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Should Hanover Insurance (THG) be in Your Portfolio Now?

On Dec 23, Zacks Investment Research upgraded The Hanover Insurance Group, Inc.THG to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Hanover Insurance has been witnessing a rise in earnings estimates on the back of positive developments like dividend hikes and strong third-quarter 2015 results. Moreover, this well-known property and casualty insurer recorded positive earnings surprises in the last four quarters with an average beat of 17.83%.

Investors' confidence in the stock was cemented by the news of a dividend hike announced on Dec 7, 2015. Per the announcement, the quarterly dividend was increased by 12% over the previous amount to 46 cents per share. The increased dividend will be paid on Dec 31, to shareholders on record as of Dec 18, 2015. The raised dividend also reflects the financial strength of the company. We believe that the increased payout boosted investor confidence and thus, helped in stock price appreciation.

Additionally, the company posted strong third-quarter earnings of $1.61 per share, which surpassed the Zacks Consensus Estimate by 14.18% and the year-ago earnings by 51.9%. The better-than-expected earnings came on the back of lower catastrophe losses and a reduced share count due to share buyback activities.

Notably, during the quarter the Board of Directors of Hanover Insurance increased its share repurchase program by $300 million. This also indicates the insurer's strong financial position. The company's financial strength is also reflected by a 2.6% increase in book value per share compared with that as of Dec 31, 2015. On execution of this program, the share count is expected to be further lowered and thereby aid earnings.

Additionally, the quarter benefited from lower catastrophes. As a result of this, the company had to bear a comparatively low catastrophe loss burden.

The Zacks Consensus Estimate for 2015 increased 0.8% to $5.96 per share as most of the estimates were revised higher over the last 60 days. For 2016, more than half of the estimates moved north over the same time frame, thereby raising the Zacks Consensus Estimate by 0.2% to $6.32 per share.

Other Stocks to Consider

Investors interested in the P&C insurance industry may also consider stocks like Cincinnati Financial Corp. CINF , RLI Corp. RLI and Hallmark Financial Services Inc. HALL . All three stocks sport the same Zacks Rank as Hanover Insurance.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

RLI CORP (RLI): Free Stock Analysis Report

CINCINNATI FINL (CINF): Free Stock Analysis Report

HALLMARK FINL (HALL): Free Stock Analysis Report

HANOVER INSURAN (THG): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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