EX-99.2

EX-99.2 3 d527632dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

LOGO

FINANCIAL SUPPLEMENT

FIRST QUARTER 2013

THE HANOVER INSURANCE GROUP

FINANCIAL SUPPLEMENT

TABLE OF CONTENTS


Business Description		1
Financial Highlights		2
Consolidated Financial Statements
Income Statements		3
Balance Sheets		4
GAAP Underwriting Results
Consolidated		5-6
Commercial Lines		7-8
Personal Lines		9-10
Chaucer		11-12
Investments
Net Investment Income and Yields		13
Investment Portfolio		14
Credit Quality and Duration of Fixed Maturities		15
Top 10 Corporate and Municipal Fixed Maturity Holdings		16
Reconciliation of Operating Income (Loss) to Net Income (Loss)		17
Other Information
Non-GAAP Financial Measures		18
Corporate Information		19
Market and Dividend Information		19
Financial Strength and Debt Ratings		19

THE HANOVER INSURANCE GROUP

BASIS OF PRESENTATION

BUSINESS DESCRIPTIONS

COMMERCIAL LINES

Commercial multiple peril coverage insures businesses against third party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products sold. It also insures business property for damage, such as that caused by fire, wind, hail, water damage (except for flooding), theft and vandalism.

Commercial automobile coverage insures businesses against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and property.

Workers’ compensation coverage insures employers against employee medical and indemnity claims resulting from injuries related to work. Workers’ compensation policies are often written in conjunction with other commercial policies.

Other Commercial Lines is comprised of inland marine, which insures businesses against physical losses to property, such as contractor’s equipment, builders’ risk and goods in transit. We also offer underwriting and managing of program business, including to under-served markets where there are specialty coverage or risk management needs. Other Commercial Lines also includes bonds, which provides businesses with contract surety coverage in the event of performance or payment claims, and commercial surety coverage related to fiduciary or regulatory obligations. Also included in Other Commercial Lines coverages are umbrella, general liability, fire, specialty property, and professional and management liability.

PERSONAL LINES

Personal automobile coverage insures individuals against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and other property.

Homeowners coverage insures individuals for losses to their residences and personal property, such as those caused by fire, wind, hail, water damage (except for flooding), theft and vandalism, and against third party liability claims.

Other Personal Lines are comprised of personal inland marine (jewelry, art, etc.), umbrella, fire, personal watercraft, earthquake and other miscellaneous coverages.

CHAUCER

The Chaucer reporting segment represents THG’s international business written through Lloyd’s and includes international property, marine and aviation, energy, UK motor and international casualty and other coverages.

Property coverage, including direct, facultative and treaty property accounts, insures property, including commercial, auto, and industrial businesses, against physical loss or damage and business interruption. The property treaty account comprises mainly catastrophe and per risk excess contract acceptances, with a small amount of proportional treaty and reinsurance assumed business.

Marine and Aviation includes coverages that insure marine hull, excess of loss, liability, cargo and specie, in addition to political risk, war, and satellite business coverages. It also includes aviation coverages that insure airline hull and liability, general aviation and refuellers and products.

Energy coverage, encompassing exploration and production, construction, liabilities downstream and renewables, insures energy businesses against physical damage, business interruption, control of well, seepage and pollution and liabilities. Energy also includes Nuclear, which predominantly provides coverage relating to power generation at nuclear power stations.

UK Motor coverage insures the UK private car and fleet markets. In addition, it writes specialist classes including commercial vehicle, taxi, motorcycle, motor trade and classic/specialist vehicles, as well as other UK small commercial products.

Casualty and Other Lines includes coverages that insure financial institutions crime and professional indemnity, medical malpractice, workers’ compensation and professional, managerial and general liability, as well as syndicate participations.

OTHER

Included in Other are Opus, which provides investment advisory services to affiliates and also manages assets for unaffiliated institutions such as insurance companies, retirement plans and foundations; earnings on holding company assets; and voluntary pools business which is in run-off.

