RenaissanceRe’s operating earnings per share of $4.71 surpassed the Zacks Consensus Estimate by 27% and rebounded from the year-ago loss of $1.59. Total revenues of $1.39 billion dipped 0.1% year over year.

RenaissanceRe’s gross premiums written surged 40.4% year over year to $1.3 billion. The combined ratio improved 3530 bps year over year to 79.4.

Progressive’s earnings of $1.05 per share beat the Zacks Consensus Estimate of 99 cents but declined 43.2% from the year-ago quarter.

Progressive’s net premiums written were $10.7 billion in the quarter, up 13% from $9.5 billion a year ago. The combined ratio deteriorated 630 bps from the prior-year quarter to 94.7.