10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                      to                     

Commission file number: 1-13754

THE HANOVER INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-3263626
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
440 Lincoln Street, Worcester, Massachusetts	01653
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(508) 855-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 par value	New York Stock Exchange
7 5/8% Senior Debentures due 2025	New York Stock Exchange
6.35% Subordinated Debentures due 2053	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

Based on the closing sales price of June 28, 2013, the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was $2,108,212,659.

The number of shares outstanding of the registrant’s common stock, $0.01 par value, was 43,882,063 shares as of February 20, 2014.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of The Hanover Insurance Group, Inc.’s Proxy Statement relating to the 2014 Annual Meeting of Shareholders to be held May 20, 2014 to be filed pursuant to Regulation 14A are incorporated by reference in Part III.

THE HANOVER INSURANCE GROUP, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013

TABLE OF CONTENTS

Item	Description	Page
Part I
1	Business		3
1A.	Risk Factors		23
1B.	Unresolved Staff Comments		39
2	Properties		39
3	Legal Proceedings		39
4	Mine Safety Disclosures		39
Part II
5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		40
6	Selected Financial Data		42
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
7A.	Quantitative and Qualitative Disclosures About Market Risk		88
8	Financial Statements and Supplementary Data		88
9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.		143
9A.	Controls and Procedures		144
9B.	Other Information		144
Part III
10	Directors, Executive Officers and Corporate Governance		145
11	Executive Compensation		147
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		147
13	Certain Relationships and Related Transactions, and Director Independence		148
14	Principal Accounting Fees and Services		148
Part IV
15	Exhibits, Financial Statement Schedules		149
	Exhibits Index		150
	Signatures		154

PART I

ITEM 1 — BUSINESS

ORGANIZATION

The Hanover Insurance Group, Inc. (“THG”) is a holding company organized as a Delaware corporation in 1995 and traces its roots to as early as 1852, when the Hanover Fire Insurance Company was founded. Our primary business operations are property and casualty insurance products and services. We market our domestic products and services through independent agents and brokers in the United States (“U.S.”) and conduct business internationally through a wholly-owned subsidiary, Chaucer Holdings plc (“Chaucer”), which operates through the Society and Corporation of Lloyd’s (“Lloyd’s”) and is domiciled in the United Kingdom (“U.K.”). Our consolidated financial statements include the accounts of THG; The Hanover Insurance Company (“Hanover Insurance”) and Citizens Insurance Company of America (“Citizens”), which are our principal U.S. domiciled property and casualty subsidiaries; Chaucer, which we acquired on July 1, 2011; and certain other insurance and non-insurance subsidiaries. Our results of operations also include the results of our discontinued operations, consisting primarily of our former life insurance businesses, our accident and health business and prior to April 30, 2012, our third party administration business.

FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS

We conduct our business operations through four operating segments. These segments are Commercial Lines, Personal Lines, Chaucer and Other. We report interest expense related to our corporate debt separately from the earnings of our operating segments.

Information with respect to each of our segments is included in “Results of Operations - Segments” in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 14 – “Segment Information” in the Notes to the Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

Information with respect to geographic concentrations is included in the “Description of Business by Segment” in Part 1 – Item 1 and in Note 14 – “Segment Information” in the Notes to the Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

DESCRIPTION OF BUSINESS BY SEGMENT

Following is a discussion of each of our operating segments.

GENERAL

We manage our operations principally through four operating segments, including three in which we provide insurance products and services: Commercial Lines, Personal Lines, and Chaucer. We underwrite commercial and personal property and casualty insurance through Hanover Insurance, Citizens and other THG subsidiaries, through an independent agent and broker network concentrated in the Northeast, Midwest and Southeast U.S. We also continue to actively grow our Commercial Lines presence in the Western region of the U.S. Our Chaucer segment is a specialist insurance underwriting group which operates through Lloyd’s and writes business internationally. Included in our fourth operating segment, Other, are Opus Investment Management, Inc. (“Opus”), a wholly-owned subsidiary of THG, which provides investment management services to our insurance and non-insurance companies, our institutions, pension funds and other organizations; earnings on holding company assets; and a run-off voluntary pools business.

Our business strategy focuses on providing our agents and customers stability and financial strength, while prudently growing and diversifying our product and geographical business mix. We conduct our business with an emphasis on agency relationships and active agency management, disciplined underwriting, pricing, quality claim handling, and customer service. Annually, we write over $4 billion in premiums, including over $3 billion domestically. Based on direct U.S. premiums written, we rank among the top 25 property and casualty insurers in the United States.

RISKS

The industry’s profitability and cash flow can be, and historically has been, significantly affected by numerous factors, including price; competition; volatile and unpredictable developments such as extreme weather conditions, catastrophes and other disasters; legal and regulatory developments affecting pricing, underwriting, policy coverage and other aspects of doing business, as well as insurer and insureds’ liability; extra-contractual liability; size of jury awards; acts of terrorism; fluctuations in interest and currency rates or the value of investments; and other general economic conditions and trends, such as inflationary pressure or unemployment, that may affect the adequacy of reserves or the demand for insurance products. Our investment portfolio and its future returns may be further impacted by the capital markets and current economic conditions, which could affect our liquidity, the amount of realized losses and impairments that will be recognized, credit default levels, our ability to hold such investments until recovery and other

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factors. Additionally, the economic conditions in geographic locations where we conduct business, especially those locations where our business is concentrated, may affect the growth and profitability of our business. The regulatory environments in those locations, including any pricing, underwriting or product controls, shared market mechanisms or mandatory pooling arrangements, and other conditions, such as our agency relationships, affect the growth and profitability of our business. In addition, our loss and loss adjustment expense (“LAE”) reserves are based on our estimates, principally involving actuarial projections, at a given time, of what we expect the ultimate settlement and administration of claims will cost based on facts and circumstances then known, predictions of future events, estimates of future trends in claims frequency and severity and judicial theories of liability, costs of repairs and replacement, legislative activity and other factors. We expect to regularly reassess our estimate of loss reserves and LAE, both for current and past years, and any resulting changes will affect our reported profitability and financial position.

Reference is also made to “Risk Factors” in Part 1 – Item 1A of this Form 10-K.

LINES OF BUSINESS

We underwrite commercial and personal property and casualty insurance coverage through our Commercial Lines, Personal Lines and Chaucer operating segments.

Commercial Lines

Our Commercial Lines segment generated $2.1 billion, or 44.3%, of consolidated operating revenues and $2.0 billion, or 44.1%, of net premiums written, for the year ended December 31, 2013.

The following table provides net premiums written by line of business for our Commercial Lines segment.

YEAR ENDED DECEMBER 31, 2013	Net		%
	Premiums		of
(in millions, except ratios)	Written		Total
Commercial multiple peril	$	651.7		32.5	%
Commercial automobile		304.7		15.2
Workers’ compensation		229.6		11.4
Other commercial lines:
AIX program business		253.0		12.6
Inland marine		197.6		9.8
Management and professional liability		116.0		5.8
Surety		68.7		3.4
Other		185.9		9.3
Total	$	2,007.2		100.0	%

Our Commercial Lines product suite provides agents and customers with products designed for small, middle and specialized markets.

Commercial Lines coverages include:

Commercial multiple peril coverage insures businesses against third party general 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 (which may exclude flood), 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:

• AIX program business provides coverage to under-served markets where there are specialty coverage or risk management needs, including commercial multiple peril, workers’ compensation, commercial automobile, general liability and other commercial coverages;

• inland marine coverage insures businesses against physical losses to property, such as contractor’s equipment, builders’ risk and goods in transit, and also covers jewelers block, fine art and other valuables;

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• management and professional liability coverage provides protection for directors and officers of companies that may be sued in connection with their performance, errors and omissions protection to companies and individuals against negligence or bad faith, as well as protection for employment practices insurance and fidelity and crime.

• surety provides businesses with contract surety coverage in the event of performance or non-payment claims, and commercial surety coverage related to fiduciary or regulatory obligations; and

• other commercial lines coverages include umbrella, monoline general liability, specialty property, healthcare and miscellaneous commercial property.

Our strategy in Commercial Lines focuses on building deep relationships with partner agents through differentiated product offerings, industry segmentation, and franchise value through limited distribution. We have made a number of enhancements to our products and technology platforms that are intended to drive more total account placements in our small commercial and middle market business, while delivering enhanced margins in our specialty businesses. This aligns with our focus of improving and expanding our partnerships with a limited number of agents.

Our small commercial, middle market and specialty businesses constitute approximately 32%, 33% and 35% of our total Commercial Lines business, respectively. Small commercial offerings, which generally include premiums of $50,000 or less, deliver value through product expertise, local presence, and ease of doing business. Middle market accounts require greater claim and underwriting expertise, as well as a focus on industry segments where we can deliver differentiation in the market and value to agents and customers. Small and middle market accounts comprise $1.3 billion of the Commercial Lines. Our strategy is to continue to grow these businesses over time, even as we seek to reduce property exposures in certain geographic areas and manage our mix of business in the short term.

In our small commercial and middle market businesses, we have developed several niche insurance programs, including for schools, human services organizations, such as non-profit youth and community service organizations, and religious institutions. We have added additional segmentation to our core middle market commercial products, including real estate, hospitality and wholesale distributors and introduced products focused on management liability, specifically non-profit and private company directors and officers liability and employment practices liability.

Part of our strategy is to expand our specialty lines offerings in order to provide our agents and policyholders with a broader product portfolio and to increase our market penetration. Net premiums written in our specialty lines account for approximately one-third of our Commercial Lines net premiums written. As part of our strategy, we have over time acquired various specialized businesses aimed at further diversifying and growing our specialty lines. We used these acquisitions as platforms to expand our product offerings and grow through our existing agency and broker distribution network.

We believe our small commercial capabilities, distinctiveness in the middle market, and continued development of specialty business provides us with a more diversified portfolio of products and enables us to deliver significant value to our agents and policyholders. We believe these efforts will enable us to continue to improve the overall mix of our business and ultimately our underwriting profitability.

Personal Lines

Our Personal Lines segment generated $1.5 billion, or 32.4%, of consolidated operating revenues and $1.4 billion, or 31.4%, of net premiums written, for the year ended December 31, 2013.

The following table provides net premiums written by line of business for our Personal Lines segment.

YEAR ENDED DECEMBER 31, 2013	Net		%
	Premiums		of
(in millions, except ratios)	Written		Total
Personal automobile	$	890.3		62.3	%
Homeowners		496.7		34.8
Other		41.0		2.9
Total	$	1,428.0		100.0	%

Personal Lines coverages include:

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.

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Homeowners coverage insures individuals for losses to their residences and personal property, such as those caused by fire, wind, hail, water damage (except for flood), 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.

Our strategy in Personal Lines is to build account–oriented business through our partner agencies, with a focus on greater geographic diversification. The market for our Personal Lines business continues to be very competitive, with continued pressure on agents from direct writers, as well as from the increased usage of real time comparative rating tools and increasingly sophisticated rating and pricing tools. We maintain a focus on partnering with high quality, value added agencies that stress the importance of consultative selling and account rounding (the conversion of single policy customers to accounts with multiple policies and/or additional coverages). We are focused on making investments that are intended to help us maintain profitability, build a distinctive position in the market, and provide us with profitable growth opportunities. We continue to refine our products and to work closely with these high potential agents to increase the percentage of business they place with us and to ensure that it is consistent with our preferred mix of business. Additionally, we remain focused on further diversifying our state mix beyond the historical core states of Michigan, Massachusetts, New York and New Jersey, and on reducing property exposures in concentrated areas or where we have experienced persistent weather-related losses. We expect these efforts to decrease our risk concentrations and our dependency on these four states, as well as to contribute to improved profitability over time.

Chaucer

Our Chaucer segment generated $1.1 billion, or 23.1%, of consolidated operating revenues and $1.1 billion, or 24.5%, of net premiums written, for the year ended December 31, 2013.

The following table provides net premiums written by line of business for our Chaucer segment.

YEAR ENDED DECEMBER 31, 2013	Net		%
	Premiums		of
(in millions, except ratios)	Written		Total
U.K. motor	$	300.5		26.9	%
Marine and aviation		277.1		24.8
Property		191.9		17.2
Energy		174.2		15.6
Casualty and other		173.8		15.5
Total	$	1,117.5		100.0	%

The Chaucer segment is comprised of international business written through Lloyd’s, and includes:

Marine and aviation includes worldwide direct, facultative and treaty business. The marine account provides cover for hull, liability, war, terrorism, cargo, political risk, specie, fine art, satellite and ports and terminals. The aviation account insures airline hull and liability, general aviation, refuellers and aviation products.

Energy encompasses exploration and production, construction, downstream, operational power and renewables, insuring against physical damage, business interruption, control of well, seepage and pollution and liabilities. Energy also includes a nuclear account, which provides coverage across the nuclear fuel cycle from raw uranium and nuclear fuel to the shipment and storage of waste, with the majority of the exposure relating to power generation at nuclear power stations. In addition to providing coverage for physical damage to civil nuclear power stations, nuclear also provides limited liability coverage.

Property includes treaty business, as well as direct and facultative coverage for commercial and industrial risks against physical damage and business interruption. The treaty account covers cedants on a global basis, predominantly on an “excess of loss” basis for both per risk and catastrophe coverage, with a limited amount of proportional treaty and reinsurance assumed business.

U.K. motor provides primary insurance coverage to U.K. motor policyholders. Chaucer writes personal automobile, commercial and fleet polices, as well as specialist classes, including motorcycles, motor trade, and classic and specialist vehicles. In addition, the U.K. motor line includes a small amount of commercial property damage and liability polices protecting small/medium-sized enterprises.

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Casualty and other provides liability coverage for professional and commercial risks on a direct and treaty basis, crime and professional liability coverage for financial institutions, medical malpractice and excess workers’ compensation. Other lines also encompass liabilities arising from previous participations on third party Lloyd’s syndicates, principally from Syndicate 4000, which provides liability coverage to financial institutions.

Chaucer is a specialist insurance underwriting group that participates in the Lloyd’s market through the provision of capital to support the underwriting activities of syndicates at Lloyd’s and the ownership of Chaucer Syndicates Limited (“CSL”), a managing agent. CSL manages two syndicates currently underwriting at Lloyd’s.

Chaucer provides capital to Syndicate 1084, which underwrites a range of property, marine, aviation, casualty and energy products for commercial clients worldwide and motor business for personal and commercial clients in the U.K.; and Syndicate 1176, which primarily provides protection against physical damage and limited liability exposures from power generation at nuclear power stations. The energy line of business includes $19.9 million of net premiums written from Syndicate 1176.

We will have an economic interest in Syndicate 1084 of 100% for 2014, increasing from 98% in 2013. Our economic interest in Syndicate 1176 will also increase to 57% in 2014 from 56% in 2013.

Previously, Chaucer managed and participated in Syndicate 4000, which continues to have exposure to potential claims arising from difficulties within the financial and professional liability markets, primarily during 2007 and 2008. Chaucer sold its right to participate in Syndicate 4000 for the 2009 year of account and after.

Chaucer has broad underwriting expertise to support its diversified underwriting portfolio that, we believe, provides many benefits, including capital diversification, volatility management and long-term protection of our underwriting capabilities. We actively manage our portfolio, transferring underwriting capital to increase premium volumes during periods of increased rates, while remaining selective or reducing our capital and premium volumes in those lines where rates are under pressure.

Overall, we believe that the strength and depth of our underwriting teams, together with the broad diversity of our underwriting portfolio and our membership of the Lloyd’s market, underpin our ability to manage both the scale and composition of our business. Moreover, these strengths, combined with our continued active management of our portfolio and the underwriting opportunities available, provide a sound basis for the profitable development of the Chaucer business.

Other

The Other segment consists of: Opus, which provides investment advisory services to affiliates and also manages approximately $1.4 billion of 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.

MARKETING AND DISTRIBUTION

We serve a variety of standard, specialty and niche markets. Consistent with our objective to diversify our underwriting risks on a geographic and line of business basis, we currently have a distribution split of approximately one-third each of domestic standard Commercial Lines, international and domestic specialty lines, and domestic standard Personal Lines. Our Commercial and Personal Lines segments, comprising our principal domestic U.S. subsidiaries, distribute our products primarily through an independent agent network. Our Chaucer segment, comprising our international business, distributes primarily through insurance brokers in the Lloyd’s market, as well as through comparative website aggregators with respect to the U.K. motor business.

Commercial and Personal Lines

Our Commercial and Personal Lines agency distribution strategy and field structure are designed to maintain a strong focus on local markets and the flexibility to respond to specific market conditions. During 2013, we wrote 21.5% of our Commercial and Personal Lines business in Michigan and 9.5% in Massachusetts. Our structure is a key factor in the establishment and maintenance of productive, long-term relationships with mid-sized, well-established independent agencies. We maintain 41 local offices across 29 states. The majority of processing support for these locations is provided from Worcester, Massachusetts; Howell, Michigan; Salem, Virginia; and Windsor, Connecticut.

Independent agents account for substantially all of the sales of our Commercial and Personal Lines property and casualty products. Agencies are appointed based on profitability, track record, financial stability, professionalism, and business strategy. Once appointed, we monitor their performance and, subject to legal and regulatory requirements, may take actions as necessary to change these business relationships, such as discontinuing the authority of the agent to underwrite certain products or revising commissions or bonus opportunities. We compensate agents primarily through base commissions and bonus plans that are tied to an agency’s written premium, growth and profitability.

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We are licensed to sell property and casualty insurance in all fifty states in the U.S., as well as in the District of Columbia. We actively market Commercial Lines policies throughout the U.S. in 36 states and Personal Lines policies in 18 states.

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The following table provides our top Commercial and Personal Lines geographical markets based on total net premiums written in the state in 2013.

											Total Commercial and
	Commercial Lines					Personal Lines					Personal Lines
YEAR ENDED DECEMBER 31, 2013
	Net		%			Net		%			Net		%
	Premiums		of			Premiums		of			Premiums		of
(in millions, except ratios)	Written		Total			Written		Total			Written		Total
Michigan	$	140.5		7.0	%	$	596.4		41.8	%	$	736.9		21.5	%
Massachusetts		145.4		7.2			181.2		12.7			326.6		9.5
New York		220.5		11.0			95.3		6.7			315.8		9.2
California		241.7		12.0			0.3		—			242.0		7.0
New Jersey		111.6		5.6			73.4		5.1			185.0		5.4
Illinois		90.3		4.5			68.8		4.8			159.1		4.6
Texas		142.6		7.1			—		—			142.6		4.2
Connecticut		49.2		2.5			56.1		3.9			105.3		3.1
Virginia		56.6		2.8			35.3		2.5			91.9		2.7
Maine		57.6		2.9			33.2		2.3			90.8		2.6
Georgia		53.0		2.6			32.3		2.3			85.3		2.5
New Hampshire		39.4		2.0			36.6		2.6			76.0		2.2
Florida		69.5		3.5			5.1		0.4			74.6		2.2
Indiana		37.2		1.9			37.1		2.6			74.3		2.2
Louisiana		32.4		1.6			35.3		2.5			67.7		2.0
Tennessee		30.9		1.5			29.2		2.0			60.1		1.8
Ohio		25.2		1.3			32.8		2.3			58.0		1.7
Wisconsin		30.5		1.5			26.3		1.8			56.8		1.7
Oklahoma		29.6		1.5			22.3		1.6			51.9		1.5
Other		403.5		20.0			31.0		2.1			434.5		12.4
Total	$	2,007.2		100.0	%	$	1,428.0		100.0	%	$	3,435.2		100.0	%

We manage our Commercial Lines portfolio, which includes our core and specialty businesses, with a focus on growth from the most profitable industry segments within our underwriting expertise. Our core business is generally comprised of several coordinated commercial lines of business, including small and middle market accounts, which include segmented businesses and niches. Core Commercial Lines direct premium written is comprised of small and mid-sized accounts; such business is split between small accounts generally having less than $50,000 in premium and middle market accounts, those with premium over $50,000, with most accounts having less than $250,000 of premium. Additionally, we have multiple specialty lines of business, which include program business, inland marine, management and professional liability, surety, specialty property and healthcare. The Commercial Lines segment seeks to maintain strong agency relationships as a strategy to secure and retain our agents’ best business. We monitor quality of business written through an ongoing quality review program, accountability for which is shared at the local, regional and corporate levels.

We manage Personal Lines business with a focus on acquiring and retaining quality accounts. Currently, approximately 75% of our policies in force are account business. Approximately 55% of our Personal Lines net premium written is generated in the combined states of Michigan and Massachusetts. In Michigan, based upon direct premiums written for 2012, we underwrite approximately 8% of the state’s total market.

Approximately 64% of our Michigan Personal Lines business is in the personal automobile line and 34% is in the homeowners line. Michigan business represents approximately 43% of our total personal automobile net premiums written and 41% our total homeowners net premiums written. In Michigan, we are a principal market for many of our appointed agencies with approximately $1.5 million of total direct premiums written per agency in 2013.

Approximately 70% of our Massachusetts Personal Lines business is in the personal automobile line and 26% is in the homeowners line. Massachusetts business represents approximately 14% of our total personal automobile net premiums written and approximately 10% of our total homeowners net premiums written.

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We sponsor local and national agent advisory councils to gain the benefit of our agents’ insight and enhance our relationships. These councils provide feedback, input on the development of products and services, guidance on marketing efforts, support for our strategies, and assist us in enhancing our local market presence.

Chaucer

Chaucer underwrites business from two main sources: approximately 77% from Lloyd’s brokers and underwriting agencies, placed in the open market, and 23% from retail brokers and comparative website aggregators for U.K. motor business. We primarily compensate brokers, underwriting agencies and aggregators through commission payments.

In the Lloyd’s open market, brokers approach Chaucer with individual insurance and reinsurance risk opportunities for underwriter consideration. Brokers also gain access to Chaucer’s products through selected underwriting agencies (also referred to as coverholders), to which Chaucer has granted limited authority to make underwriting decisions on individual risks. In general, risks written through underwriting agencies are smaller in terms of both exposure and premium. Risks are placed in Lloyd’s through a subscription placement process whereby generally several syndicates take a share of a contract rather than one insurer taking 100% on a direct basis. This facilitates the spreading of large and complex risks across a number of insurers, while limiting the counterparty risk of each insurer.

We have an international network of offices to improve our access to high quality risks worldwide. This is expected to improve the diversification of our underwriting and our ability to manage our portfolio. We have offices in Singapore; Copenhagen, Denmark; and Buenos Aires, Argentina to capitalize upon specific class of business opportunities in these regions. We also have offices in Houston, Texas, to extend our energy network to North America, and Oslo, Norway, to provide access to the Norwegian and regional North Sea energy sector.

The following table provides a geographical breakdown of Chaucer’s total gross premiums written (“GPW”) based on the location of risk:

	% of Total GPW
	in Chaucer
YEAR ENDED DECEMBER 31, 2013	Segment
United Kingdom(1)		24.0	%
United States		14.9
Americas, excluding the United States		11.1
Asia Pacific		5.4
Middle East and Africa		5.2
Europe		3.1
Worldwide and other(2)		36.3
Total		100.0	%

(1) Primarily U.K. motor.

(2) “Worldwide and other” comprises insured risks that move across multiple geographic areas due to their mobile nature or insured risks that are fixed in locations that span more than one geographic area. These contracts include, for example, marine and aviation hull, satellite and offshore energy exploration and production risks that can move across multiple geographic areas and assumed risks where the cedant insures risks in two or more geographic zones.

Other

With respect to our Other segment business, we market our investment advisory services directly through Opus.

PRICING AND COMPETITION

The property and casualty industry is a very competitive market. Our competitors include national, international, regional and local companies that sell insurance through various distribution channels, including independent agencies, captive agency forces, brokers and direct to consumers through the internet or otherwise. They also include mutual insurance companies, reciprocals and exchanges. In the Commercial and Personal Lines segments, we market through independent agents and brokers and compete for business on the basis of product, price, agency and customer service, local relationships, ratings, and effective claims handling, among other things. We believe that an emphasis on maintaining strong agency relationships and a local presence in our markets, coupled with investments in products, operating efficiency, technology and effective claims handling, will enable us to compete effectively. Our broad product offerings in Commercial Lines and total account strategy in Personal Lines are instrumental to our strategy to capitalize on these relationships and improve profitability.

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We seek to achieve targeted combined ratios in each of our product lines. Targets vary by product and geography and change with market conditions. The targeted combined ratios reflect competitive market conditions, investment yield expectations, our loss payout patterns, and target returns on equity. This strategy is intended to enable us to achieve measured growth and consistent profitability.

For all major product lines, we employ pricing teams which produce exposure and experience-based rating models to support underwriting decisions. In addition, in the Commercial and Personal Lines segments, we seek to utilize our understanding of local markets to achieve superior underwriting results. We rely on market information provided by our local agents and on the knowledge of staff in the local branch offices. Since we maintain a strong regional focus and a significant market share in a number of states, we can better apply our knowledge and experience in making underwriting and rate setting decisions. Also, we seek to gather objective and verifiable information at a policy level during the underwriting process, such as loss histories, past driving records and, where permitted, credit histories.

The Commercial and Personal Lines segments are not dependent on a single customer or even a few customers, for which the loss of any one or more would have an adverse effect upon the insurance operations for these segments.

Although we conduct some business on a direct basis through the Chaucer segment, we market the majority of Chaucer product offerings through insurance brokers in the Lloyd’s specialty and the U.K. motor markets, which provide access to business from clients and coverholders. We are able to attract business through our recognized capability to serve as the lead underwriter in most classes we write, particularly in classes where such lead ability is sought by clients and recognized by following markets. This requires significant underwriting and claims handling expertise in very specialized lines of business. Our competitors include large international insurance companies and other Lloyd’s managing underwriters. In the U.K. motor lines, our competitors include large U.K. personal lines insurers. Broker relationships that are ten percent or more of total Chaucer 2013 gross premiums written are with Marsh & McLennan Companies (14%) and Aon Benfield (14%).

CLAIMS MANAGEMENT

Claims management includes the receipt of initial loss notifications, generation of appropriate responses to claim reports, loss appraisals, identification and handling of coverage issues, determination of whether further investigation is required, retention of legal representation where appropriate, establishment of case reserves, approval of loss payments and notification to reinsurers. Part of our strategy focuses on efficient, timely, and fair claim settlements to meet customer service expectations and maintain valuable independent agent relationships. Additionally, effective claims management is important to our business as claim payments and related loss adjustment expenses are our single largest expenditures.

Commercial and Personal Lines

We utilize experienced claims adjusters, appraisers, medical specialists, managers and attorneys to manage our claims. Our U.S. property and casualty operations have field claims adjusters located throughout the states and regions in which we do business. Claims field staff members work closely with the independent agents who bound the policies under which coverage is claimed. Claims office adjusting staff is supported by general adjusters for large property and large casualty losses, by automobile and heavy equipment damage appraisers for automobile material damage losses, and by medical specialists whose principal concentration is on workers’ compensation and automobile injury cases. Additionally, the claims offices are supported by staff attorneys, both in the home office and in regional locations, who specialize in litigation defense and claim settlements. We have a catastrophe response team to assist policyholders impacted by severe weather events. This team mobilizes quickly to impacted regions, often in advance for a large tracked storm, to support our local claims adjusters and facilitate a timely response to resulting claims. We also maintain a special unit that investigates suspected insurance fraud and abuse. We utilize claims processing technology which allows most of the smaller and more routine Personal Lines claims to be processed at centralized locations.

Chaucer

For international risks, the Chaucer claims team generally is responsible for establishing case reserves, loss and LAE cost management, exposure mitigation and litigation management. Chaucer has engaged a third party administrator to handle aviation claims and authorizes selected agencies to manage claims under risks which they have bound on Chaucer’s behalf.

For claims under our direct claims team management, where Chaucer is the lead syndicate or designated claims manager, our appointed claims adjusters work with the broker representing the insured. This may involve appointing attorneys, loss adjusters or other third party experts. Where Chaucer is not the lead underwriter or designated claims manager, the lead underwriter and designated claims manager together establish case reserves in conjunction with professional third party adjusters, and then advise all

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other syndicates participating on the risk of the loss reserve requirements. In such cases, the Chaucer claims team review material claims and developments. Chaucer also engages automobile body and repair shops to assist in managing claims for its U.K. motor business.

CATASTROPHES

We are subject to claims arising out of catastrophes, which historically have had a significant impact on our results of operations and financial condition. Coverage for such events is a core part of our business and we expect to experience catastrophe losses in the future, which could have a material adverse impact on us. Catastrophes can be caused by various events, including snow, ice storm, hurricane, earthquake, tornado, wind, hail, flood, drought, terrorism, fire, explosion, or other extraordinary events. The incidence and severity of catastrophes are inherently unpredictable.

Commercial and Personal Lines

We endeavor to manage our catastrophe risks through underwriting procedures, including the use of deductibles and specific exclusions for floods and earthquakes, subject to regulatory restrictions, and through geographic exposure management and reinsurance. The catastrophe reinsurance program is structured to protect us on a per-occurrence basis. We monitor geographic location and coverage concentrations in order to manage corporate exposure to catastrophic events. Although catastrophes can cause losses in a variety of property and casualty lines, commercial multiple peril and homeowners property coverages have, in the past, generated the majority of catastrophe-related claims.

Chaucer

Individual commercial and industrial risks within our property, marine and aviation, and energy lines include protection against natural or man-made catastrophes worldwide. We accept these risks on direct, facultative and proportional and excess of loss treaty bases. Such risks are managed through limiting the proportion of any individual risk or class of risk we assume, managing geographic concentration and through the purchase of reinsurance.

We purchase reinsurance to limit our exposure to individual risks and catastrophic events. This includes facultative reinsurance, to limit the exposure on a specified risk; specific excess and proportional treaty, to limit exposure to individual contracts or risks within specified classes of business; and catastrophe excess of loss reinsurance, to limit exposure to any one event that might affect more than one individual contract.

The level of reinsurance that Chaucer purchases is dependent on a number of factors, including our underwriting risk appetite for catastrophe risk, the specific risks inherent in each line or class of business risk written and the pricing, coverage and terms and conditions available from the reinsurance market.

TERRORISM

As a result of the tragic events of September 11, 2001, the insurance industry has had heightened concern about the potential for losses caused by terrorist acts. These losses may encompass people, property and business operations covered under workers’ compensation, commercial multiple peril and other Commercial Lines policies. In certain cases, we are not able to exclude coverage for these losses, either because of regulatory requirements or competitive pressures. We continually evaluate the potential effect of these low frequency, but potentially high severity events in our overall pricing and underwriting plans, especially for policies written in major metropolitan areas.

Private sector catastrophe reinsurance is limited and generally unavailable for losses attributed to acts of terrorism, particularly those involving nuclear, biological, chemical and/or radiological events. As a result, the industry’s primary reinsurance protection against large-scale terrorist attacks in the U.S. is provided through a Federal program that provides compensation for insured losses resulting from acts of terrorism. Additionally, certain terrorism-related risks embedded in our Commercial and Personal Lines are covered under the existing Catastrophe, Property per Risk and Casualty Excess of Loss corporate reinsurance treaties (see “Reinsurance” for additional information).

The Terrorism Risk Insurance Act of 2002 established the Terrorism Risk Insurance Program (the “U.S. Program”). Coverage under the U.S. Program applies to workers’ compensation, commercial multiple peril and certain other Commercial Lines policies for U.S. direct written policies. The Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) extended the U.S. Program through December 31, 2014. All commercial property and casualty insurers licensed in the U.S. participate in the program. Under the program, a participating issuer, in exchange for making terrorism insurance available, is entitled to be reimbursed by the Federal Government for 85% of subject losses, after an insurer deductible, subject to an annual industry-wide cap of $100 billion. The U.S. Program does not cover losses in surety, Personal Lines or certain other lines of insurance. Losses caused by terrorist acts are not excluded from homeowners or personal automobile policies.

Efforts are underway to extend the U.S. Program beyond 2014, although there can be no assurance that such legislation will pass or be similar to the existing U.S. Program. Accordingly, there is additional uncertainty regarding our exposure with respect to terrorism coverage after December 31, 2014, and this uncertainty extends to any policies issued or renewed in 2014, since such policy terms will extend into the 2015 calendar year.

As an admitted carrier, we are regulated by state laws that specifically prohibit the industry’s ability to exclude terrorism losses from workers’ compensation coverage in addition to requiring the industry to offer terrorism coverage for virtually all commercial property and casualty products. The expiration of the U.S. Program has prompted consideration by the industry of “conditional renewal provisions”. Such provisions would automatically exclude losses caused by terrorism if the U.S. Program is not extended. At this time, we have elected not to take this approach, consistent with most of the industry, because of our expectation that the U.S. Program will be extended. We continue to review our approach to this matter as we monitor the progress of pending legislation and other market considerations. See “Risk Factors” for additional information.

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As required by the current U.S. Program, we offer policyholders in specific lines of insurance the option to elect terrorism coverage. In order for a loss to be covered under the U.S. Program, the loss must meet aggregate industry loss minimums and must be the result of an act of terrorism as certified by the Secretary of the Treasury in concurrence with the Secretary of State and the U.S. Attorney General. Losses from acts which do not qualify or are not so certified will not receive the benefit of the U.S. Program and in fact, may be deemed covered losses whether or not terrorism coverage was purchased. The current U.S. Program requires insurance carriers to retain 15% of any claims from a certified terrorist event in excess of the federally mandated deductible. The deductible represents 20% of direct earned premium for the covered lines of business of the prior year. In 2013, our deductible was $322.7 million, which represents 21.2% of year-end 2012 statutory policyholder surplus of our U.S. domestic insurers, and is estimated to be $350.4 million in 2014, representing 19.1% of 2013 year-end statutory policyholder surplus.

Given the unpredictable nature of the frequency and severity of terrorism losses, future losses from acts of terrorism could be material to our operating results, financial position, and/or liquidity. We attempt to manage our exposures on an individual line of business basis and in the aggregate by one-half square mile grids.

Chaucer’s direct written U.S. policies are also covered under the provisions of TRIPRA. A limited portion of Chaucer’s business outside of the U.S. is exposed to terrorism with respect to certain commercial property classes that are written on a standalone basis. We manage this exposure through policy limits, monitoring of risk aggregation and reinsurance. Generally, terrorism coverage is excluded from most commercial property classes and coverages that Chaucer writes. For our nuclear energy business, most of our liability coverage does not exclude losses resulting from acts of terrorism, although such policies are generally subject to a sub-limit of 50% of full policy limits.

REGULATION

Commercial and Personal Lines

Our U.S. property and casualty insurance subsidiaries are subject to extensive regulation in the various states in which they transact business and are supervised by the individual state insurance departments. Numerous aspects of our business are subject to regulation, including premium rates, mandatory covered risks, limitations on the ability to non-renew or reject business, prohibited exclusions, licensing of agents, investments, restrictions on the size of risks that may be insured under a single policy, reserves and provisions for unearned premiums, losses and other obligations, deposits of securities for the benefit of policyholders, investments and capital, policy forms and coverages, advertising, and other conduct, including restrictions on the use of credit information and other factors in underwriting, as well as other underwriting and claims practices. States also regulate various aspects of the contractual relationships between insurers and independent agents.

Such laws, rules and regulations are usually overseen and enforced by the various state insurance departments, as well as through private rights of action and increasingly, by state attorneys general. Such regulations or enforcement actions are often responsive to current consumer and political sensitivities such as automobile and homeowners insurance rates and coverage forms, or which may arise after a major event such as Superstorm Sandy. Such rules and regulations may result in rate suppression, and limit our ability to manage our exposure to unprofitable or volatile risks or other adverse consequences. The federal government also may regulate aspects of our businesses such as the use of insurance (credit) scores in underwriting and the protection of confidential information.

In addition, as a condition to writing business in certain states, insurers are required to participate in various pools or risk sharing mechanisms or to accept certain classes of risk, regardless of whether such risks meet its underwriting requirements for voluntary business. Some states also limit or impose restrictions on the ability of an insurer to withdraw from certain classes of business. For example, Massachusetts, New Jersey, New York, and California each impose material restrictions on a company’s ability to materially reduce its exposures or to withdraw from certain lines of business in their respective states. The state insurance departments can impose significant charges on an insurer in connection with a market withdrawal or refuse to approve withdrawal plans on the grounds that they could lead to market disruption. Laws and regulations that limit cancellation and non-renewal of policies or that subject withdrawal plans to prior approval requirements may significantly restrict our ability to exit unprofitable markets.

Over the past several years, other state-sponsored insurers, reinsurers or involuntary pools have increased, particularly those states which have Atlantic or Gulf Coast storm exposures. As a result, the potential assessment exposure of insurers doing business in such states and the attendant collection risks have increased. Such actions and related regulatory restrictions may limit our ability to reduce our potential exposure to hurricane-related losses.

The insurance laws of many states subject property and casualty insurers doing business in those states to statutory property and casualty guaranty fund assessments. The purpose of a guaranty fund is to protect policyholders by requiring that solvent property and casualty insurers pay insurance claims of insolvent insurers. These guaranty associations generally pay these claims by assessing solvent insurers proportionately based on the insurer’s share of voluntary premiums written in the state. While most guaranty associations provide for recovery of assessments through subsequent rate increases, surcharges or premium tax credits, there is no assurance that insurers will ultimately recover these assessments, which could be material, particularly following a large catastrophe or in markets which become disrupted.

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We are subject to periodic financial and market conduct examinations conducted by state insurance departments. We are also required to file annual and other reports with state insurance departments relating to the financial condition of our insurance subsidiaries and other matters.

From time to time, proposals have been made to establish a federal based insurance regulatory system and to allow insurers to elect either federal or state-based regulation (“optional federal chartering”). In light of the recent challenging economic environment, the focus on increased regulatory controls and the creation of a Federal Insurance Office, there has been renewed interest in such proposals.

Chaucer

Chaucer is regulated by the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”), which replaced the Financial Services Authority in April 2013, who together have responsibility for the financial services industry, including insurers, insurance intermediaries and Lloyd’s in the U.K, and is supervised by the Council of Lloyd’s, which is the franchisor for all Lloyd’s operations.

The PRA (which is part of The Bank of England) and FCA are given statutory powers by the Financial Services Act of 2012. The PRA is responsible for the prudential supervision of, among other financial institutions, Lloyd’s insurers, with a particular focus on financial stability. The FCA focuses on conduct of business issues, with a particular focus on consumer protection and market integrity.

The PRA, FCA and Council of Lloyd’s have common objectives in ensuring the appropriate regulation of the Lloyd’s market and, to minimize duplication, the PRA and FCA have arrangements with Lloyd’s for co-operation on supervision and enforcement. Lloyd’s, which is regulated by both the PRA and FCA, has responsibility under the Lloyd’s Act 1982 (“the Lloyd’s Act”) for the implementation of certain PRA and FCA prescribed rules relating to the operation of the Lloyd’s market. Lloyd’s prescribes, in respect of its managing agents and corporate members, certain minimum standards relating to their management and control, solvency and various other requirements. The PRA and FCA directly monitor the compliance of Lloyd’s managing agents with the systems and controls that Lloyd’s prescribes.

The Council of Lloyd’s has wide discretionary powers to regulate Lloyd’s underwriting. For example, it may change the basis of allocation for syndicate expenses or the capital requirements for syndicate participations. Exercising any of these powers might affect the return on an investment of the corporate member in a given underwriting year. In addition, the annual business plans of each syndicate are subject to the review and approval of the Lloyd’s Franchise Board, which is responsible for business planning and monitoring for all syndicates.

We participate in the Lloyd’s market through our ownership of Chaucer Syndicates Limited, which we refer to as CSL, a managing agent with responsibility for the management of Syndicates 1084 and 1176, for which we provide capital to support their underwriting activities. Our membership in Lloyd’s requires us to comply with its bylaws and regulations, the Lloyd’s Act and the applicable provisions of the Financial Services and Markets Act. These include the requirement to provide capital (referred to as “Funds at Lloyd’s”) in the form of cash, securities or letters of credit in an amount agreed with by Lloyd’s under the capital setting regime of the PRA. The completion of an annual capital adequacy exercise enables each corporate member to calculate the capital required. These requirements allow Lloyd’s to evaluate whether each corporate member has sufficient assets to meet its underwriting liabilities plus a required solvency margin.

If a corporate member of Lloyd’s is unable to meets its policyholder obligations, such obligations may be payable by the Lloyd’s Central Fund, which acts similar to a state guaranty fund in the U.S. If Lloyd’s determines that the Central Fund needs to be increased, it has the power to assess premium levies on all current Lloyd’s members. The Council of Lloyd’s has discretion to call or assess up to 3% of a member’s underwriting capacity in 2014 as a Central Fund contribution.

Solvency II

In 2009, the European Union (“E.U.”) adopted a directive covering capital requirements, risk management and regulatory reporting for insurance organizations. The directive, known as Solvency II, imposes economic risk-based solvency requirements across all E.U. member states that comprise three pillars. First, there are quantitative capital requirements, based on a valuation of the entire balance sheet of an insurance organization. Second, Solvency II requires insurance organizations to undertake a qualitative regulatory review, including governance, internal controls, enterprise risk management and the supervisory review process. Third, to enhance market discipline, insurance organizations must report their financial conditions to regulators. Final E.U. approval of Solvency II is

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currently due in the first half of 2014, with an anticipated commencement date for the new regulatory regime of January 1, 2016. Chaucer continues to work to ensure compliance with the requirements in accordance with the timetable set out by Lloyd’s.

Other

In addition to the U.K. and European regulations, the Chaucer segment is subject to regulation in the U.S through the Lloyd’s market. The Lloyd’s market has licenses to engage in insurance business in Illinois, Kentucky and the U.S. Virgin Islands and operates as an eligible excess and surplus lines insurer in all other states and territories. Lloyd’s is also an accredited reinsurer in all states and territories. Lloyd’s maintains various trust funds in the state of New York to protect its U.S. business and is subject to regulation by the New York Insurance Department, which acts as the domiciliary department for Lloyd’s U.S. trust funds. There are also deposit trust funds in other U.S. states to support Lloyd’s excess and surplus lines insurance and reinsurance business.

See also to Note 18 — “Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

INVOLUNTARY RESIDUAL MARKETS

As a condition of our license to write business in various domestic states and international jurisdictions, we are required to participate in mandatory property and casualty residual market mechanisms which provide various insurance coverages where such coverage may not otherwise be available at rates deemed reasonable. Such mechanisms provide coverage primarily for personal and commercial property, personal and commercial automobile, and workers’ compensation, and include assigned risk plans, reinsurance facilities and involuntary pools, joint underwriting associations, fair access to insurance requirements (“FAIR”) plans, and commercial automobile insurance plans.

For example, since most states compel the purchase of a minimal level of automobile liability insurance, states have developed shared market mechanisms to provide the required coverages and in many cases, optional coverages, to those drivers who, because of their driving records or other factors, cannot find insurers who will insure them voluntarily. Also, FAIR plans and other similar property insurance shared market mechanisms increase the availability of property insurance in circumstances where homeowners are unable to obtain insurance at rates deemed reasonable, such as in coastal areas or in areas subject to other hazards. Licensed insurers writing business in such states are often required to pay assessments to cover reserve deficiencies generated by such plans.

With respect to FAIR plans and other similar property insurance shared market mechanisms that have significant exposures, it is difficult to accurately estimate our potential financial exposure for future events. Assessments following a large coastal event, particularly affecting Massachusetts, Florida, New York or New Jersey, could be material to our results of operations. Our participation in such shared markets or pooling mechanisms is generally proportional to our direct writings for the type of coverage written by the specific pooling mechanism in the applicable state or other jurisdiction. For example, we are subject to mandatory participation in the Michigan Assigned Claims (“MAC”) facility. MAC is an assigned claim plan covering people injured in uninsured motor vehicle accidents. Our participation in the MAC facility is based on our share of personal and commercial automobile direct written premium in the state and resulted in underwriting losses of $15.0 million in 2013 and 2012 and $11.1 million in 2011. Additionally, Chaucer’s U.K. motor line is subject to similar mandatory assessments from the U.K. Motor Insurance Bureau (“MIB”) and these assessments were $4.3 million in 2013 and not significant to our results of operations in 2012 and 2011. Included in other expenses in 2011 was a $4.3 million charge related to a write-off of our equity interest in the accumulated surplus of the North Carolina Beach Plan (“NCBP”), a mandatory reinsurance facility, as a result of state legislation intended to reform the funding mechanism of the NCBP. There were no other mandatory residual market mechanisms that were significant to our 2013, 2012 or 2011 results of operations.

RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Reference is made to “Results of Operations - Segments – Reserve for Losses and Loss Adjustment Expenses” of Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.

The following table reconciles reserves determined in accordance with accounting principles and practices prescribed or permitted by U.S. insurance statutory authorities (“U.S. Statutory”) and the U.K. financial services regulatory authority (“U.K. Statutory”) for our domestic and Chaucer operations, respectively, to reserves determined in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The primary difference between the U.S. Statutory reserves and our U.S. GAAP reserves is the requirement, on a U.S. GAAP basis, to present reinsurance recoverables as an asset, whereas U.S. Statutory guidance

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provides that reserves are reflected net of the corresponding reinsurance recoverables. There are no significant differences between U.K. Statutory reserves and our U.S. GAAP reserves. We do not use discounting techniques in establishing U.S. GAAP reserves for losses and LAE, nor have we participated in any loss portfolio transfers or other similar transactions.

DECEMBER 31	2013			2012			2011
(in millions)
U.S. Statutory reserve for losses and LAE	$	2,725.0		$	2,646.7		$	2,350.7
U.K. Statutory reserve for losses and LAE		2,373.9			2,397.7			2,319.8
Total Statutory reserve for losses and LAE		5,098.9			5,044.4			4,670.5
U.S. GAAP adjustments:
Reinsurance recoverables on unpaid losses of our U.S. insurance subsidiaries		1,242.2			1,265.0			1,198.5
Reserves for discontinued operations		(121.3	)		(126.8	)		(124.6	)
Other		11.7			14.4			15.9
U.S. GAAP reserve for losses and LAE	$	6,231.5		$	6,197.0		$	5,760.3

Reserves for discontinued operations of our U.S. insurance subsidiaries are included in liabilities of discontinued operations for U.S. GAAP and loss and loss adjustment expenses for Statutory reporting.

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ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE DEVELOPMENT

The following table sets forth the development of our U.S. GAAP reserves (net of reinsurance recoverables) for unpaid losses and LAE from 2003 through 2013. This table includes our Chaucer segment U.S. GAAP reserves beginning December 31, 2011. Conditions and trends that have affected reserve development in the past will not necessarily recur in the future. It is not appropriate to extrapolate future favorable or unfavorable development based on amounts experienced in prior periods.

DECEMBER 31	2013		2012		2011			2010			2009			2008			2007		2006		2005		2004			2003
(in millions)
Net reserve for losses and LAE (1)	$	4,201.1	$	4,122.7	$	3,828.5		$	2,162.2		$	2,093.7		$	2,214.9		$	2,227.2	$	2,276.5	$	2,354.1	$	2,166.3		$	2,087.0
Cumulative amount paid as of:(2)
One year later				1,469.8		1,396.5			840.7			738.6			788.5			711.1		689.9		729.5		622.0			658.3
Two years later						2,172.6			1,277.9			1,120.3			1,126.8			1,050.5		1,061.8		1,121.9		967.0			995.4
Three years later									1,543.6			1,355.8			1,362.8			1,222.7		1,268.4		1,368.3		1,175.4			1,217.1
Four years later												1,487.2			1,500.5			1,346.8		1,364.7		1,499.6		1,312.9			1,351.6
Five years later															1,577.6			1,426.6		1,438.8		1,555.7		1,384.4			1,436.5
Six years later																		1,473.9		1,493.9		1,606.3		1,416.2			1,486.5
Seven years later																				1,527.5		1,647.8		1,456.3			1,508.9
Eight years later																						1,676.7		1,489.9			1,544.4
Nine years later																								1,515.3			1,575.5
Ten years later																											1,597.9
Net reserve re-estimated as of:(3)
End of year		4,201.1		4,122.7		3,828.5			2,162.2			2,093.7			2,214.9			2,227.2		2,276.5		2,354.1		2,166.3			2,087.0
One year later				4,052.0		3,841.6			2,094.4			1,982.6			2,059.6			2,075.6		2,140.1		2,274.1		2,086.8			2,072.5
Two years later						3,843.2			2,090.5			1,916.4			1,973.3			1,865.7		2,011.0		2,158.8		1,994.4			2,025.5
Three years later									2,124.2			1,902.7			1,930.8			1,793.7		1,852.7		2,075.0		1,904.4			1,979.6
Four years later												1,923.4			1,922.6			1,770.6		1,810.9		1,965.3		1,858.0			1,925.4
Five years later															1,939.7			1,773.2		1,793.9		1,936.4		1,780.8			1,904.2
Six years later																		1,779.4		1,798.0		1,922.4		1,761.2			1,836.2
Seven years later																				1,802.4		1,924.6		1,749.0			1,823.3
Eight years later																						1,929.1		1,749.0			1,809.9
Nine years later																								1,754.7			1,812.3
Ten years later																											1,817.2
Cumulative net redundancy (deficiency) (4)	$	—	$	70.7	$	(14.7	)	$	38.0		$	170.3		$	275.2		$	447.8	$	474.1	$	425.0	$	411.6		$	269.8
Adjustment for foreign currency exchange(3)		—		5.6		33.0			—			—			—			—		—		—		—			—
Cumulative net redundancy (deficiency) excluding foreign currency exchange(3)	$	—	$	76.3	$	18.3		$	38.0		$	170.3		$	275.2		$	447.8	$	474.1	$	425.0	$	411.6		$	269.8
Gross reserve for losses and LAE	$	6,231.5	$	6,197.0	$	5,760.3		$	3,277.7		$	3,153.9		$	3,203.1		$	3,167.7	$	3,166.0	$	3,461.7	$	3,073.4		$	3,027.0
Reinsurance recoverables		2,030.4		2,074.3		1,931.8			1,115.5			1,060.2			988.2			940.5		889.5		1,107.6		907.1			940.0
Net liability		4,201.1		4,122.7		3,828.5			2,162.2			2,093.7			2,214.9			2,227.2		2,276.5		2,354.1		2,166.3			2,087.0
Re-estimated gross reserve for losses and LAE		—		6,065.1		5,756.3			3,374.6			3,213.1			3,211.8			3,052.7		3,063.5		3,452.3		3,080.8			3,138.7
Re-estimated reinsurance recoverables		—		2,013.1		1,913.1			1,250.4			1,289.7			1,272.1			1,273.3		1,261.1		1,523.2		1,326.1			1,326.0
Re-estimated net liability		—		4,052.0		3,843.2			2,124.2			1,923.4			1,939.7			1,779.4		1,802.4		1,929.1		1,754.7			1,812.7
Cumulative gross redundancy (deficiency) (4)	$	—	$	131.9	$	4.0		$	(96.9	)	$	(59.2	)	$	(8.7	)	$	115.0	$	102.5	$	9.4	$	(7.4	)	$	(111.7	)

(1) Sets forth the estimated net liability for unpaid losses and LAE recorded at the balance sheet date at the end of each of the indicated years; represents the estimated amount of net losses and LAE for claims arising in the current and all prior years that are unpaid at the balance sheet date, including incurred but not reported (“IBNR”) reserves.

(2) Cumulative loss and LAE payments made in succeeding years for losses incurred prior to the balance sheet date. Chaucer claims payments denominated in foreign currencies are converted to U.S. dollars at the average foreign exchange rates during the year of payment and are not revalued at the current year foreign exchange rates. Because claims paid in prior years are not revalued at the current year’s foreign exchange rates, the difference between the cumulative claims paid at the end of any given year and the immediately previous year represents the claims paid during the year.

(3) Re-estimated amount of the previously recorded liability based on experience for each succeeding year; increased or decreased as payments are made and more information becomes known about the severity of remaining unpaid claims. Chaucer unpaid losses and LAE denominated in foreign currencies are re-estimated using the foreign exchange rates in effect as of December 31, 2013 and the resulting cumulative foreign exchange translation effect is shown as an adjustment to the cumulative net redundancy (deficiency).

(4) Cumulative redundancy or deficiency at December 31, 2013 of the net and gross reserve amounts shown in the corresponding column. A redundancy in reserves means the reserves established in prior years exceeded actual losses and LAE or were re-evaluated at less than the original reserved amount. A deficiency in reserves means the reserves established in prior years were less than actual losses and LAE or were re-evaluated at more than the original reserved amount.

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REINSURANCE

Reinsurance Program Overview

We maintain ceded reinsurance programs designed to protect against large or unusual loss and LAE activity. We utilize a variety of reinsurance agreements, which are intended to control our individual policy and aggregate exposure to large property and casualty losses, stabilize earnings and protect capital resources. These programs include facultative reinsurance (to limit exposure on a specified policy); specific excess and proportional treaty reinsurance (to limit exposure on individual policies or risks within specified classes of business); and catastrophe excess of loss reinsurance (to limit exposure to any one event that might impact more than one individual contract). Catastrophe reinsurance protects us, as the ceding insurer, from significant losses arising from a single event such as snow, ice storm, hurricane, earthquake, tornado, wind, hail, terrorism, fire, explosion or other extraordinary events. We determine the appropriate amount of reinsurance based upon our evaluation of the risks insured, exposure analyses prepared by consultants, our risk appetite and on market conditions, including the availability and pricing of reinsurance.

We cede to reinsurers a portion of our risk based upon insurance policies subject to such reinsurance. Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to us. We believe that the terms of our reinsurance contracts are consistent with industry practice in that they contain standard terms with respect to lines of business covered, limit and retention, arbitration and occurrence. We believe our reinsurers are financially sound, based upon our ongoing review of their financial statements, financial strength ratings assigned to them by rating agencies, their reputations in the reinsurance marketplace, our collections history, advice from third parties, and the analysis and guidance of our reinsurance advisors.

Although we exclude coverage of nuclear, chemical or biological events from the Personal Lines and Commercial Lines policies we write in the U.S., we are statutorily required to provide this coverage in our workers’ compensation policies. We have workers’ compensation reinsurance coverage under our casualty reinsurance treaty of approximately $10 million for losses that result from nuclear, chemical or biological events and approximately $45 million for terrorism losses excluding those that result from nuclear, chemical or biological events. All other U.S.-based exposure or treaties exclude such coverage. Further, under TRIPRA, our retention of U.S. domestic losses in 2014 from such events, if deemed certified terrorist events, is limited to 15% of losses in excess of an approximate $350 million deductible, up to a combined annual aggregate limit for the federal government and all insurers of $100 billion. Such events could be material to our financial position or results of operations. See “Terrorism” for additional information.

Reference is made to Note 16 — “Reinsurance” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K. Reference is also made to “Involuntary Residual Markets”.

Commercial and Personal Lines

Our 2014 reinsurance program for our Commercial Lines and Personal Lines segments is substantially consistent with our 2013 program design. In light of the favorable reinsurance market conditions at January 1, 2014, we expanded our reinsurance coverage in some treaties and increased our limit in others. The following discussion summarizes both our 2013 and 2014 reinsurance programs for our Commercial Lines and Personal Lines segments (excluding coverage available under the U.S. federal terrorism program which is described under “Terrorism”), but does not purport to be a complete description of the program or the various restrictions or limitations which may apply:

• Our Commercial Lines and Personal Lines segments were primarily protected by a property catastrophe occurrence treaty, a property per risk excess of loss treaty, as well as a casualty excess of loss treaty, with retentions of $200 million, $2 million, and $2 million, respectively.

• The property catastrophe occurrence treaty provides coverage, on an occurrence basis, up to $700 million (up to $1.1 billion in the Northeast), less a $200 million retention, with no co-participation, for all defined perils. The $700 million to $1.1 billion layer has been renewed effective July 1, 2014 and will reinsure all catastrophe occurrences nationwide. For 2013 and 2014, the property per risk excess of loss treaty provides coverage, on a per risk basis, up to $100 million, less a $2 million retention, with co-participations for 2013 and 2014 ranging from 10% to 12.75% for reinsurance placed in the $2 million to $3 million layer and zero to 10% for reinsurance placed in the $3 million to $10 million layer.

• The casualty excess of loss treaty provides coverage, on a per occurrence basis for each loss, up to $50 million less a $2 million retention, with no co-participation. For both years, umbrella lines share coverage with casualty lines at the $2 million to $10 million layer, with the maximum umbrella limit of $5 million subject to the casualty treaty. There is also separate umbrella only coverage that provides protection in both 2013 and 2014 for the $5 million to $25 million layer. Professional liability and management liability risks formerly covered in a separate treaty are covered in the casualty excess of loss treaty effective January 1, 2014, which now includes a $1 million to $2 million layer only for these risks.

• For 2013 and 2014, Commercial Lines segments are further protected by excess of loss treaty agreements for specific lines of business such as surety and fidelity bond liability, and healthcare liability. Surety and fidelity bond excess of loss treaty provides coverage, on a per principal basis, up to $35 million, less a $5 million retention, with co-participations ranging from 5% to 15% for individual layers placed within the treaty.

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• In addition to certain layers of coverage from our Commercial and Personal Lines segment reinsurance program as described above, the Commercial Lines AIX program business also includes surplus share, quota share, excess of loss, facultative and other forms of reinsurance that cover the writings from AIX specialty and proprietary programs. There are approximately 45 different AIX programs, and the reinsurance structure is customized to fit the exposure profile for each program.

Our intention is to renew the surety and fidelity bond treaty, and the property per risk excess of loss treaty in July 2014 with the same or similar terms and conditions, but there can be no assurance that we will be able to maintain our current levels of reinsurance, pricing and terms and conditions. For our 2014 reinsurance program, all other treaties described above were effective January 1, 2014 for a twelve month period.

Chaucer

Chaucer’s 2014 reinsurance program is substantially consistent with the 2013 program design. The 2013 and 2014 Chaucer reinsurance programs contain a combination of reinsurance treaties that either provide coverage across several lines or are specific to individual lines of business or classes of business within certain lines. Generally, for each line or class of Chaucer’s business, there are a variety of proportional, excess of loss (occurrence and aggregate basis), facultative and other treaty forms, which work in conjunction to provide coverage limits. For 2013, Chaucer increased its net retentions for certain lines and classes predominantly through various co-participation levels within certain treaty layers. For 2014, Chaucer’s net retentions are generally consistent with the 2013 levels.

The Chaucer programs described below are substantially in place as of February 1, 2014 and we expect to implement throughout the year any remaining parts of the program as described; however, there can be no assurances that we will be successful in placing reinsurance for each line as planned. The following discussion summarizes both our 2013 and 2014 reinsurance programs for the Chaucer segment, but does not purport to be a complete description of the program or the various restrictions or limitations which may apply. The limit figures below are presented net of treaty co-participation.

We purchase proportional and non-proportional reinsurance which is intended to provide sufficient underwriting capacity to effectively conduct business in the Lloyd’s market and to protect against frequency and severity of losses.

For the property lines reinsurance coverage in 2013 and 2014:

• The direct property catastrophe occurrence reinsurance for selected international territories provides coverage up to approximately $46 million and $38 million, less retentions of approximately $15 million and $10 million, respectively.

• The assumed property catastrophe reinsurance for selected international territories provides coverage up to approximately $93 million and $115 million, less retentions of approximately $20 million and $24 million, respectively. Additionally, the assumed property catastrophe occurrence reinsurance for the United States and the Caribbean provides coverage up to approximately $112 million and $133 million, less retentions of approximately $29 million and $30 million, respectively. For 2014 reinsurance programs, our assumed property catastrophe coverage is placed partially on an occurrence, and partially on an aggregate basis.

• The direct property per risk excess of loss reinsurance provides coverage up to approximately $17 million and $18 million, less retentions of approximately $6 million and $8 million, respectively.

For the energy, marine and aviation lines reinsurance coverage in 2013 and 2014:

• The nuclear energy lines occurrence reinsurance provides coverage up to approximately $163 million and $165 million, less retentions of approximately $54 million and $55 million, respectively.

• The non-nuclear energy lines occurrence reinsurance provides coverage up to approximately $158 million and $154 million, respectively, less retentions of approximately $17 million and $20 million, respectively.

• The marine lines excess of loss reinsurance provides coverage, on a per occurrence basis, up to approximately $56 million and $60 million, respectively, less retentions of approximately $5 million for both years.

• The aviation lines reinsurance provides coverage, on a per occurrence basis, up to approximately $51 million and $52 million respectively, less retentions of approximately $2 million and $3million, respectively.

The U.K. motor line has protection from a reinsurance program placed on a losses occurring basis, which is unlimited in excess of $1.6 million, both in terms of the amount and the number of losses sustained. For 2012, 2013 and 2014, there is co-participation on the $1.6 million in excess of $1.6 million layer of 30%, 30% and 15% for each year, respectively.

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Reinsurance Recoverables

Other than our investment portfolio, the single largest asset class is our reinsurance receivables, which consist of our estimate of amounts recoverable from reinsurers with respect to losses incurred to date (including losses incurred but not reported) and unearned premiums, net of amounts estimated to be uncollectible. This estimate depends upon a number of factors, including an estimate of the amount of reserves attributable to business written in various lines and in various years. This estimate is expected to be revised at each reporting period and such revisions, which could be material, affect our results of operations and financial position. Reinsurance recoverables include amounts due from both United States and state mandatory reinsurance or other risk sharing mechanisms, and private reinsurers to whom we have voluntarily ceded business.

We are subject to concentration of risk with respect to reinsurance ceded to various mandatory residual markets, facilities and pooling mechanisms. As a condition to conduct business in various states, we are required to participate in residual market mechanisms, facilities and pooling arrangements which usually are designed to provide insurance coverages to individuals or other entities that are otherwise unable to purchase such coverage voluntarily or at rates deemed reasonable. These market mechanisms, facilities and pooling arrangements comprise $887.6 million of our total reinsurance recoverables on paid and unpaid losses and unearned premiums at December 31, 2013 and include, among others, the Michigan Catastrophic Claims Association (“MCCA”).

The MCCA is a mandatory reinsurance association which reinsures claims under Michigan’s unlimited personal injury protection coverage which is required under all Michigan automobile insurance policies. The MCCA reinsures all such claims in excess of a statutorily established company retention, currently $530,000. Funding for MCCA comes from assessments against automobile insurers based upon their share of insured automobiles in the state. Insurers are allowed to pass along this cost to Michigan automobile policyholders. This recoverable accounted for 61% of our total personal automobile gross reserves at December 31, 2013 and 2012. Reinsurance recoverables related to MCCA were $867.0 million and $856.3 million at December 31, 2013 and 2012, respectively. Because the MCCA is supported by assessments permitted by statute, and there have been no significant uncollectible balances from MCCA identified during the three years ending December 31, 2013, we believe that we have no significant exposure to uncollectible reinsurance balances from this entity.

In addition to the reinsurance ceded to various residual market mechanisms, facilities and pooling arrangements and the former capital provision reinsurance treaty with Flagstone Re, as described below, we have $1,315.9 million of reinsurance assets due from traditional reinsurers. These amounts are due principally from highly-rated reinsurers, defined as rated A- or higher by A.M. Best Rating Agency or other equivalent rating. The following table displays balances recoverable from our ten largest reinsurance groups at December 31, 2013, along with the group’s rating from the indicated rating agency. The contractual obligations under reinsurance agreements are typically with individual subsidiaries of the group or syndicates at Lloyd’s and are not typically guaranteed by other group members or syndicates at Lloyd’s. Reinsurance recoverables are comprised of paid losses recoverable, outstanding losses recoverable, incurred but not reported losses recoverable, and ceded unearned premium.

	A.M. Best	Reinsurance
REINSURERS	Rating	Recoverable
(in millions)
Lloyd’s Syndicates	A	$	271.0
Munich Reinsurance Companies	A+		156.5
HDI Group	A		119.9
Partner Re Ltd. Companies	A+		91.9
Alleghany Corporation	A		77.3
Swiss Re Ltd.	A+		52.0
XL Group PLC	A		47.4
Toa Reinsurance Company Ltd.	A+		44.4
Aspen Insurance Holdings Ltd.	A		30.4
Everest Re Group Ltd.	A+		28.5
Subtotal			919.3
All other reinsurers			396.6
Residual markets, facilities and pooling arrangements			887.6
Flagstone Re (capital provision reinsurance)			131.5
Total		$	2,335.0

Reinsurance recoverable balances in the table above are shown before consideration of balances owed to reinsurers and any potential rights of offset, including collateral held by us and, are net of an allowance for uncollectible recoverables. Reinsurance treaties are generally purchased on an annual basis. Treaties typically contain provisions that allow us to demand that a reinsurer post letters of credit or assets as security if a reinsurer is an unauthorized reinsurer under applicable regulations or if its rating falls below a

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predetermined contractual level. In regards to reinsurance recoverables due from Lloyd’s Syndicates, as part of the Lloyd’s “chain of security” afforded to all of its policyholders, recourse is available to the Lloyd’s Central Fund in the event of the failure of an individual syndicate and its capital providers. In accordance with the terms of a capital provision reinsurance treaty with Flagstone Re, which was in place for underwriting years 2009 through 2012, Flagstone Re provided additional gross underwriting capacity to Syndicate 1084. Under this agreement, Flagstone Re is obligated to provide Funds at Lloyd’s and is subject to offsetting funds withheld balances with Chaucer. As a result, in the event of a default, we have access to collateral to pay losses reinsured by Flagstone Re on policies written through the end of 2012.

Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, ceded reinsurance arrangements do not eliminate our obligation to pay claims to our policyholders. Accordingly, we bear credit risk with respect to our reinsurers. Specifically, our reinsurers may not pay claims made by us on a timely basis, or they may not pay some or all of these claims. In addition, from time to time insurers and reinsurers may disagree on the scope of the reinsurance or on the underlying insured risks. Any of these events would increase our costs and could have a material adverse effect on our business.

We have established a reserve for uncollectible reinsurance of $20.7 million as of December 31, 2013, which was determined by considering reinsurer specific default risk on paid and unpaid recoverables as indicated by their financial strength ratings, any current risk of dispute on paid recoverables, our collection experience and the development of our ceded loss reserves. There have been no significant balances determined to be uncollectible, and thus no significant charges recorded during 2013 for uncollectible reinsurance recoverables.

Our exposure to credit risk from any one reinsurer is managed through diversification by reinsuring with a number of different reinsurers, principally in the United States and European reinsurance markets. When reinsurance for our Commercial and Personal Lines segments is placed, our standards of acceptability generally require that a reinsurer must have a minimum policyholder surplus of $500 million, a rating from A.M. Best and/or S&P of “A” or better, or an equivalent financial strength if not rated. Similarly, the Chaucer segment generally requires all reinsurers to have a rating from S&P of “A-” or better and minimum level of net assets of $500 million. In addition, for lower rated reinsurers, certain reinsurers for our United States insurance operations that have not been granted authorized status by an insurance company’s state of domicile, and in certain other circumstances deemed appropriate by Chaucer’s security committee, reinsurers must generally provide collateral equal to 100% of estimated reinsurance recoverables. The collateral can serve to mitigate credit risk.

DISCONTINUED OPERATIONS

Discontinued operations primarily include our former life insurance businesses, which were sold prior to 2009, our Discontinued Accident and Health Business and our former third party administration business, which was sold in 2012.

The Discontinued Accident and Health Business includes interests in 25 accident and health reinsurance pools and arrangements that we retained subsequent to the sale of First Allmerica Financial Life Insurance Company (“FAFLIC”); all of which were assumed by Hanover Insurance. We ceased writing new premiums in this business in 1999, subject to certain contractual obligations. The reinsurance pool business consists primarily of the medical and disability portions of workers’ compensation risks, long-term care, assumed personal accident, individual medical, long-term disability, and special risk business. This business includes residual health insurance policies. Total claim reserves for the assumed accident and health business were $120.4 million at December 31, 2013. The total amount recoverable from third party reinsurers was $2.0 million at December 31, 2013. Total net reserves were $118.4 million at December 31, 2013. We will continue to account for this business as discontinued operations. Assets and liabilities related to the Discontinued Accident and Health Business are reflected as assets and liabilities of discontinued operations.

Loss estimates associated with substantially all of the Discontinued Accident and Health Business are provided by managers of each pool. We adopt reserve estimates for this business that consider this information, expected returns on assets assigned to this business and other facts. We update these reserves as new information becomes available and further events occur that may affect the ultimate resolution of unsettled claims. We believe that the reserves recorded related to this business are adequate. However, since reserve and loss cost estimates related to the Discontinued Accident and Health Business are dependent on several assumptions, including, but not limited to, future health care costs, persistency of medical care inflation, investment performance, claims, particularly in the long-term care business, morbidity and mortality assumptions, and these assumptions can be impacted by technical developments and advancements in the medical field and other factors, there can be no assurance that the reserves established for this business will prove sufficient. Revisions to these reserves could have a material adverse effect on our results of operations for a particular quarterly or annual period or on our financial position.

Discontinued operations, in total, generated a net gain of $5.3 million during 2013 and primarily related to our former life insurance business. Reference is made to “Discontinued Operations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.

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INVESTMENT PORTFOLIO

We held $8.1 billion of investment assets, including cash and cash equivalents, at December 31, 2013. Approximately 86% of our investment assets were comprised of fixed maturities, which included both investment grade and below investment grade public and private debt securities; 6% were comprised of cash and cash equivalents; 5% consisted of equity securities; and the remaining 3% included overseas deposits and other investments. These investments are generally of high quality and our fixed maturities are broadly diversified across sectors of the fixed income market.

Our investment portfolio is managed by Opus Investment Management Inc., a wholly-owned subsidiary of THG, including the selection and monitoring of external asset managers primarily for our non-U.S. dollar portfolios. Our overall investment strategy is intended to balance investment income with credit and interest rate risk, while maintaining sufficient liquidity and the opportunity for capital growth. The asset allocation process takes into consideration the types of business written and the level of surplus required to support our different businesses and the risk return profiles of the underlying asset classes. We look to balance the goals of capital preservation, net investment income stability, liquidity and total return. For certain portfolios in which fixed maturities are primarily denominated in U.K. pound sterling and Euro, we employ two external asset managers with international market expertise to manage these portfolios, totaling approximately $823 million. We select and monitor managers based on investment style, performance and corporate governance.

The majority of our assets are invested in the fixed income markets. Through fundamental research and credit analysis, with a focus on value investing, we seek to identify a portfolio of stable income-producing higher quality U.S. government, foreign government, municipal, corporate, residential and commercial mortgage-backed securities and asset-backed securities. We have a general policy of diversifying investments both within and across major investment and industry sectors to mitigate credit and interest rate risk. We monitor the credit quality of our investments and our exposure to individual markets, borrowers, industries, sectors and, in the case of direct commercial mortgages and commercial mortgage-backed securities, property types and geographic locations.

Investments held by our insurance subsidiaries are subject to diversification requirements under state insurance laws and other regulatory requirements. The investment portfolio duration is approximately 4.1 years and is generally maintained in the range of 1 to 2 times the duration of our insurance liabilities. We seek to maintain sufficient liquidity to support our cash flow requirements by monitoring the cash requirements associated with our insurance and corporate liabilities, laddering the maturities within the portfolio, closely monitoring our investment durations, holding high quality liquid public securities and managing the purchases and sales of assets.

Reference is made to “Investments” in Management’s Discussion and Analysis of the Financial Condition and Results of Operations of this Form 10-K.

RATING AGENCIES

Insurance companies are rated by rating agencies to provide both industry participants and insurance consumers information on specific insurance companies. Higher ratings generally indicate the rating agencies’ opinion regarding financial stability and a stronger ability to pay claims.

We believe that strong ratings are important factors in marketing our products to our agents and customers, since rating information is broadly disseminated and generally used throughout the industry. We believe that a rating of “A-” or higher from A.M. Best Co. is particularly important for our business. Insurance company financial strength ratings are assigned to an insurer based upon factors deemed by the rating agencies to be relevant to policyholders and are not directed toward protection of investors. Such ratings are neither a rating of securities nor a recommendation to buy, hold or sell any security.

EMPLOYEES

As of December 31, 2013, we have approximately 5,100 employees, with approximately 4,300 located in the United States, and 800 internationally, almost all of whom are located in the United Kingdom. We believe our relations with employees are good.

EXECUTIVE OFFICERS OF THE REGISTRANT

Reference is made to “Directors and Executive Officers of the Registrant” in Part III - Item 10 of this Form 10-K.

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AVAILABLE INFORMATION

We file our annual report on Form 10-K, quarterly reports on Form 10-Q, periodic information on Form 8-K, our proxy statement, and other required information with the Securities Exchange Commission (“SEC”). Shareholders may read and copy any materials on file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Shareholders may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website, http://www.sec.gov, which contains reports, proxy and information statements and other information with respect to our filings.

Our website address is http://www.hanover.com. We make available free of charge on or through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Additionally, our Code of Conduct is available, free of charge, on our website. Our Corporate Governance Guidelines and the charters of our Audit Committee, Compensation Committee, Committee of Independent Directors and Nominating and Corporate Governance Committee, are available on our website. All documents are also available in print to any shareholder who requests them.

ITEM 1A–RISK FACTORS

RISK FACTORS AND FORWARD LOOKING STATEMENTS

We wish to caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, our actual results and could cause our actual results to differ materially from historical results and from those expressed in any forward-looking statements made from time to time by us on the basis of our then-current expectations. When used in this Form 10-K, the words “believes”, “anticipates”, “expects”, “projections”, “outlook”, “should”, “could”, “plan”, “guidance”, “likely”, “on track to”, “targeted” and similar expressions are intended to identify forward-looking statements. Our businesses are in rapidly changing and competitive markets and involve a high degree of risk and unpredictability. Forward-looking projections are subject to these risks and unpredictability.

Our results may fluctuate as a result of cyclical or non-cyclical changes in the property and casualty insurance industry.

The property and casualty insurance industry historically has been subject to significant fluctuations and uncertainties. Our profitability is affected significantly by the following items:

• increases in costs, particularly those occurring after the time our insurance products are priced and including construction, automobile repair, and medical and rehabilitation costs. This includes “cost shifting” from health insurers to casualty and liability insurers (whether as a result of an increasing number of injured parties without health insurance, coverage changes in health policies to make such coverage secondary to casualty policies, the implementation of national healthcare legislation, lower reimbursement rates for the same procedure by health insurers or government-sponsored insurance, or the implementation of the Medicare Secondary Payer Act, which imposes reporting and other requirements with respect to medical and related claims paid for Medicare eligible individuals). As it relates to construction, there are often temporary increases in the cost of building supplies and construction labor after a significant event (for example, so called “demand surge” that causes the cost of labor, construction materials and other items to increase in a geographic area affected by a catastrophe). In addition, we are limited in our ability to negotiate and manage reimbursable expenses incurred by our policyholders;

• competitive and regulatory pressures, which affect the prices of our products and the nature of the risks covered;

• volatile and unpredictable developments, including severe weather, catastrophes and terrorist actions;

• legal, regulatory and socio-economic developments, such as new theories of insured and insurer liability and related claims and extra-contractual awards such as punitive damages, and increases in the size of jury awards or changes in applicable laws and regulations (such as changes in the thresholds affecting “no fault” liability or when non-economic damages are recoverable for bodily injury claims or coverage requirements);

• fluctuations in interest rates, inflationary pressures, default rates and other factors that affect investment returns; and

• other general economic conditions and trends that may affect the adequacy of reserves.

The demand for property and casualty insurance can also vary significantly based on general economic conditions (either nationally or regionally and, with respect to our Chaucer segment, internationally), rising as the overall level of economic activity increases and falling as such activity decreases. Loss patterns also tend to vary inversely with local economic conditions, increasing during difficult economic times and moderating during economic upswings or periods of stability. The fluctuations in demand and competition could produce unpredictable underwriting results.

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Actual losses from claims against our property and casualty insurance subsidiaries may exceed their reserves for claims.

Our property and casualty insurance subsidiaries maintain reserves to cover their estimated ultimate liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred as of the end of each accounting period. Reserves do not represent an exact calculation of liability. Rather, reserves represent estimates, involving actuarial projections and judgments at a given time, of what we expect the ultimate settlement and administration of incurred claims will cost based on facts and circumstances then known, predictions of future events, estimates of future trends in claims frequency and severity and judicial theories of liability, costs of repair and replacement, legislative activity and myriad other factors.

The inherent uncertainties of estimating reserves are greater for certain types of property and casualty insurance lines. These include automobile bodily injury, personal automobile personal injury protection, and workers’ compensation, where a longer period of time may elapse before a definitive determination of ultimate liability may be made, environmental liability, where the technological, judicial and political climates involving these types of claims are continuously evolving, and casualty coverages such as professional liability. There is also greater uncertainty in establishing reserves with respect to new business, particularly new business that is generated with respect to newly introduced product lines, such as our professional liability and healthcare lines, by newly appointed agents or in geographies where we have less experience in conducting business. In these cases, there is less historical experience or knowledge and less data upon which the actuaries can rely. Estimating reserves is further complicated by unexpected claims or unintended coverage that emerge due to changing conditions. These emerging issues may increase the size or number of claims beyond our underwriting intent and may not become apparent for many years after a contract is issued.

Additionally, the introduction of new Commercial Lines products, including through several acquired subsidiaries, the development of new niche and specialty lines and the introduction of new lines of business at Chaucer, present new risks. Certain new specialty products, such as the human services program, non-profit directors and officers liability and employment practices liability policies, lawyers and other professional liability policies, healthcare lines and private company directors and officers coverage may also require a longer period of time (the so-called “tail”) to determine the ultimate liability associated with the claims and may produce more volatility in our results and less certainty in our accident year reserves. Some lines of business, such as commercial surety, are less susceptible to establishing reserves based on actuarial or historical experience and losses may be episodic, depending on economic and other factors.

We regularly review our reserving techniques, reinsurance and the overall adequacy of our reserves based upon, among other things:

• our review of historical data, legislative enactments, judicial decisions, legal developments in imposition of damages, changes in political attitudes and trends in general economic conditions;

• our review of per claim information;

• historical loss experience of our property and casualty insurance subsidiaries and the industry as a whole; and

• the terms of our property and casualty insurance policies.

Underwriting results and operating income could be adversely affected by further changes in our net loss and LAE estimates related to significant events or emerging risks, such as risks related to breaches of computer network systems (“cyber-risks”), privacy regulations or disruptions caused by solar flares.

Estimating losses following any major catastrophe or with respect to emerging claims is an inherently uncertain process. Factors that add to the complexity in these events include the legal and regulatory uncertainty, the complexity of factors contributing to the losses, delays in claim reporting and with respect to areas with significant property damage, the impact of “demand surge” and a slower pace of recovery resulting from the extent of damage sustained in the affected areas due, in part, to the availability and cost of resources to effect repairs. Emerging claims issues may involve complex coverage, liability and other costs which could significantly affect LAE. As a result, there can be no assurance that our ultimate costs associated with these events or issues will not be substantially different from current estimates (for example, actual losses arising from an event like Superstorm Sandy may vary widely depending on the interpretation of various policy provisions). Investors should consider the risks and uncertainties in our business that may affect net loss and LAE reserve estimates and future performance, including the difficulties in arriving at such estimates.

Anticipated losses associated with business interruption exposure, the impact of wind versus water as the cause of loss, supplemental payments on previously closed claims caused by the development of latent damages or new theories of liability and inflationary pressures could have a negative impact on future loss reserve development.

Because of the inherent uncertainties involved in setting reserves and establishing current and prior-year “loss picks”, including those related to catastrophes, we cannot provide assurance that the existing reserves or future reserves established by our property and casualty insurance subsidiaries will prove adequate in light of subsequent events. Our results of operations and financial condition could therefore be materially affected by adverse loss development for events that we insured in prior periods.

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Due to geographical concentration in our U.S. property and casualty business, changes in economic, regulatory and other conditions in the regions where we operate could have a significant negative impact on our business as a whole. Geographic concentrations also expose us to losses that are potentially disproportionate to our market share in the event of natural or other catastrophes.

We generate a significant portion of our U.S. property and casualty insurance net premiums written and earnings in Michigan, Massachusetts and other states in the Northeast, including New Jersey and New York. For the year ended December 31, 2013, approximately 22% and 10% of our net premiums written in our U.S. property and casualty business were generated in the states of Michigan and Massachusetts, respectively. Many states in which we do business impose significant rate control and residual market charges, and restrict an insurer’s ability to exit such markets. The revenues and profitability of our property and casualty insurance subsidiaries are subject to prevailing economic, regulatory, demographic and other conditions, including adverse weather in Michigan and the Northeast. Because of our geographic concentration in certain regions, our business as a whole could be significantly affected by changes in the economic, regulatory and other conditions in such areas.

Further, certain new catastrophe models assume an increase in frequency and severity of certain weather events, whether as a result of potential global climate change or otherwise. Financial strength rating agencies are placing increased emphasis on capital and reinsurance adequacy for insurers with certain geographic concentrations of risk which may be subject to disproportionate risk of loss. These factors also may result in insurers seeking to diversify their geographic exposure, which could result in increased regulatory restrictions in those markets where insurers seek to exit or reduce coverage, as well as an increase in competitive pressures in less weather-exposed markets.

Our profitability may be adversely affected if our pricing models differ materially from actual results.

The profitability of our business depends on the extent to which our actual claims experience is consistent with the assumptions we use in pricing our policies. We price our business in a manner that is intended to be consistent, over time, with actual results and return objectives. Our estimates and models, and/or the assumptions behind them, may differ materially from actual results.

If we fail to appropriately price the risks we insure, or fail to change our pricing model to appropriately reflect our current experience, or if our claims experience is more frequent or severe than our underlying risk assumptions, our profit margins may be negatively affected. If we underestimate the frequency and/or severity of extreme adverse events occurring, our financial condition may be adversely affected. If we overestimate the risks we are exposed to, we may overprice our products, and new business growth and retention of our existing business may be adversely affected.

Limitations on the ability to predict the potential impact of weather events and catastrophes may impact our future profits and cash flows.

Our business is subject to claims arising out of catastrophes that may have a significant impact on our results of operations and financial condition. We may experience catastrophe losses that could have a material adverse impact on our business. Catastrophes can be caused by various events, including hurricanes, floods, earthquakes, tornadoes, wind, hail, fires, drought, severe winter weather, sabotage, terrorist actions, explosions, nuclear accidents, solar flares, and power outages. The frequency and severity of catastrophes are inherently unpredictable.

The extent of gross losses from a catastrophe is a function of the total amount of insured exposure in the area affected by the event and the severity of the event. The extent of net losses depends on the amount and collectability of reinsurance.

Additionally, the severity of certain catastrophes could be so significant that it impacts the ability of certain locations to recover their economic viability in the near-term, which could also have a significant negative impact on our business.

Although catastrophes can cause losses in a variety of property and casualty lines, homeowners and commercial multiple peril property insurance have, in the past, generated the vast majority of our catastrophe-related claims. Our catastrophe losses have historically been principally weather-related, particularly from hurricanes, as well as snow and ice damage from winter storms. However, with the acquisition of Chaucer, we are subject to greater diversity in the types and geographic distribution of potential catastrophe losses. For example, Chaucer incurred catastrophe losses in 2013 from floods in Europe and hurricanes in Mexico, in 2012 from the earthquake in Italy and both the drought and Superstorm Sandy in the U.S., and in 2011 from the earthquake and ensuing tsunami in Japan, the earthquakes in New Zealand, and flooding in Australia and Thailand.

Although the insurance industry and rating agencies have developed various models intended to help estimate potential insured losses under thousands of scenarios, there is no reliable way of predicting the probability of such events or the magnitude of such losses before a specific event occurs. We utilize various models and other techniques in an attempt to measure and manage potential catastrophe losses within various income and capital risk appetites. However, such models and techniques have many limitations. In addition, due to historical concentrations of business, regulatory restrictions and other factors, particularly in the Northeast and in the state of Michigan, our ability to manage such concentrations is limited.

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We purchase catastrophe reinsurance as protection against catastrophe losses. Based upon an ongoing review of our reinsurers’ financial statements, financial strength ratings assigned to them by rating agencies, their reputations in the reinsurance marketplace, our collections history with them and the analysis and guidance of our reinsurance advisors, we believe that the financial condition of our reinsurers is sound. However, reinsurance is subject to counterparty risks, including those resulting from over-concentration of exposures within the industry. In setting our retention levels and coverage limits, we also consider our level of statutory surplus and exposures, as well as the current reinsurance pricing environment. There can be no assurance that our reinsurance program will provide adequate coverage levels should we experience losses from one significant or several large catastrophes.

Our business is dependent on our ability to manage risk, and the failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations.

Our business performance is highly dependent on our ability to manage operational risks that arise from a large number of day-to-day business activities, including insurance underwriting, claims processing, servicing, investment, financial and tax reporting, compliance with regulatory requirements and other activities. We utilize a number of strategies to mitigate our insurance risk exposure, including: engaging in thorough underwriting, utilizing limits, deductibles and exclusions to mitigate policy risk, reviewing the terms and conditions of our policies, focusing on our risk aggregation by product line, geography, industry type, credit exposure and other bases, and ceding insurance risk. We seek to monitor and control our exposure to risks arising out of these activities through an enterprise-wide risk management framework. However, there are inherent limitations in all of these tactics and no assurance can be given that these processes and procedures will effectively control all known risks or effectively identify unforeseen risks or that an event or series of events will not result in loss levels in excess of our probable maximum loss models, which could have a material adverse effect on our financial condition or results of operations. It is also possible that losses could manifest themselves in ways that we do not anticipate and that our risk mitigation strategies are not designed to address. Such a manifestation of losses could have a material adverse effect on our financial condition or results of operations. These risks may be heightened during challenging economic conditions such as those recently experienced in the U.S. and elsewhere.

We cannot guarantee the adequacy of or ability to maintain our current level of reinsurance coverage.

Similar to insurance companies, reinsurance companies can also be adversely impacted when catastrophes occur. There can be no assurance that we will be able to maintain our current levels of reinsurance coverage. In particular, and as discussed under “Reinsurance Program Overview” of this Form 10-K, not all of our 2014 reinsurance programs for the Commercial and Personal Lines and Chaucer business are fully placed. Future catastrophic events and other changes in the reinsurance marketplace, including as a result of investment losses or disruptions due to challenges in the financial markets that have occurred or could occur in the future, may adversely affect our ability to obtain such coverages, as well as adversely affect the cost of obtaining that coverage.

Additionally, the availability, scope of coverage, cost, and creditworthiness of reinsurance could continue to be adversely affected as a result of not only new catastrophes, but also terrorist attacks and the perceived risks associated with future terrorist activities, global conflicts, and the changing legal and regulatory environment (including changes which could create new insured risks).

Federal terrorism coverage under TRIPRA is due to expire by its terms on December 31, 2014, and there have been proposals to scale back coverage under TRIPRA. We are unable to predict the likelihood that TRIPRA will be extended or of adoption of any proposals to reduce coverage; however, failure to timely reauthorize TRIPRA or a reduction in TRIPRA coverage would change our risk profile, and could have an adverse effect on our results of operations and financial position, because among other things, we may deem it prudent to reduce coverage in certain lines of business, such as workers’ compensation, or limit our exposure concentrations in certain geographic areas or to purchase additional reinsurance. Reinsurance may not be available at reasonable rates.

Although we monitor their financial soundness, we cannot be sure that our reinsurers will pay in a timely fashion, if at all.

We purchase reinsurance by transferring part of the risk that we have assumed (known as ceding) to reinsurance companies in exchange for part of the premium we receive in connection with the risk. As of December 31, 2013, our reinsurance receivable (including from the MCCA) amounted to approximately $2.3 billion. Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us (the reinsured) of our liability to our policyholders or, in cases where we are a reinsurer, to our reinsureds. Accordingly, we bear counterparty risk with respect to our reinsurers. Although we monitor the credit quality of our reinsurers, we cannot be sure that they will pay the reinsurance recoverables owed to us currently or in the future or that they will pay such recoverables on a timely basis.

Climate change may adversely impact our results of operations.

There are concerns that the higher level of weather-related catastrophes and other losses incurred by the industry in recent years is indicative of changing weather patterns, whether as a result of changing climate (“global climate change”) or otherwise, which could cause such events to persist. This would lead to higher overall losses which we may not be able to recoup, particularly in the current economic and competitive environment, and higher reinsurance costs. As noted above, certain catastrophe models assume an increase in frequency and severity of certain weather events which could result in a disproportionate impact on insurers with certain geographic concentrations of risk. This would also likely increase the risks of writing property insurance in coastal areas, particularly in jurisdictions which restrict pricing and underwriting flexibility.

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In addition, global climate change could have an impact on assets in which we invest, resulting in realized and unrealized losses in future periods which could have a material adverse impact on our results of operations and/or financial position. It is not possible to foresee which, if any, assets, industries or markets will be materially and adversely affected, nor is it possible to foresee the magnitude of such effect.

We may incur financial losses resulting from our participation in shared market mechanisms, mandatory reinsurance programs and mandatory and voluntary pooling arrangements.

In most of the jurisdictions in which we operate, our property and casualty insurance subsidiaries are required to participate in mandatory property and casualty shared market mechanisms, government-sponsored reinsurance programs or pooling arrangements. These arrangements are designed to provide various insurance coverages to individuals or other entities that otherwise are unable to purchase such coverage or to support the costs of uninsured motorist claims in a particular state or region. We cannot predict whether our participation in these shared market mechanisms or pooling arrangements will provide underwriting profits or losses to us. For the year ended December 31, 2013, we experienced an underwriting loss of $14.5 million from participation in these mechanisms and pooling arrangements, compared to underwriting losses of $15.3 million and $13.1 million in 2012 and 2011, respectively. We may face similar or even more dramatic earnings fluctuations in the future.

Additionally, increases in the number of participants or insureds in state-sponsored reinsurance pools, FAIR Plans or other residual market mechanisms, particularly in the states of Louisiana, Massachusetts and Florida, combined with regulatory restrictions on the ability to adequately price, underwrite, or non-renew business, as well as new legislation, or changes in existing case law, could expose us to significant exposures and risks of increased assessments from these residual market mechanisms. There could also be significant adverse impact as a result of losses incurred in those states due to hurricane exposure, as well as the declining number of carriers providing coverage in those regions. We are unable to predict the likelihood or impact of such potential assessments or other actions.

We also have credit risk associated with certain mandatory reinsurance programs such as the Michigan Catastrophic Claims Association. The MCCA was created to fund Michigan’s unique unlimited personal injury protection benefit. As of December 31, 2013, our estimated reinsurance recoverable from the MCCA was $867.0 million. The MCCA operates with a deficit which may fluctuate significantly based on investment returns, discount rates, incurred claims, annual assessments and other factors.

In addition, we may be adversely affected by liabilities resulting from our previous participation in certain voluntary property and casualty assumed reinsurance pools. We have terminated participation in virtually all property and casualty voluntary pools, but remain subject to claims related to periods in which we participated. The property and casualty assumed reinsurance businesses have suffered substantial losses during the past several years, particularly related to environmental and asbestos exposure for property and casualty coverages, in some cases resulting from incidents alleged to have occurred decades ago. Due to the inherent volatility in these businesses, possible issues related to the enforceability of reinsurance treaties in the industry and the recent history of increased losses, we cannot provide assurance that our current reserves are adequate or that we will not incur losses in the future. Although we have discontinued participation in these reinsurance pools, we are subject to claims related to prior years or from pools we could not exit entirely. Our operating results and financial position may be adversely affected by liabilities resulting from any such claims in excess of our loss estimates. As of December 31, 2013, our reserves for these pools totaled $37.1 million.

Our businesses are heavily regulated and changes in regulation may reduce our profitability.

Our U.S. insurance businesses are subject to supervision and regulation by the state insurance authority in each state in which we transact business. This system of supervision and regulation relates to numerous aspects of an insurance company’s business and financial condition, including limitations on the authorization of lines of business, underwriting limitations, the ability to utilize credit-based insurance scores in underwriting, the ability to terminate agents, supervisory and liability responsibilities for agents, the setting of premium rates, the requirement to write certain classes of business which we might otherwise avoid or charge different premium rates, restrictions on the ability to withdraw from certain lines of business, the establishment of standards of solvency, the licensing of insurers and agents, compensation of agents, concentration of investments, levels of reserves, the payment of dividends, transactions with affiliates, changes of control, protection of private information of our agents, policyholders, claimants and others (which may include highly sensitive financial or medical information or other private information such as social security numbers, driving records, drivers license numbers, etc.) and the approval of policy forms. From time to time, various states and Congress have proposed to prohibit or otherwise restrict the use of credit-based insurance scores in underwriting or rating our Personal Lines business. The elimination of the use of credit-based insurance scores could cause significant disruption to our business and our confidence in our pricing and underwriting. Most insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors.

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Legislative and regulatory restrictions are constantly evolving and are subject to then current political pressures. For example, following Superstorm Sandy, the states of New Jersey and New York are considering proposals such as homeowners’ “Bill of Rights”, restrictions on storm deductibles and additional mandatory claim handling guidelines. Such actions also occur at the federal level, such as the U. S. Department of Housing and Urban Development’s proposal that may increase the legal risk of providing homeowners and commercial residential property insurance by imposing liability for discrimination on the basis of a disparate-impact theory even without any evidence of discriminatory intent. Some states are also considering mandating owners of firearms to purchase liability insurance.

In addition, in July 2010, in response to the global financial crisis, The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted. This legislation provides for enhanced regulation for the financial services industry through initiatives including, but not limited to, the creation of a Federal Insurance Office and several federal oversight agencies, the requiring of more transparency, accountability and focus in protecting investors and businesses, input of shareholders regarding executive compensation, and enhanced empowerment of regulators to pursue those who engage in financial fraud and unethical business practices. The Securities and Exchange Commission adopted regulations designed to encourage, reward, and protect “whistleblowers”, whether or not they first report the potential infraction to the company for correction or remedial action.

Also, beginning in 2011, the federal Medicare, Medicaid and SCHIP Extension Act mandates reporting and other requirements applicable to property and casualty insurance companies which make payments to or on behalf of claimants who are eligible for Medicare benefits. These requirements have made bodily injury claim resolutions more difficult, particularly for complex matters or for injuries requiring treatment over an extended period, and impose significant penalties for non-compliance and reporting errors. These new requirements also have increased the circumstances under which the federal government may seek to recover from insurers amounts paid to claimants in circumstances where the government had previously paid benefits. In January 2013, the Strengthening Medicare and Repaying Taxpayers Act was signed into law. We are not yet certain of the effect of this law on our ability to settle cases or exposure to federal recoupment claims.

With respect to our U.S. insurance business, state regulatory oversight and various proposals at the federal level may in the future adversely affect our ability to sustain adequate returns in certain lines of business or in some cases, operate the line profitably. In recent years, the state insurance regulatory framework has come under increased federal scrutiny, and certain state legislatures have considered or enacted laws that alter and, in many cases, increase state authority to regulate insurance companies and insurance holding company systems.

Our business could be negatively impacted by adverse state, federal and foreign legislation or regulation, including those resulting in:

• decreases in rates;

• limitations on premium levels;

• coverage and benefit mandates;

• limitations on the ability to manage care and utilization or other claim costs;

• requirements to write certain classes of business or in certain geographies;

• restrictions on underwriting, on methods of compensating independent producers, or on our ability to cancel or renew certain business (which negatively affects our ability to reduce concentrations of property risks);

• higher liability exposures for our insureds;

• increased assessments or higher premium or other taxes; and

• enhanced ability to pierce “no fault” thresholds or recover non-economic damages (such as “pain and suffering”).

These regulations serve to protect the customers and other third parties who deal with us and are heavily influenced by the then current political environment. If we are found to have violated an applicable regulation, administrative or judicial proceedings may be initiated against us which could result in censures, fines, civil penalties (including punitive damages), the issuance of cease-and-desist orders, premium refunds or the reopening of closed claim files, among other consequences. These actions could have a material adverse effect on our financial position and results of operations.

Congress, as well as state, local and foreign governments, also consider from time to time legislation that could increase our tax costs. If such legislation is adopted, our consolidated net income could decline.

In addition, we are reliant upon independent agents and brokers to market our products. Changes in regulations related to insurance agents and brokers that materially impact the profitability of the agent and broker business or that restrict the ability of agents and brokers to market and sell insurance products would have a material adverse effect on our business.

With respect to our U.K. insurance business, Chaucer’s regulated subsidiaries are subject to the U.K.’s Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”) regulations, which replaced the Financial Services Authority in April 2013, and are subject to limitations and approval requirements with respect to payments of dividends, return of capital and becoming a borrower, guarantor or provider of security interest on any financial obligations and other aspects of its operations.

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The PRA and FCA have substantial powers of intervention in relation to the Lloyd’s managing agents, such as Chaucer, which they regulate, including the power to remove their authorization to manage Lloyd’s syndicates. In addition, each year the PRA requires Lloyd’s to satisfy an annual solvency test that measures whether Lloyd’s has sufficient assets in the aggregate to meet all outstanding liabilities of its members, both current and run-off. If Lloyd’s fails this test, the PRA may require Lloyd’s to cease trading and/or its members to cease or reduce underwriting. The FCA focuses on conduct of business issues with a particular focus on consumer protection and market integrity. Future regulatory changes or rulings by the PRA and FCA could interfere with our business strategy or financial assumptions, possibly resulting in a material adverse effect on our profitability.

There are a number of regulatory and legal changes that are aimed at reducing the cost of motor insurance to consumers which will have an impact on Chaucer’s U.K. Division, including the Legal Aid and Sentencing of Offenders Act (“LASPO”) 2012, the Competition Commission inquiry in the U.K. Private Motor Insurance market and the Department for Transport consultation on whiplash claims. Of these three initiatives only LASPO is currently in effect and the U.K. Division has completed all necessary steps to ensure that compliance with the requirements of the Act is achieved without any commercial disadvantages to the division. We do not yet know the impact of the Competition Commission inquiry in the U.K. Private Motor Insurance market and the Department for Transport consultation on whiplash claims on Chaucer’s business operations or the U.K. insurance industry.

Additionally, the Lloyd’s worldwide insurance and reinsurance business is subject to various regulations, laws, treaties and other applicable policies of the European Union, as well as each nation, state and locality in which it operates. Material changes in governmental requirements and laws could have an adverse effect on Lloyd’s and its member companies, including Chaucer.

The European Union (“E.U.”) is phasing in a new composite E.U. directive (known as Solvency II) covering the prudential supervision of all insurance and reinsurance companies that is being developed to replace the existing life insurance, non-life insurance and reinsurance directives that govern the insurance business in the U.K. (among various other obligations, Solvency II will impose new capital requirements on Chaucer). It is estimated that the implementation of Solvency II will take effect during 2016, but it is possible some rules will come into force earlier. We could be impacted by the implementation of Solvency II, depending on the costs associated with implementation by each E.U. country, any increased capital requirements applicable to us, and any costs associated with adjustments to our operations. We are also subject to risks and uncertainties relating to changes to the regulatory framework in the U.K. with the recent introduction of the PRA and FCA. We anticipate new conduct requirements to develop over the next twelve months.

From time to time, we are also involved in investigations and proceedings by U.S., U.K., state and other governmental and self-regulatory agencies. We cannot provide assurance that these investigations, proceedings and inquiries will not result in actions that would adversely affect our results of operations or financial condition.

As a specialist in Lloyd’s insurance group, Chaucer is subject to a number of risks which could materially and adversely affect us.

As a specialist in Lloyd’s insurance group, Chaucer is subject to a number of specific risk factors and uncertainties, including without limitation:

• its reliance on insurance and reinsurance brokers and distribution channels to distribute and market its products (so called “coverholders”);

• its obligations to maintain funds at Lloyd’s to support its underwriting activities; its risk-based capital requirement being assessed periodically by Lloyd’s and being subject to variation;

• its reliance on ongoing approvals from Lloyd’s, the PRA and FCA and other regulators to conduct its business, including a requirement that its Annual Business Plan be approved by Lloyd’s before the start of underwriting for each account year;

• its obligations to contribute to the Lloyd’s Central Fund and pay levies to Lloyd’s;

• its financial strength rating is derived from the rating assigned to Lloyd’s, and Chaucer has very limited ability to directly affect the overall Lloyd’s rating;

• its ongoing ability to utilize Lloyd’s trading licenses in order to underwrite business outside the United Kingdom;

• its ongoing exposure to levies and charges in order to underwrite at Lloyd’s; and

• the requirement to maintain deposits in the United States for U.S. site risks it underwrites.

Whenever a member of Lloyd’s is unable to pay its policyholder obligations, such obligations may be payable by the Lloyd’s Central Fund. If Lloyd’s determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd’s

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members up to 3% of a member’s underwriting capacity in any one year. We do not believe that any assessment is likely in the foreseeable future and have not provided allowance for such an assessment. However, based on our 2014 estimated underwriting capacity at Lloyd’s of £878.0 million, the December 31, 2013 exchange rate of 1.66 dollars per GBP and assuming the maximum 3% assessment, we could be assessed up to approximately $43.6 million in 2014.

We are subject to litigation risks, including risks relating to the application and interpretation of contracts, and adverse outcomes in litigation and legal proceedings could adversely affect our results of operations and financial condition.

We are subject to litigation risks, including risks relating to the application and interpretation of insurance and reinsurance contracts, and are routinely involved in litigation that challenges specific terms and language incorporated into property and casualty contracts, such as claims reimbursements, covered perils and exclusion clauses, among others, or the interpretation or administration of such contracts. We are also involved in legal actions that do not arise in the ordinary course of business, some of which assert claims for substantial amounts. Adverse outcomes, including with respect to the matter captioned “Durand Litigation” under “Commitments and Contingencies – Legal Proceedings” in Note 18 in the Notes to the Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K, could materially affect our results of operations and financial condition.

We are subject to mandatory assessments by state guaranty funds; an increase in these assessments could adversely affect our results of operations and financial condition.

All fifty states of the United States and the District of Columbia have insurance guaranty fund laws requiring property and casualty insurance companies doing business within the state to participate in guaranty associations. These associations are organized to pay contractual obligations under insurance policies issued by impaired or insolvent insurance companies. The associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired or insolvent insurer is engaged. Although mandatory assessments by state guaranty funds that are used to cover losses to policyholders of insolvent or rehabilitated companies can be substantially recovered through policyholder surcharges or a reduction in future premium taxes in many states (provided the collecting insurer continues to write business in such state), there can be no assurance that all funds will be recoupable in the future. During 2013, we had a total assessment of $6.0 million levied against us, with refunds of $0.4 million received in 2013 for a total net assessment of $5.6 million. As of December 31, 2013, we have $0.7 million of reserves related to guaranty fund assessments. In the future, these assessments may increase above levels experienced in the current and prior years. Future increases in these assessments depend upon the rate of insolvencies of insurance companies. An increase in assessments could adversely affect our results of operations and financial condition.

If we are unable to attract and retain qualified personnel, or if we experience the loss or retirement of key executives or other key employees, we may not be able to compete effectively and our operations could be impacted significantly.

Our future success will be affected by our continued ability to attract and retain qualified executives and other key employees, particularly those experienced in the property and casualty industry and the Lloyd’s market.

Our profitability could be adversely affected by periodic changes to our relationships with our agencies.

We periodically review agencies, including managing general agencies, with which we do business to identify those that do not meet our profitability standards or are not strategically aligned with our business. Following these periodic reviews, we may restrict such agencies’ access to certain types of policies or terminate our relationship with them, subject to applicable contractual and regulatory requirements which limit our ability to terminate agents or which require us to renew policies. We may not achieve the desired results from these measures, and our failure to do so could negatively affect our operating results and financial position.

We may be affected by disruptions caused by the introduction of new products, related technology changes, and new operating models in Commercial Lines, Personal Lines and Chaucer businesses and recent or future acquisitions, and expansion into new geographic areas. We could also be affected by an inability to retain profitable policies in force and attract profitable policies in our Commercial Lines, Personal Lines and Chaucer segments, particularly in light of a competitive product pricing environment and the adoption by competitors of strategies to increase agency appointments and commissions and increased advertising.

There are increased underwriting risks associated with premium growth and the introduction of new products or programs in our Commercial Lines, Personal Lines and Chaucer businesses. Additionally, we have increased underwriting risks associated with the appointment of new agencies and managing general agencies and with the expansion into new geographical areas, including international expansion.

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The introduction of new Commercial Lines products, including through our acquired subsidiaries and the development of new niche and specialty lines, presents new risks. Certain new specialty products may present longer “tail” risks and increased volatility in profitability. Our expansion into western states, including California, presents additional underwriting risks since the regulatory, geographic, natural risk, legal environment, demographic, business, economic and other characteristics of these states present challenges different from those in the states in which we historically have conducted business.

Our Personal Lines production and earnings may be unfavorably affected by the continued introduction of new products and our focus on account business (i.e., policyholders who have both automobile and homeowner insurance with us) which we believe, despite pricing discounts, will ultimately be more profitable business. We may also experience adverse selection, which occurs when insureds with larger risks purchase our products because of favorable pricing, under-pricing, operational difficulties or implementation impediments with independent agents or the inability to grow new markets after the introduction of new products or the appointment of new agents.

There can be no assurance that as we enter new states or regions or grow business in our identified growth states, we won’t experience higher loss trends than anticipated.

Integration of acquired businesses involves a number of risks and there can be no assurance that we will be successful integrating recent and future acquisitions.

There can be no assurance that we will be able to successfully integrate recent and any future acquisitions or that we will not assume unknown liabilities and reserve deficiencies in connection with such acquisitions. If we are unable to successfully integrate new businesses, then we could be impeded from realizing the benefits of an acquisition. The integration process could disrupt our business and a failure to successfully integrate newer businesses could have a material adverse effect on our business, financial condition and results of operations. The difficulties of integrating an acquisition and risks to our business include, among others:

• unanticipated issues in integrating information, communications and other systems;

• unanticipated incompatibility of logistics, marketing and administration methods;

• maintaining employee morale and retaining key employees;

• integrating the business cultures of different companies;

• preserving important strategic, reinsurance and other relationships;

• integrating legal and financial controls in multiple jurisdictions;

• consolidating corporate and administrative infrastructures and eliminating duplicative operations;

• the diversion of management’s attention from ongoing business concerns;

• integrating geographically separate organizations;

• unexpected or overlapping concentrations of risk where one event or series of events can affect many insured parties;

• significant transaction costs, including the effect of exchange rate fluctuations;

• risks and uncertainties in our ability to increase the investment yield on the investment portfolio;

• uncertainties in our ability to decrease leverage as a result of adding future earnings to our capital base;

• risks and uncertainties regarding the volatility of underwriting results in a combined entity;

• an ability to more efficiently manage capital;

• an ability to improve renewal rates and increase new property and casualty policy counts;

• an ability to increase or maintain certain property and casualty insurance rates;

• complying with laws, rules and regulations in multiple jurisdictions, including new and multiple employment regulations, regulations relating to the conduct of business activities such as the U.K. Bribery Act, sanctions imposed by the U.S. or U.K. on doing business with certain foreign countries or other persons, privacy, information security, and environmental-related laws; and

• the impact of new product or line of business introductions and our ability to meet projected return on capital targets.

In addition, even if we are able to integrate successfully recent and future acquisitions, we may not realize the full benefits of such acquisitions, including the synergies, cost savings or underwriting or growth opportunities that we expect. It is possible that these benefits may not be achieved within the anticipated time frame, or at all.

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Our international operations expose us to additional risks which could cause a material adverse effect on our business, financial position and results of operations.

Our operations extend to countries outside the U.S. and operating globally increases the scope of our risks and exposes us to certain additional risks including but not limited to:

• an expansion in the scope of the risks to which our U.S. operations are subject as an insurance company, such as risk of adverse loss development, litigation, investment risks and the possibility of significant catastrophe losses (as a result of natural disasters, nuclear accidents, severe weather and terrorism) occurring outside the U.S.;

• compliance with a variety of national and local laws, regulations and practices of the countries in which we do business and adherence to any changes in such laws, regulations and practices affecting the insurance industry in such countries;

• adverse changes in the economies in which we operate; and

• requirements, such as those enforced by Her Majesty’s Treasury, Asset Freezing Unit (U.K.) and the U.S. Treasury’s Office of Foreign Asset Controls, to comply with various U.K., U.S., E.U. or other sanctions imposed on doing business with, or affecting, certain countries, their citizens, specially designated nationals or other persons doing business with any such countries or persons.

Intense competition could negatively affect our ability to maintain or increase our profitability.

We compete, and will continue to compete, with a large number of companies, including international, national and regional insurers, mutual companies, specialty insurance companies, so called “off-shore” companies which enjoy certain tax advantages, underwriting agencies and financial services institutions. We also compete with mutual insurance companies, reciprocal and exchange companies which may not have shareholders and may have different profitability targets than publicly or privately owned companies. Chaucer competes with numerous other Lloyd’s syndicates and managing agents, domestic and international insurers and government or government-sponsored insurance or reinsurance mechanisms. In recent years, there has been substantial consolidation and convergence among companies in the financial services industry, resulting in increased competition from large, well-capitalized financial services firms. Many of our competitors have greater financial, technical and operating resources than we do and may be able to offer a wider range of, or more sophisticated, commercial and personal line products. Some of our competitors also have different marketing and sales strategies than we do and market and sell their products to consumers directly. Some companies are seeking to protect new products with patents or other legal protections, which may create new legal exposures or limit our ability to develop competing products. In addition, competition in the U.S. and international property and casualty insurance markets has intensified over the past several years. This competition has had and may continue to have an adverse impact on our revenues and profitability.

A number of new, proposed or potential legislative or industry developments could further increase competition in our industry. These developments include:

• the implementation of commercial lines deregulation in several states;

• programs in which state-sponsored entities provide property insurance in catastrophe-prone areas or other alternative markets types of coverage;

• changes in, or restrictions on, the way independent agents may be compensated by insurance companies;

• increased competition from off-shore tax advantaged insurance companies; and

• changing practices caused by the internet and the increased usage of real time comparative rating tools, which have led to greater competition in the insurance business in general, particularly on the basis of price.

In addition, we could face heightened competition resulting from the entry of new competitors and the introduction of new products by new and existing competitors. Increased competition could make it difficult for us to obtain new customers, retain existing customers or maintain policies in force by existing customers. It could also result in increasing our service, administrative, policy acquisition or general expense due to the need for additional advertising and marketing of our products. In addition, our administrative, technology and management information systems expenditures could increase substantially as we try to maintain or improve our competitive position. We cannot provide assurance that we will be able to maintain a competitive position in the markets in which we operate, or that we will be able to expand our operations into new markets. If we fail to do so, our business could be materially adversely affected.

We are rated by several rating agencies, and changes to our ratings could adversely affect our operations.

Our ratings are important in establishing our competitive position and marketing the products of our insurance companies to our agents and customers, since rating information is broadly disseminated and generally used throughout the industry.

Our insurance company subsidiaries are rated by A.M. Best, Moody’s, and Standard & Poor’s. These ratings reflect a rating agency’s opinion of our insurance subsidiaries’ financial strength, operating performance, strategic position and ability to meet their obligations

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to policyholders. These ratings are not evaluations directed to investors, and are not recommendations to buy, sell or hold our securities. Our ratings are subject to periodic review by the rating agencies and we cannot guarantee the continued retention or improvement of our current ratings. This is particularly true in the current economic environment where rating agencies may increase their capital requirements or other criteria for various rating levels. In addition, Chaucer’s rating is derived from the rating assigned to Lloyd’s, and Chaucer has very limited ability to directly affect the overall Lloyd’s rating.

A downgrade in one or more of our or any of our subsidiaries’ claims-paying ratings could negatively impact our business and competitive position, particularly in lines where customers require us to maintain minimum ratings. Additionally, a downgrade in one or more of our debt ratings could adversely impact our ability to access the capital markets and other sources of funds, increase the cost of current credit facilities, and/or adversely affect pricing of new debt sought in the capital markets in the future.

Negative changes in our level of statutory surplus could adversely affect our ratings and profitability.

The capacity for a U.S. insurance company’s growth in premiums is in part a function of its statutory surplus. Maintaining appropriate levels of statutory surplus, as measured by state insurance regulators, is considered important by state insurance regulatory authorities and by rating agencies that rate insurers’ claims-paying abilities and financial strength. As our business grows, or due to other factors, regulators may require that additional capital be contributed to increase the level of statutory surplus. Failure to maintain certain levels of statutory surplus could result in increased regulatory scrutiny, action by state regulatory authorities or a downgrade by private rating agencies. Our surplus is affected by, among other things, results of operations and investment gains, losses, impairments, and dividends from the insurance operating company to its parent company. A number of these factors affecting our level of statutory surplus are, in turn, influenced by factors that are out of our control, including the frequency and severity of catastrophes, changes in policyholder behavior, changes in rating agency models and economic factors such as changes in equity markets, credit markets, interest rates or foreign currency exchange rates.

The National Association of Insurance Commissioners, or NAIC, uses a system for assessing the adequacy of statutory capital for U.S. property and casualty insurers. The system, known as risk-based capital, is in addition to the states’ fixed dollar minimum capital and other requirements. The system is based on risk-based formulas that apply prescribed factors to the various risk elements in an insurer’s business and investments to report a minimum capital requirement proportional to the amount of risk assumed by the insurer. We believe that any failure to maintain appropriate levels of statutory surplus would have an adverse impact on our ability to grow our business profitably.

We may not be able to grow as quickly or as profitably as we intend, which is important to our current strategy.

Over the past several years, we have made and our current plans are to continue to make, significant investments in our Commercial and Personal Lines of business, and we have increased expenses and made acquisitions in order to, among other things, strengthen our product offerings and service capabilities, expand into new geographic areas, improve technology and our operating models, build expertise in our personnel, and expand our distribution capabilities, with the ultimate goal of achieving significant, sustained growth. The ability to achieve significant profitable premium growth in order to earn adequate returns on such investments and expenses, and to grow further without proportionate increases in expenses, is an important part of our current strategy. There can be no assurance that we will be successful at profitably growing our business, or that we will not alter our current strategy due to changes in our markets or an inability to successfully maintain acceptable margins on new business or for other reasons, in which case premiums written and earned, operating income and net book value could be adversely affected.

An impairment in the carrying value of goodwill and intangible assets could negatively impact our consolidated results of operations and shareholders’ equity.

Upon an acquisition of a business, we record goodwill and intangible assets at fair value. Goodwill and intangible assets determined to have indefinite useful lives are not amortized, while other intangible assets are amortized over their estimated useful lives. Goodwill and intangible assets that are not amortized are reviewed for impairment at least annually. Evaluating the recoverability of such assets requires us to rely on estimates and assumptions related to return on equity, margin, growth rates, discount rates, and other data. There are inherent uncertainties related to these factors, and significant judgment is required in applying these factors. Goodwill and intangible asset impairment charges can result from declines in operating results, divestitures or sustained market declines and other factors. As of December 31, 2013, goodwill and intangible assets represented 12.1% of shareholders’ equity. Although we believe these assets are recoverable, we cannot provide assurance that future market or business conditions would not result in the impairment of a portion of these assets. Impairment charges could materially affect our financial position and our financial results in the quarter or annual period in which they are recognized.

We could be subject to additional losses related to the sale of our Discontinued FAFLIC and variable life insurance and annuity businesses.

On January 2, 2009, we sold our remaining life insurance subsidiary, FAFLIC, to Commonwealth Annuity and Life Insurance Company, a subsidiary of Goldman Sachs. Coincident with the sale transaction, Hanover Insurance and FAFLIC entered into a reinsurance contract whereby Hanover Insurance assumed FAFLIC’s discontinued accident and health insurance business. Goldman Sachs previously purchased, in 2005, our variable life insurance and annuity business.

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In connection with these transactions, we have agreed to indemnify Commonwealth Annuity and Goldman Sachs for certain contingent liabilities, including litigation and other regulatory matters. We have established a reserve related to these contractual indemnifications. Although we believe that this reserve is adequate, we cannot provide assurance that costs related to these indemnifications when they ultimately settle, will not exceed our current reserve.

We may incur financial losses related to our discontinued assumed accident and health reinsurance pools and arrangements.

We previously participated, through FAFLIC, in approximately 40 assumed accident and health reinsurance pools and arrangements. The business was retained in the sale of FAFLIC and assumed by Hanover Insurance through a reinsurance agreement. During 1999, we ceased writing new premiums in this business, subject to certain contractual obligations. The reinsurance pool business consisted primarily of the medical and disability portions of workers’ compensation risks, long-term care pools, assumed personal accident, individual medical, long-term disability and special risk business. We are currently monitoring and managing the run-off of our related participation in the 25 pools with remaining liabilities.

Under these arrangements, we variously acted as a reinsurer, a reinsured or both. In some instances, we ceded significant exposures to other reinsurers in the marketplace. The potential risk to us as a participant in these pools is primarily that other companies that reinsured this business from us may seek to avoid or fail to timely pay their reinsurance obligations (especially in light of the fact that historically these pools sometimes involved multiple layers of overlapping reinsurers, or so-called “spirals”) or may become insolvent. Thus, we are exposed to both assumed losses and to credit risk related to these pools. We are not currently engaged in any significant disputes in respect to this business. At this time, we do not anticipate that any significant portion of recorded reinsurance recoverables will be uncollectible. However, we cannot provide assurance that all recoverables are collectible and should these recoverables prove to be uncollectible, our results of operations and financial position may be negatively affected.

We believe our reserves for the accident and health assumed and ceded reinsurance business appropriately reflect current claims, unreported losses and likely investment returns on related assets supporting these reserves. However, due to the inherent volatility in this business and the reporting lag of losses that tend to develop over time and which ultimately affect excess covers, there can be no assurance that current reserves are adequate or that we will not have additional losses in the future. Although we have discontinued participation in these reinsurance arrangements, unreported claims related to the years in which we were a participant may be reported and previously reported claims may develop unfavorably. If any such unreported claims or unfavorable development is reported to us, our results of operations and financial position may be negatively impacted. In addition, at this time it is unclear what impact the Federal Healthcare Act has on our obligations under the residual healthcare policies which are outstanding, but we may be required to significantly expand benefits without a commensurate ability to increase premiums.

Other market fluctuations and general economic, market and political conditions may also negatively affect our business, profitability and investment portfolio.

It is difficult to predict the impact of a challenging economic environment on our business. In Commercial Lines, a difficult economy has resulted in reductions in demand for insurance products and services as there are more companies ceasing to do business and there are fewer business start-ups, particularly as small businesses are affected by a decline in overall consumer and business spending. Additionally, claims frequency could increase as policyholders submit and pursue claims more aggressively than in the past, fraud incidences may increase, or we may experience higher incidents of abandoned properties or poorer maintenance, which may also result in more claims activity. We have experienced higher workers’ compensation claims as injured employees take longer to return to work, increased surety losses as construction companies experience financial pressures and higher retroactive premium returns as audit results reflect lower payrolls. Our business could also be affected by an ensuing consolidation of independent insurance agencies. Our ability to increase pricing has been impacted as agents and policyholders have been more price sensitive, customers shop for policies more frequently or aggressively, utilize comparative rating models or, in Personal Lines in particular, turn to direct sales channels rather than independent agents. We have also experienced decreased new business premium levels, retention and renewal rates, and renewal premiums. Specifically in Personal Lines, policyholders may reduce coverages or change deductibles to reduce premiums, experience declining home values, or be subject to increased foreclosures, and policyholders may retain older or less expensive automobiles and purchase or insure fewer ancillary items such as boats, trailers and motor homes for which we provide coverages. Additionally, if as a result of a difficult economic environment, drivers continue to eliminate automobile insurance coverage or to reduce their bodily injury limit, we may be exposed to more uninsured and underinsured motorist coverage losses.

Chaucer’s business is similarly subject to risks related to the economy, both in its traditional Lloyd’s business, and its U.K. motor business. In addition to the risks noted above, adverse economic conditions could negatively affect our ability to obtain letters of credit utilized by Chaucer to underwrite business through Lloyd’s.

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At December 31, 2013, we held approximately $8 billion of investment assets in categories such as fixed maturities, cash and short-term investments, equity securities, and other long-term investments. Our investments are primarily concentrated in the U.S. domestic market; however, we have exposure to international markets as well, with approximately 28% of our cash and investment assets invested in foreign markets. Our investment returns, and thus our profitability, statutory surplus and shareholders’ equity, may be adversely affected from time to time by conditions affecting our specific investments and, more generally, by bond, stock, real estate and other market fluctuations and general economic, market and political conditions, including concerns regarding sub-prime and prime mortgages, as well as residential and commercial mortgage-backed or other debt securities, increasing concerns relating to the municipal bond markets and European sovereign debt, and developments that negatively impact our investment in real estate such as increased development costs. Many of these broader market conditions are out of our control. Our ability to make a profit on insurance products depends in part on the returns on investments supporting our obligations under these products, and the value of specific investments may fluctuate substantially depending on the foregoing conditions. We may use a variety of strategies to hedge our exposure to interest and currency rates and other market risks. However, hedging strategies are not always available and carry certain credit risks, and our hedging could be ineffective.

Additionally, the aggregate performance of our investment portfolio depends to a significant extent on the ability of our investment managers to select and manage appropriate investments. As a result, we are also exposed to operational risks which may include, but are not limited to, a failure to follow our investment guidelines, technological and staffing deficiencies and inadequate disaster recovery plans. The failure of these investment managers to perform their services in a manner consistent with our expectations and investment objectives could adversely affect our ability to conduct our business.

Debt securities comprise a material portion of our investment portfolio. The concentration of our investment portfolio in any one type of investment, industry or geography could have a disproportionately adverse effect on our investment portfolio. The issuers of debt securities, as well as borrowers under the loans we make, customers, trading counterparties, counterparties under swaps and other derivative contracts, banks which have commitments under our various borrowing arrangements, and reinsurers, may be affected by declining market conditions or credit weaknesses. These parties may default on their obligations to us due to lack of liquidity, downturns in the economy or real estate values, operational failure, bankruptcy or other reasons. Future increases in interest rates from current near-historic lows could result in increased defaults as borrowers are unable to pay the additional borrowing costs on variable rate securities or obtain refinancing. We cannot assure you that further impairment charges will not be necessary in the future. In addition, evaluation of available-for-sale securities for other-than- temporary impairment includes inherent uncertainty and subjective determinations. We cannot be certain that such impairments are adequate as of any stated date. Our ability to fulfill our debt and other obligations could be adversely affected by the default of third parties on their obligations owed to us.

Deterioration in the global financial markets may adversely affect our investment portfolio and have a related impact on our other comprehensive income, shareholders’ equity and overall investment performance. In recent years, global financial markets experienced unprecedented and challenging conditions, including a tightening in the availability of credit, the failure of several large financial institutions and concerns about the creditworthiness of the sovereign debt of several European and other countries. As a result, certain government bodies and central banks worldwide, including the U.S. Treasury Department and the U.S. Federal Reserve, provided for unprecedented intervention programs, the efficacy of which remain uncertain.

In addition, our current borrowings from the FHLBB are secured by collateral. If the fair value of pledged collateral falls below specific levels, we would be required to pledge additional collateral or repay any outstanding FHLBB borrowings.

Market conditions also affect the value of assets under our employee pension plans, including our U.S. Cash Balance Plan and Chaucer pension plan. The expense or benefit related to our employee pension plans results from several factors, including changes in the market value of plan assets, interest rates, regulatory requirements or judicial interpretation of benefits. For the year ended December 31, 2013, we recognized net expenses of approximately $13 million related to our employee pension plans. At December 31, 2013, our U.S. plan assets included approximately 84% of fixed maturities and 16% of equity securities and other assets. At December 31, 2013, our Chaucer pension plan assets included approximately 74% of equities, 19% of fixed maturities, and 7% of real estate funds. The Chaucer pension plan had net liabilities that exceeded assets by approximately $8 million as of December 31, 2013. Additionally our net liabilities exceed assets by approximately $37 million and $7 million for our U.S. non-qualified and U.S. qualified pension plans, respectively, at December 31, 2013. Declines in the market value of plan assets and interest rates from levels at December 31, 2013, among other factors, could impact our funding estimates and negatively affect our results of operations. Deterioration in market conditions and differences between our assumptions and actual occurrences, and behaviors, including judicial determinations of ultimate benefit obligations pursuant to the Durand case discussed elsewhere, or otherwise, could result in a need to fund more into the qualified plans to maintain an appropriate funding level.

We may experience unrealized losses on our investments, especially during a period of heightened volatility, which could have a material adverse effect on our results of operations or financial condition.

Our investment portfolio and shareholders’ equity can be, and in the past have been, significantly impacted by the changes in the market values of our securities. U.S. and global financial markets and economies remain uncertain. This could result in unrealized and

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realized losses in future periods, and adversely affect the liquidity of our investments, which could have a material adverse impact on our results of operations and our financial position. At December 31, 2013, our financial position is benefited by $219.1 million as a result of unrealized gains, largely driven by the low interest rate environment. Information with respect to interest rate sensitivity is included in “Quantitative and Qualitative Disclosures” in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K. Valuation of financial instruments (i.e. Level 1, 2, or 3) include methodologies, estimates, assumptions and judgments that are subject to different interpretations and could result in changes to investment valuations or the ability to receive such valuations on sale. During periods of market disruption it may be difficult to value certain of our securities if trading becomes less frequent and/or market data becomes less observable. In addition, in times of financial market disruption, certain asset classes that were in active markets with significant observable data may become illiquid. In those cases, the valuation process includes inputs that are less observable and require more subjectivity and judgment by management.

If, following such declines, we are unable to hold our investment assets until they recover in value, or if such asset value never recovers, we would incur other-than-temporary impairments which would be recognized as realized losses in our results of operations, reduce net income and earnings per share and adversely affect our liquidity. Temporary declines in market value are recorded as unrealized losses, which do not affect net income and earnings per share, but reduce other comprehensive income, which is reflected on our Consolidated Balance Sheets. We cannot provide assurance that we will not have additional other-than-temporary impairments and/or unrealized investment losses in the future. Likewise, there can be no assurance that our investment portfolio will retain the net unrealized gains reflected on the balance sheet as of December 31, 2013, since such gains are dependent on prevailing interest rates, credit ratings and creditworthiness and general economic and other factors.

We invest a portion of our portfolio in common stock or preferred stocks. The value of these assets fluctuates with the equity markets. Particularly in times of economic weakness, the market value and liquidity of these assets may decline, and may impact net income, capital and cash flows.

We are exposed to significant capital market risks related to changes in interest rates, credit spreads, equity prices and foreign exchange rates, which may adversely affect our results of operations, financial position or cash flows.

We are exposed to significant capital markets risk related to changes in interest rates, credit spreads, equity prices and foreign currency exchange rates. If significant, declines in equity prices, changes in interest rates, changes in credit spreads and the strengthening or weakening of foreign currencies against the U.S. dollar could have a material adverse effect on our results, financial position or cash flows. Our exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. Our investment portfolio contains interest rate sensitive instruments, such as fixed income securities, which may be adversely affected by changes in interest rates from governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A rise in interest rates would reduce the fair value of our investment portfolio, but provide the opportunity to earn higher rates of return on funds reinvested. A further decline in interest rates, on the other hand, would increase the fair value of our investment portfolio, but we would earn lower rates of return on reinvested assets. We may be forced to liquidate investments prior to maturity at a loss in order to cover liabilities and such liquidation could be accelerated in the event of significant loss events, such as catastrophes. Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our assets relative to our liabilities.

Our fixed income portfolio is invested primarily in high quality, investment-grade securities. However, we also invest in alternative investments such as non-investment-grade high yield fixed income securities. These securities, which pay a higher rate of interest, also have a higher degree of credit or default risk. These securities may also be less liquid in times of economic weakness or market disruptions. Additionally, the reported value of our investments do not necessarily reflect the lowest current market price for the asset, and if we require significant amounts of cash on short notice, we may have difficulty selling our investments in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both. While we have procedures to monitor the credit risk and liquidity of our invested assets, we expect from time to time, and particularly in periods of economic weakness, to experience default losses in our portfolio. This would result in a corresponding reduction of net income, capital and cash flows.

Inflationary pressures may negatively impact expenses, reserves and the value of investments.

Inflationary pressures in the geographies in which we operate may negatively impact reserves and the value of investments. In particular, inflationary pressures in the U.S. with respect to medical and health care, automobile repair and construction costs, all of which are significant components of our indemnity liabilities under policies we issue to our customers, and which could also impact the adequacy of reserves we have set aside for prior accident years, may have a negative effect on our results of operations. Inflationary pressures also cause or contribute to, or are the result of, increases in interest rates, which would reduce the fair value of our investment portfolio.

Our operations may be adversely impacted by foreign currency fluctuations.

Our reporting currency is the U.S. dollar. The functional currencies of our Chaucer segment are the U.S. dollar, U.K. pound sterling and the Canadian dollar. Exchange rate fluctuations relative to the functional currencies may materially impact our financial position.

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Further, our Chaucer segment maintains assets and liabilities in currencies different than its functional currency, which exposes us to changes in currency exchange rates. In addition, locally required capital levels are invested in local currencies in order to satisfy regulatory requirements and to support local insurance operations regardless of currency fluctuations. We attempt to manage our foreign currency exposure through matching of assets and liabilities, as well as through the use of derivatives. Despite our mitigation efforts, exposure to foreign exchange loss could have a material adverse effect on our reported earnings and book value.

We are a holding company and rely on our insurance company subsidiaries for cash flow; we may not be able to receive dividends from our subsidiaries in needed amounts and may be required to provide capital to support their operations.

We are a holding company for a diversified group of insurance companies, and our principal assets are the shares of capital stock of these subsidiaries. Our ability to make required interest payments on our debt, as well as our ability to pay operating expenses and pay dividends to shareholders depends upon the receipt of sufficient funds from our subsidiaries. The payment of dividends by our insurance company subsidiaries is subject to regulatory restrictions and will depend on the surplus and future earnings of these subsidiaries, as well as these regulatory restrictions. We are required to notify insurance regulators prior to paying any dividends from our U.S. insurance subsidiaries and pre-approval is required with respect to “extraordinary dividends”, and distributions from Chaucer are subject to various requirements imposed by Lloyd’s and the PRA and FCA.

Because of the regulatory limitations on the payment of dividends from our insurance company subsidiaries, we may not always be able to receive dividends from these subsidiaries at times and in amounts necessary to meet our debt and other obligations. The inability of our subsidiaries to pay dividends to us in an amount sufficient to meet our debt interest and funding obligations would have a material adverse effect on us. These regulatory dividend restrictions also impede our ability to transfer cash and other capital resources among our subsidiaries.

Similarly, our insurance subsidiaries may require capital from the holding company to support their operations. For example, our holding company has provided a guaranty for the benefit of our Chaucer segment to support the letter of credit agreement supplied to support Chaucer’s Funds at Lloyd’s requirements.

Our dependence on our insurance subsidiaries for cash flow, and their potential need for capital support, exposes us to the risk of changes in their ability to generate sufficient cash inflows from new or existing customers or from increased cash outflows. Cash outflows may result from claims activity, expense payments or investment losses. Because of the nature of our business, claims activity can arise suddenly and in amounts which could outstrip our capital or liquidity resources. Reductions in cash flow or capital demands from our subsidiaries could have a material adverse effect on our business and results of operations.

We may require additional capital or credit in the future, which may not be available or only available on unfavorable terms.

We monitor our capital adequacy on a regular basis. Our future capital and liquidity requirements depend on many factors, including our premiums written, loss reserves and claim payments, investment portfolio composition and risk exposures, the availability of letters and lines of credit, as well as regulatory and rating agency capital requirements. In addition, our capital strength can affect our ratings, and therefore is important to our ability to underwrite. The quality of our claims paying and financial strength ratings are evaluated by independent rating agencies. Such ratings affect our ability to write quality business, our borrowing expenses and our ability to raise capital.

Our Chaucer business is required to satisfy Lloyd’s minimum capital standards. We satisfy Lloyd’s “member deposit funds” requirement (referred to as Funds at Lloyd’s or “FAL”), in part, through a standby letter of credit. If the letters of credit were drawn, we would expect to use a syndicated credit facility to pay such obligation, which would increase our debt borrowings. Our ability to borrow under this facility is conditioned upon the satisfaction of covenants and other requirements contained in the facility. If the syndicated credit facility was not available to repay this letter of credit facility, we would need to obtain capital elsewhere, and face the risk that alternative financing, such as through cash or other borrowings, would not be available at acceptable terms, if at all. In addition, no assurance can be given as to how much business Lloyd’s will permit Chaucer to underwrite in any single year nor as to the viability and cost of the capital structure we may use as a substitute for the external capital and reinsurance currently used by Chaucer.

To the extent that our existing capital is insufficient or unavailable to fund our future operating requirements and/or cover claim losses, we may need to raise additional funds through financings or limit our growth. Any equity or debt financing, if available, may be on terms that are unfavorable to us. In the case of equity financings, dilution to our shareholders could result and, in any case, such securities may have rights, preferences, and privileges that are senior to our common stock. If we are not able to obtain additional capital as necessary, our business, results of operations and financial condition could be adversely affected.

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Errors or omissions in connection with the administration of any of our products may cause our business and profitability to be negatively impacted.

We are responsible to our policyholders for administering their policies, premiums and claims and ensuring that appropriate records are maintained which reflect their transactions. We are subject to risks that errors or omissions of information occurred with respect to the administration of our products. As a result, we are subject to risks of liabilities associated with “bad faith”, unfair claims practices, unfair trade practices or similar allegations. Such risks may stem from allegations of agents, vendors, policyholders, claimants, members of Lloyd’s syndicates, reinsurers, regulators, states’ attorneys general, Lloyd’s, the PRA and FCA, or other international regulators, or others. We may incur charges associated with any errors and omissions previously made or which are made in future periods. These charges may result from our obligation to policyholders to correct any errors or omissions or refund premiums, non-compliance with regulatory requirements, from fines imposed by regulatory authorities, or from other items, which may affect our financial position or results of operations.

We are subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar worldwide anti-bribery laws, which impose restrictions and may carry substantial penalties. Violations of these laws or allegations of such violations could cause a material adverse effect on our business, financial position and results of operations.

The U.S. Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions, including anti-bribery legislation in the U.K. that took effect in 2011, generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage. Our Company policies mandate compliance with these anti-bribery laws, which often carry substantial penalties. We cannot assure you that our internal control policies and procedures always will protect us from reckless or other inappropriate acts committed by our affiliates, employees, agents or coverholders. Violations of these laws, or allegations of such violations, could have a material adverse effect on our business, financial position and results of operations.

We may experience difficulties with technology, data security and/or outsourcing relationships, which could have a negative impact on our ability to conduct our business.

We use computer systems to store, retrieve, evaluate and utilize customer and company data and information. Our computer, information technology and telecommunications systems, in turn, interface with and rely upon third-party systems. Our business is highly dependent on our ability, and the ability of certain third parties, to access these systems to perform necessary business functions, including, without limitation, providing insurance quotes, processing premium payments, making changes to existing policies, filing and paying claims, providing customer support and managing our investment portfolios. Systems failures or outages could compromise our ability to perform these functions in a timely manner, which could harm our ability to conduct business and hurt our relationships with our business partners and customers. In the event of a disaster such as a natural catastrophe, an industrial accident, a blackout, a computer virus, a terrorist attack or war, or interference from solar flares, our systems may be inaccessible to our employees, customers or business partners for an extended period of time. Even if our employees are able to report to work, they may be unable to perform their duties for an extended period of time if our data or systems are disabled or destroyed. This could result in a materially adverse effect on our business results and liquidity.

Our systems, like others in the financial services industry, are potentially vulnerable to cyber security risks, and we are subject to potential disruption caused by such activities. Large corporations such as ours are subject to near daily attacks on their systems. Such attacks may have various goals, from seeking confidential information to causing operational disruption. Although to date such activities have not resulted in material disruptions to our operations or, to our knowledge, breach of any security or confidential information, no assurance can be provided that such disruptions or breach will not occur in the future.

Additionally, we could be subject to liability if confidential customer information is misappropriated from our computer systems, those of our vendors or others with whom we do business, or otherwise. Despite whatever security measures may be in place, any such systems may be vulnerable to physical break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. Any well-publicized compromise of security could deter people from entering into transactions that involve transmitting confidential information, which could have a material adverse effect on our business.

We outsource certain technology and business process functions to third parties and may do so increasingly in the future. If we do not effectively develop, implement and monitor our outsourcing strategy, third party providers do not perform as anticipated or we experience technological or other problems with a transition, we may not realize productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and a loss of business. Our outsourcing of certain technology and business process functions to third parties may expose us to enhanced risk related to data security, which could result in monetary and reputational damages. In addition, our ability to receive services from third party providers outside of the United States might be impacted by cultural differences, political instability, unanticipated regulatory requirements or policies inside or outside of the United States. As a result, our ability to conduct our business might be adversely affected.

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ITEM 1B–UNRESOLVED STAFF COMMENTS

None.

ITEM 2–PROPERTIES

We own our headquarters, located at 440 Lincoln Street, Worcester, Massachusetts, with approximately 919,000 square feet.

We also own office space located in a three-building complex located at 808 North Highlander Way, Howell, Michigan, with approximately 176,000 square feet, where various business operations are conducted, and office space located at Thanet Way, Whitstable, United Kingdom, with approximately 40,000 square feet, where we operate our U.K. motor line of business. In 2013, we consolidated the business operations in Howell, Michigan. Accordingly, approximately 108,000 square feet of owned office space located at 645 W. Grand River in Howell, Michigan is no longer required for our business operations. Certain of our properties have been leased to unrelated third parties or are available for lease.

We lease office space located at 30 Fenchurch Street, London, United Kingdom. We also lease offices throughout the United States and in select locations worldwide for branch sales, underwriting and claims processing functions, and the operations of acquired subsidiaries.

We believe that our facilities are adequate for our present needs in all material respects.

ITEM 3–LEGAL PROCEEDINGS

Reference is made to the litigation matter captioned “Durand Litigation” under “Commitments and Contingencies – Legal Proceedings” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

ITEM 4–MINE SAFTEY DISCLOSURES

Not applicable.

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PART II

ITEM 5–MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK AND STOCKHOLDER OWNERSHIP

Our common stock is traded on the New York Stock Exchange under the symbol “THG”. On February 20, 2014, we had approximately 21,896 shareholders of record and 43,882,063 shares outstanding. On the same date, the trading price of our common stock was $58.24 per share.

COMMON STOCK PRICES

The following tables set forth the high and low closing sales prices of our common stock for the periods indicated:

	High (1)		Low (1)
2013
First Quarter	$	49.68	$	39.19
Second Quarter	$	51.66	$	46.73
Third Quarter	$	56.06	$	48.67
Fourth Quarter	$	60.99	$	54.83
2012
First Quarter	$	41.52	$	34.27
Second Quarter	$	41.04	$	37.17
Third Quarter	$	39.69	$	33.99
Fourth Quarter	$	39.51	$	34.58

(1) Common stock prices were obtained from a third party service provider.

DIVIDENDS

The Board of Directors declared dividends in 2013 and 2012 as follows:

	2013		2012
	Per Share		Per Share
	Amount		Amount
First Quarter	$	0.33	$	0.30
Second Quarter	$	0.33	$	0.30
Third Quarter	$	0.33	$	0.30
Fourth Quarter	$	0.37	$	0.33

We currently expect that comparable cash dividends will be paid in the future; however, the payment of future dividends on our common stock will be determined by the Board of Directors from time to time based upon cash available at our holding company, our results of operations and financial condition and such other factors as the Board of Directors considers relevant.

Dividends to shareholders may be funded from dividends paid to us from our subsidiaries. Dividends from insurance subsidiaries are subject to restrictions imposed by state insurance laws and regulations and for our foreign subsidiaries, to restrictions imposed by the Prudential Regulation Authority and Lloyd’s. See “Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 13 – “Dividend Restrictions” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

ISSUER PURCHASES OF EQUITY SECURITIES

The Board of Directors has authorized a stock repurchase program which provides for aggregate repurchases of up to $600 million, including a $100 million increase in the program in May 2013. Under the repurchase authorizations, we may repurchase our common stock from time to time, in amounts and prices and at such times as deemed appropriate, subject to market conditions and other considerations. Our repurchases may be executed using open market purchases, privately negotiated transactions, accelerated repurchase programs or other transactions. We are not required to purchase any specific number of shares or to make purchases by any certain date under this program. Total repurchases under this program as of December 31, 2013 were 10.7 million shares at a cost of $463.0 million.

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Shares purchased in the fourth quarter of 2013 are as follows:

					Total Number of		Approximate Dollar Value of
					Shares Purchased as		Shares That May Yet
					Part of Publicly		be Purchased Under the
PERIOD	Total Number of		Average Price		Announced Plans or		Plans or Programs
	Shares Purchased		Paid per Share		Programs		(in millions)
October 1 – 31, 2013		1,021	$	56.10		—	$	137
November 1 – 30, 2013		27,024		59.32		—		137
December 1 – 31, 2013		820		56.45		—		137
Total		28,865	$	59.12		—	$	137

The total number of shares purchased reflects shares withheld to satisfy tax withholding amounts due from employees related to the receipt of stock which resulted from the exercise or vesting of equity awards.

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ITEM 6 - SELECTED FINANCIAL DATA

FIVE YEAR SUMMARY OF SELECTED FINANCIAL HIGHLIGHTS⁽¹⁾

YEARS ENDED DECEMBER 31	2013		2012			2011			2010		2009
(in millions, except per share data)
Statements of Income
Revenues
Premiums	$	4,450.5	$	4,239.1		$	3,598.6		$	2,841.0	$	2,546.4
Net investment income		269.0		276.6			258.2			247.2		252.1
Net realized investment gains		33.5		23.6			28.1			29.7		1.4
Fees and other income		40.7		51.4			46.7			34.3		34.2
Total revenues		4,793.7		4,590.7			3,931.6			3,152.2		2,834.1
Losses and Expenses
Losses and loss adjustment expenses		2,761.1		2,974.4			2,550.8			1,856.3		1,639.2
Amortization of deferred acquisition costs		971.0		938.1			778.9			600.8		524.3
Net loss (gain) from repayment of debt		27.7		5.1			2.3			2.0		(34.5	)
Other operating expenses		704.8		644.4			578.0			487.5		439.8
Total losses and expenses		4,464.6		4,562.0			3,910.0			2,946.6		2,568.8
Income before income taxes		329.1		28.7			21.6			205.6		265.3
Income tax expense (benefit)		83.4		(17.4	)		(9.9	)		56.0		81.2
Income from continuing operations		245.7		46.1			31.5			149.6		184.1
Discontinued operations		5.3		9.8			5.2			1.6		9.4
Net income	$	251.0	$	55.9		$	36.7		$	151.2	$	193.5
Net income per common share (diluted)	$	5.59	$	1.23		$	0.80		$	3.27	$	3.79
Dividends declared per common share	$	1.36	$	1.23		$	1.13		$	1.00	$	0.75
Balance Sheets (at December 31)
Total assets	$	13,378.7	$	13,484.9		$	12,598.6		$	8,546.8	$	8,023.2
Debt		903.9		849.4			911.1			605.9		433.9
Total liabilities		10,784.2		10,889.5			10,114.6			6,109.4		5,684.1
Shareholders’ equity		2,594.5		2,595.4			2,484.0			2,437.4		2,339.1

(1) Includes results of Chaucer Holdings plc since the July 1, 2011 acquisition date.

