Equibles

8-K

HANOVER INSURANCE GROUP, INC. (THG)

8-K 2022-08-02 For: 2022-08-02
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Added on April 08, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 2, 2022

THE HANOVER INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware 1-13754 04-3263626
(State or other jurisdiction<br><br>of incorporation) (Commission File Number) (IRS Employer<br><br>Identification No.)
440 Lincoln Street, Worcester, Massachusetts<br><br>(Address of principal executive offices) 01653<br><br>(Zip Code)
(508) 855-1000<br><br>Registrant’s telephone number, including area code:

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

The following information is being furnished under Item 2.02 – Results of Operations and Financial Condition. Such information, including the exhibits attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

On August 2, 2022, The Hanover Insurance Group, Inc. (the Company) issued a press release announcing its financial results for the quarter ended June 30, 2022. The release is furnished as Exhibit 99.1 hereto. Additionally, on August 2, 2022, the Company made available on its website unaudited financial information contained in its Financial Supplement for the period ended June 30, 2022. The supplement is furnished as Exhibit 99.2 hereto.

Item 9.01 Financial Statements and Exhibits.

(a) Not applicable.
(b) Not applicable.
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(c) Not applicable.
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(d) Exhibits.
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The following exhibits are furnished herewith.

Exhibit 99.1 Press Release, dated August 2, 2022, announcing the Company’s financial results for the quarter ended June 30, 2022.
Exhibit 99.2 The Hanover Insurance Group, Inc. Unaudited Financial Supplement for the period ended June 30, 2022.
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

Exhibit Index

Exhibit 99.1 Press Release, dated August 2, 2022, announcing the Company’s financial results for the quarter ended June 30, 2022.
Exhibit 99.2 The Hanover Insurance Group, Inc. Unaudited Financial Supplement for the period ended June 30, 2022.
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements 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.<br><br>(Registrant)
Date: August 2, 2022 By: /s/ Jeffrey M. Farber
Jeffrey M. Farber
Executive Vice President and<br><br>Chief Financial Officer

EX-99.1

Exhibit 99.1

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The Hanover Reports Second Quarter Net Income and

Operating Income of $0.63 and $2.32 per Diluted Share, Respectively;

Combined Ratio of 96.2%; Combined Ratio, Excluding Catastrophes, of 90.2%

Second Quarter Highlights

• Net premiums written increase of 10.4%*, with strong growth from each segment

• Rate increases(1) of 6.9% in Core Commercial, 8.0% in Specialty and 3.2% in Personal Lines

• Renewal price change(1) of 11.0% in Core Commercial, 12.0% in Specialty and 5.4% in Personal Lines

• Catastrophe losses of $77.4 million, or 6.0 points of the combined ratio, including favorable development on prior-year catastrophes

• Current accident year loss and loss adjustment expense (“LAE”) ratio, excluding catastrophes(2), of 60.1%, included improved loss ratios within Specialty and Core Commercial, which were more than offset by the impact of higher property severity in Personal Lines

• Net investment income of $70.5 million, below the prior-year quarter due to the elevated level of partnership income in the second quarter of 2021

• Book value per share of $72.20, down 9.3% from March 31, 2022, primarily driven by a decrease in the fair value of fixed maturity investments due to the higher interest rate environment

WORCESTER, Mass., August 2, 2022 - The Hanover Insurance Group, Inc. (NYSE: THG) today reported net income of $22.6 million, or $0.63 per diluted share, in the second quarter of 2022, compared to $128.5 million, or $3.52 per diluted share, in the prior-year quarter. Operating income(3) was $83.9 million, or $2.32 per diluted share, for the second quarter of 2022. This compared to operating income of $104.0 million, or $2.85 per diluted share, in the prior-year quarter. The difference between net and operating income in the second quarter of 2022 was primarily due to the after-tax decrease in the fair value of equity securities of $46.6 million, or $1.29 per fully diluted share, which is excluded from operating income.

“We are pleased to report another strong quarter – punctuated by an 11.1% operating return on equity(4) and operating earnings per share of $2.32, as well as double-digit premium growth,” said John C. Roche, president and chief executive officer at The Hanover. “Year-to-date, we generated an operating ROE of 13.4% and a 24.0% increase in operating income per share to $5.58, reflecting our continued business momentum, and demonstrating our adeptness to navigate our business through the unprecedented complexities of the current economic environment.

*Unless otherwise stated, net premiums written growth and other growth comparisons are to the same period of the prior year

(1) See information about this and other non-GAAP measures and definitions used throughout this press release on the final pages of this document.

The Hanover Insurance Group, Inc. may also be referred to as “The Hanover” or “the company” interchangeably throughout this press release.

“We remain focused on pricing and other levers to address the ongoing headwinds in Personal Lines, in particular in homeowners,” said Roche. “At the same time, very strong performance and returns across our commercial businesses helped to largely offset these pressures, culminating in a consolidated ex-CAT combined ratio(5) of 90.2% in the second quarter. We are pleased with the impressive results within our Core Commercial and Specialty lines as they delivered improved profitability, significant renewal price increases of 11% and 12%, and net written premium growth of 7.7% and 14.0%, respectively. With the ongoing support of our robust agency relationships and talented team, we continue to have confidence in our ability to profitably grow our business and deliver superior returns to our valued shareholders.”

“Our diversified book of business, proven insurance portfolio and analytical acumen are serving us exceptionally well in this dynamic environment, allowing us to produce consistent underwriting profit,” said Jeffrey M. Farber, executive vice president and chief financial officer at The Hanover. “Additionally, our high-quality investment portfolio generated pre-tax net investment income of $70.5 million. Looking ahead, we expect the current rising interest rate environment to be a long-term positive as robust insurance cashflow and maturing assets are reinvested at higher yields.

“Given the continued elevated inflation and supply chain disruption, we are updating our full year outlook," said Farber. "We expect our ex-CAT combined ratio to be in the range of 90.5% to 91.5%, an increase of one point from our original 2022 outlook. The updated range incorporates our year-to-date performance and assumes no additional prior-year development. In addition, we expect pre-tax net investment income to be in the range of $280 to $285 million, up approximately 5% from our original expectations. While we anticipate some continuing near-term pressure within Personal Lines, we have full confidence in our ability to achieve our 14% long-term operating ROE target as we leverage our specialized capabilities and deliver substantial shareholder value.”

Three months ended Six months ended
June 30 June 30
($ in millions, except per share data) 2022 2021 2022 2021
Net premiums written $1,332.8 $1,207.2 $2,645.1 $2,403.3
Growth 10.4% 11.7% 10.1% 8.4%
Net premiums earned $1,293.8 $1,179.8 $2,557.6 $2,341.6
Current accident year loss and LAE ratio, excluding catastrophes(2) 60.1 % 57.8 % 59.6 % 57.1 %
Prior-year development ratio (0.7)% (1.1)% (0.6)% (0.9)%
Catastrophe ratio 6.0 % 6.5 % 4.8 % 9.0 %
Expense ratio 30.8 % 31.2 % 31.0 % 31.4 %
Combined ratio 96.2 % 94.4 % 94.8 % 96.6 %
Combined ratio, excluding catastrophes 90.2 % 87.9 % 90.0 % 87.6 %
Current accident year combined ratio,<br><br>excluding catastrophes(5) 90.9 % 89.0 % 90.6 % 88.5 %
Net income $22.6 $128.5 $127.4 $221.2
per diluted share 0.63 3.52 3.52 6.03
Operating income 83.9 104.0 201.6 165.4
per diluted share 2.32 2.85 5.58 4.50
Book value per share $72.20 $88.23 $72.20 $88.23
Ending shares outstanding (in millions) 35.6 35.8 35.6 35.8

Second Quarter Operating Highlights

Core Commercial

Core Commercial operating income before taxes was $66.9 million in the second quarter of 2022, compared to $69.9 million in the second quarter of 2021. The Core Commercial combined ratio was 92.6%, compared to 91.9% in the prior-year quarter. Catastrophe losses in the second quarter of 2022 were $17.8 million, or 3.7 points of the combined ratio, which is net of $10.9 million of favorable prior-year catastrophe development. This compared to catastrophe losses of $13.8 million, or 3.1 points, in the prior-year quarter, which was net of $8.7 million of favorable prior-year catastrophe development.

Second quarter 2022 results included $2.8 million, or 0.6 points, of net favorable prior-year reserve development, excluding catastrophes, driven primarily by continued favorability in workers’ compensation. This compared to net favorable prior-year reserve development of $4.6 million, or 1.0 point, in the second quarter of 2021.

Core Commercial current accident year combined ratio, excluding catastrophes, decreased 0.3 points to 89.5%

in the second quarter of 2022, from 89.8% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, decreased by 0.6 points to 57.0%, primarily driven by the benefit of rate increases earning in.

Net premiums written were $454.2 million in the quarter, up 7.7% from the prior-year quarter, primarily driven by strong growth of 10.5% in small commercial. Core Commercial average rate increased 6.9% in the second quarter, while renewal price change averaged 11.0%.

The following table summarizes premiums and the components of the combined ratio for Core Commercial:

Three months ended Six months ended
June 30 June 30
($ in millions) 2022 2021 2022 2021
Net premiums written $454.2 $421.7 $980.8 $902.3
Growth 7.7% 11.4% 8.7% 7.5%
Net premiums earned 480.1 447.6 954.8 882.8
Operating income before taxes 66.9 69.9 134.4 55.1
Loss and LAE ratio 60.1% 59.7% 60.2% 69.1%
Expense ratio 32.5% 32.2% 32.7% 32.6%
Combined ratio 92.6% 91.9% 92.9% 101.7%
Prior-year development ratio (0.6)% (1.0)% (1.0)% (0.8)%
Catastrophe ratio 3.7 % 3.1 % 3.9 % 12.3 %
Combined ratio, excluding catastrophes 88.9 % 88.8 % 89.0 % 89.4 %
Combined ratio, excluding catastrophes<br><br>and prior year development 89.5 % 89.8 % 90.0 % 90.2 %

Specialty

Specialty operating income before taxes was $45.2 million in the second quarter of 2022, compared to $34.5 million in the second quarter of 2021. The Specialty combined ratio was 89.4%, compared to 92.3% in the prior-year quarter. Catastrophe losses in the second quarter of 2022 were $6.6 million, or 2.2 points of the combined ratio, which is net of $3.1 million of favorable prior-year catastrophe development. This compared to catastrophe losses of $4.4 million, or 1.7 points, in the prior-year quarter, which was net of $3.3 million of favorable prior-year catastrophe development.

Second quarter 2022 results included $1.2 million, or 0.4 points, of net favorable prior-year reserve development, excluding catastrophes. This compared to net favorable prior-year reserve development of $3.3 million, or 1.3 points, in the second quarter of 2021.

Specialty current accident year combined ratio, excluding catastrophes, decreased 4.3 points to 87.6%

in the second quarter of 2022, from 91.9% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, decreased by 4.7 points to 52.3%, due to the benefit of rate increases earning in, as well as the impact of a large property loss in the prior-year second quarter.

Net premiums written were $302.3 million in the quarter, up 14.0% from the prior-year quarter, driven primarily by rate and exposure increases. Specialty average rate increased 8.0% in the second quarter, while renewal price change averaged 12.0%.

The following table summarizes premiums and the components of the combined ratio for Specialty:

Three months ended Six months ended
June 30 June 30
($ in millions) 2022 2021 2022 2021
Net premiums written $302.3 $265.1 $605.1 $541.9
Growth 14.0% 12.2% 11.7% 12.1%
Net premiums earned 293.5 255.8 577.3 513.5
Operating income before taxes 45.2 34.5 95.2 51.5
Loss and LAE ratio 54.1% 57.4% 53.2% 60.2%
Expense ratio 35.3% 34.9% 35.4% 35.4%
Combined ratio 89.4% 92.3% 88.6% 95.6%
Prior-year development ratio (0.4)% (1.3)% (2.5)% (0.8)%
Catastrophe ratio 2.2 % 1.7 % 2.5 % 5.6 %
Combined ratio, excluding catastrophes 87.2 % 90.6 % 86.1 % 90.0 %
Combined ratio, excluding catastrophes<br><br>and prior year development 87.6 % 91.9 % 88.6 % 90.8 %

Personal Lines

Personal Lines operating income before taxes was $2.8 million in the second quarter of 2022, compared to $32.2 million in the second quarter of 2021. The Personal Lines combined ratio was 103.2%, compared to 97.6% in the prior-year quarter. Catastrophe losses in the second quarter of 2022 were $53.0 million, or 10.2 points of the combined ratio, which includes $2.0 million of unfavorable prior-year catastrophe development. This compared to catastrophe losses of $58.6 million, or 12.3 points of the combined ratio, in the prior-year quarter, which was net of $3.0 million of favorable prior-year catastrophe development.

