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The Hanover Insurance Group, Inc. Investor Presentation February 2026
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Core Commercial 36% Specialty 23% Personal Lines 41% The Hanover Insurance Group, Inc. (NYSE: THG) Overview Exchange/Ticker NYSE: THG February 5, 2026 Stock price* $178.06 Market capitalization* $6.3 billion Annual dividend per share $3.80 (Yield: 2.1%) December 31, 2025 GAAP Equity $3.6 billion Equity, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax $3.7 billion Total Capital $4.8 billion Book value per share $100.90 Company Ratings* AM Best S&P Global Moody’s Financial Strength Ratings The Hanover Insurance Company A A A2 Debt Ratings Senior Debt bbb+ BBB Baa2 Subordinated Debentures bbb- BB+ Baa3 *As of February 5, 2026 $6.3B 2025 Net Premiums Written Business Mix 2
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Key Takeaways Our winning business strategy presents a sustainable competitive advantage in the independent agency market Building a sustainable organization by focusing on culture, human capital development, and enterprise risk management Differentiation Growth Profitability Sustainability Broad set of specialized products and capabilities provides distinct growth opportunities, with a particular focus on further expansion of our Specialty business This presentation and the content thereof must be read and interpreted in conjunction with information regarding risk factors and forward-looking information as set forth in this presentation and in the company’s most recently filed reports on Form 10-K and 10-Q and other documents filed by The Hanover Insurance Group, Inc. with the Securities and Exchange Commission (“SEC”) and that are also available at hanover.com under “Investors.” Strategy Robust product capabilities and analytics combined with distinctive distribution approach and local underwriting drives Hanover’s differentiation, positioning us well among both national and regional carriers Each major segment is positioned for strong profitability over the near- and long- term, enabling for broad-based, balanced returns 3
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Strategy 4
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Robust Product Capabilities and Analytics Combined with Fulsome Distribution and Local Underwriting Drives Hanover’s Differentiation 5 The Hanover combines the best attributes of Nationals and Regionals Regional Carriers Local presence Robust agency relationships Underwriting flexibility Large Carriers Broad product offerings Technology Deep analytics
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Our Differentiated Strategy Presents a Sustainable Competitive Advantage in the Independent Agency Market 6 Competitive Advantages CUSTOMER- DRIVEN APPROACH Agile innovator Attractive employer Comprehensive risk manager Strategic Sustainability Enablers DISTINCTIVE AGENCY PARTNERSHIPS SPECIALIZED PRODUCTS AND CAPABILITIES OUR VISION: To be the premier P&C franchise in the independent agency channel and help agents transform the way customers experience insurance
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7 Diversified and Relevant Business Capabilities Personal Lines 41% Core Commercial 36% Specialty 23% 57% 43% 32% 29% 32% 7% 51% 19% 18% 12% $2.6B Personal Lines 2025 NPW $6.3B $1.4B Specialty $2.3B Core Commercial • Commercial multiple peril • Commercial auto • Workers’ compensation • Other core commercial • Personal auto • Home and other • Professional and executive lines • Specialty property and casualty • Marine • Surety and other
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Specialized and Differentiated Offering in Each Business Segment 8 Personal Lines – 41% ✓ Account business creates higher retention and lifetime value ✓ Expanding up-market to higher value properties Avoid non-standard and monoline business Specialty – 23% ✓ Lower end of the risk and size spectrum ✓ Account-based approach, integrated with core commercial ✓ Retail agency focus Avoid potentially volatile products (MedMal, Excess Casualty) Core Commercial – 36% ✓ Specialized products by industry class ✓ Profitable account business (65%) ✓ POS and non-POS capabilities Avoid large account, monoline umbrella, intensely volatile markets Business Profile $6.3B 2025 Net Premiums Written
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2+ Business Units, 47% 2+ Business Units, 80% 1 Business Unit, 53% 1 Business Unit, 20% $5M+, 32% $5M+, 74% <$5M, 68% <$5M, 26% Increased depth and breadth of agency relationships drives growth and profitability, and increased relevance leads to higher retention and improved loss ratios Depth of Hanover Agency Relationships 20252010 Breadth of Hanover Agency Relationships 20252010 9 Our Three-Pronged Agency Approach Focused on Targeted Distribution, Broad and Relevant Underwriting, and Deep Business Insights Drives Growth and Profitability
