HANOVER INSURANCE GROUP, INC. - FORM 8-K - EX-99.2

Attached files

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8-K - FORM 8-K - HANOVER INSURANCE GROUP, INC.	d919182d8k.htm
EX-99.1 - EX-99.1 - HANOVER INSURANCE GROUP, INC.	d919182dex991.htm

Exhibit 99.2

LOGO

FINANCIAL SUPPLEMENT

FIRST QUARTER 2015

THE HANOVER INSURANCE GROUP

FINANCIAL SUPPLEMENT

TABLE OF CONTENTS


Business Descriptions			1
Financial Highlights			2
Consolidated Financial Statements
Income Statements			3
Balance Sheets			4
GAAP Underwriting Results
Consolidated			5-6
Commercial Lines			7-8
Personal Lines			9-10
Chaucer			11-12
Investments
Net Investment Income and Yields			13
Investment Portfolio			14
Credit Quality and Duration of Fixed Maturities			15
Top 10 Corporate and Municipal Fixed Maturity Holdings			16
Reconciliation of Operating Income (Loss) to Net Income (Loss)			17
Other Information
Non-GAAP Financial Measures			18
Corporate Information			19
Market and Dividend Information			19
Financial Strength and Debt Ratings			19

THE HANOVER INSURANCE GROUP

BASIS OF PRESENTATION

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

Included in Other are 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.

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


(In millions, except earnings per share)	Q1 2014		Q2 2014		Q3 2014		Q4 2014		Q1 2015
PREMIUMS
Gross premiums written	$	1,408.1	$	1,423.6	$	1,388.2	$	1,245.5	$	1,456.0
Net premiums written		1,172.3		1,276.2		1,244.8		1,116.8		1,215.1
Net premiums earned		1,163.0		1,174.7		1,184.0		1,188.6		1,211.0

EARNINGS
Operating income before interest and taxes	$	85.0	$	102.2	$	86.4	$	132.6	$	100.2
Operating income after taxes		47.0		58.4		47.7		79.6		57.1
Income from continuing operations		54.7		82.5		55.0		90.1		54.9
Net income		54.6		82.6		54.9		89.9		54.9

PER SHARE DATA (DILUTED)
Operating income after taxes	$	1.05	$	1.30	$	1.06	$	1.77	$	1.27
Income from continuing operations		1.22		1.84		1.22		2.01		1.22
Net income		1.22		1.84		1.22		2.00		1.22

Weighted average shares outstanding		44.8		44.9		44.9		45.0		45.1

BALANCE SHEET


(In millions, except per share data)	March 31 2014			June 30 2014			September 30 2014			December 31 2014			March 31 2015
Total assets	$	13,643.0		$	13,964.8		$	13,960.2		$	13,759.7		$	13,925.6
Total loss and loss adjustment expense reserves		6,323.4			6,448.0			6,435.0			6,391.7			6,483.6
Total shareholders’ equity		2,681.1			2,795.1			2,771.9			2,844.0			2,899.9
Total shareholders’ equity, excluding net unrealized appreciation depreciation on investments and derivative instruments, net of tax⁽¹⁾		2,373.0			2,452.7			2,478.2			2,543.1			2,572.2

U.S. Property and Casualty Companies
Statutory surplus	$	1,900.4		$	1,974.9		$	1,998.6		$	2,052.0		$	2,088.2
Premium to surplus ratio		1.83: 1			1.77:1			1.77:1			1.75:1			1.74:1

Book value per share	$	61.24		$	63.65		$	63.37		$	64.85		$	65.92
Book value per share, excluding net unrealized appreciation depreciation on investments and derivative instruments, net of tax ⁽¹⁾	$	54.21		$	55.85		$	56.65		$	57.98		$	58.47
Tangible book value per share (total book value excluding goodwill and intangibles)	$	54.06		$	56.47		$	56.30		$	57.91		$	59.12
Shares outstanding		43.8			43.9			43.7			43.9			44.0

Total debt/equity		33.7	%		32.3	%		32.6	%		31.8	%		29.0	%
Total debt/total capital		25.2	%		24.4	%		24.6	%		24.1	%		22.5	%

⁽¹⁾

The calculation of this measure has been updated, including prior periods, to include all values contained within the caption of net unrealized appreciation (depreciation) on investments and derivative instruments, net of tax, as reported in the consolidated statements of shareholders’ equity in THG’s Form 10Q and Form 10K.

