Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - HANOVER INSURANCE GROUP, INC. | d297397d8k.htm |
| EX-99.1 - PRESS RELEASE - HANOVER INSURANCE GROUP, INC. | d297397dex991.htm |
Exhibit 99.2
STATISTICAL SUPPLEMENT
FOURTH QUARTER 2011
THE HANOVER INSURANCE GROUP
STATISTICAL SUPPLEMENT
TABLE OF CONTENTS
| Business Description |
1 | |||
| Financial Highlights |
2 | |||
| Consolidated Financial Statements |
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| Income Statements |
3 | |||
| Balance Sheets |
4 | |||
| GAAP Underwriting Results |
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| Consolidated |
5-7 | |||
| Commercial Lines |
8-10 | |||
| Personal Lines |
11-13 | |||
| Chaucer |
14-16 | |||
| Investments |
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| Net Investment Income and Yields |
17 | |||
| Investment Portfolio |
18 | |||
| Credit Quality and Duration of Fixed Maturities |
19 | |||
| Top 10 Corporate and Municipal Fixed Maturity Holdings |
20 | |||
| Reconciliation of Segment Income to Net Income |
21 | |||
| Other Information |
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| Non-GAAP Financial Measures |
22 | |||
| Corporate Information |
23 | |||
| Market and Dividend Information |
23 | |||
| Financial Strength and Debt Ratings |
23 |
THE HANOVER INSURANCE GROUP
BASIS OF PRESENTATION
Information contained in this document includes the results of Chaucer from the acquisition date of July 1, 2011 onward.
BUSINESS DESCRIPTIONS
COMMERCIAL LINES
Commercial multiple peril coverage insures businesses against third party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products sold. It also insures business property for damage, such as that caused by fire, wind, hail, water damage (except for flooding), theft and vandalism.
Commercial automobile coverage insures businesses against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and property.
Workers’ compensation coverage insures employers against employee medical and indemnity claims resulting from injuries related to work. Workers’ compensation policies are often written in conjunction with other commercial policies.
Other Commercial Lines is comprised of inland marine, which insures businesses against physical losses to property, such as contractor’s equipment, builders’ risk and goods in transit. We also offer underwriting and managing of program business, including to under-served markets where there are specialty coverage or risk management needs. Other Commercial Lines also includes bonds, which provides businesses with contract surety coverage in the event of performance or payment claims, and commercial surety coverage related to fiduciary or regulatory obligations. Also included in Other Commercial Lines coverages are umbrella, general liability, fire, specialty property, and professional and management liability.
PERSONAL LINES
Personal automobile coverage insures individuals against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and other property.
Homeowners coverage insures individuals for losses to their residences and personal property, such as those caused by fire, wind, hail, water damage (except for flooding), theft and vandalism, and against third party liability claims.
Other Personal Lines are comprised of personal inland marine (jewelry, art, etc.), umbrella, fire, personal watercraft, earthquake and other miscellaneous coverages.
CHAUCER
The Chaucer reporting segment represents THG’s international business written through Lloyd’s and includes international property, marine and aviation, energy, UK motor and international casualty and other coverages.
Property coverage, including direct, facultative and treaty property accounts, insures property, including commercial, auto, and industrial businesses, against physical loss or damage and business interruption. The property treaty account comprises mainly catastrophe and per risk excess contract acceptances, with a small amount of proportional treaty and reinsurance assumed business.
Marine and Aviation includes coverages that insure marine hull, excess of loss, liability, cargo and specie, in addition to political risk, war, and satellite business coverages. It also includes aviation coverages that insure airline hull and liability, general aviation and refuellers and products.
Energy coverage, encompassing exploration and production, construction, liabilities downstream and renewables, insures energy businesses against physical damage, business interruption, control of well, seepage and pollution and liabilities. Energy also includes Nuclear, which predominantly provides coverage relating to power generation at nuclear power stations.
UK Motor coverage insures the UK private car and fleet markets. In addition, it writes specialist classes including commercial vehicle, taxi, motorcycle, motor trade and classic/specialist vehicles, as well as other UK small commercial products.
Casualty and Other Lines includes coverages that insure financial institutions crime and professional indemnity, medical malpractice, workers’ compensation and professional, managerial and general liability, as well as syndicate participations.
OTHER PROPERTY AND CASUALTY
Other Property and Casualty segment consists of Opus, which provides investment advisory services to affiliates and also manages assets for unaffiliated institutions such as insurance companies, retirement plans and foundations; earnings on holding company assets; and voluntary pools business which is in run-off.
1
THE HANOVER INSURANCE GROUP
FINANCIAL HIGHLIGHTS (1)
| (In millions, except earnings per share) |
Q4 2010 |
Q1 2011 |
Q2 2011 |
Q3 2011 |
Q4 2011 |
Dec-YTD 2010 |
Dec-YTD 2011 |
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| PREMIUMS |
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| Gross premiums written |
$ | 795.3 | $ | 833.3 | $ | 894.6 | $ | 1,198.3 | $ | 1,133.0 | $ | 3,358.6 | $ | 4,059.2 | ||||||||||||||
| Net premiums written |
717.1 | 749.9 | 815.4 | 1,051.0 | 977.1 | 3,048.0 | 3,593.4 | |||||||||||||||||||||
| Net premiums earned |
748.7 | 761.7 | 770.5 | 1,018.6 | 1,047.8 | 2,841.0 | 3,598.6 | |||||||||||||||||||||
| EARNINGS |
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| Segment income (loss) before interest and taxes |
$ | 76.2 | $ | 49.8 | (46.8 | ) | $ | (7.6 | ) | $ | 77.1 | $ | 227.7 | $ | 72.5 | |||||||||||||
| Segment income (loss) after taxes |
43.7 | 26.0 | (38.1 | ) | (18.5 | ) | 45.2 | 122.2 | 14.6 | |||||||||||||||||||
| Income (loss) from continuing operations |
57.4 | 27.9 | (32.4 | ) | (9.7 | ) | 46.1 | 153.2 | 31.9 | |||||||||||||||||||
| Net income (loss) |
58.4 | 29.3 | (31.8 | ) | (9.7 | ) | 49.3 | 154.8 | 37.1 | |||||||||||||||||||
| PER SHARE DATA (DILUTED) (1) |
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| Segment income (loss) after taxes |
$ | 0.95 | $ | 0.56 | (0.84 | ) | $ | (0.41 | ) | $ | 1.00 | $ | 2.64 | $ | 0.32 | |||||||||||||
| Income (loss) from continuing operations |
1.25 | 0.61 | (0.71 | ) | (0.21 | ) | 1.02 | 3.31 | 0.70 | |||||||||||||||||||
| Net income (loss) |
1.27 | 0.64 | (0.70 | ) | (0.21 | ) | 1.09 | 3.34 | 0.81 | |||||||||||||||||||
| Weighted average shares outstanding (1) |
45.9 | 46.0 | 45.4 | 45.3 | 45.3 | 46.3 | 45.8 | |||||||||||||||||||||
BALANCE SHEET
| (In millions, except per share data) |
December 31 2010 |
March 31 2011 |
June 30 2011 |
September 30 2011 |
December 31 2011 |
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| Total assets |
$ | 8,569.9 | $ | 8,514.9 | $ | 8,981.3 | $ | 12,684.5 | $ | 12,624.4 | ||||||||||
| Total loss and loss adjustment expense reserves |
