# Hanover Insurance Group, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Hanover Insurance Group, Inc.](/companies/thg.md) (CIK 944695)
- Form: 10-Q
- Filed: 2025-05-01
- Accepted by EDGAR: May 1, 2025, 16:02 ET
- Period: 2025-03-31
- Accession: 0000950170-25-061802
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/944695/000095017025061802/thg-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/944695/000095017025061802/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $1.60bn | us-gaap:Revenues |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $186.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $31.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $128.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $3.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $3.56 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 36,600,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $38.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $1.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $32.4m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $11.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-03-31 | $315.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2025-03-31 | $15.47bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $12.43bn | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $722.5m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2025-03-31 | $61.8m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2025-03-31 | $3.04bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 62,722 characters.

### MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

|  |  |
| --- | ---: |
| Introduction | 24 |
| Executive Overview | 24 |
| Description of Segments | 25 |
| Results of Operations - Consolidated | 26 |
| Results of Operations - Segments | 27 |
| Investments | 31 |
| Other Items | 35 |
| Income Taxes | 35 |
| Critical Accounting Estimates | 35 |
| Statutory Surplus of Insurance Subsidiaries | 36 |
| Liquidity and Capital Resources | 36 |
| Contingencies and Regulatory Matters | 37 |

23

### Introduction

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist readers in understanding the interim consolidated results of operations and financial condition of The Hanover Insurance Group, Inc. and its subsidiaries (“THG”). Consolidated results of operations and financial condition are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). This discussion should be read in conjunction with the interim consolidated financial statements and related footnotes included elsewhere in this Quarterly Report on Form 10-Q and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2025.

Results of operations include the accounts of The Hanover Insurance Company (“Hanover Insurance”) and Citizens Insurance Company of America (“Citizens”), our principal property and casualty companies, and certain other insurance and non-insurance subsidiaries.

The following discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this discussion and analysis, words such as: “believes,” “anticipates,” “expects,” “projections,” “outlook,” “should,” “could,” “plan,” “guidance,” “likely,” “on track to,” “potential,” “continue,” “targeted,” “designed,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. We caution readers that accuracy with respect to forward-looking projections is difficult and subject to risks and uncertainties. Those risks and uncertainties, in some cases, have affected, and in the future could affect, our actual results and could cause our actual results to differ materially from historical results and from those expressed in any of our forward-looking statements. For important factors that could cause actual results to differ materially from those contained in forward-looking statements, see “Risk Factors” in Part II – Item 1A of this Quarterly Report on Form 10-Q and in Part I – Item 1A of our 2024 Annual Report on Form 10-K.

### Executive Overview

Business operations consist of four reporting segments: Core Commercial, Specialty, Personal Lines and Other.

Our strategy, which focuses on the independent agency distribution channel, supports THG’s commitment to our select independent agents. It is designed to generate profitable growth by leveraging the strengths of our distribution approach, including expansion of our agency footprint in underpenetrated geographies, as warranted. As part of that strategy, we have increased our capabilities in specialty markets and made investments designed to develop growth solutions for our agency distribution channel that meet the needs of our customers. Our goal is to grow responsibly in all of our businesses, while managing volatility.

During the three months ended March 31, 2025, our net income was $128.2 million, compared to $115.5 million for the three months ended March 31, 2024, an improvement of $12.7 million. This favorable change was primarily due to higher after-tax operating income, partially offset by after-tax net realized losses from investments.

Operating income before interest expense and income taxes (a non-GAAP financial measure; see also “Results of Operations – Consolidated – Non-GAAP Financial Measures”) was $186.4 million for the three months ended March 31, 2025, compared to $149.7 million for the three months ended March 31, 2024, an improvement of $36.7 million. This increase was primarily due to improvements in current accident year underwriting results in Personal Lines and from higher net investment income, partially offset by higher current accident year large property losses in our Core Commercial segment. The lower Personal Lines current accident year losses were primarily due to the benefit of earned pricing outpacing loss trends in both personal automobile and homeowners lines, and moderated frequency trends, particularly in automobile collision and homeowners coverages.

Pre-tax catastrophe losses were $95.6 million for the three months ended March 31, 2025, compared to $86.9 million during the same period of 2024, an increase of $8.7 million. Catastrophe losses in the first quarter of 2025 were primarily due to severe convective storms in the Midwest and the California Palisades and Eaton wildfires. Net favorable development on prior years’ loss reserves was $20.0 million for the three months ended March 31, 2025, compared to $10.4 million for the three months ended March 31, 2024, an increase of $9.6 million.

### Core Commercial

Core Commercial includes two businesses, small commercial and middle market, both of which focus on account business, including coverage for commercial multiple peril, commercial automobile, workers’ compensation and other (commercial umbrella, monoline general liability, claims-made liability, and monoline property). Small commercial focuses on small businesses, with annual policy premiums generally up to $50,000. Middle market provides coverage to mid-sized businesses with annual policy premiums generally between $50,000 and $500,000. Middle market offers coverage in distinct industry segments, including technology, human services, manufacturing, retail, and real estate, among others. We believe that our account-focused approach to the small commercial market and distinctiveness in the middle market, including our diversified portfolio of products, delivers significant value to agents and policyholders. We continue to pursue our core strategy of developing strong relationships with retail agents, enhancing franchise value through selective distribution, distinctive products and coverages, and through continued investment in products for additional industry segmentation.

Net premiums written increased 3.8% in the first three months of 2025, compared to the same period in 2024, primarily driven by renewal price increases. Operating income before interest expense and income taxes decreased in the first three months of 2025, compared to the same period in 2024, primarily due to higher catastrophe losses and higher current accident year large property losses. The competitive nature of the Core Commercial market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business.

### Specialty

Specialty offers a comprehensive suite of products focused predominately on small to mid-sized businesses. This includes numerous specialized product areas that are organized into four distinct divisions – Professional and Executive Lines, Specialty Property and Casualty (“Specialty P&C”), Marine, and Surety and Other. We believe that this diverse set of Specialty products, distributed primarily through retail agents, supplemented by select specialists, helps to enhance our overall agent value and increase growth opportunities by providing agents easier access to placement solutions for Specialty needs, including those that complement Core Commercial accounts.

Net premiums written increased 5.4% in the first three months of 2025, compared to the same period in 2024, primarily due to renewal price increases. Operating income before interest expense and income taxes increased in the first three months of 2025 compared to the same period in 2024, primarily due to higher net favorable development on prior year loss reserves and higher net investment income, partially offset by higher catastrophe losses and higher current accident year underwriting results. The competitive nature of the Specialty market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business.

### Personal Lines

Personal Lines focuses on working with high quality, value-oriented agencies that deliver consultative selling to customers and stress the importance of account rounding, which is the conversion of single policy customers to accounts with multiple policies and/or additional coverages, to address customers’ broader needs and objectives. Approximately 89% of our policies in force (“PIF”) have been issued to customers with multiple policies and/or coverages with us. We are focused on seeking profitable growth opportunities, building a distinctive position in the market in order to meet our customers’ needs, and diversifying geographically. We continue to seek appropriate rate increases that meet or exceed underlying loss cost trends, subject to regulatory and competitive considerations.

