MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS – InsuranceNewsNet

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TABLE OF CONTENTS

  Introduction                                    24
  Executive Overview                              24
  Description of Operating Segments               25
  Results of Operations - Consolidated            25
  Results of Operations - Segments                27
  Investments                                     32
  Other Items                                     35
  Income Taxes                                    35
  Critical Accounting Estimates                   36
  Statutory Surplus of Insurance Subsidiaries     36
  Liquidity and Capital Resources                 36
  Contingencies and Regulatory Matters            38
  Risks and Forward - Looking Statements          38





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  Table of Contents


Introduction

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations is intended to assist readers in understanding the interim
consolidated results of operations and financial condition of The Hanover
Insurance Group, Inc. and its subsidiaries ("THG"). Consolidated results of
operations and financial condition are prepared in accordance with generally
accepted accounting principles in the United States of America ("U.S. GAAP").
This discussion should be read in conjunction with the interim consolidated
financial statements and related footnotes included elsewhere in this Quarterly
Report on Form 10-Q and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K
filed with the Securities and Exchange Commission (the "SEC") on February 25,
2022.

Results of operations include the accounts of The Hanover Insurance Company
("Hanover Insurance") and Citizens Insurance Company of America ("Citizens"),
our principal property and casualty insurance companies, and other insurance and
non-insurance subsidiaries. Our results of operations also include the results
of our discontinued operations, consisting primarily of our former accident and
health and former life insurance businesses.

Executive Overview

Commercial activities consist of four operating segments: Core Commercial,
Specialty, personal lines and others.

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

During the three months ended March 31, 2022, our net income was $104.8 million,
compared to $92.7 million for the three months ended March 31, 2021, an increase
of $12.1 million, primarily due to higher operating income, partially offset by
changes in the fair value of equity securities.

Operating income before interest expense and income taxes (a non-GAAP financial
measure; see also "Results of Operations - Consolidated - Non-GAAP Financial
Measures") was $154.4 million for the three months ended March 31, 2022,
compared to $85.1 million for the three months ended March 31, 2021, an increase
of $69.3 million. This increase was primarily due to lower catastrophe losses
and earned premium growth, partially offset by higher personal automobile
current accident year losses. The higher personal automobile losses were
primarily due to higher severity, as a result of inflation and to supply chain
disruptions.

Pre-tax catastrophe losses were $45.5 million for the three months ended March
31, 2022, compared to $133.3 million during the same period of 2021, a decrease
of $87.8 million. The higher level of catastrophe losses in 2021 was primarily
due to the freeze events in Texas and surrounding states. Net favorable
development on prior years' loss reserves was $6.0 million for the three months
ended March 31, 2022, compared to $8.2 million for the three months ended March
31, 2021, a decrease of $2.2 million.

As vaccination efforts and other factors have mitigated the ongoing severity of
the COVID-19 pandemic ("Pandemic"), states are lifting restrictions, businesses
that ceased operations are re-opening, new businesses are being created, and
companies that shifted to remote work environments have begun transitioning back
to the workplace. Nevertheless, the impact of the Pandemic on U.S. and global
financial markets and economies continues to evolve, is complex and uncertain,
and is outside our control. These complexities have been compounded by a
substantial increase in inflation and supply chain disruptions. As a result, we
are experiencing higher claims costs, particularly in our automobile and
homeowners lines of business. Several other uncertainties persist, including,
among others, return to workplace initiatives, virus variants, vaccination
rates, driving patterns and court caseload backlogs. We continue to believe that
the effect of these uncertainties on our near-term results should be manageable.
However, they may affect the property and casualty insurance industry, our
business, and our financial results over the intermediate and long-term. (See
"Contingencies and Regulatory Matters" and "Item 1A - Risk Factors" for further
discussion).

Core Commercial

Core Commercial entails two distinct businesses, small commercial and middle
market, both of which focus on account business, including commercial multiple
peril, commercial automobile, workers' compensation and other (general
liability, ancillary professional, commercial umbrella, and monoline
property). Small commercial focuses on small businesses, with annual policy
premiums up to $50,000. Small commercial recently launched TAP sales, a quoting
platform, that has generated a 20% increase in new business submissions during
the quarter, enhancing the ease of doing business. Middle market provides
coverage to mid-sized businesses with annual policy premiums between $50,000 and
$500,000. Middle market offers coverage in distinct industry segments, including
technology, manufacturing, human services, retail, real estate, and others. We
believe that our account-focused approach to the small commercial market and
distinctiveness in the middle market provides us with a diversified portfolio of
products and 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 industry
segmentation. Net premiums written increased 9.6% in the first three months of
2022, compared to the same period in 2021, primarily driven by pricing and
exposure increases and continued strong retention.

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Contents

Underwriting results increased in the first three months of 2022, primarily due
to lower catastrophe losses. The competitive nature of the Core Commercial
market requires us to be highly disciplined in our underwriting process to
ensure that we write business at acceptable margins, and we continue to seek
rate increases across many lines of business.

Speciality

Specialty offers a competitive set of products that is 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 distribution of Specialty products, primarily with
retail agents supplemented by select specialists, serves as a complement to our
Core Commercial business and helps to enhance our overall agent value and
increase growth opportunities. Net premiums written increased 9.4% in the first
three months of 2022, compared to the same period in 2021, primarily due to
pricing increases.

Underwriting results increased in the first three months of 2022, primarily due
to lower catastrophe losses and higher favorable development of prior years'
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.

Personal Lines

Personal Lines focuses on working with high quality, value-oriented agencies
that deliver consultative selling to customers and stress the importance of
account rounding (the conversion of single policy customers to accounts with
multiple policies and/or additional coverages, to address customers' broader
objectives). Approximately 87% of our policies in force have been issued to
customers with multiple policies and/or coverages with us. We are focused on
seeking profitable growth opportunities, building a distinctive position in the
market in order to meet our customers' needs and diversifying geographically. We
continue to seek appropriate rate increases that meet or exceed underlying loss
cost trends, subject to regulatory and competitive considerations.

Net premiums written increased by 10.1% in the first three months of 2022,
compared to the same period in 2021, primarily due to increased new business
production and improved retention. Underwriting results decreased in the first
three months of 2022, primarily due to higher current accident year personal
automobile losses and unfavorable development of prior years' loss reserves in
our homeowners line, partially offset by earned premium growth.

Description of operating segments

Primary business operations include insurance products and services currently
provided through four operating 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 (provides
commercial insurance to markets with specialized coverage or risk management
needs related to groups of similar businesses), specialty industrial and
commercial property, and excess and surplus lines. Personal Lines includes
personal automobile, homeowners and other personal coverages, such as
umbrella. Included in the "Other" segment are Opus Investment Management, Inc.,
which markets investment management services to institutions, pension funds, and
other organizations; 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 and run-off direct asbestos and
environmental businesses. During the first quarter of 2022, we disaggregated our
former Commercial Lines segment into the aforementioned Core Commercial and
Specialty segments. Prior periods reflect this new presentation. This
presentation is consistent with the manner in which our chief operating decision
maker evaluates results in deciding how to allocate resources and in assessing
performance.

