8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 30, 2006

THE HANOVER INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	1-13754	04-3263626
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

440 Lincoln Street, Worcester, Massachusetts 01653

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (508) 855-1000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

The following information is being furnished under Item 2.02 – Results of Operations and Financial Condition. Such information, including the exhibits attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

On October 30, 2006, The Hanover Insurance Group, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2006. The release is furnished as Exhibit 99.1 hereto. Additionally, on October 30, 2006, the Company made available on its website financial information contained in its Statistical Supplement for the period ended September 30, 2006. The supplement is furnished as Exhibit 99.2 hereto.

Item 9.01 Financial Statements and Exhibits.

(a) Not applicable.

(b) Not applicable.

(c) Not applicable.

(d) Exhibits.

The following exhibits are furnished herewith.

Exhibit 99.1	Press Release, dated October 30, 2006, announcing the Company’s financial results for the quarter ended September 30, 2006.
Exhibit 99.2	The Hanover Insurance Group, Inc. Statistical Supplement for the period ended September 30, 2006.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	The Hanover Insurance Group, Inc.
	(Registrant)
Date: October 30, 2006	By:	/s/ Edward J. Parry III
		Edward J. Parry III
		Chief Financial Officer,
		Executive Vice President,
		Principal Accounting Officer and Director

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Exhibit Index

Exhibit 99.1	Press Release, dated October 30, 2006, announcing the Company’s financial results for the quarter ended September 30, 2006.
Exhibit 99.2	The Hanover Insurance Group, Inc. Statistical Supplement for the period ended September 30, 2006.

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EX-99.1

Exhibit 99.1

THE HANOVER INSURANCE GROUP, INC. REPORTS THIRD QUARTER 2006 EARNINGS:

NET INCOME OF $0.65 PER SHARE COMPARED TO A NET LOSS OF $10.51 PER SHARE LAST YEAR; INCOME FROM CONTINUING OPERATIONS OF $0.56 PER SHARE COMPARED TO $(1.97) PER SHARE LAST YEAR

WORCESTER, Mass., October 30, 2006—The Hanover Insurance Group, Inc. (NYSE: THG) today reported net income for the third quarter of $33.4 million, or $0.65 per share, compared to a net loss of $562.4 million, or $10.51 per share, in the third quarter of last year. As previously announced, the current quarter’s results include a $34 million charge, or $0.66 per share, of after-tax net losses related to Hurricane Katrina. Last year’s third quarter net loss is attributed to a $474.6 million after-tax net loss on the sale of the variable life insurance and annuity business and $140 million in after-tax net catastrophe losses related to Hurricane Katrina.

Income from continuing operations was $28.5 million for the third quarter, or $0.56 per share, compared to a loss of $105.4 million, or $1.97 per share, in the third quarter of last year. Results for both quarters include the impact of the aforementioned catastrophe losses related to Hurricane Katrina and several other much less significant items.

Total Property and Casualty pre-tax segment income was $52.8 million in the quarter, compared to a loss of $127.7 million in the third quarter of last year. As previously announced, the current quarter’s results include $64.2 million of net pre-tax catastrophe losses and loss adjustment expenses, of which $52.1 million relate to a reserve increase attributable to Hurricane Katrina. In addition, current quarter results also include the benefit of a $7.0 million litigation settlement related to Opus Investment Management, Inc. Results from the third quarter of last year include pre-tax net catastrophe related losses of $245.5 million, primarily attributed to Hurricane Katrina.

“We continue to be very pleased with the progress we are making throughout our organization,” said Frederick H. Eppinger, chief executive officer of The Hanover Insurance Group, Inc. “In spite of the additional Hurricane Katrina losses, we generated solid results in the quarter, reflected in the positive momentum we have established in both commercial and personal lines.”

Segment Results

The Hanover conducts its business in four operating segments. Three of these operating segments, Personal Lines, Commercial Lines, and Other Property and Casualty, are included in our Property and Casualty operations. The Personal Lines segment markets automobile, homeowners and ancillary coverages to individuals and families. The Commercial Lines segment offers a suite of products targeted at the small- to mid-size business markets, which include commercial multiple peril, commercial automobile, workers’ compensation and other commercial coverages, such as fidelity and surety, and inland marine. The Other Property and Casualty segment includes AMGRO, Inc., a premium financing business; Opus Investment Management, Inc., which provides investment management services to institutions, pension funds and other organizations; and earnings on holding company assets, as well as a block of run-off voluntary pools business in which we have not actively participated since 1995. The Life Companies, the

company’s fourth operating segment, include the run-off business of First Allmerica Financial Life Insurance Company (FAFLIC), principally consisting of traditional life insurance and retirement businesses.

The following table shows pre-tax segment income (loss). It is presented in a manner consistent with the way management evaluates results and is set forth in accordance with Statement of Financial Accounting Standards No. 131, “Disclosures About Segments of an Enterprise and Related Information.”

	Quarter ended September 30 (In millions)
	2006			2005
Property and Casualty:
Personal Lines(1)	$	35.0		$	(27.8	)
Commercial Lines(2)		7.7			(101.0	)
Other Property and Casualty		10.1			1.1
Total Property & Casualty		52.8			(127.7	)
Life Companies		(1.1	)		(0.9	)
Interest expense on corporate debt		(10.0	)		(10.0	)
Total pre-tax segment income (loss)		41.7			(138.6	)
Federal income tax (expense) benefit		(14.1	)		29.6
Total segment income (loss) after taxes(3)	$	27.6		$	(109.0	)

⁽¹⁾ Includes Personal Lines pre-tax net impact of catastrophes of $20.7 million and $101.7 million for the third quarter of 2006 and 2005, respectively.

⁽²⁾ Includes Commercial Lines pre-tax net impact of catastrophes of $43.5 million and $143.8 million for the third quarter of 2006 and 2005, respectively.

⁽³⁾ See reconciliation from segment income (loss) to net income (loss) at the end of this document.

Property and Casualty

Property and Casualty pre-tax segment income was $52.8 million in the third quarter of 2006, compared to a net loss of $127.7 million in the third quarter of 2005, an increase of $180.5 million due to lower catastrophe related losses in the current quarter. The pre-tax net impact of catastrophes was $64.2 million in the current quarter compared to $245.5 million in the third quarter of 2005. Excluding the pre-tax net impact of catastrophes, property and casualty pre-tax segment income was $117.0 million in the current quarter compared to $117.8 million in the prior year quarter. Benefiting the current quarter’s results was improved loss performance and the previously mentioned $7.0 million litigation settlement, offset by increased expenses.

Property and Casualty highlights:

• Net premiums written were $602.9 million in the third quarter of 2006, compared to $542.0 million in the third quarter of 2005. Excluding the effect of reinsurance reinstatement

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premiums of $27.0 million, which were incurred following Hurricane Katrina, net premiums written were $569.0 million in the third quarter of 2005, which equates to 6.0% current quarter growth.

• Net premiums earned were $562.6 million in the third quarter of 2006, compared to $519.7 million in the third quarter of 2005. Excluding the effect of reinsurance reinstatement premiums of $27.0 million, net premiums earned were $546.7 million in the third quarter of 2005.

• New business net premiums written were $157.4 million in the third quarter of 2006, representing an increase of 67% over $94.4 million in the third quarter of 2005.

• Favorable development of prior-year loss and LAE reserves was $39.2 million in the third quarter of 2006, compared to favorable development of $23.4 million in the third quarter of 2005.

The following table summarizes the components of the GAAP combined ratio for the Property and Casualty segment:

	Quarter ended September 30
	2006		2005		Adjusted 2005(1)
Personal Lines losses (excluding catastrophes)	50.7	%	53.1	%	50.4	%
Personal Lines catastrophe-related losses	4.7	%	24.8	%	23.6	%
Total Personal Lines losses	55.4	%	77.9	%	74.0	%
Commercial Lines losses (excluding catastrophes)	36.1	%	49.3	%	47.0	%
Commercial Lines catastrophe-related losses	18.7	%	70.4	%	67.1	%
Total Commercial Lines losses	54.8	%	119.7	%	114.1	%
Total P&C Losses	55.2	%	93.4	%	88.7	%
Loss adjustment expenses	10.8	%	10.1	%	9.6	%
Hurricane Katrina-related loss adjustment expenses	1.5	%	0.7	%	0.7	%
Policy acquisition and other underwriting expenses	34.9	%	31.6	%	30.1	%
Combined Ratio	102.4	%	135.8	%	129.1	%

⁽¹⁾ The Adjusted 2005 ratios have been adjusted to exclude the impact of the reinsurance reinstatement premiums.

Personal Lines

Personal Lines pre-tax segment income was $35.0 million in the quarter, compared to a loss of $27.8 million in the prior-year quarter, an increase of $62.8 million. The pre-tax net impact of catastrophes was $20.7 million in the current quarter, compared to $101.7 million in the third quarter of 2005. Excluding the pre-tax net impact of catastrophes, personal lines pre-tax segment income was $55.7 million in the current quarter, compared to $73.9 million in the prior-year quarter. This decrease was primarily due to higher expenses.

Underwriting and loss adjustment expenses were higher in the quarter due to several factors, including: an increase in variable compensation expenses, an unusual premium tax refund in the third quarter of last year, increased claims spending principally related to the operating model, the

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impact of new accounting for stock-based compensation, increased technology spending, and, to a lesser extent, an increase in the proportion of overhead expenses absorbed by the Property and Casualty segment.

Personal Lines highlights:

• Net premiums written were $383.2 million in the third quarter of 2006, compared to $353.5 million in the third quarter of 2005. Excluding the effect of reinsurance reinstatement premiums of $17.6 million, net premiums written were $371.1 million in the third quarter of 2005, which equates to 3.3% current quarter growth.

• Net premiums earned were $353.1 million in the third quarter of 2006, compared to $331.4 million in the third quarter of 2005. Excluding the effect of reinsurance reinstatement premiums of $17.6 million, net premiums earned were $349.0 million in the third quarter of 2005.

• New business net premiums written were $77.0 million in the third quarter of 2006, representing an increase of 91% over $40.3 million in the third quarter of 2005.

• The Personal Lines GAAP combined ratio was 98.4% in the third quarter, versus 117.1% in the prior year quarter. Excluding the effect of reinsurance reinstatement premiums, the Personal Lines GAAP combined ratio was 111.3% in the third quarter of 2005.

• The pre-tax net impact of catastrophes was $20.7 million, or 5.9 points of the combined ratio, for the third quarter of 2006, compared to $101.7 million, or 30.0 points of the combined ratio, for the third quarter of 2005.

• Favorable development of prior-year loss and LAE reserves was $13.6 million in the current quarter, compared to favorable development of $13.4 million in the third quarter of 2005; improving the Personal Lines combined ratio by 3.9 points and 3.8 points, excluding reinsurance reinstatement premiums, respectively.

