The Hanover Insurance Group, Inc. 8K Results of Operations and Financial Condition | THG 30 Apr 14

Exhibit 99.2

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FINANCIAL SUPPLEMENT

FIRST QUARTER 2014

THE HANOVER INSURANCE GROUP

FINANCIAL SUPPLEMENT

TABLE OF CONTENTS


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

THE HANOVER INSURANCE GROUP

BASIS OF PRESENTATION

BUSINESS DESCRIPTIONS

COMMERCIAL LINES

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

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

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

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

PERSONAL LINES

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

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

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

CHAUCER

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

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

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

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

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

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

OTHER

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

THE HANOVER INSURANCE GROUP

FINANCIAL HIGHLIGHTS


(In millions, except earnings per share)	Q1 2013			Q2 2013			Q3 2013			Q4 2013			Q1 2014
PREMIUMS
Gross premiums written	$	1,318.1		$	1,394.4		$	1,313.8		$	1,175.4		$	1,408.1
Net premiums written		1,076.7			1,242.6			1,181.9			1,051.5			1,172.3
Net premiums earned		1,094.3			1,090.8			1,124.7			1,140.7			1,163.0
EARNINGS
Operating income before interest and taxes	$	102.2		$	81.1		$	107.2		$	102.9		$	85.0
Operating income after taxes		59.9			46.8			60.9			59.6			47.0
Income from continuing operations		66.4			53.1			61.3			64.9			54.7
Net income		66.2			53.4			61.3			70.1			54.6

PER SHARE DATA (DILUTED)
Operating income after taxes	$	1.32		$	1.05		$	1.36		$	1.33		$	1.05
Income from continuing operations		1.47			1.19			1.37			1.45			1.22
Net income		1.46			1.19			1.37			1.57			1.22

Weighted average shares outstanding		45.3			44.8			44.6			44.8			44.8

BALANCE SHEET

(In millions, except per share data)	March 31 2013			June 30 2013			September 30 2013			December 31 2013			March 31 2014
Total assets	$	13,442.1		$	13,306.4		$	13,463.3		$	13,378.7		$	13,643.0
Total loss and loss adjustment expense reserves		6,092.5			6,063.6			6,162.8			6,231.5			6,323.4
Total shareholders’ equity		2,624.0			2,495.7			2,544.2			2,594.5			2,681.1

U.S. Property and Casualty Companies
Statutory surplus	$	1,623.3		$	1,639.5		$	1,751.3		$	1,834.3		$	1,900.4
Premium to surplus ratio		2.09:1			2.08:1			1.95:1			1.87:1			1.83:1

Book value per share	$	59.58		$	57.41		$	58.43		$	59.43		$	61.24
Book value per share, excluding net unrealized investment gains and losses, net of tax	$	52.81		$	53.62		$	54.64		$	56.07		$	56.70
Tangible book value per share (total book value excluding goodwill and intangibles)	$	52.46		$	50.25		$	51.20		$	52.22		$	54.06
Shares outstanding		44.0			43.5			43.6			43.7			43.8

Total debt/equity		37.3	%		37.6	%		36.9	%		34.8	%		33.7	%
Total debt/total capital		27.2	%		27.3	%		27.0	%		25.8	%		25.2	%

THE HANOVER INSURANCE GROUP

CONSOLIDATED INCOME STATEMENTS


	Three Months ended March 31
(In millions)	2014			2013			% Change

REVENUES
Premiums earned	$	1,163.0		$	1,094.3			6.3
Net investment income		67.0			67.3			(0.4	)
Net realized investment gains		4.4			8.1			(45.7	)
Fees and other income		9.5			10.6			(10.4	)

Total revenues		1,243.9			1,180.3			5.4


LOSSES AND EXPENSES
Losses and loss adjustment expenses		750.5			683.4			9.8
Amortization of deferred acquisition costs		253.7			242.5			4.6
Interest expense		16.3			14.7			10.9
Other operating expenses		151.3			150.8			0.3

Total losses and expenses		1,171.8			1,091.4			7.4


Income from continuing operations before income taxes		72.1			88.9			(18.9	)
Income tax expense		17.4			22.5			(22.7	)


