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		9-12
Life Companies
Condensed Income Statements		13
Life Companies Consolidated Balance Sheets		14
Future Policy Benefits and Account Balances		15
Investments
Net Investment Income		16
Net Realized Investment Gains (Losses)		17
Unrealized Losses		18
Credit Quality of Fixed Maturities		19
Property and Casualty Statutory Ratios		20-21
Historical Financial Highlights		22-23
Other Information		24
Corporate Information		24
Market and Dividend Information		24
Industry Ratings		24

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended September 30								Nine Months ended September 30
(In millions)	2007			2006			% Change		2007			2006			% Change
SEGMENT INCOME
Property and Casualty
Personal Lines	$	49.4		$	35.0		41.1		$	152.5		$	137.7		10.7
Commercial Lines		39.4			7.7		N/M			127.7			76.9		66.1
Other		4.0			10.1		(60.4	)		11.6			16.1		(28.0	)

Total Property and Casualty		92.8			52.8		75.8			291.8			230.7		26.5

Life Companies		(4.1	)		(1.1	)	N/M			(4.2	)		(4.0	)	5.0
Interest expense on corporate debt		(10.0	)		(10.0	)	—			(29.9	)		(29.9	)	—

Total segment income		78.7			41.7		88.7			257.7			196.8		30.9
Federal income tax expense on P&C segment income		(31.7	)		(15.2	)	N/M			(99.6	)		(74.4	)	33.9
Federal income tax benefit on other segment income		6.0			1.1		N/M			14.3			13.1		9.2

Total federal income tax expense on segment income		(25.7	)		(14.1	)	82.3			(85.3	)		(61.3	)	39.2

Total segment income after taxes	$	53.0		$	27.6		92.0		$	172.4		$	135.5		27.2


RECONCILIATION FROM SEGMENT INCOME TO NET INCOME
Total segment income after taxes	$	53.0		$	27.6		92.0		$	172.4		$	135.5		27.2
Federal income tax settlement		0.2			—		N/M			2.6			—		N/M
Net realized investment (losses) gains, net of amortization		(0.9	)		2.0		N/M			1.2			11.4		(89.5	)
Gains on derivative instruments		—			0.1		N/M			0.1			0.2		(50.0	)
Restructuring (cost) benefit		—			(0.5	)	N/M			0.2			(1.4	)	N/M
Federal income tax benefit (expense) on non-segment income		0.7			(0.7	)	N/M			(0.2	)		(3.5	)	(94.3	)

Income from continuing operations		53.0			28.5		86.0			176.3			142.2		24.0
Gain (loss) on disposal of variable life insurance and annuity business, net of taxes		0.1			(2.9	)	N/M			0.2			(25.8	)	N/M
Gain on sale of Financial Profiles Inc., net of taxes		0.8			7.8		(89.7	)		0.8			7.8		(89.7	)

Income before cumulative effect of accounting change		53.9			33.4		61.4			177.3			124.2		42.8
Cumulative effect of change in accounting principle, net of taxes		—			—		—			—			0.6		N/M

Net income	$	53.9		$	33.4		61.4		$	177.3		$	124.8		42.1

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended September 30								Nine Months ended September 30
	2007			2006			% Change		2007			2006			% Change
PER SHARE DATA (DILUTED)
Total segment income	$	1.50		$	0.81		85.2		$	4.93		$	3.77		30.8
Federal income tax expense on segment income		(0.49	)		(0.27	)	81.5			(1.63	)		(1.17	)	39.3

Total segment income after taxes		1.01			0.54		87.0			3.30			2.60		26.9
Federal income tax settlement		0.01			—		N/M			0.05			—		N/M
Net realized investment (losses) gains, net of amortization		(0.02	)		0.04		N/M			0.03			0.22		(86.4	)
Restructuring costs		—			(0.01	)	N/M			—			(0.02	)	N/M
Federal income tax benefit (expense) on non-segment income		0.01			(0.01	)	N/M			(0.01	)		(0.07	)	(85.7	)

Income from continuing operations		1.01			0.56		80.4			3.37			2.73		23.4
Loss on disposal of variable life insurance and annuity business, net of taxes		—			(0.06	)	N/M			—			(0.49	)	N/M
Gain on sale of Financial Profiles Inc., net of taxes		0.02			0.15		(86.7	)		0.02			0.14		(85.7	)

Income before cumulative effect of accounting change		1.03			0.65		58.5			3.39			2.38		42.4
Cumulative effect of change in accounting principle, net of taxes		—			—		—			—			0.01		N/M

Net income	$	1.03		$	0.65		58.5		$	3.39		$	2.39		41.8

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


(In millions, except per share data)	September 30 2007			December 31 2006			% Change
BALANCE SHEET
Shareholders' equity
The Hanover Insurance Company (consolidated)	$	2,093.2		$	1,929.7		8.5
First Allmerica Financial Life Insurance Company (consolidated)		311.8			318.0		(1.9	)
THG Holding Company debt (1)		(499.5	)		(499.5	)	—
THG Holding Company and other		287.1			251.0		14.4