Commercial Lines

Commercial Lines pre-tax segment income was $7.7 million in the quarter, compared to a loss of $101.0 million in the third quarter of 2005. The pre-tax net impact of catastrophes was $43.5 million in the current quarter, compared to $143.8 million in the third quarter of 2005. Excluding the pre-tax net impact of catastrophes, commercial lines pre-tax segment income was $51.2 million in the current quarter, compared to $42.8 million in the prior-year quarter. This increase was primarily driven by favorable development of prior-year reserves and growth in specialty lines, partially offset by higher expenses.

In the current quarter, development of prior-year loss and loss adjustment expense reserves were favorable by $25.7 million, compared to $11.2 million in the third quarter of 2005. The increase in favorable prior-year reserve development was driven by Workers’ Compensation, Commercial Auto and Commercial Multi-Peril lines.

Underwriting and loss adjustment expenses were higher in the quarter due to several factors which include: an increase in variable compensation expenses, increased technology spending, higher expenses in support of our specialty lines, the impact of new accounting for stock-based compensation, certain other miscellaneous items, and to a lesser extent, an increase in the proportion of overhead expenses absorbed by the Property and Casualty segment.

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Commercial Lines highlights:

• Net premiums written were $219.7 million in the third quarter of 2006, compared to $188.5 million in the third quarter of 2005. Excluding the effect of reinsurance reinstatement premiums of $9.4 million, net premiums written were $197.9 million in the third quarter of 2005, which equates to 11.0% current quarter growth.

• Net premiums earned were $209.5 million in the third quarter of 2006, compared to $188.3 million in the third quarter of 2005. Excluding the effect of reinsurance reinstatement premiums of $9.4 million, net premiums earned were $197.7 million in the third quarter of 2005.

• New business net premiums written were $80.4 million in the third quarter of 2006, representing an increase of 49% over $54.1 million in the third quarter of 2005.

• The Commercial Lines GAAP combined ratio was 109.2% in the third quarter, versus 167.8% in the prior year quarter. Excluding the effect of reinsurance reinstatement premiums, the Commercial Lines GAAP combined ratio was 159.9% in the third quarter of 2005.

• The pre-tax net impact of catastrophes was $43.5 million, or 20.8 points of the combined ratio, for the third quarter of 2006, compared to $143.8 million, or 76.0 points of the combined ratio, for the third quarter of 2005.

• Favorable development of prior-year loss and LAE reserves was $25.7 million in the current quarter, compared to favorable development of $11.2 million in the third quarter of 2005; improving the Commercial Lines combined ratio by 12.3 points and 5.7 points, excluding reinsurance reinstatement premiums, respectively.

Other Property & Casualty

Other Property & Casualty pre-tax segment income was $10.1 million in the quarter, compared to $1.1 million in the prior-year quarter. Excluding the previously mentioned $7.0 million litigation settlement benefit related to Opus Investment Management, Inc., pre-tax segment income was $3.1 million in the current quarter. Other Property & Casualty includes the company’s premium financing business, investment management operations, earnings on holding company assets, as well as run-off voluntary pools.

Life Companies

Continuing Operations:

The continuing operations of the Life Companies now include the FAFLIC retained business. The retained business primarily includes the closed block of traditional life insurance, group retirement business, guaranteed investment contract (GIC) businesses, and the company’s discontinued group life and health business, including group life and health voluntary pools, which are all in run-off.

The Life Companies continuing operations reported a segment loss of $1.1 million in the current quarter of 2006, compared to a loss of $0.9 million in the third quarter of 2005.

Loss on Disposal of the Variable Life Insurance and Annuity Business:

For the current quarter, the company recorded, as expected, a loss on the sale of the variable life insurance and annuity business of $2.9 million, net of tax, relating primarily to net transition service expenses.

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Gain on Sale of Financial Profiles:

During the quarter, the company sold all of the outstanding shares of Financial Profiles, Inc., a wholly-owned subsidiary. The developer and distributor of financial planning software, was originally acquired by the company in 1998 in connection with the company’s then-ongoing life insurance and annuity operations. The company received pre-tax proceeds of $21.5 million from the transaction and recognized an after-tax gain of $7.8 million during the third quarter of 2006.

Investment Results

Net investment income was $78.3 million for the third quarter of 2006, compared to $79.4 million in the same period of 2005. Net investment income in the Life Companies decreased $4.9 million to $22.2 million, driven by lower average invested assets, resulting from the maturities of long-term funding agreements and continued cash outflows from life operations. This was partially offset by an increase in net investment income in the Property and Casualty segment of $3.7 million, to $55.9 million, primarily due to increased operating cash flows and higher investment income from the proceeds on the sale of the variable life insurance and annuity business.

Third quarter 2006 pre-tax net realized investment gains were $2.1 million, compared to $1.9 million of pre-tax net realized investment gains in the same period of 2005. In the current quarter, the company experienced pre-tax net realized investment gains of $3.6 million primarily from the sale of fixed maturities. These gains were partially offset by $1.5 million of capital losses resulting from impairments on certain fixed maturity securities. In the third quarter of 2005, the company experienced pre-tax net realized investment gains of $6.7 million, primarily from the sale of fixed maturities. These gains were partially offset by $4.8 million of capital losses resulting from impairments on certain fixed maturity securities.

Balance Sheet

Shareholders’ equity was $1.90 billion, or $37.49 per share at September 30, 2006, compared to $1.95 billion or $36.30 per share at December 31, 2005. This change is primarily due to the company’s share repurchase program in the first half of 2006. Excluding accumulated other comprehensive income, book value was $39.20 per share at the close of the current quarter, compared to $37.33 per share at December 31, 2005.

Earnings Conference Call

The Hanover will host a conference call to discuss the company’s third quarter results on Tuesday, October 31st at 10:00 a.m. Eastern Time. A PowerPoint slide presentation will accompany our prepared remarks and has been posted on our web site. Interested investors and others can listen to the call and access the presentation through The Hanover’s web site, located at www.hanover.com. Web-cast participants should go to the web site 15 minutes early to register, download, and install any necessary audio software. A re-broadcast of the conference call will be available on this web site two hours after the call.

Statistical Supplement

The Hanover’s third quarter earnings press release and statistical supplement are also available in the Investors section at http://www.hanover.com.

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Forward-Looking Statements and Non-GAAP Financial Measures

Certain statements in this release or in the above referenced conference call may be considered to be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Use of the words “believes,” “anticipates,” “expects,” “projections,” “outlook,” “should,” “plan,” “guidance” and similar expressions is intended to identify forward-looking statements. The company cautions investors that any such forward-looking statements are not guarantees of future performance, and actual results could differ materially. Investors are directed to consider the risks and uncertainties in our business that may affect future performance and that are discussed in readily available documents, including the company’s annual report and other documents filed by The Hanover with the Securities and Exchange Commission and which are also available at http://www.hanover.com under “Investors”. These uncertainties include the possibility of adverse catastrophe experiences (including terrorism) and severe weather, the uncertainties in estimating property and casualty losses (particularly with respect to products with longer tails and with respect to losses incurred as the result of Hurricanes Katrina and Rita), the ability to increase or maintain certain property and casualty insurance rates, the impact of new product introductions (such as the multi-variate personal auto product), adverse loss development and adverse trends in mortality and morbidity and medical costs, change in the current favorable frequency and loss trends generally being experienced industry-wide, the ability to improve renewal rates and increase new property and casualty policy counts, investment impairments, heightened competition (including rate pressure), adverse state and federal legislation or regulation or regulatory actions, financial ratings actions, uncertainties in estimating the FIN 45 liability recorded in conjunction with certain indemnity obligations to Goldman Sachs in connection with the sale of the variable life insurance and annuity business (including with respect to existing and potential litigation and regulatory actions and the remediation of certain processing errors in connection with tax reporting), and various other factors.

The Hanover uses non-GAAP financial measures as important measures of the company’s operating performance, including total segment income, property and casualty segment income, and measures of segment income and loss ratios excluding catastrophe losses (and with respect to 2005, reinsurance reinstatement premiums).

Segment income is net income excluding federal income taxes and net realized investment gains and losses, including gains or losses on certain derivative instruments, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Segment income also excludes net gains and losses on disposals of businesses, discontinued operations, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Property and Casualty segment income is the sum of the segment income of the three operating segments of The Hanover’s property and casualty operations: Personal Lines, Commercial Lines and Other Property and Casualty. The Hanover believes that measures of total segment income and Property and Casualty segment income provide investors with a valuable measure of the performance of the company’s ongoing businesses because they highlight net income attributable to the normal operations of the business.

The Hanover also provides measures of segment income and loss ratios that exclude the effects of catastrophe losses. A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, hurricane, earthquake, windstorm, explosion, terrorism or other similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance. The Hanover believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings and loss ratios.

Net income is the most directly comparable GAAP measure for total segment income, Property and Casualty segment income and measures of segment income that exclude the effects of catastrophe losses. Segment income, Property and Casualty segment income and measures of segment income that exclude the effects of catastrophe losses should not be construed as a substitute for net income determined in accordance with GAAP. A reconciliation of net income to segment income and Property and Casualty segment income for the quarters ended September 30, 2006 and 2005 is set forth in the table at the end of this document and in the statistical supplement. Loss ratios calculated in accordance with GAAP are the most directly comparable GAAP measure for loss ratios calculated excluding the effects of catastrophe losses or reinsurance reinstatement premiums. The presentation

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of loss ratios calculated excluding the effects of catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP.

The Hanover provides measures of net premiums written, net premiums earned and loss ratios that exclude the effects of catastrophe reinsurance reinstatement premiums. Catastrophe reinsurance reinstatement premiums are a reduction to net written and earned premiums, and represent the cost to reinstate the amount of catastrophe reinsurance coverage that the Company has used as the result of a reinsurance loss payment under the terms of the reinsurance contract. The company believes that the loss ratios excluding the effects of catastrophe reinsurance reinstatement premiums represent a better measure of underlying loss trends. The presentation of loss ratios calculated excluding the effects of catastrophe reinstatement premiums should not be construed as a substitute for loss ratios determined in accordance with GAAP.

The Hanover Insurance Group, Inc., based in Worcester, Mass., is the holding company for a group of insurers that includes The Hanover Insurance Company, also based in Worcester, Citizens Insurance Company of America, headquartered in Howell, Michigan, and their affiliates. The Hanover offers a wide range of property and casualty products and services to individuals, families and businesses through an extensive network of independent agents, and has been meeting its obligations to its agent partners and their customers for more than 150 years. Taken as a group, The Hanover ranks among the top 35 property and casualty insurers in the United States.

Contact Information
Investors: Sujata Mutalik E-mail: smutalik@hanover.com 1-508-855-3457	Media: Michael F. Buckley E-mail: mibuckley@hanover.com 1-508-855-3099

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THE HANOVER INSURANCE GROUP, INC.

