THG 2018 Annual Report

environment, particularly ZLWKLQ RXU ZRUNHUV¶ FRPSHQVDWLRQ OLQH DV ZHOO DV for larger middle market accounts, which may hamper our ability to grow in this portion of our business. Personal Lines Personal Lines net premiums written were $1,774.1 million for the year ended December 31, 2018, compared to $1,647.1 million for the year ended December 31, 2017, an increase of $127.0 million. This was primarily due to higher renewal premium driven by rate increases and strong retention, as well as new business growth. Net premiums written in the personal automobile line of business for the year ended December 31, 2018 were $1,127.5 million, compared to $1,041.6 million for the year ended December 31, 2017, an increase of $85.9 million. This increase was primarily due to rate increases and an increase in policies in force of 2.5%. Net premiums written in the homeowners line of business for the year ended December 31, 2018 were $604.0 million, compared to $566.9 million for the year ended December 31, 2017, an increase of $37.1 million. This is attributable to rate increases and an increase in policies in force of 3.0%. Personal Lines underwriting profit for the year ended December 31, 2018 was $66.6 million, compared to $83.7 million for the year ended December 31, 2017, a decline of $17.1 million. Catastrophe losses for the year ended December 31, 2018 were $76.9 million, compared to $80.9 million for the year ended December 31, 2017, a decrease of $4.0 million. Unfavorable development on prior \HDUV¶ loss reserves for the year ended December 31, 2018 was $33.3 million, compared to $9.4 million for the year ended December 31, 2017, an increase of $23.9 million. Personal Lines current accident year underwriting profit, excluding catastrophes, was $176.8 million in the year ended December 31, 2018, compared to $174.0 million for the year ended December 31, 2017. This $2.8 million increase was primarily a result of earned premium growth and lower expenses, partially offset by higher non-catastrophe current accident year losses. This increase in losses was driven by higher homeowners property losses, partly due to large losses and non-catastrophe weather activity, higher personal automobile bodily injury loss severity and, to a lesser extent, higher personal automobile property losses. We have been able to obtain rate increases in our Personal Lines markets and believe that our ability to obtain these increases will continue. However, our ability to maintain Personal Lines net premiums written may be affected by price competition, and regulatory and legal developments. Additionally, these factors along with weather-related loss volatility may also affect our ability to maintain and improve underwriting results. We monitor these trends and consider them in our rate actions. Other Other operating losses were $5.4 million for the year ended December 31, 2018, compared to $8.8 million for the year ended December 31, 2017, an improvement of $3.4 million, primarily due to higher net investment income. 2017 Compared to 2016 Commercial Lines Commercial Lines net premiums written were $2,462.0 million for the year ended December 31, 2017, compared to $2,361.5 million for the year ended December 31, 2016. This $100.5 million increase was due to growth of $117.4 million, primarily driven by pricing increases, strong retention, and targeted new business expansion, partially offset by a $16.9 million increase in reinsurance reinstatement premiums driven by large property losses in our inland marine and commercial multiple peril lines. Commercial Lines underwriting profit for the year ended December 31, 2017 was $12.2 million, compared to underwriting loss of PLOOLRQ IRU WKH \HDU HQGHG 'HFHPEHU D FKDQJH RI PLOOLRQ )DYRUDEOH GHYHORSPHQW RQ SULRU \HDUV¶ ORVV U eserves for the year ended December 31, 2017 was $9.4 million, compared to unfavorable development of $223.0 million for the year ended December 31, 2016, a favorable change of $232.4 million, primarily due to the aforementioned reserve charge following our 2016 fourth quarter reserve review. Catastrophe-related losses for the year ended December 31, 2017 were $170.6 million, compared to $70.1 million for the year ended December 31, 2016, an increase of $100.5 million. This increase is primarily due to hurricanes Harvey and Irma that occurred in the third quarter, the California wildfires that occurred in the fourth quarter, and a large Midwest hail event that occurred in the second quarter. Commercial Lines current accident year underwriting profit, excluding catastrophes, was $173.4 million for the year ended December 31, 2017, compared to $169.9 million for the year ended December 31, 2016. This $3.5 million improvement was primarily due to lower ORVVHV LQ RXU ZRUNHUV¶ FRPSHQVDWLRQ OLQH ORZHU H[SHQVHV DQG SUHPLXP JURZWK SDUW ially offset by higher large losses and the increase in reinstatement premiums. The impact of additional reinstatement premiums, net of ceding commissions, decreased 2017 current accident year underwriting profit by $12.0 million from 2016 levels. Personal Lines Personal Lines net premiums written were $1,647.1 million for the year ended December 31, 2017, compared to $1,521.2 million for the year ended December 31, 2016, an increase of $125.9 million. This was primarily due to higher renewal premium driven by rate increases and improved retention, as well as new business growth. 45 2018 ANNUAL REPORT | THE HANOVER INSURANCE GROUP