Total shareholders' equity	$	2,192.6		$	1,999.2		9.7

Total adjusted statutory capital
The Hanover Insurance Company (consolidated)	$	1,601.7		$	1,463.6		9.4
First Allmerica Financial Life Insurance Company	$	191.3		$	179.9		6.3
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		489	%		431	%	58.0
Book value per share
The Hanover Insurance Company (consolidated)	$	40.42		$	37.74		7.1
First Allmerica Financial Life Insurance Company (consolidated)		6.02			6.22		(3.2	)
THG Holding Company debt (1)		(9.64	)		(9.77	)	(1.3	)
THG Holding Company and other		5.54			4.91		12.8

Total book value per share	$	42.34		$	39.10		8.3

THG book value per share, excluding accumulated other comprehensive income	$	43.62		$	39.88		9.4

The Hanover Insurance Company (consolidated) book value per share, excluding accumulated other comprehensive income	$	40.63		$	37.59		8.1

Shares outstanding (2)		51.8			51.1

Stock price	$	44.19		$	48.80		(9.4	)
Price/book value per share		1.0	x		1.2	x	(0.2	)x
Debt/equity		23.4	%		25.5	%	(2.1	)pts
Debt/total capital		19.0	%		20.3	%	(1.3	)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)	2007			2006			% Change		2007		2006			% Change
REVENUES
Premiums	$	600.4		$	568.2		5.7		$	1,798.1	$	1,682.4		6.9
Net investment income		81.4			78.3		4.0			241.9		237.8		1.7
Net realized investment (losses) gains		(1.2	)		2.1		N/M			1.9		10.6		(82.1	)
Fees and other income		14.5			22.6		(35.8	)		42.7		58.8		(27.4	)

Total revenues		695.1			671.2		3.6			2,084.6		1,989.6		4.8

BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		393.1			399.5		(1.6	)		1,160.8		1,114.8		4.1
Policy acquisition expenses		132.6			121.7		9.0			390.0		352.8		10.5
Other operating expenses		91.6			106.7		(14.2	)		274.6		315.0		(12.8	)

Total benefits, losses and expenses		617.3			627.9		(1.7	)		1,825.4		1,782.6		2.4

Income from continuing operations before federal income taxes		77.8			43.3		79.7			259.2		207.0		25.2
Federal income tax expense		24.8			14.8		67.6			82.9		64.8		27.9

Income from continuing operations		53.0			28.5		86.0			176.3		142.2		24.0
Gain (loss) on disposal of variable life insurance and annuity business, net of taxes		0.1			(2.9	)	N/M			0.2		(25.8	)	N/M
Gain on sale of Financial Profiles Inc., net of taxes		0.8			7.8		(89.7	)		0.8		7.8		(89.7	)

Income before cumulative effect of change in accounting principle		53.9			33.4		61.4			177.3		124.2		42.8
Cumulative effect of change in accounting principle, net of taxes		—			—		—			—		0.6		N/M

Net income	$	53.9		$	33.4		61.4		$	177.3	$	124.8		42.1

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Quarter ended September 30							Nine Months ended September 30
	2007		2006			% Change		2007		2006			% Change
PER SHARE DATA (DILUTED)
Income from continuing operations	$	1.01	$	0.56		80.4		$	3.37	$	2.73		23.4
Loss on disposal of variable life insurance and annuity business, net of taxes		—		(0.06	)	N/M			—		(0.49	)	N/M
Gain on sale of Financial Profiles Inc., net of taxes		0.02		0.15		(86.7	)		0.02		0.14		(85.7	)

Income before cumulative effect of change in accounting principle		1.03		0.65		58.5			3.39		2.38		42.4
Cumulative effect of change in accounting principle, net of taxes		—		—		—			—		0.01		N/M

Net income (1)	$	1.03	$	0.65		58.5		$	3.39	$	2.39		41.8

Weighted average shares outstanding		52.5		51.3					52.3		52.2

(1)

Basic income per share was $1.04 and $0.66 for the quarters ended September 30, 2007 and 2006, respectively and $3.44 and $2.42 for the nine months ended September 30, 2007 and 2006, respectively.

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	September 30 2007			December 31 2006			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $5,746.0 and $5,643.2)	$	5,709.2		$	5,629.0		1.4
Equity securities, at fair value (cost of $27.4 and $11.6)		35.3			17.2		N/M
Mortgage loans		41.8			57.1		(26.8	)
Policy loans		117.7			125.7		(6.4	)
Other long-term investments		32.6			35.4		(7.9	)

Total investments		5,936.6			5,864.4		1.2

Cash and cash equivalents		229.7			372.7		(38.4	)
Accrued investment income		76.7			72.3		6.1
Premiums, accounts and notes receivable, net		660.5			584.7		13.0
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,373.8			1,350.5		1.7
Deferred policy acquisition costs		255.2			233.5		9.3
Deferred federal income taxes		356.3			385.0		(7.5	)
Goodwill		126.0			121.4		3.8
Other assets		322.8			328.5		(1.7	)
Separate account assets		507.6			543.6		(6.6	)

Total assets	$	9,845.2		$	9,856.6		(0.1	)


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,177.0		$	1,242.3		(5.3	)
Outstanding claims, losses and loss adjustment expenses		3,239.9			3,247.2		(0.2	)
Unearned premiums		1,203.6			1,101.4		9.3
Contractholder deposit funds and other policy liabilities		174.5			194.9		(10.5	)

