Hanover Insurance : Fourth Quarter and Full Year 2020 Results

The Hanover Insurance Group, Inc.

Fourth Quarter and Full Year 2020 Results

February 4, 2021

To be read in conjunction with the press release dated

February 3, 2021, and conference call scheduled for February 4, 2021

Fourth Quarter and Full Year Operating Highlights

The Hanover Reports Fourth Quarter Net Income and

Operating Income(1)of $4.43 and $3.02 per Diluted Share, Respectively;

Full Year Net Income and Operating Income of $9.42 and $9.32 per Diluted Share, Respectively; Full Year Combined Ratio of 94.4%; Full Year Combined Ratio, Excluding Catastrophes(2), of 88.1%

• Operating return on equity(3)of 16.2% in the fourth quarter and 13.1% in the year
• Net premiums written increase of approximately 1%* for the fourth quarter and 0.4%* for the full year
• Fourth quarter rate increases of 6.4% in core commercial lines(4), 8.9% in specialty and 4.4% in Personal Lines(5)
• Catastrophe loss ratio of 3.0% in the fourth quarter and 6.3% for the full year
• Fourth quarter current accident year loss and loss adjustment expense ("LAE") ratio, excluding catastrophes(6), of 57.8% continued to benefit from underwriting and mix improvement in other commercial lines ("OCL"), as well as favorable loss frequency, particularly in auto
• Net investment income of $70.2 million in the fourth quarter and $265.1 million for the full year, down 3.4% and 5.8% from theprior-year quarter and prior year, driven by lower new money yields
• Book value per share of $87.96, up 4.3% from September 30, 2020, and up 15.8% from December 31, 2019, primarily driven by net income and increases in the fair value of fixed income securities
• The $100 million accelerated share repurchase ("ASR") agreement announced on October 27, 2020, was completed on January 29, with approximately 887,000 shares repurchased, including approximately 45,000 shares delivered at termination

1. See information about this and othernon-GAAP measures and definitions used throughout this presentation on the final pages of this document.
   The Hanover Insurance Group, Inc. may also be referred to as "The Hanover" or "the company" interchangeably throughout this presentation. * Unless otherwise stated, net premiums written growth and other growth comparisons are to the same period of the prior year.

2

Consolidated Financial Results Snapshot

	Three months ended		Year ended
($ in millions,except per share amounts)
December 31,		December 31,		December 31,		December 31,
	2019		2020		2019		2020
Net income	$109.8	$164.6	$425.1	$358.7
Per diluted share	$2.76	$4.43	$10.46	$9.42
Operating income before interest and taxes	$110.5	$150.3	$453.6	$484.7
Operating income after taxes	$80.2	$112.0	$331.6	$355.0
Per diluted share	$2.01	$3.02	$8.16	$9.32
Book value per share	$75.94	$87.96	$75.94	$87.96
Shareholders' equity	$2,916.2	$3,202.2	$2,916.2	$3,202.2
Debt	$653.4	$780.8	$653.4	$780.8
Total capital	$3,569.6	$3,983.0	$3,569.6	$3,983.0
Debt/Total Capital	18.3 %	19.6 %	18.3 %	19.6 %
Total assets	$12,490.5	$13,443.7	$12,490.5	$13,443.7
Net income return on average equity(3)	14.6 %	20.7 %	14.3 %	11.9 %
Operating return on average equity(3)	11.6 %	16.2 %	12.0 %	13.1 %
Adjusted operating return on average equity(3)	11.9 %		N/A	12.8 %		N/A

N/A = Not Applicable

3

Strong Operating Results

	Three months ended		Year ended
	December 31		December 31
($ in millions)	2019	2020		2019	2020
Net premiums written	$1,103.0	$1,112.1	$4,581.7	$4,598.5
Growth	5.6%	0.8%	4.5%	0.4%
Net premiums earned	$1,144.3	$1,154.0	$4,474.5	$4,527.4
Combined ratio	96.2%	92.4%	95.6%	94.4%
Combined ratio, ex-cat	93.1%	89.4%	91.8%	88.1%
Current accident year	93.2%	89.9%	91.8%	88.4%
combined ratio, ex-cat(2)

($ in millions)Net Premiums Written and Growth

Full year combined ratio of 94.4%, improved 1.2 points compared to the prior year

• Catastrophe losses of 6.3 points
• Net favorableex-cat prior year reserve development of $15.5 million, or 0.3 points
• Current accident year loss and LAE ratio, excluding catastrophes, of 56.8%, improved
  3.4 points due to:

• Underwriting, mix and rate actions, as well as lower property volatility in OCL (largely specialty)

			↑ 2.1%		-Favorable loss frequency, primarily in
↑ 5.6%	↑ 3.5%		$1,268.5	↑ 0.8%
↓ 5.0%	auto
	$1,136.9
$1,103.0	$1,081.0		$1,112.1	•Expense ratio of 31.6%, flat with prior year,
					due to higher-than-expected compensation
					expenses attributable to better-than-
					expected performance
4Q19	1Q20	2Q20	3Q20	4Q20

Current Accident Year Combined Ratio, Ex-Cat

93.2%	89.9%	91.8%	88.4%
61.8%	57.8%	60.2%	56.8%
31.4%	32.1%	31.6%	31.6%
4Q19	4Q20	FY 19	FY 20

Expense ratio(7)Current accident year loss and LAE ratio, ex-cat

• Achieved expense savings targets
• Expect0.3-point improvement for full year 2021

Net premiums written increased 0.4%, driven by most profitable areas of specialty and core commercial

4

Personal Lines Underwriting Highlights

Current Accident Year Combined Ratio, Ex-Cat

92.7%	88.1%	90.1%
	84.0%

65.5%	59.7%	62.7%	56.3%

27.2%	28.4%	27.4%	27.7%
		4Q19	4Q20	FY 19	FY 20
		Expense ratio		Current accident year loss and LAE ratio, ex-cat

