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 the periods indicated:

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Operating income before interest expense and income taxes was $247.7 million for the three months ended September 30, 2025, compared to $150.6 million for the three months ended September 30, 2024, an improvement of $97.1 million. This increase was primarily due to lower catastrophe losses, higher net investment income and improvements in current accident year underwriting results in Personal Lines, partially offset by higher current accident year losses in our Core Commercial segment. The improved Personal Lines current accident year underwriting results were primarily due to the benefit of earned pricing outpacing loss trends in our homeowners line, and moderated frequency trends, particularly in homeowners property coverages. The increase in Core Commercial current accident year losses was primarily in our commercial automobile line of business.

Net premiums written increased $75.5 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase in net premiums written was due to renewal price increases and an increase in new business.

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 $620.3 million for the three months ended September 30, 2025, compared to $599.2 million for the three months ended September 30, 2024. The $21.1 million increase in net premiums written was primarily driven by renewal price increases and an increase in new business.

Core Commercial underwriting profit for the three months ended September 30, 2025 was $14.2 million, compared to $14.6 million for the three months ended September 30, 2024, a decrease of $0.4 million. Catastrophe losses for the three months ended September 30, 2025 were $17.8 million, compared to $31.7 million for the three months ended September 30, 2024, a decrease of $13.9 million. Net favorable development on prior years’ loss reserves for the three months ended September 30, 2025 was $1.2 million, compared to $3.6 million for the three months ended September 30, 2024, a decrease of $2.4 million.

Core Commercial current accident year underwriting profit, excluding catastrophes, was $30.8 million for the three months ended September 30, 2025, compared to $42.7 million for the three months ended September 30, 2024. This decrease was due to higher current accident year losses in our 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 $379.2 million for the three months ended September 30, 2025, compared to $350.2 million for the three months ended September 30, 2024. The $29.0 million increase in net premiums written was primarily due to renewal price increases and an increase in new business.

Specialty underwriting profit for the three months ended September 30, 2025 was $52.8 million, compared to $52.6 million for the three months ended September 30, 2024, an increase of $0.2 million. Catastrophe losses for the three months ended September 30, 2025 were $6.0 million, compared to $4.4 million for the three months ended September 30, 2024, an increase of $1.6 million.

Specialty current accident year underwriting profit, excluding catastrophes, was $48.8 million for the three months ended September 30, 2025, compared to $46.8 million for the three months ended September 30, 2024. The $2.0 million increase in underwriting results was primarily driven by earned premium growth.

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 $739.4 million for the three months ended September 30, 2025, compared to $714.0 million for the three months ended September 30, 2024. The $25.4 million increase in net premiums written was primarily due to renewal price increases and increased new business.

Net premiums written in the personal automobile line of business were $416.5 million for the three months ended September 30, 2025, compared to $411.1 million for the three months ended September 30, 2024, an increase of $5.4 million. Personal automobile PIF decreased by 3.2% since September 30, 2024. Net premiums written in the homeowners and other lines of business for the three months ended September 30, 2025 were $322.9 million, compared to $302.9 million for the three months ended September 30, 2024, an increase of $20.0 million. Homeowners PIF decreased by 2.5% since September 30, 2024.

Personal Lines underwriting profit for the three months ended September 30, 2025 was $66.3 million, compared to an underwriting loss of $6.7 million for the three months ended September 30, 2024, an improvement in underwriting results of $73.0 million. Catastrophe losses for the three months ended September 30, 2025 were $22.4 million, compared to $69.8 million for the three months ended September 30, 2024, a decrease of $47.4 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $87.8 million for the three months ended September 30, 2025, compared to $62.9 million for the three months ended September 30, 2024. The $24.9 million increase in underwriting results was primarily due to lower current accident year losses primarily in our homeowners line. The improved Personal Lines current accident year underwriting results were primarily due to the benefit of earned pricing outpacing loss trends in the homeowners line, and moderated frequency trends, particularly in homeowners property coverages.

We obtained pricing increases of approximately 14% in our homeowners line and approximately 8% in our personal automobile line during the third quarter of 2025 and believe that our ability to obtain pricing increases, although moderating, will continue. Consistent with our expectations, PIF declined in the first nine months of 2025, as a result of the actions we took in recent years to be more selective on new business quoting. 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.

Other

Our Other segment had operating profit of $3.3 million for the three months ended September 30, 2025, compared to de minimis for the three months ended September 30, 2024, a favorable change of $3.3 million, due primarily to an increase in investment income.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Operating income before interest expense and income taxes was $644.0 million for the nine months ended September 30, 2025, compared to $395.7 million for the nine months ended September 30, 2024, an improvement of $248.3 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results, primarily in Personal Lines, as well as, higher net investment income, and earned premium growth. These improvements were partially offset by higher current accident year losses in our Core Commercial segment. Pre-tax catastrophe losses were $249.3 million for the nine months ended September 30, 2025 compared to $349.9 million during the same period of 2024, a decrease of $100.6 million. The catastrophe losses in the first nine months of 2025 were due to severe convective storms in the Midwest and, to a lesser extent, the California Palisades and Eaton wildfires.

