EX-99.2 3 dex992.htm STATISTICAL SUPPLEMENT FOR THE PERIOD ENDED MARCH 31, 2006 Statistical Supplement for the period ended March 31, 2006

Exhibit 99.2

THE HANOVER INSURANCE GROUP

STATISTICAL SUPPLEMENT

TABLE OF CONTENTS

 

Financial Highlights

    1-3

Consolidated Financial Statements

   

Income Statements

    4-5

Balance Sheets

    6

Property and Casualty

   

Condensed Income Statements

    7

Property and Casualty Consolidated Balance Sheets

    8

GAAP Underwriting Results

    9-10

Life Companies

   

Condensed Income Statements

    11

Life Companies Consolidated Balance Sheets

    12

Future Policy Benefits and Account Balances

    13

Investments

   

Net Investment Income

    14

Net Realized Investment Gains (Losses)

    15

Unrealized Losses

    16

Credit Quality of Fixed Maturities

    17

Property and Casualty Statutory Ratios

    18

Historical Financial Highlights

    19-20

Other Information

    Inside back cover

Corporate Information

   

Market and Dividend Information

   

Industry Ratings

   

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

 

     Quarter ended March 31  

(In millions)

    2006     2005     % Change  

SEGMENT INCOME

       

Property and Casualty

       

Personal Lines

    $ 49.0     $ 39.2     25.0  

Commercial Lines

      39.0       20.5     90.2  

Other

      3.7       2.1     76.2  
                      

Total Property and Casualty

      91.7       61.8     48.4  
                      

Life Companies

      (1.9 )     (9.3 )   (79.6 )

Interest expense on corporate debt

      (10.0 )     (10.0 )   —    
                      

Total segment income

      79.8       42.5     87.8  

Federal income tax expense on P&C segment income

      (28.9 )     (17.4 )   66.1  

Federal income tax benefit on other segment income

      5.3       7.6     (30.3 )
                      

Total federal income tax expense on segment income

      (23.6 )     (9.8 )   N/M  
                      

Total segment income after taxes

    $ 56.2     $ 32.7     71.9  
                      

RECONCILIATION FROM SEGMENT INCOME TO NET INCOME

       

Total segment income after taxes

    $ 56.2     $ 32.7     71.9  

Net realized investment gains, net of amortization

      5.8       11.3     (48.7 )

Losses on derivative instruments

      —         (0.2 )   N/M  

Restructuring costs

      (0.3 )     (0.7 )   (57.1 )

Federal income tax expense on non-segment income

      (1.7 )     (2.7 )   (37.0 )
                      

Income from continuing operations, net of taxes

      60.0       40.4     48.5  

Income from discontinued variable life insurance and annuity business, net of taxes

      —         6.1     N/M  

Loss on disposal of variable life insurance and annuity business, net of taxes

      (20.1 )     —       N/M  
                      

Income before cumulative effect of accounting change

      39.9       46.5     (14.2 )

Cumulative effect of change in accounting principle, net of taxes

      0.6       —       N/M  
                      

Net income

    $ 40.5     $ 46.5     (12.9 )
                      

 

1

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

 

     Quarter ended March 31  
      2006     2005     % Change  

PER SHARE DATA (DILUTED)

       

Total segment income

    $ 1.49     $ 0.79     88.6  

Federal income tax expense on segment income

      (0.44 )     (0.18 )   N/M  
                      

Total segment income after taxes

      1.05       0.61     72.1  

Net realized investment gains, net of amortization

      0.11       0.20     (45.0 )

Losses on derivative instruments

      —         —       N/M  

Restructuring costs

      (0.01 )     (0.01 )   —    

Federal income tax expense on non-segment income

      (0.03 )     (0.05 )   (40.0 )
                      

Income from continuing operations, net of taxes

      1.12       0.75     49.3  

Income from discontinued variable life insurance and annuity business, net of taxes

      —         0.11     N/M  

Loss on disposal of variable life insurance and annuity business, net of taxes

      (0.38 )     —       N/M  
                      

Income before cumulative effect of accounting change

      0.74       0.86     (14.0 )

Cumulative effect of change in accounting principle, net of taxes

      0.01       —       N/M  
                      

Net income

    $ 0.75     $ 0.86     (12.8 )
                      

 

2

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

 

(In millions, except per share data)

   

March 31

2006

    

December 31

2005

     % Change  

BALANCE SHEET

       

Shareholders’ equity

       

The Hanover Insurance Company (consolidated)

    $ 1,718.3     $ 1,709.8     0.5  

First Allmerica Financial Life Insurance Company (consolidated)

      353.3       367.0     (3.7 )

THG Holding Company debt (1)

      (499.5 )     (499.5 )   —    

THG Holding Company and other

      270.9       374.0     (27.6 )
                  

Total shareholders’ equity

    $ 1,843.0     $ 1,951.3     (5.6 )
                  

Total adjusted statutory capital

       

The Hanover Insurance Company (consolidated)

    $ 1,257.4     $ 1,204.6     4.4  

First Allmerica Financial Life Insurance Company

    $ 193.3     $ 195.2     (1.0 )

The Hanover Insurance Company (consolidated) premium to surplus ratio

      1.7:1       1.8:1     N/M  

First Allmerica Financial Life Insurance Company estimated risk based capital ratio

      429 %     410 %   19.0  

Book value per share

       

The Hanover Insurance Company (consolidated)

    $ 32.95     $ 31.81     3.6  

First Allmerica Financial Life Insurance Company (consolidated)

      6.78       6.82     (0.6 )

THG Holding Company debt (1)

      (9.58 )     (9.47 )   1.2  

THG Holding Company and other

      5.20       7.14     (27.2 )
                  

Total book value per share

    $ 35.35     $ 36.30     (2.6 )
                  

THG book value per share, excluding accumulated other comprehensive income

    $ 37.77     $ 37.33     1.2  
                  

The Hanover Insurance Company (consolidated) book value per share, excluding accumulated other comprehensive income

    $ 34.19     $ 32.00     6.8  
                  

Shares outstanding (2)

      52.1       53.7    

Stock price

    $ 52.42     $ 41.77     25.5  

Price/book value per share

      1.5 x     1.2 x   0.3 x

Debt/equity

      27.6 %     26.1 %   1.5 pts

Debt/total capital

      21.6 %     20.7 %   0.9 pts
(1) Excludes $9.3 million of holding company debt related to its affiliate, AFC Capital Trust I.
(2) Shares outstanding do not include common stock equivalents.
(3) Excludes corporate assets related to AFC Holding Company.

