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Q3 2024 Earnings Presentation

The Hanover Insurance Group, Inc.

Third Quarter 2024 Results

October 30, 2024

To be read in conjunction with the press release dated

October 30, 2024, and conference call scheduled for October 31, 2024.

Please also see important information regarding forward-looking statements and additional risks and uncertainties at the end of this presentation.

1

Excellent Third Quarter 2024 Operating Highlights

  • Combined ratio of 95.5%; combined ratio, excluding catastrophes(1), of 88.3%
  • Catastrophe losses of $105.9 million, or 7.2 points of the combined ratio
  • Net premiums written increase of 4.2%*
  • Renewal price increases(2) of 15.4% in Personal Lines, 12.9% in Core Commercial and 10.1% in Specialty
  • Rate increases(2) of 14.4% in Personal Lines, 10.0% in Core Commercial and 7.6% in Specialty
  • Loss and loss adjustment expense (LAE) ratio of 64.5%, 9.7 points below the prior-year quarter
  • Current accident year loss and LAE ratio, excluding catastrophes(3), of 58.2%, 2.4 points below the prior-year quarter, led by strong improvement in Personal Lines
  • Net investment income of $91.8 million, up 9.0% from the prior-year quarter, primarily due to higher bond reinvestment yields; net investment income from fixed maturities up 15.4% from the prior-year quarter
  • Book value per share of $79.90, up 12.6% from June 30, 2024, driven by unrealized gains on the fixed maturity portfolio, as well as strong earnings
  • Net and operating retuon equity(4) of 15.0% and 14.4% for the third quarter of 2024 and 13.2% and 12.8% for the first nine months of 2024, respectively

(1) See information about this and other non-GAAP measures and definitions used throughout this presentation on the final pages of this document.

2

*Unless otherwise stated, net premiums written growth and other growth comparisons are to the same period of the prior year

The Hanover Insurance Group, Inc. may also be referred to as "The Hanover" or "the company" interchangeably throughout this presentation.

Consolidated Financial Results

Three months ended

Nine months ended

($ in millions, except per share amounts)

September 30,

September 30,

September 30,

September 30,

2023

2024

2023

2024

Net income (loss)

$8.6

$102.1

($72.6)

$258.1

Per diluted/(basic) share

$0.24

$2.80

($2.03)

$7.10

Operating income (loss) before interest expense and income taxes(5)

$13.7

$150.6

($52.5)

$395.7

Operating income (loss) after income taxes

$6.8

$111.3

($56.9)

$291.3

Per diluted (basic) share

$0.19

$3.05

($1.59)

$8.01

Book value per share

$59.21

$79.90

$59.21

$79.90

Book value per share, excluding net unrealized appreciation

(depreciation) on fixed maturity investments, net of tax (6)

$79.38

$86.81

$79.38

$86.81

Shareholders' equity

$2,116.3

$2,877.7

$2,116.3

$2,877.7

Debt

$783.0

$783.9

$783.0

$783.9

Total capital

$2,899.3

$3,661.6

$2,899.3

$3,661.6

Debt/total capital

27.0%

21.4%

27.0%

21.4%

Total assets

$14,315.0

$15,367.0

$14,315.0

$15,367.0

Net income (loss) retuon average equity

1.6%

15.0%

(4.3)%

13.2%

Operating income (loss) retuon average equity

1.0%

14.4%

(2.6)%

12.8%

3

This page contains non-GAAP financial measures. For reconciliation to the closest GAAP measures, please refer to the endnotes in this presentation starting on page 18.