Net premiums written increased 3.0% in the first three months of 2025, compared to the same period in 2024, primarily due to increased new business and renewal price increases. Operating income before interest expense and income taxes improved in the first three months of 2025, compared to the same period in 2024, primarily due to improvements in current accident year underwriting results and lower catastrophe losses.

### Description of Segments

Primary business operations include insurance products and services currently provided through four reporting segments: Core Commercial, Specialty, Personal Lines and Other. Core Commercial includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial lines coverages provided to small and mid-sized businesses. Specialty includes four divisions of business: Professional and Executive Lines, Specialty P&C, Marine, and Surety and Other. Specialty P&C includes coverages such as program business (providing commercial insurance to markets with specialized coverage or risk management needs related to groups of similar businesses), specialty industrial and commercial property, excess and surplus lines and specialty general liability coverage. Personal Lines includes personal automobile, homeowners and other personal coverages, such as umbrella. The “Other” segment includes earnings on holding company assets; holding company and other expenses, including certain costs associated with retirement benefits due to our former life insurance subsidiaries’ employees and agents; and our run-off voluntary assumed property and casualty pools, run-off direct asbestos and environmental, and product liability businesses.

We report interest expense on debt separately from the earnings of our reporting segments. This consists primarily of interest on our senior and subordinated debentures.

### Results of Operations – Consolidated

Consolidated net income for the three months ended March 31, 2025 was $128.2 million, compared to $115.5 million for the three months ended March 31, 2024, an increase of $12.7 million. This increase was due to higher after-tax operating income of $29.9 million, partially offset by an $18.3 million unfavorable change in after-tax net realized and unrealized investment results, from $5.5 million of gains in 2024 to $17.8 million of losses in 2025. Operating income before interest expense and income taxes was $186.4 million for the three months ended March 31, 2025, compared to $149.7 million for the three months ended March 31, 2024, an increase of $36.7 million. This increase was primarily due to improvements in current accident year underwriting results in our Personal Lines segment and from higher net investment income, partially offset by higher current accident year large property losses in our Core Commercial segment.

The following table reflects operating income before interest expense and income taxes for each reporting segment and a reconciliation to consolidated net income from operating income before interest expense and income taxes (a non-GAAP measure).

*(in millions)*

| Operating income before interest expense and income taxes: | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Core Commercial | **$26.8** | $71.5 |
| Specialty | **64.6** | 58.8 |
| Personal Lines | **94.2** | 18.9 |
| Other | **0.8** | 0.5 |
| Operating income before interest expense and income taxes | **186.4** | 149.7 |
| Interest expense on debt | **(8.5)** | (8.5) |
| Operating income before income taxes | **177.9** | 141.2 |
| Income tax expense on operating income | **(36.1)** | (29.3) |
| Operating income | **141.8** | 111.9 |
| Non-operating items: |  |  |
| Net realized and unrealized investment gains (losses) | **(17.8)** | 5.5 |
| Other non-operating | **—** | (1.4) |
| Income tax benefit (expense) on non-operating items | **4.2** | (0.5) |
| Net income | **$128.2** | $115.5 |

### Non-GAAP Financial Measures

In addition to consolidated net income, discussed above, we assess our financial performance based upon pre-tax “operating income,” and we assess the operating performance of each of our four reporting segments based upon the pre-tax operating income generated by each segment. As reflected in the table above, operating income before interest expense and income taxes excludes interest expense on debt and certain other items, which we believe are not indicative of our core operations, such as net realized and unrealized investment gains and losses. Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income before interest expense and income taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income before interest expense and income taxes are important components in understanding and assessing our overall financial performance, we believe a discussion of operating income before interest expense and income taxes enhances an investor’s understanding of our results of operations by highlighting net income attributable to the core operations of the business. However, operating income before interest expense and income taxes, which is a non-GAAP measure, should not be construed as a substitute for income before income taxes or income from continuing operations, and operating income should not be construed as a substitute for net income.

Catastrophe losses and prior years’ reserve development are significant components in understanding and assessing the financial performance of our business. Management reviews and evaluates catastrophes and prior years’ reserve development separately from the other components of earnings. References to “current accident year underwriting results” exclude prior accident year reserve development and may also be presented “excluding catastrophes.” Prior years’ reserve development and catastrophes are not predictable as to timing or the amount that will affect the results of our operations and have an effect on each year’s operating income and net income. Management believes that providing certain financial metrics and trends excluding the effects of catastrophes and prior years’ reserve development helps investors to understand the variability in periodic earnings and to evaluate the underlying performance of our operations. Discussion of catastrophe losses in this Management’s Discussion and Analysis includes development on prior years’ catastrophe reserves and, unless otherwise indicated, such development is excluded from discussions of prior year loss and loss adjustment expenses (“LAE”) reserve development.

### Results of Operations – Segments

The following is our discussion and analysis of the results of operations by reporting segment. The operating results are presented before interest expense, income taxes and other items which management believes are not indicative of our core operations, including realized gains and losses, as well as unrealized gains and losses on equity securities, and the results of discontinued operations.

The following table summarizes the results of operations for the periods indicated:

*(in millions)*

| Operating revenues: | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net premiums written | **$1,510.8** | $1,454.0 |
| Net premiums earned | **$1,508.5** | $1,448.6 |
| Net investment income | **106.1** | 89.7 |
| Other income | **6.4** | 7.3 |
| Total operating revenues | **1,621.0** | 1,545.6 |
| Losses and operating expenses: |  |  |
| Losses and LAE | **955.3** | 935.2 |
| Amortization of deferred acquisition costs | **313.9** | 299.0 |
| Other operating expenses | **165.4** | 161.7 |
| Total losses and operating expenses | **1,434.6** | 1,395.9 |
| Operating income before interest expense and income taxes | **$186.4** | $149.7 |

### Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Operating income before interest expense and income taxes was $186.4 million for the three months ended March 31, 2025, compared to $149.7 million for the three months ended March 31, 2024, an improvement of $36.7 million. This increase was primarily due to improvements in current accident year underwriting results in Personal Lines and from higher net investment income, partially offset by higher current accident year large property losses in our Core Commercial segment. The lower Personal Lines current accident year losses were primarily due to the benefit of earned pricing outpacing loss trends in both the personal automobile and homeowners lines, and moderated frequency trends, particularly in automobile collision and homeowners coverages.

Net premiums written increased $56.8 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase in net premiums written was due to an increase in new business and renewal price increases.

### Premium Production and Underwriting Results

The following tables summarize premiums written on a gross and net basis, net premiums earned and, catastrophe loss, loss and LAE (including catastrophe losses), expense, and combined ratios for our Core Commercial, Specialty and Personal Lines segments. Loss and LAE, catastrophe loss and combined ratios shown below include prior year reserve development. These items are not meaningful for our Other segment.

