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Hanover Insurance (THG)
NYSE:THG
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Hanover Insurance
(NYSE:THG)
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Rating:77Outperform
Price Target:
$199.00
â–²(14.43% Upside)
Action:ReiteratedDate:02/21/26
The score is driven primarily by improving financial performance (strong 2024–2025 rebound and solid cash generation) and attractive valuation (low P/E with a ~2.1% dividend yield). Earnings call guidance and sentiment were also supportive, while technical indicators are mixed and do not add strong momentum confirmation.
Positive Factors
Cash generation
Hanover’s free cash flow closely tracks reported earnings and stepped up to $1.17B in 2025, indicating durable cash conversion. Reliable FCF supports ongoing dividends, buybacks, reserve strengthening and underwriting flexibility, providing long-term capital allocation optionality.
Underwriting improvement
Improved combined ratios and record operating ROE reflect stronger underwriting discipline and portfolio management. Sustained ex‑CAT combined ratios in the high 80s improve earnings durability, reduce sensitivity to normal loss variability, and underpin more predictable underwriting returns over time.
Investment portfolio strength
Meaningful investment income growth and a high‑quality, short‑to‑moderate duration portfolio increase recurring yield and lower capital volatility. Higher reinvestment yields and partnership income provide a steady earnings contributor, helping offset underwriting cyclicality over time.
Negative Factors
Earnings volatility
Hanover’s earnings and margins have shown sizable swings across cycles, with weak results in 2022–2023 followed by sharp rebounds. This underwriting sensitivity means profits can reverse materially in adverse loss years, complicating capital planning and making long‑term earnings less predictable.
Catastrophe exposure
Sustained exposure to convective storms and other catastrophes keeps earnings prone to large, infrequent losses. The conservative CAT load acknowledges this structural risk; recurring weather volatility can materially swing combined ratios and capital needs over multi‑year horizons.
Competitive & expense pressure
Heightened competition in select product lines can erode pricing power and new business margins, while an elevated expense ratio from investments and variable compensation limits operating leverage. Together, these structural pressures can constrain sustainable margin expansion across cycles.
Hanover Insurance (THG) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$6.21B
Dividend Yield1.97%
Average Volume (3M)385.51K
Price to Earnings (P/E)9.6
Beta (1Y)0.29
Revenue Growth5.26%
EPS Growth72.46%
CountryUS
Employees4,900
SectorFinancial
Sector Strength70
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)5.79
Shares Outstanding35,583,965
10 Day Avg. Volume235,298
30 Day Avg. Volume385,510
Financial Highlights & Ratios
PEG Ratio0.18
Price to Book (P/B)1.83
Price to Sales (P/S)0.99
P/FCF Ratio5.59
Enterprise Value/Market Cap1.01
Enterprise Value/Revenue0.96
Enterprise Value/Gross Profit3.33
Enterprise Value/Ebitda7.11
Forecast
1Y Price Target
$202.75Price Target Upside16.58% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering4
EPS Forecast (FY)17.09
Revenue Forecast (FY)$6.71B
Hanover Insurance Business Overview & Revenue Model
Company DescriptionThe Hanover Insurance Group, Inc., through its subsidiaries, provides various property and casualty insurance products and services in the United States. The company operates through three segments: Commercial Lines, Personal Lines, and Other. The Commercial Lines segment offers commercial multiple peril, commercial automobile, and workers' compensation insurance products, as well as management and professional liability, marine, specialty industrial and commercial property, monoline general liability, surety, umbrella, fidelity, crime, and other commercial coverages. The Personal Lines segment provides personal automobile and homeowner's coverages, as well as other personal coverages, such as personal umbrella, inland marine, fire, personal watercraft, personal cyber, and other miscellaneous coverages. The Other segment markets investment management services to institutions, pension funds, and other organizations. The Hanover Insurance Group, Inc. markets its products and services through independent agents and brokers. The company was formerly known as Allmerica Financial Corp. and changed its name to The Hanover Insurance Group, Inc. in December 2005. The Hanover Insurance Group, Inc. was founded in 1852 and is headquartered in Worcester, Massachusetts.
