Hello, and welcome to The Hanover Insurance Group 2009 third quarter earnings conference call. All participants will be in listen-only mode for this event. (Operator Instructions). After today’s presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the call over to Bob Myron, Senior Vice President, Finance. Please go ahead, sir.

Thank you operator. Good morning and thank you for joining us for our third quarter conference call. Participating in today’s call are Fred Eppinger, our President and Chief Executive Officer, Marita Zuraitis, President of our Property & Casualty Companies and Gene Bullis, our Executive Vice President and CFO. Before I turn the call over to Fred for a discussion of our results, let me note that our earnings press release statistical supplement and a complete slide presentation for today’s call are available at, in the Investor’s section of our website at www.hanover.com. After the presentation we will answer questions in the Q&A session. Our prepared remarks and responses to your questions today, other than statements of historical fact, include forward-looking statements. These include statements regarding expectations of segment earnings, pricing, accident year results, premiums, expenses, development of loss and LAE reserves, returns on equity and other projections for 2009. There are certain factors that could cause actual results to differ materially from those anticipated by this press release, slide presentation and conference call. We caution you with respect to reliance on forward-looking statements and in this respect refer you to the forward-looking statement section in our press release, Slide 2 of the presentation deck, in our filings with the SEC. Today’s discussion will also reference certain non-GAAP financial measures, such as total segment income, segment results excluding the impact of catastrophes, ex-CAT loss ratios, book value excluding accumulated other comprehensive income and accident year loss ratios 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 supplement, which are posted on our website as I mentioned earlier. With those comments, I will turn the call over to Fred.

Good morning everyone, and thank you for joining us. As usual I will take a few minutes to talk briefly about our results. I’ll review some of the initiatives we have underway and put our third quarter results in our competitive position to context. Marita and Gene will provide additional insight into our performance and trends in our business. With respect to our earnings in the quarter the fundamentals of our core business remain very strong. In addition, all our strategic initiatives have good traction, which makes us very positive about the current mix of our overall book of business. The growing partnership with winning agents in our expanding product offerings. Our business momentum and our financial strength position us very well to the continued disruption we see in the marketplace. We also feel very good about the strength of our investment portfolio, our capital and liquidity position and a resulting flexibility it gives us with respect to the capital actions that we are taking to drive shareholder value. With respect to the results for the quarter as noted on Slide 4, we generated net income of approximately $50 million or $0.97 per share for the quarter compared to a net loss of about $62 million or $1.21 per share in the third quarter of last year. We generated segment income of approximately 45 million or $0.89 per share compared to about $3 million or $0.07 per share quarter-over-quarter. Putting catastrophes aside our combined ratio was approximately two points higher than the prior year quarter, driven by higher than expected accident year losses and higher expenses. On a law side, earnings for the quarter were impacted by continuing weather related losses, the impact of the economy and the state of the insurance margin. In particular in Personal Lines, the largest…

Thanks, Fred. Good morning everyone and thanks for joining us today. Fred gave you a broad overview of our operations and I’ll review our business specific trends. Starting with the discussion of our overall P&C results on slide 7. This moderate margin compression is reflective of a number of factors, including increases in expenses, driven by an investments in our operating model and our product breadth and higher losses in some business lines driven by weather and economic conditions. Net written premiums were $689 million in the quarter, this represents a 5.7% increase over the third quarter of 2008. Our more specialized businesses such as niches, professional lines, marine and AIX as well as increased segmentation of our core commercial offerings, fuels our year-over-year premium growth. I’d like to discuss the drivers underlying these results in more detail starting with personal lines. Turning to slide eight, our Personal Lines segment reported pretax earnings of $27 million in the current quarter compared to $18 million in the prior year quarter. Earnings in the current quarter were impacted by lower CAT losses, higher underwriting expenses and higher ex-CAT accident year losses in our homeowners line, which was primarily weather related. We expect these higher expenses to continue in the fourth quarter, but starting in 2010 our cash spending on these projects will decrease significantly. As we’ve discussed in the past expenses in the current quarter were also impacted by increased pension cost compared to the prior year, and finally the year-over-year expense comparison also was affected by a reduction of variable compensation expenses made in the third quarter of 2008, which was related to the first three quarters of 2008. The variable compensation reduction was a consequence of decreased profitability in 2008 due to heavy CAT losses in the third quarter. Fire…