Total policy liabilities and accruals		5,795.0			5,785.8		0.2

Expenses and taxes payable		727.1			928.0		(21.6	)
Reinsurance premiums payable		69.9			52.7		32.6
Trust instruments supported by funding obligations		39.0			38.5		1.3
Long-term debt		514.0			508.8		1.0
Separate account liabilities		507.6			543.6		(6.6	)

Total liabilities		7,652.6			7,857.4		(2.6	)

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		1,818.4			1,814.3		0.2
Accumulated other comprehensive loss		(66.7	)		(39.9	)	67.2
Retained earnings		892.8			712.0		25.4
Treasury stock at cost (8.7 and 9.4 million shares)		(452.5	)		(487.8	)	(7.2	)

Total shareholders’ equity		2,192.6			1,999.2		9.7

Total liabilities and shareholders’ equity	$	9,845.2		$	9,856.6		(0.1	)

PROPERTY & CASUALTY

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS


	Quarter ended September 30								Nine Months ended September 30
(In millions)	2007			2006			% Change		2007			2006			% Change
REVENUES
Net premiums written	$	621.8		$	602.9		3.1		$	1,853.7		$	1,775.3		4.4
Change in unearned premiums, net of prepaid reinsurance premiums		(26.6	)		(40.3	)	(34.0	)		(83.4	)		(122.4	)	(31.9	)

Net premiums earned		595.2			562.6		5.8			1,770.3			1,652.9		7.1
Net investment income		62.4			55.9		11.6			182.7			168.4		8.5
Other income		16.9			20.9		(19.1	)		48.3			48.7		(0.8	)

Total segment revenue		674.5			639.4		5.5			2,001.3			1,870.0		7.0

LOSSES AND OPERATING EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		373.4			380.2		(1.8	)		1,089.8			1,044.6		4.3
Policy acquisition expenses		132.5			121.5		9.1			389.5			352.1		10.6
Other operating expenses		75.8			84.9		(10.7	)		230.2			242.6		(5.1	)

Total losses and operating expenses		581.7			586.6		(0.8	)		1,709.5			1,639.3		4.3

Segment income before federal income taxes	$	92.8		$	52.8		75.8		$	291.8		$	230.7		26.5

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONSOLIDATED BALANCE SHEETS (1)


(In millions, except per share data)	September 30 2007			December 31 2006		% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $4,173.3 and $3,999.1)	$	4,146.6		$	3,989.0	4.0
Equity securities, at fair value (cost of $19.7 and $3.9)		25.5			7.3	N/M
Mortgage loans		11.1			23.7	(53.2	)
Other long-term investments		8.5			10.2	(16.7	)

Total investments		4,191.7			4,030.2	4.0

Cash and cash equivalents		177.3			230.5	(23.1	)
Accrued investment income		52.7			48.0	9.8
Premiums, accounts, and notes receivable, net		659.5			581.8	13.4
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,050.8			1,012.2	3.8
Deferred policy acquisition costs		250.8			228.4	9.8
Deferred federal income tax asset		204.9			206.2	(0.6	)
Goodwill		126.0			121.4	3.8
Other assets		200.7			194.9	3.0

Total assets	$	6,914.4		$	6,653.6	3.9


LIABILITIES AND SHAREHOLDER’S EQUITY

LIABILITIES
Policy liabilities and accruals:
Outstanding claims, losses and loss adjustment expenses	$	3,159.1		$	3,163.9	(0.2	)
Unearned premiums		1,202.0			1,099.9	9.3
Contractholder deposit funds and other policy liabilities		2.0			2.1	(4.8	)

Total policy liabilities and accruals		4,363.1			4,265.9	2.3

Expenses and taxes payable		385.5			408.8	(5.7	)
Reinsurance premiums payable		67.4			49.2	37.0
Long-term debt		5.2			—	—

Total liabilities		4,821.2			4,723.9	2.1


SHAREHOLDER’S EQUITY
Common stock, par value $1.00 per share; authorized 20.9 million shares; issued 5.0 million shares		5.0			5.0	—
Additional paid-in capital		169.2			169.2	—
Accumulated other comprehensive income		(11.1	)		7.3	N/M
Retained earnings		1,930.1			1,748.2	10.4

Total shareholder’s equity		2,093.2			1,929.7	8.5

Total liabilities and shareholder’s equity	$	6,914.4		$	6,653.6	3.9

(1)

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

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME


	Quarter ended September 30, 2007
	Personal Lines												Commercial Lines
(In millions)	Auto			Home			Other			Total			Workers’ Comp			Auto			Multiple Peril			Other			Total			Other P&C			Total P&C
Net premiums written	$	260.3		$	122.0		$	10.6		$	392.9		$	28.1		$	48.7		$	85.9		$	66.2		$	228.9		$	—		$	621.8