How the Company Makes MoneyHanover Insurance generates revenue primarily through the underwriting of insurance policies. The company collects premiums from policyholders in exchange for coverage, which constitutes its main revenue stream. Additionally, THG earns investment income from its portfolio of invested premiums and reserves, which is a critical component of its overall profitability. The company also engages in reinsurance arrangements, allowing it to manage risk and enhance cash flow. Strategic partnerships with independent agents and brokers play a significant role in expanding its market reach and customer base, contributing further to its earnings.
Hanover Insurance Earnings Call Summary
Earnings Call Date:Feb 03, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 05, 2026
Earnings Call Sentiment Positive
The call conveyed a strongly positive operational and financial story: record earnings metrics, meaningful improvement in combined ratios (especially ex-CAT), robust investment income growth, book value appreciation, active capital returns, and constructive 2026 guidance. Challenges discussed were mostly tactical and manageable — competitive pressures in pockets of the portfolio, some reserve and severity adjustments (notably personal auto BI and commercial casualty), modestly elevated expense ratio due to investments and variable compensation, and ongoing CAT uncertainty. Overall, the company emphasized disciplined underwriting, portfolio management, and continued investments to support profitable growth.Q4-2025 Updates
Positive Updates
Record Earnings and Strong ROE
Delivered record quarterly operating EPS and an all-time high annual operating return on equity (Jack: 20% full year) with an exceptional operating ROE reported at 23.1% in the fourth quarter (Jeff).
Improved Combined Ratios and Underlying Profitability
Fourth quarter combined ratio of 89.0% and full year combined ratio of 91.6%, with full-year combined ratio ex-CAT at 87.1% (1.3 points better vs. 2024) and Q4 underlying consolidated loss ratio improving 1.1 points to 57.1%.
Personal Lines Margin and Price Strength
Personal Lines net written premium growth: Q4 +4.4%, full year +3.7%. Personal Lines current accident year ex-CAT combined ratio: 85.3% (year) and 85.4% (Q4). Renewal pricing in the quarter averaged 9.2% (auto +6.9%, home +12.3%, umbrella ~20%). Homeowners ex-CAT loss ratio improved 6.4 points to 45.8% for the year (Q4 36.6%, down 4.6 points).
Core Commercial Profitability and Growth
Core Commercial net written premiums grew +3.6% for the year and +2.5% for the quarter (or +4.1% Q4 excluding reinstatement premium impact). Q4 ex-CAT current accident year combined ratio improved 2.4 points YoY to 91.6% and ex-CAT loss ratio improved to 57.4% in Q4 (down 1.5 points). Retention strong at 85.3% (up ~1 point from Q3).
Small Commercial Outperformance
Small Commercial delivered nearly +5% net written premium growth in the quarter and year, with double-digit new business growth, double-digit renewal price increases, and expanded distribution and product rollout (Workers' Compensation Advantage in 17 states, national rollout targeted by end of 2026).
Specialty Segment Strength and Execution
Specialty current accident year combined ratio ex-CAT: 87.4% (year) and 89.5% (Q4); ex-CAT loss ratio ~50.1% for the year (in line with low-50s expectation). Specialty saw robust double-digit growth in E&S and surety and accelerated management liability growth; Q4 favorable prior-year reserve development of 5.3 points in Specialty.
Investment Income and Portfolio Positioning
Net investment income increased +22% for the year to $454.4 million (Q4 +24.9%), benefiting from higher reinvestment yields, partnership income and portfolio repositioning. Fixed maturity portfolio carries A+ weighted average rating with 95% investment grade; portfolio duration ~4.3 years.
Capital Returns and Balance Sheet Strength
Book value rose ~27% in 2025 to $100.90 (ex-unrealized +15% to $104.21). Raised quarterly dividend +5.6% to $0.95 (21st consecutive increase). Repurchased ~754,000 shares for $130M in 2025 (Q4: 307,000 shares/$55M) and repurchased ~$44M of shares through Jan 30.
