The Hanover Insurance Group, Inc. Statistical Supplement

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

Exhibit 99.2

LOGO

STATISTICAL SUPPLEMENT

FIRST QUARTER 2011

THE HANOVER INSURANCE GROUP

STATISTICAL SUPPLEMENT

TABLE OF CONTENTS


Financial Highlights			1
Consolidated Financial Statements
Income Statements			2
Balance Sheets			3
Underwriting and Premium Information
GAAP Underwriting Results			4-8
Investments
Net Investment Income			9
Investment Portfolio			10
Credit Quality and Duration of Fixed Maturities			11
Top 10 Holdings			12
Underwriting and Premium Information			13
Other Information
Non-GAAP Financial Measures			14
Corporate Information			15
Market and Dividend Information			15
Financial Strength and Debt Ratings			15

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Q1			Q2			Q3			Q4			Q1
(In millions, except earnings per share)	2010			2010			2010			2010			2011

PREMIUMS
Direct premiums written	$	715.2		$	782.8		$	815.2		$	774.7		$	833.3
Net premiums written		725.2			802.0			803.7			717.1			749.9
Net premiums earned		666.5			697.8			728.0			748.7			761.7

EARNINGS
Segment income before interest expense and taxes	$	57.7		$	14.6		$	79.2		$	76.2		$	47.1
Segment income after taxes		32.0			1.8			44.7			43.7			24.2
Income from continuing operations		42.2			2.2			51.4			57.4			27.9
Net income		41.8			2.3			52.3			58.4			29.3

PER SHARE DATA (DILUTED)
Segment income after taxes	$	0.66		$	0.04		$	0.98		$	0.95		$	0.53
Income from continuing operations		0.88			0.05			1.12			1.25			0.61
Net income		0.87			0.05			1.15			1.27			0.64

Weighted average shares outstanding		48.2			45.5			45.7			45.9			46.0

BALANCE SHEET

(In millions, except per share data)	March 31 2010			June 30 2010			September 30 2010			December 31 2010			March 31 2011
Total assets	$	8,068.5		$	8,373.4		$	8,596.7		$	8,569.9		$	8,514.9
Total loss and loss adjustment expense reserves		3,187.1			3,224.7			3,232.1			3,277.7			3,315.4
Total shareholders’ equity		2,302.2			2,351.6			2,478.8			2,460.5			2,488.7
Property and Casualty Companies
Statutory surplus	$	1,747.4		$	1,752.0		$	1,795.3		$	1,747.3		$	1,776.6
Premium to surplus ratio		1.55:1			1.63:1			1.65:1			1.75:1			1.73:1

Book value per share	$	51.59		$	52.61		$	55.25		$	54.74		$	55.06
Book value per share, excluding net unrealized gains and losses related to investments, net of tax	$	48.98		$	49.02		$	50.23		$	51.92		$	52.06
Tangible book value per share (total book value excluding goodwill)	$	47.75		$	48.61		$	51.25		$	50.75		$	51.10
Shares outstanding		44.6			44.7			44.9			44.9			45.2

Total debt/equity		27.5	%		26.9	%		25.8	%		24.6	%		22.5	%
Total debt/total capital		21.5	%		21.2	%		20.5	%		19.8	%		18.4	%

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Quarter ended March 31
(In millions)	2011		2010			% Change
REVENUES
Premiums earned	$	761.7	$	666.5			14.3
Net investment income		60.4		61.1			(1.1	)
Total net realized investment gains		3.3		10.9			(69.7	)
Fees and other income		8.4		8.1			3.7

Total revenues		833.8		746.6			11.7


LOSSES AND EXPENSES
Losses and loss adjustment expenses		511.0		431.6			18.4
Policy acquisition expenses		180.8		154.4			17.1
Loss from retirement of debt		2.5		—			N/M
Interest expense on debt		10.4		9.3			11.8
Other operating expenses		91.6		92.0			(0.4	)

