THG 2019 Proxy Statement

THE HANOVER INSURANCE GROUP 2019 PROXY STATEMENT 24 successful transitions to two new CEOs and a new CFO. We believe that our executive compensation programs over this period appropriately rewarded our executives for the value generated for our shareholders. Short-Term Incentive Compensation Awards Year Performance Measure Targets* Actual Results / Percent of Target* Payout Relative to Target Award 2016 Operating Income - $455M - $495M Ex-Cat Operating Income - $705M - $745M Pre-Established Strategic Priorities $322.8M - 52% $447.9M - 0% Achieved 51%** 2017 Operating Income - $468M - $508M Ex-Cat Operating Income - $681M - $721M Pre-Established Strategic Priorities $336.3M - 53% $718.9M - 100% Achieved 95% 2018 Operating Income – $425M - $459M Ex-Cat Operating Income - $619M - $653M Pre-Established Strategic Priorities $406.5M - 95% $625.7M - 100% Achieved 100% * Operating and Ex-Cat Operating Income Targets and Actual Results / Percent of Target for 2016 and 2017 include target measures and results of our former Chaucer segment. These figures have not been restated in accordance with GAAP to exclude the results of this segment. In contrast, 2018 consists solely of our domestic businesses, which explains the reductions in targets from prior years. Accordingly, targets and actual results for 2018 are not comparable to 2016 and 2017. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2018 Annual Report on Form 10-K for restated operating and ex-cat operating income excluding the former Chaucer segment, for 2016 and 2017. ** Although underlying financial results were strong, funding level for NEOs was significantly impacted by net unfavorable prior year loss and loss adjustment expense development from domestic operations of $174.1 million during the fourth quarter of 2016. Long-Term Incentive Compensation: PBRSUs with Performance Periods Ending in 2016, 2017 and 2018* Year Ended Target (100%) 3-Year Total Shareholder Return Relative Total Shareholder Return Payout 2016 Three-Year Relative Total 62.48% 79 th Percentile 150% 2017 Shareholder 59.81% 64 th Percentile 129% 2018 Return at the 50 th Percentile 43.55% 58 th Percentile 115% * Table does not reflect off-cycle awards made in connection with Mr. Farber’s hiring in 2016 and Mr. Salvatore’s hiring in 2017. Long-Term Compensation: Options Granted in 2016, 2017 and 2018* FY End 2016 FY End 2017 FY End 2018 Year of Option Award Option Exercise Price THG Closing Price Intrinsic Value** per Option THG Closing Price Intrinsic Value** per Option THG Closing Price Intrinsic Value** per Option 2016 $82.74 $91.01 $8.27 $108.08 $25.34 $116.77 $34.03 2017 $91.19 N/A $108.08 $16.89 $116.77 $25.58 2018 $110.57 N/A $116.77 $6.20 * Table does not reflect off-cycle awards made in connection with Mr. Farber’s hiring in 2016 and Mr. Salvatore’s hiring in 2017. ** Intrinsic Value is calculated as the difference between the applicable THG Closing Price and the Option Exercise Price.