Second quarter 2022 results included net favorable prior-year reserve development, excluding catastrophes, of $5.2 million, or 1.0 point, driven by both auto and homeowners. This compared to net favorable prior-year reserve development of $5.0 million, or 1.0 point, in the second quarter of 2021, driven by auto.

Personal Lines current accident year combined ratio, excluding catastrophe losses, increased 7.7 points to 94.0% in the second quarter of 2022, from 86.3% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, increased 9.2 points to 67.3%. The loss ratio increase in auto was attributable to increased property severity, and higher frequency as compared to the unusually low level of claims experienced in the second quarter of 2021. Loss frequency in auto remains below pre-pandemic levels. The increase in the homeowners loss ratio was primarily due to higher than usual large loss activity, and, to a lesser extent, non-CAT weather and continued inflationary pressures on claims costs.

The expense ratio(6) decreased by 1.5 points to 26.7% in the second quarter of 2022, compared to the second quarter of 2021, primarily attributable to fixed cost leverage from premium growth and lower performance-based agency compensation.

Net premiums written were $576.3 million in the quarter, up 10.7% from the prior-year quarter, driven by strong retention. Personal Lines renewal price change averaged 5.4% in the second quarter of 2022, while average rate increases were 3.2%.

The following table summarizes premiums and components of the combined ratio for Personal Lines:

Three months ended Six months ended
June 30 June 30
($ in millions) 2022 2021 2022 2021
Net premiums written $576.3 $520.4 $1,059.2 $959.1
Growth 10.7% 11.6% 10.4% 7.1%
Net premiums earned 520.2 476.4 1,025.5 945.3
Operating income before taxes 2.8 32.2 39.1 114.0
Loss and LAE ratio 76.5% 69.4% 73.3% 64.2%
Expense ratio 26.7% 28.2% 26.9% 28.1%
Combined ratio 103.2% 97.6% 100.2% 92.3%
Prior-year development ratio (1.0)% (1.0)% 0.8 % (1.1)%
Catastrophe ratio 10.2 % 12.3 % 6.9 % 7.7 %
Combined ratio, excluding catastrophes 93.0 % 85.3 % 93.3 % 84.6 %
Combined ratio, excluding catastrophes<br><br>and prior year development 94.0 % 86.3 % 92.5 % 85.7 %

Investments

Net investment income was $70.5 million for the second quarter of 2022, below the prior-year quarter of $75.6 million, primarily due to elevated partnership income in the prior-year quarter, partially offset by the continued investment of operational cashflow. Total pre-tax earned yield on the investment portfolio for the quarter ended June 30, 2022, was 3.19%, down from 3.65% in the prior-year quarter. The average pre-tax earned yield on fixed maturities was 2.97% and 3.02% for the quarters ended June 30, 2022, and 2021, respectively.

Net realized and unrealized investment losses recognized in earnings were $77.9 million in the second quarter of 2022, primarily driven by the change in fair value of equity securities. This compared to net realized and unrealized investment gains recognized in earnings of $31.1 million in the second quarter of 2021.

The company held $8.6 billion in cash and invested assets on June 30, 2022. Fixed maturities and cash represented approximately 86% of the investment portfolio. Approximately 95% of the company’s fixed maturity portfolio is rated investment grade. Net unrealized losses on the fixed maturity portfolio as of June 30, 2022, were $587.0 million before taxes, a decrease in fair value of $324.4 million since March 31, 2022, primarily due to higher interest rates.

Shareholders’ Equity and Capital Actions

On June 30, 2022, book value per share was $72.20, down 9.3% from March 31, 2022, primarily driven by a decrease in the fair value of fixed maturity investments. Book value per share, excluding net unrealized depreciation on fixed maturity investments(7), net of tax, remained flat compared to March 31, 2022, and increased 2.1% from December 31, 2021.

During the quarter, the company repurchased approximately 27,000 shares of common stock in the open market for $4.1 million. The company has approximately $341 million of remaining capacity under its existing share repurchase program.

Earnings Conference Call

The company will host a conference call to discuss its second quarter results on Wednesday, August 3, at 10:00 a.m. E.T. A PowerPoint slide presentation will accompany the prepared remarks and has been posted on The Hanover’s website. Interested investors and others can listen to the call and access the presentation through The Hanover's website, located in the “Investors” section at www.hanover.com. Investors may access the conference call by dialing 1-844-413-3975 in the U.S. and 1-412-317-5458 internationally. Webcast participants should go to the website 15 minutes early to register, download and install any necessary audio software. A re-broadcast of the conference call will be available on The Hanover’s website approximately two hours after the call.

About The Hanover

The Hanover Insurance Group, Inc. is the holding company for several property and casualty insurance companies, which together constitute one of the largest insurance businesses in the United States. The company provides exceptional insurance solutions through a select group of independent agents and brokers. Together with its agent partners, the company offers standard and specialized insurance protection for small and mid-sized businesses, as well as for homes, automobiles, and other personal items. For more information, please visit hanover.com.

Contact Information
Investors: Media:
Oksana Lukasheva Michael F. Buckley Emily P. Trevallion
Email: olukasheva@hanover.com Email: mibuckley@hanover.com Email: etrevallion@hanover.com
1-508-525-6081 1-508-855-3099 1-508-855-3263

Definition of Reported Segments

Continuing operations include four operating segments: Core Commercial, Specialty, Personal Lines and Other. The Core Commercial segment includes commercial multiple peril, commercial automobile, workers’ compensation and other commercial lines coverages provided to small and mid-sized businesses. The Specialty segment includes four divisions of business: professional and executive lines, specialty P&C, marine, and surety and other. Specialty P&C includes coverages such as program business (provides commercial insurance to markets with specialized coverage or risk management needs related to groups of similar businesses), specialty industrial and commercial property, and excess and surplus lines. The Personal Lines segment markets automobile, homeowners and ancillary coverages to individuals and families. The “Other” segment includes Opus Investment Management, Inc., which provides investment management services to institutions, pension funds and other organizations, the operations of the holding company, as well as a block of run-off voluntary property and casualty pools business in which the company has not actively participated since 1995.

Financial Supplement

The Hanover's second quarter news release and financial supplement are available in the “Investors” section of the company’s website at hanover.com.

Condensed Financial Statements and Reconciliations

The Hanover Insurance Group, Inc.
Condensed Consolidated Income Statements Three months ended Six months ended
June 30 June 30
($ in millions) 2022 2021 2022 2021
Revenues
Premiums earned $1,293.8 $1,179.8 $2,557.6 $2,341.6
Net investment income 70.5 75.6 147.4 152.4
Net realized and unrealized investment gains (losses):
Net realized gains (losses) from sales and other (19.2) 4.8 (16.2) 3.2
Net change in fair value of equity securities (59.0) 26.5 (77.0) 65.6
Recoveries (impairments) on investments 0.3 (0.2) (0.6) (0.2)
Total net realized and unrealized investment gains (losses) (77.9) 31.1 (93.8) 68.6
Fees and other income 6.5 5.8 12.4 11.8
Total revenues 1,292.9 1,292.3 2,623.6 2,574.4
Losses and expenses
Losses and loss adjustment expenses 845.5 745.1 1,633.0 1,526.4
Amortization of deferred acquisition costs 269.3 244.2 532.2 484.5
Interest expense 8.5 8.5 17.0 17.0
Other operating expenses 141.4 134.6 283.2 272.5
Total losses and expenses 1,264.7 1,132.4 2,465.4 2,300.4
Income from continuing operations before income taxes 28.2 159.9 158.2 274.0
Income tax expense 5.4 30.3 30.1 51.6
Income from continuing operations 22.8 129.6 128.1 222.4
Discontinued operations (net of taxes):
Loss from discontinued life businesses (0.2) (1.1) (0.7) (1.2)
Net income $22.6 $128.5 $127.4 $221.2
The Hanover Insurance Group, Inc.
--- --- ---
Condensed Consolidated Balance Sheets
December 31
( in millions) 2021
Assets
Total investments $9,152.6
Cash and cash equivalents 230.9
Premiums and accounts receivable, net 1,469.5
Reinsurance recoverable on paid and unpaid losses and unearned premiums 1,907.3
Other assets 1,386.9
Assets of discontinued businesses 107.1
Total assets $14,254.3
Liabilities
Loss and loss adjustment expense reserves $6,447.6
Unearned premiums 2,734.9
Debt 781.6
Other liabilities 1,023.6
Liabilities of discontinued businesses 121.7
Total liabilities 11,109.4
Total shareholders’ equity 3,144.9
Total liabilities and shareholders’ equity $14,254.3

All values are in US Dollars.

The following is a reconciliation from operating income to net income(8):

The Hanover Insurance Group, Inc.
Three months ended June 30 Six months ended June 30
2022 2022 2021
($ in millions, except per share data) Amount Amount Amount
Operating income (loss)
Core Commercial 66.9 134.4 55.1
Specialty 45.2 95.2 51.5
Personal Lines 2.8 39.1 114.0
Other 0.1 0.7 1.8
Total 115.0 269.4 222.4
Interest expense (8.5) (17.0) (17.0)
Operating income before income taxes 106.5 252.4 205.4
Income tax expense on operating income (22.6) (50.8) (40.0)
Operating income after income taxes 83.9 201.6 165.4
Non-operating items:
Net realized gains (losses) from sales and other (19.2) (16.2) 3.2
Net change in fair value of equity securities (59.0) (77.0) 65.6
Recoveries (impairments) on investments 0.3 (0.6) (0.2)
Other non-operating items (0.4) (0.4) -
Income tax benefit (expense) on non-operating items 17.2 20.7 (11.6)
Income from continuing operations, net of taxes 22.8 128.1 222.4
Discontinued operations (net of taxes):
Loss from discontinued life businesses (0.2) (0.7) (1.2)
Net income 22.6 127.4 221.2
Dilutive weighted average shares outstanding

All values are in US Dollars.

Forward-Looking Statements and Non-GAAP Financial Measures

Forward-Looking Statements

Certain statements in this document and comments made by management may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as, but not limited to, “believes,” “anticipates,” “expects,” “may,” “projects,” “projections,” “plan,” “likely,” “potential,” “targeted,” “forecasts,” “should,” “could,” “continue,” “outlook,” “guidance,” “modeling,” “moving forward” and other similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. The company cautions investors that any such forward-looking statements are estimates, beliefs, expectations and/or projections that involve significant judgment, and that historical results, trends and forward-looking statements are not guarantees and are not necessarily indicative of future performance. Actual results could differ materially from those anticipated.

These statements include, but are not limited to, the company’s statements regarding:

• The company’s outlook and its ability to achieve components or the sum of the respective period guidance on its future results of operations including: the combined ratio, excluding catastrophe losses; catastrophe losses; net investment income; growth of net premiums written and/or net premiums earned in total or by line of business; expense ratio; operating return on equity; and/or the effective tax rate;

• The continued impacts of the global pandemic (“Pandemic”) and related economic conditions on the company’s operating and financial results, including, but not limited to, the impact on the company’s investment portfolio, changes in claims frequency as a result of fluctuations in economic activity, severity from higher cost of repairs due to, among other things, supply chain disruptions, inflation, declines in premium as a result of, among other things, credits or returns to the company’s customers, lower submissions, changes in renewals and policy endorsements, public health guidance, recession, and the impact of government orders and restrictions in the states and jurisdictions in which the company operates;

• Uses of capital for share repurchases, special or ordinary cash dividends, business investments or growth, or otherwise, and outstanding shares in future periods as a result of various share repurchase mechanisms, capital management framework, especially in the current environment, and overall comfort with liquidity and capital levels;

• Variability of catastrophe losses due to risk concentrations, changes in weather patterns including climate change, wildfires, severe storms, hurricanes, terrorism, civil unrest, riots or other events, as well as the complexity in estimating losses from large catastrophe events due to delayed reporting of the existence, nature or extent of losses or where “demand surge,” regulatory assessments, litigation, coverage and technical complexities or other factors may significantly impact the ultimate amount of such losses;

• Current accident year losses and loss selections (“picks”), excluding catastrophes, and prior accident year loss reserve development patterns, particularly in complex “longer-tail” liability lines, as well as the inherent variability in short-tail property and non-catastrophe weather losses;

• Changes in frequency and loss severity trends;

• Ability to manage the impact of inflationary pressures, as a result of the Pandemic, global market disruptions, geopolitical events or otherwise, including, but not limited to, supply chain disruptions, labor shortages, and increases in cost of goods, services, and materials;

• The confidence or concern that the current level of reserves is adequate and/or sufficient for future claim payments, whether due to losses that have been incurred but not reported, circumstances that delay the reporting of losses, business complexity, adverse judgments or developments with respect to case reserves, the difficulties and uncertainties inherent in projecting future losses from historical data, changes in replacement and medical costs, as well as complexities related to the Pandemic, including legislative, regulatory or judicial actions that expand the intended scope of coverages, or other factors;

• Characterization of some business as being “more profitable” in light of inherent uncertainty of ultimate losses incurred, especially for “longer-tail” liability businesses;

• Efforts to manage expenses, including the company’s long-term expense savings targets, while allocating capital to business investment, which is at management’s discretion;

• Risks and uncertainties with respect to our ability to retain profitable policies in force and attract profitable policies and to increase rates commensurate with, or in excess of, loss trends;

• Mix improvement, underwriting initiatives, coverage restrictions and pricing segmentation actions, among others, to grow businesses believed to be more profitable or reduce premiums attributable to products or lines of business believed to be less profitable; balance rate actions and retention; offset long-term and/or short-term loss trends due to increased frequency; increased “social inflation” from a more litigious environment and higher average cost of resolution, increased property replacement costs, and/or social movements;

• The ability to generate growth in targeted segments through new agency appointments; rate increases (as a result of its market position, agency relationships or otherwise), retention improvements or new business; expansion into new geographies; new product introductions; or otherwise; and

• Investment returns and the effect of macro-economic interest rate trends and overall security yields, including the macro-economic impact of the Pandemic, inflationary pressures and corresponding governmental and/or central banking initiatives taken in response thereto, and geopolitical circumstances on new money yields and overall investment returns.