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


(In millions, except earnings per share)	Q1 2012			Q2 2012			Q3 2012			Q4 2012			Q1 2013
PREMIUMS
Gross premiums written	$	1,287.8		$	1,417.1		$	1,291.9		$	1,207.4		$	1,318.1
Net premiums written		1,016.8			1,197.6			1,120.1			1,033.9			1,076.7
Net premiums earned		1,035.6			1,050.0			1,071.0			1,082.5			1,094.3

EARNINGS
Operating income (loss) before interest and taxes	$	85.7		$	31.0		$	62.9		$	(104.5	)	$	102.2

Operating income (loss) after taxes		46.0			10.0			32.5			(73.4	)		59.9

Income (loss) from continuing operations		50.7			9.8			40.9			(55.3	)		66.4
Net income (loss)		49.7			20.8			40.4			(55.0	)		66.2

PER SHARE DATA (DILUTED) (1)

Operating income (loss) after taxes	$	1.01		$	0.22		$	0.72		$	(1.65	)	$	1.32
Income (loss) from continuing operations		1.11			0.22			0.90			(1.24	)		1.47
Net income (loss)		1.09			0.46			0.89			(1.24	)		1.46

Weighted average shares outstanding (1)		45.5			45.4			45.2			44.5			45.3
BALANCE SHEET

(In millions, except per share data)	March 31 2012			June 30 2012			September 30 2012			December 31 2012			March 31 2013
Total assets	$	12,913.4		$	13,118.7		$	13,330.1		$	13,484.9		$	13,442.1
Total loss and loss adjustment expense reserves		5,827.3			5,853.4			5,938.9			6,197.0			6,092.5
Total shareholders’ equity		2,579.0			2,617.5			2,699.4			2,595.4			2,624.0

U.S. Property and Casualty Companies
Statutory surplus	$	1,681.1		$	1,655.1		$	1,670.8		$	1,523.4		$	1,623.3
Premium to surplus ratio		1.92:1			1.98:1			2.01:1			2.22:1			2.09:1

Book value per share	$	57.65		$	58.81		$	61.00		$	58.59		$	59.58
Book value per share, excluding net unrealized investment gains and losses, net of tax	$	52.32		$	53.10		$	53.82		$	51.88		$	52.81
Tangible book value per share (total book value excluding goodwill and intangibles)	$	50.31		$	51.53		$	53.69		$	51.32		$	52.46

Shares outstanding		44.7			44.5			44.3			44.3			44.0

Total debt/equity		35.6	%		35.1	%		34.0	%		32.7	%		37.3	%
Total debt/total capital		26.3	%		26.0	%		25.4	%		24.7	%		27.2	%

(1)

Weighted average shares outstanding and per diluted share amounts in the fourth quarter of 2012 excludes common stock equivalents, as the impact of these instruments was anti-dilutive.

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Three Months ended March 31
(In millions)	2013			2012			% Change
REVENUES
Premiums earned	$	1,094.3		$	1,035.6			5.7
Net investment income		67.3			68.8			(2.2	)
Total net realized investment gains		8.1			3.1			161.3
Fees and other income		10.6			14.3			(25.9	)

Total revenues		1,180.3			1,121.8			5.2


LOSSES AND EXPENSES
Losses and loss adjustment expenses		683.4			661.4			3.3
Amortization of deferred acquisition costs		242.5			228.1			6.3
Interest expense		14.7			16.2			(9.3	)
Other operating expenses		150.8			145.3			3.8

Total losses and expenses		1,091.4			1,051.0			3.8


Income from continuing operations before income taxes		88.9			70.8			25.6
Income tax expense		22.5			20.1			11.9


Income from continuing operations		66.4			50.7			31.0

Discontinued operations		(0.2	)		(1.0	)		N/M


Net income	$	66.2		$	49.7			33.2

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	March 31 2013			December 31 2012			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $6,310.6 and $6,529.5)	$	6,723.5		$	6,952.2			(3.3	)
Equity securities, at fair value (cost of $391.2 and $299.0)		435.0			315.8			37.7
Other investments		207.5			210.3			(1.3	)

Total investments		7,366.0			7,478.3			(1.5	)

Cash and cash equivalents		691.0			564.8			22.3
Accrued investment income		68.9			69.0			(0.1	)
Premiums and accounts receivable, net		1,318.1			1,308.8			0.7
Reinsurance recoverable on paid and unpaid losses and unearned premiums		2,435.5			2,479.7			(1.8	)
Deferred acquistion costs		494.7			489.5			1.1
Deferred income taxes		238.5			267.6			(10.9	)
Goodwill		184.4			184.9			(0.3	)
Other assets		524.4			511.8			2.5
Assets of discontinued operations		120.6			130.5			(7.6	)

Total assets	$	13,442.1		$	13,484.9			(0.3	)