3,277.7 | 3,315.4 | 3,406.4 | 5,722.0 | 5,760.3 | |||||||||||||||
| Total shareholders’ equity |
2,460.5 | 2,488.7 | 2,485.0 | 2,454.9 | 2,509.8 | |||||||||||||||
| U.S. Property and Casualty Companies |
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| Statutory surplus |
$ | 1,747.3 | $ | 1,776.6 | $ | 1,658.6 | $ | 1,538.5 | $ | 1,582.8 | ||||||||||
| Premium to surplus ratio |
1.75:1 | 1.73:1 | 1.86:1 | 2.02:1 | 2.00:1 | |||||||||||||||
| Book value per share |
$ | 54.74 | $ | 55.06 | $ | 54.96 | $ | 54.98 | $ | 56.24 | ||||||||||
| Book value per share, excluding net unrealized investment gains and losses, net of tax |
$ | 51.92 | $ | 52.06 | $ | 51.12 | $ | 51.65 | $ | 52.16 | ||||||||||
| Tangible book value per share (total book value excluding goodwill and intangibles) |
$ | 49.22 | $ | 49.62 | $ | 49.57 | $ | 47.20 | $ | 48.84 | ||||||||||
| Shares outstanding |
44.9 | 45.2 | 45.2 | 44.6 | 44.6 | |||||||||||||||
| Total debt/equity |
24.6 | % | 22.5 | % | 34.5 | % | 36.7 | % | 36.3 | % | ||||||||||
| Total debt/total capital |
19.8 | % | 18.4 | % | 25.7 | % | 26.9 | % | 26.6 | % | ||||||||||
| (1) | Weighted average shares outstanding and per diluted share amounts in the second and third quarters of 2011 exclude common stock equivalents, as the impact of these instruments was anti-dilutive. |
2
THE HANOVER INSURANCE GROUP
CONSOLIDATED INCOME STATEMENTS
| Three Months ended December 31 | Year ended December 31 | |||||||||||||||||||||||
| (In millions) |
2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||
| REVENUES |
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| Premiums earned |
$ | 1,047.8 | $ | 748.7 | 39.9 | $ | 3,598.6 | $ | 2,841.0 | 26.7 | ||||||||||||||
| Net investment income |
69.0 | 63.0 | 9.5 | 258.2 | 247.2 | 4.4 | ||||||||||||||||||
| Total net realized investment gains |
3.2 | 12.9 | (75.2 | ) | 28.1 | 29.7 | (5.4 | ) | ||||||||||||||||
| Fees and other income |
15.9 | 8.7 | 82.8 | 46.7 | 34.3 | 36.2 | ||||||||||||||||||
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| Total revenues |
1,135.9 | 833.3 | 36.3 | 3,931.6 | 3,152.2 | 24.7 | ||||||||||||||||||
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| LOSSES AND EXPENSES |
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| Losses and loss adjustment expenses |
687.4 | 471.7 | 45.7 | 2,550.8 | 1,856.3 | 37.4 | ||||||||||||||||||
| Policy acquisition expenses |
250.8 | 178.2 | 40.7 | 854.0 | 669.0 | 27.7 | ||||||||||||||||||
| Interest expense |
16.4 | 11.5 | 42.6 | 55.0 | 44.3 | 24.2 | ||||||||||||||||||
| Other operating expenses |
118.1 | 96.3 | 22.6 | 449.5 | 371.5 | 21.0 | ||||||||||||||||||
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| Total losses and expenses |
1,072.7 | 757.7 | 41.6 | 3,909.3 | 2,941.1 | 32.9 | ||||||||||||||||||
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| Income from continuing operations before income taxes |
63.2 | 75.6 | (16.4 | ) | 22.3 | 211.1 | (89.4 | ) | ||||||||||||||||
| Income tax expense (benefit) |
17.1 | 18.2 | (6.0 | ) | (9.6 | ) | 57.9 | (116.6 | ) | |||||||||||||||
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| Income from continuing operations |
46.1 | 57.4 | (19.7 | ) | 31.9 | 153.2 | (79.2 | ) | ||||||||||||||||
| Discontinued operations |
3.2 | 1.0 | N/M | 5.2 | 1.6 | N/M | ||||||||||||||||||
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| Net income |
$ | 49.3 | $ | 58.4 | (15.6 | ) | $ | 37.1 | $ | 154.8 | (76.0 | ) | ||||||||||||
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3
THE HANOVER INSURANCE GROUP
CONSOLIDATED BALANCE SHEETS
| (In millions, except per share data) |
December 31 2011 |
December 31 2010 |
% Change | |||||||||
| ASSETS |
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| Investments: |
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| Fixed maturities, at fair value (amortized cost of $6,008.7 and $4,598.8) |
$ | 6,284.7 | $ | 4,797.9 | 31.0 | |||||||
| Equity securities, at fair value (cost of $239.9 and $120.7) |
246.4 | 128.6 | 91.6 | |||||||||
| Other investments |
190.2 | 39.4 | 382.7 | |||||||||
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| Total investments |
6,721.3 | 4,965.9 | 35.3 | |||||||||
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| Cash and cash equivalents |
820.4 | 290.4 | 182.5 | |||||||||
| Accrued investment income |
71.8 | 53.8 | 33.5 | |||||||||
| Premiums and accounts receivable, net |
1,168.1 | 772.0 | 51.3 | |||||||||
| Reinsurance recoverable on paid and unpaid losses, benefits and unearned premiums |
2,262.2 | 1,254.2 | 80.4 | |||||||||
| Deferred policy acquisition costs |
498.4 | 345.3 | 44.3 | |||||||||
| Deferred income taxes |
260.0 | 177.4 | 46.6 | |||||||||
| Goodwill |
185.5 | 179.2 | 3.5 | |||||||||
| Other assets |
515.5 | 398.1 | 29.5 | |||||||||
| Assets of discontinued operations |
121.2 | 133.6 | (9.3 | ) | ||||||||
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| Total assets |
$ | 12,624.4 | $ | 8,569.9 | 47.3 | |||||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| LIABILITIES |
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| Loss and loss adjustment expense reserves |
$ | 5,760.3 | $ | 3,277.7 | 75.7 | |||||||
| Unearned premiums |
2,292.1 | 1,520.3 | 50.8 | |||||||||
| Expenses and taxes payable |
642.9 | 541.7 | 18.7 | |||||||||
| Reinsurance premiums payable |
378.9 | 34.4 | N/M | |||||||||
| Debt |
911.1 | 605.9 | 50.4 | |||||||||
| Liabilities of discontinued operations |
129.3 | 129.4 | (0.1 | ) | ||||||||
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| Total liabilities |
10,114.6 | 6,109.4 | 65.6 | |||||||||
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| SHAREHOLDERS’ EQUITY |
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| Preferred stock, par value $0.01 per share; 20.0 million shares authorized; none issued |
— | — | — | |||||||||
| Common stock, par value $0.01 per share; 300.0 million shares authorized; 60.5 million shares issued |
0.6 | 0.6 | — | |||||||||
| Additional paid-in capital |
1,784.8 | 1,796.5 | (0.7 | ) | ||||||||
| Accumulated other comprehensive income |
210.4 | 136.7 | 53.9 | |||||||||
| Retained earnings |
1,237.1 | 1,246.8 | (0.8 | ) | ||||||||
| Treasury stock at cost (15.9 and 15.6 million shares) |
(723.1 | ) | (720.1 | ) | 0.4 | |||||||
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| Total shareholders’ equity |
2,509.8 | 2,460.5 | 2.0 | |||||||||
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| Total liabilities and shareholders’ equity |
$ | 12,624.4 | $ | 8,569.9 | 47.3 | |||||||
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4
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
CONSOLIDATED
Three Months ended December 31
| 2011 | 2010 | |||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Commercial Lines |
Personal Lines |
Chaucer | Other P&C |
Total P&C |
Commercial Lines |
Personal Lines |
Other P&C |
Total P&C |
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| Gross premiums written |
$ | 475.3 | $ | 380.0 | $ | 277.7 | $ | — | $ | 1,133.0 | $ | 422.0 | $ | 373.3 | $ | — | $ | 795.3 | ||||||||||||||||||
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| Net premiums written |
$ | 415.7 | $ | 354.9 | $ | 206.5 | $ | — | $ | 977.1 | $ | 369.1 | $ | 348.0 | $ | — | $ | 717.1 | ||||||||||||||||||
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| Net premiums earned |
$ | 422.3 | $ | 364.0 | $ | 261.5 | $ | — | $ | 1,047.8 | $ | 384.7 | $ | 364.0 | $ | — | $ | 748.7 | ||||||||||||||||||
| Losses and LAE: |
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| Current accident year, excluding catastrophe losses |
