Hanover Unshaken By Falling Stock Price
It's been a difficult few months for Hanover Insurance Group's stock.
As a whole, the property and casualty insurance industry has been battered by unusually rough weather this spring and summer. For Hanover, the weather-related losses were particularly deep, and there was also the complicating fact that the company spent the season acquiring U.K. insurer Chaucer Holdings PLC for $474 million.
Between mid-March and mid-June, Hanover's stock price fell more than 20 percent, from $46 a share to less than $37. Since then, it has bobbed around at a level that it hadn't seen since climbing back from the market crash in mid-2009. It closed Thursday at $36.25.
But Hanover spokesman Michael Buckley said the company isn't worried.
"We focus on the performance of our stock over longer periods of time, and not so much over shorter periods," he said. "We recognize that there'll be fluctuations in value as circumstances change, and we're confident that the value of our business will be evident in the performance of our stock over time."
Still, Buckley said the "confluence of events" in recent months was unusual enough to make Hanover break with its general policy of not commenting publicly about its stock price.
He said the damage done by winter storms and spring tornadoes was far out of the ordinary, and the Chaucer acquisition was the kind of large investment that can make some investors skittish until it proves its value.
Among market watchers, there's some disagreement about Hanover's strategies. In early July, Barclay's Capital reduced its price target for Hanover from $46 to $40 per share based on its estimation of risks associated with the Chaucer acquisition. It also reduced its 2011 earnings-per-share estimate for the company from $2.40 to $1.70 based on Hanover's announcement that it expected second-quarter catastrophe losses of $145 million to $160 million.
Cliff Gallant, an analyst with Keefe, Bruyette and Woods, agreed that the company's earnings will be hurt by the major storms, but he said that's only a short-term issue. And Gallant said he raised his estimates for the company because of the Chaucer deal, arguing that the U.K. firm is in insurance lines where prices are rising.
Gallant said some observers may wonder if Hanover is going too far beyond its area of expertise by making a big international acquisition, but he said he's impressed with insurer's management and ability to make good decisions.
"Every time you make an acquisition there's a degree of risk," he said.
WBJ Web Partners
Most Recent
Most Recent
0 Comments