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    THG
    Earnings call· Jun 2026(Q2 FY26)

    HANOVER INSURANCE GROUP Q2 FY26 earnings call THG

    Jul 29, 2026 Source

    Executive summary

    The Hanover Insurance Group Q2 FY26 — Record Performance Driven by Underwriting Discipline and Strategic Growth

    The Hanover Insurance Group delivered a record second quarter, showcasing strong underwriting discipline and strategic growth across its diversified portfolio. The company's focus on targeted expansion in attractive markets, coupled with technology investments, is driving consistent profitable growth and enhancing its position with independent agents. Management expressed confidence in sustaining this positive trajectory into the second half of the year, while also announcing a CEO transition for January.

    Highlights

    5

    • Delivered record second quarter performance with operating return on equity of approximately 20% and operating earnings of $5.31 per diluted share.

    • Net written premium growth accelerated to 4.6% in Q2, up from 4.3% in Q1, led by core commercial and specialty.

    • Achieved a combined ratio of 91.2%, a 1.3 point improvement year-over-year, with an ex-catastrophe combined ratio of 85.5%.

    • Net investment income increased 13.4% in the quarter, driven by asset base growth and higher reinvestment yields.

    • Book value per share increased 3.5% sequentially to $105.40, with ex-unrealized book value per share up 3.8% sequentially.

    Concerns

    3

    • The expense ratio for the quarter of 31% was modestly elevated compared to expectations, primarily from higher variable compensation for agents and employee incentive costs.

    • Core Commercial's current accident year ex-catastrophe loss ratio of 58.7% was 2.2 points higher than the prior year quarter, driven by reduced large property losses in 2025 and prudently increased liability picks in 2026.

    • Partnership income was lower than expectations for the quarter, though it performed in line with expectations through the first half of the year.

    Guidance & targets

    4
    CategoryTargetConfidence
    Personal Lines PIF growth
    sequential PIF growth
    medium materiality
    High
    Catastrophe load
    6.9%
    medium materiality
    High
    Small Commercial Workers' Compensation product rollout
    full country rollout
    medium materiality
    High
    Specialty premium growth
    further premium growth acceleration
    medium materiality
    Medium

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Personal Lines
    Reaping benefits of prudent underwriting and strong execution. Gradually increasing mix towards higher-value Prestige customers, enhancing portfolio quality and pricing resilience. Added approximately 100 new distribution points year-to-date.
    Renewal pricing: above long-term loss cost trendsRetention: improved from Q1PIF: roughly flat sequentiallyAuto renewal pricing: 7.1%Home renewal pricing: 10.9%Umbrella pricing increases: 19%Prestige business: pushing towards $350M
    		—2.6%consistent with Q181.9% current accident year ex-cat combined ratio
    Core Commercial
    Executing very well, delivering healthy growth and solid profitability. Market pricing remains favorable but becoming more competitive. Focused on retention, disciplined underwriting, and targeted pricing strategies.
    Market pricing: high single digitsSmall Commercial premium growth: 6%Small Commercial retention: 86%Middle Market top line growth: 9.4% (approx. 7% excluding nonrecurring items)
    		—7.2%up from 4.3% in the first quarterUnderlying margins improved from full year 2025 levels
    Small Commercial
    Represents another quarter of healthy expansion. Benefiting from advanced underwriting tools and technology. Workers' compensation product expansion remains on track for a full country rollout this year.
    Renewal activity: favorableNew business pricing: favorableRetention: 86%
    		—6%——
    Middle Market
    Delivered strong top line growth, winning attractive business through strong agent relationships. Less exposed to broader property market softening due to focus on smaller account space.
    		—9.4%significant improvement from 1.5% growth in the first quarter—
    Specialty
    Key driver of profitable growth, converting risk selection expertise into attractive growth and disciplined returns. Production activity not uniform by design, leaning into attractive opportunities while moderating production where pricing is pressured.
    Current accident year ex-cat loss ratio: 51.6%
    		—4.4%acceleration from the first quarter88.6% current accident year ex-cat combined ratio
    Professional and Executive Lines
    Saw healthy growth as market conditions continue to improve.
    		—healthy growth——
    Management Liability
    Driven by strong new business production and continued gains in response speed and underwriting execution.
    		—excellent top line results——
    Surety
    Fueled by robust new business, healthy demand, and momentum in targeted bond offerings with strongest distribution partners.
    		—strong growth——
    Hanover Specialty Industrial
    Reflecting its greater exposure to the softening property market. Production moderated where pricing came under pressure.
    		—more subdued——