249.3 | 254.0 | 159.2 | — | 662.5 | 225.8 | 252.7 | 0.1 | 478.6 | |||||||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(7.5 | ) | (4.5 | ) | (18.9 | ) | 0.2 | (30.7 | ) | (11.3 | ) | (12.2 | ) | (0.2 | ) | (23.7 | ) | |||||||||||||||||||
| Catastrophe losses |
4.0 | 15.7 | 35.9 | — | 55.6 | 9.1 | 7.7 | — | 16.8 | |||||||||||||||||||||||||||
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| Total losses and LAE |
245.8 | 265.2 | 176.2 | 0.2 | 687.4 | 223.6 | 248.2 | (0.1 | ) | 471.7 | ||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
165.8 | 102.0 | 86.1 | 0.2 | 354.1 | 159.2 | 105.5 | — | 264.7 | |||||||||||||||||||||||||||
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| GAAP underwriting profit (loss) |
10.7 | (3.2 | ) | (0.8 | ) | (0.4 | ) | 6.3 | 1.9 | 10.3 | 0.1 | 12.3 | ||||||||||||||||||||||||
| Net investment income |
34.9 | 23.6 | 8.3 | 2.2 | 69.0 | 33.3 | 26.3 | 3.4 | 63.0 | |||||||||||||||||||||||||||
| Other income |
5.1 | 3.5 | 6.8 | 2.0 | 17.4 | 5.0 | 3.2 | 1.7 | 9.9 | |||||||||||||||||||||||||||
| Other operating expenses |
(4.3 | ) | (3.6 | ) | (1.9 | ) | (5.8 | ) | (15.6 | ) | (3.8 | ) | (0.8 | ) | (4.4 | ) | (9.0 | ) | ||||||||||||||||||
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| Segment income (loss) before income taxes |
$ | 46.4 | $ | 20.3 | $ | 12.4 | $ | (2.0 | ) | $ | 77.1 | $ | 36.4 | $ | 39.0 | $ | 0.8 | $ | 76.2 | |||||||||||||||||
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| Loss and LAE ratio: |
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| Current accident year, excluding catastrophe losses |
59.1 | % | 69.7 | % | 60.9 | % | N/M | 63.2 | % | 58.7 | % | 69.5 | % | N/M | 64.0 | % | ||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(1.8 | )% | (1.2 | )% | (7.2 | )% | N/M | (2.9 | )% | (2.9 | )% | (3.4 | )% | N/M | (3.2 | )% | ||||||||||||||||||||
| Catastrophe losses |
0.9 | % | 4.3 | % | 13.7 | % | N/M | 5.3 | % | 2.4 | % | 2.1 | % | N/M | 2.2 | % | ||||||||||||||||||||
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| Total loss and LAE ratio |
58.2 | % | 72.8 | % | 67.4 | % | N/M | 65.6 | % | 58.2 | % | 68.2 | % | N/M | 63.0 | % | ||||||||||||||||||||
| Expense ratio |
39.1 | % | 27.2 | % | 32.9 | % | N/M | 33.4 | % | 41.1 | % | 28.2 | % | N/M | 34.8 | % | ||||||||||||||||||||
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| Combined ratio |
97.3 | % | 100.0 | % | 100.3 | % | N/M | 99.0 | % | 99.3 | % | 96.4 | % | N/M | 97.8 | % | ||||||||||||||||||||
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| Change in policies in force |
7.1 | % | (2.3 | )% | 24.7 | % | (3.6 | )% | ||||||||||||||||||||||||||||
| Retention |
85.9 | % | 80.8 | % | 81.5 | % | 78.7 | % | ||||||||||||||||||||||||||||
5
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
CONSOLIDATED
Year ended December 31
| 2011 | 2010 | |||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Commercial Lines |
Personal Lines |
Chaucer | Other P&C |
Total P&C |
Commercial Lines |
Personal Lines |
Other P&C |
Total P&C |
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| Gross premiums written |
$ | 1,938.0 | $ | 1,561.3 | $ | 559.6 | $ | 0.3 | $ | 4,059.2 | $ | 1,798.5 | $ | 1,559.8 | $ | 0.3 | $ | 3,358.6 | ||||||||||||||||||
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| Net premiums written |
$ | 1,703.1 | $ | 1,461.2 | $ | 428.8 | $ | 0.3 | $ | 3,593.4 | $ | 1,584.8 | $ | 1,462.9 | $ | 0.3 | $ | 3,048.0 | ||||||||||||||||||
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| Net premiums earned |
$ | 1,641.7 | $ | 1,450.5 | $ | 506.3 | $ | 0.1 | $ | 3,598.6 | $ | 1,373.4 | $ | 1,467.3 | $ | 0.3 | $ | 2,841.0 | ||||||||||||||||||
| Losses and LAE: |
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| Current accident year, excluding catastrophe losses |
1,004.8 | 988.2 | 299.2 | 0.3 | 2,292.5 | 810.6 | 996.2 | 0.3 | 1,807.1 | |||||||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(34.7 | ) | (33.0 | ) | (35.5 | ) | (0.1 | ) | (103.3 | ) | (61.5 | ) | (48.8 | ) | (0.8 | ) | (111.1 | ) | ||||||||||||||||||
| Catastrophe losses |
148.4 | 163.7 | 49.5 | — | 361.6 | 61.6 | 98.7 | — | 160.3 | |||||||||||||||||||||||||||
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|||||||||||||||||||
| Total losses and LAE |
1,118.5 | 1,118.9 | 313.2 | 0.2 | 2,550.8 | 810.7 | 1,046.1 | (0.5 | ) | 1,856.3 | ||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
644.5 | 404.6 | 181.8 | 0.2 | 1,231.1 | 583.3 | 419.6 | — | 1,002.9 | |||||||||||||||||||||||||||
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|||||||||||||||||||
| GAAP underwriting profit (loss) |
(121.3 | ) | (73.0 | ) | 11.3 | (0.3 | ) | (183.3 | ) | (20.6 | ) | 1.6 | 0.8 | (18.2 | ) | |||||||||||||||||||||
| Net investment income |
136.5 | 92.1 | 16.9 | 12.7 | 258.2 | 129.9 | 102.9 | 14.4 | 247.2 | |||||||||||||||||||||||||||
| Other income |
20.7 | 13.3 | 10.9 | 7.0 | 51.9 | 19.0 | 13.6 | 6.3 | 38.9 | |||||||||||||||||||||||||||
| Other operating expenses |
(17.9 | ) | (9.7 | ) | (6.8 | ) | (19.9 | ) | (54.3 | ) | (17.1 | ) | (5.1 | ) | (18.0 | ) | (40.2 | ) | ||||||||||||||||||
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|||||||||||||||||||
| Segment income (loss) before income taxes |
$ | 18.0 | $ | 22.7 | $ | 32.3 | $ | (0.5 | ) | $ | 72.5 | $ | 111.2 | $ | 113.0 | $ | 3.5 | $ | $227.7 | |||||||||||||||||
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|||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
61.3 | % | 68.1 | % | 59.1 | % | N/M | 63.7 | % | 59.1 | % | 67.9 | % | N/M | 63.6 | % | ||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(2.1 | )% | (2.3 | )% | (7.0 | )% | N/M | (2.9 | )% | (4.5 | )% | (3.3 | )% | N/M | (3.9 | )% | ||||||||||||||||||||
| Catastrophe losses |
9.0 | % | 11.3 | % | 9.8 | % | N/M | 10.0 | % | 4.5 | % | 6.7 | % | N/M | 5.6 | % | ||||||||||||||||||||
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|||||||||||||||||||
| Total loss and LAE ratio |
68.2 | % | 77.1 | % | 61.9 | % | N/M | 70.8 | % | 59.1 | % | 71.3 | % | N/M | 65.3 | % | ||||||||||||||||||||
| Expense ratio |
38.9 | % | 27.1 | % | 35.9 | % | N/M | 33.8 | % | 42.2 | % | 27.8 | % | N/M | 34.8 | % | ||||||||||||||||||||
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|||||||||||||||||||
| Combined ratio |
107.1 | % | 104.2 | % | 97.8 | % | N/M | 104.6 | % | 101.3 | % | 99.1 | % | N/M | 100.1 | % | ||||||||||||||||||||
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|||||||||||||||||||
| Change in policies in force |
7.1 | % | (2.3 | )% | 24.7 | % | (3.6 | )% | ||||||||||||||||||||||||||||
| Retention |
84.1 | % | 80.8 | % | 80.3 | % | 78.7 | % | ||||||||||||||||||||||||||||
6
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
CONSOLIDATED
| (In millions, except percentage data) |
Q4 2010 |
Q1 2011 |
Q2 2011 |
Q3 2011 |
Q4 2011 |
Dec-YTD 2010 |
Dec-YTD 2011 |
|||||||||||||||||||||
| Gross premiums written |
$ | 795.3 | $ | 833.3 | $ | 894.6 | $ | 1,198.3 | $ | 1,133.0 | $ | 3,358.6 | $ | 4,059.2 | ||||||||||||||
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|||||||||||||||
| Net premiums written |
$ | 717.1 | $ | 749.9 | $ | 815.4 | $ | 1,051.0 | $ | 977.1 | $ | 3,048.0 | $ | 3,593.4 | ||||||||||||||
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|
|||||||||||||||
| Net premiums earned |
$ | 748.7 | $ | 761.7 | $ | 770.5 | 1,018.6 | $ | 1,047.8 | $ | 2,841.0 | $ | 3,598.6 | |||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
478.6 | 489.8 | 476.1 | 664.1 | 662.5 | 1,807.1 | 2,292.5 | |||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(23.7 | ) | (28.5 | ) | (15.3 | ) | (28.8 | ) | (30.7 | ) | (111.1 | ) | (103.3 | ) | ||||||||||||||