Conservative Reserving and Prior-Year Favorability
Favorable prior-year reserve development ex-CAT across each segment in Q4 and full year; company emphasized prudent reserving with additions for PL auto BI severity when appropriate and higher IBNR added for recent years to support balance sheet strength.
Positive 2026 Guidance
Guidance calls for accelerated consolidated net written premium growth to mid-single-digits in 2026, net investment income growth mid- to upper-single-digits, combined ratio ex-CAT targeted 88%-89%, and maintained CAT load guidance at 6.5% for the year (Q1 CAT load 6.1%).
Negative Updates
Competitive Pressure in Select Markets
Management noted intensifying competition in monoline auto markets, heightened competition across certain Specialty property lines, and pockets of competition in middle market property schedules which could pressure pricing and new business margins.
Elevated Expense Ratio and Investment in Growth
Full year expense ratio of 31.1% improved 20 bps vs. 2024 but was above expectations due to higher variable agency/employee compensation (driven by strong underwriting results and lower CATs) and continued investments in technology and talent. Company will stop providing future expense ratio guidance.
Reserve Actions and Severity Trends in Auto Liability
Management increased loss picks for personal auto bodily injury in response to higher severity and noted they made prudently increased loss selections in commercial auto liability and workers' compensation, which elevated some Core Commercial results year-over-year.
Moderation in Specialty Premium Growth and Property Pressure
Specialty premium growth moderated to ~4% in Q4 (adjusted for reinstatement premium) due to heightened competitive pressure across property lines, particularly impacting Hanover Specialty Industrial Property and to a lesser degree Marine.
Reinstatement Premium Timing and Accounting Effects
Core Commercial growth was impacted by reinstatement premium timing (receipts in Q4 2024 and payments in 2025) which compressed reported growth; excluding the effect, Q4 growth was stronger (+4.1%).
Catastrophe Uncertainty and Conservative CAT Load
Although 2025 CAT losses were favorable at 4.5 points, management maintained a conservative CAT load of 6.5% for 2026 given weather volatility; severe convective storm exposure remains a source of earnings volatility.
Reinsurance Pricing Below Expectations
Multiline casualty reinsurance renewal was placed similarly to prior year but at rate levels slightly below management expectations, which could modestly affect reinsurance economics.
Policy Count and Near-Term New Business Dynamics
Policy in force (PIF) was relatively stable but shrank 0.6 points sequentially in Q4; management expects PIF growth in 2026 but noted potential headwinds as pricing normalizes and competition evolves.
Company Guidance
For 2026 Hanover guided to consolidated net written premium growth of mid‑single digits and net investment income growth in the mid‑ to upper‑single digits versus 2025, an expected expense ratio of 30.3% (management said it will stop issuing specific expense‑ratio guidance in future years), an accident‑year combined ratio excluding catastrophes of 88%–89% (an improvement versus prior 2025 guidance), a full‑year catastrophe load of 6.5% (consistent with 2025) and a Q1 CAT load of 6.1%.Hanover Insurance Financial Statement Overview
Summary
Strong recent improvement: revenue grew into 2025 and profitability rebounded sharply in 2024–2025, supported by strong cash generation (FCF closely tracking earnings and stepping up in 2025). Main offset is earnings/margin volatility (weak 2022–2023) which suggests underwriting/claims sensitivity and less consistent earnings power.Income Statement
Revenue has grown steadily over the period, accelerating into 2025 ($6.60B vs. $6.22B in 2024). Profitability, however, has been volatile: earnings were very weak in 2022–2023, then rebounded sharply in 2024 and strengthened again in 2025 (net margin ~10% in 2025 vs. ~0.6% in 2023). The large swing in gross and operating margins year-to-year points to underwriting/claims sensitivity and less predictable earnings power than a consistently compounding profile.74
