The Hanover Insurance Group Reports Second Quarter Results

WORCESTER, Mass., July 30 /PRNewswire-FirstCall/ --

-- Net income of $64.4 million, or $1.25 per share, compared to a net
loss
of $10.2 million, or $0.20 per share in the prior-year quarter
-- Segment income after tax of $44.0 million, or $0.86 per share,
compared
to $55.5 million, or $1.07 per share in the prior-year quarter(1)
-- Net premiums written of $663.1 million, 3.5% higher than the
prior-year
quarter
-- A Property and Casualty combined ratio of 96.4%

-- Book value per share increase of $5.13, or 13%, to $43.75 from $38.62
at
March 31, 2009

(Logo: http://www.newscom.com/cgi-bin/prnh/20051031/NEM023LOGO )

Selected Financial Highlights
Quarter ended
in millions, except per share amounts June 30
------------------------------------- ---------------
2009 2008
==== ====
Total Segment Income after taxes(1) $44.0 $55.5
Net realized investment gains (losses) and other,
net of tax 19.1 (7.6)
---- -----
Income from Continuing Operations 63.1 47.9
Income (Loss) from Discontinued Operations
(including assets held-for-sale) 1.3 (58.1)
--- ------
Net Income (Loss) $64.4 $(10.2)
----- -------
Net Income (Loss) per share (Diluted) $1.25 $(0.20)

Book Value Per Share $43.75 $43.57
Book Value Per Share (excluding AOCI) $47.15 $45.55
==================================== ====== ======

(1) Segment income after tax and segment income after tax per share are
non-GAAP measures. The reconciliation of these measures to the
closest GAAP measures, income from continuing operations and income
from continuing operations per share, are provided on page 12 of this
press release.

The Hanover Insurance Group, Inc. (NYSE: THG) today reported net income for
the second quarter of 2009 of $64.4 million, or $1.25 per share, compared to a
net loss of $10.2 million, or $0.20 per share, in the second quarter of 2008.
Net income in the current quarter included an after-tax gain of $22.3 million,
or $0.43 per share, from the company's debt restructuring. Net income in the
current quarter also included an after-tax net realized loss on investments of
$3.6 million, or $0.07 per share, compared to an after-tax net realized loss
of $7.6 million, or $0.15 per share, in the prior-year quarter. The net loss
for the second quarter of 2008 also included an estimated after-tax loss of
$66.1 million, or $1.27 per share, related to the then-pending sale of the
company's run-off life insurance subsidiary, First Allmerica Life Insurance
Company (FAFLIC), partially offset by a gain of $11.1 million, or $0.21 per
share, resulting from the sale of the company's premium finance subsidiary,
AMGRO, that closed in June 2008.

"We had solid results for the quarter, despite headwinds from weather losses,
the market environment and the economy", said Frederick H. Eppinger, chief
executive officer at The Hanover. "Our written premium grew 3.5% and our mix
of business continues to improve. We are seeing benefits from the disruption
in the marketplace and believe our momentum is just beginning to reflect our
recent A.M. Best upgrade to "A." Our visibility to profitable growth
momentum, including improvements in pricing, gives us confidence to continue
to invest in our business in order to capitalize on these opportunities. We
also saw a substantial increase in the market value of our investment
portfolio as credit markets continued to stabilize and overall we generated
book value per share growth of 13% in the quarter."

Total Property and Casualty pre-tax segment income was $76.3 million in the
second quarter of 2009 compared to $94.2 million in the second quarter of the
prior year. The second quarter of 2009 included pre-tax catastrophe losses of
$27.4 million, compared to $38.1 million pre-tax in the prior-year quarter.
The second quarter of 2009 was affected by unusually high non-catastrophe
weather losses, which impacted the prior-year quarter comparison by
approximately $12 million.

The following table details pre-tax segment income (loss).
Quarter ended
$in millions, except per share amounts June 30
-------------------------------------- ---------------
2009 2008
---- ----
Personal Lines $25.6 $38.6
Commercial Lines 50.9 52.7
Other Property and Casualty (0.2) 2.9
---- ---
Total Property & Casualty 76.3 94.2
Interest expense on corporate debt (10.5) (9.9)
----- ----
Total pre-tax segment income 65.8 84.3
Federal income tax expense (21.8) (28.8)
----- -----
Total segment income after
taxes (1) $44.0 $55.5
----- -----
per share(1) $0.86 $1.07
======================= ===== =====

(1) See reconciliation from segment income to net income at the end of
this document.

