THG 2018 Annual Report

6 THE HANOVER INSURANCE GROUP | 2018 ANNUAL REPORT We strengthened our market presence in under-penetrated geographic markets with select new agency appointments. In 2018, we appointed approximately 200 new agency locations to build out our less concentrated states. We also appointed additional high-quality specialty agents to expand distribution points for products such as professional liability, management liability and inland marine. These high profit margin products continue to make a meaningful contribution to our bottom line. LEADING SPECIALIZED CAPABILITIES: PROVIDING MORE VALUE TO OUR CUSTOMERS We have developed differentiated product offerings in each of our business segments, and we continue to expand our capabilities to generate profitable growth and enhance our relevancy to the top agents in the country. In personal lines, we have built and are capitalizing on our strong brand in the account business segment. This account business now represents 84 percent of our personal lines book. Over the years, we developed an account value proposition and synchronized the multivariate pricing models and billing cycles across homeowners and auto lines. In doing so, we have helped our agents differentiate themselves from direct writers and captive agent carriers, improving their economics through efficiencies, better customer service and higher client retention. For our policyholders with more complex insurance needs, our account solutions provide more comprehensive coverage. In core commercial lines, we continue to focus on small and mid-size accounts, building industry specialization in the less commoditized sectors and lines of business, such as life sciences and technology. This approach helps us differentiate our offerings, while allowing our agents to build franchise value and grow. We continue to build our broad and relevant specialty portfolio, which now contributes approximately $1 billion to our overall premium, making us one of the top domestic specialty writers. Our specialty business delivers above- target returns, helped by maturation of the portfolio, as well as past mix and $1.0B 6% 4% 28% 8% 7% $2.6B COMMERCIAL LINES • Commercial Multiple Peril • Commercial Auto • Workers’ Compensation • Inland Marine • AIX Program Business • Management and Professional Liability • Surety • Specialty Property • Other 3% 2% 33% 12% 10% 9% 9% 9% 13% • Personal Auto • Homeowners • Other $1.8B PERSONAL LINES 34% 64% 2% $1.0B SPECIALTY 6% 4% 28% 9 8% 7% $2.6B COMMERCIAL LINES • Commercial Multiple Peril • Commercial Auto • Workers’ Compensation Inland Marine AIX Program Business • Management and Professional Liability • Surety Specialty Property • Oth r 3% 2% 33% 12% 10% 9% 9% 9% 13% • Personal Auto • Homeowners • Other $1.8B PERSONAL LINES 34% 64% 2% MIX BY LINE OF BUSINESS 2018 Net Premiums Written