Additional Risks and Uncertainties

Investors are further cautioned and should consider the risks and uncertainties in the company’s business that may affect such estimates and future performance that are discussed in the company’s most recently filed reports on Form 10-K and Form 10-Q and other documents filed by The Hanover Insurance Group, Inc. with the Securities and Exchange Commission (“SEC”) and that are also available at www.hanover.com under “Investors.” These risks and uncertainties include, but are not limited to:

• The severity, duration and long-term impact related to the Pandemic, including, but not limited to, actual and possible government responses, legislative, regulatory and judicial actions, changes in frequency and severity of claims in Core Commercial, Specialty and/or Personal Lines, impacts to distributors (including agent partners), and the possibility of additional premium adjustments, including credits and returns, for the benefit of insureds;

• Changes in regulatory, legislative, economic, market and political conditions, particularly in response to COVID-19 and the Pandemic (such as legislative or regulatory actions that would retroactively require insurers to cover business interruption or other types of claims irrespective of terms, exclusions or other conditions included in the contractual terms of the policies that would otherwise preclude coverage, mandatory returns and other rate-related actions, as well as presumption legislation in regards to workers’ compensation);

• Heightened volatility, fluctuations in interest rates (which have a significant impact on the market value of our investment portfolio and thus our book value), inflationary pressures, default rates and other factors that affect investment returns from the investment portfolio;

• Recessionary economic periods that may inhibit the company’s ability to increase pricing or renew business;

• Data security incidents, including, but not limited to, those resulting from a malicious cyber security attack on the company or its business partners and service providers, or intrusions into the company’s systems or data sources;

• Adverse claims experience, including those driven by large or increased frequency of catastrophe events (including those related to terrorism, riots and civil unrest), and severe weather;

• The uncertainty in estimating weather-related losses or the long-term impacts of the Pandemic, and the limitations and assumptions used to model other property and casualty losses (particularly with respect to products with longer-tail liability lines, such as casualty and bodily injury claims, or involving emerging issues related to losses incurred as the result of new lines of business, such as cyber or financial institutions coverage, or reinsurance contracts and reinsurance recoverables), leading to potential adverse development of loss and loss adjustment expense reserves;

• Changes in weather patterns, whether as a result of global climate change, or otherwise;

• Litigation and the possibility of adverse judicial decisions, including those which expand policy coverage beyond its intended scope and/or award “bad faith” or other non-contractual damages, and the impact of “social inflation” affecting judicial awards and settlements;

• The ability to increase or maintain insurance rates in line with anticipated loss costs and/or governmental action, including mandates by state departments of insurance to either raise or lower rates or provide credits or return premium to insureds;

• Investment impairments, which may be affected by, among other things, the company’s ability and willingness to hold investment assets until they recover in value, as well as credit and interest rate risk, and general financial and economic conditions;

• Disruption of the independent agency channel, including the impact of competition and consolidation in the industry and among agents and brokers;

• Competition, particularly from competitors who have resource and capability advantages;

• The global macroeconomic environment, including actions taken in response to the Pandemic, inflation, global trade disputes, war, energy market disruptions, equity price risk, and interest rate fluctuations, which, among other things, could result in reductions in market values of fixed maturities and other investments;

• Adverse state and federal regulation, legislative and/or regulatory actions (including recent significant revisions to Michigan’s automobile personal injury protection system and related litigation, and various regulations, orders and proposed legislation related to business interruption and workers’ compensation coverages, premium grace periods and returns, and rate actions);

• Financial ratings actions, in particular, downgrades to the company’s ratings;

• Operational and technology risks and evolving technological and product innovation, including risks created by remote work environments, and the risk of cyber-security attacks on or breaches of the company’s systems and/or impacting our outsourcing relationships and third-party operations, or resulting in claim payments (including from products not intended to provide cyber coverage);

• Uncertainties in estimating indemnification liabilities recorded in conjunction with obligations undertaken in connection with the sale of various businesses and discontinued operations; and

• The ability to collect from reinsurers, reinsurance pricing, reinsurance terms and conditions, and the performance of the run-off voluntary property and casualty pools business (including those in the Other segment or in discontinued operations).

Investors should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and should understand the risks and uncertainties inherent in or particular to the company’s business. The company does not undertake the responsibility to update or revise such forward-looking statements.

Non-GAAP Financial Measures

As discussed on page 37 of the company’s Annual Report on Form 10-K for the year ended December 31, 2021, the company uses non-GAAP financial measures as important measures of its operating performance, including operating income, operating income before interest expense and income taxes, operating income per share, and components of the combined ratio, both excluding and/or including, catastrophe losses, prior-year reserve development and the expense ratio. Management believes these non-GAAP financial measures are important indications of the company’s operating performance. The definition of other non-GAAP financial measures and terms can be found in the 2021 Annual Report on pages 63-66.

Operating income and operating income per share are non-GAAP measures. They are defined as net income excluding the after-tax impact of net realized and unrealized investment gains (losses), gains and/or losses on the repayment of debt, other non-operating items, and results from discontinued operations. Net realized and unrealized investment gains (losses), which include changes in the fair value of equity securities still held, are excluded for purposes of presenting operating income, as they are, to a certain extent, determined by interest rates, financial markets and the timing of sales. Operating income also excludes net gains and losses from disposals of businesses, gains and losses related to the repayment of debt, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes, and certain other items. Operating income is the sum of the segment income from: Core Commercial, Specialty, Personal Lines, and Other, after interest expense and income taxes. In reference to one of the company’s four segments, “operating income” is the segment income before both interest expense and income taxes. The company also uses “operating income per share” (which is after both interest expense and income taxes). It is calculated by dividing operating income by the weighted average number of diluted shares of common stock. The company believes that metrics of operating income and operating income in relation to its four segments provide investors with a valuable measure of the performance of the company’s continuing businesses because they highlight the portion of net income attributable to the core operations of the business. Income from continuing operations is the most directly comparable GAAP measure for operating income (and operating income before income taxes) and measures of operating income that exclude the effects of catastrophe losses and/or reserve development should not be misconstrued as substitutes for income from continuing operations or net income determined in accordance with GAAP. A reconciliation of operating income (loss) to income from continuing operations and net income for the relevant periods is included on page 10 of this news release and in the Financial Supplement.

Operating return on equity (“ROE”) is a non-GAAP measure. See end note (4) for a detailed explanation of how this measure is calculated. Operating ROE is based on non-GAAP operating income. In addition, the portion of shareholder equity attributed to unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is excluded. The company believes this measure is helpful in that it provides insight to the capital used by, and results of, the continuing business exclusive of interest expense, income taxes, and other non-operating items. These measures should not be misconstrued as substitutes for GAAP ROE, which is based on net income and shareholders’ equity of the entire company and without adjustments.

The company may also provide measures of operating income and combined ratios that exclude the impact of catastrophe losses (which in all respects include prior accident year catastrophe loss development). A catastrophe is a severe loss, resulting from natural or manmade events, including, but is not limited to, hurricanes, tornadoes, windstorms, earthquakes, hail, severe winter weather, freeze events, fire, explosions, civil unrest and terrorism. Due to the unique characteristics of each catastrophe loss, there is an inherent inability to reasonably estimate the timing or loss amount in advance. The company believes a separate discussion excluding the effects of catastrophe losses is meaningful to understand the underlying trends and variability of earnings, loss and combined ratio results, among others.

Prior accident year reserve development, which can either be favorable or unfavorable, represents changes in the company’s estimate of costs related to claims from prior years. Calendar year loss and loss adjustment expense (“LAE”) ratios determined in accordance with GAAP, excluding prior accident year reserve development, are sometimes referred to as “current accident year loss ratios.” The company believes a discussion of loss and combined ratios, excluding prior accident year reserve development, is helpful since it provides insight into both estimates of current accident year results and the accuracy of prior-year estimates.

The loss and combined ratios in accordance with GAAP are the most directly comparable GAAP measures for the loss and combined ratios calculated excluding the effects of catastrophe losses and/or reserve development. The presentation of loss and combined ratios calculated excluding the effects of catastrophe losses and/or reserve development should not be misconstrued as substitutes for the loss and/or combined ratios determined in accordance with GAAP.

Endnotes

(1) Renewal price changes in Core Commercial and Specialty represent 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 risks. Rate increases in Core Commercial and Specialty represent the average change in premium on renewed policies caused by the base rate changes, discretionary pricing, and inflation, excluding the impact of changes in policy level exposure or insured risks. Renewal price change in Personal Lines represents the average change in premium on policies available to renew caused by the net effects of filed rate, inflation adjustments or other changes in policy level exposure or insured risks, regardless of whether or not the policies are retained for the duration of their contractual terms. Rate change in Personal Lines is the estimated cumulative premium effect of approved rate actions applied to policies available for renewal, regardless of whether or not policies are actually renewed. Accordingly, rate changes do not represent actual increases or decreases realized by the company. Personal Lines rate changes do not include inflation or changes in policy level exposure or insured risks.

(2) Current accident year loss and LAE ratio, excluding catastrophe losses, is a non-GAAP measure, which is equal to the loss and LAE ratio (“loss ratio”), excluding prior-year reserve development and catastrophe losses. The loss ratio (which includes losses, LAE, catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. A reconciliation of the GAAP loss ratio to the current accident year loss ratio, excluding catastrophe losses, is shown on the following page.

Three months ended
June 30, 2022
Core Commercial Specialty Personal Lines Total
Total loss and LAE ratio 60.1 % 54.1 % 76.5 % 65.4 %
Less:
Prior-year reserve development ratio (0.6)% (0.4)% (1.0)% (0.7)%
Catastrophe ratio 3.7 % 2.2 % 10.2 % 6.0 %
Current accident year loss and LAE ratio, excluding catastrophes 57.0 % 52.3 % 67.3 % 60.1 %
June 30, 2021
Total loss and LAE ratio 59.7 % 57.4 % 69.4 % 63.2 %
Less:
Prior-year reserve development ratio (1.0)% (1.3)% (1.0)% (1.1)%
Catastrophe ratio 3.1 % 1.7 % 12.3 % 6.5 %
Current accident year loss and LAE ratio, excluding catastrophes 57.6 % 57.0 % 58.1 % 57.8 %
Six months ended
June 30, 2022
Core Commercial Specialty Personal Lines Total
Total loss and LAE ratio 60.2 % 53.2 % 73.3 % 63.8 %
Less:
Prior-year reserve development ratio (1.0)% (2.5)% 0.8 % (0.6)%
Catastrophe ratio 3.9 % 2.5 % 6.9 % 4.8 %
Current accident year loss and LAE ratio, excluding catastrophes 57.3 % 53.2 % 65.6 % 59.6 %
June 30, 2021
Total loss and LAE ratio 69.1 % 60.2 % 64.2 % 65.2 %
Less:
Prior-year reserve development ratio (0.8)% (0.8)% (1.1)% (0.9)%
Catastrophe ratio 12.3 % 5.6 % 7.7 % 9.0 %
Current accident year loss and LAE ratio, excluding catastrophes 57.6 % 55.4 % 57.6 % 57.1 %

(3) Operating income and operating income per diluted share are non-GAAP measures. Operating income (loss) before income taxes, as referenced in the results of the business segments, is defined as, with respect to such segment, operating income (loss) before interest expense and income taxes. The reconciliation of operating income and operating income per diluted share to the closest GAAP measures, income from continuing operations and income from continuing operations per diluted share, respectively, is provided on the preceding pages of this news release.

