Statistical Supplement for the period ended June 30, 2006

EX-99.2 3 dex992.htm STATISTICAL SUPPLEMENT FOR THE PERIOD ENDED JUNE 30, 2006 Statistical Supplement for the period ended June 30, 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		9-12
Life Companies
Condensed Income Statements		13
Life Companies Consolidated Balance Sheets		14
Future Policy Benefits and Account Balances		15
Investments
Net Investment Income		16
Net Realized Investment Gains (Losses)		17
Unrealized Losses		18
Credit Quality of Fixed Maturities		19
Property and Casualty Statutory Ratios		20-21
Historical Financial Highlights		22-23
Other Information		24
Corporate Information
Market and Dividend Information
Industry Ratings

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended June 30								Six Months ended June 30
(In millions)	2006			2005			% Change		2006			2005			% Change
SEGMENT INCOME
Property and Casualty
Personal Lines	$	53.7		$	57.4		(6.4	)	$	102.7		$	96.6		6.3
Commercial Lines		30.2			31.0		(2.6	)		69.2			51.5		34.4
Other		2.3			1.7		35.3			6.0			3.8		57.9

Total Property and Casualty		86.2			90.1		(4.3	)		177.9			151.9		17.1

Life Companies		(1.0	)		(7.5	)	(86.7	)		(2.9	)		(16.8	)	(82.7	)
Interest expense on corporate debt		(9.9	)		(9.9	)	—			(19.9	)		(19.9	)	—

Total segment income		75.3			72.7		3.6			155.1			115.2		34.6

Federal income tax expense on P&C segment income		(30.3	)		(26.8	)	13.1			(59.2	)		(44.2	)	33.9
Federal income tax benefit on other segment income		6.7			7.3		(8.2	)		12.0			14.9		(19.5	)

Total federal income tax expense on segment income		(23.6	)		(19.5	)	21.0			(47.2	)		(29.3	)	61.1

Total segment income after taxes	$	51.7		$	53.2		(2.8	)	$	107.9		$	85.9		25.6

RECONCILIATION FROM SEGMENT INCOME TO NET INCOME

Total segment income after taxes	$	51.7		$	53.2		(2.8	)	$	107.9		$	85.9		25.6
Change in prior years tax reserves		—			2.3		N/M			—			2.3		N/M
Net realized investment gains, net of amortization		3.6			3.6		—			9.4			14.9		(36.9	)
Gains (losses) on derivative instruments		0.1			(0.3	)	N/M			0.1			(0.5	)	N/M
Restructuring costs		(0.6	)		(0.2	)	N/M			(0.9	)		(0.9	)	—
Federal income tax expense on non-segment income		(1.1	)		(1.5	)	(26.7	)		(2.8	)		(4.2	)	(33.3	)

Income from continuing operations, net of taxes		53.7			57.1		(6.0	)		113.7			97.5		16.6
Income from discontinued variable life insurance and annuity business, net of taxes		—			14.9		N/M			—			21.0		N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(2.8	)		—		N/M			(22.9	)		—		N/M

Income before cumulative effect of accounting change		50.9			72.0		(29.3	)		90.8			118.5		(23.4	)
Cumulative effect of change in accounting principle, net of taxes		—			—		N/M			0.6			—		N/M

Net income	$	50.9		$	72.0		(29.3	)	$	91.4		$	118.5		(22.9	)

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended June 30								Six Months ended June 30
	2006			2005			% Change		2006			2005			% Change
PER SHARE DATA (DILUTED)
Total segment income	$	1.46		$	1.35		8.1		$	2.95		$	2.14		37.9
Federal income tax expense on segment income		(0.46	)		(0.36	)	27.8			(0.90	)		(0.54	)	66.7

Total segment income after taxes		1.00			0.99		1.0			2.05			1.60		28.1
Change in prior years tax reserves		—			0.04		N/M			—			0.04		N/M
Net realized investment gains, net of amortization		0.07			0.07		—			0.18			0.28		(35.7	)
Losses on derivative instruments		—			(0.01	)	N/M			—			(0.01	)	N/M
Restructuring costs		(0.01	)		—		N/M			(0.02	)		(0.02	)	—
Federal income tax expense on non-segment income		(0.02	)		(0.03	)	(33.3	)		(0.05	)		(0.08	)	(37.5	)

Income from continuing operations, net of taxes		1.04			1.06		(1.9	)		2.16			1.81		19.3

Income from discontinued variable life insurance and annuity business, net of taxes		—			0.28		N/M			—			0.39		N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.05	)		—		N/M			(0.43	)		—		N/M

Income before cumulative effect of accounting change		0.99			1.34		(26.1	)		1.73			2.20		(21.4	)

Cumulative effect of change in accounting principle, net of taxes		—			—		N/M			0.01			—		N/M

Net income	$	0.99		$	1.34		(26.1	)	$	1.74		$	2.20		(20.9	)

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


(In millions, except per share data)	June 30 2006			December 31 2005			% Change
BALANCE SHEET
Shareholders’ equity
The Hanover Insurance Company (consolidated)	$	1,730.2		$	1,709.8		1.2
First Allmerica Financial Life Insurance Company (consolidated)		333.3			367.0		(9.2	)
THG Holding Company debt (1)		(499.5	)		(499.5	)	—
THG Holding Company and other		206.0			374.0		(44.9	)

Total shareholders’ equity	$	1,770.0		$	1,951.3		(9.3	)

Total adjusted statutory capital
The Hanover Insurance Company (consolidated)	$	1,300.5		$	1,204.6		8.0
First Allmerica Financial Life Insurance Company	$	205.3		$	195.2		5.2

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		504	%		410	%	94.0

Book value per share
The Hanover Insurance Company (consolidated)	$	33.99		$	31.81		6.9
First Allmerica Financial Life Insurance Company (consolidated)		6.55			6.82		(4.0	)
THG Holding Company debt (1)		(9.81	)		(9.47	)	3.6
THG Holding Company and other		4.04			7.14		(43.4	)

Total book value per share	$	34.77		$	36.30		(4.2	)

THG book value per share, excluding accumulated other comprehensive income	$	38.46		$	37.33		3.0

The Hanover Insurance Company (consolidated) book value per share, excluding accumulated other comprehensive income	$	36.14		$	32.00		12.9

Shares outstanding (2)		50.9			53.7

Stock price	$	47.46		$	41.77		13.6
Price/book value per share		1.4 x			1.2 x		0.2 x
Debt/equity		28.7	%		26.1	%	2.6 pts
Debt/total capital		22.3	%		20.7	%	1.6 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 THG Holding Company.

