Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HANOVER INSURANCE GROUP, INC. | d671203d8k.htm |
| EX-99.1 - EX-99.1 - HANOVER INSURANCE GROUP, INC. | d671203dex991.htm |
Exhibit 99.2
FINANCIAL SUPPLEMENT
FOURTH QUARTER 2013
THE HANOVER INSURANCE GROUP
FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
| Business Description |
1 | |
| Financial Highlights |
2 | |
| Consolidated Financial Statements |
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| Income Statements |
3 | |
| Balance Sheets |
4 | |
| GAAP Underwriting Results |
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| Consolidated |
5-7 | |
| Commercial Lines |
8-10 | |
| Personal Lines |
11-13 | |
| Chaucer |
14-16 | |
| Investments |
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| Net Investment Income and Yields |
17 | |
| Investment Portfolio |
18 | |
| Credit Quality and Duration of Fixed Maturities |
19 | |
| Top 10 Corporate and Municipal Fixed Maturity Holdings |
20 | |
| Reconciliation of Operating Income (Loss) to Net Income (Loss) |
21 | |
| Other Information |
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| Non-GAAP Financial Measures |
22 | |
| Corporate Information |
23 | |
| Market and Dividend Information |
23 | |
| Financial Strength and Debt Ratings |
23 |
THE HANOVER INSURANCE GROUP
BASIS OF PRESENTATION
BUSINESS DESCRIPTIONS
COMMERCIAL LINES
Commercial multiple peril coverage insures businesses against third party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products sold. It also insures business property for damage, such as that caused by fire, wind, hail, water damage (except for flooding), theft and vandalism.
Commercial automobile coverage insures businesses against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and property.
Workers’ compensation coverage insures employers against employee medical and indemnity claims resulting from injuries related to work. Workers’ compensation policies are often written in conjunction with other commercial policies.
Other Commercial Lines is comprised of inland marine, which insures businesses against physical losses to property, such as contractor’s equipment, builders’ risk and goods in transit. We also offer underwriting and managing of program business, including to under-served markets where there are specialty coverage or risk management needs. Other Commercial Lines also includes bonds, which provides businesses with contract surety coverage in the event of performance or payment claims, and commercial surety coverage related to fiduciary or regulatory obligations. Also included in Other Commercial Lines coverages are umbrella, general liability, fire, specialty property, and professional and management liability.
PERSONAL LINES
Personal automobile coverage insures individuals against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and other property.
Homeowners coverage insures individuals for losses to their residences and personal property, such as those caused by fire, wind, hail, water damage (except for flooding), theft and vandalism, and against third party liability claims.
Other Personal Lines are comprised of personal inland marine (jewelry, art, etc.), umbrella, fire, personal watercraft, earthquake and other miscellaneous coverages.
CHAUCER
The Chaucer reporting segment represents THG’s international business written through Lloyd’s and includes international property, marine and aviation, energy, UK motor and international casualty and other coverages.
Property coverage, including direct, facultative and treaty property accounts, insures property, including commercial, auto, and industrial businesses, against physical loss or damage and business interruption. The property treaty account comprises mainly catastrophe and per risk excess contract acceptances, with a small amount of proportional treaty and reinsurance assumed business.
Marine and Aviation includes coverages that insure marine hull, excess of loss, liability, cargo and specie, in addition to political risk, war, and satellite business coverages. It also includes aviation coverages that insure airline hull and liability, general aviation and refuellers and products.
Energy coverage, encompassing exploration and production, construction, liabilities downstream and renewables, insures energy businesses against physical damage, business interruption, control of well, seepage and pollution and liabilities. Energy also includes Nuclear, which predominantly provides coverage relating to power generation at nuclear power stations.
UK Motor coverage insures the UK private car and fleet markets. In addition, it writes specialist classes including commercial vehicle, taxi, motorcycle, motor trade and classic/specialist vehicles, as well as other UK small commercial products.
Casualty and Other Lines includes coverages that insure financial institutions crime and professional indemnity, medical malpractice, workers’ compensation and professional, managerial and general liability, as well as syndicate participations.
OTHER
Included in Other are Opus, which provides investment advisory services to affiliates and also manages assets for unaffiliated institutions such as insurance companies, retirement plans and foundations; earnings on holding company assets; and voluntary pools business which is in run-off.
1
THE HANOVER INSURANCE GROUP
FINANCIAL HIGHLIGHTS
| (In millions, except earnings per share) |
Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
Dec-YTD 2012 |
Dec-YTD 2013 |
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| PREMIUMS |
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| Gross premiums written |
$ | 1,207.4 | $ | 1,318.1 | $ | 1,394.4 | $ | 1,313.8 | $ | 1,175.4 | $ | 5,204.2 | $ | 5,201.7 | ||||||||||||||
| Net premiums written |
1,033.9 | 1,076.7 | 1,242.6 | 1,181.9 | 1,051.5 | 4,368.4 | 4,552.7 | |||||||||||||||||||||
| Net premiums earned |
1,082.5 | 1,094.3 | 1,090.8 | 1,124.7 | 1,140.7 | 4,239.1 | 4,450.5 | |||||||||||||||||||||
| EARNINGS |
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| Operating income (loss) before interest and taxes |
$ | (104.5 | ) | $ | 102.2 | $ | 81.1 | $ | 107.2 | $ | 102.9 | $ | 75.1 | $ | 393.4 | |||||||||||||
| Operating income (loss) after taxes |
(73.4 | ) | 59.9 | 46.8 | 60.9 | 59.6 | 15.1 | 227.2 | ||||||||||||||||||||
| Income (loss) from continuing operations |
(55.3 | ) | 66.4 | 53.1 | 61.3 | 64.9 | 46.1 | 245.7 | ||||||||||||||||||||
| Net income (loss) |
(55.0 | ) | 66.2 | 53.4 | 61.3 | 70.1 | 55.9 | 251.0 | ||||||||||||||||||||
| PER SHARE DATA (DILUTED) (1) |
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| Operating income (loss) after taxes |
$ | (1.65 | ) | $ | 1.32 | $ | 1.05 | $ | 1.36 | $ | 1.33 | $ | 0.33 | $ | 5.06 | |||||||||||||
| Income (loss) from continuing operations |
(1.24 | ) | 1.47 | 1.19 | 1.37 | 1.45 | 1.02 | 5.47 | ||||||||||||||||||||
| Net income (loss) |
(1.24 | ) | 1.46 | 1.19 | 1.37 | 1.57 | 1.23 | 5.59 | ||||||||||||||||||||
| Weighted average shares outstanding (1) |
44.5 | 45.3 | 44.8 | 44.6 | 44.8 | 45.3 | 44.9 | |||||||||||||||||||||
BALANCE SHEET
| (In millions, except per share data) |
December 31 2012 |
March 31 2013 |
June 30 2013 |
September 30 2013 |
December 31 2013 |
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| Total assets |
$ | 13,484.9 | $ | 13,442.1 | $ | 13,306.4 | $ | 13,463.3 | $ | 13,378.7 | ||||||||||
| Total loss and loss adjustment expense reserves |
6,197.0 | 6,092.5 | 6,063.6 | 6,162.8 | 6,231.5 | |||||||||||||||
| Total shareholders’ equity |
2,595.4 | 2,624.0 | 2,495.7 | 2,544.2 | 2,594.5 | |||||||||||||||
| U.S. Property and Casualty Companies |
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| Statutory surplus |
$ | 1,523.4 | $ | 1,623.3 | $ | 1,639.5 | $ | 1,751.3 | $ | 1,834.3 | ||||||||||
| Premium to surplus ratio |