Net premiums written increased $195.0 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase in net premiums written was primarily due to an increase in new business and 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 $1,760.9 million for the nine months ended September 30, 2025 compared to $1,695.0 million for the nine months ended September 30, 2024. The $65.9 million increase in net premiums written was primarily driven by renewal price increases and an increase in new business.

Core Commercial underwriting profit for the nine months ended September 30, 2025 was $31.4 million, compared to $88.3 million for the nine months ended September 30, 2024, a decrease of $56.9 million. Catastrophe losses for the nine months ended September 30, 2025 were $86.5 million, compared to $68.8 million for the nine months ended September 30, 2024, an increase of $17.7 million. Net favorable development on prior years’ loss reserves for the nine months ended September 30, 2025 was $5.5 million, compared to $14.9 million for the nine months ended September 30, 2024, a decrease of $ 9.4 million.

Core Commercial current accident year underwriting profit, excluding catastrophes, was $112.4 million for the nine months ended September 30, 2025, compared to $142.2 million for the nine months ended September 30, 2024. The $29.8 million decrease in underwriting results was primarily driven by higher current accident year losses in our commercial automobile line of business and, to a lesser extent, in our workers’ compensation line.

Specialty net premiums written were $1,105.7 million for the nine months ended September 30, 2025, compared to $1,042.1 million for the nine months ended September 30, 2024. The $63.6 million increase in net premiums written was primarily due to renewal price increases and an increase in new business.

Specialty underwriting profit for the nine months ended September 30, 2025 was $141.8 million, compared to $113.5 million for the nine months ended September 30, 2024, an increase of $28.3 million. Catastrophe losses for the nine months ended September 30, 2025 were $35.3 million, compared to $33.5 million for the nine months ended September 30, 2024, an increase of $1.8 million. Net favorable development on prior years’ loss reserves for the nine months ended September 30, 2025 was $38.4 million, compared to $22.6 million for the nine months ended September 30, 2024, an increase of $15.8 million.

Specialty current accident year underwriting profit, excluding catastrophes, was $138.7 million for the nine months ended September 30, 2025, compared to $124.4 million for the nine months ended September 30, 2024. The $14.3 million increase in underwriting results was primarily driven by earned premium growth, primarily in our Marine and Specialty Property & Casualty divisions, and lower current accident year losses in our Professional and Executive Lines division.

Personal Lines net premiums written were $1,966.9 million for the nine months ended September 30, 2025, compared to $1,901.4 million for the nine months ended September 30, 2024. The $65.5 million increase in net premiums written was primarily due to renewal price increases, increased new business and higher retention, partially offset by fewer policies available to renew year over year from margin recapture actions taken.

Personal Lines underwriting profit for the nine months ended September 30, 2025 was $153.2 million, compared to an underwriting loss of $74.4 million for the nine months ended September 30, 2024, an improvement in underwriting results of $227.6 million. Catastrophe losses for the nine months ended September 30, 2025 were $127.5 million, compared to $247.6 million for the nine months ended September 30, 2024, a decrease of $120.1 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $274.4 million for the nine months ended September 30, 2025, compared to $168.9 million for the nine months ended September 30, 2024. The $105.5 million increase in underwriting results was primarily due to lower current accident year losses in our homeowners and personal automobile lines. The improved Personal Lines current accident year underwriting results were primarily due to the benefit of earned pricing outpacing loss trends in both homeowners and personal automobile lines, and moderated loss trends, particularly in homeowners property and automobile collision coverages.

Other

Our Other segment had operating profit of $1.5 million for the nine months ended September 30, 2025, compared to operating profit of $0.5 million for the nine months ended September 30, 2024, an increase of $1.0 million.

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. “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 direct asbestos and environmental, and product liability businesses, and, to a lesser extent, our run-off voluntary assumed property and casualty reinsurance pools business.

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

It is not possible to know whether the factors that affected loss reserves in the first nine 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.

Catastrophe Loss Development

For the nine months ended September 30, 2025, favorable catastrophe loss development was $18.0 million, primarily due to lower than expected losses related to events from accident years 2023 through 2024, including several convective storms across multiple states, and Winter Storm Elliot. For the nine months ended September 30, 2024, favorable catastrophe development was $37.0 million, primarily due to lower than expected losses related to events from accident years 2021 through 2023, including several convective storms across multiple states, Winter Storm Elliot, hurricane Ian, and hurricane Ida.

2025 Loss and LAE Development, excluding catastrophes

For the nine months ended September 30, 2025, net favorable loss and LAE development, excluding catastrophes, was $50.3 million. Specialty favorable loss and LAE development of $38.4 million was primarily due to lower than expected losses in our Professional and Executive Lines division, driven by our general liability-claims made coverage, and in our Marine and Specialty Property & Casualty divisions. Within Personal Lines, lower than expected losses of $6.3 million were driven primarily by homeowners. Core Commercial favorable loss and LAE development of $5.5 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.

