HANOVER INSURANCE GROUP, INC.

Previous wording

The following discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this discussion and analysis, words such as: “believes,” “anticipates,” “expects,” “projections,” “outlook,” “should,” “could,” “plan,” “guidance,” “likely,” “on track to,” “potential,” “continue,” “targeted,” “designed,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. We caution readers that accuracy with respect to forward-looking projections is difficult and subject to risks and uncertainties. Those risks and uncertainties, in some cases, have affected, and in the future could affect, our actual results and could cause our actual results and beyond to differ materially from historical results and from those expressed in any of our forward-looking statements. For important factors that could cause actual results to differ materially from those contained in forward-looking statements, see “Risk Factors” in Part I – Item 1A.

Current wording

The following discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this discussion and analysis, words such as: “believes,” “anticipates,” “expects,” “projections,” “outlook,” “should,” “could,” “plan,” “guidance,” “likely,” “on track to,” “potential,” “continue,” “targeted,” “designed,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. We caution readers that accuracy with respect to forward-looking projections is difficult and subject to risks and uncertainties. Those risks and uncertainties, in some cases, have affected, and in the future could affect, our actual results and could cause our actual results to differ materially from historical results and from those expressed in any of our forward-looking statements. For important factors that could cause actual results to differ materially from those contained in forward-looking statements, see “Risk Factors” in Part I – Item 1A.

Previous wording

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.

Current wording

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 earnings volatility.

Previous wording

Net income was $426.0 million in 2024, compared to $35.3 million in 2023, an increase of $390.7 million, primarily due to higher after-tax operating income.

Current wording

Net income was $662.5 million in 2025, compared to $426.0 million in 2024, an increase of $236.5 million, primarily due to higher after-tax operating income.

Previous wording

Operating income before interest expense and income taxes (a non-GAAP financial measure; see also “Results of Operations – Consolidated – Non-GAAP Financial Measures”) was $650.1 million in 2024 compared to $105.6 million in 2023, an increase of $544.5 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results, primarily in our Personal Lines segment, and, to a lesser extent, higher net favorable development on prior years’ loss reserves and higher net investment income. Pre-tax catastrophe losses were $375.9 million in 2024, compared to $690.1 million in 2023, a decrease of $314.2 million. The catastrophe losses in 2024 were primarily due to several convective storms across multiple states, with wind and hail damage representing the majority of reported losses, primarily in the Midwest, and, to a lesser extent, the impacts of hurricanes Helene and Beryl. The higher catastrophe losses in 2023 were primarily due to several convective storms across multiple states, particularly in 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 personal automobile and homeowners lines, and moderated loss trends, particularly in automobile collision coverages.

Current wording

Operating income before interest expense and income taxes (a non-GAAP financial measure; see also “Results of Operations – Consolidated – Non-GAAP Financial Measures”) was $933.0 million in 2025 compared to $650.1 million in 2024, an increase of $282.9 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results in our Personal Lines segment, higher net investment income, and earned premium growth. These improvements were 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 both homeowners and personal automobile lines, and moderated loss frequency trends, particularly in homeowners property and automobile collision coverages.

Previous wording

Net favorable development on prior years’ loss reserves was $67.4 million in 2024, compared to $15.9 million in 2023, an increase of $51.5 million.

Current wording

Net favorable development on prior years’ loss reserves was $70.4 million in 2025, compared to $67.4 million in 2024, an increase of $3.0 million.

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 (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, real estate, and 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, enhanced 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 core commercial (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 independent 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 6.2% in 2024, compared to 2023, primarily due to renewal price increases and improved new business. Operating income before interest expense and income taxes increased in 2024, primarily due to lower current accident year losses, relative to earned premiums, higher net investment income, and earned premium growth, partially offset by higher expenses. 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 3.6% in 2025, compared to 2024, primarily due to renewal price increases and an increase in new business. Operating income before interest expense and income taxes decreased in 2025, primarily due to higher catastrophe losses and higher current accident year losses, partially offset by higher net investment income. 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

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.

Current wording

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 independent agents, including wholesalers, 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.

Previous wording

Net premiums written increased 4.2% in 2024, compared to 2023, primarily driven by renewal price increases. Operating income before interest expense and income taxes increased in 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 4.9% in 2025, compared to 2024, primarily due to renewal price increases and an increase in new business. Operating income before interest expense and income taxes increased in 2025, primarily due to higher net investment income, earned premium growth and higher net favorable development on prior year loss reserves. 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, as appropriate.

