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		9-10

Life Companies
Condensed Income Statements		11
Life Companies Consolidated Balance Sheets		12
Future Policy Benefits and Account Balances		13

Investments
Net Investment Income		14
Net Realized Investment Gains (Losses)		15
Unrealized Losses		16
Credit Quality of Fixed Maturities		17

Property and Casualty Statutory Ratios		18
Historical Financial Highlights		19-20
Other Information		21
Corporate Information
Market and Dividend Information
Industry Ratings

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended March 31
(In millions)	2007			2006			% Change
SEGMENT INCOME
Property and Casualty
Personal Lines	$	47.4		$	49.0		(3.3	)
Commercial Lines		49.0			39.0		25.6
Other		4.5			3.7		21.6

Total Property and Casualty		100.9			91.7		10.0

Life Companies		(0.9	)		(1.9	)	(52.6	)
Interest expense on corporate debt		(10.0	)		(10.0	)	—

Total segment income		90.0			79.8		12.8

Federal income tax expense on P&C segment income		(34.1	)		(28.9	)	18.0
Federal income tax benefit on other segment income		4.3			5.3		(18.9	)

Total federal income tax expense on segment income		(29.8	)		(23.6	)	26.3

Total segment income after taxes	$	60.2		$	56.2		7.1


RECONCILIATION FROM SEGMENT INCOME TO NET INCOME
Total segment income after taxes	$	60.2		$	56.2		7.1
Federal income tax settlement		2.4			—		N/M
Net realized investment gains, net of amortization		1.9			5.8		(67.2	)
Restructuring costs		—			(0.3	)	N/M
Federal income tax expense on non-segment income		( 0.7	)		(1.7	)	(58.8	)

Income from continuing operations		63.8			60.0		6.3
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.2	)		(20.1	)	(99.0	)

Income before cumulative effect of accounting change		63.6			39.9		59.4
Cumulative effect of change in accounting principle, net of taxes		—			0.6		N/M

Net income	$	63.6		$	40.5		57.0

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended March 31
	2007			2006			% Change
PER SHARE DATA (DILUTED)
Total segment income	$	1.73		$	1.49		16.1
Federal income tax expense on segment income		(0.57	)		(0.44	)	29.5

Total segment income after taxes		1.16			1.05		10.5
Federal income tax settlement		0.04			—		N/M
Net realized investment gains, net of amortization		0.04			0.11		(63.6	)
Restructuring costs		—			(0.01	)	N/M
Federal income tax expense on non-segment income		(0.01	)		(0.03	)	(66.7	)

Income from continuing operations		1.23			1.12		9.8
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.01	)		(0.38	)	(97.4	)

Income before cumulative effect of accounting change		1.22			0.74		64.9
Cumulative effect of change in accounting principle, net of taxes		—			0.01		N/M

Net income	$	1.22		$	0.75		62.7

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


(In millions, except per share data)	March 31 2007			December 31 2006			% Change
BALANCE SHEET

Shareholders' equity
The Hanover Insurance Company (consolidated)	$	2,005.3		$	1,929.7		3.9
First Allmerica Financial Life Insurance Company (consolidated)		325.7			318.0		2.4
THG Holding Company debt (1)		(499.5	)		(499.5	)	—
THG Holding Company and other		269.2			251.0		7.3

Total shareholders' equity	$	2,100.7		$	1,999.2		5.1


Total adjusted statutory capital
The Hanover Insurance Company (consolidated)	$	1,516.1		$	1,463.6		3.6
First Allmerica Financial Life Insurance Company	$	174.3		$	179.9		(3.1	)

The Hanover Insurance Company (consolidated) premium to surplus ratio		1.5:1			1.6:1		N/M
First Allmerica Financial Life Insurance Company estimated risk based capital ratio		436	%		431	%	5.0

Book value per share
The Hanover Insurance Company (consolidated)	$	39.06		$	37.74		3.5
First Allmerica Financial Life Insurance Company (consolidated)		6.35			6.22		2.1
THG Holding Company debt (1)		(9.73	)		(9.77	)	(0.4	)
THG Holding Company and other		5.24			4.91		6.7

Total book value per share	$	40.92		$	39.10		4.7


THG book value per share, excluding accumulated other comprehensive income	$	41.33		$	39.88		3.6


The Hanover Insurance Company (consolidated) book value per share, excluding accumulated other comprehensive income	$	38.65		$	37.59		2.8


