AM Best Affirms Ratings for The Hanover Insurance Group and Its Insurance Subsidiaries
AM Best has reaffirmed the financial strength and credit ratings of The Hanover Insurance Group, Inc. and its property and casualty insurance subsidiaries, maintaining a stable outlook across the organization. The ratings agency cited the insurer’s strong balance sheet, improving operating performance, favorable business profile and effective enterprise risk management as key factors supporting the ratings.
The Hanover Insurance Group, Inc. is listed on the New York Stock Exchange under the ticker symbol THG, while the company and its principal subsidiaries are headquartered in Worcester, Massachusetts.
AM Best affirmed a Financial Strength Rating (FSR) of A (Excellent) and Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) for The Hanover’s property and casualty insurance subsidiaries. The ratings of the parent company, The Hanover Insurance Group, Inc., were also affirmed, including a Long-Term ICR of “bbb+” (Good).
The outlook for all of these ratings remains stable, indicating that AM Best does not currently anticipate significant changes to the company’s credit profile or financial strength over the near term.
Strong Balance Sheet Supports Ratings
A major factor behind the reaffirmed ratings is The Hanover’s balance sheet strength, which AM Best continues to assess at its strongest level.
The company benefits from very strong risk-adjusted capitalization, as measured by AM Best’s Best’s Capital Adequacy Ratio, commonly referred to as BCAR. Strong capitalization provides an important financial cushion for an insurance organization because it enables the company to absorb unexpected losses and maintain its obligations to policyholders and other stakeholders.
The Hanover has also generated organic surplus growth over the past five years. This improvement has helped reinforce its capital position and provides additional support for the company’s current ratings.
AM Best also highlighted the company’s stable loss reserve position and favorable reserve development patterns. For insurers, the adequacy of loss reserves is a critical component of financial strength because insufficient reserves can create significant pressure on earnings and capital when claims ultimately develop.
The Hanover’s favorable reserve trends therefore represent an important positive factor in the overall balance sheet assessment.
Reinsurance Adds Financial Protection
The Hanover also benefits from a comprehensive reinsurance program.
Reinsurance allows an insurer to transfer a portion of its potential exposure to other insurance companies or reinsurers. This can help limit the financial impact of large or unexpected losses, particularly from catastrophic events.
AM Best considers The Hanover’s reinsurance arrangements to be a positive factor supporting its overall balance sheet strength.
The company also benefits from additional financial flexibility provided through The Hanover Insurance Group, Inc. This flexibility gives the organization another source of financial support and contributes to its ability to manage capital requirements and unexpected market developments.
However, these strengths are partially offset by relatively higher premium and underwriting leverage.
Higher Underwriting Leverage Remains a Consideration
While The Hanover maintains strong capitalization, AM Best noted that some of the company’s gross and net leverage measures remain comparatively higher than those of the commercial casualty industry composite.
Higher premium and underwriting leverage can increase an insurer’s exposure to adverse claims experience because a larger volume of business is supported by a given level of capital.
AM Best therefore continues to monitor The Hanover’s leverage metrics as part of its overall assessment.
The company also faces geographic exposure to natural catastrophes and terrorism. Because The Hanover operates across regions that can experience severe weather and other catastrophic events, the potential for concentrated losses remains an important risk consideration.
Nevertheless, AM Best believes the company’s strong capital position, reinsurance program and financial flexibility provide meaningful protection against these risks.
Financial Leverage Remains Manageable
The Hanover’s financial leverage remains within levels considered appropriate for its current ratings.
Another positive factor is the company’s strong interest coverage.
Strong interest coverage means that the organization has sufficient operating earnings and cash flow to meet interest obligations associated with its debt. This is important for credit quality because it reduces the risk that debt servicing requirements could place excessive pressure on the company’s financial resources.
AM Best therefore considers The Hanover’s financial leverage to be manageable in relation to its current credit ratings.
Operating Performance Continues to Improve
AM Best assessed The Hanover’s operating performance as adequate.
Although the company’s longer-term results remain affected by weaker performance earlier in the five-year evaluation period, more recent results show meaningful improvement.
The insurer experienced weaker results during 2022 and 2023, when severe convective storms across multiple states contributed to significant underwriting losses. Severe convective storms can generate substantial claims from hail, wind and other weather-related damage, placing pressure on insurers that have exposure across affected regions.
These losses negatively affected The Hanover’s five-year pre-tax return-on-revenue measures, which continue to trail those of the commercial casualty industry composite when viewed over the longer period.
However, the company has taken several steps to improve profitability and create more sustainable operating results.
Management Initiatives Drive Improvement
The Hanover has implemented management initiatives designed to improve underwriting performance and maintain those improvements through different market cycles.
The company has benefited from sustained rate increases across portions of its business. Higher insurance rates can help insurers offset increasing claims costs, inflation and other pressures affecting underwriting profitability.
The Hanover has also benefited from favorable reserve releases associated with prior-year losses.
Reserve releases occur when an insurer determines that previously established reserves are more than sufficient to cover claims and related expenses. When reserves are released, the excess can contribute positively to current-period earnings.
Together, pricing improvements, management initiatives and favorable reserve development have contributed to the company’s improving financial results.
Stronger 2025 Performance
The Hanover’s performance in 2025 represented an important improvement in its recent financial history.
AM Best noted that the company’s pre-tax return-on-revenue measures during 2025 were in line with the commercial casualty industry composite. This improvement was supported by the largest pre-tax operating income reported by the company during the most recent five-year period.
The stronger performance reflected improvements in both underwriting profitability and net investment income.
Investment income is an important component of profitability for property and casualty insurers because insurers typically invest premiums received from policyholders before claims are paid.