(In millions, except per share data)

	Quarter ended September 30
	2006		2005
Net income (loss)	$	33.4	$	(562.4	)
Net income (loss) per share(1)	$	0.65	$	(10.51	)
Weighted average shares		51.3		53.5

The following is a reconciliation from segment income (loss) to net income (loss)⁽²⁾:

PER SHARE DATA (DILUTED)(1)	Quarter ended September 30
	2006						2005
Segment Income	$			Per Share			$			Per Share
Property and Casualty
Personal Lines	$	35.0			—		$	(27.8	)		—
Commercial Lines		7.7			—			(101.0	)		—
Other Property & Casualty		10.1			—			1.1			—
Total Property and Casualty		52.8			—			(127.7	)		—
Life Companies		(1.1	)		—			(0.9	)		—
Interest expense on corporate debt		(10.0	)		—			(10.0	)		—
Total segment income (loss)		41.7		$	0.81			(138.6	)	$	(2.59	)
Federal income tax (expense) benefit on P&C segment income		(15.2	)		—			40.8			—
Federal income tax benefit (expense) on other segment income		1.1			—			(11.2	)		—
Total federal income tax (expense) benefit on segment income		(14.1	)		(0.27	)		29.6			0.55
Total segment income (loss) after federal income taxes		27.6			0.54			(109.0	)		(2.04	)
Net realized investment gains (losses), net of amortization		2.0			0.04			(2.0	)		(0.04	)
Gain on derivatives		0.1			—			0.2			—
Restructuring costs		(0.5	)		(0.01	)		(0.4	)		(0.01	)
Federal income tax (expense) benefit on non-segment income		(0.7	)		(0.01	)		5.8			0.12
Income (loss) from continuing operations, net of taxes		28.5			0.56			(105.4	)		(1.97	)
Income from discontinued variable life insurance and annuity business, net of taxes		—			—			17.6			0.33
Loss on disposal of variable life insurance and annuity business, net of taxes		(2.9	)		(0.06	)		(474.6	)		(8.87	)
Gain on Sale of Financial Profiles, net of taxes		7.8			0.15			—			—
Income (loss) before cumulative effect of accounting change		33.4			0.65			(562.4	)		(10.51	)
Cumulative effect of change in accounting principle, net of taxes		—			—			—			—
Net income (loss)	$	33.4		$	0.65		$	(562.4	)	$	(10.51	)

⁽¹⁾ Basic net income per share was $0.66 for the quarter ended September 30, 2006. Per share data for the quarter ended September 30, 2005 represents basic loss per share due to antidilution.

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⁽²⁾ In accordance with Statement of Financial Accounting Standards No. 131, “Disclosure about Segments of an Enterprise and Related Information,” the separate financial information of each segment is presented consistent with the way results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Management evaluates the results of the aforementioned segments on a pre-tax basis. Segment income is determined by adjusting net income for net realized investment gains and losses including certain gains or losses on derivative instruments, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Also, segment income excludes net gains and losses on disposals of businesses, discontinued operations, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items.

Net income includes the following items by segment:

	Quarter ended September 30, 2006 (In millions)
	Personal Lines			Commercial Lines			Other Property & Casualty		Life Companies			Total
Net realized investment gains	$	0.6		$	1.0			—	$	0.4		$	2.0
Gain on derivatives		—			—			—		0.1			0.1
Restructuring costs		—			—			—		(0.5	)		(0.5	)
Loss on disposal of variable life insurance and annuity business, net of taxes		—			—			—		(2.9	)		(2.9	)
Gain on Sale of Financial Profiles, net of taxes		—			—			—		7.8			7.8
	Quarter ended September 30, 2005 (In millions)
	Personal Lines			Commercial Lines			Other Property & Casualty		Life Companies			Total
Net realized investment (losses) gains	$	(0.3	)	$	(0.3	)	$	0.1	$	(1.5	)	$	(2.0	)
Gain on derivatives		—			—			—		0.2			0.2
Restructuring costs		—			—			—		(0.4	)		(0.4	)
Income from discontinued variable life insurance and annuity business, net of taxes		—			—			—		17.6			17.6
Loss on disposal of variable life insurance and annuity business, net of taxes		—			—			—		(474.6	)		(474.6	)

All figures reported are unaudited.

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EX-99.2

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	9-14
Life Companies
Condensed Income Statements	15
Life Companies Consolidated Balance Sheets	16
Future Policy Benefits and Account Balances	17
Investments
Net Investment Income	18
Net Realized Investment Gains (Losses)	19
Unrealized Losses	20
Credit Quality of Fixed Maturities	21
Property and Casualty Statutory Ratios	22-25
Historical Financial Highlights	26-27
Other Information	28
Corporate Information
Market and Dividend Information
Industry Ratings

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

	Quarter ended September 30								Nine Months ended September 30
(In millions)	2006			2005			% Change		2006			2005			% Change
SEGMENT INCOME
Property and Casualty
Personal Lines	$	35.0		$	(27.8	)	N/M		$	137.7		$	68.8		N/M
Commercial Lines		7.7			(101.0	)	N/M			76.9			(49.5	)	N/M
Other		10.1			1.1		N/M			16.1			4.9		N/M
Total Property and Casualty		52.8			(127.7	)	N/M			230.7			24.2		N/M
Life Companies		(1.1	)		(0.9	)	22.2			(4.0	)		(17.7	)	(77.4	)
Interest expense on corporate debt		(10.0	)		(10.0	)	—			(29.9	)		(29.9	)	—
Total segment income (loss)		41.7			(138.6	)	N/M			196.8			(23.4	)	N/M
Federal income tax (expense) benefit on P&C segment income		(15.2	)		40.8		N/M			(74.4	)		(3.5	)	N/M
Federal income tax benefit (expense) on other segment income		1.1			(11.2	)	N/M			13.1			3.8		N/M
Total federal income tax (expense) benefit on segment income		(14.1	)		29.6		N/M			(61.3	)		0.3		N/M
Total segment income (loss) after taxes	$	27.6		$	(109.0	)	N/M		$	135.5		$	(23.1	)	N/M
RECONCILIATION FROM SEGMENT INCOME TO NET INCOME
Total segment income (loss) after taxes	$	27.6		$	(109.0	)	N/M		$	135.5		$	(23.1	)	N/M
Change in prior years tax reserves		—			—		N/M			—			2.3		N/M
Net realized investment gains (losses), net of amortization		2.0			(2.0	)	—			11.4			12.9		(11.6	)
Gains (losses) on derivative instruments		0.1			0.2		(50.0	)		0.2			(0.3	)	N/M
Restructuring costs		(0.5	)		(0.4	)	25.0			(1.4	)		(1.3	)	7.7
Federal income tax (expense) benefit on non-segment income		(0.7	)		5.8		N/M			(3.5	)		1.6		N/M
Income (loss) from continuing operations, net of taxes		28.5			(105.4	)	N/M			142.2			(7.9	)	N/M
Income from discontinued variable life insurance and annuity business, net of taxes		—			17.6		N/M			—			38.6		N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(2.9	)		(474.6	)	(99.4	)		(25.8	)		(474.6	)	(94.6	)
Gain on sale of Financial Profiles, Inc., net of taxes		7.8			—		N/M			7.8			—		N/M
Income (loss) before cumulative effect of accounting change		33.4			(562.4	)	N/M			124.2			(443.9	)	N/M
Cumulative effect of change in accounting principle, net of taxes		—			—		N/M			0.6			—		N/M
Net income (loss)	$	33.4		$	(562.4	)	N/M		$	124.8		$	(443.9	)	N/M

1

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

	Quarter ended September 30								Nine Months ended September 30
	2006			2005			% Change		2006			2005			% Change
PER SHARE DATA (DILUTED)
Total segment income (loss)	$	0.81		$	(2.59	)	N/M		$	3.77		$	(0.44	)	N/M
Federal income tax (benefit) expense on segment income		(0.27	)		0.55		N/M			(1.17	)		0.01		N/M
Total segment income (loss) after taxes		0.54			(2.04	)	N/M			2.60			(0.43	)	N/M
Change in prior years tax reserves		—			—		N/M			—			0.04		N/M
Net realized investment gains (losses), net of amortization		0.04			(0.04	)	N/M			0.22			0.24		(8.3	)
Losses on derivative instruments		—			—		N/M			—			(0.01	)	N/M
Restructuring costs		(0.01	)		(0.01	)	—			(0.02	)		(0.02	)	—
Federal income tax (benefit) expense on non-segment income		(0.01	)		0.12		N/M			(0.07	)		0.03		N/M
Income (loss) from continuing operations, net of taxes		0.56			(1.97	)	N/M			2.73			(0.15	)	N/M
Income from discontinued variable life insurance and annuity business, net of taxes		—			0.33		N/M			—			0.72		N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.06	)		(8.87	)	(99.3	)		(0.49	)		(8.88	)	(94.5	)
Gain on sale of Financial Profiles, Inc., net of taxes		0.15			—		N/M			0.14			—		N/M
Income (loss) before cumulative effect of accounting change		0.65			(10.51	)	N/M			2.38			(8.31	)	N/M
Cumulative effect of change in accounting principle, net of taxes		—			—		N/M			0.01			—		N/M
Net income (loss)	$	0.65		$	(10.51	)	N/M		$	2.39		$	(8.31	)	N/M

2

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

(In millions, except per share data)	September 30 2006			December 31 2005			% Change
BALANCE SHEET
Shareholders’ equity
The Hanover Insurance Company (consolidated)	$	1,834.8		$	1,709.8		7.3
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		220.7			374.0		(41.0	)
Total shareholders’ equity	$	1,909.3		$	1,951.3		(2.2	)
Total adjusted statutory capital
The Hanover Insurance Company (consolidated)	$	1,343.9		$	1,204.6		11.6
First Allmerica Financial Life Insurance Company	$	201.3		$	195.2		3.1
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		497	%		410	%	87.0
Book value per share
The Hanover Insurance Company (consolidated)	$	36.02		$	31.81		13.2
First Allmerica Financial Life Insurance Company (consolidated)		6.94			6.82		1.8
THG Holding Company debt (1)		(9.81	)		(9.47	)	3.6
THG Holding Company and other		4.34			7.14		(39.2	)
Total book value per share	$	37.49		$	36.30		3.3
THG book value per share, excluding accumulated other comprehensive income	$	39.20		$	37.33		5.0
The Hanover Insurance Company (consolidated) book value per share, excluding accumulated other comprehensive income	$	36.68		$	32.00		14.6
Shares outstanding (2)		50.9			53.7
Stock price	$	44.63		$	41.77		6.8
Price/book value per share		1.2x			1.2	x	—	x
Debt/equity		26.6	%		26.1	%	0.5	pts
Debt/total capital		21.0	%		20.7	%	0.3	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

