Hanover’s Flywheel
The Hanover held its Q2 2026 earnings call on July 29. Here are the key takeaways.
Hanover is using AI to prioritize E&S submissions
The insurer’s proprietary Triage Pro tool helps E&S underwriters identify the most attractive submissions and respond more quickly.
“As an example, in E&S, our proprietary AI-driven tool, Triage Pro helps underwriters prioritize the most attractive submissions and be more responsive to the best opportunities.”
Technology is supporting higher rates and retention
Hanover said its technology allows small-commercial underwriters to segment renewals more precisely and process more business without manual intervention.
Small commercial grew 6%
Small-commercial premium increased 6%, while retention remained stable at approximately 86%. Hanover has expanded the no-touch submission flow available through its TAP Sales platform.
Core commercial grew 7.2%
Core-commercial premium growth accelerated from 4.3% in the first quarter to 7.2% in the second quarter. Middle-market premium increased 9.4%, or approximately 7% after excluding timing and nonrecurring items.
Hanover sees a technology and distribution flywheel
Management attributed its commercial-lines performance to the combination of technology, operating improvements and strong relationships with agents.
“You kind of put all those together, and we feel like there’s a flywheel of performance that helps us outperform.”
Technology should lower the expense ratio
Incoming CEO Dick Lavey believes Hanover can use technology to scale personal lines and improve the expense ratio over time. The company plans to provide more details at its September 17 investor day.
“You can expect some improvement through all of the investments that we’re making.”
Hanover is moving upmarket in personal lines
The insurer is shifting its personal-lines portfolio toward higher-value customers through its Prestige offering, which generally covers homes with replacement values between $750,000 and $3 million.
Prestige is approaching $350 million in premium
The Prestige book is nearing $350 million and is growing faster than Hanover’s broader personal-lines portfolio. Management said these customers have higher retention and less sensitivity to price.
“Frankly, there’s less price elasticity up there.”
Hanover isn’t seeing its bundled customers leave
Management said nearly 90% of its personal-lines customers have common effective dates and close to 80% face a single shopping event. Despite greater competition from direct insurers, Hanover has not seen evidence of agents losing these bundled accounts.
“We’re watching for that unbundling and agents losing business, and we’re not seeing evidence of that.”
Personal-lines pricing remains strong
Renewal pricing increased 7.1% in auto, 10.9% in homeowners and approximately 19% in umbrella. Hanover said pricing remains above long-term loss-cost trends.
Personal lines produced an 81.9% underlying combined ratio
The current accident-year combined ratio excluding catastrophes improved 2.9 points to 81.9%, driven by earned pricing and favorable claim frequency.
Higher deductibles are reducing small claims
Hanover believes deductible changes contributed to fewer small homeowners claims in both catastrophe and non-catastrophe results.
“We continue to attribute some of the benefit we’ve seen in recent quarters to deductible changes leading to fewer small claims.”
Hanover is preparing for casualty uncertainty
The company has increased its current casualty loss assumptions over several quarters. Management wants its selections to remain above the actuarial central estimate due to uncertainty surrounding liability trends and legal-system abuse.
The insurer is less exposed to property softening
Hanover focuses primarily on smaller commercial accounts and the lower end of the middle market, where management sees less pressure from the broader softening in commercial property.
Specialty industrial growth was deliberately restrained
Production in Hanover Specialty Industrial remained subdued because of its exposure to the softening property market. The company said it is reducing production where pricing is under pressure and reallocating capital toward more attractive opportunities.
Professional and executive lines are improving
Hanover reported healthy growth in professional and executive lines, supported by stronger management-liability production and faster underwriting response times. Surety also produced strong growth.
The property-catastrophe program now exhausts at $2.05 billion
Hanover renewed its property reinsurance treaties while maintaining a $200 million retention. Its catastrophe occurrence program provides coverage up to $2.05 billion for covered perils.
Hanover issued a $150 million catastrophe bond
Strong investor demand allowed Hanover to increase the size of its new catastrophe bond to $150 million, lower its pricing guidance and issue the bond at the bottom of the revised range.
Reinsurance costs came in below expectations
The company achieved substantial risk-adjusted cost reductions on its loss-free catastrophe program. It also expanded its property per-risk limit by $25 million, replacing facultative coverage while reducing its participation.
Capital is accumulating quickly
Hanover said capital is building rapidly because of strong profitability and moderate premium growth. It repurchased $55 million of shares during the second quarter and recently authorized a new $700 million repurchase program.
Hanover is running ahead of its combined-ratio plan
First-half results were approximately two points better than the trajectory assumed in Hanover’s original combined-ratio guidance. The company does not expect to give back that outperformance but declined to update its guidance during the year.
Transformational M&A is unlikely
Hanover continues to consider acquisitions but does not expect to pursue a large transformational transaction. Management is more interested in smaller, capital-light deals that add products, capabilities or talent.
“Some of the smaller capital-light inorganic opportunities to expand capability, product, talent are very much in that capability.”
Hanover has struggled to find suitable acquisitions
Management said it has spent much of the past decade reviewing opportunities but has struggled to find businesses offering the right strategic fit, culture and price.
“The last decade, we’ve been frustrated, frankly, that we haven’t found things that align with our strategy, but also could come to us at an appropriate price or would have a cultural fit. So that pursue is going to continue. I think going into the future, I believe there are going to be more and more opportunities that present themselves in the marketplace and our company is very capable of not only assessing those opportunities, but executing on the ones that we find to be really strategic. So time will tell how much of that actually ends up being part of our next chapter, but I think it’s certainly part of our regular pursuit.”
The next CEO plans to stay the course
Dick Lavey will succeed Jack Roche as CEO in January. He signaled continuity in Hanover’s strategy, with greater emphasis on innovation, technology and scaling the business.
“You’d expect us to stay the course on a strategy that’s working, but layer in some important elements like innovation and capability to help scale the company.”
