HANOVER INSURANCE GROUP INC

We file a consolidated U.S. federal income tax return that includes our holding company and its domestic subsidiaries (including non-insurance operations).

The provision for income taxes from continuing operations was an expense of $7.6 million and $27.2 million in 2023 and 2022, respectively. These amounts resulted in consolidated effective tax rates of 18.5% and 18.9% on pre-tax income for 2023 and 2022, respectively. The provisions in 2023 and 2022 reflect benefits related to tax planning strategies implemented in prior years of $1.3 million and $1.4 million, respectively. The provisions in 2023 and 2022 also included excess tax benefits related to stock-based compensation of $1.1 million and $3.2 million, respectively. In addition, the provision for 2023 includes a benefit related to the release of prior years’ uncertain tax position of $0.9 million. Absent these items, the provision for income taxes for 2023 and 2022 would have been expenses of $10.9 million, or 26.5%, and $31.8 million, or 22.1%, respectively. The higher effective tax rate in 2023 is primarily due to lower income from continuing operations in the current year.

The income tax provision on operating income was an expense of $15.3 million and $51.1 million for 2023 and 2022, respectively. These provisions resulted in effective tax rates for operating income of 21.4% and 20.4%, respectively. The provisions for 2023 and 2022 reflect the aforementioned excess tax benefits related to stock-based compensation. The 2023 provision also reflects the benefit related to the release of prior years’ uncertain tax position. Absent these items, the provision for income taxes for 2023 and 2022 would have been expenses of $17.3 million, or 24.2%, and $54.3 million, or 21.6%, respectively. The higher effective tax rate in 2023 is primarily due to lower operating income in the current year.

During 2023 we recorded a decrease in reserves related to uncertain tax positions, due to the expiration of certain statutes of limitations. The reserve release of $0.9 million was recorded as a benefit in continuing operations. We are subject to U.S. federal and state examinations and foreign examinations for years after 2019. The audit of our 2019 Illinois business income tax was settled in June 2023 and the audit of our Massachusetts corporate excise tax years 2017 and 2018 was settled in October 2022.