 

3

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS

 

     Quarter ended March 31  

(In millions, except per share data)

    2006     2005    % Change  

REVENUES

        

Premiums

    $ 559.4     $ 569.3    (1.7 )

Fees and other income

      19.3       20.2    (4.5 )

Net investment income

      80.3       80.3    —    

Net realized investment gains

      5.6       12.0    (53.3 )
                     

Total revenues

      664.6       681.8    (2.5 )
                     

BENEFITS, LOSSES AND EXPENSES

        

Policy benefits, claims, losses and loss adjustment expenses

      359.8       408.7    (12.0 )

Policy acquisition expenses

      113.6       116.3    (2.3 )

Losses on derivative instruments

      0.6       0.4    50.0  

Restructuring costs

      0.3       0.7    (57.1 )

Other operating expenses

      105.0       102.8    2.1  
                     

Total benefits, losses and expenses

      579.3       628.9    (7.9 )
                     

Income from continuing operations before federal income taxes

      85.3       52.9    61.2  

Federal income tax expense

      25.3       12.5    N/M  
                     

Income from continuing operations

      60.0       40.4    48.5  

Income from discontinued variable life insurance and annuity business, net of taxes

      —         6.1    N/M  

Loss on disposal of variable life insurance and annuity business, net of taxes

      (20.1 )     —      N/M  
                     

Income before cumulative effect of change in accounting principle

      39.9       46.5    (14.2 )

Cumulative effect of change in accounting principle, net of taxes

      0.6       —      N/M  
                     

Net income

    $ 40.5     $ 46.5    (12.9 )
                     

 

4

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS

 

     Quarter ended March 31  
     2006     2005    % Change  

PER SHARE DATA (DILUTED)

        

Income from continuing operations

    $ 1.12     $ 0.75    49.3  

Income from discontinued variable life insurance and annuity business

      —         0.11    N/M  

Loss on disposal of variable life insurance and annuity business

      (0.38 )     —      N/M  
                     

Income before cumulative effect of change in accounting principle

      0.74       0.86    (14.0 )

Cumulative effect of change in accounting principle, net of taxes

      0.01       —      N/M  
                     

Net income (1)

    $ 0.75     $ 0.86    (12.8 )
                     

Weighted average shares outstanding

      53.6       53.8   
                 
(1) Basic income per share was $0.76 and $0.87 for the quarters ended March 31, 2006 and 2005, respectively.

 

5

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS

 

(In millions, except per share data)

   

March 31

2006

    

December 31

2005

     % Change  

ASSETS

       

Investments:

       

Fixed maturities, at fair value (amortized cost of $5,618.3 and $5,685.9)

    $ 5,555.7     $ 5,708.2     (2.7 )

Equity securities, at fair value (cost of $13.0)

      18.2       18.0     1.1  

Mortgage loans

      90.4       99.6     (9.2 )

Policy loans

      136.8       139.9     (2.2 )

Other long-term investments

      40.7       42.6     (4.5 )
                      

Total investments

      5,841.8       6,008.3     (2.8 )
                      

Cash and cash equivalents

      550.2       701.5     (21.6 )

Accrued investment income

      75.2       76.5     (1.7 )

Premiums, accounts and notes receivable, net

      537.7       493.2     9.0  

Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums

      1,450.9       1,617.3     (10.3 )

Deferred policy acquisition costs

      216.3       209.0     3.5  

Deferred federal income taxes

      456.9       465.3     (1.8 )

Goodwill

      128.2       128.2     —    

Other assets

      335.6       362.8     (7.5 )

Separate account assets

      564.0       571.9     (1.4 )
                      

Total assets

    $ 10,156.8     $ 10,634.0     (4.5 )
                      

LIABILITIES AND SHAREHOLDERS’ EQUITY

       

LIABILITIES

       

Policy liabilities and accruals:

       

Future policy benefits

    $ 1,324.3     $ 1,336.1     (0.9 )

Outstanding claims, losses and loss adjustment expenses

      3,328.3       3,551.6     (6.3 )

Unearned premiums

      1,048.6       1,011.3     3.7  

Contractholder deposit funds and other policy liabilities

      199.3       254.7     (21.8 )
                      

Total policy liabilities and accruals

      5,900.5       6,153.7     (4.1 )
                      

Expenses and taxes payable

      993.1       1,062.0     (6.5 )

Reinsurance premiums payable

      51.9       92.0     (43.6 )

Trust instruments supported by funding obligations

      295.5       294.3     0.4  

Long-term debt

      508.8       508.8     —    

Separate account liabilities

      564.0       571.9     (1.4 )
                      

Total liabilities

      8,313.8       8,682.7     (4.2 )
                      

SHAREHOLDERS’ EQUITY

       

Preferred stock, par value $.01 per share; authorized 20.0 million shares; issued none

      —         —       —    

Common stock, par value $.01 per share; authorized 300.0 million shares; issued 60.5 million shares

      0.6       0.6     —    

Additional paid-in capital

      1,798.0       1,785.1     0.7  

Accumulated other comprehensive loss

      (126.2 )     (59.5 )   N/M  

Retained earnings

      605.0       589.8     2.6  

Treasury stock at cost (8.3 and 6.8 million shares)

      (434.4 )     (364.7 )   19.1  
                      

Total shareholders’ equity

      1,843.0       1,951.3     (5.6 )
                      

Total liabilities and shareholders’ equity

    $ 10,156.8     $ 10,634.0     (4.5 )
                      

 

6

PROPERTY & CASUALTY

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS

 

     Quarter ended March 31  

(In millions)

    2006     2005    % Change  

REVENUES

        

Net premiums written

    $ 574.0     $ 548.4    4.7  

Change in unearned premiums, net of prepaid reinsurance premiums

      (33.1 )     1.8    N/M  
                     

Net premiums earned

      540.9       550.2    (1.7 )

Net investment income

      56.5       50.8    11.2  

Other income

      14.7       12.9    14.0  
                     

Total segment revenue

      612.1       613.9    (0.3 )
                     

LOSSES AND OPERATING EXPENSES

        

Policy benefits, claims, losses and loss adjustment expenses

      327.8       371.5    (11.8 )

Policy acquisition expenses

      113.4       114.1    (0.6 )