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Three Months ended March 31
(In millions)	2015		2014			% Change

REVENUES
Premiums earned	$	1,211.0	$	1,163.0			4.1
Net investment income		70.1		67.0			4.6
Net realized investment gains		9.4		4.4			113.6
Fees and other income		8.2		9.5			(13.7	)

Total revenues		1,298.7		1,243.9			4.4


LOSSES AND EXPENSES
Losses and loss adjustment expenses		773.1		750.5			3.0
Amortization of deferred acquisition costs		260.6		253.7			2.7
Interest expense		15.9		16.3			(2.5	)
Other operating expenses		172.1		151.3			13.7

Total losses and expenses		1,221.7		1,171.8			4.3


Income from continuing operations before income taxes		77.0		72.1			6.8
Income tax expense		22.1		17.4			27.0


Income from continuing operations		54.9		54.7			0.4
Discontinued operations		—		(0.1	)		N/M


Net income	$	54.9	$	54.6			0.5

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	March 31 2015			December 31 2014			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $7,056.5 and $7,145.7)	$	7,341.6		$	7,378.1			(0.5	)
Equity securities, at fair value (cost of $527.2 and $506.6)		593.0			580.8			2.1
Other investments		277.6			291.4			(4.7	)

Total investments		8,212.2			8,250.3			(0.5	)

Cash and cash equivalents		403.9			373.3			8.2
Accrued investment income		68.0			66.9			1.6
Premiums and accounts receivable, net		1,451.5			1,360.9			6.7
Reinsurance recoverable on paid and unpaid losses and unearned premiums		2,334.8			2,268.2			2.9
Deferred acquisition costs		533.3			525.7			1.4
Deferred income taxes		123.1			131.2			(6.2	)
Goodwill		184.3			184.6			(0.2	)
Other assets		504.3			486.6			3.6
Assets of discontinued operations		110.2			112.0			(1.6	)

Total assets	$	13,925.6		$	13,759.7			1.2


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Loss and loss adjustment expense reserves	$	6,483.6		$	6,391.7			1.4
Unearned premiums		2,645.7			2,583.9			2.4
Expenses and taxes payable		637.8			695.4			(8.3	)
Reinsurance premiums payable		303.9			226.8			34.0
Debt		841.5			903.5			(6.9	)
Liabilities of discontinued operations		113.2			114.4			(1.0	)

Total liabilities		11,025.7			10,915.7			1.0


SHAREHOLDERS’ EQUITY
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		1,828.1			1,830.7			(0.1	)
Accumulated other comprehensive income		226.9			206.4			9.9
Retained earnings		1,588.4			1,558.7			1.9
Treasury stock at cost (16.5 and 16.6 million shares)		(744.1	)		(752.4	)		(1.1	)

Total shareholders’ equity		2,899.9			2,844.0			2.0

Total liabilities and shareholders’ equity	$	13,925.6		$	13,759.7			1.2

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CONSOLIDATED

Three Months ended March 31


	2015															2014
(In millions, except percentage data)	Commercial Lines			Personal Lines			Chaucer			Other			Total			Commercial Lines			Personal Lines			Chaucer			Other			Total
Gross premiums written	$	656.2		$	349.1		$	450.7		$	—		$	1,456.0		$	597.8		$	343.3		$	467.0		$	—		$	1,408.1

Net premiums written	$	581.9		$	326.4		$	306.8		$	—		$	1,215.1		$	539.3		$	319.2		$	313.8		$	—		$	1,172.3

Net premiums earned	$	546.2		$	352.9		$	311.9		$	—		$	1,211.0		$	512.7		$	350.2		$	300.1		$	—		$	1,163.0
Losses and LAE:
Current accident year, excluding catastrophe losses		318.7			226.0			191.3			—			736.0			303.6			230.6			178.1			—			712.3
Prior year unfavorable (favorable) reserve development		0.9			(2.2	)		(24.2	)		0.3			(25.2	)		0.6			(1.0	)		(19.6	)		0.3			(19.7	)
Catastrophe losses		33.9			25.5			2.9			—			62.3			40.2			18.4			(0.7	)		—			57.9