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ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TABLE OF CONTENTS

Introduction	44
Executive Overview	44
Description of Operating Segments	45
Results of Operations - Consolidated	46
Results of Operations - Segments	47
Investments	65
Other Items	71
Quantitative and Qualitative Disclosures about Market Risk	72
Discontinued Operations	74
Income Taxes	74
Critical Accounting Estimates	75
Statutory Surplus of U.S. Insurance Subsidiaries	80
Lloyd’s Capital Requirement	80
Liquidity and Capital Resources	81
Off-Balance Sheet Arrangements	84
Contingencies and Regulatory Matters	84
Rating Agencies	85
Risks and Forward-Looking Statements	85
Glossary of Selected Insurance Terms	85

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INTRODUCTION

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist readers in understanding the consolidated results of operations and financial condition of The Hanover Insurance Group, Inc. and its subsidiaries (“THG”). Consolidated results of operations and financial condition are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). This discussion should be read in conjunction with the Consolidated Financial Statements and related footnotes included elsewhere herein.

Results of operations include the accounts of The Hanover Insurance Company (“Hanover Insurance”) and Citizens Insurance Company of America (“Citizens”), our principal U.S. domiciled property and casualty companies; Chaucer Holdings plc (“Chaucer”), our United Kingdom (U.K.) domiciled specialist insurance underwriting group which operates through the Society and Corporation of Lloyd’s (“Lloyd’s”); and certain other insurance and non-insurance subsidiaries. The acquisition of Chaucer on July 1, 2011, which has added meaningful business volumes to our results, has affected the comparability of our results of operations for the years ended December 31, 2013, 2012 and 2011. Results of operations for the years ended December 31, 2013 and 2012 include results from all of our business segments, while results of operations for the year ended December 31, 2011 include Chaucer’s results for only the period from July 1, 2011 through December 31, 2011. Additionally, results of operations include our discontinued operations, consisting primarily of our former life insurance businesses, accident and health business and prior to April 30, 2012, our third party administration business.

EXECUTIVE OVERVIEW

Business operations consist of four operating segments: Commercial Lines, Personal Lines, Chaucer and Other.

Operating income (formally referred to as segment income) before interest expense and income taxes was $393.4 million in 2013 compared to $75.1 million in 2012, an increase of $318.3. This increase was primarily due to lower catastrophe and non-catastrophe related losses, and higher favorable development on prior years’ loss and loss adjustment expense (“LAE”) reserves (“prior years’ loss reserves”). Pre-tax catastrophe losses were $140.0 million, compared to $369.9 million during 2012. Catastrophe losses in 2012 were primarily the result of $198.1 million of pre-tax losses related to Superstorm Sandy during the fourth quarter, and from several tornadoes during the first six months of the year. There was favorable development on prior years’ loss reserves of $76.3 million in 2013, compared to $15.8 million in 2012.

Over recent years, weather-related catastrophe and non-catastrophe losses have been in excess of longer term averages. Pricing in our Commercial and Personal Lines remained strong throughout 2013 as the industry continues to respond to these increased weather-related losses, as well as to the earnings impact of reduced investment income as a result of low interest rates, and other factors. We are continuing efforts to improve our underwriting results in both our Commercial and Personal Lines, through rate increases and improvements to our mix of business.

Commercial Lines

We believe our unique approach to the small commercial market, distinctiveness in the middle market, and continued development of specialty lines provides us with a diversified portfolio of products and delivers significant value to agents and policyholders. The small commercial and middle market businesses are expected to contribute to premium growth in Commercial Lines over the next several years as we continue to pursue our core strategy of developing strong partnerships with agents, distinctive products, franchise value through limited distribution, and industry segmentation. Growth in our specialty lines continues to be an important part of our strategy, with the expansion of our product offerings in these lines supported by acquisitions of specialized business over the past several years.

We believe these efforts have driven, and will continue to drive, improvement in our overall mix of business and ultimately our underwriting profitability. Commercial Lines net premiums written grew by 5.5% in 2013, driven by our core commercial businesses. This growth is primarily due to rate increases, strong retention and targeted new business expansion.

Underwriting results improved in 2013, as compared to 2012, primarily due to lower catastrophe losses, improved non-catastrophe current accident year results and lower unfavorable development on prior years’ loss reserves. The competitive nature of the Commercial Lines market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins and we continue to seek rate increases across our lines of business.

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Personal Lines

Personal Lines focuses on partnering with high quality, value-oriented agencies that deliver consultative selling and stress the importance of account rounding (the conversion of single policy customers to accounts with multiple policies and additional coverages). Approximately 75% of our policies in force are account business. We are focused on making investments that help maintain profitability, build a distinctive position in the market, help diversify us geographically from our historical core states of Michigan, Massachusetts, New York and New Jersey, and provide us with profitable growth opportunities.

Underwriting results improved in 2013, as compared to 2012, primarily due to lower catastrophe losses, improved non-catastrophe current accident year results and lower net unfavorable development on prior years’ loss reserves. We continue to seek additional rate increases, subject to regulatory and competitive considerations, in our personal automobile line, particularly as a result of recent trends of higher loss severity in bodily injury and personal injury protection claims. We also continue to seek rate increases in our homeowners lines as a result of the catastrophe and non-catastrophe weather-related losses that the industry experienced in the past several years.

Chaucer

Chaucer deploys specialist underwriters in over 30 major insurance and reinsurance classes, including energy, marine and aviation, U.K. motor, property, and casualty and other coverages. We obtain business through Lloyd’s, the leading international insurance and reinsurance market, which provides us with access to specialist business in over 200 countries and territories worldwide through its international licenses, brand reputation and strong security rating. Our underwriting strength, diverse portfolio and Lloyd’s membership underpin our ability to actively manage the scale, composition and profitable development of this business.

Underwriting results improved in 2013, as compared to 2012, primarily due to higher favorable development on prior years’ loss reserves and lower catastrophe losses, partially offset by higher non-catastrophe losses. Favorable development on prior years’ loss reserves during 2013 was $94.6 million, compared to $72.6 million during 2012, a change of $22.0 million. Chaucer net premiums written grew by 12.8% in 2013, primarily due to an increase in Chaucer’s economic interests in Syndicate 1084 to 98% for 2013, up from 84% in 2012. While we benefited from favorable rates in certain catastrophe-exposed marine and property lines following high levels of insured market losses in recent years, we experienced overall downward pressure on rates throughout 2013 because of new capital inflows and an absence of major market losses in the current year. Rates in the energy market remained under pressure throughout 2013 due to a continued absence of major market losses. Also, net premiums written in our energy line were lower due to a reduction of estimated premiums for both the exploration and production coverage class and the construction coverage class. The aviation and casualty markets continued to remain soft as a result of low loss activity and industry excess capacity. U.K. motor market rates continued their modest decline, following the significant increases in 2010 and 2011. In response, we continue to actively manage Chaucer’s underwriting portfolio, using our expertise, distinctive underwriting capabilities and market knowledge to target specific attractive underwriting opportunities despite an uncertain international Lloyd’s market environment.

DESCRIPTION OF OPERATING SEGMENTS

Primary business operations include insurance products and services currently provided through four operating segments. Our domestic operating segments are Commercial Lines, Personal Lines, and Other. Our international operating segment is Chaucer. Commercial Lines includes commercial multiple peril, commercial automobile, workers’ compensation and other commercial coverages, such as specialty program business, inland marine, management and professional liability and surety. Personal Lines includes personal automobile, homeowners and other personal coverages. Chaucer includes marine and aviation, energy, property, U.K. motor, and casualty and other coverages (which includes international liability, specialist coverages, and syndicate participations). Included in Other are Opus Investment Management, Inc., which markets investment management services to institutions, pension funds and other organizations; earnings on holding company assets; and, a voluntary pools business which is in run-off. We present the separate financial information of each segment consistent with the manner in which our chief operating decision maker evaluates results in deciding how to allocate resources and in assessing performance.

We report interest expense on debt separately from the earnings of our operating segments. This consists of interest on our senior debentures, subordinated debentures, collateralized borrowings with the Federal Home Loan Bank of Boston (“FHLBB”), and letter of credit facility.

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RESULTS OF OPERATIONS – CONSOLIDATED

2013 Compared to 2012

Consolidated net income was $251.0 million in 2013, compared to $55.9 million in 2012. The $195.1 million increase is primarily due to improved operating results after taxes, which was principally attributable to a decrease in catastrophe losses, higher favorable development on prior years’ loss reserves and an improvement in non-catastrophe current accident year results. In addition, net income increased in 2013 as a result of higher realized gains from the sale of securities, partially offset by losses resulting from the repayment of debt.

2012 Compared to 2011

Consolidated net income was $55.9 million in 2012, compared to $36.7 million in 2011. The $19.2 million increase is primarily due to income from our Chaucer segment and lower costs in 2012 related to the Chaucer acquisition. Additionally, we recognized a $10.8 million gain from the sale of our third party administration business, Citizens Management, Inc. (“CMI”), which was completed on April 30, 2012 (see also “Discontinued Operations”). These increases were partially offset by a decrease in operating results in our domestic operations.

In addition to consolidated net income, we assess our financial performance based upon pre-tax “operating income (loss),” and we assess the operating performance of each of our four operating segments based upon the pre-tax operating income (loss) generated by each segment. We formerly referred to these pre-tax measures as “segment income (loss).” Operating income (loss) before taxes excludes interest expense on debt and certain other items which we believe are not indicative of our core operations, such as net realized investment gains and losses (including net gains and losses on certain derivative instruments). Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income (loss) before taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income (loss) before taxes may be important components in understanding and assessing our overall financial performance, we believe a discussion of operating income before taxes enhances an investor’s understanding of our results of operations by segregating income attributable to the core operations of the business. However, operating income (loss) before taxes should not be construed as a substitute for income (loss) before income taxes and operating income (loss) should not be construed as a substitute for net income (loss).

Catastrophe losses and prior years’ reserve development are significant components in understanding and assessing the financial performance of our business. Management reviews and evaluates catastrophes and prior years’ reserve development separately from the other components of earnings. Catastrophes and prior years’ reserve development are not predictable as to timing or the amount that will affect the results of our operations and have affected our results in the past few years. Management believes that providing certain financial metrics and trends excluding the effects of catastrophes and prior years’ reserve development helps investors to understand the variability in periodic earnings and to evaluate the underlying performance of our operations.

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The following table reflects operating income and a reconciliation of total operating income to consolidated net income.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Operating income (loss) before interest expense and income taxes:
Commercial Lines	$	132.4		$	(80.3	)	$	16.3
Personal Lines		118.6			25.5			23.1
Chaucer		150.4			136.8			32.9
Other		(8.0	)		(6.9	)		(0.5	)
Operating income before interest expense and income taxes		393.4			75.1			71.8
Interest expense on debt		(65.3	)		(61.9	)		(55.0	)
Operating income before income taxes		328.1			13.2			16.8
Income tax benefit (expense) on operating income		(100.9	)		1.9			(2.6	)
Net realized investment gains		33.5			23.6			28.1
Loss on real estate		(4.7	)		—			—
Net loss from repayment of debt		(27.7	)		(5.1	)		(2.3	)
Net costs related to acquired businesses		(0.1	)		(2.6	)		(16.4	)
Loss on derivative instruments		—			—			(11.3	)
Net foreign exchange gains (losses)		—			(0.4	)		6.7
Income tax benefit on non-operating items		17.5			15.5			12.5
Income from continuing operations, net of taxes		245.7			46.1			31.5
Net gain from discontinued operations, net of taxes		5.3			9.8			5.2
Net income	$	251.0		$	55.9		$	36.7

RESULTS OF OPERATIONS - SEGMENTS

The following is our discussion and analysis of the results of operations by business segment. The operating results are presented before interest expense, taxes and other items which management believes are not indicative of our core operations, including realized gains and losses. Results for Chaucer include activity since the July 1, 2011 acquisition.

The following table summarizes the results of operations for the periods indicated:

YEARS ENDED DECEMBER 31	2013		2012		2011
(in millions)
Operating revenues
Net premiums written	$	4,552.7	$	4,368.4	$	3,593.4
Net premiums earned		4,450.5		4,239.1		3,598.6
Net investment income		269.0		276.3		258.2
Other income		40.7		58.2		51.9
Total operating revenues		4,760.2		4,573.6		3,908.7
Losses and operating expenses
Losses and LAE		2,761.1		2,974.4		2,550.8
Amortization of deferred acquisition costs		971.0		938.1		778.9
Other operating expenses		634.7		586.0		507.2
Total losses and operating expenses		4,366.8		4,498.5		3,836.9
Operating income before interest expense and income taxes	$	393.4	$	75.1	$	71.8

2013 Compared to 2012

Operating income before interest expense and income taxes was $393.4 million for the year ended December 31, 2013, compared to $75.1 million for the year ended December 31, 2012, an increase of $318.3 million reflecting improvements in each of our insurance segments. This increase in operating income is primarily due to lower catastrophe and non-catastrophe related losses and higher favorable development.

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Our consolidated catastrophe related activity for the year ended December 31, 2013 was $140.0 million, compared to $369.9 million for the year ended December 31, 2012, a decrease of $229.9 million. Our 2012 catastrophe losses included $198.1 million of pre-tax losses related to Superstorm Sandy.

Favorable development on prior years’ loss reserves was $76.3 million for the year ended December 31, 2013, compared to $15.8 million for the year ended December 31, 2012, an increase of $60.5 million. For 2013, $94.6 million of favorable development related to our Chaucer segment was partially offset by $18.3 million of unfavorable development related to our domestic operations. For the year ended December 31, 2012, $72.6 million of favorable development related to our Chaucer segment was partially offset by $56.8 million of unfavorable development related to our domestic operations.

Net premiums written grew by $184.3 million for the year ended December 31, 2013, compared to the year ended December 31, 2012, and net premiums earned grew by $211.4 million. Chaucer accounted for $127.0 million of the net premiums written increase and $71.1 million of the net premiums earned increase, primarily due to the aforementioned increase in Chaucer’s economic interests in Syndicate 1084. Additionally, growth in our core commercial businesses, resulting from rate increases, strong retention and targeted new business expansion, was partially offset by a decrease in our Personal Lines net premiums written.

2012 Compared to 2011

Operating income before interest expense and income taxes was $75.1 million for the year ended December 31, 2012, compared to $71.8 million for the year ended December 31, 2011, an increase in earnings of $3.3 million. This increase is primarily due to a $103.9 million increase in Chaucer operating income, reflecting a full year of earnings for Chaucer compared to only six months in 2011 and lower loss activity in most Chaucer product classes, partially offset by a $96.6 million decrease in Commercial Lines earnings. The Commercial Lines earnings decrease was primarily due to unfavorable development on prior years’ loss reserves and increased catastrophe losses.

Our consolidated catastrophe related activity for the year ended December 31, 2012 was $369.9 million, compared to $361.6 million for the year ended December 31, 2011, an increase of $8.3 million. Both our 2012 and 2011 results reflected significantly elevated levels of catastrophe losses compared to our historical averages. Catastrophe losses in 2012 were primarily the result of $198.1 million of pre-tax losses related to Superstorm Sandy during the fourth quarter, and from several tornadoes during the first six months of the year. Our 2011 catastrophe losses resulted principally from winter storms, tornado, hail and windstorm activity in the first half of the year, and from Hurricane Irene and floods in Thailand and Denmark during the second half of the year.

Favorable development on prior years’ loss reserves was $15.8 million for the year ended December 31, 2012, compared to $103.3 million for the year ended December 31, 2011, a decrease of $87.5 million. For 2012, $72.6 million of favorable development related to our Chaucer segment was partially offset by $56.8 million of unfavorable development related to our domestic operations. For the year ended December 31, 2011, $67.8 million of favorable development was related to our domestic operations and $35.5 million was related to our Chaucer segment.

Net premiums written grew by $775.0 million for the year ended December 31, 2012, compared to the year ended December 31, 2011, and net premiums earned grew by $640.5 million, in each case primarily as a result of including a full year of Chaucer’s net premiums in 2012 compared to only six months in 2011. Chaucer accounted for $561.7 million of the net premiums written increase and $460.5 million of the net premiums earned increase. The balance of the growth is primarily attributable to Commercial Lines, resulting from rate increases, strong retention and targeted new business expansion.

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PRODUCTION AND UNDERWRITING RESULTS

The following table summarizes premiums written on a gross and net basis, net premiums earned and loss, LAE, expense and combined ratios for the Commercial Lines, Personal Lines and Chaucer segments. Loss, LAE, catastrophe loss and combined ratios shown below include prior year reserve development. These items are not meaningful for our Other segment.

	YEAR ENDED DECEMBER 31, 2013
	Gross
	Premiums		Net Premiums		Net Premiums		Catastrophe		Loss & LAE		Expense		Combined
(dollars in millions)	Written		Written		Earned		Loss Ratios		Ratios		Ratios		Ratios
Commercial Lines	$	2,295.9	$	2,007.2	$	1,958.4		2.0		62.4		38.0		100.4
Personal Lines		1,531.6		1,428.0		1,454.2		4.6		68.8		27.9		96.7
Chaucer		1,374.2		1,117.5		1,037.9		3.3		51.8		37.8		89.6
Total	$	5,201.7	$	4,552.7	$	4,450.5		3.1		62.0		34.7		96.7
	YEAR ENDED DECEMBER 31, 2012
	Gross
	Premiums		Net Premiums		Net Premiums		Catastrophe		Loss & LAE		Expense		Combined
(dollars in millions)	Written		Written		Earned		Loss Ratios		Ratios		Ratios		Ratios
Commercial Lines	$	2,182.4	$	1,902.0	$	1,811.5		10.7		74.5		37.7		112.2
Personal Lines		1,611.7		1,475.6		1,459.9		9.2		76.5		27.3		103.8
Chaucer		1,409.8		990.5		966.8		4.3		52.4		37.9		90.3
Total	$	5,203.9	$	4,368.1	$	4,238.2		8.7		70.2		34.2		104.4
	YEAR ENDED DECEMBER 31, 2011
	Gross
	Premiums		Net Premiums		Net Premiums		Catastrophe		Loss & LAE		Expense		Combined
(dollars in millions)	Written		Written		Earned		Loss Ratios		Ratios		Ratios		Ratios
Commercial Lines	$	1,938.0	$	1,703.1	$	1,641.7		9.0		68.2		39.0		107.2
Personal Lines		1,561.3		1,461.2		1,450.5		11.3		77.1		27.1		104.2
Chaucer		559.6		428.8		506.3		9.8		61.9		35.7		97.6
Total	$	4,058.9	$	3,593.1	$	3,598.5		10.0		70.8		33.9		104.7

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The following table summarizes net premiums written, and loss and LAE and catastrophe loss ratios by line of business for the Commercial Lines and Personal Lines segments. Loss and LAE and catastrophe loss ratios include prior year reserve development.

	YEAR ENDED DECEMBER 31, 2013
	Net				Catastrophe
	Premiums		Loss & LAE		Loss
(dollars in millions)	Written		Ratios		Ratios
Commercial Lines:
Commercial multiple peril	$	651.7		57.4		4.6
Commercial automobile		304.7		74.4		0.2
Workers’ compensation		229.6		62.1		—
Other commercial		821.2		62.1		1.1
Total Commercial Lines		2,007.2		62.4		2.0
Personal Lines:
Personal automobile		890.3		75.9		0.4
Homeowners		496.7		58.0		12.0
Other personal		41.0		43.7		5.0
Total Personal Lines		1,428.0		68.8		4.6
Total	$	3,435.2		65.1		3.1
	YEAR ENDED DECEMBER 31, 2012
	Net				Catastrophe
	Premiums		Loss & LAE		Loss
(dollars in millions)	Written		Ratios		Ratios
Commercial Lines:
Commercial multiple peril	$	612.9		72.9		19.2
Commercial automobile		276.5		79.0		3.7
Workers’ compensation		201.4		69.9		—
Other commercial		811.2		75.2		9.3
Total Commercial Lines		1,902.0		74.5		10.7
Personal Lines:
Personal automobile		922.7		79.6		2.3
Homeowners		510.2		73.3		21.8
Other personal		42.7		48.4		7.7
Total Personal Lines		1,475.6		76.5		9.2
Total	$	3,377.6		75.4		10.0
	YEAR ENDED DECEMBER 31, 2011
	Net				Catastrophe
	Premiums		Loss & LAE		Loss
(dollars in millions)	Written		Ratios		Ratios
Commercial Lines:
Commercial multiple peril	$	569.5		74.6		19.3
Commercial automobile		248.9		65.1		1.0
Workers’ compensation		174.5		65.9		—
Other commercial		710.2		64.4		5.7
Total Commercial Lines		1,703.1		68.2		9.0
Personal Lines:
Personal automobile		910.5		72.5		1.3
Homeowners		507.2		88.1		30.0
Other personal		43.5		50.2		7.9
Total Personal Lines		1,461.2		77.1		11.3
Total	$	3,164.3		72.4		10.1

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The following table summarizes premiums written on a gross and net basis and net premiums earned by line of business for the Chaucer segment.

	YEAR ENDED DECEMBER 31, 2013
	Gross Premiums		Net Premiums		Net Premiums
(in millions)	Written		Written		Earned
Chaucer:
Marine and aviation	$	348.0	$	277.1	$	250.0
U.K. motor		319.4		300.5		284.2
Property		254.6		191.9		183.6
Energy		233.3		174.2		169.6
Casualty and other		218.9		173.8		150.5
Total Chaucer	$	1,374.2	$	1,117.5	$	1,037.9
	YEAR ENDED DECEMBER 31, 2012
	Gross Premiums		Net Premiums		Net Premiums
(in millions)	Written		Written		Earned
Chaucer:
Marine and aviation	$	338.9	$	234.3	$	227.2
U.K. motor		311.6		259.8		247.0
Property		248.6		161.3		180.9
Energy		303.8		195.1		181.8
Casualty and other		206.9		140.0		129.9
Total Chaucer	$	1,409.8	$	990.5	$	966.8
	PERIOD JULY 1, 2011 (DATE OF ACQUISITION) TO DECEMBER 31, 2011
	Gross Premiums		Net Premiums		Net Premiums
(in millions)	Written		Written		Earned
Chaucer:
Marine and aviation	$	140.0	$	107.4	$	119.0
U.K. motor		139.8		121.8		124.4
Property		94.8		72.8		121.7
Energy		97.2		66.7		82.6
Casualty and other		87.8		60.1		58.6
Total Chaucer	$	559.6	$	428.8	$	506.3

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The following table summarizes GAAP underwriting results for the Commercial Lines, Personal Lines, Chaucer and Other segments and reconciles it to operating income.

	YEAR ENDED DECEMBER 31, 2013
	Commercial			Personal
(in millions)	Lines			Lines			Chaucer			Other			Total
GAAP underwriting profit (loss), excluding prior year reserve development and catastrophes	$	31.0		$	118.2		$	47.5		$	(2.1	)	$	194.6
Prior year favorable (unfavorable) loss and LAE reserve development		(3.3	)		(13.7	)		94.6			(1.3	)		76.3
Pre-tax catastrophe effect		(38.7	)		(66.9	)		(34.4	)		—			(140.0	)
GAAP underwriting profit (loss)		(11.0	)		37.6			107.7			(3.4	)		130.9
Net investment income		143.5			75.8			42.7			7.0			269.0
Fees and other income		7.6			12.5			17.6			3.0			40.7
Other operating expenses		(7.7	)		(7.3	)		(17.6	)		(14.6	)		(47.2	)
Operating income (loss) before interest expense and income taxes	$	132.4		$	118.6		$	150.4		$	(8.0	)	$	393.4
	YEAR ENDED DECEMBER 31, 2012
	Commercial			Personal
(in millions)	Lines			Lines			Chaucer			Other			Total
GAAP underwriting profit (loss), excluding prior year reserve development and catastrophes	$	(1.8	)	$	94.0		$	62.6		$	(2.2	)	$	152.6
Prior year favorable (unfavorable) loss and LAE reserve development		(29.0	)		(26.5	)		72.6			(1.3	)		15.8
Pre-tax catastrophe effect		(193.4	)		(134.8	)		(41.7	)		—			(369.9	)
GAAP underwriting profit (loss)		(224.2	)		(67.3	)		93.5			(3.5	)		(201.5	)
Net investment income		142.4			86.5			40.2			7.2			276.3
Fees and other income		12.3			13.6			23.0			9.3			58.2
Other operating expenses		(10.8	)		(7.3	)		(19.9	)		(19.9	)		(57.9	)
Operating income (loss) before interest expense and income taxes	$	(80.3	)	$	25.5		$	136.8		$	(6.9	)	$	75.1
	YEAR ENDED DECEMBER 31, 2011
	Commercial			Personal
(in millions)	Lines			Lines			Chaucer			Other			Total
GAAP underwriting profit (loss), excluding prior year reserve development and catastrophes	$	(9.3	)	$	58.1		$	25.9		$	(0.4	)	$	74.3
Prior year favorable (unfavorable) loss and LAE reserve development		34.7			33.0			35.5			0.1			103.3
Pre-tax catastrophe effect		(148.4	)		(163.7	)		(49.5	)		—			(361.6	)
GAAP underwriting profit (loss)		(123.0	)		(72.6	)		11.9			(0.3	)		(184.0	)
Net investment income		136.5			92.1			16.9			12.7			258.2
Fees and other income		20.7			13.3			10.9			7.0			51.9
Other operating expenses		(17.9	)		(9.7	)		(6.8	)		(19.9	)		(54.3	)
Operating income (loss) before interest expense and income taxes	$	16.3		$	23.1		$	32.9		$	(0.5	)	$	71.8

2013 Compared to 2012

Commercial Lines

Commercial Lines net premiums written were $2,007.2 million in the year ended December 31, 2013, compared to $1,902.0 million in the year ended December 31, 2012. This $105.2 million increase was primarily driven by rate increases, strong retention, and targeted new business expansion in our core commercial businesses, partially offset by exposure management actions that focus on reducing volatility from weather-related events and driving profit improvement.

Commercial Lines underwriting loss for the year ended December 31, 2013 was $11.0 million, compared to $224.2 million for the year ended December 31, 2012, a decrease of $213.2 million. This improvement reflects decreased catastrophe losses and lower

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unfavorable development on prior years’ loss reserves. Catastrophe related losses for the year ended December 31, 2013 were $38.7 million, compared to $193.4 million for the year ended December 31, 2012, a decrease of $154.7 million. Catastrophe losses in 2012 included $124.8 million of pre-tax losses related to Superstorm Sandy. Unfavorable development on prior years’ loss reserves for the year ended December 31, 2013 was $3.3 million, compared to unfavorable development of $29.0 million for the year ended December 31, 2012, a decrease of $25.7 million.

Commercial Lines current accident year underwriting profit, excluding catastrophes, was $31.0 million for the year ended December 31, 2013, compared to a loss of $1.8 million for the year ended December 31, 2012. This $32.8 million improvement in current accident year results was primarily due to lower losses in our commercial multiple peril, surety and workers’ compensation lines, partially offset by higher losses in our commercial automobile line. The improvement in current accident year losses in our commercial multiple peril and surety lines was primarily due to fewer large losses and underwriting actions, while commercial multiple peril also benefited from price increases. The improvement in current accident year losses in our workers’ compensation line primarily resulted from price increases. In our commercial automobile line, current accident year losses increased in our liability coverages.

Pricing in Commercial Lines continued to be favorable in 2013 due to recent years’ weather-related losses, as well as to reduced investment income as a result of low interest rates, and other factors. We are continuing efforts to improve our underwriting results, including through increased rates; however, our ability to increase Commercial Lines net premiums written while maintaining or improving underwriting results may be affected by price competition and the current challenging economic environment. We also expect to continue our efforts to reduce our property exposures in certain geographic areas and classes of business, with a goal of improving our longer-term profitability and reducing earnings volatility. Also, in the past several years, weather-related catastrophe and non-catastrophe losses have been in excess of longer term averages. We continue to monitor these trends and consider them in our rate actions.

Personal Lines

Personal Lines net premiums written were $1,428.0 million in the year ended December 31, 2013, compared to $1,475.6 million in the year ended December 31, 2012, a decrease of $47.6 million. The primary factors contributing to this decrease were our continued property-focused exposure management actions and actions to improve underwriting results in all lines of business. These decreases were partially offset by higher rates in both our homeowners and personal automobile lines.

Net premiums written in the personal automobile line of business for the year ended December 31, 2013 were $890.3 million compared to $922.7 million for the year ended December 31, 2012, a decrease of $32.4 million. This decrease was primarily due to a decline in policies in force of 11.0%, primarily from ongoing exposure management actions and actions to improve underwriting results. This reduction in policies in force was partially offset by rate increases. Net premiums written in the homeowners line of business for the year ended December 31, 2013 were $496.7 million compared to $510.2 million for the year ended December 31, 2012, a decrease of $13.5 million. This is attributable to a decline in policies in force of 11.7%, as a result of aforementioned exposure management actions, partially offset by rate increases.

Personal Lines underwriting profit for the year ended December 31, 2013 was $37.6 million, compared to a loss of $67.3 million for the year ended December 31, 2012, an improvement of $104.9 million. This was primarily due to decreased catastrophe losses and improved non-catastrophe current accident year results. Catastrophe losses for the year ended December 31, 2013 were $66.9 million, compared to $134.8 million for the year ended December 31, 2012, a decrease of $67.9 million. Catastrophe losses in 2012 included $45.2 million of pre-tax losses related to Superstorm Sandy. Unfavorable development on prior years’ loss reserves for the year ended December 31, 2013 was $13.7 million, compared to unfavorable development of $26.5 million for the year ended December 31, 2012, a change of $12.8 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $118.2 million in the year ended December 31, 2013, compared to $94.0 million for the year ended December 31, 2012. This $24.2 million improvement in non-catastrophe current accident year results was primarily due to lower losses in our homeowners line, which we attribute to rate increases and profit improvement actions.

Although we have been able to obtain rate increases in our Personal Lines markets and believe that our ability to obtain these increases will continue, our ability to maintain Personal Lines net premiums written and to maintain and improve underwriting results may be affected by price competition, recent years’ weather-related losses, our exposure management actions, recent loss trends in bodily injury and personal injury protection claims, and regulatory and legal developments. In the past several years prior to 2013, weather-related catastrophe and non-catastrophe losses have been in excess of longer term averages. We monitor these trends and consider them in our rate actions.

Chaucer

Chaucer’s net premiums written were $1,117.5 million for the year ended December 31, 2013, compared to $990.5 million for the year ended December 31, 2012, an increase of $127.0 million, or 12.8%. This growth was primarily due to the aforementioned increase in

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Chaucer’s economic interests in Syndicate 1084. Written premium growth was also driven by growth in our marine, casualty, and property lines, due to favorable pricing and specific underwriting opportunities in these markets. Partially offsetting this growth was a reduction in net premiums written in our energy line, primarily due to a reduction of estimated premiums for the exploration and production coverage class, specifically control of well business, and the construction coverage class. This change was based on a reduced volume in actual well footage drilled, following tighter safety regulations worldwide and a reduction of offshore gas exploration in the U.S., and a reduced number and size of new construction projects worldwide. Additionally, strong market competition decreased net premiums in our aviation line.

Chaucer’s underwriting profit for the year ended December 31, 2013 was $107.7 million, compared to $93.5 million for the year ended December 31, 2012, an improvement of $14.2 million. These improved results were primarily due to increased favorable development on prior years’ loss reserves and lower catastrophe losses, partially offset by higher non-catastrophe losses. Favorable development on prior years’ loss reserves for the year ended December 31, 2013 was $94.6 million, compared to $72.6 million for the year ended December 31, 2012, a change of $22.0 million. Catastrophe losses for the year ended December 31, 2013 were $34.4 million, compared to $41.7 million for the year ended December 31, 2012, a decrease of $7.3 million. Higher non-catastrophe losses were primarily due to several single large losses in our energy, U.K. motor and aviation lines.

After a profitable year in our international insurance business and against a very competitive market background, we expect few rate increases in 2014. Current pricing conditions for international energy, marine and aviation and both direct and assumed property reinsurance markets continue to be affected by an absence of major losses, excess capacity and high levels of competition. Overall, we expect rates to remain flat in these markets, with any increases in these areas to be negligible and restricted to local market conditions in specific classes. Also, a reduction in worldwide energy industry projects is lowering the demand and pricing for exploration, production and construction coverages. Casualty market rates are flat overall, although after several years of continued rate decline, there are now signs of potential modest rate increases in certain classes. We will seek rate increases in the U.K. motor market in 2014 to maintain margins at acceptable overall levels. There can be no assurance that we will be able to maintain adequate rates in light of economic and regulatory conditions in our markets.

Other

Other operating loss was $8.0 million for the year ended December 31, 2013, compared to $6.9 million for the year ended December 31, 2012. The $1.1 million increased loss is primarily due to higher employee retirement costs.

2012 Compared to 2011

Commercial Lines

Commercial Lines net premiums written were $1,902.0 million in the year ended December 31, 2012, compared to $1,703.1 million in the year ended December 31, 2011. This $198.9 million increase was primarily driven by rate increases, strong retention, and targeted new business expansion, including growth in the AIX program business, which grew by approximately $69 million. These factors were partially offset by the effects of exposure management actions and business mix improvement initiatives.

Commercial Lines underwriting loss for the year ended December 31, 2012 was $224.2 million, compared to $123.0 million for the year ended December 31, 2011, or $101.2 million of increased losses. This was primarily due to unfavorable development on prior years’ loss reserves and increased catastrophe related activity. Unfavorable development on prior years’ loss reserves for the year ended December 31, 2012 was $29.0 million, compared to favorable development of $34.7 million for the year ended December 31, 2011, a change of $63.7 million. Included in these amounts are $26.5 million and $9.2 million, respectively, of unfavorable development in our surety line in 2012 and 2011. Catastrophe related activity for the year ended December 31, 2012 was $193.4 million, compared to $148.4 million for the year ended December 31, 2011, an increase of $45.0 million. The impact of Superstorm Sandy was $124.8 million for the year ended December 31, 2012.

Commercial Lines current accident year underwriting loss, excluding catastrophes, was $1.8 million for the year ended December 31, 2012, compared to $9.3 million for the year ended December 31, 2011. This $7.5 million improvement was primarily due to growth in earned premium and the resulting positive effect on our expense ratio, partially offset by higher current accident year losses. There were higher non-catastrophe losses in our commercial automobile lines, including automobile coverages in our AIX program business, partially offset by lower non-catastrophe losses in our commercial multiple peril and inland marine lines.

Personal Lines

Personal Lines net premiums written were $1,475.6 million in the year ended December 31, 2012, compared to $1,461.2 million in the year ended December 31, 2011, an increase of $14.4 million. The factors contributing to this modest increase were higher rates in both our homeowners and personal automobile lines. These increases were partially offset by our continued property-focused exposure management actions. Our actions to reduce homeowners policy exposures, including increases in rate, have resulted in an increase in policy attrition.

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Net premiums written in the personal automobile line of business for the year ended December 31, 2012 were $922.7 million compared to $910.5 million for the year ended December 31, 2011. Growth in premiums resulting primarily from rate increases were partially offset by a decline in policies in force of 2.2%, primarily as a result of fewer policies in force in Michigan, Florida, New York, Connecticut and Oklahoma. Net premiums written in the homeowners line of business increased 0.6%, resulting primarily from rate increases, partially offset by a 3.7% decline in policies in force primarily attributable to fewer policies in force in Michigan, New York and New Jersey. These declines in both our personal automobile and homeowners lines are attributed to more selective portfolio management, including attrition resulting from rate increases we have implemented despite the competitive pricing environment.

Personal Lines underwriting loss for the year ended December 31, 2012 was $67.3 million, compared to $72.6 million for the year ended December 31, 2011, an improvement of $5.3 million. This was primarily due to decreased catastrophe related activity and non-catastrophe weather-related losses, partially offset by unfavorable development on prior years’ loss reserves. Catastrophe related activity for the year ended December 31, 2012 was $134.8 million, including Superstorm Sandy of $45.2 million, compared to $163.7 million for the year ended December 31, 2011, a decrease of $28.9 million. Unfavorable development on prior years’ loss reserves for the year ended December 31, 2012 was $26.5 million, compared to favorable development of $33.0 million for the year ended December 31, 2011, a change of $59.5 million. The unfavorable development was primarily in the personal automobile bodily injury and personal injury protection coverages as we and the industry have experienced higher loss severity.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $94.0 million in the year ended December 31, 2012, compared to $58.1 million for the year ended December 31, 2011. This $35.9 million increase was primarily due to lower non-catastrophe weather-related losses in our homeowners line, partially offset by the aforementioned increase in liability and personal injury protection losses in the automobile line.

Chaucer

Chaucer’s net premiums written were $990.5 million for the year ended December 31, 2012. By line of business, Chaucer’s net premiums written were comprised of 26.2% U.K. motor, 23.7% marine and aviation, 19.7% energy, 16.3% property, and 14.1% casualty and other lines. This mix of business was driven and supported by our specialist underwriting strategy which is focused on actively managing the premium portfolio and risk exposures.

Chaucer’s underwriting profit for the year ended December 31, 2012 was $93.5 million, $72.6 million of which is attributable to favorable development on prior years’ loss reserves. Catastrophe losses for the year ended December 31, 2012 were $41.7 million, principally due to Superstorm Sandy and the U.S. drought.

Chaucer’s underwriting profit, excluding prior year loss development and catastrophes, was $62.6 million for the year ended December 31, 2012. Underwriting expenses of $366.1 million represented 37.9% of earned premium.

Other

Other operating loss was $6.9 million for the year ended December 31, 2012, compared to $0.5 million for the year ended December 31, 2011. The $6.4 million increased loss is primarily due to lower net investment income in our holding company.

RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

Overview of Loss Reserve Estimation Process

We maintain reserves for our property and casualty products to provide for our ultimate liability for losses and loss adjustment expenses (our “loss reserves”) with respect to reported and unreported claims incurred as of the end of each accounting period. These reserves are estimates, taking into account past loss experience, modified for current trends, as well as prevailing economic, legal and social conditions. Loss reserves represent our largest liability.

Management’s process for establishing loss reserves is a comprehensive process that involves input from multiple functions throughout our organization, including finance, actuarial, claims, legal, underwriting, distribution and business operations management. The process incorporates facts currently known and the current, and in some cases, the anticipated, state of the law and coverage litigation. Based on information currently available, we believe that the aggregate loss reserves at December 31, 2013 were adequate to cover claims for losses that had occurred as of that date, including both those known to us and those yet to be reported. However, as described below, there are significant uncertainties inherent in the loss reserving process. Our estimate of the ultimate liability for losses that had occurred as of December 31, 2013 is expected to change in future periods as we obtain further information, and such changes could have a material effect on our results of operations and financial condition.

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Our loss reserves include case estimates for claims that have been reported and estimates for claims that have been incurred but not reported (“IBNR”) at the balance sheet date. They also include estimates of the expenses associated with processing and settling all reported and unreported claims, less estimates of anticipated salvage and subrogation recoveries. Our property and casualty loss reserves are not discounted to present value.

Case reserves are established by our claim personnel individually on a claim by claim basis and based on information specific to the occurrence and terms of the underlying policy. For some classes of business, average case reserves are used initially. Case reserves are periodically reviewed and modified based on new or additional information pertaining to the claim.

IBNR reserves are estimated by management and our reserving actuaries on an aggregate basis for each line of business or coverage for loss and loss expense liabilities not reflected within the case reserves. The sum of the case reserves and the IBNR reserves represents our estimate of total unpaid losses and loss adjustment expenses.

We regularly review our loss reserves using a variety of industry accepted analytical techniques. We update the loss reserves as historical loss experience develops, additional claims are reported and resolved and new information becomes available. Net changes in loss reserves are reflected in operating results in the period in which the reserves are changed.

The IBNR reserve includes a provision for claims that have occurred but have not yet been reported to us, some of which may not yet be known to the insured, as well as a provision for future development on reported claims. IBNR represents a significant proportion of our total net loss reserves, particularly for long-tail liability classes. In fact, approximately 46% of our aggregate net loss reserves at December 31, 2013 were for IBNR losses and loss expenses.

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Critical Judgments and Key Assumptions

We determine the amount of our loss reserves based on an estimation process that is very complex and uses information from both company specific and industry data, as well as general economic and other information. The estimation process is a combination of objective and subjective information, the blending of which requires significant professional judgment. There are various assumptions required, including future trends in frequency and severity of claims, operational changes in claim handling, and trends related to general economic and social conditions. Informed subjective estimates and judgments as to our ultimate exposure to losses are an integral component of our loss reserve estimation process.

Given the inherent complexity of our loss reserve estimation process and the potential variability of the assumptions used, the actual emergence of losses will vary, perhaps substantially, from the estimate of losses included in our financial statements, particularly in those instances where settlements or other claim resolutions do not occur until well into the future. Our net loss reserves at December 31, 2013 were $4.3 billion. Therefore, a relatively small percentage change in the estimate of net loss reserves would have a material effect on our results of operations.

There is greater inherent uncertainty in estimating insurance reserves for certain types of property and casualty insurance lines, particularly liability lines, where a longer period of time may elapse before a definitive determination of ultimate liability and losses may be made. In addition, the technological, judicial, regulatory and political climates involving these types of claims are continuously evolving. There is also greater uncertainty in establishing reserves with respect to business that is new to us, particularly new business which is generated with respect to newly introduced product lines, by newly appointed agents or in geographies in which we have less experience in conducting business, such as the program business written by our AIX subsidiary, Chaucer’s international liability lines, our professional liability specialty lines, and business written in the western part of the United States. In some of these cases, there is less historical experience or knowledge and less data upon which we can rely. A combination of business that is both new to us and has longer development periods, provides even greater uncertainty in estimating insurance reserves. In our management and professional liability and healthcare lines, we are modestly increasing, and expect to continue to increase, our exposure to longer-tailed liability lines, including directors and officers liability, errors and omissions liability and product liability coverages. The Chaucer business acquired in 2011 contains several international and U.S. liability lines, of which financial institution and professional liability, international liability and energy liability, contribute the most uncertainty.

We regularly update our reserve estimates as new information becomes available and additional events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in the results of operations as adjustments to losses and LAE. Often, these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and the loss event occurred. When these types of subsequent adjustments affect prior years, they are described separately as “prior year reserve development”. Such development can be either favorable or unfavorable to our financial results and may vary by line of business. As discussed below, estimated loss and LAE reserves for claims occurring in prior years developed favorably by $76.3 million, $15.8 million, and $103.3 million for the years ended December 31, 2013, 2012, and 2011, respectively. However, we have experienced unfavorable development and there can be no assurance that current loss and LAE reserves will be sufficient.

We regularly review our reserving techniques, our overall reserving position and our reinsurance. Based on (i) our review of historical data, legislative enactments, judicial decisions, legal developments in impositions of damages and policy coverage, political attitudes and trends in general economic conditions, (ii) our review of per claim information, (iii) our historical loss experience and that of the industry, (iv) the nature of policies written by us, and (v) our internal estimates of required reserves, we believe that adequate provision has been made for loss reserves. However, establishment of appropriate reserves is an inherently uncertain process and there can be no certainty that current established reserves will prove adequate in light of subsequent actual experience. A significant change to the estimated reserves could have a material impact on our results of operations and financial position. An increase or decrease in reserve estimates would result in a corresponding decrease or increase in financial results. For example, each one percentage point change in the aggregate loss and LAE ratio resulting from a change in reserve estimation is currently projected to have an approximate $45 million impact on operating income, based on 2013 full year premiums.

The major causes of material uncertainty relating to ultimate losses and loss adjustment expenses (“risk factors”) generally vary for each line of business, as well as for each separately analyzed component of the line of business. In some cases, such risk factors are explicit assumptions of the estimation method and in others, they are implicit. For example, a method may explicitly assume that a certain percentage of claims will close each year, but will implicitly assume that the legal interpretation of existing contract language will remain unchanged. Actual results will likely vary from expectations for each of these assumptions, resulting in an ultimate claim liability that is different from that being estimated currently.

Some risk factors affect multiple lines of business. Examples include changes in claim department practices, changes in settlement patterns, regulatory and legislative actions, court actions, timeliness of claim reporting, state mix of claimants, and degree of claimant fraud. Additionally, there is also a higher degree of uncertainty due to growth in our newly acquired businesses, with respect to which we have less familiarity and, in some cases, limited historical claims experience. The extent of the impact of a risk factor will also vary by components within a line of business. Individual risk factors are subject to interactions with other risk factors within line of business components. Thus, risk factors can have offsetting or compounding effects on required reserves.

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Inflation generally increases the cost of losses covered by insurance contracts. The effect of inflation varies by product. Our property and casualty insurance premiums are established before the amount of losses and LAE and the extent to which inflation may affect such expenses are known. Consequently, we attempt, in establishing rates and reserves, to anticipate the potential impact of inflation in the projection of ultimate costs. For example, we have experienced increasing medical and attendant care costs, including those associated with automobile personal injury protection claims, particularly in Michigan, as well as in our workers’ compensation line in most states. Also, the U.K. motor business written by Chaucer recently has experienced high levels of claims inflation and increases in potential fraud-type claims. Increases are reflected in our current reserve estimates, but continued increases could contribute to increased losses and LAE in the future.

We are also defendants in various litigation matters, including putative class actions, which may claim punitive damages, bad faith or extra-contractual damages, legal fees and interest, or claim a broader scope of policy coverage or settlement and payment obligations than our interpretation. Resolution of these cases are often highly unpredictable and could involve material unanticipated damage awards.

Loss and LAE Reserves by Line of Business

Reserving Process Overview

Our loss reserves include amounts related to short-tail and long-tail classes of business. “Tail” refers to the time period between the occurrence of a loss and the final settlement of the claim. The longer the time span between the incidence of a loss and the settlement of the claim (i.e. a longer tail), the more the ultimate settlement amount is likely to vary from our original estimate.

Short-tail classes consist principally of automobile physical damage, homeowners property, commercial property and marine business. The Chaucer business, while having a longer-tail on average than our traditional U.S. business, contains a substantial book of U.K. motor property damage, worldwide property insurance and reinsurance business, including certain high excess property layers, marine property, aviation property and energy property business which has relatively short development patterns. For these property coverages, claims are generally reported and settled shortly after the loss occurs because the claims relate to tangible property and are more likely to be discovered shortly after the loss occurs, and property losses are often more easily valued. Consequently, the estimation of loss reserves for these classes is generally less complex. However, this is less true for our Chaucer reinsurance business and high excess property layers where there is often a longer period of time between the date a claim is incurred and the date the claim is reported compared with our direct insurance operations. Therefore, the risk of delayed recognition of loss reserve development is higher for our assumed reinsurance and high excess property layers than for our direct insurance lines.

While we estimate that a majority of our written premium is in what we would characterize as shorter-tailed classes of business, most of our loss reserves relate to longer-tail liability classes of business. Long-tailed classes include commercial liability, automobile liability, workers’ compensation and other types of third party coverage. Chaucer’s longer-tailed lines include aviation liability, marine liability, energy liability, nuclear liability, U.K. motor medical and liability, international liability, specialist liability, and financial institutions and professional liability. For many liability claims, significant periods of time, ranging up to several years or more, may elapse between the occurrence of the loss, the discovery and reporting of the loss to us and the settlement of the claim. As a result, loss experience in the more recent accident years for long-tailed liability coverage has limited statistical credibility because a relatively small proportion of losses in these accident years (the calendar years in which losses are incurred) are reported claims and an even smaller proportion are paid losses. Liability claims are also more susceptible to litigation and can be significantly affected by changing contract interpretations, the legal environment and the risk and expense of protracted litigation. Consequently, the estimation of loss reserves for these coverages is more complex and typically subject to a higher degree of variability and uncertainty compared to short-tailed coverages.

Most of our indirect business from voluntary and involuntary pools is long-tailed casualty reinsurance. Reserve estimates for this business are therefore subject to the variability caused by extended loss emergence periods. The estimation of loss reserves for this business is further complicated by delays between the time the claim is reported to the ceding insurer and when it is reported by the ceding insurer to the pool manager and then to us, and by our dependence on the quality and consistency of the loss reporting by the ceding company and actuarial estimates by the pool manager.

A comprehensive review of loss reserves for each of the classes of business which we write is conducted regularly, generally quarterly. This review process takes into consideration a variety of trends that impact the ultimate settlement of claims. Where appropriate, the review includes a review of overall payment patterns and the emergence of paid and reported losses relative to expectations.

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The loss reserve estimation process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is an appropriate basis for predicting future outcomes. As part of this process, we use a variety of analytical methods that consider experience, trends and other relevant factors. IBNR reserves are generally calculated by first projecting the ultimate cost of all claims that have been reported or expected to be reported in the future and then subtracting reported losses and loss expenses. Reported losses include cumulative paid losses and loss expenses plus case reserves. Within the comprehensive loss reserving process, standard actuarial methods which include: (1) loss development factor methods; (2) expected loss methods (Bornheutter-Ferguson); and (3) adjusted loss methods (Berquist-Sherman), are given due consideration. These methods are described below:

• Loss development factor methods generally assume that the losses yet to emerge for an accident year are proportional to the paid or reported loss amount observed to date. Historical patterns of the development of paid and reported losses by accident year can be predictive of the expected future patterns that are applied to current paid and reported losses to generate estimated ultimate losses by accident year.

• Bornheutter-Ferguson methods utilize the product of the expected ultimate losses times the proportion of ultimate losses estimated to be unreported or unpaid to calculate IBNR. The expected ultimate losses are based upon current estimates of ultimate losses from prior accident years, adjusted to reflect expected earned premium, current rating, claims cost levels and changes in business mix. The expected losses, and corresponding loss ratios, are a critical component of Bornheutter-Ferguson methodologies and provide a general reasonability guide.

• Berquist-Sherman methods are used for estimating reserves in business lines where historical development patterns may be deemed less reliable for more recent accident years’ ultimate losses. Under these methods, patterns of historical paid or reported losses are first adjusted to reflect current payment settlement patterns and case reserve adequacy and then evaluated in the same manner as the loss development factor methods described above. When the adequacy of case reserves change, the Berquist-Sherman incurred method may be deemed more reliable than the reported loss development factor method. Likewise, when the settlement patterns change, the Berquist-Sherman paid method may be deemed more reliable than the paid loss development factor method.

In addition to the methods described above, various tailored reserving methodologies are used for certain businesses. For example, for some low volume and high volatility classes of business, special reserving techniques are utilized that estimate IBNR by selecting the loss ratio that balances actual reported losses to expected reported losses as defined by the estimated underlying reporting pattern. Also, for some classes with long exposure periods (e.g. energy construction, engineering and political risks), earnings patterns plus an estimated reporting lag applied to the Bornheutter-Ferguson initial expected loss ratio are used to estimate IBNR. This is done in order to reflect the changing average exposure periods by policy year (and consequently accident year).

In completing the loss reserve analysis, a variety of assumptions must be made for each line of business, coverage and accident year. Each estimation method has its own pattern, parameter and/or judgmental dependencies, with no estimation method being better than the others in all situations. The relative strengths and weaknesses of the various estimation methods, when applied to a particular class of business, can also change over time, depending on the underlying circumstances. In many cases, multiple estimation methods will be valid for the particular facts and circumstances of the relevant class of business. The manner of application and the degree of reliance on a given method will vary by line of business and coverage, and by accident year based on an evaluation of the above dependencies and the potential volatility of the loss frequency and severity patterns. The estimation methods selected or given weight at a particular valuation date are those that are believed to produce the most reliable indication for the loss reserves being evaluated. Selections incorporate input from claims personnel, pricing actuaries, and underwriting management on loss cost trends and other factors that could affect ultimate losses.

For most classes of shorter-tailed business in our Commercial and Personal Lines segments, the emergence of paid and incurred losses generally exhibits a relatively stable pattern of loss development from one accident year to the next. Thus, for these classes, the loss development factor method is generally appropriate. For many of the classes of shorter-tailed business in our Chaucer segment, the emergence of paid and incurred losses may exhibit a relatively volatile pattern of loss development from one accident year to the next. In certain cases where there is a relatively low level of reliability placed on the available paid and incurred loss data, expected loss methods or adjusted loss methods are considered appropriate for the most recent accident year.

For longer-tailed lines of business, applying the loss development factor method often requires even more judgment in selecting development factors, as well as more significant extrapolation. For those long-tailed lines of business with high frequency and relatively low per-loss severity (e.g., personal automobile liability), volatility will often be sufficiently modest for the loss development factor method to be given significant weight, even in the most recent accident years, but expected loss methods and adjusted loss methods are always considered and frequently utilized in the selection process. For those long-tailed lines of business with low frequency and high loss potential (e.g., commercial liability), anticipated loss experience is less predictable because of the small number of claims and erratic claim severity patterns. In these situations, the loss development factor methods may not produce a reliable estimate of ultimate losses in the most recent accident years since many claims either have not yet been reported or are only in the early stages of the settlement process. Therefore, the loss reserve estimates for these accident years are based on methods less reliant on extrapolation, such as Bornheutter-Ferguson. Over time, as a greater number of claims are reported and the statistical credibility of loss experience increases, loss development factor methods or adjusted loss methods are given increasing weight.

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Management endeavors to apply as much available data as practicable to estimate the loss reserve amount for each line of business, coverage and accident year, utilizing varying assumptions, projections and methods. The ultimate outcome is likely to fall within a range of potential outcomes around this loss reserve estimated amount.

Our carried reserves for each line of business and coverage are determined based on this quarterly loss reserving process. In making the determination, we consider numerous quantitative and qualitative factors. Quantitative factors include changes in reserve estimates in the period, the maturity of the accident year, trends observed over the recent past, the level of volatility within a particular class of business, the estimated effects of reinsurance, including reinstatement premiums, general economic trends, and other factors. Qualitative factors may include legal and regulatory developments, changes in claim handling, recent entry into new markets or products, changes in underwriting practices, concerns that we do not have sufficient or quality historical reported and paid loss and LAE information with respect to a particular line or segment of our business, effects of the economy and political outlook, perceived anomalies in the historical results, evolving trends or other factors. In doing so, we must evaluate whether a change in the data represents credible actionable information or an anomaly. Such an assessment requires considerable judgment. Even if a change is determined to be apparent, it is not always possible to determine the extent of the change. As a result, there can be a time lag between the emergence of a change and a determination that the change should be partially or fully reflected in the carried loss reserves. In general, changes are made more quickly to reserves for more mature accident years and less volatile classes of business.

Reserving Process Uncertainties

As stated above, numerous factors (both internal and external) contribute to the inherent uncertainty in the process of establishing loss reserves, including changes in the rate of inflation for goods and services related to insured damages (e.g., medical care, home repairs, etc.), changes in the judicial interpretation of policy provisions, and settlement obligations, changes in the general attitude of juries in determining damage awards, legislative actions, changes in the extent of insured injuries, changes in the trend of expected frequency and/or severity of claims, changes in our book of business (e.g., change in mix due to new product offerings, new geographic areas, etc.), changes in our underwriting practices, and changes in claim handling procedures and/or systems. Regarding our indirect business from voluntary and involuntary pools, we are provided loss estimates by managers of each pool. We adopt reserve estimates for the pools that consider this information and other facts.

In addition, we must consider the uncertain effects of emerging or potential claims and coverage issues that arise as legal, judicial, social conditions, political risks, and economic conditions change. For example, claims which we consider closed may be re-opened as additional damages surface or new liability or damage theories are presented. These and other issues could have a negative effect on our loss reserves by either extending coverage beyond the original underwriting intent or by increasing the number or size of claims. Additionally, the effect of the recent U.K. legislation (the Legal Aid, Sentencing and Punishment of Offenders Act) on our U.K. motor business is unclear. Effective April 2013, key changes introduced by this legislation are limiting the level of success fees paid to lawyers, banning referral fees and increasing general damages by 10% for all bodily injury claims. As a result, the uncertainties inherent in estimating ultimate claim costs on the basis of past experience further complicate the already complex loss reserving process.

As part of our loss reserving analysis, we consider the various factors that contribute to the uncertainty in the loss reserving process. Those factors that could materially affect our loss reserve estimates include loss development patterns and loss cost trends, reporting lags, rate and exposure level changes, the effects of changes in coverage and policy limits, business mix shifts, the effects of regulatory and legislative developments, the effects of changes in judicial interpretations, the effects of emerging claims and coverage issues and the effects of changes in claim handling practices. In making estimates of reserves, however, we do not necessarily make an explicit assumption for each of these factors. Moreover, all estimation methods do not utilize the same assumptions and typically no single method is determinative in the reserve analysis for a line of business and coverage. Consequently, changes in our loss reserve estimates generally are not the result of changes in any one assumption. Instead, the variability will be affected by the interplay of changes in numerous assumptions, many of which are implicit to the approaches used.

For each line of business and coverage, we regularly adjust the assumptions and methods used in the estimation of loss reserves in response to our actual loss experience, as well as our judgments regarding changes in trends and/or emerging patterns. In those instances where we primarily utilize analyses of historical patterns of the development of paid and reported losses, this may be reflected, for example, in the selection of revised loss development factors. In longer-tailed classes of business and for which loss experience is less predictable due to potential changes in judicial interpretations, potential legislative actions, the cost of litigation or determining liability and the ultimate loss, inflation and potential claims issues, this may be reflected in a judgmental change in our estimate of ultimate losses for particular accident years.

The Chaucer segment contains run-off business comprised of liability lines, notably financial institutions and professional liability business written by Lloyd’s Syndicate 4000. There is particular uncertainty around the reserve estimates in respect of business written in 2007 and 2008 which have been subject to claims arising out of the financial turmoil in that time period, particularly in the financial institutions book. These claims are unlikely to be settled for some time since they contain numerous coverage issues and in many

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cases involve class action lawsuits that are likely to take several years to resolve. We have utilized substantially all of our available reinsurance with respect to losses and LAE related to Syndicate 4000 business written in 2008. Effective January 1, 2014, Syndicate 1084 accepted the reinsurance to close of the unpaid liabilities of Syndicate 4000 for the 2008 year of account and prior. This transaction resulted in the closure of the Syndicate 4000 and has no impact on a consolidated basis.

The future impact of the various factors that contribute to the uncertainty in the loss reserving process is impossible to predict. There is potential for significant variation in the development of loss reserves, particularly for long-tailed classes of business and classes of business that are more vulnerable to economic or political risks. We do not derive statistical loss distributions or confidence levels around our loss reserve estimate, and as a result, we do not establish reserve range estimates.

Reserving Process for Catastrophe Events

The estimation of claims and claims expense reserves for catastrophes also comprises estimates of losses from reported claims and IBNR, primarily for damage to property. In general, our estimates for catastrophe reserves are determined on an event basis by considering various sources of available information, including specific loss estimates reported to us based on claim adjuster inspections, overall industry loss estimates, and our internal data regarding exposures related to the geographical location of the event. However, depending on the nature of the catastrophe, the estimation process can be further complicated by other impediments. For example, for hurricanes and other severe wind storms, complications often include the inability of insureds to promptly report losses, delays in the ability of claims adjusting staff to inspect losses, difficulties in determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind driven rain) or are specifically excluded from coverage caused by flood, and challenges in estimating additional living expenses, assessing the impact of demand surge, exposure to mold damage, and the effects of numerous other considerations. Another example is the complication of estimating the cost of business interruption coverage on commercial lines policies. Estimates for catastrophes which occur at or near the end of a financial reporting period may be even less reliable since we will have less claims data available and little time to complete our estimation process. In such situations, we may adapt our practices to accommodate the circumstances.

For events designated as catastrophes which affect our Commercial and Personal Lines business segments, we generally calculate IBNR reserves directly as a result of an estimated IBNR claim count and an estimated average claim amount for each event. Such an assessment involves a comprehensive analysis of the nature of the event, of policyholder exposures within the affected geographic area and of available claims intelligence. Depending on the nature of the event, available claims intelligence could include surveys of field claims associates within the affected geographic area, feedback from a catastrophe claims team sent into the area, as well as data on claims reported as of the financial statement date. In addition, loss emergence from similar historical events is compared to the estimated IBNR for our current catastrophe events to help assess the reasonableness of our estimates.

For events designated as catastrophes which affect our Chaucer business segment, we initially calculate IBNR reserves using a ground up exposure by exposure analysis based on each cedant or insured. These are supported by broker supplied information, catastrophe modeling and industry event estimates. As more specific claim level data becomes available over time for each catastrophe event, these initial estimates are revised and updated by claim frequency and severity modeling as described above, as appropriate for each event.

Reserving Sensitivity Analysis

The following discussion presents disclosure related to possible variation in net reserve estimates due to changes in key assumptions. This information is provided for illustrative purposes only. Many other assumptions may also lead to material reserve adjustments. If any such variations do occur, they would likely occur over a period of several years and therefore their impact on our results of operations would be recognized during the same period. It is important to note, however, that there is the potential for future variations greater than the amounts described below and for any such variations to be recognized in a single quarterly or annual period. No consideration has been given to potential correlation or lack of correlation among key assumptions or among lines of business and coverage as described below. As a result and because there are so many other factors which affect our net reserve estimate, it would be inappropriate to take the amounts described below and simply add them together in an attempt to estimate volatility in total. While we believe these are reasonably likely scenarios, the reader should not consider the following sensitivity analysis as illustrative of a reserve range.

• Personal and Commercial Automobile Bodily Injury – reserves recorded for bodily injury on U.S. voluntary business were $495.9 million as of December 31, 2013. A key assumption for bodily injury is the inflation rate underlying the estimated reserve. A five point change (e.g. 4% changed to 9% or -1%) in the imbedded inflation would have changed estimated IBNR by approximately $49 million, either positive or negative, respectively, at December 31, 2013.

• Personal Automobile Personal Injury Protection Medical Payment – reserves recorded for personal injury protection medical payment on U.S. voluntary business were $179.2 million as of December 31, 2013. A key assumption for this coverage is the inflation rate underlying the estimated reserve. Given the long reporting pattern for this line of business, an additional key assumption is the amount of additional development required to reach full maturity, thereby reflecting

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ultimate costs, as represented by the tail factor. A five point change in the imbedded inflation and a one point change to the tail factor assumption (e.g. 1.02 changed to 1.01 or 1.03) would have changed estimated IBNR by approximately $27 million, either positive or negative, at December 31, 2013.

• Workers’ Compensation – reserves recorded for workers’ compensation on U.S. voluntary business were $349.5 million as of December 31, 2013. A key assumption for workers’ compensation is the inflation rate underlying the estimated reserve. Given the long reporting pattern for this line of business, an additional key assumption is the amount of additional development required to reach full maturity, thereby reflecting ultimate costs, as represented by the tail factor. A five point change in the imbedded inflation and a one point change to the tail factor assumption would have changed estimated IBNR by approximately $37 million, either positive or negative, at December 31, 2013.

• Monoline and Multi-Peril General Liability – reserves recorded for general liability on U.S. voluntary business were $402.0 million as of December 31, 2013. A key assumption for general liability is the implied adequacy of the underlying case reserves. A ten point change in case adequacy (e.g. 10% deficiency changed to 0% or 20% deficiency) would have changed estimated IBNR by approximately $32 million, either positive or negative, at December 31, 2013.

• Specialty Programs – reserves recorded (including allocated LAE) for the AIX Companies were $252.2 million as of December 31, 2013. Two key assumptions underlying the actuarial reserve analysis for specialty programs are the expected loss and allocated LAE ratio (“ELR”) and the tail factor selection. A ten point change to the ELR and a five point change in the tail factor on AIX would have changed estimated IBNR by approximately $23 million at December 31, 2013.

• New classes of business – reserves recorded for new classes of Chaucer business (primarily within energy, engineering and international liability lines) were $292 million as of December 31, 2013. An increase in the ultimate loss by 5%, 10%, and 15% in the 2011 and prior, 2012, and 2013 years of account, respectively, on these classes would have increased estimated IBNR by approximately $49 million at December 31, 2013.

• Catastrophe events – a 25% increase in estimated gross ultimate claim deterioration for the 2011 Japan earthquakes and Thailand floods and Superstorm Sandy, would have reduced underwriting income by approximately $14 million, including reinstatement premiums.

Carried Reserves and Reserve Rollforward

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Gross loss and LAE reserves, beginning of year	$	6,197.0		$	5,760.3		$	3,277.7
Reinsurance recoverable on unpaid losses		2,074.3			1,931.8			1,115.5
Net loss and LAE reserves, beginning of year		4,122.7			3,828.5			2,162.2
Net incurred losses and LAE in respect of losses occurring in:
Current year		2,837.4			2,990.2			2,654.1
Prior years		(76.3	)		(15.8	)		(103.3	)
Total incurred losses and LAE		2,761.1			2,974.4			2,550.8
Net payments of losses and LAE in respect of losses occurring in:
Current year		1,213.5			1,317.6			1,482.4
Prior years		1,469.8			1,396.5			1,010.3
Total payments		2,683.3			2,714.1			2,492.7
Purchase of Chaucer, net of reinsurance recoverable on unpaid losses of $669.6		—			—			1,631.0
Effect of foreign exchange rate changes		0.6			33.9			(22.8	)
Net reserve for losses and LAE, end of year		4,201.1			4,122.7			3,828.5
Reinsurance recoverable on unpaid losses		2,030.4			2,074.3			1,931.8
Gross reserve for losses and LAE, end of year	$	6,231.5		$	6,197.0		$	5,760.3

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The table below summarizes the gross reserve for losses and LAE by line of business.

DECEMBER 31	2013		2012		2011
(in millions)
Commercial multiple peril	$	597.5	$	629.7	$	550.0
Workers’ compensation		596.1		571.8		544.7
Commercial automobile		297.9		269.7		234.9
AIX		337.5		321.6		239.6
Other		470.7		454.2		360.1
Total Commercial and Other		2,299.7		2,247.0		1,929.3
Personal automobile		1,413.1		1,400.7		1,366.3
Homeowners and other personal		137.2		141.3		131.9
Total Personal		1,550.3		1,542.0		1,498.2
Total Chaucer		2,381.5		2,408.0		2,332.8
Total loss and LAE reserves	$	6,231.5	$	6,197.0	$	5,760.3

Other lines are primarily comprised of our general liability, umbrella, professional and management liability, marine, voluntary pools, surety, and healthcare lines. Included in the above table, primarily in other lines, are $61.9 million, $60.5 million and $59.8 million of asbestos and environmental reserves as of December 31, 2013, 2012 and 2011, respectively. Included in the Chaucer segment in the above table are $230.6 million, $272.4 million and $302.8 million of reserves as of December 31, 2013, 2012 and 2011, respectively, related to Chaucer’s Syndicate 4000, which consists of financial and professional liability lines written in 2008 and prior.

Prior Year Development

Loss and LAE reserves for claims occurring in prior years developed favorably by $76.3 million, $15.8 million and $103.3 million during the years ended December 31, 2013, 2012 and 2011, respectively. The 2013 activity by segment includes favorable development of $94.6 million for Chaucer, partially offset by unfavorable development of $18.3 million in our domestic operations, consisting of $3.3 million, $13.7 million and $1.3 million for Commercial Lines, Personal Lines and Other, respectively. The 2012 activity by segment includes favorable development of $72.6 million for Chaucer, partially offset by unfavorable development of $56.8 million in our domestic operations, consisting of $29.0 million, $26.5 million and $1.3 million for Commercial Lines, Personal Lines and Other, respectively.

The primary drivers of reserve development for the year ended December 31, 2013 were as follows:

• Lower than expected losses within Chaucer’s business as follows:

• energy line, primarily in the 2009 through 2012 accident years,

• property line, primarily in the 2011 and 2012 accident years,

• within casualty and other lines, specialist liability lines, primarily in the 2008 accident year, and

• marine and aviation line, primarily in the 2010 through 2012 accident years.

• favorable impact of foreign exchange rate movements on prior years’ loss reserves.

• Lower than expected losses within our workers’ compensation line, primarily related to accident years 2006 through 2011 and lower involuntary pool losses including a $3.2 million benefit from the settlement of a legal proceeding.

• Lower than expected losses within our commercial multi-peril line, primarily related to accident year 2012.

Partially offsetting the favorable development discussed above were the following:

• Higher than expected losses within our personal automobile line, due to severity in bodily injury coverage for accident years 2010 through 2012.

• Higher than expected large losses within our commercial automobile line, primarily related to liability coverage in accident years 2009 through 2011.

• Higher than expected losses within our other commercial lines, primarily related to accident years 2010 through 2012.

The primary drivers of reserve development for the year ended December 31, 2012 were as follows:

• Favorable development of previously established reserves in Chaucer’s lines of business as follows:

• energy line, primarily in the 2008 through 2011 accident years,

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• marine and aviation lines, primarily in the 2007 through 2011 accident years,

• within casualty lines, primarily in the 2010 and 2011 accident years, and

• property line, primarily in the 2009 through 2011 accident years.

• Favorable development within Commercial Lines was due to lower than expected losses within our commercial multiple peril line related to the 2008 through 2011 accident years.

Partially offsetting the favorable development discussed above were the following:

• Within other commercial lines, higher than expected losses in our contract surety line due to the challenging macroeconomic environment for contractors, and to a lesser extent, our AIX program business primarily related to unexpected severity in commercial automobile liability, commercial multiple peril and general liability in a limited number of programs.

• Within Personal Lines, higher than expected losses within our personal automobile line, primarily related to bodily injury severity in the 2010 and 2011 accident years, and higher than expected homeowners property losses from non-catastrophe weather related activity in the 2011 accident year.

• Higher than expected large losses within our commercial automobile line, primarily related to liability coverage in the 2011 accident year.

The primary drivers of reserve development for the year ended December 31, 2011 were as follows:

• Lower than expected losses within our personal automobile line, primarily related to bodily injury coverage in the 2008 through 2010 accident years.

• Lower than expected losses within our commercial multiple peril line related to the 2007 through 2010 accident years.

• Lower than expected losses within our workers’ compensation line related to the 2007 through 2010 accident years.

• Lower than expected losses in Chaucer’s energy, property and U.K. motor lines, primarily related to the 2009 and 2010 accident years.

• Additionally, within other commercial lines, unfavorable development in our professional liability and surety lines were partially offset by favorable development in our healthcare and other commercial property lines.

It is not possible to know whether the factors that affected loss reserves in the year ended December 31, 2013 will also occur in future periods. As discussed in detail in this Form 10-K, there are inherent uncertainties in estimating reserves for losses and loss adjustment expenses and we encourage you to read this Form 10-K for more information about our reserving process and the judgments, uncertainties and risks associated therewith.

Asbestos and Environmental Reserves

Although we attempt to limit our exposures to asbestos and environmental damage liability through specific policy exclusions, we have been and may continue to be subject to claims related to these exposures. Ending loss and LAE reserves for all direct business written by our property and casualty companies related to asbestos and environmental damage liability were $11.5 million, $9.8 million and $10.0 million, net of reinsurance of $20.6 million, $20.4 million, and $18.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Activity for our asbestos and environmental reserves was not significant to our 2013, 2012 or 2011 financial results. In recent years, average asbestos and environmental payments have declined modestly. As a result of our historical direct underwriting mix of Commercial Lines policies toward smaller and middle market risks, past asbestos and environmental damage liability loss experience has remained minimal in relation to our total loss and LAE incurred experience.

In addition, we have established gross loss and LAE reserves for assumed reinsurance pool business with asbestos and environmental damage liability of $29.8 million, $30.3 million and $31.1 million at December 31, 2013, 2012 and 2011, respectively. These reserves relate to pools in which we have terminated our participation; however, we continue to be subject to claims related to years in which we were a participant. Results of operations from these pools are included in our Other segment. A significant part of our pool reserves relates to our participation in the Excess and Casualty Reinsurance Association (“ECRA”) voluntary pool from 1950 to 1982. In 1982, the pool was dissolved and since that time, the business has been in run-off. Our percentage of the total pool liabilities varied from 1% to 6% during these years. Our participation in this pool has resulted in average paid losses of approximately $2 million annually over the past ten years.

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We estimate our ultimate liability for asbestos, environmental and toxic tort liability claims, whether resulting from direct business, assumed reinsurance or pool business, based upon currently known facts, reasonable assumptions where the facts are not known, current law and methodologies currently available. Although these outstanding claims are not significant, their existence gives rise to uncertainty and are discussed because of the possibility that they may become significant. We believe that, notwithstanding the evolution of case law expanding liability in asbestos and environmental claims, recorded reserves related to these claims are adequate. Nevertheless, the asbestos, environmental and toxic tort liability reserves could be revised, and any such revisions could have a material adverse effect on our results of operations for a particular quarterly or annual period or on our financial position.

Reinsurance

We maintain a reinsurance program designed to protect against large or unusual losses and LAE activity. We utilize a variety of reinsurance agreements that are intended to control our exposure to large property and casualty losses, stabilize earnings and protect capital resources, including facultative reinsurance, excess of loss reinsurance and catastrophe reinsurance. We determine the appropriate amount of reinsurance based upon our evaluation of the risks insured, exposure analyses prepared by consultants, our capital allocation models and on market conditions, including the availability and pricing of reinsurance. Reinsurance contracts do not relieve us from our primary obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to us. We believe that the terms of our reinsurance contracts are consistent with industry practice in that they contain standard terms and conditions with respect to lines of business covered, limit and retention, arbitration and occurrence. Based on an ongoing review of our reinsurers’ financial statements, their history of timely payments to us, reported financial strength ratings from rating agencies, and the analysis and guidance of our reinsurance advisors, we believe that our reinsurers are financially sound.

Catastrophe reinsurance serves to protect us, as the ceding insurer, from significant losses arising from a single event such as snow, ice storm, windstorm, hail, hurricane, tornado, riot or other extraordinary events. Although we believe our catastrophe reinsurance program, including our retention and co-participation amounts for 2014, are appropriate given our surplus level and the current reinsurance pricing environment, there can be no assurance that our reinsurance program will provide coverage levels that will prove adequate should we experience losses from one significant or several large catastrophes during 2014. Additionally, as a result of the current economic environment, as well as losses incurred by reinsurers in the past several years, the availability and pricing of appropriate reinsurance programs may be adversely affected in future renewal periods. We may not be able to pass these costs on to policyholders in the form of higher premiums or assessments.

See “Reinsurance” in Item 1 – Business of this Form 10-K for further information on our reinsurance programs.

INVESTMENTS

INVESTMENT RESULTS

Net investment income before taxes was $269.0 million, $276.6 million and $258.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. The decrease in net investment income in 2013 compared to 2012 was primarily due to the impact of lower new money yields. This decrease was partially offset by additional income resulting from our investments in higher yielding investment grade mortgage-backed securities and the investment of operational cash flows, lower investment expenses and the investment of cash balances into fixed maturities beginning in the second quarter of 2012. The increase in net investment income in 2012 compared to 2011 was primarily due to the acquisition of Chaucer on July 1, 2011 and its related assets and investment income. Also, the increase resulted from our investments in dividend-yielding equity securities, various higher yielding investment grade fixed maturities and the investment of cash balances into fixed maturities, partially offset by the impact of lower new money yields. Average pre-tax earned yields on fixed maturities were 3.95%, 4.26% and 4.84% for the years ended December 31, 2013, 2012 and 2011, respectively. We expect average investment yields to continue to decline as new money rates remain lower than embedded book yields.

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INVESTMENT PORTFOLIO

We held cash and investment assets diversified across several asset classes, as follows:

DECEMBER 31	2013					2012
			% of Total					% of Total
	Carrying		Carrying			Carrying		Carrying
(dollars in millions)	Value		Value			Value		Value
Fixed maturities, at fair value	$	6,970.6		86.3	%	$	6,952.2		86.5	%
Equity securities, at fair value		430.2		5.3			315.8		3.9
Cash and cash equivalents		486.2		6.0			564.8		7.0
Other investments		192.5		2.4			210.3		2.6
Total cash and investments	$	8,079.5		100.0	%	$	8,043.1		100.0	%

CASH AND INVESTMENTS

Total cash and investments increased $36.4 million, or 0.5%, for the year ended December 31, 2013, of which equities increased $114.4 million, fixed maturities increased $18.4 million, cash and cash equivalents decreased $78.6 million and other investments decreased $17.8 million. Equity securities increased primarily from purchases of dividend yielding stocks and exchange traded funds, as well as market value appreciation, partially offset by sales of mutual funds. Fixed maturities increased due to the investment of positive operational cash flows and available cash, partially offset by market value depreciation of $267.3 million for the year. Cash and cash equivalents decreased due to funding net investments and financing activities. Cash used in financing activities in 2013 included repayment of debt, common stock repurchases and external dividend payments, partially offset by cash provided by net proceeds from the issuance of subordinated debentures.

Our fixed maturity portfolio is comprised of corporate securities, taxable and tax-exempt municipal securities, residential mortgage-backed securities, commercial mortgage-backed securities, U.S. governmental securities, foreign government securities and asset-backed securities. Equity securities primarily consist of common stocks, exchange traded funds and non-redeemable preferred stocks.

The following table provides information about the investment types of our fixed maturities portfolio:

DECEMBER 31	2013
					Net			Change in Net
(in millions)	Amortized				Unrealized			Unrealized for
Investment Type	Cost		Fair Value		Gain (Loss)			the Year
U.S. Treasury and government agencies	$	417.5	$	406.6	$	(10.9	)	$	(19.3	)
Foreign government		304.5		305.0		0.5			(3.9	)
Municipals:
Taxable		959.3		977.2		17.9			(61.2	)
Tax exempt		148.7		149.1		0.4			(6.6	)
Corporate		3,690.2		3,824.2		134.0			(126.6	)
Asset-backed:
Residential mortgage-backed		722.8		728.8		6.0			(30.2	)
Commercial mortgage-backed		405.9		411.6		5.7			(17.2	)
Asset-backed		166.3		168.1		1.8			(2.3	)
Total fixed maturities	$	6,815.2	$	6,970.6	$	155.4		$	(267.3	)

Net unrealized gains on fixed maturities decreased $267.3 million, or 63.2%, to a net unrealized gain of $155.4 million at December 31, 2013, compared to $422.7 million at December 31, 2012, primarily due to higher prevailing interest rates.

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Amortized cost and fair value by rating category were as follows:

DECEMBER 31		2013							2012
	Rating Agency					% of Total							% of Total
(dollars in millions)	Equivalent	Amortized				Fair			Amortized		Fair		Fair
NAIC Designation	Designation	Cost		Fair Value		Value			Cost		Value		Value
1	Aaa/Aa/A	$	4,934.1	$	5,009.7		71.9	%	$	4,744.0	$	5,017.9		72.2	%
2	Baa		1,494.0		1,555.5		22.3			1,443.5		1,569.3		22.6
3	Ba		164.7		173.1		2.5			143.1		156.2		2.2
4	B		170.8		178.4		2.5			135.1		143.5		2.1
5	Caa and lower		44.1		46.0		0.7			50.1		50.7		0.7
6	In or near default		7.5		7.9		0.1			13.7		14.6		0.2
Total fixed maturities		$	6,815.2	$	6,970.6		100.0	%	$	6,529.5	$	6,952.2		100.0	%

Based on ratings by the National Association of Insurance Commissioners (“NAIC”), approximately 94% of the fixed maturity portfolio consisted of investment grade securities at December 31, 2013, compared to 95% at December 31, 2012. The quality of our fixed maturity portfolio remains strong based on ratings, capital structure position, support through guarantees, underlying security, issuer diversification and yield curve position.

We deposit funds with various state and governmental authorities as well as with Lloyd’s. See Note 3 - “Investments” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K for additional information.

Our fixed maturity and equity securities are classified as available-for-sale and are carried at fair value. Financial instruments whose value was determined using significant management judgment or estimation constituted less than 2% of the total assets we measured at fair value. (See also Note 5 - “Fair Value” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K).

Other investments consisted primarily of overseas deposits, which are U.S. dollar and foreign denominated investments maintained in overseas funds and managed exclusively by Lloyd’s. These funds are required in order to protect policyholders in overseas markets and enable Chaucer to operate in those markets. Access to those funds is restricted and we have no control over the investment strategy. Also included in other investments were investments in limited partnerships, which were accounted for at cost or under the equity method of accounting.

Although we expect to invest new funds primarily in investment grade fixed maturities, we have invested, and expect to continue to invest, a portion of funds in common equity securities and below investment grade fixed maturities and other assets.

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European sovereign and non-sovereign debt exposure

Our European fixed maturity credit exposure at December 31, 2013 was as follows:

					Non-Sovereign
(in millions)	Sovereign				Foreign Agency				Financial				Non-Financial				Total
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
Country:	Cost		Value		Cost		Value		Cost		Value		Cost		Value		Cost		Value
United Kingdom	$	45.9	$	45.5	$	20.9	$	20.8	$	235.4	$	238.9	$	232.2	$	239.3	$	534.4	$	544.5
Germany		—		—		64.3		64.3		—		—		79.5		81.8		143.8		146.1
The Netherlands		—		—		23.9		24.1		41.0		41.6		30.8		31.8		95.7		97.5
France		—		—		4.8		4.9		19.4		19.3		60.7		62.5		84.9		86.7
Switzerland		—		—		—		—		21.7		22.0		59.4		63.0		81.1		85.0
Supranationals		—		—		78.0		78.8		—		—		—		—		78.0		78.8
Sweden		—		—		—		—		23.9		24.5		13.0		13.1		36.9		37.6
Spain		—		—		—		—		10.2		10.4		17.0		18.3		27.2		28.7
Norway		—		—		6.3		6.3		2.7		2.7		9.3		9.3		18.3		18.3
Italy		—		—		—		—		0.2		0.2		17.5		17.9		17.7		18.1
Other		—		—		—		—		—		—		47.8		49.7		47.8		49.7
Total fixed maturities	$	45.9	$	45.5	$	198.2	$	199.2	$	354.5	$	359.6	$	567.2	$	586.7	$	1,165.8	$	1,191.0

Our sovereign debt totaled $45.5 million, or 0.6% of investment assets as of December 31, 2013, and was limited to the highly rated country of the U.K. In addition, our supranational and foreign agency exposure totaled $199.2 million, or 2.5% of investment assets, and primarily consisted of debt securities from the highly rated countries of Germany, the Netherlands, and the U.K. Our exposure to European non-sovereign financials, excluding those based in the U.K., totaled $120.7 million, or 1.5% of investment assets. Exposure to non-sovereign U.K. financial debt consisted primarily of term deposits and senior notes of banks. Also, we held money market funds totaling $136.5 million, or 1.7% of investment assets, which were comprised of a well-diversified portfolio of short-term debt securities of predominately large financial institutions domiciled in highly rated countries. The remainder of our European non-sovereign debt exposure, excluding the U.K., was $347.4 million, which represented 4.3% of investment assets. Generally, these securities were high quality, large cap multi-national companies that were well diversified by sector, country and issuer. Included in our non-financial, non-sovereign exposure were issuers domiciled in Spain, Italy, Ireland and Portugal totaling $56.5 million, or 0.7% of investment assets. These consisted of large market capitalization issuers that provide essential products and/or services.

We determined country exposures based on the country of domicile for the ultimate parent company of the various issuers we held as of December 31, 2013; however, in light of the economic and financial inter-relatedness and dependencies that exist among European countries and related financial systems, economic turmoil in one country could trigger a contagion effect on other countries. We believe the quality of our European credit exposure remains sound based on ratings and issuer strength, position in the capital structure, support through guarantees and partial government ownership by highly rated countries, diversity and quality of non-financial issuers and blend of industry exposures, and yield curve position. We believe that we do not have meaningful indirect exposures in our portfolio and we do not invest in credit derivatives.

We manage our country exposure using fundamental analysis coupled with relative value considerations. Investment decisions are based on the combination of a top-down macroeconomic perspective and bottom-up credit security analysis. We monitor political and economic developments; progress toward attainment of growth and budget targets; developments related to policy, reform and regulatory initiatives from European officials; progress toward funding objectives, including the availability and cost of funding; outlook for credit ratings; ability of banks to meet increased regulatory capital standards, operate in a weakened macroeconomic environment, and maintain adequate liquidity and sufficient access to capital to meet funding requirements; and contagion throughout the financial system as evidenced by increased costs for interbank funding, volatility in prices for stocks and corporate bonds, as well as the availability of capital.

We actively manage our credit exposure and seek securities with the best combination of credit strength and valuation. As we invest new capital, we consider expectations for the strength and duration of economic recovery in Europe and the possibility of additional volatility. Accordingly, we focus on providers of essential services or products best positioned to navigate the period of weak growth; industrials with greater international exposure, either locally or via exports, particularly to the developing world, which we view favorably based on higher growth assumptions for emerging market economies; and financial institutions best positioned regarding asset quality, liquidity and capital adequacy.

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Overall economic growth remains weak throughout Europe but modestly improved versus the prior year. Volatility, while currently suppressed, could increase suddenly as officials in Europe continue to address the twin objectives of stimulating economic growth while balancing fiscal budgets. We believe that leaders remain committed to protecting the currency union and improving financial stability. Although the timing and degree of success toward achieving these goals remains uncertain, we do not anticipate that future developments related to our European sovereign and non-sovereign debt exposure will have a material effect on our financial condition, results of operations or liquidity.

OTHER-THAN-TEMPORARY IMPAIRMENTS

For the year ended December 31, 2013, we recognized in earnings $6.0 million of other-than-temporary impairments (“OTTI”), of which $4.1 million related to equity securities and $1.9 million related to debt securities. OTTI on equity securities consisted of $2.5 million from an emerging markets exchange-traded fund and $1.6 million of common stocks. OTTI on debt securities consisted of $1.4 million of estimated credit losses, including $0.8 million of corporate securities in the industrial sector and $0.6 million on residential mortgage-backed securities, and $0.5 million on below investment grade corporate securities that we intended to sell. For the year ended December 31, 2012, we recognized in earnings $7.8 million of OTTI, of which $6.6 million related to debt securities and $1.2 million related to equity securities. OTTI on debt securities consisted of $4.6 million of below investment grade corporate bonds in the utilities and industrial sectors that we intended to sell and $2.0 million related to estimated credit losses, consisting of $0.9 million on municipal bonds, $0.7 million on residential mortgage-backed securities and $0.4 million on corporate bonds. For the year ended December 31, 2011, we recognized in earnings $6.9 million of OTTI, of which $5.5 million related to debt securities and $1.4 million related to equity securities. OTTI on debt securities consisted of $4.6 million of primarily below investment grade corporate and municipal bonds that we intended to sell and $0.9 million related to estimated credit losses on residential mortgage-backed securities.

UNREALIZED LOSSES

The following table provides information about our fixed maturities and equity securities that were in an unrealized loss position. (See also Note 3 - “Investments” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K).

DECEMBER 31	2013				2012
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
(in millions)	Losses		Value		Losses		Value
Fixed maturities:
Investment grade:
12 months or less	$	64.7	$	2,102.4	$	3.4	$	546.0
Greater than 12 months		21.9		203.7		9.5		106.5
Total investment grade fixed maturities		86.6		2,306.1		12.9		652.5
Below investment grade:
12 months or less		3.0		73.9		1.2		28.2
Greater than 12 months		1.9		22.9		5.9		55.1
Total below investment grade fixed maturities		4.9		96.8		7.1		83.3
Equity securities:
12 months or less		2.8		45.2		4.8		74.4
Greater than 12 months		0.4		0.7		—		—
Total equity securities		3.2		45.9		4.8		74.4
Total	$	94.7	$	2,448.8	$	24.8	$	810.2

Gross unrealized losses on fixed maturities and equity securities increased $69.9 million compared to December 31, 2012, primarily attributable to higher prevailing interest rates. At December 31, 2013, gross unrealized losses consisted primarily of $37.5 million of corporate fixed maturities, $19.1 million in municipal securities, $14.2 million of U.S. Treasury and government agency securities and $14.1 million of residential mortgage-backed securities.

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We view gross unrealized losses on fixed maturities and equity securities as temporary since it is our assessment that these securities will recover in the near term, allowing us to realize their anticipated long-term economic value. With respect to gross unrealized losses on fixed maturities, we do not intend to sell, nor is it more likely than not we will be required to sell, such debt securities before this expected recovery of amortized cost (See also “Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K). With respect to equity securities, we have the intent and ability to retain such investments for the period of time anticipated to allow for this expected recovery in fair value. Inherent in our assessment are the risks that, subsequent to the balance sheet date, market factors may differ from our expectations; the global economic recovery is less robust than we expect or reverts to recessionary trends; we may decide to subsequently sell a security for unforeseen business needs; or changes in the credit assessment or equity characteristics from our original assessment may lead us to determine that a sale at the current value would maximize recovery on such investments. To the extent that there are such adverse changes, an OTTI would be recognized as a realized loss. Although unrealized losses are not reflected in the results of financial operations until they are realized or deemed “other-than-temporary”, the fair value of the underlying investment, which does reflect the unrealized loss, is reflected in our Consolidated Balance Sheets.

The following table sets forth gross unrealized losses for fixed maturities by maturity period and for equity securities at December 31, 2013 and 2012. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties, or we may have the right to put or sell the obligations back to the issuers.

DECEMBER 31	2013		2012
(in millions)
Due in one year or less	$	0.5	$	0.5
Due after one year through five years		8.4		4.7
Due after five years through ten years		36.6		2.5
Due after ten years		26.9		8.8
		72.4		16.5
Mortgage-backed and asset-backed securities		19.1		3.5
Total fixed maturities		91.5		20.0
Equity securities		3.2		4.8
Total fixed maturities and equity securities	$	94.7	$	24.8

The carrying values of defaulted fixed maturity securities on non-accrual status at December 31, 2013 and 2012 were not material. The effects of non-accruals compared with amounts that would have been recognized in accordance with the original terms of the fixed maturities, were reductions in net investment income of $2.3 million, $2.5 million and $2.3 million for the years ended December 31, 2013, 2012 and 2011, respectively. Any defaults in the fixed maturities portfolio in future periods may negatively affect investment income.

Our investment portfolio and shareholders’ equity can be significantly impacted by changes in market values of our securities. Market volatility could increase and defaults on fixed income securities could occur. As a result, we could incur additional realized and unrealized losses in future periods, which could have a material adverse impact on our results of operations and/or financial position.

Monetary policies in the developed economies, particularly in the United States, Europe and Japan, are supportive of moderate economic growth, while fiscal policies are more divergent and subject to change. During 2014 in the United States, the Federal Reserve (the “Fed”) began tapering its $85 billion of monthly bond purchases, known as quantitative easing, which has put upward pressure on investment yields. However, the Fed’s balance sheet of more than $4 trillion is expected to keep rates low. The Fed has indicated that it does not plan to begin raising short-term rates in the near future and is expected to continue to provide forward guidance to keep rates relatively stable even as the economy strengthens. As a result, we anticipate marginally higher new money yields and lower fixed maturity market values in 2014.

While the United States is beginning to reduce its extraordinary measures, other major central banks, such as the Bank of England, the European Central Bank and the Bank of Japan, continue with their stimulus policies as they seek higher growth, and in the case of the latter two, fight deflation. The removal, modification or suggestion of changes in these policies could have an adverse effect on prevailing market interest rates and on issuers’ level of business activity or liquidity, increasing the probability of future defaults. While we may experience defaults on fixed income securities, particularly with respect to non-investment grade securities, it is difficult to foresee which issuers, industries or markets will be affected. As a result, the value of our fixed maturity portfolio could change rapidly in ways we cannot currently anticipate and we could incur additional realized and unrealized losses in future periods.

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DERIVATIVE INSTRUMENTS

We maintain an overall risk management strategy that incorporates the use of derivative instruments, as necessary, to manage significant unplanned fluctuations in earnings caused by foreign currency and interest rate volatility.

We did not use derivative instruments in 2013. In 2012, we realized a loss of $5.1 million on futures contracts relating to the release of tax capital loss carryforwards. Additionally, we recognized a gain of $0.7 million on a foreign currency forward used to mitigate changes in fair value caused by foreign currency fluctuation in converting U.K. pound sterling (“GBP”) denominated securities into their U.S. dollar denominated equivalent.

In 2011, we realized losses on derivative instruments of $7.1 million. In April 2011, we entered into a foreign currency forward contract to hedge the foreign currency exchange risk embedded in the purchase price of Chaucer, which was denominated in GBP, resulting in the recognition of a loss of $11.3 million in income from continuing operations. In May 2011, we entered into a treasury lock forward agreement to hedge the interest rate risk associated with our planned issuance of senior debt, resulting in a loss of $1.9 million, which was recorded in accumulated other comprehensive income and will be recognized in earnings over the term of the senior notes. Additionally in 2011, Chaucer held foreign currency forward contracts utilized to mitigate changes in fair value caused by foreign currency fluctuation in converting the fair value of GBP and Euro denominated investment portfolios into their U.S. dollar denominated equivalent. These portfolios supported U.S. dollar denominated claim reserve liabilities. For the year ended December 31, 2011, we recognized a gain of $6.1 million related to these instruments, which were terminated in October 2011.

OTHER ITEMS

Net income also included the following items:

	Commercial			Personal									Discontinued
(in millions)	Lines			Lines			Chaucer			Other			Operations		Total
2013
Net realized investment gains (losses)	$	21.3		$	12.2		$	0.1		$	(0.1	)	$	—	$	33.5
Net loss from repayment of debt		(5.2	)		(2.6	)		—			(19.9	)		—		(27.7	)
Loss on real estate		(0.9	)		(3.8	)		—			—			—		(4.7	)
Net costs related to acquired businesses		—			—			—			(0.1	)		—		(0.1	)
Discontinued operations, net of taxes		—			—			—			—			5.3		5.3
2012
Net realized investment gains	$	12.5		$	7.1		$	1.5		$	2.5		$	—	$	23.6
Net loss from repayment of debt		—			—			(5.1	)		—			—		(5.1	)
Net costs related to acquired businesses		—			—			—			(2.6	)		—		(2.6	)
Net foreign exchange losses		—			—			—			(0.4	)		—		(0.4	)
Discontinued operations, net of taxes		—			—			—			—			9.8		9.8
2011
Net realized investment gains	$	4.7		$	4.0		$	6.7		$	12.7		$	—	$	28.1
Net gain (loss) from repayment of debt		0.3			—			—			(2.6	)		—		(2.3	)
Net costs related to acquired businesses		—			—			—			(16.4	)		—		(16.4	)
Loss on derivative instruments		—			—			—			(11.3	)		—		(11.3	)
Net foreign exchange gains		—			—			—			6.7			—		6.7
Discontinued operations, net of taxes		—			—			—			—			5.2		5.2

We manage investment assets for our Commercial Lines, Personal Lines, and Other segments based on the requirements of our U.S. combined property and casualty companies. We allocate the investment income, expenses and realized gains and losses to our Commercial Lines, Personal Lines and Other segments based on actuarial information related to the underlying businesses. We manage investment assets separately for our Chaucer segment.

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Net realized gains on investments were $33.5 million, $23.6 million, and $28.1 million for 2013, 2012, and 2011, respectively. Net realized gains in 2013 were primarily due to $41.3 million of gains recognized from the sale of equities and fixed maturities, partially offset by $6.0 million of other-than-temporary impairments. Net realized gains in 2012 were primarily due to $31.8 million of gains recognized from the sale of equities and fixed maturities, partially offset by $7.8 million of other-than-temporary impairments. Net realized gains in 2011 were primarily due to $27.7 million of gains recognized from the sale of fixed maturities and equity securities and $6.1 million of gains on foreign currency hedges, partially offset by $6.9 million of other-than-temporary impairments.

In 2013, through several transactions, we repurchased senior debentures with a net carrying value of $73.8 million at a cost of $93.7 million, resulting in a loss of $19.9 million. Additionally in 2013, we repaid $46.3 million of our FHLBB advances plus prepayment fees of $7.8 million for a total payment of $54.1 million. In 2012, we repurchased $65.4 million of our subordinated unsecured notes related to Chaucer at a par value. These notes had a carrying value of $60.3 million, resulting in a net loss of $5.1 million on the repurchases. In addition, we repurchased $7.0 million of capital securities related to AIX Holdings, Inc. (“AIX”) at par value. In 2011, we repurchased in several transactions, $69.5 million of our subordinated debentures at a cost of $72.1 million, resulting in a net loss of $2.6 million on the repurchases. In addition, we repurchased $8.0 million of capital securities related to AIX at a cost of $7.7 million, resulting in a gain of $0.3 million.

In 2013, we consolidated our operations in Howell, Michigan from two buildings into one building. This resulted in a plan to relocate the employees and pursue the sale of one of the buildings. In conjunction with the planned relocation, we recognized a loss of $4.7 million. This is included in other operating expenses in the Consolidated Statements of Income during the year ended December 31, 2013.

Acquisition costs were $0.1 million and $2.6 million in 2013 and 2012, respectively, and $16.4 million in 2011, which primarily consisted of advisory, legal, and accounting costs associated with the acquisition of Chaucer on July 1, 2011. For information on the loss on derivative instruments and net foreign exchange gains recognized during 2011, see Note 2 – “Acquisitions and Discontinued Operations” of the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY

Operations are subject to risk resulting from interest rate fluctuations which may adversely impact the valuation of the investment portfolio. In a rising interest rate environment, the value of the fixed income sector, which comprises 86% of our investment portfolio, may decline as a result of decreases in the fair value of the securities. Our intent is to hold securities to maturity and recover the decline in valuation as prices accrete to par. However, our intent may change prior to maturity due to changes in the financial markets, our analysis of an issuer’s credit metrics and prospects, or as a result of changes in cash flow needs. Interest rate fluctuations may also reduce net investment income and as a result, profitability. The portfolio may realize lower yields and therefore lower net investment income on securities because the securities with prepayment and call features may prepay at a different rate than originally projected. Also, funds may not be available to invest at higher interest rates.

In a declining interest rate environment, prepayments and calls may increase as issuers exercise their option to refinance at lower rates. The resulting funds would be reinvested at lower yields.

The following table illustrates the estimated impact on the fair value of our investment portfolio at December 31, 2013 of hypothetical changes in prevailing interest rates, defined as changes in interest rates on U.S. Treasury debt. It does not reflect changes in credit spreads, liquidity spreads and other factors that affect the value of securities. Since changes in prevailing interest rates are often accompanied by changes in these other factors, the reader should not assume that an actual change in interest rates would result in the values illustrated.

(dollars in millions)
INVESTMENT TYPE	+300bp		+200bp		+100bp		0		-100bp		-200bp		-300bp
Residential mortgage-backed securities	$	650	$	675	$	700	$	730	$	755	$	770	$	775
Municipal securities		955		1,010		1,065		1,125		1,190		1,245		1,285
All other fixed income securities		4,580		4,745		4,925		5,115		5,295		5,435		5,515
Total	$	6,185	$	6,430	$	6,690	$	6,970	$	7,240	$	7,450	$	7,575

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Our overall investment strategy is intended to balance investment income with credit and interest rate risk, while maintaining sufficient liquidity and the opportunity for capital growth. The asset allocation process takes into consideration the types of business written, the level of surplus required to support our different businesses and the risk return profiles of the underlying asset classes. We look to balance the goals of capital preservation, net investment income stability, liquidity and total return.

The majority of our assets are invested in the fixed income markets. Through fundamental research and credit analysis, with a focus on value investing, our investment professionals seek to identify a portfolio of stable income-producing higher quality U.S. government, foreign government, municipal, corporate, residential and commercial mortgage-backed securities and asset-backed securities. We have a general policy of diversifying investments both within and across major investment and industrial sectors to mitigate credit and interest rate risk. We monitor the credit quality of our investments and our exposure to individual markets, borrowers, industries, sectors and, in the case of direct commercial mortgages and commercial mortgage-backed securities, property types and geographic locations. In addition, we currently carry debt which is subject to interest rate risk, which was issued at fixed interest rates between 5.50% and 8.207%. Current market conditions, in light of our risk tolerance, restrict our ability to invest fixed income assets at similar rates of return; therefore, earnings on a similar level of assets are not sufficient to cover current debt interest costs.

The following tables for the years ended December 31, 2013 and 2012 provide information about financial instruments that are sensitive to changes in interest rates. The tables present principal cash flows and related weighted-average interest rates by expected maturities. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or we may have the right to put or sell the obligations back to the issuers. Mortgage-backed and asset-backed securities are included in the category representing their expected maturity. Available-for-sale securities include both U.S. and foreign-denominated fixed maturities. Additionally, we have assumed available-for-sale securities are similar enough to aggregate those securities for presentation purposes. Specifically, variable rate available-for-sale securities comprise an immaterial portion of the portfolio and do not have a significant impact on weighted-average interest rates. Therefore, the variable rate investments are not presented separately; instead they are included in the tables at their current interest rate. Debt is presented at contractual maturities, except for the FHLBB advances which were repaid in January 2013.

																						Fair
																						Value
DECEMBER 31, 2013	2014			2015			2016			2017			2018			Thereafter			Total			12/31/13
(dollars in millions)
Rate Sensitive Assets:
Available-for-sale securities	$	663.6		$	768.9		$	843.3		$	670.6		$	607.5		$	3,248.6		$	6,802.5		$	6,970.6
Average interest rate		3.68	%		3.83	%		4.25	%		4.04	%		3.75	%		4.17	%		4.04	%
Rate Sensitive Liabilities:
Debt	$	—		$	—		$	—		$	—		$	—		$	903.9		$	903.9		$	961.7
Average interest rate		—			—			—			—			—			6.70	%		6.70	%
																						Fair
																						Value
DECEMBER 31, 2012	2013			2014			2015			2016			2017			Thereafter			Total			12/31/12
(dollars in millions)
Rate Sensitive Assets:
Available-for-sale securities	$	669.3		$	791.1		$	830.5		$	759.6		$	627.9		$	2,841.3		$	6,519.7		$	6,952.2
Average interest rate		3.98	%		4.11	%		3.91	%		4.62	%		4.15	%		4.46	%		4.29	%
Rate Sensitive Liabilities:
Debt	$	46.3		$	—		$	—		$	—		$	—		$	803.1		$	849.4		$	995.2
Average interest rate		3.88	%		—			—			—			—			6.84	%		6.68	%

EQUITY PRICE RISK

Our equity securities portfolio is exposed to equity price risk arising from potential volatility in equity market prices. Portfolio characteristics are analyzed regularly and price risk is actively managed through a variety of techniques. A hypothetical increase or decrease of 10% in the market price of our equity securities would have resulted in an increase or decrease in the fair value of the equity securities portfolio of approximately $43 million at December 31, 2013 and approximately $32 million at December 31, 2012.

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FOREIGN CURRENCY EXCHANGE RISK

Chaucer has exposure to foreign currency risk, most notably in insurance contracts and invested assets. Some of the insurance contracts provide that ultimate losses may be payable in foreign currencies depending on the country of original loss. Foreign currency exchange rate risk exists to the extent that there is an increase in the exchange rate of the foreign currency in which losses are ultimately owed. Thus, Chaucer attempts to manage foreign currency risk by seeking to match liabilities under insurance and reinsurance policies that are payable in foreign currencies with cash and investments that are denominated in such currencies. We may also utilize foreign currency forward contracts as part of our investment strategy. The principal currency creating foreign exchange risk for us is the U.K. pound sterling, and to a lesser extent, the Euro and the Canadian dollar. A hypothetical 10% reduction in the value of foreign denominated investments would be expected to produce a loss in fair value of approximately $112 million at December 31, 2013 and approximately $124 million at December 31, 2012.

DISCONTINUED OPERATIONS

Discontinued operations primarily consist of our former life insurance businesses which were sold prior to 2009, our Discontinued Accident and Health Business and our former third party administration business, CMI, which was sold in 2012.

The Discontinued Accident and Health Business had no significant financial results that impacted 2013, 2012 or 2011.

Results from discontinued operations for the year ended December 31, 2013 include $5.8 million relating to our former life insurance businesses. This was primarily due to an insurance settlement related to a class action lawsuit, net of tax.

Discontinued operations for the year ended December 31, 2012 primarily included the net gain on the sale of our third party administration subsidiary, CMI, which was completed on April 30, 2012. CMI provided third party workers’ compensation and disability program administration services (such as claims administration, loss prevention and medical cost containment and in-house excess workers’ compensation coverage) to public entities, self–insured employers and group programs. CMI generated total revenues of $4.4 million during the four months ended April 30, 2012 and $12.5 million during the year ended December 31, 2011. Income before taxes totaled $0.7 million during the first four months of 2012, while contributing $2.0 million during 2011. Assets and shareholder’s equity transferred as part of this sale totaled $10.9 million and $0.6 million, respectively. This sale resulted in a net gain of $10.8 million after taxes and is included in discontinued operations for the year ended December 31, 2012.

INCOME TAXES

We are subject to the tax laws and regulations of the U.S. and foreign countries in which we operate. We file a consolidated U.S. federal income tax return that includes the holding company and its U.S. subsidiaries. Generally, taxes are accrued at the U.S. statutory tax rate of 35% for income from the U.S. operations. Our primary non-U.S. jurisdiction is the U.K. In July 2012, the U.K. statutory rate decreased from 26% to 24% effective April 1, 2012 and from 24% to 23% effective April 1, 2013. Further decreases were enacted in July 2013 to reduce the statutory rate from 23% to 21% effective April 1, 2014 and from 21% to 20% effective April 1, 2015. We accrue taxes on certain non-U.S. income that is subject to U.S. tax at the U.S. tax rate. Foreign tax credits, where available, are utilized to offset U.S. tax as permitted. Certain of our non-U.S. income is not subject to U.S. tax until repatriated. Foreign taxes on this non-U.S. income are accrued at the local foreign rate and do not have an accrual for U.S. deferred taxes since these earnings are intended to be indefinitely reinvested overseas.

The provision for income taxes from continuing operations was an expense of $83.4 million in 2013, compared to benefits of $17.4 million and $9.9 million in 2012 and 2011, respectively. These amounts resulted in consolidated effective tax rates of 25.3%, (60.6)%, and (45.8)% on pre-tax income for 2013, 2012, and 2011, respectively. These provisions reflect benefits related to tax planning strategies implemented in prior years of $17.5 million, $14.3 million and $9.7 million in 2013, 2012 and 2011, respectively. The provisions in 2012 and 2011 also reflect decreases in our valuation allowance related to capital loss carryforwards of $7.7 million and $7.5 million, respectively. Absent these benefits, the provision for income taxes for 2013, 2012, and 2011 would have been expenses of $100.9 million or 30.7%, $4.6 million, or 16.0%, and $7.3 million, or 33.8%, respectively. The increase in 2013 effective tax rate is primarily due to higher underwriting income.

The income tax provision on operating income was an expense of $100.9 million for 2013, compared to a benefit of $1.9 million for 2012 and an expense of $2.6 million in 2011. These provisions resulted in effective tax rates for operating income of 30.8%, (14.4)% and 15.5% in 2013, 2012 and 2011, respectively. The increase in expense for 2013 is primarily due to higher underwriting income. The tax benefit in 2012 is primarily due to income from foreign operations not subject to U.S. tax and lower domestic underwriting income.

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Included in our deferred tax asset as of December 31, 2013 is an asset of $42.1 million related to U.S. net operating loss carryforwards and a deferred tax asset of $22.4 million related to foreign net operating loss carryforwards. Our pre-tax U.S. operating loss carryforwards of $120.3 million will expire beginning in 2031. Our pre-tax foreign operating loss carryforwards of $66.2 million were generated in the U.K. and have no expiration date. It is our opinion that there will be sufficient future U.S. and U.K. taxable income to utilize these loss carryforwards. Our estimate of the gross amount and likely realization of loss carryforwards may change over time.

Included in our deferred tax net asset as of December 31, 2013 are assets of $110.3 million related to alternative minimum tax (“AMT”) credit carryforwards and $12.8 million related to foreign tax credit carryforwards. We may utilize these credits to offset future taxable income. The result of their utilization will be a lower current tax rate offset by a higher deferred tax provision, and also lower cash expenditures for federal income taxes during the utilization period. There is no expiration on AMT credit carryforwards and our foreign tax credit carryforwards will expire beginning in 2022. It is our opinion that there will be sufficient future U.S. and U.K. taxable income to utilize these tax credit carryforwards. Our estimate of the gross amount and likely realization of tax credit carryforwards may change over time.

The IRS audits of the years 2007 and 2008 commenced in April 2010. In 2011, we received a Revenue Agent Report for the 2007 and 2008 IRS audit. We agreed to all proposed adjustments other than the disallowance of deduction for certain loss reserves, for which we filed a formal protest. In December 2013, we reached a tentative settlement on the disallowance of deduction for certain loss reserves and as a result a liability for uncertain tax positions was established for $4.8 million, with an offsetting deferred tax asset. The net impact is a decrease to income from continuing operations of $0.5 million. We expect to reach a final settlement of this issue during 2014.

During 2013, we recorded a valuation allowance of $2.9 million related to our deferred tax asset on the unrealized depreciation in our investment portfolio. It is our opinion that it is more likely than not that this asset will not be realized and accordingly, we recorded this valuation allowance as an adjustment to accumulated other comprehensive income.

In prior years, we completed several transactions which resulted in the realization, for tax purposes only, of unrealized gains in our investment portfolio. We realized $69.6 million and $98.4 million, respectively, in 2012 and 2011 as a result of such transactions. These transactions enabled us to realize capital loss carryforwards to offset these gains, and resulted in the release of the valuation allowance we held against the deferred tax asset related to these capital loss carryforwards. In 2012, we released $24.4 million of our valuation allowance which was recorded as a benefit in accumulated other comprehensive income. In 2011, we released $29.0 million of our valuation allowance which $0.2 million was reflected in income from continuing operations and the remaining $28.8 million was reflected as a benefit in accumulated other comprehensive income. During 2013, 2012 and 2011, we recognized in income from continuing operations, related to non-operating income, $17.5 million, $14.3 million and $9.7 million, respectively. The remaining amount of $107.7 million in accumulated other comprehensive income will be released into income from continuing operations in future years, as the investment securities subject to these transactions are sold or mature.

During 2012, we released $35.9 million of our valuation allowance related to our deferred tax asset held at the beginning of the year. The release of this valuation allowance resulted from the aforementioned transaction which utilized our capital loss carryforwards, unrealized appreciation in our investment portfolio, and net realized capital gains in our Consolidated Statements of Income. Accordingly, we recorded decreases in our valuation allowance of $25.3 million as an adjustment to accumulated other comprehensive income, $7.7 million as an adjustment to income tax expense from continuing operations, and $2.9 million in discontinued operations.

During 2011, we reduced the valuation allowance related to our deferred tax asset by $55.6 million, from $91.5 million to $35.9 million. There were four principal components to this reduction. First, we decreased the valuation allowance by $29.0 million as a result of the transactions described above which utilized our capital loss carryforwards. Second, we decreased the valuation allowance by $21.9 million on certain unrealized losses as a result of unrealized appreciation in our investment portfolio. This decrease was reflected as an increase in accumulated other comprehensive income. Third, as a result of $28.1 million in net realized gains during 2011, we decreased the valuation allowance by $7.5 million as an increase to income from continuing operations, since these gains utilized our capital loss carryforwards. Fourth, in the 2010 U.S. federal income tax return, we were able to utilize an additional $7.6 million of capital loss carryforwards that expired in 2010. As such, we increased the valuation allowance by $2.6 million with an equal and offsetting increase to the related deferred tax asset. The remaining increase of $0.2 million was attributable to other items reflected as expense from discontinued operations.

CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements. These statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following critical accounting estimates are those which we believe affect the more significant judgments and estimates used in the preparation of our financial statements. Additional information about other significant accounting policies and estimates may be found in Note 1—“Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

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RESERVE FOR LOSSES AND LOSS EXPENSES

See “Results of Operations – Segments - Reserve for Losses and Loss Adjustment Expenses” in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K for a discussion of our critical accounting estimates for loss reserves.

REINSURANCE RECOVERABLE BALANCES

We share insurance risk of the primary underlying contracts with various insurance entities through the use of reinsurance contracts. As a result, when we experience loss events that are subject to a reinsurance contract, reinsurance recoveries are recorded. The amount of the reinsurance recoverable can vary based on the size of the individual loss or the aggregate amount of all losses in a particular line, book of business or an aggregate amount associated with a particular accident year. The valuation of losses recoverable depends on whether the underlying loss is a reported loss, or an incurred but not reported loss. For reported losses, we value reinsurance recoverables at the time the underlying loss is recognized, in accordance with contract terms. For incurred but not reported losses, we estimate the amount of reinsurance recoverable based on the terms of the reinsurance contracts and historical reinsurance recovery information and apply that information to the gross loss reserve estimates. The most significant assumption we use is the average size of the individual losses for those claims that have occurred but have not yet been recorded by us. The reinsurance recoverable is based on what we believe are reasonable estimates and is disclosed separately on the financial statements. However, the ultimate amount of the reinsurance recoverable is not known until all losses are settled.

Reinsurance recoverables recorded on insurance losses ceded under reinsurance contracts are subject to judgments and uncertainties similar to those involved in estimating gross loss reserves, as disclosed above. In addition to these uncertainties, our reinsurance recoverables may prove uncollectible if the reinsurers are unable or unwilling to perform under the reinsurance contracts. In establishing our reinsurance allowance for amounts deemed uncollectible, we evaluate the financial condition of our reinsurers and monitor concentration of credit risk arising from our exposure to individual reinsurers. To determine if an allowance is necessary, we consider, among other factors, published financial information, reports from rating agencies, payment history, collateral held and our legal right to offset balances recoverable against balances we may owe. Our reinsurance allowance for doubtful accounts is subject to uncertainty and volatility due to the time lag involved in collecting amounts recoverable from reinsurers. Over the period of time that losses occur, reinsurers are billed and amounts are ultimately collected, economic conditions, as well as the operational and financial performance of particular reinsurers, may change and these changes may affect the reinsurers’ willingness and ability to meet their contractual obligation to us. It is also difficult to fully evaluate the impact of major catastrophic events on the financial stability of reinsurers, as well as the access to capital that reinsurers may have when such events occur. The ceding of insurance does not legally discharge us from our primary liability for the full amount of the policies, and we will be required to pay the loss and bear collection risk even if the reinsurers fail to meet their obligations under the reinsurance contracts.

PENSION BENEFIT OBLIGATIONS

General

We currently have a U.S. qualified defined benefit plan, a defined benefit pension plan for our international subsidiary, Chaucer, and several smaller qualified and non–qualified benefit plans. In order to measure the liabilities and expense associated with these plans, we must make various estimates and key assumptions, including discount rates used to value liabilities, assumed rates of return on plan assets, employee turnover rates and anticipated mortality rates. Additionally, our Chaucer pension plan also must take into consideration inflation rates, specifically related to participant salary increases. These estimates and assumptions are reviewed at least annually and are based on our historical experience, as well as current facts and circumstances. In addition, we use outside actuaries to assist in measuring the expenses and liabilities associated with our defined benefit pension plans.

Two significant assumptions used in the determination of benefit plan obligations and expenses that are dependent on market factors, which have been subject to a greater level of volatility over the past few years, are the discount rate and the return on plan asset assumptions. The discount rate enables us to state expected future cash flows as a present value on the measurement date. We also use this discount rate in the determination of our pre-tax pension expense or benefit. A lower discount rate increases the present value of benefit obligations and increases pension expense. To determine the expected long-term return on plan assets, we generally consider historical mean returns by asset class for passive indexed strategies, as well as current and expected asset allocations, and adjust for certain factors that we believe will have an impact on future returns. Actual returns on plan assets in any given year seldom result in the achievement of the expected rate of return on assets. Actual returns on plan assets in excess of these expected returns will generally reduce our net actuarial losses (or increase actuarial gains) that are reflected in our accumulated other comprehensive income balance in shareholders’ equity, whereas actual returns on plan assets which are less than expected returns will generally increase our net actuarial losses (or decrease actuarial gains) that are reflected in accumulated other comprehensive income. These gains or losses are amortized into expense in future years.

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Expenses related to these plans are generally calculated based upon information available at the beginning of the plan year. Our pre-tax expense related to our defined benefit plans was $12.6 million and $11.0 million for 2013 and 2012, respectively.

U.S. Qualified Defined Benefit Plan

Prior to 2005, we provided pension retirement benefits to substantially all of our U.S. employees based on a defined benefit cash balance formula. In addition to the cash balance allocation, certain transition group employees, who had met specified age and service requirements as of December 31, 1994, were eligible for a grandfathered benefit based primarily on the employees’ years of service and compensation during their highest five consecutive plan years of employment. As of January 1, 2005, the defined benefit pension plans were frozen.

As of December 31, 2013 and 2012, we determined our discount rate utilizing an independent yield curve which provides for a portfolio of high quality bonds that are expected to match the cash flows of our pension plan. Bond information used in the yield curve included only those rated Aa or better as of December 31, 2013 and 2012, respectively, and had been rated by at least two well-known rating agencies. At December 31, 2013, based upon our qualified plan liabilities and cash flows in relation to this discount curve, we increased our discount rate to 5.00%, from 4.25% at December 31, 2012.

For the years ended December 31, 2013 and 2012, the expected rate of return on our qualified plan assets was 5.25% and 6.0%, respectively. The decrease reflects declines in the fixed maturities markets in general. Actual returns of the plan investments generated approximately $3 million of losses and $57 million of gains during 2013 and 2012, respectively, as compared to expected returns of approximately $30 million and $33 million, respectively. The plan assets consisted of 84% fixed maturities and 16% equities at December 31, 2013.

In 2013, actuarial gains of approximately $37 million primarily resulting from the increase in the discount rate from the prior year were partially offset by investment losses of approximately $33 million. Actuarial losses of approximately $48 million experienced in 2012 primarily as a result of a decrease in the discount rate from the prior year were offset by the benefit from investment gains of approximately $24 million. The net gain in 2013 resulted in an adjustment to our accumulated actuarial loss of $4.2 million, which is reflected as an increase to our accumulated other comprehensive income. The net loss in 2012 resulted in an adjustment to our accumulated net actuarial losses of $23.7 million, which is reflected as a decrease to our accumulated other comprehensive income. The change in these actuarial gains and losses is amortized into earnings in future years. In addition to the adjustments to accumulated other comprehensive income from the actuarial gains occurring in 2013 was amortization of actuarial losses from prior years of $12.9 million. The adjustments to accumulated other comprehensive income from the actuarial losses occurring in 2012 were offset by the amortization of actuarial losses from prior years of $10.8 million. Given the effect of our actual investment experience in 2013, and taking into consideration the increase in discount rates in 2014, U.S. pension related expenses are expected to increase slightly from 2013. Accordingly, in 2014 we expect our pre-tax pension expense for the U.S. qualified defined benefit pension plan to remain consistent with that in 2013 at approximately $8 million.

Holding all other assumptions constant, sensitivity to changes in our key assumptions related to our U.S. qualified defined benefit pension plan is as follows:

Discount Rate – A 25 basis point increase in the discount rate would decrease our pension expense in 2014 by $1.6 million and decrease our projected benefit obligation by $11.9 million. A 25 basis point reduction in the discount rate would increase our pension expense by $1.5 million and increase our projected benefit obligation by $12.4 million.

Expected Return on Plan Assets – A 25 basis point increase or decrease in the expected return on plan assets would decrease or increase our pension expense in 2014 by $1.3 million.

Chaucer Pension Plan

Prior to 2002, Chaucer provided defined benefit pension retirement benefits to certain of its employees. As of December 31, 2001, the defined benefit section of the pension plan was closed to new members. The defined benefit obligation for this plan is based on the employees’ years of service and final pensionable salary.

As of December 31, 2013 and 2012, we determined the discount rate utilizing an independent yield curve which provides for a portfolio of high quality bonds that are expected to match the cash flows of the Chaucer plan. At December 31, 2013, based upon Chaucer’s plan liabilities and cash flows in relation to these yield curves, we decreased the discount rate to 4.50% from 4.80% at December 31, 2012.

For the years ended December 31, 2013 and 2012, the expected rate of return on plan assets was 6.70% and 7.50%, respectively. The composition of Chaucer’s plan assets are 74% equities, 19% fixed maturities, and 7% real estate funds at December 31, 2013. Actual returns of the plan investments generated approximately $17 million and $10 million of gains during the years ended December 31, 2013 and 2012, respectively, as compared to expected returns of approximately $6 million in each year.

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The benefits from the investment gains experienced in 2013 and 2012 were partially offset by decreases in the discount rate from the prior year, resulting in net actuarial gains for the Chaucer plan of approximately $7.5 million and $2.5 million in 2013 and 2012, respectively. These gains are reflected as increases to our accumulated other comprehensive income. This balance is amortized into earnings in future periods. Given the effect of our actual investment experience in 2013, expected rates of return on investments in 2014 and taking into consideration the slight decrease in discount rates, pension related expenses for the Chaucer plan are expected to decrease by approximately $1 million (using the December 31, 2013 GBP to U.S. dollar conversion rate of 1.56) to a benefit of $0.4 million.

Holding all other assumptions constant (using the December 31, 2013 GBP to U.S. dollar conversion rate of 1.56), sensitivity to changes in our key assumptions related to our Chaucer pension plan is as follows:

Discount Rate – A 25 basis point increase in the discount rate would decrease our pension expense in 2014 by $0.1 million and decrease our projected benefit obligation by $7.1 million. A 25 basis point reduction in the discount rate would increase our pension expense by $0.1 million and increase our projected benefit obligation by $7.5 million.

Expected Return on Plan Assets – A 25 basis point increase or decrease in the expected return on plan assets would decrease or increase our pension expense in 2014 by $ 0.3 million.

OTHER-THAN-TEMPORARY IMPAIRMENTS

We employ a systematic methodology to evaluate declines in fair values below amortized cost for all fixed maturity and equity security investments. The methodology utilizes a quantitative and qualitative process which seeks to ensure that available evidence concerning the declines in fair value below amortized cost is evaluated in a disciplined manner. In determining whether a decline in fair value below amortized cost is other-than-temporary, we evaluate several factors and circumstances, including the issuer’s overall financial condition; the issuer’s credit and financial strength ratings; the issuer’s financial performance, including earnings trends, dividend payments and asset quality; any specific events which may influence the operations of the issuer; the general outlook for market conditions in the industry or geographic region in which the issuer operates; and the length of time and the degree to which the fair value of an issuer’s securities remains below our cost. With respect to fixed maturity investments, we consider factors that might raise doubt about the issuer’s ability to make contractual payments as they become due and whether we expect to recover the entire amortized cost basis of the security. With respect to equity securities, we consider our ability and intent to hold the investment for a period of time to allow for a recovery in value.

We monitor corporate fixed maturity securities with unrealized losses on a quarterly basis and more frequently when necessary to identify potential credit deterioration as evidenced by ratings downgrades, unexpected price variances, and/or company or industry specific concerns. We apply consistent standards of credit analysis which includes determining whether the issuer is current on its contractual payments and we consider past events, current conditions and reasonable forecasts to evaluate whether we expect to recover the entire amortized cost basis of the security. We utilize valuation declines as a potential indicator of credit deterioration and apply additional levels of scrutiny in our analysis as the severity of the decline increases or duration persists.

For our impairment review of asset-backed fixed maturity securities, we forecast our best estimate of the prospective future cash flows of the security to determine if we expect to recover the entire amortized cost basis of the security. Our analysis includes estimates of underlying collateral default rates based on historical and projected delinquency rates and estimates of the amount and timing of potential recovery. We consider available information relevant to the collectability of cash flows, including information about the payment terms of the security, prepayment speeds, the financial condition of the underlying borrowers, collateral trustee reports, credit ratings analysis and other market data when developing our estimate of the expected cash flows.

When an OTTI of a debt security occurs, and we intend to sell or more likely than not will be required to sell the investment before recovery of its amortized cost basis, the amortized cost of the security is reduced to its fair value, with a corresponding charge to earnings, which reduces net income and earnings per share. If we do not intend to sell the fixed maturity investment or more likely than not will not be required to sell it, we separate the OTTI into the amount we estimate represents the credit loss and the amount related to all other factors. The amount of the estimated loss attributable to credit is recognized in earnings, which reduces net income and earnings per share. The amount of the estimated OTTI that is non-credit related is recognized in other comprehensive income, net of applicable taxes.

We estimate the amount of the OTTI that relates to credit by comparing the amortized cost of the debt security with the net present value of the debt security’s projected future cash flows, discounted at the effective interest rate implicit in the investment prior to impairment. The non-credit portion of the impairment is equal to the difference between the fair value and the net present value of the debt security at the impairment measurement date.

OTTIs of equity securities are recorded as realized losses, which reduce net income and earnings per share. The new cost basis of an impaired security is not adjusted for subsequent increases in estimated fair value.

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For equity method investments, we recognize an impairment when evidence demonstrates that a loss in value that is other-than-temporary has occurred. Evidence of a loss in value that is other-than-temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. During each period, we evaluate whether an impairment indicator has occurred that may have a significant adverse effect on the carrying value of the investment. Impairment indicators may include: lower expectations of residual value from a limited partnership, reduced valuations of the investments held by limited partnerships, actual recent cash flows that are significantly less than expected cash flows or any other adverse events since the last financial statements received that might affect the value of the investee’s capital. OTTIs of equity method investments are recorded as realized losses, which reduce net income and earnings per share.

Temporary declines in market value are recorded as unrealized losses, which do not affect net income and earnings per share, but reduce accumulated other comprehensive income, which is reflected in our Consolidated Balance Sheets. We cannot provide assurance that the OTTIs will be adequate to cover future losses or that we will not have substantial additional impairments in the future. (See “Investments” in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K for further discussion regarding OTTIs and securities in an unrealized loss position).

DEFERRED TAX ASSETS

Deferred tax assets and liabilities primarily result from temporary differences between the amounts recorded in our consolidated financial statements and the tax basis of our assets and liabilities and loss and tax credit carryforwards. These temporary differences are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse.

The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Consideration is given to available positive and negative evidence, including reversals of deferred tax liabilities, projected future taxable income in each tax jurisdiction, tax planning strategies and recent financial operations. Valuation allowances are established if, based on the weight of available information, it is more likely than not that all or some portion of the deferred tax assets will not be realized. The determination of the valuation allowance for our deferred tax assets requires management to make certain judgments and assumptions. Our judgments and assumptions are subject to change given the inherent uncertainty in predicting future performance and specific industry and investment market conditions. Changes in valuation allowances are generally reflected in income tax expense or as an adjustment to other comprehensive income (loss) depending on the nature of the item for which the valuation allowance is being recorded.

The following are the components of our deferred tax assets and liabilities with the associated valuation allowance as of December 31, 2013.

	Gross			Valuation			Net
DEFERRED TAX ASSETS (LIABILITIES)	Amount			Allowance			Amount
(in millions)
Tax attributes
Tax credit carryforwards	$	123.1		$	—		$	123.1
Operating loss carryforwards		64.5			—			64.5
		187.6			—			187.6
Other
Loss, LAE and unearned premium reserves, net		185.0			—			185.0
Deferred acquisition costs		(123.5	)		—			(123.5	)
Employee benefit plans		38.2			—			38.2
Investments, net		(8.4	)		(2.9	)		(11.3	)
Software capitalization		(30.1	)		—			(30.1	)
Deferred Lloyd’s underwriting income		(13.8	)		—			(13.8	)
Deferred foreign sourced income		(5.1	)		—			(5.1	)
Other, net		12.7			—			12.7
		55.0			(2.9	)		52.1
Total	$	242.6		$	(2.9	)	$	239.7

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We have $110.3 million of alternative minimum tax credit carryforwards and $12.8 million of foreign tax credit carryforwards. The alternative minimum tax credit carryforwards have no expiration date and may be used to offset regular federal income taxes due from future income. The foreign tax credit carryforwards will expire beginning in 2022 and may be used to offset federal income taxes due from future foreign sourced income. In addition, we have operating loss carryforwards that relate to current year U.S. net operating loss and foreign net operating loss carryforwards from our Chaucer segment. The U.S. net operating loss carryforwards expire beginning in 2031 and the Chaucer net operating loss carryforwards have no expiration date. Based on our projection of future economic conditions, taxable income, reversals of existing taxable temporary liabilities, and our strategic tax planning strategies, we believe that these tax credit carryforwards and operating loss carryforwards will be fully realized.

At December 31, 2013, the deferred tax liability on our investment portfolio is comprised of a deferred tax liability of $14.7 million related to our foreign portfolio and a deferred tax asset of $6.3 million related to our U.S. portfolio. Due to the nature of the deductibility of these unrealized tax losses in our federal tax return, we recorded a valuation allowance against this asset. In making our valuation allowance assessment, we considered our carryback capacity, reversals of deferred tax liabilities related to our investment portfolio, and tax planning strategies that include holding a portion of debt securities with market value losses until recovery. Given the nature and the magnitude of the unrealized loss and current market conditions, it is more likely than not that this asset will not be realized.

We believe the remaining deferred tax asset from other temporary differences is fully realizable based on our projected future taxable income and recent financial operations. Although we believe that these assets are fully recoverable, there can be no certainty that future events will not affect their recoverability. Future economic conditions and debt market volatility, including increases in interest rates, can adversely impact our tax planning strategies.

STATUTORY SURPLUS OF U.S. INSURANCE SUBSIDIARIES

The following table reflects statutory surplus for our U.S. insurance subsidiaries:

DECEMBER 31	2013		2012
(in millions)
Total Statutory Capital and Surplus–U.S. Insurance Subsidiaries	$	1,834.3	$	1,523.4

The statutory capital and surplus for our U.S. insurance subsidiaries increased $310.9 million during 2013, primarily due to operating results, an increase in admitted assets, and unrealized and realized gains on investments.

The NAIC prescribes an annual calculation regarding risk based capital (“RBC”). RBC ratios for regulatory purposes, as described in the glossary, are expressed as a percentage of the capital required to be above the Authorized Control Level (the “Regulatory Scale”); however, in the insurance industry, RBC ratios are widely expressed as a percentage of the Company Action Level. The following table reflects the Company Action Level, the Authorized Control Level and RBC ratios for Hanover Insurance (which includes Citizens and other U.S. insurance subsidiaries), as of December 31, 2013 and 2012, expressed both on the Industry Scale (Total Adjusted Capital divided by the Company Action Level) and Regulatory Scale (Total Adjusted Capital divided by Authorized Control Level):

(dollars in millions)
	Company		Authorized		RBC Ratio			RBC Ratio
	Action		Control		Industry			Regulatory
DECEMBER 31, 2013	Level		Level		Scale			Scale
The Hanover Insurance Company	$	709.1	$	354.5		257	%		515	%
DECEMBER 31, 2012
The Hanover Insurance Company	$	658.0	$	329.0		230	%		460	%

LLOYD’S CAPITAL REQUIREMENT

Chaucer corporate members operate in the Lloyd’s market, which requires that these members deposit funds, referred to as “Funds at Lloyd’s”, to support their underwriting interests. Lloyd’s sets required capital annually for all participating syndicates based on each syndicate’s business plans, the rating and reserving environment, and discussions with regulatory and rating agencies. Although the minimum capital levels are set by Lloyd’s, it is the responsibility of Chaucer to continually monitor the risk profiles of its managed syndicates to ensure that the level of funding remains appropriate. Such capital is comprised of cash and cash equivalents, investments, undrawn letters of credit provided by various banks and other assets. At December 31, 2013, we are in compliance with

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the capital requirements. We have the following securities, assets and letters of credit pledged to Lloyd’s to satisfy these capital requirements at December 31, 2013. In 2012, we decided not to renew the capital provision reinsurance treaty for the 2013 underwriting year with Flagstone Re. In accordance with the terms of the capital provision reinsurance treaty, Flagstone Re is obligated to provide funds at Lloyd’s in relation to its participation during the 2009 through 2012 underwriting years, until such time that these years close. We expect to be able to meet these capital requirements in the future.

December 31, 2013
(in millions)
Letters of credit	$	215.3
Reinsurance treaty		71.2
Fixed maturities, at fair value		334.4
Cash and cash equivalents		1.0
Total securities, assets and letters of credit pledged to Lloyd’s	$	621.9

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of our ability to generate sufficient cash flows to meet the cash requirements of business operations. As a holding company, our primary ongoing source of cash is dividends from our insurance subsidiaries. However, dividend payments to us by our U.S. insurance subsidiaries are subject to limitations imposed by regulators, such as prior notice periods and the requirement that dividends in excess of a specified percentage of statutory surplus or prior year’s statutory earnings receive prior approval (so called “extraordinary dividends”). No dividends were paid to the holding company by Hanover Insurance in 2013 or 2012. In 2011, a $99 million ordinary dividend was paid by Hanover. This dividend was used to help fund the acquisition of Chaucer.

Dividend payments to the holding company by Chaucer are regulated by U.K. law. Dividends from Chaucer are dependent on dividends from its subsidiaries. Annual dividend payments from Chaucer are limited to retained earnings that are not restricted by capital and other requirements for business at Lloyd’s. Also, Chaucer must provide advance notice to the U.K.’s Prudential Regulation Authority (“PRA”), one of the successors to the Financial Services Authority, of certain proposed dividends or other payments from PRA regulated entities. Chaucer paid approximately $14 million in dividends during 2013 to the holding company. No dividends were paid by Chaucer to the holding company in 2012 or 2011.

In connection with an intercompany borrowing arrangement between Chaucer and the holding company, interest on a $300 million note is paid by Chaucer on a quarterly basis to the holding company. This interest may be deferred at the election of the holding company. If deferred, the interest is added to the principal. Chaucer paid $28.1 million and $27.4 million of interest during 2013 and 2012, respectively.

At December 31, 2013, THG, as a holding company, held approximately $122.4 million of fixed maturities and cash. We believe our holding company assets are sufficient to meet our future obligations, which consist primarily of dividends to our shareholders (as and to the extent declared), the interest on our senior and subordinated debentures, certain costs associated with benefits due to our former life employees and agents, additional funds relating to the purchase of Chaucer, and, to the extent required, payments related to indemnification of liabilities associated with the sale of various subsidiaries. We do not expect that it will be necessary to dividend additional funds from our insurance subsidiaries in order to fund 2014 holding company obligations; however, we may decide to do so.

Sources of cash for our insurance subsidiaries primarily consist of premiums collected, investment income and maturing investments. Primary cash outflows are paid claims, losses and loss adjustment expenses, policy and contract acquisition expenses, other underwriting expenses and investment purchases. Cash outflows related to losses and loss adjustment expenses can be variable because of uncertainties surrounding settlement dates for liabilities for unpaid losses and because of the potential for large losses either individually or in the aggregate. We periodically adjust our investment policy to respond to changes in short-term and long-term cash requirements.

Net cash provided by operating activities was $383.9 million during 2013, as compared to $408.2 million in 2012 and $221.7 million in 2011. The $24.3 million decrease in 2013 compared to 2012 is primarily due to the timing of reimbursements made to Lloyd’s related to claim payments made on our behalf, partially offset by lower claims payments in 2013. The $186.5 million increase in 2012 compared to 2011 primarily resulted from an increase in premiums, partially offset by an increase in loss and LAE payments.

Net cash used in investing activities was $358.7 million during 2013, as compared to $562.8 million in 2012 and net cash provided by investing activities of $182.8 million in 2011. During 2013, cash used was primarily related to net purchases of fixed maturities and equity securities. During 2012, cash used was primarily related to net purchases of fixed maturities as we invested cash from Chaucer and net investments in equity securities. Cash used to purchase investments was partially offset by cash received from the sale of a building. See Note 3 – “Investments” in the Notes to Consolidated Financial Statements included in Financial Statements and

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Supplementary Data of this Form 10-K. During 2011, cash provided by investing activities primarily resulted from $756.1 million of cash and cash equivalents acquired from Chaucer. This increase was partially offset by cash paid for the Chaucer acquisition totaling $468.4 million, which included an $11.3 million payment related to a foreign currency exchange forward contract, and the investment of a portion of our Chaucer segment’s cash into fixed maturities.

Net cash used in financing activities was $105.5 million during 2013, as compared to $133.4 million in 2012 and net cash provided by financing activities of $127.3 million in 2011. During 2013, cash used in financing activities primarily resulted from the repayment of approximately $121 million of debt, repurchases of common stock and the payment of dividends to shareholders, partially offset by the proceeds from the issuance, on March 20, 2013, of $175.0 million of unsecured subordinated debentures. During 2012, cash used in financing activities primarily resulted from the repayment of $72.4 million of debt, the payment of dividends to shareholders, repurchases of our common stock and repayments of collateral held for our securities lending program, partially offset by the proceeds from the FHLBB debt borrowings. During 2011, cash provided by financing activities primarily resulted from the issuance, on June 17, 2011, of $300.0 million of unsecured senior debentures. Cash received from the issuance of debt was partially offset by the repayment of $86.8 million of debt, the payment of dividends to our shareholders, repayments of collateral related to our securities lending program, and repurchases of common stock.

Dividends to common shareholders are subject to quarterly board approval and declaration. During 2013, as declared by the Board, we paid three quarterly dividends of $0.33 per share and one quarterly dividend of $0.37 per share to our shareholders totaling $60.0 million. We believe that our holding company assets are sufficient to provide for future shareholder dividends should the Board of Directors declare them.

We expect to continue to generate sufficient positive operating cash to meet all short-term and long-term cash requirements relating to current operations, including the funding of our qualified defined benefit pension plan and the Chaucer pension plan. Based upon the current estimate of liabilities and certain assumptions regarding investment returns and other factors, our qualified defined benefit pension plans and Chaucer pension plan collectively have plan liabilities in excess of plan assets by approximately $15 million. The ultimate payment amounts for our benefit plans are based on several assumptions, including but not limited to, the rate of return on plan assets, the discount rate for benefit obligations, mortality experience, interest crediting rates, inflation and the ultimate valuation and determination of benefit obligations. Since differences between actual plan experience and our assumptions are almost certain, changes both positive and negative to our current funding status and ultimately our obligations in future periods are likely.

Our insurance subsidiaries maintain a high degree of liquidity within their respective investment portfolios in fixed maturity and short-term investments. We believe that the quality of the assets we hold will allow us to realize the long-term economic value of our portfolio, including securities that are currently in an unrealized loss position. We do not anticipate the need to sell these securities to meet our insurance subsidiaries’ cash requirements since we expect our insurance subsidiaries to generate sufficient operating cash to meet all short-term and long-term cash requirements. However, there can be no assurance that unforeseen business needs or other items will not occur causing us to have to sell those securities in a loss position before their values fully recover, thereby causing us to recognize impairment charges in that time period.

Since October 2007 and through December 2013, our Board of Directors has authorized aggregate repurchases of our common stock of up to $600 million, including a $100 million increase in the program in 2013. Repurchases may be executed using open market purchases, privately negotiated transactions, accelerated repurchase programs or other transactions. We are not required to purchase any specific number of shares or to make purchases by any certain date under this program. During 2013, we repurchased 1.6 million shares of our common stock at a cost of $78.2 million.

Over the past several years, we have issued, through two separate transactions, $500 million in senior debentures and have received advances of $171.3 million through our membership in FHLBB as part of a collateralized borrowing program. In March 2013, we issued $175 million aggregate principal amount of subordinated unsecured debentures due March 30, 2053. These subordinated debentures pay interest quarterly. We may redeem these subordinated debentures in whole at any time, or in part from time to time, on or after March 30, 2018, at a redemption price equal to their principal amount plus accrued and unpaid interest.

Additionally, from time to time, we may also repurchase our debt on an opportunistic basis. During 2013, we repurchased senior debentures with a net carrying value of $73.8 million at a cost of $93.7 million, resulting in a loss of $19.9 million. Additionally in 2013, we repaid $46.3 million of our FHLBB advances plus prepayment fees of $7.8 million for a total payment of $54.1 million. We expect these repurchases will reduce our annual pre-tax interest costs by approximately $7 million. In 2012, we called $65.4 million of our subordinated unsecured notes related to Chaucer at par value. These notes had a carrying value of $60.3 million, resulting in a net loss of $5.1 million on the repayment. Additional information related to all borrowings is in Note 6 – “Debt and Credit Arrangements” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K.

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In November 2013, we entered into a $200.0 million credit agreement which expires in November 2018, with an option to increase the facility to $300.0 million assuming no default and satisfaction of certain other conditions. Borrowings, if any, under the agreement are unsecured and incur interest at a rate per annum equal to, the higher of (a) the prime commercial lending rate of the administrative agent, (b) the Federal Funds Rate plus half of a percent, or (c) the one month Adjusted LIBOR plus one percent and any applicable margin. The agreement contains financial covenants substantially similar to those in our prior credit agreement including, but not limited to, maintaining at least a certain level of consolidated equity, maximum consolidated leverage ratios and requires certain of our subsidiaries to maintain a minimum RBC ratio. This agreement replaces the previous committed syndicated credit agreement entered in August 2011 for $200.0 million, which was set to expire in August 2015. Both the current and the terminated agreement also include a $50 million sub-facility for standby letters of credit that can be used for general corporate purposes. We had no borrowings under either of the agreements in 2012 and 2013.

In November 2013, we amended and restated our existing Standby Letter of Credit Facility (the “Amended Facility Agreement”) not to exceed £130.0 million (or $215.8 million) outstanding at any one time, with the option to increase the amount available for issuances of letters of credit to £195.0 million (or $323.7 million) in the aggregate on one occasion only during the term of the Amended Facility Agreement (subject to the consent of all lenders and assuming no default and satisfaction of other specified conditions). Amounts in U.S. dollars were converted based on the foreign currency exchange rate of 1.66 at December 31, 2013. Prior to the amendment, we had a Standby Letter of Credit Facility Agreement in place not to exceed $180.0 million outstanding at any one time, with a similar option to increase the amount available for issuances of letters of credit to $270.0 million. The amended agreement provides certain covenants including, but not limited to, the syndicates’ financial condition which were also in place prior to the amendment of the agreement. The Amended Facility Agreement provides regulatory capital supporting Chaucer’s underwriting activities for the 2014 and 2015 years of account and each prior open year of account and is generally renewed biennially to support new underwriting years. A letter of credit commission fee on outstanding letters of credit is payable quarterly, and ranges from 1.375% to 1.75% per annum, depending on our credit ratings for portions that are not cash collateralized, and 0.275% per annum for portions that are cash collateralized. We may, from time to time, collateralize a portion of the outstanding letter of credit. In addition to the commission fee on the uncollateralized outstanding letter of credit, a commitment fee in respect of the unutilized commitments under the Amended Facility Agreement is payable quarterly, and ranges from 0.55% to 0.70% per annum, depending on our credit ratings. Chaucer is also required to pay customary agency fees. Under the previous agreement we paid $2.7 million in interest in 2013. We expect lower interest payments under the new agreement based on current prevailing interest rates.

