STATISTICAL SUPPLEMENT

EX-99.2 3 dex992.htm STATISTICAL SUPPLEMENT STATISTICAL SUPPLEMENT

Exhibit 99.2

LOGO

STATISTICAL SUPPLEMENT

SECOND QUARTER 2011

THE HANOVER INSURANCE GROUP

STATISTICAL SUPPLEMENT

SECOND QUARTER 2011

TABLE OF CONTENTS


Financial Highlights			1
Consolidated Financial Statements
Income Statements			2
Balance Sheets			3
Underwriting and Premium Information
GAAP Underwriting Results			4-10
Investments
Net Investment Income			11
Investment Portfolio			12
Credit Quality and Duration of Fixed Maturities			13
Top 10 Holdings			14
Underwriting and Premium Information			15
Other Information
Non-GAAP Financial Measures			16
Corporate Information			17
Market and Dividend Information			17
Financial Strength and Debt Ratings			17

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


(In millions, except earnings per share)	Q2 2010		Q3 2010		Q4 2010		Q1 2011		Q2 2011			Q2-YTD 2010		Q2-YTD 2011
PREMIUMS
Direct premiums written	$	782.8	$	815.2	$	774.7	$	833.3	$	891.3		$	1,498.0	$	1,724.6
Net premiums written		802.0		803.7		717.1		749.9		815.4			1,527.2		1,565.3
Net premiums earned		697.8		728.0		748.7		761.7		770.5			1,364.3		1,532.2
EARNINGS
Segment income (loss) before interest expense and taxes	$	14.6	$	79.2	$	76.2	$	49.8	$	(46.8	)	$	72.3	$	3.0
Segment income (loss) after interest expense and taxes		1.8		44.7		43.7		26.0		(38.1	)		33.8		(12.1	)
Income (loss) from continuing operations		2.2		51.4		57.4		27.9		(32.4	)		44.4		(4.5	)
Net income (loss)		2.3		52.3		58.4		29.3		(31.8	)		44.1		(2.5	)
PER SHARE DATA (DILUTED) (1)
Segment income (loss) after taxes	$	0.04	$	0.98	$	0.95	$	0.56	$	(0.84	)	$	0.72	$	(0.27	)
Income (loss) from continuing operations		0.05		1.12		1.25		0.61		(0.71	)		0.95		(0.10	)
Net income (loss)		0.05		1.15		1.27		0.64		(0.70	)		0.94		(0.06	)

Weighted average shares outstanding (1)		45.5		45.7		45.9		46.0		45.4			46.8		45.4

BALANCE SHEET


(In millions, except per share data)	June 30 2010			September 30 2010			December 31 2010			March 31 2011			June 30 2011
Total assets	$	8,373.4		$	8,596.7		$	8,569.9		$	8,514.9		$	8,981.3
Total loss and loss adjustment expense reserves		3,224.7			3,232.1			3,277.7			3,315.4			3,406.4
Total shareholders’ equity		2,351.6			2,478.8			2,460.5			2,488.7			2,485.0
Property and Casualty Companies
Statutory surplus	$	1,752.0		$	1,795.3		$	1,747.3		$	1,776.6		$	1,658.6
Premium to surplus ratio		1.63:1			1.65:1			1.75:1			1.73:1			1.86:1
Book value per share	$	52.61		$	55.25		$	54.74		$	55.06		$	54.96
Book value per share, excluding net unrealized gains and losses related to investments, net of tax	$	49.02		$	50.23		$	51.92		$	52.06		$	51.12
Tangible book value per share (total book value excluding goodwill)	$	48.61		$	51.25		$	50.75		$	51.10		$	51.00
Shares outstanding		44.7			44.9			44.9			45.2			45.2

Total debt/equity		26.9	%		25.8	%		24.6	%		22.5	%		34.5	%
Total debt/total capital		21.2	%		20.5	%		19.8	%		18.4	%		25.7	%

(1)

Weighted average shares outstanding and per diluted share amounts in 2011 exclude common stock equivalents, as the impact of these instruments was anti-dilutive.