We report interest expense on debt separately from the earnings of our operating
segments. This consists primarily of interest on our senior and subordinated
debentures.

Results of Operations – Consolidated

Consolidated net income for the three months ended March 31, 2022 was $104.8
million, compared to $92.7 million for the three months ended March 31, 2021, an
increase of $12.1 million. The increase in consolidated net income was primarily
due to an increase in operating income before interest expense and income taxes
for the three months ended March 31, 2022, partially offset by higher after-tax
net realized and unrealized investment losses of approximately $43.8 million,
primarily related to the change in the fair value of equity securities.
Operating income before interest expense and income taxes increased $69.3
million primarily due to lower catastrophe losses and earned premium growth,
partially offset by higher current accident year losses in our Personal Lines
segment.

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The following table reflects operating income before interest expense and income
taxes for each operating segment and a reconciliation to consolidated net income
from operating income before interest expense and income taxes (a non-GAAP
measure).

                                                              Three Months Ended
                                                                   March 31,
(in millions)                                               2022               2021
Operating income (loss) before interest expense and
income taxes:
Core Commercial                                         $        67.5      $      (14.8 )
Specialty                                                        50.0              17.0
Personal Lines                                                   36.3              81.8
Other                                                             0.6               1.1

Operating profit before charges and interest income
taxes

                                                           154.4       

85.1

Interest expense on debt                                         (8.5 )            (8.5 )
Operating income before income taxes                            145.9       

76.6

Income tax expense on operating income                          (28.2 )           (15.2 )
Operating income                                                117.7       

61.4

Non-operating items:
Net realized and unrealized investment gains (losses)           (15.9 )     

37.5

Income tax benefit (expense) on non-operating items               3.5              (6.1 )
Income from continuing operations, net of taxes                 105.3       

92.8

Discontinued operations (net of taxes):
Loss from discontinued life businesses                           (0.5 )            (0.1 )
Net income                                              $       104.8      $       92.7


Non-GAAP Financial Measures

In addition to consolidated net income, discussed above, we assess our financial
performance based upon pre-tax "operating income," and we assess the operating
performance of each of our four operating segments based upon the pre-tax
operating income (loss) generated by each segment. As reflected in the table
above, operating income before interest expense and income taxes excludes
interest expense on debt and certain other items which we believe are not
indicative of our core operations, such as net realized and unrealized
investment gains and losses. Such gains and losses are excluded since they are
determined by interest rates, financial markets and the timing of sales. Also,
operating income before interest expense and income taxes excludes net gains and
losses on disposals of businesses, gains and losses related to the repayment of
debt, discontinued operations, costs to acquire businesses, restructuring costs,
the cumulative effect of accounting changes and certain other items. Although
the items excluded from operating income before interest expense and income
taxes are important components in understanding and assessing our overall
financial performance, we believe a discussion of operating income before
interest expense and income taxes enhances an investor's understanding of our
results of operations by highlighting net income attributable to the core
operations of the business. However, operating income before interest expense
and income taxes, which is a non-GAAP measure, should not be construed as a
substitute for income before income taxes or income from continuing operations,
and operating income should not be construed as a substitute for net income.

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.

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Results of operations – Segments

The following is our discussion and analysis of the results of operations by
business segment. The operating results are presented before interest expense,
income taxes and other items, which management believes are not indicative of
our core operations, including realized gains and losses, as well as unrealized
gains and losses on equity securities, and the results of discontinued
operations.

The following table summarizes the results of operations for the periods
indicated:

                                                               Three Months Ended
                                                                    March 31,
(in millions)                                                 2022            2021
Operating revenues
Net premiums written                                        $ 1,312.3       $ 1,196.1
Net premiums earned                                         $ 1,263.8       $ 1,161.8
Net investment income                                            76.9            76.8
Other income                                                      5.9             6.0
Total operating revenues                                      1,346.6         1,244.6
Losses and operating expenses
Losses and LAE                                                  787.5       

781.3

Amortization of deferred acquisition costs                      262.9       

240.3

Other operating expenses                                        141.8       

137.9

Total losses and operating expenses                           1,192.2       

1,159.5

Operating profit before interest expense and income taxes $154.4 $85.1

Three months completed March 31, 2022 Compared to the three months ended March 31, 2021

Operating income before interest expense and income taxes was $154.4 million for
the three months ended March 31, 2022, compared to $85.1 million for the three
months ended March 31, 2021, an increase of $69.3 million. This increase was
primarily due to lower catastrophe losses and earned premium growth, partially
offset by higher personal automobile current accident year losses.

Net premiums written increased $116.2 million for the three months ended March
31, 2022, compared to the three months ended March 31, 2021, primarily due to
rate and exposure increases and continued strong retention.

Production and underwriting results

The following tables summarize premiums written on a gross and net basis, net
premiums earned and loss (including catastrophe losses), LAE, expense and
combined ratios for the Core Commercial, Specialty, and Personal Lines segments.
Loss, LAE, catastrophe loss and combined ratios shown below include prior year
reserve development. These items are not meaningful for our Other segment.

                                                                 Three Months Ended March 31, 2022
                                  Gross          Net           Net
                                Premiums      Premiums      Premiums       Catastrophe      Loss & LAE       Expense       Combined
(dollars in millions)            Written       Written       Earned        Loss Ratios        Ratios         Ratios         Ratios
Core Commercial                 $   591.9     $   526.6     $   474.7               4.1            60.2          32.8           93.0
Specialty                           379.1         302.8         283.8               2.7            52.3          35.4           87.7
Personal Lines                      499.1         482.9         505.3               3.6            69.9          27.2           97.1
Total                           $ 1,470.1     $ 1,312.3     $ 1,263.8               3.6            62.3          31.1           93.4

                                                                 Three Months Ended March 31, 2021
                                  Gross          Net           Net
                                Premiums      Premiums      Premiums       Catastrophe      Loss & LAE       Expense       Combined
(dollars in millions)            Written       Written       Earned        Loss Ratios        Ratios         Ratios         Ratios
Core Commercial                 $   539.9     $   480.6     $   435.2              21.7            78.7          33.0          111.7
Specialty                           344.1         276.8         257.7               9.5            62.9          35.9           98.8
Personal Lines                      453.6         438.7         468.9               3.1            59.0          28.0           87.0
Total                           $ 1,337.6     $ 1,196.1     $ 1,161.8              11.5            67.2          31.6           98.8




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The following table summarizes WE GAAP Underwriting Results for Core
Business, Specialty, Personal and Other segments and brings them closer to
operating profit before interest expense and income taxes.