Total losses and expenses		796.3		687.3			15.9


Income from continuing operations before federal income taxes		37.5		59.3			(36.8	)
Federal income tax expense		9.6		17.1			(43.9	)


Income from continuing operations		27.9		42.2			(33.9	)

Discontinued operations		1.4		(0.4	)		N/M


Net income	$	29.3	$	41.8			(29.9	)

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


	March 31			December 31
(In millions, except per share data)	2011			2010			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $4,632.1 and $4,598.8)	$	4,826.6		$	4,797.9			0.6
Equity securities, at fair value (cost of $132.9 and $120.7)		147.3			128.6			14.5
Other investments		40.7			39.4			3.3

Total investments		5,014.6			4,965.9			1.0

Cash and cash equivalents		218.8			290.4			(24.7	)
Accrued investment income		53.3			53.8			(0.9	)
Premiums and accounts receivable, net		752.5			772.0			(2.5	)
Reinsurance recoverable on paid and unpaid losses, benefits and unearned premiums		1,268.8			1,254.2			1.2
Deferred policy acquisition costs		339.9			345.3			(1.6	)
Deferred federal income taxes		174.7			177.4			(1.5	)
Goodwill		178.8			179.2			(0.2	)
Other assets		383.2			398.1			(3.7	)
Assets of discontinued operations		130.3			133.6			(2.5	)

Total assets	$	8,514.9		$	8,569.9			(0.6	)


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Loss and loss adjustment expense reserves	$	3,315.4		$	3,277.7			1.2
Unearned premiums		1,510.5			1,520.3			(0.6	)
Expenses and taxes payable		479.6			541.7			(11.5	)
Reinsurance premiums payable		30.3			34.4			(11.9	)
Debt		561.0			605.9			(7.4	)
Liabilities of discontinued operations		129.4			129.4			—

Total liabilities		6,026.2			6,109.4			(1.4	)


SHAREHOLDERS’ EQUITY
Preferred stock, par value $0.01 per share; 20.0 million shares authorized; none issued		—			—			—
Common stock, par value $0.01 per share; 300.0 million shares authorized; 60.5 million shares issued		0.6			0.6			—
Additional paid-in capital		1,780.0			1,796.5			(0.9	)
Accumulated other comprehensive income		145.0			136.7			6.1
Retained earnings		1,267.4			1,246.8			1.7
Treasury stock at cost (15.3 and 15.6 million shares)		(704.3	)		(720.1	)		(2.2	)

Total shareholders’ equity		2,488.7			2,460.5			1.1

Total liabilities and shareholders’ equity	$	8,514.9		$	8,569.9			(0.6	)

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION

Quarter ended March 31


	2011
	Commercial Lines															Personal Lines
(In millions)	Multiple Peril			Auto			Workers’ Comp			Other			Total			Auto			Home			Other		Total			Other P&C			Total P&C
Net premiums written	$	137.2		$	62.0		$	45.8		$	163.5		$	408.5		$	231.1		$	101.2		$	9.1	$	341.4		$	—		$	749.9

Net premiums earned	$	139.9		$	61.3		$	41.8		$	157.8		$	400.8		$	228.9		$	121.5		$	10.5	$	360.9		$	—		$	761.7
Losses and LAE:
Current accident year, excluding catastrophe losses		89.5			39.0			31.5			84.1			244.1			170.2			72.4			3.0		245.6			0.1			489.8
Prior year (favorable) unfavorable reserve development		(5.6	)		(0.3	)		(3.7	)		(4.7	)		(14.3	)		(11.9	)		(2.6	)		0.4		(14.1	)		(0.1	)		(28.5	)
Catastrophe losses		21.6			0.2			—			5.7			27.5			—			21.9			0.3		22.2			—			49.7

Total losses and LAE		105.5			38.9			27.8			85.1			257.3			158.3			91.7			3.7		253.7			—			511.0
Policy acquisition and other underwriting expenses														159.3											101.0			(0.1	)		260.2