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 total account solutions, 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

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 direct asbestos and environmental business, run-off voluntary assumed property and casualty pools, and run-off product liability business.

Previous wording

Consolidated net income was $426.0 million in 2024, compared to $35.3 million in 2023, an increase of $390.7 million. This increase was due to higher after-tax operating income of $429.7 million, partially offset by an increase in after-tax net realized and unrealized investment losses of $34.2 million. Operating income before interest expense and income taxes was $650.1 million in 2024, compared to $105.6 million in 2023, an increase of $544.5 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results, primarily in our Personal Lines segment and, to a lesser extent, higher net favorable development on prior years’ loss reserves and higher net investment income.

Current wording

Consolidated net income was $662.5 million in 2025, compared to $426.0 million in 2024, an increase of $236.5 million. This increase was primarily due to higher after-tax operating income of $210.3 million, and, to a lesser extent, a decrease in after-tax net realized and unrealized investment losses of $23.1 million. Operating income before interest expense and income taxes was $933.0 million in 2025, compared to $650.1 million in 2024, an increase of $282.9 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results in our Personal Lines segment, higher net investment income, and earned premium growth. These improvements were partially offset by higher current accident year losses in our Core Commercial segment.

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 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.

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 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’

Previous wording

Operating income before interest expense and income taxes was $650.1 million for the year ended December 31, 2024, compared to $105.6 million for the year ended December 31, 2023, an improvement of $544.5 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results, primarily in our Personal Lines segment, and, to a lesser extent, higher net favorable development on prior years’ loss reserves, and higher net investment income. Pre-tax catastrophe losses were $375.9 million for the year ended December 31, 2024, compared to $690.1 million for the year ended December 31, 2023, a decrease of $314.2 million. The catastrophe losses in 2024 were primarily due to several convective storms across multiple states, with wind and hail damage representing the majority of reported losses, primarily in the Midwest, and, to a lesser extent, the impacts of hurricanes Helene and Beryl. The catastrophe losses in 2023 were primarily due to several convective storms across multiple states, particularly in 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 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 $933.0 million for the year ended December 31, 2025, compared to $650.1 million for the year ended December 31, 2024, an improvement of $282.9 million. This increase was primarily due to lower catastrophe losses, improvements in current accident year underwriting results in our Personal Lines segment, 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 $276.3 million for the year ended December 31, 2025, compared to $375.9 million for the year ended December 31, 2024, a decrease of $99.6 million. The catastrophe losses in 2025 were due to severe convective storms across multiple states, and to a lesser extent, the California Palisades and Eaton wildfires. The higher catastrophe losses in 2024 were primarily due to several convective storms across multiple states, with wind and hail damage representing the majority of reported losses, primarily in the Midwest, and, to a lesser extent, the impacts of hurricanes Helene and Beryl. 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 frequency trends, particularly in homeowners property and automobile collision coverages. The increase in Core Commercial current accident year losses was primarily in our commercial automobile and workers’ compensation lines of business, partially offset by lower current accident year losses in our commercial multiple peril line of business.

Previous wording

Net premiums written increased $273.4 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase in net premiums written was primarily due to renewal price increases.

Current wording

Net premiums written increased $238.5 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase in net premiums written was primarily due to renewal price increases and new business.

Previous wording

Core Commercial net premiums written were $2,195.5 million for the year ended December 31, 2024, compared to $2,107.0 million for the year ended December 31, 2023. The $88.5 million increase in net premiums written was primarily driven by renewal price increases.

Current wording

Core Commercial net premiums written were $2,273.7 million for the year ended December 31, 2025, compared to $2,195.5 million for the year ended December 31, 2024. The $78.2 million increase in net premiums written was primarily driven by renewal price increases and an increase in new business.

Previous wording

Core Commercial current accident year underwriting profit, excluding catastrophes, was $174.3 million for the year ended December 31, 2024, compared to $192.6 million for the year ended December 31, 2023. The $18.3 million decrease in underwriting results was primarily due to higher expenses, and higher current accident year losses, relative to earned premiums, in our umbrella product within other core commercial lines, partially offset by lower losses, relative to earned premiums, in our commercial automobile line of business. The higher expenses were primarily due to increased variable compensation expenses.