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Quarter ended June 30								Six Months ended June 30
(In millions)	2011			2010		% Change			2011			2010			% Change
REVENUES
Premiums earned	$	770.5		$	697.8		10.4		$	1,532.2		$	1,364.3			12.3
Net investment income		61.0			61.8		(1.3	)		121.4			122.9			(1.2	)
Total net realized investment gains		13.4			0.2		N/M			16.7			11.1			50.5
Fees and other income		9.0			8.5		5.9			17.4			16.6			4.8

Total revenues		853.9			768.3		11.1			1,687.7			1,514.9			11.4


LOSSES AND EXPENSES
Losses and loss adjustment expenses		617.5			498.4		23.9			1,128.5			930.0			21.3
Policy acquisition expenses		181.3			163.0		11.2			362.1			317.4			14.1
Interest expense on debt		10.8			11.7		(7.7	)		21.2			21.0			1.0
Other operating expenses		104.0			92.1		12.9			198.1			184.1			7.6

Total losses and expenses		913.6			765.2		19.4			1,709.9			1,452.5			17.7


Income (loss) from continuing operations before federal income taxes		(59.7	)		3.1		N/M			(22.2	)		62.4			(135.6	)
Federal income tax expense (benefit)		(27.3	)		0.9		N/M			(17.7	)		18.0			(198.3	)


Income (loss) from continuing operations		(32.4	)		2.2		N/M			(4.5	)		44.4			N/M

Discontinued operations		0.6			0.1		N/M			2.0			(0.3	)		N/M


Net income (loss)	$	(31.8	)	$	2.3		N/M		$	(2.5	)	$	44.1			(105.7	)

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	June 30 2011			December 31 2010			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $4,466.3 and $4,598.8)	$	4,697.9		$	4,797.9			(2.1	)
Equity securities, at fair value (cost of $147.8 and $120.7)		164.2			128.6			27.7
Other investments		44.0			39.4			11.7

Total investments		4,906.1			4,965.9			(1.2	)

Cash and cash equivalents		721.6			290.4			148.5
Accrued investment income		53.7			53.8			(0.2	)
Premiums and accounts receivable, net		760.9			772.0			(1.4	)
Reinsurance recoverable on paid and unpaid losses		1,280.9			1,254.2			2.1
Deferred policy acquistion costs		348.9			345.3			1.0
Deferred federal income taxes		173.1			177.4			(2.4	)
Goodwill		178.8			179.2			(0.2	)
Other assets		428.9			398.1			7.7
Assets of discontinued operations		128.4			133.6			(3.9	)

Total assets	$	8,981.3		$	8,569.9			4.8


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Loss and loss adjustment expense reserves	$	3,406.4		$	3,277.7			3.9
Unearned premiums		1,553.0			1,520.3			2.2
Expenses and taxes payable		519.0			541.7			(4.2	)
Reinsurance premiums payable		33.1			34.4			(3.8	)
Debt		857.9			605.9			41.6
Liabilities of discontinued operations		126.9			129.4			(1.9	)

Total liabilities		6,496.3			6,109.4			6.3


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		1,782.5			1,796.5			(0.8	)
Accumulated other comprehensive income		182.5			136.7			33.5
Retained earnings		1,222.9			1,246.8			(1.9	)
Treasury stock at cost (15.3 and 15.6 million shares)		(703.5	)		(720.1	)		(2.3	)

Total shareholders’ equity		2,485.0			2,460.5			1.0

Total liabilities and shareholders’ equity	$	8,981.3		$	8,569.9			4.8

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION

Quarter ended June 30

2011

Commercial Lines

Personal Lines

Multiple

Workers’

Other

Total

(In millions)

Peril

Auto

Comp

Other

Total

Auto

Home

Other

Total

P&C

Net premiums written

144.7

64.7

44.2

186.9

440.5

229.6

133.2

11.8

374.6

0.3

815.4

Net premiums earned

139.6

61.2

43.6

164.1

408.5

229.1

122.2

10.6

361.9

0.1

770.5

Losses and LAE:

Current accident year, excluding catastrophe losses

83.3

34.6

34.3

88.5

240.7

163.8

67.1

4.4

235.3

0.1

476.1

Prior year (favorable) unfavorable reserve development

(6.0

)

1.7

(6.9

)

1.9

(9.3

)

(7.4

)

0.8

0.7

(5.9

)

(0.1

)

(15.3

)

Catastrophe losses

58.1

0.7

—

18.3

77.1

6.3

71.8

1.5

79.6

—

156.7

Total losses and LAE

135.4

37.0

27.4

108.7

308.5

162.7

139.7

6.6

309.0

—

617.5

Policy acquisition and other underwriting expenses

159.5

100.0

0.1

259.6

GAAP underwriting loss

(59.5

)