Other operating expenses

      79.2       66.5    19.1  
                     

Total losses and operating expenses

      520.4       552.1    (5.7 )
                     

Segment income before federal income taxes

    $ 91.7     $ 61.8    48.4  
                     

 

7

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONSOLIDATED BALANCE SHEETS (1)

 

(In millions, except per share data)

    March 31
2006		     December 31
2005		     % Change  

ASSETS

       

Investments:

       

Fixed maturities, at fair value (amortized cost of $3,790.4 and $3,810.7)

    $ 3,745.2     $ 3,822.1     (2.0 )

Equity securities, at fair value (cost of $2.0 )

      6.0       6.0     —    

Mortgage loans

      42.7       45.0     (5.1 )

Other long-term investments

      0.3       0.3     —    
                      

Total investments

      3,794.2       3,873.4     (2.0 )
                      

Cash and cash equivalents

      252.5       322.9     (21.8 )

Accrued investment income

      48.7       48.1     1.2  

Premiums, accounts, and notes receivable, net

      535.6       489.2     9.5  

Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums

      1,072.9       1,226.3     (12.5 )

Deferred policy acquisition costs

      210.2       201.9     4.1  

Deferred federal income tax asset

      251.4       246.5     2.0  

Goodwill

      121.4       121.4     —    

Other assets

      180.2       181.5     (0.7 )
                      

Total assets

    $ 6,467.1     $ 6,711.2     (3.6 )
                      

LIABILITIES AND SHAREHOLDER’S EQUITY

       

LIABILITIES

       

Policy liabilities and accruals:

       

Outstanding claims, losses and loss adjustment expenses

    $ 3,240.4     $ 3,458.7     (6.3 )

Unearned premiums

      1,047.0       1,009.7     3.7  

Contractholder deposit funds and other policy liabilities

      2.6       3.0     (13.3 )
                      

Total policy liabilities and accruals

      4,290.0       4,471.4     (4.1 )
                      

Expenses and taxes payable

      411.2       444.5     (7.5 )

Reinsurance premiums payable

      47.6       85.5     (44.3 )
                      

Total liabilities

      4,748.8       5,001.4     (5.1 )
                      

SHAREHOLDER’S EQUITY

       

Common stock, par value $1.00 per share; authorized 20.9 million shares; issued 5.0 million shares

      5.0       5.0     —    

Additional paid-in capital

      169.1       169.2     (0.1 )

Accumulated other comprehensive loss

      (64.2 )     (9.6 )   N/M  

Retained earnings

      1,608.4       1,545.2     4.1  
                      

Total shareholder’s equity

      1,718.3       1,709.8     0.5  
                      

Total liabilities and shareholder’s equity

    $ 6,467.1     $ 6,711.2     (3.6 )
                      
(1) Property and Casualty Companies includes The Hanover Insurance Company and Citizens Insurance Company of America, and their subsidiaries.

 

8

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME (LOSS)

 

     Quarter ended March 31, 2006  
     Personal Lines     Commercial Lines     Other
Property and
Casualty		     Total
Property and
Casualty		  

(In millions)

    Personal
Automobile		     Homeowners     Other
Personal
Lines		     Total
Personal
Lines		     Workers’
Compensation		     Commercial
Automobile		    Commercial
Multiple
Peril		     Other
Commercial
Lines		     Total
Commercial
Lines		      

Net premiums written

    $ 252.0     $ 81.2     $ 8.4     $ 341.6     $ 35.5     $ 52.0    $ 92.9     $ 52.0     $ 232.4     $ —       $ 574.0  
                                                                                       

Net premiums earned

    $ 232.0     $ 98.0     $ 9.8     $ 339.8     $ 28.3     $ 47.7    $ 83.2     $ 41.9     $ 201.1     $ —       $ 540.9  

Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses

      144.9       41.6       3.3       189.8       21.9       22.2      40.0       13.6       97.7       —         287.5  

Prior year loss and LAE reserve development (favorable) unfavorable

      (7.4 )     1.7       (2.4 )     (8.1 )     (2.4 )     0.2      (12.6 )     (2.3 )     (17.1 )     0.3       (24.9 )

Pre-tax catastrophe losses

      0.1       3.6       —         3.7       —         0.3      1.2       2.1       3.6       —         7.3  

Loss adjustment expenses excluding prior year reserve development

      26.5       8.2       0.7       35.4       4.1       3.2      11.9       2.8       22.0       0.3       57.7  

Policy acquisition expenses and other underwriting expenses

            100.6                82.9       (0.3 )     183.2  

Policyholders’ dividends

            —                  0.2       —         0.2  
                                               

GAAP underwriting profit (loss)

            18.4                11.8       (0.3 )     29.9  

Net investment income

            26.6                26.1       3.8       56.5  

Other income

            4.9                3.9       5.9       14.7  

Other operating expenses

            (0.9 )              (2.8 )     (5.7 )     (9.4 )
                                               

Segment income before federal income taxes

          $ 49.0              $ 39.0     $ 3.7     $ 91.7  
                                               
     Quarter ended March 31, 2005  
     Personal Lines     Commercial Lines     Other
Property and
Casualty		     Total
Property and
Casualty		  
     Personal
Automobile		     Homeowners     Other
Personal
Lines		     Total
Personal
Lines		     Workers’
Compensation		     Commercial
Automobile		    Commercial
Multiple
Peril		     Other
Commercial
Lines		     Total
Commercial
Lines		      

Net premiums written

    $ 246.5     $ 81.0     $ 8.3     $ 335.8     $ 40.1     $ 50.2    $ 89.0     $ 33.3     $ 212.6     $ —       $ 548.4  
                                                                                       

Net premiums earned

    $ 247.3     $ 103.3     $ 9.9     $ 360.5     $ 32.2     $ 46.5    $ 82.9     $ 28.1     $ 189.7     $ —       $ 550.2  

Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses

      167.7       48.7       3.8       220.2       23.7       24.4      39.7       11.8       99.6       —         319.8  

Prior year loss and LAE reserve development (favorable) unfavorable

      (3.5 )     (5.8 )     (0.2 )     (9.5 )     3.8       0.1      (4.7 )     (4.1 )     (4.9 )     0.7       (13.7 )

Pre-tax catastrophe losses

      —         6.5       0.3       6.8       —         —        4.5       1.0       5.5       —         12.3  