GAAP underwriting (loss) profit														(15.8	)										6.2			0.1			(9.5	)
Net investment income														33.6											22.7			4.1			60.4
Other income														4.9											3.1			1.7			9.7
Other operating expenses														(4.3	)										(1.9	)		(7.3	)		(13.5	)

Segment income (loss) before federal income taxes													$	18.4										$	30.1		$	(1.4	)	$	47.1


	2010
	Commercial Lines															Personal Lines
	Multiple Peril			Auto			Workers’ Comp			Other			Total			Auto			Home			Other		Total			Other P&C			Total P&C
Net premiums written	$	135.4		$	63.0		$	39.9		$	137.0		$	375.3		$	241.1		$	99.2		$	9.3	$	349.6		$	0.3		$	725.2

Net premiums earned	$	98.6		$	49.6		$	28.6		$	123.0		$	299.8		$	238.7		$	117.5		$	10.2	$	366.4		$	0.3		$	666.5
Losses and LAE:
Current accident year, excluding catastrophe losses		61.1			29.6			23.5			66.8			181.0			184.2			65.3			3.5		253.0			0.3			434.3
Prior year (favorable) unfavorable reserve development		(7.5	)		(1.5	)		(9.9	)		(3.2	)		(22.1	)		(14.8	)		0.1			—		(14.7	)		(0.3	)		(37.1	)
Catastrophe losses		13.8			0.5			—			4.3			18.6			0.7			15.0			0.1		15.8			—			34.4

Total losses and LAE		67.4			28.6			13.6			67.9			177.5			170.1			80.4			3.6		254.1			—			431.6
Policy acquisition and other underwriting expenses														131.1											105.6			—			236.7

GAAP underwriting (loss) profit														(8.8	)										6.7			0.3			(1.8	)
Net investment income														32.0											25.6			3.5			61.1
Other income														4.4											3.3			1.5			9.2
Other operating expenses														(4.8	)										(1.1	)		(4.9	)		(10.8	)

Segment income before federal income taxes													$	22.8										$	34.5		$	0.4		$	57.7

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING RATIOS

Quarter ended March 31


	2011
	Commercial Lines															Personal Lines
	Multiple Peril			Auto			Workers’ Comp			Other			Total			Auto			Home			Other			Total			Other P&C	Total P&C
Loss and LAE ratio:
Current accident year, excluding catastrophe losses		64.0	%		63.6	%		75.4	%		53.4	%		60.9	%		74.4	%		59.6	%		28.5	%		68.0	%	N/M		64.2	%
Prior year (favorable) unfavorable reserve development		(4.0	)%		(0.5	)%		(8.9	)%		(3.0	)%		(3.6	)%		(5.2	)%		(2.1	)%		3.8	%		(3.9	)%	N/M		(3.7	)%
Catastrophe losses		15.4	%		0.3	%		N/M			3.6	%		6.9	%		N/M			18.0	%		2.9	%		6.2	%	N/M		6.5	%

Total loss and LAE ratio		75.4	%		63.4	%		66.5	%		54.0	%		64.2	%		69.2	%		75.5	%		35.2	%		70.3	%	N/M		67.0	%
Expense ratio														39.5	%											27.2	%	N/M		33.7	%

Combined ratio														103.7	%											97.5	%	N/M		100.7	%


Change in policies in force		16.9	%		18.1	%		37.0	%		10.3	%		16.4	%		(6.7	)%		(0.6	)%		(6.9	)%		(3.9	)%	N/M		(1.2	)%
Retention		85.0	%		82.0	%		81.8	%		N/M			83.5	%		77.1	%		80.6	%		N/M			79.0	%

