HANOVER INSURANCE GROUP, INC.

The following is our discussion and analysis of the results of operations by reporting segment. The operating results are presented before interest expense, income taxes and other items which management believes are not indicative of our core operations, including realized gains and losses, as well as unrealized gains and losses on equity securities, and the results of discontinued operations.

The following table summarizes the results of operations for our combined reporting segments for the periods indicated:

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

Operating income before interest expense and income taxes was $251.9 million for the three months ended June 30, 2026, compared to $209.9 million for the three months ended June 30, 2025, an improvement of $42.0 million. This increase was primarily due to lower catastrophe losses, higher net investment income and improvements in current accident year underwriting results, driven by Personal Lines.

Net premiums written increased $73.0 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The increase in net premiums written was due to an increase in new business volume and the impact of renewal price increases.

Premium Production and Underwriting Results

The following tables summarize premiums written on a gross and net basis, net premiums earned and, catastrophe loss, loss and LAE (including catastrophe losses), expense, and combined ratios for our Core Commercial, Specialty and Personal Lines segments. Loss and LAE, catastrophe loss and combined ratios shown below include prior year reserve development. These items are not meaningful for our Other segment.

The following table summarizes U.S. GAAP underwriting results for our Core Commercial, Specialty, Personal Lines and Other segments and reconciles them to operating income before interest expense and income taxes.

Core Commercial net premiums written were $574.8 million for the three months ended June 30, 2026, compared to $536.0 million for the three months ended June 30, 2025. The $38.8 million increase in net premiums written was primarily driven by renewal price increases and, to a lesser extent, an increase in new business volume.

Core Commercial underwriting profit for the three months ended June 30, 2026 was $23.2 million, compared to $37.2 million for the three months ended June 30, 2025, a decrease of $14.0 million. Catastrophe losses for the three months ended June 30, 2026 were $26.4 million, compared to $22.7 million for the three months ended June 30, 2025, an increase of $3.7 million.

Core Commercial current accident year underwriting profit, excluding catastrophes, was $49.0 million for the three months ended June 30, 2026, compared to $56.9 million for the three months ended June 30, 2025. This $7.9 million decrease was due to higher current accident year losses in workers’ compensation and commercial multiple peril lines of business, partially offset by lower current accident year losses in the commercial automobile line.

We continue to manage underwriting performance through rate actions, risk selection and mitigation, pricing segmentation, specific underwriting actions and targeted new business growth. Our ability to achieve overall rate increases is affected by many factors, including regulatory activity and the competitive pricing environment, particularly within the workers’ compensation line.

Specialty net premiums written were $384.4 million for the three months ended June 30, 2026, compared to $368.2 million for the three months ended June 30, 2025. The $16.2 million increase in net premiums written was primarily due to an increase in new business volume and, to a lesser extent, renewal price increases.

Specialty underwriting profit for the three months ended June 30, 2026 was $42.2 million, compared to $47.8 million for the three months ended June 30, 2025, a decrease of $5.6 million. Catastrophe losses for the three months ended June 30, 2026 were $10.0 million, compared to $14.6 million for the three months ended June 30, 2025, a decrease of $4.6 million.

Specialty current accident year underwriting profit, excluding catastrophes, was $41.4 million for the three months ended June 30, 2026, compared to $49.9 million for the three months ended June 30, 2025. This $8.5 million decrease was primarily driven by higher current accident year losses in our Marine & Industrial Property division, partially offset by lower current accident year losses in our E&S and Alternative Markets division.

We continue to manage underwriting performance through rate actions, risk selection and mitigation, pricing segmentation, specific underwriting actions and targeted new business growth. Our ability to achieve overall rate increases is affected by many factors, including regulatory activity and the competitive pricing environment.

Personal Lines net premiums written were $697.6 million for the three months ended June 30, 2026, compared to $679.6 million for the three months ended June 30, 2025. The $18.0 million increase in net premiums written was primarily due to higher new business and, to a lesser extent, the impact of renewal price increases.

Net premiums written in the personal automobile line of business were $390.7 million for the three months ended June 30, 2026, compared to $389.3 million for the three months ended June 30, 2025, an increase of $1.4 million. Personal automobile PIF decreased by 1.5% since June 30, 2025. Net premiums written in the homeowners and other lines of business for the three months ended June 30, 2026 were $306.9 million, compared to $290.3 million for the three months ended June 30, 2025, an increase of $16.6 million. Homeowners PIF decreased by 1.6% since June 30, 2025.

