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The Hanover Reports Record Fourth Quarter Net Income and Operating Income of $4.53 and $3.38 per Diluted Share, Respectively;

Full Year Net Income and Operating Income of $11.49 and $8.73 per Diluted Share, Respectively

Fourth Quarter Highlights

• Combined ratio of 92.9%; combined ratio, excluding catastrophes(1) of 89.8%
• Net premiums written increase of 9.2%*
• Rate increases(2) of 6.3% in core commercial lines(3), 8.9% in specialty(4), and 2.0% in Personal Lines
• Catastrophe loss ratio of 3.1%, 0.8 points below the company's catastrophe assumption for the fourth quarter
• Current accident year loss and loss adjustment expense ("LAE") ratio, excluding catastrophes(5), of 59.6%, up 1.8 points from the fourth quarter of 2020, and down 2.2 points from the fourth quarter of 2019, before the onset of the pandemic
• Net investment income of $79.5 million, up 13.2% from the prior-year quarter
• Book value per share of $88.59, up 1.8% from September 30, 2021 and up 0.7% from December 31, 2020, primarily driven by net income, partially offset by a decline in unrealized gains in the company's fixed income portfolio. Excluding net unrealized gains on fixed maturity investments, net of tax, book value per share(6) increased 4.4% from September 30, 2021, and 9.4% from December 31, 2020
• On December 6, 2021, the Board of Directors approved an increase to the quarterly dividend of 7.1% to $0.75 per common share

WORCESTER, Mass., February 2, 2022 - The Hanover Insurance Group, Inc.(NYSE: THG) today reported net income of $163.5 million, or $4.53 per diluted share, in the fourth quarter of 2021, compared to $164.6 million, or $4.43 per diluted share, in the prior-year quarter. Operating income(7) was $122.1 million, or $3.38 per diluted share, for the fourth quarter of 2021. This compared to operating income of $112.0 million, or $3.02 per diluted share, in the prior-year quarter. The difference between net and operating income in the fourth quarter of 2021 was primarily due to the after- tax increase in the fair value of equity securities of $42.0 million, or $1.16 per fully diluted share, which is excluded from operating income.

Net income for the full year 2021 was $418.7 million, or $11.49 per diluted share. This compares to net income of $358.7 million, or $9.42 per diluted share, in the prior year. Operating income was $318.3 million, or $8.73 per diluted share, in 2021, compared to operating income of $355.0 million, or $9.32 per diluted share, in the prior year.

1. See information about this and other non -GAAP measures and definitions used throughout this press release on the final pages of this document. The Hanover Insurance Group, Inc. may also be referred to as "The Hanover" or "the Company" interchangeably throughout this press release .

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

"2021 was an exceptional year for our company, as we enhanced our competitive position, continued our positive financial momentum and advanced our unique culture," said John C. Roche, president and chief executive officer at The Hanover. "We delivered strong performance in the fourth quarter, with record operating earnings of $3.38 per diluted share, as well as net premiums written growth of 9.2%. Our performance in the quarter and the year underscores the effectiveness of our distinctive strategy, the relevancy of our product and service offerings, and the strength of our agency partnerships. At the same time, we made important progress across all of our businesses throughout the year. In Personal Lines, our thoughtful pricing strategy, combined with continued strong performance, has positioned us to deliver sustained, profitable growth and value creation in the year ahead. In Commercial Lines, robust rate increases generated meaningful margin expansion, particularly in our specialty business, while our focus on innovative products and technology advancements continued to drive impressive growth. Our ability to generate broad-based profitability, along with our superior underwriting and advanced data and analytics capabilities, proved to be more critical than ever in 2021, as we navigated extremely dynamic market conditions and challenges. We begin 2022 with a proven strategy and a talented, committed team, eager to build on our unique competitive advantage and position us for even greater success."

"We are very pleased with the outstanding financial results we delivered this year," said Jeffrey M. Farber, executive vice president and chief financial officer at The Hanover. "Our fourth quarter results reflect a sub-90sex-CAT combined ratio and an excellent operating retuon equity(8) of 16.8%, providing an incredibly strong ending to an already successful year. We delivered a full-year operating retuon equity of 11.2%, despite significant catastrophe activity and increasing severity trends. Furthermore, our business is delivering underlying profitability above pre-pandemic levels, which speaks to the sustainability of our strong financial performance. In line with prior guidance, we achieved a 30-basis-point improvement in our full-year expense ratio, reflecting the benefit of growth and operational efficiencies generated by our investments in technology and data analytics. We continued to be responsible stewards of our capital and deliver value to our shareholders in 2021, returning $265 million through dividends and share repurchases. We start the new year with great optimism and enthusiasm, in an excellent financial position, supported by a strong balance sheet and a high-quality investment portfolio."