	2010
	Commercial Lines															Personal Lines
	Multiple Peril			Auto			Workers’ Comp			Other			Total			Auto			Home			Other			Total			Other P&C	Total P&C
Loss and LAE ratio:
Current accident year, excluding catastrophe losses		62.0	%		59.7	%		82.1	%		54.3	%		60.4	%		77.2	%		55.5	%		34.3	%		69.0	%	N/M		65.2	%
Prior year (favorable) unfavorable reserve development		(7.6	)%		(3.0	)%		(34.6	)%		(2.6	)%		(7.4	)%		(6.2	)%		0.1	%		N/M			(4.0	)%	N/M		(5.6	)%
Catastrophe losses		14.0	%		1.0	%		N/M			3.5	%		6.2	%		0.3	%		12.8	%		1.0	%		4.3	%	N/M		5.2	%

Total loss and LAE ratio		68.4	%		57.7	%		47.5	%		55.2	%		59.2	%		71.3	%		68.4	%		35.3	%		69.3	%	N/M		64.8	%
Expense ratio														43.5	%											28.0	%	N/M		34.9	%

Combined ratio														102.7	%											97.3	%	N/M		99.7	%


Change in policies in force		4.0	%		(2.2	)%		1.8	%		(3.3	)%		0.0	%		(3.8	)%		4.7	%		(5.1	)%		(0.1	)%	N/M		(0.1	)%
Retention		78.6	%		79.1	%		74.3	%		N/M			78.3	%		74.8	%		82.1	%		N/M			78.5	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

COMMERCIAL LINES


(In millions)	Q1 2010			Q2 2010			Q3 2010			Q4 2010			Q1 2011
Direct premiums written	$	342.3		$	383.4		$	400.9		$	402.1		$	466.8

Net premiums written	$	375.3		$	425.1		$	415.3		$	369.1		$	408.5

Net premiums earned	$	299.8		$	328.7		$	360.2		$	384.7		$	400.8
Losses and LAE:
Current accident year, excluding catastrophe losses		181.0			189.8			214.0			225.8			244.1
Prior year favorable reserve development		(22.1	)		(11.6	)		(16.5	)		(11.3	)		(14.3	)
Catastrophe losses		18.6			25.7			8.2			9.1			27.5

Total losses and LAE		177.5			203.9			205.7			223.6			257.3
Policy acquisition and other underwriting expenses		131.1			140.8			152.2			159.2			159.3

GAAP underwriting (loss) profit	$	(8.8	)	$	(16.0	)	$	2.3		$	1.9		$	(15.8	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		60.4	%		57.8	%		59.4	%		58.7	%		60.9	%
Prior year favorable reserve development		(7.4	)%		(3.5	)%		(4.6	)%		(2.9	)%		(3.6	)%
Catastrophe losses		6.2	%		7.8	%		2.3	%		2.4	%		6.9	%

Total loss and LAE ratio		59.2	%		62.1	%		57.1	%		58.2	%		64.2	%
Expense ratio		43.5	%		42.6	%		42.0	%		41.1	%		39.5	%

Combined ratio		102.7	%		104.7	%		99.1	%		99.3	%		103.7	%


Combined ratio, excluding catastrophe losses		96.5	%		96.9	%		96.8	%		96.9	%		96.8	%

Current accident year combined ratio, excluding catastrophe losses		103.9	%		100.4	%		101.4	%		99.8	%		100.4	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

PERSONAL LINES


(In millions)	Q1 2010			Q2 2010			Q3 2010			Q4 2010			Q1 2011
Direct premiums written	$	372.9		$	399.4		$	414.3		$	372.6		$	366.5

Net premiums written	$	349.6		$	376.9		$	388.4		$	348.0		$	341.4

Net premiums earned	$	366.4		$	369.1		$	367.8		$	364.0		$	360.9
Losses and LAE:
Current accident year, excluding catastrophe losses		253.0			247.9			242.6			252.7			245.6
Prior year favorable reserve development		(14.7	)		(12.6	)		(9.3	)		(12.2	)		(14.1	)
Catastrophe losses		15.8			59.3			15.9			7.7			22.2