                                                                                                                 Three Months Ended March 31,
                                                                          2022                                                                                               2021
                                  Core Commercial               Specialty     Personal            Other           Total          Core Commercial         Specialty            Personal               Other             Total
(in millions)                                                                   Lines                                                                                          Lines
Underwriting profit,
excluding
  prior year reserve
development
  and catastrophes            $             45.5            $     28.3     $      44.1       $        -       $    117.9       $            40.4        $      25.8                $    68.2            $     -          $   134.4
Prior year favorable
(unfavorable)
  loss and LAE reserve
development
  on non-catastrophe losses                  6.4                  13.2           (13.6 )              -              6.0                     2.7                0.6                      5.2               (0.3 )              8.2
Prior year favorable
(unfavorable)
  catastrophe development                      -                     -               -                -                -                     0.1               (0.1 )                      -                  -                  -
Current year catastrophe
losses                                     (19.7 )                (7.6 )         (18.2 )              -            (45.5 )                 (94.5 )            (24.3 )                  (14.5 )                -             (133.3 )
Underwriting profit (loss)                  32.2                  33.9            12.3                -             78.4                   (51.3 )              2.0                     58.9               (0.3 )              9.3
Net investment income                       35.4                  16.2            22.6              2.7             76.9                    36.9               14.9                     22.1                2.9               76.8
Fees and other income                        1.0                   1.3             2.8              0.8              5.9                     0.8                1.6                      2.3                1.3                6.0
Other operating expenses                    (1.1 )                (1.4 )          (1.4 )           (2.9 )           (6.8 )                  (1.2 )     
       (1.5 )                   (1.5 )             (2.8 )             (7.0 )
Operating income (loss)
before
  interest expense and
income taxes                  $             67.5            $     50.0     $      36.3       $      0.6       $    154.4       $           (14.8 )      $      17.0                $    81.8            $   1.1          $    85.1



Core Commercial

Core Commercial net premiums written were $526.6 million for the three months
ended March 31, 2022, compared to $480.6 million for the three months ended
March 31, 2021. This $46.0 million increase was primarily driven by pricing and
exposure increases and continued strong retention.

Core Commercial underwriting profit for the three months ended March 31, 2022
was $32.2 million, compared to a $51.3 million loss for the three months ended
March 31, 2021, a favorable change of $83.5 million. Catastrophe losses for the
three months ended March 31, 2022 were $19.7 million, compared to $94.4 million
for the three months ended March 31, 2021, a decrease of $74.7 million. The
higher catastrophe losses in 2021 were primarily due to freeze events in Texas
and surrounding states. Net favorable development on prior year's loss reserves
for the three months ended March 31, 2022 was $6.4 million, compared to $2.7
million for the three months ended March 31, 2021, an increase of $3.7 million.

Underwriting result for the current loss year Core Commercial, excluding
disasters, has been $45.5 million for the three months ended March 31, 2022,
compared to $40.4 million for the three months ended March 31, 2021. This $5.1
million
the increase is mainly attributable to the growth in earned premiums.

We continue to manage underwriting performance through rate actions, 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. Due to uncertainty caused by
the Pandemic and the increase in inflation, there is a level of uncertainty in
our ability to grow our business and maintain or improve our underwriting
profitability in this environment. The extent and duration of these
uncertainties are unknown and may result in an increase in claims costs and
reduced premium levels.

Speciality

Specialty net premiums written were $302.8 million for the three months ended
March 31, 2022, compared to $276.8 million for the three months ended March 31,
2021. This $26.0 million increase was primarily driven by improved retention and
pricing, especially in our Professional and Executive and Specialty P&C
divisions.

Specialty underwriting profit for the three months ended March 31, 2022 was
$33.9 million, compared to $2.0 million for the three months ended March 31,
2021, an increase of $31.9 million. Catastrophe losses for the three months
ended March 31, 2022 were $7.6 million, compared to $24.4 million for the three
months ended March 31, 2021, a decrease of $16.8 million. The higher catastrophe
losses in 2021 were primarily due to freeze events in Texas and surrounding
states. Net favorable development on prior year's loss reserves for the three
months ended March 31, 2022 was $13.2 million, compared to $0.6 million for the
three months ended March 31, 2021, an increase of $12.6 million.

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Specialty current accident year underwriting profit, excluding catastrophes, was
$28.3 million for the three months ended March 31, 2022, compared to $25.8
million for the three months ended March 31, 2021. This $2.5 million increase
was primarily driven by earned premium growth.

We continue to manage underwriting performance through rate actions, 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. Due to
uncertainty caused by the Pandemic and the increase in inflation, there is a
level of uncertainty in our ability to grow our business and maintain or improve
our underwriting profitability in this environment. The extent and duration of
these uncertainties are unknown and may result in an increase in claims costs
and reduced premium levels.

Personal Lines

Net written premiums for individuals were $482.9 million for three months
finished March 31, 2022compared to $438.7 million for the three months ended
March 31, 2021. The growth in premiums $44.2 million was mainly motivated by
increased new business and retention.

Net premiums written in the personal automobile line of business for the three
months ended March 31, 2022 were $298.4 million, compared to $280.7 million for
the three months ended March 31, 2021, an increase of $17.7 million. Personal
automobile policies in force increased by 8.0%. Net premiums written in the
homeowners and other lines of business for the three months ended March 31, 2022
were $184.5 million, compared to $158.0 million for the three months ended March
31, 2021, an increase of $26.5 million. Homeowners policies in force increased
by 7.5%.

Personal Lines underwriting profit for the three months ended March 31, 2022 was
$12.3 million, compared to $58.9 million for the three months ended March 31,
2021, a decrease of $46.6 million. Catastrophe losses for the three months ended
March 31, 2022 were $18.2 million, compared to $14.5 million for the three
months ended March 31, 2021, an increase of $3.7 million. Net unfavorable
development on prior year's loss reserves for the three months ended March 31,
2022 was $13.6 million, compared to $5.2 million of favorable development for
the three months ended March 31, 2021. The 2022 unfavorable development was
primarily related to a higher severity of losses in our homeowners line.

Personal Lines current accident year underwriting profit, excluding
catastrophes, was $44.1 million for the three months ended March 31, 2022,
compared to $68.2 million for the three months ended March 31, 2021. This $24.1
million decrease was primarily due to higher current accident year loss severity
in our personal automobile line, partially offset by lower expenses and higher
earned premium growth. We experienced an increase in physical damage and
property severity associated with supply chain issues and limited availability
of new vehicles due to chip shortages, higher used vehicle prices, and higher
cost of parts.

We have been able to obtain rate increases in our Personal Lines markets and
believe that our ability to obtain increases will continue over the long-term.
Our ability to maintain Personal Lines net premiums written may be affected,
however, by price competition, and regulatory and legal activity and
developments. See "Contingencies and Regulatory Matters." Additionally, these
factors, along with weather-related loss volatility, may also affect our ability
to maintain and improve underwriting results. We monitor these trends and
consider them in our rate actions. Due to uncertainty caused by the Pandemic and
the increase in inflation, there is a level of uncertainty in our ability to
retain or grow our business, and may result in an increase in claims costs.

