Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - HANOVER INSURANCE GROUP, INC. | d8k.htm |
| EX-99.1 - PRESS RELEASE - HANOVER INSURANCE GROUP, INC. | dex991.htm |
Exhibit 99.2
THE HANOVER INSURANCE GROUP
STATISTICAL SUPPLEMENT
TABLE OF CONTENTS
| Financial Highlights |
1-3 | |
| Consolidated Financial Statements |
||
| Income Statements |
4-5 | |
| Balance Sheets |
6 | |
| Property and Casualty |
||
| Condensed Income Statements |
7 | |
| Property and Casualty Consolidated Balance Sheets |
8 | |
| GAAP Underwriting Results |
9-12 | |
| Investments |
||
| Net Investment Income |
13 | |
| Net Realized Investment Gains (Losses) |
14 | |
| Investment Portfolio |
15 | |
| Unrealized Losses |
16 | |
| Credit Quality of Fixed Maturities |
17 | |
| Top 25 Financial Holdings |
18 | |
| Top 25 Non-Financial Holdings |
19 | |
| Property and Casualty Statutory Ratios |
20-21 | |
| Historical Financial Highlights |
22-23 | |
| Other Information |
24 | |
| Corporate Information |
||
| Market and Dividend Information |
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| Industry Ratings |
THE HANOVER INSURANCE GROUP
FINANCIAL HIGHLIGHTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
| (In millions) |
2009 | 2008 | % Change | 2009 | 2008 | % Change | ||||||||||||||||
| SEGMENT INCOME |
||||||||||||||||||||||
| Property and Casualty |
||||||||||||||||||||||
| Personal Lines |
$ | 20.3 | $ | 39.7 | (48.9 | ) | $ | 76.4 | $ | 123.5 | (38.1 | ) | ||||||||||
| Commercial Lines |
52.5 | 55.6 | (5.6 | ) | 189.7 | 169.7 | 11.8 | |||||||||||||||
| Other |
(2.5 | ) | 2.2 | (213.6 | ) | 4.0 | 9.0 | (55.6 | ) | |||||||||||||
| Total Property and Casualty |
70.3 | 97.5 | (27.9 | ) | 270.1 | 302.2 | (10.6 | ) | ||||||||||||||
| Interest expense on corporate debt |
(7.9 | ) | (10.0 | ) | (21.0 | ) | (35.1 | ) | (39.9 | ) | (12.0 | ) | ||||||||||
| Total segment income |
62.4 | 87.5 | (28.7 | ) | 235.0 | 262.3 | (10.4 | ) | ||||||||||||||
| Federal income tax expense on P&C segment income |
(23.4 | ) | (31.4 | ) | (25.5 | ) | (89.8 | ) | (100.3 | ) | (10.5 | ) | ||||||||||
| Federal income tax benefit on other segment income |
2.8 | 3.5 | (20.0 | ) | 12.3 | 14.0 | (12.1 | ) | ||||||||||||||
| Total federal income tax expense on segment income |
(20.6 | ) | (27.9 | ) | (26.2 | ) | (77.5 | ) | (86.3 | ) | (10.2 | ) | ||||||||||
| Total segment income after taxes |
$ | 41.8 | $ | 59.6 | (29.9 | ) | $ | 157.5 | $ | 176.0 | (10.5 | ) | ||||||||||
| RECONCILIATION FROM SEGMENT INCOME TO NET INCOME |
||||||||||||||||||||||
| Total segment income after taxes |
$ | 41.8 | $ | 59.6 | (29.9 | ) | $ | 157.5 | $ | 176.0 | (10.5 | ) | ||||||||||
| Federal income tax settlement |
— | — | — | — | 6.4 | (100.0 | ) | |||||||||||||||
| Net realized investment gains (losses) |
11.1 | (37.1 | ) | (129.9 | ) | 1.4 | (97.8 | ) | (101.4 | ) | ||||||||||||
| Gain from retirement of corporate debt |
— | — | — | 34.5 | — | N/M | ||||||||||||||||
| Loss on derivative instruments items |
— | (0.1 | ) | (100.0 | ) | — | (0.1 | ) | (100.0 | ) | ||||||||||||
| Federal income tax benefit (expense) on non-segment income |
3.0 | 0.4 | 650.0 | (5.6 | ) | — | N/M | |||||||||||||||
| Income from continuing operations |
55.9 | 22.8 | 145.2 | 187.8 | 84.5 | 122.2 | ||||||||||||||||
| Discontinued operations (net of taxes): |
||||||||||||||||||||||
| Gain (loss) from discontinued FAFLIC business (Including loss on assets held-for-sale of $5.1 and $77.3 in 2008) |
0.8 | 8.1 | (90.1 | ) | 7.1 | (84.8 | ) | (108.4 | ) | |||||||||||||
| Loss from discontinued accident and health business |
(0.2 | ) | — | N/M | (2.6 | ) | — | N/M | ||||||||||||||
| Income from operations of AMGRO (Including gain on disposal of $11.1 in 2008) |
— | — | — | — | 10.1 | (100.0 | ) | |||||||||||||||
| Gain on disposal of variable life and annuity business |
0.8 | 3.2 | (75.0 | ) | 4.9 | 11.3 | (56.6 | ) | ||||||||||||||
| Other |
— | — | — | — | (0.5 | ) | (100.0 | ) | ||||||||||||||
| Net income |
$ | 57.3 | $ | 34.1 | 68.0 | $ | 197.2 | $ | 20.6 | 857.3 | ||||||||||||
1
THE HANOVER INSURANCE GROUP
FINANCIAL HIGHLIGHTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||||||||||
| PER SHARE DATA (DILUTED) (1) |
||||||||||||||||||||||
| Total segment income |
$ | 1.24 | $ | 1.70 | (27.1 | ) | $ | 4.60 | $ | 5.07 | (9.3 | ) | ||||||||||
| Federal income tax expense on segment income |
(0.41 | ) | (0.54 | ) | (24.1 | ) | (1.52 | ) | (1.67 | ) | (9.0 | ) | ||||||||||
| Total segment income after taxes |
0.83 | 1.16 | (28.4 | ) | 3.08 | 3.40 | (9.4 | ) | ||||||||||||||
| Federal income tax settlement |
— | — | — | — | 0.12 | (100.0 | ) | |||||||||||||||
| Net realized investment gains (losses) |
0.22 | (0.73 | ) | (130.1 | ) | 0.03 | (1.89 | ) | (101.6 | ) | ||||||||||||
| Gain from retirement of corporate debt |
— | — | — | 0.68 | — | N/M | ||||||||||||||||
| Federal income tax benefit (expense) on non-segment income |
0.06 | 0.01 | 500.0 | (0.11 | ) | — | N/M | |||||||||||||||
| Income from continuing operations |
1.11 | 0.44 | 152.3 | 3.68 | 1.63 | 125.8 | ||||||||||||||||
| Discontinued operations (net of taxes): |
||||||||||||||||||||||
| Gain (loss) from discontinued FAFLIC business (Including loss on assets held for sale of $0.10 and $1.49 in 2008) |
0.01 | 0.16 | (93.8 | ) | 0.14 | (1.64 | ) | (108.5 | ) | |||||||||||||
| Loss from discontinued accident and health business |
— | — | — | (0.05 | ) | — | N/M | |||||||||||||||
| Income from operations of AMGRO (Including gain on disposal of $0.21 in 2008) |
— | — | — | — | 0.20 | (100.0 | ) | |||||||||||||||
| Gain on disposal of variable life and annuity business |
0.02 | 0.06 | (66.7 | ) | 0.09 | 0.22 | (59.1 | ) | ||||||||||||||
| Other |
— | — | — | — | (0.01 | ) | (100.0 | ) | ||||||||||||||
| Net income |
$ | 1.14 | $ | 0.66 | 72.7 | $ | 3.86 | $ | 0.40 | 865.0 | ||||||||||||
2
THE HANOVER INSURANCE GROUP
FINANCIAL HIGHLIGHTS
| (In millions, except per share data) |
December 31 2009 |
December 31 2008 |
% Change | ||||||||
| BALANCE SHEET |
|||||||||||
| Shareholders’ equity |
|||||||||||
| Property and Casualty Group |
$ | 2,332.1 | $ | 1,995.5 | 16.9 | ||||||
| First Allmerica Financial Life Insurance Company (consolidated) (1) |
— | 78.1 | (100.0 | ) | |||||||
| THG Holding Company debt |
(287.1 | ) | (499.5 | ) | (42.5 | ) | |||||
| THG Holding Company |
313.6 | 313.1 | 0.2 | ||||||||
| Total shareholders’ equity |
$ | 2,358.6 | $ | 1,887.2 | 25.0 | ||||||
| Property and Casualty Companies (2) |
|||||||||||
| Total adjusted statutory capital |
$ | 1,741.6 | $ | 1,600.7 | 8.8 | ||||||
| Premium to surplus ratio |
1.5:1 | 1.6:1 | — | ||||||||
| Book value per share |
|||||||||||
| Property and Casualty Group |
$ | 49.16 | $ | 39.20 | 25.4 | ||||||
| First Allmerica Financial Life Insurance Company (consolidated) |
— | 1.53 | (100.0 | ) | |||||||
| THG Holding Company debt |
(6.05 | ) | (9.81 | ) | (38.3 | ) | |||||
| THG Holding Company |
6.61 | 6.16 | 7.3 | ||||||||
| Total book value per share |
$ | 49.72 | $ | 37.08 | 34.1 | ||||||
| THG book value per share, excluding accumulated other comprehensive income/(loss) |
$ | 49.11 | $ | 44.64 | 10.0 | ||||||
| Shares outstanding (3) |
47.4 | 50.9 | |||||||||
| Stock price |
$ | 44.43 | $ | 42.97 | 3.4 | ||||||
| Price/book value per share |
0.9 | x | 1.2 | x | (0.3 | ) x | |||||
| Total Debt/equity |
18.4 | % | 28.1 | % | (9.7 | ) pts | |||||
| Total Debt/total capital |
15.5 | % | 22.0 | % | (6.5 | ) pts | |||||
| (1) | FAFLIC was sold to Commonwealth Annuity and Life Insurance Company effective January 2, 2009. December 31, 2008 reflects a dividend to THG Holding Company of $136.3 million. |
| (2) | Property and Casualty Companies include The Hanover Insurance Company, Citizens Insurance Company of America, and all other insurance subsidiaries. |