(4) Operating return on average equity (“operating ROE”) is a non-GAAP measure. Operating ROE is calculated by dividing annualized operating income after tax for the applicable period (see under the heading in this news release “Non-GAAP Financial Measures” and end note (3)), by average shareholders’ equity, excluding unrealized appreciation (depreciation) on fixed maturity investments, net of tax, for the period presented. Total shareholders’ equity, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is also a non-GAAP measure. Total shareholders’ equity is the most directly comparable GAAP measure, and is reconciled below. For the calculation of operating ROE, the average of beginning and ending shareholders’ equity, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is used for the period as shown and reconciled in the table below.
( in millions) June 30 September 30 December 31 March 31 June 30
2021 2021 2021 2022 2022
Total shareholders' equity (GAAP) $3,154.0 $3,102.3 $3,144.9 $2,832.8 $2,571.8
Less: net unrealized appreciation (depreciation) on fixed maturity investments, net of tax 304.7 256.8 184.9 (195.0) (459.4)
Total shareholders' equity, excluding net     unrealized appreciation (depreciation)     on fixed maturity investments, net of tax $2,849.3 $2,845.5 $2,960.0 $3,027.8 $3,031.2
Quarter Averages
Average shareholders' equity (GAAP) $2,702.3
Average shareholders' equity, excluding net     unrealized appreciation (depreciation) on     fixed maturity investments, net of tax $3,029.5
Year-to-date Averages
Average shareholders' equity (GAAP) $2,849.8
Average shareholders' equity, excluding net     unrealized appreciation (depreciation) on     fixed maturity investments, net of tax $3,006.3

All values are in US Dollars.

($ in millions) Three months ended
June 30 June 30
Net Income ROE 2022 2022
Net income (GAAP) 22.6 $127.4
Annualized net income* 90.4 254.8
Average shareholders' equity (GAAP) 2,702.3 $2,849.8
Return on equity 3.3% 8.9%
Operating Income ROE (non-GAAP)
Operating income after taxes 83.9 $201.6
Annualized operating income, net of tax* 335.6 403.2
Average shareholders' equity, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax 3,029.5 $3,006.3
Operating return on equity 11.1% 13.4%

All values are in US Dollars.

*For three months ended June 30, 2022, annualized net income and operating income after taxes is calculated by multiplying three months ended net income and operating income after taxes, respectively, by 4. For six months ended June 30, 2022, annualized net income and operating income after taxes is calculated by multiplying six months ended net income and operating income after taxes, respectively, by 2.

(5) Combined ratio, excluding catastrophes, and current accident year combined ratio, excluding catastrophes, are non-GAAP measures. The combined ratio (which includes catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. This and other non-GAAP measures are used throughout this document. See the disclosure on the use of this and other non-GAAP measures under the heading “Forward-Looking Statements and Non-GAAP Financial Measures.” A reconciliation of the GAAP combined ratio to the combined ratio, excluding catastrophes, and to the current accident year combined ratio, excluding catastrophes, is shown on the following page.

Three months ended
June 30, 2022
Core Commercial Specialty Personal Lines Total
Total combined ratio (GAAP) 92.6 % 89.4 % 103.2 % 96.2 %
Less: Catastrophe ratio 3.7 % 2.2 % 10.2 % 6.0 %
Combined ratio, excluding catastrophe losses (non-GAAP) 88.9 % 87.2 % 93.0 % 90.2 %
Less: Prior-year reserve development ratio (0.6)% (0.4)% (1.0)% (0.7)%
Combined ratio, excluding catastrophe losses<br><br>and prior year development (non-GAAP) 89.5 % 87.6 % 94.0 % 90.9 %
June 30, 2021
Total combined ratio (GAAP) 91.9 % 92.3 % 97.6 % 94.4 %
Less: Catastrophe ratio 3.1 % 1.7 % 12.3 % 6.5 %
Combined ratio, excluding catastrophe losses (non-GAAP) 88.8 % 90.6 % 85.3 % 87.9 %
Less: Prior-year reserve development ratio (1.0)% (1.3)% (1.0)% (1.1)%
Combined ratio, excluding catastrophe losses<br><br>and prior year development (non-GAAP) 89.8 % 91.9 % 86.3 % 89.0 %
Six months ended
June 30, 2022
Total combined ratio (GAAP) 92.9 % 88.6 % 100.2 % 94.8 %
Less: Catastrophe ratio 3.9 % 2.5 % 6.9 % 4.8 %
Combined ratio, excluding catastrophe losses (non-GAAP) 89.0 % 86.1 % 93.3 % 90.0 %
Less: Prior-year reserve development ratio (1.0)% (2.5)% 0.8 % (0.6)%
Current accident year combined ratio, excluding<br><br>catastrophe losses (non-GAAP) 90.0 % 88.6 % 92.5 % 90.6 %
June 30, 2021
Total combined ratio (GAAP) 101.7 % 95.6 % 92.3 % 96.6 %
Less: Catastrophe ratio 12.3 % 5.6 % 7.7 % 9.0 %
Combined ratio, excluding catastrophe losses (non-GAAP) 89.4 % 90.0 % 84.6 % 87.6 %
Less: Prior-year reserve development ratio (0.8)% (0.8)% (1.1)% (0.9)%
Current accident year combined ratio, excluding<br><br>catastrophe losses (non-GAAP) 90.2 % 90.8 % 85.7 % 88.5 %

(6) Here, and later in this document, the expense ratio is reduced by installment and other fee revenues for purposes of the ratio calculation.

(7) Book value per share, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is a non-GAAP measure. Book value per share is the most directly comparable GAAP measure and is reconciled in the table on the following page.

Period ended
December March June
2021 2022 2022
Book value per share $88.59 $79.58 $72.20
Less: Net unrealized appreciation (depreciation) on fixed<br><br>maturity investments, net of tax 5.21 (5.48) (12.90)
Book value per share, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax $83.38 $85.06 $85.10
Quarter-to-Date<br><br>Change in book value per share (9.3)%
Change in book value per share, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax -
Year-to-Date
Change in book value per share (18.5)%
Change in book value per share, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax 2.1 %

(8) The separate financial information of each operating segment 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. Management evaluates the results of the aforementioned operating segments without consideration of interest expense on debt and on a pre-tax basis.

EX-99.2

Exhibit 99.2

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FINANCIAL SUPPLEMENT SECOND QUARTER 2022

THE HANOVER INSURANCE GROUP
FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
Segment Descriptions........................................................................................................................ 1
Financial Highlights............................................................................................................................. 2
Consolidated Financial Statements
Income Statements................................................................................................................................. 3
Balance Sheets....................................................................................................................................... 4
Pre-tax Operating Results and Related Metrics
Consolidated........................................................................................................................................... 5-7
Core Commercial................................................................................................................................... 8-9
Specialty.................................................................................................................................................. 10-11
Personal Lines........................................................................................................................................ 12-15
Investments
Net Investment Income and Yields......................................................................................................... 16
Investment Portfolio................................................................................................................................. 17
Credit Quality and Duration of Fixed Maturities................................................................................... 18
Top 25 Corporate and Municipal Fixed Maturity Holdings................................................................. 19
Reconciliation of Operating Income to Net Income.................................................................... 20
Other Information
Non-GAAP Financial Measures............................................................................................................ 21
Premium Related Metric Definitions..................................................................................................... 22
Corporate Information............................................................................................................................. 23
Market and Dividend Information.......................................................................................................... 23
Financial Strength and Debt Ratings.................................................................................................... 23
THE HANOVER INSURANCE GROUP
--- --- ---
BASIS OF PRESENTATION
SEGMENT DESCRIPTIONS
CORE COMMERCIAL
Sub-segment Customer and business type Primary lines of business
Small Commercial Coverage to small businesses, with annual premiums of $50,000 or less; <br>Products are tailored to specific industry segments as needed. ● Business owners' policy/commercial multiple peril<br>● Commercial automobile<br>● Workers' compensation<br>● Other (general liability, commercial umbrella, monoline <br>    property)
Middle Market Coverage to mid-sized businesses with annual premiums starting at $50,000, focusing on those between $50,000 and $250,000. Products are tailored to certain specific industry segments, including technology, manufacturing, human services, retail, real estate, among others. ● Commercial multiple peril<br>● Commercial automobile<br>● Workers' compensation<br>● Other (general liability, commercial umbrella, monoline <br>    property)
SPECIALTY
Sub-segment Customer and business type Primary lines of business
Professional and Executive Lines Coverage to small to mid-sized non-public companies, including lawyer, engineer, accountant, and various other professional and advisory firms including healthcare; provide protection for directors, officers and employees against actual or alleged errors, negligence or bad faith, employment practices. ● Professional liability<br>● Management liability<br>● Fidelity and crime<br>● Other property and liability lines for healthcare firms
Specialty Property & Casualty Program business - coverage to markets with specialty or risk management needs related to groups of similar businesses; <br>Hanover Specialty Industrial (HSI) - coverage to small and medium chemical, paint, solvent and other manufacturers and distributors; <br>Excess & Surplus - non-admitted general liability and property coverage to risks outside of the appetite of standard commercial lines;<br>Specialty General Liability - admitted coverage for higher-hazard liability risks ● Commercial multiple peril<br>● Commercial automobile<br>● Workers' compensation<br>● Other (general liability, commercial umbrella, monoline <br>    property)
Marine Includes coverage for inland and ocean marine, and insures against physical losses to property, such as contractor's equipment, builders' risk and goods in transit. Also covers jewelers block, fine art and other valuables. ● Inland/ocean marine<br>● Ancillary lines of business written through marine agents
Surety and Other Provides coverage for construction and other firms, as well as sole proprietors in the event of claims for non-performance or non-payment, and commercial surety coverage related to fiduciary or regulatory obligations. ● Bond
PERSONAL LINES
Sub-segment Customer and business type Primary lines of business
Personal Automobile Includes coverage for 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 ● Personal automobile
Homeowners and Other Includes coverage for individuals for losses to their residences and personal property, such as those caused by fire, wind, hail, water damage (excluding flood), theft and vandalism, and against third-party liability claims. ● Homeowners<br>● Personal umbrella<br>● Inland Marine (jewelry, art, etc.)<br>● Other (fire, personal watercraft, other miscellaneous)
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; holding company and other expenses; and our run-off voluntary assumed property and casualty pools and run-off direct asbestos and environmental businesses.
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
FINANCIAL HIGHLIGHTS
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except earnings per share) 2021 2021 2021 2021 2022 2022 2021 2022
PREMIUMS
Gross premiums written $ 1,337.6 $ 1,342.8 $ 1,493.2 $ 1,170.7 $ 1,470.1 $ 1,473.9 $ 2,680.4 $ 2,944.0
- -
Net premiums written 1,196.1 1,207.2 1,375.2 1,214.9 1,312.3 1,332.8 2,403.3 2,645.1
- -
Net premiums earned 1,161.8 1,179.8 1,186.0 1,242.6 1,263.8 1,293.8 2,341.6 2,557.6
EARNINGS
Operating income before interest and taxes $ 85.1 $ 137.3 $ 47.0 $ 162.9 $ 154.4 $ 115.0 $ 222.4 $ 269.4
- -
Operating income after taxes 61.4 104.0 30.8 122.1 117.7 83.9 165.4 201.6
- -
Income from continuing operations 92.8 129.6 34.8 162.8 105.3 22.8 222.4 128.1
- -
Net income 92.7 128.5 34.0 163.5 104.8 22.6 221.2 127.4
PER SHARE DATA (DILUTED)
- -
Operating income after taxes $ 1.66 $ 2.85 $ 0.85 $ 3.38 $ 3.26 $ 2.32 $ 4.50 $ 5.58
- -
Income from continuing operations 2.52 3.55 0.96 4.51 2.91 0.63 6.06 3.55
- -
Net income 2.51 3.52 0.94 4.53 2.90 0.63 6.03 3.52
- -
Dilutive weighted average shares outstanding 36.9 36.5 36.3 36.1 36.1 36.1 36.7 36.1
- -
Basic weighted average shares outstanding 36.4 35.9 35.7 35.5 35.5 35.6 36.2 35.6
BALANCE SHEET
March 31 June 30 September 30 December 31 March 31 June 30
(In millions, except per share data) 2021 2021 2021 2021 2022 2022
Total assets $ 13,448.0 $ 13,728.1 $ 14,105.3 $ 14,254.3 $ 13,847.2 $ 13,600.9
Total loss and loss adjustment expense reserves 6,223.7 6,343.4 6,540.1 6,447.6 6,512.2 6,606.9
Total shareholders' equity 3,046.8 3,154.0 3,102.3 3,144.9 2,832.8 2,571.8
Total shareholders' equity, excluding net unrealized appreciation
(depreciation) on fixed maturity investments, net of tax 2,804.2 2,849.3 2,845.5 2,960.0 3,027.8 3,031.2
Property and Casualty Companies
Statutory surplus $ 2,667.7 $ 2,547.1 $ 2,548.4 $ 2,720.0 $ 2,809.6 $ 2,693.5
Premium to surplus ratio 1.75:1 1.88:1 1.92:1 1.83:1 1.82:1 1.94:1
Book value per share $ 84.21 $ 88.23 $ 87.04 $ 88.59 $ 79.58 $ 72.20
Book value per share, excluding net unrealized appreciation
(depreciation) on fixed maturity investments, net of tax $ 77.50 $ 79.71 $ 79.84 $ 83.38 $ 85.06 $ 85.10
Tangible book value per share (total book value excluding goodwill
and intangibles) $ 78.78 $ 82.76 $ 81.54 $ 83.08 $ 74.09 $ 66.73
Shares outstanding 36.2 35.8 35.6 35.5 35.6 35.6
Total debt/equity 25.6 % 24.8 % 25.2 % 24.8 % 27.6 % 30.4 %
Total debt/total capital 20.4 % 19.9 % 20.1 % 19.9 % 21.6 % 23.3 %
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- ---
CONSOLIDATED INCOME STATEMENTS
Three Months ended June 30 Six Months ended June 30
(In millions) 2022 2021 % Change 2022 2021 % Change
Premiums earned $ 1,293.8 $ 1,179.8 9.7 $ 2,557.6 $ 2,341.6 9.2
Net investment income 70.5 75.6 (6.7) 147.4 152.4 (3.3)
Net realized and unrealized investment gains (losses):
Net realized gains (losses) from sales and other (19.2) 4.8 N/M (16.2) 3.2 N/M
Net change in fair value of equity securities (59.0) 26.5 N/M (77.0) 65.6 N/M
Recoveries (impairments) on investments 0.3 (0.2) N/M (0.6) (0.2) N/M
Total net realized and unrealized investment gains (losses) (77.9) 31.1 N/M (93.8) 68.6 N/M
Fees and other income 6.5 5.8 12.1 12.4 11.8 5.1
Total revenues 1,292.9 1,292.3 - 2,623.6 2,574.4 1.9
LOSSES AND EXPENSES
Losses and loss adjustment expenses 845.5 745.1 13.5 1,633.0 1,526.4 7.0
Amortization of deferred acquisition costs 269.3 244.2 10.3 532.2 484.5 9.8
Interest expense 8.5 8.5 - 17.0 17.0 -
Other operating expenses 141.4 134.6 5.1 283.2 272.5 3.9
Total losses and expenses 1,264.7 1,132.4 11.7 2,465.4 2,300.4 7.2
Income from continuing operations before income taxes 28.2 159.9 (82.4) 158.2 274.0 (42.3)
Income tax expense 5.4 30.3 (82.2) 30.1 51.6 -
Income from continuing operations 22.8 129.6 (82.4) 128.1 222.4 (42.4)
Discontinued operations (net of taxes):
Loss from discontinued life businesses (0.2) (1.1) (81.8) (0.7) (1.2) (41.7)
Net income $ 22.6 $ 128.5 (82.4) $ 127.4 $ 221.2 (42.4)
THE HANOVER INSURANCE GROUP
--- --- --- --- ---
CONSOLIDATED BALANCE SHEETS
June 30 December 31
(In millions, except per share data) 2022 2021 % Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of 7,831.7 and 7,514.8) 7,244.7 $ 7,723.9 (6.2)
Equity securities, at fair value 429.8 661.3 (35.0)
Other investments 793.6 767.4 3.4
Total investments 8,468.1 9,152.6 (7.5)
Cash and cash equivalents 145.9 230.9 (36.8)
Accrued investment income 50.2 49.8 0.8
Premiums and accounts receivable, net 1,527.2 1,469.5 3.9
Reinsurance recoverable on paid and unpaid losses and unearned premiums 1,934.7 1,907.3 1.4
Deferred acquisition costs 571.0 552.0 3.4
Deferred income tax asset 134.5 - N/M
Goodwill 178.8 178.8 -
Other assets 489.5 606.3 (19.3)
Assets of discontinued businesses 101.0 107.1 (5.7)
Total assets 13,600.9 $ 14,254.3 (4.6)
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Loss and loss adjustment expense reserves 6,606.9 $ 6,447.6 2.5
Unearned premiums 2,804.1 2,734.9 2.5
Expenses and taxes payable 638.4 907.7 (29.7)
Deferred income tax liability - 60.8 N/M
Reinsurance premiums payable 77.2 55.1 40.1
Debt 782.0 781.6 0.1
Liabilities of discontinued businesses 120.5 121.7 (1.0)
Total liabilities 11,029.1 11,109.4 (0.7)
SHAREHOLDERS' EQUITY
Preferred stock, par value 0.01 per share;
20.0 million shares authorized; none issued - - -
Common stock, par value 0.01 per share; 300.0 million shares
authorized; 60.5 million shares issued 0.6 0.6 -
Additional paid-in capital 1,896.8 1,887.2 0.5
Accumulated other comprehensive income (loss) (519.9) 122.2 N/M
Retained earnings 3,056.7 2,983.2 2.5
Treasury stock at cost (24.9 million and 25.0 million shares) (1,862.4) (1,848.3) 0.8
Total shareholders' equity 2,571.8 3,144.9 (18.2)
Total liabilities and shareholders' equity 13,600.9 $ 14,254.3 (4.6)

