The Hanover Insurance Group Inc., a Worcester, Mass.-based holding company for several property and casualty insurance companies, reported in its second quarter results that it has initiated expense actions to eliminate approximately 160 positions.
This move is part of the company’s overall expense management strategy and is expected to contribute to annualized pre-tax expense savings of approximately $30 million in personnel-related costs, the company outlined in its second quarter release. A spokesperson for The Hanover told Insurance Journal in an emailed statement regarding the position eliminations that “the vast majorities of actions have already been taken.”
“Part of our margin expansion strategy was to be more disciplined on expense management, which would create significant fixed cost leverage and fund strategic growth initiatives,” said Hanover President and CEO Joseph Zubretsky in prepared remarks during The Hanover’s earnings conference call held Thursday. “Through the course of a thorough analysis, we have identified expense reduction opportunities beyond what we had previously anticipated.”
The personnel-related cost reductions, combined with other non-personnel cost savings of $20 million and continued growth of the company’s revenue base, are expected to provide additional earnings momentum in the last half of this year and into 2018, enabling The Hanover to reinvest in its business, Zubretsky added during the call.
“Rather than merely allowing expense leverage to occur over time, the opportunity to react more extensively and more quickly was compelling,” he said.
Zubretsky explained in the earnings conference call that these expense actions do not impact the company’s ability to serve its partners and customers, adding that the aim of this strategy is to position the company to better achieve its strategic growth objectives.
“Going forward, rigorous expense management will be an integral part of our regular operating model,” he said.
The Hanover spokesperson said that the company is intently focused on driving a global growth agenda across its portfolio of businesses, working in collaboration with its agent partners.
“These savings enable us to achieve expense leverage that will be invested in our business growth initiatives, benefiting our agents and customers,” the spokesperson said. “Additionally, the savings enable us to consistently achieve our stated financial targets.”
The company expects to realize a non-operating charge of approximately $10 million in 2017, with $1.8 million recognized in the second quarter, the press release stated.
The company delivered a 95.6% combined ratio in the second quarter, an improvement over the prior-year quarter on comparable catastrophe losses. The Hanover also demonstrated mid-single digit growth in most of its segments, and 10.6 percent operating return on equity, according to the release.
This quarter, The Hanover placed an additional focus on advancing its Hanover 2021 strategy by realigning its leadership team, expanding Chaucer’s capabilities globally and accelerating its margin expansion strategy, Zubretsky stated in the release.
“Overall, I am very pleased with our results in the quarter and year to date as they are consistent with the strategic plan we outlined for you at our investor day,” he said in the call. “We are confident we can continue to deliver superior value to our shareholders.”