Shares outstanding (2)		51.3			51.1

Stock price	$	46.12		$	48.80		(5.5	)
Price/book value per share		1.1 x			1.2 x		(0.1	) x
Debt/equity		24.2	%		25.5	%	(1.3	) pts
Debt/total capital		19.5	%		20.3	%	(0.8	) 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 March 31
(In millions, except per share data)	2007			2006			% Change
REVENUES
Premiums	$	602.2		$	559.4		7.7
Fees and other income		13.4			19.3		(30.6	)
Net investment income		80.2			80.3		(0.1	)
Net realized investment gains		2.3			5.6		(58.9	)

Total revenues		698.1			664.6		5.0

BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		385.5			359.8		7.1
Policy acquisition expenses		127.2			113.6		12.0
Other operating expenses		93.5			105.9		(11.7	)

Total benefits, losses and expenses		606.2			579.3		4.6

Income from continuing operations before federal income taxes		91.9			85.3		7.7
Federal income tax expense		28.1			25.3		11.1

Income from continuing operations		63.8			60.0		6.3
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.2	)		(20.1	)	(99.0	)

Income before cumulative effect of change in accounting principle		63.6			39.9		59.4
Cumulative effect of change in accounting principle, net of taxes		—			0.6		N/M

Net income	$	63.6		$	40.5		57.0

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Quarter ended March 31
	2007			2006			% Change
PER SHARE DATA (DILUTED)
Income from continuing operations	$	1.23		$	1.12		9.8
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.01	)		(0.38	)	(97.4	)

Income before cumulative effect of change in accounting principle		1.22			0.74		64.9
Cumulative effect of change in accounting principle, net of taxes		—			0.01		N/M

Net income (1)	$	1.22		$	0.75		62.7

Weighted average shares outstanding		51.9			53.6

(1)

Basic income per share was $1.24 and $0.76 for the quarters ended March 31, 2007 and 2006, respectively.

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	March 31 2007			December 31 2006			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $5,663.5 and $5,643.2)	$	5,671.4		$	5,629.0		0.8
Equity securities, at fair value (cost of $11.6)		18.6			17.2		8.1
Mortgage loans		56.3			57.1		(1.4	)
Policy loans		122.0			125.7		(2.9	)
Other long-term investments		33.3			35.4		(5.9	)

Total investments		5,901.6			5,864.4		0.6

Cash and cash equivalents		218.5			372.7		(41.4	)
Accrued investment income		74.9			72.3		3.6
Premiums, accounts and notes receivable, net		620.7			584.7		6.2
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,341.9			1,350.5		(0.6	)
Deferred policy acquistion costs		239.5			233.5		2.6
Deferred federal income taxes		415.8			385.0		8.0
Goodwill		121.4			121.4		—
Other assets		324.5			328.5		(1.2	)
Separate account assets		517.4			543.6		(4.8	)

Total assets	$	9,776.2		$	9,856.6		(0.8	)

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,227.0		$	1,242.3		(1.2	)
Outstanding claims, losses and loss adjustment expenses		3,237.6			3,247.2		(0.3	)
Unearned premiums		1,134.1			1,101.4		3.0
Contractholder deposit funds and other policy liabilities		182.5			194.9		(6.4	)

Total policy liabilities and accruals		5,781.2			5,785.8		(0.1	)

Expenses and taxes payable		773.0			928.0		(16.7	)
Reinsurance premiums payable		55.7			52.7		5.7
Trust instruments supported by funding obligations		39.4			38.5		2.3
Long-term debt		508.8			508.8		—
Separate account liabilities		517.4			543.6		(4.8	)

Total liabilities		7,675.5			7,857.4		(2.3	)


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		1,814.7			1,814.3		NM
Accumulated other comprehensive loss		(21.1	)		(39.9	)	(47.1	)
Retained earnings		782.8			712.0		9.9
Treasury stock at cost (9.2 and 9.4 million shares)		(476.3	)		(487.8	)	(2.4	)

Total shareholders’ equity		2,100.7			1,999.2		5.1

Total liabilities and shareholders’ equity	$	9,776.2		$	9,856.6		(0.8	)

PROPERTY & CASUALTY

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS


	Quarter ended March 31
(In millions)	2007			2006			% Change
REVENUES
Net premiums written	$	612.0		$	574.0		6.6
Change in unearned premiums, net of prepaid reinsurance premiums		(27.6	)		(33.1	)	(16.6	)

Net premiums earned		584.4			540.9		8.0
Net investment income		60.7			56.5		7.4
Other income		15.0			14.7		2.0

Total segment revenue		660.1			612.1		7.8


LOSSES AND OPERATING EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		353.1			327.8		7.7
Policy acquisition expenses		127.0			113.4		12.0
Other operating expenses		79.1			79.2		(0.1	)

