EX-99.2

EX-99.2 3 d764811dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

LOGO

FINANCIAL SUPPLEMENT

SECOND QUARTER 2014

THE HANOVER INSURANCE GROUP

FINANCIAL SUPPLEMENT

TABLE OF CONTENTS


Business Description			1

Financial Highlights			2

Consolidated Financial Statements

Income Statements			3

Balance Sheets			4

GAAP Underwriting Results

Consolidated			5-7

Commercial Lines			8-10

Personal Lines			11-13

Chaucer			14-16

Investments

Net Investment Income and Yields			17

Investment Portfolio			18

Credit Quality and Duration of Fixed Maturities			19

Top 10 Corporate and Municipal Fixed Maturity Holdings			20

Reconciliation of Operating Income (Loss) to Net Income (Loss)			21

Other Information

Non-GAAP Financial Measures			22

Corporate Information			23

Market and Dividend Information			23

Financial Strength and Debt Ratings			23

THE HANOVER INSURANCE GROUP

BASIS OF PRESENTATION

BUSINESS DESCRIPTIONS

COMMERCIAL LINES

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

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

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

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

PERSONAL LINES

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

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

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

CHAUCER

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

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

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

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

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

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

OTHER

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

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


	Q2			Q3			Q4			Q1			Q2			Jun-YTD		Jun-YTD
(In millions, except earnings per share)	2013			2013			2013			2014			2014			2013		2014
PREMIUMS
Gross premiums written	$	1,394.4		$	1,313.8		$	1,175.4		$	1,408.1		$	1,423.6		$	2,712.5	$	2,831.7
Net premiums written		1,242.6			1,181.9			1,051.5			1,172.3			1,276.2			2,319.3		2,448.5
Net premiums earned		1,090.8			1,124.7			1,140.7			1,163.0			1,174.7			2,185.1		2,337.7
EARNINGS
Operating income before interest and taxes	$	81.1		$	107.2		$	102.9		$	85.0		$	102.2		$	183.3	$	187.2
Operating income after taxes		46.8			60.9			59.6			47.0			58.4			106.7		105.4
Income from continuing operations		53.1			61.3			64.9			54.7			82.5			119.5		137.2
Net income		53.4			61.3			70.1			54.6			82.6			119.6		137.2
PER SHARE DATA (DILUTED)
Operating income after taxes	$	1.05		$	1.36		$	1.33		$	1.05		$	1.30		$	2.37	$	2.35
Income from continuing operations		1.19			1.37			1.45			1.22			1.84			2.65		3.06
Net income		1.19			1.37			1.57			1.22			1.84			2.66		3.06
Weighted average shares outstanding		44.8			44.6			44.8			44.8			44.9			45.0		44.8

BALANCE SHEET
(In millions, except per share data)	June 30 2013			September 30 2013			December 31 2013			March 31 2014			June 30 2014
Total assets	$	13,306.4		$	13,463.3		$	13,378.7		$	13,643.0		$	13,964.8
Total loss and loss adjustment expense reserves		6,063.6			6,162.8			6,231.5			6,323.4			6,448.0
Total shareholders’ equity		2,495.7			2,544.2			2,594.5			2,681.1			2,795.1
U.S. Property and Casualty Companies
Statutory surplus	$	1,639.5		$	1,751.3		$	1,834.3		$	1,900.4		$	1,974.9
Premium to surplus ratio		2.08:1			1.95:1			1.87:1			1.83:1			1.77:1
Book value per share	$	57.41		$	58.43		$	59.43		$	61.24		$	63.65
Book value per share, excluding net unrealized investment gains and losses, net of tax	$	53.62		$	54.64		$	56.07		$	56.70		$	58.16
Tangible book value per share (total book value excluding goodwill and intangibles)	$	50.25		$	51.20		$	52.22		$	54.06		$	56.47
Shares outstanding		43.5			43.6			43.7			43.8			43.9
Total debt/equity		37.6	%		36.9	%		34.8	%		33.7	%		32.3	%
Total debt/total capital		27.3	%		27.0	%		25.8	%		25.2	%		24.4	%

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Three Months ended June 30							Six Months ended June 30
(In millions)	2014		2013		% Change			2014		2013		% Change
REVENUES
Premiums earned	$	1,174.7	$	1,090.8		7.7		$	2,337.7	$	2,185.1		7.0
Net investment income		67.0		67.9		(1.3	)		134.0		135.2		(0.9	)
Net realized investment gains		22.2		13.7		62.0			26.6		21.8		22.0
Fees and other income		9.1		10.2		(10.8	)		18.6		20.8		(10.6	)

Total revenues		1,273.0		1,182.6		7.6			2,516.9		2,362.9		6.5

LOSSES AND EXPENSES
Losses and loss adjustment expenses		725.5		692.1		4.8			1,476.0		1,375.5		7.3
Amortization of deferred acquisition costs		259.6		232.7		11.6			513.3		475.2		8.0
Interest expense		16.3		17.4		(6.3	)		32.6		32.1		1.6
Other operating expenses		163.9		174.5		(6.1	)		315.2		325.3		(3.1	)

Total losses and expenses		1,165.3		1,116.7		4.4			2,337.1		2,208.1		5.8

Income from continuing operations before income taxes		107.7		65.9		63.4			179.8		154.8		16.1
Income tax expense		25.2		12.8		96.9			42.6		35.3		20.7

Income from continuing operations		82.5		53.1		55.4			137.2		119.5		14.8
Discontinued operations		0.1		0.3		N/M			—		0.1		N/M

Net income	$	82.6	$	53.4		54.7		$	137.2	$	119.6		14.7

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


	June 30			December 31
(In millions, except per share data)	2014			2013			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $6,785.1 and $6,815.2)	$	7,058.5		$	6,970.6			1.3
Equity securities, at fair value (cost of $446.4 and $366.5)		530.5			430.2			23.3
Other investments		238.5			192.5			23.9

