THG 2018 Annual Report

THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31 2018 2017 2016 (in millions, except per share data) Revenues Premiums $ 4,254.4 $ 3,980.4 $ 3,789.5 Net investment income 267.4 243.9 231.6 Net realized and unrealized investment gains (losses): Net realized gains (losses) from sales and other (2.7) 26.7 37.6 Net change in fair value of equity securities (43.4) ² ² Net other ± than ± temporary impairment losses on investments recognized in earnings (4.6) (5.6) (27.4) Total net realized and unrealized investment gains (losses) (50.7) 21.1 10.2 Fees and other income 23.2 22.5 22.6 Total revenues 4,494.3 4,267.9 4,053.9 Losses and expenses Losses and loss adjustment expenses 2,724.6 2,579.6 2,546.0 Amortization of deferred acquisition costs 891.8 840.7 803.6 Interest expense 45.1 45.2 51.4 Loss on repayment of debt 28.2 ² 88.3 Other operating expenses 522.1 509.5 498.6 Total losses and expenses 4,211.8 3,975.0 3,987.9 Income from continuing operations before income taxes 282.5 292.9 66.0 Current 46.2 3.1 26.2 Deferred (2.7) 73.7 (27.2) Total income tax expense (benefit) 43.5 76.8 (1.0) Income from continuing operations 239.0 216.1 67.0 Discontinued operations: Gain from sale of Chaucer business, net of taxes 131.9 ² ² Income (loss) from Chaucer business, net of taxes 20.0 (13.1) 89.1 Net gain (loss) from discontinued life businesses, net of taxes 0.1 (16.8) (1.0) Net income $ 391.0 $ 186.2 $ 155.1 Earnings per common share: Basic: Income from continuing operations $ 5.63 $ 5.08 $ 1.57 Discontinued operations: Gain from sale of Chaucer business, net of taxes 3.11 ² ² Income (loss) from Chaucer business, net of taxes 0.47 (0.30) 2.08 Net gain (loss) from discontinued life businesses, net of taxes ² (0.40) (0.02) Net income per share $ 9.21 $ 4.38 $ 3.63 Weighted average shares outstanding 42.4 42.5 42.8 Diluted: Income from continuing operations $ 5.56 $ 5.03 $ 1.55 Discontinued operations: Gain from sale of Chaucer business, net of taxes 3.07 ² ² Income (loss) from Chaucer business, net of taxes 0.46 (0.30) 2.06 Net gain (loss) from discontinued life businesses, net of taxes ² (0.40) (0.02) Net income per share $ 9.09 $ 4.33 $ 3.59 Weighted average shares outstanding 43.0 43.0 43.2 The accompanying notes are an integral part of these consolidated financial statements. 76 THE HANOVER INSURANCE GROUP | 2018 ANNUAL REPORT