Loss adjustment expenses excluding prior year reserve development

      25.7       5.4       0.5       31.6       5.2       3.8      9.9       2.2       21.1       0.1       52.8  

Policy acquisition expenses and other underwriting expenses

            99.6                73.3       (0.3 )     172.6  

Policyholders’ dividends

            —                  0.3       —         0.3  
                                               

GAAP underwriting profit (loss)

            11.8                (5.2 )     (0.5 )     6.1  

Net investment income

            24.9                24.6       1.3       50.8  

Other income

            3.9                3.3       5.7       12.9  

Other operating expenses

            (1.4 )              (2.2 )     (4.4 )     (8.0 )
                                               

Segment income before federal income taxes

          $ 39.2              $ 20.5     $ 2.1     $ 61.8  
                                               

 

9

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS

 

    Quarter ended March 31, 2006  
    Personal Lines     Commercial Lines     Other
Property and
Casualty 		  Total
Property and
Casualty		  
    Personal
Automobile		     Homeowners     Other
Personal
Lines		     Total
Personal
Lines		    

Workers’

Compensation

     Commercial
Automobile		     Commercial
Multiple Peril		     Other
Commercial
Lines		     Total
Commercial
Lines		      

Losses, excluding catastrophe losses and development

   62.5 %   42.4 %   33.7 %   55.9 %   77.4 %   46.5 %   48.1 %   32.5 %   48.6 %   N/M   53.1 %

Catastrophe losses

   —       3.7 %   —       1.1 %   —       0.6 %   1.4 %   5.0 %   1.8 %   N/M   1.3 %

Loss development

   (3.3 )%   2.1 %   (24.5 )%   (2.4 )%   (5.7 )%   0.2 %   (12.3 )%   (5.5 )%   (7.0 )%   N/M   (4.0 )%
                                                               

Total loss reserves

   59.2 %   48.2 %   9.2 %   54.6 %   71.7 %   47.3 %   37.2 %   32.0 %   43.4 %   N/M   50.4 %

Loss adjustment expenses

   11.6 %   8.0 %   7.1 %   10.4 %   11.7 %   6.9 %   11.4 %   6.7 %   9.4 %   N/M   10.1 %

Policy acquisition and other underwriting expenses

         29.6 %           41.2 %   N/M   33.9 %

Policyholders’ dividends

         —               0.1 %   N/M   —    
                                   

Combined

         94.6 %           94.1 %   N/M   94.4 %
                                   

Policies in force

   (1.7 )%   (3.9 )%   (2.5 )%   (2.8 )%   (6.6 )%   (3.7 )%   (5.0 )%   2.7 %   (2.3 )%   —     (2.7 )%

Retention (1)

   79.5 %   83.3 %   N/M     81.5 %   68.4 %   77.1 %   81.9 %   N/M     77.8 %    
    Quarter ended March 31, 2005  
    Personal Lines     Commercial Lines     Other
Property and
Casualty		   Total
Property and
Casualty		  
    Personal
Automobile		     Homeowners     Other
Personal
Lines		     Total
Personal
Lines		    

Workers’

Compensation

     Commercial
Automobile		     Commercial
Multiple Peril		     Other
Commercial
Lines		     Total
Commercial
Lines		      

Losses, excluding catastrophe losses and development

   67.8 %   47.1 %   38.4 %   61.1 %   73.6 %   52.5 %   47.9 %   42.0 %   52.5 %   N/M   58.1 %

Catastrophe losses

   —       6.3 %   3.0 %   1.9 %   —       —       5.4 %   3.6 %   2.9 %   N/M   2.2 %

Loss development

   (1.5 )%   (4.9 )%   (1.0 )%   (2.5 )%   16.2 %   N/M     (3.3 )%   (14.6 )%   (0.8 )%   N/M
   (1.8 )%
                                                               

Total loss reserves

   66.3 %   48.5 %   40.4 %   60.5 %   89.8 %   52.5 %   50.0 %   31.0 %   54.6 %   N/M   58.5 %

Loss adjustment expenses

   10.5 %   4.5 %   4.0 %   8.6 %   11.8 %   8.4 %   9.5 %   7.8 %   9.4 %   N/M   8.9 %

Policy acquisition and other underwriting expenses

         27.6 %           38.6 %   N/M   31.4 %

Policyholders’ dividends

         —               0.2 %   N/M   0.1 %
                                   

Combined

         96.7 %           102.8 %   N/M   98.9 %
                                   

Policies in force

   (12.5 )%   (9.3 )%   (7.5 )%   (10.7 )%   (0.1 )%   0.6 %   (1.0 )%   1.7 %   0.3 %   —     (9.5 )%

Retention (1)

   78.4 %   80.7 %   N/M     79.7 %   87.8 %   79.5 %   81.1 %   N/M     82.4 %    
(1) The retention rate for personal lines is a twelve month rolling average calculation based on policies in force; the retention rate for commercial lines is based on direct voluntary written premiums, based on processed policies in the current period versus the same period in the prior year. Additionally, the retention rates have been adjusted to exclude the effect of our strategic termination of specialty commercial programs which resulted from an extensive review during the fourth quarter of 2001.

 

10

LIFE COMPANIES

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONDENSED INCOME STATEMENTS

 

     Quarter ended March 31  

(In millions)

    2006     2005     % Change  

REVENUES

       

Premiums

    $ 18.5     $ 19.1     (3.1 )

Fees and other income

      6.0       9.4     (36.2 )

Net investment income

      23.7       29.5     (19.7 )
                      

Total segment revenue

      48.2       58.0     (16.9 )
                      

POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES

       

Policy benefits, claims and losses

      32.2       36.4     (11.5 )

Policy acquisition expenses

      0.2       2.2     (90.9 )

Other operating expenses

      17.7       28.7     (38.3 )
                      

Total policy benefits, claims and operating expenses

      50.1       67.3     (25.6 )
                      

Segment loss before federal income taxes

    $ (1.9 )   $ (9.3 )   (79.6 )
                      

 

11

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions, except per share data)

    March 31
2006		     December 31
2005		     % Change  

ASSETS

       

Investments:

       

Fixed maturities, at fair value (amortized cost of $1,677.4 and $1,789.8)

    $ 1,666.4     $ 1,801.2     (7.5 )

Equity securities, at fair value (cost of $1.7 )

      2.9       2.7     7.4  

Mortgage loans

      47.8       54.8     (12.8 )