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Quarter ended June 30								Six Months ended June 30
(In millions, except per share data)	2006			2005			% Change		2006			2005		% Change
REVENUES
Premiums	$	554.8		$	555.3		(0.1	)	$	1,114.2		$	1,124.6	(0.9	)
Fees and other income		16.9			18.4		(8.2	)		36.2			38.6	(6.2	)
Net investment income		79.2			78.3		1.1			159.5			158.6	0.6
Net realized investment gains		2.9			4.2		(31.0	)		8.5			16.2	(47.5	)

Total revenues		653.8			656.2		(0.4	)		1,318.4			1,338.0	(1.5	)

BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		355.5			365.3		(2.7	)		715.3			774.0	(7.6	)
Policy acquisition expenses		117.5			115.1		2.1			231.1			231.4	(0.1	)
(Gains) losses on derivative instruments		(0.4	)		(0.2	)	100.0			0.2			0.2	N/M
Restructuring costs		0.6			0.2		N/M			0.9			0.9	N/M
Other operating expenses		102.2			100.0		2.2			207.2			202.8	2.2

Total benefits, losses and expenses		575.4			580.4		(0.9	)		1,154.7			1,209.3	(4.5	)

Income from continuing operations before federal income taxes		78.4			75.8		3.4			163.7			128.7	27.2
Federal income tax expense		24.7			18.7		32.1			50.0			31.2	60.3

Income from continuing operations		53.7			57.1		(6.0	)		113.7			97.5	16.6

Income from discontinued variable life insurance and annuity business, net of taxes		—			14.9		N/M			—			21.0	N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(2.8	)		—		N/M			(22.9	)		—	N/M

Income before cumulative effect of change in accounting principle		50.9			72.0		(29.3	)		90.8			118.5	(23.4	)

Cumulative effect of change in accounting principle, net of taxes		—			—		—			0.6			—	N/M

Net income	$	50.9		$	72.0		(29.3	)	$	91.4		$	118.5	(22.9	)

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Quarter ended June 30							Six Months ended June 30
	2006			2005		% Change		2006			2005		% Change
PER SHARE DATA (DILUTED)
Income from continuing operations	$	1.04		$	1.06	(1.9	)	$	2.16		$	1.81	19.3

Income from discontinued variable life insurance and annuity business, net of taxes		—			0.28	N/M			—			0.39	N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.05	)		—	N/M			(0.43	)		—	N/M

Income before cumulative effect of change in accounting principle		0.99			1.34	(26.1	)		1.73			2.20	(21.4	)
Cumulative effect of change in accounting principle, net of taxes		—			—	N/M			0.01			—	N/M

Net income (1)	$	0.99		$	1.34	(26.1	)	$	1.74		$	2.20	(20.9	)

Weighted average shares outstanding		51.6			53.9				52.6			53.8

(1)

Basic income per share was $1.00 and $1.35 for the quarters ended June 30, 2006 and 2005, respectively and $1.76 and $2.22 for the six months ended June 30, 2006 and 2005, respectively.

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	June 30 2006			December 31 2005			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $5,468.5 and $5,685.9)	$	5,335.8		$	5,708.2		(6.5	)
Equity securities, at fair value (cost of $12.1 and $13.0)		17.5			18.0		(2.8	)
Mortgage loans		74.9			99.6		(24.8	)
Policy loans		133.9			139.9		(4.3	)
Other long-term investments		39.3			42.6		(7.7	)

Total investments		5,601.4			6,008.3		(6.8	)

Cash and cash equivalents		393.4			701.5		(43.9	)
Accrued investment income		72.2			76.5		(5.6	)
Premiums, accounts and notes receivable, net		580.4			493.2		17.7
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,378.4			1,617.3		(14.8	)
Deferred policy acquistion costs		227.7			209.0		8.9
Deferred federal income taxes		443.6			465.3		(4.7	)
Goodwill		128.2			128.2		—
Other assets		335.4			362.8		(7.6	)
Separate account assets		528.4			571.9		(7.6	)

Total assets	$	9,689.1		$	10,634.0		(8.9	)

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,308.7		$	1,336.1		(2.1	)
Outstanding claims, losses and loss adjustment expenses		3,266.8			3,551.6		(8.0	)
Unearned premiums		1,097.0			1,011.3		8.5
Contractholder deposit funds and other policy liabilities		188.5			254.7		(26.0	)

Total policy liabilities and accruals		5,861.0			6,153.7		(4.8	)

Expenses and taxes payable		926.3			1,062.0		(12.8	)
Reinsurance premiums payable		57.2			92.0		(37.8	)
Trust instruments supported by funding obligations		37.4			294.3		(87.3	)
Long-term debt		508.8			508.8		—
Separate account liabilities		528.4			571.9		(7.6	)

Total liabilities		7,919.1			8,682.7		(8.8	)

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		1,804.5			1,785.1		1.1
Accumulated other comprehensive loss		(188.0	)		(59.5	)	N/M
Retained earnings		652.7			589.8		10.7
Treasury stock at cost (9.6 and 6.8 million shares)		(499.8	)		(364.7	)	37.0

Total shareholders’ equity		1,770.0			1,951.3		(9.3	)

Total liabilities and shareholders’ equity	$	9,689.1		$	10,634.0		(8.9	)

PROPERTY & CASUALTY

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS


	Quarter ended June 30								Six Months ended June 30
(In millions)	2006			2005			% Change		2006			2005			% Change
REVENUES
Net premiums written	$	598.4		$	557.5		7.3		$	1,172.4		$	1,105.9		6.0
Change in unearned premiums, net of prepaid reinsurance premiums		(49.0	)		(7.7	)	N/M			(82.1	)		(5.9	)	N/M

