Why You Should Stay Invested in Hanover Insurance (THG) Stock

Zacks Equity Research
·3-min read

The Hanover Insurance Group’s THG growth in the Core Commercial and Specialty segments, stable retention, better pricing, strong market presence and solid capital position poise it well for growth.

Shares have gained 6.5% year to date, compared with the industry’s increase of 16.6%. The insurer carries a Zacks Rank #3 (Hold).

It has a VGM Score of B.

 

Zacks Investment Research
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Return on Equity

Hanover Insurance believes that it is well-positioned to achieve a long-term return on equity target of 14% or higher by 2026 on better rates and prudent cost management.

Optimistic Growth Projection

The Zacks Consensus Estimate for THG’s 2024 earnings is pegged at $10.67 per share, indicating an increase of 584% on 4.5% higher revenues of $6.3 billion. The Zacks Consensus Estimate for 2025 earnings is pegged at $13.18 per share, indicating an increase of 23.5% on 6.2% higher revenues of $6.7 billion.   

It has a Growth Score of B.

Growth Drivers

Focus on pricing segmentation and mix management, rate increase, as well as an emphasis on growth in target states, product lines and industry classes in the middle market should continue to benefit Hanover Insurance. The company has gradually transformed into a more balanced and differentiated property and casualty franchise.

Hanover Insurance is a leading carrier for specialty focus small to mid-sized clients and is poised to deliver about 10% CAGR over the next five years. The insurer envisions being a premier P&C franchise in the independent agency channel. Capitalizing on the opportunities the $45 billion market offers, the insurer nearly doubled written premiums in Specialty over the last 10 years using organic and inorganic means.

Prudent underwriting, data, analytic tools and technology helped the company lower coastal exposure and enhance pricing for catastrophes, eventually helping it build a diversified book of business. The insurer’s claims strategy implementation should poise it to deliver a 130-basis point reduction in the loss adjustment expense ratio by 2026 while generating $2 billion in premium growth by the same time.

In tandem with industry trends, THG continues to invest in technology to upgrade its front-end capabilities.

Impressive Dividend History

Banking on operational expertise, Hanover Insurance has been hiking dividends for the last 17 years, in addition to paying special dividends .

Stocks to Consider

Some top-ranked stocks from the insurance industry are HCI Group, Inc. HCI, Palomar Holdings PLMR and ProAssurance PRA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

HCI Group earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. In the past year, HCI has rallied 76.6%.

The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies 57.6% and 4.3% year-over-year growth, respectively.

Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 53.4%.

The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 25.8% and 16.1% year-over-year growth, respectively.

ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has surged 10.9%.

The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 371.4% and 71.6% year-over-year growth, respectively.

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ProAssurance Corporation (PRA) : Free Stock Analysis Report

The Hanover Insurance Group, Inc. (THG) : Free Stock Analysis Report

HCI Group, Inc. (HCI) : Free Stock Analysis Report

Palomar Holdings, Inc. (PLMR) : Free Stock Analysis Report

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