Policy loans

      136.8       139.9     (2.2 )

Other long-term investments

      40.4       42.3     (4.5 )
                      

Total investments

      1,894.3       2,040.9     (7.2 )
                      

Cash and cash equivalents

      121.3       101.9     19.0  

Accrued investment income

      24.5       27.6     (11.2 )

Premiums, accounts, and notes receivable, net

      2.1       4.0     (47.5 )

Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums

      378.0       391.0     (3.3 )

Deferred policy acquisition costs

      6.1       7.1     (14.1 )

Deferred federal income tax asset

      188.8       204.6     (7.7 )

Other assets

      95.9       91.2     5.2  

Separate account assets

      564.0       571.9     (1.4 )
                      

Total assets

    $ 3,275.0     $ 3,440.2     (4.8 )
                      

LIABILITIES AND SHAREHOLDER’S EQUITY

       

LIABILITIES

       

Policy liabilities and accruals:

       

Future policy benefits

    $ 1,324.3     $ 1,336.1     (0.9 )

Outstanding claims, losses and loss adjustment expenses

      87.9       92.9     (5.4 )

Unearned premiums

      1.6       1.6     —    

Contractholder deposit funds and other policy liabilities

      196.7       251.7     (21.9 )
                      

Total policy liabilities and accruals

      1,610.5       1,682.3     (4.3 )
                      

Expenses and taxes payable

      447.4       518.2     (13.7 )

Reinsurance premiums payable

      4.3       6.5     (33.8 )

Trust instruments supported by funding obligations

      295.5       294.3     0.4  

Separate account liabilities

      564.0       571.9     (1.4 )
                      

Total liabilities

      2,921.7       3,073.2     (4.9 )
                      

SHAREHOLDER’S EQUITY

       

Common stock, par value $10 per share; authorized 1 million shares; issued 500,000 shares

      5.0       5.0     N/M  

Additional paid-in capital

      684.9       684.9     N/M  

Accumulated other comprehensive loss

      (33.7 )     (26.3 )   28.1  

Retained deficit

      (302.9 )     (296.6 )   2.1  
                      
     353.3       367.0     (3.7 )
                      

Total liabilities and shareholder’s equity

    $ 3,275.0     $ 3,440.2     (4.8 )
                      

 

12

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

FUTURE POLICY BENEFITS AND ACCOUNT BALANCES

 

     Gross     Net of Reinsurance Recoverables  

(In millions)

    March 31
2006		    December 31
2005		    % Change     March 31
2006		    December 31
2005		    % Change  

Insurance

                 

Traditional life

    $ 735.0    $ 760.2    (3.3 )   $ 734.8    $ 760.0    (3.3 )

Universal life

      1.0      1.0    N/M       —        —      —    

Variable universal life

      32.5      32.9    (1.2 )     —        —      —    

Individual health

      17.7      18.7    (5.3 )     0.4      0.4    N/M  
                                        

Total insurance

      786.2      812.8    (3.3 )     735.2      760.4    (3.3 )
                                        

Annuities

                 

Individual annuities

      107.5      113.5    (5.3 )     14.1      15.7    (10.2 )

Group annuities

      391.4      400.7    (2.3 )     386.2      395.5    (2.4 )
                                        

Total annuities

      498.9      514.2    (3.0 )     400.3      411.2    (2.7 )
                                        

Guaranteed investment contracts

                 

Contractholder deposit funds and other policy liabilities

      4.9      30.3    (83.8 )     4.9      30.3    (83.8 )
                                        

Total general account reserves

    $ 1,290.0    $ 1,357.3    (5.0 )   $ 1,140.4    $ 1,201.9    (5.1 )
                                        

Trust instruments supported by funding obligations

    $ 295.5    $ 294.3    0.4     $ 295.5    $ 294.3    0.4  
                                        

SEPARATE ACCOUNT LIABILITIES

                 

Variable universal life

    $ 69.0    $ 67.6    2.1     $ 69.0    $ 67.6    2.1  

Variable individual annuities

      396.8      405.5    (2.1 )     396.8      405.5    (2.1 )
                                        

Total individual

      465.8      473.1    (1.5 )     465.8      473.1    (1.5 )

Group variable universal life

      2.3      2.6    (11.5 )     2.3      2.6    (11.5 )

Group annuities

      95.9      96.2    (0.3 )     95.9      96.2    (0.3 )
                                        

Total group

      98.2      98.8    (0.6 )     98.2      98.8    (0.6 )
                                        

Total separate account liabilities (1)

    $ 564.0    $ 571.9    (1.4 )   $ 564.0    $ 571.9    (1.4 )
                                        
(1) Includes separate account liabilities subject to a modified coinsurance agreement with AFLIAC of $460.2 million and $465.7 million as of March 31, 2006 and December 31, 2005, respectively.

 

13

INVESTMENTS

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME

 

(In millions, except yields)

    Quarter ended March 31, 2006  
   Property and
Casualty (1)		     Yield     Life
Companies (2)		     Yield     Total     Yield  

Fixed maturities

    $ 53.2     5.56 %   $ 23.0     5.72 %   $ 76.2     5.61 %

Equity securities

      0.6     —         —       —         0.6     —    

Mortgages

      0.9     8.55 %     1.0     7.76 %     1.9     8.14 %

All other

      3.6     —         0.4     —         4.0     —    

Investment expenses

      (1.7 )   —         (0.7 )   —         (2.4 )   —    
                                          

Total

    $ 56.6     5.33 %   $ 23.7     4.98 %   $ 80.3     5.23 %
                                          
     Quarter ended March 31, 2005  
     Property and
Casualty (1)		     Yield     Life
Companies (2)		     Yield     Total     Yield  

Fixed maturities

    $ 51.4     5.57 %   $ 31.4     5.76 %   $ 82.8     5.64 %

Equity securities

      0.2     —         —       —         0.2     —    

Mortgages

      1.0     8.10 %     1.3     8.36 %     2.3     8.24 %

All other

      (0.7 )   —         (1.9 )   —         (2.6 )   —    

Investment expenses

      (1.1 )   —         (1.3 )   —         (2.4 )   —    
                                          

Total

    $ 50.8     5.36 %   $ 29.5     4.60 %   $ 80.3     5.06 %
                                          
(1) Includes purchase accounting adjustments of $0.8 for the quarters ended March 31, 2006 and 2005. Also includes corporate eliminations of $0.1 million $0.2 for the quarters ended March 31, 2006 and 2005 respectively.
(2) Excludes AFLIAC discontinued operations of $20.8 million for the quarter ended March 31, 2005.