Total losses and LAE		353.5			249.3			170.0			0.3			773.1			344.4			248.0			157.8			0.3			750.5
Amortization of deferred acquisition costs and other underwriting expenses		198.6			100.2			106.3			0.4			405.5			189.6			100.1			105.8			0.2			395.7

GAAP underwriting profit (loss)		(5.9	)		3.4			35.6			(0.7	)		32.4			(21.3	)		2.1			36.5			(0.5	)		16.8
Net investment income		38.6			17.9			12.3			1.3			70.1			37.3			17.9			10.5			1.3			67.0
Other income		1.9			3.2			2.3			0.8			8.2			2.0			2.9			3.9			0.7			9.5
Other operating expenses		(3.4	)		(2.2	)		(1.0	)		(3.9	)		(10.5	)		(1.9	)		(1.3	)		(1.7	)		(3.4	)		(8.3	)

Operating income (loss) before income taxes	$	31.2		$	22.3		$	49.2		$	(2.5	)	$	100.2		$	16.1		$	21.6		$	49.2		$	(1.9	)	$	85.0


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		58.4	%		64.1	%		61.4	%		N/M			60.9	%		59.3	%		65.8	%		59.2	%		N/M			61.3	%
Prior year unfavorable (favorable) reserve development		0.2	%		(0.6	)%		(7.8	)%		N/M			(2.1	)%		0.1	%		(0.3	)%		(6.5	)%		N/M			(1.7	)%
Catastrophe losses		6.2	%		7.2	%		0.9	%		N/M			5.1	%		7.8	%		5.3	%		(0.2	)%		N/M			5.0	%

Total loss and LAE ratio		64.8	%		70.7	%		54.5	%		N/M			63.9	%		67.2	%		70.8	%		52.5	%		N/M			64.6	%
Expense ratio		36.2	%		27.7	%		34.1	%		N/M			33.2	%		36.8	%		27.9	%		35.3	%		N/M			33.7	%

Combined ratio		101.0	%		98.4	%		88.6	%		N/M			97.1	%		104.0	%		98.7	%		87.8	%		N/M			98.3	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CONSOLIDATED


(In millions, except percentage data)	Q1 2014			Q2 2014			Q3 2014			Q4 2014			Q1 2015
Gross premiums written	$	1,408.1		$	1,423.6		$	1,388.2		$	1,245.5		$	1,456.0

Net premiums written	$	1,172.3		$	1,276.2		$	1,244.8		$	1,116.8		$	1,215.1

Net premiums earned	$	1,163.0		$	1,174.7		$	1,184.0		$	1,188.6		$	1,211.0
Losses and LAE:
Current accident year, excluding catastrophe losses		712.3			699.0			689.4			702.9			736.0
Prior year favorable reserve development		(19.7	)		(29.2	)		(21.9	)		(28.3	)		(25.2	)
Catastrophe losses		57.9			55.7			88.1			21.3			62.3

Total losses and LAE		750.5			725.5			755.6			695.9			773.1
Amortization of deferred acquisition costs and other underwriting expenses		395.7			414.9			410.4			428.6			405.5

GAAP underwriting profit	$	16.8		$	34.3		$	18.0		$	64.1		$	32.4


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		61.3	%		59.6	%		58.2	%		59.1	%		60.9	%
Prior year favorable reserve development		(1.7	)%		(2.5	)%		(1.8	)%		(2.4	)%		(2.1	)%
Catastrophe losses		5.0	%		4.7	%		7.4	%		1.8	%		5.1	%

Total loss and LAE ratio		64.6	%		61.8	%		63.8	%		58.5	%		63.9	%
Expense ratio		33.7	%		35.0	%		34.4	%		35.8	%		33.2	%

Combined ratio		98.3	%		96.8	%		98.2	%		94.3	%		97.1	%


Combined ratio, excluding catastrophe losses		93.3	%		92.1	%		90.8	%		92.5	%		92.0	%

Current accident year combined ratio, excluding catastrophe losses		95.0	%		94.6	%		92.6	%		94.9	%		94.1	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

