EX-99.2 3 dex992.htm STATISTICAL SUPPLEMENT FOR THE PERIOD ENDED SEPTEMBER 30, 2009 Statistical Supplement for the period ended September 30, 2009

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

Investments

   

Net Investment Income

    13

Net Realized Investment Gains (Losses)

    14

Investment Portfolio

    15

Unrealized Losses

    16

Credit Quality of Fixed Maturities

    17

Top 25 Financial Holdings

    18

Top 25 Non-Financial Holdings

    19

Property and Casualty Statutory Ratios

    20-21

Historical Financial Highlights

    22-23

Other Information

    24

Corporate Information

   

Market and Dividend Information

   

Industry Ratings

   

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

 

     Quarter ended September 30     Nine Months ended September 30  
(In millions)    2009     2008     % Change     2009     2008     % Change  
   

SEGMENT INCOME

             

Property and Casualty

             

Personal Lines

    $ 27.4      $ 18.1      51.4      $ 56.1      $ 83.8      (33.1 ) 

Commercial Lines

      38.7        (6.6 )    N/M        137.2        114.1      20.2   

Other

      7.5        2.3      N/M        6.5        6.8      (4.4 ) 
                

Total Property and Casualty

      73.6        13.8      N/M        199.8        204.7      (2.4 ) 
                

Interest expense on corporate debt

      (6.3 )      (10.0 )    (37.0 )      (27.2 )      (29.9 )    (9.0 ) 
                

Total segment income

      67.3        3.8      N/M        172.6        174.8      (1.3 ) 

Federal income tax expense on P&C segment income

      (24.2 )      (4.0 )    N/M        (66.4 )      (68.9 )    (3.6 ) 

Federal income tax benefit on other segment income

      2.2        3.5      (37.1 )      9.5        10.5      (9.5 ) 
                

Total federal income tax expense on segment income

      (22.0 )      (0.5 )    N/M        (56.9 )      (58.4 )    (2.6 ) 
                

Total segment income after taxes

    $ 45.3      $ 3.3      N/M      $ 115.7      $ 116.4      (0.6 ) 
                

RECONCILIATION FROM SEGMENT INCOME TO NET INCOME

             

Total segment income after taxes

    $ 45.3      $ 3.3      N/M      $ 115.7      $ 116.4      (0.6 ) 

Federal income tax settlement

      -          6.4      N/M        -          6.4      N/M   

Net realized investment losses

      -          (52.8 )    N/M        (9.7 )      (60.7 )    (84.0 ) 

Gain from retirement of corporate debt

      0.2        -        N/M        34.5        -        N/M   

Federal income tax benefit (expense) on non-segment income

      3.1        (0.4 )    N/M        (8.6 )      (0.4 )    N/M   
                

Income (loss) from continuing operations

      48.6        (43.5 )    N/M        131.9        61.7      N/M   

Discontinued operations (net of taxes):

             

Gain (loss) from discontinued FAFLIC business (Including loss on assets held-for-sale of $6.1 and $72.2 in 2008)

      0.4        (21.7 )    N/M        6.3        (92.9 )    N/M   

Gain (loss) from discontinued accident and health business

      0.7        -        N/M        (2.4 )      -        N/M   

Income from operations of AMGRO (Including gain on disposal of $11.1 in 2008)

      -          -        -          -          10.1      N/M   

Gain on disposal of variable life and annuity business

      -          2.7      N/M        4.1        8.1      (49.4 ) 

Other

      -          0.7      N/M        -          (0.5 )    N/M   
                

Net income (loss)

    $ 49.7      $ (61.8 )    N/M      $ 139.9      $ (13.5 )    N/M   
                

 

1

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

 

     Quarter ended September 30    Nine Months ended September 30  
     2009        2008      % Change      2009        2008      % Change   
   

PER SHARE DATA (DILUTED) (1)

              

Total segment income

    $ 1.32      $ 0.08      N/M    $ 3.36      $ 3.37      (0.3 ) 

Federal income tax expense on segment income

      (0.43 )      (0.01 )    N/M      (1.11 )      (1.12 )    (0.9 ) 
               

Total segment income after taxes

      0.89        0.07      N/M      2.25        2.25      -     

Federal income tax settlement

      -          0.13      N/M      -          0.12      N/M   

Net realized investment losses

      -          (1.04 )    N/M      (0.19 )      (1.17 )    (83.8 ) 

Gain from retirement of corporate debt

      -          -        N/M      0.67        -        N/M   

Federal income tax expense on non-segment income

      0.06        (0.01 )    N/M      (0.16 )      (0.01 )    N/M   
               

Income (loss) from continuing operations

      0.95        (0.85 )    N/M      2.57        1.19      N/M   

Discontinued operations (net of taxes):

              

Gain (loss) from discontinued FAFLIC business (Including loss on assets held for sale of $0.12 and $1.39 in 2008)

      0.01        (0.42 )    N/M      0.12        (1.80 )    N/M   

Gain (loss) from discontinued accident and health business

      0.01        -        N/M      (0.05 )      -        N/M   

Income from operations of AMGRO (Including gain on disposal of $0.21 in 2008)

      -          -        -        -          0.20      N/M   

Gain on disposal of variable life and annuity business

      -          0.05      N/M      0.08        0.16      (50.0 ) 

Other

      -          0.01      N/M      -          (0.01 )    N/M   
               

Net income (loss)

    $ 0.97      $ (1.21 )    N/M    $ 2.72      $ (0.26 )    N/M   
               

 

(1) Per share data for the quarter ended September 30, 2008 represents basic loss per share due to antidilution.

 

2

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS

 

(In millions, except per share data)    September 30
2009		     December 31
2008		     % Change  

BALANCE SHEET

       

Shareholders’ equity

       

Property and Casualty Group

    $ 2,390.7      $ 1,995.5      19.8   

First Allmerica Financial Life Insurance Company (consolidated) (1)

      -          78.1      N/M   

THG Holding Company debt

      (287.0 )      (499.5 )    (42.5 ) 

THG Holding Company

      303.4        313.1      (3.1 ) 
                  

Total shareholders’ equity

    $ 2,407.1      $ 1,887.2      27.5   
                  

Property and Casualty Companies (2)

       

Total adjusted statutory capital

    $ 1,709.8      $ 1,600.7      6.8   

Premium to surplus ratio

      1.5:1        1.6:1      -     

Book value per share

       

Property and Casualty Group

    $ 47.73      $ 39.20      21.8   

First Allmerica Financial Life Insurance Company (consolidated)

      -          1.53      N/M   

THG Holding Company debt

      (5.73 )      (9.81 )    (41.6 ) 

THG Holding Company

      6.06        6.16      (1.6 ) 
                  

Total book value per share

    $ 48.06      $ 37.08      29.6   
                  

THG book value per share, excluding accumulated other comprehensive loss

    $ 48.28      $ 44.64      8.2   
                  

Shares outstanding (3)

      50.1        50.9     
      
                        

Stock price

    $ 41.33      $ 42.97      (3.8 ) 

Price/book value per share

      0.9  x      1.2  x    (0.3 ) x 

Total Debt/equity

      18.0 %      28.1 %    (10.1 ) pts 

Total Debt/total capital

      15.3 %      22.0 %    (6.7 ) pts 
                        

 

(1) FAFLIC was sold to Commonwealth Annuity and Life Insurance Company effective January 2, 2009. December 31, 2008 reflects a dividend to THG Holding Company of $136.3 million.
(2) Property and Casualty Companies include The Hanover Insurance Company, Citizens Insurance Company of America, and all other insurance subsidiaries.
(3) Shares outstanding do not include common stock equivalents.

