Third quarter 2026
Filed Oct 28, 2026The Hanover Reports Excellent Third Quarter Net Income and Operating Income of $4.86 and $5.15 per Diluted Share, Respectively; Third Quarter Net and Operating Return on Equity of 19.4% and 18.7%, Respectively
Underlying underwriting improved and operating EPS reached $5.15 per diluted share, while elevated catastrophe losses drove the GAAP combined ratio to 92.3% and reduced net income from the prior-year quarter.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net premiums written, three months ended September 30, 2026GAAP | $1.79B | – | 3.1% |
| Net premiums earned, three months ended September 30, 2026GAAP | $1.61B | – | – |
| Total revenues, three months ended September 30, 2026GAAP | $1.74B | – | – |
| Net investment income, three months ended September 30, 2026GAAP | $131.9M | – | 12.7% |
| Total net realized and unrealized investment losses, three months ended September 30, 2026GAAP | $14.1M | – | – |
| Loss and loss adjustment expense ratio, three months ended September 30, 2026GAAP | 61.4% | – | 1.6 points higher |
| Expense ratio, three months ended September 30, 2026GAAP | 30.9% | – | – |
| Combined ratio, three months ended September 30, 2026GAAP | 92.3% | – | – |
| Combined ratio, excluding catastrophes, three months ended September 30, 2026non-GAAP | 85.5% | – | – |
| Current accident year loss and LAE ratio, excluding catastrophes, three months ended September 30, 2026non-GAAP | 55.7% | – | 1.9 points below |
| Current accident year combined ratio, excluding catastrophes, three months ended September 30, 2026non-GAAP | 86.6% | – | – |
| Prior-year development ratio, three months ended September 30, 2026GAAP | (1.1)% | – | – |
| Catastrophe ratio, three months ended September 30, 2026GAAP | 6.8% | – | – |
| Catastrophe losses, three months ended September 30, 2026other | $109.7M | – | – |
| Net income, three months ended September 30, 2026GAAP | $172.6M | – | – |
| Net income per diluted share, three months ended September 30, 2026GAAP | $4.86 per diluted share | – | – |
| Operating income after income taxes, three months ended September 30, 2026non-GAAP | $183.1M | – | – |
| Operating income per diluted share, three months ended September 30, 2026non-GAAP | $5.15 per diluted share | – | – |
| Return on equity, three months ended September 30, 2026GAAP | 19.4% | – | – |
| Operating return on equity, three months ended September 30, 2026non-GAAP | 18.7% | – | – |
| Net premiums written, nine months ended September 30, 2026GAAP | $5.01B | – | 3.6% |
| Net premiums earned, nine months ended September 30, 2026GAAP | $4.78B | – | – |
| Total revenues, nine months ended September 30, 2026GAAP | $5.16B | – | – |
| Net investment income, nine months ended September 30, 2026GAAP | $378.4M | – | – |
| Combined ratio, nine months ended September 30, 2026GAAP | 91.8% | – | – |
| Combined ratio, excluding catastrophes, nine months ended September 30, 2026non-GAAP | 85.5% | – | – |
| Net income, nine months ended September 30, 2026GAAP | $551M | – | – |
| Net income per diluted share, nine months ended September 30, 2026GAAP | 15.43 per diluted share | – | – |
| Operating income after income taxes, nine months ended September 30, 2026non-GAAP | $560.8M | – | – |
| Operating income per diluted share, nine months ended September 30, 2026non-GAAP | 15.70 per diluted share | – | – |
| Book value per share, September 30, 2026GAAP | $99.69 | (5.4)% | – |
| Book value per share, excluding net unrealized depreciation on fixed maturity investments, net of tax, September 30, 2026non-GAAP | $114.26 | 2.7% | – |
| Total pre-tax earned yield on the investment portfolio, third quarter of 2026other | 4.60% | – | – |
| Average pre-tax earned yield on fixed maturities, third quarter of 2026other | 4.58% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Core CommercialGrowth of 2.8% in small commercial and 6.7% in middle market; renewal price increases averaged 7.4%, including average rate increases of 6.1%. | $648.9 million net premiums written | – | 4.6% |
| SpecialtyRenewal price increases averaged 4.3%, including average rate increases of 1.9%. | $391.6 million net premiums written | – | 3.3% |
| Personal LinesThe increase was primarily due to the impact of renewal price increases and higher new business; renewal price increases averaged 8.7%, including average rate increases of 4.9%. | $752.0 million net premiums written | – | 1.7% |
Capital returns
- The company repurchased approximately 386,000 shares of common stock in the third quarter of 2026, totaling approximately $86 million.
- Year-to-date through October 26th, the company has repurchased approximately 1,334,000 shares, totaling approximately $263 million.
- The company has approximately $546 million of remaining capacity under its existing share repurchase authorization.
- Ordinary quarterly cash dividends contributed to the decline in book value per share from June 30, 2026.
What drove it
- Total current accident year loss and LAE ratio excluding catastrophes improved to 55.7% from 57.6%.
- Specialty current accident year combined ratio excluding catastrophes improved to 84.6% from 86.0%, with lower-than-expected property losses.
- Personal Lines current accident year combined ratio excluding catastrophes improved to 81.9% from 85.8%, driven by earned pricing outpacing loss trends and benign property claims frequency.
- Net investment income increased 12.7%, driven by continued investment of cashflows from operations, higher earned yields on the fixed maturity investment portfolio, and higher limited-partnership investment income.