2.22:1 | 2.09:1 | 2.08:1 | 1.95:1 | 1.87:1 | |||||||||||||||
| Book value per share |
$ | 58.59 | $ | 59.58 | $ | 57.41 | $ | 58.43 | $ | 59.43 | ||||||||||
| Book value per share, excluding net unrealized investment gains and losses, net of tax |
$ | 51.88 | $ | 52.81 | $ | 53.62 | $ | 54.64 | $ | 56.07 | ||||||||||
| Tangible book value per share (total book value excluding goodwill and intangibles) |
$ | 51.32 | $ | 52.46 | $ | 50.25 | $ | 51.20 | $ | 52.22 | ||||||||||
| Shares outstanding |
44.3 | 44.0 | 43.5 | 43.6 | 43.7 | |||||||||||||||
| Total debt/equity |
32.7 | % | 37.3 | % | 37.6 | % | 36.9 | % | 34.8 | % | ||||||||||
| Total debt/total capital |
24.7 | % | 27.2 | % | 27.3 | % | 27.0 | % | 25.8 | % | ||||||||||
| (1) | Weighted average shares outstanding and per diluted share amounts in the fourth quarter of 2012 excludes common stock equivalents, as the impact of these instruments was anti-dilutive. |
2
THE HANOVER INSURANCE GROUP
CONSOLIDATED INCOME STATEMENTS
| Three Months ended December 31 | Year ended December 31 | |||||||||||||||||||||||
| (In millions) |
2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||||||||||||||
| REVENUES |
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| Premiums earned |
$ | 1,140.7 | $ | 1,082.5 | 5.4 | $ | 4,450.5 | $ | 4,239.1 | 5.0 | ||||||||||||||
| Net investment income |
68.1 | 70.1 | (2.9 | ) | 269.0 | 276.6 | (2.7 | ) | ||||||||||||||||
| Total net realized investment gains |
10.7 | 18.9 | (43.4 | ) | 33.5 | 23.6 | 41.9 | |||||||||||||||||
| Fees and other income |
9.5 | 12.5 | (24.0 | ) | 40.7 | 51.4 | (20.8 | ) | ||||||||||||||||
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| Total revenues |
1,229.0 | 1,184.0 | 3.8 | 4,793.7 | 4,590.7 | 4.4 | ||||||||||||||||||
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| LOSSES AND EXPENSES |
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| Losses and loss adjustment expenses |
689.7 | 872.5 | (21.0 | ) | 2,761.1 | 2,974.4 | (7.2 | ) | ||||||||||||||||
| Amortization of deferred acquisition costs |
251.9 | 241.1 | 4.5 | 971.0 | 938.1 | 3.5 | ||||||||||||||||||
| Interest expense |
16.6 | 15.2 | 9.2 | 65.3 | 61.9 | 5.5 | ||||||||||||||||||
| Other operating expenses |
182.6 | 161.6 | 13.0 | 667.2 | 587.6 | 13.5 | ||||||||||||||||||
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| Total losses and expenses |
1,140.8 | 1,290.4 | (11.6 | ) | 4,464.6 | 4,562.0 | (2.1 | ) | ||||||||||||||||
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| Income (loss) from continuing operations before income taxes |
88.2 | (106.4 | ) | (182.9 | ) | 329.1 | 28.7 | N/M | ||||||||||||||||
| Income tax expense (benefit) |
23.3 | (51.1 | ) | (145.6 | ) | 83.4 | (17.4 | ) | (579.3 | ) | ||||||||||||||
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| Income (loss) from continuing operations |
64.9 | (55.3 | ) | (217.4 | ) | 245.7 | 46.1 | 433.0 | ||||||||||||||||
| Discontinued operations |
5.2 | 0.3 | N/M | 5.3 | 9.8 | N/M | ||||||||||||||||||
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| Net income (loss) |
$ | 70.1 | $ | (55.0 | ) | (227.5 | ) | $ | 251.0 | $ | 55.9 | 349.0 | ||||||||||||
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3
THE HANOVER INSURANCE GROUP
CONSOLIDATED BALANCE SHEETS
| (In millions, except per share data) |
December 31 2013 |
December 31 2012 |
% Change | |||||||||
| ASSETS |
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| Investments: |
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| Fixed maturities, at fair value (amortized cost of $6,815.2 and $6,529.5) |
$ | 6,970.6 | $ | 6,952.2 | 0.3 | |||||||
| Equity securities, at fair value (cost of $366.5 and $299.0) |
430.2 | 315.8 | 36.2 | |||||||||
| Other investments |
192.5 | 210.3 | (8.5 | ) | ||||||||
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| Total investments |
7,593.3 | 7,478.3 | 1.5 | |||||||||
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| Cash and cash equivalents |
486.2 | 564.8 | (13.9 | ) | ||||||||
| Accrued investment income |
68.0 | 69.0 | (1.4 | ) | ||||||||
| Premiums and accounts receivable, net |
1,324.6 | 1,308.8 | 1.2 | |||||||||
| Reinsurance recoverable on paid and unpaid losses and unearned premiums |
2,335.0 | 2,479.7 | (5.8 | ) | ||||||||
| Deferred acquisition costs |
506.0 | 489.5 | 3.4 | |||||||||
| Deferred income taxes |
239.7 | 267.6 | (10.4 | ) | ||||||||
| Goodwill |
184.9 | 184.9 | — | |||||||||
| Other assets |
526.1 | 511.8 | 2.8 | |||||||||
| Assets of discontinued operations |
114.9 | 130.5 | (12.0 | ) | ||||||||
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| Total assets |
$ | 13,378.7 | $ | 13,484.9 | (0.8 | ) | ||||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| LIABILITIES |
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| Loss and loss adjustment expense reserves |
$ | 6,231.5 | $ | 6,197.0 | 0.6 | |||||||
| Unearned premiums |
2,515.8 | 2,474.8 | 1.7 | |||||||||
| Expenses and taxes payable |
637.2 | 775.8 | (17.9 | ) | ||||||||
| Reinsurance premiums payable |
374.7 | 466.2 | (19.6 | ) | ||||||||
| Debt |
903.9 | 849.4 | 6.4 | |||||||||
| Liabilities of discontinued operations |
121.1 | 126.3 | (4.1 | ) | ||||||||
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| Total liabilities |
10,784.2 | 10,889.5 | (1.0 | ) | ||||||||
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| SHAREHOLDERS’ EQUITY |
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| Preferred stock, par value $0.01 per share; 20.0 million shares authorized; none issued |
— | — | — | |||||||||
| Common stock, par value $0.01 per share; 300.0 million shares authorized; 60.5 million shares issued |
0.6 | 0.6 | — | |||||||||
| Additional paid-in capital |
1,830.1 | 1,787.1 | 2.4 | |||||||||
| Accumulated other comprehensive income |
177.6 | 325.8 | (45.5 | ) | ||||||||
| Retained earnings |
1,349.1 | 1,211.6 | 11.3 | |||||||||
| Treasury stock at cost (16.8 and 16.2 million shares) |
(762.9 | ) | (729.7 | ) | 4.5 | |||||||
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| Total shareholders’ equity |
2,594.5 | 2,595.4 | (0.03 | ) | ||||||||
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| Total liabilities and shareholders’ equity |
$ | 13,378.7 | $ | 13,484.9 | (0.8 | ) | ||||||
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4
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
CONSOLIDATED
Three Months ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
| Commercial | Personal | Commercial | Personal | |||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Lines | Lines | Chaucer | Other | Total | Lines | Lines | Chaucer | Other | Total | ||||||||||||||||||||||||||||||
| Gross premiums written |
$ | 541.8 | $ | 368.2 | $ | 265.4 | $ | — | $ | 1,175.4 | $ | 514.0 | $ | 393.9 | $ | 299.5 | $ | — | $ | 1,207.4 | ||||||||||||||||||||
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| Net premiums written |
$ | 471.6 | $ | 342.9 | $ | 237.0 | $ | — | $ | 1,051.5 | $ | 436.4 | $ | 363.4 | $ | 234.1 | $ | — | $ | 1,033.9 | ||||||||||||||||||||
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| Net premiums earned |
$ | 503.3 | $ | 355.3 | $ | 282.1 | $ | — | $ | 1,140.7 | $ | 466.3 | $ | 365.8 | $ | 250.4 | $ | — | $ | 1,082.5 | ||||||||||||||||||||
| Losses and LAE: |
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| Current accident year, excluding catastrophe losses |
300.2 | 221.2 | 159.2 | 0.1 | 680.7 | 298.7 | 250.4 | 127.5 | 0.1 | 676.7 | ||||||||||||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
0.3 | 3.2 | (22.8 | ) | 0.4 | (18.9 | ) | 9.6 | 11.3 | (28.7 | ) | 0.3 | (7.5 | ) | ||||||||||||||||||||||||||
| Catastrophe losses |
7.7 | 12.7 | 7.5 | — | 27.9 | 126.9 | 51.7 | 24.7 | — | 203.3 | ||||||||||||||||||||||||||||||
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| Total losses and LAE |
