Good day ladies and gentlemen and welcome to the Q1 2008 The Hanover Insurance Group Earnings Call. My name Kobe and I will be your coordinator for today. At this time, all participants in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. [Operator Instructions]. I would now like to turn the presentation over to your host for today's call, Sujata Mutalik, Vice President of Investor Relations. Please proceed.

Thank you Kobe. Good morning and thank you for joining our first quarter conference call. Participating in today's call are Fred Eppinger, our President and Chief Executive Officer; Eugene Bullis, Our Executive Vice President and CFO; and Marita Zuraitis President of Property and Casualty Companies. Before I turn the call over to Fred for a discussion of our results, let me know that our earnings press release and our current report on Form 8-K were issued last night. Our press release, statistical supplement and a complete slide presentation for today's call are available in the Investors section of our website as www.hanover.com. After the presentation, we will answer questions in the Q&A session. Our prepared remarks and response to your question today other than statements of historical fact may include forward-looking statements. There are certain factors that could cause actual results to differ materially from those anticipated by the press release or the slide presentation and the conference call, we caution you with respect to reliance on these forward-looking statements and in this respect refer you to the forward-looking statement section in our press release and slide 2 of the presentation deck. Today's discussion will also reference of non-GAAP financial measures such as total segment income, segment results excluding the impact of catastrophes, ex-catalogs ratios and accident-year loss ratio among others. A reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release or the statistical supplements, which are posted on our website as I mentioned earlier. With those comments, I will turn the call over to Fred.

Good morning and thanks for joining our call. Today we will review the first quarter results and provide some insight in to the trends in our business. Let me start by saying, I am very pleased with the strength of our performance and quality of our earnings for the first quarter of 2008. Segment earnings after tax were $57 million... $57.3 million or a $1.9 per share, compared to $60.2 million or a $1.16 per share from the prior year quarter. Earnings were slightly lower in the current quarter because of significantly more weather-related losses this year than last year. Book value per share was up 2% in the quarter, at $45.23 per share, up from $44.37 per share at the end of 2007. Our fourth quarter trailing P&C levered return on equity was 13.7% at the end of the first quarter of 2008. These advantages resulted from strong earnings of our Property and Casualty segment which earned $98 million in the first quarter of 2008, compared to $100.9 million in the prior year quarter. Catastrophe losses in most so severe winter in the Midwest and Northeast really have a significant presence led to higher weather related losses in the first quarter of '08. These losses were not outside our expectations for typical first quarter, but were much higher than our experience in the prior period quarter. Earnings in the current quarter would have been ahead of prior quarter by $2 million just adjusting for capital loans. In addition non-cap weather related losses also were higher particularly in Personal Lines and are reflected in the higher current accident losses which would otherwise have reflected in improving accident-year trend in the aggregate, consistent with our ongoing expectations of maintaining or slightly improving accident-year margins. Additionally, our business portfolio has continued to…

Thank you, Fred. Good morning every one, and thank you for joining our call. As usual a slide presentation accompanies my remarks and I trust all of you have this available, Please turn the slide 5 which presents our consolidated results for the quarter. For the quarter, we reported net income of $59 million, a $1.12 per share, down from $64 million, or $1.22 per share in the first quarter of 2007. Net income for the first quarter of 2008 benefited by $5 million, or $0.09 per share from adjustments to after tax net gain on previously sold businesses. Net income for the first quarter of 2008 also included pretax net realized investment losses of $5 million, or $0.09 a share, compared to a gain of $2 million, or $0.04 a share in the same period of 2007. This quarter we recognized impairments of $7.5 million of certain fixed maturity securities, partially offset by pretax net investment gains of $2.5 million, primarily from sales of fixed maturities. The increase in impairments in the current quarter was attributable to credit market conditions not directly associated with financial institution losses. Let's turn to slide 6 for a discussion of our segment earnings. Segment income after tax was $57 million for the quarter, down from $60 million in the first quarter of last year. Our Property and Casualty segment generated $98 million of pretax income, down from $101 million in the prior year quarter, primarily due to higher catastrophe and weather-related losses. Our Life companies posted a $2.5 million loss from continuing operations, versus the loss of $1 million in the prior year quarter. The segment loss in the current quarter was $1 million higher than expected primarily due to unfavorable mortality experience in our run off traditional Life business. Now let's turn…

Thanks, Marita. Operator, with that we will open up for questions. Question And Answer

[Operator Instructions]. Your first question comes from the line of Jay Gelb with Lehman Brothers. Please proceed.

Thanks, Good morning. I was hoping

Hi, Jay.

How are you? I was hoping you could update us with your conversations on the rating agencies and I know you don't have an update today on the potential side of Life business but maybe you can walk us through how you see that playing out?

