The Hanover at KBW Insurance Conference: Strategic Focus on Diversification

On Thursday, 04 September 2025, The Hanover Insurance Group (NYSE:THG) presented at the KBW Insurance Conference 2025, showcasing a robust strategic approach to navigating a complex market landscape. Led by CEO Jack Roche and CFO Jeff Farber, the discussion highlighted both the strengths and challenges faced by the company, emphasizing a diversified earnings strategy and proactive risk management.

Key Takeaways

• The Hanover reported a year-to-date ROE of 18%, underlining strong financial performance.
• The company is focusing on selective agency partnerships and leveraging the TAP Sales platform to improve efficiency.
• Commercial auto remains a challenge, but proactive measures have been implemented to manage risks.
• Geographic expansion and strategic pricing are key components of future growth plans.
• Specialty business, particularly marine, continues to show strong performance.

Financial Results

• Overall Performance: The Hanover achieved a year-to-date ROE of 18%, supported by diversified earnings across personal lines, small commercial, specialty, and middle market businesses. Strong cash flows and new bonds at higher interest rates have contributed to increases in net investment income.

• Segment Performance:

- Core commercial experienced heavier losses, particularly in Q1 due to property losses.

- Specialty business showed strong results in the first half, especially in Q2, with expectations of continued performance.

- Personal lines have room for improvement, with price increases anticipated to outpace loss trends.

• Pricing and Loss Trends: The company is pricing its products at or above loss trends in major sectors, with an expected hardening in liability pricing next year.

Operational Updates

• Agency Strategy: The Hanover is focusing on selective partnerships with agencies, emphasizing specialized capabilities and a franchise approach. This strategy differentiates them from competitors with over-distribution.
• TAP Sales Platform: The platform has improved efficiency for agents by up to 50% in time spent on location input, particularly benefiting small commercial segments.
• Commercial Auto: Comprising less than 7% of the business, the focus is on smaller accounts with proactive measures to manage risks, including geographic restrictions and industry-specific focus.

Future Outlook

• Geographic Growth: Plans for controlled expansion are based on local market assessments, with regional vice presidents playing a key role in strategy execution.
• Pricing Strategy: The Hanover is positioning itself for potential market shifts, particularly in liability pricing, while maintaining responsible pricing in personal lines.
• Specialty Business: Continued investment in talent and technology aims to enhance efficiency and customer experience, with marine being a standout performer.

Q&A Highlights

• Pricing and Loss Trends: The Hanover remains confident in its pricing strategy, expecting a significant hardening in liability pricing as the year progresses.
• Talent Management: The company is focused on improving customer experience and creating new roles to attract talent, enhancing its operational model.

In conclusion, The Hanover Insurance Group’s presentation at the KBW Insurance Conference 2025 reflected a strategic focus on diversification and proactive risk management. For a detailed account, please refer to the full transcript below.

Full transcript - KBW Insurance Conference 2025:

Unidentified speaker, Speaker: Okay. Thanks so much. We are going to move on. Our next guests are Jack Roche, CEO, and Jeff Farber, CFO of The Hanover Group. Is going start with some introductory comments, and then we’ll move into Q and A.

And as always, if you

Unidentified speaker, Speaker: have questions in the audience,

Unidentified speaker, Speaker: please don’t hesitate to raise your hand. We will get you the mic, and that way we can ensure you’re getting what you need out of this session. With Jack, that let me try that again. With that, Jack, the floor is yours.

Jack Roche, CEO, The Hanover Group: All right. Thank you, Mayor, and appreciate the opportunity to be here with you today. And I’m also appreciative of the opportunity to just give you a brief update on the Hanover and dive into some good Q and A. And I think I would just headline the fact that we’re really excited about where we are from a financial position and financial trajectory perspective that allows us to lean into this complex and dynamic market and start taking the enterprise to the next level. We’ve worked hard to navigate some pretty difficult challenges with the weather and with the changing loss patterns.