Simultaneous with the Amended Facility Agreement, we entered into a Guaranty Agreement (the “Guaranty Agreement”) with Lloyds Bank plc, as Facility Agent and Security Agent, pursuant to which, we unconditionally guarantee the obligations of Chaucer under the Amended Facility Agreement. The Guaranty Agreement contains certain financial covenants that require us to maintain a minimum net worth, a minimum risk-based capital ratio at our primary U.S. domiciled property and casualty companies and a maximum leverage ratio, and certain negative covenants that limit our ability, among other things, to incur or assume certain debt, grant liens on our property, merge or consolidate, dispose of assets, materially change the nature or conduct of our business and make restricted payments (except, in each case, as provided by certain exceptions). The Guaranty Agreement also contains certain customary representations and warranties. The current Guaranty Agreement contains terms and conditions substantially similar to the previous guaranty agreement we had in place with Lloyds Bank plc in connection with Chaucer’s previous Facility Agreement.

At December 31, 2013, we were in compliance with the covenants of the aforementioned debt agreements.

CONTRACTUAL OBLIGATIONS

Financing obligations generally include repayment of our senior debentures, subordinated debentures, borrowings from the FHLBB, and operating lease payments. The following table represents our annual payments related to the contractual principal and interest payments of these financing obligations as of December 31, 2013 and operating lease payments reflect expected cash payments based upon lease terms. In addition, we also have included our estimated payments related to our loss and LAE obligations and our current expectation of payments to be made to support the obligations of our benefit plans. The following table also includes commitments to purchase investment securities at a future date. Actual payments may differ from the contractual and/or estimated payments in the table.

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	Maturity						Maturity
	less than		Maturity		Maturity		in excess of
DECEMBER 31, 2013	1 year		1-3 years		4-5 years		5 years		Total
(in millions)
Debt (1)	$	—	$	—	$	—	$	903.9	$	903.9
Interest associated with debt (1)		60.7		121.4		121.4		606.9		910.4
Operating lease commitments (2)		17.0		22.6		7.0		0.6		47.2
Qualified defined benefit pension plan funding obligations (3)		3.3		—		—		—		3.3
Non-qualified defined benefit pension and post-retirement benefit obligations (4)		5.7		10.3		8.9		19.7		44.6
Investment commitments (5)		24.4		25.8		8.4		—		58.6
Loss and LAE obligations (6)		1,977.6		1,958.7		892.7		1,402.5		6,231.5

(1) Debt includes our senior debentures due in 2025, which pay annual interest at a rate of 7 5/8%, our senior debentures due in 2020, which pay annual interest at a rate of 7.50%, our senior debentures due in 2021, which pay annual interest at a rate of 6.375%, our subordinated debentures due in 2053, which pay annual interest at a rate of 6.35% and our subordinated debentures due in 2027, which pay cumulative dividends at an annual rate of 8.207%. Payments related to the principal amounts of these agreements represent contractual maturity; therefore, principal and interest associated with these obligations are reflected in the above table based upon the contractual maturity dates. In addition, we have $125.0 million of borrowings under a collateralized borrowing program with the FHLBB which pays interest monthly at a rate of 5.50% annually. Such borrowings are available for a twenty-year term or through September 25, 2029.

(2) Our U.S. and international subsidiaries are lessees with a number of operating leases.

(3) Reflects funding associated with the expectation of terminating one of our qualified plans in 2014, and approximately $2 million associated with the Chaucer plan, based upon current funded status. We do not expect to make any significant contributions in order to meet our minimum funding requirements. However, additional contributions may be required in the future based on the level of pension assets and liabilities in future periods.

The ultimate payment amount for our pension plans are based on several assumptions, including, but not limited to, the rate of return on plan assets, the discount rate for benefit obligations, mortality experience, interest crediting rates and the ultimate valuation of benefit obligations. Differences between actual plan experience and our assumptions are likely and will likely result in changes to our funding obligations in future periods.

(4) Non-qualified defined benefit pension and postretirement benefit obligations reflect estimated payments to be made through plan year 2023 for pension, postretirement and postemployment benefits. Estimates of these payments and the payment patterns are based upon historical experience.

(5) Investment commitments relate primarily to partnerships.

(6) Unlike many other forms of contractual obligations, loss and LAE reserves do not have definitive due dates and the ultimate payment dates are subject to a number of variables and uncertainties. As a result, the total loss and LAE reserve payments to be made by period, as shown in the table, are estimates based principally on historical experience.

OFF-BALANCE SHEET ARRANGEMENTS

We currently do not have any material off-balance sheet arrangements that are reasonably likely to have an effect on our financial position, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources.

CONTINGENCIES AND REGULATORY MATTERS

Information regarding litigation and legal contingencies appears in Note 18—“Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in Financial Statements and Supplementary Data of this Form 10-K. Information related to certain regulatory and industry developments are contained in “Regulation” in Part 1 - Item 1 of this Form 10-K and in “Risk Factors” in Part 1 – Item 1A of this Form 10-K.

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RATING AGENCIES

Insurance companies are rated by rating agencies to provide both industry participants and insurance consumers information on specific insurance companies. Higher ratings generally indicate the rating agencies’ opinion regarding financial stability and a stronger ability to pay claims.

We believe that strong ratings are important factors in marketing our products to our agents and customers, since rating information is broadly disseminated and generally used throughout the industry. Insurance company financial strength ratings are assigned to an insurer based upon factors deemed by the rating agencies to be relevant to policyholders and are not directed toward protection of investors. Such ratings are neither a rating of securities nor a recommendation to buy, hold or sell any security. Customers typically focus on claims-paying ratings, while creditors focus on debt ratings. Investors use both to evaluate a company’s overall financial strength.

RISKS AND FORWARD-LOOKING STATEMENTS

Management’s Discussion and Analysis contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. For a discussion of indicators of forward-looking statements and specific important factors that could cause actual results to differ materially from those contained in forward-looking statements, see “Risk Factors” in Part 1 – Item  1A of this Form 10-K. This Management’s Discussion and Analysis should be read and interpreted in light of such factors.

GLOSSARY OF SELECTED INSURANCE TERMS

Account rounding – The conversion of single policy customers to accounts with multiple policies and/or additional coverages.

Benefit payments – Payments made to an insured or their beneficiary in accordance with the terms of an insurance policy.

Capacity – The maximum amount of business which may be accepted by a syndicate or a corporate member on a syndicate, expressed in terms of gross premium written, net of commission.

Casualty insurance – Insurance that is primarily concerned with the losses caused by injuries to third persons and their property (other than the policyholder) and the related legal liability of the insured for such losses.

Catastrophe – A severe loss, resulting from natural and manmade events, including risks such as hurricane, fire, earthquake, windstorm, tornado, hailstorm, severe winter weather, drought, explosion, terrorism, riots and other similar events.

Catastrophe loss – Loss and directly identified loss adjustment expenses from catastrophes. The Insurance Services Office (“ISO”) Property Claim Services (“PCS”) defines a catastrophe loss as an event that causes $25 million or more in U.S. industry insured property losses and affects a significant number of property and casualty policyholders and insurers. In addition to those catastrophe events declared by ISO, claims management also generally includes within the definition of a “catastrophe loss”, a property loss event that causes approximately $5 million or more in company insured losses and affects in excess of one hundred policyholders or multiple independent risks. For the international business in our Chaucer segment, management utilizes a “catastrophe loss” definition that is substantially consistent with the ISO definition framework.

Cede; cedent; ceding company – When a party reinsures its liability with another, it “cedes” business and is referred to as the “cedent” or “ceding company”.

Combined ratio, GAAP – This ratio is the GAAP equivalent of the statutory ratio that is widely used as a benchmark for determining an insurer’s underwriting performance. A ratio below 100% generally indicates profitable underwriting prior to the consideration of investment income. A combined ratio over 100% generally indicates unprofitable underwriting prior to the consideration of investment income. The combined ratio is the sum of the loss ratio, the loss adjustment expense ratio and the underwriting expense ratio.

Corporate member – A company admitted to membership of Lloyd’s and which provides capital in support of a Lloyd’s syndicate to enable the syndicate to undertake underwriting risks.

Credit spread – The difference between the yield on the debt securities of a particular corporate debt issue and the yield of a similar maturity of U.S. Treasury debt securities.

Current accident year loss results – A non-GAAP measure of the estimated earnings impact of current premiums offset by estimated loss experience and expenses for the current accident year. This measure includes the estimated increase in revenue associated with higher prices (premiums), including those caused by price inflation and changes in exposure, partially offset by higher volume driven expenses and inflation of loss costs. Volume driven expenses include acquisition costs such as commissions paid to agents, which are typically based on a percentage of premium dollars.

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Earned premium – The portion of a premium that is recognized as income, or earned, based on the expired portion of the policy period, that is, the period for which loss coverage has actually been provided. For example, after six months, $50 of a $100 annual premium is generally considered earned premium. The remaining $50 of annual premium is unearned premium. Net earned premium is earned premium net of reinsurance.

Economic interest– The share of syndicate underwriting capacity supported by capital from Chaucer Holdings plc.

Excess of loss reinsurance – Reinsurance that indemnifies the insured against all or a specific portion of losses under reinsured policies in excess of a specified dollar amount or “retention”.

Expense Ratio, GAAP – The ratio of underwriting expenses to premiums earned for a given period.

Exposure – As it relates to underwriting, a measure of the rating units or premium basis of a risk; for example, an exposure of a number of automobiles. As it relates to loss events, the maximum value of claims made on an insurer from an event or events that would result in the total exhaustion of the cover or indemnity offered by an insurance policy.

Exposure management actions – Actions that focus on improving underwriting profitability and/or lessening earnings volatility by reducing our exposures and property concentrations in certain geographies and lines that are more prone to both catastrophe and non-catastrophe losses. These actions include, but are not limited to, non-renewal, rate increases, stricter underwriting standards and higher deductible utilization, agency management actions, and more selective portfolio management by modifying our business mix.

Frequency – The number of claims occurring during a given coverage period.

Funds at Lloyd’s – Funds held in trust at Lloyd’s as security for the policyholders and to support a corporate member’s overall underwriting activities. The funds must be in a form approved by Lloyd’s and be maintained at certain specified levels.

Inland Marine Insurance – In Commercial Lines, this is a type of coverage developed for shipments that do not involve ocean transport. It covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication. In the context of Personal Lines, this term relates to floater policies that cover expensive personal items such as fine art and jewelry.

Loss adjustment expenses (“LAE”) – Expenses incurred in the adjusting, recording, and settlement of claims. These expenses include both internal company expenses and outside services. Examples of LAE include claims adjustment services, adjuster salaries and fringe benefits, legal fees and court costs, investigation fees and claims processing fees.

Loss adjustment expense (“LAE”) ratio, GAAP – The ratio of loss adjustment expenses to earned premiums for a given period.

Loss costs – An amount of money paid for an insurance claim.

Loss ratio, GAAP– The ratio of losses to premiums earned for a given period.

Loss reserves – Liabilities established by insurers to reflect the estimated cost of claims payments and the related expenses that the insurer will ultimately be required to pay in respect of insurance it has written. Reserves are established for losses and for LAE.

Managing agent – An agent that runs the affairs of a syndicate.

Multivariate product – An insurance product, the pricing for which is based upon the magnitude of, and correlation between, multiple rating factors. In practical application, the term refers to the foundational analytics and methods applied to the product construct. Our Connections Auto product is an example of a multivariate product.

Peril – A cause of loss.

Price(ing) increase or decrease (Commercial Lines and Chaucer) – Represents the average change in premium on renewed policies caused by the estimated net effect of base rate changes, discretionary pricing, inflation or changes in policy level exposure or insured risk.

Price(ing) increase or decrease (Personal Lines) – The estimated cumulative premium effect of approved rate actions applied to policies available for renewal, regardless of whether or not policies are actually renewed. Pricing changes do not represent actual increases or decreases realized by the Company.

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Property insurance – Insurance that provides coverage for tangible property in the event of loss, damage or loss of use.

Rate – The estimated pure pricing factor upon which the policyholder’s premium is based excluding changes in exposure or risk.

Reinstatement premium – A pro-rata reinsurance premium that may be charged for reinstating the amount of reinsurance coverage reduced as the result of a reinsurance loss payment under a reinsurance treaty. For events that we are the insured party, the charge would decrease premiums; for events where we provide reinsurance coverage, the charge would increase premiums. For example, in 2005, this premium was required to ensure that our property catastrophe occurrence treaty, which was exhausted by Hurricane Katrina, was available again in the event of another large catastrophe loss in 2005.

Reinsurance – An arrangement in which an insurance company, or a reinsurance company, known as the reinsurer, agrees to indemnify another insurance or reinsurance company, known as the ceding company, against all or a portion of the insurance or reinsurance risks underwritten by the ceding company under one or more policies. Reinsurance can provide a ceding company with several benefits, including a reduction in net liability on risks and catastrophe protection from large or multiple losses. Reinsurance does not legally discharge the primary insurer from its liability with respect to its obligations to the insured.

Risk based capital (“RBC”) – A method of measuring the minimum amount of capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. The RBC ratio for regulatory purposes is calculated as total adjusted capital divided by required risk based capital. Total adjusted capital for property and casualty companies is capital and surplus, adjusted for the non-tabular reserve discount applicable to our assumed discontinued accident and health insurance business. The Company Action Level is the first level at which regulatory involvement is specified based upon the level of capital.

Regulators may take action for reasons other than triggering various RBC action levels. The various action levels are summarized as follows:

• The Company Action Level, which equals 200% of the Authorized Control Level, requires a company to prepare and submit a RBC plan to the commissioner of the state of domicile. A RBC plan proposes actions which a company may take in order to bring statutory capital above the Company Action Level. After review, the commissioner will notify the company if the plan is satisfactory.

• The Regulatory Action Level, which equals 150% of the Authorized Control Level, requires the insurer to submit to the commissioner of the state of domicile an RBC plan, or if applicable, a revised RBC plan. After examination or analysis, the commissioner will issue an order specifying corrective actions to be taken.

• The Authorized Control Level authorizes the commissioner of the state of domicile to take whatever regulatory actions considered necessary to protect the best interest of the policyholders and creditors of the insurer.

• The Mandatory Control Level, which equals 70% of the Authorized Control Level, authorizes the commissioner of the state of domicile to take actions necessary to place the company under regulatory control (i.e., rehabilitation or liquidation).

Security Lending – We engage our banking provider to lend securities from our investment portfolio to third parties. These lent securities are fully collateralized by cash. We monitor the fair value of the securities on a daily basis to assure that the collateral is maintained at a level of at least 102% of the fair value of the loaned securities. We record securities lending collateral as a cash equivalent, with an offsetting liability in expenses and taxes payable.

Severity – A monetary increase in the loss costs associated with the same or similar type of event or coverage.

Solvency II – European Commission-led fundamental review of the capital adequacy regime for the European insurance industry.

Specialty Lines – A major component of our other commercial lines. There is no accepted industry definition of “specialty lines”, but for our purpose specialty lines consist of products such as inland and ocean marine, surety, specialty property, professional liability, management liability and various other program businesses. When discussing net premiums written and other financial measures of our specialty businesses, we may include non-specialty premiums that are written as part of the entire account.

Statutory accounting principles – Recording transactions and preparing financial statements in accordance with the rules and procedures prescribed or permitted by insurance regulatory authorities including the NAIC, which in general reflect a liquidating, rather than going concern, concept of accounting.

Supranational – An international organization, or union, whereby member states transcend national boundaries or interests to share in the decision-making and vote on issues pertaining to the wider grouping. European Investment Bank is an example of a supranational.

Syndicate – A group of members underwriting insurance at Lloyd’s through the agency of a managing agent, to whom a particular syndicate number is assigned.

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Underwriting – The process of selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept risks.

Underwriting expenses – Expenses incurred in connection with the acquisition, pricing and administration of a policy or contract.

Underwriting expense ratio, GAAP – The ratio of underwriting expenses to earned premiums in a given period.

Unearned premiums – The portion of a premium representing the unexpired amount of the contract term as of a certain date.

Written premium – The premium assessed for the entire coverage period of an insurance policy or contract without regard to how much of the premium has been earned. See also earned premium. Net written premium is written premium net of reinsurance.

ITEM 7A–QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to “Quantitative and Qualitative Disclosures about Market Risk” in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

The Hanover Insurance Group, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of The Hanover Insurance Group, Inc. and its subsidiaries at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Boston, MA

February 24, 2014

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THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions, except per share data)
Revenues
Premiums	$	4,450.5		$	4,239.1		$	3,598.6
Net investment income		269.0			276.6			258.2
Net realized investment gains (losses):
Net realized gains from sales and other		39.5			31.4			35.0
Net other–than–temporary impairment losses on investments recognized in earnings		(6.0	)		(7.8	)		(6.9	)
Total net realized investment gains		33.5			23.6			28.1
Fees and other income		40.7			51.4			46.7
Total revenues		4,793.7			4,590.7			3,931.6
Losses and expenses
Losses and loss adjustment expenses		2,761.1			2,974.4			2,550.8
Amortization of deferred acquisition costs		971.0			938.1			778.9
Interest expense		65.3			61.9			55.0
Other operating expenses		667.2			587.6			525.3
Total losses and expenses		4,464.6			4,562.0			3,910.0
Income before income taxes		329.1			28.7			21.6
Income tax expense (benefit):
Current		8.6			18.4			(0.6	)
Deferred		74.8			(35.8	)		(9.3	)
Total income tax expense (benefit)		83.4			(17.4	)		(9.9	)
Income from continuing operations		245.7			46.1			31.5
Net gain from discontinued operations (net of income tax expense (benefit) of $4.1, $(0.5) and $(2.5) in 2013, 2012 and 2011)		5.3			9.8			5.2
Net income	$	251.0		$	55.9		$	36.7
Earnings per common share:
Basic:
Income from continuing operations	$	5.58		$	1.03		$	0.70
Net gain from discontinued operations		0.12			0.22			0.11
Net income per share	$	5.70		$	1.25		$	0.81
Weighted average shares outstanding		44.1			44.7			45.2
Diluted:
Income from continuing operations	$	5.47		$	1.02		$	0.69
Net gain from discontinued operations		0.12			0.21			0.11
Net income per share	$	5.59		$	1.23		$	0.80
Weighted average shares outstanding		44.9			45.3			45.8

The accompanying notes are an integral part of these consolidated financial statements.

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THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Net income	$	251.0		$	55.9		$	36.7
Other comprehensive income (loss), net of tax:
Available-for-sale securities and derivative instruments:
Net appreciation (depreciation) during the period		(167.3	)		109.4			83.6
Change in other-than-temporary impairment losses recognized in other comprehensive income		0.6			7.9			6.8
Total available-for-sale securities and derivative instruments		(166.7	)		117.3			90.4
Pension and postretirement benefits:
Net actuarial gain (loss) arising in the period		10.8			(15.9	)		(11.8	)
Amortization recognized as net periodic benefit and postretirement cost		9.7			6.1			6.6
Total pension and postretirement benefits		20.5			(9.8	)		(5.2	)
Cumulative foreign currency translation adjustment:
Amount recognized as cumulative foreign currency translation during the period		(2.0	)		7.9			(11.5	)
Other comprehensive income (loss), net of tax		(148.2	)		115.4			73.7
Comprehensive income	$	102.8		$	171.3		$	110.4

The accompanying notes are an integral part of these consolidated financial statements.

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THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31	2013			2012
(in millions, except share data)
Assets
Investments:
Fixed maturities, at fair value (amortized cost of $6,815.2 and $6,529.5)	$	6,970.6		$	6,952.2
Equity securities, at fair value (cost of $366.5 and $299.0)		430.2			315.8
Other investments		192.5			210.3
Total investments		7,593.3			7,478.3
Cash and cash equivalents		486.2			564.8
Accrued investment income		68.0			69.0
Premiums and accounts receivable, net		1,324.6			1,308.8
Reinsurance recoverable on paid and unpaid losses and unearned premiums		2,335.0			2,479.7
Deferred acquisition costs		506.0			489.5
Deferred income taxes		239.7			267.6
Goodwill		184.9			184.9
Other assets		526.1			511.8
Assets of discontinued operations		114.9			130.5
Total assets	$	13,378.7		$	13,484.9
Liabilities
Loss and loss adjustment expense reserves	$	6,231.5		$	6,197.0
Unearned premiums		2,515.8			2,474.8
Expenses and taxes payable		637.2			775.8
Reinsurance premiums payable		374.7			466.2
Debt		903.9			849.4
Liabilities of discontinued operations		121.1			126.3
Total liabilities		10,784.2			10,889.5
Commitments and contingencies
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		1,830.1			1,787.1
Accumulated other comprehensive income		177.6			325.8
Retained earnings		1,349.1			1,211.6
Treasury stock at cost (16.8 and 16.2 million shares)		(762.9	)		(729.7	)
Total shareholders’ equity		2,594.5			2,595.4
Total liabilities and shareholders’ equity	$	13,378.7		$	13,484.9

The accompanying notes are an integral part of these consolidated financial statements.

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THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Preferred Stock
Balance at beginning and end of year	$	—		$	—		$	—
Common Stock
Balance at beginning and end of year		0.6			0.6			0.6
Additional Paid-in Capital
Balance at beginning of year		1,787.1			1,784.8			1,796.5
Employee and director stock-based awards and other		43.0			2.3			(11.7	)
Balance at end of year		1,830.1			1,787.1			1,784.8
Accumulated Other Comprehensive Income (Loss), net of tax
Net Unrealized Appreciation (Depreciation) on Investments and Derivative Instruments:
Balance at beginning of year		426.0			308.7			218.3
Net appreciation (depreciation) on available-for-sale securities and derivative instruments		(166.7	)		117.3			90.4
Balance at end of year		259.3			426.0			308.7
Defined Benefit Pension and Postretirement Plans:
Balance at beginning of year		(96.6	)		(86.8	)		(81.6	)
Net actuarial gain (loss) arising in the period		10.8			(15.9	)		(11.8	)
Net amount recognized as net periodic benefit cost		9.7			6.1			6.6
Balance at end of year		(76.1	)		(96.6	)		(86.8	)
Cumulative Foreign Currency Translation Adjustment:
Balance at beginning of year		(3.6	)		(11.5	)		—
Amount recognized as cumulative foreign currency translation during the year		(2.0	)		7.9			(11.5	)
Balance at end of year		(5.6	)		(3.6	)		(11.5	)
Total accumulated other comprehensive income		177.6			325.8			210.4
Retained Earnings
Balance at beginning of year		1,211.6			1,211.3			1,223.7
Cumulative effect of accounting change, net of tax		—			—			(2.3	)
Net income		251.0			55.9			36.7
Dividends to shareholders		(60.0	)		(55.1	)		(50.9	)
Stock-based compensation		(53.5	)		(0.5	)		4.1
Balance at end of year		1,349.1			1,211.6			1,211.3
Treasury Stock
Balance at beginning of year		(729.7	)		(723.1	)		(720.1	)
Shares purchased at cost		(78.2	)		(20.0	)		(21.7	)
Net shares reissued at cost under employee stock-based compensation plans		45.0			13.4			18.7
Balance at end of year		(762.9	)		(729.7	)		(723.1	)
Total shareholders’ equity	$	2,594.5		$	2,595.4		$	2,484.0

The accompanying notes are an integral part of these consolidated financial statements.

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THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Cash Flows From Operating Activities
Net income	$	251.0		$	55.9		$	36.7
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains		(33.5	)		(22.8	)		(16.2	)
Net loss from repurchase of debt		19.9			5.1			2.3
Gain on sale of Citizens Management, Inc.		—			(10.8	)		—
Gain on discontinued operations		—			(0.7	)		(5.2	)
Net amortization and depreciation		35.0			35.6			26.7
Stock-based compensation expense		12.4			12.8			12.0
Amortization of defined benefit plan costs		14.9			9.3			10.2
Deferred income taxes expense (benefit)		74.9			(35.5	)		(9.2	)
Change in deferred acquisition costs		(16.3	)		(30.8	)		18.3
Change in premiums receivable, net of reinsurance premiums payable		(107.4	)		(53.3	)		69.4
Change in loss, loss adjustment expense and unearned premium reserves		65.9			598.3			78.5
Change in reinsurance recoverable		148.8			(230.7	)		(48.1	)
Change in expenses and taxes payable		(62.9	)		87.6			48.2
Other, net		(18.8	)		(11.8	)		(1.9	)
Net cash provided by operating activities		383.9			408.2			221.7
Cash Flows From Investing Activities
Proceeds from disposals and maturities of fixed maturities		1,394.3			1,684.8			1,624.2
Proceeds from disposals of equity securities and other investments		217.8			218.2			101.2
Purchase of fixed maturities		(1,698.8	)		(2,170.4	)		(1,688.0	)
Purchase of equity securities and other investments		(249.1	)		(274.9	)		(128.6	)
Proceeds from disposal of Citizens Management, Inc., net of cash transferred		—			5.2			—
Cash provided by business acquisitions, net of cash acquired		—			—			287.7
Capital expenditures		(22.9	)		(21.3	)		(16.5	)
Net proceeds (payments) related to derivative agreements		—			(4.4	)		2.8
Net cash provided by (used in) investing activities		(358.7	)		(562.8	)		182.8
Cash Flows From Financing Activities
Proceeds from exercise of employee stock options		25.0			2.6			3.9
Proceeds from debt borrowings, net		168.6			7.4			325.4
Increase (decrease) in cash collateral related to securities lending program		(15.9	)		5.2			(42.1	)
Dividends paid to shareholders		(60.0	)		(55.1	)		(50.9	)
Repurchases of debt		(139.9	)		(73.1	)		(86.8	)
Repurchases of common stock		(78.2	)		(20.0	)		(21.7	)
Other financing activities		(5.1	)		(0.4	)		(0.5	)
Net cash provided by (used in) financing activities		(105.5	)		(133.4	)		127.3
Effect of exchange rate changes on cash		1.6			32.1			(3.9	)
Net change in cash and cash equivalents		(78.7	)		(255.9	)		527.9
Net change in cash related to discontinued operations		0.1			0.3			2.1
Cash and cash equivalents, beginning of year		564.8			820.4			290.4
Cash and cash equivalents, end of year	$	486.2		$	564.8		$	820.4
Supplemental Cash Flow information
Interest payments	$	66.1		$	62.7		$	55.5
Income tax net payments (refunds)	$	9.5		$	(5.5	)	$	3.0

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of The Hanover Insurance Group, Inc. (“THG” or the “Company”), include the accounts of The Hanover Insurance Company (“Hanover Insurance”) and Citizens Insurance Company of America (“Citizens”), THG’s principal U.S. domiciled property and casualty companies; Chaucer Holdings plc (“Chaucer”), a specialist insurance underwriting group which operates through the Society and Corporation of Lloyd’s (“Lloyd’s”); and certain other insurance and non-insurance subsidiaries. These legal entities conduct their operations through several business segments discussed in Note 14 – “Segment Information”. The acquisition of Chaucer on July 1, 2011, which has added meaningful business volumes to THG results, has affected the comparability of the consolidated financial statements and related footnotes for the years ended December 31, 2013, 2012 and 2011. Results of operations for the years ended December 31, 2013 and 2012 include results from all of the Company’s business segments, while results of operations for the year ended December 31, 2011 include Chaucer’s results for only the period from July 1, 2011 through December 31, 2011. Additionally, the consolidated financial statements include the Company’s discontinued operations, consisting primarily of the Company’s former life insurance businesses, its accident and health business and prior to April 30, 2012, its third party administration business. All intercompany accounts and transactions have been eliminated. During 2013, the Company increased additional paid-in capital and decreased retained earnings by $34 million to correct the classification of amounts relating to stock-based compensation in prior periods. This reclassification within shareholders’ equity had no impact on net income, assets, liabilities or total shareholders’ equity of the Company for the current or any prior period.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of the Company’s management these financial statements reflect all adjustments, consisting of normal recurring items necessary for a fair presentation of the financial position and results of operations.

B. VALUATION OF INVESTMENTS

The Company is required to classify its investments into one of three categories: held-to-maturity, available-for-sale or trading. It determines the appropriate classification of fixed maturity and equity securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Fixed maturities and equity securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported in accumulated other comprehensive income, a separate component of shareholders’ equity. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in net investment income.

Fixed maturities that are delinquent are placed on non-accrual status, and thereafter interest income is recognized only when cash payments are received.

Realized investment gains and losses are reported as a component of revenues based upon specific identification of the investment assets sold. When an other-than-temporary decline in value of a specific investment is deemed to have occurred, and a charge to earnings is required, the Company recognizes a realized investment loss.

The Company reviews investments in an unrealized loss position to identify other-than-temporary declines in value. When it is determined that a decline in value of an equity security is other-than-temporary, the Company reduces the cost basis of the security to fair value with a corresponding charge to earnings. When an other-than-temporary decline in value of a debt security is deemed to have occurred, the Company must assess whether it intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the debt security meets either of these two criteria, an other-than-temporary impairment (“OTTI”) is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the impairment measurement date. If the Company does not intend to sell the debt security and it is not more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, the credit loss portion of an OTTI is recorded through earnings while the portion attributable to all other factors is recorded separately as a component of other comprehensive income. The amount of the OTTI that relates to credit is estimated by comparing the amortized cost of the fixed maturity security with the net present value of the security’s projected future cash flows, discounted at the effective interest rate implicit in the investment prior to impairment. The non-credit portion of the impairment is equal to the difference between the fair value and the net present value of the security’s cash flows at the impairment measurement date. Once an OTTI has been recognized, the new amortized cost basis of the security is equal to the previous amortized cost less the amount of OTTI recognized in earnings. For equity method investments, an impairment is recognized when evidence demonstrates that an other-than-temporary loss in value has occurred, including the absence of the ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment.

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C. FINANCIAL INSTRUMENTS

In the normal course of business, the Company may enter into transactions involving various types of financial instruments, including debt, investments such as fixed maturities, equity securities and mortgage loans, investment and loan commitments, swap contracts, option contracts, forward contracts and futures contracts. These instruments involve credit risk and could also be subject to risk of loss due to interest rate and foreign currency fluctuation. The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses.

D. OTHER INVESTMENTS

Other investments consist primarily of overseas deposits, which are investments maintained in overseas funds and managed exclusively by Lloyd’s. These funds are required in order to protect policyholders in overseas markets and enable the Company to operate in those markets. Overseas deposits are carried at fair value. Realized and unrealized gains and losses on overseas deposits, including the impact of foreign currency movements, are reflected in the income statement in the period the gain or loss was generated.

E. CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less.

F. DEFERRED ACQUISITION COSTS

Acquisition costs consist of commissions, underwriting costs and other costs, which vary with, and are primarily related to, the successful production of premiums. Acquisition costs are deferred and amortized over the terms of the insurance policies.

Deferred acquisition costs (“DAC”) for each line of business are reviewed to determine if the costs are recoverable from future income, including investment income. If such costs are determined to be unrecoverable, they are expensed at the time of determination. Although recoverability of DAC is not assured, the Company believes it is more likely than not that all of these costs will be recovered. The amount of DAC considered recoverable, however, could be reduced in the near term if the estimates of total revenues discussed above are reduced or permanently impaired as a result of a disposition of a line of business. The amount of amortization of DAC could be revised in the near term if any of the estimates discussed above are revised.

G. REINSURANCE RECOVERABLES

The Company shares certain insurance risks it has underwritten, through the use of reinsurance contracts, with various insurance entities. Reinsurance accounting is followed for ceded transactions when the risk transfer provisions of ASC 944, Financial Services – Insurance (“ASC 944”), have been met. As a result, when the Company experiences loss or claims events that are subject to a reinsurance contract, reinsurance recoverables are recorded. The amount of the reinsurance recoverable can vary based on the terms of the reinsurance contract, the size of the individual loss or claim, or the aggregate amount of all losses or claims in a particular line or book of business or an aggregate amount associated with a particular accident year. The valuation of losses or claims recoverable depends on whether the underlying loss or claim is a reported loss or claim, or an incurred but not reported loss. For reported losses and claims, the Company values reinsurance recoverables at the time the underlying loss or claim is recognized, in accordance with contract terms. For incurred but not reported losses, the Company estimates the amount of reinsurance recoverables based on the terms of the reinsurance contracts and historical reinsurance recovery information and applies that information to the gross loss reserve. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured business and the balance is disclosed separately in the financial statements. However, the ultimate amount of the reinsurance recoverable is not known until all losses and claims are settled. Allowances are established for amounts deemed uncollectible and reinsurance recoverables are recorded net of these allowances. The Company evaluates the financial condition of its reinsurers and monitors concentration risk to minimize its exposure to significant credit losses from individual reinsurers.

H. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE

Property, equipment, leasehold improvements and capitalized software are recorded at cost, less accumulated depreciation and amortization. Depreciation is generally provided using the straight-line method over the estimated useful lives of the related assets, which generally range from 3 to 30 years. The estimated useful life for capitalized software is generally 5 to 7 years. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the term of the leases or the estimated useful life of the improvements.

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The Company tests for the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company recognizes impairment losses only to the extent that the carrying amounts of long-lived assets exceed the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. When an impairment loss occurs, the Company reduces the carrying value of the asset to fair value and no longer depreciates the asset. Fair values are estimated using discounted cash flow analysis.

In 2013, the Company consolidated its operations in Howell, Michigan from two buildings into one building. This resulted in a plan to relocate the employees and pursue the sale of one of the buildings. In conjunction with the planned relocation, the Company recognized a loss of $4.7 million. This is included in other operating expenses in the Consolidated Statements of Income for the year ended December 31, 2013.

I. GOODWILL AND INTANGIBLE ASSETS

In accordance with the provisions of ASC 350, Intangibles- Goodwill and Other, the Company carries its goodwill at cost, net of amortization prior to January 1, 2002 and net of impairments. Increases to goodwill are generated through acquisition and represent the excess of the cost of an acquisition over the fair value of net assets acquired, including any intangibles acquired. Since January 1, 2002 goodwill is no longer amortized but rather, is reviewed for impairment. Additionally, acquisitions can also produce intangible assets, which have either a definite or indefinite life. Intangible assets with definite lives are amortized over that life, whereas those intangible assets determined to have an indefinite life are reviewed at least annually for impairment.

The Company tests for the recoverability of goodwill and intangible assets with indefinite lives annually or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company recognizes impairment losses only to the extent that the carrying amounts of reporting units with goodwill exceed the fair value. The amount of the impairment loss that is recognized is determined based upon the excess of the carrying value of goodwill compared to the implied fair value of the goodwill, as determined with respect to all assets and liabilities of the reporting unit. The Company has performed its annual review of goodwill and intangible assets with indefinite lives for impairment in the fourth quarters of 2013 and 2012 with no impairments recognized.

J. LIABILITIES FOR LOSSES, LAE, AND UNEARNED PREMIUMS

Liabilities for outstanding claims, losses and loss adjustment expenses (“LAE”) are estimates of payments to be made for reported losses and LAE and estimates of losses and LAE incurred but not reported. These liabilities are determined using case basis evaluations and statistical analyses of historical loss patterns and represent estimates of the ultimate cost of all losses incurred but not paid. These estimates are continually reviewed and adjusted as necessary; adjustments are reflected in current operations. Estimated amounts of salvage and subrogation on unpaid losses are deducted from the liability for unpaid claims.

Premiums for direct and assumed business are reported as earned on a pro-rata basis over the contract period. The unexpired portion of these premiums is recorded as unearned premiums.

All losses, LAE and unearned premium liabilities are based on the various estimates discussed above. Although the adequacy of these amounts cannot be assured, the Company believes that it is more likely than not that these liabilities and accruals will be sufficient to meet future obligations of policies in force. The amount of liabilities and accruals, however, could be revised in the near-term if the estimates discussed above are revised.

K. DEBT

The Company’s debt at December 31, 2013 includes senior debentures, subordinated debentures, and collateralized borrowings with the Federal Home Loan Bank of Boston (“FHLBB”). The senior debentures are carried at principal amount borrowed, net of any applicable unamortized discounts. The subordinated debentures and borrowings under the FHLBB program are carried at principal amount borrowed (See Note 6 – “Debt and Credit Arrangements”).

L. PREMIUM, PREMIUM RECEIVABLE, FEE REVENUE AND RELATED EXPENSES

Insurance premiums written are generally recorded at the policy inception and are primarily earned on a pro rata basis over the terms of the policies for all products. Premiums written include estimates, primarily in the Chaucer segment, that are derived from multiple sources, which include the historical experience of the underlying business, similar businesses and available industry information. These estimates are regularly reviewed and updated and any resulting adjustments are included in the current year’s results. Unearned premium reserves represent the portion of premiums written that relates to the unexpired terms of the underlying in-force insurance policies and reinsurance contracts. Premium receivables reflect the unpaid balance of premium written as of the balance sheet date. Premium receivables are generally short-term in nature and are reported net of an allowance for estimated uncollectible premium accounts. The Company reviews its receivables for collectability at the balance sheet date. The allowance for uncollectible accounts was not material as of December 31, 2013 and 2012. Ceded premiums are charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Reinsurance reinstatement premiums, when required, are recognized in the same period as the loss event that gave rise to the reinstatement premiums. Losses and related expenses are matched with premiums, resulting in their recognition over the lives of the contracts. This matching is accomplished through estimated and unpaid losses and amortization of deferred acquisition costs.

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M. INCOME TAXES

The Company is subject to the tax laws and regulations of the U.S. and foreign countries in which it operates. The Company files a consolidated U.S. federal income tax return that includes the holding company and its U.S. subsidiaries. Generally, taxes are accrued at the U.S. statutory tax rate of 35% for income from the U.S. operations. The Company’s primary non-U.S. jurisdiction is the United Kingdom (“U.K.”). In July 2012, the U.K. statutory rate decreased from 26% to 24% effective April 1, 2012 and from 24% to 23% effective April 1, 2013. Further decreases were enacted in July 2013 to reduce the statutory rate from 23% to 21% effective April 1, 2014 and from 21% to 20% effective April 1, 2015. The Company accrues taxes on certain non-U.S. income that is subject to U.S. tax at the U.S. tax rate. Foreign tax credits, where available, are utilized to offset U.S. tax as permitted. Certain of our non-U.S. income is not subject to U.S. tax until repatriated. Foreign taxes on this non-U.S. income are accrued at the local foreign rate and do not have an accrual for U.S. deferred taxes since these earnings are intended to be indefinitely reinvested overseas.

The Company’s accounting for income taxes represents its best estimate of various events and transactions.

Deferred income taxes are generally recognized when assets and liabilities have different values for financial statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by ASC 740, Income Taxes (“ASC 740”). These temporary differences are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. These differences result primarily from insurance reserves, deferred acquisition costs, tax credit carryforwards, loss carryforwards and employee benefit plans.

The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Consideration is given to all available positive and negative evidence, including reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. Valuation allowances are established if, based on available information, it is determined that it is more likely than not that all or some portion of the deferred tax assets will not be realized. Changes in valuation allowances are generally reflected in income tax expense or as an adjustment to other comprehensive income (loss) depending on the nature of the item for which the valuation allowance is being recorded.

N. STOCK-BASED COMPENSATION

The Company recognizes the fair value of compensation costs for all share-based payments, including employee stock options, in the financial statements. Unvested awards are generally expensed on a straight line basis, by tranche, over the vesting period of the award. The Company’s stock-based compensation plans are discussed further in Note 11 – “Stock-Based Compensation Plans”.

O. EARNINGS PER SHARE

Earnings per share (“EPS”) for the years ended December 31, 2013, 2012 and 2011 is based on a weighted average of the number of shares outstanding during each year. Basic and diluted EPS is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. The weighted average shares outstanding used to calculate basic EPS differ from the weighted average shares outstanding used in the calculation of diluted EPS due to the effect of dilutive employee stock options, nonvested stock grants and other contingently issuable shares. If the effect of such items is antidilutive, the weighted average shares outstanding used to calculate diluted EPS are equal to those used to calculate basic EPS.

Options to purchase shares of common stock whose exercise prices are greater than the average market price of the common shares are not included in the computation of diluted earnings per share because the effect would be antidilutive.

P. FOREIGN CURRENCY

The Company’s reporting currency is the U.S. dollar. The functional currencies of the Company’s foreign operations are the U.K. pound sterling (“GBP”), U.S. dollar, and Canadian dollar. Assets and liabilities of foreign operations are translated into the U.S. dollar using the exchange rates in effect at the balance sheet date. Revenues and expenses of foreign operations are translated using the average exchange rate for the period. Gains or losses from translating the financial statements of foreign operations are recorded in the cumulative translation adjustment, as a separate component of accumulated other comprehensive income. Gains and losses arising from transactions denominated in a foreign currency, other than the Company’s functional currencies, are included in net income (loss), except for the Company’s foreign currency denominated available-for-sale investments. The Company’s foreign currency denominated available-for-sale investments’ change in exchange rates between the local currency and the functional currency at each balance sheet date represents an unrealized appreciation or depreciation in value of these securities, and is included as a component of accumulated other comprehensive income.

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The Company manages its exposure to foreign currency risk primarily by matching assets and liabilities denominated in the same currency. To the extent that assets and liabilities in foreign currencies are not matched, the Company is exposed to foreign currency risk. For functional currencies, the related exchange rate fluctuations are reflected in other comprehensive income (loss). The Company translated Chaucer’s balance sheet at December 31, 2013, 2012 and 2011 from GBP to U.S. dollars using a conversion rate of 1.66, 1.63 and 1.55, respectively. The Company recognized approximately $4.2 million and $6.3 million in foreign currency transaction gains in the Statement of Income during the years ended December 31, 2013 and 2012, respectively. During the six months ended December 31, 2011, the Company recognized $5.1 million of foreign exchange transaction gains including the $6.4 million gain recognized on the foreign currency forward contract associated with the purchase price of Chaucer. See Note 2 – “Acquisitions and Discontinued Operations” for further information.

Q. NEW ACCOUNTING PRONOUNCEMENTS

Recently Implemented Standards

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Update No. 2013-02 (Topic 220) Comprehensive Income Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASC Update No. 2013-02”). This guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) either on the face of the Statement of Income or in the Notes to the Consolidated Financial Statements. Significant amounts reclassified out of AOCI should be provided by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified in its entirety to net income in the same reporting period. For amounts not required to be reclassified in their entirety to net income, a cross-reference to other disclosures provided for in accordance with U.S. GAAP is required. This guidance was applicable for reporting periods beginning after December 15, 2012. The Company implemented the guidance effective January 1, 2013. The effect of implementing the guidance relates to financial statement presentation and disclosures. (See disclosures in Note 10 – Other Comprehensive Income.)

In July 2012, the FASB issued ASC Update No. 2012-02 (Topic 350) Testing Indefinite – Lived Intangible Assets for Impairment. This ASC update allows an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite – lived intangible asset is impaired. This assessment should be used as a basis for determining whether it is necessary to perform the quantitative impairment test. An entity would not be required to calculate the fair value of the intangible asset and perform the quantitative test unless the entity determines, based upon its qualitative assessment, that it is more likely than not that its fair value is less than its carrying value. The update further improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of an indefinite – lived intangible asset is less than its carrying amount. The update also allows an entity the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. This ASC update was effective for annual and interim periods beginning after September 15, 2012, with early adoption permitted. The Company implemented this guidance effective October 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In September 2011, the FASB issued ASC Update No. 2011-08 (Topic 350) Testing Goodwill for Impairment. This ASC update allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The update provides that an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on its qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The update further improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the update improves the examples of events and circumstances that should be considered by an entity that has a reporting unit with a zero or negative carrying amount in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. This ASC update was effective for annual and interim periods beginning after December 15, 2011, with early adoption permitted. The Company implemented this guidance effective January 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In June 2011, the FASB issued ASC Update No. 2011-05 (Topic 220) Presentation of Comprehensive Income (“ASC Update No. 2011-05”). This ASC update requires companies to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of income and other comprehensive income. The option to present items of other comprehensive income in the statement of changes in equity is eliminated. In addition, an entity is required to present on the face of the financial statements reclassification adjustments from other comprehensive income to net income. This ASC update should be applied retrospectively and except for the provisions related to reclassification adjustment, was effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASC Update 2011-12 (Topic 220) Comprehensive Income which deferred the implementation date of the reclassification adjustment guidance in ASC Update No. 2011-05 and was subsequently replaced by ASC Update No. 2013-02, as described above. The Company implemented the guidance related to financial statements presentation effective January 1, 2012. The effect of implementing the guidance related to financial statements presentation did not have a significant impact to the Company’s financial statement presentation.

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In May 2011, the FASB issued ASC Update No. 2011-04 (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASC update results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value for both U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new guidance includes changes to how and when the valuation premise of highest and best use applies, clarification on the application of blockage factors and other premiums and discounts, as well as new and revised disclosure requirements. This ASC update was effective for interim and annual periods beginning after December 15, 2011. The Company implemented this guidance as of January 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In October 2010, the FASB issued ASC Update No. 2010-26 (Topic 944), Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (a consensus of the FASB Emerging Issues Task Force). This ASC update provides clarity in defining which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral, commonly known as deferred acquisition costs. Additionally, this update specifies that only costs associated with the successful acquisition of a policy or contract may be deferred, whereas industry practice historically included costs relating to unsuccessful contract acquisition. This ASC was effective for fiscal years beginning after December 15, 2011. Retrospective application to all prior periods upon the date of adoption was permitted. The Company implemented this guidance effective January 1, 2012 and elected to apply this guidance retrospectively. Retrospective application required that the new accounting principle be reflected in the earliest period presented as if the accounting principle had always been used. Upon adoption in 2012, the Company applied this guidance to the then earliest period, which was January 1, 2010. Additionally, since the Company purchased Chaucer July 1, 2011, it has reflected the impact of the retrospective application for Chaucer through equity, as a cumulative effect of a change in accounting principle, during 2011. The implementation of this ASC resulted in an after-tax reduction to our shareholders’ equity as of January 1, 2012 of $25.8 million, or 1%. The effect of implementing this guidance was not material to our results of operations or cash flows on either a historical basis or a prospective basis.

Recently Issued Standards

In July 2013, the FASB issued ASC Update No. 2013-11 (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). This ASC update clarifies the applicable guidance for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward as long as it is available, at the reporting date under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position (with certain exceptions). The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company does not expect the adoption of ASC Update 2013-11 to have a material impact on its financial position or results of operations.

In March 2013, the FASB issued ASC Update No. 2013-05 (Topic 830) Foreign Currency Matters-Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force). This ASC update clarifies the applicable guidance for the release of the cumulative translation adjustment into net income when a parent either sells all or a portion of its investment in a foreign entity. This guidance is also required to be applied when an entity no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity (with certain exceptions). Additionally, this update clarifies that the sale of an investment in a foreign entity includes events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date in a business combination achieved in stages. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to derecognition events occurring after the effective date. The Company does not expect the adoption of ASC Update 2013-05 to have a material impact on its financial position or results of operations.

R. RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year presentation.

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2. ACQUISITIONS AND DISCONTINUED OPERATIONS

ACQUISITIONS

Chaucer Acquisition

On July 1, 2011, the Company acquired Chaucer, a U.K. insurance business. Shareholders of Chaucer received 53.3 pence for each Chaucer share, which was paid in either cash or loan notes to those shareholders who elected to receive such notes in lieu of cash. The following table summarizes the transaction in both GBP and U.S. dollars:

(in millions)
Aggregate purchase price announced on April 20, 2011
Based on 53.3p contract price	£	297.7	$	485.3
Actual consideration on July 14, 2011:
Cash	£	287.4	$	455.0
Loan notes and other payables		9.5		15.3
Foreign exchange forward settlement		—		11.3
Total	£	296.9	$	481.6

The difference between the aggregate purchase price at signing and closing is attributable to the effect of currency fluctuations between the GBP and the U.S. dollar, as well as a change in outstanding shares.

In connection with the transaction, the Company entered into a foreign exchange forward contract, which provided for an economic hedge between the agreed upon purchase price of Chaucer in GBP and currency fluctuations between the GBP and U.S. dollar prior to close. This contract effectively locked in the U.S. dollar equivalent of the purchase price to be delivered in GBP and was settled at a loss of $11.3 million during the year ended December 31, 2011. The loss on the contract was due to a decrease in the exchange rate between the GBP and U.S. dollar, but was partially offset by the lower U.S. dollars required to meet the GBP-based purchase price, resulting in a $6.4 million gain on foreign exchange during the year ended December 31, 2011.

Acquisition costs, which include advisory, legal, and accounting costs, totaled $11.7 million and were expensed as incurred.

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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 year ended December 31, 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 the date indicated, or of future results of the Company. Amounts in 2011 are converted from GBP to U.S. dollar at a 1.60 exchange rate.

	(UNAUDITED)
	YEAR ENDED
	DECEMBER 31
(in millions, except per share data)	2011
Revenue	$	4,364.8
Net income (loss)	$	(12.1	)
Net income (loss) per share—basic	$	(0.27	)
Net income (loss) per share — diluted (1)	$	(0.27	)
Weighted average shares outstanding—basic		45.2
Weighted average shares outstanding — diluted (1)		45.2

(1) Weighted average shares outstanding and per diluted share amounts in 2011 exclude common stock equivalents, since the impact of these instruments would be antidilutive.

DISCONTINUED OPERATIONS

Discontinued operations primarily consist of the Company’s former life insurance businesses, which were sold prior to 2009, its Discontinued Accident and Health Business and its former third party administration business, Citizens Management, Inc. (“CMI”), which was sold in 2012.

During 1999, the Company exited its accident and health insurance business, consisting of its Employee Benefit Services business, its Affinity Group Underwriters business and its accident and health assumed reinsurance pool business. Prior to 1999, these businesses comprised substantially all of the former Corporate Risk Management Services segment. Accordingly, the operating results of the discontinued segment have been reported in accordance with Accounting Principles Board Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (“APB Opinion No. 30”). On January 2, 2009, Hanover Insurance directly assumed a portion of the accident and health business; and therefore continues to apply APB Opinion No. 30 to this business. In addition, the remainder of the Discontinued First Allmerica Financial Life Insurance Company (“FAFLIC”) accident and health business was reinsured by Hanover Insurance in connection with the sale of FAFLIC to Commonwealth Annuity, and has been reported in accordance with ASC 205, Presentation of Financial Statements.

The accident and health business had no significant financial results that impacted 2013, 2012 or 2011. At December 31, 2013 and 2012, the portion of the discontinued accident and health business that was directly assumed had assets of $66.6 million and $72.9 million, respectively, consisting primarily of invested assets, and liabilities of $51.3 million and $52.5 million, respectively, consisting primarily of policy liabilities. At December 31, 2013 and 2012, the assets and liabilities of this business, as well as those of the reinsured portion of the accident and health business are classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheets.

In 2013, the Company recognized a $5.8 million gain relating to its former life insurance businesses. This was primarily due to an insurance settlement related to a class action lawsuit, net of tax.

On April 30, 2012, the Company completed the sale of its third party administration subsidiary, CMI. The Company recognized net gains of $10.8 million after taxes related to this transaction during the year ended December 31, 2012. Included in this amount was a contingent gain with a fair value of $1.7 million that was entirely contributed to the Company’s charitable foundation.

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3. INVESTMENTS

A. FIXED MATURITIES AND EQUITY SECURITIES

The amortized cost and fair value of available-for-sale fixed maturities and the cost and fair value of equity securities were as follows:

DECEMBER 31, 2013
(in millions)
	Amortized		Gross		Gross				OTTI
	Cost or Cost		Unrealized Gains		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. Treasury and government agencies	$	417.5	$	3.3	$	14.2	$	406.6	$	—
Foreign government		304.5		2.1		1.6		305.0		—
Municipal		1,108.0		37.4		19.1		1,126.3		—
Corporate		3,690.2		171.5		37.5		3,824.2		8.6
Residential mortgage-backed		722.8		20.1		14.1		728.8		1.6
Commercial mortgage-backed		405.9		10.5		4.8		411.6		—
Asset-backed		166.3		2.0		0.2		168.1		—
Total fixed maturities	$	6,815.2	$	246.9	$	91.5	$	6,970.6	$	10.2
Equity securities	$	366.5	$	66.9	$	3.2	$	430.2	$	—
DECEMBER 31, 2012
(in millions)
	Amortized		Gross		Gross				OTTI
	Cost or Cost		Unrealized Gains		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. Treasury and government agencies	$	317.2	$	8.8	$	0.4	$	325.6	$	—
Foreign government		348.5		4.6		0.2		352.9		—
Municipal		1,010.2		87.2		1.1		1,096.3		—
Corporate		3,512.8		275.4		14.8		3,773.4		9.3
Residential mortgage-backed		769.0		39.4		3.2		805.2		1.7
Commercial mortgage-backed		373.3		23.2		0.3		396.2		—
Asset-backed		198.5		4.1		—		202.6		—
Total fixed maturities	$	6,529.5	$	442.7	$	20.0	$	6,952.2	$	11.0
Equity securities	$	299.0	$	21.6	$	4.8	$	315.8	$	—

OTTI unrealized losses in the tables above represent OTTI recognized in accumulated other comprehensive income. This amount excludes net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date of $16.4 million and $20.5 million as of December 31, 2013 and 2012, respectively.

The Company participates in a security lending program for the purpose of enhancing income. Securities on loan to various counterparties had a fair value of $13.6 million and $29.2 million at December 31, 2013 and 2012, respectively, and were fully collateralized by cash. The fair value of the loaned securities is monitored on a daily basis, and the collateral is maintained at a level of at least 102% of the fair value of the loaned securities. Securities lending collateral is recorded by the Company in cash and cash equivalents, with an offsetting liability included in expenses and taxes payable.

At December 31, 2013 and 2012, fixed maturities with fair values of $142.4 million and $115.7 million, respectively, and amortized cost of $135.2 million and $106.2 million, respectively, were on deposit with various state and governmental authorities.

In accordance with Lloyd’s operating guidelines, the Company deposits funds at Lloyd’s to support underwriting operations. These funds are available only to fund claim obligations. At December 31, 2013 and 2012, fixed maturities with a fair value of approximately $334 million and $497 million, respectively, and cash of $1 million and $3 million, respectively, were on deposit with Lloyd’s.

The Company enters into various agreements that may require its fixed maturities to be held as collateral by others. At December 31, 2013 and 2012, fixed maturities with a fair value of $160.9 million and $213.8 million, respectively, were held as collateral for collateralized borrowings and other arrangements. Of these amounts, $148.1 million and $200.8 million related to the FHLBB collateralized borrowing program at December 31, 2013 and 2012, respectively. See Note 6—“Debt and Credit Arrangements” for additional information related to the Company’s FHLBB program.

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The amortized cost and fair value by maturity periods for fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers.

DECEMBER 31	2013
(in millions)
	Amortized		Fair
	Cost		Value
Due in one year or less	$	495.5	$	501.4
Due after one year through five years		2,234.5		2,327.9
Due after five years through ten years		2,100.2		2,139.6
Due after ten years		690.0		693.2
		5,520.2		5,662.1
Mortgage-backed and asset-backed securities		1,295.0		1,308.5
Total fixed maturities	$	6,815.2	$	6,970.6

B. DERIVATIVE INSTRUMENTS

The Company maintains an overall risk management strategy that incorporates the use of derivative instruments, as necessary, to manage significant unplanned fluctuations in earnings that may be caused by foreign currency exchange and interest rate volatility.

The Company did not use derivative instruments in 2013. In 2012, the Company realized a loss of $5.1 million on futures contracts relating to the realization for tax purposes only, of unrealized gains in its investment portfolio. Additionally, the Company utilized a foreign currency forward contract to mitigate changes in fair value caused by foreign currency fluctuation in converting GBP denominated securities into their U.S. dollar denominated equivalent. The contract was terminated in March 2012 and the Company recognized a gain of $0.7 million.

In 2011, the Company realized losses on derivative instruments of $7.1 million. In April 2011, the Company entered into a foreign currency forward contract as an economic hedge of the foreign currency exchange risk embedded in the purchase price of Chaucer, which was denominated in GBP resulting in a loss of $11.3 million, reflected in other operating expenses in the Consolidated Statements of Income. In May 2011, the Company entered into a treasury lock forward agreement to hedge the interest rate risk associated with the planned issuance of senior debt resulting in a loss of $1.9 million which was recorded in accumulated other comprehensive income and is being recognized as an expense over the term of the senior notes. This hedge qualified as a cash flow hedge. Additionally in 2011, Chaucer held foreign currency forward contracts utilized to mitigate changes in fair value caused by foreign currency fluctuation in converting the fair value of GBP and Euro denominated investment portfolios into their U.S. dollar denominated equivalent. During the year ended December 31, 2011, the Company recognized a net gain of $6.1 million, reflected in net realized investment gains in the Consolidated Statements of Income, related to these instruments, which were terminated in October 2011.

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C. UNREALIZED GAINS AND LOSSES

Unrealized gains and losses on available-for-sale and other securities are summarized in the following table.

YEARS ENDED DECEMBER 31
(in millions)
				Equity
	Fixed			Securities And
2013	Maturities			Other			Total
Net appreciation, beginning of year	$	410.1		$	15.9		$	426.0
Net appreciation (depreciation) on available-for-sale securities and derivative instruments		(273.6	)		48.1			(225.5	)
Change in OTTI losses recognized in other comprehensive income		0.8			—			0.8
Benefit (provision) for deferred income taxes		74.8			(16.8	)		58.0
		(198.0	)		31.3			(166.7	)
Net appreciation, end of year	$	212.1		$	47.2		$	259.3
2012
Net appreciation, beginning of year	$	300.2		$	8.5		$	308.7
Net appreciation on available-for-sale securities and derivative instruments		140.7			10.6			151.3
Change in OTTI losses recognized in other comprehensive income		12.2			—			12.2
Provision for deferred income taxes		(43.0	)		(3.2	)		(46.2	)
		109.9			7.4			117.3
Net appreciation, end of year	$	410.1		$	15.9		$	426.0
2011
Net appreciation, beginning of year	$	210.3			8.0		$	218.3
Net appreciation (depreciation) on available-for-sale securities and derivative instruments		66.4			(1.3	)		65.1
Change in OTTI losses recognized in other comprehensive income		10.5			—			10.5
Benefit for deferred income taxes		13.0			1.8			14.8
		89.9			0.5			90.4
Net appreciation, end of year	$	300.2			8.5		$	308.7

Equity securities and other balances at December 31, 2013, 2012 and 2011 include after-tax net appreciation on other invested assets of $2.9 million, $2.1 million and $1.9 million, respectively. Fixed maturities at December 31, 2013, 2012 and 2011 include after-tax net depreciation on derivative instruments of $0.9 million, $1.0 million and $1.2 million, respectively.

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D. SECURITIES IN AN UNREALIZED LOSS POSITION

The following tables provide information about the Company’s fixed maturities and equity securities that were in an unrealized loss position at December 31, 2013 and 2012:

DECEMBER 31, 2013
(in millions)
					Greater than 12
	12 months or less				months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value
Fixed maturities:
Investment grade:
U.S. Treasury and government agencies	$	12.3	$	247.9	$	1.9	$	18.8	$	14.2	$	266.7
Foreign governments		1.5		129.0		0.1		17.3		1.6		146.3
Municipal		14.8		345.3		4.3		39.9		19.1		385.2
Corporate		21.4		872.7		11.6		87.7		33.0		960.4
Residential mortgage-backed		10.3		321.1		3.4		29.5		13.7		350.6
Commercial mortgage-backed		4.2		155.4		0.6		10.2		4.8		165.6
Asset-backed		0.2		31.0		—		0.3		0.2		31.3
Total investment grade		64.7		2,102.4		21.9		203.7		86.6		2,306.1
Below investment grade:
Corporate		2.9		71.9		1.6		21.4		4.5		93.3
Residential mortgage-backed		0.1		2.0		0.3		1.5		0.4		3.5
Total below investment grade		3.0		73.9		1.9		22.9		4.9		96.8
Total fixed maturities		67.7		2,176.3		23.8		226.6		91.5		2,402.9
Equity securities		2.8		45.2		0.4		0.7		3.2		45.9
Total	$	70.5	$	2,221.5	$	24.2	$	227.3	$	94.7	$	2,448.8
DECEMBER 31, 2012
(in millions)
					Greater than 12
	12 months or less				months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value
Fixed maturities:
Investment grade:
U.S. Treasury and government agencies	$	0.2	$	89.5	$	0.2	$	8.5	$	0.4	$	98.0
Foreign governments		0.2		81.2		—		0.4		0.2		81.6
Municipal		0.5		61.9		0.6		24.0		1.1		85.9
Corporate		1.8		224.8		6.6		59.0		8.4		283.8
Residential mortgage-backed		0.5		47.3		2.0		9.4		2.5		56.7
Commercial mortgage-backed		0.2		29.9		0.1		4.9		0.3		34.8
Asset-backed		—		11.4		—		0.3		—		11.7
Total investment grade		3.4		546.0		9.5		106.5		12.9		652.5
Below investment grade:
Municipal		—		—		—		2.0		—		2.0
Corporate		1.1		26.6		5.3		50.6		6.4		77.2
Residential mortgage-backed		0.1		1.6		0.6		2.5		0.7		4.1
Total below investment grade		1.2		28.2		5.9		55.1		7.1		83.3
Total fixed maturities		4.6		574.2		15.4		161.6		20.0		735.8
Equity securities		4.8		74.4		—		—		4.8		74.4
Total	$	9.4	$	648.6	$	15.4	$	161.6	$	24.8	$	810.2

The Company views gross unrealized losses on fixed maturities and equity securities as being temporary since it is its assessment that these securities will recover in the near term, allowing the Company to realize the anticipated long-term economic value. The Company employs a systematic methodology to evaluate declines in fair value below amortized cost for fixed maturity securities or cost for equity securities. In determining OTTI of fixed maturity and equity securities, the Company evaluates several factors and

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circumstances, including the issuer’s overall financial condition; the issuer’s credit and financial strength ratings; the issuer’s financial performance, including earnings trends, dividend payments and asset quality; any specific events which may influence the operations of the issuer; the general outlook for market conditions in the industry or geographic region in which the issuer operates; and the length of time and the degree to which the fair value of an issuer’s securities remains below the Company’s cost. With respect to fixed maturity investments, the Company considers any factors that might raise doubt about the issuer’s ability to make contractual payments as they come due and whether the Company expects to recover the entire amortized cost basis of the security. With respect to equity securities, the Company considers its ability and intent to hold the investment for a period of time to allow for a recovery in value.

E. OTHER

The Company had no concentration of investments in a single investee that exceeded 10% of shareholders’ equity except for fixed maturities invested in Federal Home Loan Mortgage Corp., which had a fair value of $341.8 million and $415.7 million as of December 31, 2013 and 2012, respectively.

On December 21, 2012, the Company sold an office building and adjacent garage that it had developed for $75.9 million, and recognized an estimated gain of $3.3 million. In 2013, upon receipt of final construction costs, the gain was adjusted by $(0.9) million, to $2.4 million. The project was financed, in part, with $46.3 million of FHLBB advances through the Company’s membership in the FHLBB, which was repaid in January 2013.

At December 31, 2013, there were contractual investment commitments of up to $58.6 million.

The Company held overseas deposits of $149.6 million and $169.2 million at December 31, 2013 and 2012, respectively, which are investments held in overseas funds and managed exclusively by Lloyd’s. These investments are reflected in other investments in the Consolidated Balance Sheets.

4. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Fixed maturities	$	254.8		$	264.2		$	254.3
Equity securities		15.6			15.3			6.8
Other investments		8.8			7.0			4.8
Gross investment income		279.2			286.5			265.9
Less investment expenses		(10.2	)		(9.9	)		(7.7	)
Net investment income	$	269.0		$	276.6		$	258.2

The carrying value of non-income producing fixed maturities, as well as the carrying value of fixed maturity securities on non-accrual status, at December 31, 2013 and 2012 were not material. The effects of non-accruals for the years ended December 31, 2013, 2012 and 2011, compared with amounts that would have been recognized in accordance with the original terms of the fixed maturities, were reductions in net investment income of $2.3 million, $2.5 million and $2.3 million, respectively.

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B. NET REALIZED INVESTMENT GAINS AND LOSSES

Net realized gains (losses) on investments were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Equity securities		26.7			15.5			0.9
Fixed maturities	$	8.6		$	9.7		$	20.4
Real estate		(0.9	)		3.3			—
Derivative instruments		—			(4.4	)		5.8
Other investments		(0.9	)		(0.5	)		1.0
Net realized investment gains	$	33.5		$	23.6		$	28.1

Included in the net realized investment gains (losses) were other-than-temporary impairments of investment securities recognized in earnings totaling $6.0 million, $7.8 million and $6.9 million in 2013, 2012 and 2011, respectively.

Other-than-temporary-impairments

For 2013, total OTTI was $7.0 million. Of this amount, $6.0 million was recognized in earnings and $1.0 million was recorded as unrealized losses in accumulated other comprehensive income. Of the $6.0 million recorded in earnings, $2.5 million related to an emerging markets exchange-traded fund, $1.6 million related to common stocks, $1.4 million was estimated credit losses on fixed maturity securities and $0.5 million related to fixed maturity securities that the Company intends to sell.

For 2012, total OTTI was $7.3 million. Of this amount, $7.8 million was recognized in earnings, including $0.5 million that was transferred from unrealized losses in accumulated other comprehensive income. Of the $7.8 million recorded in earnings, $5.4 million related to fixed maturity securities that the Company intends to sell, $1.2 million was estimated credit losses on fixed maturity securities and $1.2 million related to common stocks.

For 2011, total OTTI was $4.9 million. Of this amount, $6.9 million was recognized in earnings, including $2.0 million that was transferred from unrealized losses in accumulated other comprehensive income. Of the $6.9 million recorded in earnings, $4.6 million related to fixed maturity securities that the Company intends to sell, $1.4 million related to common stocks and $0.9 million was estimated credit losses on fixed maturity securities.

The methodology and significant inputs used to measure the amount of credit losses on fixed maturities in 2013, 2012 and 2011 were as follows:

Corporate bonds - the Company utilized a financial model that derives expected cash flows based on probability-of-default factors by credit rating and asset duration and loss-given-default factors based on security type. These factors are based on historical data provided by an independent third-party rating agency.

Asset-backed securities, including commercial and residential mortgage-backed securities - the Company utilized cash flow estimates based on bond specific facts and circumstances that include collateral characteristics, expectations of delinquency and default rates, loss severity, prepayment speeds and structural support, including subordination and guarantees.

Municipals - the Company utilized cash flow estimates based on bond specific facts and circumstances that may include the political subdivision’s taxing authority, the issuer’s ability to adjust user fees or other sources of revenue to satisfy its debt obligations and the ability to access insurance or guarantees.

The following table provides rollforwards of the cumulative amounts related to the Company’s credit loss portion of the OTTI losses on fixed maturity securities for which the non-credit portion of the loss is included in other comprehensive income.

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YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Credit losses as of the beginning of the year	$	8.6		$	14.5		$	16.7
Credit losses for which an OTTI was not previously recognized		1.1			0.6			—
Additional credit losses on securities for which an OTTI was previously recognized		0.3			0.6			0.9
Reductions for securities sold, matured or called		(2.2	)		(6.9	)		(1.8	)
Reductions for securities reclassified as intend to sell		—			(0.2	)		(1.3	)
Credit losses as of the end of the year	$	7.8		$	8.6		$	14.5

The proceeds from sales of available-for-sale securities and the gross realized gains and gross realized losses on those sales, were as follows:

YEARS ENDED DECEMBER 31
(in millions)
	Proceeds from		Gross		Gross
2013	Sales		Gains		Losses
Fixed maturities	$	450.4	$	6.0	$	4.0
Equity securities	$	193.5	$	31.2	$	0.4
2012
Fixed maturities	$	616.3	$	12.1	$	2.0
Equity securities	$	141.3	$	17.5	$	0.7
2011
Fixed maturities	$	678.1	$	20.0	$	1.1
Equity securities	$	86.6	$	3.0	$	0.5

5. FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, i.e., exit price, in an orderly transaction between market participants. The Company emphasizes the use of observable market data whenever available in determining fair value. Fair values presented for certain financial instruments are estimates which, in many cases, may differ significantly from the amounts that could be realized upon immediate liquidation. A hierarchy of the three broad levels of fair value are as follows, with the highest priority given to Level 1 as these are the most observable, and the lowest priority given to Level 3:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data, including model-derived valuations.

Level 3 – Unobservable inputs that are supported by little or no market activity.

When more than one level of input is used to determine fair value, the financial instrument is classified as Level 2 or 3 according to the lowest level input that has a significant impact on the fair value measurement.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments and have not changed since last year.

CASH AND CASH EQUIVALENTS

The carrying amount approximates fair value. Cash equivalents primarily consist of money market instruments, which are generally valued using unadjusted quoted prices in active markets that are accessible for identical assets and are classified as Level 1.

FIXED MATURITIES

Level 1 securities generally include U.S. Treasury issues and other securities that are highly liquid and for which quoted market prices are available. Level 2 securities are valued using pricing for similar securities and pricing models that incorporate observable inputs

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including, but not limited to yield curves and issuer spreads. Level 3 securities include issues for which little observable data can be obtained, primarily due to the illiquid nature of the securities, and for which significant inputs used to determine fair value are based on the Company’s own assumptions. Non-binding broker quotes are also included in Level 3.

The Company utilizes a third party pricing service for the valuation of the majority of its fixed maturity securities and receives one quote per security. When quoted market prices in an active market are available, they are provided by the pricing service as the fair value and such values are classified as Level 1. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value for those securities using pricing applications based on a market approach. Inputs into the fair value pricing common to all asset classes include: benchmark U.S. Treasury security yield curves; reported trades of identical or similar fixed maturity securities; broker/dealer quotes of identical or similar fixed maturity securities and structural characteristics such as maturity date, coupon, mandatory principal payment dates, frequency of interest and principal payments, and optional redemption features. Inputs into the fair value applications that are unique by asset class include, but are not limited to:

• U.S. government agencies – determination of direct versus indirect government support and whether any contingencies exist with respect to the timely payment of principal and interest.

• Foreign government – estimates of appropriate market spread versus underlying related sovereign treasury curve(s) dependent on liquidity and direct or contingent support.

• Municipals – overall credit quality, including assessments of the level and variability of: sources of payment such as income, sales or property taxes, levies or user fees; credit support such as insurance; state or local economic and political base; natural resource availability; and susceptibility to natural or man-made catastrophic events such as hurricanes, earthquakes or acts of terrorism.

• Corporate fixed maturities – overall credit quality, including assessments of the level and variability of: economic sensitivity; liquidity; corporate financial policies; management quality; regulatory environment; competitive position; ownership; restrictive covenants; and security or collateral.

• Residential mortgage-backed securities – estimates of prepayment speeds based upon: historical prepayment rate trends; underlying collateral interest rates; geographic concentration; vintage year; borrower credit quality characteristics; interest rate and yield curve forecasts; government or monetary authority support programs; tax policies; delinquency/default trends; and, in the case of non-agency collateralized mortgage obligations, severity of loss upon default and length of time to recover proceeds following default.

• Commercial mortgage-backed securities – overall credit quality, including assessments of the value and supply/demand characteristics of: collateral type such as office, retail, residential, lodging, or other; geographic concentration by region, state, metropolitan statistical area and locale; vintage year; historical collateral performance including defeasance, delinquency, default and special servicer trends; and capital structure support features.

• Asset-backed securities – overall credit quality, including assessments of the underlying collateral type such as credit card receivables, auto loan receivables and equipment lease receivables; geographic diversification; vintage year; historical collateral performance including delinquency, default and casualty trends; economic conditions influencing use rates and resale values; and contract structural support features.

Generally, all prices provided by the pricing service, except actively traded securities with quoted market prices, are reported as Level 2.

The Company holds privately placed fixed maturity securities and certain other fixed maturity securities that do not have an active market and for which the pricing service cannot provide fair values. The Company determines fair values for these securities using either matrix pricing utilizing the market approach or broker quotes. The Company will use observable market data as inputs into the fair value applications, as discussed in the determination of Level 2 fair values, to the extent it is available, but is also required to use a certain amount of unobservable judgment due to the illiquid nature of the securities involved. Unobservable judgment reflected in the Company’s matrix model accounts for estimates of additional spread required by market participants for factors such as issue size, structural complexity, high bond coupon, long maturity term or other unique features. These matrix-priced securities are reported as Level 2 or Level 3, depending on the significance of the impact of unobservable judgment on the security’s value. Additionally, the Company may obtain non-binding broker quotes which are reported as Level 3.

EQUITY SECURITIES

Level 1 consists of publicly traded securities, including exchange traded funds, valued at quoted market prices. Level 2 includes securities that are valued using pricing for similar securities and pricing models that incorporate observable inputs. Level 2 also

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includes fair values obtained from net asset values provided by mutual fund investment managers, upon which subscriptions and redemptions can be executed. Level 3 consists of common or preferred stock of private companies for which observable inputs are not available. Non-binding broker quotes are also included in Level 3.

The Company utilizes a third party pricing service for the valuation of the majority of its equity securities and receives one quote for each equity security. When quoted market prices in an active market are available, they are provided by the pricing service as the fair value and such values are classified as Level 1. Generally, all prices provided by the pricing service, except quoted market prices, are reported as Level 2. The Company holds certain equity securities that have been issued by privately-held entities that do not have an active market and for which the pricing service cannot provide fair values. Generally, the Company estimates fair value for these securities based on the issuer’s book value and market multiples. These securities are reported as Level 3 as market multiples represent significant unobservable inputs.

OTHER INVESTMENTS

Other investments consist primarily of overseas trust funds, for which fair values are provided by the investment manager based on quoted prices for similar instruments in active markets and are reported as Level 2. Also included in other investments are cost basis limited partnerships and mortgage loans. Cost basis limited partnerships’ fair values are based on the net asset value provided by the general partner and recent financial information and are reported as Level 3. Mortgage loans’ fair values are estimated by discounting the future contractual cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and are reported as Level 2.

DEBT

The fair value of debt is estimated based on quoted market prices. If a quoted market price is not available, fair values are estimated using discounted cash flows that are based on current interest rates and yield curves for debt issuances with maturities and credit risks consistent with the debt being valued. Debt is reported as Level 2.

The estimated fair value of the financial instruments were as follows:

DECEMBER 31	2013				2012
(in millions)	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial Assets
Cash and cash equivalents	$	486.2	$	486.2	$	564.8	$	564.8
Fixed maturities		6,970.6		6,970.6		6,952.2		6,952.2
Equity securities		430.2		430.2		315.8		315.8
Other investments		173.1		173.7		188.9		189.4
Total financial assets	$	8,060.1	$	8,060.7	$	8,021.7	$	8,022.2
Financial Liabilities
Debt	$	903.9	$	961.7	$	849.4	$	995.2

The Company has processes designed to ensure that the values received from its third party pricing service are accurately recorded, that the data inputs and valuation techniques utilized are appropriate and consistently applied and that the assumptions are reasonable and consistent with the objective of determining fair value. The Company performs a review of the fair value hierarchy classifications and of prices received from its pricing service on a quarterly basis. The Company reviews the pricing services’ policies describing its methodology, processes, practices and inputs, including various financial models used to value securities. Also, the Company reviews the portfolio pricing, including securities with changes in prices that exceed a defined threshold are verified to independent sources, if available. If upon review, the Company is not satisfied with the validity of a given price, a pricing challenge would be submitted to the pricing service along with supporting documentation for its review. The Company does not adjust quotes or prices obtained from the pricing service unless the pricing service agrees with the Company’s challenge. During 2013 and 2012, the Company did not adjust any prices received from brokers or its pricing service.

Changes in the observability of valuation inputs may result in a reclassification of certain financial assets or liabilities within the fair value hierarchy. Reclassifications between levels of the fair value hierarchy are reported as of the beginning of the period in which the reclassification occurs. As previously discussed, the Company utilizes a third party pricing service for the valuation of the majority of its fixed maturities and equity securities. The pricing service has indicated that it will only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If the pricing service discontinues pricing an investment, the Company will use observable market data to the extent it is available, but may also be required to make assumptions for market based inputs that are unavailable due to market conditions.

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The following tables provide, for each hierarchy level, the Company’s assets that were measured at fair value on a recurring basis.

	DECEMBER 31, 2013
(in millions)	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	406.6	$	167.2	$	239.4	$	—
Foreign government		305.0		45.6		259.4		—
Municipal		1,126.3		—		1,100.7		25.6
Corporate		3,824.2		—		3,811.2		13.0
Residential mortgage-backed, U.S. agency backed		573.2		—		573.2		—
Residential mortgage-backed, non-agency		155.6		—		155.1		0.5
Commercial mortgage-backed		411.6		—		388.7		22.9
Asset-backed		168.1		—		168.1		—
Total fixed maturities		6,970.6		212.8		6,695.8		62.0
Equity securities		420.9		382.3		—		38.6
Other investments		153.2		—		149.6		3.6
Total investment assets at fair value	$	7,544.7	$	595.1	$	6,845.4	$	104.2
	DECEMBER 31, 2012
	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	325.6	$	144.2	$	181.4	$	—
Foreign government		352.9		60.9		292.0		—
Municipal		1,096.3		—		1,076.9		19.4
Corporate		3,773.4		—		3,747.0		26.4
Residential mortgage-backed, U.S. agency backed		610.8		—		610.8		—
Residential mortgage-backed, non-agency		194.4		—		193.7		0.7
Commercial mortgage-backed		396.2		—		369.5		26.7
Asset-backed		202.6		—		201.1		1.5
Total fixed maturities		6,952.2		205.1		6,672.4		74.7
Equity securities		306.1		226.9		54.8		24.4
Other investments		172.8		—		169.2		3.6
Total investment assets at fair value	$	7,431.1	$	432.0	$	6,896.4	$	102.7

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The following tables provide, for each hierarchy level, the Company’s estimated fair values of financial instruments that were not carried at fair value.

	DECEMBER 31, 2013
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	486.2	$	486.2	$	—	$	—
Equity securities		9.3		—		9.3		—
Other investments		20.5		—		2.7		17.8
Liabilities:
Debt	$	961.7	$	—	$	961.7	$	—
	DECEMBER 31, 2012
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	564.8	$	564.8	$	—	$	—
Equity securities		9.7		—		9.7		—
Other investments		16.6		—		4.8		11.8
Liabilities:
Debt	$	995.2	$	—	$	995.2	$	—

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The tables below provide a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

YEAR ENDED DECEMBER 31, 2013	Fixed Maturities
(in millions)	Municipal			Corporate			Residential mortgage- backed, non- agency			Commercial mortgage- backed			Asset-backed			Total			Equity and Other			Total Assets
Balance at beginning of year	$	19.4		$	26.4		$	0.7		$	26.7		$	1.5		$	74.7		$	28.0		$	102.7
Transfers into Level 3		9.7			0.2			—			—			—			9.9			—			9.9
Transfers out of Level 3		—			(2.2	)		—			—			(1.5	)		(3.7	)		(0.9	)		(4.6	)
Total gains (losses):
Included in earnings		—			1.5			—			—			—			1.5			—			1.5
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities		(0.8	)		(1.6	)		—			(1.3	)		—			(3.7	)		15.1			11.4
Sales		(2.7	)		(11.3	)		(0.2	)		(2.5	)		—			(16.7	)		—			(16.7	)
Balance at end of year	$	25.6		$	13.0		$	0.5		$	22.9		$	—		$	62.0		$	42.2		$	104.2
YEAR ENDED DECEMBER 31, 2012	Fixed Maturities
(in millions)	Municipal			Corporate			Residential mortgage- backed, non- agency			Commercial mortgage- backed			Asset-backed			Total			Equity and Other			Total Assets
Balance at beginning of year	$	13.6		$	23.8		$	5.2		$	23.7		$	9.2		$	75.5		$	27.0		$	102.5
Transfers into Level 3		2.6			4.3			—			—			—			6.9			0.1			7.0
Transfers out of Level 3		—			(2.3	)		—			—			(8.7	)		(11.0	)		—			(11.0	)
Total gains (losses):
Included in earnings		—			0.4			—			—			—			0.4			(0.2	)		0.2
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities		1.1			0.7			0.1			(0.4	)		—			1.5			1.8			3.3
Purchases and sales:
Purchases		3.0			1.5			0.1			5.2			1.5			11.3			—			11.3
Sales		(0.9	)		(2.0	)		(4.7	)		(1.8	)		(0.5	)		(9.9	)		(0.7	)		(10.6	)
Balance at end of year	$	19.4		$	26.4		$	0.7		$	26.7		$	1.5		$	74.7		$	28.0		$	102.7

During the years ended December 31, 2013 and 2012, the Company transferred fixed maturities between Level 2 and Level 3 primarily as a result of assessing the significance of unobservable inputs on the fair value measurement. There were no transfers between Level 1 and Level 2 during 2013 or 2012.

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The following table summarizes gains and losses due to changes in fair value that are recorded in net income for Level 3 assets.

YEARS ENDED DECEMBER 31	2013		2012
	Net realized investment
(in millions)	gains (losses)
Level 3 Assets:
Fixed maturities:
Corporate	$	1.5	$	0.4
Equity securities		—		(0.2	)
Total assets	$	1.5	$	0.2

There were no Level 3 liabilities held by the Company for years ended December 31, 2013 and 2012.

The following table provides quantitative information about the significant unobservable inputs used by the Company in the fair value measurements of Level 3 assets. Where discounted cash flows were used in the valuation of fixed maturities, the internally-developed discount rate was adjusted by the significant unobservable inputs shown in the table. Valuations for securities based on broker quotes for which there was a lack of transparency as to inputs used to develop the valuations have been excluded.

			December 31, 2013			December 31, 2012
	Valuation	Significant	Fair		Range	Fair		Range
(in millions)	Technique	Unobservable Inputs	Value		(Wtd Average)	Value		(Wtd Average)
Fixed maturities:
Municipal	Discounted	Discount for:	$	25.6		$	19.4
	cash flow	Small issue size			1.0-4.0%(2.3%)			1.0-4.0%(3.1%)
		Above-market coupon			0.3-1.0%(0.5%)			0.3-1.0%(0.5%)
		Long maturity			N/A			0.5%(0.5%)
Corporate	Discounted	Discount for:		12.8			26.4
	cash flow	Above-market coupon			0.3-0.8%(0.6%)			0.3-1.0%(0.7%)
		Small issue size			0.3-1.0%(0.5%)			0.3-3.0%(0.5%)
		Credit stress			N/A			1.0-3.0%(1.1%)
		Long maturity			N/A			0.5%(0.5%)
Residential mortgage-backed, non-agency	Discounted	Discount for:		0.5			0.7
	cash flow	Small issue size			0.5%(0.5%)			0.5%(0.5%)
Commercial mortgage-backed	Discounted	Discount for:		22.9			26.7
	cash flow	Above-market coupon			0.5-0.8%(0.6%)			0.3-0.8%(0.4%)
		Credit stress			0.5%(0.5%)			1.0%(1.0%)
		Small issue size			0.5%(0.5%)			0.5%(0.5%)
		Lease structure			0.3%(0.3%)			0.3%(0.3%)
		Long maturity			N/A			0.5-0.8%(0.7%)
Asset backed	Discounted	Discount for:		—			1.5
	cash flow	Small issue size			N/A			0.7-2.0%(1.6%)
Equity securities	Market	Net tangible asset		38.5			24.3
	comparables	market multiples			1.3X (1.3X)			0.9X (0.9X)
Other	Discounted	Discount rate		3.6	18.0%(18.0%)		3.6	18.0%(18.0%)
	cash flow

Significant increases (decreases) in any of the above inputs in isolation would result in a significantly lower (higher) fair value measurement. There were no interrelationships between these inputs which might magnify or mitigate the effect of changes in unobservable inputs on the fair value measurement.

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6. DEBT AND CREDIT ARRANGEMENTS

Debt consists of the following:

DECEMBER 31	2013			2012
(in millions)
Senior debentures maturing June 15, 2021	$	300.0		$	300.0
Senior debentures maturing March 1, 2020		165.1			200.0
Senior debentures maturing October 15, 2025		81.2			120.9
Subordinated debentures maturing March 30, 2053		175.0			—
Subordinated debentures maturing February 3, 2027		59.7			59.7
FHLBB borrowings (secured)		125.0			171.3
Total principal debt	$	906.0		$	851.9
Unamortized debt discount		(2.1	)		(2.5	)
Total	$	903.9		$	849.4

On March 20, 2013, the Company issued $175.0 million aggregate principal amount of 6.35% subordinated unsecured debentures due March 30, 2053. These debentures pay interest quarterly. The Company may redeem these debentures in whole at any time, or in part from time to time, on or after March 30, 2018, at a redemption price equal to their principal amount plus accrued and unpaid interest.

On June 17, 2011, the Company issued $300.0 million aggregate principal amount of 6.375% senior unsecured debentures due June 15, 2021. Additionally, on February 23, 2010, the Company issued $200.0 million aggregate principal amount of 7.50% senior unsecured debentures due March 1, 2020. The Company also issued 7.625% senior unsecured debentures with a par value of $200.0 million on October 16, 1995. As of December 31, 2013 and 2012, the remaining 7.625% senior debentures have a par value of $81.2 million and $120.9 million, respectively, and mature on October 15, 2025. All of the Company’s senior debentures are subject to certain restrictive covenants, including limitations on the issuance or disposition of stock of restricted subsidiaries and limitations on liens. These debentures pay interest semi-annually. In addition, the Company’s subordinated debentures maturing February 3, 2027 have a par value of $59.7 million as of December 31, 2013 and 2012 and pay cumulative dividends semi-annually at 8.207%.

In 2013, the Company repurchased senior debentures maturing October 15, 2025, with a net carrying value of $39.2 million at a cost of $50.5 million, resulting in a loss of $11.3 million. Also in 2013, the Company repurchased senior debentures maturing March 1, 2020, with a net carrying value of $34.6 million at a cost of $43.2 million, resulting in a loss of $8.6 million.

In 2009, Hanover Insurance received a $125.0 million FHLBB advance through its membership in the FHLBB. This collateralized advance bears interest at a fixed rate of 5.50% per annum over a twenty-year term. In July 2010, Hanover Insurance committed to an additional $46.3 million of FHLBB advances. These advances were drawn in several increments from July 2010 to January 2012 and carried fixed interest rates with a weighted average of 3.88%. In January 2013, Hanover Insurance repaid the $46.3 million of FHLBB advances plus prepayment fees of $7.8 million for a total payment of $54.1 million. These advances would have matured on July 30, 2020.

As collateral to FHLBB, Hanover Insurance pledged government agency securities with a fair value of $148.1 million and $200.8 million, for the aggregate borrowings of $125.0 million and $171.3 million as of December 31, 2013 and December 31, 2012, respectively. The amount of required collateral decreased in conjunction with the repayment of the $46.3 million of FHLBB advances. The fair value of the collateral pledged must be maintained at certain specified levels of the borrowed amount, which can vary depending on the type of assets pledged. If the fair value of this collateral declines below these specified levels, Hanover Insurance would be required to pledge additional collateral or repay outstanding borrowings. Hanover Insurance is permitted to voluntarily repay the outstanding borrowings at any time, subject to a repayment fee. As a requirement of membership in the FHLBB, Hanover Insurance maintains a certain level of investment in FHLBB stock. Total holdings of FHLBB stock were $9.3 million and $9.7 million at December 31, 2013 and 2012, respectively.

On July 1, 2011, the Company acquired all of the outstanding shares of Chaucer. As part of this acquisition, €12.0 million aggregate principal amount of floating rate subordinated unsecured notes due November 16, 2034 were assumed. These notes paid interest semi-annually based on the European Inter bank offer rate (Euribor) plus 3.75%. Additionally, the Company also assumed $50.0 million aggregate principal amount of floating rate subordinated unsecured notes due September 21, 2036. These notes paid interest quarterly based on the three-month LIBOR plus 3.1%. During 2012, the Company called these subordinated unsecured notes at par value. These notes had a carrying value of $60.3 million resulting in a net loss on the repurchases of $5.1 million.

At December 31, 2013, the Company had a $200.0 million credit agreement which expires in November 2018. The Company had no borrowings under this agreement. Additionally, the Company had a Standby Letter of Credit Facility not to exceed £130.0 million (or $215.8 million based on the foreign currency exchange rate of 1.66 at December 31, 2013). This Letter of Credit Facility provides regulatory capital supporting Chaucer’s underwriting activities for the 2014 and 2015 years of account and each prior open year of account. Simultaneous with this agreement, THG entered into a Guaranty Agreement with Lloyds Bank plc, as Facility Agent and Security Agent, pursuant to which, THG unconditionally guarantees the obligations of Chaucer under the Letter of Credit Facility.

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Interest expense was $65.3 million, $61.9 million, and $55.0 million in 2013, 2012 and 2011, respectively. At December 31, 2013, the Company was in compliance with the covenants associated with all of its debt indentures and credit arrangements.

7 . INCOME TAXES

Provisions for income taxes have been calculated in accordance with the provisions of ASC 740. A summary of the components of income before income taxes and income tax expense (benefit) in the Consolidated Statements of Income are shown below:

YEARS ENDED DECEMBER 31	2013		2012			2011
(in millions)
Income (loss) before income taxes:
U.S.	$	183.5	$	(99.1	)	$	(13.3	)
Non-U.S.		145.6		127.8			34.9
	$	329.1	$	28.7		$	21.6

Income tax expense (benefit) includes the following components:

YEARS ENDED DECEMBER 31	2013		2012			2011
(in millions)
Current:
U.S.	$	8.0	$	2.3		$	(0.6	)
Non-U.S.		0.6		16.1			—
Subtotal		8.6		18.4			(0.6	)
Deferred:
U.S.		52.9		(42.7	)		(20.3	)
Non-U.S.		21.9		6.9			11.0
Subtotal		74.8		(35.8	)		(9.3	)
Total income tax expense (benefit)	$	83.4	$	(17.4	)	$	(9.9	)

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The income tax expense attributable to the consolidated results of continuing operations is different from the amount determined by multiplying income from continuing operations before income taxes by the U.S. statutory federal income tax rate of 35%. The sources of the difference and the tax effects of each were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Expected income tax expense	$	115.2		$	10.0		$	7.5
Tax difference related to investment disposals and maturities		(17.5	)		(14.3	)		(9.7	)
Effect of foreign operations		(10.8	)		(3.5	)		(1.5	)
Dividend received deduction		(2.5	)		(2.8	)		(1.1	)
Tax-exempt interest		(1.7	)		(1.5	)		(2.0	)
Nondeductible expenses		1.1			2.8			4.7
Change in foreign tax rate		(0.7	)		(0.4	)		—
Change in valuation allowance		—			(7.7	)		(7.5	)
Other, net		0.3			—			(0.3	)
Income tax expense (benefit)	$	83.4		$	(17.4	)	$	(9.9	)
Effective tax rate		25.3	%		(60.6	)%		(45.8	)%

The following are the components of the Company’s deferred tax assets and liabilities (excluding those associated with its discontinued operations).

DECEMBER 31	2013		2012
(in millions)
Deferred tax assets
Loss, LAE and unearned premium reserves, net	$	185.0	$	190.6
Tax credit carryforwards		123.1		126.8
Operating loss carryforwards		64.5		75.1
Employee benefit plans		38.2		56.4
Deferred Lloyd’s underwriting losses		—		13.5
Other		74.9		60.7
		485.7		523.1
Less: Valuation Allowance		2.9		—
		482.8		523.1
Deferred tax liabilities
Deferred acquisition costs		123.5		115.8
Software capitalization		30.1		31.4
Deferred Lloyd’s underwriting income		13.8		—
Investments, net		8.4		43.3
Deferred foreign sourced income		5.1		8.0
Other		62.2		57.0
		243.1		255.5
Net deferred tax asset	$	239.7	$	267.6

Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.

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Included in the Company’s deferred tax asset as of December 31, 2013 are assets of $42.1 million related to U.S. net operating loss carryforwards and a deferred tax asset of $22.4 million related to foreign net operating carryforwards. The pre-tax U.S. operating loss carryforwards of $120.3 million will expire beginning in 2031. The pre-tax foreign operating loss carryforwards of $66.2 million were generated in the U.K. and have no expiration date. It is the Company’s opinion that there will be sufficient future U.S. and U.K. taxable income to utilize these loss carryforwards. The Company’s estimate of the gross amount and likely realization of loss carryforwards may change over time.

Included in the Company’s deferred tax asset as of December 31, 2013 are assets of $110.3 million related to alternative minimum tax credit carryforwards and $12.8 million related to foreign tax credit carryforwards. The alternative minimum tax credit carryforwards have no expiration date and the foreign tax credit carryforwards will expire beginning in 2022. The Company may utilize the credits to offset regular federal income taxes due from future income, and although the Company believes that these assets are fully recoverable, there can be no certainty that future events will not affect their recoverability. The Company believes, based on objective evidence, it is more likely than not that the remaining deferred tax assets will be realized.

During 2013, the Company recorded a valuation allowance of $2.9 million related to its deferred tax asset on the unrealized depreciation in its investment portfolio. It is the Company’s opinion that it is more likely than not that this asset will not be realized and accordingly, the Company recorded this valuation allowance as an adjustment to other comprehensive income.

In prior years, the Company completed several transactions which resulted in the realization, for tax purposes only, of unrealized gains in its investment portfolio. The Company realized $69.6 million and $98.4 million, respectively, in 2012 and 2011 as a result of such transactions. These transactions enabled the Company to realize capital loss carryforwards to offset these gains, and resulted in the release of the valuation allowance the Company held against the deferred tax asset related to these capital loss carryforwards. In 2012, the Company released $24.4 million of its valuation allowance which was recorded as a benefit in accumulated other comprehensive income. In 2011, the Company released $29.0 million of its valuation allowance which $0.2 million was reflected in income from continuing operations and the remaining $28.8 million was reflected as a benefit in accumulated other comprehensive income. During 2013, 2012 and 2011, the Company recognized in income from continuing operations, related to non-operating income, $17.5 million, $14.3 million and $9.7 million, respectively. The remaining amount of $107.7 million in accumulated other comprehensive income will be released into income from continuing operations in future years, as the investment securities subject to these transactions are sold or mature. During 2012, the Company released $35.9 million of its valuation allowance related to its deferred tax asset held at the beginning of the year. The release of this valuation allowance resulted from the aforementioned transaction which utilized capital loss carryforwards, unrealized appreciation in its investment portfolio, and net realized capital gains in its Consolidated Statements of Income. Accordingly, the Company recorded decreases in its valuation allowance of $25.3 million as an adjustment to accumulated other comprehensive income, $7.7 million as an adjustment to income tax expense from continuing operations, and $2.9 million in discontinued operations.

During 2011, the Company reduced its valuation allowance, for both continuing and discontinued operations, related to its deferred tax asset by $55.6 million, from $91.5 million to $35.9 million. There were four principal components to this reduction. First, the Company decreased its valuation allowance by $29.0 million as a result of the aforementioned transaction, which utilized the capital loss carryforwards. Second, the Company decreased its valuation allowance by $21.9 million on certain unrealized losses as a result of unrealized appreciation in its investment portfolio. This decrease was reflected as an increase in accumulated other comprehensive income. Third, as a result of $28.1 million in net realized gains during 2011, the Company decreased its valuation allowance by $7.5 million as an increase to income from continuing operations, since these gains utilized the Company’s capital loss carryforwards. Fourth, in the 2010 U.S. federal income tax return the Company was able to utilize an additional $7.6 million of capital loss carryforward that expired in 2010. As such, the valuation allowance was increased by $2.6 million with an equal and offsetting increase to the related deferred tax asset. The remaining increase of $0.2 million was attributable to other items reflected as an expense from discontinued operations.

Although most of the Company’s non – U.S. income is subject to U.S. federal income tax, certain of its non-U.S. income is not subject to U.S. federal income tax until repatriated. Foreign taxes on this non – U.S. income are accrued at the local foreign tax rate, as opposed to the higher U.S. statutory tax rate, since these earnings currently are expected to be indefinitely reinvested overseas. This assumption could change, as a result of a sale of the subsidiaries, the receipt of dividends from the subsidiaries, a change in management’s intentions, or as a result of various other events. The Company has not made a provision for U.S. taxes on $20.3 million, $10.0 million and $4.2 million of non-U.S. income for 2013, 2012 and 2011, respectively. However, in the future, if such earnings were distributed to the Company, taxes of $13.0 million would be payable on such undistributed earnings and would be reflected in the tax provision for the year in which these earnings are no longer intended to be indefinitely reinvested overseas, assuming all foreign tax credits are realized.

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The table below provides a reconciliation of the beginning and ending liability for uncertain tax position as follows:

YEARS ENDED DECEMBER 31	2013			2012		2011
(in millions)
Liability at beginning and end of year, net	$	0.8		$	0.8	$	0.8
Additions for tax positions of prior years		5.4			—		—
Deferred deductions		(4.8	)		—		—
Liability at end of year, net	$	1.4		$	0.8	$	0.8

The IRS audits of the years 2007 and 2008 commenced in April 2010. In 2011, the Company received a Revenue Agent Report for the 2007 and 2008 IRS audit. The Company agreed to all proposed adjustments other than the disallowance of deduction for certain loss reserves, for which it filed a formal protest. In December 2013, the Company reached a tentative settlement on the disallowance of deduction for certain loss reserves and as a result a liability for uncertain tax positions was established for $4.8 million, with an offsetting deferred tax asset. The Company expects to reach a final settlement of this issue during 2014.

The ultimate deductibility of the aforementioned $4.8 million payable is highly certain, but there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, a change in the timing of deductions would not impact the annual effective tax rate. There are no tax positions at December 31, 2012 and 2011 for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.

The Company recognizes interest and penalties related to unrecognized tax benefits in federal income tax expense. The Company had accrued interest of $1.2 million and $0.4 million as of December 31, 2013 and 2012, respectively. The Company has not recognized any penalties associated with unrecognized tax benefits.

The Company or its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, as well as foreign jurisdictions. With few exceptions, the Company and its subsidiaries are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2007. The IRS audits of the years 2009 and 2010 commenced in June 2012. The Company and its subsidiaries are still subject to U.S. state income tax examinations by tax authorities for years after 2006 and foreign examinations for years after 2010.

8. PENSION PLANS

DEFINED BENEFIT PLANS

The Company recognizes the funded status of its defined benefit plans in its Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation of the Company’s defined benefit plans. The Company is required to aggregate separately all overfunded plans from all underfunded plans.

U.S. Defined Benefit Plans

Prior to 2005, THG provided retirement benefits to substantially all of its employees under defined benefit pension plans. These plans were based on a defined benefit cash balance formula, whereby the Company annually provided an allocation to each covered employee based on a percentage of that employee’s eligible salary, similar to a defined contribution plan arrangement. In addition to the cash balance allocation, certain transition group employees who had met specified age and service requirements as of December 31, 1994 were eligible for a grandfathered benefit based primarily on the employees’ years of service and compensation during their highest five consecutive plan years of employment. The Company’s policy for the plans is to fund at least the minimum amount required by the Employee Retirement Income Security Act of 1974 (“ERISA”).

As of January 1, 2005, the defined benefit pension plans were frozen and since that date, no further cash balance allocations have been credited to participants. Participants’ accounts are credited with interest daily, based upon the General Agreement of Trades and Tariffs. In addition, the grandfathered benefits for the transition group were also frozen at January 1, 2005 levels with an annual transition pension adjustment calculated at an interest rate equal to 5% per year up to 35 years of completed service, and 3% thereafter. As of December 31, 2013, based on current estimates of plan liabilities and other assumptions, the projected benefit obligation of the qualified defined benefit pension plans exceeds plan assets by approximately $7 million.

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Chaucer Pension Plan

Prior to 2002, the Chaucer segment provided defined benefit pension retirement benefits to certain of its employees. As of December 31, 2001, the defined benefit pension plan was closed to new members. The defined benefit obligation for this plan is based on the employees’ years of service and final pensionable salary. Contributions are made at least annually to this plan by both the Company and by employees. As of December 31, 2013, based on current estimates of plan liabilities and other assumptions, the projected benefit obligation of the qualified defined benefit pension plan exceeds plan assets by approximately $8 million.

Assumptions

In order to measure the expense associated with these plans, management must make various estimates and assumptions, including discount rates used to value liabilities, assumed rates of return on plan assets, employee turnover rates and anticipated mortality rates, for example. The estimates used by management are based on the Company’s historical experience, as well as current facts and circumstances. In addition, the Company uses outside actuaries to assist in measuring the expense and liability associated with these plans.

The Company measures the funded status of its plans as of the date of its year-end statement of financial position. The Company utilizes a measurement date of December 31st to determine its benefit obligations, consistent with the date of its Consolidated Balance Sheets.

Weighted-average assumptions used to determine pension benefit obligations are as follows:

DECEMBER 31	2013			2012			2011
U.S.:
Discount rate—qualified plan		5.00	%		4.25	%		5.13	%
Discount rate—non-qualified plan		5.00	%		4.13	%		5.00	%
Cash balance interest crediting rate		3.50	%		3.50	%		4.00	%
Chaucer:
Discount rate		4.50	%		4.80	%		4.90	%
Rate of increase in future compensation		3.15	%		4.20	%		4.30	%

The Company utilizes a measurement date of January 1st to determine its periodic pension costs. Weighted-average assumptions used to determine net periodic pension costs for the defined benefit plans are as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
U.S.:
Qualified plan
Discount rate		4.25	%		5.13	%		5.63	%
Expected return on plan assets		5.25	%		6.00	%		6.50	%
Cash balance interest crediting rate		3.50	%		4.00	%		4.50	%
Non-qualified plan
Discount rate		4.13	%		5.00	%		5.50	%
Chaucer:
Discount rate		4.80	%		4.90	%		5.50	%
Rate of increase in future compensation		4.20	%		4.30	%		4.60	%
Expected return on plan assets		6.70	%		7.50	%		7.40	%

The expected rates of return were determined by using historical mean returns for each asset class, adjusted for certain factors believed to have an impact on future returns. Specifically, for the U.S. defined benefit plans, because the allocation of assets between fixed maturities and equities has changed over time, the historical mean returns were adjusted downward slightly to reflect the plan’s asset mix. The adjusted mean returns were weighted to the plan’s expected target asset allocation at December 31, 2013, resulting in an expected rate of return on plan assets for 2013 of 5.25%. The Company reviews and updates, at least annually, its expected return on plan assets based on changes in the actual assets held by the plans.

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Plan Assets

U.S. Qualified Defined Benefit Plans

The Company utilizes a target allocation strategy, which focuses on creating a mix of assets that will generate modest growth from equity securities while minimizing volatility in the Company’s earnings from changes in the markets and economic environment. Various factors are taken into consideration in determining the appropriate asset mix, such as census data, actuarial valuation information and capital market assumptions. During 2013 and 2012, the plan assets were invested 84% in fixed income securities and 16% in equity securities. The Company reviews and updates, at least annually, the target allocation and makes changes periodically.

The following table provides 2013 target allocations and actual invested asset allocations for 2013 and 2012.

	2013
	TARGET
DECEMBER 31	LEVELS			2013			2012
Fixed income securities:
Fixed maturities		83	%		83	%		83	%
Money market funds		2	%		1	%		1	%
Total fixed income securities		85	%		84	%		84	%
Equity securities:
Domestic		11	%		12	%		10	%
International		4	%		4	%		3	%
THG common stock		—			—			3	%
Total equity securities		15	%		16	%		16	%
Total plan assets		100	%		100	%		100	%

The following tables present for each hierarchy level the U.S. qualified defined benefit plan’s investment assets that are measured at fair value at December 31, and 2012. (Refer to Note 5 – “Fair Value” for a description of the different levels in the Fair Value Hierarchy).

DECEMBER 31	2013								2012
(in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income securities:
Fixed maturities	$	449.6	$	2.1	$	447.5	$	—	$	491.4	$	3.3	$	488.1	$	—
Money market funds		5.3		5.3		—		—		5.0		5.0		—		—
Total fixed income securities		454.9		7.4		447.5		—		496.4		8.3		488.1		—
Equity securities:
Domestic		67.8		0.2		67.6		—		58.3		0.4		57.9		—
International		19.3		0.1		19.2		—		18.8		0.1		18.7		—
THG common stock		—		—		—		—		18.1		18.1		—		—
Total equity securities		87.1		0.3		86.8		—		95.2		18.6		76.6		—
Total investments at fair value	$	542.0	$	7.7	$	534.3	$	—	$	591.6	$	26.9	$	564.7	$	—

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Fixed Income Securities

Securities classified as Level 1 at December 31, 2013 and 2012 include actively traded mutual funds and publicly traded securities, which are valued at quoted market prices. Securities classified as Level 2 at December 31, 2013 and 2012 include a separate investment account, which is invested entirely in the Vanguard Total Bond Market Index Fund, a mutual fund that in turn invests in investment grade fixed maturities, as well as commingled pools and investment grade fixed income securities that are held in a custom fund. The fair value of each of the Level 2 investments is determined daily as the Net Asset Value (“NAV”) based on the value of the underlying investments, which is determined independently by the investment manager. The daily NAV, which is not published as a quoted market price for these investments, is used as the basis for transactions. Redemption of these funds is not subject to restriction.

Equity Securities

Securities classified as Level 1 at December 31, 2013 and 2012 include actively traded mutual funds that are publicly traded and which primarily invest in equity securities that are valued at quoted market prices. Additionally, Level 1 securities at December 31, 2012 include 466,755 shares of THG common stock held by the plan, which were valued at quoted market prices. The plan held no shares of THG common stock at December 31, 2013. Securities classified as Level 2 include investments in commingled pools that primarily invest in publicly traded common stocks and international equity securities. The fair value of each of the Level 2 investments is determined daily as the NAV based on the value of the underlying investments, which is determined independently by the investment manager. The daily NAV, which is not published as a quoted market price for these investments, is used as the basis for transactions. Redemption of these funds is not subject to restriction.

Chaucer Pension Plan

The investment strategy of the Chaucer defined benefit pension plan is to invest primarily in growth assets in the form of equity funds which are expected to provide a positive return that exceeds inflation over the longer term in order to protect the existing and future liabilities of the pension plan. In order to reduce volatility and diversify the portfolio, the target allocation includes an exposure to corporate bond and commercial property funds. In 2013, the Company modified its investment allocation strategy and began shifting assets from equity securities into fixed maturities. The Company will continue shifting assets until it reaches its current ultimate target level of 60% equities, 30% fixed maturities and 10% real estate funds. This allocation plan will be reviewed annually and target allocation changes will be made as appropriate. The following table provides 2013 target allocations and actual invested asset allocations for 2013 and 2012.

	2013
	TARGET
DECEMBER 31	LEVELS			2013			2012
Fixed income securities:
Fixed maturities		20	%		19	%		14	%
Equity securities:
Domestic (United Kingdom)		25	%		26	%		33	%
International		45	%		48	%		44	%
Total equity securities		70	%		74	%		77	%
Real estate funds		10	%		7	%		9	%
Total plan assets		100	%		100	%		100	%

Included in total plan assets of $120.2 million at December 31, 2013 were $119.9 million of invested assets carried at fair value and $0.3 million of cash and equivalents. Total plan assets at December 31, 2012 of $90.9 million included $90.7 million of invested assets carried at fair value and $0.2 million of cash and equivalents.

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The following table presents for each hierarchy level the Chaucer defined benefit plan’s investment assets that are measured at fair value at December 31, 2013 and 2012.

YEARS ENDED DECEMBER 31	2013								2012
(in millions)	Fair Value								Fair Value
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income securities:
Fixed maturities	$	22.8	$	—	$	22.8	$	—	$	12.9	$	—	$	12.9	$	—
Equity securities:
Domestic		30.5		—		30.5		—		29.9		—		29.9		—
International		57.8		—		57.8		—		39.7		—		39.7		—
Total equity securities		88.3		—		88.3		—		69.6		—		69.6		—
Real estate funds		8.8		—		—		8.8		8.2		—		—		8.2
Total investments at fair value	$	119.9	$	—	$	111.1	$	8.8	$	90.7	$	—	$	82.5	$	8.2

Fixed Income and Equity Securities

Securities classified as Level 2 at December 31, 2013 and 2012 include pooled funds which are valued at the close of business using a third party pricing service. These values are adjusted by the fund manager to reflect outstanding dividends, taxes and investment fees and other expenses to calculate the NAV.

Real Estate Funds

Real estate fund investments classified as Level 3 at December 31, 2013 and 2012 are valued based upon the values of the net assets of the fund. Although the NAV is calculated daily, transactions also consider cash inflows and outflows of the fund. The price where units are transacted includes the NAV, which is adjusted for investment charges and other estimated acquisition costs such as legal fees, taxes, planning and architect fees, survey and agent fees, among others.

The table below provides a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

YEARS ENDED DECEMBER 31	2013		2012
(in millions)
Balance at beginning of period	$	8.2	$	7.7
Actual return on plan assets related to assets still held		0.5		—
Foreign currency translation		0.1		0.5
Balance at end of year	$	8.8	$	8.2

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Obligations and Funded Status

The Company recognizes the current net underfunded status of its plans in its Consolidated Balance Sheets. Changes in the funded status of the plans are reflected as components of accumulated other comprehensive loss or income. The components of accumulated other comprehensive loss or income are reflected as either a net actuarial gain or loss or a net prior service cost. The following table reflects the benefit obligations, fair value of plan assets and funded status of the plans at December 31, 2013 and 2012.

	U.S. Qualified Pension						U.S. Non-Qualified						Chaucer Pension
DECEMBER 31	Plans						Pension Plans						Plan
(in millions)	2013			2012			2013			2012			2013			2012
Accumulated benefit obligation	$	548.8		$	607.0		$	37.4		$	41.2		$	128.5		$	116.6
Change in benefit obligation:
Projected benefit obligation, beginning of period	$	607.0		$	570.8		$	41.2		$	39.2		$	116.6		$	104.4
Employee contributions		—			—			—			—			0.4			0.4
Service cost – benefits earned during the period		—			—			—			—			1.5			1.6
Interest cost		24.8			28.1			1.6			1.9			5.4			5.2
Actuarial losses (gains)		(36.5	)		49.0			(2.3	)		3.3			3.6			1.8
Benefits paid		(46.5	)		(40.9	)		(3.1	)		(3.2	)		(1.5	)		(2.4	)
Foreign currency translation		—			—			—			—			2.5			5.6
Projected benefit obligation, end of year		548.8			607.0			37.4			41.2			128.5			116.6
Change in plan assets:
Fair value of plan assets, beginning of period		591.6			574.7			—			—			90.9			74.3
Actual return on plan assets		(3.1	)		57.8			—			—			17.1			9.9
Contributions		—			—			3.1			3.2			10.6			4.9
Benefits paid		(46.5	)		(40.9	)		(3.1	)		(3.2	)		(1.5	)		(2.4	)
Foreign currency translation		—			—			—			—			3.1			4.2
Fair value of plan assets, end of year		542.0			591.6			—			—			120.2			90.9
Funded status of the plans	$	(6.8	)	$	(15.4	)	$	(37.4	)	$	(41.2	)	$	(8.3	)	$	(25.7	)

Contributions include $0.4 million of Chaucer employee contributions during 2013 and 2012. All other contributions for all plans were made by the Company.

Components of Net Periodic Pension Cost

The components of total net periodic pension cost are as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Service cost - benefits earned during the period	$	1.5		$	1.6		$	0.7
Interest cost		31.9			35.2			34.3
Expected return on plan assets		(35.9	)		(38.7	)		(37.1	)
Recognized net actuarial loss		14.7			12.8			15.0
Amortization of prior service cost		—			0.1			0.1
Settlement loss		0.4			—			—
Net periodic pension cost	$	12.6		$	11.0		$	13.0

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The following table reflects the total amounts recognized in accumulated other comprehensive income relating to both the U.S.

defined benefit pension plans and the Chaucer pension plan as of December 31, 2013 and 2012.

DECEMBER 31	2013		2012
(in millions)
Net actuarial loss	$	118.7	$	147.3
Net prior service cost		0.1		—
	$	118.8	$	147.3

The unrecognized net actuarial gains (losses) which exceed 10% of the greater of the projected benefit obligation or the fair value of plan assets are amortized as a component of net periodic pension cost in future years. The following table reflects the total estimated amount of actuarial losses that will be amortized from accumulated other comprehensive income into net periodic pension cost in 2014:

ESTIMATED AMORTIZATION IN 2014	Expense
(in millions)
Net actuarial loss	$	11.3
Net prior service cost		0.1
	$	11.4

Contributions

In accordance with ERISA guidelines, the Company is not required to fund its U.S. qualified benefit plan in 2014. The Company expects to contribute $3.3 million to its U.S. non-qualified pension plans to fund 2014 benefit payments, and approximately $2 million to the Chaucer pension plan. At this time, no additional discretionary contributions are expected to be made to the plans during 2014 and the Company does not expect that any funds will be returned from the plans to the Company during 2014.

Benefit Payments

The Company estimates that benefit payments over the next 10 years will be as follows:

YEARS ENDED DECEMBER 31	2014		2015		2016		2017		2018		2019-2023
(in millions)
U.S. qualified pension plans	$	43.9	$	40.6	$	40.1	$	41.8	$	41.7	$	205.2
U.S. non-qualified pension plans	$	3.3	$	3.4	$	3.1	$	3.1	$	3.0	$	14.2
Chaucer pension plan	$	1.6	$	1.7	$	1.7	$	1.8	$	1.9	$	10.3

The benefit payments are based on the same assumptions used to measure the Company’s benefit obligations at the end of 2013. Benefit payments related to the U.S. qualified plans and the Chaucer plan will be made from plan assets, whereas those payments related to the non-qualified plans will be provided for by the Company.

DEFINED CONTRIBUTION PLAN

In addition to the defined benefit plans, THG provides a defined contribution 401(k) plan for its U.S. employees, whereby the Company matches employee elective 401(k) contributions, up to a maximum percentage of 6% in 2013, 2012, and 2011. The Company’s expense for this matching provision was $18.3 million, $17.9 million and $17.8 million for 2013, 2012 and 2011, respectively. In addition to this matching provision, the Company can elect to make an annual contribution to employees’ accounts. Additional contributions amounted to $2.8 million for the 2013 plan year. There were no additional contributions in 2012 and 2011.

Chaucer also provides a defined contribution plan for its employees which provides for employer provided contributions. The Company’s expense for 2013 and 2012 was $5.0 million and $4.8 million, respectively.

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9. OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the Company’s pension plans, the Company also has postretirement medical benefits that it provides to former agents and retirees and their dependents, and a limited number of full-time employees. The medical plans provide benefits including hospital and major medical, with certain limits, and have varying co-payments and deductibles, depending on the plan. Generally, employees who were actively employed on December 31, 1995 became eligible with at least 15 years of service after the age of 40. Effective January 1, 1996, the Company revised these benefits so as to establish limits on future benefit payments to beneficiaries of retired participants and to restrict eligibility to then current employees. In 2009, the Company changed the postretirement medical benefits, only as they relate to current employees who still qualified for participation in the plan under the above formula. For these participants, the plan now provides for only post age 65 benefits. The population of agents receiving postretirement benefits was frozen as of December 31, 2002, when the Company ceased its distribution of proprietary life and annuity products. This plan is unfunded.

Prior to June 2013, the Company also had postretirement death benefits providing for payment at death up to the retirees’ final annual salary. In May 2013, the Company settled and defeased the life insurance portion of its postretirement benefits by decreasing the level of death benefits and concurrently fully funding the remaining benefits through the purchase of life insurance policies for the plan beneficiaries from an unaffiliated life insurer, resulting in a net settlement gain. This plan was also unfunded.

The Company has recognized the funded status of its postretirement benefit plans in its Consolidated Balance Sheets. Since the plans are unfunded, the amount recognized in the Consolidated Balance Sheets is equal to the accumulated benefit obligation of the plans. The components of accumulated other comprehensive income or loss are reflected as either a net actuarial gain or loss or a net prior service cost.

Obligation and Funded Status

The following table reflects the funded status of these plans:

DECEMBER 31	2013			2012
(in millions)
Change in benefit obligation:
Accumulated postretirement benefit obligation, beginning of year	$	45.2		$	46.0
Service cost		0.1			0.1
Interest cost		1.2			2.1
Net actuarial gains		(1.0	)		(0.2	)
Benefits paid		(2.8	)		(2.8	)
Plan amendment		(8.4	)		—
Settlement of death benefits		(17.2	)		—
Accumulated postretirement benefit obligation, end of year		17.1			45.2
Fair value of plan assets, end of year		—			—
Funded status of plans	$	(17.1	)	$	(45.2	)

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Benefit Payments

The Company estimates that benefit payments over the next 10 years will be as follows:

YEARS ENDING DECEMBER 31
(in millions)
2014	$	2.1
2015		1.9
2016		1.7
2017		1.5
2018		1.3
2019-2023		5.5

The benefit payments are based on the same assumptions used to measure the Company’s benefit obligation at the end of 2013 and reflect benefits attributable to estimated future service.

Components of Net Periodic Postretirement Expense (Benefit)

The components of net periodic postretirement expense (benefit) were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Service cost	$	0.1		$	0.1		$	0.1
Interest cost		1.2			2.1			2.4
Recognized net actuarial loss		0.2			0.2			0.4
Amortization of prior service cost		(3.7	)		(3.8	)		(5.3	)
Net settlement gain		(1.6	)		—			—
Net periodic postretirement benefit	$	(3.8	)	$	(1.4	)	$	(2.4	)

The following table reflects the balances in accumulated other comprehensive income relating to the Company’s postretirement benefit plans:

DECEMBER 31	2013			2012
(in millions)
Net actuarial loss	$	1.9		$	7.2
Net prior service cost		(3.5	)		(7.5	)
	$	(1.6	)	$	(0.3	)

The following table reflects the estimated amortization to be recognized in net periodic benefit cost in 2014:

Estimated Amortization in 2014	Expense (Benefit)
(in millions)
Net actuarial loss	$	0.1
Net prior service cost		(1.9	)
	$	(1.8	)

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Assumptions

Employers are required to measure the funded status of their plans as of the date of their year-end statement of financial position. As such, the Company has utilized a measurement date of December 31, 2013 and 2012, to determine its postretirement benefit obligations, consistent with the date of its Consolidated Balance Sheets. Weighted-average discount rate assumptions used to determine postretirement benefit obligations and periodic postretirement costs are as follows:

YEARS ENDED DECEMBER 31	2013			2012
Postretirement benefit obligations discount rate		5.00	%		4.25	%
Postretirement benefit cost discount rate		4.25	%		5.00	%

Assumed health care cost trend rates are as follows:

DECEMBER 31	2013			2012
Health care cost trend rate assumed for next year		7.00	%		7.00	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)		5.00	%		5.00	%
Year the rate reaches the ultimate trend rate		2020			2017

A one-percentage point change in assumed health care cost trend rates in each year would have an immaterial effect on net periodic

benefit cost during 2013 and accumulated postretirement benefit obligation at December 31, 2013.

10. OTHER COMPREHENSIVE INCOME

The following table provides changes in other comprehensive income.

YEARS ENDED DECEMBER 31	2013									2012									2011
				Tax									Tax									Tax
				Benefit			Net of						Benefit			Net of						Benefit			Net of
(in millions)	Pre-Tax			(Expense)			Tax			Pre-Tax			(Expense)			Tax			Pre-Tax			(Expense)			Tax
Unrealized gains (losses) on available-for-sale securities and derivative instruments:
Unrealized gains (losses) arising during period (net of pre-tax, ceded unrealized losses of $1.2 million for the twelve months ended December 31, 2013)	$	(189.4	)	$	63.1		$	(126.3	)	$	186.4		$	(40.2	)	$	146.2		$	96.0		$	24.1		$	120.1
Amount of realized gains from sales and other		(41.3	)		(3.0	)		(44.3	)		(31.8	)		(3.3	)		(35.1	)		(28.8	)		(6.9	)		(35.7	)
Portion of other-than-temporary impairment losses recognized in earnings		6.0			(2.1	)		3.9			8.9			(2.7	)		6.2			8.4			(2.4	)		6.0
Net unrealized gains (losses)		(224.7	)		58.0			(166.7	)		163.5			(46.2	)		117.3			75.6			14.8			90.4
Pension and postretirement benefits:
Net actuarial gain (loss) arising in the period		15.0			(4.2	)		10.8			(24.9	)		9.0			(15.9	)		(16.0	)		4.2			(11.8	)
Amortization of net actuarial loss and prior service cost recognized as net periodic benefit cost		14.9			(5.2	)		9.7			9.3			(3.2	)		6.1			10.2			(3.6	)		6.6
Cumulative foreign currency translation adjustment:
Foreign currency translation recognized during the period		(3.1	)		1.1			(2.0	)		12.2			(4.3	)		7.9			(17.7	)		6.2			(11.5	)
Other comprehensive income (loss)	$	(197.9	)	$	49.7		$	(148.2	)	$	160.1		$	(44.7	)	$	115.4		$	52.1		$	21.6		$	73.7

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YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)	Amount Reclassified from
Details about Accumulated Other	Accumulated Other									Affected Line Item in the Statement
Comprehensive Income Components	Comprehensive Income									Where Net Income is Presented
Unrealized gains (losses) on available-for-sale securities and derivative instruments	$	41.3		$	31.8		$	27.8		Net realized gains from sales and other
		(6.0	)		(7.8	)		(6.9	)	Net other-than-temporary impairment losses on investments recognized in earnings
		35.3			24.0			20.9		Total before tax
		5.1			6.0			9.3		Tax benefit (expense)
		40.4			30.0			30.2
		—			(0.9	)		(0.5	)	Discontinued operations, net of tax
		40.4			29.1			29.7		Net of tax
Amortization of defined benefit pension and postretirement plans		14.9			9.3			10.2		Loss adjustment expenses and other operating expenses
		(5.2	)		(3.2	)		(3.6	)	Tax benefit (expense)
		9.7			6.1			6.6		Net of tax
Total reclassifications for the period	$	50.1		$	35.2		$	36.3		Net of tax

The amount reclassified from accumulated other comprehensive income for the pension and postretirement benefits was allocated approximately 40% to loss adjustment expenses and 60% to other operating expenses for each of the years ended December 31, 2013, 2012 and 2011.

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11. STOCK-BASED COMPENSATION PLANS

On May 16, 2006, the shareholders approved the adoption of The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan (the “Plan”). Key employees, directors and certain consultants of the Company and its subsidiaries are eligible for awards pursuant to the Plan, which is administered by the Compensation Committee of the Board of Directors (the “Committee”) of the Company. Under the Plan, awards may be granted in the form of non-qualified or incentive stock options, stock appreciation rights, performance awards, restricted stock, unrestricted stock, stock units, or any other award that is convertible into or otherwise based on the Company’s stock, subject to certain limits. The Plan authorized the issuance of 3,000,000 new shares that may be used for awards. In addition, shares of stock underlying any award granted and outstanding under the Company’s Amended Long-Term Stock Incentive Plan (the “1996 Plan”) as of the adoption date of the Plan that are forfeited, cancelled, expire or terminate without the issuance of stock become available for future grants under the Plan. As of December 31, 2013, there were 1,033,786 shares available for grants under the Plan. The Company utilizes shares of stock held in the treasury account for option exercises and other awards granted under both plans.

Compensation cost for the years ended December 31, 2013, 2012, and 2011 totaled $12.4 million, $12.8 million and $12.2 million, respectively. Related tax benefits were $4.3 million, $4.5 million and $4.3 million, respectively.

STOCK OPTIONS

Under the Plan, options may be granted to eligible employees, directors or consultants at an exercise price equal to the market price of the Company’s common stock on the date of grant. Option shares may be exercised subject to the terms prescribed by the Committee at the time of grant. Options granted in 2013 generally vest over 3 years with 33 1/3% vesting in each year, whereas options granted in 2012, and 2011 generally vest over 4 years with a 50% vesting rate in the third year and a 50% vesting rate in the fourth year. Options must be exercised not later than ten years from the date of grant.

Information on the Company’s stock option plans is summarized below.

YEARS ENDED DECEMBER 31	2013					2012					2011
(in whole shares and dollars)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding, beginning of year		2,892,882		$	38.28		2,715,430		$	38.57		2,843,909		$	39.22
Granted		537,800			42.53		529,500			36.84		297,000			46.47
Exercised		(1,192,134	)		34.70		(90,624	)		25.47		(120,064	)		32.82
Forfeited or cancelled		(189,375	)		41.54		(101,574	)		41.45		(49,165	)		41.67
Expired		—			—		(159,850	)		44.05		(256,250	)		57.00
Outstanding, end of year		2,049,173		$	41.18		2,892,882		$	38.28		2,715,430		$	38.57
Exercisable, end of year		783,873		$	41.16		1,630,382		$	37.18		1,686,930		$	37.69

Cash received for options exercised for the years ended December 31, 2013, 2012 and 2011 was $24.4 million, $2.3 million and $3.9 million, respectively. The intrinsic value of options exercised for the years ended December 31, 2013, 2012 and 2011 was $19.9 million, $1.2 million and $1.8 million, respectively.

The excess tax expense realized from options exercised for the years ended December 31, 2013, 2012, and 2011 was $9.0 million, $0.4 million, and $1.5 million, respectively. The aggregate intrinsic value at December 31, 2013 for shares outstanding and shares exercisable was $38.0 million and $14.5 million, respectively. At December 31, 2013, the weighted average remaining contractual life for shares outstanding and shares exercisable was 6.4 years and 3.6 years, respectively. Additional information about employee options outstanding and exercisable at December 31, 2013 is included in the following table:

	Options Outstanding						Options Currently Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
			Contractual		Exercise				Exercise
Range of Exercise Prices	Number		Lives		Price		Number		Price
$34.19		175,250		5.15		34.19		175,250		34.19
$35.86 to $36.50		160,500		1.19		35.94		160,500		35.94
$36.81		432,500		8.06		36.81		—		—
$36.88 to $42.15		242,591		6.00		41.71		115,091		41.61
$42.49		482,300		9.16		42.49		—		—
$44.88 to $46.28		155,751		2.80		45.88		155,751		45.88
$46.47 to $47.41		243,000		7.15		46.56		22,500		47.41
$48.46 to $54.41		157,281		3.25		48.49		154,781		48.46

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The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model. For all options granted through December 31, 2013, the exercise price equaled the market price on the grant date. Compensation cost related to options is based upon the grant date fair value and expensed on a straight-line basis over the service period for each separately vesting portion of the option as if the option was, in substance, multiple awards.

The weighted average grant date fair value of options granted during the years ended December 31, 2013, 2012 and 2011 was $7.69, $8.87 and $12.23, respectively.

The following significant assumptions were used to determine the fair value for options granted in the years indicated.

	2013			2012			2011
Dividend yield		2.43% to 3.11	%		3.13% to 3.26	%		2.152	%
Expected volatility		21.77% to 32.02	%		32.86% to 35.27	%		31.53% to 33.30	%
Weighted average expected volatility		27.53	%		34.05	%		32.42	%
Risk-free interest rate		0.29%-2.02	%		0.61%-1.06	%		2.00%-2.35	%
Expected term, in years		3.0 to 6.0			4.5 to 5.5			4.5 to 5.5

The expected dividend yield is based on the Company’s dividend payout rate(s), in the year noted. Expected volatility is based generally on the Company’s historical daily stock price volatility. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term of options granted represents the period of time that options are expected to be outstanding and is derived primarily using historical exercise, forfeit and cancellation behavior, along with certain other factors expected to differ from historical data.

The fair value of shares that vested during the years ended December 31, 2013 and 2012 was $2.3 million and $1.6 million, respectively. For the year ended December 31, 2011, the market price of shares that vested was lower than the value of these shares on their grant date. As of December 31, 2013, the Company had unrecognized compensation expense of $4.7 million related to unvested stock options that is expected to be recognized over a weighted average period of 1.6 years.

RESTRICTED STOCK UNITS

Stock grants may be awarded to eligible employees at a price established by the Committee (which may be zero). Under the Plan, the Company may award shares of restricted stock, restricted stock units, as well as shares of unrestricted stock. Restricted stock grants may vest based upon performance criteria, market criteria or continued employment and be in the form of shares or units. Vesting periods are established by the Committee.

The Company granted market-based restricted share units in 2013 and 2012 and performance-based restricted share units in 2011 to certain employees. Share units granted in 2013 generally vest after 3 years of continued employment and after the achievement of certain stock performance targets and share units granted in 2012 and 2011 vest after the achievement of certain performance targets at a rate of 50% after 3 years and the remaining 50% after 4 years of continued employment. The Company also granted restricted stock units to eligible employees that for awards granted in 2013 generally vest after 3 years of continued employment and for those granted in 2012 and 2011 generally vest at a rate of 50% after 3 years and the remaining 50% after 4 years of continued employment. The following table summarizes information about employee restricted stock units;

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YEARS ENDED DECEMBER 31	2013					2012					2011
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Time-based restricted stock units:
Outstanding, beginning of year		750,837		$	40.15		768,529		$	40.17		838,129		$	40.93
Granted		141,073			43.31		174,841			37.01		198,957			42.08
Vested		(298,388	)		39.51		(137,194	)		36.19		(230,613	)		44.40
Forfeited		(67,542	)		41.33		(55,339	)		40.47		(37,944	)		41.23
Outstanding, end of year		525,980		$	41.20		750,837		$	40.15		768,529		$	40.17
Performance and market-based restricted stock units:
Outstanding, beginning of year		132,775		$	39.97		69,500		$	45.37		101,680		$	39.62
Granted		82,795			41.85		96,150			36.91		42,500			46.47
Vested		—			—		—			—		(27,059	)		45.21
Forfeited		(30,944	)		42.33		(32,875	)		43.28		(47,621	)		34.16
Outstanding, end of year		184,626		$	40.42		132,775		$	39.97		69,500		$	45.37

In 2013 and 2012, the Company granted market-based awards totaling 76,175 and 92,400, respectively, to certain members of senior management, which are included in the table above as performance and market-based restricted stock activity. The vesting of these stock units is based on the relative total shareholder return (“TSR”) of the Company. This metric is generally based on relative TSR for a three year period as compared to a Property and Casualty Index of peer companies. The fair value of market based awards was estimated at the date of grant using a valuation model. These units have the potential to range from 0% to 150% of the shares disclosed.

Performance-based restricted stock units are based upon the achievement of the performance metric at 100%. These units have the potential to range from 0% to 200% of the shares disclosed, which varies based on grant year and individual participation level. Increases above the 100% target level are reflected as granted in the period in which performance-based stock unit goals are achieved. Decreases below the 100% target level are reflected as forfeited. In 2013, performance-based stock units of 8,244 were included as forfeited due to completion levels less than 100% for units granted in 2011. The weighted average grant date fair value for these awards was $46.47. In 2012, performance-based stock units of 31,750 were included as forfeited due to completion levels of less than the threshold achievement level for shares granted in 2010. The weighted average grant date fair value for these awards was $42.15. In 2011, performance-based stock units of 47,375 were included as forfeited due to completion levels of less than the threshold achievement level for shares granted in 2009. The weighted average grant date fair value for these awards was $34.19.

The intrinsic value, which is equal to the fair value for restricted stock and for restricted stock units that vested during the year ended December 31, 2013 and 2012, was $1.8 million and $1.7 million, respectively. For performance-based restricted stock units that would have vested in 2013 and 2012, there was no intrinsic value since these awards were forfeited due to the aforementioned completion levels of less than threshold. The intrinsic value of restricted stock units and performance-based restricted units that vested during the year ended December 31, 2011 were $10.2 million and $1.3 million, respectively.

At December 31, 2013, the aggregate intrinsic value of restricted stock and restricted stock units was $31.4 million and the weighted average remaining contractual life was 1.1 years. The aggregate intrinsic value of performance and market-based restricted stock units was $11.0 million and the weighted average remaining contractual life was 2.0 years. As of December 31, 2013, there was $12.1 million of total unrecognized compensation cost related to unvested restricted stock units and performance and market-based restricted stock units, assuming performance and market-based restricted stock units are achieved at 100% of the performance metric. The cost is expected to be recognized over a weighted-average period of 1.8 years. Compensation cost associated with restricted stock, restricted stock units and performance and market-based restricted stock units is generally calculated based upon grant date fair value, which is determined using current market prices.

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12. EARNINGS PER SHARE AND SHAREHOLDERS’ EQUITY TRANSACTIONS

The following table provides weighted average share information used in the calculation of the Company’s basic and diluted earnings per share:

DECEMBER 31	2013			2012			2011
(in millions, except per share data)
Basic shares used in the calculation of earnings per share		44.1			44.7			45.2
Dilutive effect of securities:
Employee stock options		0.3			0.2			0.2
Non-vested stock grants		0.5			0.4			0.4
Diluted shares used in the calculation of earnings per share		44.9			45.3			45.8
Per share effect of dilutive securities on income from continuing operations	$	(0.11	)	$	(0.01	)	$	(0.01	)
Per share effect of dilutive securities on net income	$	(0.11	)	$	(0.02	)	$	(0.01	)

Diluted earnings per share during 2013, 2012 and 2011 excludes 0.1 million, 1.8 million and 1.6 million, respectively, of common shares issuable under the Company’s stock compensation plans, because their effect would be antidilutive.

Since October 2007 and through December 2013, the Company’s Board of Directors has authorized aggregate repurchases of the Company’s common stock of up to $600 million, including a $100 million increase in the program in 2013. As of December 31, 2013, the Company has $137.0 million available for repurchases under these repurchase authorizations. Repurchases may be executed using open market purchases, privately negotiated transactions, accelerated repurchase programs or other transactions. The Company is not required to purchase any specific number of shares or to make purchases by any certain date under this program. During 2013, the Company purchased 1.6 million shares of the Company’s common stock at a cost of $78.2 million.

13. DIVIDEND RESTRICTIONS

U.S. INSURANCE SUBSIDIARIES

The individual law of all states, including New Hampshire and Michigan, where Hanover Insurance and Citizens are domiciled, respectively, restrict the payment of dividends to stockholders by insurers. These laws affect the dividend paying ability of Hanover Insurance and Citizens.

Pursuant to New Hampshire’s statute, the maximum dividends and other distributions that an insurer may pay in any twelve month period, without prior approval of the New Hampshire Insurance Commissioner, is limited to 10% of such insurer’s statutory policyholder surplus as of the preceding December 31. No dividends were declared by Hanover Insurance in 2013 or 2012. In 2011, Hanover Insurance declared dividends to its parent totaling $99.0 million. During 2014, the maximum dividend payable without prior approval is $183.0 million.

Pursuant to Michigan’s statute, the maximum dividends and other distributions that an insurer may pay in any twelve month period, without prior approval of the Michigan Insurance Commissioner, is limited to the greater of 10% of policyholders’ surplus as of December 31 of the immediately preceding year or the statutory net income less net realized gains, for the immediately preceding calendar year. Citizens declared dividends to its parent, Hanover Insurance, totaling $68.0 million, $70.0 million and $69.0 million in 2013, 2012 and 2011, respectively. Citizens cannot pay a further dividend to its parent without prior approval until December 2014, at which time the maximum dividend payable without prior approval would be $66.2 million.

The statutes in both New Hampshire and Michigan require that prior notice to the respective Insurance Commissioner of any proposed dividend be provided and such Commissioner may, in certain circumstances, prohibit the payment of the proposed dividend.

CHAUCER

Dividend payments from Chaucer to its parent are regulated by U.K. law. Dividends from Chaucer are dependent on dividends from its subsidiaries. Annual dividend payments from Chaucer are limited to retained earnings that are not restricted by capital and other requirements for business at Lloyd’s. Also, Chaucer must provide advance notice to the U.K.’s Prudential Regulation Authority (“PRA”), one of the successors to the Financial Services Authority, of certain proposed dividends or other payments from PRA regulated entities. Dividend payments to THG from Chaucer entities totaled $13.9 million in 2013. No dividends were declared by Chaucer in 2012 or 2011.

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14. SEGMENT INFORMATION

The Company’s primary business operations include insurance products and services provided through four operating segments. The domestic operating segments are Commercial Lines, Personal Lines and Other, and the Company’s international operating segment is Chaucer. Commercial Lines includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial coverages, such as specialty program business, inland marine, management and professional liability and surety. Personal Lines includes personal automobile, homeowners and other personal coverages. Chaucer includes marine and aviation, energy, property, U.K. motor, and casualty and other coverages (which includes international liability, specialist coverages, and syndicate participations). Included in Other are Opus Investment Management, Inc., which markets investment management services to institutions, pension funds and other organizations; earnings on holding company assets; and, a voluntary pools business which is in run-off. The separate financial information is presented consistent with the way results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company reports interest expense related to debt separately from the earnings of its operating segments. This consists of interest on the Company’s senior debentures, subordinated debentures, collateralized borrowings with the Federal Home Loan Bank of Boston, and letter of credit facility. Management evaluates the results of the aforementioned segments based on operating income (loss) before taxes (formerly referred to as segment income) which also excludes interest expense on debt. Operating income (loss) before taxes excludes certain items which are included in net income (loss), such as net realized investment gains and losses (including gains and losses on certain derivative instruments). Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income (loss) before taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income (loss) before taxes may be important components in understanding and assessing the Company’s overall financial performance, management believes that the presentation of operating income (loss) before taxes enhances an investor’s understanding of the Company’s results of operations by highlighting net income (loss) attributable to the core operations of the business. However, operating income (loss) before taxes should not be construed as a substitute for income (loss) before income taxes and operating income (loss) should not be construed as a substitute for net income (loss).

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Summarized below is financial information with respect to the Company’s business segments. Amounts reflect activity of Chaucer since the July 1, 2011 acquisition date.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Operating revenues:
Commercial Lines	$	2,109.5		$	1,966.2		$	1,798.9
Personal Lines		1,542.5			1,560.0			1,555.9
Chaucer		1,098.2			1,030.0			534.1
Other		10.0			10.9			14.6
Total		4,760.2			4,567.1			3,903.5
Net realized investment gains		33.5			23.6			28.1
Total revenues	$	4,793.7		$	4,590.7		$	3,931.6
Operating income (loss) before interest expense and income taxes:
Commercial Lines:
GAAP underwriting loss	$	(11.0	)	$	(224.2	)	$	(123.0	)
Net investment income		143.5			142.4			136.5
Other income (expense)		(0.1	)		1.5			2.8
Commercial Lines operating income (loss)		132.4			(80.3	)		16.3
Personal Lines:
GAAP underwriting income (loss)		37.6			(67.3	)		(72.6	)
Net investment income		75.8			86.5			92.1
Other income		5.2			6.3			3.6
Personal Lines operating income		118.6			25.5			23.1
Chaucer:
GAAP underwriting income		107.7			93.5			11.9
Net investment income		42.7			40.2			16.9
Other income		—			3.1			4.1
Chaucer operating income		150.4			136.8			32.9
Other:
GAAP underwriting loss		(3.4	)		(3.5	)		(0.3	)
Net investment income		7.0			7.2			12.7
Other net expenses		(11.6	)		(10.6	)		(12.9	)
Other operating loss		(8.0	)		(6.9	)		(0.5	)
Operating income before interest expense and income taxes		393.4			75.1			71.8
Interest on debt		(65.3	)		(61.9	)		(55.0	)
Operating income before income taxes		328.1			13.2			16.8
Non-operating income items:
Net realized investment gains		33.5			23.6			28.1
Net loss from repayment of debt		(27.7	)		(5.1	)		(2.3	)
Loss on real estate		(4.7	)		—			—
Net costs related to acquired businesses		(0.1	)		(2.6	)		(16.4	)
Loss on derivative instruments		—			—			(11.3	)
Net foreign exchange gains (losses)		—			(0.4	)		6.7
Income before income taxes	$	329.1		$	28.7		$	21.6

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The following table provides identifiable assets for the Company’s business segments and discontinued operations:

DECEMBER 31	2013		2012
(in millions)	Identifiable Assets
U.S. Companies	$	8,962.6	$	8,909.6
Chaucer		4,301.2		4,444.8
Discontinued operations		114.9		130.5
Total	$	13,378.7	$	13,484.9

The Company reviews the assets of its U.S. Companies collectively and does not allocate them between the Commercial Lines, Personal Lines and Other segments.

GEOGRAPHIC CONCENTRATIONS

The following table presents the Company’s gross written premium (“GWP”) based on the location of the risk:

YEAR ENDED DECEMBER 31	2013			2012			2011
	% of Total
	GWP
United States		78	%		76	%		87	%
United Kingdom		6			6			4
Worldwide and other		16			18			9
Total		100	%		100	%		100	%

The worldwide and other category includes insured risks that move across multiple geographic areas, including the U.S. and U.K., due to their mobile nature or insured risks that are fixed in locations that span more than one geographic area, and risks located in a single country outside the U.S. and U.K. These contracts include, for example, marine and aviation, hull, satellite, offshore energy exploration and production risks that can move across multiple geographic areas and assumed risks where the cedant insures risks in two or more geographic zones. These risks may include U.S. and U.K. insured risks.

Long-lived assets located outside the U.S. were not material for the year ended December 31, 2013 or 2012. The Company does not have revenue from transactions with a single agent or broker amounting to 10 percent or more of its consolidated revenue.

15. LEASE COMMITMENTS

Rental expenses for operating leases amounted to $21.6 million, $22.4 million and $21.1 million in 2013, 2012 and 2011, respectively. These expenses relate primarily to building leases of the Company. At December 31, 2013, future minimum rental payments under non-cancelable operating leases, were $47.2 million, payable as follows: 2014 - $17.0 million; 2015 - $14.2 million; 2016 - $8.4 million; 2017 - $4.3 million and 2018 and thereafter - $3.3 million. It is expected that in the normal course of business, leases that expire may be renewed or replaced by leases on other property and equipment.

16. REINSURANCE

In the normal course of business, the Company seeks to reduce the losses that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. Reinsurance transactions are accounted for in accordance with the provisions of ASC 944.

Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. The Company determines the appropriate amount of reinsurance based on evaluations of the risks accepted and analyses prepared by consultants and on market conditions (including the availability and pricing of reinsurance). The Company also believes that the terms of its reinsurance contracts are consistent with industry practice in that they contain standard terms with respect to lines of business covered,

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limit and retention, arbitration and occurrence. The Company believes that its reinsurers are financially sound. This belief is based upon an ongoing review of its reinsurers’ financial statements, reported financial strength ratings from rating agencies, reputations in the marketplace, and the analysis and guidance of THG’s reinsurance advisors.

As a condition to conduct certain business in various states, the Company is required to participate in residual market mechanisms, facilities and pooling arrangements such as the Michigan Catastrophic Claims Association (“MCCA”). The Company is subject to concentration of risk with respect to reinsurance ceded to the MCCA. Funding for MCCA comes from assessments against automobile insurers based upon their share of insured automobiles in the state. Insurers are allowed to pass along this cost to Michigan automobile policyholders. The Company ceded to the MCCA premiums earned and losses and LAE incurred of $72.2 million and $76.6 million in 2013, $74.0 million and $99.9 million in 2012, $69.6 million and $122.6 million in 2011, respectively. MCCA, which represented 37.1% of the total reinsurance receivable balance at December 31, 2013, is the Company’s only reinsurer representing at least 10% of its reinsurance assets. Reinsurance recoverables related to MCCA were $867.0 million and $856.3 million at December 31, 2013 and 2012, respectively. Because the MCCA is supported by assessments permitted by statute, and there have been no significant uncollectible balances from MCCA identified during the three years ending December 31, 2013, the Company believes that it has no significant exposure to uncollectible reinsurance balances from this entity.