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Loss and loss adjustment expense reserves	$	6,092.5		$	6,197.0			(1.7	)
Unearned premiums		2,488.1			2,474.8			0.5
Expenses and taxes payable		660.3			775.8			(14.9	)
Reinsurance premiums payable		475.9			466.2			2.1
Debt		978.1			849.4			15.2
Liabilities of discontinued operations		123.2			126.3			(2.5	)

Total liabilities		10,818.1			10,889.5			(0.7	)


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		1,785.3			1,787.1			(0.1	)
Accumulated other comprehensive income		323.1			325.8			(0.8	)
Retained earnings		1,252.8			1,211.6			3.4
Treasury stock at cost (16.5 and 16.2 million shares)		(737.8	)		(729.7	)		1.1

Total shareholders’ equity		2,624.0			2,595.4			1.1

Total liabilities and shareholders’ equity	$	13,442.1		$	13,484.9			(0.3	)

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CONSOLIDATED

Three Months ended March 31


	2013															2012
(In millions, except percentage data)	Commercial Lines			Personal Lines			Chaucer			Other			Total			Commercial Lines			Personal Lines			Chaucer			Other			Total
Gross premiums written	$	561.4		$	367.2		$	389.5		$	—		$	1,318.1		$	532.6		$	373.2		$	381.7		$	0.3		$	1,287.8

Net premiums written	$	483.6		$	341.6		$	251.5		$	—		$	1,076.7		$	468.9		$	347.4		$	200.2		$	0.3		$	1,016.8

Net premiums earned	$	476.6		$	368.8		$	248.9		$	—		$	1,094.3		$	434.9		$	363.3		$	237.0		$	0.4		$	1,035.6
Losses and LAE:
Current accident year, excluding catastrophe losses		290.0			238.3			140.3			—			668.6			256.3			229.9			151.6			0.2			638.0
Prior year unfavorable (favorable) reserve development		0.2			5.6			(13.3	)		0.6			(6.9	)		0.5			3.8			(21.7	)		0.2			(17.2	)
Catastrophe losses		7.4			11.7			2.6			—			21.7			11.1			23.0			6.5			—			40.6

Total losses and LAE		297.6			255.6			129.6			0.6			683.4			267.9			256.7			136.4			0.4			661.4
Amortization of deferred acquisition costs and other underwriting expenses		182.1			103.1			86.3			0.5			372.0			169.5			102.4			85.9			0.4			358.2

GAAP underwriting profit (loss)		(3.1	)		10.1			33.0			(1.1	)		38.9			(2.5	)		4.2			14.7			(0.4	)		16.0
Net investment income		36.1			19.0			10.5			1.7			67.3			35.7			21.6			9.4			2.1			68.8
Other income		2.0			3.3			4.5			0.8			10.6			5.1			3.5			5.3			2.0			15.9
Other operating expenses		(2.0	)		(1.9	)		(7.1	)		(3.6	)		(14.6	)		(4.4	)		(1.8	)		(3.9	)		(4.9	)		(15.0	)

Operating income (loss) before income taxes	$	33.0		$	30.5		$	40.9		$	(2.2	)	$	102.2		$	33.9		$	27.5		$	25.5		$	(1.2	)	$	85.7


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		60.9	%		64.6	%		56.3	%		N/M			61.0	%		58.9	%		63.4	%		64.1	%		N/M			61.7	%
Prior year unfavorable (favorable) reserve development		—			1.5	%		(5.3	)%		N/M			(0.6	)%		0.1	%		1.0	%		(9.2	)%		N/M			(1.7	)%
Catastrophe losses		1.6	%		3.2	%		1.0	%		N/M			2.0	%		2.6	%		6.3	%		2.7	%		N/M			3.9	%

Total loss and LAE ratio		62.5	%		69.3	%		52.0	%		N/M			62.4	%		61.6	%		70.7	%		57.6	%		N/M			63.9	%
Expense ratio		38.0	%		27.2	%		34.7	%		N/M			33.7	%		38.7	%		27.3	%		36.2	%		N/M			34.2	%

Combined ratio		100.5	%		96.5	%		86.7	%		N/M			96.1	%		100.3	%		98.0	%		93.8	%		N/M			98.1	%


Change in policies in force		7.8	%		(4.2	)%											6.1	%		(1.5	)%
Retention		82.2	%		79.6	%											84.6	%		81.0	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CONSOLIDATED


(In millions, except percentage data)	Q1 2012			Q2 2012			Q3 2012			Q4 2012			Q1 2013