Net premiums earned	$	254.8		$	103.2		$	9.7		$	367.7		$	27.4		$	49.0		$	88.2		$	62.9		$	227.5		$	—		$	595.2
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		151.9			51.9			4.5			208.3			15.1			25.6			45.0			24.7			110.4			—			318.7
Prior year loss and LAE reserve development (favorable) unfavorable		(8.5	)		(0.7	)		(0.4	)		(9.6	)		(4.7	)		(0.7	)		(11.2	)		(8.2	)		(24.8	)		0.2			(34.2	)
Pre-tax catastrophe losses		(0.1	)		4.6			0.4			4.9			—			(0.3	)		13.0			2.5			15.2			—			20.1
Pre-tax catastrophe LAE		0.1			0.2			—			0.3			—			—			4.3			0.4			4.7			—			5.0
Loss adjustment expenses excluding prior year reserve development		30.0			8.1			0.6			38.7			3.7			4.3			12.5			4.3			24.8			0.2			63.7
Policy acquisition expenses and other underwriting expenses											108.7															87.8			—			196.5
Policyholders’ dividends											—															0.1			—			0.1

GAAP underwriting profit (loss)											16.4															9.3			(0.4	)		25.3
Net investment income											30.2															27.9			4.3			62.4
Other income											4.9															4.2			7.8			16.9
Other operating expenses											(2.1	)														(2.0	)		(7.7	)		(11.8	)

Segment income before federal income taxes										$	49.4														$	39.4		$	4.0		$	92.8


	Quarter ended September 30, 2006
	Personal Lines												Commercial Lines
	Auto			Home			Other			Total			Workers’ Comp			Auto			Multiple Peril			Other			Total			Other P&C			Total P&C
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

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME


	Nine Months ended September 30, 2007
	Personal Lines											Commercial Lines
(In millions)	Auto			Home		Other			Total			Workers’ Comp			Auto			Multiple Peril			Other			Total			Other P&C			Total P&C
Net premiums written	$	783.4		$	316.9	$	29.7		$	1,130.0		$	88.7		$	155.1		$	273.2		$	206.4		$	723.4		$	0.3		$	1,853.7

Net premiums earned	$	754.2		$	308.9	$	29.3		$	1,092.4		$	81.3		$	146.3		$	263.2		$	186.8		$	677.6		$	0.3		$	1,770.3
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		478.4			146.7		9.6			634.7			53.0			77.4			133.2			72.4			336.0			—			970.7
Prior year loss and LAE reserve development (favorable) unfavorable		(53.6	)		0.4		(0.4	)		(53.6	)		(18.5	)		(7.9	)		(25.7	)		(16.5	)		(68.6	)		1.2			(121.0	)
Pre-tax catastrophe losses		2.5			16.6		1.1			20.2			—			(0.1	)		21.6			4.5			26.0			—			46.2
Pre-tax catastrophe LAE		0.1			1.3		—			1.4			—			—			5.1			1.2			6.3			—			7.7
Loss adjustment expenses excluding prior year reserve development		89.9			23.3		1.4			114.6			10.8			11.9			35.1			13.1			70.9			0.3			185.8
Policy acquisition expenses and other underwriting expenses										320.9															264.3			(0.2	)		585.0
Policyholders’ dividends										—															0.4			—			0.4

GAAP underwriting profit (loss)										54.2															42.3			(1.0	)		95.5
Net investment income										88.5															81.8			12.4			182.7
Other income										13.9															11.8			22.6			48.3
Other operating expenses										(4.1	)														(8.2	)		(22.4	)		(34.7	)

Segment income before federal income taxes									$	152.5														$	127.7		$	11.6		$	291.8


	Nine Months ended September 30, 2006
	Personal Lines											Commercial Lines
	Auto			Home		Other			Total			Workers’ Comp			Auto			Multiple Peril			Other			Total			Other P&C			Total P&C
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		8.8			567.9			62.9			74.7			110.1			44.2			291.9			—			859.8
Prior year loss and LAE reserve development (favorable) unfavorable		(37.2	)		0.1		(1.1	)		(38.2	)		(17.9	)		(11.9	)		(20.8	)		(3.9	)		(54.5	)		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

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS


	Quarter ended September 30, 2007
	Personal Lines								Commercial Lines
	Auto		Home		Other		Total		Workers’ Comp		Auto		Multiple Peril		Other		Total		Other P&C	Total P&C
Losses, excluding catastrophe losses and development	59.6	%	50.3	%	46.4	%	56.6	%	55.1	%	52.2	%	51.0	%	39.3	%	48.5	%	N/M	53.5	%
Catastrophe losses	—		4.5	%	4.1	%	1.3	%	—		(0.6	)%	14.7	%	4.0	%	6.7	%	N/M	3.4	%
Loss development	(3.6	)%	(0.2	)%	(3.1	)%	(2.6	)%	(17.1	)%	(2.2	)%	(9.6	)%	(12.9	)%	(9.8	)%	N/M	(5.3	)%

Total losses	56.0	%	54.6	%	47.4	%	55.3	%	38.0	%	49.4	%	56.1	%	30.4	%	45.4	%	N/M	51.6	%
Loss adjustment expenses	12.1	%	7.4	%	5.2	%	10.6	%	13.5	%	9.6	%	11.1	%	6.7	%	9.8	%	N/M	10.4	%
Pre-tax catastrophe LAE	—		0.2	%	—		0.1	%	—		—		4.9	%	0.6	%	2.1	%	N/M	0.8	%
Policy acquisition and other underwriting expenses							29.6	%									38.6	%	N/M	33.0	%
Policyholders’ dividends							—										—		N/M	—

