THG 2018 Annual Report

At December 31, 2018 and 2017, fixed maturities with fair values of $299.9 million and $286.9 million, respectively, were on deposit with various state governmental authorities or trustees. The Company enters into various agreements that may require its fixed maturities to be held as collateral by others. At December 31, 2018 and 2017, fixed maturities with fair values of $234.9 million and $225.7 million, respectively, were held as collateral for the FHLB collateralized borrowing program. See Note 6 ²³'HEW DQG &UHGLW $UUDQJHPHQWV´ IRU DGGLWLRQDO LQIRUPDWLRQ UHODWHG WR WKH &RPSDQ\¶V FHLB program. The amortized cost and fair value by maturity periods for fixed maturities are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers. DECEMBER 31 2018 (in millions) Amortized Cost Fair Value $ 207.4 $ 208.5 Due after one year through five years 1,830.9 1,830.0 Due after five years through ten years 2,465.1 2,398.7 Due after ten years 274.2 276.6 4,777.6 4,713.8 Mortgage-backed and asset-backed securities 1,468.3 1,447.7 Fixed maturities, excluding held-for-sale (Chaucer) 6,245.9 6,161.5 Fixed maturities, held-for-sale 24.9 24.5 Total fixed maturities $ 6,270.8 $ 6,186.0 B. UNREALIZED GAINS AND LOSSES Unrealized gains and losses on available-for-sale and other securities are summarized in the following table. YEARS ENDED DECEMBER 31 (in millions) Equity Fixed Securities and 2018 Maturities Other Total Net appreciation, beginning of year $ 110.1 $ 95.3 $ 205.4 Net depreciation on available-for-sale securities (203.7) ² (203.7) Provision for deferred income taxes 33.6 ² 33.6 Amount realized with sale of Chaucer, net of tax 19.1 ² 19.1 Cumulative effect adjustment for ASUs 2016-01 and 2018-02, net of tax 13.7 (95.3) (81.6) (137.3) (95.3) (232.6) Net depreciation, end of year $ (27.2) $ ² $ (27.2) 2017 Net appreciation, beginning of year $ 127.1 $ 58.9 $ 186.0 Net appreciation (depreciation) on available-for-sale securities (15.0) 55.9 40.9 Provision for deferred income taxes (11.2) (19.5) (30.7) Change in OTTI losses recognized in other comprehensive income 9.2 ² 9.2 (17.0) 36.4 19.4 Net appreciation, end of year $ 110.1 $ 95.3 $ 205.4 2016 Net appreciation, beginning of year $ 116.5 $ 33.4 $ 149.9 Net appreciation on available-for-sale securities 36.9 39.2 76.1 Provision for deferred income taxes (37.5) (13.7) (51.2) Change in OTTI losses recognized in other comprehensive income 11.2 ² 11.2 10.6 25.5 36.1 Net appreciation, end of year $ 127.1 $ 58.9 $ 186.0 92 THE HANOVER INSURANCE GROUP | 2018 ANNUAL REPORT