Oct 29, 2026 earnings call — Profitability, Specialty growth, and AI investments
Company reported best ever third quarter operating earnings per share of $5.15.
Revenue $1.7B (est $1.8B) · EPS $5.15 (est $4.62)
Key quotes
"Profitability is our top priority, and the company will continue to make underwriting, growth, and capital allocation decisions through that lens."
"In the quarter, excluding Hanover Specialty Industrial, which is most exposed to competition in the larger property market, and Hanover Programs, which we continue to tightly manage and limit expansion, we generated strong growth of 6.7%."
"Our technology throughput continues to improve, allowing us to deploy new capabilities more quickly and embed AI more deeply across underwriting, claims, and customer service."
Analyst Q&A 6
agency size and profitability
Q (Michael Phillips · Oppenheimer): Is there a link between agency size and the profitability of the business they give you? If a small agency is bought by a large broker, does that improve loss ratios over time?
A: They track performance by agency type and size closely. Management said profitability is strong across different agent sizes, scale helps absorb big losses, and breadth across lines, especially access to Specialty Lines, also improves performance. They said integrated smaller agencies tend to show better profitability over time as they gain access to broader capabilities.
"Broad observations, we see strong profitability across our different distribution segments, so various sized agents can perform well, of course." — Dick Lavey (CEO)
Specialty book protection from big insurers
Q (Bryan Salvatore): To what extent is your Specialty book protected from admitted insurers entering the space in a soft market? Will that protect your five-year growth plan?
A: Management said they focus on the small to middle market, where there is less competition and more pricing power. They said the portfolio is diversified, they like its composition, and they expect growth to hold up and even improve into 2027–2028.
pricing power; reserves and IBNR
Q (Mike Zaremski · BMO): Why is your pricing power holding up better than peers in Personal and Commercial Lines? Are you adding IBNR to your reserves, and what is your new money rate comment?
A: Management said the portfolio is more mature now and their focus on higher-value IA accounts, high retention, and account structure helps pricing resiliency in Personal Lines and Core Commercial. They also said they are clearly adding IBNR, increasing the IBNR share of total reserves and setting reserves above actuarial central estimates. For investments, new money rates are well above expiring and above earned yield given current Treasury levels.
"Mike, we are clearly adding IBNR to our reserves." — Jeff Farber (CFO)
investment yields and PIF growth
Q (Rowland Mayor · RBC): How do investment yields affect your target underwriting margins for 2027? And what is holding back policy count (PIF) growth in homeowners?
A: They said investment decisions and underwriting targets are handled independently; they maximize conservative portfolio yield while separately optimizing underwriting income. For PIF, management said they are shifting mix into higher-valued customers, so average premium is higher but there are fewer policies; they are growing PIF in target segments and diversification states as a deliberate strategy.
"As you've heard us say, we're shifting our mix upwards into that higher valued customer and with that is a higher average premium." — Dick Lavey (CEO)
priority: margins versus growth; Core Commercial CR
Q (Paul Newsome · Piper Sandler): Given the soft market, will you prioritize margin improvement over growth near term? Also, why was Core Commercial combined ratio over 100 this quarter — seasonal or something else?
A: Management said they remain disciplined: preserving strong earnings now gives better opportunity to grow over the mid to long term, and they will not stretch growth at the wrong time. For the Core Commercial combined ratio, they said the loss ratio was stable but CATs were a few points high; with a smaller book and quarter sample size, CATs and a few multi-million losses pushed the combined ratio above 100.
"From a combined ratio perspective, really the challenge was CAT." — Jeff Farber (CFO)
expense ratio and workers' comp trends
Q (Meyer Shields · KBW): Why did Personal Lines expense ratio improve this quarter despite little premium growth? And are you seeing rising frequency in workers' compensation like others report?
A: They said expense ratios can vary by quarter due to allocations and the strong combined ratio can push expense ratios up; they remain committed to long-term expense efficiency even if the 30.3% guide is not hit this year. For workers' comp, management said the line performs well overall, but results depend on state and industry mix; they have seen varied frequency trends and manage that with thoughtful mix and loss picks.
"Meyer, I'll start by saying, on balance, the work comp line performs very well for us in hitting target returns." — Dick Lavey (CEO)