Good day, ladies and gentlemen, and welcome to the Q4 2014 The Hanover Insurance Group Inc. earnings conference call. My name is Joyce and I will be the operator for today. At this time, all participants are in listen–only mode. Later we will conduct a question–and–answer session. (Operator Instructions) As a reminder this conference is being recorded for replay purposes. I would now turn the conference over to Oksana Lukasheva. Please proceed.

Thank you, Joyce. Good morning and thank you for joining our fourth quarter conference call. We will begin today’s call with prepared remarks from Fred Eppinger, our President and Chief Executive Officer; and David Greenfield, our Executive Vice President and CFO. Available to answer your questions after our prepared remarks are Dick Lavey, our recently appointed President of Personal Lines; Andrew Robinson, President of Specialty Lines; Jack Roche, President of Business Insurance; and Bob Stuchbery, President of International Operations and Chief Executive Officer of Chaucer. Before I turn the call over to Fred, let me note that our earnings press release, financial supplements and a complete slide presentation for today’s call are available in the Investors section on 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 facts include forward–looking statements, including our earnings guidance for 2015. 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 and our filings with the SEC. Today’s discussion will also reference certain non–GAAP financial measures such as operating income, operating results, excluding the impact of catastrophes and accident year loss and combined ratios excluding catastrophes, 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 financial supplements, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Fred.

Thank you, Oksana. Good morning, everyone, and thank you for joining our fourth quarter earnings call. 2014 was a strong year for our company. We are very pleased to report record results for the full year and for the fourth quarter. We delivered net income per share of $6.28, the highest annual income in our history as a public company. Operating income per share was $5.19 in 2014, yielding an operating ROE of 9%. And our combined ratio, excluding catastrophes, was 92%, in line with our original 2014 guidance. Results of the fourth quarter were also solid, with operating income of $1.77 per share and an ROE of 12.7%. In 2014 we took an important step on our path to achieve target returns. Fundamentally repositioning our portfolio, driving needed _ and achieving greater penetration with our partners. Coming out of the year with 6% at premium growth and 1.5 point improvement in ex-cat combined ratio, compared to 2013. We feel good about our market position, the fundamentals of our business and the progress we have made on all our strategic priorities. As important, given our current market position and financial condition, we have confidence in our ability to continue to generate profitable growth and earnings accretion going forward. This confidence is based on our success thus far, our market momentum and the multiple earnings leverage that work in our business as we enter 2015. I will have more on these items after David reviews our financials.

Thank you, Fred and good morning everyone. We had an excellent quarter and we are pleased to report our highest full year in quarterly earnings, a product of the team’s relentless focus on making the most of our profitability levers, and improving the underlying strength of our operation. Net income for the fourth quarter was $90 million or $2 per diluted share compared to $70 million or $1.57 per diluted share in the prior year quarter. Operating income was $80 million or $1.77 per diluted share compared to $60 million or $1.33 per diluted share in the fourth quarter of last year. For the full year, net income was $282 million or $6.28 per diluted share compared to $251 million or $5.59 per diluted share in 2013. Operating income was $233 million in 2014 or $5.19 per diluted share compared to $227 million or $5.06 per diluted share last year. Turning to underwriting results, I'm going to focus my comments on the full year with references to the quarter results where appropriate. Our 2014 combined ratio was 96.9%, in line with the prior year ratio of 96.7%. This slight increase was fully attributed to higher catastrophe losses of the current year which were largely offset with improved ex-cat performance. At 4.7% of net earned premiums, catastrophe losses essentially were in line with our assumptions at the beginning of the year and 1.6 points higher than we reported in 2013. The combined ratio, excluding catastrophes, improved by 1.4 points, reflecting a 2 point improvement in the domestic business, with Chaucer remaining relatively unchanged. We are proud of what we accomplished in our domestic operations in 2014. The 2 points improvement in ex-cat combined ratio stems from the decrease in the loss ratio, with contributions from both commercial and personal lines, along…

Thanks David. As we reflect on our progress and turn our focus to 2015, we are confident that we will capitalize on the improvements we made across our organization and the forward momentum we have established in the market. Looking back on 2014, we significantly advanced our journey, making progress on all our strategic priorities. We enhanced the distinctiveness and quality of our product portfolio and service capabilities, while improving our position with our agents and broker partners. I’ll review some of the key areas of progress in each business segment and why our current position is a source of confidence for continued improvement in 2016. Starting with Personal Lines. 2014 was an important transition year for this business. We began the year with a focus on exposure management initiatives and rolling out our Platinum Experience platform. We ended the year with momentum, accelerating new business and increasing retention for the last two quarters. Net written premiums grew 3% for the quarter and we were basically flat for the year as we nearly completed our exposure management actions, ending the drag on growth on this business. Rate increases for the year were 6% for the fourth quarter indicators being slightly lower at 5%. With good transparency into 2015 rates, we believe the increases will hold at the same level at about 5%. Our underlying retention, which excludes the impact of voluntary premium reduction continued to improve and stood at 81% at the close of the fourth quarter 2014. A combination of mix management and pricing initiatives drove solid profitability improvement in our Personal Lines book as demonstrated by the decline in ex-cat loss ratio from 64% in 2013, to 62% in 2014. Given our retention levels in pricing which remain above loss cost, we believe we are well positioned to…