COMMERCIAL LINES

Three Months ended March 31


	2015															2014
(In millions, except percentage data)	Multiple Peril			Auto			Workers’ Comp			Other			Total			Multiple Peril			Auto			Workers’ Comp			Other			Total
Net premiums written	$	185.8		$	79.1		$	79.4		$	237.6		$	581.9		$	172.9		$	76.2		$	71.3		$	218.9		$	539.3

Net premiums earned	$	178.2		$	76.2		$	66.0		$	225.8		$	546.2		$	167.5		$	75.5		$	58.8		$	210.9		$	512.7
Losses and LAE:
Current accident year, excluding catastrophe losses		96.1			55.0			44.8			122.8			318.7			92.3			54.4			41.5			115.4			303.6
Prior year unfavorable (favorable) reserve development		(1.1	)		3.0			(4.4	)		3.4			0.9			(0.7	)		3.4			(1.6	)		(0.5	)		0.6
Catastrophe losses		24.5			(0.1	)		—			9.5			33.9			32.1			—			—			8.1			40.2

Total losses and LAE		119.5			57.9			40.4			135.7			353.5			123.7			57.8			39.9			123.0			344.4
Amortization of deferred acquisition costs and other underwriting expenses														198.6															189.6

GAAP underwriting loss														(5.9	)														(21.3	)
Net investment income														38.6															37.3
Other income														1.9															2.0
Other operating expenses														(3.4	)														(1.9	)

Operating income before income taxes													$	31.2														$	16.1


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		53.9	%		72.2	%		68.0	%		54.4	%		58.4	%		55.0	%		72.1	%		70.5	%		54.7	%		59.3	%
Prior year unfavorable (favorable) reserve development		(0.6	)%		3.9	%		(6.7	)%		1.5	%		0.2	%		(0.4	)%		4.5	%		(2.7	)%		(0.2	)%		0.1	%
Catastrophe losses		13.7	%		(0.1	)%		—			4.2	%		6.2	%		19.2	%		—			—			3.8	%		7.8	%

Total loss and LAE ratio		67.0	%		76.0	%		61.3	%		60.1	%		64.8	%		73.8	%		76.6	%		67.8	%		58.3	%		67.2	%
Expense ratio														36.2	%														36.8	%

Combined ratio														101.0	%														104.0	%


Change in policies in force		5.5	%		(1.9	)%		3.5	%		5.2	%		4.1	%		2.1	%		5.6	%		10.4	%		0.7	%		3.0	%
Retention		86.2	%		81.4	%		78.7	%		N/M			83.6	%		84.6	%		80.6	%		79.4	%		N/M			82.9	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

COMMERCIAL LINES


(In millions, except percentage data)	Q1 2014			Q2 2014			Q3 2014			Q4 2014			Q1 2015
Gross premiums written	$	597.8		$	613.0		$	656.0		$	575.7		$	656.2

Net premiums written	$	539.3		$	541.0		$	576.6		$	499.0		$	581.9

Net premiums earned	$	512.7		$	517.6		$	521.9		$	529.2		$	546.2
Losses and LAE:
Current accident year, excluding catastrophe losses		303.6			300.8			299.9			311.8			318.7
Prior year unfavorable reserve development		0.6			1.8			1.1			5.7			0.9
Catastrophe losses		40.2			17.0			20.4			10.2			33.9

Total losses and LAE		344.4			319.6			321.4			327.7			353.5
Amortization of deferred acquisition costs and other underwriting expenses		189.6			190.7			194.6			201.7			198.6

GAAP underwriting profit (loss)	$	(21.3	)	$	7.3		$	5.9		$	(0.2	)	$	(5.9	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		59.3	%		58.2	%		57.5	%		58.9	%		58.4	%
Prior year unfavorable reserve development		0.1	%		0.3	%		0.2	%		1.1	%		0.2	%
Catastrophe losses		7.8	%		3.3	%		3.9	%		1.9	%		6.2	%

Total loss and LAE ratio		67.2	%		61.8	%		61.6	%		61.9	%		64.8	%
Expense ratio		36.8	%		36.6	%		37.1	%		37.9	%		36.2	%

Combined ratio		104.0	%		98.4	%		98.7	%		99.8	%		101.0	%


Combined ratio, excluding catastrophe losses		96.2	%		95.1	%		94.8	%		97.9	%		94.8	%

Current accident year combined ratio, excluding catastrophe losses		96.1	%		94.8	%		94.6	%		96.8	%		94.6	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