Total losses and operating expenses		559.2			520.4		7.5

Segment income before federal income taxes	$	100.9		$	91.7		10.0

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONSOLIDATED BALANCE SHEETS (1)



(In millions, except per share data)	March 31 2007		December 31 2006		% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $4,077.8 and $3,999.1)	$	4,085.3	$	3,989.0	2.4
Equity securities, at fair value (cost of $3.9)		8.7		7.3	19.2
Mortgage loans		23.4		23.7	(1.3	)
Other long-term investments		8.6		10.2	(15.7	)

Total investments		4,126.0		4,030.2	2.4

Cash and cash equivalents		160.1		230.5	(30.5	)
Accrued investment income		51.2		48.0	6.7
Premiums, accounts, and notes receivable, net		619.2		581.8	6.4
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,015.1		1,012.2	0.3
Deferred policy acquisition costs		234.7		228.4	2.8
Deferred federal income tax asset		244.8		206.2	18.7
Goodwill		121.4		121.4	—
Other assets		191.7		194.9	(1.6	)

Total assets	$	6,764.2	$	6,653.6	1.7


LIABILITIES AND SHAREHOLDER’S EQUITY

LIABILITIES
Policy liabilities and accruals:
Outstanding claims, losses and loss adjustment expenses	$	3,157.1	$	3,163.9	(0.2	)
Unearned premiums		1,132.5		1,099.9	3.0
Contractholder deposit funds and other policy liabilities		2.1		2.1	—

Total policy liabilities and accruals		4,291.7		4,265.9	0.6

Expenses and taxes payable		414.5		408.8	1.4
Reinsurance premiums payable		52.7		49.2	7.1

Total liabilities		4,758.9		4,723.9	0.7


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 income		20.8		7.3	N/M
Retained earnings		1,810.3		1,748.2	3.6

Total shareholder’s equity		2,005.3		1,929.7	3.9

Total liabilities and shareholder’s equity	$	6,764.2	$	6,653.6	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


	Quarter ended March 31, 2007
	Personal Lines										Commercial Lines
(In millions)	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	$	273.5		$	84.5	$	8.3	$	366.3		$	34.5		$	51.6		$	91.8		$	67.8		$	245.7		$	—		$	612.0

Net premiums earned	$	247.8		$	102.7	$	9.8	$	360.3		$	27.4		$	48.2		$	87.2		$	61.3		$	224.1		$	—		$	584.4
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		165.5			45.9		2.3		213.7			19.0			25.6			42.7			25.0			112.3			—			326.0
Prior year loss and LAE reserve development (favorable) unfavorable		(23.7	)		1.3		0.9		(21.5	)		(11.0	)		(4.4	)		(8.5	)		(6.6	)		(30.5	)		—			(52.0	)
Pre-tax catastrophe losses		0.3			5.4		0.4		6.1			—			—			4.9			0.6			5.5			—			11.6
Pre-tax catastrophe LAE		—			1.1		—		1.1			—			—			0.8			0.8			1.6			—			2.7
Loss adjustment expenses excluding prior year reserve development		30.9			7.9		0.6		39.4			5.0			4.0			11.8			4.4			25.2			—			64.6
Policy acquisition expenses and other underwriting expenses									106.6															88.9			(0.3	)		195.2
Policyholders' dividends									—															0.2			—			0.2

GAAP underwriting profit									14.9															20.9			0.3			36.1
Net investment income									29.5															27.3			3.9			60.7
Other income									3.8															4.1			7.1			15.0
Other operating expenses									(0.8	)														(3.3	)		(6.8	)		(10.9	)

Segment income before federal income taxes								$	47.4														$	49.0		$	4.5		$	100.9


	Quarter ended March 31, 2006
	Personal Lines											Commercial Lines
	Personal Automobile			Homeowners		Other Personal Lines			Total Personal Lines			Workers' Compensation			Commercial Automobile			Commercial Multiple Peril			Other Commercial Lines			Total Commercial Lines			Other Property and Casualty			Total Property and Casualty
Net premiums written	$	252.0		$	81.2	$	8.4		$	341.6		$	35.5		$	52.0		$	92.9		$	52.0		$	232.4		$	—		$	574.0

