THG 2018 Annual Report

Income (loss) from Chaucer Business 7KH IROORZLQJ WDEOH VXPPDUL]HV WKH UHVXOWV RI &KDXFHU¶V RSHUDWLRQV YEARS ENDED DECEMBER 31 2018 (1) 2017 2016 (in millions) Revenues Net premiums earned $ 850.0 $ 853.0 $ 838.6 Net investment income 54.9 52.0 45.7 Other income 7.5 6.7 7.1 912.4 911.7 891.4 Losses and operating expenses Losses and LAE 515.5 549.5 419.3 Amortization of deferred acquisition costs 252.5 245.9 231.6 Other expenses 115.0 109.2 113.7 883.0 904.6 764.6 Income from Chaucer business before income taxes and other items (previously presented as Chaucer's operating income) 29.4 7.1 126.8 Other items: Interest expense (3.8) (3.3) (3.5) Net realized and unrealized investment gains (losses) (1.3) 2.6 (1.6) Other income 0.4 2.2 4.6 Income from Chaucer business before income taxes 24.7 8.6 126.3 Income tax expense (4.7) (21.7) (37.2) Income (loss) from Chaucer business, net of taxes $ 20.0 $ (13.1) $ 89.1 (1) 2018 reflects the results of operations for the period in which THG owned Chaucer, which concluded with the sale of the Chaucer business on December 28, 2018. The Company recognized $0.8 million, $1.1 million and $22.3 million in foreign currency transaction losses in net income in 2018, 2017 and 2016, respectively. The following table details the carrying amounts of major assets and liabilities reflected in the Consolidated Balance Sheets under the FDSWLRQ ³$VVHWV KHOG -for-s DOH´ DQG ³/LDELOLWLHV KHOG -for- VDOH´ UHVSHFWLYHO\ DECEMBER 31 2018 2017 (in millions) Assets: Investments $ 24.5 $ 2,153.5 Cash and cash equivalents 3.3 78.5 Premiums and accounts receivable, net 2.8 471.9 Deferred acquisition costs 1.4 120.2 Reinsurance recoverable on paid and unpaid losses and unearned premiums 2.3 1,431.5 Goodwill 6.5 13.8 Other assets 16.6 197.2 Total assets $ 57.4 $ 4,466.6 Liabilities: Loss and loss adjustment expense reserves $ 2.0 $ 2,686.5 Unearned premiums 7.1 631.9 Reinsurance premium payable 1.5 293.3 Other liabilities 11.6 95.5 Total liabilities $ 22.2 $ 3,707.2 89 2018 ANNUAL REPORT | THE HANOVER INSURANCE GROUP