Gross premiums written	$	1,287.8		$	1,417.1		$	1,291.9		$	1,207.4		$	1,318.1

Net premiums written	$	1,016.8		$	1,197.6		$	1,120.1		$	1,033.9		$	1,076.7

Net premiums earned	$	1,035.6		$	1,050.0		$	1,071.0		$	1,082.5		$	1,094.3
Losses and LAE:
Current accident year, excluding catastrophe losses		638.0			640.8			664.8			676.7			668.6
Prior year unfavorable (favorable) reserve development		(17.2	)		17.2			(8.3	)		(7.5	)		(6.9	)
Catastrophe losses		40.6			74.1			51.9			203.3			21.7

Total losses and LAE		661.4			732.1			708.4			872.5			683.4
Amortization of deferred acquisition costs and other underwriting expenses		358.2			354.6			369.2			384.2			372.0

GAAP underwriting profit (loss)	$	16.0		$	(36.7	)	$	(6.6	)	$	(174.2	)	$	38.9


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		61.7	%		61.1	%		62.1	%		62.5	%		61.0	%
Prior year unfavorable (favorable) reserve development		(1.7	)%		1.6	%		(0.8	)%		(0.7	)%		(0.6	)%
Catastrophe losses		3.9	%		7.1	%		4.8	%		18.8	%		2.0	%

Total loss and LAE ratio		63.9	%		69.8	%		66.1	%		80.6	%		62.4	%
Expense ratio		34.2	%		33.3	%		34.1	%		35.1	%		33.7	%

Combined ratio		98.1	%		103.1	%		100.2	%		115.7	%		96.1	%


Combined ratio, excluding catastrophe losses		94.2	%		96.0	%		95.4	%		96.9	%		94.1	%

Current accident year combined ratio, excluding catastrophe losses		95.9	%		94.4	%		96.2	%		97.6	%		94.7	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

COMMERCIAL LINES

Three Months ended March 31


	2013															2012
(In millions, except percentage data)	Multiple Peril			Auto			Workers’ Comp			Other			Total			Multiple Peril			Auto			Workers’ Comp			Other			Total
Net premiums written	$	154.0		$	72.8		$	62.2		$	194.6		$	483.6		$	148.0		$	70.7		$	55.0		$	195.2		$	468.9

Net premiums earned	$	152.6		$	69.5		$	53.0		$	201.5		$	476.6		$	141.9		$	64.5		$	45.9		$	182.6		$	434.9
Losses and LAE:
Current accident year, excluding catastrophe losses		86.9			48.9			37.1			117.1			290.0			76.8			42.1			34.5			102.9			256.3
Prior year unfavorable (favorable) reserve development		(0.1	)		1.8			(3.5	)		2.0			0.2			(5.9	)		3.5			(1.2	)		4.1			0.5
Catastrophe losses		5.2			0.1			—			2.1			7.4			9.7			0.5			—			0.9			11.1

Total losses and LAE		92.0			50.8			33.6			121.2			297.6			80.6			46.1			33.3			107.9			267.9
Amortization of deferred acquisition costs and other underwriting expenses														182.1															169.5

GAAP underwriting loss														(3.1	)														(2.5	)
Net investment income														36.1															35.7
Other income														2.0															5.1
Other operating expenses														(2.0	)														(4.4	)

Operating income before income taxes													$	33.0														$	33.9


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		56.9	%		70.4	%		70.0	%		58.1	%		60.9	%		54.2	%		65.2	%		75.2	%		56.4	%		58.9	%
Prior year unfavorable (favorable) reserve development		(0.1	)%		2.6	%		(6.6	)%		1.0	%		—			(4.2	)%		5.4	%		(2.6	)%		2.2	%		0.1	%
Catastrophe losses		3.4	%		0.1	%		N/M			1.0	%		1.6	%		6.8	%		0.8	%		N/M			0.5	%		2.6	%

Total loss and LAE ratio		60.2	%		73.1	%		63.4	%		60.1	%		62.5	%		56.8	%		71.4	%		72.6	%		59.1	%		61.6	%
Expense ratio														38.0	%														38.7	%

Combined ratio														100.5	%														100.3	%


Change in policies in force		2.6	%		7.1	%		13.1	%		10.9	%		7.8	%		(0.1	)%		4.3	%		2.1	%		14.2	%		6.1	%
Retention		84.1	%		81.8	%		78.3	%		N/M			82.2	%		86.1	%		84.5	%		80.0	%		N/M			84.6	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