Current Accident Year Loss and LAE Ratio, Ex-Cat

71.6%

61.3%		62.7%
	49.1%	56.3%
47.9%
	38.9%	37.4%

Auto	Home	Other	Total
	FY 2019	FY 2020

Fourth quarter combined ratio of 93.4%, improved 3.1 points, compared to the prior-year quarter

Current accident year combined ratio, ex-cat, of 88.1%, decreased 4.6 points from prior-year quarter, reflecting:

• Improvement in current accident year loss and LAE ratio, excluding catastrophes, of 5.8 points, due to auto frequency benefit, although to a lesser extent than in the first half of 2020
• Expense ratio increase of 1.2 points, driven by higherperformance-based compensation due to strong underwriting results

Full year combined ratio of 92.4%, improved 3.9 points, compared to the prior year

Current accident year combined ratio, ex-cat, of 84.0%, decreased 6.1 points, compared to the prior year, reflecting:

• Improvement in current accident year loss and LAE ratio, excluding catastrophes, of 6.4 points, driven by favorable loss frequency in personal auto
• Expense ratio of 27.7%, up 0.3 points, driven by higherperformance-based compensation due to strong underwriting results

5

Personal Lines Growth Highlights

($ in millions)

Net Premiums Written and Growth

↓ 0.5%

↓ 0.5%

$1,874.5$1,865.4

$464.3$462.0

Fourth quarter and full year net premiums written declined 0.5%, reflecting:

• Competitive market environment spurred by temporary claims frequency benefit
• Maintaining balance between rate and retention by effectively managing competitiveness with price stability andlong-term profitability

					•Rate increases of 4.4% in the quarter and 4.7%
					in the full year
					•Fourth quarter retention of 80.1%, an
4Q19	4Q20		FY 19	FY 20	improvement from 79.4% in the third quarter
Retention*				Rate
				10.0%
85%		84.7%			Very satisfied with quality of business:
81.8%	81.6%			8.0%	•Account business is approximately 85% of our
		80.1%
		Personal Lines portfolio
			79.4%
80%			6.0%	•Continue to build momentum in Hanover
5.1%	5.1%	4.8%	4.7%	4.0%	Prestige brand, adding 7,000 new customer
accounts and increasing new business by nearly
75%		4.4%
			30% in the year
				2.0%
70%				0.0%
4Q19	1Q20	2Q20	3Q20	4Q20
	PIF Retention	Rate

*Retention is defined as ratio of net retained policies for noted period to those policies	6
available to renew over the same period.

Commercial Lines Underwriting Highlights

Current Accident Year Combined Ratio, Ex-Cat

93.7%

90.9%

93.2%

91.6%

59.4%

56.3%

58.6%

57.2%

	34.3%	34.6%	34.6%	34.4%
			4Q19		4Q20	FY 19	FY 20
				Expense ratio				Current accident year loss and LAE ratio, ex-cat
		Current Accident Year Loss and LAE Ratio, Ex-Cat
				69.6%
					63.8%	60.7%	60.9%
	56.2%	57.7%				58.6%	57.2%
					56.5%
									53.6%

CMP	Auto	WC	Other	Total
	FY 2019		FY 2020

Fourth quarter combined ratio of 91.5%, improved 4.6 points, compared to the prior-year quarter

Current accident year combined ratio, ex-cat, of 90.9%, improved 2.8 points, reflecting:

• Improvement in current accident year loss and LAE ratio, excluding catastrophes, of 3.1 points, reflecting proactive underwriting actions and lower large losses in OCL, as well as lower loss frequency in commercial auto
• Expense ratio of 34.6%, up 0.3 points, driven by higherperformance-based compensation due to higher-than-expected underwriting results

Full year combined ratio of 95.8%, improved 0.6 points, compared to the prior year

Current accident year combined ratio, ex-cat, of 91.6%, improved 1.6 points, reflecting:

• Improvement in current accident year loss and LAE ratio, excluding catastrophes, of 1.4 points, compared to the prior year, driven by proactive underwriting actions and lower large losses in OCL, as well as lower loss frequency in commercial auto
• Expense ratio of 34.4%, an improvement of 0.2 points, driven by lower operational spend

7

Commercial Lines Growth Highlights

($ in millions)	Net Premiums Written and Growth	•Net premiums written increased 1.8% in the
		fourth quarter and 1.0% in the full year, reflecting:

	↑ 1.0%	-
$2,707.2	$2,733.1	-

↑ 1.8%

$638.7$650.1

Strong growth in specialty lines

Robust rate increases, with fourth quarter increases of 6.4% in core commercial and 8.9% in specialty, up from 5.7% and 7.2% in the third quarter, respectively

4Q19

4Q20

FY 19

FY 20

Core Commercial Lines (4)

• Moderating cancellation and endorsement activity, with small commercial turning positive in the fourth quarter
• Strong fourth quarter core commercial lines retention of 85.3%;full-year retention near historic highs

Retention*		86.9%			Rate
			87.1%		8.0%
		85.3%			85.3%
85%	84.1%
					6.4%	6.0%
				5.7%
80%		4.6%	5.1%			4.0%
	4.4%
75%						2.0%
	4Q19	1Q20	2Q20	3Q20	4Q20

Premium Retention				Rate
* Retention is defined as ratio of net retained policies for noted period to those policies
available to renew over the same period					8