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS

	Quarter ended September 30								Nine Months ended September 30
(In millions, except per share data)	2006			2005			% Change		2006			2005			% Change
REVENUES
Premiums	$	568.2		$	525.7		8.1		$	1,682.4		$	1,650.3		1.9
Fees and other income		22.6			22.2		1.8			58.8			60.8		(3.3	)
Net investment income		78.3			79.4		(1.4	)		237.8			238.0		(0.1	)
Net realized investment gains		2.1			1.9		10.5			10.6			18.1		(41.4	)
Total revenues		671.2			629.2		6.7			1,989.6			1,967.2		1.1
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		399.5			566.9		(29.5	)		1,114.8			1,340.9		(16.9	)
Policy acquisition expenses		121.7			116.5		4.5			352.8			347.9		1.4
Losses on derivative instruments		0.2			1.4		(85.7	)		0.4			1.6		(75.0	)
Restructuring costs		0.5			0.4		25.0			1.4			1.3		7.7
Other operating expenses		106.0			84.8		25.0			313.2			287.6		8.9
Total benefits, losses and expenses		627.9			770.0		(18.5	)		1,782.6			1,979.3		(9.9	)
Income (loss) from continuing operations before federal income taxes		43.3			(140.8	)	N/M			207.0			(12.1	)	N/M
Federal income tax expense (benefit)		14.8			(35.4	)	N/M			64.8			(4.2	)	N/M
Income (loss) from continuing operations		28.5			(105.4	)	N/M			142.2			(7.9	)	N/M
Income from discontinued variable life insurance and annuity business, net of taxes		—			17.6		N/M			—			38.6		N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(2.9	)		(474.6	)	(99.4	)		(25.8	)		(474.6	)	(94.6	)
Gain on sale of Financial Profiles, Inc., net of taxes		7.8			—		N/M			7.8			—		N/M
Income (loss) before cumulative effect of change in accounting principle		33.4			(562.4	)	N/M			124.2			(443.9	)	N/M
Cumulative effect of change in accounting principle, net of taxes		—			—		—			0.6			—		N/M
Net income (loss)	$	33.4		$	(562.4	)	N/M		$	124.8		$	(443.9	)	N/M

4

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS

	Quarter ended September 30								Nine Months ended September 30
	2006			2005			% Change		2006			2005			% Change
PER SHARE DATA (DILUTED)
Income from continuing operations	$	0.56		$	(1.97	)	N/M		$	2.73		$	(0.15	)	N/M
Income from discontinued variable life insurance and annuity business, net of taxes		—			0.33		N/M			—			0.72		N/M
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.06	)		(8.87	)	(99.3	)		(0.49	)		(8.88	)	(94.5	)
Gain on sale of Financial Profiles, Inc., net of taxes		0.15			—		N/M			0.14			—		N/M
Income (loss) before cumulative effect of change in accounting principle		0.65			(10.51	)	N/M			2.38			(8.31	)	N/M
Cumulative effect of change in accounting principle, net of taxes		—			—		N/M			0.01			—		N/M
Net income (loss) (1)	$	0.65		$	(10.51	)	N/M		$	2.39		$	(8.31	)	N/M
Weighted average shares outstanding (2)		51.3			53.5					52.2			53.4

(1) Basic income per share for the quarter and nine months ended September 30, 2006 was $0.66 and $2.42, respectively. Per share data for the quarter and nine months ended September 30, 2005 represents basic loss per share due to antidilution.

(2) Weighted average shares outstanding for the quarter and nine months ended September 30, 2005 represents basic shares outstanding due to antidilution.

5

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)	September 30 2006			December 31 2005			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $5,498.4 and $5,685.9)	$	5,474.9		$	5,708.2		(4.1	)
Equity securities, at fair value (cost of $12.1 and $13.0)		17.3			18.0		(3.9	)
Mortgage loans		59.4			99.6		(40.4	)
Policy loans		127.2			139.9		(9.1	)
Other long-term investments		40.5			42.6		(4.9	)
Total investments		5,719.3			6,008.3		(4.8	)
Cash and cash equivalents		391.9			701.5		(44.1	)
Accrued investment income		72.6			76.5		(5.1	)
Premiums, accounts and notes receivable, net		606.9			493.2		23.1
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,391.7			1,617.3		(13.9	)
Deferred policy acquistion costs		237.9			209.0		13.8
Deferred federal income taxes		432.5			465.3		(7.0	)
Goodwill		121.4			128.2		(5.3	)
Other assets		345.6			362.8		(4.7	)
Separate account assets		524.2			571.9		(8.3	)
Total assets	$	9,844.0		$	10,634.0		(7.4	)
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,281.5		$	1,336.1		(4.1	)
Outstanding claims, losses and loss adjustment expenses		3,279.9			3,551.6		(7.7	)
Unearned premiums		1,141.6			1,011.3		12.9
Contractholder deposit funds and other policy liabilities		203.2			254.7		(20.2	)
Total policy liabilities and accruals		5,906.2			6,153.7		(4.0	)
Expenses and taxes payable		898.2			1,062.0		(15.4	)
Reinsurance premiums payable		60.4			92.0		(34.3	)
Trust instruments supported by funding obligations		36.9			294.3		(87.5	)
Long-term debt		508.8			508.8		—
Separate account liabilities		524.2			571.9		(8.3	)
Total liabilities		7,934.7			8,682.7		(8.6	)
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		1,809.0			1,785.1		1.3
Accumulated other comprehensive loss		(87.5	)		(59.5	)	47.1
Retained earnings		685.4			589.8		16.2
Treasury stock at cost (9.6 and 6.8 million shares)		(498.2	)		(364.7	)	36.6
Total shareholders’ equity		1,909.3			1,951.3		(2.2	)
Total liabilities and shareholders’ equity	$	9,844.0		$	10,634.0		(7.4	)

6

PROPERTY & CASUALTY

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS

	Quarter ended September 30								Nine Months ended September 30
(In millions)	2006			2005			% Change		2006			2005			% Change
REVENUES
Net premiums written	$	602.9		$	542.0		11.2		$	1,775.3		$	1,647.9		7.7
Change in unearned premiums, net of prepaid reinsurance premiums		(40.3	)		(22.3	)	80.7			(122.4	)		(28.2	)	N/M
Net premiums earned		562.6			519.7		8.3			1,652.9			1,619.7		2.0
Net investment income		55.9			52.2		7.1			168.4			154.4		9.1
Other income		20.9			14.0		49.3			48.7			39.1		24.6
Total segment revenue		639.4			585.9		9.1			1,870.0			1,813.2		3.1
LOSSES AND OPERATING EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		380.2			541.3		(29.8	)		1,044.6			1,256.5		(16.9	)
Policy acquisition expenses		121.5			115.1		5.6			352.1			342.7		2.7
Other operating expenses		84.9			57.2		48.4			242.6			189.8		27.8
Total losses and operating expenses		586.6			713.6		(17.8	)		1,639.3			1,789.0		(8.4	)
Segment income (loss) before federal income taxes	$	52.8		$	(127.7	)	N/M		$	230.7		$	24.2		N/M

7

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONSOLIDATED BALANCE SHEETS (1)

(In millions, except per share data)	September 30 2006			December 31 2005			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $3,944.1 and $3,810.7)	$	3,928.5		$	3,822.1		2.8
Equity securities, at fair value (cost of $3.9 and $2.0)		6.3			6.0		5.0
Mortgage loans		24.2			45.0		(46.2	)
Other long-term investments		0.3			0.3		—
Total investments		3,959.3			3,873.4		2.2
Cash and cash equivalents		175.7			322.9		(45.6	)
Accrued investment income		49.5			48.1		2.9
Premiums, accounts, and notes receivable, net		604.7			489.2		23.6
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,028.2			1,226.3		(16.2	)
Deferred policy acquistion costs		232.5			201.9		15.2
Deferred federal income tax asset		235.9			246.5		(4.3	)
Goodwill		121.4			121.4		—
Other assets		189.3			181.5		4.3
Total assets	$	6,596.5		$	6,711.2		(1.7	)
LIABILITIES AND SHAREHOLDER’S EQUITY
LIABILITIES
Policy liabilities and accruals:
Outstanding claims, losses and loss adjustment expenses	$	3,197.6		$	3,458.7		(7.5	)
Unearned premiums		1,140.0			1,009.7		12.9
Contractholder deposit funds and other policy liabilities		2.2			3.0		(26.7	)
Total policy liabilities and accruals		4,339.8			4,471.4		(2.9	)
Expenses and taxes payable		361.6			444.5		(18.7	)
Reinsurance premiums payable		60.3			85.5		(29.5	)
Total liabilities		4,761.7			5,001.4		(4.8	)
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		(33.3	)		(9.6	)	N/M
Retained earnings		1,693.9			1,545.2		9.6
Total shareholder’s equity		1,834.8			1,709.8		7.3
Total liabilities and shareholder’s equity	$	6,596.5		$	6,711.2		(1.7	)

(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 September 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	$	253.7		$	118.8	$	10.7	$	383.2		$	27.2		$	48.7		$	86.2		$	57.6		$	219.7		$	—		$	602.9
Net premiums earned	$	241.6		$	101.6	$	9.9	$	353.1		$	26.8		$	48.6		$	84.7		$	49.4		$	209.5		$	—		$	562.6
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		149.5			40.0		3.2		192.7			20.5			27.0			36.7			16.1			100.3			—			293.0
Prior year loss and LAE reserve development (favorable) unfavorable		(16.1	)		2.1		0.4		(13.6	)		(8.2	)		(8.1	)		(8.6	)		(0.8	)		(25.7	)		0.1			(39.2	)
Pre-tax catastrophe losses		1.0			14.4		1.2		16.6			—			0.7			32.8			5.7			39.2			—			55.8
Pre-tax catastrophe LAE		0.6			3.4		0.1		4.1			—			—			4.0			0.3			4.3			—			8.4
Loss adjustment expenses excluding prior year reserve development		30.9			8.9		0.3		40.1			3.4			4.6			11.0			2.9			21.9			0.1			62.1
Policy acquisition expenses and other underwriting expenses									107.2															88.9			—			196.1
Policyholders’ dividends									—															0.1			—			0.1
GAAP underwriting profit (loss)									6.0															(19.5	)		(0.2	)		(13.7	)
Net investment income									26.7															26.0			3.2			55.9
Other income									3.4															4.1			13.4			20.9
Other operating expenses									(1.1	)														(2.9	)		(6.3	)		(10.3	)
Segment income before federal income taxes								$	35.0														$	7.7		$	10.1		$	52.8