Third Quarter 2024 Underwriting Results

• Combined ratio (CR) of 95.5% in the third quarter of

Net premiums written and growth

2024, improved 8.9 points from the prior-year quarter,

($ in millions)

driven by lower catastrophe losses, as well as

improvement in the current accident year loss and LAE

ratio, ex-CAT

↑ 6.0%

↑ 2.3%

↑ 5.1%

↑ 4.2%

• Catastrophe losses of $105.9 million, or 7.2 points,

↑ 1.5%

primarily driven by losses related to Hurricane Helene's

impact on Georgia and the Carolinas, Hurricane Beryl,

$1,596.4

$1,345.5

$1,454.0

$1,521.1

$1,663.4

and some other events in the Midwesteand

SoutheasteUnited States

• Losses from Hurricane Helene totaled $40

3Q23

4Q23

1Q24

2Q24

3Q24

million; expect losses related to Hurricane Milton

in October to be minimal

• Prior-year reserve development, ex-CAT, was $14.0

Current accident year combined ratio, ex-CAT(1)

million favorable, driven by widespread favorability in

property lines

CR: 104.4%

94.2%

95.5%

99.2%

95.5%

• Current accident year loss and LAE ratio, ex-CAT, of

90.8%

90.8%

90.2%

89.7%

89.2%

58.2%, improved 2.4 points from the prior-year quarter,

driven by significant improvement in Personal Lines, as

well as strong, steady margins in Core Commercial and

60.6%

60.2%

59.3%

58.9%

58.2%

Specialty

30.2%

30.6%

30.9%

30.8%

31.0%

3Q23

4Q23

1Q24

2Q24

3Q24

Expense ratio(7)

Current accident year loss and LAE ratio, ex-CAT
  • Expense ratio increased 80 basis points compared to the prior-year quarter, primarily driven by higher variable compensation expenses in the current quarter, particularly compared to lower levels in the third quarter of 2023; part of the increase was driven by ongoing talent and technology investments in Specialty

4

This page contains non-GAAP financial measures. For reconciliation to the closest GAAP measures, please refer to the endnotes in this presentation starting on page 18.

Core Commercial Underwriting Highlights

Three months ended

Nine months ended

September 30

September 30

($ in millions)

2023

2024

2023

2024

Net premiums written

$589.4

$599.2

$1,641.5

$1,695.0

Growth

4.2%

1.7%

6.1%

3.3%

Net premiums earned

$517.4

$533.3

$1,540.4

$1,599.6

Combined ratio

98.7%

97.0%

99.7%

94.2%

Catastrophe ratio

8.6%

5.9%

9.2%

4.3%

Combined ratio, ex-CAT

90.1%

91.1%

90.5%

89.9%

Prior-year development ratio

0.5%

(0.7)%

0.4%

(0.9)%

Current accident year combined ratio, ex-CAT

89.6%

91.8%

90.1%

90.8%

Current accident year combined ratio, ex-CAT

89.6%

91.4%

91.7%

89.1%

91.8%

56.3%

57.8%

58.5%

55.7%

58.2%

33.3%

33.6%

33.2%

33.4%

33.6%

3Q23

4Q23

1Q24

2Q24

3Q24

Expense ratio

Current accident year loss and LAE ratio, ex-CAT
  • Third quarter 2024 combined ratio, ex-CAT, increased 1.0 point from the prior-year quarter
  • Net favorable prior-year reserve development, ex-CAT, of $3.6 million, or 0.7 points, with favorability in each major line of business
  • Current accident year loss and LAE ratio, ex- CAT, increased 1.9 points from the prior-year quarter and was relatively in line with the company's expectations. Variance to third quarter 2023 driven by:
    • Lower-than-expectedproperty large losses in the prior-year quarter
    • Prudently increased loss selections in certain liability coverages in the third quarter of 2024
  • Expense ratio increased 30 basis points compared to the prior-year quarter, primarily driven by an increase in variable compensation

5

This page contains non-GAAP financial measures. For reconciliation to the closest GAAP measures, please refer to the endnotes in this presentation starting on page 18.

