HANOVER INSURANCE GROUP, INC.

Business operations consist of four reporting segments: Core Commercial, Specialty, Personal Lines and Other.

Our strategy, which focuses on the independent agency distribution channel, supports THG’s commitment to our select independent agents. It is designed to generate profitable growth by leveraging the strengths of our distribution approach, including expansion of our agency footprint in underpenetrated geographies, as warranted. As part of that strategy, we have increased our capabilities in specialty markets and made investments designed to develop growth solutions for our agency distribution channel that meet the needs of our customers. Our goal is to grow responsibly in all of our businesses, while managing volatility.

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.

Operating income before interest expense and income taxes (a non-GAAP financial measure; see also “Results of Operations – Consolidated – Non-GAAP Financial Measures”) 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 personal automobile and homeowners lines, and moderated frequency trends, particularly in automobile collision and homeowners coverages.

Pre-tax catastrophe losses were $95.6 million for the three months ended March 31, 2025, compared to $86.9 million during the same period of 2024, an increase of $8.7 million. Catastrophe losses in the first quarter of 2025 were primarily due to severe convective storms in the Midwest and the California Palisades and Eaton wildfires. Net favorable development on prior years’ loss reserves was $20.0 million for the three months ended March 31, 2025, compared to $10.4 million for the three months ended March 31, 2024, an increase of $9.6 million.

Core Commercial

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.

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.

Specialty

Specialty offers a comprehensive suite of products focused predominately on small to mid-sized businesses. This includes numerous specialized product areas that are organized into four distinct divisions – Professional and Executive Lines, Specialty Property and Casualty (“Specialty P&C”), Marine, and Surety and Other. We believe that this diverse set of Specialty products, distributed primarily through retail agents, supplemented by select specialists, helps to enhance our overall agent value and increase growth opportunities by providing agents easier access to placement solutions for Specialty needs, including those that complement Core Commercial accounts.

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.

Personal Lines

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.

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.