COMMERCIAL LINES


(In millions, except percentage data)	Q1 2012			Q2 2012			Q3 2012			Q4 2012			Q1 2013
Gross premiums written	$	532.6		$	564.2		$	571.6		$	514.0		$	561.4

Net premiums written	$	468.9		$	496.7		$	500.0		$	436.4		$	483.6

Net premiums earned	$	434.9		$	449.2		$	461.1		$	466.3		$	476.6
Losses and LAE:
Current accident year, excluding catastrophe losses		256.3			276.3			295.2			298.7			290.0
Prior year unfavorable reserve development		0.5			14.5			4.4			9.6			0.2
Catastrophe losses		11.1			38.4			17.0			126.9			7.4

Total losses and LAE		267.9			329.2			316.6			435.2			297.6
Amortization of deferred acquisition costs and other underwriting expenses		169.5			164.7			172.3			180.3			182.1

GAAP underwriting loss	$	(2.5	)	$	(44.7	)	$	(27.8	)	$	(149.2	)	$	(3.1	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		58.9	%		61.6	%		63.9	%		64.0	%		60.9	%
Prior year unfavorable reserve development		0.1	%		3.2	%		1.0	%		2.1	%		—
Catastrophe losses		2.6	%		8.5	%		3.7	%		27.2	%		1.6	%

Total loss and LAE ratio		61.6	%		73.3	%		68.6	%		93.3	%		62.5	%
Expense ratio		38.7	%		36.4	%		37.2	%		38.5	%		38.0	%

Combined ratio		100.3	%		109.7	%		105.8	%		131.8	%		100.5	%


Combined ratio, excluding catastrophe losses		97.7	%		101.2	%		102.1	%		104.6	%		98.9	%

Current accident year combined ratio, excluding catastrophe losses		97.6	%		98.0	%		101.1	%		102.5	%		98.9	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

PERSONAL LINES

Three Months ended March 31


	2013												2012
(In millions, except percentage data)	Auto			Home			Other			Total			Auto			Home			Other			Total
Net premiums written	$	227.1		$	105.4		$	9.1		$	341.6		$	233.1		$	105.0		$	9.3		$	347.4

Net premiums earned	$	228.5		$	129.7		$	10.6		$	368.8		$	225.7		$	126.8		$	10.8		$	363.3
Losses and LAE:
Current accident year, excluding catastrophe losses		170.5			63.5			4.3			238.3			163.9			60.6			5.4			229.9
Prior year unfavorable reserve development		4.5			1.0			0.1			5.6			3.5			0.3			—			3.8
Catastrophe losses		(0.3	)		11.4			0.6			11.7			2.4			20.0			0.6			23.0

Total losses and LAE		174.7			75.9			5.0			255.6			169.8			80.9			6.0			256.7
Amortization of deferred acquisition costs and other underwriting expenses											103.1												102.4

GAAP underwriting profit											10.1												4.2
Net investment income											19.0												21.6
Other income											3.3												3.5
Other operating expenses											(1.9	)											(1.8	)

Operating income before income taxes										$	30.5											$	27.5


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		74.5	%		48.9	%		40.6	%		64.6	%		72.5	%		47.7	%		50.0	%		63.4	%
Prior year unfavorable reserve development		2.0	%		0.8	%		0.9	%		1.5	%		1.6	%		0.2	%		N/M			1.0	%
Catastrophe losses		—			8.8	%		5.7	%		3.2	%		1.1	%		15.8	%		5.6	%		6.3	%

Total loss and LAE ratio		76.5	%		58.5	%		47.2	%		69.3	%		75.2	%		63.7	%		55.6	%		70.7	%
Expense ratio											27.2	%											27.3	%

Combined ratio											96.5	%											98.0	%


Change in policies in force		(3.4	)%		(4.4	)%		(9.3	)%		(4.2	)%		(2.3	)%		(0.2	)%		(6.5	)%		(1.5	)%
Retention		78.2	%		80.5	%		N/M			79.6	%		79.1	%		82.4	%		N/M			81.0	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

PERSONAL LINES


	Q1			Q2			Q3			Q4			Q1
(In millions, except percentage data)	2012			2012			2012			2012			2013
Gross premiums written	$	373.2		$	414.3		$	430.3		$	393.9		$	367.2

Net premiums written	$	347.4		$	371.1		$	393.7		$	363.4		$	341.6

Net premiums earned	$	363.3		$	364.3		$	366.5		$	365.8		$	368.8
Losses and LAE:
Current accident year, excluding catastrophe losses		229.9			233.5			241.5			250.4			238.3
Prior year unfavorable reserve development		3.8			7.8			3.6			11.3			5.6
Catastrophe losses		23.0			32.4			27.7			51.7			11.7