Net Investment Income Trends

($ in millions)		Net Investment Income*
$72.7	$69.6			$67.6	$70.2
$14.2	$13.4	$57.7	$12.3	$15.4
				$1.5
$58.5	$56.2	$56.2	$55.3	$54.8
			4Q19		1Q20		2Q20		3Q20		4Q20
			Fixed Maturities		Partnerships, Equities and Other Investments
($ in millions)		Cash and Invested Assets
	=			$8,484	$8,959		$8,967
		$8,212	$7,971		3%	2%
			2%
			14%	15%
			3%		2%
				14%
		16%	15%
		81%	83%	84%	83%	83%

4Q19	1Q20	2Q20		3Q20	4Q20
Fixed Maturities	Equities, Mortgages & Other		Cash & Cash Equivalents

• Full year net investment income of $265.1 million, down slightly from the prior year due to:
• • Lower new money yields
  • Lower partnership income in Q2, partially offset by a rebound topre-COVID-19 levels in Q3 and Q4
• Fourth quarter net investment income of $70.2 million impacted by lower yields

Fixed Maturity Investment Portfolio Trends

5.0%							$7.5
							$7.0B
4.5%						$6.8B	$7.0
$6.5B	$6.6B	$6.6B	$6.5B	$6.5B
				$6.5
4.0%	$57.8M	$58.1M	$58.5M				$6.0
	$56.2M	$56.2M
				$55.3M	$54.8M
3.5%							$5.5
3.57%	3.55%	3.56%
	3.45%	3.45%
					$5.0
						3.26%
3.0%						3.15%
							$4.5
2.5%							$4.0
	2Q19	3Q19	4Q19	1Q20	2Q20	3Q20	4Q20
	Average Invested Assets		Earned Yield	Fixed Maturity Net Investment Income

* Net Investment Income from Partnerships, Equities and Other investments is		9
presented net of investment expenses

Investment Portfolio Holdings - Total Invested Assets and Cash of $9.0B

As of December 31, 2020

Fixed Maturities: $7.5 Billion

1%

5%

10%

				31%
				Industrials
15%
14%	Utilities	Financials
18%
			6%
		Industrials				Financials
		Utilities				Municipals (Taxable)
		RMBS/ABS			CMBS
		US Government			Municipals (Tax-exempt)

Fixed Income Characteristics:

• 96% of fixed maturity securities are investment grade
• Weighted average quality: A+
• Duration: 4.8 years

Equities, Cash and Other: $1.5 Billion

	8%	1%
		Marketable
		Securities
21%		22%

Exchange Traded

Funds (ETF)

17%

31%

Equities	Mortgage Loans
Limited Partnerships	Cash and cash equivalents
Other

10

About The Hanover

The Hanover Insurance Group, Inc. is the holding company for several property and casualty insurance companies, which together constitute one of the largest insurance businesses in the United States. The company provides exceptional insurance solutions through a select group of independent agents and brokers. Together with its agent partners, The Hanover offers standard and specialized insurance protection for small and mid-sized businesses, as well as for homes, automobiles, and other personal items. For more information, please visit hanover.com.

11

Forward-Looking Statements and Additional Risks and Uncertainties

Forward-Looking Statements

Certain statements in this document and comments made by management may be "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. Words such as, but not limited to, "believes," "anticipates," "expects," "may," "projects," "projections," "plan," "likely," "potential," "targeted," "forecasts," "should," "could," "continue," "outlook," "guidance," "modeling," "moving forward" and other similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. The company cautions investors that any such forward-looking statements are estimates, beliefs, expectations and/or projections that involve significant judgement, and that historical results, trends and forward-looking statements are not guarantees and are not necessarily indicative of future performance. Actual results could differ materially from those anticipated.

These statements include, but are not limited to, the company's statements regarding:

• The company's outlook and its ability to achieve components or the sum of the respective period guidance on its future results of operations including: the combined ratio, excluding or including bothprior-year reserve development and/or catastrophe losses; catastrophe losses; net investment income; growth of net premiums written and/or net premiums earned in total or by line of business; expense ratio; operating return on equity; and/or the effective tax rate;
• The impact of theCOVID-19 outbreak and subsequent global pandemic ("Pandemic") and related economic conditions on the company's operating and financial results, including, but not limited to, the impact on the company's investment portfolio, declining claims frequency as a res ult of reduced economic activity, severity from higher cost of repairs due to, among other things, supply chain disruptions, declines in premium as a result of, among other things, credits or returns to the company's customers, lower submissions, changes in renewals and policy endorsements, public health guidance, and the impact o f government orders and restrictions in the states and jurisdictions in which the company operates;
• Uses of capital for share repurchases, special or ordinary cash dividends, business investments or growth, or otherwise, and outstanding shares in future periods as a result of various share repurchase mechanisms, capital management framework, especially in the current environment, and overall comfort with capital levels;
• Variability of catastrophe losses due to risk concentrations, changes in weather patterns including climate change, wildfires, terrorism, civil unrest, riots or other events, as well as the complexity in estimating losses from large catastrophe events due to delayed reporting of the existence, nature or extent of losses or where
  "demand surge," regulatory assessments, litigation, coverage and technical complexities or other factors may significantly im pact the ultimate amount of such losses;
• Current accident year losses and loss selections ("picks"), excluding catastrophes, and prior accident year loss reserve development patterns, particularly in complex"longer-tail" liability lines, as well as the inherent variability in short-tail property and non-catastrophe weather losses;
• The confidence or concern that the current level of reserves is adequate and/or sufficient for future claim payments, whether due to losses that have been incurred but not reported, circumstances that delay the reporting of losses, business complexity, adverse judgments or developments with respect to case reserves, the difficulties and uncertainties inherent in projecting future losses from historical data, changes in replacement and medical costs, as well as complexities related to the Pandemic, including legislative, regulatory or judicial actions that expand the intended scope of coverages, or other factors;
• Characterization of some business as being "more profitable" in light of inherent uncertainty of ultimate losses incurred, especially for"longer-tail" liability businesses;
• Efforts to manage expenses, including the company'slong-term expense savings targets, while allocating capital to business investment, which is at management's discretion;
• Mix improvement, underwriting initiatives, coverage restrictions and pricing segmentation actions, among others, to grow businesses believed to be more profitable or reduce premiums attributable to products or lines of business believed to be less profitable; balance rate actions and retention; offsetlong-term and/or short-term loss trends due to increased frequency; increased "social inflation" from a more litigious environment and higher average cost of resolution, increased property replacement costs, and/or social movements;
• The ability to generate growth in targeted segments through new agency appointments; rate increases (as a result of its market position, agency relationships or otherwise), retention improvements or new business; expansion into new geographies; new product introductions; or otherwise; and
• Investment returns and the effect ofmacro-economic interest rate trends and overall security yields, including the macro-economic impact of the Pandemic and corresponding governmental initiatives taken in response, and geopolitical circumstances on new money yields and overall investment returns.

