HANOVER INSURANCE GROUP, INC.

Previous wording

During the nine months ended September 30, 2024, our net income was $258.1 million, compared to a net loss of $72.6 million for the nine months ended September 30, 2023, an improvement of $330.7 million. This favorable change was primarily due to higher after-tax operating income.

Current wording

During the three months ended March 31, 2025, our net income was $128.2 million, compared to $115.5 million for the three months ended March 31, 2024, an improvement of $12.7 million. This favorable change was primarily due to higher after-tax operating income, partially offset by after-tax net realized losses from investments.

Previous wording

Core Commercial includes two businesses, small commercial and middle market, both of which focus on account business, including coverage for commercial multiple peril, commercial automobile, workers’ compensation and other (monoline general liability, ancillary professional, commercial umbrella, and monoline property). Small commercial focuses on small businesses, with annual policy premiums generally up to $50,000. Middle market provides coverage to mid-sized businesses with annual policy premiums generally between $50,000 and $500,000. Middle market offers coverage in distinct industry segments, including technology, manufacturing, human services, retail, and real estate, among others. We believe that our account-focused approach to the small commercial market and distinctiveness in the middle market, including our diversified portfolio of products, delivers significant value to agents and policyholders. We continue to pursue our core strategy of developing strong relationships with retail agents, enhancing franchise value through selective distribution, distinctive products and coverages, and through continued investment in products for additional industry segmentation.

Current wording

Core Commercial includes two businesses, small commercial and middle market, both of which focus on account business, including coverage for commercial multiple peril, commercial automobile, workers’ compensation and other (commercial umbrella, monoline general liability, claims-made liability, and monoline property). Small commercial focuses on small businesses, with annual policy premiums generally up to $50,000. Middle market provides coverage to mid-sized businesses with annual policy premiums generally between $50,000 and $500,000. Middle market offers coverage in distinct industry segments, including technology, human services, manufacturing, retail, and real estate, among others. We believe that our account-focused approach to the small commercial market and distinctiveness in the middle market, including our diversified portfolio of products, delivers significant value to agents and policyholders. We continue to pursue our core strategy of developing strong relationships with retail agents, enhancing franchise value through selective distribution, distinctive products and coverages, and through continued investment in products for additional industry segmentation.

Previous wording

Net premiums written increased 3.3% in the first nine months of 2024, compared to the same period in 2023, primarily driven by renewal price increases, partially offset by lower retention driven by underwriting actions. Operating income before interest expense and income taxes increased in the first nine months of 2024, primarily due to lower catastrophe losses and higher net favorable development on prior years’ loss reserves. The competitive nature of the Core Commercial market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business.

Current wording

Net premiums written increased 3.8% in the first three months of 2025, compared to the same period in 2024, primarily driven by renewal price increases. Operating income before interest expense and income taxes decreased in the first three months of 2025, compared to the same period in 2024, primarily due to higher catastrophe losses and higher current accident year large property losses. The competitive nature of the Core Commercial market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business.

Previous wording

Net premiums written increased 5.4% in the first nine months of 2024, compared to the same period in 2023, primarily due to renewal price increases. Operating income before interest expense and income taxes increased in the first nine months of 2024 compared to the same period in 2023, primarily due to lower current accident year losses and higher net investment income, partially offset by higher expenses and lower favorable development. The competitive nature of the Specialty market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business.

Current wording

Net premiums written increased 5.4% in the first three months of 2025, compared to the same period in 2024, primarily due to renewal price increases. Operating income before interest expense and income taxes increased in the first three months of 2025 compared to the same period in 2024, primarily due to higher net favorable development on prior year loss reserves and higher net investment income, partially offset by higher catastrophe losses and higher current accident year underwriting results. The competitive nature of the Specialty market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business.

Previous wording

Personal Lines focuses on working with high quality, value-oriented agencies that deliver consultative selling to customers and stress the importance of account rounding, which is the conversion of single policy customers to accounts with multiple policies and/or additional coverages, to address customers’ broader needs and objectives. Approximately 88% of our policies in force (“PIF”) have been issued to customers with multiple policies and/or coverages with us. We are focused on seeking profitable growth opportunities, building a distinctive position in the market in order to meet our customers’ needs, and diversifying geographically. We continue to seek appropriate rate increases that meet or exceed underlying loss cost trends, subject to regulatory and competitive considerations.