| Catastrophe losses |
16.8 | 49.7 | 156.7 | 99.6 | 55.6 | 160.3 | 361.6 | |||||||||||||||||||||
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|||||||||||||||
| Total losses and LAE |
471.7 | 511.0 | 617.5 | 734.9 | 687.4 | 1,856.3 | 2,550.8 | |||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
264.7 | 260.2 | 259.6 | 357.2 | 354.1 | 1,002.9 | 1,231.1 | |||||||||||||||||||||
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|||||||||||||||
| GAAP underwriting profit (loss) |
$ | 12.3 | $ | (9.5 | ) | $ | (106.6 | ) | $ | (73.5 | ) | $ | 6.3 | $ | (18.2 | ) | $ | (183.3 | ) | |||||||||
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|||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
64.0 | % | 64.2 | % | 61.8 | % | 65.2 | % | 63.2 | % | 63.6 | % | 63.7 | % | ||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(3.2 | )% | (3.7 | )% | (2.0 | )% | (2.8 | )% | (2.9 | )% | (3.9 | )% | (2.9 | )% | ||||||||||||||
| Catastrophe losses |
2.2 | % | 6.5 | % | 20.3 | % | 9.8 | % | 5.3 | % | 5.6 | % | 10.0 | % | ||||||||||||||
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|||||||||||||||
| Total loss and LAE ratio |
63.0 | % | 67.0 | % | 80.1 | % | 72.2 | % | 65.6 | % | 65.3 | % | 70.8 | % | ||||||||||||||
| Expense ratio |
34.8 | % | 33.7 | % | 33.2 | % | 34.6 | % | 33.4 | % | 34.8 | % | 33.8 | % | ||||||||||||||
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|
|||||||||||||||
| Combined ratio |
97.8 | % | 100.7 | % | 113.3 | % | 106.8 | % | 99.0 | % | 100.1 | % | 104.6 | % | ||||||||||||||
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|||||||||||||||
| Combined ratio, excluding catastrophe losses |
95.6 | % | 94.2 | % | 93.0 | % | 97.0 | % | 93.7 | % | 94.5 | % | 94.6 | % | ||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses |
98.8 | % | 97.9 | % | 95.0 | % | 99.8 | % | 96.6 | % | 98.4 | % | 97.5 | % | ||||||||||||||
7
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
COMMERCIAL LINES
Three Months ended December 31
| 2011 | 2011 | |||||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Multiple Peril |
Auto | Workers’ Comp |
Other | Total | Multiple Peril |
Auto | Workers’ Comp |
Other | Total | ||||||||||||||||||||||||||||||
| Net premiums written |
$ | 134.8 | $ | 58.2 | $ | 41.0 | $ | 181.7 | $ | 415.7 | $ | 119.8 | $ | 53.8 | $ | 34.3 | $ | 161.2 | $ | 369.1 | ||||||||||||||||||||
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|
|||||||||||||||||||||
| Net premiums earned |
$ | 141.2 | $ | 61.8 | $ | 42.9 | $ | 176.4 | $ | 422.3 | $ | 133.1 | $ | 60.9 | $ | 39.4 | $ | 151.3 | $ | 384.7 | ||||||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
72.3 | 40.3 | 31.4 | 105.3 | 249.3 | 75.8 | 36.2 | 32.2 | 81.6 | 225.8 | ||||||||||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(6.0 | ) | 1.6 | (5.2 | ) | 2.1 | (7.5 | ) | (5.8 | ) | 1.0 | (4.8 | ) | (1.7 | ) | (11.3 | ) | |||||||||||||||||||||||
| Catastrophe losses |
5.1 | (0.7 | ) | — | (0.4 | ) | 4.0 | 7.9 | — | — | 1.2 | 9.1 | ||||||||||||||||||||||||||||
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|||||||||||||||||||||
| Total losses and LAE |
71.4 | 41.2 | 26.2 | 107.0 | 245.8 | 77.9 | 37.2 | 27.4 | 81.1 | 223.6 | ||||||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
165.8 | 159.2 | ||||||||||||||||||||||||||||||||||||||
|
|
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|
|
|||||||||||||||||||||||||||||||||||||
| GAAP underwriting profit (loss) |
10.7 | 1.9 | ||||||||||||||||||||||||||||||||||||||
| Net investment income |
34.9 | 33.3 | ||||||||||||||||||||||||||||||||||||||
| Other income |
5.1 | 5.0 | ||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(4.3 | ) | (3.8 | ) | ||||||||||||||||||||||||||||||||||||
|
|
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|
|
|||||||||||||||||||||||||||||||||||||
| Segment income (loss) before income taxes |
$ | 46.4 | $ | 36.4 | ||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
51.2 | % | 65.1 | % | 73.2 | % | 59.7 | % | 59.1 | % | 57.1 | % | 59.4 | % | 81.7 | % | 53.9 | % | 58.7 | % | ||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(4.2 | )% | 2.6 | % | (12.1 | )% | 1.2 | % | (1.8 | )% | (4.4 | )% | 1.6 | % | (12.2 | )% | (1.1 | )% | (2.9 | )% | ||||||||||||||||||||
| Catastrophe losses |
3.6 | % | (1.1 | )% | N/M | (0.2 | )% | 0.9 | % | 5.9 | % | N/M | N/M | 0.8 | % | 2.4 | % | |||||||||||||||||||||||
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|||||||||||||||||||||
| Total loss and LAE ratio |
50.6 | % | 66.6 | % | 61.1 | % | 60.7 | % | 58.2 | % | 58.6 | % | 61.0 | % | 69.5 | % | 53.6 | % | 58.2 | % | ||||||||||||||||||||
| Expense ratio |
39.1 | % | 41.1 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Combined ratio |
97.3 | % | 99.3 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Change in policies in force |
5.3 | % | 2.9 | % | 10.5 | % | 9.2 | % | 7.1 | % | 16.6 | % | 29.8 | % | 60.4 | % | 22.7 | % | 24.7 | % | ||||||||||||||||||||
| Retention |
86.9 | % | 83.0 | % | 84.9 | % | N/M | 85.9 | % | 83.2 | % | 78.6 | % | 78.8 | % | N/M | 81.5 | % | ||||||||||||||||||||||
8
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
COMMERCIAL LINES
Year ended December 31
| 2011 | 2010 | |||||||||||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Multiple Peril |
Auto | Workers’ Comp |
Other | Total | Multiple Peril |
Auto | Workers’ Comp |
Other | Total | ||||||||||||||||||||||||||||||
| Net premiums written |
$ | 569.5 | $ | 248.9 | $ | 174.5 | $ | 710.2 | $ | 1,703.1 | $ | 559.8 | $ | 246.1 | $ | 161.3 | $ | 617.6 | $ | 1,584.8 | ||||||||||||||||||||
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|
|||||||||||||||||||||
| Net premiums earned |
$ | 557.5 | $ | 245.5 | $ | 171.6 | $ | 667.1 | $ | 1,641.7 | $ | 462.9 | $ | 220.0 | $ | 136.7 | $ | 553.8 | $ | 1,373.4 | ||||||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
331.9 | 153.5 | 131.0 | 388.4 | 1,004.8 | 270.6 | 132.8 | 110.4 | 296.8 | 810.6 | ||||||||||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(23.4 | ) | 3.9 | (18.0 | ) | 2.8 | (34.7 | ) | (29.2 | ) | (3.4 | ) | (27.5 | ) | (1.4 | ) | (61.5 | ) | ||||||||||||||||||||||
| Catastrophe losses |
107.7 | 2.4 | — | 38.3 | 148.4 | 45.1 | 0.6 | — | 15.9 | 61.6 | ||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||
| Total losses and LAE |
416.2 | 159.8 | 113.0 | 429.5 | 1,118.5 | 286.5 | 130.0 | 82.9 | 311.3 | 810.7 | ||||||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
644.5 | 583.3 | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| GAAP underwriting profit (loss) |
(121.3 | ) | (20.6 | ) | ||||||||||||||||||||||||||||||||||||
| Net investment income |
136.5 | 129.9 | ||||||||||||||||||||||||||||||||||||||
| Other income |
20.7 | 19.0 | ||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(17.9 | ) | (17.1 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Segment income (loss) before income taxes |
$ | 18.0 | $ | 111.2 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
59.5 | % | 62.5 | % | 76.4 | % | 58.3 | % | 61.3 | % | 58.5 | % | 60.2 | % | 80.7 | % | 53.6 | % | 59.1 | % | ||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(4.2 | )% | 1.6 | % | (10.5 | )% | 0.4 | % | (2.1 | )% | (6.3 | )% | (1.5 | )% | (20.1 | )% | (0.3 | )% | (4.5 | )% | ||||||||||||||||||||
| Catastrophe losses |
19.3 | % | 1.0 | % | N/M | 5.7 | % | 9.0 | % | 9.7 | % | 0.3 | % | N/M | 2.9 | % | 4.5 | % | ||||||||||||||||||||||
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|
|||||||||||||||||||||
| Total loss and LAE ratio |
74.6 | % | 65.1 | % | 65.9 | % | 64.4 | % | 68.2 | % | 61.9 | % | 59.0 | % | 60.6 | % | 56.2 | % | 59.1 | % | ||||||||||||||||||||