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Capitalizing on Industry-Wide Agency Consolidation Trends 10 Total Addressable Market 2016 2025 $78B $53B +47% 2,100 Agencies 2,150 Agencies ✓ Partnering with growing agents ✓ Broader market reach by leveraging agency consolidation trends ✓ Broadening capabilities Positioned to drive continued expansion in a consolidating market through organic growth, partnering with consolidators, and new agency appointments *Total addressable market of $78B reflects 2023 data, which is the latest available update. *
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Growth 11
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Personal Lines Core Commercial Specialty Transformed Into Diversified P&C Franchise with Broad-Based Profitability and Extensive Growth Opportunities Across the P&C Market 12 3 7 % 3 8 % 2 5 % Net Premiums Written 6 3 % 3 0 % ✓ Transformed to a more balanced, differentiated P&C franchise with broad-based profitability and opportunities ✓ Diversification allows for greater agility and ability to best navigate varying points in the insurance cycle ✓ More geographically diversified through national footprint ✓ Change fueled by organic growth and targeted “capabilities” acquisitions ✓ Reduced reliance on property lines in challenging geographies ✓ Most recent growth primarily driven by pricing increases $6.3B 2005 2025 63% 30% 23% 36% 41% 7% $2.2B ~5% CAGR Pre-tax Operating Income by major segment 2025 • National footprint • Diversified across PL, Core Commercial, and Specialty • Balanced between property/casualty • Regional footprint • Personal Lines focused • Property concentration Core Commercial Specialty Personal Lines
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Specialty Leading carrier for small to mid-sized clients primarily served by retail agents, with compelling growth strategy 13 Independent agency focus, with an emphasis on the lower-end of the risk and account size spectrum ✓ Nearly doubled written premium over the last 10 years using organic and inorganic opportunities ✓ Accelerating technology investments to create efficiencies for agents ✓ Expanding product capabilities focused on agent needs ✓ Capturing excess & surplus opportunities at strong margins ✓ Expanding marine business ✓ Leveraging Core Commercial for account strategy ✓ Expanding shelf space with agent partners ✓ Broadening distribution (i.e., wholesale channel) Growth and Profitability Drivers Market Focus • Management Liability • Professional Liability • Healthcare • Cyber • Programs • Industrial Property • E&S • Specialty GL • Inland Marine • Contract Surety • Commercial Surety Business Mix $1.4B NPW 2025 Hanover Risk and Size Spectrum Independent Agents Wholesalers E&S Brokers Big Three Brokers Low High $84B Market Opportunity Specialty Property and Casualty, 29% Professional and Executive Lines, 32% Marine, 32% Surety, 7% 2026 Target: Elevate growth while accelerating investments in technology and talent
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8% 9% 12% 15% 16% 17% 23% 14 Core Commercial Leading carrier in providing agents with the flexibility between straight through and more complex, risk specific underwriting Growth and Profitability Drivers ✓ Deepen agency relationships, leveraging market insights ✓ Enhanced use of granular pricing and segmentation; capitalizing on rate momentum ✓ Leveraging our new, state -of-the-art quoting and binding platform in Small Commercial ✓ Targeted underwriting appetite expansion Real Estate and Institutions Manuf. and Wholesale Human and Social Services Contractors, Transp., and Maint. Services Hospitality and Retail Technology Prof. and Fin. Services Business Mix $2.3B NPW Market Focus Hanover Risk and Size SpectrumLow High Small Middle Large 2025 Diversified portfolio providing distinctive industry solutions $198B Market Opportunity 2026 Target: Accelerate our successful growth strategy, while prudently managing profitability
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15 Personal Lines Leading carrier for whole account offerings for middle market customers across an attractive regional footprint Expanding upstream toward a more value-oriented and growing customer segment ✓ Partnering with select independent agents to gain share of preferred accounts ✓ Leveraging state -of-the-art TAP Sales platform ✓ Continue successful expansion “upmarket” through Prestige product ✓ New agency appointments in under-penetrated geographies Value Drivers • “Middle market” account customers • “Emerging affluent market” account customers The Hanover PLATNIUM EXPERIENCE HANOVER PRESTIGE Non- standard Monoline Hanover High net worth Market Focus Monoline Auto Home Monoline ~89% Account Business $2.6B NPW Business Mix 2025 $82B Market Opportunity 2026 Target: Accelerate growth led by higher- return diversification states
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Profitability 16