Current wording

Core Commercial current accident year underwriting profit, excluding catastrophes, was $158.5 million for the year ended December 31, 2025, compared to $174.3 million for the year ended December 31, 2024. The $15.8 million decrease in underwriting results was primarily due to higher current accident year losses, partially offset by lower expenses and earned premium growth. Higher current accident year losses were primarily due to our commercial automobile and workers’ compensation lines of business, partially offset by lower losses in our commercial multiple peril line.

Previous wording

Specialty net premiums written were $1,373.9 million for the year ended December 31, 2024, compared to $1,293.3 million for the year ended December 31, 2023. The $80.6 million increase in net premiums written was primarily due to renewal price increases and improved new business.

Current wording

Specialty net premiums written were $1,441.5 million for the year ended December 31, 2025, compared to $1,373.9 million for the year ended December 31, 2024. The $67.6 million increase in net premiums written was primarily due to renewal price increases and an increase in new business.

Previous wording

Personal Lines net premiums written were $2,514.2 million for the year ended December 31, 2024, compared to $2,409.9 million for the year ended December 31, 2023. The $104.3 million increase in net premiums written was primarily driven by renewal price increases, partially offset by decreased new business and lower retention.

Current wording

Personal Lines net premiums written were $2,606.9 million for the year ended December 31, 2025, compared to $2,514.2 million for the year ended December 31, 2024. The $92.7 million increase in net premiums written was primarily due to renewal price increases, higher retention, and increased new business.

Previous wording

Net premiums written in the personal automobile line of business for the year ended December 31, 2024 were $1,463.6 million, compared to $1,404.2 million for the year ended December 31, 2023, an increase of $59.4 million. Personal automobile policies in force decreased by 7.0% since December 31, 2023. Net premiums written in the homeowners and other lines of business for the year ended December 31, 2024 were $1,050.6 million, compared to $1,005.7 million for the year ended December 31, 2023, an increase of $44.9 million. Homeowners policies in force decreased by 6.1% since December 31, 2023.

Current wording

Net premiums written in the personal automobile line of business for the year ended December 31, 2025 were $1,489.9 million, compared to $1,463.6 million for the year ended December 31, 2024, an increase of $26.3 million. Personal automobile policies in force decreased by 3.1% since December 31, 2024. Net premiums written in the homeowners and other lines of business for the year ended December 31, 2025 were $1,117.0 million, compared to $1,050.6 million for the year ended December 31, 2024, an increase of $66.4 million. Homeowners policies in force decreased by 2.6% since December 31, 2024.

Previous wording

Personal Lines current accident year underwriting profit, excluding catastrophes, was $252.2 million for the year ended December 31, 2024, compared to $90.0 million for the year ended December 31, 2023. The $162.2 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 $365.3 million for the year ended December 31, 2025, compared to $252.2 million for the year ended December 31, 2024. The $113.1 million increase in underwriting results was primarily due to lower current accident year losses in our homeowners and personal automobile lines and, to a lesser extent, earned premium growth. The improved Personal Lines current accident year results were primarily due to the benefit of earned pricing outpacing loss trends in both homeowners and personal automobile lines, and moderated loss frequency trends, particularly in homeowners property and automobile collision 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 19% in our homeowners line and approximately 16% in our personal automobile line during 2024 and believe that our ability to obtain pricing increases, while moderating, will continue. Consistent with our expectations, PIF declined in 2024, driven by lower renewal business. We expect our sequential PIF counts to continue to shrink in 2025, primarily driven by our targeted actions in the Midwest. 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 obtained pricing increases of approximately 14% in our homeowners line and 9% in our personal automobile line during 2025 and believe that our ability to obtain pricing increases, although moderating, will continue. Consistent with our expectations, PIF declined in 2025, driven by lower policies available to renew year over year from prior margin recapture actions taken. Additionally, our Personal Lines net premiums written may be affected by price competition and the regulatory and overall macroeconomic environment. These factors may also affect our ability to maintain and improve underwriting results.

Previous wording

Our Other segment had an operating loss of $0.5 million for the year ended December 31, 2024, compared to $0.8 million for the year ended December 31, 2023, an improvement of $0.3 million.

Current wording

Our Other segment had an operating profit of $6.2 million for the year ended December 31, 2025, compared to an operating loss of $0.5 million for the year ended December 31, 2024, an improvement of $6.7 million, due primarily to an increase in net investment income.

