Understanding The Hanover Insurance Group’s AM Best Rating

When shopping for insurance, it’s important to choose a financially stable company that will be there when you need them. One way to evaluate an insurer’s financial strength is to look at their AM Best rating. So what is the AM Best rating for The Hanover Insurance Group?

Overview of AM Best Ratings

AM Best is a credit rating agency focused on the insurance industry They analyze the financial health of thousands of insurers and assign letter grade ratings indicating financial strength and long-term viability

AM Best ratings are a trusted standard used by insurance agents, regulators and consumers to compare the relative financial stability of companies. Key facts about their ratings

• Rates an insurer’s ability to pay claims, a key measure of security for policyholders

• Conducts in-depth proprietary research of balance sheets, reserves, operations, and market position

• Categories range from A++ (Superior) to D (Poor)

• Adds outlooks of Positive, Negative or Stable for potential upgrade or downgrade

• Considers the consolidated strength of a group of commonly owned insurers

• Rates life, health, property & casualty, and title insurers

Checking an insurer’s AM Best rating is a smart first step when buying insurance, ensuring your carrier will be solvent when you need them.

Hanover Insurance Group’s AM Best Ratings

The Hanover Insurance Group (THG) is a leading property and casualty insurer based in Worcester, MA. The company and its affiliates underwrite policies including home, auto, business, and specialty commercial coverages.

AM Best evaluates THG insurers collectively under “AM Best Rating Unit 004861 – Hanover Ins Group Prop & Cas Cos”. This encompasses the consolidated financials of key underwriting entities like The Hanover Ins Co, Citizens Ins Co of America, and Massachusetts Bay Ins Co.

THG currently holds the following AM Best ratings:

• Financial Strength Rating: A (Excellent)

  • Assigned to insurers with excellent ability to meet ongoing policy and contract obligations
  • The second highest of AM Best’s 13 rating categories

• Long-Term Issuer Credit Rating: a+ (Excellent)

  • Indicates excellent credit quality and ability to meet senior financial obligations
  • The second highest of AM Best’s letter grade categories

• Outlook: Stable

  • Indicates AM Best believes the ratings are unlikely to change over the medium term

These ratings were most recently affirmed by AM Best in June 2022, continuing a long track record of strong ratings. They reflect THG’s balance sheet strength, operating performance, business profile, and enterprise risk management.

Understanding The Hanover’s “A” (Excellent) FSR

The Hanover’s “A” (Excellent) Financial Strength Rating signifies superior financial security and claims paying ability according to AM Best’s analysis.

An A rating is assigned only to companies that have, in AM Best’s opinion:

• Very strong balance sheets, with high quality capital, conservative reserves, and solid liquidity

• Consistently positive operating performance, with profitable underwriting and steady investment gains

• Established market positions, diversified products, and excellent distribution

• Very strong enterprise risk management frameworks and practices

• Low exposure to contingent liabilities or risky assets

• Capacity to withstand significant negative market or economic conditions

The Hanover’s excellent capitalization, operating profitability, market profile, and risk controls support the A (Excellent) rating indicating resilience and low policyholder default risk.

Understanding The Hanover’s “a+” Issuer Credit Rating

In addition to Financial Strength Ratings that specifically evaluate insurance subsidiaries, AM Best assigns Long-Term Issuer Credit Ratings (Long-Term ICRs) to insurance holding companies like The Hanover Insurance Group.

Long-Term ICRs measure the ability to meet senior financial obligations and claims if an insurance group’s underwriting companies were unable to pay. The Hanover holds an Issuer Credit Rating of “a+” (Excellent), the second highest rating.

A Long-Term ICR of a+ means AM Best believes THG has an “excellent” ability to meet its ongoing senior credit obligations based on:

• Substantial consolidated capital and liquidity

• Consistent and stable earnings

• Considerable financial flexibility

• Access to capital markets

• Manageable debt leverage

• Strong enterprise risk management

This rating indicates The Hanover holding company could absorb operating losses from affiliates and has excellent financial flexibility, a reassuring sign for stakeholders.

Outlook Indicates Ratings Stability

In addition to the letter grade ratings, AM Best assigns a Positive, Negative, or Stable outlook indicating potential direction of future ratings. The Hanover has an outlook of Stable, meaning AM Best anticipates the financial strength ratings are unlikely to change over the medium term, barring unexpected events.

A Stable outlook is generally preferred, showing ratings stability versus uncertainty in either direction. This reflects continued balance sheet strength, solid underwriting performance, and effective risk management by The Hanover.

The Takeaway

Choosing an insurer with strong financial ratings is key to protecting policyholders. The Hanover Insurance Group’s AM Best ratings of A (Excellent) for Financial Strength and a+ (Excellent) for Long-Term Issuer Credit provide confidence they have superior financial capacity to meet claims obligations now and into the future. For insurance buyers seeking stability and security, The Hanover’s AM Best ratings indicate financial excellence.