Current wording

Personal Lines focuses on working with high quality, value-oriented agencies that deliver consultative selling to customers and stress the importance of account rounding, which is the conversion of single policy customers to accounts with multiple policies and/or additional coverages, to address customers’ broader needs and objectives. Approximately 89% of our policies in force (“PIF”) have been issued to customers with multiple policies and/or coverages with us. We are focused on seeking profitable growth opportunities, building a distinctive position in the market in order to meet our customers’ needs, and diversifying geographically. We continue to seek appropriate rate increases that meet or exceed underlying loss cost trends, subject to regulatory and competitive considerations.

Previous wording

Net premiums written increased 3.6% in the first nine months of 2024, compared to the same period in 2023, primarily due to renewal price increases, partially offset by decreased new business and lower retention. Operating income before interest expense and income taxes improved in the first nine months of 2024, compared to the same period in 2023, primarily due to lower catastrophe losses, improvements in current accident year underwriting results, and favorable development on prior years’ loss reserves.

Current wording

Net premiums written increased 3.0% in the first three months of 2025, compared to the same period in 2024, primarily due to increased new business and renewal price increases. Operating income before interest expense and income taxes improved in the first three months of 2025, compared to the same period in 2024, primarily due to improvements in current accident year underwriting results and lower catastrophe losses.

Previous wording

Primary business operations include insurance products and services currently provided through four reporting segments: Core Commercial, Specialty, Personal Lines and Other. Core Commercial includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial lines coverages provided to small and mid-sized businesses. Specialty includes four divisions of business: Professional and Executive Lines, Specialty P&C, Marine, and Surety and Other. Specialty P&C includes coverages such as program business (providing commercial insurance to markets with specialized coverage or risk management needs related to groups of similar businesses), specialty industrial and commercial property, excess and surplus lines and specialty general liability coverage. Personal Lines includes personal automobile, homeowners and other personal coverages, such as umbrella. The “Other” segment includes earnings on holding company assets; holding company and other expenses, including certain costs associated with retirement benefits due to our former life insurance employees and agents; and our run-off voluntary assumed property and casualty pools, run-off direct asbestos and environmental, and product liability businesses. Also included in the Other segment during the first half of 2024 and prior were the operations of Opus Investment Management, Inc. (“Opus”), which provided investment management services to THG, as well as institutions, pension funds, and other organizations. During the second and third quarters of 2024, we exited all of Opus’ business operations serving unaffiliated entities. Investment management services provided by Opus to THG related to its investment-grade fixed maturities portfolio were also transferred to an external manager during the second quarter of 2024.

Current wording

Primary business operations include insurance products and services currently provided through four reporting segments: Core Commercial, Specialty, Personal Lines and Other. Core Commercial includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial lines coverages provided to small and mid-sized businesses. Specialty includes four divisions of business: Professional and Executive Lines, Specialty P&C, Marine, and Surety and Other. Specialty P&C includes coverages such as program business (providing commercial insurance to markets with specialized coverage or risk management needs related to groups of similar businesses), specialty industrial and commercial property, excess and surplus lines and specialty general liability coverage. Personal Lines includes personal automobile, homeowners and other personal coverages, such as umbrella. The “Other” segment includes earnings on holding company assets; holding company and other expenses, including certain costs associated with retirement benefits due to our former life insurance subsidiaries’ employees and agents; and our run-off voluntary assumed property and casualty pools, run-off direct asbestos and environmental, and product liability businesses.

Previous wording

Consolidated net income for the three months ended September 30, 2024 was $102.1 million, compared to $8.6 million for the three months ended September 30, 2023, an increase of $93.5 million. This increase was due to after-tax operating income of $104.5 million, partially offset by an increase in after-tax net realized and unrealized investment losses of $10.6 million. Operating income before interest expense and income taxes was $150.6 million for the three months ended September 30, 2024, compared to $13.7 million for the three months ended September 30, 2023, an increase of $136.9 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results in our Personal Lines segment and, to a lesser extent, higher net favorable development on prior years’ loss reserves.

Current wording

Consolidated net income for the three months ended March 31, 2025 was $128.2 million, compared to $115.5 million for the three months ended March 31, 2024, an increase of $12.7 million. This increase was due to higher after-tax operating income of $29.9 million, partially offset by an $18.3 million unfavorable change in after-tax net realized and unrealized investment results, from $5.5 million of gains in 2024 to $17.8 million of losses in 2025. Operating income before interest expense and income taxes was $186.4 million for the three months ended March 31, 2025, compared to $149.7 million for the three months ended March 31, 2024, an increase of $36.7 million. This increase was primarily due to improvements in current accident year underwriting results in our Personal Lines segment and from higher net investment income, partially offset by higher current accident year large property losses in our Core Commercial segment.

Previous wording

The following table reflects operating income (loss) before interest expense and income taxes for each reporting segment and a reconciliation to consolidated net income (loss) from operating income (loss) before interest expense and income taxes (a non-GAAP measure).

