Form 8-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Adcb8bNQ6j+LbhH2N6CTPRCI2LiirBINTp8gt+5jRetpMi6pl+HDRrMGDeiorSg+ Ji7Cb9ejxiCpDOf8t8/SBA== 0001193125-10-111157.txt : 20100506 0001193125-10-111157.hdr.sgml : 20100506 20100506172155 ACCESSION NUMBER: 0001193125-10-111157 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20100506 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20100506 DATE AS OF CHANGE: 20100506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANOVER INSURANCE GROUP, INC. CENTRAL INDEX KEY: 0000944695 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 043263626 STATE OF INCORPORATION: DE FISCAL YEAR END: 1106 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13754 FILM NUMBER: 10809247 BUSINESS ADDRESS: STREET 1: 440 LINCOLN ST CITY: WORCESTER STATE: MA ZIP: 01653 BUSINESS PHONE: 5088551000 MAIL ADDRESS: STREET 1: 440 LINCOLN ST CITY: WORCESTER STATE: MA ZIP: 01653 FORMER COMPANY: FORMER CONFORMED NAME: ALLMERICA FINANCIAL CORP DATE OF NAME CHANGE: 19950501 8-K 1 d8k.htm FORM 8-K Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 6, 2010

THE HANOVER INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

1-13754

04-3263626

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

440 Lincoln Street, Worcester, Massachusetts 01653

(Address of principal executive offices) (Zip Code)

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

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

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

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

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

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

Item 2.02

Results of Operations and Financial Condition.

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

On May 6, 2010, The Hanover Insurance Group, Inc. issued a press release announcing its financial results for the quarter ended March 31, 2010. The release is furnished as Exhibit 99.1 hereto. Additionally, on May 6, 2010, the Company made available on its website financial information contained in its Statistical Supplement for the period ended March 31, 2010. The supplement is furnished as Exhibit 99.2 hereto.

Item 9.01

Financial Statements and Exhibits.

(a)	Not applicable.

(b)	Not applicable.

(c)	Not applicable.

(d)

Exhibits.

The following exhibits are furnished herewith.


Exhibit 99.1		Press Release, dated May 6, 2010, announcing the Company’s financial results for the quarter ended March 31, 2010.

Exhibit 99.2		The Hanover Insurance Group, Inc. Statistical Supplement for the period ended March 31, 2010.

SIGNATURES

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


	The Hanover Insurance Group, Inc.
	(Registrant)

Date May 6, 2010	By:	/s/ Steven J. Bensinger
	Steven J. Bensinger
	Executive Vice President
	and Chief Financial Officer

Exhibit Index


Exhibit 99.1		Press Release, dated May 6, 2010, announcing the Company’s financial results for the quarter ended March 31, 2010.

Exhibit 99.2		The Hanover Insurance Group, Inc. Statistical Supplement for the period ended March 31, 2010.

EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

WORCESTER, Mass., May 6, 2010 –

The Hanover Insurance Group Reports

First Quarter Results

First Quarter 2010 Financial Highlights

•

Net income of $41.8 million, or $0.87 per share, compared to net income of $25.8 million, or $0.50 per share, in the prior-year quarter

•

After-tax segment income of $32.0 million, or $0.66 per share, compared to $26.4 million, or $0.51 per share, in the prior-year quarter⁽¹⁾

•

Combined ratio of 99.7%, compared to 101.1% in the prior-year quarter; ex-catastrophe combined ratio⁽²⁾ of 94.5%, compared to 95.2% in the prior-year quarter

•

Net premiums written of $725.2 million, compared to $629.9 million in the prior-year quarter, an increase of 15.1%

•

Book value per share of $51.59 at March 31, 2010, compared to $49.72 per share at December 31, 2009, and $38.62 at March 31, 2009, an increase of 3.8% and 33.6%, respectively

Financial Highlights


	Quarter ended March 31
*$ in millions, except per share amounts*	2010			2009
Total Segment Income After Taxes⁽¹⁾	$	32.0		$	26.4
Net Realized Investment Gains (Losses) and Other		10.2			(6.2	)

Income from Continuing Operations		42.2			20.2
(Loss) Gain from Discontinued Operations		(0.4	)		5.6

Net Income	$	41.8		$	25.8

Net Income Per Share (Diluted)	$	0.87		$	0.50

(1)	Segment income after tax and segment income after tax per share are non-GAAP measures. The reconciliation of these measures to the closest GAAP measure, income from continuing operations and income from continuing operations per share, is provided on page 11 of this press release.

(2)	Ex-catastrophe combined ratio is a non-GAAP measure. The combined ratio (which includes catastrophe losses) is the closest GAAP measure.

The Hanover Insurance Group, Inc. (NYSE: THG) today reported net income for the first quarter of 2010 of $41.8 million, or $0.87 per share, compared to $25.8 million, or $0.50 per share, in the first quarter of the prior year. Net income for the first quarter of 2010 included $10.9 million, or $0.23 per share, of net realized investment gains, compared to a $6.1 million, or $0.12 per share, loss in the prior-year quarter. Net income for the prior-year quarter included a gain from discontinued operations of $5.6 million, or $0.11 per share, from our previously sold life businesses, compared to $0.4 million loss from discontinued operations in the first quarter of 2010.

Total Property and Casualty segment income before interest expense and taxes⁽ ¹⁾ was $57.7 million in the first quarter of 2010, compared to $49.9 million in the first quarter of the prior year. The pre-tax net impact of catastrophes was $34.4 million in the first quarter of 2010, compared to $37.4 million in the first quarter of 2009.

“I am very pleased with our Company’s performance in the quarter,” said Frederick H. Eppinger, chief executive officer at The Hanover. “It was a difficult weather quarter for the insurance industry as a whole, and accordingly, we had an elevated level of catastrophe losses. However, our core loss performance improved over prior periods and we were able to deliver a combined ratio below 100. We had industry-leading growth during the quarter, driven by recent investments we have made in our commercial and specialty businesses, both of which position us to achieve an improved earnings trajectory in future periods. As a result of this growth, our net written premiums in commercial lines were more than 50% of our total net written premiums in the quarter. We also continue to achieve rate increases, most notably in personal lines. And lastly, as a result of our earnings, unrealized investment gains and capital management actions, book value per share increased almost 4% for the quarter, as we continue to build value for our shareholders.”

The following table details segment income:


	Quarter ended March 31
*$ in millions, except per share amounts*	2010			2009
Personal Lines	$	34.5		$	3.1
Commercial Lines		22.8			47.6
Other Property and Casualty		0.4			(0.8	)

Total Property & Casualty⁽¹⁾		57.7			49.9
Interest expense on debt		(9.3	)		(10.4	)

Total pre-tax segment income⁽¹⁾		48.4			39.5
Federal income tax expense		(16.4	)		(13.1	)

Total segment income after taxes ⁽¹⁾	$	32.0		$	26.4

Per share⁽¹⁾	$	0.66		$	0.51

⁽¹⁾	Total Property & Casualty, Total pre-tax segment income and Total segment income after taxes (and per share) are non-GAAP measures. See reconciliations to income from continuing operations, the closest GAAP measure, provided on page 11 of this press release.