	Quarter ended September 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
Net premiums written	$	241.2		$	102.3		$	10.0	$	353.5		$	28.1		$	49.3		$	72.3		$	38.8		$	188.5		$	—		$	542.0
Net premiums earned	$	235.0		$	87.5		$	8.9	$	331.4		$	30.9		$	48.4		$	77.2		$	31.8		$	188.3		$	—		$	519.7
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		145.2			41.6			3.3		190.1			24.1			25.5			37.9			14.2			101.7			—			291.8
Prior year loss and LAE reserve development (favorable) unfavorable		(11.3	)		(3.0	)		0.9		(13.4	)		(2.0	)		(2.3	)		(3.6	)		(3.3	)		(11.2	)		1.2			(23.4	)
Pre-tax catastrophe losses		3.8			77.8			0.7		82.3			—			—			128.8			3.8			132.6			—			214.9
Pre-tax catastrophe LAE		0.1			1.7			—		1.8			—			—			1.8			—			1.8			—			3.6
Loss adjustment expenses excluding prior year reserve development		24.9			7.7			0.4		33.0			4.7			4.1			9.9			2.4			21.1			0.2			54.3
Policy acquisition expenses and other underwriting expenses										94.6															69.8			—			164.4
Policyholders’ dividends										—															0.1			—			0.1
GAAP underwriting loss										(57.0	)														(127.6	)		(1.4	)		(186.0	)
Net investment income										25.6															25.3			1.3			52.2
Other income										4.8															3.2			6.0			14.0
Other operating expenses										(1.2	)														(1.9	)		(4.8	)		(7.9	)
Segment (loss) income before federal income taxes									$	(27.8	)													$	(101.0	)	$	1.1		$	(127.7	)

9

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

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

	Nine Months ended September 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	$	749.7		$	305.6	$	30.2		$	1,085.5		$	90.5		$	154.3		$	275.4		$	169.3		$	689.5		$	0.3		$	1,775.3
Net premiums earned	$	710.8		$	297.3	$	29.3		$	1,037.4		$	82.5		$	144.5		$	252.0		$	136.3		$	615.3		$	0.2		$	1,652.9
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		434.0			125.1		9.6			568.7			62.9			74.7			110.1			43.4			291.1			—			859.8
Prior year loss and LAE reserve development (favorable) unfavorable		(37.2	)		0.1		(1.9	)		(39.0	)		(17.9	)		(11.9	)		(20.8	)		(3.1	)		(53.7	)		1.4			(91.3	)
Pre-tax catastrophe losses		2.4			25.2		1.6			29.2			—			1.9			38.3			13.2			53.4			—			82.6
Pre-tax catastrophe LAE		(0.2	)		2.7		0.1			2.6			—			—			5.5			0.3			5.8			—			8.4
Loss adjustment expenses excluding prior year reserve development		87.4			27.5		1.6			116.5			11.4			12.0			35.4			8.9			67.7			0.5			184.7
Policy acquisition expenses and other underwriting expenses										310.3															255.1			(0.3	)		565.1
Policyholders’ dividends										—															0.4			—			0.4
GAAP underwriting profit (loss)										49.1															(4.5	)		(1.4	)		43.2
Net investment income										80.1															78.3			10.0			168.4
Other income										11.6															12.1			25.0			48.7
Other operating expenses										(3.1	)														(9.0	)		(17.5	)		(29.6	)
Segment income before federal income taxes									$	137.7														$	76.9		$	16.1		$	230.7

	Nine Months ended September 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
Net premiums written	$	719.0		$	288.6		$	29.4		$	1,037.0		$	96.9		$	151.9		$	251.0		$	110.9		$	610.7		$	0.2		$	1,647.9
Net premiums earned	$	722.9		$	293.5		$	28.8		$	1,045.2		$	95.6		$	143.0		$	245.4		$	90.3		$	574.3		$	0.2		$	1,619.7
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		464.4			132.9			10.0			607.3			74.2			74.3			118.2			35.3			302.0			—			909.3
Prior year loss and LAE reserve development (favorable) unfavorable		(24.6	)		(7.8	)		(0.1	)		(32.5	)		(0.2	)		(2.7	)		(15.1	)		(4.9	)		(22.9	)		2.4			(53.0	)
Pre-tax catastrophe losses		4.5			87.7			1.3			93.5			—			0.2			135.3			5.2			140.7			—			234.2
Pre-tax catastrophe LAE		0.1			1.7			—			1.8			—			—			1.8			—			1.8			—			3.6
Loss adjustment expenses excluding prior year reserve development		76.0			20.1			1.1			97.2			14.9			12.3			30.5			6.6			64.3			0.3			161.8
Policy acquisition expenses and other underwriting expenses											293.3															215.5			(0.5	)		508.3
Policyholders’ dividends											—															0.6			—			0.6
GAAP underwriting loss											(15.4	)														(127.7	)		(2.0	)		(145.1	)
Net investment income											75.7															74.8			3.9			154.4
Other income											12.4															9.4			17.3			39.1
Other operating expenses											(3.9	)														(6.0	)		(14.3	)		(24.2	)
Segment income (loss) before federal income taxes										$	68.8														$	(49.5	)	$	4.9		$	24.2

10

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS

	Quarter ended September 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
Losses, excluding catastrophe losses and develop- ment	61.9	%	39.4	%	32.3	%	54.6	%	76.5	%	55.6	%	43.3	%	32.6	%	47.9	%	N/M	52.1	%
Catastrophe losses	0.4	%	14.2	%	12.1	%	4.7	%	—		1.4	%	38.7	%	11.5	%	18.7	%	N/M	9.9	%
Loss develop- ment	(6.7	)%	2.5	%	2.0	%	(3.9	)%	(28.0	)%	(16.3	)%	(8.6	)%	(3.8	)%	(11.8	)%	N/M	(6.8	)%
Total loss reserves	55.6	%	56.1	%	46.4	%	55.4	%	48.5	%	40.7	%	73.4	%	40.3	%	54.8	%	N/M	55.2	%
Loss adjustment expenses	12.9	%	8.4	%	5.1	%	11.4	%	10.1	%	9.1	%	11.5	%	8.1	%	9.9	%	N/M	10.8	%
Pre-tax catastrophe LAE	0.2	%	3.3	%	1.0	%	1.2	%	—		—		4.7	%	0.6	%	2.1	%	N/M	1.5	%
Policy acquisition and other under- writing expenses							30.4	%									42.4	%	N/M	34.9	%
Policyholders’ dividends							—										—		N/M	—
Combined							98.4	%									109.2	%	N/M	102.4	%
Policies in force	5.6	%	(2.0	)%	—		1.8	%	(5.3	)%	(1.5	)%	(2.6	)%	4.5	%	(0.1	)%	—	1.5	%
Retention (1)	76.8	%	83.6	%	N/M		80.5	%	84.8	%	78.1	%	82.7	%	85.0	%	82.3	%

	Quarter ended September 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
Losses, excluding catastrophe losses and develop- ment	61.8	%	47.5	%	37.1	%	57.4	%	78.0	%	52.7	%	49.1	%	44.6	%	54.0	%	N/M	56.2	%
Catastrophe losses	1.6	%	88.9	%	7.9	%	24.8	%	—		—		166.8	%	11.9	%	70.4	%	N/M	41.4	%
Loss develop- ment	(5.2	)%	(3.2	)%	11.2	%	(4.3	)%	(1.0	)%	(4.6	)%	(3.5	)%	(11.3	)%	(4.7	)%	N/M	(4.2	)%
Total loss reserves	58.2	%	133.2	%	56.2	%	77.9	%	77.0	%	48.1	%	212.4	%	45.2	%	119.7	%	N/M	93.4	%
Loss adjustment expenses	11.1	%	8.6	%	3.4	%	10.2	%	9.7	%	8.3	%	11.7	%	8.5	%	9.9	%	N/M	10.1	%
Pre-tax catastrophe LAE	—		1.9	%	—		0.5	%	—		—		2.3	%	—		1.0	%	N/M	0.7	%
Policy acquisition and other under- writing expenses							28.5	%									37.1	%	N/M	31.6	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							117.1	%									167.8	%	N/M	135.8	%
Policies in force	(9.3	)%	(6.8	)%	(5.6	)%	(7.9	)%	(2.8	)%	(1.5	)%	(2.7	)%	2.5	%	(0.7	)%	—	(7.1	)%
Retention (1)	79.6	%	82.1	%	N/M		81.0	%	71.6	%	79.0	%	79.1	%	N/M		78.4	%

(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.

11

THE HANOVER INSURANCE GROUP PROPERTY AND CASUALTY GAAP UNDERWRITING RATIOS EXCLUDING REINSTATEMENT PREMIUM RATIOS EXCLUDE REINSTATEMENT PREMIUM

	Quarter ended September 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
Losses, excluding catastrophe losses and develop- ment	61.9	%	39.4	%	32.3	%	54.6	%	76.5	%	55.6	%	43.3	%	32.6	%	47.9	%	N/M	52.1	%
Catastrophe losses	0.4	%	14.2	%	12.1	%	4.7	%	—		1.4	%	38.7	%	11.5	%	18.7	%	N/M	9.9	%
Loss develop- ment	(6.7	)%	2.5	%	2.0	%	(3.9	)%	(28.0	)%	(16.3	)%	(8.6	)%	(3.8	)%	(11.8	)%	N/M	(6.8	)%
Total loss reserves	55.6	%	56.1	%	46.4	%	55.4	%	48.5	%	40.7	%	73.4	%	40.3	%	54.8	%	N/M	55.2	%
Loss adjustment expenses	12.9	%	8.4	%	5.1	%	11.4	%	10.1	%	9.1	%	11.5	%	8.1	%	9.9	%	N/M	10.8	%
Pre-tax catastrophe LAE	0.2	%	3.3	%	1.0	%	1.2	%	—		—		4.7	%	0.6	%	2.1	%	N/M	1.5	%
Policy acquisition and other under- writing expenses							30.4	%									42.4	%	N/M	34.9	%
Policyholders’ dividends							—										—		N/M	—
Combined							98.4	%									109.2	%	N/M	102.4	%
Policies in force	5.6	%	(2.0	)%	—		1.8	%	(5.3	)%	(1.5	)%	(2.6	)%	4.5	%	(0.1	)%	—	1.5	%
Retention (1)	76.8	%	83.6	%	N/M		80.5	%	84.8	%	78.1	%	82.7	%	85.0	%	82.3	%

	Quarter ended September 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
Losses, excluding catastrophe losses and develop- ment	61.1	%	41.1	%	33.0	%	54.4	%	78.0	%	52.3	%	44.9	%	42.2	%	51.4	%	N/M	53.4	%
Catastrophe losses	1.6	%	76.8	%	7.0	%	23.6	%	—		—		152.6	%	11.3	%	67.1	%	N/M	39.3	%
Loss develo- pment	(5.2	)%	(2.8	)%	10.0	%	(4.0	)%	(1.0	)%	(4.5	)%	(3.2	)%	(10.7	)%	(4.4	)%	N/M	(4.0	)%
Total loss reserves	57.5	%	115.1	%	50.0	%	74.0	%	77.0	%	47.8	%	194.3	%	42.8	%	114.1	%	N/M	88.7	%
Loss adjustment expenses	10.9	%	7.4	%	3.0	%	9.7	%	9.7	%	8.2	%	10.7	%	8.0	%	9.5	%	N/M	9.6	%
Pre-tax catastrophe LAE	—		1.7	%	—		0.5	%	—		—		2.1	%	—		0.9	%	N/M	0.7	%
Policy acquisition and other under- writing expenses							27.1	%									35.3	%	N/M	30.1	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							111.3	%									159.9	%	N/M	129.1	%
Policies in force	(9.3	)%	(6.8	)%	(5.6	)%	(7.9	)%	(2.8	)%	(1.5	)%	(2.7	)%	(2.5	)%	(0.7	)%	—	(7.1	)%
Retention (1)	79.6	%	82.1	%	N/M		81.0	%	71.6	%	79.0	%	79.1	%	N/M		78.4	%

(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.