Personal Lines underwriting profit for the three months ended June 30, 2026 was $69.4 million, compared to $25.2 million for the three months ended June 30, 2025, an increase of $44.2 million. Catastrophe losses for the three months ended June 30, 2026 were $55.4 million, compared to $70.2 million for the three months ended June 30, 2025, a decrease of $14.8 million. Net favorable development on prior years’ loss reserves for the three months ended June 30, 2026 was $10.1 million, compared to $2.6 million for the three months ended June 30, 2025, an increase of $7.5 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $114.7 million for the three months ended June 30, 2026, compared to $92.8 million for the three months ended June 30, 2025. This $21.9 million increase was primarily due to lower current accident year losses in our homeowners and other personal lines and, to a lesser extent, our personal automobile line.

We obtained renewal pricing increases of approximately 11% in our homeowners line and approximately 7% in our personal automobile line during the second quarter of 2026. Consistent with our expectations, PIF was down slightly compared to the end of 2025, and declined as compared to the first six months of 2025, driven by lower policies available to renew year over year from prior margin recapture actions taken. Additionally, our Personal Lines net premiums written may be affected by price competition and the regulatory and overall macroeconomic environment. These factors may also affect our ability to maintain and improve underwriting results.

Other

Our Other segment had operating profit of $1.1 million for the three months ended June 30, 2026, compared to an operating loss of $2.6 million for the three months ended June 30, 2025, an increase of $3.7 million, due to lower expenses.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

Operating income before interest expense and income taxes was $502.1 million for the six months ended June 30, 2026, compared to $396.3 million for the six months ended June 30, 2025, an improvement of $105.8 million. This increase was primarily due to improvements in current accident year losses, principally in Personal Lines, higher net investment income, earned premium growth and lower catastrophe losses.

Net premiums written increased $121.9 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase in net premiums written was due to renewal price increases and an increase in new business volume.

Premium Production and Underwriting Results

The following tables summarize premiums written on a gross and net basis, net premiums earned and, catastrophe loss, loss and LAE (including catastrophe losses), expense, and combined ratios for our Core Commercial, Specialty and Personal Lines segments. Loss and LAE, catastrophe loss and combined ratios shown below include prior year reserve development. These items are not meaningful for our Other segment.

The following table summarizes U.S. GAAP underwriting results for our Core Commercial, Specialty, Personal Lines and Other segments and reconciles them to operating income before interest expense and income taxes.

Core Commercial net premiums written were $1,205.2 million for the six months ended June 30, 2026, compared to $1,140.6 million for the six months ended June 30, 2025. The $64.6 million increase in net premiums written was primarily driven by renewal price increases and, to a lesser extent, an increase in new business.

Core Commercial underwriting profit for the six months ended June 30, 2026 was $41.0 million, compared to $17.2 million for the six months ended June 30, 2025, an increase of $23.8 million. Catastrophe losses for the six months ended June 30, 2026 were $56.8 million, compared to $68.7 million for the six months ended June 30, 2025, a decrease of $11.9 million.

Core Commercial current accident year underwriting profit, excluding catastrophes, was $95.6 million for the six months ended June 30, 2026, compared to $81.6 million for the six months ended June 30, 2025. This $14.0 million increase was primarily driven by earned premium growth and lower current accident year losses. Within current accident year losses, lower large property losses in our commercial multiple peril line were partially offset by higher losses in our workers’ compensation line of business.

Specialty net premiums written were $751.1 million for the six months ended June 30, 2026, compared to $726.5 million for the six months ended June 30, 2025. The $24.6 million increase in net premiums written was primarily due to an increase in new business volume and renewal price increases.

Specialty underwriting profit for the six months ended June 30, 2026 was $98.3 million, compared to $89.0 million for the six months ended June 30, 2025, an increase of $9.3 million. Catastrophe losses for the six months ended June 30, 2026 were $19.6 million, compared to $29.3 million for the six months ended June 30, 2025, a decrease of $9.7 million.

Specialty current accident year underwriting profit, excluding catastrophes, was $92.9 million for the six months ended June 30, 2026, compared to $89.9 million for the six months ended June 30, 2025. This $3.0 million increase was primarily driven by earned premium growth partially offset by higher current accident year losses. Within current accident year losses, higher losses in our Marine and Industrial Property division were partially offset by lower losses in our E&S and Alternative Markets division.