The following table summarizes the components of the Property and Casualty
GAAP combined ratio:
Quarter ended
June 30
--------------
2009 2008
---- ----
Personal Lines losses (excluding
catastrophes) 55.6% 51.5%
Personal Lines catastrophe-related losses 5.5% 6.7%
Total Personal Lines losses 61.1% 58.2%

Commercial Lines losses (excluding
catastrophes) 39.9% 37.5%
Commercial Lines catastrophe-related losses 2.8% 5.4%
Total Commercial Lines losses 42.7% 42.9%

Total P&C Losses 53.3% 51.7%
Loss adjustment expenses 9.2% 10.5%
Policy acquisition and other underwriting
expenses 33.9% 32.6%
---- ----
Combined Ratio 96.4% 94.8%
============== ==== ====

Personal Lines

Personal Lines pre-tax segment income was $25.6 million in the second quarter
of 2009 compared to $38.6 million in the prior-year quarter. The
year-over-year decline in earnings is primarily the result of higher
non-catastrophe weather-related property losses of approximately $10 million,
lower net investment income and increased pension costs.

The Personal Lines GAAP combined ratio was 99.9% in the second quarter of 2009
compared to 97.5% in the second quarter of 2008. Catastrophe related losses of
$20.1 million contributed 5.5 points to the current quarter combined ratio.
For the second quarter of 2008, catastrophe-related losses were $24.6 million,
or 6.7 points. Favorable development of prior-year loss reserves was $18.7
million, or 5.1 points, in the second quarter of 2009 compared to favorable
development of $22.0 million, or 5.9 points, in the second quarter of 2008.
Favorable development of loss adjustment expenses (LAE) was $2.0 million in
the current quarter compared to adverse development of $1.5 million in the
prior-year quarter. Current quarter favorable LAE development was primarily
driven by the continuing effect of the adjustment in our actuarial methodology
for estimating loss adjustment expense reserves first introduced in the first
quarter of 2009.

Net premiums written were $371.8 million in the second quarter of 2009
compared to $373.5 million in the second quarter of 2008. A reduction in the
average written premium per policy, offset by improved pricing, drove the
relatively flat year-over-year results. The lower average written premium per
policy is primarily the result of planned changes in business mix toward lower
risk drivers.

Commercial Lines

Commercial Lines pre-tax segment income was $50.9 million in the second
quarter of 2009 compared to $52.7 million in the second quarter of 2008. The
year-over-year decline in earnings is primarily the result of higher expenses
and less favorable current accident year results, partially offset by more
favorable prior year loss and LAE reserve development and lower catastrophe
losses. The higher expenses result from increased employee-related costs,
reflecting investments in both core and specialty businesses, operating
expenses related to recently acquired subsidiaries, and higher pension costs.
The current accident year loss ratio was affected by a moderate increase in
large losses in some of our specialty businesses.

The Commercial Lines GAAP combined ratio was 91.8% in the second quarter of
2009 compared to 91.4% in the prior-year quarter. Catastrophe-related losses
were $7.3 million, or 2.8 points, of the second quarter combined ratio in 2009
compared to $13.5 million, or 5.4 points, in the prior-year quarter.
Favorable development of prior-year loss reserves was $17.8 million, or 6.7
points, in the second quarter of 2009 compared to favorable development of
$15.9 million, or 6.4 points, in the second quarter of 2008. Additionally,
favorable development of loss adjustment expenses was $5.8 million in the
current quarter compared to $0.4 million in the prior-year quarter. Current
quarter favorable LAE development was primarily driven by the continuing
effect of the adjustment in our actuarial methodology for estimating loss
adjustment expense reserves first introduced in the first quarter of 2009.

Net premiums written were $291.1 million in the second quarter of 2009
compared to $266.9 million in the second quarter of 2008. Growth in the
company's specialty businesses, including AIX which was acquired in November
2008, accounted for the year-over-year growth in net written premium.

Other Property & Casualty

Other Property & Casualty's pre-tax segment loss was $0.2 million in the
second quarter of 2009 compared to income of $2.9 million in the prior-year
quarter, primarily driven by increased pension expense.

