The Hanover Insurance Group (NYSE:THG) reported what executives described as a “very strong start” to 2026, highlighted by record first-quarter operating performance and improved underwriting margins despite elevated weather activity in the company’s footprint.
Record operating results and improved underwriting margins
President and CEO John C. Roche said the company posted “record first quarter performance,” including operating return on equity of 20.3% and operating earnings per share of $5.25. The all-in combined ratio improved nearly 2.5 points to 91.7%, while the combined ratio excluding catastrophes improved to 85.4%, which Roche said were both first-quarter records.
Catastrophes, prior-year development, and expense trends
CFO Jeffrey M. Farber said catastrophe losses added 6.3 points to the combined ratio in the quarter. He also reported 3.1 points of favorable prior-year catastrophe development, “largely from lower severity on 2025 events,” which management believes reflects stronger-than-expected benefits from terms and conditions changes and other property management actions.
Farber provided an example, saying the company has observed lower severity on hail events due to increased policy deductibles in both personal and commercial lines. Current accident year catastrophe losses were driven primarily by an “unusually severe hail and wind event” in early March, with the heaviest impact in Illinois and Michigan, along with Winter Storm Fern in January. Together those events accounted for more than half of current-year catastrophe losses, Farber said.
Excluding catastrophes, Farber said the combined ratio was 85.4%, reflecting a 2.4-point improvement from the prior-year quarter, with loss ratio improvements in each segment. The expense ratio was 30.7%, which Farber said was in line with expectations. For the full year, he reiterated the company expects an expense ratio of 30.3%, with more growth-related operating leverage anticipated later in the year.
Farber also disclosed $25 million of favorable prior-year reserve development excluding catastrophes, with favorability across each segment. Specialty had $14.2 million of favorable development, Personal Lines $9.2 million, and Core Commercial $1.6 million. He said the reserve position “remains strong and aligned to the current uncertain environment.”
Segment highlights: Personal Lines, Core Commercial, and Specialty
In Personal Lines, Roche said net written premiums increased 2.7% as the company pursued state-specific growth strategies, prioritizing under-penetrated states while managing Midwest exposure to support diversification. He said pricing remained ahead of loss cost trends and cited “healthy” quoting activity and conversion metrics. Farber reported a current accident year ex-catastrophe combined ratio of 83.8%, improving 0.7 points from the prior-year quarter, driven by earned pricing and favorable frequency. Homeowners produced an ex-cat current accident year loss ratio of 46.7%, improving two points year over year, while personal auto’s ex-cat current accident year loss ratio was 66.7%. Farber said auto pricing increased 6.7% and home pricing increased 10.8% in the quarter, with umbrella pricing up about 19%.
In Core Commercial, Roche said net written premiums grew 4.3%, led by Small Commercial and improving momentum in Middle Market. He said the company is maintaining discipline amid “softening property conditions” and is implementing pricing and underwriting actions in Commercial Auto and Umbrella to address continued industry pressure. Farber reported a current accident year ex-cat combined ratio of 91.5%, a 3.6-point improvement from a year ago, and said large loss performance was within expectations this quarter. Small Commercial net written premiums grew 6.4% and Middle Market increased 1.5%.
In Specialty, Roche said growth of 2.3% reflected a measured posture in more competitive areas, particularly property-exposed lines, and he pointed to a decline in net written premiums in the Programs business as an example of selective pullback. Farber said Specialty delivered a current accident year ex-cat combined ratio of 85.4%, with an ex-cat current accident year loss ratio of 49%, “better than our expectations” and below the company’s “low 50s target” for the segment, driven by property favorability while liability performed within expectations.
Management cited areas of Specialty growth momentum including Management Liability, Surety, Specialty GL, E&S, Professional Lines, and Marine. Roche said Specialty growth is expected to “ramp up from here,” reiterating the company had planned for the first quarter to be the lowest growth quarter of the year.
Programs, commercial casualty trends, and reserve commentary
During Q&A, Roche and Bryan J. Salvatore, president of Specialty, discussed the company’s programs business. Roche emphasized that programmatic business is written across the enterprise, and said the Hanover Programs unit is smaller than program business written elsewhere in the company. He said profitability improvements have been achieved and the company “shrunk a little bit” in the quarter by not taking on material new programs, describing the approach as “keeping our powder dry” for future opportunities. Salvatore said pricing in that part of the portfolio is “quite strong” and that the business “performed very well,” while management remains selective in distribution relationships, particularly given its view of the MGA environment.
On commercial casualty trends, Roche said liability severity remains “dramatically higher” than historical levels and described trends as “maturing… but at a very high level” as court activity normalizes following COVID-era disruptions. He said Hanover’s commercial auto results were “fairly benign” this quarter but added that the line has reached a plateau of “fairly high severity” across the industry, underscoring the need for “substantial rate.”
Asked about reserve movements in casualty lines, Farber said the company reviews reserves each quarter across the entire book and makes adjustments as needed, but indicated there were “essentially no… almost no movements in individual lines of business” in prior-year development for core casualty.
Investment income, capital management, and technology initiatives
Farber said net investment income increased 19.6% year over year, driven by asset base growth from earnings, higher reinvestment yields, and improved partnership income. He described the portfolio as high quality, with about 88% of invested assets in cash and investment-grade fixed income. The fixed maturity portfolio’s weighted average rating was AA-, and Farber said 95% of holdings are investment grade. Earned yields on fixed maturities rose to 4.42% from 4.08% a year earlier, and duration excluding cash was about 4.4 years.
Book value per share increased 1% sequentially to $101.86, Farber said, driven by earnings and partially offset by higher unrealized losses, share repurchases, and the dividend. Excluding unrealized amounts, book value per share increased 2.8%. The company repurchased about 503,000 shares for $87 million in the first quarter and an additional $14 million through April 28. Farber also said the company’s second-quarter catastrophe load is expected to be 7.9%.
Roche and COO Dick Lavey also detailed ongoing technology and AI initiatives aimed at improving underwriting, claims, and operations. Roche said the company is “intentionally building reusable AI capabilities for the most common enterprise tasks.” Lavey provided examples including an underwriting “ingestion and triage agent” intended to codify and route submissions more efficiently—beginning with E&S, where Lavey said the company received 70,000 submissions last year—as well as claims tools that summarize complex contracts and medical records to improve speed and accuracy. Lavey said the company believes it is “right in the game” competitively and argued that companies that do not invest in these capabilities “are gonna miss out.”
Looking ahead, Farber said management is “confident” in the company’s market position for the rest of 2026, while Roche reiterated an emphasis on disciplined underwriting, selective growth, and continued investment in capabilities to navigate an evolving property and casualty market.
About The Hanover Insurance Group (NYSE:THG)
The Hanover Insurance Group, Inc (NYSE: THG) is a property and casualty insurance company that provides a range of commercial and personal insurance products. Through its subsidiary companies, Hanover offers coverage for businesses of all sizes, including workers’ compensation, general liability, commercial auto, and professional liability. On the personal lines side, the company underwrites homeowners, personal auto, flood, and umbrella policies designed to meet the needs of individuals and families.
In addition to its core commercial and personal insurance offerings, Hanover maintains a specialty arm that focuses on niche markets through tailored product solutions.
