WORCESTER – How a company makes money today might not be how a company makes money tomorrow, said Jack Roche, president and chief executive officer of the Hanover Insurance Group, said in an interview Thursday night.
Ahead of a talk at the Worcester Economic Club’s 556th meeting at the College of the Holy Cross, Mr. Roche said being clear-eyed about profit pools and managing a wide business portfolio should be balanced with a corporate culture that encourages employees to question established practices and gives them the support to offer alternative solutions.
“In order to prosper you can’t have a static strategy,” Mr. Roche said.
He said that willingness at the Worcester-based insurance giant to move away from insular thinking has led to bold decisions that have paid off in the short term and strengthened the company long-term.
The company acquired Chaucer, a specialty insurer that operates within the Lloyd’s of London marketplace, in July 2011 for $482 million. Hanover sold the company in December 2018 for $940 million.
“It was one of our most successful acquisitions,” Mr. Roche said.
But aside from the 20 percent internal rate of return Hanover realized from the deal, selling Chaucer allowed Hanover to double-down on its domestic product, Mr. Roche said.
Mr. Roche said the property and casualty insurance space in which Hanover operates is one of the backbones of the U.S. economy. Businesses and entrepreneurs could not take the risks they take to succeed without companies like Hanover, he said.
But the insurance business is changing and must continue to change to adapt to new challenges, Mr. Roche said. Those challenges include climate change impacts and the threat of cyber-attacks.
Mr. Roche said the cost of weather impacts is making its way into the cost of insurance, he said. He said it’s important that the company go beyond its customer base in raising awareness about the effects of climate change.
“We’re doing an injustice if we don’t show the greater community how, at least over the last couple of decades, not only is the amount of damage related to weather/storms increasing, but the complexion of those storms is changing,” Mr. Roche said.