| (3) | Shares outstanding do not include common stock equivalents. |
3
THE HANOVER INSURANCE GROUP
CONSOLIDATED INCOME STATEMENTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
| (In millions) |
2009 | 2008 | % Change | 2009 | 2008 | % Change | ||||||||||||||||
| REVENUES |
||||||||||||||||||||||
| Premiums |
$ | 647.0 | $ | 626.8 | 3.2 | $ | 2,546.4 | $ | 2,484.9 | 2.5 | ||||||||||||
| Net investment income |
63.8 | 64.8 | (1.5 | ) | 252.1 | 258.7 | (2.6 | ) | ||||||||||||||
| Net realized investment losses: |
||||||||||||||||||||||
| Total other-than-temporary impairment losses on securities |
(3.1 | ) | (46.4 | ) | (93.3 | ) | (42.2 | ) | (113.1 | ) | (62.7 | ) | ||||||||||
| Portion of loss transferred (from) to other comprehensive income |
(0.5 | ) | — | N/M | 9.3 | — | N/M | |||||||||||||||
| Net other-than-temporary impairment losses on securities recognized in earnings |
(3.6 | ) | (46.4 | ) | (92.2 | ) | (32.9 | ) | (113.1 | ) | (70.9 | ) | ||||||||||
| Realized gains from sales and other |
14.7 | 9.3 | 58.1 | 34.3 | 15.3 | 124.2 | ||||||||||||||||
| Total net realized investment gains (losses) |
11.1 | (37.1 | ) | (129.9 | ) | 1.4 | (97.8 | ) | (101.4 | ) | ||||||||||||
| Fees and other income |
8.4 | 8.9 | (5.6 | ) | 34.2 | 34.6 | (1.2 | ) | ||||||||||||||
| Total revenues |
730.3 | 663.4 | 10.1 | 2,834.1 | 2,680.4 | 5.7 | ||||||||||||||||
| LOSSES AND EXPENSES |
||||||||||||||||||||||
| Losses and loss adjustment expenses |
414.1 | 386.5 | 7.1 | 1,639.2 | 1,626.2 | 0.8 | ||||||||||||||||
| Policy acquisition expenses |
146.6 | 140.1 | 4.6 | 581.3 | 556.2 | 4.5 | ||||||||||||||||
| Gain from retirement of corporate debt |
— | — | — | (34.5 | ) | — | N/M | |||||||||||||||
| Other operating expenses |
96.1 | 86.5 | 11.1 | 377.2 | 333.6 | 13.1 | ||||||||||||||||
| Total losses and expenses |
656.8 | 613.1 | 7.1 | 2,563.2 | 2,516.0 | 1.9 | ||||||||||||||||
| Income from continuing operations before federal income taxes |
73.5 | 50.3 | 46.1 | 270.9 | 164.4 | 64.8 | ||||||||||||||||
| Federal income tax expense |
17.6 | 27.5 | (36.0 | ) | 83.1 | 79.9 | 4.0 | |||||||||||||||
| Income from continuing operations |
55.9 | 22.8 | 145.2 | 187.8 | 84.5 | 122.2 | ||||||||||||||||
| Discontinued operations (net of taxes): |
||||||||||||||||||||||
| Gain (loss) from discontinued FAFLIC business (Including loss on assets held-for-sale of $5.1 and $77.3 in 2008) |
0.8 | 8.1 | (90.1 | ) | 7.1 | (84.8 | ) | (108.4 | ) | |||||||||||||
| Loss from discontinued accident and health business |
(0.2 | ) | — | N/M | (2.6 | ) | — | N/M | ||||||||||||||
| Income from operations of AMGRO (Including gain on disposal of $11.1 in 2008) |
— | — | — | — | 10.1 | (100.0 | ) | |||||||||||||||
| Gain on disposal of variable life and annuity business |
0.8 | 3.2 | (75.0 | ) | 4.9 | 11.3 | (56.6 | ) | ||||||||||||||
| Other |
— | — | — | — | (0.5 | ) | (100.0 | ) | ||||||||||||||
| Net income |
$ | 57.3 | $ | 34.1 | 68.0 | $ | 197.2 | $ | 20.6 | 857.3 | ||||||||||||
4
THE HANOVER INSURANCE GROUP
CONSOLIDATED INCOME STATEMENTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||||||||
| PER SHARE DATA (DILUTED) |
||||||||||||||||||||
| Income from continuing operations |
$ | 1.11 | $ | 0.44 | 152.3 | $ | 3.68 | $ | 1.63 | 125.8 | ||||||||||
| Discontinued operations (net of taxes): |
||||||||||||||||||||
| Gain (loss) from discontinued FAFLIC business (Including loss on assets held for sale of $0.10 and $1.49 in 2008) |
0.01 | 0.16 | (93.8 | ) | 0.14 | (1.64 | ) | (108.5 | ) | |||||||||||
| Loss from discontinued accident and health business |
— | — | — | (0.05 | ) | — | N/M | |||||||||||||
| Income from operations of AMGRO (Including gain on disposal of $0.21 in 2008) |
— | — | — | — | 0.20 | (100.0 | ) | |||||||||||||
| Gain on disposal of variable life and annuity business |
0.02 | 0.06 | (66.7 | ) | 0.09 | 0.22 | (59.1 | ) | ||||||||||||
| Other |
— | — | — | — | (0.01 | ) | (100.0 | ) | ||||||||||||
| Net income (1) |
$ | 1.14 | $ | 0.66 | 72.7 | $ | 3.86 | $ | 0.40 | 865.0 | ||||||||||
| Weighted average shares outstanding |
50.2 | 51.4 | 51.1 | 51.7 | ||||||||||||||||
| (1) | Basic income per share was $1.16 and $0.67 for the quarters ended December 31, 2009 and 2008, respectively, and $3.90 and $0.40 for the years ended December 31, 2009 and 2008, respectively. |
5
THE HANOVER INSURANCE GROUP
CONSOLIDATED BALANCE SHEETS
| (In millions, except per share data) |
December 31 2009 |
December 31 2008 |
% Change | ||||||||
| ASSETS |
|||||||||||
| Investments: |
|||||||||||
| Fixed maturities, at fair value (amortized cost of $4,520.3 and $4,382.0) |
$ | 4,615.6 | $ | 4,140.9 | 11.5 | ||||||
| Equity securities, at fair value (cost of $57.3 and $97.6) |
69.2 | 76.2 | (9.2 | ) | |||||||
| Mortgage loans |
14.1 | 31.1 | (54.7 | ) | |||||||
| Other long-term investments |
18.2 | 18.4 | (1.1 | ) | |||||||
| Total investments |
4,717.1 | 4,266.6 | 10.6 | ||||||||
| Cash and cash equivalents |
316.5 | 397.7 | (20.4 | ) | |||||||
| Accrued investment income |
52.3 | 52.3 | — | ||||||||
| Premiums, accounts and notes receivable, net |
590.8 | 578.5 | 2.1 | ||||||||
| Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums |
1,197.9 | 1,129.6 | 6.0 | ||||||||
| Deferred policy acquisition costs |
286.3 | 264.8 | 8.1 | ||||||||
| Deferred federal income taxes |
228.6 | 285.6 | (20.0 | ) | |||||||
| Goodwill |
171.4 | 169.9 | 0.9 | ||||||||
| Other assets |
351.2 | 315.7 | 11.2 | ||||||||
| Assets of discontinued operations |
130.6 | 1,769.5 | (92.6 | ) | |||||||
| Total assets |
$ | 8,042.7 | $ | 9,230.2 | (12.9 | ) | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||||
| LIABILITIES |
|||||||||||
| Policy liabilities and accruals: |
|||||||||||
| Losses and loss adjustment expenses |
$ | 3,153.9 | $ | 3,203.1 | (1.5 | ) | |||||
| Unearned premiums |
1,300.5 | 1,246.3 | 4.3 | ||||||||
| Total policy liabilities and accruals |
4,454.4 | 4,449.4 | 0.1 | ||||||||
| Expenses and taxes payable |
603.2 | 622.3 | (3.1 | ) | |||||||
| Reinsurance premiums payable |
58.5 | 61.3 | (4.6 | ) | |||||||
| Long-term debt |
433.9 | 531.4 | (18.3 | ) | |||||||
| Liabilities of discontinued operations |
134.1 | 1,678.6 | (92.0 | ) | |||||||
| Total liabilities |
5,684.1 | 7,343.0 | (22.6 | ) | |||||||
| SHAREHOLDERS' EQUITY |
|||||||||||
| Preferred stock, par value $.01 per share; authorized 20.0 million shares; issued none |
— | — | — | ||||||||
| Common stock, par value $.01 per share; authorized 300.0 million shares; issued 60.5 million shares |
0.6 | 0.6 | — | ||||||||
| Additional paid-in capital |
1,808.5 | 1,803.8 | 0.3 | ||||||||
| Accumulated other comprehensive income/(loss) |
28.8 | (384.8 | ) | (107.5 | ) | ||||||
| Retained earnings |
1,141.1 | 949.8 | 20.1 | ||||||||
| Treasury stock at cost (13.0 and 9.6 million shares) |
(620.4 | ) | (482.2 | ) | 28.7 | ||||||
| Total shareholders' equity |
2,358.6 | 1,887.2 | 25.0 | ||||||||
| Total liabilities and shareholders' equity |
$ | 8,042.7 | $ | 9,230.2 | (12.9 | ) | |||||
6
PROPERTY & CASUALTY
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY
CONDENSED INCOME STATEMENTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||
| (In millions) |
2009 | 2008 | % Change | 2009 | 2008 | % Change | ||||||||||||||
| REVENUES |
||||||||||||||||||||
| Net premiums written |
$ | 626.9 | $ | 597.3 | 5.0 | $ | 2,608.7 | $ | 2,518.0 | 3.6 | ||||||||||
| Change in unearned premiums, net of prepaid reinsurance premiums |
20.1 | 29.5 | (31.9 | ) | (62.3 | ) | (33.1 | ) | 88.2 | |||||||||||
| Net premiums earned |
647.0 | 626.8 | 3.2 | 2,546.4 | 2,484.9 | 2.5 | ||||||||||||||
| Net investment income |
63.8 | 64.7 | (1.4 | ) | 251.7 | 258.0 | (2.4 | ) | ||||||||||||
| Other income |
9.5 | 9.9 | (4.0 | ) | 38.6 | 40.9 | (5.6 | ) | ||||||||||||
| Total segment revenue |