Combined							95.6	%									95.9	%	N/M	95.8	%


Policies in force	5.0	%	(2.5	)%	(2.6	)%	1.2	%	0.8	%	1.8	%	(2.1	)%	6.1	%	1.8	%	—	1.3	%
Retention (1)	73.6	%	82.9	%	N/M		78.4	%	74.8	%	77.8	%	76.6	%	77.5	%	76.6	%

	Quarter ended September 30, 2006
	Personal Lines								Commercial Lines
	Auto		Home		Other		Total		Workers’ Comp		Auto		Multiple Peril		Other		Total		Other P&C	Total P&C
Losses, excluding catastrophe losses and development	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 development	(6.7	)%	2.5	%	2.0	%	(3.9	)%	(28.0	)%	(16.3	)%	(8.6	)%	(3.8	)%	(11.8	)%	N/M	(6.8	)%

Total losses	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 underwriting 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	%

(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, 2007
	Personal Lines								Commercial Lines
	Auto		Home		Other		Total		Workers’ Comp		Auto		Multiple Peril		Other		Total		Other P&C	Total P&C
Losses, excluding catastrophe losses and development	63.4	%	47.5	%	32.8	%	58.1	%	65.2	%	52.9	%	50.6	%	38.8	%	49.6	%	N/M	54.8	%
Catastrophe losses	0.3	%	5.4	%	3.8	%	1.8	%	—		(0.1	)%	8.2	%	2.4	%	3.8	%	N/M	2.6	%
Loss development	(7.6	)%	0.2	%	(1.1	)%	(5.2	)%	(22.6	)%	(5.9	)%	(7.6	)%	(8.9	)%	(9.4	)%	N/M	(6.7	)%

Total losses	56.1	%	53.1	%	35.5	%	54.7	%	42.6	%	46.9	%	51.2	%	32.3	%	44.0	%	N/M	50.7	%
Loss adjustment expenses	12.4	%	7.5	%	4.4	%	10.8	%	13.2	%	8.6	%	11.2	%	7.1	%	9.8	%	N/M	10.4	%
Pre-tax catastrophe LAE	—		0.4	%	—		0.1	%	—		—		1.9	%	0.6	%	0.9	%	N/M	0.4	%
Policy acquisition and other underwriting expenses							29.4	%									39.0	%	N/M	33.0	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							95.0	%									93.8	%	N/M	94.5	%


Policies in force	5.0	%	(2.5	)%	(2.6	)%	1.2	%	0.8	%	1.8	%	(2.1	)%	6.1	%	1.8	%	—	1.3	%
Retention (1)	73.6	%	82.9	%	N/M		78.4	%	76.5	%	79.2	%	78.0	%	85.2	%	78.3	%

	Nine Months ended September 30, 2006
	Personal Lines								Commercial Lines
	Auto		Home		Other		Total		Workers’ Comp		Auto		Multiple Peril		Other		Total		Other P&C	Total P&C
Losses, excluding catastrophe losses and development	61.1	%	42.1	%	30.0	%	54.7	%	76.3	%	51.7	%	43.7	%	32.4	%	47.4	%	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	%	(4.0	)%	(3.6	)%	(18.8	)%	(8.2	)%	(5.9	)%	(4.3	)%	(7.7	)%	N/M	(5.0	)%

Total losses	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 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	%

(1)

LIFE COMPANIES

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONDENSED INCOME STATEMENTS


	Quarter ended September 30								Nine Months ended September 30
(In millions)	2007			2006			% Change		2007			2006			% Change
REVENUES
Premiums	$	5.2		$	5.6		(7.1	)	$	27.8		$	29.5		(5.8	)
Fees and other income		0.2			3.4		(94.1	)		1.0			15.1		(93.4	)
Net investment income		18.8			22.2		(15.3	)		58.6			68.9		(14.9	)

Total segment revenue		24.2			31.2		(22.4	)		87.4			113.5		(23.0	)


POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES
Policy benefits, claims and losses		20.0			19.2		4.2			70.2			71.0		(1.1	)
Policy acquisition expenses		0.1			0.2		(50.0	)		0.5			0.7		(28.6	)
Other operating expenses		8.2			12.9		(36.4	)		20.9			45.8		(54.4	)

Total policy benefits, claims and operating expenses		28.3			32.3		(12.4	)		91.6			117.5		(22.0	)

Segment (loss) before federal income taxes	$	(4.1	)	$	(1.1	)	N/M		$	(4.2	)	$	(4.0	)	5.0

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	September 30 2007			December 31 2006			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $1,244.2 and $1,381.7)	$	1,232.8		$	1,377.8		(10.5	)
Equity securities, at fair value (cost of $0.1)		0.5			0.6		(16.7	)
Mortgage loans		30.4			33.4		(9.0	)
Policy loans		117.7			125.7		(6.4	)
Other long-term investments		24.1			25.2		(4.4	)

Total investments		1,405.5			1,562.7		(10.1	)