Thank you, Marita, and good morning everyone. As you just heard our third quarter operating income was $45 million after tax already $0.09 a share. Both weather in the difficult economy played a role in our results for the quarter. Based on our year-to-date results in a more cautious outlook for the remainder of the year, we are adjusting our full year 2009 pretax segment earnings outlook to a range of $280 million to $290 million. Pretax segment earnings excluding interest on corporate debt and realize investment gains on losses. This revised outlook is based on an assumption of a modestly higher ex-catastrophe current excellent year loss ratio when compared to the full year 2008. Reflective of higher weather in the first three quarters of current year as well as a stronger than expected negative impact of the economy on our accident year fix. All other assumptions remain unchanged. Combined personal lines and commercial lines we expect to achieve mid single digit net written premium growth with some full year catastrophes of 4.2% of net written premium. We continue to expect lower prior year development as compared to actual amount of 2008. We expect our full year total expense ratio to be in the higher end of our current guidance of 1 to 1.5 point increase driven by higher hedging costs and other investments in our business. And we expect an effective tax rate of 33%. I like to touch on a couple of other items not covered yet on this call, on our income statement for the third quarter before I move on to discussing our balance sheet. Net income this quarter was higher than operating income by about $4 million driven by a federal income tax benefit of non-segment income. This benefit was related to a release of…

Thank you Gene. Operator that concludes our prepared remarks could you please open the line to questions.

Thank you. (Operator Instructions). Our first question comes from Jay Gelb of Barclays Capital. Jay Gelb – Barclays Capital: Thanks good morning.

.: Jay Gelb – Barclays Capital: In terms of the guidance outlook for 2009 being taken down just a bit. What are the implication with that, are there for that for 2010 especially looking in terms of the expense ratio as well as capital management, the stock ratings [and intangible value]?

Yeah, I actually feel like for 2010 the conversation we had that in yesterday still [over]. So I mean obviously the company has three levers, Jay that are pretty clear for our improvement of our returns. We have the capital lever, expense lever and the mix and margin lever. And there is no question that the economy and kind of the uncertainty around this kind of non-CAT weather has made us feel little bit more conservative in the fourth quarter, but if you look at the rate we are achieving and frankly what's already been approved we feel very, very good about the increasing margin in personal lines, as some uncertainty around how the weather enforced, but we have assumed that is significant above the average weather continues. And so I feel like while there is some short-term issues there, I feel like the vast majority of that we have transparency to overcome. So I’ll look at our action here as and I say we will see improvement next year. And I feel good about the mix in commercial and that we are achieving obviously the economy in the written premium like our places that comp little bit of pressure on that, but we are achieving rate increase and our mix is improving a lot. So I feel pretty good about 2010 and how that will unfold. On a capital size obviously as I said one other things that I’m watching is the particular opportunity that presented itself to us both organically and inorganic, we are seeing some interesting opportunities present itself to us in the market place partly because of our upgrade, partly because of this west coast expansion, we obviously have started doing some capital of action that give capital back as I could have transparency the excess…

But we haven't guided that free to average for the year, but what I said is that I would like to see us get to that or target by a run rate by six quarters, which is actual the fourth quarter next year and I believe we can get there. But we will as I say we haven’t given all the guidance on the average numbers on all laps of the year, which we will say next earnings call. Jay Gelb – Barclays Capital: Is that consistent with the Investor Dat that's possible?

Jay Gelb – Barclays Capital: Right, finally kind you quantify the excess capital at this point?

Yeah, still again, we have done a little bit, slight if you look at, as we look out next year, within that 300 to 400 range still. I mean, we've done a lot of interest in good things, but we are also earning in the money so I would say is still in that range as we looked for the full year next year. Jay Gelb – Barclays Capital: That’s very helpful. Thank you.

Thank you.

Our next question comes from Dan Farrell of FPK. (Fox-Pitt Kelton) Dan Farrell – Fox-Pitt Kelton: Good morning.

Good morning, Dan. Dan Farrell – Fox-Pitt Kelton: Fred, can you just comment on what you’re seeing currently in the environment for MNA activity?