[Operator Instructions] The first question comes from the line of Dan Farrell of Sterne Agee. Please proceed. Dan Farrell – Sterne Agee: Good morning. Just a question as it relates to your guidance. If I look at the midpoint of that, and correct me if I'm thinking wrong on this matter, it looked like it would imply something just below about 9.5% cost base ROE. How do you think about that level versus your ultimate goal of getting close to an 11% ROE? What do you think the ability is to get there and sort of the path and time that you think you might be able to do that?

Yeah, I think that’s right, Dan. I think the midpoint for us the way we think about it is at about right at about a 10 because as we think about our operating ROE. I believe that where we are is really within the ranks. So by the run rate in the fourth quarter I see us be very close to or at that range that we always talk bout. So I feel pretty good about that. Obviously the yields have been surprisingly low as far as stickiness being low. But I feel pretty good about where we are and the continued improvement of our earnings and feel that we are going to be very close to the range as we close out next year. Dan Farrell – Sterne Agee: Okay, great. And then I have a question regarding the auto segment. As you guys transition towards more of a growth outlook, how do you think about your ability to maintain the nice profitability gains that you’ve achieved in that business? And maybe if you could talk a little bit more about the Platinum product and is that really the key? Are there characteristic of that business that allow it to be more profitable than new business that comes on? Thank you.

Yes, and then I'll let Dick Lavey who has joined us to supplement what I'm talking about. We are thrilled actually about the personal lines. We think we hit something here. We’ve worked pretty hard over the last three years to get to an account focused approach and to change the demographics of our book. And we believe we have really good market insight into what our target market is. We talk about 78% of our business is now this full account, but it's also a very attractive demographic, call it middle market. We’ve built a terrific value offering for this middle market and what you’re seeing is our ability to sustain pretty good rates. We have as you can imagine first line because you file way ahead and you get the policies out way ahead. We have pretty good transparency to this 5% level almost across our business in pricing because a lot of our corrective actions and concentration in weather, you remember two and half years ago we said we were going to take our weather assumptions up on our overall business and we did that. But what you’re saying is really nice persistency and frankly growth now with our target agents around this segment and this profit, kind of what I would say profit a little kind of middle market approach to the business and we are pretty happy with it. I mentioned at the earnings call, we believe that it's about a $90 billion business in the agency channel and about $70 billion of that is this value added segment we are going after. And there is a significant amount of it in our agency channel. And we’ve been able to identify that with our partners and have had pretty good success moving against that and transitioning bad business to us with a number of our partners. We believe we can get the rate. We believe the profitability of the lines are good and more importantly we believe they’re stable.

Yes. And actually not be redundant with what Fred said, but the rate that we have flowing into the book gives us great confidence that we will be a target returns, and of course you have to do that on a state by state basis. And in each of our states we feel confident. Of course we’ll watch loss cost trends carefully, but we think at kind of a stable 5% rate for the foreseeable future that that that’s going to sustain our ability to continue to see improvement in loss ratio or combined ratio. Just to echo what Fred said, the quality of our business, we couldn’t feel better about. The segment that we go after and because of our agent distribution strategy, we know where that business is. We have tight relationships with our agents so they understand the target segment that we’re interested in. We have more than a handful of quality metrics that gives us a lot of confidence. Our umbrella penetration is upwards of 15% to 20% better. Out coverage A curves are higher. Our BI limits are higher. And so all of that just says we’ve got the right customer segment that we’ll be able to see consistent price increases without losing retention.

Yeah and I think the other points that I made a little in my script tonight and we talked on the earnings call, we also believe how you service this segment. A lot of other people that we compete against have not invested in the self-service tools. The center tools, the proactive ability to reach out to these clients and serve them better. That helps our agents’ economics and ours. And I think that’s why we are seeing a nice little uptick. So I'm pretty, I think as this simple, also keep watching it and focusing on it, but I think we’ve added another growth part of our business.

Yeah, maybe the last point on this is we’ve been at this for five years. So we believe we are ahead of much of our competition in the sense that we have the market leading product out there. We’ve done the mix management that we need to do. As Fred said, the 80% of our business is this nice, high quality customer segment and is an account book. So we start from that great position and from here we think we just build upon it. The business that’s coming on the book has really high quality mix. And so we believe we’ve got a running start against the competition. As you see there are a lot of folks talking about this market segment and the value of pulling the account together and we feel like we are several paces ahead of that. Dan Farrell – Sterne Agee: That’s some very helpful detail. Thank you very much. I'll key back in with anything else.