308.2 | 237.1 | 143.9 | 0.5 | 689.7 | 435.2 | 313.4 | 123.5 | 0.4 | 872.5 | ||||||||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
196.3 | 108.4 | 109.0 | 0.6 | 414.3 | 180.3 | 105.1 | 98.0 | 0.8 | 384.2 | ||||||||||||||||||||||||||||||
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| GAAP underwriting profit (loss) |
(1.2 | ) | 9.8 | 29.2 | (1.1 | ) | 36.7 | (149.2 | ) | (52.7 | ) | 28.9 | (1.2 | ) | (174.2 | ) | ||||||||||||||||||||||||
| Net investment income |
36.1 | 19.1 | 11.3 | 1.6 | 68.1 | 36.1 | 22.0 | 10.4 | 1.5 | 70.0 | ||||||||||||||||||||||||||||||
| Other income |
1.7 | 3.0 | 4.0 | 0.8 | 9.5 | 1.9 | 3.4 | 6.5 | 2.6 | 14.4 | ||||||||||||||||||||||||||||||
| Other operating expenses |
(1.9 | ) | (1.4 | ) | (4.3 | ) | (3.8 | ) | (11.4 | ) | (1.7 | ) | (1.7 | ) | (6.3 | ) | (5.0 | ) | (14.7 | ) | ||||||||||||||||||||
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| Operating income (loss) before income taxes |
$ | 34.7 | $ | 30.5 | $ | 40.2 | $ | (2.5 | ) | $ | 102.9 | $ | (112.9 | ) | $ | (29.0 | ) | $ | 39.5 | $ | (2.1 | ) | $ | (104.5 | ) | |||||||||||||||
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| Loss and LAE ratio: |
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| Current accident year, excluding catastrophe losses |
59.7 | % | 62.2 | % | 56.4 | % | N/M | 59.8 | % | 64.0 | % | 68.5 | % | 51.0 | % | N/M | 62.5 | % | ||||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
0.1 | % | 0.9 | % | (8.1 | )% | N/M | (1.7 | )% | 2.1 | % | 3.1 | % | (11.5 | )% | N/M | (0.7 | )% | ||||||||||||||||||||||
| Catastrophe losses |
1.5 | % | 3.6 | % | 2.7 | % | N/M | 2.4 | % | 27.2 | % | 14.1 | % | 9.9 | % | N/M | 18.8 | % | ||||||||||||||||||||||
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| Total loss and LAE ratio |
61.3 | % | 66.7 | % | 51.0 | % | N/M | 60.5 | % | 93.3 | % | 85.7 | % | 49.4 | % | N/M | 80.6 | % | ||||||||||||||||||||||
| Expense ratio |
38.8 | % | 29.8 | % | 38.6 | % | N/M | 36.0 | % | 38.5 | % | 27.9 | % | 39.1 | % | N/M | 35.1 | % | ||||||||||||||||||||||
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| Combined ratio |
100.1 | % | 96.5 | % | 89.6 | % | N/M | 96.5 | % | 131.8 | % | 113.6 | % | 88.5 | % | N/M | 115.7 | % | ||||||||||||||||||||||
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5
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
CONSOLIDATED
Year ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Commercial Lines |
Personal Lines |
Chaucer | Other | Total | Commercial Lines |
Personal Lines |
Chaucer | Other | Total | ||||||||||||||||||||||||||||||
| Gross premiums written |
$ | 2,295.9 | $ | 1,531.6 | $ | 1,374.2 | $ | — | $ | 5,201.7 | $ | 2,182.4 | $ | 1,611.7 | $ | 1,409.8 | $ | 0.3 | $ | 5,204.2 | ||||||||||||||||||||
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| Net premiums written |
$ | 2,007.2 | $ | 1,428.0 | $ | 1,117.5 | $ | — | $ | 4,552.7 | $ | 1,902.0 | $ | 1,475.6 | $ | 990.5 | $ | 0.3 | $ | 4,368.4 | ||||||||||||||||||||
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| Net premiums earned |
$ | 1,958.4 | $ | 1,454.2 | $ | 1,037.9 | $ | — | $ | 4,450.5 | $ | 1,811.5 | $ | 1,459.9 | $ | 966.8 | $ | 0.9 | $ | 4,239.1 | ||||||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
1,179.9 | 919.1 | 598.4 | — | 2,697.4 | 1,126.5 | 955.3 | 538.1 | 0.4 | 2,620.3 | ||||||||||||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
3.3 | 13.7 | (94.6 | ) | 1.3 | (76.3 | ) | 29.0 | 26.5 | (72.6 | ) | 1.3 | (15.8 | ) | ||||||||||||||||||||||||||
| Catastrophe losses |
38.7 | 66.9 | 34.4 | — | 140.0 | 193.4 | 134.8 | 41.7 | — | 369.9 | ||||||||||||||||||||||||||||||
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| Total losses and LAE |
1,221.9 | 999.7 | 538.2 | 1.3 | 2,761.1 | 1,348.9 | 1,116.6 | 507.2 | 1.7 | 2,974.4 | ||||||||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
747.5 | 416.9 | 392.0 | 2.1 | 1,558.5 | 686.8 | 410.6 | 366.1 | 2.7 | 1,466.2 | ||||||||||||||||||||||||||||||
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| GAAP underwriting profit (loss) |
(11.0 | ) | 37.6 | 107.7 | (3.4 | ) | 130.9 | (224.2 | ) | (67.3 | ) | 93.5 | (3.5 | ) | (201.5 | ) | ||||||||||||||||||||||||
| Net investment income |
143.5 | 75.8 | 42.7 | 7.0 | 269.0 | 142.4 | 86.5 | 40.2 | 7.2 | 276.3 | ||||||||||||||||||||||||||||||
| Other income |
7.6 | 12.5 | 17.6 | 3.0 | 40.7 | 12.3 | 13.6 | 23.0 | 9.3 | 58.2 | ||||||||||||||||||||||||||||||
| Other operating expenses |
(7.7 | ) | (7.3 | ) | (17.6 | ) | (14.6 | ) | (47.2 | ) | (10.8 | ) | (7.3 | ) | (19.9 | ) | (19.9 | ) | (57.9 | ) | ||||||||||||||||||||
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| Operating income (loss) before income taxes |
$ | 132.4 | $ | 118.6 | $ | 150.4 | $ | (8.0 | ) | $ | 393.4 | $ | (80.3 | ) | $ | 25.5 | $ | 136.8 | $ | (6.9 | ) | $ | 75.1 | |||||||||||||||||
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| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
60.2 | % | 63.3 | % | 57.6 | % | N/M | 60.6 | % | 62.2 | % | 65.5 | % | 55.6 | % | N/M | 61.9 | % | ||||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
0.2 | % | 0.9 | % | (9.1 | )% | N/M | (1.7 | )% | 1.6 | % | 1.8 | % | (7.5 | )% | N/M | (0.4 | )% | ||||||||||||||||||||||
| Catastrophe losses |
2.0 | % | 4.6 | % | 3.3 | % | N/M | 3.1 | % | 10.7 | % | 9.2 | % | 4.3 | % | N/M | 8.7 | % | ||||||||||||||||||||||
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| Total loss and LAE ratio |
62.4 | % | 68.8 | % | 51.8 | % | N/M | 62.0 | % | 74.5 | % | 76.5 | % | 52.4 | % | N/M | 70.2 | % | ||||||||||||||||||||||
| Expense ratio |
38.0 | % | 27.9 | % | 37.8 | % | N/M | 34.7 | % | 37.7 | % | 27.3 | % | 37.9 | % | N/M | 34.2 | % | ||||||||||||||||||||||
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| Combined ratio |
100.4 | % | 96.7 | % | 89.6 | % | N/M | 96.7 | % | 112.2 | % | 103.8 | % | 90.3 | % | N/M | 104.4 | % | ||||||||||||||||||||||
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6
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
CONSOLIDATED
| (In millions, except percentage data) |
Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
Dec-YTD 2012 |
Dec-YTD 2013 |
|||||||||||||||||||||
| Gross premiums written |
$ | 1,207.4 | $ | 1,318.1 | $ | 1,394.4 | $ | 1,313.8 | $ | 1,175.4 | $ | 5,204.2 | $ | 5,201.7 | ||||||||||||||
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| Net premiums written |
$ | 1,033.9 | $ | 1,076.7 | $ | 1,242.6 | $ | 1,181.9 | $ | 1,051.5 | $ | 4,368.4 | $ | 4,552.7 | ||||||||||||||
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| Net premiums earned |
$ | 1,082.5 | $ | 1,094.3 | $ | 1,090.8 | $ | 1,124.7 | $ | 1,140.7 | $ | 4,239.1 | $ | 4,450.5 | ||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
676.7 | 668.6 | 659.2 | 688.9 | 680.7 | 2,620.3 | 2,697.4 | |||||||||||||||||||||
| Prior year favorable reserve development |
(7.5 | ) | (6.9 | ) | (26.9 | ) | (23.6 | ) | (18.9 | ) | (15.8 | ) | (76.3 | ) | ||||||||||||||
| Catastrophe losses |
203.3 | 21.7 | 59.8 | 30.6 | 27.9 | 369.9 | 140.0 | |||||||||||||||||||||
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| Total losses and LAE |
872.5 | 683.4 | 692.1 | 695.9 | 689.7 | 2,974.4 | 2,761.1 | |||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
384.2 | 372.0 | 384.8 | 387.4 | 414.3 | 1,466.2 | 1,558.5 | |||||||||||||||||||||
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| GAAP underwriting profit (loss) |
$ | (174.2 | ) | $ | 38.9 | $ | 13.9 | $ | 41.4 | $ | 36.7 | $ | (201.5 | ) | $ | 130.9 | ||||||||||||
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| Loss and LAE ratio: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
62.5 | % | 61.0 | % | 60.4 | % | 61.3 | % | 59.8 | % | 61.9 | % | 60.6 | % | ||||||||||||||
| Prior year favorable reserve development |
(0.7 | )% | (0.6 | )% | (2.5 | )% | (2.1 | )% | (1.7 | )% | (0.4 | )% | (1.7 | )% | ||||||||||||||