PERSONAL LINES

Three Months ended March 31


	2015												2014
(In millions, except percentage data)	Auto			Home			Other			Total			Auto			Home			Other			Total
Net premiums written	$	216.3		$	102.0		$	8.1		$	326.4		$	211.8		$	99.0		$	8.4		$	319.2

Net premiums earned	$	217.8		$	125.2		$	9.9		$	352.9		$	214.9		$	125.1		$	10.2		$	350.2
Losses and LAE:
Current accident year, excluding catastrophe losses		160.1			62.3			3.6			226.0			160.5			66.1			4.0			230.6
Prior year unfavorable (favorable) reserve development		(1.0	)		(1.4	)		0.2			(2.2	)		(1.0	)		—			—			(1.0	)
Catastrophe losses		0.1			25.2			0.2			25.5			0.1			17.9			0.4			18.4

Total losses and LAE		159.2			86.1			4.0			249.3			159.6			84.0			4.4			248.0
Amortization of deferred acquisition costs and other underwriting expenses											100.2												100.1

GAAP underwriting profit											3.4												2.1
Net investment income											17.9												17.9
Other income											3.2												2.9
Other operating expenses											(2.2	)											(1.3	)

Operating income before income taxes										$	22.3											$	21.6


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		73.6	%		49.7	%		36.4	%		64.1	%		74.8	%		52.9	%		39.2	%		65.8	%
Prior year unfavorable (favorable) reserve development		(0.5	)%		(1.1	)%		2.0	%		(0.6	)%		(0.5	)%		—			—			(0.3	)%
Catastrophe losses		—			20.1	%		2.0	%		7.2	%		—			14.3	%		3.9	%		5.3	%

Total loss and LAE ratio		73.1	%		68.7	%		40.4	%		70.7	%		74.3	%		67.2	%		43.1	%		70.8	%
Expense ratio											27.7	%											27.9	%

Combined ratio											98.4	%											98.7	%


Change in policies in force		(1.8	)%		(2.9	)%		(11.7	)%		(2.7	)%		(12.0	)%		(13.5	)%		(15.2	)%		(12.9	)%
Retention⁽¹⁾		84.4	%		79.8	%		N/M			82.6	%		83.1	%		74.1	%		N/M			79.6	%

⁽¹⁾	The calculation has been updated, including prior periods, to reflect the ratio of net retained policies for the noted period to those policies available to renew over the same period.

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

PERSONAL LINES


(In millions, except percentage data)	Q1 2014			Q2 2014			Q3 2014			Q4 2014			Q1 2015
Gross premiums written	$	343.3		$	395.2		$	402.3		$	376.5		$	349.1

Net premiums written	$	319.2		$	370.8		$	379.1		$	353.7		$	326.4

Net premiums earned	$	350.2		$	350.3		$	353.0		$	353.6		$	352.9
Losses and LAE:
Current accident year, excluding catastrophe losses		230.6			219.8			213.5			214.1			226.0
Prior year favorable reserve development		(1.0	)		(2.2	)		(0.7	)		(1.2	)		(2.2	)
Catastrophe losses		18.4			27.2			51.6			9.2			25.5

Total losses and LAE		248.0			244.8			264.4			222.1			249.3
Amortization of deferred acquisition costs and other underwriting expenses		100.1			101.9			101.0			102.7			100.2

GAAP underwriting profit (loss)	$	2.1		$	3.6		$	(12.4	)	$	28.8		$	3.4


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		65.8	%		62.7	%		60.5	%		60.5	%		64.1	%
Prior year favorable reserve development		(0.3	)%		(0.6	)%		(0.2	)%		(0.3	)%		(0.6	)%
Catastrophe losses		5.3	%		7.8	%		14.6	%		2.6	%		7.2	%

Total loss and LAE ratio		70.8	%		69.9	%		74.9	%		62.8	%		70.7	%
Expense ratio		27.9	%		28.4	%		27.9	%		28.3	%		27.7	%

Combined ratio		98.7	%		98.3	%		102.8	%		91.1	%		98.4	%


Combined ratio, excluding catastrophe losses		93.4	%		90.5	%		88.2	%		88.5	%		91.2	%