12

Additional Risks and Uncertainties (continued)

Additional Risks and Uncertainties

Investors are further cautioned and should consider the risks and uncertainties in the company's business that may affect such estimates and future performance that are discussed in the company's most recently filed reports on Form 10-K and Form 10-Q and other documents filed by The Hanover Insurance Group, Inc. with the Securities and Exchange Commission ("SEC") and that are also available at www.hanover.com under "Investors." These risks and uncertainties include, but are not limited to:

• The severity, duration andlong-term impact related to the Pandemic, including, but not limited to, decline in economic conditions, actual and possible government responses, legislative, regulatory and judicial actions, adverse impacts to the investment portfolio valuation and yield, changes in frequency and severity of claims in both Commercial and Personal Lines, customers' abilities to pay premiums or renew existing insurance policies, impacts to distributors (including agent partners), and the possibility of additional premium adjustments, including credits and returns, for the benefit of insureds;
• The potential for operations to be disrupted or negatively impacted due to (i) the risk of the company's workforce, includingthird-party contractors, being unable to work due to illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19 and the Pandemic; (ii) the company's reliance on the functioning of business continuity plans and technology while the majority of employees work remotely for an extended period of time; and (iii) the ongoing threat of cyberattacks and vulnerabilities;
• Changes in regulatory, legislative, economic, market and political conditions, particularly in response toCOVID-19 and the Pandemic (such as legislative or regulatory actions that would retroactively require insurers to cover business interruption or other types of claims irrespective of terms, exclusions or other conditions included in the contractual terms of the policies that would otherwise preclude coverage, mandatory returns and other rate-related actions, as well as presumption legislation in regards to workers' compensation);
• Heightened investment market volatility, fluctuations in interest rates (which have a significant impact on the market value of the investment portfolio and thus book value), U.S. Federal Reserve actions, inflationary pressures, default rates, prolonged global market conditions and other factors that affect investment returns from the investment portfolio;
• Adverse claims experience, including those driven by large or increased frequency of catastrophe events (including those related to terrorism, riots and civil unrest), and severe weather;
• The uncertainty in estimatingweather-related losses or the long-term impacts of the Pandemic, and the limitations and assumptions used to model other property and casualty losses (particularly with respect to products with longer-tail liability lines, such as casualty and bodily injury claims, or involving emerging issues related to losses incurred as the result of new lines of business, such as cyber or financial institutions coverage, or reinsurance contracts and reinsurance recoverables), leading to potential adverse development of loss and loss adjustment expense reserves;
• Litigation and the possibility of adverse judicial decisions, including those which expand policy coverage beyond its intended scope or award "bad faith" or othernon-contractual damages, and the impact of "social inflation" affecting judicial awards and settlements;
• The ability to increase or maintain insurance rates in line with anticipated loss costs and/or governmental action, including mandates by state departments of insurance to either raise or lower rates or provide credits or return premium to insureds;
• Investment impairments, which may be affected by, among other things, the company's ability and willingness to hold investment assets until they recover in value, as well as credit and interest rate risk and general financial and economic conditions;
• Disruption of the independent agency channel, including the impact of competition and consolidation in the industry and among agents and brokers, and the degree to which agents and brokers remain operational during the Pandemic;
• Competition, particularly from competitors who have resource and capability advantages;
• The global macroeconomic environment, including actions taken in response to the Pandemic, inflation, global trade wars, energy market disruptions, equity price risk, and interest rate fluctuations, which, among other things, could result in reductions in market values of fixed maturities and other investments;
• Adverse state and federal regulation, legislative and/or regulatory actions (including recent significant revisions to Michigan's automobile personal injury protection system and related litigation, and various regulations, orders and proposed legislation related to business interruption and workers' compensation coverages, premium grace periods and returns, and rate actions);
• Financial ratings actions, in particular, downgrades to the company's ratings;
• Operational and technology risks and evolving technological and product innovation, including risks created by remote work environments, and the risk ofcyber-security attacks or breaches on the company's systems or resulting in claim payments (including from products not intended to provide cyber coverage);
• Uncertainties in estimating indemnification liabilities recorded in conjunction with obligations undertaken in connection with the sale of various businesses and discontinued operations; and
• The ability to collect from reinsurers, reinsurance pricing, reinsurance terms and conditions, and the performance of therun-off voluntary property and casualty pools business (including those in the Other segment or in Discontinued operations).

Investors should not place undue reliance on forward-looking statements, which speak only as of the date they are made and should understand the risks and uncertainties inherent in or

particular to the company's business. The company does not undertake the responsibility to update or revise such forward-looking statements.