Positive
Balance Sheet
Leverage looks reasonable for the business, with debt-to-equity generally in the ~0.25–0.34 range and 2025 at ~0.34. Equity has expanded versus 2022–2024 levels, supporting the balance sheet, and return on equity improved meaningfully in 2024–2025 (about 15% to 19%). The key drawback is variability in returns (very low ROE in 2022–2023), which suggests the balance sheet’s earnings efficiency can weaken materially in tougher underwriting years.72
Positive
Cash Flow
Cash generation is a clear strength: free cash flow is consistently close to reported earnings across all years (roughly ~97%–99%), and 2025 shows a sizable step-up in operating and free cash flow (FCF $1.17B vs. $0.80B in 2024) with strong growth. That said, cash flow growth has not been smooth (declines in 2022 and 2023), and one reported cash-to-earnings coverage data point in 2025 appears inconsistent (shown as 0.0), limiting confidence in that specific indicator.78
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 6.60B | 6.22B | 5.96B | 5.43B | 5.16B |
| Gross Profit | 2.87B | 1.24B | 652.90M | 716.30M | 1.04B |
| EBITDA | 887.00M | 573.40M | 81.50M | 191.00M | 572.20M |
| Net Income | 662.50M | 426.00M | 35.30M | 116.00M | 422.80M |
Balance Sheet | |||||
| Total Assets | 15.10B | 15.27B | 14.61B | 14.00B | 14.25B |
| Cash, Cash Equivalents and Short-Term Investments | 1.12B | 2.02B | 8.30B | 7.79B | 7.95B |
| Total Debt | 1.22B | 784.10M | 783.20M | 782.40M | 781.60M |
| Total Liabilities | 11.36B | 12.43B | 12.15B | 11.66B | 11.11B |
| Stockholders Equity | 3.57B | 2.84B | 2.47B | 2.33B | 3.14B |
Cash Flow | |||||
| Free Cash Flow | 1.17B | 796.20M | 349.80M | 704.50M | 815.70M |
| Operating Cash Flow | 1.18B | 806.40M | 361.70M | 722.30M | 823.70M |
| Investing Cash Flow | -666.20M | -541.50M | -228.50M | -507.60M | -460.20M |
| Financing Cash Flow | 175.20M | -145.50M | -122.10M | -140.60M | -253.20M |
Hanover Insurance Technical Analysis
Negative
173.91
Price Trends
176.86
Negative
177.19
Negative
173.04
Positive
Market Momentum
-0.23
Negative
48.82
Neutral
64.34
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 173.91 is above the 20-day moving average (MA) of 173.71, below the 50-day MA of 176.86, and above the 200-day MA of 173.04, indicating a neutral trend. The MACD of -0.23 indicates Negative momentum. The RSI at 48.82 is Neutral, neither overbought nor oversold. The STOCH value of 64.34 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
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $6.21B | 9.61 | 20.60% | 1.97% | 5.26% | 72.46% | |
77 Outperform | $5.12B | 11.38 | 13.86% | 1.85% | 10.98% | 74.87% | |
75 Outperform | $5.55B | 13.84 | 24.44% | 4.05% | 3.72% | -16.23% | |
74 Outperform | $4.84B | 8.94 | 24.80% | 1.34% | 6.18% | -21.28% | |
72 Outperform | $8.02B | 8.31 | 16.21% | 1.80% | 6.37% | 68.32% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
56 Neutral | $1.93B | 14.38 | 9.03% | 3.15% | 4.51% | -8.29% |
* Financial Sector Average
THG
Hanover Insurance
173.91
18.13
11.64%
AXS
Axis Capital
104.35
11.56
12.45%
MCY
Mercury General
83.81
31.09
58.96%
RLI
RLI
60.03
-11.83
-16.46%
SIGI
Selective Insurance Group
83.00
4.02
5.08%
KMPR
Kemper
30.78
-32.39
-51.28%
Hanover Insurance Corporate Events
Private Placements and Financing
Hanover Insurance Announces Redemption of 2026 Notes
Neutral
Dec 16, 2025
On December 16, 2025, Hanover Insurance Group announced the redemption of its outstanding 4.500% Notes due 2026, originally issued in 2016. The redemption, scheduled for January 15, 2026, involves a total principal amount of $375 million, marking a significant financial maneuver for the company.
The most recent analyst rating on (THG) stock is a Hold with a $200.00 price target. To see the full list of analyst forecasts on Hanover Insurance stock, see the THG Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.