Other

Our Other segment recorded an operating profit of $0.6 million for three months
finished March 31, 2022compared to $1.1 million for the three months ended March
31, 2021
a decrease of $0.5 million.

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Provision for claims and claims settlement expenses

The table below presents a reconciliation of the gross beginning and ending amounts
provision for unpaid claims and claims adjustment expenses.

                                                             Three Months Ended
                                                                  March 31,
(in millions)                                               2022             2021

Gross provision for losses and LAE, beginning of period $6,447.6 $

6,024.0

Reinsurance recoverable on unpaid losses                     1,693.8        

1,641.6

Net provision for losses and LAE, beginning of period 4,753.8

4,382.4

Net incurred losses and LAE in respect of losses
occurring in:
Current year                                                   793.5        

789.5

Prior year non-catastrophe loss development                     (6.0 )           (8.2 )
Total incurred losses and LAE                                  787.5        

781.3

Net payments of losses and LAE in respect of losses
occurring in:
Current year                                                   191.1            178.5
Prior years                                                    534.2            435.0
Total payments                                                 725.3            613.5
Net reserve for losses and LAE, end of period                4,816.0        

4,550.2

Reinsurance recoverable on unpaid losses                     1,696.2        

1,673.5

Gross provision for losses and LAE, end of period $6,512.2 $

6,223.7


The table below summarizes the gross reserve for losses and LAE by line of
business and division.

                                   March 31,       December 31,
(in millions)                         2022             2021
Commercial multiple peril          $  1,329.4     $      1,338.4
Workers' compensation                   472.5              473.1
Commercial automobile                   708.1              698.5
Other core commercial                   501.5              481.0
Total Core Commercial                 3,011.5            2,991.0
Specialty Property & Casualty           811.9              798.6
Professional and Executive Lines        511.0              494.9
Marine                                  123.3              122.5
Surety and Other                        109.8              106.0
Total Specialty                       1,556.0            1,522.0
Personal automobile                   1,576.2            1,590.7
Homeowners and Other                    303.1              277.7
Total Personal Lines                  1,879.3            1,868.4
Total Other                              65.4               66.2
Total loss and LAE reserves        $  6,512.2     $      6,447.6


Loss and LAE reserves in our "Other core commercial" lines include general
liability, commercial umbrella, and monoline property. "Specialty Property &
Casualty" includes program business, specialty industrial and commercial
property, and excess and surplus lines. "Professional and Executive Lines"
includes professional and management liability, fidelity and crime, 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 business.


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

                                                                Three Months Ended March 31,
                                                      2022                                          2021
(in millions)                       Loss & LAE       Catastrophe       Total      Loss & LAE       Catastrophe      Total
Core Commercial                    $       (6.4 )   $           -     $  (6.4 )   $      (2.7 )   $        (0.1 )   $ (2.8 )
Specialty                                 (13.2 )               -       (13.2 )          (0.6 )             0.1       (0.5 )
Personal Lines                             13.6                 -        13.6            (5.2 )               -       (5.2 )
Other                                         -                 -           -             0.3                 -        0.3
Total prior year favorable
development                        $       (6.0 )   $           -     $  (6.0 )   $      (8.2 )   $           -     $ (8.2 )



It is not possible to know whether the factors that affected loss reserves in
the first three months of 2022 will also occur in future periods. We encourage
you to read our 2021 Annual Report on Form 10-K for more information about our
reserving process and the judgments, uncertainties and risks associated
therewith.

Development of catastrophe losses

For the three months ended March 31, 2022 and 2021, there was no net disaster
evolution of losses.

2022 Loss and EAS developmentexcluding disaster

For the three months ended March 31, 2022, net favorable loss and LAE
development, excluding catastrophes, was $6.0 million. Core Commercial favorable
loss and LAE development of $6.4 million was primarily due to lower than
expected losses in the workers' compensation line, primarily in accident year
2020. Specialty favorable loss and LAE development of $13.2 million was
primarily due to lower than expected losses in our marine, specialty industrial
and commercial property, professional and executive, and surety lines. Personal
Lines unfavorable loss and LAE development of $13.6 million was due to higher
than expected loses in the homeowners line of $13.9 million. The increase in
homeowners losses was primarily due to higher severity and longer cycle times in
repair activity, primarily related to claims incurred in the fourth quarter of
2021.

Loss 2021 and EAS developmentexcluding disaster

For the three months ended March 31, 2021, net favorable loss and LAE
development, excluding catastrophes, was $8.2 million. This was primarily due to
lower than expected losses in the personal automobile line, driven by lower
bodily injury and personal injury protection losses primarily in accident year
2020, and in the workers' compensation line, primarily in accident years 2015
through 2017 and 2019.

Reinsurance Recoverables

Reinsurance recoverables were $1,940.3 million and $1,907.3 million at March 31,
2022 and December 31, 2021, respectively, of which $128.6 million and $100.4
million, respectively, represent billed recoverables. A reinsurance recoverable
is billed after an eligible reinsured claim is paid by an insurer. Billed
reinsurance recoverables related to the Michigan Catastrophic Claims Association
(the "MCCA") were $55.7 million and $49.8 million at March 31, 2022 and December
31, 2021, respectively, and billed non-MCCA reinsurance recoverables totaled
$72.9 million and $50.6 million at March 31, 2022 and December 31, 2021,
respectively. At March 31, 2022, $0.3 million of the billed non-MCCA
recoverables were outstanding greater than 90 days, whereas at December 31,
2021, there were no balances outstanding greater than 90 days.

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Investments

Investment Results

Net investment income before income taxes was as follows:

                                    Three Months Ended March 31,
(dollars in millions)                2022                    2021
Fixed maturities                 $        55.8             $   54.5
Limited partnerships                      15.2                 15.1
Mortgage loans                             4.4                  5.4
Equity securities                          3.6                  3.8
Other investments                          0.8                  0.7
Investment expenses                       (2.9 )               (2.7 )
Net investment income            $        76.9             $   76.8
Earned yield, fixed maturities            2.95 %               3.11 %
Earned yield, total portfolio             3.52 %               3.74 %



The increase in net investment income for the three months ended March 31, 2022
mainly explained by the continued investment of operating cash flows,
partially offset by the impact of lower new money yields and lower mortgage lending
Income.