720.3 | 701.4 | 2.7 | 2,836.7 | 2,783.8 | 1.9 | ||||||||||||||
| LOSSES AND OPERATING EXPENSES |
||||||||||||||||||||
| Losses and loss adjustment expenses |
414.1 | 386.5 | 7.1 | 1,639.2 | 1,626.2 | 0.8 | ||||||||||||||
| Policy acquisition expenses |
146.6 | 140.1 | 4.6 | 581.3 | 556.2 | 4.5 | ||||||||||||||
| Other operating expenses |
89.3 | 77.3 | 15.5 | 346.1 | 299.2 | 15.7 | ||||||||||||||
| Total losses and operating expenses |
650.0 | 603.9 | 7.6 | 2,566.6 | 2,481.6 | 3.4 | ||||||||||||||
| Segment income before federal income taxes |
$ | 70.3 | $ | 97.5 | (27.9 | ) | $ | 270.1 | $ | 302.2 | (10.6 | ) | ||||||||
7
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY GROUP (1)
SELECT BALANCE SHEET INFORMATION
| (In millions) |
December 31 2009 |
December 31 2008 |
% Change | ||||||
| ASSETS |
|||||||||
| Investments: |
|||||||||
| Fixed maturities, at fair value (amortized cost of $4,207.4 and $4,154.9) |
$ | 4,325.7 | $ | 3,912.1 | 10.6 | ||||
| Equity securities, at fair value (cost of $57.3 and $88.3) |
69.2 | 66.9 | 3.4 | ||||||
| Mortgage loans |
14.3 | 32.7 | (56.3 | ) | |||||
| Other long-term investments |
13.7 | 13.5 | 1.5 | ||||||
| Total investments |
4,422.9 | 4,025.2 | 9.9 | ||||||
| Cash and cash equivalents |
311.9 | 377.8 | (17.4 | ) | |||||
| Accrued investment income |
49.5 | 48.6 | 1.9 | ||||||
| Premiums, accounts, and notes receivable, net |
590.8 | 579.2 | 2.0 | ||||||
| Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums |
1,197.9 | 1,129.6 | 6.0 | ||||||
| Deferred policy acquisition costs |
286.3 | 264.8 | 8.1 | ||||||
| Deferred federal income tax asset |
190.5 | 220.8 | (13.7 | ) | |||||
| Goodwill |
171.4 | 169.9 | 0.9 | ||||||
| Other assets |
362.7 | 309.3 | 17.3 | ||||||
| Assets of discontinued operations |
130.6 | — | N/M | ||||||
| Total assets |
$ | 7,714.5 | $ | 7,125.2 | 8.3 | ||||
| LIABILITIES |
|||||||||
| Policy liabilities and accruals: |
|||||||||
| Losses and loss adjustment expenses |
$ | 3,153.9 | $ | 3,203.1 | (1.5 | ) | |||
| Unearned premiums |
1,300.5 | 1,246.3 | 4.3 | ||||||
| Total policy liabilities and accruals |
4,454.4 | 4,449.4 | 0.1 | ||||||
| Expenses and taxes payable |
588.6 | 596.4 | (1.3 | ) | |||||
| Reinsurance premiums payable |
58.5 | 61.3 | (4.6 | ) | |||||
| Long-term debt |
146.8 | 22.6 | 549.6 | ||||||
| Liabilities of discontinued operations |
134.1 | — | N/M | ||||||
| Total liabilities |
$ | 5,382.4 | $ | 5,129.7 | 4.9 | ||||
| (1) | Property and Casualty group includes The Hanover Insurance Company, Citizens Insurance Company of America, and AIX Holdings, Inc. and their subsidiaries, Verlan Fire Insurance Company, OPUS Investments, Inc. and other insurance and non-insurance subsidiaries. |
8
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY
GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME
| Quarter ended December 31, 2009 | |||||||||||||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | ||||||||||||||||||||||||||||||||||||||||||
| (In millions) |
Auto | Home | Other | Total | Workers' Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||||||||||||
| Net premiums written |
$ | 227.3 | $ | 119.5 | $ | 9.7 | $ | 356.5 | $ | 21.4 | $ | 39.5 | $ | 77.3 | $ | 132.2 | $ | 270.4 | $ | — | $ | 626.9 | |||||||||||||||||||||
| Net premiums earned |
$ | 243.1 | $ | 114.5 | $ | 9.9 | $ | 367.5 | $ | 26.4 | $ | 47.3 | $ | 89.4 | $ | 116.4 | $ | 279.5 | $ | — | $ | 647.0 | |||||||||||||||||||||
| Losses excluding prior year loss reserve development and catastrophe losses |
165.9 | 57.0 | 3.4 | 226.3 | 18.3 | 26.0 | 45.4 | 46.7 | 136.4 | — | 362.7 | ||||||||||||||||||||||||||||||||
| Prior year loss reserve (favorable) unfavorable development |
(0.4 | ) | (1.8 | ) | 0.4 | (1.8 | ) | (11.1 | ) | (2.4 | ) | (12.7 | ) | 2.9 | (23.3 | ) | (1.4 | ) | (26.5 | ) | |||||||||||||||||||||||
| Pre-tax catastrophe losses (income) |
0.1 | 5.9 | 0.2 | 6.2 | — | — | 1.0 | (0.6 | ) | 0.4 | — | 6.6 | |||||||||||||||||||||||||||||||
| Loss adjustment expenses (2) |
32.6 | 9.1 | 0.5 | 42.2 | 0.7 | 2.9 | 10.6 | 14.0 | 28.2 | 0.3 | 70.7 | ||||||||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses |
104.8 | 117.6 | — | 222.4 | |||||||||||||||||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.6 | — | 0.6 | |||||||||||||||||||||||||||||||||||||||
| GAAP underwriting (loss) profit |
(10.2 | ) | 19.6 | 1.1 | 10.5 | ||||||||||||||||||||||||||||||||||||||
| Net investment income |
28.2 | 32.4 | 3.2 | 63.8 | |||||||||||||||||||||||||||||||||||||||
| Other income |
3.6 | 4.4 | 1.5 | 9.5 | |||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(1.3 | ) | (3.9 | ) | (8.3 | ) | (13.5 | ) | |||||||||||||||||||||||||||||||||||
| Segment income (loss) before federal income taxes |
$ | 20.3 | $ | 52.5 | $ | (2.5 | ) | $ | 70.3 | ||||||||||||||||||||||||||||||||||
| Quarter ended December 31, 2008 | |||||||||||||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | ||||||||||||||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
|||||||||||||||||||||||||||||||||
| Net premiums written |
$ | 238.9 | $ | 113.0 | $ | 9.4 | $ | 361.3 | $ | 28.8 | $ | 40.2 | $ | 82.8 | $ | 84.1 | $ | 235.9 | $ | 0.1 | $ | 597.3 | |||||||||||||||||||||
| Net premiums earned |
$ | 248.3 | $ | 107.1 | $ | 9.7 | $ | 365.1 | $ | 33.6 | $ | 48.1 | $ | 92.9 | $ | 87.1 | $ | 261.7 | $ | — | $ | 626.8 | |||||||||||||||||||||
| Losses excluding prior year loss reserve development and catastrophe losses |
162.5 | 47.1 | 2.7 | 212.3 | 21.0 | 27.0 | 41.0 | 30.3 | 119.3 | — | 331.6 | ||||||||||||||||||||||||||||||||
| Prior year loss reserve (favorable) unfavorable development |
(7.1 | ) | (4.7 | ) | 0.7 | (11.1 | ) | (5.3 | ) | 1.5 | (7.1 | ) | (3.0 | ) | (13.9 | ) | (1.2 | ) | (26.2 | ) | |||||||||||||||||||||||
| Pre-tax catastrophe losses (income) |
— | 9.6 | 0.5 | 10.1 | — | — | (5.8 | ) | 9.8 | 4.0 | — | 14.1 | |||||||||||||||||||||||||||||||
| Loss adjustment expenses (2) |
29.9 | 10.2 | 0.4 | 40.5 | 3.4 | 3.1 | 11.0 | 7.4 | 24.9 | 0.4 | 65.8 | ||||||||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses (income) |
108.0 | 104.5 | (0.1 | ) | 212.4 | ||||||||||||||||||||||||||||||||||||||
| Policyholders’ dividends |
— | 1.2 | — | 1.2 | |||||||||||||||||||||||||||||||||||||||
| GAAP underwriting income |
5.3 | 21.7 | 0.9 | 27.9 | |||||||||||||||||||||||||||||||||||||||
| Net investment income |
29.8 | 31.5 | 3.4 | 64.7 | |||||||||||||||||||||||||||||||||||||||
| Other income |
3.8 | 4.5 | 1.6 | 9.9 | |||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
0.8 | (2.1 | ) | (3.7 | ) | (5.0 | ) | ||||||||||||||||||||||||||||||||||||
| Segment income before federal income taxes |
$ | 39.7 | $ | 55.6 | $ | 2.2 | $ | 97.5 | |||||||||||||||||||||||||||||||||||
| (1) | Other Commercial Lines includes inland marine, bonds, professional liability and program business. |
| (2) | Loss adjustment expenses include unfavorable (favorable) development of $2.2 million and $0.4 million in Personal Lines, $(2.8) million and $(1.0) million in Commercial Lines, and $(0.6) million in Total P&C for the quarters ended December 31, 2009 and 2008, respectively. |
9
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY
GAAP UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME
| Year ended December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||||||||||||||
| (In millions) |
Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
|||||||||||||||||||||||||||||||||
| Net premiums written |
$ | 967.9 | $ | 464.3 | $ | 40.0 | $ | 1,472.2 | $ | 109.7 | $ | 187.3 | $ | 366.7 | $ | 472.6 | $ | 1,136.3 | $ | 0.2 | $ | 2,608.7 | ||||||||||||||||||||||
| Net premiums earned |
$ | 978.0 | $ | 444.1 | $ | 39.2 | $ | 1,461.3 | $ | 112.0 | $ | 186.9 | $ | 360.7 | $ | 425.2 | $ | 1,084.8 | $ | 0.3 | $ | 2,546.4 | ||||||||||||||||||||||