Net premiums earned	$	232.0		$	98.0	$	9.8		$	339.8		$	28.3		$	47.7		$	83.2		$	41.9		$	201.1		$	—		$	540.9
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		144.9			41.6		2.5			189.0			21.9			23.8			40.0			14.4			100.1			—			289.1
Prior year loss and LAE reserve development (favorable) unfavorable		(7.4	)		1.7		(1.6	)		(7.3	)		(2.4	)		(1.4	)		(12.6	)		(3.1	)		(19.5	)		0.3			(26.5	)
Pre-tax catastrophe losses		0.1			3.6		—			3.7			—			0.3			1.2			2.1			3.6			—			7.3
Pre-tax catastrophe LAE		—			—		—			—			—			—			—			—			—			—			—
Loss adjustment expenses excluding prior year reserve development		26.5			8.2		0.7			35.4			4.1			3.2			11.9			2.8			22.0			0.3			57.7
Policy acquisition expenses and other underwriting expenses										100.6															82.9			(0.3	)		183.2
Policyholders' dividends										—															0.2			—			0.2

GAAP underwriting profit (loss)										18.4															11.8			(0.3	)		29.9
Net investment income										26.6															26.1			3.8			56.5
Other income										4.9															3.9			5.9			14.7
Other operating expenses										(0.9	)														(2.8	)		(5.7	)		(9.4	)

Segment income before federal income taxes									$	49.0														$	39.0		$	3.7		$	91.7

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS


	Quarter ended March 31, 2007
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers' Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and development	66.8	%	44.7	%	23.5	%	59.3	%	69.3	%	53.1	%	49.0	%	40.8	%	50.1	%	N/M	55.8	%
Catastrophe losses	0.1	%	5.3	%	4.1	%	1.7	%	—		—		5.6	%	1.0	%	2.5	%	N/M	2.0	%
Loss development	(10.3	)%	1.5	%	12.2	%	(6.3	)%	(36.5	)%	(9.3	)%	(7.4	)%	(11.4	)%	(12.4	)%	N/M	(8.7	)%

Total losses	56.6	%	51.5	%	39.8	%	54.7	%	32.8	%	43.8	%	47.2	%	30.4	%	40.2	%	N/M	49.1	%
Loss adjustment expenses	13.2	%	7.5	%	3.1	%	11.3	%	14.6	%	8.5	%	11.1	%	7.8	%	10.1	%	N/M	10.8	%
Pre-tax catastrophe LAE	—		1.1	%	—		0.3	%	—		—		0.9	%	1.3	%	0.7	%	N/M	0.5	%
Policy acquisition and other underwriting expenses							29.6	%									39.7	%	N/M	33.4	%
Policyholders' dividends							—										0.1	%	N/M	—

Combined							95.9	%									90.8	%	N/M	93.8	%

Policies in force	7.8	%	(1.7	)%	(0.3	)%	3.0	%	(0.5	)%	1.7	%	0.2	%	5.6	%	2.3	%	—	2.9	%
Retention (1)	74.5	%	83.4	%	N/M		79.1	%	79.0	%	82.0	%	80.2	%	79.8	%	79.8	%


	Quarter ended March 31, 2006
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers' Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and development	62.5	%	42.4	%	25.5	%	55.6	%	77.4	%	49.9	%	48.1	%	34.4	%	49.8	%	N/M	53.4	%
Catastrophe losses	—		3.7	%	—		1.1	%	—		0.6	%	1.4	%	5.0	%	1.8	%	N/M	1.3	%
Loss development	(3.3	)%	2.1	%	(16.3	)%	(2.1	)%	(5.7	)%	(3.2	)%	(12.3	)%	(7.4	)%	(8.2	)%	N/M	(4.3	)%

Total losses	59.2	%	48.2	%	9.2	%	54.6	%	71.7	%	47.3	%	37.2	%	32.0	%	43.4	%	N/M	50.4	%
Loss adjustment expenses	11.6	%	8.0	%	7.1	%	10.4	%	11.7	%	6.9	%	11.4	%	6.7	%	9.4	%	N/M	10.1	%
Pre-tax catastrophe LAE	—		—		—		—		—		—		—		—		—		N/M	—
Policy acquisition and other underwriting expenses							29.6	%									41.2	%	N/M	33.9	%
Policyholders' dividends							—										0.1	%	N/M	—

Combined							94.6	%									94.1	%	N/M	94.4	%

Policies in force	(1.7	)%	(3.9	)%	(2.5	)%	(2.8	)%	(6.6	)%	(3.7	)%	(5.0	)%	2.7	%	(2.3	)%	—	(2.7	)%
Retention (1)	79.5	%	83.3	%	N/M		81.5	%	68.4	%	77.1	%	81.9	%	N/M		77.8	%

(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.