Current wording

The following table reflects operating income before interest expense and income taxes for each reporting segment and a reconciliation to consolidated net income from operating income before interest expense and income taxes (a non-GAAP measure).

Previous wording

In addition to consolidated net income (loss), discussed above, we assess our financial performance based upon pre-tax “operating income (loss),” and we assess the operating performance of each of our four reporting segments based upon the pre-tax operating income (loss) generated by each segment. As reflected in the table above, operating income (loss) before interest expense and income taxes excludes interest expense on debt and certain other items, which we believe are not indicative of our core operations, such as net realized and unrealized investment gains and losses. Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income (loss) before interest expense and income taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income (loss) before interest expense and income taxes are important components in understanding and assessing our overall financial performance, we believe a discussion of operating income (loss) before interest expense and income taxes enhances an investor’s understanding of our results of operations by highlighting net income (loss) attributable to the core operations of the business. However, operating income (loss) before interest expense and income taxes, which is a non-GAAP measure, should not be construed as a substitute for income (loss) before income taxes or income (loss) from continuing operations and operating income (loss) should not be construed as a substitute for net income (loss).

Current wording

In addition to consolidated net income, discussed above, we assess our financial performance based upon pre-tax “operating income,” and we assess the operating performance of each of our four reporting segments based upon the pre-tax operating income generated by each segment. As reflected in the table above, operating income before interest expense and income taxes excludes interest expense on debt and certain other items, which we believe are not indicative of our core operations, such as net realized and unrealized investment gains and losses. Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income before interest expense and income taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income before interest expense and income taxes are important components in understanding and assessing our overall financial performance, we believe a discussion of operating income before interest expense and income taxes enhances an investor’s understanding of our results of operations by highlighting net income attributable to the core operations of the business. However, operating income before interest expense and income taxes, which is a non-GAAP measure, should not be construed as a substitute for income before income taxes or income from continuing operations, and operating income should not be construed as a substitute for net income.

Previous wording

Catastrophe losses and prior years’ reserve development are significant components in understanding and assessing the financial performance of our business. Management reviews and evaluates catastrophes and prior years’ reserve development separately from the other components of earnings. References to “current accident year underwriting results” exclude prior accident year reserve development and may also be presented “excluding catastrophes.” Prior years’ reserve development and catastrophes are not predictable as to timing or the amount that will affect the results of our operations and have an effect on each year’s operating income (loss) and net income (loss). Management believes that providing certain financial metrics and trends excluding the effects of catastrophes and prior years’ reserve development helps investors to understand the variability in periodic earnings and to evaluate the underlying performance of our operations. Discussion of catastrophe losses in this Management’s Discussion and Analysis includes development on prior years’ catastrophe reserves and, unless otherwise indicated, such development is excluded from discussions of prior year loss and loss adjustment expenses (“LAE”) reserve development.

Current wording

Catastrophe losses and prior years’ reserve development are significant components in understanding and assessing the financial performance of our business. Management reviews and evaluates catastrophes and prior years’ reserve development separately from the other components of earnings. References to “current accident year underwriting results” exclude prior accident year reserve development and may also be presented “excluding catastrophes.” Prior years’ reserve development and catastrophes are not predictable as to timing or the amount that will affect the results of our operations and have an effect on each year’s operating income and net income. Management believes that providing certain financial metrics and trends excluding the effects of catastrophes and prior years’ reserve development helps investors to understand the variability in periodic earnings and to evaluate the underlying performance of our operations. Discussion of catastrophe losses in this Management’s Discussion and Analysis includes development on prior years’ catastrophe reserves and, unless otherwise indicated, such development is excluded from discussions of prior year loss and loss adjustment expenses (“LAE”) reserve development.

Previous wording

Operating income before interest expense and income taxes was $150.6 million for the three months ended September 30, 2024, compared to $13.7 million for the three months ended September 30, 2023, an improvement of $136.9 million. This increase was primarily due to lower catastrophe losses in our Personal Lines and Core Commercial segments, improvements in current accident year underwriting results in our Personal Lines Segment, and favorable development on prior years’ loss reserves. Catastrophe losses in the third quarter of 2024 primarily resulted from Hurricane Helene and, to a lesser extent, Hurricane Beryl and several severe wind and hail storms in the Midwest and Southeast. The higher catastrophe losses in the third quarter of 2023 were primarily due to several convective storms across the Midwest, with hail and wind damage representing the majority of reported losses, primarily impacting our Personal Lines business. The lower Personal Lines current accident year losses were primarily due to the benefit of earned pricing outpacing loss trends in both the personal automobile and homeowners lines, and moderated loss trends, particularly in automobile collision coverages.