*(dollars in millions)*

|  | Three Months Ended March 31, 2025 Gross Premiums Written | Net Premiums Written | Net Premiums Earned | Catastrophe Loss Ratios | Loss & LAE Ratios | Expense Ratios | Combined Ratios |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Core Commercial | **$693.1** | **$604.6** | **$541.0** | **8.5** | **70.0** | **33.4** | **103.4** |
| Specialty | **424.4** | **358.3** | **339.6** | **4.3** | **50.7** | **37.0** | **87.7** |
| Personal Lines | **572.4** | **547.9** | **627.9** | **5.6** | **64.4** | **25.3** | **89.7** |
| Total | **$1,689.9** | **$1,510.8** | **$1,508.5** | **6.3** | **63.3** | **30.8** | **94.1** |
|  | **Three Months Ended March 31, 2024** |  |  |  |  |  |  |
| **(dollars in millions)** | **Gross Premiums Written** | **Net Premiums Written** | **Net Premiums Earned** | **Catastrophe Loss Ratios** | **Loss & LAE Ratios** | **Expense Ratios** | **Combined Ratios** |
| Core Commercial | $660.0 | $582.4 | $528.9 | 3.9 | 60.7 | 33.2 | 93.9 |
| Specialty | 408.4 | 339.8 | 320.9 | 2.2 | 50.6 | 37.0 | 87.6 |
| Personal Lines | 557.4 | 531.8 | 598.8 | 9.9 | 75.5 | 25.5 | 101.0 |
| Total | $1,625.8 | $1,454.0 | $1,448.6 | 6.0 | 64.6 | 30.9 | 95.5 |

27

The following table summarizes U.S. GAAP underwriting results for our Core Commercial, Specialty, Personal Lines and Other segments and reconciles them to operating income before interest expense and income taxes.

*(in millions)*

|  | Three Months Ended March 31, 2025 Core Commercial | Specialty | Personal Lines | Other | Total | 2024 Core Commercial | Specialty | Personal Lines | Other | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Underwriting profit, excluding prior year reserve development and catastrophes | **$24.7** | **$40.0** | **$93.8** | **$—** | **$158.5** | $42.4 | $44.8 | $50.0 | $— | $137.2 |
| Prior year favorable loss and LAE reserve development on non-catastrophe losses | **1.3** | **15.9** | **2.8** | **—** | **20.0** | 9.2 | 1.1 | 0.1 | — | 10.4 |
| Prior year favorable catastrophe development | **8.5** | **2.5** | **1.0** | **—** | **12.0** | 3.8 | 3.2 | — | — | 7.0 |
| Current year catastrophe losses | **(54.5)** | **(17.2)** | **(35.9)** | **—** | **(107.6)** | (24.5) | (10.2) | (59.2) | — | (93.9) |
| Underwriting profit (loss) | **(20.0)** | **41.2** | **61.7** | **—** | **82.9** | 30.9 | 38.9 | (9.1) | — | 60.7 |
| Net investment income | **48.0** | **24.3** | **30.5** | **3.3** | **106.1** | 40.8 | 20.3 | 25.6 | 3.0 | 89.7 |
| Fees and other income | **1.3** | **1.3** | **3.7** | **0.1** | **6.4** | 1.3 | 1.3 | 4.0 | 0.7 | 7.3 |
| Other operating expenses | **(2.5)** | **(2.2)** | **(1.7)** | **(2.6)** | **(9.0)** | (1.5) | (1.7) | (1.6) | (3.2) | (8.0) |
| Operating income before interest expense and income taxes | **$26.8** | **$64.6** | **$94.2** | **$0.8** | **$186.4** | $71.5 | $58.8 | $18.9 | $0.5 | $149.7 |

#### Core Commercial

Core Commercial net premiums written were $604.6 million for the three months ended March 31, 2025, compared to $582.4 million for the three months ended March 31, 2024. The $22.2 million increase in net premiums written was primarily driven by renewal price increases and improved retention.

Core Commercial underwriting loss for the three months ended March 31, 2025 was $20.0 million, compared to underwriting profit of $30.9 million for the three months ended March 31, 2024, an unfavorable change of $50.9 million. Catastrophe losses for the three months ended March 31, 2025 were $46.0 million, compared to $20.7 million for the three months ended March 31, 2024, an increase of $25.3 million. Net favorable development on prior years’ loss reserves for the three months ended March 31, 2025 was $1.3 million, compared to $9.2 million for the three months ended March 31, 2024, a decrease of $7.9 million.

Core Commercial current accident year underwriting profit, excluding catastrophes, was $24.7 million for the three months ended March 31, 2025, compared to $42.4 million for the three months ended March 31, 2024. The $17.7 million decrease in underwriting results was primarily driven by higher current accident year large property losses in our commercial multiple peril and other core commercial lines of business.

We continue to manage underwriting performance through rate actions, risk selection and mitigation, pricing segmentation, specific underwriting actions and targeted new business growth. Our ability to achieve overall rate increases is affected by many factors, including regulatory activity and the competitive pricing environment, particularly within the workers’ compensation line.

#### Specialty

Specialty net premiums written were $358.3 million for the three months ended March 31, 2025, compared to $339.8 million for the three months ended March 31, 2024. The $18.5 million increase in net premiums written was primarily due to renewal price increases.

Specialty underwriting profit for the three months ended March 31, 2025 was $41.2 million, compared to $38.9 million for the three months ended March 31, 2024, an increase of $2.3 million. Catastrophe losses for the three months ended March 31, 2025 were $14.7 million, compared to $7.0 million for the three months ended March 31, 2024, an increase of $7.7 million. Net favorable development on prior years’ loss reserves for the three months ended March 31, 2025 was $15.9 million, compared to $1.1 million for the three months ended March 31, 2024, an increase of $14.8 million.

Specialty current accident year underwriting profit, excluding catastrophes, was $40.0 million for the three months ended March 31, 2025, compared to $44.8 million for the three months ended March 31, 2024. The $4.8 million decrease in underwriting results was primarily driven by higher current accident year losses in our specialty industrial line of business. In contrast, we experienced an unusually low level of current accident year losses in our specialty industrial property line of business in the first quarter of 2024.

We continue to manage underwriting performance through rate actions, risk selection and mitigation, pricing segmentation, specific underwriting actions and targeted new business growth. Our ability to achieve overall rate increases is affected by many factors, including regulatory activity and the competitive pricing environment.

#### Personal Lines

Personal Lines net premiums written were $547.9 million for the three months ended March 31, 2025, compared to $531.8 million for the three months ended March 31, 2024. The $16.1 million increase in net premiums written was primarily due to increased new business and renewal price increases.

Net premiums written in the personal automobile line of business were $323.8 million for the three months ended March 31, 2025, compared to $317.0 million for the three months ended March 31, 2024, an increase of $6.8 million. Personal automobile PIF decreased by 4.9% since March 31, 2024. Net premiums written in the homeowners and other lines of business for the three months ended March 31, 2025 were $224.1 million, compared to $214.8 million for the three months ended March 31, 2024, an increase of $9.3 million. Homeowners PIF decreased by 4.0% since March 31, 2024.

