The Hanover Net Income Down in 4th Quarter But Up for Year
Net income for the fourth quarter of 2006 at The Hanover Insurance Group, Inc. fell to $45.5 million, or $0.88 per share, compared to $118.7 million, or $2.19 per share, in the fourth quarter of the prior year. Net income for the prior year quarter benefited from a favorable adjustment of $30.2 million to reflect the actual purchase price from the sale of the variable life insurance and annuity business. Net income for the 2006 quarter includes pre- tax realized losses on investments of $14.9 million, compared to gains of $5.7 million in the same period of 2005, and a more normal level of tax expense.
For the year, however, net income was up. Net income for the full year of 2006 was $170.3 million, or $3.27 per share, compared to a net loss of $325.2 million, or $6.02 per share in 2005. The net loss in 2005 is attributable to the $444.4 million after-tax net loss on the sale of the variable life insurance and annuity business and the $162 million net catastrophe loss related to Hurricane Katrina.
Total property and casualty pre-tax segment income was $97.4 million in the fourth quarter of 2006, compared to $89.5 million in the fourth quarter of the prior year. For the full year, total property and casualty pre-tax segment income was $328.1 million for 2006, compared to $113.7 million in 2005. Last year’s pre-tax segment income for 2005 includes $249.7 million in pre-tax Hurricane Katrina losses, while the current years results include $48.6 million in Hurricane Katrina losses.
The pre-tax net impact of catastrophes was $16.2 million in the current quarter compared to $39.1 million in the fourth quarter of 2005. Excluding the pre-tax net impact of catastrophes, property and casualty pre-tax segment income would have been $113.6 million in the fourth quarter of 2006 compared to $128.6 million in the prior year quarter. This decrease was driven primarily by higher operating expenses in the fourth quarter 2006, partially offset by increased favorable development of prior year reserves.
Net premiums written were $531.8 million in the fourth quarter of 2006, compared to $502.5 million in the fourth quarter of 2005, an increase of 5.8%. Full-year net premiums written were $2,307.1 million, compared to $2,150.4 million in 2005. Excluding the effect of reinsurance reinstatement premiums of $27.0 million, which were incurred following Hurricane Katrina, full year 2005 net premiums written were $2,177.4 million. Excluding the effect of these reinsurance reinstatements premiums in 2005, net written premium growth was 6.0% for the full year.
Source: The Hanover