Current accident year combined ratio, excluding catastrophe losses		93.7	%		91.1	%		88.4	%		88.8	%		91.8	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CHAUCER

Three Months ended March 31


	2015													2014
(In millions, except percentage data)	Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total			Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total
Gross premiums written	$	92.0	$	114.3	$	65.8	$	73.7	$	104.9	$	450.7		$	106.8	$	128.3	$	59.5	$	77.8	$	94.6	$	467.0

Net premiums written	$	46.0	$	84.4	$	30.9	$	52.4	$	93.1	$	306.8		$	59.2	$	91.0	$	24.4	$	56.1	$	83.1	$	313.8

Net premiums earned	$	40.2	$	72.9	$	55.8	$	70.2	$	72.8	$	311.9		$	46.6	$	66.8	$	53.2	$	77.3	$	56.2	$	300.1
Losses and LAE:
Current accident year, excluding catastrophe losses												191.3													178.1
Prior year favorable reserve development												(24.2	)												(19.6	)
Catastrophe losses												2.9													(0.7	)

Total losses and LAE												170.0													157.8
Amortization of deferred acquisition costs and other underwriting expenses												106.3													105.8

GAAP underwriting profit												35.6													36.5
Net investment income												12.3													10.5
Other income												2.3													3.9
Other operating expenses												(1.0	)												(1.7	)

Operating income before income taxes											$	49.2												$	49.2


Loss and LAE ratio:
Current accident year, excluding catastrophe losses												61.4	%												59.2	%
Prior year favorable reserve development												(7.8	)%												(6.5	)%
Catastrophe losses												0.9	%												(0.2	)%

Total loss and LAE ratio												54.5	%												52.5	%
Expense ratio												34.1	%												35.3	%

Combined ratio												88.6	%												87.8	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CHAUCER


	Q1			Q2			Q3			Q4			Q1
(In millions, except percentage data)	2014			2014			2014			2014			2015

Gross premiums written	$	467.0		$	415.4		$	329.9		$	293.3		$	450.7

Net premiums written	$	313.8		$	364.4		$	289.1		$	264.1		$	306.8

Net premiums earned	$	300.1		$	306.8		$	309.1		$	305.8		$	311.9
Losses and LAE:
Current accident year, excluding catastrophe losses		178.1			178.4			176.0			177.0			191.3
Prior year favorable reserve development		(19.6	)		(29.2	)		(22.6	)		(33.2	)		(24.2	)
Catastrophe losses		(0.7	)		11.5			16.1			1.9			2.9

Total losses and LAE		157.8			160.7			169.5			145.7			170.0
Amortization of deferred acquisition costs and other underwriting expenses		105.8			121.8			114.4			123.6			106.3

GAAP underwriting profit	$	36.5		$	24.3		$	25.2		$	36.5		$	35.6


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		59.2	%		58.2	%		56.9	%		58.0	%		61.4	%
Prior year favorable reserve development		(6.5	)%		(9.5	)%		(7.3	)%		(10.9	)%		(7.8	)%
Catastrophe losses		(0.2	)%		3.7	%		5.2	%		0.6	%		0.9	%

Total loss and LAE ratio		52.5	%		52.4	%		54.8	%		47.7	%		54.5	%
Expense ratio		35.3	%		39.7	%		37.0	%		40.4	%		34.1	%

Combined ratio		87.8	%		92.1	%		91.8	%		88.1	%		88.6	%


Combined ratio, excluding catastrophe losses		88.0	%		88.4	%		86.6	%		87.5	%		87.7	%

Current accident year combined ratio, excluding catastrophe losses		94.5	%		97.9	%		93.9	%		98.4	%		95.5	%

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME AND YIELDS


	Q1			Q2			Q3			Q4			Q1
(In millions, except yields)	2014			2014			2014			2014			2015
Net Investment Income
Fixed maturities	$	64.7		$	63.2		$	63.4		$	64.5		$	64.7
Equity securities		3.4			4.4			4.5			4.2			3.9
Other investments		1.5			2.1			2.3			3.1			4.2
Investment expenses		(2.6	)		(2.7	)		(2.7	)		(3.0	)		(2.7	)

Total	$	67.0		$	67.0		$	67.5		$	68.8		$	70.1


Pre-tax Yields

Fixed maturities		3.79	%		3.74	%		3.68	%		3.65	%		3.64	%
Total		3.47	%		3.42	%		3.39	%		3.39	%		3.41	%

Pre-tax yields are calculated as annualized net investment income divided by the average of investment balances, excluding unrealized capital gains and losses, at the end of each month during the period.