Sure. On the rating agencies obviously we are right in the middle of those conversations we got Moody's upgrade last quarter. We had a terrific conversation with S&P that just concluded and Iwe are in the middle kind of a quarterly best March [ph] we go with them as well. I am very optimistic about the last two pieces of this occurring sometime over the next twelve months and I can't decide when they are going to do things, but I would tell the conversations we've been have were very positive, we are meeting all their expectations and I actually feel very, very good. We've said the way the calendar works and when people make decisions my guess is at S&P the decision will come before our best [ph] decision, but I feel very, very good about those conversations. Do you have any add on that?

No, I think that's exactly where we are and we expect to see... I think out we are out there with a positive outlook from S&P... and they have to do something with respect to that sometime in the next two months

And we're also positive allocation very best in the guidance they've given is kind 18- to 24 months and so when they gave to us, so again so I think this year is a big year for us in both cases and I... nothing in the conversation that make me anything but optimistic about it. [Indiscernible] is very happy with the Moody's move which proceeded the other two. On the Life Company, again we are in process there, I don't see any reason why this can't be achieved, it is as we said it's not anything like the first year that we did, this is a more straight forward book of business. And we kept it so because we wanted to retain the tax attributes that were in it. I think it was the right decision but now it's the right decision to move forward to monetize it, and I think we will do that. Now the way we are thinking about it Jay is very straight forward, but what I like about the situation for us is that obviously we've had some amount of jet capital types in our like business because we've held it to really get those tax attributes. So we couldwe could see ourselves this year as we come to closing on that transaction being able to free up capital fees to give back to our shareholders, or to take and put it in a much more productive 12% plus return type of business. So I see that's going to be a tremendous boost to people's transparency of our company. I think it was the right decision to keep it because the MPD was good on the tax attributes, but I would tell you that you can just do the math, right that the ROE bond for doing... taking dead capital and either applying it to our business at a 12% return or giving it back shareholders should be very positive action and the right action that we should be able to achieve this year. Again Gene is there anything else that...

Yes, it's a process that we don't want to get out ahead of ourselves in terms specific disclosures, but we set out to achieve an outcome that we set at Investor day today and I think we are on track to do that.

Okay, and then my... my last question is, given the significant transaction we the\saw last week, I was wondering if that makes you re-look at in bound or outbound M&A with all the cash there.

No, I mean again, I think I have been pretty clear on this last four years, I believe very strongly that we are going to see a consolidation in the industry I think that there are 500 little companies that are represented by 45% of the $450 billion market that are sub scale, there are about 18 to 20 that are big and what you are going to see is the big guys potentially buy each other and you are going to see the consolidation of some of these small opportunities, and what we are seeing is lot of opportunities to talk to a number of company's that I have done through the last couple of years and pricing expectations are more in line now and the people are more thoughtful about what they have and they don't have. So I continue to see opportunities for us, I don't need them per se, but we would continue to look at them and if we think it helps our value proposition and we can make a significant shareholder value creation we will do it and the other thing I would say is that we had built this company to take advantage of disruption and so one of the best days in my life is when [indiscernible] was merged and we are able to acquire a lot of great talent and this takeover opportunity presented an enormous opportunity for us and both the disruption at the agency level and places like small commercial across our network when they just lost the market in the talent that is under and we are uneasy about the consolidation challenges that company now has present real share holder value operation opportunity for us if we continue down the path to accelerate some of our partnerships because of the deals. So we have always been very activist and part what I do, I talk to everybody always and because I do think that this is the part of the cycle where these opportunities represent and I think what we're going to try to do is what we've done last four years is trying to do the right thing to create shareholder value and capitalizing opportunities as presented. So I am pretty again, I've said all along, I've talked about how casualty I'd thought it was going to happen, this one is not, to me a surprise at all. I do think there will be something among the big guys, given the pressure that they face and I think there will be a lot of small guys that will also feel the pressure from subscale. So we are still optimistic about the opportunity presented to us [ph].

Right, thanks for the answers.

Thank you.

Your next question comes from the line of Rohan Pai with Banc of America Securities. Please proceed.

Hi good morning.

Good morning.

Good morning.

Fred, I guess the first question I had, had to do with the personal auto, just looking at the calendar year combined ratios have been rising sequentially in each of last four quarters it was 102 in the first quarter. And based on Gene's comments, may be reserve releases decline going forward, is what kind of a combined ratio are you willing to tolerate in personal auto on a calendar year basis?