All values are in US Dollars.

THE HANOVER INSURANCE GROUP
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
CONSOLIDATED
Three Months ended June 30
2022 2021
Core Personal Core Personal
(In millions, except percentage data) Commercial Specialty Lines Other Total Commercial Specialty Lines Other Total
Gross premiums written $ 525.6 $ 354.6 $ 593.7 $ - $ 1,473.9 $ 473.6 $ 332.1 $ 537.1 $ - $ 1,342.8
- - -
Net premiums written $ 454.2 $ 302.3 $ 576.3 $ - $ 1,332.8 $ 421.7 $ 265.1 $ 520.4 $ - $ 1,207.2
- - -
Net premiums earned $ 480.1 $ 293.5 $ 520.2 $ - $ 1,293.8 $ 447.6 $ 255.8 $ 476.4 $ - $ 1,179.8
- - -
Losses and LAE:
- - -
Current year, excluding catastrophe losses 273.6 153.5 350.2 - 777.3 258.2 145.7 277.0 - 680.9
- -
Prior year unfavorable (favorable) development, excluding catastrophe losses (2.8) (1.2) (5.2) - (9.2) (4.6) (3.3) (5.0) 0.3 (12.6)
- - -
Current year catastrophe losses 28.7 9.7 51.0 - 89.4 22.5 7.7 61.6 - 91.8
- - -
Prior year unfavorable (favorable) catastrophe development (10.9) (3.1) 2.0 - (12.0) (8.7) (3.3) (3.0) - (15.0)
- - -
Total losses and LAE 288.6 158.9 398.0 - 845.5 267.4 146.8 330.6 0.3 745.1
- - -
Amortization of deferred acquisition costs and other underwriting expenses 157.2 104.3 142.1 - 403.6 145.1 90.3 136.3 - 371.7
- - -
GAAP underwriting profit (loss) 34.3 30.3 (19.9) - 44.7 35.1 18.7 9.5 (0.3) 63.0
- - -
Net investment income 32.6 14.8 20.6 2.5 70.5 35.0 16.0 21.8 2.8 75.6
- - -
Other income 0.9 1.5 3.4 0.7 6.5 0.8 1.7 2.2 1.1 5.8
- - -
Other operating expenses (0.9) (1.4) (1.3) (3.1) (6.7) (1.0) (1.9) (1.3) (2.9) (7.1)
- -
Operating income before income taxes $ 66.9 $ 45.2 $ 2.8 $ 0.1 $ 115.0 $ 69.9 $ 34.5 $ 32.2 $ 0.7 $ 137.3
Loss and LAE ratio:
Current year, excluding catastrophe losses 57.0 % 52.3 % 67.3 % N/M 60.1 % 57.6 % 57.0 % 58.1 % N/M 57.8 %
-
Prior year favorable development, excluding catastrophe losses (0.6)% (0.4)% (1.0)% N/M (0.7)% (1.0)% (1.3)% (1.0)% N/M (1.1)%
-
Current year catastrophe losses 6.0 % 3.3 % 9.8 % N/M 6.9 % 5.0 % 3.0 % 12.9 % N/M 7.8 %
-
Prior year unfavorable (favorable) catastrophe development (2.3)% (1.1)% 0.4 % N/M (0.9)% (1.9)% (1.3)% (0.6)% N/M (1.3)%
Total loss and LAE ratio 60.1 % 54.1 % 76.5 % N/M 65.4 % 59.7 % 57.4 % 69.4 % N/M 63.2 %
-
Expense ratio 32.5 % 35.3 % 26.7 % N/M 30.8 % 32.2 % 34.9 % 28.2 % N/M 31.2 %
-
Combined ratio 92.6 % 89.4 % 103.2 % N/M 96.2 % 91.9 % 92.3 % 97.6 % N/M 94.4 %
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
CONSOLIDATED
Six Months ended June 30
2022 2021
Core Personal Core Personal
(In millions, except percentage data) Commercial Specialty Lines Other Total Commercial Specialty Lines Other Total
Gross premiums written $ 1,117.5 $ 733.7 $ 1,092.8 $ - $ 2,944.0 $ 1,013.5 $ 676.2 $ 990.7 $ - $ 2,680.4
- - -
Net premiums written $ 980.8 $ 605.1 $ 1,059.2 $ - $ 2,645.1 $ 902.3 $ 541.9 $ 959.1 $ - $ 2,403.3
- - - - -
Net premiums earned $ 954.8 $ 577.3 $ 1,025.5 $ - $ 2,557.6 $ 882.8 $ 513.5 $ 945.3 $ - $ 2,341.6
- - - - -
Losses and LAE:
- - - - -
Current year, excluding catastrophe losses 546.2 307.5 671.6 - 1,525.3 508.8 284.0 544.3 - 1,337.1
- - -
Prior year unfavorable (favorable) development, excluding catastrophe losses (9.2) (14.4) 8.4 - (15.2) (7.3) (3.9) (10.2) 0.6 (20.8)
- - -
Current accident year catastrophe losses 48.4 17.3 69.2 - 134.9 117.0 32.0 76.1 - 225.1
- - -
Prior year unfavorable (favorable) catastrophe development (10.9) (3.1) 2.0 - (12.0) (8.8) (3.2) (3.0) - (15.0)
- - - - -
Total losses and LAE 574.5 307.3 751.2 - 1,633.0 609.7 308.9 607.2 0.6 1,526.4
- - -
Amortization of deferred acquisition costs and other underwriting expenses 313.8 205.8 281.9 - 801.5 289.3 183.9 269.7 - 742.9
- - - - -
GAAP underwriting profit (loss) 66.5 64.2 (7.6) - 123.1 (16.2) 20.7 68.4 (0.6) 72.3
Net investment income 68.0 31.0 43.2 5.2 147.4 71.9 30.9 43.9 5.7 152.4
- - - - -
Other income 1.9 2.8 6.2 1.5 12.4 1.6 3.3 4.5 2.4 11.8
- -
Other operating expenses (2.0) (2.8) (2.7) (6.0) (13.5) (2.2) (3.4) (2.8) (5.7) (14.1)
- - - - -
Operating income before income taxes $ 134.4 $ 95.2 $ 39.1 $ 0.7 $ 269.4 $ 55.1 $ 51.5 $ 114.0 $ 1.8 $ 222.4
Loss and LAE ratio:
Current year, excluding catastrophe losses 57.3 % 53.2 % 65.6 % N/M 59.6 % 57.6 % 55.4 % 57.6 % N/M 57.1 %
Prior year unfavorable (favorable) development, excluding catastrophe losses (1.0)% (2.5)% 0.8 % N/M (0.6)% (0.8)% (0.8)% (1.1)% N/M (0.9)%
Current year catastrophe losses 5.0 % 3.0 % 6.7 % N/M 5.3 % 13.3 % 6.2 % 8.0 % N/M 9.6 %
Prior year unfavorable (favorable) catastrophe development (1.1)% (0.5)% 0.2 % N/M (0.5)% (1.0)% (0.6)% (0.3)% N/M (0.6)%
Total loss and LAE ratio 60.2 % 53.2 % 73.3 % N/M 63.8 % 69.1 % 60.2 % 64.2 % N/M 65.2 %
Expense ratio 32.7 % 35.4 % 26.9 % N/M 31.0 % 32.6 % 35.4 % 28.1 % N/M 31.4 %
Combined ratio 92.9 % 88.6 % 100.2 % N/M 94.8 % 101.7 % 95.6 % 92.3 % N/M 96.6 %
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
CONSOLIDATED
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except percentage data) 2021 2021 2021 2021 2022 2022 2021 2022
Gross premiums written $ 1,337.6 $ 1,342.8 $ 1,493.2 $ 1,170.7 $ 1,470.1 $ 1,473.9 $ 2,680.4 $ 2,944.0
- -
Net premiums written $ 1,196.1 $ 1,207.2 $ 1,375.2 $ 1,214.9 $ 1,312.3 $ 1,332.8 $ 2,403.3 $ 2,645.1
- -
Net premiums earned $ 1,161.8 $ 1,179.8 $ 1,186.0 $ 1,242.6 $ 1,263.8 $ 1,293.8 $ 2,341.6 $ 2,557.6
. - -
Losses and LAE:
-
Current year, excluding catastrophe losses 656.2 680.9 711.4 739.2 748.0 777.3 1,337.1 1,525.3
- -
Prior year favorable development, excluding catastrophe losses (8.2) (12.6) (20.9) (14.4) (6.0) (9.2) (20.8) (15.2)
- -
Current year catastrophe losses 133.3 91.8 153.5 39.0 45.5 89.4 225.1 134.9
-
Prior year favorable catastrophe development - (15.0) - - - (12.0) (15.0) (12.0)
- -
Total losses and LAE 781.3 745.1 844.0 763.8 787.5 845.5 1,526.4 1,633.0
-
Amortization of deferred acquisition costs and other underwriting expenses 371.2 371.7 372.9 394.2 397.9 403.6 742.9 801.5
-
GAAP underwriting profit (loss) 9.3 63.0 (30.9) 84.6 78.4 44.7 72.3 123.1
- -
Net investment income 76.8 75.6 78.8 79.5 76.9 70.5 152.4 147.4
- -
Other income 6.0 5.8 6.1 6.0 5.9 6.5 11.8 12.4
- -
Other operating expenses (7.0) (7.1) (7.0) (7.2) (6.8) (6.7) (14.1) (13.5)
- -
Operating income before income taxes $ 85.1 $ 137.3 $ 47.0 $ 162.9 $ 154.4 $ 115.0 $ 222.4 $ 269.4
Loss and LAE ratio:
- -
Current year, excluding catastrophe losses 56.4 % 57.8 % 60.1 % 59.6 % 59.2 % 60.1 % 57.1 % 59.6 %
- -
Prior year favorable development, excluding catastrophe losses (0.7)% (1.1)% (1.8)% (1.2)% (0.5)% (0.7)% (0.9)% (0.6)%
- -
Current year catastrophe losses 11.5 % 7.8 % 12.9 % 3.1 % 3.6 % 6.9 % 9.6 % 5.3 %
-
Prior year favorable catastrophe development - (1.3)% - - - (0.9)% (0.6)% (0.5)%
-
Total loss and LAE ratio 67.2 % 63.2 % 71.2 % 61.5 % 62.3 % 65.4 % 65.2 % 63.8 %
-
Expense ratio 31.6 % 31.2 % 31.1 % 31.4 % 31.1 % 30.8 % 31.4 % 31.0 %
-
Combined ratio 98.8 % 94.4 % 102.3 % 92.9 % 93.4 % 96.2 % 96.6 % 94.8 %
-
Combined ratio, excluding catastrophe losses 87.3 % 87.9 % 89.4 % 89.8 % 89.8 % 90.2 % 87.6 % 90.0 %
-
Current accident year combined ratio, excluding catastrophe losses 88.0 % 89.0 % 91.2 % 91.0 % 90.3 % 90.9 % 88.5 % 90.6 %
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
CORE COMMERCIAL
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except percentage data) 2021 2021 2021 2021 2022 2022 2021 2022
Gross premiums written $ 539.9 $ 473.6 $ 601.1 $ 484.9 $ 591.9 $ 525.6 $ 1,013.5 $ 1,117.5
Net premiums written $ 480.6 $ 421.7 $ 534.6 $ 427.9 $ 526.6 $ 454.2 $ 902.3 $ 980.8
0
Net premiums earned $ 435.2 $ 447.6 $ 459.7 $ 468.4 $ 474.7 $ 480.1 $ 882.8 $ 954.8
0
Losses and LAE:
0
Current year, excluding catastrophe losses 250.6 258.2 281.7 271.9 272.6 273.6 508.8 546.2
0
Prior year favorable development, excluding catastrophe losses (2.7) (4.6) (3.3) (7.2) (6.4) (2.8) (7.3) (9.2)
0
Current year catastrophe losses 94.5 22.5 57.3 10.9 19.7 28.7 117.0 48.4