Income from continuing operations		54.7			66.4			(17.6	)

Discontinued operations		(0.1	)		(0.2	)		N/M


Net income	$	54.6		$	66.2			(17.5	)

THE HANOVER INSURANCE GROUP

CONSOLIDATED BALANCE SHEETS


(In millions, except per share data)	March 31 2014			December 31 2013			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $6,789.8 and $6,815.2)	$	7,007.5		$	6,970.6			0.5
Equity securities, at fair value (cost of $421.7 and $366.5)		501.0			430.2			16.5
Other investments		235.8			192.5			22.5

Total investments		7,744.3			7,593.3			2.0

Cash and cash equivalents		476.3			486.2			(2.0	)
Accrued investment income		70.7			68.0			4.0
Premiums and accounts receivable, net		1,415.8			1,324.6			6.9
Reinsurance recoverable on paid and unpaid losses and unearned premiums		2,379.3			2,335.0			1.9
Deferred acquisition costs		520.1			506.0			2.8
Deferred income taxes		200.9			239.7			(16.2	)
Goodwill		185.0			184.9			0.1
Other assets		534.3			526.1			1.6
Assets of discontinued operations		116.3			114.9			1.2

Total assets	$	13,643.0		$	13,378.7			2.0


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Loss and loss adjustment expense reserves	$	6,323.4		$	6,231.5			1.5
Unearned premiums		2,593.7			2,515.8			3.1
Expenses and taxes payable		576.1			637.2			(9.6	)
Reinsurance premiums payable		448.1			374.7			19.6
Debt		903.9			903.9			—
Liabilities of discontinued operations		116.7			121.1			(3.6	)

Total liabilities		10,961.9			10,784.2			1.6


SHAREHOLDERS’ EQUITY
Preferred stock, par value $0.01 per share; 20.0 million shares authorized; none issued		—			—			—
Common stock, par value $0.01 per share; 300.0 million shares authorized; 60.5 million shares issued		0.6			0.6			—
Additional paid-in capital		1,821.4			1,830.1			(0.5	)
Accumulated other comprehensive income		228.1			177.6			28.4
Retained earnings		1,387.4			1,349.1			2.8
Treasury stock at cost (16.7 and 16.8 million shares)		(756.4	)		(762.9	)		(0.9	)

Total shareholders’ equity		2,681.1			2,594.5			3.3

Total liabilities and shareholders’ equity	$	13,643.0		$	13,378.7			2.0

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CONSOLIDATED

Three Months ended March 31


	2014															2013
(In millions, except percentage data)	Commercial Lines			Personal Lines			Chaucer			Other			Total			Commercial Lines			Personal Lines			Chaucer			Other			Total
Gross premiums written	$	597.8		$	343.3		$	467.0		$	—		$	1,408.1		$	561.4		$	367.2		$	389.5		$	—		$	1,318.1

Net premiums written	$	539.3		$	319.2		$	313.8		$	—		$	1,172.3		$	483.6		$	341.6		$	251.5		$	—		$	1,076.7

Net premiums earned	$	512.7		$	350.2		$	300.1		$	—		$	1,163.0		$	476.6		$	368.8		$	248.9		$	—		$	1,094.3
Losses and LAE:
Current accident year, excluding catastrophe losses		303.6			230.6			178.1			—			712.3			290.0			238.3			140.3			—			668.6
Prior year unfavorable (favorable) reserve development		0.6			(1.0	)		(19.6	)		0.3			(19.7	)		0.2			5.6			(13.3	)		0.6			(6.9	)
Catastrophe losses		40.2			18.4			(0.7	)		—			57.9			7.4			11.7			2.6			—			21.7

Total losses and LAE		344.4			248.0			157.8			0.3			750.5			297.6			255.6			129.6			0.6			683.4
Amortization of deferred acquisition costs and other underwriting expenses		189.6			100.1			105.8			0.2			395.7			182.1			103.1			86.3			0.5			372.0