Cash and cash equivalents		29.9			104.2		(71.3	)
Accrued investment income		19.6			21.5		(8.8	)
Premiums, accounts, and notes receivable, net		1.0			2.9		(65.5	)
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		323.0			338.3		(4.5	)
Deferred policy acquisition costs		4.4			5.1		(13.7	)
Deferred federal income tax asset		145.8			174.3		(16.4	)
Other assets		85.5			98.7		(13.4	)
Separate account assets		507.6			543.6		(6.6	)

Total assets	$	2,522.3		$	2,851.3		(11.5	)


LIABILITIES AND SHAREHOLDER’S EQUITY

LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	1,177.0		$	1,242.3		(5.3	)
Outstanding claims, losses and loss adjustment expenses		80.8			83.3		(3.0	)
Unearned premiums		1.6			1.5		6.7
Contractholder deposit funds and other policy liabilities		172.5			192.8		(10.5	)

Total policy liabilities and accruals		1,431.9			1,519.9		(5.8	)

Expenses and taxes payable		229.5			427.8		(46.4	)
Reinsurance premiums payable		2.5			3.5		(28.6	)
Trust instruments supported by funding obligations		39.0			38.5		1.3
Separate account liabilities		507.6			543.6		(6.6	)

Total liabilities		2,210.5			2,533.3		(12.7	)


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		(35.1	)		(25.7	)	36.6
Retained deficit		(343.0	)		(346.2	)	(0.9	)

Total shareholder’s equity		311.8			318.0		(1.9	)

Total liabilities and shareholder’s equity	$	2,522.3		$	2,851.3		(11.5	)

THE HANOVER INSURANCE GROUP

LIFE COMPANIES

FUTURE POLICY BENEFITS AND ACCOUNT BALANCES


	Gross						Net of Reinsurance Recoverables
(In millions)	September 30 2007		December 31 2006		% Change		September 30 2007		December 31 2006		% Change
Insurance
Traditional life	$	704.3	$	723.8	(2.7	)	$	703.9	$	723.7	(2.7	)
Group life and health		269.4		287.3	(6.2	)		63.3		77.5	(18.3	)
Other life and health		31.3		34.1	(8.2	)		1.1		1.2	(8.3	)

Total insurance		1,005.0		1,045.2	(3.8	)		768.3		802.4	(4.2	)


Annuities
Individual annuities		85.6		97.6	(12.3	)		4.5		7.2	(37.5	)
Group annuities		339.0		374.7	(9.5	)		333.8		369.5	(9.7	)

Total annuities		424.6		472.3	(10.1	)		338.3		376.7	(10.2	)

Total general account reserves	$	1,429.6	$	1,517.5	(5.8	)	$	1,106.6	$	1,179.1	(6.1	)


Trust instruments supported by funding obligations	$	39.0	$	38.5	1.3		$	39.0	$	38.5	1.3


SEPARATE ACCOUNT LIABILITIES
Insurance - Variable universal life	$	87.0	$	85.3	2.0		$	87.0	$	85.3	2.0
Annuities
Variable individual annuities		326.0		362.0	(9.9	)		326.0		362.0	(9.9	)
Group annuities		94.6		96.3	(1.8	)		94.6		96.3	(1.8	)

Total annuities		420.6		458.3	(8.2	)		420.6		458.3	(8.2	)

Total separate account liabilities (1)	$	507.6	$	543.6	(6.6	)	$	507.6	$	543.6	(6.6	)

(1)

Includes separate account liabilities subject to a modified coinsurance agreement with a former subsidiary, AFLIAC, of $409.1 million and $437.3 million as of September 30, 2007 and December 31, 2006, respectively.

INVESTMENTS

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME


(In millions, except yields)	Nine Months ended September 30, 2007
	Property and Casualty (1)			Yield		Life Companies			Yield		Total			Yield
Fixed maturities	$	180.5		5.62	%	$	49.7		5.59	%	$	230.2		5.61	%
Equity securities		0.7		—			—		—			0.7		—
Mortgages (2)		1.8		14.27	%		2.2		8.99	%		4.0		10.85	%
All other		4.3		—			8.0		—			12.3		—
Investment expenses		(4.0	)	—			(1.3	)	—			(5.3	)	—

Total	$	183.3		5.48	%	$	58.6		5.57	%	$	241.9		5.50	%


	Nine Months ended September 30, 2006
	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)		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	%

(1)

Includes purchase accounting adjustments of $2.4 million for the nine months ended September 30, 2007 and 2006. Also includes corporate eliminations of $0.1 million for the nine months ended September 30, 2006. There were no corporate eliminations for the nine months ended September 30, 2007.

(2)

Excluding Property and Casualty mortgage prepayment fees totaling $0.8 million and $0.4 million for the nine months ended September 30, 2007 and 2006, respectively, mortgage yields are 8.05% for Property and Casualty and 8.66% in Total for the nine months ended September 30, 2007 and 8.23% for Property and Casualty and 8.56% in Total for the nine months ended September 30, 2006.