The next question comes from the line of Vincent DeAugustino with KBW. Please proceed.

Good morning everyone. Just a bit of I guess a longer term question and I guess first, thank you very much for the nice guidance range there. And so just looking back over the last few years, it's been quite an awesome trajectory. And so I'm kind of curious about is that on the guidance, that can be really helpful when there’s substantial flux in the business. And now that you’ve arrived so to speak, what I'm curious about is of you plan on continuing to provide guidance in the future word, at this point have we reached a kind of level where the results start to speak for themselves? And the reason I ask is we’ve sense some of your peers kind of go down that path of not giving guidance once they’ve kind of come to the conclusion of a turn around. I just wanted to kind get your philosophy on that now versus maybe a year from now.

So Vincent, I think I’d first start to say we don’t have a sunset date by which we’re planning to no longer give guidance. But to your question, you might imagine we kick it around and talk about it pretty regularly. And I think to some degree you are right that as our results and our performance that are more normal and more easily projectable, you might be able to not have to provide guidance because it will be simpler to estimate. But I would just say for now for the foreseeable future, that’s not our plan to stop giving guidance. And we’ll just continue to do so and if we do change we’ll give plenty of notice to that.

Okay, good. Thank you very much for the color. Fred, this may be a good question for you or maybe even perhaps Dick. So when we think about Hannover’s agency model, there’s probably two other competitors that I’d put in the same group mentally as far as that focus on the agency franchise value and how Hannover plays into that. And I guess what I'm kind of curious about is your -- we’ve seen both of those other two step up their game as far as their commitment to that service level. And so what I'm curiously about is if there’s anything on the competitive landscape where some of these other players, they’re really agency focused would need to re-double their agency service effort.

Yeah, what's fascinating if you go -- if you think about it both first lines, but let me go broadly. If I go broadly personal commercial, I believe we have one of the handful, and I'm taking less than five world class agency networks. And our network is narrower than the big national guys that have built over the years strong penetration at the retail agent level and they’ve gone broader and we’ve chosen to stay with the winners a little bit better. And what you’re seeing is we have built a lot more insight as we talked at Investor Day about that channel, where the business is, how attractive it is, etc. But what we’ve decided to do and lay on top of it and personalize is a great example, is the notion of about really trying to get at the most profitable business, the best business, the most -- the business we think that would allow us to kind of hold and retain it for a longer period of time. So we’ve done a lot on saying where are the segments where we can provide valued added. So whether it's the schmiddle or in the middle market and our industry solution has always been personalized, we worked with our agents to say okay, this is where we can actually help your economics to create more sustainability, but also ability to share shift self-based to us. So personalized is a great example. We believe that this segment is very good, but it's underserved. I would tell you that a good two thirds of the agency personalized business is in companies. It's with our competitors that are less than $1 billion in premium, many under $500 million. Their ability to invest in service centers that are effective or self-service or…

Vince, I think one other thing I would add to that is that trying to project on the two centers you’re thinking about. There is a very material difference in our product capabilities, which is part of the fundamental difference in whether the specialty industrial, marine, technology, professional liability, healthcare. We see a bit of executive protection from a couple of those more agency focused competitors, but it’s pretty perfunctory relative to what we do. I think a big part of this is about the sophistication of our organization, is much more comparable as it relates to commercial lines to the very best, most sophisticated players in our industry. I do think that’s really one of the defining differences, in addition to the points that Fred talked about.

It sounds like you guys actually maybe some of the impetus behind some of the other commentary, so definitely thanks to that. Shipping over to Chaucer, just two quick ones hopefully. I guess, has there been any change in the net economic tradeoff between UK motor returns and the capital benefits that motor provides to the other lines of business?

No, that remains as it is since the model that we’re doing now, internal model that we’ve got subject to, we delivered on solvency too is still coming out with that same benefit. The extreme, specifically the one in 200 capital number, we get diverse protection credit from writing the UK note against our other lines. That hasn’t changed.

Okay, good. And then just on Jan 1 renewals, anything from the Chaucer side that surprised you or anything stand out?

No, I think wave always guided that 2015 we expect to see notable growth. We plan for that and from what we’ve seen now analyzing, doing a post review of ones, nothing that’s come out of that, particularly on our annuity business, nothing that’s come out of that that surprised us. We still think we are in line with our expectations.

Okay, thanks very much guys and best of luck.

[Operator instructions] The next question comes from the line of Larry Greenberg of Jenney Capital, please proceed.

It’s actually Lou [indiscernible] calling in for Larry. Congrats on the quarter guys and congrats on the year. We had a couple of questions. In your reserve strengthening in commercial, was that just all commercial auto or was that beyond there?