Current wording

Operating income before interest expense and income taxes was $186.4 million for the three months ended March 31, 2025, compared to $149.7 million for the three months ended March 31, 2024, an improvement of $36.7 million. This increase was primarily due to improvements in current accident year underwriting results in Personal Lines and from higher net investment income, partially offset by higher current accident year large property losses in our Core Commercial segment. The lower Personal Lines current accident year losses were primarily due to the benefit of earned pricing outpacing loss trends in both the personal automobile and homeowners lines, and moderated frequency trends, particularly in automobile collision and homeowners coverages.

Previous wording

The following tables summarize premiums written on a gross and net basis, net premiums earned, and 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.

Current wording

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.

Previous wording

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 (loss) before interest expense and income taxes.

Current wording

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.

Previous wording

Core Commercial net premiums written were $599.2 million for the three months ended September 30, 2024, compared to $589.4 million for the three months ended September 30, 2023. The $9.8 million increase in net premiums written was primarily driven by renewal price increases.

Current wording

Core Commercial net premiums written were $604.6 million for the three months ended March 31, 2025, compared to $582.4 million for the three months ended March 31, 2024. The $22.2 million increase in net premiums written was primarily driven by renewal price increases and improved retention.

Previous wording

Core Commercial current accident year underwriting profit, excluding catastrophes, was $42.7 million for the three months ended September 30, 2024, compared to $52.6 million for the three months ended September 30, 2023. The $9.9 million decrease in underwriting results was primarily driven by higher current accident year losses, relative to earned premiums, in our commercial multiple peril and workers’ compensation lines of business.

Current wording

Core Commercial current accident year underwriting profit, excluding catastrophes, was $24.7 million for the three months ended March 31, 2025, compared to $42.4 million for the three months ended March 31, 2024. The $17.7 million decrease in underwriting results was primarily driven by higher current accident year large property losses in our commercial multiple peril and other core commercial lines of business.

Previous wording

Net premiums written in the personal automobile line of business were $411.1 million for the three months ended September 30, 2024, compared to $385.0 million for the three months ended September 30, 2023, an increase of $26.1 million. Personal automobile PIF decreased by 8.5% since September 30, 2023. Net premiums written in the homeowners and other lines of business for the three months ended September 30, 2024 were $302.9 million, compared to $283.3 million for the three months ended September 30, 2023, an increase of $19.6 million. Homeowners PIF decreased by 7.8% since September 30, 2023.

Current wording

Net premiums written in the personal automobile line of business were $323.8 million for the three months ended March 31, 2025, compared to $317.0 million for the three months ended March 31, 2024, an increase of $6.8 million. Personal automobile PIF decreased by 4.9% since March 31, 2024. Net premiums written in the homeowners and other lines of business for the three months ended March 31, 2025 were $224.1 million, compared to $214.8 million for the three months ended March 31, 2024, an increase of $9.3 million. Homeowners PIF decreased by 4.0% since March 31, 2024.

Previous wording

Personal Lines current accident year underwriting profit, excluding catastrophes, was $62.9 million for the three months ended September 30, 2024, compared to $17.2 million for the three months ended September 30, 2023. The $45.7 million increase in underwriting results was primarily due to lower current accident year losses, relative to earned premiums, in our personal automobile and homeowners lines. The lower Personal Lines current accident year losses were primarily due to the benefit of earned pricing outpacing loss trends in both personal automobile and homeowners lines, and moderated loss trends, particularly in automobile collision coverages.

Current wording

Personal Lines current accident year underwriting profit, excluding catastrophes, was $93.8 million for the three months ended March 31, 2025, compared to $50.0 million for the three months ended March 31, 2024. The $43.8 million increase in underwriting results was primarily due to lower current accident year losses in our personal automobile and homeowners lines. The lower Personal Lines current accident year losses were primarily due to the benefit of earned pricing outpacing loss trends in both personal automobile and homeowners lines, and moderated frequency trends, particularly in automobile collision and homeowners coverages.

Previous wording

We have been taking actions to improve financial results and reduce volatility within our Personal Lines segment. These actions include increasing pricing, changing certain policy terms and conditions, and being more selective on new business quoting, where permissible, around certain geographies, driver and vehicle history, and building and roof condition type. We were able to obtain pricing increases of approximately 16% in our homeowners line and approximately 15% in our personal automobile line during the third quarter of 2024 and believe that our ability to obtain pricing increases, while moderating, will continue. Consistent with our expectations, PIF declined in the third quarter of 2024, driven by lower new business, as our new business pricing is at levels at or above our renewal price increases. We expect our sequential PIF counts to continue to shrink in the fourth quarter of this year. Additionally, our Personal Lines net premiums written may be affected by price competition and the regulatory environment. These factors, along with the aforementioned actions, may also affect our ability to maintain and improve underwriting results.