Investment Results

Net investment income from continuing operations decreased by $2.5 million to
$61.3 million for the second quarter of 2009, compared to $63.8 million in the
same period of 2008. This decrease is primarily due to the impact of
defaulted bonds, primarily occurring in the second half of 2008, as well as
lower partnership income and lower new money yields. These decreases were
partially offset by prepayment fees and an increase in investment income
related to our recent acquisitions.

Second quarter 2009 pre-tax net realized investment losses included in
continuing operations were $3.6 million compared to $7.6 million in the same
period of 2008. In the second quarter of 2009, the company recognized
impairment charges to earnings of $6.7 million on certain fixed maturity and
equity securities, which were partially offset by pre-tax net investment gains
of $3.1 million from sales of fixed maturity securities. In the second
quarter of 2008, the company recognized impairments of $8.3 million on fixed
maturity and equity securities, partially offset by pre-tax net realized gains
on sales of securities of $0.7 million.

During the second quarter of 2009, the company adopted FASB Staff Position No.
FAS 115-2, "Recognition and Presentation of Other-Than-Temporary Impairments"
("FSP FAS 115-2"), which revises the recognition and reporting requirements
for other-than-temporary impairments ("OTTI") on debt securities. The company
reviewed OTTI previously recorded through realized losses on securities held
at April 1, 2009 and determined that $33.3 million of these impairments were
related to non-credit factors. Accordingly, under FSP FAS 115-2, the company
increased the amortized cost basis of these debt securities and recorded a
cumulative effect adjustment of $33.3 million within its shareholders' equity.
The cumulative effect adjustment had no effect on total shareholders' equity
as it increased retained earnings and reduced accumulated other comprehensive
income.

Under the new accounting guidance, the credit loss portion of OTTI is recorded
through earnings while the portion attributable to all other factors is
recorded separately as a component of other comprehensive income. During the
second quarter, the company recognized $6.7 million of net impairment losses
through earnings, while the portion of loss recorded as a component of other
comprehensive income was $11.4 million.

Realized gains/(losses) related to continuing
operations:
=============================================
Quarter ended
($in millions) June 30, 2009
------------- -------------
Net gains on sales of securities $3.1
Impairment charges to earnings:
Below investment grade fixed maturities (5.4)
Equity securities (1.3)
----
Total net realized losses $(3.6)
========================= =====

Investment Portfolio
The company held $4.9 billion in cash and investment assets at June 30, 2009,
including cash and investment assets associated with the discontinued accident
and health business.

Fixed maturities and cash with a carrying value of $4.8 billion represented
97% of our investment portfolio. Approximately 93% of our fixed maturity
portfolio is rated investment grade. The following table provides information
about the company's fixed maturity and other investments as of June 30, 2009:

$ in millions Net
Weighted Unrealized
Average Amortized Carrying Gain
Investment type Quality Cost Value (Loss)(2)
--------------- --------- -------- --------- -----------
Corporates: (1)
NAIC 1 A $898.7 $893.3 $(5.4)
NAIC 2 BBB 1,009.8 1,002.1 (7.7)
NAIC 3 or below B+ 317.0 287.7 (29.3)
--- ------- ----- -----
Total Corporates BBB+ 2,225.5 2,183.1 (42.4)

MBS/CMBS/ABS:
MBS AAA 972.0 973.5 1.5
CMBS AA+ 276.1 256.2 (19.9)
ABS BBB+ 55.4 55.0 (0.4)

Municipals:
Taxable AA- 567.9 564.5 (3.4)
Tax Exempt A+ 216.4 211.4 (5.0)

U.S. Government AAA 255.7 256.2 0.5

Total Fixed Maturities A+ 4,569.0 4,499.9 (69.1)
Perpetual Preferred Securities 32.9 32.3 (0.6)
Common Equity Securities 61.7 59.8 (1.9)
---- ---- ----
Total fixed maturity and
equity securities 4,663.6 4,592.0 (71.6)
Cash and cash equivalents 280.7 280.7 -
Mortgage loans 26.2 26.2 -
Other long-term investments 14.9 16.9 2.0
---- ---- ---
$4,985.4 $4,915.8 $(69.6)
-------- -------- ------

(1) NAIC 1 is generally equivalent to an investment grade rating agency
designation of "A" or above; NAIC 2 is generally equivalent to an
investment grade rating agency designation of "BBB"; and NAIC 3 or
below is generally equivalent to a non-investment grade rating agency
designation of "BB" or below.
(2) Net unrealized loss at June 30, 2009 includes $33.3 million cumulative
effect of adoption of FSP FAS 115-2.