| Catastrophe losses |
18.8 | % | 2.0 | % | 5.5 | % | 2.7 | % | 2.4 | % | 8.7 | % | 3.1 | % | ||||||||||||||
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| Total loss and LAE ratio |
80.6 | % | 62.4 | % | 63.4 | % | 61.9 | % | 60.5 | % | 70.2 | % | 62.0 | % | ||||||||||||||
| Expense ratio |
35.1 | % | 33.7 | % | 35.0 | % | 34.1 | % | 36.0 | % | 34.2 | % | 34.7 | % | ||||||||||||||
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|||||||||||||||
| Combined ratio |
115.7 | % | 96.1 | % | 98.4 | % | 96.0 | % | 96.5 | % | 104.4 | % | 96.7 | % | ||||||||||||||
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|||||||||||||||
| Combined ratio, excluding catastrophe losses |
96.9 | % | 94.1 | % | 92.9 | % | 93.3 | % | 94.1 | % | 95.7 | % | 93.6 | % | ||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses |
97.6 | % | 94.7 | % | 95.4 | % | 95.4 | % | 95.8 | % | 96.1 | % | 95.3 | % | ||||||||||||||
7
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
COMMERCIAL LINES
Three Months ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Multiple Peril |
Auto | Workers’ Comp |
Other | Total | Multiple Peril |
Auto | Workers’ Comp |
Other | Total | ||||||||||||||||||||||||||||||
| Net premiums written |
$ | 149.0 | $ | 74.0 | $ | 53.0 | $ | 195.6 | $ | 471.6 | $ | 138.5 | $ | 63.0 | $ | 47.7 | $ | 187.2 | $ | 436.4 | ||||||||||||||||||||
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|||||||||||||||||||||
| Net premiums earned |
$ | 160.9 | $ | 75.9 | $ | 57.8 | $ | 208.7 | $ | 503.3 | $ | 152.8 | $ | 68.6 | $ | 51.0 | $ | 193.9 | $ | 466.3 | ||||||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
85.4 | 52.6 | 37.5 | 124.7 | 300.2 | 80.1 | 49.9 | 37.6 | 131.1 | 298.7 | ||||||||||||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
(2.0 | ) | 2.6 | (4.4 | ) | 4.1 | 0.3 | (1.6 | ) | 4.8 | (3.1 | ) | 9.5 | 9.6 | ||||||||||||||||||||||||||
| Catastrophe losses |
4.3 | 0.1 | — | 3.3 | 7.7 | 60.1 | 8.7 | — | 58.1 | 126.9 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||
| Total losses and LAE |
87.7 | 55.3 | 33.1 | 132.1 | 308.2 | 138.6 | 63.4 | 34.5 | 198.7 | 435.2 | ||||||||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
196.3 | 180.3 | ||||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||||
| GAAP underwriting loss |
(1.2 | ) | (149.2 | ) | ||||||||||||||||||||||||||||||||||||
| Net investment income |
36.1 | 36.1 | ||||||||||||||||||||||||||||||||||||||
| Other income |
1.7 | 1.9 | ||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(1.9 | ) | (1.7 | ) | ||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||||
| Operating income (loss) before income taxes |
$ | 34.7 | $ | (112.9 | ) | |||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
53.0 | % | 69.4 | % | 64.9 | % | 59.7 | % | 59.7 | % | 52.4 | % | 72.7 | % | 73.8 | % | 67.5 | % | 64.0 | % | ||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
(1.2 | )% | 3.4 | % | (7.6 | )% | 2.0 | % | 0.1 | % | (1.0 | )% | 7.0 | % | (6.1 | )% | 4.9 | % | 2.1 | % | ||||||||||||||||||||
| Catastrophe losses |
2.7 | % | 0.1 | % | — | 1.6 | % | 1.5 | % | 39.3 | % | 12.7 | % | — | 30.0 | % | 27.2 | % | ||||||||||||||||||||||
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| Total loss and LAE ratio |
54.5 | % | 72.9 | % | 57.3 | % | 63.3 | % | 61.3 | % | 90.7 | % | 92.4 | % | 67.7 | % | 102.4 | % | 93.3 | % | ||||||||||||||||||||
| Expense ratio |
38.8 | % | 38.5 | % | ||||||||||||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||||||||||||||||||
| Combined ratio |
100.1 | % | 131.8 | % | ||||||||||||||||||||||||||||||||||||
|
|
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|
|
|||||||||||||||||||||||||||||||||||||
| Change in policies in force |
2.2 | % | 6.3 | % | 14.0 | % | 0.9 | % | 3.6 | % | 2.4 | % | 7.6 | % | 10.2 | % | 14.4 | % | 8.8 | % | ||||||||||||||||||||
| Retention |
85.7 | % | 82.4 | % | 77.4 | % | N/M | 83.8 | % | 83.3 | % | 82.4 | % | 80.9 | % | N/M | 82.9 | % | ||||||||||||||||||||||
8
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
COMMERCIAL LINES
Year ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Multiple Peril |
Auto | Workers’ Comp |
Other | Total | Multiple Peril |
Auto | Workers’ Comp |
Other | Total | ||||||||||||||||||||||||||||||
| Net premiums written |
$ | 651.7 | $ | 304.7 | $ | 229.6 | $ | 821.2 | $ | 2,007.2 | $ | 612.9 | $ | 276.5 | $ | 201.4 | $ | 811.2 | $ | 1,902.0 | ||||||||||||||||||||
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|
|||||||||||||||||||||
| Net premiums earned |
$ | 628.2 | $ | 290.8 | $ | 219.6 | $ | 819.8 | $ | 1,958.4 | $ | 589.8 | $ | 266.3 | $ | 192.7 | $ | 762.7 | $ | 1,811.5 | ||||||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
337.6 | 205.2 | 151.8 | 485.3 | 1,179.9 | 331.7 | 184.2 | 143.0 | 467.6 | 1,126.5 | ||||||||||||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
(6.0 | ) | 10.5 | (15.4 | ) | 14.2 | 3.3 | (15.2 | ) | 16.6 | (8.3 | ) | 35.9 | 29.0 | ||||||||||||||||||||||||||
| Catastrophe losses |
28.8 | 0.7 | — | 9.2 | 38.7 | 113.0 | 9.8 | — | 70.6 | 193.4 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||
| Total losses and LAE |
360.4 | 216.4 | 136.4 | 508.7 | 1,221.9 | 429.5 | 210.6 | 134.7 | 574.1 | 1,348.9 | ||||||||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
747.5 | 686.8 | ||||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||||
| GAAP underwriting loss |
(11.0 | ) | (224.2 | ) | ||||||||||||||||||||||||||||||||||||
| Net investment income |
143.5 | 142.4 | ||||||||||||||||||||||||||||||||||||||
| Other income |
7.6 | 12.3 | ||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(7.7 | ) | (10.8 | ) | ||||||||||||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||||||||||||||||||
| Operating income (loss) before income taxes |
$ | 132.4 | $ | (80.3 | ) | |||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
53.8 | % | 70.6 | % | 69.1 | % | 59.3 | % | 60.2 | % | 56.3 | % | 69.1 | % | 74.2 | % | 61.2 | % | 62.2 | % | ||||||||||||||||||||
| Prior year unfavorable (favorable) reserve development |
(1.0 | )% | 3.6 | % | (7.0 | )% | 1.7 | % | 0.2 | % | (2.6 | )% | 6.2 | % | (4.3 | )% | 4.7 | % | 1.6 | % | ||||||||||||||||||||
| Catastrophe losses |
4.6 | % | 0.2 | % | — | 1.1 | % | 2.0 | % | 19.2 | % | 3.7 | % | — | 9.3 | % | 10.7 | % | ||||||||||||||||||||||
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|||||||||||||||||||||
| Total loss and LAE ratio |
57.4 | % | 74.4 | % | 62.1 | % | 62.1 | % | 62.4 | % | 72.9 | % | 79.0 | % | 69.9 | % | 75.2 | % | 74.5 | % | ||||||||||||||||||||
|
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|
|||||||||||||||||||||||||||||||||||||
| Expense ratio |
38.0 | % | 37.7 | % | ||||||||||||||||||||||||||||||||||||
| Combined ratio |
100.4 | % | 112.2 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Change in policies in force |
2.2 | % | 6.3 | % | 14.0 | % | 0.9 | % | 3.6 | % | 2.4 | % | 7.6 | % | 10.2 | % | 14.4 | % | 8.8 | % | ||||||||||||||||||||
| Retention |
83.9 | % | 80.7 | % | 78.2 | % | N/M | 82.1 | % | 84.5 | % | 83.0 | % | 80.0 | % | N/M | 83.5 | % | ||||||||||||||||||||||
9
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
COMMERCIAL LINES
| (In millions, except percentage data) |
Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
Dec-YTD 2012 |
Dec-YTD 2013 |
|||||||||||||||||||||
| Gross premiums written |
$ | 514.0 | $ | 561.4 | $ | 591.0 | $ | 601.7 | $ | 541.8 | $ | 2,182.4 | $ | 2,295.9 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums written |
$ | 436.4 | $ | 483.6 | $ | 521.5 | $ | 530.5 | $ | 471.6 | $ | 1,902.0 | $ | 2,007.2 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums earned |
$ | 466.3 | $ | 476.6 | $ | 485.8 | $ | 492.7 | $ | 503.3 | $ | 1,811.5 | $ | 1,958.4 | ||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
298.7 | 290.0 | 296.0 | 293.7 | 300.2 | 1,126.5 | 1,179.9 | |||||||||||||||||||||