The following table summarizes the components of the GAAP combined ratio:


	Quarter ended March 31
	2010		2009
Personal Lines losses (excluding catastrophes)	54.8	%	59.7	%
Personal Lines catastrophe-related losses	4.3	%	7.1	%
Total Personal Lines losses	59.1	%	66.8	%
Commercial Lines losses (excluding catastrophes)	44.9	%	42.2	%
Commercial Lines catastrophe-related losses	6.2	%	4.2	%
Total Commercial Lines losses	51.1	%	46.4	%
Total P&C Losses	55.6	%	58.2	%
Loss adjustment expenses	9.2	%	9.6	%
Policy acquisition and other underwriting expenses⁽¹⁾	34.9	%	33.3	%
Combined Ratio	99.7	%	101.1	%
Combined Ratio (excluding catastrophes)	94.5	%	95.2	%

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

Personal Lines

Personal Lines pre-tax segment income was $34.5 million in the first quarter of 2010, compared to $3.1 million in the prior-year quarter. The Personal Lines GAAP combined ratio was 97.3% in the current quarter, compared to 106.4% in the prior-year quarter. Catastrophe-related losses were $15.8 million, or 4.3 points of the first quarter combined ratio in 2010, compared to $26.0 million, or 7.1 points in the prior-year quarter.

Excluding the pre-tax impact of catastrophes, Personal Lines pre-tax segment income would have been $50.3 million in the first quarter of 2010, compared to $29.1 million in the prior-year quarter.

The year-over-year increase in quarterly ex-catastrophe segment income is primarily the result of lower ex-catastrophe current accident year losses, driven by a lower frequency of losses. We attribute this to mix of business improvements and rate increases, as well as more benign weather losses in our homeowners line, compared to the first quarter of 2009.

Favorable development of prior-year loss reserves was $10.6 million in the first quarter of 2010, compared to $8.4 million in the first quarter of 2009, representing 2.9 points and 2.2 points of the Personal Lines combined ratio, respectively.

Additionally, included in the first quarter 2010 results was approximately $2 million of favorable loss adjustment expenses (LAE) reserve development principally related to a change in the cost factors used for establishing unallocated loss adjustment expense reserves.

Net premiums written were $349.6 million in the first quarter of 2010, compared to $347.2 million in the first quarter of 2009, an increase of 0.7%. Improved pricing and retention, partially offset by lower new business, drove the modest year-over-year growth.

Commercial Lines

Commercial Lines pre-tax segment income was $22.8 million in the first quarter of 2010, compared to $47.6 million in the first quarter of 2009. The Commercial Lines GAAP combined ratio was 102.7% in the first quarter of 2010, compared to 94.0% in the prior-year quarter. Catastrophe related losses were $18.6 million, or 6.2 points of the first quarter combined ratio in 2010, compared to $11.4 million, or 4.2 points in the prior-year quarter. Excluding the pre-tax impact of catastrophes, Commercial Lines pre-tax segment income would have been $41.4 million in the first quarter of 2010, compared to $59.0 million in the prior-year quarter, primarily due to higher underwriting expenses and lower prior-year favorable development of loss and LAE reserves.

The higher expenses reflect continued investments in our Commercial Lines businesses, including upfront costs associated with the recently announced renewal rights transaction, as well as investments in our westward expansion initiative and specialty businesses.

Favorable development of prior-year loss reserves was $12.6 million in the first quarter of 2010, compared to favorable development of $23.2 million in the first quarter of 2009, representing 4.2 points and 8.6 points of the Commercial Lines combined ratio, respectively.

Additionally, included in the first quarter 2010 results was approximately $8 million of favorable LAE development, principally related to a change in the cost factors used for establishing unallocated loss adjustment expense reserves. Loss adjustment expenses in the first quarter of 2009 included an approximate $10 million benefit to loss adjustment expenses related to the change in our LAE reserving methodology.

Ex-catastrophe accident year losses were lower in the current quarter when compared to the prior-year quarter, primarily driven by a lower frequency of losses in our commercial multiple peril line, which we attribute to more benign weather. This was partially offset by a higher incidence of property losses in our inland marine business, reported as a part of Other Commercial Lines.

Net premiums written were $375.3 million in the first quarter of 2010, an increase of $92.6 million, or 32.8%, over $282.7 million net premiums written in the first quarter of 2009. This increase reflects the implementation of the recently announced renewal rights transaction, as well as continued growth in our specialty businesses.

Other Property & Casualty

Other Property & Casualty’s pre-tax segment income was $0.4 million in the first quarter of 2010, compared to a segment loss of $0.8 million in the prior-year quarter. The increase was primarily driven by lower pension expense related to retained pension liabilities from previously disposed life businesses, partially offset by lower net investment income.

Discontinued Operations

Discontinued Operations include several exited businesses, as well as results of the accident and health business, which was discontinued in 1998.

The net loss on discontinued operations in the first quarter of 2010 was $0.4 million, compared to a net gain of $5.6 million in the first quarter of 2009. The gain in the prior-year quarter was primarily driven by changes in estimates in our indemnification liabilities associated with our previously sold life business.

Investment Results

Net investment income from continuing operations decreased by $3.8 million, to $61.1 million for the first quarter of 2010, compared to $64.9 million in the same period of 2009. This decrease is primarily due to the utilization of fixed maturities to fund certain corporate actions, such as the 2009 stock and corporate debt repurchases and a $100 million contribution to the company’s pension plan on January 4, 2010. The impact of lower new money yields during the last 12 months also contributed to the decline.

In the first quarter of 2010, the company recognized pre-tax net investment gains of $13.6 million, primarily from sales of fixed maturity and equity securities, which were partially offset by impairment charges of $2.7 million, principally on fixed maturities. In the first quarter of 2009, the company recognized impairments of $16.5 million on fixed maturities and perpetual preferred securities, partially offset by pre-tax net realized gains of $10.4 million, primarily from sales of fixed maturities.

Realized gains/(losses) related to continuing operations:


*$ in millions*	Quarter ended March 31, 2010			Quarter ended March 31, 2009
Net gains on sales of securities	$	13.6		$	10.4
Impairments:

Investment grade fixed maturities		(1.6	)		—
Below investment grade fixed maturities		(0.8	)		(8.8	)
Perpetual preferred securities		—			(7.7	)
Equity securities		(0.3	)		—

Total net realized gains (losses)	$	10.9		$	(6.1	)

Investment Portfolio

The Company held $5.1 billion in cash and investment assets at March 31, 2010, including cash and investment assets associated with the discontinued accident and health business.

Fixed maturities and cash represented 99% of our investment portfolio. Approximately 93% of our fixed maturity portfolio is rated investment grade. Net unrealized investment gains increased $57.6 million during the quarter, from $106.4 million at December 31, 2009 to $164.0 million at March 31, 2010.

As of March 31, 2010, the Company had no investment exposure to non-US sovereign debt obligations.

Book Value and Other Items

The following exhibit provides a roll forward of book value for the quarter ended March 31, 2010:


	$ Amounts			$ per share
*$ in millions, except per share*	Quarter Ended March 31, 2010			Quarter Ended March 31, 2010
Beginning of Period Book Value	$	2,358.6		$	49.72
Net Income
Continuing Operations		42.2			0.88
Discontinued Operations		(0.4	)		(0.01	)
Change in AOCI, net of tax
Change in Pension and Postretirement Related Benefits		1.6			0.04
Change in Net Unrealized Investment Losses		37.4			0.84
Dividend		(12.3	)		(0.25	)
Common Stock Activity
Accelerated Stock Repurchase Program		(100.9	)		—
Other Stock Repurchases		(25.1	)		—
Other, net		1.1			—
Common Stock Net Activity, per share		—			0.37

Ending of Period Book Value	$	2,302.2		$	51.59

During the first quarter 2010, the company repurchased approximately 2.3 million shares of its common stock for approximately $100.9 million (subject to adjustment) under an Accelerated Stock Repurchase Transaction, and approximately 610,000 shares for $25.1 million through open market repurchases. At March 31, 2010, the company had approximately $65 million of capacity remaining under its $400 million stock repurchase program.

