THG
The Hanover Insurance Group, Inc.
$231.73
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 25.0% below fair value
Bear
$308.98
+33.3%
ROTCE 18.5% → 4.00x TBV
Fair
$308.98
+33.3%
ROTCE 24.6% → 4.00x TBV
Bull
$308.98
+33.3%
ROTCE 28.3% → 4.00x TBV
Adjust Assumptions
24.6%
6.0%
Key Value Driver
ROTCE (24.6%) vs. cost of equity (6.0%)
Implied Market Multiple
3.0x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (22 analysts)
$229.60
Divergence from AlphaVal
35%
Summary
With ROTCE of 24.6% vs. 6.0% cost of equity, fair P/TBV is 4.00x on $77.25 tangible book, implying $308.98 per share. DDM cross-check: $343.84.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $229.60 (from 22 analysts). Our estimate is 35% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly