What changed in this filing

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Item 1. Financial Statements

2020-10-28 compared with 2020-07-29 · 135 added, 109 removed, 786 unchanged (24% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions, except per share data)

3 unchanged sentences

Net change in fair value of equity securities

Impairment recoveries (losses) on investments

Impairment losses on investments

Total net realized and unrealized investment gains (losses)

5 unchanged sentences

Interest expense

Loss from repayment of debt

Other operating expenses

7 unchanged sentences

Sale of Chaucer business

Loss from Chaucer business

Income from Chaucer business

Loss from discontinued life businesses

3 unchanged sentences

Sale of Chaucer business

Loss from Chaucer business

Income from Chaucer business

Loss from discontinued life businesses

4 unchanged sentences

Sale of Chaucer business

Loss from Chaucer business

Income from Chaucer business

Loss from discontinued life businesses

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

18 unchanged sentences

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30,

(In millions, except share data)

34 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

15 unchanged sentences

Balance at beginning of period

Net amount recognized as net periodic benefit

Net amount recognized as net periodic benefit cost

Balance at end of period

22 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

Nine Months Ended

September 30,

(In millions)

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Net realized and unrealized investment (gains) losses

Net realized and unrealized investment losses (gains)

Loss from repayment of debt

Sale of Chaucer business

20 unchanged sentences

Proceeds from exercise of employee stock options

Proceeds from debt borrowings, net

Change in cash collateral related to securities lending program

19 unchanged sentences

and other insurance and non-insurance subsidiaries.

These legal entities conduct their operations through several business segments discussed in Note 9 – “Segment Information”.

The interim consolidated financial statements also include the Company’s discontinued operations, consisting of the Company’s accident and health and former life insurance businesses, as well as the Company’s former Chaucer business.

These legal entities conduct their operations through several business segments discussed in Note 9 – “Segment Information.” The interim consolidated financial statements also include the Company’s discontinued operations, consisting of the Company’s former accident and health and life insurance businesses, as well as the Company’s former Chaucer business.

All intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with U.S.

GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

In the opinion of the Company’s management, the accompanying interim consolidated financial statements reflect all adjustments, consisting of normal recurring items, necessary for a fair presentation of the financial position and results of operations.

The results of operations for the six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year.

These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 24, 2020.

7 unchanged sentences

The estimate of expected credit losses should consider both historical and current information, reasonable and supportable forecasts, as well as estimates of prepayments.

The estimated credit losses and subsequent adjustment to such loss estimates, will be recorded through an allowance account which is deducted from the amortized cost of the financial instrument, with the offset recorded in current earnings.

The estimated credit losses and subsequent adjustment to such loss estimates are recorded through an allowance account which is deducted from the amortized cost of the financial instrument, with the offset recorded in current earnings.

ASC Update No.

2016-13 also modifies the impairment model for available-for-sale debt securities.

The new model will require an estimate of expected credit losses only when the fair value is below the amortized cost of the asset, thus the length of time the fair value of an available-for-sale debt security has been below the amortized cost will no longer affect the determination of whether a credit loss exists.

The new model requires an estimate of expected credit losses only when the fair value is below the amortized cost of the asset, thus the length of time the fair value of an available-for-sale debt security has been below the amortized cost no longer affects the determination of whether a credit loss exists.

In addition, credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value.

31 unchanged sentences

Recently Issued Standards

In August 2020, the FASB issued ASC Update No.

2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) .

This ASC update aims to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, Debt – Debt with Conversion and Other Options, for convertible instruments.

The update also simplifies the settlement conditions required to be met to qualify for equity classification for contracts that are settled in an entity’s own equity.

ASC Update No.

2020-06 also requires that an entity use the if-converted method for convertible instruments in its earnings per share (“EPS”) calculations, requires the effect of potential share settlement to be included in the diluted EPS calculation when an instrument may be settled in cash or shares, eliminates the beneficial conversion features model, and clarifies the use of an average market price for calculating the diluted EPS denominator.

The updated guidance is effective for annual and interim periods beginning after December 15, 2021.

Early adoption is permitted no earlier than for annual and interim periods beginning after December 15, 2020.

This ASC allows for either a modified retrospective method of transition or a fully retrospective method of transition.

The Company does not expect the adoption of ASC Update No.