The following table provides the effects of reinsurance. Amounts reflect activity of Chaucer since the July 1, 2011 acquisition date.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Premiums written:
Direct	$	4,599.2		$	4,515.1		$	3,830.9
Assumed (1)		602.5			689.1			228.3
Ceded (2)		(649.0	)		(835.8	)		(465.8	)
Net premiums written	$	4,552.7		$	4,368.4		$	3,593.4
Premiums earned:
Direct	$	4,546.3		$	4,352.9		$	3,695.2
Assumed (1)		617.7			687.0			442.6
Ceded (2)		(713.5	)		(800.8	)		(539.2	)
Net premiums earned	$	4,450.5		$	4,239.1		$	3,598.6
Percentage of assumed to net premiums earned		13.88	%		16.21	%		12.30	%
Losses and LAE:
Direct	$	2,939.4		$	3,251.4		$	2,723.5
Assumed(1)		172.3			311.4			249.4
Ceded (2)		(350.6	)		(588.4	)		(422.1	)
Net losses and LAE	$	2,761.1		$	2,974.4		$	2,550.8

(1) Assumed reinsurance activity primarily relates to the Chaucer segment. In addition, 2011 assumed premiums earned and assumed losses and LAE included $96.0 million and $54.2 million, respectively, related to the 2010 OneBeacon renewal rights transaction.

(2) In 2013, we did not renew the capital provision reinsurance treaty with Flagstone Re. This reduced ceded premiums written, premiums earned and losses and LAE for the year ended December 31, 2013.

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17. LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES

The Company regularly updates its reserve estimates as new information becomes available and further events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in results of operations as adjustments to losses and LAE. Often these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and loss event occurred. These types of subsequent adjustments are described as “prior years’ loss reserves”. Such development can be either favorable or unfavorable to the Company’s financial results and may vary by line of business.

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses (results for Chaucer for the year ended December 31, 2011 reflect the period from July 1, 2011 to December 31, 2011).

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Gross loss and LAE reserves, beginning of year	$	6,197.0		$	5,760.3		$	3,277.7
Reinsurance recoverable on unpaid losses		2,074.3			1,931.8			1,115.5
Net loss and LAE reserves, beginning of year		4,122.7			3,828.5			2,162.2
Net incurred losses and LAE in respect of losses occurring in:
Current year		2,837.4			2,990.2			2,654.1
Prior years		(76.3	)		(15.8	)		(103.3	)
Total incurred losses and LAE		2,761.1			2,974.4			2,550.8
Net payments of losses and LAE in respect of losses occurring in:
Current year		1,213.5			1,317.6			1,482.4
Prior years		1,469.8			1,396.5			1,010.3
Total payments		2,683.3			2,714.1			2,492.7
Purchase of Chaucer, net of reinsurance recoverable on unpaid losses of $669.6		—			—			1,631.0
Effect of foreign exchange rate changes		0.6			33.9			(22.8	)
Net reserve for losses and LAE, end of year		4,201.1			4,122.7			3,828.5
Reinsurance recoverable on unpaid losses		2,030.4			2,074.3			1,931.8
Gross reserve for losses and LAE, end of year	$	6,231.5		$	6,197.0		$	5,760.3

As part of an ongoing process, reserves have been re-estimated for all prior accident years and were decreased by $76.3 million, $15.8 million and $103.3 million in 2013, 2012 and 2011, respectively. For the years ended December 31, 2013, 2012 and the six months ended December 31, 2011, these amounts include favorable loss and LAE reserve development of $94.6 million, $72.6 million and $35.5 million, respectively for Chaucer. Chaucer’s favorable development during 2013 was primarily the result of lower than expected losses in the energy line, primarily in the 2009 through 2012 accident years, property line, primarily in the 2011 and 2012 accident years, within casualty and other lines, specialty liability lines, primarily in the 2008 accident year, and the marine and aviation line, primarily in the 2010 through 2012 accident years. For Commercial and Personal Lines, the unfavorable loss and LAE development during 2013 was primarily the result of higher than expected losses within the personal automobile line, due to severity in bodily injury coverage in the 2010 through 2012 accident years, higher than expected large losses in the commercial automobile line, primarily related to liability coverage in the 2009 through 2011 accident years, and higher than expected losses within other commercial lines, primarily in the 2010 through 2012 accident years. Partially offsetting the unfavorable development was lower than expected losses within the workers’ compensation line, primarily in the 2006 through 2011 accident years and lower involuntary pool losses, including a $3.2 million benefit from the settlement of a legal proceeding, and lower than expected losses within the commercial multi-peril line, primarily in the 2012 accident year.

The $15.8 million favorable loss and LAE reserve development during the year ended December 31, 2012 includes favorable loss and LAE reserve development of $72.6 million for Chaucer. Chaucer’s favorable development during 2012 was primarily the result of lower than expected losses in the energy line, primarily in the 2008 through 2011 accident years, marine and aviation lines, primarily in the 2007 through 2011 accident years, casualty lines, primarily in the 2010 and 2011 accident years, and the property lines, primarily in the 2009 through 2011 accident years. For Commercial and Personal Lines, the unfavorable loss and LAE development during 2012 was primarily the result of higher than expected losses within other commercial lines, primarily in the contract surety line due to the challenging macroeconomic environment for contractors, and to a lesser extent, the AIX program business, primarily related unexpected severity in commercial automobile liability, commercial multiple peril and general liability in a limited number of programs, and from higher than expected large losses within the commercial automobile line, primarily related to liability coverage in the 2011 accident year. In addition, the Company experienced higher than expected losses within the personal automobile line,

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primarily related to bodily injury severity in the 2010 and 2011 accident years, and higher than expected homeowners property losses from non-catastrophe weather related activity in the 2011 accident year. Partially offsetting the unfavorable development was lower than expected losses within the commercial multiple peril line, related to the 2008 through 2011 accident years.

The $103.3 million favorable loss and LAE reserve development during 2011 includes favorable loss and LAE reserve development of $35.5 million for Chaucer. Chaucer’s favorable development was primarily the result of lower than expected losses in the energy, property and U.K. motor lines, primarily related to the 2009 and 2010 accident years. For Commercial and Personal Lines, the favorable loss and LAE reserve development during 2011 was primarily the result of lower than expected losses in the personal automobile line, primarily related to bodily injury coverage in the 2008 through 2010 accident years, the commercial multiple peril line related to the 2007 through 2010 accident years and lower than expected losses in the 2007 through 2010 accident years in the workers’ compensation line. In addition, within other commercial lines, unfavorable development in the professional liability and surety lines were partially offset by favorable development in the healthcare and other commercial property lines.

Loss and LAE reserves related to asbestos and environmental damage liability, primarily in other commercial lines, were $61.9 million, $60.5 million and $59.8 million as of December 31, 2013, 2012 and 2011, respectively. Ending loss and LAE reserves for all direct business written by the Company related to asbestos and environmental damage liability, included in the reserve for losses and LAE, were $11.5 million, $9.8 million and $10.0 million, net of reinsurance of $20.6 million, $20.4 million and $18.7 million as of December 31, 2013, 2012 and 2011, respectively. As a result of the Company’s historical direct underwriting mix of Commercial Lines policies toward smaller and middle market risks, past asbestos and environmental damage liability loss experience has remained minimal in relation to the Company’s total loss and LAE incurred experience. In addition, the Company has established gross loss and LAE reserves for its run-off voluntary assumed reinsurance pool business with asbestos and environmental damage liability of $29.8 million, $30.3 million and $31.1 million at December 31, 2013, 2012 and 2011, respectively. These reserves relate to pools in which the Company has terminated its participation; however, the Company continues to be subject to claims related to years in which it was a participant. Because of the inherent uncertainty regarding the types of claims in these pools, the Company cannot provide assurance that its reserves will be sufficient.

The Company estimates its ultimate liability for asbestos, environmental and toxic tort liability claims, whether resulting from direct business, assumed reinsurance and pool business, based upon currently known facts, reasonable assumptions where the facts are not known, current law and methodologies currently available. Although these outstanding claims are not significant, their existence gives rise to uncertainty and are discussed because of the possibility that they may become significant. The Company believes that, notwithstanding the evolution of case law expanding liability in asbestos and environmental claims, recorded reserves related to these claims are adequate. The asbestos, environmental and toxic tort liability could be revised in the near term if the estimates used in determining the liability are revised, and any such revisions could have a material adverse effect on the Company’s results of operations for a particular quarterly or annual period or its financial position.

18. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Durand Litigation

On March 12, 2007, a putative class action suit captioned Jennifer A. Durand v. The Hanover Insurance Group, Inc., and The Allmerica Financial Cash Balance Pension Plan was filed in the United States District Court for the Western District of Kentucky. The named plaintiff, a former employee who received a lump sum distribution from the Company’s Cash Balance Plan (the “Plan”) at or about the time of her termination, claims that she and others similarly situated did not receive the appropriate lump sum distribution because in computing the lump sum, the Company and the Plan understated the accrued benefit in the calculation. The plaintiff claims that the Plan underpaid her distributions and those of similarly situated participants by failing to pay an additional so-called “whipsaw” amount reflecting the present value of an estimate of future interest credits from the date of the lump sum distribution to each participant’s retirement age of 65.

The plaintiff filed an Amended Complaint adding two new named plaintiffs and additional claims on December 11, 2009. In response, the Company filed a Motion to Dismiss on January 30, 2010. In addition to the pending claim challenging the calculation of lump sum distributions, the Amended Complaint included: (a) a claim that the Plan failed to calculate participants’ account balances and lump sum payments properly because interest credits were based solely upon the performance of each participant’s selection from among various hypothetical investment options (as the Plan provided) rather than crediting the greater of that performance or the 30 year Treasury rate; (b) a claim that the 2004 Plan amendment, which changed interest crediting for all participants from the performance of participant’s investment selections to the 30 year Treasury rate, reduced benefits in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”) for participants who had account balances as of the amendment date by not continuing to provide them performance-based interest crediting on those balances; and (c) claims against the Company for breach of fiduciary duty and ERISA notice requirements arising from the various interest crediting and lump sum distribution matters of which plaintiffs complain. On March 31, 2011, the District Court granted the Company and the Plan’s Motion to Dismiss on statute of limitations grounds the

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additional claims set forth in (a) and (b) above, however, in response to a motion for reconsideration, the Court allowed the new breach of fiduciary duty claim to stand, but only as to plaintiffs’ “whipsaw” claim that remained in the case. On June 22, 2012, the Company and the Plan filed a Partial Motion for Summary Judgment to dismiss the “whipsaw” claim of one of the named plaintiffs who received his lump sum distribution after December 31, 2003. On October 2, 2013, the Court granted the Company and the Plan’s Partial Motion for Summary Judgment and dismissed with prejudice the “whipsaw” claim of the named plaintiff who received a lump sum distribution after December 31, 2003 and the similar claims of the putative class members he sought to represent. On December 17, 2013, the Court entered an order certifying a class to bring “whipsaw” and related breach of fiduciary duty claims consisting of all persons who received a lump sum distribution between March 1, 1997 and December 31, 2003, and a subclass to bring such claims consisting of all persons who received lump sum distributions between March 1, 1997 and March 12, 2002. On December 17, 2013, the Court also granted plaintiffs’ motion for entry of a final order allowing an immediate appeal by the two named plaintiffs added in the Amended Complaint of their dismissed claims that the 2004 Plan amendment reduced benefits in violation of ERISA, and for one of them, that his post-2003 lump sum distribution should have been greater. On January 14, 2014, the Company filed a Motion to Alter or Amend the Court’s December 17, 2013 Order requesting that the Court reverse its order making the dismissed claims final and appealable or, in the alternative, stay merits discovery on the claims remaining in the district court pending resolution of the dismissed plaintiffs’ appeal. The Court has not yet ruled on that motion.

At this time, the Company is unable to provide a reasonable estimate of the potential range of ultimate liability if the outcome of the suit is unfavorable. The extent to which any of the plaintiffs’ multiple theories of liability, some of which are overlapping and others of which are quite complex and novel, are accepted and upheld on appeal will significantly affect the Plan’s or the Company’s potential liability. The statute of limitations applicable to the class has not yet been finally determined and the extent of potential liability, if any, will depend on this final determination. In addition, assuming for these purposes that the plaintiffs prevail with respect to claims that benefits accrued or payable under the Plan were understated, then there are numerous possible theories and other variables upon which any revised calculation of benefits as requested under plaintiffs’ claims could be based. Any adverse judgment in this case against the Plan would be expected to create a liability for the Plan, with resulting effects on the Plan’s assets available to pay benefits. The Company’s future required funding of the Plan could also be impacted by such a liability.

Other Matters

The Company has been named a defendant in various other legal proceedings arising in the normal course of business. In addition, the Company is involved, from time to time, in examinations, investigations and proceedings by governmental and self-regulatory agencies. The potential outcome of any such action or regulatory proceedings in which the Company has been named a defendant or the subject of an inquiry or investigation, and its ultimate liability, if any, from such action or regulatory proceedings, is difficult to predict at this time. The ultimate resolutions of such proceedings are not expected to have a material effect on its financial position, although they could have a material effect on the results of operations for a particular quarter or annual period.

Residual Markets

The Company is required to participate in residual markets in various states, which generally pertain to high risk insureds, disrupted markets or lines of business or geographic areas where rates are regarded as excessive. The results of the residual markets are not subject to the predictability associated with the Company’s own managed business, and are significant to both the personal and commercial automobile lines of business, the workers’ compensation line of business, and the homeowners line of business.

19. STATUTORY FINANCIAL INFORMATION

The Company’s U.S. insurance subsidiaries are required to file annual statements with state regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis), as codified by the National Association of Insurance Commissioners. Permitted statutory accounting practices encompass all accounting practices that are not prescribed; such practices differ from state to state, may differ from company to company within a state, and may change in the future. The Company’s U.S. insurance subsidiaries did not have any permitted practices as of or for the years ended December 31, 2013, 2012 and 2011.

Statutory capital and surplus differs from shareholders’ equity reported in accordance with generally accepted accounting principles primarily because under the statutory basis of accounting, deferred acquisition costs are expensed when incurred, the recognition of deferred tax assets is based on different recoverability assumptions and prior to 2013, postretirement benefit costs were based on different participant assumptions.

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The following table provides statutory net income for the year ended December 31 and statutory capital and surplus as of December 31 for the periods indicated:

	2013		2012			2011
(in millions)
Statutory Net Income (Loss)
U.S. Insurance Subsidiaries	$	193.2	$	(47.3	)	$	(5.2	)
Statutory Capital and Surplus
U.S. Insurance Subsidiaries	$	1,834.3	$	1,523.4		$	1,582.8

The minimum statutory capital and surplus necessary to satisfy the Company’s regulatory requirements was $354.5 million, $329.0 million and $291.0 million, which equals the Authorized Control Level at December 31, 2013, 2012 and 2011, respectively.

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20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The quarterly results of operations for 2013 and 2012 are summarized below.

THREE MONTHS ENDED
(in millions, except per share data)
2013	March 31		June 30		Sept. 30		Dec. 31
Total revenues	$	1,180.3	$	1,182.6	$	1,201.8	$	1,229.0
Income from continuing operations	$	66.4	$	53.1	$	61.3	$	64.9
Net income	$	66.2	$	53.4	$	61.3	$	70.1
Income from continuing operations per share:
Basic	$	1.49	$	1.21	$	1.40	$	1.48
Diluted	$	1.47	$	1.19	$	1.37	$	1.45
Net income per share:
Basic	$	1.49	$	1.21	$	1.40	$	1.60
Diluted	$	1.46	$	1.19	$	1.37	$	1.57
Dividends declared per share	$	0.33	$	0.33	$	0.33	$	0.37
THREE MONTHS ENDED
(in millions, except per share data)
2012	March 31		June 30		Sept. 30		Dec. 31
Total revenues	$	1,121.8	$	1,127.2	$	1,157.7	$	1,184.0
Income (loss) from continuing operations	$	50.7	$	9.8	$	40.9	$	(55.3	)
Net income (loss)	$	49.7	$	20.8	$	40.4	$	(55.0	)
Income (loss) from continuing operations per share:
Basic	$	1.13	$	0.22	$	0.92	$	(1.24	)
Diluted (1)	$	1.11	$	0.22	$	0.90	$	(1.24	)
Net income (loss) per share:
Basic	$	1.11	$	0.46	$	0.91	$	(1.24	)
Diluted (1)	$	1.09	$	0.46	$	0.89	$	(1.24	)
Dividends declared per share	$	0.30	$	0.30	$	0.30	$	0.33

(1) Per diluted share amounts in the fourth quarter of 2012 exclude common stock equivalents, since the impact of these instruments was antidilutive.

Due to the use of weighted average shares outstanding when calculating earnings per common share, the sum of the quarterly per common share data may not equal the per common share data for the year.

21. SUBSEQUENT EVENTS

There were no subsequent events requiring adjustment to the financial statements and no additional disclosures required in the notes to the consolidated financial statements.

ITEM 9–CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A–CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES EVALUATION

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act).

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES

Based on our controls evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this annual report, our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the original framework in Internal Control – Integrated Framework issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2013.

The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

CHANGES IN INTERNAL CONTROL

Our management, including the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the internal control over financial reporting, as required by Rule 13a-15(d) of the Exchange Act, to determine whether any changes occurred during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, the Chief Executive and Chief Financial Officer concluded that there was no such change during the last quarter of the fiscal year covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B–OTHER INFORMATION

None.

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PART III

ITEM 10–DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DIRECTORS OF THE REGISTRANT

Except for the portion about executive officers and our Code of Conduct which is set forth below, this information is incorporated herein by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held on May 20, 2014 to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is biographical information concerning our executive officers.

Mark R. Desrochers, 45

Senior Vice President

President, Personal Lines

Mr. Desrochers has been President, Personal Lines since 2009. From 2006 until 2009, Mr. Desrochers was Vice President, State Management. Prior to joining THG, from 2003 until 2006, Mr. Desrochers held several positions with Liberty Mutual Insurance Company, last serving as Vice President and Product Manager. Previously, Mr. Desrochers worked at Electric Insurance Company and at Applied Insurance Research.

Frederick H. Eppinger, Jr., 55

Director

President and Chief Executive Officer

Mr. Eppinger has been Director, President and Chief Executive Officer of THG since joining the Company in 2003. Before joining the Company, Mr. Eppinger was Executive Vice President of Property and Casualty Field and Service Operations for The Hartford Financial Services Group, Inc. Prior to that, he was Senior Vice President of Strategic Marketing from 2000 to 2001 for ChannelPoint, Inc., a firm that provided business-to-business technology for insurance and financial service companies, and was a senior partner at the international consulting firm of McKinsey & Company. Mr. Eppinger led the insurance practice at McKinsey, where he worked closely with chief executive officers of many leading insurers over a period of 15 years, beginning in 1985. Mr. Eppinger began his career as an accountant with the firm then known as Coopers & Lybrand. He is a director of Centene Corporation, a publicly traded, multi-line healthcare company. Mr. Eppinger is an employee of THG, and therefore is not an independent director. Mr. Eppinger’s term of office as a director of THG expires in 2016.

David B. Greenfield, 51

Executive Vice President

Chief Financial Officer and Principal Accounting Officer

Mr. Greenfield has served as Executive Vice President, Chief Financial Officer and Principal Accounting Officer since March 2011. Prior to that, from December 2010 to March 2011, he served as Executive Vice President, Senior Finance Officer. Prior to joining the Company, Mr. Greenfield served as the Chief Financial Officer of Axis Capital Holdings Limited from 2006 until 2010. From 1984 to 2006, Mr. Greenfield worked for KPMG LLP, where he advanced to partnership serving as KPMG’s Global Sector Chair for Insurance and a member of KPMG’s Global Financial Services Leadership Team.

J. Kendall Huber, 59

Executive Vice President

General Counsel and Assistant Secretary

Mr. Huber has been General Counsel and Assistant Secretary since joining THG in 2000. Prior to joining THG, Mr. Huber was Executive Vice President, General Counsel and Secretary of Promus Hotel Corporation from 1999 to 2000. Previously, Mr. Huber was Vice President and Deputy General Counsel of Legg Mason, Inc. from 1998 to 1999, and of USF&G Corporation, where he was employed from 1990 to 1998. Mr. Huber was previously with the law firm now known as DLA Piper and a Lieutenant, U.S. Navy Judge Advocate General’s Corps.

Richard Lavey, 46

Senior Vice President, Chief Marketing and Distribution Officer

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Mr. Lavey has been Chief Marketing and Distribution Officer of THG since 2011. Mr. Lavey joined THG in 2004 and during this time has also served in the following roles: Senior Vice President, Operations and Marketing; Regional President, Northeast; and Vice President, Field Operations and Marketing & Distribution. Prior to joining the Company, Mr. Lavey worked for The Hartford Financial Services Group, Inc. and The Travelers Corp.

Andrew S. Robinson, 48

Executive Vice President, Corporate Development

President, Specialty Insurance

Mr. Robinson has been President, Specialty Insurance since November 2011, Chief Risk Officer since 2010 and has led THG’s Corporate Development Department since joining the Company in 2006. From 2009 to 2011, Mr. Robinson was President, Specialty Casualty. Prior to joining the Company, from 1996 until 2006, Mr. Robinson held a variety of positions at Diamond Consultants, last serving as Managing Director, Global Insurance Practice.

John C. Roche, 50

Executive Vice President

President, Business Insurance

Mr. Roche has been Executive Vice President, President Business Insurance since May 2013. Prior to that he served as Senior Vice President, President Business Insurance from 2009 to 2013. From 2007 to 2009, Mr. Roche served as Vice President, Field Operations and from 2006 to 2007, Mr. Roche was Vice President, Underwriting and Product Management, Commercial Lines. From 1994 to 2006, Mr. Roche served in a variety of leadership positions at St. Paul Travelers Companies, Inc., last serving as Vice President, Commercial Accounts. Previously, Mr. Roche served in a variety of underwriting and management positions at Fireman’s Fund Insurance Company and Atlantic Mutual Insurance Company.

Robert Stuchbery, 57

President of International Operations

Chief Executive Officer, Chaucer

Mr. Stuchbery has been Chief Executive Officer of Chaucer since January 2010. Prior to his appointment as CEO, Mr. Stuchbery served as Chaucer’s Chief Underwriting Officer from 2005 to 2009, and as Group Underwriting Director from 2000 to 2005. He was Active Underwriter for Syndicate 1096 from 1996 to 2000 and prior to that was Deputy Underwriter of Syndicate 1096 from 1988 to 1996. Before joining Chaucer in 1988, Mr. Stuchbery served in various positions with the U.K. subsidiary of CNA Reinsurance of London Limited from 1976 to 1987. Mr. Stuchbery is a Fellow of the Chartered Insurance Institute and a member of the Lloyd’s Market Association Board where he currently serves as Deputy Chairman.

Gregory D. Tranter, 57

Executive Vice President

Chief Information Officer and Chief Operations Officer

Mr. Tranter joined the Company in 1998, has been Chief Information Officer since 2000 and Chief Operations Officer since 2007. Prior to joining THG, Mr. Tranter was Vice President, Automation Strategy of Travelers Property and Casualty Company from 1996 to 1998. Mr. Tranter was employed by Aetna Life and Casualty Company from 1983 to 1996.

Mark Welzenbach, 54

Senior Vice President, Chief Claims Officer

Mr. Welzenbach has been Chief Claims Officer of THG since joining the Company in 2005. Before joining the Company, Mr. Welzenbach was Senior Vice President, Claims for The Hartford Financial Services Group, Inc. from 1995 to 2005. Prior to that, he was Director of Claims from 1991 to 1995 for Travelers Insurance Company. Mr. Welzenbach began his career as a practicing attorney.

OTHER SENIOR CORPORATE OFFICERS OF THE REGISTRANT

Ann K. Tripp, 55

Senior Vice President, Chief Investment Officer

President, Opus Investment Management, Inc.

Ms. Tripp has been Chief Investment Officer and President of Opus Investment Management, Inc. since 2006. She joined the Company in 1987, and prior to becoming our Chief Investment Officer, served in a variety of increasingly senior roles within our investment department.

Pursuant to section 4.4 of the Company’s by-laws, each officer shall hold office until the first meeting of the Board of Directors following the next annual meeting of the shareholders and until his or her respective successor is chosen and qualified unless a shorter period shall have been specified by the terms of his or her election or appointment, or in each case until such officer sooner dies, resigns, is removed or becomes disqualified.

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ANNUAL MEETING OF SHAREHOLDERS

The Board of Directors of THG have scheduled the 2014 Annual Meeting of Shareholders for May 20, 2014. The record date for determining the shareholders of the Company entitled to notice of and to vote at such Annual Meeting is March 25, 2014.

CODE OF CONDUCT

Our Code of Conduct is available, free of charge, on our website at www.hanover.com under “About Us - Corporate Governance”. The Code of Conduct applies to our directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer and Controller. While we do not expect to grant waivers to our Code of Conduct, any such waivers to our Chief Executive Officer, Chief Financial Officer or Controller will be posted on our website at www.hanover.com, as required by applicable law or New York Stock Exchange requirements. A printed copy of the Code of Conduct will be provided free of charge by contacting the Company’s Corporate Secretary at the Company’s headquarters, 440 Lincoln Street, Worcester, MA 01653.

ITEM 11–EXECUTIVE COMPENSATION

Incorporated herein by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held May 20, 2014, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934.

ITEM 12–SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2013 with respect to compensation plans under which equity securities of the Company are authorized for issuance.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (2)
Equity compensation plans approved by security holders		2,864,012	$	41.18		1,033,786
Equity compensation plans not approved by security holders		—		—		—
Total		2,864,012	$	41.18		1,033,786

(1) Includes 814,839 shares of Common Stock which may be issued upon vesting of outstanding restricted stock, restricted stock units, performance-based restricted stock units (assuming the maximum award amount), or market-based restricted stock units. The weighted-average exercise price does not take these awards into account.

(2) The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan (the “Plan”), which was adopted on May 16, 2006, authorized the issuance of 3,000,000 new shares that may be used for awards. In addition, shares of stock underlying any award granted and outstanding under the Company’s Amended Long-Term Stock Incentive Plan (the “1996 Plan”) as of the adoption date of the Plan that are forfeited, cancelled, expire or terminate after the adoption date without the issuance of stock, become available for future grants under the Plan.

Additional information related to Security Ownership of Certain Beneficial Owners and Management is incorporated herein by

reference from the Proxy Statement for the Annual Meeting of Shareholders to be held May 20, 2014, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934.

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ITEM 13–CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated herein by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held May 20, 2014, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934.

ITEM 14–PRINCIPAL ACCOUNTING FEES AND SERVICES

Incorporated herein by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held May 20, 2014, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934.

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PART IV

ITEM 15–EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(A)(1) FINANCIAL STATEMENTS

The consolidated financial statements and accompanying notes thereto are included on pages 155 to 162 of this Form 10-K.

		Page No. in this Report
Report of Independent Registered Public Accounting Firm			88
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011			90
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011			91
Consolidated Balance Sheets as of December 31, 2013 and 2012			92
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013, 2012 and 2011			93
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011			94
Notes to Consolidated Financial Statements			95
(A)(2) FINANCIAL STATEMENT SCHEDULES
		Page No. in this Report
I	Summary of Investments—Other than Investments in Related Parties		155
II	Condensed Financial Information of Registrant		156
III	Supplementary Insurance Information		159
IV	Reinsurance		160
V	Valuation and Qualifying Accounts		161
VI	Supplemental Information Concerning Property and Casualty Insurance Operations		162

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(A)(3) EXHIBIT INDEX

2.1	Stock Purchase Agreement, dated as of August 22, 2005, between The Goldman Sachs Group, Inc., as Buyer, and Registrant, as Seller (the schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) previously filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 24, 2005 and incorporated herein by reference.
2.2	Stock Purchase Agreement by and between the Registrant and Commonwealth Annuity and Life Insurance Company, dated July 30, 2008 (the schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K), previously filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 4, 2008 and incorporated herein by reference.
3.1	Certificate of Incorporation of the Registrant previously filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 16, 2006 and incorporated herein by reference.
3.2	Amended By-Laws of the Registrant, previously filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 21, 2006 and incorporated herein by reference.
4.1	Specimen Certificate of Common Stock previously filed as Exhibit 4 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 16, 2006 and incorporated herein by reference.
4.2	Form of Indenture relating to the Debentures between the Registrant and State Street Bank & Trust Company, as trustee, previously filed as Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-96764) filed with the Commission on September 11, 1995 and incorporated herein by reference.
4.3	Form of Global Debenture previously filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 16, 2006 and incorporated herein by reference .
4.4	Indenture dated February 3, 1997 relating to the Junior Subordinated Debentures of the Registrant previously filed as Exhibit 3 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 5, 1997 and incorporated herein by reference.
4.5	First Supplemental Indenture dated July 30, 2009 amending the indenture dated February 3, 1997 relating to the Junior Subordinated Debentures of the Registrant previously filed as Exhibit 4.5 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2010 and incorporated herein by reference.
4.6	Form of Global Security representing $300,000,000 principal amount of Junior Subordinated Debentures of the Registrant previously filed as Exhibit 4.6 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2010 and incorporated herein by reference.
4.7	Indenture dated January 21, 2010, between the Registrant and U.S. Bank National Association, as trustee, previously filed as Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3 ASR (No. 333-164446) filed with the Commission on January 21, 2010 and incorporated herein by reference.
4.8	First Supplemental Indenture and Form of Global Note dated February 23, 2010, related to the Notes of the Registrant, between the Registrant and U.S. Bank National Association, as trustee, previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 23, 2010 and incorporated herein by reference.
4.9	Second Supplemental Indenture dated as of June 17, 2011, between U.S. Bank National Association, as trustee, including the form of Global Note attached as Annex A thereto, supplementing the Indenture dated as of January 21, 2010, previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 17, 2011 and incorporated herein by reference.
4.10	Indenture, dated as of March 20, 2013, by and between the Registrant and U.S. Bank National Association previously filed as Exhibit 4.1 to the Registrant’s Registration Statement No: 333-187373 on Form S-3 as filed with the Commission on March 20, 2013 and incorporated herein by reference.
4.11	First Supplemental Indenture dated as of March 27, 2013, between U.S. Bank National Association, as trustee, supplementing the Indenture dated as of March 20, 2013 previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 27, 2013 and incorporated herein by reference.
4.12	Form of Security Certificate representing the 6.35% Subordinated Debentures due 2053 previously filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 27, 2013 and incorporated herein by reference.
	Management agrees to furnish the Securities and Exchange Commission, upon request, a copy of any other agreements or instruments of the Registrant and its subsidiaries defining the rights of holders of any non-registered debt whose authorized principal amount does not exceed 10% of Registrant’s total consolidated assets.

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+10.1	State Mutual Life Assurance Company of America Excess Benefit Retirement Plan previously filed as Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 (No. 33-91766) filed with the Commission on May 1, 1995 and incorporated herein by reference.
+10.2	The Hanover Insurance Group Cash Balance Pension Plan, as amended.
+10.3	The Hanover Insurance Group Retirement Savings Plan, as amended, previously filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 1, 2013 and incorporated herein by reference.
+10.4	The Hanover Insurance Group, Inc. Amended and Restated Non-Qualified Retirement Savings Plan, previously filed as Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 24, 2011 and incorporated herein by reference.
+10.5	The Hanover Insurance Group, Inc. Amended Long-Term Stock Incentive Plan previously filed as Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K filed with the Commission on April 1, 2002 and incorporated herein by reference.
+10.6	Form of Amended and Restated Non-Qualified Stock Option Agreement under The Hanover Insurance Group, Inc. Amended Long-Term Stock Incentive Plan previously filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 21, 2007 and incorporated herein by reference.
+10.7	Amendment to Outstanding Stock Options Issued under the Registrant’s 2006 Long-Term Incentive Plan and Amended Long-Term Stock Incentive Plan previously filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2011 and incorporated herein by reference.
+10.8	The Hanover Insurance Group 2006 Long-Term Incentive Plan, as amended, previously filed as Annex I to the Registrant’s Proxy Statement filed with the Commission on March 29, 2012 and incorporated herein by reference.
+10.9	Form of Non-Qualified Stock Option Agreement under The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 21, 2007 and incorporated herein by reference.
+10.10	Form of Non-Qualified Stock Option Agreement under The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan previously filed as Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 27, 2009 and incorporated herein by reference.
+10.11	Form of Non-Qualified Stock Option Agreement under the 2006 Long-Term Incentive Plan previously filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2011 and incorporated herein by reference.
+10.12	Form of Non-Qualified Stock Option Agreement under The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan previously filed as Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 26, 2013 and incorporated herein by reference.
+10.13	Form of Restricted Stock Unit Agreement under The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan previously filed as Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 27, 2009 and incorporated herein by reference.
+10.14	Form of Restricted Stock Unit Agreement under The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan previously filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 26, 2013 and incorporated herein by reference.
+10.15	Form of Performance-Based Restricted Stock Unit Agreement under The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan previously filed as Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 27, 2009 and incorporated herein by reference.
+10.16	Form of Performance-Based Restricted Stock Unit Agreement under The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan previously filed as Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 26, 2013 and incorporated herein by reference.
+10.17	Form of Restricted Stock Agreement under the 2006 Long-Term Incentive Plan previously filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 29, 2012 and incorporated herein by reference.
+10.18	The Hanover Insurance Group, Inc. 2009 Short-Term Incentive Compensation Plan previously filed as Annex 2 to the Registrant’s Proxy Statement filed with the Commission on March 27, 2009 and incorporated herein by reference.
+10.19	The Hanover Insurance Group Amended and Restated Employment Continuity Plan previously filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 11, 2008 and incorporated herein by reference.

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+10.20	Letter Agreement between David Greenfield and the Registrant dated January 20, 2011 regarding his participation in The Hanover Insurance Group Amended and Restated Employment Continuity Plan previously filed as Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 24, 2011 and incorporated herein by reference.
+10.21	Letter Agreement between Andrew Robinson and the Registrant dated October 15, 2012 regarding his participation in The Hanover Insurance Group Amended and Restated Employment Continuity Plan previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 19, 2012 and incorporated herein by reference.
+10.22	Description of 2012— 2013 Non-Employee Director Compensation previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 2, 2012 and incorporated herein by reference.
+10.23	Description of 2013— 2014 Non-Employee Director Compensation previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 1, 2013 and incorporated herein by reference.
+10.24	The Hanover Insurance Group, Inc. Non-Employee Director Deferral Plan previously filed as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 27, 2009 and incorporated herein by reference.
+10.25	Offer Letter, dated August 14, 2003, between the Registrant and Frederick H. Eppinger, Jr., as amended December 10, 2008 previously filed as Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 27, 2009 and incorporated herein by reference.
+10.26	Offer Letter dated December 15, 2010 between David Greenfield and the Registrant previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 17, 2010 and incorporated herein by reference.
+10.27	Description of 2012 Named Executive Officer Short-Term Incentive Compensation Program Awards, 2013 Named Executive Officer Short-Term Incentive Compensation Programs and 2013 Named Executive Officer Long-Term Incentive Compensation Programs previously filed as Item 5.02 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 1, 2013 and incorporated herein by reference.
+10.28	IRC Section 162(m) Deferral Letter for Certain Executive Officers of the Registrant previously filed as Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 27, 2009 and incorporated herein by reference.
+10.29	Service Agreement dated January 20, 2010 by and between Robert Stuchbery and Chaucer Holdings plc previously filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2011 and incorporated herein by reference.
+10.30	Chaucer Pension Scheme, as amended, previously filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2011 and incorporated herein by reference.
+10.31	Robert Stuchbery Retention Agreement dated August 23, 2011 previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2011 and incorporated herein by reference.
+10.32	Trust Deed and Rules of The Chaucer Share Incentive Plan previously filed as Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2011 and incorporated herein by reference.
+10.33	Description of 2012 Chaucer Annual Bonus Scheme previously filed as Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 26, 2013 and incorporated herein by reference.
+10.34	Description of Robert Stuchbery’s 2012 Long-Term Incentive Award previously filed as Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 26, 2013 and incorporated herein by reference.
+10.35	2011 Chaucer Long-Term Incentive Plan previously filed as Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 26, 2013 and incorporated herein by reference.
+10.36	Transition Assistance and Cooperation Agreement by and between the Registrant and Marita Zuraitis dated April 29, 2013 previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 3, 2013 and incorporated herein by reference.
10.37	Standby Letter of Credit Facility Agreement, dated November 28, 2011, among Chaucer Holdings plc, as Account Party (as defined therein), 440 Tessera Limited and certain subsidiaries of the Account Party, as Guarantors (as defined therein), the Lenders (as defined therein) party thereto from time to time, Lloyds TSB Bank plc, Barclays Bank plc and The Royal Bank of Scotland plc as mandated lead arrangers and Lloyds TSB Bank plc as bookrunner, overdraft provider, facility agent of the other Finance Parties (as defined therein) and security agent to the Secured Parties (as defined therein) previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 1, 2011 and incorporated herein by reference.

- 152 -

10.38	Guaranty Agreement, dated November 28, 2011, among The Hanover Insurance Group, Inc. and Lloyds TSB Bank plc, as Facility Agent and Security Agent (each as defined therein) previously filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 1, 2011 and incorporated herein by reference.
10.39	Federal Home Loan Bank of Boston Agreement for Advances, Collateral Pledge, and Security Agreement dated September 11, 2009 previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 4, 2009 and incorporated herein by reference.
10.40	Form of Accident and Health Coinsurance Agreement between The Hanover Insurance Company, as Reinsurer, and First Allmerica Financial Life Insurance Company (the schedules and certain exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 4, 2008 and incorporated by reference herein.
10.41	Credit Agreement, dated August 2, 2011, among The Hanover Insurance Group, Inc., as Borrower, Wells Fargo Bank, National Association, as administrative agent, and various other lender parties, previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 3, 2011 and incorporated herein by reference.
10.42	Credit Agreement, dated November 12, 2013, among The Hanover Insurance Group, Inc., as Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and various other lender parties previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 18, 2013 and incorporated herein by reference.
10.43	Amendment and Restatement Agreement with Amended and Restated Standby Letter of Credit Facility Agreement, dated November 15, 2013, among Chaucer Holdings plc and the lenders party thereto from time to time, Lloyds Bank plc, Barclays Bank PLC and The Royal Bank of Scotland plc as mandated lead arrangers and Lloyds Bank plc as bookrunner, overdraft provider, facility agent of the other Finance Parties (as defined therein) and security agent to the Secured Parties (as defined therein) previously filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 18, 2013 and incorporated herein by reference.
10.44	Guaranty Agreement, dated November 15, 2013, among The Hanover Insurance Group, Inc. and Lloyds Bank plc, as Facility Agent and Security Agent (each as defined therein) previously filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 18, 2013 and incorporated herein by reference.
+10.45	Description of 2013 Named Executive Officer Short-Term Incentive Compensation Program Awards, 2014 Named Executive Officer Short-Term Incentive Compensation Programs and 2014 Named Executive Officer Long-Term Incentive Compensation Programs previously filed as Item 5.02 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 21, 2014 and incorporated herein by reference.
12.1	Computation of Ratio of Earnings to Fixed Charges
21	Subsidiaries of THG
23	Consent of Independent Registered Public Accounting Firm
24	Power of Attorney
31.1	Certification of the Chief Executive Officer, pursuant to 15 U.S.C. 78m, 78o(d), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer, pursuant to 15 U.S.C. 78m, 78o(d), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Internal Revenue Service Ruling dated April 15, 1995 previously filed as Exhibit 99.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-91766) filed with the Commission on May 1, 1995 and incorporated herein by reference.
101	The following materials from The Hanover Insurance Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013 formatted in eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011; (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011; (iii) Consolidated Balance Sheets at December 31, 2013 and 2012; (iv) Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013, 2012 and 2011; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011; (vi) related notes to these consolidated financial statements; and (vii) Financial Statement Schedules.

+ Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		THE HANOVER INSURANCE GROUP, INC.
		Registrant
Date: February 24, 2014	By:	/S/ FREDERICK H. EPPINGER, JR.
		Frederick H. Eppinger, Jr.,
		President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: February 24, 2014	By:	/S/ FREDERICK H. EPPINGER, JR.
		Frederick H. Eppinger, Jr.,
		President, Chief Executive Officer and Director
Date: February 24, 2014	By:	/S/ DAVID B. GREENFIELD
		David B. Greenfield,
		Executive Vice President, Chief Financial Officer
		and Principal Accounting Officer
Date: February 24, 2014	By:	*
		Michael P. Angelini,
		Chairman of the Board
Date: February 24, 2014	By:	*
		Richard H. Booth,
		Director
Date: February 24, 2014	By:	*
		P. Kevin Condron,
		Director
Date: February 24, 2014	By:	*
		Neal F. Finnegan,
		Director
Date: February 24, 2014	By:	*
		David J. Gallitano,
		Director
Date: February 24, 2014	By:	*
		Wendell J. Knox,
		Director
Date: February 24, 2014	By:	*
		Robert J. Murray,
		Director
Date: February 24, 2014	By:	*
		Joseph R. Ramrath,
		Director
Date: February 24, 2014	By:	*
		Harriett Tee Taggart,
		Director
Date: February 24, 2014	*By:	/S/ DAVID B. GREENFIELD
		David B. Greenfield,
		Attorney-in-fact

- 154 -

SCHEDULE I

THE HANOVER INSURANCE GROUP, INC.

SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES

DECEMBER 31, 2013
(in millions)
Type of investment	Cost (1)		Value		Amount at which shown in the balance sheet
Fixed maturities:
Bonds:
United States Government and agencies and authorities	$	992.1	$	979.8	$	979.8
States, municipalities and political subdivisions		1,106.7		1,125.0		1,125.0
Foreign governments		299.9		300.4		300.4
Public utilities		556.5		582.2		582.2
All other corporate bonds		3,851.9		3,975.1		3,975.1
Total fixed maturities		6,807.1		6,962.5		6,962.5
Equity securities:
Common stocks:
Public utilities		92.6		95.3		95.3
Banks, trust and insurance companies		10.3		10.4		10.4
Industrial, miscellaneous and all other		229.5		268.8		268.8
Nonredeemable preferred stocks		34.1		55.7		55.7
Total equity securities		366.5		430.2		430.2
Mortgage loans on real estate		2.5		XXXXX		2.5
Real estate		9.1		XXXXX		9.1
Other long-term investments(2)		177.7		XXXXX		180.9
Short-term investments		8.1		XXXXX		8.1
Total investments	$	7,371.0	$	XXXXX	$	7,593.3

⁽¹⁾ For equity securities, represents original cost, and for fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums and accretion of discounts.

⁽²⁾ The cost of other long-term investments differs from the carrying value due to market value changes in the Company’s equity ownership of limited partnership investments.

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SCHEDULE II

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Revenues
Net investment income	$	5.5		$	6.6		$	10.5
Net realized gains from sales and other		0.8			2.5			8.7
Interest income from loan to subsidiary		22.5			22.5			10.5
Other income		0.1			0.1			—
Total revenues		28.9			31.7			29.7
Expenses
Interest expense		55.3			48.6			41.3
Loss from retirement of debt		19.9			—			2.6
Employee benefit related expenses		6.2			5.3			6.9
Costs (benefit) related to acquired businesses		(6.4	)		2.6			16.4
Loss on derivative instruments		—			—			11.3
Other operating expenses		8.0			8.0			5.5
Total expenses		83.0			64.5			84.0
Net loss before income taxes and equity in income of unconsolidated subsidiaries		(54.1	)		(32.8	)		(54.3	)
Income tax benefit		37.3			40.5			31.1
Equity in income of unconsolidated subsidiaries		262.5			47.5			54.7
Income from continuing operations		245.7			55.2			31.5
Income from discontinued operations (net of income tax expense (benefit) of $4.1, $(0.1) and $2.8 in 2013, 2012 and 2011)		5.3			0.7			5.2
Net income	$	251.0		$	55.9		$	36.7

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

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SCHEDULE II (CONTINUED)

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

BALANCE SHEETS

DECEMBER 31	2013			2012
(In millions, except per share data)
Assets
Fixed maturities - at fair value (amortized cost of $98.5 and $131.1)	$	101.7		$	139.3
Equity securities - at fair value (cost of $1.0)		1.1			1.0
Cash and cash equivalents		20.7			23.8
Investments in unconsolidated subsidiaries		2,876.0			2,763.8
Net receivable from subsidiaries		23.0			26.6
Deferred income taxes		49.1			20.7
Current income taxes		8.3			14.1
Loan receivable from subsidiary		300.0			300.0
Other assets		17.6			14.5
Total assets	$	3,397.5		$	3,303.8
Liabilities
Expenses and state taxes payable	$	16.0		$	20.7
Interest payable		8.1			9.6
Debt		778.9			678.1
Total liabilities		803.0			708.4
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		1,830.1			1,787.1
Accumulated other comprehensive income		177.6			325.8
Retained earnings		1,349.1			1,211.6
Treasury stock at cost (16.8 and 16.2 million)		(762.9	)		(729.7	)
Total shareholders’ equity		2,594.5			2,595.4
Total liabilities and shareholders’ equity	$	3,397.5		$	3,303.8

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

- 157 -

SCHEDULE II (CONTINUED)

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Cash flows from operating activities
Net income	$	251.0		$	55.9		$	36.7
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss (gain) on discontinued operations		2.5			(0.7	)		(5.2	)
Loss from retirement of debt		19.9			0.1			2.6
Equity in net income of unconsolidated subsidiaries		(262.5	)		(47.5	)		(54.7	)
Net realized investment gains		(0.8	)		(2.5	)		(8.7	)
Loss on derivative instruments		—			—			11.3
Dividends received from unconsolidated subsidiaries		12.5			1.0			1.6
Deferred income tax expense (benefit)		(32.3	)		3.9			(3.4	)
Change in expenses and taxes payable		0.1			6.2			(11.7	)
Change in net payable from subsidiaries		16.5			30.7			(0.5	)
Other, net		3.4			2.8			2.3
Net cash provided by (used in) operating activities		10.3			49.9			(29.7	)
Cash flows from investing activities
Proceeds from disposals and maturities of fixed maturities		122.9			44.2			436.3
Purchase of fixed maturities		(90.8	)		(2.2	)		(148.7	)
Net cash used for business acquisitions		(2.2	)		(3.4	)		(468.4	)
Other investing activities		—			—			(1.9	)
Net cash provided by (used in) investing activities		29.9			38.6			(182.7	)
Cash flows from financing activities
Proceeds from debt borrowings		168.6			—			296.0
Repurchases of debt		(93.6	)		(0.7	)		(72.1	)
Dividends paid to shareholders		(60.0	)		(55.1	)		(50.9	)
Repurchase of common stock		(78.2	)		(20.0	)		(21.7	)
Proceeds from exercise of employee stock options		25.0			2.6			3.9
Other financing activities		(5.1	)		(0.4	)		(0.5	)
Net cash provided by (used in) financing activities		(43.3	)		(73.6	)		154.7
Net change in cash and cash equivalents		(3.1	)		14.9			(57.7	)
Cash and cash equivalents, beginning of year		23.8			8.9			66.6
Cash and cash equivalents, end of year	$	20.7		$	23.8		$	8.9

Included in other operating cash flows were the cash portion of dividends received from unconsolidated subsidiaries. Cash payments of $12.5 million, $1.0 million and $1.6 million in 2013, 2012 and 2011, and investment assets of $17.9 million and $97.8 million were transferred to the parent company in 2012 and 2011, respectively, to settle dividend and other intercompany balances. There were no assets transferred to the parent company from its subsidiaries in 2013 to settle balances.

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

- 158 -

SCHEDULE III

THE HANOVER INSURANCE GROUP, INC.

SUPPLEMENTARY INSURANCE INFORMATION

DECEMBER 31, 2013
(in millions)
Segments	Deferred acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums		Other policy claims and benefits payable		Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred acquisition costs		Other operating expenses			Premiums written
Commercial, Personal and Other	$	354.2	$	3,845.9	$	1,727.1	$	4.1	$	3,412.6	$	226.3	$	2,222.9	$	729.8	$	503.0		$	3,435.2
Chaucer (1)		151.8		2,381.5		788.7		—		1,037.9		42.7		538.2		241.2		170.8			1,117.5
Interest on Debt		—		—		—		—		—		—		—		—		65.3			—
Eliminations		—		—		—		—		—		—		—		—		(6.6	)		—
Total	$	506.0	$	6,227.4	$	2,515.8	$	4.1	$	4,450.5	$	269.0	$	2,761.1	$	971.0	$	732.5		$	4,552.7
DECEMBER 31, 2012
(in millions)
Segments	Deferred acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums		Other policy claims and benefits payable		Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred acquisition costs		Other operating expenses			Premiums written
Commercial, Personal and Other	$	346.6	$	3,784.9	$	1,711.1	$	4.1	$	3,272.3	$	236.1	$	2,467.2	$	704.2	$	436.5		$	3,377.9
Chaucer (1)		142.9		2,408.0		763.7		—		966.8		40.2		507.2		233.9		157.6			990.5
Interest on Debt		—		—		—		—		—		—		—		—		61.9			—
Eliminations		—		—		—		—		—		0.3		—		—		(6.5	)		—
Total	$	489.5	$	6,192.9	$	2,474.8	$	4.1	$	4,239.1	$	276.6	$	2,974.4	$	938.1	$	649.5		$	4,368.4
DECEMBER 31, 2011
(in millions)
Segments	Deferred acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums		Other policy claims and benefits payable		Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred acquisition costs		Other operating expenses			Premiums written
Commercial, Personal and Other	$	325.3	$	3,424.5	$	1,588.9	$	3.0	$	3,092.3	$	241.3	$	2,237.6	$	658.8	$	462.6		$	3,164.6
Chaucer (1)		133.3		2,332.8		703.2		—		506.3		16.9		313.2		120.1		67.9			428.8
Interest on Debt		—		—		—		—		—		—		—		—		55.0			—
Eliminations		—		—		—		—		—		—		—		—		(5.2	)		—
Total	$	458.6	$	5,757.3	$	2,292.1	$	3.0	$	3,598.6	$	258.2	$	2,550.8	$	778.9	$	580.3		$	3,593.4

(1) 2011 includes results of Chaucer Holdings plc (“Chaucer”) since the July 1, 2011 acquisition date. Results in 2013 and 2012 include Chaucer for the entire year.

- 159 -

SCHEDULE IV

THE HANOVER INSURANCE GROUP, INC.

REINSURANCE

Incorporated herein by reference to Note 16 —“Reinsurance” in the Notes of the Consolidated Financial Statements included in Financial Statements and Supplemental Data of this Form 10-K.

- 160 -

SCHEDULE V

THE HANOVER INSURANCE GROUP, INC.

VALUATION AND QUALIFYING ACCOUNTS

DECEMBER 31
(in millions)
			Additions
Description	Balance at		Charged to		Charged to					Balance
	beginning of period		costs and expenses		other accounts(1)		Deductions			at end of period
2013
Allowance for doubtful accounts	$	2.8	$	8.1	$	—	$	(7.8	)	$	3.1
Allowance for uncollectible reinsurance recoverables		16.9		3.6		0.5		(0.3	)		20.7
	$	19.7	$	11.7	$	0.5	$	(8.1	)	$	23.8
2012
Allowance for doubtful accounts	$	2.3	$	8.1	$	—	$	(7.6	)	$	2.8
Allowance for uncollectible reinsurance recoverables		16.4		0.4		0.9		(0.8	)		16.9
	$	18.7	$	8.5	$	0.9	$	(8.4	)	$	19.7
2011
Allowance for doubtful accounts	$	3.6	$	10.1	$	—	$	(11.4	)	$	2.3
Allowance for uncollectible reinsurance recoverables		2.3		2.2		11.9		—			16.4
	$	5.9	$	12.3	$	11.9	$	(11.4	)	$	18.7

(1) Amount charged to other accounts includes foreign exchange gains and losses and in 2011 also includes the allowance for uncollectible reinsurance recoverables acquired from Chaucer Holdings plc on July 1, 2011.

- 161-

SCHEDULE VI

THE HANOVER INSURANCE GROUP, INC.

SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY INSURANCE OPERATIONS

YEARS ENDED DECEMBER 31
(in millions)
Affiliation with Registrant	Deferred acquisition costs		Reserves for unpaid claims and claim adjustment expenses (1)		Discount, if any, deducted from previous column (2)			Unearned premiums (1)		Earned premiums		Net investment income
Consolidated Property and Casualty Subsidiaries
2013	$	506.0	$	6,231.5	$	—		$	2,515.8	$	4,450.5	$	269.0
2012	$	489.5	$	6,197.0	$	—		$	2,474.8	$	4,239.1	$	276.6
2011	$	458.6	$	5,760.3	$	—		$	2,292.1	$	3,598.6	$	258.2
			Claims and claim
			adjustment expenses					Amortization		Paid claims
			incurred related to					of deferred		and claim
			Current year		Prior years			acquisition costs		adjustment expenses		Premiums written
2013			$	2,837.4	$	(76.3	)	$	971.0	$	2,683.3	$	4,552.7
2012			$	2,990.2	$	(15.8	)	$	938.1	$	2,714.1	$	4,368.4
2011			$	2,654.1	$	(103.3	)	$	778.9	$	2,492.7	$	3,593.4

(1) Reserves for unpaid claims and claim adjustment expenses are shown gross of $2,030.4 million, $2,074.3 million and $1,931.8 million of reinsurance recoverable on unpaid losses in 2013, 2012 and 2011, respectively. Unearned premiums are shown gross of prepaid premiums of $219.0 million, $275.4 million and $234.9 million in 2013, 2012 and 2011, respectively. Reserves for unpaid claims and claims adjustment expense also include policyholder dividends.

(2) The Company does not use discounting techniques.

- 162-

EX-10.2

Exhibit 10.2

THE HANOVER INSURANCE GROUP CASH BALANCE

PENSION PLAN

PART I

(As amended and restated generally effective January 1, 2010)

Part I

THE HANOVER INSURANCE GROUP CASH BALANCE

PENSION PLAN

PART I

TABLE OF CONTENTS

		PAGE
ARTICLE I            NAME, PURPOSE AND EFFECTIVE DATE OF PLAN			1
1.01	General Statement.		1
1.02	Name of Plan.		1
1.03	Purpose.		2
1.04	Restated Plan Effective Date.		2
ARTICLE II          DEFINITIONS			2
ARTICLE III        PARTICIPATION REQUIREMENTS			21
3.01	Participation Requirements.		21
3.02	Classification Changes.		22
3.03	Participant Cooperation, Participant Refusal.		23
ARTICLE IV        PARTICIPANT ACCOUNTS			23
4.01	Establishment of Accounts.		23
4.02	Allocations to Accounts.		23
4.03	Adjustments of Accounts.		23
4.04	Distributions.		24
ARTICLE V          EMPLOYER CONTRIBUTIONS			24
5.01	Employer Contributions.		24
5.02	Payment of Contributions to Trustee.		25
5.03	Receipt of Contributions by Trustee.		25
ARTICLE VI        RETIREMENT AND DISABILITY BENEFITS			25
6.01	Normal Retirement Benefit.		25
6.02	Early Retirement Benefit.		26
6.03	Subsidized Early Retirement Benefit.		27
6.04	Late Retirement Benefit.		30
6.05	Disability Benefit.		31
6.06	Distribution of Benefits.		32
6.07	Qualified Joint and Survivor Annuity for Married Participants.		34
6.08	Supplementary Pension Benefits.		36
6.09	Suspension of Retirement Benefits.		38
6.10	Rollovers to Other Qualified Plans.		39
ARTICLE VII      DEATH BENEFITS			41
7.01	Pre-Retirement Death Benefits.		41
7.02	Death Benefits for Certain Dependent Spouses (Applicable only to certain Employees entitled to Special Grandfathered Benefits).		44
ARTICLE VIII     BENEFITS UPON TERMINATION FROM SERVICE			46
8.01	In General.		46

Part I

8.02	Termination Benefits.	46
8.03	Forfeitures.	48
8.04	Resumption of Service.	48
8.05	Service with Affiliates.	48
8.06	Distribution of Benefits.	48
8.07	Cash Out Repayment Option.	49
8.08	Early Retirement Election.	49
8.09	Amendment to Vesting Schedule.	49

Part I

ARTICLE I

NAME, PURPOSE AND EFFECTIVE DATE OF PLAN

1.01 General Statement. The Hanover Insurance Group Cash Balance Pension Plan (the “Plan”) consists of three parts, Part I, Part II and Part III. Part I of the Plan provides a cash balance and pension benefit, which was formerly provided under a plan known as “The Allmerica Financial Cash Balance Pension Plan”. Part II of the Plan provides a pension benefit, which was formerly provided under a plan known as “The Allmerica Financial Agents’ Pension Plan”. Part III of the Plan contains provisions applicable to each of Part I and Part II.

The provisions of Part III of the Plan shall override any provision of Part I and or Part II of the Plan as provided in Part III of the Plan.

The benefits payable to eligible Participants under Part I of the Plan are governed by the terms and conditions of Part I of the Plan and Part III of the Plan. The definitions of terms as used in this Part I of the Plan are as set forth in Article II, except as otherwise provided in this Article I.

1.02 Name of Plan. The prior version of this Part I of the Plan, known as The Allmerica Financial Cash Balance Pension Plan, generally effective January 1, 1997 (“The Allmerica Cash Balance Plan”), was an amendment and restatement of the State Mutual Companies’ Pension Plan. It was adopted by First Allmerica Financial Life Insurance Company (“First Allmerica”) and its affiliates, Citizens Insurance Company (“Citizens”) and The Hanover Insurance Company (“Hanover”). Effective January 1, 1995, the State Mutual Companies Pension Plan added a cash balance benefit. Effective December 31, 1994, benefit accruals provided under the integrated unit credit benefit formula of the State Mutual Companies’ Pension Plan were frozen for all Participants, except Participants eligible for certain continuing benefit accruals. Certain other accruals and benefits under this Part I of the Plan were subsequently frozen as provided in this Part I.

Prior versions of this Part I of the Plan were sponsored by First Allmerica, formerly known as State Mutual Life Assurance Company of America, from January 1, 1941 to December 31, 2007. Effective January 1, 2008, this Part I of the Plan was adopted by Hanover, an Affiliate of First Allmerica, as the sole Employer. Effective January 1, 1992, a prior version of this Part I of the Plan was merged with The Allmerica Financial Agents’ Pension Plan (formerly known as the State Mutual Agents’ Pension Plan) (the “Agents’ Pension Plan”).

Benefits payable under the Agents’ Pension Plan are set forth in Part II of the Plan. Parts I and II of the Plan are permissively aggregated for purposes of the qualification and non-discrimination requirements applicable to the Plan under Sections 401 and 410 of the Internal Revenue Code.

Part I - 1

1.03 Purpose. The Plan has been established for the exclusive benefit of Participants and their Beneficiaries and as far as possible shall be interpreted and administered in a manner consistent with this intent and consistent with the requirements of Section 401 of the Internal Revenue Code.

Subject to Article IV of Part III of the Plan (Limitations on Benefits) and to Section 10.04 of Part III of the Plan, which relates to the return of Employer contributions under special circumstances, until such time as the Plan has been terminated and all Plan liabilities have been satisfied, under no circumstances shall any assets of the Plan, or any contributions made under the Plan, be used for, or diverted to, purposes other than for the exclusive benefit of the Participants and their Beneficiaries and to defray reasonable expenses incurred in the administration of the Plan.

1.04 Restated Plan Effective Date. The effective date of this amended and restated Part I of the Plan is January 1, 2010 (except for those provisions of this Part of the Plan which have an alternative effective date). Except to the extent otherwise specifically provided in this Part I of the Plan, (i) the provisions of this amended and restated Part I of the Plan shall apply to a Participant who is in the employ of the Employer on or after January 1, 2010. The rights and benefits of any Participant whose employment with the Employer terminated prior to January 1, 2010 shall be determined in accordance with the provisions of this Part I of the Plan as were in effect at the appropriate time or times prior to January 1, 2010; provided, however, that if the Accrued Benefit of any such Participant has not been completely distributed before January 1, 2010, then such Accrued Benefit shall be accounted for and distributed in accordance with the provisions of this version of Part I of the Plan, but only to the extent that any such provision is not inconsistent with Part III of the Plan and subject to the requirements of applicable law.

ARTICLE II

DEFINITIONS

All section and article references in this Part I are to section and article references in this Part I, except as otherwise expressly provided.

As used in Parts I, II and III of the Plan, the following words and phrases shall have the meanings set forth in this Part I, unless a different meaning is clearly required by the context or is otherwise provided in Part II and or Part III of the Plan.

2.01 “Accrued Benefit”:

(a) means, except as provided in (b) below, the sum of (i) the monthly retirement benefit payable as a single life annuity to the Participant beginning on his or her Normal Retirement Date which is the Actuarial Equivalent of the Participant’s Projected Account Balance, plus (ii) the Participant’s Grandfathered Benefit, if any.

(b) means, with respect to the minimum benefit for Non-Key Employee Participants in a Top Heavy Plan, the sum of such benefits earned by the Participant, which

Part I - 2

benefits are payable at the Participant’s Normal Retirement Date and are described in Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans).

2.02 “Actuarial Equivalent” means a benefit having the same value as the benefit or benefits otherwise payable. Except as otherwise provided in this Section, the present value of any benefit determined under the terms of the Part I of the Plan will be the actuarial equivalent of the no-death benefit life annuity retirement benefit specified in Section 6.01.

Actuarial Equivalent life annuity settlements of Participant Projected Account Balances or of optional life annuity Top Heavy Plan benefits will be computed utilizing (i) the Code Section 417 Mortality Table and (ii) the Code Section 417 Interest Rate for determining the amount payable to a Participant having an annuity starting date on or after January 1, 2004.

Optional life annuity settlements of Grandfathered Benefits will be computed utilizing the 1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum. Adjustment factors used to determine optional forms of Grandfathered Benefits are included in Exhibit A, attached hereto and made a part of Part I of the Plan.

Adjustment factors for optional Grandfathered Benefits not illustrated will be computed on an actuarial basis consistent with that used in computing the factors shown in Exhibit A.

The present value (including, but not limited to, for purposes of Section 7.01(a)(i)(B), Section 7.01(a)(ii)(B) and determining eligibility for cashout distributions under Section 8.02) and the amount of any cash distribution of a Grandfathered Benefit or a benefit for Non-Key Employee Participants in a Top Heavy Plan shall be determined on the basis of (i) the mortality rates specified above and an interest rate of 7% per annum, or (ii) the Code Section 417 Mortality Table and the Code Section 417 Interest Rate (or for determining the amount payable to a Participant having an annuity starting date on and after January 1, 2008, the Code Section 417 Applicable Interest Rate), whichever produces the greater benefit.

The preceding paragraphs shall not apply to the extent they would cause the Plan to fail to satisfy the requirements of Article IV of Part III of the Plan (Limitations on Benefits) or Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans).

For purposes of the Part I of the Plan, (a) the “Code Section 417 Mortality Table” means the applicable mortality table prescribed by the Secretary of the Treasury pursuant to Code section 417(e)(3), as in effect from time to time, provided, however, that notwithstanding the preceding provisions of this paragraph, for distributions commencing on or after December 31, 2002 and prior to January 1, 2008, the Code Section 417 Mortality Table means the Table set forth in Revenue Ruling 2001-62 and for purposes of determining the amount payable to a Participant with an annuity starting date on or after

Part I - 3

January 1, 2008, the Code Section 417 Mortality Table means the Table set forth in Revenue Ruling 2007-67 or such other Table as may be prescribed by the Secretary of the Treasury pursuant to Code Section 417(e)(3); (b) for periods beginning on and after January 1, 2004, the “Code Section 417 Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the annual rate of interest on 30-year Treasury securities in effect for the second month immediately preceding the first day of the Plan Year (e.g., November 2009 for the 2010 Plan Year), and (c) for periods beginning on and after January 1, 2008, the “Code Section 417 Applicable Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the applicable interest rate described by Code section 417(e) after its amendment by the Pension Protection Act of 2006, which rate more specifically shall be the adjusted first, second, and third segment rates applied under rules similar to the rules of Code section 430(h)(2)(C) for the lookback month used to determine the previously applicable interest rate on 30-year Treasury securities (e.g., November 2009 for the 2010 Plan Year) or for such other time as the Secretary of the Treasury may by regulations prescribe. For purposes of determining the Code Section 417 Applicable Interest Rate, the first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code section 430(h)(2)(C) if:

(i) Code section 430(h)(2)(D) were applied by substituting the average yields for the month described in clause (ii) below for the average yields for the 24-month period described in such Code section, and

(ii) Code section 430(h)(2)(G)(i)(II) were applied by substituting “Section 417(e)(3)(A)(ii)(II) for “Section 412(b)(5)(B)(ii)(II)”, and

(iii) The applicable percentage under Code section 430(h)(2)(G) is treated as being 20% in 2008, 40% in 2009, 60% in 2010, and 80% in 2011.

2.03 (a) “Affiliate” means any incorporated Career Agent of an Employer and corporation affiliated with the Employer through the action of such corporation’s board of directors and the Employer’s Board of Directors.

(b) Affiliate also means:

(i) Any corporation or corporations which together with the Employer constitute a controlled group of corporations or an “affiliated service group”, as described in Sections 414 (b) and 414 (m) of the Internal Revenue Code as now enacted or as later amended and in regulations promulgated thereunder; and

(ii) Any partnerships or proprietorships under the common control of the Employer.

2.04 “Age” means, except for purposes of determining lump sum cash distributions and optional life annuity benefits, the age of a person at his or her last birthday. Lump sum cash distributions and optional life annuity benefits will be determined on the basis of a person’s age nearest birthday.

Part I - 4

2.05 “Allocation” means an amount equal to the percentage of a Participant’s Eligible Compensation specified below for each of the Plan Years commencing on or after January 1, 1995 and prior to January 1, 2005.

Plan Year	Percentage
1995	7%
1996	7%
1997	7%
1998	7%
1999	7%
2000	7%
2001	5%
2002	3%
2003	5%
2004	5.5%

An Employee will not receive more than one Allocation for any Plan Year with respect to the same Compensation.

2.06 “Annuity Commencement Date” means the date as of which a benefit commences under the Plan.

2.07 “Beneficiary” means the person, trust, organization or estate designated to receive Plan benefits payable on or after the death of a Participant.

2.08 “Compensation” means:

(a) For purposes of determining a Participant’s Allocation specified in Section 4.02, the total wages or salary, overtime, bonuses, and any other taxable remuneration paid to an Employee by the Employer during the Plan Year, while the Employee is a Participant, as reported on the Participant’s W-2 for the Plan Year; provided, however, that Compensation for this purpose shall be determined without reduction for (i) any Code Section 401(k) salary reduction contributions contributed on the Participant’s behalf for the Plan Year to any defined contribution plan sponsored by the Employer and (ii) the amount of any salary reduction contributions contributed on the Participant’s behalf for the Plan Year to any Code Section 125 plan sponsored by the Employer.

Part I - 5

Notwithstanding the above, Compensation for the above purpose shall not include:

(i) incentive compensation paid to Participants pursuant to the Employer’s Executive Long Term Performance Unit Plan or pursuant to any similar or successor executive compensation plan;

(ii) Employer contributions to a deferred compensation plan or arrangement (other than salary reduction contributions to a Code Section 401(k) or 125 plan, as described above) either for the year of deferral or for the year included in the Participant’s gross income;

(iii) any income which is received by or on behalf of a Participant in connection with the grant, receipt, settlement, exercise, lapse of risk of forfeiture or restriction on transferability, or disposition of any stock option, stock award, stock grant, stock appreciation right or similar right or award granted under any plan, now or hereafter in effect, of the Employer or any successor to the Employer, the Employer’s parent, any such successor’s parent, any subsidiaries or affiliates of the Employer, or any stock or securities underlying any such option, award, grant or right;

(iv) severance payments paid in a lump sum;

(v) Code Section 79 imputed income or long term disability and workers’ compensation benefit payments;

(vi) taxable moving expense allowances or taxable tuition or other educational reimbursements;

(vii) for Plan Years commencing after December 31, 1998, compensation paid in the form of commissions;

(viii) non-cash taxable benefits provided to executives, including the taxable value of Employer-paid club memberships, chauffeur services and Employer-provided automobiles; and

(ix) other taxable amounts received other than cash compensation for services rendered, as determined by the Plan Administrator.

(b) For purposes of Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) and for purposes of Article IV of Part III of the Plan (Limitations on Benefits), the term “Compensation” means a Participant’s wages, salaries, fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and

Part I - 6

reimbursements or other expense allowances under a non-accountable plan (as described in Section 1.62-2(c) of the Regulations), and excluding the following:

(i) Employer contributions to a plan of deferred compensation which are not includible in the Employee’s gross income for the taxable year in which contributed, or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation;

(ii) amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by an Employee becomes freely transferable or is no longer subject to a substantial risk of forfeiture;

(iii) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and

(iv) other amounts which receive special tax benefits.

For Plan Years commencing after December 31, 1997, Compensation for purposes of the Part I of the Plan shall also include Employee elective deferrals under Code Section 402(g)(3), and amounts contributed or deferred by the Employer at the election of the Employee and not includible in the gross income of the Employee, by reason of Code Sections 125, 132(f)(4), 402(e)(3) and 402(h)(1)(B).

Additionally, amounts under Code Section 125 include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage (deemed Code Section 125 compensation). Such an amount will be treated as an amount under Code Section 125 only if the Employer does not request or collect information regarding the Participant’s other health coverage as part of the enrollment process for the health plan.

(c) Notwithstanding (a) and (b) above, for Plan Years beginning on or after January 1, 1994 and prior to January 1, 2002, the annual Compensation of each Participant taken into account for determining all benefits provided under Part I of the Plan for any determination period shall not exceed $150,000. This limitation shall be adjusted for inflation by the Secretary under Code Section 401(a)(17)(B) in multiples of $10,000 by applying an inflation adjustment factor and rounding the result down to the next multiple of $10,000 (increases of less than $10,000 are disregarded). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined beginning in such calendar year.

If Compensation is being determined for a Plan Year that contains fewer than 12 calendar months, then the annual Compensation limit is an amount equal to the annual Compensation limit for the calendar year in which the Compensation period begins multiplied by the ratio obtained by dividing the number of full months in the period by 12.

Part I - 7

If Compensation for any prior determination period is taken into account in determining a Participant’s benefits for the current Plan Year, the Compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that prior period. For this purpose, in determining benefits in Plan Years beginning on or after January 1, 1989, the annual Compensation limit in effect for determination periods beginning before that date is $200,000. In addition, in determining benefits in Plan Years beginning on or after January 1, 1994, the annual Compensation limit in effect for determination periods beginning before that date is $150,000.

(d) Notwithstanding (a) and (b) above, the annual Compensation of each Participant taken into account in determining benefit accruals in any Plan Year beginning after December 31, 2001, shall not exceed $200,000. Annual compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Part I of the Plan (the “determination period”). For purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, the annual Compensation for any prior determination period shall be limited to $200,000.

The $200,000 limit on annual Compensation for determination periods beginning after December 31, 2001 shall be adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year.

2.09 “Credited Service” means and includes all Hours of Service (except excluded Hours described in Subsection 2.23(b), (c), (g) and (h)) completed with the Employer as an eligible Employee on and after the date an Employee becomes a Participant in Part I of the Plan.

For purposes of the Part I of the Plan, a Participant shall receive a Year of Credited Service for each Plan Year in which he or she completes at least 1,000 Hours of Credited Service; provided that for the Plan Year in which an Employee initially becomes a Participant in Part I of the Plan, such Participant shall receive a Year of Credited Service if he or she completes at least 1,000 Hours of Service in the Plan Year.

A Participant who is absent because of sickness or injury shall receive Credited Service for the period described in Subsections 2.23(b) or (g). Except as provided in Section 6.05, if any such absence continues beyond such period, the Participant shall receive no further Credited Service.

Notwithstanding the rules for determining Credited Service described above:

(i) Eligible Re-employed Pensioners of First Allmerica, Citizens, Hanover and General Agents of First Allmerica (as each is described in Section 6.09) shall receive no further Credited Service for periods of re-employment following their retirement unless they complete at least 1,000 Hours of Service in a Plan Year.

Part I - 8

(ii) If during a Plan Year a Participant is employed by the Employer as a member of an eligible class of Employees and is also employed by an Affiliate, employed as a member of an ineligible class of Employees or employed as a Career Agent or General Agent of First Allmerica, he or she shall receive Credited Service under this Part I of the Plan only for Hours of Service completed while employed as a member of an eligible class of Employees.

(iii) For purposes only of determining eligibility for early retirement and eligibility for the Rule of 85 and Rule of 95 subsidized Early Retirement Benefits described in Section 6.02, but not for purposes of computing the amount of benefits payable, Credited Service shall include Hours of Service completed with Craftsman Insurance Company and the Hanover Life Insurance Company, both former affiliates of Hanover, and as a Career Agent or General Agent of First Allmerica.

2.10 “Determination Date” means the date as of which a Participant’s Accrued Benefit is calculated.

2.11 “Eligible Compensation” means the Compensation taken into account for purposes of determining a Participant’s Allocation for a Plan Year pursuant to Section 4.02 of the Part I of the Plan. If a Participant is a Participant in Part I of the Plan on the first day of any Plan Year, such Participant’s Eligible Compensation shall be his or her Compensation for such Plan Year paid while the Participant is employed as a member of an eligible class of Employees. If an Employee becomes a Participant in Part I of the Plan on any day after the first day of a Plan Year, such Participant’s Eligible Compensation shall be his or her Compensation for such Plan Year paid on and after the date he or she becomes a Participant and while the Participant is employed as a member of an eligible class of Employees.

2.12 “Eligibility Computation Period” means a period of twelve consecutive months commencing on an Employee’s Employment Commencement Date or, if an Employee does not complete at least 1,000 Hours of Service during such initial period, such Employee’s Eligibility Computation Period means the Plan Year commencing with the first Plan Year following the Employee’s Employment Commencement Date and, if necessary, each succeeding Plan Year.

2.13 “Employee” means any employee who is employed by the Employer.

2.14 “Employer” means The Hanover Insurance Company.

2.15 “Employment Commencement Date” means the date on which an Employee first performs an Hour of Service or, in the case of an Employee who has a One-Year Break in Service, the date on which he or she first performs an Hour of Service after such Break.

2.16 “Fiduciary” means any person who (i) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or

Part I - 9

control respecting management or disposition of its assets; (ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Plan or has any authority or responsibility to do so; or (iii) has any discretionary authority or discretionary responsibility in the administration of the Plan, including, but not limited to, the Plan Administrator.

2.17 “First Allmerica” means First Allmerica Financial Life Insurance Company.

2.18 “Five Percent Owner” means, in the case of a corporation, any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent of the outstanding stock of the Employer or stock possessing more than five percent of the total combined voting power of all stock of the Employer. In the case of an Employer that is not a corporation; “Five Percent Owner” means any person who owns or under applicable regulations is considered as owning more than five percent of the capital or profits interest in the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers.

2.19 “Former Participant” means a person who had been an active Participant in Part I or Part II of the Plan (as applicable), but who has ceased to accrue further Credited Service for any reason.

2.20 “Grandfathered Benefit” means either the Basic Grandfathered Benefit or the Special Grandfathered Benefit, as defined below.

(a) “Basic Grandfathered Benefit” means the monthly retirement benefit payable as a single life annuity to an actively employed Participant on his or her Normal Retirement Date, calculated in accordance with the benefit formula set forth in Section 6.01 of Part I of the Plan, as in effect on December 31, 1994. Such benefit shall be calculated based on the Participant’s Average Monthly Compensation and Credited Service, determined as of December 31, 1994, based on the provisions of Part I of the Plan as in effect on such date.

(b) “Special Grandfathered Benefit” means the monthly retirement benefit payable as a single life annuity to an actively employed Participant on his or her Normal Retirement Date, calculated in accordance with the benefit formula set forth in Section 6.01 of Part I of the Plan, as in effect on December 31, 1994. Such benefit shall be based on the Participant’s Average Monthly Compensation and Credited Service calculated as of the date of determination, both being determined in accordance with the provisions of Part I of the Plan as in effect on December 31, 1994. The Special Grandfathered Benefit is available only to Participants who were actively employed by the Employer or by an Affiliate and accruing Credited Service on December 31, 1994, whose age on December 31, 1994, when added to two times their Credited Service as of such date (determined in accordance with the provisions of Part I of the Plan as in effect on December 31, 1994), total at least 85.

Part I - 10

For purposes of this Section “actively employed” means that the Participant was performing work duties for the Employer or an Affiliate on December 31, 1994 or was then absent by reason of a scheduled day off, paid vacation day, personal day, or sick day or was then absent due to an Employer-approved leave of absence. Additionally, a Participant shall be deemed to have been actively employed on December 31, 1994 if on such date the Participant was then employed by the Employer or by an Affiliate and was then receiving disability benefits under his or her Employer’s long-term disability benefit plan.

Notwithstanding the above, each Section 401(a)(17) Employee’s Special Grandfathered Benefit under this Part I of the Plan will be the greater of the Special Grandfathered Benefit determined for the Employee under (i) or (ii) below:

(i) the Employee’s Special Grandfathered Benefit, calculated as described above, based on the Employee’s total Years of Credited Service as of the date of determination; or

(ii) the sum of:

(A) the Employee’s Plan Accrued Benefit as of December 31, 1993, frozen in accordance with
Section 1.401(a)(4)-13 of the Treasury Regulations, and

(B) the Employee’s Special Grandfathered Benefit determined under the benefit formula applicable for the 1994 Plan Year, as applied to the Employee’s Years of Credited Service (calculated as of the date of determination in accordance with the provisions of Part I of the Plan as in effect on December 31, 1994) for Plan Years beginning on or after January 1, 1994 and prior to January 1, 2005.

A “Section 401(a)(17) Employee” means an Employee whose Accrued Benefit as of a date on or after the first day of the first Plan Year beginning on or after January 1, 1994, is based on Compensation for a Year beginning prior to the first day of the first Plan Year beginning on or after January 1, 1994, that exceeded $150,000.

Notwithstanding anything in Part I of the Plan to the contrary, if an Employee who is accruing additional Special Grandfathered Benefits ceases to be eligible to accrue further benefits under Part I of the Plan because of termination of employment, retirement, transfer to an ineligible class of Employees, or for any other reason, such Employee shall not be eligible to accrue any additional Special Grandfathered Benefits upon resumption of service as an otherwise eligible Employee of the Employer.

Notwithstanding anything in Part I of the Plan to the contrary, no additional Special Grandfathered Benefits shall accrue for periods after December 31, 2004. Except as provided in the following paragraph, the amount of a Participant’s

Part I - 11

Special Grandfathered Benefit shall be frozen as of December 31, 2004, with such frozen Special Grandfathered Benefit being calculated based on the Participant’s Average Monthly Compensation and Credited Service as of the earlier of December 31, 2004 or the date the Participant ceases to be eligible to accrue additional Special Grandfathered Benefits determined in accordance with the provisions of Part I of the Plan as in effect on such date.

If a Participant was eligible to accrue additional Special Grandfathered Benefits as of December 31, 2004 under the provisions of Part I of the Plan in effect on December 31, 2004, the amount of the Participant’s frozen Special Grandfathered Benefit shall be increased to reflect increases in the cost of living after December 31, 2004 by:

(i) 5% per annum, compounded annually, for each Plan Year commencing on or after January 1, 2005 and ending on the earlier of (A) the date the Participant commences distribution of his or her Special Grandfathered Benefit or (B) the last day of the month within which the Participant would have completed 35 years of Credited Service (based on the provisions of Part I of the Plan in effect on December 31, 2004) if he or she had remained in continuous employment with the Employer through such date (the “Maximum Service Date”), and

(ii) If the Participant has not commenced receiving distribution of his or her Special Grandfathered Benefit prior to his or her Maximum Service Date, 3% per annum, compounded annually, for each Plan Year commencing after the Participant’s Maximum Service Date and ending on the date the Participant begins receiving his or her Special Grandfathered Benefit.

If the Participant commences receiving distribution of his or her Special Grandfathered Benefit as of any date other than the first day of a Plan Year, the cost of living adjustment percentage for such Plan Year shall be determined by multiplying the applicable cost of living adjustment percentage for such year by a fraction the numerator of which is the number of full or partial months from the first day of such Plan Year until the date as of which distribution of the Participant’s Special Grandfathered Benefit commences and the denominator of which is 12. If a Participant would have completed 35 years of Credited Service on a day other than the last day of the Plan Year, then the cost of living adjustment for such Plan Year shall be determined by multiplying 5% by a fraction the numerator of which is the number of full or partial months from the first day of such Plan Year until the date the Participant would have completed 35 years of Credited Service and the denominator of which is 12. The remaining months of the Plan Year after the Participant would have completed 35 years of Credited Service will be credited with a cost of living adjustment determined by multiplying 3% by a fraction the numerator of which is the remaining full months of such Plan Year and the denominator of which is 12. The foregoing cost of living adjustment provided in this Subsection 2.20(b) shall be applied to each eligible Participant’s Special Grandfathered Benefit without regard to his or her

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employment status after December 31, 2004. A Participant will not be eligible for this cost of living adjustment if the Participant had ceased accruing additional Special Grandfathered Benefits prior to December 31, 2004 due to the Participant’s retirement, death or other termination of employment prior to December 31, 2004.

2.21 “Group Annuity Contract” means the group annuity contract or contracts issued by the Insurer through which benefits of the Plan are to be funded.

2.22 “Highly Compensated Employee” means any Employee who:

(a) was a Five Percent Owner at any time during the Plan Year or the preceding Plan Year; or

(b) for the preceding Plan Year:

(i) had Compensation from the Employer in excess of $80,000 (as adjusted pursuant to Code Section 414(q)(1)), and

(ii) for such preceding Plan Year was in the top-paid group of Employees for such preceding Year.

For purposes of this Section the “top-paid group” for a Plan Year is the top 20% of Employees ranked on the basis of Compensation paid during such Year.

In addition to the foregoing, the term “Highly Compensated Employee” shall also mean any former Employee who separated from service prior to the Plan Year, performs no service for the Employer during the Plan Year, and was an actively employed Highly Compensated Employee in the separation year or any Plan Year ending on or after the date the Employee attained Age 55.

In determining whether an Employee is a Highly Compensated Employee for Plan Years beginning in 1997, the Amendments of Code Section 414(q) stated above are treated as having been in effect for Plan Years beginning in 1996.

For purposes of this Section, Compensation means Compensation determined for purposes of Article IV of Part III of the Plan (Limitations on Benefits) but, for Plan Years beginning before January 1, 1998, without regard to Code Sections 125, 402(e)(3) and 402(h)(1)(B).

The determination of who is a Highly Compensated Employee, including the determinations of the numbers and identity of employees in the top-paid group and the Compensation that is considered will be made in accordance with Section 414(q) of the Code and regulations thereunder.

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2.23 “Hour of Service” means:

(a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. For purposes of Part I of the Plan an Employee who is exempt from the requirements of the Fair Labor Standards Act of 1938, as amended, shall be credited with 45 Hours of Service for each complete or partial week he or she would be credited with at least one Hour of Service under this Section 2.23.

(b) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence:

(i) No more than the number of Hours in one regularly scheduled work year of the Employer shall be credited to an Employee under this Subsection (b) on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period);

(ii) No hours shall be credited under this Subsection (b) for any payments made or due under a plan maintained solely for the purpose of complying with any applicable workers’ compensation, unemployment compensation or disability insurance laws; and

(iii) No hours shall be credited under this Subsection (b) for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.

For purposes of this Subsection (b) a payment shall be deemed to be made by or due from the Employer regardless of whether such payment is made by or due from the Employer directly, or indirectly through, among others, a trust fund or insurer, to which the Employer contributes or pays premium.

(c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service shall not be both credited under Subsections (a) or (b), as the case may be, and under this Subsection. No more than 501 Hours shall be credited under this Subsection for a period of time during which an Employee did not or would not have performed duties.

(d) Special rules for determining Hours of Service under Subsections (b) and (c) for reasons other than the performance of duties.

In the case of a payment which is made or due which results in the crediting of Hours of Service under Subsection (b) or in the case of an award or agreement for back pay, to the extent that such an award or agreement is made with respect to a

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period during which an Employee performs no duties, the number of Hours of Service to be credited shall be determined as follows:

(i) In the case of a payment made or due which is calculated on the basis of units of time (such as hours, days, weeks or months), the number of Hours of Service to be credited for “exempt” Employees described in Subsection (a) shall be determined as provided in such Subsection. For all other Employees, the Hours of Service to be credited shall be those regularly scheduled hours in such unit of time; provided, however, that when an Employee does not have regularly scheduled hours, such Employee shall be credited with 8 Hours of Service for each workday for which he or she is entitled to be credited with Hours of Service under paragraph (b).

(ii) Except as provided in Paragraph (d)(iii), in the case of a payment made or due which is not calculated on the basis of units of time, the number of Hours of Service to be credited shall be equal to the amount of the payment divided by the Employee’s most recent hourly rate of compensation (as determined below) before the period during which no duties are performed.

(A) The hourly rate of compensation of Employees paid on an hourly basis shall be the most recent hourly rate of such Employees.

(B) In the case of Employees whose compensation is determined on the basis of a fixed rate for specified periods of time (other than hours) such as days, weeks or months, the hourly rate of compensation shall be the Employee’s most recent rate of compensation for a specified period of time (other than an hour), divided by the number of hours regularly scheduled for the performance of duties during such period of time. The rule described in Paragraph (d)(i) shall also be applied under this subparagraph to Employees without a regular work schedule.

(C) In the case of Employees whose compensation is not determined on the basis of a fixed rate for specified periods of time, the Employee’s hourly rate of compensation shall be the lowest hourly rate of compensation paid to Employees in the same job classification as that of the Employee or, if no Employees in the same job classification have an hourly rate, the minimum wage as established from time to time under Section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended.

(iii) Rule against double credit. An Employee shall not be credited on account of a period during which no duties are performed with more hours than such employee would have been credited but for such absence.

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(e) Crediting of Hours of Service to computation periods.

(i) Hours of Service described in Subsection (a) shall be credited to the Employee for the computation period or periods in which the duties are performed.

(ii) Hours of Service described in Subsection (b) shall be credited as follows:

(A) Hours of Service credited to an Employee on account of a payment which is calculated on the basis of units of time (such as hours, days, weeks or months) shall be credited to the computation period or periods in which the period during which no duties are performed occurs, beginning with the first unit of time to which the payment relates.

(B) Hours of Service credited to an Employee by reason of a payment which is not calculated on the basis of units of time shall be credited to the computation period in which the period during which no duties are performed occurs, or if the period during which no duties are performed extends beyond one computation period, such Hours of Service shall be allocated between not more than the first two computation periods in accordance with reasonable rules established by the Employer, which rules shall be consistently applied with respect to all Employees within the same job classification, reasonably defined.

(iii) Hours of Service described in Subsection (c) shall be credited to the computation period or periods to which the award or agreement for back pay pertains, rather than to the computation period in which the award, agreement or payment is made.

(f) For purposes only of determining participation and vesting under Part I of the Plan, Hours of Service shall include periods of service calculated in accordance with the rules set forth in the other Subsections of this Section 2.23:

(i) with the Employer in a job or position in which the Employee was not eligible to participate in this Part I of the Plan; or

(ii) as a Career Agent or General Agent of First Allmerica;

(iii) for periods prior to January 1, 1998, with Citizens, Hanover or as an employee of a General Agent of First Allmerica;

(iv) with Financial Profiles, Inc., or Advantage Insurance Network, Affiliates of First Allmerica, including periods of service completed prior to the date it became an Affiliate; or

(v) with an Affiliate.

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(g) Rules for Non-Paid Leaves of Absence. For purposes of Part I of the Plan, a Participant will also be credited with Hours of Service during any non-paid leave of absence granted by the Employer. Except as provided in Subsection (a) for exempt Employees, the number of Hours of Service to be credited under this Subsection (g) shall be the number of regularly scheduled working hours in each workday during the leave of absence; provided, however, that no more than the number of Hours in one regularly scheduled work year of the Employer will be credited for each non-paid leave of absence. In the case of a non-exempt Employee without a regular work schedule, the number of Hours to be credited shall be based on a 40 hour work week and an 8 hour workday. Hours of Service described in this Subsection (g) shall be credited to the Employee for the computation period or periods during which the leave of absence occurs.

Notwithstanding the foregoing, for Plan Years beginning after December 31, 1998, all Employees (exempt and non-exempt) shall be credited with 8 Hours of Service for each workday for which they are entitled to be credited with Hours of Service for a non-paid leave of absence pursuant to this Subsection (g).

(h) Rules for Maternity or Paternity Leaves of Absence. In addition to the foregoing rules and solely for purposes of determining whether a One Year Break in Service for participation and vesting purposes has occurred in a computation period, an individual who is absent for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such Hours cannot be determined, 8 Hours of Service per day of such absence. Provided, however, that:

(i) Hours shall not be credited under both this paragraph (h) and one of the other paragraphs of this Section 2.23;

(ii) no more than 501 Hours shall be credited for each maternity or paternity absence; and

(iii) if a maternity or paternity leave extends beyond one Plan Year, the Hours shall be credited to the Plan Year in which the absence begins to the extent necessary to prevent a One Year Break in Service, otherwise such Hours shall be credited to the following Plan Year.

For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.

(i) Other Federal Law. Nothing in this Section 2.23 shall be construed to alter, amend, modify, invalidate, impair or supersede any law of the United States or any rule or regulation issued under any such law.

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2.24 “Insurer” means First Allmerica.

2.25 “Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as amended, and any future Internal Revenue Code or similar Internal Revenue laws.

2.26 “Key Employee”. In determining whether the Plan (in the aggregate, including Parts I, II, and III) is top-heavy for Plan Years beginning after December 31, 2001, “Key Employee” means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the determination date is: (a) an officer of the Employer (as that term is defined within the meaning of Code Section 416 and the regulations thereunder) having an annual Compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a (b) Five Percent Owner, or (c) a 1-percent owner of the Employer having an annual Compensation of more than $150,000. In determining whether a Plan is top heavy for Plan Years beginning before January 1, 2002, “Key Employee” means any Employee or former Employee (including any deceased Employee) who at any time during the 5-year period ending on the determination date, is (i) an officer of the Employer (as that term is defined within the meaning of Code Section 416 and the regulations thereunder) having an annual Compensation that exceeds 50 percent of the dollar limitation under Code Section 415(b)(1)(A), (ii) an owner (or an individual considered an owner under Code Section 318) of one of the ten largest interests in the Employer if such individual’s Compensation exceeds 100 percent of the dollar limitation under Code Section 415(c)(1)(A), (ii) a Five Percent Owner, or (iv) a 1-percent owner of the Employer who has an annual Compensation of more than $150,000.

The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Internal Revenue Code and the Treasury Regulations and other guidance of general applicability issued thereunder. For purposes of determining whether a Participant is a Key Employee, the Participant’s Compensation means Compensation as defined for purposes of Article IV of Part III of the Plan (Limitations on Benefits), but for Plan Years beginning before January 1, 1998, without regard to Code Sections 125, 402(e)(3) and 402(h)(1)(B).

2.27 “Limitation Year” means a calendar year.

2.28 “Non-Highly Compensated Employee” means any employee who is not a Highly Compensated Employee.

2.29 “Non-Key Employee” means any Employee who is not a Key Employee.

2.30 “Normal Retirement Age” means Age 65.

2.31 “Normal Retirement Date” means the first day of the month in which the Participant’s Normal Retirement Age occurs.

2.32 “One Year Break in Service” means any Plan Year, or for purposes of Article III, Eligibility Computation Period, during which the Employee has not completed more than 500 Hours of Service.

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2.33 “Participant” means any eligible Employee who participates in the Plan as provided in Article III of Part I of the Plan and or Article III of Part II of the Plan as applicable; and who has not for any reason become ineligible to participate further in the Plan.

2.34 “Plan Administrator” means the Benefits Committee, which shall have fiduciary responsibility for the interpretation and administration of the Plan as provided in Article VII of Part III of the Plan (Plan Fiduciary Responsibilities). Members of the Benefits Committee shall be appointed as provided in Section 8.01 of Part III of the Plan.

2.35 “Plan Sponsor” means the Employer.

2.36 “Plan Year” means a calendar year.

2.37 “Plan Year Allocation Date” means for any Plan Year the date each Participant’s Account shall be credited with an Allocation for the Plan Year. Such date shall be the March 1 following the Plan Year with respect to which the Allocation is made.

Notwithstanding the foregoing, for Plan Years beginning after December 31, 1997 the Plan Year Allocation Date means the first business day of March following the Plan Year with respect to which the Allocation is made.

2.38 “Projected Account Balance” means:

(a) With respect to a Participant who has attained his or her Normal Retirement Date on the Determination Date, the Participant’s Account Balance as of such Determination Date; and

(b) With respect to a Participant who has not attained his or her Normal Retirement Date as of the Determination Date, the projected value of the Participant’s Account Balance as of his or her Normal Retirement Date determined as if (i) the Participant has a separation from service on the Determination Date, and (ii) the Participant’s Account Balance is credited with earnings on a daily basis based upon an annual effective rate equal to the Code Section 417 Interest Rate (as defined in Section 2.02) from the Determination Date through the Participant’s Normal Retirement Date. Notwithstanding anything in Part I of the Plan to the contrary, in determining a Participant’s Projected Account Balance, the Code Section 417 Interest Rate in effect for the Plan Year that contains the Determination Date shall be assumed to remain the same for all future Plan Years.

2.39 “Qualified Domestic Relations Order” means any judgment, decree or order (including approval of a property settlement agreement) which:

(a) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of a Participant;

(b) is made pursuant to a state domestic relations law (including a community property law);

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(c) constitutes a “qualified domestic relations order” within the meaning of Section 414(p) of the Code; and

(d) is entered on or after January 1, 1985.

Effective April 6, 2007, a domestic relations order that otherwise satisfies the requirements for a qualified domestic relations order (“QDRO”) will not fail to be a QDRO: (i) solely because the order is issued after, or revises, another domestic relations order or QDRO; or (ii) solely because of the time at which the order is issued, including issuance after the annuity starting date or after the Participant’s death.

2.40 “Qualified Joint and Survivor Annuity” means an immediate annuity for the life of the Participant, with a survivor annuity for the life of the Participant’s spouse which is not less than one-half, nor greater than, the amount of the annuity payable during the joint lives of the Participant and the Participant’s spouse. The Qualified Joint and Survivor Annuity (i) for the purposes of Part I of the Plan will be the Actuarial Equivalent of the Plan’s no-death benefit life annuity normal form of benefit; and (ii) for the purposes of Part II of the Plan will be the Actuarial Equivalent of the Plan’s normal form of benefit.

2.41 “Top Heavy Plan” means for any Plan Year beginning after December 31, 1983 that any of the following conditions exists:

(i) If the top heavy ratio (as defined in Article II of Part III of the Plan) for this Plan exceeds 60 percent and this Plan is not part of any required aggregation group or permissive aggregation group of plans.

(ii) If this Plan is a part of a required aggregation group and part of a permissive aggregation group and the top heavy ratio for the group of plans exceeds 60 percent.

(iii) If this Plan is a part of a required aggregation group and part of a permissive aggregation group of plans and the top heavy ratio for the permissive aggregation group exceeds 60 percent.

See Article II of Part III of the Plan for requirements and additional definitions applicable to Top Heavy Plans.

2.42 “Top Heavy Plan Year” means that, for a particular Plan Year commencing after December 31, 1983, the Plan is a Top Heavy Plan.

2.43 “Trustee” means the bank, trust company or person(s) who shall be constituted the original trustee or trustees for the Plan and Trust created therefor, and also any such successor trustee or trustees. The duties and responsibilities of the Trustee are set forth in the Trust Indenture in the form annexed hereto.

2.44 “Year of Service” means, any Plan Year during which an Employee completes at least 1,000 Hours of Service; provided, however, that for purposes of determining Plan entry under Article III of Part I of the Plan, Year of Service means an Eligibility Computation

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Period during which an Employee completes at least 1,000 Hours of Service; provided, further however, that for purposes of determining Plan entry under Article III of Part II of the Plan, Year of Service shall mean any twelve consecutive month period during which he completes 1,000 Hours of Service computed from the date an Employee first performs an Hour of Service, or any anniversary thereof (or again performs an Hour of Service upon re-employment following a termination resulting in a One Year Break in Service).

ARTICLE III

PARTICIPATION REQUIREMENTS

3.01 Participation Requirements.

(a) Employee Participation. Individuals who were Participants in Part I of the Plan on December 31, 2009 shall continue to be Participants in Part I of the Plan on January 1, 2010.

Notwithstanding anything in Part I of the Plan to the contrary, for periods commencing on and after January 1, 2005, (i) no Employee who had not previously been a Participant in Part I of the Plan shall become a Participant in Part I of the Plan, and (ii) a Former Participant who is re-employed as an Employee shall be reinstated as an active Participant in Part I of the Plan but only for purposes of increasing Plan vesting on his or her frozen Accrued Benefit and for purposes of determining eligibility for early retirement under Section 6.02.

For Plan Years that commenced prior to January 1, 2005, an Employee became eligible to be a Participant on the first day of the calendar month coincident with or next following completion of one Year of Service, provided he or she was then an eligible Employee.

Eligible Employees who were actively employed and who were Participants in The Allmerica Financial Cash Balance Pension Plan as adopted by Citizens Insurance Company of America or in The Allmerica Financial Cash Balance Pension Plan as adopted by The Hanover Insurance Company, each of which were merged with and into this Part I of the Plan, became Participants in this Part I of the Plan on January 1, 1998.

Notwithstanding the foregoing: (i) an Employee who was formerly employed by Financial Profiles, Inc. shall not become eligible to become a Participant in this Part I of the Plan until January 1, 1999; and (ii) an Employee who was formerly employed by Advantage Insurance Network shall not become eligible to become a Participant in this Part I of the Plan until August 1, 1999.

Notwithstanding the foregoing, the following persons shall not be eligible to become or remain active Participants in Part I of the Plan:

(i) Employees who are or were eligible to participate in The Allmerica Financial Agents’ Retirement Plan;

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(ii) Retirees of First Allmerica or retirees of General Agents of First Allmerica who are receiving retirement benefits under this Part I of the Plan whose current period of post-retirement re-employment with First Allmerica, Citizens or Hanover began prior to January 1, 1988;

(iii) Retirees of Citizens or Hanover who are receiving retirement benefits under this Part I of the Plan whose current period of post-retirement re-employment with First Allmerica, Citizens or Hanover began prior to January 1, 1993;

(iv) Leased Employees, within the meaning of Code Sections 414(n) and (o);

(v) A contractor’s employee, i.e., a person working for a company providing goods or services (including temporary employee services) to the Employer or to an Affiliate whom the Employer does not regard to be its common law employee, as evidenced by its failure to withhold taxes from his or her compensation, even if the individual is actually the Employer’s common law employee; or

(vi) An independent contractor, i.e., a person who is classified by the Employer as an independent contractor, as evidenced by its failure to withhold taxes from his or her compensation, even if the individual is actually the Employer’s common law employee.

(b) Reeligibility of Former Participants. A Former Participant, who again becomes eligible to participate in Part I of the Plan, will become a Participant in Part I of the Plan on the date of his or her recommencement of service with the Employer. Any other former Employee who again becomes eligible will become a Participant on the entry date determined under the rules set forth in Subsection (a).

3.02 Classification Changes. In the event of a change in job classification, such that an Employee, although still in the employment of the Employer, no longer is an eligible Employee, he or she shall receive no further Credited Service under Part I of the Plan, and the Participant’s Accrued Benefit on the date he or she becomes ineligible shall continue to vest, become payable or be forfeited, as the case may be, in the same manner and to the same extent as if the Employee had remained an eligible Participant.

For periods commencing prior to January 1, 2005, in the event a Participant becomes ineligible to accrue further Credited Service because he or she is no longer a member of an eligible class of Employees, but has not terminated his or her employment with an Employer, such Participant shall again be eligible to accrue further Credited Service immediately upon his or her return to an eligible class of Employees.

In the event an Employee who is not a member of the eligible class of Employees becomes a member of the eligible class, such Employee shall participate immediately if such Employee has satisfied the minimum service requirements of Part I of the Plan, and would have previously become a Participant had he or she been in the eligible class.

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3.03 Participant Cooperation, Participant Refusal. Each Employee who is eligible shall become a Participant on the entry date specified in Subsection 3.01(a) unless he or she notifies the Plan Administrator in writing prior to such entry date that he or she does not wish to be a Participant under this Part I of the Plan. Any such election not to participate in this Part I of the Plan shall be irrevocable. In order to waive participation in this Part I of the Plan, an Employee must agree to irrevocably waive his or her right to become a Participant in any other qualified retirement plan sponsored by the Employer. Each eligible Employee who becomes a Participant hereunder thereby agrees to be bound by all of the terms and conditions of this Part I of the Plan. Each eligible Employee, by becoming a Participant in this Part I of the Plan, agrees to cooperate fully with the Insurer, including completion and signing of such forms as are required by the Insurer under the Group Annuity Contract.

ARTICLE IV

PARTICIPANT ACCOUNTS

4.01 Establishment of Accounts. For Plan Years commencing on or after January 1, 1995, a memorandum Account shall be established under Part I of the Plan for each Participant. Such Account shall be credited with Allocations in accordance with Section 4.02 and shall be adjusted in accordance with Section 4.03 and for any distributions in accordance with Section 4.04. The resultant value determined at any time, after the operation of Sections 4.02, 4.03 and 4.04, shall be the “Participant’s Account Balance”. The memorandum Account is part of a mechanism for computing benefits under Part I of the Plan. Accordingly, there need be no relationship between Participants’ Account Balances and the amount or nature of Plan assets.

4.02 Allocations to Accounts. For each Plan Year commencing on or after January 1, 1995 and prior to January 1, 2005 during which a Participant completes a Year of Credited Service and, regardless of the number of Hours of Service credited to the Participant, for any such Plan Year during which a Participant dies or first retires, such Participant’s Account shall be credited with an Allocation for such Plan Year as of the Plan Year Allocation Date. Allocations under the Plan are part of the mechanism for computing benefits under the Plan and do not relate to actual contributions to the Plan.

Notwithstanding anything in the Plan to the contrary, no Allocations shall be credited to Participants for Plan Years beginning on or after January 1, 2005; provided, however, (i) that Allocations shall be credited to eligible Participants for the 2004 Plan Year as of the 2004 Plan Year Allocation Date and (ii) memorandum Accounts shall continue to be credited with investment experience credits after December 31, 2004, as provided in Section 4.03 of Part I of the Plan.

4.03 Adjustments of Accounts.

(a) Adjustment for Earnings for Plan Years beginning on and after January 1, 2004. For each Plan Year beginning on or after January 1, 2004, each Participant’s Account shall be credited with earnings on a daily basis based upon an annual effective rate equal to the Code Section 417 Interest Rate in effect for such Plan Year.

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(b) Adjustment for Investment Experience for Plan Years beginning on or after January 1, 1995 and before January 1, 2004. For each Plan Year beginning on or after January 1, 1995 and before January 1, 2004, Participants in Part I of the Plan shall make investment experience elections with respect to their respective Account Balances from among choices prescribed by the Plan Administrator. The specific investment choices and the time and manner of making elections may be changed from time to time. Each Participant’s Account Balance shall be adjusted to reflect investment experience in the same manner as if the Account Balance were actually invested pursuant to the Participant’s elections and as if each Allocation were actually a contribution made to the Plan on the relevant Plan Year Allocation Date.

4.04 Distributions. The Account Balance shall be decreased for any non-annuity distributions paid to the Participant or his or her Beneficiary. In the event a benefit becomes payable as an annuity in accordance with Article VI or as a survivor annuity in accordance with Article VII, the Account Balance shall be decreased by the Actuarial Equivalent of such annuity as of the Annuity Commencement Date.

ARTICLE V

EMPLOYER CONTRIBUTIONS

5.01 Employer Contributions.

(a) Employer Contributions for Plan Years beginning after December 31, 1997. The Employer shall contribute for each Plan Year during which Part I of the Plan is in effect that amount, if any, which the enrolled actuary for the Plan determines is necessary to fund the Plan under the actuarial cost method in effect for the Plan. No contributions will be required of or permitted by Employees.

(b) Employer Contributions for Plan Years beginning prior to January 1, 1998. Each Employer shall contribute for each Plan Year during which the Plan is in effect that amount, if any, which the enrolled actuary for the Plan determines is necessary to fund Part I of the Plan under the actuarial costs method in effect for Part I of the Plan. No contributions will be required of or permitted by Employees.

Except as provided below, contributions paid by each Employer and earnings thereon will be used only to fund Plan costs and benefits for its Employees and will not be used to fund Plan costs and benefits for any other Employees. Notwithstanding the foregoing:

(i) Plan contributions paid by First Allmerica and General Agents of First Allmerica and earnings thereon will be used to fund Plan costs and benefits of both First Allmerica and such General Agents.

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(ii) Plan contributions paid by First Allmerica and General Agents of First Allmerica and earnings thereon will also be used to fund costs and benefits of The Allmerica Financial Agents’ Pension Plan (Part II of the Plan), which plan was merged with this Part I of the Plan on January 1, 1992.

5.02 Payment of Contributions to Trustee. The Employer shall make payment of all contributions directly to the Trustee to be held, managed and invested in one or more Group Annuity Contracts and in other investments permitted under the Trust, but subject to Section 5.03.

5.03 Receipt of Contributions by Trustee. The Trustee shall accept and hold under the Trust such contributions of money, or other property approved by the Employer for acceptance by the Trustee, on behalf of the Employer and its Employees and Beneficiaries as it may receive from time to time from the Employer, other than cash it is instructed to remit to the Insurer for deposit with the Insurer. However, the Employer may pay contributions directly to the Insurer and such payment shall be deemed a contribution to the Trust to the same extent as if payment had been made to the Trustee. All such contributions shall be accompanied by written instructions from the Plan Administrator or its designee accounting for the manner in which they are to be credited.

ARTICLE VI

RETIREMENT AND DISABILITY BENEFITS

6.01 Normal Retirement Benefit. Subject to Section 6.07, each Participant who retires on his or her Normal Retirement Date (and each Former Participant with a vested benefit deferred to his or her Normal Retirement Date) shall be entitled to receive a monthly life annuity commencing on such Date and terminating on the last regular payment date prior to his or her death, which monthly benefit shall equal the Participant’s Accrued Benefit (or, in case of each Former Participant with a vested benefit, the Former Participant’s vested Accrued Benefit).

Notwithstanding the foregoing, the Grandfathered Benefit (if any) of each Participant shall not be less than the largest periodic Grandfathered Benefit that would have been payable to the Participant upon separation from service at or prior to Normal Retirement Age under Part I of the Plan. For purposes of comparing periodic benefits in the same form commencing prior to and at Normal Retirement Age, the greater benefit is determined by converting the benefit payable prior to Normal Retirement Age into the same form of annuity benefit payable at Normal Retirement Age and comparing the amount of such annuity payments.

Notwithstanding the foregoing, Non-Key Employees who are Participants in a Top Heavy shall be entitled to the minimum benefit described in Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) if such benefit is greater than the benefit provided by this Section 6.01.

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Each actively employed Participant’s Accrued Benefit shall become 100% vested and nonforfeitable when the Participant attains his or her Normal Retirement Age. An actively employed Participant may terminate employment with the Employer and retire on his or her Normal Retirement Date. Upon such date the Participant shall be entitled to receive, or to begin to receive, his or her Normal Retirement Benefit.

The Plan Administrator shall notify the Trustee (and Insurer, if appropriate) as and when the Normal Retirement Age and Normal Retirement Date of each Participant shall occur and shall also advise the Trustee (and Insurer, if appropriate) as to the manner in which retirement benefits are to be distributed to a Participant, subject to the provisions of this Article. Upon receipt of such notification and subject to the other provisions of this Article, the Trustee or Insurer shall take such action as may be necessary in order to commence payment of the Participant’s Normal Retirement Benefit.

6.02 Early Retirement Benefit. Any actively employed Participant who has completed at least fifteen Years of Service (or, if earlier, who has completed at least fifteen Years of Credited Service, with Years of Credited Service completed before 1995 being determined in accordance with the terms of Part I of the Plan as in effect on December 31, 1994) may elect to retire on the first day of any month following attainment of Age 55, in which event he or she shall receive, subject to Section 6.07 in the case of a married Participant, a monthly life annuity commencing on the date of his or her early retirement and terminating on the last regular payment date prior to his or her death. Each early retiree’s monthly life annuity will be equal to the Actuarial Equivalent of the early retiree’s Accrued Benefit, except that the portion of the Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, shall equal the early retiree’s Grandfathered Benefit multiplied by the appropriate percentage.

Retirement Age	Percentage of Monthly Grandfathered Benefit*
65	100
64	93 1/3
63	86 2/3
62	80
61	73 1/3
60	66 2/3
59	63 1/3
58	60
57	56 2/3
56	53 1/3
55	50
*  If benefit payments commence in a month other than the month in which the Participant attains the specified Age, the percentage shall be determined by straight line interpolation.

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Provided, however, that an actively employed Participant (i) who is entitled to a Special Grandfathered Benefit, (ii) who has been continuously employed as a member of an eligible class of Employees from January 1, 1995 until the date of his or her early retirement, and (iii) whose combined Age and Years of Credited Service as of the date of determination (calculated in accordance with the provisions of Part I of the Plan in effect on December 31, 1994) total at least 85 (the “Rule of 85”) shall be entitled to receive a Special Grandfathered Benefit determined without the above actuarial reduction.

Provided, however, that an actively employed Participant (i) who is entitled to a Grandfathered Benefit, (ii) who has attained Age 62, and (iii) whose combined Age and Years of Credited Service as of the date of determination (calculated in accordance with the provisions of Part I of the Plan in effect on December 31, 1994) total at least 95 (the “Rule of 95”) shall be entitled to receive a Grandfathered Benefit determined without the above actuarial reduction.

For purposes of determining eligibility for the Rule of 85 and Rule of 95 subsidized early retirement benefits, but not for purpose of computing actual benefit amounts, Years of Credited Service shall include Hours of Service completed as a Career Agent or General Agent of First Allmerica.

If a Participant terminates employment after having completed at least fifteen Years of Service, he or she may elect to retire on the first day of any month following his or her 55th birthday and prior to his or her Normal Retirement Date. If any such Former Participant elects to retire early, he or she shall be entitled to receive a monthly retirement benefit equal to a percentage of the monthly benefit to which the Participant would have been entitled on his or her Normal Retirement Date. Such percentage shall be obtained by applying the appropriate percentage set forth in the table above to the monthly benefit payable on the Former Participant’s Normal Retirement Date.

Notwithstanding the foregoing, if this Plan is a Top Heavy Plan, and if greater than the benefit described above, each Non-Key Employee who elects early retirement shall be entitled to receive a monthly early retirement benefit equal to the appropriate percentage above of his or her Accrued Benefit described in Section 2.01(b).

6.03 Subsidized Early Retirement Benefit. Any eligible Participant who elected an immediate early retirement benefit to commence between March 1, 2003 and May 1, 2004 shall be entitled to an increased retirement benefit, computed as described below, to commence on the date of his or her actual retirement.

(a) Eligible Participants. Only Participants in Part I of the Plan who are actively employed by First Allmerica on February 1, 2003 (or are then on an Employer-approved paid leave of absence, which paid leave commenced no earlier than December 18, 2002) shall be eligible for the subsidized early retirement benefit described in this Section 6.03. In addition, in order to be eligible for such benefits, a Participant must have retired between March 1, 2003 and May 1, 2004 and met the following requirements:

(i) The Participant must be eligible for a “Special Grandfathered Benefit” (as described in Section 2.20(b) of Part I of the Plan) on the date of his or her early retirement.

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(ii) The Participant must have been continuously employed as a member of an eligible class of Employees from January 1, 1995 until the date of his or her retirement.

(iii) The Participant must not have attained Age 65 on the date of his or her retirement.

(iv) The Participant must not be eligible for the Rule of 85 subsidized early retirement benefit (as described in Section 6.02 of Part I of the Plan) on the date of his or her retirement.

(v) The Participant’s job or position with First Allmerica must have been or will be eliminated by May 1, 2003 as a result of the reorganization of the Allmerica Financial Services Division of First Allmerica.

(vi) The Participant must be actively at work on the last business day preceding the date of his or her early retirement or then be on vacation, be on an Employer-approved paid leave of absence or be absent due to sickness or injury.

(vii) The Participant must execute an appropriate release satisfactory to First Allmerica releasing the company (and its subsidiaries and affiliates and its and their officers, directors and employees) from all liability arising out of or relating to his or her employment with First Allmerica or with any of its predecessors, subsidiaries or affiliates.

(b) Qualified Early Retirement Benefit. Those eligible Participants as described in Section (a) who retired between March 1, 2003 and May 1, 2004 shall be entitled to a subsidized early retirement benefit, to be computed as follows:

(i) Subsidized Plan Early Retirement Benefit. Those eligible Participants electing early retirement under Part I of the Plan shall be entitled to an increased retirement benefit commencing on their date of actual retirement, to be computed as follows:

The Participant’s early retirement benefit shall be computed as provided in Section 6.02 of Part I of the Plan, except as provided below:

Any eligible Participant may elect to retire on the first day of any month between March 1, 2003 and May 1, 2004, in which event he or she shall receive, subject to Section 6.07 of Part I of the Plan in the case of a married Participant, a monthly life annuity commencing on the date of his or her early retirement and terminating on the last regular payment date prior to his or her death. An eligible Participant may also choose one of

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the distribution options set forth in Section 6.06 of Part I of the Plan, with spousal consent if the Participant is married. In the case of a Participant who chooses a monthly life annuity, such benefit will be equal to the sum of (A) and (B) below:

(A) A monthly life annuity benefit that is the Actuarial Equivalent (as described in Section 2.02 of Part I of the Plan) of the Participant’s Account Balance (as described in Section 4.01 of Part I of the Plan), plus

(B) A monthly life annuity benefit which is equal to a percentage of the Participant’s Special Grandfathered Benefit, accrued to the date of actual retirement, based on the Participant’s Age, Average Monthly Compensation and Credited Service (such Average Monthly Compensation and Credited Service being calculated in accordance with the provisions of Part I of the Plan in effect on December 31, 1994), each determined as of the date of the Participant’s early retirement. Such percentage shall be equal to the appropriate percentage determined from the Schedule below of the Special Grandfathered Benefit that would have been payable had the Participant’s date of initial eligibility for the Rule of 85 subsidized early retirement benefit (as described in Section 6.02 of Part I of the Plan) been his or her Normal Retirement Date, based on the assumption that his or her continuous employment had continued until such date, but with the actual benefit being based on the Participant’s Special Grandfathered Benefit actually accrued as of the date of early retirement.

Retirement Age*	Percentage of Special Monthly Grand-Fathered Benefit**
55	1.0000
54	0.9333
53	0.8667
52	0.8000
51	0.7333
50	0.6667
49	0.6333
48	0.6000
47	0.5667
46	0.5333
45	0.500
*  This Schedule assumes the Participant would have been eligible for the Rule of 85 subsidized early retirement benefit at Age 55. If a Participant would have been eligible for the Rule of 85 at a date later than Age 55, the

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appropriate percentage shall be determined by the Plan actuary using the same assumptions used in constructing the above Schedule.

**     If a benefit commences in a month other than the month in which the Participant attains the specified Age, the percentage shall be determined by straight line interpretation.

Example. Assume an eligible Participant will attain Age 52 on January 1, 2004 and will have completed 32 Years of Credited Service on such date. Assume further that as of such date the Participant has accrued a Special Grandfathered Benefit, payable as a single life annuity, of $1,000 per month. Thus, the Participant will initially be eligible for the Rule of 85 subsidized early retirement benefit on January 1, 2007, the date the Participant will attain Age 55. Under the terms of Section 6.03, the Participant may elect to retire on January 1, 2004 and begin to receive an immediate early retirement benefit. If a single life annuity benefit is chosen, such life annuity benefit will be equal to $800 per month ($1,000 x 0.8000 = $800).

(ii) Cost-of-Living (“COL”) Adjustments. Notwithstanding anything in Section 6.08 of Part I of the Plan to the contrary, Participants (and the Beneficiaries of Participants) who elect to retire pursuant to this Section 6.03 shall be eligible to receive COL benefits, subject to the other rules and requirements set forth in Section 6.08 of Part I of the Plan. Notwithstanding anything in Section 6.08 of Part I of the Plan to the contrary, the early retirement monthly annuity benefits described in this Section 6.03 shall be a part of a Participant’s basic plan benefit and shall be included in determining any COL adjustment to which the Participant may become entitled pursuant to Section 6.08 of Part I of the Plan.

6.04 Late Retirement Benefit. If a Participant shall continue in active service beyond his or her Normal Retirement Date, he or she shall continue to participate under Part I of the Plan and Trust. For Employees in ERISA Section 203(a)(3)(B) service (as described in Subsection 6.09(a) of Part I of the Plan), who continue in active employment beyond their Normal Retirement Date, retirement benefits shall be suspended, as provided in Section 6.09 of Part I of the Plan. Except as provided in Section 6.07 of Part I of the Plan in the case of a married Participant, the monthly retirement benefit payable to a Participant retiring on a late retirement date shall be a monthly life annuity commencing on the date of his or her late retirement and terminating on the last regular payment date prior to his or her death. Each late retiree’s monthly life annuity will be equal to the late retiree’s Accrued Benefit; provided that the portion of the Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, shall equal the Participant’s Basic Grandfathered Benefit, if any, or the Participant’s Special Grandfathered Benefit” if any.

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Notwithstanding the foregoing, if this Plan is a Top Heavy Plan, if greater than the benefit described above, each Non-Key Employee who elects late retirement shall be entitled to receive a monthly late retirement benefit equal to his or her Accrued Benefit described in Section 2.01(b).

Notwithstanding the above, monthly annuity benefits shall commence no later than a Participant’s required beginning date (as defined in Article III of Part III of the Plan). If a Participant has not retired by his or her required beginning date, monthly retirement benefits shall commence on such date and shall be computed as described in the preceding paragraph, with benefits based on the assumption that the Participant’s required beginning date was the date of late retirement.

Notwithstanding the foregoing, if late retirement benefits commence after Age 70 ¹/₂, to the extent required under Code Section 401(a)(9)(C) and regulations thereunder, a Participant’s Accrued Benefit shall be actuarially increased to take into account the period after Age 70 ¹/₂ in which the Participant was not receiving any benefits under the Plan, including any period during which the Employee is in Section 203(a)(3)(B) service, as described in Subsection 6.09(a) of Part I of the Plan.

6.05 Disability Benefit. Notwithstanding anything in Part I of the Plan to the contrary, if a Participant becomes Totally Disabled while employed by the Employer as an active Participant in Part I of the Plan, such Participant shall have a 100% vested and nonforfeitable right to his or her Accrued Benefit, regardless of his or her length of service.

In addition, if a Participant in Part I of the Plan who is eligible for a Special Grandfathered Benefit was Totally Disabled on December 31, 1994 and before January 1, 2005, becomes Totally Disabled while employed by the Employer as an active Participant in Part I of the Plan, it shall be assumed for purposes of this Part I of the Plan that his or her employment continues from the date of the commencement of his or her total disability to the earliest of his or her Normal Retirement Date, death, termination of employment or date that he or she is no longer Totally Disabled. Prior to January 1, 2005 and while an eligible Employee is Totally Disabled, it shall be assumed for purposes of calculating the Participant’s Special Grandfathered Benefit that the Employee continues to earn monthly one-twelfth of the Compensation paid to the Participant during the 12 complete months prior to the month in which he or she ceased active service because of his or her having become Totally Disabled.

For purposes of Part I of the Plan “Totally Disabled” means the inability to perform the duties of any occupation for which the Employee is or becomes reasonably fitted by education, training or experience; provided, however, in the case of an Employee receiving disability benefits under a long term disability plan sponsored by the Employer, until benefits have been paid under such policy for 24 months, such Employee will be considered Totally Disabled if he or she is unable to perform the duties of his or her occupation and is not working at any other occupation.

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6.06 Distribution of Benefits. The Plan Administrator shall direct the Trustee (or Insurer, if applicable) to commence payment of benefits provided under this Article VI of Part I of the Plan (or provided to a Former Participant pursuant to Article IX of Part I of the Plan). Plan benefits will be paid only on death, termination of service, Plan termination or retirement.

Except as otherwise provided in Section 6.07 of Part I of the Plan, the requirements of this Section shall apply to any distribution of a Participant’s interest and will take precedence over any inconsistent provisions of this Part I of the Plan.

All distributions required under the Plan shall be determined and made in accordance with the Regulations under Code Section 401(a)(9), including, to the extent applicable, the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed Regulations.

Except as provided below and in Section 6.07, a Participant’s retirement benefit shall be payable as a life annuity for the life of the Participant with no further benefits payable after the last regular payment date prior to his or her death.

At any time prior to actual retirement, a Participant, with spousal consent if the Participant is married, may elect to receive his or her retirement benefit under one or more of the following settlement options; provided, however, that a Participant may not elect to have the balance of his or her Account, described in Section 4.01, distributed under more than one annuity option, or his or her Grandfathered Benefit distributed under more than one annuity option.

(i) An annuity for the joint lives of the Participant and his or her spouse with 50% or 66  ²/₃% (whichever is specified when this option is elected) of such amount payable as an annuity for life to the survivor. No further benefits are payable after the death of both the Participant and his or her spouse.

(ii) An annuity for the life of the Participant and upon his or her death 100%, 66  ²/₃%, or 50% (whichever is specified when this option is elected) of the annuity amount will be continued to his or her spouse as his or her contingent annuitant. No further annuity benefits are payable after the death of both the Participant and his or her spouse.

(iii) An annuity for the life of the Participant with guaranteed installment payments for a period certain not longer than the life expectancy of the Participant.

(iv) An annuity for the life of the Participant with guaranteed installment payments for a period certain not longer than the life expectancy of the Participant and his or her spouse.

(v) Notwithstanding anything in Part I of the Plan to the contrary, a single lump sum payment in an amount equal to the Participant’s vested Account Balance on the Determination Date: provided, however, that except as provided in (vi) below, this form of payment shall not be available with respect to the portion of the Participant’s vested Accrued Benefit attributable to the

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Participant’s Grandfathered Benefit, if any. In the event a Participant elects to have his or her vested Account Balance on the Determination Date payable in a lump sum, the portion of his or her Accrued Benefit attributable to his or her Grandfathered Benefit, if any, shall be paid in accordance with the otherwise applicable provisions of this Article VI of Part I of the Plan.

(vi) If the present value of a Participant’s vested Grandfathered Benefit, if any, does not exceed $5,000 ($3,500 for Plan Years beginning prior to January 1, 1998), a single sum payment in an amount equal to such present value. If the present value of a Participant’s vested Grandfathered Benefit exceeds $5,000 ($3,500 for Plan Years beginning prior to January 1, 1998), only annuity options (i) through (iv) above shall be available with respect to such vested Grandfathered Benefit.

All optional forms of benefits shall be the Actuarial Equivalent (as of the date selected) of the normal retirement benefit described in Section 6.01 of Part I of the Plan or 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans), if applicable. Any spousal consent shall satisfy the requirements of Section 6.07.

Unless the Participant elects otherwise, distribution of benefits will begin no later than the 60th day after the later of the close of the Plan Year in which:

(i) the Participant attains Normal Retirement Age; or

(ii) the Participant terminates service with the Employer.

Notwithstanding the foregoing, the failure of a Participant and spouse (or where either the Participant or the spouse has died, the survivor) to consent to a distribution when a benefit is “immediately distributable” (as described below) shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section 6.06 of Part I of the Plan (and provisions of Article III of Part III of the Plan). In no event will benefits begin to be distributed prior to the later of Age 62 or Normal Retirement Age without the consent of the Participant. The consent of the Participant’s spouse will also be required for any such distribution unless the benefit is paid in the form of a Qualified Joint and Survivor Annuity. Any spousal consent shall satisfy the requirements of Section 6.07, and no involuntary cash-outs shall be made in any amount on or after March 28, 2005.

If the Accrued Benefit is immediately distributable, the Participant and the Participant’s spouse (or where either the Participant or the spouse has died, the survivor) must consent to any distribution of such Accrued Benefit. The consent of the Participant and the Participant’s spouse shall be obtained in writing within the 90-day period (180-day period for Plan Years beginning January 1, 2007 and thereafter) ending on the annuity starting date. The “annuity starting date” is the first day of the first period for which an amount is paid as an annuity or any other form. The Plan Administrator shall notify the Participant and the Participant’s spouse of the right to defer any distribution until the Participant’s Accrued Benefit is no longer immediately distributable. Such notification

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shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code, and shall be provided no less than 30 days and no more than 90 days (180 days for Plan Years beginning January 1, 2007 and thereafter) prior to the annuity starting date.

Notwithstanding the foregoing, only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the Accrued Benefit is immediately distributable. Neither the consent of the Participant nor the Participant’s spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code.

An Accrued Benefit is immediately distributable if any part of the Accrued Benefit could be distributed to the Participant (or surviving spouse) before the Participant attains (or would have attained if not deceased) the later of Normal Retirement Age or Age 62.

Notwithstanding the above the entire interest of a Participant or a Beneficiary must be distributed in accordance with the minimum required distribution rules set forth in Article III of Part III of the Plan.

6.07 Qualified Joint and Survivor Annuity for Married Participants.

(a) General Rules. Notwithstanding anything in this Article to the contrary, unless a married Participant’s Accrued Benefit has been paid in a lump sum pursuant to Section 6.06 above, such Participant’s retirement benefit will be payable to the Participant and his or her spouse in the form of a Qualified Joint and Survivor Annuity, with the survivor to receive 100% of the benefit which had been payable during their joint lives, unless an optional form of benefit is selected pursuant to a qualified election within the 90-day period (180-day period for Plan Years beginning January 1, 2007 and thereafter) ending on the annuity starting date. In the case of an unmarried Participant, unless the Participant elects an optional form of benefit the Participant’s retirement benefit will be paid in the form of a no-death benefit life annuity.

(b) Definitions.

(i) Qualified election: A waiver of a Qualified Joint and Survivor Annuity. Any waiver of a Qualified Joint and Survivor Annuity shall not be effective unless: (A) the Participant’s spouse consents in writing to the election; (B) the election designates a specific Beneficiary, including any class of Beneficiaries or any contingent Beneficiaries, which may not be changed without spousal consent (or the spouse expressly permits designations by the Participant without any further spousal consent); (C) the spouse’s consent acknowledges the effect of the election; and (D) the spouse’s consent is witnessed by a Plan representative or notary public. Additionally, a Participant’s waiver of the Qualified Joint and Survivor Annuity will not be effective unless the election designates a form of

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benefit payment which may not be changed without spousal consent (or the spouse expressly permits designations by the Participant without any further spousal consent). If it is established to the satisfaction of a Plan representative that there is no spouse or that the spouse cannot be located, a waiver will be deemed a qualified election.

Any consent by a spouse obtained under this Subsection (or establishment that the consent of a spouse may not be obtained) shall be effective only with respect to such spouse. A consent that permits designations by the Participant without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the spouse voluntarily elects to relinquish either or both of such rights. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Subsection (c) below.

(ii) Spouse (surviving spouse): the opposite-gender person, if any, to whom the Participant is lawfully married at the date of his death or at his annuity starting date, whichever is earlier, provided that a former spouse will be treated as the spouse or surviving spouse to the extent provided under a Qualified Domestic Relations Order.

(iii) Annuity starting date: The first day of the first period for which an amount is paid as an annuity or under any other form.

(c) Notice Requirement.

(i) In the case of a Qualified Joint and Survivor Annuity as described in Subsection (a), the Plan Administrator shall provide each Participant no less than 30 days and no more than 90 days (180 days for Plan Years beginning January 1, 2007 and thereafter) prior to the annuity starting date a written explanation of: (A) the terms and conditions of a Qualified Joint and Survivor Annuity; (B) the Participant’s right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit; (C) the rights of a Participant’s spouse; (D) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity; and (E) the relative values of the various optional forms of benefit under the Plan. Notices given to Participants pursuant to Code Section 411(a)(11) in Plan Years beginning after December 31, 2006 shall include a description of how much larger benefits will be if the commencement of distributions is deferred.

(ii) A Participant may commence receiving a distribution in a form other than a Qualified Joint and Survivor Annuity less than 30 days after receipt of

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the written explanation described in the preceding paragraph provided: (A) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect (with spousal consent) a form of distribution other than a Qualified Joint and Survivor Annuity; (B) the Participant is permitted to revoke any affirmative distribution election at least until the Distribution Commencement Date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant; and (C) the Distribution Commencement Date is after the date the written explanation was provided to the Participant. For distributions on or after December 31, 1996, the Distribution Commencement Date may be a date prior to the date the written explanation is provided to the Participant if the distribution does not commence until at least 30 days after such written explanation is provided, subject to the waiver of the 30-day period. For the purposes of this paragraph, the “Distribution Commencement Date” is the date a Participant commences distributions from the Plan. If a Participant commences distribution with respect to a portion of his/her Account Balance, a separate Distribution Commencement Date applies to any subsequent distribution. If distribution is made in the form of an annuity, the Distribution Commencement Date is the first day of the first period for which annuity payments are made.

(d) Applicability. The provisions of this Section 6.07 shall apply to any Participant who is credited with at least one Hour of Service with the Employer on or after January 1, 1976. In addition, any living Participant or Former Participant not receiving benefits under Part I of the Plan on August 23, 1984 who would otherwise not receive the benefits prescribed by this Section 6.07 shall be given the opportunity to elect to have the provisions of this Section apply provided such Participant or Former Participant was credited with at least one Hour of Service under this Part I of the Plan or a predecessor plan on or after September 2, 1974.

The opportunity to elect a Qualified Joint and Survivor retirement option must be afforded to the appropriate Participants or Former Participants during the period commencing on August 23, 1984 and ending on the dates benefits would otherwise commence to such person.

6.08 Supplementary Pension Benefits. Effective July 1, 1986, and on each July 1 thereafter, the amount of monthly retirement benefits payable to eligible retirees (as described below) or their Beneficiaries shall be increased by a percentage determined in accordance with the following formula:

Percentage Increase = .8 (M - .07) x 100

For Plan Years beginning after December 31, 2008, for purposes of the above formula, “M” equals the annual coupon return on December 31, 2009 and on each December 31 thereafter of the Barclays Capital U.S. Government/Credit 5-10 Year Index, or its successor.

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For Plan Years beginning after December 31, 1997 and prior to January 1, 2009, for purposes of the above formula, “M” equaled the earnings rate for the prior Plan Year on assets representing retired life reserves for retirees of First Allmerica, Citizens and Hanover. Additionally, retired life reserve assets of the Agents’ Pension Plan (Part II of the Plan) and retired life reserve assets attributable to retirees of General Agents of First Allmerica and retirees of Beacon Insurance Company of America (“Beacon”), formerly an affiliate of Hanover, shall be aggregated and combined with the retired life reserve assets of this Part I of the Plan.

For Plan Years beginning prior to January 1, 1998, for purposes of the above formula, “M” equaled the earnings rate for the prior Plan Year on assets representing retired life reserves for retirees of each Employer. The formula shall be applied separately and retired life reserves shall be determined separately for each Employer; provided, however, (i) that for retirees of First Allmerica and its General Agents who have adopted this Part I of the Plan, retired life reserve assets shall be aggregated and combined with the retired life reserve assets of The First Allmerica Agents’ Pension Plan (Part II of the Plan) and (ii) for Plan Years beginning after December 31, 1992, the retired life reserve assets of Beacon shall be combined with the retired life reserve assets of Hanover.

For the Plan Years for which “M” depended on the returns of designated retired life reserve assets, the earnings rate on retired life reserve assets was to be determined by an actuary, using the “investment year block” method of crediting interest that First Allmerica used to credit interest on its Experience Rated group annuity contracts that were in force on an active basis. The resulting earnings rate(s) should neither be associated with nor construed as the investment yield (all or in part) of the pension fund.

For each Plan Year for which “M” depended on the returns of designated retired life reserve assets, the retired life reserve assets for newly qualified retirees to be added to the total retired life assets outstanding was to be determined using a 7% interest rate and the 1971 GAM mortality table.

The determination of “M” and of the overall earning rate(s) shall be final and conclusively binding for all persons.

The effective date for the payment of supplemental pension benefits paid as a result of this Section shall be each July 1, commencing with July 1, 1986. Those eligible to receive supplemental pension benefits as a result of this Section shall be those retirees of First Allmerica, Citizens, Hanover and General Agents of First Allmerica (and their Beneficiaries) who were receiving basic retirement benefits under Part I of the Plan on the July 1 increase effective date, had been retired for at least 18 months on such increase effective date, and:

(i) had elected an immediate early retirement benefit pursuant to Section 6.02 (or its successor, if any)

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(ii) had terminated employment after having met the eligibility requirements for early retirement specified in Section 6.02 (or its successor, if any) and elected to defer receipt of retirement benefits: or

(iii) had retired on or after their Normal Retirement Age after having completed at least 15 years of Credited Service.

The Beneficiaries of any retiree meeting the above requirements shall be entitled to receive a supplemental pension benefit under this Section if the Beneficiaries were receiving survivor benefits under Part I of the Plan on the July 1 increase effective date.

A supplemental pension benefit determined under this Section shall be added to and become a part of the recipient’s basic benefit under Part I of the Plan and shall be payable during such period and under such option as the basic benefit under Part I of the Plan is being paid.

6.09 Suspension of Retirement Benefits.

(a) Suspension of Benefits. Except as provided below, Normal, Early or Late Retirement Benefits will be suspended for each calendar month during which an Employee or Eligible Re-employed Pensioner (a “Pensioner”) completes more than 80 Hours of Service as described in Subsection 2.23(a) and (b) with an Employer in a job or position in which the Employee or Pensioner is eligible to participate in Part I of the Plan (hereinafter Section 203(a)(3)(B) service).

For purposes of this Section 6.09 of Part I of the Plan, an “Eligible Re-employed Pensioner” means (i) a retiree of First Allmerica or a retiree of a General Agent of First Allmerica who is re-employed by First Allmerica, Citizens or Hanover on or after January 1, 1988 or (ii) a retiree of Citizens or Hanover who is re-employed by First Allmerica, Citizens or Hanover on or after January 1, 1993 and (iii) for Plan Years beginning after December 31, 1988, who had not attained Age 70; provided, that (i) benefits will not be suspended during the calendar month a Pensioner first retires from the Employer, regardless of the number of Hours of Service completed by the Pensioner during such month, and (ii) this Section shall not apply to the Top-Heavy Plan minimum benefits to which any Non-Key Employee may be entitled under the top-heavy rules of Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans).

(b) Amount Suspended. The benefit suspended shall be equal to the portion of the Employee’s or Pensioner’s monthly annuity benefit derived from Employer contributions, including any temporary early retirement supplement.

(c) Resumption of payment. If retirement benefit payments have been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Employee or Pensioner ceases to be employed in ERISA Section 203(a)(3)(B) service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of ERISA Section 203(a)(3)(B) service and the resumption of payments.

Part I - 38

Provided, that there shall be an offset from any payments to be resumed for the amount of any retirement benefits that had been paid but which should have been withheld under the suspension rules of this Section 6.09. In no event may the offset exceed in any one month more than 25 percent of the amount that would otherwise be payable under Part I of the Plan (excluding the first payment made after resumption which may be offset without limitation). The amount to be resumed shall be the greater of the benefit amount suspended or a benefit computed as described in Sections 6.01 or 6.02 or 6.04, as appropriate, but based on the pensioner’s Age (and any joint or contingent annuitant’s Age), Credited Service and Compensation on the date of resumption.

(d) Notification. Notwithstanding anything in Part I of the Plan to the contrary, effective January 1, 2007, no retirement benefits (Early, Normal or Late) shall be withheld by the Plan unless the Employee or Pensioner is notified by personal delivery or first class mail during the first calendar month in which the Plan withholds payments that his or her benefits are suspended.

(e) Such notifications shall contain a description of the specific reasons why benefit payments are being suspended, a description of the plan provisions relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor regulations may be found in Section 2530.203-3 of the Labor Regulations.

In addition, the notice shall inform the Employee or Pensioner of the Plan’s procedures for affording a review of the suspension of benefits. Requests for such reviews may be considered in accordance with the claims procedure adopted by the Plan, as described in Article VIII of Part III of the Plan.

6.10 Rollovers to Other Qualified Plans.

(a) Notwithstanding any provision of Part I of the Plan to the contrary that would otherwise limit a distributee’s election under this Article or under Articles VII and VIII of Part III of the Plan, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(b) Definitions.

(i) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies)

Part I - 39

of the distributee and the distributee’s designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any other distribution(s) that is reasonably expected to total less than $200 during a year. A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to (i) an individual retirement account or annuity described in Section 408(a) or (b) of the Internal Revenue Code; (ii) for taxable years beginning after December 31, 2001 and before January 1, 2007, to a qualified trust which is part of a defined contribution plan that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible; or (iii) for taxable years beginning after December 31, 2006, to a qualified trust or to an annuity contract described in Section 403(b) of the Internal Revenue Code, if such trust or contract provides for separate accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(ii) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, a Roth IRA as pursuant to in Section 408A(e) of the Code, an annuity contract described in Section 403(b) of the Code, an annuity plan described in Section 403(a) of the Code, a qualified plan described in Section 401(a) of the Code, that accepts the distributee’s eligible rollover distribution or an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.

(iii) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s surviving spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse.

(iv) Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee.

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(c) For distributions after June 9, 2009, a non-spouse Beneficiary who is a “designated beneficiary” under Code Section 401(a)(9)(E) and the regulations thereunder, by a direct trustee-to-trustee transfer (“direct rollover”), may roll over all or any portion of his or her distribution to an individual retirement account the Beneficiary establishes for purposes of receiving the distribution. In order to do a direct rollover of the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution.

Although a non-spouse Beneficiary may roll over directly a distribution as provided above, any distribution made prior to January 1, 2010 is not subject to the direct rollover requirements of Code Section 401(a)(31) (including Code Section 401(a)(31)(B), the notice requirements of Code Section 402(f) or the mandatory withholding requirements of Code Section 3405(c)). If a non-spouse Beneficiary receives a distribution from the Plan, the distribution is not eligible for a
“60-day” rollover.

If the Participant’s named Beneficiary is a trust, the Plan may make a direct rollover to an individual retirement account on behalf of the trust, provided the trust satisfies the requirements to be a “designated beneficiary” within the meaning of Code Section 401(a)(9)(E).

A non-spouse Beneficiary may not roll over an amount which is a required minimum distribution, as determined under applicable Treasury Regulations and other Internal Revenue Service guidance. If the Participant dies before his or her required beginning date and the non-spouse Beneficiary rolls over to an IRA the maximum amount eligible for rollover, the Beneficiary may elect to use either the 5-year rule or the life expectancy rule, pursuant to Treasury Regulation Section 1.401(a)(9)-3, A-4(c), in determining the required minimum distributions from the IRA that receives the non-spouse Beneficiary’s distribution.

ARTICLE VII

DEATH BENEFITS

7.01 Pre-Retirement Death Benefits.

(a) General Rules. The provisions of this Section shall apply to any Participant or Former Participant provided that such Participant or Former Participant completes at least one Hour of Service on or after January 1, 1995.

(i) If a married Participant who has satisfied the eligibility requirements for an early retirement benefit or normal retirement benefit dies (regardless of whether the Participant is still working for the Employer) before beginning to receive such benefits, then the Participant’s surviving spouse will receive a monthly retirement benefit equal to the sum of:

(A) the portion of the Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, that would have been payable if the Participant had retired on the day before his or her death after having elected an immediate Qualified Joint and Survivor Annuity Option with a 50% continuation of monthly benefits to be payable to the survivor; and

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(B) the Actuarial Equivalent annuity (payable on the Participant’s death) of the portion of the vested Accrued Benefit attributable to the Participant’s Projected Account Balance.

The amount of such benefit shall be payable monthly for the life of the spouse, with the first payment payable as of the date of the Participant’s death, unless the spouse requests a later commencement date (consistent with the provisions of the Part I of the Plan).

(ii) If a fully or partially vested married Participant dies on or before attaining eligibility for early retirement, the Participant’s surviving spouse will receive a monthly retirement benefit equal to the sum of (A) and (B) below.

(A) The portion of the Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, which would be payable if the Participant had:

(1) separated from service on the date of death;

(2) survived to Age 55 (if younger than Age 55 on the date of death);

(3) retired at Age 55 (or retired on the day before his or her death, if older than Age 55 at the date of death) after having elected an immediate Qualified Joint and Survivor Annuity Option with a 50% continuation of monthly benefits to be payable to the survivor; and

(4) died on the day after retirement.

(B) the Actuarial Equivalent annuity (payable when the Participant would have attained age 55) of the portion of the vested Accrued Benefit attributable to the Participant’s Projected Account Balance.

A surviving spouse entitled to benefits under this paragraph (ii) will begin to receive payments on the first day of the month following the date the Participant would have attained Age 55 (or on the first day of the month following the date of death, if the Participant was Age 55 or older on the date of his or her death), unless the spouse requests an earlier or later commencement date (consistent with the provisions of Part I of the Plan).

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For purposes of this paragraph (ii), the “earliest retirement age” is the earliest date on which, under Part I of the Plan, the Participant could elect to receive retirement benefits attributable to his or her Grandfathered Benefit.

The surviving spouse of a Participant who is entitled to receive a pre-retirement death benefit as described in paragraph (a)(i) or (a)(ii) above, may, in lieu of receiving such benefit, elect to receive the portion of such death benefit which is the Participant’s Account Balance on the Determination Date in a single sum amount. Such single sum benefit shall be distributed as soon as practicable after the date of the Participant’s death (or at any later date, as elected by the surviving spouse, consistent with the provisions of Part I of the Plan) and shall be in an amount equal to the Account Balance as of the Determination Date. Alternatively, the surviving spouse may elect to have the Actuarial Equivalent of the pre-retirement death benefit (or the Actuarial Equivalent of the Grandfathered Benefit, if the Account Balance is to be paid as a single sum) payable commencing as of the date of the Participant’s death (or at any later date as elected by the surviving spouse, consistent with the provisions of Part I of the Plan) in any of the other optional forms of payment available under Section 6.06 of Part I of the Plan. In the event that a surviving spouse elects to have the portion of his or her benefit attributable to the Participant’s Account Balance payable in a lump sum in accordance with this paragraph, the balance of the death benefit otherwise payable under Part I of the Plan in accordance with paragraph (a)(i) or (a)(ii) above, shall consist solely of that portion of such death benefit that is attributable to the Participant’s Grandfathered Benefit, if any.

