The Hanover Insurance Group (NYSE:THG) reported record second-quarter operating performance, citing improved underwriting margins, accelerating premium growth and higher investment income across its diversified insurance portfolio.
President and Chief Executive Officer Jack Roche said the company generated operating earnings of $5.31 per diluted share and an operating return on equity of about 20%. Net written premiums increased 4.6%, led by Core Commercial and Specialty lines, while Personal Lines continued to produce what Roche described as strong margins and improving business momentum.
Combined Ratio Improves as Reserve Development Adds Support
Chief Financial Officer Jeff Farber said Hanover posted a combined ratio of 91.2% for the quarter, improving 1.3 percentage points from a year earlier. The combined ratio excluding catastrophe losses was 85.5%, while the current accident-year loss ratio excluding catastrophes was 55.8%.
Catastrophe losses accounted for 5.7 points of the combined ratio, including 0.8 points of favorable prior-year catastrophe development. Farber said catastrophe losses came in below the company’s modeled expectations despite frequent catastrophe activity in its operating regions.
The company also reported $21.5 million of favorable prior-year reserve development excluding catastrophes, with favorable development in all three operating segments:
- Specialty generated $10.8 million of favorable development, or 3 points, across multiple coverages.
- Personal Lines produced $10.1 million of favorable development, or 1.5 points, primarily from Homeowners and, to a lesser extent, Personal Auto property coverages.
- Core Commercial generated $0.6 million of favorable development.
Farber said the company’s expense ratio was 31%, modestly above expectations because of higher variable compensation for agents in Personal Lines and employee incentive costs tied to better-than-expected underwriting results.
Personal Lines Margins Benefit From Pricing and Lower Frequency
Personal Lines recorded a current accident-year combined ratio excluding catastrophes of 81.9%, a 2.9-point improvement from the prior-year quarter. The improvement reflected earned pricing and what Farber called benign frequency trends.
Homeowners generated an ex-catastrophe current accident-year loss ratio of 43.7%, improving 7.4 points from a year earlier. Farber cited earned pricing, favorable attritional loss frequency and lower large and weather-related losses. He also said deductible changes have contributed to fewer small claims in catastrophe and non-catastrophe results.
Personal Auto’s ex-catastrophe current accident-year loss ratio was 64.7%, improving 1.5 points year over year, aided by favorable frequency across multiple coverages, particularly collision.
Personal Lines net written premiums increased 2.6%, matching first-quarter growth. The company said prior actions to manage concentrations have reduced policies in force on a year-over-year basis, though policies in force were roughly flat sequentially. Hanover expects sequential policies-in-force growth by the end of 2026.
Second-quarter renewal price increases were 7.1% in auto and 10.9% in home, while umbrella pricing rose about 19%. Roche said the company continues to shift toward higher-value customers through its Prestige offering. In response to an analyst question, Specialty Lines President Bryan Salvatore defined Prestige business as homes with $750,000 to approximately $3 million of Coverage A replacement cost and said the company is targeting $350 million of that business.
Hanover added about 100 new Personal Lines distribution points year to date, with 75% in targeted diversification states, according to Roche.
Commercial and Specialty Growth Accelerates
Core Commercial net written premiums rose 7.2%, up from 4.3% in the first quarter. Small Commercial grew 6%, supported by stable retention of approximately 86%, favorable renewal and new-business pricing, and expanded use of automated underwriting capabilities.
Roche said the company expanded no-touch submission flow through its TAP Sales platform and remains on track for a full-country rollout of its TAP Sales workers’ compensation product this year.
Middle Market premiums increased 9.4%; excluding several non-recurring or timing items, growth was approximately 7%, compared with 1.5% in the first quarter. Roche said Hanover’s focus on smaller accounts and the lower end of the Middle Market provides less exposure to broad property-market softening.
Core Commercial’s current accident-year combined ratio excluding catastrophes was 91.2%. Its ex-catastrophe loss ratio of 58.7% was 2.2 points above the prior-year quarter, which Farber attributed to unusually low large property losses in the 2025 period and prudently increased liability loss selections in 2026.
Specialty net written premiums increased 4.4%, accelerating from the first quarter. The segment’s current accident-year combined ratio excluding catastrophes was 88.6%, and its ex-catastrophe loss ratio was 51.6%.
Roche said growth was strongest in professional and executive lines, management liability and Surety. Hanover Specialty Industrial production was more subdued because of its greater exposure to softening property-market conditions. The company also cited activity in Marine and excess-and-surplus lines, where it said it is deploying capacity selectively.
The company highlighted technology investments including an artificial intelligence-driven E&S tool called Triage Pro, which it said helps underwriters prioritize attractive submissions, and new Surety workbench tools intended to streamline workflows and improve underwriting insights.
Reinsurance, Investments and Capital Deployment
Hanover renewed its property reinsurance treaties effective July 1, maintaining or enhancing its prior structures, according to Farber. The company issued a new catastrophe bond with expanded coverage, increasing its size to $150 million after investor demand allowed the company to reduce pricing guidance and issue at the low end of the revised range.
The catastrophe occurrence program exhausts at $2.05 billion across covered perils, while maintaining a $200 million retention. Farber said reinsurance costs declined substantially on a risk-adjusted basis, and the company expanded its property per-risk limit by $25 million.
Net investment income increased 13.4%, driven by asset growth and higher fixed-income reinvestment yields. Fixed-income portfolio investment income rose 16.3% from the prior-year quarter. About 88% of invested assets were held in cash and investment-grade fixed income, and the fixed-maturity portfolio had a weighted average rating of A+, Farber said.
Book value per share increased 3.5% sequentially to $105.40. Hanover repurchased approximately 291,000 shares for $55 million during the quarter and announced a new $700 million share repurchase authorization. Through July 24, it had repurchased about 827,000 shares year to date at an average price of $180.
Farber said first-half results were running “a couple of points better” than the path contemplated in the company’s original combined-ratio guidance, though Hanover did not update its annual guidance. The company expects a 6.9% catastrophe load in the third quarter.
Roche also discussed his planned retirement after more than nine years as CEO. He will remain in the role through year-end, with Chief Operating Officer Dick Lavey set to become CEO in January. Lavey said the company remains focused on executing its existing strategy and intends to provide additional details on its longer-term plans at its Sept. 17 investor day.
About The Hanover Insurance Group (NYSE:THG)
The Hanover Insurance Group, Inc (NYSE: THG) is a property and casualty insurance company that provides a range of commercial and personal insurance products. Through its subsidiary companies, Hanover offers coverage for businesses of all sizes, including workers’ compensation, general liability, commercial auto, and professional liability. On the personal lines side, the company underwrites homeowners, personal auto, flood, and umbrella policies designed to meet the needs of individuals and families.
In addition to its core commercial and personal insurance offerings, Hanover maintains a specialty arm that focuses on niche markets through tailored product solutions.