Net premiums earned		549.4			549.8		(0.1	)		1,090.3			1,100.0		(0.9	)
Net investment income		56.0			51.4		8.9			112.5			102.2		10.1
Other income		13.1			12.2		7.4			27.8			25.1		10.8

Total segment revenue		618.5			613.4		0.8			1,230.6			1,227.3		0.3

LOSSES AND OPERATING EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		336.6			343.7		(2.1	)		664.4			715.2		(7.1	)
Policy acquisition expenses		117.2			113.5		3.3			230.6			227.6		1.3
Other operating expenses		78.5			66.1		18.8			157.7			132.6		18.9

Total losses and operating expenses		532.3			523.3		1.7			1,052.7			1,075.4		(2.1	)

Segment income before federal income taxes	$	86.2		$	90.1		(4.3	)	$	177.9		$	151.9		17.1

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONSOLIDATED BALANCE SHEETS (1)


(In millions, except per share data)	June 30 2006			December 31 2005			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $3,923.8 and $3,810.7)	$	3,831.4		$	3,822.1		0.2
Equity securities, at fair value (cost of $4.0 and $2.0)		6.5			6.0		8.3
Mortgage loans		28.4			45.0		(36.9	)
Other long-term investments		0.3			0.3		—

Total investments		3,866.6			3,873.4		(0.2	)

Cash and cash equivalents		160.6			322.9		(50.3	)
Accrued investment income		48.3			48.1		0.4
Premiums, accounts, and notes receivable, net		578.4			489.2		18.2
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,012.1			1,226.3		(17.5	)
Deferred policy acquistion costs		221.9			201.9		9.9
Deferred federal income tax asset		252.0			246.5		2.2
Goodwill		121.4			121.4		—
Other assets		189.1			181.5		4.2

Total assets	$	6,450.4		$	6,711.2		(3.9	)

LIABILITIES AND SHAREHOLDER’S EQUITY

LIABILITIES
Policy liabilities and accruals:
Outstanding claims, losses and loss adjustment expenses	$	3,184.2		$	3,458.7		(7.9	)
Unearned premiums		1,095.4			1,009.7		8.5
Contractholder deposit funds and other policy liabilities		2.1			3.0		(30.0	)

Total policy liabilities and accruals		4,281.7			4,471.4		(4.2	)

Expenses and taxes payable		385.6			444.5		(13.3	)
Reinsurance premiums payable		52.9			85.5		(38.1	)

Total liabilities		4,720.2			5,001.4		(5.6	)

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		169.2			169.2		—
Accumulated other comprehensive loss		(109.7	)		(9.6	)	N/M
Retained earnings		1,665.7			1,545.2		7.8

Total shareholder’s equity		1,730.2			1,709.8		1.2

Total liabilities and shareholder’s equity	$	6,450.4		$	6,711.2		(3.9	)

(1)

Property and Casualty Companies includes The Hanover Insurance Company and Citizens Insurance Company of America, and their subsidiaries.

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

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

Quarter ended June 30, 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

244.0

105.6

11.1

360.7

27.8

53.6

96.3

59.7

237.4

0.3

598.4

Net premiums earned

237.2

97.7

9.6

344.5

27.4

48.2

84.1

45.0

204.7

0.2

549.4

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

139.6

43.5

3.1

186.2

20.5

25.5

33.4

13.7

93.1

—

279.3

Prior year loss and LAE reserve development (favorable) unfavorable

(13.7

)

(3.7

)

0.1

(17.3

)

(7.3

)

(4.0

)

0.4

—

(10.9

)

1.0

(27.2

)

Pre-tax catastrophe losses

1.3

7.2

0.4

8.9

—

0.9

4.3

5.4

10.6

—

19.5

Loss adjustment expenses excluding prior year reserve development

29.2

9.7

0.6

39.5

3.9

4.2

14.0

3.2

25.3

0.1

64.9

Policy acquisition expenses and other underwriting expenses

102.5

83.3

—

185.8

Policyholders’ dividends

—

0.1

—

0.1

GAAP underwriting profit (loss)

24.7

3.2

(0.9

)

27.0

Net investment income

26.8

26.2

3.0

56.0

Other income

3.3

4.1

5.7

13.1

Other operating expenses

(1.1

)

(3.3

)

(5.5

)

(9.9

)

Segment income before federal income taxes

53.7

30.2

2.3

86.2


	Quarter ended June 30, 2005
	Personal Lines											Commercial Lines
	Personal Automobile			Homeowners		Other Personal Lines			Total Personal Lines			Workers’ Compensation			Commercial Automobile			Commercial Multiple Peril			Other Commercial Lines		Total Commercial Lines			Other Property and Casualty			Total Property and Casualty
Net premiums written	$	231.3		$	105.3	$	11.1		$	347.7		$	28.7		$	52.4		$	89.7		$	38.8	$	209.6		$	0.2		$	557.5

Net premiums earned	$	240.6		$	102.7	$	10.0		$	353.3		$	32.5		$	48.1		$	85.3		$	30.4	$	196.3		$	0.2		$	549.8
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		151.5			42.6		2.9			197.0			26.4			24.4			40.6			9.3		100.7			—			297.7
Prior year loss and LAE reserve development (favorable) unfavorable		(9.8	)		1.0		(0.8	)		(9.6	)		(2.0	)		(0.5	)		(6.8	)		2.5		(6.8	)		0.5			(15.9	)
Pre-tax catastrophe losses		0.7			3.4		0.3			4.4			—			0.2			2.0			0.4		2.6			—			7.0
Loss adjustment expenses excluding prior year reserve development		25.4			7.0		0.2			32.6			5.0			4.4			10.7			2.0		22.1			—			54.7
Policy acquisition expenses and other underwriting expenses										99.1														72.4			(0.2	)		171.3
Policyholders’ dividends										—														0.2			—			0.2