2020-06 to have a material impact on its financial position or results of operations.

In January 2020, the FASB issued ASC Update No.

1 unchanged sentence

This ASC update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting when using the measurement alternative under ASC 321.

It also clarifies the accounting for certain forward contracts and purchased options accounted for under ASC 815.

This update also clarifies the accounting for certain forward contracts and purchased options accounted for under ASC 815.

The updated guidance is effective for annual and interim periods beginning after December 15, 2020.

12 unchanged sentences

This ASC update modifies disclosures related to defined benefit pension or other postretirement plans.

This ASC update removes the disclosure of amounts in accumulated other comprehensive income expected to be recognized over the next fiscal year and the effects of a one percentage point change of health care cost trends on net periodic benefit costs and postretirement benefit obligations and clarifies the specific requirements of disclosures related to the projected benefit obligation and accumulated benefit obligation.

This ASC update also adds disclosures related to weighted average crediting rates for cash balance plans and requires disclosure of an explanation of any significant gains and losses related to changes in benefit obligations for the period.

This ASC update removes the disclosure of amounts in accumulated other comprehensive income expected to be recognized over the next fiscal year and the effects of a one percentage point change of health care cost trends on net periodic benefit costs and postretirement benefit obligations and clarifies the specific requirements of disclosures related to the project ed benefit obligation and accumulated benefit obligation.

This ASC u pdate also adds disclosures related to weighted average crediting rates for cash balance plans and requires disclosure of an explanation of any significant gains and losses related to changes in benefit obligations for the period.

The amendments in this ASC update are effective for fiscal years ending after December 15, 2020, and should be applied on a retrospective basis to all periods presented.

4 unchanged sentences

The amortized cost and fair value of available-for-sale fixed maturities were as follows:

June 30, 2020

September 30, 2020

Amortized Cost,

19 unchanged sentences

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers.

June 30, 2020

September 30, 2020

Amortized Cost, net

9 unchanged sentences

Fixed maturity securities in an unrealized loss position

The following tables provide information about the Company’s available-for-sale fixed maturity securities that were in an unrealized loss position at June 30, 2020 and December 31, 2019 including the length of time the securities have been in an unrealized loss position:

June 30, 2020

The following tables provide information about the Company’s available-for-sale fixed maturity securities that were in an unrealized loss position at September 30, 2020 and December 31, 2019, including the length of time the securities have been in an unrealized loss position:

September 30, 2020

12 months or less

27 unchanged sentences

the general outlook for market conditions in the industry or geographic region in which the issuer operates;

and the degree to which the fair value of an issuer’s securities is below the Company’s amortized cost.

and the degree to which the fair value of an issuer’s securities i s below the Company’s amortized cost.

The Company also considers any factors that might raise doubt about the issuer’s ability to make contractual payments as they come due and whether the Company expects to recover the entire amortized cost basis of the security.

1 unchanged sentence

The proceeds from sales of available-for-sale fixed maturities and gross realized gains and gross realized losses on those sales were as follows:

Three Months Ended June 30,

Three Months Ended September 30,

Proceeds from

2 unchanged sentences

Fixed maturities

Six Months Ended June 30,

Nine Months Ended September 30,

Proceeds from

4 unchanged sentences

Total fixed maturities

For the three months ended June 30, 2020, the Company recognized in earnings a $ 1.4 million net recovery in impairment losses on fixed maturities, primarily resulting from increased market values during the quarter on credit losses recognized in the first quarter of 2020.

For the six months ended June 30, 2020, the Company recognized $ 27.1 million of impairment losses, consisting primarily of $ 20.8 million on fixed maturities and $ 4.8 million on mortgage loans.

For the three months ended September 30, 2020, the Company recognized $ 0.8 million of impairments, consisting primarily of additional credit losses on mortgage loans, partially offset by net recoveries of credit losses on fixed maturities, primarily resulting from increased market values during the quarter on credit losses recognized in prior quarters.

For the nine months ended September 30, 2020, the Company recognized $ 27.9 million of impairment losses, consisting primarily of $ 19.1 million on fixed maturities and $ 6.6 million on mortgage loans.

Impairments on fixed maturities included $ 16.5 million categorized as intend-to-sell and $ 2.6 million of credit-related losses.

