Welcome to the Hanover Insurance Group Third Quarter Earnings Conference Call. My name is Richard, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Oksana Lukasheva. You may begin.

Thank you, operator. Good morning and thank you for joining us for our third quarter conference call. We will begin today's call with prepared remarks from Joe Zubretsky, our President and Chief Executive Officer; Jeff Farber, our Chief Financial Officer; and Jack Roche, EVP and President of Agency Markets, who as you know, will be succeeding Joe Zubretsky as the Hanover CEO on November 4. Available to answer your questions after our prepared remarks are John Fowle, Chief Executive Officer of Chaucer; and Brian Salvatore, President of Specialty Lines. Before I turn the call over to Joe, let me note that our earnings press release, financial supplement and a complete slide presentation for today's call are available on the investors section of our web site 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, including our guidance for the remainder of 2017. 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 statements 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 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, the slide presentation, or the financial supplement, which are posted on our web site, as I mentioned earlier. With those comments, I will turn the call over to Joe.

Thank you, Oksana. Welcome everyone and thank you for joining our call today. Overall, we are pleased with our results in the quarter. While catastrophe losses significantly reduced our earnings, our underlying performance was strong, and we continue to make strategic process, that will enable us to build on the positive momentum we have established across our businesses. This morning, I will briefly comment on our overall financial condition and our results in the quarter. Jack will comment on our strategic focus going forward. Jeff will provide an overview of our business performance and progress in the quarter, and then we will open the line for questions. First however, I would like to take a minute to provide some perspective on my decision to leave The Hanover, and to convey my strong confidence in the company, Jack and his talented and committed leadership team. I have very much enjoyed my time at The Hanover and I continue to believe the company has tremendous potential. However, upon being presented with a personally compelling opportunity in the healthcare industry, I decided to leave, but with the upmost respect for The Hanover and it's people and confidence in its future. Over the past 16 months, I have worked side-by-side with our executive leadership team and others across the organization. Together, we have developed and advanced a long term strategy, that will enable the company to achieve its full potential. At the same time, we have strengthened our balance sheet and improved our cost efficiency and culture of financial management. I have every confidence, that the strategy we have embarked upon is the right one for this company, and that the company has the team and the organizational commitment necessary to deliver. Jack played an integral role in developing our strategy. He is well prepared and fully capable of driving the strategy and this company to the next level. Today, The Hanover is in excellent financial condition, with a strong balance sheet, capital position and financial flexibility. The same disciplined financial and risk practices that have enabled us to establish our strong financial foundation, also served us well during the quarter. Despite the significant catastrophe events in the quarter, we are pleased with our performance. Our losses from these events were less than our market share would indicate. We posted a profit in the quarter, and as disclosed previously, this was an earnings event, rather than a capital event. Excluding catastrophes, the operating performance in the quarter was very strong. The company achieved an ex-catastrophe combined ratio of 89%, an increased net written premium by nearly 6%. These metrics continue to support the strategic assertion that we can grow profitably, as we execute to our clearly articulated Hanover 2021 strategic plan. With that said, I would like to extend my most sincere thanks for the honest dialog and your interest and support for our company. I wish you all the best going forward. With that, I will turn it over to Jack.

Thank you, Joe. On behalf of our company and our entire team, I would like to thank you for your contributions to The Hanover. Our company is indeed stronger and better positioned today than ever before, and our vision for the future is well defined. In one of the most dynamic times for the industry, we have the right strategy to thrive and prosper in this changing world. All of us at The Hanover wish you well. I am honored and privileged and truly excited to serve as President and Chief Executive Officer of The Hanover. I have been proud to be proud of our company for 11 years now, and believe we have tremendous potential. Our team has what it takes to further distinguish our company in the marketplace, and to position our organization for even greater success. As we move forward, we believe we have the right strategic focus, one that will benefit our partners, customers, shareholders, and other stakeholders. Specifically, we are committed to several key tenants. First, further leveraging our distinctive agency business model and continuing to grow market share with the best agents in our business. Second, thoughtfully expanding our domestic and Chaucer specialty businesses. Both will be important contributors to our growth. While the catastrophes in the quarter may not lead to a hard market, it is likely that pricing conditions will improve. Third, continuing our focus on innovation, as we closely work with our agency partners, to pursue new business models and growth opportunities, and to transform the way we do business together, to better serve our customers. Fourth, maintaining our focus on discipline, financial and expense management. With the pace of change rapidly increasing in our industry, I look forward with great confidence, supported by an experienced and dedicated team, intent on delivering on our promises to our shareholders and other stakeholders. I look forward to the opportunities ahead, and to working with all of you. I will now turn the call over to Jeff, for a review of our third quarter results.

