The Hanover Insurance Group, Inc. Statistical Supplement

EX-99.2 3 dex992.htm THE HANOVER INSURANCE GROUP, INC. STATISTICAL SUPPLEMENT The Hanover Insurance Group, Inc. Statistical Supplement

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

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

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.

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

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.

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	)

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

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.

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			Other Property and Casualty			Total Property and Casualty
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	)

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			Other Property and Casualty			Total Property and Casualty
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

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		Other Property and Casualty	Total Property and Casualty
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.

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		Other Property and Casualty	Total Property and Casualty
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.

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		Other Property and Casualty	Total Property and Casualty
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		Other Property and Casualty	Total Property and Casualty
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.

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		Other Property and Casualty	Total Property and Casualty
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		Other Property and Casualty	Total Property and Casualty
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)

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	)

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	)

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.

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.

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.

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

THE HANOVER INSURANCE GROUP

CREDIT QUALITY OF FIXED MATURITIES


(In millions)	September 30, 2006
	Rating Agency Equivalent Designation	Amortized Cost						Fair Value
NAIC Designation	Rating Agency Equivalent Designation	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
1	Aaa/Aa/A	$	2,994.7	$	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	Rating Agency Equivalent Designation	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
1	Aaa/Aa/A	$	2,779.9	$	1,111.3	$	3,891.2	$	2,787.3	$	1,108.7	$	3,896.0
2	Baa		850.5		580.3		1,430.8		848.8		591.6		1,440.4
3	Ba		96.2		56.2		152.4		95.6		56.7		152.3
4	B		114.8		37.4		152.2		114.1		37.6		151.7
5	Caa and lower		47.9		7.6		55.5		53.4		9.4		62.8
6	In or near default		1.9		1.9		3.8		3.0		2.0		5.0

Total fixed maturities		$	3,891.2	$	1,794.7	$	5,685.9	$	3,902.2	$	1,806.0	$	5,708.2

PROPERTY & CASUALTY

STATUTORY RATIOS

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS


	Quarter ended 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		Other Property and Casualty	Total Property and Casualty
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		Other Property and Casualty	Total Property and Casualty
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	%

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		Other Property and Casualty	Total Property and Casualty
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		Other Property and Casualty	Total Property and Casualty
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	%

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		Other Property and Casualty	Total Property and Casualty
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		Other Property and Casualty	Total Property and Casualty
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	%

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		Other Property and Casualty	Total Property and Casualty
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		Other Property and Casualty	Total Property and Casualty
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	%

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.

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.

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		Dividends Per Share
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		Dividends Per Share
March 31	$	36.50	$	30.27	—
June 30	$	37.29	$	32.85	—
September 30	$	42.11	$	37.13	—
December 31	$	42.03	$	37.20	0.25

INDUSTRY RATINGS AS OF 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