The Hanover Insurance (THG) - 2025 Q2 - Quarterly Results

Segment Descriptions The Hanover Insurance Group operates through three main business segments: Core Commercial, Specialty, and Personal Lines, with an 'Other' segment for run-off businesses and holding company assets Segment Descriptions The Hanover Insurance Group operates through three main business segments: Core Commercial, which serves small to mid-sized businesses; Specialty, which provides coverage for niche markets with special risk needs like professional liability and marine; and Personal Lines, which offers automobile and homeowners insurance to individuals. An 'Other' segment handles run-off businesses and holding company assets and expenses - Core Commercial: Provides coverage for small businesses (premiums ≤$50k) and mid-sized businesses (premiums ≥$50k), focusing on industries like technology, manufacturing, and retail[5] - Specialty: Offers tailored insurance for professional firms (lawyers, engineers), program business, marine, and surety bonds[5] - Personal Lines: Includes personal automobile coverage and homeowners insurance for individuals, covering residences and personal property[5] Financial Highlights The Hanover Insurance Group reported significant Q2 2025 year-over-year growth in net premiums written, operating income, and book value per share Financial Highlights For the second quarter of 2025, The Hanover Insurance Group reported significant year-over-year growth. Net premiums written increased to $1,583.8 million, and operating income after taxes rose to $158.7 million, or $4.35 per diluted share. For the six months ended June 30, 2025, operating income reached $300.5 million, a substantial increase from $180.0 million in the prior year period. The company's balance sheet strengthened, with book value per share increasing to $89.62 Q2 & YTD 2025 vs 2024 Earnings | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating Income After Taxes | $158.7M | $68.1M | $300.5M | $180.0M | | Net Income | $157.1M | $40.5M | $285.3M | $156.0M | | Operating EPS (Diluted) | $4.35 | $1.88 | $8.22 | $4.96 | Q2 & YTD 2025 vs 2024 Premiums | Metric (in millions) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Gross Premiums Written | $1,752.6 | $1,679.3 | $3,442.5 | $3,305.1 | | Net Premiums Written | $1,583.8 | $1,521.1 | $3,094.6 | $2,975.1 | | Net Premiums Earned | $1,545.3 | $1,473.2 | $3,053.8 | $2,921.8 | Balance Sheet Highlights (as of June 30) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $15,732.1M | $14,872.2M | | Total Shareholders' Equity | $3,216.3M | $2,552.2M | | Book Value Per Share | $89.62 | $70.96 | | Total Debt/Equity | 24.4% | 30.7% | Consolidated Financial Statements The company's Q2 2025 consolidated financial statements show increased revenues and income, alongside growth in total assets and shareholders' equity Income Statements The consolidated income statement for Q2 2025 shows a 7.7% increase in total revenues to $1,654.4 million, driven by higher premiums earned and net investment income. Total losses and expenses decreased by 2.0%, leading to a significant rise in income from continuing operations to $156.9 million from $40.4 million in Q2 2024. For the first six months of 2025, income from continuing operations grew 82.9% to $285.1 million Consolidated Income Statement Highlights (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | YTD 2025 | YTD 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Premiums Earned | $1,545.3 | $1,473.2 | 4.9% | $3,053.8 | $2,921.8 | 4.5% | | Total Revenues | $1,654.4 | $1,536.7 | 7.7% | $3,257.6 | $3,087.8 | 5.5% | | Losses and LAE | $957.2 | $1,007.6 | -5.0% | $1,912.5 | $1,942.8 | -1.6% | | Income from Continuing Operations | $156.9 | $40.4 | N/M | $285.1 | $155.9 | 82.9% | | Net Income | $157.1 | $40.5 | N/M | $285.3 | $156.0 | 82.9% | - Net investment income increased by 16.7% to $105.5 million in Q2 2025 compared to Q2 2024[10] Balance Sheets As of June 30, 2025, the company's total assets grew by 3.0% to $15.73 billion compared to year-end 2024. This was supported by a 5.6% increase in total investments. Total liabilities saw a marginal increase of 0.7%, while total shareholders' equity rose significantly by 13.2% to $3.22 billion, reflecting strong earnings Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2025 | Dec 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Investments | $9,941.3 | $9,409.8 | 5.6% | | Total Assets | $15,732.1 | $15,274.5 | 3.0% | | Loss and LAE Reserves | $7,636.2 | $7,461.2 | 2.3% | | Total Liabilities | $12,515.8 | $12,432.7 | 0.7% | | Total Shareholders' Equity | $3,216.3 | $2,841.8 | 13.2% | - The company's debt structure shifted, with short-term debt increasing significantly while long-term debt was reduced by 51.8%[13] Pre-tax Operating Results and Related Metrics The company's pre-tax operating results show improved combined ratios across segments, driven by lower catastrophe losses and stable