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THG Stock Up 34.4% YTD: Time to Add to Your Portfolio for Better Return?
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The Hanover Insurance Group’s (THG - Free Report) shares have gained 34.2% year to date, outperforming the industry’s increase of 30.9%, the Finance sector’s increase of 21.1% and the S&P 500 Composite’s rise of 24.5%. Continued strong performing Core Commercial and Specialty segments, stable retention, better pricing, strong market presence and a solid capital position drive shares.
With a market capitalization of $2 billion, the average volume of shares traded in the last three months was 5.9 million.
THG shares are trading well above the 50-day moving average, indicating a bullish trend. Shares are trading near the high end of the company’s 52-week range.
THG Outperforms Industry, Sector & S&P in a Year
Image Source: Zacks Investment Research
Analyst Sentiment Instills Confidence in THG
Two of the three analysts covering the stock have raised estimates for 2024, while one has raised for 2025 over the past 30 days. The consensus estimate for 2024 and 2025 has moved 3.4% and 1.9% north, respectively, in the past 30 days.
The Zacks Consensus Estimate for 2024 implies a 623.7% year-over-year increase, while the same for 2025 suggests a 21.2% increase. It has a Growth Score of B.
Factors Favoring Hanover Insurance
Hanover Insurance is a leading carrier with a specialty focus on small-to-midsize clients operating in a total addressable $78 billion market. The company has gradually transformed into a more balanced and differentiated property and casualty franchise. It aims to be a premier P&C franchise in the independent agency channel and targets delivering about 10% CAGR in Specialty written premiums over the next five years.
Thus, THG is poised to grow based on prudent pricing segmentation, rate increases and an emphasis on growth in target states, product lines and industry classes in the middle market.
Hanover Insurance has built a diversified book of business banking on prudent underwriting, data, analytic tools and technology, which, in turn, has lowered coastal exposure and enhanced pricing for catastrophes. THG also continues to invest in technology to upgrade its front-end capabilities.
THG claims strategy implementation should help it lower the loss adjustment expense ratio by 130 basis points in 2026 while generating $2 billion in premium growth by the same time frame. It expects 2024 expense ratio to be at or near 30.9 and 30.5 in 2025.
As part of wealth distribution, Hanover Insurance has been hiking dividends for the last 17 years, apart from paying special dividends. Its dividend yield of 2.4% is better than the industry average of 0.3%, making it an attractive pick for yield-seeking investors.
THG’s Return on Capital
THG’s return on equity has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12-month ROE was 15.5% compared favorably with the industry average of 8%.
Return on invested capital has been improving over the last few quarters, reflecting THG’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 7.5%, compared favorably with the industry’s average of 5.8%.
Expensive Valuation
THG shares are trading at a premium to the Zacks Property and Property Insurance industry. Its price-to-book of 2.04X is higher than the industry average of 1.59X. It has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) are the most attractive value stocks.
The stock is expensive compared with other players like CNA Financial Corporation (CNA - Free Report) and MetLife Inc. (MET - Free Report) , which are trading at a discount to the industry average.
Average Target Price for THG Suggests an Upside
Based on short-term price targets offered by six analysts, the Zacks average price target is $168.83 per share. The average suggests a potential 3.5% upside from Tuesday’s closing price of $163.16.
To Conclude
THG is set to grow banking on sustainable competitive advantage in the independent agency market, focus on further expansion of Specialty business, solid agency partnerships and lower exposure on property lines in challenging geographies. Hanover Insurance, carrying a Zacks Rank #3 (Hold), believes that it is well-positioned to achieve a long-term return on equity target of 14% or higher by 2026 on better rates and prudent cost management. It has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, given an expensive valuation, it is better to wait for a better entry point for new investors.
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THG Stock Up 34.4% YTD: Time to Add to Your Portfolio for Better Return?
The Hanover Insurance Group’s (THG - Free Report) shares have gained 34.2% year to date, outperforming the industry’s increase of 30.9%, the Finance sector’s increase of 21.1% and the S&P 500 Composite’s rise of 24.5%. Continued strong performing Core Commercial and Specialty segments, stable retention, better pricing, strong market presence and a solid capital position drive shares.
With a market capitalization of $2 billion, the average volume of shares traded in the last three months was 5.9 million.
THG shares are trading well above the 50-day moving average, indicating a bullish trend. Shares are trading near the high end of the company’s 52-week range.
THG Outperforms Industry, Sector & S&P in a Year
Image Source: Zacks Investment Research
Analyst Sentiment Instills Confidence in THG
Two of the three analysts covering the stock have raised estimates for 2024, while one has raised for 2025 over the past 30 days. The consensus estimate for 2024 and 2025 has moved 3.4% and 1.9% north, respectively, in the past 30 days.
The Zacks Consensus Estimate for 2024 implies a 623.7% year-over-year increase, while the same for 2025 suggests a 21.2% increase. It has a Growth Score of B.
Factors Favoring Hanover Insurance
Hanover Insurance is a leading carrier with a specialty focus on small-to-midsize clients operating in a total addressable $78 billion market. The company has gradually transformed into a more balanced and differentiated property and casualty franchise. It aims to be a premier P&C franchise in the independent agency channel and targets delivering about 10% CAGR in Specialty written premiums over the next five years.
Thus, THG is poised to grow based on prudent pricing segmentation, rate increases and an emphasis on growth in target states, product lines and industry classes in the middle market.
Hanover Insurance has built a diversified book of business banking on prudent underwriting, data, analytic tools and technology, which, in turn, has lowered coastal exposure and enhanced pricing for catastrophes. THG also continues to invest in technology to upgrade its front-end capabilities.
THG claims strategy implementation should help it lower the loss adjustment expense ratio by 130 basis points in 2026 while generating $2 billion in premium growth by the same time frame. It expects 2024 expense ratio to be at or near 30.9 and 30.5 in 2025.
As part of wealth distribution, Hanover Insurance has been hiking dividends for the last 17 years, apart from paying special dividends. Its dividend yield of 2.4% is better than the industry average of 0.3%, making it an attractive pick for yield-seeking investors.
THG’s Return on Capital
THG’s return on equity has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12-month ROE was 15.5% compared favorably with the industry average of 8%.
Return on invested capital has been improving over the last few quarters, reflecting THG’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 7.5%, compared favorably with the industry’s average of 5.8%.
Expensive Valuation
THG shares are trading at a premium to the Zacks Property and Property Insurance industry. Its price-to-book of 2.04X is higher than the industry average of 1.59X. It has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) are the most attractive value stocks.
The stock is expensive compared with other players like CNA Financial Corporation (CNA - Free Report) and MetLife Inc. (MET - Free Report) , which are trading at a discount to the industry average.
Average Target Price for THG Suggests an Upside
Based on short-term price targets offered by six analysts, the Zacks average price target is $168.83 per share. The average suggests a potential 3.5% upside from Tuesday’s closing price of $163.16.
To Conclude
THG is set to grow banking on sustainable competitive advantage in the independent agency market, focus on further expansion of Specialty business, solid agency partnerships and lower exposure on property lines in challenging geographies. Hanover Insurance, carrying a Zacks Rank #3 (Hold), believes that it is well-positioned to achieve a long-term return on equity target of 14% or higher by 2026 on better rates and prudent cost management. It has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, given an expensive valuation, it is better to wait for a better entry point for new investors.