The Hanover Insurance Group, Inc. (NYSE:THGA) Q4 2016 Earnings Conference Call - Final Transcript

Feb 03, 2017 • 10:00 am ET

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The Hanover Insurance Group, Inc. (NYSE:THGA) Q4 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to The Hanover Insurance Group Fourth Quarter Conference Call. My name is Mark, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Oksana Lukasheva, Vice President of Investor Relations. Please proceed.

Executive
Oksana Lukasheva

Thank you, operator. Good morning and thank you for joining us for our fourth quarter conference call. We will begin today's call with prepared remarks from Joe Zubretsky, our President and Chief Executive Officer; and Chief Financial Officer, Jeff Farber. Available to answer your questions after our prepared remarks are Dick Lavey, President of Personal Lines; Jack Roche, President of Commercial Lines; and Johan Slabbert, Chief Executive Officer of Chaucer.

Before I turn the call over to Joe, 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. There are certain factors that could cause actual results to differ materially from those anticipated by this press release, slide presentation, and conference call. 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, Slide 2 of 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 fourth quarter and full year domestic development and 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 Joe.

Executive
Joe Zubretsky

Thank you, Oksana. Welcome, everyone, to our fourth quarter earnings call. Today, I will discuss overall results and our business performance, Jeff will cover financial details and an in-depth discussion of the results of our annual reserve analysis, and then I will provide some framing statements about our upcoming Investor Day before opening the line for your questions.

In the quarter, we had an after-tax operating loss of $19.7 million or $0.46 per share and a consolidated combined ratio of 107.7%. For the year, we earned operating income of $184.4 million or $4.27 per fully diluted share and produced a consolidated combined ratio of 98.6%, generating an operating return on equity of 7%.

Our results were significantly impacted by the $174 million domestic reserve charge we recorded in the fourth quarter for prior year reserve development, the outcome of our annual loss reserve review. This, combined with some less significant prior year development in each of the first