Previous wording

The IBNR reserve includes both a provision for claims that have occurred but have not yet been reported to us, some of which may not yet be known to the insured, and a provision for future development on reported claims. IBNR represents a significant proportion of our total net loss reserves (i.e., net of estimated reinsurance recoverables), particularly for long-tail liability classes. In fact, approximately 53% of our aggregate net loss reserves at December 31, 2024 were for IBNR losses and loss expenses.

Current wording

The IBNR reserve includes both a provision for claims that have occurred but have not yet been reported to us, some of which may not yet be known to the insured, and a provision for future development on reported claims. IBNR represents a significant proportion of our total net loss reserves (i.e., net of estimated reinsurance recoverables), particularly for long-tail liability classes. In fact, approximately 56% of our aggregate net loss reserves at December 31, 2025 were for IBNR losses and loss expenses.

Previous wording

We regularly update our reserve estimates as new information becomes available and additional events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in the results of operations as adjustments to losses and LAE. Often, these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and the loss event occurred. When these types of subsequent adjustments affect prior years, they are described separately as “prior year reserve development.” Such development can be either favorable or unfavorable to our financial results and may vary by line of business. As discussed below, estimated loss and LAE reserves for claims occurring in prior years, in the aggregate, developed favorably by $67.4 million and $15.9 million for the years ended December 31, 2024 and 2023, respectively, although there was some significant variance by segment. Additionally, our estimated loss and LAE reserves for catastrophe claims occurring in prior years developed favorably by $42.0 million for the year ended December 31, 2024 and was zero for the year ended December 31, 2023. There can be no assurance that current loss and LAE reserves will be sufficient.

Current wording

We regularly update our reserve estimates as new information becomes available and additional events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in the results of operations as adjustments to losses and LAE. Often, these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and the loss event occurred. When these types of subsequent adjustments affect prior years, they are described separately as “prior year reserve development.” Such development can be either favorable or unfavorable to our financial results and may vary by line of business. As discussed below, estimated loss and LAE reserves for claims occurring in prior years, in the aggregate, developed favorably by $70.4 million and $67.4 million for the years ended December 31, 2025 and 2024, respectively, although there was some significant variance by segment. Additionally, our estimated loss and LAE reserves for catastrophe claims occurring in prior years developed favorably by $26.0 million for the year ended December 31, 2025 and $42.0 million for the year ended December 31, 2024. There can be no assurance that current loss and LAE reserves will be sufficient.

Previous wording

We regularly review our reserving techniques, our overall reserving position and our reinsurance. Based on (i) our review of historical data, legislative enactments, judicial decisions, legal developments in impositions of damages and policy coverage, political attitudes and trends in general economic conditions, (ii) our review of per claim information, (iii) our historical loss experience and that of the industry, (iv) the nature of policies written by us, and (v) our internal estimates of required reserves, we believe that adequate provision has been made for loss reserves. Given the inherent complexity of our loss reserve estimation process and the potential variability of the assumptions used, the actual emergence of losses will vary, perhaps substantially, from the estimate of losses included in our financial statements, particularly in those instances where settlements or other claim resolutions do not occur until well into the future. Our net loss reserves at December 31, 2024 were $5.6 billion. Therefore, a relatively small percentage change in the estimate of net loss reserves would have a material effect on our results of operations. Similarly, a one percentage point change in the aggregate loss and LAE ratio resulting from a change in reserve estimation is currently projected to have an approximate $60.8 million impact on operating income, based on 2024 full year premiums.

Current wording

We regularly review our reserving techniques, our overall reserving position and our reinsurance. Based on (i) our review of historical data, legislative enactments, judicial decisions, legal developments in impositions of damages and policy coverage, political attitudes and trends in general economic conditions, (ii) our review of per claim information, (iii) our historical loss experience and that of the industry, (iv) the nature of policies written by us, and (v) our internal estimates of required reserves, we believe that adequate provision has been made for loss reserves. Given the inherent complexity of our loss reserve estimation process and the potential variability of the assumptions used, the actual emergence of losses will vary, perhaps substantially, from the estimate of losses included in our financial statements, particularly in those instances where settlements or other claim resolutions do not occur until well into the future. Our net loss reserves at December 31, 2025 were $5.9 billion. Therefore, a relatively small percentage change in the estimate of net loss reserves would have a material effect on our results of operations. Similarly, a one percentage point change in the aggregate loss and LAE ratio resulting from a change in reserve estimation is currently projected to have an approximate $62 million impact on operating income, based on 2025 full year premiums.