13

Non-GAAP Financial Measures

Non-GAAP Financial Measures

As discussed on page 38 of the company's Annual Report on Form 10-K for the year ended December 31, 2019, the company uses non-GAAP financial measures as important measures of its operating performance, including operating income, operating income before interest expense and income taxes, operating income per share, and components of the combined ratio, both excluding and/or including, catastrophe losses, prior-year reserve development and the expense ratio. Management believes these non-GAAP

financial measures are important indications of the company's operating performance. The definition of other non-GAAP financial measures and terms can be found in the 2019

Annual Report on pages 67-70.

Operating income and operating income per share are non-GAAP measures. They are defined as net income excluding the after-tax impact of net realized investment gains (losses), fair value changes of equity securities, gains and/or losses on the repayment of debt, other non-operating items, and results from discontinued operations. Net realized investment gains and losses, which include changes in the fair value of equity securities still held, are excluded for purposes of presenting operating income, as they are, to a certain extent, determined by interest rates, financial markets and the timing of sales. Operating income also excludes net gains and losses from disposals of businesses, gains and losses related to the repayment of debt, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes and certain other items. Operating income is the sum of the segment income from: Commercial Lines, Personal Lines, and Other, after interest expense and income taxes. In reference to one of the company's three segments, "operating income" is the segment income before both interest expense and income taxes. The company also uses "operating income per share" (which is after both interest expense and income taxes). It is calculated by dividing operating income by the weighted average number of diluted shares of common stock. The company believes that metrics of operating income and operating income in relation to its three segments provide investors with a valuable measure of the performance of the company's continuing businesses because they highlight the portion of net income attributable to the core operations of the business. Income from continuing operations is the most directly comparable GAAP measure for operating income (and operating income before income taxes) and measures of operating income that exclude the effects of catastrophe losses and/or reserve development should not be misconstrued as substitutes for income from continuing operations or net income determined in accordance with GAAP. A reconciliation of operating income (loss) to income from continuing operations and net income for the relevant periods is included on page 15 of this presentation and in the Financial Supplement.

The company may also provide measures of operating income and combined ratios that exclude the impact of catastrophe losses (which in all respects include prior accident year catastrophe loss development). A catastrophe is a severe loss, resulting from natural or manmade events, including, but is not limited to, hurricanes, tornadoes, windstorms, earthquakes, hail, severe winter weather, fire, explosions, civil unrest and terrorism. Due to the unique characteristics of each catastrophe loss, there is an inherent inability to reasonably estimate the timing or loss amount in advance. The company believes a separate discussion excluding the effects of catastrophe losses is meaningful to understand the underlying trends and variability of earnings, loss and combined ratio results, among others.

Prior accident year reserve development, which can either be favorable or unfavorable, represents changes in the company's es timate of costs related to claims from prior years. Calendar year loss and loss adjustment expense ("LAE") ratios determined in accordance with GAAP, excluding prior accident year reserve development, are sometimes referred to as "accident year loss ratios." The company believes a discussion of loss and combined ratios, excluding prior ac cident year reserve development, is helpful since it provides insight into both estimates of current accident year results and the accuracy of prior-year estimates.

The loss and combined ratios in accordance with GAAP are the most directly comparable GAAP measures for the loss and combined ratios calculated excluding the effects of catastrophe losses and/or reserve development. The presentation of loss and combined ratios calculated excluding the effects of catastrophe losses and/or reserve development should not be misconstrued as substitutes for the loss and/or combined ratios determined in accordance with GAAP.

Operating return on equity ("ROE") is a non-GAAP measure. See end note (8) for a detailed explanation of how this measure is calculated. Operating ROE is based on non- GAAP operating income. In addition, the portion of shareholder equity attributed to unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is excluded. The company believes this measure is helpful in that it provides insight to the capital used by, and results of, the continuing business exclusive of interest expense, income taxes, and other non-operating items. These measures should not be misconstrued as substitutes for GAAP ROE, which is based on net income and shareholders' equity of the

entire company and without adjustments.

14

End notes

1. Operating income (loss) and operating income per diluted share arenon-GAAP measures. See the disclosure on the use of non-GAAP measures throughout this presentation under the heading "Non-GAAP Financial Measures." The following table provides the reconciliation of operating income (loss) and operating income per diluted share to the most directly comparable GAAP measures, income from continuing operations and income from continuing operations per diluted share, respectively, which are then reconciled to net income and net income per diluted share, respectively:

				Three months ended						Year ended
		December 31, 2019		December 31, 2020		December 31, 2019		December 31, 2020
				Per				Per				Per				Per
		$		Share	$		Share	$		Share	$		Share
(In millions, except per share data)	Amount		Diluted		Amount		Diluted		Amount		Diluted		Amount		Diluted
OPERATING INCOME (LOSS)
Commercial Lines		$73.0			$103.2			$300.1			$275.4
Personal Lines		36.2			50.8			144.9			212.5
Other		1.3				(3.7)				8.6				(3.2)
Total		110.5			150.3			453.6			484.7
Interest expense		(9.4)				(8.5)				(37.5)				(37.1)
Operating income before income taxes		101.1	$2.53	141.8	$3.82	416.1	$10.24	447.6	$11.75
Income tax expense on operating income		(20.9)		(0.52)		(29.8)		(0.80)		(84.5)		(2.08)		(92.6)		(2.43)
Operating income after income taxes		80.2	2.01	112.0	3.02	331.6	8.16	355.0	9.32
Non-operating items:
Net realized gains from sales and other		3.9	0.10	5.8	0.16	4.9	0.12	17.9	0.47
Net change in fair value of equity securities		31.2	0.78	57.8	1.56	106.5	2.62	13.4	0.35
Impairment recoveries (losses) on investments		(0.8)	(0.02)	1.6	0.04	(2.0)	(0.05)	(26.3)	(0.69)
Loss from repayment of borrowings		-	-	-	-	-	-	(6.2)	(0.16)
Other non-operating items		(2.0)	(0.04)	-	-	(3.4)	(0.08)	(1.6)	(0.05)
Income tax benefit (expense) on non-operating items		(2.3)		(0.06)		(11.3)		(0.31)		(8.6)		(0.21)		9.8		0.26
Income from continuing operations, net of taxes		110.2	2.77	165.9	4.47	429.0	10.56	362.0	9.50
Discontinued Operations (net of taxes):
Sale of Chaucer business		1.4	0.03	-	-	(1.2)	(0.03)	-	-
Income from Chaucer business		-	-	0.4	0.01	1.6	0.04	0.4	0.01
Loss from discontinued life businesses		(1.8)		(0.04)		(1.7)		(0.05)		(4.3)		(0.11)		(3.7)		(0.09)
Net income		$109.8	$2.76		$164.6	$4.43		$425.1	10.46		$358.7		$9.42
Dilutive weighted average shares outstanding			39.8			37.1			40.6			38.1