0
Prior year favorable catastrophe development (0.1) (8.7) (0.9) - - (10.9) (8.8) (10.9)
0
Total losses and LAE 342.3 267.4 334.8 275.6 285.9 288.6 609.7 574.5
0
Amortization of deferred acquisition costs and other underwriting expenses 144.2 145.1 150.6 158.4 156.6 157.2 289.3 313.8
0
GAAP underwriting profit (loss) (51.3) 35.1 (25.7) 34.4 32.2 34.3 (16.2) 66.5
0 0 0 0 0 0
Net investment income 36.9 35.0 37.0 37.6 35.4 32.6 71.9 68.0
0 0 0 0 0 0
Other income 0.8 0.8 0.9 0.8 1.0 0.9 1.6 1.9
0 0 0 0 0 0
Other operating expenses (1.2) (1.0) (1.2) (0.9) (1.1) (0.9) (2.2) (2.0)
0 0 0 0 0
Operating income before income taxes $ (14.8) $ 69.9 $ 11.0 $ 71.9 $ 67.5 $ 66.9 $ 55.1 $ 134.4
- - - - - -
Loss and LAE ratio:
- - - - - -
Current year, excluding catastrophe losses 57.6 % 57.6 % 61.2 % 58.0 % 57.4 % 57.0 % 57.6 % 57.3 %
0 0 0 0 0 0
Prior year favorable development, excluding catastrophe losses (0.6)% (1.0)% (0.7)% (1.5)% (1.3)% (0.6)% (0.8)% (1.0)%
0 0 0 0 0 0
Current year catastrophe losses 21.7 % 5.0 % 12.5 % 2.3 % 4.1 % 6.0 % 13.3 % 5.0 %
0 0 0 0 0 0
Prior year favorable catastrophe development - (1.9)% (0.2)% - - (2.3)% (1.0)% (1.1)%
Total loss and LAE ratio 78.7 % 59.7 % 72.8 % 58.8 % 60.2 % 60.1 % 69.1 % 60.2 %
0 0 0 0 0 0.691
Expense ratio 33.0 % 32.2 % 32.6 % 33.6 % 32.8 % 32.5 % 32.6 % 32.7 %
0 0 0 0 0 0.326
Combined ratio 111.7 % 91.9 % 105.4 % 92.4 % 93.0 % 92.6 % 101.7 % 92.9 %
0 0 0 0 0
Combined ratio, excluding catastrophe losses 90.0 % 88.8 % 93.1 % 90.1 % 88.9 % 88.9 % 89.4 % 89.0 %
0 0 0 0 0
Combined ratio, excluding catastrophe losses and prior year development 90.6 % 89.8 % 93.8 % 91.6 % 90.2 % 89.5 % 90.2 % 90.0 %
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
PREMIUMS WRITTEN AND RELATED METRICS
CORE COMMERCIAL
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except percentage data) 2021 2021 2021 2021 2022 2022 2021 2022
Written Premium
Gross $ 539.9 $ 473.6 $ 601.1 $ 484.9 $ 591.9 $ 525.6 $ 1,013.5 $ 1,117.5
Ceded (59.3) (51.9) (66.5) (57.0) (65.3) (71.4) (111.2) (136.7)
Net $ 480.6 $ 421.7 $ 534.6 $ 427.9 $ 526.6 $ 454.2 $ 902.3 $ 980.8
Growth 4.3% 11.4% 9.9% 6.8% 9.6% 7.7% 7.5% 8.7%
Net premiums written by segment
Small Commercial $ 257.1 $ 246.8 $ 256.3 $ 243.2 $ 283.7 $ 272.8 $ 503.9 $ 556.5
Middle Market 223.5 174.9 278.3 184.7 242.9 181.4 398.4 424.3
Total $ 480.6 $ 421.7 $ 534.6 $ 427.9 $ 526.6 $ 454.2 $ 902.3 $ 980.8
Net premiums written by line of business
Commercial Multiple Peril $ 237.2 $ 219.0 $ 284.2 $ 217.3 $ 256.0 $ 224.0 $ 456.2 $ 480.0
Commercial Automobile 90.0 80.6 92.9 77.3 96.1 82.5 170.6 178.6
Workers' Compensation 95.7 76.6 92.7 84.3 113.0 92.6 172.3 205.6
Other Core Commercial 57.7 45.5 64.8 49.0 61.5 55.1 103.2 116.6
Total $ 480.6 $ 421.7 $ 534.6 $ 427.9 $ 526.6 $ 454.2 $ 902.3 $ 980.8
Related Metrics
Premium Retention 87.3% 84.9% 87.8% 86.7% 86.2% 84.2% 86.2% 85.3%
Renewal Price Change 6.3% 9.3% 9.4% 9.5% 9.7% 11.0% 7.7% 10.3%
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
SPECIALTY
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except percentage data) 2021 2021 2021 2021 2022 2022 2021 2022
Gross premiums written $ 344.1 $ 332.1 $ 327.2 $ 346.0 $ 379.1 $ 354.6 $ 676.2 $ 733.7
- -
Net premiums written $ 276.8 $ 265.1 $ 292.2 $ 284.8 $ 302.8 $ 302.3 $ 541.9 $ 605.1
- -
Net premiums earned $ 257.7 $ 255.8 $ 238.9 $ 277.5 $ 283.8 $ 293.5 $ 513.5 $ 577.3
- -
Losses and LAE:
- -
Current year, excluding catastrophe losses 138.3 145.7 125.8 145.7 154.0 153.5 284.0 307.5
- -
Prior year favorable development, excluding catastrophe losses (0.6) (3.3) (8.1) (4.2) (13.2) (1.2) (3.9) (14.4)
- -
Current year catastrophe losses 24.3 7.7 17.5 4.6 7.6 9.7 32.0 17.3
- -
Prior year unfavorable (favorable) catastrophe development 0.1 (3.3) 0.9 - - (3.1) (3.2) (3.1)
- -
Total losses and LAE 162.1 146.8 136.1 146.1 148.4 158.9 308.9 307.3
- -
Amortization of deferred acquisition costs and other underwriting expenses 93.6 90.3 87.3 98.2 101.5 104.3 183.9 205.8
- -
GAAP underwriting profit 2.0 18.7 15.5 33.2 33.9 30.3 20.7 64.2
- -
Net investment income 14.9 16.0 15.9 16.1 16.2 14.8 30.9 31.0
- -
Other income 1.6 1.7 1.6 1.5 1.3 1.5 3.3 2.8
- -
Other operating expenses (1.5) (1.9) (1.6) (1.8) (1.4) (1.4) (3.4) (2.8)
- -
Operating income before income taxes $ 17.0 $ 34.5 $ 31.4 $ 49.0 $ 50.0 $ 45.2 $ 51.5 $ 95.2
-
Loss and LAE ratio:
- -
Current year, excluding catastrophe losses 53.6 % 57.0% 52.7 % 52.4 % 54.3 % 52.3 % 55.4% 53.2 %
-
Prior year favorable development, excluding catastrophe losses (0.2)% (1.3)% (3.4)% (1.5)% (4.7)% (0.4)% (0.8)% (2.5)%
- -
Current year catastrophe losses 9.5 % 3.0% 7.3 % 1.7 % 2.7 % 3.3 % 6.2% 3.0 %
- -
Prior year unfavorable (favorable) catastrophe development - (1.3)% 0.4 % - - (1.1)% (0.6)% (0.5)%
- -
Total loss and LAE ratio 62.9 % 57.4 % 57.0 % 52.6 % 52.3 % 54.1 % 60.2 % 53.2 %
- - - - - - -
Expense ratio 35.9 % 34.9 % 36.2 % 35.1 % 35.4 % 35.3 % 35.4 % 35.4 %
- - - - - - -
Combined ratio 98.8 % 92.3 % 93.2 % 87.7 % 87.7 % 89.4 % 95.6 % 88.6 %
0 0 0 0 0 -
Combined ratio, excluding catastrophe losses 89.3 % 90.6 % 85.5 % 86.0 % 85.0 % 87.2% 90.0 % 86.1 %
0 0 0 0 0
Combined ratio, excluding catastrophe losses and prior year development 89.5 % 91.9 % 88.9 % 87.5 % 89.7 % 87.6% 90.8 % 88.6 %
THE HANOVER INSURANCE GROUP
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PREMIUMS WRITTEN AND RELATED METRICS
SPECIALTY
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except percentage data) 2021 2021 2021 2021 2022 2022 2021 2022
Written Premiums
Gross $ 344.1 $ 332.1 $ 327.2 $ 346.0 $ 379.1 $ 354.6 $ 676.2 $ 733.7
Ceded (67.3) (67.0) (35.0) (61.2) (76.3) (52.3) (134.3) (128.6)
Net $ 276.8 $ 265.1 $ 292.2 $ 284.8 $ 302.8 $ 302.3 $ 541.9 $ 605.1
Growth 12.1% 12.2% 6.6% 14.1% 9.4% 14.0% 12.1% 11.7%
- -
Net premiums written by segment - -
Professional and Executive Lines $ 94.4 $ 81.3 $ 98.0 $ 93.3 $ 111.0 $ 94.6 $ 175.7 $ 205.6
Specialty Property & Casualty 79.3 79.8 87.1 101.4 90.4 98.5 159.1 188.9
Marine 91.1 86.6 90.4 77.1 84.3 91.2 177.7 175.5
Surety and Other 12.0 17.4 16.7 13.0 17.1 18.0 29.4 35.1
Total $ 276.8 $ 265.1 $ 292.2 $ 284.8 $ 302.8 $ 302.3 $ 541.9 $ 605.1
- -
Related Metrics
Premium Retention 82.3% 83.1% 85.5% 84.8% 84.2% 83.5% 82.7% 83.9%
Renewal Price Change 8.7% 11.3% 10.8% 12.7% 12.6% 12.0% 10.0% 12.3%
THE HANOVER INSURANCE GROUP
--- --- --- --- --- --- --- --- --- --- --- --- ---
GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
PERSONAL LINES
Three Months ended June 30
2022 2021
(In millions, except percentage data) Auto Home and Other Total Auto Home and Other Total
Net premiums written $ 340.2 $ 236.1 $ 576.3 $ 318.6 $ 201.8 $ 520.4
Net premiums earned $ 314.7 $ 205.5 $ 520.2 $ 295.6 $ 180.8 $ 476.4
-
Losses and LAE:
-
Current year, excluding catastrophe losses 226.5 123.7 350.2 183.6 93.4 277.0
- -
Prior year favorable development, excluding catastrophe losses (2.7) (2.5) (5.2) (3.8) (1.2) (5.0)
- -
Current year catastrophe losses 3.4 47.6 51.0 9.4 52.2 61.6
- -
Prior year unfavorable (favorable) catastrophe development (0.6) 2.6 2.0 (0.7) (2.3) (3.0)
-
Total losses and LAE 226.6 171.4 398.0 188.5 142.1 330.6
-
Amortization of deferred acquisition costs and other underwriting expenses 142.1 136.3
-
GAAP underwriting profit (loss) (19.9) 9.5
-
Net investment income 20.6 21.8
-
Other income 3.4 2.2
-
Other operating expenses (1.3) (1.3)
-
Operating income before income taxes $ 2.8 $ 32.2
Loss and LAE ratio:
Current year, excluding catastrophe losses 72.0 % 60.2 % 67.3 % 62.2% 51.7 % 58.1 %
(70.0)% (1.0)%
Prior year favorable development, excluding catastrophe losses (0.9)% (1.2)% (1.0)% (1.3)% (0.7)% (1.0)%
Current year catastrophe losses 1.1 % 23.1 % 9.8 % 3.1 % 28.9 % 12.9 %
Prior year unfavorable (favorable) catastrophe development (0.2)% 1.3 % 0.4 % (0.2)% (1.3)% (0.6)%
Total loss and LAE ratio 72.0 % 83.4 % 76.5 % 63.8 % 78.6 % 69.4 %
Expense ratio 26.7 % 28.2 %
