THG 2018 Annual Report

THE HANOVER INSURANCE GROUP, INC. AND SUBSIDIARIES &2162/,'$7(' 67$7(0(176 2) 6+$5(+2/'(56¶ (48,7< YEARS ENDED DECEMBER 31 2018 2017 2016 (in millions) Preferred Stock Balance at beginning and end of year $ ² $ ² $ ² Common Stock Balance at beginning and end of year 0.6 0.6 0.6 Additional Paid-in Capital Balance at beginning of year 1,857.0 1,846.7 1,833.5 Employee and director stock-based awards and other 14.8 10.3 13.2 Balance at end of year 1,871.8 1,857.0 1,846.7 Accumulated Other Comprehensive Income (Loss), net of tax Net Unrealized Appreciation (Depreciation) on Investments: Balance at beginning of year 205.4 186.0 149.9 Net appreciation (depreciation) on available-for-sale securities (170.1) 19.4 36.1 Adoption of Accounting Standards Update 2016-01 and 2018-02 (81.6) ² ² Amount realized with sale of Chaucer business 19.1 Balance at end of year (27.2) 205.4 186.0 Defined Benefit Pension and Postretirement Plans: Balance at beginning of year (79.5) (102.5) (78.6) Net amount arising in the period (17.0) 13.6 (30.3) Net amount recognized as net periodic benefit cost 7.7 9.4 6.4 Adoption of Accounting Standards Update 2018-02 (16.2) ² ² Amount realized with sale of Chaucer business 16.4 Balance at end of year (88.6) (79.5) (102.5) Cumulative Foreign Currency Translation Adjustment: Balance at beginning of year (18.3) (20.7) (17.4) Amount recognized as cumulative foreign currency translation during the year (1.7) 2.4 (3.3) Adoption of Accounting Standards Update 2018-02 (3.9) ² ² Amount realized with sale of Chaucer business 23.2 Balance at end of year (0.7) (18.3) (20.7) Total accumulated other comprehensive income (116.5) 107.6 62.8 Retained Earnings Balance at beginning of year 1,975.0 1,875.6 1,803.5 Cumulative effect of accounting change, net of taxes 104.3 ² ² Balance at beginning of period, as adjusted 2,079.3 1,875.6 1,803.5 Net income 391.0 186.2 155.1 Dividends to shareholders (288.0) (86.8) (80.4) Stock-based compensation ² ² (2.6) Balance at end of year 2,182.3 1,975.0 1,875.6 Treasury Stock Balance at beginning of year (942.5) (928.2) (847.1) Shares purchased at cost (57.7) (37.2) (105.6) Net shares reissued at cost under employee stock-based compensation plans 16.7 22.9 24.5 Balance at end of year 983.5 (942.5) (928.2) 7RWDO VKDUHKROGHUV¶ HTXLW\ $ 2,954.7 $ 2,997.7 $ 2,857.5 The accompanying notes are an integral part of these consolidated financial statements. 79 2018 ANNUAL REPORT | THE HANOVER INSURANCE GROUP