Current wording

We have been taking actions to improve financial results and reduce volatility within our Personal Lines segment. These actions include increasing pricing, changing certain policy terms and conditions, and being more selective on new business quoting, where permissible, around certain geographies, driver and vehicle history, and building and roof condition type. We were able to obtain pricing increases of approximately 15% in our homeowners line and approximately 12% in our personal automobile line during the first quarter of 2025 and believe that our ability to obtain pricing increases will continue. Consistent with our expectations, PIF declined in the first three months of 2025, driven by lower renewal business. As a result of our targeted actions in the Midwest, we expect our sequential PIF counts to continue to shrink throughout the year, although moderating from the levels we have recently experienced. Additionally, our Personal Lines net premiums written may be affected by price competition and the regulatory and overall macroeconomic environment. These factors, along with the aforementioned actions, may also affect our ability to maintain and improve underwriting results.

Previous wording

Our Other segment had operating income of $0.5 million for the nine months ended September 30, 2024, compared to $1.2 million for the nine months ended September 30, 2023, a decrease of $0.7 million.

Current wording

Our Other segment had operating income of $0.8 million for the three months ended March 31, 2025, compared to $0.5 million for the three months ended March 31, 2024, an increase of $0.3 million.

Previous wording

Loss and LAE reserves in our “Other core commercial” lines include monoline general liability, commercial umbrella, and monoline property. “Specialty Property & Casualty” includes program business, specialty industrial and commercial property, excess and surplus lines, and specialty general liability coverage. “Professional and Executive Lines” includes professional and management liability, fidelity and crime, and other property and liability lines for healthcare firms. Loss and LAE reserves in our “Total Other” segment relate to our run-off voluntary assumed property and casualty reinsurance pools business and our run-off direct asbestos and environmental, and product liability businesses.

Current wording

Loss and LAE reserves in our “Other core commercial” lines include monoline general liability, commercial umbrella, and monoline property. “Specialty Property & Casualty” includes specialty industrial and commercial property, excess and surplus lines and specialty general liability coverage, and program business. “Professional and Executive Lines” includes management liability, fidelity and crime, professional liability and other property and liability lines for healthcare firms. Loss and LAE reserves in our “Total Other” segment relate to our run-off voluntary assumed property and casualty reinsurance pools business, and our run-off direct asbestos and environmental, and product liability businesses.

Previous wording

The following table summarizes prior year (favorable) unfavorable development for the periods indicated:

Current wording

The following table summarizes prior year favorable development for the periods indicated:

Previous wording

It is not possible to know whether the factors that affected loss reserves in the first nine months of 2024 will also occur in future periods. We encourage you to read our 2023 Annual Report on Form 10-K for more information about our reserving process and the judgments, uncertainties and risks associated therewith.

Current wording

It is not possible to know whether the factors that affected loss reserves in the first three months of 2025 will also occur in future periods. We encourage you to read our 2024 Annual Report on Form 10-K for more information about our reserving process and the judgments, uncertainties and risks associated therewith.

Previous wording

For the nine months ended September 30, 2024, favorable catastrophe loss development was $37.0 million, primarily due to lower than expected losses related to events from accident years 2020 through 2023, including several convective storms across multiple states, Winter Storm Elliot, Hurricane Ian, and Hurricane Ida. For the nine months ended September 30, 2023, total catastrophe loss development was not meaningful.

Current wording

For the three months ended March 31, 2025, favorable catastrophe loss development was $12.0 million, primarily due to lower than expected losses in our commercial multiple peril line related to events from accident years 2021 through 2023, including several convective storms across multiple states, and Winter Storm Elliot. For the three months ended March 31, 2024, favorable catastrophe development was $7.0 million, primarily due to lower than expected losses in our commercial multiple peril line related to 2022 and 2023 events, including hurricane Ian and tornadic activity.