(47.1

)

—

(106.6

)

Net investment income

34.0

23.1

3.9

61.0

Other income

5.4

3.2

1.6

10.2

Other operating expenses

(4.6

)

(2.1

)

(4.7

)

(11.4

)

Segment income (loss) before federal income taxes

(24.7

)

(22.9

)

0.8

(46.8

)


	2010
	Commercial Lines														Personal Lines
	Multiple						Workers’																			Other			Total
	Peril			Auto			Comp			Other		Total			Auto			Home		Other			Total			P&C			P&C
Net premiums written	$	152.8		$	68.1		$	40.9		$	163.3	$	425.1		$	237.2		$	128.2	$	11.5		$	376.9		$	—		$	802.0

Net premiums earned	$	109.4		$	53.1		$	31.7		$	134.5	$	328.7		$	238.4		$	119.9	$	10.8		$	369.1		$	—		$	697.8
Losses and LAE:
Current accident year, excluding catastrophe losses		64.7			30.6			24.2			70.3		189.8			178.0			64.8		5.1			247.9			0.1			437.8
Prior year (favorable) unfavorable reserve development		(9.5	)		(2.8	)		(6.7	)		7.4		(11.6	)		(13.0	)		1.3		(0.9	)		(12.6	)		(0.2	)		(24.4	)
Catastrophe losses		19.4			—			—			6.3		25.7			6.7			51.8		0.8			59.3			—			85.0

Total losses and LAE		74.6			27.8			17.5			84.0		203.9			171.7			117.9		5.0			294.6			(0.1	)		498.4
Policy acquisition and other underwriting expenses													140.8											105.1			0.1			246.0

GAAP underwriting loss													(16.0	)										(30.6	)		—			(46.6	)
Net investment income													32.3											25.6			3.9			61.8
Other income													4.9											3.2			1.6			9.7
Other operating expenses													(4.3	)										(1.7	)		(4.3	)		(10.3	)

Segment income (loss) before federal income taxes												$	16.9										$	(3.5	)	$	1.2		$	14.6

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND SEGMENT INCOME INFORMATION

Six Months ended June 30

2011

Commercial Lines

Personal Lines

Multiple

Workers'

Other

Total

(In millions)

Peril

Auto

Comp

Other

Total

Auto

Home

Other

Total

P&C

Net premiums written

281.9

126.7

90.0

350.4

849.0

460.7

234.4

20.9

716.0

0.3

1,565.3

Net premiums earned

279.5

122.5

85.4

321.9

809.3

458.0

243.7

21.1

722.8

0.1

1,532.2

Losses and LAE:

Current accident year, excluding catastrophe losses

172.8

73.6

65.8

172.6

484.8

334.0

139.5

7.4

480.9

0.2

965.9

Prior year (favorable) unfavorable reserve development

(11.6

)

1.4

(10.6

)

(2.8

)

(23.6

)

(19.3

)

(1.8

)

1.1

(20.0

)

(0.2

)

(43.8

)

Catastrophe losses

79.7

0.9

—

24.0

104.6

6.3

93.7

1.8

101.8

—

206.4

Total losses and LAE

240.9

75.9

55.2

193.8

565.8

321.0

231.4

10.3

562.7

—

1,128.5

Policy acquisition and other underwriting expenses

318.8

201.0

—

519.8

GAAP underwriting profit (loss)

(75.3

)

(40.9

)

0.1

(116.1

)

Net investment income

67.6

45.8

8.0

121.4

Other income

10.3

6.3

3.3

19.9

Other operating expenses

(8.9

)

(4.0

)

(9.3

)

(22.2

)

Segment income (loss) before federal income taxes

(6.3

)

7.2

2.1

3.0


	2010
	Commercial Lines														Personal Lines
	Multiple						Workers'																			Other			Total
	Peril			Auto			Comp			Other		Total			Auto			Home		Other			Total			P&C			P&C
Net premiums written	$	288.2		$	131.1		$	80.8		$	300.3	$	800.4		$	478.3		$	227.4	$	20.8		$	726.5		$	0.3		$	1,527.2