expense management Consolidated Consolidated results for Q2 2025 showed significant improvement, with the combined ratio decreasing to 92.5% from 99.2% in Q2 2024. This was driven by a lower loss and LAE ratio of 61.9% and a stable expense ratio. GAAP underwriting profit was $110.3 million, a stark contrast to the $6.2 million profit in the prior-year quarter. The improvement was largely due to lower catastrophe losses, which were $113.5 million in Q2 2025 compared to $177.1 million in Q2 2024 Consolidated Combined Ratio - Q2 | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Loss and LAE Ratio | 61.9% | 68.4% | | Expense Ratio | 30.6% | 30.8% | | Combined Ratio | 92.5% | 99.2% | | Combined Ratio, ex-CAT | 85.5% | 88.5% | Consolidated Combined Ratio - YTD | Ratio | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Total Loss and LAE Ratio | 62.6% | 66.5% | | Expense Ratio | 30.7% | 30.8% | | Combined Ratio | 93.3% | 97.3% | | Combined Ratio, ex-CAT | 86.6% | 88.9% | - Current year catastrophe losses decreased to 7.4% of net premiums earned in Q2 2025 from 12.1% in Q2 2024[16] Core Commercial The Core Commercial segment reported a combined ratio of 93.0% for Q2 2025, a slight deterioration from 91.8% in Q2 2024, despite lower catastrophe losses. The total loss and LAE ratio increased to 60.1% from 58.4%. Net premiums written grew 4.4% in the quarter, driven by both Small Commercial and Middle Market sub-segments. Renewal price changes remained strong at 10.7%, though slightly lower than the prior year Core Commercial Combined Ratio - Q2 | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Loss and LAE Ratio | 60.1% | 58.4% | | Expense Ratio | 32.9% | 33.4% | | Combined Ratio | 93.0% | 91.8% | Core Commercial Net Premiums Written (in millions) | Sub-segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Small Commercial | $334.3 | $316.5 | | Middle Market | $201.7 | $196.9 | | Total | $536.0 | $513.4 | - Renewal price change for Core Commercial was 10.7% in Q2 2025, compared to 11.7% in Q2 2024. Premium retention improved to 85.1% from 83.2%[25] Specialty The Specialty segment delivered strong performance in Q2 2025 with a combined ratio of 86.5%, a significant improvement from 93.1% in Q2 2024. This was driven by a lower loss ratio, particularly from reduced catastrophe losses and favorable prior year development. Net premiums written grew 4.6% to $368.2 million, with growth across all sub-segments. Renewal price change moderated to 7.8% from 11.7% in the prior-year quarter Specialty Combined Ratio - Q2 | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Loss and LAE Ratio | 49.6% | 56.4% | | Expense Ratio | 36.9% | 36.7% | | Combined Ratio | 86.5% | 93.1% | - Net premiums written grew 4.6% in Q2 2025, with the Marine sub-segment showing strong growth[30] - Renewal price change for the Specialty segment was 7.8% in Q2 2025, down from 11.7% in Q2 2024. Premium retention was 81.8%[30] Personal Lines Personal Lines showed a dramatic turnaround in Q2 2025, posting an operating income of $57.4 million compared to a loss of $30.4 million in Q2 2024. The combined ratio improved to 95.5% from 109.1%, primarily due to a significant reduction in the loss ratio from 83.8% to 70.5%. This was driven by substantially lower catastrophe losses, especially in the Homeowners line. Net premiums written grew 3.7%, and renewal price changes remained robust at 12.3% Personal Lines Combined Ratio - Q2 | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Loss and LAE Ratio | 70.5% | 83.8% | | Expense Ratio | 25.0% | 25.3% | | Combined Ratio | 95.5% | 109.1% | - The improvement was driven by a lower loss ratio in the Homeowners and Other line, which fell to 74.5% from 102.8% in Q2 2024, due to lower catastrophe losses[33] Personal Lines Renewal Price Change - Q2 | Line of Business | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Personal Automobile | 9.8% | 18.0% | | Homeowners | 15.7% | 19.1% | | Total | 12.3% | 18.5% | Investments The company's investment portfolio shows increased net investment income and yields, primarily from high-quality fixed maturities with moderate duration Net Investment Income and Yields Total net investment income for Q2 2025 was $105.5 million, a 16.7% increase from Q2 2024. The growth was primarily driven by higher income from fixed maturities. The annualized pre-tax yield on the total investment portfolio was 4.11% for the quarter, up from 3.73% in the prior-year period Net Investment Income (in millions) | Source | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Fixed Maturities | $98.4 | $76.5 | $191.7 | $152.2 | | Total | $105.5 | $90.4 | $211.6 | $180.1 | Pre-tax Yields | Portfolio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Fixed Maturities | 4.24% | 3.53% | | Total | 4.11% | 3.73% | Investment Portfolio As of June 30, 2025, the total investment portfolio had a fair value of $9.94 billion. Fixed maturities constituted the largest portion at 