Previous wording

For the nine months ended September 30, 2023, net favorable loss and LAE development, excluding catastrophes, was $6.8 million. Specialty favorable loss and LAE development of $34.8 million was primarily due to lower than expected losses and LAE of $28.9 million in our Professional and Executive Lines division, notably in accident years 2019 through 2022 and, to a lesser extent, lower than expected losses and LAE in our surety line. Personal Lines unfavorable loss and LAE development of $21.1 million was primarily due to higher than expected losses in our personal automobile line of $17.1 million. The higher than expected losses in our personal automobile line were primarily within bodily injury coverages in accident years 2018, 2019 and 2022, and within property damage coverages in accident years in 2021 and 2022, partially offset by lower than expected losses within personal injury protection coverages in accident years 2021 and 2022. Core Commercial unfavorable loss and LAE development of $6.9 million was primarily due to higher than expected losses in our commercial automobile line of $14.0 million, driven by higher bodily injury and personal injury protection losses in accident years 2014 and 2019 and, to a lesser extent, higher than expected losses in general liability and commercial umbrella coverages, partially offset by lower than expected losses in our workers’ compensation line of $17.7 million, primarily in accident years 2013 through 2021.

Current wording

For the three months ended March 31, 2025, net favorable loss and LAE development, excluding catastrophes, was $20.0 million. Specialty favorable loss and LAE development of $15.9 million was primarily due to lower than expected losses in our Marine division and, to a lesser extent, in our Professional and Executive Lines division. Within Core Commercial, lower than expected losses in our workers’ compensation line were largely offset by higher than expected losses in our commercial automobile line.

Previous wording

For the nine months ended September 30, 2024, net favorable loss and LAE development, excluding catastrophes, was $41.8 million. Core Commercial favorable loss and LAE development was $14.9 million, with favorability in each of the main product lines: commercial multiple peril, commercial automobile, workers’ compensation and other commercial lines. Lower than expected property losses of $25.6 million were partially offset by higher than expected losses of $10.7 million across several of the liability lines. Specialty favorable loss and LAE development of $22.6 million was primarily due to lower than expected losses in our Professional and Executive Lines division’s liability claims-made coverage of $14.1 million and, to a lesser extent, lower than expected losses in our surety line. Personal Lines favorable development was primarily due to lower than expected losses of $13.4 million in our personal automobile line within physical damage coverage. This favorable development was partially offset by higher than expected losses of $10.3 million in other personal lines within our standalone umbrella coverage.

Current wording

For the three months ended March 31, 2024, net favorable loss and LAE development, excluding catastrophes, was $10.4 million. Core Commercial favorable loss and LAE development of $9.2 million was due to lower than expected losses across several lines of business.

Previous wording

Reinsurance recoverables were $1,960.9 million and $2,056.1 million at September 30, 2024 and December 31, 2023, respectively, of which $101.1 million and $162.0 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 $48.1 million and $72.2 million at September 30, 2024 and December 31, 2023, respectively, and billable non-MCCA reinsurance recoverables totaled $53.0 million and $89.8 million at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, there were $0.6 million of billed balances outstanding greater than 90 days. At December 31, 2023, there were no billed balances outstanding greater than 90 days.

Current wording

Reinsurance recoverables were $2,034.2 million and $1,994.5 million at March 31, 2025 and December 31, 2024, respectively, of which $69.3 million and $74.2 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 $36.2 million and $39.3 million at March 31, 2025 and December 31, 2024, respectively, and billable non-MCCA reinsurance recoverables totaled $33.1 million and $34.9 million at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025 and December 31, 2024, there were $0.8 million of billed balances outstanding greater than 90 days.

Previous wording

The increase in net investment income for the three and nine months ended September 30, 2024 was primarily due to the impact of higher interest rates and the continued investment of operational cashflows, partially offset by lower partnership income. Income from partnerships can vary significantly from period to period based on the performance in the underlying portfolios. Also, partnership income for the nine months ended September 30, 2023 benefited from a real estate property sale in a tax credit partnership.

Current wording

The increase in net investment income for the three months ended March 31, 2025 was primarily due to the impact of reinvesting at higher interest rates and the continued investment of operational cashflows, slightly offset by lower partnership income. Income from partnerships can vary significantly from period to period based on the performance in the underlying portfolios.

Previous wording

Total cash and investments increased $728.6 million, or 7.9%, for the nine months ended September 30, 2024 as compared to December 31, 2023. The increase was primarily due to continued investment of cashflows from operations and net market value appreciation, partially offset by the funding of financing activities, including our dividend payments.

Current wording

Total cash and investments increased $159.3 million, or 1.6%, for the three months ended March 31, 2025 as compared to December 31, 2024. The increase was primarily due to net market value appreciation and continued investment of cashflows from operations, partially offset by the funding of financing activities, including our dividend payment.

Previous wording

The decrease in net unrealized losses on fixed maturities was primarily due to lower interest rates.

Current wording

The improvement in net unrealized losses on fixed maturities was primarily due to lower interest rates, partially offset by wider credit spreads.