THE HANOVER INSURANCE GROUP

INVESTMENT PORTFOLIO

March 31, 2015


(In millions)
Investment Type	Weighted Average Quality	Amortized Cost or Cost		Fair Value		% of Total			Net Unrealized Gain		Change in Net Unrealized YTD

Fixed maturities:
U.S. Treasury and government agencies	AAA	$	435.7	$	444.0		5.2	%	$	8.3	$	4.2
Foreign government	AAA		326.6		331.2		3.8	%		4.6		—
Municipals:
Taxable	AA		952.7		1,013.3		11.7	%		60.6		5.9
Tax exempt	AA		122.8		126.5		1.5	%		3.7		—
Corporate:
NAIC 1	A		1,805.2		1,888.9		22.0	%		83.7		12.6
NAIC 2	BBB		1,534.6		1,613.1		18.7	%		78.5		15.2
NAIC 3 and below	B+		436.7		440.0		5.1	%		3.3		3.2

Total corporate	BBB+		3,776.5		3,942.0		45.8	%		165.5		31.0

Asset backed:
Residential mortgage-backed	AA+		754.5		778.0		9.0	%		23.5		4.8
Commercial mortgage-backed	AAA		507.5		525.2		6.1	%		17.7		6.6
Asset-backed	AAA		180.2		181.4		2.1	%		1.2		0.2

Total fixed maturities	A+		7,056.5		7,341.6		85.2	%		285.1		52.7
Equity securities			527.2		593.0		6.9	%		65.8		(8.4	)
Other investments			274.0		277.6		3.2	%		3.6		—

Total investments			7,857.7		8,212.2		95.3	%		354.5		44.3
Cash and cash equivalents			403.9		403.9		4.7	%		—		—

Total		$	8,261.6	$	8,616.1		100.0	%	$	354.5	$	44.3

THE HANOVER INSURANCE GROUP

CREDIT QUALITY AND DURATION OF FIXED MATURITIES

March 31, 2015

(In millions)

CREDIT QUALITY OF FIXED MATURITIES

NAIC Designation

Rating Agency
Equivalent Designation

Amortized
Cost

Fair
Value

% of Total
Fair Value

Aaa/Aa/A

5,042.2

5,244.0

71.4

Baa

1,571.6

1,651.4

22.5

216.2

224.4

3.1

192.3

2.6

Caa and lower

30.5

25.7

0.3

In or near default

3.7

3.8

0.1

Total fixed maturities

7,056.5

7,341.6

100.0

DURATION OF FIXED MATURITIES

Amortized
Cost

Fair
Value

% of Total
Fair Value

0-2 Years

1,623.4

1,663.6

22.7

2-4 Years

1,876.3

1,955.0

26.6

4-6 Years

1,971.7

2,061.0

28.1

6-8 Years

1,254.7

1,310.9

17.9

8-10 Years

260.6

274.0

3.7

10+ Years

69.8

77.1

1.0

Total fixed maturities

7,056.5

7,341.6

100.0

Weighted Average Duration

4.15

THE HANOVER INSURANCE GROUP

TOP 10 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS

March 31, 2015


(In millions, except percentage data)
Issuer	Amortized Cost		Fair Value		As a Percent of Invested Assets			S&P Ratings
Lloyds Bank: (1)
Term deposit	$	49.3	$	49.1		0.57	%	A
Notes		8.9		9.4		0.11	%	A-
Bank of America		28.0		29.9		0.35	%	A-
JP Morgan		27.9		28.4		0.33	%	A
Citigroup		27.2		28.8		0.33	%	A-
Daimler		25.6		26.2		0.30	%	A-
Goldman Sachs		25.3		26.7		0.31	%	A-
Metlife		24.7		26.1		0.30	%	A+
Verizon		24.6		25.8		0.30	%	BBB+
GE Capital		24.6		26.3		0.31	%	AA+
Kinder Morgan		23.7		24.9		0.29	%	BBB-

Top 10 Corporate and Municipal Fixed	$	289.8	$	301.6		3.50	%

(1)	UK government owns 22% of bank equity; term deposit matures in the third quarter of 2015.