Net premiums earned	$	208.0		$	102.7		$	60.3		$	257.5	$	628.5		$	477.1		$	237.4	$	21.0		$	735.5		$	0.3		$	1,364.3
Losses and LAE:
Current accident year, excluding catastrophe losses		125.8			60.2			47.7			137.1		370.8			362.2			130.1		8.6			500.9			0.4			872.1
Prior year (favorable) unfavorable reserve development		(17.0	)		(4.3	)		(16.6	)		4.2		(33.7	)		(27.8	)		1.4		(0.9	)		(27.3	)		(0.5	)		(61.5	)
Catastrophe losses		33.2			0.5			—			10.6		44.3			7.4			66.8		0.9			75.1			—			119.4

Total losses and LAE		142.0			56.4			31.1			151.9		381.4			341.8			198.3		8.6			548.7			(0.1	)		930.0
Policy acquisition and other underwriting expenses													271.9											210.7			0.1			482.7

GAAP underwriting profit (loss)													(24.8	)										(23.9	)		0.3			(48.4	)
Net investment income													64.3											51.2			7.4			122.9
Other income													9.3											6.5			3.1			18.9
Other operating expenses													(9.1	)										(2.8	)		(9.2	)		(21.1	)

Segment income before federal income taxes												$	39.7										$	31.0		$	1.6		$	72.3

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING RATIOS

Quarter ended June 30

2011

Commercial Lines

Personal Lines

Multiple

Workers’

Other

Total

Peril

Auto

Comp

Other

Total

Auto

Home

Other

Total

P&C

Loss and LAE ratio:

Current accident year, excluding catastrophe losses

59.7

56.6

78.6

53.8

58.9

71.5

54.8

41.5

65.0

N/M

61.8

Prior year (favorable) unfavorable reserve development

(4.3

2.8

(15.8

1.2

(2.3

(3.2

0.7

6.6

(1.6

N/M

(2.0

Catastrophe losses

41.6

1.1

—

11.2

18.9

2.7

58.8

14.2

22.0

N/M

20.3

Total loss and LAE ratio

97.0

60.5

62.8

66.2

75.5

71.0

114.3

62.3

85.4

N/M

80.1

Expense ratio

38.8

26.8

N/M

33.2

Combined ratio

114.3

112.2

N/M

113.3

Change in policies in force

24.7

25.1

50.2

15.7

23.6

(6.0

(0.9

(6.8

(3.7

N/M

—

Retention

85.1

79.4

82.5

N/M

83.1

77.8

80.9

N/M

79.5


	2010
	Commercial Lines															Personal Lines
	Multiple						Workers’																					Other		Total
	Peril			Auto			Comp			Other			Total			Auto			Home			Other			Total			P&C		P&C
Loss and LAE ratio:
Current accident year, excluding catastrophe losses		59.2	%		57.6	%		76.3	%		52.2	%		57.8	%		74.7	%		54.0	%		47.2	%		67.1	%		N/M		62.7	%
Prior year (favorable) unfavorable reserve development		(8.7	)%		(5.3	)%		(21.1	)%		5.5	%		(3.5	)%		(5.5	)%		1.1	%		(8.3	)%		(3.4	)%		N/M		(3.5	)%
Catastrophe losses		17.7	%		—			—			4.7	%		7.8	%		2.8	%		43.2	%		7.4	%		16.1	%		N/M		12.2	%

Total loss and LAE ratio		68.2	%		52.3	%		55.2	%		62.4	%		62.1	%		72.0	%		98.3	%		46.3	%		79.8	%		N/M		71.4	%
Expense ratio														42.6	%											27.7	%		N/M		34.7	%

Combined ratio														104.7	%											107.5	%		N/M		106.1	%


Change in policies in force		1.1	%		0.2	%		4.8	%		(0.8	)%		0.6	%		(5.0	)%		3.6	%		(6.0	)%		(1.2	)%		N/M		(1.0	)%
Retention		81.5	%		76.9	%		75.5	%		N/M			79.6	%		75.2	%		81.7	%		N/M			78.5	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING RATIOS

Six Months ended June 30

2011

Commercial Lines

Personal Lines

Multiple

Workers’

Other

Total

Peril

Auto

Comp

Other

Total

Auto

Home

Other

Total

P&C

Losses and LAE ratio:

Current accident year, excluding catastrophe losses

61.9

60.1

77.0

53.6

59.9

72.8

57.2

35.1

66.6

N/M

63.1

Prior year (favorable) unfavorable reserve development

(4.2

1.1

(12.4

(0.9

(2.9

(4.2

(0.7

5.2

(2.8

N/M

(2.9

Catastrophe losses

28.5

0.7

—

7.5

12.9

1.4

38.4

8.5

14.1

N/M

13.5

Total losses and LAE ratio

86.2

61.9

64.6

60.2

69.9

70.0

94.9

48.8

77.9

N/M

73.7

Expense ratio

39.2

27.0

N/M

33.4

Combined ratio

109.1

104.9

N/M

107.1

Change in policies in force

24.7

25.1

50.2

15.7

23.6

(6.0

(0.9

(6.8

(3.7

N/M

—

Retention

85.1

80.7

82.1

N/M

83.3

77.8

80.9

N/M

79.5


	2010
	Commercial Lines															Personal Lines
	Multiple						Workers’																					Other		Total
	Peril			Auto			Comp			Other			Total			Auto			Home			Other			Total			P&C		P&C
Losses and LAE ratio:
Current accident year, excluding catastrophe losses		60.5	%		58.6	%		79.1	%		53.3	%		59.1	%		75.8	%		54.8	%		41.0	%		68.1	%		N/M		63.9	%
Prior year (favorable) unfavorable reserve development		(8.2	)%		(4.2	)%		(27.5	)%		1.6	%		(5.4	)%		(5.8	)%		0.6	%		(4.3	)%		(3.7	)%		N/M		(4.5	)%
Catastrophe losses		16.0	%		0.5	%		—			4.1	%		7.0	%		1.6	%		28.1	%		4.3	%		10.2	%		N/M		8.8	%

Total losses and LAE ratio		68.3	%		54.9	%		51.6	%		59.0	%		60.7	%		71.6	%		83.5	%		41.0	%		74.6	%		N/M		68.2	%
Expense ratio														43.0	%											27.8	%		N/M		34.8	%

Combined ratio														103.7	%											102.4	%		N/M		103.0	%


Change in policies in force		1.1	%		0.2	%		4.8	%		(0.8	)%		0.6	%		(5.0	)%		3.6	%		(6.0	)%		(1.2	)%		N/M		(1.0	)%
Retention		80.1	%		78.0	%		74.8	%		N/M			78.9	%		75.2	%		81.7	%		N/M			78.5	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

COMMERCIAL LINES


(In millions)	Q2 2010			Q3 2010			Q4 2010			Q1 2011			Q2 2011			Q2-YTD 2010			Q2-YTD 2011
Direct premiums written	$	383.4		$	400.9		$	402.1		$	466.8		$	491.7		$	725.7		$	958.5

Net premiums written	$	425.1		$	415.3		$	369.1		$	408.5		$	440.5		$	800.4		$	849.0

Net premiums earned	$	328.7		$	360.2		$	384.7		$	400.8		$	408.5		$	628.5		$	809.3
Losses and LAE:
Current accident year, excluding catastrophe losses		189.8			214.0			225.8			244.1			240.7			370.8			484.8
Prior year favorable reserve development		(11.6	)		(16.5	)		(11.3	)		(14.3	)		(9.3	)		(33.7	)		(23.6	)
Catastrophe losses		25.7			8.2			9.1			27.5			77.1			44.3			104.6

Total losses and LAE		203.9			205.7			223.6			257.3			308.5			381.4			565.8
Policy acquisition and other underwriting expenses		140.8			152.2			159.2			159.3			159.5			271.9			318.8

GAAP underwriting profit (loss)	$	(16.0	)	$	2.3		$	1.9		$	(15.8	)	$	(59.5	)	$	(24.8	)	$	(75.3	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		57.8	%		59.4	%		58.7	%		60.9	%		58.9	%		59.1	%		59.9	%
Prior year favorable reserve development		(3.5	)%		(4.6	)%		(2.9	)%		(3.6	)%		(2.3	)%		(5.4	)%		(2.9	)%
Catastrophe losses		7.8	%		2.3	%		2.4	%		6.9	%		18.9	%		7.0	%		12.9	%

Total loss and LAE ratio		62.1	%		57.1	%		58.2	%		64.2	%		75.5	%		60.7	%		69.9	%
Expense ratio		42.6	%		42.0	%		41.1	%		39.5	%		38.8	%		43.0	%		39.2	%

Combined ratio		104.7	%		99.1	%		99.3	%		103.7	%		114.3	%		103.7	%		109.1	%


Combined ratio, excluding catastrophe losses		96.9	%		96.8	%		96.9	%		96.8	%		95.4	%		96.7	%		96.2	%