    Operational metrics

    26
    Operating Return on Equity
    20%
    Q2 FY26

    Record second quarter performance.

    Operating Earnings per Diluted Share
    $5.31
    Q2 FY26

    Record second quarter performance.

    Ex-Catastrophe Combined Ratio
    85.5%
    Q2 FY26

    Outstanding result.

    Current Accident Year Loss Ratio, ex-catastrophe
    55.8%improved from prior year
    Q2 FY26

    Driven by Personal Lines.

    Catastrophe Losses (Combined Ratio Impact)
    5.7 pointsbelow our modeled expectations
    Q2 FY26

    Gives confidence that past actions are leading to more consistent returns.

    Expense Ratio
    31%
    Q2 FY26

    Modestly elevated compared to expectations, primarily from higher variable compensation for agents and employee incentive costs.

    Personal Lines Current Accident Year Ex-Cat Combined Ratio
    81.9%2.9 point improvement from prior year period
    Q2 FY26

    Driven by the benefit of earned pricing and benign frequency.

    Personal Lines Homeowners Ex-Cat Current Accident Year Loss Ratio
    43.7%7.4 points improvement from prior year quarter
    Q2 FY26

    Benefited from earned pricing, very favorable attritional loss frequency, and lower large and weather-related losses.

    Personal Lines Personal Auto Ex-Cat Current Accident Year Loss Ratio
    64.7%1.5 points improvement compared to prior year quarter
    Q2 FY26

    Frequency remains favorable across multiple coverages, particularly in collision.

    Core Commercial Current Accident Year Ex-Cat Combined Ratio
    91.2%
    Q2 FY26

    Reflects strength of underwriting strategy and deliberate portfolio management actions.

    Core Commercial Current Accident Year Ex-Cat Loss Ratio
    58.7%2.2 points higher than prior year quarter; improved 0.4 points compared to full year 2025
    Q2 FY26

    Driven by reduced large property losses in 2025 and prudently increased liability picks in 2026. Liability loss selections reflect a disciplined view of the operating environment.

    Specialty Current Accident Year Ex-Cat Combined Ratio
    88.6%
    Q2 FY26

    Continued to perform extremely well.

    Specialty Current Accident Year Ex-Cat Loss Ratio
    51.6%
    Q2 FY26

    In line with expectation for this segment. Modestly elevated from prior year quarter which saw lower-than-expected property large losses.

    Cat Bond Upsize
    $150 million
    Q2 FY26

    New cat bond issued with expanded coverage, upsized due to positive investor interest and issued at the low end of the reduced pricing guidance range.

    Cat Occurrence Program Exhaustion
    $2.05 billion
    Q2 FY26

    For all covered perils.

    Property Per Risk Limit Expansion
    $25 million
    Q2 FY26

    Replaces facultative purchases while maintaining attachment point and reducing co-participation. Pricing was significantly better than original expectations.

    Net Investment Income Growth
    13.4%
    Q2 FY26

    Driven by growth in asset base from strong earnings and the benefit of higher reinvestment yields for fixed income.

    Net Investment Income from Fixed Income Portfolio Growth
    16.3%over the prior year quarter
    Q2 FY26

    Contributed to steady growing returns.

