THG 2018 Annual Report

x other commercial lines coverages include umbrella, healthcare, miscellaneous commercial property, and monoline general liability. Our healthcare coverage includes product liability, medical professional liability and general liability coverages for selected portions of the healthcare industry, including eldercare providers, durable medical equipment suppliers, podiatrists and behavioral health specialists. Our strategy in Commercial Lines focuses on building deep relationships with partner independent agents through differentiated product offerings, industry segmentation, and franchise value through limited distribution. We continue to make enhancements to our products and technology platforms that are intended to drive more total account placements in our small commercial and middle market business, while delivering enhanced margins in our specialty businesses. This aligns with our focus of delivering the capabilities that will help expand the depth and breadth of our partnerships with a limited number of agents. Our small commercial, middle market and specialty businesses each constitute approximately one-third of our total Commercial Lines business. Small commercial offerings, which generally include premiums of $50,000 or less, deliver value through product expertise, local presence, and ease of doing business. Middle market accounts, with premiums generally in the range of $50,000 to $250,000, require greater claim and underwriting expertise, as well as a focus on industry segments where we can deliver differentiation in the market and value to agents and customers. Small and middle market accounts comprise approximately $1.7 billion of the Commercial Lines segment net premiums written. Our specialty lines of business include inland marine, management and professional liability, AIX program business, surety and specialty property. In our small commercial and middle market businesses, we offer coverages and capabilities in several key industries including technology, schools, and human services organizations, such as non-profit youth and community service organizations. We also provide further segmentation in our core middle market commercial products, including real estate, hospitality, manufacturing, contractors and wholesale distributors. Part of our strategy is to expand our specialty lines offerings in order to provide our agents and policyholders with a broader product portfolio and to increase our market share of our partner agents ¶ total business. We have over time acquired various specialized businesses aimed at further diversifying and growing our specialty lines. We used these acquisitions as platforms to expand our product offerings and grow through our existing agency and broker distribution network. We believe our small commercial capabilities, distinctiveness in the middle market, and continued development of specialty business provides us with a more diversified portfolio of products and enables us to deliver significant value to our agents and policyholders. We believe these efforts will enable us to continue to improve the overall mix of our business and ultimately our underwriting profitability. Personal Lines Our Personal Lines segment generated $1.8 billion, or 39.4%, of consolidated operating revenues and $1.8 billion, or 40.5%, of net premiums written, for the year ended December 31, 2018. The following table provides net premiums written by line of business for our Personal Lines segment. Net Premiums YEAR ENDED DECEMBER 31, 2018 Written % of Total (in millions, except ratios) $ 1,127.5 63.6% Homeowners 604.0 34.0 Other 42.6 2.4 Total $ 1,774.1 100.0% Personal Lines coverages include: Personal automobile coverage insures individuals against losses incurred from personal bodily injury, bodily injury to third parties, SURSHUW\ GDPDJH WR DQ LQVXUHG¶V YHKLFOH DQG SURSHUW\ GDPDJH WR RWKHU YHKLFOHV DQG RWKH r property. Homeowners coverage insures individuals for losses to their residences and personal property, such as those caused by fire, wind, hail, water damage (excluding flood), theft and vandalism, and against third-party liability claims. Other personal lines are comprised of personal inland marine (jewelry, art, etc.), umbrella, fire, personal watercraft, earthquake and other miscellaneous coverages. Our strategy in Personal Lines is to provide account ± oriented business (i.e., writing both an insure G¶V DXWRPRELOH DQG KRPHRZQHUV insurance) through our partner agencies, with a focus on increasing geographic diversification. The market for our Personal Lines business is very competitive, with continued pressure on independent agents from direct writers, as well as from the increased usage of real time comparative rating tools and increasingly sophisticated rating and pricing tools. We maintain a focus on partnering with high 5 2018 ANNUAL REPORT | THE HANOVER INSURANCE GROUP