Current accident year combined ratio, excluding catastrophe losses		100.4	%		101.4	%		99.8	%		100.4	%		97.7	%		102.1	%		99.1	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

PERSONAL LINES


(In millions)	Q2 2010			Q3 2010			Q4 2010			Q1 2011			Q2 2011			Q2-YTD 2010			Q2-YTD 2011
Direct premiums written	$	399.4		$	414.3		$	372.6		$	366.5		$	399.6		$	772.3		$	766.1

Net premiums written	$	376.9		$	388.4		$	348.0		$	341.4		$	374.6		$	726.5		$	716.0

Net premiums earned	$	369.1		$	367.8		$	364.0		$	360.9		$	361.9		$	735.5		$	722.8
Losses and LAE:
Current accident year, excluding catastrophe losses		247.9			242.6			252.7			245.6			235.3			500.9			480.9
Prior year favorable reserve development		(12.6	)		(9.3	)		(12.2	)		(14.1	)		(5.9	)		(27.3	)		(20.0	)
Catastrophe losses		59.3			15.9			7.7			22.2			79.6			75.1			101.8

Total losses and LAE		294.6			249.2			248.2			253.7			309.0			548.7			562.7
Policy acquisition and other underwriting expenses		105.1			103.4			105.5			101.0			100.0			210.7			201.0

GAAP underwriting profit (loss)	$	(30.6	)	$	15.2		$	10.3		$	6.2		$	(47.1	)	$	(23.9	)	$	(40.9	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		67.1	%		65.9	%		69.5	%		68.0	%		65.0	%		68.1	%		66.6	%
Prior year favorable reserve development		(3.4	)%		(2.5	)%		(3.4	)%		(3.9	)%		(1.6	)%		(3.7	)%		(2.8	)%
Catastrophe losses		16.1	%		4.3	%		2.1	%		6.2	%		22.0	%		10.2	%		14.1	%

Total loss and LAE ratio		79.8	%		67.7	%		68.2	%		70.3	%		85.4	%		74.6	%		77.9	%
Expense ratio		27.7	%		27.4	%		28.2	%		27.2	%		26.8	%		27.8	%		27.0	%

Combined ratio		107.5	%		95.1	%		96.4	%		97.5	%		112.2	%		102.4	%		104.9	%


Combined ratio, excluding catastrophe losses		91.4	%		90.8	%		94.3	%		91.3	%		90.2	%		92.2	%		90.8	%

Current accident year combined ratio, excluding catastrophe losses		94.8	%		93.3	%		97.7	%		95.2	%		91.8	%		95.9	%		93.6	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

TOTAL P&C


(In millions)	Q2 2010			Q3 2010			Q4 2010			Q1 2011			Q2 2011			Q2-YTD 2010			Q2-YTD 2011
Direct premiums written	$	782.8		$	815.2		$	774.7		$	833.3		$	891.3		$	1,498.0		$	1,724.6

Net premiums written	$	802.0		$	803.7		$	717.1		$	749.9		$	815.4		$	1,527.2		$	1,565.3

Net premiums earned	$	697.8		$	728.0		$	748.7		$	761.7		$	770.5		$	1,364.3		$	1,532.2
Losses and LAE:
Current accident year, excluding catastrophe losses		437.8			456.4			478.6			489.8			476.1			872.1			965.9
Prior year favorable reserve development		(24.4	)		(25.9	)		(23.7	)		(28.5	)		(15.3	)		(61.5	)		(43.8	)
Catastrophe losses		85.0			24.1			16.8			49.7			156.7			119.4			206.4

Total losses and LAE		498.4			454.6			471.7			511.0			617.5			930.0			1,128.5
Policy acquisition and other underwriting expenses		246.0			255.5			264.7			260.2			259.6			482.7			519.8

GAAP underwriting profit (loss)	$	(46.6	)	$	17.9		$	12.3		$	(9.5	)	$	(106.6	)	$	(48.4	)	$	(116.1	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		62.7	%		62.7	%		64.0	%		64.2	%		61.8	%		63.9	%		63.1	%
Prior year favorable reserve development		(3.5	)%		(3.6	)%		(3.2	)%		(3.7	)%		(2.0	)%		(4.5	)%		(2.9	)%
Catastrophe losses		12.2	%		3.3	%		2.2	%		6.5	%		20.3	%		8.8	%		13.5	%