Total losses and LAE		256.7			273.7			272.8			313.4			255.6
Amortization of deferred acquisition costs and other underwriting expenses		102.4			101.0			102.1			105.1			103.1

GAAP underwriting profit (loss)	$	4.2		$	(10.4	)	$	(8.4	)	$	(52.7	)	$	10.1


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		63.4	%		64.1	%		65.8	%		68.5	%		64.6	%
Prior year unfavorable reserve development		1.0	%		2.1	%		1.0	%		3.1	%		1.5	%
Catastrophe losses		6.3	%		8.9	%		7.6	%		14.1	%		3.2	%

Total loss and LAE ratio		70.7	%		75.1	%		74.4	%		85.7	%		69.3	%
Expense ratio		27.3	%		26.9	%		27.0	%		27.9	%		27.2	%

Combined ratio		98.0	%		102.0	%		101.4	%		113.6	%		96.5	%


Combined ratio, excluding catastrophe losses		91.7	%		93.1	%		93.8	%		99.5	%		93.3	%

Current accident year combined ratio, excluding catastrophe losses		90.7	%		91.0	%		92.8	%		96.4	%		91.8	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CHAUCER

Three Months ended March 31


	2013													2012
(In millions, except percentage data)	Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total			Property		Marine & Aviation		Energy		UK Motor		Casualty and Other		Total
Gross premiums written	$	92.2	$	108.3	$	51.8	$	79.7	$	57.5	$	389.5		$	87.7	$	99.5	$	71.3	$	66.6	$	56.6	$	381.7

Net premiums written	$	47.8	$	81.3	$	17.7	$	60.1	$	44.6	$	251.5		$	29.6	$	58.5	$	23.3	$	45.5	$	43.3	$	200.2

Net premiums earned	$	44.5	$	58.8	$	44.8	$	66.5	$	34.3	$	248.9		$	46.7	$	54.2	$	39.4	$	61.5	$	35.2	$	237.0
Losses and LAE:
Current accident year, excluding catastrophe losses												140.3													151.6
Prior year favorable reserve development												(13.3	)												(21.7	)
Catastrophe losses												2.6													6.5

Total losses and LAE												129.6													136.4
Amortization of deferred acquisition costs and other underwriting expenses												86.3													85.9

GAAP underwriting profit												33.0													14.7
Net investment income												10.5													9.4
Other income												4.5													5.3
Other operating expenses												(7.1	)												(3.9	)

Operating income before income taxes											$	40.9												$	25.5


Loss and LAE ratio:
Current accident year, excluding catastrophe losses												56.3	%												64.1	%
Prior year favorable reserve development												(5.3	)%												(9.2	)%
Catastrophe losses												1.0	%												2.7	%

Total loss and LAE ratio												52.0	%												57.6	%
Expense ratio												34.7	%												36.2	%

Combined ratio												86.7	%												93.8	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CHAUCER


(In millions, except percentage data)	Q1 2012			Q2 2012			Q3 2012			Q4 2012			Q1 2013

Gross premiums written	$	381.7		$	438.6		$	290.0		$	299.5		$	389.5

Net premiums written	$	200.2		$	329.8		$	226.4		$	234.1		$	251.5

Net premiums earned	$	237.0		$	236.5		$	242.9		$	250.4		$	248.9
Losses and LAE:
Current accident year, excluding catastrophe losses		151.6			131.0			128.0			127.5			140.3
Prior year favorable reserve development		(21.7	)		(5.1	)		(17.1	)		(28.7	)		(13.3	)
Catastrophe losses		6.5			3.3			7.2			24.7			2.6

Total losses and LAE		136.4			129.2			118.1			123.5			129.6
Amortization of deferred acquisition costs and other underwriting expenses		85.9			88.1			94.1			98.0			86.3

GAAP underwriting profit	$	14.7		$	19.2		$	30.7		$	28.9		$	33.0


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		64.1	%		55.5	%		52.7	%		51.0	%		56.3	%
Prior year favorable reserve development		(9.2	)%		(2.2	)%		(7.0	)%		(11.5	)%		(5.3	)%
Catastrophe losses		2.7	%		1.4	%		3.0	%		9.9	%		1.0	%