Investment portfolio

We held cash and investment assets diversified across several asset classes, as
follows:

                                                  March 31, 2022                      December 31, 2021
                                          Carrying         % of Total           Carrying         % of Total
(dollars in millions)                       Value        Carrying Value          Value         Carrying Value
Fixed maturities, at fair value           $ 7,382.2                 81.6   %   $  7,723.9                 82.3   %
Equity securities, at fair value              607.0                  6.7            661.3                  7.0
Mortgage and other loans                      438.5                  4.9            434.0                  4.6
Other investments                             347.6                  3.8            333.4                  3.6
Cash and cash equivalents                     272.0                  3.0            230.9                  2.5
Total cash and investments                $ 9,047.3                100.0   %   $  9,383.5                100.0   %



Cash and Investments

Total cash and investments decreased $336.2 million, or 3.6%, for the three
months ended March 31, 2022 as compared to December 31, 2021. The decrease was
primarily due to net market value depreciation, partially offset by cash
received from the MCCA to refund policyholders. Through March 31, 2022, $34.4
million of the MCCA refund was paid to policyholders and $148.9 million is
expected to be paid during the second quarter of 2022.

The following table provides information about the investment types of our fixed
maturities portfolio:

                                                                            March 31, 2022
                                           Amortized Cost, Net of                                             Change in Net
(in millions)                               Allowance for Credit                        Net Unrealized         Unrealized
Investment Type                                    Losses              Fair Value         Gain (Loss)         For the Year
U.S. Treasury and government agencies      $                404.0     $      381.7     $           (22.3 )   $         (24.2 )
Foreign government                                            2.2              2.3                   0.1                (0.3 )
Municipals:
Taxable                                                   1,166.5          1,113.0                 (53.5 )             (77.3 )
Tax-exempt                                                   23.1             22.9                  (0.2 )              (1.0 )
Corporate                                                 3,999.4          3,911.5                 (87.9 )            (246.8 )
Asset-backed:
Residential mortgage-backed                               1,060.2            999.0                 (61.2 )             (62.6 )
Commercial mortgage-backed                                  824.1            796.4                 (27.7 )             (49.7 )
Asset-backed                                                165.3            155.4                  (9.9 )              (9.8 )
Total fixed maturities                     $              7,644.8     $    

$7,382.2 (262.6) $(471.7)

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The change in net unrealized gain (loss) on fixed maturities is mainly explained
at higher prevailing interest rates and, to a lesser extent, broader credit
spreads.

Amortized cost and fair value by rating category were as follows:

                                                                          March 31, 2022                                                 December 31, 2021
(dollars in millions)           Rating Agency           Amortized Cost, Net of        Fair         % of Total           Amortized Cost, Net of        Fair         % of Total
NAIC Designation            Equivalent Designation    Allowance for Credit Losses    Value         Fair Value         Allowance for Credit Losses    Value         Fair Value
1                                  Aaa/Aa/A          $         5,010.9             $  4,829.3             65.4   %   $         4,867.5             $  4,987.6             64.6   %
2                                    Baa                       2,256.5                2,186.2             29.6                 2,302.2                2,380.4             30.8
3                                     Ba                         230.2                  223.4              3.0                   216.9                  225.2              2.9
4                                     B                          140.8                  136.4              1.9                   123.2                  125.3              1.6
5                               Caa and lower                      6.4                    6.9              0.1                     5.0                    5.4              0.1
Total fixed maturities                               $         7,644.8             $  7,382.2            100.0   %   $         7,514.8             $  7,723.9            100.0   %



Based on ratings by the National Association of Insurance Commissioners
("NAIC"), approximately 95% of the fixed maturity portfolio consisted of
investment grade securities at both March 31, 2022 and December 31, 2021. The
quality of our fixed maturity portfolio remains strong based on ratings, capital
structure position, support through guarantees, underlying security, issuer
diversification and yield curve position.

Our investment portfolio primarily consists of fixed maturity securities whose
fair value is susceptible to market risk, including interest rate changes. See
also "Quantitative and Qualitative Disclosures about Market Risk" included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in our 2021 Annual Report on Form 10-K. Duration is a
measurement used to quantify our inherent interest rate risk and analyze
invested assets relative to our reserve liabilities.

The duration of our fixed-maturity portfolio was as follows:

                                                  March 31, 2022                                                   December 31, 2021
(dollars in millions)          Amortized Cost, Net of                       % of Total           Amortized Cost, Net of                       % of Total
Duration                     Allowance for Credit Losses   Fair Value       Fair Value         Allowance for Credit Losses   Fair Value       Fair Value
0-2 years                   $         1,036.5             $    1,044.8             14.2   %   $         1,080.2             $    1,108.3             14.3   %
2-4 years                             1,535.3                  1,539.4             20.8                 1,581.1                  1,660.9             21.5
4-6 years                             2,230.1                  2,176.7             29.5                 2,263.8                  2,349.0             30.4
6-8 years                             2,162.9                  2,001.9             27.1                 1,603.8                  1,622.4             21.0
8-10 years                              570.7                    517.5              7.0                   854.9                    846.5             11.0
10+ years                               109.3                    101.9              1.4                   131.0                    136.8              1.8
Total fixed maturities      $         7,644.8             $    7,382.2            100.0   %   $         7,514.8             $    7,723.9            100.0   %
Weighted average duration                                          4.9                                                               4.9



Our fixed maturity and equity securities are carried at fair value. Financial
instruments whose value was determined using significant management judgment or
estimation constituted less than 1% of the total assets we measured at fair
value. See also Note 4 - "Fair Value" in the Notes to Interim Consolidated
Financial Statements.

Equity securities consist mainly of WE income-oriented large cap
common stocks and developed market equity index funds.

Mortgage and other loans consist primarily of commercial mortgage loan
participations, which represent our interest in commercial mortgage loans
originated by a third party. We share, on a pro-rata basis, in all related cash
flows of the underlying mortgage loans, which are primarily investment-grade
quality and diversified by geographic area and property type.

Other investments consist primarily of our interest in corporate middle market
and real estate limited partnerships. Corporate middle market limited
partnerships may invest in senior or subordinated debt, preferred or common
equity, or a combination thereof, of privately held middle market businesses.
Real estate limited partnerships hold equity ownership positions in real
properties and invest in debt secured by real properties. Our limited
partnerships are generally accounted for under the equity method, or as a
practical expedient using the fund's net asset value, with financial information
provided by the partnership on a two or three month lag.

Although we expect to invest new funds primarily in investment grade fixed
maturities, we have invested, and expect to continue to invest, a portion of
funds in limited partnerships, common equity securities, below investment grade
fixed maturities and other investment assets.

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Impairments

For the three months ended March 31, 2022we have observed net impairments on
fixed deadlines of $0.9 millionmade up of $0.6 million credit related
losses and $0.3 million classified as intending to sell. For the three months
finished March 31, 2021we did not recognize any impairment.

To March 31, 2022 and December 31, 2021allowance for credit losses
mortgages were $7.1 million and allowance for credit losses
available-for-sale debt securities were $0.9 million and $0.3 million,
respectively.

At March 31, 2022 and December 31, 2021 we held no fixed maturity securities on
non-accrual status. At March 31, 2021, fixed maturities on non-accrual status
were not material and the effect of non-accruals for the three months ended
March 31, 2021, compared with amounts that would have been recognized in
accordance with the original terms of the fixed maturities, were also not
material. Any defaults in the fixed maturities portfolio in future periods may
negatively affect investment income.