Total loss and LAE ratio		71.4	%		62.4	%		63.0	%		67.0	%		80.1	%		68.2	%		73.7	%
Expense ratio		34.7	%		34.6	%		34.8	%		33.7	%		33.2	%		34.8	%		33.4	%

Combined ratio		106.1	%		97.0	%		97.8	%		100.7	%		113.3	%		103.0	%		107.1	%


Combined ratio, excluding catastrophe losses		93.9	%		93.7	%		95.6	%		94.2	%		93.0	%		94.2	%		93.6	%

Current accident year combined ratio, excluding catastrophe losses		97.4	%		97.3	%		98.8	%		97.9	%		95.0	%		98.7	%		96.5	%

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME AND YIELDS


(In millions, except yields)	Q2 2010			Q3 2010			Q4 2010			Q1 2011			Q2 2011			Q2-YTD 2010			Q2-YTD 2011
Net Investment Income
Fixed maturities	$	62.7		$	62.2		$	61.5		$	60.6		$	60.3		$	124.9		$	120.9
Equity securities		0.6			1.1			2.2			1.3			1.4			1.2			2.7
Other investments		0.2			(0.5	)		1.3			0.5			1.0			0.2			1.5
Investment expenses		(1.7	)		(1.5	)		(2.0	)		(2.0	)		(1.7	)		(3.4	)		(3.7	)

Total	$	61.8		$	61.3		$	63.0		$	60.4		$	61.0		$	122.9		$	121.4

Pre-tax Yields
Fixed maturities		5.51	%		5.46	%		5.37	%		5.28	%		5.35	%		5.50	%		5.32	%
Total		5.23	%		5.11	%		5.13	%		4.97	%		5.09	%		5.19	%		5.04	%

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

June 30, 2011


(in millions)
Investment Type	Weighted Average Quality	Amortized Cost or Cost		Fair Value		% of Total			Net Unrealized Gain		Change in Net Unrealized Q2 2011			Change in Net Unrealized YTD
Fixed Maturities:
U.S. Treasury and government agencies	AAA	$	212.2	$	214.4		3.8	%	$	2.2	$	2.3		$	0.4
Municipals:
Taxable	AA		787.7		808.9		14.4	%		21.2		17.7			22.2
Tax exempt	A+		156.5		160.2		2.8	%		3.7		1.2			0.7
Corporate:
NAIC 1	A		932.1		993.2		17.6	%		61.1		8.8			5.0
NAIC 2	BBB		1,011.5		1,089.1		19.4	%		77.6		9.8			7.4
NAIC 3 and below	B+		316.7		334.8		6.0	%		18.1		(2.5	)		—

Total corporate	BBB+		2,260.3		2,417.1		43.0	%		156.8		16.1			12.4

Asset backed:
Residential mortgage backed	AA+		669.5		699.6		12.4	%		30.1		1.5			0.2
Commercial mortgage backed	AA+		339.9		354.1		6.3	%		14.2		(1.6	)		(3.1	)
Asset backed	A		40.2		43.6		0.8	%		3.4		(0.1	)		(0.3	)

Total fixed maturities	A+		4,466.3		4,697.9		83.5	%		231.6		37.1			32.5
Equity securities:
Perpetual preferred			10.1		17.8		0.3	%		7.7		(0.1	)		0.9
Common equity			137.7		146.4		2.6	%		8.7		2.1			7.6

Total fixed maturities and equity securities			4,614.1		4,862.1		86.4	%		248.0		39.1			41.0
Cash and cash equivalents			721.6		721.6		12.8	%		—		—			—
Other investments			40.9		44.0		0.8	%		3.1		—			0.4

Total		$	5,376.6	$	5,627.7		100.0	%	$	251.1	$	39.1		$	41.4

THE HANOVER INSURANCE GROUP

CREDIT QUALITY AND DURATION OF FIXED MATURITIES

June 30, 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

3,010.7

3,148.1

67.0

Baa

1,131.8

1,207.8

25.7

160.8

171.2

3.7

115.2

119.2

2.5

Caa and lower

39.4

40.8

0.9

In or near default

8.4

10.8

0.2

Total fixed maturities

4,466.3

4,697.9

100.0

DURATION OF FIXED MATURITIES

(In millions)

