Hanover Insurance Group Inc

Good day, and welcome to the Hanover Insurance Group's first quarter earnings conference call. My name is Nick, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Oksana Lukashova. Please go ahead.

Thank you, Operator. Good morning and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roach, our President and Chief Executive Officer, and Jeff Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are Dick Levy, Chief Operating Officer and President of Agency Markets, and Brian Salvador, President of Specialty Lines. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement, and a complete slide presentation for today's call are available in the Investors section of our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session. Our prepared remarks and responses to your questions today, other than statements of historical fact, include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements can relate to, among other things, our outlook and guidance for 2025, economic conditions and related effects, including economic and social inflation, potential recessionary impacts, tariffs, as well as other risks and uncertainties, such as severe weather and catastrophes that could affect the company's performance and or cause actual results to differ materially from those anticipated. We caution you with respect to reliance on forward-looking statements, and in this respect, refer you to the forward-looking statements section in our press release, the presentation deck, and our filings with the SEC. Today's discussion will also reference certain non-GAAP financial measures, such as operating income and accident-year loss and combined ratios excluding catastrophes, among others. A reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release, the slide presentation, or the financial supplement, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Jack.

Thank you, Oksana. Good morning, everyone, and thank you for joining us. We're very pleased with the first quarter performance. Our strong start to the year reflects a positive trajectory that's building real momentum, and we are excited about the opportunities ahead. Our diversified product offering, broad-based profitability, pricing agility, and thoughtful approach to investment management continue to position us well. And our superior results for the first three months of the year reflect the strength of that foundation. We delivered a strong operating return on equity of 17.2% in the quarter, despite significant catastrophe losses that affected the industry, including the California wildfires and multiple convective storms that impacted our geographic footprint. All in, however, our catastrophe experience was quite manageable, which is a testament to the effectiveness of our ongoing catastrophe mitigation actions. Excluding cats, we achieved a one-point improvement in our overall current accident-year loss ratio, driven by personal lines. Our specialty business performed in line with expectations. And while we experienced property volatility in core commercial, we believe it is not reflective of any new trend and expect losses to return to our planned levels. Turning to the top line, we expect overall growth of 3.9% in the quarter to be the low point for 2025. Our measured and selective approach to growth enables us to maintain alignment with our margin expansion targets and optimal geographic market focus and spread. Looking at our performance by segment, Purcellines achieved net written premium growth of 3.0%, reflecting the continuation of our targeted state-specific strategies. We continue to prioritize profitable growth in high potential markets while managing our exposure in the Midwest to align with our strategic diversification priorities. Our team is operating with discipline, staying true to the strategy we've outlined on past calls, particularly through targeted catastrophe mitigation efforts and our deconcentration approach in regions most vulnerable to severe convective storm activity. At the same time, we're proactively adjusting pricing in states where profitability has improved rapidly, enabling us to lean into favorable trends. Excluding the Midwest, Personaline's net written premiums increased by 7.1%, supported by solid, stable retention levels and strong pricing exceeding loss trends. Our Personaline's book is exceeding our margin improvement expectations, driven by both earned rate and favorable frequency experience. As it relates to tariffs... We have the tools, agility, and organizational focus to achieve our profitability targets in the vast majority of market scenarios in personal lines. The portfolio is well positioned to adjust to lost cost increases given the strong profitability of the business and multiple levers at our disposal, including exposure changes and new business pricing, all of which we can trigger when and if necessary. Overall, our personal lines portfolio is very well positioned. Our team has adapted well to the dynamic environment, and we are excited about the opportunities to build on our performance and accelerate growth in the quarters ahead. Turning to core commercial, net written premium growth of 3.8% was driven by solid momentum in middle market on the strength of robust new business generation and improved retention. Our previous underwriting actions in middle market have contributed to a meaningfully improved underlying business profile over the last few quarters. This, in turn, has given us the opportunity to begin prioritizing growth. We are continuing to support our agent partners by leveraging our specialized offering and effective underwriting augmented by our experienced team, advanced pricing sophistication, and third-party data utilization. Our small commercial segment had a slower start to the year, largely due to a conservative stance on new business and renewal pricing. While the overall small commercial market remains rational, some property-oriented sectors have become slightly more competitive. Accordingly, we are adjusting pricing to achieve desired growth levels. We continue to refine our rate retention balance in some classes of business and in some geographies to optimize growth while maintaining profitability. In addition, reallocation of reinsurance costs from middle market to small commercial impacted the net written premium growth in both segments. We're extremely proud of the high-quality book we've built and the strength of the new business pipeline. Submission activity continues to increase, even following strong growth last year. This speaks to the strength of our market position, the relevance of our insurance solutions, and the growing impact of our tech-enabled capabilities in small commercial. Looking ahead, we are excited about our prospects. We fully expect to benefit from increased investments in field sales and underwriting, our expanded virtual sales teams, and robust third-party data sources to accelerate new agency appointments. We're also placing greater emphasis on high opportunity sectors, including technology, life sciences, professional and human services, and broadly workers' compensation, where we see an attractive runway and strong alignment with our capabilities. With these levers in motion, we are already seeing a growth acceleration in April, and we expect to return to our planned trajectory in small commercial growth. Now moving on to specialty. This segment's premium growth at 5.4% reflects the team's disciplined execution, particularly given the profitability improvement initiatives in Hanover programs. Excluding programs, specialty growth reached 7.3% year-over-year, with upper single-digit to double-digit growth in our most profitable lines, including surety, excess and surplus lines, marine, and health care. We continue to drive strong momentum in new business growth, supported by sustained pricing strength across our portfolio. Our sub-90s combined ratio underscores our disciplined approach to risk management and operational excellence, and positions us to drive sustained, superior performance while maintaining resilience and adaptability in dynamic market conditions. At the same time, we're investing in people, tools, and products that position us to capitalize on opportunities in the marketplace and extend our competitive advantage. We see several distinct levers driving future growth, each tailored to build on our relevance and brand in the market. These growth levers include capitalizing on our small specialty business, which is uniquely positioned to serve the needs of our agents and customers, and to differentiate our company in the marketplace. Fully implementing our same-day express quote solution in management liability and marine with future implementations in E&S and professional liability. Capturing momentum with our integration into the small commercial tap sales platform available in our management liability, professional liability, and marine lines. and thoughtfully expanding our underwriting appetite to increase our relevance in targeted specialty lines, such as increasing our risk capacity in marine, building out our E&S offerings in professional liability, and expanding our offering in the small E&S market. As we advance in 2025, we are confident in our ability to leverage discipline execution and targeted investments, accelerating year-over-year growth. Looking forward, as we navigate an uncertain economic environment, we approach it with vigilance, acknowledging that the depth and duration of potential tariffs and the likelihood of a recession are unpredictable. However, what is clear is that our company is prepared to face these uncertainties from a position of strength. Our high-caliber book of business stands out for its robust pricing levels, profitability, lower reinsurance attachment points, and reserve strength. These attributes provide a solid foundation for navigating macro volatility. Our premium and earnings streams are among the most diversified in our peer group, ensuring stability across the different market scenarios. Our high-quality investment portfolio is designed to withstand economic uncertainty. With risk assets currently at the lower end of our appetite, we are also poised to capitalize on market opportunities as they arise. We are taking a proactive approach to our business, using scenario work with relevant underwriting units to successfully manage through the uncertainty. We have faced dynamic economic conditions before and emerged stronger, focusing sharply, acting decisively, and executing effectively. this playbook remains central to our approach. With agility, alignment, and performance at the core of our strategy, we remain confident in our prospects to deliver on our goals for 2025 and beyond. With that, I will now turn the call over to Jeff.