Hanover Insurance (THG) AI Stock Analysis

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Hanover Insurance

(NYSE:THG)

82Outperform

Hanover Insurance's strong financial performance, backed by robust earnings call insights, underpins its favorable stock score. Despite challenges in expense management and commercial reserves, the company’s strategic growth initiatives and reasonable valuation support its overall strength in the market.

Positive Factors

Earnings

Hanover’s home-insurance profit margins are on track to beat consensus, potentially by a meaningful margin.

Investment Income

Material uplift from net investment income is expected relative to peers.

Pricing Power

Pricing power increases are estimated to provide significant benefit beyond loss-expense inflation.

Negative Factors

Expense Ratio

Total company expense ratio of 32.3% was above consensus expectations of 30.9%.

Hanover Insurance (THG) vs. S&P 500 (SPY)

Market Cap

$5.65B

Dividend Yield2.23%

Average Volume (3M)285.13K

Price to Earnings (P/E)13.4

Beta (1Y)0.39

Revenue Growth4.07%

EPS Growth1110.92%

CountryUS

Employees4,900

SectorFinancial

Sector Strength79

IndustryInsurance - Property & Casualty

Share Statistics

EPS (TTM)11.68

Shares Outstanding36,039,406

10 Day Avg. Volume312,311

30 Day Avg. Volume285,126

Financial Highlights & Ratios

PEG Ratio0.01

Price to Book (P/B)N/A

Price to Sales (P/S)0.98

Price to Cash Flow (P/CF)7.20

P/FCF Ratio6.90

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$183.00

Price Target Upside17.28% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering5

Hanover Insurance Business Overview & Revenue Model

Company DescriptionHanover Insurance Group (THG) is a leading provider of property and casualty insurance products and services in the United States. The company operates in various sectors, including personal lines, commercial lines, and specialty insurance. Hanover offers a wide range of insurance products, such as auto, home, business, and professional liability insurance, tailored to meet the diverse needs of individuals, families, and businesses.

How the Company Makes MoneyHanover Insurance Group generates revenue primarily through the underwriting and sale of insurance policies. Premiums collected from policyholders constitute the main source of income. The company employs a diversified distribution strategy, working with independent agents and brokers to reach its clients. Additionally, Hanover invests the premiums it collects in a variety of financial instruments to generate investment income. The company's earnings are influenced by factors such as underwriting performance, claims experience, and investment returns. Strategic partnerships with agencies and reinsurers also play a role in expanding its market reach and managing risk exposure effectively.

Hanover Insurance Financial Statement Overview

Summary

Hanover Insurance demonstrates strong financial health with significant improvements in profitability, cash flow generation, and a stable balance sheet. Revenue growth and profitability were effectively managed, while maintaining a low leverage position. However, there are concerns about increasing liabilities relative to equity.

Income Statement

Very Positive

Hanover Insurance shows strong revenue growth with a 4.06% increase from 2023 to 2024. The net profit margin significantly improved to 6.83% in 2024, up from 0.59% in 2023, indicating enhanced profitability. The company also maintained a stable gross profit margin of 100%, reflecting efficient cost management. However, the EBIT margin, while improved to 6.82% in 2024, was previously low at 0.80% in 2023, suggesting past operational challenges.

Balance Sheet

Positive

The balance sheet reflects a stable equity base with stockholders' equity rising to $2.84 billion in 2024. The debt-to-equity ratio remained manageable at 0.28, indicating low financial leverage. However, the equity ratio slightly decreased to 18.61% from 16.88% in 2023, which might suggest a growing reliance on liabilities. Return on equity surged to 14.99% in 2024, indicating improved efficiency in generating profits from equity.

Cash Flow

Very Positive

Free cash flow exhibited robust growth, increasing by 127.59% from 2023 to 2024, showcasing strong cash generation capabilities. The operating cash flow to net income ratio of 1.89 in 2024 underscores efficient cash generation from operations. The free cash flow to net income ratio of 1.87 further highlights the company's solid cash flow position relative to its net income.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
6.24B	5.99B	5.47B	5.23B	4.83B
	Gross Profit
6.24B	6.01B	5.47B	5.23B	4.83B
	EBIT
425.30M	48.00M	177.30M	520.00M	441.50M
	EBITDA
425.30M	75.20M	178.10M	555.30M	500.10M
	Net Income Common Stockholders
426.00M	35.30M	116.00M	422.80M	358.70M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
435.50M	316.10M	305.00M	230.90M	120.60M
	Total Assets
15.27B	14.61B	14.00B	14.25B	13.44B
	Total Debt
784.10M	783.20M	782.40M	781.60M	780.80M
	Net Debt
348.60M	467.10M	477.40M	550.70M	660.20M
	Total Liabilities
12.43B	12.15B	11.67B	11.11B	10.24B
	Stockholders Equity
2.84B	2.47B	2.33B	3.14B	3.20B
Cash Flow		Free Cash Flow
796.20M	349.80M	704.50M	815.70M	692.70M
	Operating Cash Flow
806.40M	361.70M	722.30M	823.70M	707.60M
	Investing Cash Flow
-540.90M	-228.50M	-507.60M	-460.20M	-608.80M
	Financing Cash Flow
-145.50M	-122.10M	-140.60M	-253.20M	-193.90M

Hanover Insurance Technical Analysis

Technical Analysis Sentiment

Negative

Last Price156.04

Price Trends

50DMA

164.14

Negative

100DMA

160.05

Negative

200DMA

149.64

Positive

Market Momentum

MACD

3.17

Negative

RSI

64.73

Neutral

STOCH

69.61

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For THG, the sentiment is Negative. The current price of 156.04 is below the 20-day moving average (MA) of 167.91, below the 50-day MA of 164.14, and above the 200-day MA of 149.64, indicating a neutral trend. The MACD of 3.17 indicates Negative momentum. The RSI at 64.73 is Neutral, neither overbought nor oversold. The STOCH value of 69.61 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for THG.

