3. Acquisitions and Discontinued Operations

ACQUISITIONS

Chaucer Acquisition

On July 1, 2011, the Company acquired Chaucer, a United Kingdom (“U.K.”) insurance business. Chaucer is a leading specialist managing agency at Lloyd’s. Chaucer underwrites business in several lines of business, including property, marine and aviation, energy, U.K. motor and casualty and other coverages (which include international liability, specialist coverages, and syndicate participations). Chaucer is headquartered in London, with a regional presence in Whitstable, England and locations in Houston, Singapore, Buenos Aires, and Copenhagen.

This transaction is expected to advance the Company’s specialty lines strategy and result in broader product and underwriting capabilities, as well as greater geographic and product diversification. The acquisition adds a presence in the Lloyd’s market, which includes access to international licenses, an excess and surplus insurance business and the ability to syndicate certain risks.

Pro Forma Results

The following unaudited pro forma information presents the combined revenues, net income (loss) and net income (loss) per share of THG and Chaucer for the nine months ended September 30, 2011, with pro forma purchase accounting adjustments as if the acquisition had been consummated as of January 1, 2011. This pro forma information is not necessarily indicative of what would have occurred had the acquisition and related transactions been made on January 1, 2011, or of future results of the Company. The Company’s income statement accounts denominated in foreign currencies are translated to U.S. dollars at the average rates of exchange for the period indicated.


(in millions, except per share data)	Nine Months Ended September 30, 2011
Revenue		$	3,224.8

Net income (loss)		$	(66.3	)

Net income (loss) per share – basic		$	(1.46	)

Net income (loss) per share – diluted		$	(1.46	)

Weighted average shares outstanding – basic			45.4

Weighted average shares outstanding – diluted			45.4

Other

The Company recognized $1.9 million in net foreign currency transaction losses in the Statement of Income during the three months ended September 30, 2011 and $1.0 million in net foreign currency transaction losses and $3.0 million in net foreign currency transaction gains during the three and nine months ended September 30, 2012, respectively.

DISCONTINUED OPERATIONS

Discontinued Third Party Administration Business

On April 30, 2012, the Company completed the sale of its third party administration subsidiary, Citizens Management, Inc. The Company recognized net gains of $10.8 million after taxes related to this transaction in the first nine months of 2012. Included in this amount and recognized during the third quarter of 2012 was a contingent gain with a fair value of $1.7 million that was entirely contributed to the Company’s charitable foundation.