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

Investments

Net Investment Income and Yields....................................................................

11

Investment Portfolio..........................................................................................

12

Credit Quality and Duration of Fixed Maturities.................................................

13

Top 25 Corporate and Municipal Fixed Maturity Holdings..................................

14

Reconciliation of Operating Income to Net Income (Loss)...................................

15

Other Information

Non-GAAP Financial Measures.........................................................................

16

Corporate Information.......................................................................................

17

Market and Dividend Information.......................................................................

17

Financial Strength and Debt Ratings................................................................

17

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. Commercial automobile policies are often written in conjunction with other commercial lines.

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. Workers' compensation policies are often written in conjunction with other commercial policies.

Other Commercial Lines is comprised of management and professional liability, which covers primarily commercial professional, management and medical liability; marine, which includes inland and ocean marine, and insures businesses against physical losses to property; Hanover Programs, which includes coverage to markets where there are specialty coverage or risk management needs related to groups of similar businesses; specialty industrial and commercial property, which provides insurance to small and medium-sized chemical, paint, solvent and other manufacturing and distribution companies; monoline general liability, which covers bodily injury, property damage and personal injury arising from products sold or accidents occurring on premises or operations; surety, which provides businesses with contract surety coverage in the event of a failure to perform or pay claims and coverage related to fiduciary or regulatory obligations; and other commercial lines, which includes umbrella, fidelity and crime.

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 (excluding flood), 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 and other miscellaneous coverages.

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; holding company and other expenses and a discontinued voluntary pools business.

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

Q1

Q2

Q3

Q4

Q1

(In millions, except earnings per share)

2019

2019

2019

2019

2020 (1)

PREMIUMS

Gross premiums written

$

1,226.3

$

1,271.5

$

1,385.8

$

1,234.9

$

1,288.9

Net premiums written

1,098.0

1,137.8

1,242.9

1,103.0

1,136.9

Net premiums earned

1,095.1

1,111.0

1,124.1

1,144.3

1,141.4

EARNINGS

Operating income before interest and taxes

$

109.8

$

107.0

$

126.3

$

110.5

$

117.1

Operating income after taxes

80.7

77.7

93.0

80.2

86.8

Income (loss) from continuing operations

122.6

85.0

111.2

110.2

(38.7

)

Net income (loss)

122.4

74.0

118.9

109.8

(40.0

)

PER SHARE DATA (DILUTED)

Operating income after taxes

$

1.96

$

1.88

$

2.31

$

2.01

$

2.23

Income (loss) from continuing operations

2.98

2.06

2.77

2.77

(1.01

)

Net income (loss)

2.97

1.79

2.96

2.76

(1.04

)

Dilutive weighted average shares outstanding

41.2

41.2

40.2

39.8

38.9

Basic weighted average shares outstanding

40.6

40.7

39.6

39.2

38.3

BALANCE SHEET

March 31

June 30

September 30

December 31

March 31

(In millions, except per share data)

2019

2019

2019

2019

2020

Total assets

$

11,983.4

$

12,159.9

$

12,627.2

$

12,490.5

$

12,277.4

Total loss and loss adjustment expense reserves

5,381.6

5,478.5

5,550.5

5,654.4

5,724.9

Total shareholders' equity

2,927.0

2,941.1

3,086.8

2,916.2

2,736.6

Total shareholders' equity, excluding net unrealized appreciation

(depreciation) on fixed maturity investments, net of tax

2,836.3

2,748.8

2,851.5

2,700.2

2,603.8

Property and Casualty Companies

Statutory surplus

$

2,301.1

$

2,249.7

$

2,347.8

$

2,470.2

$

2,420.2

Premium to surplus ratio

1.92:1

1.98:1

1.93:1

1.85:1

1.91:1

Book value per share

$

71.95

$

74.39

$

78.01

$

75.94

$

72.05

Book value per share, excluding net unrealized appreciation

(depreciation) on fixed maturity investments, net of tax

$

69.72

$

69.52

$

72.06

$

70.32

$

68.55

Tangible book value per share (total book value excluding goodwill

and intangibles)

$

66.67

$

69.30

$

72.94

$

70.74

$

66.81

Shares outstanding

40.7

39.6

39.6

38.4

38.0

Total debt/equity

22.3

%

22.2

%

21.6

%

22.4

%

25.9

%

Total debt/total capital

18.2

%

18.2

%

17.8

%

18.3

%

20.5

%

(1) Operating income per share metrics are calculated using diluted shares outstanding. Income (loss) from continuing operations and net income (loss) per share metrics are calculated using

     basic shares outstanding due to antidilution.