Total loss and LAE ratio		57.6	%		54.7	%		48.7	%		49.4	%		52.0	%
Expense ratio		36.2	%		37.2	%		38.7	%		39.1	%		34.7	%

Combined ratio		93.8	%		91.9	%		87.4	%		88.5	%		86.7	%


Combined ratio, excluding catastrophe losses		91.1	%		90.5	%		84.4	%		78.6	%		85.7	%

Current accident year combined ratio, excluding catastrophe losses		100.3	%		92.7	%		91.4	%		90.1	%		91.0	%

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME AND YIELDS


(In millions, except yields)	Q1 2012			Q2 2012			Q3 2012			Q4 2012			Q1 2013
Net Investment Income

Fixed maturities	$	65.9		$	66.5		$	66.3		$	65.5		$	64.7
Equity securities		3.4			2.8			4.0			5.1			3.1
Other investments		2.0			1.5			1.7			1.8			2.2
Investment expenses		(2.5	)		(2.3	)		(2.8	)		(2.3	)		(2.7	)

Total	$	68.8		$	68.5		$	69.2		$	70.1		$	67.3


Pre-tax Yields

Fixed maturities		4.38	%		4.31	%		4.23	%		4.10	%		4.03	%
Total		3.89	%		3.87	%		3.80	%		3.78	%		3.64	%

Pre-tax yields are calculated as annualized investment income divided by the average of investment balances, excluding unrealized capital gains and losses, at the end of each month during the period.

THE HANOVER INSURANCE GROUP

INVESTMENT PORTFOLIO

March 31, 2013


(In millions)
Investment Type	Weighted Average Quality	Amortized Cost or Cost		Fair Value		% of Total			Net Unrealized Gain		Change in Net Unrealized During Q1 2013

Fixed maturities:
U.S. Treasury and government agencies	AAA	$	314.0	$	321.5		4.0	%	$	7.5	$	(0.9	)
Foreign government	AAA		299.7		305.6		3.8	%		5.9		1.5
Municipals:
Taxable	AA		841.8		922.7		11.5	%		80.9		1.8
Tax exempt	AA		146.4		153.4		1.9	%		7.0		—
Corporate:
NAIC 1	A		1,844.7		1,965.3		24.4	%		120.6		3.8
NAIC 2	BBB		1,281.9		1,393.8		17.3	%		111.9		(9.3	)
NAIC 3 and below	B+		316.7		339.7		4.2	%		23.0		0.4

Total corporate	BBB+		3,443.3		3,698.8		45.9	%		255.5		(5.1	)

Asset backed:
Residential mortgage-backed	AA-		720.3		754.3		9.3	%		34.0		(2.2	)
Commercial mortgage-backed	AA		340.6		358.8		4.4	%		18.2		(4.7	)
Asset-backed	AA+		204.5		208.4		2.6	%		3.9		(0.2	)

Total fixed maturities	A+		6,310.6		6,723.5		83.4	%		412.9		(9.8	)
Equity securities			391.2		435.0		5.4	%		43.8		27.0

Total fixed maturities and equity securities			6,701.8		7,158.5		88.8	%		456.7		17.2
Cash and cash equivalents			691.0		691.0		8.6	%		—		—
Other investments			204.3		207.5		2.6	%		3.2		—

Total		$	7,597.1	$	8,057.0		100.0	%	$	459.9	$	17.2

THE HANOVER INSURANCE GROUP

CREDIT QUALITY AND DURATION OF FIXED MATURITIES

March 31, 2013

(In millions)