 

3

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS

 

     Quarter ended September 30     Nine Months ended September 30  
(In millions)    2009     2008     % Change     2009     2008     % Change  
   

REVENUES

             

Premiums

    $ 637.4      $ 621.1      2.6      $ 1,899.4      $ 1,858.1      2.2   

Net investment income

      62.1        65.5      (5.2 )      188.3        193.9      (2.9 ) 

Net realized investment losses:

             

Total other-than-temporary impairment losses on securities

      (4.5 )      (53.1 )    (91.5 )      (39.1 )      (66.7 )    (41.4 ) 

Portion of loss recognized in other comprehensive income

      (1.6 )      -        N/M        9.8        -        N/M   
                

Net other-than-temporary impairment losses on securities recognized in earnings

      (6.1 )      (53.1 )    (88.5 )      (29.3 )      (66.7 )    (56.1 ) 

Realized gains from sales and other

      6.1        0.3      N/M        19.6        6.0      N/M   
                

Total net realized investment losses

      -          (52.8 )    N/M        (9.7 )      (60.7 )    (84.0 ) 

Fees and other income

      9.0        8.3      8.4        25.8        25.7      0.4   
                

Total revenues

      708.5        642.1      10.3        2,103.8        2,017.0      4.3   
                

LOSSES AND EXPENSES

             

Losses and loss adjustment expenses

      403.0        474.2      (15.0 )      1,225.1        1,239.7      (1.2 ) 

Policy acquisition expenses

      146.8        139.7      5.1        434.7        416.1      4.5   

Gain from retirement of corporate debt

      (0.2 )      -        N/M        (34.5 )      -        N/M   

Other operating expenses

      91.4        77.2      18.4        281.1        247.1      13.8   
                

Total losses and expenses

      641.0        691.1      (7.2 )      1,906.4        1,902.9      0.2   
                

Income (loss) from continuing operations before federal income taxes

      67.5        (49.0 )    N/M        197.4        114.1      73.0   

Federal income tax expense (benefit)

      18.9        (5.5 )    N/M        65.5        52.4      25.0   
                

Income (loss) from continuing operations

      48.6        (43.5 )    N/M        131.9        61.7      N/M   

Discontinued operations (net of taxes):

             

Gain (loss) from discontinued FAFLIC business (Including loss on assets held-for-sale of $6.1 and $72.2 in 2008)

      0.4        (21.7 )    N/M        6.3        (92.9 )    N/M   

Gain (loss) from discontinued accident and health business

      0.7        -        N/M        (2.4 )      -        N/M   

Income from operations of AMGRO (Including gain on disposal of $11.1 in 2008)

      -          -        -          -          10.1      N/M   

Gain on disposal of variable life and annuity business

      -          2.7      N/M        4.1        8.1      (49.4 ) 

Other

      -          0.7      N/M        -          (0.5 )    N/M   
                

Net income (loss)

    $ 49.7      $ (61.8 )    N/M      $ 139.9      $ (13.5 )    N/M   
                

 

4

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS

 

     Quarter ended September 30    Nine Months ended September 30  
     2009    2008     % Change    2009     2008     % Change  
   

PER SHARE DATA (DILUTED)

               

Income (loss) from continuing operations

    $ 0.95    $ (0.85 )    N/M    $ 2.57      $ 1.19      N/M   

Discontinued operations (net of taxes):

               

Gain (loss) from discontinued FAFLIC business (Including loss on assets held for sale of $0.12 and $1.39 in 2008)

      0.01      (0.42 )    N/M      0.12        (1.80 )    N/M   

Gain (loss) from discontinued accident and health business

      0.01      -        N/M      (0.05 )      -        N/M   

Income from operations of AMGRO (Including gain on disposal of $0.21 in 2008)

      -        -        -        -          0.20      N/M   

Gain on disposal of variable life and annuity business

      -        0.05      N/M      0.08        0.16      (50.0 ) 

Other

      -        0.01      N/M      -          (0.01 )    N/M   
        

Net income (loss) (1)

    $ 0.97    $ (1.21 )    N/M    $ 2.72      $ (0.26 )    N/M   
               

Weighted average shares outstanding (2)

      51.2      51.0           51.4        51.8     
                     

 

(1) Per share data for the quarter ended September 30, 2008 represents basic loss per share due to antidilution. Basic income (loss) per share was $0.98 for the quarter ended September 30, 2009, and $2.75 and $(0.26) for the nine months ended September 30, 2009 and 2008, respectively.

 

(2) Weighted average shares outstanding for the quarter ended September 30, 2008 represents basic shares outstanding due to antidilution.

 

5

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS

 

(In millions, except per share data)    September 30
2009		     December 31
2008		     % Change  
   

ASSETS

       

Investments:

       

Fixed maturities, at fair value (amortized cost of $4,696.3 and $4,382.0)

    $ 4,805.1      $ 4,140.9      16.0   

Equity securities, at fair value (cost of $109.8 and $97.6)

      122.0        76.2      60.1   

Mortgage loans

      20.4        31.1      (34.4 ) 

Other long-term investments

      16.7        18.4      (9.2 ) 
        

Total investments

      4,964.2        4,266.6      16.4   
        

Cash and cash equivalents

      233.2        397.7      (41.4 ) 

Accrued investment income

      53.4        52.3      2.1   

Premiums, accounts and notes receivable, net

      616.7        578.5      6.6   

Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums

      1,111.3        1,129.6      (1.6 ) 

Deferred policy acquisition costs

      285.3        264.8      7.7   

Deferred federal income taxes

      216.4        285.6      (24.2 ) 

Goodwill

      170.0        169.9      0.1   

Other assets

      309.7        315.7      (1.9 ) 

Assets of discontinued operations

      128.4        1,769.5      (92.7 ) 
        

Total assets

    $ 8,088.6      $ 9,230.2      (12.4 ) 
        

LIABILITIES AND SHAREHOLDERS’ EQUITY

       

LIABILITIES

       

Policy liabilities and accruals:

       

Losses and loss adjustment expenses

    $ 3,084.8      $ 3,201.3      (3.6 ) 

Unearned premiums

      1,322.6        1,246.3      6.1   

Contractholder deposit funds and other policy liabilities

      1.5        1.8      (16.7 ) 
        

Total policy liabilities and accruals

      4,408.9        4,449.4      (0.9 ) 
        

Expenses and taxes payable

      645.1        622.3      3.7   

Reinsurance premiums payable

      63.4        61.3      3.4   

Long-term debt

      433.8        531.4      (18.4 ) 

Liabilities of discontinued operations

      130.3        1,678.6      (92.2 ) 
        

Total liabilities

      5,681.5        7,343.0      (22.6 ) 
        

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

      1,807.8        1,803.8      0.2   

Accumulated other comprehensive loss

      (10.8 )      (384.8 )    (97.2 ) 

Retained earnings

      1,121.4        949.8      18.1   

Treasury stock at cost (10.4 and 9.6 million shares)

      (511.9 )      (482.2 )    6.2   
        

Total shareholders’ equity

      2,407.1        1,887.2      27.5   
        

Total liabilities and shareholders’ equity

    $ 8,088.6      $ 9,230.2      (12.4 ) 
        

 

6

PROPERTY & CASUALTY

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS

 

     Quarter ended September 30     Nine Months ended September 30  
(In millions)    2009     2008     % Change     2009     2008     % Change  
   

REVENUES

             