Combined ratio 103.2 % 97.6 %
THE HANOVER INSURANCE GROUP
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GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS
PERSONAL LINES
Six Months ended June 30
2022 2021
(In millions, except percentage data) Auto Home & Other Total Auto Home & Other Total
Net premiums written $ 638.6 $ 420.6 $ 1,059.2 $ 599.3 $ 359.8 $ 959.1
Net premiums earned $ 622.4 $ 403.1 $ 1,025.5 $ 586.7 $ 358.6 $ 945.3
-
Losses and LAE:
-
Current year, excluding catastrophe losses 443.0 228.6 671.6 358.3 186.0 544.3
-
Prior year unfavorable (favorable) development, excluding catastrophe losses (2.9) 11.3 8.4 (9.1) (1.1) (10.2)
-
Current year catastrophe losses 3.8 65.4 69.2 10.0 66.1 76.1
-
Prior year unfavorable (favorable) catastrophe development (1.0) 3.0 2.0 (0.7) (2.3) (3.0)
Total losses and LAE 442.9 308.3 751.2 358.5 248.7 607.2
Amortization of deferred acquisition costs and other underwriting expenses 281.9 269.7
GAAP underwriting profit (loss) (7.6) 68.4
Net investment income 43.2 43.9
Other income 6.2 4.5
Other operating expenses (2.7) (2.8)
Operating income before income taxes $ 39.1 $ 114.0
Loss and LAE ratio:
Current year, excluding catastrophe losses 71.3 % 56.7 % 65.6 % 61.1 % 51.9 % 57.6 %
Prior year unfavorable (favorable) development, excluding catastrophe losses (0.5)% 2.8 % 0.8 % (1.6)% (0.3)% (1.1)%
Current year catastrophe losses 0.6 % 16.3 % 6.7 % 1.7 % 18.4 % 8.0 %
Prior year unfavorable (favorable) catastrophe development (0.2)% 0.7 % 0.2 % (0.1)% (0.6)% (0.3)%
Total loss and LAE ratio 71.2 % 76.5 % 73.3 % 61.1 % 69.4 % 64.2 %
Expense ratio 26.9 % 28.1 %
Combined ratio 100.2 % 92.3 %
THE HANOVER INSURANCE GROUP
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GAAP UNDERWRITING INFORMATION AND RELATED RATIOS
PERSONAL LINES
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except percentage data) 2021 2021 2021 2021 2022 2022 2021 2022
Gross premiums written $ 453.6 $ 537.1 $ 564.9 $ 339.8 $ 499.1 $ 593.7 $ 990.7 $ 1,092.8
-
Net premiums written $ 438.7 $ 520.4 $ 548.4 $ 502.2 $ 482.9 $ 576.3 $ 959.1 $ 1,059.2
- -
Net premiums earned $ 468.9 $ 476.4 $ 487.4 $ 496.7 $ 505.3 $ 520.2 $ 945.3 $ 1,025.5
- -
Losses and LAE:
-
Current year, excluding catastrophe losses 267.3 277.0 303.9 321.6 321.4 350.2 544.3 671.6
Prior year unfavorable (favorable) development, excluding catastrophe losses (5.2) (5.0) (9.9) (3.0) 13.6 (5.2) (10.2) 8.4
Current year catastrophe losses 14.5 61.6 78.7 23.5 18.2 51.0 76.1 69.2
Prior year favorable catastrophe development - (3.0) - - - 2.0 (3.0) 2.0
- - - - -
Total losses and LAE 276.6 330.6 372.7 342.1 353.2 398.0 607.2 751.2
- - - - -
Amortization of deferred acquisition costs and other underwriting expenses 133.4 136.3 135.0 137.6 139.8 142.1 269.7 281.9
- - - - -
GAAP underwriting profit (loss) 58.9 9.5 (20.3) 17.0 12.3 (19.9) 68.4 (7.6)
- - - - -
Net investment income 22.1 21.8 22.6 22.9 22.6 20.6 43.9 43.2
Other income 2.3 2.2 2.6 2.6 2.8 3.4 4.5 6.2
Other operating expenses (1.5) (1.3) (1.3) (1.6) (1.4) (1.3) (2.8) (2.7)
Operating income before income taxes $ 81.8 $ 32.2 $ 3.6 $ 40.9 $ 36.3 $ 2.8 $ 114.0 $ 39.1
Loss and LAE ratio:
-
Current year, excluding catastrophe losses 57.0 % 58.1 % 62.4 % 64.8 % 63.6 % 67.3 % 57.6 % 65.6 %
0 0 0 0 0
Prior year unfavorable (favorable) development, excluding catastrophe losses (1.1)% (1.0)% (2.0)% (0.6)% 2.7 % (1.0)% (1.1)% 0.8 %
- - - - -
Current year catastrophe losses 3.1 % 12.9 % 16.1 % 4.7 % 3.6 % 9.8 % 8.0 % 6.7 %
- - - - -
Prior year unfavorable (favorable) catastrophe development - (0.6)% - - - 0.4 % (0.3)% 0.2 %
- - - - -
Total loss and LAE ratio 59.0 % 69.4 % 76.5 % 68.9 % 69.9 % 76.5 % 64.2 % 73.3 %
- - - - -
Expense ratio 28.0 % 28.2 % 27.3 % 27.3 % 27.2 % 26.7 % 28.1 % 26.9 %
0 0 0 0 0
Combined ratio 87.0 % 97.6 % 103.8 % 96.2 % 97.1 % 103.2 % 92.3 % 100.2 %
0 0 0 0 0.1
Combined ratio, excluding catastrophe losses 83.9 % 85.3 % 87.7 % 91.5 % 93.5 % 93.0 % 84.6 % 93.3 %
Current accident year combined ratio, excluding catastrophe losses 85.0 % 86.3 % 89.7 % 92.1 % 90.8 % 94.0 % 85.7 % 92.5 %
THE HANOVER INSURANCE GROUP
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PREMIUMS WRITTEN AND RELATED METRICS
PERSONAL LINES
Q1 Q2 Q3 Q4 Q1 Q2 Jun-YTD Jun-YTD
(In millions, except percentage data) 2021 2021 2021 2021 2022 2022 2021 2022
Written Premiums
Gross $ 453.6 $ 537.1 $ 564.9 $ 339.8 $ 499.1 $ 593.7 $ 990.7 $ 1,092.8
Ceded (14.9) (16.7) (16.5) 162.4 (16.2) (17.4) (31.6) (33.6)
Net $ 438.7 $ 520.4 $ 548.4 $ 502.2 $ 482.9 $ 576.3 $ 959.1 $ 1,059.2
Growth 2.2% 11.6% 8.0% 8.7% 10.1% 10.7% 7.1% 10.4%
Net premiums written by line of business
Personal Automobile $ 280.7 $ 318.6 $ 330.8 $ 300.3 $ 298.4 $ 340.2 $ 599.3 $ 638.6
Homeowners and Other 158.0 201.8 217.6 201.9 184.5 236.1 359.8 420.6
Total $ 438.7 $ 520.4 $ 548.4 $ 502.2 $ 482.9 $ 576.3 $ 959.1 $ 1,059.2
Related Metrics
Renewal Price Change
Personal Automobile 4.2% 3.5% 1.5% 1.2% 2.4% 2.9% 3.8% 2.7%
Homeowners 6.2% 5.7% 5.9% 6.9% 7.7% 9.3% 5.9% 8.6%
Total (1) 4.9% 4.4% 3.2% 3.4% 4.3% 5.4% 4.6% 4.9%
Policy Retention
Personal Automobile 84.0% 85.8% 88.0% 88.4% 88.5% 88.4% 84.9% 88.4%
Homeowners 84.2% 86.9% 89.3% 89.6% 89.2% 89.7% 85.7% 89.5%
Total (1) 84.1% 86.4% 88.6% 89.0% 88.8% 89.1% 85.4% 89.0%
PIF change from prior year period
Personal Automobile (2.7)% (0.9)% 2.7% 6.1% 8.0% 8.0% (0.9)% 8.0%
Homeowners (0.9)% 0.6 % 3.4% 6.0% 7.5% 7.6% 0.6% 7.6%
Total (1) (1.8)% (0.1)% 3.1% 6.1% 7.8% 7.8% (0.1)% 7.8%
(1) Related metrics exclude Other Personal Lines.
THE HANOVER INSURANCE GROUP
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NET INVESTMENT INCOME AND YIELDS
Q1 Q2 Q3 Q4 Q1 Q2 YTD YTD
(In millions, except yields) 2021 2021 2021 2021 2022 2022 2021 2022
Net Investment Income
Fixed maturities $54.5 $53.9 $54.2 $54.3 $55.8 $57.6 $108.4 $113.4
Limited partnerships 15.1 15.5 18.9 18.7 15.2 7.8 30.6 23.0
Mortgage loans 5.4 4.2 4.0 4.4 4.4 4.0 9.6 8.4
Equity securities 3.8 3.8 3.7 4.3 3.6 3.1 7.6 6.7
Other investments 0.7 0.9 0.7 0.7 0.8 0.8 1.6 1.6
Investment expenses (2.7) (2.7) (2.7) (2.9) (2.9) (2.8) (5.4) (5.7)
Total $76.8 $75.6 $78.8 $79.5 $76.9 $70.5 $152.4 $147.4
Pre-tax Yields
Fixed maturities 3.11% 3.02% 2.96% 2.90% 2.95% 2.97% 3.07% 2.96%
Total 3.74% 3.65% 3.72% 3.69% 3.52% 3.19% 3.70% 3.35%
Pre-tax yields represent annualized net investment income for the period divided by the monthly average invested assets at amortized cost or cost, which excludes accumulated changes in fair value for fixed maturities and equity securities.
THE HANOVER INSURANCE GROUP
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INVESTMENT PORTFOLIO
June 30, 2022
(In millions)
Change in Change in
Amortized Net Net Net
Cost Fair Value / % of Unrealized Unrealized Unrealized
Investment Type or Cost (1) Carry Value Total Loss During Q2 YTD
Fixed maturities:
U.S. Treasury and government agencies $414.2 $375.8 4.4% $(38.4) $(16.1) $(40.3)
Foreign government 2.2 2.2 - - (0.1) (0.4)
Municipals:
Taxable 1,187.3 1,079.9 12.5% (107.4) (53.9) (131.2)
Tax-exempt 21.5 20.9 0.2% (0.6) (0.4) (1.4)
Corporate:
NAIC 1 1,465.1 1,396.4 16.2% (68.7) (54.6) (137.8)
NAIC 2 2,120.5 1,955.2 22.7% (165.3) (102.3) (244.2)
NAIC 3 and below 389.3 346.7 4.0% (42.6) (31.8) (53.5)
Total corporate 3,974.9 3,698.3 42.9% (276.6) (188.7) (435.5)
Asset-backed:
Residential mortgage-backed 1,074.0 985.4 11.5% (88.6) (27.4) (90.0)
Commercial mortgage-backed 881.6 823.2 9.6% (58.4) (30.7) (80.4)
Asset-backed 276.0 259.0 3.0% (17.0) (7.1) (16.9)
Total fixed maturities 7,831.7 7,244.7 84.1% (587.0) (324.4) (796.1)
Equity securities 429.8 429.8 5.0% - - -
Mortgage and other loans 435.0 435.0 5.0% - - -
Other investments 358.6 358.6 4.2% - - -
Total investments 9,055.1 8,468.1 98.3% (587.0) (324.4) (796.1)
Cash and cash equivalents 145.9 145.9 1.7% - - -
Total $9,201.0 $8,614.0 100.0% $(587.0) $(324.4) $(796.1)
(1) Net of allowance for credit losses of 7.4 million.