Personal Lines underwriting profit for the three months ended March 31, 2025 was $61.7 million, compared to underwriting loss of $9.1 million for the three months ended March 31, 2024, an improvement in underwriting results of $70.8 million. Catastrophe losses for the three months ended March 31, 2025 were $34.9 million, compared to $59.2 million for the three months ended March 31, 2024, a decrease of $24.3 million. Net favorable development on prior years’ loss reserves for the three months ended March 31, 2025 was $2.8 million, compared to $0.1 million for the three months ended March 31, 2024, an increase of $2.7 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $93.8 million for the three months ended March 31, 2025, compared to $50.0 million for the three months ended March 31, 2024. The $43.8 million increase in underwriting results was primarily due to lower current accident year losses in our personal automobile and homeowners lines. The lower Personal Lines current accident year losses were primarily due to the benefit of earned pricing outpacing loss trends in both personal automobile and homeowners lines, and moderated frequency trends, particularly in automobile collision and homeowners coverages.

We have been taking actions to improve financial results and reduce volatility within our Personal Lines segment. These actions include increasing pricing, changing certain policy terms and conditions, and being more selective on new business quoting, where permissible, around certain geographies, driver and vehicle history, and building and roof condition type. We were able to obtain pricing increases of approximately 15% in our homeowners line and approximately 12% in our personal automobile line during the first quarter of 2025 and believe that our ability to obtain pricing increases will continue. Consistent with our expectations, PIF declined in the first three months of 2025, driven by lower renewal business. As a result of our targeted actions in the Midwest, we expect our sequential PIF counts to continue to shrink throughout the year, although moderating from the levels we have recently experienced. Additionally, our Personal Lines net premiums written may be affected by price competition and the regulatory and overall macroeconomic environment. These factors, along with the aforementioned actions, may also affect our ability to maintain and improve underwriting results.

#### Other

Our Other segment had operating income of $0.8 million for the three months ended March 31, 2025, compared to $0.5 million for the three months ended March 31, 2024, an increase of $0.3 million.

### Reserve for Losses and Loss Adjustment Expenses

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses.

*(in millions)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Gross reserve for losses and LAE, beginning of period | **$7,461.2** | $7,308.1 |
| Reinsurance recoverable on unpaid losses | **1,829.8** | 1,795.0 |
| Net reserve for losses and LAE, beginning of period | **5,631.4** | 5,513.1 |
| Net incurred losses and LAE in respect of losses occurring in: |  |  |
| Current year | **987.3** | 952.6 |
| Prior year non-catastrophe loss development | **(20.0)** | (10.4) |
| Prior year catastrophe loss development | **(12.0)** | (7.0) |
| Total incurred losses and LAE | **955.3** | 935.2 |
| Net payments of losses and LAE in respect of losses occurring in: |  |  |
| Current year | **236.5** | 236.1 |
| Prior years | **613.2** | 654.7 |
| Total payments | **849.7** | 890.8 |
| Net reserve for losses and LAE, end of period | **5,737.0** | 5,557.5 |
| Reinsurance recoverable on unpaid losses | **1,871.9** | 1,773.6 |
| Gross reserve for losses and LAE, end of period | **$7,608.9** | $7,331.1 |

The table below summarizes the gross reserve for losses and LAE by line of business and division.

*(in millions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Commercial multiple peril | **$1,615.6** | $1,563.4 |
| Workers’ compensation | **773.5** | 773.0 |
| Commercial automobile | **529.6** | 523.1 |
| Other core commercial | **770.2** | 753.9 |
| Total Core Commercial | **3,688.9** | 3,613.4 |
| Specialty Property & Casualty | **891.2** | 846.2 |
| Professional and Executive Lines | **631.3** | 610.1 |
| Marine | **135.4** | 134.2 |
| Surety and Other | **75.8** | 85.4 |
| Total Specialty | **1,733.7** | 1,675.9 |
| Personal automobile | **1,662.2** | 1,673.2 |
| Homeowners and Other | **461.9** | 435.8 |
| Total Personal Lines | **2,124.1** | 2,109.0 |
| Total Other | **62.2** | 62.9 |
| Total loss and LAE reserves | **$7,608.9** | $7,461.2 |

Loss and LAE reserves in our “Other core commercial” lines include monoline general liability, commercial umbrella, and monoline property. “Specialty Property & Casualty” includes specialty industrial and commercial property, excess and surplus lines and specialty general liability coverage, and program business. “Professional and Executive Lines” includes management liability, fidelity and crime, professional liability and other property and liability lines for healthcare firms. Loss and LAE reserves in our “Total Other” segment relate to our run-off voluntary assumed property and casualty reinsurance pools business, and our run-off direct asbestos and environmental, and product liability businesses.

The following table summarizes prior year favorable development for the periods indicated:

*(in millions)*

|  | Three Months Ended March 31, 2025 Non-Catastrophe Losses | Catastrophe Losses | Total | 2024 Non-Catastrophe Losses | Catastrophe Losses | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Core Commercial | **$(1.3)** | **$(8.5)** | **$(9.8)** | $(9.2) | $(3.8) | $(13.0) |
| Specialty | **(15.9)** | **(2.5)** | **(18.4)** | (1.1) | (3.2) | (4.3) |
| Personal Lines | **(2.8)** | **(1.0)** | **(3.8)** | (0.1) | — | (0.1) |
| Total prior year favorable development | **$(20.0)** | **$(12.0)** | **$(32.0)** | $(10.4) | $(7.0) | $(17.4) |

30

It is not possible to know whether the factors that affected loss reserves in the first three months of 2025 will also occur in future periods. We encourage you to read our 2024 Annual Report on Form 10-K for more information about our reserving process and the judgments, uncertainties and risks associated therewith.

#### Catastrophe Loss Development

For the three months ended March 31, 2025, favorable catastrophe loss development was $12.0 million, primarily due to lower than expected losses in our commercial multiple peril line related to events from accident years 2021 through 2023, including several convective storms across multiple states, and Winter Storm Elliot. For the three months ended March 31, 2024, favorable catastrophe development was $7.0 million, primarily due to lower than expected losses in our commercial multiple peril line related to 2022 and 2023 events, including hurricane Ian and tornadic activity.

#### 2025 Loss and LAE Development, excluding catastrophes

For the three months ended March 31, 2025, net favorable loss and LAE development, excluding catastrophes, was $20.0 million. Specialty favorable loss and LAE development of $15.9 million was primarily due to lower than expected losses in our Marine division and, to a lesser extent, in our Professional and Executive Lines division. Within Core Commercial, lower than expected losses in our workers’ compensation line were largely offset by higher than expected losses in our commercial automobile line.

#### 2024 Loss and LAE Development, excluding catastrophes

For the three months ended March 31, 2024, net favorable loss and LAE development, excluding catastrophes, was $10.4 million. Core Commercial favorable loss and LAE development of $9.2 million was due to lower than expected losses across several lines of business.

### Reinsurance Recoverables

Reinsurance recoverables were $2,034.2 million and $1,994.5 million at March 31, 2025 and December 31, 2024, respectively, of which $69.3 million and $74.2 million, respectively, represent billable recoverables. A reinsurance recoverable is billable after an eligible reinsured claim is paid by an insurer. Billable reinsurance recoverables related to the Michigan Catastrophic Claims Association (the “MCCA”) were $36.2 million and $39.3 million at March 31, 2025 and December 31, 2024, respectively, and billable non-MCCA reinsurance recoverables totaled $33.1 million and $34.9 million at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025 and December 31, 2024, there were $0.8 million of billed balances outstanding greater than 90 days.