Net premiums written

    $ 688.8      $ 651.6      5.7      $ 1,981.8      $ 1,920.7      3.2   

Change in unearned premiums, net of prepaid reinsurance premiums

      (51.4 )      (30.5 )    68.5        (82.4 )      (62.6 )    31.6   
                

Net premiums earned

      637.4        621.1      2.6        1,899.4        1,858.1      2.2   

Net investment income

      62.1        65.3      (4.9 )      187.9        193.3      (2.8 ) 

Other income

      10.0        9.4      6.4        29.1        31.0      (6.1 ) 
                

Total segment revenue

      709.5        695.8      2.0        2,116.4        2,082.4      1.6   
                

LOSSES AND OPERATING EXPENSES

             

Losses and loss adjustment expenses

      403.0        474.2      (15.0 )      1,225.1        1,239.7      (1.2 ) 

Policy acquisition expenses

      146.8        139.7      5.1        434.7        416.1      4.5   

Other operating expenses

      86.1        68.1      26.4        256.8        221.9      15.7   
                

Total losses and operating expenses

      635.9        682.0      (6.8 )      1,916.6        1,877.7      2.1   
                

Segment income before federal income taxes

    $ 73.6      $ 13.8      N/M      $ 199.8      $ 204.7      (2.4 ) 
                

 

7

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY GROUP (1)

SELECT BALANCE SHEET INFORMATION

 

(In millions)    September 30
2009		    December 31
2008		    % Change  
   

ASSETS

         

Investments:

         

Fixed maturities, at fair value (amortized cost of $4,385.2 and $4,154.9)

    $ 4,521.9    $ 3,912.1    15.6   

Equity securities, at fair value (cost of $111.4 and $88.3)

      122.0      66.9    82.4   

Mortgage loans

      21.0      32.7    (35.8 ) 

Other long-term investments

      12.0      13.5    (11.1 ) 
        

Total investments

      4,676.9      4,025.2    16.2   
        

Cash and cash equivalents

      203.7      377.8    (46.1 ) 

Accrued investment income

      51.3      48.6    5.6   

Premiums, accounts, and notes receivable, net

      616.7      579.2    6.5   

Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums

      1,111.3      1,129.6    (1.6 ) 

Deferred policy acquisition costs

      285.3      264.8    7.7   

Deferred federal income tax asset

      183.9      220.8    (16.7 ) 

Goodwill

      170.0      169.9    0.1   

Other assets

      321.8      309.3    4.0   

Assets of discontinued operations

      128.4      -      N/M   
        

Total assets

    $ 7,749.3    $ 7,125.2    8.8   
        

LIABILITIES

         

Policy liabilities and accruals:

         

Losses and loss adjustment expenses

    $ 3,084.8    $ 3,201.3    (3.6 ) 

Unearned premiums

      1,322.6      1,246.3    6.1   

Contractholder deposit funds and other policy liabilities

      1.5      1.8    (16.7 ) 
        

Total policy liabilities and accruals

      4,408.9      4,449.4    (0.9 ) 
        

Expenses and taxes payable

      609.2      596.4    2.1   

Reinsurance premiums payable

      63.4      61.3    3.4   

Long-term debt

      146.8      22.6    N/M   

Liabilities of discontinued operations

      130.3      -      N/M   
        

Total liabilities

    $ 5,358.6    $ 5,129.7    4.5   
        

 

(1) Property and Casualty group includes The Hanover Insurance Company, Citizens Insurance Company of America, and AIX Holdings, Inc. and their subsidiaries, Verlan Fire Insurance Company, OPUS Investments, Inc. and other insurance and non-insurance subsidiaries.

 

8

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME

 

     Quarter ended September 30, 2009  
     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

    $ 249.1      $ 136.5      $ 11.1      $ 396.7      $ 27.8      $ 47.4      $ 98.7      $ 118.2      $ 292.1      $ -        $ 688.8   
                                

Net premiums earned

    $ 243.8      $ 112.2      $ 9.7      $ 365.7      $ 26.9      $ 46.8      $ 90.6      $ 107.4      $ 271.7      $ -        $ 637.4   

Losses excluding prior year loss reserve development and catastrophe losses

      155.2        57.2        3.9        216.3        18.8        25.1        42.7        47.9        134.5        0.1        350.9   

Prior year loss reserve favorable development

      (9.7 )      (1.0 )      (0.5 )      (11.2 )      (5.9 )      (2.1 )      (5.7 )      (3.2 )      (16.9 )      (10.5 )      (38.6 ) 

Pre-tax catastrophe losses

      0.8        14.3        0.3        15.4        -          0.8        8.1        0.4        9.3        -          24.7   

Loss adjustment expenses (1)

      29.7        9.6        0.3        39.6        3.0        3.1        12.0        8.0        26.1        0.2        65.9   

Policy acquisition expenses and other underwriting expenses

            109.7                113.4        (0.1 )      223.0   

Policyholders’ dividends

            -                  0.1        -          0.1   
                                              

GAAP underwriting (loss) profit

            (4.1 )              5.2        10.3        11.4   

Net investment income

            27.8                31.9        2.4        62.1   

Other income

            3.7                4.8        1.5        10.0   

Other operating expenses

            -                  (3.2 )      (6.7 )      (9.9 ) 
                                              

Segment income before federal income taxes

          $ 27.4              $ 38.7      $ 7.5      $ 73.6   
                                              
     Quarter ended September 30, 2008  
     Personal Lines     Commercial Lines              
     Auto     Home     Other     Total     Workers’
Comp		     Auto     Multiple
Peril		     Other     Total     Other
P&C		     Total
P&C		  
   

Net premiums written

    $ 260.8      $ 125.8      $ 10.9      $ 397.5      $ 30.8      $ 46.3      $ 93.6      $ 83.4      $ 254.1      $ -        $ 651.6   
                                

Net premiums earned

    $ 252.0      $ 106.9      $ 9.7      $ 368.6      $ 30.3      $ 48.8      $ 92.9      $ 80.5      $ 252.5      $ -        $ 621.1   

Losses excluding prior year loss reserve development and catastrophe losses

      160.8        50.6        3.9        215.3        18.5        25.1        55.2        32.1        130.9        -          346.2   

Prior year loss reserve favorable development

      (13.3 )      (1.3 )      (1.2 )      (15.8 )      (5.3 )      (4.7 )      (5.5 )      (4.0 )      (19.5 )      (0.2 )      (35.5 ) 

Pre-tax catastrophe losses

      1.2        37.2        1.3        39.7        -          0.1        48.3        10.1        58.5        -          98.2   

Loss adjustment expenses (1)

      30.9        9.0        0.3        40.2        3.2        3.9        10.5        7.0        24.6        0.4        65.2   

Policy acquisition expenses and other underwriting expenses

            102.9                96.6        (0.2 )      199.3   

Policyholders’ dividends

            -                  0.1        -          0.1   
                                              

GAAP underwriting loss

            (13.7 )              (38.7 )      -          (52.4 ) 

Net investment income

            30.1                31.5        3.7        65.3   

Other income

            3.4                4.3        1.7        9.4   

Other operating expenses

            (1.7 )              (3.7 )      (3.1 )      (8.5 ) 
                                              

Segment income (loss) before federal income taxes

          $ 18.1              $ (6.6 )    $ 2.3      $ 13.8   
                                              

 

(1) Loss adjustment expenses includes (unfavorable) favorable development of $(0.2) million and $(0.1) million in Personal Lines, $4.4 million and $2.9 million in Commercial Lines, and $4.2 million and $2.8 million in Total P&C for the quarters ended September 30, 2009 and 2008, respectively.