Any surviving spouse described in the preceding paragraph who elects to receive the Participant’s Account Balance in a single sum payment may also elect to receive the present value of the Participant’s Grandfathered Benefit, if any, in a single sum amount; provided, however, that this option with respect to a Grandfathered Benefit shall only be available to a surviving spouse if the present value of the Grandfathered Benefit does not exceed $5,000 ($3,500 for Plan Years beginning prior to January 1, 1998). Any such single sum benefit shall be distributed as soon as practicable after the date of the Participant’s death.

If a Participant, on or after the earlier of the first day of the Plan Year in which he or she attains age 35 or the date of his or her separation from service and prior to his or her death, elects to waive the pre-retirement death benefit which is attributable to the Participant’s Projected Account Balance and the participant’s spouse consents to the waiver in accordance with Section 6.07(b)(i) (as if the pre-retirement death benefit waiver was a waiver of a Qualified Joint and Survivor Annuity), the Participant may designate a Beneficiary other than his or her spouse to receive the portion of the Participant’s pre-retirement death benefit which is attributable to the Participant’s Projected Account Balance.

Part I - 43

Any such designation shall be in writing on a form provided by or satisfactory to the Plan Administrator, and such designation may include primary and contingent Beneficiaries. Such benefit shall be paid in the form of a lump sum as soon as practicable after the death of the Participant and shall equal the Participant’s Account Balance at the Determination Date. In the event that a portion of a Participant’s benefit under the Plan is payable to a non-spouse Beneficiary in accordance with this paragraph, the remaining portion of the death benefit attributable to such Participant shall be paid to the Participant’s surviving spouse in accordance with paragraphs (a)(i) and (a)(ii) above, as applicable. Before a Participant is permitted to waive the pre-retirement death benefit which is attributable to the Participant’s Account Balance, the Plan Administrator shall provide each Participant a written explanation with respect to the pre-retirement death benefit comparable to that described in Section 6.07(c)(i).

(b) Unmarried Participants. If any unmarried Participant dies in any of the circumstances described in paragraphs (a)(i) or (a)(ii) above with respect to married Participants, the Beneficiary (designated in accordance with the rules described in (a) above) of such Participant shall receive a death benefit in a single sum as soon as practicable after the date of the Participant’s death. The amount of such death benefit shall be equal to the Participant’s Account Balance at the Determination Date. There shall be no death benefit payable with respect to the Grandfathered Benefits of any such Participant.

7.02 Death Benefits for Certain Dependent Spouses (Applicable only to certain Employees entitled to Special Grandfathered Benefits).

(a) Eligibility. The spouse of a deceased Employee (including the spouse of any such deceased Employee who had become and continuously remained Totally Disabled [as described in Section 6.05] until death) shall be entitled to a monthly income as set forth in Subsection (b) hereof, provided:

(i) The spouse was married to, living with and was a dependent of the Employee for at least the three year period immediately preceding the death of the Employee. For purposes of this Section 7.02 dependency shall be assumed only if the average earned income of the spouse during such three year period was less than the average earned income of the Employee during the same three year period;

(ii) The Employee had attained Age 50 prior to the date of death;

(iii) The Employee was an employee of First Allmerica or a General Agent of First Allmerica prior to January 1, 1976 and had not thereafter retired or attained Age 65 and since December 31, 1975 was continuously employed with the Employer until the date of his or her death;

Part I - 44

(iv) The Employee was eligible to accrue additional Special Grandfathered Benefits (as described in Subsection 2.20(b)) on December 31, 2004 (or on the date of his or her death, if earlier); and

(v) The Employee was not a Highly Compensated Employee on the date of his or her death.

Whether or not a spouse qualifies as a “dependent spouse” shall be determined by the Plan Administrator, whose determination shall be conclusive and binding on all persons. If an Employee or spouse is totally disabled (as described in Section 6.05), the “average earned income” of the disabled person shall be determined as of the date the Total Disability commenced. The term “earned income” for a year means a person’s Compensation as defined in Section 2.08(b) paid during the year plus the sum of (i) any salary reduction contributions allocated during the year on the person’s behalf to any tax sheltered annuity qualified under Section 403(b) of the Code or to any defined contribution plan qualified under Section 401(k) of the Code maintained by the person’s employer and (ii) the amount of any salary reduction contributions contributed on the person’s behalf during the year to any Code Section 125 plan maintained by the person’s employer.

(b) Amount of Benefit. The benefit to spouses qualifying under Subsection (a) shall be a monthly income commencing as of the date of the death of the Employee, in an amount equal to (i) less (ii) below:

(i) the applicable percentage below of the Special Grandfathered Benefit which the Employee would have received at his or her Normal Retirement Date had the Employee lived and remained a Participant in Part I of the Plan until such date and had the Participant continued to earn monthly one-twelfth of the Compensation paid to the Participant during the 12 complete months prior to the month in which occurred the date of his or her death.

Number of Completed Years Over Employee’s Age 49 at Date of Employee’s Death		Percentage of Grandfathered Retirement Benefit*
	1		10%
	2		20%
	3		30%
	4		40%
	5 and over		50%; less

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*  If death occurs in a month other than the month in which the Participant attains the specified Age, the percentage shall be determined based on straight line interpolation.

(ii) the amount of any benefits provided to the surviving spouse pursuant to Section 7.01 attributable to the Employee’s Special Grandfathered Benefit.

ARTICLE VIII

BENEFITS UPON TERMINATION FROM SERVICE

8.01 In General. In the event that a Participant shall terminate from service with the Employer for any reason other than death, Normal, Early or Late Retirement, the interests and rights of such Participant shall be limited to those contained in this Article.

8.02 Termination Benefits. Upon any separation from service described in Section 8.01, a Participant shall be entitled to a benefit under Part I of the Plan, payable at his or her Normal Retirement Date, equal to the vesting percentage specified below of the Participant’s Accrued Benefit. The automatic form of benefit shall be a Qualified Joint and Survivor Annuity, with the survivor to receive 100% of the benefit which had been payable during their joint lives, if the Participant is married at the time of commencement of benefits, or a single life annuity if the Participant is not married at the time of commencement. With spousal consent, the Participant may elect to have his or her benefit paid in any of the optional forms described in Section 6.06. The amount of any annuity attributable to a Participant’s vested Account Balance shall be the Actuarial Equivalent of such vested Account Balance.

Vesting Percentages

(a) With respect to the portion of the Accrued Benefit attributable to such Participant’s Grandfathered Benefit, if any:

Completed Years of Service	Nonforfeitable Percentage
Less than 5	0
5 or more	100

(b) With respect to the portion of the Accrued Benefit attributable to such Participant’s Projected Account Balance:

Completed Years of Service	Nonforfeitable Percentage
Less than 2	0
2	25
3	50
4	75
5 or more	100

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Notwithstanding the above, if the Plan is a Top Heavy Plan, then the Plan shall meet the following vesting requirements for such Plan Year and for all subsequent Plan Years, even if the Plan is not a Top Heavy Plan for such subsequent Plan Years.

Completed Years of Service	Nonforfeitable Percentage
Less than 2	0
2	25
3	50
4	75
5 or more	100

Notwithstanding anything in Part I of the Plan to the contrary, effective on August 17, 2006, for those Participants employed by the Employer on or after such date, such Participants shall be 25% vested in their Account Balance, as defined in Section 4.01, upon completion of two (2) Years of Service and 100% vested in their Accrued Benefit, as described in Section 2.01, upon completion of three (3) Years of Service.

For purposes of this Article, Years of Service means Plan Years during which an Employee was credited with at least 1,000 Hours of Service.

Notwithstanding the foregoing, a Participant who is entitled to a deferred Normal Retirement Benefit may elect to receive his or her vested Account Balance on the Determination Date in a single lump sum. In addition, if a Participant makes an election described in the immediately preceding sentence and if the present value of the portion of the vested Accrued Benefit attributable to such Participant’s vested Grandfathered Benefit does not exceed $3,500 ($5,000 for Plan Years beginning on and after January 1, 1998), the Participant may elect to receive such portion of his or her vested Accrued Benefit attributable to the Grandfathered Benefit in a lump sum. Any such Participant may elect to receive either such lump sum at any time after separation from service and, in the case of a single lump sum distribution of his or her vested Account Balance, must receive such benefit no later than the time at which benefits attributable to the Participant’s Grandfathered Benefit, if any, commences. Any such election shall be subject to spousal consent in the case of a married Participant. Any spousal consent must satisfy the requirement of Section 6.07. In the event a Participant elects to have his or her vested Account Balance paid in a lump sum, the portion of such Participant’s vested Accrued Benefit attributable to his or her Grandfathered Benefit, if any, shall be paid in accordance with the otherwise applicable provisions of Section 6.06 (and of Article III of Part III of the Plan).

Notwithstanding anything in Part I of the Plan to the contrary, an actively employed Participant’s Accrued Benefit shall become 100% vested and non-forfeitable upon the

Part I - 47

earliest of (i) the date of such Participant’s death; (ii) the date such a Participant becomes Totally Disabled (within the meaning of Section 6.05 of Part I of the Plan); or (iii) the date such a Participant attains his or her Normal Retirement Age.

Any distributions under this Article shall be subject to the requirements of Sections 6.06 and 6.07, including the requirement that a Participant shall be eligible to receive any form of distribution provided for under Section 6.06 of Part I of the Plan at such time as he or she is eligible to receive his or her vested Account Balance in a lump sum.

8.03 Forfeitures. The non-vested portion of a Participant’s Accrued Benefit shall be treated as a forfeiture when the Participant or his or her spouse (or surviving spouse) receives a distribution of the present value of his or her vested Accrued Benefit, pursuant to Section 8.02 of Part I of the Plan and the Participant’s service attributable to such distribution shall be disregarded as provided for in Section 8.07 of Part I of the Plan. For purposes of this Section, if the present value of a Participant’s vested Accrued Benefit is zero, the Participant shall be deemed to have received a distribution of such vested Accrued Benefit.

In the case of a partially vested terminated Participant who does not receive a distribution pursuant to the above paragraph, the value of the nonvested portion of his Accrued Benefit shall be treated as a forfeiture at the end of the Plan Year in which the Participant incurs a One Year Break in Service until the Participant has completed one Year of Service after he has been re-employed.

Forfeitures will be used to reduce (i) Employer contributions for the Plan Year following the Plan Year in which the forfeiture occurs; and or (ii) the Employer’s costs under the Plan.

8.04 Resumption of Service. A Participant who terminates his or her participation in Part I of the Plan and who subsequently resumes service with the Employer will again become a Participant on the entry date determined in accordance with Section 3.01(b) of Part I of the Plan.

8.05 Service with Affiliates. As provided in Section 2.23, in determining a Participant’s vesting percentage, Hours of Service completed with an Affiliate or as a Career Agent or General Agent of First Allmerica shall be deemed to be Hours of Service completed with the Employer.

8.06 Distribution of Benefits. On the Former Participant’s Normal Retirement Date, benefits to which he or she is entitled pursuant to this Article shall be distributed in accordance with Article VI.

If a Former Participant entitled to a deferred benefit pursuant to this Article VIII dies prior to his or her Normal Retirement Date, the death benefit, if any, to which he or she is entitled shall be as is specified in Article VII.

Part I - 48

8.07 Cash Out Repayment Option.

(a) Notwithstanding anything in this Article or in Section 2.01 to the contrary, unless a repayment has been made in accordance with Subsection (b) below, in determining a partially vested Employee’s Grandfathered Benefit (or, in the case of a Top Heavy Plan, the minimum benefit for Non-Key Employees described in Subsection 2.01(b)) after a resumption of participation, periods of service with respect to which the Employee received a distribution of the present value of his or her vested Accrued Benefit shall be disregarded.

(b) In the case of the distribution of the present value of a partially vested Employee’s vested Accrued Benefit in accordance with Section 8.02, the Employee’s Accrued Benefit described in Subsections 2.01(a) and (b) (including all optional forms of benefits and subsidies relating to such benefits) shall be restored if the Employee repays the amount distributed plus interest, if applicable, compounded annually from the date of distribution at the rate of 5 percent. In determining the amount of any required repayment, interest shall be charged on the portion of any distribution attributable to a Participant’s Grandfathered Benefit, if any or, in the case of a Top Heavy Plan, on the portion of any distribution that is a minimum benefit for Non-Key Employees described in Subsection 2.01(b). No interest shall be payable with respect to the portion of a Participant’s distribution attributable to his or her Account Balance. Such repayment must be made by the Employee before the earlier of five years after the first date on which the Employee is subsequently reemployed by the Employer, or the date the Employee incurs five consecutive One Year Breaks in Service following the date of distribution.

If an Employee is deemed to receive a distribution pursuant to this Article, and the Employee resumes employment covered under this Plan before the date the Participant incurs 5 consecutive One-Year Breaks in Service, upon the reemployment of such Employee, the Employer-derived Accrued Benefit will be restored to the amount of such Accrued Benefit on the date of the deemed distribution.

8.08 Early Retirement Election. Any Participant who terminates service after having completed at least fifteen Years of Service may elect to retire on the first day of any month following his or her 55th birthday, as described in Section 6.02.

8.09 Amendment to Vesting Schedule. If the Vesting Schedule of the Plan is amended, or the Plan is amended in any way that directly or indirectly affects the computation of a Participant’s nonforfeitable percentage, or if the Plan is deemed amended by an automatic change to or from a top-heavy vesting schedule, each Participant with at least 3 Years of Service with the Employer may elect, within a reasonable period after the adoption of the amendment or change, to have their nonforfeitable percentage computed under the Plan without regard to such amendment or change. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of:

(i) 60 days after the amendment is adopted;

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(ii) 60 days after the amendment becomes effective; or

(iii) 60 days after the Participant is issued written notice of the amendment by the Employer or Plan Administrator.

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EXHIBIT A – ADJUSTMENT FACTORS FOR OPTIONAL GRANDFATHERED BENEFITS

Factors for ages not illustrated on the following tables will be computed on an actuarial basis consistent with that used to compute the factors shown.

Part I - 51

JOINT AND SURVIVOR OPTION PERCENTAGES

(Applicable only if the Participant’s age, nearest birthday, on the date monthly income commences is 65).

Age Nearest Birthday of Joint Annuitant on the Date Monthly Income Commences to the Participant	Percentage of the Adjusted Grandfathered Retirement Annuity Payments which are to be Continued to the Surviving Joint Annuitant
	100%			66 2/3%			50%
50		80.3	%		87.1	%		90.9	%
51		80.7			87.5			91.3
52		81.1			87.9			91.8
53		81.5			88.4			92.2
54		82.0			88.8			92.7
55		82.4			89.3			93.2
56		82.9			89.8			93.8
57		83.3			90.3			94.3
58		83.8			90.9			94.9
59		84.3			91.4			95.5
60		84.8			92.0			96.1
61		85.3			92.7			96.8
62		85.9			93.3			97.5
63		86.4			94.0			98.3
64		86.9			94.7			99.1
65		87.5			95.4			100.0
66		88.0			96.2			100.0
67		88.6			97.0			101.9
68		89.1			97.9			102.9
69		89.6			98.7			104.0
70		90.2			99.6			105.1
		1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum.
		Life Ann/Opt.

Part I - 52

CONTINGENT ANNUITANT OPTION PERCENTAGES

(Applicable only if the Participant’s age, nearest birthday, on the date monthly income commences is 65).

Age Nearest Birthday of Contingent Annuitant on the Date Monthly Income Commences to the Participant	Percentage of the Adjusted Grandfathered Retirement Annuity Payments which are to be Continued to the Surviving Contingent Annuitant
	100%			66 2/3%			50%
50		80.3	%		85.9	%		89.0	%
51		80.7			86.2			89.3
52		81.1			86.5			89.6
53		81.5			86.9			89.8
54		82.0			87.2			90.1
55		82.4			87.5			90.4
56		82.9			87.9			90.6
57		83.3			88.2			90.9
58		83.8			88.6			91.2
59		84.3			89.0			91.5
60		84.8			89.3			91.8
61		85.3			89.7			92.1
62		85.9			90.1			92.4
63		86.4			90.5			92.7
64		86.9			90.9			93.0
65		87.5			91.3			93.3
66		88.0			91.7			93.6
67		88.6			92.1			93.9
68		89.1			92.5			94.2
69		89.6			92.9			94.5
70		90.2			93.2			94.8
		1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of  birth of 1930 and interest at the rate of 7% per annum.
		Life Ann/Opt.

Part I - 53

ANNUITY OPTION ADJUSTMENT PERCENTAGES

Percentages to be applied to the monthly benefit which would be payable to the Participant on his or her Retirement Date if no Optional Form of Annuity were in effect to determine the monthly income benefit commencing on the Participant’s Retirement Date if one of the following options is in effect.

Age Nearest Birthday on the Date Monthly Income Commences Benefit		Annuity Option for Grandfathered
		5C&C			10C&C			15C&C			20C&C
50			99.8	%		99.2	%		98.3	%		97.2	%
51			99.8			99.1			98.1			96.9
52			99.7			99.0			97.9			96.6
53			99.7			98.9			97.7			96.3
54			99.7			98.8			97.5			96.0
55			99.6			98.6			97.3			95.6
56			99.6			98.5			97.0			95.2
57			99.6			98.4			96.8			94.8
58			99.5			98.3			96.5			94.3
59			99.5			98.1			96.2			93.8
60			99.4			98.0			95.9			93.3
61			99.4			97.8			95.5			92.7
62			99.3			97.6			95.0			92.0
63			99.3			97.3			94.5			91.2
64			99.2			97.1			94.0			90.4
65			99.1			96.7			93.3			89.5
66			99.0			96.4			92.6			88.5
67			98.9			95.9			91.8			87.4
68			98.8			95.4			91.0			86.2
69			98.6			94.9			90.0			84.9
70			98.4			94.3			89.0			83.5
	1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum.
	Life Ann/Opt.

Part I - 54

THE HANOVER INSURANCE GROUP CASH BALANCE

PENSION PLAN

PART II

(As amended and restated generally effective January 1, 2010)

Part II

THE HANOVER INSURANCE GROUP CASH BALANCE

PENSION PLAN

PART II

TABLE OF CONTENTS

		PAGE
ARTICLE I            NAME, PURPOSE AND EFFECTIVE DATE OF PLAN			1
1.01	General Statement.		1
1.02	Name of Plan.		1
1.03	Purpose.		1
1.04	Restated Plan Effective Date.		2
ARTICLE II          DEFINITIONS			2
ARTICLE III        PARTICIPATION REQUIREMENTS			14
3.01	Participation Requirements.		14
3.02	Classification Changes.		14
3.03	Participant Cooperation.		14
ARTICLE IV        EMPLOYER CONTRIBUTIONS			15
4.01	Employer Contributions.		15
4.02	Plan Contributions to Trustees.		15
4.03	Receipt of Contributions by Trustee.		15
ARTICLE V         RETIREMENT AND DISABILITY BENEFITS			15
5.01	Normal Retirement Benefit.		15
5.02	Early Retirement Benefit.		16
5.03	Late Retirement Benefit.		17
5.04	Disability Benefit.		18
5.05	Distribution of Benefits.		18
5.06	Qualified Joint and Survivor Annuity for Married Participants.		20
5.07	Supplementary Pension Benefits.		23
5.08	Rollovers to Other Qualified Plans.		24
ARTICLE VI        DEATH BENEFITS			27
6.01	Pre-Retirement Spouse Benefit for Married Participants.		27
6.02	Minimum Death Benefit.		28
ARTICLE VII      BENEFITS UPON TERMINATION FROM SERVICE			29
7.01	In General.		29
7.02	Options on Termination of Participation.		29
7.03	Forfeitures.		31
7.04	Resumption of Service.		31
7.05	Distribution of Benefits.		31
7.06	Cash Out Repayment Option.		31
7.07	Early Retirement Election.		32
7.08	Amendment to Vesting Schedule.		32

Part II

ARTICLE I

NAME, PURPOSE AND EFFECTIVE DATE OF PLAN

1.01 General Statement. The Hanover Insurance Group Cash Balance Pension Plan (the “Plan”) consists of three parts, Part I, Part II and Part III. Part I of the Plan provides a cash balance and pension benefit, which was formerly provided under a plan known as “The Allmerica Financial Cash Balance Pension Plan”. Part II of the Plan provides a pension benefit, which was formerly provided under a plan known as “The Allmerica Financial Agents’ Pension Plan”. Part III of the Plan contains provisions applicable to each of Part I and Part II.

The provisions of Part III of the Plan shall override any provision of Part II of the Plan as provided in Part III of the Plan.

The benefits payable to eligible Participants under Part II of the Plan are governed by the terms and conditions of Part II of the Plan and Part III of the Plan. Terms used in this Part II of the Plan are defined in Part I of the Plan, except as otherwise specifically provided in this Part II of the Plan.

1.02 Name of Plan. The prior version of this Part II of the Plan, known as The Allmerica Financial Agents’ Pension Plan, was generally effective January 1, 1999 (except for those provisions of the Plan which had an alternative effective date). The effective date of the prior version of this Part II of the Plan (the “Prior Agents’ Plan”) was January 1, 1971. Effective January 1, 1992, the Prior Agents’ Plan was merged with and became a part of The Allmerica Financial Cash Balance Pension Plan, formerly known as The State Mutual Companies’ Pension Plan. Thus, the Prior Agents’ Pension Plan became Part II of The Hanover Insurance Group Cash Balance Pension Plan. On December 31, 2007, First Allmerica did not employ any person who was eligible to participate or was actively participating in The Allmerica Financial Agents’ Pension Plan. Effective January 1, 2008, First Allmerica transferred sponsorship of, and the liabilities and obligations associated with, The Hanover Insurance Group Cash Balance Plan (including The Allmerica Financial Agents’ Pension Plan) to Hanover, and Hanover agreed to assume sponsorship of, and the liabilities and obligations associated with, The Hanover Insurance Group Cash Balance Pension Plan as of such date.

1.03 Purpose. This Part II of the Plan has been established for the exclusive benefit of Participants and their Beneficiaries and as far as possible shall be interpreted and administered in a manner consistent with this intent and consistent with the requirements of Section 401 of the Internal Revenue Code.

Subject to Article IV of Part III of the Plan (Limitations on Benefits) and to Section 10.04 of Part III of the Plan, which relates to the return of Employer contributions under special circumstances, until such time as the Plan has been terminated and all Plan liabilities have been satisfied, under no circumstances shall any assets of the Plan, or any contributions made under the Plan, be used for, or diverted to, purposes other than for the exclusive benefit of the Participants and their Beneficiaries and to defray reasonable expenses incurred in the administration of the Plan.

Part II -1

1.04 Restated Plan Effective Date. The effective date of this amended and restated Part II of the Plan is January 1, 2010 (except for those provisions of this Part of the Plan which have an expressly stated alternative effective date). Except to the extent otherwise specifically provided in this Part II of the Plan, (i) the terms and conditions of this amended and restated Part II of the Plan shall apply only to those eligible Employees actively employed by the Employer (or to those eligible Career Agents with a Career Agent Contract in force) on or after January 1, 2010. The rights and benefits of any Participant whose employment with the Employer terminated (or whose Career Agent Contract terminated) prior to January 1, 2010 shall be determined in accordance with the provisions of this Part II of the Plan as were in effect during the appropriate time or times prior to January 1, 2010; provided, however, that if the Accrued Benefit of any such Participant has not been completely distributed before January 1, 2010, then such Accrued Benefit shall be accounted for and distributed in accordance with the provisions of this version of Part II of the Plan, but only to the extent that any such provision is not inconsistent with Part III of the Plan and subject to the requirements of applicable law and as otherwise specifically provided herein.

ARTICLE II

DEFINITIONS

All section and article references in this Part II are to section and article references in this Part II, except as otherwise expressly provided.

Except to the extent a word or phrase is specifically defined in this Part II of the Plan, the words and phrases used in this Part II of the Plan shall have the meanings set forth in Part I of the Plan, unless a different meaning is clearly required by the context or is otherwise provided in Part III of the Plan.

2.01 “Accrued Benefit”:

(a) means, except as provided in (c) or (d) below, the sum of a Participant’s frozen Grandfathered Benefit (accrued during Years of Credited Service completed prior to January 1, 1999) and the defined benefit credited to eligible Participants in accordance with Section 5.01 attributable to Years of Credited Service completed by the Participant after December 31, 1998.

(b) No Employee contributions shall be required or permitted for Plan Years beginning after December 31, 1988. The portion of a Participant’s Accrued Benefit derived from required Employee contributions made on or after January 1, 1971 and prior to January 1, 1989 will be determined in accordance with the rules set forth below:

(i) STEP ONE - Determine the total amount of such contributions made by a Participant as a condition of participation in Part II of the Plan;

Part II -2

(ii) STEP TWO - Add to the amount in Step One interest required by the terms of Part II of the Plan to be credited to such contributions up to the Plan’s ERISA compliance date;

(iii) STEP THREE - Add to the sum of the amounts determined in Steps One and Two interest compounded annually at the rate of 5% from the Plan’s ERISA compliance date or the date the Participant began participation in Part II of the Plan, whichever is later, to the end of the last Plan Year beginning before January 1, 1988 or the Participant’s Normal Retirement Date, whichever is earlier.

(iv) STEP FOUR - Add to the sum of the amounts determined in Steps One, Two and Three interest compounded annually -

(A) at the rate of 120 percent of the Federal mid-term rate (as in effect under Section 1274 of the Code for the first month of the Plan Year) from the beginning of the first Plan Year beginning after December 31, 1987, and ending with the date on which the determination is being made, and

(B) at the interest rate which would be used under Part II of the Plan under Section 417(e)(3) of the Code (as of the determination date) for the period beginning with the determination date and ending on the date on which the Employee attains his Normal Retirement Date.

Notwithstanding the foregoing, for Plan Years beginning after December 31, 1998, the interest rate credited in Step (iv)(A) shall not be less than 5%.

(v) STEP FIVE - The amount in Step 4 will be converted into the normal form of benefit using the interest rate that would be used under Part II of the Plan under Code Section 417(e)(3).

The portion of a Participant’s Accrued Benefit derived from Employee contributions made prior to January 1, 1971 shall be equal to the total amount of such contributions made by a Participant, plus interest credited thereon. For Plan Years beginning prior to January 1, 1999, interest on such contributions shall be credited at the rate or rates in effect for each Plan Year under the terms of Part II of the Plan as in effect on December 31, 1998. For Plan Years beginning after December 31, 1998, interest on such contributions shall be credited as provided in STEPS FOUR and FIVE above.

Part II - 3

The portion of the Accrued Benefit described in Subsection (a) derived from Employer contributions as of any date is equal to such total Accrued Benefit less the portion derived from Employee contributions.

At all times the portion of a Participant’s Accrued Benefit attributable to mandatory Employee contributions shall be 100% vested and nonforfeitable.

(c) means, with respect to the minimum benefit for Non-Key Employee Participants in a Top Heavy Plan, the sum of such benefits earned by the Participant, which benefits are payable at the Participant’s Normal Retirement Date and are described in Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans).

(d) (i) Notwithstanding anything in Subsections (a), (b) or (c) to the contrary, unless a repayment has been made in accordance with the rules set forth in subparagraph (ii) below, in determining the portion of an Employee’s Accrued Benefit derived from Employer Contributions upon a resumption of participation, periods of service with respect to which the Employee received a distribution of the present value of his vested Accrued Benefit shall be disregarded.

(ii) In the case of an election of Option 2 described in Section 7.02 or in the case of an involuntary cash-out of the present value of an Employee’s Accrued Benefit in accordance with such Section, the Employee’s Accrued Benefit described in Subsections 2.01(a), (b) and (c) (including all optional forms of benefits and subsidies relating to such benefits) shall be restored if the Employee repays the amount distributed plus interest, compounded annually from the date of distribution at the rate of 5 percent. Such repayment must be made by the Employee before the earlier of five years after the first date on which the Employee is subsequently reemployed by the Employer, or the date the Employee incurs five consecutive One Year Breaks in Service following the date of distribution; provided, however, that there shall be no right of repayment if the Employee was 100% vested on the date of his termination of participation.

Notwithstanding anything in Part II of the Plan to the contrary, for Plan Years beginning before Section 411 of the Code is applicable hereto, the Participant’s Accrued Benefit shall be the greater of that provided by Part II of the Plan, or 1/2 of the benefit which would have accrued had the provisions of this Section 2.01 been in effect. In the event the Accrued Benefit as of the effective date of Code Section 411 is less than that provided hereunder, such difference shall be accrued in accordance with this Section.

Part II - 4

2.02 “Actuarial Equivalent” means a benefit having the same value as the benefit or benefits otherwise payable. Except as otherwise provided in this Section, the present value of any benefit determined under the terms of Part II of the Plan will be the actuarial equivalent of the no-death benefit life annuity retirement benefit specified in Section 5.01.

Actuarial Equivalent life annuity settlements of optional life annuity Top Heavy Plan benefits will be computed utilizing (i) the Code Section 417 Mortality Table and (ii) the Code Section 417 Interest Rate for determining the amount payable to a Participant having an annuity starting date on or after January 1, 2004.

Optional life annuity benefits will be computed on the basis of the 1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum. Adjustment factors used to determine optional forms of life annuity benefits are included in Exhibit A, attached hereto and made a part of Part II of the Plan. Adjustment factors for optional life annuity benefits not illustrated will be computed on an actuarial basis consistent with that used in computing the factors shown in Exhibit A.

The present value of any Plan benefit and the amount of any cash distribution shall be determined on the basis of (i) the mortality rates specified above and an interest rate of 7% per annum or (ii) the Code Section 417 Mortality Table and the Code Section 417 Interest Rate (or for determining the amount payable to a Participant having an annuity starting date on and after January 1, 2008, the Code Section 417 Applicable Interest Rate), whichever produces the greater benefit.

The preceding paragraphs shall not apply to the extent they would cause the Plan to fail to satisfy the requirements of Article IV of Part III of the Plan (Limitations on Benefits) or Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans).

For purposes of Part II of the Plan,

(a) the “Code Section 417 Mortality Table” means the applicable mortality table prescribed by the Secretary of the Treasury pursuant to Code Section 417(e)(3), as in effect from time to time, provided, however, that notwithstanding the preceding provisions of this paragraph, for distributions commencing on or after December 31, 2002 and prior to January 1, 2008, the Code Section 417 Mortality Table means the Table set forth in Revenue Ruling 2001-62 and for purposes of determining the amount payable to a Participant with an annuity starting date on or after January 1, 2008, the Code Section 417 Mortality Table means the Table set forth in Revenue Ruling 2007-67 or such other Table as may be prescribed by the Secretary of the Treasury pursuant to Code Section 417(e)(3);

(b) for periods beginning on and after January 1, 2004, the “Code Section 417 Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the annual rate of interest on a 30-year Treasury securities in effect for the second month immediately preceding the first day of the Plan Year (e.g., November 2009 for the 2010 Plan Year), and

Part II - 5

(c) for periods beginning on and after January 1, 2008, the “Code Section 417 Applicable Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the applicable interest rate described by Code section 417(e) after its amendment by the Pension Protection Act of 2006, which rate more specifically shall be the adjusted first, second, and third segment rates applied under rules similar to the rules of Code Section 430(h)(2)(C) for the lookback month used to determine the previously applicable interest rate on 30-year Treasury securities (e.g., November 2009 for the 2010 Plan Year) or for such other time as the Secretary of the Treasury may by regulations prescribe.

(d) For purposes of determining the Code Section 417 Applicable Interest Rate, the first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code Section 430(h)(2)(C) if:

(i) Code Section 430(h)(2)(D) were applied by substituting the average yields for the month described in clause (ii) below for the average yields for the 24-month period described in such Code section, and

(ii) Code Section 430(h)(2)(G)(i)(II) were applied by substituting “Section 417(e)(3)(A)(ii)(II) for “Section 412(b)(5)(B)(ii)(II)”, and

(iii) The applicable percentage under Code section 430(h)(2)(G) is treated as being 20% in 2008, 40% in 2009, 60% in 2010, and 80% in 2011.

2.03 “Compensation” means:

(a) For purposes of determining a Participant’s Normal Retirement Benefit specified in Section 5.01 of Part II of the Plan, a Participant’s total calendar year compensation paid (or deferred pursuant to an unfunded, non-qualified deferred payment arrangement) on and after the date he becomes a Participant and while he remains in an eligible class of Employees for (i) and (ii) below:

(i) services performed in connection with the sale and service of products of First Allmerica Financial Life Insurance Company.

(ii) services performed in connection with the sale and service of products of Allmerica Financial Life Insurance and Annuity Company.

Compensation shall also mean and include:

(iii) commissions paid to the Participant by Allmerica Investments, Inc., and

Part II - 6

(iv) compensation which is not currently includable in the Participant’s gross income by reason of the application of Sections 125, 402(e)(3) or 132(f)(4) of the Code.

Notwithstanding the foregoing, for purposes of Subsection (a) renewal commissions received which are attributable to business sold prior to the date the Employee became a Career Agent or General Agent of the Employer shall be excluded.

(b) For purposes of Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) and or for purposes of Article IV of Part III of the Plan (Limitations on Benefits), the term “Compensation” means a Participant’s earned income, wages, salaries, fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the plan to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or other expense allowances under a nonaccountable plan (as described in Section 1.62-2(c) of the Treasury Regulations), and excluding the following:

(i) Employer contributions to a plan of deferred compensation which are not includible in the Employee’s gross income for the taxable year in which contributed, or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the employee, or any distributions from a plan of deferred compensation;

(ii) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;

(iii) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and

(iv) Other amounts which received special tax benefits.

For Plan Years commencing after December 31, 1997, Compensation for purposes of Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) and Article IV of Part III of the Plan (Limitations on Benefits) shall also include Employee elective deferrals under Code Section 402(g)(3), amounts contributed or deferred by the Employer at the election of the Employee and not includable in the gross income of the Employee by reason of Code Section 125, and elective amounts that are not includable in the gross income of the Employee by reason of Code Section 132(f)(4).

Part II - 7

(c) Notwithstanding (a) and (b) above, for Plan Years beginning on or after January 1, 1994 and prior to January 1, 2002, the annual Compensation of each Participant taken into account for determining all benefits provided under Part II of the Plan for any determination period shall not exceed $150,000. This limitation shall be adjusted for inflation by the Secretary under Code Section 401(a)(17)(B) in multiples of $10,000 by applying an inflation adjustment factor and rounding the result down to the next multiple of $10,000 (increases of less than $10,000 are disregarded). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined beginning in such calendar year. If Compensation is being determined over a period of time that contains fewer than 12 calendar months, then the annual Compensation limit is an amount equal to the annual Compensation limit for the calendar year in which the Compensation period begins multiplied by the ratio obtained by dividing the number of full months in the period by 12.

If Compensation for any prior determination period is taken into account in determining a Participant’s benefits for the current Plan Year, the Compensation for such prior determination period is subject to the applicable annual Compensation limit in effect for that prior period. For this purpose, in determining benefits in Plan Years beginning on or after January 1, 1989, the annual compensation limit in effect for determination periods beginning before that date is $200,000. In addition, in determining benefits in Plan Years beginning on or after January 1, 1994, the annual Compensation limit in effect for determination periods beginning before that date is $150,000.

(d) Notwithstanding the foregoing and (a) and (b) above, the annual Compensation of each Participant taken into account in determining benefit accruals in any Plan Year beginning after December 31, 2001, shall not exceed $200,000. Annual compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under Part II of the Plan (the “determination period”). For purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, the annual Compensation for any prior determination period shall be limited to $200,000.

The $200,000 limit on annual Compensation for determination periods beginning after December 31, 2001 shall be adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year.

2.04 “Career Agent Contract” means that form of contract between a life insurance agent and the Employer whereby the agent agrees to sell insurance and annuity policies on a full-time basis.

Part II - 8

2.05 “Credited Interest” means interest utilized in determining the minimum death benefit specified in Section 6.02 of Part II of the Plan. Such interest shall be at the rate determined in accordance with the Group Annuity Contract, but not less than 3% per annum compounded annually from the January 1st next following the date such contributions were made to the first day of the month as of which the Credited Interest is being determined for periods prior to January 1, 1976, plus 5% per annum compounded annually for periods beginning on or after January 1, 1976 and prior to January 1, 1988, plus the greater of (i) 5% per annum compounded annually or (ii) the interest rate which would be credited under Part II of the Plan under Step (iv)(A) of Subsection 2.01(b) for periods beginning on or after January 1, 1988.

2.06 “Credited Service”

(a) Except as provided in Subsection (c) and except for Hours excluded under Subsections 2.12(b), (c), (g) and (h), Credited Service shall mean and include all Hours of Service completed with the Employer on and after the date the Employee becomes a Participant in Part II of the Plan, completed while the Participant remains in an eligible class of Employees.

(b) A Participant shall receive a year of Credited Service for each Plan Year in which he is credited with 1,000 or more Hours of Service with the Employer.

Additionally, for Plan Years beginning after 1998, a Participant shall receive a Year of Credited Service for the Plan Year he retires or dies and a Former Participant shall receive a Year of Credited Service for the Year he again becomes a Participant upon a rehire, in each case regardless of the number of Hours of Service completed in such Year. In no event will a Participant receive more than one Year of Credited Service for any one Plan Year.

(c) Notwithstanding anything in this Section to the contrary, Credited Service shall not include periods of service with respect to which any Employee has received a distribution described in Section 2.01(d) unless a repayment has been made pursuant to the rules set forth in paragraph (ii) of such Section.

(d) For purposes only of determining a Participant’s eligibility for the Disability Benefit specified in Section 5.03 of Part II of the Plan, the following periods of service shall be counted:

(i) periods of prior service with an Affiliate during which he was a participant in a qualified pension or profit sharing plan sponsored by the Affiliate;

(ii) periods of prior service with the Employer in a position in which he was not eligible to participate in this Plan during which he was a participant in another qualified pension or profit sharing plan sponsored by the Employer; and

Part II - 9

(iii) the number of full years and completed months during which a General Agent or former General Agent made contributions under Part II of his General Agent’s Contract.

2.07 “Employee” means any General Agent or life insurance agent who is a common-law employee of the Company or any life insurance agent who holds a Career Agent’s Contract with the Employer.

2.08 “Employee Contributions” means contributions made by a Participant prior to January 1, 1989 as a condition of participation in Part II of the Plan.

2.09 “Employer” means First Allmerica; provided that on and after January 1, 2008 the term “Employer” shall also mean the Plan Sponsor.

2.10 “General Agent” means an agent of the Company whose relationship is determined by a General Agent’s Agreement wherein the General Agent is required to devote his full-time business activities in the hiring, supervision and management of life insurance agents who sell, administer and service the policies and contracts of the Employer.

2.11 “Grandfathered Benefit” means the frozen monthly retirement benefit payable as a single life annuity to a Participant on his Normal Retirement Date, calculated in accordance with the benefit formulas set forth in Sections 5.01 and, if applicable, 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) as in effect on December 31, 1998. Such benefit shall be calculated based on the Participant’s Average Compensation, Final Average Compensation, Credited Service, and the amount of benefit offset as determined by applying Section 5.06, each determined as of December 31, 1998, based on the provisions of Part II of the Plan in effect on such date.

2.12 “Hour of Service” means:

(a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. For purposes of Part II of the Plan a Career Agent shall be credited with 45 Hours of Service for each complete or partial week his Career Agent’s Contract remains in force and a General Agent or life insurance agent who is a common-law employee shall be credited with 45 Hours of Service for each complete or partial week he performs duties for the Employer.

(b) Each hour for which the Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence:

(i) Except in the case of a Participant who is eligible for the Disability Benefit specified in Section 5.04, no more than 1,000 Hours shall be credited to an Employee under this Subsection (b) on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period);

Part II - 10

(ii) No hours shall be credited under this Subsection (b) for any payments made or due under a plan maintained solely for the purpose of complying with any applicable workers’ compensation, unemployment compensation or disability insurance laws; and

(iii) No hours shall be credited under this Subsection (b) for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.

For purposes of this Subsection (b) a payment shall be deemed to be made by or due from the Employer regardless of whether such payment is made by or due from the Employer directly, or indirectly through, among others, a trust fund or insurer, to which the Employer contributes or pays premiums.

(c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service shall not be both credited under Subsections (a) or (b), as the case may be, and under this Subsection. No more than 501 Hours shall be credited under this Subsection for a period of time during which an Employee did not or would not have performed duties.

(d) Special rules for determining Hours of Service under Subsections (b) and (c) for reasons other than the performance of duties. In the case of a payment which is made or due which results in the crediting of Hours of Service under Subsection (b) or in the case of an award or agreement for back pay, to the extent that such an award or agreement is made with respect to a period during which an Employee performs no duties, the number of Hours of Service to be credited shall be determined as follows:

(i) In the case of a payment made or due which is calculated on the basis of units of time (such as hours, days, weeks or months), the number of Hours of Service to be credited shall be determined as provided in Subsection (a).

(ii) Except as provided in Paragraph (d)(iii), in the case of a payment made or due which is not calculated on the basis of units of time, the number of Hours of Service to be credited shall be equal to the amount of the payment divided by the Employee’s most recent hourly rate of compensation (as determined below) before the period during which no duties are performed.

(A) In the case of General Agents, the hourly rate of compensation shall be the Employee’s most recent rate of semi-monthly compensation divided by 80.

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(B) In the case of life insurance agents, the hourly rate of compensation shall be the minimum wage as established from time to time under Section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended.

(iii) Rule against double credit. An Employee shall not be credited on account of a period during which no duties are performed with more hours than such Employee would have been credited but for such absence.

(e) Crediting of Hours of Service to computation periods.

(i) Hours of Service described in Subsection (a) shall be credited to the Employee for the computation period or periods in which the duties are performed.

(ii) Hours of Service described in Subsection (b) shall be credited as follows:

(A) Hours of Service credited to an Employee on account of a payment which is calculated on the basis of units of time (such as hours, days, weeks or months) shall be credited to the computation period or periods in which the period during which no duties are performed occurs, beginning with the first unit of time to which the payment relates.

(B) Hours of Service credited to an Employee by reason of a payment which is not calculated on the basis of units of time shall be credited to the computation period in which the period during which no duties are performed occurs, or if the period during which no duties are performed extends beyond one computation period, such Hours of Service shall be allocated between not more than the first two computation periods in accordance with reasonable rules established by the Employer, which rules shall be consistently applied with respect to all Employees within the same job classification, reasonably defined.

(iii) Hours of Service described in Subsection (c) shall be credited to the computation period or periods to which the award or agreement for back pay pertains, rather than to the computation period in which the award, agreement or payment is made.

(f) For purposes of Article III (Participation Requirements), determining eligibility for early retirement (Section 5.02) and Article VII (Benefits upon Termination from Service), Hours of Service shall also include Hours of Service determined in accordance with the rules set forth in this Section 2.12 and which would not have been excluded if such Service had been performed with the Employer, completed prior or subsequent to the Employee’s commencement of service with the Employer, completed with an Affiliate, as a General Agent or with the Employer in a position in which he was not eligible to participate in this Plan.

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(g) Rules for Maternity or Paternity Leaves of Absence. In addition to the foregoing rules and solely for purposes of determining whether a One Year Break in Service for participation and vesting purposes has occurred in a computation period, an individual who is absent for maternity or paternity reasons, shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such Hours cannot be determined, 8 Hours of Service per day of such absence. Provided, however, that:

(i) Hours shall not be credited under both this Subsection (g) and one of the other Subsections of this Section 2.12;

(ii) no more than 501 hours shall be credited for each maternity or paternity absence; and

(iii) if a maternity or paternity leave extends beyond one Plan Year, the Hours shall be credited to the Plan Year in which the absence begins to the extent necessary to prevent a One Year Break in Service, otherwise such Hours shall be credited to the following Plan Year. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual, in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.

(h) Other Federal Law. Nothing in this Section 2.12 shall be construed to alter, amend, modify, invalidate, impair or supersede any law of the United States or any rule or regulation issued under any such law.

2.13 “Normal Retirement Age” means the later of:

(a) the 65th birthday of the Employee; or

(b) the fifth anniversary of the time the Participant commenced participation in Part II of the Plan.

For purposes of the foregoing, the participation commencement date is the first day of the Plan Year in which the Participant commenced participation in Part II of the Plan.

2.14 “Normal Retirement Date” shall mean the first day of the month next following the Participant’s Normal Retirement Age.

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2.15 (a) “One Year Break in Service” means, except for purposes of Article III (Participation Requirements), any Plan Year during which the Employee has not completed more than 500 Hours of Service.

(b) For purposes of Article III, “One Year Break in Service” means a twelve consecutive month period, computed with reference to the date the Employee’s employment commenced, during which the Employee does not complete more than 500 Hours of Service.

ARTICLE III

PARTICIPATION REQUIREMENTS

3.01 Participation Requirements.

(a) Employee Participation. Individuals who were Participants in Part II of the Plan on December 31, 2009 shall continue as a Participant in this Part II of the Plan on January 1, 2010. On and after January 1, 1983 no additional Employees shall be eligible to become Participants in Part II of the Plan.

(b) Notwithstanding the rules set forth in Subsection (a), a Former Participant who again becomes eligible to participate in Part II of the Plan will become a Participant on the date of his recommencement of service with the Employer.

(c) Notwithstanding anything in Part II of the Plan to the contrary, for periods commencing on and after January 1, 2003, a Former Participant who is re-employed as an Employee shall be reinstated as an active Plan Participant only for purposes of increasing Plan vesting on his or her frozen Accrued Benefit and for purposes of determining eligibility for early retirement under Section 5.02.

3.02 Classification Changes. In the event of a change in job classification, such that an Employee, although still in the employment of the Employer, no longer is an eligible Employee, he shall receive no further Credited Service under Part II of the Plan, and the Participant’s Accrued Benefit on the date he becomes ineligible shall continue to vest, become payable or be forfeited, as the case may be, in the same manner and to the same extent as if the Employee had remained a Participant.

For periods commencing prior to January 1, 2003, in the event a Participant becomes ineligible to accrue further Credited Service because he is no longer a member of an eligible class of Employees, but has not terminated his employment with the Employer, such Employee shall again be eligible to accrue further Credited Service immediately upon his return to an eligible class of Employees.

3.03 Participant Cooperation. Each eligible Employee who becomes a Participant thereby agrees to be bound by all of the terms and conditions of this Plan. Each eligible

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Employee, by becoming a Participant, agrees to cooperate fully with the Insurer, including completion and signing of such forms as are required by the Insurer under the Group Annuity Contract.

ARTICLE IV

EMPLOYER CONTRIBUTIONS

4.01 Employer Contributions. Each Employer shall pay to the Trustee for each Plan Year such amount which, when combined with required Employee Contributions, shall be necessary in the opinion of the Plan’s enrolled actuary to provide the benefits of Part II of the Plan.

4.02 Plan Contributions to Trustees. The Employer shall make payment of all contributions directly to the Trustee to be held, managed and invested in one or more Group Annuity Contracts and in other investments permitted under the Trust, but subject to Section 4.03.

4.03 Receipt of Contributions by Trustee. The Trustee shall accept and hold under the Trust Indenture such contributions of money, or other property approved for acceptance by the Trustee, on behalf of the Employer and its Employees and Beneficiaries, as it may receive from time to time, other than cash it is instructed to remit to the Insurer for deposit with the Insurer. However, the payor may pay contributions directly to the Insurer and such payment shall be deemed a contribution to the Trust to the same extent as if payment had been made to the Trustee. All such contributions shall be accompanied by written instructions from the Plan Administrator accounting for the manner in which they are to be credited.

Notwithstanding the foregoing, for periods commencing on and after January 1, 1992, Plan contributions will also be used to fund costs and provide benefits under the merged State Mutual Companies’ Pension Plan, which plan was merged with The Allmerica Financial Agents’ Pension Plan on such date.

ARTICLE V

RETIREMENT AND DISABILITY BENEFITS

5.01 Normal Retirement Benefit. (Applicable to all Employees who are active Participants on or after January 1, 1999).

Except as provided in Sections 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) and Section 5.06 of Part II of the Plan, each Participant who retires on his Normal Retirement Date shall be entitled to receive a monthly retirement income, commencing on his Normal Retirement Date and terminating on the last regular payment date prior to his death, which monthly retirement income will be equal to the sum of (a) and, if applicable, (b) below:

(a) The Participant’s Grandfathered Benefit; and

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(b) For those Participants whose Participant Number is listed on Exhibit B, attached hereto and made a part hereof, an amount equal to 1/12 of the Participant’s Post-1998 Annual Accrued Benefit.

For purposes of Part II of the Plan, a Participant’s Post-1998 Annual Accrued Benefit shall be equal to the Participant’s total Compensation paid during all Years of Credited Service completed after December 31, 1998 multiplied by the Participant’s individual accrual percentage. Each eligible Participant’s accrual percentage is set forth in Exhibit B.

5.02 Early Retirement Benefit.

An actively employed Participant in Part II of the Plan who has completed at least 15 Years of Service may retire on the first day of any month after his 55th birthday, in which event, except as provided in Section 5.06, he shall receive a monthly retirement benefit equal to the appropriate percentage set forth below of his Accrued Benefit.

Notwithstanding the above, if the Plan is top heavy and the minimum benefit for Non-Key Employees described in Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) is to be provided to the Participant, the Participant’s early retirement benefit shall be equal to the appropriate percentage set forth below of the Participant’s Accrued Benefit (as described in Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans)) earned as of the date of his early retirement.

In the event of early retirement, benefits shall be determined as of the date of retirement and shall be equal to the following percentage of the benefit payable at Age 65:

Retirement Age*	Percentage of Monthly Accrued Benefit
65	100%
64	97
63	94
62	91
61	88
60	85
59	82
58	79
57	76
56	73
55	70
54	67
53	64
52	61
51	58
50	55

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*  If benefit payments commence in a month other than the month in which the Participant attains the specified Age, the percentage shall be determined by straight line interpolation.

If a Participant terminates his employment (or terminates his Career Agent Contract) after having completed at least 15 Years of Service, he may elect to retire at any time after the first day of the month next following his 55th birthday and prior to his Normal Retirement Date and receive a retirement benefit based on his Credited Service as of the date of termination. The benefit to be provided to any such terminee shall be equal to the appropriate percentage set forth above of his Accrued Benefit.

Notwithstanding anything in this Section to the contrary, any Participant who was actively employed on June 30, 1977 may elect early retirement on the earlier of (i) and (ii) below, in which event, except as provided in Section 5.06, he shall receive a monthly retirement benefit equal to the appropriate percentage set forth above of his Accrued Benefit.

(i) the first day of the month following attainment of Age 50, and completion of at least 20 Years of Service; and

(ii) the first day of any month following attainment of Age 55 and completion of at least 15 Years of Service.

5.03 Late Retirement Benefit.

With the consent of the Employer, a Participant may elect to have his retirement benefit deferred to a late retirement date which may be the first day of any month after his Normal Retirement Date; provided, however, that Employer consent shall not be required for Employees protected beyond their Normal Retirement Date under the Age Discrimination in Employment Act of 1967, as amended or under applicable state law. Except as provided in Section 5.06, the monthly benefit payable to the Participant on his late retirement date shall be equal to the sum of (a) and (b) below:

(a) The Participant’s Grandfathered Benefit, which benefit will be actuarially increased; and

(b) For those Participants whose Participant Number is listed on Exhibit B, attached hereto and made a part hereof, an amount equal to 1/12 the Participant’s Post-1998 Annual Accrued Benefit, which benefit will be actuarially increased.

For purposes of Part II of the Plan, a Participant’s Post-1998 Annual Accrued Benefit shall be equal to the Participant’s total Compensation paid during all Years of Credited Service completed after December 31, 1998, including Years of Credited Service completed after the Participant’s Normal Retirement Date, multiplied by the Participant’s individual accrual percentage. Each eligible Participant’s accrual percentage is set forth in Exhibit B. Actuarial increases will be determined as provided in Exhibit A, attached hereto and made a part hereof.

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Notwithstanding the above, if the Plan is top heavy and the minimum benefit for Non-Key Employees described in Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans) is to be provided to the Participant, the Participant’s late retirement benefit shall be determined in accordance with Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans), with top-heavy minimum benefits being computed for each Year of Service completed until the Participant’s Late Retirement Date, which resulting benefit shall be actuarially increased.

5.04 Disability Benefit.

If a Participant becomes Totally Disabled while employed as a General Agent or while his Career Agent Contract remains in force and if such total disability commenced after the Participant had completed at least five Years of Credited Service, it shall be assumed for purposes of this Plan that his employment or contractual relationship continued unchanged from the date of the commencement of his total disability to the earliest of his Normal Retirement Date, death, termination of employment (or, in the case of an Agent, termination of his Career Agent Contract) or the date that he is no longer Totally Disabled. While an Employee is Totally Disabled it shall be assumed for purposes of this Section that the Employee continued to earn annually an amount determined by dividing by three the Compensation paid to the Participant during the 36 months prior to the month in which he became Totally Disabled.

For purposes of this Part II of the Plan “Totally Disabled” means the inability to perform the duties of any occupation for which the Employee is reasonably fitted by training, education or experience; provided, however, that during the first 30 months of any disability an Employee will be considered Totally Disabled if he is unable to perform the duties of his occupation and is not working at any other occupation unless such occupation constitutes rehabilitative employment approved by the Plan Administrator.

5.05 Distribution of Benefits. The Plan Administrator shall direct the Insurer to commence payment of benefits provided under this Article V (or provided to a Former Participant pursuant to Article VII of Part II of the Plan). Plan benefits will be paid only on death, disability, termination of employment, Plan termination or retirement.

Except as otherwise provided in Section 5.06 of Part II of the Plan, the requirements of this Section shall apply to any distribution of a Participant’s interest and will take precedence over any inconsistent provisions of this Part II of the Plan.

All distributions required under the Plan shall be determined and made in accordance with the Regulations under Code Section 401(a)(9), including, to the extent applicable, the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed Regulations.

Part II - 18

Except as provided below and in Section 5.06, a Participant’s retirement benefit shall be payable as a life annuity for the life of the Participant with no further benefits payable after the last regular payment date prior to his death.

At any time prior to actual retirement a Participant, with spousal consent if the Participant is married, may elect to receive his retirement benefit under one or more of the following settlement options:

(a) An annuity for the joint lives of the Participant and his spouse with 50% or 66 ²/₃% (whichever is specified when this option is elected) of such amount payable as an annuity for life to the survivor. No further benefits are payable after the death of both the Participant and his spouse.

(b) An annuity for the life of the Participant and upon his death 100%, 66 ²/₃%, or 50% (whichever is specified when this option is elected) of the annuity amount will be continued to his spouse as his contingent annuitant. No further annuity benefits are payable after the death of both the Participant and his spouse.

(c) An annuity for the life of the Participant with guaranteed installment payments for a period certain not longer than the life expectancy of the Participant.

(d) An annuity for the life of the Participant with guaranteed installment payments for a period certain not longer than the life expectancy of the Participant and his spouse.

(e) A lump sum amount equal to the present value of the portion of the Participant’s Accrued Benefit described in Section 2.01(b) attributable to required Employee Contributions. Additionally, the Participant shall be entitled to receive a monthly annuity benefit equal to the portion of his Accrued Benefit described in Section 2.01(a) attributable to Employer Contributions. The Participant may elect to receive such monthly annuity benefit under one or more of the options described in (a) through (d) above, subject to spousal consent if the Participant is married.

All optional forms of benefits shall be the Actuarial Equivalent (as of the date selected) of the normal retirement benefits described in Section 5.01 of Part II of the Plan or Section 2.03 of Part III of the Plan (Minimum Benefit for Top Heavy Plans). Any spousal consent shall satisfy the requirements of Section 5.06.

Unless the Participant elects otherwise, distribution of benefits will begin no later than the 60th day after the later of the close of the Plan Year in which:

(i) the Participant attains Normal Retirement Age; or

(ii) the Participant terminates service with the Employer.

Part II - 19

Notwithstanding the foregoing, the failure of a Participant and spouse (or where either the Participant or the spouse has died, the survivor) to consent to a distribution when a benefit is “immediately distributable” (as described below) shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section 5.05 (and provisions of Article III of Part III of the Plan). In no event will benefits begin to be distributed prior to the later of Age 62 or Normal Retirement Age without the consent of the Participant. The consent of the Participant’s spouse will also be required for any such distribution unless the benefit is paid in the form of a Qualified Joint and Survivor Annuity.

If the Accrued Benefit is immediately distributable, the Participant and the Participant’s spouse (or where either the Participant or the spouse has died, the survivor) must consent to any distribution of such Accrued Benefit. The consent of the Participant and the Participant’s spouse shall be obtained in writing within the 90-day period (180-day period for Plan Years beginning January 1, 2007 and thereafter) ending on the annuity starting date. The “annuity starting date” is the first day of the first period for which an amount is paid as an annuity or any other form. The Plan Administrator shall notify the Participant and the Participant’s spouse of the right to defer any distribution until the Participant’s Accrued Benefit is no longer immediately distributable. Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under Part II of the Plan in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code, and shall be provided no less than 30 days and no more than 90 days (180 days for Plan Years beginning January 1, 2007 and thereafter) prior to the annuity starting date.

Notwithstanding the foregoing, only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the Accrued Benefit is immediately distributable. Neither the consent of the Participant nor the Participant’s spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code.

An Accrued Benefit is immediately distributable if any part of the Accrued Benefit could be distributed to the Participant (or surviving spouse) before the Participant attains (or would have attained if not deceased) the later of Normal Retirement Age or Age 62.

Notwithstanding the above, the distribution of the entire interest of a Participant or a Beneficiary must not violate the minimum required distribution rules set forth in Article III of Part III of the Plan.

5.06 Qualified Joint and Survivor Annuity for Married Participants.

(a) General Rules. Notwithstanding anything in this Article to the contrary, unless a married Participant’s Accrued Benefit has been paid in a lump sum pursuant to Section 5.05 above, such Participant’s retirement benefit will be payable to the Participant and his spouse in the form of a Qualified Joint and Survivor Annuity, with the survivor to receive 100% of the benefit which had been payable during

Part II - 20

their joint lives, unless an optional form of benefit is selected pursuant to a qualified election within the 90-day period (180-day period for Plan Years beginning January 1, 2007 and thereafter) ending on the annuity starting date. In the case of an unmarried Participant, unless the Participant elects an optional form of benefit the Participant’s retirement benefit will be paid in the form of a no-death benefit life annuity.

(b) Definitions.

(i) Qualified election: A waiver of a Qualified Joint and Survivor Annuity. Any waiver of a Qualified Joint and Survivor Annuity shall not be effective unless: (A) the Participant’s spouse consents in writing to the election; (B) the election designates a specific Beneficiary, including any class of Beneficiaries or any contingent Beneficiaries, which may not be changed without spousal consent (or the spouse expressly permits designations by the Participant without any further spousal consent); (C) the spouse’s consent acknowledges the effect of the election; and (D) the spouse’s consent is witnessed by a Plan representative or notary public. Additionally, a Participant’s waiver of the Qualified Joint and Survivor Annuity will not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the spouse expressly permits designations by the Participant without any further spousal consent). If it is established to the satisfaction of a Plan representative that there is no spouse or that the spouse cannot be located, a waiver will be deemed a qualified election.

Any consent by a spouse obtained under this provision (or establishment that the consent of a spouse may not be obtained) shall be effective only with respect to such spouse. A consent that permits designations by the Participant without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the spouse voluntarily elects to relinquish either or both of such rights. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Subsection (c) below.

(ii) Spouse (surviving spouse): the opposite-gender person, if any, to whom the Participant is lawfully married at the date of his death or at his annuity starting date, whichever is earlier, provided that a former spouse will be treated as the spouse or surviving spouse to the extent provided under a Qualified Domestic Relations Order.

Part II - 21

(iii) Annuity starting date: The first day of the first period for which an amount is paid as an annuity or under any other form.

(c) Notice Requirement.

(i) In the case of a Qualified Joint and Survivor Annuity as described in Subsection (a), the Plan Administrator shall provide each Participant no less than 30 days and no more than 90 days (180 days for Plan Years beginning January 1, 2007 and thereafter) prior to the annuity starting date a written explanation of: (A) the terms and conditions of a Qualified Joint and Survivor Annuity; (B) the Participant’s right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit; (C) the rights of a Participant’s spouse; (D) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity; and (E) the relative values of the various optional forms of benefit under Part II of the Plan. Notices given to Participants pursuant to Code Section 411(a)(11) in Plan Years beginning after December 31, 2006 shall include a description of how much larger benefits will be if the commencement of distributions is deferred.

(ii) A Participant may commence receiving a distribution in a form other than a Qualified Joint and Survivor Annuity less than 30 days after receipt of the written explanation described in the preceding paragraph provided: (1) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect (with spousal consent) a form of distribution other than a Qualified Joint and Survivor Annuity; (2) the Participant is permitted to revoke any affirmative distribution election at least until the Distribution Commencement Date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant; and (3) the Distribution Commencement Date is after the date the written explanation was provided to the Participant. For distributions on or after December 31, 1996, the Distribution Commencement Date may be a date prior to the date the written explanation is provided to the Participant if the distribution does not commence until at least 30 days after such written explanation is provided, subject to the waiver of the 30-day period. For the purposes of this paragraph, the “Distribution Commencement Date” is the date a Participant commences distributions from Part II of the Plan. If a Participant commences distribution with respect to a portion of his/her Accrued Benefit, a separate Distribution Commencement Date applies to any subsequent distribution. If distribution is made in the form of an annuity, the Distribution Commencement Date is the first day of the first period for which annuity payments are made.

Part II - 22

(d) Applicability. The provisions of this Section 5.06 shall apply to any Participant who is credited with at least one Hour of Service with the Employer on or after January 1, 1976. In addition, any living Participant or Former Participant not receiving Plan benefits on August 23, 1984 who would otherwise not receive the benefits prescribed by this Section 5.06 shall be given the opportunity to elect to have the provisions of this Section apply provided such Participant or Former Participant was credited with at least one Hour of Service under this Plan or a predecessor Plan on or after September 2, 1974.

The opportunity to elect a Qualified Joint and Survivor retirement option must be afforded to the appropriate Participants or Former Participants during the period commencing on August 23, 1984 and ending on the dates benefits would otherwise commence to such person.

5.07 Supplementary Pension Benefits.

Effective July 1, 1986, and on each July 1 thereafter, the amount of monthly retirement benefits payable to eligible retirees (as described below) or their Beneficiaries shall be increased by a percentage determined in accordance with the following formula:

Percentage Increase = .8 (M - .07) x 100

For Plan Years beginning after December 31, 2008, for purposes of the above formula, “M” equals the annual coupon return on December 31, 2009 and on each December 31 thereafter of the Barclays Capital U.S. Government/Credit 5-10 Year Index, or its successor.

For Plan Years beginning before January 1, 2009, for purposes of the above formula, “M” equals the earnings rate for the prior Plan Year on assets representing retired life reserves for retirees under this Plan and retirees under The Allmerica Financial Cash Balance Pension Plan as adopted by First Allmerica (now known as The Hanover Insurance Company Cash Balance Pension Plan), certain of First Allmerica’s General Agents, retirees of The Hanover Insurance Company (“Hanover”) and retirees of Citizens Insurance Company of America, both Affiliates of First Allmerica. Additionally, in determining “M”, retired life reserve assets attributable to retirees of Beacon Insurance Company of America, formerly an Affiliate of Hanover, shall be aggregated and combined with the retired life reserve assets of this Plan.

For the Plan Years for which “M” depended on the returns of designated retired life reserve assets, the earnings rate on retired life reserve assets was to be determined by an actuary, using the “investment year block” method of crediting interest that First Allmerica used to credit interest on its Experience Rated group annuity contracts that are in force on an active basis. The resulting earnings rate(s) should neither be associated with nor construed as the investment yield (all or in part) of the pension fund.

For each Plan Year for which “M” depended on the returns of designated retired life reserve assets, the retired life reserve assets for newly qualified retirees to be added to the total retired life assets outstanding was to be determined using a 7% interest rate and the 1971 GAM mortality table.

Part II - 23

The determination of “M” and of the overall earnings rate(s) shall be final and conclusively binding for all persons.

The effective date for the payment of supplemental pension benefits paid as a result of this Section shall be each July 1, commencing with July 1, 1986. Those eligible to receive supplemental pension benefits as a result of this Section shall be those Plan retirees and their Beneficiaries who were receiving basic Plan retirement benefits on the July 1 increase effective date, had been retired for at least 18 months on such increase effective date, and:

(A) were actively employed Plan Participants who had elected an immediate early retirement benefit pursuant to Section 5.02 (or its successor, if any):

(B) had terminated employment after having met the eligibility requirements for early retirement specified in Section 5.02 (or its successor, if any) and elected to defer receipt of retirement benefits; or

(C) had retired on or after their Normal Retirement Age after having completed at least 15 Years of Service.

The Beneficiaries of any retiree meeting the above requirements shall be entitled to receive a supplemental pension benefit under this Section if the Beneficiaries were receiving Plan survivor benefits on the July 1 increase effective date.

A supplemental pension benefit determined under this Section shall be added to and become a part of the recipient’s basic Plan benefit and shall be payable during such period and under such option as the basic Plan benefit is being paid.

5.08 Rollovers to Other Qualified Plans.

(a) Notwithstanding any provision of Part II of the Plan to the contrary that would otherwise limit a distributee’s election under this Article or under Articles VI and VII, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(b) Definitions.

(i) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic

Part II - 24

payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any other distribution(s) that is reasonably expected to total less than $200 during a year. A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to (i) an individual retirement account or annuity described in Section 408(a) or (b) of the Internal Revenue Code; (ii) for taxable years beginning after December 31, 2001 and before January 1, 2007, to a qualified trust which is part of a defined contribution plan that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible; or (iii) for taxable years beginning after December 31, 2006, to a qualified trust or to an annuity contract described in Section 403(b) of the Internal Revenue Code, if such trust or contract provides for separate accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(ii) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, a Roth IRA as pursuant to in Section 408A(e) of the Code, an annuity plan described in Section 403(a) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified Plan described in Section 401(a) of the Code, that accepts the distributee’s eligible rollover distribution or an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.

(iii) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s surviving spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse.

Part II - 25

(iv) Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. For distributions after June 9, 2009, a non-spouse Beneficiary who is a “designated beneficiary” under Code Section 401(a)(9)(E) and the regulations thereunder, by a direct trustee-to-trustee transfer (“direct rollover”), may roll over all or any portion of his or her distribution to an individual retirement account the Beneficiary establishes for purposes of receiving the distribution. In order to be able to do a direct rollover of the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution.

(v) For distributions after June 9, 2009, a non-spouse Beneficiary who is a “designated beneficiary” under Code Section 401(a)(9)(E) and the regulations thereunder, by a direct trustee-to-trustee transfer (“direct rollover”), may roll over all or any portion of his or her distribution to an individual retirement account the Beneficiary establishes for purposes of receiving the distribution. In order to do a direct rollover of the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution.

Although a non-spouse Beneficiary may roll over directly a distribution as provided in Subsection (b)(iv) above, any distribution made prior to January 1, 2010 is not subject to the direct rollover requirements of Code Section 401(a)(31) (including Code Section 401(a)(31)(B)), the notice requirements of Code Section 402(f) or the mandatory withholding requirements of Code Section 3405(c)). If a non-spouse Beneficiary receives a distribution from the Plan, the distribution is not eligible for a “60-day” rollover.

If the Participant’s named Beneficiary is a trust, the Plan may make a direct rollover to an individual retirement account on behalf of the trust, provided the trust satisfies the requirements to be a “designated beneficiary” within the meaning of Code Section 401(a)(9)(E).

A non-spouse Beneficiary may not roll over an amount which is a required minimum distribution, as determined under applicable Treasury regulations and other Internal Revenue Service guidance. If the Participant dies before his or her required beginning date and the non-spouse Beneficiary rolls over to an IRA the maximum amount eligible for rollover, the Beneficiary may elect to use either the 5-year rule or the life expectancy rule, pursuant to Treasury Regulation Section 1.401(a)(9)-3, A-4(c), in determining the required minimum distributions from the IRA that receives the non-spouse Beneficiary’s distribution.

Part II - 26

ARTICLE VI

DEATH BENEFITS

6.01 Pre-Retirement Spouse Benefit for Married Participants.

(a) General Rules. The provisions of this Section shall apply to any Participant or Former Participant described in Subsection (b).

(i) If an eligible married Participant:

(A) dies after attaining eligibility for early retirement but before actually retiring;

(B) dies on or after his Normal Retirement Age while still working for the Employer; or

(C) separates from service on or after his Normal Retirement Age (or after attaining the age necessary for early retirement) and after satisfying the eligibility requirements for the payment of benefits under Part II of the Plan and thereafter dies before beginning to receive such benefits;

then the Participant’s surviving spouse will receive a monthly retirement benefit equal to the benefit that would have been payable if the Participant had retired on the day before his death after having elected an immediate Qualified Joint and Survivor Annuity option with a 50% continuation of monthly benefits to be payable to the survivor. The amount of such 50% continuation shall be payable monthly for the life of such spouse, with the first payment payable as of the date of the Participant’s death, unless the spouse requests a later commencement date (consistent with the provisions of Part II of the Plan).

(ii) If a fully or partially vested eligible married Participant dies on or before the earliest retirement age, the Participant’s surviving spouse will receive the same benefit that would be payable if the Participant had:

(A) separated from service on the date of death;

(B) survived to the earliest retirement age;

(C) retired at the earliest retirement age after having elected an immediate Qualified Joint and Survivor Annuity option with a 50% continuation of monthly benefits to be payable to the survivor; and

(D) died on the day after the earliest retirement age.

Part II - 27

A surviving spouse entitled to benefits under this paragraph (ii) will begin to receive payments at the earliest retirement age unless the spouse requests an earlier or later commencement date (consistent with the provisions of Part II of the Plan).

For purposes of this paragraph (ii) the “earliest retirement age” is the earliest date on which, under Part II of the Plan, the Participant could elect to receive retirement benefits.

In the case of a partially vested Participant, benefits under this paragraph (ii) will be based on the Participant’s vested Accrued Benefit computed on the date of his death.

(b) Applicability. The provisions of paragraph (a)(i) shall apply to all Participants or Former Participants who were credited with an Hour of Service on or after January 1, 1976 who meet the eligibility requirements described in such paragraph and thereafter die before actually retiring. The provisions of Paragraph (a)(ii) shall apply to any Participant who is credited with at least one Hour of Service on or after August 23, 1984 and to any Participant or Former Participant living on August 23, 1984 not receiving Plan benefits on such date who was credited with at least one Hour of Service on or after January 1, 1976 and who had at least 10 years of vesting service when he separated from service.

6.02 Minimum Death Benefit. If no optional form of retirement benefit has been elected by a Participant pursuant to Section 5.05 of Part II of the Plan, a death benefit, as described below, shall be payable. If the death benefit is payable as a result of the Participant’s death, any such death benefit shall be payable to the Participant’s Beneficiary or, if no Beneficiary survives the Participant, to the executors or administrators of the Participant’s estate. If the Participant was survived by his spouse and (i) if the joint and survivor benefit described in Section 5.06 of Part II of the Plan was in effect on the date of the spouse’s death, or (ii) the pre-retirement spouse benefit described in Section 6.01 of Part II of the Plan was being paid to the spouse, any such death benefit shall be payable to the Participant’s Beneficiary, or if such Beneficiary does not survive the spouse, to the executors or administrators of the spouse’s estate.

The amount of this minimum death benefit will be equal to the Participant’s unrefunded required Contributions with Credited Interest to the first day of the month in which the earlier of the Participant’s death or retirement occurred reduced by (i), (ii) and (iii) below:

(i) the amount of monthly retirement payments which had been paid to the Participant;

(ii) the amount of monthly payments which had been paid to the Participant and his spouse, if the joint and survivor benefit described in Section 5.08 was being paid; and

Part II - 28

(iii) the amount of retirement benefits which had been paid to the spouse, if the pre-retirement spouse benefit described in Section 6.01 was being paid.

ARTICLE VII

BENEFITS UPON TERMINATION FROM SERVICE

7.01 In General. In the event that an Employee shall terminate service (or, in the case of a Career Agent, the agent terminates his Career Agent’s Contract) for any reason other than death, his becoming totally disabled (as described in Section 5.04), Normal, Early or Late Retirement, the interests and rights of such Participant shall be limited to those contained in this Article.

7.02 Options on Termination of Participation. Upon any termination of service described in Section 7.01, a Participant shall have the right, subject to any required spousal consent, to elect either Option 1 or Option 2 described below.

For purposes of determining the Actuarial Equivalent present value of benefits, values shall be calculated using the interest rate(s) specified in Section 2.02.

Any distributions made pursuant to this Article shall be subject to the requirements of Sections 5.05 and 5.06 of Part II of the Plan (and Article III of Part III of the Plan).

Option 1 - Deferred Benefit - Under this Option the Participant will receive a monthly retirement benefit commencing on his Normal Retirement Date equal to the sum of (a) and, if applicable, (b) below:

(a) 1/12 of the annual deferred benefit described in Section 2.01(b), which deferred benefit is attributable to required Employee contributions.

(b) In addition, if as of his date of termination of participation the Employee has completed at least the minimum Years of Service required for vesting, he will receive commencing on his Normal Retirement Date, an additional monthly retirement benefit equal to (i) or (ii) below, whichever is applicable:

(i) the portion of the Accrued Benefit described in Section 2.01(a) derived from Employer Contributions, multiplied by the appropriate percentage in Subparagraph (iii) below.

(ii) in the case of a Non-Key Employee Participant in a Top Heavy Plan, if greater than (i) above, the Accrued Benefit described in Section 2.01(c), multiplied by the appropriate percentage in Subparagraph (iii) below.

(iii)	Completed Years of Service	Nonforfeitable Percentage
	Less than 5	0%
	5 or more	100%

Part II - 29

Notwithstanding the above, if the Plan is a Top Heavy Plan for any Plan Year beginning after December 31, 1983, then the Plan shall meet the following vesting requirements for such Plan Year and for all subsequent Plan Years, even if the Plan is not a Top Heavy Plan for such subsequent Plan Years.

Completed Years of Service	Nonforfeitable Percentage
Less than 2	0%
2	20
3	40
4	60
5 or more	100

Notwithstanding anything in Part II of the Plan to the contrary, the portion of an Employee’s Accrued Benefit derived from Employer Contributions shall be 100% vested upon completion of three (3) Years of Service.

Option 2 - Cash Option - Under this option, except as provided in Section 5.08, the Participant will receive an amount equal to (a) below plus, if applicable, a deferred benefit as described in (b) below:

(a) an amount equal to the present value of the portion of the Participant’s Accrued Benefit described in Section 2.01(b) attributable to required Employee Contributions, and

(b) In addition, if the Employee is fully or partially vested in the portion of his Accrued Benefit derived from Employer Contributions, as determined from the appropriate table above on the date of his termination of participation, he will receive, commencing on his Normal Retirement Date, a monthly retirement benefit determined in accordance with Subsection (b) of Option 1.

Option 1 will be deemed to have been elected by an Employee unless he elects Option 2 within 90 days of his termination of participation in this Plan.

For purposes of this Article VII, Years of Service means Plan Years during which an Employee completed at least 1,000 Hours of Service; provided, however, for purposes of this Article service shall not be deemed to be interrupted or employment terminated because employment is transferred to a position or job with the Employer in which he is no longer eligible to participate in this Plan, or because the Employee becomes a General Agent who is not a common-law employee of the Company, but service shall be deemed terminated if the Employee terminates from the Employer or as a General Agent.

Notwithstanding anything in of Part II of the Plan to the contrary, a Participant’s Normal Retirement Benefit shall become 100% vested and nonforfeitable upon the attainment of his Normal Retirement Age.

Part II - 30

Notwithstanding anything in Part II of the Plan to the contrary, (i) a Participant who was actively employed on December 31, 2002 (or an agent whose Career Agent’s Contract had not been terminated prior to such date), and (ii) all Former Participants who had not incurred five consecutive One Year Breaks in Service as of December 31, 2002, shall have a fully vested and non-forfeitable interest in any Accrued Benefit that had not been distributed to the Participant or Former Participant prior to December 31, 2002.

7.03 Forfeitures. The non-vested portion of a Participant’s Accrued Benefit shall be treated as a forfeiture when the Participant or his or her spouse (or surviving spouse) receives a distribution of the present value of his or her vested Accrued Benefit attributable to Employer and Employee Contributions pursuant to Section 7.02 and the Participant’s service attributable to such distribution shall be disregarded as provided for in Section 7.06. For purposes of this Section, if the present value of a Participant’s vested Accrued Benefit is zero, the Participant shall be deemed to have received a distribution of such vested Accrued Benefit.

In the case of a partially vested terminated Participant who does not receive a distribution pursuant to the above paragraph, the value of the nonvested portion of his Accrued Benefit shall be treated as a forfeiture at the end of the Plan Year in which the Participant incurs a One Year Break in Service until the Participant has completed one Year of Service after he has been re-employed.

Forfeitures will be used to reduce (i) Employer contributions for the Plan Year following the Plan Year in which the forfeiture occurs; and or (ii) the Employer’s costs under the Plan.

7.04 Resumption of Service. A Participant who terminates his or her participation in Part II of the Plan and who subsequently resumes service with the Employer will again become a Participant, if eligible, on the date of his or her recommencement of such service.

7.05 Distribution of Benefits. On the Former Participant’s Normal Retirement Date, benefits to which he or she is entitled pursuant to this Article shall be distributed in accordance with Article V.

If a Former Participant entitled to a deferred benefit pursuant to this Article VII dies prior to his or her Normal Retirement Date, the death benefit, if any, to which he is entitled shall be as is specified in Article VI.

7.06 Cash Out Repayment Option.

(a) Notwithstanding anything in this Article to the contrary, unless a repayment has been made in accordance with Subsection (b) below, in determining the portion of an Employee’s Accrued Benefit derived from Employer contributions (or, in the case of a Top Heavy Plan, the minimum benefit for Non-Key Employees described in Subsection 2.01(c)) after a resumption of participation, periods of service with respect to which the Employee received a distribution of the present value of his vested Accrued Benefit shall be disregarded.

Part II - 31

(b) In the case of the distribution of the present value of a partially vested Employee’s vested Accrued Benefit in accordance with Section 7.02, the Employee’s Accrued Benefit described in Sections 2.01(a) and (b) (including all optional forms of benefits and subsidies relating to such benefits) shall be restored if the Employee repays the amount distributed plus interest, compounded annually from the date of distribution at the rate of 5 percent. Such repayment must be made by the Employee before the earlier of five years after the first date on which the Employee is subsequently reemployed by the Employer, or the date the Employee incurs five consecutive One Year Breaks in Service following the date of distribution.

If an Employee is deemed to receive a distribution pursuant to this Article, and the Employee resumes employment covered under this Plan before the date on which the Employee could no longer repay his distribution under the preceding paragraph, upon the reemployment of such Employee, the Employer-derived Accrued Benefit will be restored to the amount of such Accrued Benefit on the date of the deemed distribution.

7.07 Early Retirement Election. Any Participant who terminates service after having completed at least fifteen Years of Service may elect to retire on the first day of any month following his 55^th birthday. Any Participant who was actively employed on June 30, 1977 who terminates service after having completed at least twenty Years of Service may elect to retire on the first day of any month following his 50^th birthday.

7.08 Amendment to Vesting Schedule. If the Vesting Schedule of Part II of the Plan is amended, or the Plan is amended in any way that directly or indirectly affects the computation of a Participant’s nonforfeitable percentage, or if the Plan is deemed amended by an automatic change to or from a top-heavy vesting schedule, each Participant with at least 3 Years of Service with the Employer may elect, within a reasonable period after the adoption of the amendment or change, to have their nonforfeitable percentage computed under Part II of the Plan without regard to such amendment or change. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of:

(1) 60 days after the amendment is adopted;

(2) 60 days after the amendment becomes effective; or

(3) 60 days after the Participant is issued written notice of the amendment by the Employer or Plan Administrator.

Part II - 32

EXHIBIT A

ADJUSTMENT FACTORS FOR OPTIONAL AND LATE RETIREMENT BENEFITS

Factors for ages not illustrated on the following tables will be computed on an actuarial basis consistent with that used to compute the factors shown.

JOINT AND SURVIVOR OPTION PERCENTAGES

(Applicable only if the Participant’s age, nearest birthday, on the date monthly income commences is 65).

Age Nearest Birthday of Joint Annuitant on the Date Monthly Income Commences to the Participant	Percentage of the Adjusted Retirement Annuity Payments which are to be Continued to the Surviving Joint Annuitant
	100%	66 2/3%			50%
50	80.3%		87.1	%		90.9	%
51	80.7		87.5			91.3
52	81.1		87.9			91.8
53	81.5		88.4			92.2
54	82.0		88.8			92.7
55	82.4		89.3			93.2
56	82.9		89.8			93.8
57	83.3		90.3			94.3
58	83.8		90.9			94.9
59	84.3		91.4			95.5
60	84.8		92.0			96.1
61	85.3		92.7			96.8
62	85.9		93.3			97.5
63	86.4		94.0			98.3
64	86.9		94.7			99.1
65	87.5		95.4			100.0
66	88.0		96.2			100.0
67	88.6		97.0			101.9
68	89.1		97.9			102.9
69	89.6		98.7			104.0
70	90.2		99.6			105.1
	1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum.

Part II - 33

CONTINGENT ANNUITANT OPTION PERCENTAGES

(Applicable only if the Participant’s age, nearest birthday, on the date monthly income commences is 65).

Age Nearest Birthday of Contingent Annuitant on the Date Monthly Income Commences to the Participant	Percentage of the Adjusted Retirement Annuity Payments which are to be Continued to the Surviving Contingent Annuitant
	100%			66 2/3%			50%
50		80.3	%		85.9	%		89.0	%~
51		80.7			86.2			89.3
52		81.1			86.5			89.6
53		81.5			86.9			89.8
54		82.0			87.2			90.1
55		82.4			87.5			90.4
56		82.9			87.9			90.6
57		83.3			88.2			90.9
58		83.8			88.6			91.2
59		84.3			89.0			91.5
60		84.8			89.3			91.8
61		85.3			89.7			92.1
62		85.9			90.1			92.4
63		86.4			90.5			92.7
64		86.9			90.9			93.0
65		87.5			91.3			93.3
66		88.0			91.7			93.6
67		88.6			92.1			93.9
68		89.1			92.5			94.2
69		89.6			92.9			94.5
70		90.2			93.2			94.8
		1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of  birth of 1930 and interest at the rate of 7% per annum. Life Ann/Opt.

Part II - 34

ANNUITY OPTION ADJUSTMENT PERCENTAGES

Percentages to be applied to the monthly benefit which would be payable to the Participant on his Retirement Date if no Optional Form of Annuity were in effect to determine the monthly income benefit commencing on the Participant’s Retirement Date if one of the following options is in effect.

Age nearest birthday on the date monthly income commences	Annuity Option
	5C&C			10C&C			15C&C			20C&C
50		99.8	%		99.2	%		98.3	%		97.2	%
51		99.8			99.1			98.1			96.9
52		99.7			99.0			97.9			96.6
53		99.7			98.9			97.7			96.3
54		99.7			98.8			97.5			96.0
55		99.6			98.6			97.3			95.6
56		99.6			98.5			97.0			95.2
57		99.6			98.4			96.8			94.8
58		99.5			98.3			96.5			94.3
59		99.5			98.1			96.2			93.8
60		99.4			98.0			95.9			93.3
61		99.4			97.8			95.5			92.7
62		99.3			97.6			95.0			92.0
63		99.3			97.3			94.5			91.2
64		99.2			97.1			94.0			90.4
65		99.1			96.7			93.3			89.5
66		99.0			96.4			92.6			88.5
67		98.9			95.9			91.8			87.4
68		98.8			95.4			91.0			86.2
69		98.6			94.9			90.0			84.9
70		98.4			94.3			89.0			83.5
		1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum. Life Ann/Opt.

Part II - 35

LATE RETIREMENT PERCENTAGES

(Applicable only if the Participant’s age, nearest birthday, on the date his or her Normal Retirement Date is 65).

The following percentages are applied to retirement benefits determined in accordance with Part II of the Plan prior to any actuarial increase with respect to a Participant whose date of retirement is subsequent to his or her Normal Retirement Date, to determine actuarially increased retirement benefits commencing on his or her Late Retirement Date. If benefits commence in a month other than the month in which the Participant attains the specified age, the percentage shall be determined by straight line interpolation. Percentages for Late Retirement Dates and ages not illustrated will be computed on an actuarial basis consistent with that used to compute the factors shown.

Number of Years Late Retirement Date Succeeds Normal Retirement Date	Actuarial Increase Percentage
1	111.3%
2	124.3%
3	139.2%
4	156.6%
5	176.8%
6	200.4%
7	228.3%
8	261.5%
9	301.1%
10	348.8%

The actuarial basis increase percentages beyond ten years after Normal Retirement Date shall be determined based on the 1951 Group Annuity Table with 2/3 of Projection C, with mortality rates based on calendar year of birth of 1910 and interest at a rate of 6% per annum (male rate).

Notwithstanding the foregoing, if late retirement benefits commence after Age 70 ¹/₂, a Participant’s Accrued Benefit shall be actuarially increased to take into account the period after Age 70 ¹/₂ in which the Participant was not receiving any benefits under Part II of the Plan. Any such actuarial increase shall be the greater of (i) the actuarial increase determined in accordance with the rules described above or (ii) such actuarial increase as shall be required under Code Section 401(a)(9)(C) and rules and regulations promulgated thereunder.

Part II - 36

Exhibit B

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Part II - 37

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Part II - 38

THE HANOVER INSURANCE GROUP CASH BALANCE

PENSION PLAN

PART III

(As amended and restated generally effective January 1, 2010)

Part III

THE HANOVER INSURANCE GROUP CASH BALANCE

PENSION PLAN

PART III

TABLE OF CONTENTS

		PAGE
ARTICLE I        PURPOSE AND EFFECTIVE DATE OF PLAN			1
1.01	General Statement.		1
1.02	Effective Date.		1
ARTICLE II       PROVISIONS APPLICABLE TO TOP HEAVY PLANS			1
2.01	Top Heavy Plan Requirements.		1
2.02	Determination of Top Heavy Status.		2
2.03	Minimum Benefit Requirements for Top Heavy Plans.		4
ARTICLE III      MINIMUM DISTRIBUTION REQUIREMENTS			6
3.01	General Rules.		6
3.02	Time and Manner of Distribution.		8
3.03	Determination of Amount to be Distributed Each Year.		9
3.04	Requirements for Annuity Distributions That Commence During Participant’s Lifetime.		12
3.05	Requirements for Minimum Distributions Where Participant Dies Before Date Distributions Begin.		13
3.06	Definitions.		14
ARTICLE IV      LIMITATIONS ON BENEFITS			16
4.01	General Limitations.		16
4.02	Additional General Limitations.		16
4.03	Limitation Year beginning after December 31, 1986.		17
4.04	Limitation Year beginning after December 31, 1994.		17
4.05	Definitions.		17
4.06	Final Section 415 Regulations.		24
ARTICLE V       PRE-TERMINATION BENEFIT RESTRICTIONS			26
5.01	In General.		26
5.02	Exceptions.		27
5.03	Included Benefits.		27
ARTICLE VI      BENEFIT RESTRICTIONS			27
6.01	Effective Date and Application of Section.		27
6.02	Funding-Based Limitation on Shutdown Benefits and Other Unpredictable Contingent Event Benefits.		27
6.03	Limitations on Plan Amendments Increasing Liability for Benefits.		28
6.04	Limitations on Accelerated Benefit Distributions.		29
6.05	Limitation on Benefit Accruals for Plans With Severe Funding Shortfalls.		30
6.06	Rules Relating to Contributions Required to Avoid Benefit Limitations.		31
6.07	Presumed Underfunding for Purposes of Benefit Limitations.		32
6.08	Treatment of Plan as of Close of Prohibited or Cessation Period.		33
6.09	Definitions.		33

Part III

ARTICLE VII        PLAN FIDUCIARY RESPONSIBILITIES		34
7.01	Plan Fiduciaries.	34
7.02	General Fiduciary Duties.	35
7.03	Duties of the Trustee(s).	35
7.04	Powers and Duties of the Plan Administrator.	35
7.05	Designation of Fiduciaries.	37
7.06	Delegation of Duties by a Fiduciary.	37
ARTICLE VIII      BENEFITS COMMITTEE		38
8.01	Appointment of Benefits Committee.	38
8.02	Benefits Committee to Act by Majority Vote, etc.	38
8.03	Records and Reports of the Benefits Committee.	38
8.04	Costs and Expenses of Administration.	38
8.05	Indemnification of the Plan Administrator and Assistants.	38
ARTICLE IX        CLAIMS PROCEDURE		39
9.01	Claims Fiduciary.	39
9.02	Claims for Benefits.	39
9.03	Duty to Keep Plan Administrator Informed of Current Address.	39
9.04	Failure to Claim Benefits.	39
9.05	Notice of Denial of Claim.	39
9.06	Request for Review of Denial of Claim.	40
9.07	Decision on Review of Denial of Claim.	40
9.08	Disability Claims.	40
ARTICLE X         AMENDMENT AND TERMINATION		40
10.01	Amendment of Plan.	40
10.02	Employer May Discontinue Plan.	41
10.03	Distribution of Benefits Upon Plan Termination.	43
10.04	Return of Employer Contributions Under Special Circumstances.	43
ARTICLE XI        MISCELLANEOUS		43
11.01	Protection of Employee Interest.	43
11.02	USERRA Compliance.	43
11.03	Meaning of Words Used in Plan.	44
11.04	Plan Does Not Create or Modify Employment Rights.	44
11.05	Massachusetts Law Controls.	44
11.06	Payments to come from Plan Assets.	45
11.07	Receipt and Release for Payments.	45
11.08	Mandatory Withholding on Eligible Rollover Distributions.	45
11.09	Payment under Qualified Domestic Relations Orders.	45
11.10	Electronic Communications.	45

Part III

ARTICLE I

PURPOSE AND EFFECTIVE DATE OF PLAN

1.01 General Statement. The Hanover Insurance Group Cash Balance Pension Plan (the “Plan”) consists of three parts, Part I, Part II and Part III. Part I of the Plan provides a cash balance and pension benefit, which was formerly provided under a plan known as “The Allmerica Financial Cash Balance Pension Plan”. Part II of the Plan provides a pension benefit, which was formerly provided under a plan known as “The Allmerica Financial Agents’ Pension Plan”. Part III of the Plan contains provisions applicable to each of Part I and Part II.

The provisions of Part III of the Plan shall override any provision of Part I and or Part II of the Plan as provided in Part III of the Plan.

The words and phrases used in this Part III of the Plan shall have the meanings set forth in Part I of the Plan, unless a different meaning is clearly required by the context or is otherwise provided in Part III of the Plan.

1.02 Effective Date. The effective date of Part III of the Plan is January 1, 2010 (except for those provisions of this Part of the Plan which have an expressly stated alternative effective date).

ARTICLE II

PROVISIONS APPLICABLE TO TOP HEAVY PLANS

2.01 Top Heavy Plan Requirements.

(a) For any Top Heavy Plan Year, the Plan shall provide the following:

(i) the minimum vesting requirements for Top Heavy Plans set forth in Section 8.02 of Part I of the Plan and Section 7.02 of Part II of the Plan; and

(ii) the minimum benefit accruals for Non-Key Employees set forth in Section 2.03 below.

(b) Once the Plan has become a Top Heavy Plan, the top heavy vesting requirements described in 8.02 of Part I of the Plan and Section 7.02 of Part II of the Plan shall be applicable to all subsequent Plan Years, regardless of whether such years are Top Heavy Plan Years.

(c) If the Plan is or becomes a Top Heavy Plan, the provisions of this Article II will supersede any conflicting provision in the Plan.

(d) In determining Top Heavy Plan vesting, the Top Heavy vesting schedule set forth in 8.02 of Part I of the Plan and in Section 7.02 of Part II of the Plan applies to all benefits within the meaning of Code Section 411(a)(7), including benefits accrued before the effective date of Code Section 416 and benefits accrued before the Plan became top-heavy. Further, no reduction in vested benefits may occur in the

Part III – 1

event the Plan’s status as top heavy changes for any Plan Year. However, this Section does not apply to the Accrued Benefits of any Employee who does not have an Hour of Service after the Plan has initially become top-heavy and such Employee’s Accrued Benefits attributable to Employer contributions will be determined without regard to this Section.

2.02 Determination of Top Heavy Status.

(a) This Plan shall be a Top Heavy Plan for any Plan Year commencing after December 31, 1983 if any of the following conditions exists:

(i) If the top heavy ratio for this Plan exceeds 60 percent and this Plan is not part of any required aggregation group or permissive aggregation group of plans.

(ii) If this Plan is a part of a required aggregation group of plans (but not part of a permissive aggregation group) and the top heavy ratio for the group of plans exceeds 60 percent.

(iii) If this Plan is a part of a required aggregation group and part of a permissive aggregation group of plans and the top heavy ratio for the permissive aggregation group exceeds 60 percent.

(b) The Plan top heavy ratio shall be determined as follows:

(i) If the Employer maintains one or more defined benefit plans and the employer has not maintained any defined contribution plan (including any simplified employee pension, as defined in section 408(k) of the Internal Revenue Code) which during the 5-year period ending on the determination date(s) has or has had account balances, the top-heavy ratio for this plan alone or for the required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the present value of Accrued Benefits of all Key Employees as of the determination date(s) (including any part of any Accrued Benefit distributed in the 1-year period ending on the determination date(s)) (5-year period ending on the determination date in the case of a distribution made for a reason other than severance from employment, death or disability), and the denominator of which is the sum of the present value of Accrued Benefits (including any part of any Accrued Benefits distributed in the 1-year period ending on the determination date(s)) (5-year period ending on the determination date in the case of a distribution made for a reason other than severance from employment, death or disability), determined in accordance with section 416 of the Internal Revenue Code and the regulations thereunder.

(ii) If the Employer maintains one or more defined benefit plans and the employer maintains or has maintained one or more defined contribution plans (including any simplified employee pension) which during the 5-

Part III – 2

year period ending on the determination date(s) has or has had any account balances, the top-heavy ratio for any required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees, determined in accordance with (i) above, and the sum of account balances under the aggregated defined contribution plan or plans for all Key Employees as of the determination date(s), and the denominator of which is the sum of the present value of accrued benefits under the defined benefit plan or plans for all participants, determined in accordance with (i) above, and the account balances under the aggregated defined contribution plan or plans for all participants as of the determination date(s), all determined in accordance with section 416 of the Internal Revenue Code and the regulations thereunder. The account balances under a defined contribution in both the numerator and denominator of the top heavy ratio are increased for any distribution of an account balance made in the 1-year period ending on the determination date (5-year period ending on the determination date in the case of a distribution made for a reason other than severance from employment, death or disability).

(iii) For purposes of (i) and (ii) above, the value of account balances and the present value of Accrued Benefits will be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the determination date, except as provided in Code Section 416 and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a Participant (1) who is not a Key Employee but who was a Key Employee in a prior year, or (2) who has not been credited with at least one Hour of Service with any employer maintaining the Plan at any time during the 1-year period ending on the determination date will be disregarded. The calculation of the top-heavy ratio and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code Section 416 and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the top-heavy ratio. When aggregating plans, the value of account balances and Accrued Benefits will be calculated with reference to the determination dates that fall within the same calendar year.

The Accrued Benefit of a Participant other than a Key Employee shall be determined under (A) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (B) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section Code 411(b)(1)(C).

(c) Permissive aggregation group: The required aggregation group of plans plus any other plan or plans of the Employer which, when considered as a group with the required aggregation group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410.

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(d) Required aggregation group: (i) Each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the Plan has terminated), and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Code Sections 401(a)(4) or 410.

(e) Determination date: The last day of the preceding Plan Year.

(f) Valuation Date: The last day of each Plan Year, as of which Accrued Benefits are valued for purposes of calculating the top heavy ratio.

(g) Present value: Present value shall be based on the interest and mortality rates specified in the definition of Actuarial Equivalent.

2.03 Minimum Benefit Requirements for Top Heavy Plans.

(a) Minimum Benefit Requirements for Top Heavy Plans.

Notwithstanding any other provision in this Plan except Subsections (b) and (c) below, for any Plan Year in which this Plan is a Top Heavy Plan, each Participant who is not a Key Employee and has completed at least 1,000 Hours of Service will accrue a benefit (to be provided solely by Employer contributions and expressed as a life annuity commencing at Normal Retirement Age) of not less than 2% of the Participant’s highest average Compensation for the five consecutive years in which such Non-Key Employee had the highest Compensation (as defined for purposes of Article III of Part III of the Plan). The aggregate Compensation for the years during such five-year period in which the Participant was credited with a Year of Service will be divided by the number of such years in order to determine average annual Compensation.

Provided, however, that no additional benefit accruals shall be provided pursuant to this Section to the extent that the total accruals on behalf of the Participant attributable to Employer contributions will provide a benefit expressed as a life annuity commencing at Normal Retirement Age that equals or exceeds 20% of the Participant’s average Compensation for the five consecutive years in which the Participant had the highest Compensation (as defined for purposes of Article III of Part III of the Plan). All accruals of Employer-derived benefits, whether or not attributable to years for which the Plan is Top Heavy, may be used in computing whether the minimum 20% accrual requirements of this paragraph are satisfied.

The minimum accrual above applies even though under other Plan provisions the Participant would not otherwise be entitled to receive an accrual, or would have received a lesser accrual for the Plan Year because (i) the Non-Key Employee fails to make mandatory contributions to the Plan, (ii) the Non-Key Employee’s Compensation is less than a stated amount, (iii) the Non-Key Employee is not employed on the last day of the accrual computation period, or (iv) the Plan is integrated with Social Security.

Part III – 4

The Compensation required to be taken into account under this Section is Compensation as defined for purposes of Article III of Part III of the Plan that is not in excess of the applicable dollar limitation imposed by Code Section 401(a)(17). However, Compensation received by a Non-Key Employee for Plan Years beginning after the close of the last year in which the Plan was a Top Heavy Plan shall be disregarded. The minimum accrual determined under this Section shall be determined without regard to any Social Security contribution.

The top-heavy minimum benefit is a life annuity benefit (with no ancillary benefits) commencing at Normal Retirement Age. If the benefit commences at a date other than Normal Retirement Age, the Employee must receive at least an amount that is the Actuarial Equivalent of the minimum single life annuity benefit commencing at Normal Retirement Age.

Notwithstanding the foregoing, for Plan Years beginning after December 31, 2001, for purposes of satisfying the minimum benefit requirements of Code Section 416(c)(1) and the Plan, in determining Years of Service with the Employer, any service with the Employer shall be disregarded to the extent that such service occurs during a Plan Year when the Plan benefits (within the meaning of Code Section 410(b)) no Key Employee or former Key Employee.

(b) Notwithstanding anything herein to the contrary, in any Plan Year in which a Non-Key Employee participates in both a defined benefit plan and a defined contribution plan included in a Required or Permissive Aggregation Group of Top Heavy Plans, the Employer is not required to provide the Non-Key Employee with both the full and separate minimum benefit and the full and separate minimum contribution. Therefore, if the Employer maintains such a defined benefit and defined contribution plan, the top-heavy minimum benefits shall be provided as follows:

(i) If a Non-Key Employee is a participant in any such Top Heavy defined contribution plan, the minimum benefit described in Subsection (a) above shall not be provided to each such Non-Key Employee who receives at least the full Top Heavy minimum contribution provided in such defined contribution plan for Non-Key Employee participants.

(ii) If a Non-Key Employee is not a Participant in any such Top Heavy defined contribution plan, the minimum and extra minimum benefits, if applicable, described in Subsection (a) shall be provided to each such Non-Key Employee meeting the requirements of Section 2.03(a) above.

Notwithstanding any provision herein to the contrary, no minimum benefit will be required (or the minimum benefit will be reduced, as the case may be) for a Participant under this Plan for any Plan Year if the Employer maintains another qualified defined benefit plan under which a minimum benefit is being accrued in whole or in part for the Participant in accordance with Code Section 416(c).

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(c) The minimum accrued benefit described in this Section (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Sections 411(a)(3)(B) or 411(a)(3)(D).

ARTICLE III

MINIMUM DISTRIBUTION REQUIREMENTS

3.01 General Rules.

(a) Effective date. The provisions of this Article will apply with respect to distributions under the Plan made for calendar years beginning on or after January 1, 2006. With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2002 and prior to the effective date of the application of the Treasury Regulations under Code Section 401(a)(9) that were finalized on June 15, 2004, the Plan will use the 1987 proposed regulations.

(b) Requirements of Treasury Regulations incorporated. All distributions required under this Article shall be determined and made in accordance with Code Section 401(a)(9), including the incidental death benefit requirement in Code Section 401(a)(9)(G), and the Treasury Regulations thereunder.

(c) Precedence. Subject to the joint and survivor annuity requirements of the Plan, the requirements of this Article will take precedence over any inconsistent provisions of the Plan.

(d) TEFRA Section 242(b)(2) elections.

(i) Notwithstanding the other provisions of this Article and the Plan, other than the spouse’s right of consent afforded under the Plan, distributions may be made on behalf of any Participant, including a five percent (5%) owner, who has made a designation in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (“TEFRA”) and in accordance with all of the following requirements (regardless of when such distribution commences):

(1) The distribution by the Plan is one which would not have disqualified such plan under Code Section 401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of 1984.

(2) The distribution is in accordance with a method of distribution designated by the Participant whose interest in the plan is being distributed or, if the Participant is deceased, by a beneficiary of such Participant.

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(3) Such designation was in writing, was signed by the Participant or beneficiary, and was made before January 1, 1984.

(4) The Participant had accrued a benefit under the Plan as of December 31, 1983.

(5) The method of distribution designated by the Participant or the beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Participant’s death, the beneficiaries of the Participant listed in order of priority.

(ii) A distribution upon death will not be covered by the transitional rule of this Subsection unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Participant.

(iii) For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Participant, or the beneficiary, to whom such distribution is being made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in (i)(1) and (i)(5) of this Subsection.

(iv) If a designation is revoked, any subsequent distribution must satisfy the requirements of Code Section 401(a)(9) and the Treasury Regulations thereunder. If a designation is revoked subsequent to the date distributions are required to begin, the Plan must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Code Section 401(a)(9) and the regulations thereunder, but for the Section 242(b)(2) election. For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life).

(v) In the case in which an amount is transferred or rolled over from one plan to another plan, the rules in Treasury Regulation Section 1.401(a)(9)-8, Q&A-14 and Q&A-15, shall apply.

Part III – 7

(e) Limits on distribution periods. To the extent otherwise permitted under the terms of the Plan, as of the first Distribution Calendar Year, distributions to a Participant, if not made in a single sum, may only be made over one of the following periods:

(i) The life of the Participant;

(ii) The joint lives of the Participant and a Designated Beneficiary;

(iii) A period certain not extending beyond the Life Expectancy of the Participant; or

(iv) A period certain not extending beyond the joint life and last survivor expectancy of the Participant and a Designated Beneficiary.

3.02 Time and Manner of Distribution.

(a) Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.

(b) Death of Participant before distributions begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(i) Life Expectancy rule, spouse is beneficiary. If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, then, except as provided in Section 3.08, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 ¹/₂, if later.

(ii) Life Expectancy rule, spouse is not beneficiary. If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, then, except as provided in Section 3.08, distributions to the Designated Beneficiary will begin by December 31st of the calendar year immediately following the calendar year in which the Participant died.

(iii) No Designated Beneficiary, 5-year rule. If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31st of the calendar year containing the fifth anniversary of the Participant’s death.

(iv) Surviving spouse dies before distributions begin. If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 3.02(b), other than Section 3.02(b)(i), will apply as if the surviving spouse were the Participant.

Part III – 8

For purposes of this Section 3.02(b), distributions are considered to begin on the Participant’s Required Beginning Date (or, if Section 3.02(b)(iv) applies, the date distributions are required to begin to the surviving spouse under Section 3.02(a)). If annuity payments irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 3.02(b)(i)), the date distributions are considered to begin is the date distributions actually commence.

(c) Form of distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, distributions will be made in accordance with Sections 3.03, 3.04 and 3.05 as of the first Distribution Calendar Year. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9) and the Treasury Regulations thereunder. Any part of the Participant’s interest which is in the form of an individual account described in Code Section 414(k) will be distributed in a manner satisfying the requirements of Code Section 401(a)(9) and the Treasury Regulations thereunder applicable to individual accounts.

3.03 Determination of Amount to be Distributed Each Year.

(a) General annuity requirements. A Participant who is required to begin payments as a result of attaining his or her Required Beginning Date, whose interest has not been distributed in the form of an annuity purchased from an insurance company or in a single sum before such date, may receive such payments in the form of annuity payments under the Plan. Payments under such annuity must satisfy the following requirements:

(i) The annuity distributions will be paid in periodic payments made at intervals not longer than one year;

(ii) The distribution period will be over a life (or lives) or over a period certain not longer than the period described in Section 3.04 or 3.05;

(iii) Once payments have begun over a period certain, the period certain will not be changed, even if the period certain is shorter than the maximum period permitted, unless otherwise elected in Section 3.08(d);

(iv) Payments will either be non-increasing or increase only to the extent permitted by one or more of the following conditions:

(1) By an annual percentage increase that does not exceed the annual percentage increase in an Eligible Cost-of-Living Index for a 12-month period ending in the year during which the increase occurs or the prior year;

Part III – 9

(2) By a percentage increase that occurs at specified times (e.g., at specified ages) and does not exceed the cumulative total of annual percentage increases in an Eligible Cost-of-Living Index since the annuity starting date, or if later, the date of the most recent percentage increase. In cases providing such a cumulative increase, an actuarial increase may not be provided to reflect the fact that increases were not provided in the interim years;

(3) To the extent of the reduction in the amount of the Participant’s payments to provide for a survivor benefit upon death, but only if the beneficiary whose life was being used to determine the distribution period described in Section 3.04 dies or is no longer the Participant’s beneficiary pursuant to a qualified domestic relations order within the meaning of Code Section 414(p);

(4) To allow a beneficiary to convert the survivor portion of a joint and survivor annuity into a single sum distribution upon the Participant’s death;

(5) To pay increased benefits that result from a Plan amendment or other increase in the Participant’s accrued benefit under the Plan;

(6) By a constant percentage, applied not less frequently than annually, at a rate that is less than 5 percent per year;

(7) To provide a final payment upon the death of the Participant that does not exceed the excess of the actuarial present value of the Participant’s accrued benefit (within the meaning of Code Section 411(a)(7)) calculated as of the annuity starting date using the applicable interest rate and the applicable mortality table under Code Section 417(e) (or, if greater, the total amount of employee contributions) over the total of payments before the death of the Participant; or

(8) As a result of dividend or other payments that result from Actuarial Gains, provided:

(I) Actuarial Gain is measured not less frequently than annually;

(II) The resulting dividend or other payments are either paid no later than the year following the year for which the actuarial experience is measured or paid in the same form as the payment of the annuity over the remaining period of the annuity (beginning no later than the year following the year for which the actuarial experience is measured);

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(III) The Actuarial Gain taken into account is limited to actuarial gain from investment experience;

(IV) The assumed interest rate used to calculate such Actuarial Gains is not less than 3 percent; and

(V) The annuity payments are not also being increased by a constant percentage as described in Section 3.03(a)(iv)(6) above.

(b) Amount required to be distributed by Required Beginning Date.

(i) In the case of a Participant whose interest in the Plan is being distributed as an annuity pursuant to Section 3.03(a), the amount that must be distributed on or before the Participant’s Required Beginning Date (or, if the Participant dies before distributions begin, the date distributions are required to begin under Section 3.02(b)(i) or 3.02(b)(ii)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bi-monthly, monthly, semi-annually, or annually. All of the Participant’s benefit accruals as of the last day of the first Distribution Calendar Year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the Participant’s Required Beginning Date.

(ii) In the case of a single sum distribution of a Participant’s entire accrued benefit during a Distribution Calendar Year, the amount that is the required minimum distribution for the Distribution Calendar Year (and thus not eligible for rollover under Code Section 402(c)) is determined under this Section 3.03(b)(ii). The portion of the single sum distribution that is a required minimum distribution is determined by treating the single sum distribution as a distribution from an individual account Plan and treating the amount of the single sum distribution as the Participant’s account balance as of the end of the relevant valuation calendar year. If the single sum distribution is being made in the calendar year containing the Required Beginning Date and the required minimum distribution for the Participant’s first Distribution Calendar Year has not been distributed, the portion of the single sum distribution that represents the required minimum distribution for the Participant’s first and second Distribution Calendar Years is not eligible for rollover.

(c) Additional accruals after first Distribution Calendar Year. Any additional benefits accruing to the Participant in a calendar year after the first Distribution

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Calendar Year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues. Notwithstanding the preceding, the Plan will not fail to satisfy the requirements of this Section 3.03(c) and Code Section 401(a)(9) merely because there is an administrative delay in the commencement of the distribution of the additional benefits accrued in a calendar year, provided that the actual payment of such amount commences as soon as practicable. However, payment must commence no later than the end of the first calendar year following the calendar year in which the additional benefit accrues, and the total amount paid during such first calendar year must be no less than the total amount that was required to be paid during that year under this Section 3.03(c).

(d) Death after distributions begin. If a Participant dies after distribution of the Participant’s interest begins in the form of an annuity meeting the requirements of this Article, then the remaining portion of the Participant’s interest will continue to be distributed over the remaining period over which distributions commenced.

3.04 Requirements for Annuity Distributions That Commence During Participant’s Lifetime.

(a) Joint life annuities where the beneficiary is the Participant’s spouse. If distributions commence under a distribution option that is in the form of a joint and survivor annuity for the joint lives of the Participant and the Participant’s spouse, the minimum distribution incidental benefit requirement will not be satisfied as of the date distributions commence unless, under the distribution option, the periodic annuity payment payable to the survivor does not at any time on and after the Participant’s Required Beginning Date exceed the annuity payable to the Participant. In the case of an annuity that provides for increasing payments, the requirement of this Section 3.04(a) will not be violated merely because benefit payments to the beneficiary increase, provided the increase is determined in the same manner for the Participant and the beneficiary. If the form of distribution combines a joint and survivor annuity for the joint lives of the Participant and the Participant’s spouse and a period certain annuity, the preceding requirements will apply to annuity payments to be made to the Designated Beneficiary after the expiration of the period certain.

(b) Joint life annuities where the beneficiary is not the Participant’s spouse. If distributions commence under a distribution option that is in the form of a joint and survivor annuity for the joint lives of the Participant and a beneficiary other than the Participant’s spouse, the minimum distribution incidental benefit requirement will not be satisfied as of the date distributions commence unless under the distribution option, the annuity payments to be made on and after the Participant’s Required Beginning Date will satisfy the conditions of this Section 3.04(b). The periodic annuity payment payable to the survivor must not at any time on and after the Participant’s Required Beginning Date exceed the applicable percentage of the annuity payment payable to the Participant using the table set forth in Q&A-2(c)(2) of section 1.401(a)(9)-6 of the Treasury regulations. The applicable percentage is based on the adjusted Participant/beneficiary age

Part III – 12

difference. The adjusted Participant/beneficiary age difference is determined by first calculating the excess of the age of the Participant over the age of the beneficiary based on their ages on their birthdays in a calendar year. If the Participant is younger than age 70, the age difference determined in the previous sentence is reduced by the number of years that the Participant is younger than age 70 on the Participant’s birthday in the calendar year that contains the annuity starting date. In the case of an annuity that provides for increasing payments, the requirement of this Section 3.04(b) will not be violated merely because benefit payments to the beneficiary increase, provided the increase is determined in the same manner for the Participant and the beneficiary. If the form of distribution combines a joint and survivor annuity for the joint lives of the Participant and a non-spouse beneficiary and a period certain annuity, the preceding requirements will apply to annuity payments to be made to the Designated Beneficiary after the expiration of the period certain.

(c) Period certain annuities. Unless the Participant’s spouse is the sole Designated Beneficiary and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution commencing during the Participant’s lifetime may not exceed the applicable distribution period for the Participant under the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations for the calendar year that contains the annuity starting date. If the annuity starting date precedes the year in which the Participant reaches age 70, the applicable distribution period for the Participant is the distribution period for age 70 under the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations plus the excess of 70 over the age of the Participant as of the Participant’s birthday in the year that contains the annuity starting date. If the Participant’s spouse is the Participant’s sole Designated Beneficiary and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the Participant’s applicable distribution period, as determined under this Section 3.04(c), or the joint life and last survivor expectancy of the Participant and the Participant’s spouse as determined under the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the calendar year that contains the annuity starting date.

3.05 Requirements for Minimum Distributions Where Participant Dies Before Date Distributions Begin.

(a) Participant survived by Designated Beneficiary. Except as provided in Section 3.08, if the Participant dies before the date distribution of his or her interest begins and there is a Designated Beneficiary, the Participant’s entire interest will be distributed, beginning no later than the time described in Section 3.02(b)(i) or Section 3.02(b)(ii), over the life of the Designated Beneficiary or over a period certain not exceeding:

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(i) Unless the annuity starting date is before the first Distribution Calendar Year, the Life Expectancy of the Designated Beneficiary determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar year immediately following the calendar year of the Participant’s death; or

(ii) If the annuity starting date is before the first Distribution Calendar Year, the Life Expectancy of the Designated Beneficiary determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar year that contains the annuity starting date.

(b) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(c) Death of surviving spouse before distributions to surviving spouse begin. If the Participant dies before the date distribution of his or her interest begins, the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, and the surviving spouse dies before distributions to the surviving spouse begin, this Section 3.05 will apply as if the surviving spouse were the Participant, except that the time by which distributions must begin will be determined without regard to Section 3.02(b)(i).

3.06 Definitions.

(a) Actuarial Gain. “Actuarial Gain” means the difference between an amount determined using the actuarial assumptions (i.e., investment return, mortality, expense, and other similar assumptions) used to calculate the initial payments before adjustment for any increases and the amount determined under the actual experience with respect to those factors. Actuarial Gain also includes differences between the amount determined using actuarial assumptions when an annuity was purchased or commenced and such amount determined using actuarial assumptions used in calculating payments at the time the Actuarial Gain is determined.

(b) Designated Beneficiary. “Designated Beneficiary” means the individual who is designated as the beneficiary under the Plan and is the Designated Beneficiary under Code Section 401(a)(9) and section 1.401(a)(9)-4, Q&A-1, of the Treasury Regulations.

(c) Distribution Calendar Year. “Distribution Calendar Year” means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year that contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin pursuant to Section 3.02(b).

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(d) Eligible Cost-of-Living Index. An “Eligible Cost-of-Living Index” means an index described below:

(i) A consumer price index that is based on prices of all items (or all items excluding food and energy) and issued by the Bureau of Labor Statistics, including an index for a specific population (such as urban consumers or urban wage earners and clerical workers) and an index for a geographic area or areas (such as a given metropolitan area or state); or

(ii) A percentage adjustment based on a cost-of-living index described in Section (a) above, or a fixed percentage, if less. In any year when the cost-of-living index is lower than the fixed percentage, the fixed percentage may be treated as an increase in an Eligible Cost-of-Living Index, provided it does not exceed the sum of:

(1) The cost-of-living index for that year, and

(2) The accumulated excess of the annual cost-of-living index from each prior year over the fixed annual percentage used in that year (reduced by any amount previously utilized under this Section 3.06(d)(ii)).

(e) Life Expectancy. “Life Expectancy” means the life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury Regulations.

(f) Required Beginning Date. Except as otherwise provided in the Plan, the “Required Beginning Date” means the April 1st of the calendar year following the later of the calendar year in which the Participant attains age 70  ¹/₂, or the calendar year in which the Participant retires, except that benefit distributions to a “5-percent owner” must commence by April 1 of the calendar year following the calendar year in which the Participant attains age 70  ¹/₂. Once distributions have begun to a “5-percent owner” under this Article II, they must continue to be distributed, even if the Participant ceases to be a “5-percent owner” in a subsequent Plan Year.

“5-percent owner” means a Participant who is a 5-percent owner as defined in Code Section 416 at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70  ¹/₂. Once required minimum distributions have begun to a 5-percent owner, they must continue to be distributed, even if the Participant ceases to be a 5-percent owner in a subsequent year.

Part III – 15

ARTICLE IV

LIMITATIONS ON BENEFITS

The limitations of Sections 4.01 through 4.05 shall be subject to those of Section 4.06 which shall apply in Limitation Years beginning on or after July 1, 2007, except as otherwise provided therein.

4.01 General Limitations. This Section applies regardless of whether any Participant is or has ever been a participant in another qualified plan maintained by the Employer. If any Participant is or has ever been a participant in another qualified plan, or a welfare benefit fund (as defined in Code Section 419(e)), an individual medical account (as defined in Code Section 415(l)(2), or a simplified employee pension (as defined in Code Section 408(k)) maintained by the Employer, which provides an Annual Addition as defined in Section 4.05(a), Section 4.02 is also applicable to that Participant’s benefits.

(a) The Annual Benefit otherwise payable to a Participant at any time will not exceed the Maximum Permissible Benefit. If the benefit the Participant would otherwise accrue in a Limitation Year would produce an Annual Benefit in excess of the Maximum Permissible Benefit, the benefit must be limited (or the rate of accrual reduced) so that the Annual Benefit does not exceed the Maximum Permissible Benefit.

(b) If a Participant has made voluntary employee contributions, or mandatory employee contributions as defined in Code Section 411(c)(2)(C) under the terms of this Plan, the amount of such contributions is treated as an Annual Addition to a qualified defined contribution plan, for purposes of Sections 4.01(a) and 4.01(b) of this Article.

4.02 Additional General Limitations. This Section applies if any Participant is also a participant, or has ever participated in another plan maintained by the Employer, including a qualified plan, a welfare benefit fund maintained by the Employer (as defined in Code Section 419(e)) under which amounts attributable to post-retirement medical benefits are allocated to separate accounts of Key Employees (as defined in Code Section 419(A)(d)(3), an individual medical account, or a simplified employee pension that provides an annual addition as described in Section 4.05(a).

(a) If a Participant is, or has ever been, a participant covered under more than one defined benefit plan maintained by the Employer, the sum of the Participant’s Annual Benefits from all such plans may not exceed the Maximum Permissible Benefit. If a Participant is or has ever been a participant in more than one defined benefit Plan maintained by an Employer, the rate of accrual in this Plan will be reduced so that the total Annual Benefits payable at any time under such plans will not exceed the Maximum Permissible Benefit.

(b) For Limitation Years beginning before January 1, 2000, if the Employer maintains, or ever maintained, one or more qualified defined contribution plans covering any Participant in this Plan, a welfare benefit fund (as defined in Code

Part III – 16

Section 419(e)), an individual medical account (as defined in Code Section 415(l)(2)), or a simplified employee pension(as defined in Code Section 408(k)), the sum of the Participant’s Defined Contribution Fraction and Defined Benefit Fraction (the “Combined Limit”) will not exceed 1.0 in any Limitation Year. In the event that a Participant’s Combined Limit would otherwise be exceeded for a Limitation Year, shall be reduced, to the extent necessary, such that such accrual plus the Annual Additions credited to any such Participant’s account for the Limitation Year under the defined contribution plan, welfare benefit fund, individual medical account or simplified employee pension will not exceed the Combined Limit.

4.03 Limitation Year beginning after December 31, 1986. In the case of an individual who was a participant in one or more defined benefit plans of the Employer as of the first day of the first Limitation Year beginning after December 31, 1986, the application of the limitations of this Article shall not cause the Maximum Permissible Benefit for such individual under all such defined benefit plans to be less than the individual’s current Accrued Benefit. The preceding sentence applies only if all such defined benefit plans met the requirements of Code Section 415 for all Limitation Years beginning before January 1, 1987.

4.04 Limitation Year beginning after December 31, 1994. In the case of an individual who was a participant in one or more defined benefit plans of the Employer as of the first day of the first Limitation Year beginning after December 31, 1994, the application of the limitations of this Article shall not cause the Maximum Permissible Amount for such individual under all such defined benefit plans to be less than the individual’s Retirement Protection Act of 1994 (“RPA ‘94”) old law benefit. The preceding sentence applies only if all such defined benefit plans met the requirements of Code Section 415 on December 7, 1994.

4.05 Definitions.

(a) Annual Additions. The sum of the following amounts credited to a Participant’s account for the Limitation Year:

(i) Employer contributions;

(ii) Employee contributions;

(iii) Allocations under a simplified employee pension;

(iv) Forfeitures; and

(v) Amounts allocated after March 31, 1984, to an individual medical account that is part of a pension or annuity plan maintained by the Employer, are treated as Annual Additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a Key Employee, as defined in Section 419A(d)(3), under a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer, are treated as Annual Additions to a defined contribution plan.

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(b) Annual Benefit. A retirement benefit under the Plan which is payable annually in the form of a straight life annuity. A benefit which is payable in a form other than a straight life annuity must be adjusted to an actuarially equivalent straight life annuity before applying the limitations of this Article. In the case of a “GATT Benefit” (which for this purpose is any benefit unless it is paid in the form of a non-decreasing annuity payable over a period not less than the life of the Participant) or a “Non-GATT Benefit” (which for this purpose is any benefit other than a GATT Benefit), the actuarial equivalent straight life annuity commencing as of the benefit commencement date of such GATT Benefit or Non-GATT Benefit is the greater of (i) the equivalent annual life annuity determined by using the interest rate and mortality table in Section 2.02 in Part I of the Plan (the definition of the term “Actuarial Equivalent”) for the purposes of Part I of the Plan and Section 2.02 in Part II of the Plan (the definition of the term “Actuarial Equivalent”) for the purposes of Part II of the Plan; and (ii) the equivalent annual life annuity determined by using the combination of (A) a 5% interest rate in the case of a Non-GATT Benefit or the Code Section 417 Interest Rate in the case of a GATT Benefit; and (B) the Code Section 417 Mortality Table. The portion of the actuarial equivalent straight life annuity attributable to the GATT Benefit is the GATT percentage and the portion of the actuarial equivalent straight life annuity attributable to the Non-GATT Benefit is the Non-GATT Percentage. The Annual Benefit does not include any benefits attributable to Employee contributions or rollover contributions, or the assets transferred from a qualified plan that was not maintained by the Employer. No actuarial adjustment to the benefit is required for (i) the value of a Qualified Joint and Survivor Annuity, (ii) the value of benefits that are not directly related to retirement benefits (such as the qualified disability benefit, pre-retirement death benefits, and post-retirement medical benefits), and (iii) the value of post-retirement cost-of-living increases made in accordance with Code Section 415(d) and Treasury Regulation Section 1.415(c)(2)(iii).

(c) Defined Benefit Dollar Limitation. $90,000. Effective on January 1 of each year, the $90,000 limitation above will be automatically adjusted by multiplying such limit by the cost of living adjustment factor prescribed by the Secretary of the Treasury under Code Section 415(d) in such manner as the Secretary shall prescribe. The new limitation will apply to Limitation Years ending within the calendar year of the date of the adjustment.

Notwithstanding the foregoing, effective for Limitation Years ending after December 31, 2001, the Defined Benefit Dollar Limitation is $160,000, as adjusted effective January 1 of each year under Section 415(d) of the Code in such manner as the Secretary shall prescribe, and payable in the form of a straight life annuity. A limitation as adjusted under Code Section 415(d) will apply to Limitation Years ending with or within the calendar year for which the adjustment applies.

Part III – 18

(d) Defined Benefit Fraction. A fraction, the numerator of which is the sum of the Participant’s Projected Annual Benefits under all the defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of 125 percent of the dollar limitation determined for the Limitation Year under Code Section 415(b)(1)(A) and (d) or 140 percent of the Highest Average Compensation, including any adjustments under Code Section 415(b)(5), both in accordance with paragraph (h) below.

Notwithstanding the above, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125 percent of the sum of the annual benefits under such plans which the Participant had accrued as of the close of the last Limitation Year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the Plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Section 415 for all Limitation Years beginning before January 1, 1987.

Notwithstanding the foregoing, for Limitation Years beginning before January 1, 2000, for any Top Heavy Plan Year, 100 percent shall be substituted for 125 percent unless an extra minimum benefit or contribution is credited pursuant to Section 2.03(b) of Part III of the Plan. However, for any such Plan Year in which this Plan is a super top heavy plan, 100 percent shall be substituted for 125 percent in any event.

(e) Defined Contribution Fraction. A fraction, the numerator of which is the sum of the Annual Additions to the Participant’s account under all the defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years, (including the Annual Additions attributable to the Participant’s nondeductible employee contributions to this and all other defined benefit plans (whether or not terminated) maintained by the Employer, and the Annual Additions attributable to all welfare benefit funds (as defined in Code Section 419(e)), individual medical accounts (as defined in Code Section 415(l)(2)), or simplified employee pensions (as defined in Code Section 408(k)), maintained by the Employer, and the denominator of which is the sum of the maximum aggregate amounts for the current and all prior Limitation Years of service with the Employer (regardless of whether a defined contribution plan was maintained by the Employer).

The maximum aggregate amount in any Limitation Year is the lesser of (1) 125 percent of the dollar limitation under Code Section 415(c)(1)(A) after adjustment under Section 415(d), or (2) 35 percent of the Participant’s Compensation for such year.

If the Employee was a participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined contribution plans

Part III – 19

maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the defined benefit fraction would otherwise exceed 1.0 under the terms of this plan. Under the adjustment, an amount equal to the product of (i) the excess of the sum of the fractions over 1.0 times (ii) the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the plans made after May 6, 1986, but using the Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987.

The annual addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all employee contributions as Annual Additions.

Notwithstanding the foregoing, for Limitation Years beginning before January 1, 2000, for any Top Heavy Plan Year, 100 percent shall be substituted for 125 percent unless an extra minimum allocation is made pursuant to Section 2.03(b) of Part III of the Plan. However, for any such Plan Year in which this Plan is a super top heavy plan, 100 percent shall be substituted for 125 percent in any event.

(f) Employer. For purposes of this Article, Employer shall mean the employer that adopt this Plan and all members of a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h), all trades or businesses under common control (as defined in Code Section 414(c) as modified by code Section 415(h), or all members of an affiliated service group (as defined in Code Section 414(m) of which the adopting Employer is a part, and any other entity required to be aggregated with the Employer pursuant to Regulations under Code Section 414(o).

(g) Highest Average Compensation. The average Compensation for the three consecutive years of service with the Employer that produces the highest average. A year of service with the Employer is the 12-consecutive month period defined in Section 2.44 of Part I of the Plan (the definition of the term, “Year of Service”).

In the case of a Participant who has separated from service, the Participant’s Highest Average Compensation will be automatically adjusted by multiplying such compensation by the cost of living adjustment factor prescribed by the Secretary of the Treasury under Code Section 415(d) in such manner as the Secretary shall prescribe. The adjusted compensation amount will apply to Limitation Years ending within the calendar year of the date of the adjustment.

(h) Maximum Permissible Benefit.

(i) The lesser of the Defined Benefit Dollar Limitation or 100 percent of the Participant’s Highest Average Compensation.

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(ii) If the Participant has less than 10 years of participation in the Plan, the Defined Benefit Dollar Limitation is reduced by one-tenth for each year of participation (or part thereof) less than ten.

(iii) If the Participant has less than ten years of service with the Employer, the Compensation limitation is reduced by one-tenth for each Year of Service (or part thereof) less than ten. The adjustments of this paragraph (iii) shall be applied in the denominator of the Defined Benefit Fraction based upon Years of Service. For purposes of computing the Defined Benefit Fraction only, Years of Service shall include future years of service occurring before the Participant’s Normal Retirement Age. Such future years of service shall include the year that contains the date the Participant reaches Normal Retirement Age, only if it can be reasonably anticipated that the Participant will receive a Year of Service for such year, or the year in which the Participant terminates employment, if earlier.

(iv) If the Annual Benefit of the Participant commences before the Participant’s Social Security Retirement Age, but on or after Age 62, the Defined Benefit Dollar Limitation as reduced above, if necessary, shall be determined as follows:

(A) If a Participant’s Social Security Retirement Age is 65, the Dollar Limitation for benefits commencing on or after Age 62 is determined by reducing the Defined Benefit Dollar Limitation by 5/9 of one percent for each month by which benefits commence before the month in which the Participant attains Age 65.

(B) If a Participant’s Social Security Retirement Age is greater than 65, the Dollar Limitation for benefits commencing on or after Age 62 is determined by reducing the Defined Benefit Dollar Limitation by 5/9 of one percent for each of the first 36 months and 5/12 of one percent for each of the additional months (up to 24 months) by which benefits commence before the month of the Participant’s Social Security Retirement Age.

(v) If the Annual Benefit of a Participant commences prior to Age 62, the Defined Benefit Dollar Limitation shall be the actuarial equivalent of an Annual Benefit beginning at Age 62, as determined above, reduced for each month by which benefits commence before the month in which the Participant attains Age 62. The reduced dollar limitation is the sum of the Non-GATT Limitation and the GATT Limitation. For purposes of the immediately preceding sentence, the Non-GATT Limitation is the product of the Non-GATT Percentage and the lesser of the equivalent early retirement dollar amount computed as described in Section 6.02 of Part I of the Plan (Early Retirement Benefit) or in Section 5.02 of Part II of the Plan (Early Retirement Benefit) and the amount computed using an interest rate of 5% and the Code Section 417 Mortality Table in Section

Part III – 21

2.02 in Part I of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part I of the Plan) or Section 2.02 in Part II of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part II of the Plan); and the GATT Limitation is the product of the GATT Percentage (as described in Section 4.05(b) of Part III of the Plan) and the lesser of the equivalent early retirement dollar amount computed as in described in Section 6.02 of Part I of the Plan (Early Retirement Benefit) or in Section 5.02 of Part II of the Plan (Early Retirement Benefit) and the amount computed using an interest rate of 5% and the Code Section 417 Mortality Table (as described in Section 2.02 in Part I of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part I of the Plan) or Section 2.02 in Part II of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part II of the Plan); and the GATT Limitation is the product of the GATT Percentage (as described in Section 4.05(b) of Part III of the Plan) and the lesser of the equivalent early retirement dollar amount computed as described in Section 6.02 of Part I of the Plan (Early Retirement Benefit) or in Section 5.02 of Part II of the Plan (Early Retirement Benefit) and the amount computed using the Code Section 417 Interest Rate and the Code Section 417 Mortality Table. Any decrease in the Defined Benefit Dollar Limitation determined in accordance with this Paragraph (iv) shall not reflect the mortality decrement to the extent that benefits will not be forfeited upon the death of the Participant.

(vi) If the Annual Benefit of a Participant commences after the Participant’s Social Security Retirement Age, the Defined Benefit Dollar Limitation as reduced in (ii) above, if necessary, shall be adjusted so that it is the actuarial equivalent of an annual benefit of such Dollar Limitation beginning at the Participant’s Social Security Retirement Age. The increased dollar limitation is the lesser of the equivalent dollar amount computed using the interest rate and mortality table used for actuarial equivalence set forth in Part I of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part I of the Plan) or Section 2.02 in Part II of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part II of the Plan) and the amount computed using an interest rate of 5 percent and the Code Section 417 Mortality Table (as described in Part I of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part I of the Plan) or Section 2.02 in Part II of the Plan (the definition of the term “Actuarial Equivalent” for the purposes of Part II of the Plan).

(i) Projected Annual Benefit. The Annual Benefit, as defined in Section 4.05(b) of this Article, to which the Participant would be entitled under the terms of the Plan assuming:

(i) the Participant will continue employment until Normal Retirement Age under the Plan (or current Age, if later); and

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(ii) the Participant’s Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the Plan will remain constant for all future Limitation Years.

(j) RPA ‘94 Old Law Benefit. The Participant’s Accrued Benefit under the terms of the plan as of December 31, 1996, (the “RPA ‘94 freeze date”), for the annuity starting date and optional form and taking into account the limitations of Code Section 415, as in effect on December 7, 1994, including the participation requirements under Code Section 415(b)(5). In determining the amount of a Participant’s RPA ‘94 old law benefit, the following shall be disregarded;

(i) any Plan amendment increasing benefits adopted after the RPA ‘94 freeze date; and

(ii) any cost of living adjustments that become effective after such date.

A Participant’s RPA ‘94 old law benefit is not increased after the RPA ‘94 freeze date, but if the limitations of Code Section 415, as in effect on December 7, 1994, are less than the limitations that were applied to determine the Participant’s RPA ‘94 old law benefit on the RPA ‘94 freeze date, then the Participant’s RPA ‘94 old law benefit will be reduced in accordance with such reduced limitation. If, at any date after the RPA ‘94 freeze date, the Participant’s total plan benefit, before the application of Code Section 415, is less than the Participant’s RPA ‘94 old law benefit, the RPA ‘94 old law benefit will be reduced to the Participant’s total plan benefit.

(k) Social Security Retirement Age. Age 65 in the case of a Participant attaining Age 62 before January 1, 2000 (i.e., born before January 1, 1938), Age 66 for a Participant attaining age 62 after December 31, 1999, and before January 1, 2017 (i.e., born after December 31, 1937, but before January 1, 1955), and Age 67 for a participant attaining Age 62 after December 31, 2016 (i.e., born after December 31, 1954).

(l) TRA ‘86 Accrued Benefit. A Participant’s Accrued Benefit under the Plan, determined as if the Participant had separated from service as of the close of the last Limitation Year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of Code Section 415(b)(2). In determining the amount of a Participant’s TRA ‘86 Accrued Benefit, the following shall be disregarded:

(i) any change in the terms and conditions of the Plan after May 5, 1986; and

(ii) any cost of living adjustments occurring after May 5, 1986.

(m) Year of Participation. The Participant shall be credited with a year of participation (computed to fractional parts of a year) for each accrual computation period for which the following conditions are met: (i) The Participant is credited with at least the number of Hours of Service for benefit accrual purposes, required

Part III – 23

under the terms of the Plan in order to accrue a benefit for the accrual computation period, and (ii) the Participant is included as a Participant under the eligibility provisions of the plan for at least one day of the accrual computation period. If these two conditions are met, the portion of a year of participation credited to the Participant shall equal the amount of benefit accrual service credited to the Participant for such accrual computation period.

4.06 Final Section 415 Regulations.Effective Date. The limitations of this Section shall apply in Limitation Years beginning on or after July 1, 2007, except as otherwise provided herein.

(b) Grandfather Provision. The application of the provisions of this Section shall not cause the maximum permissible benefit for any Participant to be less than the Participant’s accrued benefit under all the defined benefit plans of the employer or a predecessor employer as of the end of the last Limitation Year beginning before July 1, 2007 under provisions of the plans that were both adopted and in effect before April 5, 2007. The preceding sentence applies only if the provisions of such defined benefit plans that were both adopted and in effect before April 5, 2007 satisfied the applicable requirements of statutory provisions, regulations, and other published guidance relating to Code Section 415 in effect as of the end of the last Limitation Year beginning before July 1, 2007, as described in Section 1.415(a)-1(g)(4) of the Treasury Regulations.

(c) Incorporation by Reference. Notwithstanding anything contained in the Plan to the contrary, the limitations, adjustments, and other requirements prescribed in the Plan shall comply with the provisions of Code Section 415 and the final regulations promulgated thereunder, the terms of which are specifically incorporated herein by reference as of the first Limitation Year beginning on or after July 1, 2007, except where an earlier effective date is otherwise provided in the final regulations or in this Section. However, where the final regulations permit the Plan to specify an alternative option to a default option set forth in the regulations, and the alternative option was available under statutory provisions, regulations, and other published guidance relating to Code Section 415 as in effect prior to April 5, 2007, and the Plan provisions in effect as of April 5, 2007 incorporated the alternative option, said alternative option shall remain in effect as a plan provision for Limitation Years beginning on or after July 1, 2007.

(d) High Three-Year Average Compensation. For purposes of the Plan’s provisions reflecting Code Section 415(b)(3) (i.e., limiting the annual benefit payable to no more than 100% of the Participant’s average annual compensation), a Participant’s average compensation shall be the average compensation for the three consecutive years of service, during which the Employee had the greatest aggregate compensation from the Employer, except that a Participant’s compensation for a year of service shall not include compensation in excess of the limitation under Code Section 401(a)(17) that is in effect for the calendar year in which such year of service begins. If the Participant has less than three consecutive years of service, compensation shall be averaged over the

Part III – 24

Participant’s longest consecutive period of service, including fractions of years, but not less than one year. In the case of a Participant who is rehired by the Employer after a severance of employment, the Participant’s high three-year average compensation shall be calculated by excluding all years for which the Participant performs no services for and receives no compensation from the Employer (the “break period”), and by treating the years immediately preceding and following the break period as consecutive.

(e) Adjustment to dollar limit after date of severance. In the case of a Participant who has had a severance from employment with the Employer, the Defined Benefit Dollar Limitation applicable to the Participant in any Limitation Year beginning after the date of severance shall be automatically adjusted under Code Section 415(d).

(f) Compensation paid after severance from employment. For Limitation Years beginning on or after July 1, 2007 compensation for a Limitation Year, within the meaning of Code Section 415(c)(3), shall also include the following types of compensation paid by the later of 2 ¹/₂ months after a Participant’s severance from employment with the employer maintaining the plan or the end of the Limitation Year that includes the date of the Participant’s severance from employment with the employer maintaining the plan. Any other payment of compensation paid after severance of employment that is not described in the following types of compensation is not considered compensation within the meaning of Code Section 415(c)(3), even if payment is made within the time period specified above.

(i) Regular pay after severance from employment. Compensation shall include regular pay after severance of employment if:

(1) The payment is regular compensation for services during the Participant’s regular working hours, or compensation for services outside the Participant’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(2) The payment would have been paid to the Participant prior to a severance from employment if the Participant had continued in employment with the employer.

(ii) Leave cashouts and deferred compensation. Leave cashouts and deferred compensation shall be included in compensation, if those amounts would have been included in the definition of compensation if they were paid prior to the Participant’s severance from employment with the Employer maintaining the Plan, and the amounts are either:

(1) Payment for unused accrued bona fide sick, vacation, or other leave, but only if the Participant would have been able to use the leave if employment had continued; or

Part III – 25

(2) Received pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid to the if the Participant had continued in employment with the employer and only to the extent that the payment is includible in the Participant’s gross income.

(iii) Salary continuation payments for military service Participants. Compensation does not include payments to an individual who does not currently perform services for the employer by reason of qualified military service (as that term is used in Code Section 414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the employer rather than entering qualified military service. Notwithstanding the foregoing, for Plan Years beginning after December 31, 2008, a differential wage payment, as defined by Code Section 3401(h)(2), shall be treated as compensation, for purposes of Code Section 415(c)(3) and Treasury Regulation Section 1.415(c)-2, as provided Section 11.02 of Part III of the Plan.

(iv) Salary continuation payments for disabled Participants. Compensation does not include compensation paid to a Participant who is permanently and totally disabled (as defined in Code Section 22(e)(3)) if the Participant is not a highly compensated employee (as defined in Code Section 414(q)) immediately before becoming disabled, or to all Participants if the Plan provides for the continuation of compensation on behalf of all Participants who are permanently and totally disabled for a fixed or determinable period.

(g) Administrative delay. Compensation for a Limitation Year shall not include amounts earned but not paid during the Limitation Year solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next Limitation Year, the amounts are included on a uniform and consistent basis with respect to all similarly situation Participants, and no compensation is included in more than one Limitation Year.

(h) Option to apply compensation provisions early. The rules in Sections 4.6(g) shall apply for Limitation Years beginning on or after July 1, 2007.

ARTICLE V

PRE-TERMINATION BENEFIT RESTRICTIONS

5.01 In General. In the event of Plan termination, the benefit of any Highly Compensated Employee is limited to a benefit that is nondiscriminatory under Code Section 401(a)(4).

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Benefits distributed to any of the 25 most Highly Compensated Employees shall be restricted such that the annual payments shall be no greater than an amount equal to the payment that would be made on behalf of the Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee’s Accrued Benefit and the Employee’s other benefits under the Plan.

5.02 Exceptions. Section 5.01 shall not apply if: (i) after payment of the benefit to an Employee described in the preceding Section, the value of Plan assets equals or exceeds 110% of the value of current liabilities, as defined in Code Section 412(l)(7); or (ii) the value of the benefits for an Employee described above is less than 1% of the value of current liabilities.

5.03 Included Benefits. For purposes of this Article, benefits include any periodic income, any withdrawal values payable to a living Employee, and any death benefits not provided for by insurance on the Employee’s life.

ARTICLE V I

BENEFIT RESTRICTIONS

6.01 Effective Date and Application of Section.

(i) Effective Date. The provisions of this Section apply to Plan Years beginning after December 31, 2007.

(ii) Notwithstanding anything in this Section to the contrary, the provisions of Code Section 436 and the Regulations thereunder are incorporated herein by reference.

(iii) For Plans that have a valuation date other than the first day of the Plan Year, the provisions of Code Section 436 and this Article will be applied in accordance with Regulations.

6.02 Funding-Based Limitation on Shutdown Benefits and Other Unpredictable Contingent Event Benefits.

(i) In general. If a Participant is entitled to an “unpredictable contingent event benefit” payable with respect to any event occurring during any Plan Year, then such benefit may not be provided if the “adjusted funding target attainment percentage” for such Plan Year (A) is less than sixty percent (60%) or, (B) would be less than sixty percent (60%) percent taking into account such occurrence.

(ii) Exemption. Paragraph (i) shall cease to apply with respect to any Plan Year, effective as of the first day of the Plan Year, upon payment by the Employer of a contribution (in addition to any minimum required contribution under Code Section 430) equal to:

(A) in the case of 5.02(i)(A) above, the amount of the increase in the funding target of the Plan (under Code Section 430) for the Plan Year attributable to the occurrence referred to in paragraph (i), and

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(B) in the case of 5.02(i)(B) above, the amount sufficient to result in an “adjusted funding target attainment percentage” of sixty percent (60%).

(iii) Unpredictable contingent event benefit. For purposes of this subsection, the term “unpredictable contingent event benefit” means any benefit payable solely by reason of:

(A) a plant shutdown (or similar event, as determined by the Secretary of the Treasury), or

(B) an event other than the attainment of any age, performance of any service, receipt or derivation of any compensation, or occurrence of death or disability.

6.03 Limitations on Plan Amendments Increasing Liability for Benefits.

(i) In general. No amendment which has the effect of increasing liabilities of the Plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable may take effect during any Plan Year if the “adjusted funding target attainment percentage” for such Plan Year is:

(A) less than eighty percent (80%), or

(B) would be less than eighty percent (80%) taking into account such amendment.

(ii) Exemption. Paragraph 5.03(i) above shall cease to apply with respect to any Plan Year, effective as of the first day of the Plan Year (or if later, the effective date of the amendment), upon payment by the Employer of a contribution (in addition to any minimum required contribution under Code Section 430) equal to -

(A) in the case of paragraph 5.03(i)(A) above, the amount of the increase in the funding target of the Plan (under Code Section 430) for the Plan Year attributable to the amendment, and

(B) in the case of paragraph 5.03(i)(B) above, the amount sufficient to result in an “adjusted funding target attainment percentage” of eighty percent (80%).