THE HANOVER INSURANCE GROUP

RECONCILIATION OF OPERATING INCOME TO NET INCOME


	Three Months ended March 31
	2015						2014
(In millions, except per share data)	$			Per Share (Diluted)			$			Per Share (Diluted)
OPERATING INCOME (LOSS)
Commercial Lines	$	31.2					$	16.1
Personal Lines		22.3						21.6
Chaucer		49.2						49.2
Other		(2.5	)					(1.9	)

Total		100.2						85.0

Interest expense		(15.9	)					(16.3	)

Operating income before income taxes		84.3		$	1.87			68.7		$	1.53

Income tax expense on operating income		(27.2	)		(0.60	)		(21.7	)		(0.48	)


Operating income after income taxes		57.1			1.27			47.0			1.05
Net realized investment gains		9.4			0.21			4.4			0.10
Loss from repurchase of debt		(16.7	)		(0.37	)		—			—
Other non-operating items		—			—			(1.0	)		(0.02	)
Income tax benefit on non-operating items		5.1			0.11			4.3			0.09

Income from continuing operations, net of taxes		54.9			1.22			54.7			1.22

Discontinued operations, net of taxes		—			—			(0.1	)		—


NET INCOME	$	54.9		$	1.22		$	54.6		$	1.22

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. The Company’s non-GAAP measures include operating income before interest expense and taxes, total operating income after taxes, total operating 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 operating income and loss ratios excluding catastrophe losses and reserve development. After-tax operating income EPS (sometimes referred to as “after-tax operating 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.

Operating 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. Operating 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. Operating income before interest expense and taxes is the sum of the operating income from: Commercial Lines, Personal Lines, Chaucer, and Other. The Hanover believes that measures of operating 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 operating 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 operating 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.

Operating income before and after interest expense and taxes and measures of operating 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 operating income before interest expense and taxes and income from continuing operations per share to operating income after taxes per share for the three months ended March 31, 2015 and 2014 is set forth on page 17 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.

CORPORATE OFFICES AND

PRINCIPAL SUBSIDIARIES

THE HANOVER INSURANCE GROUP, INC.

440 Lincoln Street

Worcester, MA 01653

The Hanover Insurance Company

440 Lincoln Street

Worcester, MA 01653

Citizens Insurance Company of America

808 North Highlander Way

Howell, MI 48843

Chaucer Holdings Limited

Plantation Place

30 Fenchurch Street

London

EC3M 3AD

MARKET AND DIVIDEND INFORMATION

The following tables set forth the high and low closing sales prices of our common stock and cash dividends for the periods indicated:

Quarter Ended

2015

Price Range

Dividends

High

Low

Per Share

March 31

73.35

68.18

0.410


Quarter Ended	2014
	Price Range				Dividends
	High		Low		Per Share
March 31	$	61.44	$	53.14	$	0.370
June 30	$	64.00	$	58.23	$	0.370
September 30	$	63.82	$	57.81	$	0.370
December 31	$	73.30	$	60.51	$	0.410

INDUSTRY RATINGS AS OF APRIL 30, 2015


Financial Strength Ratings	A.M. Best	Standard & Poor’s	Moody’s
The Hanover Insurance Company	A	A	A3
Citizens Insurance Company of America	A	A	—


Debt Ratings	A.M. Best	Standard & Poor’s	Moody’s
The Hanover Insurance Group, Inc.
Senior Debt	bbb	BBB	Baa3
Subordinated Debentures	bb+	BB+	Ba1

TRANSFER AGENT

Computershare Investor Services

PO Box 30170

College Station, TX 77842-3170

1-800-317-4454

COMMON STOCK

Common stock of The Hanover Insurance Group is traded on the New York Stock Exchange under the symbol “THG”.

INQUIRIES

Oksana Lukasheva

Vice President

Investor Relations

(508) 855-2063

olukasheva@hanover.com

INVESTOR INFORMATION LINE

Dial 1-800-407-5222 to receive additional printed information, fax-on-demand services or other prerecorded messages.

Please visit our internet site at http://www.Hanover.com

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HANOVER INSURANCE GROUP, INC. Reports