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A.M. Best Affirms Ratings of The Hanover Insurance Group, Inc. and Its Subsidiaries

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A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of the subsidiaries of the parent holding company, The Hanover Insurance Group, Inc. (THG)(NYSE:THG) , collectively referred to as Hanover Insurance Group Property and Casualty Companies (The Hanover). Additionally, A.M. Best has affirmed the ICR of “bbb” and all existing debt ratings of THG. The outlook for all ratings is stable. All above named companies are headquartered in Worcester, MA. (Please see below for a detailed listing of the companies and ratings.)

The ratings reflect The Hanover’s solid risk-adjusted capitalization stemming from favorable operating earnings and prudent capital management. Exposure management and re-underwriting efforts over the past several years have significantly improved geographic and product diversification, resulting in enhanced profitability and earnings stability. Underwriting results in the past two years also partially benefited from relatively milder weather patterns compared with the historic catastrophic weather-related losses in 2011 and 2012. The favorable underwriting results, coupled with favorable investment returns, have enabled the group to substantially increase surplus by 12% in 2014, which follows a 20% increase in surplus in 2013. In addition, the ratings reflect The Hanover’s sound business profile and diversified product offerings, especially in the commercial and specialty segments of its book of business. Furthermore, the subsidiaries of THG benefit from its moderate financial leverage and strong financial flexibility.

Partially offsetting these positive rating factors are The Hanover’s comparatively high underwriting leverage and pressure on underwriting results caused by significant weather-related losses, as witnessed especially in 2011 and 2012 when it posted combined ratios of 106% and 109%, respectively. In response, The Hanover undertook various risk management actions to mitigate its exposure to catastrophe losses, including initiatives to significantly improve its business profile by further diversifying its lines of business by de-emphasizing catastrophe prone property business and increasing its writings of casualty and specialty lines and segments. It also has reduced its historical geographic concentration in the Northeast, particularly in areas impacted by Superstorm Sandy in 2012, as well as the Midwest, which were impacted by tornado/hail activity in 2011, by emphasizing further expansion in Western states. Additionally, The Hanover has undertaken several rate actions and implemented targeted exposure reductions in localized areas using portfolio optimization tools.

Partly as a result of these initiatives, The Hanover’s underlying book of business, excluding catastrophe results, continues to improve as witnessed by a significantly improved combined ratio in the past two years. However, any future positive movement in its current ratings and/or outlook will require sustained improvement in operating performance in the form of profitable underwriting results (which includes catastrophe and other weather-related losses), as well as maintenance of favorable risk-adjusted capitalization levels. Conversely, deterioration in The Hanover’s underwriting performance and/or unfavorable operating performance coupled with decreased levels of risk-adjusted capitalization could result in potential negative pressure on the ratings and/or outlook.

The FSR of A (Excellent) and the ICRs of “a” have been affirmed for the following subsidiaries of The Hanover Insurance Group, Inc.:

  • AIX Specialty Insurance Company
  • Allmerica Financial Alliance Insurance Company
  • Allmerica Financial Benefit Insurance Company
  • Campmed Casualty & Indemnity Company, Inc.
  • Citizens Insurance Company of America
  • Citizens Insurance Company of Ohio
  • Citizens Insurance Company of the Midwest
  • Citizens Insurance Company of Illinois
  • The Hanover American Insurance Company
  • The Hanover Insurance Company
  • The Hanover Lloyd’s Insurance Company
  • The Hanover New Jersey Insurance Company
  • Massachusetts Bay Insurance Company
  • NOVA Casualty Company
  • Professionals Direct Insurance Company
  • Verlan Fire Insurance Company

The following debt ratings have been affirmed:

The Hanover Insurance Group, Inc.-
– “bbb” on $200 million 7.5% senior unsecured fixed rate notes, due 2020 (of which $102.4 million remains outstanding)
– “bbb” on $300 million 6.375% senior unsecured fixed rate notes, due 2021
– “bbb” on $199.5 million 7.625% senior unsecured debentures, due 2025 (of which $81.1 million remains outstanding)
– “bb+” on $166 million 8.207% subordinated deferrable debentures, due 2027 (of which $59.7 million remains outstanding)
– “bb+” on $175 million 6.350% subordinated deferrable debentures, due 2053

The following indicative ratings under the shelf registration have been affirmed:

The Hanover Insurance Group, Inc.-
– “bbb” on senior unsecured debt
– “bb+” on subordinated debt
– “bb+” on preferred stock

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at

Key insurance criteria reports utilized include:

  • Understanding BCAR for Property/Casualty Insurers
  • Risk Management and the Rating Process for Insurance Companies
  • Catastrophe Analysis in A.M. Best Ratings
  • Rating Members of Insurance Groups
  • Rating Lloyds Syndicates
  • The Treatment of Terrorism Risk in the Rating Evaluation
  • Analyzing Insurance Holding Company Liquidity
  • Insurance Holding Company and Debt Ratings
  • Equity Credit for Hybrid Securities
  • Understanding Universal BCAR

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit

Copyright (c) 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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