Total investments		7,827.5			7,593.3			3.1

Cash and cash equivalents		606.2			486.2			24.7
Accrued investment income		70.0			68.0			2.9
Premiums and accounts receivable, net		1,515.9			1,324.6			14.4
Reinsurance recoverable on paid and unpaid losses and unearned premiums		2,416.7			2,335.0			3.5
Deferred acquistion costs		540.6			506.0			6.8
Deferred income taxes		145.6			239.7			(39.3	)
Goodwill		185.2			184.9			0.2
Other assets		542.1			526.1			3.0
Assets of discontinued operations		115.0			114.9			0.1

Total assets	$	13,964.8		$	13,378.7			4.4

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Loss and loss adjustment expense reserves	$	6,448.0		$	6,231.5			3.5
Unearned premiums		2,689.0			2,515.8			6.9
Expenses and taxes payable		569.7			637.2			(10.6	)
Reinsurance premiums payable		443.2			374.7			18.3
Debt		903.9			903.9			—
Liabilities of discontinued operations		115.9			121.1			(4.3	)

Total liabilities		11,169.7			10,784.2			3.6

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		1,824.5			1,830.1			(0.3	)
Accumulated other comprehensive income		267.1			177.6			50.4
Retained earnings		1,451.7			1,349.1			7.6
Treasury stock at cost (16.6 and 16.8 million shares)		(748.8	)		(762.9	)		(1.8	)

Total shareholders’ equity		2,795.1			2,594.5			7.7

Total liabilities and shareholders’ equity	$	13,964.8		$	13,378.7			4.4

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CONSOLIDATED

Three Months ended June 30


	2014															2013
	Commercial			Personal												Commercial			Personal
(In millions, except percentage data)	Lines			Lines			Chaucer			Other			Total			Lines			Lines			Chaucer			Other			Total
Gross premiums written	$	613.0		$	395.2		$	415.4		$	—		$	1,423.6		$	591.0		$	397.8		$	405.6		$	—		$	1,394.4

Net premiums written	$	541.0		$	370.8		$	364.4		$	—		$	1,276.2		$	521.5		$	370.6		$	350.5		$	—		$	1,242.6

Net premiums earned	$	517.6		$	350.3		$	306.8		$	—		$	1,174.7		$	485.8		$	366.7		$	238.3		$	—		$	1,090.8
Losses and LAE:
Current accident year, excluding catastrophe losses		300.8			219.8			178.4			—			699.0			296.0			229.1			134.1			—			659.2
Prior year unfavorable (favorable) reserve development		1.8			(2.2	)		(29.2	)		0.4			(29.2	)		0.5			2.8			(30.7	)		0.5			(26.9	)
Catastrophe losses		17.0			27.2			11.5			—			55.7			15.1			32.2			12.5			—			59.8

Total losses and LAE		319.6			244.8			160.7			0.4			725.5			311.6			264.1			115.9			0.5			692.1
Amortization of deferred acquisition costs and other underwriting expenses		190.7			101.9			121.8			0.5			414.9			183.7			102.9			97.7			0.5			384.8

GAAP underwriting profit (loss)		7.3			3.6			24.3			(0.9	)		34.3			(9.5	)		(0.3	)		24.7			(1.0	)		13.9
Net investment income		37.2			18.0			10.7			1.1			67.0			36.0			19.1			10.7			2.1			67.9
Other income		2.1			3.1			3.1			0.8			9.1			1.9			3.1			4.5			0.7			10.2
Other operating expenses		(2.4	)		(2.0	)		—			(3.8	)		(8.2	)		(2.2	)		(2.0	)		(3.0	)		(3.7	)		(10.9	)

Operating income (loss) before income taxes	$	44.2		$	22.7		$	38.1		$	(2.8	)	$	102.2		$	26.2		$	19.9		$	36.9		$	(1.9	)	$	81.1

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		58.2	%		62.7	%		58.2	%		N/M			59.6	%		61.0	%		62.4	%		56.3	%		N/M			60.4	%
Prior year unfavorable (favorable) reserve development		0.3	%		(0.6	)%		(9.5	)%		N/M			(2.5	)%		0.1	%		0.8	%		(12.9	)%		N/M			(2.5	)%
Catastrophe losses		3.3	%		7.8	%		3.7	%		N/M			4.7	%		3.1	%		8.8	%		5.2	%		N/M			5.5	%

Total loss and LAE ratio		61.8	%		69.9	%		52.4	%		N/M			61.8	%		64.2	%		72.0	%		48.6	%		N/M			63.4	%
Expense ratio		36.6	%		28.4	%		39.7	%		N/M			35.0	%		37.6	%		27.3	%		41.0	%		N/M			35.0	%

Combined ratio		98.4	%		98.3	%		92.1	%		N/M			96.8	%		101.8	%		99.3	%		89.6	%		N/M			98.4	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CONSOLIDATED

Six Months ended June 30


	2014															2013
	Commercial			Personal												Commercial			Personal
(In millions, except percentage data)	Lines			Lines			Chaucer			Other			Total			Lines			Lines			Chaucer			Other			Total
Gross premiums written	$	1,210.8		$	738.5		$	882.4		$	—		$	2,831.7		$	1,152.4		$	765.0		$	795.1		$	—		$	2,712.5

Net premiums written	$	1,080.3		$	690.0		$	678.2		$	—		$	2,448.5		$	1,005.1		$	712.2		$	602.0		$	—		$	2,319.3

Net premiums earned	$	1,030.3		$	700.5		$	606.9		$	—		$	2,337.7		$	962.4		$	735.5		$	487.2		$	—		$	2,185.1
Losses and LAE:
Current accident year, excluding catastrophe losses		604.4			450.4			356.5			—			1,411.3			586.0			467.4			274.4			—			1,327.8
Prior year unfavorable (favorable) reserve development		2.4			(3.2	)		(48.8	)		0.7			(48.9	)		0.7			8.4			(44.0	)		1.1			(33.8	)
Catastrophe losses		57.2			45.6			10.8			—			113.6			22.5			43.9			15.1			—			81.5

Total losses and LAE		664.0			492.8			318.5			0.7			1,476.0			609.2			519.7			245.5			1.1			1,375.5
Amortization of deferred acquisition costs and other underwriting expenses		380.3			202.0			227.6			0.7			810.6			365.8			206.0			184.0			1.0			756.8