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Fourth Quarter Operating Highlights

Commercial Lines

Commercial Lines operating income before taxes was $120.9 million in the fourth quarter of 2021, compared to $103.2 million in the fourth quarter of 2020. The Commercial Lines combined ratio was 90.7%, compared to 91.5% in the prior-year quarter. Catastrophe losses in the fourth quarter of 2021 were $15.5 million, or 2.1 points of the combined ratio. This compares to catastrophe losses of $10.0 million, or 1.5 points of the combined ratio, in the prior-year quarter.

Fourth quarter 2021 results included $11.4 million, or 1.5 points, of net favorable prior-year reserve development, driven primarily by continued favorability in workers' compensation. This compared to net favorable prior-year reserve development of $6.3 million, or 0.9 points, in the fourth quarter of 2020.

Commercial Lines current accident year combined ratio, excluding catastrophes, decreased 0.8 points to 90.1% in the fourth quarter of 2021, from 90.9% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, decreased by 0.4 points to 55.9%, primarily driven by earning-in rate increases, most notably in other commercial lines, where most of the specialty business is reported.

The expense ratio(9) decreased 0.4 points to 34.2% in the fourth quarter of 2021, compared to the prior-year period, primarily attributable to fixed cost leverage from premium growth.

Net premiums written were $712.7 million in the quarter, up 9.6% from the prior-year quarter, driven primarily by rate and exposure increases. Core commercial average base rate increased 6.3% for the fourth quarter, while pricing(2) increases averaged 9.5%.

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The following table summarizes premiums and the components of the combined ratio for Commercial Lines:

Personal Lines

Personal Lines operating income before taxes was $40.9 million in the fourth quarter of 2021, compared to $50.8 million in the fourth quarter of 2020. The Personal Lines combined ratio was 96.2%, compared to 93.4% in the prior-year quarter. Catastrophe losses in the fourth quarter of 2021 were $23.5 million, or 4.7 points of the combined ratio, compared to $25.1 million, or 5.3 points of the combined ratio, in the prior-year quarter.

Fourth quarter 2021 results included net favorable prior-year reserve development of $3.0 million, or 0.6 points, compared to no net impact in the fourth quarter of 2020.

Personal Lines current accident year combined ratio, excluding catastrophe losses, increased by 4.0 points to 92.1% in the fourth quarter, from 88.1% in the prior-year quarter. The current accident year loss and LAE ratio, excluding catastrophes, increased by 5.1 points to 64.8% in the fourth quarter of 2021, compared to the fourth quarter of 2020, attributable to increased property severity and auto loss frequency, although loss frequency in auto remains below pre-pandemic levels.

The expense ratio decreased by 1.1 points to 27.3% in the fourth quarter of 2021, primarily attributable to lower performance-based agency compensation and higher net premiums earned.

Net premiums written were $502.2 million in the fourth quarter of 2021, up 8.7% from the prior-year quarter, driven by higher new business. Personal Lines average rate increases in the fourth quarter of 2021 were 2.0%.

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The following table summarizes premiums and components of the combined ratio for Personal Lines:

Full Year Operating Highlights

Operating income before income taxes and interest expense was $432.3 for the full year of 2021, with a combined ratio of 97.0%. In 2020, operating income before income taxes and interest expense was $484.7 million, with a combined ratio of 94.4%.

Catastrophe losses were $402.6 million, or 8.4 points of the combined ratio in 2021, compared to $286.7 million, or 6.3 points, in the prior year. Net favorable prior-year reserve development, excluding catastrophes, was $56.1 million, or 1.2 points, in 2021. For 2020, net favorable prior-year reserve development, excluding catastrophes, was $15.5 million, or 0.3 points.

The current accident year combined ratio, excluding catastrophe losses, was 89.8% in 2021, compared to 88.4% in 2020, driven by an increase in the current accident year loss and LAE ratio, primarily due to higher property severity and auto loss frequency, though loss frequency in auto remains below pre-pandemic levels. Relative to the comparative period of 2019, the underlying loss experience remains favorable. Partially offsetting the increase in the loss ratio was a 0.3-point improvement in the expense ratio, primarily due to fixed cost leverage from premium growth.

Total net premiums written were $5.0 billion in 2021, up 8.6% from 2020, including Commercial Lines growth of 9.2%, reflecting strong contributions from the specialty business, and Personal Lines growth of 7.7%.

Commercial Lines operating income before taxes was $269.9 million in 2021, which included $227.3 million, or 8.0 points, of catastrophe losses, and $34.0 million, or 1.2 points, of net favorable prior-year reserve development. In 2020, Commercial Lines operating income before taxes was $275.4 million, which included $132.2 million, or 4.9 points, of catastrophe losses, and $19.0 million, or 0.7 points, of net favorable prior-year reserve development.

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