Previous wording

Short-tail classes consist principally of automobile physical and property damage, commercial property, homeowners property and marine business. For these property coverages, claims are generally reported and settled shortly after the loss occurs because the claims relate to tangible property and are more likely to be discovered shortly after the loss occurs. Consequently, the estimation of loss reserves for these classes is generally less complex. However, the estimation of loss reserves for these classes is more complex when there are rapid changes in the ultimate timing or future cost to settle the claims.

Current wording

Short-tail classes consist principally of automobile physical and property damage, homeowners property, commercial property, and marine business. For these property coverages, claims are generally reported and settled shortly after the loss occurs because the claims relate to tangible property and are more likely to be discovered shortly after the loss occurs. Consequently, the estimation of loss reserves for these classes is generally less complex. However, the estimation of loss reserves for these classes is more complex when there are rapid changes in the ultimate timing or future cost to settle the claims.

Previous wording

While we estimate that approximately half of our written premium is in, what we would characterize as, shorter-tail classes of business, most of our loss reserves relate to longer-tail liability classes of business. Long-tailed classes include commercial general liability, automobile liability, personal and commercial umbrella, third-party coverage and workers’ compensation. For many liability claims, significant periods of time, ranging up to several years or more, may elapse between the occurrence of the loss, the discovery and reporting of the loss to us and the settlement of the claim. As a result, loss experience in the more recent accident years for long-tailed liability coverage has limited statistical credibility because a relatively small proportion of losses in these accident years (the calendar years in which losses are incurred) are reported claims and an even smaller proportion are paid losses. Liability claims are also more susceptible to litigation and can be significantly affected by changing contract interpretations, the legal, political and social environments, the risk and expense of protracted litigation, legal system abuse dynamics, and inflation. Consequently, the estimation of loss reserves for these coverages is more complex and typically subject to a higher degree of variability and uncertainty compared to short-tailed coverages.

Current wording

While we estimate that approximately half of our written premium is in, what we would characterize as, shorter-tail classes of business, most of our loss reserves relate to longer-tail liability classes of business. Long-tailed classes include commercial general liability, third-party coverage, automobile liability, personal and commercial umbrella, and workers’ compensation. For many liability claims, significant periods of time, ranging up to several years or more, may elapse between the occurrence of the loss, the discovery and reporting of the loss to us and the settlement of the claim. As a result, loss experience in the more recent accident years for long-tailed liability coverage has limited statistical credibility because a relatively small proportion of losses in these accident years (the calendar years in which losses are incurred) are reported claims and an even smaller proportion are paid losses. Liability claims are also more susceptible to litigation and can be significantly affected by changing contract interpretations, the legal, political and social environments, the risk and expense of protracted litigation, legal system abuse dynamics, and inflation. Consequently, the estimation of loss reserves for these coverages is more complex and typically subject to a higher degree of variability and uncertainty compared to short-tailed coverages.

Previous wording

Most of our indirect business from our run-off voluntary and ongoing involuntary pools is assumed long-tailed casualty reinsurance. Reserve estimates for this business are therefore subject to the variability caused by extended loss emergence periods. The estimation of loss reserves for this business is further complicated by delays between the time the claim is reported to the ceding insurer and when it is reported by the ceding insurer to the pool manager and then to us, and by our dependence on the quality and consistency of the loss reporting by the ceding company and actuarial estimates by the pool manager. These reserving factors also apply to our discontinued assumed accident and health reinsurance pools and arrangements that are included in our liabilities of discontinued businesses (See “Risk Factors” in Part I – Item 1A for further discussion).

Current wording

Most of our indirect business from our ongoing involuntary and run-off voluntary pools is assumed long-tailed casualty reinsurance. Reserve estimates for this business are therefore subject to the variability caused by extended loss emergence periods. The estimation of loss reserves for this business is further complicated by delays between the time the claim is reported to the ceding insurer and when it is reported by the ceding insurer to the pool manager and then to us, and by our dependence on the quality and consistency of the loss reporting by the ceding company and actuarial estimates by the pool manager. These reserving factors also apply to our discontinued assumed accident and health reinsurance pools and arrangements that are included in our liabilities of discontinued businesses (See “Risk Factors” in Part I – Item 1A for further discussion).