I think we’ve demonstrated to ourselves and to our investors that we have the right agility and capability to take on some of those challenges and in relatively short order reemerge as a top performer from a bottom line perspective. And so now we’re focused on using that broad based profitability across four major businesses to our advantage, frankly, because I don’t think the world is going to get any less complex or dynamic. And we believe that the companies that have diversified earnings stream and real strong capability are going to be able to both navigate some of the challenges, but take advantage of the opportunities that naturally come from these type of market changes. So just real quickly in personal lines, we believe we’re one of the top account writers in the independent agency channel, albeit in the 20 states we choose to do business. We have an amazing small commercial platform that focuses not only on the point of sale oriented business, but the non point of sale position, which puts us in an enviable position at a time when agents or brokers are trying to consolidate markets and do more with less.

Our specialty business now is approaching 1,000,000,000 and growing and generating tremendous returns, nine businesses, 20 something products, all focused on the agents building specialization. And then last but not least, our middle market business is in the best place it’s been in some time. We are navigating the challenges that come in the higher limits business, but we believe that’s going to be huge upside for our company as we continue to show the right level of discipline. So all in, we’re in the best position, frankly, we’ve been in many, many years and excited about the opportunities ahead.

Unidentified speaker, Speaker: Great, thanks so much. I want to start with a big picture question. I get a lot of introductory questions about the cycle and less about other things that matter tremendously but are maybe harder to put into a chart. And one of the things where I think Hanover distinguishes itself is with its agency strategy. And I was hoping you could talk about how when you’re going to either existing agencies looking for deeper penetration or for newer agencies, how you differentiate yourself from the competition.

Jack Roche, CEO, The Hanover Group: Yes, listen, a real important tenant to our strategy is being selective in who we do business with, but bringing forward a value proposition to the agents that are winning in the space, both big, medium and small, to give them specialized capabilities, but also give them a bit of a franchise approach towards that frankly the industry has lost over time. Many of our most capable competitors frankly over distribute and have become distribution agnostic over time. It doesn’t make them bad companies, but it makes it really opens up an opportunity for a company like ours that’s big enough to invest in businesses that are specialized, but also agile and capable of focusing more and more on agent strategy versus just ours. And the biggest way we differentiate ourselves with the consolidators as well as the best mid sized agents across the land is we’ve demonstrated the ability to listen and understand and digest the agent strategy both nationally and locally and bring our capability set to help them advance. We believe when we do that well, we get more than rewarded, but that’s really what distinguishes us on a daily basis.

And I think you know we’ve been able to build things like our agency insights portal and other analytical tools that make that dialogue less anecdotal and more specific about how do we build those future partnerships in a way that’s mutually beneficial. Great.

Unidentified speaker, Speaker: Thank you. We’ve agency consolidation has been a constant really since well, I started in the ’90s and it predates me by a few decades. One of the more recent themes has been the largest brokerages out there focusing more on the smaller end of the middle market or the small account market. And I was wondering, given that that’s a lot of where Hanover focuses, how does that aspect of consolidation impact your growth strategy? What are the costs, what are the opportunities?

Jack Roche, CEO, The Hanover Group: Yeah. Listen, if we’re honest with you, over time, we wondered, frankly, how the flow businesses would factor into our value proposition. Many of the large and medium sized agents get up every day and think about writing mid sized accounts or greater and generating really good returns and adding value. But the reality is that many of those agents have spent the last decade buying agencies, integrating them and have more small commercial and personal lines and frankly smaller specialty business than they ever expected. The other reality of that situation is that those that business, that part of their portfolio is probably has the lower end of the EBITDA margins.

Unidentified speaker, Speaker: Mhmm.

Jack Roche, CEO, The Hanover Group: And they need the most help in terms of either consolidating that or creating new efficiencies for this business that they paid a fair amount of money for. So our relevancy in the distribution system has actually gone up. Even though we spend a lot of time on the specialized businesses and try to be in that day to day flow of transactions, our dialogue increasingly has been in the flow businesses all the way through specialty on how can we help them improve their EBITDA margins, where should we be account centric versus more specialized by line of business or sector. And I would say that half of our dialogue with the national folks now is really on that aspect of our value proposition.