Personal Lines net premiums written were $1,260.2 million for the six months ended June 30, 2026, compared to $1,227.5 million for the six months ended June 30, 2025. The $32.7 million increase in net premiums written was primarily due to higher new business and, to a lesser extent, the impact of renewal price increases.

Personal Lines underwriting profit for the six months ended June 30, 2026 was $121.7 million, compared to $86.9 million for the six months ended June 30, 2025, an increase of $34.8 million. Catastrophe losses for the six months ended June 30, 2026 were $114.3 million, compared to $105.1 million for the six months ended June 30, 2025, an increase of $9.2 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $216.7 million for the six months ended June 30, 2026, compared to $186.6 million for the six months ended June 30, 2025. This $30.1 million increase was primarily due to lower current accident year losses in our homeowners and other personal lines and, to a lesser extent, our personal automobile line, partially offset by higher performance-based agency compensation expenses.

Other

Our Other segment had operating profit of $3.3 million for the six months ended June 30, 2026, compared to operating loss of $1.8 million for the six months ended June 30, 2025, a favorable change of $5.1 million, due to lower expenses and higher net investment income.

Reserve for Losses and Loss Adjustment Expenses

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

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

Loss and LAE reserves in our “Other core commercial” lines include monoline general liability, commercial umbrella, and monoline property. “Marine and Industrial Property” division includes marine and specialty industrial and commercial property coverages. “Professional and Executive Lines” division includes management liability, fidelity and crime, professional liability and other property and liability lines for healthcare firms. “E&S and Alternative Markets” division includes excess and surplus lines, program business, and specialty general liability coverages. “Surety and Other” includes contract and commercial surety coverages. Loss and LAE reserves in our “Total Other” segment relate to run-off direct asbestos and environmental, run-off voluntary assumed property and casualty reinsurance pools, and run-off product liability business.

The following table summarizes prior year (favorable) unfavorable development by segment:

It is not possible to know whether the factors that affected loss reserves in the first six months of 2026 will also occur in future periods. We encourage you to read our 2025 Annual Report on Form 10-K for more information about our reserving process and the judgments, uncertainties and risks associated therewith.

Catastrophe Loss Development

For the six months ended June 30, 2026, favorable catastrophe loss development was $61.7 million, primarily due to lower than expected losses related to several convective storms across multiple states from accident year 2025, and to a lesser extent, accident year 2024, impacting our commercial multiple peril line in Core Commercial and our homeowners line in Personal Lines. In 2025, favorable catastrophe development was $18.0 million, primarily due to lower than expected losses related to events from accident year 2023, and to a lesser extent, accident year 2024, including several convective storms across multiple states and Winter Storm Elliot.

2026 Loss and LAE Development, excluding catastrophes

For the six months ended June 30, 2026, net favorable loss and LAE development, excluding catastrophes, was $46.5 million. Specialty favorable loss and LAE development of $25.0 million was primarily due to lower than expected losses in our E&S and Alternative Markets, Marine & Industrial Property, and Surety and Other Specialty Lines divisions. Personal Lines favorable loss and LAE development of $19.3 million was primarily due to lower than expected losses in our homeowners property coverages.

2025 Loss and LAE Development, excluding catastrophes

For the six months ended June 30, 2025, net favorable loss and LAE development, excluding catastrophes, was $38.2 million. Specialty favorable loss and LAE development of $28.4 million was primarily due to lower than expected losses in our Professional and Executive Lines and Marine & Industrial Property divisions. Within Personal Lines, lower than expected losses of $5.4 million were driven primarily by homeowners coverages. Core Commercial favorable loss and LAE development of $4.3 million was primarily due to favorable development in the workers’ compensation and commercial multiple peril lines, partially offset by unfavorable development in the commercial automobile line.

Asbestos and Environmental Reserves

As of June 30, 2026, we had $11.2 million of net asbestos and environmental reserves, comprised of $9.5 million of direct reserves and $1.7 million of assumed reinsurance pool reserves. This compares to net reserves of $10.5 million at December 31, 2025, comprised of $8.3 million of direct reserves and $2.2 million of assumed reinsurance pool reserves. These assumed reinsurance pool reserves relate to pools in which we have terminated our participation, however, we continue to be subject to claims related to years in which we were a participant. Results of operations from these pools are included in our Other segment.