 

14

THE HANOVER INSURANCE GROUP

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)

 

     Quarter ended March 31  

(In millions)

    2006     2005  
   Net Realized Gains (Losses)     Net Realized Gains (Losses)  
   Property and
Casualty (1)		     Life
Companies		     Total     Property and
Casualty (1)		     Life
Companies (2)		     Total  

Net gains (losses) on securities transactions

    $ 11.8     $ (1.4 )   $ 10.4     $ 0.2     $ 13.0     $ 13.2  

Other than temporary impairments

      (2.2 )     (2.6 )     (4.8 )     (1.7 )     (0.4 )     (2.1 )

Other

      —         —         —         0.1       0.8       0.9  
                                                

Net realized investment gains (losses)

    $ 9.6     $ (4.0 )   $ 5.6     $ (1.4 )   $ 13.4     $ 12.0  
                                                
(1) Includes corporate eliminations of $5.2 million for the quarter ended March 31, 2006. There were no corporate eliminations in the quarter ended March 31, 2005.
(2) Excludes discontinued operations of $8.2 million for the quarter ended March 31, 2005.

 

15

THE HANOVER INSURANCE GROUP

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE

 

(In millions)

    March 31, 2006
   Gross Unrealized Losses    Fair Value
   Property and
Casualty		    Life
Companies		    Total    Property and
Casualty		    Life
Companies		    Total

INVESTMENT GRADE FIXED MATURITIES:

                  

12 months or less

    $ 53.3    $ 27.7    $ 81.0    $ 2,186.3    $ 821.3    $ 3,007.6

Greater than 12 months

      24.5      12.4      36.9      437.3      212.6      649.9
                                         

Total investment grade fixed maturities

      77.8      40.1      117.9      2,623.6      1,033.9      3,657.5

BELOW INVESTMENT GRADE FIXED MATURITIES:

                  

12 months or less

      4.6      0.4      5.0      117.9      22.2      140.1

Greater than 12 months

      —        —        —        1.7      0.3      2.0
                                         

Total below investment grade fixed maturities

      4.6      0.4      5.0      119.6      22.5      142.1

Equity securities

      —        —        —        —        1.3      1.3
                                         

Total fixed maturities and equity securities

    $ 82.4    $ 40.5    $ 122.9    $ 2,743.2    $ 1,057.7    $ 3,800.9
                                         
     December 31, 2005
     Gross Unrealized Losses    Fair Value
     Property and
Casualty		    Life
Companies		    Total    Property and
Casualty		    Life
Companies		    Total

INVESTMENT GRADE FIXED MATURITIES:

                  

12 months or less

    $ 24.5    $ 14.2    $ 38.7    $ 1,571.7    $ 764.0    $ 2,335.7

Greater than 12 months

      18.0      8.7      26.7      404.1      191.7      595.8
                                         

Total investment grade fixed maturities

      42.5      22.9      65.4      1,975.8      955.7      2,931.5

BELOW INVESTMENT GRADE FIXED MATURITIES:

                  

12 months or less

      6.2      2.8      9.0      134.4      36.9      171.3

Greater than 12 months

      —        —        —        —        —        —  
                                         

Total below investment grade fixed maturities

      6.2      2.8      9.0      134.4      36.9      171.3

Equity securities

      —        0.1      0.1      —        1.4      1.4
                                         

Total fixed maturities and equity securities

    $ 48.7    $ 25.8    $ 74.5    $ 2,110.2    $ 994.0    $ 3,104.2
                                         

 

16

THE HANOVER INSURANCE GROUP

CREDIT QUALITY OF FIXED MATURITIES

 

(In millions)

 

NAIC Designation

   

Rating Agency
Equivalent Designation

    March 31, 2006
      Amortized Cost    Fair Value
      Property and
Casualty		    Life
Companies		    Total    Property and
Casualty		    Life
Companies		    Total

1

    Aaa/Aa/A    $ 2,837.4    $ 1,055.2    $ 3,892.6    $ 2,800.4    $ 1,034.8    $ 3,835.2

2

    Baa      846.8      528.5      1,375.3      830.5      531.3      1,361.8

3

    Ba      116.3      53.9      170.2      114.1      54.8      168.9

4

    B      95.5      29.7      125.2      97.4      31.7      129.1

5

    Caa and lower      43.0      8.1      51.1      43.0      10.3      53.3

6

    In or near default      1.9      2.0      3.9      3.9      3.5      7.4
                                            

Total fixed maturities

       $ 3,940.9    $ 1,677.4    $ 5,618.3    $ 3,889.3    $ 1,666.4    $ 5,555.7
                                            
    

Rating Agency

Equivalent Designation

    December 31, 2005
        Amortized Cost    Fair Value

NAIC Designation

       Property and
Casualty		    Life
Companies		    Total    Property and
Casualty		    Life
Companies		    Total

1

    Aaa/Aa/A    $ 2,779.9    $ 1,111.3    $ 3,891.2    $ 2,787.3    $ 1,108.7    $ 3,896.0

2

    Baa      850.5      580.3      1,430.8      848.8      591.6      1,440.4

3

    Ba      96.2      56.2      152.4      95.6      56.7      152.3

4

    B      114.8      37.4      152.2      114.1      37.6      151.7

5

    Caa and lower      47.9      7.6      55.5      53.4      9.4      62.8

6

    In or near default      1.9      1.9      3.8      3.0      2.0      5.0
                                            

Total fixed maturities

       $ 3,891.2    $ 1,794.7    $ 5,685.9    $ 3,902.2    $ 1,806.0    $ 5,708.2
                                            

 

17

PROPERTY & CASUALTY

STATUTORY RATIOS

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

 

    Quarter ended March 31, 2006  
    Personal Lines     Commercial Lines     Other
Property and
Casualty 		  Total
Property and
Casualty		  
    Personal
Automobile		     Homeowners     Other
Personal
Lines		     Total
Personal
Lines		     Workers'
Compensation		     Commercial
Automobile		     Commercial
Multiple
Peril		     Other
Commercial
Lines		     Total
Commercial
Lines		      