GAAP underwriting profit (loss)		(14.0	)		5.7			60.8			(1.4	)		51.1			(12.6	)		9.8			57.7			(2.1	)		52.8
Net investment income		74.5			35.9			21.2			2.4			134.0			72.1			38.1			21.2			3.8			135.2
Other income		4.1			6.0			7.0			1.5			18.6			3.9			6.4			9.0			1.5			20.8
Other operating expenses		(4.3	)		(3.3	)		(1.7	)		(7.2	)		(16.5	)		(4.2	)		(3.9	)		(10.1	)		(7.3	)		(25.5	)

Operating income (loss) before income taxes	$	60.3		$	44.3		$	87.3		$	(4.7	)	$	187.2		$	59.2		$	50.4		$	77.8		$	(4.1	)	$	183.3

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		58.7	%		64.4	%		58.7	%		N/M			60.3	%		60.9	%		63.5	%		56.3	%		N/M			60.8	%
Prior year unfavorable (favorable) reserve development		0.2	%		(0.5	)%		(8.0	)%		N/M			(2.1	)%		0.1	%		1.1	%		(9.0	)%		N/M			(1.5	)%
Catastrophe losses		5.6	%		6.5	%		1.8	%		N/M			4.9	%		2.3	%		6.0	%		3.1	%		N/M			3.7	%

Total loss and LAE ratio		64.5	%		70.4	%		52.5	%		N/M			63.1	%		63.3	%		70.6	%		50.4	%		N/M			63.0	%
Expense ratio		36.7	%		28.1	%		37.5	%		N/M			34.4	%		37.8	%		27.3	%		37.8	%		N/M			34.3	%

Combined ratio		101.2	%		98.5	%		90.0	%		N/M			97.5	%		101.1	%		97.9	%		88.2	%		N/M			97.3	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CONSOLIDATED


	Q2			Q3			Q4			Q1			Q2			Jun-YTD			Jun-YTD
(In millions, except percentage data)	2013			2013			2013			2014			2014			2013			2014
Gross premiums written	$	1,394.4		$	1,313.8		$	1,175.4		$	1,408.1		$	1,423.6		$	2,712.5		$	2,831.7

Net premiums written	$	1,242.6		$	1,181.9		$	1,051.5		$	1,172.3		$	1,276.2		$	2,319.3		$	2,448.5

Net premiums earned	$	1,090.8		$	1,124.7		$	1,140.7		$	1,163.0		$	1,174.7		$	2,185.1		$	2,337.7
Losses and LAE:
Current accident year, excluding catastrophe losses		659.2			688.9			680.7			712.3			699.0			1,327.8			1,411.3
Prior year favorable reserve development		(26.9	)		(23.6	)		(18.9	)		(19.7	)		(29.2	)		(33.8	)		(48.9	)
Catastrophe losses		59.8			30.6			27.9			57.9			55.7			81.5			113.6

Total losses and LAE		692.1			695.9			689.7			750.5			725.5			1,375.5			1,476.0
Amortization of deferred acquisition costs and other underwriting expenses		384.8			387.4			414.3			395.7			414.9			756.8			810.6

GAAP underwriting profit	$	13.9		$	41.4		$	36.7		$	16.8		$	34.3		$	52.8		$	51.1

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		60.4	%		61.3	%		59.8	%		61.3	%		59.6	%		60.8	%		60.3	%
Prior year favorable reserve development		(2.5	)%		(2.1	)%		(1.7	)%		(1.7	)%		(2.5	)%		(1.5	)%		(2.1	)%
Catastrophe losses		5.5	%		2.7	%		2.4	%		5.0	%		4.7	%		3.7	%		4.9	%

Total loss and LAE ratio		63.4	%		61.9	%		60.5	%		64.6	%		61.8	%		63.0	%		63.1	%
Expense ratio		35.0	%		34.1	%		36.0	%		33.7	%		35.0	%		34.3	%		34.4	%

Combined ratio		98.4	%		96.0	%		96.5	%		98.3	%		96.8	%		97.3	%		97.5	%

Combined ratio, excluding catastrophe losses		92.9	%		93.3	%		94.1	%		93.3	%		92.1	%		93.6	%		92.6	%
Current accident year combined ratio, excluding catastrophe losses		95.4	%		95.4	%		95.8	%		95.0	%		94.6	%		95.1	%		94.7	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

COMMERCIAL LINES

Three Months ended June 30


	2014															2013
	Multiple						Workers’									Multiple						Workers’
(In millions, except percentage data)	Peril			Auto			Comp			Other			Total			Peril			Auto			Comp			Other			Total
Net premiums written	$	171.7		$	76.4		$	58.6		$	234.3		$	541.0		$	163.2		$	76.8		$	57.1		$	224.4		$	521.5

Net premiums earned	$	169.8		$	75.8		$	59.4		$	212.6		$	517.6		$	157.9		$	70.5		$	54.8		$	202.6		$	485.8
Losses and LAE:
Current accident year, excluding catastrophe losses		86.6			54.7			42.2			117.3			300.8			87.4			50.7			38.4			119.5			296.0
Prior year unfavorable (favorable) reserve development		(4.1	)		4.1			(0.3	)		2.1			1.8			(3.9	)		3.6			(4.0	)		4.8			0.5
Catastrophe losses		12.6			0.2			—			4.2			17.0			11.1			0.1			—			3.9			15.1

Total losses and LAE		95.1			59.0			41.9			123.6			319.6			94.6			54.4			34.4			128.2			311.6
Amortization of deferred acquisition costs and other underwriting expenses														190.7															183.7

GAAP underwriting profit (loss)														7.3															(9.5	)
Net investment income														37.2															36.0
Other income														2.1															1.9
Other operating expenses														(2.4	)														(2.2	)

Operating income before income taxes													$	44.2														$	26.2

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		51.0	%		72.2	%		71.1	%		55.1	%		58.2	%		55.4	%		71.9	%		70.1	%		59.0	%		61.0	%
Prior year unfavorable (favorable) reserve development		(2.4	)%		5.4	%		(0.5	)%		1.0	%		0.3	%		(2.5	)%		5.1	%		(7.3	)%		2.4	%		0.1	%
Catastrophe losses		7.4	%		0.3	%		—			2.0	%		3.3	%		7.0	%		0.1	%		—			1.9	%		3.1	%