The Hanover continues to have no direct exposure to investments in sub-prime
mortgages or sub-prime mortgage-backed securities, nor does it currently own
any collateralized debt or loan obligations or invest in credit derivatives.
Residential mortgage-backed securities constitute $973.5 million of the
company's invested assets. Approximately 84% of the company's residential
mortgage-backed securities are agency issued prime securities and 76% of the
remaining securities are rated AAA. Commercial mortgage-backed securities
(CMBS) constitute $256.2 million of the company's invested assets, of which
approximately 20% are fully defeased with US government securities.
Approximately 84% of the company's CMBS holdings are pre-2005 vintages, with
9% from the 2007 vintage, 5% from the 2006 vintage and 2% from the 2005
vintage. The entire CMBS portfolio, of which approximately 81% was AAA rated,
has a weighted average loan-to-value ratio of approximately 68%. As of June
30, 2009, The Hanover holds $775.9 million of municipal bonds with an overall
rating of AA-. Financial guarantor insurance enhanced municipal bonds
represent $335.4 million, or approximately 43%, of the municipal portfolio.
The overall credit rating of The Hanover's insured municipal bond portfolio,
giving no effect to the insurance enhancement, was A-.

Book Value and Capital Management

The following exhibit provides a roll forward of book value for the quarter
ended June 30, 2009:
$ Amounts $ per share
--------- -----------
Quarter Quarter
Ended Ended
June 30, June 30,
$ in millions, except per share 2009 2009
------------------------------- ---- ----
Beginning of Period Book Value $1,967.6 $38.62
Net Income
Continuing Operations 63.1 1.24
Discontinued Operations 1.3 0.03
Change in AOCI, net of tax
Change in Pension and Postretirement
Related Benefits 4.0 0.08
Change in Net Unrealized Investment Losses
(current) 190.8 3.76
Other items (1.4) (0.03)
Shares Repurchased at Cost (7.1) -
Common Stock Net Activity 2.8 0.05
--- ----
End of Period Book Value $2,221.1 $43.75
======================== ======== ======

In the second quarter of 2009, the company repurchased $7.1 million of common
equity, or approximately 192 thousand shares. At the end of the quarter,
approximately $33 million of the company's $100 million share repurchase
authorization was outstanding.

As previously reported on June 30, 2009, the company completed a tender offer
pursuant to which it repurchased a liquidation amount of $69.3 million of
Capital Securities issued by AFC Capital Trust and $77.3 million of senior
debt. Subsequently, the company liquidated the AFC Capital Trust on July 30,
2009 and exchanged all of the outstanding securities with like debentures
issued directly by The Hanover Insurance Group. Upon the liquidation of the
trust, the company retired an additional $65.0 million of Capital Securities
repurchased previously on the open market. The company realized an after-tax
gain of $22.3 million, or $0.43 per share, associated with these transactions.
As of July 30, 2009, $165.7 million of the subordinated debentures and $122.7
million of the senior debt remain outstanding. As previously disclosed, the
company expects to borrow between $125 million and $150 million from the
Federal Home Loan Bank (FHLB), subject to approval of its application for
membership in the FHLB.

Earnings Conference Call

The Hanover will host a conference call to discuss the company's second
quarter results on Friday, July 31 at 9:00 a.m. Eastern Time. A PowerPoint
slide presentation will accompany our prepared remarks and has been posted on
our Web site. Interested investors and others can listen to the call and
access the presentation through The Hanover's Web site, at www.hanover.com.
Web-cast participants should go to the Web site 15 minutes early to register,
download, and install any necessary audio software. A re-broadcast of the
conference call will be available on this Web site approximately two hours
after the call.

Statistical Supplement

The Hanover's second quarter earnings news release and statistical supplement
are available in the Investors section at www.hanover.com.