 

9

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME

 

     Nine Months ended September 30, 2009  
     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

    $ 740.6      $ 344.8      $ 30.3      $ 1,115.7      $ 88.3      $ 147.8      $ 289.4      $ 340.4      $ 865.9      $ 0.2      $ 1,981.8   
                                

Net premiums earned

    $ 734.9      $ 329.6      $ 29.3      $ 1,093.8      $ 85.6      $ 139.6      $ 271.3      $ 308.8      $ 805.3      $ 0.3      $ 1,899.4   

Losses excluding prior year loss reserve development and catastrophe losses

      477.5        172.2        10.5        660.2        58.1        74.6        128.8        132.7        394.2        -          1,054.4   

Prior year loss reserve (favorable) unfavorable development

      (44.5 )      7.8        (1.6 )      (38.3 )      (17.1 )      (4.7 )      (16.1 )      (20.0 )      (57.9 )      (10.4 )      (106.6 ) 

Pre-tax catastrophe losses

      4.1        59.3        0.7        64.1        -          1.1        22.3        4.8        28.2        -          92.3   

Loss adjustment expenses (1)

      89.5        28.7        0.6        118.8        0.5        7.6        31.0        26.1        65.2        0.6        184.6   

Policy acquisition expenses and other underwriting expenses

            322.4                333.9        (0.5 )      655.8   

Policyholders’ dividends

            -                  0.4        -          0.4   
                                              

GAAP underwriting (loss) profit

            (33.4 )              41.3        10.6        18.5   

Net investment income

            81.4                93.2        13.3        187.9   

Other income

            10.8                14.0        4.3        29.1   

Other operating expenses

            (2.7 )              (11.3 )      (21.7 )      (35.7 ) 
                                              

Segment income before federal income taxes

          $ 56.1              $ 137.2      $ 6.5      $ 199.8   
                                              
     Nine Months ended September 30, 2008  
     Personal Lines     Commercial Lines              
     Auto     Home     Other     Total     Workers’
Comp		     Auto     Multiple
Peril		     Other     Total     Other
P&C		     Total
P&C		  
   

Net premiums written

    $ 772.4      $ 319.5      $ 30.8      $ 1,122.7      $ 98.4      $ 152.6      $ 285.7      $ 261.1      $ 797.8      $ 0.2      $ 1,920.7   
                                

Net premiums earned

    $ 755.6      $ 322.3      $ 29.5      $ 1,107.4      $ 91.5      $ 148.6      $ 271.4      $ 238.9      $ 750.4      $ 0.3      $ 1,858.1   

Losses excluding prior year loss reserve development and catastrophe losses

      487.1        156.4        10.1        653.6        60.1        78.2        133.4        90.7        362.4        -          1,016.0   

Prior year loss reserve favorable development

      (47.5 )      (1.0 )      (1.9 )      (50.4 )      (22.3 )      (10.8 )      (29.0 )      (15.0 )      (77.1 )      (0.7 )      (128.2 ) 

Pre-tax catastrophe losses

      3.5        69.4        2.4        75.3        -          0.6        64.8        14.9        80.3        -          155.6   

Loss adjustment expenses (1)

      95.3        26.1        1.3        122.7        10.3        12.8        29.7        19.4        72.2        1.0        195.9   

Policy acquisition expenses and other underwriting expenses

            319.2                294.1        (0.3 )      613.0   

Policyholders’ dividends

            -                  0.4        -          0.4   
                                              

GAAP underwriting (loss) profit

            (13.0 )              18.1        0.3        5.4   

Net investment income

            89.1                92.9        11.3        193.3   

Other income

            12.2                13.8        5.0        31.0   

Other operating expenses

            (4.5 )              (10.7 )      (9.8 )      (25.0 ) 
                                              

Segment income before federal income taxes

          $ 83.8              $ 114.1      $ 6.8      $ 204.7   
                                              

 

(1) Loss adjustment expenses includes favorable (unfavorable) development of $1.5 million and $(2.2) million in Personal Lines, $20.1 million and $6.2 million in Commercial Lines, and $21.6 million and $4.0 million in Total P&C for the nine months ended September 30, 2009 and 2008, respectively.

 

10

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS

 

     Quarter ended September 30, 2009  
     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

    63.6  %    51.0  %    40.2  %    59.2  %    69.8  %    53.7  %    47.2  %    44.7  %    49.5  %    N/M    55.2  % 

Catastrophe losses

    0.3  %    12.7  %    3.1  %    4.2  %    -        1.7  %    8.9  %    0.4  %    3.4  %    N/M    3.9  % 

Loss development

    (4.0 )%    (0.9 )%    (5.2 )%    (3.1 )%    (21.9 )%    (4.5 )%    (6.3 )%    (3.0 )%    (6.2 )%    N/M    (6.1 )% 
      

Total losses

    59.9  %    62.8  %    38.1  %    60.3  %    47.9  %    50.9  %    49.8  %    42.1  %    46.7  %    N/M    53.0  % 

Loss adjustment expenses (1)

    12.2  %    8.6  %    3.1  %    10.8  %    11.2  %    6.6  %    13.2  %    7.4  %    9.6  %    N/M    10.3  % 

Policy acquisition and other underwriting expenses (2)

          29.1  %            41.5  %    N/M    34.3  % 

Policyholders’ dividends

          -                -        N/M    -     
                                     

Combined

          100.2  %            97.8  %    N/M    97.6  % 
                                     

Policies in force (3)

    (1.2 )%    4.7  %    (4.8 )%    1.2  %    (2.1 )%    (3.0 )%    2.7  %    (3.3 )%    (0.9 )%    -      0.9  % 

Retention (3), (4)

    74.3  %    82.0  %    N/M      78.2  %    77.8  %    79.7  %    80.0  %    78.4  %    79.4  %      
     Quarter ended September 30, 2008  
     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

    63.7  %    47.4  %    40.2  %    58.4  %    61.1  %    51.4  %    59.4  %    39.9  %    51.8  %    N/M    55.7  % 

Catastrophe losses

    0.5  %    34.8  %    13.4  %    10.8  %    -        0.2  %    52.0  %    12.5  %    23.2  %    N/M    15.8  % 

Loss development

    (5.3 )%    (1.2 )%    (12.4 )%    (4.3 )%    (17.5 )%    (9.6 )%    (5.9 )%    (5.0 )%    (7.7 )%    N/M    (5.7 )% 
      

Total losses

    58.9  %    81.0  %    41.2  %    64.9  %    43.6  %    42.0  %    105.5  %    47.4  %    67.3  %    N/M    65.8  % 

Loss adjustment expenses (1)

    12.3  %    8.4  %    3.1  %    10.9  %    10.6  %    8.0  %    11.3  %    8.7  %    9.7  %    N/M    10.5  % 

Policy acquisition and other underwriting expenses (2)

          27.0  %            38.1  %    N/M    31.5  % 

Policyholders’ dividends

          -                -        N/M    -     
                                     

Combined

          102.8  %            115.1  %    N/M    107.8  % 
                                     

Policies in force (3)

    (2.0 )%    (1.2 )%    (5.7 )%    (1.8 )%    2.9  %    5.3  %    0.9  %    4.8  %    3.2  %    -      (1.2 )% 

Retention (3), (4)

    73.2  %    81.3  %    N/M      77.4  %    76.3  %    78.5  %    82.9  %    72.8  %    80.5  %      

 

(1) Loss adjustment expenses includes (unfavorable) favorable development of $(0.2) million and $(0.1) million in Personal Lines, $4.4 million and $2.9 million in Commercial Lines, and $4.2 million and $2.8 million in Total P&C for the quarters ended September 30, 2009 and 2008, respectively.

 

(2) Policy acquisition and other underwriting expenses are reduced by installment fee revenues for purposes of the ratio calculation.

