HANOVER INSURANCE GROUP, INC. [THG] Filings

10-Q 1 thg-20230630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-13754

THE HANOVER INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

04-3263626

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

440 Lincoln Street, Worcester, Massachusetts 01653

(Address of principal executive offices) (Zip Code)

(508) 855-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, $.01 par value	THG	New York Stock Exchange
7 5/8% Senior Debentures due 2025	THG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock was 35,753,876 as of August 1, 2023.

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements	2
	Consolidated Statements of Income (Loss)	2
	Consolidated Statements of Comprehensive Income (Loss)	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Shareholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Interim Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	45

PART II.	OTHER INFORMATION	46

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 5.	Other Information	49

Item 6.	Exhibits	50

SIGNATURES		51

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions, except per share data)	2023			2022			2023			2022
Revenues
Premiums	$	1,411.7		$	1,293.8		$	2,791.7		$	2,557.6
Net investment income		87.6			70.5			166.3			147.4
Net realized and unrealized investment gains (losses):
Net realized gains (losses) from sales and other		0.1			(19.2	)		(1.0	)		(16.2	)
Net change in fair value of equity securities		(1.1	)		(59.0	)		(8.2	)		(77.0	)
Impairments on investments:
Credit-related recoveries (impairments)		(1.7	)		0.5			(6.2	)		(0.1	)
Losses on intent to sell securities		—			(0.2	)		(10.3	)		(0.5	)
		(1.7	)		0.3			(16.5	)		(0.6	)
Total net realized and unrealized investment losses		(2.7	)		(77.9	)		(25.7	)		(93.8	)
Fees and other income		7.8			6.5			15.8			12.4
Total revenues		1,504.4			1,292.9			2,948.1			2,623.6
Losses and expenses
Losses and loss adjustment expenses		1,139.9			845.5			2,157.3			1,633.0
Amortization of deferred acquisition costs		292.7			269.3			581.5			532.2
Interest expense		8.6			8.5			17.1			17.0
Other operating expenses		153.9			141.4			300.4			283.2
Total losses and expenses		1,595.1			1,264.7			3,056.3			2,465.4
Income (loss) from continuing operations before income taxes		(90.7	)		28.2			(108.2	)		158.2
Income tax expense (benefit):
Current		(14.8	)		29.4			(12.6	)		59.6
Deferred		(5.9	)		(24.0	)		(13.6	)		(29.5	)
Total income tax expense (benefit)		(20.7	)		5.4			(26.2	)		30.1
Income (loss) from continuing operations		(70.0	)		22.8			(82.0	)		128.1
Discontinued operations (net of taxes):
Income from discontinued Chaucer business		0.8			—			0.8			—
Loss from discontinued life businesses		—			(0.1	)		—			(0.5	)
Net income (loss)	$	(69.2	)	$	22.7		$	(81.2	)	$	127.6
Earnings per common share:
Basic:
Income (loss) from continuing operations	$	(1.96	)	$	0.64		$	(2.30	)	$	3.60
Discontinued operations (net of taxes):
Income from discontinued Chaucer business		0.02			—			0.03			—
Loss from discontinued life businesses		—			—			—			(0.01	)
Net income (loss) per share	$	(1.94	)	$	0.64		$	(2.27	)	$	3.59
Weighted average shares outstanding		35.7			35.6			35.7			35.6
Diluted:
Income (loss) from continuing operations	$	(1.96	)	$	0.63		$	(2.30	)	$	3.55
Discontinued operations (net of taxes):
Income from discontinued Chaucer business		0.02			—			0.03			—
Loss from discontinued life businesses		—			—			—			(0.02	)
Net income (loss) per share	$	(1.94	)	$	0.63		$	(2.27	)	$	3.53
Weighted average shares outstanding		35.7			36.1			35.7			36.1

The accompanying notes are an integral part of these interim consolidated financial statements.

THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended							Six Months Ended
	June 30,						June 30,
(In millions)	2023			2022				2023			2022
Net income (loss)	$	(69.2	)	$	22.7			$	(81.2	)	$	127.6
Other comprehensive income (loss), net of tax:
Available-for-sale securities:
Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the Consolidated Statements of Income (Loss)		(66.6	)		(261.4	)			26.7			(640.8	)
Having credit losses recognized in the Consolidated Statements of Income (Loss)		0.4			(3.0	)			1.4			(3.5	)
Total available-for-sale securities		(66.2	)		(264.4	)			28.1			(644.3	)
Pension and postretirement benefits:
Net change in net actuarial loss		1.6			1.1				3.2			2.2
Long-duration insurance contracts:
Net change in market risk		1.4			6.2				(0.7	)		13.1
Total other comprehensive income (loss), net of tax		(63.2	)		(257.1	)			30.6			(629.0	)
Comprehensive loss	$	(132.4	)	$	(234.4	)		$	(50.6	)	$	(501.4	)

The accompanying notes are an integral part of these interim consolidated financial statements.

THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30,			December 31,
(In millions, except share data)	2023			2022
Assets
Investments:
Fixed maturities, at fair value (amortized cost of $8,375.5 and $8,294.5)	$	7,598.0		$	7,481.8
Equity securities, at fair value		232.7			241.9
Other investments		809.7			786.1
Total investments		8,640.4			8,509.8
Cash and cash equivalents		167.6			305.0
Accrued investment income		55.5			54.5
Premiums and accounts receivable, net		1,673.8			1,601.4
Reinsurance recoverable on paid and unpaid losses and unearned premiums		1,997.3			1,964.5
Deferred acquisition costs		606.4			604.8
Deferred income tax asset		203.7			199.2
Goodwill		178.8			178.8
Other assets		577.4			493.0
Assets of discontinued businesses		85.8			84.1
Total assets	$	14,186.7		$	13,995.1
Liabilities
Loss and loss adjustment expense reserves	$	7,313.3		$	7,012.6
Unearned premiums		3,020.8			2,954.2
Expenses and taxes payable		651.7			731.7
Reinsurance premiums payable		69.5			70.3
Debt		782.8			782.4
Liabilities of discontinued businesses		110.7			110.2
Total liabilities		11,948.8			11,661.4
Commitments and contingencies
Shareholders’ Equity
Preferred stock, par value $0.01 per share; 20.0 million shares authorized; none issued		—			—
Common stock, par value $0.01 per share; 300.0 million shares authorized; 60.5 million shares issued		0.6			0.6
Additional paid-in capital		1,923.0			1,913.1
Accumulated other comprehensive loss		(670.9	)		(701.5	)
Retained earnings		2,853.0			2,992.9
Treasury stock at cost (24.7 million and 24.9 million shares)		(1,867.8	)		(1,871.4	)
Total shareholders’ equity		2,237.9			2,333.7
Total liabilities and shareholders’ equity	$	14,186.7

HANOVER INSURANCE GROUP, INC. [THG] Filings
10-Q	[2023-08-04]
10-Q	[2023-05-03]
10-K	[2023-02-23]
10-Q	[2022-11-02]
10-Q	[2022-08-03]
10-Q	[2022-05-04]
10-K	[2022-02-25]
10-Q	[2021-10-28]
10-Q	[2021-07-28]
10-Q	[2021-04-30]
10-K	[2021-02-24]
10-Q	[2020-10-28]
10-Q	[2020-07-29]
10-Q	[2020-04-29]
10-K	[2020-02-24]
10-Q	[2019-10-31]
10-Q	[2019-08-01]
10-Q	[2019-05-02]
10-K	[2019-02-22]
10-Q	[2018-11-01]
10-Q	[2018-08-03]
10-Q	[2018-05-03]
10-K	[2018-02-27]
10-Q	[2017-11-02]
10-Q	[2017-08-03]
10-Q	[2017-05-04]
10-K	[2017-02-22]
10-Q	[2016-11-04]
10-Q	[2016-07-29]
10-Q	[2016-05-05]
10-K	[2016-02-25]
10-Q	[2015-10-30]
10-Q	[2015-07-30]
10-Q	[2015-05-01]
10-K	[2015-02-24]
10-Q	[2014-10-30]
10-Q	[2014-08-01]
10-Q	[2014-05-01]
10-K	[2014-02-25]
10-Q	[2013-11-01]
10-Q	[2013-08-01]
10-Q	[2013-05-01]
10-K	[2013-02-26]
10-Q	[2012-11-01]
10-Q	[2012-08-02]
10-Q	[2012-05-04]
10-K	[2012-02-29]

HANOVER INSURANCE GROUP, INC. [THG] Filings

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