Hanover Insurance Hits 52-Week High: Can the Trend Carry on?
Shares of The Hanover Insurance Group, Inc. THG hit a new 52-week high of $131.44 on Aug 20, gaining traction from strong second-quarter 2018 earnings. With about 0.1 million shares exchanging hands in the last trading session, the stock finally closed at $130.44, rising 0.2%. The company’s return on equity has been an encouraging 9.1%, comparing favorably with the industry average of 5.9%.
Robust Q2 Results
Hanover Insurance Group’s bottom line of $2.20 outpaced the Zacks Consensus Estimate by 5.3% and also improved 20.2% year over year on the strength of its segmental performances.
Net premium written grew nearly 7% on the back better performances across Personal Lines, Small Commercial and Specialty businesses. Net investment income grew nearly 9% on higher cash flows from operations and an increased partnership income. Total revenues thus rose 7.6% year over year.
Combined ratio improved 550 basis points (bps) on a year-over-year basis to 93.9%.
Shares of the company have gained 3.9% since it posted solid second-quarter results, outperforming the industry’s increase of 3.7%. This Zacks Rank #2 (Buy) property and casualty insurer flaunts a commendable surprise history, surpassing estimates for five straight quarters with an average beat of 32.94%.
Why Should the Stock Continue the Bull Run?
The insurer remains focused on expanding in the markets offering attractive returns. Better pricing and prudent underwriting should continue to drive underwriting profitability.
Hanover Insurance Group’s concerted efforts to write high-quality new business should help it sustain the positive premium improvement momentum.
The company continues to benefit from an expense savings initiative, which it pursued last year. This was also reflected through 50 basis points lower expense ratio in Personal and Commercial Lines segment during the second quarter. The company intends to achieve 50 basis point improvements in domestic expense ratio in 2018.
Hanover Insurance Group has also taken an additional reinsurance cover of $75 million in excess of aggregate $300 million in loss. This in turn, lowers earnings volatility and enhances financial flexibility as well.
The insurer also has $121 million remaining under its $900 million share buyback authorization.
The Zacks Consensus Estimate for 2018 reflects an 81.4% staggering increase on 6.2% higher revenues. The consensus mark for top and bottom line per share in 2019 translates into a year-over-year climb of 4.5% and 4.7%, respectively. Over the past 30 days, the consensus estimate has been moved 0.6% north for 2018 and 2.9% up for 2019.
Other Stocks to Consider
Investors interested in property and casualty industry can also check out a few other top-ranked stocks like Arch Capital Group Ltd. ACGL, American Financial Group, Inc. AFG and Berkshire Hathaway Inc. BRK.B, each sharing the same bullish Zacks Rank of 2 with Hanover Insurance Group. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arch Capital provides property, casualty and mortgage insurance and reinsurance products worldwide. It delivered a 13.46% positive surprise in the earlier reported quarter.
American Financial provides property and casualty insurance products in the United States. Last reported quarter, it pulled off an 8.51% earnings surprise.
Berkshire Hathaway engages in insurance, freight rail transportation and utility businesses. It came up with a 22.91% beat in the previously reported quarter.
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