12

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS

	Nine Months ended September 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
Losses, excluding catastrophe losses and develop- ment	61.1	%	42.1	%	32.8	%	54.8	%	76.3	%	51.7	%	43.7	%	31.8	%	47.3	%	N/M	52.0	%
Catastrophe losses	0.3	%	8.5	%	5.5	%	2.8	%	—		1.3	%	15.2	%	9.7	%	8.7	%	N/M	5.0	%
Loss develop- ment	(5.4	)%	0.9	%	(6.8	)%	(3.7	)%	(18.8	)%	(8.2	)%	(5.9	)%	(3.7	)%	(7.6	)%	N/M	(5.0	)%
Total loss reserves	56.0	%	51.5	%	31.5	%	53.9	%	57.5	%	44.8	%	53.0	%	37.8	%	48.4	%	N/M	52.0	%
Loss adjustment expenses	12.5	%	8.4	%	5.8	%	11.1	%	10.9	%	8.3	%	11.7	%	7.9	%	10.0	%	N/M	10.7	%
Pre-tax catastrophe LAE	—		0.9	%	0.3	%	0.3	%	—		—		2.2	%	0.2	%	0.9	%	N/M	0.5	%
Policy acquisition and other under- writing expenses							29.9	%									41.5	%	N/M	34.2	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							95.2	%									100.9	%	N/M	97.4	%
Policies in force	5.6	%	(2.0	)%	—		1.8	%	(5.3	)%	(1.5	)%	(2.6	)%	4.5	%	(0.1	)%	—	1.5	%
Retention (1)	76.8	%	83.6	%	N/M		80.5	%	76.6	%	77.8	%	82.7	%	83.3	%	80.8	%
	Nine Months ended September 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
Losses, excluding catastrophe losses and develop- ment	64.2	%	45.3	%	34.7	%	58.1	%	77.6	%	51.9	%	48.2	%	39.1	%	52.6	%	N/M	56.1	%
Catastrophe losses	0.6	%	29.9	%	4.5	%	8.9	%	—		0.1	%	55.1	%	5.8	%	24.5	%	N/M	14.5	%
Loss develop- ment	(3.5	)%	(2.2	)%	0.4	%	(3.0	)%	4.4	%	(1.8	)%	(4.3	)%	(6.0	)%	(2.5	)%	N/M	(2.7	)%
Total loss reserves	61.3	%	73.0	%	39.6	%	64.0	%	82.0	%	50.2	%	99.0	%	38.9	%	74.6	%	N/M	67.9	%
Loss adjustment expenses	10.7	%	6.4	%	3.1	%	9.2	%	11.0	%	8.5	%	10.6	%	7.9	%	9.7	%	N/M	9.4	%
Pre-tax catastrophe LAE	—		0.6	%	—		0.2	%	—		—		0.7	%	—		0.3	%	—	0.2	%
Policy acquisition and other under- writing expenses							28.1	%									37.5	%	N/M	31.4	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							101.5	%									122.2	%	N/M	108.9	%
Policies in force	(9.3	)%	(6.8	)%	(5.6	)%	(7.9	)%	(2.8	)%	(1.5	)%	(2.7	)%	2.5	%	(0.7	)%	—	(7.1	)%
Retention (1)	79.6	%	82.1	%	N/M		81.0	%	76.4	%	80.8	%	80.9	%	N/M		80.6	%

(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.

13

THE HANOVER INSURANCE GROUP PROPERTY AND CASUALTY GAAP UNDERWRITING RATIOS EXCLUDING REINSTATEMENT PREMIUM RATIOS EXCLUDE REINSTATEMENT PREMIUM

	Nine Months ended September 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
Losses, excluding catastrophe losses and development	61.1	%	42.1	%	32.8	%	54.8	%	76.3	%	51.7	%	43.7	%	31.8	%	47.3	%	N/M	52.0	%
Catastrophe losses	0.3	%	8.5	%	5.5	%	2.8	%	—		1.3	%	15.2	%	9.7	%	8.7	%	N/M	5.0	%
Loss development	(5.4	)%	0.9	%	(6.8	)%	(3.7	)%	(18.8	)%	(8.2	)%	(5.9	)%	(3.7	)%	(7.6	)%	N/M	(5.0	)%
Total loss reserves	56.0	%	51.5	%	31.5	%	53.9	%	57.5	%	44.8	%	53.0	%	37.8	%	48.4	%	N/M	52.0	%
Loss adjustment expenses	12.5	%	8.4	%	5.8	%	11.1	%	10.9	%	8.3	%	11.7	%	7.9	%	10.0	%	N/M	10.7	%
Pre-tax catastrophe LAE	—		0.9	%	0.3	%	0.3	%	—		—		2.2	%	0.2	%	0.9	%		0.5	%
Policy acquisition and other underwriting expenses							29.9	%									41.5	%	N/M	34.2	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							95.2	%									100.9	%	N/M	97.4	%
Policies in force	5.6	%	(2.0	)%	—		1.8	%	(5.3	)%	(1.5	)%	(2.6	)%	4.5	%	(0.1	)%	—	1.5	%
Retention (1)	76.8	%	83.6	%	N/M		80.5	%	76.6	%	77.8	%	82.7	%	83.3	%	80.8	%
	Nine Months ended September 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
Losses, excluding catastrophe losses and development	64.0	%	43.3	%	33.5	%	57.1	%	77.6	%	51.8	%	46.8	%	38.3	%	51.7	%	N/M	55.2	%
Catastrophe losses	0.6	%	28.5	%	4.3	%	8.8	%	—		0.1	%	53.6	%	5.6	%	24.1	%	N/M	14.2	%
Loss development	(3.5	)%	(2.1	)%	0.3	%	(3.0	)%	4.4	%	(1.8	)%	(4.2	)%	(5.9	)%	(2.4	)%	N/M	(2.6	)%
Total loss reserves	61.1	%	69.7	%	38.1	%	62.9	%	82.0	%	50.1	%	96.2	%	38.0	%	73.4	%	N/M	66.8	%
Loss adjustment expenses	10.6	%	6.1	%	3.0	%	9.1	%	11.0	%	8.5	%	10.3	%	7.7	%	9.6	%	N/M	9.3	%
Pre-tax catastrophe LAE	—		0.5	%	—		0.2	%	—		—		0.7	%	—		0.3	%	N/M	0.2	%
Policy acquisition and other under- writing expenses							27.6	%									36.9	%	N/M	30.9	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							99.8	%									120.3	%	N/M	107.2	%
Policies in force	(9.3	)%	(6.8	)%	(5.6	)%	(7.9	)%	(2.8	)%	(1.5	)%	(2.7	)%	2.5	%	0.7	%	—	(7.1	)%
Retention (1)	79.6	%	82.1	%	N/M		81.0	%	76.4	%	80.8	%	80.9	%	N/M		80.6	%

(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.

14

LIFE COMPANIES

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONDENSED INCOME STATEMENTS

	Quarter ended September 30								Nine Months ended September 30
(In millions)	2006			2005			% Change		2006			2005			% Change
REVENUES
Premiums	$	5.6		$	6.0		(6.7	)	$	29.5		$	30.6		(3.6	)
Fees and other income		3.4			8.8		(61.4	)		15.1			27.3		(44.7	)
Net investment income		22.2			27.1		(18.1	)		68.9			83.4		(17.4	)
Total segment revenue		31.2			41.9		(25.5	)		113.5			141.3		(19.7	)
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES
Policy benefits, claims and losses		19.2			21.8		(11.9	)		71.0			79.2		(10.4	)
Policy acquisition expenses		0.2			1.5		(86.7	)		0.7			5.2		(86.5	)
Other operating expenses		12.9			19.5		(33.8	)		45.8			74.6		(38.6	)
Total policy benefits, claims and operating expenses		32.3			42.8		(24.5	)		117.5			159.0		(26.1	)
Segment loss before federal income taxes	$	(1.1	)	$	(0.9	)	22.2		$	(4.0	)	$	(17.7	)	(77.4	)

15

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)	September 30 2006			December 31 2005			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $1,407.9 and $1,789.8)	$	1,405.4		$	1,801.2		(22.0	)
Equity securities, at fair value (cost of $0.5 and $1.7)		1.7			2.7		(37.0	)
Mortgage loans		35.2			54.8		(35.8	)
Policy loans		127.2			139.9		(9.1	)
Other long-term investments		40.2			42.3		(5.0	)
Total investments		1,609.7			2,040.9		(21.1	)
Cash and cash equivalents		77.3			101.9		(24.1	)
Accrued investment income		21.6			27.6		(21.7	)
Premiums, accounts, and notes receivable, net		2.2			4.0		(45.0	)
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		363.5			391.0		(7.0	)
Deferred policy acquistion costs		5.4			7.1		(23.9	)
Deferred federal income tax asset		180.1			204.6		(12.0	)
Other assets		99.7			91.2		9.3
Separate account assets		524.2			571.9		(8.3	)
Total assets	$	2,883.7		$	3,440.2		(16.2	)
LIABILITIES AND SHAREHOLDER’S EQUITY
LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,281.5		$	1,336.1		(4.1	)
Outstanding claims, losses and loss adjustment expenses		82.3			92.9		(11.4	)
Unearned premiums		1.6			1.6		—
Contractholder deposit funds and other policy liabilities		201.0			251.7		(20.1	)
Total policy liabilities and accruals		1,566.4			1,682.3		(6.9	)
Expenses and taxes payable		402.8			518.2		(22.3	)
Reinsurance premiums payable		0.1			6.5		(98.5	)
Trust instruments supported by funding obligations		36.9			294.3		(87.5	)
Separate account liabilities		524.2			571.9		(8.3	)
Total liabilities		2,530.4			3,073.2		(17.7	)
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		(27.8	)		(26.3	)	5.7
Retained deficit		(308.8	)		(296.6	)	4.1
Total shareholder’s equity		353.3			367.0		(3.7	)
Total liabilities and shareholder’s equity	$	2,883.7		$	3,440.2		(16.2	)

16

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

FUTURE POLICY BENEFITS AND ACCOUNT BALANCES

	Gross						Net of Reinsurance Recoverables
(In millions)	September 30 2006		December 31 2005		% Change		September 30 2006		December 31 2005		% Change
Insurance
Traditional life	$	727.3	$	760.2	(4.3	)	$	727.1	$	760.0	(4.3	)
Universal life		0.9		1.0	(10.0	)		—		—	—
Variable universal life		29.5		32.9	(10.3	)		—		—	—
Individual health		18.2		18.7	(2.7	)		1.1		0.4	N/M
Total insurance		775.9		812.8	(4.5	)		728.2		760.4	(4.2	)
Annuities
Individual annuities		104.3		113.5	(8.1	)		11.7		15.7	(25.5	)
Group annuities		382.0		400.7	(4.7	)		376.6		395.5	(4.8	)
Total annuities		486.3		514.2	(5.4	)		388.3		411.2	(5.6	)
Guaranteed investment contracts
Contractholder deposit funds and other policy liabilities		5.1		30.3	(83.2	)		5.1		30.3	(83.2	)
Total general account reserves	$	1,267.3	$	1,357.3	(6.6	)	$	1,121.6	$	1,201.9	(6.7	)
Trust instruments supported by funding obligations	$	36.9	$	294.3	(87.5	)	$	36.9	$	294.3	(87.5	)
SEPARATE ACCOUNT LIABILITIES
Variable universal life	$	67.7	$	67.6	0.1		$	67.7	$	67.6	0.1
Variable individual annuities		355.5		405.5	(12.3	)		355.5		405.5	(12.3	)
Total individual		423.2		473.1	(10.5	)		423.2		473.1	(10.5	)
Group variable universal life		2.2		2.6	(15.4	)		2.2		2.6	(15.4	)
Group annuities		98.8		96.2	2.7			98.8		96.2	2.7
Total group		101.0		98.8	2.2			101.0		98.8	2.2
Total separate account liabilities (1)	$	524.2	$	571.9	(8.3	)	$	524.2	$	571.9	(8.3	)

(1) Includes separate account liabilities subject to a modified coinsurance agreement with AFLIAC of $419.5 million and $465.7 million as of September 30, 2006 and December 31, 2005, respectively.