Total losses and LAE		254.1			294.6			249.2			248.2			253.7
Policy acquisition and other underwriting expenses		105.6			105.1			103.4			105.5			101.0

GAAP underwriting profit (loss)	$	6.7		$	(30.6	)	$	15.2		$	10.3		$	6.2


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		69.0	%		67.1	%		65.9	%		69.5	%		68.0	%
Prior year favorable reserve development		(4.0	)%		(3.4	)%		(2.5	)%		(3.4	)%		(3.9	)%
Catastrophe losses		4.3	%		16.1	%		4.3	%		2.1	%		6.2	%

Total loss and LAE ratio		69.3	%		79.8	%		67.7	%		68.2	%		70.3	%
Expense ratio		28.0	%		27.7	%		27.4	%		28.2	%		27.2	%

Combined ratio		97.3	%		107.5	%		95.1	%		96.4	%		97.5	%


Combined ratio, excluding catastrophe losses		93.0	%		91.4	%		90.8	%		94.3	%		91.3	%

Current accident year combined ratio, excluding catastrophe losses		97.0	%		94.8	%		93.3	%		97.7	%		95.2	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

TOTAL P&C


(In millions)	Q1 2010			Q2 2010			Q3 2010			Q4 2010			Q1 2011
Direct premiums written	$	715.2		$	782.8		$	815.2		$	774.7		$	833.3

Net premiums written	$	725.2		$	802.0		$	803.7		$	717.1		$	749.9

Net premiums earned	$	666.5		$	697.8		$	728.0		$	748.7		$	761.7
Losses and LAE:
Current accident year, excluding catastrophe losses		434.3			437.8			456.4			478.6			489.8
Prior year favorable reserve development		(37.1	)		(24.4	)		(25.9	)		(23.7	)		(28.5	)
Catastrophe losses		34.4			85.0			24.1			16.8			49.7

Total losses and LAE		431.6			498.4			454.6			471.7			511.0
Policy acquisition and other underwriting expenses		236.7			246.0			255.5			264.7			260.2

GAAP underwriting (loss) profit	$	(1.8	)	$	(46.6	)	$	17.9		$	12.3		$	(9.5	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		65.2	%		62.7	%		62.7	%		64.0	%		64.2	%
Prior year favorable reserve development		(5.6	)%		(3.5	)%		(3.6	)%		(3.2	)%		(3.7	)%
Catastrophe losses		5.2	%		12.2	%		3.3	%		2.2	%		6.5	%

Total loss and LAE ratio		64.8	%		71.4	%		62.4	%		63.0	%		67.0	%
Expense ratio		34.9	%		34.7	%		34.6	%		34.8	%		33.7	%

Combined ratio		99.7	%		106.1	%		97.0	%		97.8	%		100.7	%


Combined ratio, excluding catastrophe losses		94.5	%		93.9	%		93.7	%		95.6	%		94.2	%

Current accident year combined ratio, excluding catastrophe losses		100.1	%		97.4	%		97.3	%		98.8	%		97.9	%

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME AND YIELDS


(In millions, except yields)	Q1 2010			Q2 2010			Q3 2010			Q4 2010			Q1 2011
Net Investment Income

Fixed maturities	$	62.2		$	62.7		$	62.2		$	61.5		$	60.6
Equity securities		0.6			0.6			1.1			2.2			1.3
Other investments		—			0.2			(0.5	)		1.3			0.5
Investment expenses		(1.7	)		(1.7	)		(1.5	)		(2.0	)		(2.0	)

Total	$	61.1		$	61.8		$	61.3		$	63.0		$	60.4


Pre-tax Yields

Fixed maturities		5.48	%		5.51	%		5.46	%		5.37	%		5.28	%
Total		5.15	%		5.23	%		5.11	%		5.13	%		4.97	%

Pre-tax yields are calculated as annualized investment income divided by the average of investment balances at the end of each month during the period. Investment balances, for purposes of the pre-tax yield calculation, exclude unrealized capital gains and losses.