Previous wording

As stated above, numerous factors (both internal and external) contribute to the inherent uncertainty in the process of establishing loss reserves, including changes in the rate of inflation for goods and services related to insured damages (e.g., medical care, home and automobile repairs, etc.), changes in the judicial interpretation of policy provisions and settlement obligations, changes in the general attitude of juries in determining damage awards, delayed court proceedings, legislative actions, such as expanding liability, coverage mandates or expanding or suspending statutes of limitations which otherwise limit the times within which claims can be made, changes in the extent of insured injuries and claims complexion, changes in the trend of expected frequency and/or severity of claims, changes in our book of business (e.g., change in mix due to new or modified product offerings, new or rapidly expanding geographic areas, etc.), changes in our underwriting practices, and changes in claim handling procedures and/or systems. Regarding our indirect business from voluntary and involuntary pools, we are periodically provided loss estimates by managers of each pool. We adopt reserve estimates for the pools that consider this information and other facts.

Current wording

As stated above, numerous factors (both internal and external) contribute to the inherent uncertainty in the process of establishing loss reserves, including changes in the rate of inflation for goods and services related to insured damages (e.g., medical care, home and automobile repairs, etc.), changes in the judicial interpretation of policy provisions and settlement obligations, changes in the general attitude of juries in determining damage awards, delayed court proceedings, legislative actions, such as expanding liability, coverage mandates or expanding or suspending statutes of limitations which otherwise limit the times within which claims can be made, changes in the extent of insured injuries and claims complexion, changes in the trend of expected frequency and/or severity of claims, changes in our book of business (e.g., change in mix due to new or modified product offerings, new or rapidly expanding geographic areas, etc.), changes in our underwriting practices, and changes in claim handling procedures and/or systems. Regarding our indirect business from involuntary and run-off voluntary pools, we are periodically provided loss estimates by managers of each pool. We adopt reserve estimates for the pools that consider this information and other facts.

Previous wording

For each line of business and coverage, we regularly adjust the assumptions and methods used in the estimation of loss reserves in response to our actual loss experience, as well as our judgments regarding changes in trends and/or emerging patterns. In those instances where we primarily utilize analyses of historical patterns of the development of paid and reported losses, this may be reflected, for example, in the selection of revised loss development factors. In longer-tailed classes of business and for which loss experience is less predictable due to potential changes in judicial interpretations, potential legislative actions, the cost of litigation or determining liability and the ultimate loss, inflation, potential claims, shifting claim settlement patterns due to delayed court proceedings, and other issues, this may be reflected in a judgmental change in our estimate of ultimate losses for particular accident years. Most of the insurance policies we have written over many years are written on an “occurrence” basis, which means we insure specified acts or events which occurred during the covered period, even if claims first arise from such events many years later. For example, the industry incurred significant losses as a result of claims arising from asbestos and environmental damage which occurred decades ago and was not known at such time, and in many cases policy limits were available for each year during which such occurrence policies were in place.

Current wording

For each line of business and coverage, we regularly adjust the assumptions and methods used in the estimation of loss reserves in response to our actual loss experience, as well as our judgments regarding changes in trends and/or emerging patterns. In those instances where we primarily utilize analyses of historical patterns of the development of paid and reported losses, this may be reflected, for example, in the selection of revised loss development factors. In longer-tailed classes of business and for which loss experience is less predictable due to potential changes in judicial interpretations, potential legislative actions, the cost of litigation or determining liability and the ultimate loss, inflation, potential claims, shifting claim settlement patterns due to delayed court proceedings, and other issues, this may be reflected in a judgmental change in our estimate of ultimate losses for particular accident years. Most of the insurance policies we have written over many years are written on an “occurrence” basis, which means we insure specified acts or events which occurred during the covered period, even if claims first arise from such events many years later. For example, the industry has incurred significant losses as a result of claims related from sexual abuse and molestation claims which occurred decades ago and were not known at such time, and in many cases policy limits were available for the years during which such occurrence policies were in place.

Previous wording

Personal and Commercial Automobile Bodily Injury – loss reserves recorded for bodily injury on voluntary business were $940.0 million as of December 31, 2024. A key assumption for bodily injury is the inflation rate underlying the estimated reserve. A five point change (e.g., 3% changed to 8% or -2%) in the embedded inflation rate would have changed total reserves by approximately $127 million, either positive or negative, at December 31, 2024.

