THG — The Hanover Insurance Group, Inc.

Summary of THG Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Operating Earnings Per Share: Achieved record levels, contributing to an all-time high for the full year.
• Operating Return on Equity (ROE): 23.1% for Q4 and 20% for the full year, marking significant performance improvements.
• Combined Ratio: Q4 combined ratio at 89%, with a full-year ratio of 91.6%, improving over 3 points year-over-year. Excluding catastrophes, the combined ratio was 87.1%.
• Net Written Premium Growth: Personal Lines grew by 4.4% in Q4 and 3.7% for the full year, while Core Commercial saw a 3.6% growth for the year.
• Net Investment Income: Increased by 24.9% in Q4 and 22% for the year, totaling $454.4 million.

2. Strategic Updates and Business Highlights

• Personal Lines: Focused on profitability through pricing adjustments and portfolio management, with strong performance in 11 key states. Retention rates remained stable, and new business momentum was noted.
• Core Commercial: Continued solid performance with disciplined pricing and active portfolio management. Small Commercial segment showed strong growth with double-digit new business growth.
• Specialty Segment: Consistent profitability through targeted risk selection and expertise-based underwriting. Notable growth in management liability and excess & surplus lines.
• Technology Investments: Continued enhancements in underwriting efficiency and operational capabilities, including AI-powered tools for submission triage.

3. Forward Guidance and Outlook

• 2026 Expectations: Consolidated net written premium growth anticipated to accelerate to mid-single digits. Combined ratio (excluding catastrophes) expected to improve to 88%-89%. Expense ratio projected at 30.3%.
• Investment Income: Expected growth in the mid- to upper single digits compared to 2025.

4. Bad News, Challenges, or Points of Concern

• Competitive Pressures: Increased competition noted in both personal auto and middle market segments, with concerns about pricing normalization impacting margins.
• Market Conditions: Some softening in property market conditions, particularly in middle market, which could affect growth and profitability.
• Claims Environment: Rising severity in auto liability claims and potential increases in litigation costs remain concerns, although management believes trends are stabilizing.

5. Notable Q&A Insights

• Claims Frequency: Management confirmed a decline in claims frequency across personal lines, attributed to improved customer behavior and safety technology.
• Agency Partnerships: The dialogue with agents is intensifying, focusing on strategic collaboration and data-driven insights to enhance efficiency and retention.
• Reinstatement Premiums: Clarified that reinstatement premiums were driven by property large loss exposure, not catastrophes.
• E&S Demand: Continued robust submission flows in the E&S market, with no signs of abatement, indicating strong growth potential.

This summary encapsulates THG's strong financial performance in Q4 2025, strategic initiatives across its business segments, and a cautiously optimistic outlook for 2026, while also addressing competitive challenges and market dynamics.