Amortized
Cost

Fair
Value

% of Total
Fair Value

0-2 years

1,084.3

1,125.7

24.0

2-4 years

1,001.5

1,071.2

22.8

4-6 years

1,062.5

1,140.6

24.3

6-8 years

759.9

793.3

16.9

8-10 years

352.8

359.1

7.6

10+ years

205.3

208.0

4.4

Total fixed maturities

4,466.3

4,697.9

100.0

Weighted Average Duration

4.45

THE HANOVER INSURANCE GROUP

TOP 10 FIXED MATURITY HOLDINGS

June 30, 2011


(In millions, except percentage data)
Issuer	Amortized Cost		Fair Value		As a Percent of Invested Assets			S&P Ratings
Virginia State Housing	$	23.6	$	24.4		0.43	%	AA+
Wells Fargo		23.4		25.1		0.45	%	AA-
CVS		20.1		22.0		0.39	%	BBB+
Kellogg		18.8		19.5		0.35	%	BBB+
M&T Bank		18.6		19.6		0.35	%	A-
Comcast		18.4		20.9		0.37	%	BBB+
PNC Bank		17.9		19.4		0.34	%	A
American Express		16.6		18.1		0.32	%	BBB+
Miller Brewing		16.5		18.2		0.32	%	BBB+
Metlife		16.2		16.8		0.30	%	AA-

Top 10 Fixed Maturity Holdings	$	190.1	$	204.0		3.62	%

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 June 30												Six Months ended June 30
	2011						2010						2011						2010
(In millions, except per share data)	$			Per Share (Diluted) (1)			$			Per Share (Diluted)			$			Per Share (Diluted) (1)			$			Per Share (Diluted)
SEGMENT INCOME
Property and Casualty
Commercial Lines	$	(24.7	)				$	16.9					$	(6.3	)				$	39.7
Personal Lines		(22.9	)					(3.5	)					7.2						31.0
Other Property and Casualty (2)		0.8						1.2						2.1						1.6

Total Property and Casualty		(46.8	)					14.6						3.0						72.3

Interest expense on debt		(10.8	)					(11.7	)					(21.2	)					(21.0	)


Segment income (loss) before federal income taxes		(57.6	)	$	(1.27	)		2.9		$	0.06			(18.2	)	$	(0.40	)		51.3		$	1.09

Federal income tax (expense) benefit on segment income (loss)		19.5			0.43			(1.1	)		(0.02	)		6.1			0.13			(17.5	)		(0.37	)


Segment income (loss) after federal income taxes		(38.1	)		(0.84	)		1.8			0.04			(12.1	)		(0.27	)		33.8			0.72
Net realized investment gains		13.4			0.30			0.2			0.01			16.7			0.37			11.1			0.24
Gain (loss) from retirement of debt		0.3			0.01			—			—			(2.2	)		(0.05	)		—			—
Costs related to acquired businesses		(11.1	)		(0.25	)		—			—			(13.8	)		(0.31	)		—			—
Loss on foreign exchange contract		(4.7	)		(0.10	)		—			—			(4.7	)		(0.10	)		—			—
Federal income tax (expense) benefit on non-segment income (loss)		7.8			0.17			0.2			—			11.6			0.26			(0.5	)		(0.01	)

Income (loss) from continuing operations		(32.4	)		(0.71	)		2.2			0.05			(4.5	)		(0.10	)		44.4			0.95

Discontinued operations, net of taxes		0.6			0.01			0.1			—			2.0			0.04			(0.3	)		(0.01	)


NET INCOME (LOSS)	$	(31.8	)	$	(0.70	)	$	2.3		$	0.05		$	(2.5	)	$	(0.06	)	$	44.1		$	0.94

(1)

Per diluted share amounts in 2011 exclude common stock equivalents, as the impact of these instruments was anti-dilutive.

(2)

The six months ended June 30, 2011 reflects $2.7 million which was reclassified from Other Property and Casualty to Costs related to acquired businesses to reflect a consistent presentation with that adopted in the second quarter of 2011.

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, net gains and losses on derivative transactions, 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 our 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 and six months ended June 30, 2011 and 2010 is set forth on page 15 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

Chaucer Holdings PLC

Plantation Place

30 Fenchurch Street

London

EC3M 3AD

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
June 30	$	46.15	$	36.18	$	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 AUGUST 8, 2011

Financial
Strength
Ratings

A.M.
Best

Standard
& Poor’s

Moody’s

Fitch

Property and
Casualty Insurance Companies:

The Hanover Insurance Company

A-

Citizens Insurance Company of America

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 Deben- tures

bb+

BB-

Ba1

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