Current wording

Personal and Commercial Automobile Bodily Injury – loss reserves recorded for bodily injury on voluntary business were $1,039.5 million as of December 31, 2025. A key assumption for bodily injury is the inflation rate underlying the estimated reserve. A five point change (e.g., 3% changed to 8% or -2%) in the embedded inflation rate would have changed total reserves by approximately $183 million, either positive or negative, at December 31, 2025.

Previous wording

Personal Automobile Personal Injury Protection Medical Payment – loss reserves recorded for personal injury protection medical payment on voluntary business were $103.4 million as of December 31, 2024, of which approximately 89% relates to Michigan policies. A key assumption for this coverage is the inflation rate underlying the estimated reserve. Given the long reporting pattern for this line of business, an additional key assumption is the amount of additional development required to reach full maturity, thereby reflecting ultimate costs, as represented by the tail factor. A five point change in the embedded inflation rate (e.g., 6% changed to 11% or 1%) and a one point change to the tail factor assumption (e.g., 1% changed to 0% or 2%) would have changed total reserves by approximately $37 million, either positive or negative, at December 31, 2024.

Current wording

Personal Automobile Personal Injury Protection Medical Payment – loss reserves recorded for personal injury protection medical payment on voluntary business were $104.7 million as of December 31, 2025, of which approximately 87% relates to Michigan policies. A key assumption for this coverage is the inflation rate underlying the estimated reserve. Given the long reporting pattern for this line of business, an additional key assumption is the amount of additional development required to reach full maturity, thereby reflecting ultimate costs, as represented by the tail factor. A five point change in the embedded inflation rate (e.g., 6% changed to 11% or 1%) and a one point change to the tail factor assumption (e.g., 1% changed to 0% or 2%) would have changed total reserves by approximately $36 million, either positive or negative, at December 31, 2025.

Previous wording

Workers’ Compensation – loss reserves recorded for workers’ compensation on voluntary business were $502.1 million as of December 31, 2024. A key assumption for workers’ compensation is the inflation rate underlying the estimated reserve. Given the long reporting pattern for this line of business, an additional key assumption is the amount of additional development required to reach full maturity, thereby reflecting ultimate costs, as represented by the tail factor. A five point change in the embedded inflation rate (e.g., 4% changed to 9% or -1%) and a one point change to the tail factor assumption (e.g., 2% changed to 1% or 3%) would have changed total reserves by approximately $186 million, either positive or negative, at December 31, 2024.

Current wording

Workers’ Compensation – loss reserves recorded for workers’ compensation on voluntary business were $508.9 million as of December 31, 2025. A key assumption for workers’ compensation is the inflation rate underlying the estimated reserve. Given the long reporting pattern for this line of business, an additional key assumption is the amount of additional development required to reach full maturity, thereby reflecting ultimate costs, as represented by the tail factor. A five point change in the embedded inflation rate (e.g., 4% changed to 9% or -1%) and a one point change to the tail factor assumption (e.g., 2% changed to 1% or 3%) would have changed total reserves by approximately $194 million, either positive or negative, at December 31, 2025.

Previous wording

Monoline and Multiple Peril General Liability – loss reserves recorded for monoline and multiple peril general liability on voluntary business were approximately $1.2 billion as of December 31, 2024. A key assumption for monoline and multiple peril general liability is the implied adequacy of the underlying case reserves. A ten point change in case adequacy (e.g., 10% deficiency changed to 0% or 20% deficiency) would have changed total reserves by approximately $165 million, either positive or negative, at December 31, 2024.

Current wording

Monoline and Multiple Peril General Liability – loss reserves recorded for monoline and multiple peril general liability on voluntary business were approximately $1,282.5 million as of December 31, 2025. A key assumption for monoline and multiple peril general liability is the implied adequacy of the underlying case reserves. A ten point change in case adequacy (e.g., 10% deficiency changed to 0% or 20% deficiency) would have changed total reserves by approximately $175 million, either positive or negative, at December 31, 2025.