17

INVESTMENTS

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME

	Nine Months ended September 30, 2006
(In millions, except yields)	Property and Casualty (1)			Yield		Life Companies			Yield		Total			Yield
Fixed maturities	$	162.2		5.54	%	$	60.3		5.65	%	$	222.5		5.57	%
Equity securities		1.0		—			—		—			1.0		—
Mortgages		2.5		9.58	%		3.0		8.83	%		5.5		9.16	%
All other		7.6		—			7.5		—			15.1		—
Investment expenses		(4.4	)	—			(1.9	)	—			(6.3	)	—
Total	$	168.9		5.34	%	$	68.9		5.35	%	$	237.8		5.34	%
	Nine Months ended September 30, 2005
	Property and Casualty (1)			Yield		Life Companies (2)			Yield		Total			Yield
Fixed maturities	$	155.2		5.54	%	$	82.5		5.66	%	$	237.7		5.58	%
Equity securities		0.7		—			—		—			0.7		—
Mortgages		3.3		9.04	%		4.1		9.32	%		7.4		9.20	%
All other		(1.3	)	—			0.7		—			(0.6	)	—
Investment expenses		(3.3	)	—			(3.9	)	—			(7.2	)	—
Total	$	154.6		5.36	%	$	83.4		4.93	%	$	238.0		5.20	%

(1) Includes purchase accounting adjustments of $2.4 million for the nine months ended September 30, 2006 and 2005. Also includes corporate eliminations of $0.1 million and $0.4 million for the nine months ended September 30, 2006 and 2005, respectively.

(2) Excludes AFLIAC discontinued operations of $60.9 million for the nine months ended September 30, 2005.

18

THE HANOVER INSURANCE GROUP

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)

	Quarter ended September 30
(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 on securities transactions	$	2.8		$	0.7		$	3.5		$	3.4		$	3.3		$	6.7
Other than temporary impairments		(1.2	)		(0.3	)		(1.5	)		(3.9	)		(0.9	)		(4.8	)
Other		—			0.1			0.1			—			—			—
Net realized investment gains (losses)	$	1.6		$	0.5		$	2.1		$	(0.5	)	$	2.4		$	1.9
	Nine Months ended September 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	$	18.6		$	0.3		$	18.9		$	6.6		$	19.1		$	25.7
Other than temporary impairments		(3.8	)		(4.4	)		(8.2	)		(6.9	)		(1.4	)		(8.3	)
Other		(0.1	)		—			(0.1	)		(0.7	)		1.4			0.7
Net realized investment gains (losses)	$	14.7		$	(4.1	)	$	10.6		$	(1.0	)	$	19.1		$	18.1

(1) Includes corporate eliminations of $0.1 million for the quarters ended September 30, 2006 and 2005, respectively, and corporate eliminations of $3.7 million and $0.8 million for the nine months ended September 30, 2006 and 2005, respectively.

(2) Excludes discontinued operations of $(1.9) million for the quarter ended September 30, 2005 and discontinued operations of $6.1 million for the nine months ended September 30, 2005.

19

THE HANOVER INSURANCE GROUP

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE

(In millions)	September 30, 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	$	9.2	$	4.3	$	13.5	$	925.2	$	305.3	$	1,230.5
Greater than 12 months		40.5		20.9		61.4		1,348.7		603.0		1,951.7
Total investment grade fixed maturities		49.7		25.2		74.9		2,273.9		908.3		3,182.2
BELOW INVESTMENT GRADE FIXED MATURITIES:
12 months or less		3.1		0.5		3.6		101.7		17.1		118.8
Greater than 12 months		—		—		—		—		—		—
Total below investment grade fixed maturities		3.1		0.5		3.6		101.7		17.1		118.8
Equity securities		—		—		—		—		—		—
Total fixed maturities and equity securities	$	52.8	$	25.7	$	78.5	$	2,375.6	$	925.4	$	3,301.0
	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

20

THE HANOVER INSURANCE GROUP

CREDIT QUALITY OF FIXED MATURITIES

(In millions)	September 30, 2006
	Rating Agency Equivalent Designation	Amortized Cost						Fair Value
NAIC Designation		Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
1	Aaa/Aa/A	$	2,994.7	$	922.6	$	3,917.3	$	2,981.4	$	915.6	$	3,897.0
2	Baa		843.6		410.7		1,254.3		834.0		411.3		1,245.3
3	Ba		93.7		30.4		124.1		93.8		31.4		125.2
4	B		119.3		33.7		153.0		120.9		34.7		155.6
5	Caa and lower		39.2		9.2		48.4		39.4		9.6		49.0
6	In or near default		—		1.3		1.3		—		2.8		2.8
Total fixed maturities		$	4,090.5	$	1,407.9	$	5,498.4	$	4,069.5	$	1,405.4	$	5,474.9
	December 31, 2005
	Rating Agency Equivalent Designation	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

21

PROPERTY & CASUALTY

STATUTORY RATIOS

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

	Quarter ended September 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
Losses, excluding catastrophe losses and development	61.9	%	39.3	%	32.7	%	54.6	%	74.7	%	55.6	%	43.4	%	33.0	%	47.9	%	N/M	52.1	%
Catastrophe losses	0.4	%	14.8	%	12.2	%	4.9	%	—		1.4	%	39.1	%	11.7	%	18.9	%	N/M	10.1	%
Loss development	(6.7	)%	2.5	%	2.0	%	(3.9	)%	(27.4	)%	(16.3	)%	(8.6	)%	(3.8	)%	(11.7	)%	N/M	(6.8	)%
Total loss reserves	55.6	%	56.6	%	46.9	%	55.6	%	47.3	%	40.7	%	73.9	%	40.9	%	55.1	%	N/M	55.4	%
Loss adjustment expenses	12.9	%	8.4	%	5.1	%	11.4	%	9.9	%	9.1	%	11.3	%	8.3	%	9.9	%	N/M	10.9	%
Pre-tax catastrophe LAE	0.2	%	3.3	%	1.0	%	1.2	%	—		—		4.7	%	0.6	%	2.0	%	N/M	1.5	%
Policy acquisition and other underwriting expenses							29.4	%									41.5	%	N/M	33.8	%
Policyholders’ dividends							—										—		N/M	—
Combined							97.6	%									108.5	%	N/M	101.6	%
	Quarter ended September 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
Losses, excluding catastrophe losses and development	61.8	%	47.4	%	36.4	%	57.4	%	77.7	%	52.5	%	48.9	%	44.9	%	53.9	%	N/M	56.1	%
Catastrophe losses	1.6	%	88.9	%	8.0	%	24.8	%	—		0.2	%	166.6	%	11.9	%	70.4	%	N/M	41.4	%
Loss development	(5.2	)%	(3.2	)%	11.3	%	(4.3	)%	(1.0	)%	(4.6	)%	(3.5	)%	(11.3	)%	(4.7	)%	N/M	(4.2	)%
Total loss reserves	58.2	%	133.1	%	55.7	%	77.9	%	76.7	%	48.1	%	212.0	%	45.5	%	119.6	%	N/M	93.3	%
Loss adjustment expenses	11.1	%	8.7	%	3.4	%	10.2	%	9.7	%	8.1	%	11.7	%	8.5	%	9.8	%	N/M	10.1	%
Pre-tax catastrophe LAE	—		1.9	%	—		0.5	%	—		—		2.3	%	—		1.0	%	N/M	0.7	%
Policy acquisition and other underwriting expenses							27.1	%									37.6	%	N/M	30.7	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							115.7	%									168.1	%	N/M	134.8	%

22

THE HANOVER INSURANCE GROUP PROPERTY AND CASUALTY STATUTORY UNDERWRITING RATIOS EXCLUDING REINSTATEMENT PREMIUM RATIOS EXCLUDE REINSTATEMENT PREMIUM

	Quarter ended September 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
Losses, excluding catastrophe losses and development	61.9	%	39.3	%	32.7	%	54.6	%	74.7	%	55.6	%	43.4	%	33.0	%	47.9	%	N/M	52.1	%
Catastrophe losses	0.4	%	14.8	%	12.2	%	4.9	%	—		1.4	%	39.1	%	11.7	%	18.9	%	N/M	10.1	%
Loss development	(6.7	)%	2.5	%	2.0	%	(3.9	)%	(27.4	)%	(16.3	)%	(8.6	)%	(3.8	)%	(11.7	)%	N/M	(6.8	)%
Total loss reserves	55.6	%	56.6	%	46.9	%	55.6	%	47.3	%	40.7	%	73.9	%	40.9	%	55.1	%	N/M	55.4	%
Loss adjustment expenses	12.9	%	8.4	%	5.1	%	11.4	%	9.9	%	9.1	%	11.3	%	8.3	%	9.9	%	N/M	10.9	%
Pre-tax catastrophe LAE	0.2	%	3.3	%	1.0	%	1.2	%	—		—		4.7	%	0.6	%	2.0	%	N/M	1.5	%
Policy acquisition and other under- writing expenses							29.4	%									41.5	%	N/M	33.8	%
Policyholders’ dividends							—										—		N/M	—
Combined							97.6	%									108.5	%	N/M	101.6	%
	Quarter ended September 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
Losses, excluding catastrophe losses and develop- ment	61.1	%	41.0	%	32.3	%	54.5	%	77.7	%	52.1	%	44.7	%	42.4	%	51.3	%	N/M	53.3	%
Catastrophe losses	1.6	%	76.8	%	7.1	%	23.6	%	—		0.2	%	152.4	%	11.3	%	67.1	%	N/M	39.3	%
Loss develop- ment	(5.1	)%	(2.8	)%	10.1	%	(4.1	)%	(1.0	)%	(4.5	)%	(3.2	)%	(10.6	)%	(4.4	)%	N/M	(3.9	)%
Total loss reserves	57.6	%	115.0	%	49.5	%	74.0	%	76.7	%	47.8	%	193.9	%	43.1	%	114.0	%	N/M	88.7	%
Loss adjustment expenses	10.9	%	7.5	%	3.0	%	9.7	%	9.7	%	8.0	%	10.7	%	8.0	%	9.4	%	N/M	9.6	%
Pre-tax catastrophe LAE	—		1.7	%	—		0.5	%	—		—		2.1	%	—		0.9	%	N/M	0.7	%
Policy acquisition and other under- writing expenses							25.8	%									35.8	%	N/M	29.3	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							110.0	%									160.2	%	N/M	128.3	%