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17 Long-term Approach to Financial Discipline Drives Success Reserving Discipline Risk and Volatility Management Capital Management Optimize Enterprise Performance Driving Shareholder Returns • Business investment based on risk-adjusted returns • Return excess capital to shareholders • Rigorous underwriting performance management • Investment in innovation • Enterprise-wide risk management • Responsible appetite expansion • Conservative reserving philosophy strengthens resilience • Limited earnings volatility
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60.2% 56.8% 58.5% 61.7% 61.1% 58.2% 57.1% 2019 2020 2021 2022 2023 2024 2025 $232 $223 $217 $239 $283 $324 $401 $49 $42 $94 $57 $49 $49 $53 $281 $265 $311 $296 $332 $373 $454 3.58% 3.33% 2.99% 3.04% 3.36% 3.70% 4.27% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 2019 2020 2021 2022 2023 2024 2025 Partnerships, Equities and other Investments* Fixed Maturities Pre-tax Fixed Maturity Investment Yield** 91.8% 88.1% 88.6% 92.1% 91.3% 88.4% 87.1% 3.8% 6.3% 8.4% 7.7% 12.2% 6.4% 4.5% 2019 2020 2021 2022 2023 2024 2025 Catastrophes Combined Ratio, excluding catastrophes $4.6 $4.6 $5.0 $5.5 $5.8 $6.1 $6.3 2019 2020 2021 2022 2023 2024 2025 *Net investment income from partnerships, equities and other investments also includes net investment expenses **Pre-tax yields represent annualized net investment income for the period divided by the monthly average invested assets at amo rtized cost or cost, which excludes accumulated changes in fair value for fixed maturities and equity securities Built a Robust Performance Track Record Over The Last Several Years… 18 Combined Ratio Current Accident Year Loss and LAE Ratio, ex-CAT(2) Net Premiums Written($ in billions) Pre-Tax Net Investment Income*($ in millions) ~5% CAGR (1) See information about this and other non-GAAP measures and definitions used throughout this presentation on the final pages of this document. (1) 91.6% 95.6% 94.4% 97.0% 99.8% 103.5% 94.8%
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$1,445.1 $1,510.8 $1,583.8 $1,738.9 $1,488.6 ↑ 7.4% ↑ 3.9% ↑ 4.1% ↑ 4.5% ↑ 3.0% 4Q24 1Q25 2Q25 3Q25 4Q25 32.3% 30.8% 30.6% 31.3% 31.8% 56.9% 58.3% 56.1% 57.6% 56.8% 89.2% 89.1% 86.7% 88.9% 88.6% 4Q24 1Q25 2Q25 3Q25 4Q25 Fourth Quarter 2025 Underwriting Results 19 Expense ratio(3) Current accident year loss and LAE ratio, ex-CAT Net premiums written and growth*($ in millions) • Combined ratio (CR) of 89.0%, 0.2 points improved from the prior-year quarter • Catastrophe losses of $27.0 million, or 1.7%, which was favorable to the company’s fourth quarter assumption and historical averages • Combined ratio, ex-CAT, of 87.3%, improved 0.2 points from the prior-year quarter, driven by a 0.5- point improvement in the expense ratio • Current accident year loss and LAE ratio, ex-CAT, of 56.8%, slightly improved from the prior-year quarter • Favorable prior-year reserve development, ex-CAT, of $20.1 million, or 1.3 points, with favorability in each segment • Net premiums written growth of 3.0%, or 4.1% excluding reinstatement premiums(4)89.2% 94.1% 92.5% 91.1% 89.0% Current accident year combined ratio, ex-CAT(1) CR: *Unless otherwise stated, net premiums written growth and other growth comparisons are to the same period of the prior year For additional information regarding forward-looking statements and non-GAAP measures on this page and throughout this presentation, please refer to pages 28-30 of this presentation.
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31.3% 31.1% 58.2% 57.1% 89.5% 88.2% FY 24 FY 25 Full-Year 2025 Underwriting Results 20 Expense ratio Current accident year loss and LAE ratio, ex-CAT Net premiums written and growth($ in millions) 94.8% 91.6% Current accident year combined ratio, ex-CAT CR: • Combined ratio of 91.6% in the full year 2025, 3.2 points improved from the prior year • Catastrophe losses of $276.3 million, or 4.5%, which was lower than the prior year and the company’s CAT load assumption, helped by benign weather and property management actions • Combined ratio, ex-CAT, improved 1.3 points from the prior year, primarily driven by a 1.1-point improvement in the current accident year loss and LAE ratio, ex-CAT, reflecting significant improvement in Personal Lines • Expense ratio of 31.1% improved 0.2 points from the prior year, but was above the company’s original expectations, impacted by temporarily higher variable expenses reflecting better-than-expected performance, including lower CAT losses, as well as continued investments in talent and technology • Favorable prior-year reserve development, ex-CAT, of $70.4 million, with favorability in each segment • Thoughtful and prudent in setting current and prior-year reserves for auto liability in both Personal and Commercial Lines • Net premiums written of $6.3 billion in the year, up 3.9% from 2024 $6,083.6 $6,322.1 ↑ 4.7% ↑ 3.9% FY 24 FY 25 For additional information regarding forward-looking statements and non-GAAP measures on this page and throughout this presentation, please refer to pages 28-30 of this presentation.