As was previously announced on February 18, 2010, the company successfully completed a senior unsecured offering of $200 million aggregate principal amount of its 7.50% senior notes due March 1, 2020. As of March 31, 2010, the company carried $632.3 million of total debt, which represents financial leverage (which is defined as the ratio of total debt to total capital) of 21.5%, with no consideration of equity credit for subordinated debt.

Earnings Conference Call

The Hanover will host a conference call to discuss the company’s first quarter results on Friday, May 7, 2010 at 10:00 a.m. Eastern Time. A PowerPoint slide presentation will accompany our prepared remarks and has been posted on our Web site. Interested investors and others can listen to the call and access the presentation through The Hanover’s Web site, located at www.hanover.com. Web-cast participants should go to the web site 15 minutes early to register, download, and install any necessary audio software. A re-broadcast of the conference call will be available on this Web site approximately two hours after the call.

Statistical Supplement

The Hanover’s first quarter earnings news release and statistical supplement are available in the Investors section at www.hanover.com.

Forward-Looking Statements and Non-GAAP Financial Measures

Forward-looking statements

Certain statements in this release or in the above referenced conference call, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Use of the words “believes,” “anticipates,” “expects,” “projections,” “outlook,” “should,” “could,” “confident,” “plan,” “guidance,” “on track to” and similar expressions is intended to identify forward-looking statements. The company cautions investors that any such forward-looking statements are estimates or projections which involve significant judgment and not guarantees of future performance, and actual results could differ materially. In particular, statements in this press release regarding “an improved earnings trajectory in future periods” and statements in the above referenced conference call regarding expectations for 2010 and beyond, including with respect to net written premium and policies in force growth, retention, new business growth, the ability to achieve rate increases, net investment income, the potential impact of capital actions and business investments, our financial strength, accident year loss ratios, the impact of product, account-based and geographic mix changes on future profitability, prior-year loss and loss adjustment expense reserve development from our continuing and run-off operations, segment income, expenses and expense ratios, effective tax rates, weighted shares outstanding and returns on equity are forward-looking statements. Statements regarding the possible impact of the current economic conditions on our business and investment portfolio, and with respect to the anticipated pricing environment, are also forward looking statements. Investors should consider the risks and uncertainties in our business and under current financial market conditions that may affect such estimates and future performance, including (i) the inherent difficulties in arriving at such estimates, particularly with respect to current accident year results and loss reserve development; (ii) the complexity of estimating losses from large catastrophe events or with respect to emerging issues such as “Chinese drywall” where circumstances may delay reporting of the existence, nature or extent of losses or

where “demand surge,” regulatory assessments, litigation, coverage and technical complexities or other factors may significantly impact the ultimate amount of such losses; (iii) the difficulties of estimating the impact of the current financial and economic environment on rates, investment income, product demand, losses and competitor actions; and (iv) the uncertainties in current circumstances of future rating agency requirements, which could affect the company as well as the company’s investment portfolio.

Investors are directed to consider the risks and uncertainties in the company’s business that may affect future performance and that are discussed in readily available documents, including the company’s annual report and other documents filed by The Hanover with the Securities and Exchange Commission and which are also available at www.hanover.com under “Investors.” These uncertainties include the possibility of adverse catastrophe experiences (including terrorism) and severe weather, the uncertainty in estimating weather-related losses, the uncertainties in estimating property and casualty losses (particularly with respect to products with longer tails or involving emerging issues and with respect to losses incurred as the result of new lines of business), the possibility of adverse judicial decisions, including those which expand policy coverage beyond its intended scope (or a change in the so-called Kreiner standard for suing for non-economic losses resulting from an automobile accident in Michigan), the ability to increase or maintain certain property and casualty insurance rates, the impact of new product introductions (such as our Management Liability products and expansion into health care product coverages) and expansion in geographic areas, including our western expansion, the impact of the company’s recent acquisitions or the renewal rights transaction with OneBeacon Insurance Company, adverse loss development and adverse trends in mortality and morbidity and medical costs, changes in frequency and loss trends, the ability to improve renewal rates and increase new property and casualty policy counts, investment impairments (which may be affected by, among other things, our ability and willingness to hold investment assets until they recover in value), heightened competition (including increasing rate pressure, particularly in Commercial Lines), the continued deterioration of the economic environment, particularly in the state of Michigan, where the company has a significant portion of its business, adverse state and federal legislation or regulation or regulatory actions (including in the state of Michigan where there are legislative efforts to require prior regulatory approval of insurance rates, eliminate the use of insurance credit scores in rating policies, require insurers to make “low cost” policies available and there is an initiative to require a roll back in insurance rates), financial ratings actions, uncertainties in estimating indemnification liabilities recorded in conjunction with indemnity obligations undertaken in connection with the sale of various businesses, including our former life companies, and increased uncertainties in general economic conditions and in investment and financial markets, which, among other things, could result in increased impairments of fixed income investments or the inability to collect from reinsurers and the performance of the discontinued voluntary pools, including the inherent uncertainty regarding the types of claims in such pools and the uncertainty whether the reserves would be sufficient. Comments referring to the net written premium growth, business mix, future profitability and premiums earned as a result of the OneBeacon Insurance Group renewal rights deal or the acquisition of Campania, Inc. are forward-looking statements.

Non-GAAP financial measures

The Hanover uses non-GAAP financial measures as important measures of the company’s operating performance, including total segment income, segment income after tax, segment income after-tax per share, and measures of segment income and loss ratios excluding catastrophe losses and reserve development. After-tax segment income EPS (sometimes referred to as “after-tax segment income per share”) is a non-GAAP measure. It is defined as net income (loss) excluding the after-tax impact of net realized investment gains (losses), as well as results from discontinued operations for a period divided by the average number of diluted shares of common stock. The definition of other financial measures and terms can be found in the Annual Report on pages 77-79.

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

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

Reserve development, which can be favorable or unfavorable, represents changes in our estimate of the costs to pay claims from prior years. We believe that a discussion of segment income excluding reserve development is helpful to investors since it provides insight into both our estimate of current year accident results and the accuracy of prior-year estimates.

Income from continuing operations is the most directly comparable GAAP measure for total segment income (and total segment income after tax) and measures of segment income that exclude the effects of catastrophe losses or reserve development. Segment income and measures of segment income that exclude the effects of catastrophe losses or reserve development should not be construed as substitutes for net income determined in accordance with GAAP. A reconciliation of income from continuing operations to segment income for the quarters ended March 31, 2010 and 2009 is set forth in the table at the end of this document and in the statistical supplement.

Loss ratios calculated in accordance with GAAP are the most directly comparable GAAP measure for loss ratios calculated excluding the effects of catastrophe losses. The presentation of loss ratios calculated excluding the effects of catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP.

The Hanover Insurance Group, Inc., based in Worcester, Mass., is the holding company for a group of insurers that includes The Hanover Insurance Company, also based in Worcester, Citizens Insurance Company of America, headquartered in Howell, Michigan, and their affiliates. The Hanover offers a wide range of property and casualty products and services to individuals, families and businesses through an extensive network of independent agents, and has been meeting its obligations to its agent partners and their customers for more than 150 years. Taken as a group, The Hanover ranks among the top 30 property and casualty insurers in the United States.

