Hanover Insurance Group's (THG) earnings growth is likely to slow even as the company continues to show conservative reserve management across key commercial lines, RBC Capital Markets said Tuesday in a report.

RBC said 2025 is expected to mark the peak earnings year through 2027, with normalizing catastrophe losses, moderating pricing spreads and macro uncertainty limiting upside.

A review of Hanover's Schedule P data shows management remains conservative in its reserving approach, particularly in "challenged" lines such as Commercial Auto Liability and Other Liability Occurrence, the report said.

Commercial Auto Liability posted a charge mainly tied to the 2023 and 2024 accident years, while the 2025 accident year carried the highest initial loss estimate in a decade at 73.3%, 910 basis points above 2024's initial estimate and 160 basis points above the current loss ratio, the report said.

"We think the adverse development says a lot more about the state of commercial auto as opposed to a company-specific issue," the report said.

Heading into 2026, "we see limited opportunities for continued earnings growth" and return-on-equity expansion, the report said. "Hanover is lapping difficult catastrophe comps and facing macro headwinds."

RBC lowered its price target on Hanover to $190 from $200 and maintained its sector perform rating.

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