Unidentified speaker, Speaker: Great. So I want to segue to that, to the TAP platform, because I imagine that’s one of the areas or one of opportunities for improving efficiencies. I was hoping you could talk through where it is, where it’s going and how it helps win share.

Jack Roche, CEO, The Hanover Group: Sure. So TAP sales is our point of sale platform that transcends from personal lines to small commercial. And now many of our smaller specialty lines are plugged into it, not necessarily transactionally but an account manager or a CSR inside of an agency can get access to those various business segments in our point of sale system today better than they ever have. The investment we made in tap sales, particularly in small commercial was a really important one. It has now put us in the top tier of day to day transactions.

It’s created efficiencies at the account manager level by up to 50% in terms of time spent on location input. Imagine the talent challenges that agents have today when you can take your day to day transactional and start cutting down time by half, expanding your appetite and through your profitability being able to be more offensive, all of those things are incredibly attractive to agents when they’re trying to gain those efficiencies and do more with less, as I said. So we’re going to build on that. We’re currently almost through with adding our workers’ comp line into that, increasing our straight through so that there’s less touch. Our responsiveness for many of those lines now are hours instead of days when there are kick outs.

So our day to day proposition for account managers and CSRs has really never been better.

Unidentified speaker, Speaker: Okay. And just as a quick follow-up on that, the agency response to TAP sales?

Jack Roche, CEO, The Hanover Group: Well, we’ve really exceeded every metric that we set out for ourselves when we made that investment, particularly in small commercial. We’re getting more account managers using the system, the uptick of number of accounts that they’re putting into the system, the efficiency coming through in the close rates, all of the major benchmarks that we set for ourselves a couple of years ago, we’ve met or exceeded. So we couldn’t be happier with the way that platform has extended our small commercial capabilities.

Unidentified speaker, Speaker: And should we look at growth, whether it’s policy counts or premiums, as the primary outcome that we’ll be able to see?

Jack Roche, CEO, The Hanover Group: Yes, but I think what we’re going to further demonstrate is we didn’t just put a new platform in place. We converted our pricing to be able to take on the higher end of the small commercial. So more and more of our non point of sale business is being able to be levered into the Tap Sales point of sale system, but in a way where we price it with the same level of precision. So we’re going to demonstrate not just growth overall, but how we’re able to kind of further diversify our offering to agents and become more relevant at a time when they have way too many markets for their lower end premium. And with our agency insights tool, when we go out there and show people how fragmented their business is, it just makes their anxiety go up.

And so what we are bringing forward is solutions, not just data to show them that the inefficiency in the smaller end of the market really needs to be resolved and we simply have more and more tools to help them.

Unidentified speaker, Speaker: Okay. That’s great. I want to drill down to one thing that you just said, is that agents have too many markets that they’re dealing with. This has been a long term thesis of mine, is that at some point in time there is an inefficiency, to be blunt, there are probably too many companies out there relative to the need and there are expenses associated with that. How important of a factor is that to your distribution network?

Jack Roche, CEO, The Hanover Group: Right now, as you’ve seen, as organic growth on the agency side starts to subside a little bit, the focus, whether you’re preparing to do an IPO or whether you’re trying to satisfy your private equity partners or you’re trying to build and maintain your independence, you’ve never been more focused on your economics. And so I think folks are looking at what are the various ways in which I can better serve customers, preferably in a digital way, but do it in a more economical way, because the smaller end of the business just keeps coming at you. And so many agents have tried to either put it in a box or separate it and what they realize is that is where the growth of the economy comes from and being better able to serve that business is better than trying to kind of push it aside and treat it like a less significant part of their portfolio. So we’re I can tell you, we are gaining more and more traction with the biggest agents in the land around how can we take their market consolidation and you have to segment it in ways that it is executable. And what people don’t realize is the last two decades, we’ve gotten more proprietary as an industry in underwriting and in pricing, and it’s simply not as simple as everybody thinks it is.

So you need somebody that not only has a breadth of appetite and some pricing capability, but has a demonstrated skill and experience in sorting through the portfolio with our analytical tools and allowing them to focus those consolidation efforts in a way where they actually get something done. And we are making meaningful progress, but if everybody just wants to take their non strategic carriers and try to jam it into their strategic carriers, they’re being very naive about what it takes to do more with less.

Unidentified speaker, Speaker: Right. No, that’s very helpful. I want to shift to talk about individual lines of business. And you mentioned that there’s a simplistic assumption for pricing and I’m going to ask this question intentionally simplistically and that is the industry has struggled with commercial auto, right? I completely get that it is ground zero for social inflation, you’ve got very very sympathetic plaintiffs in many cases and a very aggressive trial bar.

But it seems to me, and I haven’t done this work in twenty five years, but it seems like, okay, all we need to do is in our pricing assumptions assume that severity is two points higher than we used to and then you get to adequate pricing. But we haven’t yet seen the industry get to that point where, okay, yes, is high, pricing is high enough to reflect that. What am I missing in the process? What are the complexities that sort of get in the way of that happening?

Jeff Farber, CFO, The Hanover Group: Commercial auto has been a challenge for the industry for a dozen years and as much as many in the industry think they’re making progress, the severity trend seems to be moving away and it is clearly the epicentre of lawyer involvement and social inflation and that doesn’t seem to be abating really anytime soon. Fortunately for The Hanover, it’s a small portion of our overall business, it’s less than 7% of the business. And for us, we tend to write smaller accounts, we tend to have smaller vehicles and we tend to have smaller limits and while we’re going to be going after this and getting additional rate, I feel like with our conservative reserving, I think we’re in good shape. But the industry really needs to deal with it and there’s a lot of solutions. I think price increase is really just one of them.

The industry is really focused on how to tame the legal environment a bit. And that’s going to be state by state. It will take some time, but there are a lot of things happening.

Unidentified speaker, Speaker: Right. And we have seen some states actually Georgia, come on

Jeff Farber, CFO, The Hanover Group: Florida a few states, absolutely.

Unidentified speaker, Speaker: This is a two pronged question because if you go back several years and it’s really early in the period of time when people were talking about social inflation getting worse, so Hanover said, know what, we’re going to focus on regions or jurisdictions if you will in the most literal sense, where the courts are less difficult. So two questions I want to ask are one, how is that manifesting itself in your commercial auto exposure and two, what’s the next step for that for general liability itself, which is, as I understand it, where the strategy first emerged?

Jack Roche, CEO, The Hanover Group: Yeah, I think as far back as really the latter part of 2011, we clearly acknowledged that something was changing in terms of the duration of liability cases and the increased involvement of lawyers. And so we started pricing. I can remember in 2012, eight to 10 points of price and got back up over 10. So this is, like Jeff said, twelve years of pretty substantial pricing. Turns out it’s simply not enough.

The environment was getting worse along the way. And I think what we did first in auto is we eliminated the vast majority of any monoline auto and assumed that that was no longer a good value proposition for us. We downsized private manufacturing fleets, durable wholesale type accounts that had auto as kind of their lead line, we moved away from. We also took a very serious look at the geographic concentrations or penetrations because there are states like Texas and even Southern California and Downstate New York that just were magnifying the problem. And so we got after it.

When we started, we also decided to remove ourselves from monoline or unsupported umbrella because that’s essentially excess auto. Then we, as you saw really kind of I think around 2018, we started to presume that that was going to start to leak its way into the slip, trip, and fall type of exposures because that’s the next biggest category that attorneys were easily able to find claimants that they could exercise on. Auto is easy because as soon as you have an accident, it gets posted at the police departments, it gets spread around and you have letters from six attorneys. But when you slip in the grocery store, it’s a little bit harder for them to figure out. It’s more volunteerism.