GAAP underwriting profit (loss)		(21.3	)		2.1			36.5			(0.5	)		16.8			(3.1	)		10.1			33.0			(1.1	)		38.9
Net investment income		37.3			17.9			10.5			1.3			67.0			36.1			19.0			10.5			1.7			67.3
Other income		2.0			2.9			3.9			0.7			9.5			2.0			3.3			4.5			0.8			10.6
Other operating expenses		(1.9	)		(1.3	)		(1.7	)		(3.4	)		(8.3	)		(2.0	)		(1.9	)		(7.1	)		(3.6	)		(14.6	)

Operating income (loss) before income taxes	$	16.1		$	21.6		$	49.2		$	(1.9	)	$	85.0		$	33.0		$	30.5		$	40.9		$	(2.2	)	$	102.2


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		59.3	%		65.8	%		59.2	%		N/M			61.3	%		60.9	%		64.6	%		56.3	%		N/M			61.0	%
Prior year unfavorable (favorable) reserve development		0.1	%		(0.3	)%		(6.5	)%		N/M			(1.7	)%		—			1.5	%		(5.3	)%		N/M			(0.6	)%
Catastrophe losses		7.8	%		5.3	%		(0.2	)%		N/M			5.0	%		1.6	%		3.2	%		1.0	%		N/M			2.0	%

Total loss and LAE ratio		67.2	%		70.8	%		52.5	%		N/M			64.6	%		62.5	%		69.3	%		52.0	%		N/M			62.4	%
Expense ratio		36.8	%		27.9	%		35.3	%		N/M			33.7	%		38.0	%		27.2	%		34.7	%		N/M			33.7	%

Combined ratio		104.0	%		98.7	%		87.8	%		N/M			98.3	%		100.5	%		96.5	%		86.7	%		N/M			96.1	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CONSOLIDATED


(In millions, except percentage data)	Q1 2013			Q2 2013			Q3 2013			Q4 2013			Q1 2014
Gross premiums written	$	1,318.1		$	1,394.4		$	1,313.8		$	1,175.4		$	1,408.1

Net premiums written	$	1,076.7		$	1,242.6		$	1,181.9		$	1,051.5		$	1,172.3

Net premiums earned	$	1,094.3		$	1,090.8		$	1,124.7		$	1,140.7		$	1,163.0
Losses and LAE:
Current accident year, excluding catastrophe losses		668.6			659.2			688.9			680.7			712.3
Prior year favorable reserve development		(6.9	)		(26.9	)		(23.6	)		(18.9	)		(19.7	)
Catastrophe losses		21.7			59.8			30.6			27.9			57.9

Total losses and LAE		683.4			692.1			695.9			689.7			750.5
Amortization of deferred acquisition costs and other underwriting expenses		372.0			384.8			387.4			414.3			395.7

GAAP underwriting profit	$	38.9		$	13.9		$	41.4		$	36.7		$	16.8


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		61.0	%		60.4	%		61.3	%		59.8	%		61.3	%
Prior year favorable reserve development		(0.6	)%		(2.5	)%		(2.1	)%		(1.7	)%		(1.7	)%
Catastrophe losses		2.0	%		5.5	%		2.7	%		2.4	%		5.0	%

Total loss and LAE ratio		62.4	%		63.4	%		61.9	%		60.5	%		64.6	%
Expense ratio		33.7	%		35.0	%		34.1	%		36.0	%		33.7	%

Combined ratio		96.1	%		98.4	%		96.0	%		96.5	%		98.3	%


Combined ratio, excluding catastrophe losses		94.1	%		92.9	%		93.3	%		94.1	%		93.3	%

Current accident year combined ratio, excluding catastrophe losses		94.7	%		95.4	%		95.4	%		95.8	%		95.0	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

COMMERCIAL LINES

Three Months ended March 31


	2014															2013
(In millions, except percentage data)	Multiple Peril			Auto			Workers’ Comp			Other			Total			Multiple Peril			Auto			Workers’ Comp			Other			Total
Net premiums written	$	172.9		$	76.2		$	71.3		$	218.9		$	539.3		$	154.0		$	72.8		$	62.2		$	194.6		$	483.6