Contact Information

Investors:

Robert P. Myron

E-mail: rmyron@hanover.com

Media:

Michael F. Buckley

E-mail: mibuckley@hanover.com

1-508-855-2200

1-508-855-3099

Oksana Lukasheva

E-mail: olukasheva@hanover.com


1-508-855-2063

Definition of Reported Segments

Continuing operations include three Property and Casualty operating segments: Personal Lines, Commercial Lines, and Other Property and Casualty. The Personal Lines segment markets automobile, homeowners and ancillary coverages to individuals and families. The Commercial Lines segment offers a suite of products targeted at the small to mid-size business markets, which include commercial multiple peril, commercial automobile, workers’ compensation and other commercial coverages, such as fidelity and surety bonds, and inland marine. The Other Property and Casualty segment includes Opus Investment Management, Inc., which provides investment management services to institutions, pension funds and other organizations, the operations of the holding company, as well as a block of run-off voluntary pools business, in which we have not actively participated since 1995.

The following is a reconciliation from segment income to net income⁽ ¹⁾:


	Quarter ended March 31
	2010						2009
*$ in millions except per share*	$			Per Share⁽²⁾			$			Per Share⁽²⁾
Property and Casualty
Personal Lines	$	34.5					$	3.1
Commercial Lines		22.8						47.6
Other Property & Casualty		0.4						(0.8	)

Total Property and Casualty		57.7						49.9
Interest expense on debt		(9.3	)					(10.4	)

Total segment income		48.4		$	1.00			39.5		$	0.77
Federal income tax expense on segment income		(16.4	)		(0.34	)		(13.1	)		(0.26	)

Total segment income after taxes		32.0			0.66			26.4			0.51
Net realized investment gains (losses)		10.9			0.23			(6.1	)		(0.12	)
Other non-segment items		—			—			(0.1	)		—
Federal income tax on non-segment income		(0.7	)		(0.01	)		—			—

Income from continuing operations		42.2			0.88			20.2			0.39
Discontinued operations (net of taxes):
Gain from discontinued FAFLIC business		—			—			5.0			0.10
Loss from discontinued accident and health business		(0.6	)		(0.01	)		(3.3	)		(0.06	)
Gain on disposal of variable life and annuity business		0.2			—			3.9			0.07

Net income	$	41.8		$	0.87		$	25.8		$	0.50
Weighted average shares					48.2						51.4

⁽¹⁾

The separate financial information of each segment is presented consistent with the way results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Management evaluates the results of the aforementioned segments on a pre-tax basis. Segment income is determined by adjusting net income for net realized investment gains and losses including certain gains or losses on derivative instruments, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Also, segment income excludes net gains and losses on disposals of businesses, discontinued operations, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items.

⁽²⁾	Per share data is per diluted share of common stock.

EX-99.2 3 dex992.htm STATISTICAL SUPPLEMENT Statistical Supplement

Exhibit 99.2

THE HANOVER INSURANCE GROUP

STATISTICAL SUPPLEMENT

TABLE OF CONTENTS


Financial Highlights		1-3
Consolidated Financial Statements
Income Statements		4
Balance Sheets		5
Property and Casualty
Condensed Income Statements		6
Property and Casualty Consolidated Balance Sheets		7
GAAP Underwriting Results		8-9
Investments
Net Investment Income		10
Net Realized Investment Gains (Losses)		11
Investment Portfolio		12
Unrealized Losses		13
Credit Quality of Fixed Maturities		14
Top 25 Corporate Holdings		15
Property and Casualty Statutory Ratios		16
Historical Financial Highlights		17-18
Other Information		19
Corporate Information
Market and Dividend Information
Industry Ratings

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended March 31
(In millions)	2010			2009			% Change
SEGMENT INCOME
Property and Casualty
Personal Lines	$	34.5		$	3.1		N/M
Commercial Lines		22.8			47.6		(52.1	)
Other		0.4			(0.8	)	(150.0	)

Total Property and Casualty		57.7			49.9		15.6


Interest expense on debt		(9.3	)		(10.4	)	(10.6	)


Total segment income		48.4			39.5		22.5

Federal income tax expense on P&C segment income		(19.7	)		(16.7	)	18.0
Federal income tax benefit on interest expense		3.3			3.6		(8.3	)

Total federal income tax expense on segment income		(16.4	)		(13.1	)	25.2


Total segment income after taxes	$	32.0		$	26.4		21.2


RECONCILIATION FROM SEGMENT
INCOME TO NET INCOME

Total segment income after taxes	$	32.0		$	26.4		21.2
Net realized investment gains (losses)		10.9			(6.1	)	(278.7	)
Other non-operating items		—			(0.1	)	(100.0	)
Federal income tax expense on non-segment income		(0.7	)		—		N/M


Income from continuing operations		42.2			20.2		108.9
Discontinued operations (net of taxes):

Gain from operations of discontinued FAFLIC business		—			5.0		(100.0	)
Loss from discontinued accident and health business		(0.6	)		(3.3	)	(81.8	)
Gain on disposal of variable life and annuity business		0.2			3.9		(94.9	)


Net income	$	41.8		$	25.8		62.0

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Quarter ended March 31
	2010			2009			% Change
PER SHARE DATA (DILUTED)
Total segment income	$	1.00		$	0.77		29.9
Federal income tax expense on segment income		(0.34	)		(0.26	)	30.8

Total segment income after taxes		0.66			0.51		29.4
Net realized investment gains (losses)		0.23			(0.12	)	(291.7	)
Federal income tax expense on non-segment income		(0.01	)		—		N/M


Income from continuing operations		0.88			0.39		125.6

Discontinued operations (net of taxes):
Gain from discontinued operations of FAFLIC business		—			0.10		(100.0	)
Loss from discontinued accident and health business		(0.01	)		(0.06	)	(83.3	)
Gain on disposal of variable life and annuity business		—			0.07		(100.0	)

Net income (1)	$	0.87		$	0.50		74.0


Weighted average shares outstanding		48.2			51.4

(1)

Basic income per share was $0.88 and $0.51 for the quarters ended March 31, 2009 and 2008, respectively.

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	March 31 2010			December 31 2009			% Change
(In millions, except per share data)	March 31 2010			December 31 2009			% Change
BALANCE SHEET

Total assets	$	8,068.5		$	8,042.7		0.3
Total shareholders’ equity	$	2,302.2		$	2,358.6		(2.4	)

Property and Casualty Companies (1)
Statutory surplus	$	1,747.4		$	1,741.6		0.3
Premium to surplus ratio		1.6:1			1.5:1		—

Total book value per share	$	51.59		$	49.72		3.8

THG book value per share, excluding accumulated other comprehensive income/(loss)	$	50.07		$	49.11		2.0

Shares outstanding (2)		44.6			47.4

Stock price	$	43.61		$	44.43		(1.8	)
Price/book value per share		0.8	x		0.9	x	(0.1	) x
Total Debt/equity		27.5	%		18.4	%	9.1	pts
Total Debt/total capital		21.5	%		15.5	%	6.0	pts

(1)

Property and Casualty Companies include The Hanover Insurance Company, Citizens Insurance Company of America, and all other insurance subsidiaries.

(2)

Shares outstanding do not include common stock equivalents.

