SCHEDULE II

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

STATEMENTS OF INCOME


YEARS ENDED DECEMBER 31		2015		2014		2013
(in millions)
Revenues
Net investment income	$	4.1	$	3.9	$	5.5
Net realized gains from sales and other		1.0		-		0.8
Interest income from loan to subsidiary		22.5		22.5		22.5
Other income		0.1		0.1		0.1
Total revenues		27.7		26.5		28.9
Expenses
Interest expense		53.4		54.1		55.3
Loss from repayment of debt		24.1		0.1		19.9
Employee benefit related expenses		7.0		11.1		6.2
Benefit related to acquired businesses		(0.7)		-		(6.4)
Other operating expenses		8.1		8.1		8.0
Total expenses		91.9		73.4		83.0
Net loss before income taxes and equity in income of subsidiaries		(64.2)		(46.9)		(54.1)
Income tax benefit		49.5		52.1		37.3
Equity in income of subsidiaries		345.2		277.4		262.5
Income from continuing operations		330.5		282.6		245.7
Income (loss) from discontinued operations (net of income tax (benefit) expense
of $(0.4), $(0.2) and $4.1 in 2015, 2014 and 2013)		1.0		(0.6)		5.3
Net income		331.5		282.0		251.0
Other comprehensive (loss) income, net of tax		(152.5)		28.8		(148.2)
Comprehensive income	$	179.0	$	310.8	$	102.8

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

SCHEDULE II (CONTINUED)

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

BALANCE SHEETS


DECEMBER 31		2015		2014
(in millions, except per share data)
Assets
Fixed maturities - at fair value (amortized cost of $121.1 and $102.1)	$	121.3	$	105.2
Equity securities - at fair value (cost of $1.0)		1.1		1.1
Cash and cash equivalents		8.6		14.5
Investments in subsidiaries		3,262.5		3,129.8
Net receivable from subsidiaries (1)		222.8		320.4
Deferred income tax receivable		7.4		62.8
Current income tax receivable		1.1		-
Other assets		12.2		14.0
Total assets	$	3,637.0	$	3,647.8
Liabilities
Expenses and state taxes payable	$	18.1	$	15.0
Current income tax payable		-		2.2
Interest payable		7.9		8.1
Debt		766.6		778.5
Total liabilities		792.6		803.8
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		1,833.5		1,830.7
Accumulated other comprehensive income		53.9		206.4
Retained earnings		1,803.5		1,558.7
Treasury stock at cost (17.5 and 16.6 million)		(847.1)		(752.4)
Total shareholders' equity		2,844.4		2,844.0
Total liabilities and shareholders' equity	$	3,637.0	$	3,647.8

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

(1)

Net receivable from subsidiaries in both years includes a $300.0 million note receivable from The Hanover Insurance International Holdings, Ltd., parent company of Chaucer Holdings, Ltd.

SCHEDULE II (CONTINUED)

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

STATEMENTS OF CASH FLOWS


YEARS ENDED DECEMBER 31		2015		2014		2013
(in millions)
Cash flows from operating activities
Net income	$	331.5	$	282.0	$	251.0
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss from discontinued operations		(1.0)		0.6		2.5
Loss from retirement of debt		24.1		0.1		19.9
Equity in net income of subsidiaries		(345.2)		(277.4)		(262.5)
Net realized investment gains		(1.0)		-		(0.8)
Dividends received from subsidiaries		5.1		70.2		12.5
Deferred income tax expense (benefit)		35.7		(29.9)		(32.3)
Change in expenses and taxes payable		(2.6)		11.4		0.1
Change in net receivable from subsidiaries		(5.9)		16.9		16.5
Other, net		6.1		4.3		3.4
Net cash provided by operating activities		46.8		78.2		10.3
Cash flows from investing activities
Proceeds from disposals and maturities of fixed maturities		70.0		25.6		122.9
Purchase of fixed maturities		(11.9)		(28.6)		(90.8)
Net cash used for business acquisitions		(2.3)		(2.3)		(2.2)
Net cash provided by (used in) investing activities		55.8		(5.3)		29.9
Cash flows from financing activities
Proceeds from short-term intercompany borrowings		102.7		-		-
Proceeds from debt borrowings		-		-		168.6
Repurchases of debt		(15.1)		(0.7)		(93.6)
Dividends paid to shareholders		(74.2)		(67.0)		(60.0)
Repurchase of common stock		(127.3)		(20.4)		(78.2)
Proceeds from exercise of employee stock options		16.6		12.6		25.0
Other financing activities		(11.2)		(3.6)		(5.1)
Net cash used in financing activities		(108.5)		(79.1)		(43.3)
Net change in cash and cash equivalents		(5.9)		(6.2)		(3.1)
Cash and cash equivalents, beginning of year		14.5		20.7		23.8
Cash and cash equivalents, end of year	$	8.6	$	14.5	$	20.7

Included in other operating cash flows was the cash portion of dividends received from unconsolidated subsidiaries. Cash payments of $5.1 million, $70.2 million and $12.5 million in 2015, 2014 and 2013, and investment assets of $76.9 million and $1.0 million were transferred to the parent company in 2015 and 2014, respectively, to settle dividend and other intercompany balances. There were no assets transferred to the parent company from its subsidiaries in 2013 to settle balances.

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.