(iii) Exception for certain benefit increases. Paragraph (i) shall not apply to any amendment which provides for an increase in benefits under a formula

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which is not based on a Participant’s compensation, but only if the rate of such increase is not in excess of the contemporaneous rate of increase in average wages of Participants covered by the amendment.

6.04 Limitations on Accelerated Benefit Distributions.

(i) Funding percentage less than sixty percent (60%). If the Plan’s “adjusted funding target attainment percentage” for a Plan Year is less than sixty percent (60%), then the Plan may not pay any “prohibited payment” after the valuation date for the Plan Year.

(ii) Bankruptcy. During any period in which the Employer is a debtor in a case under title 11, United States Code, or similar Federal or State law, the Plan may not pay any “prohibited payment.” The preceding sentence shall not apply on or after the date on which the enrolled actuary of the Plan certifies that the “adjusted funding target attainment percentage” of the Plan is not less than one-hundred percent (100%).

(iii) Limited payment if percentage at least sixty percent (60%) but less than eighty percent (80%) percent.

(A) In general. If the Plan’s “adjusted funding target attainment percentage” for a Plan Year is sixty percent (60%) or greater but less than eighty percent (80%), then the Plan may not pay any “prohibited payment” after the valuation date for the Plan Year to the extent the amount of the payment exceeds the lesser of:

(1) fifty (50) percent of the amount of the payment which could be made without regard to this subsection, or

(2) the present value (determined under guidance prescribed by the Pension Benefit Guaranty Corporation, using the interest and mortality assumptions under Code Section 417(e)) of the maximum guarantee with respect to the participant under ERISA Section 4022.

(B) One-time application.

(1) In general. Only 1 “prohibited payment” meeting the requirements of subparagraph (A) may be made with respect to any Participant during any period of consecutive Plan Years to which the limitations under either paragraph (i) or (ii) or this paragraph applies.

(2) Treatment of beneficiaries. For purposes of this subparagraph, a Participant and any Beneficiary (including an alternate payee, as defined in Code Section 414(p)(8)) shall be treated as one Participant. If the Accrued Benefit

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of a Participant is allocated to such an alternate payee and one or more other persons, the amount under subparagraph (A) shall be allocated among such persons in the same manner as the Accrued Benefit is allocated unless the qualified domestic relations order (as defined in Code Section 414(p)(1)(A)) provides otherwise.

(iv) Exception. This subsection shall not apply for any Plan Year if the terms of the Plan (as in effect for the period beginning on September 1, 2005, and ending with such Plan Year) provide for no benefit accruals with respect to any Participant during such period.

(v) “Prohibited payment.” For purpose of this subsection, the term “prohibited payment” means:

(A) any payment, in excess of the monthly amount paid under a single life annuity (plus any Social Security supplements described in the last sentence of Code Section 411(a)(9)), to a Participant or Beneficiary whose Annuity Starting Date occurs during any period a limitation under paragraph (i) or (ii) is in effect,

(B) any payment for the purchase of an irrevocable commitment from an insurer to pay benefits, and

(C) any other payment specified by the Secretary by Regulations.

Such term shall not include the payment of a benefit which under Code Section 411(a)(11) may be immediately distributed without the consent of the Participant.

6.05 Limitation on Benefit Accruals for Plans With Severe Funding Shortfalls.

(i) In general. If the Plan’s “adjusted funding target attainment percentage” for a Plan Year is less than sixty percent (60%), benefit accruals under the Plan shall cease as of the valuation date for the Plan Year.

(ii) Exemption. Paragraph (i) shall cease to apply with respect to any Plan Year, effective as of the first day of the Plan Year, upon payment by the Employer of a contribution (in addition to any minimum required contribution under Code Section 430) equal to the amount sufficient to result in an “adjusted funding target attainment percentage” of sixty percent (60%).

(iii) Temporary modification of limitation. In the case of the first Plan Year beginning during the period beginning on October 1, 2008, and ending on September 30, 2009, the provisions of Section 6.05(i) above shall be applied by substituting the Plan’s “adjusted funding target attainment percentage” for the preceding Plan Year for such percentage for such Plan Year, but only if the “adjusted funding target attainment percentage” for the preceding year is greater.

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6.06 Rules Relating to Contributions Required to Avoid Benefit Limitations.

(i) Security may be provided.

(A) In general. For purposes of this section, the “adjusted funding target attainment percentage” shall be determined by treating as an asset of the Plan any security provided by the Employer in a form meeting the requirements of subparagraph (B).

(B) Form of security. The security required under subparagraph (A) shall consist of:

(1) a bond issued by a corporate surety company that is an acceptable surety for purposes of ERISA Section 412;

(2) cash, or United States obligations which mature in three (3) years or less, held in escrow by a bank or similar financial institution; or

(3) such other form of security as is satisfactory to the Secretary and the parties involved.

(C) Enforcement. Any security provided under subparagraph (A) may be perfected and enforced at any time after the earlier of:

(1) the date on which the Plan terminates;

(2) if there is a failure to make a payment of the minimum required contribution for any Plan Year beginning after the security is provided, the due date for the payment under Code Section 430(j); or

(3) if the “adjusted funding target attainment percentage” is less than sixty percent (60%) for a consecutive period of 7 years, the valuation date for the last year in the period.

(D) Release of security. The security shall be released (and any amounts thereunder shall be refunded together with any interest accrued thereon) at such time as the Secretary may prescribe in Regulations, including Regulations for partial releases of the security by reason of increases in the “adjusted funding target attainment percentage.”

(ii) Prefunding balance or funding standard carryover balance may not be used. No prefunding balance under Code Section 430(f) or funding

Part III – 31

standard carryover balance may be used under Sections 6.02, 6.03, or 6.05 to satisfy any payment an Employer may make under any such subsection to avoid or terminate the application of any limitation under such subsection.

(iii) Deemed reduction of funding balances:

(A) In general. In any case in which a benefit limitation under Sections 6.02, 6.03, 6.04, or 6.05 would (but for this subparagraph and determined without regard to Sections 6.02(ii), 6.03(ii), or 6.05(ii)) apply to such Plan for the Plan Year, the Employer shall be treated for purposes of this title as having made an election under Code Section 430(f) to reduce the prefunding balance or funding standard carryover balance by such amount as is necessary for such benefit limitation to not apply to the Plan for such Plan Year.

(B) Exception for insufficient funding balances. Subparagraph (A) shall not apply with respect to a benefit limitation for any Plan Year if the application of subparagraph (A) would not result in the benefit limitation not applying for such Plan Year.

6.07 Presumed Underfunding for Purposes of Benefit Limitations.

(i) Presumption of continued underfunding. In any case in which a benefit limitation under Sections 6.02, 6.03, 6.04, or 6.05 has been applied to a Plan with respect to the Plan Year preceding the current Plan Year, the “adjusted funding target attainment percentage” of the Plan for the current Plan Year shall be presumed to be equal to the “adjusted funding target attainment percentage” of the Plan for the preceding Plan Year until the enrolled actuary of the Plan certifies the actual “adjusted funding target attainment percentage” of the Plan for the current Plan Year.

(ii) Presumption of underfunding after 10th month. In any case in which no certification of the “adjusted funding target attainment percentage” for the current Plan Year is made with respect to the Plan before the first day of the 10th month of such year, for purposes of Sections 6.02, 6.03, 6.04, and 6.05, such first day shall be deemed, for purposes of such subsection, to be the valuation date of the Plan for the current Plan Year and the Plan’s “adjusted funding target attainment percentage” shall be conclusively presumed to be less than sixty percent (60%) as of such first day.

(iii) Presumption of underfunding after 4th month for nearly underfunded plans. In any case in which:

(A) a benefit limitation under Sections 6.02, 6.03, 6.04, or 6.05 did not apply to a Plan with respect to the Plan Year preceding the current Plan Year, but the “adjusted funding target attainment percentage”

Part III – 32

of the Plan for such preceding Plan Year was not more than ten (10) percentage points greater than the percentage which would have caused such subsection to apply to the Plan with respect to such preceding Plan Year, and

(B) as of the first day of the 4th month of the current Plan Year, the enrolled actuary of the Plan has not certified the actual “adjusted funding target attainment percentage” of the Plan for the current Plan Year, until the enrolled actuary so certifies, such first day shall be deemed, for purposes of such subsection, to be the valuation date of the Plan for the current Plan Year and the “adjusted funding target attainment percentage” of the Plan as of such first day shall, for purposes of such subsection, be presumed to be equal to ten (10) percentage points less than the “adjusted funding target attainment percentage” of the Plan for such preceding Plan Year.

6.08 Treatment of Plan as of Close of Prohibited or Cessation Period. The following provisions apply for purposes of applying this Section.

(i) Operation of Plan after period. Payments will resume effective as of the day following the close of the period for which any limitation of payment of benefits under Section 6.04 applies. If a limitation on benefit accruals under Section 6.05 applies to the Plan as of a “Section 436 measurement date,” but that limit no longer applies to the Plan as of a later “Section 436 measurement date,” then that limitation shall not apply to benefit accruals that are based on service on or after that later “Section 436 measurement date,” except to the extent that the Plan does then not provide for such benefit accruals or provides that benefit accruals will not resume when the limitation ceases to apply. A “Section 436 measurement date” is the date that is used to determine when the limitations of Code Sections 436(d) and 436(e) apply or cease to apply.

(ii) Treatment of affected benefits. Nothing in this subsection shall be construed as affecting the Plan’s treatment of benefits which would have been paid or accrued but for this Section.

6.09 Definitions.

(i) The term “funding target attainment percentage” has the same meaning given such term by Code Section 430(d)(2), except as otherwise provided herein. However, in the case of Plan Years beginning in 2008, the “funding target attainment percentage” for the preceding Plan Year may be determined using such methods of estimation as the Secretary may provide.

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(ii) The term “adjusted funding target attainment percentage” means the “funding target attainment percentage” which is determined under paragraph (i) by increasing each of the amounts under subparagraphs (A) and (B) of Code Section 430(d)(2) by the aggregate amount of purchases of annuities for employees other than highly compensated employees (as defined in Code Section 414(q)) which were made by the Plan during the preceding two (2) Plan Years.

(iii) Application to plans which are fully funded without regard to reductions for funding balances.

(A) In general. In the case of a Plan for any Plan Year, if the “funding target attainment percentage” is one-hundred percent (100%) or more (determined without regard to this paragraph and without regard to the reduction in the value of assets under Code Section 430(f)(4)(A)), the “funding target attainment percentage” for purposes of paragraphs (i) and (ii) shall be determined without regard to such reduction.

(B) Transition rule. Subparagraph (A) shall be applied to Plan Years beginning after 2007 and before 2011 by substituting for “one-hundred percent (100%)” the applicable percentage determined in accordance with the following table:

In the case of a Plan Year beginning in calendar year:	The applicable percentage is:
2008	92%
2009	94%
2010	96%

(C) Subparagraph (B) shall not apply with respect to any Plan Year after 2008 unless the “funding target attainment percentage” (determined without regard to this paragraph) of the Plan for each preceding Plan Year after 2007 was not less than the applicable percentage with respect to such preceding Plan Year determined under subparagraph (B).

ARTICLE VII

PLAN FIDUCIARY RESPONSIBILITIES

7.01 Plan Fiduciaries. The Plan Fiduciaries shall be:

(i) the Trustee(s) of the Plan;

(ii) the Plan Administrator; and

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(iii) such other person or persons as may be designated by the Plan Administrator as a fiduciary in accordance with the provisions of this Article.

7.02 General Fiduciary Duties. Each Plan Fiduciary shall discharge his or her duties solely in the interest of the Participants and their Beneficiaries and act:

(i) for the exclusive purpose of providing benefits to Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan;

(ii) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

(iii) by diversifying the investments of the Plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so, if the Fiduciary has the responsibility to invest plan assets; and

(iv) in accordance with the documents and instruments governing the Plan insofar as such documents and instruments are consistent with the provisions only Title I of ERISA.

Each Plan Fiduciary shall perform the duties specifically assigned to him or her. No Plan Fiduciary shall have any responsibility for the performance or non-performance of any duties not specifically allocated to him or her.

7.03 Duties of the Trustee(s). The specific responsibilities and duties of the Trustee(s) are set forth in the Trust Indenture among the Plan Sponsor, the Plan Administrator, and the Trustee(s). In general the Trustee(s) shall:

(i) invest Plan assets, subject to directions from the Plan Administrator or from any duly appointed investment manager;

(ii) maintain adequate records of receipts, disbursements, and other transactions involving the Plan; and

(iii) prepare such reports, statements, tax returns and other forms as may be required under the Trust Indenture or applicable laws and regulations.

7.04 Powers and Duties of the Plan Administrator. The Plan Administrator is the Benefits Committee. The Plan Administrator shall have the power, discretionary authority, and duty to interpret the provisions of the Plan and to make all decisions and take all actions that shall be necessary or proper in order to carry out the provisions of the Plan. Without limiting the generality of the foregoing, the Plan Administrator shall:

(i) monitor compliance with the provisions of ERISA and other applicable laws with respect to the Plan;

Part III – 35

(ii) establish an investment policy and funding method consistent with objectives of the Plan and with the requirements of applicable laws and regulations;

(iii) invest Plan assets except to the extent that the Plan Administrator has delegated such investment duties to an investment manager;

(iv) evaluate from time to time investment policy and the performance of any investment manager or investment advisor appointed by it;

(v) be solely responsible to, and shall, interpret and construe the Plan and resolve any ambiguities therein, with any such interpretations or constrictions to be conclusively binding and final, to the extent permitted by applicable law, upon all persons interested or claiming under the Plan;

(vi) determine, in its sole discretion, all questions concerning the eligibility of any person to participate in the Plan, the right to and the amount of any benefit payable under the Plan to or on behalf of an individual and the date on which any individual ceases to be a Participant, with any such determination to be conclusively binding and final, to the extent permitted by applicable law, upon all persons interested or claiming an interest in the Plan;

(vii) establish guidelines as required for the orderly and uniform administration of the Plan;

(viii) exercise overall control of the operation and administration of the Plan in matters not allocated to some other Fiduciary by the terms of this Plan.

(ix) administer the Plan on a day-to-day basis in accordance with the provisions of this Plan and all other pertinent documents;

(x) retain and maintain Plan records, including Participant census data, participation dates, compensation records, and such other records necessary or desirable for proper Plan administration;

(xi) prepare and arrange for delivery to Participants of such summaries, descriptions, announcements and reports as are required to be given to participants under applicable laws and regulations;

(xii) file with the U.S. Department of Labor, the Internal Revenue Service and other regulatory agencies on a timely basis all required reports, forms and other documents;

Part III – 36

(xiii) prepare and furnish to the Trustee(s) sufficient records and data to enable the Trustee(s) to properly perform its obligations under the Trust Indenture; and

(xiv) to take appropriate actions required to correct any errors made in determining the eligibility of any employee for benefits under the Plan or the amount of benefits payable under the Plan, including as part of correcting any error made in computing the benefits of any Participant or Beneficiary, making equitable adjustments (an increase or decrease) in the amount of any future benefits payable under the Plan and including the recovery of any overpayment of benefits paid from the Plan as provided in Treasury Regulation Section 1.401(a)-13(c)(2)(iii).

The Plan Administrator may appoint or employ such advisers or assistants as the Plan Administrator deems necessary and may delegate to any one or more of its members any responsibility it may have under the Plan or designate any other person or persons to carry out any responsibility it may have under the Plan.

Notwithstanding any provisions elsewhere to the contrary, the Plan Administrator shall have total discretion to fulfill the above responsibilities as the Plan Administrator sees fit on a uniform and consistent basis and as the Plan Administrator believes a prudent person acting in a like capacity and familiar with such matters would do.

7.05 Designation of Fiduciaries. The Plan Administrator shall have the authority to appoint and remove Trustee(s) in accordance with the Trust Indenture. The Plan Administrator may appoint and remove an investment manager and delegate to said investment manager power to manage, acquire or dispose of any assets of the Plan.

While there is an investment manager, the Plan Administrator shall have no obligation under this Plan with regard to the performance or non-performance of the duties delegated to the investment manager.

The Plan Administrator shall appoint all other Fiduciaries of this Plan. In making its appointment or delegation of authority, the Plan Administrator may designate all of the responsibilities to one person or it may allocate the responsibilities, on a continuing basis or on an ad hoc basis, to one or more individuals either jointly or severally. No individual named a Fiduciary shall have any responsibility for the performance or non-performance of any responsibilities or duties not allocated to him or her.

The appointing authority of a Fiduciary shall periodically, but not less frequently than annually, review the performance of each Fiduciary appointed in order to carry out the general fiduciary duties specified in Section 7.02 and, where appropriate, in its sole discretion, take or recommend remedial action.

7.06 Delegation of Duties by a Fiduciary. Except as provided in this Plan or in the appointment as a Fiduciary, no Fiduciary may delegate his or her or her fiduciary responsibilities. If authorized by the appointing authority, a Fiduciary may appoint such agents as may be deemed necessary and delegate to such agents any non-fiduciary powers or duties,

Part III – 37

whether ministerial or discretionary. No Fiduciary or agent of a Fiduciary who is a full-time employee of the Employer will receive any compensation from the Plan for his or her or her services, but the Employer or the Plan shall pay all expenses that such employee reasonably incurs in the discharge of his or her duties.

ARTICLE VIII

BENEFITS COMMITTEE

8.01 Appointment of Benefits Committee. The Benefits Committee (the “Benefits Committee”) shall consist of three or more members appointed from time to time by the President of the Employer (the “President”), who shall also designate one of the members as chairperson. Each member of the Benefits Committee and its chairperson shall serve at the pleasure of the appointing authority.

8.02 Benefits Committee to Act by Majority Vote, etc. The Benefits Committee shall act by majority vote of all members. All actions, determinations, interpretations and decisions of the Benefits Committee with respect to any matter within its jurisdiction will be conclusive and binding on all persons. Any person may rely conclusively upon any action if certified by the Benefits Committee.

Notwithstanding the above, a member of the Benefits Committee who is also a Participant shall not vote or act upon any matter relating solely or primarily to himself or herself.

8.03 Records and Reports of the Benefits Committee. The Benefits Committee shall keep a record of all of its proceedings and acts, and shall keep such books of account, records and other data as may be necessary for the proper administration of the Plan and file or deliver to Participants and their Beneficiaries whatever reports are required by any regulatory authority.

8.04 Costs and Expenses of Administration. Notwithstanding any provisions of the Plan to the contrary, all clerical, legal and other expenses of the Plan and the Trust, including Trustee’s fees, shall be paid by the Plan, except to the extent the Employer elects to pay such amounts; provided, however, that if the Employer pays such amounts it shall be reimbursed by the Trust for such amounts unless the Employer elects not to be so reimbursed.

8.05 Indemnification of the Plan Administrator and Assistants. The Employer shall indemnify and defend, to the extent permitted under the By-Laws of the Employer, any Employee or former Employee (i) who serves or has served as a member of the Benefits Committee, (ii) who has been appointed to assist the Benefits Committee in administering the Plan, or (iii) to whom the Benefits Committee has delegated any of its duties or responsibilities against any liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in connection with the Plan, if such act or omission to act is in good faith and without gross negligence; provided that such Employee or former Employee is not otherwise indemnified or saved harmless under any liability insurance or other indemnification arrangement.

Part III – 38

ARTICLE IX

CLAIMS PROCEDURE

9.01 Claims Fiduciary. The Plan Administrator will act as Claims Fiduciary, except to the extent that the Plan Administrator has delegated the function to some other person or persons, committee or entity.

Notwithstanding anything in the Plan to the contrary, the Claims Fiduciary shall have total and complete discretion to fulfill its fiduciary responsibilities as it sees fit on a uniform and consistent basis and as it believes a prudent person acting in a like capacity and familiar with such matters would do.

9.02 Claims for Benefits. Claims for benefits under the Plan may be filed with the Plan Administrator on forms supplied by the Employer. For the purpose of this procedure, “claim” means a request for a Plan benefit by a Participant or a Beneficiary of a Participant. If the basis of the claim includes documentation not a part of the records of the Plan or of the Employer, all such documentation must be included with the claim.

9.03 Duty to Keep Plan Administrator Informed of Current Address. Each Participant and Beneficiary must file with the Plan Administrator from time to time his or her post office address and each change thereof. Any communication, statement or notice addressed to a Participant or Beneficiary at his or her last post office address filed with the Plan Administrator, or if no address is filed with the Plan Administrator, then at his or her last post office address as shown on the Employer’s records, will be binding on the Participant and Beneficiary for all purposes of the Plan. Neither the Plan Administrator nor the Employer shall be required to search for or locate a Participant or Beneficiary.

9.04 Failure to Claim Benefits. If the Plan Administrator notifies a Participant or Beneficiary by registered or certified mail at his or her last known address that he or she is entitled to a distribution and also notifies him or her of the provision of this Section, and the Participant or Beneficiary fails to claim his or her benefits under the Plan, the Plan Administrator shall make reasonable efforts to locate such Participant or Beneficiary. If the Participant or Beneficiary fails to claim his or her benefits under the Plan or fails to make his or her or her current address known to the Plan Administrator within three years after such notification, the Plan Administrator, at the end of such three-year period, shall direct that benefits which would have been payable to such Participant or Beneficiary shall be forfeited. In the event that the Participant or Beneficiary is subsequently located, the benefits which were forfeited shall be reinstated, and such reinstatement shall be taken into account in determining the Employer contribution for the Plan Year of the reinstatement.

9.05 Notice of Denial of Claim. If a claim is wholly or partially denied, the Plan Administrator shall notify the claimant of the denial of the claim within a reasonable period of time. Such notice of denial (i) shall be in writing, (ii) shall be written in a manner calculated to be understood by the claimant, and (iii) shall contain (A) the specific reason or reasons for denial of the claim, (B) a specific reference to the pertinent Plan provisions upon which the denial is based, (C) a description of any additional material or information necessary for the claimant to perfect the claim, along with an explanation why such material or information is necessary, and

Part III – 39

(D) an explanation of the Plan’s claim review procedure. Unless special circumstances require an extension of time for processing the claim, the Plan Administrator shall notify the claimant of the claim denial no later than 90 days after the Plan Administrator’s receipt of the claim. If such an extension is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. The extension notice shall indicate the special circumstances requiring the extension of time and the date by which the Plan Administrator expects to render the final decision, which date will not be later than 180 days after the Plan Administrator’s receipt of the claim.

9.06 Request for Review of Denial of Claim. Within 120 days of the receipt by the claimant of the written notice of the denial of the claim, or such later time as shall be deemed reasonable in the sole discretion of the Plan Administrator, taking into account the nature of the benefit subject to the claim and any other attendant circumstances, or if the claim has not been granted within a reasonable period of time, the claimant may file a written request with the Plan Administrator to conduct a full and fair review of the denial of the claimant’s claim for benefits. In connection with the claimant’s appeal of the denial of his or her benefit, the claimant may review pertinent documents and may submit issues and comments in writing.

9.07 Decision on Review of Denial of Claim. The Plan Administrator shall deliver to the claimant a written decision on the claim promptly, but not later than 60 days, after the receipt of the claimant’s request for review, except that if there are special circumstances which require an extension of time for processing, the aforesaid 60-day period may be extended to 120 days. Such decision shall (i) be written in a manner calculated to be understood by the claimant, (ii) include specific reasons for the decision, and (iii) contain specific references to the pertinent Plan provisions upon which the decision is based.

9.08 Disability Claims. Notwithstanding anything in this Article IX of Part III of the Plan to the contrary, when a claim under this Article is made in connection with a benefit payable under Section 6.05 of Part I (as a result of a qualifying Participant’s total disability) or is made in connection with a benefit payable under Section 5.04 of Part II (as a result of a qualifying Participant’s Total Disability), solely for purposes of processing such a claim (i) all references in Sections 9.05 and 9.07 of this Part III to “90 days” and “60 days” are deemed to have been replaced with “45 days”, (ii) the reference to “180 days” in Section 9.05 of this Part III is deemed to have been replaced with “75 days”, (iii) the reference to “120 days” in Section 9.07 of this Part III is deemed to have been replaced with “90 days”, (iv) a second, maximum 30 day extension of time will be allowed only under Section 9.05 of this Part III in the case of a claim within this Section, but only if the other requirements for an extension of time to respond described in Section 9.05 of this Part III are satisfied with respect to this second extension, and (v) the claimant will be allowed at least 45 days within which to provide any needed additional information sought in connection with any extension under Sections 9.05 and 9.08 of this Part III.

ARTICLE X

AMENDMENT AND TERMINATION

10.01 Amendment of Plan. The right is reserved to the Employer to amend the Plan at any time and from time to time and all parties or any person claiming any interest hereunder shall be

Part III – 40

bound thereby; except no person having an already vested interest in the Plan shall be deprived of any interest already existing nor have such interest adversely affected. No such amendment shall have the effect of vesting in the Employer any right, title or interest to any assets of the Plan. The decision of the Employer shall be binding upon the Participants and all other persons and parties interested as to whether or not any amendment does deprive a Participant or any other person or adversely affects such interest. No amendment to the Plan (including a change in the actuarial basis for determining optional or early retirement benefits) shall decrease a Participant’s Accrued Benefit or eliminate an optional form of distribution. Notwithstanding the preceding sentence, a Participant’s Accrued Benefit may be reduced to the extent permitted under Code Section 412(c)(8). For purposes of this paragraph, a Plan amendment which has the effect of (i) eliminating or reducing an early retirement benefit or a retirement-type subsidy, or (ii) eliminating an optional form of benefit with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the pre-amendment conditions for the subsidy. In general, a retirement-type subsidy is a subsidy that continues after retirement, but does not include a qualified disability benefit, a medical benefit, or a social security supplement that does not continue after retirement age. Furthermore, no amendment to the Plan shall have the effect of decreasing a Participant’s vested interest determined without regard to such amendment as of the later of the date such amendment is adopted, or becomes effective. Participants shall be notified of any Plan amendments.

In the case of any merger, consolidation with or transfer of assets or liabilities by the Employer to another Plan, each Participant in the Plan on the date of the transaction shall have a benefit in the surviving Plan (determined as if such Plan were terminated immediately after the transaction) at least equal to the benefit to which he or she would have been entitled to receive immediately prior to the transaction if the Plan had been terminated. However, this provision shall not be construed to be a termination or discontinuance of the Plan or to be a guarantee of a specific level of benefits from this Plan.

Notwithstanding the foregoing, a transfer of amounts from this Plan or its related trust to a nonqualified foreign trust as described in Revenue Ruling 2008-40 shall be treated as a distribution from the Plan.

10.02 Employer May Discontinue Plan. The Employer reserves the right at any time to reduce its annual payments, to partially terminate its Plan or to terminate its Plan in its entirety.

In the event of the liquidation of the Employer or the bona fide sale of the controlling interest thereof, the Employer or its successors or assigns shall not be obligated to continue the Plan.

Upon termination of the Employer’s Plan or upon a partial termination of the Plan, each affected Participant shall have a 100% vested and non-forfeitable right to his or her Accrued Benefit to the extent then funded.

In the event of termination or partial termination of the Employer’s Plan, the assets of the Plan then available to provide benefits shall be applied in accordance with ERISA Section 4044

Part III – 41

and Rules and Regulations promulgated thereunder, in accordance with the following order of priority; provided, however, that no benefits being provided to former Participants or their Beneficiaries by the Insurer shall be canceled.

(a) First, to provide that portion of each affected Participant’s Accrued Benefit which is derived from any mandatory Employee contributions.

(b) Second, to provide, in the case of retirement income benefits of each affected Participant or Beneficiary:

(i) Annuity benefits which were in pay status for at least the three-year period ending on the date of Plan termination; and

(ii) Annuity benefits which would have been in pay status during the three-year period ending on the date of Plan termination, had a Participant eligible to retire at the beginning of such three-year period retired on the date of Plan termination.

The level of benefits allocated to this priority class shall be determined on the basis of the Plan’s provisions which were in effect at any time during the five-year period ending on the date of Plan termination under which the annuity benefits would be the least. Additionally, the level of such benefits is limited to the lowest level which was, or could have been, in pay status during the three- year period ending on the date of Plan termination (but, in the case of a benefit which would have been in pay status, the amount of the benefit, but not the entitlement to the benefit, shall be determined using the age, service and other relevant factors for computing the benefit under the Plan with respect to the Participant as of the date of Plan termination).

(c) Third, to provide all other benefits guaranteed to affected Participants under Title IV of ERISA and Rules and Regulations promulgated thereunder (determined as if the insurance limits provided under the Act for benefits payable to one person with respect to more than one Participant or from more than one terminated Plan and the insurance limits on benefits payable to a substantial owner all were not applicable).

(d) Fourth, to provide all other non-forfeitable benefits accrued by affected Participants under the Plan.

(e) Fifth, to provide all other benefits accrued by affected Participants under the Plan.

(f) Any residual assets of the Plan remaining after distribution in accordance with this Article shall be distributed to the Employer provided that all liabilities of the Plan to Participants and their Beneficiaries have been satisfied.

Notwithstanding anything in this Section to the contrary, in the event of a partial termination of the Plan, this Section shall be applicable only to those Participants and their Beneficiaries affected by the partial termination.

Part III – 42

10.03 Distribution of Benefits Upon Plan Termination. Subject to Article IV (Pre-Termination Benefit Restrictions) and upon approval of the Pension Benefit Guaranty Corporation (“PBGC”), when required, upon a termination or partial termination of the Plan, benefits shall be distributed to affected Participants in any manner which the Plan Administrator deems to be in the best interests of the Participants which is acceptable under applicable PBGC and Internal Revenue Service laws, Rules and Regulations. Any such distribution may include a lump sum payment, deferment of the distribution or the distribution of an annuity contract without life insurance, immediate or deferred, which by its terms may not be sold, assigned discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose to any party other than the issuer thereof. Spousal consent shall be required for distributions made on account of Plan termination. In no event shall the payment of benefits be deferred beyond the Participant’s Normal Retirement Date.

10.04 Return of Employer Contributions Under Special Circumstances.

Notwithstanding any provisions of this Plan to the contrary:

(a) Any monies or other Plan assets attributable to any contributions made by the Employer to the Plan because of a mistake of fact must be returned to the Employer within one year after the date of contribution.

(b) Any monies or other Plan assets attributable to any contribution made by the Employer which is conditional on the deductibility of such contribution must be refunded to the Employer, to the extent the deduction is disallowed, within one year after the date of such disallowance.

ARTICLE XI

MISCELLANEOUS

11.01 Protection of Employee Interest. No Participant or Beneficiary shall have the right to assign, pledge, alienate or convey any right, benefit or payment to which he or she shall be entitled in accordance with the provisions of the Plan, and any such attempted assignment, pledge, alienation or conveyance shall be null and void and of no effect. To the extent permitted by law, none of the benefits, payments, proceeds or rights herein created and provided for shall in any way be subject to any debts, contracts or engagements of any Participant or Beneficiary, as herein before described, nor to any suits, actions or other judicial process to levy upon or attach the same for the payment thereof; provided, however, that this provision does not preclude the Plan Administrator from complying with the terms of a Qualified Domestic Relations Order.

11.02 USERRA Compliance. Notwithstanding any provisions of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with the rules and requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) and Code Section 414(u).

(a) Differential Wage Payments. For Plan Years beginning after December 31, 2008, (i) an individual receiving a differential wage payment (as defined by Code Section 3401(h)(2)), shall be treated as an employee of the employer making the payment, (ii) the differential wage payment shall be treated as compensation, the

Part III – 43

the differential wage payment shall be treated as compensation, for purposes of Code Section 415(c)(3) and Treasury Regulation Section 1.415(c)-2 (e.g., for purposes of Code Section 415, top-heavy provisions of Code Section 416, determination of highly compensated employees under Code Section 414(q), and applying the 5% gateway requirement under the Code Section 401(a)(4) regulations), and (iii) the Plan shall not be treated as failing to meet the requirements of any provision described in Code Section 414(u)(1)(C) by reason of any contribution or benefit which is based on the differential wage payment. Subparagraph (iii) in the foregoing sentence shall apply only if all employees of the Employer performing service in the uniformed services described in Code Section 3401(h)(2)(A) are entitled to receive differential wage payments (as defined in Code Section 3401(h)(2)) on reasonably equivalent terms and, if eligible to participate in a retirement plan maintained by the employer, to make contributions based on the payments on reasonably equivalent terms (taking into account Code Sections 410(b)(3), (4), and (5)).

(b) Death Benefits Under USERRA. Effective for deaths occurring on or after January 1, 2007, in the case of a Participant who dies while performing qualified military service as defined in Code Section 414(u), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan had the Participant resumed and then terminated employment on account of death. Moreover, the Plan will credit the Participant’s qualified military service as service for vesting purposes, as though the Participant had resumed employment under USSERRA immediately prior to the Participant’s death. Moreover, the Plan will credit the Participant’s qualified military service as service for vesting purposes, as though the Participant had resumed employment under USSERRA immediately prior to the Participant’s death.

11.03 Meaning of Words Used in Plan. Wherever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine or neuter gender in all cases where they would so apply. Wherever any words are used herein in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply.

Titles used herein are for general information only and this Plan is not to be construed by reference thereto.

11.04 Plan Does Not Create or Modify Employment Rights. The Plan shall not be construed as creating or modifying any contract of employment between the Employer and any Participant. All Employees shall be subject to discharge to the same extent that they would have been if the Plan had never been adopted.

11.05 Massachusetts Law Controls. This Plan shall be governed by the laws of the Commonwealth of Massachusetts to the extent that they are not pre-empted by the laws of the United States of America.

Part III – 44

11.06 Payments to come from Plan Assets. All benefits and amounts payable under the Plan shall be paid or provided for solely from the assets of the Plan, and neither the Employer nor the Plan Administrator assumes any liability or responsibility therefor.

11.07 Receipt and Release for Payments. Any payment to any Participant, his or her legal representative, Beneficiary, or to any guardian, custodian or committee appointed for such Participant or Beneficiary in accordance with the provisions of this Plan, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Employer and the Insurer, any of whom may require such Participant, legal representative, Beneficiary, guardian, custodian or committee, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Employer or Insurer.

11.08 Mandatory Withholding on Eligible Rollover Distributions. Except as provided in Code Section 3405 and in rules and regulations promulgated thereunder, the Employer is required to withhold 20% on any portion of an eligible rollover distribution not paid directly to an eligible retirement plan.

11.09 Payment under Qualified Domestic Relations Orders. Notwithstanding any provisions of the Plan to the contrary, if there is entered any Qualified Domestic Relations Order that affects the payment of benefits hereunder, such benefits shall be paid in accordance with the applicable requirements of such Order, provided that such Order (i) does not require the Plan to provide any type or form of benefits, or any option that is not otherwise provided hereunder, (ii) does not require the Plan to provide increased benefits, and (iii) does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a Qualified Domestic Relations Order.

The Plan Administrator shall establish reasonable procedures to determine whether an order or other decree is a Qualified Domestic Relations Order and to administer distributions under such orders.

To the extent required or permitted by any such Order, at any time on or after the date the Plan Administrator has determined that the Order is a Qualified Domestic Relations Order, the alternate payee shall have the right to request the Plan Administrator to commence distribution of benefits under the Plan (including any single sum cash-out that would be available if the Participant were the payee and entitled to a benefit payment on account of termination from service) regardless of whether the Participant is otherwise entitled to a distribution at such time under the Plan.

11.10 Electronic Communications. Effective for Plan Years beginning on or after January 1, 2007, any electronic communications made by the Plan to Participants in regards to eligible rollover distribution tax notices, Participant consents to distributions, and tax withholding notices shall comply with the requirements contained in Treasury Regulation Section 1.401(a)-21, in addition to all otherwise applicable requirements relating to the specific communication.

[Remainder of the page intentionally left blank]

Part III – 45

EXECUTED this 28th day of January, 2011

The Hanover Insurance Company
By:	/s/ Lorna Stearns
	Name: Lorna Stearns
	Title: Vice President

Part III – 46

THE HANOVER INSURANCE GROUP

CASH BALANCE PENSION PLAN

FIRST AMENDMENT

This First Amendment is executed by The Hanover Insurance Company, a New Hampshire corporation (the “Company”).

WHEREAS, the Company sponsors The Hanover Insurance Group Cash Balance Pension Plan (the “Plan”) and amended and restated the Plan generally effective January 1, 2010; and

WHEREAS, the Company has the authority to amend the Plan pursuant to Section 10.01 of Part III of the Plan; and

WHEREAS, the Company desires to further amend the Plan.

NOW, THEREFORE, the Plan is amended effective for Plan Years beginning on or after January 1, 2010, except as otherwise indicated, as follows:

1. The reference to “Article IX” in the first sentence of Section 6.06 of Part I of the Plan is changed from “Article IX” to “Article VIII”.

2. Section 6.09(b) of Part I of the Plan is deleted in its entirety and the following new Section 6.09(b) is inserted in lieu thereof:

“The benefit suspended shall be equal to the portion of the Employee’s or Pensioner’s monthly annuity benefit derived from Employer contributions, including any temporary early retirement supplement; provided, however, that earnings credits provided under Section 4.03(a) of Part I of the Plan shall not be suspended by operation of this Section 6.09 of Part I of the Plan.”

3. The last sentence of Section 11.02 of Part III of the Plan is deleted as duplicative of the immediately preceding sentence.

This First Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment and, except as hereby amended; the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, this First Amendment has been executed this 21st day of December, 2011.

THE HANOVER INSURANCE COMPANY
By:
	Authorized Representative

THE HANOVER INSURANCE GROUP

CASH BALANCE PENSION PLAN

SECOND AMENDMENT

This Second Amendment is executed by The Hanover Insurance Company, a New Hampshire corporation (the “Company”).

WHEREAS, the Company sponsors The Hanover Insurance Group Cash Balance Pension Plan (the “Plan”); and

WHEREAS, the Plan consists of the following three component parts, each of which is set forth in the same document: (i) Part I, which provides a cash balance and pension benefit which were formerly provided under a plan known as “The Allmerica Financial Cash Balance Pension Plan”, and then “The Hanover Insurance Group Cash Balance Pension Plan”, (ii) Part II, which provides a pension benefit which was formerly provided under a plan known as “The Allmerica Financial Agents’ Pension Plan”, and (iii) Part III, which contains Plan terms applicable to each of Part I and Part II; and

WHEREAS, the Plan was most recently amended and restated generally effective January 1, 2010, and such restatement has been amended once; and

WHEREAS, the Company has the authority to amend the Plan at any time pursuant to Section 10.01 of Part III of the Plan; and

WHEREAS, the Company desires to amend the Plan to encourage payment of the vested deferred benefits of certain terminated former participants by adding the option to make qualifying mandatory cashout distributions and related changes and by adding for only a stated, limited period of time certain voluntary lump sum optional forms.

NOW, THEREFORE, the Plan is amended, effective as provided below, as follows:

Part I is amended as follows:

1. Effective on October 18, 2012, Section 2.02 of Part I of the Plan is deleted in its entirety, and the following new Section 2.02 is inserted in lieu thereof:

“2.02 “Actuarial Equivalent” means a benefit having the same value as the benefit or benefits otherwise payable. Except as otherwise provided in this Section, the present value of any benefit determined under the terms of Part I of the Plan will be the actuarial equivalent of the no-death benefit life annuity retirement benefit specified in Section 6.01.

Actuarial Equivalent life annuity settlements of Participant Projected Account Balances or of optional life annuity Top Heavy Plan benefits will be computed utilizing (i) the Code Section 417 Mortality Table for determining the amount payable to a Participant having an annuity starting date on or after January 1, 2004, and (ii) the Code Section 417 Interest Rate for determining the amount payable to a Participant having an annuity starting date that occurred from January 1, 2004 through December 31, 2007, and the Code Section 417 Applicable Interest Rate beginning January 1, 2008 for determining the amount payable to a Participant having an annuity starting date on or after January 1,

2008. Except as provided otherwise in this Section, Actuarial Equivalents of the normal form of benefits payable when and as provided under Section 6.06(viii) and Section 8.02(z) will be computed using the Code Section 417 Mortality Table and the Code Section 417 Applicable Interest Rate.

Optional life annuity settlements of Grandfathered Benefits and of the Actuarial Equivalent monthly life annuity derived from a Participant’s Projected Account Balance will be computed utilizing the 1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum. Adjustment factors used to determine optional forms of Grandfathered Benefits and of the Actuarial Equivalent monthly life annuity derived from a Projected Account Balance are included in Exhibit A, attached hereto and made a part of Part I of the Plan.

Adjustment factors for optional Grandfathered Benefits not illustrated and of the optional annuities for the Actuarial Equivalent monthly life annuity derived from a Projected Account Balance not included in the preceding paragraph, if any, will be computed on an actuarial basis consistent with that used in computing the factors shown in Exhibit A.

The present value (including, but not limited to, for purposes of Section 7.01(a)(i)(B), Section 7.01 (a)(ii)(B), determining eligibility for cashout distributions under Sections 6.06 and 8.02 and determining the amount of any lump sum distribution of a Grandfathered Benefit or a benefit for Non-Key Employee Participants in a Top Heavy Plan) shall be determined on the basis of (i) the mortality rates specified above and an interest rate of 7% per annum, or (ii) the Code Section 417 Mortality Table and the Code Section 417 Interest Rate (or for determining the amount payable to a Participant having an annuity starting date on and after January 1, 2008, the Code Section 417 Applicable Interest Rate), whichever produces the greater benefit.

The preceding paragraphs shall not apply to the extent they would cause the Plan to fail to satisfy the requirements of Article IV of Part III of the Plan (Limitations on Benefits) or Section 2.03 of Part III of the Plan (Minimum Benefits for Top Heavy Benefits).

For purposes of Part I of the Plan, (a) the “Code Section 417 Mortality Table” means the applicable mortality table prescribed by the Secretary of the Treasury pursuant to Code section 417(e)(3), as in effect from time to time; provided, however, that notwithstanding the preceding provisions of this paragraph, for distributions commencing on or after December 31, 2002, and prior to January 1, 2008, the Code Section 417 Mortality Table means the Table set forth in Revenue Ruling 2001-62 and for purposes of determining the amount payable to a Participant with an annuity starting date on or after January 1, 2008, the Code Section 417 Mortality Table means the Table set forth in Revenue Ruling 2007-67 or such other Table as may be prescribed by the Secretary of the Treasury pursuant to Code section 417(e)(3); (b) for periods beginning on and after January 1, 2004, the “Code Section 417 Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the annual rate of interest on 30-year Treasury securities in effect for the second month immediately preceding the first day of the Plan Year (e.g., November 2006 for

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the 2007 Plan Year), and (c) for periods beginning on and after January 1, 2008, the “Code Section 417 Applicable Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the applicable interest rate described by Code section 417(e) after its amendment by the Pension Protection Act of 2006, which rate more specifically shall be the adjusted first, second, and third segment rates applied under rules similar to the rules of Code section 430(h)(2)(C) for the lookback month used to determine the previously applicable interest rate on 30-year Treasury securities (e.g., November 2009 for the 2010 Plan Year) or for such other time as the Secretary of the Treasury may by regulations prescribe. For purposes of determining the Code Section 417 Applicable Interest Rate, the first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code section 430(h)(2)(C) if:

(i) Code section 430(h)(2)(D) were applied by substituting the average yields for the month described in clause (ii) below for the average yields for the 24-month period described in such Code section, and

(ii) Code section 430(h)(2)(G)(i)(II) were applied by substituting “Section 417(e)(3)(A)(ii)(II) for “Section 412(b)(5)(B)(ii)(II)”, and

(iii) The applicable percentage under Code section 430(h)(2)(G) is treated as being 20% in 2008, 40% in 2009, 60% in 2010, and 80% in 2011.”

2. Effective on and after January 1, 2013, the last sentence of the second paragraph of Section 2.02 of Part I of the Plan, as added by this Amendment, is deleted in its entirety.

3. Effective on and after January 1, 2010, Section 4.01 of Part I of the Plan is amended to delete the third sentence of Section 4.01 and to substitute the following as the new third sentence of Section 4.01, as follows:

“The resultant value determined at any time, after the operation of Sections 4.02, 4.03, and 4.04, shall be the Participant’s “Account Balance.””

4. Effective solely for the period beginning October 18, 2012 and ending December 31, 2012, Section 6.06(v) of Part I of the Plan is deleted in its entirety, and the following new Section 6.06(v) is inserted in lieu thereof:

“(v) Notwithstanding anything in Part I of the Plan to the contrary, a single lump sum payment in an amount equal to the Participant’s vested Account Balance on the Determination Date; provided, however, that except as provided in (vi) below, in (vii) below, and during the period from October 18, 2012 through December 31, 2012, as provided in (viii) below or in Section 8.02(z), this form of payment shall not be available with respect to the Participant’s vested Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, on the Determination Date.”

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5. Effective on and after January 1, 2013, Section 6.06(v) of Part I of the Plan, as changed by this Amendment, is deleted in its entirety, and the following new Section 6.06(v) is inserted in lieu thereof:

“(v) Notwithstanding anything in Part I of the Plan to the contrary, a single lump sum payment in an amount equal to the Participant’s vested Account Balance on the Determination Date; provided, however, that except as provided in (vi) below and (vii) below, this form of payment shall not be available with respect to the Participant’s vested Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, on the Determination Date. In the event a Participant elects to have his or her vested Account Balance on the Determination Date payable in a lump sum under this (v), the portion of his or her Accrued Benefit attributable to his or her Grandfathered Benefit, if any, shall be paid only in accordance with the otherwise applicable provisions of this Article VI of Part I of the Plan.”

6. Effective solely for the period beginning October 18, 2012 and ending December 31, 2012, Section 6.06(vi) of Part I of the Plan is deleted in its entirety, and the following new Section 6.06(vi) is inserted in lieu thereof:

“(vi) If the present value of a Participant’s vested Grandfathered Benefit, if any, on the Determination Date does not exceed $5,000, an immediate single sum payment in an amount equal to such present value.”

7. Effective on and after January 1, 2013, Section 6.06(vi) of Part I of the Plan, as changed by this Amendment, is deleted in its entirety, and the following new Section 6.06(vi) is inserted in lieu thereof:

“(vi) If the present value of a Participant’s vested Grandfathered Benefit, if any, on the Determination Date does not exceed $5,000, an immediate single sum payment in an amount equal to such present value. If the present value of a Participant’s vested Grandfathered Benefit exceeds $5,000, only annuity options (i) through (iv) above shall be available with respect to such vested Grandfathered Benefit.”

8. Effective on October 18, 2012, Section 6.06 of Part I of the Plan is amended to insert the following immediately after Section 6.06(vi), as follows:

“(vii) Notwithstanding anything in Part I of the Plan to the contrary except Section 6.10, for involuntary cashouts paid on or after December 1, 2012, an immediate single lump sum payment of the present value of the Former Participant’s vested Accrued Benefit as of December 1, 2012 (or after December 1, 2012, on the Determination Date) will be paid to a Former Participant (other than a Former Participant (a) who is a participant in The Hanover Excess Benefit Retirement Plan, or (b) whose Accrued Benefit has been restricted by an approved Qualified Domestic Relations Order) who is not an Employee of the Employer or an Affiliate if the present value of the Former Participant’s vested Accrued Benefit, if any, on December 1, 2012 (or after December 1, 2012, on the

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Determination Date) does not exceed $5,000. Consent to this involuntary cashout from the Former Participant will not be required, and spousal consent to this involuntary cashout will not be required in the case of a married Former Participant. For purposes of Sections 6.06 and 8.02, an “involuntary cashout” is a payment under Section 6.06(vii) or its counterpart in Section 8.02, as appropriate.

(viii) Notwithstanding anything in Part I of the Plan to the contrary, for distributions elected under this (viii) by a qualified Former Participant during the period beginning October 18, 2012 and ending at midnight on November 30, 2012, either an immediate single sum payment of the present value of the qualified Former Participant’s vested Accrued Benefit in an amount equal to such present value as of the Determination Date, or one of the annuity settlement options described in (i) through (iv) above, to the extent otherwise available, payable beginning immediately on the Determination Date (except that the only immediate annuity settlement options available under this (viii) to a qualified Former Participant whose vested Accrued Benefit is only a Grandfathered Benefit and who is not eligible for early retirement under Section 6.02 or 6.03 on the Determination Date will be the annuity settlement option described in (i) above (and only with a 50% survivor option), a Qualified Joint and Survivor Annuity, and a single life annuity). An election by a qualified Former Participant under this (viii) may not be revoked after December 1, 2012. Solely for purposes of calculating a Former Participant’s vested Accrued Benefit under this (viii), an early retirement subsidy or subsidies available for the qualified Former Participant under Section 6.02 or Section 6.03 on the Determination Date or after the Determination Date upon reaching his or her 55^th birthday (or later) after the Determination Date shall be included in the vested Accrued Benefit under this (viii). For purposes of this (viii) and Section 8.02(z), a “qualified Former Participant” is (1) a Former Participant (a) who was a Former Participant on July 1, 2012 and on December 1, 2012, (b) who is entitled to a vested, deferred Normal Retirement Benefit, (c) who has not received any portion of his or her vested, deferred Grandfathered Benefit by December 1, 2012, (d) who is not a participant in The Hanover Excess Benefit Retirement Plan on December 1, 2012, (e) the Actuarial Equivalent present value of whose vested Accrued Benefit on December 1, 2012 exceeds $5,000 but does not exceed $15,000, (f) whose last day as an Employee of an Employer or an Affiliate was before July 1, 2012, (g) who is not a named party in a Domestic Relations Order under review on the Determination Date by the Plan to determine whether it will be a Qualified Domestic Relations Order, and (h) who has not become eligible to begin receiving his or her vested deferred Normal Retirement Benefit (other than his or her Account Balance) from the Plan, and (2) an alternate payee of a qualified Former Participant, but only if the combined present values of the vested Accrued Benefits of the qualified Former Participant and his or her alternate payee do not exceed $15,000.”

9. Effective on and after January 1, 2013, Section 6.06(viii) of Part I of the Plan, as added by this Amendment, is deleted in its entirety.

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10. Effective on and after December 1, 2012, Section 6.06 of Part I of the Plan is amended to delete the last five paragraphs of Section 6.06 and to substitute the following as the new last paragraphs of Section 6.06, as follows:

“Unless the Participant elects otherwise, distribution of benefits will begin no later than the 60^th day after the later of the close of the Plan Year in which:

(i) the Participant attains Normal Retirement Age; or

(ii) the Participant terminates service with the Employer.

Notwithstanding the foregoing, the failure of a Participant and spouse (or where either the Participant or the spouse has died, the survivor) to consent to a distribution (other than an involuntary cashout) when a benefit is “immediately distributable” (as described below) shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section 6.06 of Part I of the Plan (and provisions of Article III of Part III of the Plan). In no event will benefits begin to be distributed (other than as an involuntary cashout) prior to the later of Age 62 or Normal Retirement Age without the consent of the Participant. The consent of the Participant’s spouse will also be required for any such distribution (other than an involuntary cashout) unless the benefit is paid in the form of a Qualified Joint and Survivor Annuity. Any spousal consent shall satisfy the requirements of Section 6.07.

If the Accrued Benefit is immediately distributable, the Participant and the Participant’s spouse (or where either the Participant or the spouse has died, the survivor) must consent to any distribution (other than as an involuntary cashout) of such Accrued Benefit. Needed consents of the Participant and the Participant’s spouse shall be obtained in writing within the 90-day period (180-day period for Plan Years beginning January 1, 2007 and thereafter) ending on the annuity starting date. The “annuity starting date” is the first day of the first period for which an amount is paid as an annuity or any other form. The Plan Administrator shall notify the Participant and the Participant’s spouse of the right to defer any distribution (other than an involuntary cashout) until the Participant’s Accrued Benefit is no longer immediately distributable. Such notification shall include a general description of the material features, and an explanation of the relative values, of the optional forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code, and shall be provided no less than 30 days and no more than 90 days (180 days for Plan Years beginning January 1, 2007 and thereafter) prior to the annuity starting date; provided, however, that the minimum 30 day notice period described in this sentence may be waived by the Participant’s written waiver given after notice to the Participant has described that the Participant was allowed at least 30 days to consider his choice under this Section and that the Participant was allowed to revoke his waiver under this Section at any time through his or her annuity starting date.

Notwithstanding the foregoing, only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the Accrued Benefit is immediately distributable. Neither the consent of the Participant nor the Participant’s spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code.

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An Accrued Benefit is “immediately distributable” if any part of the Accrued Benefit could be distributed to the Participant (or surviving spouse) before the Participant attains (or would have attained if not deceased) the later of Normal Retirement Age or Age 62.

Notwithstanding the above the entire interest of a Participant or a Beneficiary must be distributed in accordance with the minimum required distribution rules set forth in Article III of Part III of the Plan.”

11. Effective for annuity starting dates occurring on and after December 1, 2012, Section 6.10(a) of Part I of the Plan is deleted in its entirety, and the following new Section 6.10(a) is substituted in lieu thereof:

“(a) Notwithstanding any provision of Part I of the Plan to the contrary that would otherwise limit a distributee’s election under this Article or under Articles VII and VIII other than this Section 6.10(a), a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover; provided, however, that if the Actuarial Equivalent present value of a distributee’s vested Accrued Benefit does not exceed $1,000, the distributee does not have to be allowed the eligible rollover election described in this sentence. If the Actuarial Equivalent present value of a Participant’s Accrued Benefit exceeds $1,000 and does not exceed $5,000 and the Participant does not elect a distribution or a rollover, the Plan shall automatically distribute the Participant’s Accrued Benefit, in a direct rollover, to an eligible individual retirement plan (a “Rollover IRA”) for the benefit of such Participant and pursuant to a written agreement with the Rollover IRA provider that provides (i) the amount rolled over to the Rollover IRA shall be invested in a manner designed to preserve principal and provide a reasonable rate of return and liquidity; (ii) all fees and expenses attendant to a Rollover IRA shall not exceed the fees and expenses charged by the Rollover IRA provider for comparable IRAs established for reasons other than receipt of a rollover distribution; and (iii) the Participant on whose behalf the automatic rollover is made under this Section shall have the right to enforce the terms of the written agreement establishing the Rollover IRA, with regard to his or her rolled over funds, against the Rollover IRA provider. All fees and expenses attendant to the Rollover IRA shall be allocated to the Rollover IRA.”

12. Effective on October 18, 2012, Section 8.02 of Part I of the Plan is amended to delete the last three paragraphs of Section 8.02 in their entirety and to substitute the following as the last paragraphs of Section 8.02, as follows:

“Notwithstanding the foregoing, a Participant who is entitled to a deferred Normal Retirement Benefit may elect to receive his or her vested Account Balance on the Determination Date in a single lump sum. In addition, if a Participant makes an election described in the immediately preceding sentence and if the present value of the portion of the vested Accrued Benefit attributable to such Participant’s vested Grandfathered Benefit does not exceed $5,000, the

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Participant may elect to receive such portion of his or her vested Accrued Benefit attributable to the Grandfathered Benefit in a lump sum. Any such Participant may elect to receive either such lump sum at any time after separation from service and, in the case of a single lump sum distribution of his or her vested Account Balance, must receive such benefit no later than the time at which benefits attributable to the Participant’s Grandfathered Benefit, if any, commences. Any such election shall be subject to spousal consent in the case of a married Participant. Any spousal consent must satisfy the requirement of Section 6.07.

Notwithstanding anything in Part I of the Plan to the contrary except Section 6.10, effective for involuntary cashouts paid on or after December 1, 2012, a Former Participant (other than a Former Participant (a) who is a participant in The Hanover Excess Benefit Retirement Plan, or (b) whose Accrued Benefit has been restricted by an approved Qualified Domestic Relations Order) who is not an Employee of the Employer or an Affiliate will be paid the present value of his or her vested Accrued Benefit on December 1, 2012 (or after December 1, 2012, on the Determination Date) in an immediate lump sum if the present value of his or her vested Accrued Benefit, if any, on December 1, 2012 (or after December 1, 2012, on the Determination Date) does not exceed $5,000. Consent to this involuntary cashout by the Former Participant will not be required, and spousal consent to this involuntary cashout will not be required in the case of a married Former Participant.

Notwithstanding anything in Part I of the Plan to the contrary, an actively employed Participant’s Accrued Benefit shall become 100% vested and non-forfeitable upon the earliest of (i) the date of such Participant’s death; (ii) the date such a Participant becomes Totally Disabled (within the meaning of Section 6.05 of Part I of the Plan); or (iii) the date such a Participant attains his or her Normal Retirement Age.

Any distributions under this Article shall be subject to the requirements of Sections 6.06 and 6.07, including the requirement that a Participant shall be eligible to receive any form of distribution provided for under Section 6.06 of Part I of the Plan at such time as he or she is eligible to receive his or her vested Account Balance in a lump sum, except to the extent expressly provided otherwise in this Section.

(z) Notwithstanding anything in Part I of the Plan to the contrary, effective for distributions elected under this Section 8.02(z) by a qualified Former Participant during the period beginning October 18, 2012 and ending at midnight on November 30, 2012, a qualified Former Participant (as defined in Section 6.06(viii)) may elect to receive his or her vested Accrued Benefit attributable to such Former Participant’s vested Grandfathered Benefit either in an immediate lump sum or in one of the annuity settlement options described in Section 6.06(i) through Section 6.06(iv), to the extent otherwise available, payable beginning immediately on the Determination Date; provided, however, that a qualified Former Participant electing under this Section 8.02(z) to receive an immediate payment of some or all of his or her vested Accrued Benefit attributable to his vested Grandfathered Benefit must also make a qualified election under this Section to receive his or her vested Account Balance in the same immediate

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payment form as part of the same distribution, and the only immediate annuity settlement options available under this Section 8.02(z) to a qualified Former Participant whose vested Accrued Benefit is only a Grandfathered Benefit and who is not eligible for early retirement under Section 6.02 or Section 6.03 on the Determination Date will be the annuity settlement option described in Section 6.06(i) (and only with a 50% survivor option), a Qualified Joint and Survivor Annuity, and a single life annuity. An election by a qualified Former Participant under this Section 8.02(z) may not be revoked after December 1, 2012. Any spousal consent must satisfy the requirements of Section 6.07. Solely for purposes of calculating a Former Participant’s vested Accrued Benefit under this Section 8.02(z), an early retirement subsidy or subsidies available for the qualified Former Participant under Section 6.02 or Section 6.03 on the Determination Date or after the Determination Date upon reaching his or her 55^th birthday (or later) after the Determination Date shall be included in the vested Accrued Benefit under this Section 8.02(z).”

13. Effective on and after January 1, 2013, Section 8.02(z) of Part I of the Plan, as added by this Amendment, is deleted in its entirety.

14. Effective on and after January 1, 2010, Section 8.07(b) of Part I of the Plan is amended to delete the first sentence of Section 8.07(b) and to substitute the following as the new first sentence of Section 8.07(b), as follows:

“In the case of the distribution of the present value of a Participant’s or Former Participant’s vested Accrued Benefit in accordance with Sections 6.06 or 8.02, the Participant’s Accrued Benefit described in Subsections 2.01(a) and (b) (including all optional forms of benefits and subsidies relating to such benefits) shall be restored if he or she is subsequently an Employee and repays the amount distributed plus interest, compounded annually from the date of distribution at the rate of 5 percent.”

Part II is amended as follows:

1. Effective on October 18, 2012, the second paragraph of Section 2.02 of Part II of the Plan is deleted in its entirety, and the following is inserted in lieu thereof as the new second paragraph of Section 2.02:

“Actuarial Equivalent life annuity settlements of optional life annuity Top Heavy Plan benefits will be computed utilizing (i) the Code Section 417 Mortality Table for determining the amount payable to a Participant having an annuity starting date on or after January 1, 2004, and (ii) the Code Section 417 Interest Rate for determining the amount payable to a Participant having an annuity starting date that occurred from January 1, 2004 through December 31, 2007, and the Code Section 417 Applicable Interest Rate for determining the amount payable to a Participant having an annuity starting date on or after January 1, 2008. Except as provided otherwise in this Section, Actuarial Equivalents of the normal form of benefits payable when and as provided under Section 5.05(f) and Section 7.02 will be computed using the Code Section 417 Mortality Table and the Code Section 417 Applicable Interest Rate.”

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2. Effective on and after January 1, 2013, the last sentence of the second paragraph of Section 2.02, as added by this Amendment, is deleted in its entirety.

3. Effective on October 18, 2012, Section 5.05 of Part II of the Plan is amended to insert the following immediately after Section 5.05(e) as new Section 5.05(f):

“(f) Notwithstanding anything in Part II of the Plan to the contrary, for distributions elected under this Section 5.05(f) by a qualified Former Participant during the period beginning October 18, 2012 and ending at midnight on November 30, 2012, a qualified Former Participant will be paid either an immediate single sum payment of the present value of the qualified Former Participant’s vested Accrued Benefit in an amount equal to such present value as of the Determination Date, or one of the annuity settlement options described in Sections 5.05(a) through 5.05(d) above, to the extent otherwise available, payable beginning immediately on the Determination Date (except that the only immediate annuity settlement options available under this Section 5.05(f) to a qualified Former Participant whose vested Accrued Benefit is only an Accrued Benefit accrued only under Part II of the Plan (and its predecessors) and who is not eligible for early retirement under Section 5.02 on the Determination Date will be the annuity settlement option under Section 5.05(a) (and only with a 50% survivor option), a Qualified Joint and Survivor Annuity, and a single life annuity). An election by a qualified Former Participant under this Section 5.05(f) may not be revoked after December 1, 2012. Solely for purposes of calculating a qualified Former Participant’s vested Accrued Benefit under this Section 5.05(f), an early retirement subsidy or subsidies available for the qualified Former Participant under Section 5.02 on the Determination Date or after the Determination Date upon reaching his or her 55^th birthday (or later) after the Determination Date shall be included in the vested Accrued Benefit under this Section 5.05(f). For purposes of this Section 5.05 and Section 7.02, a “qualified Former Participant” is (1) a Former Participant (a) who was a Former Participant on July 1, 2012 and on December 1, 2012, (b) who is entitled to a vested, deferred Normal Retirement Benefit, (c) who has not received any portion of his or her vested, deferred Normal Retirement Benefit by December 1, 2012, (d) who is not a participant in The Hanover Excess Benefit Retirement Plan on December 1, 2012, (e) the Actuarial Equivalent present value of whose vested Accrued Benefit on December 1, 2012 exceeds $5,000 but does not exceed $15,000, and (f) whose last day as an Employee of an Employer or an Affiliate was before July 1, 2012, (g) who is not a named party in a Domestic Relations Order under review on the Determination Date by the Plan to determine whether it will be a Qualified Domestic Relations Order, and (h) who has not become eligible to begin receiving his or her vested deferred Normal Retirement Benefit (as defined in Part II) from the Plan, and (2) an alternate payee of a qualified Former Participant, but only if the combined present values of the vested Accrued Benefits on the Determination Date of the qualified Former Participant and his or her alternate payee do not exceed $15,000.”

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4. Effective on and after January 1, 2013, Section 5.05(f) of Part II of the Plan, as added by this Amendment, is deleted in its entirety.

5. Effective on and after October 18, 2012, Section 5.05 of Part II of the Plan is amended to add the following immediately after new Section 5.05(f):

“Notwithstanding anything in Part II of the Plan to the contrary except Section 5.08, effective for involuntary cashouts paid on or after December 1, 2012, a Former Participant (other than a Former Participant (a) who is a participant in The Hanover Excess Benefit Retirement Plan, or (b) whose Accrued Benefit has been restricted by an approved Qualified Domestic Relations Order) who is not an Employee of the Employer or an Affiliate will be paid the present value of his or her vested Accrued Benefit on December 1, 2012 (or after December 1, 2012, on the Determination Date) in an immediate lump sum if the present value of the Former Participant’s vested Accrued Benefit, if any, on December 1, 2012 (or after December 1, 2012, on the Determination Date) does not exceed $5,000. Consent to this involuntary cashout by the Former Participant will not be required, and spousal consent to this involuntary cashout will not be required in the case of a married Former Participant.”

6. Effective on and after December 1, 2012, Section 5.05 of Part II of the Plan is amended to delete the last five paragraphs of Section 5.05 and to substitute the following as the new last paragraphs of Section 5.05, as follows:

“Notwithstanding the foregoing, the failure of a Participant and spouse (or where either the Participant or the spouse has died, the survivor) to consent to a distribution (other than an involuntary cashout) when a benefit is “immediately distributable” (as described below) shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section 5.05 (and provisions of Article III of Part III of the Plan). In no event will benefits begin to be distributed (other than as an involuntary cashout) prior to the later of Age 62 or Normal Retirement Age without the consent of the Participant. The consent of the Participant’s spouse will also be required for any such distribution (other than an involuntary cashout) unless the benefit is paid in the form of a Qualified Joint and Survivor Annuity.

If the Accrued Benefit is immediately distributable, the Participant and the Participant’s spouse (or where either the Participant or the spouse has died, the survivor) must consent to any distribution (other than as an involuntary cashout) of such Accrued Benefit. Needed consents of the Participant and the Participant’s spouse shall be obtained in writing within the 90-day period (180-day period for Plan Years beginning January 1, 2007 and thereafter) ending on the annuity starting date. The “annuity starting date” is the first day of the first period for which an amount is paid as an annuity or any other form. The Plan Administrator shall notify the Participant and the Participant’s spouse of the right to defer any distribution (other than an involuntary cashout) until the Participant’s Accrued Benefit is no longer immediately distributable.

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Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under Part II of the Plan in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code, and shall be provided no less than 30 days and no more than 90 days (180 days for Plan Years beginning January 1, 2007 and thereafter) prior to the annuity starting date; provided, however, that the minimum 30 day notice period described in this sentence may be waived by the Participant’s written waiver given after notice to the Participant has described that the Participant was allowed at least 30 days to consider his choice under this Section and that the Participant was allowed to revoke his waiver under this Section at any time through his or her annuity starting date.

Notwithstanding the foregoing, only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the Accrued Benefit is immediately distributable. Neither the consent of the Participant nor the Participant’s spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code.

An Accrued Benefit is “immediately distributable” if any part of the Accrued Benefit could be distributed to the Participant (or surviving spouse) before the Participant attains (or would have attained if not deceased) the later of Normal Retirement Age or Age 62.

Notwithstanding the above, the distribution of the entire interest of a Participant or a Beneficiary must not violate the minimum required distribution rules set forth in Article III of Part III of the Plan.”

7. Effective for annuity starting dates occurring on and after December 1, 2012, Section 5.08(a) of Part II of the Plan is deleted in its entirety, and the following new Section 5.08(a) is substituted in lieu thereof:

“(a) Notwithstanding any provision of Part II of the Plan to the contrary that would otherwise limit a distributee’s election under this Article or under Articles VI and VII other than this Section 5.08(a), a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover; provided, however, that if the Actuarial Equivalent present value of a distributee’s vested Accrued Benefit does not exceed $1,000, the distributee does not have to be allowed the eligible rollover election described in this sentence. If the Actuarial Equivalent present value of a Participant’s Accrued Benefit exceeds $1,000 and does not exceed $5,000 and the Participant does not elect a distribution or a rollover, the Plan shall automatically distribute the Participant’s Accrued Benefit, in a direct rollover, to an eligible individual retirement plan (a “Rollover IRA”) for the benefit of such Participant and pursuant to a written agreement with the Rollover IRA provider that provides (i) the amount rolled over to the Rollover IRA

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shall be invested in a manner designed to preserve principal and provide a reasonable rate of return and liquidity; (ii) all fees and expenses attendant to a Rollover IRA shall not exceed the fees and expenses charged by the Rollover IRA provider for comparable IRAs established for reasons other than receipt of a rollover distribution; and (iii) the Participant on whose behalf the automatic rollover is made under this Section shall have the right to enforce the terms of the written agreement establishing the Rollover IRA, with regard to his or her rolled over funds, against the Rollover IRA provider. All fees and expenses attendant to the Rollover IRA shall be allocated to the Rollover IRA.”

8. Effective on and after January 1, 2010, Section 5.08(b)(v) of Part II of the Plan is re-designated as Section 5.08(c) of Part II of the Plan.

9. Effective on October 18, 2012, Section 7.02 of Part II of the Plan is amended to insert the following immediately after Option 2 in Section 7.02 as the last sentence at the end of Option 2 in Section 7.02:

“Notwithstanding anything in Part II of the Plan to the contrary, a timely qualified election by a qualified Former Participant under Section 5.05(f) shall also be treated, to the extent appropriate or necessary, as an election under this Section.”

10. Effective on and after January 1, 2013, Section 7.02 of Part II of the Plan, as changed by this Amendment, is amended to delete the last sentence of Option 2 of Section 7.02 added by this Amendment.

11. Effective on and after October 18, 2012, Section 7.06(b) of Part II of the Plan is amended to delete the first sentence of Section 7.06(b) and to substitute the following as the new first sentence of Section 7.06(b), as follows:

“In the case of the distribution of the present value of a partially vested Employee’s vested Accrued Benefit in accordance with Sections 5.05 or 7.02, the Employee’s Accrued Benefit described in Subsections 2.01(a) and (b) (including all optional forms of benefits and subsidies relating to such benefits) shall be restored if he or she is subsequently an Employee and repays the amount distributed plus interest, compounded annually from the date of distribution at the rate of 5 percent.”

This Second Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment, and except as amended by this Amendment, the Plan shall remain in full force and effect.

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IN WITNESS WHEREOF, this Second Amendment has been executed this 17th day of October, 2012.

THE HANOVER INSURANCE COMPANY

Authorized Representative

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THE HANOVER INSURANCE GROUP

CASH BALANCE PENSION PLAN

THIRD AMENDMENT

This Third Amendment is executed by The Hanover Insurance Company, a New Hampshire corporation (the “Company”).

WHEREAS, the Company sponsors The Hanover Insurance Group Cash Balance Pension Plan (the “Plan”); and

WHEREAS, the Plan consists of the following three component parts, each of which is set forth in the same document: (i) Part I, which provides a cash balance and pension benefit which were formerly provided under a plan known as “The Allmerica Financial Cash Balance Pension Plan”, and then “The Hanover Insurance Group Cash Balance Pension Plan”, (ii) Part II, which provides a pension benefit which was formerly provided under a plan known as “The Allmerica Financial Agents’ Pension Plan”, and (iii) Part III, which contains Plan terms applicable to each of Part I and Part II; and

WHEREAS, the Plan was most recently amended and restated generally effective January 1, 2010, and such restatement has been amended twice; and

WHEREAS, the Company has the authority to amend the Plan at any time pursuant to Section 10.01 of Part III of the Plan; and

WHEREAS, the Company desires to amend the Plan to encourage payment of the vested deferred benefits of certain terminated former participants for the second time by adding for only a stated, limited period of time certain voluntary lump sum optional forms.

NOW, THEREFORE, the Plan is amended, effective as provided below, as follows:

Part I is amended as follows:

1. Effective on September 20, 2013, Section 2.02 of Part I of the Plan is amended to add the following as the new last sentence of the second paragraph of existing Section 2.02, as follows:

“Except as provided otherwise in this Section, Actuarial Equivalents of the normal form of benefits payable when and as provided under Section 6.06(viii) and Section 8.02(z) will be computed using the Code Section 417 Mortality Table and the Code Section 417 Applicable Interest Rate.”

2. Effective on and after January 1, 2014, the last sentence of the second paragraph of Section 2.02 of Part I of the Plan, as added by this Amendment, is deleted in its entirety.

3. Effective solely for the period beginning September 20, 2013 and ending December 31, 2013, Section 6.06(v) of Part I of the Plan is deleted in its entirety, and the following new Section 6.06(v) is inserted in lieu thereof:

“(v) Notwithstanding anything in Part I of the Plan to the contrary, a single lump sum payment in an amount equal to the Participant’s vested Account Balance on the Determination Date; provided, however, that

except as provided in (vi) below, in (vii) below, and during the period from September 20, 2013 through December 31, 2013, as provided in (viii) below or in Section 8.02(z), this form of payment shall not be available with respect to the Participant’s vested Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, on the Determination Date.”

4. Effective on and after January 1, 2014, Section 6.06(v) of Part I of the Plan, as changed by this Amendment, is deleted in its entirety, and the following new Section 6.06(v) is inserted in lieu thereof:

“(v) Notwithstanding anything in Part I of the Plan to the contrary, a single lump sum payment in an amount equal to the Participant’s vested Account Balance on the Determination Date; provided, however, that except as provided in (vi) below and (vii) below, this form of payment shall not be available with respect to the Participant’s vested Accrued Benefit attributable to the Participant’s Grandfathered Benefit, if any, on the Determination Date. In the event a Participant elects to have his or her vested Account Balance on the Determination Date payable in a lump sum under this (v), the portion of his or her Accrued Benefit attributable to his or her Grandfathered Benefit, if any, shall be paid only in accordance with the otherwise applicable provisions of this Article VI of Part I of the Plan.”

5. Effective solely for the period beginning September 20, 2013 and ending December 31, 2013, Section 6.06(vi) of Part I of the Plan is deleted in its entirety, and the following new Section 6.06(vi) is inserted in lieu thereof:

“(vi) If the present value of a Participant’s vested Grandfathered Benefit, if any, on the Determination Date does not exceed $5,000, an immediate single sum payment in an amount equal to such present value.”

6. Effective on and after January 1, 2014, Section 6.06(vi) of Part I of the Plan, as changed by this Amendment, is deleted in its entirety, and the following new Section 6.06(vi) is inserted in lieu thereof:

“(vi) If the present value of a Participant’s vested Grandfathered Benefit, if any, on the Determination Date does not exceed $5,000, an immediate single sum payment in an amount equal to such present value. If the present value of a Participant’s vested Grandfathered Benefit exceeds $5,000, only annuity options (i) through (iv) above shall be available with respect to such vested Grandfathered Benefit.”

7. Effective on September 20, 2013, Section 6.06 of Part I of the Plan is amended to insert the following immediately after Section 6.06(vii), as follows:

“(viii) Notwithstanding anything in Part I of the Plan to the contrary, for distributions elected under this (viii) by a qualified Former Participant during the period beginning September 20, 2013 and ending at midnight on October 31, 2013, either an immediate single sum

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payment of the present value of the qualified Former Participant’s vested Accrued Benefit in an amount equal to such present value as of the Determination Date, or one of the annuity settlement options described in (i) through (iv) above, to the extent otherwise available, payable beginning immediately on the Determination Date (except that the only immediate annuity settlement options available under this (viii) to a qualified Former Participant whose vested Accrued Benefit is only a Grandfathered Benefit and who is not eligible for early retirement under Section 6.02 or 6.03 on the Determination Date will be the annuity settlement option described in (i) above (and only with a 50% survivor option), a Qualified Joint and Survivor Annuity, and a single life annuity). An election by a qualified Former Participant under this (viii) may not be revoked after November 1, 2013. Solely for purposes of calculating a Former Participant’s vested Accrued Benefit under this (viii), an early retirement subsidy or subsidies available for the qualified Former Participant under Section 6.02 or Section 6.03 on the Determination Date or after the Determination Date upon reaching his or her 55^th birthday (or later) after the Determination Date shall be included in the vested Accrued Benefit under this (viii). For purposes of this (viii) and Section 8.02(z), a “qualified Former Participant” is (1) a Former Participant (a) who was a Former Participant on August 1, 2013 and on November 1, 2013, (b) who is entitled to a vested, deferred Normal Retirement Benefit, (c) who has not received any portion of his or her vested, deferred Grandfathered Benefit by November 1, 2013, (d) who is not a participant in The Hanover Excess Benefit Retirement Plan on November 1, 2013, (e) the Actuarial Equivalent present value of whose vested Accrued Benefit on November 1, 2013 exceeds $5,000 but does not exceed $28,000, (f) whose last day as an Employee of an Employer or an Affiliate was before August 1, 2013, (g) who is not a named party in a Domestic Relations Order under review on the Determination Date by the Plan to determine whether it will be a Qualified Domestic Relations Order, (h) who has not become eligible to begin receiving his or her vested deferred Normal Retirement Benefit (other than his or her Account Balance) from the Plan, and (i) who either was not eligible to receive a payment under the Plan’s predecessor voluntary cashout opportunity that occurred during December 2012 or was eligible, but due to an inaccurate mailing address did not receive the invitation to participate in that predecessor cashout opportunity, and (2) an alternate payee of a qualified Former Participant, but only if the combined present values of the vested Accrued Benefits of the qualified Former Participant and his or her alternate payee do not exceed $28,000.”

8. Effective on and after January 1, 2014, Section 6.06(viii) of Part I of the Plan, as added by this Amendment, is deleted in its entirety.

9. Effective on September 20, 2013, Section 8.02 of Part I of the Plan is amended to add the following as new Section 8.02(z), as follows:

“(z) Notwithstanding anything in Part I of the Plan to the contrary, effective for distributions elected under this Section 8.02(z) by a qualified Former Participant during the period beginning September 20, 2013 and ending at

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midnight on October 31, 2013, a qualified Former Participant (as defined in Section 6.06(viii)) may elect to receive his or her vested Accrued Benefit attributable to such Former Participant’s vested Grandfathered Benefit either in an immediate lump sum or in one of the annuity settlement options described in Section 6.06(i) through Section 6.06(iv), to the extent otherwise available, payable beginning immediately on the Determination Date; provided, however, that a qualified Former Participant electing under this Section 8.02(z) to receive an immediate payment of some or all of his or her vested Accrued Benefit attributable to his vested Grandfathered Benefit must also make a qualified election under this Section to receive his or her vested Account Balance in the same immediate payment form as part of the same distribution, and the only immediate annuity settlement options available under this Section 8.02(z) to a qualified Former Participant whose vested Accrued Benefit is only a Grandfathered Benefit and who is not eligible for early retirement under Section 6.02 or Section 6.03 on the Determination Date will be the annuity settlement option described in Section 6.06(i) (and only with a 50% survivor option), a Qualified Joint and Survivor Annuity, and a single life annuity. An election by a qualified Former Participant under this Section 8.02(z) may not be revoked after November 1, 2013. Any spousal consent must satisfy the requirements of Section 6.07. Solely for purposes of calculating a Former Participant’s vested Accrued Benefit under this Section 8.02(z), an early retirement subsidy or subsidies available for the qualified Former Participant under Section 6.02 or Section 6.03 on the Determination Date or after the Determination Date upon reaching his or her 55^th birthday (or later) after the Determination Date shall be included in the vested Accrued Benefit under this Section 8.02(z).”

10. Effective on and after January 1, 2014, Section 8.02(z) of Part I of the Plan, as added by this Amendment, is deleted in its entirety.

Part II is amended as follows:

1. Effective on September 20, 2013, Section 2.02 of Part II of the Plan is amended to add the following as the new last sentence of the second paragraph of existing Section 2.02, as follows:

“Except as provided otherwise in this Section, Actuarial Equivalents of the normal form of benefits payable when and as provided under Section 5.05(f) and Section 7.02 will be computed using the Code Section 417 Mortality Table and the Code Section 417 Applicable Interest Rate.”

2. Effective on and after January 1, 2014, the last sentence of the second paragraph of Section 2.02 of Part II of the Plan, as added by this Amendment, is deleted in its entirety.

3. Effective on September 20, 2013, Section 5.05 of Part II of the Plan is amended to insert the following immediately after Section 5.05(e) as new Section 5.05(f):

“(f) Notwithstanding anything in Part II of the Plan to the contrary, for distributions elected under this Section 5.05(f) by a qualified Former Participant during the period beginning September 20, 2013 and ending at midnight on October 31, 2013, a qualified Former Participant will be

- 4 -

paid either an immediate single sum payment of the present value of the qualified Former Participant’s vested Accrued Benefit in an amount equal to such present value as of the Determination Date, or one of the annuity settlement options described in Sections 5.05(a) through 5.05(d) above, to the extent otherwise available, payable beginning immediately on the Determination Date (except that the only immediate annuity settlement options available under this Section 5.05(f) to a qualified Former Participant whose vested Accrued Benefit is only an Accrued Benefit accrued only under Part II of the Plan (and its predecessors) and who is not eligible for early retirement under Section 5.02 on the Determination Date will be the annuity settlement option under Section 5.05(a) (and only with a 50% survivor option), a Qualified Joint and Survivor Annuity, and a single life annuity). An election by a qualified Former Participant under this Section 5.05(f) may not be revoked after November 1, 2013. Solely for purposes of calculating a qualified Former Participant’s vested Accrued Benefit under this Section 5.05(f), an early retirement subsidy or subsidies available for the qualified Former Participant under Section 5.02 on the Determination Date or after the Determination Date upon reaching his or her 55^th birthday (or later) after the Determination Date shall be included in the vested Accrued Benefit under this Section 5.05(f). For purposes of this Section 5.05 and Section 7.02, a “qualified Former Participant” is (1) a Former Participant (a) who was a Former Participant on August 1, 2013 and on November 1, 2013, (b) who is entitled to a vested, deferred Normal Retirement Benefit, (c) who has not received any portion of his or her vested, deferred Normal Retirement Benefit by November 1, 2013, (d) who is not a participant in The Hanover Excess Benefit Retirement Plan on November 1, 2013, (e) the Actuarial Equivalent present value of whose vested Accrued Benefit on November 1, 2013 exceeds $5,000 but does not exceed $28,000, (f) whose last day as an Employee of an Employer or an Affiliate was before August 1, 2013, (g) who is not a named party in a Domestic Relations Order under review on the Determination Date by the Plan to determine whether it will be a Qualified Domestic Relations Order, (h) who has not become eligible to begin receiving his or her vested deferred Normal Retirement Benefit (as defined in Part II) from the Plan, and (i) who either was not eligible to receive a payment under the Plan’s predecessor voluntary cashout opportunity that occurred during December 2012 or was eligible, but due to an inaccurate mailing address did not receive the invitation to participate in that predecessor cashout opportunity, and (2) an alternate payee of a qualified Former Participant, but only if the combined present values of the vested Accrued Benefits on the Determination Date of the qualified Former Participant and his or her alternate payee do not exceed $28,000.”

4. Effective on and after January 1, 2014, Section 5.05(f) of Part II of the Plan, as added by this Amendment, is deleted in its entirety.

5. Effective on September 20, 2013, Section 7.02 of Part II of the Plan is amended to insert the following immediately after Option 2 in Section 7.02 as the last sentence at the end of Option 2 in Section 7.02:

- 5 -

“Notwithstanding anything in Part II of the Plan to the contrary, a timely qualified election by a qualified Former Participant under Section 5.05(f) shall also be treated, to the extent appropriate or necessary, as an election under this Section.”

6. Effective on and after January 1, 2014, Section 7.02 of Part II of the Plan, as changed by this Amendment, is amended to delete the last sentence of Option 2 of Section 7.02 added by this Amendment.

This Third Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment, and except as amended by this Amendment, the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, this Third Amendment has been executed this 18th day of September, 2013.

THE HANOVER INSURANCE COMPANY

Authorized Representative

- 6 -

THE HANOVER INSURANCE GROUP

CASH BALANCE PENSION PLAN

FOURTH AMENDMENT

This Fourth Amendment is executed by The Hanover Insurance Company, a New Hampshire corporation (the “Company”).

WHEREAS, the Company sponsors The Hanover Insurance Group Cash Balance Pension Plan (the “Plan”); and

WHEREAS, the Plan consists of the following three component parts, each of which is set forth in the same document: (i) Part I, which provides a cash balance and pension benefit which were formerly provided under a plan known as “The Allmerica Financial Cash Balance Pension Plan”, and then “The Hanover Insurance Group Cash Balance Pension Plan”, (ii) Part II, which provides a pension benefit which was formerly provided under a plan known as “The Allmerica Financial Agents’ Pension Plan”, and (iii) Part III, which contains Plan terms applicable to each of Part I and Part II; and

WHEREAS, the Plan was most recently amended and restated generally effective January 1, 2010, and such restatement has been amended three times; and

WHEREAS, the Company has the authority to amend the Plan at any time pursuant to Section 10.01 of Part III of the Plan; and

WHEREAS, the Company desires to amend the Plan to take into account a recently effective statutory change.

NOW, THEREFORE, the Plan is amended, effective as provided below, as follows:

Part I is amended as follows:

Effective January 1, 2013, Section 2.02(c) of Part I of the Plan is deleted in its entirety, and the following is inserted as new Section 2.02(c) of Part I of the Plan, as follows:

“(c) for periods beginning on and after January 1, 2008, the “Code Section 417 Applicable Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the applicable interest rate described by Code section 417(e) after its amendment by the Pension Protection Act of 2006, which rate more specifically shall be the adjusted first, second, and third segment rates applied under rules similar to the rules of Code section 430(h)(2)(C) (without considering any adjustment under Code section 430(h)(2)(C)(iv)) for the lookback month used to determine the previously applicable interest rate on 30-year Treasury securities (e.g., November 2009 for the 2010 Plan Year) or for such other time as the Secretary of the Treasury may by regulations prescribe. For purposes of determining the Code Section 417 Applicable Interest Rate, the first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code section 430(h)(2)(C) (without considering any adjustment under Code section 430(h)(2)(C)(iv)) if:

(i) Code section 430(h)(2)(D) were applied by substituting the average yields for the month described in clause (ii) below for the average yields for the 24-month period described in such Code section, and

(ii) Code section 430(h)(2)(G)(i)(II) were applied by substituting “Section 417(e)(3)(A)(ii)(II) for “Section 412(b)(5)(B)(ii)(II),” and

(iii) The applicable percentage under Code section 430(h)(2)(G) is treated as being 20% in 2008, 40% in 2009, 60% in 2010, and 80% in 2011.”

Part II is amended as follows:

1. Effective January 1, 2013, Section 2.02(c) of Part II of the Plan is deleted in its entirety, and the following is inserted as new Section 2.02(c) of Part II of the Plan, as follows:

“(c) for periods beginning on and after January 1, 2008, the “Code Section 417 Applicable Interest Rate” means, for the Plan Year which contains the annuity starting date for the distribution, the applicable interest rate described by Code section 417(e) after its amendment by the Pension Protection Act of 2006, which rate more specifically shall be the adjusted first, second, and third segment rates applied under rules similar to the rules of Code section 430(h)(2)(C) (without considering any adjustment under Code section 430(h)(2)(C)(iv)) for the lookback month used to determine the previously applicable interest rate on 30-year Treasury securities (e.g., November 2009 for the 2010 Plan Year) or for such other time as the Secretary of the Treasury may by regulations prescribe.”

2. Effective January 1, 2013, Section 2.02(d) of Part II of the Plan is amended to delete all of existing Section 2.02(d) of Part II of the Plan that precedes Section 2.02(d)(i) of Part II of the Plan and to substitute the following in its place, as follows:

“(d) For purposes of determining the Code Section 417 Applicable Interest Rate, the first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code section 430(h)(2)(C) (without considering any adjustment under Code section 430(h)(2)(C)(iv)) if:”

This Fourth Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment, and except as amended by this Amendment, the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, this Fourth Amendment has been executed this 16th day of December, 2013.

THE HANOVER INSURANCE COMPANY

Authorized Representative

- 2 -

EX-12.1

Exhibit 12.1

The Hanover Insurance Group, Inc.

Computation of Ratio of Earnings to Fixed Charges

(in millions, except ratios)

Including realized gains and losses

	Fiscal Years Ended
	December 31, 2013		December 31, 2012		December 31, 2011		December 31, 2010		December 31, 2009
Earnings before income taxes, minority interest, extraordinary items and cumulative effect of accounting changes		329.1		28.7		21.6		205.6		265.3
Fixed charges:
Interest expense		65.3		61.9		55.0		44.3		35.5
Interest portion of rental expense		7.1		7.4		7.0		5.7		5.1
Total fixed charges		72.4		69.3		62.0		50.0		40.6
Earnings before income taxes, minority interest, extraordinary items, cumulative effect of accounting changes and fixed charges		401.5		98.0		83.6		255.6		305.9
Ratio of earnings to fixed charges		5.546		1.414		1.348		5.112		7.534

EX-21

Exhibit 21

Direct and Indirect Subsidiaries of the Registrant

I. The Hanover Insurance Group, Inc. (Delaware)

A. Opus Investment Management, Inc. (Massachusetts)

a. The Hanover Insurance Company (New Hampshire)

1. Citizens Insurance Company of America (Michigan)

2. Allmerica Financial Benefit Insurance Company (Michigan)

3. Allmerica Plus Insurance Agency, Inc. (Massachusetts)

4. The Hanover American Insurance Company (New Hampshire)

5. Hanover Texas Insurance Management Company, Inc. (Texas)

6. Citizens Insurance Company of Ohio (Ohio)

7. Citizens Insurance Company of the Midwest (Indiana)

8. The Hanover New Jersey Insurance Company (New Hampshire)

9. Massachusetts Bay Insurance Company (New Hampshire)

10. Allmerica Financial Alliance Insurance Company (New Hampshire)

11. Professionals Direct Insurance Company (Michigan)

12. Professionals Direct, Inc. (Michigan)

(i) Professionals Direct Insurance Services, Inc. (Michigan)

(ii) Professionals Direct Finance, Inc. (Michigan)

13. Verlan Fire Insurance Company (New Hampshire)

14. The Hanover National Insurance Company (New Hampshire)

15. AIX Holdings, Inc. (Delaware)

(i) Nova American Group, Inc. (New York)

1. Nova Insurance Group, Inc. (Delaware)

a. Professional Underwriters Agency, Inc. (Florida)

2. Nova Casualty Company (New York)

a. AIX Specialty Insurance Company (Delaware)

(ii) AIX, Inc. (Delaware)

1. AIX Insurance Services of California, Inc. (California)

16. 440 Lincoln Street Holding Company, LLC (Massachusetts)

17. Campmed Casualty & Indemnity Company, Inc. (New Hampshire)

18. CitySquare II Investment Company LLC (Massachusetts)

(i) One Mercantile Place LLC (Massachusetts)

b. Citizens Insurance Company of Illinois (Illinois)

c. CitySquare II Development Co. LLC. (Massachusetts)

B. VeraVest Investments, Inc. (Massachusetts)

C. Verlan Holdings, Inc. (Maryland)

a. Hanover Specialty Insurance Brokers, Inc. (Virginia)

D. Campania Holding Company, Inc. (Virginia)

a. Campania Management Company, Inc. (Virginia)

b. Campania Insurance Agency, Inc. (Virginia)

E. Educators Insurance Agency, Inc. (Massachusetts)

F. The Hanover Insurance International Holdings Limited (United Kingdom)

a. Chaucer Holdings PLC (United Kingdom)

1. ALIT Insurance Holdings Limited (United Kingdom)

(i) Aberdeen Underwriting Advisers Limited (United Kingdom)

(ii) ALIT Underwriting Limited (United Kingdom)

1. ALIT (No. 1) Limited (United Kingdom)

2. ALIT (No. 2) Limited (United Kingdom)

3. ALIT (No. 3) Limited (United Kingdom)

4. ALIT (No. 4) Limited (United Kingdom)

5. ALIT (No. 5) Limited (United Kingdom)

2. Chaucer Corporate Capital (No. 2) Limited (United Kingdom)

3. Chaucer Corporate Capital (No. 3) Limited (United Kingdom)

4. Chaucer Corporate Capital Limited (United Kingdom)

5. Chaucer Freeholds Limited (United Kingdom)

6. Hayward Brick Stuchbery Holdings Limited (United Kingdom)

(i) CH 1997 Limited (United Kingdom)

1. Chaucer Consortium Underwriting Limited (United Kingdom)

2. Chaucer Dedicated Limited (United Kingdom)

3. Chaucer Underwriting A/S (Denmark)

4. INSURANCE4CARGOSERVICES LIMITED (United Kingdom)

5. Chaucer Syndicates Limited (United Kingdom)

a) Chaucer GmbH (Germany)

b) Chaucer Insurance Services Limited (United Kingdom)

c) Chaucer Latin America SA (Argentina)

d) Chaucer Singapore Pte. Limited (Singapore)

e) Chaucer Syndicate Services Limited (United Kingdom)

f) Chaucer Osio AS (Norway)

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-164446 and No. 333-187373) and Form S-8 ( No. 333-24929, No. 333-31397, No. 333-134394 and No. 333-134395) of The Hanover Insurance Group, Inc. of our report dated February 24, 2014 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, MA

February 24, 2014

EX-24

Exhibit 24

POWER OF ATTORNEY

We, the undersigned, hereby severally constitute and appoint Frederick H. Eppinger, Jr., J. Kendall Huber, and David B. Greenfield, each of them singly, our true and lawful attorneys, with full power in each of them, to sign for and in each of our names and in any and all capacities, the Form 10-K of The Hanover Insurance Group, Inc. (the “Company”) and any other filings made on behalf of said Company pursuant to the requirements of the Securities Exchange Act of 1934, and to file the same with all exhibits and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands and common seal on the date set forth below.

Signature	Title	Date
/s/    Frederick H. Eppinger, Jr.         Frederick H. Eppinger, Jr.	President, Chief Executive Officer and Director	February 19, 2014
/s/    David B. Greenfield         David B. Greenfield	Executive Vice President, Chief Financial Officer and Principal Accounting Officer	February 19, 2014
/s/    Michael P. Angelini         Michael P. Angelini	Chairman of the Board	February 19, 2014
/s/    Richard H. Booth         Richard H. Booth	Director	February 19, 2014
/s/    P. Kevin Condron          P. Kevin Condron	Director	February 19, 2014
/s/    Neal F. Finnegan         Neal F. Finnegan	Director	February 19, 2014
/s/    David J. Gallitano         David J. Gallitano	Director	February 19, 2014
/s/    Wendell J. Knox         Wendell J. Knox	Director	February 19, 2014
/s/    Robert J. Murray         Robert J. Murray	Director	February 19, 2014
/s/    Joseph R. Ramrath         Joseph R. Ramrath	Director	February 19, 2014
/s/    Harriett Tee Taggart         Harriett Tee Taggart	Director	February 19, 2014

EX-31.1

Exhibit 31.1

CERTIFICATION AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Frederick H. Eppinger, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of The Hanover Insurance Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2014

/s/ Frederick H. Eppinger, Jr.

Frederick H. Eppinger, Jr.

President, Chief Executive Officer

and Director

EX-31.2

Exhibit 31.2

CERTIFICATION AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, David B. Greenfield, certify that:

1. I have reviewed this annual report on Form 10-K of The Hanover Insurance Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2014

/s/ David B. Greenfield

David B. Greenfield

Executive Vice President,

Chief Financial Officer

and Principal Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as President, Chief Executive Officer and Director of The Hanover Insurance Group, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1) the Company’s Annual Report on Form 10-K for the period ended December 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Frederick H. Eppinger, Jr.

Frederick H. Eppinger, Jr.

President, Chief Executive Officer

and Director

Dated: February 24, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Executive Vice President, Chief Financial Officer and Principal Accounting Officer of The Hanover Insurance Group, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1) the Company’s Annual Report on Form 10-K for the period ended December 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David B. Greenfield

David B. Greenfield

Executive Vice President,

Chief Financial Officer

and Principal Accounting Officer

Dated: February 24, 2014

XML

INVESTMENT INCOME AND GAINS AND LOSSES (Tables)

12 Months Ended

Dec. 31, 2013

Components of Net Investment Income

The components of net investment income were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Fixed maturities	$	254.8		$	264.2		$	254.3
Equity securities		15.6			15.3			6.8
Other investments		8.8			7.0			4.8
Gross investment income		279.2			286.5			265.9
Less investment expenses		(10.2	)		(9.9	)		(7.7	)
Net investment income	$	269.0		$	276.6		$	258.2

Schedule of Net Realized Gains (Losses) on Investments

Net realized gains (losses) on investments were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Equity securities		26.7			15.5			0.9
Fixed maturities	$	8.6		$	9.7		$	20.4
Real estate		(0.9	)		3.3			—
Derivative instruments		—			(4.4	)		5.8
Other investments		(0.9	)		(0.5	)		1.0
Net realized investment gains	$	33.5		$	23.6		$	28.1

Rollforwards of Cumulative Amounts Related to Credit Loss Portion of OTTI Losses

The following table provides rollforwards of the cumulative amounts related to the Company’s credit loss portion of the OTTI losses on fixed maturity securities for which the non-credit portion of the loss is included in other comprehensive income.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Credit losses as of the beginning of the year	$	8.6		$	14.5		$	16.7
Credit losses for which an OTTI was not previously recognized		1.1			0.6			—
Additional credit losses on securities for which an OTTI was previously recognized		0.3			0.6			0.9
Reductions for securities sold, matured or called		(2.2	)		(6.9	)		(1.8	)
Reductions for securities reclassified as intend to sell		—			(0.2	)		(1.3	)
Credit losses as of the end of the year	$	7.8		$	8.6		$	14.5

Proceeds from Sale of Available-For-Sale Securities

The proceeds from sales of available-for-sale securities and the gross realized gains and gross realized losses on those sales, were as follows:

YEARS ENDED DECEMBER 31
(in millions)
	Proceeds from		Gross		Gross
2013	Sales		Gains		Losses
Fixed maturities	$	450.4	$	6.0	$	4.0
Equity securities	$	193.5	$	31.2	$	0.4
2012
Fixed maturities	$	616.3	$	12.1	$	2.0
Equity securities	$	141.3	$	17.5	$	0.7
2011
Fixed maturities	$	678.1	$	20.0	$	1.1
Equity securities	$	86.6	$	3.0	$	0.5

XML

Dividend Restrictions - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
New Hampshire's Statute
Restrictions on Dividends, Loans and Advances [Line Items]
Dividends declared	$ 0	$ 0	$ 99.0
New Hampshire's Statute | Maximum
Restrictions on Dividends, Loans and Advances [Line Items]
Percentage of policyholder's surplus distributes as dividends and other distributions	10.00%
Maximum dividends payable without prior approval of state regulators	183.0
Michigan's Statute
Restrictions on Dividends, Loans and Advances [Line Items]
Dividends declared	68.0	70.0	69.0
Additional dividend approval date	December 2014
Michigan's Statute | Maximum
Restrictions on Dividends, Loans and Advances [Line Items]
Percentage of policyholder's surplus distributes as dividends and other distributions	10.00%
Maximum dividends payable without prior approval of state regulators	66.2
Chaucer
Restrictions on Dividends, Loans and Advances [Line Items]
Dividends declared	$ 13.9	$ 0	$ 0

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Acquisitions and Discontinued Operations - Additional Information (Detail) In Millions, except Per Share data, unless otherwise specified	1 Months Ended	6 Months Ended	12 Months Ended					12 Months Ended
	Jun. 30, 2011 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 GBP (£)	Apr. 20, 2011 GBP (£)	Dec. 31, 2012 Citizens Management, Inc. USD ($)	Dec. 31, 2013 Discontinued Accident And Health Insurance Business USD ($)	Dec. 31, 2012 Discontinued Accident And Health Insurance Business USD ($)
Significant Acquisitions and Disposals [Line Items]
Per share amount received by shareholders, pence						£ 0.533	£ 0.533
Business acquisition, purchase price, settlement loss		$ 11.3			$ 11.3
Gain (loss) on foreign exchange		6.4			6.4
Acquisition costs	11.7		0.1	2.6	16.4
Current exchange rate between GBP and US dollars		1.60
Assets of discontinued operations			114.9	130.5					66.6	72.9
Liabilities of discontinued operations			121.1	126.3					51.3	52.5
Gain from insurance settlement			5.8
Gain on discontinued operations, after taxes				0.7	5.2			10.8
Contribution to charitable foundation that offset gain from disposal of discontinued operation				$ 1.7

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SEGMENT INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

Financial Information with Respect to Business Segments

Summarized below is financial information with respect to the Company’s business segments. Amounts reflect activity of Chaucer since the July 1, 2011 acquisition date.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Operating revenues:
Commercial Lines	$	2,109.5		$	1,966.2		$	1,798.9
Personal Lines		1,542.5			1,560.0			1,555.9
Chaucer		1,098.2			1,030.0			534.1
Other		10.0			10.9			14.6
Total		4,760.2			4,567.1			3,903.5
Net realized investment gains		33.5			23.6			28.1
Total revenues	$	4,793.7		$	4,590.7		$	3,931.6
Operating income (loss) before interest expense and income taxes:
Commercial Lines:
GAAP underwriting loss	$	(11.0	)	$	(224.2	)	$	(123.0	)
Net investment income		143.5			142.4			136.5
Other income (expense)		(0.1	)		1.5			2.8
Commercial Lines operating income (loss)		132.4			(80.3	)		16.3
Personal Lines:
GAAP underwriting income (loss)		37.6			(67.3	)		(72.6	)
Net investment income		75.8			86.5			92.1
Other income		5.2			6.3			3.6
Personal Lines operating income		118.6			25.5			23.1
Chaucer:
GAAP underwriting income		107.7			93.5			11.9
Net investment income		42.7			40.2			16.9
Other income		—			3.1			4.1
Chaucer operating income		150.4			136.8			32.9
Other:
GAAP underwriting loss		(3.4	)		(3.5	)		(0.3	)
Net investment income		7.0			7.2			12.7
Other net expenses		(11.6	)		(10.6	)		(12.9	)
Other operating loss		(8.0	)		(6.9	)		(0.5	)
Operating income before interest expense and income taxes		393.4			75.1			71.8
Interest on debt		(65.3	)		(61.9	)		(55.0	)
Operating income before income taxes		328.1			13.2			16.8
Non-operating income items:
Net realized investment gains		33.5			23.6			28.1
Net loss from repayment of debt		(27.7	)		(5.1	)		(2.3	)
Loss on real estate		(4.7	)		—			—
Net costs related to acquired businesses		(0.1	)		(2.6	)		(16.4	)
Loss on derivative instruments		—			—			(11.3	)
Net foreign exchange gains (losses)		—			(0.4	)		6.7
Income before income taxes	$	329.1		$	28.7		$	21.6

Business Segments and Discontinued Operations Related to Identifiable Assets

The following table provides identifiable assets for the Company’s business segments and discontinued operations:

DECEMBER 31	2013		2012
(in millions)	Identifiable Assets
U.S. Companies	$	8,962.6	$	8,909.6
Chaucer		4,301.2		4,444.8
Discontinued operations		114.9		130.5
Total	$	13,378.7	$	13,484.9

Gross Written Premium by Geographical Location

The following table presents the Company’s gross written premium (“GWP”) based on the location of the risk:

YEAR ENDED DECEMBER 31	2013			2012			2011
	% of Total
	GWP
United States		78	%		76	%		87	%
United Kingdom		6			6			4
Worldwide and other		16			18			9
Total		100	%		100	%		100	%

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Schedule of Liability for Unpaid Losses and Loss Adjustment Expenses (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Liabilities For Outstanding Claims, Losses And Loss Adjustment Expenses [Line Items]
Gross loss and LAE reserves, beginning of year	$ 6,197.0	$ 5,760.3	$ 3,277.7
Reinsurance recoverable on unpaid losses, beginning of year	2,074.3	1,931.8	1,115.5
Net loss and LAE reserves, beginning of year	4,122.7	3,828.5	2,162.2
Net incurred losses and LAE in respect of losses occurring in Current year	2,837.4	2,990.2	2,654.1
Net incurred losses and LAE in respect of losses occurring in prior year	(76.3)	(15.8)	(103.3)
Total incurred losses and LAE	2,761.1	2,974.4	2,550.8
Net payments of losses and LAE in respect of losses occurring in Current year	1,213.5	1,317.6	1,482.4
Net payments of losses and LAE in respect of losses occurring in Prior years	1,469.8	1,396.5	1,010.3
Total payments	2,683.3	2,714.1	2,492.7
Effect of foreign exchange rate changes	0.6	33.9	(22.8)
Net reserve for losses and LAE, end of year	4,201.1	4,122.7	3,828.5
Reinsurance recoverable on unpaid losses, end of year	2,030.4	2,074.3	1,931.8
Gross reserve for losses and LAE, end of year	6,231.5	6,197.0	5,760.3
Chaucer Business
Liabilities For Outstanding Claims, Losses And Loss Adjustment Expenses [Line Items]
Purchase of Chaucer, net of reinsurance recoverable on unpaid losses of $669.6			$ 1,631.0

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Estimated Fair Values of Financial Instruments Not Carried at Fair Value (Detail) (Estimate of Fair Value, Fair Value Disclosure, USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 486.2	$ 564.8
Equity securities	9.3	9.7
Other investments	20.5	16.6
Debt	961.7	995.2
Fair Value, Inputs, Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	486.2	564.8
Fair Value, Inputs, Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Equity securities	9.3	9.7
Other investments	2.7	4.8
Debt	961.7	995.2
Fair Value, Inputs, Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other investments	$ 17.8	$ 11.8

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Commitments and Contingencies - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013 Y	Dec. 11, 2009 Plaintiff
Loss Contingencies [Line Items]
Participant's retirement age	65
Treasury rate, years	30 years
Named plaintiffs		2

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Purchase Price Determination (Detail) In Millions, unless otherwise specified	0 Months Ended
	Jul. 14, 2011 USD ($)	Jul. 14, 2011 GBP (£)	Apr. 20, 2011 USD ($)	Apr. 20, 2011 GBP (£)
Business Acquisition [Line Items]
Aggregate purchase price announced on April 20, 2011 Based on 53.3p contract price			$ 485.3	£ 297.7
Cash	455.0	287.4
Loan notes and other payables	15.3	9.5
Foreign exchange forward settlement	11.3
Total	$ 481.6	£ 296.9

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Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Deferred Tax Assets [Line Items]
U.S. statutory federal income tax rate	35.00%
Deferred tax assets, U.S. net operating loss carryforwards	$ 42.1
Deferred tax assets, foreign net operating loss carryforwards	22.4
Deferred tax asset, alternative minimum tax carryforward	110.3
Deferred tax assets, Foreign tax credit carryforwards	12.8
Valuation Allowance	2.9	35.9	35.9	91.5
Unrealized gains in our investment portfolio		69.6	98.4
Valuation allowance, deferred tax asset, reduction (increase) in amount			55.6
Increase in accumulated other comprehensive income due to valuation allowance decrease			28.8
Income recognized in continuing operations related to non-segment income	107.7
Tax benefit recorded as income from discontinued operations		2.9
Net realized investment gains	33.5	23.6	28.1
Tax credit carryforwards expired			7.6
Foreign income permanently reinvested	20.3	10.0	4.2
Estimated taxes payable on undistributed earnings	13.0
Deferred deductions	4.8
Accrued interest	1.2	0.4
Non Reportable Segment
Deferred Tax Assets [Line Items]
Income recognized in continuing operations related to non-segment income	17.5	14.3	9.7
Valuation Allowance, Capital Loss Carryforwards Realized due to Unrealized Gains
Deferred Tax Assets [Line Items]
Valuation Allowance		24.4	29.0
Valuation Allowance, Unrealized Appreciation
Deferred Tax Assets [Line Items]
Valuation allowance, deferred tax asset, reduction (increase) in amount		25.3	21.9
Valuation Allowance, Other
Deferred Tax Assets [Line Items]
Valuation allowance, deferred tax asset, reduction (increase) in amount			0.2
Increase in income from continuing operations due to valuation allowance decrease		7.7
Valuation Allowance, Capital Loss Carryforwards Realized due to Net Realized Gain
Deferred Tax Assets [Line Items]
Valuation allowance, deferred tax asset, reduction (increase) in amount			7.5
Valuation Allowance, Portion Utilized before Expiration
Deferred Tax Assets [Line Items]
Valuation allowance, deferred tax asset, reduction (increase) in amount			(2.6)
Foreign Tax Credit Carryforwards
Deferred Tax Assets [Line Items]
Foreign tax credit carryforwards expiration date	Beginning in 2022
Domestic Tax Authority
Deferred Tax Assets [Line Items]
Pre-tax operating loss carryforward	120.3
Operating loss expiration date	Beginning in 2031
U.K.
Deferred Tax Assets [Line Items]
Pre-tax operating loss carryforward	$ 66.2
Operating loss expiration date	No expiration date

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Other Comprehensive Income - Additional Information (Detail) (Accumulated Defined Benefit Plans Adjustment)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accumulated Defined Benefit Plans Adjustment
Comprehensive Income (Loss) [Line Items]
Loss Adjustment Expense	40.00%	40.00%	40.00%
Percentage Of Other Operating Expenses	60.00%	60.00%	60.00%

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STOCK-BASED COMPENSATION PLANS (Tables)

12 Months Ended

Dec. 31, 2013

Summary of Stock Option Plan Activity

Information on the Company’s stock option plans is summarized below.

YEARS ENDED DECEMBER 31	2013					2012					2011
(in whole shares and dollars)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding, beginning of year		2,892,882		$	38.28		2,715,430		$	38.57		2,843,909		$	39.22
Granted		537,800			42.53		529,500			36.84		297,000			46.47
Exercised		(1,192,134	)		34.70		(90,624	)		25.47		(120,064	)		32.82
Forfeited or cancelled		(189,375	)		41.54		(101,574	)		41.45		(49,165	)		41.67
Expired		—			—		(159,850	)		44.05		(256,250	)		57.00
Outstanding, end of year		2,049,173		$	41.18		2,892,882		$	38.28		2,715,430		$	38.57
Exercisable, end of year		783,873		$	41.16		1,630,382		$	37.18		1,686,930		$	37.69

Schedule of Employee Options Outstanding and Exercisable

Additional information about employee options outstanding and exercisable at December 31, 2013 is included in the following table:

	Options Outstanding						Options Currently Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
			Contractual		Exercise				Exercise
Range of Exercise Prices	Number		Lives		Price		Number		Price
$34.19		175,250		5.15		34.19		175,250		34.19
$35.86 to $36.50		160,500		1.19		35.94		160,500		35.94
$36.81		432,500		8.06		36.81		—		—
$36.88 to $42.15		242,591		6.00		41.71		115,091		41.61
$42.49		482,300		9.16		42.49		—		—
$44.88 to $46.28		155,751		2.80		45.88		155,751		45.88
$46.47 to $47.41		243,000		7.15		46.56		22,500		47.41
$48.46 to $54.41		157,281		3.25		48.49		154,781		48.46

Assumptions Used to Determine Fair Value for Options Granted

The following significant assumptions were used to determine the fair value for options granted in the years indicated.

	2013			2012			2011
Dividend yield		2.43% to 3.11	%		3.13% to 3.26	%		2.152	%
Expected volatility		21.77% to 32.02	%		32.86% to 35.27	%		31.53% to 33.30	%
Weighted average expected volatility		27.53	%		34.05	%		32.42	%
Risk-free interest rate		0.29%-2.02	%		0.61%-1.06	%		2.00%-2.35	%
Expected term, in years		3.0 to 6.0			4.5 to 5.5			4.5 to 5.5

Summary of Restricted Stock Activity

The following table summarizes information about employee restricted stock units;

YEARS ENDED DECEMBER 31	2013					2012					2011
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Time-based restricted stock units:
Outstanding, beginning of year		750,837		$	40.15		768,529		$	40.17		838,129		$	40.93
Granted		141,073			43.31		174,841			37.01		198,957			42.08
Vested		(298,388	)		39.51		(137,194	)		36.19		(230,613	)		44.40
Forfeited		(67,542	)		41.33		(55,339	)		40.47		(37,944	)		41.23
Outstanding, end of year		525,980		$	41.20		750,837		$	40.15		768,529		$	40.17
Performance and market-based restricted stock units:
Outstanding, beginning of year		132,775		$	39.97		69,500		$	45.37		101,680		$	39.62
Granted		82,795			41.85		96,150			36.91		42,500			46.47
Vested		—			—		—			—		(27,059	)		45.21
Forfeited		(30,944	)		42.33		(32,875	)		43.28		(47,621	)		34.16
Outstanding, end of year		184,626		$	40.42		132,775		$	39.97		69,500		$	45.37

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SCHEDULE IV REINSURANCE

12 Months Ended

Dec. 31, 2013

SCHEDULE IV REINSURANCE

SCHEDULE IV

THE HANOVER INSURANCE GROUP, INC.

REINSURANCE

Incorporated herein by reference to Note 16 —“Reinsurance” in the Notes of the Consolidated Financial Statements included in Financial Statements and Supplemental Data of this Form 10-K.

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Detail of Income tax Difference from Statutory Rate (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Schedule Of Effective Tax Rates Line Items
Expected income tax expense	$ 115.2	$ 10.0	$ 7.5
Tax difference related to investment disposals and maturities	(17.5)	(14.3)	(9.7)
Effect of foreign operations	(10.8)	(3.5)	(1.5)
Dividend received deduction	(2.5)	(2.8)	(1.1)
Tax-exempt interest	(1.7)	(1.5)	(2.0)
Nondeductible expenses	1.1	2.8	4.7
Change in foreign tax rate	(0.7)	(0.4)
Change in valuation allowance		(7.7)	(7.5)
Other, net	0.3		(0.3)
Income tax expense (benefit)	$ 83.4	$ (17.4)	$ (9.9)
Effective tax rate	25.30%	(60.60%)	(45.80%)

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Reinsurance - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Effects of Reinsurance [Line Items]
Property and casualty premiums earned, Ceded	$ 713.5	[1]	$ 800.8	[1]	$ 539.2	[1]
Property and casualty losses and LAE, Ceded	350.6	[1]	588.4	[1]	422.1	[1]
Reinsurance recoverable	2,335.0		2,479.7
MCCA
Effects of Reinsurance [Line Items]
Property and casualty premiums earned, Ceded	72.2		74.0		69.6
Property and casualty losses and LAE, Ceded	76.6		99.9		122.6
Percentage of reinsurance receivable represented by segment	37.10%
Percentage of reinsurance assets represented by segment, minimum	10.00%
Reinsurance recoverable	$ 867.0		$ 856.3

[1] In 2013, we did not renew the capital provision reinsurance treaty with Flagstone Re. This reduced ceded premiums written, premiums earned and losses and LAE for the year ended December 31, 2013.

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Schedule of Quarterly Financial Information (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended												12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012		Sep. 30, 2012		Jun. 30, 2012		Mar. 31, 2012		Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Schedule Of Quarterly Financial Information [Line Items]
Total revenues	$ 1,229.0	$ 1,201.8	$ 1,182.6	$ 1,180.3	$ 1,184.0		$ 1,157.7		$ 1,127.2		$ 1,121.8		$ 4,793.7	$ 4,590.7	$ 3,931.6
Income (loss) from continuing operations	64.9	61.3	53.1	66.4	(55.3)		40.9		9.8		50.7		245.7	46.1	31.5
Net income (loss)	$ 70.1	$ 61.3	$ 53.4	$ 66.2	$ (55.0)		$ 40.4		$ 20.8		$ 49.7		$ 251.0	$ 55.9	$ 36.7
Income (loss) from continuing operations per share, Basic	$ 1.48	$ 1.40	$ 1.21	$ 1.49	$ (1.24)		$ 0.92		$ 0.22		$ 1.13		$ 5.58	$ 1.03	$ 0.70
Income (loss) from continuing operations per share, Diluted	$ 1.45	$ 1.37	$ 1.19	$ 1.47	$ (1.24)	[1]	$ 0.90	[1]	$ 0.22	[1]	$ 1.11	[1]	$ 5.47	$ 1.02	$ 0.69
Net income (loss) per share, Basic	$ 1.60	$ 1.40	$ 1.21	$ 1.49	$ (1.24)		$ 0.91		$ 0.46		$ 1.11		$ 5.70	$ 1.25	$ 0.81
Net income (loss) per share, Diluted	$ 1.57	$ 1.37	$ 1.19	$ 1.46	$ (1.24)	[1]	$ 0.89	[1]	$ 0.46	[1]	$ 1.09	[1]	$ 5.59	$ 1.23	$ 0.80
Dividends declared per share	$ 0.37	$ 0.33	$ 0.33	$ 0.33	$ 0.33		$ 0.30		$ 0.30		$ 0.30

[1] Per diluted share amounts in the fourth quarter of 2012 exclude common stock equivalents, since the impact of these instruments was antidilutive.

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Condensed Financial Information of Registrant Parent Company Only Statements Of Cash Flows (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash Flows From Operating Activities
Net income	$ 251.0	$ 55.9	$ 36.7
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss from retirement of debt	27.7	5.1	2.3
Net realized investment gains	(33.5)	(22.8)	(16.2)
Deferred income tax expense (benefit)	74.9	(35.5)	(9.2)
Change in expenses and taxes payable	(62.9)	87.6	48.2
Net cash provided by (used in) operating activities	383.9	408.2	221.7
Cash flows from investing activities
Proceeds from disposals and maturities of fixed maturities	1,394.3	1,684.8	1,624.2
Purchase of fixed maturities	(1,698.8)	(2,170.4)	(1,688.0)
Net cash used for business acquisitions			287.7
Net cash provided by (used in) investing activities	(358.7)	(562.8)	182.8
Cash Flows From Financing Activities
Proceeds from debt borrowings	168.6	7.4	325.4
Repurchases of debt	(139.9)	(73.1)	(86.8)
Dividends paid to shareholders	(60.0)	(55.1)	(50.9)
Repurchase of common stock	(78.2)	(20.0)	(21.7)
Proceeds from exercise of employee stock options	25.0	2.6	3.9
Other financing activities	(5.1)	(0.4)	(0.5)
Net cash provided by (used in) financing activities	(105.5)	(133.4)	127.3
Net change in cash and cash equivalents	(78.7)	(255.9)	527.9
Cash and cash equivalents, beginning of year	564.8	820.4	290.4
Cash and cash equivalents, end of year	486.2	564.8	820.4
The Hanover Insurance Group, Inc
Cash Flows From Operating Activities
Net income	251.0	55.9	36.7
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss (gain) on discontinued operations	2.5	(0.7)	(5.2)
Loss from retirement of debt	19.9	0.1	2.6
Equity in net income of unconsolidated subsidiaries	(262.5)	(47.5)	(54.7)
Net realized investment gains	(0.8)	(2.5)	(8.7)
Loss on derivative instruments			11.3
Dividends received from unconsolidated subsidiaries	12.5	1.0	1.6
Deferred income tax expense (benefit)	(32.3)	3.9	(3.4)
Change in expenses and taxes payable	0.1	6.2	(11.7)
Change in net payable from subsidiaries	16.5	30.7	(0.5)
Other, net	3.4	2.8	2.3
Net cash provided by (used in) operating activities	10.3	49.9	(29.7)
Cash flows from investing activities
Proceeds from disposals and maturities of fixed maturities	122.9	44.2	436.3
Purchase of fixed maturities	(90.8)	(2.2)	(148.7)
Net cash used for business acquisitions	(2.2)	(3.4)	(468.4)
Other investing activities			(1.9)
Net cash provided by (used in) investing activities	29.9	38.6	(182.7)
Cash Flows From Financing Activities
Proceeds from debt borrowings	168.6		296.0
Repurchases of debt	(93.6)	(0.7)	(72.1)
Dividends paid to shareholders	(60.0)	(55.1)	(50.9)
Repurchase of common stock	(78.2)	(20.0)	(21.7)
Proceeds from exercise of employee stock options	25.0	2.6	3.9
Other financing activities	(5.1)	(0.4)	(0.5)
Net cash provided by (used in) financing activities	(43.3)	(73.6)	154.7
Net change in cash and cash equivalents	(3.1)	14.9	(57.7)
Cash and cash equivalents, beginning of year	23.8	8.9	66.6
Cash and cash equivalents, end of year	$ 20.7	$ 23.8	$ 8.9

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Schedule of Additional Information about Significant Unobservable Inputs Used in Fair Valuations of Level Three (Detail) (USD $) In Millions, unless otherwise specified						12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Fair Value, Inputs, Level 3	Dec. 31, 2012 Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Municipal Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Municipal Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Municipal Discount For Small Issue Size Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Small Issue Size Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Municipal Discount For Above Market Coupon Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Above Market Coupon Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Municipal Discount For Above Market Coupon Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Above Market Coupon Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Municipal Discount For Above Market Coupon Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Above Market Coupon Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Long Maturity Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Municipal Discount For Long Maturity Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Corporate Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Corporate Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Corporate Discount For Small Issue Size Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Small Issue Size Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Corporate Discount For Above Market Coupon Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Above Market Coupon Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Corporate Discount For Above Market Coupon Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Above Market Coupon Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Corporate Discount For Above Market Coupon Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Above Market Coupon Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Long Maturity Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Long Maturity Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Credit Stress Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Credit Stress Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Corporate Discount For Credit Stress Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Residential mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Residential mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Residential mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Residential mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Above Market Coupon Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Above Market Coupon Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Above Market Coupon Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Above Market Coupon Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Above Market Coupon Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Above Market Coupon Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Long Maturity Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Long Maturity Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Long Maturity Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Credit Stress Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Credit Stress Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Credit Stress Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Credit Stress Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Lease Structure Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Lease Structure Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Fixed Maturities Commercial mortgage-backed Discount For Lease Structure Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Commercial mortgage-backed Discount For Lease Structure Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Asset-backed Discount For Small Issue Size Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Asset-backed Discount For Small Issue Size Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Fixed Maturities Asset-backed Discount For Small Issue Size Income Approach Valuation Technique Maximum Fair Value, Inputs, Level 3	Dec. 31, 2013 Other securities Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2012 Other securities Income Approach Valuation Technique Fair Value, Inputs, Level 3	Dec. 31, 2013 Other securities Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2012 Other securities Income Approach Valuation Technique Minimum Fair Value, Inputs, Level 3	Dec. 31, 2013 Equity Securities Fair Value, Inputs, Level 3	Dec. 31, 2012 Equity Securities Fair Value, Inputs, Level 3
Fair Value [Line Items]
Fair value measurement market multiples																																																																					1.3	0.9
Fair value measurement weighted average market multiples																																																																					1.3	0.9
Fair Value	$ 104.2	$ 102.7	$ 102.5	$ 38.5	$ 24.3	$ 25.6	$ 19.4																			$ 12.8	$ 26.4										$ 0.5	$ 0.7							$ 22.9	$ 26.7																$ 1.5			$ 3.6	$ 3.6
Weighted average rate						2.30%	3.10%	1.00%	1.00%	4.00%	4.00%	0.50%	0.50%	0.30%	0.30%	1.00%	1.00%	0.50%	0.50%	0.50%	0.50%	0.30%	0.30%	1.00%	3.00%	0.60%	0.70%	0.30%	0.30%	0.80%	1.00%	0.50%	0.50%	1.10%	1.00%	3.00%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.60%	0.40%	0.50%	0.30%	0.80%	0.80%	0.70%	0.50%	0.80%	0.50%	1.00%	0.50%	1.00%	0.30%	0.30%	0.30%	0.30%	1.60%	0.70%	2.00%	18.00%	18.00%	18.00%	18.00%

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Components of Net Periodic Benefit Cost (Detail) (Pension Benefits, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Pension Benefits
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost - benefits earned during the period	$ 1.5	$ 1.6	$ 0.7
Interest cost	31.9	35.2	34.3
Expected return on plan assets	(35.9)	(38.7)	(37.1)
Recognized net actuarial loss	14.7	12.8	15.0
Amortization of prior service cost		0.1	0.1
Settlement loss	0.4
Net periodic pension cost	$ 12.6	$ 11.0	$ 13.0

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Unaudited Pro Forma Information (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011
Business Acquisition [Line Items]
Revenue	$ 4,364.8
Net income (loss)	$ (12.1)
Net income (loss) per share-basic	$ (0.27)
Net income (loss) per share - diluted	$ (0.27)	[1]
Weighted average shares outstanding-basic	45.2
Weighted average shares outstanding - diluted	45.2	[1]

[1] Weighted average shares outstanding and per diluted share amounts in 2011 exclude common stock equivalents, since the impact of these instruments would be antidilutive.

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Summary of Restricted Stock Activity (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Weighted Average Grant Date Fair Value
Schedule of Share based Compensation Arrangements by Share based Payment Award, Equity Instruments, Other Than Options, Restricted Stock Units [Line Items]
Outstanding, beginning of period, Weighted Average Grant Date Fair Value	$ 40.15	$ 40.17	$ 40.93
Granted, Weighted Average Grant Date Fair Value	$ 43.31	$ 37.01	$ 42.08
Vested, Weighted Average Grant Date Fair Value	$ 39.51	$ 36.19	$ 44.40
Forfeited, Weighted Average Grant Date Fair Value	$ 41.33	$ 40.47	$ 41.23
Outstanding, end of period, Weighted Average Grant Date Fair Value	$ 41.20	$ 40.15	$ 40.17
Performance-Based Weighted Average Grant Date Fair Value
Schedule of Share based Compensation Arrangements by Share based Payment Award, Equity Instruments, Other Than Options, Restricted Stock Units [Line Items]
Outstanding, beginning of period, Weighted Average Grant Date Fair Value	$ 39.97	$ 45.37	$ 39.62
Granted, Weighted Average Grant Date Fair Value	$ 41.85	$ 36.91	$ 46.47
Vested, Weighted Average Grant Date Fair Value			$ 45.21
Forfeited, Weighted Average Grant Date Fair Value	$ 42.33	$ 43.28	$ 34.16
Outstanding, end of period, Weighted Average Grant Date Fair Value	$ 40.42	$ 39.97	$ 45.37
Time-Based Restricted Stock Units
Schedule of Share based Compensation Arrangements by Share based Payment Award, Equity Instruments, Other Than Options, Restricted Stock Units [Line Items]
Outstanding, beginning of period, Shares	750,837	768,529	838,129
Granted, Shares	141,073	174,841	198,957
Vested, Shares	(298,388)	(137,194)	(230,613)
Forfeited, Shares	(67,542)	(55,339)	(37,944)
Outstanding, end of period, Shares	525,980	750,837	768,529
Performance And Market-Based Restricted Stock Units
Schedule of Share based Compensation Arrangements by Share based Payment Award, Equity Instruments, Other Than Options, Restricted Stock Units [Line Items]
Outstanding, beginning of period, Shares	132,775	69,500	101,680
Granted, Shares	82,795	96,150	42,500
Vested, Shares			(27,059)
Forfeited, Shares	(30,944)	(32,875)	(47,621)
Outstanding, end of period, Shares	184,626	132,775	69,500

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Condensed Financial Information of Registrant Parent Company Only - Additional Information (Detail) (The Hanover Insurance Group, Inc, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
The Hanover Insurance Group, Inc
Supplementary Insurance Information, by Segment [Line Items]
Cash portion of dividends received from unconsolidated subsidiaries	$ 12.5	$ 1.0	$ 1.6
Investment assets transferred to the parent company to settle dividend balances	$ 0	$ 17.9	$ 97.8

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Components of Income Before Income Taxes (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Schedule of Income Before Income Tax [Line Items]
U.S.	$ 183.5	$ (99.1)	$ (13.3)
Non-U.S.	145.6	127.8	34.9
Income before income taxes	$ 329.1	$ 28.7	$ 21.6

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Summary of Plan Assets Investment Measured At Fair Value (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
U.S. Defined Benefit Plans
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	$ 542.0	$ 591.6
U.S. Defined Benefit Plans | Fixed Maturities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	449.6	491.4
U.S. Defined Benefit Plans | Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	5.3	5.0
U.S. Defined Benefit Plans | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	454.9	496.4
U.S. Defined Benefit Plans | Domestic
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	67.8	58.3
U.S. Defined Benefit Plans | International
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	19.3	18.8
U.S. Defined Benefit Plans | THG Common Stock
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value		18.1
U.S. Defined Benefit Plans | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	87.1	95.2
Chaucer Pension Scheme
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	119.9	90.7
Chaucer Pension Scheme | Fixed Maturities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	22.8	12.9
Chaucer Pension Scheme | Domestic
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	30.5	29.9
Chaucer Pension Scheme | International
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	57.8	39.7
Chaucer Pension Scheme | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	88.3	69.6
Chaucer Pension Scheme | Real Estate Funds
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	8.8	8.2
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	7.7	26.9
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans | Fixed Maturities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	2.1	3.3
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans | Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	5.3	5.0
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	7.4	8.3
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans | Domestic
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	0.2	0.4
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans | International
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	0.1	0.1
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans | THG Common Stock
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value		18.1
Fair Value, Inputs, Level 1 | U.S. Defined Benefit Plans | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	0.3	18.6
Fair Value, Inputs, Level 2 | U.S. Defined Benefit Plans
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	534.3	564.7
Fair Value, Inputs, Level 2 | U.S. Defined Benefit Plans | Fixed Maturities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	447.5	488.1
Fair Value, Inputs, Level 2 | U.S. Defined Benefit Plans | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	447.5	488.1
Fair Value, Inputs, Level 2 | U.S. Defined Benefit Plans | Domestic
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	67.6	57.9
Fair Value, Inputs, Level 2 | U.S. Defined Benefit Plans | International
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	19.2	18.7
Fair Value, Inputs, Level 2 | U.S. Defined Benefit Plans | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	86.8	76.6
Fair Value, Inputs, Level 2 | Chaucer Pension Scheme
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	111.1	82.5
Fair Value, Inputs, Level 2 | Chaucer Pension Scheme | Fixed Maturities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	22.8	12.9
Fair Value, Inputs, Level 2 | Chaucer Pension Scheme | Domestic
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	30.5	29.9
Fair Value, Inputs, Level 2 | Chaucer Pension Scheme | International
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	57.8	39.7
Fair Value, Inputs, Level 2 | Chaucer Pension Scheme | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	88.3	69.6
Fair Value, Inputs, Level 3 | Chaucer Pension Scheme
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	8.8	8.2
Fair Value, Inputs, Level 3 | Chaucer Pension Scheme | Real Estate Funds
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Invested assets, fair value	$ 8.8	$ 8.2

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Reconciliation of Beginning and Ending Liability for Uncertain Tax Provision (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2011	Dec. 31, 2010
Income Tax Contingency [Line Items]
Liability at beginning and end of year, net	$ 0.8	$ 0.8	$ 0.8
Additions for tax positions of prior years	5.4
Deferred deductions	(4.8)
Liability at end of year, net	$ 1.4	$ 0.8	$ 0.8

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Reconciliation of Assets Measured at Fair Value on Recurring Basis (Detail) (USD $) In Millions, unless otherwise specified				12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Real Estate Funds	Dec. 31, 2012 Real Estate Funds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance at beginning of period	$ 104.2	$ 102.7	$ 102.5	$ 8.2	$ 7.7
Actual return on plan assets related to assets still held				0.5
Foreign currency translation				0.1	0.5
Balance at end of year	$ 104.2	$ 102.7	$ 102.5	$ 8.8	$ 8.2

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Component of Income Tax Expense (Benefit) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes [Line Items]
Current income taxes, U.S.	$ 8.0	$ 2.3	$ (0.6)
Current income taxes, Non-U.S.	0.6	16.1
Current income taxes, Subtotal	8.6	18.4	(0.6)
Deferred income taxes, U.S.	52.9	(42.7)	(20.3)
Deferred income taxes, Non-U.S.	21.9	6.9	11.0
Deferred income taxes, Subtotal	74.8	(35.8)	(9.3)
Total income tax expense (benefit)	$ 83.4	$ (17.4)	$ (9.9)

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Reconciliation for Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	$ 102.7	$ 102.5
Transfers into Level 3	9.9	7.0
Transfers out of Level 3	(4.6)	(11.0)
Included in earnings	1.5	0.2
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities	11.4	3.3
Purchases		11.3
Sales	(16.7)	(10.6)
Balance at end of year	104.2	102.7
Fixed Maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	74.7	75.5
Transfers into Level 3	9.9	6.9
Transfers out of Level 3	(3.7)	(11.0)
Included in earnings	1.5	0.4
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities	(3.7)	1.5
Purchases		11.3
Sales	(16.7)	(9.9)
Balance at end of year	62.0	74.7
Fixed Maturities | Municipal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	19.4	13.6
Transfers into Level 3	9.7	2.6
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities	(0.8)	1.1
Purchases		3.0
Sales	(2.7)	(0.9)
Balance at end of year	25.6	19.4
Fixed Maturities | Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	26.4	23.8
Transfers into Level 3	0.2	4.3
Transfers out of Level 3	(2.2)	(2.3)
Included in earnings	1.5	0.4
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities	(1.6)	0.7
Purchases		1.5
Sales	(11.3)	(2.0)
Balance at end of year	13.0	26.4
Fixed Maturities | Residential mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	0.7	5.2
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities		0.1
Purchases		0.1
Sales	(0.2)	(4.7)
Balance at end of year	0.5	0.7
Fixed Maturities | Commercial mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	26.7	23.7
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities	(1.3)	(0.4)
Purchases		5.2
Sales	(2.5)	(1.8)
Balance at end of year	22.9	26.7
Fixed Maturities | Asset-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	1.5	9.2
Transfers out of Level 3	(1.5)	(8.7)
Purchases		1.5
Sales		(0.5)
Balance at end of year		1.5
Equity Securities and Other Investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance at beginning of period	28.0	27.0
Transfers into Level 3		0.1
Transfers out of Level 3	(0.9)
Included in earnings		(0.2)
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities	15.1	1.8
Sales		(0.7)
Balance at end of year	$ 42.2	$ 28.0

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LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES

12 Months Ended

Dec. 31, 2013

LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES

17. LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES

The Company regularly updates its reserve estimates as new information becomes available and further events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in results of operations as adjustments to losses and LAE. Often these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and loss event occurred. These types of subsequent adjustments are described as “prior years’ loss reserves”. Such development can be either favorable or unfavorable to the Company’s financial results and may vary by line of business.

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses (results for Chaucer for the year ended December 31, 2011 reflect the period from July 1, 2011 to December 31, 2011).

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Gross loss and LAE reserves, beginning of year	$	6,197.0		$	5,760.3		$	3,277.7
Reinsurance recoverable on unpaid losses		2,074.3			1,931.8			1,115.5
Net loss and LAE reserves, beginning of year		4,122.7			3,828.5			2,162.2
Net incurred losses and LAE in respect of losses occurring in:
Current year		2,837.4			2,990.2			2,654.1
Prior years		(76.3	)		(15.8	)		(103.3	)
Total incurred losses and LAE		2,761.1			2,974.4			2,550.8
Net payments of losses and LAE in respect of losses occurring in:
Current year		1,213.5			1,317.6			1,482.4
Prior years		1,469.8			1,396.5			1,010.3
Total payments		2,683.3			2,714.1			2,492.7
Purchase of Chaucer, net of reinsurance recoverable on unpaid losses of $669.6		—			—			1,631.0
Effect of foreign exchange rate changes		0.6			33.9			(22.8	)
Net reserve for losses and LAE, end of year		4,201.1			4,122.7			3,828.5
Reinsurance recoverable on unpaid losses		2,030.4			2,074.3			1,931.8
Gross reserve for losses and LAE, end of year	$	6,231.5		$	6,197.0		$	5,760.3

As part of an ongoing process, reserves have been re-estimated for all prior accident years and were decreased by $76.3 million, $15.8 million and $103.3 million in 2013, 2012 and 2011, respectively. For the years ended December 31, 2013, 2012 and the six months ended December 31, 2011, these amounts include favorable loss and LAE reserve development of $94.6 million, $72.6 million and $35.5 million, respectively for Chaucer. Chaucer’s favorable development during 2013 was primarily the result of lower than expected losses in the energy line, primarily in the 2009 through 2012 accident years, property line, primarily in the 2011 and 2012 accident years, within casualty and other lines, specialty liability lines, primarily in the 2008 accident year, and the marine and aviation line, primarily in the 2010 through 2012 accident years. For Commercial and Personal Lines, the unfavorable loss and LAE development during 2013 was primarily the result of higher than expected losses within the personal automobile line, due to severity in bodily injury coverage in the 2010 through 2012 accident years, higher than expected large losses in the commercial automobile line, primarily related to liability coverage in the 2009 through 2011 accident years, and higher than expected losses within other commercial lines, primarily in the 2010 through 2012 accident years. Partially offsetting the unfavorable development was lower than expected losses within the workers’ compensation line, primarily in the 2006 through 2011 accident years and lower involuntary pool losses, including a $3.2 million benefit from the settlement of a legal proceeding, and lower than expected losses within the commercial multi-peril line, primarily in the 2012 accident year.

The $15.8 million favorable loss and LAE reserve development during the year ended December 31, 2012 includes favorable loss and LAE reserve development of $72.6 million for Chaucer. Chaucer’s favorable development during 2012 was primarily the result of lower than expected losses in the energy line, primarily in the 2008 through 2011 accident years, marine and aviation lines, primarily in the 2007 through 2011 accident years, casualty lines, primarily in the 2010 and 2011 accident years, and the property lines, primarily in the 2009 through 2011 accident years. For Commercial and Personal Lines, the unfavorable loss and LAE development during 2012 was primarily the result of higher than expected losses within other commercial lines, primarily in the contract surety line due to the challenging macroeconomic environment for contractors, and to a lesser extent, the AIX program business, primarily related unexpected severity in commercial automobile liability, commercial multiple peril and general liability in a limited number of programs, and from higher than expected large losses within the commercial automobile line, primarily related to liability coverage in the 2011 accident year. In addition, the Company experienced higher than expected losses within the personal automobile line, primarily related to bodily injury severity in the 2010 and 2011 accident years, and higher than expected homeowners property losses from non-catastrophe weather related activity in the 2011 accident year. Partially offsetting the unfavorable development was lower than expected losses within the commercial multiple peril line, related to the 2008 through 2011 accident years.

The $103.3 million favorable loss and LAE reserve development during 2011 includes favorable loss and LAE reserve development of $35.5 million for Chaucer. Chaucer’s favorable development was primarily the result of lower than expected losses in the energy, property and U.K. motor lines, primarily related to the 2009 and 2010 accident years. For Commercial and Personal Lines, the favorable loss and LAE reserve development during 2011 was primarily the result of lower than expected losses in the personal automobile line, primarily related to bodily injury coverage in the 2008 through 2010 accident years, the commercial multiple peril line related to the 2007 through 2010 accident years and lower than expected losses in the 2007 through 2010 accident years in the workers’ compensation line. In addition, within other commercial lines, unfavorable development in the professional liability and surety lines were partially offset by favorable development in the healthcare and other commercial property lines.

Loss and LAE reserves related to asbestos and environmental damage liability, primarily in other commercial lines, were $61.9 million, $60.5 million and $59.8 million as of December 31, 2013, 2012 and 2011, respectively. Ending loss and LAE reserves for all direct business written by the Company related to asbestos and environmental damage liability, included in the reserve for losses and LAE, were $11.5 million, $9.8 million and $10.0 million, net of reinsurance of $20.6 million, $20.4 million and $18.7 million as of December 31, 2013, 2012 and 2011, respectively. As a result of the Company’s historical direct underwriting mix of Commercial Lines policies toward smaller and middle market risks, past asbestos and environmental damage liability loss experience has remained minimal in relation to the Company’s total loss and LAE incurred experience. In addition, the Company has established gross loss and LAE reserves for its run-off voluntary assumed reinsurance pool business with asbestos and environmental damage liability of $29.8 million, $30.3 million and $31.1 million at December 31, 2013, 2012 and 2011, respectively. These reserves relate to pools in which the Company has terminated its participation; however, the Company continues to be subject to claims related to years in which it was a participant. Because of the inherent uncertainty regarding the types of claims in these pools, the Company cannot provide assurance that its reserves will be sufficient.

The Company estimates its ultimate liability for asbestos, environmental and toxic tort liability claims, whether resulting from direct business, assumed reinsurance and pool business, based upon currently known facts, reasonable assumptions where the facts are not known, current law and methodologies currently available. Although these outstanding claims are not significant, their existence gives rise to uncertainty and are discussed because of the possibility that they may become significant. The Company believes that, notwithstanding the evolution of case law expanding liability in asbestos and environmental claims, recorded reserves related to these claims are adequate. The asbestos, environmental and toxic tort liability could be revised in the near term if the estimates used in determining the liability are revised, and any such revisions could have a material adverse effect on the Company’s results of operations for a particular quarterly or annual period or its financial position.

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LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Liability for Unpaid Losses and Loss Adjustment Expenses

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses (results for Chaucer for the year ended December 31, 2011 reflect the period from July 1, 2011 to December 31, 2011).

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Gross loss and LAE reserves, beginning of year	$	6,197.0		$	5,760.3		$	3,277.7
Reinsurance recoverable on unpaid losses		2,074.3			1,931.8			1,115.5
Net loss and LAE reserves, beginning of year		4,122.7			3,828.5			2,162.2
Net incurred losses and LAE in respect of losses occurring in:
Current year		2,837.4			2,990.2			2,654.1
Prior years		(76.3	)		(15.8	)		(103.3	)
Total incurred losses and LAE		2,761.1			2,974.4			2,550.8
Net payments of losses and LAE in respect of losses occurring in:
Current year		1,213.5			1,317.6			1,482.4
Prior years		1,469.8			1,396.5			1,010.3
Total payments		2,683.3			2,714.1			2,492.7
Purchase of Chaucer, net of reinsurance recoverable on unpaid losses of $669.6		—			—			1,631.0
Effect of foreign exchange rate changes		0.6			33.9			(22.8	)
Net reserve for losses and LAE, end of year		4,201.1			4,122.7			3,828.5
Reinsurance recoverable on unpaid losses		2,030.4			2,074.3			1,931.8
Gross reserve for losses and LAE, end of year	$	6,231.5		$	6,197.0		$	5,760.3

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Components of Income Before Income Taxes

A summary of the components of income before income taxes and income tax expense (benefit) in the Consolidated Statements of Income are shown below:

YEARS ENDED DECEMBER 31	2013		2012			2011
(in millions)
Income (loss) before income taxes:
U.S.	$	183.5	$	(99.1	)	$	(13.3	)
Non-U.S.		145.6		127.8			34.9
	$	329.1	$	28.7		$	21.6

Components of Income Tax Expense

Income tax expense (benefit) includes the following components:

YEARS ENDED DECEMBER 31	2013		2012			2011
(in millions)
Current:
U.S.	$	8.0	$	2.3		$	(0.6	)
Non-U.S.		0.6		16.1			—
Subtotal		8.6		18.4			(0.6	)
Deferred:
U.S.		52.9		(42.7	)		(20.3	)
Non-U.S.		21.9		6.9			11.0
Subtotal		74.8		(35.8	)		(9.3	)
Total income tax expense (benefit)	$	83.4	$	(17.4	)	$	(9.9	)

Details of Income Tax Difference from Statutory Rate

The sources of the difference and the tax effects of each were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Expected income tax expense	$	115.2		$	10.0		$	7.5
Tax difference related to investment disposals and maturities		(17.5	)		(14.3	)		(9.7	)
Effect of foreign operations		(10.8	)		(3.5	)		(1.5	)
Dividend received deduction		(2.5	)		(2.8	)		(1.1	)
Tax-exempt interest		(1.7	)		(1.5	)		(2.0	)
Nondeductible expenses		1.1			2.8			4.7
Change in foreign tax rate		(0.7	)		(0.4	)		—
Change in valuation allowance		—			(7.7	)		(7.5	)
Other, net		0.3			—			(0.3	)
Income tax expense (benefit)	$	83.4		$	(17.4	)	$	(9.9	)
Effective tax rate		25.3	%		(60.6	)%		(45.8	)%

Components of Deferred Tax Assets and Liabilities

The following are the components of the Company’s deferred tax assets and liabilities (excluding those associated with its discontinued operations).