| Prior year unfavorable reserve development |
9.6 | 0.2 | 0.5 | 2.3 | 0.3 | 29.0 | 3.3 | |||||||||||||||||||||
| Catastrophe losses |
126.9 | 7.4 | 15.1 | 8.5 | 7.7 | 193.4 | 38.7 | |||||||||||||||||||||
|
|
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|
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|
|
|
|
|
|
|||||||||||||||
| Total losses and LAE |
435.2 | 297.6 | 311.6 | 304.5 | 308.2 | 1,348.9 | 1,221.9 | |||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
180.3 | 182.1 | 183.7 | 185.4 | 196.3 | 686.8 | 747.5 | |||||||||||||||||||||
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|
|||||||||||||||
| GAAP underwriting profit (loss) |
$ | (149.2 | ) | $ | (3.1 | ) | $ | (9.5 | ) | $ | 2.8 | $ | (1.2 | ) | $ | (224.2 | ) | $ | (11.0 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
64.0 | % | 60.9 | % | 61.0 | % | 59.6 | % | 59.7 | % | 62.2 | % | 60.2 | % | ||||||||||||||
| Prior year unfavorable reserve development |
2.1 | % | — | 0.1 | % | 0.5 | % | 0.1 | % | 1.6 | % | 0.2 | % | |||||||||||||||
| Catastrophe losses |
27.2 | % | 1.6 | % | 3.1 | % | 1.7 | % | 1.5 | % | 10.7 | % | 2.0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total loss and LAE ratio |
93.3 | % | 62.5 | % | 64.2 | % | 61.8 | % | 61.3 | % | 74.5 | % | 62.4 | % | ||||||||||||||
| Expense ratio |
38.5 | % | 38.0 | % | 37.6 | % | 37.4 | % | 38.8 | % | 37.7 | % | 38.0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio |
131.8 | % | 100.5 | % | 101.8 | % | 99.2 | % | 100.1 | % | 112.2 | % | 100.4 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio, excluding catastrophe losses |
104.6 | % | 98.9 | % | 98.7 | % | 97.5 | % | 98.6 | % | 101.5 | % | 98.4 | % | ||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses |
102.5 | % | 98.9 | % | 98.6 | % | 97.0 | % | 98.5 | % | 99.9 | % | 98.2 | % | ||||||||||||||
10
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
PERSONAL LINES
Three Months ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Auto | Home | Other | Total | Auto | Home | Other | Total | ||||||||||||||||||||||||
| Net premiums written |
$ | 209.5 | $ | 123.4 | $ | 10.0 | $ | 342.9 | $ | 223.1 | $ | 129.7 | $ | 10.6 | $ | 363.4 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net premiums earned |
$ | 220.0 | $ | 124.9 | $ | 10.4 | $ | 355.3 | $ | 228.6 | $ | 126.6 | $ | 10.6 | $ | 365.8 | ||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
171.0 | 46.7 | 3.5 | 221.2 | 184.0 | 63.0 | 3.4 | 250.4 | ||||||||||||||||||||||||
| Prior year unfavorable reserve development |
3.2 | — | — | 3.2 | 11.2 | 0.1 | — | 11.3 | ||||||||||||||||||||||||
| Catastrophe losses |
1.0 | 11.4 | 0.3 | 12.7 | 11.9 | 38.2 | 1.6 | 51.7 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total losses and LAE |
175.2 | 58.1 | 3.8 | 237.1 | 207.1 | 101.3 | 5.0 | 313.4 | ||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
108.4 | 105.1 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| GAAP underwriting profit (loss) |
9.8 | (52.7 | ) | |||||||||||||||||||||||||||||
| Net investment income |
19.1 | 22.0 | ||||||||||||||||||||||||||||||
| Other income |
3.0 | 3.4 | ||||||||||||||||||||||||||||||
| Other operating expenses |
(1.4 | ) | (1.7 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Operating income (loss) before income taxes |
$ | 30.5 | $ | (29.0 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
77.6 | % | 37.4 | % | 33.6 | % | 62.2 | % | 80.5 | % | 49.7 | % | 32.1 | % | 68.5 | % | ||||||||||||||||
| Prior year unfavorable reserve development |
1.5 | % | — | — | 0.9 | % | 4.9 | % | 0.1 | % | — | 3.1 | % | |||||||||||||||||||
| Catastrophe losses |
0.5 | % | 9.1 | % | 2.9 | % | 3.6 | % | 5.2 | % | 30.2 | % | 15.1 | % | 14.1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total loss and LAE ratio |
79.6 | % | 46.5 | % | 36.5 | % | 66.7 | % | 90.6 | % | 80.0 | % | 47.2 | % | 85.7 | % | ||||||||||||||||
| Expense ratio |
29.8 | % | 27.9 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Combined ratio |
96.5 | % | 113.6 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Change in policies in force |
(11.0 | )% | (11.7 | )% | (13.9 | )% | (11.5 | )% | (2.3 | )% | (3.7 | )% | (8.8 | )% | (3.3 | )% | ||||||||||||||||
| Retention |
73.6 | % | 74.7 | % | N/M | 74.4 | % | 78.7 | % | 81.1 | % | N/M | 80.1 | % | ||||||||||||||||||
11
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
PERSONAL LINES
Year ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Auto | Home | Other | Total | Auto | Home | Other | Total | ||||||||||||||||||||||||
| Net premiums written |
$ | 890.3 | $ | 496.7 | $ | 41.0 | $ | 1,428.0 | $ | 922.7 | $ | 510.2 | $ | 42.7 | $ | 1,475.6 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net premiums earned |
$ | 903.2 | $ | 509.1 | $ | 41.9 | $ | 1,454.2 | $ | 910.1 | $ | 507.2 | $ | 42.6 | $ | 1,459.9 | ||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
668.6 | 234.4 | 16.1 | 919.1 | 682.3 | 256.7 | 16.3 | 955.3 | ||||||||||||||||||||||||
| Prior year unfavorable reserve development |
13.6 | — | 0.1 | 13.7 | 21.2 | 4.3 | 1.0 | 26.5 | ||||||||||||||||||||||||
| Catastrophe losses |
3.6 | 61.2 | 2.1 | 66.9 | 21.0 | 110.5 | 3.3 | 134.8 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total losses and LAE |
685.8 | 295.6 | 18.3 | 999.7 | 724.5 | 371.5 | 20.6 | 1,116.6 | ||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
416.9 | 410.6 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| GAAP underwriting profit (loss) |
37.6 | (67.3 | ) | |||||||||||||||||||||||||||||
| Net investment income |
75.8 | 86.5 | ||||||||||||||||||||||||||||||
| Other income |
12.5 | 13.6 | ||||||||||||||||||||||||||||||
| Other operating expenses |
(7.3 | ) | (7.3 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Operating income before income taxes |
$ | 118.6 | $ | 25.5 | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
74.0 | % | 46.0 | % | 38.5 | % | 63.3 | % | 75.0 | % | 50.7 | % | 38.4 | % | 65.5 | % | ||||||||||||||||
| Prior year unfavorable reserve development |
1.5 | % | — | 0.2 | % | 0.9 | % | 2.3 | % | 0.8 | % | 2.3 | % | 1.8 | % | |||||||||||||||||
| Catastrophe losses |
0.4 | % | 12.0 | % | 5.0 | % | 4.6 | % | 2.3 | % | 21.8 | % | 7.7 | % | 9.2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total loss and LAE ratio |
75.9 | % | 58.0 | % | 43.7 | % | 68.8 | % | 79.6 | % | 73.3 | % | 48.4 | % | 76.5 | % | ||||||||||||||||
| Expense ratio |
27.9 | % | 27.3 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Combined ratio |
96.7 | % | 103.8 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Change in policies in force |
(11.0 | )% | (11.7 | )% | (13.9 | )% | (11.5 | )% | (2.3 | )% | (3.7 | )% | (8.8 | )% | (3.3 | )% | ||||||||||||||||
| Retention |
73.6 | % | 74.7 | % | N/M | 74.4 | % | 78.7 | % | 81.1 | % | N/M | 80.1 | % | ||||||||||||||||||
12
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
PERSONAL LINES
| Q4 | Q1 | Q2 | Q3 | Q4 | Dec-YTD | Dec-YTD | ||||||||||||||||||||||
| (In millions, except percentage data) |
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | |||||||||||||||||||||
| Gross premiums written |
$ | 393.9 | $ | 367.2 | $ | 397.8 | $ | 398.4 | $ | 368.2 | $ | 1,611.7 | $ | 1,531.6 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums written |
$ | 363.4 | $ | 341.6 | $ | 370.6 | $ | 372.9 | $ | 342.9 | $ | 1,475.6 | $ | 1,428.0 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums earned |
$ | 365.8 | $ | 368.8 | $ | 366.7 | $ | 363.4 | $ | 355.3 | $ | 1,459.9 | $ | 1,454.2 | ||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
250.4 | 238.3 | 229.1 | 230.5 | 221.2 | 955.3 | 919.1 | |||||||||||||||||||||
| Prior year unfavorable reserve development |
11.3 | 5.6 | 2.8 | 2.1 | 3.2 | 26.5 | 13.7 | |||||||||||||||||||||
| Catastrophe losses |
51.7 | 11.7 | 32.2 | 10.3 | 12.7 | 134.8 | 66.9 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total losses and LAE |