GAAP underwriting profit (loss)										29.8														5.1			(0.1	)		34.8
Net investment income										25.2														24.9			1.3			51.4
Other income										3.7														2.9			5.6			12.2
Other operating expenses										(1.3	)													(1.9	)		(5.1	)		(8.3	)

Segment income before federal income taxes									$	57.4													$	31.0		$	1.7		$	90.1

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

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

Six Months ended June 30, 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

496.0

186.8

19.5

702.3

63.3

105.6

189.2

111.7

469.8

0.3

1,172.4

Net premiums earned

469.2

195.7

19.4

684.3

55.7

95.9

167.3

86.9

405.8

0.2

1,090.3

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

284.5

85.1

6.4

376.0

42.4

47.7

73.4

27.3

190.8

—

566.8

Prior year loss and LAE reserve development (favorable) unfavorable

(21.1

)

(2.0

)

(2.3

)

(25.4

)

(9.7

)

(3.8

)

(12.2

)

(2.3

)

(28.0

)

1.3

(52.1

)

Pre-tax catastrophe losses

1.4

10.8

0.4

12.6

—

1.2

5.5

7.5

14.2

—

26.8

Loss adjustment expenses excluding prior year reserve development

55.7

17.9

1.3

74.9

8.0

7.4

25.9

6.0

47.3

0.4

122.6

Policy acquisition expenses and other underwriting expenses

203.1

166.2

(0.3

)

369.0

Policyholders’ dividends

—

0.3

—

0.3

GAAP underwriting profit (loss)

43.1

15.0

(1.2

)

56.9

Net investment income

53.4

52.3

6.8

112.5

Other income

8.2

8.0

11.6

27.8

Other operating expenses

(2.0

)

(6.1

)

(11.2

)

(19.3

)

Segment income before federal income taxes

102.7

69.2

6.0

177.9


	Six Months ended June 30, 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			Other Property and Casualty			Total Property and Casualty
Net premiums written	$	477.8		$	186.3		$	19.4		$	683.5		$	68.8	$	102.6		$	178.7		$	72.1		$	422.2		$	0.2		$	1,105.9

Net premiums earned	$	487.9		$	206.0		$	19.9		$	713.8		$	64.7	$	94.6		$	168.2		$	58.5		$	386.0		$	0.2		$	1,100.0
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		319.2			91.3			6.7			417.2			50.1		48.8			80.3			21.1			200.3			—			617.5
Prior year loss and LAE reserve development (favorable) unfavorable		(13.3	)		(4.8	)		(1.0	)		(19.1	)		1.8		(0.4	)		(11.5	)		(1.6	)		(11.7	)		1.2			(29.6	)
Pre-tax catastrophe losses		0.7			9.9			0.6			11.2			—		0.2			6.5			1.4			8.1			—			19.3
Loss adjustment expenses excluding prior year reserve development		51.1			12.4			0.7			64.2			10.2		8.2			20.6			4.2			43.2			0.1			107.5
Policy acquisition expenses and other underwriting expenses											198.7														145.7			(0.5	)		343.9
Policyholders’ dividends											—														0.5			—			0.5

GAAP underwriting profit (loss)											41.6														(0.1	)		(0.6	)		40.9
Net investment income											50.1														49.5			2.6			102.2
Other income											7.6														6.2			11.3			25.1
Other operating expenses											(2.7	)													(4.1	)		(9.5	)		(16.3	)

Segment income before federal income taxes										$	96.6													$	51.5		$	3.8		$	151.9

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS


	Quarter ended June 30, 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		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	58.9	%	44.5	%	32.3	%	54.0	%	74.8	%	52.9	%	39.7	%	30.4	%	45.5	%	N/M	50.8	%
Catastrophe losses	0.5	%	7.4	%	4.2	%	2.6	%	—		1.9	%	5.1	%	12.0	%	5.2	%	N/M	3.5	%
Loss develop- ment	(6.2	)%	(1.9	)%	2.1	%	(4.7	)%	(23.4	)%	(8.5	)%	3.1	%	(1.8	)%	(4.3	)%	N/M	(4.4	)%

Total loss reserves	53.2	%	50.0	%	38.6	%	51.9	%	51.4	%	46.3	%	47.9	%	40.6	%	46.4	%	N/M	49.9	%
Loss adjustment expenses	12.7	%	8.1	%	5.2	%	11.2	%	10.9	%	8.9	%	14.0	%	8.9	%	11.3	%	N/M	11.2	%
Policy acquisition and other underwriting expenses							29.8	%									40.7	%	N/M	33.8	%
Policyholders’ dividends							—										—		N/M	—

Combined							92.9	%									98.4	%	N/M	94.9	%

Policies in force	2.5	%	(3.0	)%	(1.2	)%	(0.3	)%	(7.0	)%	(4.4	)%	(4.3	)%	4.0	%	(1.7	)%	—	(0.5	)%
Retention (1)	78.6	%	83.5	%	N/M		81.2	%	78.3	%	78.7	%	83.6	%	85.2	%	82.1	%

	Quarter ended June 30, 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		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	62.9	%	41.4	%	29.0	%	55.8	%	81.2	%	50.7	%	47.6	%	30.6	%	51.3	%	N/M	54.1	%
Catastrophe losses	0.3	%	3.3	%	3.0	%	1.2	%	—		0.4	%	2.3	%	1.3	%	1.3	%	N/M	1.3	%
Loss develop- ment	(3.9	)%	1.5	%	(8.0	)%	(2.5	)%	(2.1	)%	(0.8	)%	(6.0	)%	7.6	%	(2.0	)%	N/M	(2.2	)%

Total loss reserves	59.3	%	46.2	%	24.0	%	54.5	%	79.1	%	50.3	%	43.9	%	39.5	%	50.6	%	N/M	53.2	%
Loss adjustment expenses	10.4	%	6.3	%	2.0	%	9.0	%	11.4	%	8.9	%	10.6	%	7.2	%	9.8	%	N/M	9.3	%
Policy acquisition and other underwriting expenses							28.0	%									36.9	%	N/M	31.2	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							91.5	%									97.4	%	N/M	93.7	%

Policies in force	(11.7	)%	(8.7	)%	(6.9	)%	(10.1	)%	(1.2	)%	(0.3	)%	(1.5	)%	2.1	%	(0.1	)%	—	(8.9	)%
Retention (1)	78.8	%	81.2	%	N/M		80.1	%	69.6	%	84.3	%	82.8	%	84.0	%	81.3	%

(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.