Net premiums earned	$	167.5		$	75.5		$	58.8		$	210.9		$	512.7		$	152.6		$	69.5		$	53.0		$	201.5		$	476.6
Losses and LAE:
Current accident year, excluding catastrophe losses		92.3			54.4			41.5			115.4			303.6			86.9			48.9			37.1			117.1			290.0
Prior year unfavorable (favorable) reserve development		(0.7	)		3.4			(1.6	)		(0.5	)		0.6			(0.1	)		1.8			(3.5	)		2.0			0.2
Catastrophe losses		32.1			—			—			8.1			40.2			5.2			0.1			—			2.1			7.4

Total losses and LAE		123.7			57.8			39.9			123.0			344.4			92.0			50.8			33.6			121.2			297.6
Amortization of deferred acquisition costs and other underwriting expenses														189.6															182.1

GAAP underwriting loss														(21.3	)														(3.1	)
Net investment income														37.3															36.1
Other income														2.0															2.0
Other operating expenses														(1.9	)														(2.0	)

Operating income before income taxes													$	16.1														$	33.0


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		55.0	%		72.1	%		70.5	%		54.7	%		59.3	%		56.9	%		70.4	%		70.0	%		58.1	%		60.9	%
Prior year unfavorable (favorable) reserve development		(0.4	)%		4.5	%		(2.7	)%		(0.2	)%		0.1	%		(0.1	)%		2.6	%		(6.6	)%		1.0	%		—
Catastrophe losses		19.2	%		—			—			3.8	%		7.8	%		3.4	%		0.1	%		—			1.0	%		1.6	%

Total loss and LAE ratio		73.8	%		76.6	%		67.8	%		58.3	%		67.2	%		60.2	%		73.1	%		63.4	%		60.1	%		62.5	%
Expense ratio														36.8	%														38.0	%

Combined ratio														104.0	%														100.5	%


Change in policies in force		2.1	%		5.6	%		10.4	%		0.7	%		3.0	%		2.6	%		7.1	%		13.1	%		10.9	%		7.8	%
Retention		84.6	%		80.6	%		79.4	%		N/M			82.9	%		83.0	%		81.4	%		78.2	%		N/M			81.3	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

COMMERCIAL LINES


	Q1			Q2			Q3			Q4			Q1
(In millions, except percentage data)	2013			2013			2013			2013			2014
Gross premiums written	$	561.4		$	591.0		$	601.7		$	541.8		$	597.8

Net premiums written	$	483.6		$	521.5		$	530.5		$	471.6		$	539.3

Net premiums earned	$	476.6		$	485.8		$	492.7		$	503.3		$	512.7
Losses and LAE:
Current accident year, excluding catastrophe losses		290.0			296.0			293.7			300.2			303.6
Prior year unfavorable reserve development		0.2			0.5			2.3			0.3			0.6
Catastrophe losses		7.4			15.1			8.5			7.7			40.2

Total losses and LAE		297.6			311.6			304.5			308.2			344.4
Amortization of deferred acquisition costs and other underwriting expenses		182.1			183.7			185.4			196.3			189.6

GAAP underwriting profit (loss)	$	(3.1	)	$	(9.5	)	$	2.8		$	(1.2	)	$	(21.3	)


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		60.9	%		61.0	%		59.6	%		59.7	%		59.3	%
Prior year unfavorable reserve development		—			0.1	%		0.5	%		0.1	%		0.1	%
Catastrophe losses		1.6	%		3.1	%		1.7	%		1.5	%		7.8	%

Total loss and LAE ratio		62.5	%		64.2	%		61.8	%		61.3	%		67.2	%
Expense ratio		38.0	%		37.6	%		37.4	%		38.8	%		36.8	%

Combined ratio		100.5	%		101.8	%		99.2	%		100.1	%		104.0	%


Combined ratio, excluding catastrophe losses		98.9	%		98.7	%		97.5	%		98.6	%		96.2	%

Current accident year combined ratio, excluding catastrophe losses		98.9	%		98.6	%		97.0	%		98.5	%		96.1	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