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Quarter ended March 31
(In millions)	2010			2009			% Change
REVENUES
Premiums earned	$	666.5		$	632.0		5.5
Net investment income		61.1			64.9		(5.9	)
Net realized investment gains (losses):
Realized gains from sales and other		13.6			10.4		30.8

Total other-than-temporary impairment losses on securities		(0.5	)		(16.5	)	(97.0	)
Portion of loss transferred (from) to other comprehensive income		(2.2	)		—		N/M

Net other-than-temporary impairment losses on securities recognized in earnings		(2.7	)		(16.5	)	(83.6	)
Total net realized investment gains (losses)		10.9			(6.1	)	(278.7	)
Fees and other income		8.1			8.1		—

Total revenues		746.6			698.9		6.8


LOSSES AND EXPENSES

Losses and loss adjustment expenses		431.6			428.3		0.8
Policy acquisition expenses		154.4			143.1		7.9
Other operating expenses		101.3			94.2		7.5

Total losses and expenses		687.3			665.6		3.3


Income from continuing operations before federal income taxes		59.3			33.3		78.1
Federal income tax expense		17.1			13.1		30.5


Income from continuing operations		42.2			20.2		108.9

Discontinued operations (net of taxes):

Gain from operations of discontinued FAFLIC business		—			5.0		(100.0	)
Loss from discontinued accident and health business		(0.6	)		(3.3	)	(81.8	)
Gain on disposal of variable life and annuity business		0.2			3.9		(94.9	)

Net income	$	41.8		$	25.8		62.0

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


	March 31 2010			December 31 2009			% Change
(In millions, except per share data)	March 31 2010			December 31 2009			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $4,588.3 and $4,520.3)	$	4,742.3		$	4,615.6		2.7
Equity securities, at fair value (cost of $38.2 and $57.3)		45.9			69.2		(33.7	)
Mortgage loans		10.6			14.1		(24.8	)
Other long-term investments		17.9			18.2		(1.6	)

Total investments		4,816.7			4,717.1		2.1

Cash and cash equivalents		209.2			316.5		(33.9	)
Accrued investment income		53.9			52.3		3.1
Premiums, accounts and notes receivable, net		654.6			590.8		10.8
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,188.4			1,197.9		(0.8	)
Deferred policy acquistion costs		306.9			286.3		7.2
Deferred federal income taxes		164.4			228.6		(28.1	)
Goodwill		171.4			171.4		—
Other assets		368.6			351.2		5.0
Assets of discontinued operations		134.4			130.6		2.9

Total assets	$	8,068.5		$	8,042.7		0.3


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Policy liabilities and accruals:
Losses and loss adjustment expenses	$	3,187.1		$	3,153.9		1.1
Unearned premiums		1,365.0			1,300.5		5.0

Total policy liabilities and accruals		4,552.1			4,454.4		2.2

Expenses and taxes payable		395.7			603.2		(34.4	)
Reinsurance premiums payable		53.0			58.5		(9.4	)
Long-term debt		632.3			433.9		45.7
Liabilities of discontinued operations		133.2			134.1		(0.7	)

Total liabilities		5,766.3			5,684.1		1.4


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		1,799.1			1,808.5		(0.5	)
Accumulated other comprehensive income		67.8			28.8		135.4
Retained earnings		1,173.8			1,141.1		2.9
Treasury stock at cost (15.9 and 13.0 million shares)		(739.1	)		(620.4	)	19.1

Total shareholders’ equity		2,302.2			2,358.6		(2.4	)

Total liabilities and shareholders’ equity	$	8,068.5		$	8,042.7		0.3

PROPERTY & CASUALTY

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS


	Quarter ended March 31
(In millions)	2010			2009		% Change

REVENUES
Net premiums written	$	725.2		$	629.9	15.1
Change in unearned premiums, net of prepaid reinsurance premiums		(58.7	)		2.1	N/M

Net premiums earned		666.5			632.0	5.5
Net investment income		61.1			64.7	(5.6	)
Other income		9.2			9.3	(1.1	)

Total segment revenue		736.8			706.0	4.4


LOSSES AND OPERATING EXPENSES
Losses and loss adjustment expenses		431.6			428.3	0.8
Policy acquisition expenses		154.4			143.1	7.9
Other operating expenses		93.1			84.7	9.9

Total losses and operating expenses		679.1			656.1	3.5


Segment income before federal income taxes	$	57.7		$	49.9	15.6

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY GROUP (1)

SELECT GAAP BALANCE SHEET INFORMATION


	March 31 2010		December 31 2009		% Change
(In millions)	March 31 2010		December 31 2009		% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $4,258.2 and $4,207.4)	$	4,407.6	$	4,325.7	1.9
Equity securities, at fair value (cost of $38.2 and $57.3)		45.9		69.2	(33.7	)
Mortgage loans		10.7		14.3	(25.2	)
Other long-term investments		13.5		13.7	(1.5	)

Total investments		4,477.7		4,422.9	1.2

Cash and cash equivalents		195.0		311.9	(37.5	)
Accrued investment income		50.8		49.5	2.6
Premiums, accounts, and notes receivable, net		654.6		590.8	10.8
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,188.4		1,197.9	(0.8	)
Deferred policy acquistion costs		306.9		286.3	7.2
Deferred federal income tax asset		165.9		190.5	(12.9	)
Goodwill		171.4		171.4	—
Other assets		377.6		362.7	4.1
Assets of discontinued operations		134.4		130.6	2.9

Total assets	$	7,722.7	$	7,714.5	0.1


LIABILITIES
Policy liabilities and accruals:
Losses and loss adjustment expenses	$	3,187.1	$	3,153.9	1.1
Unearned premiums		1,365.0		1,300.5	5.0

Total policy liabilities and accruals		4,552.1		4,454.4	2.2

Expenses and taxes payable		421.9		588.6	(28.3	)
Reinsurance premiums payable		53.0		58.5	(9.4	)
Long-term debt		146.3		146.8	(0.3	)
Liabilities of discontinued operations		133.2		134.1	(0.7	)

Total liabilities	$	5,306.5	$	5,382.4	(1.4	)

(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.

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME

Quarter ended March 31, 2010

Personal Lines

Commercial Lines

Workers’

Multiple

Other

Total

(In millions)

Auto

Home

Other

Total

Comp

Auto

Peril

Other(1)

Total

P&C

Net premiums written

241.1

99.2

9.3

349.6

39.9

63.0

135.4

137.0

375.3

⁽²⁾

0.3

725.2

Net premiums earned

238.7

117.5

10.2

366.4

28.6

49.6

98.6

123.0

299.8

0.3

666.5

Losses excluding prior year loss reserve development and catastrophe losses

153.5

55.5

2.7

211.7

19.3

26.0

47.8

54.2

147.3

—

359.0

Prior year loss reserve (favorable) unfavorable development

(10.1

)

(0.9

)

0.4

(10.6

)

(4.9

)

(1.1

)

(3.1

)

(3.5

)

(12.6

)

(0.3

)

(23.5

)

Pre-tax catastrophe losses

0.7

15.0

0.1

15.8

—

0.5

13.8

4.3

18.6

—

34.4

Loss adjustment expenses (3)

26.0

10.8

0.4

37.2

(1.1

)

3.2

8.9

12.9

23.9

0.3

61.4

Policy acquisition and other underwriting expenses

105.6

131.1

—

236.7

Policyholders’ dividends

—

0.3

—

0.3

GAAP underwriting profit (loss)

6.7

(8.8

)

0.3

(1.8

)

Net investment income

25.6

32.0

3.5

61.1

Other income

3.3

4.4

1.5

9.2

Other operating expenses

(1.1

)

(4.8

)

(4.9

)

(10.8

)

Segment income before federal income taxes

34.5

22.8

0.4

57.7


	Quarter ended March 31, 2009
	Personal Lines											Commercial Lines
												Workers’						Multiple									Other			Total
	Auto			Home		Other			Total			Comp			Auto			Peril			Other(1)			Total			P&C			P&C
Net premiums written	$	249.2		$	89.7	$	8.3		$	347.2		$	33.5		$	48.0		$	93.1		$	108.1		$	282.7		$	—		$	629.9

