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The Hanover Insurance's Senior Notes Sees Rating Action

The newly issued $375 million 4.50% senior unsecured notes of The Hanover Insurance Group, Inc. THG were recently assigned an issue rating of “bbb” by credit rating giant, A.M. Best. The outlook is stable. The notes are scheduled to mature on Apr 15, 2026.

In addition, the company’s senior unsecured debt was assigned indicative ratings of “bbb”, while the subordinated debt and preferred stock received ratings of “bb+”. These were part of the recently filed shelf registration of the company. These too carried a stable outlook.

The property and casualty (P&C) insurer plans to deploy the net proceeds from the issued notes to redeem its outstanding 2020 and 2021 maturity senior notes during the second quarter of 2016.

The multiple ratings indicate A.M. Best’s perception of the company’s strong risk-adjusted capitalization as well as the positive operating earnings trend of the Hanover Insurance Group Property and Casualty Companies, a unit of The Hanover Insurance. In addition, the ratings acknowledge the company’s proactive and comprehensive risk management, strong international segment’s earnings as well as the significant U.S. market exposure in commercial and personal lines.

At the end of 2015, the company’s financial leverage was 22.6%. However, the currently issued unsecured notes and the subsequent redemption of senior notes will lead to a moderate decline of 22.4% of the same with strong interest coverage ratio.

Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence on the stock as well as maintaining credit worthiness in the market. Hence, it is expected that such ratings will help the company instill and retain investor confidence in the future.  

Zacks Rank and Stocks to Consider

Currently, The Hanover Insurance sports a Zacks Rank #1 (Strong Buy). Investors interested in the P&C industry might consider looking at Hallmark Financial Services Inc. HALL, White Mountains Insurance Group, Ltd. WTM and EMC Insurance Group Inc. EMCI. All these share the same Zacks Rank with The Hanover Insurance.

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