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS


	Six Months ended June 30, 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		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	60.6	%	43.5	%	33.0	%	54.9	%	76.1	%	49.7	%	43.9	%	31.4	%	47.0	%	N/M	52.0	%
Catastrophe losses	0.3	%	5.5	%	2.1	%	1.8	%	—		1.3	%	3.3	%	8.6	%	3.5	%	N/M	2.5	%
Loss develop- ment	(4.8	)%	0.1	%	(11.3	)%	(3.6	)%	(14.4	)%	(4.2	)%	(4.5	)%	(3.6	)%	(5.6	)%	N/M	(4.2	)%

Total loss reserves	56.1	%	49.1	%	23.8	%	53.1	%	61.7	%	46.8	%	42.7	%	36.4	%	44.9	%	N/M	50.3	%
Loss adjustment expenses	12.1	%	8.0	%	6.2	%	10.8	%	11.3	%	7.9	%	12.7	%	7.8	%	10.3	%	N/M	10.7	%
Policy acquisition and other underwriting expenses							29.7	%									41.0	%	N/M	33.8	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							93.6	%									96.3	%	N/M	94.8	%

Policies in force	2.5	%	(3.0	)%	(1.2	)%	(0.3	)%	(7.0	)%	(4.4	)%	(4.3	)%	4.0	%	(1.7	)%	—	(0.5	)%
Retention (1)	78.6	%	83.5	%	N/M		81.2	%	73.5	%	77.6	%	82.7	%	82.5	%	80.2	%

	Six Months ended June 30, 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		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	65.4	%	44.3	%	33.6	%	58.5	%	77.4	%	51.6	%	47.7	%	36.1	%	51.9	%	N/M	56.1	%
Catastrophe losses	0.1	%	4.8	%	3.0	%	1.6	%	—		0.2	%	3.9	%	2.4	%	2.1	%	N/M	1.8	%
Loss develop- ment	(2.7	)%	(1.7	)%	(4.5	)%	(2.5	)%	7.0	%	(0.4	)%	(4.6	)%	(3.1	)%	(1.4	)%	N/M	(2.0	)%

Total loss reserves	62.8	%	47.4	%	32.1	%	57.6	%	84.4	%	51.4	%	47.0	%	35.4	%	52.6	%	N/M	55.9	%
Loss adjustment expenses	10.5	%	5.4	%	3.0	%	8.8	%	11.6	%	8.7	%	10.0	%	7.5	%	9.6	%	N/M	9.1	%
Policy acquisition and other underwriting expenses							27.8	%									37.7	%	N/M	31.3	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							94.2	%									100.0	%	N/M	96.3	%

Policies in force	(11.7	)%	(8.7	)%	(6.9	)%	(10.1	)%	(1.2	)%	(0.3	)%	(1.5	)%	2.1	%	(0.1	)%	—	(8.9	)%
Retention (1)	78.8	%	81.2	%	N/M		80.1	%	79.2	%	81.9	%	81.9	%	84.9	%	81.8	%

(1)

LIFE COMPANIES

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONDENSED INCOME STATEMENTS


	Quarter ended June 30								Six Months ended June 30
(In millions)	2006			2005			% Change		2006			2005			% Change
REVENUES
Premiums	$	5.4		$	5.5		(1.8	)	$	23.9		$	24.6		(2.8	)
Fees and other income		5.7			9.1		(37.4	)		11.7			18.5		(36.8	)
Net investment income		23.0			26.8		(14.2	)		46.7			56.3		(17.1	)

Total segment revenue		34.1			41.4		(17.6	)		82.3			99.4		(17.2	)

POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES
Policy benefits, claims and losses		19.6			21.0		(6.7	)		51.8			57.4		(9.8	)
Policy acquisition expenses		0.3			1.5		(80.0	)		0.5			3.7		(86.5	)
Other operating expenses		15.2			26.4		(42.4	)		32.9			55.1		(40.3	)

Total policy benefits, claims and operating expenses		35.1			48.9		(28.2	)		85.2			116.2		(26.7	)

Segment loss before federal income taxes	$	(1.0	)	$	(7.5	)	(86.7	)	$	(2.9	)	$	(16.8	)	(82.7	)

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	June 30 2006			December 31 2005			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $1,397.2 and $1,789.8)	$	1,364.8		$	1,801.2		(24.2	)
Equity securities, at fair value (cost of $0.5 and $1.7)		1.7			2.7		(37.0	)
Mortgage loans		46.4			54.8		(15.3	)
Policy loans		133.9			139.9		(4.3	)
Other long-term investments		39.0			42.3		(7.8	)

Total investments		1,585.8			2,040.9		(22.3	)

Cash and cash equivalents		114.5			101.9		12.4
Accrued investment income		22.4			27.6		(18.8	)
Premiums, accounts, and notes receivable, net		2.0			4.0		(50.0	)
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		366.3			391.0		(6.3	)
Deferred policy acquistion costs		5.8			7.1		(18.3	)
Deferred federal income tax asset		175.4			204.6		(14.3	)
Other assets		88.9			91.2		(2.5	)
Separate account assets		528.4			571.9		(7.6	)

Total assets	$	2,889.5		$	3,440.2		(16.0	)

LIABILITIES AND SHAREHOLDER’S EQUITY

LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,308.7		$	1,336.1		(2.1	)
Outstanding claims, losses and loss adjustment expenses		82.6			92.9		(11.1	)
Unearned premiums		1.6			1.6		—
Contractholder deposit funds and other policy liabilities		186.4			251.7		(25.9	)

Total policy liabilities and accruals		1,579.3			1,682.3		(6.1	)