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THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

	Nine Months ended September 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
Losses, excluding catastrophe losses and develop- ment	61.1	%	42.1	%	32.8	%	54.8	%	76.9	%	51.7	%	43.7	%	32.1	%	47.4	%	N/M	52.1	%
Catastrophe losses	0.3	%	8.8	%	5.5	%	2.9	%	—		1.3	%	15.4	%	9.8	%	8.8	%	N/M	5.1	%
Loss develop- ment	(5.4	)%	0.9	%	(6.8	)%	(3.7	)%	(19.0	)%	(8.2	)%	(5.9	)%	(3.7	)%	(7.6	)%	N/M	(5.1	)%
Total loss reserves	56.0	%	51.8	%	31.5	%	54.0	%	57.9	%	44.8	%	53.2	%	38.2	%	48.6	%	N/M	52.1	%
Loss adjustment expenses	12.5	%	8.4	%	5.8	%	11.1	%	11.0	%	8.3	%	11.7	%	7.9	%	10.0	%	N/M	10.7	%
Pre-tax catastrophe LAE	—		0.9	%	0.3	%	0.3	%	—		—		2.2	%	0.2	%	0.9	%	N/M	0.5	%
Policy acquisition and other under- writing expenses							29.6	%									39.1	%	N/M	33.2	%
Policyholders’ dividends							—										0.2	%	N/M	0.1	%
Combined							95.0	%									98.8	%	N/M	96.6	%
	Nine Months ended September 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
Losses, excluding catastrophe losses and develop- ment	64.2	%	45.3	%	35.1	%	58.1	%	77.7	%	51.9	%	48.2	%	39.3	%	52.6	%	N/M	56.1	%
Catastrophe losses	0.6	%	29.8	%	4.2	%	8.9	%	—		0.2	%	55.1	%	5.6	%	24.5	%	N/M	14.5	%
Loss develop- ment	(3.5	)%	(2.2	)%	0.3	%	(3.0	)%	4.4	%	(1.8	)%	(4.3	)%	(6.0	)%	(2.5	)%	N/M	(2.7	)%
Total loss reserves	61.3	%	72.9	%	39.6	%	64.0	%	82.1	%	50.3	%	99.0	%	38.9	%	74.6	%	N/M	67.9	%
Loss adjustment expenses	10.7	%	6.4	%	3.1	%	9.3	%	11.0	%	8.5	%	10.5	%	7.9	%	9.7	%	N/M	9.5	%
Pre-tax catastrophe LAE	—		0.6	%	—		0.2	%	—		—		0.7	%	—		0.3	%	N/M	0.2	%
Policy acquisition and other under- writing expenses							27.6	%									36.4	%	N/M	30.9	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							101.1	%									121.1	%	N/M	108.5	%

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THE HANOVER INSURANCE GROUP PROPERTY AND CASUALTY STATUTORY UNDERWRITING RATIOS EXCLUDING REINSTATEMENT PREMIUM RATIOS EXCLUDE REINSTATEMENT PREMIUM

	Nine Months ended September 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
Losses, excluding catastrophe losses and develop- ment	61.1	%	42.1	%	32.8	%	54.8	%	76.9	%	51.7	%	43.7	%	32.1	%	47.4	%	N/M	52.1	%
Catastrophe losses	0.3	%	8.8	%	5.5	%	2.9	%	—		1.3	%	15.4	%	9.8	%	8.8	%	N/M	5.1	%
Loss develop- ment	(5.4	)%	0.9	%	(6.8	)%	(3.7	)%	(19.0	)%	(8.2	)%	(5.9	)%	(3.7	)%	(7.6	)%	N/M	(5.1	)%
Total loss reserves	56.0	%	51.8	%	31.5	%	54.0	%	57.9	%	44.8	%	53.2	%	38.2	%	48.6	%	N/M	52.1	%
Loss adjustment expenses	12.5	%	8.4	%	5.8	%	11.1	%	11.0	%	8.3	%	11.7	%	7.9	%	10.0	%	N/M	10.7	%
Pre-tax catastrophe LAE	—		0.9	%	0.3	%	0.3	%	—		—		2.2	%	0.2	%	0.9	%	N/M	0.5	%
Policy acquisition and other under- writing expenses							29.6	%									39.1	%	N/M	33.2	%
Policyholders’ dividends							—										0.2	%	N/M	0.1	%
Combined							95.0	%									98.8	%	N/M	96.6	%
	Nine Months ended September 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
Losses, excluding catastrophe losses and develop- ment	64.0	%	43.3	%	33.8	%	57.1	%	77.7	%	51.8	%	46.8	%	38.5	%	51.8	%	N/M	55.2	%
Catastrophe losses	0.6	%	28.5	%	4.0	%	8.8	%	N/M		0.2	%	53.5	%	5.5	%	24.1	%	N/M	14.2	%
Loss develop- ment	(3.5	)%	(2.1	)%	0.3	%	(3.0	)%	4.4	%	(1.8	)%	(4.2	)%	(5.9	)%	(2.5	)%	N/M	(2.6	)%
Total loss reserves	61.1	%	69.7	%	38.1	%	62.9	%	82.1	%	50.2	%	96.1	%	38.1	%	73.4	%	N/M	66.8	%
Loss adjustment expenses	10.7	%	6.1	%	3.0	%	9.1	%	11.0	%	8.4	%	10.2	%	7.7	%	9.5	%	N/M	9.3	%
Pre-tax catastrophe LAE	—		0.6	%	—		0.2	%	—		—		0.7	%	—		0.3	%	N/M	0.2	%
Policy acquisition and other under- writing expenses							27.1	%									35.8	%	N/M	30.4	%
Policyholders’ dividends							—										0.1	%	N/M	—
Combined							99.3	%									119.1	%	N/M	106.7	%

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Historical Highlights

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS

(In millions, except per share data)	Q3 06			Q2 06			Q1 06			2005			Q4 05			Q3 05			Q2 05			Q1 05
SEGMENT INCOME (1)
Property and Casualty
Personal Lines	$	35.0		$	53.7		$	49.0		$	143.2		$	74.4		$	(27.8	)	$	57.4		$	39.2
Commercial Lines		7.7			30.2			39.0			(35.0	)		14.5			(101.0	)		31.0			20.5
Other Property and Casualty		10.1			2.3			3.7			5.5			0.6			1.1			1.7			2.1
Total Property and Casualty		52.8			86.2			91.7			113.7			89.5			(127.7	)		90.1			61.8
Life Companies		(1.1	)		(1.0	)		(1.9	)		(18.7	)		(1.0	)		(0.9	)		(7.5	)		(9.3	)
Interest expense on corporate debt		(10.0	)		(9.9	)		(10.0	)		(39.9	)		(10.0	)		(10.0	)		(9.9	)		(10.0	)
Total segment income (loss) before federal income taxes	$	41.7		$	75.3		$	79.8		$	55.1		$	78.5		$	(138.6	)	$	72.7		$	42.5
Federal income tax (expense) benefit on segment income		(14.1	)		(23.6	)		(23.6	)		(1.0	)		(1.3	)		29.6			(19.5	)		(9.8	)
Total segment income (loss) after federal income taxes	$	27.6		$	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		2.0			3.6			5.8			18.6			5.7			(2.0	)		3.6			11.3
Gains (losses) on derivative instruments		0.1			0.1			—			(0.3	)		—			0.2			(0.3	)		(0.2	)
Restructuring costs		(0.5	)		(0.6	)		(0.3	)		(2.1	)		(0.8	)		(0.4	)		(0.2	)		(0.7	)
Federal income tax (expense) benefit on non-segment income		(0.7	)		(1.1	)		(1.7	)		(5.6	)		(7.2	)		5.8			(1.5	)		(2.7	)
Income (loss) from continuing operations		28.5			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		(2.9	)		(2.8	)		(20.1	)		(444.4	)		30.2			(474.6	)		—			—
Gain on sale of Financial Profiles, Inc., net of taxes		7.8			—			—			—			—			—			—			—
Income (loss) before cumulative effect of accounting change		33.4			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)	$	33.4		$	50.9		$	40.5		$	(325.2	)	$	118.7		$	(562.4	)	$	72.0		$	46.5
PER SHARE DATA (DILUTED)
INCOME (LOSS) FROM CONTINUING OPERATIONS	$	0.56		$	1.04		$	1.12		$	1.42		$	1.56		$	(1.97	)	$	1.06		$	0.75
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES	$	0.09		$	(0.05	)	$	(0.38	)	$	(7.44	)	$	0.63		$	(8.54	)	$	0.28		$	0.11
NET INCOME (LOSS)	$	0.65		$	0.99		$	0.75		$	(6.02	)	$	2.19		$	(10.51	)	$	1.34		$	0.86
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) (2)		51.3			51.6			53.6			54.0			54.2			53.5			53.9			53.8
BALANCE SHEET
Total investments	$	5,719.3		$	5,601.4		$	5,841.8					$	6,008.3		$	7,535.0		$	7,678.4		$	7,663.9
Separate account assets	$	524.2		$	528.4		$	564.0					$	571.9		$	9,385.9		$	9,444.6		$	9,726.0
Total assets	$	9,844.0		$	9,689.1		$	10,156.8					$	10,634.0		$	21,647.1		$	21,846.6		$	22,167.8
Total shareholders’ equity	$	1,909.3		$	1,770.0		$	1,843.0					$	1,951.3		$	1,867.7		$	2,490.5		$	2,325.2
Book value per share	$	37.49		$	34.77		$	35.35					$	36.30		$	34.81		$	46.60		$	43.53
Book value per share, excluding accumulated other comprehensive income	$	39.20		$	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.

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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.

27

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:

Quarter Ended	2006
	Price Range				Dividends Per Share
	High		Low
March 31	$	53.12	$	42.98	—
June 30	$	54.11	$	43.17	—
September 30	$	48.49	$	41.17	—
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 October 30, 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+	Baa1
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

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