### Investments

### Investment Results

Net investment income before income taxes was as follows:

*(dollars in millions)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Fixed maturities | **$93.3** | $75.7 |
| Limited partnerships | **7.5** | 9.2 |
| Mortgage loans | **2.9** | 3.7 |
| Equity securities | **0.9** | 0.8 |
| Other investments | **5.3** | 3.8 |
| Investment expenses | **(3.8)** | (3.5) |
| Net investment income | **$106.1** | $89.7 |
| Earned yield, fixed maturities | **4.08%** | 3.52% |
| Earned yield, total portfolio | **4.14%** | 3.70% |

The increase in net investment income for the three months ended March 31, 2025 was primarily due to the impact of reinvesting at higher interest rates and the continued investment of operational cashflows, slightly offset by lower partnership income. Income from partnerships can vary significantly from period to period based on the performance in the underlying portfolios.

### Investment Portfolio

We held cash and investment assets diversified across several asset classes, as follows:

*(dollars in millions)*

|  | March 31, 2025 Carrying Value | % of Total Carrying Value | December 31, 2024 Carrying Value | % of Total Carrying Value |
| --- | ---: | ---: | ---: | ---: |
| Fixed maturities, at fair value | **$8,808.3** | **88.0%** | $8,542.2 | 86.8% |
| Limited partnerships and other investments | **426.1** | **4.3** | 405.0 | 4.1 |
| Mortgage and other loans | **294.1** | **3.0** | 304.9 | 3.1 |
| Equity securities, at fair value | **161.0** | **1.6** | 157.7 | 1.6 |
| Cash and cash equivalents | **315.1** | **3.1** | 435.5 | 4.4 |
| Total cash and investments | **$10,004.6** | **100.0%** | $9,845.3 | 100.0% |

### Cash and Investments

Total cash and investments increased $159.3 million, or 1.6%, for the three months ended March 31, 2025 as compared to December 31, 2024. The increase was primarily due to net market value appreciation and continued investment of cashflows from operations, partially offset by the funding of financing activities, including our dividend payment.

The following table provides information about the investment types of our fixed maturities portfolio:

| (in millions) Investment Type | March 31, 2025 Weighted Average Quality | Amortized Cost, Net of Allowance for Credit Losses | Fair Value | Net Unrealized Gain (Loss) | Change in Net Unrealized for the Year |
| --- | --- | ---: | ---: | ---: | ---: |
| U.S. Treasury and government agencies | **AA+** | **$538.8** | **$492.7** | **$(46.1)** | **$12.3** |
| Foreign governments | **BB** | **2.3** | **2.4** | **0.1** | **—** |
| Municipals: |  |  |  |  |  |
| Taxable | **AA** | **948.9** | **860.6** | **(88.3)** | **19.7** |
| Tax-exempt | **AA** | **23.5** | **23.3** | **(0.2)** | **(0.5)** |
| Corporates | **BBB+** | **4,030.1** | **3,938.8** | **(91.3)** | **55.7** |
| Asset-backed: |  |  |  |  |  |
| Residential mortgage-backed | **AA+** | **2,375.7** | **2,263.0** | **(112.7)** | **40.8** |
| Commercial mortgage-backed | **AAA** | **436.9** | **404.6** | **(32.3)** | **9.7** |
| Other asset-backed | **AAA** | **822.5** | **822.9** | **0.4** | **1.2** |
| Total fixed maturities | **A+** | **$9,178.7** | **$8,808.3** | **$(370.4)** | **$138.9** |

The improvement in net unrealized losses on fixed maturities was primarily due to lower interest rates, partially offset by wider credit spreads.

Amortized cost and fair value by rating category were as follows:

| (dollars in millions) NAIC Designation Rating Agency Equivalent Designation | March 31, 2025 Amortized Cost, Net of Allowance for Credit Losses | Fair Value | % of Total Fair Value | December 31, 2024 Amortized Cost, Net of Allowance for Credit Losses | Fair Value | % of Total Fair Value |
| ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| 1 Aaa/Aa/A | **$7,062.3** | **$6,755.1** | **76.7%** | $7,000.1 | $6,577.8 | 77.0% |
| 2 Baa | **1,673.0** | **1,612.8** | **18.3** | 1,623.5 | 1,535.3 | 18.0 |
| 3 Ba | **226.5** | **227.4** | **2.6** | 221.7 | 222.5 | 2.6 |
| 4 B | **189.0** | **187.7** | **2.1** | 180.3 | 182.4 | 2.1 |
| 5 Caa and lower | **22.7** | **21.3** | **0.2** | 20.5 | 19.6 | 0.2 |
| 6 In or near default | **5.2** | **4.0** | **0.1** | 5.4 | 4.6 | 0.1 |
| Total fixed maturities | **$9,178.7** | **$8,808.3** | **100.0%** | $9,051.5 | $8,542.2 | 100.0% |

32

Based on ratings by the National Association of Insurance Commissioners (“NAIC”), approximately 95% of our fixed maturity portfolio consisted of investment-grade securities at March 31, 2025 and December 31, 2024. The quality of our fixed maturity portfolio remains strong based on ratings, capital structure position, support through guarantees, underlying security, issuer diversification and yield curve position. Our U.S. Treasury and government agencies fixed maturities are directly or indirectly backed by the full faith and credit of the U.S. government. Our municipal bonds include revenue bonds and general obligations of state and local issuers. Corporate fixed maturities include publicly traded and privately placed securities in the industrial, financial, and utility sectors. Residential mortgage-backed securities are structured securities that are collateralized by residential real estate loans and are primarily U.S. agency-backed. Our commercial mortgage-backed securities are structured securities that are collateralized by commercial real estate loans and are well-diversified by geography, property type, expected maturity and vintage year. Our other asset-backed securities are structured securities that are primarily collateralized by consumer and corporate borrowings, including collateralized loan obligations.

Our investment portfolio primarily consists of fixed maturity securities whose fair value is susceptible to market risk, including interest rate changes. See also “Quantitative and Qualitative Disclosures about Market Risk” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2024 Annual Report on Form 10-K. Duration is a measurement used to quantify our inherent interest rate risk and analyze invested assets relative to our reserve liabilities.

The duration of our fixed maturity portfolio was as follows:

| (dollars in millions) Duration | March 31, 2025 Amortized Cost, Net of Allowance for Credit Losses | Fair Value | % of Total Fair Value | December 31, 2024 Amortized Cost, Net of Allowance for Credit Losses | Fair Value | % of Total Fair Value |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| 0-2 years | **$1,703.0** | **$1,699.7** | **19.3%** | $1,590.6 | $1,587.6 | 18.6% |
| 2-4 years | **1,861.0** | **1,841.0** | **20.9** | 2,172.8 | 2,130.5 | 24.9 |
| 4-6 years | **2,408.8** | **2,251.3** | **25.6** | 2,376.9 | 2,175.1 | 25.5 |
| 6-8 years | **2,835.9** | **2,690.1** | **30.5** | 2,557.0 | 2,346.3 | 27.5 |
| 8-10 years | **221.5** | **208.5** | **2.4** | 219.1 | 201.2 | 2.3 |
| 10+ years | **148.5** | **117.7** | **1.3** | 135.1 | 101.5 | 1.2 |
| Total fixed maturities | **$9,178.7** | **$8,808.3** | **100.0%** | $9,051.5 | $8,542.2 | 100.0% |
| Weighted average duration |  | **4.5** |  |  | 4.4 |  |

Our fixed maturity and equity securities are carried at fair value. Financial instruments, whose value was determined using significant management judgment or estimation, constituted less than 1% of the total assets we measured at fair value. See also Note 4 – “Fair Value” in the Notes to Interim Consolidated Financial Statements.