Losses, excluding catastrophe losses and development

   62.5 %   42.4 %   33.7 %   55.9 %   79.6 %   46.5 %   47.9 %   32.5 %   48.7 %   N/M   53.2 %

Catastrophe losses

   —       3.7 %   —       1.1 %   —       0.6 %   1.4 %   5.0 %   1.8 %   N/M   1.4 %

Loss development

  (3.3 )%   2.1 %   (24.5 )%   (2.4 )%   (5.8 )%   0.2 %   (12.3 )%   (5.5 )%   (7.0 )%   N/M   (4.0 )%
                                                               

Total loss reserves

   59.2 %   48.2 %   9.2 %   54.6 %   73.8 %   47.3 %   37.0 %   32.0 %   43.5 %   N/M   50.6 %

Loss adjustment expenses

   11.6 %   8.0 %   7.1 %   10.4 %   12.0 %   6.9 %   11.4 %   6.7 %   9.4 %   N/M   10.1 %

Policy acquisition and other underwriting expenses

         29.9 %           38.0 %   N/M   33.2 %

Policyholders’ dividends

         —               0.2 %   N/M   —    
                                   

Combined

         94.9 %           91.1 %   N/M   93.9 %
                                   
    Quarter ended March 31, 2005  
    Personal Lines     Commercial Lines    

Other
Property and
Casualty

  

Total
Property and
Casualty

  
    Personal
Automobile		     Homeowners     Other
Personal
Lines		     Total
Personal
Lines		     Workers'
Compensation		     Commercial
Automobile		     Commercial
Multiple
Peril		     Other
Commercial
Lines		     Total
Commercial
Lines		      

Losses, excluding catastrophe losses and development

   67.8 %   47.1 %   38.4 %   61.1 %   74.0 %   52.5 %   47.9 %   41.9 %   52.5 %   N/M   58.4 %

Catastrophe losses

   —       6.3 %   3.0 %   1.9 %   —       —       5.4 %   3.6 %   2.9 %   N/M   2.2 %

Loss development

  (1.5 )%   (4.9 )%   (1.0 )%   (2.5 )%   16.3 %   N/M     (3.3 )%   (14.5 )%   (0.8 )%   N/M
   (1.8 )%
                                                               

Total loss reserves

   66.3 %   48.5 %   40.4 %   60.5 %   90.3 %   52.5 %   50.0 %   31.0 %   54.6 %   N/M   58.8 %

Loss adjustment expenses

   10.6 %   4.6 %   3.0 %   8.7 %   11.9 %   8.2 %   9.5 %   8.2 %   9.4 %   N/M   8.9 %

Policy acquisition and other underwriting expenses

         27.7 %           35.5 %   N/M   30.7 %

Policyholders’ dividends

         —               0.1 %   N/M   —    
                                   

Combined

         96.9 %           99.6 %   N/M   98.4 %
                                   

 

18

Historical Highlights

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS

 

(In millions, except per share data)

   Q1 06     2005     Q4 05     Q3 05     Q2 05     Q1 05  

SEGMENT INCOME (1)

            

Property and Casualty

            

Personal Lines

   $ 49.0     $ 143.2     $ 74.4     $ (27.8 )   $ 57.4     $ 39.2  

Commercial Lines

     39.0       (35.0 )     14.5       (101.0 )     31.0       20.5  

Other Property and Casualty

     3.7       5.5       0.6       1.1       1.7       2.1  
                                               

Total Property and Casualty

     91.7       113.7       89.5       (127.7 )     90.1       61.8  

Life Companies

     (1.9 )     (18.7 )     (1.0 )     (0.9 )     (7.5 )     (9.3 )

Interest expense on corporate debt

     (10.0 )     (39.9 )     (10.0 )     (10.0 )     (9.9 )     (10.0 )
                                               

Total segment income (loss) before federal income taxes

   $ 79.8     $ 55.1     $ 78.5     $ (138.6 )   $ 72.7     $ 42.5  
                                               

Federal income tax (expense) benefit on segment income

     (23.6 )     (1.0 )     (1.3 )     29.6       (19.5 )     (9.8 )
                                               

Total segment income (loss) after federal income taxes

   $ 56.2     $ 54.1     $ 77.2     $ (109.0 )   $ 53.2     $ 32.7  
                                               

Change in prior years tax reserves

     —         2.3       —         —         2.3       —    

Federal income tax settlement

     —         5.3       5.3       —         —         —    

Net realized investment gains (losses), net of amortization

     5.8       18.7       5.8       (0.7 )     2.3       11.3  

(Losses) gains on derivative instruments

     —         (0.3 )     —         0.2       (0.3 )     (0.2 )

Restructuring costs

     (0.3 )     (2.1 )     (0.8 )     (0.4 )     (0.2 )     (0.7 )

Federal income tax (expense) benefit on non-segment income

    (1.7 )     (5.7 )     (7.3 )     4.5       (0.2 )     (2.7 )
                                               

Income (loss) from continuing operations

     60.0       72.3       80.2       (105.4 )     57.1       40.4  

Income from discontinued variable life and annuity business, net of taxes

     —         42.7       4.1       17.6       14.9       6.1  

(Loss) income on disposal of variable life and annuity business, net of taxes

     (20.1 )     (444.4 )     30.2       (474.6 )     —         —    
                                               

Income (loss) before cumulative effect of accounting change

     39.9       (329.4 )     114.5       (562.4 )     72.0       46.5  

Cumulative effect of change in accounting principle, net of taxes

    0.6       —         —         —         —         —    
                                               

NET INCOME (LOSS)

   $ 40.5     $ (329.4 )   $ 114.5     $ (562.4 )   $ 72.0     $ 46.5  
                                               

PER SHARE DATA (DILUTED)

            

INCOME (LOSS) FROM CONTINUING OPERATIONS

   $ 1.12     $ 1.34     $ 1.48     $ (1.97 )   $ 1.06     $ 0.75  

(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES

   $ (0.38 )   $ (7.44 )   $ 0.63     $ (8.54 )   $ 0.28     $ 0.11  

NET INCOME (LOSS)

   $ 0.75     $ (6.10 )   $ 2.11     $ (10.51 )   $ 1.34     $ 0.86  

WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) (2)

     53.6       54.0       54.2       53.5       53.9       53.8  

BALANCE SHEET

            

Total investments

   $ 5,841.8       $ 6,008.3     $ 7,535.0     $ 7,678.4     $ 7,663.9  

Separate account assets

   $ 564.0       $ 571.9     $ 9,385.9     $ 9,444.6     $ 9,726.0  

Total assets

   $ 10,156.8       $ 10,507.9     $ 21,647.1     $ 21,846.6     $ 22,167.8  

Total shareholders’ equity

   $ 1,843.0       $ 1,947.1     $ 1,867.7     $ 2,490.5     $ 2,325.2  

Book value per share

   $ 35.35       $ 36.23     $ 34.81     $ 46.60     $ 43.53  

Book value per share, excluding accumulated other comprehensive income

   $ 37.77       $ 37.33     $ 35.47     $ 46.01     $ 44.67  
(1) Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty, Life Companies and interest expense on corporate debt. In accordance with Statement of Financial Accounting Standards No.131, the separate financial information of each segment is presented consistent with the manner in which results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
(2) Weighted average shares outstanding for the quarter ending September 30, 2005 represents basic shares outstanding due to antidilution.