Unrealized losses

Gross unrealized capital losses on fixed maturities at March 31, 2022 have been $312.2
million
an augmentation of $264.2 million compared to December 31, 2021principally
attributable to higher interest rates and, to a lesser extent, broader credit
spreads. To March 31, 2022gross unrealized losses consisted mainly of
$123.1 million on fixed corporate maturities, $62.6 million on residential
securities backed by mortgages, $62.4 million on the municipal ones, $29.6 million on
commercial mortgage-backed securities, and $24.4 million on WE government
securities. See Note 3 – “Investments” in the Interim Consolidated Notes
Financial state.

We view gross unrealized losses on fixed maturities as non-credit related since
it is our assessment that these securities will recover, allowing us to realize
their anticipated long-term economic value. Further, we do not intend to sell,
nor is it more likely than not we will be required to sell, such debt securities
before this expected recovery of amortized cost (See also "Liquidity and Capital
Resources"). Inherent in our assessment are the risks that market factors may
differ from our expectations; we may decide to subsequently sell a security for
unforeseen business needs; or changes in the credit assessment from our original
assessment may lead us to determine that a sale at the current value would
maximize recovery on such investments. To the extent that there are such adverse
changes, an impairment would be recognized as a realized loss. Although
unrealized losses on fixed maturities are not reflected in the results of
financial operations until they are realized, the fair value of the underlying
investment, which does reflect the unrealized loss, is reflected in our
Consolidated Balance Sheets.

The following table sets forth gross unrealized losses for fixed maturities by
maturity period at March 31, 2022 and December 31, 2021. Actual maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations, with or without call or prepayment penalties, or we may
have the right to put or sell the obligations back to the issuers.

                                               March 31,       December 31,
(in millions)                                    2022              2021

Due after one to five years $11.3 $0.7
Due after five years to ten years

              156.2               19.4
Due after ten years                                  42.4               10.9
                                                    209.9               31.0
Mortgage-backed and asset-backed securities         102.3               17.0
Total fixed maturities                        $     312.2     $         48.0


Our investment portfolio and shareholders' equity can be significantly impacted
by changes in market values of our securities. Market volatility could increase
and defaults on fixed income securities could occur. As a result, we could incur
additional realized and unrealized losses in future periods, which could have a
material adverse impact on our results of operations and/or financial position.

Economic growth in the U.S. remains positive, driven by strength in the overall
labor market and consumer spending. However, a number of risks have created
greater uncertainty in the near-term. The spike in interest rates has led to a
tightening of financial conditions for businesses and consumers which may impact
consumer spending and corporate profitability. Lingering effects of the
Pandemic, such as supply chain interruptions and labor market imbalances, have
yet to be fully resolved. In addition, implications of the invasion of Ukraine
by Russia and the impact of recently imposed sanctions, higher energy and
commodity prices, as well as broad global trade disruptions impose additional
risks. Despite this uncertainty, indicators of economic activity and employment
have remained strong in the U.S. It is unclear how these risks will affect the
continued economic recovery and our investment portfolio.

With inflation having exceeded their 2 percent target for some time, combined
with improvement in the labor market, the Federal Reserve (the "Fed") raised the
federal funds rate by 0.25% in March and anticipates that ongoing increases in
the target range will be appropriate. Additionally, it expects to reduce its
holdings of Treasury and agency securities in coming months. The Fed's asset
purchase program represents a significant source of demand for certain sectors
of the fixed income market and even a well-telegraphed, accelerated winding down
of the program may result in market disruptions. In assessing the appropriate
stance of monetary policy, the Fed will continue to monitor the implications of
incoming information on its economic outlook.

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Fundamental conditions in certain corporate sectors remain challenging, such as
lodging and hospitality, which still face lower than pre-Pandemic levels of
demand. We may experience defaults on fixed income securities, particularly with
respect to non-investment grade debt securities. Although we perform rigorous
credit analysis of our fixed income investments, it is difficult to foresee
which issuers, industries or markets will be most affected. As a result, the
value of our fixed maturity portfolio could change rapidly in ways we cannot
currently anticipate, and we could incur additional realized and unrealized
losses in future periods.

Other items

Net income also includes the following items:

                                                                  Three Months Ended March 31,
                                                                         Personal                    Discontinued
(in millions)                      Core Commercial       Specialty        Lines         Other         Operations        Total
2022
Net realized and unrealized
investment gains (losses)          $           (7.6 )   $      (3.5 )   $     (4.9 )   $    0.1     $            -     $ (15.9 )
Discontinued life businesses                      -               -              -            -               (0.5 )      (0.5 )

2021
Net realized and unrealized
investment gains                   $           18.6     $       7.5     $     11.2     $    0.2     $            -     $  37.5
Discontinued life businesses                      -               -              -            -               (0.1 )      (0.1 )


We manage investment assets for our Core Commercial, Specialty, Personal Lines
and Other segments based on the requirements of our combined property and
casualty insurance companies. We allocate the investment income, expenses and
realized gains and losses to our Core Commercial, Specialty, Personal Lines and
Other segments based on actuarial information related to the underlying
businesses.

Net realized and unrealized investment losses were $15.9 million for the three
months ended March 31, 2022, compared to net realized and unrealized gains of
$37.5 million for the three months ended March 31, 2021. For the three months
ended March 31, 2022 and 2021, net realized and unrealized investment gains
(losses) were primarily due to changes in the fair value of equity securities.

Discontinued operations include our discontinued accident and health and life
businesses. Losses of $0.5 million and $0.1 million the three months ended March
31, 2022 and 2021, primarily reflect adverse loss trends related to the
long-term care pool.

Income taxes

We file a consolidated file WE federal income tax return that includes our interest
the company and its national subsidiaries (including non-insurance activities).

Three months completed March 31, 2022 Compared to the three months ended March 31, 2021

The provision for income taxes from continuing operations was an expense of
$24.7 million and $21.3 million for the three months ended March 31, 2022 and
2021, respectively. These provisions resulted in consolidated effective federal
tax rates of 19.0% and 18.7% for the three months ended March 31, 2022 and 2021,
respectively. These provisions include excess tax benefits related to
stock-based compensation of $2.8 million and $1.0 million for the three months
ended March 31, 2022 and 2021, respectively. In addition, the provision for 2021
reflects benefits related to tax planning strategies implemented in prior years
of $1.9 million. Absent these items, the provision for income taxes would have
been an expense of $27.5 million and $24.2 million for the three months ended
March 31, 2022 and 2021, respectively, or 21.2% for both periods.

The income tax provision on operating income was an expense of $28.2 million and
$15.2 million for the three months ended March 31, 2022 and 2021, respectively.
These provisions resulted in effective tax rates for operating income of 19.3%
and 19.8% for the three months ended March 31, 2022 and 2021, respectively.
These provisions include excess tax benefits related to stock-based compensation
of $2.8 million and $1.0 million for the three months ended March 31, 2022 and
2021, respectively. Absent this item, the provisions for income taxes would have
been an expense of $31.0 million, or 21.2%, and $16.2 million, or 21.1%, for the
three months ended March 31, 2022 and 2021, respectively.