Total loss and LAE ratio		56.0	%		77.9	%		70.6	%		58.1	%		61.8	%		59.9	%		77.1	%		62.8	%		63.3	%		64.2	%
Expense ratio														36.6	%														37.6	%

Combined ratio														98.4	%														101.8	%

Change in policies in force		3.6	%		5.1	%		8.5	%		1.8	%		3.7	%		2.1	%		6.8	%		14.1	%		6.0	%		5.8	%
Retention		85.2	%		78.2	%		75.3	%		N/M			82.1	%		83.5	%		78.7	%		78.3	%		N/M			81.4	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

COMMERCIAL LINES

Six Months ended June 30


	2014															2013
	Multiple						Workers’									Multiple						Workers’
(In millions, except percentage data)	Peril			Auto			Comp			Other			Total			Peril			Auto			Comp			Other			Total
Net premiums written	$	344.6		$	152.6		$	129.9		$	453.2		$	1,080.3		$	317.2		$	149.6		$	119.3		$	419.0		$	1,005.1

Net premiums earned	$	337.3		$	151.3		$	118.2		$	423.5		$	1,030.3		$	310.5		$	140.0		$	107.8		$	404.1		$	962.4
Losses and LAE:
Current accident year, excluding catastrophe losses		178.9			109.1			83.7			232.7			604.4			174.3			99.6			75.5			236.6			586.0
Prior year unfavorable (favorable) reserve development		(4.8	)		7.5			(1.9	)		1.6			2.4			(4.0	)		5.4			(7.5	)		6.8			0.7
Catastrophe losses		44.7			0.2			—			12.3			57.2			16.3			0.2			—			6.0			22.5

Total losses and LAE		218.8			116.8			81.8			246.6			664.0			186.6			105.2			68.0			249.4			609.2
Amortization of deferred acquisition costs and other underwriting expenses														380.3															365.8

GAAP underwriting loss														(14.0	)														(12.6	)
Net investment income														74.5															72.1
Other income														4.1															3.9
Other operating expenses														(4.3	)														(4.2	)

Operating income before income taxes													$	60.3														$	59.2

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		52.9	%		72.1	%		70.8	%		55.0	%		58.7	%		56.2	%		71.1	%		70.1	%		58.6	%		60.9	%
Prior year unfavorable (favorable) reserve development		(1.4	)%		5.0	%		(1.6	)%		0.4	%		0.2	%		(1.3	)%		3.9	%		(7.0	)%		1.7	%		0.1	%
Catastrophe losses		13.3	%		0.1	%		—			2.9	%		5.6	%		5.2	%		0.1	%		—			1.5	%		2.3	%

Total loss and LAE ratio		64.8	%		77.2	%		69.2	%		58.3	%		64.5	%		60.1	%		75.1	%		63.1	%		61.8	%		63.3	%
Expense ratio														36.7	%														37.8	%

Combined ratio														101.2	%														101.1	%

Change in policies in force		3.6	%		5.1	%		8.5	%		1.8	%		3.7	%		2.1	%		6.8	%		14.1	%		6.0	%		5.8	%
Retention		84.9	%		79.4	%		77.6	%		N/M			82.5	%		83.3	%		80.0	%		78.3	%		N/M			81.4	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

COMMERCIAL LINES


	Q2			Q3			Q4			Q1			Q2			Jun-YTD			Jun-YTD
(In millions, except percentage data)	2013			2013			2013			2014			2014			2013			2014
Gross premiums written	$	591.0		$	601.7		$	541.8		$	597.8		$	613.0		$	1,152.4		$	1,210.8

Net premiums written	$	521.5		$	530.5		$	471.6		$	539.3		$	541.0		$	1,005.1		$	1,080.3

Net premiums earned	$	485.8		$	492.7		$	503.3		$	512.7		$	517.6		$	962.4		$	1,030.3
Losses and LAE:
Current accident year, excluding catastrophe losses		296.0			293.7			300.2			303.6			300.8			586.0			604.4
Prior year unfavorable reserve development		0.5			2.3			0.3			0.6			1.8			0.7			2.4
Catastrophe losses		15.1			8.5			7.7			40.2			17.0			22.5			57.2

Total losses and LAE		311.6			304.5			308.2			344.4			319.6			609.2			664.0
Amortization of deferred acquisition costs and other underwriting expenses		183.7			185.4			196.3			189.6			190.7			365.8			380.3

GAAP underwriting profit (loss)	$	(9.5	)	$	2.8		$	(1.2	)	$	(21.3	)	$	7.3		$	(12.6	)	$	(14.0	)

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		61.0	%		59.6	%		59.7	%		59.3	%		58.2	%		60.9	%		58.7	%
Prior year unfavorable reserve development		0.1	%		0.5	%		0.1	%		0.1	%		0.3	%		0.1	%		0.2	%
Catastrophe losses		3.1	%		1.7	%		1.5	%		7.8	%		3.3	%		2.3	%		5.6	%

Total loss and LAE ratio		64.2	%		61.8	%		61.3	%		67.2	%		61.8	%		63.3	%		64.5	%
Expense ratio		37.6	%		37.4	%		38.8	%		36.8	%		36.6	%		37.8	%		36.7	%

Combined ratio		101.8	%		99.2	%		100.1	%		104.0	%		98.4	%		101.1	%		101.2	%

Combined ratio, excluding catastrophe losses		98.7	%		97.5	%		98.6	%		96.2	%		95.1	%		98.8	%		95.6	%
Current accident year combined ratio, excluding catastrophe losses		98.6	%		97.0	%		98.5	%		96.1	%		94.8	%		98.7	%		95.4	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

PERSONAL LINES

Three Months ended June 30


	2014												2013
(In millions, except percentage data)	Auto			Home			Other			Total			Auto			Home			Other			Total
Net premiums written	$	227.3		$	132.7		$	10.8		$	370.8		$	227.9		$	131.8		$	10.9		$	370.6