 

(3) Policies in force and retention rates do not include recent acquisitions of Professionals Direct, Inc., Verlan Fire Insurance Company, and AIX, Inc.

 

(4) 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.

 

11

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS

 

     Nine Months ended September 30, 2009  
     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

    65.0  %    52.2  %    35.9  %    60.3  %    67.8  %    53.5  %    47.5  %    42.9  %    49.0  %    N/M    55.5  % 

Catastrophe losses

    0.6  %    18.0  %    2.4  %    5.9  %    -        0.8  %    8.2  %    1.6  %    3.5  %    N/M    4.9  % 

Loss development

    (6.1 )%    2.4  %    (5.5 )%    (3.5 )%    (20.0 )%    (3.4 )%    (5.9 )%    (6.5 )%    (7.2 )%    N/M    (5.6 )% 
      

Total losses

    59.5  %    72.6  %    32.8  %    62.7  %    47.8  %    50.9  %    49.8  %    38.0  %    45.3  %    N/M    54.8  % 

Loss adjustment expenses (1)

    12.2  %    8.7  %    2.0  %    10.9  %    0.6  %    5.4  %    11.4  %    8.5  %    8.1  %    N/M    9.7  % 

Policy acquisition and other underwriting expenses (2)

          28.5  %            41.2  %    N/M    33.9  % 

Policyholders’ dividends

          -                -        N/M    -     
                                     

Combined

          102.1  %            94.6  %    N/M    98.4  % 
                                     

Policies in force (3)

    (1.2 )%    4.7  %    (4.8 )%    1.2  %    (2.1 )%    (3.0 )%    2.7  %    (3.3 )%    (0.9 )%    -      0.9  % 

Retention (3), (4)

    74.3  %    82.0  %    N/M      78.2  %    73.8  %    77.7  %    79.9  %    78.3  %    78.3  %      
     Nine Months ended September 30, 2008  
     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

    64.5  %    48.5  %    34.2  %    59.0  %    65.7  %    52.6  %    49.2  %    38.0  %    48.3  %    N/M    54.7  % 

Catastrophe losses

    0.5  %    21.5  %    8.1  %    6.8  %    -        0.4  %    23.9  %    6.2  %    10.7  %    N/M    8.4  % 

Loss development

    (6.3 )%    (0.3 )%    (6.4 )%    (4.5 )%    (24.4 )%    (7.2 )%    (10.7 )%    (6.3 )%    (10.3 )%    N/M    (6.9 )% 
      

Total losses

    58.7  %    69.7  %    35.9  %    61.3  %    41.3  %    45.8  %    62.4  %    37.9  %    48.7  %    N/M    56.2  % 

Loss adjustment expenses (1)

    12.6  %    8.1  %    4.4  %    11.1  %    11.3  %    8.6  %    10.9  %    8.1  %    9.6  %    N/M    10.5  % 

Policy acquisition and other underwriting expenses (2)

          27.9  %            38.9  %    N/M    32.4  % 

Policyholders’ dividends

          -                0.1  %    N/M    -     
                                     

Combined

          100.3  %            97.3  %    N/M    99.1  % 
                                     

Policies in force (3)

    (2.0 )%    (1.2 )%    (5.7 )%    (1.8 )%    2.9  %    5.3  %    0.9  %    4.8  %    3.2  %    -      (1.2 )% 

Retention (3), (4)

    73.2  %    81.3  %    N/M      77.4  %    79.2  %    80.2  %    80.9  %    75.0  %    80.8  %      

 

(1) Loss adjustment expenses includes favorable (unfavorable) development of $1.5 million and $(2.2) million in Personal Lines, $20.1 million and $6.2 million in Commercial Lines, and $21.6 million and $4.0 million in Total P&C for the nine months ended September 30, 2009 and 2008, respectively.

 

(2) Policy acquisition and other underwriting expenses are reduced by installment fee revenues for purposes of the ratio calculation.

 

(3) Policies in force and retention rates do not include recent acquisitions of Professionals Direct, Inc., Verlan Fire Insurance Company, and AIX, Inc.

 

(4) 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.

 

12

INVESTMENTS

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME

 

     Nine Months ended September 30  
(In millions, except yields)    2009     2008  
   
           Yield           Yield  
                

Fixed maturities (1)

    $ 186.4      5.56 %    $ 188.1      5.60 % 

Equity securities

      3.3      -          3.1      -     

Mortgages (2)

      1.8      8.63 %      0.7      10.32 % 

All other

      1.8      -          5.7      -     

Investment expenses

      (5.0 )    -          (3.7 )    -     
                

Total (3)

    $ 188.3      5.18 %    $ 193.9      5.45 % 
                

 

(1) Includes purchase accounting adjustments of $(1.6) million and $(2.5) million for the nine months ended September 30, 2009 and 2008, respectively.

 

(2) Excluding mortgage prepayment fees of $0.1 and $0.2 million for the nine months ended September 30, 2009 and 2008, mortgage yields were 8.37% and 8.86%, respectively.

 

(3) Excludes discontinued operations of $1.3 million and $49.8 million for the nine months ended September 30, 2009 and 2008, respectively.

 

13

THE HANOVER INSURANCE GROUP

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)

 

     Quarter ended September 30     Nine Months ended September 30  
(In millions)    2009     2008     2009     2008  
   

Total other-than-temporary impairment losses

    $ (4.5 )    $ (53.1 )    $ (39.1 )    $ (66.7 ) 

Portion of loss recognized in other comprehensive income

      (1.6 )      -          9.8        -     
                                

Net other-than-temporary losses on securities recognized in earnings

      (6.1 )      (53.1 )      (29.3 )      (66.7 ) 

Realized gains from sales and other

      6.1        0.3        19.6        6.0   
                                

Net realized investment losses (1)

    $ -        $ (52.8 )    $ (9.7 )    $ (60.7 ) 
                                

 

(1) Excludes discontinued operations of $(15.6) million for the quarter ended September 30, 2008, and $(3.2) million and $(23.0) million for the nine months ended September 30, 2009 and 2008, respectively. There were no realized gains or losses for discontinued operations for the quarter ended September 30, 2009.

 

14

THE HANOVER INSURANCE GROUP

INVESTMENT PORTFOLIO

 

($ in millions)    September 30, 2009             
   
Investment Type    Weighted
Average
Quality		    Amortized
Cost		    Fair
Value		    Net
Unrealized
Gain (Loss)		     Change in
Net
Unrealized
Q3		    Change in
Net
Unrealized
YTD		  
                  

Fixed Maturities:

                 

Corporate:

                 

NAIC 1

    A    $ 902.1    $ 936.3    $ 34.2      $ 39.6    $ 94.0   

NAIC 2

    BBB      1,059.8      1,103.5      43.7        51.4      115.9   

NAIC 3 and below

    B+      298.2      294.6      (3.6 )      25.7      52.9   
                          

Total corporate

    BBB+      2,260.1      2,334.4      74.3        116.7      262.8   

Asset backed:

                 

Residential mortgage backed securities

    AA+      922.1      938.4      16.3        14.8      17.6   

Commercial mortgage backed securities

    AA+      336.7      337.8      1.1        21.0      32.0   

Asset backed securities

    A-      67.3      70.1      2.8        3.2      10.1   

Municipals:

                 

Taxable

    AA-      631.2      635.9      4.7        4.4      19.8   

Tax exempt

    A+      204.8      208.2      3.4        12.1      19.9   

U.S. government

    AAA      385.8      388.6      2.8        2.3      (1.8 ) 
                          

Total fixed maturities (1)

    A+      4,808.0      4,913.4      105.4        174.5      360.4   

Equity securities:

                 

Perpetual preferred securities

         32.4      36.3      3.9        4.5      17.3   

Common equity securities

         77.4      85.7      8.3        10.2      16.3   
                          

Total fixed maturities and equity securities

         4,917.8      5,035.4      117.6        189.2      394.0   

Cash and cash equivalents (2)

         241.3      241.3      -          -        -     

Mortgage loans and other long-term investments

         35.1      37.1      2.0        -        (0.1 ) 
                          

Total

       $ 5,194.2    $ 5,313.8    $ 119.6      $ 189.2    $ 393.9   
                          

 

(1) Includes discontinued accident and health business of $111.7 million in amortized cost and $108.3 million in fair value at September 30, 2009. Net unrealized losses associated with the discontinued accident and health business improved $5.6 million during the third quarter of 2009 and $10.5 million since year end 2008.