| Expense ratio |
38.9 | % | 42.2 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Combined ratio |
107.1 | % | 101.3 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
| Change in policies in force |
5.3 | % | 2.9 | % | 10.5 | % | 9.2 | % | 7.1 | % | 16.6 | % | 29.8 | % | 60.4 | % | 22.7 | % | 24.7 | % | ||||||||||||||||||||
| Retention |
85.8 | % | 81.7 | % | 81.1 | % | N/M | 84.1 | % | 81.7 | % | 78.4 | % | 76.7 | % | N/M | 80.3 | % | ||||||||||||||||||||||
9
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
COMMERCIAL LINES
| (In millions, except percentage data) |
Q4 2010 |
Q1 2011 |
Q2 2011 |
Q3 2011 |
Q4 2011 |
Dec-YTD 2010 |
Dec-YTD 2011 |
|||||||||||||||||||||
| Gross premiums written |
$ | 422.0 | $ | 466.8 | $ | 494.6 | $ | 501.3 | $ | 475.3 | $ | 1,798.5 | $ | 1,938.0 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums written |
$ | 369.1 | $ | 408.5 | $ | 440.5 | $ | 438.4 | $ | 415.7 | $ | 1,584.8 | $ | 1,703.1 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums earned |
$ | 384.7 | $ | 400.8 | $ | 408.5 | $ | 410.1 | $ | 422.3 | $ | 1,373.4 | $ | 1,641.7 | ||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
225.8 | 244.1 | 240.7 | 270.7 | 249.3 | 810.6 | 1,004.8 | |||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(11.3 | ) | (14.3 | ) | (9.3 | ) | (3.6 | ) | (7.5 | ) | (61.5 | ) | (34.7 | ) | ||||||||||||||
| Catastrophe losses |
9.1 | 27.5 | 77.1 | 39.8 | 4.0 | 61.6 | 148.4 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total losses and LAE |
223.6 | 257.3 | 308.5 | 306.9 | 245.8 | 810.7 | 1,118.5 | |||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
159.2 | 159.3 | 159.5 | 159.9 | 165.8 | 583.3 | 644.5 | |||||||||||||||||||||
|
|
|
|
|
|
|
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|
|
|
|
|
|
|||||||||||||||
| GAAP underwriting profit (loss) |
$ | 1.9 | $ | (15.8 | ) | $ | (59.5 | ) | $ | (56.7 | ) | $ | 10.7 | $ | (20.6 | ) | $ | (121.3 | ) | |||||||||
|
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|
|
|
|
|
|
|||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
58.7 | % | 60.9 | % | 58.9 | % | 66.1 | % | 59.1 | % | 59.1 | % | 61.3 | % | ||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(2.9 | )% | (3.6 | )% | (2.3 | )% | (0.9 | )% | (1.8 | )% | (4.5 | )% | (2.1 | )% | ||||||||||||||
| Catastrophe losses |
2.4 | % | 6.9 | % | 18.9 | % | 9.7 | % | 0.9 | % | 4.5 | % | 9.0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total loss and LAE ratio |
58.2 | % | 64.2 | % | 75.5 | % | 74.9 | % | 58.2 | % | 59.1 | % | 68.2 | % | ||||||||||||||
| Expense ratio |
41.1 | % | 39.5 | % | 38.8 | % | 38.7 | % | 39.1 | % | 42.2 | % | 38.9 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio |
99.3 | % | 103.7 | % | 114.3 | % | 113.6 | % | 97.3 | % | 101.3 | % | 107.1 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio, excluding catastrophe losses |
96.9 | % | 96.8 | % | 95.4 | % | 103.9 | % | 96.4 | % | 96.8 | % | 98.1 | % | ||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses |
99.8 | % | 100.4 | % | 97.7 | % | 104.8 | % | 98.2 | % | 101.3 | % | 100.2 | % | ||||||||||||||
10
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
PERSONAL LINES
Three Months ended December 31
| 2011 | 2010 | |||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Auto | Home | Other | Total | Auto | Home | Other | Total | ||||||||||||||||||||||||
| Net premiums written |
$ | 216.1 | $ | 128.0 | $ | 10.8 | $ | 354.9 | $ | 217.7 | $ | 120.2 | $ | 10.1 | $ | 348.0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net premiums earned |
$ | 226.0 | $ | 126.7 | $ | 11.3 | $ | 364.0 | $ | 233.0 | $ | 120.4 | $ | 10.6 | $ | 364.0 | ||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
179.1 | 71.0 | 3.9 | 254.0 | 181.5 | 65.6 | 5.6 | 252.7 | ||||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(4.8 | ) | 0.5 | (0.2 | ) | (4.5 | ) | (10.0 | ) | (1.2 | ) | (1.0 | ) | (12.2 | ) | |||||||||||||||||
| Catastrophe losses |
2.7 | 12.8 | 0.2 | 15.7 | 0.3 | 7.2 | 0.2 | 7.7 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total losses and LAE |
177.0 | 84.3 | 3.9 | 265.2 | 171.8 | 71.6 | 4.8 | 248.2 | ||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
102.0 | 105.5 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| GAAP underwriting profit (loss) |
(3.2 | ) | 10.3 | |||||||||||||||||||||||||||||
| Net investment income |
23.6 | 26.3 | ||||||||||||||||||||||||||||||
| Other income |
3.5 | 3.2 | ||||||||||||||||||||||||||||||
| Other operating expenses |
(3.6 | ) | (0.8 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Segment income (loss) before income taxes |
$ | 20.3 | $ | 39.0 | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
79.2 | % | 56.0 | % | 34.5 | % | 69.7 | % | 77.9 | % | 54.4 | % | 52.8 | % | 69.5 | % | ||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(2.1 | )% | 0.4 | % | (1.8 | )% | (1.2 | )% | (4.3 | )% | (1.0 | )% | (9.4 | )% | (3.4 | )% | ||||||||||||||||
| Catastrophe losses |
1.2 | % | 10.1 | % | 1.8 | % | 4.3 | % | 0.1 | % | 6.0 | % | 1.9 | % | 2.1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total loss and LAE ratio |
78.3 | % | 66.5 | % | 34.5 | % | 72.8 | % | 73.7 | % | 59.4 | % | 45.3 | % | 68.2 | % | ||||||||||||||||
| Expense ratio |
27.2 | % | 28.2 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Combined ratio |
100.0 | % | 96.4 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Change in policies in force |
(3.8 | )% | (0.4 | )% | (6.1 | )% | (2.3 | )% | (6.7 | )% | 0.2 | % | (6.8 | )% | (3.6 | )% | ||||||||||||||||
| Retention |
79.0 | % | 82.3 | % | N/M | 80.8 | % | 76.3 | % | 80.8 | % | N/M | 78.7 | % | ||||||||||||||||||
11
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
PERSONAL LINES
Year ended December 31
| 2011 | 2010 | |||||||||||||||||||||||||||||||
| (In millions, except percentage data) |
Auto | Home | Other | Total | Auto | Home | Other | Total | ||||||||||||||||||||||||
| Net premiums written |
$ | 910.5 | $ | 507.2 | $ | 43.5 | $ | 1,461.2 | $ | 935.1 | $ | 485.5 | $ | 42.3 | $ | 1,462.9 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net premiums earned |
$ | 912.8 | $ | 494.7 | $ | 43.0 | $ | 1,450.5 | $ | 946.3 | $ | 478.9 | $ | 42.1 | $ | 1,467.3 | ||||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
683.3 | 288.2 | 16.7 | 988.2 | 717.8 | 259.6 | 18.8 | 996.2 | ||||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(33.6 | ) | (0.9 | ) | 1.5 | (33.0 | ) | (45.0 | ) | (1.4 | ) | (2.4 | ) | (48.8 | ) | |||||||||||||||||
| Catastrophe losses |
11.7 | 148.6 | 3.4 | 163.7 | 9.2 | 88.1 | 1.4 | 98.7 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total losses and LAE |
661.4 | 435.9 | 21.6 | 1,118.9 | 682.0 | 346.3 | 17.8 | 1,046.1 | ||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
404.6 | 419.6 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| GAAP underwriting profit (loss) |
(73.0 | ) | 1.6 | |||||||||||||||||||||||||||||
| Net investment income |
92.1 | 102.9 | ||||||||||||||||||||||||||||||
| Other income |
13.3 | 13.6 | ||||||||||||||||||||||||||||||
| Other operating expenses |
(9.7 | ) | (5.1 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Segment income (loss) before income taxes |
$ | 22.7 | $ | 113.0 | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
74.9 | % | 58.3 | % | 38.8 | % | 68.1 | % | 75.9 | % | 54.2 | % | 44.7 | % | 67.9 | % | ||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(3.7 | )% | (0.2 | )% | 3.5 | % | (2.3 | )% | (4.8 | )% | (0.3 | )% | (5.7 | )% | (3.3 | )% | ||||||||||||||||
| Catastrophe losses |