Limited partnerships and other investments consist primarily of our interest in corporate middle market and real estate limited partnerships. Corporate middle market limited partnerships may invest in senior or subordinated debt, preferred or common equity or a combination thereof, of privately-held middle market businesses. Real estate limited partnerships hold equity ownership positions in real properties and invest in debt secured by real properties. Our limited partnerships are generally accounted for under the equity method, or as a practical expedient using the fund’s net asset value, with financial information provided by the partnership on a two or three month lag.

Mortgage and other loans consist of commercial mortgage loan participations, which represent our interest in commercial mortgage loans originated by a third-party. We share, on a pro-rata basis, in all related cash flows of the underlying mortgage loans, which are primarily investment-grade quality and diversified by geographic area and property type.

Equity securities primarily consist of U.S. income-oriented large capitalization common stocks and a broadly diversified U.S. equity index exchange-traded fund.

Although we expect to invest new funds primarily in investment-grade fixed maturities, we have invested, and expect to continue to invest, a portion of funds in below investment-grade fixed maturities, limited partnerships, common equity securities and other investment assets.

### Impairments (Recoveries)

For the three months ended March 31, 2025, impairments were not significant. For the three months ended March 31, 2024, we recognized $0.3 million of recoveries on previously impaired fixed maturities.

At March 31, 2025 and December 31, 2024, the allowance for credit losses on mortgage loans was $5.7 million, and the allowance for credit losses on available-for-sale debt securities was $0.5 million and $0.6 million, respectively.

We held no fixed maturity securities or mortgage loans on non-accrual status at March 31, 2025 and December 31, 2024. The carrying value of fixed maturity securities on non-accrual status at March 31, 2024 was $14.8 million. At March 31, 2024, a mortgage loan with a carrying value of $7.1 million was also on non-accrual status. The effects on income of non-accruals compared with amounts that would have been recognized in accordance with the original terms of the fixed maturities and mortgage loan were not material for the three months ended March 31, 2024. Any defaults in the fixed maturities or mortgage loan portfolios in future periods may negatively affect investment income.

### Unrealized Losses

Gross unrealized losses on fixed maturities at March 31, 2025 were $416.4 million, an improvement of $114.7 million compared to December 31, 2024, primarily due to lower interest rates, partially offset by wider credit spreads. At March 31, 2025, gross unrealized losses consisted primarily of $126.7 million on residential mortgage-backed securities, $116.3 million on corporate fixed maturities, $90.5 million on municipals and $47.7 million on U.S. government securities. See Note 3 – “Investments” in the Notes to Interim Consolidated Financial Statements.

We view gross unrealized losses on fixed maturities as non-credit related since it is our assessment that these securities will recover, allowing us to realize their anticipated long-term economic value. Further, we do not intend to sell, nor is it more likely than not we will be required to sell, such debt securities before this expected recovery of amortized cost (see also “Liquidity and Capital Resources”). Inherent in our assessment are the risks that market factors may differ from our expectations; we may decide to subsequently sell a security for unforeseen business needs or an economic purpose; or changes in the credit assessment from our original assessment may lead us to determine that a sale at the current value would maximize recovery on such investments. To the extent that there are such adverse changes, an impairment would be recognized as a realized loss. Although unrealized losses on fixed maturities are not reflected in the results of financial operations until they are realized, the fair value of the underlying investment, which does reflect the unrealized loss, is reflected in our Consolidated Balance Sheets.

The following table sets forth gross unrealized losses for fixed maturities by maturity period at March 31, 2025 and December 31, 2024. 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 we may have the right to put or sell the obligations back to the issuers.

*(in millions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Due in one year or less | **$1.2** | $2.0 |
| Due after one year through five years | **47.6** | 55.1 |
| Due after five years through ten years | **174.5** | 235.0 |
| Due after ten years | **31.2** | 37.3 |
|  | **254.5** | 329.4 |
| Mortgage-backed and other asset-backed securities | **161.9** | 201.7 |
| Total fixed maturities | **$416.4** | $531.1 |

Our investment portfolio and shareholders’ equity can be significantly impacted by changes in market values of our securities. Market volatility could increase and defaults on fixed income securities could occur. As a result, we could incur additional realized and unrealized losses in future periods, which could have a material adverse impact on our results of operations and/or financial position.

The U.S. economy continued to expand at a solid pace during the first quarter of 2025, reflecting a stable labor market and moderating inflation. However, heightened geopolitical risks, including those driven by tariffs, create economic uncertainty, the extent of which is unknown. These risks, among others, may increase the likelihood of defaults on our fixed income investments, particularly with respect to non-investment grade debt securities. Although we perform rigorous credit analysis of our fixed income investments, it is difficult to identify with specificity which issuers, industries or markets, if any, will be most affected. As a result, the value of our fixed maturity portfolio could change rapidly in ways we cannot currently anticipate, and we could incur additional realized and unrealized losses in future periods.

### Other Items

Net income also included the following items:

*(in millions)*

| 2025 | Three Months Ended March 31, Core Commercial | Specialty | Personal Lines | Other | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net realized and unrealized investment losses | **$(8.0)** | **$(4.0)** | **$(5.2)** | **$(0.6)** | **$(17.8)** |
| **2024** |  |  |  |  |  |
| Net realized and unrealized investment gains | $2.6 | $1.3 | $1.6 | $— | $5.5 |
| Other non-operating | **—** | **—** | **—** | (1.4) | (1.4) |

We manage investment assets for our Core Commercial, Specialty, Personal Lines and Other segments based on the requirements of our combined property and casualty insurance companies. We allocate the investment income, expenses, and net realized and unrealized investment gains and losses to our Core Commercial, Specialty, Personal Lines and Other segments based on earned premium and actuarial information related to the underlying businesses.

Net realized and unrealized investment losses were $17.8 million for the three months ended March 31, 2025, compared to net realized and unrealized investment gains of $5.5 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, net realized and unrealized investment losses were primarily due to $18.8 million of net realized losses from sales of investments, primarily lower-yield fixed maturities, in consideration of expiring tax gains from 2022, partially offset by changes in the fair value of equity securities. For the three months ended March 31, 2024, net realized and unrealized investment gains were primarily due to $6.5 million of changes in the fair value of equity securities, partially offset by net realized losses from sales of fixed maturities and other investments.

### Income Taxes

We file a consolidated U.S. federal income tax return that includes our holding company and its domestic subsidiaries (including non-insurance operations).

### Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

The provision for income taxes from continuing operations was an expense of $31.9 million and $29.8 million for the three months ended March 31, 2025 and 2024, respectively. These amounts resulted in consolidated effective tax rates of 19.9% and 20.5% on pre-tax income for the three months ended March 31, 2025 and 2024, respectively. These provisions include excess tax benefits primarily related to stock-based compensation of $2.1 million and $1.1 million for the three months ended March 31, 2025 and 2024, respectively. Absent excess tax benefits, the provision for income taxes would have been an expense of $34.4 million and $31.3 million for the three months ended March 31, 2025 and 2024, respectively, or 21.5% for both periods.

The income tax provision on operating results was an expense of $36.1 million and $29.3 million for the three months ended March 31, 2025 and 2024, respectively. These provisions resulted in effective tax rates on operating income of 20.3% and 20.8% for the three months ended March 31, 2025 and 2024, respectively. These provisions reflect the aforementioned excess tax benefits related to stock-based compensation. Absent this item, the provision for income taxes would have been an expense of $38.2 million and $30.4 million for the three months ended March 31, 2025 and 2024, respectively, or 21.5% for both periods.

### Critical Accounting Estimates

Interim consolidated financial statements have been prepared in conformity with U.S. GAAP and include certain accounting policies that we consider to be critical due to the amount of judgment and uncertainty inherent in the application of those policies. While we believe that the amounts included in our consolidated financial statements reflect our best judgment, the use of different assumptions could produce materially different accounting estimates. As disclosed in our 2024 Annual Report on Form 10-K, we believe the following accounting estimates are critical to our operations and require the most subjective and complex judgment:

- Reserve for losses and loss expenses
- Reinsurance recoverable balances
- Pension benefit obligations
- Investment credit losses

For a more detailed discussion of these critical accounting estimates, see our 2024 Annual Report on Form 10-K.

### Statutory Surplus of Insurance Subsidiaries

The following table reflects statutory surplus for our insurance subsidiaries:

*(in millions)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Total Statutory Capital and Surplus | **$3,098.3** | $2,971.7 |

The statutory capital and surplus for our insurance subsidiaries increased $126.6 million during the first three months of 2025. This increase was primarily due to operating profits, partially offset by net realized and unrealized investment losses.

### Liquidity and Capital Resources

Liquidity is a measure of our ability to generate sufficient cash flows to meet the cash requirements of business operations. As a holding company, our primary ongoing source of cash is dividends from our insurance subsidiaries. However, dividend payments to us by our insurance subsidiaries are subject to limitations imposed by regulators, such as prior notice periods and the requirement that dividends in excess of a specified percentage of statutory surplus or prior years’ statutory earnings receive prior approval (so called “extraordinary dividends”). During the first three months of 2025, Hanover Insurance did not provide dividends to the holding company.

Sources of cash for our insurance subsidiaries primarily consist of premiums collected, investment income and maturing investments. Primary cash outflows are payments for losses and loss adjustment expenses, policy and contract acquisition expenses, other underwriting expenses, and investment purchases. Cash outflows related to losses and loss adjustment expenses can be variable because of uncertainties surrounding settlement dates for liabilities for unpaid losses and because of the potential for large losses, either individually or in the aggregate. We periodically adjust our investment policy to respond to changes in short-term and long-term cash requirements.

Net cash provided by operating activities was $38.9 million during the first three months of 2025, as compared to $58.7 million during the first three months of 2024, a decrease of $19.8 million. The decrease in cash provided was primarily due to higher payments made in the first quarter of 2025 related to prior year’s variable compensation costs, partially offset by an increase in premiums received and lower loss and LAE payments made during the first three months of 2025, as compared to the same period in 2024.

Net cash used in investing activities was $112.3 million during the first three months of 2025, as compared to $74.8 million during the first three months of 2024. During the first three months of 2025 and 2024, cash used in investing activities primarily related to net purchases of fixed maturities.

Net cash used in financing activities was $47.5 million during the first three months of 2025, as compared to $35.4 million during the first three months of 2024. During the first three months of 2025, cash used in financing activities primarily resulted from a quarterly dividend payment to our shareholders and, to a lesser extent, from repurchases of common stock through the open market. During the first three months of 2024, cash used in financing activities primarily resulted from a quarterly dividend payment to our shareholders.

Dividends to common shareholders are subject to quarterly board approval and declaration. During the first three months of 2025, as declared by the Board, we paid a quarterly dividend, of $0.90 per share, to our shareholders totaling $32.4 million. We believe that our holding company assets are sufficient to provide for future shareholder dividends should the Board of Directors declare them.

At March 31, 2025, THG, as a holding company, held approximately $236.6 million of fixed maturities and cash. We believe our holding company assets will be sufficient to meet our short-term obligations, which we expect to consist primarily of quarterly dividends to our shareholders (as and to the extent declared), interest on our senior and subordinated debentures, and certain costs associated with benefits due to our former life insurance subsidiaries’ employees and agents. As discussed below, we have, and opportunistically may continue to, repurchase our common stock and debt. We do not expect that it will be necessary to dividend additional funds from our insurance subsidiaries in order to fund short-term holding company obligations; however, we may decide to do so.

We expect to continue to generate sufficient positive operating cash to meet all short-term and long-term cash requirements relating to current operations, including the funding of our qualified defined benefit pension plan. We believe that this plan is fully funded. The ultimate payment amounts for our benefit plan is based on several assumptions, including but not limited to, the rate of return on plan assets, the discount rate for benefit obligations, mortality experience, interest crediting rates, inflation and the ultimate valuation and determination of benefit obligations. Since differences between actual plan experience and our assumptions are almost certain, changes, both positive and negative, to our current funding status and ultimately our obligations in future periods are likely.

Our insurance subsidiaries maintain a high degree of liquidity within their respective investment portfolios in fixed maturity and short-term investments. Volatility and uncertainty in the financial markets continued to affect the value of investments currently held by THG and its subsidiaries, many of which remain in unrealized loss positions. We believe that the quality of the assets we hold will allow us to realize the long-term economic value of our portfolio, including the securities that are currently in an unrealized loss position. We do not anticipate the need to sell these securities to meet our insurance subsidiaries’ cash requirements since we expect our insurance subsidiaries to generate sufficient operating cash to meet all short-term and long-term cash requirements relating to current operations. However, unforeseen business needs or other items may occur which could cause us to sell those securities in a loss position before their values fully recover, thereby resulting in the recognition of impairment charges in that time period.

The Board of Directors authorized a stock repurchase program which provides for aggregate repurchases of our common stock of up to $1.3 billion. Under the repurchase authorization, we may repurchase, from time to time, common stock in amounts, at prices and at such times as we deem appropriate, subject to market conditions and other considerations. Repurchases may be executed using open market purchases, privately negotiated transactions, accelerated repurchase programs, or other transactions. We are not required to purchase any specific number of shares or to make purchases by any certain date under this program. During the first three months of 2025, we repurchased approximately 65,000 shares, at an aggregate cost of $11.0 million. As of March 31, 2025, we had repurchased approximately 8.1 million shares under this $1.3 billion program and had approximately $292 million available for additional repurchases.

We maintain our membership in the Federal Home Loan Bank (“FHLB”) to provide access to additional liquidity based on our holdings of FHLB stock and pledged collateral. At March 31, 2025, we had access to borrowing capacity of $325.8 million. There were no outstanding borrowings under this short-term facility at March 31, 2025; however, we have borrowed and may continue to borrow, from time to time, through this facility to provide short-term liquidity.