Net premiums earned	$	216.0		$	124.2		$	10.1		$	350.3		$	228.5		$	127.8		$	10.4		$	366.7
Losses and LAE:
Current accident year, excluding catastrophe losses		151.3			64.8			3.7			219.8			165.3			59.8			4.0			229.1
Prior year unfavorable (favorable) reserve development		(3.0	)		1.0			(0.2	)		(2.2	)		2.8			—			—			2.8
Catastrophe losses		1.2			25.7			0.3			27.2			2.4			28.9			0.9			32.2

Total losses and LAE		149.5			91.5			3.8			244.8			170.5			88.7			4.9			264.1
Amortization of deferred acquisition costs and other underwriting expenses											101.9												102.9

GAAP underwriting profit (loss)											3.6												(0.3	)
Net investment income											18.0												19.1
Other income											3.1												3.1
Other operating expenses											(2.0	)											(2.0	)

Operating income before income taxes										$	22.7											$	19.9

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		70.0	%		52.1	%		36.6	%		62.7	%		72.3	%		46.8	%		38.4	%		62.4	%
Prior year unfavorable (favorable) reserve development		(1.4	)%		0.8	%		(2.0	)%		(0.6	)%		1.2	%		—			—			0.8	%
Catastrophe losses		0.6	%		20.7	%		3.0	%		7.8	%		1.1	%		22.6	%		8.7	%		8.8	%

Total loss and LAE ratio		69.2	%		73.6	%		37.6	%		69.9	%		74.6	%		69.4	%		47.1	%		72.0	%
Expense ratio											28.4	%											27.3	%

Combined ratio											98.3	%											99.3	%

Change in policies in force		(10.1	)%		(11.8	)%		(15.1	)%		(11.1	)%		(5.1	)%		(6.0	)%		(8.8	)%		(5.7	)%
Retention		74.5	%		74.5	%		N/M			74.7	%		76.9	%		79.1	%		N/M			78.3	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

PERSONAL LINES

Six Months ended June 30


	2014												2013
(In millions, except percentage data)	Auto			Home			Other			Total			Auto			Home			Other			Total
Net premiums written	$	439.1		$	231.7		$	19.2		$	690.0		$	455.0		$	237.2		$	20.0		$	712.2

Net premiums earned	$	430.9		$	249.3		$	20.3		$	700.5		$	457.0		$	257.5		$	21.0		$	735.5
Losses and LAE:
Current accident year, excluding catastrophe losses		311.8			130.9			7.7			450.4			335.8			123.3			8.3			467.4
Prior year unfavorable (favorable) reserve development		(4.0	)		1.0			(0.2	)		(3.2	)		7.3			1.0			0.1			8.4
Catastrophe losses		1.3			43.6			0.7			45.6			2.1			40.3			1.5			43.9

Total losses and LAE		309.1			175.5			8.2			492.8			345.2			164.6			9.9			519.7
Amortization of deferred acquisition costs and other underwriting expenses											202.0												206.0

GAAP underwriting profit											5.7												9.8
Net investment income											35.9												38.1
Other income											6.0												6.4
Other operating expenses											(3.3	)											(3.9	)

Operating income before income taxes										$	44.3											$	50.4

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		72.3	%		52.5	%		38.0	%		64.4	%		73.4	%		47.8	%		39.5	%		63.5	%
Prior year unfavorable (favorable) reserve development		(0.9	)%		0.4	%		(1.0	)%		(0.5	)%		1.6	%		0.4	%		0.5	%		1.1	%
Catastrophe losses		0.3	%		17.5	%		3.4	%		6.5	%		0.5	%		15.7	%		7.1	%		6.0	%

Total loss and LAE ratio		71.7	%		70.4	%		40.4	%		70.4	%		75.5	%		63.9	%		47.1	%		70.6	%
Expense ratio											28.1	%											27.3	%

Combined ratio											98.5	%											97.9	%

Change in policies in force		(10.1	)%		(11.8	)%		(15.1	)%		(11.1	)%		(5.1	)%		(6.0	)%		(8.8	)%		(5.7	)%
Retention		74.5	%		74.5	%		N/M			74.7	%		76.9	%		79.1	%		N/M			78.3	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

PERSONAL LINES


	Q2			Q3			Q4			Q1			Q2			Jun-YTD			Jun-YTD
(In millions, except percentage data)	2013			2013			2013			2014			2014			2013			2014
Gross premiums written	$	397.8		$	398.4		$	368.2		$	343.3		$	395.2		$	765.0		$	738.5

Net premiums written	$	370.6		$	372.9		$	342.9		$	319.2		$	370.8		$	712.2		$	690.0

Net premiums earned	$	366.7		$	363.4		$	355.3		$	350.2		$	350.3		$	735.5		$	700.5
Losses and LAE:
Current accident year, excluding catastrophe losses		229.1			230.5			221.2			230.6			219.8			39.9			450.4
Prior year unfavorable (favorable) reserve development		2.8			2.1			3.2			(1.0	)		(2.2	)		8.4			(3.2	)
Catastrophe losses		32.2			10.3			12.7			18.4			27.2			43.9			45.6
Total losses and LAE		264.1			242.9			237.1			248.0			244.8			92.2			492.8
Amortization of deferred acquisition costs and other underwriting expenses		102.9			102.5			108.4			100.1			101.9			206.0			202.0

GAAP underwriting profit (loss)	$	(0.3	)	$	18.0		$	9.8		$	2.1		$	3.6		$	437.3		$	5.7

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		62.4	%		63.4	%		62.2	%		65.8	%		62.7	%		63.5	%		64.4	%
Prior year unfavorable (favorable) reserve development		0.8	%		0.6	%		0.9	%		(0.3	)%		(0.6	)%		1.1	%		(0.5	)%
Catastrophe losses		8.8	%		2.8	%		3.6	%		5.3	%		7.8	%		6.0	%		6.5	%

Total loss and LAE ratio		72.0	%		66.8	%		66.7	%		70.8	%		69.9	%		70.6	%		70.4	%
Expense ratio		27.3	%		27.5	%		29.8	%		27.9	%		28.4	%		27.3	%		28.1	%