All values are in US Dollars.

THE HANOVER INSURANCE GROUP
CREDIT QUALITY AND DURATION OF FIXED MATURITIES
June 30, 2022
(In millions)
CREDIT QUALITY OF FIXED MATURITIES
Rating Agency % of Total
NAIC Designation Equivalent Designation Fair Value
1 Aaa/Aa/A 5,221.9 4,854.5 67.0 %
2 Baa 2,220.5 2,043.5 28.2 %
3 Ba 229.9 203.5 2.8 %
4 B 143.3 127.9 1.8 %
5 Caa and lower 16.1 15.3 0.2 %
Total fixed maturities 7,831.7 7,244.7 100.0 %
DURATION OF FIXED MATURITIES
% of Total
Fair Value
1,085.7 1,077.6 14.9 %
1,804.6 1,757.1 24.2 %
2,221.8 2,082.7 28.7 %
2,121.8 1,824.2 25.2 %
462.5 389.3 5.4 %
135.3 113.8 1.6 %
Total fixed maturities 7,831.7 7,244.7 100.0 %
Weighted Average Duration 4.7
(1) Net of allowance for credit losses of 2.2 million.

All values are in US Dollars.

THE HANOVER INSURANCE GROUP
TOP 25 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS
June 30, 2022
(In millions, except percentage data)
Issuer Amortized Cost Fair Value As a Percent of Invested Assets Ratings (1)
Minnesota Housing Finance Agency $38.4 $34.7 0.40% AAA
Morgan Stanley 34.4 32.3 0.37% A-
State of Ohio 34.2 28.1 0.33% AA+
Goldman Sachs 32.0 29.8 0.35% BBB+
Massachusetts School Building Authority 30.8 26.3 0.31% AA+
Citigroup 28.7 27.1 0.31% BBB+
State of Oregon 28.3 24.7 0.29% AA+
Bank of America 28.2 27.7 0.32% A-
JP Morgan Chase 28.0 26.4 0.31% A-
Capital One Financial 27.9 25.8 0.30% BBB
AbbVie 27.1 26.6 0.31% BBB+
Westpac Banking 26.9 25.8 0.30% A
Truist Financial 25.5 25.1 0.29% A-
Sumitomo Mitsui Financial 25.4 23.1 0.27% A-
California State University 25.3 21.5 0.25% AA-
Citizens Financial Group 25.3 23.1 0.27% BBB+
PNC Bank 24.7 23.7 0.28% A
SVB Financial Group 24.7 21.6 0.25% BBB
Charles Schwab 24.6 23.3 0.27% A
National Grid 24.2 22.7 0.26% BBB+
US Bancorp 23.9 23.3 0.27% A
Cigna 23.6 21.8 0.25% A-
Mitsubishi Financial Group 23.1 21.7 0.25% A-
District of Columbia 23.0 19.1 0.22% AAA
University of California 22.9 21.8 0.25% AA
Top 25 Corporate and Municipal $681.1 $627.1 7.28%
(1) - Represents nationally recognized rating agency sources.
THE HANOVER INSURANCE GROUP
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RECONCILIATION OF OPERATING INCOME TO NET INCOME
Three Months ended June 30 Six Months ended June 30
2022 2021 2022 2021
(In millions, except per share data) $ Per<br>Share (Diluted) $ Per<br>Share (Diluted) $ Per<br>Share (Diluted) $ Per<br>Share (Diluted)
OPERATING INCOME (LOSS)
Core Commercial $ 66.9 $ 69.9 $ 134.4 $ 55.1
Specialty 45.2 34.5 95.2 51.5
Personal Lines 2.8 32.2 39.1 114.0
Other 0.1 0.7 0.7 1.8
Total 115.0 137.3 269.4 222.4
Interest expense (8.5) (8.5) (17.0) (17.0)
Operating income before income taxes 106.5 $ 2.94 128.8 $ 3.53 252.4 $ 6.98 205.4 $ 5.59
Income tax expense on operating income (22.6) (0.62) (24.8) (0.68) (50.8) (1.40) (40.0) (1.09)
-
Operating income after income taxes 83.9 2.32 104.0 2.85 201.6 5.58 165.4 4.50
-
Non-operating items:
Net realized gains (losses) from sales and other (19.2) (0.53) 4.8 0.13 (16.2) (0.45) 3.2 0.09
Net change in fair value of equity securities (59.0) (1.63) 26.5 0.73 (77.0) (2.13) 65.6 1.79
Recoveries (impairments) on investments 0.3 0.01 (0.2) (0.01) (0.6) (0.02) (0.2) -
Other non-operating items (0.4) (0.01) - - (0.4) (0.01) - -
Income tax benefit (expense) on non-operating items 17.2 0.47 (5.5) (0.15) 20.7 0.58 (11.6) (0.32)
Income from continuing operations, net of taxes 22.8 0.63 129.6 3.55 128.1 3.55 222.4 6.06
-
Discontinued operations (net of taxes): -
-
Loss from discontinued life businesses (0.2) - (1.1) (0.03) (0.7) (0.03) (1.2) (0.03)
NET INCOME $ 22.6 $ 0.63 $ 128.5 $ 3.52 $ 127.4 $ 3.52 $ 221.2 $ 6.03
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 and combined ratios excluding catastrophe losses (catastrophe losses as discussed here and in all other measures include catastrophe loss development) and reserve development.
Operating income before interest expense and taxes is net income (loss), excluding interest expense on debt, income taxes and net realized and unrealized investment gains and losses, which includes changes in the fair value of equity securities still held 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, the cumulative effect of accounting changes and certain other items. Operating income before interest expense and taxes is the sum of the operating income (loss) from: Commercial Lines, Personal Lines, and Other. After-tax operating income EPS (sometimes referred to as “after-tax operating income per share”) is also a non-GAAP measure. It is defined as net income (loss) excluding the after-tax impact of net realized and unrealized investment gains (losses), as well as results from discontinued operations and other non-operating items for a period divided by the average number of diluted shares of common stock. 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 (loss) 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 fixed maturity investments, net of tax, is total shareholders’ equity excluding the after-tax effect of unrealized investment gains and losses on fixed maturities divided by the number of common shares outstanding. Tangible book value per share is total shareholders' equity, excluding goodwill and intangible assets, 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, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, severe winter weather, fire, explosions and terrorism. 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 (loss) determined in accordance with GAAP. A reconciliation of income (loss) from continuing operations to operating income before interest expense and taxes and income (loss) from continuing operations per share to operating income after taxes per share for the three and six months ended June 30, 2022 and 2021 is set forth on page 20 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.
Additional reconciliations are provided in the press release relating to the current period(s) financial results, which is available on the Company's website, www.hanover.com
THE HANOVER INSURANCE GROUP
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PREMIUM RELATED METRIC DEFINITIONS
Renewal Price Change
● Core Commercial and Specialty: Represents the average change in premium on renewed policies caused by the estimated net effect of base rate changes, discretionary pricing, specific inflationary changes or changes in policy level exposure or insured risks.
● Personal Lines: Represents the average change in premium on policies charged at renewal caused by the net effects of filed rate, inflation adjustments or other changes in policy level exposure or insured risks. Actual written price changes may differ, as not all policies are retained.
Rate
● Core Commercial and Specialty: Represents the average change in premium on renewed policies caused by the base rate changes, discretionary pricing, and inflation, excluding the impact of changes in policy level exposure or insured risks.
● Personal Lines: Represents the estimated cumulative premium effect of approved rate actions applied to policies at renewal. Actual written rate changes may differ, as not all policies are retained. Personal Lines rate changes do not include inflation or changes in policy level exposure or insured risks.
Retention
● Core Commercial and Specialty: Represents the ratio of net retained premium for the noted period to the premium available to renew over the same period.
● Personal Lines: Represents the ratio of net retained policies for the noted period to those policies available to renew over the same period and includes policies that were canceled and rewritten.
Policies in Force (PIF) Change
● Represents the change in the number of policies in force at the end of a given period from the end of the same period in the prior year.
CORPORATE OFFICES AND TRANSFER AGENT
--- --- --- --- --- --- --- ---
PRINCIPAL SUBSIDIARIES
THE HANOVER INSURANCE GROUP, INC. A.M. Standard Computershare Investor Services
440 Lincoln Street Best & Poor's Moody's PO Box 505000
Worcester, MA 01653 Louisville, KY 40233-5000
A A A2 1-800-317-4454
The Hanover Insurance Company
440 Lincoln Street A A -
Worcester, MA 01653
COMMON STOCK
Citizens Insurance Company of America A.M. Standard
808 North Highlander Way Best & Poor's Moody's Common stock of The Hanover Insurance Group, Inc. is traded
Howell, MI 48843 on the New York Stock Exchange under the symbol "THG".
bbb+ BBB Baa2
bbb- BB+ Baa3
MARKET AND DIVIDEND INFORMATION INQUIRIES
The following tables set forth the high and low closing Oksana Lukasheva
sales prices of our common stock and quarterly cash Senior Vice President
dividends for the periods indicated: Corporate Finance
olukasheva@hanover.com
Quarter Ended 2022
Price Range Dividends
High Low Per Share
March 31 $150.95 $131.19 0.750
June 30 $154.28 $136.34 0.750
Quarter Ended 2021
Price Range Dividends
High Low Per Share
March 31 $133.12 $112.47 0.700
June 30 $142.80 $129.83 0.700
September 30 $142.35 $127.33 0.700
December 31 $136.97 $121.75 0.750

All values are in US Dollars.

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