Yeah, I mean it’s fascinating again I would tell people, this is that quietest storm I’ve ever seen, but it’s a storm. What do I mean by that, clearly the spreads and investment rate to come back, but it kind of it was shy of release that’s a visible, but underneath all of this what we see is continuing term now particularly for this small companies. I mean and again what we’re seeing in particular the geographies we compete in, a lot these regional companies are getting killed. I mean there is a lot of 115s, 120s out there and they’re under a lot of strap. And so we see both kind of organic opportunities because of that as they have the shrink and hunger down, but I would also say that for some of these small capitalized specialty companies there are more and more meaningful conversation about should they get out because as the capital they have to carry and the third deal with the economy, I mean it’s the first time in the 50 years we should talk about the capital thing that’s coming back and all that but the reality is this is the first time in 50 years that the cycle has coincided with an economic downturn. Those two things put tremendous pressure on folks that are heavy into some of the specialty areas that are most effective by the economic so our view is you are going to see it how, is there a still some higher than should be expectations develop pricing for some of these sure, but what we see is lots of meaningful conversation going on out there with some of these smaller specialty companies and frankly in some of the other companies that are sub scale and some line thinking about…

Thank you.

Our next question is from Cliff Gallant of Keefe, Bruyette & Woods. Cliff Gallant – Keefe, Bruyette & Woods: Good morning.

Good morning, Cliff. Cliff Gallant – Keefe, Bruyette & Woods: Just wanted to talk a little bit more about the expense lever you talked about?

Sure.. Cliff Gallant – Keefe, Bruyette & Woods: And sort of expense ratio to go down it really mainly to leverage existing platforms and I was wondering if anything you could do more proactively. Are you considering any reductions in any?

No. I think Cliff its both.. I talked about you know you heard me talk about it's in the lot but it's the third, third for us almost. It is if you look at Marita, have mentioned one of our big capital investments and discretionary expenditure this year, which was Think Hanover we believe that there is a wide open opportunity as some of our personal lines compares went direct and some of the other guys will come advertising by pulling over agents to got a fewer agents with account offering and toward. We put a significant amount of effort in this over the last 15 months and spending on a broad run rate and IP product investments in personal line. The way it works about half of that is expense and half of that is capitalized. Well, you will see it this year take our discretionary investment and technology will go down. So that is very proactive and if you remember two years ago we put a lot of work in variablizing our IP costs. So we can take our IP costs down very quickly and it's very, variable mostly the partners outside partners. So we have that ability to do it so we proactively can move there. Second a big part of our expense this year was our pension were scratched up because that the way the timing of the market the capital markets collapse in the fourth quarter first quarter that some of that comes back for us as well. So you will see that is a more quicker expense leverage well. So yes, it is growth but there is the discretionary expense stuff that you will see us managed. The other think I would tell you is that we don’t because it gets in the wash.…

Thank you.

Our next question comes from Michael Phillips of Stifel Nicolaus. Michael Phillips – Stifel Nicolaus: Thanks, good morning.

Good morning, Michael. Michael Phillips – Stifel Nicolaus: Covering upon Freds, we are still largely a personal line company, couple of questions on that segment. Fred you mentioned in you opening comments 6.2% increase in your growth states, I think Marita said that the core four were down two, what was the number for the non-core for? Is that we mean by the growth states? Is that everything else.

Yeah.

Yes. Michael Phillips – Stifel Nicolaus: Okay.

That's basically everything. Michael Phillips – Stifel Nicolaus: Okay, I'm trying to get the dollar amount of this discretionary IP spending in personal lines then impact it's in the third quarter.

Well, in total the discretionary if you look at what we've done over the last five or six years, that the run rate of the company I believe a normal run rate for us. It's always going to be in the $45 million discretionary debt run rate at the levels. This year and again I can't give you the exact number of expense versus amortization that number got into the low 60 right, so because we accelerated a budget development until its real month to take it back down to that a normal run rate. Now again some of that capitalized, some of that is expense, it typically runs 50:50, but it's why I guided to this additional investment. I saw was an ability to take some teams and I really did believe to accelerate some of our niche, niches, personal lines, we increased our segmentation, we brought in the technology team and rebuilding this technology products that's being watched in January all of that also has filing that you have to do and adjust in our technology because of the filing of all those products and that's why the discretionary went up. In addition there was some personal attached to that again I won't, but that's why I guided up because in the first quarter I saw this opportunity and I started to accelerate that stuff so I would hit the ground in the third and fourth quarter, that's what, if that's in the beginning the momentum was coming in the third and fourth quarter because a lot of this stuff was coming to flourish thinking and over the specialty businesses would be in filed in all states being approved, we are getting internal, we are getting internal a little bit more on some of the earlier niches that…

And specifically in personal lines because we packaged the product enhancements with the ease of doing business enhancements in this Think Hanover campaign that the buss and the attraction and the impacts that we're getting is much more substantial than if we had stretched it out. So clearly the acceleration of these IP investments and product investments in the third and fourth quarter build well for the attraction that we'll get in personal lines in 2010 which is why we talked about our cash spent in that area being less than 2010 because it really was an acceleration and packaging of all those things together, so we could have market impact with the Think Hanover offering. Michael Phillips – Stifel Nicolaus: Okay can I speak one more.