313.4 | 255.6 | 264.1 | 242.9 | 237.1 | 1,116.6 | 999.7 | |||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
105.1 | 103.1 | 102.9 | 102.5 | 108.4 | 410.6 | 416.9 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| GAAP underwriting profit (loss) |
$ | (52.7 | ) | $ | 10.1 | $ | (0.3 | ) | $ | 18.0 | $ | 9.8 | $ | (67.3 | ) | $ | 37.6 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
68.5 | % | 64.6 | % | 62.4 | % | 63.4 | % | 62.2 | % | 65.5 | % | 63.3 | % | ||||||||||||||
| Prior year unfavorable reserve development |
3.1 | % | 1.5 | % | 0.8 | % | 0.6 | % | 0.9 | % | 1.8 | % | 0.9 | % | ||||||||||||||
| Catastrophe losses |
14.1 | % | 3.2 | % | 8.8 | % | 2.8 | % | 3.6 | % | 9.2 | % | 4.6 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total loss and LAE ratio |
85.7 | % | 69.3 | % | 72.0 | % | 66.8 | % | 66.7 | % | 76.5 | % | 68.8 | % | ||||||||||||||
| Expense ratio |
27.9 | % | 27.2 | % | 27.3 | % | 27.5 | % | 29.8 | % | 27.3 | % | 27.9 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio |
113.6 | % | 96.5 | % | 99.3 | % | 94.3 | % | 96.5 | % | 103.8 | % | 96.7 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio, excluding catastrophe losses |
99.5 | % | 93.3 | % | 90.5 | % | 91.5 | % | 92.9 | % | 94.6 | % | 92.1 | % | ||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses |
96.4 | % | 91.8 | % | 89.7 | % | 90.9 | % | 92.0 | % | 92.8 | % | 91.2 | % | ||||||||||||||
13
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
CHAUCER
Three Months ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Property | Marine & Aviation |
Energy | UK Motor |
Casualty & Other |
Total | Property | Marine & Aviation |
Energy | UK Motor |
Casualty & Other |
Total | ||||||||||||||||||||||||||||||||||||
| Gross premiums written |
$ | 20.6 | $ | 71.1 | $ | 48.1 | $ | 75.7 | $ | 49.9 | $ | 265.4 | $ | 27.2 | $ | 78.6 | $ | 62.6 | $ | 78.7 | $ | 52.4 | $ | 299.5 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Net premiums written |
$ | 23.2 | $ | 57.1 | $ | 41.4 | $ | 75.8 | $ | 39.5 | $ | 237.0 | $ | 24.2 | $ | 57.3 | $ | 47.8 | $ | 68.7 | $ | 36.1 | $ | 234.1 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Net premiums earned |
$ | 49.0 | $ | 65.2 | $ | 48.7 | $ | 75.9 | $ | 43.3 | $ | 282.1 | $ | 46.1 | $ | 57.8 | $ | 46.1 | $ | 64.6 | $ | 35.8 | $ | 250.4 | ||||||||||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
159.2 | 127.5 | ||||||||||||||||||||||||||||||||||||||||||||||
| Prior year favorable reserve development |
(22.8 | ) | (28.7 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Catastrophe losses |
7.5 | 24.7 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Total losses and LAE |
143.9 | 123.5 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
109.0 | 98.0 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| GAAP underwriting profit |
29.2 | 28.9 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income |
11.3 | 10.4 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other income |
4.0 | 6.5 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(4.3 | ) | (6.3 | ) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Operating income before income taxes |
$ | 40.2 | $ | 39.5 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
56.4 | % | 51.0 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Prior year favorable reserve development |
(8.1 | )% | (11.5 | )% | ||||||||||||||||||||||||||||||||||||||||||||
| Catastrophe losses |
2.7 | % | 9.9 | % | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Total loss and LAE ratio |
51.0 | % | 49.4 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Expense ratio |
38.6 | % | 39.1 | % | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Combined ratio |
89.6 | % | 88.5 | % | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
14
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
CHAUCER
Year ended December 31
| 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Property | Marine & Aviation |
Energy | UK Motor |
Casualty & Other |
Total | Property | Marine & Aviation |
Energy | UK Motor |
Casualty & Other |
Total | ||||||||||||||||||||||||||||||||||||
| Gross premiums written |
$ | 254.6 | $ | 348.0 | $ | 233.3 | $ | 319.4 | $ | 218.9 | $ | 1,374.2 | $ | 248.6 | $ | 338.9 | $ | 303.8 | $ | 311.6 | $ | 206.9 | $ | 1,409.8 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Net premiums written |
$ | 191.9 | $ | 277.1 | $ | 174.2 | $ | 300.5 | $ | 173.8 | $ | 1,117.5 | $ | 161.3 | $ | 234.3 | $ | 195.1 | $ | 259.8 | $ | 140.0 | $ | 990.5 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Net premiums earned |
$ | 183.6 | $ | 250.0 | $ | 169.6 | $ | 284.2 | $ | 150.5 | $ | 1,037.9 | $ | 180.9 | $ | 227.2 | $ | 181.8 | $ | 247.0 | $ | 129.9 | $ | 966.8 | ||||||||||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
598.4 | 538.1 | ||||||||||||||||||||||||||||||||||||||||||||||
| Prior year favorable reserve development |
(94.6 | ) | (72.6 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Catastrophe losses |
34.4 | 41.7 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Total losses and LAE |
538.2 | 507.2 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
392.0 | 366.1 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
| GAAP underwriting profit |
107.7 | 93.5 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income |
42.7 | 40.2 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other income |
17.6 | 23.0 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(17.6 | ) | (19.9 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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|
|
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| Operating income before income taxes |
$ | 150.4 | $ | 136.8 | ||||||||||||||||||||||||||||||||||||||||||||
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| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
57.6 | % | 55.6 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Prior year favorable reserve development |
(9.1 | )% | (7.5 | )% | ||||||||||||||||||||||||||||||||||||||||||||
| Catastrophe losses |
3.3 | % | 4.3 | % | ||||||||||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||||||||||||
| Total loss and LAE ratio |
51.8 | % | 52.4 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Expense ratio |
37.8 | % | 37.9 | % | ||||||||||||||||||||||||||||||||||||||||||||
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|
|
|||||||||||||||||||||||||||||||||||||||||||||
| Combined ratio |
89.6 | % | 90.3 | % | ||||||||||||||||||||||||||||||||||||||||||||
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15
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
CHAUCER
| (In millions, except percentage data) |
Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
Dec-YTD 2012 |
Dec-YTD 2013 |
|||||||||||||||||||||
| Gross premiums written |
$ | 299.5 | $ | 389.5 | $ | 405.6 | $ | 313.7 | $ | 265.4 | $ | 1,409.8 | $ | 1,374.2 | ||||||||||||||
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|
|
|||||||||||||||
| Net premiums written |
$ | 234.1 | $ | 251.5 | $ | 350.5 | $ | 278.5 | $ | 237.0 | $ | 990.5 | $ | 1,117.5 | ||||||||||||||
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|
|||||||||||||||
| Net premiums earned |
$ | 250.4 | $ | 248.9 | $ | 238.3 | $ | 268.6 | $ | 282.1 | $ | 966.8 | $ | 1,037.9 | ||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
127.5 | 140.3 | 134.1 | 164.8 | 159.2 | 538.1 | 598.4 | |||||||||||||||||||||
| Prior year favorable reserve development |
(28.7 | ) | (13.3 | ) | (30.7 | ) | (27.8 | ) | (22.8 | ) | (72.6 | ) | (94.6 | ) | ||||||||||||||
| Catastrophe losses |
24.7 | 2.6 | 12.5 | 11.8 | 7.5 | 41.7 | 34.4 | |||||||||||||||||||||
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|||||||||||||||
| Total losses and LAE |