    Invested Assets in Cash and Investment-Grade Fixed Income
    88%
    Q2 FY26

    Highlighting the high-quality composition of the portfolio.

    Fixed Maturity Portfolio Weighted Average Rating
    A+
    Q2 FY26

    With 95% of holdings investment grade.

    Earned Yields on Fixed Maturity Portfolio
    4.45%up from 4.24% a year ago
    Q2 FY26

    Company continues to reinvest at higher yields than what is maturing.

    Portfolio Duration (excluding cash)
    4.5 yearsincreased slightly
    Q2 FY26

    Consistent with long-term asset liability alignment approach.

    Book Value Per Share (ex-unrealized)
    3.8% sequential increase
    Q2 FY26

    Excluding unrealized book value per share.

    Shares Repurchased
    $55 million
    Q2 FY26

    Actively participating in share buybacks.

    Shares Repurchased
    $148.86 million
    YTD July 24

    Year-to-date through July 24.

    Share Repurchase Authorization
    $700 million
    Q2 FY26

    New share repurchase authorization announced in Q2.

    Industry KPIs

    10
    MetricValueDetails
    Combined ratio91.2% (Total), 85.5% (Ex-Cat)%
    Capital returns$55 million (Q2 buybacks), $148.86 million (YTD buybacks), $700 million (new authorization)USD
    ROE operating ROEapproximately 20%%
    Catastrophe losses5.7 pointspoints
    Book value per share$105.40USD
    Net investment income13.4% growth (Total), 16.3% growth (Fixed Income), 4.45% (Earned Yields on Fixed Maturity Portfolio)% (growth), % (yield)
    Retention persistencyimproved from Q1 (Personal Lines), 86% (Small Commercial)%
    Net premiums written earned4.6% growth (Total), 2.6% growth (Personal Lines), 7.2% growth (Core Commercial), 4.4% growth (Specialty)%
    Renewal rate change pricing7.1% (Auto), 10.9% (Home), 19% (Umbrella), high single digits (Core Commercial Market Pricing)%
    Prior year reserve development$21.5 million favorableUSD

    Product announcements

    1
    ProductTypeDetails
    Small Commercial Workers' Compensation product expansionexpansion

    Risks & headwinds

    3
    Competitive market conditions in Personal LinesCurrent

    Market pricing remains favorable, generally in the high single digits, although we are seeing conditions become a bit more competitive.

    Mitigation: Relationship-driven approach, full account strategy, disciplined underwriting, and targeted pricing strategies tailored to specific products, industries, and geographies.

    Softening property market impacting Specialty Industrial businessCurrent

    Hanover Specialty Industrial business production was more subdued. Reflecting its greater exposure to the softening property market.

    Mitigation: Willingness to moderate production where pricing comes under pressure and reallocate capital to more attractive opportunities within the diversified specialty portfolio.

    Legal system abuse and deteriorating trends in liability linesOngoing

    A portion of the liability book that is exposed to legal system abuse and some of the trends that continue to deteriorate.

    Mitigation: Diversification of the portfolio, prudent liability picks, and setting uncertainty reserves to remain well prepared.

    What to watch in Q3 FY26

    5

    Personal Lines PIF growth

    by the end of 2026
    Currentroughly flat sequentially
    Targetsequential PIF growth

    Why it matters

    Indicates the effectiveness of strategic actions to manage exposure and grow the Personal Lines business, which is a key segment.

    However, our trajectory has improved over time⏳ as PIF was again roughly flat sequentially, and we continue to expect sequential PIF growth by the end of 2026.

    Q&A highlights

    6

    How is 'Prestige' defined, what percentage of the personal book is it, and should the recent acceleration in Personal Lines rate increases be expected to continue given market competition?

    Prestige is defined as $750,000 to $3 million of coverage A (replacement cost), and the company is pushing towards $350 million in this segment. The rate acceleration was primarily due to a sizable rate increase in a particular state with a full quarter impact. The company's relationship-driven, full-account strategy and focus on higher-value customers provide insulation from direct channel competition, supporting continued strong pricing.