PERSONAL LINES

Three Months ended March 31


	2014												2013
(In millions, except percentage data)	Auto			Home			Other			Total			Auto			Home			Other			Total
Net premiums written	$	211.8		$	99.0		$	8.4		$	319.2		$	227.1		$	105.4		$	9.1		$	341.6

Net premiums earned	$	214.9		$	125.1		$	10.2		$	350.2		$	228.5		$	129.7		$	10.6		$	368.8
Losses and LAE:
Current accident year, excluding catastrophe losses		160.5			66.1			4.0			230.6			170.5			63.5			4.3			238.3
Prior year unfavorable (favorable) reserve development		(1.0	)		—			—			(1.0	)		4.5			1.0			0.1			5.6
Catastrophe losses		0.1			17.9			0.4			18.4			(0.3	)		11.4			0.6			11.7

Total losses and LAE		159.6			84.0			4.4			248.0			174.7			75.9			5.0			255.6
Amortization of deferred acquisition costs and other underwriting expenses											100.1												103.1

GAAP underwriting profit											2.1												10.1
Net investment income											17.9												19.0
Other income											2.9												3.3
Other operating expenses											(1.3	)											(1.9	)

Operating income before income taxes										$	21.6											$	30.5


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		74.8	%		52.9	%		39.2	%		65.8	%		74.5	%		48.9	%		40.6	%		64.6	%
Prior year unfavorable (favorable) reserve development		(0.5	)%		—			—			(0.3	)%		2.0	%		0.8	%		0.9	%		1.5	%
Catastrophe losses		—			14.3	%		3.9	%		5.3	%		—			8.8	%		5.7	%		3.2	%

Total loss and LAE ratio		74.3	%		67.2	%		43.1	%		70.8	%		76.5	%		58.5	%		47.2	%		69.3	%
Expense ratio											27.9	%											27.2	%

Combined ratio											98.7	%											96.5	%


Change in policies in force		(12.0	)%		(13.5	)%		(15.2	)%		(12.9	)%		(3.4	)%		(4.4	)%		(9.3	)%		(4.2	)%
Retention		73.6	%		74.0	%		N/M			74.0	%		78.2	%		80.5	%		N/M			79.6	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

PERSONAL LINES


	Q1			Q2			Q3			Q4			Q1
(In millions, except percentage data)	2013			2013			2013			2013			2014
Gross premiums written	$	367.2		$	397.8		$	398.4		$	368.2		$	343.3

Net premiums written	$	341.6		$	370.6		$	372.9		$	342.9		$	319.2

Net premiums earned	$	368.8		$	366.7		$	363.4		$	355.3		$	350.2
Losses and LAE:
Current accident year, excluding catastrophe losses		238.3			229.1			230.5			221.2			230.6
Prior year unfavorable (favorable) reserve development		5.6			2.8			2.1			3.2			(1.0	)
Catastrophe losses		11.7			32.2			10.3			12.7			18.4

Total losses and LAE		255.6			264.1			242.9			237.1			248.0
Amortization of deferred acquisition costs and other underwriting expenses		103.1			102.9			102.5			108.4			100.1

GAAP underwriting profit (loss)	$	10.1		$	(0.3	)	$	18.0		$	9.8		$	2.1


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		64.6	%		62.4	%		63.4	%		62.2	%		65.8	%
Prior year unfavorable (favorable) reserve development		1.5	%		0.8	%		0.6	%		0.9	%		(0.3	)%
Catastrophe losses		3.2	%		8.8	%		2.8	%		3.6	%		5.3	%

Total loss and LAE ratio		69.3	%		72.0	%		66.8	%		66.7	%		70.8	%
Expense ratio		27.2	%		27.3	%		27.5	%		29.8	%		27.9	%

Combined ratio		96.5	%		99.3	%		94.3	%		96.5	%		98.7	%


Combined ratio, excluding catastrophe losses		93.3	%		90.5	%		91.5	%		92.9	%		93.4	%

Current accident year combined ratio, excluding catastrophe losses		91.8	%		89.7	%		90.9	%		92.0	%		93.7	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING AND OPERATING INCOME INFORMATION AND RATIOS