Thank you, Jack. As Joe mentioned, our financial results in the quarter were heavily impacted by several catastrophe events. However, we are pleased with the underlying performance of our business, and feel very good about our prospects moving forward. We reported net income of $11.1 million or $0.26 per diluted share, compared to $88.4 million and $2.06 per diluted share in the prior year quarter. After tax operating income was $4.7 million or $0.11 per diluted share, compared to $78.6 million or $1.83 per diluted share in the prior year quarter. Our combined ratio was 104.8% compared to 94.2% in the prior year quarter, driven by the exceptionally active catastrophe season. Given the magnitude of weather events in the quarter, I will begin my review of the results, with some comments on catastrophes. I will then discuss the other important quarterly highlights, before reviewing our financials by segment. The third quarter of 2017 will go down in history as one of the most active quarters for cat events. Hurricanes Harvey, Irma and Maria, as well as two Mexico earthquakes resulted in devastating losses. The unprecedented frequency of these severe events, served as a test of our organization and the industry as a whole, a challenge that Hanover successfully managed, both operationally and financially. Our dedicated teams have been working around the clock, to help our agents and customers recover as quickly as possible. Despite the catastrophe activity, we made a profit for the quarter and continue to have a strong balance sheet and capital base to execute on our strategy. Our current accident year cat losses were $202.4 million, net of reinsurance and before taxes or 16.5% of the combined ratio. We also had favorable development on prior year catastrophes of $7.9 million, including $7.5 million at Chaucer. Domestic catastrophe…

[Operator Instructions]. Our first question on line comes from Mr. Paul Newsome from Sandler O'Neill.

Good morning. Congratulations on the quarter. I'd like to ask a big picture question. Every hard market I have experienced or really read about, had some big lesson to it, something that is fundamentally different in how things should have been underwritten before and then later underwritten afterwards. Is there something in your book, now that you see the lessons of the third quarter, that you say, we are just going to do it differently here, whether it'd be correlation risk [indiscernible] cat losses like, clash risk after 9/11, severity issues and liability after the 1980s hard market. You know, what's your view as to what -- what's the lesson that will change underwriting fundamentally?

Thanks Paul. This is Jack, and appreciate your question. Obviously, after any material events, we too look and reflect upon how we perform, but also, what's going on more broadly in the environment and look for those lessons to be learned. And I think, as we look at these, somewhat unprecedented frequency of severe storms, I would say our biggest takeaway is, it gives us additional motivation to continue down the path we have been going down over the last several years, to appropriately diversify the firm. And in the U.S., we have obviously been spreading our risk into more geographies, from a property perspective. We have been diversifying into more casualty lines of business, including some of the specialized businesses that we have bought and built. Obviously, we purchased Chaucer a number of years ago, to help with that diversification. So it really just motivates us to pursue that diversification, even more thoughtfully. We do not look back at these events and have major changes that we would make in our underwriting execution or for that matter, even underwriting direction. We actually feel quite good about the performance, and when we get down even to the granular level with our underwriters, we were quite pleased with the day-to-day execution on terms and conditions and how we spread our risk in the affected geography. So I think overall, we are motivated to keep motivated to keep moving down the path we have been after for the last half a dozen years.

Great, thank you.

Thank you. [Operator Instructions]. Our next question on line comes from Meyer Shields from KBW. Please go ahead.

Thanks. Good morning. I just wanted to start by congratulating both Joe and Jack on your new roles. Jeff, in your comments -- I think it was in your comments, I apologize if I am getting this wrong. You talked about pursuing tighter terms and conditions along with rates in specialty and Chaucer lines. What are the terms and conditions that you think need tweaking?

Well this is Jack. I think, John Fowle is on the line, so we can let him respond more specifically to that question. I think in general though, what I would offer to you is that, we continue both in Chaucer and the U.S. domestic businesses, to get further refined in where our profit pools are building and where they are moving, and where our pricing is adequate and where there is room for improvement. So I think as we get ready to deal with the market shift here, both in London and in the U.S., where we are getting ready to use that segmentation and to start pushing harder on both price and terms and conditions, where the individual sectors require that. So with that, John, you want to follow-up from a Chaucer perspective.