15

End notes continued

1. Combined ratio, excluding catastrophes, and current accident year combined ratio, excluding catastrophes, arenon-GAAP measures. The combined ratio, excluding catastrophes is equal to the combined ratio, excluding catastrophe losses. The current accident year combined ratio, excluding catastrophes, is equal to the combined ratio, excluding catastrophe losses and prior-year reserve development. These measures are used throughout this document. The combined ratio (which includes catastrophe losses and prior-year reserve development) is the most directly comparable GAAP measure. The following is a reconciliation of the GAAP combined ratio to the combined ratio, excluding catastrophe losses, and the current accident year combined ratio, excluding catastrophe losses:

		Three months ended
		December 31, 2020
		Commercial		Personal	Total
		Lines		Lines
Total combined ratio		91.5 %	93.4 %			92.4 %
Less: Catastrophe loss ratio		1.5 %		5.3 %			3.0 %
Combined ratio, excluding catastrophe losses		90.0 %	88.1 %			89.4 %
Less: Prior-year reserve development ratio		(0.9)%		-			(0.5)%
Current accident year combined ratio, excluding catastrophe losses		90.9 %		88.1 %			89.9 %
		December 31, 2019
Total combined ratio		96.1 %	96.5 %			96.2 %
Less: Catastrophe loss ratio		4.1 %		1.6 %			3.1 %
Combined ratio, excluding catastrophe losses		92.0 %	94.9 %			93.1 %
Less: Prior-year reserve development ratio		(1.7)%		2.2 %			(0.1)%
Current accident year combined ratio, excluding catastrophe losses		93.7 %		92.7 %			93.2 %
				Year ended
		December 31, 2020
		Commercial		Personal	Total
		Lines		Lines
Total combined ratio		95.8 %	92.4 %			94.4 %
Less: Catastrophe loss ratio		4.9 %		8.4 %			6.3 %
Combined ratio, excluding catastrophe losses		90.9 %	84.0 %			88.1 %
Less: Prior-year reserve development ratio		(0.7)%		-			(0.3)%
Current accident year combined ratio, excluding catastrophe losses		91.6 %		84.0 %			88.4 %
		December 31, 2019
Total combined ratio		95.2 %	96.3 %			95.6 %
Less: Catastrophe loss ratio		3.1 %		4.7 %			3.8 %
Combined ratio, excluding catastrophe losses		92.1 %	91.6 %			91.8 %
Less: Prior-year reserve development ratio		(1.1)%		1.5 %			-
Current accident year combined ratio, excluding catastrophe losses		93.2 %	90.1 %			91.8 %

16

End notes continued

1. Operating Return on Average Equity and Adjusted Operating Return on Average Equity ("Operating ROE" and "Adjusted Operating ROE") arenon-GAAP measures. Operating ROE is calculated by dividing annualized operating income after taxes for the applicable period (see under the heading in this presentation "Non-GAAP Financial Measures" and end note (1)), by average shareholders' equity, excluding unrealized appreciation (depreciation) on fixed maturity investments, net of tax, for the stated period (end note (8)). For Adjusted Operating ROE, shareholders' equity is adjusted for the then un-deployed equity attributable to Chaucer and for net unrealized appreciation (depreciation) on fixed maturity investments, net of tax (end note (8)). Please see end note

1. for a detailed reconciliation of adjusted shareholders' equity with and without net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, and including the payment of the $250 million accelerated share repurchase ("ASR") agreement for year ended 2019 calculation. Additionally, for the calculation of Adjusted Operating ROE, Operating Income, net of tax, is adjusted for the net investment income, net of tax, related toun-deployed equity attributable to the sale of Chaucer, net of tax. Chaucer constituted our international business, the components of which we sold to China Reinsurance (Group) Corporation in 2018 and 2019. Operating ROE and Adjusted Operating ROE should not be misconstrued as substitutes for GAAP ROE. See calculations in table below, including the calculation of Net Income ROE using net income, annualized, and average shareholders' equity without adjustments:

		Three months ended		Year ended
		December 31		December 31		December 31		December 31
Net Income ROE (non-GAAP)		2019		2020		2019		2020
Net income (GAAP)	$109.8	$164.6	$425.1	$358.7
Annualized net income (non-GAAP)	439.2	658.4	425.1	358.7
Average shareholders' equity (GAAP) (end note (8))	3,001.5		3,178.6		2,965.2		3,016.3
Return on equity (non-GAAP)	14.6 %		20.7 %		14.3%		11.9%

Operating Income ROE (non-GAAP)

Operating income after income taxes

Annualized operating income, net of tax* (end note (1)) Average shareholders' equity, excluding net unrealized

appreciation (depreciation) on fixed maturity investments, net of tax, and including the ASR payment (end note (8))