CREDIT QUALITY OF FIXED MATURITIES

NAIC Designation

Rating Agency
Equivalent Designation

Amortized
Cost

Fair
Value

% of Total
Fair Value

Aaa/Aa/A

4,613.0

4,886.3

72.7

Baa

1,350.8

1,466.0

21.8

147.0

159.0

2.3

138.3

147.5

2.2

Caa and lower

50.9

52.7

0.8

In or near default

10.6

12.0

0.2

Total fixed maturities

6,310.6

6,723.5

100.0

DURATION OF FIXED MATURITIES

Amortized
Cost

Fair
Value

% of Total
Fair Value

0-2 years

1,692.0

1,746.5

26.0

2-4 years

1,869.9

1,988.8

29.6

4-6 years

1,208.5

1,326.6

19.7

6-8 years

1,064.8

1,145.4

17.0

8-10 years

358.4

388.1

5.8

10+ years

117.0

128.1

1.9

Total fixed maturities

6,310.6

6,723.5

100.0

Weighted Average Duration

3.99

THE HANOVER INSURANCE GROUP

TOP 10 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS

March 31, 2013


(In millions, except percentage data)
Issuer	Amortized Cost		Fair Value		As a Percent of Invested Assets			S&P Ratings
Royal Bank of Scotland: (1)
Term deposits (2)	$	164.5	$	167.7		2.08	%	A
Notes		15.3		16.0		0.20	%	A
Lloyds TSB Bank: (3)
Term deposits (2)		49.0		49.4		0.61	%	A
Notes		9.1		9.5		0.12	%	A
GE Capital		31.9		34.3		0.42	%	AA+
American Express		27.6		29.7		0.37	%	A-
JP Morgan		25.8		27.3		0.34	%	A
Wells Fargo		25.8		28.3		0.35	%	A+
Citigroup		22.9		25.0		0.31	%	A-
Rabobank Nederland		22.6		23.1		0.29	%	AA-
Miller Brewing Co.		22.5		24.0		0.30	%	BBB+
Bank of America		22.5		24.4		0.30	%	BBB+

Top 10 Corporate and Municipal Fixed	$	439.5	$	458.7		5.69	%

(1)	UK government owns 83% of bank equity

(2)	Weighted average duration is approximately 1 year

(3)	UK government owns 40% of bank equity

THE HANOVER INSURANCE GROUP

RECONCILIATION OF OPERATING INCOME TO NET INCOME


	Three Months ended March 31
	2013						2012
(In millions, except per share data)	$			Per Share (Diluted)			$			Per Share (Diluted)
OPERATING INCOME
Commercial Lines	$	33.0					$	33.9
Personal Lines		30.5						27.5
Chaucer		40.9						25.5
Other		(2.2	)					(1.2	)

Total		102.2						85.7

Interest expense		(14.7	)					(16.2	)

Operating income before income taxes		87.5		$	1.93			69.5		$	1.53

Income tax expense on operating income		(27.6	)		(0.61	)		(23.5	)		(0.52	)


Operating income after income taxes		59.9			1.32			46.0			1.01
Net realized investment gains		8.1			0.18			3.1			0.07
Loss from repayment of advances		(7.8	)		(0.17	)		—			—
Net costs related to acquired businesses		0.4			0.01			(1.5	)		(0.03	)
Net foreign exchange gains (losses)		0.7			0.02			(0.3	)		(0.01	)
Income tax benefit on non-operating income		5.1			0.11			3.4			0.07

Income from continuing operations		66.4			1.47			50.7			1.11

Discontinued operations, net of taxes		(0.2	)		(0.01	)		(1.0	)		(0.02	)


NET INCOME	$	66.2		$	1.46		$	49.7		$	1.09

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. In the first quarter of 2013, the Company renamed its non-GAAP income measure from segment income to operating income. The Company’s non-GAAP measures include operating income before interest expense and taxes, total operating income after taxes, total operating 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 operating income and loss ratios excluding catastrophe losses and reserve development. After-tax operating income EPS (sometimes referred to as “after-tax operating 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.

Operating income before interest expense and taxes is net income, excluding interest expense on debt, 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. Operating 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. Operating income before interest expense and taxes is the sum of the operating income from: Commercial Lines, Personal Lines, Chaucer, and Other. The Hanover believes that measures of operating 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 operating 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 operating 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.

Operating income before and after interest expense and taxes and measures of operating 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 operating income before interest expense and taxes and income from continuing operations per share to operating income after taxes per share for the three months ended March 31, 2013 and 2012 is set forth on page 17 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	2013
	Price Range				Dividends
	High		Low		Per Share
March 31	$	49.68	$	39.19	$	0.330

Quarter Ended	2012
	Price Range				Dividends
	High		Low		Per Share
March 31	$	41.52	$	34.27	$	0.300
June 30	$	41.04	$	37.17	$	0.300
September 30	$	39.69	$	33.99	$	0.300
December 31	$	39.51	$	34.58	$	0.330

INDUSTRY RATINGS AS OF APRIL 29, 2013


Financial Strength Ratings	A.M. Best	Standard & Poor’s	Moody’s
Property and Casualty Insurance Companies:
The Hanover Insurance Company	A	A-		A3
Citizens Insurance Company of America	A	A-		—

Debt Ratings	A.M. Best	Standard & Poor’s	Moody’s
The Hanover Insurance Group, Inc. Senior Debt	bbb	BBB-		Baa3
The Hanover Insurance Group, Inc. Subordinated Debentures	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