CHAUCER

Three Months ended March 31


	2014													2013
(In millions, except percentage data)	Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total			Property		Marine & Aviation		Energy		UK Motor		Casualty & Other		Total
Gross premiums written	$	106.8	$	128.3	$	59.5	$	77.8	$	94.6	$	467.0		$	92.2	$	108.3	$	51.8	$	79.7	$	57.5	$	389.5

Net premiums written	$	59.2	$	91.0	$	24.4	$	56.1	$	83.1	$	313.8		$	47.8	$	81.3	$	17.7	$	60.1	$	44.6	$	251.5

Net premiums earned	$	46.6	$	66.8	$	53.2	$	77.3	$	56.2	$	300.1		$	44.5	$	58.8	$	44.8	$	66.5	$	34.3	$	248.9
Losses and LAE:
Current accident year, excluding catastrophe losses												178.1													140.3
Prior year favorable reserve development												(19.6	)												(13.3	)
Catastrophe losses												(0.7	)												2.6

Total losses and LAE												157.8													129.6
Amortization of deferred acquisition costs and other underwriting expenses												105.8													86.3

GAAP underwriting profit												36.5													33.0
Net investment income												10.5													10.5
Other income												3.9													4.5
Other operating expenses												(1.7	)												(7.1	)

Operating income before income taxes											$	49.2												$	40.9


Loss and LAE ratio:
Current accident year, excluding catastrophe losses												59.2	%												56.3	%
Prior year favorable reserve development												(6.5	)%												(5.3	)%
Catastrophe losses												(0.2	)%												1.0	%

Total loss and LAE ratio												52.5	%												52.0	%
Expense ratio												35.3	%												34.7	%

Combined ratio												87.8	%												86.7	%

THE HANOVER INSURANCE GROUP

GAAP UNDERWRITING INFORMATION AND RELATED RATIOS

CHAUCER


	Q1			Q2			Q3			Q4			Q1
(In millions, except percentage data)	2013			2013			2013			2013			2014

Gross premiums written	$	389.5		$	405.6		$	313.7		$	265.4		$	467.0

Net premiums written	$	251.5		$	350.5		$	278.5		$	237.0		$	313.8

Net premiums earned	$	248.9		$	238.3		$	268.6		$	282.1		$	300.1
Losses and LAE:
Current accident year, excluding catastrophe losses		140.3			134.1			164.8			159.2			178.1
Prior year favorable reserve development		(13.3	)		(30.7	)		(27.8	)		(22.8	)		(19.6	)
Catastrophe losses		2.6			12.5			11.8			7.5			(0.7	)

Total losses and LAE		129.6			115.9			148.8			143.9			157.8
Amortization of deferred acquisition costs and other underwriting expenses		86.3			97.7			99.0			109.0			105.8

GAAP underwriting profit	$	33.0		$	24.7		$	20.8		$	29.2		$	36.5


Loss and LAE ratio:
Current accident year, excluding catastrophe losses		56.3	%		56.3	%		61.3	%		56.4	%		59.2	%
Prior year favorable reserve development		(5.3	)%		(12.9	)%		(10.3	)%		(8.1	)%		(6.5	)%
Catastrophe losses		1.0	%		5.2	%		4.4	%		2.7	%		(0.2	)%

Total loss and LAE ratio		52.0	%		48.6	%		55.4	%		51.0	%		52.5	%
Expense ratio		34.7	%		41.0	%		36.9	%		38.6	%		35.3	%

Combined ratio		86.7	%		89.6	%		92.3	%		89.6	%		87.8	%


Combined ratio, excluding catastrophe losses		85.7	%		84.4	%		87.9	%		86.9	%		88.0	%

Current accident year combined ratio, excluding catastrophe losses		91.0	%		97.3	%		98.2	%		95.0	%		94.5	%

THE HANOVER INSURANCE GROUP

NET INVESTMENT INCOME AND YIELDS


	Q1			Q2			Q3			Q4			Q1
(In millions, except yields)	2013			2013			2013			2013			2014
Net Investment Income