Operating return on equity

Adjusted Operating Income ROE (non-GAAP)

Annualized operating income, net of tax* (end note (1))

Less: Annualized net investment income related to un-deployed equity attributable to Chaucer, net of tax**

Annualized operating income, excluding the net investment income related to the un-deployed equity attributable to Chaucer, net of tax

Average adjusted shareholders' equity, excluding both net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, and pre-sale, equity attributable

to Chaucer; or post-close,un-deployed equity (end note (8)) Adjusted operating return on equity

$80.2	$112.0	$331.6	$355.0
320.8	448.0	331.6	355.0
2,775.9		2,758.4		2,773.7		2,701.6
11.6 %	16.2 %	12.0%	13.1%
$320.8			$331.6
(6.4)			(9.3)
$314.4			$322.3
2,647.6				2,508.5
11.9 %				12.8%

*For three months ended December 31, 2019 and 2020, respectively, annualized net income and operating income is calculated by multiplying three months	ended net income and operating income, respectively, by four.
**Net investment income related to the un-deployed equity attributable to Chaucer, net of tax, for three months ended December 31, 2019 is calculated by	multiplying the respective quarter's un-deployed equity attributable to Chaucer (end	17
note (8)) by the respective quarter's total pre-tax yield, net of tax, and dividing by 4. Net investment income related to the un-deployed equity attributable to	Chaucer, net of tax, for year ended December 31, 2019 is calculated by adding the
respective quarters' net investment income related to the un-deployed equity attributable to Chaucer, net of tax.

End notes continued

1. Core commercial business provides commercial property and casualty coverages to small andmid-sized businesses in the U.S., generally with annual premiums per policy up to $250,000, primarily through the commercial multiple peril, commercial auto and workers' compensation lines of business, as reported on the current quarter Financial Supplement. Price increases in Commercial Lines and core commercial lines represent the average change in premium on renewed policies caused by the estimated net effect of base rate changes, discretionary pricing, inflation or changes in policy level exposure or insured risks. Rate increases in Commercial Lines and core commercial lines represent the average change in premium on renewed policies caused by the base rate changes, discretionary pricing, and inflation, excluding the impact of changes in policy level exposure or

insured risks:

($ in millions)		Three months ended			Year ended
		December 31, 2020		December 31, 2020
	Core	Other	Total Commercial	Core	Other	Total
	Commercial	Commercial	Commercial	Commercial	Commercial
Net premiums written	$367.9	$282.2		$650.1	$1,578.0	$1,155.1	$2,733.1
Net premiums earned	$398.6	$285.1		$683.7	$1,561.6	$1,121.7	$2,683.3
		September 30, 2020
	Core	Other	Total Commercial
	Commercial	Commercial
Net premiums written	$441.2	$319.3		$760.5
Net premiums earned	$385.9	$279.2		$665.1
		June 30, 2020
	Core	Other	Total Commercial
	Commercial	Commercial
Net premiums written	$347.2	$267.7		$614.9
Net premiums earned	$381.7	$276.9		$658.6
		March 31, 2020
	Core	Other	Total Commercial
	Commercial	Commercial
Net premiums written	$421.7	$285.9		$707.6
Net premiums earned	$395.4	$280.5		$675.9
		December 31, 2019		December 31, 2019
	Core	Other	Total Commercial	Core	Other	Total
	Commercial	Commercial	Commercial	Commercial	Commercial
Net premiums written	$369.8	$268.9		$638.7	$1,580.1	$1,127.1	$2,707.2
Net premiums earned	$396.6	$282.9		$679.5	$1,550.0	$1,104.2	$2,654.2

1. Price increases in Personal Lines is the estimated cumulative premium effect of approved rate actions applied to policies available for renewal, regardless of whether or not policies are actually renewed. Accordingly, pricing changes do not represent actual increases or decreases realized by

the company.

18

End notes continued

1. Current accident year loss and LAE ratio, excluding catastrophe losses, is anon-GAAP measure, which is equal to the loss and LAE ratio ("loss ratio"), excluding prior-year reserve development and catastrophe losses. The loss ratio (which includes losses, LAE, catastrophe losses and prior-year loss reserve development) is the most directly comparable GAAP measure. The following is a reconciliation of the GAAP loss ratio to the current accident year loss and LAE ratio, excluding catastrophe losses:

