The Hanover Q3 2026 Underwriting Improves Despite Higher Catastrophe Losses

The Hanover Insurance Group reported stronger underlying underwriting results for the third quarter of 2026, although higher catastrophe losses pushed its overall combined ratio above the prior-year level. Net premiums written rose 3.1%, while higher investment income also supported results.

The property and casualty insurer recorded net income of $172.6 million, or $4.86 per diluted share, compared with $178.7 million, or $4.90 per share, a year earlier. Non-GAAP operating income after taxes was $183.1 million, or $5.15 per diluted share, versus $185.6 million, or $5.09 per share, in the third quarter of 2025.

Net return on equity was 19.4%, while non-GAAP operating return on equity was 18.7%. For the first nine months of 2026, net income increased to $551.0 million, or $15.43 per diluted share, from $464.0 million, or $12.70 per share, in the prior-year period.

Underlying underwriting results improve

The Hanover’s third-quarter combined ratio was 92.3%, up from 91.1% a year earlier, as catastrophe losses increased to $109.7 million, or 6.8 points of the ratio. The loss and loss adjustment expense ratio rose 1.6 points to 61.4%, also reflecting the higher catastrophe burden.

Excluding catastrophes, however, the combined ratio improved by 2.6 points to 85.5%. The current accident year loss and LAE ratio excluding catastrophes fell 1.9 points to 55.7%, with year-over-year improvement in each operating segment. Favorable prior-year reserve development excluding catastrophes totaled $18.3 million, or 1.1 points.

The expense ratio improved 0.4 points to 30.9%, though it was higher than the company had expected. The Hanover attributed the difference primarily to increased variable compensation expense resulting from better-than-expected year-to-date performance.

Net premiums written reached $1.79 billion, up 3.1% from the prior-year quarter. Renewal price increases were 8.7% in Personal Lines, 7.4% in Core Commercial and 4.3% in Specialty. Corresponding rate increases were 4.9%, 6.1% and 1.9%, respectively.

Personal Lines leads underwriting gains

Personal Lines produced a combined ratio excluding catastrophes of 81.8%, improving 3.9 points year over year. Its current accident year loss and LAE ratio excluding catastrophes improved 3.8 points to 56.0%.

The auto result improved by 1.2 points, benefiting from earned pricing increases and benign property-loss frequency, particularly in collision coverage. The homeowners and other loss ratio improved by 6.6 points to 40.6%, reflecting earned rate, favorable frequency, fewer large losses and lower non-catastrophe weather losses.

Personal Lines net premiums written increased 1.7% to $752.0 million, with growth moderating from the second quarter. The company continued to shift toward customers with at least $500,000 of Coverage A, where premiums grew 4% and policies in force increased slightly from a year earlier. Overall policies in force were essentially unchanged sequentially.

Renewal price increases were 10.9% in homeowners and 7.1% in auto. The Hanover said pricing remained above loss trends and that most states were achieving its target profitability.

Specialty net premiums written rose 3.3% to $391.6 million, with growth across surety, excess and surplus lines, management and professional liability, and marine. The company maintained a measured approach in more competitive areas, particularly property lines.

The segment’s combined ratio excluding catastrophes improved 2.6 points to 80.6%. Its current accident year loss and LAE ratio excluding catastrophes fell 1.1 points to 47.7%, helped by lower-than-expected property losses. Favorable prior-year reserve development totaled $14.8 million, or 4.0 points.

Core Commercial net premiums written increased 4.6% to $648.9 million, including growth of 2.8% in small commercial and 6.7% in middle market. Retention strengthened to 86.3%.

The segment’s combined ratio excluding catastrophes improved 1.4 points to 92.7%, while its expense ratio declined one point to 32.7% because of fixed-cost leverage and efficiencies. The current accident year loss and LAE ratio excluding catastrophes edged down to 60.5%. The company said it remained prudent in its liability loss-ratio selections, while property losses increased sequentially due to seasonality.

Investment income rises as yields increase

Net investment income increased 12.7% to $131.9 million, reflecting the continued investment of cash flows, higher earned yields and increased partnership income. Income from the fixed-maturity portfolio rose 15.4% to $119.2 million.

Average invested assets increased to $10.4 billion from $9.6 billion a year earlier, while the earned yield rose to 4.58% from 4.33%. At September 30, the company held $11.2 billion of invested assets and cash, including a $9.8 billion fixed-maturity portfolio. About 95% of fixed-maturity securities were investment grade, with an A+ weighted-average quality and a duration of 4.6 years.

Book value per share ended the quarter at $99.69, down 5.4% from June 30 as net unrealized depreciation on fixed-maturity investments increased. Excluding that after-tax depreciation, book value per share rose 2.7% sequentially to $114.26 and was 14.1% above the prior-year level.

The company repurchased about 386,000 shares for approximately $86 million during the quarter. Through October 26, year-to-date repurchases totaled roughly 1.33 million shares for about $263 million. Debt represented 19.7% of total capital at quarter-end, down from 27.2% a year earlier.

The Hanover identified catastrophe exposure, claims severity and frequency, reserve-estimation uncertainty, inflation, competition, regulatory changes and the ability to maintain pricing above loss trends among its principal risks. Investment results and book value also remain exposed to interest-rate movements, market volatility and credit conditions, while reinsurance availability, technology and cybersecurity risks could affect future results.