THG 2018 Annual Report

SCHEDULE II (CONTINUED) THE HANOVER INSURANCE GROUP, INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31 2018 2017 2016 (in millions) Cash flows from operating activities Net income $ 391.0 $ 186.2 $ 155.1 Adjustments to reconcile net income to net cash provided by operating activities: Gain from sale of Chaucer business (131.9) ² ² Net realized investment losses 0.6 0.2 ² Loss from retirement of debt 1.9 ² 88.3 Equity in net income of subsidiaries (288.4) (196.1) (207.0) Dividends received from subsidiaries 86.4 55.1 228.1 Deferred income tax expense (benefit) (5.3) 18.9 (39.0) Change in expenses and taxes payable 59.7 (27.4) 6.6 Change in net receivable from subsidiaries 8.9 9.0 50.5 Other, net (0.4) (0.1) 7.3 Net cash provided by operating activities 122.5 45.8 289.9 Cash flows from investing activities Proceeds from disposals and maturities of fixed maturities 82.8 94.1 82.4 Purchase of fixed maturities (4.0) ² ² Net cash received from sale of Chaucer business 762.0 ² ² Net cash used for business acquisitions ² (12.3) (2.2) Net cash provided by investing activities 840.8 81.8 80.2 Cash flows from financing activities Proceeds from debt borrowings ² ² 370.7 Proceeds from long-term intercompany borrowings ² ² 125.0 Net cash related to short-term intercompany borrowings (19.8) ² (102.7) Repurchases of debt (11.6) ² (571.9) Repurchase of common stock (57.7) (37.2) (105.6) Dividends paid to shareholders (94.3) (86.8) (80.4) Proceeds from exercise of employee stock options 14.8 23.1 16.2 Other financing activities ² (4.1) (19.9) Net cash used in financing activities (168.6) (105.0) (368.6) Net change in cash and cash equivalents 794.7 22.6 1.5 Cash and cash equivalents, beginning of year 32.7 10.1 8.6 Cash and cash equivalents, end of year $ 827.4 $ 32.7 $ 10.1 Included in other operating cash flows was the cash portion of dividends received from unconsolidated subsidiaries. Additionally, investment assets of $179.8 million, $261.6 million and $78.5 million were transferred to the parent company in 2018, 2017 and 2016, respectively, to settle dividend obligations and other intercompany borrowings and balances. The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto. 150 THE HANOVER INSURANCE GROUP | 2018 ANNUAL REPORT