| Losses excluding prior year loss reserve development and catastrophe losses |
643.4 | 229.2 | 13.9 | 886.5 | 76.4 | 100.6 | 174.2 | 179.4 | 530.6 | — | 1,417.1 | |||||||||||||||||||||||||||||||||
| Prior year loss reserve (favorable) unfavorable development |
(44.9 | ) | 6.0 | (1.2 | ) | (40.1 | ) | (28.2 | ) | (7.1 | ) | (28.8 | ) | (17.1 | ) | (81.2 | ) | (11.8 | ) | (133.1 | ) | |||||||||||||||||||||||
| Pre-tax catastrophe losses |
4.2 | 65.2 | 0.9 | 70.3 | — | 1.1 | 23.3 | 4.2 | 28.6 | — | 98.9 | |||||||||||||||||||||||||||||||||
| Loss adjustment expenses (2) |
122.1 | 37.8 | 1.1 | 161.0 | 1.2 | 10.5 | 41.6 | 40.1 | 93.4 | 0.9 | 255.3 | |||||||||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses (income) |
427.2 | 451.5 | (0.5 | ) | 878.2 | |||||||||||||||||||||||||||||||||||||||
| Policyholders’ dividends |
— | 1.0 | — | 1.0 | ||||||||||||||||||||||||||||||||||||||||
| GAAP underwriting (loss) profit |
(43.6 | ) | 60.9 | 11.7 | 29.0 | |||||||||||||||||||||||||||||||||||||||
| Net investment income |
109.6 | 125.6 | 16.5 | 251.7 | ||||||||||||||||||||||||||||||||||||||||
| Other income |
14.4 | 18.4 | 5.8 | 38.6 | ||||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(4.0 | ) | (15.2 | ) | (30.0 | ) | (49.2 | ) | ||||||||||||||||||||||||||||||||||||
| Segment income before federal income taxes |
$ | 76.4 | $ | 189.7 | $ | 4.0 | $ | 270.1 | ||||||||||||||||||||||||||||||||||||
| Year ended December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||||||||||||||
| Net premiums written |
$ | 1,011.3 | $ | 432.5 | $ | 40.2 | $ | 1,484.0 | $ | 127.2 | $ | 192.8 | $ | 368.5 | $ | 345.2 | $ | 1,033.7 | $ | 0.3 | $ | 2,518.0 | ||||||||||||||||||||||
| Net premiums earned |
$ | 1,003.9 | $ | 429.4 | $ | 39.2 | $ | 1,472.5 | $ | 125.1 | $ | 196.7 | $ | 364.3 | $ | 326.0 | $ | 1,012.1 | $ | 0.3 | $ | 2,484.9 | ||||||||||||||||||||||
| Losses excluding prior year loss reserve development and catastrophe losses |
649.6 | 203.5 | 12.8 | 865.9 | 81.1 | 105.2 | 174.4 | 121.0 | 481.7 | — | 1,347.6 | |||||||||||||||||||||||||||||||||
| Prior year loss reserve favorable development |
(54.6 | ) | (5.7 | ) | (1.2 | ) | (61.5 | ) | (27.6 | ) | (9.3 | ) | (36.1 | ) | (18.0 | ) | (91.0 | ) | (1.9 | ) | (154.4 | ) | ||||||||||||||||||||||
| Pre-tax catastrophe losses |
3.5 | 79.0 | 2.9 | 85.4 | — | 0.6 | 59.0 | 24.7 | 84.3 | — | 169.7 | |||||||||||||||||||||||||||||||||
| Loss adjustment expenses (2) |
125.2 | 36.3 | 1.7 | 163.2 | 13.7 | 15.9 | 40.7 | 26.8 | 97.1 | 1.4 | 261.7 | |||||||||||||||||||||||||||||||||
| Policy acquisition and other underwriting expenses (income) |
427.2 | 398.6 | (0.4 | ) | 825.4 | |||||||||||||||||||||||||||||||||||||||
| Policyholders’ dividends |
— | 1.6 | — | 1.6 | ||||||||||||||||||||||||||||||||||||||||
| GAAP underwriting (loss) profit |
(7.7 | ) | 39.8 | 1.2 | 33.3 | |||||||||||||||||||||||||||||||||||||||
| Net investment income |
118.9 | 124.4 | 14.7 | 258.0 | ||||||||||||||||||||||||||||||||||||||||
| Other income |
16.0 | 18.3 | 6.6 | 40.9 | ||||||||||||||||||||||||||||||||||||||||
| Other operating expenses |
(3.7 | ) | (12.8 | ) | (13.5 | ) | (30.0 | ) | ||||||||||||||||||||||||||||||||||||
| Segment income before federal income taxes |
$ | 123.5 | $ | 169.7 | $ | 9.0 | $ | 302.2 | ||||||||||||||||||||||||||||||||||||
| (1) | Other Commercial Lines includes inland marine, bonds, professional liability and program business. |
| (2) | Loss adjustment expenses include unfavorable (favorable) development of $0.7 million and $2.6 million in Personal Lines, $(22.9) million and $(7.2) million in Commercial Lines, and $(22.2) million and $(4.6) million in Total P&C for the years ended December 31, 2009 and 2008, respectively. |
10
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY
GAAP UNDERWRITING RATIOS
| Quarter ended December 31, 2009 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
68.3 | % | 49.8 | % | 34.3 | % | 61.6 | % | 69.2 | % | 55.0 | % | 50.8 | % | 40.1 | % | 48.8 | % | N/M | 56.1 | % | |||||||||||
| Catastrophe losses |
— | 5.2 | % | 2.0 | % | 1.7 | % | — | — | 1.1 | % | (0.5 | )% | 0.1 | % | N/M | 1.0 | % | ||||||||||||||
| Loss development |
(0.1 | )% | (1.6 | )% | 4.0 | % | (0.5 | )% | (42.0 | )% | (5.1 | )% | (14.2 | )% | 2.5 | % | (8.3 | )% | N/M | (4.1 | )% | |||||||||||
| Total losses |
68.2 | % | 53.4 | % | 40.3 | % | 62.8 | % | 27.2 | % | 49.9 | % | 37.7 | % | 42.1 | % | 40.6 | % | N/M | 53.0 | % | |||||||||||
| Loss adjustment expenses (2) |
13.4 | % | 7.9 | % | 5.1 | % | 11.5 | % | 2.7 | % | 6.1 | % | 11.9 | % | 12.0 | % | 10.1 | % | N/M | 10.9 | % | |||||||||||
| Policy acquisition and other underwriting expenses (3) |
27.6 | % | 41.8 | % | N/M | 33.7 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.2 | % | N/M | 0.1 | % | ||||||||||||||||||||||||||
| Combined |
101.9 | % | 92.7 | % | N/M | 97.7 | % | |||||||||||||||||||||||||
| Policies in force (4) |
(2.0 | )% | 5.3 | % | (4.4 | )% | 1.0 | % | (0.3 | )% | (2.4 | )% | 3.5 | % | (2.0 | )% | 0.2 | % | — | 0.9 | % | |||||||||||
| Retention (4), (5) |
74.5 | % | 82.2 | % | N/M | 78.4 | % | 65.0 | % | 76.3 | % | 74.5 | % | 79.0 | % | 73.5 | % | |||||||||||||||
| Quarter ended December 31, 2008 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
65.5 | % | 44.0 | % | 27.8 | % | 58.1 | % | 62.5 | % | 56.1 | % | 44.1 | % | 34.8 | % | 45.6 | % | N/M | 52.9 | % | |||||||||||
| Catastrophe losses |
— | 9.0 | % | 5.2 | % | 2.8 | % | — | — | (6.2 | )% | 11.3 | % | 1.5 | % | N/M | 2.2 | % | ||||||||||||||
| Loss development |
(2.8 | )% | (4.4 | )% | 7.2 | % | (3.1 | )% | (15.8 | )% | 3.2 | % | (7.6 | )% | (3.5 | )% | (5.4 | )% | N/M | (4.2 | )% | |||||||||||
| Total losses |
62.7 | % | 48.6 | % | 40.2 | % | 57.8 | % | 46.7 | % | 59.3 | % | 30.3 | % | 42.6 | % | 41.7 | % | N/M | 50.9 | % | |||||||||||
| Loss adjustment expenses (2) |
12.0 | % | 9.5 | % | 4.1 | % | 11.1 | % | 10.1 | % | 6.4 | % | 11.8 | % | 8.5 | % | 9.5 | % | N/M | 10.5 | % | |||||||||||
| Policy acquisition and other underwriting expenses (3) |
28.7 | % | 39.7 | % | N/M | 33.3 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.5 | % | N/M | 0.2 | % | ||||||||||||||||||||||||||
| Combined |
97.6 | % | 91.4 | % | N/M | 94.9 | % | |||||||||||||||||||||||||
| Policies in force (4) |
(1.7 | )% | (0.2 | )% | (5.8 | )% | (1.3 | )% | 0.3 | % | 4.0 | % | 0.1 | % | 2.1 | % | 1.4 | % | — | (0.9 | )% | |||||||||||
| Retention (4), (5) |
73.6 | % | 80.8 | % | N/M | 77.3 | % | 88.8 | % | 80.8 | % | 84.0 | % | 76.2 | % | 83.4 | % | |||||||||||||||
| (1) | Other Commercial Lines includes inland marine, bonds, professional liability and program business. |
| (2) | Loss adjustment expenses include unfavorable (favorable) development of $2.2 million and $0.4 million in Personal Lines, $(2.8) million and $(1.0) million in Commercial Lines, and $(0.6) million in Total P&C for the quarters ended December 31, 2009 and 2008, respectively. |
| (3) | Policy acquisition and other underwriting expenses are reduced by installment fee revenues for purposes of the ratio calculation. |
| (4) | Policies in force and retention rates do not include recent acquisitions of Professionals Direct, Inc., Verlan Fire Insurance Company, and AIX, Inc. |
| (5) | The retention rate for Personal Lines is a twelve month rolling average calculation based on policies in force; the retention rate for Commercial Lines is based on direct voluntary written premiums, based on processed policies in the current period versus the same period in the prior year. |
11
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY
GAAP UNDERWRITING RATIOS
| Year ended December 31, 2009 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
65.8 | % | 51.5 | % | 35.5 | % | 60.7 | % | 68.2 | % | 53.8 | % | 48.3 | % | 42.2 | % | 49.0 | % | N/M | 55.7 | % | |||||||||||
| Catastrophe losses |
