The Hanover Insurance Group, Inc. (THG) | Investment Case

1. Company Snapshot

1.a. Company Description

The Hanover Insurance Group, Inc., through its subsidiaries, provides various property and casualty insurance products and services in the United States.The company operates through three segments: Commercial Lines, Personal Lines, and Other.The Commercial Lines segment offers commercial multiple peril, commercial automobile, and workers' compensation insurance products, as well as management and professional liability, marine, specialty industrial and commercial property, monoline general liability, surety, umbrella, fidelity, crime, and other commercial coverages.

The Personal Lines segment provides personal automobile and homeowner's coverages, as well as other personal coverages, such as personal umbrella, inland marine, fire, personal watercraft, personal cyber, and other miscellaneous coverages.The Other segment markets investment management services to institutions, pension funds, and other organizations.The Hanover Insurance Group, Inc.

markets its products and services through independent agents and brokers.The company was formerly known as Allmerica Financial Corp.and changed its name to The Hanover Insurance Group, Inc.

in December 2005.The Hanover Insurance Group, Inc.was founded in 1852 and is headquartered in Worcester, Massachusetts.

Show Full description

1.b. Last Insights on THG

The Hanover Insurance Group's recent performance was negatively driven by elevated catastrophe losses of $107.5 million, or 7.0 points of the combined ratio, which may have pressured its underwriting results. Additionally, the company's high loss and loss adjustment expense ratio of 61.9% may have contributed to the negative drivers.

1.c. Company Highlights

Last Price	172.59
Change Percentage	-1.05%
Open	174.04
Previous Close	174.42
Market Cap ( Millions)	6141
Volume	206564
Year High	188.18
Year Low	147.76
M A 50	178.07
M A 200	173.89

FCF Yield	12.92%
Dividend Yield	2.11%
ROE	19.99%
Debt / Equity	34.11%
Net Debt / EBIDTA	10.82%
Price To Book	1.72
Price Earnings Ratio	9.25
Price To FCF	7.74
Price To sales	0.93
EV / EBITDA	7.06

2. The Hanover Insurance Group Delivers Record Quarterly Operating Earnings

The Hanover Insurance Group reported a strong fourth quarter with record quarterly operating earnings per share. The company's full-year operating return on equity reached an all-time high of 20%, with annual operating earnings per share setting a new record. The company's EPS came in at $5.79, beating analyst estimates of $5.2. Revenue growth was driven by a 4.4% increase in Personal Lines net written premium in the quarter, with full-year growth of 3.7%. The company's combined ratio for the quarter was an excellent 89%, with a full-year combined ratio of 91.6%, improving over 3 points year-over-year.

Publication Date: Feb -09

                                    📋 Highlights
                                    Record Operating Earnings per Share:
                                                Achieved record quarterly operating earnings per share, with a full-year operating return on equity of 20%—an all-time high.
Personal Lines Profitability:
                                                Delivered a 4.4% quarterly net written premium growth and a 3.7% annual growth, driven by pricing actions and portfolio management.
Core Commercial Performance:
                                                Small Commercial saw 5% quarterly net written premium growth, while the segment’s current accident year ex-CAT combined ratio improved by 2.4 points in Q4.
Specialty Segment Strength:
                                                Excess & Surplus lines posted double-digit growth, with a current accident year ex-CAT combined ratio of 87.4% for the year, aligning with long-term targets.
Investment Portfolio Growth:
                                                Net investment income rose 24.9% in Q4 and 22% annually, supported by a $185 million stock buyback program in 2025.

                                

Segment Performance

The Personal Lines team delivered outstanding profitability, driven by decisive actions, strong execution, and disciplined portfolio management. The Core Commercial business also delivered solid profitability, supported by active portfolio management and disciplined pricing. Specialty continued to deliver consistent and strong profitability through expertise-based underwriting, targeted risk selection, and disciplined execution. As Bryan Salvatore mentioned, the E&S demand is still robust, with double-digit growth throughout the year and in the fourth quarter.