Committed to navigating the evolving liability environment with vigilance and agility

Relatively smaller exposure to liability versus most public peers

Based on 2023 Hanover Direct Written Premiums

46%

54%

Shorter reserve duration

compared to peers

(duration in years)

3.3

Grew slower than the industry

• Maintaining attentive focus on current

liability trends, which have remained within

in occurrence liability lines*

expectations, supported by:

from 2019 to 2023

Based on Direct Written Premiums

•

Prior initiatives to de-emphasize

Source: S&P Global

44%

industry classes most impacted by

social inflation, particularly in large

metro areas

16%

•

Advantageous industry and

geographic mix has driven

substantial reduction in loss

frequency relative to pre-pandemic

Hanover

Industry

periods (lower exposure to

contractors class)

•

Prudent severity assumptions

Seeing continued frequency benefit in

•

Slowed down growth over the last

many industry classes

several years, in reaction to

Core Commercial BOP, CPP, and OCL Liability

challenging loss trends

Frequency Indexed to 2019

2.7

Total Reserves

Contractors

0%

Education

Restaurants

Manufacturing

Real Estate

All Other
    • Do not write standalone excess umbrella
    • Casualty reinsurance attaches at $2.5 million
  • Remain confident in the strength of our

Hanover

Select Peer Average**

2019 2020 2021 2022 2023

reserves and disciplined in our loss ratio

picks

6

*Occurrence liability lines includes other liability occurrence and CMP liability

**Select peer average includes Allstate, Chubb, Cincinnati, CNA, Hartford, RLI, Selective, Travelers, and W.R. Berkley - Source: Dowling & Partners

Core Commercial Growth Highlights

($ in millions) Net premiums written and growth

$589.4

↑ 1.7%

$599.2

$297.4

$289.2

$292.0

$310.0

3Q23

3Q24

Middle market

Small commercial
  • Net premiums written increased 1.7% in the third quarter of 2024:
    • Growth of 6.2% in small commercial, propelled by strong pricing; remain extremely optimistic about our advanced capabilities and growth prospects
    • Middle market premium decline of 2.8%, as we finish profitability improvement actions in property; expect to generate growth starting in the fourth quarter of 2024 and in 2025

Retention*

Rate/RPC

20.0%

•

85%

83.8%

83.6%

82.3%

83.2%

83.2%

15.0%

11.8%

12.4%

12.9%

11.5%

11.7%

•

80%

10.0%

9.2%

9.3%

9.3%

9.3%

10.0%

75%

5.0%

70%

0.0%

3Q23

4Q23

1Q24

2Q24

3Q24

Premium retention

Rate

Renewal price change

*Retention is defined as the ratio of net retained premium for the noted period to the premium available to renew over the same period

Renewal price increases of 12.9%, driven by strong price increases in both property and liability

Retention remained consistent at 83.2%

7

Specialty Underwriting Highlights

Three months ended

Nine months ended

September 30

September 30

($ in millions)

2023

2024

2023

2024

Net premiums written

$338.7

$350.2

$988.4

$1,042.1

Growth

2.9%

3.4%

5.8%

5.4%

Net premiums earned

$321.7

$331.2

$953.2

$982.6

Combined ratio

83.4%

83.9%

87.2%

88.2%

Catastrophe ratio

2.1%

1.3%

3.9%

3.4%

Combined ratio, ex-CAT

81.3%

82.6%

83.3%

84.8%

Prior-year development ratio

(1.6)%

(3.1)%

(3.7)%

(2.3)%

Current accident year combined ratio, ex-CAT

82.9%

85.7%

87.0%

87.1%

Current accident year combined ratio, ex-CAT

82.9%

85.9%

85.7%

89.8%

85.7%

47.8%

49.5%

48.7%

53.1%

48.0%

35.1%

36.4%

37.0%

36.7%

37.7%

3Q23

4Q23

1Q24

2Q24

3Q24

Expense ratio

Current accident year loss and LAE ratio, ex-CAT
  • Third quarter 2024 combined ratio, ex-CAT, increased 1.3 points from the prior-year quarter, driven by an increase in the expense ratio
  • Net favorable prior-year reserve development, ex-CAT, of $10.2 million, or 3.1 points, primarily driven by favorability in professional and executive lines claims- made business
  • Current accident year loss and LAE ratio, ex- CAT, was in line with the prior-year quarter and favorable to the company's low-50s underlying loss ratio target for the segment
  • Expense ratio increased 2.6 points from the prior-year quarter to 37.7%, reflecting:
    • Higher variable compensation expenses in the current quarter compared to lower levels in the third quarter of 2023
    • Strategic business investments, including in talent and technology

8

This page contains non-GAAP financial measures. For reconciliation to the closest GAAP measures, please refer to the endnotes in this presentation starting on page 18.