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6% 3% 1% 12% 18% 57% 3% Equities Mortgage loans Limited partnerships Cash and cash equivalents Other 27% 14% 4%9% 25% 6% 5% 10% Corporates Municipals (taxable) RMBS CMBS U.S. government ABS Investment Portfolio – Total Invested Assets and Cash of $11.5 Billion 21 As of December 31, 2025 • 95% of fixed maturity securities are investment grade • Weighted average quality: A+ • Duration: 4.3 years High-quality, well-laddered fixed income portfolio Equities, cash and other: $2.0 billionFixed maturities: $9.5 billion High-quality, well-diversified investment portfolio Industrials Financials Utilities Marketable securities ETFs Preferred and other * *Higher-than-usual cash and cash equivalents reflects $500 million debt issuance in the third quarter of 2025. The company called $375 million of senior notes at par, which was retired in January 2026
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Streamline Operations For Agents • Quote and Issue Platform (TAP Sales) • APIs • Tighter Data Integration For Employees • Claims System (CMX) • Microsoft Copilot • Document Summarization • Workflow Automation For Customers • Digital Payments • Texting • Status Tracking Augment Risk Analytics • Property Tools for Underwriters • Jumper Models • Third-Party Data Integration • Customer 360 Views • Continued Investment in Operational Data Stores • Drone Capabilities • Further Expanding Sensor and Telematic Usage Ensure Governance and Security • Governance • Cybersecurity • Data Privacy Safeguards • AI Governance and Model Oversight 22 The Hanover Technology Strategy: Enable the Evolution of Capabilities and Technologies Which Advance The Hanover’s Competitive Position in the Marketplace *Areas of focus either executed or in progress at The Hanover. Areas of Focus*
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23 Building On Our Modernized Platforms Real-time, AI-enabled, integrated submission TRIAGE Accelerate and improve UW decisions and leveraging AI and predictive models ASSESSMENT Digitize and automate simple interactions and optimize self-service offerings. Use AI to summarize calls to free time for exceptional experience INTAKE UNDERWRITING & PRICING CUSTOMER SERVICE & CLAIMS MANAGEMENT Optimizing Our Operating Model Ecosystem as a Strategic Differentiator INTAKE Smooth transition between reps and ability to monitor tasks TRIAGE DESIRED OUTCOMES Straight-through processing Improved decision- making Realization of operational efficiencies Improved customer service and satisfaction
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24 An organization of 1,400 professionals and an extremely broad and sophisticated set of capabilities Claims paid per year Experienced best-in-class specialists driving advanced insights and differentiated performance 325k 71% Deploying new capabilities and tools to increase operating efficiency and further improve claims expenses as the industry undergoes rapid change ~80% Digitally transforming business through leverage of AI capabilities to bolster accuracy, speed and scalability 50 people Net promoter score Of auto physical damage claims settled with virtual appraisal Robust medical management team Yielding Exceptional Results Case Study: Innovative Technology Solutions Augment Our Strong Claims Capabilities
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Living Our CARE Values Through A People-First Culture 25 Collaboration Accountability Respect Empowerment 80%+ Participation In All- Employee Pulse Survey
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Diverse Board Focused on Delivering Sustainable, Long- Term Stakeholder Value Through Strong Governance 26 Board Member Selected Experience Cynthia Egan Chair of the Board T. Rowe Price, Fidelity Francisco Aristeguieta Citigroup, State Street Kevin Bradicich McKinsey Theodore Bunting, Jr. Entergy Jane Carlin* Morgan Stanley, Credit Suisse J. Paul Condrin III* Liberty Mutual, KPMG Kathleen Lane TJX, National Grid, Gillette, GE, Pepsi Joseph Ramrath* Colchester Partners, United Asset Management Elizabeth Ward MassMutual, Babson Capital Management William Donnell NCCI, Swiss Re Jack Roche CEO, The Hanover Travelers, Fireman’s Fund, Atlantic Mutual ✓ P&C Insurance ✓ Financial Services ✓ Mergers and Acquisitions ✓ Finance / Accounting ✓ Investments / Portfolio Management ✓ Technology ✓ Operations ✓ Marketing and Distribution ✓ Governance ✓ Government and Public Policy ✓ Capital Markets ✓ Risk Management ✓ Information Security ✓ Artificial Intelligence ✓ Legal / Regulatory ✓ Investor Relations ✓ Corporate Strategy ✓ Human Resources ✓ Sustainability Collective Expertise 18% People of Color 36% Female Added 3 new directors in the last 4 yearsSeparate CEO and Board Chair 6.7 years average tenure 91% Independent (10 of 11 members) 26 50% Female Leadership in Board Chair and Committee Chair Roles * Committee Chair
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About The Hanover 27 The Hanover Insurance Group, Inc. is the holding company for several property and casualty insurance companies, which together constitute one of the largest insurance businesses in the United States. The company provides exceptional insurance solutions through a select group of independent agents and brokers. Together with its agent partners, The Hanover offers standard and specialized insurance protection for small and mid-sized businesses, as well as for homes, automobiles, and other personal items. For more information, please visit hanover.com.