Expenses and taxes payable		406.8			518.2		(21.5	)
Reinsurance premiums payable		4.3			6.5		(33.8	)
Trust instruments supported by funding obligations		37.4			294.3		(87.3	)
Separate account liabilities		528.4			571.9		(7.6	)

Total liabilities		2,556.2			3,073.2		(16.8	)

SHAREHOLDER’S EQUITY
Common stock, par value $10 per share; authorized 1 million shares; issued 500,000 shares		5.0			5.0		—
Additional paid-in capital		684.9			684.9		—
Accumulated other comprehensive loss		(49.8	)		(26.3	)	89.4
Retained deficit		(306.8	)		(296.6	)	3.4

		333.3			367.0		(9.2	)

Total liabilities and shareholder’s equity	$	2,889.5		$	3,440.2		(16.0	)

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

FUTURE POLICY BENEFITS AND ACCOUNT BALANCES


	Gross						Net of Reinsurance Recoverables
(In millions)	June 30 2006		December 31 2005		% Change		June 30 2006		December 31 2005		% Change
Insurance
Traditional life	$	723.6	$	760.2	(4.8	)	$	723.4	$	760.0	(4.8	)
Universal life		0.9		1.0	(10.0	)		—		—	—
Variable universal life		29.4		32.9	(10.6	)		—		—	—
Individual health		18.4		18.7	(1.6	)		1.1		0.4	N/M

Total insurance		772.3		812.8	(5.0	)		724.5		760.4	(4.7	)

Annuities
Individual annuities		109.3		113.5	(3.7	)		12.6		15.7	(19.7	)
Group annuities		381.9		400.7	(4.7	)		376.5		395.5	(4.8	)

Total annuities		491.2		514.2	(4.5	)		389.1		411.2	(5.4	)

Guaranteed investment contracts
Contractholder deposit funds and other policy liabilities		5.0		30.3	(83.5	)		5.0		30.3	(83.5	)

Total general account reserves	$	1,268.5	$	1,357.3	(6.5	)	$	1,118.6	$	1,201.9	(6.9	)

Trust instruments supported by funding obligations	$	37.4	$	294.3	(87.3	)	$	37.4	$	294.3	(87.3	)

SEPARATE ACCOUNT LIABILITIES
Variable universal life	$	66.1	$	67.6	(2.2	)	$	66.1	$	67.6	(2.2	)
Variable individual annuities		364.6		405.5	(10.1	)		364.6		405.5	(10.1	)

Total individual		430.7		473.1	(9.0	)		430.7		473.1	(9.0	)
Group variable universal life		2.2		2.6	(15.4	)		2.2		2.6	(15.4	)
Group annuities		95.5		96.2	(0.7	)		95.5		96.2	(0.7	)

Total group		97.7		98.8	(1.1	)		97.7		98.8	(1.1	)

Total separate account liabilities (1)	$	528.4	$	571.9	(7.6	)	$	528.4	$	571.9	(7.6	)

(1)

Includes separate account liabilities subject to a modified coinsurance agreement with AFLIAC of $426.7 million and $465.7 million as of June 30, 2006 and December 31, 2005, respectively.

INVESTMENTS

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME


	Six Months ended June 30, 2006
(In millions, except yields)	Property and Casualty (1)			Yield		Life Companies			Yield		Total			Yield
Fixed maturities	$	107.2		5.53	%	$	42.2		5.69	%	$	149.4		5.58	%
Equity securities		0.8		—			—		—			0.8		—
Mortgages (2)		2.0		10.18	%		1.9		7.95	%		3.9		8.95	%
All other		5.8		—			4.0		—			9.8		—
Investment expenses		(3.0	)	—			(1.4	)	—			(4.4	)	—

Total	$	112.8		5.35	%	$	46.7		5.20	%	$	159.5		5.31	%


	Six Months ended June 30, 2005
	Property and Casualty (1)			Yield		Life Companies (3)			Yield		Total			Yield
Fixed maturities	$	103.0		5.56	%	$	57.0		5.65	%	$	160.0		5.59	%
Equity securities		0.4		—			—		—			0.4		—
Mortgages (2)		2.3		9.41	%		2.8		9.17	%		5.1		9.28	%
All other		(1.2	)	—			(0.6	)	—			(1.8	)	—
Investment expenses		(2.2	)	—			(2.9	)	—			(5.1	)	—

Total	$	102.3		5.38	%	$	56.3		4.79	%	$	158.6		5.15	%

(1)

Includes purchase accounting adjustments of $1.6 million for the six months ended June 30, 2006 and 2005. Also includes corporate eliminations of $0.1 million and $0.3 million for the six months ended June 30, 2006 and 2005, respectively.

(2)

Excluding mortgage prepayment fees totalling $0.4 million and $0.7 million for the six months ended June 30, 2006 and 2005, respectively, mortgage yields are 8.36% for Property and Casualty, 7.95% for Life Companies and 8.13% in Total for the six months ended June 30, 2006 and 8.15% for Property and Casualty, 7.98% for Life Companies and 8.06% in Total for the six months ended June 30, 2005.

(3)

Excludes AFLIAC discontinued operations of $41.1 million for the six months ended June 30, 2005.

THE HANOVER INSURANCE GROUP

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)


	Quarter ended June 30
	2006									2005
	Net Realized Gains (Losses)									Net Realized Gains (Losses)
(In millions)	Property and Casualty (1)			Life Companies			Total			Property and Casualty (1)			Life Companies (2)			Total
Net gains on securities transactions	$	4.0		$	1.5		$	5.5		$	3.0		$	2.8		$	5.8
Other than temporary impairments		(0.4	)		(1.5	)		(1.9	)		(1.3	)		(0.1	)		(1.4	)
Other		(0.1	)		(0.6	)		(0.7	)		(0.8	)		0.6			(0.2	)

Net realized investment gains (losses)	$	3.5		$	(0.6	)	$	2.9		$	0.9		$	3.3		$	4.2


	Six Months ended June 30
	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 on securities transactions	$	15.8		$	0.1		$	15.9		$	3.2		$	15.8		$	19.0
Other than temporary impairments		(2.6	)		(4.1	)		(6.7	)		(3.0	)		(0.5	)		(3.5	)
Other		(0.1	)		(0.6	)		(0.7	)		(0.7	)		1.4			0.7

Net realized investment gains (losses)	$	13.1		$	(4.6	)	$	8.5		$	(0.5	)	$	16.7		$	16.2

(1)

Includes corporate eliminations of $(1.6) million and $0.7 million for the quarters ended June 30, 2006 and 2005, respectively and corporate eliminations of $3.6 million and $0.7 million for the six months ended June 30, 2006 and 2005, respectively.