Reinsurance

We discuss our reinsurance coverage in the Reinsurance section of Part I – Item 1 – Business of our 2025 Annual Report on Form 10-K. Except as discussed below, there have been no material changes to our reinsurance coverage from that reported in our 2025 Annual Report on Form 10-K.

2026 Reinsurance Program

For the first half of 2026, the property per risk excess of loss treaty provided coverage, on a per risk basis, up to $100 million, less a $3 million retention, with a co-participation for the second half of 2025 and the first half of 2026 of 45.75% for reinsurance placed in the $3 million to $5 million layer, 13.75% for reinsurance in the $5 million to $12.5 million layer, and no co-participation for reinsurance layers placed between $12.5 million and $100 million. Effective July 1, 2026, the property per risk excess of loss treaty expanded to provide coverage, on a per risk basis, up to $125 million while maintaining a $3 million retention. Co-participation declined to 39% for reinsurance placed in the $3 million to $5 million layer and to 9.5% for reinsurance in the $5 million to $12.5 million layer, and no co-participation for reinsurance layers placed between $12.5 million and $125 million.

For the first half of 2026, the core property catastrophe occurrence excess of loss reinsurance program provided coverage up to $1.9 billion, less a $200 million retention, with no co-participation. Additionally, coverage extended to $2.05 billion for Northeast named storm events, less a $200 million retention, with no co-participation. Effective July 1, 2026, this treaty expanded to provide coverage up to $2.05 billion, less a $200 million retention, with no co-participation across the program. A portion of the coverage is secured through reinsurance agreements supported by catastrophe bonds, as described in further detail below.

Catastrophe Bonds

We updated our catastrophe protection for all fifty states of the U.S. and the District of Columbia through an additional per occurrence excess of loss reinsurance agreement (the “2026 Agreement”) with Commonwealth Re Ltd. (“Commonwealth Re”), an independent company, licensed as a Special Purpose Insurer in Bermuda, providing coverage effective July 1, 2026. The 2026 Agreement qualifies for reinsurance accounting under applicable accounting guidance for reinsurance contracts. In connection with the 2026 Agreement, Commonwealth Re issued notes (generally referred to as “catastrophe bonds”) to unrelated investors. The proceeds of the notes have been deposited in a reinsurance trust account.

The 2026 Agreement provides us with coverage of up to $150.0 million for covered events through June 30, 2029. For a covered event, we are entitled to begin recovering amounts when covered losses in the covered area for a single occurrence reach the applicable attachment point, which is initially $1.1 billion. The $150.0 million coverage amount is available for 100% of the covered losses, until such losses reach a maximum level of $1.25 billion. The attachment level, the maximum level (or exhaustion level) and percentage of coverage under this agreement may be reset annually to adjust the expected loss of the layer within a predetermined range. The 2026 Agreement inures to the benefit of the reinsurance agreement with Commonwealth Re, which provided coverage effective July 1, 2025 (“2025 Agreement”). As such, coverage under the 2026 Agreement will apply first, and coverage under the 2025 Agreement is available once the 2026 Agreement is exhausted.

A reinsurance agreement with Commonwealth Re effective July 1, 2023 expired on June 30, 2026 without any losses incurred under the agreement.

See the “Reinsurance – Catastrophe Bonds” section of “Part I – Item 1 – Business” in our 2025 Annual Report on Form 10-K for more details, including a discussion of the structure of and accounting for Commonwealth Re.

Reinsurance Recoverables

Reinsurance recoverables were $2,078.9 million and $2,011.1 million at June 30, 2026 and December 31, 2025, respectively, of which $83.0 million and $62.6 million, respectively, represent billable recoverables. A reinsurance recoverable is billable after an eligible reinsured claim is paid by an insurer. Billable reinsurance recoverables related to the Michigan Catastrophic Claims Association (the “MCCA”) were $33.9 million and $30.5 million at June 30, 2026 and December 31, 2025, respectively, and billable non-MCCA reinsurance recoverables totaled $49.1 million and $32.1 million at June 30, 2026 and December 31, 2025, respectively. Billed balances outstanding greater than 90 days at June 30, 2026 and December 31, 2025 were not material.