By Michael Loney

Feb 4 - (The Insurer) - The Hanover Insurance Group has reported a 5 point improvement in its combined ratio to 89.2 percent for the fourth quarter, in an earnings beat that also included 7.4 percent net premiums written growth to $1.45bn.

Worcester, Massachusetts-based The Hanover reported operating income of $194.6mn for the fourth quarter of 2024, up from $113.1mn in the prior-year quarter.

The operating income per diluted share of $5.32 beat the $3.36 consensus estimate of eight analysts as per MarketWatch and was up from $3.13 in Q4 2023.

The combined ratio improved to 89.2 percent in the quarter from 94.2 percent in the prior-year quarter.

Catastrophes represented 1.7 points of the combined ratio in Q4 2024 and 4.0 points in the prior-year period, while there was 1.7 points of favourable prior year development compared with 0.6 points in Q4 2023.

The combined ratio excluding catastrophes of 87.5 percent was an improvement from 90.2 percent in the fourth quarter of 2023.

Net premiums written increased 7.4 percent to $1.45bn in the fourth quarter of 2024, from $1.35bn in the same period of last year

The core commercial combined ratio improved to 95.0 percent in the quarter, compared with 96.7 percent in the prior-year quarter.

Core commercial net premiums written were $500.5mn in the quarter, up 7.5 percent from the prior-year quarter.

This consisted of 9.3 percent growth in small commercial and 5.0 percent growth in middle market, which The Hanover said were both sequential accelerations from the third quarter of 2024.

In the fourth quarter, core commercial renewal price increases averaged 11.8 percent, including average rate increases of 9.2 percent. These were both sequential decelerations from the 12.9 percent renewal price increase and 10.0 percent rate increase in Q3 2024.

The Hanover in an investor presentation commented that the core commercial renewal price increases of 11.8 percent were “driven by strong price increases in both property and liability”.

The specialty combined ratio was 81.6 percent, compared to 83.2 percent in the prior-year quarter.

Specialty net premiums written were $331.8mn in the quarter, up 8.8 percent from the prior-year quarter.

In the fourth quarter, specialty renewal price increases averaged 9.5 percent (10.1 percent in Q3 2024), including average rate increases of 6.1 percent (7.6 percent in Q3 2024).

The personal lines combined ratio was 88.1 percent in the fourth quarter of 2024, compared to 97.6 percent in the prior-year quarter.

Personal lines net premiums written were $612.8mn in the quarter, up 6.6 percent compared to the prior-year quarter. The increase was primarily due to the impact of renewal pricing increases and higher new business, The Hanover said.

Personal lines renewal price increases averaged 14.2 percent (15.2 percent in Q3 2024), including average rate increases of 13.1 percent (14.4 percent in Q3 2024).

The renewal price and rate increases in both personal auto and homeowners were all sequential decelerations from Q3 2024.

The Hanover said that personal lines policies in force in the fourth quarter of 2024 decreased 0.6 percent compared to the third quarter of 2024, with a 1.1 percent decline in the Midwestern US, while the rest of the country was essentially flat.

For the full year 2024, The Hanover’s combined ratio was 94.8 percent, compared to 103.5 percent in 2023.

Catastrophe losses were $375.9mn, or 6.4 points of the combined ratio, in 2024, compared to $690.1mn, or 12.2 points, in the prior year.

Net favourable prior-year reserve development, excluding catastrophes, was $67.4mn, or 1.1 points, in 2024, compared to $15.9mn, or 0.3 points, in the prior year.

Total net premiums written were $6.08bn in 2024, up 4.7 percent from 2023, reflecting growth of 6.2 percent in specialty, 4.3 percent in personal lines, and 4.2 percent in core commercial, with The Hanover stating that growth in each segment was impacted by targeted underwriting actions.

"2024 was an exceptional year for our company, as we delivered excellent financial performance, executed well on our strategic priorities, and continued to invest in innovative tools and technology, further enhancing our strong competitive position and prospects," said John Roche, president and CEO at The Hanover.

Roche also highlighted “significant progress in executing our catastrophe mitigation initiatives and delivering on our margin recapture plan”.

“We expect to make continued progress in 2025, while leveraging our targeted growth initiatives throughout the enterprise and capitalizing on emerging opportunities in the marketplace. We continue to operate in firm market conditions and expect strong pricing will enable us to optimize our geographic mix further and achieve broad-based profitability across all segments,” he continued.

In addition, The Hanover’s investor presentation also noted that the impact of catastrophe bookings in January 2025 is expected to be less than $10mn above the January monthly catastrophe plan of $30mn.

“California wildfire activity represents the overwhelming majority of January CATs,” it said.