THE HANOVER INSURANCE GROUP

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)


	Quarter ended September 30
(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 (losses) gains on securities transactions	$	(0.6	)	$	(0.3	)	$	(0.9	)	$	2.8		$	0.7		$	3.5
Other than temporary impairments		(0.3	)		(0.1	)		(0.4	)		(1.2	)		(0.3	)		(1.5	)
Other		0.1			—			0.1			—			0.1			0.1

Net realized investment (losses) gains	$	(0.8	)	$	(0.4	)	$	(1.2	)	$	1.6		$	0.5		$	2.1


	Nine Months ended September 30
	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 on securities transactions	$	0.6		$	2.4		$	3.0		$	18.6		$	0.3		$	18.9
Other than temporary impairments		(1.1	)		(0.1	)		(1.2	)		(3.8	)		(4.4	)		(8.2	)
Other		0.2			(0.1	)		0.1			(0.1	)		—			(0.1	)

Net realized investment (losses) gains	$	(0.3	)	$	2.2		$	1.9		$	14.7		$	(4.1	)	$	10.6

(1)

Includes corporate eliminations of $0.1 million for the quarter ended September 30, 2006. There were no corporate eliminations for the quarter ended September 30, 2007. Includes corporate eliminations of $0.7 and $3.7 million for the nine months ended September 30, 2007 and 2006, respectively.

THE HANOVER INSURANCE GROUP

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE


(In millions)	September 30, 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	$	19.5	$	6.4	$	25.9	$	1,046.7	$	196.4	$	1,243.1
Greater than 12 months		30.0		18.9		48.9		1,278.7		602.5		1,881.2

Total investment grade fixed maturities		49.5		25.3		74.8		2,325.4		798.9		3,124.3

BELOW INVESTMENT GRADE FIXED MATURITIES:
12 months or less		4.6		0.9		5.5		147.7		23.9		171.6
Greater than 12 months		—		—		—		—		—		—

Total below investment grade fixed maturities		4.6		0.9		5.5		147.7		23.9		171.6
Equity securities		0.1		—		0.1		0.3		—		0.3

Total fixed maturities and equity securities	$	54.2	$	26.2	$	80.4	$	2,473.4	$	822.8	$	3,296.2


	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
Equity securities		—		—		—		—		—		—

Total fixed maturities and equity securities	$	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)		September 30, 2007
		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	$	3,282.1	$	831.4	$	4,113.5	$	3,265.2	$	822.6	$	4,087.8
2	Baa		927.7		346.1		1,273.8		918.7		341.0		1,259.7
3	Ba		124.4		28.7		153.1		122.8		28.8		151.6
4	B		136.5		31.5		168.0		138.3		32.2		170.5
5	Caa and lower		31.1		5.3		36.4		31.4		5.3		36.7
6	In or near default		—		1.2		1.2		—		2.9		2.9

Total fixed maturities		$	4,501.8	$	1,244.2	$	5,746.0	$	4,476.4	$	1,232.8	$	5,709.2


		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 September 30, 2007
	Personal Lines								Commercial Lines
	Auto		Home		Other		Total		Workers’ Comp		Auto		Multiple Peril		Other		Total		Other P&C	Total P&C
Losses, excluding catastrophe losses and development	59.6	%	50.4	%	47.4	%	56.7	%	55.1	%	52.0	%	51.1	%	39.3	%	48.5	%	N/M	53.6	%
Catastrophe losses	(0.1	)%	4.5	%	3.1	%	1.3	%	—		(0.4	)%	14.7	%	3.8	%	6.7	%	N/M	3.3	%
Loss development	(3.7	)%	(0.2	)%	(3.1	)%	(2.7	)%	(17.2	)%	(2.2	)%	(9.6	)%	(12.9	)%	(9.8	)%	N/M	(5.3	)%

Total losses	55.8	%	54.7	%	47.4	%	55.3	%	37.9	%	49.4	%	56.2	%	30.2	%	45.4	%	N/M	51.6	%
Loss adjustment expenses	12.3	%	7.6	%	5.2	%	10.8	%	13.5	%	9.8	%	11.2	%	6.7	%	9.9	%	N/M	10.5	%
Pre-tax catastrophe LAE	—		0.2	%	—		0.1	%	—		—		4.9	%	0.6	%	2.1	%	N/M	0.8	%
Policy acquisition and other underwriting expenses							29.0	%									38.8	%	N/M	32.5	%
Policyholders’ dividends							—										—		N/M	—

Combined							95.2	%									96.2	%	N/M	95.4	%


	Quarter ended September 30, 2006
	Personal Lines								Commercial Lines
	Auto		Home		Other		Total		Workers’ Comp		Auto		Multiple Peril		Other		Total		Other P&C	Total P&C
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 losses	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	%

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

Nine Months ended September 30, 2007

Personal Lines

Commercial Lines

Auto

Home

Other

Total

Workers’

