First Quarter 2024 Earnings Presentation
First Quarter 2024 Results
To be read in conjunction with the press release dated
Please also see important information regarding forward-looking statements and additional risks and uncertainties at the end of this presentation.
1
First Quarter 2024 Operating Highlights
Net and operating retuon equity(1) of 18.5% and 15.1%, respectively
- Net income of
$3.18 per diluted share; operating income(2) of$3.08 per diluted share - Combined ratio of 95.5%; combined ratio, excluding catastrophes(3), of 89.5%
- Catastrophe losses of
$86.9 million , or 6.0 points of the combined ratio - Net premiums written increase of 2.3%*
- Renewal price increases(4) of 22.8% in Personal Lines, 11.5% in Core Commercial and 11.0% in Specialty
- Rate increases(4) of 15.8% in Personal Lines, 9.3% in Core Commercial and 8.4% in Specialty
- Loss and loss adjustment expense (LAE) ratio of 64.6%, 9.1 points below the prior-year quarter, driven by lower catastrophe and non-catastrophe losses
- Current accident year loss and LAE ratio, excluding catastrophes(5), of 59.3%, 1.9 points below the prior-year quarter
- Net investment income of
$89.7 million , up 14.0% from the prior-year quarter, primarily due to higher bond reinvestment rates, higher partnership income, and the continued investment of operational cashflows - Book value per share of
$70.22 , up 1.9% fromDecember 31, 2023 , primarily due to strong earnings in the quarter
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*Unless otherwise stated, net premiums written growth and other growth comparisons are to the same period of the prior year |
2 |
- See information about this and other non-GAAP measures and definitions used throughout this presentation on the final pages of this document.
The Hanover Insurance Group, Inc. may also be referred to as "The Hanover" or "the company" interchangeably throughout this presentation.
Consolidated Financial Results
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Three months ended |
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($ in millions, except per share amounts) |
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2023 |
2024 |
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Net income (loss) |
( |
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Per diluted/(basic) share |
( |
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Operating income before interest expense and income taxes |
(2) |
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Operating income after income taxes |
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Per diluted share |
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Book value per share |
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Book value per share, excluding net unrealized appreciation |
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(depreciation) on fixed maturity investments, net of tax |
(6) |
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Shareholders' equity |
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Debt |
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Total capital |
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Debt/total capital |
24.7% |
23.7% |
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Total assets |
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Net income (loss) retuon average equity |
(2.0)% |
18.5% |
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Operating income retuon average equity |
0.6% |
15.1% |
3
First Quarter 2024 Underwriting Results
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($ in millions) |
Net premiums written and growth |
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↑ 8.3% |
↑ 8.6% |
↑ 6.0% |
↑ 2.3% |
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↑ 1.5% |
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1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
Current accident year combined ratio, ex-CAT
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91.9% |
92.9% |
90.8% |
90.8% |
90.2% |
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61.2% |
62.3% |
60.6% |
60.2% |
59.3% |
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30.7% |
30.6% |
30.2% |
30.6% |
30.9% |
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1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
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Expense ratio(7) |
Current accident year loss and LAE ratio, ex-CAT |
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- Combined ratio of 95.5% in the first quarter 2024, improved 8.9 points from the prior-year quarter, primarily driven by lower catastrophe losses
- Combined ratio, ex-CAT, improved 2.2 points from the prior-year quarter to 89.5%, primarily driven by a lower current accident year loss and LAE ratio, ex-CAT, with improvement in Specialty and Personal Lines, and strong, steady margins in Core Commercial, demonstrating the effectiveness of our underwriting actions
- Prior-yearreserve development, ex-CAT, was
$10.4 million favorable in the quarter, with favorability in Core Commercial and Specialty - Expense ratio increased 20 basis points compared to the prior-year quarter, primarily driven by continued strategic business investments and timing of certain expenses
- Net premiums written increased 2.3%, impacted by targeted profitability improvement actions
4
Core Commercial Underwriting Highlights
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Three months ended |
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($ in millions) |
2023 |
2024 |
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Net premiums written |
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Growth |
7.3% |
3.0% |
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Net premiums earned |