123.5 | 129.6 | 115.9 | 148.8 | 143.9 | 507.2 | 538.2 | |||||||||||||||||||||
| Amortization of deferred acquisition costs and other underwriting expenses |
98.0 | 86.3 | 97.7 | 99.0 | 109.0 | 366.1 | 392.0 | |||||||||||||||||||||
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|
|||||||||||||||
| GAAP underwriting profit |
$ | 28.9 | $ | 33.0 | $ | 24.7 | $ | 20.8 | $ | 29.2 | $ | 93.5 | $ | 107.7 | ||||||||||||||
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|||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
51.0 | % | 56.3 | % | 56.3 | % | 61.3 | % | 56.4 | % | 55.6 | % | 57.6 | % | ||||||||||||||
| Prior year favorable reserve development |
(11.5 | )% | (5.3 | )% | (12.9 | )% | (10.3 | )% | (8.1 | )% | (7.5 | )% | (9.1 | )% | ||||||||||||||
| Catastrophe losses |
9.9 | % | 1.0 | % | 5.2 | % | 4.4 | % | 2.7 | % | 4.3 | % | 3.3 | % | ||||||||||||||
|
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|
|||||||||||||||
| Total loss and LAE ratio |
49.4 | % | 52.0 | % | 48.6 | % | 55.4 | % | 51.0 | % | 52.4 | % | 51.8 | % | ||||||||||||||
| Expense ratio |
39.1 | % | 34.7 | % | 41.0 | % | 36.9 | % | 38.6 | % | 37.9 | % | 37.8 | % | ||||||||||||||
|
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|
|
|||||||||||||||
| Combined ratio |
88.5 | % | 86.7 | % | 89.6 | % | 92.3 | % | 89.6 | % | 90.3 | % | 89.6 | % | ||||||||||||||
|
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|
|
|||||||||||||||
| Combined ratio, excluding catastrophe losses |
78.6 | % | 85.7 | % | 84.4 | % | 87.9 | % | 86.9 | % | 86.0 | % | 86.3 | % | ||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses |
90.1 | % | 91.0 | % | 97.3 | % | 98.2 | % | 95.0 | % | 93.5 | % | 95.4 | % | ||||||||||||||
16
THE HANOVER INSURANCE GROUP
NET INVESTMENT INCOME AND YIELDS
| (In millions, except yields) |
Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
Q4 YTD 2012 |
Q4 YTD 2013 |
|||||||||||||||||||||
| Net Investment Income |
||||||||||||||||||||||||||||
| Fixed maturities |
$ | 65.5 | $ | 64.7 | $ | 62.6 | $ | 63.0 | $ | 64.5 | $ | 264.2 | $ | 254.8 | ||||||||||||||
| Equity securities |
5.1 | 3.1 | 4.9 | 4.0 | 3.6 | 15.3 | 15.6 | |||||||||||||||||||||
| Other investments |
1.8 | 2.2 | 2.8 | 1.3 | 2.5 | 7.0 | 8.8 | |||||||||||||||||||||
| Investment expenses |
(2.3 | ) | (2.7 | ) | (2.4 | ) | (2.6 | ) | (2.5 | ) | (9.9 | ) | (10.2 | ) | ||||||||||||||
|
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|
|
|
|||||||||||||||
| Total |
$ | 70.1 | $ | 67.3 | $ | 67.9 | $ | 65.7 | $ | 68.1 | $ | 276.6 | $ | 269.0 | ||||||||||||||
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|||||||||||||||
| Pre-tax Yields |
||||||||||||||||||||||||||||
| Fixed maturities |
4.10 | % | 4.03 | % | 3.98 | % | 3.99 | % | 3.86 | % | 4.26 | % | 3.95 | % | ||||||||||||||
| Total |
3.78 | % | 3.64 | % | 3.71 | % | 3.61 | % | 3.59 | % | 3.85 | % | 3.63 | % | ||||||||||||||
Pre-tax yields are calculated as annualized net investment income divided by the average of investment balances, excluding unrealized capital gains and losses, at the end of each month during the period.
17
THE HANOVER INSURANCE GROUP
INVESTMENT PORTFOLIO
December 31, 2013
| (In millions) |
||||||||||||||||||||||||||
| Investment Type |
Weighted |
Amortized Cost or Cost |
Fair Value |
% of Total |
Net Unrealized Gain (Loss) |
Change in Net Unrealized During Q4 2013 |
Change in Net Unrealized YTD |
|||||||||||||||||||
| Fixed maturities: |
||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
AAA | $ | 417.5 | $ | 406.6 | 5.1 | % | $ | (10.9 | ) | $ | (5.1 | ) | $ | (19.3 | ) | ||||||||||
| Foreign government |
AAA | 304.5 | 305.0 | 3.8 | % | 0.5 | (1.3 | ) | (3.9 | ) | ||||||||||||||||
| Municipals: |
||||||||||||||||||||||||||
| Taxable |
AA | 959.3 | 977.2 | 12.1 | % | 17.9 | (15.7 | ) | (61.2 | ) | ||||||||||||||||
| Tax exempt |
AA | 148.7 | 149.1 | 1.8 | % | 0.4 | (0.9 | ) | (6.6 | ) | ||||||||||||||||
| Corporate: |
||||||||||||||||||||||||||
| NAIC 1 |
A | 1,893.3 | 1,949.6 | 24.1 | % | 56.3 | (12.7 | ) | (60.5 | ) | ||||||||||||||||
| NAIC 2 |
BBB | 1,429.2 | 1,490.0 | 18.4 | % | 60.8 | (7.3 | ) | (60.4 | ) | ||||||||||||||||
| NAIC 3 and below |
B+ | 367.7 | 384.6 | 4.8 | % | 16.9 | 4.8 | (5.7 | ) | |||||||||||||||||
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|
|
|
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|
|
|||||||||||||||
| Total corporate |
BBB+ | 3,690.2 | 3,824.2 | 47.3 | % | 134.0 | (15.2 | ) | (126.6 | ) | ||||||||||||||||
|
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|
|||||||||||||||
| Asset backed: |
||||||||||||||||||||||||||
| Residential mortgage-backed |
AA | 722.8 | 728.8 | 9.0 | % | 6.0 | (7.1 | ) | (30.2 | ) | ||||||||||||||||
| Commercial mortgage-backed |
AA+ | 405.9 | 411.6 | 5.1 | % | 5.7 | (1.1 | ) | (17.2 | ) | ||||||||||||||||
| Asset-backed |
AAA | 166.3 | 168.1 | 2.1 | % | 1.8 | (0.4 | ) | (2.3 | ) | ||||||||||||||||
|
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|
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|
|
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|
|
|||||||||||||||
| Total fixed maturities |
A+ | 6,815.2 | 6,970.6 | 86.3 | % | 155.4 | (46.8 | ) | (267.3 | ) | ||||||||||||||||
| Equity securities |
366.5 | 430.2 | 5.3 | % | 63.7 | 18.6 | 46.9 | |||||||||||||||||||
| Other investments |
189.3 | 192.5 | 2.4 | % | 3.2 | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total investments |
7,371.0 | 7,593.3 | 94.0 | % | 222.3 | (28.2 | ) | (220.4 | ) | |||||||||||||||||
| Cash and cash equivalents |
486.2 | 486.2 | 6.0 | % | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | 7,857.2 | $ | 8,079.5 | 100.0 | % | $ | 222.3 | $ | (28.2 | ) | $ | (220.4 | ) | ||||||||||||
|
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|||||||||||||||
18
THE HANOVER INSURANCE GROUP
CREDIT QUALITY AND DURATION OF FIXED MATURITIES
December 31, 2013
| (In millions) | ||||||||||||||
| CREDIT QUALITY OF FIXED MATURITIES |
||||||||||||||
| NAIC Designation |
Rating Agency Equivalent Designation |
Amortized Cost |
Fair Value |
% of Total Fair Value |
||||||||||
| 1 |
Aaa/Aa/A | $ | 4,934.1 | $ | 5,009.7 | 71.9 | % | |||||||
| 2 |
Baa | 1,494.0 | 1,555.5 | 22.3 | % | |||||||||
| 3 |
Ba | 164.7 | 173.1 | 2.5 | % | |||||||||
| 4 |
B | 170.8 | 178.4 | 2.5 | % | |||||||||
| 5 |
Caa and lower | 44.1 | 46.0 | 0.7 | % | |||||||||
| 6 |
In or near default | 7.5 | 7.9 | 0.1 | % | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total fixed maturities |
$ | 6,815.2 | $ | 6,970.6 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|||||||||
| DURATION OF FIXED MATURITIES |
||||||||||||||
| Amortized Cost |
Fair Value |
% of Total Fair Value |
||||||||||||
| 0-2 years |
$ | 1,611.4 | $ | 1,652.0 | 23.7 | % | ||||||||
| 2-4 years |
1,798.6 | 1,883.9 | 27.0 | % | ||||||||||
| 4-6 years |
1,671.6 | 1,727.3 | 24.8 | % | ||||||||||
| 6-8 years |
1,315.7 | 1,297.2 | 18.6 | % | ||||||||||
| 8-10 years |
352.0 | 346.0 | 5.0 | % | ||||||||||
| 10+ years |
65.9 | 64.2 | 0.9 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total fixed maturities |
$ | 6,815.2 | $ | 6,970.6 | 100.0 | % | ||||||||
|
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|
|
|
|
|
|||||||||
| Weighted Average Duration |
4.13 | |||||||||||||
|
|
|
|||||||||||||
19
THE HANOVER INSURANCE GROUP
TOP 10 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS
December 31, 2013
| (In millions, except percentage data) |
||||||||||||||
| Issuer |
Amortized Cost | Fair Value | As a Percent of Invested Assets |
S&P | ||||||||||
| Royal Bank of Scotland: (1) |
||||||||||||||
| Term deposits |
$ | 80.3 | $ | 81.9 | 1.01 | % | A- | |||||||
| Notes |
16.2 | 16.6 | 0.21 | % | A- | |||||||||
| Lloyds Bank: (2) |
||||||||||||||
| Term deposits |
48.7 | 48.0 | 0.59 | % | A | |||||||||
| Notes |
9.8 | 10.1 | 0.13 | % | A | |||||||||
| GE Capital |
32.4 | 33.8 | 0.42 | % | AA+ | |||||||||
