Massachusetts-based Hanover Insurance Group has seen a sharp decline in net income in the second quarter of 2016 owing to catastrophe and large losses, as well as movement in foreign exchange rates faced by its Chaucer division.
Figures from its Q2 2016 report showed that net income slid to $2 million from $120.7 million in the second quarter of 2015.
Despite this, the second quarter remained relatively stable for the insurance company.
Net premiums written hit $1.22 billion in Q2 2016, compared to $1.29 billion in Q2 2015 — a decline attributed to the sale of the Chaucer motor business in the UK.
Meanwhile, US net premiums went up 2.9 percent.
Net investment income stood at $69.1 million for the second quarter of 2016, compared to $70.7 million in the same period last year.
Two of its segments, Commercial Lines and Personal Lines, both saw continuous price increases, the company said.
Hanover’s combined ratio slightly went up from 95.7 percent in Q2 2015 to 97.3 percent in Q2 2016, including 4.5 points of catastrophe losses.
The company also repurchased 230,000 shares of common stock for $19.1 million, at an average price of $83.19 apiece during the quarter.
Joseph M. Zubretsky, president and CEO at The Hanover, commented, “The underlying fundamentals of the business remain very strong despite some specific, but isolated operating challenges in the U.S. and global large loss volatility at Chaucer. More broadly, the Hanover has an innovative underwriting platform, strong distribution plant and top-notch talent domestically and globally, which we will leverage for margin expansion, growth, and superior value creation.”
Eugene Bullis, Chief Financial Officer at The Hanover, said, “We achieved operating income of $54 million and operating return on equity of 8%, which was within expectations in light of our active participation in global syndicated risks, and unusual swings in foreign exchange rates this quarter. We remain confident in the strength of our balance sheet and positioning of the investment portfolio. Book value per share grew 2% during the quarter to $70.58, and was down slightly excluding net unrealized gains on investments, as we continued to prudently return capital to shareholders and improve our capital structure.”
The Hanover Insurance Group is the holding company for various property and casualty insurance companies, forming one of the biggest insurance businesses in the US.
Operating in four segments—Commercial Lines, Personal Lines, Chaucer and Other, it provides property and casualty products and services and distributes these to a select group of independent agents and brokers. Together with its agents, Hanover provides specialized coverage for small and mid-sized businesses, and insurance protection for homes, automobiles, and other personal items.
The company also underwrites business at Lloyd’s of London in major insurance and reinsurance classes (marine, casualty, property and energy) through its international member company Chaucer, which it acquired in 2011 in an attempt to expand its market presence and achieve greater scale and diversification.
The Other segment comprises Opus Investment Management, Inc, offering investment advisory services.