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Catastrophe ratio |
12.6% |
3.9% |
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Prior-year development ratio |
0.7 % |
(1.7)% |
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Expense ratio |
32.9% |
33.2% |
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Combined ratio |
104.7% |
93.9% |
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Combined ratio, ex-CAT |
92.1% |
90.0% |
Current accident year combined ratio, ex-CAT
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91.4% |
89.2% |
89.6% |
91.4% |
91.7% |
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58.5% |
56.2% |
56.3% |
57.8% |
58.5% |
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32.9% |
33.0% |
33.3% |
33.6% |
33.2% |
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1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
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Expense ratio |
Current accident year loss and LAE ratio, ex-CAT |
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- First quarter 2024 combined ratio, ex-CAT, improved 2.1 points from the prior-year quarter
- Net favorable prior-year reserve development, ex-CAT, of
$9.2 million , or 1.7 points, with favorability in each major line of business - Current accident year loss and LAE ratio, ex- CAT, relatively in line with our expectations and the prior-year quarter; maintaining attentive focus on current liability trends, which have remained within expectations
- Expense ratio increased 30 basis points compared to the prior-year quarter, primarily driven by timing of certain expenses
5
Core Commercial Growth Highlights
($ in millions) Net premiums written and growth
↑ 3.0%
$565.3
$253.4
$311.9
1Q231Q24
Middle market Small commercial
- Net premiums written increased 3.0% in the first quarter
-
- Driven by growth of 7.7% in small commercial, propelled by strong pricing
- Partially offset by a decline of 2.8% in middle market due to continued targeted non-renewals
- Renewal price increases of 11.5%, driven by consistent rate increases, as well as insurance-to-value and other exposure adjustments
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- Retention down 1.3 points sequentially from the fourth quarter of 2023 due to the middle market underwriting actions
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Retention* |
Rate/RPC |
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20.0% |
||||||
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85% |
84.0% |
83.5% |
83.8% |
83.6% |
82.3% |
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11.5% |
11.8% |
12.4% |
15.0% |
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11.3% |
11.5% |
|||||
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80% |
10.0% |
|||||
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7.8% |
7.8% |
9.2% |
9.3% |
9.3% |
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75% |
5.0% |
|||||
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70% |
0.0% |
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1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
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Premium retention |
Rate |
Renewal price change |
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* Retention is defined as the ratio of net retained premium for the noted period to the premium available to renew over the same period
6
Property IoT Sensor Utilization
Estimated TIV protected
- Accelerating implementation of our property IoT sensor offerings, primarily in our core commercial middle market business, to proactively mitigate risk and prevent losses
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- Already have observed numerous occasions of sensors driving loss prevention
- Seeing strong enrollment momentum and agency support
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- Top targeted industries include medical offices, schools, and real estate
Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Forecast Forecast
2024 2025
End End
- Expect TIV protected to double by the end of 2025 as we continue to drive utilization of this technology to enhance profitability for the enterprise and prevent losses for our customers
Enrolled customers by business type
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Misc/other, |
Enrolled customers by sub-segment |
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13% |
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Real estate, 25% |
Beauty |
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salons, 9% |
Other, |
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28% |
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Dental offices, |
Middle |
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7% |
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Market, |
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72% |
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Schools, 30% |
Apartments/condo, 5% |
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Manufacturing, 5% |
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Health + elder care, 4% |
7 |
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Hospitality/restaurants, 2% |
Specialty Underwriting Highlights
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Three months ended |
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($ in millions) |
2023 |
2024 |
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Net premiums written |
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Growth |
7.1% |
4.8 % |
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Net premiums earned |
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Catastrophe ratio |
6.9% |
2.2% |
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Prior-year development ratio |
(5.8)% |
(0.3)% |
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Expense ratio |
