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 our combined reporting segments for the periods indicated:

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Operating income before interest expense and income taxes was $250.2 million for the three months ended March 31, 2026, compared to $186.4 million for the three months ended March 31, 2025, an improvement of $63.8 million. This increase was primarily due to improvements in current accident year underwriting results and higher net investment income.

Net premiums written increased $48.9 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in net premiums written was due to renewal price increases and an increase in new business volume.

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

Core Commercial net premiums written were $630.4 million for the three months ended March 31, 2026, compared to $604.6 million for the three months ended March 31, 2025. The $25.8 million increase in net premiums written was primarily driven by renewal price increases.

Core Commercial underwriting profit for the three months ended March 31, 2026 was $17.8 million, compared to an underwriting loss of $20.0 million for the three months ended March 31, 2025, a favorable change of $37.8 million. Catastrophe losses for the three months ended March 31, 2026 were $30.4 million, compared to $46.0 million for the three months ended March 31, 2025, a decrease of $15.6 million.

Core Commercial current accident year underwriting profit, excluding catastrophes, was $46.6 million for the three months ended March 31, 2026, compared to $24.7 million for the three months ended March 31, 2025. This increase was primarily driven by lower current accident year large property losses in our commercial multiple peril line of business.

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

Specialty net premiums written were $366.7 million for the three months ended March 31, 2026, compared to $358.3 million for the three months ended March 31, 2025. The $8.4 million increase in net premiums written was primarily due to renewal price increases and, to a lesser extent, an increase in new business.

Specialty underwriting profit for the three months ended March 31, 2026 was $56.1 million, compared to $41.2 million for the three months ended March 31, 2025, an increase of $14.9 million. Catastrophe losses for the three months ended March 31, 2026 were $9.6 million, compared to $14.7 million for the three months ended March 31, 2025, a decrease of $5.1 million. Net favorable development on prior years’ loss reserves for the three months ended March 31, 2026 was $14.2 million, compared to $15.9 million for the three months ended March 31, 2025, a decrease of $1.7 million.

Specialty current accident year underwriting profit, excluding catastrophes, was $51.5 million for the three months ended March 31, 2026, compared to $40.0 million for the three months ended March 31, 2025. The $11.5 million increase in underwriting results was primarily driven by lower current accident year losses in our E&S and Alternative Markets division and marine line, within our Marine and Industrial Property division, and to a lesser extent, 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

Personal Lines net premiums written were $562.6 million for the three months ended March 31, 2026, compared to $547.9 million for the three months ended March 31, 2025. The $14.7 million increase in net premiums written was primarily due to higher new business volume.

Net premiums written in the personal automobile line of business were $327.2 million for the three months ended March 31, 2026, compared to $323.8 million for the three months ended March 31, 2025, an increase of $3.4 million. Personal automobile PIF decreased by 2.2% since March 31, 2025. Net premiums written in the homeowners and other lines of business for the three months ended March 31, 2026 were $235.4 million, compared to $224.1 million for the three months ended March 31, 2025, an increase of $11.3 million. Homeowners PIF decreased by 2.2% since March 31, 2025.

Personal Lines underwriting profit for the three months ended March 31, 2026 was $52.3 million, compared to $61.7 million for the three months ended March 31, 2025, a decrease in underwriting results of $9.4 million. Catastrophe losses for the three months ended March 31, 2026 were $58.9 million, compared to an unusually low $34.9 million for the three months ended March 31, 2025, an increase of $24.0 million. Net favorable development on prior years’ loss reserves for the three months ended March 31, 2026 was $9.2 million, compared to $2.8 million for the three months ended March 31, 2025, an increase of $6.4 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $102.0 million for the three months ended March 31, 2026, compared to $93.8 million for the three months ended March 31, 2025. The $8.2 million increase in underwriting results was primarily due to lower current accident year losses in our homeowners and other personal lines.

We obtained pricing increases of approximately 11% in our homeowners line and approximately 7% in our personal automobile line during the first quarter of 2026 and believe that our ability to obtain a similar level of pricing increases will continue. Consistent with our expectations, PIF was largely unchanged compared to the end of 2025, but declined as compared to the first three months of 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.

Other

Our Other segment had operating profit of $2.2 million for the three months ended March 31, 2026, compared to $0.8 million for the three months ended March 31, 2025, an increase of $1.4 million, due to higher net investment income.

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. “Marine and Industrial Property” division includes marine and specialty industrial and commercial property coverages. “Professional and Executive Lines” division includes management liability, fidelity and crime, professional liability and other property and liability lines for healthcare firms. “E&S and Alternative Markets” division includes excess and surplus lines, program business, and specialty general liability coverages. “Surety and Other” includes contract and commercial surety coverages. Loss and LAE reserves in our “Total Other” segment relate to run-off direct asbestos and environmental, run-off voluntary assumed property and casualty reinsurance pools, and run-off product liability business.

The following table summarizes prior year (favorable) unfavorable development by segment:

It is not possible to know whether the factors that affected loss reserves in the first three months of 2026 will also occur in future periods. We encourage you to read our 2025 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 three months ended March 31, 2026, favorable catastrophe loss development was $48.8 million, primarily due to lower than expected losses related to several convective storms across multiple states from accident years 2025 and 2024, including lower than expected large commercial multiple peril losses in Core Commercial and lower than expected homeowners severity in Personal Lines. In 2025, favorable catastrophe development was $12.0 million, primarily due to lower than expected losses in our commercial multiple peril line related to events from accident years 2021 though 2023, including several convective storms across multiple states, and Winter Storm Elliot.

2026 Loss and LAE Development, excluding catastrophes

For the three months ended March 31, 2026, net favorable loss and LAE development, excluding catastrophes, was $25.0 million. Specialty favorable loss and LAE development of $14.2 million was primarily due to lower than expected losses in our Marine and Industrial Property division, driven by our inland marine coverage, our E&S and Alternative Markets division, and, to a lesser extent, our Surety and Other division. Within Personal Lines, lower than expected losses of $9.2 million were driven primarily by homeowners property coverages.

2025 Loss and LAE Development, excluding catastrophes

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

Asbestos and Environmental Reserves

As of March 31, 2026, we had $9.8 million of net asbestos and environmental reserves, comprised of $8.1 million of direct reserves and $1.7 million of assumed reinsurance pool reserves. This compares to net reserves of $10.5 million at December 31, 2025, comprised of $8.3 million of direct reserves and $2.2 million of assumed reinsurance pool reserves. 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.

Reinsurance Recoverables

Reinsurance recoverables were $2,051.7 million and $2,011.1 million at March 31, 2026 and December 31, 2025, respectively, of which $65.1 million and $62.6 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 $34.4 million and $30.5 million at March 31, 2026 and December 31, 2025, respectively, and billable non-MCCA reinsurance recoverables totaled $30.7 million and $32.1 million at March 31, 2026 and December 31, 2025, respectively. Billed balances outstanding greater than 90 days at March 31, 2026 and December 31, 2025 were not material.