1.3 | % | 30.0 | % | 7.9 | % | 11.3 | % | 1.0 | % | 18.4 | % | 3.3 | % | 6.7 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total loss and LAE ratio |
72.5 | % | 88.1 | % | 50.2 | % | 77.1 | % | 72.1 | % | 72.3 | % | 42.3 | % | 71.3 | % | ||||||||||||||||
| Expense ratio |
27.1 | % | 27.8 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Combined ratio |
104.2 | % | 99.1 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Change in policies in force |
(3.8 | )% | (0.4 | )% | (6.1 | )% | (2.3 | )% | (6.7 | )% | 0.2 | % | (6.8 | )% | (3.6 | )% | ||||||||||||||||
| Retention |
79.0 | % | 82.3 | % | N/M | 80.8 | % | 76.3 | % | 80.8 | % | N/M | 78.7 | % | ||||||||||||||||||
12
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
PERSONAL LINES
| (In millions, except percentage data) |
Q4 2010 |
Q1 2011 |
Q2 2011 |
Q3 2011 |
Q4 2011 |
Dec-YTD 2010 |
Dec-YTD 2011 |
|||||||||||||||||||||
| Gross premiums written |
$ | 373.3 | $ | 366.5 | $ | 399.7 | $ | 415.1 | $ | 380.0 | $ | 1,559.8 | $ | 1,561.3 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums written |
$ | 348.0 | $ | 341.4 | $ | 374.6 | $ | 390.3 | $ | 354.9 | $ | 1,462.9 | $ | 1,461.2 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net premiums earned |
$ | 364.0 | $ | 360.9 | $ | 361.9 | $ | 363.7 | $ | 364.0 | $ | 1,467.3 | $ | 1,450.5 | ||||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
252.7 | 245.6 | 235.3 | 253.3 | 254.0 | 996.2 | 988.2 | |||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(12.2 | ) | (14.1 | ) | (5.9 | ) | (8.5 | ) | (4.5 | ) | (48.8 | ) | (33.0 | ) | ||||||||||||||
| Catastrophe losses |
7.7 | 22.2 | 79.6 | 46.2 | 15.7 | 98.7 | 163.7 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total losses and LAE |
248.2 | 253.7 | 309.0 | 291.0 | 265.2 | 1,046.1 | 1,118.9 | |||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
105.5 | 101.0 | 100.0 | 101.6 | 102.0 | 419.6 | 404.6 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| GAAP underwriting profit (loss) |
$ | 10.3 | $ | 6.2 | $ | (47.1 | ) | $ | (28.9 | ) | $ | (3.2 | ) | $ | 1.6 | $ | (73.0 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
69.5 | % | 68.0 | % | 65.0 | % | 69.6 | % | 69.7 | % | 67.9 | % | 68.1 | % | ||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(3.4 | )% | (3.9 | )% | (1.6 | )% | (2.3 | )% | (1.2 | )% | (3.3 | )% | (2.3 | )% | ||||||||||||||
| Catastrophe losses |
2.1 | % | 6.2 | % | 22.0 | % | 12.7 | % | 4.3 | % | 6.7 | % | 11.3 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total loss and LAE ratio |
68.2 | % | 70.3 | % | 85.4 | % | 80.0 | % | 72.8 | % | 71.3 | % | 77.1 | % | ||||||||||||||
| Expense ratio |
28.2 | % | 27.2 | % | 26.8 | % | 27.1 | % | 27.2 | % | 27.8 | % | 27.1 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio |
96.4 | % | 97.5 | % | 112.2 | % | 107.1 | % | 100.0 | % | 99.1 | % | 104.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Combined ratio, excluding catastrophe losses |
94.3 | % | 91.3 | % | 90.2 | % | 94.4 | % | 95.7 | % | 92.4 | % | 92.9 | % | ||||||||||||||
| Current accident year combined ratio, excluding catastrophe losses |
97.7 | % | 95.2 | % | 91.8 | % | 96.7 | % | 96.9 | % | 95.7 | % | 95.2 | % | ||||||||||||||
13
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
CHAUCER
Three Months ended December 31
| 2011 | ||||||||||||||||||||||||
| (In millions, except percentage data) |
Property | Marine & Aviation |
Energy | UK Motor |
Casualty & Other |
Total | ||||||||||||||||||
| Gross premiums written |
$ | 42.2 | $ | 70.6 | $ | 53.9 | $ | 68.1 | $ | 42.9 | $ | 277.7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net premiums written |
$ | 33.2 | $ | 51.2 | $ | 37.0 | $ | 58.8 | $ | 26.3 | $ | 206.5 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net premiums earned |
$ | 69.3 | $ | 58.9 | $ | 41.5 | $ | 64.6 | $ | 27.2 | $ | 261.5 | ||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
159.2 | |||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(18.9 | ) | ||||||||||||||||||||||
| Catastrophe losses |
35.9 | |||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total losses and LAE |
176.2 | |||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
86.1 | |||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| GAAP underwriting profit (loss) |
(0.8 | ) | ||||||||||||||||||||||
| Net investment income |
8.3 | |||||||||||||||||||||||
| Other income |
6.8 | |||||||||||||||||||||||
| Other operating expenses |
(1.9 | ) | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Segment income (loss) before income taxes |
$ | 12.4 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
60.9 | % | ||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(7.2 | )% | ||||||||||||||||||||||
| Catastrophe losses |
13.7 | % | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total loss and LAE ratio |
67.4 | % | ||||||||||||||||||||||
| Expense ratio |
32.9 | % | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Combined ratio |
100.3 | % | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
14
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION AND RATIOS
CHAUCER
Six Months ended December 31
| 2011 | ||||||||||||||||||||||||
| (In millions, except percentage data) |
Property | Marine & Aviation |
Energy | UK Motor |
Casualty & Other |
Total | ||||||||||||||||||
| Gross premiums written |
$ | 94.8 | $ | 140.0 | $ | 97.2 | $ | 139.8 | $ | 87.8 | $ | 559.6 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net premiums written |
$ | 72.8 | $ | 107.4 | $ | 66.7 | $ | 121.8 | $ | 60.1 | $ | 428.8 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net premiums earned |
$ | 121.7 | $ | 119.0 | $ | 82.6 | $ | 124.4 | $ | 58.6 | $ | 506.3 | ||||||||||||
| Losses and LAE: |
||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
299.2 | |||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(35.5 | ) | ||||||||||||||||||||||
| Catastrophe losses |
49.5 | |||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total losses and LAE |
313.2 | |||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
181.8 | |||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| GAAP underwriting profit (loss) |
11.3 | |||||||||||||||||||||||
| Net investment income |
16.9 | |||||||||||||||||||||||
| Other income |
10.9 | |||||||||||||||||||||||
| Other operating expenses |
(6.8 | ) | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Segment income (loss) before income taxes |
$ | 32.3 | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Loss and LAE ratio: |
||||||||||||||||||||||||
| Current accident year, excluding catastrophe losses |
59.1 | % | ||||||||||||||||||||||
| Prior year (favorable) unfavorable reserve development |
(7.0 | )% | ||||||||||||||||||||||
| Catastrophe losses |
9.8 | % | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total loss and LAE ratio |
61.9 | % | ||||||||||||||||||||||
| Expense ratio |
35.9 | % | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Combined ratio |
97.8 | % | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
15
THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
CHAUCER
| (In millions, except percentage data) |
Q3 2011 |
Q4 2011 |
Dec-YTD 2011 |
|||||||||
| Gross premiums written |
$ | 281.9 | $ | 277.7 | $ | 559.6 | ||||||
|
|
|
|
|
|
|
|||||||
| Net premiums written |
$ | 222.3 | $ | 206.5 | $ | 428.8 | ||||||
|
|
|
|
|
|
|
|||||||
| Net premiums earned |
$ | 244.8 | $ | 261.5 | $ | 506.3 | ||||||
| Losses and LAE: |
||||||||||||
| Current accident year, excluding catastrophe losses |
140.0 | 159.2 | 299.2 | |||||||||
| Prior year (favorable) unfavorable reserve development |
(16.6 | ) | (18.9 | ) | (35.5 | ) | ||||||
| Catastrophe losses |