0.4 | % | 14.7 | % | 2.3 | % | 4.8 | % | — | 0.6 | % | 6.5 | % | 1.0 | % | 2.6 | % | N/M | 3.9 | % | ||||||||||||
| Loss development |
(4.6 | )% | 1.4 | % | (3.1 | )% | (2.7 | )% | (25.2 | )% | (3.8 | )% | (8.0 | )% | (4.0 | )% | (7.5 | )% | N/M | (5.2 | )% | |||||||||||
| Total losses |
61.6 | % | 67.6 | % | 34.7 | % | 62.8 | % | 43.0 | % | 50.6 | % | 46.8 | % | 39.2 | % | 44.1 | % | N/M | 54.4 | % | |||||||||||
| Loss adjustment expenses (2) |
12.5 | % | 8.5 | % | 2.8 | % | 11.0 | % | 1.1 | % | 5.6 | % | 11.5 | % | 9.4 | % | 8.6 | % | N/M | 10.0 | % | |||||||||||
| Policy acquisition and other underwriting expenses (3) |
28.3 | % | 41.3 | % | N/M | 33.8 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.1 | % | N/M | — | |||||||||||||||||||||||||||
| Combined |
102.1 | % | 94.1 | % | N/M | 98.2 | % | |||||||||||||||||||||||||
| Policies in force (4) |
(2.0 | )% | 5.3 | % | (4.4 | )% | 1.0 | % | (0.3 | )% | (2.4 | )% | 3.5 | % | (2.0 | )% | 0.2 | % | — | 0.9 | % | |||||||||||
| Retention (4), (5) |
74.5 | % | 82.2 | % | N/M | 78.4 | % | 71.9 | % | 77.5 | % | 78.4 | % | 78.6 | % | 77.3 | % | |||||||||||||||
| Year ended December 31, 2008 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
64.7 | % | 47.4 | % | 32.7 | % | 58.8 | % | 64.8 | % | 53.5 | % | 47.9 | % | 37.1 | % | 47.6 | % | N/M | 54.2 | % | |||||||||||
| Catastrophe losses |
0.3 | % | 18.4 | % | 7.4 | % | 5.8 | % | — | 0.3 | % | 16.2 | % | 7.6 | % | 8.3 | % | N/M | 6.8 | % | ||||||||||||
| Loss development |
(5.5 | )% | (1.4 | )% | (3.1 | )% | (4.2 | )% | (22.1 | )% | (4.8 | )% | (10.0 | )% | (5.5 | )% | (9.0 | )% | N/M | (6.1 | )% | |||||||||||
| Total losses |
59.5 | % | 64.4 | % | 37.0 | % | 60.4 | % | 42.7 | % | 49.0 | % | 54.1 | % | 39.2 | % | 46.9 | % | N/M | 54.9 | % | |||||||||||
| Loss adjustment expenses (2) |
12.5 | % | 8.5 | % | 4.3 | % | 11.1 | % | 11.0 | % | 8.1 | % | 11.2 | % | 8.2 | % | 9.6 | % | N/M | 10.5 | % | |||||||||||
| Policy acquisition and other underwriting expenses (3) |
28.1 | % | 39.1 | % | N/M | 32.5 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.2 | % | N/M | 0.1 | % | ||||||||||||||||||||||||||
| Combined |
99.6 | % | 95.8 | % | N/M | 98.0 | % | |||||||||||||||||||||||||
| Policies in force (4) |
(1.7 | )% | (0.2 | )% | (5.8 | )% | (1.3 | )% | 0.3 | % | 4.0 | % | 0.1 | % | 2.1 | % | 1.4 | % | — | (0.9 | )% | |||||||||||
| Retention (4), (5) |
73.6 | % | 80.8 | % | N/M | 77.3 | % | 81.1 | % | 80.3 | % | 82.5 | % | 75.2 | % | 81.4 | % | |||||||||||||||
| (1) | Other Commercial Lines includes inland marine, bonds, professional liability and program business. |
| (2) | Loss adjustment expenses include unfavorable (favorable) development of $0.7 million and $2.6 million in Personal Lines, $(22.9) million and $(7.2) million in Commercial Lines, and $(22.2) million and $(4.6) million in Total P&C for the years ended December 31, 2009 and 2008, respectively. |
| (3) | Policy acquisition and other underwriting expenses are reduced by installment fee revenues for purposes of the ratio calculation. |
| (4) | Policies in force and retention rates do not include recent acquisitions of Professionals Direct, Inc., Verlan Fire Insurance Company, and AIX, Inc. |
| (5) | The retention rate for Personal Lines is a twelve month rolling average calculation based on policies in force; the retention rate for Commercial Lines is based on direct voluntary written premiums, based on processed policies in the current period versus the same period in the prior year. |
12
INVESTMENTS
THE HANOVER INSURANCE GROUP
NET INVESTMENT INCOME
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||||||||
| (In millions, except yields) |
2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||||||
| Yield | Yield | Yield | Yield | |||||||||||||||||||||||||
| Fixed maturities (1) |
$ | 62.9 | 5.43 | % | $ | 63.0 | 5.79 | % | $ | 249.3 | 5.53 | % | $ | 251.3 | 5.65 | % | ||||||||||||
| Equity securities |
1.9 | — | 1.8 | — | 5.2 | — | 4.7 | — | ||||||||||||||||||||
| Mortgages (2) |
0.5 | 9.58 | % | 0.2 | 5.23 | % | 2.3 | 8.78 | % | 0.9 | 8.37 | % | ||||||||||||||||
| All other |
0.1 | — | 1.0 | — | 1.9 | — | 6.7 | — | ||||||||||||||||||||
| Investment expenses |
(1.6 | ) | — | (1.2 | ) | — | (6.6 | ) | — | (4.9 | ) | — | ||||||||||||||||
| Total (3) |
$ | 63.8 | 5.23 | % | $ | 64.8 | 5.44 | % | $ | 252.1 | 5.19 | % | $ | 258.7 | 5.45 | % | ||||||||||||
| (1) | Includes purchase accounting adjustments of $(0.3) million and $(0.9) million for the quarters ended December 31, 2009 and 2008, respectively, and $(1.9) million and $(3.4) million for the years ended December 31, 2009 and 2008, respectively. |
| (2) | There were no mortgage prepayment fees for the quarters ended December 31, 2009 and 2008. Excluding mortgage prepayment fees of $0.1 and $0.2 million for the years ended December 31, 2009 and 2008, mortgage yields were 8.45% and 7.01%, respectively. |
| (3) | Excludes discontinued operations of $0.4 million and $16.4 million for the quarters ended December 31, 2009 and 2008, respectively, and $1.7 million and $66.2 million for the years ended December 31, 2009 and 2008, respectively. |
13
THE HANOVER INSURANCE GROUP
COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||
| (In millions) |
2009 | 2008 | 2009 | 2008 | ||||||||||||
| Total other-than-temporary impairment losses |
$ | (3.1 | ) | $ | (46.4 | ) | $ | (42.2 | ) | $ | (113.1 | ) | ||||
| Portion of loss transferred (from) to other comprehensive income |
(0.5 | ) | — | 9.3 | — | |||||||||||
| Net other-than-temporary losses on securities recognized in earnings |
(3.6 | ) | (46.4 | ) | (32.9 | ) | (113.1 | ) | ||||||||
| Realized gains from sales and other |
14.7 | 9.3 | 34.3 | 15.3 | ||||||||||||
| Net realized investment gains (losses) (1) |
$ | 11.1 | $ | (37.1 | ) | $ | 1.4 | $ | (97.8 | ) | ||||||
| (1) | Excludes discontinued operations of $8.6 million for the quarter ended December 31, 2008, and $(3.2) million and $(14.4) million for the years ended December 31, 2009 and 2008, respectively. There were no realized gains or losses for discontinued operations for the quarter ended December 31, 2009. |
14
THE HANOVER INSURANCE GROUP
INVESTMENT PORTFOLIO
| ($ in millions) |
December 31, 2009 | |||||||||||||||||||
| Investment Type |
Weighted Average Quality |
Amortized Cost |
Fair Value |
Net Unrealized Gain (Loss) |
Change in Net Unrealized Q4 |
Change in Net Unrealized YTD |
||||||||||||||
| Fixed Maturities: |
||||||||||||||||||||
| Corporate: |
||||||||||||||||||||
| NAIC 1 |
A | $ | 844.1 | $ | 876.4 | $ | 32.3 | $ | (1.9 | ) | $ | 92.1 | ||||||||
| NAIC 2 |
BBB | 1,038.9 | 1,087.4 | 48.5 | 4.8 | 121.2 | ||||||||||||||
| NAIC 3 and below |
B+ | 300.6 | 304.5 | 3.9 | 7.5 | 60.4 | ||||||||||||||
| Total corporate |
BBB+ | 2,183.6 | 2,268.3 | 84.7 | 10.4 | 273.7 | ||||||||||||||
| Asset backed: |
||||||||||||||||||||
| Residential mortgage backed securities |
AA+ | 858.8 | 874.4 | 15.6 | (0.7 | ) | 16.9 | |||||||||||||
| Commercial mortgage backed securities |
AA+ | 334.5 | 337.2 | 2.7 | 1.6 | 33.6 | ||||||||||||||
| Asset backed securities |
A | 63.1 | 65.6 | 2.5 | (0.3 | ) | 9.8 | |||||||||||||
| Municipals: |
||||||||||||||||||||
| Taxable |
AA- | 685.6 | 669.0 | (16.6 | ) | (21.3 | ) | (2.0 | ) | |||||||||||
| Tax exempt |
A+ | 159.1 | 163.2 | 4.1 | 0.7 | 20.6 | ||||||||||||||
| U.S. government |
AAA | 355.2 | 354.7 | (0.5 | ) | (3.3 | ) | (5.1 | ) | |||||||||||
| Total fixed maturities |
A+ | 4,639.9 | 4,732.4 | 92.5 | (12.9 | ) | 347.5 | |||||||||||||
| Equity securities: |
||||||||||||||||||||
| Perpetual preferred securities |
18.7 | 24.7 | 6.0 | 2.1 | 19.4 | |||||||||||||||
| Common equity securities |
38.7 | 44.6 | 5.9 | (2.4 | ) | 13.9 | ||||||||||||||
| Total fixed maturities and equity securities (1) |