For the three and six months ended June 30, 2019, total impairments on fixed maturities recognized in earnings was $ 0.4 million.

For the three and nine months ended September 30, 2019, total impairments on fixed maturities recognized in earnings were $ 0.8 million and $ 1.2 million, respectively.

See Note 2, “New Accounting Pronouncements — Recently Implemented Standards ”, for a discussion of new guidance effective January 1, 2020, which impacts the accounting for expected credit losses on fixed maturity securities and mortgage loans.

2 unchanged sentences

The new guidance stipulates that recoveries of previously recorded credit losses are recorded immediately as a reversal of the allowance.

In addition, the allowance is limited to the amount that fair value is less than amortized cost and therefore, changes in the fair value of investments due to reasons other than credit could result in increases or decreases in the allowance.

In addition, the allowance is limited to the amount that fair value is less than amortized cost and therefore, increases in the fair value of investments due to reasons other than credit could result in decreases in the allowance.

Changes in the allowance for credit losses are recorded in net realized and unrealized investment gains (losses).

At June 30, 2020 and December 31, 2019, the allowance for credit losses on mortgage loans was $ 6.1 million and $ 1.3 million, respectively.

The allowance for credit losses on available-for-sale securities was $ 3.8 million at June 30, 2020.

At September 30, 2020 and December 31, 2019, the allowance for credit losses on mortgage loans was $ 7.8 million and $ 1.3 million, respectively.

The allowance for credit losses on available-for-sale securities was $ 1.6 million at September 30, 2020.

There was no allowance for credit losses on available-for-sale securities at December 31, 2019.

10 unchanged sentences

The following table provides pre-tax net realized and unrealized gains (losses) on equity securities:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions)

Net gains (losses) recognized during the period

net (losses) gains recognized on equity securities sold

net gains (losses) recognized on equity securities sold

during the period

83 unchanged sentences

The estimated fair values of the financial instruments were as follows:

June 30, 2020

September 30, 2020

December 31, 2019

18 unchanged sentences

The Company does not adjust quotes or prices obtained from the pricing service unless the pricing service agrees with the Company’s challenge.

During the first six months of 2020 and 2019, the Company did not adjust any prices received from its pricing service.

During the first nine months of 2020 and 2019, the Company did not adjust any prices received from its pricing service.

Changes in the observability of valuation inputs may result in a reclassification of certain financial assets or liabilities within the fair value hierarchy.

3 unchanged sentences

The following tables provide, for each hierarchy level, the Company’s investment assets that were measured at fair value on a recurring basis.

June 30, 2020

September 30, 2020

(in millions)

20 unchanged sentences

Limited partnerships measured at fair value using NAV based on an ownership interest in partners’ capital have not been included in the hierarchy tables.

At June 30, 2020 and December 31, 2019, the fair values of these investments were $ 179.0 million and $ 183.6 million, respectively, approximately 2 % of total investment assets.

At September 30, 2020 and December 31, 2019, the fair values of these investments were $ 174.3 million and $ 183.6 million, respectively, approximately 2 % of total investment assets.

The following tables provide, for each hierarchy level, the Company’s estimated fair values of financial instruments that were not carried at fair value:

June 30, 2020

September 30, 2020

(in millions)

11 unchanged sentences

Three Months Ended

June 30, 2020

Balance April 1, 2020

Transfers out of Level 3

September 30, 2020

Balance July 1, 2020

Included in total net realized and

unrealized investment gains

Included in other comprehensive income-

net appreciation on available-for-sale

Balance June 30, 2020

Included in other comprehensive income-net appreciation on available-for-sale securities

Balance September 30, 2020

Change in unrealized gains for the period

2 unchanged sentences

Three Months Ended

June 30, 2019

Balance April 1, 2019

Total (losses) gains:

Included in total net realized and

unrealized investment losses

Included in other comprehensive income-

net appreciation on available-for-sale

Purchases and Sales:

Balance June 30, 2019

September 30, 2019

Balance July 1, 2019

Included in other comprehensive income-net appreciation on available-for-sale securities

Balance September 30, 2019

Fixed Maturities

(in millions)

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2020

Balance January 1, 2020

Transfers out of Level 3

Total gains (losses):