LIFE COMPANIES

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONDENSED INCOME STATEMENTS


	Quarter ended March 31
(In millions)	2007			2006			% Change
REVENUES
Premiums	$	17.8		$	18.5		(3.8	)
Fees and other income		0.4			6.0		(93.3	)
Net investment income		19.3			23.7		(18.6	)

Total segment revenue		37.5			48.2		(22.2	)

POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES
Policy benefits, claims and losses		32.0			32.2		(0.6	)
Policy acquisition expenses		0.2			0.2		—
Other operating expenses		6.2			17.7		(65.0	)

Total policy benefits, claims and operating expenses		38.4			50.1		(23.4	)

Segment loss before federal income taxes	$	(0.9	)	$	(1.9	)	(52.6	)

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	March 31 2007			December 31 2006			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $1,265.8 and $1,381.7)	$	1,266.3		$	1,377.8		(8.1	)
Equity securities, at fair value (cost of $0.1)		0.6			0.6		—
Mortgage loans		32.9			33.4		(1.5	)
Policy loans		122.0			125.7		(2.9	)
Other long-term investments		24.7			25.2		(2.0	)

Total investments		1,446.5			1,562.7		(7.4	)

Cash and cash equivalents		38.9			104.2		(62.7	)
Accrued investment income		19.6			21.5		(8.8	)
Premiums, accounts, and notes receivable, net		1.5			2.9		(48.3	)
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		326.8			338.3		(3.4	)
Deferred policy acquistion costs		4.8			5.1		(5.9	)
Deferred federal income tax asset		168.5			174.3		(3.3	)
Other assets		98.3			98.7		(0.4	)
Separate account assets		517.4			543.6		(4.8	)

Total assets	$	2,622.3		$	2,851.3		(8.0	)

LIABILITIES AND SHAREHOLDER’S EQUITY

LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,227.0		$	1,242.3		(1.2	)
Outstanding claims, losses and loss adjustment expenses		80.5			83.3		(3.4	)
Unearned premiums		1.6			1.5		6.7
Contractholder deposit funds and other policy liabilities		180.4			192.8		(6.4	)

Total policy liabilities and accruals		1,489.5			1,519.9		(2.0	)

Expenses and taxes payable		247.3			427.8		(42.2	)
Reinsurance premiums payable		3.0			3.5		(14.3	)
Trust instruments supported by funding obligations		39.4			38.5		2.3
Separate account liabilities		517.4			543.6		(4.8	)

Total liabilities		2,296.6			2,533.3		(9.3	)

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		(21.3	)		(25.7	)	(17.1	)
Retained deficit		(342.9	)		(346.2	)	(1.0	)

Total shareholder’s equity		325.7			318.0		2.4

Total liabilities and shareholder’s equity	$	2,622.3		$	2,851.3		(8.0	)

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

FUTURE POLICY BENEFITS AND ACCOUNT BALANCES


	Gross						Net of Reinsurance Recoverables
(In millions)	March 31 2007		December 31 2006		% Change		March 31 2007		December 31 2006		% Change
Insurance
Traditional life	$	712.5	$	723.8	(1.6	)	$	712.3	$	723.7	(1.6	)
Group life and health		277.8		287.3	(3.3	)		76.5		77.5	(1.3	)
Other life and health		32.1		34.1	(5.9	)		1.1		1.2	(8.3	)

Total insurance		1,022.4		1,045.2	(2.2	)		789.9		802.4	(1.6	)


Annuities
Individual annuities		95.8		97.6	(1.8	)		6.7		7.2	(6.9	)
Group annuities		368.9		374.7	(1.5	)		363.7		369.5	(1.6	)

Total annuities		464.7		472.3	(1.6	)		370.4		376.7	(1.7	)


Total general account reserves	$	1,487.1	$	1,517.5	(2.0	)	$	1,160.3	$	1,179.1	(1.6	)


Trust instruments supported by funding obligations	$	39.4	$	38.5	2.3		$	39.4	$	38.5	2.3


SEPARATE ACCOUNT LIABILITIES
Insurance - Variable universal life	$	84.3	$	85.3	(1.2	)	$	84.3	$	85.3	(1.2	)
Annuities
Variable individual annuities		342.4		362.0	(5.4	)		342.4		362.0	(5.4	)
Group annuities		90.7		96.3	(5.8	)		90.7		96.3	(5.8	)

Total annuities		433.1		458.3	(5.5	)		433.1		458.3	(5.5	)

Total separate account liabilities (1)	$	517.4	$	543.6	(4.8	)	$	517.4	$	543.6	(4.8	)

(1)

Includes separate account liabilities subject to a modified coinsurance agreement with a former subsidiary, AFLIAC, of $421.0 million and $437.3 million as of March 31, 2007 and December 31, 2006, respectively.