Forward-Looking Statements and Non-GAAP Financial Measures

Forward-looking statements
Certain statements in this release or in the above referenced conference call,
may be forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. Use of the words "believes," "anticipates,"
"expects," "projections," "outlook," "should," "could," "confident," "plan,"
"guidance," "on track to" and similar expressions is intended to identify
forward-looking statements. The company cautions investors that any such
forward-looking statements are estimates or projections which involve
significant judgment and not guarantees of future performance, and actual
results could differ materially. In particular, statements in the above
referenced conference call regarding expectations for 2009, including with
respect to net written premium and policies in force growth, retention, new
business growth, net investment income, accident year loss ratios, prior year
reserve development, segment income, expense, and expense ratios and effective
tax rate are forward-looking statements. Statements regarding the possible
impact of the current disruption in the credit markets and in the property and
casualty industry, including the effect of current economic conditions on our
business and investment portfolio, and with respect to the anticipated pricing
environment, are also forward looking statements. Investors should consider
the risks and uncertainties in our business and under current financial market
conditions that may affect such estimates and future performance, including
(i) the inherent difficulties in arriving at such estimates; (ii) the
complexity of estimating losses from large catastrophe events or with respect
to emerging issues such as "Chinese drywall" where circumstances may delay
reporting of the existence, nature or extent of losses or where "demand
surge," regulatory assessments, litigation, coverage and technical
complexities or other factors may significantly impact the ultimate amount of
such losses; (iii) the difficulties of estimating the impact of the current
financial turmoil on the value of our investment portfolio and future
investment income, including the amount of realized losses and impairments
which will be recognized in future financial reports and our ability and
intent to hold such investments until recovery; (iv) the uncertainties in
current circumstances of future rating agency requirements, which could affect
the company as well as the company's investment portfolio; (v) the impact on
our capital and liquidity of the current financial turmoil; and (vi) the
impact of recent federal government intervention into the financial sector.

Investors are directed to consider the risks and uncertainties in the
company's business that may affect future performance and that are discussed
in readily available documents, including the company's annual report and
other documents filed by The Hanover with the Securities and Exchange
Commission and which are also available at www.hanover.com under "Investors."
These uncertainties include the possibility of adverse catastrophe experiences
(including terrorism) and severe weather, the uncertainty in estimating
non-catastrophe weather-related losses, the uncertainties in estimating
property and casualty losses (particularly with respect to products with
longer tails or involving emerging issues and with respect to losses incurred
as the result of Hurricanes Gustav, Ike, Katrina and Rita), the possibility of
adverse judicial decisions, including those which expand policy coverage
beyond its intended scope, the ability to increase or maintain certain
property and casualty insurance rates, the impact of new product introductions
and expansion in geographic areas, the impact of the company's acquisitions of
Professionals Direct, Inc., Verlan Holdings, Inc. and AIX Holdings, Inc.,
adverse loss development and adverse trends in mortality and morbidity and
medical costs, changes in frequency and loss trends, the ability to improve
renewal rates and increase new property and casualty policy counts, investment
impairments (which may be affected by, among other things, our ability and
willingness to hold investment assets until they recover in value), heightened
competition (including increasing rate pressure, particularly in Commercial
Lines), the continued deterioration of the economic environment, particularly
in the state of Michigan, where the company has a significant portion of its
business, adverse state and federal legislation or regulation or regulatory
actions (including in the state of Michigan where the Governor announced
efforts to freeze automobile rates and to initiate actions to reduce
automobile insurance rates and to make them "affordable. . .fair. . .and
equitable"), financial ratings actions, uncertainties in estimating FIN 45
liabilities recorded in conjunction with indemnity obligations undertaken in
connection with the sale of various businesses, including our former life
companies, and increased uncertainties in general economic conditions and in
investment and financial markets, which, among other things, could result in
increased impairments of fixed income investments or the inability to collect
from reinsurers, the performance of the discontinued voluntary pools and
accident and health business that was transferred to The Hanover Insurance
Company from FAFLIC in connection with the sale of FAFLIC, the ability to
realize the benefits in connection with tax attributes from our former life
companies, and various other factors.

Non-GAAP financial measures
The Hanover uses non-GAAP financial measures as important measures of the
Company's operating performance, including total segment income, segment
income after tax, segment income after-tax per share, property and casualty
segment income, and measures of segment income and loss ratios excluding
catastrophe losses and reserve development.