2024 Loss and LAE Development, excluding catastrophes

For the nine months ended September 30, 2024, net favorable loss and LAE development, excluding catastrophes, was $41.8 million. 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, driven by our general liability-claims made coverage, and, to a lesser extent, lower than expected losses in our surety line. 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. Within Personal Lines, lower than expected losses were $4.3 million, primarily driven by our personal automobile line, partially offset by higher than expected losses in the other personal lines.

Asbestos and Environmental Reserves

As of September 30, 2025, we had $10.2 million of net asbestos and environmental reserves, comprised of $8.0 million of direct reserves and $2.2 million of assumed reinsurance pool reserves. This compares to net reserves of $10.9 million at December 31, 2024, comprised of $8.7 million of direct reserves and $2.2 million of assumed reinsurance pool reserves.

As of September 30, 2025, we had $2.2 million of gross loss and LAE reserves for our assumed reinsurance pool business compared to $29.9 million in December 31, 2024. 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. A significant part of our gross pool reserves was related to our participation in the Excess and Casualty Reinsurance Association (“ECRA”) voluntary pool for our ECRA claim liability participations, which were written during the period 1950 to 1982. In 1982, the pool was dissolved and since that time, the business has been in run-off. In 2021, we entered into a 100% reinsurance agreement with a third-party reinsurer for our ECRA claim liability participations. During the second quarter of 2025, we completed an insurance business transfer of our ECRA liabilities to a third-party insurer pursuant to Oklahoma law, which novation has fully relieved us of our obligations to ECRA policyholders. This transaction had no significant impact on our results of operations for the nine months ended September 30, 2025.

Reinsurance

We discuss our catastrophe reinsurance coverage in the Reinsurance section of Part I – Item 1 – Business of our 2024 Annual Report on Form 10-K. Except as discussed below, there have been no material changes to our catastrophe reinsurance coverage from that reported in our 2024 Annual Report on Form 10-K.

2025 Reinsurance Program – The core property catastrophe occurrence excess of loss reinsurance program has been enhanced to provide coverage up to $1.9 billion, while maintaining a $200 million retention, with no co-participation. Similarly, coverage has been expanded for Northeast named storm events up to $2.05 billion, while also maintaining a $200 million retention, with no co-participation. A portion of the coverage is secured through reinsurance agreements supported by catastrophe bonds, as described in further detail below.

Catastrophe Bonds – We have catastrophe protection through per occurrence excess of loss reinsurance agreements with Commonwealth Re Ltd. (“Commonwealth Re”), an independent company, licensed as a Special Purpose Insurer in Bermuda. Under an additional agreement effective July 1, 2025 (“2025 Agreement”), coverage includes all fifty states of the U.S. and the District of Columbia for catastrophe losses from named tropical storms or hurricanes, including all events or perils directly resulting from such storm or storm system, which may include, by way of example and not limitation, hurricane, wind, gusts, typhoon, hail, rain, tornadoes, cyclones, ensuing flood, storm surge, water damage, fire following, sprinkler leakage, collapse, ensuing riots and ensuing vandalism. Additional coverage under the 2025 Agreement includes earthquake, severe thunderstorms, winter storms and wildfire. The reinsurance agreement meets the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts.

In connection with this reinsurance agreement, Commonwealth Re issued notes (generally referred to as “catastrophe bonds”) to unrelated investors. The proceeds have been deposited in a reinsurance trust account.

The 2025 Agreement provides us with coverage of up to $200.0 million through June 30, 2028. For events up to and including June 30, 2028, we are entitled to begin recovering amounts under this reinsurance agreement if the covered losses in the covered area for a single occurrence reach an initial attachment amount of $1.1 billion. The $200.0 million coverage amount is available for 100% of the covered losses, until such losses reach a maximum level of $1.3 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.

Pursuant to the terms of the reinsurance agreement with Commonwealth Re effective July 1, 2023, (“2023 Agreement”), beginning July 1, 2025, we reset the exhaustion level and percentage of coverage within the layer. For the period from July 1, 2025 through and including June 30, 2026, we will be entitled to recover amounts under the 2023 Agreement for covered losses in the covered area for a single occurrence. The $150.0 million coverage amount is available for 100% of the covered losses, until such losses reach a maximum level of $1.95 billion for the first event that reaches that level of loss. Prior to the reset, the $150.0 million coverage was available for 50% of the covered losses between $1.1 billion and $1.4 billion.

A reinsurance agreement with Commonwealth Re effective July 1, 2022 expired on June 30, 2025 without any incurred losses that resulted in a recovery under this agreement.

See the “Reinsurance – Catastrophe Bonds” section of “Part I – Item 1 – Business” in our 2024 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 $1,974.8 million and $1,994.5 million at September 30, 2025 and December 31, 2024, respectively, of which $56.3 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 $35.3 million and $39.3 million at September 30, 2025 and December 31, 2024, respectively, and billable non-MCCA reinsurance recoverables totaled $21.0 million and $34.9 million at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025 there were $0.2 million of billed balances outstanding greater than 90 days. At December 31, 2024, there were $0.8 million of billed balances outstanding greater than 90 days.