Hanover Insurance Risk Analysis

Hanover Insurance disclosed 39 risk factors in its most recent earnings report. Hanover Insurance reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Hanover Insurance Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AXS	82 Outperform	$7.36B	7.49	19.06%	1.88%	6.10%	206.71%
THG	82 Outperform	$5.65B	13.40	16.03%	2.23%	4.07%	1110.92%
RLI	75 Outperform	$6.99B	20.37	23.56%	0.77%	18.31%	13.13%
SIGI	75 Outperform	$5.27B	26.88	6.82%	1.68%	15.35%	-44.64%
WTM	68 Neutral	$4.47B	19.32	5.22%	0.06%	2.48%	-54.02%
Sector *	64 Neutral	$13.46B	9.44	9.34%	4.72%	16.14%	-8.80%
KMPR	59 Neutral	$3.85B	12.27	12.01%	2.08%	-6.08%	―

* Financial Sector Average

Performance Comparison

THG

Hanover Insurance

156.04

30.66

24.45%

AXS

Axis Capital

91.41

30.80

50.82%

RLI

76.35

9.77

14.67%

SIGI

Selective Insurance Group

86.03

-13.55

-13.61%

KMPR

Kemper

58.11

3.16

5.75%

WTM

White Mountains Insurance Group

1,707.94

20.04

1.19%

Hanover Insurance Earnings Call Summary

Earnings Call Date: Feb 4, 2025 | % Change Since: 2.58% | Next Earnings Date: Apr 30, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong performance for The Hanover Insurance Group in 2024, marked by record returns on equity, substantial improvements in underwriting results, and successful implementation of catastrophe mitigation strategies. The company demonstrated significant growth in specialty lines and increased investment income. However, challenges remain in managing commercial umbrella reserves and temporary spikes in expense ratios.

Highlights

Record Operating Return on Equity

Achieved a record operating return on equity of 24.4% for the quarter and 15.8% for the full year, the highest on record.

Improvement in Ex-Cat Combined Ratio

Improved the ex-cat combined ratio by 2.7 points year over year to 87.5%.

Strong Specialty Segment Growth

Accelerated top-line growth to 8.8% in the fourth quarter, with double-digit growth in E&S, HSI, healthcare, and marine lines.

Successful Catastrophe Mitigation Strategies

Implemented cat mitigation actions and increased cumulative written renewal pricing by 47% in homeowners and by 29% in core commercial property.

Investment Income Increase

Net investment income increased by 23.4% in the quarter and 12.2% for the year.

Expense Management and Future Growth

Despite a temporary spike in expenses, committed to achieving a 30.5% expense ratio in 2025.

Lowlights

Increased IBNR Reserves

Added IBNR reserves in commercial umbrella due to uncertainty around claim severities.

Pressure in Commercial Umbrella

Facing social inflation and aggressive legal involvement, leading to a need for prudence in reserving.

Temporary Spike in Expense Ratio

Expense ratio was 31.3% for the year, above expectations, due to higher variable expenses.

Company Guidance

During The Hanover Insurance Group's earnings call for the fourth quarter of 2024, the company provided guidance for 2025, highlighting several key metrics. The company anticipates overall consolidated net written premium growth of 6% to 7%, with specialty and small commercial segments expected to exceed this growth range, while personal lines and middle market are projected to fall below it. The combined ratio excluding catastrophes is forecasted to be between 88.5% and 89.5%, indicating an improvement from the previous guidance of 90% to 91%. The expense ratio is expected to decrease to 30.5%, reflecting a return to traditional pacing. Additionally, net investment income is projected to rise by 12% to 14% from 2024 levels. The company remains optimistic about its ability to deliver strong, sustainable, and profitable results, underpinned by a diversified franchise and strategic technological investments.

Hanover Insurance Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Hanover Insurance Appoints Richard Lavey as COO

Neutral

Apr 3, 2025

On March 31, 2025, The Hanover Insurance Group appointed Richard W. Lavey as Executive Vice President and Chief Operating Officer. In this newly created role, Lavey will enhance the company’s business strategy and foster integration between business and technology, while maintaining his current responsibilities.

Executive/Board Changes

Hanover Insurance Announces Leadership Transition in 2025

Neutral

Feb 25, 2025

Hanover Insurance announced the retirement of Warren E. Barnes, Senior Vice President, Corporate Controller, and Principal Accounting Officer, effective April 1, 2025. Jeffrey M. Farber, the company’s Executive Vice President and Chief Financial Officer since 2016, has been appointed to assume Barnes’ role, bringing extensive experience from previous roles at AIG, GAMCO Investors, and Bear Stearns.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.