13.6 | 35.9 | 49.5 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total losses and LAE |
137.0 | 176.2 | 313.2 | |||||||||
| Policy acquisition and other underwriting expenses |
95.7 | 86.1 | 181.8 | |||||||||
|
|
|
|
|
|
|
|||||||
| GAAP underwriting profit (loss) |
$ | 12.1 | $ | (0.8 | ) | $ | 11.3 | |||||
|
|
|
|
|
|
|
|||||||
| Loss and LAE ratio: |
||||||||||||
| Current accident year, excluding catastrophe losses |
57.2 | % | 60.9 | % | 59.1 | % | ||||||
| Prior year (favorable) unfavorable reserve development |
(6.8 | )% | (7.2 | )% | (7.0 | )% | ||||||
| Catastrophe losses |
5.6 | % | 13.7 | % | 9.8 | % | ||||||
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|
|||||||
| Total loss and LAE ratio |
56.0 | % | 67.4 | % | 61.9 | % | ||||||
| Expense ratio |
39.1 | % | 32.9 | % | 35.9 | % | ||||||
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| Combined ratio |
95.1 | % | 100.3 | % | 97.8 | % | ||||||
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|
|||||||
| Combined ratio, excluding catastrophe losses |
89.5 | % | 86.6 | % | 88.0 | % | ||||||
| Current accident year combined ratio, excluding catastrophe losses |
96.3 | % | 93.8 | % | 95.0 | % | ||||||
16
THE HANOVER INSURANCE GROUP
NET INVESTMENT INCOME AND YIELDS
| (In millions, except yields) |
Q4 2010 |
Q1 2011 |
Q2 2011 |
Q3 2011 |
Q4 2011 |
YTD 2010 |
YTD 2011 |
|||||||||||||||||||||
| (1) | ||||||||||||||||||||||||||||
| Net Investment Income |
||||||||||||||||||||||||||||
| Fixed maturities |
$ | 61.5 | $ | 60.6 | $ | 60.3 | $ | 66.1 | $ | 67.3 | $ | 248.6 | $ | 254.3 | ||||||||||||||
| Equity securities |
2.2 | 1.3 | 1.4 | 1.5 | 2.6 | 4.5 | 6.8 | |||||||||||||||||||||
| Other investments |
1.3 | 0.5 | 1.0 | 2.3 | 1.0 | 1.0 | 4.8 | |||||||||||||||||||||
| Investment expenses |
(2.0 | ) | (2.0 | ) | (1.7 | ) | (2.1 | ) | (1.9 | ) | (6.9 | ) | (7.7 | ) | ||||||||||||||
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| Total |
$ | 63.0 | $ | 60.4 | $ | 61.0 | $ | 67.8 | $ | 69.0 | $ | 247.2 | $ | 258.2 | ||||||||||||||
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| Pre-tax Yields |
||||||||||||||||||||||||||||
| Fixed maturities |
5.37 | % | 5.28 | % | 5.35 | % | 4.49 | % | 4.48 | % | 5.46 | % | 4.84 | % | ||||||||||||||
| Total |
5.13 | % | 4.97 | % | 5.09 | % | 3.96 | % | 3.92 | % | 5.16 | % | 4.39 | % | ||||||||||||||
Pre-tax yields are calculated as annualized investment income divided by the average of investment balances at the end of each month during the period. Investment balances, for purposes of the pre-tax yield calculation, exclude unrealized capital gains and losses.
| (1) | Includes $16.9 million of income from assets acquired with Chaucer, with pre-tax yields on fixed maturities and total investments of 2.10% and 1.58%, respectively. |
17
THE HANOVER INSURANCE GROUP
INVESTMENT PORTFOLIO
December 31, 2011
| (in millions) |
||||||||||||||||||||||||||
| Investment Type |
Weighted Average Quality |
Amortized Cost or Cost |
Fair Value |
% of Total |
Net Unrealized Gain (Loss) |
Change in Net Unrealized During Q4 2011 |
Change in Net Unrealized YTD |
|||||||||||||||||||
| Fixed Maturities: |
||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
AAA | $ | 261.7 | $ | 269.3 | 3.6 | % | $ | 7.6 | $ | 0.6 | $ | 5.8 | |||||||||||||
| Foreign government |
AAA | 239.1 | 239.0 | 3.2 | % | (0.1 | ) | (0.4 | ) | (0.1 | ) | |||||||||||||||
| Municipals: |
||||||||||||||||||||||||||
| Taxable |
AA | 792.5 | 850.9 | 11.3 | % | 58.4 | 0.1 | 59.4 | ||||||||||||||||||
| Tax exempt |
AA- | 172.0 | 177.1 | 2.3 | % | 5.1 | 0.5 | 2.1 | ||||||||||||||||||
| Corporate: |
||||||||||||||||||||||||||
| NAIC 1 |
A+ | 1,667.9 | 1,735.1 | 23.0 | % | 67.2 | 2.0 | 11.1 | ||||||||||||||||||
| NAIC 2 |
BBB | 1,224.6 | 1,304.0 | 17.3 | % | 79.4 | 2.5 | 9.2 | ||||||||||||||||||
| NAIC 3 and below |
B+ | 325.7 | 336.5 | 4.5 | % | 10.8 | 12.2 | (7.3 | ) | |||||||||||||||||
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|
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|
|
|||||||||||||||
| Total corporate |
BBB+ | 3,218.2 | 3,375.6 | 44.8 | % | 157.4 | 16.7 | 13.0 | ||||||||||||||||||
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| Asset backed: |
||||||||||||||||||||||||||
| Residential mortgage backed |
AA+ | 816.1 | 848.6 | 11.2 | % | 32.5 | (6.5 | ) | 2.6 | |||||||||||||||||
| Commercial mortgage backed |
AA+ | 367.6 | 379.1 | 5.0 | % | 11.5 | 3.5 | (5.8 | ) | |||||||||||||||||
| Asset backed |
AA | 141.5 | 145.1 | 1.9 | % | 3.6 | — | (0.1 | ) | |||||||||||||||||
|
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|
|
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|
|
|
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|
|
|||||||||||||||
| Total fixed maturities |
A+ | 6,008.7 | 6,284.7 | 83.3 | % | 276.0 | 14.5 | 76.9 | ||||||||||||||||||
| Equity securities |
239.9 | 246.4 | 3.3 | % | 6.5 | 9.4 | (1.4 | ) | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total fixed maturities and equity securities |
6,248.6 | 6,531.1 | 86.6 | % | 282.5 | 23.9 | 75.5 | |||||||||||||||||||
| Cash and cash equivalents |
820.4 | 820.4 | 10.9 | % | — | — | — | |||||||||||||||||||
| Other investments |
187.3 | 190.2 | 2.5 | % | 2.9 | 1.9 | 0.2 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | 7,256.3 | $ | 7,541.7 | 100.0 | % | $ | 285.4 | $ | 25.8 | $ | 75.7 | ||||||||||||||
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18
THE HANOVER INSURANCE GROUP
CREDIT QUALITY AND DURATION OF FIXED MATURITIES
December 31, 2011
CREDIT QUALITY OF FIXED MATURITIES
| (In millions) |
||||||||||||||
| NAIC Designation |
Rating Agency Equivalent Designation |
Amortized Cost |
Fair Value |
% of Total Fair Value |
||||||||||
| 1 |
Aaa/Aa/A | $ | 4,325.1 | $ | 4,510.7 | 71.8 | % | |||||||
| 2 |
Baa | 1,338.7 | 1,419.7 | 22.6 | % | |||||||||
| 3 |
Ba | 151.2 | 160.0 | 2.5 | % | |||||||||
| 4 |
B | 134.5 | 136.4 | 2.2 | % | |||||||||
| 5 |
Caa and lower | 47.1 | 44.7 | 0.7 | % | |||||||||
| 6 |
In or near default | 12.1 | 13.2 | 0.2 | % | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total fixed maturities |
$ | 6,008.7 | $ | 6,284.7 | 100.0 | % | ||||||||
|
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|
|
|
|
|
|||||||||
DURATION OF FIXED MATURITIES
| (In millions) |
||||||||||||
| Amortized Cost |
Fair Value |
% of Total Fair Value |
||||||||||
| 0-2 years |
$ | 2,015.3 | $ | 2,045.2 | 32.5 | % | ||||||
| 2-4 years |
1,399.1 | 1,457.3 | 23.2 | % | ||||||||
| 4-6 years |
1,211.3 | 1,302.8 | 20.7 | % | ||||||||
| 6-8 years |
844.1 | 903.5 | 14.4 | % | ||||||||
| 8-10 years |
391.2 | 418.0 | 6.7 | % | ||||||||
| 10+ years |
147.7 | 157.9 | 2.5 | % | ||||||||
|
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|
|
|
|
|
|||||||
| Total fixed maturities |
$ | 6,008.7 | $ | 6,284.7 | 100.0 | % | ||||||
|
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|
|
|
|
|||||||
| Weighted Average Duration |
3.86 | |||||||||||
|
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|
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19
THE HANOVER INSURANCE GROUP
TOP 10 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS
December 31, 2011
| (In millions, except percentage data) | ||||||||||||||
| Issuer |
Amortized Cost | Fair Value | As a Percent of Invested Assets |
S&P Ratings | ||||||||||
| Royal Bank of Scotland: (1) |
||||||||||||||
| Term deposits (2) |
$ | 163.2 | $ | 156.2 | 2.07 | % | A | |||||||
| Notes |
6.9 | 6.4 | 0.08 | % | A | |||||||||
| Lloyds TSB Bank: (3) |
||||||||||||||
| Term deposits (2) |
83.6 | 83.7 | 1.11 | % | A | |||||||||
| Notes |
6.1 | 5.6 | 0.07 | % | A | |||||||||
| GE Capital |
38.7 | 39.7 | 0.53 | % | AA+ | |||||||||