35.3% |
37.0% |
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Combined ratio |
89.9% |
87.6% |
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Combined ratio, ex-CAT |
83.0% |
85.4% |
Current accident year combined ratio, ex-CAT
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88.8% |
89.3% |
82.9% |
85.9% |
85.7% |
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53.5% |
54.0% |
47.8% |
49.5% |
48.7% |
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35.3% |
35.3% |
35.1% |
36.4% |
37.0% |
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1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
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Expense ratio |
Current accident year loss and LAE ratio, ex-CAT |
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- First quarter 2024 current accident year combined ratio, ex-CAT, decreased 3.1 points from the prior-year quarter
- Net favorable prior-year reserve development, ex-CAT, of
$1.1 million , or 0.3 points - Current accident year loss and LAE ratio, ex- CAT, improved 4.8 points from the prior-year quarter, favorable to the company's low-50s loss ratio target
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- The decrease from the prior-year quarter reflects lower-than-expected loss experience in our Hanover specialty industrial business, as well as the benefit of earned pricing above loss trends
- Expense ratio increased 1.7 points compared to the prior-year quarter to 37.0%, primarily driven by strategic investments, including talent
8
Specialty Growth Highlights
($ in millions) Net premiums written and growth
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↑ 4.8% |
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1Q23 |
1Q24 |
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Professional and executive lines |
Specialty property & casualty |
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Marine |
Surety and other |
- Net premiums written growth of 4.8% in the first quarter of 2024
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- Somewhat slowed down by targeted non- renewals predominately in specialty property and casualty
- On track to deliver upper-single digit growth for 2024
- Renewal price increases remain strong at 11.0%, led by property pricing
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- Robust rate increases of 8.4%
- Retention remained robust
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Retention* |
RPC |
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83.1% |
25.0% |
|||||
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85% |
82.5% |
80.5% |
79.7% |
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20.0% |
||||||
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76.0% |
||||||
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75% |
12.6% |
11.4% |
12.9% |
11.6% |
11.0% |
15.0% |
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10.0% |
||||||
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65% |
||||||
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5.0% |
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55% |
0.0% |
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1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
Premium retention Renewal price change
* Retention is defined as the ratio of net retained premium for the noted period to the premium available to renew over the same period
9
Personal Lines Underwriting Highlights
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Three months ended |
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($ in millions) |
2023 |
2024 |
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Net premiums written |
|
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Growth |
10.1% |
0.0% |
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Net premiums earned |
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Catastrophe ratio |
16.0% |
9.9% |
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Prior-year development ratio |
2.1% |
0.0% |
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Expense ratio |
26.1% |
25.5% |
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Combined ratio |
112.2% |
101.0% |
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Combined ratio, ex-CAT |
96.2% |
91.1% |
Current accident year combined ratio, ex-CAT
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94.1% |
98.4% |
96.4% |
93.0% |
91.1% |
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68.0% |
72.5% |
71.5% |
68.0% |
65.6% |
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26.1% |
25.9% |
24.9% |
25.0% |
25.5% |
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1Q23 |
2Q23 |
3Q23 |
4Q23 |
1Q24 |
||
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Expense ratio |
Current accident year loss and LAE ratio, ex-CAT |
|||||
- Combined ratio, ex-CAT, improved 5.1 points from the prior-year quarter driven by improvements in both the loss ratio and expense ratio
- Immaterial ex-CAT prior year reserve development, as favorability of
$5.8 million in personal auto was offset by unfavorable development in Homeowners and Other, reflecting prudent reserve increases in umbrella - Current accident year loss and LAE ratio, ex-CAT, improved 2.4 points from the prior-year quarter
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- Auto improved 2.2 points compared to the prior-year quarter, driven by the benefit of earned pricing increases and moderating loss trends, particularly in collision coverage; remaining prudent around liability coverages
- Homeowners and Other improved 2.4 points compared to the prior-year quarter, driven by the benefit of rate earning in, partially offset by increase in expectations for umbrella coverages
10
Attachments
Disclaimer
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