89.1% ($9.08 billion) of the total portfolio. The portfolio is primarily composed of corporate bonds (39.7%) and asset-backed securities, including residential and commercial mortgage-backed securities (36.2%) Investment Portfolio Composition (June 30, 2025) | Investment Type | Fair Value (in millions) | % of Total | | :--- | :--- | :--- | | Total Fixed Maturities | $9,078.9 | 89.1% | | Corporates | $4,038.6 | 39.7% | | Residential mortgage-backed | $2,520.4 | 24.7% | | Total Investments | $9,941.3 | 97.6% | - The fixed maturity portfolio had a net unrealized loss of $299.0 million at the end of Q2 2025[48] Credit Quality and Duration of Fixed Maturities The fixed maturity portfolio as of June 30, 2025, is of high credit quality, with 78.2% of holdings rated 'A' or better (NAIC 1) and 16.8% rated 'Baa' (NAIC 2). The portfolio has a weighted average duration of 4.4 years, indicating a moderate sensitivity to interest rate changes - 95.0% of the fixed maturity portfolio is rated investment grade (NAIC 1 and 2)[51] - The weighted average duration of the fixed maturity portfolio is 4.4 years[52] Top 10 Corporate and Municipal Fixed Maturity Holdings The top 10 corporate and municipal holdings represent 2.91% of total invested assets as of June 30, 2025. The largest single issuer exposure is to Morgan Stanley, with a fair value of $43.0 million. Other top holdings include Minnesota Housing Finance Agency, Goldman Sachs, and the State of Ohio - The top 10 holdings have a total fair value of $296.2 million[54] - The largest holding is Morgan Stanley ($43.0M fair value), followed by Minnesota Housing Finance Agency ($32.5M fair value)[54] Reconciliation of Operating Income to Net Income The reconciliation details the transition from operating income to net income, accounting for non-operating items like investment gains/losses Reconciliation of Operating Income to Net Income For Q2 2025, operating income after taxes was $158.7 million ($4.35 per share). After accounting for non-operating items, primarily net realized and unrealized investment losses and their tax effects, the company reported income from continuing operations of $156.9 million ($4.30 per share) and net income of $157.1 million ($4.30 per share) Reconciliation for Q2 2025 (in millions) | Metric | Amount | Per Share (Diluted) | | :--- | :--- | :--- | | Operating Income After Taxes | $158.7 | $4.35 | | Net Realized/Unrealized Losses & Other | ($1.8) | ($0.05) | | Income from Continuing Operations | $156.9 | $4.30 | | Discontinued Operations | $0.2 | $0.00 | | Net Income | $157.1 | $4.30 | Other Information This section provides definitions for non-GAAP financial measures, premium-related metrics, and key corporate details including stock symbol and financial strength ratings Non-GAAP Financial Measures The company utilizes several non-GAAP measures to evaluate operating performance, including operating income, book value per share excluding unrealized gains/losses, and combined ratios excluding catastrophe losses and reserve development. Management believes these measures provide investors with a clearer view of the core operational performance by excluding volatile items like investment market fluctuations and unpredictable catastrophe events - Operating income excludes net realized/unrealized investment gains/losses, discontinued operations, and other non-operating items to highlight core business performance[61] - Metrics excluding catastrophe losses and prior year reserve development are provided to help investors understand underlying profitability and the variability of periodic earnings[63][64] Premium Related Metric Definitions The report defines key premium-related metrics used to assess business trends. 'Renewal Price Change' measures the average premium change on renewed policies from rate and exposure changes. 'Rate' specifically isolates the impact of base rate changes. 'Retention' measures the ratio of renewed premium or policies to the amount available for renewal - Renewal Price Change: Captures the net effect of base rate changes, pricing adjustments, and changes in policy exposure[70] - Retention: For Commercial lines, it's based on premium; for Personal Lines, it's based on the number of policies[70] Corporate Information The Hanover Insurance Group, Inc. trades on the NYSE under the symbol 'THG'. The company paid a quarterly cash dividend of $0.90 per share in Q1 and Q2 2025. As of July 30, 2025, its principal subsidiaries, The Hanover Insurance Company and Citizens Insurance Company of America, hold strong financial strength ratings, including an 'A' from A.M. Best and S&P Global Quarterly Dividends Per Share | Quarter | 2025 | 2024 | | :--- | :--- | :--- | | Q1 | $0.900 | $0.850 | | Q2 | $0.900 | $0.850 | Financial Strength Ratings (as of July 30, 2025) | Agency | The Hanover Ins. Co. | Citizens Ins. Co. of America | | :--- | :--- | :--- | | A.M. Best | A | A | | S&P Global | A | A | | Moody's | A2 | - |