HANOVER INSURANCE GROUP INC

Taxes

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

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

The provision for income taxes from continuing operations was an expense of $27.6 million compared to a benefit of $9.1 million for the three months ended September 30, 2024 and 2023, respectively. The expense in 2024 resulted in a consolidated effective tax rate of 21.3% on pre-tax income for the three months ended September 30, 2024. The benefit from 2023 resulted in a consolidated effective tax rate that was not meaningful for the three months ended September 30, 2023. The provision for 2024 includes excess tax benefits related to stock-based compensation and benefits related to tax planning strategies implemented in prior years of $0.4 million and $0.6 million, respectively. Absent these items, the provision for income taxes would have been an expense of $28.6 million, or 22.1%, for the three months ended September 30, 2024. The tax benefit of $9.1 million, for the three months ended September 30, 2023, was the result of applying a higher year-to-date tax rate, due to lower year-to-date underwriting income, to a $0.9 million pre-tax loss.

The income tax provision on operating results was an expense of $30.8 million compared to a benefit of $1.6 million for the three months ended September 30, 2024 and 2023, respectively. These provisions resulted in effective tax rates on operating income of 21.7% and 30.8% for the three months ended September 30, 2024 and 2023, respectively. The 2024 provision reflects the aforementioned excess tax benefits related to stock-based compensation of $0.4 million. Absent this item, the provision for income taxes would have been an expense of $31.2 million, or 22.0%, for the three months ended September 30, 2024.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

The provision for income taxes from continuing operations was an expense of $68.3 million compared to a benefit of $35.3 million for the nine months ended September 30, 2024 and 2023, respectively. These provisions resulted in consolidated effective federal tax rates of 20.9% and 32.4% for the nine months ended September 30, 2024 and 2023, respectively. These provisions include excess tax benefits related to stock-based compensation of $1.6 million and $1.0 million for the nine months ended September 30, 2024 and 2023, respectively. In addition, these provisions reflect benefits related to tax planning strategies implemented in prior years of $1.2 million in each of the nine months ended September 30, 2024 and 2023. Absent these items, the provision for income taxes would have been an expense of $71.1 million, or 21.8%, and a benefit of $33.1 million, or 30.3%, for the nine months ended September 30, 2024 and 2023, respectively. The lower effective federal tax rate in 2024 was due to higher underwriting income in the current period.

The income tax provision on operating results was an expense of $78.8 million compared to a benefit of $21.2 million for the nine months ended September 30, 2024 and 2023, respectively. These provisions resulted in an effective tax rate on operating income of 21.3% for the nine months ended September 30, 2024 and an effective tax rate on operating losses of 27.1% for the nine months ended September 30, 2023. These provisions include excess tax benefits related to stock-based compensation of $1.6 million and $1.0 million for the nine months ended September 30, 2024 and 2023, respectively. Absent this item, the provisions for income taxes would have been an expense of $80.4 million, or 21.7%, and a benefit of $20.2 million, or 25.9%, for the nine months ended September 30, 2024 and 2023, respectively.