The Hanover Insurance Group (THG) Q4 2023 earnings summary

Executive summary

• Q4 net income was $107.9 million, or $2.98 per diluted share, versus a $12.1 million loss; operating income was $113.1 million, or $3.13 per diluted share.

• Q4 combined ratio improved 13.8 points YoY to 94.2%; excluding catastrophes, it improved 3.9 points to 90.2%, reflecting lower catastrophe losses and stronger underlying results.

• FY net income was $35.3 million, or $0.98 per diluted share, and operating income was $56.2 million, or $1.56 per diluted share; both declined from 2022.

Financial highlights

• Q4 net premiums written rose 1.5% to $1.35 billion; FY net premiums written increased 6.1% to $5.81 billion.

• Q4 net investment income rose 7.5% to $81.6 million; FY net investment income increased 12.1% to $332.1 million.

• Q4 book value per share was $68.93, up 16.4% from September 30, 2023; excluding after-tax unrealized depreciation on fixed maturities, it was $81.86.

• FY catastrophe losses were $690.1 million, or 12.2 combined-ratio points, versus $402.6 million, or 7.7 points, in 2022.

Outlook and guidance

• FY 2024 net premiums written growth expected in the mid-single digits; ex-catastrophe combined ratio guidance is 90%–91%.

• FY 2024 expense ratio guidance is 30.7%, 10 bps better than prior guidance; catastrophe loss ratio assumption is 7.0% and effective tax rate is 21%.

• FY 2024 net investment income growth is expected to be -10%; higher bond reinvestment rates and operational cash flows are expected to support investment income over time.

• Outlook emphasized further ex-cat ratio improvement, robust Personal Lines improvement, continued profitability in Specialty and Core Commercial, and growth led by Specialty.

• Specialty is expected to return to upper-single-digit growth in 2024, with growth ramping through the year.