The company also benefited from a decline in natural catastrophe losses during the period. Lower catastrophe-related losses helped reduce pressure on underwriting results and contributed to improved overall profitability.
The combination of better underwriting performance and stronger investment income provides a more balanced earnings profile for The Hanover.
Diversified Business Profile
AM Best also cited The Hanover’s favorable business profile as a key rating factor.
The company has a diversified product portfolio spanning personal insurance, commercial insurance and specialty coverage. This diversification helps reduce dependence on any single line of business.
Commercial and specialty insurance remain particularly important components of The Hanover’s strategy. The company has established strong positions in several targeted niche markets, supported by an experienced management team.
Its broad range of insurance offerings allows the organization to serve different customer groups and market segments while maintaining a diversified source of premium revenue.
Strong Independent Agency Relationships
The Hanover’s distribution model also contributes to its favorable business profile.
The company has developed strong relationships with independent insurance agencies. These agency partnerships provide an important distribution channel and help The Hanover reach customers across its targeted markets.
Independent agencies can offer customers products from multiple insurance providers, making strong agency relationships particularly important for insurers competing for business.
The Hanover’s established relationships with its agency partners support its ability to expand in selected markets and maintain its position in targeted niches.
Enterprise Risk Management
AM Best also highlighted The Hanover’s enterprise risk management, or ERM, program.
The insurer has established an ERM framework designed to identify, monitor and manage risks throughout the organization.
AM Best considers the company’s ERM program appropriately designed and effectively embedded within its operations.
The program is considered suitable for the size, scope and complexity of The Hanover’s business.
The ability to identify and monitor key risks and establish appropriate risk tolerances is particularly important for a property and casualty insurer exposed to underwriting, investment, catastrophe, regulatory and operational risks.
AM Best said The Hanover has well-established capabilities for monitoring key risks and tolerances, providing additional support for the company’s overall credit profile.
Ratings Affirmed for Major Insurance Subsidiaries
AM Best affirmed the A (Excellent) Financial Strength Ratings and “a+” (Excellent) Long-Term Issuer Credit Ratings for a broad group of The Hanover’s property and casualty subsidiaries.
The companies receiving affirmed ratings include AIX Specialty Insurance Company, Allmerica Financial Alliance Insurance Company, Allmerica Financial Benefit Insurance Company and Campmed Casualty & Indemnity Company, Inc.
The ratings were also affirmed for Citizens Insurance Company of America, Citizens Insurance Company of Ohio, Citizens Insurance Company of the Midwest and Citizens Insurance Company of Illinois.
Other subsidiaries receiving the affirmed ratings include The Hanover American Insurance Company, The Hanover Atlantic Insurance Company Ltd., The Hanover Insurance Company, The Hanover Casualty Company, Massachusetts Bay Insurance Company, NOVA Casualty Company and Verlan Fire Insurance Company.
All of the ratings carry stable outlooks.
Parent Company Credit Ratings
AM Best also affirmed the Long-Term Issuer Credit Rating of “bbb+” (Good) for The Hanover Insurance Group, Inc.
The ratings agency also affirmed several issue-level credit ratings for the parent company.
These include a “bbb-” (Good) rating on $165.7 million of 8.207% subordinated deferrable debentures due in 2027. Approximately $50.1 million of those securities remains outstanding.
AM Best also affirmed a “bbb+” (Good) rating on $300 million of 2.5% senior unsecured notes due in 2030.
In addition, the agency affirmed a “bbb+” (Good) rating on $500 million of 5.5% senior unsecured fixed-rate notes due in 2035.
The company also received affirmed indicative Long-Term Issue Ratings under its shelf registration.
AM Best maintained a “bbb+” (Good) rating for senior unsecured debt.
The agency also maintained a “bbb-” (Good) rating for subordinated debt and a “bbb-” (Good) rating for preferred stock.
These ratings provide an indication of the credit quality AM Best assigns to potential future securities issued under the company’s shelf registration.
The stable outlook across the ratings indicates that AM Best currently expects The Hanover to maintain its overall financial strength and credit profile.
The outlook is supported by the company’s strongest-level balance sheet strength, adequate operating performance, favorable business profile and appropriate enterprise risk management.
At the same time, the company continues to face risks related to catastrophe exposure, underwriting leverage and the potential volatility associated with property and casualty insurance claims.
The Hanover’s ability to maintain strong capitalization, sustain underwriting improvements and manage catastrophe exposure will remain important to its future ratings.
The latest rating affirmation provides a positive signal about The Hanover’s financial position following several years of challenging insurance conditions.
The company has demonstrated improving operating performance, particularly through stronger underwriting results and investment income. Sustained pricing increases and favorable prior-year reserve development have also contributed to improved profitability.
Its diversified business portfolio, strong agency relationships and established positions in commercial and specialty insurance markets provide additional support for its business profile.
Meanwhile, its strong risk-adjusted capitalization and comprehensive reinsurance program give the company financial flexibility to manage unexpected losses.
However, AM Best’s assessment also recognizes areas that require continued attention, including relatively elevated underwriting leverage and exposure to natural catastrophe and terrorism events.
For now, the stable outlook indicates that AM Best believes the strengths of The Hanover’s business and financial profile outweigh these challenges.
Overall, the reaffirmation of the A (Excellent) Financial Strength Rating for The Hanover’s property and casualty subsidiaries and the “a+” (Excellent) Long-Term Issuer Credit Ratings underscores the insurer’s strong financial foundation. The continued improvement in operating results, combined with disciplined risk management and diversified insurance operations, will remain important as The Hanover seeks to build on its recent performance and maintain financial stability across future market cycles.
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