But it’s penetrated there. We made some meaningful adjustments like you referenced in the big cities. We got off a lot of real estate, a lot of OL and T exposures. And we did this all before I think the industry started to talk more and more about legal system abuse. So I think that’s what we’ve been able to demonstrate to investors is that, listen, everybody’s got this problem to different degrees, but have you done something about it beyond price that hasn’t been sufficient?

And I think we make a good case. For example, in auto, over the last five years, we actually have a lower level of piff in commercial auto. We compete against some people that have grown commercial auto in a meaningful way during that period and likely have deep regrets about what that did to their reserve position and their results. So I think that’s what we commit to doing is being very transparent with our investors that this is how we’re growing the business, this is where we’ve seen some progress, this is where we’ve seen some things not work out and have a reputation for dealing with things along the way and not letting them build up to the point where they become huge problems for the company.

Jeff Farber, CFO, The Hanover Group: And the combination of being selective about geographies, being selective about particular industries that we focused on has manifested itself in the last five years of having substantially reduced frequency of these matters. The severity is the severity, and in some cases we can moderate the severity by avoiding some judicial hell holes and all that, but severity is up a lot. But thank goodness our frequency of matters is down a lot, which allows us, with some good reserving and some price, to be able to have a conservative balance sheet.

Unidentified speaker, Speaker: Okay, fantastic. When we take that, maybe in the other direction, from a growth mindset, what’s the process and sorry, process, little Canadian doesn’t and timeline for adding new industries to core commercial?

Jack Roche, CEO, The Hanover Group: So we’ll continue to flex our appetite. And I would say that in small commercial, we are very diverse in terms of the industry sectors. I don’t think there’s a lot of areas where agents say, hey, need you to maybe habitational is an area we’re particularly conservative. But beyond that, I think we’re seen as a pretty broad based appetite and small. In middle, we’ve been more discriminating for good reason.

But I would say most of our appetite is more of percentage of penetration or percentage of your portfolio. So for example, we have a moderate level of concentration in construction. There are times when the construction business is more palatable, and there’s other areas where you have to contract. Human service agencies right now is a particularly challenging sector. But our expectation is as the market contracts and pricing really comes through and terms of conditions change, that we’ll flex back in and be a little bit more robust at the right time for those sectors.

So I don’t think there’s any particular area sectorally that we’re missing out on or that we think is a big part of our next steps. But it’s the ability to kind of be more agile around what levels of growth you’re going

Unidentified speaker, Speaker: to have in each of

Jack Roche, CEO, The Hanover Group: the sub segments and geographies. We have a model where our local RVP understands what we bring to the table, but it’s their job to help us understand what is our portfolio going to look like in that particular state.

Unidentified speaker, Speaker: Right.

Jack Roche, CEO, The Hanover Group: And that is super important because what we look like in Texas is a lot different than what we look like in Maine, and it needs to be. And it’s not just about what economy lives there, it’s about what are the legal and cat and other exposures that make our portfolio kind of different by geography. It’s a big part of our secret sauce.

Unidentified speaker, Speaker: So when we think about that, just as a follow-up, geographic growth ambitions, how does this enhance or constrain your growth appetite?

Jack Roche, CEO, The Hanover Group: It does both. We’ll have all of our field leaders into our home office next week, and they will present, as they do twice a year, what their proposition is. Why should they get a stronger capital allocation? Are they in a position for growth? Or do we need to be patient and see them continue to make some modifications in their underwriting and their portfolio management.

Again, that’s a big part of how we run the company. But as you would imagine, whether it be personal lines or commercial lines, we have more and more geographies that are ready for some elevated growth. We’re never going to be one of those companies that’s going to be growth for growth’s sake. It’s just not how we’re born. But we are more diversified in our earnings stream, and we have more geographies and businesses that are hitting our hurdle rates.

And that allows us to kind of elevate the growth of the overall firm. But it still comes back to one geography at a time. Where are we? What steps do we need to take? But if you have a dozen plus states that are hitting on all cylinders, our expectation is that we’re ramping growth and growing our business disproportionately there.