INVESTMENTS

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME

(In millions, except yields)

Quarter ended March 31, 2007

Property and
Casualty (1)

Yield

Life
Companies

Yield

Total

Yield

Fixed maturities

60.0

5.71

17.2

5.64

77.2

5.70

Equity securities

0.2

—

0.2

—

Mortgages

0.5

7.99

0.8

9.98

1.3

9.15

All other

1.7

—

1.8

—

3.5

—

Investment expenses

(1.5

)

—

(0.5

)

—

(2.0

)

—

Total

60.9

5.53

19.3

5.35

80.2

5.49


	Quarter ended March 31, 2006
	Property and Casualty (1)			Yield		Life Companies			Yield		Total			Yield
Fixed maturities	$	53.2		5.56	%	$	23.0		5.72	%	$	76.2		5.61	%
Equity securities		0.6		—			—		—			0.6		—
Mortgages		0.9		8.55	%		1.0		7.76	%		1.9		8.14	%
All other		3.6		—			0.4		—			4.0		—
Investment expenses		(1.7	)	—			(0.7	)	—			(2.4	)	—

Total	$	56.6		5.33	%	$	23.7		4.98	%	$	80.3		5.23	%

(1)

Includes purchase accounting adjustments of $0.8 million for the quarters ended March 31, 2007 and 2006. Also includes corporate eliminations of $0.1 million for the quarter ended March 31, 2006. There were no corporate eliminations for the quarter ended March 31, 2007.

THE HANOVER INSURANCE GROUP

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)


	Quarter ended March 31
(In millions)	2007								2006
	Net Realized Gains (Losses)								Net Realized Gains (Losses)
	Property and Casualty (1)			Life Companies		Total			Property and Casualty (1)			Life Companies			Total
Net gains (losses) on securities transactions	$	0.8		$	2.0	$	2.8		$	11.8		$	(1.4	)	$	10.4
Other than temporary impairments		(0.5	)		—		(0.5	)		(2.2	)		(2.6	)		(4.8	)

Net realized investment gains (losses)	$	0.3		$	2.0	$	2.3		$	9.6		$	(4.0	)	$	5.6

(1)

Includes corporate eliminations of $1.0 million and $5.2 million for the quarters ended March 31, 2007 and 2006, respectively.

THE HANOVER INSURANCE GROUP

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE

(In millions)

March 31, 2007

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

6.2

1.3

7.5

783.8

109.6

893.4

Greater than 12 months

25.9

17.3

43.2

1,420.6

689.2

2,109.8

Total investment grade fixed maturities

32.1

18.6

50.7

2,204.4

798.8

3,003.2

BELOW INVESTMENT GRADE FIXED MATURITIES:

12 months or less

0.3

0.1

0.4

36.7

4.6

41.3

Greater than 12 months

—

6.5

1.1

7.6

Total below investment grade fixed maturities

0.3

0.1

0.4

43.2

5.7

48.9

Total fixed maturities

32.4

18.7

51.1

2,247.6

804.5

3,052.1


	December 31, 2006
	Gross Unrealized Losses						Fair Value
	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
INVESTMENT GRADE FIXED MATURITIES:
12 months or less	$	11.1	$	2.1	$	13.2	$	1,163.2	$	158.9	$	1,322.1
Greater than 12 months		32.2		23.2		55.4		1,342.4		747.1		2,089.5

Total investment grade fixed maturities		43.3		25.3		68.6		2,505.6		906.0		3,411.6

BELOW INVESTMENT GRADE FIXED MATURITIES:
12 months or less		1.1		0.2		1.3		60.8		7.5		68.3
Greater than 12 months		—		—		—		—		—		—

Total below investment grade fixed maturities		1.1		0.2		1.3		60.8		7.5		68.3

Total fixed maturities	$	44.4	$	25.5	$	69.9	$	2,566.4	$	913.5	$	3,479.9

THE HANOVER INSURANCE GROUP

CREDIT QUALITY OF FIXED MATURITIES

(In millions)

March 31, 2007

Amortized Cost

Fair Value

NAIC Designation

Rating Agency
Equivalent Designation

Property and
Casualty

Life
Companies

Total

Property and
Casualty

Life
Companies

Total

Aaa/Aa/A

3,233.2

846.5

4,079.7

3,232.5

841.4

4,073.9

Baa

896.3

354.2

1,250.5

894.9

355.1

1,250.0

110.5

25.7

136.2

112.5

26.7

139.2

115.1

31.0

146.1

120.4

32.6

153.0

Caa and lower

42.6

7.2

49.8

44.8

7.6

52.4

In or near default

—

1.2

—

2.9

Total fixed maturities

4,397.7

1,265.8

5,663.5

4,405.1

1,266.3

5,671.4


		December 31, 2006
		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	$	3,165.6	$	930.1	$	4,095.7	$	3,153.6	$	920.0	$	4,073.6
2	Baa		839.5		381.5		1,221.0		833.6		382.4		1,216.0
3	Ba		101.1		25.9		127.0		102.5		27.1		129.6
4	B		118.0		36.6		154.6		122.9		39.0		161.9
5	Caa and lower		37.3		6.4		43.7		38.5		6.5		45.0
6	In or near default		—		1.2		1.2		—		2.9		2.9