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Forward-Looking Statements 28 Certain statements in this document and comments made by management may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as, but not limited to, “believes,” “anticipates,” “expects,” “intends,” “may,” “projects,” “projections,” “plan,” “likely,” “potential,” “targeted,” “forecasts,” “should,” “could,” “continue,” “outlook,” “guidance,” “modeling,” “target profitability,” “target margins,” “confident,” “optimistic,” “committed,” “will,” “line of sight,” “clear visibility to,” “designed,” "position us," and other similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. The company cautions investors that any such forward-looking statements are estimates, beliefs, expectations and/or projections that involve significant judgment, and that historical results, trends and forward-looking statements are not guarantees and are not necessarily indicative of future performance. Actual results could differ materially from those anticipated. These statements include, but are not limited to, the company’s statements regarding: • The company’s outlook and its ability and confidence in achieving components or the sum of the respective period guidance and/or long-term targets for future results of operations including: the combined ratio, excluding catastrophe losses; catastrophe losses; net investment income; growth of net premiums written, net premiums earned and/or pricing increases in total or by line of business; expense ratio; operating return on equity; interest rate assumptions and investment portfolio management, renewal price change, rate, and/or the effective tax rate; • The company’s ability and timing to deliver on expectations set forth related to target margins, target returns and/or return to target profitability in total or by line of business; • The impacts of general economic and socioeconomic conditions on the company’s operating and financial results, including, but not limited to, the impact on the company’s investment portfolio and capital planning, changes in claims frequency as a result of fluctuations in economic activity, the potential impacts of inflation and other economic factors, and/or claims severity from higher cost of repairs due to, among other things, supply chain disruptions, tariffs and inflation; • Ability to manage the impact of inflationary pressures, global market disruptions, economic conditions, geopolitical events or otherwise, including, but not limited to, supply chain disruptions, tariffs, trade policy, labor shortages, and increases in cost of goods, services, labor, and materials; • Uses, including the timing of uses, of capital for share repurchases, special or ordinary cash dividends, business investments or growth, debt maturities, or otherwise, and outstanding shares in future periods as a result of various share repurchase mechanisms, capital management framework, and overall comfort with liquidity and capital levels; • Catastrophe modeling and variability of catastrophe losses due to risk concentrations, changes in weather patterns, severe weather including hurricanes, tornadoes and other windstorms, hail, flood, earthquakes, fires, drought, explosions, severe winter weather and other convective storms, or pandemics, terrorism, civil unrest, riots or other events, as well as the complexity in estimating losses from large catastrophe events due to delayed reporting of the existence, nature or extent of losses or where “demand surge,” regulatory assessments, litigation, coverage and technical complexities or other factors may significantly impact the ultimate amount of such losses; • Current accident year losses and loss selections (picks), excluding catastrophes, and prior accident year loss reserve development patterns, particularly in complex “longer-tail” liability lines, as well as the inherent variability in short-tail property and non-catastrophe weather losses; • Changes in frequency and loss severity trends in Core Commercial, Specialty and/or Personal Lines; • The confidence or concern that the current level of reserves is adequate and/or sufficient for future claim payments, whether due to losses that have been incurred but not reported, circumstances that delay the reporting of losses, business complexity, adverse judgments or developments with respect to case reserves, the difficulties and uncertainties inherent in projecting future losses from historical data, changes in replacement and medical costs, as well as complexities including legislative, regulatory or judicial actions that expand the intended scope of coverages, or other factors; • Characterization of some business as being “more profitable” in light of inherent uncertainty of ultimate losses incurred, especially for “longer-tail” liability businesses; • Efforts to manage expenses, including the company’s long-term expense savings targets, while allocating capital to business investment, which is at management’s discretion; • Our ability to retain profitable policies in force and attract profitable policies, and to increase rates commensurate with, or in excess of, loss trends; • The positive impact of mix improvement, underwriting initiatives, coverage restrictions, non-renewals, changes in terms and conditions, and pricing segmentation, among others, on the company’s results; • The ability to generate growth in targeted businesses, segments, and/or geographies through new agency appointments, rate increases, retention improvements, new business, expansion into geographies, new product introductions, or otherwise, the ability to balance rate actions and retention, as well as the ability to reduce premiums attributable to products, lines of business, or geographies believed to be less profitable; • The ability to offset long-term and/or short-term loss trends due to increased frequency and/or severity; increased “social inflation” from a more litigious environment, lawsuit abuse and higher average cost of resolution; increased property replacement or repair costs; and/or social unrest; and • Investment returns and the effect of macro-economic interest rate trends and overall security yields, including the macro-economic impact of governmental and/or central banking initiatives taken in response to inflationary pressures, and geopolitical circumstances, on new money yields, as well as individual investment and overall investment returns.