| Santander US: |
||||||||||||||
| Term deposits (4) |
33.4 | 33.4 | 0.44 | % | A | |||||||||
| Notes |
4.3 | 4.2 | 0.06 | % | AA- | |||||||||
| Rabobank |
29.1 | 29.3 | 0.39 | % | AA | |||||||||
| Wells Fargo |
26.8 | 28.2 | 0.37 | % | A+ | |||||||||
| Total Capital |
25.2 | 26.1 | 0.35 | % | AA- | |||||||||
| Australia & New Zealand Bank |
25.2 | 25.7 | 0.34 | % | AA- | |||||||||
| HSBC Bank |
25.1 | 24.8 | 0.33 | % | A+ | |||||||||
| American Express |
21.6 | 23.0 | 0.31 | % | BBB+ | |||||||||
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|
|
|||||||||
| Top 10 Corporate and Municipal Fixed |
$ | 489.2 | $ | 486.3 | 6.45 | % | ||||||||
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|||||||||
| (1) | UK government owns 83% of bank equity |
| (2) | Weighted average duration is approximately 1.5 |
| (3) | UK government owns 40% of bank equity |
| (4) | Mature in April 2012 |
20
THE HANOVER INSURANCE GROUP
RECONCILIATION OF SEGMENT INCOME TO NET INCOME
| Three Months ended December 31 | Year ended December 31 | |||||||||||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||
| (In millions, except per share data) |
$ | Per Share (Diluted) |
$ | Per Share (Diluted) |
$ | Per Share (Diluted) |
$ | Per Share (Diluted) |
||||||||||||||||||||||||
| SEGMENT INCOME |
||||||||||||||||||||||||||||||||
| Commercial Lines |
$ | 46.4 | $ | 36.4 | $ | 18.0 | $ | 111.2 | ||||||||||||||||||||||||
| Personal Lines |
20.3 | 39.0 | 22.7 | 113.0 | ||||||||||||||||||||||||||||
| Chaucer |
12.4 | — | 32.3 | — | ||||||||||||||||||||||||||||
| Other Property and Casualty |
(2.0 | ) | 0.8 | (0.5 | ) | 3.5 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total |
77.1 | 76.2 | 72.5 | 227.7 | ||||||||||||||||||||||||||||
| Interest expense on debt |
(16.4 | ) | (11.5 | ) | (55.0 | ) | (44.3 | ) | ||||||||||||||||||||||||
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|
|||||||||||||||||||||||||
| Segment income before income taxes |
60.7 | $ | 1.34 | 64.7 | $ | 1.41 | 17.5 | $ | 0.38 | 183.4 | $ | 3.96 | ||||||||||||||||||||
| Income tax expense on segment income |
(15.5 | ) | (0.34 | ) | (21.0 | ) | (0.46 | ) | (2.9 | ) | (0.06 | ) | (61.2 | ) | (1.32 | ) | ||||||||||||||||
|
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|
|||||||||||||||||
| Segment income after income taxes |
45.2 | 1.00 | 43.7 | 0.95 | 14.6 | 0.32 | 122.2 | 2.64 | ||||||||||||||||||||||||
| Net realized investment gains |
3.2 | 0.07 | 12.9 | 0.28 | 28.1 | 0.61 | 29.7 | 0.64 | ||||||||||||||||||||||||
| Loss from retirement of debt |
— | — | (2.0 | ) | (0.04 | ) | (2.3 | ) | (0.05 | ) | (2.0 | ) | (0.04 | ) | ||||||||||||||||||
| Costs related to acquired businesses |
(0.7 | ) | (0.01 | ) | — | — | (16.4 | ) | (0.35 | ) | — | — | ||||||||||||||||||||
| Net foreign exchange gains |
— | — | — | — | 6.7 | 0.15 | — | — | ||||||||||||||||||||||||
| Loss on derivative instruments |
— | — | — | — | (11.3 | ) | (0.25 | ) | — | — | ||||||||||||||||||||||
| Income tax (expense) benefit on non-segment income |
(1.6 | ) | (0.04 | ) | 2.8 | 0.06 | 12.5 | 0.27 | 3.3 | 0.07 | ||||||||||||||||||||||
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|
|||||||||||||||||
| Income from continuing operations |
46.1 | 1.02 | 57.4 | 1.25 | 31.9 | 0.70 | 153.2 | 3.31 | ||||||||||||||||||||||||
| Discontinued operations, net of taxes |
3.2 | 0.07 | 1.0 | 0.02 | 5.2 | 0.11 | 1.6 | 0.03 | ||||||||||||||||||||||||
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|
|||||||||||||||||
| NET INCOME |
$ | 49.3 | $ | 1.09 | $ | 58.4 | $ | 1.27 | $ | 37.1 | $ | 0.81 | $ | 154.8 | $ | 3.34 | ||||||||||||||||
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21
Non-GAAP Financial Measures
The Hanover uses non-GAAP financial measures as important measures of the Company’s operating performance, which we believe provide investors’ with additional information regarding management’s evaluation of our results of operations and financial performance. These metrics include segment income before interest expense and taxes, total segment income after taxes, total segment income after taxes per share, total book value per share, total book value per share excluding net unrealized gains and losses related to investments, net of tax, tangible book value per share and measures of segment income and loss ratios excluding catastrophe losses and reserve development. After-tax segment income EPS (sometimes referred to as “after-tax segment income per share”) is a non-GAAP measure. It is defined as net income (loss) excluding the after-tax impact of net realized investment gains (losses), as well as results from discontinued operations for a period divided by the average number of diluted shares of common stock.
Segment income before interest expense and taxes is net income, excluding interest expense on debt, income taxes and net realized investment gains and losses, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Segment income before interest expense and taxes also excludes net gains and losses on disposals of businesses, discontinued operations, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Segment income before interest expense and taxes is the sum of the segment income from: Commercial Lines, Personal Lines, Chaucer, and Other Property and Casualty. The Hanover believes that measures of segment income before interest expense and taxes provide investors with a valuable measure of the performance of the Company’s ongoing businesses because they highlight net income attributable to the core operations of the business.
Book value per share is total shareholders’ equity divided by the number of common shares outstanding. Book value per share excluding net unrealized gains and losses related to investments, net of tax is total shareholders’ equity excluding the after-tax effect of unrealized investment gains and losses divided by the number of common shares outstanding. Tangible book value per share is total shareholders’ equity, excluding goodwill, divided by the number of common shares outstanding.
The Hanover also provides measures of segment income and loss ratios that exclude the effects of catastrophe losses. A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, hurricane, earthquake, windstorm, explosion, terrorism or other similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance. The Hanover believes that providing certain financial metrics and trends excluding the effects of catastrophes is meaningful for investors to understand the variability of periodic earnings and loss ratios.
Prior year reserve development, which can be favorable or unfavorable, represents changes in our estimate of the costs to pay claims from prior years. We believe that a discussion of segment income excluding prior year reserve development is helpful to investors since it provides insight into both our estimate of current year accident results and changes to prior-year reserve estimates.
Segment income before and after interest expense and taxes and measures of segment income that exclude the effects of catastrophe losses or reserve development should not be construed as substitutes for net income determined in accordance with GAAP. A reconciliation of income from continuing operations to segment income before interest expense and taxes and income from continuing operations per share to segment income after taxes per share for the three months and year ended December 31, 2011 and 2010 is set forth on page 21 of this document. The presentation of loss ratios calculated excluding the effects of reserve development and/or catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP.
22
23