Total fixed maturities		$	4,261.5	$	1,381.7	$	5,643.2	$	4,251.1	$	1,377.9	$	5,629.0

PROPERTY & CASUALTY

STATUTORY RATIOS

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

Quarter ended March 31, 2007

Personal Lines

Commercial Lines

Personal
Auto-
mobile

Home-
owners

Other
Personal
Lines

Total
Personal
Lines

Workers'
Compen-
sation

Commercial
Auto-
mobile

Commercial
Multiple
Peril

Other
Commercial
Lines

Total
Commercial
Lines

Other
Property
and
Casualty

Total
Property

and Casualty

Losses, excluding catastrophe losses and development

66.8

44.8

24.5

59.4

68.6

53.1

49.0

41.0

50.1

N/M

55.8

Catastrophe losses

0.1

6.2

4.1

2.0

—

6.0

1.1

2.6

N/M

2.2

Loss development

(10.3

1.5

12.2

(6.4

(36.1

(9.3

(7.3

(11.4

(12.4

N/M

(8.7

Total losses

56.6

52.5

40.8

55.0

32.5

43.8

47.7

30.7

40.3

N/M

49.3

Loss adjustment expenses

13.2

7.5

3.1

11.3

14.4

8.3

11.1

7.8

10.0

N/M

10.8

Pre-tax catastrophe LAE

—

1.1

—

0.3

—

0.9

1.3

0.7

N/M

0.5

Policy acquisition and other underwriting expenses

29.2

37.9

N/M

32.7

Policyholders' dividends

—

0.1

N/M

—

Combined

95.8

89.0

N/M

93.3


	Quarter ended March 31, 2006
	Personal Lines								Commercial Lines
	Personal Auto- mobile		Home- owners		Other Personal Lines		Total Personal Lines		Workers' Compen- sation		Commercial Auto- mobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses and development	62.5	%	42.4	%	25.5	%	55.6	%	79.6	%	49.9	%	47.9	%	34.4	%	49.9	%	N/M	53.5	%
Catastrophe losses	—		3.7	%	—		1.1	%	—		0.6	%	1.4	%	5.0	%	1.8	%	N/M	1.4	%
Loss development	(3.3	)%	2.1	%	(16.3	)%	(2.1	)%	(5.8	)%	(3.2	)%	(12.3	)%	(7.4	)%	(8.2	)%	N/M	(4.3	)%

Total losses	59.2	%	48.2	%	9.2	%	54.6	%	73.8	%	47.3	%	37.0	%	32.0	%	43.5	%	N/M	50.6	%
Loss adjustment expenses	11.6	%	8.0	%	7.1	%	10.4	%	12.0	%	6.9	%	11.4	%	6.7	%	9.4	%	N/M	10.1	%
Pre-tax catastrophe LAE	—		—		—		—		—		—		—		—		—		N/M	—
Policy acquisition and other underwriting expenses							29.9	%									38.0	%	N/M	33.2	%
Policyholders' dividends							—										0.2	%	N/M	—

Combined							94.9	%									91.1	%	N/M	93.9	%

Historical Highlights

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS


(In millions, except per share data)	Q1 07			2006			Q4 06			Q3 06			Q2 06			Q1 06
SEGMENT INCOME (1)
Property and Casualty
Personal Lines	$	47.4		$	186.7		$	49.0		$	35.0		$	53.7		$	49.0
Commercial Lines		49.0			120.3			43.4			7.7			30.2			39.0
Other Property and Casualty		4.5			21.1			5.0			10.1			2.3			3.7

Total Property and Casualty		100.9			328.1			97.4			52.8			86.2			91.7
Life Companies		(0.9	)		(3.9	)		0.1			(1.1	)		(1.0	)		(1.9	)
Interest expense on corporate debt		(10.0	)		(39.9	)		(10.0	)		(10.0	)		(9.9	)		(10.0	)

Total segment income before federal income taxes	$	90.0		$	284.3		$	87.5		$	41.7		$	75.3		$	79.8

Federal income tax expense on segment income		(29.8	)		(88.2	)		(26.9	)		(14.1	)		(23.6	)		(23.6	)

Total segment income after federal income taxes	$	60.2		$	196.1		$	60.6		$	27.6		$	51.7		$	56.2