 

(2) Includes discontinued accident and health business of $8.1 million in amortized cost and in fair value at September 30, 2009.

 

15

THE HANOVER INSURANCE GROUP

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE

 

(In millions)    September 30, 2009    December 31, 2008
     Gross
Unrealized
Losses and OTTI		    Fair
Value		    Gross
Unrealized
Losses		    Fair
Value
             

INVESTMENT GRADE FIXED MATURITIES:

            

12 months or less

    $ 14.3    $ 325.7    $ 150.2    $ 1,724.1

Greater than 12 months

      57.2      438.1      94.4      469.8
                           

Total investment grade fixed maturities

      71.5      763.8      244.6      2,193.9

BELOW INVESTMENT GRADE FIXED MATURITIES:

            

12 months or less

      24.4      99.3      64.2      152.5

Greater than 12 months

      22.0      160.3      -        -  
                           

Total below investment grade fixed maturities

      46.4      259.6      64.2      152.5

PERPETUAL PREFERRED SECURITIES:

            

12 months or less

      -        -        -        -  

Greater than 12 months

      -        -        13.4      28.5
                           

Total perpetual preferred securities

      -        -        13.4      28.5

EQUITY SECURITIES:

            

12 months or less

      0.1      0.1      11.4      32.3

Greater than 12 months

      -        -        -        -  
                           

Total equity securities

      0.1      0.1      11.4      32.3
                           

Total (1)

    $ 118.0    $ 1,023.5    $ 333.6    $ 2,407.2
                           

 

(1) Includes discontinued accident and health business of $11.1 million in gross unrealized losses with $36.3 million in fair value at September 30, 2009 and $15.7 million in gross unrealized losses with $52.3 million in fair value at December 31, 2008.

 

16

THE HANOVER INSURANCE GROUP

CREDIT QUALITY OF FIXED MATURITIES

 

(In millions)          September 30, 2009    December 31, 2008
NAIC Designation    Rating Agency Equivalent Designation    Amortized
Cost		    Fair
Value		    Amortized
Cost		    Fair
Value
        

1

    Aaa/Aa/A    $ 3,208.0    $ 3,287.8    $ 3,098.1    $ 2,997.8

2

    Baa      1,253.9      1,293.1      1,074.8      981.5

3

    Ba      159.1      147.0      151.5      133.2

4

    B      101.8      99.8      111.0      83.8

5

    Caa and lower      69.1      70.4      37.1      24.5

6

    In or near default      16.1      15.3      8.8      5.5
                

Total fixed maturities (1)

       $ 4,808.0    $ 4,913.4    $ 4,481.3    $ 4,226.3
                

 

(1) Includes discontinued accident and health business of $111.7 million in amortized cost and $108.3 million in fair value at September 30, 2009 and $99.3 million in amortized cost and $85.4 million in fair value at December 31, 2008.

 

17

THE HANOVER INSURANCE GROUP

TOP 25 FINANCIAL FIXED MATURITY HOLDINGS

 

(In millions, except percentage data)   As of September 30, 2009
Issuer   Amortized Cost         Fair Value        

 As a percent of    

 Invested Assets    

        S&P Ratings    

Bank of America

   $   34.2    $    30.4     0.57%            A-    

Wells Fargo

     21.9       21.9     0.41%            AA-    

PNC Bank

     19.9       19.3     0.36%            A    

GE Capital

     19.3       19.6     0.37%            AA+    

American Express

     18.3       18.0     0.34%            BBB+    

Capital One

     17.4       17.9     0.34%            BBB    

Manufacturers & Traders Bank

     15.1       12.6     0.24%            A-    

Morgan Stanley

     15.0       16.2     0.31%            A    

Fifth Third Bancorp

     15.0       13.1     0.25%            BBB-    

Student Loan Market

     14.5       14.2     0.27%            BBB-    

Bank of Scotland

     13.0       12.8     0.24%            BBB    

Genworth Global Funding

     12.9       12.7     0.24%            BBB    

Branch Bank & Trust

     12.5       12.7     0.24%            A    

Prudential Financial

     12.5       12.9     0.24%            A    

Charter One

     12.1       12.2     0.23%            BBB+    

Goldman Sachs

     12.0       12.1     0.23%            A    

Union Bank of California

     11.5       11.4     0.21%            A    

American General Finance

     10.8       8.5     0.16%            BB+    

Aetna

     10.6       11.0     0.21%            A-    

FMR

     10.5       10.7     0.20%            A+    

Simon Property Group

     10.1       10.3     0.19%            A-    

Regions Bank

     10.1       8.2     0.15%            BB+    

Bank of Oklahoma

     10.0       9.0     0.17%            BBB+    

Bank of New York Mellon

     9.6       9.8     0.18%            A+    

Lincoln National

       9.5         7.1     0.13%            BBB    

Top 25 Financial

     358.3       344.6     6.48%         

Other Financial

       143.9         137.5     2.59%         

Total Financial

   $   502.2    $    482.1     9.07%         

 

18

THE HANOVER INSURANCE GROUP

TOP 25 NON-FINANCIAL FIXED MATURITY HOLDINGS

 

(In millions, except percentage data)   As of September 30, 2009
Issuer   Amortized Cost         Fair Value        

As a percent of    

Invested Assets    

        S&P Ratings    

Valero Energy

   $   19.7    $    19.4      0.37%            BBB    

Union Pacific

     19.3       20.1      0.38%            BBB    

Dominion Resources

     18.2       19.1      0.36%            A-    

Conoco Phillips

     18.0       19.2      0.36%            A    

AT&T

     17.8       19.0      0.36%            A    

Safeway

     17.4       18.5      0.35%            BBB    

Kroger

     17.4       18.4      0.35%            BBB    

CVS

     17.3       18.3      0.34%            BBB+    

Home Depot

     16.9       17.8      0.34%            BBB+    

Miller Brewing

     16.4       17.6      0.33%            BBB+    

Comcast

     15.8       17.6      0.33%            BBB+    

Schering-Plough

     15.4       16.7      0.31%            A-    

Pacific Gas & Electric

     15.3       16.8      0.32%            BBB+    

Canadian National Railways

     15.0       16.2      0.30%            A-    

Shell

     15.0       15.8      0.30%            AA    

Vodafone

     14.9       15.9      0.30%            A-    

Atmos Energy

     14.9       16.1      0.30%            BBB+    

Plains All-America Pipeline

     14.6       15.1      0.28%            BBB-    

Sempra Energy

     14.6       15.3      0.29%            BBB+    

BP Capital Markets

     14.4       14.9      0.28%            AA    

Duke Energy

     14.4       15.3      0.29%            A-    

Enterprise Products

     14.2       14.5      0.27%            BBB-    

Exelon

     14.1       14.4      0.27%            BBB-    

Deutsche Telecom

     13.9       14.9      0.28%            BBB+    

Lowe’s

       13.6         14.8      0.28%            A+    

Top 25 Non-Financial

     398.5       421.7      7.94%         

Other Non-Financial

       1,359.4         1,430.6    26.92%         

Total Non-Financial

   $   1,757.9    $    1,852.3    34.86%         

 