On July 21, 2023, we entered into a credit agreement that provides for a five-year unsecured revolving credit facility not to exceed $150.0 million at any one time outstanding, with the option to increase the facility up to $300.0 million (assuming no default and satisfaction of other specified conditions, including the receipt of additional lender commitments). The agreement also includes an uncommitted subfacility of $50.0 million for standby letters of credit. Borrowings, if any, under this agreement are unsecured and incur interest at a rate per annum equal to, at our election, either (i) the greatest of, (a) the prime commercial lending rate of the administrative agent, (b) the NYFRB Rate plus half a percent, or (c) the one month Adjusted Term SOFR Rate plus one percent; each subject to a margin that ranges from 0.125% to 0.625% depending on our debt rating, or (ii) Adjusted SOFR Rate for the applicable interest period, plus a margin that ranges from 1.125% to 1.625% depending on our debt rating. The agreement also contains certain financial covenants such as maintenance of specified levels of consolidated equity and leverage ratios. During the first three months of 2025, we had no borrowings under this credit agreement.

At March 31, 2025, we were in compliance with the covenants of our debt and credit agreements.

### Contingencies and Regulatory Matters

Information regarding litigation, legal contingencies and regulatory matters appears in Part I – Note 12 “Commitments and Contingencies” in the Notes to Interim Consolidated Financial Statements.

## Market risk

As filed, 497 characters.

### QUANTITATIVE AND QUALITATIVE DISCLOSURES

### ABOUT MARKET RISK

Our market risks, the ways we manage them, and sensitivity to changes in interest rates, and equity price risk are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2024, included in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in the first three months of 2025 to these risks or our management of them.

## Controls and procedures

As filed, 3,829 characters.

### CONTROLS AND PROCEDURES

### Disclosure Controls and Procedures Evaluation

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

### Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

### Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on our controls evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

### Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(d) of the Exchange Act, to determine whether any changes occurred during the period covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that there were no such changes during the quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 7,653 characters.

This document contains, and management may make, certain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. When used in our Management’s Discussion and Analysis, words such as: “believes,” “anticipates,” “expects,” “projections,” “outlook,” “should,” “could,” “plan,” “guidance,” “likely,” “on track to,” “potential,” “continue,” “targeted,” “designed,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. We caution readers that accuracy with respect to forward-looking projections is difficult and subject to risks and uncertainties. Those risks and uncertainties, in some cases, have affected, and in the future could affect, our actual results and could cause our actual results for the remainder of 2025 and beyond to differ materially from historical results and from those expressed in any of our forward-looking statements. We operate in a business environment that is continually changing, and as such, new risk factors may emerge over time. Additionally, our business is conducted in competitive markets and, therefore, involves a higher degree of risk. We cannot predict these new risk factors, nor can we assess the impact, if any, that they may have on our business in the future.

Some of the factors that could cause actual results to differ include, but are not limited to, the following:

- changes in the demand for our products;
- risks and uncertainties with respect to our ability to retain profitable policies in force and attract profitable policies, and to increase rates commensurate with, or in excess of, loss trends;
- adverse claims experience or changes in our estimates of loss and loss adjustment expense reserves, including with respect to catastrophes, which may result in lower current year underwriting results or adverse loss development, and could impact our carried reserves;
- uncertainties with respect to the long-term profitability of our products, including with respect to newer products, or longer-tail products covering casualty losses;
- disruption in our distribution channels, including the loss or disruption of our independent agency channel, and the impact of competition and consolidation in the industry and among agents and brokers;
- changes in frequency and loss severity trends, exacerbated by fluctuations in economic conditions;
- changes in regulation, legislation, economic, market and political conditions, particularly with respect to rates, policy terms and conditions, payment flexibility, and regions where we have geographical concentrations;
- volatile and unpredictable developments, including severe weather and other natural physical events, catastrophes, pandemics, civil unrest, and terrorist actions, and the uncertainty in estimating the resulting losses;
- impacts of changing climate conditions and weather patterns, causing higher levels of losses from weather events to persist and leading to new or enhanced regulations;
- limitations on the physical ability to adjust claims or the availability of sufficient information to accurately estimate a loss at a point in time and the limitations and assumptions used to model property and casualty losses in general;
- risks and uncertainties with respect to our ability to collect all amounts due from reinsurers and to maintain current levels of reinsurance in the future at commercially reasonable rates, or at all;
- heightened volatility, fluctuations in interest rates (which have a significant impact on the market value of our investment portfolio and thus our book value), inflationary pressures, default rates, tariffs, difficult economic, market and political conditions, and other factors that affect investment returns from our investment portfolio;
- recessionary economic periods that may inhibit our ability to increase pricing or renew business, and which may be accompanied by higher claims activity in certain lines;
- risks and uncertainties associated with our participation in shared market mechanisms, mandatory reinsurance programs and mandatory and voluntary pooling arrangements, including the MCCA;
- an increase in mandatory assessments by state guaranty funds;
- actions by our competitors, many of which are larger or have greater financial resources than we do;
- loss, prolonged illness or retirement of key employees;
- operating difficulties and other unintended consequences from the introduction of new products and related technology changes and applications, including the use of pricing models and artificial intelligence, as well as new operating models, particularly as business processes become more digital;
- changes in our claims-paying and financial strength ratings;
- negative changes in our level of statutory surplus;
- risks and uncertainties with respect to our growth or operating strategies, or with respect to our expense and strategic initiatives;
- our ability to declare and pay dividends;
- changes in accounting principles and related financial reporting requirements;
- errors or omissions in connection with the administration of any of our products;
- risks and uncertainties with our operations and technology, including our internal and external information systems, such as cloud-based data information storage or network systems, information security, cyber risks, artificial intelligence, remote working capabilities, and/or outsourcing relationships and third-party operations and data security that may negatively impact our ability to conduct business;
- an inability to be compliant with recently implemented regulations or existing regulations, such as those relating to Sarbanes-Oxley, or a failure of internal controls;
- risks, uncertainties or unfavorable developments associated with enacted legislation, litigation matters, social inflation and the possibility of adverse judicial decisions, including those related to exposures to potentially harmful products or substances or those which expand policy coverage beyond its intended scope or award “bad faith,” or other non-contractual damages, and including those related to the Michigan legislation which was effective July 2, 2020 and reformed the prior requirements that all personal and commercial automobile polices issued in the state include no-fault personal injury protection coverage without a cap on maximum benefits allowed and the resulting increase in litigation challenging or associated with this reform;
- risks and uncertainties associated with pandemics and related economic and socio-economic conditions; and
- other factors described in such forward-looking statements.

In addition, historical and future reported financial results include estimates with respect to premiums written and earned, reinsurance recoverables, current accident year “picks,” loss and loss adjustment reserves and development, fair values of certain investments, other assets and liabilities, tax, contingent and other liabilities, and other items. These estimates are subject to change as more information becomes available.

Readers should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake any responsibility to update or revise our forward-looking statements, except as required by law.

For a more detailed discussion of our risks and uncertainties, see also Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024.

Filed May 1, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-061802. Last ingested by Listed: Oct 29, 2026, 16:20 ET. No prices; not investment advice.