 

19

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS

 

(In millions, except per share data)

    2004     Q4 04     Q3 04     Q2 04     Q1 04  

SEGMENT INCOME (1)

           

Property and Casualty

           

Personal Lines

    $ 134.6     $ 45.9     $ 42.1     $ 35.8     $ 10.8  

Commercial Lines

      58.0       26.0       (7.1 )     12.6       26.5  

Other Property and Casualty

      5.4       1.7       1.7       0.7       1.3  
                                        

Total Property and Casualty

      198.0       73.6       36.7       49.1       38.6  

Life Companies

      (22.3 )     (8.7 )     (2.1 )     (6.9 )     (4.6 )

Interest expense on corporate debt

      (39.9 )     (10.0 )     (10.0 )     (9.9 )     (10.0 )
                                        

Total segment income before federal income taxes

    $ 135.8     $ 54.9     $ 24.6     $ 32.3     $ 24.0  
                                        

Federal income tax expense on segment income

      (26.6 )     (12.6 )     (4.5 )     (6.3 )     (3.2 )
                                        

Total segment income after federal income taxes

    $ 109.2     $ 42.3     $ 20.1     $ 26.0     $ 20.8  
                                        

Federal income tax settlement

      30.4       0.1       —         0.2       30.1  

Net realized investment gains (losses), net of amortization

      16.1       3.7       (5.5 )     6.8       11.1  

(Losses) gains from retirement of funding agreements and trust instruments supported by funding obligations

      (0.2 )     0.1       2.9       —         (3.2 )

Gains on derivative instruments

      1.3       0.9       0.1       0.3       —    

Restructuring costs

      (8.5 )     (2.7 )     (0.3 )     (2.2 )     (3.3 )

Federal income tax (expense) benefit on non-segment income

      (3.0 )     (0.9 )     0.5       (1.9 )     (0.7 )
                                        

Income from continuing operations

      145.3       43.5       17.8       29.2       54.8  

Income (loss) from discontinued variable life and annuity business, net of taxes

      37.2       19.6       (0.1 )     3.2       14.5  
                                        

Income before cumulative effect of accounting change

      182.5       63.1       17.7       32.4       69.3  

Cumulative effect of change in accounting principle, net of taxes

      (57.2 )     —         —         —         (57.2 )
                                        

NET INCOME

    $ 125.3     $ 63.1     $ 17.7     $ 32.4     $ 12.1  
                                        

PER SHARE DATA (DILUTED)

           

INCOME FROM CONTINUING OPERATIONS

    $ 2.71     $ 0.81     $ 0.33     $ 0.54     $ 1.02  

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES

    $ 0.69     $ 0.37     $ —       $ 0.06     $ 0.27  

NET INCOME

    $ 2.34     $ 1.18     $ 0.33     $ 0.60     $ 0.23  

WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED)

      53.7       53.7       53.6       53.7       53.7  

BALANCE SHEET

           

Total investments

      $ 8,265.7     $ 8,253.1     $ 8,091.3     $ 8,239.5  

Separate account assets

      $ 10,455.0     $ 10,086.0     $ 10,740.3     $ 11,304.9  

Total assets

      $ 23,719.2     $ 23,448.9     $ 24,030.5     $ 24,763.9  

Total shareholders’ equity

      $ 2,339.5     $ 2,294.2     $ 2,207.2     $ 2,289.3  

Book value per share

      $ 43.91     $ 43.09     $ 41.48     $ 43.04  

Book value per share, excluding accumulated other comprehensive income

      $ 43.85     $ 42.69     $ 42.36     $ 41.77  
(1) Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty, Life Companies and interest expense on corporate debt. In accordance with Statement of Financial Accounting Standards No.131, the separate financial information of each segment is presented consistent with the manner in which results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

 

20

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

645 West Grand River
Howell, MI 48843

MARKET AND DIVIDEND INFORMATION

 

The following information shows trading activity for the Company for the periods indicated:

 

Quarter Ended

    2006
   Price Range    Dividends
Per Share
   High    Low   

March 31

    $ 53.12    $ 42.98    —  

June 30

         

September 30

         

December 31

         

Quarter Ended

    2005
   Price Range    Dividends
Per Share
   High    Low   

March 31

    $ 36.50    $ 30.27    —  

June 30

    $ 37.29    $ 32.85    —  

September 30

    $ 42.11    $ 37.13    —  

December 31

    $ 42.03    $ 37.20    0.25

INDUSTRY RATINGS AS OF April 28, 2006

 

Financial Strength Ratings

    A.M.
Best		    Standard
& Poor’s		    Moody’s

Property and Casualty Insurance Companies:

         

The Hanover Insurance Company

    A-    BBB+    Baa1

Citizens Insurance Company of America

    A-    BBB+    —  

Life Insurance Companies:

         

First Allmerica Financial Life Insurance Company

    B+    BBB-    Ba1

Debt Ratings

    A.M.
Best		    Standard
& Poor’s		    Moody’s

The Hanover Insurance Group, Inc.

         

Senior Debt

    bbb-    BB+    Ba1

The Hanover Insurance Group, Inc.

         

Capital Securities

    bb    B+    Ba2

The Hanover Insurance

         

Company Short Term Debt

    —      —      NP

TRANSFER AGENT

Computershare Limited

PO Box 43076

Providence, RI 02940-3076

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

Sujata Mutalik

Vice President, Investor Relations

(508) 855-3457

smutalik@Hanover.com

Kenneth Popeleski

Director, Investor Relations

(508) 855-4022

kpopeleski@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