THG
The Hanover Insurance Group, Inc.
$224.15
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Fair Value
Trading 21.2% below fair value
Bear
$284.57
+27.0%
ROTCE 18.5% → 4.00x TBV
Fair
$284.57
+27.0%
ROTCE 24.6% → 4.00x TBV
Bull
$284.57
+27.0%
ROTCE 28.3% → 4.00x TBV
Key Value Driver
ROTCE (24.6%) vs. cost of equity (6.0%)
Implied Market Multiple
2.92x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $215.75 from 22 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $284.57 per share.
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 $215.75 (from 22 analysts). Our estimate is 43% 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