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Critical accounting estimates

Interim consolidated financial statements have been prepared in conformity with
U.S. GAAP and include certain accounting policies that we consider to be
critical due to the amount of judgment and uncertainty inherent in the
application of those policies. While we believe that the amounts included in our
consolidated financial statements reflect our best judgment, the use of
different assumptions could produce materially different accounting estimates.
As disclosed in our 2021 Annual Report on Form 10-K, we believe the following
accounting estimates are critical to our operations and require the most
subjective and complex judgment:
  • Reserve for losses and loss expenses


  • Reinsurance recoverable balances


  • Pension benefit obligations


  • Investment credit losses

For a more detailed discussion of these critical accounting estimates, see our
2021 Annual Report on Form 10-K.

Statutory surplus of insurance subsidiaries

The following table reflects the statutory surplus of our insurance subsidiaries:

                                      March 31,       December 31,
(in millions)                            2022             2021

Total share capital and Surplus $2,809.6 $2,720.0


The statutory capital and surplus for our insurance subsidiaries increased $89.6
million during the first three months of 2022. This increase was primarily
driven by an increase in underwriting profits and net realized investment gains,
partially offset by net unrealized investment losses, primarily due to changes
in the fair value of equity securities.

The NAIC prescribes an annual calculation regarding risk-based capital ("RBC").
RBC ratios for regulatory purposes are expressed as a percentage of the capital
required to be above the Authorized Control Level (the "Regulatory Scale");
however, in the insurance industry, RBC ratios are widely expressed as a
percentage of the Company Action Level. The following table reflects the Company
Action Level, the Authorized Control Level and RBC ratios for Hanover Insurance
(which includes Citizens and other insurance subsidiaries), as of March 31,
2022, expressed both on the Industry Scale (Total Adjusted Capital divided by
the Company Action Level) and Regulatory Scale (Total Adjusted Capital divided
by Authorized Control Level):

                                              Company           Authorized           RBC Ratio             RBC Ratio
(dollars in millions)                       Action Level       Control Level       Industry Scale      Regulatory Scale
The Hanover Insurance Company              $      1,190.6     $         595.3                  235 %                 470 %



Cash and capital resources

Liquidity is a measure of our ability to generate sufficient cash flows to meet
the cash requirements of business operations. As a holding company, our primary
ongoing source of cash is dividends from our insurance subsidiaries. However,
dividend payments to us by our insurance subsidiaries are subject to limitations
imposed by regulators, such as prior notice periods and the requirement that
dividends in excess of a specified percentage of statutory surplus or prior
year's statutory earnings receive prior approval (so called "extraordinary
dividends"). During the first quarter of 2022, Hanover Insurance did not pay
dividends to the holding company.

Sources of cash for our insurance subsidiaries primarily consist of premiums
collected, investment income and maturing investments. Primary cash outflows are
payments for losses and loss adjustment expenses, policy and contract
acquisition expenses, other underwriting expenses and investment purchases. Cash
outflows related to losses and loss adjustment expenses can be variable because
of uncertainties surrounding settlement dates for liabilities for unpaid losses
and because of the potential for large losses either individually or in the
aggregate. We periodically adjust our investment policy to respond to changes in
short-term and long-term cash requirements.

Net cash provided by operating activities was $200.1 million during the first
three months of 2022, as compared to $141.8 million during the first three
months of 2021. The $58.3 million increase in cash provided was primarily due to
the receipt of $183.3 million of surplus funds received from the MCCA, partially
offset by $34.4 million that were remitted to policyholders in the first quarter
of 2022. We expect to remit the remainder of these funds to policyholders in the
second quarter of 2022. Additionally, cash was provided by an increase in
premiums received, partially offset by an increase in loss and LAE payments.

Net cash used in investing activities was $112.2 million during the first three
months of 2022, as compared to $78.6 million during the first three months of
2021. During the first three months of 2022 and 2021, cash used in investing
activities primarily related to net purchases of fixed maturities.

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Net cash used in financing activities was $46.8 million during the first three
months of 2022, as compared to $71.7 million during the first three months of
2021. During the first three months of 2022, cash used in financing activities
primarily resulted from the quarterly dividend payment to our shareholders and,
to a lesser extent, the repurchase of common stock. During the first three
months of 2021, cash used in financing activities primarily resulted from the
repurchase of common stock and from the quarterly dividend payment to
shareholders.

Dividends to common shareholders are subject to quarterly board approval and
declaration. During the first three months of 2022, as declared by the Board, we
paid a quarterly dividend of $0.75 per share to our shareholders totaling $26.7
million. We believe that our holding company assets are sufficient to provide
for future shareholder dividends should the Board of Directors declare them.

At March 31, 2022, THG, as a holding company, held approximately $333.1 million
of fixed maturities and cash. We believe our holding company assets will be
sufficient to meet our current year obligations, which we expect to consist
primarily of quarterly dividends to our shareholders (as and to the extent
declared), interest on our senior and subordinated debentures, certain costs
associated with benefits due to our former life employees and agents, and, to
the extent required, payments related to indemnification of liabilities
associated with the sale of various subsidiaries. As discussed below, we have,
and opportunistically may continue to, repurchase our common stock and our debt.
We do not expect that it will be necessary to dividend additional funds from our
insurance subsidiaries in order to fund 2022 holding company obligations;
however, we may decide to do so.

We expect to continue to generate sufficient positive operating cash to meet all
short-term and long-term cash requirements relating to current operations,
including the funding of our qualified defined benefit pension plan. The
ultimate payment amounts for our benefit plan is based on several assumptions,
including but not limited to, the rate of return on plan assets, the discount
rate for benefit obligations, mortality experience, interest crediting rates,
inflation and the ultimate valuation and determination of benefit obligations.
Since differences between actual plan experience and our assumptions are almost
certain, changes, both positive and negative, to our current funding status and
ultimately our obligations in future periods are likely.

Our insurance subsidiaries maintain a high degree of liquidity within their
respective investment portfolios in fixed maturity and short-term investments.
We believe that the quality of the assets we hold will allow us to realize the
long-term economic value of our portfolio, including securities that are
currently in an unrealized loss position. We do not anticipate the need to sell
these securities to meet our insurance subsidiaries' cash requirements since we
expect our insurance subsidiaries to generate sufficient operating cash to meet
all short-term and long-term cash requirements relating to current operations.
However, there can be no assurance that unforeseen business needs or other items
will not occur causing us to have to sell those securities in a loss position
before their values fully recover, thereby causing us to recognize impairment
charges in that time period.