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Additional Risks and Uncertainties 29 Investors are further cautioned and should consider the risks and uncertainties in the company’s business that may affect such estimates and future performance that are discussed in the company’s most recently filed reports on Form 10-K and Form 10-Q and other documents filed by The Hanover Insurance Group, Inc. with the Securities and Exchange Commission (SEC) and that are also available at www.hanover.com under “Investors.” These risks and uncertainties include, but are not limited to: • Changes in regulatory, legislative, economic, market and political conditions, particularly with respect to rates, competition, the use of data, technology, artificial intelligence (AI), cybersecurity, policy terms and conditions, restrictions on cancellations and/or non-renewals, payment flexibility, and regions where the company has geographical concentrations; • Heightened financial market volatility, fluctuations in interest rates (which have a significant impact on the market value of our investment portfolio and thus our book value), inflationary pressures, default rates, tariffs, difficult economic, market and geopolitical conditions, and other factors that affect investment returns from the investment portfolio; • Recessionary economic periods that may inhibit the company’s ability to increase pricing or renew business, or otherwise impact the company’s results, and which may be accompanied by higher claims activity in certain lines; • Data security and privacy incidents, including, but not limited to, those resulting from malicious cybersecurity attacks on the company or its business partners and service providers, or intrusions into the company’s information network systems, including cloud-based data information storage, or data sources; • Adverse claims experience, including those driven by large or increased frequency and/or severity of catastrophe events, including those related to hurricanes, tornadoes and other windstorms, hail, flood, earthquakes, fires, drought, explosions, severe winter weather and other convective storms, or due to terrorism, civil unrest, riots, or cybersecurity events (including from products not intended to provide cyber coverage); • The limitations and assumptions used to model non-catastrophe property and casualty losses (particularly with respect to products with longer-tail liability lines, such as casualty and bodily injury claims, or involving emerging issues related to losses incurred as the result of new lines of business or reinsurance contracts and reinsurance recoverables), leading to potential adverse development of loss and loss adjustment expense reserves; • Impacts of changing climate conditions and weather patterns causing higher levels of losses from weather events to persist and leading to new or enhanced regulations; • Litigation and the possibility of adverse judicial decisions, including those which expand policy coverage beyond its intended scope and/or award “bad faith” or other non-contractual damages, and the impact of “social inflation” and third-party litigation funding affecting judicial awards and settlements; • The ability to increase or maintain insurance rates in line with anticipated loss costs and/or governmental action, including mandates by state departments of insurance to either raise or lower rates, or provide credits or return premium to insureds; • Investment impairments, which may be affected by, among other things, the company’s ability and willingness to hold investment assets until they recover in value, as well as credit and interest rate risk, and general financial and economic conditions; • Disruption of the independent agency channel or its operating model, including the impact of competition and consolidation in the industry and among agents and brokers, and the impact of AI tools; • Competition, particularly from competitors who have resource and capability advantages, including the advancing use of AI technology; • The global macroeconomic environment, including inflation, recessionary effects, global trade disputes, war, energy market disruptions, equity price risk, tariffs, and interest rate fluctuations, which, among other things, could result in reductions in market values of fixed maturities and other investments, and/or increases in loss costs; • Adverse state and federal regulation, legislative and/or regulatory actions (including significant revisions to Michigan’s automobile personal injury protection system and related litigation, and various regulations, orders and proposed legislation regarding bad faith, premium grace periods and returns, changes to policy terms and conditions, and rate actions); • Financial ratings actions, in particular, downgrades to the company’s ratings; • Operational and technology risks and evolving technological and product innovation, including risks created by remote work environments, the evolving use of AI, and cybersecurity threats; • Uncertainties in estimating indemnification liabilities recorded in conjunction with obligations undertaken in connection with the sale of various businesses and discontinued operations; and • The ability to collect from reinsurers, reinsurance availability and pricing, and reinsurance terms and conditions. Investors should not place undue reliance on forward-looking statements, which speak only as of the date they are made and should understand the risks and uncertainties inherent in or particular to the company’s business. The company does not undertake the responsibility to update or revise such forward-looking statements, except as required by law.