    “So prestige, we just defined as $750,000 to, say, $3 million of coverage A. As a reminder, that's a replacement cost. And of course, varies by geography as to what fits into those bookends. But we are pushing towards $350 million of that business and growing it very nicely.”

    asked by Michael Phillips · answered by Richard Lavey

    3 min read8 chapters

    Detailed Narrative

    01

    Strategic Transformation and Portfolio Refinement

    The company's strong results reflect multi-year strategic actions to strengthen and reshape its portfolio, focusing on underwriting and distribution strengths. Investments in capabilities enhance risk selection, improve efficiencies, and enable faster, more precise operations, driving a stronger, more scalable business. This strategic refinement has positioned the company to deliver consistent profitable growth and sustain strong earnings over time⏳ through portfolio diversification.

    02

    Personal Lines Performance and Strategy

    Personal Lines is benefiting from prudent underwriting, sustained pricing discipline, and proactive exposure management, leading to healthy margins. The business is gradually increasing its mix towards higher-value Prestige customers (defined as $750k-$3M of coverage A), who exhibit higher retention and enhance portfolio quality and pricing resilience. The company is also expanding its distribution network, adding approximately 100 new points year-to-date, with 75% in targeted diversification states.

    03

    Core Commercial Execution and Market Dynamics

    Core Commercial is executing well, delivering healthy growth and solid profitability, with underlying margins improving from FY25 levels and robust market pricing generally in the high single digits. The segment's focus on smaller account sizes and advanced underwriting tools supports strong retention (86% in Small Commercial) and targeted pricing strategies. The Small Commercial workers' compensation product expansion is on track for a full country rollout this year, expected to broaden market share.

    04

    Specialty Segment as a Growth Driver

    Specialty remains a key driver of profitable growth, leveraging technical expertise and underwriting discipline to convert risk selection into attractive returns. Healthy growth was observed in professional and executive lines and Surety, while Hanover Specialty Industrial production was moderated due to its greater exposure to the softening property market. This strategic reallocation of capital to more attractive opportunities highlights the advantage of the highly diversified specialty portfolio.

    05

    Technology and Innovation

    The company is advancing an ambitious enterprise-wide transformation agenda, deploying capabilities that improve productivity and enhance decision-making. Examples include the proprietary AI-driven tool 'Triage Pro' in E&S, which helps underwriters prioritize attractive submissions, and new workbench tools in Surety that streamline workflows and provide actionable insights. This combination of specialized expertise, data, and advanced technology is expected to be a significant differentiator as markets evolve.

    06

    Reinsurance Program Renewal

    The property treaties were successfully renewed on July 1, with a favorable market response from both incumbent and new reinsurers. The cat occurrence program exhausts at $2.05 billion for all covered perils, maintaining a $200 million retention. A new $150 million cat bond was issued with expanded coverage, and the company achieved substantial reductions in risk-adjusted reinsurance costs, while expanding its property per risk limit by $25 million.

    07

    Capital Management and Shareholder Returns

    The company continues to actively repurchase shares, buying back approximately 291,000 shares totaling $55 million in Q2, and 827,000 shares year-to-date through July 24 at an average price of $180. A new $700 million share repurchase authorization was announced, reflecting increasing flexibility to return capital to shareholders through dividends and buybacks as excess capital accumulates in the current profitable environment.

    08

    CEO Transition

    Jack Roche announced his retirement after 40 years in the industry, including over 9 years as CEO of The Hanover, effective January. Dick Lavey, the current Chief Operating Officer, will assume the role of CEO. Roche expressed confidence in Lavey's leadership and the company's future, highlighting the transformation of the company into a specialized national carrier with a unique value proposition for independent agents.

    AI-generated summary of the company’s earnings call. Not investment advice.