Sure. Michael Phillips – Stifel Nicolaus: In the personal lines you said 45% auto and home rate increases if I am going to get even better, I can see the confidence in current actual year improving next year, there and in the specialty side I can also see it there, what confident are you there you can do that maintain or improve the current margins on the core commercial lines?

That's a great question.

In the core commercial as we mentioned in the script that's exactly why new business at a lower level in the third quarter that had been prior, you see price holding 2.5 in small and one in middle market is not significant but it certainly better than the averages that we're seeing out there in the industry. We're very careful about what we have taken, we're very careful on how we price it. I would say we're holding our own but I completely agree with you, I think it's an excellent question and we have intent focus on that segment. And that's a segment that the growth will be what the growth is. We underwrite it prudently and we price that appropriately and if its fixed and its fixed and doesn't we're okay with that because we're seeing growth in high.

One of the things that to remember about as the non-segment at middle market we have. We have most of our business is quite small, right, with the vast majority. And so, well 2.5 in some of the lines are complete inflation its pretty dam close. And what we're doing is reunderwriting, so we actually feel pretty good, but it is the challenge. That should be is the heart of what we need to focused on for our momentum. If that making sure that all our middle market is segmented in achieving the right rate and our mix continues to improve. But again one of the benefits we have is most of our business is small. We got out of most all of our large account and frankly like model line comp, we don’t have it. So, for the most part, part issue is kind of the small middle, but what Marita likes to call it [shmiddle], which is the low of middle market the unsegmented portion of that and making sure that our underwriters are absolutely displenishing rate now. Again we have gotten rates most of our competitors will talk about middle market not being positive. We have been positive in middle market now for fourth quarter, and we have been positive obviously since April on most of our business. So, I feel good but it is the right depression is the place we need to zero in and make sure that we're managing our business properly. Michael Phillips – Stifel Nicolaus: Okay, guys, thanks a lot I appreciate it.

Thank you.

Thank you.

Thank you. Our next question comes from Sam Hoffman of Lincoln Square Capital. Samuel Hoffman – Lincoln Square Capital: All right, yes, good morning.

Good morning, Sam. Samuel Hoffman – Lincoln Square Capital: Good morning. I just had two questions. On other commercial lines your loss ratio which it's been in the 35 to 40% range pretty consistently since 2006 and even into the beginning of this year is now kind of in the mid 40s. And, I think the last quarter you had described kind of an increase in severity of the cost and of the increase in the loss effect and now it's I think more it's kind of the permanent increase at least for the time being. And so I guess my question is can you give a bit more color as to what specifically is causing it, is it just the business surety business or there other class of the business that you are being more conservative on? And then also are there other lines that are giving you concern where you potentially might need to increase your pick in the future?

Sure, it's a good question. I mean the other obviously makes might good money for us. So let me just now the other has changed the nature of what and other has changed dramatically since the day to described. We didn't own AIX, B4 obviously also and there is a lot of the other specialty lines and bonds is obviously in there to. So what we have done again, when you look at what we looked it's particularly around the severity business, it's not a big amount. But we did take the actions here off because of where we are in the cycle. We still doing great and making money its line, but I just deal that given where we are in the cycle and given the activity we're seeing in contractors and general in the industry that it was appropriate for us to do it. It obviously at the same time we are thinking about pricing had going forward and I feel pretty about what pricing we're achieving in those lines. On AIX, we did have some severity but it was on programs if you recall what I said before the last call and I feel very good about this. When we bought AIX there was no program because their rating was not programs that we would have written. And so we have discontinued all those programs, but there was some severity that came out of those programs as we ran them off. So that we feel good that that has gone, so I don't think that was a permanent thing, it was just, it was one of those things where they as a low related company build a little bit stuff that was a little that we wanted to drive off. So that's really again you are actually right we did it up we are being conservative, I feel like the earnings business has been and will be fine, but we didn't take it up. Samuel Hoffman – Lincoln Square Capital: And are there other lines that you might acquire an increase in the loss going forward?