Fixed maturities	$	64.7		$	62.6		$	63.0		$	64.5		$	64.7
Equity securities		3.1			4.9			4.0			3.6			3.4
Other investments		2.2			2.8			1.3			2.5			1.5
Investment expenses		(2.7	)		(2.4	)		(2.6	)		(2.5	)		(2.6	)

Total	$	67.3		$	67.9		$	65.7		$	68.1		$	67.0


Pre-tax Yields

Fixed maturities		4.03	%		3.98	%		3.99	%		3.86	%		3.79	%
Total		3.64	%		3.71	%		3.61	%		3.59	%		3.47	%

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

THE HANOVER INSURANCE GROUP

INVESTMENT PORTFOLIO

March 31, 2014


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

Fixed maturities:
U.S. Treasury and government agencies	AAA	$	402.0	$	396.6		4.8	%	$	(5.4	)	$	5.5
Foreign government	AAA		317.3		319.1		3.9	%		1.8			1.3
Municipals:
Taxable	AA		951.4		986.2		12.0	%		34.8			16.9
Tax exempt	AA		145.7		148.8		1.8	%		3.1			2.7
Corporate:
NAIC 1	A		1,878.4		1,947.4		23.7	%		69.0			12.7
NAIC 2	BBB		1,453.3		1,526.6		18.6	%		73.3			12.5
NAIC 3 and below	B+		369.2		390.5		4.7	%		21.3			4.4

Total corporate	BBB+		3,700.9		3,864.5		47.0	%		163.6			29.6

Asset backed:
Residential mortgage-backed	AA		697.2		707.5		8.6	%		10.3			4.3
Commercial mortgage-backed	AA+		405.5		413.3		5.0	%		7.8			2.1
Asset-backed	AAA		169.8		171.5		2.1	%		1.7			(0.1	)

Total fixed maturities	A+		6,789.8		7,007.5		85.2	%		217.7			62.3
Equity securities			421.7		501.0		6.1	%		79.3			15.6
Other investments			232.5		235.8		2.9	%		3.3			0.1

Total investments			7,444.0		7,744.3		94.2	%		300.3			78.0
Cash and cash equivalents			476.3		476.3		5.8	%		—			—

Total		$	7,920.3	$	8,220.6		100.0	%	$	300.3		$	78.0

THE HANOVER INSURANCE GROUP

CREDIT QUALITY AND DURATION OF FIXED MATURITIES

March 31, 2014

(In millions)

CREDIT QUALITY OF FIXED MATURITIES

NAIC Designation

Rating Agency
Equivalent Designation

Amortized
Cost

Fair
Value

% of Total
Fair Value

Aaa/Aa/A

4,888.7

5,008.9

71.5

Baa

1,516.1

1,590.8

22.7

170.4

180.3

2.6

167.9

177.9

2.5

Caa and lower

44.6

47.1

0.7

In or near default

2.1

2.5

—

Total fixed maturities

6,789.8

7,007.5

100.0

DURATION OF FIXED MATURITIES

Amortized
Cost

Fair
Value

% of Total
Fair Value

0-2 years

1,594.7

1,636.4

23.4

2-4 years

1,805.0

1,889.9

27.0

4-6 years

1,670.8

1,744.4

24.9

6-8 years

1,371.1

1,387.3

19.8

8-10 years

283.7

283.6

4.0

10+ years

64.5

65.9

0.9

Total fixed maturities

6,789.8

7,007.5

100.0

Weighted Average Duration

4.11

THE HANOVER INSURANCE GROUP

TOP 10 CORPORATE AND MUNICIPAL FIXED MATURITY HOLDINGS

March 31, 2014


(In millions, except percentage data)
Issuer	Amortized Cost		Fair Value		As a Percent of Invested Assets			S&P Ratings
Royal Bank of Scotland: (1)
Term deposits	$	81.3	$	82.6		1.00	%		BBB+
Notes		16.2		16.7		0.20	%		A
Lloyds Bank: (2)
Term deposits		48.8		48.1		0.58	%		A
Notes		9.8		10.2		0.12	%		A–
GE Capital		32.7		34.2		0.42	%		AA+
Citigroup		28.6		30.1		0.37	%		A–
American Express		28.4		29.6		0.36	%		A–
JP Morgan		25.9		26.9		0.33	%		A
Bank of America		25.8		27.5		0.33	%		BBB+
Wells Fargo		24.8		26.8		0.33	%		A+
Rabobank Nederland		24.4		24.5		0.30	%		AA–
CVS Caremark		22.6		24.5		0.30	%		BBB+