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Non-GAAP Financial Measures 30 Non-GAAP Financial Measures As discussed on page 39 of the company’s Annual Report on Form 10-K for the year ended December 31, 2024, the company uses non-GAAP financial measures as important measures of its operating performance, including operating income, operating income before interest expense and income taxes, operating income per diluted share, and components of the combined ratio, both excluding and/or including catastrophe losses, prior-year reserve development and the expense ratio. Management believes these non- GAAP financial measures are important indications of the company’s operating performance. The definition of other non-GAAP financial measures and terms can be found in the 2024 Annual Report on pages 62-65. Operating income and operating income per diluted share are non-GAAP measures. They are defined as net income excluding the after-tax impact of net realized and unrealized investment gains (losses), gains and/or losses on the repayment of debt, other non-operating items, and results from discontinued operations. Net realized and unrealized investment gains (losses), which include changes in the fair value of equity securities still held, are excluded for purposes of presenting operating income, as they are, to a certain extent, determined by interest rates, financial markets and the timing of sales. Operating income also excludes net gains and losses from disposals of businesses, gains and losses related to the repayment of debt, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes, and certain other items. Operating income is the sum of the segment income (loss) from: Core Commercial, Specialty, Personal Lines, and Other, after interest expense and income taxes. In reference to one of the company’s four reporting segments, “operating income (loss)” is the segment income (loss) before both interest expense and income taxes. The company also uses “operating income per diluted share” (which is after both interest expense and income taxes). Operating income per share is calculated by dividing operating income by the weighted average number of diluted shares of common stock. Operating loss per share is calculated by dividing operating loss by the weighted average number of basic shares of common stock due to antidilution. The company believes that metrics of operating income and operating income (loss) in relation to its four reporting segments provide investors with a valuable measure of the performance of the company’s continuing businesses because they highlight the portion of net income attributable to the core operations of the business. Income from continuing operations is the most directly comparable GAAP measure for operating income (and operating income before income taxes) and measures of operating income that exclude the effects of catastrophe losses and/or prior-year reserve development. These non-GAAP measures should not be misconstrued as substitutes for income from continuing operations or net income determined in accordance with GAAP. The company may provide measures of operating income and combined ratios that exclude the impact of catastrophe losses (which in all respects include prior accident year catastrophe loss development). A catastrophe is a severe loss, resulting from natural or manmade events including, but is not limited to, hurricanes, tornadoes and other windstorms, hail, flood, earthquakes, fires, drought, explosions, severe winter weather and other convective storms, riots, and terrorism. Due to the unique characteristics of each catastrophe loss, there is an inherent inability to reasonably estimate the timing or loss amount in advance. The company believes a separate discussion excluding the effects of catastrophe losses is meaningful to understand the underlying trends and variability of earnings, loss and combined ratio results, among others. Book value per share is total shareholders’ equity divided by the number of common shares outstanding. Book value per share excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is a non-GAAP measure and is total shareholders’ equity excluding the after-tax effect of unrealized appreciation (depreciation) on fixed maturities and market risk divided by the number of common shares outstanding. Prior accident year reserve development, which can either be favorable or unfavorable, represents changes in the company’s estimate of costs related to claims from prior years. Calendar year loss and loss adjustment expense (LAE) ratios determined in accordance with GAAP, excluding prior accident year reserve development, are sometimes referred to as “current accident year loss ratios.” The company believes a discussion of loss and combined ratios excluding prior accident year reserve development is helpful since it provides insight into both estimates of current accident year results and the accuracy of prior-year estimates. The loss and combined ratios in accordance with GAAP are the most directly comparable GAAP measures for the loss and combined ratios calculated excluding the effects of catastrophe losses and/or prior-year reserve development. The presentation of loss and combined ratios calculated excluding the effects of catastrophe losses and/or prior-year reserve development should not be misconstrued as substitutes for the loss and/or combined ratios determined in accordance with GAAP.