Unidentified speaker, Speaker: Okay, fantastic. I do want to take a second just to look through the room to see

Unidentified speaker, Speaker: if there are questions. Go ahead, Clayton, they’ll just bring you the mic. Just on a high level, when think about the business cumulatively across the board and you think about the general pricing trend and loss cost trend and you think about your forward looking accident year loss picks, can you just talk about that trend and how you think about the margin from here and if it can actually get better or it’s just too difficult of a macro backdrop and too much competition?

Unidentified speaker, Speaker: Yes. I’ll make a couple

Jack Roche, CEO, The Hanover Group: of comments and then Jeff, jump in. I’ve done this I’ve been in this business a while and realized that pricing versus loss trend is super important, but it’s anything but a static measure. So we think about it as right now we feel like we’re pricing our product overall at or above loss trend in all of our major sectors. But we also think out into the future, if I use middle market as an example, right now you’re seeing some compression on the property side because a lot of people have priced their product more aggressively, have changed some terms and conditions. And so in some ways the pricing should decelerate.

On the other side, I think we’re a little slow as an industry to recognize the liability pricing that’s required given the way those trends have gone about it. As an account writer for the most part, we balance that so we’re not too schizophrenic, but I believe as we go through the rest of this year and into next year, you’re going to see a significant hardening on the liability side. So that forward looking approach is what allows us to kind of think about right today we’re certainly hitting the pricing targets that we want, but we are starting to position ourselves for when some of the less capable or more disadvantaged folks on the liability side start to reduce their appetite or accelerate their pricing, where can we take advantage of that or where can we actually turn that into some accelerated offense. But overall I think the answer to your question is, I think this is a pretty rational market. I think people, there’s some areas where there is some pricing pressure.

Well, you’ve got some sectors that are performing in the low 80s in terms of a combined ratio. That’s not, you know, there should be some competition there. But I go back to the diversification of our earnings stream. What makes us really excited about our proposition going forward is we’re not overly dependent on any one sector. Right?

We have four major businesses, we have almost 20 business sectors below that, And we have optionality in terms of if we see some compression in certain parts of our specialty business or if there’s some accelerated competition in certain small commercial states. We have our personal lines business that’s come back into its own. We have a middle market business that will likely take advantage of some hardening on the liability lines. And that really gives us some real power going forward.

Jeff Farber, CFO, The Hanover Group: So to talk about a baseline, I’ll talk about our year to date results because it tends to eliminate the vagaries of individual quarters by segment fluctuations. So as I think about we’re I think we had an 18% ROE year to date, so we’re performing at a pretty solid level. If I go segment by segment, the core commercial segment had slightly heavier losses largely driven in the first quarter property, I think there is room for improvement on that basis on that benchmark. Specialty had a very strong six months, particularly in the second quarter and I think that should continue at that level, but hard to say. And personal lines has some room for improvement as the continuation of price of earned price above loss trend should show some improvement as we go forward.

And that coupled with the ongoing increases of NII based on cash flows that have been strong and also buying new bonds at higher interest rates that are rolling forward gives us confidence as we go forward for the rest of the year.

Unidentified speaker, Speaker: Then Mark, let me just get the mic to you.

Unidentified speaker, Speaker: Just as a follow-up on that. You said the market is pretty rational. Commercial property, maybe like there a little bit of an overcorrection going on in certain types of markets, coastal markets or lines that have had some losses or something. What about personal lines? Like do you think they’re are we moving into a more moderating rate environment that’s more consistent with kind of low to mid single digit claims inflation long term that everyone believes?

Or do you think there’s risk as we look out kind of twelve to eighteen months that there’s a need for or potential risk of overcorrection in personal lines, just like there has been in some areas of commercial property this year?

Jack Roche, CEO, The Hanover Group: Sure. Yes, I agree with some of your view on commercial property. I think you know about us, we really are not an opportunistic property market, right? We don’t over index on E and S property or coastal property. So we see that, but we don’t feel terribly affected by it.