Change in prior years tax reserves		—			3.3			3.3			—			—			—
Federal income tax settlement		2.4			—			—			—			—			—
Net realized investment gains (losses), net of amortization		1.9			(3.5	)		(14.9	)		2.0			3.6			5.8
Gains on derivative instruments		—			0.2			—			0.1			0.1			—
Restructuring costs		—			(1.6	)		(0.2	)		(0.5	)		(0.6	)		(0.3	)
Federal income tax (expense) benefit on non-segment income		(0.7	)		(2.8	)		0.7			(0.7	)		(1.1	)		(1.7	)

Income from continuing operations		63.8			191.7			49.5			28.5			53.7			60.0
Loss on disposal of variable life insurance and annuity business, net of taxes		(0.2	)		(29.8	)		(4.0	)		(2.9	)		(2.8	)		(20.1	)
Gain on sale of Financial Profiles Inc., net of taxes		—			7.8			—			7.8			—			—

Income before cumulative effect of accounting change		63.6			169.7			45.5			33.4			50.9			39.9
Cumulative effect of change in accounting principle, net of taxes		—			0.6			—			—			—			0.6

NET INCOME	$	63.6		$	170.3		$	45.5		$	33.4		$	50.9		$	40.5

PER SHARE DATA (DILUTED)
INCOME FROM CONTINUING OPERATIONS	$	1.23		$	3.68		$	0.96		$	0.56		$	1.04		$	1.12
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES	$	(0.01	)	$	(0.42	)	$	(0.08	)	$	0.09		$	(0.05	)	$	(0.38	)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAXES	$	—		$	0.01		$	—		$	—		$	—		$	0.01
NET INCOME	$	1.22		$	3.27		$	0.88		$	0.65		$	0.99		$	0.75

WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED)		51.9			52.2			51.7			51.3			51.6			53.6

BALANCE SHEET
Total investments	$	5,901.6					$	5,864.4		$	5,719.3		$	5,601.4		$	5,841.8
Separate account assets	$	517.4					$	543.6		$	524.2		$	528.4		$	564.0
Total assets	$	9,776.2					$	9,856.6		$	9,844.0		$	9,689.1		$	10,156.8
Total shareholders’ equity	$	2,100.7					$	1,999.2		$	1,909.3		$	1,770.0		$	1,843.0
Book value per share	$	40.92					$	39.10		$	37.49		$	34.77		$	35.35
Book value per share, excluding accumulated other comprehensive income	$	41.33					$	39.88		$	39.20		$	38.46		$	37.77

(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.

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS


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

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


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


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


Total segment income (loss) after federal income taxes	$	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		18.6			5.7			(2.0	)		3.6			11.3
(Losses) gains on derivative instruments		(0.3	)		—			0.2			(0.3	)		(0.2	)
Restructuring costs		(2.1	)		(0.8	)		(0.4	)		(0.2	)		(0.7	)
Federal income tax (expense) benefit on non-segment income		(5.6	)		(7.2	)		5.8			(1.5	)		(2.7	)

Income (loss) from continuing operations		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		(444.4	)		30.2			(474.6	)		—			—

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


PER SHARE DATA (DILUTED)
INCOME (LOSS) FROM CONTINUING OPERATIONS	$	1.42		$	1.56		$	(1.97	)	$	1.06		$	0.75
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES	$	(7.44	)	$	0.63		$	(8.54	)	$	0.28		$	0.11
NET (LOSS) INCOME	$	(6.02	)	$	2.19		$	(10.51	)	$	1.34		$	0.86

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

BALANCE SHEET
Total investments				$	6,008.3		$	7,535.0		$	7,678.4		$	7,663.9
Separate account assets				$	571.9		$	9,385.9		$	9,444.6		$	9,726.0
Total assets				$	10,634.0		$	21,647.1		$	21,846.6		$	22,167.8
Total shareholders’ equity				$	1,951.3		$	1,867.7		$	2,490.5		$	2,325.2
Book value per share				$	36.30		$	34.81		$	46.60		$	43.53
Book value per share, excluding accumulated other comprehensive income				$	37.33		$	35.47		$	46.01		$	44.67

(1)

(2)

Weighted average shares outstanding for the quarter ending September 30, 2005 represents basic shares outstanding due to antidilution.

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	2007
	Price Range				Dividends Per Share
	High		Low		Dividends Per Share
March 31	$	49.11	$	44.70		—
June 30
September 30
December 31

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	$	50.25	$	43.95	$	0.30

INDUSTRY RATINGS AS OF April 30, 2007


Financial Strength Ratings	A.M. Best	Standard & Poor’s	Moody’s
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

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