DECEMBER 31	2013		2012
(in millions)
Deferred tax assets
Loss, LAE and unearned premium reserves, net	$	185.0	$	190.6
Tax credit carryforwards		123.1		126.8
Operating loss carryforwards		64.5		75.1
Employee benefit plans		38.2		56.4
Deferred Lloyd’s underwriting losses		—		13.5
Other		74.9		60.7
		485.7		523.1
Less: Valuation Allowance		2.9		—
		482.8		523.1
Deferred tax liabilities
Deferred acquisition costs		123.5		115.8
Software capitalization		30.1		31.4
Deferred Lloyd’s underwriting income		13.8		—
Investments, net		8.4		43.3
Deferred foreign sourced income		5.1		8.0
Other		62.2		57.0
		243.1		255.5
Net deferred tax asset	$	239.7	$	267.6

Reconciliation of Beginning and Ending Liability for Uncertain Tax Position

The table below provides a reconciliation of the beginning and ending liability for uncertain tax position as follows:

YEARS ENDED DECEMBER 31	2013			2012		2011
(in millions)
Liability at beginning and end of year, net	$	0.8		$	0.8	$	0.8
Additions for tax positions of prior years		5.4			—		—
Deferred deductions		(4.8	)		—		—
Liability at end of year, net	$	1.4		$	0.8	$	0.8

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Debt and Credit Arrangements - Additional Information (Detail) In Millions, unless otherwise specified	12 Months Ended					1 Months Ended		12 Months Ended	1 Months Ended			0 Months Ended						12 Months Ended		12 Months Ended		12 Months Ended		12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 Standby Letters of Credit USD ($)	Dec. 31, 2013 Standby Letters of Credit GBP (£)	Jan. 31, 2013 Federal Home Loan Bank of Boston USD ($)	Jul. 31, 2010 Federal Home Loan Bank of Boston USD ($)	Dec. 31, 2009 Federal Home Loan Bank of Boston USD ($)	Jan. 31, 2013 Collateralized Borrowing Program USD ($)	Dec. 31, 2013 Collateralized Borrowing Program USD ($)	Dec. 31, 2012 Collateralized Borrowing Program USD ($)	Mar. 20, 2013 Subordinated debentures (unsecured) maturing March 30, 2053 USD ($)	Jun. 17, 2011 Senior Unsecured Notes Issued On June 17, 2011 USD ($)	Feb. 23, 2010 Senior unsecured Notes Issued On February 23, 2010 USD ($)	Oct. 16, 1995 Senior Unsecured Notes Issued On October 16, 1995 USD ($)	Dec. 31, 2013 Senior Unsecured Notes Issued On October 16, 1995 USD ($)	Dec. 31, 2012 Senior Unsecured Notes Issued On October 16, 1995 USD ($)	Dec. 31, 2013 8.207% Subordinated Debentures USD ($)	Dec. 31, 2012 8.207% Subordinated Debentures USD ($)	Dec. 31, 2013 Senior debentures maturing October 15, 2025 USD ($)	Dec. 31, 2012 Senior debentures maturing October 15, 2025 USD ($)	Dec. 31, 2013 Senior debentures maturing March 1, 2020 USD ($)	Dec. 31, 2012 Senior debentures maturing March 1, 2020 USD ($)	Dec. 31, 2013 Maturing November 16, 2034 EUR (€)	Dec. 31, 2013 Floating Rate Subordinated Unsecured Notes Maturing September 21, 2036 USD ($)	Dec. 31, 2013 Unsecured Debt USD ($)
Debt Instrument [Line Items]
Aggregate principal amount												$ 175.0	$ 300.0	$ 200.0	$ 200.0	$ 81.2	$ 120.9	$ 59.7	$ 59.7					€ 12.0	$ 50.0
Debt instrument interest rate								5.50%				6.35%	6.375%	7.50%	7.625%
Maturity date							Jul. 30, 2020					Mar. 30, 2053	Jun. 15, 2021	Mar. 01, 2020	Oct. 15, 2025			Feb. 03, 2027		Oct. 15, 2025		Mar. 01, 2020		Nov. 16, 2034	Sep. 21, 2036
Debt Instrument Redemption Date												Mar. 30, 2018
Interest rate of Series B Subordinated Deferrable Interest Debentures																		8.207%
Repurchase of senior debentures																				39.2		34.6
Repurchase of senior debentures at cost																				50.5		43.2
Gain (loss) on the repurchase of debt	(27.7)	(5.1)	(2.3)																	(11.3)		(8.6)				(5.1)
Advance received								125.0
Length of debt instrument								20 years
Securities borrowed							46.3
Weighted average fixed interest rate							3.88%
Repayment of FHLBB community development advances						46.3			46.3
Prepayment fees on FHLBB borrowings						7.8
Total payments of FHLBB borrowings						54.1
Securities held as collateral, at fair value										148.1	200.8
Aggregate amount of borrowings										125.0	171.3
Total holdings of FHLBB stock	9.3	9.7
Debt instrument interest rate, agreed margin																								3.75%	3.10%
Debt instrument, carrying value	906.0	851.9																		81.2	120.9	165.1	200.0			60.3
Amount of credit agreement	200.0			215.8	130.0
Credit agreement expiration date	2018-11
Foreign currency exchange rate	1.66	1.63	1.55
Interest expense	$ 65.3	$ 61.9	$ 55.0

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Accumulated Other Comprehensive Income Loss Related to Postretirement Benefit Plans (Detail) (Postretirement Benefits, USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Postretirement Benefits
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Net actuarial loss	$ 1.9	$ 7.2
Net prior service cost	(3.5)	(7.5)
Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), before Tax, Total	$ (1.6)	$ (0.3)

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ACQUISITIONS AND DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Dec. 31, 2013

Determination of Purchase Price

The following table summarizes the transaction in both GBP and U.S. dollars:

(in millions)
Aggregate purchase price announced on April 20, 2011
Based on 53.3p contract price	£	297.7	$	485.3
Actual consideration on July 14, 2011:
Cash	£	287.4	$	455.0
Loan notes and other payables		9.5		15.3
Foreign exchange forward settlement		—		11.3
Total	£	296.9	$	481.6

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 year ended December 31, 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 the date indicated, or of future results of the Company. Amounts in 2011 are converted from GBP to U.S. dollar at a 1.60 exchange rate.

	(UNAUDITED)
	YEAR ENDED
	DECEMBER 31
(in millions, except per share data)	2011
Revenue	$	4,364.8
Net income (loss)	$	(12.1	)
Net income (loss) per share—basic	$	(0.27	)
Net income (loss) per share — diluted (1)	$	(0.27	)
Weighted average shares outstanding—basic		45.2
Weighted average shares outstanding — diluted (1)		45.2

(1) Weighted average shares outstanding and per diluted share amounts in 2011 exclude common stock equivalents, since the impact of these instruments would be antidilutive.

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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Quarterly Financial Information

The quarterly results of operations for 2013 and 2012 are summarized below.

THREE MONTHS ENDED
(in millions, except per share data)
2013	March 31		June 30		Sept. 30		Dec. 31
Total revenues	$	1,180.3	$	1,182.6	$	1,201.8	$	1,229.0
Income from continuing operations	$	66.4	$	53.1	$	61.3	$	64.9
Net income	$	66.2	$	53.4	$	61.3	$	70.1
Income from continuing operations per share:
Basic	$	1.49	$	1.21	$	1.40	$	1.48
Diluted	$	1.47	$	1.19	$	1.37	$	1.45
Net income per share:
Basic	$	1.49	$	1.21	$	1.40	$	1.60
Diluted	$	1.46	$	1.19	$	1.37	$	1.57
Dividends declared per share	$	0.33	$	0.33	$	0.33	$	0.37
THREE MONTHS ENDED
(in millions, except per share data)
2012	March 31		June 30		Sept. 30		Dec. 31
Total revenues	$	1,121.8	$	1,127.2	$	1,157.7	$	1,184.0
Income (loss) from continuing operations	$	50.7	$	9.8	$	40.9	$	(55.3	)
Net income (loss)	$	49.7	$	20.8	$	40.4	$	(55.0	)
Income (loss) from continuing operations per share:
Basic	$	1.13	$	0.22	$	0.92	$	(1.24	)
Diluted (1)	$	1.11	$	0.22	$	0.90	$	(1.24	)
Net income (loss) per share:
Basic	$	1.11	$	0.46	$	0.91	$	(1.24	)
Diluted (1)	$	1.09	$	0.46	$	0.89	$	(1.24	)
Dividends declared per share	$	0.30	$	0.30	$	0.30	$	0.33

(1) Per diluted share amounts in the fourth quarter of 2012 exclude common stock equivalents, since the impact of these instruments was antidilutive.

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Proceeds from Sale of Available for Sale Securities (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fixed Maturities
Gain (Loss) on Investments [Line Items]
Proceeds from Sales	$ 450.4	$ 616.3	$ 678.1
Gross Gains	6.0	12.1	20.0
Gross Losses	4.0	2.0	1.1
Equity Securities
Gain (Loss) on Investments [Line Items]
Proceeds from Sales	193.5	141.3	86.6
Gross Gains	31.2	17.5	3.0
Gross Losses	$ 0.4	$ 0.7	$ 0.5

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Earnings Per Share and Shareholders Equity Transactions - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended			75 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive effect on earnings per share	0.1	1.8	1.6
Repurchases common stock, authorized	$ 100			$ 600
Repurchases common stock, available for repurchases	137.0
Repurchases common stock, shares	1.6
Repurchases common stock, value	$ 78.2

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Unrealized Gains and Losses on Available-For-Sale and Other Securities (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Ending balance	$ 2.9	$ 2.1	$ 1.9
Accumulated Net Unrealized Investment Gain (Loss)
Schedule of Available-for-sale Securities [Line Items]
Beginning balance	426.0	308.7	218.3
Net appreciation (depreciation) on available-for-sale securities and derivative instruments	(225.5)	151.3	65.1
Change in OTTI losses recognized in other comprehensive income	0.8	12.2	10.5
Benefit (provision) for deferred income taxes	58.0	(46.2)	14.8
Total adjustment	(166.7)	117.3	90.4
Ending balance	259.3	426.0	308.7
Accumulated Net Unrealized Investment Gain (Loss) | Fixed Maturities
Schedule of Available-for-sale Securities [Line Items]
Beginning balance	410.1	300.2	210.3
Net appreciation (depreciation) on available-for-sale securities and derivative instruments	(273.6)	140.7	66.4
Change in OTTI losses recognized in other comprehensive income	0.8	12.2	10.5
Benefit (provision) for deferred income taxes	74.8	(43.0)	13.0
Total adjustment	(198.0)	109.9	89.9
Ending balance	212.1	410.1	300.2
Accumulated Net Unrealized Investment Gain (Loss) | Equity Securities And Other
Schedule of Available-for-sale Securities [Line Items]
Beginning balance	15.9	8.5	8.0
Net appreciation (depreciation) on available-for-sale securities and derivative instruments	48.1	10.6	(1.3)
Benefit (provision) for deferred income taxes	(16.8)	(3.2)	1.8
Total adjustment	31.3	7.4	0.5
Ending balance	$ 47.2	$ 15.9	$ 8.5

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EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2013

Information Regarding Basic and Diluted Earnings Per Share

The following table provides weighted average share information used in the calculation of the Company’s basic and diluted earnings per share:

DECEMBER 31	2013			2012			2011
(in millions, except per share data)
Basic shares used in the calculation of earnings per share		44.1			44.7			45.2
Dilutive effect of securities:
Employee stock options		0.3			0.2			0.2
Non-vested stock grants		0.5			0.4			0.4
Diluted shares used in the calculation of earnings per share		44.9			45.3			45.8
Per share effect of dilutive securities on income from continuing operations	$	(0.11	)	$	(0.01	)	$	(0.01	)
Per share effect of dilutive securities on net income	$	(0.11	)	$	(0.02	)	$	(0.01	)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of The Hanover Insurance Group, Inc. (“THG” or the “Company”), include the accounts of The Hanover Insurance Company (“Hanover Insurance”) and Citizens Insurance Company of America (“Citizens”), THG’s principal U.S. domiciled property and casualty companies; Chaucer Holdings plc (“Chaucer”), a specialist insurance underwriting group which operates through the Society and Corporation of Lloyd’s (“Lloyd’s”); and certain other insurance and non-insurance subsidiaries. These legal entities conduct their operations through several business segments discussed in Note 14 – “Segment Information”. The acquisition of Chaucer on July 1, 2011, which has added meaningful business volumes to THG results, has affected the comparability of the consolidated financial statements and related footnotes for the years ended December 31, 2013, 2012 and 2011. Results of operations for the years ended December 31, 2013 and 2012 include results from all of the Company’s business segments, while results of operations for the year ended December 31, 2011 include Chaucer’s results for only the period from July 1, 2011 through December 31, 2011. Additionally, the consolidated financial statements include the Company’s discontinued operations, consisting primarily of the Company’s former life insurance businesses, its accident and health business and prior to April 30, 2012, its third party administration business. All intercompany accounts and transactions have been eliminated. During 2013, the Company increased additional paid-in capital and decreased retained earnings by $34 million to correct the classification of amounts relating to stock-based compensation in prior periods. This reclassification within shareholders’ equity had no impact on net income, assets, liabilities or total shareholders’ equity of the Company for the current or any prior period.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of the Company’s management these financial statements reflect all adjustments, consisting of normal recurring items necessary for a fair presentation of the financial position and results of operations.

B. VALUATION OF INVESTMENTS

The Company is required to classify its investments into one of three categories: held-to-maturity, available-for-sale or trading. It determines the appropriate classification of fixed maturity and equity securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Fixed maturities and equity securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported in accumulated other comprehensive income, a separate component of shareholders’ equity. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in net investment income.

Fixed maturities that are delinquent are placed on non-accrual status, and thereafter interest income is recognized only when cash payments are received.

Realized investment gains and losses are reported as a component of revenues based upon specific identification of the investment assets sold. When an other-than-temporary decline in value of a specific investment is deemed to have occurred, and a charge to earnings is required, the Company recognizes a realized investment loss.

The Company reviews investments in an unrealized loss position to identify other-than-temporary declines in value. When it is determined that a decline in value of an equity security is other-than-temporary, the Company reduces the cost basis of the security to fair value with a corresponding charge to earnings. When an other-than-temporary decline in value of a debt security is deemed to have occurred, the Company must assess whether it intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the debt security meets either of these two criteria, an other-than-temporary impairment (“OTTI”) is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the impairment measurement date. If the Company does not intend to sell the debt security and it is not more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, the credit loss portion of an OTTI is recorded through earnings while the portion attributable to all other factors is recorded separately as a component of other comprehensive income. The amount of the OTTI that relates to credit is estimated by comparing the amortized cost of the fixed maturity security with the net present value of the security’s projected future cash flows, discounted at the effective interest rate implicit in the investment prior to impairment. The non-credit portion of the impairment is equal to the difference between the fair value and the net present value of the security’s cash flows at the impairment measurement date. Once an OTTI has been recognized, the new amortized cost basis of the security is equal to the previous amortized cost less the amount of OTTI recognized in earnings. For equity method investments, an impairment is recognized when evidence demonstrates that an other-than-temporary loss in value has occurred, including the absence of the ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment.

C. FINANCIAL INSTRUMENTS

In the normal course of business, the Company may enter into transactions involving various types of financial instruments, including debt, investments such as fixed maturities, equity securities and mortgage loans, investment and loan commitments, swap contracts, option contracts, forward contracts and futures contracts. These instruments involve credit risk and could also be subject to risk of loss due to interest rate and foreign currency fluctuation. The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses.

D. OTHER INVESTMENTS

Other investments consist primarily of overseas deposits, which are investments maintained in overseas funds and managed exclusively by Lloyd’s. These funds are required in order to protect policyholders in overseas markets and enable the Company to operate in those markets. Overseas deposits are carried at fair value. Realized and unrealized gains and losses on overseas deposits, including the impact of foreign currency movements, are reflected in the income statement in the period the gain or loss was generated.

E. CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less.

F. DEFERRED ACQUISITION COSTS

Acquisition costs consist of commissions, underwriting costs and other costs, which vary with, and are primarily related to, the successful production of premiums. Acquisition costs are deferred and amortized over the terms of the insurance policies.

Deferred acquisition costs (“DAC”) for each line of business are reviewed to determine if the costs are recoverable from future income, including investment income. If such costs are determined to be unrecoverable, they are expensed at the time of determination. Although recoverability of DAC is not assured, the Company believes it is more likely than not that all of these costs will be recovered. The amount of DAC considered recoverable, however, could be reduced in the near term if the estimates of total revenues discussed above are reduced or permanently impaired as a result of a disposition of a line of business. The amount of amortization of DAC could be revised in the near term if any of the estimates discussed above are revised.

G. REINSURANCE RECOVERABLES

The Company shares certain insurance risks it has underwritten, through the use of reinsurance contracts, with various insurance entities. Reinsurance accounting is followed for ceded transactions when the risk transfer provisions of ASC 944, Financial Services – Insurance (“ASC 944”), have been met. As a result, when the Company experiences loss or claims events that are subject to a reinsurance contract, reinsurance recoverables are recorded. The amount of the reinsurance recoverable can vary based on the terms of the reinsurance contract, the size of the individual loss or claim, or the aggregate amount of all losses or claims in a particular line or book of business or an aggregate amount associated with a particular accident year. The valuation of losses or claims recoverable depends on whether the underlying loss or claim is a reported loss or claim, or an incurred but not reported loss. For reported losses and claims, the Company values reinsurance recoverables at the time the underlying loss or claim is recognized, in accordance with contract terms. For incurred but not reported losses, the Company estimates the amount of reinsurance recoverables based on the terms of the reinsurance contracts and historical reinsurance recovery information and applies that information to the gross loss reserve. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured business and the balance is disclosed separately in the financial statements. However, the ultimate amount of the reinsurance recoverable is not known until all losses and claims are settled. Allowances are established for amounts deemed uncollectible and reinsurance recoverables are recorded net of these allowances. The Company evaluates the financial condition of its reinsurers and monitors concentration risk to minimize its exposure to significant credit losses from individual reinsurers.

H. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE

Property, equipment, leasehold improvements and capitalized software are recorded at cost, less accumulated depreciation and amortization. Depreciation is generally provided using the straight-line method over the estimated useful lives of the related assets, which generally range from 3 to 30 years. The estimated useful life for capitalized software is generally 5 to 7 years. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the term of the leases or the estimated useful life of the improvements.

The Company tests for the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company recognizes impairment losses only to the extent that the carrying amounts of long-lived assets exceed the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. When an impairment loss occurs, the Company reduces the carrying value of the asset to fair value and no longer depreciates the asset. Fair values are estimated using discounted cash flow analysis.

In 2013, the Company consolidated its operations in Howell, Michigan from two buildings into one building. This resulted in a plan to relocate the employees and pursue the sale of one of the buildings. In conjunction with the planned relocation, the Company recognized a loss of $4.7 million. This is included in other operating expenses in the Consolidated Statements of Income for the year ended December 31, 2013.

I. GOODWILL AND INTANGIBLE ASSETS

In accordance with the provisions of ASC 350, Intangibles- Goodwill and Other, the Company carries its goodwill at cost, net of amortization prior to January 1, 2002 and net of impairments. Increases to goodwill are generated through acquisition and represent the excess of the cost of an acquisition over the fair value of net assets acquired, including any intangibles acquired. Since January 1, 2002 goodwill is no longer amortized but rather, is reviewed for impairment. Additionally, acquisitions can also produce intangible assets, which have either a definite or indefinite life. Intangible assets with definite lives are amortized over that life, whereas those intangible assets determined to have an indefinite life are reviewed at least annually for impairment.

The Company tests for the recoverability of goodwill and intangible assets with indefinite lives annually or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company recognizes impairment losses only to the extent that the carrying amounts of reporting units with goodwill exceed the fair value. The amount of the impairment loss that is recognized is determined based upon the excess of the carrying value of goodwill compared to the implied fair value of the goodwill, as determined with respect to all assets and liabilities of the reporting unit. The Company has performed its annual review of goodwill and intangible assets with indefinite lives for impairment in the fourth quarters of 2013 and 2012 with no impairments recognized.

J. LIABILITIES FOR LOSSES, LAE, AND UNEARNED PREMIUMS

Liabilities for outstanding claims, losses and loss adjustment expenses (“LAE”) are estimates of payments to be made for reported losses and LAE and estimates of losses and LAE incurred but not reported. These liabilities are determined using case basis evaluations and statistical analyses of historical loss patterns and represent estimates of the ultimate cost of all losses incurred but not paid. These estimates are continually reviewed and adjusted as necessary; adjustments are reflected in current operations. Estimated amounts of salvage and subrogation on unpaid losses are deducted from the liability for unpaid claims.

Premiums for direct and assumed business are reported as earned on a pro-rata basis over the contract period. The unexpired portion of these premiums is recorded as unearned premiums.

All losses, LAE and unearned premium liabilities are based on the various estimates discussed above. Although the adequacy of these amounts cannot be assured, the Company believes that it is more likely than not that these liabilities and accruals will be sufficient to meet future obligations of policies in force. The amount of liabilities and accruals, however, could be revised in the near-term if the estimates discussed above are revised.

K. DEBT

The Company’s debt at December 31, 2013 includes senior debentures, subordinated debentures, and collateralized borrowings with the Federal Home Loan Bank of Boston (“FHLBB”). The senior debentures are carried at principal amount borrowed, net of any applicable unamortized discounts. The subordinated debentures and borrowings under the FHLBB program are carried at principal amount borrowed (See Note 6 – “Debt and Credit Arrangements”).

L. PREMIUM, PREMIUM RECEIVABLE, FEE REVENUE AND RELATED EXPENSES

Insurance premiums written are generally recorded at the policy inception and are primarily earned on a pro rata basis over the terms of the policies for all products. Premiums written include estimates, primarily in the Chaucer segment, that are derived from multiple sources, which include the historical experience of the underlying business, similar businesses and available industry information. These estimates are regularly reviewed and updated and any resulting adjustments are included in the current year’s results. Unearned premium reserves represent the portion of premiums written that relates to the unexpired terms of the underlying in-force insurance policies and reinsurance contracts. Premium receivables reflect the unpaid balance of premium written as of the balance sheet date. Premium receivables are generally short-term in nature and are reported net of an allowance for estimated uncollectible premium accounts. The Company reviews its receivables for collectability at the balance sheet date. The allowance for uncollectible accounts was not material as of December 31, 2013 and 2012. Ceded premiums are charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Reinsurance reinstatement premiums, when required, are recognized in the same period as the loss event that gave rise to the reinstatement premiums. Losses and related expenses are matched with premiums, resulting in their recognition over the lives of the contracts. This matching is accomplished through estimated and unpaid losses and amortization of deferred acquisition costs.

M. INCOME TAXES

The Company is subject to the tax laws and regulations of the U.S. and foreign countries in which it operates. The Company files a consolidated U.S. federal income tax return that includes the holding company and its U.S. subsidiaries. Generally, taxes are accrued at the U.S. statutory tax rate of 35% for income from the U.S. operations. The Company’s primary non-U.S. jurisdiction is the United Kingdom (“U.K.”). In July 2012, the U.K. statutory rate decreased from 26% to 24% effective April 1, 2012 and from 24% to 23% effective April 1, 2013. Further decreases were enacted in July 2013 to reduce the statutory rate from 23% to 21% effective April 1, 2014 and from 21% to 20% effective April 1, 2015. The Company accrues taxes on certain non-U.S. income that is subject to U.S. tax at the U.S. tax rate. Foreign tax credits, where available, are utilized to offset U.S. tax as permitted. Certain of our non-U.S. income is not subject to U.S. tax until repatriated. Foreign taxes on this non-U.S. income are accrued at the local foreign rate and do not have an accrual for U.S. deferred taxes since these earnings are intended to be indefinitely reinvested overseas.

The Company’s accounting for income taxes represents its best estimate of various events and transactions.

Deferred income taxes are generally recognized when assets and liabilities have different values for financial statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by ASC 740,Income Taxes (“ASC 740”). These temporary differences are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. These differences result primarily from insurance reserves, deferred acquisition costs, tax credit carryforwards, loss carryforwards and employee benefit plans.

The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Consideration is given to all available positive and negative evidence, including reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. Valuation allowances are established if, based on available information, it is determined that it is more likely than not that all or some portion of the deferred tax assets will not be realized. Changes in valuation allowances are generally reflected in income tax expense or as an adjustment to other comprehensive income (loss) depending on the nature of the item for which the valuation allowance is being recorded.

N. STOCK-BASED COMPENSATION

The Company recognizes the fair value of compensation costs for all share-based payments, including employee stock options, in the financial statements. Unvested awards are generally expensed on a straight line basis, by tranche, over the vesting period of the award. The Company’s stock-based compensation plans are discussed further in Note 11 – “Stock-Based Compensation Plans”.

O. EARNINGS PER SHARE

Earnings per share (“EPS”) for the years ended December 31, 2013, 2012 and 2011 is based on a weighted average of the number of shares outstanding during each year. Basic and diluted EPS is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. The weighted average shares outstanding used to calculate basic EPS differ from the weighted average shares outstanding used in the calculation of diluted EPS due to the effect of dilutive employee stock options, nonvested stock grants and other contingently issuable shares. If the effect of such items is antidilutive, the weighted average shares outstanding used to calculate diluted EPS are equal to those used to calculate basic EPS.

Options to purchase shares of common stock whose exercise prices are greater than the average market price of the common shares are not included in the computation of diluted earnings per share because the effect would be antidilutive.

P. FOREIGN CURRENCY

The Company’s reporting currency is the U.S. dollar. The functional currencies of the Company’s foreign operations are the U.K. pound sterling (“GBP”), U.S. dollar, and Canadian dollar. Assets and liabilities of foreign operations are translated into the U.S. dollar using the exchange rates in effect at the balance sheet date. Revenues and expenses of foreign operations are translated using the average exchange rate for the period. Gains or losses from translating the financial statements of foreign operations are recorded in the cumulative translation adjustment, as a separate component of accumulated other comprehensive income. Gains and losses arising from transactions denominated in a foreign currency, other than the Company’s functional currencies, are included in net income (loss), except for the Company’s foreign currency denominated available-for-sale investments. The Company’s foreign currency denominated available-for-sale investments’ change in exchange rates between the local currency and the functional currency at each balance sheet date represents an unrealized appreciation or depreciation in value of these securities, and is included as a component of accumulated other comprehensive income.

The Company manages its exposure to foreign currency risk primarily by matching assets and liabilities denominated in the same currency. To the extent that assets and liabilities in foreign currencies are not matched, the Company is exposed to foreign currency risk. For functional currencies, the related exchange rate fluctuations are reflected in other comprehensive income (loss). The Company translated Chaucer’s balance sheet at December 31, 2013, 2012 and 2011 from GBP to U.S. dollars using a conversion rate of 1.66, 1.63 and 1.55, respectively. The Company recognized approximately $4.2 million and $6.3 million in foreign currency transaction gains in the Statement of Income during the years ended December 31, 2013 and 2012, respectively. During the six months ended December 31, 2011, the Company recognized $5.1 million of foreign exchange transaction gains including the $6.4 million gain recognized on the foreign currency forward contract associated with the purchase price of Chaucer. See Note 2 – “Acquisitions and Discontinued Operations” for further information.

Q. NEW ACCOUNTING PRONOUNCEMENTS

Recently Implemented Standards

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Update No. 2013-02 (Topic 220) Comprehensive Income Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASC Update No. 2013-02”). This guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) either on the face of the Statement of Income or in the Notes to the Consolidated Financial Statements. Significant amounts reclassified out of AOCI should be provided by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified in its entirety to net income in the same reporting period. For amounts not required to be reclassified in their entirety to net income, a cross-reference to other disclosures provided for in accordance with U.S. GAAP is required. This guidance was applicable for reporting periods beginning after December 15, 2012. The Company implemented the guidance effective January 1, 2013. The effect of implementing the guidance relates to financial statement presentation and disclosures. (See disclosures in Note 10 – Other Comprehensive Income.)

In July 2012, the FASB issued ASC Update No. 2012-02 (Topic 350) Testing Indefinite – Lived Intangible Assets for Impairment. This ASC update allows an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite – lived intangible asset is impaired. This assessment should be used as a basis for determining whether it is necessary to perform the quantitative impairment test. An entity would not be required to calculate the fair value of the intangible asset and perform the quantitative test unless the entity determines, based upon its qualitative assessment, that it is more likely than not that its fair value is less than its carrying value. The update further improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of an indefinite – lived intangible asset is less than its carrying amount. The update also allows an entity the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. This ASC update was effective for annual and interim periods beginning after September 15, 2012, with early adoption permitted. The Company implemented this guidance effective October 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In September 2011, the FASB issued ASC Update No. 2011-08 (Topic 350) Testing Goodwill for Impairment. This ASC update allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The update provides that an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on its qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The update further improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the update improves the examples of events and circumstances that should be considered by an entity that has a reporting unit with a zero or negative carrying amount in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. This ASC update was effective for annual and interim periods beginning after December 15, 2011, with early adoption permitted. The Company implemented this guidance effective January 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In June 2011, the FASB issued ASC Update No. 2011-05 (Topic 220) Presentation of Comprehensive Income (“ASC Update No. 2011-05”). This ASC update requires companies to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of income and other comprehensive income. The option to present items of other comprehensive income in the statement of changes in equity is eliminated. In addition, an entity is required to present on the face of the financial statements reclassification adjustments from other comprehensive income to net income. This ASC update should be applied retrospectively and except for the provisions related to reclassification adjustment, was effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASC Update 2011-12 (Topic 220) Comprehensive Incomewhich deferred the implementation date of the reclassification adjustment guidance in ASC Update No. 2011-05 and was subsequently replaced by ASC Update No. 2013-02, as described above. The Company implemented the guidance related to financial statements presentation effective January 1, 2012. The effect of implementing the guidance related to financial statements presentation did not have a significant impact to the Company’s financial statement presentation.

In May 2011, the FASB issued ASC Update No. 2011-04 (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASC update results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value for both U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new guidance includes changes to how and when the valuation premise of highest and best use applies, clarification on the application of blockage factors and other premiums and discounts, as well as new and revised disclosure requirements. This ASC update was effective for interim and annual periods beginning after December 15, 2011. The Company implemented this guidance as of January 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In October 2010, the FASB issued ASC Update No. 2010-26 (Topic 944), Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (a consensus of the FASB Emerging Issues Task Force). This ASC update provides clarity in defining which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral, commonly known as deferred acquisition costs. Additionally, this update specifies that only costs associated with the successful acquisition of a policy or contract may be deferred, whereas industry practice historically included costs relating to unsuccessful contract acquisition. This ASC was effective for fiscal years beginning after December 15, 2011. Retrospective application to all prior periods upon the date of adoption was permitted. The Company implemented this guidance effective January 1, 2012 and elected to apply this guidance retrospectively. Retrospective application required that the new accounting principle be reflected in the earliest period presented as if the accounting principle had always been used. Upon adoption in 2012, the Company applied this guidance to the then earliest period, which was January 1, 2010. Additionally, since the Company purchased Chaucer July 1, 2011, it has reflected the impact of the retrospective application for Chaucer through equity, as a cumulative effect of a change in accounting principle, during 2011. The implementation of this ASC resulted in an after-tax reduction to our shareholders’ equity as of January 1, 2012 of $25.8 million, or 1%. The effect of implementing this guidance was not material to our results of operations or cash flows on either a historical basis or a prospective basis.

Recently Issued Standards

In July 2013, the FASB issued ASC Update No. 2013-11 (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). This ASC update clarifies the applicable guidance for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward as long as it is available, at the reporting date under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position (with certain exceptions). The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company does not expect the adoption of ASC Update 2013-11 to have a material impact on its financial position or results of operations.

In March 2013, the FASB issued ASC Update No. 2013-05 (Topic 830) Foreign Currency Matters-Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force). This ASC update clarifies the applicable guidance for the release of the cumulative translation adjustment into net income when a parent either sells all or a portion of its investment in a foreign entity. This guidance is also required to be applied when an entity no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity (with certain exceptions). Additionally, this update clarifies that the sale of an investment in a foreign entity includes events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date in a business combination achieved in stages. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to derecognition events occurring after the effective date. The Company does not expect the adoption of ASC Update 2013-05 to have a material impact on its financial position or results of operations.

R. RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year presentation.

XML

Gross Written Premium by Geographical Location (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Gross written premium, percentage	100.00%	100.00%	100.00%
UNITED STATES
Segment Reporting Information [Line Items]
Gross written premium, percentage	78.00%	76.00%	87.00%
U.K.
Segment Reporting Information [Line Items]
Gross written premium, percentage	6.00%	6.00%	4.00%
Worldwide And Other
Segment Reporting Information [Line Items]
Gross written premium, percentage	16.00%	18.00%	9.00%

XML

Fixed Maturities and Equity Securities (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	$ 70.5	$ 9.4
12 months or less, Fair Value	2,221.5	648.6
Greater than 12 months, Gross Unrealized Losses	24.2	15.4
Greater than 12 months, Fair Value	227.3	161.6
Total, Gross Unrealized Losses	94.7	24.8
Total, Fair Value	2,448.8	810.2
Fixed Maturities
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	67.7	4.6
12 months or less, Fair Value	2,176.3	574.2
Greater than 12 months, Gross Unrealized Losses	23.8	15.4
Greater than 12 months, Fair Value	226.6	161.6
Total, Gross Unrealized Losses	91.5	20.0
Total, Fair Value	2,402.9	735.8
Fixed Maturities | Investment grade
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	64.7	3.4
12 months or less, Fair Value	2,102.4	546.0
Greater than 12 months, Gross Unrealized Losses	21.9	9.5
Greater than 12 months, Fair Value	203.7	106.5
Total, Gross Unrealized Losses	86.6	12.9
Total, Fair Value	2,306.1	652.5
Fixed Maturities | Investment grade | U.S. Treasury And Government Agencies
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	12.3	0.2
12 months or less, Fair Value	247.9	89.5
Greater than 12 months, Gross Unrealized Losses	1.9	0.2
Greater than 12 months, Fair Value	18.8	8.5
Total, Gross Unrealized Losses	14.2	0.4
Total, Fair Value	266.7	98.0
Fixed Maturities | Investment grade | Foreign government
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	1.5	0.2
12 months or less, Fair Value	129.0	81.2
Greater than 12 months, Gross Unrealized Losses	0.1
Greater than 12 months, Fair Value	17.3	0.4
Total, Gross Unrealized Losses	1.6	0.2
Total, Fair Value	146.3	81.6
Fixed Maturities | Investment grade | Municipal
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	14.8	0.5
12 months or less, Fair Value	345.3	61.9
Greater than 12 months, Gross Unrealized Losses	4.3	0.6
Greater than 12 months, Fair Value	39.9	24.0
Total, Gross Unrealized Losses	19.1	1.1
Total, Fair Value	385.2	85.9
Fixed Maturities | Investment grade | Corporate
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	21.4	1.8
12 months or less, Fair Value	872.7	224.8
Greater than 12 months, Gross Unrealized Losses	11.6	6.6
Greater than 12 months, Fair Value	87.7	59.0
Total, Gross Unrealized Losses	33.0	8.4
Total, Fair Value	960.4	283.8
Fixed Maturities | Investment grade | Residential mortgage-backed
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	10.3	0.5
12 months or less, Fair Value	321.1	47.3
Greater than 12 months, Gross Unrealized Losses	3.4	2.0
Greater than 12 months, Fair Value	29.5	9.4
Total, Gross Unrealized Losses	13.7	2.5
Total, Fair Value	350.6	56.7
Fixed Maturities | Investment grade | Commercial mortgage-backed
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	4.2	0.2
12 months or less, Fair Value	155.4	29.9
Greater than 12 months, Gross Unrealized Losses	0.6	0.1
Greater than 12 months, Fair Value	10.2	4.9
Total, Gross Unrealized Losses	4.8	0.3
Total, Fair Value	165.6	34.8
Fixed Maturities | Investment grade | Asset-backed
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	0.2
12 months or less, Fair Value	31.0	11.4
Greater than 12 months, Fair Value	0.3	0.3
Total, Gross Unrealized Losses	0.2
Total, Fair Value	31.3	11.7
Fixed Maturities | Below Investment Grade
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	3.0	1.2
12 months or less, Fair Value	73.9	28.2
Greater than 12 months, Gross Unrealized Losses	1.9	5.9
Greater than 12 months, Fair Value	22.9	55.1
Total, Gross Unrealized Losses	4.9	7.1
Total, Fair Value	96.8	83.3
Fixed Maturities | Below Investment Grade | Municipal
Schedule of Available-for-sale Securities [Line Items]
Greater than 12 months, Fair Value		2.0
Total, Fair Value		2.0
Fixed Maturities | Below Investment Grade | Corporate
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	2.9	1.1
12 months or less, Fair Value	71.9	26.6
Greater than 12 months, Gross Unrealized Losses	1.6	5.3
Greater than 12 months, Fair Value	21.4	50.6
Total, Gross Unrealized Losses	4.5	6.4
Total, Fair Value	93.3	77.2
Fixed Maturities | Below Investment Grade | Residential mortgage-backed
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	0.1	0.1
12 months or less, Fair Value	2.0	1.6
Greater than 12 months, Gross Unrealized Losses	0.3	0.6
Greater than 12 months, Fair Value	1.5	2.5
Total, Gross Unrealized Losses	0.4	0.7
Total, Fair Value	3.5	4.1
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
12 months or less, Gross Unrealized Losses	2.8	4.8
12 months or less, Fair Value	45.2	74.4
Greater than 12 months, Gross Unrealized Losses	0.4
Greater than 12 months, Fair Value	0.7
Total, Gross Unrealized Losses	3.2	4.8
Total, Fair Value	$ 45.9	$ 74.4

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Summary of Investments Other than Investments in Related Parties (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	$ 7,371.0	[1]
Amount at which shown in the balance sheet	7,593.3
Mortgage loans on real estate
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	2.5	[1]
Amount at which shown in the balance sheet	2.5
Real estate
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	9.1	[1]
Amount at which shown in the balance sheet	9.1
Other Long-term Investments
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	177.7	[1],[2]
Amount at which shown in the balance sheet	180.9	[2]
Short-term Investments
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	8.1	[1]
Amount at which shown in the balance sheet	8.1
Fixed Maturities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	6,807.1	[1]
Value	6,962.5
Amount at which shown in the balance sheet	6,962.5
Fixed Maturities | United States Government and agencies and authorities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	992.1	[1]
Value	979.8
Amount at which shown in the balance sheet	979.8
Fixed Maturities | States, municipalities and political subdivisions
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,106.7	[1]
Value	1,125.0
Amount at which shown in the balance sheet	1,125.0
Fixed Maturities | Foreign governments
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	299.9	[1]
Value	300.4
Amount at which shown in the balance sheet	300.4
Fixed Maturities | Public utilities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	556.5	[1]
Value	582.2
Amount at which shown in the balance sheet	582.2
Fixed Maturities | All other corporate bonds
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	3,851.9	[1]
Value	3,975.1
Amount at which shown in the balance sheet	3,975.1
Equity securities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	366.5	[1]
Value	430.2
Amount at which shown in the balance sheet	430.2
Equity securities | Public utilities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	92.6	[1]
Value	95.3
Amount at which shown in the balance sheet	95.3
Equity securities | Banks, trust and insurance companies
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	10.3	[1]
Value	10.4
Amount at which shown in the balance sheet	10.4
Equity securities | Industrial, miscellaneous and all other
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	229.5	[1]
Value	268.8
Amount at which shown in the balance sheet	268.8
Equity securities | Nonredeemable preferred stocks
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	34.1	[1]
Value	55.7
Amount at which shown in the balance sheet	$ 55.7

[1] For equity securities, represents original cost, and for fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums and accretion of discounts.

[2] The cost of other long-term investments differs from the carrying value due to market value changes in the Company's equity ownership of limited partnership investments.

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Valuation and Qualifying Accounts (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	$ 19.7		$ 18.7		$ 5.9
Charged to costs and expenses	11.7		8.5		12.3
Charged to other accounts	0.5	[1]	0.9	[1]	11.9	[1]
Deductions	(8.1)		(8.4)		(11.4)
Balance at end of period	23.8		19.7		18.7
Allowance for doubtful accounts
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	2.8		2.3		3.6
Charged to costs and expenses	8.1		8.1		10.1
Deductions	(7.8)		(7.6)		(11.4)
Balance at end of period	3.1		2.8		2.3
Allowance for uncollectible reinsurance recoverables
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	16.9		16.4		2.3
Charged to costs and expenses	3.6		0.4		2.2
Charged to other accounts	0.5	[1]	0.9	[1]	11.9	[1]
Deductions	(0.3)		(0.8)
Balance at end of period	$ 20.7		$ 16.9		$ 16.4

[1] Amount charged to other accounts includes foreign exchange gains and losses and in 2011 also includes the allowance for uncollectible reinsurance recoverables acquired from Chaucer Holdings plc on July 1, 2011.

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OTHER POSTRETIREMENT BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2013

Summary of Weighted-Average Assumptions Used To Determine Pension Benefit Obligations

Weighted-average assumptions used to determine pension benefit obligations are as follows:

DECEMBER 31	2013			2012			2011
U.S.:
Discount rate—qualified plan		5.00	%		4.25	%		5.13	%
Discount rate—non-qualified plan		5.00	%		4.13	%		5.00	%
Cash balance interest crediting rate		3.50	%		3.50	%		4.00	%
Chaucer:
Discount rate		4.50	%		4.80	%		4.90	%
Rate of increase in future compensation		3.15	%		4.20	%		4.30	%

Estimated Amortization to be Recognized in Net Periodic Benefit Cost

The following table reflects the estimated amortization to be recognized in net periodic benefit cost in 2014:

Estimated Amortization in 2014	Expense (Benefit)
(in millions)
Net actuarial loss	$	0.1
Net prior service cost		(1.9	)
	$	(1.8	)

Postretirement Benefits

Summary of Weighted-Average Assumptions Used To Determine Pension Benefit Obligations

Weighted-average discount rate assumptions used to determine postretirement benefit obligations and periodic postretirement costs are as follows:

YEARS ENDED DECEMBER 31	2013			2012
Postretirement benefit obligations discount rate		5.00	%		4.25	%
Postretirement benefit cost discount rate		4.25	%		5.00	%

Funded Status of Plans

The following table reflects the funded status of these plans:

DECEMBER 31	2013			2012
(in millions)
Change in benefit obligation:
Accumulated postretirement benefit obligation, beginning of year	$	45.2		$	46.0
Service cost		0.1			0.1
Interest cost		1.2			2.1
Net actuarial gains		(1.0	)		(0.2	)
Benefits paid		(2.8	)		(2.8	)
Plan amendment		(8.4	)		—
Settlement of death benefits		(17.2	)		—
Accumulated postretirement benefit obligation, end of year		17.1			45.2
Fair value of plan assets, end of year		—			—
Funded status of plans	$	(17.1	)	$	(45.2	)

Components of Net Periodic (Benefit) Cost

The components of net periodic postretirement expense (benefit) were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Service cost	$	0.1		$	0.1		$	0.1
Interest cost		1.2			2.1			2.4
Recognized net actuarial loss		0.2			0.2			0.4
Amortization of prior service cost		(3.7	)		(3.8	)		(5.3	)
Net settlement gain		(1.6	)		—			—
Net periodic postretirement benefit	$	(3.8	)	$	(1.4	)	$	(2.4	)

Accumulated Other Comprehensive (Income) Loss Related to Postretirement Benefit Plans

The following table reflects the balances in accumulated other comprehensive income relating to the Company’s postretirement benefit plans:

DECEMBER 31	2013			2012
(in millions)
Net actuarial loss	$	1.9		$	7.2
Net prior service cost		(3.5	)		(7.5	)
	$	(1.6	)	$	(0.3	)

Expected Benefit Payments

The Company estimates that benefit payments over the next 10 years will be as follows:

YEARS ENDING DECEMBER 31
(in millions)
2014	$	2.1
2015		1.9
2016		1.7
2017		1.5
2018		1.3
2019-2023		5.5

Assumed Health Care Cost Trend Rates

Assumed health care cost trend rates are as follows:

DECEMBER 31	2013			2012
Health care cost trend rate assumed for next year		7.00	%		7.00	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)		5.00	%		5.00	%
Year the rate reaches the ultimate trend rate		2020			2017

Pension Benefits

Funded Status of Plans

The following table reflects the benefit obligations, fair value of plan assets and funded status of the plans at December 31, 2013 and 2012.

	U.S. Qualified Pension						U.S. Non-Qualified						Chaucer Pension
DECEMBER 31	Plans						Pension Plans						Plan
(in millions)	2013			2012			2013			2012			2013			2012
Accumulated benefit obligation	$	548.8		$	607.0		$	37.4		$	41.2		$	128.5		$	116.6
Change in benefit obligation:
Projected benefit obligation, beginning of period	$	607.0		$	570.8		$	41.2		$	39.2		$	116.6		$	104.4
Employee contributions		—			—			—			—			0.4			0.4
Service cost – benefits earned during the period		—			—			—			—			1.5			1.6
Interest cost		24.8			28.1			1.6			1.9			5.4			5.2
Actuarial losses (gains)		(36.5	)		49.0			(2.3	)		3.3			3.6			1.8
Benefits paid		(46.5	)		(40.9	)		(3.1	)		(3.2	)		(1.5	)		(2.4	)
Foreign currency translation		—			—			—			—			2.5			5.6
Projected benefit obligation, end of year		548.8			607.0			37.4			41.2			128.5			116.6
Change in plan assets:
Fair value of plan assets, beginning of period		591.6			574.7			—			—			90.9			74.3
Actual return on plan assets		(3.1	)		57.8			—			—			17.1			9.9
Contributions		—			—			3.1			3.2			10.6			4.9
Benefits paid		(46.5	)		(40.9	)		(3.1	)		(3.2	)		(1.5	)		(2.4	)
Foreign currency translation		—			—			—			—			3.1			4.2
Fair value of plan assets, end of year		542.0			591.6			—			—			120.2			90.9
Funded status of the plans	$	(6.8	)	$	(15.4	)	$	(37.4	)	$	(41.2	)	$	(8.3	)	$	(25.7	)

Components of Net Periodic (Benefit) Cost

The components of total net periodic pension cost are as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Service cost - benefits earned during the period	$	1.5		$	1.6		$	0.7
Interest cost		31.9			35.2			34.3
Expected return on plan assets		(35.9	)		(38.7	)		(37.1	)
Recognized net actuarial loss		14.7			12.8			15.0
Amortization of prior service cost		—			0.1			0.1
Settlement loss		0.4			—			—
Net periodic pension cost	$	12.6		$	11.0		$	13.0

Accumulated Other Comprehensive (Income) Loss Related to Postretirement Benefit Plans

The following table reflects the total amounts recognized in accumulated other comprehensive income relating to both the U.S.

defined benefit pension plans and the Chaucer pension plan as of December 31, 2013 and 2012.

DECEMBER 31	2013		2012
(in millions)
Net actuarial loss	$	118.7	$	147.3
Net prior service cost		0.1		—
	$	118.8	$	147.3

Expected Benefit Payments

The Company estimates that benefit payments over the next 10 years will be as follows:

YEARS ENDED DECEMBER 31	2014		2015		2016		2017		2018		2019-2023
(in millions)
U.S. qualified pension plans	$	43.9	$	40.6	$	40.1	$	41.8	$	41.7	$	205.2
U.S. non-qualified pension plans	$	3.3	$	3.4	$	3.1	$	3.1	$	3.0	$	14.2
Chaucer pension plan	$	1.6	$	1.7	$	1.7	$	1.8	$	1.9	$	10.3

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

SUBSEQUENT EVENTS

21. SUBSEQUENT EVENTS

There were no subsequent events requiring adjustment to the financial statements and no additional disclosures required in the notes to the consolidated financial statements.

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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

12 Months Ended

Dec. 31, 2013

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The quarterly results of operations for 2013 and 2012 are summarized below.

THREE MONTHS ENDED
(in millions, except per share data)
2013	March 31		June 30		Sept. 30		Dec. 31
Total revenues	$	1,180.3	$	1,182.6	$	1,201.8	$	1,229.0
Income from continuing operations	$	66.4	$	53.1	$	61.3	$	64.9
Net income	$	66.2	$	53.4	$	61.3	$	70.1
Income from continuing operations per share:
Basic	$	1.49	$	1.21	$	1.40	$	1.48
Diluted	$	1.47	$	1.19	$	1.37	$	1.45
Net income per share:
Basic	$	1.49	$	1.21	$	1.40	$	1.60
Diluted	$	1.46	$	1.19	$	1.37	$	1.57
Dividends declared per share	$	0.33	$	0.33	$	0.33	$	0.37
THREE MONTHS ENDED
(in millions, except per share data)
2012	March 31		June 30		Sept. 30		Dec. 31
Total revenues	$	1,121.8	$	1,127.2	$	1,157.7	$	1,184.0
Income (loss) from continuing operations	$	50.7	$	9.8	$	40.9	$	(55.3	)
Net income (loss)	$	49.7	$	20.8	$	40.4	$	(55.0	)
Income (loss) from continuing operations per share:
Basic	$	1.13	$	0.22	$	0.92	$	(1.24	)
Diluted (1)	$	1.11	$	0.22	$	0.90	$	(1.24	)
Net income (loss) per share:
Basic	$	1.11	$	0.46	$	0.91	$	(1.24	)
Diluted (1)	$	1.09	$	0.46	$	0.89	$	(1.24	)
Dividends declared per share	$	0.30	$	0.30	$	0.30	$	0.33

(1) Per diluted share amounts in the fourth quarter of 2012 exclude common stock equivalents, since the impact of these instruments was antidilutive.

Due to the use of weighted average shares outstanding when calculating earnings per common share, the sum of the quarterly per common share data may not equal the per common share data for the year.

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Assumed Health Care Cost Trend Rates (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Health care cost trend rate assumed for next year	7.00%	7.00%
Rate to which the cost trend is assumed to decline (ultimate trend rate)	5.00%	5.00%
Year the rate reaches the ultimate trend rate	2020	2017

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Purchase Price Determination (Parenthetical) (Detail) (GBP £)	Dec. 31, 2013	Apr. 20, 2011
Business Acquisition [Line Items]
Aggregate purchase price announced, contract price per share	£ 0.533	£ 0.533

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PENSION PLANS (Tables)

12 Months Ended

Dec. 31, 2013

Summary of Weighted-Average Assumptions Used to Determine Net Periodic Pension Costs

Weighted-average assumptions used to determine net periodic pension costs for the defined benefit plans are as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
U.S.:
Qualified plan
Discount rate		4.25	%		5.13	%		5.63	%
Expected return on plan assets		5.25	%		6.00	%		6.50	%
Cash balance interest crediting rate		3.50	%		4.00	%		4.50	%
Non-qualified plan
Discount rate		4.13	%		5.00	%		5.50	%
Chaucer:
Discount rate		4.80	%		4.90	%		5.50	%
Rate of increase in future compensation		4.20	%		4.30	%		4.60	%
Expected return on plan assets		6.70	%		7.50	%		7.40	%

Chaucer Pension Scheme

Summary of Target Allocations and Invested Asset Allocations

The following table provides 2013 target allocations and actual invested asset allocations for 2013 and 2012.

	2013
	TARGET
DECEMBER 31	LEVELS			2013			2012
Fixed income securities:
Fixed maturities		20	%		19	%		14	%
Equity securities:
Domestic (United Kingdom)		25	%		26	%		33	%
International		45	%		48	%		44	%
Total equity securities		70	%		74	%		77	%
Real estate funds		10	%		7	%		9	%
Total plan assets		100	%		100	%		100	%

Summary of Plan Assets Investment Measured at Fair Value

The following table presents for each hierarchy level the Chaucer defined benefit plan’s investment assets that are measured at fair value at December 31, 2013 and 2012.

YEARS ENDED DECEMBER 31	2013								2012
(in millions)	Fair Value								Fair Value
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income securities:
Fixed maturities	$	22.8	$	—	$	22.8	$	—	$	12.9	$	—	$	12.9	$	—
Equity securities:
Domestic		30.5		—		30.5		—		29.9		—		29.9		—
International		57.8		—		57.8		—		39.7		—		39.7		—
Total equity securities		88.3		—		88.3		—		69.6		—		69.6		—
Real estate funds		8.8		—		—		8.8		8.2		—		—		8.2
Total investments at fair value	$	119.9	$	—	$	111.1	$	8.8	$	90.7	$	—	$	82.5	$	8.2

Summary of Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

The table below provides a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

YEARS ENDED DECEMBER 31	2013		2012
(in millions)
Balance at beginning of period	$	8.2	$	7.7
Actual return on plan assets related to assets still held		0.5		—
Foreign currency translation		0.1		0.5
Balance at end of year	$	8.8	$	8.2

Pension Benefits

Summary of Estimated Amount Amortized From Accumulated Other Comprehensive Income (Loss) Into Net Periodic Pension Cost

The following table reflects the total estimated amount of actuarial losses that will be amortized from accumulated other comprehensive income into net periodic pension cost in 2014:

ESTIMATED AMORTIZATION IN 2014	Expense
(in millions)
Net actuarial loss	$	11.3
Net prior service cost		0.1
	$	11.4

U.S. Defined Benefit Plans

Summary of Target Allocations and Invested Asset Allocations

The following table provides 2013 target allocations and actual invested asset allocations for 2013 and 2012.

	2013
	TARGET
DECEMBER 31	LEVELS			2013			2012
Fixed income securities:
Fixed maturities		83	%		83	%		83	%
Money market funds		2	%		1	%		1	%
Total fixed income securities		85	%		84	%		84	%
Equity securities:
Domestic		11	%		12	%		10	%
International		4	%		4	%		3	%
THG common stock		—			—			3	%
Total equity securities		15	%		16	%		16	%
Total plan assets		100	%		100	%		100	%

Summary of Plan Assets Investment Measured at Fair Value

The following tables present for each hierarchy level the U.S. qualified defined benefit plan’s investment assets that are measured at fair value at December 31, and 2012. (Refer to Note 5 – “Fair Value” for a description of the different levels in the Fair Value Hierarchy).

DECEMBER 31	2013								2012
(in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income securities:
Fixed maturities	$	449.6	$	2.1	$	447.5	$	—	$	491.4	$	3.3	$	488.1	$	—
Money market funds		5.3		5.3		—		—		5.0		5.0		—		—
Total fixed income securities		454.9		7.4		447.5		—		496.4		8.3		488.1		—
Equity securities:
Domestic		67.8		0.2		67.6		—		58.3		0.4		57.9		—
International		19.3		0.1		19.2		—		18.8		0.1		18.7		—
THG common stock		—		—		—		—		18.1		18.1		—		—
Total equity securities		87.1		0.3		86.8		—		95.2		18.6		76.6		—
Total investments at fair value	$	542.0	$	7.7	$	534.3	$	—	$	591.6	$	26.9	$	564.7	$	—

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SCHEDULE I SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

12 Months Ended

Dec. 31, 2013

SCHEDULE I SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

SCHEDULE I

THE HANOVER INSURANCE GROUP, INC.

SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES

DECEMBER 31, 2013
(in millions)
Type of investment	Cost (1)		Value		Amount at which shown in the balance sheet
Fixed maturities:
Bonds:
United States Government and agencies and authorities	$	992.1	$	979.8	$	979.8
States, municipalities and political subdivisions		1,106.7		1,125.0		1,125.0
Foreign governments		299.9		300.4		300.4
Public utilities		556.5		582.2		582.2
All other corporate bonds		3,851.9		3,975.1		3,975.1
Total fixed maturities		6,807.1		6,962.5		6,962.5
Equity securities:
Common stocks:
Public utilities		92.6		95.3		95.3
Banks, trust and insurance companies		10.3		10.4		10.4
Industrial, miscellaneous and all other		229.5		268.8		268.8
Nonredeemable preferred stocks		34.1		55.7		55.7
Total equity securities		366.5		430.2		430.2
Mortgage loans on real estate		2.5		XXXXX		2.5
Real estate		9.1		XXXXX		9.1
Other long-term investments(2)		177.7		XXXXX		180.9
Short-term investments		8.1		XXXXX		8.1
Total investments	$	7,371.0	$	XXXXX	$	7,593.3

⁽¹⁾ For equity securities, represents original cost, and for fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums and accretion of discounts.

⁽²⁾ The cost of other long-term investments differs from the carrying value due to market value changes in the Company’s equity ownership of limited partnership investments.

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SCHEDULE II CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY STATEMENTS OF INCOME

12 Months Ended

Dec. 31, 2013

SCHEDULE II CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY STATEMENTS OF INCOME

SCHEDULE II

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Revenues
Net investment income	$	5.5		$	6.6		$	10.5
Net realized gains from sales and other		0.8			2.5			8.7
Interest income from loan to subsidiary		22.5			22.5			10.5
Other income		0.1			0.1			—
Total revenues		28.9			31.7			29.7
Expenses
Interest expense		55.3			48.6			41.3
Loss from retirement of debt		19.9			—			2.6
Employee benefit related expenses		6.2			5.3			6.9
Costs (benefit) related to acquired businesses		(6.4	)		2.6			16.4
Loss on derivative instruments		—			—			11.3
Other operating expenses		8.0			8.0			5.5
Total expenses		83.0			64.5			84.0
Net loss before income taxes and equity in income of unconsolidated subsidiaries		(54.1	)		(32.8	)		(54.3	)
Income tax benefit		37.3			40.5			31.1
Equity in income of unconsolidated subsidiaries		262.5			47.5			54.7
Income from continuing operations		245.7			55.2			31.5
Income from discontinued operations (net of income tax expense (benefit) of $4.1, $(0.1) and $2.8 in 2013, 2012 and 2011)		5.3			0.7			5.2
Net income	$	251.0		$	55.9		$	36.7

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

SCHEDULE II (CONTINUED)

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

BALANCE SHEETS

DECEMBER 31	2013			2012
(In millions, except per share data)
Assets
Fixed maturities - at fair value (amortized cost of $98.5 and $131.1)	$	101.7		$	139.3
Equity securities - at fair value (cost of $1.0)		1.1			1.0
Cash and cash equivalents		20.7			23.8
Investments in unconsolidated subsidiaries		2,876.0			2,763.8
Net receivable from subsidiaries		23.0			26.6
Deferred income taxes		49.1			20.7
Current income taxes		8.3			14.1
Loan receivable from subsidiary		300.0			300.0
Other assets		17.6			14.5
Total assets	$	3,397.5		$	3,303.8
Liabilities
Expenses and state taxes payable	$	16.0		$	20.7
Interest payable		8.1			9.6
Debt		778.9			678.1
Total liabilities		803.0			708.4
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		1,830.1			1,787.1
Accumulated other comprehensive income		177.6			325.8
Retained earnings		1,349.1			1,211.6
Treasury stock at cost (16.8 and 16.2 million)		(762.9	)		(729.7	)
Total shareholders’ equity		2,594.5			2,595.4
Total liabilities and shareholders’ equity	$	3,397.5		$	3,303.8

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

SCHEDULE II (CONTINUED)

THE HANOVER INSURANCE GROUP, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Cash flows from operating activities
Net income	$	251.0		$	55.9		$	36.7
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss (gain) on discontinued operations		2.5			(0.7	)		(5.2	)
Loss from retirement of debt		19.9			0.1			2.6
Equity in net income of unconsolidated subsidiaries		(262.5	)		(47.5	)		(54.7	)
Net realized investment gains		(0.8	)		(2.5	)		(8.7	)
Loss on derivative instruments		—			—			11.3
Dividends received from unconsolidated subsidiaries		12.5			1.0			1.6
Deferred income tax expense (benefit)		(32.3	)		3.9			(3.4	)
Change in expenses and taxes payable		0.1			6.2			(11.7	)
Change in net payable from subsidiaries		16.5			30.7			(0.5	)
Other, net		3.4			2.8			2.3
Net cash provided by (used in) operating activities		10.3			49.9			(29.7	)
Cash flows from investing activities
Proceeds from disposals and maturities of fixed maturities		122.9			44.2			436.3
Purchase of fixed maturities		(90.8	)		(2.2	)		(148.7	)
Net cash used for business acquisitions		(2.2	)		(3.4	)		(468.4	)
Other investing activities		—			—			(1.9	)
Net cash provided by (used in) investing activities		29.9			38.6			(182.7	)
Cash flows from financing activities
Proceeds from debt borrowings		168.6			—			296.0
Repurchases of debt		(93.6	)		(0.7	)		(72.1	)
Dividends paid to shareholders		(60.0	)		(55.1	)		(50.9	)
Repurchase of common stock		(78.2	)		(20.0	)		(21.7	)
Proceeds from exercise of employee stock options		25.0			2.6			3.9
Other financing activities		(5.1	)		(0.4	)		(0.5	)
Net cash provided by (used in) financing activities		(43.3	)		(73.6	)		154.7
Net change in cash and cash equivalents		(3.1	)		14.9			(57.7	)
Cash and cash equivalents, beginning of year		23.8			8.9			66.6
Cash and cash equivalents, end of year	$	20.7		$	23.8		$	8.9

Included in other operating cash flows were the cash portion of dividends received from unconsolidated subsidiaries. Cash payments of $12.5 million, $1.0 million and $1.6 million in 2013, 2012 and 2011, and investment assets of $17.9 million and $97.8 million were transferred to the parent company in 2012 and 2011, respectively, to settle dividend and other intercompany balances. There were no assets transferred to the parent company from its subsidiaries in 2013 to settle balances.

The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.

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Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash Flows From Operating Activities
Net income	$ 251.0	$ 55.9	$ 36.7
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains	(33.5)	(22.8)	(16.2)
Net loss from repurchase of debt	19.9	5.1	2.3
Gain on discontinued operations		(0.7)	(5.2)
Net amortization and depreciation	35.0	35.6	26.7
Stock-based compensation expense	12.4	12.8	12.0
Amortization of defined benefit plan costs	14.9	9.3	10.2
Deferred income taxes expense (benefit)	74.9	(35.5)	(9.2)
Change in deferred acquisition costs	(16.3)	(30.8)	18.3
Change in premiums receivable, net of reinsurance premiums payable	(107.4)	(53.3)	69.4
Change in loss, loss adjustment expense and unearned premium reserves	65.9	598.3	78.5
Change in reinsurance recoverable	148.8	(230.7)	(48.1)
Change in expenses and taxes payable	(62.9)	87.6	48.2
Other, net	(18.8)	(11.8)	(1.9)
Net cash provided by operating activities	383.9	408.2	221.7
Cash flows from investing activities
Proceeds from disposals and maturities of fixed maturities	1,394.3	1,684.8	1,624.2
Proceeds from disposals of equity securities and other investments	217.8	218.2	101.2
Purchase of fixed maturities	(1,698.8)	(2,170.4)	(1,688.0)
Purchase of equity securities and other investments	(249.1)	(274.9)	(128.6)
Proceeds from disposal of Citizens Management, Inc., net of cash transferred		5.2
Cash provided by business acquisitions, net of cash acquired			287.7
Capital expenditures	(22.9)	(21.3)	(16.5)
Net proceeds (payments) related to derivative agreements		(4.4)	2.8
Net cash provided by (used in) investing activities	(358.7)	(562.8)	182.8
Cash Flows From Financing Activities
Proceeds from exercise of employee stock options	25.0	2.6	3.9
Proceeds from debt borrowings, net	168.6	7.4	325.4
Increase (decrease) in cash collateral related to securities lending program	(15.9)	5.2	(42.1)
Dividends paid to shareholders	(60.0)	(55.1)	(50.9)
Repurchases of debt	(139.9)	(73.1)	(86.8)
Repurchases of common stock	(78.2)	(20.0)	(21.7)
Other financing activities	(5.1)	(0.4)	(0.5)
Net cash provided by (used in) financing activities	(105.5)	(133.4)	127.3
Effect of exchange rate changes on cash	1.6	32.1	(3.9)
Net change in cash and cash equivalents	(78.7)	(255.9)	527.9
Net change in cash related to discontinued operations	0.1	0.3	2.1
Cash and cash equivalents, beginning of year	564.8	820.4	290.4
Cash and cash equivalents, end of year	486.2	564.8	820.4
Supplemental Cash Flow information
Interest payments	66.1	62.7	55.5
Income tax net payments (refunds)	9.5	(5.5)	3.0
Citizens Management, Inc.
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on discontinued operations		$ (10.8)

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SCHEDULE III SUPPLEMENTARY INSURANCE INFORMATION

12 Months Ended

Dec. 31, 2013

SCHEDULE III SUPPLEMENTARY INSURANCE INFORMATION

SCHEDULE III

THE HANOVER INSURANCE GROUP, INC.

SUPPLEMENTARY INSURANCE INFORMATION

DECEMBER 31, 2013
(in millions)
Segments	Deferred acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums		Other policy claims and benefits payable		Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred acquisition costs		Other operating expenses			Premiums written
Commercial, Personal and Other	$	354.2	$	3,845.9	$	1,727.1	$	4.1	$	3,412.6	$	226.3	$	2,222.9	$	729.8	$	500.4		$	3,435.2
Chaucer (1)		151.8		2,381.5		788.7		—		1,037.9		42.7		538.2		241.2		173.4			1,117.5
Interest on Debt		—		—		—		—		—		—		—		—		65.3			—
Eliminations		—		—		—		—		—		—		—		—		(6.6	)		—
Total	$	506.0	$	6,227.4	$	2,515.8	$	4.1	$	4,450.5	$	269.0	$	2,761.1	$	971.0	$	732.5		$	4,552.7
DECEMBER 31, 2012
(in millions)
Segments	Deferred acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums		Other policy claims and benefits payable		Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred acquisition costs		Other operating expenses			Premiums written
Commercial, Personal and Other	$	346.6	$	3,784.9	$	1,711.1	$	4.1	$	3,272.3	$	236.1	$	2,467.2	$	704.2	$	436.5		$	3,377.9
Chaucer (1)		142.9		2,408.0		763.7		—		966.8		40.2		507.2		233.9		157.6			990.5
Interest on Debt		—		—		—		—		—		—		—		—		61.9			—
Eliminations		—		—		—		—		—		0.3		—		—		(6.5	)		—
Total	$	489.5	$	6,192.9	$	2,474.8	$	4.1	$	4,239.1	$	276.6	$	2,974.4	$	938.1	$	649.5		$	4,368.4
DECEMBER 31, 2011
(in millions)
Segments	Deferred acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums		Other policy claims and benefits payable		Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred acquisition costs		Other operating expenses			Premiums written
Commercial, Personal and Other	$	325.3	$	3,424.5	$	1,588.9	$	3.0	$	3,092.3	$	241.3	$	2,237.6	$	658.8	$	462.6		$	3,164.6
Chaucer (1)		133.3		2,332.8		703.2		—		506.3		16.9		313.2		120.1		67.9			428.8
Interest on Debt		—		—		—		—		—		—		—		—		55.0			—
Eliminations		—		—		—		—		—		—		—		—		(5.2	)		—
Total	$	458.6	$	5,757.3	$	2,292.1	$	3.0	$	3,598.6	$	258.2	$	2,550.8	$	778.9	$	580.3		$	3,593.4

(1) 2011 includes results of Chaucer Holdings plc (“Chaucer”) since the July 1, 2011 acquisition date. Results in 2013 and 2012 include Chaucer for the entire year.

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Weighted-Average Assumptions Used To Determine Pension Benefit Obligations (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Qualified Plan
Schedule of Benefit Obligations Weighted Average Assumptions [Line Items]
Discount rate	5.00%	4.25%	5.13%
Nonqualified Plan
Schedule of Benefit Obligations Weighted Average Assumptions [Line Items]
Discount rate	5.00%	4.13%	5.00%
U.S. Defined Benefit Plans
Schedule of Benefit Obligations Weighted Average Assumptions [Line Items]
Cash balance interest crediting rate	3.50%	3.50%	4.00%
Chaucer Pension Scheme
Schedule of Benefit Obligations Weighted Average Assumptions [Line Items]
Discount rate	4.50%	4.80%	4.90%
Rate of increase in future compensation	3.15%	4.20%	4.30%

XML

Financial Information with Respect to Business Segments (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended								12 Months Ended
	Jun. 30, 2011	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Net realized investment gains										$ 33.5	$ 23.6	$ 28.1
Total revenues		1,229.0	1,201.8	1,182.6	1,180.3	1,184.0	1,157.7	1,127.2	1,121.8	4,793.7	4,590.7	3,931.6
Operating income (loss) before interest expense and income taxes										393.4	75.1	71.8
Interest on debt										(65.3)	(61.9)	(55.0)
Operating income before income taxes										328.1	13.2	16.8
Net realized investment gains										33.5	23.6	28.1
Net loss from repayment of debt										(27.7)	(5.1)	(2.3)
Loss on real estate										(4.7)
Net costs related to acquired businesses	(11.7)									(0.1)	(2.6)	(16.4)
Loss on derivative instruments												(11.3)
Net foreign exchange gains (losses)											(0.4)	6.7
Income before income taxes										329.1	28.7	21.6
Net investment income										269.0	276.6	258.2
Commercial Lines
Segment Reporting Information [Line Items]
Operating income (loss) before interest expense and income taxes										132.4	(80.3)	16.3
GAAP underwriting income (loss)										(11.0)	(224.2)	(123.0)
Net investment income										143.5	142.4	136.5
Other income										(0.1)	1.5	2.8
Personal Lines
Segment Reporting Information [Line Items]
Operating income (loss) before interest expense and income taxes										118.6	25.5	23.1
GAAP underwriting income (loss)										37.6	(67.3)	(72.6)
Net investment income										75.8	86.5	92.1
Other income										5.2	6.3	3.6
Chaucer
Segment Reporting Information [Line Items]
Operating income (loss) before interest expense and income taxes										150.4	136.8	32.9
GAAP underwriting income (loss)										107.7	93.5	11.9
Net investment income										42.7	40.2	16.9
Other income											3.1	4.1
Other
Segment Reporting Information [Line Items]
Operating income (loss) before interest expense and income taxes										(8.0)	(6.9)	(0.5)
GAAP underwriting income (loss)										(3.4)	(3.5)	(0.3)
Net investment income										7.0	7.2	12.7
Other net expenses										(11.6)	(10.6)	(12.9)
Earned Premiums
Segment Reporting Information [Line Items]
Operating revenues										4,760.2	4,567.1	3,903.5
Earned Premiums | Commercial Lines
Segment Reporting Information [Line Items]
Operating revenues										2,109.5	1,966.2	1,798.9
Earned Premiums | Personal Lines
Segment Reporting Information [Line Items]
Operating revenues										1,542.5	1,560.0	1,555.9
Earned Premiums | Chaucer
Segment Reporting Information [Line Items]
Operating revenues										1,098.2	1,030.0	534.1
Earned Premiums | Other
Segment Reporting Information [Line Items]
Operating revenues										$ 10.0	$ 10.9	$ 14.6

XML

FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value of Financial Instruments

The estimated fair value of the financial instruments were as follows:

DECEMBER 31	2013				2012
(in millions)	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial Assets
Cash and cash equivalents	$	486.2	$	486.2	$	564.8	$	564.8
Fixed maturities		6,970.6		6,970.6		6,952.2		6,952.2
Equity securities		430.2		430.2		315.8		315.8
Other investments		173.1		173.7		188.9		189.4
Total financial assets	$	8,060.1	$	8,060.7	$	8,021.7	$	8,022.2
Financial Liabilities
Debt	$	903.9	$	961.7	$	849.4	$	995.2

Fair Value, Assets Measured on Recurring Basis

The following tables provide, for each hierarchy level, the Company’s assets that were measured at fair value on a recurring basis.

	DECEMBER 31, 2013
(in millions)	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	406.6	$	167.2	$	239.4	$	—
Foreign government		305.0		45.6		259.4		—
Municipal		1,126.3		—		1,100.7		25.6
Corporate		3,824.2		—		3,811.2		13.0
Residential mortgage-backed, U.S. agency backed		573.2		—		573.2		—
Residential mortgage-backed, non-agency		155.6		—		155.1		0.5
Commercial mortgage-backed		411.6		—		388.7		22.9
Asset-backed		168.1		—		168.1		—
Total fixed maturities		6,970.6		212.8		6,695.8		62.0
Equity securities		420.9		382.3		—		38.6
Other investments		153.2		—		149.6		3.6
Total investment assets at fair value	$	7,544.7	$	595.1	$	6,845.4	$	104.2
	DECEMBER 31, 2012
	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	325.6	$	144.2	$	181.4	$	—
Foreign government		352.9		60.9		292.0		—
Municipal		1,096.3		—		1,076.9		19.4
Corporate		3,773.4		—		3,747.0		26.4
Residential mortgage-backed, U.S. agency backed		610.8		—		610.8		—
Residential mortgage-backed, non-agency		194.4		—		193.7		0.7
Commercial mortgage-backed		396.2		—		369.5		26.7
Asset-backed		202.6		—		201.1		1.5
Total fixed maturities		6,952.2		205.1		6,672.4		74.7
Equity securities		306.1		226.9		54.8		24.4
Other investments		172.8		—		169.2		3.6
Total investment assets at fair value	$	7,431.1	$	432.0	$	6,896.4	$	102.7

Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following tables provide, for each hierarchy level, the Company’s estimated fair values of financial instruments that were not carried at fair value.

	DECEMBER 31, 2013
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	486.2	$	486.2	$	—	$	—
Equity securities		9.3		—		9.3		—
Other investments		20.5		—		2.7		17.8
Liabilities:
Debt	$	961.7	$	—	$	961.7	$	—
	DECEMBER 31, 2012
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	564.8	$	564.8	$	—	$	—
Equity securities		9.7		—		9.7		—
Other investments		16.6		—		4.8		11.8
Liabilities:
Debt	$	995.2	$	—	$	995.2	$	—

Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

The tables below provide a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

YEAR ENDED DECEMBER 31, 2013	Fixed Maturities
(in millions)	Municipal			Corporate			Residential mortgage- backed, non- agency			Commercial mortgage- backed			Asset-backed			Total			Equity and Other			Total Assets
Balance at beginning of year	$	19.4		$	26.4		$	0.7		$	26.7		$	1.5		$	74.7		$	28.0		$	102.7
Transfers into Level 3		9.7			0.2			—			—			—			9.9			—			9.9
Transfers out of Level 3		—			(2.2	)		—			—			(1.5	)		(3.7	)		(0.9	)		(4.6	)
Total gains (losses):
Included in earnings		—			1.5			—			—			—			1.5			—			1.5
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities		(0.8	)		(1.6	)		—			(1.3	)		—			(3.7	)		15.1			11.4
Sales		(2.7	)		(11.3	)		(0.2	)		(2.5	)		—			(16.7	)		—			(16.7	)
Balance at end of year	$	25.6		$	13.0		$	0.5		$	22.9		$	—		$	62.0		$	42.2		$	104.2
YEAR ENDED DECEMBER 31, 2012	Fixed Maturities
(in millions)	Municipal			Corporate			Residential mortgage- backed, non- agency			Commercial mortgage- backed			Asset-backed			Total			Equity and Other			Total Assets
Balance at beginning of year	$	13.6		$	23.8		$	5.2		$	23.7		$	9.2		$	75.5		$	27.0		$	102.5
Transfers into Level 3		2.6			4.3			—			—			—			6.9			0.1			7.0
Transfers out of Level 3		—			(2.3	)		—			—			(8.7	)		(11.0	)		—			(11.0	)
Total gains (losses):
Included in earnings		—			0.4			—			—			—			0.4			(0.2	)		0.2
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities		1.1			0.7			0.1			(0.4	)		—			1.5			1.8			3.3
Purchases and sales:
Purchases		3.0			1.5			0.1			5.2			1.5			11.3			—			11.3
Sales		(0.9	)		(2.0	)		(4.7	)		(1.8	)		(0.5	)		(9.9	)		(0.7	)		(10.6	)
Balance at end of year	$	19.4		$	26.4		$	0.7		$	26.7		$	1.5		$	74.7		$	28.0		$	102.7

Schedule of Gain and Losses Due to Change in Fair Value Level 3 Assets

The following table summarizes gains and losses due to changes in fair value that are recorded in net income for Level 3 assets.

YEARS ENDED DECEMBER 31	2013		2012
	Net realized investment
(in millions)	gains (losses)
Level 3 Assets:
Fixed maturities:
Corporate	$	1.5	$	0.4
Equity securities		—		(0.2	)
Total assets	$	1.5	$	0.2

Schedule of Additional Information About Significant Unobservable Inputs Used in Fair Valuations of Level 3

The following table provides quantitative information about the significant unobservable inputs used by the Company in the fair value measurements of Level 3 assets. Where discounted cash flows were used in the valuation of fixed maturities, the internally-developed discount rate was adjusted by the significant unobservable inputs shown in the table. Valuations for securities based on broker quotes for which there was a lack of transparency as to inputs used to develop the valuations have been excluded.

			December 31, 2013			December 31, 2012
	Valuation	Significant	Fair		Range	Fair		Range
(in millions)	Technique	Unobservable Inputs	Value		(Wtd Average)	Value		(Wtd Average)
Fixed maturities:
Municipal	Discounted	Discount for:	$	25.6		$	19.4
	cash flow	Small issue size			1.0-4.0%(2.3%)			1.0-4.0%(3.1%)
		Above-market coupon			0.3-1.0%(0.5%)			0.3-1.0%(0.5%)
		Long maturity			N/A			0.5%(0.5%)
Corporate	Discounted	Discount for:		12.8			26.4
	cash flow	Above-market coupon			0.3-0.8%(0.6%)			0.3-1.0%(0.7%)
		Small issue size			0.3-1.0%(0.5%)			0.3-3.0%(0.5%)
		Credit stress			N/A			1.0-3.0%(1.1%)
		Long maturity			N/A			0.5%(0.5%)
Residential mortgage-backed, non-agency	Discounted	Discount for:		0.5			0.7
	cash flow	Small issue size			0.5%(0.5%)			0.5%(0.5%)
Commercial mortgage-backed	Discounted	Discount for:		22.9			26.7
	cash flow	Above-market coupon			0.5-0.8%(0.6%)			0.3-0.8%(0.4%)
		Credit stress			0.5%(0.5%)			1.0%(1.0%)
		Small issue size			0.5%(0.5%)			0.5%(0.5%)
		Lease structure			0.3%(0.3%)			0.3%(0.3%)
		Long maturity			N/A			0.5-0.8%(0.7%)
Asset backed	Discounted	Discount for:		—			1.5
	cash flow	Small issue size			N/A			0.7-2.0%(1.6%)
Equity securities	Market	Net tangible asset		38.5			24.3
	comparables	market multiples			1.3X (1.3X)			0.9X (0.9X)
Other	Discounted	Discount rate		3.6	18.0%(18.0%)		3.6	18.0%(18.0%)
	cash flow

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	4 Months Ended	6 Months Ended	12 Months Ended			1 Months Ended		12 Months Ended
	Mar. 31, 2012	Jul. 31, 2012	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jul. 31, 2013 Effective April 1, 2014	Jul. 31, 2013 Effective April 1, 2015	Dec. 31, 2013 Minimum	Dec. 31, 2013 Minimum Software	Dec. 31, 2013 Maximum	Dec. 31, 2013 Maximum Software	Dec. 31, 2013 Additional Paid-in Capital	Dec. 31, 2013 Retained Earnings	Dec. 31, 2011 Retained Earnings
Summary Of Significant Accounting Policies [Line Items]
Prior period reclassification adjustment													$ 34	$ (34)
Property, equipment and leasehold improvements, estimated useful lives									3 years	5 years	30 years	7 years
Loss on sale of asset				(4.7)
U.S. federal income tax rate				35.00%
Non-U.S. jurisdiction income tax rate	26.00%	24.00%		23.00%			21.00%	20.00%
Current exchange rate between GBP and US dollars			1.55	1.66	1.63	1.55
Foreign currency transaction gain			5.1	4.2	6.3
Gain (loss) on foreign exchange			6.4			6.4
Impact of new accounting guide lines after tax				$ 25.8											$ (2.3)
Percentage of reduction on shareholders' equity				1.00%

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Summary of Gains and Losses Due to Changes in Fair Value in Net Income for Level Three Assets (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net realized investment gains (losses)	$ (1.5)	$ (0.2)
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net realized investment gains (losses)	1.5	0.2
Fair Value, Inputs, Level 3 | Fixed Maturities | Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net realized investment gains (losses)	1.5	0.4
Fair Value, Inputs, Level 3 | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net realized investment gains (losses)		$ (0.2)

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Consolidated Statements of Income (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenues
Premiums	$ 4,450.5	$ 4,239.1	$ 3,598.6
Net investment income	269.0	276.6	258.2
Net realized investment gains (losses):
Net realized gains from sales and other	39.5	31.4	35.0
Net other-than-temporary impairment losses on investments recognized in earnings	(6.0)	(7.8)	(6.9)
Total net realized investment gains	33.5	23.6	28.1
Fees and other income	40.7	51.4	46.7
Total revenues	4,793.7	4,590.7	3,931.6
Losses and expenses
Losses and loss adjustment expenses	2,761.1	2,974.4	2,550.8
Amortization of deferred acquisition costs	971.0	938.1	778.9
Interest expense	65.3	61.9	55.0
Other operating expenses	667.2	587.6	525.3
Total expenses	4,464.6	4,562.0	3,910.0
Income before income taxes	329.1	28.7	21.6
Income tax expense (benefit):
Current	8.6	18.4	(0.6)
Deferred	74.8	(35.8)	(9.3)
Total income tax expense (benefit)	83.4	(17.4)	(9.9)
Income from continuing operations	245.7	46.1	31.5
Net gain from discontinued operations (net of income tax expense (benefit) of $4.1, $(0.5) and $(2.5) in 2013, 2012 and 2011)	5.3	9.8	5.2
Net income	$ 251.0	$ 55.9	$ 36.7
Basic:
Income from continuing operations	$ 5.58	$ 1.03	$ 0.70
Net gain from discontinued operations	$ 0.12	$ 0.22	$ 0.11
Net income per share	$ 5.70	$ 1.25	$ 0.81
Weighted average shares outstanding	44.1	44.7	45.2
Diluted:
Income from continuing operations	$ 5.47	$ 1.02	$ 0.69
Net gain from discontinued operations	$ 0.12	$ 0.21	$ 0.11
Net income per share	$ 5.59	$ 1.23	$ 0.80
Weighted average shares outstanding	44.9	45.3	45.8

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OTHER COMPREHENSIVE INCOME (Tables)

12 Months Ended

Dec. 31, 2013

Changes in Other Comprehensive Income

The following table provides changes in other comprehensive income.

YEARS ENDED DECEMBER 31	2013									2012									2011
				Tax									Tax									Tax
				Benefit			Net of						Benefit			Net of						Benefit			Net of
(in millions)	Pre-Tax			(Expense)			Tax			Pre-Tax			(Expense)			Tax			Pre-Tax			(Expense)			Tax
Unrealized gains (losses) on available-for-sale securities and derivative instruments:
Unrealized gains (losses) arising during period (net of pre-tax, ceded unrealized losses of $1.2 million for the twelve months ended December 31, 2013)	$	(189.4	)	$	63.1		$	(126.3	)	$	186.4		$	(40.2	)	$	146.2		$	96.0		$	24.1		$	120.1
Amount of realized gains from sales and other		(41.3	)		(3.0	)		(44.3	)		(31.8	)		(3.3	)		(35.1	)		(28.8	)		(6.9	)		(35.7	)
Portion of other-than-temporary impairment losses recognized in earnings		6.0			(2.1	)		3.9			8.9			(2.7	)		6.2			8.4			(2.4	)		6.0
Net unrealized gains (losses)		(224.7	)		58.0			(166.7	)		163.5			(46.2	)		117.3			75.6			14.8			90.4
Pension and postretirement benefits:
Net actuarial gain (loss) arising in the period		15.0			(4.2	)		10.8			(24.9	)		9.0			(15.9	)		(16.0	)		4.2			(11.8	)
Amortization of net actuarial loss and prior service cost recognized as net periodic benefit cost		14.9			(5.2	)		9.7			9.3			(3.2	)		6.1			10.2			(3.6	)		6.6
Cumulative foreign currency translation adjustment:
Foreign currency translation recognized during the period		(3.1	)		1.1			(2.0	)		12.2			(4.3	)		7.9			(17.7	)		6.2			(11.5	)
Other comprehensive income (loss)	$	(197.9	)	$	49.7		$	(148.2	)	$	160.1		$	(44.7	)	$	115.4		$	52.1		$	21.6		$	73.7

Reclassifications Out of Accumulated Other Comprehensive Income

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)	Amount Reclassified from
Details about Accumulated Other	Accumulated Other									Affected Line Item in the Statement
Comprehensive Income Components	Comprehensive Income									Where Net Income is Presented
Unrealized gains (losses) on available-for-sale securities and derivative instruments	$	41.3		$	31.8		$	27.8		Net realized gains from sales and other
		(6.0	)		(7.8	)		(6.9	)	Net other-than-temporary impairment losses on investments recognized in earnings
		35.3			24.0			20.9		Total before tax
		5.1			6.0			9.3		Tax benefit (expense)
		40.4			30.0			30.2
		—			(0.9	)		(0.5	)	Discontinued operations, net of tax
		40.4			29.1			29.7		Net of tax
Amortization of defined benefit pension and postretirement plans		14.9			9.3			10.2		Loss adjustment expenses and other operating expenses
		(5.2	)		(3.2	)		(3.6	)	Tax benefit (expense)
		9.7			6.1			6.6		Net of tax
Total reclassifications for the period	$	50.1		$	35.2		$	36.3		Net of tax

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Components of Net Periodic Postretirement Benefit Cost (Detail) (Postretirement Benefits, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Postretirement Benefits
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	$ 0.1	$ 0.1	$ 0.1
Interest cost	1.2	2.1	2.4
Recognized net actuarial loss	0.2	0.2	0.4
Amortization of prior service cost	(3.7)	(3.8)	(5.3)
Net settlement gain	(1.6)
Net periodic pension cost	$ (3.8)	$ (1.4)	$ (2.4)

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Supplementary Insurance Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Supplementary Insurance Information, by Segment [Line Items]
Deferred acquisition costs	$ 506.0		$ 489.5		$ 458.6
Future policy benefits, losses, claims and loss expenses	6,227.4		6,192.9		5,757.3
Unearned premiums	2,515.8		2,474.8		2,292.1
Other policy claims and benefits payable	4.1		4.1		3.0
Premium revenue	4,450.5		4,239.1		3,598.6
Net investment income	269.0		276.6		258.2
Benefits, claims, losses and settlement expenses	2,761.1		2,974.4		2,550.8
Amortization of deferred policy acquisition costs	971.0		938.1		778.9
Other operating expenses	732.5		649.5		580.3
Premiums written	4,552.7		4,368.4		3,593.4
Property And Casualty Insurance
Supplementary Insurance Information, by Segment [Line Items]
Deferred acquisition costs	354.2		346.6		325.3
Future policy benefits, losses, claims and loss expenses	3,845.9		3,784.9		3,424.5
Unearned premiums	1,727.1		1,711.1		1,588.9
Other policy claims and benefits payable	4.1		4.1		3.0
Premium revenue	3,412.6		3,272.3		3,092.3
Net investment income	226.3		236.1		241.3
Benefits, claims, losses and settlement expenses	2,222.9		2,467.2		2,237.6
Amortization of deferred policy acquisition costs	729.8		704.2		658.8
Other operating expenses	500.4		436.5		462.6
Premiums written	3,435.2		3,377.9		3,164.6
Chaucer
Supplementary Insurance Information, by Segment [Line Items]
Deferred acquisition costs	151.8	[1]	142.9	[1]	133.3	[1]
Future policy benefits, losses, claims and loss expenses	2,381.5	[1]	2,408.0	[1]	2,332.8	[1]
Unearned premiums	788.7	[1]	763.7	[1]	703.2	[1]
Premium revenue	1,037.9	[1]	966.8	[1]	506.3	[1]
Net investment income	42.7	[1]	40.2	[1]	16.9	[1]
Benefits, claims, losses and settlement expenses	538.2	[1]	507.2	[1]	313.2	[1]
Amortization of deferred policy acquisition costs	241.2	[1]	233.9	[1]	120.1	[1]
Other operating expenses	173.4	[1]	157.6	[1]	67.9	[1]
Premiums written	1,117.5	[1]	990.5	[1]	428.8	[1]
Interest On Debt
Supplementary Insurance Information, by Segment [Line Items]
Other operating expenses	65.3		61.9		55.0
Eliminations
Supplementary Insurance Information, by Segment [Line Items]
Net investment income			0.3
Other operating expenses	$ (6.6)		$ (6.5)		$ (5.2)

[1] 2011 includes results of Chaucer Holdings plc ("Chaucer") since the July 1, 2011 acquisition date. Results in 2013 and 2012 include Chaucer for the entire year.

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Segment Information - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013 Segment
Segment Reporting Information [Line Items]
Operating segments	4

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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fixed maturities, amortized cost	$ 6,815.2	$ 6,529.5
Equity securities, cost	$ 366.5	$ 299.0
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20.0	20.0
Preferred stock, issued
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	300.0	300.0
Common stock, shares issued	60.5	60.5
Treasury stock, shares	16.8	16.2

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Funded Status of Plans (Detail) (Postretirement Benefits, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Postretirement Benefits
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Projected benefit obligation, beginning of period	$ 45.2	$ 46.0
Service cost	0.1	0.1	0.1
Interest cost	1.2	2.1	2.4
Net actuarial gains	(1.0)	(0.2)
Benefits paid	(2.8)	(2.8)
Plan amendment	(8.4)
Settlement of death benefits	(17.2)
Projected benefit obligation, end of year	17.1	45.2	46.0
Fair value of plan assets, end of year
Funded status of plans	$ (17.1)	$ (45.2)

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Supplemental Information Concerning Property and Casualty Insurance Operations (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Supplemental Information for Property, Casualty Insurance Underwriters [Line Items]
Reserves for losses and loss adjustment expenses	$ 2,030.4	$ 2,074.3	$ 1,931.8
Prepaid premiums, gross	$ 219.0	$ 275.4	$ 234.9

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Investments - Additional Information (Detail) In Millions, unless otherwise specified	1 Months Ended	12 Months Ended							12 Months Ended
	Apr. 30, 2011 GBP (£)	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 Overseas USD ($)	Dec. 31, 2012 Overseas USD ($)	Dec. 31, 2013 Federal Home Loan Mortgage Corp. USD ($)	Dec. 31, 2012 Federal Home Loan Mortgage Corp. USD ($)	Dec. 31, 2012 Capital Loss Carryforward USD ($)	Dec. 31, 2013 Security Lending Program USD ($)	Dec. 31, 2012 Security Lending Program USD ($)	Dec. 31, 2013 United States Government and agencies and authorities USD ($)	Dec. 31, 2012 United States Government and agencies and authorities USD ($)	Dec. 31, 2013 Collateralized Borrowings And Other Arrangements USD ($)	Dec. 31, 2012 Collateralized Borrowings And Other Arrangements USD ($)	Dec. 31, 2013 Federal Home Loan Bank of Boston USD ($)	Dec. 31, 2012 Federal Home Loan Bank of Boston USD ($)
Schedule of Investments [Line Items]
Net unrealized gains on impaired securities		$ 16.4	$ 20.5
Securities on loan, fair value										13.6	29.2	142.4	115.7	160.9	213.8	148.1	200.8
Fair value of the loaned securities, description										The fair value of the loaned securities is monitored on a daily basis, and the collateral is maintained at a level of at least 102% of the fair value of the loaned securities.
Fixed maturities deposit, amortized cost												135.2	106.2
Restricted assets, fixed maturities		334	497
Restricted assets, cash and cash equivalents		1	3
Loss on derivative	11.3			7.1					5.1
Derivative instruments, gain recognized				6.1					0.7
Net appreciation on other invested assets		2.9	2.1	1.9
Net depreciation on fixed maturity derivative instruments		0.9	1.0	1.2
Equity investment, fair value							341.8	415.7
Concentration of Investment in a Single Investee, Maximum		10.00%
Sale of office building and adjacent garage			75.9
Gain recognized on sale of office building and adjacent garage		2.4	3.3
Adjustments made to gain on sale of office building and adjacent garage		0.9
FHLB loan																	46.3
Contractual investment commitments		58.6
Overseas deposits		$ 192.5	$ 210.3		$ 149.6	$ 169.2

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Weighted Average Discount Rate Assumptions (Detail) (Postretirement Benefits)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Postretirement Benefits
Schedule of Postemployment Benefits Weighted Average Assumptions [Line Items]
Postretirement benefit obligations discount rate	5.00%	4.25%
Postretirement benefit cost discount rate	4.25%	5.00%

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SCHEDULE VI SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY INSURANCE OPERATIONS

12 Months Ended

Dec. 31, 2013

SCHEDULE VI SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY INSURANCE OPERATIONS

SCHEDULE VI

THE HANOVER INSURANCE GROUP, INC.

SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY INSURANCE OPERATIONS

YEARS ENDED DECEMBER 31
(in millions)
Affiliation with Registrant	Deferred acquisition costs		Reserves for unpaid claims and claim adjustment expenses (1)		Discount, if any, deducted from previous column (2)			Unearned premiums (1)		Earned premiums		Net investment income
Consolidated Property and Casualty Subsidiaries
2013	$	506.0	$	6,231.5	$	—		$	2,515.8	$	4,450.5	$	269.0
2012	$	489.5	$	6,197.0	$	—		$	2,474.8	$	4,239.1	$	276.6
2011	$	458.6	$	5,760.3	$	—		$	2,292.1	$	3,598.6	$	258.2
			Claims and claim
			adjustment expenses					Amortization		Paid claims
			incurred related to					of deferred		and claim
			Current year		Prior years			acquisition costs		adjustment expenses		Premiums written
2013			$	2,837.4	$	(76.3	)	$	971.0	$	2,683.3	$	4,552.7
2012			$	2,990.2	$	(15.8	)	$	938.1	$	2,714.1	$	4,368.4
2011			$	2,654.1	$	(103.3	)	$	778.9	$	2,492.7	$	3,593.4

(1) Reserves for unpaid claims and claim adjustment expenses are shown gross of $2,030.4 million, $2,074.3 million and $1,931.8 million of reinsurance recoverable on unpaid losses in 2013, 2012 and 2011, respectively. Unearned premiums are shown gross of prepaid premiums of $219.0 million, $275.4 million and $234.9 million in 2013, 2012 and 2011, respectively. Reserves for unpaid claims and claims adjustment expense also include policyholder dividends.

(2) The Company does not use discounting techniques.

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Condensed Financial Information of Registrant Parent Company Only Balance Sheets (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Assets
Fixed maturities - at fair value (amortized cost of $98.5 and $131.1)	$ 6,970.6	$ 6,952.2
Equity securities - at fair value (cost of $1.0)	430.2	315.8
Cash and cash equivalents	486.2	564.8	820.4	290.4
Deferred income taxes	239.7	267.6
Other assets	526.1	511.8
Total assets	13,378.7	13,484.9
Liabilities
Debt	903.9	849.4
Total liabilities	10,784.2	10,889.5
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	1,830.1	1,787.1
Accumulated other comprehensive income	177.6	325.8
Retained earnings	1,349.1	1,211.6
Treasury stock at cost (16.8 and 16.2 million)	(762.9)	(729.7)
Total shareholders' equity	2,594.5	2,595.4	2,484.0
Total liabilities and shareholders' equity	13,378.7	13,484.9
The Hanover Insurance Group, Inc
Assets
Fixed maturities - at fair value (amortized cost of $98.5 and $131.1)	101.7	139.3
Equity securities - at fair value (cost of $1.0)	1.1	1.0
Cash and cash equivalents	20.7	23.8	8.9	66.6
Investments in unconsolidated subsidiaries	2,876.0	2,763.8
Net receivable from subsidiaries	23.0	26.6
Deferred income taxes	49.1	20.7
Current income taxes	8.3	14.1
Loan receivable from subsidiary	300.0	300.0
Other assets	17.6	14.5
Total assets	3,397.5	3,303.8
Liabilities
Expenses and state taxes payable	16.0	20.7
Interest payable	8.1	9.6
Debt	778.9	678.1
Total liabilities	803.0	708.4
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	1,830.1	1,787.1
Accumulated other comprehensive income	177.6	325.8
Retained earnings	1,349.1	1,211.6
Treasury stock at cost (16.8 and 16.2 million)	(762.9)	(729.7)
Total shareholders' equity	2,594.5	2,595.4
Total liabilities and shareholders' equity	$ 3,397.5	$ 3,303.8

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Schedule of Net Realized Gains Losses on Investments (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Gain (Loss) on Investments [Line Items]
Net realized investment gains	$ 33.5	$ 23.6	$ 28.1
Equity Securities
Gain (Loss) on Investments [Line Items]
Net realized investment gains	26.7	15.5	0.9
Fixed Maturities
Gain (Loss) on Investments [Line Items]
Net realized investment gains	8.6	9.7	20.4
Real Estate
Gain (Loss) on Investments [Line Items]
Net realized investment gains	(0.9)	3.3
Derivative Instruments
Gain (Loss) on Investments [Line Items]
Net realized investment gains		(4.4)	5.8
Other Investments
Gain (Loss) on Investments [Line Items]
Net realized investment gains	$ (0.9)	$ (0.5)	$ 1.0

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SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2013

SEGMENT INFORMATION

14. SEGMENT INFORMATION

The Company’s primary business operations include insurance products and services provided through four operating segments. The domestic operating segments are Commercial Lines, Personal Lines and Other, and the Company’s international operating segment is Chaucer. Commercial Lines includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial coverages, such as specialty program business, inland marine, management and professional liability and surety. Personal Lines includes personal automobile, homeowners and other personal coverages. Chaucer includes marine and aviation, energy, property, U.K. motor, and casualty and other coverages (which includes international liability, specialist coverages, and syndicate participations). Included in Other are Opus Investment Management, Inc., which markets investment management services to institutions, pension funds and other organizations; earnings on holding company assets; and, a voluntary pools business which is in run-off. The separate financial information is presented consistent with the way results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company reports interest expense related to debt separately from the earnings of its operating segments. This consists of interest on the Company’s senior debentures, subordinated debentures, collateralized borrowings with the Federal Home Loan Bank of Boston, and letter of credit facility. Management evaluates the results of the aforementioned segments based on operating income (loss) before taxes (formerly referred to as segment income) which also excludes interest expense on debt. Operating income (loss) before taxes excludes certain items which are included in net income (loss), such as net realized investment gains and losses (including gains and losses on certain derivative instruments). Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income (loss) before taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income (loss) before taxes may be important components in understanding and assessing the Company’s overall financial performance, management believes that the presentation of operating income (loss) before taxes enhances an investor’s understanding of the Company’s results of operations by highlighting net income (loss) attributable to the core operations of the business. However, operating income (loss) before taxes should not be construed as a substitute for income (loss) before income taxes and operating income (loss) should not be construed as a substitute for net income (loss).

Summarized below is financial information with respect to the Company’s business segments. Amounts reflect activity of Chaucer since the July 1, 2011 acquisition date.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Operating revenues:
Commercial Lines	$	2,109.5		$	1,966.2		$	1,798.9
Personal Lines		1,542.5			1,560.0			1,555.9
Chaucer		1,098.2			1,030.0			534.1
Other		10.0			10.9			14.6
Total		4,760.2			4,567.1			3,903.5
Net realized investment gains		33.5			23.6			28.1
Total revenues	$	4,793.7		$	4,590.7		$	3,931.6
Operating income (loss) before interest expense and income taxes:
Commercial Lines:
GAAP underwriting loss	$	(11.0	)	$	(224.2	)	$	(123.0	)
Net investment income		143.5			142.4			136.5
Other income (expense)		(0.1	)		1.5			2.8
Commercial Lines operating income (loss)		132.4			(80.3	)		16.3
Personal Lines:
GAAP underwriting income (loss)		37.6			(67.3	)		(72.6	)
Net investment income		75.8			86.5			92.1
Other income		5.2			6.3			3.6
Personal Lines operating income		118.6			25.5			23.1
Chaucer:
GAAP underwriting income		107.7			93.5			11.9
Net investment income		42.7			40.2			16.9
Other income		—			3.1			4.1
Chaucer operating income		150.4			136.8			32.9
Other:
GAAP underwriting loss		(3.4	)		(3.5	)		(0.3	)
Net investment income		7.0			7.2			12.7
Other net expenses		(11.6	)		(10.6	)		(12.9	)
Other operating loss		(8.0	)		(6.9	)		(0.5	)
Operating income before interest expense and income taxes		393.4			75.1			71.8
Interest on debt		(65.3	)		(61.9	)		(55.0	)
Operating income before income taxes		328.1			13.2			16.8
Non-operating income items:
Net realized investment gains		33.5			23.6			28.1
Net loss from repayment of debt		(27.7	)		(5.1	)		(2.3	)
Loss on real estate		(4.7	)		—			—
Net costs related to acquired businesses		(0.1	)		(2.6	)		(16.4	)
Loss on derivative instruments		—			—			(11.3	)
Net foreign exchange gains (losses)		—			(0.4	)		6.7
Income before income taxes	$	329.1		$	28.7		$	21.6

The following table provides identifiable assets for the Company’s business segments and discontinued operations:

DECEMBER 31	2013		2012
(in millions)	Identifiable Assets
U.S. Companies	$	8,962.6	$	8,909.6
Chaucer		4,301.2		4,444.8
Discontinued operations		114.9		130.5
Total	$	13,378.7	$	13,484.9

The Company reviews the assets of its U.S. Companies collectively and does not allocate them between the Commercial Lines, Personal Lines and Other segments.

GEOGRAPHIC CONCENTRATIONS

The following table presents the Company’s gross written premium (“GWP”) based on the location of the risk:

YEAR ENDED DECEMBER 31	2013			2012			2011
	% of Total
	GWP
United States		78	%		76	%		87	%
United Kingdom		6			6			4
Worldwide and other		16			18			9
Total		100	%		100	%		100	%

The worldwide and other category includes insured risks that move across multiple geographic areas, including the U.S. and U.K., due to their mobile nature or insured risks that are fixed in locations that span more than one geographic area, and risks located in a single country outside the U.S. and U.K. These contracts include, for example, marine and aviation, hull, satellite, offshore energy exploration and production risks that can move across multiple geographic areas and assumed risks where the cedant insures risks in two or more geographic zones. These risks may include U.S. and U.K. insured risks.

Long-lived assets located outside the U.S. were not material for the year ended December 31, 2013 or 2012. The Company does not have revenue from transactions with a single agent or broker amounting to 10 percent or more of its consolidated revenue.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

Basis of Presentation and Principles of Consolidation

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of The Hanover Insurance Group, Inc. (“THG” or the “Company”), include the accounts of The Hanover Insurance Company (“Hanover Insurance”) and Citizens Insurance Company of America (“Citizens”), THG’s principal U.S. domiciled property and casualty companies; Chaucer Holdings plc (“Chaucer”), a specialist insurance underwriting group which operates through the Society and Corporation of Lloyd’s (“Lloyd’s”); and certain other insurance and non-insurance subsidiaries. These legal entities conduct their operations through several business segments discussed in Note 14 – “Segment Information”. The acquisition of Chaucer on July 1, 2011, which has added meaningful business volumes to THG results, has affected the comparability of the consolidated financial statements and related footnotes for the years ended December 31, 2013, 2012 and 2011. Results of operations for the years ended December 31, 2013 and 2012 include results from all of the Company’s business segments, while results of operations for the year ended December 31, 2011 include Chaucer’s results for only the period from July 1, 2011 through December 31, 2011. Additionally, the consolidated financial statements include the Company’s discontinued operations, consisting primarily of the Company’s former life insurance businesses, its accident and health business and prior to April 30, 2012, its third party administration business. All intercompany accounts and transactions have been eliminated. During 2013, the Company increased additional paid-in capital and decreased retained earnings by $34 million to correct the classification of amounts relating to stock-based compensation in prior periods. This reclassification within shareholders’ equity had no impact on net income, assets, liabilities or total shareholders’ equity of the Company for the current or any prior period.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of the Company’s management these financial statements reflect all adjustments, consisting of normal recurring items necessary for a fair presentation of the financial position and results of operations.

Valuation of Investments

B. VALUATION OF INVESTMENTS

The Company is required to classify its investments into one of three categories: held-to-maturity, available-for-sale or trading. It determines the appropriate classification of fixed maturity and equity securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Fixed maturities and equity securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported in accumulated other comprehensive income, a separate component of shareholders’ equity. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in net investment income.

Fixed maturities that are delinquent are placed on non-accrual status, and thereafter interest income is recognized only when cash payments are received.

Realized investment gains and losses are reported as a component of revenues based upon specific identification of the investment assets sold. When an other-than-temporary decline in value of a specific investment is deemed to have occurred, and a charge to earnings is required, the Company recognizes a realized investment loss.

The Company reviews investments in an unrealized loss position to identify other-than-temporary declines in value. When it is determined that a decline in value of an equity security is other-than-temporary, the Company reduces the cost basis of the security to fair value with a corresponding charge to earnings. When an other-than-temporary decline in value of a debt security is deemed to have occurred, the Company must assess whether it intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the debt security meets either of these two criteria, an other-than-temporary impairment (“OTTI”) is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the impairment measurement date. If the Company does not intend to sell the debt security and it is not more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, the credit loss portion of an OTTI is recorded through earnings while the portion attributable to all other factors is recorded separately as a component of other comprehensive income. The amount of the OTTI that relates to credit is estimated by comparing the amortized cost of the fixed maturity security with the net present value of the security’s projected future cash flows, discounted at the effective interest rate implicit in the investment prior to impairment. The non-credit portion of the impairment is equal to the difference between the fair value and the net present value of the security’s cash flows at the impairment measurement date. Once an OTTI has been recognized, the new amortized cost basis of the security is equal to the previous amortized cost less the amount of OTTI recognized in earnings. For equity method investments, an impairment is recognized when evidence demonstrates that an other-than-temporary loss in value has occurred, including the absence of the ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment.

Financial Instruments

C. FINANCIAL INSTRUMENTS

In the normal course of business, the Company may enter into transactions involving various types of financial instruments, including debt, investments such as fixed maturities, equity securities and mortgage loans, investment and loan commitments, swap contracts, option contracts, forward contracts and futures contracts. These instruments involve credit risk and could also be subject to risk of loss due to interest rate and foreign currency fluctuation. The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses.

Other Investments

D. OTHER INVESTMENTS

Other investments consist primarily of overseas deposits, which are investments maintained in overseas funds and managed exclusively by Lloyd’s. These funds are required in order to protect policyholders in overseas markets and enable the Company to operate in those markets. Overseas deposits are carried at fair value. Realized and unrealized gains and losses on overseas deposits, including the impact of foreign currency movements, are reflected in the income statement in the period the gain or loss was generated.

Cash and Cash Equivalents

E. CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less.

Deferred Acquisition Costs

F. DEFERRED ACQUISITION COSTS

Acquisition costs consist of commissions, underwriting costs and other costs, which vary with, and are primarily related to, the successful production of premiums. Acquisition costs are deferred and amortized over the terms of the insurance policies.

Deferred acquisition costs (“DAC”) for each line of business are reviewed to determine if the costs are recoverable from future income, including investment income. If such costs are determined to be unrecoverable, they are expensed at the time of determination. Although recoverability of DAC is not assured, the Company believes it is more likely than not that all of these costs will be recovered. The amount of DAC considered recoverable, however, could be reduced in the near term if the estimates of total revenues discussed above are reduced or permanently impaired as a result of a disposition of a line of business. The amount of amortization of DAC could be revised in the near term if any of the estimates discussed above are revised.

Reinsurance Recoverables

G. REINSURANCE RECOVERABLES

The Company shares certain insurance risks it has underwritten, through the use of reinsurance contracts, with various insurance entities. Reinsurance accounting is followed for ceded transactions when the risk transfer provisions of ASC 944, Financial Services – Insurance (“ASC 944”), have been met. As a result, when the Company experiences loss or claims events that are subject to a reinsurance contract, reinsurance recoverables are recorded. The amount of the reinsurance recoverable can vary based on the terms of the reinsurance contract, the size of the individual loss or claim, or the aggregate amount of all losses or claims in a particular line or book of business or an aggregate amount associated with a particular accident year. The valuation of losses or claims recoverable depends on whether the underlying loss or claim is a reported loss or claim, or an incurred but not reported loss. For reported losses and claims, the Company values reinsurance recoverables at the time the underlying loss or claim is recognized, in accordance with contract terms. For incurred but not reported losses, the Company estimates the amount of reinsurance recoverables based on the terms of the reinsurance contracts and historical reinsurance recovery information and applies that information to the gross loss reserve. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured business and the balance is disclosed separately in the financial statements. However, the ultimate amount of the reinsurance recoverable is not known until all losses and claims are settled. Allowances are established for amounts deemed uncollectible and reinsurance recoverables are recorded net of these allowances. The Company evaluates the financial condition of its reinsurers and monitors concentration risk to minimize its exposure to significant credit losses from individual reinsurers.

Property, Equipment and Capitalized Software

H. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE

Property, equipment, leasehold improvements and capitalized software are recorded at cost, less accumulated depreciation and amortization. Depreciation is generally provided using the straight-line method over the estimated useful lives of the related assets, which generally range from 3 to 30 years. The estimated useful life for capitalized software is generally 5 to 7 years. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the term of the leases or the estimated useful life of the improvements.

The Company tests for the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company recognizes impairment losses only to the extent that the carrying amounts of long-lived assets exceed the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. When an impairment loss occurs, the Company reduces the carrying value of the asset to fair value and no longer depreciates the asset. Fair values are estimated using discounted cash flow analysis.

In 2013, the Company consolidated its operations in Howell, Michigan from two buildings into one building. This resulted in a plan to relocate the employees and pursue the sale of one of the buildings. In conjunction with the planned relocation, the Company recognized a loss of $4.7 million. This is included in other operating expenses in the Consolidated Statements of Income for the year ended December 31, 2013.

Goodwill and Intangible Assets

I. GOODWILL AND INTANGIBLE ASSETS

In accordance with the provisions of ASC 350, Intangibles- Goodwill and Other, the Company carries its goodwill at cost, net of amortization prior to January 1, 2002 and net of impairments. Increases to goodwill are generated through acquisition and represent the excess of the cost of an acquisition over the fair value of net assets acquired, including any intangibles acquired. Since January 1, 2002 goodwill is no longer amortized but rather, is reviewed for impairment. Additionally, acquisitions can also produce intangible assets, which have either a definite or indefinite life. Intangible assets with definite lives are amortized over that life, whereas those intangible assets determined to have an indefinite life are reviewed at least annually for impairment.

The Company tests for the recoverability of goodwill and intangible assets with indefinite lives annually or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company recognizes impairment losses only to the extent that the carrying amounts of reporting units with goodwill exceed the fair value. The amount of the impairment loss that is recognized is determined based upon the excess of the carrying value of goodwill compared to the implied fair value of the goodwill, as determined with respect to all assets and liabilities of the reporting unit. The Company has performed its annual review of goodwill and intangible assets with indefinite lives for impairment in the fourth quarters of 2013 and 2012 with no impairments recognized.

Liabilities for Losses, LAE, and Unearned Premiums

J. LIABILITIES FOR LOSSES, LAE, AND UNEARNED PREMIUMS

Liabilities for outstanding claims, losses and loss adjustment expenses (“LAE”) are estimates of payments to be made for reported losses and LAE and estimates of losses and LAE incurred but not reported. These liabilities are determined using case basis evaluations and statistical analyses of historical loss patterns and represent estimates of the ultimate cost of all losses incurred but not paid. These estimates are continually reviewed and adjusted as necessary; adjustments are reflected in current operations. Estimated amounts of salvage and subrogation on unpaid losses are deducted from the liability for unpaid claims.

Premiums for direct and assumed business are reported as earned on a pro-rata basis over the contract period. The unexpired portion of these premiums is recorded as unearned premiums.

All losses, LAE and unearned premium liabilities are based on the various estimates discussed above. Although the adequacy of these amounts cannot be assured, the Company believes that it is more likely than not that these liabilities and accruals will be sufficient to meet future obligations of policies in force. The amount of liabilities and accruals, however, could be revised in the near-term if the estimates discussed above are revised.

Debt

K. DEBT

The Company’s debt at December 31, 2013 includes senior debentures, subordinated debentures, and collateralized borrowings with the Federal Home Loan Bank of Boston (“FHLBB”). The senior debentures are carried at principal amount borrowed, net of any applicable unamortized discounts. The subordinated debentures and borrowings under the FHLBB program are carried at principal amount borrowed (See Note 6 – “Debt and Credit Arrangements”).

Premium, Premium Receivable, Fee Revenue and Related Expenses

L. PREMIUM, PREMIUM RECEIVABLE, FEE REVENUE AND RELATED EXPENSES

Insurance premiums written are generally recorded at the policy inception and are primarily earned on a pro rata basis over the terms of the policies for all products. Premiums written include estimates, primarily in the Chaucer segment, that are derived from multiple sources, which include the historical experience of the underlying business, similar businesses and available industry information. These estimates are regularly reviewed and updated and any resulting adjustments are included in the current year’s results. Unearned premium reserves represent the portion of premiums written that relates to the unexpired terms of the underlying in-force insurance policies and reinsurance contracts. Premium receivables reflect the unpaid balance of premium written as of the balance sheet date. Premium receivables are generally short-term in nature and are reported net of an allowance for estimated uncollectible premium accounts. The Company reviews its receivables for collectability at the balance sheet date. The allowance for uncollectible accounts was not material as of December 31, 2013 and 2012. Ceded premiums are charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Reinsurance reinstatement premiums, when required, are recognized in the same period as the loss event that gave rise to the reinstatement premiums. Losses and related expenses are matched with premiums, resulting in their recognition over the lives of the contracts. This matching is accomplished through estimated and unpaid losses and amortization of deferred acquisition costs.

Income Taxes

M. INCOME TAXES

The Company is subject to the tax laws and regulations of the U.S. and foreign countries in which it operates. The Company files a consolidated U.S. federal income tax return that includes the holding company and its U.S. subsidiaries. Generally, taxes are accrued at the U.S. statutory tax rate of 35% for income from the U.S. operations. The Company’s primary non-U.S. jurisdiction is the United Kingdom (“U.K.”). In July 2012, the U.K. statutory rate decreased from 26% to 24% effective April 1, 2012 and from 24% to 23% effective April 1, 2013. Further decreases were enacted in July 2013 to reduce the statutory rate from 23% to 21% effective April 1, 2014 and from 21% to 20% effective April 1, 2015. The Company accrues taxes on certain non-U.S. income that is subject to U.S. tax at the U.S. tax rate. Foreign tax credits, where available, are utilized to offset U.S. tax as permitted. Certain of our non-U.S. income is not subject to U.S. tax until repatriated. Foreign taxes on this non-U.S. income are accrued at the local foreign rate and do not have an accrual for U.S. deferred taxes since these earnings are intended to be indefinitely reinvested overseas.

The Company’s accounting for income taxes represents its best estimate of various events and transactions.

Deferred income taxes are generally recognized when assets and liabilities have different values for financial statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by ASC 740,Income Taxes (“ASC 740”). These temporary differences are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. These differences result primarily from insurance reserves, deferred acquisition costs, tax credit carryforwards, loss carryforwards and employee benefit plans.

The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Consideration is given to all available positive and negative evidence, including reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. Valuation allowances are established if, based on available information, it is determined that it is more likely than not that all or some portion of the deferred tax assets will not be realized. Changes in valuation allowances are generally reflected in income tax expense or as an adjustment to other comprehensive income (loss) depending on the nature of the item for which the valuation allowance is being recorded.

Stock-Based Compensation

N. STOCK-BASED COMPENSATION

The Company recognizes the fair value of compensation costs for all share-based payments, including employee stock options, in the financial statements. Unvested awards are generally expensed on a straight line basis, by tranche, over the vesting period of the award. The Company’s stock-based compensation plans are discussed further in Note 11 – “Stock-Based Compensation Plans”.

Earnings Per Share

O. EARNINGS PER SHARE

Earnings per share (“EPS”) for the years ended December 31, 2013, 2012 and 2011 is based on a weighted average of the number of shares outstanding during each year. Basic and diluted EPS is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. The weighted average shares outstanding used to calculate basic EPS differ from the weighted average shares outstanding used in the calculation of diluted EPS due to the effect of dilutive employee stock options, nonvested stock grants and other contingently issuable shares. If the effect of such items is antidilutive, the weighted average shares outstanding used to calculate diluted EPS are equal to those used to calculate basic EPS.

Options to purchase shares of common stock whose exercise prices are greater than the average market price of the common shares are not included in the computation of diluted earnings per share because the effect would be antidilutive.

Foreign Currency

P. FOREIGN CURRENCY

The Company’s reporting currency is the U.S. dollar. The functional currencies of the Company’s foreign operations are the U.K. pound sterling (“GBP”), U.S. dollar, and Canadian dollar. Assets and liabilities of foreign operations are translated into the U.S. dollar using the exchange rates in effect at the balance sheet date. Revenues and expenses of foreign operations are translated using the average exchange rate for the period. Gains or losses from translating the financial statements of foreign operations are recorded in the cumulative translation adjustment, as a separate component of accumulated other comprehensive income. Gains and losses arising from transactions denominated in a foreign currency, other than the Company’s functional currencies, are included in net income (loss), except for the Company’s foreign currency denominated available-for-sale investments. The Company’s foreign currency denominated available-for-sale investments’ change in exchange rates between the local currency and the functional currency at each balance sheet date represents an unrealized appreciation or depreciation in value of these securities, and is included as a component of accumulated other comprehensive income.

The Company manages its exposure to foreign currency risk primarily by matching assets and liabilities denominated in the same currency. To the extent that assets and liabilities in foreign currencies are not matched, the Company is exposed to foreign currency risk. For functional currencies, the related exchange rate fluctuations are reflected in other comprehensive income (loss). The Company translated Chaucer’s balance sheet at December 31, 2013, 2012 and 2011 from GBP to U.S. dollars using a conversion rate of 1.66, 1.63 and 1.55, respectively. The Company recognized approximately $4.2 million and $6.3 million in foreign currency transaction gains in the Statement of Income during the years ended December 31, 2013 and 2012, respectively. During the six months ended December 31, 2011, the Company recognized $5.1 million of foreign exchange transaction gains including the $6.4 million gain recognized on the foreign currency forward contract associated with the purchase price of Chaucer. See Note 2 – “Acquisitions and Discontinued Operations” for further information.

New Accounting Pronouncements

Q. NEW ACCOUNTING PRONOUNCEMENTS

Recently Implemented Standards

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Update No. 2013-02 (Topic 220) Comprehensive Income Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASC Update No. 2013-02”). This guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) either on the face of the Statement of Income or in the Notes to the Consolidated Financial Statements. Significant amounts reclassified out of AOCI should be provided by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified in its entirety to net income in the same reporting period. For amounts not required to be reclassified in their entirety to net income, a cross-reference to other disclosures provided for in accordance with U.S. GAAP is required. This guidance was applicable for reporting periods beginning after December 15, 2012. The Company implemented the guidance effective January 1, 2013. The effect of implementing the guidance relates to financial statement presentation and disclosures. (See disclosures in Note 10 – Other Comprehensive Income.)

In July 2012, the FASB issued ASC Update No. 2012-02 (Topic 350) Testing Indefinite – Lived Intangible Assets for Impairment. This ASC update allows an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite – lived intangible asset is impaired. This assessment should be used as a basis for determining whether it is necessary to perform the quantitative impairment test. An entity would not be required to calculate the fair value of the intangible asset and perform the quantitative test unless the entity determines, based upon its qualitative assessment, that it is more likely than not that its fair value is less than its carrying value. The update further improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of an indefinite – lived intangible asset is less than its carrying amount. The update also allows an entity the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. This ASC update was effective for annual and interim periods beginning after September 15, 2012, with early adoption permitted. The Company implemented this guidance effective October 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In September 2011, the FASB issued ASC Update No. 2011-08 (Topic 350) Testing Goodwill for Impairment. This ASC update allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The update provides that an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on its qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The update further improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the update improves the examples of events and circumstances that should be considered by an entity that has a reporting unit with a zero or negative carrying amount in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. This ASC update was effective for annual and interim periods beginning after December 15, 2011, with early adoption permitted. The Company implemented this guidance effective January 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In June 2011, the FASB issued ASC Update No. 2011-05 (Topic 220) Presentation of Comprehensive Income (“ASC Update No. 2011-05”). This ASC update requires companies to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of income and other comprehensive income. The option to present items of other comprehensive income in the statement of changes in equity is eliminated. In addition, an entity is required to present on the face of the financial statements reclassification adjustments from other comprehensive income to net income. This ASC update should be applied retrospectively and except for the provisions related to reclassification adjustment, was effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASC Update 2011-12 (Topic 220) Comprehensive Incomewhich deferred the implementation date of the reclassification adjustment guidance in ASC Update No. 2011-05 and was subsequently replaced by ASC Update No. 2013-02, as described above. The Company implemented the guidance related to financial statements presentation effective January 1, 2012. The effect of implementing the guidance related to financial statements presentation did not have a significant impact to the Company’s financial statement presentation.

In May 2011, the FASB issued ASC Update No. 2011-04 (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASC update results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value for both U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new guidance includes changes to how and when the valuation premise of highest and best use applies, clarification on the application of blockage factors and other premiums and discounts, as well as new and revised disclosure requirements. This ASC update was effective for interim and annual periods beginning after December 15, 2011. The Company implemented this guidance as of January 1, 2012. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

In October 2010, the FASB issued ASC Update No. 2010-26 (Topic 944), Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (a consensus of the FASB Emerging Issues Task Force). This ASC update provides clarity in defining which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral, commonly known as deferred acquisition costs. Additionally, this update specifies that only costs associated with the successful acquisition of a policy or contract may be deferred, whereas industry practice historically included costs relating to unsuccessful contract acquisition. This ASC was effective for fiscal years beginning after December 15, 2011. Retrospective application to all prior periods upon the date of adoption was permitted. The Company implemented this guidance effective January 1, 2012 and elected to apply this guidance retrospectively. Retrospective application required that the new accounting principle be reflected in the earliest period presented as if the accounting principle had always been used. Upon adoption in 2012, the Company applied this guidance to the then earliest period, which was January 1, 2010. Additionally, since the Company purchased Chaucer July 1, 2011, it has reflected the impact of the retrospective application for Chaucer through equity, as a cumulative effect of a change in accounting principle, during 2011. The implementation of this ASC resulted in an after-tax reduction to our shareholders’ equity as of January 1, 2012 of $25.8 million, or 1%. The effect of implementing this guidance was not material to our results of operations or cash flows on either a historical basis or a prospective basis.

Recently Issued Standards

In July 2013, the FASB issued ASC Update No. 2013-11 (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). This ASC update clarifies the applicable guidance for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward as long as it is available, at the reporting date under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position (with certain exceptions). The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company does not expect the adoption of ASC Update 2013-11 to have a material impact on its financial position or results of operations.

In March 2013, the FASB issued ASC Update No. 2013-05 (Topic 830) Foreign Currency Matters-Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force). This ASC update clarifies the applicable guidance for the release of the cumulative translation adjustment into net income when a parent either sells all or a portion of its investment in a foreign entity. This guidance is also required to be applied when an entity no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity (with certain exceptions). Additionally, this update clarifies that the sale of an investment in a foreign entity includes events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date in a business combination achieved in stages. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to derecognition events occurring after the effective date. The Company does not expect the adoption of ASC Update 2013-05 to have a material impact on its financial position or results of operations.

Reclassifications

R. RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year presentation.

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Estimated Amortization to be Recognized in Net Periodic Benefit Cost (Detail) (Postretirement Benefits, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Postretirement Benefits
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Net actuarial loss	$ 0.1
Net prior service cost	(1.9)
Defined Benefit Plan, Amount to be Amortized from Accumulated Other Comprehensive Income (Loss) Next Fiscal Year	$ (1.8)

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Liabilities for Outstanding Claims Losses and Loss Adjustment Expenses - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Liabilities For Outstanding Claims, Losses And Loss Adjustment Expenses [Line Items]
Decrease in reserves after re-estimation		$ 76.3	$ 15.8	$ 103.3
Benefit from settlement of legal proceeding			3.2
Loss and LAE reserves of asbestos and environmental damage liability	59.8	61.9	60.5	59.8
Net loss and LAE reserves for asbestos and environmental damage liability		11.5	9.8	10.0
Reinsurance of loss and LAE reserves		20.6	20.4	18.7
Gross loss and LAE reserves for asbestos and environmental damage liability		29.8	30.3	31.1
Chaucer Business
Liabilities For Outstanding Claims, Losses And Loss Adjustment Expenses [Line Items]
Favorable loss and LAE reserve development	$ 35.5	$ 94.6	$ 72.6	$ 35.5

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REINSURANCE

12 Months Ended

Dec. 31, 2013

REINSURANCE

16. REINSURANCE

In the normal course of business, the Company seeks to reduce the losses that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. Reinsurance transactions are accounted for in accordance with the provisions of ASC 944.

Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. The Company determines the appropriate amount of reinsurance based on evaluations of the risks accepted and analyses prepared by consultants and on market conditions (including the availability and pricing of reinsurance). The Company also believes that the terms of its reinsurance contracts are consistent with industry practice in that they contain standard terms with respect to lines of business covered, limit and retention, arbitration and occurrence. The Company believes that its reinsurers are financially sound. This belief is based upon an ongoing review of its reinsurers’ financial statements, reported financial strength ratings from rating agencies, reputations in the marketplace, and the analysis and guidance of THG’s reinsurance advisors.

As a condition to conduct certain business in various states, the Company is required to participate in residual market mechanisms, facilities and pooling arrangements such as the Michigan Catastrophic Claims Association (“MCCA”). The Company is subject to concentration of risk with respect to reinsurance ceded to the MCCA. Funding for MCCA comes from assessments against automobile insurers based upon their share of insured automobiles in the state. Insurers are allowed to pass along this cost to Michigan automobile policyholders. The Company ceded to the MCCA premiums earned and losses and LAE incurred of $72.2 million and $76.6 million in 2013, $74.0 million and $99.9 million in 2012, $69.6 million and $122.6 million in 2011, respectively. MCCA, which represented 37.1% of the total reinsurance receivable balance at December 31, 2013, is the Company’s only reinsurer representing at least 10% of its reinsurance assets. Reinsurance recoverables related to MCCA were $867.0 million and $856.3 million at December 31, 2013 and 2012, respectively. Because the MCCA is supported by assessments permitted by statute, and there have been no significant uncollectible balances from MCCA identified during the three years ending December 31, 2013, the Company believes that it has no significant exposure to uncollectible reinsurance balances from this entity.

The following table provides the effects of reinsurance. Amounts reflect activity of Chaucer since the July 1, 2011 acquisition date.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Premiums written:
Direct	$	4,599.2		$	4,515.1		$	3,830.9
Assumed (1)		602.5			689.1			228.3
Ceded (2)		(649.0	)		(835.8	)		(465.8	)
Net premiums written	$	4,552.7		$	4,368.4		$	3,593.4
Premiums earned:
Direct	$	4,546.3		$	4,352.9		$	3,695.2
Assumed (1)		617.7			687.0			442.6
Ceded (2)		(713.5	)		(800.8	)		(539.2	)
Net premiums earned	$	4,450.5		$	4,239.1		$	3,598.6
Percentage of assumed to net premiums earned		13.88	%		16.21	%		12.30	%
Losses and LAE:
Direct	$	2,939.4		$	3,251.4		$	2,723.5
Assumed(1)		172.3			311.4			249.4
Ceded (2)		(350.6	)		(588.4	)		(422.1	)
Net losses and LAE	$	2,761.1		$	2,974.4		$	2,550.8

(1) Assumed reinsurance activity primarily relates to the Chaucer segment. In addition, 2011 assumed premiums earned and assumed losses and LAE included $96.0 million and $54.2 million, respectively, related to the 2010 OneBeacon renewal rights transaction.

(2) In 2013, we did not renew the capital provision reinsurance treaty with Flagstone Re. This reduced ceded premiums written, premiums earned and losses and LAE for the year ended December 31, 2013.

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Fair Value of Financial Instruments (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 486.2	$ 564.8	$ 820.4	$ 290.4
Fixed maturities	6,970.6	6,952.2
Equity securities	430.2	315.8
Other investments	192.5	210.3
Debt	903.9	849.4
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	486.2	564.8
Fixed maturities	6,970.6	6,952.2
Equity securities	430.2	315.8
Other investments	173.1	188.9
Total financial assets	8,060.1	8,021.7
Debt	903.9	849.4
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	486.2	564.8
Fixed maturities	6,970.6	6,952.2
Equity securities	430.2	315.8
Other investments	173.7	189.4
Total financial assets	8,060.7	8,022.2
Debt	$ 961.7	$ 995.2

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Assumptions Used to Determine Fair Value for Options Granted (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share based Compensation Arrangement Assumptions Used to Estimate Fair Values of Share Options Granted [Line Items]
Dividend yield			2.152%
Dividend yield, minimum	2.43%	3.13%
Dividend yield, maximum	3.11%	3.26%
Expected volatility, minimum	21.77%	32.86%	31.53%
Expected volatility, maximum	32.02%	35.27%	33.30%
Weighted average expected volatility	27.53%	34.05%	32.42%
Risk-free interest rate, minimum	0.29%	0.61%	2.00%
Risk-free interest rate, maximum	2.02%	1.06%	2.35%
Minimum
Share based Compensation Arrangement Assumptions Used to Estimate Fair Values of Share Options Granted [Line Items]
Expected term, in years	3 years	4 years 6 months	4 years 6 months
Maximum
Share based Compensation Arrangement Assumptions Used to Estimate Fair Values of Share Options Granted [Line Items]
Expected term, in years	6 years	5 years 6 months	5 years 6 months

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Consolidated Statements of Shareholders' Equity (USD $) In Millions	Total	Common Stock	Additional Paid-in Capital	Net Unrealized Appreciation (Depreciation) on Investments and Derivative Instruments:	Defined Benefit Pension and Postretirement Plans:	Cumulative Foreign Currency Translation Adjustment:	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Treasury Stock
Balance at beginning of year at Dec. 31, 2010		$ 0.6	$ 1,796.5	$ 218.3	$ (81.6)			$ 1,223.7	$ (720.1)
Cumulative effect of accounting change, net of tax								(2.3)
Net actuarial gain (loss) arising in the period	(11.8)				(11.8)
Shares purchased at cost									(21.7)
Employee and director stock-based awards and other			(11.7)
Net appreciation (depreciation) on available-for-sale securities and derivative instruments	90.4			90.4
Amount recognized as cumulative foreign currency translation during the year	(11.5)					(11.5)
Net income	36.7							36.7
Net amount recognized as net periodic benefit cost	(5.2)				6.6
Net shares reissued at cost under employee stock-based compensation plans									18.7
Dividends to shareholders								(50.9)
Stock-based compensation								4.1
Balance at end of period at Dec. 31, 2011	2,484.0	0.6	1,784.8	308.7	(86.8)	(11.5)	210.4	1,211.3	(723.1)
Net actuarial gain (loss) arising in the period	(15.9)				(15.9)
Shares purchased at cost									(20.0)
Employee and director stock-based awards and other			2.3
Net appreciation (depreciation) on available-for-sale securities and derivative instruments	117.3			117.3
Amount recognized as cumulative foreign currency translation during the year	7.9					7.9
Net income	55.9							55.9
Net amount recognized as net periodic benefit cost	(9.8)				6.1
Net shares reissued at cost under employee stock-based compensation plans									13.4
Dividends to shareholders								(55.1)
Stock-based compensation								(0.5)
Balance at end of period at Dec. 31, 2012	2,595.4	0.6	1,787.1	426.0	(96.6)	(3.6)	325.8	1,211.6	(729.7)
Cumulative effect of accounting change, net of tax	25.8
Net actuarial gain (loss) arising in the period	10.8				10.8
Shares purchased at cost									(78.2)
Employee and director stock-based awards and other			43.0
Net appreciation (depreciation) on available-for-sale securities and derivative instruments	(166.7)			(166.7)
Amount recognized as cumulative foreign currency translation during the year	(2.0)					(2.0)
Net income	251.0							251.0
Net amount recognized as net periodic benefit cost	20.5				9.7
Net shares reissued at cost under employee stock-based compensation plans									45.0
Dividends to shareholders								(60.0)
Stock-based compensation								(53.5)
Balance at end of period at Dec. 31, 2013	$ 2,594.5		$ 1,830.1	$ 259.3	$ (76.1)	$ (5.6)	$ 177.6	$ 1,349.1	$ (762.9)

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Consolidated Statements of Income (Parenthetical) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net gain from discontinued operations, income tax expense (benefit)	$ 4.1	$ (0.5)	$ (2.5)

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OTHER POSTRETIREMENT BENEFIT PLANS

12 Months Ended

Dec. 31, 2013

OTHER POSTRETIREMENT BENEFIT PLANS

9. OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the Company’s pension plans, the Company also has postretirement medical benefits that it provides to former agents and retirees and their dependents, and a limited number of full-time employees. The medical plans provide benefits including hospital and major medical, with certain limits, and have varying co-payments and deductibles, depending on the plan. Generally, employees who were actively employed on December 31, 1995 became eligible with at least 15 years of service after the age of 40. Effective January 1, 1996, the Company revised these benefits so as to establish limits on future benefit payments to beneficiaries of retired participants and to restrict eligibility to then current employees. In 2009, the Company changed the postretirement medical benefits, only as they relate to current employees who still qualified for participation in the plan under the above formula. For these participants, the plan now provides for only post age 65 benefits. The population of agents receiving postretirement benefits was frozen as of December 31, 2002, when the Company ceased its distribution of proprietary life and annuity products. This plan is unfunded.

Prior to June 2013, the Company also had postretirement death benefits providing for payment at death up to the retirees’ final annual salary. In May 2013, the Company settled and defeased the life insurance portion of its postretirement benefits by decreasing the level of death benefits and concurrently fully funding the remaining benefits through the purchase of life insurance policies for the plan beneficiaries from an unaffiliated life insurer, resulting in a net settlement gain. This plan was also unfunded.

The Company has recognized the funded status of its postretirement benefit plans in its Consolidated Balance Sheets. Since the plans are unfunded, the amount recognized in the Consolidated Balance Sheets is equal to the accumulated benefit obligation of the plans. The components of accumulated other comprehensive income or loss are reflected as either a net actuarial gain or loss or a net prior service cost.

Obligation and Funded Status

The following table reflects the funded status of these plans:

DECEMBER 31	2013			2012
(in millions)
Change in benefit obligation:
Accumulated postretirement benefit obligation, beginning of year	$	45.2		$	46.0
Service cost		0.1			0.1
Interest cost		1.2			2.1
Net actuarial gains		(1.0	)		(0.2	)
Benefits paid		(2.8	)		(2.8	)
Plan amendment		(8.4	)		—
Settlement of death benefits		(17.2	)		—
Accumulated postretirement benefit obligation, end of year		17.1			45.2
Fair value of plan assets, end of year		—			—
Funded status of plans	$	(17.1	)	$	(45.2	)

Benefit Payments

The Company estimates that benefit payments over the next 10 years will be as follows:

YEARS ENDING DECEMBER 31
(in millions)
2014	$	2.1
2015		1.9
2016		1.7
2017		1.5
2018		1.3
2019-2023		5.5

The benefit payments are based on the same assumptions used to measure the Company’s benefit obligation at the end of 2013 and reflect benefits attributable to estimated future service.

Components of Net Periodic Postretirement Expense (Benefit)

The components of net periodic postretirement expense (benefit) were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Service cost	$	0.1		$	0.1		$	0.1
Interest cost		1.2			2.1			2.4
Recognized net actuarial loss		0.2			0.2			0.4
Amortization of prior service cost		(3.7	)		(3.8	)		(5.3	)
Net settlement gain		(1.6	)		—			—
Net periodic postretirement benefit	$	(3.8	)	$	(1.4	)	$	(2.4	)

The following table reflects the balances in accumulated other comprehensive income relating to the Company’s postretirement benefit plans:

DECEMBER 31	2013			2012
(in millions)
Net actuarial loss	$	1.9		$	7.2
Net prior service cost		(3.5	)		(7.5	)
	$	(1.6	)	$	(0.3	)

The following table reflects the estimated amortization to be recognized in net periodic benefit cost in 2014:

Estimated Amortization in 2014	Expense (Benefit)
(in millions)
Net actuarial loss	$	0.1
Net prior service cost		(1.9	)
	$	(1.8	)

Assumptions

Employers are required to measure the funded status of their plans as of the date of their year-end statement of financial position. As such, the Company has utilized a measurement date of December 31, 2013 and 2012, to determine its postretirement benefit obligations, consistent with the date of its Consolidated Balance Sheets. Weighted-average discount rate assumptions used to determine postretirement benefit obligations and periodic postretirement costs are as follows:

YEARS ENDED DECEMBER 31	2013			2012
Postretirement benefit obligations discount rate		5.00	%		4.25	%
Postretirement benefit cost discount rate		4.25	%		5.00	%

Assumed health care cost trend rates are as follows:

DECEMBER 31	2013			2012
Health care cost trend rate assumed for next year		7.00	%		7.00	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)		5.00	%		5.00	%
Year the rate reaches the ultimate trend rate		2020			2017

A one-percentage point change in assumed health care cost trend rates in each year would have an immaterial effect on net periodic

benefit cost during 2013 and accumulated postretirement benefit obligation at December 31, 2013.

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Reclassifications out of Accumulated Other Comprehensive Income (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Other Comprehensive Income Loss Reclassification Adjustments [Line Items]
Net realized gains from sales and other									$ 39.5	$ 31.4	$ 35.0
Total losses and expenses									(4,464.6)	(4,562.0)	(3,910.0)
Net other-than-temporary impairment losses on investments recognized in earnings									(6.0)	(7.8)	(6.9)
Income before income taxes									329.1	28.7	21.6
Tax benefit (expense)									(83.4)	17.4	9.9
Income from continuing operations	64.9	61.3	53.1	66.4	(55.3)	40.9	9.8	50.7	245.7	46.1	31.5
Discontinued operations, net of tax									5.3	9.8	5.2
Net income	70.1	61.3	53.4	66.2	(55.0)	40.4	20.8	49.7	251.0	55.9	36.7
Reclassification out of Accumulated Other Comprehensive Income
Other Comprehensive Income Loss Reclassification Adjustments [Line Items]
Net income									50.1	35.2	36.3
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Net Unrealized Investment Gain (Loss)
Other Comprehensive Income Loss Reclassification Adjustments [Line Items]
Net realized gains from sales and other									41.3	31.8	27.8
Net other-than-temporary impairment losses on investments recognized in earnings									(6.0)	(7.8)	(6.9)
Income before income taxes									35.3	24.0	20.9
Tax benefit (expense)									5.1	6.0	9.3
Income from continuing operations									40.4	30.0	30.2
Discontinued operations, net of tax										(0.9)	(0.5)
Net income									40.4	29.1	29.7
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Defined Benefit Plans Adjustment
Other Comprehensive Income Loss Reclassification Adjustments [Line Items]
Total losses and expenses									14.9	9.3	10.2
Tax benefit (expense)									(5.2)	(3.2)	(3.6)
Net income									$ 9.7	$ 6.1	$ 6.6

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Other Postretirement Benefit Plans - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013 Y
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Minimum service period required to avail postretirement benefits (in years)	15
Employee eligibility age	40

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Summary of Estimated Amount Amortized from Accumulated Other Comprehensive Income Loss into Net Periodic Pension Cost (Detail) (Pension Benefits, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Net actuarial loss	$ 11.3
Net prior service cost	0.1
Defined Benefit Plan Future Amortization Of Total Actuarial Gain (Loss), Total	$ 11.4

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Schedule of Liability for Unpaid Losses and Loss Adjustment Expenses (Parenthetical) (Detail) (Chaucer Business, USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Chaucer Business
Liabilities For Outstanding Claims, Losses And Loss Adjustment Expenses [Line Items]
Purchase of Chaucer, reinsurance recoverable on unpaid losses	$ 669.6

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Condensed Financial Information of Registrant Parent Company Only Balance Sheets (Parenthetical) (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Condensed Financial Statements, Captions [Line Items]
Fixed maturities, amortized cost	$ 6,815.2	$ 6,529.5
Equity securities, cost	366.5	299.0
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20.0	20.0
Preferred stock, shares issued
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	300.0	300.0
Common stock, shares issued	60.5	60.5
Treasury stock, shares	16.8	16.2
The Hanover Insurance Group, Inc
Condensed Financial Statements, Captions [Line Items]
Fixed maturities, amortized cost	98.5	131.1
Equity securities, cost	$ 1.0	$ 1.0
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20.0	20.0
Preferred stock, shares issued
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	300.0	300.0
Common stock, shares issued	60.5	60.5
Treasury stock, shares	16.8	16.2

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Schedule of Effects of Reinsurance (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Effects of Reinsurance [Line Items]
Property and casualty premiums written, Direct	$ 4,599.2		$ 4,515.1		$ 3,830.9
Property and casualty premiums written, Assumed	602.5	[1]	689.1	[1]	228.3	[1]
Property and casualty premiums written, Ceded	(649.0)	[2]	(835.8)	[2]	(465.8)	[2]
Property and casualty premiums written, Net	4,552.7		4,368.4		3,593.4
Property and casualty premiums earned, Direct	4,546.3		4,352.9		3,695.2
Property and casualty premiums earned, Assumed	617.7	[1]	687.0	[1]	442.6	[1]
Property and casualty premiums earned, Ceded	(713.5)	[2]	(800.8)	[2]	(539.2)	[2]
Property and casualty premiums earned, Net	4,450.5		4,239.1		3,598.6
Percentage of assumed to net premiums earned	13.88%		16.21%		12.30%
Property and casualty losses and LAE, Direct	2,939.4		3,251.4		2,723.5
Property and casualty losses and LAE, Assumed	172.3	[1]	311.4	[1]	249.4	[1]
Property and casualty losses and LAE, Ceded	(350.6)	[2]	(588.4)	[2]	(422.1)	[2]
Net losses and LAE	$ 2,761.1		$ 2,974.4		$ 2,550.8

[1] Assumed reinsurance activity primarily relates to the Chaucer segment. In addition, 2011 assumed premiums earned and assumed losses and LAE included $96.0 million and $54.2 million, respectively, related to the 2010 OneBeacon renewal rights transaction.