- Core Commercial expense ratio decreased by 1.0 point to 32.7%, reflecting fixed cost leverage and efficiency gains.
Concerns
- Catastrophe losses were $109.7 million, or 6.8 points of the combined ratio, versus a catastrophe ratio of 3.0% in the prior-year quarter.
- Core Commercial combined ratio increased to 100.5% from 97.3%, as catastrophe losses rose to $45.3 million from $17.8 million.
- Net income declined to $172.6 million from $178.7 million, and operating income after income taxes declined to $183.1 million from $185.6 million.
- Net realized and unrealized investment losses recognized in earnings were $14.1 million, compared to $9.0 million in the third quarter of 2025.
- Book value per share declined 5.4% from June 30, 2026 as strong earnings were more than offset by increased unrealized losses on fixed maturities, share repurchases and ordinary quarterly cash dividends.
What to watch
- Catastrophe losses and their effect on the GAAP combined ratio.
- Whether renewal price increases continue to outpace loss trends, particularly in Personal Lines.
- Core Commercial profitability following its 100.5% combined ratio in the quarter.
- The evolution of net unrealized losses on the fixed maturity portfolio and book value per share.
- Capital allocation under the remaining approximately $546 million share repurchase authorization.
Balance sheet and cash flow
- The company held $11.2 billion in cash and invested assets at September 30, 2026.
- Total investments were $10,671.4 million at September 30, 2026, compared to $10,382.7 million at December 31, 2025.
- Cash and cash equivalents were $506.3 million at September 30, 2026, compared to $1,122.7 million at December 31, 2025.
- Short-term debt was $50.1 million and long-term debt was $794.1 million at September 30, 2026.
- Total shareholders' equity was $3,441.5 million at September 30, 2026, compared to $3,571.5 million at December 31, 2025.
- Operating insurance company’s statutory capital and surplus was $3.70 billion at September 30, 2026, compared to $3.54 billion at June 30, 2026.
- Net unrealized losses on the fixed maturity portfolio were $636.1 million before income taxes at September 30, 2026, compared to $259.5 million at June 30, 2026.
- Fixed maturities and cash represented approximately 93% of the investment portfolio, and approximately 95% of the fixed maturity portfolio is rated investment grade.
Analysis
The third quarter showed stronger underlying insurance profitability despite a heavier catastrophe burden. Net premiums written increased 3.1% to $1,792.5 million, while the current accident year loss and LAE ratio excluding catastrophes improved to 55.7% from 57.6%. The GAAP combined ratio nevertheless increased to 92.3% from 91.1% because the catastrophe ratio rose to 6.8% from 3.0%. Excluding catastrophes, the combined ratio improved to 85.5% from 88.1%.
Segment mix remained favorable. Specialty delivered an 84.0% combined ratio and an 80.6% combined ratio excluding catastrophes, with operating income before taxes increasing to $88.1 million from $78.2 million. Personal Lines operating income before taxes rose to $103.6 million from $101.1 million as its current accident year combined ratio excluding catastrophes improved 3.9 points to 81.9%. Core Commercial premiums increased 4.6%, but operating income before taxes fell to $55.5 million from $65.1 million and its combined ratio rose to 100.5%, reflecting $45.3 million of catastrophe losses.
Investment income was a meaningful earnings support. Net investment income increased 12.7% to $131.9 million, supported by higher earned yields, operating cashflows and partnership income. The total pre-tax earned yield on the investment portfolio increased to 4.60% from 4.31%. These gains were partly offset in GAAP income by $14.1 million of net realized and unrealized investment losses, compared with $9.0 million in the prior-year quarter. Net income declined to $172.6 million, while operating income per diluted share increased to $5.15 from $5.09.
Capital generation supported approximately $86 million of third-quarter repurchases and approximately $263 million repurchased year-to-date through October 26th. Statutory capital and surplus increased to $3.70 billion from $3.54 billion at June 30, 2026. However, book value per share declined to $99.69 from $105.40 at June 30, 2026 as net unrealized losses on fixed maturities increased to $636.1 million before income taxes from $259.5 million. Book value per share excluding net unrealized depreciation on fixed maturity investments, net of tax increased 2.7% to $114.26.
The release did not provide quantitative forward guidance. Management emphasized confidence in its outlook, continued technology and AI investment, underwriting selectivity and capital allocation priorities. The key reported balance is between improved underlying loss ratios, pricing and investment income against catastrophe volatility and the mark-to-market pressure on fixed-maturity securities.
Management, verbatim
With operating return on equity of 18.7% and record third quarter operating earnings per share of $5.15, our results reflect excellent underwriting execution and the benefits of our past portfolio actions.
John C. Roche, president and chief executive officer at The Hanover
We are very pleased with our third quarter performance highlighted by nearly two points of improvement in our current accident year ex-catastrophe loss ratio, favorable reserve development, continued growth in net investment income, and the strength of our capital position.
Jeffrey M. Farber, executive vice president and chief financial officer at The Hanover
The consistent capital generation of our business enabled us to repurchase approximately $86 million of stock during the quarter, totaling $263 million year-to-date through October 26th.
Jeffrey M. Farber, executive vice president and chief financial officer at The Hanover
Not in the filing
stated, not guessed- Quantitative forward revenue, earnings, margin, expense, tax-rate or capital-return guidance
- Previous-release outlook for comparison with actual results
- Operating cash flow
- Free cash flow
- Cash dividend amount
- Gross margin
- Quarterly total debt comparison with the prior-year quarter
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.