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS

Three Months ended March 31

(In millions)

2020

2019

% Change

REVENUES

Premiums earned

$

1,141.4

$

1,095.1

4.2

Net investment income

69.6

70.2

(0.9

)

Net realized and unrealized investment gains (losses):

       Net realized gains (losses) from sales and other

3.1

(0.4

)

N/M

       Net change in fair value of equity securities

(136.2

)

48.6

N/M

       Impairment losses on investments

(28.5

)

-

N/M

Total net realized and unrealized investment gains (losses)

(161.6

)

48.2

N/M

Fees and other income

6.8

6.0

13.3

Total revenues

1,056.2

1,219.5

(13.4

)

LOSSES AND EXPENSES

Losses and loss adjustment expenses

728.2

699.6

4.1

Amortization of deferred acquisition costs

236.9

229.5

3.2

Interest expense

9.4

9.4

-

Other operating expenses

135.6

132.4

2.4

Total losses and expenses

1,110.1

1,070.9

3.7

Income (loss) from continuing operations before income taxes

(53.9

)

148.6

N/M

Income tax expense (benefit)

(15.2

)

26.0

N/M

\

Income (loss) from continuing operations

(38.7

)

122.6

N/M

Discontinued operations (net of taxes):

-

Sale of Chaucer business

-

0.9

N/M

Loss from Chaucer business

-

(0.3

)

N/M

Loss from discontinued life businesses

(1.3

)

(0.8

)

N/M

Net income (loss)

$

(40.0

)

$

122.4

N/M

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS

March 31

December 31

(In millions, except per share data)

2020

2019

% Change

ASSETS

Investments:

Fixed maturities, at fair value (amortized cost of $6,493.7 and $6,452.2)

$

6,625.0

$

6,687.1

(0.9

)

Equity securities, at fair value

447.0

575.7

(22.4

)

Other investments

755.5

733.2

3.0

Total investments

7,827.5

7,996.0

(2.1

)

Cash and cash equivalents

143.9

215.7

(33.3

)

Accrued investment income

51.5

53.0

(2.8

)

Premiums and accounts receivable, net

1,271.0

1,260.4

0.8

Reinsurance recoverable on paid and unpaid losses and unearned premiums

1,820.4

1,814.0

0.4

Deferred acquisition costs

465.7

467.4

(0.4

)

Deferred income tax asset

3.2

-

N/M

Goodwill

178.8

178.8

-

Other assets

417.3

402.4

3.7

Assets of discontinued businesses

98.1

102.8

(4.6

)

Total assets

$

12,277.4

$

12,490.5

(1.7

)

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES

Loss and loss adjustment expense reserves

$

5,724.9

$

5,654.4

1.2

Unearned premiums

2,421.0

2,416.7

0.2

Expenses and taxes payable

512.0

627.7

(18.4

)

Deferred income tax liability

-

51.8

N/M

Reinsurance premiums payable

58.5

53.4

9.6

Debt

707.5

653.4

8.3

Liabilities of discontinued businesses

116.9

116.9

-

Total liabilities

9,540.8

9,574.3

(0.3

)

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

1,861.6

1,837.3

1.3

Accumulated other comprehensive income

70.6

152.6

(53.7

)

Retained earnings

2,344.9

2,410.9

(2.7

)

Treasury stock at cost (22.5 million and 22.1 million shares)

(1,541.1

)

(1,485.2

)

3.8

Total shareholders' equity

2,736.6

2,916.2

(6.2

)

Total liabilities and shareholders' equity

$

12,277.4

$

12,490.5

(1.7

)

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CONSOLIDATED

Three Months ended March 31

2020

2019

Commercial

Personal

Commercial

Personal

(In millions, except percentage data)

Lines

Lines

Other

Total

Lines

Lines

Other

Total

Gross premiums written

$

830.5

$

458.4

$

-

$

1,288.9

$

779.5

$

446.8

$

-

$

1,226.3

Net premiums written

$

707.6

$

429.3

$

-

$

1,136.9

$

677.4

$

420.6

$

-

$

1,098.0

Net premiums earned

$

675.9

$

465.5

$

-

$

1,141.4