4,697.3 | 4,801.7 | 104.4 | (13.2 | ) | 380.8 | ||||||||||||||
| Cash and cash equivalents (2) |
316.7 | 316.7 | — | — | — | |||||||||||||||
| Mortgage loans and other long-term investments |
30.3 | 32.3 | 2.0 | — | (0.1 | ) | ||||||||||||||
| Total |
$ | 5,044.3 | $ | 5,150.7 | $ | 106.4 | $ | (13.2 | ) | $ | 380.7 | |||||||||
| (1) | Includes discontinued accident and health business of $119.7 million in amortized cost and $116.9 million in fair value at December 31, 2009. Net unrealized losses associated with the discontinued accident and health business improved $0.6 million during the fourth quarter of 2009 and $11.1 million since year end 2008. |
| (2) | Includes discontinued accident and health business of $0.2 million in amortized cost and in fair value at December 31, 2009. |
15
THE HANOVER INSURANCE GROUP
AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE
| (In millions) |
December 31, 2009 | December 31, 2008 | ||||||||||
| Gross Unrealized Losses and OTTI |
Fair Value |
Gross Unrealized Losses |
Fair Value | |||||||||
| INVESTMENT GRADE FIXED MATURITIES: |
||||||||||||
| 12 months or less |
$ | 23.1 | $ | 664.4 | $ | 150.2 | $ | 1,724.1 | ||||
| Greater than 12 months |
43.4 | 421.8 | 94.4 | 469.8 | ||||||||
| Total investment grade fixed maturities |
66.5 | 1,086.2 | 244.6 | 2,193.9 | ||||||||
| BELOW INVESTMENT GRADE FIXED MATURITIES: |
||||||||||||
| 12 months or less |
10.8 | 92.8 | 64.2 | 152.5 | ||||||||
| Greater than 12 months (1) |
17.7 | 158.3 | — | — | ||||||||
| Total below investment grade fixed maturities |
28.5 | 251.1 | 64.2 | 152.5 | ||||||||
| PERPETUAL PREFERRED SECURITIES: |
||||||||||||
| 12 months or less |
— | — | — | — | ||||||||
| Greater than 12 months |
— | — | 13.4 | 28.5 | ||||||||
| Total perpetual preferred securities |
— | — | 13.4 | 28.5 | ||||||||
| EQUITY SECURITIES: |
||||||||||||
| 12 months or less |
— | — | 11.4 | 32.3 | ||||||||
| Greater than 12 months |
0.3 | 1.4 | — | — | ||||||||
| Total equity securities |
0.3 | 1.4 | 11.4 | 32.3 | ||||||||
| Total (2) |
$ | 95.3 | $ | 1,338.7 | $ | 333.6 | $ | 2,407.2 | ||||
| (1) | Gross Unrealized Losses and OTTI includes $14.8 million of OTTI at December 31, 2009. |
| (2) | Includes discontinued accident and health business of $8.8 million and $15.7 million in gross unrealized losses with $55.0 million and $52.3 million in fair value at December 31, 2009 and 2008, respectively. |
16
THE HANOVER INSURANCE GROUP
CREDIT QUALITY OF FIXED MATURITIES
| (In millions) |
December 31, 2009 | December 31, 2008 | ||||||||||||||||||
| NAIC Designation |
Rating Agency Equivalent Designation |
Amortized Cost |
Fair Value |
% of Total Fair Value |
Amortized Cost |
Fair Value |
% of Total Fair Value |
|||||||||||||
| 1 |
Aaa/Aa/A | $ | 3,120.8 | $ | 3,168.0 | 66.9 | % | $ | 3,098.1 | $ | 2,997.8 | 70.9 | % | |||||||
| 2 |
Baa | 1,198.0 | 1,240.3 | 26.2 | % | 1,074.8 | 981.5 | 23.2 | % | |||||||||||
| 3 |
Ba | 138.2 | 130.5 | 2.8 | % | 151.5 | 133.2 | 3.2 | % | |||||||||||
| 4 |
B | 93.1 | 98.0 | 2.1 | % | 111.0 | 83.8 | 2.0 | % | |||||||||||
| 5 |
Caa and lower | 84.0 | 88.0 | 1.9 | % | 37.1 | 24.5 | 0.6 | % | |||||||||||
| 6 |
In or near default | 5.8 | 7.6 | 0.1 | % | 8.8 | 5.5 | 0.1 | % | |||||||||||
| Total fixed maturities (1) |
$ | 4,639.9 | $ | 4,732.4 | 100.0 | % | $ | 4,481.3 | $ | 4,226.3 | 100.0 | % | ||||||||
| (1) | Includes discontinued accident and health business of $119.6 million and $99.3 million in amortized cost and $116.8 million and $85.4 million in fair value at December 31, 2009 and 2008, respectively. |
17
THE HANOVER INSURANCE GROUP
TOP 25 FINANCIAL FIXED MATURITY HOLDINGS
| (In millions, except percentage data) |
As of December 31, 2009 | ||||||||||
| Issuer |
Amortized Cost | Fair Value | As a percent of Invested Assets |
S&P Ratings | |||||||
| Wells Fargo |
$ | 21.9 | $ | 22.2 | 0.43 | % | AA- | ||||
| Bank of America |
21.7 | 19.0 | 0.37 | % | A- | ||||||
| PNC Bank |
19.8 | 19.8 | 0.39 | % | A | ||||||
| GE Capital |
19.2 | 19.6 | 0.38 | % | AA+ | ||||||
| American Express |
18.3 | 18.9 | 0.37 | % | BBB+ | ||||||
| Capital One |
17.5 | 18.2 | 0.35 | % | BBB | ||||||
| Manufacturers & Traders Bank |
15.1 | 13.2 | 0.26 | % | A- | ||||||
| Morgan Stanley |
15.1 | 16.4 | 0.32 | % | A | ||||||
| Fifth Third Bancorp |
15.0 | 13.4 | 0.26 | % | BBB- | ||||||
| Bank of Scotland |
12.9 | 13.0 | 0.25 | % | BBB | ||||||
| Genworth Global Funding |
12.9 | 13.1 | 0.25 | % | BBB | ||||||
| Student Loan Market |
12.5 | 13.4 | 0.26 | % | BBB- | ||||||
| Goldman Sachs |
12.0 | 12.1 | 0.23 | % | A | ||||||
| Union Bank of California |
11.5 | 11.3 | 0.22 | % | A | ||||||
| Aetna |
10.6 | 11.0 | 0.21 | % | A- | ||||||
| FMR |
10.5 | 10.5 | 0.20 | % | A+ | ||||||
| Prudential Financial |
10.5 | 11.3 | 0.22 | % | A | ||||||
| Branch Bank & Trust |
10.5 | 10.9 | 0.21 | % | A | ||||||
| American General Finance |
10.3 | 8.6 | 0.17 | % | BB+ | ||||||
| Regions Bank |
10.1 | 8.2 | 0.16 | % | BB | ||||||
| Simon Property Group |
10.1 | 10.2 | 0.20 | % | A- | ||||||
| Bank of Oklahoma |
10.0 | 9.2 | 0.18 | % | BBB+ | ||||||
| Lincoln National |
9.5 | 8.3 | 0.16 | % | BBB | ||||||
| Wellpoint |
9.2 | 9.7 | 0.19 | % | A- | ||||||
| ABN Amro Bank Chicago |
9.0 | 7.2 | 0.14 | % | A | ||||||
| Top 25 Financial |
335.7 | 328.7 | 6.38 | % | |||||||
| Other Financial |
117.4 | 114.3 | 2.22 | % | |||||||
| Total Financial |
$ | 453.1 | $ | 443.0 | 8.60 | % | |||||
18
THE HANOVER INSURANCE GROUP
TOP 25 NON-FINANCIAL FIXED MATURITY HOLDINGS
| (In millions, except percentage data) |
As of December 31, 2009 | ||||||||||
| Issuer |
Amortized Cost | Fair Value | As a percent of Invested Assets |
S&P Ratings | |||||||
| Union Pacific |
$ | 19.3 | $ | 20.0 | 0.39 | % | BBB | ||||
| Dominion Resources |
18.2 | 18.9 | 0.37 | % | A- | ||||||
| Conoco Phillips |
17.9 | 19.1 | 0.37 | % | A | ||||||
| AT&T |
17.8 | 18.9 | 0.37 | % | A | ||||||
| Valero Energy |
17.6 | 17.8 | 0.35 | % | BBB | ||||||
| Kroger |
17.4 | 18.3 | 0.35 | % | BBB | ||||||
| CVS |
17.3 | 18.0 | 0.35 | % | BBB+ | ||||||
| Enterprise Products |
16.9 | 17.9 | 0.35 | % | BBB- | ||||||
| Home Depot |
16.9 | 17.8 | 0.34 | % | BBB+ | ||||||
| Miller Brewing |
16.4 | 17.7 | 0.34 | % | BBB+ | ||||||
| Comcast |
15.8 | 17.4 | 0.34 | % | BBB+ | ||||||
| Merck & Co. |
15.7 | 17.0 | 0.33 | % | AA- | ||||||
| Pacific Gas & Electric |
15.3 | 16.4 | 0.32 | % | BBB+ | ||||||
| Canadian National Railways |
15.0 | 16.1 | 0.31 | % | A- | ||||||
| Shell |
15.0 | 15.7 | 0.30 | % | AA | ||||||
| Vodafone |
15.0 | 15.9 | 0.31 | % | A- | ||||||
| Atmos Energy |
14.9 | 16.1 | 0.31 | % | BBB+ | ||||||
| Safeway |
14.9 | 15.7 | 0.30 | % | BBB | ||||||
| Plains All-America Pipeline |
14.6 | 15.2 | 0.30 | % | BBB- | ||||||
| Pfizer |
14.5 | 15.9 | 0.31 | % | AA | ||||||
| Duke Energy |
14.3 | 15.1 | 0.29 | % | A- | ||||||
| Exelon |
14.1 | 14.3 | 0.28 | % | BBB- | ||||||
| Deutsche Telecom |
13.9 | 14.8 | 0.29 | % | BBB+ | ||||||
| Lowe’s |
13.6 | 14.7 | 0.28 | % | A+ | ||||||
| Sempra Energy |
13.5 | 14.2 | 0.28 | % | BBB+ | ||||||
| Top 25 Non-Financial |
395.8 | 418.9 | 8.13 | % | |||||||
| Other Non-Financial |
1,334.7 | 1,406.4 | 27.31 | % | |||||||
| Total Non-Financial |
$ | 1,730.5 | $ | 1,825.3 | 35.44 | % | |||||
19
PROPERTY & CASUALTY
STATUTORY RATIOS
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY
STATUTORY UNDERWRITING RATIOS
| Quarter ended December 31, 2009 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
68.1 | % | 49.7 | % | 34.7 | % | 61.5 | % | 67.5 | % | 55.3 | % | 50.2 | % | 40.5 | % | 48.7 | % | N/M | 56.2 | % | |||||||||||
| Catastrophe losses |
0.1 | % | 5.1 | % | 2.0 | % | 1.7 | % | — | — | 1.2 | % | (0.5 | )% | 0.2 | % | N/M | 1.0 | % | |||||||||||||
| Loss development |
(0.2 | )% | (1.6 | )% | 4.1 | % | (0.5 | )% | (41.4 | )% | (5.1 | )% | (14.0 | )% | 2.5 | % | (8.3 | )% | N/M | (4.0 | )% | |||||||||||