| American Express |
28.4 | 29.9 | 0.37 | % | A- | |||||||||
| JP Morgan |
27.3 | 28.3 | 0.35 | % | A | |||||||||
| Citigroup |
26.0 | 27.5 | 0.34 | % | A- | |||||||||
| AT&T |
25.9 | 25.4 | 0.31 | % | A- | |||||||||
| Wells Fargo |
24.8 | 26.7 | 0.33 | % | A+ | |||||||||
| Bank of America |
24.4 | 25.9 | 0.32 | % | BBB+ | |||||||||
| Rabobank Nederland |
24.1 | 24.3 | 0.30 | % | AA- | |||||||||
|
|
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|
|
|
|
|||||||||
| Top 10 Corporate and Municipal Fixed |
$ | 368.3 | $ | 378.4 | 4.68 | % | ||||||||
|
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|||||||||
| (1) | UK government owns 83% of bank equity |
| (2) | UK government owns 33% of bank equity |
20
THE HANOVER INSURANCE GROUP
RECONCILIATION OF OPERATING INCOME TO NET INCOME
| Three Months ended December 31 | Year ended December 31 | |||||||||||||||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||
| (In millions, except per share data) |
$ | Per Share (Diluted) |
$ | Per Share (Diluted) |
$ | Per Share (Diluted) |
$ | Per Share (Diluted) |
||||||||||||||||||||||||
| OPERATING INCOME (LOSS) |
||||||||||||||||||||||||||||||||
| Commercial Lines |
$ | 34.7 | $ | (112.9 | ) | $ | 132.4 | $ | (80.3 | ) | ||||||||||||||||||||||
| Personal Lines |
30.5 | (29.0 | ) | 118.6 | 25.5 | |||||||||||||||||||||||||||
| Chaucer |
40.2 | 39.5 | 150.4 | 136.8 | ||||||||||||||||||||||||||||
| Other |
(2.5 | ) | (2.1 | ) | (8.0 | ) | (6.9 | ) | ||||||||||||||||||||||||
|
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|
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|
|
|
|
|||||||||||||||||||||||||
| Total |
102.9 | (104.5 | ) | 393.4 | 75.1 | |||||||||||||||||||||||||||
| Interest expense |
(16.6 | ) | (15.2 | ) | (65.3 | ) | (61.9 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Operating income (loss) before income taxes |
86.3 | $ | 1.93 | (119.7 | ) | $ | (2.69 | ) | 328.1 | $ | 7.31 | 13.2 | $ | 0.29 | ||||||||||||||||||
| Income tax benefit (expense) on operating income |
(26.7 | ) | (0.60 | ) | 46.3 | 1.04 | (100.9 | ) | (2.25 | ) | 1.9 | 0.04 | ||||||||||||||||||||
|
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|
|
|
|||||||||||||||||
| Operating income (loss) after income taxes |
59.6 | 1.33 | (73.4 | ) | (1.65 | ) | 227.2 | 5.06 | 15.1 | 0.33 | ||||||||||||||||||||||
| Net realized investment gains |
10.7 | 0.24 | 18.9 | 0.42 | 33.5 | 0.75 | 23.6 | 0.52 | ||||||||||||||||||||||||
| Loss on real estate |
— | — | — | — | (4.7 | ) | (0.11 | ) | — | — | ||||||||||||||||||||||
| Loss from repayment of debt |
(8.6 | ) | (0.19 | ) | (5.1 | ) | (0.11 | ) | (27.7 | ) | (0.62 | ) | (5.1 | ) | (0.11 | ) | ||||||||||||||||
| Net costs related to acquired businesses |
(0.1 | ) | — | (0.4 | ) | (0.01 | ) | (0.1 | ) | — | (2.6 | ) | (0.05 | ) | ||||||||||||||||||
| Net foreign exchange losses |
(0.1 | ) | — | (0.1 | ) | — | — | — | (0.4 | ) | (0.01 | ) | ||||||||||||||||||||
| Income tax benefit on non-operating items |
3.4 | 0.07 | 4.8 | 0.11 | 17.5 | 0.39 | 15.5 | 0.34 | ||||||||||||||||||||||||
|
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|
|
|||||||||||||||||
| Income (loss) from continuing operations, net of taxes |
64.9 | 1.45 | (55.3 | ) | (1.24 | ) | 245.7 | 5.47 | 46.1 | 1.02 | ||||||||||||||||||||||
| Discontinued operations, net of taxes |
5.2 | 0.12 | 0.3 | — | 5.3 | 0.12 | 9.8 | 0.21 | ||||||||||||||||||||||||
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|
|||||||||||||||||
| NET INCOME (LOSS) |
$ | 70.1 | $ | 1.57 | $ | (55.0 | ) | $ | (1.24 | ) | $ | 251.0 | $ | 5.59 | $ | 55.9 | $ | 1.23 | ||||||||||||||
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|||||||||||||||||
21
Non-GAAP Financial Measures
The Hanover uses non-GAAP financial measures as important measures of the Company’s operating performance, which we believe provide investors with additional information regarding management’s evaluation of our results of operations and financial performance. In the first quarter of 2013, the Company renamed its non-GAAP income measure from segment income to operating income. The Company’s non-GAAP measures include operating income before interest expense and taxes, total operating income after taxes, total operating income after taxes per share, total book value per share, total book value per share excluding net unrealized gains and losses related to investments, net of tax, tangible book value per share and measures of operating income and loss ratios excluding catastrophe losses and reserve development. After-tax operating income EPS (sometimes referred to as “after-tax operating income per share”) is a non-GAAP measure. It is defined as net income (loss) excluding the after-tax impact of net realized investment gains (losses), as well as results from discontinued operations for a period divided by the average number of diluted shares of common stock.
Operating income before interest expense and taxes is net income, excluding interest expense on debt, income taxes and net realized investment gains and losses, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Operating income before interest expense and taxes also excludes net gains and losses on disposals of businesses, discontinued operations, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Operating income before interest expense and taxes is the sum of the operating income from: Commercial Lines, Personal Lines, Chaucer, and Other. The Hanover believes that measures of operating income before interest expense and taxes provide investors with a valuable measure of the performance of the Company’s ongoing businesses because they highlight net income attributable to the core operations of the business.
Book value per share is total shareholders’ equity divided by the number of common shares outstanding. Book value per share excluding net unrealized gains and losses related to investments, net of tax is total shareholders’ equity excluding the after-tax effect of unrealized investment gains and losses divided by the number of common shares outstanding. Tangible book value per share is total shareholders’ equity, excluding goodwill, divided by the number of common shares outstanding.
The Hanover also provides measures of operating income and loss ratios that exclude the effects of catastrophe losses. A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, hurricane, earthquake, windstorm, explosion, terrorism or other similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance. The Hanover believes that providing certain financial metrics and trends excluding the effects of catastrophes is meaningful for investors to understand the variability of periodic earnings and loss ratios.
Prior year reserve development, which can be favorable or unfavorable, represents changes in our estimate of the costs to pay claims from prior years. We believe that a discussion of operating income excluding prior year reserve development is helpful to investors since it provides insight into both our estimate of current year accident results and changes to prior-year reserve estimates.
Operating income before and after interest expense and taxes and measures of operating income that exclude the effects of catastrophe losses or reserve development should not be construed as substitutes for net income determined in accordance with GAAP. A reconciliation of income from continuing operations to operating income before interest expense and taxes and income from continuing operations per share to operating income after taxes per share for the three months and twelve months ended December 31, 2013 and 2012 is set forth on page 21 of this document. The presentation of loss ratios calculated excluding the effects of reserve development and/or catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP.
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