The Board of Directors authorized a stock repurchase program which provides for
aggregate repurchases of our common stock of up to $1.3 billion. Under the
repurchase authorization, we may repurchase, from time to time, common stock in
amounts, at prices and at such times as we deem appropriate, subject to market
conditions and other considerations. Repurchases may be executed using open
market purchases, privately negotiated transactions, accelerated repurchase
programs, or other transactions. We are not required to purchase any specific
number of shares or to make purchases by any certain date under this program.
During the first three months of 2022 we repurchased approximately 0.1 million
shares at an aggregate cost of $16.3 million. As of March 31, 2022, we had
repurchased 7.8 million shares under this $1.3 billion program and had
approximately $345 million available for additional repurchases.

We maintain our membership in the Federal Home Loan Bank ("FHLB") to provide
access to additional liquidity based on our holdings of FHLB stock and pledged
collateral. At March 31, 2022, we had borrowing capacity of $116.6 million.
There were no outstanding borrowings under this short-term facility at March 31,
2022 however, we have and may continue to borrow, from time to time, through
this facility to provide short-term liquidity.

On April 30, 2019, we entered into a credit agreement that provides for a
five-year unsecured revolving credit facility not to exceed $200.0 million at
any one time outstanding, with the option to increase the facility up to $300.0
million (assuming no default and satisfaction of other specified conditions,
including the receipt of additional lender commitments). The agreement also
includes an uncommitted subfacility of $50.0 million for standby letters of
credit. Borrowings, if any, under this agreement are unsecured and incur
interest at a rate per annum equal to, at our election, either (i) the greater
of, (a) the prime commercial lending rate of the administrative agent, (b) the
NYFRB Rate plus half a percent, or (c) the one month Adjusted LIBOR plus one
percent and a margin that ranges from 0.25% to 0.625% depending on our debt
rating, or (ii) Adjusted LIBOR for the applicable interest period, plus a margin
that ranges from 1.25% to 1.625% depending on our debt rating. The agreement
also contains certain financial covenants such as maintenance of specified
levels of consolidated equity and leverage ratios, and requires that certain of
our subsidiaries maintain minimum RBC ratios.  We currently have no borrowings
under this agreement and had no borrowings under this agreement during the first
three months of 2022. The LIBOR rate, upon which Adjusted LIBOR is based, is in
process of being discontinued. During 2021, certain key tenors of LIBOR were
extended with a new cessation date of June 20, 2023. Our credit agreement
permits us to agree with the Administrative Agent for the credit facility on a
replacement to Adjusted LIBOR subject to the satisfaction of certain conditions.

To March 31, 2022we complied with the covenants of our debt and
credit agreements.

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Contingencies and regulatory issues

REGULATORY AND INDUSTRY DEVELOPMENTS

In response to the Pandemic, regulators in many of the states in which we
operate have issued orders or guidance pertaining to, among other things, (a)
premium refunds, credits or reductions for personal automobile insurance
premiums and premiums for other insurance lines that regulators have determined
are disproportionately impacted by the Pandemic, including certain commercial
lines, for the periods during which governmental restrictions were or remain in
effect, with premium adjustments based on factors such as the ongoing frequency
and severity of claims, inflation, repair costs and reinsurance pricing, among
others; (b) premium payment grace periods, moratoriums on policy non-renewals
and cancellations, and other measures that are similar to actions historically
implemented in regions heavily impacted by catastrophes, which we anticipate to
be manageable, depending on the duration of the regulatory orders and the degree
to which policyholder payment patterns vary as a result; and (c) a reassessment
of rates in light of current exposures, loss experience and economic conditions.
Regulatory restrictions on rate increases, underwriting, policy terms, and the
ability to non-renew business may, depending on their duration, limit THG's
ability to manage our mix of business and any potential exposures that emerge in
our lines of business in the near term.

Draft legislation has been proposed in several state legislatures and/or in the
United States Congress that seeks to require insurers to retroactively pay
unfunded Pandemic business interruption claims that insurance policies do not
currently cover, to impose presumptions on insurance policy interpretation,
and/or to mandate prospective pandemic coverage. The impact of such legislation,
were it to be adopted, would, according to a statement of the NAIC on March 25,
2020, "create substantial solvency risks" for the property and casualty
insurance sector, "significantly undermine the ability of insurers to pay other
types of claims, and potentially exacerbate the negative financial and economic
impacts the country is currently experiencing." Industry trade groups further
assert that any such legislation would be violative of basic contract law and
well-founded principles of constitutional law. Federal stimulus plans such as
the CARES Act and the American Rescue Plan Act of 2021 providing financial
support to individuals and businesses during the Pandemic may mitigate the
political pressure to continue advancing such proposed legislation.

Proposals are also being considered at the federal level to establish
government-funded pandemic insurance programs, possibly similar to the federal
terrorism risk insurance program. Discussion on such competing proposals is
ongoing and at a preliminary stage such that it is too early to estimate their
potential impact, if any, on our business.

Information regarding litigation, legal contingencies and regulatory matters
figure in Part I – Note 12 “Commitments and contingencies” of the Notes to
Interim Consolidated Financial Statements.

Risks and forward-looking statements

Information regarding risk factors and forward-looking information appears in
Part II - Item 1A of this Quarterly Report on Form 10-Q and in Part I - Item 1A
of our 2021 Annual Report on Form 10-K. This Management's Discussion and
Analysis should be read and interpreted in light of such factors.

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                                     ITEM 3

                    QUANTITATIVE AND QUALITATIVE DISCLOSURES
                               ABOUT MARKET RISK

Our market risks, the ways we manage them, and sensitivity to changes in
interest rates, and equity price risk are summarized in Management's Discussion
and Analysis of Financial Condition and Results of Operations as of December 31,
2021, included in our Annual Report on Form 10-K for the year ended December 31,
2021. There have been no material changes in the first three months of 2022 to
these risks or our management of them.

                                     ITEM 4

                            CONTROLS AND PROCEDURES

Assessment of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of our "disclosure controls and procedures," as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").

Limits to Control Effectiveness

Our management, including our Chief Executive Officer and Chief Financial
Officer, do not expect that our disclosure controls over financial reporting
will prevent all error and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that
the control system's objectives will be met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because
of simple error or mistake. Controls can also be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is based in part
on certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree of compliance
with policies or procedures. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

Conclusion regarding the effectiveness of disclosure controls and procedures

Based on our controls evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of the end of the period covered by this
quarterly report, our disclosure controls and procedures were effective to
provide reasonable assurance that (i) the information required to be disclosed
by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms and (ii) material information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.

Internal Control of Financial Reporting

Our management is responsible for establishing and maintaining adequate
"internal control over financial reporting," as such term is defined in Exchange
Act Rule 13a-15(f). Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of our internal control over
financial reporting, as required by Rule 13a-15(d) of the Exchange Act, to
determine whether any changes occurred during the period covered by this
quarterly report on Form 10-Q that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Based on the that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that there were no such changes during the quarter ended March
31, 2022, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

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