Combined ratio		99.3	%		94.3	%		96.5	%		98.7	%		98.3	%		97.9	%		98.5	%

Combined ratio, excluding catastrophe losses		90.5	%		91.5	%		92.9	%		93.4	%		90.5	%		91.9	%		92.0	%
Current accident year combined ratio, excluding catastrophe losses		89.7	%		90.9	%		92.0	%		93.7	%		91.1	%		90.8	%		92.5	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CHAUCER

Three Months ended June 30


	2014													2013
(In millions, except percentage data)	Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total			Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total
Gross premiums written	$	68.1	$	82.4	$	80.7	$	95.2	$	89.0	$	415.4		$	93.7	$	83.9	$	85.4	$	86.5	$	56.1	$	405.6

Net premiums written	$	59.0	$	69.9	$	64.9	$	94.6	$	76.0	$	364.4		$	78.3	$	67.3	$	73.0	$	87.0	$	44.9	$	350.5

Net premiums earned	$	48.1	$	69.3	$	48.0	$	82.4	$	59.0	$	306.8		$	40.5	$	58.2	$	34.1	$	69.7	$	35.8	$	238.3
Losses and LAE:
Current accident year, excluding catastrophe losses												178.4													134.1
Prior year favorable reserve development												(29.2	)												(30.7	)
Catastrophe losses												11.5													12.5

Total losses and LAE												160.7													115.9
Amortization of deferred acquisition costs and other underwriting expenses												121.8													97.7

GAAP underwriting profit												24.3													24.7
Net investment income												10.7													10.7
Other income												3.1													4.5
Other operating expenses												—													(3.0	)

Operating income before income taxes											$	38.1												$	36.9

Loss and LAE ratio:
Current accident year, excluding catastrophe losses												58.2	%												56.3	%
Prior year favorable reserve development												(9.5	)%												(12.9	)%
Catastrophe losses												3.7	%												5.2	%

Total loss and LAE ratio												52.4	%												48.6	%
Expense ratio												39.7	%												41.0	%

Combined ratio												92.1	%												89.6	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CHAUCER

Six Months ended June 30


	2014													2013
(In millions, except percentage data)	Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total			Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total
Gross premiums written	$	174.9	$	210.7	$	140.2	$	173.0	$	183.6	$	882.4		$	185.9	$	192.2	$	137.2	$	166.2	$	113.6	$	795.1

Net premiums written	$	118.2	$	160.9	$	89.3	$	150.7	$	159.1	$	678.2		$	126.1	$	148.6	$	90.7	$	147.1	$	89.5	$	602.0

Net premiums earned	$	94.7	$	136.1	$	101.2	$	159.7	$	115.2	$	606.9		$	85.0	$	117.0	$	78.9	$	136.2	$	70.1	$	487.2
Losses and LAE:
Current accident year, excluding catastrophe losses												356.5													274.4
Prior year favorable reserve development												(48.8	)												(44.0	)
Catastrophe losses												10.8													15.1

Total losses and LAE												318.5													245.5
Amortization of deferred acquisition costs and other underwriting expenses												227.6													184.0

GAAP underwriting profit												60.8													57.7
Net investment income												21.2													21.2
Other income												7.0													9.0
Other operating expenses												(1.7	)												(10.1	)

Operating income before income taxes											$	87.3												$	77.8

Loss and LAE ratio:
Current accident year, excluding catastrophe losses												58.7	%												56.3	%
Prior year favorable reserve development												(8.0	)%												(9.0	)%
Catastrophe losses												1.8	%												3.1	%

Total loss and LAE ratio												52.5	%												50.4	%
Expense ratio												37.5	%												37.8	%

Combined ratio												90.0	%												88.2	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CHAUCER


	Q2			Q3			Q4			Q1			Q2			Jun-YTD			Jun-YTD
(In millions, except percentage data)	2013			2013			2013			2014			2014			2013			2014
Gross premiums written	$	405.6		$	313.7		$	265.4		$	467.0		$	415.4		$	795.1		$	882.4

Net premiums written	$	350.5		$	278.5		$	237.0		$	313.8		$	364.4		$	602.0		$	678.2

Net premiums earned	$	238.3		$	268.6		$	282.1		$	300.1		$	306.8		$	487.2		$	606.9
Losses and LAE:
Current accident year, excluding catastrophe losses		134.1			164.8			159.2			178.1			178.4			274.4			356.5
Prior year favorable reserve development		(30.7	)		(27.8	)		(22.8	)		(19.6	)		(29.2	)		(44.0	)		(48.8	)
Catastrophe losses		12.5			11.8			7.5			(0.7	)		11.5			15.1			10.8

Total losses and LAE		115.9			148.8			143.9			157.8			160.7			245.5			318.5
Amortization of deferred acquisition costs and other underwriting expenses		97.7			99.0			109.0			105.8			121.8			184.0			227.6

GAAP underwriting profit	$	24.7		$	20.8		$	29.2		$	36.5		$	24.3		$	57.7		$	60.8

Loss and LAE ratio:
Current accident year, excluding catastrophe losses		56.3	%		61.3	%		56.4	%		59.2	%		58.2	%		56.3	%		58.7	%
Prior year favorable reserve development		(12.9	)%		(10.3	)%		(8.1	)%		(6.5	)%		(9.5	)%		(9.0	)%		(8.0	)%
Catastrophe losses		5.2	%		4.4	%		2.7	%		(0.2	)%		3.7	%		3.1	%		1.8	%

Total loss and LAE ratio		48.6	%		55.4	%		51.0	%		52.5	%		52.4	%		50.4	%		52.5	%
Expense ratio		41.0	%		36.9	%		38.6	%		35.3	%		39.7	%		37.8	%		37.5	%

Combined ratio		89.6	%		92.3	%		89.6	%		87.8	%		92.1	%		88.2	%		90.0	%

Combined ratio, excluding catastrophe losses		84.4	%		87.9	%		86.9	%		88.0	%		88.4	%		85.1	%		88.2	%
Current accident year combined ratio, excluding catastrophe losses		97.3	%		98.2	%		95.0	%		94.5	%		97.9	%		94.1	%		96.2	%