[2] In 2013, we did not renew the capital provision reinsurance treaty with Flagstone Re. This reduced ceded premiums written, premiums earned and losses and LAE for the year ended December 31, 2013.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Feb. 20, 2014	Jun. 28, 2013
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	THG
Entity Registrant Name	HANOVER INSURANCE GROUP, INC.
Entity Central Index Key	0000944695
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		43,882,063
Entity Public Float			$ 2,108,212,659

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Statutory Net Income and Surplus (Detail) (U.S. Insurance Subsidiaries, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
U.S. Insurance Subsidiaries
Statutory Accounting Practices [Line Items]
Statutory Net Income (Loss)	$ 193.2	$ (47.3)	$ (5.2)
Statutory Surplus	$ 1,834.3	$ 1,523.4	$ 1,582.8

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OTHER COMPREHENSIVE INCOME

12 Months Ended

Dec. 31, 2013

OTHER COMPREHENSIVE INCOME

10. OTHER COMPREHENSIVE INCOME

The following table provides changes in other comprehensive income.

YEARS ENDED DECEMBER 31	2013									2012									2011
				Tax									Tax									Tax
				Benefit			Net of						Benefit			Net of						Benefit			Net of
(in millions)	Pre-Tax			(Expense)			Tax			Pre-Tax			(Expense)			Tax			Pre-Tax			(Expense)			Tax
Unrealized gains (losses) on available-for-sale securities and derivative instruments:
Unrealized gains (losses) arising during period (net of pre-tax, ceded unrealized losses of $1.2 million for the twelve months ended December 31, 2013)	$	(189.4	)	$	63.1		$	(126.3	)	$	186.4		$	(40.2	)	$	146.2		$	96.0		$	24.1		$	120.1
Amount of realized gains from sales and other		(41.3	)		(3.0	)		(44.3	)		(31.8	)		(3.3	)		(35.1	)		(28.8	)		(6.9	)		(35.7	)
Portion of other-than-temporary impairment losses recognized in earnings		6.0			(2.1	)		3.9			8.9			(2.7	)		6.2			8.4			(2.4	)		6.0
Net unrealized gains (losses)		(224.7	)		58.0			(166.7	)		163.5			(46.2	)		117.3			75.6			14.8			90.4
Pension and postretirement benefits:
Net actuarial gain (loss) arising in the period		15.0			(4.2	)		10.8			(24.9	)		9.0			(15.9	)		(16.0	)		4.2			(11.8	)
Amortization of net actuarial loss and prior service cost recognized as net periodic benefit cost		14.9			(5.2	)		9.7			9.3			(3.2	)		6.1			10.2			(3.6	)		6.6
Cumulative foreign currency translation adjustment:
Foreign currency translation recognized during the period		(3.1	)		1.1			(2.0	)		12.2			(4.3	)		7.9			(17.7	)		6.2			(11.5	)
Other comprehensive income (loss)	$	(197.9	)	$	49.7		$	(148.2	)	$	160.1		$	(44.7	)	$	115.4		$	52.1		$	21.6		$	73.7

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)	Amount Reclassified from
Details about Accumulated Other	Accumulated Other									Affected Line Item in the Statement
Comprehensive Income Components	Comprehensive Income									Where Net Income is Presented
Unrealized gains (losses) on available-for-sale securities and derivative instruments	$	41.3		$	31.8		$	27.8		Net realized gains from sales and other
		(6.0	)		(7.8	)		(6.9	)	Net other-than-temporary impairment losses on investments recognized in earnings
		35.3			24.0			20.9		Total before tax
		5.1			6.0			9.3		Tax benefit (expense)
		40.4			30.0			30.2
		—			(0.9	)		(0.5	)	Discontinued operations, net of tax
		40.4			29.1			29.7		Net of tax
Amortization of defined benefit pension and postretirement plans		14.9			9.3			10.2		Loss adjustment expenses and other operating expenses
		(5.2	)		(3.2	)		(3.6	)	Tax benefit (expense)
		9.7			6.1			6.6		Net of tax
Total reclassifications for the period	$	50.1		$	35.2		$	36.3		Net of tax

The amount reclassified from accumulated other comprehensive income for the pension and postretirement benefits was allocated approximately 40% to loss adjustment expenses and 60% to other operating expenses for each of the years ended December 31, 2013, 2012 and 2011.

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Component of Deferred Income Tax Assets and Liabilities (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Schedule of Deferred Income Tax Assets and Liabilities [Line Items]
Loss, LAE and unearned premium reserves, net	$ 185.0	$ 190.6
Tax credit carryforwards	123.1	126.8
Operating loss carryforwards	64.5	75.1
Employee benefit plans	38.2	56.4
Deferred Lloyd's underwriting losses		13.5
Other	74.9	60.7
Deferred tax assets, gross	485.7	523.1
Valuation Allowance	2.9	35.9	35.9	91.5
Deferred tax assets, total	482.8	523.1
Deferred acquisition costs	123.5	115.8
Software capitalization	30.1	31.4
Deferred Lloyd's underwriting income	13.8
Investments, net	8.4	43.3
Deferred foreign sourced income	5.1	8.0
Other	62.2	57.0
Deferred tax liabilities, total	243.1	255.5
Net deferred tax asset	$ 239.7	$ 267.6

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Summary of Amounts Recognized in Accumulated Other Comprehensive Income Loss (Detail) (Pension Benefits, USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Pension Benefits
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Net actuarial loss	$ 118.7	$ 147.3
Net prior service cost	0.1
Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), before Tax	$ 118.8	$ 147.3

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Consolidated Statements of Comprehensive Income (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net income	$ 251.0	$ 55.9	$ 36.7
Available-for-sale securities and derivative instruments:
Net appreciation (depreciation) during the period	(167.3)	109.4	83.6
Change in other-than-temporary impairment losses recognized in other comprehensive income	0.6	7.9	6.8
Total available-for-sale securities and derivative instruments	(166.7)	117.3	90.4
Pension and postretirement benefits:
Net actuarial gain (loss) arising in the period	10.8	(15.9)	(11.8)
Amortization recognized as net periodic benefit and postretirement cost	9.7	6.1	6.6
Total pension and postretirement benefits	20.5	(9.8)	(5.2)
Cumulative foreign currency translation adjustment:
Amount recognized as cumulative foreign currency translation during the period	(2.0)	7.9	(11.5)
Other comprehensive income (loss), Net of Tax	(148.2)	115.4	73.7
Comprehensive income	$ 102.8	$ 171.3	$ 110.4

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INVESTMENT INCOME AND GAINS AND LOSSES

12 Months Ended

Dec. 31, 2013

INVESTMENT INCOME AND GAINS AND LOSSES

4. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Fixed maturities	$	254.8		$	264.2		$	254.3
Equity securities		15.6			15.3			6.8
Other investments		8.8			7.0			4.8
Gross investment income		279.2			286.5			265.9
Less investment expenses		(10.2	)		(9.9	)		(7.7	)
Net investment income	$	269.0		$	276.6		$	258.2

The carrying value of non-income producing fixed maturities, as well as the carrying value of fixed maturity securities on non-accrual status, at December 31, 2013 and 2012 were not material. The effects of non-accruals for the years ended December 31, 2013, 2012 and 2011, compared with amounts that would have been recognized in accordance with the original terms of the fixed maturities, were reductions in net investment income of $2.3 million, $2.5 million and $2.3 million, respectively.

B. NET REALIZED INVESTMENT GAINS AND LOSSES

Net realized gains (losses) on investments were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Equity securities		26.7			15.5			0.9
Fixed maturities	$	8.6		$	9.7		$	20.4
Real estate		(0.9	)		3.3			—
Derivative instruments		—			(4.4	)		5.8
Other investments		(0.9	)		(0.5	)		1.0
Net realized investment gains	$	33.5		$	23.6		$	28.1

Included in the net realized investment gains (losses) were other-than-temporary impairments of investment securities recognized in earnings totaling $6.0 million, $7.8 million and $6.9 million in 2013, 2012 and 2011, respectively.

Other-than-temporary-impairments

For 2013, total OTTI was $7.0 million. Of this amount, $6.0 million was recognized in earnings and $1.0 million was recorded as unrealized losses in accumulated other comprehensive income. Of the $6.0 million recorded in earnings, $2.5 million related to an emerging markets exchange-traded fund, $1.6 million related to common stocks, $1.4 million was estimated credit losses on fixed maturity securities and $0.5 million related to fixed maturity securities that the Company intends to sell.

For 2012, total OTTI was $7.3 million. Of this amount, $7.8 million was recognized in earnings, including $0.5 million that was transferred from unrealized losses in accumulated other comprehensive income. Of the $7.8 million recorded in earnings, $5.4 million related to fixed maturity securities that the Company intends to sell, $1.2 million was estimated credit losses on fixed maturity securities and $1.2 million related to common stocks.

For 2011, total OTTI was $4.9 million. Of this amount, $6.9 million was recognized in earnings, including $2.0 million that was transferred from unrealized losses in accumulated other comprehensive income. Of the $6.9 million recorded in earnings, $4.6 million related to fixed maturity securities that the Company intends to sell, $1.4 million related to common stocks and $0.9 million was estimated credit losses on fixed maturity securities.

The methodology and significant inputs used to measure the amount of credit losses on fixed maturities in 2013, 2012 and 2011 were as follows:

Corporate bonds - the Company utilized a financial model that derives expected cash flows based on probability-of-default factors by credit rating and asset duration and loss-given-default factors based on security type. These factors are based on historical data provided by an independent third-party rating agency.

Asset-backed securities, including commercial and residential mortgage-backed securities - the Company utilized cash flow estimates based on bond specific facts and circumstances that include collateral characteristics, expectations of delinquency and default rates, loss severity, prepayment speeds and structural support, including subordination and guarantees.

Municipals - the Company utilized cash flow estimates based on bond specific facts and circumstances that may include the political subdivision’s taxing authority, the issuer’s ability to adjust user fees or other sources of revenue to satisfy its debt obligations and the ability to access insurance or guarantees.

The following table provides rollforwards of the cumulative amounts related to the Company’s credit loss portion of the OTTI losses on fixed maturity securities for which the non-credit portion of the loss is included in other comprehensive income.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Credit losses as of the beginning of the year	$	8.6		$	14.5		$	16.7
Credit losses for which an OTTI was not previously recognized		1.1			0.6			—
Additional credit losses on securities for which an OTTI was previously recognized		0.3			0.6			0.9
Reductions for securities sold, matured or called		(2.2	)		(6.9	)		(1.8	)
Reductions for securities reclassified as intend to sell		—			(0.2	)		(1.3	)
Credit losses as of the end of the year	$	7.8		$	8.6		$	14.5

The proceeds from sales of available-for-sale securities and the gross realized gains and gross realized losses on those sales, were as follows:

YEARS ENDED DECEMBER 31
(in millions)
	Proceeds from		Gross		Gross
2013	Sales		Gains		Losses
Fixed maturities	$	450.4	$	6.0	$	4.0
Equity securities	$	193.5	$	31.2	$	0.4
2012
Fixed maturities	$	616.3	$	12.1	$	2.0
Equity securities	$	141.3	$	17.5	$	0.7
2011
Fixed maturities	$	678.1	$	20.0	$	1.1
Equity securities	$	86.6	$	3.0	$	0.5

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INVESTMENTS

12 Months Ended

Dec. 31, 2013

INVESTMENTS

3. INVESTMENTS

A. FIXED MATURITIES AND EQUITY SECURITIES

The amortized cost and fair value of available-for-sale fixed maturities and the cost and fair value of equity securities were as follows:

DECEMBER 31, 2013
(in millions)
	Amortized		Gross		Gross				OTTI
	Cost or Cost		Unrealized Gains		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. Treasury and government agencies	$	417.5	$	3.3	$	14.2	$	406.6	$	—
Foreign government		304.5		2.1		1.6		305.0		—
Municipal		1,108.0		37.4		19.1		1,126.3		—
Corporate		3,690.2		171.5		37.5		3,824.2		8.6
Residential mortgage-backed		722.8		20.1		14.1		728.8		1.6
Commercial mortgage-backed		405.9		10.5		4.8		411.6		—
Asset-backed		166.3		2.0		0.2		168.1		—
Total fixed maturities	$	6,815.2	$	246.9	$	91.5	$	6,970.6	$	10.2
Equity securities	$	366.5	$	66.9	$	3.2	$	430.2	$	—
DECEMBER 31, 2012
(in millions)
	Amortized		Gross		Gross				OTTI
	Cost or Cost		Unrealized Gains		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. Treasury and government agencies	$	317.2	$	8.8	$	0.4	$	325.6	$	—
Foreign government		348.5		4.6		0.2		352.9		—
Municipal		1,010.2		87.2		1.1		1,096.3		—
Corporate		3,512.8		275.4		14.8		3,773.4		9.3
Residential mortgage-backed		769.0		39.4		3.2		805.2		1.7
Commercial mortgage-backed		373.3		23.2		0.3		396.2		—
Asset-backed		198.5		4.1		—		202.6		—
Total fixed maturities	$	6,529.5	$	442.7	$	20.0	$	6,952.2	$	11.0
Equity securities	$	299.0	$	21.6	$	4.8	$	315.8	$	—

OTTI unrealized losses in the tables above represent OTTI recognized in accumulated other comprehensive income. This amount excludes net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date of $16.4 million and $20.5 million as of December 31, 2013 and 2012, respectively.

The Company participates in a security lending program for the purpose of enhancing income. Securities on loan to various counterparties had a fair value of $13.6 million and $29.2 million at December 31, 2013 and 2012, respectively, and were fully collateralized by cash. The fair value of the loaned securities is monitored on a daily basis, and the collateral is maintained at a level of at least 102% of the fair value of the loaned securities. Securities lending collateral is recorded by the Company in cash and cash equivalents, with an offsetting liability included in expenses and taxes payable.

At December 31, 2013 and 2012, fixed maturities with fair values of $142.4 million and $115.7 million, respectively, and amortized cost of $135.2 million and $106.2 million, respectively, were on deposit with various state and governmental authorities.

In accordance with Lloyd’s operating guidelines, the Company deposits funds at Lloyd’s to support underwriting operations. These funds are available only to fund claim obligations. At December 31, 2013 and 2012, fixed maturities with a fair value of approximately $334 million and $497 million, respectively, and cash of $1 million and $3 million, respectively, were on deposit with Lloyd’s.

The Company enters into various agreements that may require its fixed maturities to be held as collateral by others. At December 31, 2013 and 2012, fixed maturities with a fair value of $160.9 million and $213.8 million, respectively, were held as collateral for collateralized borrowings and other arrangements. Of these amounts, $148.1 million and $200.8 million related to the FHLBB collateralized borrowing program at December 31, 2013 and 2012, respectively. See Note 6—“Debt and Credit Arrangements” for additional information related to the Company’s FHLBB program.

The amortized cost and fair value by maturity periods for fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers.

DECEMBER 31	2013
(in millions)
	Amortized		Fair
	Cost		Value
Due in one year or less	$	495.5	$	501.4
Due after one year through five years		2,234.5		2,327.9
Due after five years through ten years		2,100.2		2,139.6
Due after ten years		690.0		693.2
		5,520.2		5,662.1
Mortgage-backed and asset-backed securities		1,295.0		1,308.5
Total fixed maturities	$	6,815.2	$	6,970.6

B. DERIVATIVE INSTRUMENTS

The Company maintains an overall risk management strategy that incorporates the use of derivative instruments, as necessary, to manage significant unplanned fluctuations in earnings that may be caused by foreign currency exchange and interest rate volatility.

The Company did not use derivative instruments in 2013. In 2012, the Company realized a loss of $5.1 million on futures contracts relating to the realization for tax purposes only, of unrealized gains in its investment portfolio. Additionally, the Company utilized a foreign currency forward contract to mitigate changes in fair value caused by foreign currency fluctuation in converting GBP denominated securities into their U.S. dollar denominated equivalent. The contract was terminated in March 2012 and the Company recognized a gain of $0.7 million.

In 2011, the Company realized losses on derivative instruments of $7.1 million. In April 2011, the Company entered into a foreign currency forward contract as an economic hedge of the foreign currency exchange risk embedded in the purchase price of Chaucer, which was denominated in GBP resulting in a loss of $11.3 million, reflected in other operating expenses in the Consolidated Statements of Income. In May 2011, the Company entered into a treasury lock forward agreement to hedge the interest rate risk associated with the planned issuance of senior debt resulting in a loss of $1.9 million which was recorded in accumulated other comprehensive income and is being recognized as an expense over the term of the senior notes. This hedge qualified as a cash flow hedge. Additionally in 2011, Chaucer held foreign currency forward contracts utilized to mitigate changes in fair value caused by foreign currency fluctuation in converting the fair value of GBP and Euro denominated investment portfolios into their U.S. dollar denominated equivalent. During the year ended December 31, 2011, the Company recognized a net gain of $6.1 million, reflected in net realized investment gains in the Consolidated Statements of Income, related to these instruments, which were terminated in October 2011.

C. UNREALIZED GAINS AND LOSSES

Unrealized gains and losses on available-for-sale and other securities are summarized in the following table.

YEARS ENDED DECEMBER 31
(in millions)
				Equity
	Fixed			Securities And
2013	Maturities			Other			Total
Net appreciation, beginning of year	$	410.1		$	15.9		$	426.0
Net appreciation (depreciation) on available-for-sale securities and derivative instruments		(273.6	)		48.1			(225.5	)
Change in OTTI losses recognized in other comprehensive income		0.8			—			0.8
Benefit (provision) for deferred income taxes		74.8			(16.8	)		58.0
		(198.0	)		31.3			(166.7	)
Net appreciation, end of year	$	212.1		$	47.2		$	259.3
2012
Net appreciation, beginning of year	$	300.2		$	8.5		$	308.7
Net appreciation on available-for-sale securities and derivative instruments		140.7			10.6			151.3
Change in OTTI losses recognized in other comprehensive income		12.2			—			12.2
Provision for deferred income taxes		(43.0	)		(3.2	)		(46.2	)
		109.9			7.4			117.3
Net appreciation, end of year	$	410.1		$	15.9		$	426.0
2011
Net appreciation, beginning of year	$	210.3			8.0		$	218.3
Net appreciation (depreciation) on available-for-sale securities and derivative instruments		66.4			(1.3	)		65.1
Change in OTTI losses recognized in other comprehensive income		10.5			—			10.5
Benefit for deferred income taxes		13.0			1.8			14.8
		89.9			0.5			90.4
Net appreciation, end of year	$	300.2			8.5		$	308.7

Equity securities and other balances at December 31, 2013, 2012 and 2011 include after-tax net appreciation on other invested assets of $2.9 million, $2.1 million and $1.9 million, respectively. Fixed maturities at December 31, 2013, 2012 and 2011 include after-tax net depreciation on derivative instruments of $0.9 million, $1.0 million and $1.2 million, respectively.

D. SECURITIES IN AN UNREALIZED LOSS POSITION

The following tables provide information about the Company’s fixed maturities and equity securities that were in an unrealized loss position at December 31, 2013 and 2012:

DECEMBER 31, 2013
(in millions)
					Greater than 12
	12 months or less				months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value
Fixed maturities:
Investment grade:
U.S. Treasury and government agencies	$	12.3	$	247.9	$	1.9	$	18.8	$	14.2	$	266.7
Foreign governments		1.5		129.0		0.1		17.3		1.6		146.3
Municipal		14.8		345.3		4.3		39.9		19.1		385.2
Corporate		21.4		872.7		11.6		87.7		33.0		960.4
Residential mortgage-backed		10.3		321.1		3.4		29.5		13.7		350.6
Commercial mortgage-backed		4.2		155.4		0.6		10.2		4.8		165.6
Asset-backed		0.2		31.0		—		0.3		0.2		31.3
Total investment grade		64.7		2,102.4		21.9		203.7		86.6		2,306.1
Below investment grade:
Corporate		2.9		71.9		1.6		21.4		4.5		93.3
Residential mortgage-backed		0.1		2.0		0.3		1.5		0.4		3.5
Total below investment grade		3.0		73.9		1.9		22.9		4.9		96.8
Total fixed maturities		67.7		2,176.3		23.8		226.6		91.5		2,402.9
Equity securities		2.8		45.2		0.4		0.7		3.2		45.9
Total	$	70.5	$	2,221.5	$	24.2	$	227.3	$	94.7	$	2,448.8
DECEMBER 31, 2012
(in millions)
					Greater than 12
	12 months or less				months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value
Fixed maturities:
Investment grade:
U.S. Treasury and government agencies	$	0.2	$	89.5	$	0.2	$	8.5	$	0.4	$	98.0
Foreign governments		0.2		81.2		—		0.4		0.2		81.6
Municipal		0.5		61.9		0.6		24.0		1.1		85.9
Corporate		1.8		224.8		6.6		59.0		8.4		283.8
Residential mortgage-backed		0.5		47.3		2.0		9.4		2.5		56.7
Commercial mortgage-backed		0.2		29.9		0.1		4.9		0.3		34.8
Asset-backed		—		11.4		—		0.3		—		11.7
Total investment grade		3.4		546.0		9.5		106.5		12.9		652.5
Below investment grade:
Municipal		—		—		—		2.0		—		2.0
Corporate		1.1		26.6		5.3		50.6		6.4		77.2
Residential mortgage-backed		0.1		1.6		0.6		2.5		0.7		4.1
Total below investment grade		1.2		28.2		5.9		55.1		7.1		83.3
Total fixed maturities		4.6		574.2		15.4		161.6		20.0		735.8
Equity securities		4.8		74.4		—		—		4.8		74.4
Total	$	9.4	$	648.6	$	15.4	$	161.6	$	24.8	$	810.2

The Company views gross unrealized losses on fixed maturities and equity securities as being temporary since it is its assessment that these securities will recover in the near term, allowing the Company to realize the anticipated long-term economic value. The Company employs a systematic methodology to evaluate declines in fair value below amortized cost for fixed maturity securities or cost for equity securities. In determining OTTI of fixed maturity and equity securities, the Company evaluates several factors and circumstances, including the issuer’s overall financial condition; the issuer’s credit and financial strength ratings; the issuer’s financial performance, including earnings trends, dividend payments and asset quality; any specific events which may influence the operations of the issuer; the general outlook for market conditions in the industry or geographic region in which the issuer operates; and the length of time and the degree to which the fair value of an issuer’s securities remains below the Company’s cost. With respect to fixed maturity investments, the Company considers any factors that might raise doubt about the issuer’s ability to make contractual payments as they come due and whether the Company expects to recover the entire amortized cost basis of the security. With respect to equity securities, the Company considers its ability and intent to hold the investment for a period of time to allow for a recovery in value.

E. OTHER

The Company had no concentration of investments in a single investee that exceeded 10% of shareholders’ equity except for fixed maturities invested in Federal Home Loan Mortgage Corp., which had a fair value of $341.8 million and $415.7 million as of December 31, 2013 and 2012, respectively.

On December 21, 2012, the Company sold an office building and adjacent garage that it had developed for $75.9 million, and recognized an estimated gain of $3.3 million. In 2013, upon receipt of final construction costs, the gain was adjusted by $(0.9) million, to $2.4 million. The project was financed, in part, with $46.3 million of FHLBB advances through the Company’s membership in the FHLBB, which was repaid in January 2013.

At December 31, 2013, there were contractual investment commitments of up to $58.6 million.

The Company held overseas deposits of $149.6 million and $169.2 million at December 31, 2013 and 2012, respectively, which are investments held in overseas funds and managed exclusively by Lloyd’s. These investments are reflected in other investments in the Consolidated Balance Sheets.

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LEASE COMMITMENTS

12 Months Ended

Dec. 31, 2013

LEASE COMMITMENTS

15. LEASE COMMITMENTS

Rental expenses for operating leases amounted to $21.6 million, $22.4 million and $21.1 million in 2013, 2012 and 2011, respectively. These expenses relate primarily to building leases of the Company. At December 31, 2013, future minimum rental payments under non-cancelable operating leases, were $47.2 million, payable as follows: 2014 - $17.0 million; 2015 - $14.2 million; 2016 - $8.4 million; 2017 - $4.3 million and 2018 and thereafter - $3.3 million. It is expected that in the normal course of business, leases that expire may be renewed or replaced by leases on other property and equipment.

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STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2013

STOCK-BASED COMPENSATION PLANS

11. STOCK-BASED COMPENSATION PLANS

On May 16, 2006, the shareholders approved the adoption of The Hanover Insurance Group, Inc. 2006 Long-Term Incentive Plan (the “Plan”). Key employees, directors and certain consultants of the Company and its subsidiaries are eligible for awards pursuant to the Plan, which is administered by the Compensation Committee of the Board of Directors (the “Committee”) of the Company. Under the Plan, awards may be granted in the form of non-qualified or incentive stock options, stock appreciation rights, performance awards, restricted stock, unrestricted stock, stock units, or any other award that is convertible into or otherwise based on the Company’s stock, subject to certain limits. The Plan authorized the issuance of 3,000,000 new shares that may be used for awards. In addition, shares of stock underlying any award granted and outstanding under the Company’s Amended Long-Term Stock Incentive Plan (the “1996 Plan”) as of the adoption date of the Plan that are forfeited, cancelled, expire or terminate without the issuance of stock become available for future grants under the Plan. As of December 31, 2013, there were 1,033,786 shares available for grants under the Plan. The Company utilizes shares of stock held in the treasury account for option exercises and other awards granted under both plans.

Compensation cost for the years ended December 31, 2013, 2012, and 2011 totaled $12.4 million, $12.8 million and $12.2 million, respectively. Related tax benefits were $4.3 million, $4.5 million and $4.3 million, respectively.

STOCK OPTIONS

Under the Plan, options may be granted to eligible employees, directors or consultants at an exercise price equal to the market price of the Company’s common stock on the date of grant. Option shares may be exercised subject to the terms prescribed by the Committee at the time of grant. Options granted in 2013 generally vest over 3 years with 33 1/3% vesting in each year, whereas options granted in 2012, and 2011 generally vest over 4 years with a 50% vesting rate in the third year and a 50% vesting rate in the fourth year. Options must be exercised not later than ten years from the date of grant.

Information on the Company’s stock option plans is summarized below.

YEARS ENDED DECEMBER 31	2013					2012					2011
(in whole shares and dollars)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding, beginning of year		2,892,882		$	38.28		2,715,430		$	38.57		2,843,909		$	39.22
Granted		537,800			42.53		529,500			36.84		297,000			46.47
Exercised		(1,192,134	)		34.70		(90,624	)		25.47		(120,064	)		32.82
Forfeited or cancelled		(189,375	)		41.54		(101,574	)		41.45		(49,165	)		41.67
Expired		—			—		(159,850	)		44.05		(256,250	)		57.00
Outstanding, end of year		2,049,173		$	41.18		2,892,882		$	38.28		2,715,430		$	38.57
Exercisable, end of year		783,873		$	41.16		1,630,382		$	37.18		1,686,930		$	37.69

Cash received for options exercised for the years ended December 31, 2013, 2012 and 2011 was $24.4 million, $2.3 million and $3.9 million, respectively. The intrinsic value of options exercised for the years ended December 31, 2013, 2012 and 2011 was $19.9 million, $1.2 million and $1.8 million, respectively.

The excess tax expense realized from options exercised for the years ended December 31, 2013, 2012, and 2011 was $9.0 million, $0.4 million, and $1.5 million, respectively. The aggregate intrinsic value at December 31, 2013 for shares outstanding and shares exercisable was $38.0 million and $14.5 million, respectively. At December 31, 2013, the weighted average remaining contractual life for shares outstanding and shares exercisable was 6.4 years and 3.6 years, respectively. Additional information about employee options outstanding and exercisable at December 31, 2013 is included in the following table:

	Options Outstanding						Options Currently Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
			Contractual		Exercise				Exercise
Range of Exercise Prices	Number		Lives		Price		Number		Price
$34.19		175,250		5.15		34.19		175,250		34.19
$35.86 to $36.50		160,500		1.19		35.94		160,500		35.94
$36.81		432,500		8.06		36.81		—		—
$36.88 to $42.15		242,591		6.00		41.71		115,091		41.61
$42.49		482,300		9.16		42.49		—		—
$44.88 to $46.28		155,751		2.80		45.88		155,751		45.88
$46.47 to $47.41		243,000		7.15		46.56		22,500		47.41
$48.46 to $54.41		157,281		3.25		48.49		154,781		48.46

The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model. For all options granted through December 31, 2013, the exercise price equaled the market price on the grant date. Compensation cost related to options is based upon the grant date fair value and expensed on a straight-line basis over the service period for each separately vesting portion of the option as if the option was, in substance, multiple awards.

The weighted average grant date fair value of options granted during the years ended December 31, 2013, 2012 and 2011 was $7.69, $8.87 and $12.23, respectively.

The following significant assumptions were used to determine the fair value for options granted in the years indicated.

	2013			2012			2011
Dividend yield		2.43% to 3.11	%		3.13% to 3.26	%		2.152	%
Expected volatility		21.77% to 32.02	%		32.86% to 35.27	%		31.53% to 33.30	%
Weighted average expected volatility		27.53	%		34.05	%		32.42	%
Risk-free interest rate		0.29%-2.02	%		0.61%-1.06	%		2.00%-2.35	%
Expected term, in years		3.0 to 6.0			4.5 to 5.5			4.5 to 5.5

The expected dividend yield is based on the Company’s dividend payout rate(s), in the year noted. Expected volatility is based generally on the Company’s historical daily stock price volatility. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term of options granted represents the period of time that options are expected to be outstanding and is derived primarily using historical exercise, forfeit and cancellation behavior, along with certain other factors expected to differ from historical data.

The fair value of shares that vested during the years ended December 31, 2013 and 2012 was $2.3 million and $1.6 million, respectively. For the year ended December 31, 2011, the market price of shares that vested was lower than the value of these shares on their grant date. As of December 31, 2013, the Company had unrecognized compensation expense of $4.7 million related to unvested stock options that is expected to be recognized over a weighted average period of 1.6 years.

RESTRICTED STOCK UNITS

Stock grants may be awarded to eligible employees at a price established by the Committee (which may be zero). Under the Plan, the Company may award shares of restricted stock, restricted stock units, as well as shares of unrestricted stock. Restricted stock grants may vest based upon performance criteria, market criteria or continued employment and be in the form of shares or units. Vesting periods are established by the Committee.

The Company granted market-based restricted share units in 2013 and 2012 and performance-based restricted share units in 2011 to certain employees. Share units granted in 2013 generally vest after 3 years of continued employment and after the achievement of certain stock performance targets and share units granted in 2012 and 2011 vest after the achievement of certain performance targets at a rate of 50% after 3 years and the remaining 50% after 4 years of continued employment. The Company also granted restricted stock units to eligible employees that for awards granted in 2013 generally vest after 3 years of continued employment and for those granted in 2012 and 2011 generally vest at a rate of 50% after 3 years and the remaining 50% after 4 years of continued employment. The following table summarizes information about employee restricted stock units;

YEARS ENDED DECEMBER 31	2013					2012					2011
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Time-based restricted stock units:
Outstanding, beginning of year		750,837		$	40.15		768,529		$	40.17		838,129		$	40.93
Granted		141,073			43.31		174,841			37.01		198,957			42.08
Vested		(298,388	)		39.51		(137,194	)		36.19		(230,613	)		44.40
Forfeited		(67,542	)		41.33		(55,339	)		40.47		(37,944	)		41.23
Outstanding, end of year		525,980		$	41.20		750,837		$	40.15		768,529		$	40.17
Performance and market-based restricted stock units:
Outstanding, beginning of year		132,775		$	39.97		69,500		$	45.37		101,680		$	39.62
Granted		82,795			41.85		96,150			36.91		42,500			46.47
Vested		—			—		—			—		(27,059	)		45.21
Forfeited		(30,944	)		42.33		(32,875	)		43.28		(47,621	)		34.16
Outstanding, end of year		184,626		$	40.42		132,775		$	39.97		69,500		$	45.37

In 2013 and 2012, the Company granted market-based awards totaling 76,175 and 92,400, respectively, to certain members of senior management, which are included in the table above as performance and market-based restricted stock activity. The vesting of these stock units is based on the relative total shareholder return (“TSR”) of the Company. This metric is generally based on relative TSR for a three year period as compared to a Property and Casualty Index of peer companies. The fair value of market based awards was estimated at the date of grant using a valuation model. These units have the potential to range from 0% to 150% of the shares disclosed.

Performance-based restricted stock units are based upon the achievement of the performance metric at 100%. These units have the potential to range from 0% to 200% of the shares disclosed, which varies based on grant year and individual participation level. Increases above the 100% target level are reflected as granted in the period in which performance-based stock unit goals are achieved. Decreases below the 100% target level are reflected as forfeited. In 2013, performance-based stock units of 8,244 were included as forfeited due to completion levels less than 100% for units granted in 2011. The weighted average grant date fair value for these awards was $46.47. In 2012, performance-based stock units of 31,750 were included as forfeited due to completion levels of less than the threshold achievement level for shares granted in 2010. The weighted average grant date fair value for these awards was $42.15. In 2011, performance-based stock units of 47,375 were included as forfeited due to completion levels of less than the threshold achievement level for shares granted in 2009. The weighted average grant date fair value for these awards was $34.19.

The intrinsic value, which is equal to the fair value for restricted stock and for restricted stock units that vested during the year ended December 31, 2013 and 2012, was $1.8 million and $1.7 million, respectively. For performance-based restricted stock units that would have vested in 2013 and 2012, there was no intrinsic value since these awards were forfeited due to the aforementioned completion levels of less than threshold. The intrinsic value of restricted stock units and performance-based restricted units that vested during the year ended December 31, 2011 were $10.2 million and $1.3 million, respectively.

At December 31, 2013, the aggregate intrinsic value of restricted stock and restricted stock units was $31.4 million and the weighted average remaining contractual life was 1.1 years. The aggregate intrinsic value of performance and market-based restricted stock units was $11.0 million and the weighted average remaining contractual life was 2.0 years. As of December 31, 2013, there was $12.1 million of total unrecognized compensation cost related to unvested restricted stock units and performance and market-based restricted stock units, assuming performance and market-based restricted stock units are achieved at 100% of the performance metric. The cost is expected to be recognized over a weighted-average period of 1.8 years. Compensation cost associated with restricted stock, restricted stock units and performance and market-based restricted stock units is generally calculated based upon grant date fair value, which is determined using current market prices.

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Weighted-Average Assumptions Used To Determine Net Periodic Pension Costs (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Qualified Defined Benefit Pension Plans
Schedule of Net Periodic Benefit Costs Weighted Average Assumptions [Line Items]
Discount rate	4.25%	5.13%	5.63%
Expected return on plan assets	5.25%	6.00%	6.50%
Cash balance interest crediting rate	3.50%	4.00%	4.50%
Non-Qualified Pension Plans, Defined Benefit
Schedule of Net Periodic Benefit Costs Weighted Average Assumptions [Line Items]
Discount rate	4.13%	5.00%	5.50%
Chaucer Pension Scheme
Schedule of Net Periodic Benefit Costs Weighted Average Assumptions [Line Items]
Discount rate	4.80%	4.90%	5.50%
Rate of increase in future compensation	4.20%	4.30%	4.60%
Expected return on plan assets	6.70%	7.50%	7.40%

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INCOME TAXES

12 Months Ended

Dec. 31, 2013

INCOME TAXES

7 . INCOME TAXES

Provisions for income taxes have been calculated in accordance with the provisions of ASC 740. A summary of the components of income before income taxes and income tax expense (benefit) in the Consolidated Statements of Income are shown below:

YEARS ENDED DECEMBER 31	2013		2012			2011
(in millions)
Income (loss) before income taxes:
U.S.	$	183.5	$	(99.1	)	$	(13.3	)
Non-U.S.		145.6		127.8			34.9
	$	329.1	$	28.7		$	21.6

Income tax expense (benefit) includes the following components:

YEARS ENDED DECEMBER 31	2013		2012			2011
(in millions)
Current:
U.S.	$	8.0	$	2.3		$	(0.6	)
Non-U.S.		0.6		16.1			—
Subtotal		8.6		18.4			(0.6	)
Deferred:
U.S.		52.9		(42.7	)		(20.3	)
Non-U.S.		21.9		6.9			11.0
Subtotal		74.8		(35.8	)		(9.3	)
Total income tax expense (benefit)	$	83.4	$	(17.4	)	$	(9.9	)

The income tax expense attributable to the consolidated results of continuing operations is different from the amount determined by multiplying income from continuing operations before income taxes by the U.S. statutory federal income tax rate of 35%. The sources of the difference and the tax effects of each were as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Expected income tax expense	$	115.2		$	10.0		$	7.5
Tax difference related to investment disposals and maturities		(17.5	)		(14.3	)		(9.7	)
Effect of foreign operations		(10.8	)		(3.5	)		(1.5	)
Dividend received deduction		(2.5	)		(2.8	)		(1.1	)
Tax-exempt interest		(1.7	)		(1.5	)		(2.0	)
Nondeductible expenses		1.1			2.8			4.7
Change in foreign tax rate		(0.7	)		(0.4	)		—
Change in valuation allowance		—			(7.7	)		(7.5	)
Other, net		0.3			—			(0.3	)
Income tax expense (benefit)	$	83.4		$	(17.4	)	$	(9.9	)
Effective tax rate		25.3	%		(60.6	)%		(45.8	)%

The following are the components of the Company’s deferred tax assets and liabilities (excluding those associated with its discontinued operations).

DECEMBER 31	2013		2012
(in millions)
Deferred tax assets
Loss, LAE and unearned premium reserves, net	$	185.0	$	190.6
Tax credit carryforwards		123.1		126.8
Operating loss carryforwards		64.5		75.1
Employee benefit plans		38.2		56.4
Deferred Lloyd’s underwriting losses		—		13.5
Other		74.9		60.7
		485.7		523.1
Less: Valuation Allowance		2.9		—
		482.8		523.1
Deferred tax liabilities
Deferred acquisition costs		123.5		115.8
Software capitalization		30.1		31.4
Deferred Lloyd’s underwriting income		13.8		—
Investments, net		8.4		43.3
Deferred foreign sourced income		5.1		8.0
Other		62.2		57.0
		243.1		255.5
Net deferred tax asset	$	239.7	$	267.6

Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.

Included in the Company’s deferred tax asset as of December 31, 2013 are assets of $42.1 million related to U.S. net operating loss carryforwards and a deferred tax asset of $22.4 million related to foreign net operating carryforwards. The pre-tax U.S. operating loss carryforwards of $120.3 million will expire beginning in 2031. The pre-tax foreign operating loss carryforwards of $66.2 million were generated in the U.K. and have no expiration date. It is the Company’s opinion that there will be sufficient future U.S. and U.K. taxable income to utilize these loss carryforwards. The Company’s estimate of the gross amount and likely realization of loss carryforwards may change over time.

Included in the Company’s deferred tax asset as of December 31, 2013 are assets of $110.3 million related to alternative minimum tax credit carryforwards and $12.8 million related to foreign tax credit carryforwards. The alternative minimum tax credit carryforwards have no expiration date and the foreign tax credit carryforwards will expire beginning in 2022. The Company may utilize the credits to offset regular federal income taxes due from future income, and although the Company believes that these assets are fully recoverable, there can be no certainty that future events will not affect their recoverability. The Company believes, based on objective evidence, it is more likely than not that the remaining deferred tax assets will be realized.

During 2013, the Company recorded a valuation allowance of $2.9 million related to its deferred tax asset on the unrealized depreciation in its investment portfolio. It is the Company’s opinion that it is more likely than not that this asset will not be realized and accordingly, the Company recorded this valuation allowance as an adjustment to other comprehensive income.

In prior years, the Company completed several transactions which resulted in the realization, for tax purposes only, of unrealized gains in its investment portfolio. The Company realized $69.6 million and $98.4 million, respectively, in 2012 and 2011 as a result of such transactions. These transactions enabled the Company to realize capital loss carryforwards to offset these gains, and resulted in the release of the valuation allowance the Company held against the deferred tax asset related to these capital loss carryforwards. In 2012, the Company released $24.4 million of its valuation allowance which was recorded as a benefit in accumulated other comprehensive income. In 2011, the Company released $29.0 million of its valuation allowance which $0.2 million was reflected in income from continuing operations and the remaining $28.8 million was reflected as a benefit in accumulated other comprehensive income. During 2013, 2012 and 2011, the Company recognized in income from continuing operations, related to non-operating income, $17.5 million, $14.3 million and $9.7 million, respectively. The remaining amount of $107.7 million in accumulated other comprehensive income will be released into income from continuing operations in future years, as the investment securities subject to these transactions are sold or mature. During 2012, the Company released $35.9 million of its valuation allowance related to its deferred tax asset held at the beginning of the year. The release of this valuation allowance resulted from the aforementioned transaction which utilized capital loss carryforwards, unrealized appreciation in its investment portfolio, and net realized capital gains in its Consolidated Statements of Income. Accordingly, the Company recorded decreases in its valuation allowance of $25.3 million as an adjustment to accumulated other comprehensive income, $7.7 million as an adjustment to income tax expense from continuing operations, and $2.9 million in discontinued operations.

During 2011, the Company reduced its valuation allowance, for both continuing and discontinued operations, related to its deferred tax asset by $55.6 million, from $91.5 million to $35.9 million. There were four principal components to this reduction. First, the Company decreased its valuation allowance by $29.0 million as a result of the aforementioned transaction, which utilized the capital loss carryforwards. Second, the Company decreased its valuation allowance by $21.9 million on certain unrealized losses as a result of unrealized appreciation in its investment portfolio. This decrease was reflected as an increase in accumulated other comprehensive income. Third, as a result of $28.1 million in net realized gains during 2011, the Company decreased its valuation allowance by $7.5 million as an increase to income from continuing operations, since these gains utilized the Company’s capital loss carryforwards. Fourth, in the 2010 U.S. federal income tax return the Company was able to utilize an additional $7.6 million of capital loss carryforward that expired in 2010. As such, the valuation allowance was increased by $2.6 million with an equal and offsetting increase to the related deferred tax asset. The remaining increase of $0.2 million was attributable to other items reflected as an expense from discontinued operations.

Although most of the Company’s non – U.S. income is subject to U.S. federal income tax, certain of its non-U.S. income is not subject to U.S. federal income tax until repatriated. Foreign taxes on this non – U.S. income are accrued at the local foreign tax rate, as opposed to the higher U.S. statutory tax rate, since these earnings currently are expected to be indefinitely reinvested overseas. This assumption could change, as a result of a sale of the subsidiaries, the receipt of dividends from the subsidiaries, a change in management’s intentions, or as a result of various other events. The Company has not made a provision for U.S. taxes on $20.3 million, $10.0 million and $4.2 million of non-U.S. income for 2013, 2012 and 2011, respectively. However, in the future, if such earnings were distributed to the Company, taxes of $13.0 million would be payable on such undistributed earnings and would be reflected in the tax provision for the year in which these earnings are no longer intended to be indefinitely reinvested overseas, assuming all foreign tax credits are realized.

The table below provides a reconciliation of the beginning and ending liability for uncertain tax position as follows:

YEARS ENDED DECEMBER 31	2013			2012		2011
(in millions)
Liability at beginning and end of year, net	$	0.8		$	0.8	$	0.8
Additions for tax positions of prior years		5.4			—		—
Deferred deductions		(4.8	)		—		—
Liability at end of year, net	$	1.4		$	0.8	$	0.8

The IRS audits of the years 2007 and 2008 commenced in April 2010. In 2011, the Company received a Revenue Agent Report for the 2007 and 2008 IRS audit. The Company agreed to all proposed adjustments other than the disallowance of deduction for certain loss reserves, for which it filed a formal protest. In December 2013, the Company reached a tentative settlement on the disallowance of deduction for certain loss reserves and as a result a liability for uncertain tax positions was established for $4.8 million, with an offsetting deferred tax asset. The Company expects to reach a final settlement of this issue during 2014.

The ultimate deductibility of the aforementioned $4.8 million payable is highly certain, but there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, a change in the timing of deductions would not impact the annual effective tax rate. There are no tax positions at December 31, 2012 and 2011 for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.

The Company recognizes interest and penalties related to unrecognized tax benefits in federal income tax expense. The Company had accrued interest of $1.2 million and $0.4 million as of December 31, 2013 and 2012, respectively. The Company has not recognized any penalties associated with unrecognized tax benefits.

The Company or its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, as well as foreign jurisdictions. With few exceptions, the Company and its subsidiaries are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2007. The IRS audits of the years 2009 and 2010 commenced in June 2012. The Company and its subsidiaries are still subject to U.S. state income tax examinations by tax authorities for years after 2006 and foreign examinations for years after 2010.

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Amortized Cost and Fair Value by Maturity Periods for Fixed Maturities (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Due in one year or less, Amortized Cost	$ 495.5
Due after one year through five years, Amortized Cost	2,234.5
Due after five years through ten years, Amortized Cost	2,100.2
Due after ten years, Amortized Cost	690.0
Gross fixed maturities, Amortized Cost	5,520.2
Mortgage-backed and asset-backed securities, Amortized Cost	1,295.0
Total fixed maturities, Amortized Cost	6,815.2	6,529.5
Due in one year or less, Fair Value	501.4
Due after one year through five years, Fair Value	2,327.9
Due after five years through ten years, Fair Value	2,139.6
Due after ten years, Fair Value	693.2
Gross fixed maturities, Fair Value	5,662.1
Mortgage-backed and asset-backed securities, Fair Value	1,308.5
Fixed maturities, Fair Value	$ 6,970.6	$ 6,952.2

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Information Regarding Basic and Diluted Earnings Per Share (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Basic shares used in the calculation of earnings per share	44.1	44.7	45.2
Diluted shares used in the calculation of earnings per share	44.9	45.3	45.8
Per share effect of dilutive securities on income from continuing operations	$ (0.11)	$ (0.01)	$ (0.01)
Per share effect of dilutive securities on net income	$ (0.11)	$ (0.02)	$ (0.01)
Employee Stock Option
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive effect of securities	0.3	0.2	0.2
Non-Vested Stock Grants
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive effect of securities	0.5	0.4	0.4

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FAIR VALUE

12 Months Ended

Dec. 31, 2013

FAIR VALUE

5. FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, i.e., exit price, in an orderly transaction between market participants. The Company emphasizes the use of observable market data whenever available in determining fair value. Fair values presented for certain financial instruments are estimates which, in many cases, may differ significantly from the amounts that could be realized upon immediate liquidation. A hierarchy of the three broad levels of fair value are as follows, with the highest priority given to Level 1 as these are the most observable, and the lowest priority given to Level 3:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data, including model-derived valuations.

Level 3 – Unobservable inputs that are supported by little or no market activity.

When more than one level of input is used to determine fair value, the financial instrument is classified as Level 2 or 3 according to the lowest level input that has a significant impact on the fair value measurement.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments and have not changed since last year.

CASH AND CASH EQUIVALENTS

The carrying amount approximates fair value. Cash equivalents primarily consist of money market instruments, which are generally valued using unadjusted quoted prices in active markets that are accessible for identical assets and are classified as Level 1.

FIXED MATURITIES

Level 1 securities generally include U.S. Treasury issues and other securities that are highly liquid and for which quoted market prices are available. Level 2 securities are valued using pricing for similar securities and pricing models that incorporate observable inputs including, but not limited to yield curves and issuer spreads. Level 3 securities include issues for which little observable data can be obtained, primarily due to the illiquid nature of the securities, and for which significant inputs used to determine fair value are based on the Company’s own assumptions. Non-binding broker quotes are also included in Level 3.

The Company utilizes a third party pricing service for the valuation of the majority of its fixed maturity securities and receives one quote per security. When quoted market prices in an active market are available, they are provided by the pricing service as the fair value and such values are classified as Level 1. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value for those securities using pricing applications based on a market approach. Inputs into the fair value pricing common to all asset classes include: benchmark U.S. Treasury security yield curves; reported trades of identical or similar fixed maturity securities; broker/dealer quotes of identical or similar fixed maturity securities and structural characteristics such as maturity date, coupon, mandatory principal payment dates, frequency of interest and principal payments, and optional redemption features. Inputs into the fair value applications that are unique by asset class include, but are not limited to:

• U.S. government agencies – determination of direct versus indirect government support and whether any contingencies exist with respect to the timely payment of principal and interest.

• Foreign government – estimates of appropriate market spread versus underlying related sovereign treasury curve(s) dependent on liquidity and direct or contingent support.

• Municipals – overall credit quality, including assessments of the level and variability of: sources of payment such as income, sales or property taxes, levies or user fees; credit support such as insurance; state or local economic and political base; natural resource availability; and susceptibility to natural or man-made catastrophic events such as hurricanes, earthquakes or acts of terrorism.

• Corporate fixed maturities – overall credit quality, including assessments of the level and variability of: economic sensitivity; liquidity; corporate financial policies; management quality; regulatory environment; competitive position; ownership; restrictive covenants; and security or collateral.

• Residential mortgage-backed securities – estimates of prepayment speeds based upon: historical prepayment rate trends; underlying collateral interest rates; geographic concentration; vintage year; borrower credit quality characteristics; interest rate and yield curve forecasts; government or monetary authority support programs; tax policies; delinquency/default trends; and, in the case of non-agency collateralized mortgage obligations, severity of loss upon default and length of time to recover proceeds following default.

• Commercial mortgage-backed securities – overall credit quality, including assessments of the value and supply/demand characteristics of: collateral type such as office, retail, residential, lodging, or other; geographic concentration by region, state, metropolitan statistical area and locale; vintage year; historical collateral performance including defeasance, delinquency, default and special servicer trends; and capital structure support features.

• Asset-backed securities – overall credit quality, including assessments of the underlying collateral type such as credit card receivables, auto loan receivables and equipment lease receivables; geographic diversification; vintage year; historical collateral performance including delinquency, default and casualty trends; economic conditions influencing use rates and resale values; and contract structural support features.

Generally, all prices provided by the pricing service, except actively traded securities with quoted market prices, are reported as Level 2.

The Company holds privately placed fixed maturity securities and certain other fixed maturity securities that do not have an active market and for which the pricing service cannot provide fair values. The Company determines fair values for these securities using either matrix pricing utilizing the market approach or broker quotes. The Company will use observable market data as inputs into the fair value applications, as discussed in the determination of Level 2 fair values, to the extent it is available, but is also required to use a certain amount of unobservable judgment due to the illiquid nature of the securities involved. Unobservable judgment reflected in the Company’s matrix model accounts for estimates of additional spread required by market participants for factors such as issue size, structural complexity, high bond coupon, long maturity term or other unique features. These matrix-priced securities are reported as Level 2 or Level 3, depending on the significance of the impact of unobservable judgment on the security’s value. Additionally, the Company may obtain non-binding broker quotes which are reported as Level 3.

EQUITY SECURITIES

Level 1 consists of publicly traded securities, including exchange traded funds, valued at quoted market prices. Level 2 includes securities that are valued using pricing for similar securities and pricing models that incorporate observable inputs. Level 2 also includes fair values obtained from net asset values provided by mutual fund investment managers, upon which subscriptions and redemptions can be executed. Level 3 consists of common or preferred stock of private companies for which observable inputs are not available. Non-binding broker quotes are also included in Level 3.

The Company utilizes a third party pricing service for the valuation of the majority of its equity securities and receives one quote for each equity security. When quoted market prices in an active market are available, they are provided by the pricing service as the fair value and such values are classified as Level 1. Generally, all prices provided by the pricing service, except quoted market prices, are reported as Level 2. The Company holds certain equity securities that have been issued by privately-held entities that do not have an active market and for which the pricing service cannot provide fair values. Generally, the Company estimates fair value for these securities based on the issuer’s book value and market multiples. These securities are reported as Level 3 as market multiples represent significant unobservable inputs.

OTHER INVESTMENTS

Other investments consist primarily of overseas trust funds, for which fair values are provided by the investment manager based on quoted prices for similar instruments in active markets and are reported as Level 2. Also included in other investments are cost basis limited partnerships and mortgage loans. Cost basis limited partnerships’ fair values are based on the net asset value provided by the general partner and recent financial information and are reported as Level 3. Mortgage loans’ fair values are estimated by discounting the future contractual cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and are reported as Level 2.

DEBT

The fair value of debt is estimated based on quoted market prices. If a quoted market price is not available, fair values are estimated using discounted cash flows that are based on current interest rates and yield curves for debt issuances with maturities and credit risks consistent with the debt being valued. Debt is reported as Level 2.

The estimated fair value of the financial instruments were as follows:

DECEMBER 31	2013				2012
(in millions)	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial Assets
Cash and cash equivalents	$	486.2	$	486.2	$	564.8	$	564.8
Fixed maturities		6,970.6		6,970.6		6,952.2		6,952.2
Equity securities		430.2		430.2		315.8		315.8
Other investments		173.1		173.7		188.9		189.4
Total financial assets	$	8,060.1	$	8,060.7	$	8,021.7	$	8,022.2
Financial Liabilities
Debt	$	903.9	$	961.7	$	849.4	$	995.2

The Company has processes designed to ensure that the values received from its third party pricing service are accurately recorded, that the data inputs and valuation techniques utilized are appropriate and consistently applied and that the assumptions are reasonable and consistent with the objective of determining fair value. The Company performs a review of the fair value hierarchy classifications and of prices received from its pricing service on a quarterly basis. The Company reviews the pricing services’ policies describing its methodology, processes, practices and inputs, including various financial models used to value securities. Also, the Company reviews the portfolio pricing, including securities with changes in prices that exceed a defined threshold are verified to independent sources, if available. If upon review, the Company is not satisfied with the validity of a given price, a pricing challenge would be submitted to the pricing service along with supporting documentation for its review. The Company does not adjust quotes or prices obtained from the pricing service unless the pricing service agrees with the Company’s challenge. During 2013 and 2012, the Company did not adjust any prices received from brokers or its pricing service.

Changes in the observability of valuation inputs may result in a reclassification of certain financial assets or liabilities within the fair value hierarchy. Reclassifications between levels of the fair value hierarchy are reported as of the beginning of the period in which the reclassification occurs. As previously discussed, the Company utilizes a third party pricing service for the valuation of the majority of its fixed maturities and equity securities. The pricing service has indicated that it will only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If the pricing service discontinues pricing an investment, the Company will use observable market data to the extent it is available, but may also be required to make assumptions for market based inputs that are unavailable due to market conditions.

The following tables provide, for each hierarchy level, the Company’s assets that were measured at fair value on a recurring basis.

	DECEMBER 31, 2013
(in millions)	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	406.6	$	167.2	$	239.4	$	—
Foreign government		305.0		45.6		259.4		—
Municipal		1,126.3		—		1,100.7		25.6
Corporate		3,824.2		—		3,811.2		13.0
Residential mortgage-backed, U.S. agency backed		573.2		—		573.2		—
Residential mortgage-backed, non-agency		155.6		—		155.1		0.5
Commercial mortgage-backed		411.6		—		388.7		22.9
Asset-backed		168.1		—		168.1		—
Total fixed maturities		6,970.6		212.8		6,695.8		62.0
Equity securities		420.9		382.3		—		38.6
Other investments		153.2		—		149.6		3.6
Total investment assets at fair value	$	7,544.7	$	595.1	$	6,845.4	$	104.2
	DECEMBER 31, 2012
	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	325.6	$	144.2	$	181.4	$	—
Foreign government		352.9		60.9		292.0		—
Municipal		1,096.3		—		1,076.9		19.4
Corporate		3,773.4		—		3,747.0		26.4
Residential mortgage-backed, U.S. agency backed		610.8		—		610.8		—
Residential mortgage-backed, non-agency		194.4		—		193.7		0.7
Commercial mortgage-backed		396.2		—		369.5		26.7
Asset-backed		202.6		—		201.1		1.5
Total fixed maturities		6,952.2		205.1		6,672.4		74.7
Equity securities		306.1		226.9		54.8		24.4
Other investments		172.8		—		169.2		3.6
Total investment assets at fair value	$	7,431.1	$	432.0	$	6,896.4	$	102.7

The following tables provide, for each hierarchy level, the Company’s estimated fair values of financial instruments that were not carried at fair value.

	DECEMBER 31, 2013
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	486.2	$	486.2	$	—	$	—
Equity securities		9.3		—		9.3		—
Other investments		20.5		—		2.7		17.8
Liabilities:
Debt	$	961.7	$	—	$	961.7	$	—
	DECEMBER 31, 2012
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	564.8	$	564.8	$	—	$	—
Equity securities		9.7		—		9.7		—
Other investments		16.6		—		4.8		11.8
Liabilities:
Debt	$	995.2	$	—	$	995.2	$	—

The tables below provide a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

YEAR ENDED DECEMBER 31, 2013	Fixed Maturities
(in millions)	Municipal			Corporate			Residential mortgage- backed, non- agency			Commercial mortgage- backed			Asset-backed			Total			Equity and Other			Total Assets
Balance at beginning of year	$	19.4		$	26.4		$	0.7		$	26.7		$	1.5		$	74.7		$	28.0		$	102.7
Transfers into Level 3		9.7			0.2			—			—			—			9.9			—			9.9
Transfers out of Level 3		—			(2.2	)		—			—			(1.5	)		(3.7	)		(0.9	)		(4.6	)
Total gains (losses):
Included in earnings		—			1.5			—			—			—			1.5			—			1.5
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities		(0.8	)		(1.6	)		—			(1.3	)		—			(3.7	)		15.1			11.4
Sales		(2.7	)		(11.3	)		(0.2	)		(2.5	)		—			(16.7	)		—			(16.7	)
Balance at end of year	$	25.6		$	13.0		$	0.5		$	22.9		$	—		$	62.0		$	42.2		$	104.2
YEAR ENDED DECEMBER 31, 2012	Fixed Maturities
(in millions)	Municipal			Corporate			Residential mortgage- backed, non- agency			Commercial mortgage- backed			Asset-backed			Total			Equity and Other			Total Assets
Balance at beginning of year	$	13.6		$	23.8		$	5.2		$	23.7		$	9.2		$	75.5		$	27.0		$	102.5
Transfers into Level 3		2.6			4.3			—			—			—			6.9			0.1			7.0
Transfers out of Level 3		—			(2.3	)		—			—			(8.7	)		(11.0	)		—			(11.0	)
Total gains (losses):
Included in earnings		—			0.4			—			—			—			0.4			(0.2	)		0.2
Included in other comprehensive income-net appreciation (depreciation) on available-for-sale securities		1.1			0.7			0.1			(0.4	)		—			1.5			1.8			3.3
Purchases and sales:
Purchases		3.0			1.5			0.1			5.2			1.5			11.3			—			11.3
Sales		(0.9	)		(2.0	)		(4.7	)		(1.8	)		(0.5	)		(9.9	)		(0.7	)		(10.6	)
Balance at end of year	$	19.4		$	26.4		$	0.7		$	26.7		$	1.5		$	74.7		$	28.0		$	102.7

During the years ended December 31, 2013 and 2012, the Company transferred fixed maturities between Level 2 and Level 3 primarily as a result of assessing the significance of unobservable inputs on the fair value measurement. There were no transfers between Level 1 and Level 2 during 2013 or 2012.

The following table summarizes gains and losses due to changes in fair value that are recorded in net income for Level 3 assets.

YEARS ENDED DECEMBER 31	2013		2012
	Net realized investment
(in millions)	gains (losses)
Level 3 Assets:
Fixed maturities:
Corporate	$	1.5	$	0.4
Equity securities		—		(0.2	)
Total assets	$	1.5	$	0.2

There were no Level 3 liabilities held by the Company for years ended December 31, 2013 and 2012.

The following table provides quantitative information about the significant unobservable inputs used by the Company in the fair value measurements of Level 3 assets. Where discounted cash flows were used in the valuation of fixed maturities, the internally-developed discount rate was adjusted by the significant unobservable inputs shown in the table. Valuations for securities based on broker quotes for which there was a lack of transparency as to inputs used to develop the valuations have been excluded.

			December 31, 2013			December 31, 2012
	Valuation	Significant	Fair		Range	Fair		Range
(in millions)	Technique	Unobservable Inputs	Value		(Wtd Average)	Value		(Wtd Average)
Fixed maturities:
Municipal	Discounted	Discount for:	$	25.6		$	19.4
	cash flow	Small issue size			1.0-4.0%(2.3%)			1.0-4.0%(3.1%)
		Above-market coupon			0.3-1.0%(0.5%)			0.3-1.0%(0.5%)
		Long maturity			N/A			0.5%(0.5%)
Corporate	Discounted	Discount for:		12.8			26.4
	cash flow	Above-market coupon			0.3-0.8%(0.6%)			0.3-1.0%(0.7%)
		Small issue size			0.3-1.0%(0.5%)			0.3-3.0%(0.5%)
		Credit stress			N/A			1.0-3.0%(1.1%)
		Long maturity			N/A			0.5%(0.5%)
Residential mortgage-backed, non-agency	Discounted	Discount for:		0.5			0.7
	cash flow	Small issue size			0.5%(0.5%)			0.5%(0.5%)
Commercial mortgage-backed	Discounted	Discount for:		22.9			26.7
	cash flow	Above-market coupon			0.5-0.8%(0.6%)			0.3-0.8%(0.4%)
		Credit stress			0.5%(0.5%)			1.0%(1.0%)
		Small issue size			0.5%(0.5%)			0.5%(0.5%)
		Lease structure			0.3%(0.3%)			0.3%(0.3%)
		Long maturity			N/A			0.5-0.8%(0.7%)
Asset backed	Discounted	Discount for:		—			1.5
	cash flow	Small issue size			N/A			0.7-2.0%(1.6%)
Equity securities	Market	Net tangible asset		38.5			24.3
	comparables	market multiples			1.3X (1.3X)			0.9X (0.9X)
Other	Discounted	Discount rate		3.6	18.0%(18.0%)		3.6	18.0%(18.0%)
	cash flow

Significant increases (decreases) in any of the above inputs in isolation would result in a significantly lower (higher) fair value measurement. There were no interrelationships between these inputs which might magnify or mitigate the effect of changes in unobservable inputs on the fair value measurement.

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DEBT AND CREDIT ARRANGEMENTS

12 Months Ended

Dec. 31, 2013

DEBT AND CREDIT ARRANGEMENTS

6. DEBT AND CREDIT ARRANGEMENTS

Debt consists of the following:

DECEMBER 31	2013			2012
(in millions)
Senior debentures maturing June 15, 2021	$	300.0		$	300.0
Senior debentures maturing March 1, 2020		165.1			200.0
Senior debentures maturing October 15, 2025		81.2			120.9
Subordinated debentures maturing March 30, 2053		175.0			—
Subordinated debentures maturing February 3, 2027		59.7			59.7
FHLBB borrowings (secured)		125.0			171.3
Total principal debt	$	906.0		$	851.9
Unamortized debt discount		(2.1	)		(2.5	)
Total	$	903.9		$	849.4

On March 20, 2013, the Company issued $175.0 million aggregate principal amount of 6.35% subordinated unsecured debentures due March 30, 2053. These debentures pay interest quarterly. The Company may redeem these debentures in whole at any time, or in part from time to time, on or after March 30, 2018, at a redemption price equal to their principal amount plus accrued and unpaid interest.

On June 17, 2011, the Company issued $300.0 million aggregate principal amount of 6.375% senior unsecured debentures due June 15, 2021. Additionally, on February 23, 2010, the Company issued $200.0 million aggregate principal amount of 7.50% senior unsecured debentures due March 1, 2020. The Company also issued 7.625% senior unsecured debentures with a par value of $200.0 million on October 16, 1995. As of December 31, 2013 and 2012, the remaining 7.625% senior debentures have a par value of $81.2 million and $120.9 million, respectively, and mature on October 15, 2025. All of the Company’s senior debentures are subject to certain restrictive covenants, including limitations on the issuance or disposition of stock of restricted subsidiaries and limitations on liens. These debentures pay interest semi-annually. In addition, the Company’s subordinated debentures maturing February 3, 2027 have a par value of $59.7 million as of December 31, 2013 and 2012 and pay cumulative dividends semi-annually at 8.207%.

In 2013, the Company repurchased senior debentures maturing October 15, 2025, with a net carrying value of $39.2 million at a cost of $50.5 million, resulting in a loss of $11.3 million. Also in 2013, the Company repurchased senior debentures maturing March 1, 2020, with a net carrying value of $34.6 million at a cost of $43.2 million, resulting in a loss of $8.6 million.

In 2009, Hanover Insurance received a $125.0 million FHLBB advance through its membership in the FHLBB. This collateralized advance bears interest at a fixed rate of 5.50% per annum over a twenty-year term. In July 2010, Hanover Insurance committed to an additional $46.3 million of FHLBB advances. These advances were drawn in several increments from July 2010 to January 2012 and carried fixed interest rates with a weighted average of 3.88%. In January 2013, Hanover Insurance repaid the $46.3 million of FHLBB advances plus prepayment fees of $7.8 million for a total payment of $54.1 million. These advances would have matured on July 30, 2020.

As collateral to FHLBB, Hanover Insurance pledged government agency securities with a fair value of $148.1 million and $200.8 million, for the aggregate borrowings of $125.0 million and $171.3 million as of December 31, 2013 and December 31, 2012, respectively. The amount of required collateral decreased in conjunction with the repayment of the $46.3 million of FHLBB advances. The fair value of the collateral pledged must be maintained at certain specified levels of the borrowed amount, which can vary depending on the type of assets pledged. If the fair value of this collateral declines below these specified levels, Hanover Insurance would be required to pledge additional collateral or repay outstanding borrowings. Hanover Insurance is permitted to voluntarily repay the outstanding borrowings at any time, subject to a repayment fee. As a requirement of membership in the FHLBB, Hanover Insurance maintains a certain level of investment in FHLBB stock. Total holdings of FHLBB stock were $9.3 million and $9.7 million at December 31, 2013 and 2012, respectively.

On July 1, 2011, the Company acquired all of the outstanding shares of Chaucer. As part of this acquisition, €12.0 million aggregate principal amount of floating rate subordinated unsecured notes due November 16, 2034 were assumed. These notes paid interest semi-annually based on the European Inter bank offer rate (Euribor) plus 3.75%. Additionally, the Company also assumed $50.0 million aggregate principal amount of floating rate subordinated unsecured notes due September 21, 2036. These notes paid interest quarterly based on the three-month LIBOR plus 3.1%. During 2012, the Company called these subordinated unsecured notes at par value. These notes had a carrying value of $60.3 million resulting in a net loss on the repurchases of $5.1 million.

At December 31, 2013, the Company had a $200.0 million credit agreement which expires in November 2018. The Company had no borrowings under this agreement. Additionally, the Company had a Standby Letter of Credit Facility not to exceed £130.0 million (or $215.8 million based on the foreign currency exchange rate of 1.66 at December 31, 2013). This Letter of Credit Facility provides regulatory capital supporting Chaucer’s underwriting activities for the 2014 and 2015 years of account and each prior open year of account. Simultaneous with this agreement, THG entered into a Guaranty Agreement with Lloyds Bank plc, as Facility Agent and Security Agent, pursuant to which, THG unconditionally guarantees the obligations of Chaucer under the Letter of Credit Facility.

Interest expense was $65.3 million, $61.9 million, and $55.0 million in 2013, 2012 and 2011, respectively. At December 31, 2013, the Company was in compliance with the covenants associated with all of its debt indentures and credit arrangements.

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Supplemental Information Concerning Property and Casualty Insurance Operations (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Supplemental Information for Property, Casualty Insurance Underwriters [Line Items]
Deferred acquisition costs	$ 506.0		$ 489.5		$ 458.6
Reserves for unpaid claims and claim adjustment expenses	6,231.5	[1]	6,197.0	[1]	5,760.3	[1]
Discount, if any, deducted from previous column		[2]		[2]		[2]
Unearned premiums	2,515.8	[1]	2,474.8	[1]	2,292.1	[1]
Earned premiums	4,450.5		4,239.1		3,598.6
Net investment income	269.0		276.6		258.2
Claims and claim adjustment expenses incurred Current year	2,837.4		2,990.2		2,654.1
Claims and claim adjustment expenses incurred Prior years	(76.3)		(15.8)		(103.3)
Amortization of deferred acquisition costs	971.0		938.1		778.9
Paid claims and claim adjustment expenses	2,683.3		2,714.1		2,492.7
Premiums written	$ 4,552.7		$ 4,368.4		$ 3,593.4

[1] Reserves for unpaid claims and claim adjustment expenses are shown gross of $2,030.4 million, $2,074.3 million and $1,931.8 million of reinsurance recoverable on unpaid losses in 2013, 2012 and 2011, respectively. Unearned premiums are shown gross of prepaid premiums of $219.0 million, $275.4 million and $234.9 million in 2013, 2012 and 2011, respectively. Reserves for unpaid claims and claims adjustment expense also include policyholder dividends.

[2] The Company does not use discounting techniques.

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PENSION PLANS

12 Months Ended

Dec. 31, 2013

PENSION PLANS

8. PENSION PLANS

DEFINED BENEFIT PLANS

The Company recognizes the funded status of its defined benefit plans in its Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation of the Company’s defined benefit plans. The Company is required to aggregate separately all overfunded plans from all underfunded plans.

U.S. Defined Benefit Plans

Prior to 2005, THG provided retirement benefits to substantially all of its employees under defined benefit pension plans. These plans were based on a defined benefit cash balance formula, whereby the Company annually provided an allocation to each covered employee based on a percentage of that employee’s eligible salary, similar to a defined contribution plan arrangement. In addition to the cash balance allocation, certain transition group employees who had met specified age and service requirements as of December 31, 1994 were eligible for a grandfathered benefit based primarily on the employees’ years of service and compensation during their highest five consecutive plan years of employment. The Company’s policy for the plans is to fund at least the minimum amount required by the Employee Retirement Income Security Act of 1974 (“ERISA”).

As of January 1, 2005, the defined benefit pension plans were frozen and since that date, no further cash balance allocations have been credited to participants. Participants’ accounts are credited with interest daily, based upon the General Agreement of Trades and Tariffs. In addition, the grandfathered benefits for the transition group were also frozen at January 1, 2005 levels with an annual transition pension adjustment calculated at an interest rate equal to 5% per year up to 35 years of completed service, and 3% thereafter. As of December 31, 2013, based on current estimates of plan liabilities and other assumptions, the projected benefit obligation of the qualified defined benefit pension plans exceeds plan assets by approximately $7 million.

Chaucer Pension Plan

Prior to 2002, the Chaucer segment provided defined benefit pension retirement benefits to certain of its employees. As of December 31, 2001, the defined benefit pension plan was closed to new members. The defined benefit obligation for this plan is based on the employees’ years of service and final pensionable salary. Contributions are made at least annually to this plan by both the Company and by employees. As of December 31, 2013, based on current estimates of plan liabilities and other assumptions, the projected benefit obligation of the qualified defined benefit pension plan exceeds plan assets by approximately $8 million.

Assumptions

In order to measure the expense associated with these plans, management must make various estimates and assumptions, including discount rates used to value liabilities, assumed rates of return on plan assets, employee turnover rates and anticipated mortality rates, for example. The estimates used by management are based on the Company’s historical experience, as well as current facts and circumstances. In addition, the Company uses outside actuaries to assist in measuring the expense and liability associated with these plans.

The Company measures the funded status of its plans as of the date of its year-end statement of financial position. The Company utilizes a measurement date of December 31st to determine its benefit obligations, consistent with the date of its Consolidated Balance Sheets.

Weighted-average assumptions used to determine pension benefit obligations are as follows:

DECEMBER 31	2013			2012			2011
U.S.:
Discount rate—qualified plan		5.00	%		4.25	%		5.13	%
Discount rate—non-qualified plan		5.00	%		4.13	%		5.00	%
Cash balance interest crediting rate		3.50	%		3.50	%		4.00	%
Chaucer:
Discount rate		4.50	%		4.80	%		4.90	%
Rate of increase in future compensation		3.15	%		4.20	%		4.30	%

The Company utilizes a measurement date of January 1st to determine its periodic pension costs. Weighted-average assumptions used to determine net periodic pension costs for the defined benefit plans are as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
U.S.:
Qualified plan
Discount rate		4.25	%		5.13	%		5.63	%
Expected return on plan assets		5.25	%		6.00	%		6.50	%
Cash balance interest crediting rate		3.50	%		4.00	%		4.50	%
Non-qualified plan
Discount rate		4.13	%		5.00	%		5.50	%
Chaucer:
Discount rate		4.80	%		4.90	%		5.50	%
Rate of increase in future compensation		4.20	%		4.30	%		4.60	%
Expected return on plan assets		6.70	%		7.50	%		7.40	%

The expected rates of return were determined by using historical mean returns for each asset class, adjusted for certain factors believed to have an impact on future returns. Specifically, for the U.S. defined benefit plans, because the allocation of assets between fixed maturities and equities has changed over time, the historical mean returns were adjusted downward slightly to reflect the plan’s asset mix. The adjusted mean returns were weighted to the plan’s expected target asset allocation at December 31, 2013, resulting in an expected rate of return on plan assets for 2013 of 5.25%. The Company reviews and updates, at least annually, its expected return on plan assets based on changes in the actual assets held by the plans.

Plan Assets

U.S. Qualified Defined Benefit Plans

The Company utilizes a target allocation strategy, which focuses on creating a mix of assets that will generate modest growth from equity securities while minimizing volatility in the Company’s earnings from changes in the markets and economic environment. Various factors are taken into consideration in determining the appropriate asset mix, such as census data, actuarial valuation information and capital market assumptions. During 2013 and 2012, the plan assets were invested 84% in fixed income securities and 16% in equity securities. The Company reviews and updates, at least annually, the target allocation and makes changes periodically.

The following table provides 2013 target allocations and actual invested asset allocations for 2013 and 2012.

	2013
	TARGET
DECEMBER 31	LEVELS			2013			2012
Fixed income securities:
Fixed maturities		83	%		83	%		83	%
Money market funds		2	%		1	%		1	%
Total fixed income securities		85	%		84	%		84	%
Equity securities:
Domestic		11	%		12	%		10	%
International		4	%		4	%		3	%
THG common stock		—			—			3	%
Total equity securities		15	%		16	%		16	%
Total plan assets		100	%		100	%		100	%

The following tables present for each hierarchy level the U.S. qualified defined benefit plan’s investment assets that are measured at fair value at December 31, and 2012. (Refer to Note 5 – “Fair Value” for a description of the different levels in the Fair Value Hierarchy).

DECEMBER 31	2013								2012
(in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income securities:
Fixed maturities	$	449.6	$	2.1	$	447.5	$	—	$	491.4	$	3.3	$	488.1	$	—
Money market funds		5.3		5.3		—		—		5.0		5.0		—		—
Total fixed income securities		454.9		7.4		447.5		—		496.4		8.3		488.1		—
Equity securities:
Domestic		67.8		0.2		67.6		—		58.3		0.4		57.9		—
International		19.3		0.1		19.2		—		18.8		0.1		18.7		—
THG common stock		—		—		—		—		18.1		18.1		—		—
Total equity securities		87.1		0.3		86.8		—		95.2		18.6		76.6		—
Total investments at fair value	$	542.0	$	7.7	$	534.3	$	—	$	591.6	$	26.9	$	564.7	$	—

Fixed Income Securities

Securities classified as Level 1 at December 31, 2013 and 2012 include actively traded mutual funds and publicly traded securities, which are valued at quoted market prices. Securities classified as Level 2 at December 31, 2013 and 2012 include a separate investment account, which is invested entirely in the Vanguard Total Bond Market Index Fund, a mutual fund that in turn invests in investment grade fixed maturities, as well as commingled pools and investment grade fixed income securities that are held in a custom fund. The fair value of each of the Level 2 investments is determined daily as the Net Asset Value (“NAV”) based on the value of the underlying investments, which is determined independently by the investment manager. The daily NAV, which is not published as a quoted market price for these investments, is used as the basis for transactions. Redemption of these funds is not subject to restriction.

Equity Securities

Securities classified as Level 1 at December 31, 2013 and 2012 include actively traded mutual funds that are publicly traded and which primarily invest in equity securities that are valued at quoted market prices. Additionally, Level 1 securities at December 31, 2012 include 466,755 shares of THG common stock held by the plan, which were valued at quoted market prices. The plan held no shares of THG common stock at December 31, 2013. Securities classified as Level 2 include investments in commingled pools that primarily invest in publicly traded common stocks and international equity securities. The fair value of each of the Level 2 investments is determined daily as the NAV based on the value of the underlying investments, which is determined independently by the investment manager. The daily NAV, which is not published as a quoted market price for these investments, is used as the basis for transactions. Redemption of these funds is not subject to restriction.

Chaucer Pension Plan

The investment strategy of the Chaucer defined benefit pension plan is to invest primarily in growth assets in the form of equity funds which are expected to provide a positive return that exceeds inflation over the longer term in order to protect the existing and future liabilities of the pension plan. In order to reduce volatility and diversify the portfolio, the target allocation includes an exposure to corporate bond and commercial property funds. In 2013, the Company modified its investment allocation strategy and began shifting assets from equity securities into fixed maturities. The Company will continue shifting assets until it reaches its current ultimate target level of 60% equities, 30% fixed maturities and 10% real estate funds. This allocation plan will be reviewed annually and target allocation changes will be made as appropriate. The following table provides 2013 target allocations and actual invested asset allocations for 2013 and 2012.

	2013
	TARGET
DECEMBER 31	LEVELS			2013			2012
Fixed income securities:
Fixed maturities		20	%		19	%		14	%
Equity securities:
Domestic (United Kingdom)		25	%		26	%		33	%
International		45	%		48	%		44	%
Total equity securities		70	%		74	%		77	%
Real estate funds		10	%		7	%		9	%
Total plan assets		100	%		100	%		100	%

Included in total plan assets of $120.2 million at December 31, 2013 were $119.9 million of invested assets carried at fair value and $0.3 million of cash and equivalents. Total plan assets at December 31, 2012 of $90.9 million included $90.7 million of invested assets carried at fair value and $0.2 million of cash and equivalents.

The following table presents for each hierarchy level the Chaucer defined benefit plan’s investment assets that are measured at fair value at December 31, 2013 and 2012.

YEARS ENDED DECEMBER 31	2013								2012
(in millions)	Fair Value								Fair Value
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income securities:
Fixed maturities	$	22.8	$	—	$	22.8	$	—	$	12.9	$	—	$	12.9	$	—
Equity securities:
Domestic		30.5		—		30.5		—		29.9		—		29.9		—
International		57.8		—		57.8		—		39.7		—		39.7		—
Total equity securities		88.3		—		88.3		—		69.6		—		69.6		—
Real estate funds		8.8		—		—		8.8		8.2		—		—		8.2
Total investments at fair value	$	119.9	$	—	$	111.1	$	8.8	$	90.7	$	—	$	82.5	$	8.2

Fixed Income and Equity Securities

Securities classified as Level 2 at December 31, 2013 and 2012 include pooled funds which are valued at the close of business using a third party pricing service. These values are adjusted by the fund manager to reflect outstanding dividends, taxes and investment fees and other expenses to calculate the NAV.

Real Estate Funds

Real estate fund investments classified as Level 3 at December 31, 2013 and 2012 are valued based upon the values of the net assets of the fund. Although the NAV is calculated daily, transactions also consider cash inflows and outflows of the fund. The price where units are transacted includes the NAV, which is adjusted for investment charges and other estimated acquisition costs such as legal fees, taxes, planning and architect fees, survey and agent fees, among others.

The table below provides a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

YEARS ENDED DECEMBER 31	2013		2012
(in millions)
Balance at beginning of period	$	8.2	$	7.7
Actual return on plan assets related to assets still held		0.5		—
Foreign currency translation		0.1		0.5
Balance at end of year	$	8.8	$	8.2

Obligations and Funded Status

The Company recognizes the current net underfunded status of its plans in its Consolidated Balance Sheets. Changes in the funded status of the plans are reflected as components of accumulated other comprehensive loss or income. The components of accumulated other comprehensive loss or income are reflected as either a net actuarial gain or loss or a net prior service cost. The following table reflects the benefit obligations, fair value of plan assets and funded status of the plans at December 31, 2013 and 2012.

	U.S. Qualified Pension						U.S. Non-Qualified						Chaucer Pension
DECEMBER 31	Plans						Pension Plans						Plan
(in millions)	2013			2012			2013			2012			2013			2012
Accumulated benefit obligation	$	548.8		$	607.0		$	37.4		$	41.2		$	128.5		$	116.6
Change in benefit obligation:
Projected benefit obligation, beginning of period	$	607.0		$	570.8		$	41.2		$	39.2		$	116.6		$	104.4
Employee contributions		—			—			—			—			0.4			0.4
Service cost – benefits earned during the period		—			—			—			—			1.5			1.6
Interest cost		24.8			28.1			1.6			1.9			5.4			5.2
Actuarial losses (gains)		(36.5	)		49.0			(2.3	)		3.3			3.6			1.8
Benefits paid		(46.5	)		(40.9	)		(3.1	)		(3.2	)		(1.5	)		(2.4	)
Foreign currency translation		—			—			—			—			2.5			5.6
Projected benefit obligation, end of year		548.8			607.0			37.4			41.2			128.5			116.6
Change in plan assets:
Fair value of plan assets, beginning of period		591.6			574.7			—			—			90.9			74.3
Actual return on plan assets		(3.1	)		57.8			—			—			17.1			9.9
Contributions		—			—			3.1			3.2			10.6			4.9
Benefits paid		(46.5	)		(40.9	)		(3.1	)		(3.2	)		(1.5	)		(2.4	)
Foreign currency translation		—			—			—			—			3.1			4.2
Fair value of plan assets, end of year		542.0			591.6			—			—			120.2			90.9
Funded status of the plans	$	(6.8	)	$	(15.4	)	$	(37.4	)	$	(41.2	)	$	(8.3	)	$	(25.7	)

Contributions include $0.4 million of Chaucer employee contributions during 2013 and 2012. All other contributions for all plans were made by the Company.

Components of Net Periodic Pension Cost

The components of total net periodic pension cost are as follows:

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Service cost - benefits earned during the period	$	1.5		$	1.6		$	0.7
Interest cost		31.9			35.2			34.3
Expected return on plan assets		(35.9	)		(38.7	)		(37.1	)
Recognized net actuarial loss		14.7			12.8			15.0
Amortization of prior service cost		—			0.1			0.1
Settlement loss		0.4			—			—
Net periodic pension cost	$	12.6		$	11.0		$	13.0

The following table reflects the total amounts recognized in accumulated other comprehensive income relating to both the U.S.

defined benefit pension plans and the Chaucer pension plan as of December 31, 2013 and 2012.

DECEMBER 31	2013		2012
(in millions)
Net actuarial loss	$	118.7	$	147.3
Net prior service cost		0.1		—
	$	118.8	$	147.3

The unrecognized net actuarial gains (losses) which exceed 10% of the greater of the projected benefit obligation or the fair value of plan assets are amortized as a component of net periodic pension cost in future years. The following table reflects the total estimated amount of actuarial losses that will be amortized from accumulated other comprehensive income into net periodic pension cost in 2014:

ESTIMATED AMORTIZATION IN 2014	Expense
(in millions)
Net actuarial loss	$	11.3
Net prior service cost		0.1
	$	11.4

Contributions

In accordance with ERISA guidelines, the Company is not required to fund its U.S. qualified benefit plan in 2014. The Company expects to contribute $3.3 million to its U.S. non-qualified pension plans to fund 2014 benefit payments, and approximately $2 million to the Chaucer pension plan. At this time, no additional discretionary contributions are expected to be made to the plans during 2014 and the Company does not expect that any funds will be returned from the plans to the Company during 2014.

Benefit Payments

The Company estimates that benefit payments over the next 10 years will be as follows:

YEARS ENDED DECEMBER 31	2014		2015		2016		2017		2018		2019-2023
(in millions)
U.S. qualified pension plans	$	43.9	$	40.6	$	40.1	$	41.8	$	41.7	$	205.2
U.S. non-qualified pension plans	$	3.3	$	3.4	$	3.1	$	3.1	$	3.0	$	14.2
Chaucer pension plan	$	1.6	$	1.7	$	1.7	$	1.8	$	1.9	$	10.3

The benefit payments are based on the same assumptions used to measure the Company’s benefit obligations at the end of 2013. Benefit payments related to the U.S. qualified plans and the Chaucer plan will be made from plan assets, whereas those payments related to the non-qualified plans will be provided for by the Company.

DEFINED CONTRIBUTION PLAN

In addition to the defined benefit plans, THG provides a defined contribution 401(k) plan for its U.S. employees, whereby the Company matches employee elective 401(k) contributions, up to a maximum percentage of 6% in 2013, 2012, and 2011. The Company’s expense for this matching provision was $18.3 million, $17.9 million and $17.8 million for 2013, 2012 and 2011, respectively. In addition to this matching provision, the Company can elect to make an annual contribution to employees’ accounts. Additional contributions amounted to $2.8 million for the 2013 plan year. There were no additional contributions in 2012 and 2011.

Chaucer also provides a defined contribution plan for its employees which provides for employer provided contributions. The Company’s expense for 2013 and 2012 was $5.0 million and $4.8 million, respectively.

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Investment Income and Gains and Losses - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Gain (Loss) on Investments [Line Items]
Non-accruals of fixed maturity securities	$ 2.3	$ 2.5	$ 2.3
Net other-than-temporary impairment losses on securities recognized in earnings	6.0	7.8	6.9
Other-than-temporary impairments	7.0	7.3	4.9
Amount transferred from unrealized losses in accumulated other comprehensive income	1.0	0.5	2.0
OTTI related to common stocks	1.6	1.2	1.4
OTTI related to estimated credit losses on fixed maturity securities	1.4	1.2	0.9
OTTI related to fixed maturity securities intended to sell	0.5	5.4	4.6
Exchange Traded Funds
Gain (Loss) on Investments [Line Items]
Net other-than-temporary impairment losses on securities recognized in earnings	$ 2.5

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Schedule of Effects of Reinsurance (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Effects of Reinsurance [Line Items]
Property and casualty losses and LAE, Assumed	$ 172.3	[1]	$ 311.4	[1]	$ 249.4	[1]
Property and casualty losses and LAE, Ceded	350.6	[2]	588.4	[2]	422.1	[2]
Information by reinsurer of credit risk arising from a reinsurance arrangement.
Effects of Reinsurance [Line Items]
Property and casualty losses and LAE, Assumed					96.0
Property and casualty losses and LAE, Ceded					$ 54.2

[1] Assumed reinsurance activity primarily relates to the Chaucer segment. In addition, 2011 assumed premiums earned and assumed losses and LAE included $96.0 million and $54.2 million, respectively, related to the 2010 OneBeacon renewal rights transaction.

[2] In 2013, we did not renew the capital provision reinsurance treaty with Flagstone Re. This reduced ceded premiums written, premiums earned and losses and LAE for the year ended December 31, 2013.

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Target Allocations and Actual Invested Asset Allocations (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
U.S. Defined Benefit Plans
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Fixed Income and Equity Securities	100.00%	100.00%
Total Assets	100.00%
U.S. Defined Benefit Plans | Fixed Maturities
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	83.00%
Total Fixed Income and Equity Securities	83.00%	83.00%
U.S. Defined Benefit Plans | Money Market Funds
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	2.00%
Total Fixed Income and Equity Securities	1.00%	1.00%
U.S. Defined Benefit Plans | Debt Securities
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	85.00%
Total Fixed Income and Equity Securities	84.00%	84.00%
U.S. Defined Benefit Plans | Domestic
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	11.00%
Total Fixed Income and Equity Securities	12.00%	10.00%
U.S. Defined Benefit Plans | International
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	4.00%
Total Fixed Income and Equity Securities	4.00%	3.00%
U.S. Defined Benefit Plans | THG Common Stock
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Fixed Income and Equity Securities		3.00%
U.S. Defined Benefit Plans | Equity Securities
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	15.00%
Total Fixed Income and Equity Securities	16.00%	16.00%
Chaucer Pension Scheme
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Fixed Income and Equity Securities	100.00%	100.00%
Total Assets	100.00%
Chaucer Pension Scheme | Fixed Maturities
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	20.00%
Total Fixed Income and Equity Securities	19.00%	14.00%
Chaucer Pension Scheme | Domestic
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	25.00%
Total Fixed Income and Equity Securities	26.00%	33.00%
Chaucer Pension Scheme | International
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	45.00%
Total Fixed Income and Equity Securities	48.00%	44.00%
Chaucer Pension Scheme | THG Common Stock
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	70.00%
Total Fixed Income and Equity Securities	74.00%	77.00%
Chaucer Pension Scheme | Equity Securities
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Fixed Income and Equity Securities	7.00%	9.00%
Chaucer Pension Scheme | Real Estate Funds
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
Total Equity Securities, TARGET LEVELS	10.00%

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Rollforward of Cumulative Amounts Related to Credit Loss Portion of Other than Temporary Impairments Losses (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Schedule of Investments [Line Items]
Credit losses as of the beginning of the year	$ 8.6	$ 14.5	$ 16.7
Credit losses for which an OTTI was not previously recognized	1.1	0.6
Additional credit losses on securities for which an OTTI was previously recognized	0.3	0.6	0.9
Reductions for securities sold, matured or called	(2.2)	(6.9)	(1.8)
Reductions for securities reclassified as intend to sell		(0.2)	(1.3)
Credit losses as of the end of the year	$ 7.8	$ 8.6	$ 14.5

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Changes in Other Comprehensive Income (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net of pre-tax, ceded unrealized losses	$ 1.2

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Components of Net Investment Income (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Gain (Loss) on Investments [Line Items]
Gross investment income	$ 279.2	$ 286.5	$ 265.9
Less investment expenses	(10.2)	(9.9)	(7.7)
Net investment income	269.0	276.6	258.2
Fixed Maturities
Gain (Loss) on Investments [Line Items]
Gross investment income	254.8	264.2	254.3
Equity Securities
Gain (Loss) on Investments [Line Items]
Gross investment income	15.6	15.3	6.8
Other Investments
Gain (Loss) on Investments [Line Items]
Gross investment income	$ 8.8	$ 7.0	$ 4.8

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Summary of Estimated Benefit Payments (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013
Qualified Pension Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2014	$ 43.9
2015	40.6
2016	40.1
2017	41.8
2018	41.7
2019-2023	205.2
Non Qualified Pension Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2014	3.3
2015	3.4
2016	3.1
2017	3.1
2018	3.0
2019-2023	14.2
Chaucer Pension Scheme
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2014	1.6
2015	1.7
2016	1.7
2017	1.8
2018	1.9
2019-2023	$ 10.3

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Condensed Financial Information of Registrant Parent Company Only Statements of Income (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Condensed Financial Statements, Captions [Line Items]
Net investment income									$ 269.0	$ 276.6	$ 258.2
Net realized gains from sales and other									39.5	31.4	35.0
Total revenues	1,229.0	1,201.8	1,182.6	1,180.3	1,184.0	1,157.7	1,127.2	1,121.8	4,793.7	4,590.7	3,931.6
Interest expense									65.3	61.9	55.0
Loss from retirement of debt									27.7	5.1	2.3
Other operating expenses									667.2	587.6	525.3
Total expenses									4,464.6	4,562.0	3,910.0
Income tax benefit									(8.0)	(2.3)	0.6
Income from continuing operations	64.9	61.3	53.1	66.4	(55.3)	40.9	9.8	50.7	245.7	46.1	31.5
Net income	70.1	61.3	53.4	66.2	(55.0)	40.4	20.8	49.7	251.0	55.9	36.7
The Hanover Insurance Group, Inc
Condensed Financial Statements, Captions [Line Items]
Net investment income									5.5	6.6	10.5
Net realized gains from sales and other									0.8	2.5	8.7
Interest income from loan to subsidiary									22.5	22.5	10.5
Other income									0.1	0.1
Total revenues									28.9	31.7	29.7
Interest expense									55.3	48.6	41.3
Loss from retirement of debt									19.9	0.1	2.6
Employee benefit related expenses									6.2	5.3	6.9
Costs (benefit) related to acquired businesses									(6.4)	2.6	16.4
Loss on derivative instruments											11.3
Other operating expenses									8.0	8.0	5.5
Total expenses									83.0	64.5	84.0
Net loss before income taxes and equity in income of unconsolidated subsidiaries									(54.1)	(32.8)	(54.3)
Income tax benefit									37.3	40.5	31.1
Equity in income of unconsolidated subsidiaries									262.5	47.5	54.7
Income from continuing operations									245.7	55.2	31.5
Income from discontinued operations (net of income tax expense (benefit) of $4.1, $(0.1) and $2.8 in 2013, 2012 and 2011)									5.3	0.7	5.2
Net income									$ 251.0	$ 55.9	$ 36.7

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SCHEDULE V VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2013

SCHEDULE V VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE V

THE HANOVER INSURANCE GROUP, INC.

VALUATION AND QUALIFYING ACCOUNTS

DECEMBER 31
(in millions)
			Additions
Description	Balance at		Charged to		Charged to					Balance
	beginning of period		costs and expenses		other accounts(1)		Deductions			at end of period
2013
Allowance for doubtful accounts	$	2.8	$	8.1	$	—	$	(7.8	)	$	3.1
Allowance for uncollectible reinsurance recoverables		16.9		3.6		0.5		(0.3	)		20.7
	$	19.7	$	11.7	$	0.5	$	(8.1	)	$	23.8
2012
Allowance for doubtful accounts	$	2.3	$	8.1	$	—	$	(7.6	)	$	2.8
Allowance for uncollectible reinsurance recoverables		16.4		0.4		0.9		(0.8	)		16.9
	$	18.7	$	8.5	$	0.9	$	(8.4	)	$	19.7
2011
Allowance for doubtful accounts	$	3.6	$	10.1	$	—	$	(11.4	)	$	2.3
Allowance for uncollectible reinsurance recoverables		2.3		2.2		11.9		—			16.4
	$	5.9	$	12.3	$	11.9	$	(11.4	)	$	18.7

(1) Amount charged to other accounts includes foreign exchange gains and losses and in 2011 also includes the allowance for uncollectible reinsurance recoverables acquired from Chaucer Holdings plc on July 1, 2011.

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STATUTORY FINANCIAL INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

Statutory Net Income And Surplus

The following table provides statutory net income for the year ended December 31 and statutory capital and surplus as of December 31 for the periods indicated:

	2013		2012			2011
(in millions)
Statutory Net Income (Loss)
U.S. Insurance Subsidiaries	$	193.2	$	(47.3	)	$	(5.2	)
Statutory Capital and Surplus
U.S. Insurance Subsidiaries	$	1,834.3	$	1,523.4		$	1,582.8

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DIVIDEND RESTRICTIONS

12 Months Ended

Dec. 31, 2013

DIVIDEND RESTRICTIONS

13. DIVIDEND RESTRICTIONS

U.S. INSURANCE SUBSIDIARIES

The individual law of all states, including New Hampshire and Michigan, where Hanover Insurance and Citizens are domiciled, respectively, restrict the payment of dividends to stockholders by insurers. These laws affect the dividend paying ability of Hanover Insurance and Citizens.

Pursuant to New Hampshire’s statute, the maximum dividends and other distributions that an insurer may pay in any twelve month period, without prior approval of the New Hampshire Insurance Commissioner, is limited to 10% of such insurer’s statutory policyholder surplus as of the preceding December 31. No dividends were declared by Hanover Insurance in 2013 or 2012. In 2011, Hanover Insurance declared dividends to its parent totaling $99.0 million. During 2014, the maximum dividend payable without prior approval is $183.0 million.

Pursuant to Michigan’s statute, the maximum dividends and other distributions that an insurer may pay in any twelve month period, without prior approval of the Michigan Insurance Commissioner, is limited to the greater of 10% of policyholders’ surplus as of December 31 of the immediately preceding year or the statutory net income less net realized gains, for the immediately preceding calendar year. Citizens declared dividends to its parent, Hanover Insurance, totaling $68.0 million, $70.0 million and $69.0 million in 2013, 2012 and 2011, respectively. Citizens cannot pay a further dividend to its parent without prior approval until December 2014, at which time the maximum dividend payable without prior approval would be $66.2 million.

The statutes in both New Hampshire and Michigan require that prior notice to the respective Insurance Commissioner of any proposed dividend be provided and such Commissioner may, in certain circumstances, prohibit the payment of the proposed dividend.

CHAUCER

Dividend payments from Chaucer to its parent are regulated by U.K. law. Dividends from Chaucer are dependent on dividends from its subsidiaries. Annual dividend payments from Chaucer are limited to retained earnings that are not restricted by capital and other requirements for business at Lloyd’s. Also, Chaucer must provide advance notice to the U.K.’s Prudential Regulation Authority (“PRA”), one of the successors to the Financial Services Authority, of certain proposed dividends or other payments from PRA regulated entities. Dividend payments to THG from Chaucer entities totaled $13.9 million in 2013. No dividends were declared by Chaucer in 2012 or 2011.

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Identifiable Assets for Business Segments and Discontinued Operations (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Segment Reporting Information [Line Items]
Discontinued operations	$ 114.9	$ 130.5
Identifiable assets	13,378.7	13,484.9
U.S. Companies
Segment Reporting Information [Line Items]
Identifiable assets	8,962.6	8,909.6
Chaucer
Segment Reporting Information [Line Items]
Identifiable assets	$ 4,301.2	$ 4,444.8

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES

18. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Durand Litigation

On March 12, 2007, a putative class action suit captioned Jennifer A. Durand v. The Hanover Insurance Group, Inc., and The Allmerica Financial Cash Balance Pension Plan was filed in the United States District Court for the Western District of Kentucky. The named plaintiff, a former employee who received a lump sum distribution from the Company’s Cash Balance Plan (the “Plan”) at or about the time of her termination, claims that she and others similarly situated did not receive the appropriate lump sum distribution because in computing the lump sum, the Company and the Plan understated the accrued benefit in the calculation. The plaintiff claims that the Plan underpaid her distributions and those of similarly situated participants by failing to pay an additional so-called “whipsaw” amount reflecting the present value of an estimate of future interest credits from the date of the lump sum distribution to each participant’s retirement age of 65.

The plaintiff filed an Amended Complaint adding two new named plaintiffs and additional claims on December 11, 2009. In response, the Company filed a Motion to Dismiss on January 30, 2010. In addition to the pending claim challenging the calculation of lump sum distributions, the Amended Complaint included: (a) a claim that the Plan failed to calculate participants’ account balances and lump sum payments properly because interest credits were based solely upon the performance of each participant’s selection from among various hypothetical investment options (as the Plan provided) rather than crediting the greater of that performance or the 30 year Treasury rate; (b) a claim that the 2004 Plan amendment, which changed interest crediting for all participants from the performance of participant’s investment selections to the 30 year Treasury rate, reduced benefits in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”) for participants who had account balances as of the amendment date by not continuing to provide them performance-based interest crediting on those balances; and (c) claims against the Company for breach of fiduciary duty and ERISA notice requirements arising from the various interest crediting and lump sum distribution matters of which plaintiffs complain. On March 31, 2011, the District Court granted the Company and the Plan’s Motion to Dismiss on statute of limitations grounds the additional claims set forth in (a) and (b) above, however, in response to a motion for reconsideration, the Court allowed the new breach of fiduciary duty claim to stand, but only as to plaintiffs’ “whipsaw” claim that remained in the case. On June 22, 2012, the Company and the Plan filed a Partial Motion for Summary Judgment to dismiss the “whipsaw” claim of one of the named plaintiffs who received his lump sum distribution after December 31, 2003. On October 2, 2013, the Court granted the Company and the Plan’s Partial Motion for Summary Judgment and dismissed with prejudice the “whipsaw” claim of the named plaintiff who received a lump sum distribution after December 31, 2003 and the similar claims of the putative class members he sought to represent. On December 17, 2013, the Court entered an order certifying a class to bring “whipsaw” and related breach of fiduciary duty claims consisting of all persons who received a lump sum distribution between March 1, 1997 and December 31, 2003, and a subclass to bring such claims consisting of all persons who received lump sum distributions between March 1, 1997 and March 12, 2002. On December 17, 2013, the Court also granted plaintiffs’ motion for entry of a final order allowing an immediate appeal by the two named plaintiffs added in the Amended Complaint of their dismissed claims that the 2004 Plan amendment reduced benefits in violation of ERISA, and for one of them, that his post-2003 lump sum distribution should have been greater. On January 14, 2014, the Company filed a Motion to Alter or Amend the Court’s December 17, 2013 Order requesting that the Court reverse its order making the dismissed claims final and appealable or, in the alternative, stay merits discovery on the claims remaining in the district court pending resolution of the dismissed plaintiffs’ appeal. The Court has not yet ruled on that motion.

At this time, the Company is unable to provide a reasonable estimate of the potential range of ultimate liability if the outcome of the suit is unfavorable. The extent to which any of the plaintiffs’ multiple theories of liability, some of which are overlapping and others of which are quite complex and novel, are accepted and upheld on appeal will significantly affect the Plan’s or the Company’s potential liability. The statute of limitations applicable to the class has not yet been finally determined and the extent of potential liability, if any, will depend on this final determination. In addition, assuming for these purposes that the plaintiffs prevail with respect to claims that benefits accrued or payable under the Plan were understated, then there are numerous possible theories and other variables upon which any revised calculation of benefits as requested under plaintiffs’ claims could be based. Any adverse judgment in this case against the Plan would be expected to create a liability for the Plan, with resulting effects on the Plan’s assets available to pay benefits. The Company’s future required funding of the Plan could also be impacted by such a liability.

Other Matters

The Company has been named a defendant in various other legal proceedings arising in the normal course of business. In addition, the Company is involved, from time to time, in examinations, investigations and proceedings by governmental and self-regulatory agencies. The potential outcome of any such action or regulatory proceedings in which the Company has been named a defendant or the subject of an inquiry or investigation, and its ultimate liability, if any, from such action or regulatory proceedings, is difficult to predict at this time. The ultimate resolutions of such proceedings are not expected to have a material effect on its financial position, although they could have a material effect on the results of operations for a particular quarter or annual period.

Residual Markets

The Company is required to participate in residual markets in various states, which generally pertain to high risk insureds, disrupted markets or lines of business or geographic areas where rates are regarded as excessive. The results of the residual markets are not subject to the predictability associated with the Company’s own managed business, and are significant to both the personal and commercial automobile lines of business, the workers’ compensation line of business, and the homeowners line of business.

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Expected Benefit Payments (Detail) (Postretirement Benefits, USD $) In Millions, unless otherwise specified	Dec. 31, 2013
Postretirement Benefits
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2014	$ 2.1
2015	1.9
2016	1.7
2017	1.5
2018	1.3
2019-2023	$ 5.5

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REINSURANCE (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Effects of Reinsurance

The following table provides the effects of reinsurance. Amounts reflect activity of Chaucer since the July 1, 2011 acquisition date.

YEARS ENDED DECEMBER 31	2013			2012			2011
(in millions)
Premiums written:
Direct	$	4,599.2		$	4,515.1		$	3,830.9
Assumed (1)		602.5			689.1			228.3
Ceded (2)		(649.0	)		(835.8	)		(465.8	)
Net premiums written	$	4,552.7		$	4,368.4		$	3,593.4
Premiums earned:
Direct	$	4,546.3		$	4,352.9		$	3,695.2
Assumed (1)		617.7			687.0			442.6
Ceded (2)		(713.5	)		(800.8	)		(539.2	)
Net premiums earned	$	4,450.5		$	4,239.1		$	3,598.6
Percentage of assumed to net premiums earned		13.88	%		16.21	%		12.30	%
Losses and LAE:
Direct	$	2,939.4		$	3,251.4		$	2,723.5
Assumed(1)		172.3			311.4			249.4
Ceded (2)		(350.6	)		(588.4	)		(422.1	)
Net losses and LAE	$	2,761.1		$	2,974.4		$	2,550.8

(1) Assumed reinsurance activity primarily relates to the Chaucer segment. In addition, 2011 assumed premiums earned and assumed losses and LAE included $96.0 million and $54.2 million, respectively, related to the 2010 OneBeacon renewal rights transaction.

(2) In 2013, we did not renew the capital provision reinsurance treaty with Flagstone Re. This reduced ceded premiums written, premiums earned and losses and LAE for the year ended December 31, 2013.

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Stock Based Compensation Plans - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 Y	Dec. 31, 2012	Dec. 31, 2011	May 16, 2006
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of new shares under plan				3,000,000
Shares available for grants under the plan	1,033,786
Compensation cost	$ 12.4	$ 12.8	$ 12.2
Tax benefit related to compensation expense	4.3	4.5	4.3
Options granted vesting (in years)	3 years	4 years	4 years
Number of years options must be exercised from date of grant	10
Options granted vesting rate	33.33%
Cash received for options exercised	24.4	2.3	3.9
Intrinsic value of options exercised	19.9	1.2	1.8
Excess tax expense realized from options exercised	9.0	0.4	1.5
Aggregate intrinsic value, outstanding	38.0
Aggregate intrinsic value, exercisable	14.5
Weighted average remaining contractual life, outstanding (in years)	6 years 4 months 24 days
Weighted average remaining contractual life, exercisable (in years)	3 years 7 months 6 days
Weighted average grant date fair value of options granted	$ 7.69	$ 8.87	$ 12.23
Unrecognized compensation expense related to unvested stock options	12.1
Unrecognized compensation expense recognized over a weighted average period (in years)	1 year 9 months 18 days
Average period based on relative TSR (in years)	3 years	3 years
Performance metric for performance based restricted stock units	100.00%
Performance metric for performance based restricted stock units minimum potential range	0.00%
Performance metric for performance based restricted stock units maximum potential range	200.00%
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value of Vested shares	2.3	1.6	10.2
Unrecognized compensation expense related to unvested stock options	4.7
Unrecognized compensation expense recognized over a weighted average period (in years)	1 year 7 months 6 days
Performance-Based Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value of Vested shares	0	0	1.3
Increase as grant in period, percentage	100.00%
Decrease as forfeited, percentage	100.00%
Aggregate intrinsic value of restricted stock units	11.0
Weighted average remaining contractual life (in years)	2 years
Granted 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based stock units included as forfeited due to completion levels	8,244
Performance-based stock units, weighted average grant date fair value	$ 46.47
Granted In Twenty Ten
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based stock units included as forfeited due to completion levels		31,750
Performance-based stock units, weighted average grant date fair value		$ 42.15
Granted 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based stock units included as forfeited due to completion levels			47,375
Performance-based stock units, weighted average grant date fair value			$ 34.19
Performance And Market-Based Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market-based awards granted to senior managment	82,795	96,150	42,500
Performance metric, minimum	0.00%	0.00%
Performance metric, maximum	150.00%	150.00%
Performance metric for performance based restricted stock units	100.00%
Restricted Stock And Restricted Stock Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value of Vested shares	1.8	1.7
Aggregate intrinsic value of restricted stock units	$ 31.4
Weighted average remaining contractual life (in years)	1 year 1 month 6 days
Senior management | Performance And Market-Based Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market-based awards granted to senior managment	76,175	92,400
Vesting Rate In The Third Year
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting rate		50.00%	50.00%
Vesting Rate In The Final Year
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting rate		50.00%	50.00%
Vesting Rate After Three Years | Restricted Stock Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting (in years)	3 years	3 years	3 years
Options granted vesting rate		50.00%	50.00%
Vesting Rate After Three Years | Market Based Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting (in years)	3 years	3 years
Options granted vesting rate		50.00%
Vesting Rate After Three Years | Performance-Based Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting (in years)			3 years
Options granted vesting rate			50.00%
Vesting Rate After Four Years | Restricted Stock Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting (in years)		4 years	4 years
Options granted vesting rate		50.00%	50.00%
Vesting Rate After Four Years | Market Based Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting (in years)		4 years
Options granted vesting rate		50.00%
Vesting Rate After Four Years | Performance-Based Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted vesting (in years)			4 years
Options granted vesting rate			50.00%

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DEBT AND CREDIT ARRANGEMENTS (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Long-Term Debt

Debt consists of the following:

DECEMBER 31	2013			2012
(in millions)
Senior debentures maturing June 15, 2021	$	300.0		$	300.0
Senior debentures maturing March 1, 2020		165.1			200.0
Senior debentures maturing October 15, 2025		81.2			120.9
Subordinated debentures maturing March 30, 2053		175.0			—
Subordinated debentures maturing February 3, 2027		59.7			59.7
FHLBB borrowings (secured)		125.0			171.3
Total principal debt	$	906.0		$	851.9
Unamortized debt discount		(2.1	)		(2.5	)
Total	$	903.9		$	849.4

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Schedule of Employee Options Outstanding and Exercisable (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013
Range 1
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 34.19
Options Outstanding, Number	175,250
Options Outstanding, Weighted Average Remaining Contractual Lives	5 years 1 month 24 days
Options Outstanding, Weighted Average Exercise Price	$ 34.19
Options Currently Exercisable, Number	175,250
ly Exercisable Weighted Average Exercise Price	$ 34.19
Range 2
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 35.86
Range of Exercise Prices, Upper limit	$ 36.50
Options Outstanding, Number	160,500
Options Outstanding, Weighted Average Remaining Contractual Lives	1 year 2 months 9 days
Options Outstanding, Weighted Average Exercise Price	$ 35.94
Options Currently Exercisable, Number	160,500
ly Exercisable Weighted Average Exercise Price	$ 35.94
Range 3
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 36.81
Options Outstanding, Number	432,500
Options Outstanding, Weighted Average Remaining Contractual Lives	8 years 22 days
Options Outstanding, Weighted Average Exercise Price	$ 36.81
Range 4
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 36.88
Range of Exercise Prices, Upper limit	$ 42.15
Options Outstanding, Number	242,591
Options Outstanding, Weighted Average Remaining Contractual Lives	6 years
Options Outstanding, Weighted Average Exercise Price	$ 41.71
Options Currently Exercisable, Number	115,091
ly Exercisable Weighted Average Exercise Price	$ 41.61
Range 5
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 42.49
Options Outstanding, Number	482,300
Options Outstanding, Weighted Average Remaining Contractual Lives	9 years 1 month 28 days
Options Outstanding, Weighted Average Exercise Price	$ 42.49
Range 6
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 44.88
Range of Exercise Prices, Upper limit	$ 46.28
Options Outstanding, Number	155,751
Options Outstanding, Weighted Average Remaining Contractual Lives	2 years 9 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 45.88
Options Currently Exercisable, Number	155,751
ly Exercisable Weighted Average Exercise Price	$ 45.88
Range 7
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 46.47
Range of Exercise Prices, Upper limit	$ 47.41
Options Outstanding, Number	243,000
Options Outstanding, Weighted Average Remaining Contractual Lives	7 years 1 month 24 days
Options Outstanding, Weighted Average Exercise Price	$ 46.56
Options Currently Exercisable, Number	22,500
ly Exercisable Weighted Average Exercise Price	$ 47.41
Range 8
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Lower limit	$ 48.46
Range of Exercise Prices, Upper limit	$ 54.41
Options Outstanding, Number	157,281
Options Outstanding, Weighted Average Remaining Contractual Lives	3 years 3 months
Options Outstanding, Weighted Average Exercise Price	$ 48.49
Options Currently Exercisable, Number	154,781
ly Exercisable Weighted Average Exercise Price	$ 48.46

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Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Investments:
Fixed maturities, at fair value (amortized cost of $6,815.2 and $6,529.5)	$ 6,970.6	$ 6,952.2
Equity securities, at fair value (cost of $366.5 and $299.0)	430.2	315.8
Other investments	192.5	210.3
Total investments	7,593.3	7,478.3
Cash and cash equivalents	486.2	564.8
Accrued investment income	68.0	69.0
Premiums and accounts receivable, net	1,324.6	1,308.8
Reinsurance recoverable on paid and unpaid losses and unearned premiums	2,335.0	2,479.7
Deferred acquisition costs	506.0	489.5
Deferred income taxes	239.7	267.6
Goodwill	184.9	184.9
Other assets	526.1	511.8
Assets of discontinued operations	114.9	130.5
Total assets	13,378.7	13,484.9
Liabilities
Loss and loss adjustment expense reserves	6,231.5	6,197.0
Unearned premiums	2,515.8	2,474.8
Expenses and taxes payable	637.2	775.8
Reinsurance premiums payable	374.7	466.2
Debt	903.9	849.4
Liabilities of discontinued operations	121.1	126.3
Total liabilities	10,784.2	10,889.5
Commitments and contingencies
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	1,830.1	1,787.1
Accumulated other comprehensive income	177.6	325.8
Retained earnings	1,349.1	1,211.6
Treasury stock at cost (16.8 and 16.2 million shares)	(762.9)	(729.7)
Total shareholders' equity	2,594.5	2,595.4
Total liabilities and shareholders' equity	$ 13,378.7	$ 13,484.9

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Fair Value of Plan Assets and Funded Status of Plans (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
United States Qualified Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Accumulated benefit obligation	$ 548.8	$ 607.0
Projected benefit obligation, beginning of period	607.0	570.8
Interest cost	24.8	28.1
Actuarial losses (gains)	(36.5)	49.0
Benefits paid	(46.5)	(40.9)
Projected benefit obligation, end of year	548.8	607.0
Fair value of plan assets, beginning of period	591.6	574.7
Actual return on plan assets	(3.1)	57.8
Benefits paid	(46.5)	(40.9)
Fair value of plan assets, end of year	542.0	591.6
Funded status of the plans	(6.8)	(15.4)
United States Non Qualified Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Accumulated benefit obligation	37.4	41.2
Projected benefit obligation, beginning of period	41.2	39.2
Interest cost	1.6	1.9
Actuarial losses (gains)	(2.3)	3.3
Benefits paid	(3.1)	(3.2)
Projected benefit obligation, end of year	37.4	41.2
Contributions	3.1	3.2
Benefits paid	(3.1)	(3.2)
Funded status of the plans	(37.4)	(41.2)
Chaucer Pension Scheme
Defined Benefit Plan Disclosure [Line Items]
Accumulated benefit obligation	128.5	116.6
Projected benefit obligation, beginning of period	116.6	104.4
Employee contributions	0.4	0.4
Service cost - benefits earned during the period	1.5	1.6
Interest cost	5.4	5.2
Actuarial losses (gains)	3.6	1.8
Benefits paid	(1.5)	(2.4)
Foreign currency translation	2.5	5.6
Projected benefit obligation, end of year	128.5	116.6
Fair value of plan assets, beginning of period	90.9	74.3
Actual return on plan assets	17.1	9.9
Contributions	10.6	4.9
Benefits paid	(1.5)	(2.4)
Foreign currency translation	3.1	4.2
Fair value of plan assets, end of year	120.2	90.9
Funded status of the plans	$ (8.3)	$ (25.7)

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ACQUISITIONS AND DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2013

ACQUISITIONS AND DISCONTINUED OPERATIONS

2. ACQUISITIONS AND DISCONTINUED OPERATIONS

ACQUISITIONS

Chaucer Acquisition

On July 1, 2011, the Company acquired Chaucer, a U.K. insurance business. Shareholders of Chaucer received 53.3 pence for each Chaucer share, which was paid in either cash or loan notes to those shareholders who elected to receive such notes in lieu of cash. The following table summarizes the transaction in both GBP and U.S. dollars:

(in millions)
Aggregate purchase price announced on April 20, 2011
Based on 53.3p contract price	£	297.7	$	485.3
Actual consideration on July 14, 2011:
Cash	£	287.4	$	455.0
Loan notes and other payables		9.5		15.3
Foreign exchange forward settlement		—		11.3
Total	£	296.9	$	481.6

The difference between the aggregate purchase price at signing and closing is attributable to the effect of currency fluctuations between the GBP and the U.S. dollar, as well as a change in outstanding shares.

In connection with the transaction, the Company entered into a foreign exchange forward contract, which provided for an economic hedge between the agreed upon purchase price of Chaucer in GBP and currency fluctuations between the GBP and U.S. dollar prior to close. This contract effectively locked in the U.S. dollar equivalent of the purchase price to be delivered in GBP and was settled at a loss of $11.3 million during the year ended December 31, 2011. The loss on the contract was due to a decrease in the exchange rate between the GBP and U.S. dollar, but was partially offset by the lower U.S. dollars required to meet the GBP-based purchase price, resulting in a $6.4 million gain on foreign exchange during the year ended December 31, 2011.

Acquisition costs, which include advisory, legal, and accounting costs, totaled $11.7 million and were expensed as incurred.

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 year ended December 31, 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 the date indicated, or of future results of the Company. Amounts in 2011 are converted from GBP to U.S. dollar at a 1.60 exchange rate.

	(UNAUDITED)
	YEAR ENDED
	DECEMBER 31
(in millions, except per share data)	2011
Revenue	$	4,364.8
Net income (loss)	$	(12.1	)
Net income (loss) per share—basic	$	(0.27	)
Net income (loss) per share — diluted (1)	$	(0.27	)
Weighted average shares outstanding—basic		45.2
Weighted average shares outstanding — diluted (1)		45.2

(1) Weighted average shares outstanding and per diluted share amounts in 2011 exclude common stock equivalents, since the impact of these instruments would be antidilutive.

DISCONTINUED OPERATIONS

Discontinued operations primarily consist of the Company’s former life insurance businesses, which were sold prior to 2009, its Discontinued Accident and Health Business and its former third party administration business, Citizens Management, Inc. (“CMI”), which was sold in 2012.

During 1999, the Company exited its accident and health insurance business, consisting of its Employee Benefit Services business, its Affinity Group Underwriters business and its accident and health assumed reinsurance pool business. Prior to 1999, these businesses comprised substantially all of the former Corporate Risk Management Services segment. Accordingly, the operating results of the discontinued segment have been reported in accordance with Accounting Principles Board Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (“APB Opinion No. 30”). On January 2, 2009, Hanover Insurance directly assumed a portion of the accident and health business; and therefore continues to apply APB Opinion No. 30 to this business. In addition, the remainder of the Discontinued First Allmerica Financial Life Insurance Company (“FAFLIC”) accident and health business was reinsured by Hanover Insurance in connection with the sale of FAFLIC to Commonwealth Annuity, and has been reported in accordance with ASC 205, Presentation of Financial Statements.

The accident and health business had no significant financial results that impacted 2013, 2012 or 2011. At December 31, 2013 and 2012, the portion of the discontinued accident and health business that was directly assumed had assets of $66.6 million and $72.9 million, respectively, consisting primarily of invested assets, and liabilities of $51.3 million and $52.5 million, respectively, consisting primarily of policy liabilities. At December 31, 2013 and 2012, the assets and liabilities of this business, as well as those of the reinsured portion of the accident and health business are classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheets.

In 2013, the Company recognized a $5.8 million gain relating to its former life insurance businesses. This was primarily due to an insurance settlement related to a class action lawsuit, net of tax.

On April 30, 2012, the Company completed the sale of its third party administration subsidiary, CMI. The Company recognized net gains of $10.8 million after taxes related to this transaction during the year ended December 31, 2012. Included in this amount was a contingent gain with a fair value of $1.7 million that was entirely contributed to the Company’s charitable foundation.

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Amortized Cost and Fair Value of Available-for-Sale Fixed Maturities and Cost and Fair Value of Equity Securities (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	$ 6,815.2	$ 6,529.5
Fixed maturities, Gross Unrealized Gains	246.9	442.7
Fixed maturities, Gross Unrealized Losses	91.5	20.0
Fixed maturities, Fair Value	6,970.6	6,952.2
Fixed maturities, OTTI Unrealized Losses	10.2	11.0
Equity securities, Amortized Cost or Cost	366.5	299.0
Equity securities, Gross Unrealized Gains	66.9	21.6
Equity securities, Gross Unrealized Losses	3.2	4.8
Equity securities, Fair Value	430.2	315.8
Equity securities, OTTI Unrealized Losses
U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	417.5	317.2
Fixed maturities, Gross Unrealized Gains	3.3	8.8
Fixed maturities, Gross Unrealized Losses	14.2	0.4
Fixed maturities, Fair Value	406.6	325.6
Foreign government
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	304.5	348.5
Fixed maturities, Gross Unrealized Gains	2.1	4.6
Fixed maturities, Gross Unrealized Losses	1.6	0.2
Fixed maturities, Fair Value	305.0	352.9
Municipal
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	1,108.0	1,010.2
Fixed maturities, Gross Unrealized Gains	37.4	87.2
Fixed maturities, Gross Unrealized Losses	19.1	1.1
Fixed maturities, Fair Value	1,126.3	1,096.3
Corporate
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	3,690.2	3,512.8
Fixed maturities, Gross Unrealized Gains	171.5	275.4
Fixed maturities, Gross Unrealized Losses	37.5	14.8
Fixed maturities, Fair Value	3,824.2	3,773.4
Fixed maturities, OTTI Unrealized Losses	8.6	9.3
Residential mortgage-backed
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	722.8	769.0
Fixed maturities, Gross Unrealized Gains	20.1	39.4
Fixed maturities, Gross Unrealized Losses	14.1	3.2
Fixed maturities, Fair Value	728.8	805.2
Fixed maturities, OTTI Unrealized Losses	1.6	1.7
Commercial mortgage-backed
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	405.9	373.3
Fixed maturities, Gross Unrealized Gains	10.5	23.2
Fixed maturities, Gross Unrealized Losses	4.8	0.3
Fixed maturities, Fair Value	411.6	396.2
Asset-backed
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, Amortized Cost or Cost	166.3	198.5
Fixed maturities, Gross Unrealized Gains	2.0	4.1
Fixed maturities, Gross Unrealized Losses	0.2
Fixed maturities, Fair Value	$ 168.1	$ 202.6

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Pension Plan - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jan. 01, 2005 Y
Retirement Plans [Line Items]
Interest rate used calculating annual transition pension adjustment for specified completed period of service				5.00%
Defined benefit plan, interest rate used calculating annual transition pension adjustment after specific completed period of service				35
Interest rate used calculating annual transition pension adjustment, thereafter				3.00%
Projected benefit obligation, defined benefit pension plans exceeds plan assets	$ 7
Common stock held by pension plan, shares	0	466,755
Maximum percentage contributed by employer	6.00%	6.00%	6.00%
Defined contribution plan expense	18.3	17.9	17.8
Additional cost contribution	2.8
Additional cost contribution	5.0	4.8
Minimum
Retirement Plans [Line Items]
Percentage of unrecognized net actuarial gains (losses) as projected benefit obligation, amortized as component of net periodic pension cost	10.00%
Chaucer Pension Scheme
Retirement Plans [Line Items]
Projected benefit obligation, defined benefit pension plans exceeds plan assets	8
Expected rate of return on plan assets	6.70%	7.50%	7.40%
Defined benefit plan, target allocation percentage	100.00%	100.00%
Fair value of total plan asset	120.2	90.9	74.3
Invested assets, fair value	119.9	90.7
Cash and cash equivalents, fair value	0.3	0.2
Employee contributions	0.4	0.4
Estimated future contributions in next fiscal year	2.0
Chaucer Pension Scheme | Equity Securities
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	7.00%	9.00%
Invested assets, fair value	88.3	69.6
Chaucer Pension Scheme | Equity Securities | Ultimate Target Level
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	60.00%
Chaucer Pension Scheme | Fixed Maturities
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	19.00%	14.00%
Invested assets, fair value	22.8	12.9
Chaucer Pension Scheme | Fixed Maturities | Ultimate Target Level
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	30.00%
Chaucer Pension Scheme | Real Estate Funds
Retirement Plans [Line Items]
Invested assets, fair value	8.8	8.2
Chaucer Pension Scheme | Real Estate Funds | Ultimate Target Level
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	10.00%
U.S. Defined Benefit Plans
Retirement Plans [Line Items]
Expected rate of return on plan assets	5.25%
Defined benefit plan, target allocation percentage	100.00%	100.00%
Invested assets, fair value	542.0	591.6
Estimated future contributions in next fiscal year	3.3
U.S. Defined Benefit Plans | Fixed Income Securities
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	84.00%	84.00%
Invested assets, fair value	454.9	496.4
U.S. Defined Benefit Plans | Equity Securities
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	16.00%	16.00%
Invested assets, fair value	87.1	95.2
U.S. Defined Benefit Plans | Fixed Maturities
Retirement Plans [Line Items]
Defined benefit plan, target allocation percentage	83.00%	83.00%
Invested assets, fair value	$ 449.6	$ 491.4

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Summary of Stock Option Plan Activity (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, beginning of year	2,892,882	2,715,430	2,843,909
Granted, Shares	537,800	529,500	297,000
Exercised, Shares	(1,192,134)	(90,624)	(120,064)
Forfeited or cancelled, Shares	(189,375)	(101,574)	(49,165)
Expired, Shares		(159,850)	(256,250)
Outstanding, end of year	2,049,173	2,892,882	2,715,430
Exercisable, end of year	783,873	1,630,382	1,686,930
Outstanding, beginning of year	$ 38.28	$ 38.57	$ 39.22
Granted, Weighted Average Exercise Price	$ 42.53	$ 36.84	$ 46.47
Exercised, Weighted Average Exercise Price	$ 34.70	$ 25.47	$ 32.82
Forfeited or cancelled, Weighted Average Exercise Price	$ 41.54	$ 41.45	$ 41.67
Expired, Weighted Average Exercise Price		$ 44.05	$ 57.00
Outstanding, end of year	$ 41.18	$ 38.28	$ 38.57
Exercisable, end of year	$ 41.16	$ 37.18	$ 37.69

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Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	$ 6,970.6	$ 6,952.2
Equity securities	430.2	315.8
Other investments	192.5	210.3
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments	153.2	172.8
Total investment assets at fair value	7,544.7	7,431.1
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investment assets at fair value	595.1	432.0
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments	149.6	169.2
Total investment assets at fair value	6,845.4	6,896.4
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments	3.6	3.6
Total investment assets at fair value	104.2	102.7
Fair Value, Measurements, Recurring | Fixed Maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	6,970.6	6,952.2
Fair Value, Measurements, Recurring | Fixed Maturities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	212.8	205.1
Fair Value, Measurements, Recurring | Fixed Maturities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	6,695.8	6,672.4
Fair Value, Measurements, Recurring | Fixed Maturities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	62.0	74.7
Fair Value, Measurements, Recurring | Fixed Maturities | U.S. Treasury And Government Agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	406.6	325.6
Fair Value, Measurements, Recurring | Fixed Maturities | U.S. Treasury And Government Agencies | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	167.2	144.2
Fair Value, Measurements, Recurring | Fixed Maturities | U.S. Treasury And Government Agencies | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	239.4	181.4
Fair Value, Measurements, Recurring | Fixed Maturities | Foreign government
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	305.0	352.9
Fair Value, Measurements, Recurring | Fixed Maturities | Foreign government | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	45.6	60.9
Fair Value, Measurements, Recurring | Fixed Maturities | Foreign government | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	259.4	292.0
Fair Value, Measurements, Recurring | Fixed Maturities | Municipal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	1,126.3	1,096.3
Fair Value, Measurements, Recurring | Fixed Maturities | Municipal | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	1,100.7	1,076.9
Fair Value, Measurements, Recurring | Fixed Maturities | Municipal | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	25.6	19.4
Fair Value, Measurements, Recurring | Fixed Maturities | Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	3,824.2	3,773.4
Fair Value, Measurements, Recurring | Fixed Maturities | Corporate | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	3,811.2	3,747.0
Fair Value, Measurements, Recurring | Fixed Maturities | Corporate | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	13.0	26.4
Fair Value, Measurements, Recurring | Fixed Maturities | Residential Mortgage Backed Securities U S Agency Backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	573.2	610.8
Fair Value, Measurements, Recurring | Fixed Maturities | Residential Mortgage Backed Securities U S Agency Backed | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	573.2	610.8
Fair Value, Measurements, Recurring | Fixed Maturities | Residential mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	155.6	194.4
Fair Value, Measurements, Recurring | Fixed Maturities | Residential mortgage-backed | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	155.1	193.7
Fair Value, Measurements, Recurring | Fixed Maturities | Residential mortgage-backed | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	0.5	0.7
Fair Value, Measurements, Recurring | Fixed Maturities | Commercial mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	411.6	396.2
Fair Value, Measurements, Recurring | Fixed Maturities | Commercial mortgage-backed | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	388.7	369.5
Fair Value, Measurements, Recurring | Fixed Maturities | Commercial mortgage-backed | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	22.9	26.7
Fair Value, Measurements, Recurring | Fixed Maturities | Asset-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	168.1	202.6
Fair Value, Measurements, Recurring | Fixed Maturities | Asset-backed | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities	168.1	201.1
Fair Value, Measurements, Recurring | Fixed Maturities | Asset-backed | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities		1.5
Fair Value, Measurements, Recurring | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	420.9	306.1
Fair Value, Measurements, Recurring | Equity Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	382.3	226.9
Fair Value, Measurements, Recurring | Equity Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities		54.8
Fair Value, Measurements, Recurring | Equity Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	$ 38.6	$ 24.4

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STATUTORY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2013

STATUTORY FINANCIAL INFORMATION

19. STATUTORY FINANCIAL INFORMATION

The Company’s U.S. insurance subsidiaries are required to file annual statements with state regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis), as codified by the National Association of Insurance Commissioners. Permitted statutory accounting practices encompass all accounting practices that are not prescribed; such practices differ from state to state, may differ from company to company within a state, and may change in the future. The Company’s U.S. insurance subsidiaries did not have any permitted practices as of or for the years ended December 31, 2013, 2012 and 2011.

Statutory capital and surplus differs from shareholders’ equity reported in accordance with generally accepted accounting principles primarily because under the statutory basis of accounting, deferred acquisition costs are expensed when incurred, the recognition of deferred tax assets is based on different recoverability assumptions and prior to 2013, postretirement benefit costs were based on different participant assumptions.

The following table provides statutory net income for the year ended December 31 and statutory capital and surplus as of December 31 for the periods indicated:

	2013		2012			2011
(in millions)
Statutory Net Income (Loss)
U.S. Insurance Subsidiaries	$	193.2	$	(47.3	)	$	(5.2	)
Statutory Capital and Surplus
U.S. Insurance Subsidiaries	$	1,834.3	$	1,523.4		$	1,582.8

The minimum statutory capital and surplus necessary to satisfy the Company’s regulatory requirements was $354.5 million, $329.0 million and $291.0 million, which equals the Authorized Control Level at December 31, 2013, 2012 and 2011, respectively.

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Lease Commitments - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating Leased Assets [Line Items]
Rental expenses for operating leases	$ 21.6	$ 22.4	$ 21.1
Future minimum rental payments	47.2
Future minimum rental payments, 2014	17.0
Future minimum rental payments, 2015	14.2
Future minimum rental payments, 2016	8.4
Future minimum rental payments, 2017	4.3
Future minimum rental payments, 2018 and thereafter	$ 3.3

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Condensed Financial Information of Registrant Parent Company Only Statements of Income (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Condensed Financial Statements, Captions [Line Items]
Income tax expense (benefit)from discontinued operations	$ 4.1	$ (0.5)	$ (2.5)
The Hanover Insurance Group, Inc
Condensed Financial Statements, Captions [Line Items]
Income tax expense (benefit)from discontinued operations	$ 4.1	$ (0.1)	$ 2.8

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Statutory Financial Information - Additional Information (Detail) (Minimum, USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Minimum
Statutory Accounting Practices [Line Items]
Minimum statutory capital and surplus necessary to satisfy regulatory requirements	$ 354.5	$ 329.0	$ 291.0

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Long Term Debt (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Total principal debt	$ 906.0	$ 851.9
Unamortized debt discount	(2.1)	(2.5)
Total	903.9	849.4
Senior debentures maturing June 15, 2021
Debt Instrument [Line Items]
Total principal debt	300.0	300.0
Senior debentures maturing March 1, 2020
Debt Instrument [Line Items]
Total principal debt	165.1	200.0
Senior debentures maturing October 15, 2025
Debt Instrument [Line Items]
Total principal debt	81.2	120.9
Subordinated debentures maturing March 30, 2053
Debt Instrument [Line Items]
Total principal debt	175.0
Subordinated debentures maturing February 3, 2027
Debt Instrument [Line Items]
Total principal debt	59.7	59.7
Federal Home Loan Bank of Boston
Debt Instrument [Line Items]
Total principal debt	$ 125.0	$ 171.3

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INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2013

Amortized Cost and Fair Value of Available-for-Sale Fixed Maturities and Cost and Fair Value of Equity Securities

The amortized cost and fair value of available-for-sale fixed maturities and the cost and fair value of equity securities were as follows:

DECEMBER 31, 2013
(in millions)
	Amortized		Gross		Gross				OTTI
	Cost or Cost		Unrealized Gains		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. Treasury and government agencies	$	417.5	$	3.3	$	14.2	$	406.6	$	—
Foreign government		304.5		2.1		1.6		305.0		—
Municipal		1,108.0		37.4		19.1		1,126.3		—
Corporate		3,690.2		171.5		37.5		3,824.2		8.6
Residential mortgage-backed		722.8		20.1		14.1		728.8		1.6
Commercial mortgage-backed		405.9		10.5		4.8		411.6		—
Asset-backed		166.3		2.0		0.2		168.1		—
Total fixed maturities	$	6,815.2	$	246.9	$	91.5	$	6,970.6	$	10.2
Equity securities	$	366.5	$	66.9	$	3.2	$	430.2	$	—
DECEMBER 31, 2012
(in millions)
	Amortized		Gross		Gross				OTTI
	Cost or Cost		Unrealized Gains		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. Treasury and government agencies	$	317.2	$	8.8	$	0.4	$	325.6	$	—
Foreign government		348.5		4.6		0.2		352.9		—
Municipal		1,010.2		87.2		1.1		1,096.3		—
Corporate		3,512.8		275.4		14.8		3,773.4		9.3
Residential mortgage-backed		769.0		39.4		3.2		805.2		1.7
Commercial mortgage-backed		373.3		23.2		0.3		396.2		—
Asset-backed		198.5		4.1		—		202.6		—
Total fixed maturities	$	6,529.5	$	442.7	$	20.0	$	6,952.2	$	11.0
Equity securities	$	299.0	$	21.6	$	4.8	$	315.8	$	—

Maturities of Available-For-Sale Debt Securities

The amortized cost and fair value by maturity periods for fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers.

DECEMBER 31	2013
(in millions)
	Amortized		Fair
	Cost		Value
Due in one year or less	$	495.5	$	501.4
Due after one year through five years		2,234.5		2,327.9
Due after five years through ten years		2,100.2		2,139.6
Due after ten years		690.0		693.2
		5,520.2		5,662.1
Mortgage-backed and asset-backed securities		1,295.0		1,308.5
Total fixed maturities	$	6,815.2	$	6,970.6

Unrealized Gains and Losses on Available-For-Sale and Other Securities

Unrealized gains and losses on available-for-sale and other securities are summarized in the following table.

YEARS ENDED DECEMBER 31
(in millions)
				Equity
	Fixed			Securities And
2013	Maturities			Other			Total
Net appreciation, beginning of year	$	410.1		$	15.9		$	426.0
Net appreciation (depreciation) on available-for-sale securities and derivative instruments		(273.6	)		48.1			(225.5	)
Change in OTTI losses recognized in other comprehensive income		0.8			—			0.8
Benefit (provision) for deferred income taxes		74.8			(16.8	)		58.0
		(198.0	)		31.3			(166.7	)
Net appreciation, end of year	$	212.1		$	47.2		$	259.3
2012
Net appreciation, beginning of year	$	300.2		$	8.5		$	308.7
Net appreciation on available-for-sale securities and derivative instruments		140.7			10.6			151.3
Change in OTTI losses recognized in other comprehensive income		12.2			—			12.2
Provision for deferred income taxes		(43.0	)		(3.2	)		(46.2	)
		109.9			7.4			117.3
Net appreciation, end of year	$	410.1		$	15.9		$	426.0
2011
Net appreciation, beginning of year	$	210.3			8.0		$	218.3
Net appreciation (depreciation) on available-for-sale securities and derivative instruments		66.4			(1.3	)		65.1
Change in OTTI losses recognized in other comprehensive income		10.5			—			10.5
Benefit for deferred income taxes		13.0			1.8			14.8
		89.9			0.5			90.4
Net appreciation, end of year	$	300.2			8.5		$	308.7

Fixed Maturities and Equity Securities in Unrealized Loss Position

The following tables provide information about the Company’s fixed maturities and equity securities that were in an unrealized loss position at December 31, 2013 and 2012:

DECEMBER 31, 2013
(in millions)
					Greater than 12
	12 months or less				months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value
Fixed maturities:
Investment grade:
U.S. Treasury and government agencies	$	12.3	$	247.9	$	1.9	$	18.8	$	14.2	$	266.7
Foreign governments		1.5		129.0		0.1		17.3		1.6		146.3
Municipal		14.8		345.3		4.3		39.9		19.1		385.2
Corporate		21.4		872.7		11.6		87.7		33.0		960.4
Residential mortgage-backed		10.3		321.1		3.4		29.5		13.7		350.6
Commercial mortgage-backed		4.2		155.4		0.6		10.2		4.8		165.6
Asset-backed		0.2		31.0		—		0.3		0.2		31.3
Total investment grade		64.7		2,102.4		21.9		203.7		86.6		2,306.1
Below investment grade:
Corporate		2.9		71.9		1.6		21.4		4.5		93.3
Residential mortgage-backed		0.1		2.0		0.3		1.5		0.4		3.5
Total below investment grade		3.0		73.9		1.9		22.9		4.9		96.8
Total fixed maturities		67.7		2,176.3		23.8		226.6		91.5		2,402.9
Equity securities		2.8		45.2		0.4		0.7		3.2		45.9
Total	$	70.5	$	2,221.5	$	24.2	$	227.3	$	94.7	$	2,448.8
DECEMBER 31, 2012
(in millions)
					Greater than 12
	12 months or less				months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value
Fixed maturities:
Investment grade:
U.S. Treasury and government agencies	$	0.2	$	89.5	$	0.2	$	8.5	$	0.4	$	98.0
Foreign governments		0.2		81.2		—		0.4		0.2		81.6
Municipal		0.5		61.9		0.6		24.0		1.1		85.9
Corporate		1.8		224.8		6.6		59.0		8.4		283.8
Residential mortgage-backed		0.5		47.3		2.0		9.4		2.5		56.7
Commercial mortgage-backed		0.2		29.9		0.1		4.9		0.3		34.8
Asset-backed		—		11.4		—		0.3		—		11.7
Total investment grade		3.4		546.0		9.5		106.5		12.9		652.5
Below investment grade:
Municipal		—		—		—		2.0		—		2.0
Corporate		1.1		26.6		5.3		50.6		6.4		77.2
Residential mortgage-backed		0.1		1.6		0.6		2.5		0.7		4.1
Total below investment grade		1.2		28.2		5.9		55.1		7.1		83.3
Total fixed maturities		4.6		574.2		15.4		161.6		20.0		735.8
Equity securities		4.8		74.4		—		—		4.8		74.4
Total	$	9.4	$	648.6	$	15.4	$	161.6	$	24.8	$	810.2

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EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY TRANSACTIONS

12 Months Ended

Dec. 31, 2013

EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY TRANSACTIONS

12. EARNINGS PER SHARE AND SHAREHOLDERS’ EQUITY TRANSACTIONS

The following table provides weighted average share information used in the calculation of the Company’s basic and diluted earnings per share:

DECEMBER 31	2013			2012			2011
(in millions, except per share data)
Basic shares used in the calculation of earnings per share		44.1			44.7			45.2
Dilutive effect of securities:
Employee stock options		0.3			0.2			0.2
Non-vested stock grants		0.5			0.4			0.4
Diluted shares used in the calculation of earnings per share		44.9			45.3			45.8
Per share effect of dilutive securities on income from continuing operations	$	(0.11	)	$	(0.01	)	$	(0.01	)
Per share effect of dilutive securities on net income	$	(0.11	)	$	(0.02	)	$	(0.01	)

Diluted earnings per share during 2013, 2012 and 2011 excludes 0.1 million, 1.8 million and 1.6 million, respectively, of common shares issuable under the Company’s stock compensation plans, because their effect would be antidilutive.

Since October 2007 and through December 2013, the Company’s Board of Directors has authorized aggregate repurchases of the Company’s common stock of up to $600 million, including a $100 million increase in the program in 2013. As of December 31, 2013, the Company has $137.0 million available for repurchases under these repurchase authorizations. Repurchases may be executed using open market purchases, privately negotiated transactions, accelerated repurchase programs or other transactions. The Company is not required to purchase any specific number of shares or to make purchases by any certain date under this program. During 2013, the Company purchased 1.6 million shares of the Company’s common stock at a cost of $78.2 million.

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Changes in Other Comprehensive Income (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accumulated Other Comprehensive Income (Loss) [Line Items]
Unrealized gains (losses) arising during period (net of pre-tax, ceded unrealized losses of $1.2 million for the twelve months ended December 31, 2013), Pre-tax	$ (189.4)	$ 186.4	$ 96.0
Amount of realized gains from sales and other, Pre-tax	(41.3)	(31.8)	(28.8)
Portion of other-than-temporary impairment losses recognized in earnings, Pre-tax	6.0	8.9	8.4
Net unrealized gains (losses), Pre-tax	(224.7)	163.5	75.6
Net actuarial gain (loss) arising in the period, Pre-tax	15.0	(24.9)	(16.0)
Amortization of net actuarial loss and prior service cost recognized as net periodic benefit cost, Pre-tax	14.9	9.3	10.2
Foreign currency translation recognized during the period, Pre-tax	(3.1)	12.2	(17.7)
Other comprehensive income (loss), Pre-tax	(197.9)	160.1	52.1
Unrealized gains (losses) arising during period (net of pre-tax, ceded unrealized losses of $1.2 million for the twelve months ended December 31, 2013), Tax Benefit (Expense)	63.1	(40.2)	24.1
Amount of realized gains from sales and other, Tax Benefit (Expense)	(3.0)	(3.3)	(6.9)
Portion of other-than-temporary impairment losses recognized in earnings, Tax Benefit (Expense)	(2.1)	(2.7)	(2.4)
Net unrealized gains (losses), Tax Benefit (Expense)	58.0	(46.2)	14.8
Net actuarial gain (loss) arising in the period, Tax Benefit (Expense)	(4.2)	9.0	4.2
Amortization of net actuarial loss and prior service cost recognized as net periodic benefit cost, Tax Benefit (Expense)	(5.2)	(3.2)	(3.6)
Foreign currency translation recognized during the period, Tax Benefit (Expense)	1.1	(4.3)	6.2
Other comprehensive income (loss), Tax Benefit (Expense)	49.7	(44.7)	21.6
Unrealized gains (losses) arising during period (net of pre-tax, ceded unrealized losses of $1.2 million for the twelve months ended December 31, 2013), Net of Tax	(126.3)	146.2	120.1
Amount of realized gains from sales and other, Net of Tax	(44.3)	(35.1)	(35.7)
Portion of other-than-temporary impairment losses recognized in earnings, Net of Tax	3.9	6.2	6.0
Total available-for-sale securities and derivative instruments	(166.7)	117.3	90.4
Net actuarial gain (loss) arising in the period, Net of Tax	10.8	(15.9)	(11.8)
Amortization of net actuarial loss and prior service cost recognized as net periodic benefit cost, Net of Tax	9.7	6.1	6.6
Foreign currency translation recognized during the period, Net of Tax	(2.0)	7.9	(11.5)
Other comprehensive income (loss), Net of Tax	$ (148.2)	$ 115.4	$ 73.7