Underwriting Profitability

The company's underwriting profitability remains strong, with a consolidated underlying loss ratio improving 1.1 points to 57.1% in the year. Personal Lines posted an outstanding current accident year ex-CAT combined ratio of 85.3% for the year, while Core Commercial and Specialty also delivered strong results. The company's combined ratio, excluding catastrophes, is expected to be in the range of 88% to 89% in 2026.

Valuation and Outlook

With a Price-to-Book Ratio of 1.75 and a Return on Equity of 19.99%, the company's valuation appears reasonable. Analysts estimate revenue growth at 4.9% next year, and the company's guidance for 2026 expects overall consolidated net written premium growth to accelerate to mid-single-digit growth. The company's strong capital position and diversified earnings stream position it well for future growth.

Expense Management and Capital Allocation

The company remains financially disciplined, with a focus on expense management and capital allocation. Jeffrey Farber emphasized that they're not lacking discipline in expense management, and they've been successful in finding savings to fund investments in technology, data, and analytics. The company has a strong capital position, and growth is at the top of the list for capital allocation, followed by buybacks, dividends, and potential reinsurance or small inorganic deals.

3. NewsRoom

The Hanover Insurance Group, Inc. (THG) Presents at Bank of America Financial Services Conference 2026 Transcript

Feb -11

Source: seekingalpha.com

The Hanover and its Employees Contribute More Than $1.5 Million to Nonprofits Countrywide

Feb -05

Source: prnewswire.com

The Hanover Insurance Group, Inc. (THG) Q4 2025 Earnings Call Transcript

Feb -04

Source: seekingalpha.com

Compared to Estimates, Hanover Insurance (THG) Q4 Earnings: A Look at Key Metrics

Feb -04

Source: zacks.com

Hanover Insurance Group (THG) Q4 Earnings Beat Estimates

Feb -03

Source: zacks.com

The Hanover Reports Record Fourth Quarter Net Income and Operating Income of $5.47 and $5.79 per Diluted Share, Respectively; Record Full-Year Net Income and Operating Income of $18.16 and $19.09 per Diluted Share, Respectively

Feb -03

Source: prnewswire.com

The Hanover Insurance Group, Inc. to Present at the Bank of America Securities 2026 Financial Services Conference

Jan -27

Source: prnewswire.com

The Hanover Insurance Group (THG) Projected to Post Earnings on Tuesday

Jan -27

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.84%)

6. Segments

Personal Lines

Expected Growth: 3%

The Hanover's Personal Lines segment growth is driven by increasing adoption of telematics-based insurance products, expansion into new states, and strategic partnerships with agents and brokers. Additionally, the company's focus on digital transformation and customer experience enhancements has improved retention rates and attracted new customers, contributing to the 3% growth.

Core Commercial

Expected Growth: 2%

The 2% growth in Core Commercial from The Hanover Insurance Group, Inc. is driven by a combination of factors, including a strong economy, increased demand for commercial insurance products, and the company's strategic expansion into new markets and lines of business, such as cyber insurance and management liability.

Specialty

Expected Growth: 4%

The Hanover's Specialty segment growth is driven by increasing demand for niche insurance products, expansion into new markets, and strategic partnerships. Additionally, the company's focus on digital transformation, data analytics, and risk management capabilities also contribute to its growth. Furthermore, the rising need for specialized insurance coverage in industries such as healthcare, technology, and financial services also fuels growth.

Reconciling Items

Expected Growth: 1%

The Hanover Insurance Group, Inc.'s growth is driven by increasing premiums, expansion into new markets, and strategic acquisitions. Additionally, the company's focus on digital transformation, improved underwriting practices, and effective risk management have contributed to its growth. Furthermore, a strong capital position and favorable regulatory environment have also supported the company's growth momentum.

Other

Expected Growth: 2%

The Hanover Insurance Group, Inc.'s 'Other' segment growth is driven by increasing demand for specialty insurance products, expansion into new markets, and strategic partnerships. Additionally, the company's focus on digital transformation and investments in data analytics are enhancing underwriting capabilities, leading to improved risk selection and pricing.