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME AND YIELDS


																Q2			Q2
	Q2			Q3			Q4			Q1			Q2			YTD			YTD
(In millions, except yields)	2013			2013			2013			2014			2014			2013			2014
Net Investment Income
Fixed maturities	$	62.6		$	63.0		$	64.5		$	64.7		$	63.2		$	127.3		$	127.9
Equity securities		4.9			4.0			3.6			3.4			4.4			8.0			7.8
Other investments		2.8			1.3			2.5			1.5			2.1			5.0			3.6
Investment expenses		(2.4	)		(2.6	)		(2.5	)		(2.6	)		(2.7	)		(5.1	)		(5.3	)

Total	$	67.9		$	65.7		$	68.1		$	67.0		$	67.0		$	135.2		$	134.0

Pre-tax Yields
Fixed maturities		3.98	%		3.99	%		3.86	%		3.79	%		3.74	%		4.00	%		3.76	%
Total		3.71	%		3.61	%		3.59	%		3.47	%		3.42	%		3.68	%		3.45	%

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

THE HANOVER INSURANCE GROUP

INVESTMENT PORTFOLIO

June 30, 2014


(In millions)
												Change in			Change in
	Weighted								Net			Net			Net
	Average	Amortized		Fair		% of			Unrealized			Unrealized			Unrealized
Investment Type	Quality	Cost or Cost		Value		Total			Gain (Loss)			During Q2 2014			YTD
Fixed maturities:
U.S. Treasury and government agencies	AAA	$	403.5	$	403.2		4.8	%	$	(0.3	)	$	5.1		$	10.6
Foreign government	AAA		319.7		321.0		3.8	%		1.3			(0.5	)		0.8
Municipals:
Taxable	AA		938.5		988.1		11.7	%		49.6			14.8			31.7
Tax exempt	AA		141.9		145.4		1.7	%		3.5			0.4			3.1
Corporate:
NAIC 1	A		1,794.4		1,871.1		22.2	%		76.7			7.7			20.4
NAIC 2	BBB		1,536.9		1,626.6		19.3	%		89.7			16.4			28.9
NAIC 3 and below	B+		387.0		411.0		4.9	%		24.0			2.7			7.1

Total corporate	BBB+		3,718.3		3,908.7		46.4	%		190.4			26.8			56.4

Asset backed:
Residential mortgage-backed	AA		697.3		713.6		8.5	%		16.3			6.0			10.3
Commercial mortgage-backed	AA+		395.1		406.1		4.8	%		11.0			3.2			5.3
Asset-backed	AAA		170.8		172.4		2.0	%		1.6			(0.1	)		(0.2	)

Total fixed maturities	A+		6,785.1		7,058.5		83.7	%		273.4			55.7			118.0
Equity securities			446.4		530.5		6.3	%		84.1			4.8			20.4
Other investments			235.3		238.5		2.8	%		3.2			(0.1	)		—

Total investments			7,466.8		7,827.5		92.8	%		360.7			60.4			138.4
Cash and cash equivalents			606.2		606.2		7.2	%		—			—			—

Total		$	8,073.0	$	8,433.7		100.0	%	$	360.7		$	60.4		$	138.4

THE HANOVER INSURANCE GROUP

CREDIT QUALITY AND DURATION OF FIXED MATURITIES

June 30, 2014

(In millions)

CREDIT QUALITY OF FIXED MATURITIES

Rating Agency

Amortized

Fair

% of Total

NAIC Designation

Equivalent Designation

Cost

Value

Fair Value

Aaa/Aa/A

4,818.7

4,977.7

70.5

Baa

1,567.3

1,657.9

23.5

173.5

184.9

2.6

184.9

195.7

2.8

Caa and lower

40.2

41.6

0.6

In or near default

0.5

0.7

—

Total fixed maturities

6,785.1

7,058.5

100.0

DURATION OF FIXED MATURITIES

Amortized
Cost

Fair
Value

% of Total
Fair Value

0-2 years

1,556.7

1,599.4

22.7

2-4 years

1,786.0

1,872.5

26.5

4-6 years

1,744.3

1,841.1

26.1

6-8 years

1,337.6

1,377.8

19.5

8-10 years

292.7

296.4

4.2

10+ years

67.8

71.3

1.0

Total fixed maturities

6,785.1

7,058.5

100.0

Weighted Average Duration

4.14

THE HANOVER INSURANCE GROUP

TOP 10 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS

June 30, 2014


(In millions, except percentage data)
Issuer	Amortized Cost		Fair Value		As a Percent of Invested Assets			S&P Ratings
Royal Bank of Scotland: (1)
Term deposits	$	82.0	$	82.8		0.98	%	A-
Notes		14.3		14.7		0.17	%	A
Lloyds Bank: (2)
Term deposits		48.7		48.2		0.57	%	A
Notes		5.0		5.4		0.07	%	BBB+
Citigroup		28.8		30.4		0.36	%	A-
American Express		28.6		29.7		0.35	%	A-
GE Capital		27.0		28.5		0.34	%	AA+
JP Morgan		26.1		26.9		0.32	%	A
Bank of America		26.0		27.8		0.33	%	BBB+
Wells Fargo		26.0		27.8		0.33	%	A+
CVS Caremark		22.6		24.6		0.29	%	BBB+
Toyota Motor Credit Corp		22.4		23.3		0.28	%	AA-

Top 10 Corporate and Municipal Fixed	$	357.5	$	370.1		4.39	%

(1)	UK government owns 64% of bank equity

(2)	UK government owns 25% of bank equity

THE HANOVER INSURANCE GROUP

RECONCILIATION OF OPERATING INCOME TO NET INCOME


	Three Months ended June 30												Six Months ended June 30
	2014						2013						2014						2013
(In millions, except per share data)	$			Per Share (Diluted)			$			Per Share (Diluted)			$			Per Share (Diluted)			$			Per Share (Diluted)
OPERATING INCOME (LOSS)
Commercial Lines	$	44.2					$	26.2					$	60.3					$	59.2
Personal Lines		22.7						19.9						44.3						50.4
Chaucer		38.1						36.9						87.3						77.8
Other		(2.8	)					(1.9	)					(4.7	)					(4.1	)