Segment income (sometimes referred to as Property and Casualty segment income)
is net income, excluding federal income taxes and net realized investment
gains and losses, including gains or losses on certain derivative instruments,
because fluctuations in these gains and losses are determined by interest
rates, financial markets and the timing of sales. Segment income also
excludes net gains and losses on disposals of businesses, discontinued
operations, restructuring costs, extraordinary items, the cumulative effect of
accounting changes and certain other items. Property and Casualty segment
income is the sum of the segment income of the three operating segments of The
Hanover's property and casualty operations: Personal Lines, Commercial Lines,
and Other Property and Casualty. The Hanover believes that measures of total
segment income provide investors with a valuable measure of the performance of
the Company's ongoing businesses because they highlight net income
attributable to the core operations of the business.

The Hanover also provides measures of segment income and loss ratios that
exclude the effects of catastrophe losses. A catastrophe is a severe loss,
resulting from natural or manmade events, including risks such as fire,
hurricane, earthquake, windstorm, explosion, terrorism or other similar
events. Each catastrophe has unique characteristics. Catastrophes are not
predictable as to timing or loss amount in advance. The Hanover believes that
a discussion of the effect of catastrophes is meaningful for investors to
understand the variability of periodic earnings and loss ratios.

Reserve development, which can be favorable or unfavorable, represents changes
in our estimate of the costs to pay claims from prior years. We believe that a
discussion of segment income excluding reserve development is helpful to
investors since it provides some insight into our estimate of current year
accident results.

Income from continuing operations is the most directly comparable GAAP measure
for total segment income and measures of segment income that exclude the
effects of catastrophe losses or reserve development. Segment income and
measures of segment income that exclude the effects of catastrophe losses or
reserve development should not be construed as substitutes for net income
determined in accordance with GAAP. A reconciliation of income from
continuing operations to segment income for the quarters ended June 30, 2009
and 2008 is set forth in the table at the end of this document and in the
statistical supplement. Loss ratios calculated in accordance with GAAP are
the most directly comparable GAAP measure for loss ratios calculated excluding
the effects of catastrophe losses. The presentation of loss ratios calculated
excluding the effects of catastrophe losses should not be construed as a
substitute for loss ratios determined in accordance with GAAP.

The Hanover Insurance Group, Inc., based in Worcester, Mass., is the holding
company for a group of insurers that includes The Hanover Insurance Company,
also based in Worcester, Citizens Insurance Company of America, headquartered
in Howell, Michigan, and their affiliates. The Hanover offers a wide range of
property and casualty products and services to individuals, families and
businesses through an extensive network of independent agents, and has been
meeting its obligations to its agent partners and their customers for more
than 150 years. Taken as a group, The Hanover ranks among the top 40 property
and casualty insurers in the United States.

Contact Information

Investors: Media:
Oksana Lukasheva Michael F. Buckley
E-mail: olukasheva@hanover.com E-mail: mibuckley@hanover.com
1-508-855-2063 1-508-855-3099

Definition of Reported Segments
Our continuing operations include three Property and Casualty operating
segments: Personal Lines, Commercial Lines, and Other Property and Casualty.
The Personal Lines segment markets automobile, homeowners and ancillary
coverages to individuals and families. The Commercial Lines segment offers a
suite of products targeted at the small to mid-size business markets, which
include commercial multiple peril, commercial automobile, workers'
compensation and other commercial coverages, such as fidelity and surety
bonds, and inland marine. The Other Property and Casualty segment includes
Opus Investment Management, Inc., which provides investment management
services to institutions, pension funds and other organizations, as well as a
block of run-off voluntary pools business, in which we have not actively
participated since 1995.

THE HANOVER INSURANCE GROUP, INC.
Quarter ended
in millions, except per share amounts June 30
------------------------------------- -------
2009 2008
---- ----
Net income (loss) $64.4 $(10.2)
Net income (loss) per share(diluted) $1.25 $(0.20)
Weighted average shares 51.4 51.8
======================= ==== ====

The following is a reconciliation from segment income to net income (loss)
(1):

Quarter ended June 30

$ in millions except per share 2009 2008
----------------------------- --------------- ---------------
$ Per $ Per
Share(2) Share(2)
--------------- ---------------
Property and Casualty
Personal Lines $25.6 $-- $38.6 $--
Commercial Lines 50.9 -- 52.7 --
Other Property & Casualty (0.2) -- 2.9 --
----- ---
Total Property and Casualty 76.3 -- 94.2 --