Top 10 Corporate and Municipal Fixed	$	369.3	$	381.7		4.64	%

(1)	UK government owns 83% of bank equity

(2)	UK government owns 25% of bank equity

THE HANOVER INSURANCE GROUP

RECONCILIATION OF OPERATING INCOME TO NET INCOME


	Three Months ended March 31
	2014						2013
(In millions, except per share data)	$			Per Share (Diluted)			$			Per Share (Diluted)
OPERATING INCOME (LOSS)
Commercial Lines	$	16.1					$	33.0
Personal Lines		21.6						30.5
Chaucer		49.2						40.9
Other		(1.9	)					(2.2	)

Total		85.0						102.2

Interest expense		(16.3	)					(14.7	)

Operating income before income taxes		68.7		$	1.53			87.5		$	1.93

Income tax expense on operating income		(21.7	)		(0.48	)		(27.6	)		(0.61	)


Operating income after income taxes		47.0			1.05			59.9			1.32
Net realized investment gains		4.4			0.10			8.1			0.18
Loss from repayment of debt		—			—			(7.8	)		(0.17	)
Net benefit (costs) related to acquired businesses		(0.9	)		(0.02	)		0.4			0.01
Net foreign exchange gains (losses)		(0.1	)		—			0.7			0.02
Income tax benefit on non-operating items		4.3			0.09			5.1			0.11

Income from continuing operations, net of taxes		54.7			1.22			66.4			1.47

Discontinued operations, net of taxes		(0.1	)		—			(0.2	)		(0.01	)


NET INCOME	$	54.6		$	1.22		$	66.2		$	1.46

Non-GAAP Financial Measures

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

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

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

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

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

Operating income before and after interest expense and taxes and measures of operating income that exclude the effects of catastrophe losses or reserve development should not be construed as substitutes for net income determined in accordance with GAAP. A reconciliation of income from continuing operations to operating income before interest expense and taxes and income from continuing operations per share to operating income after taxes per share for the three months ended March 31, 2014 and 2013 is set forth on page 17 of this document. The presentation of loss ratios calculated excluding the effects of reserve development and/or catastrophe losses should not be construed as a substitute for loss ratios determined in accordance with GAAP.

CORPORATE OFFICES AND PRINCIPAL SUBSIDIARIES

THE HANOVER INSURANCE GROUP, INC.

440 Lincoln Street

Worcester, MA 01653

The Hanover Insurance Company

440 Lincoln Street

Worcester, MA 01653

Citizens Insurance Company of America

808 North Highlander Way

Howell, MI 48843

Chaucer Holdings PLC

Plantation Place

30 Fenchurch Street

London

EC3M 3AD

MARKET AND DIVIDEND INFORMATION

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

Quarter Ended

2014

Price Range

Dividends

High

Low

Per Share

March 31

61.44

53.14

0.370


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

INDUSTRY RATINGS AS OF APRIL 29, 2014


Financial Strength Ratings	A.M. Best	Standard & Poor’s	Moody’s
The Hanover Insurance Company	A	A–	A3
Citizens Insurance Company of America	A	A–	—


Debt Ratings	A.M. Best	Standard & Poor’s	Moody’s
The Hanover Insurance Group, Inc.
Senior Debt	bbb	BBB–	Baa3
Subordinated Debentures	bb+	BB	Ba1

TRANSFER AGENT

Computershare Investor Services

PO Box 30170

College Station, TX 77842-3170

1-800-317-4454

COMMON STOCK

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

INQUIRIES

Oksana Lukasheva

Vice President

Investor Relations

(508) 855-2063

olukasheva@hanover.com

INVESTOR INFORMATION LINE

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

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

The Hanover Insurance Group, Inc. (THG) 8-KResults of Operations and Financial Condition