THE HANOVER INSURANCE GROUP

INVESTMENT PORTFOLIO

March 31, 2011


(in millions)
Investment Type	Weighted Average Quality		Amortized Cost or Cost		Fair Value		% of Total			Net Unrealized Gain (Loss)			Change in Net Unrealized During Q1 2011

Fixed Maturities:
U.S. Treasury and government agencies		AAA	$	266.0	$	265.9		5.1	%	$	(0.1	)	$	(1.9	)
Municipals:
Taxable		AA		795.3		798.8		15.2	%		3.5			4.5
Tax exempt		A+		152.7		155.2		3.0	%		2.5			(0.5	)
Corporate:
NAIC 1		A		992.0		1,044.3		20.0	%		52.3			(3.8	)
NAIC 2		BBB		1,049.5		1,117.3		21.3	%		67.8			(2.4	)
NAIC 3 and below		B+		306.8		327.4		6.3	%		20.6			2.5

Total corporate		BBB+		2,348.3		2,489.0		47.6	%		140.7			(3.7	)

Asset backed:
Residential mortgage backed		AA+		671.7		700.3		13.4	%		28.6			(1.3	)
Commercial mortgage backed		AA+		345.8		361.6		6.9	%		15.8			(1.5	)
Asset backed		A+		52.3		55.8		1.0	%		3.5			(0.2	)

Total fixed maturities		A+		4,632.1		4,826.6		92.2	%		194.5			(4.6	)
Equity securities:
Perpetual preferred				10.1		17.9		0.3	%		7.8			1.0
Common equity				122.8		129.4		2.5	%		6.6			5.5

Total fixed maturities and equity securities				4,765.0		4,973.9		95.0	%		208.9			1.9
Cash and cash equivalents				218.8		218.8		4.2	%		—			—
Other investments				37.6		40.7		0.8	%		3.1			0.4

Total			$	5,021.4	$	5,233.4		100.0	%	$	212.0		$	2.3

THE HANOVER INSURANCE GROUP

CREDIT QUALITY AND DURATION OF FIXED MATURITIES

March 31, 2011

CREDIT QUALITY OF FIXED MATURITIES

(In millions)

NAIC Designation

Rating Agency
Equivalent Designation

Amortized
Cost

Fair
Value

% of Total
Fair Value

Aaa/Aa/A

3,141.4

3,251.5

67.4

Baa

1,176.5

1,240.3

25.7

155.1

164.7

3.4

109.1

114.3

2.4

Caa and lower

41.3

44.8

0.9

In or near default

8.7

11.0

0.2

Total fixed maturities

4,632.1

4,826.6

100.0

DURATION OF FIXED MATURITIES

(In millions)

Amortized
Cost

Fair
Value

% of Total
Fair Value

0-2 years

1,086.5

1,124.4

23.3

2-4 years

999.8

1,067.9

22.1

4-6 years

1,241.2

1,310.1

27.2

6-8 years

656.9

679.7

14.1

8-10 years

411.0

410.8

8.5

10+ years

236.7

233.7

4.8

Total fixed maturities

4,632.1

4,826.6

100.0

Weighted Average Duration

4.52

THE HANOVER INSURANCE GROUP

TOP 10 FIXED MATURITY HOLDINGS

March 31, 2011


(In millions, except percentage data)
Issuer	Amortized Cost		Fair Value		As a Percent of Invested Assets			S&P Ratings
Virginia State Housing	$	23.8	$	24.4		0.47	%		AA+
Wells Fargo		23.4		25.0		0.48	%		AA-
Kellogg		21.2		21.6		0.41	%		BBB+
CVS		20.5		22.0		0.42	%		BBB+
PNC Bank		19.9		21.2		0.41	%		A
American Express		18.6		20.1		0.38	%		BBB+
Comcast		18.4		20.6		0.39	%		BBB+
Dominion Resources		18.2		19.7		0.38	%		A-
GE Capital		17.7		18.5		0.35	%		AA+
Home Depot		17.0		18.9		0.36	%		BBB+

Top 10 Fixed Maturity Holdings	$	198.7	$	212.0		4.05	%

Excludes U.S. Government and government agency securities, commercial and residential mortgage-backed securities, and asset-backed securities.