19

PROPERTY & CASUALTY

 

STATUTORY RATIOS

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

 

     Quarter ended September 30, 2009  
     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

    63.6  %    51.0  %    40.2  %    59.1  %    66.7  %    53.3  %    46.8  %    44.7  %    49.2  %    N/M    55.1  % 

Catastrophe losses

    0.3  %    12.8  %    3.1  %    4.2  %    -        1.9  %    9.2  %    0.8  %    3.7  %    N/M    4.0  % 

Loss development

    (4.0 )%    (0.9 )%    (5.2 )%    (3.1 )%    (20.9 )%    (4.5 )%    (6.2 )%    (3.0 )%    (6.2 )%    N/M    (6.0 )% 
      

Total losses

    59.9  %    62.9  %    38.1  %    60.2  %    45.8  %    50.7  %    49.8  %    42.5  %    46.7  %    N/M    53.1  % 

Loss adjustment expenses (1)

    12.2  %    8.6  %    4.1  %    10.9  %    11.0  %    6.6  %    13.0  %    7.3  %    9.5  %    N/M    10.3  % 

Policy acquisition and other underwriting expenses

          29.3  %            40.7  %    N/M    34.2  % 

Policyholders’ dividends

          -                0.1  %    N/M    -     
                                     

Combined

          100.4  %            97.0  %    N/M    97.6  % 
                                     
     Quarter ended September 30, 2008  
     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

    63.8  %    47.3  %    40.2  %    58.4  %    61.3  %    51.3  %    59.3  %    40.0  %    51.8  %    N/M    55.7  % 

Catastrophe losses

    0.5  %    34.9  %    12.4  %    10.8  %    -        0.2  %    51.3  %    11.3  %    22.5  %    N/M    15.6  % 

Loss development

    (5.3 )%    (1.2 )%    (12.4 )%    (4.3 )%    (17.5 )%    (9.6 )%    (5.9 )%    (5.0 )%    (7.7 )%    N/M    (5.7 )% 
      

Total losses

    59.0  %    81.0  %    40.2  %    64.9  %    43.8  %    41.9  %    104.7  %    46.3  %    66.6  %    N/M    65.6  % 

Loss adjustment expenses (1)

    12.2  %    8.4  %    4.1  %    10.9  %    10.3  %    8.0  %    11.3  %    8.6  %    9.7  %    N/M    10.5  % 

Policy acquisition and other underwriting expenses

          26.5  %            38.4  %    N/M    31.1  % 

Policyholders’ dividends

          -                0.1  %    N/M    -     
                                     

Combined

          102.3  %            114.8  %    N/M    107.2  % 
                                     

 

(1) Loss adjustment expenses includes (unfavorable) favorable development of $(0.2) million and $(0.1) million in Personal Lines, $4.4 million and $2.9 million in Commercial Lines, and $4.2 million and $2.8 million in Total P&C for the quarters ended September 30, 2009 and 2008, respectively.

 

20

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

 

     Nine Months ended September 30, 2009  
     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

    65.0  %    52.3  %    35.7  %    60.4  %    66.5  %    53.4  %    47.4  %    43.3  %    49.0  %    N/M    55.7  % 

Catastrophe losses

    0.5  %    18.0  %    2.4  %    5.9  %    -            0.8  %    8.3  %    1.7  %    3.6  %    N/M    4.9  % 

Loss development

    (6.1 )%    2.4  %    (5.4 )%    (3.5 )%    (19.6 )%    (3.4 )%    (5.9 )%    (6.5 )%    (7.2 )%    N/M    (5.6 )% 
      

Total losses

    59.4  %    72.7  %    32.7  %    62.8  %    46.9  %    50.8  %    49.8  %    38.5  %    45.4  %    N/M    55.0  % 

Loss adjustment expenses (1)

    12.2  %    8.7  %    2.0  %    10.9  %    0.6  %    5.4  %    11.4  %    8.4  %    8.0  %    N/M    9.7  % 

Policy acquisition and other underwriting expenses

          29.4  %            40.3  %    N/M    34.2  % 

Policyholders’ dividends

          -                0.1  %    N/M    -     
                                     

Combined

          103.1  %            93.8  %    N/M    98.9  % 
                                     
     Nine Months ended September 30, 2008  
     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

    64.5  %    48.5  %    34.2  %    59.0  %    65.4  %    52.6  %    49.2  %    38.3  %    48.4  %    N/M    54.7  % 

Catastrophe losses

    0.5  %    21.6  %    8.1  %    6.8  %    -        0.4  %    23.7  %    5.8  %    10.5  %    N/M    8.3  % 

Loss development

    (6.3 )%    (0.3 )%    (6.4 )%    (4.6 )%    (24.3 )%    (7.3 )%    (10.7 )%    (6.3 )%    (10.3 )%    N/M    (6.9 )% 
      

Total losses

    58.7  %    69.8  %    35.9  %    61.2  %    41.1  %    45.7  %    62.2  %    37.8  %    48.6  %    N/M    56.1  % 

Loss adjustment expenses (1)

    12.6  %    8.1  %    4.7  %    11.0  %    11.2  %    8.6  %    10.9  %    8.1  %    9.6  %    N/M    10.5  % 

Policy acquisition and other underwriting expenses

          28.4  %            38.4  %    N/M    32.6  % 

Policyholders’ dividends

          -                0.1  %    N/M    -     
                                     

Combined

          100.6  %            96.7  %    N/M    99.2  % 
                                     

 

(1) Loss adjustment expenses includes favorable (unfavorable) development of $1.5 million and $(2.2) million in Personal Lines, $20.1 million and $6.2 million in Commercial Lines, and $21.6 million and $4.0 million in Total P&C for the nine months ended September 30, 2009 and 2008, respectively.

 

21

Historical Highlights

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS

 

(In millions, except per share data)    Q3 09     Q2 09     Q1 09     2008     Q4 08     Q3 08     Q2 08     Q1 08  
   

SEGMENT INCOME (1)

                   

Property and Casualty

                   

Personal Lines

    $ 27.4      $ 25.6      $ 3.1      $ 123.5      $ 39.7      $ 18.1      $ 38.6      $ 27.1   

Commercial Lines

      38.7        50.9        47.6        169.7        55.6        (6.6 )      52.7        68.0   

Other Property and Casualty

      7.5        (0.2 )      (0.8 )      9.0        2.2        2.3        2.9        1.3   
        

Total Property and Casualty

      73.6        76.3        49.9        302.2        97.5        13.8        94.2        96.4   

Interest expense on corporate debt

      (6.3 )      (10.5 )      (10.4 )      (39.9 )      (10.0 )      (10.0 )      (9.9 )      (10.0 ) 
        
 

Total segment income before federal income taxes

    $ 67.3      $ 65.8      $ 39.5      $ 262.3      $ 87.5      $ 3.8      $ 84.3      $ 86.4   
        
 

Federal income tax expense on segment income

      (22.0 )      (21.8 )      (13.1 )      (86.3 )      (27.9 )      (0.5 )      (28.8 )      (29.1 ) 
        
 

Total segment income after federal income taxes

    $ 45.3      $ 44.0      $ 26.4      $ 176.0      $ 59.6      $ 3.3      $ 55.5      $ 57.3   
        

Federal income tax settlement

      -          -          -          6.4        -          6.4        -          -     

Net realized investment losses

      -          (3.6 )      (6.1 )      (97.8 )      (37.1 )      (52.8 )      (7.6 )      (0.3 ) 

