The Hanover Insurance Group’s core commercial business lost money on underwriting in the third quarter as catastrophe losses jumped. But the insurer continued to push renewal pricing well above wider market trends, and its personal lines margins improved sharply.
Company-wide, the Worcester, Massachusetts-based insurer reported a combined ratio of 92.3%, up from 91.1% a year earlier. Catastrophe losses rose to $109.7 million, or 6.8 points of the combined ratio, from 3.0 points. Excluding catastrophes, the combined ratio improved to 85.5% from 88.1%.
Net income was $172.6 million, or $4.86 per diluted share. Operating income was a record $5.15 per share for the third quarter, and operating return on equity was 18.7%.
Core Commercial, which covers small business and middle market accounts sold through independent agents, posted a 100.5% combined ratio, compared with 97.3% a year earlier. Catastrophe losses in the segment more than doubled to $45.3 million, or 7.8 points.
Excluding catastrophes, the segment’s underlying performance improved. The current accident year combined ratio excluding catastrophes fell 1.1 points to 93.2%, helped by a 1.0-point drop in the expense ratio. Hanover kept its underlying loss ratio flat at 60.5%, saying it continues to prudently set loss ratio selections in liability coverages.
Core Commercial renewal prices rose 7.4% on average, including 6.1% from rate. That is well above the latest Ivans Index, which showed industry renewal increases slowing to 4.12% in general liability and 5.61% in BOP in the third quarter. Net premiums written grew 4.6%, with small commercial up 2.8% and middle market up 6.7%.
Personal lines had the biggest improvement. The current accident year combined ratio excluding catastrophes fell 3.9 points to 81.9%, as earned pricing kept running ahead of loss trends and property claims frequency stayed low.
Renewal prices rose 8.7% on average, including 4.9% from rate. Net premiums written grew only 1.7%, and policies in force were essentially flat on the second quarter, suggesting Hanover is choosing to hold pricing rather than chase growth.
Specialty had the strongest margins, with a combined ratio of 84.0% and $14.8 million of favorable reserve development across the book. But rate increases in the segment slowed to just 1.9%, and premium growth slowed to 3.3% from 8.3% a year earlier, reflecting more competition in specialty lines.
“Our business mix continues to support strong performance and stable renewal pricing,” said John Roche, president and chief executive. He said Hanover would stay patient where conditions call for greater selectivity.
For independent agents placing small business and middle market accounts with Hanover, the carrier remains firm on pricing even as the wider market softens. Renewal increases of more than 7% are likely to be harder to explain to clients who are being offered flatter terms elsewhere.
Hanover’s caution on liability loss picks is also telling. It suggests a disciplined regional carrier still sees enough risk in casualty to hold back, even as industry rates slow. That supports the view that liability pressure hasn’t eased, and that the softening is concentrated in property and specialty.
In personal lines, flat policy counts and above-inflation renewal increases show Hanover prioritizing margin over volume. Agents with preferred clients may find it easier to place new business as rate adequacy improves.
