160-Year Old Hanover Insurance Group Retaking Its Place as P/C Industry Leader

April 16, 2012 by

(A full version of this article, as well as exclusive podcasts featuring Hanover CEO Frederick Eppinger, is available on InsuranceJournal.com)

Eight out of 160 years of history may not seem like a big deal but for Hanover Insurance Group, founded in 1852, the last eight years have seen a series of big deals.


Eight years ago in 2004, the $2.4 billion heavily personal lines super-regional insurer was trying to regain momentum after a big venture into life insurance and annuities by its parent company at the time, Allmerica Financial, went sour.

Today, the Worcester, Mass.-based company has $4 billion in revenues, writes only property/casualty, conducts business on a nationwide basis, underwrites a balanced book of personal, commercial and specialty lines business, and is one of the country’s fastest-growing P/C insurers.

In recent years, the company has been expanding its footprint, diversifying its products, partnering with select independent agents, adding international and excess/surplus capabilities, and earning strong ratings — executing notes it has played to varying degrees of success since its founding 160 years ago.

“I tell people that one of the parts of our journey right now is taking our place again as one of the lead companies in the marketplace and it’s not the first time we did it,” Frederick Eppinger, CEO, told Insurance Journal in a recent wide-ranging interview.

After eight years of deals shedding the life and annuity businesses then adding new property/casualty products and expertise by buying business from OneBeacon and London-based Chaucer and others, Eppinger thinks now is a good time for Hanover to grow organically — and reflect.

“We are at a milestone as a company. We’re now a couple years into the expansion out West. With Chaucer we have the Lloyd’s connection again. I feel like it’s not a bad time to step back and reflect on where we are and where we’re going and why I think we’re going to be quite successful,” he said.

“I reflect on the last four years with a horrible recession and all the others things, the financial crisis, and for us to be growing and being upgraded and really thriving in a difficult time, to me it all comes together into a nice story about where the company is.”

Hanover’s History

Hanover Insurance was founded in 1852 in Hanover Square in New York, which makes it older than big players Allstate, W.R. Berkley, Chubb, CNA and Travelers. It’s one of the 40 oldest companies on the New York Stock Exchange — a fact the company celebrated on April 4 by ringing the closing bell on the floor of the NYSE. Eppinger was joined on the bell platform by Marita Zuraitis, president of Hanover’s property/casualty companies, and the company’s executive team.

Hanover started as a fire insurance company. It later added auto, marine and surety, then workers’ comp, general liability and other casualty lines. It did business with Lloyd’s in London as far back as 1880.

Hanover moved its headquarters to central Massachusetts in 1969, the same year it expanded its business in the Midwest with its affiliation with Citizens Insurance Co. in Michigan.

The insurer has weathered the 1872 Chicago fire, the 1906 San Francisco earthquake, the 1929 stock market crash, and the 2004-2005 hurricanes. It also survived the 2008 financial crisis- the only insurer in the country that had its ratings upgraded during this period by A.M. Best, Moody’s and S&P. In 2011, it survived a record $362 million in catastrophe losses.

One of Hanover’s biggest challenges in its history had nothing to do with its property/casualty business. For a period starting in 1992, Hanover came under the umbrella of Allmerica Financial, which included State Mutual, one of the oldest and biggest life insurers. In addition to selling fixed life products, Allmerica became one of the hottest sellers of variable annuities in the late ’90s. It got into deep trouble, however, after the stock market collapsed following the Sept. 11, 2001, terrorist attacks. The company began struggling to generate investment returns sufficient to meet the guaranteed return it promised the holders of variable annuities.

Allmerica CEO John F. O’Brien, who championed the variable annuity sales, resigned in 2002. In 2003, the company made the big decision to sell its fixed life insurance business and in August of that year hired Eppinger to take over the company.

Under Eppinger, by 2005, the company had completed restructuring and reinsurance deals that led to its eventual exit from the variable life and annuity businesses. The company also returned to its P/C roots and restored its name, Hanover Insurance Group.

The Hanover Insurance Group is now the holding company for a group of insurers that includes The Hanover Insurance Co., based in Worcester, Mass., and Citizens Insurance Company of America, headquartered in Howell, Michigan, and Chaucer Holdings plc, based in London, and their affiliates.

The current news of Hartford Financial Services getting out of the life insurance and annuities business to focus on property/casualty is a déjà vu for Hanover veterans including Eppinger, who himself worked in Hartford’s property/casualty division before returning to his hometown of Worcester and taking over Hanover in 2003.

Business Mix

Under Eppinger, the company has diversified its business along with expanding geographically.

Eight years ago in 2004, two-thirds of Hanover’s business was personal lines. Today its mix is almost one-third personal, one-third commercial and one-third specialty. Personal lines is at 34 percent; commercial lines, 27 percent; U.S. specialty lines, 15 percent; and, thanks to the acquisition of Chaucer, it also has 15 percent in international specialty lines. Reinsurance and some UK motor insurance make up the rest.

Hanover’s core commercial lines business generates $1.1 billion in premiums targeting small and middle market accounts. The most commonly written accounts have less than $250,000 of premium. These products include a standard business owners policy (BOP), commercial packages, property, general liability, workers’ comp and umbrellas.

The company’s U.S. specialty commercial lines business reached $600 million in 2011. Specialized products include those for marine, surety, industrial property, professional liability, management liability, healthcare and commercial umbrellas and excess.

The company today is licensed to sell P/C insurance in all states and the District of Columbia. It actively markets commercial lines policies in 36 states and in D.C and personal lines policies in 19 states.