(2)

Excludes discontinued operations of $(0.2) million for the quarter ended June 30, 2005 and discontinued operations of $8.0 million for the six months ended June 30, 2005.

THE HANOVER INSURANCE GROUP

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE


	June 30, 2006
	Gross Unrealized Losses						Fair Value
(In millions)	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
INVESTMENT GRADE FIXED MATURITIES:
12 months or less	$	78.6	$	34.8	$	113.4	$	2,395.0	$	729.1	$	3,124.1
Greater than 12 months		30.1		14.0		44.1		464.5		223.2		687.7

Total investment grade fixed maturities		108.7		48.8		157.5		2,859.5		952.3		3,811.8

BELOW INVESTMENT GRADE FIXED MATURITIES:
12 months or less		8.5		1.2		9.7		189.3		36.2		225.5
Greater than 12 months		—		—		—		—		—		—

Total below investment grade fixed maturities		8.5		1.2		9.7		189.3		36.2		225.5
Equity securities		—		—		—		—		—		—

Total fixed maturities and equity securities	$	117.2	$	50.0	$	167.2	$	3,048.8	$	988.5	$	4,037.3


	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

THE HANOVER INSURANCE GROUP

CREDIT QUALITY OF FIXED MATURITIES


		June 30, 2006
(In millions)	Rating Agency Equivalent Designation	Amortized Cost						Fair Value
NAIC Designation	Rating Agency Equivalent Designation	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
1	Aaa/Aa/A	$	2,978.2	$	906.0	$	3,884.2	$	2,909.6	$	876.5	$	3,786.1
2	Baa		817.5		417.3		1,234.8		790.6		412.3		1,202.9
3	Ba		115.8		32.6		148.4		112.1		32.9		145.0
4	B		111.9		32.0		143.9		110.4		32.3		142.7
5	Caa and lower		47.4		8.1		55.5		46.8		8.1		54.9
6	In or near default		0.5		1.2		1.7		1.5		2.7		4.2

Total fixed maturities		$	4,071.3	$	1,397.2	$	5,468.5	$	3,971.0	$	1,364.8	$	5,335.8


		December 31, 2005
	Rating Agency Equivalent Designation	Amortized Cost						Fair Value
NAIC Designation	Rating Agency Equivalent 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

PROPERTY & CASUALTY

STATUTORY RATIOS

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS


	Quarter ended June 30, 2006
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	58.9	%	44.6	%	32.0	%	54.1	%	76.2	%	52.8	%	39.8	%	30.4	%	45.6	%	N/M	50.9	%
Catastrophe losses	0.5	%	7.7	%	4.1	%	2.7	%	—		1.9	%	5.2	%	12.2	%	5.3	%	N/M	3.6	%
Loss develop- ment	(6.2	)%	(1.9	)%	2.1	%	(4.7	)%	(23.8	)%	(8.5	)%	3.1	%	(1.8	)%	(4.3	)%	N/M	(4.4	)%

Total loss reserves	53.2	%	50.4	%	38.2	%	52.1	%	52.4	%	46.2	%	48.1	%	40.8	%	46.6	%	N/M	50.1	%
Loss adjustment expenses	12.7	%	8.2	%	5.2	%	11.2	%	11.2	%	8.9	%	14.0	%	8.7	%	11.3	%	N/M	11.3	%
Policy acquisition and other underwriting expenses							29.3	%									37.9	%	N/M	32.7	%
Policyholders’ dividends							—										0.3	%	N/M	0.1	%

Combined							92.6	%									96.1	%	N/M	94.2	%


	Quarter ended June 30, 2005
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	62.9	%	41.4	%	28.6	%	55.8	%	81.2	%	50.3	%	47.6	%	30.7	%	51.3	%	N/M	54.1	%
Catastrophe losses	0.3	%	3.3	%	2.0	%	1.2	%	—		0.2	%	2.5	%	2.0	%	1.4	%	N/M	1.3	%
Loss develop- ment	(3.9	)%	1.5	%	(8.2	)%	(2.5	)%	(2.1	)%	(0.8	)%	(6.0	)%	7.6	%	(2.0	)%	N/M	(2.2	)%

Total loss reserves	59.3	%	46.2	%	22.4	%	54.5	%	79.1	%	49.7	%	44.1	%	40.3	%	50.7	%	N/M	53.2	%
Loss adjustment expenses	10.5	%	6.2	%	3.1	%	9.0	%	11.3	%	9.1	%	10.4	%	6.9	%	9.7	%	N/M	9.3	%
Policy acquisition and other underwriting expenses							28.1	%									36.4	%	N/M	31.2	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							91.6	%									96.9	%	N/M	93.7	%

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS


	Six Months ended June 30, 2006
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	60.6	%	43.5	%	32.8	%	55.0	%	77.9	%	49.7	%	43.8	%	31.4	%	47.1	%	N/M	52.0	%
Catastrophe losses	0.3	%	5.7	%	2.1	%	1.9	%	—		1.3	%	3.3	%	8.7	%	3.6	%	N/M	2.5	%
Loss develop- ment	(4.8	)%	—		(11.3	)%	(3.6	)%	(14.7	)%	(4.2	)%	(4.5	)%	(3.6	)%	(5.6	)%	N/M	(4.2	)%

Total loss reserves	56.1	%	49.2	%	23.6	%	53.3	%	63.2	%	46.8	%	42.6	%	36.5	%	45.1	%	N/M	50.3	%
Loss adjustment expenses	12.2	%	8.0	%	6.2	%	10.8	%	11.6	%	7.9	%	12.7	%	7.7	%	10.4	%	N/M	10.7	%
Policy acquisition and other underwriting expenses							29.6	%									38.0	%	N/M	33.0	%
Policyholders’ dividends							—										0.3	%	N/M	0.1	%

