A.M. Best Co.
has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the subsidiaries of the parent holding company,
The Hanover Insurance Group, Inc.
(THG) [NYSE: THG], collectively referred to as
The Hanover Insurance Group Property and Casualty Companies
(The Hanover). Additionally, A.M. Best has affirmed the ICR of “bbb” and all existing debt ratings of
THG. The outlook for all ratings is stable. The above named companies are headquartered in Worcester, MA. (Please see below for a detailed listing of the companies and ratings.)
The ratings reflect The Hanover’s solid risk-adjusted capitalization, stemming from consistently favorable operating earnings. Despite consistent dividend payments to THG in recent years, The Hanover has been able to sustain its surplus base over the past five years through solid net investment income, which is somewhat offset by catastrophes and other weather related losses resulting in fluctuating underwriting performance. In addition, the ratings reflect the company’s prudent risk management and diversified product offerings, especially in the commercial and specialty segments of its book of business. The ratings also recognize moderate financial leverage and financial flexibility at THG.
Partially offsetting these positive rating factors is The Hanover’s comparatively high underwriting leverage, somewhat elevated expense structure and pressure on underwriting results caused by significant weather-related losses, as witnessed especially in 2011 when it posted a combined ratio of nearly 107%.
Although, The Hanover’s underlying book of business, excluding catastrophe results, continues to perform reasonably well, negative rating pressure may result from a continued deterioration in overall underwriting performance (which includes catastrophe and other weather related losses) and/or a decline in overall risk-adjusted capitalization levels. Conversely, there also could be potential positive movement in the ratings from a restoration of positive underwriting performance and continued favorable operating performance coupled with increased levels of risk-adjusted capitalization that is sustained over a period of time.