Sorry. I think you mentioned reserve strengthening. Commercial auto there was some development in that line.

That was with the [indiscernible] it was.

Yeah, in just auto.

In just auto, okay. Have you guys seen any change in trends there or just a continuation of what’s been going on recently?

Again, one of the interesting things, obviously we’ve been talking about this since ‘11 and there was a lot of talk about it in the industry. What we feel pretty good about it is a couple of things. We’ve been at it for a couple of years here and the ability to get rate and do the underwriting has allowed us to have some transparency and we feel really good about our book going forward. Obviously the industry has had some what I would say frequency of severity if you will. But we feel like we’ve been on top of it and we are in a pretty good place right now. In new business it’s interesting. Pricing in the environment is much more realistic right now. You are seeing that we business pricing is a really solid and so what the industry has recognized what the issues are and so I think that’s one thing that it might be a change. Last year the industry has really adjusted price levels and you can in my view go into it with your eyes open and build a good book of business. So at least maintain a good book of business given where our competitors are very active. So is there anything that Jack you would want to add?

No, I think to your question a little bit. What we are seeing is that this trend has taken a couple of three years to really fully emerge. Many companies have been watching this. Others have just recently acknowledged what some of us have seen for a couple of years. Remember, this is our new level of BI severity driven by a number of bankers. So it was really difficult to be able to try to declare where the final resting point was going to be for some of the severities so we think we are at that stage now particularly in the second half of 2014 where wave seen some improvement in or large loss activity that’s driving that severity. We are cautious as David said earlier to take too much credit for it. remember the duration of the severity and the litigation that surrounds it pushed out over the last couple of years so you’ve got to be careful about reading too much into present day trends but at least our large loss activity appear to be reacting to some of the re-underwriting and to what Fred said, we are covering up enough price now that even the same large loss activity is going to get better pad for. We feel like we are at that point of improvement opportunity but we are going to remain very cautious about how we account for this line.

Great, that’s super helpful. One more question, what are your expectations for expense ratio in commercial and personal? I think freed mentioned 50 basis improvement commercial is that correct?

Right now to not get into work we’ve done.

Okay and for personal that was?

It should be stable, just slightly …

Flat year over year?

Yes.

Great. Thank you so much. You were helpful.

We have a follow up question from Vincent DeAugustino with KBW. Please proceed.

Hi guys and thanks for taking the follow up. Two on workers comp. Just on the top line close system surround a good bit, at least relative to where I’ve been modeling it, but I'm just curious if new business is moving around renewals, auto premiums or items like that would be moving a needle?

This is Jack. Clearly, you’ve seen a bumping around there from a topline perspective. Some of that is exactly as you described. We have some comparisons on the audit for example, fourth quarter 2014 we have particularly strong AP that came through so the comparisons have a bit of an impact on the fourth quarter numbers. We also had some booking anomalies that moved the numbers around, but I think what you’ve seen overall is that workers comps growth really going to be in line with our overall growth. we are going to continue to be cautious in the auto line but if you see a total accounts layer particularly in the lower end of middle market and small commercial and from a profit perspective, we think we have a little bit of bumpiness in 2014 regarding a couple of large losses, but the underlying trends in what we continue to look favorable for us and we have a pretty good prospect moving forward.

Okay and this may just be a bit of a curve on workers comp. I guess one of the things that we’ve heard about is that healthcare reform can cause some shifts in or more toward part-time workers. So from a loss cost standpoint, I'm kind of trying to think through that because arguably this may be less experience from the workers standpoint and then even if the premium was the same for 40 hours’ worth of work versus two shifts of 20, I'm thinking the margin performance may not be the same and so jus to be curious if you guys have thought through any of that or is it too early to tell?

Well, we think through it regularly. I think it is too early to tell. I think there is competing views here that more insured people through the healthcare system will have a positive impact on how many people show up in our workers comp claim environment, but there is also the possibility that the disadvantages quite frankly in the workers comp system can either be a cost in drive a certain amount of behavior into the workers comp sets. So we are -- one of the things we would say is that we believe wave driven our portfolio towards a risk profile that minimizes the impact one way or the other quite frankly. We are down in the low to no loss sector if you will through with the small commercial environment. Where you can really see volatility in your results and workers comp. is when you are in the high frequency kind of area. We are approached with those disadvantages and these schedules and the overall claim management issue can come back to haunt you. I think we are going to be in a stable place here for a while. The worker comp system has really starting the right mix and getting price over loss trend dons we like the trend that we have going in both of those categories.

Okay, thanks for the answers guys. Take care.

There are no further questions in queue at this time. I’d like to turn the call back over to Oksana Lukasheva.

Thank you all for your participation today and we are looking forward to speaking to you next quarter.