Net premiums earned	$	246.0		$	107.8	$	9.9		$	363.7		$	30.2		$	46.4		$	90.1		$	101.6		$	268.3		$	—		$	632.0
Losses excluding prior year loss reserve development and catastrophe losses		164.6			57.5		3.2			225.3			20.0			24.9			50.2			41.2			136.3			—			361.6
Prior year loss reserve (favorable) unfavorable development		(14.0	)		5.8		(0.2	)		(8.4	)		(6.9	)		(2.9	)		(2.5	)		(10.9	)		(23.2	)		—			(31.6	)
Pre-tax catastrophe losses		1.1			24.7		0.2			26.0			—			0.2			10.1			1.1			11.4			—			37.4
Loss adjustment expenses (3)		31.2			10.3		0.4			41.9			(1.4	)		4.0			6.4			9.6			18.6			0.2			60.7
Policy acquisition and other underwriting expenses (income)										105.4															109.6			(0.2	)		214.8
Policyholders’ dividends										—															0.2			—			0.2

GAAP underwriting (loss) profit										(26.5	)														15.4			—			(11.1	)
Net investment income										27.6															31.6			5.5			64.7
Other income										3.5															4.4			1.4			9.3
Other operating expenses										(1.5	)														(3.8	)		(7.7	)		(13.0	)

Segment income (loss) before federal income taxes									$	3.1														$	47.6		$	(0.8	)	$	49.9

(1)

Other Commercial Lines includes inland marine, bonds, professional liability and program business.

(2)

Total Commercial Lines Net premiums written includes $67.6 million related to our recently announced renewal rights transaction.

(3)

Loss adjustment expenses include (favorable) unfavorable development of $(4.1) million and $0.3 million in Personal Lines, $(9.5) million and $(9.9) million in Commercial Lines, and $(13.6) million and $(9.6) million in Total P&C for the three months ended March 31, 2010 and 2009, respectively.

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

GAAP UNDERWRITING RATIOS

Quarter ended March 31, 2010

Personal Lines

Commercial Lines

Workers’

Multiple

Other

Total

Auto

Home

Other

Total

Comp

Auto

Peril

Other(1)

Total

P&C

Losses, excluding catastrophe losses and development

64.3

47.2

26.5

57.7

67.4

52.4

48.5

44.0

49.1

N/M

53.9

Catastrophe losses

0.3

12.8

1.0

4.3

—

1.0

14.0

3.5

6.2

N/M

5.2

Loss development

(4.2

(0.8

3.9

(2.9

(17.1

(2.2

(3.1

(2.8

(4.2

N/M

(3.5

Total losses

60.4

59.2

31.4

59.1

50.3

51.2

59.4

44.7

51.1

N/M

55.6

Loss adjustment expenses (2)

10.9

9.2

3.9

10.2

(3.8

6.5

9.0

10.5

8.0

N/M

9.2

Policy acquisition and other underwriting expenses (3)

28.0

43.5

N/M

34.9

Policyholders’ dividends

—

0.1

N/M

—

Combined

97.3

102.7

N/M

99.7

Policies in force (4)

(3.3

4.7

(5.0

0.1

1.8

(2.2

4.0

(3.3

0.0

N/M

0.1

Retention (4), (5)

74.8

82.1

N/M

78.5

74.3

79.1

78.6

77.6

78.0


	Quarter ended March 31, 2009
	Personal Lines								Commercial Lines
									Workers’				Multiple						Other	Total
	Auto		Home		Other		Total		Comp		Auto		Peril		Other(1)		Total		P&C	P&C
Losses, excluding catastrophe losses and development	66.9	%	53.3	%	32.3	%	61.9	%	66.2	%	53.7	%	55.7	%	40.6	%	50.8	%	N/M	57.2	%
Catastrophe losses	0.4	%	22.9	%	2.0	%	7.1	%	—		0.4	%	11.2	%	1.1	%	4.2	%	N/M	5.9	%
Loss development	(5.6	)%	5.4	%	(2.0	)%	(2.2	)%	(22.9	)%	(6.3	)%	(2.7	)%	(10.8	)%	(8.6	)%	N/M	(4.9	)%

Total losses	61.7	%	81.6	%	32.3	%	66.8	%	43.3	%	47.8	%	64.2	%	30.9	%	46.4	%	N/M	58.2	%
Loss adjustment expenses (2)	12.7	%	9.6	%	4.0	%	11.5	%	(4.6	)%	8.6	%	7.1	%	9.4	%	6.9	%	N/M	9.6	%
Policy acquisition and other underwriting expenses (3)							28.1	%									40.6	%	N/M	33.3	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							106.4	%									94.0	%	N/M	101.1	%


Policies in force (4)	(1.0	)%	1.6	%	(5.1	)%	(0.1	)%	(0.4	)%	2.3	%	(0.1	)%	1.5	%	0.9	%	N/M	0.0	%
Retention (4), (5)	74.1	%	81.3	%	N/M		77.8	%	77.3	%	77.9	%	78.5	%	78.0	%	78.1	%

(1)

Other Commercial Lines includes inland marine, bonds, professional liability and program business.

(2)

(3)

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

(4)

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

(5)

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 direct voluntary written premiums, based on renewed policies in the current period versus those available to renew.

INVESTMENTS

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME


	Quarter ended March 31
(In millions, except yields)	2010					2009
				Yield					Yield
Fixed maturities (1)	$	62.2		5.48	%	$	64.4		5.81	%
Equity securities		0.6		—			1.0		—
Mortgages		0.2		7.99	%		0.6		8.40	%
All other		(0.2	)	—			0.7		—
Investment expenses		(1.7	)	—			(1.8	)	—

Total (2)	$	61.1		5.15	%	$	64.9		5.30	%

(1)

Includes purchase accounting adjustments of $(0.3) million and $(0.7) million for the quarters ended March 31, 2010 and 2009, respectively. Average book value of fixed maturities was $4,555.3 million and $4,473.9 million at March 31, 2010 and 2009, respectively.

(2)

Excludes discontinued operations of $0.6 million and $0.5 million for the quarters ended March 31, 2010 and 2009, respectively.

THE HANOVER INSURANCE GROUP

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)


	Quarter ended March 31
(In millions)	2010			2009

Net realized gains from sales and other	$	13.6		$	10.4


Total other-than-temporary impairment losses		(0.5	)		(16.5	)

Portion of loss transferred from other comprehensive income		(2.2	)		—


Net other-than-temporary losses on securities recognized in earnings		(2.7	)		(16.5	)


Net realized investment gains (losses) (1)	$	10.9		$	(6.1	)

(1)

Excludes discontinued operations of $(0.7) million and $(3.2) million for the quarters ended March 31, 2010 and 2009, respectively.

THE HANOVER INSURANCE GROUP

INVESTMENT PORTFOLIO


(in millions)	March 31, 2010
Investment Type	Weighted Average Quality	Amortized Cost		Fair Value		Net Unrealized Gain (Loss)			Change in Net Unrealized during Q1 2010

Fixed Maturities:
Corporate:
NAIC 1	A	$	869.7	$	912.5	$	42.8		$	10.5
NAIC 2	BBB		1,055.7		1,118.0		62.3			13.8
NAIC 3 and below	B+		327.3		338.9		11.6			7.7

Total corporate	BBB+		2,252.7		2,369.4		116.7			32.0
Asset backed:
Residential mortgage backed securities	AA+		804.8		829.9		25.1			9.5
Commercial mortgage backed securities	AA+		347.1		356.0		8.9			6.2
Asset backed securities	A		70.2		73.4		3.2			0.7
Municipals:
Taxable	AA-		716.4		711.0		(5.4	)		11.2
Tax exempt	A+		167.0		170.8		3.8			(0.3	)
U.S. government	AAA		352.0		354.0		2.0			2.5

Total fixed maturities	A+		4,710.2		4,864.5		154.3			61.8
Equity securities:
Perpetual preferred securities			18.8		26.2		7.4			1.4
Common equity securities			19.4		19.7		0.3			(5.6	)

Total fixed maturities and equity securities (1)			4,748.4		4,910.4		162.0			57.6
Cash and cash equivalents (2)			209.5		209.5		—			—
Mortgage loans and other long-term investments			26.5		28.5		2.0			—

Total		$	4,984.4	$	5,148.4	$	164.0		$	57.6

(1)

Includes discontinued accident and health business of $121.9 million in amortized cost and $122.2 million in fair value at March 31, 2010. Net unrealized gain (loss) associated with the discontinued accident and health business improved $3.1 million during the first quarter of 2010.