Previous wording

Based on ratings by the National Association of Insurance Commissioners (“NAIC”), approximately 95% of the fixed maturity portfolio consisted of investment-grade securities at September 30, 2024 and December 31, 2023. The quality of our fixed maturity portfolio remains strong based on ratings, capital structure position, support through guarantees, underlying security, issuer diversification and yield curve position. Our U.S. Treasury and government agencies fixed maturities are directly or indirectly backed by the full faith and credit of the U.S. government. Our municipal bonds include revenue bonds and general obligations of state and local issuers. Corporate fixed maturities include publicly traded and privately placed securities in the industrial, financial, and utility sectors. Residential mortgage-backed securities are structured securities that are collateralized by residential real estate loans and are primarily U.S. agency-backed. Our commercial mortgage-backed securities are structured securities that are collateralized by commercial real estate loans and are well-diversified by geography, property type, expected maturity and vintage year. Our other asset-backed securities are structured securities that are primarily collateralized by consumer and corporate borrowings.

Current wording

Based on ratings by the National Association of Insurance Commissioners (“NAIC”), approximately 95% of our fixed maturity portfolio consisted of investment-grade securities at March 31, 2025 and December 31, 2024. The quality of our fixed maturity portfolio remains strong based on ratings, capital structure position, support through guarantees, underlying security, issuer diversification and yield curve position. Our U.S. Treasury and government agencies fixed maturities are directly or indirectly backed by the full faith and credit of the U.S. government. Our municipal bonds include revenue bonds and general obligations of state and local issuers. Corporate fixed maturities include publicly traded and privately placed securities in the industrial, financial, and utility sectors. Residential mortgage-backed securities are structured securities that are collateralized by residential real estate loans and are primarily U.S. agency-backed. Our commercial mortgage-backed securities are structured securities that are collateralized by commercial real estate loans and are well-diversified by geography, property type, expected maturity and vintage year. Our other asset-backed securities are structured securities that are primarily collateralized by consumer and corporate borrowings, including collateralized loan obligations.

Previous wording

At September 30, 2024 and December 31, 2023, the allowance for credit losses on mortgage loans was $7.5 million and $10.0 million, respectively, and the allowance for credit losses on available-for-sale debt securities was $0.6 million and $1.9 million, respectively.

Current wording

At March 31, 2025 and December 31, 2024, the allowance for credit losses on mortgage loans was $5.7 million, and the allowance for credit losses on available-for-sale debt securities was $0.5 million and $0.6 million, respectively.

Previous wording

The carrying value of fixed maturity securities on non-accrual status was $14.4 million at September 30, 2024, and $14.8 million at December 31, 2023 and September 30, 2023. At September 30, 2024, a mortgage loan with a carrying value of $5.3 million was also on non-accrual status. The effects on income of non-accruals for fixed maturity securities and mortgage loans for the nine months ended September 30, 2024 and September 30, 2023, compared with amounts that would have been recognized in accordance with the original terms of the fixed maturities and mortgage loans, were not material. Any defaults in the fixed maturities or mortgage loan portfolios in future periods may negatively affect investment income.

Current wording

We held no fixed maturity securities or mortgage loans on non-accrual status at March 31, 2025 and December 31, 2024. The carrying value of fixed maturity securities on non-accrual status at March 31, 2024 was $14.8 million. At March 31, 2024, a mortgage loan with a carrying value of $7.1 million was also on non-accrual status. The effects on income of non-accruals compared with amounts that would have been recognized in accordance with the original terms of the fixed maturities and mortgage loan were not material for the three months ended March 31, 2024. Any defaults in the fixed maturities or mortgage loan portfolios in future periods may negatively affect investment income.

Previous wording

Gross unrealized losses on fixed maturities at September 30, 2024 were $396.6 million, an improvement of $228.1 million compared to December 31, 2023, primarily attributable to lower interest rates. At September 30, 2024, gross unrealized losses consisted primarily of $118.9 million on corporate fixed maturities, $105.1 million on residential mortgage-backed securities, $90.0 million on municipals and $44.0 million on U.S. government securities. See Note 3 – “Investments” in the Notes to Interim Consolidated Financial Statements.

Current wording

Gross unrealized losses on fixed maturities at March 31, 2025 were $416.4 million, an improvement of $114.7 million compared to December 31, 2024, primarily due to lower interest rates, partially offset by wider credit spreads. At March 31, 2025, gross unrealized losses consisted primarily of $126.7 million on residential mortgage-backed securities, $116.3 million on corporate fixed maturities, $90.5 million on municipals and $47.7 million on U.S. government securities. See Note 3 – “Investments” in the Notes to Interim Consolidated Financial Statements.