Gain from retirement of corporate debt

      0.2        34.3        -          -          -          -          -          -     

Other non-segment items

      -          0.1        (0.1 )      (0.1 )      (0.1 )      -          -          -     

Federal income tax benefit (expense) on non-segment income

      3.1        (11.7 )      -          -          0.4        (0.4 )      -          -     
        

Income (loss) from continuing operations

      48.6        63.1        20.2        84.5        22.8        (43.5 )      47.9        57.0   
 

Discontinued operations (net of taxes):

                   

Gain (loss) from discontinued FAFLIC business

      0.4        0.9        5.0        (84.8 )      8.1        (21.7 )      (67.7 )      (3.5 ) 

Gain (loss) from discontinued accident and health business

      0.7        0.2        (3.3 )      -          -          -          -          -     

Gain from operations of AMGRO

      -          -          -          10.1        -          -          10.4        -     

Gain (loss) on disposal of discontinued variable life and annuity business

      -          0.2        3.9        11.3        3.2        2.7        (0.8 )      6.2   

Other

      -          -          -          (0.5 )      -          0.7        -          (1.2 ) 
        
 

NET INCOME (LOSS)

    $ 49.7      $ 64.4      $ 25.8      $ 20.6      $ 34.1      $ (61.8 )    $ (10.2 )    $ 58.5   
        
 

PER SHARE DATA (DILUTED)

                   
 

INCOME (LOSS) FROM CONTINUING OPERATIONS

    $ 0.95      $ 1.23      $ 0.39      $ 1.63      $ 0.44      $ (0.85 )    $ 0.92      $ 1.09   
 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS

    $ 0.02      $ 0.02      $ 0.11      $ (1.23 )    $ 0.22      $ (0.36 )    $ (1.12 )    $ 0.03   

NET INCOME (LOSS)

    $ 0.97      $ 1.25      $ 0.50      $ 0.40      $ 0.66      $ (1.21 )    $ (0.20 )    $ 1.12   
 

WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) (2)

      51.2        51.4        51.4        51.7        51.4        51.0        51.8        52.3   

BALANCE SHEET

                 

Total assets

    $ 8,088.6      $ 7,747.7      $ 7,698.1        $ 9,230.2      $ 9,254.8      $ 9,463.8      $ 9,700.6   

Total shareholders’ equity

    $ 2,407.1      $ 2,221.1      $ 1,967.6        $ 1,887.2      $ 2,040.1      $ 2,212.7      $ 2,320.7   

Book value per share

    $ 48.06      $ 43.75      $ 38.62        $ 37.08      $ 40.09      $ 43.57      $ 45.23   

Book value per share, excluding accumulated other comprehensive (loss) income

    $ 48.28      $ 47.15      $ 45.16        $ 44.64      $ 44.37      $ 45.55      $ 45.70   

 

(1) Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty and interest expense on corporate debt. In accordance with generally accepted accounting principles, 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 ended September 30, 2008 represents basic shares outstanding due to antidilution.

 

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THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS

(In millions, except per share data)    2007     Q4 07     Q3 07     Q2 07     Q1 07  
   

SEGMENT INCOME (1)

             

Property and Casualty

             

Personal Lines

    $ 208.2      $ 57.8      $ 48.8      $ 55.0      $ 46.6   

Commercial Lines

      169.3        42.6        39.2        38.9        48.6   

Other Property and Casualty

      4.8        (2.4 )      0.3        2.5        4.4   
        

Total Property and Casualty

      382.3        98.0        88.3        96.4        99.6   

Interest expense on corporate debt

      (39.9 )      (10.0 )      (10.0 )      (9.9 )      (10.0 ) 
        
 

Total segment income before federal income taxes

    $ 342.4      $ 88.0      $ 78.3      $ 86.5      $ 89.6   
        
 

Federal income tax expense on segment income

      (113.7 )      (27.2 )      (26.6 )      (29.8 )      (30.1 ) 
        

Total segment income after federal income taxes

    $ 228.7      $ 60.8      $ 51.7      $ 56.7      $ 59.5   
        

Net realized investment (losses) gains

      (0.9 )      (0.6 )      (0.8 )      0.2        0.3   

Federal income tax benefit (expense) on non-segment income

      0.5        0.1        0.6        (0.1 )      (0.1 ) 
        

Income from continuing operations

      228.3        60.3        51.5        56.8        59.7   
 

Discontinued operations (net of taxes):

             

Income from discontinued FAFLIC business

      10.9        2.6        1.5        2.7        4.1   

Gain (loss) on disposal of discontinued variable life and annuity business

      13.1        12.9        0.1        0.3        (0.2 ) 

Other

      0.8        -          0.8        -          -     
        
 

NET INCOME

    $ 253.1      $ 75.8      $ 53.9      $ 59.8      $ 63.6   
        
 

PER SHARE DATA (DILUTED)

             
 

INCOME FROM CONTINUING OPERATIONS

    $ 4.36      $ 1.15      $ 0.98      $ 1.09      $ 1.15   
 

INCOME FROM DISCONTINUED OPERATIONS

    $ 0.47      $ 0.29      $ 0.05      $ 0.05      $ 0.07   

NET INCOME

    $ 4.83      $ 1.44      $ 1.03      $ 1.14      $ 1.22   
 

WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED)

      52.4        52.6        52.5        52.3        51.9   

BALANCE SHEET

           

Total assets

      $ 9,815.6      $ 9,845.2      $ 9,805.7      $ 9,776.2   

Total shareholders’ equity

      $ 2,299.0      $ 2,192.6      $ 2,099.4      $ 2,100.7   

Book value per share

      $ 44.37      $ 42.34      $ 40.55      $ 40.92   

Book value per share, excluding accumulated other comprehensive (loss) income

      $ 44.77      $ 43.62      $ 42.51      $ 41.33   

 

(1) Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty and interest expense on corporate debt. In accordance with generally accepted accounting principles, 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.

 

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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    2009
                 Price Range                Dividends
Per Share
    

High

   

Low

   

March 31

    $ 43.37    $ 28.49      -  

June 30

    $ 38.11    $ 29.19      -  

September 30

    $ 42.82    $ 37.23      -  

December 31

         
Quarter Ended    2008
                 Price Range               

Dividends

Per Share

    

High

   

Low

   

March 31

    $ 47.17    $ 40.14      -  

June 30

    $ 46.83    $ 41.71      -  

September 30

    $ 51.00    $ 38.01      -  

December 31

    $ 45.00    $ 31.92    $ 0.45

INDUSTRY RATINGS AS OF NOVEMBER 2, 2009

 

Financial Strength Ratings   

    A.M.    

Best

   

    Standard    

& Poor’s

        Moody’s              Fitch      

Property and Casualty Insurance Companies:

                    

The Hanover Insurance Company

    A    A-    A3    A-

Citizens Insurance Company of America

    A    A-    -      A-
Debt Ratings    A.M.
Best		   

Standard

& Poor’s

    Moody’s    Fitch

The Hanover Insurance Group, Inc. Senior Debt

    bbb    BBB-    Baa3    BBB-

The Hanover Insurance Group, Inc. Junior Subordinated Debentures

    bb+    BB-    Ba1    BB+

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

Oksana Lukasheva

Assistant Vice President

Investor Relations

(508) 855-2063

olukasheva@hanover.com

INVESTOR INFORMATION LINE

Dial 1-800-407-5222 to receive additional printed information, fax-on-demand services or other prerecorded messages.

Please visit our internet site at http:// www.Hanover.com

 

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