(2)

Includes discontinued accident and health business of $0.3 million in amortized cost and in fair value at March 31, 2010.

THE HANOVER INSURANCE GROUP

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE


(In millions)	March 31, 2010				December 31, 2009
	Gross Unrealized Losses and OTTI		Fair Value		Gross Unrealized Losses and OTTI		Fair Value

INVESTMENT GRADE FIXED MATURITIES:
12 months or less	$	12.3	$	484.3	$	23.1	$	664.4
Greater than 12 months		35.9		362.1		43.4		421.8

Total investment grade fixed maturities		48.2		846.4		66.5		1,086.2
BELOW INVESTMENT GRADE FIXED MATURITIES:
12 months or less		10.6		107.4		10.8		92.8
Greater than 12 months (1)		15.6		141.5		17.7		158.3

Total below investment grade fixed maturities		26.2		248.9		28.5		251.1
EQUITY SECURITIES:
12 months or less		1.2		8.0		—		—
Greater than 12 months		—		—		0.3		1.4

Total equity securities		1.2		8.0		0.3		1.4

Total (2)	$	75.6	$	1,103.3	$	95.3	$	1,338.7

(1)

Gross Unrealized Losses and OTTI includes $13.6 million and $14.8 million of OTTI at March 31, 2010 and December 31, 2009, respectively.

(2)

Includes discontinued accident and health business of $7.0 million and $8.8 million in gross unrealized losses with $52.8 million and $55.0 million in fair value at March 31, 2010 and December 31, 2009, respectively.

THE HANOVER INSURANCE GROUP

CREDIT QUALITY OF FIXED MATURITIES


(In millions)		March 31, 2010						December 31, 2009
NAIC Designation	Rating Agency Equivalent Designation	Amortized Cost		Fair Value		% of Total Fair Value		Amortized Cost		Fair Value		% of Total Fair Value

1	Aaa/Aa/A	$	3,158.0	$	3,242.6	66.7	%	$	3,120.8	$	3,168.0	66.9	%
2	Baa		1,207.4		1,266.4	26.0	%		1,198.0		1,240.3	26.2	%
3	Ba		142.4		141.6	2.9	%		138.2		130.5	2.8	%
4	B		115.9		121.1	2.5	%		93.1		98.0	2.1	%
5	Caa and lower		81.1		85.5	1.8	%		84.0		88.0	1.9	%
6	In or near default		5.4		7.3	0.1	%		5.8		7.6	0.1	%

Total fixed maturities (1)		$	4,710.2	$	4,864.5	100.0	%	$	4,639.9	$	4,732.4	100.0	%

(1)

Includes discontinued accident and health business of $121.9 million and $119.6 million in amortized cost and $122.2 million and $116.8 million in fair value at March 31, 2010 and December 31, 2009, respectively.

THE HANOVER INSURANCE GROUP

TOP 25 CORPORATE FIXED MATURITY HOLDINGS


(In millions, except percentage data)	As of March 31, 2010
Issuer	Amortized Cost		Fair Value		As a percent of Invested Assets		S&P Ratings
Bank of America	$	22.8	$	20.2	0.39	%	A-
Wells Fargo		22.2		23.3	0.45	%	AA-
GE Capital		19.9		20.5	0.40	%	AA+
PNC Bank		19.8		20.2	0.39	%	A
American Express		18.6		19.6	0.38	%	BBB+
Dominion Resources		18.4		19.6	0.38	%	A-
AT&T		18.3		19.3	0.37	%	A
Conoco Phillips		18.2		19.4	0.38	%	A
Valero Energy		17.6		17.8	0.35	%	BBB
Capital One		17.4		18.1	0.35	%	BBB
CVS		17.3		18.4	0.36	%	BBB+
Kroger		17.3		18.2	0.35	%	BBB
Home Depot		17.0		18.5	0.36	%	BBB+
Union Pacific		16.8		17.4	0.34	%	BBB
Miller Brewing		16.4		17.8	0.35	%	BBB+
Genworth Global Funding		16.0		16.7	0.32	%	BBB
Morgan Stanley		16.0		17.4	0.34	%	A
Merck & Co.		15.7		17.2	0.33	%	AA-
Pacific Gas & Electric		15.3		16.5	0.32	%	BBB+
Manufacturers & Traders Bank		15.1		14.0	0.27	%	A-
Canadian National Railways		15.0		16.0	0.31	%	A-
Fifth Third Bancorp		15.0		14.8	0.29	%	BBB-
Vodafone		15.0		15.9	0.31	%	A-
Atmos Energy		14.9		16.3	0.32	%	BBB+
Safeway		14.8		15.8	0.31	%	BBB

Top 25 Corporate		430.8		448.9	8.72	%
Other Corporate		1,821.9		1,920.5	37.30	%

Total Corporate	$	2,252.7	$	2,369.4	46.02	%

PROPERTY & CASUALTY

STATUTORY RATIOS

THE HANOVER INSURANCE GROUP

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

Quarter ended March 31, 2010

Personal Lines

Commercial Lines

Workers’

Multiple

Other

Total

Auto

Home

Other

Total

Comp

Auto

Peril

Other(1)

Total

P&C

Losses, excluding catastrophe losses and development

64.3

47.1

26.2

57.8

68.2

52.4

48.7

44.2

49.3

N/M

54.1

Catastrophe losses

0.3

12.9

1.0

4.3

—

1.0

14.1

3.5

6.2

N/M

5.2

Loss development

(4.2

(0.8

3.9

(2.9

(17.3

(2.2

(3.2

(2.8

(4.2

N/M

(3.5

Total losses

60.4

59.2

31.1

59.2

50.9

51.2

59.6

44.9

51.3

N/M

55.8

Loss adjustment expenses (2)

11.1

9.3

3.9

10.3

(3.9

6.5

9.1

10.6

8.0

N/M

9.3

Policy acquisition and other underwriting expenses

29.7

41.4

N/M

35.8

Policyholders’ dividends

—

N/M

—

Combined

99.2

100.7

N/M

100.9


	Quarter ended March 31, 2009
	Personal Lines								Commercial Lines
									Workers’				Multiple						Other	Total
	Auto		Home		Other		Total		Comp		Auto		Peril		Other(1)		Total		P&C	P&C
Losses, excluding catastrophe losses and development	66.9	%	53.3	%	32.0	%	61.9	%	65.5	%	53.8	%	55.8	%	41.3	%	51.1	%	N/M	57.6	%
Catastrophe losses	0.4	%	22.9	%	2.0	%	7.1	%	—		0.4	%	11.2	%	1.1	%	4.2	%	N/M	5.9	%
Loss development	(5.7	)%	5.4	%	(2.0	)%	(2.3	)%	(22.7	)%	(6.2	)%	(2.8	)%	(10.7	)%	(8.6	)%	N/M	(5.0	)%

Total losses	61.6	%	81.6	%	32.0	%	66.7	%	42.8	%	48.0	%	64.2	%	31.7	%	46.7	%	N/M	58.5	%
Loss adjustment expenses (2)	12.7	%	9.6	%	4.0	%	11.6	%	(4.3	)%	8.4	%	7.1	%	9.4	%	6.9	%	N/M	9.6	%
Policy acquisition and other underwriting expenses							29.4	%									39.9	%	N/M	34.0	%
Policyholders’ dividends							—										0.1	%	N/M	—

Combined							107.7	%									93.6	%	N/M	102.1	%

(1)

Other Commercial Lines includes inland marine, bonds, professional liability and program business.