Combined							93.7	%									93.8	%	N/M	94.1	%


	Six Months ended June 30, 2005
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and develop- ment	65.4	%	44.3	%	33.6	%	58.4	%	77.7	%	51.5	%	47.7	%	36.1	%	51.9	%	N/M	56.1	%
Catastrophe losses	0.2	%	4.8	%	3.0	%	1.6	%	N/M		0.2	%	3.9	%	2.4	%	2.1	%	N/M	1.8	%
Loss develop- ment	(2.7	)%	(1.7	)%	(4.5	)%	(2.5	)%	7.0	%	(0.4	)%	(4.6	)%	(3.1	)%	(1.4	)%	N/M	(2.0	)%

Total loss reserves	62.9	%	47.4	%	32.1	%	57.5	%	84.7	%	51.3	%	47.0	%	35.4	%	52.6	%	N/M	55.9	%
Loss adjustment expenses	10.5	%	5.4	%	3.0	%	8.9	%	11.6	%	8.7	%	10.0	%	7.4	%	9.5	%	N/M	9.1	%
Policy acquisition and other underwriting expenses							27.9	%									35.9	%	N/M	30.9	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							94.3	%									98.1	%	N/M	95.9	%

Historical Highlights

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS


(In millions, except per share data)	Q2 06			Q1 06			2005			Q4 05			Q3 05			Q2 05			Q1 05
SEGMENT INCOME (1)
Property and Casualty
Personal Lines	$	53.7		$	49.0		$	143.2		$	74.4		$	(27.8	)	$	57.4		$	39.2
Commercial Lines		30.2			39.0			(35.0	)		14.5			(101.0	)		31.0			20.5
Other Property and Casualty		2.3			3.7			5.5			0.6			1.1			1.7			2.1

Total Property and Casualty		86.2			91.7			113.7			89.5			(127.7	)		90.1			61.8
Life Companies		(1.0	)		(1.9	)		(18.7	)		(1.0	)		(0.9	)		(7.5	)		(9.3	)
Interest expense on corporate debt		(9.9	)		(10.0	)		(39.9	)		(10.0	)		(10.0	)		(9.9	)		(10.0	)

Total segment income (loss) before federal income taxes	$	75.3		$	79.8		$	55.1		$	78.5		$	(138.6	)	$	72.7		$	42.5

Federal income tax (expense) benefit on segment income		(23.6	)		(23.6	)		(1.0	)		(1.3	)		29.6			(19.5	)		(9.8	)

Total segment income (loss) after federal income taxes	$	51.7		$	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		—			—			9.5			9.5			—			—			—
Net realized investment gains (losses), net of amortization		3.6			5.8			18.6			5.7			(2.0	)		3.6			11.3
Gains (losses) on derivative instruments		0.1			—			(0.3	)		—			0.2			(0.3	)		(0.2	)
Restructuring costs		(0.6	)		(0.3	)		(2.1	)		(0.8	)		(0.4	)		(0.2	)		(0.7	)
Federal income tax (expense) benefit on non-segment income		(1.1	)		(1.7	)		(5.6	)		(7.2	)		5.8			(1.5	)		(2.7	)

Income (loss) from continuing operations		53.7			60.0			76.5			84.4			(105.4	)		57.1			40.4
Income from discontinued variable life insurance and annuity business, net of taxes		—			—			42.7			4.1			17.6			14.9			6.1
(Loss) income on disposal of variable life insurance and annuity business, net of taxes		(2.8	)		(20.1	)		(444.4	)		30.2			(474.6	)		—			—

Income (loss) before cumulative effect of accounting change		50.9			39.9			(325.2	)		118.7			(562.4	)		72.0			46.5
Cumulative effect of change in accounting principle, net of taxes		—			0.6			—			—			—			—			—

NET INCOME (LOSS)	$	50.9		$	40.5		$	(325.2	)	$	118.7		$	(562.4	)	$	72.0		$	46.5

PER SHARE DATA (DILUTED)

INCOME (LOSS) FROM CONTINUING OPERATIONS	$	1.04		$	1.12		$	1.42		$	1.56		$	(1.97	)	$	1.06		$	0.75
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES	$	(0.05	)	$	(0.38	)	$	(7.44	)	$	0.63		$	(8.54	)	$	0.28		$	0.11
NET INCOME (LOSS)	$	0.99		$	0.75		$	(6.02	)	$	2.19		$	(10.51	)	$	1.34		$	0.86

WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) (2)		51.6			53.6			54.0			54.2			53.5			53.9			53.8

BALANCE SHEET
Total investments	$	5,601.4		$	5,841.8					$	6,008.3		$	7,535.0		$	7,678.4		$	7,663.9
Separate account assets	$	528.4		$	564.0					$	571.9		$	9,385.9		$	9,444.6		$	9,726.0
Total assets	$	9,689.1		$	10,156.8					$	10,634.0		$	21,647.1		$	21,846.6		$	22,167.8
Total shareholders’ equity	$	1,770.0		$	1,843.0					$	1,951.3		$	1,867.7		$	2,490.5		$	2,325.2
Book value per share	$	34.77		$	35.35					$	36.30		$	34.81		$	46.60		$	43.53
Book value per share, excluding accumulated other comprehensive income	$	38.46		$	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.

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)

Other Information

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:


	2006
Quarter Ended	Price Range				Dividends Per Share
Quarter Ended	High		Low		Dividends Per Share
March 31	$	53.12	$	42.98	—
June 30	$	54.11	$	43.17	—
September 30
December 31

	2005
Quarter Ended	Price Range				Dividends Per Share
Quarter Ended	High		Low		Dividends Per Share
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 July 31, 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.	bbb-	BB+	Ba1
Senior Debt
The Hanover Insurance Group, Inc.	bb	B+	Ba2
Capital Securities
The Hanover Insurance	—	—	NP
Company Short Term Debt

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