Comp

Auto

Multiple

Peril

Other

Total

Other

P&C

Total

P&C

Losses, excluding catastrophe losses and development

63.4

47.5

32.8

58.1

64.6

52.9

50.6

38.8

49.6

N/M

54.8

Catastrophe losses

0.3

5.9

4.1

2.0

—

8.4

2.5

3.9

N/M

2.7

Loss development

(7.6

0.2

(1.0

(5.2

(22.4

(5.9

(7.6

(8.9

(9.4

N/M

(6.7

Total losses

56.1

53.6

35.9

54.9

42.2

47.0

51.4

32.4

44.1

N/M

50.8

Loss adjustment expenses

12.5

7.5

4.4

10.9

13.2

8.7

11.3

7.1

9.8

N/M

10.5

Pre-tax catastrophe LAE

—

0.4

—

0.1

—

1.9

0.6

0.9

N/M

0.4

Policy acquisition and other underwriting expenses

29.1

38.1

N/M

32.6

Policyholders’ dividends

—

0.1

N/M

—

Combined

95.0

93.0

N/M

94.3


	Nine Months ended September 30, 2006
	Personal Lines								Commercial Lines
									Workers’				Multiple						Other	Total
	Auto		Home		Other		Total		Comp		Auto		Peril		Other		Total		P&C	P&C
Losses, excluding catastrophe losses and development	61.1	%	42.1	%	30.0	%	54.7	%	76.9	%	51.7	%	43.7	%	32.7	%	47.5	%	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 development	(5.4	)%	0.9	%	(4.0	)%	(3.6	)%	(19.0	)%	(8.2	)%	(5.9	)%	(4.3	)%	(7.7	)%	N/M	(5.1	)%

Total losses	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 underwriting 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	%

Historical Highlights

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS


(In millions, except per share data)	Q3 07			Q2 07			Q1 07			2006			Q4 06			Q3 06			Q2 06			Q1 06
SEGMENT INCOME (1)
Property and Casualty
Personal Lines	$	49.4		$	55.7		$	47.4		$	186.7		$	49.0		$	35.0		$	53.7		$	49.0
Commercial Lines		39.4			39.3			49.0			120.3			43.4			7.7			30.2			39.0
Other Property and Casualty		4.0			3.1			4.5			21.1			5.0			10.1			2.3			3.7

Total Property and Casualty		92.8			98.1			100.9			328.1			97.4			52.8			86.2			91.7
Life Companies		(4.1	)		0.8			(0.9	)		(3.9	)		0.1			(1.1	)		(1.0	)		(1.9	)
Interest expense on corporate debt		(10.0	)		(9.9	)		(10.0	)		(39.9	)		(10.0	)		(10.0	)		(9.9	)		(10.0	)

Total segment income before federal income taxes	$	78.7		$	89.0		$	90.0		$	284.3		$	87.5		$	41.7		$	75.3		$	79.8

Federal income tax expense on segment income		(25.7	)		(29.8	)		(29.8	)		(88.2	)		(26.9	)		(14.1	)		(23.6	)		(23.6	)

Total segment income after federal income taxes	$	53.0		$	59.2		$	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		0.2			—			2.4			—			—			—			—			—
Net realized investment (losses) gains, net of amortization		(0.9	)		0.2			1.9			(3.5	)		(14.9	)		2.0			3.6			5.8
Gains on derivative instruments		—			0.1			—			0.2			—			0.1			0.1			—
Restructuring costs (benefit)		—			0.2			—			(1.6	)		(0.2	)		(0.5	)		(0.6	)		(0.3	)
Federal income tax benefit (expense) on non-segment income		0.7			(0.2	)		(0.7	)		(2.8	)		0.7			(0.7	)		(1.1	)		(1.7	)

Income from continuing operations		53.0			59.5			63.8			191.7			49.5			28.5			53.7			60.0
Gain (loss) on disposal of variable life insurance and annuity business, net of taxes		0.1			0.3			(0.2	)		(29.8	)		(4.0	)		(2.9	)		(2.8	)		(20.1	)
Gain on sale of Financial Profiles Inc., net of taxes		0.8			—			—			7.8			—			7.8			—			—

Income before cumulative effect of accounting change		53.9			59.8			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	$	53.9		$	59.8		$	63.6		$	170.3		$	45.5		$	33.4		$	50.9		$	40.5

PER SHARE DATA (DILUTED)

INCOME FROM CONTINUING OPERATIONS	$	1.01		$	1.14		$	1.23		$	3.68		$	0.96		$	0.56		$	1.04		$	1.12
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES	$	0.02		$	—		$	(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	$	1.03		$	1.14		$	1.22		$	3.27		$	0.88		$	0.65		$	0.99		$	0.75

WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED)		52.5			52.3			51.9			52.2			51.7			51.3			51.6			53.6

BALANCE SHEET
Total investments	$	5,936.6		$	5,827.1		$	5,901.6					$	5,864.4		$	5,719.3		$	5,601.4		$	5,841.8
Separate account assets	$	507.6		$	519.0		$	517.4					$	543.6		$	524.2		$	528.4		$	564.0
Total assets	$	9,845.2		$	9,805.7		$	9,776.2					$	9,856.6		$	9,844.0		$	9,689.1		$	10,156.8
Total shareholders’ equity	$	2,192.6		$	2,099.4		$	2,100.7					$	1,999.2		$	1,909.3		$	1,770.0		$	1,843.0
Book value per share	$	42.34		$	40.55		$	40.92					$	39.10		$	37.49		$	34.77		$	35.35
Book value per share, excluding accumulated other comprehensive income	$	43.62		$	42.51		$	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	$	49.73	$	44.46		—
September 30	$	49.76	$	41.14		—
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 October 29, 2007


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