I think what we target is 95, 96, I feel like we can hit that, where accident years will improve this year. We are I think people know, I think this weather thing was a little bit... its what we don't really have big cats for a kitty cat kind of company, and the first quarter tends to be the most volatile for us given dry stock, dry kind [ph] storms and freezes that we had this year. Buy I'm actually quite bullish, Personal Lines, if you look at where we are with our core accident years excess whether they continue to improve, and I think that they're going to be very stable. Now, we are very conservative, if you look at what we do because if you'll recall last two years we totally revamped our Personal Lines home and auto in every state, Connections is now $500 million business. And we were very conservative about our accident years because we were going returning over an entire book of both home and auto as we watch those new products and we're going into new states. So our conservatism we were out first last year with somebody's accident year's increases and that's why we think there is an opportunity to continue to decrease it. So our goals by the way is at the 12% ROE through the cycle. We don't mess around that's what we focus on, I'm very clear that we're going to do that. I have no qualms about us doing that in the P&C business and as we get rid of the Life business and we get these upgrades our capital will be better managed and more appropriate and that'll be very easy to do for the overall business. So I feel very good about what we're going…

But those are two separate subjects though again on reserve releases

And our action here is are not two separate subjects, when you turn over its much focused you do, we are very thoughtful and very conservative that in total we get, we create shareholder value, we think about it that way, because we did enter a lot of new states with new products. It is not two separate conversations.

Thanks for the detailed answer. Marita what kind of rate increases were you referring to, what prices are you putting through and what are you seeing in the marketplace for personal auto? Marita Zuraitis - President, Property & Casualty Companies: Yeah, we mentioned specifically what we did in Michigan and obviously it differs by state and location, but the answer to that question will be as much as the market will possibly bear. And the hope is that we can continue to push that bar higher and higher. I can tell you that all of our rate activity at this point is on the positive side of the house, not the negative side of the house. But those numbers obviously differ dramatically by individual states, what the rate need is, where our indications are, what the market will bear, but we're clearly seeing a trend on towards positive numbers and the markets ability to bear that.

We track in every one of our states every one of the major competitors, say the top ten and we have a map, and what you've seen as a turn going to the first quarter last year it was kind of split and near the tail end it became more 50-50. Now you are seeing most people are taking rate and so the opportunity here is dramatic. Now we are pretty aggressive about taking rate every year in almost every market, Massachusetts being the exception. But what we see is people starting to take rate and we believe that you will see that to be very common practice by the second half of the year. Everybody is seeing the same results and so we are relatively bullish on seeing rates in the second half of the year.

I guess on a different note, in Michigan there seems to be a bill for

Taken out credit.

Exactly.

Its on the house side, the republican side is of senate, but we do not believe that has any legs at all because the... on a house side it just barely passed and what we said... what we're hearing is not going to taken up by the Senate. The other thing that's been introduced which is the more important thing for portability in Michigan is there's been a bill filed in the Senate about the PIP coverage its the only state union that has mandatory PIP coverage and what we're looking for is a different type of optional environment that would save money for consumers, and frankly avoid the potential cost shifting and risk that could occur in the PIP area in Michigan. So we're pretty bullish that something will happen like that much more likely been the credit thing I can't imagine the credit thing pass much legs given what I've seen in the political environment in Michigan.

Okay, that's good news. And just it is finally Massachusetts you seem pretty bullish on growing policy account [ph] despite the price decrease. What is the combined ratio there in that state for personal auto?

We do very well... we do very well in Massachusetts and we believe we can maintain what we have in Massachusetts going forward. Its one of the few states where you are actually still seeing frequency declines. If you recall, we were late to the game in Massachusetts both for broad [ph] and then the other thing that we didn't have an assigned risk plan. So people didn't take responsibility, one of the big reforms that you now see are facing end of the resign risk plans. So you are going to see underlying cost trends in Massachusetts is actually be... continue to be a little bit better if they probably flatten out this year, but what we will see is maintaining our margins. The one place we've spent a little bit is we did... I think I talked about the last call. We spent a little bit more expenses than others because we put in a full multi-variant [ph] product while others held back. One of the optimistic feelings we have is that this is the time when these other folks have done a lot of segmentation for us to really improve our position in the agencies shelf space because we have so much better segmentation. And particularly the market leaders here and the ability to increase margins is real for us because now it's based on your own experience not just the overall state [ph] experience. So we believe that we can continue improve margin but we are very solid and we are happy with that margins and I don't see it deferred [ph] a deterioration of those margins except we did spend probably $2 million or $3 million more kind of in a one time expense play around the new product and services, that's a little pressure on our expense margin this year. Marita Zuraitis - President, Property & Casualty Companies: And knowing the state as well is we do clearly gets us some market advantage no doubt about that.

Thank you. Thanks Marita for the answers and congrats on the results.

Thank you.

[Operator Instructions]. At this time, there are no more questions appearing in queue.

All right then I think... I thank you all for joining the call and we will look forward to talking to you again.

Thank you for your participation in today's conference, this concludes the presentation, you may now disconnect. Good day.