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Hanover Insurance Group & Units' Rating Upped by A.M. Best

Zacks Equity Research

The Hanover Insurance Group, Inc.’s THG long-term issuer credit ratings (Long-Term ICR) has been upgraded to “bbb+” from “bbb” by A.M. Best. Concurrently, the Long-Term ICR of all its subsidiaries has been upgraded to “a+” from “a” while financial strength rating (FSR) of A (Excellent) has been reiterated by the rating giant. Outlook of these credit ratings are stable.

The upgrade accounts for the company’s solid business profile. Boasting a rank among the top 25 property/casualty organizations in the United States, the company has remained focused on increasing market penetration while continuing on the growth path.

The rating affirmations reflect the company’s sturdy balance sheet and risk-adjusted capitalization, sustained solid operational performance, favorable business profile and apt enterprise risk management. Proper risk management and re-underwriting have helped the company maintain its profitability and earnings stability. The rating giant also noted that the subsidiaries enjoy modest financial leverage and financial flexibility.

Though high underwriting leverage and escalated expenses partially offset these positives, the company’s enhanced scale and improved operating efficiencies have helped it improve its expense ratio over the last few years.

Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence as well as maintaining creditworthiness of a stock. Rating downgrades not only hamper business but also increase the cost of future debt issuances. We believe that such ratings will help The Hanover Insurance Group retain investors’ trust and write more businesses going forward.

Shares of The Hanover Insurance Group have gained 9.2% year to date, outperforming the industry’s rise of 4.6%. Strong market presence, varied insurance solutions for distribution partners and policyholders and shareholder rewards should help to drive share price higher. The stock carries a Zacks Rank #3 (Hold).


Stocks to Consider

Some better-ranked property and casualty insurance stocks are Alleghany Corporation Y, Argo Group International Holdings, Ltd. ARGO and CNA Financial Corporation CNA. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany Corporation provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprise of 32.51% in the last reported quarter.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty markets. The company delivered positive surprise of 34.09% in the last reported quarter.

CNA Financial provides commercial property and casualty insurance products primarily in the United States. The company delivered positive surprise of 12.50% in the last reported quarter.

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