THG 2018 Annual Report

Any failure to protect the confidentiality of customer information could adversely affect our reputation or expose us to fines, penalties or litigation, which could have a material adverse effect on our business, financial condition and results of operations. We are required to safeguard the confidential personal information of our customers and applicants and are subject to an increasing number of federal, state, local and international laws and regulations regarding privacy and data security, as well as contractual commitments. These laws and regulations are rapidly evolving, complex, vary significantly from jurisdiction to jurisdiction, and sometimes conflict. We could be subject to governmental enforcement actions and fines, penalties, litigation, or public statements against us by consumer advocacy groups or others if confidential customer information is misappropriated from our computer systems, those of our vendors or others with whom we do business, or otherwise. Despite the security measures that may be in place, any such systems may be vulnerable to the types of attacks and security incidents described above. Any well-publicized compromise of security could deter people from entering into transactions that involve transmitting confidential information, or damage our reputation, which could have a material adverse effect on our business. Integration of acquired businesses involves a number of risks. There can be no assurance that we will be able to successfully integrate future acquisitions or that we will not assume unknown liabilities and reserve deficiencies in connection with such acquisitions. If we are unable to successfully integrate new businesses, then we could be impeded from realizing the benefits of an acquisition. The integration process could disrupt our business, and a failure to successfully integrate newer businesses could have a material adverse effect on our business, financial condition and results of operations. The difficulties of integrating an acquisition and risks to our business include, among others: x unanticipated issues in integrating information, communications and other system or unknown vulnerabilities or LQDGHTXDFLHV RI DQ DFTXLUHG FRPSDQ\¶V V\VWHPV x assumption of unknown and unrecorded liabilities; x unanticipated incompatibility of logistics, marketing and administration methods; x maintaining employee morale and retaining key employees; x integrating the business cultures of different companies; x preserving important strategic, reinsurance and other relationships; x integrating legal and financial controls in multiple jurisdictions; x consolidating corporate and administrative infrastructures and eliminating duplicative operations; x WKH GLYHUVLRQ RI PDQDJHPHQW¶V DWWHQWLRQ IURP RQJRLQJ EXVLQHVV FRQFHUQV x integrating geographically separate organizations; x unexpected or overlapping concentrations of risk where one event or series of events can affect many insured parties; x significant transaction costs; x risks and uncertainties in our ability to increase the investment yield on the investment portfolio; x uncertainties in our ability to decrease leverage as a result of adding future earnings to our capital base; x risks and uncertainties regarding the volatility of underwriting results in a combined entity; x the ability to more efficiently manage capital; x the ability to improve renewal rates and increase new property and casualty policy counts; x the ability to increase or maintain certain property and casualty insurance rates; x complying with laws, rules and regulations in multiple jurisdictions, including new and multiple employment regulations, and regulations relating to the conduct of business activities such as tax, privacy, information security, and environmental- related laws; and x the impact of new product or line of business introductions and our ability to meet projected return on capital targets. In addition, even if we are able to successfully integrate future acquisitions, we may not realize the full benefits of such acquisitions, including the synergies, cost savings or underwriting or growth opportunities that we expect. It is possible that these benefits may not be achieved within the anticipated time frame, or at all. 26 THE HANOVER INSURANCE GROUP | 2018 ANNUAL REPORT