| Total losses |
68.0 | % | 53.2 | % | 40.8 | % | 62.7 | % | 26.1 | % | 50.2 | % | 37.4 | % | 42.5 | % | 40.6 | % | N/M | 53.2 | % | |||||||||||
| Loss adjustment expenses (2) |
13.3 | % | 8.0 | % | 5.1 | % | 11.4 | % | 2.2 | % | 6.2 | % | 11.7 | % | 12.3 | % | 10.1 | % | N/M | 10.9 | % | |||||||||||
| Policy acquisition and other underwriting expenses |
29.0 | % | 45.5 | % | N/M | 36.2 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.3 | % | N/M | 0.1 | % | ||||||||||||||||||||||||||
| Combined |
103.1 | % | 96.5 | % | N/M | 100.4 | % | |||||||||||||||||||||||||
| Quarter ended December 31, 2008 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
65.5 | % | 43.9 | % | 28.1 | % | 58.2 | % | 66.0 | % | 56.1 | % | 44.6 | % | 32.5 | % | 45.3 | % | N/M | 52.9 | % | |||||||||||
| Catastrophe losses |
N/M | 8.9 | % | 5.2 | % | 2.7 | % | — | — | (6.2 | )% | 11.1 | % | 1.5 | % | N/M | 2.2 | % | ||||||||||||||
| Loss development |
(2.9 | )% | (4.4 | )% | 7.3 | % | (3.0 | )% | (16.7 | )% | 3.1 | % | (7.7 | )% | (3.4 | )% | (5.4 | )% | N/M | (4.2 | )% | |||||||||||
| Total losses |
62.6 | % | 48.4 | % | 40.6 | % | 57.9 | % | 49.3 | % | 59.2 | % | 30.7 | % | 40.2 | % | 41.4 | % | N/M | 50.9 | % | |||||||||||
| Loss adjustment expenses (2) |
12.0 | % | 9.6 | % | 3.1 | % | 11.1 | % | 10.4 | % | 6.4 | % | 12.0 | % | 10.8 | % | 10.4 | % | N/M | 10.8 | % | |||||||||||
| Policy acquisition and other underwriting expenses |
29.6 | % | 42.7 | % | N/M | 34.7 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.4 | % | N/M | 0.2 | % | ||||||||||||||||||||||||||
| Combined |
98.6 | % | 94.9 | % | N/M | 96.6 | % | |||||||||||||||||||||||||
| (1) | Other Commercial Lines includes inland marine, bonds, professional liability and program business. |
| (2) | Loss adjustment expenses includes unfavorable (favorable) development of $2.2 million and $0.4 million in Personal Lines, $(2.8) million and $(1.0) million in Commercial Lines, and $(0.6) million in Total P&C for the quarters ended December 31, 2009 and 2008, respectively. |
20
THE HANOVER INSURANCE GROUP
PROPERTY AND CASUALTY
STATUTORY UNDERWRITING RATIOS
| Year ended December 31, 2009 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
65.7 | % | 51.6 | % | 35.5 | % | 60.6 | % | 66.7 | % | 53.9 | % | 48.1 | % | 42.6 | % | 48.9 | % | N/M | 55.9 | % | |||||||||||
| Catastrophe losses |
0.4 | % | 14.7 | % | 2.3 | % | 4.8 | % | — | 0.6 | % | 6.5 | % | 1.1 | % | 2.7 | % | N/M | 3.9 | % | ||||||||||||
| Loss development |
(4.6 | )% | 1.4 | % | (3.1 | )% | (2.7 | )% | (24.7 | )% | (3.8 | )% | (7.9 | )% | (4.0 | )% | (7.5 | )% | N/M | (5.2 | )% | |||||||||||
| Total losses |
61.5 | % | 67.7 | % | 34.7 | % | 62.7 | % | 42.0 | % | 50.7 | % | 46.7 | % | 39.7 | % | 44.1 | % | N/M | 54.6 | % | |||||||||||
| Loss adjustment expenses (2) |
12.5 | % | 8.6 | % | 2.8 | % | 11.0 | % | 1.1 | % | 5.7 | % | 11.5 | % | 9.4 | % | 8.6 | % | N/M | 10.0 | % | |||||||||||
| Policy acquisition and other underwriting expenses |
29.3 | % | 41.6 | % | N/M | 34.7 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.1 | % | N/M | 0.1 | % | ||||||||||||||||||||||||||
| Combined |
103.0 | % | 94.4 | % | N/M | 99.4 | % | |||||||||||||||||||||||||
| Year ended December 31, 2008 | ||||||||||||||||||||||||||||||||
| Personal Lines | Commercial Lines | |||||||||||||||||||||||||||||||
| Auto | Home | Other | Total | Workers’ Comp |
Auto | Multiple Peril |
Other(1) | Total | Other P&C |
Total P&C |
||||||||||||||||||||||
| Losses, excluding catastrophe losses and development |
64.7 | % | 47.4 | % | 32.7 | % | 58.8 | % | 65.5 | % | 53.5 | % | 48.1 | % | 36.7 | % | 47.6 | % | N/M | 54.2 | % | |||||||||||
| Catastrophe losses |
0.4 | % | 18.4 | % | 7.4 | % | 5.8 | % | — | 0.3 | % | 16.1 | % | 7.2 | % | 8.2 | % | N/M | 6.8 | % | ||||||||||||
| Loss development |
(5.4 | )% | (1.3 | )% | (3.1 | )% | (4.2 | )% | (22.3 | )% | (4.7 | )% | (9.9 | )% | (5.5 | )% | (9.0 | )% | N/M | (6.2 | )% | |||||||||||
| Total losses |
59.7 | % | 64.5 | % | 37.0 | % | 60.4 | % | 43.2 | % | 49.1 | % | 54.3 | % | 38.4 | % | 46.8 | % | N/M | 54.8 | % | |||||||||||
| Loss adjustment expenses (2) |
12.4 | % | 8.5 | % | 4.3 | % | 11.0 | % | 11.0 | % | 8.1 | % | 11.2 | % | 8.8 | % | 9.8 | % | N/M | 10.6 | % | |||||||||||
| Policy acquisition and other underwriting expenses |
28.7 | % | 39.3 | % | N/M | 33.1 | % | |||||||||||||||||||||||||
| Policyholders’ dividends |
— | 0.2 | % | N/M | 0.1 | % | ||||||||||||||||||||||||||
| Combined |
100.1 | % | 96.1 | % | N/M | 98.6 | % | |||||||||||||||||||||||||
| (1) | Other Commercial Lines includes inland marine, bonds, professional liability and program business. |
| (2) | Loss adjustment expenses include unfavorable (favorable) development of $0.7 million and $2.6 million in Personal Lines, $(22.9) million and $(7.2) million in Commercial Lines, and $(22.2) million and $(4.6) million in Total P&C for the years ended December 31, 2009 and 2008, respectively. |
21
Historical Highlights
THE HANOVER INSURANCE GROUP
HISTORICAL FINANCIAL HIGHLIGHTS
| (In millions, except per share data) |
2009 | Q4 09 | Q3 09 | Q2 09 | Q1 09 | 2008 | Q4 08 | Q3 08 | Q2 08 | Q1 08 | ||||||||||||||||||||||||||||||
| SEGMENT INCOME (1) |
||||||||||||||||||||||||||||||||||||||||
| Property and Casualty |
||||||||||||||||||||||||||||||||||||||||
| Personal Lines |
$ | 76.4 | $ | 20.3 | $ | 27.4 | $ | 25.6 | $ | 3.1 | $ | 123.5 | $ | 39.7 | $ | 18.1 | $ | 38.6 | $ | 27.1 | ||||||||||||||||||||
| Commercial Lines |
189.7 | 52.5 | 38.7 | 50.9 | 47.6 | 169.7 | 55.6 | (6.6 | ) | 52.7 | 68.0 | |||||||||||||||||||||||||||||
| Other Property and Casualty |
4.0 | (2.5 | ) | 7.5 | (0.2 | ) | (0.8 | ) | 9.0 | 2.2 | 2.3 | 2.9 | 1.3 | |||||||||||||||||||||||||||
| Total Property and Casualty |
270.1 | 70.3 | 73.6 | 76.3 | 49.9 | 302.2 | 97.5 | 13.8 | 94.2 | 96.4 | ||||||||||||||||||||||||||||||
| Interest expense on corporate debt |
(35.1 | ) | (7.9 | ) | (6.3 | ) | (10.5 | ) | (10.4 | ) | (39.9 | ) | (10.0 | ) | (10.0 | ) | (9.9 | ) | (10.0 | ) | ||||||||||||||||||||
| Total segment income before federal income taxes |
$ | 235.0 | $ | 62.4 | $ | 67.3 | $ | 65.8 | $ | 39.5 | $ | 262.3 | $ | 87.5 | $ | 3.8 | $ | 84.3 | $ | 86.4 | ||||||||||||||||||||
| Federal income tax expense on segment income |
(77.5 | ) | (20.6 | ) | (22.0 | ) | (21.8 | ) | (13.1 | ) | (86.3 | ) | (27.9 | ) | (0.5 | ) | (28.8 | ) | (29.1 | ) | ||||||||||||||||||||
| Total segment income after federal income taxes |
$ | 157.5 | $ | 41.8 | $ | 45.3 | $ | 44.0 | $ | 26.4 | $ | 176.0 | $ | 59.6 | $ | 3.3 | $ | 55.5 | $ | 57.3 | ||||||||||||||||||||
| Federal income tax settlement |
— | — | — | — | — | 6.4 | — | 6.4 | — | — | ||||||||||||||||||||||||||||||
| Net realized investment gains (losses) |
1.4 | 11.1 | — | (3.6 | ) | (6.1 | ) | (97.8 | ) | (37.1 | ) | (52.8 | ) | (7.6 | ) | (0.3 | ) | |||||||||||||||||||||||
| Gain from retirement of corporate debt |
34.5 | — | 0.2 | 34.3 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Other non-segment items |
— | — | — | 0.1 | (0.1 | ) | (0.1 | ) | (0.1 | ) | — | — | — | |||||||||||||||||||||||||||
| Federal income tax (expense) benefit on non-segment income |
(5.6 | ) | 3.0 | 3.1 | (11.7 | ) | — | — | 0.4 | (0.4 | ) | — | — | |||||||||||||||||||||||||||
| Income (loss) from continuing operations |
187.8 | 55.9 | 48.6 | 63.1 | 20.2 | 84.5 | 22.8 | (43.5 | ) | 47.9 | 57.0 | |||||||||||||||||||||||||||||
| Discontinued operations (net of taxes): |
||||||||||||||||||||||||||||||||||||||||
| Gain (loss) from discontinued FAFLIC business |
7.1 | 0.8 | 0.4 | 0.9 | 5.0 | (84.8 | ) | 8.1 | (21.7 | ) | (67.7 | ) | (3.5 | ) | ||||||||||||||||||||||||||
| (Loss) gain from discontinued accident and health business |
