Is The Hanover Insurance Group (THG) a High-Quality P&C Company?

Core Viewpoint - Madison Small Cap Fund's second-quarter 2025 investor letter highlights the performance of the fund and its focus on The Hanover Insurance Group, Inc. as a promising investment opportunity in the small-cap insurance sector [1][2][3]. Fund Performance - The second quarter of 2025 saw the Russell 2000 Index increase by 8.5%, while the Madison Small Cap Fund (class Y) returned 4.42%, underperforming relative to the Russell 2000 and Russell 2500 indices [1]. The Hanover Insurance Group, Inc. - The Hanover Insurance Group, Inc. is characterized as a regionally focused property and casualty insurance company that is relatively underfollowed and misunderstood in the market [3]. - The company has diversified its business model since selling its international operations in 2018, with a current mix of 37% commercial, 50% personal, and 23% specialty insurance [3]. - The Hanover Insurance Group's stock closed at $174.92 on September 17, 2025, with a market capitalization of $6.257 billion, and has seen a 17.37% increase in value over the past 52 weeks [2][3]. Investment Potential - The intrinsic value of The Hanover Insurance Group is assessed at $210, indicating potential for growth that is not fully recognized by the market [3]. - Despite its potential, The Hanover Insurance Group is not among the most popular stocks among hedge funds, with 32 hedge fund portfolios holding the stock at the end of the second quarter, down from 35 in the previous quarter [4].