In personal lines, I’ll succinctly tell you that I think the personal lines business is further segmenting itself. Right? And the reason why I emphasize our account orientation is because while those that focus almost exclusively on auto are headed down a dangerous path of becoming a price war and potentially overcompensating on the back end of this cycle. On the other side, even the folks that had intentions of being a bundler are doing a lot less bundling these days because home is a challenge. People are a little bit worried about whether the weather patterns are going to continue, and so we’re seeing inside the IA channel, which still represents about 38% of the market, some real stabilization.

And I’ll remind you that there’s only a couple of nationals, there’s a couple of big super regionals like we are in the personal lines base in 20 states, and then a whole bunch of smaller mutuals and regionals. And so two thirds of the personal lines market in the IA channel, which has been pretty stable, is driven by companies that are behind, either because they haven’t gotten their insurance to values up yet, they haven’t reconciled their property aggregations, they don’t have the pricing sophistication that the nationals of the mid sized companies have. So there’s still a fairly challenging market, particularly in the IA channel, for somebody to say, how do I I can chase some auto pricing, but then I’ve to place the home with somebody and there’s not a lot of monoline home players, particularly in Middle America. So we feel like we’re in a pretty good spot where our margins are in good place, we’re still getting relatively good price and we just can’t get greedy. We’ve got to keep being thoughtful about what the right pricing is for a total account that allows us to hit the returns that we want to do, but provide some relative stability because the consumers are hurting, right?

This is a challenging time for many consumers in the personal line space. So we monitor the direct to consumer market and what’s happening there, we pay attention to the captive channel. What I would tell you inside the IA channel, we still feel like we’re in a really good position and it’s reasonably responsible terms of how the pricing patterns are playing out.

Unidentified speaker, Speaker: Alright, does that hit it? Yes, thank you. Okay, perfect. I want to spend a little time talking about specialty, maybe from two different perspectives. First, just a broad overview, how much of your specialty book involves unusual lines where you’ve got some lines or customers in the core commercial segment?

Jack Roche, CEO, The Hanover Group: So the strength of our specialty business is that we have a number of businesses that create an expert to expert experience where an agent has expertise in management liability or professional liability or some healthcare space surety where we handle that, I don’t want say a monoline basis, but on a kind of expert to expert experience. We may or may not write the casualty or the other lines, but we’re still dealing with an expertise based model. But because we play on the lower end of the spectrum, kind of small to mid sized accounts, we have an added ability to go out to a number of our agents and see where we can cross market or cross sell. If you take away from some of the portal business that we have for like Builders Risk or some of the online stuff that is just literally off the point of sale system, it’s roughly between 35% to 40% of our specialty business has some connectivity to the core lines. And I quite frankly think that’s healthy because what we don’t want to do is let cross sell become obligatory.

It’s really hard to have appetites across multiple lines or multiple businesses and get it right. So I think what we’ve been able to do is, and I think that percentage, 35 to 40 is probably industry leading, particularly for management liability and professional liability. Think many of the people we compete against either get their business exclusively through wholesalers, which means they’re by definition getting a monoline proposition, or they’re dealing with the brokers of the bigger accounts where it is they’re really not even attempting to do any cross sell. So I quite like the way that mosaic plays out for us, and we have different strategies to kind of bring that forward. And our core lines underwriters, both small commercial and middle market, they have incentives to go out and find the desirable specialty lines that are associated with our core lines.

And that is when you hear Brian Salvatore talk, that’s what excites him is that he’s part of a company that thinks like that and can help extend his specialty business into the core line area.

Unidentified speaker, Speaker: Okay, fantastic. And then another specialty line that can mean a lot of things is marine. I was hoping just to drill down in terms of what you currently focus on in marine and maybe what the growth prospects are expanding that definition.

Jack Roche, CEO, The Hanover Group: Yes, I would say marine is probably our strongest specialty business frankly, both in terms of consistent high profitability, but also our growth prospects going forward. It’s approaching $05,000,000,000 We have some of the best talent in the industry. When you go out to the core independent agents, there’s only two or three markets that they depend on a regular basis for builders risk, contractors equipment, motor truck cargo, things like instrument floaters, and musical there’s all these non fixed property exposures that are best underwritten and placed over time by marine underwriters. We do a small portion of our in the ocean marine, but that’s really not our specialty. We’re more in the inland marine.

