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Hanover Boosting Auto and Surety Reserves, Estimates Up to $77 Million in 2Q Cat Losses

Posted on 20 Jul 2012 by Neilson

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HanoverHanover Insurance Group Inc. said its second quarter would be impacted by reserve increases in automobile and surety, and catastrophe losses would also impact the quarter by $70 million to $77 million.

Catastrophe losses were primarily related to severe hail and windstorms from 11 events in the United States. The largest losses were caused by hailstorms in the Midwest in April and a series of widespread hail and windstorm events in the Midwest and mid-Atlantic regions in May and June, the company said.

The company also said its second-quarter results would be impacted by additions to reserves in domestic lines, primarily in surety and auto. Surety reserve additions are driven by continuing weak economic conditions, while auto reserve re-estimations primarily reflect an increase in severity of losses from the 2011 accident year, the company said in a statement. The company did not disclose a dollar amount for the reserve additions.

"Catastrophe activity in the U.S. continues to impact industry results as well as our own," Frederick H. Eppinger, chief executive officer, said in a statement. "However, the strategic diversification of our business is helping us mitigate the volatility associated with weather. Higher-than-expected catastrophe losses in our domestic operations were somewhat offset this quarter by lower catastrophes in our international business. Perhaps most importantly, we are satisfied with our accident-year results, and we continue to see favorable pricing and retention trends."

Attempts to reach the company for additional comment were not immediately successful.

Catastrophes have impacted a number of companies this quarter. Travelers Cos., which reported their earnings July 19, said in a written statement that losses were lower than in the second quarter of 2011, but still "considerably higher than we would have expected based on historical experience."

Travelers reported pretax catastrophe losses for the most recent quarter of $549 million, compared with $1.66 billion in the prior-year quarter.

Allstate Corp. estimates its second-quarter pretax catastrophe losses will be about $820 million, with about half of that number coming from events in June, according to a filing the company made with the U.S. Securities and Exchange Commission.