									Three months ended
									December 31, 2020
		Commercial		Commercial	Workers'		Commercial		Commercial	Personal		Home		Other		Personal		Total
		Multiple Peril		Auto			Comp		Other		Lines			Auto			Personal		Lines
Total loss and LAE Ratio		58.4 %	70.9 %			47.7 %	54.3 %	56.9 %			68.1 %	62.0 %	37.6 %	65.0 %	60.3 %
Less:
Prior-year reserve development ratio		0.4 %	5.7 %			(12.4)%	(0.6)%	(0.9)%			0.6 %	(0.7)%	(4.0)%	-	(0.5)%
Catastrophe ratio		1.5 %		0.7 %			-		2.1 %		1.5 %			0.3 %		14.8 %		2.0 %		5.3 %		3.0 %
Current accident year loss ratio,		56.5 %	64.5 %			60.1 %	52.8 %	56.3 %			67.2 %	47.9 %	39.6 %	59.7 %	57.8 %
excluding catastrophe losses
									December 31, 2019
Total loss and LAE Ratio		67.1 %	72.9 %			41.3 %	60.3 %	61.8 %			80.0 %	52.0 %	36.2 %	69.3 %	64.8 %
Less:
Prior-year reserve development ratio		(0.6)%	1.7 %			(19.7)%	1.8 %	(1.7)%			2.8 %	1.3 %	0.8 %	2.2 %	(0.1)%
Catastrophe ratio		10.7 %		0.2 %			-		1.2 %		4.1 %			0.3 %		3.9 %		0.8 %		1.6 %		3.1 %
Current accident year loss ratio,		57.0 %	71.0 %			61.0 %	57.3 %	59.4 %			76.9 %	46.8 %	34.6 %	65.5 %	61.8 %
excluding catastrophe losses
											Year ended
									December 31, 2020
		Commercial		Commercial	Workers'		Commercial		Commercial	Personal		Home		Other		Personal		Total
		Multiple Peril		Auto			Comp		Other		Lines			Auto			Personal		Lines
Total loss and LAE Ratio		68.6 %	69.0 %			49.5 %	56.6 %	61.4 %			62.7 %	71.1 %	31.6 %	64.7 %	62.8 %
Less:
Prior-year reserve development ratio		1.6 %	4.6 %			(11.4)%	(1.1)%	(0.7)%			0.4 %	(0.1)%	(8.3)%	-	(0.3)%
Catastrophe ratio		9.3 %		0.6 %			-		4.1 %		4.9 %			1.0 %		22.1 %		2.5 %		8.4 %		6.3 %
Current accident year loss ratio,		57.7 %	63.8 %			60.9 %	53.6 %	57.2 %			61.3 %	49.1 %	37.4 %	56.3 %	56.8 %
excluding catastrophe losses
									December 31, 2019
Total loss and LAE Ratio		63.0 %	71.9 %			50.7 %	58.3 %	60.6 %			74.0 %	61.5 %	41.5 %	68.9 %	64.0 %
Less:
Prior-year reserve development ratio		(0.7)%	1.9 %			(10.0)%	0.4 %	(1.1)%			1.9 %	0.8 %	(0.2)%	1.5 %	-
Catastrophe ratio		7.5 %		0.4 %			-		1.4 %		3.1 %			0.5 %		12.8 %		2.8 %		4.7 %		3.8 %
Current accident year loss ratio,		56.2 %	69.6 %			60.7 %	56.5 %			58.6 %			71.6 %	47.9 %	38.9 %	62.7 %	60.2 %
excluding catastrophe losses
																									19

End notes continued

1. Throughout this presentation, for purposes of the expense ratio calculation, expenses are reduced by installment and other fee revenues.
2. Total shareholders' equity, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, is anon-GAAP measure. Total shareholders' equity is the most directly comparable GAAP measure and is reconciled in the table below. For the calculation of Operating ROE, the average of total shareholders' equity, excluding net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, for the beginning, ending, and interim (if applicable) quarters are used. For the calculation of Adjusted Operating ROE, the average shareholders' equity, excluding both net unrealized appreciation (depreciation) on fixed maturity investments, net of tax, and the then un-deployed equity attributable to Chaucer, for the beginning, ending, and interim (if applicable) quarters are used. For the calculation of Operating ROE and Adjusted Operating ROE, the balance at December 31, 2018 was adjusted by the $250 million paid for the ASR on January 2, 2019 to eliminate the dilutive impact the ASR would have had on unadjusted and adjusted Operating ROE.

	December 31,		March 31,		June 30,		September		December 31,		March 31,		June 30,		September		December 31,
($ in millions)	2018		2019		2019		30, 2019		2019		2020		2020		30, 2020		2020
Total shareholders' equity (GAAP)	$2,954.7	$2,927.0	$2,941.1	$3,086.8	$2,916.2	$2,736.6	$3,071.7	$3,155.0	$3,202.2
Less: net unrealized appreciation (depreciation) on fixed
maturity investments, net of tax	(27.2)	90.7	192.3	235.3	216.0	132.8	384.5	412.3	428.1
Total shareholders' equity, excluding net unrealized
appreciation (depreciation) on fixed maturity
investments, net of tax	2,981.9	$2,836.3	$2,748.8	2,851.5	2,700.2	2,603.8	2,687.2	2,742.7	2,774.1
Less: Payment made on January 2, 2019 for the ASR
agreement entered into on December 30, 2018	250.0	-	-	-	-	-	-	-	-
Total shareholders' equity, excluding net unrealized
appreciation (depreciation) on fixed maturity investments,
net of tax, and including the ASR payment	2,731.9	2,836.3	2,748.8	2,851.5	2,700.2	2,603.8	2,687.2	2,742.7	2,774.1
Less: Un-deployed equity attributable to Chaucer;	406.6	406.6	256.6	256.6		N/A		N/A		N/A		N/A		N/A
Adjusted shareholders' equity, excluding both net
unrealized appreciation (depreciation) on fixed maturity
investments, net of tax, and un-deployed equity attributable
to Chaucer;	$2,325.3	$2,429.7	$2,492.2	$2,594.9	$2,700.2	$2,603.8	$2,687.2	$2,742.7	$2,774.1
Quarter Averages
Average shareholders' equity (GAAP)								$3,001.5							$3,178.6
Average shareholders' equity, excluding net unrealized
appreciation (depreciation) on fixed maturity
investments, net of tax, and including the ASR payment								$2,775.9							$2,758.4
Average adjusted shareholders' equity, excluding both net
unrealized appreciation (depreciation) on fixed maturity
investments, net of tax, and un-deployed equity attributable
to Chaucer;								$2,647.6							$2,758.4
Year-to-date Averages
Average shareholders' equity (GAAP)								$2,965.2							$3,016.3
Average shareholders' equity, excluding net unrealized
appreciation (depreciation) on fixed maturity
investments, net of tax, and including the ASR payment								$2,773.7							$2,701.6
Average adjusted shareholders' equity, excluding both net
unrealized appreciation (depreciation) on fixed maturity
investments, net of tax, and un-deployed equity attributable
to Chaucer;								$2,508.5							$2,701.6

20

N/A = Not Applicable