Sure Jack. Thanks. Certainly from our perspective over the last several years -- over the last several years, we have seen an erosion of terms and conditions generally in price. But it's also being deductible levels, the exclusionary language getting weaker, limits being broader, that's the pressure we have been under and managing through the down cycle. We expect all of those facets of the timing up over the next year, as we are able to have reclaimed some of that ground we have lost. That's across most classes, but often most particularly in those, either cat affected or cat exposed classes.

Okay. That's very helpful. Thank you. Second question, I guess, you have had a lot of success in the -- on picking workers compensation business mix shift towards smaller account. Is that a permanent strategy, or are there markets where it would make more sense to now start moving back up?

Yeah, this is Jack. Obviously, it's kind of the Tale of Two Cities. There are sectors of the business that are very profitable, and we feel better positioned than ever to focus on some of those, as we have been a relatively conservative workers comp market in the industry. That said, there is also pricing pressure in the line, and you have got kind of conflicting motivations there. We have areas like the technology sector, where we have made a lot of progress at small and mid-sized firms, where a disproportionate amount of our profit comes from the workers comp line. And so, we have continued to refine our strategy, both in small commercial and middle market to target kind of subsectors of the business, that have outsized profit opportunities, and then just cautiously watch the pricing environment, to make sure that we are getting our timing right. But I think I would finish that with saying that yes, the ultimate answer is that, we believe there is an opportunity to mature over time, be a little bit more fullsome in our workers comp capabilities, to be a full account writer in the right sectors and generate profitable returns on accounts within the desired industry sectors.

[Operator Instructions]. Our next question on line comes from Mr. Matt Carletti, from JMP.

Hey, thanks. Good morning. I actually just want to dig a little deeper on both of Meyer's topics he hit on. Jack, maybe just sticking with workers comp; what have you seen, real recently, kind of since the events. I mean, there is a bit of line that, like you said, there has been rate pressures I think it has attracted some new competition as other lines of business have been under even more pressure. With that maybe changing going forward, given what's going on in property, and maybe it will trickle in elsewhere, have you seen any change in appetite or change in competitive landscape in the comp business, or so far, has it really not changed?

I haven't seen anything dramatic, other than the fact that most states do have rate decreases in place, based on some favorable experience. But that will turn around relatively quickly, and -- so the industry trends have been relatively benign and stable, and there is some indication that will kind of now turn the corner here and there will be some pressure going back the other way. But I would go back to kind of what I was alluding to earlier that, the business is getting very segmented and proprietary in terms of its pricing. The better carriers, the more sophisticated carriers understand where the profit pools are and where the challenges are, and I think, we have made tremendous progress as a company, to get better at understanding by sub-geography, by industry sector, certainly by state, where are the best opportunities for profit. So you can't -- I think it's a microcosm of the overall business, where you can't make general statements anymore. And that's why I think, as we look forward and we see the market cycle, trying to make some kind of churn here, it's not going to be very uniform, it's going to be somewhat specific about where are the opportunities for strategic offense, and where do you quite frankly have to start pricing up some profit pools that are starting to deteriorate.

That makes sense. And maybe just a follow-up for John on Lloyds; basically, similar question. What are you seeing so far? I mean, I appreciate the comments on kind of where you expect to kind of see the greatest pressures. I know there aren't a lot of business renewing right now, but based on what you have seen, are we getting in kind of exposed property areas? Are you seeing some of the double digit changes that some others have quoted, or are you seeing something different?

No. I think when we are looking at impacted Caribbean business, the changing rate environment there is seriously marked. And as you know, as you say, there is not a huge amount of business [indiscernible] now. What we are really doing is trying to turn the tide, and I think that's common across a lot of the lead underwriters that are trying to change the dialog with the brokers and the clients. And we are having a very different discussion with people, than we were having a quarter ago, about the rate that's needed for a sustainable underwriting, and the whole dialog has changed. As it stands at the moment, in terms of having stats, we are at a stage really in November, of testing the client and brokers' ability to accept the rate demands we have. But I do think that shift in dialog in the market is quite key, and as one of the leaders in our sectors, that's really the job over the next month or so.

Okay, great. Thanks for the color and Jack and Joe, best of luck in your respective new roles.

Thank you.

Thank you very much. Thank you.

We have no further questions at this time. I would like to turn the call over to Oksana for closing remarks.

Thank you everybody for your participation today. We are looking forward to talk to you next quarter.