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The Hanover Insurance Group’s THG shares are trading at a premium to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.93X is higher than the industry average of 1.53X.
The company has a Value Score of B. This style score helps find the most attractive value stocks.
THG is a leading carrier with a specialty focus on small-to-midsize clients. It operates in a total addressable $78 billion market and has a market capitalization of $5.5 billion. The average volume of shares traded in the last three months was 0.2 million.
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The stock is expensive compared with other players like CNA Financial Corporation CNA and MetLife Inc. MET, which are trading at a discount to the industry average.
THG: An Outperformer?
THG shares have gained 3.4% in the past three months, in contrast to the industry’s decrease of 1% and the Finance sector’s decrease of 5.2%. However, it has lagged the S&P 500 composite’s rise of 4% in the same time frame.
Continued strong performance of Core Commercial and Specialty segments, stable retention, better pricing, strong market presence and a solid capital position drive shares.
THG Vs Industry, Sector & S&P in 3 Months
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THG shares are trading well above the 50-day moving average, indicating a bullish trend.
THG’s Return on Capital
THG’s return on equity has also improved over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12-month ROE was 15.5%, which compared favorably with the industry average of 7.6%.
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.
Return on invested capital has improved over the last few quarters, reflecting THG’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 7.5%, which compared favorably with the industry average of 5.8%.
Optimistic Growth Instills Confidence in THG Shares
One of the three analysts covering the stock has raised estimates for 2024, while there has been no change for 2025 over the past seven days. The consensus estimate for 2024 has moved 2 cents north in the past seven days.
The Zacks Consensus Estimate for 2024 implies a 623.7% year-over-year increase, while the same for 2025 suggests a 19.8% increase. The stock has a Growth Score of B.
Factors Favoring Hanover Insurance
Hanover Insurance has evolved as a more balanced and differentiated property and casualty franchise and now envisions to be a premier P&C franchise in the independent agency channel and targets delivering about 10% CAGR in Specialty written premiums over the next five years.
A prudent pricing segmentation, rate increases and emphasis on growth in target states, product lines and industry classes in the middle market should help it grow and achieve goals.
Hanover Insurance has built a diversified book of business banking on prudent underwriting, data, analytic tools and technology, which, in turn, has lowered coastal exposure and enhanced pricing for catastrophes. THG also continues to invest in technology to upgrade its front-end capabilities.
THG claims strategy implementation should help it lower the loss adjustment expense ratio by 130 basis points in 2026 while generating $2 billion in premium growth by the same time frame. It expects 2024 expense ratio to be at or near 30.9 and 30.5 in 2025.