Total		102.2						81.1						187.2						183.3
Interest expense		(16.3	)					(17.4	)					(32.6	)					(32.1	)

Operating income before income taxes		85.9		$	1.91			63.7		$	1.42			154.6		$	3.45			151.2		$	3.36
Income tax expense on operating income		(27.5	)		(0.61	)		(16.9	)		(0.37	)		(49.2	)		(1.10	)		(44.5	)		(0.99	)

Operating income after income taxes		58.4			1.30			46.8			1.05			105.4			2.35			106.7			2.37
Net realized investment gains		22.2			0.49			13.7			0.31			26.6			0.59			21.8			0.48
Loss from repayment of debt		—			—			(11.3	)		(0.25	)		—			—			(19.1	)		(0.42	)
Net benefit (costs) related to acquired businesses		(0.2	)		—			(0.2	)		(0.01	)		(1.1	)		(0.02	)		0.2			0.01
Net foreign exchange gains (losses)		(0.2	)		—			—			—			(0.3	)		(0.01	)		0.7			0.01
Income tax benefit (expense) on non-operating items		2.3			0.05			4.1			0.09			6.6			0.15			9.2			0.20

Income from continuing operations, net of taxes		82.5			1.84			53.1			1.19			137.2			3.06			119.5			2.65
Discontinued operations, net of taxes		0.1			—			0.3			—			—			—			0.1			0.01

NET INCOME	$	82.6		$	1.84		$	53.4		$	1.19		$	137.2		$	3.06		$	119.6		$	2.66

Non-GAAP Financial Measures

The Hanover uses non-GAAP financial measures as important measures of the Company’s operating performance, which we believe provide investors with additional information regarding management’s evaluation of our results of operations and financial performance. The Company’s non-GAAP measures include operating income before interest expense and taxes, total operating income after taxes, total operating income after taxes per share, total book value per share, total book value per share excluding net unrealized gains and losses related to investments, net of tax, tangible book value per share and measures of operating income and loss ratios excluding catastrophe losses and reserve development. After-tax operating income EPS (sometimes referred to as “after-tax operating income per share”) is a non-GAAP measure. It is defined as net income (loss) excluding the after-tax impact of net realized investment gains (losses), as well as results from discontinued operations for a period divided by the average number of diluted shares of common stock.

Operating income before interest expense and taxes is net income, excluding interest expense on debt, income taxes and net realized investment gains and losses, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Operating income before interest expense and taxes also excludes net gains and losses on disposals of businesses, discontinued operations, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Operating income before interest expense and taxes is the sum of the operating income from: Commercial Lines, Personal Lines, Chaucer, and Other. The Hanover believes that measures of operating income before interest expense and taxes provide investors with a valuable measure of the performance of the Company’s ongoing businesses because they highlight net income attributable to the core operations of the business.

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

The Hanover also provides measures of operating income and loss ratios that exclude the effects of catastrophe losses. A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, hurricane, earthquake, windstorm, explosion, terrorism or other similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance. The Hanover believes that providing certain financial metrics and trends excluding the effects of catastrophes is meaningful for investors to understand the variability of periodic earnings and loss ratios.

Prior year reserve development, which can be favorable or unfavorable, represents changes in our estimate of the costs to pay claims from prior years. We believe that a discussion of operating income excluding prior year reserve development is helpful to investors since it provides insight into both our estimate of current year accident results and changes to prior-year reserve estimates.

Operating income before and after interest expense and taxes and measures of operating income that exclude the effects of catastrophe losses or reserve development should not be construed as substitutes for net income determined in accordance with GAAP. A reconciliation of income from continuing operations to operating income before interest expense and taxes and income from continuing operations per share to operating income after taxes per share for the six months ended June 30, 2014 and 2013 is set forth on page 21 of this document. The presentation of loss ratios calculated excluding the effects of reserve development and/or catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP.

CORPORATE OFFICES AND

PRINCIPAL SUBSIDIARIES

THE HANOVER INSURANCE GROUP, INC.

440 Lincoln Street

Worcester, MA 01653

The Hanover Insurance Company

440 Lincoln Street

Worcester, MA 01653

Citizens Insurance Company of America

808 North Highlander Way

Howell, MI 48843

Chaucer Holdings PLC

Plantation Place

30 Fenchurch Street

London

EC3M 3AD

MARKET AND DIVIDEND INFORMATION

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


Quarter Ended	2014
	Price Range				Dividends
	High		Low		Per Share
March 31	$	61.44	$	53.14	$	0.370
June 30	$	64.00	$	58.23	$	0.370

Quarter Ended	2013
	Price Range				Dividends
	High		Low		Per Share
March 31	$	49.68	$	39.19	$	0.330
June 30	$	51.66	$	46.73	$	0.330
September 30	$	56.06	$	48.67	$	0.330
December 31	$	60.99	$	54.83	$	0.370

INDUSTRY RATINGS AS OF JULY 31, 2014

Financial
Strength Ratings

A.M.
Best

Standard
& Poor’s

Moody’s

The Hanover Insurance Company

A-

Citizens Insurance Company of America

A-

—

Debt Ratings

A.M.
Best

Standard
& Poor’s

Moody’s

The Hanover Insurance Group, Inc. Senior Debt

bbb

BBB-

Baa3

Subordinated Debentures

bb+

Ba1

TRANSFER AGENT

Computershare Investor Services

PO Box 30170

College Station, TX 77842-3170

1-800-317-4454

COMMON STOCK

Common stock of The Hanover Insurance Group is traded on the New York Stock Exchange under the symbol “THG”.

INQUIRIES

Oksana Lukasheva

Vice President

Investor Relations

(508) 855-2063

olukasheva@hanover.com

INVESTOR INFORMATION LINE

Dial 1-800-407-5222 to receive additional printed information, fax-on-demand services or other prerecorded messages.

Please visit our internet site at http:// www.Hanover.com