The Hanover Insurance Group Inc. saw higher net income in the 2020 second quarter compared to the same period a year ago, with limited impact to date from the COVID-19 pandemic.
The Massachusetts-based insurer reported net income of $115.2 million in Q2 2020, compared to $74 million in the prior-year quarter.
The insurer said it has experienced limited COVID-19-related loss activity to date, although it increased COVID-19 loss reserves by $6 million to now include workers compensation, bringing the total ultimate loss expectation to $19 million.
Catastrophe losses came in at $147.8 million. About $83 million of those were in personal lines (compared to $36.6 million in the prior-year quarter) and were driven primarily by wind and hail events in the Midwest and the Southeast. Commercial lines catastrophe losses in the second quarter of $64.8 million compared to $23.0 million in 2019’s second quarter.
The overall combined ratio for the quarter was 96.2 including catastrophes and 82.7 without catastrophes.
Net investment income decreased to $57.7 million.
Personal auto premium returns of $29.4 million due to reduced driving during the pandemic contributed to a 5 percent drop in net premiums written. Lower new business overall and exposure reductions within commercial lines also had an effect on premiums written.
The insurer achieved a 5.1 percent rate increase in commercial lines and 4.8 percent in personal lines.
“We’re very pleased with our performance in the second quarter, particularly in light of the elevated catastrophe loss experience for us and across the industry,” John C. Roche, president and chief executive officer, said in prepared remarks.
Roche said COVID-19-related loss activity “remains limited” and the company believes future exposure is manageable. Although second quarter net premiums written were down 5 percent due to the economic slowdown and premium returns, he noted that the insurer still saw flat premium growth in the month of June, and started to see growth resume in July.
Other second quarter results:
- Commercial lines operating income was $55.3 million in the quarter, compared to $72.8 million in the second quarter of 2019.
- Commercial lines net premiums written were $614.9 million in the quarter, down 4.6 percent from the prior-year quarter, driven by the decline in economic activity, which resulted in decreased policy exposures and lower new business, partially offset by increased rate and retention.
- The commercial lines combined ratio was 96.6, compared to 95.4 in the prior-year quarter.
- Commercial lines retention of 86.9 percent was elevated, due to lower re-marketing activity and temporary moratoriums on cancellations.
- Personal lines operating income before taxes was $32.6 million in the quarter, compared to $31.7 million in the second quarter of 2019.
- The personal lines combined ratio was 95.7, compared to 97.0 in the prior-year quarter.
- Personal lines net premiums written were $466.1 million in the quarter, down 5.5 percent from the prior-year quarter, driven by the $29.4 million premium returns in April and May. Excluding the impact of the premium returns, net premiums written increased 0.5 percent from the prior-year quarter.
Source: The Hanover
*A version of this story ran previously in our sister publication Insurance Journal.