The Hanover pushed to Q3 profit warning cats & multiple peril property

US-based property/casualty firm  Hanover Insurance Group expects an over-budget catastrophe loss of neighbourhood $90 million and a hit from large loss and inflation in personal and commercial multiple peril property lines sufficient to warrant a profit warning to investors.

The $90 million catastrophe price tag, or 6.8 points on the combined ratio, came $22 million over budget, thanks in large part to the $28 million expected hit from Hurricane Ian, primarily in the company’s commercial lines book in Florida, management said.

"The strategic actions we have taken in the past reduced our exposure in coastal areas and helped mitigate the loss impact on our company from this storm," CEO John Roche said.

Personal and commercial multiple peril property lines also added earnings pressure, succumbing to the one-two punch of large loss in property and runaway inflation.

“Inflationary and supply chain pressures surpassed our expectations, and as such we are accelerating property price increases to improve margins in this unprecedented industry environment,” Roche said. “We are supplementing price increases with a robust plan of action, parts of which are already in place.”

The current accident year combined ratio, ex-catastrophe, could be at 64.1% in the third quarter,

well above the 59.2 to 60.1% range from the prior four quarters. The total combined ratio, ex-cats, is likely at 94.2% versus a prior quarter reading near 90%.  And cats in Q3 add another 6.8 points, suggesting a technical loss.

“We have the utmost confidence in our high-quality diversified book of business and our team's ability to execute this plan and bring the business to target profitability,” Roche commented. Details on Q3 will be presented November 2.

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