7. Detailed Products

Personal Lines

Insurance products for individuals and families, including auto, homeowners, umbrella, and specialty insurance

Commercial Lines

Insurance products for businesses, including workers' compensation, commercial auto, general liability, and property insurance

Specialty Insurance

Specialized insurance products for unique risks, including marine, aviation, and professional liability insurance

Workers' Compensation

Insurance products for employers to provide wage replacement and medical benefits to employees injured on the job

Management Liability

Insurance products for directors, officers, and organizations to protect against management-related risks

Professional Liability

Insurance products for professionals, including doctors, lawyers, and accountants, to protect against errors and omissions

8. The Hanover Insurance Group, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The Hanover Insurance Group, Inc. operates in a highly competitive industry, but the threat of substitutes is mitigated by the complexity and customization of insurance products.

Bargaining Power Of Customers

Individual customers have limited bargaining power due to the complexity of insurance products and the lack of price sensitivity.

Bargaining Power Of Suppliers

The Hanover Insurance Group, Inc. relies on a network of independent agents and brokers, which can exert some bargaining power, but the company's scale and diversification mitigate this risk.

Threat Of New Entrants

The insurance industry has high barriers to entry, including regulatory hurdles, capital requirements, and the need for established distribution networks, making it difficult for new entrants to compete with The Hanover Insurance Group, Inc.

Intensity Of Rivalry

The Hanover Insurance Group, Inc. operates in a highly competitive industry with many established players, leading to intense rivalry and pricing pressure.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	24.11%
Debt Cost	5.34%
Equity Weight	75.89%
Equity Cost	7.32%
WACC	6.84%
Leverage	31.77%

11. Quality Control: The Hanover Insurance Group, Inc. passed 3 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

WR Berkley

A-Score: 7.2/10

Value: 6.0

Growth: 7.9

Quality: 6.4

Yield: 5.0

Momentum: 8.5

Volatility: 9.3

1-Year Total Return ->

Hanover Insurance

A-Score: 6.8/10

Value: 7.2

Growth: 4.8

Quality: 6.7

Yield: 4.0

Momentum: 8.5

Volatility: 9.7

1-Year Total Return ->

Mercury General

A-Score: 6.7/10

Value: 6.9

Growth: 6.8

Quality: 6.7

Yield: 5.0

Momentum: 8.0

Volatility: 6.7

1-Year Total Return ->

RLI

A-Score: 6.6/10

Value: 5.5

Growth: 6.9

Quality: 8.4

Yield: 8.0

Momentum: 1.5

Volatility: 9.3

1-Year Total Return ->

Markel

A-Score: 6.4/10

Value: 6.7

Growth: 7.2

Quality: 6.8

Yield: 0.0

Momentum: 8.0

Volatility: 9.7

1-Year Total Return ->

Loews

A-Score: 6.1/10

Value: 6.3

Growth: 6.7

Quality: 5.3

Yield: 0.0

Momentum: 8.5

Volatility: 10.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-1.63%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.84%

The Hanover Insurance Group, Inc. - US4108671052

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on THG

1.c. Company Highlights

Less Volatile

Average Growth

Stable Momentum

Earnings Beats

Lower Growth

Revenues Beats

Fairly Valued

Average Quality

Revenues Miss

Average Yield

Strong Momentum

Medium Volatility

2. The Hanover Insurance Group Delivers Record Quarterly Operating Earnings

Segment Performance

Underwriting Profitability

Valuation and Outlook

Expense Management and Capital Allocation

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.84%)

6. Segments

Personal Lines

Expected Growth: 3%

Core Commercial

Expected Growth: 2%

Specialty

Expected Growth: 4%

Reconciling Items

Expected Growth: 1%

Other

Expected Growth: 2%

7. Detailed Products

Personal Lines

Commercial Lines

Specialty Insurance

Workers' Compensation

Management Liability

Professional Liability

8. The Hanover Insurance Group, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: The Hanover Insurance Group, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

172.59$

Current Price

172.59$

Potential

-0.00%

12.e Scoring ^Insights

12.f DCF ^BETA