Specialty Growth Highlights

($ in millions)

Net premiums written and growth

•

$338.7

↑ 3.4%

$350.2

$22.8

$25.4

$107.4

$112.2

$97.5

$97.8

$111.0

$114.8

3Q23

3Q24

Professional and executive lines

Specialty property & casualty

Marine

Surety and other

•

Retention*

RPC

•

83.1%

25.0%

85%

83.0%

81.5%

79.7%

20.0%

76.0%

75%

12.9%

11.6%

11.0%

11.7%

15.0%

10.1%

10.0%

65%

5.0%

55%

0.0%

3Q23

4Q23

1Q24

2Q24

3Q24

Premium retention

Renewal price change

*Retention is defined as the ratio of net retained premium for the noted period to the premium available to renew over the same period

Specialty net premiums written growth of

3.4% in the third quarter of 2024:

  • Impacted by profitability actions, most notably in program business; excluding programs, Specialty grew 5.4% in the quarter and 7.4% year-to-date
  • Delivered upper-single or double-digit growth across most profitable lines (E&S, surety, management liability)
  • Expect to retuto high-single-digit growth beginning in the fourth quarter of 2024

Making investments in tools, technology and talent to support new business opportunities

Renewal price increases remain strong at 10.1%, driven by both property and liability pricing

  • Robust rate increases of 7.6%
  • Retention remained solid

9

Personal Lines Underwriting Highlights

Three months ended

Nine months ended

September 30

September 30

($ in millions)

2023

2024

2023

2024

Net premiums written

$668.3

$714.0

$1,834.8

$1,901.4

Growth

9.5%

6.8%

9.9%

3.6%

Net premiums earned

$592.0

$614.7

$1,729.2

$1,818.8

Combined ratio

120.8%

100.6%

123.7%

103.5%

Catastrophe ratio

24.4%

11.4%

26.2%

13.6%

Combined ratio, ex-CAT

96.4%

89.2%

97.5%

89.9%

Prior-year development ratio

0.0%

0.0 %

1.2%

(0.2)%

Current accident year combined ratio, ex-CAT

96.4%

89.2%

96.3%

90.1%

Current accident year combined ratio, ex-CAT

96.4%

93.0%

91.1%

90.2%

89.2%

71.5%

68.0%

65.6%

64.9%

63.9%

24.9%

25.0%

25.5%

25.3%

25.3%

3Q23

4Q23

1Q24

2Q24

3Q24

Expense ratio

Current accident year loss and LAE ratio, ex-CAT
  • Combined ratio, ex-CAT, improved 7.2 points from the prior-year quarter, driven by strong improvement in the underlying loss ratio
  • Current accident year loss and LAE ratio, ex- CAT, improved 7.6 points from the prior-year quarter
    • Auto improved 7.7 points compared to the prior-year quarter, driven by the benefit of earned pricing increases and moderating loss trends; comparison to prior-year quarter somewhat impacted by higher loss picks in the third quarter of 2023, which developed favorably in the fourth quarter of 2023
    • Homeowners and Other improved 7.3 points compared to the prior-year quarter, driven by the benefit of rate earning in and underwriting actions; observing lower frequency on both attritional and large losses
  • Prior-yearreserve development, ex-CAT, was immaterial

10

This page contains non-GAAP financial measures. For reconciliation to the closest GAAP measures, please refer to the endnotes in this presentation starting on page 18.

Disclaimer

The Hanover Insurance Group Inc. published this content on October 30, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on October 30, 2024 at 20:33:24.690.

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