Previous wording

The U.S. economy continued to expand at a solid pace during the third quarter of 2024. Inflation moved closer to the Federal Reserve’s (the “Fed”) current two percent long-term target. However, job gains slowed and the unemployment rate, while still low, crept up in the third quarter. In September, the Fed announced its first rate cut in what is expected to be a cutting cycle, reducing the federal funds target range to 4.75% to 5.00%. Despite the easing, financial conditions continue to be tight and remain a challenge to the U.S. economy. This may increase the likelihood of defaults on our fixed income investments, particularly with respect to non-investment grade debt securities. Geopolitical risks also create economic uncertainty, the extent of which is unknown. Although we perform rigorous credit analysis of our fixed income investments, it is difficult to foresee which issuers, industries or markets, if any, will be most affected. As a result, the value of our fixed maturity portfolio could change rapidly in ways we cannot currently anticipate, and we could incur additional realized and unrealized losses in future periods.

Current wording

The U.S. economy continued to expand at a solid pace during the first quarter of 2025, reflecting a stable labor market and moderating inflation. However, heightened geopolitical risks, including those driven by tariffs, create economic uncertainty, the extent of which is unknown. These risks, among others, may increase the likelihood of defaults on our fixed income investments, particularly with respect to non-investment grade debt securities. Although we perform rigorous credit analysis of our fixed income investments, it is difficult to identify with specificity which issuers, industries or markets, if any, will be most affected. As a result, the value of our fixed maturity portfolio could change rapidly in ways we cannot currently anticipate, and we could incur additional realized and unrealized losses in future periods.

Previous wording

Net income (loss) also included the following items:

Current wording

Net income also included the following items:

Previous wording

We manage investment assets for our Core Commercial, Specialty, Personal Lines and Other segments based on the requirements of our combined property and casualty insurance companies. We allocate the investment income, expenses, and net realized and unrealized investment gains and losses to our Core Commercial, Specialty, Personal Lines and Other segments based on actuarial information related to the underlying businesses.

Current wording

We manage investment assets for our Core Commercial, Specialty, Personal Lines and Other segments based on the requirements of our combined property and casualty insurance companies. We allocate the investment income, expenses, and net realized and unrealized investment gains and losses to our Core Commercial, Specialty, Personal Lines and Other segments based on earned premium and actuarial information related to the underlying businesses.

Previous wording

Net realized and unrealized investment losses were $12.4 million for the three months ended September 30, 2024, compared to $6.1 million for the three months ended September 30, 2023. For the three months ended September 30, 2024, net realized and unrealized investment losses were primarily due to $23.5 million of net realized losses from sales of investments, primarily fixed maturities. These realized losses were partially offset by changes in the fair value of equity securities of $11.7 million. For the three months ended September 30, 2023, net realized and unrealized investment losses were primarily due to the change in fair value of equity securities of $5.2 million and, to a lesser extent, from net realized losses from sales of investments, primarily fixed maturities.

Current wording

Net realized and unrealized investment losses were $17.8 million for the three months ended March 31, 2025, compared to net realized and unrealized investment gains of $5.5 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, net realized and unrealized investment losses were primarily due to $18.8 million of net realized losses from sales of investments, primarily lower-yield fixed maturities, in consideration of expiring tax gains from 2022, partially offset by changes in the fair value of equity securities. For the three months ended March 31, 2024, net realized and unrealized investment gains were primarily due to $6.5 million of changes in the fair value of equity securities, partially offset by net realized losses from sales of fixed maturities and other investments.

Previous wording

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.

Current wording

The provision for income taxes from continuing operations was an expense of $31.9 million and $29.8 million for the three months ended March 31, 2025 and 2024, respectively. These amounts resulted in consolidated effective tax rates of 19.9% and 20.5% on pre-tax income for the three months ended March 31, 2025 and 2024, respectively. These provisions include excess tax benefits primarily related to stock-based compensation of $2.1 million and $1.1 million for the three months ended March 31, 2025 and 2024, respectively. Absent excess tax benefits, the provision for income taxes would have been an expense of $34.4 million and $31.3 million for the three months ended March 31, 2025 and 2024, respectively, or 21.5% for both periods.

Previous wording

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.

Current wording

The income tax provision on operating results was an expense of $36.1 million and $29.3 million for the three months ended March 31, 2025 and 2024, respectively. These provisions resulted in effective tax rates on operating income of 20.3% and 20.8% for the three months ended March 31, 2025 and 2024, respectively. These provisions reflect the aforementioned excess tax benefits related to stock-based compensation. Absent this item, the provision for income taxes would have been an expense of $38.2 million and $30.4 million for the three months ended March 31, 2025 and 2024, respectively, or 21.5% for both periods.