(2.6 | ) | (0.2 | ) | 0.7 | 0.2 | (3.3 | ) | — | — | — | — | — | |||||||||||||||||||||||||||
| Gain from operations of AMGRO |
— | — | — | — | — | 10.1 | — | — | 10.4 | — | ||||||||||||||||||||||||||||||
| Gain (loss) on disposal of discontinued variable life and annuity business |
4.9 | 0.8 | — | 0.2 | 3.9 | 11.3 | 3.2 | 2.7 | (0.8 | ) | 6.2 | |||||||||||||||||||||||||||||
| Other |
— | — | — | — | — | (0.5 | ) | — | 0.7 | — | (1.2 | ) | ||||||||||||||||||||||||||||
| NET INCOME (LOSS) |
$ | 197.2 | $ | 57.3 | $ | 49.7 | $ | 64.4 | $ | 25.8 | $ | 20.6 | $ | 34.1 | $ | (61.8 | ) | $ | (10.2 | ) | $ | 58.5 | ||||||||||||||||||
| PER SHARE DATA (DILUTED) |
||||||||||||||||||||||||||||||||||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS |
$ | 3.68 | $ | 1.11 | $ | 0.95 | $ | 1.23 | $ | 0.39 | $ | 1.63 | $ | 0.44 | $ | (0.85 | ) | $ | 0.92 | $ | 1.09 | |||||||||||||||||||
| INCOME (LOSS) FROM DISCONTINUED OPERATIONS |
$ | 0.18 | $ | 0.03 | $ | 0.02 | $ | 0.02 | $ | 0.11 | $ | (1.23 | ) | $ | 0.22 | $ | (0.36 | ) | $ | (1.12 | ) | $ | 0.03 | |||||||||||||||||
| NET INCOME (LOSS) |
$ | 3.86 | $ | 1.14 | $ | 0.97 | $ | 1.25 | $ | 0.50 | $ | 0.40 | $ | 0.66 | $ | (1.21 | ) | $ | (0.20 | ) | $ | 1.12 | ||||||||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) (2) |
51.1 | 50.2 | 51.2 | 51.4 | 51.4 | 51.7 | 51.4 | 51.0 | 51.8 | 52.3 | ||||||||||||||||||||||||||||||
| BALANCE SHEET |
||||||||||||||||||||||||||||||||||||||||
| Total assets |
$ | 8,042.7 | $ | 8,088.6 | $ | 7,747.7 | $ | 7,698.1 | $ | 9,230.2 | $ | 9,254.8 | $ | 9,463.8 | $ | 9,700.6 | ||||||||||||||||||||||||
| Total shareholders’ equity |
$ | 2,358.6 | $ | 2,407.1 | $ | 2,221.1 | $ | 1,967.6 | $ | 1,887.2 | $ | 2,040.1 | $ | 2,212.7 | $ | 2,320.7 | ||||||||||||||||||||||||
| Book value per share |
$ | 49.72 | $ | 48.06 | $ | 43.75 | $ | 38.62 | $ | 37.08 | $ | 40.09 | $ | 43.57 | $ | 45.23 | ||||||||||||||||||||||||
| Book value per share, excluding accumulated other comprehensive income (loss) |
$ | 49.11 | $ | 48.28 | $ | 47.15 | $ | 45.16 | $ | 44.64 | $ | 44.37 | $ | 45.55 | $ | 45.70 | ||||||||||||||||||||||||
| (1) | Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty and interest expense on corporate debt. In accordance with generally accepted accounting principles, the separate financial information of each segment is presented consistent with the manner in which results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. |
| (2) | Weighted average shares outstanding for the quarter ended September 30, 2008 represents basic shares outstanding due to antidilution. |
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THE HANOVER INSURANCE GROUP
HISTORICAL FINANCIAL HIGHLIGHTS
| (In millions, except per share data) |
2007 | Q4 07 | Q3 07 | Q2 07 | Q1 07 | |||||||||||||||
| SEGMENT INCOME (1) |
||||||||||||||||||||
| Property and Casualty |
||||||||||||||||||||
| Personal Lines |
$ | 208.2 | $ | 57.8 | $ | 48.8 | $ | 55.0 | $ | 46.6 | ||||||||||
| Commercial Lines |
169.3 | 42.6 | 39.2 | 38.9 | 48.6 | |||||||||||||||
| Other Property and Casualty |
4.8 | (2.4 | ) | 0.3 | 2.5 | 4.4 | ||||||||||||||
| Total Property and Casualty |
382.3 | 98.0 | 88.3 | 96.4 | 99.6 | |||||||||||||||
| Interest expense on corporate debt |
(39.9 | ) | (10.0 | ) | (10.0 | ) | (9.9 | ) | (10.0 | ) | ||||||||||
| Total segment income before federal income taxes |
$ | 342.4 | $ | 88.0 | $ | 78.3 | $ | 86.5 | $ | 89.6 | ||||||||||
| Federal income tax expense on segment income |
(113.7 | ) | (27.2 | ) | (26.6 | ) | (29.8 | ) | (30.1 | ) | ||||||||||
| Total segment income after federal income taxes |
$ | 228.7 | $ | 60.8 | $ | 51.7 | $ | 56.7 | $ | 59.5 | ||||||||||
| Net realized investment (losses) gains |
(0.9 | ) | (0.6 | ) | (0.8 | ) | 0.2 | 0.3 | ||||||||||||
| Federal income tax benefit (expense) on non-segment income |
0.5 | 0.1 | 0.6 | (0.1 | ) | (0.1 | ) | |||||||||||||
| Income from continuing operations |
228.3 | 60.3 | 51.5 | 56.8 | 59.7 | |||||||||||||||
| Discontinued operations (net of taxes): |
||||||||||||||||||||
| Income from discontinued FAFLIC business |
10.9 | 2.6 | 1.5 | 2.7 | 4.1 | |||||||||||||||
| Gain (loss) on disposal of discontinued variable life and annuity business |
13.1 | 12.9 | 0.1 | 0.3 | (0.2 | ) | ||||||||||||||
| Other |
0.8 | — | 0.8 | — | — | |||||||||||||||
| NET INCOME |
$ | 253.1 | $ | 75.8 | $ | 53.9 | $ | 59.8 | $ | 63.6 | ||||||||||
| PER SHARE DATA (DILUTED) |
||||||||||||||||||||
| INCOME FROM CONTINUING OPERATIONS |
$ | 4.36 | $ | 1.15 | $ | 0.98 | $ | 1.09 | $ | 1.15 | ||||||||||
| INCOME FROM DISCONTINUED OPERATIONS |
$ | 0.47 | $ | 0.29 | $ | 0.05 | $ | 0.05 | $ | 0.07 | ||||||||||
| NET INCOME |
$ | 4.83 | $ | 1.44 | $ | 1.03 | $ | 1.14 | $ | 1.22 | ||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) |
52.4 | 52.6 | 52.5 | 52.3 | 51.9 | |||||||||||||||
| BALANCE SHEET |
||||||||||||||||||||
| Total assets |
$ | 9,815.6 | $ | 9,845.2 | $ | 9,805.7 | $ | 9,776.2 | ||||||||||||
| Total shareholders’ equity |
$ | 2,299.0 | $ | 2,192.6 | $ | 2,099.4 | $ | 2,100.7 | ||||||||||||
| Book value per share |
$ | 44.37 | $ | 42.34 | $ | 40.55 | $ | 40.92 | ||||||||||||
| Book value per share, excluding accumulated other comprehensive (loss) income |
$ | 44.77 | $ | 43.62 | $ | 42.51 | $ | 41.33 | ||||||||||||
| (1) | Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty and interest expense on corporate debt. In accordance with generally accepted accounting principles, the separate financial information of each segment is presented consistent with the manner in which results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. |
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Other Information
CORPORATE OFFICES AND
PRINCIPAL SUBSIDIARIES
THE HANOVER INSURANCE GROUP, INC.
440 Lincoln Street
Worcester, MA 01653
The Hanover Insurance Company
440 Lincoln Street
Worcester, MA 01653
Citizens Insurance Company of America
645 West Grand River
Howell, MI 48843
MARKET AND DIVIDEND INFORMATION
The following information shows trading activity for the Company for the periods indicated:
| Quarter Ended |
2009 | ||||||||
| Price Range | Dividends Per Share | ||||||||
| High | Low | ||||||||
| March 31 |
$ | 43.37 | $ | 28.49 | — | ||||
| June 30 |
$ | 38.11 | $ | 29.19 | — | ||||
| September 30 |
$ | 42.82 | $ | 37.23 | — | ||||
| December 31 |
$ | 45.23 | $ | 40.67 | $ | 0.75 | |||
| Quarter Ended |
2008 | ||||||||
| Price Range | Dividends Per Share | ||||||||
| High | Low | ||||||||
| March 31 |
$ | 47.17 | $ | 40.14 | — | ||||
| June 30 |
$ | 46.83 | $ | 41.71 | — | ||||
| September 30 |
$ | 51.00 | $ | 38.01 | — | ||||
| December 31 |
$ | 45.00 | $ | 31.92 | $ | 0.45 | |||
INDUSTRY RATINGS AS OF FEBRUARY 3, 2010
| Financial Strength Ratings |
A.M. Best |
Standard & Poor’s |
Moody’s | Fitch | ||||
| Property and Casualty Insurance Companies: |
||||||||
| The Hanover Insurance Company |
A | A- | A3 | A- | ||||
| Citizens Insurance Company of America |
A | A- | - | A- | ||||
| Debt Ratings |
A.M. Best |
Standard & Poor’s |
Moody’s | Fitch | ||||
| The Hanover Insurance Group, Inc. |
||||||||
| Senior Debt |
bbb | BBB- | Baa3 | BBB- | ||||
| The Hanover Insurance Group, Inc. |
||||||||
| Junior Subordinated Debentures |
bb+ | BB- | Ba1 | BB | ||||
TRANSFER AGENT
Computershare Limited
PO Box 43076
Providence, RI 02940-3076
1-800-317-4454
COMMON STOCK
Common stock of The Hanover Insurance Group is traded on the New York Stock Exchange under the symbol “THG”.
INQUIRIES
Oksana Lukasheva
Assistant Vice President
Investor Relations
(508) 855-2063
olukasheva@hanover.com
INVESTOR INFORMATION LINE
Dial 1-800-407-5222 to receive additional printed information, fax-on-demand services or other prerecorded messages.
Please visit our internet site at http:// www.Hanover.com
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