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End Notes 31 (1) Combined ratio, excluding catastrophes, and current accident year combined ratio, excluding catastrophes, are non-GAAP measures. The combined ratio (which includes catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. A reconciliation of the GAAP combined ratio to the combined ratio, excluding catastrophes, and the current accident year combined ratio, excluding catastrophes, is shown below. December 31, 2024 March 31, 2025 June 30, 2025 September 30, 2025 December 31, 2025 Total combined ratio (GAAP) 89.2% 94.1% 92.5% 91.1% 89.0% Less: Catastrophe ratio 1.7% 6.3% 7.0% 3.0% 1.7% Combined ratio, excluding catastrophe losses (non-GAAP) 87.5% 87.8% 85.5% 88.1% 87.3% Less: Prior-year reserve development ratio (1.7)% (1.3)% (1.2)% (0.8)% (1.3)% Current accident year combined ratio, excluding catastrophe losses (non-GAAP) 89.2% 89.1% 86.7% 88.9% 88.6% Three months ended FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total combined ratio (GAAP) 95.6% 94.4% 97.0% 99.8% 103.5% 94.8% 91.6% Less: Catastrophe ratio 3.8% 6.3% 8.4% 7.7% 12.2% 6.4% 4.5% Combined ratio, excluding catastrophe losses (non-GAAP) 91.8% 88.1% 88.6% 92.1% 91.3% 88.4% 87.1% Less: Prior-year reserve development ratio 0.0% -0.3% -1.2% -0.4% -0.3% -1.1% -1.1% Current accident year combined ratio, excluding catastrophe losses (non-GAAP) 91.8% 88.4% 89.8% 92.5% 91.6% 89.5% 88.2%
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End Notes Continued 32 (2) Current accident year loss and LAE ratio, excluding catastrophe losses, is a non-GAAP measure, which is equal to the loss and LAE ratio (“loss ratio”), excluding prior-year reserve development and catastrophe losses. The loss ratio (which includes losses, LAE, catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. A reconciliation of the GAAP loss ratio to the current accident year loss and LAE ratio, excluding catastrophe losses is shown below. (3) Here, and throughout this document, the expense ratio is reduced by installment and other fee revenues for purposes of the ratio calculation. FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total Loss and LAE ratio (GAAP) 64.0% 62.8% 65.7% 69.0% 73.0% 63.5% 60.5% Less: Catastrophe ratio 3.8% 6.3% 8.4% 7.7% 12.2% 6.4% 4.5% Less: Prior-year reserve development ratio 0.0% -0.3% -1.2% -0.4% -0.3% -1.1% -1.1% Current accident year loss and LAE ratio, ex cat losses (non-GAAP) 60.2% 56.8% 58.5% 61.7% 61.1% 58.2% 57.1% December 31, 2024 March 31, 2025 June 30, 2025 September 30, 2025 December 31, 2025 Total Loss and LAE ratio (GAAP) 56.9% 63.3% 61.9% 59.8% 57.2% Less: Prior-year reserve development ratio (1.7)% (1.3)% (1.2)% (0.8)% (1.3)% Less: Catastrophe ratio 1.7% 6.3% 7.0% 3.0% 1.7% Current accident year loss and LAE ratio, excluding catastrophes (non-GAAP) 56.9% 58.3% 56.1% 57.6% 56.8% Three months ended
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End Notes Continued 33 (4) Net premiums written, excluding reinstatement premiums, is a non-GAAP measure. Net premiums written (which includes reinstatement premiums) is the most directly comparable GAAP measure. A reconciliation of GAAP net premiums written to net premiums written, excluding reinstatement premiums, is shown below. ($ in millions) Consolidated 1,488.6$ (9.3)$ 1,497.9$ Grow th vs prior-year quarter 4.1% Consolidated 1,445.1$ 6.3$ 1,438.8$ Three months ended December 31, 2025 December 31, 2024 Net premiums written, excluding reinstatement premiums Net premiums written Less: Reinstatement premiums Less: Reinstatement premiums Net premiums written, excluding reinstatement premiums Net premiums written