But it’s that breadth of product line. In fact, from a strategy standpoint, we try not to get any subsector of the marine business to be more than 20% of the portfolio because over time, things ebb and flow and it’s that diversification in the marine business that has allowed us to consistently produce sub-ninety combined ratios and continue to grow the business. So couldn’t be more excited about it. The leadership that we have in that business is second to none. And we have huge headroom ahead for us in the marine business.

Unidentified speaker, Speaker: Okay. And then as a follow-up on specialty, and I always define specialty as reliant more on underwriting skill than maybe simply analytics. I know that’s a little bit of a generalization. But what does Hanover do to attract, to retain and to train underwriting and claims talent? On the claims side?

And on the underwriting side.

Jack Roche, CEO, The Hanover Group: On the underwriting side. Yes, I mean one of your premises is that you go all the way from personal lines on one side of the spectrum to maybe some of the most bespoke specialty businesses, highly analytical, highly actuarial to much more of an art than a science. Data is important across all of our businesses, but data analytics and data science and the ability to put multi variant products together are most important in personal lines and small commercial. And frankly, intuitiveness and experience and then figuring out how to get some efficiencies on the specialty business is kind of the continuum that we work with. I think one of the strengths and the reason why I think we’re winning the talent war is because people look at, if you just stay on the specialty side of the business, they can be part of building something and helping us redefine operating models on the small to mid sized business.

This is an exciting time that if you are investing in technology, in data and analytics, and you have people that like working on that small face value business, the game is changing, whether it be building portals, working more directly with agents, giving them some opportunity to do some pre underwriting in a box environment or just leveraging the service center environment that we’ve created. We’ve got more and more specialty business where they’re saying, hey, can you just service this business for me because it’s some of the lowest EBITDA margins we have. On the claims side, I think there’s a parallel to that. The companies that are leaning into the operating model change and figuring out what they have to touch, what they don’t have to touch. I’ll give you a small example.

Six years ago, we had 18 appraisers that would have to go out and see probably eighty percent of the auto accidents that we had. It was a very archaic way, but the COVID changed that overnight. And now what we have is a set of digital tools and inside appraisal folks that can do God bless you. Thank you. Four or 5x in terms of workload, the efficiency and the effectiveness of the appraisals is improved, and the customer experience is through the roof.

Our NPS scores in claims are the highest they’ve been in some time. So it’s so ironic that we’re at a if you’re focused on this and you know what part of the value chain has an opportunity to improve, the adoption rates are way up. People are just they have they they want to do things digitally. They want to get things done, And we’re leaning into that environment and improving expenses, customer experience, and frankly creating new roles for talent to be able to come in and say, hey, that job is more enticing to me than being Hector the inspector or driving out and looking at cars for a living. That’s just frankly not that exciting of a job anymore.

Unidentified speaker, Speaker: It’s not that rewarding. We’ve got thirty seconds. I’m going to throw in a quick question on the personal line side. You’re in 20 states now. In X years, what number will that be?

Jack Roche, CEO, The Hanover Group: I don’t know is the right answer. I think some of that will be how the personal lines plays out. We always have a set of next states that we would consider. We also have a list of states that probably never. Good.

And those states we’ve been pretty disciplined on. I think it’s going to be a function, frankly, of how the game plays out in terms of independent agency persistency in the channel, whether our account orientation continues to evolve as something that’s truly distinctive in the marketplace. If it is, I could see us being in another half a dozen states. I don’t see it ever being 40 plus. Some of the states are just undesirable, from either a legal or a weather perspective.

And frankly, we can be a super regional in personal lines and fit our agents’ desires for that business. In commercial, we think of ourselves as really a full national player. Perfect.

Unidentified speaker, Speaker: With that, we’ve come to the end of our session. Please join me in thanking Jack and Jeff for the tremendous session. Thank you.

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