Interest expense on corporate debt (10.5) -- (9.9) --
------ -----
Total segment income 65.8 1.28 84.3 1.63
Federal income tax expense on
segment income (21.8) (0.42) (28.8) (0.56)
------ ------ ------ ------
Total segment income after
federal income taxes 44.0 0.86 55.5 1.07

Net realized investment losses
and other (3.5) (0.07) (7.6) (0.15)

Gain on tender offer 34.3 0.67 -- --
Federal income tax expense on
non-segment income (11.7) (0.23) -- --
------ ------
Income from continuing
operations, net of taxes 63.1 1.23 47.9 0.92
Gain (loss) from discontinued
FAFLIC business (includes loss
on assets held-for-sale of
$66.1 in 2008) 0.9 0.02 (67.7) (1.30)
Gain (loss) from discontinued
accident and health business 0.2 -- -- --
Income from operations of AMGRO
(includes gain on disposal of
$11.1 in 2008) -- -- 10.4 0.20
Gain (loss) on disposal of
variable business, net of taxes 0.2 -- (0.8) (0.02)

Other -- -- -- --

Net income (loss) (3) $64.4 $1.25 $(10.2) $(0.20)
======================== ===== ===== ======= =======

Six months ended June 30

$in millions except per share 2009 2008
----------------------------- --------------- ---------------
$ Per $ Per
Share(2) Share(2)
--------------- ---------------
Property and Casualty
Personal Lines $28.7 $-- $65.7 $--
Commercial Lines 98.5 -- 120.7 --
Other Property & Casualty (1.0) -- 4.5 --
----- ---
Total Property and Casualty 126.2 -- 190.9 --

Interest expense on corporate debt (20.9) -- (19.9) --
------ ------
Total segment income 105.3 2.05 171.0 3.28
Federal income tax expense on
segment income (34.9) (0.68) (57.9) (1.11)
------ ------ ------ ------
Total segment income after
federal income taxes 70.4 1.37 113.1 2.17

Net realized investment losses
and other (9.7) (0.19) (7.9) (0.15)

Gain on tender offer 34.3 0.67 -- --
Federal income tax expense on
non-segment income (11.7) (0.23) -- --
------ ------
Income from continuing
operations, net of taxes 83.3 1.62 105.2 2.02
Gain (loss) from discontinued
FAFLIC business (includes loss
on assets held-for-sale of
$66.1 in 2008) 5.9 0.11 (71.2) (1.37)
Gain (loss) from discontinued
accident and health business (3.1) (0.06) -- --
Income from operations of AMGRO
(includes gain on disposal of
$11.1 in 2008) -- -- 10.1 0.20
Gain (loss) on disposal of
variable business, net of taxes 4.1 0.08 5.4 0.10

Other -- -- (1.2) (0.02)
----- ------
Net income (loss) (3) $90.2 $1.75 $48.3 $0.93
======================== ===== ===== ===== =====

(1) In accordance with Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related
Information," the separate financial information of each segment is
presented consistent with the way results are regularly evaluated by
the chief operating decision maker in deciding how to allocate
resources and in assessing performance. Management evaluates the
results of the aforementioned segments on a pre-tax basis. Segment
income is determined by adjusting net income for net realized
investment gains and losses including certain gains or losses on
derivative instruments, because fluctuations in these gains and losses
are determined by interest rates, financial markets and the timing of
sales. Also, segment income excludes net gains and losses on
disposals of businesses, discontinued operations, restructuring costs,
extraordinary items, the cumulative effect of accounting changes and
certain other items.

(2) Per Share data is per diluted share of common stock.

(3) Basic net income per share was $1.26 and $(0.20) for quarters ended
June 30, 2009 and 2008, respectively, and $1.77 and $0.94 for the six
months ended June 30, 2009 and 2008, respectively.

All figures reported are unaudited

SOURCE The Hanover Insurance Group, Inc.

Investors, Oksana Lukasheva, +1-508-855-2063, olukasheva@hanover.com, or
Media, Michael F. Buckley, +1-508-855-3099, mibuckley@hanover.com, both of The
Hanover Insurance Group, Inc.