THE HANOVER INSURANCE GROUP

RECONCILIATION OF SEGMENT INCOME TO NET INCOME


	Quarter ended March 31
	2011						2010
(In millions, except per share data)	$			Per Share (Diluted)			$			Per Share (Diluted)
SEGMENT INCOME
Property and Casualty
Commercial Lines	$	18.4					$	22.8
Personal Lines		30.1						34.5
Other Property and Casualty		(1.4	)					0.4

Total Property and Casualty		47.1						57.7

Interest expense on debt		(10.4	)					(9.3	)


Segment income before federal income taxes		36.7		$	0.80			48.4		$	1.00

Federal income tax expense on segment income		(12.5	)		(0.27	)		(16.4	)		(0.34	)


Segment income after federal income taxes		24.2			0.53			32.0			0.66

Net realized investment gains		3.3			0.07			10.9			0.23
Loss from retirement of debt		(2.5	)		(0.05	)		—			—
Federal income tax (expense) benefit on non-segment income		2.9			0.06			(0.7	)		(0.01	)

Income from continuing operations		27.9			0.61			42.2			0.88

Discontinued operations, net of taxes		1.4			0.03			(0.4	)		(0.01	)


NET INCOME	$	29.3		$	0.64		$	41.8		$	0.87

Non-GAAP Financial Measures

The Hanover uses non-GAAP financial measures as important measures of the Company’s operating performance, which we believe provide investors’ with additional information regarding management’s evaluation of our results of operations and financial performance. These metrics include segment income before interest expense and taxes, total segment income after taxes, total segment income after taxes per share, total book value per share, total book value per share excluding net unrealized gains and losses related to investments, net of tax, tangible book value 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.

Segment income before interest expense and taxes is net income, excluding interest expense on debt, federal income taxes and net realized investment gains and losses, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Segment income before interest expense and taxes 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 before interest expense and taxes is the sum of the segment income from: Commercial Lines, Personal Lines, and Other Property and Casualty. The Hanover believes that measures of segment income before interest expense and taxes 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.

Book value per share is total shareholders’ equity divided by the number of common shares outstanding. Book value per share excluding net unrealized gains and losses related to investments, net of tax is total shareholders’ equity excluding the after-tax effect of unrealized investment gains and losses divided by the number of common shares outstanding. Tangible book value per share is total shareholders’ equity, excluding goodwill, divided by the number of common shares outstanding.

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 providing certain financial metrics and trends excluding the effects of catastrophes is meaningful for investors to understand the variability of periodic earnings and loss ratios.

Prior year 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 prior year reserve development is helpful to investors since it provides insight into both our estimate of current year accident results and changes to prior-year reserve estimates.

Segment income before and after interest expense and taxes 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 before interest expense and taxes and income from continuing operations per share to segment income after taxes per share for the quarters ended March 31, 2010 and 2009 is set forth on page 13 of this document. The presentation of loss ratios calculated excluding the effects of reserve development and/or catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP.


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	2011
	Price Range				Dividends
	High		Low		Per Share
March 31	$	48.82	$	45.08	$	0.275
Quarter Ended	2010
	Price Range				Dividends
	High		Low		Per Share
March 31	$	44.63	$	40.51	$	0.25
June 30	$	45.72	$	42.33	$	0.25
September 30	$	47.00	$	43.16	$	0.25
December 31	$	47.73	$	45.25	$	0.25


INDUSTRY RATINGS AS OF May 4, 2011

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