Yeah, obviously this year our numbers Marita talked about in our script was a return premium in comp there is a impact now what's interesting about us as we don't have much comp total and we don't have a lot of model line comp and we don't have a large comps. So the the smaller comp is performing very well for us, but we did have a movement in that line, which is almost directly attributable to the increase in return premium again it's a peanut in total. But it is the other place that we look. The auto well over time that has come down a little bit it's still very attractive to us our commercial auto and we actually stabilize, so that the question for us is nice the huge fear about our commercial result. I would say our commercial results is really two issues one is earning in the additional expense we have in commercial, which changes our combined ratio dramatically and then the other issue is just making sure as we go forward in our flow businesses as was asked earlier that we are achieving that kind of rate and pricing in mix that we're comfortable with so that we don't have a slow decrease in margin. But again I don't see that happening yet, and so I feel very good about what's coming in and as Marita both the growth there because we have the plenty of growth in stuff where we believe we have adequate margins, there is no real need to push it. So net I feel kind of we're in pretty good shape. Samuel Hoffman – Lincoln Square Capital: And then when the does the AIX business that is not the quality of that's you are looking at?

Pretty much go on. I would say with this quarter because again the nice thing about them that they have a conflict where they can, the way those programs work you could just stop. Right, it is no remnant it just goes a way. So we would have closed on December of last year I guess, so it might be a little bit in the first quarter but a vast majority of that that's all behind us. So I feel very, very good by the way about. I would say the AIX does upgrading increase then coming on board using a retail distribution, the quality and what I call age of that business. Most of that business were picking up AIG with AIX is stuff that with the people we were getting it from for years if not getting so it is tough and stable transparent and good margins. So I'm pretty excited about it. Samuel Hoffman – Lincoln Square Capital: Okay. My other question is for 2008 and 2009 you have experienced pretty consistent higher and non-CAT and CAT losses and commercial lines then you would expected and because of that you probably can be getting some good price increases going forward. So my question is what in your statistical analysis makes you believe that this is actually get business mainly in the states that you located and the pricing that you are going to getting. Is this in fact get business get business has it been under price given the higher CATs that are expected currently in the marketplace given the companies that really been competing aggressively moving their business to the Midwest from places like Florida and California and so forth.

Yeah its a great question. So again when we look at it, we can’t remember the entire industry destroys economic value, right. So on average if now just homeowners. The entire industry doesn’t earn across the capital through this cycle. So homeowner is not a unique think about our industry. So when you look at some of those analyses if I say homeowners is under price. We all performing our core states against regional companies and a lot of case is 5 to 10 drop point. So there is no question that homeowners has underperformed through the cycle and there is also any question that the Midwest, part of the Midwest has chronically had some problems probably in the last three, four, five years it’s been graduated as people have gone to those market. So both of those things are true. Now if you look at our business, through the cycles been great. So yes for seven quarters we’ve had above average non-CAT weather and I wish I was fair enough to know who was permanent or not. Well I am smart enough to know as to assume it is. And take rate that essentially makes get this across the capital assuming that is permanent. Now our data would tell, that this is a relatively cyclical thing. And over the last couple of decades the last two-years have been the worst two-years as far as non-CAT weather and it is, it is spiky, it is somewhat cyclical. But that’s just better for us if it goes back to normal. So we have assumed a higher, but I the question you asked is the right one, we believe very, very strongly this account focused nearer fluent focus that we have that our full account and our homeowners on a standalone basis in the account are well earned cost capital through the cycle. We believe that, we believe we can achieve excess returns in that business and in the account through the cycle. Now again, I would tell you that you are absolutely right about this non-CAT weather its been, there is 26 state in the last two-years that have had their single worse storm ever. And its all occurred in the last couple of years, which is our remarkable thing, right. So again I do think that its important for us to stand top at rate, its important to make sure that we are not do any model line home. And if you seen us get out of Florida home, you see us get out of Road Island home, you seen decrease our exposures in this Southeast dramatically where we thought there was chronic problems with pricing. But I think where we are, we are very confident that we have set it up to get our target insurance through the cycle, okay? Samuel Hoffman – Lincoln Square Capital: Thank you.

Thank you.

This does conclude our question and answer session. Gentlemen do you have any closing remarks today.

We don’t, rather than just thank everyone for their participation on the call. And we look forward to speaking with you again in quarters time. Thanks very much.

Thank you for joining us today. This time the conference has ended, you may now disconnect your lines.