Previous wording

Specialty Programs – loss reserves recorded for Hanover Programs were $303.2 million as of December 31, 2024. Two key assumptions underlying the actuarial reserve analysis for specialty programs are the inflation rate underlying the estimated reserve for our commercial automobile liability, general liability and workers’ compensation coverages, as well as the tail factor selection for workers’ compensation. A five point change to the embedded inflation rate for the aforementioned coverages (e.g., 4% changed to 9% or -1%), and a one point change in the workers’ compensation tail factor on Hanover Programs (e.g., 0.1% changed to 1.1% or -0.9%) would have changed total reserves by approximately $54 million, either positive or negative, at December 31, 2024.

Current wording

Specialty Programs – loss reserves recorded for Hanover Programs were $285.5 million as of December 31, 2025. Two key assumptions underlying the actuarial reserve analysis for specialty programs are the inflation rate underlying the estimated reserve for our commercial automobile liability, general liability and workers’ compensation coverages, as well as the tail factor selection for workers’ compensation. A five point change to the embedded inflation rate for the aforementioned coverages (e.g., 4% changed to 9% or -1%), and a one point change in the workers’ compensation tail factor on Hanover Programs (e.g., 0.1% changed to 1.1% or -0.9%) would have changed total reserves by approximately $43 million, either positive or negative, at December 31, 2025.

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 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.

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 direct asbestos and environmental business, our run-off voluntary assumed property and casualty reinsurance pools, and run-off product liability business.

Previous wording

For the year ended December 31, 2024, favorable catastrophe loss development was $42.0 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 and Hurricane Ian. In 2023, prior year catastrophe loss development was zero in total. The lower than expected losses in Specialty and Core Commercial were offset by higher than expected losses in Personal Lines that were primarily related to Winter Storm Elliot.

Current wording

For the year ended December 31, 2025, favorable catastrophe loss development was $26.0 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. In 2024, prior year catastrophe loss development was favorable $42.0 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 and Hurricane Ian.

Previous wording

In 2024, net favorable loss and LAE development, excluding catastrophes, was $67.4 million. Specialty favorable development of $46.2 million was primarily due to lower than expected losses of $23.3 million in our general liability-claims-made coverage within our Professional and Executive Lines division and, to a lesser extent, lower than expected losses in our Surety and Specialty P&C divisions. Core Commercial favorable loss and LAE development was $17.7 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 $30.3 million were partially offset by higher than expected losses of $12.6 million across several of the liability lines. Personal Lines favorable development of $4.9 million was primarily due to lower than expected losses of $13.8 million in our personal automobile line and, to a lesser extent, lower than expected losses in our homeowners line. This favorable development was partially offset by higher than expected losses of $13.3 million in other personal lines within our standalone umbrella coverage.

Current wording

In 2024, net favorable loss and LAE development, excluding catastrophes, was $67.4 million. Specialty favorable loss and LAE development of $46.2 million was primarily due to lower than expected losses in our general liability-claims-made coverage within our Professional and Executive Lines division, and in our Marine and Surety and Specialty Property & Casualty divisions. Core Commercial favorable loss and LAE development was $17.7 million, with favorability in each of the main product lines: commercial multiple peril, commercial automobile, workers’ compensation and other commercial lines. Personal Lines favorable development of $4.9 million was primarily due to lower than expected losses in our personal automobile line and, to a lesser extent, lower than expected losses in our homeowners line, partially offset by higher than expected losses in other personal lines.

Previous wording

As of December 31, 2024, we had $10.9 million of net asbestos and environmental reserves, comprised of $8.7 million of direct reserves and $2.2 million of assumed reinsurance pool reserves. This compares to net reserves of $12.4 million as of December 31, 2023. Ending loss and LAE reserves for all direct business written by our insurance companies related to asbestos and environmental damage liability were $8.7 million and $10.3 million, net of reinsurance of $17.2 million and $16.9 million for the years ended December 31, 2024 and 2023, respectively. Activity for our direct asbestos and environmental reserves was not significant to our 2024 or 2023 financial results. As a result of our historical direct underwriting mix of Core Commercial and Specialty policies toward smaller and middle market risks, past asbestos and environmental damage liability loss experience has remained minimal in relation to our total loss and LAE incurred experience. Although we attempt to limit our exposures to asbestos and environmental damage liability through specific policy exclusions, we have been, and may continue to be, subject to claims related to these exposures.

Current wording

As of December 31, 2025, we had $10.5 million of net asbestos and environmental reserves, comprised of $8.3 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.