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Best’s News & Research Service - May 25, 2017 02:06 PM (EDT)

A.M. Best Affirms Credit Ratings of The Hanover Insurance Group, Inc. and Its Subsidiaries

  • May 25, 2017 02:06 PM (EDT)
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Oldwick //BestWire// - A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the subsidiaries of the parent holding company, The Hanover Insurance Group, Inc. (THG) [NYSE: THG], collectively referred to as Hanover Insurance Group Property and Casualty Companies (The Hanover). Additionally, A.M. Best has affirmed the Long-Term ICR of “bbb” and all Long-Term Issue Credit Ratings (Long-Term IR) of THG. The outlook of these Credit Ratings (ratings) is stable. All above named companies are headquartered in Worcester, MA. (See below for a detailed listing of the companies and ratings.)

The ratings reflect The Hanover’s solid risk-adjusted capitalization, stemming from favorable operating earnings and prudent capital management. Exposure management and re-underwriting have significantly improved geographic and product diversification, resulting in profitability and earnings stability. Underwriting results in recent years also have benefited partially from relatively milder weather patterns compared with the historical catastrophic, weather-related losses during earlier periods. The near break-even underwriting results, coupled with favorable investment returns, have enabled the group to substantially increase net income in recent years. In addition, the ratings reflect The Hanover’s sound business profile and diversified product offerings, especially within its commercial and specialty lines of business. Furthermore, ownership of Chaucer, a Lloyd’s market syndicate, has enabled The Hanover to further diversify its risk exposures, while creating a global platform for marketing and cross-selling opportunities for its products, thus potentially achieving greater consistency in its operating performance and improving long-term earnings and risk-adjusted capitalization. Lastly, the subsidiaries of THG benefit from its moderate financial leverage and financial flexibility.

Partially offsetting these positive rating factors are The Hanover’s comparatively high underwriting leverage and above-average expense position. In addition, the group’s underwriting performance was impacted negatively by reserve strengthening in 2016 to more fully reflect the increase in average claim severity across multiple lines, relating to prior accident years. However, in recent years, the generally favorable operating results were due primarily to exposure management and re-underwriting efforts, along with milder weather patterns. Additionally, The Hanover continues to take rate actions where needed and has implemented targeted exposure reductions in localized areas using portfolio optimization tools.

Partly as a result of these initiatives, The Hanover’s underlying book of business continues to evolve as evidenced by the generally stable combined ratios reported in recent years. Future positive rating actions could occur if the current level of favorable risk-adjusted capitalization can be sustained and underwriting results improve. However, the outlooks may be changed to negative and pressure put on the ratings if risk-adjusted capitalization weakens or operating performance deteriorates.

The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed for the following subsidiaries of The Hanover Insurance Group, Inc.:


  • AIX Specialty Insurance Company

  • Allmerica Financial Alliance Insurance Company

  • Allmerica Financial Benefit Insurance Company

  • Campmed Casualty & Indemnity Company, Inc.

  • Citizens Insurance Company of America

  • Citizens Insurance Company of Ohio

  • Citizens Insurance Company of the Midwest

  • Citizens Insurance Company of Illinois

  • The Hanover American Insurance Company

  • The Hanover Atlantic Insurance Company, Ltd.

  • The Hanover Insurance Company

  • The Hanover Lloyd’s Insurance Company

  • The Hanover New Jersey Insurance Company

  • Massachusetts Bay Insurance Company

  • NOVA Casualty Company

  • Verlan Fire Insurance Company

The Long-Term ICR of “bbb” and the following Long-Term IRs of The Hanover Insurance Group, Inc. have been affirmed:

The Hanover Insurance Group, Inc.

— “bbb” on $199.5 million 7.625% senior unsecured debentures, due 2025 (of which $62.6 million remains outstanding)

— “bbb” on $375.0 million 4.5% senior unsecured fixed rate notes, due 2026

— “bb+” on $166 million 8.207% subordinated deferrable debentures, due 2027 (of which $59.7 million remains outstanding)

— “bb+” on $175 million 6.350% subordinated deferrable debentures, due 2053

The following indicative Long-Term IRs under the shelf registration have been affirmed:

The Hanover Insurance Group, Inc.

— “bbb” on senior unsecured debt

— “bb+” on subordinated debt

— “bb+” on preferred stock

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.



United States Financial Strength Lloyds Press Release Insurance Issue Credit Rating Massachusetts Property And Casualty Insurers Issuer Credit Rating Best's Credit Rating Action


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