Hanover Insurance Group blames 'dramatic downturn' for Q1 loss

US-based property/casualty insurer The Hanover made a loss in the first quarter of 2020 due to the "dramatic downturn" in the financial markets and increased volatility due to the global COVID-19 pandemic.

The insurer reported a net loss of $40 million in the first quarter of 2020, compared with the net income of $122.4 million, in the prior-year quarter.

The combined ratio for the quarter was broadly flat at 95.2 percent, compared with 95.8 percent in the first quarter 2019.

Overall, the net premiums written were $1.14 billion in the quarter, up 3.5 percent from the prior-year quarter.

According to its chief financial officer Jeffrey Farber, the earnings benefited from favorable catastrophe and expense results, while commercial lines property losses were slightly elevated, primarily due to one large fire loss and the establishment of COVID-19-related reserves in commercial lines portfolio.

"We are very pleased with our performance in the first quarter, highlighted by a 13.1% operating return on equity, operating income of $2.23 per diluted share and a combined ratio, excluding catastrophes, of 91.9%," said Farber. "Our high-quality well-laddered investment portfolio is well positioned to withstand the current market volatility and economic disruption. Our decision in recent years to meaningfully reduce our exposure to more volatile industry classes and transition away from below investment grade assets is serving us well. We will continue to manage our business thoughtfully and conservatively, delivering value to our shareholders and other stakeholders."

John Roche, president and chief executive officer, said: "From a financial perspective, our company remains very strong, as demonstrated by our strong results in the quarter. Our insurance book of business is built on thoughtful and conservative underwriting practices, a diversified, carefully constructed product portfolio and broad-based profitability.

"We believe these elements, combined with our solid balance sheet and ample liquidity, will allow us to successfully manage through the impacts of COVID-19, while continuing to deliver superior industry results. I have confidence the industry will respond and perform where contractual business interruption insurance exists, but that the sanctity of the contract will prevail in policies where coverage is excluded."