(2)

Historical Highlights

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS


(In millions, except per share data)	Q1 10			2009			Q4 09			Q3 09			Q2 09			Q1 09
SEGMENT INCOME (1)
Property and Casualty
Personal Lines	$	34.5		$	76.4		$	20.3		$	27.4		$	25.6		$	3.1
Commercial Lines		22.8			189.7			52.5			38.7			50.9			47.6
Other Property and Casualty		0.4			4.0			(2.5	)		7.5			(0.2	)		(0.8	)

Total Property and Casualty		57.7			270.1			70.3			73.6			76.3			49.9
Interest expense on debt		(9.3	)		(35.1	)		(7.9	)		(6.3	)		(10.5	)		(10.4	)


Total segment income before federal income taxes	$	48.4		$	235.0		$	62.4		$	67.3		$	65.8		$	39.5


Federal income tax expense on segment income		(16.4	)		(77.5	)		(20.6	)		(22.0	)		(21.8	)		(13.1	)


Total segment income after federal income taxes	$	32.0		$	157.5		$	41.8		$	45.3		$	44.0		$	26.4

Net realized investment gains (losses)		10.9			1.4			11.1			—			(3.6	)		(6.1	)
Gain from retirement of corporate debt		—			34.5			—			0.2			34.3			—
Other non-segment items		—			—			—			—			0.1			(0.1	)
Federal income tax (expense) benefit on non-segment income		(0.7	)		(5.6	)		3.0			3.1			(11.7	)		—

Income from continuing operations		42.2			187.8			55.9			48.6			63.1			20.2

Discontinued operations (net of taxes):
Gain from discontinued FAFLIC business		—			7.1			0.8			0.4			0.9			5.0
(Loss) gain from discontinued accident and health business		(0.6	)		(2.6	)		(0.2	)		0.7			0.2			(3.3	)
Gain on disposal of discontinued variable life and annuity business		0.2			4.9			0.8			—			0.2			3.9


NET INCOME	$	41.8		$	197.2		$	57.3		$	49.7		$	64.4		$	25.8


PER SHARE DATA (DILUTED)

INCOME FROM CONTINUING OPERATIONS	$	0.88		$	3.68		$	1.11		$	0.95		$	1.23		$	0.39
(LOSS) INCOME FROM DISCONTINUED OPERATIONS	$	(0.01	)	$	0.18		$	0.03		$	0.02		$	0.02		$	0.11
NET INCOME	$	0.87		$	3.86		$	1.14		$	0.97		$	1.25		$	0.50

WEIGHTED AVERAGE SHARES
OUTSTANDING (DILUTED)		48.2			51.1			50.2			51.2			51.4			51.4

BALANCE SHEET
Total assets	$	8,068.5					$	8,042.7		$	8,088.6		$	7,747.7		$	7,698.1
Total shareholders’ equity	$	2,302.2					$	2,358.6		$	2,407.1		$	2,221.1		$	1,967.6
Book value per share	$	51.59					$	49.72		$	48.06		$	43.75		$	38.62
Book value per share, excluding accumulated other comprehensive income (loss)	$	50.07					$	49.11		$	48.28		$	47.15		$	45.16

(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.

THE HANOVER INSURANCE GROUP

HISTORICAL FINANCIAL HIGHLIGHTS


(In millions, except per share data)	2008			Q4 08			Q3 08			Q2 08			Q1 08
SEGMENT INCOME (1)
Property and Casualty
Personal Lines	$	123.5		$	39.7		$	18.1		$	38.6		$	27.1
Commercial Lines		169.7			55.6			(6.6	)		52.7			68.0
Other Property and Casualty		9.0			2.2			2.3			2.9			1.3

Total Property and Casualty		302.2			97.5			13.8			94.2			96.4
Interest expense on corporate debt		(39.9	)		(10.0	)		(10.0	)		(9.9	)		(10.0	)


Total segment income before federal income taxes	$	262.3		$	87.5		$	3.8		$	84.3		$	86.4

Federal income tax expense on segment income		(86.3	)		(27.9	)		(0.5	)		(28.8	)		(29.1	)


Total segment income after federal income taxes	$	176.0		$	59.6		$	3.3		$	55.5		$	57.3


Federal income tax settlement		6.4			—			6.4			—			—
Net realized investment losses		(97.8	)		(37.1	)		(52.8	)		(7.6	)		(0.3	)
Other non-segment items		(0.1	)		(0.1	)		—			—			—
Federal income tax benefit (expense) on non-segment income		—			0.4			(0.4	)		—			—

Income (loss) from continuing operations		84.5			22.8			(43.5	)		47.9			57.0

Discontinued operations (net of taxes):
(Loss) gain from discontinued FAFLIC business		(84.8	)		8.1			(21.7	)		(67.7	)		(3.5	)
Gain from operations of AMGRO		10.1			—			—			10.4			—
Gain (loss) on disposal of discontinued variable life and annuity business		11.3			3.2			2.7			(0.8	)		6.2
Other		(0.5	)		—			0.7			—			(1.2	)


NET INCOME (LOSS)	$	20.6		$	34.1		$	(61.8	)	$	(10.2	)	$	58.5


PER SHARE DATA (DILUTED)

INCOME (LOSS) FROM CONTINUING OPERATIONS	$	1.63		$	0.44		$	(0.85	)	$	0.92		$	1.09

(LOSS) INCOME FROM DISCONTINUED OPERATIONS	$	(1.23	)	$	0.22		$	(0.36	)	$	(1.12	)	$	0.03
NET INCOME (LOSS)	$	0.40		$	0.66		$	(1.21	)	$	(0.20	)	$	1.12
WEIGHTED AVERAGE SHARES
OUTSTANDING (DILUTED) (2)		51.7			51.4			51.0			51.8			52.3

BALANCE SHEET
Total assets				$	9,230.2		$	9,254.8		$	9,463.8		$	9,700.6
Total shareholders’ equity				$	1,887.2		$	2,040.1		$	2,212.7		$	2,320.7
Book value per share				$	37.08		$	40.09		$	43.57		$	45.23
Book value per share, excluding accumulated other comprehensive income (loss)				$	44.64		$	44.37		$	45.55		$	45.70

(1)

(2)

Weighted average shares outstanding for the quarter ended September 30, 2008 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	2010
	Price Range				Dividends Per Share
	High		Low		Dividends Per Share
March 31	$	44.63	$	40.51	$	0.25
June 30
September 30
December 31

Quarter Ended	2009
	Price Range				Dividends Per Share
	High		Low		Dividends Per Share
March 31	$	43.37	$	28.49		—
June 30	$	38.11	$	29.19		—
September 30	$	42.82	$	37.23		—
December 31	$	45.23	$	40.67	$	0.75

INDUSTRY RATINGS AS OF MAY 6, 2010


	A.M.	Standard
Financial Strength Ratings	Best	& 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-

	A.M.	Standard
Debt Ratings	Best	& 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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