Included in total net realized and unrealized

1 unchanged sentence

Included in other comprehensive income-net

appreciation (depreciation) on

available-for-sale securities

Balance June 30, 2020

Change in unrealized gains (losses) for the period

appreciation on available-for-sale securities

Balance September 30, 2020

Change in unrealized gains for the period

included in other comprehensive income for

assets held at the end of the period

Six Months Ended

June 30, 2019

Nine Months Ended

September 30, 2019

Balance January 1, 2019

2 unchanged sentences

Purchases and sales:

Balance June 30, 2019

During the three and six months ended June 30, 2020, a fixed maturity security was transferred from Level 3 to Level 2, primarily as a result of assessing the significance of unobservable inputs on the fair value measurement.

There were no transfers between Level 2 and Level 3 for the three and six months ended June 30, 2019.

There were no Level 3 liabilities held by the Company for the three and six months ended June 30, 2020 and 2019.

Balance September 30, 2019

There were no transfers between Level 2 and Level 3 during the three months ended September 30, 2020 and 2019.

During the nine months ended September 30, 2020, a fixed maturity security was transferred from Level 3 to Level 2, primarily as a result of assessing the significance of unobservable inputs on the fair value measurement.

There were no transfers between Level 2 and Level 3 for the nine months ended September 30, 2019.

There were no Level 3 liabilities held by the Company for the three and nine months ended September 30, 2020 and 2019.

The following table provides quantitative information about the significant unobservable inputs used by the Company in the fair value measurements of Level 3 assets.

Where discounted cash flows were used in the valuation of fixed maturities, the internally-developed discount rate was adjusted by the significant unobservable inputs shown in the table.

June 30, 2020

September 30, 2020

December 31, 2019

36 unchanged sentences

(in millions)

June 30, 2020

September 30, 2020

December 31, 2019

Senior debentures maturing April 15, 2026

Senior debentures maturing September 1, 2030

Senior debentures maturing October 15, 2025

3 unchanged sentences

Unamortized debt issuance costs

At June 30, 2020, the Company was in compliance with the covenants associated with its debt indentures and credit arrangements.

Income tax expense for the six months ended June 30, 2020 and 2019 has been computed using estimated annual effective tax rates.

On August 24, 2020, the Company issued $ 300.0 million aggregate principal amount of 2.50 % unsecured senior debentures maturing in 2030 .

This debt is subject to certain restrictive covenants, including limitations on the issuance or disposition of stock of restricted subsidiaries and limitations on liens, and pays interest semi-annually.

On September 19, 2020, the Company used a portion of the net proceeds of its August 2020 debt issuance to redeem its outstanding $ 175.0 million principal amount of 6.35 % subordinated debentures due 2053 .

The Company recognized $ 6.1 million of unamortized debt issuance costs associated with this debt.

At September 30, 2020, the Company was in compliance with the covenants associated with its debt indentures and credit arrangements.

Income tax expense for the nine months ended September 30, 2020 and 2019 has been computed using estimated annual effective tax rates.

These rates are revised, if necessary, at the end of each successive interim period to reflect current estimates of the annual effective tax rates.

The tax provision was comprised of a U.S.

federal income tax expense of $ 12.6 million and $ 50.8 million for the six months ended June 30, 2020 and 2019, respectively.

The Company or its subsidiaries files income tax returns in the U.S.

federal income tax expense of $ 41.7 million and $ 69.9 million for the nine months ended September 30, 2020 and 2019, respectively.

The Company and its subsidiaries files income tax returns in the U.S.

federal jurisdiction and various state jurisdictions, and have previously filed in foreign jurisdictions.

3 unchanged sentences

The components of net periodic pension cost for the defined benefit pension plans included in the Company’s results of operations are as follows:

Three Months Ended June 30,

Three Months Ended September 30,

(in millions)

4 unchanged sentences

Net periodic pension cost

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

6 unchanged sentences

The following tables provide changes in other comprehensive income.

Three Months Ended June 30,

Three Months Ended September 30,

(in millions)

Changes in net unrealized gains on investment

Changes in net unrealized gains (losses) on investment

Net unrealized gains arising during period for

6 unchanged sentences

recognized in Consolidated Statement of

Amount of credit (recoveries) losses

Amount of credit losses (recoveries)

recognized in the Consolidated

6 unchanged sentences

recognized as net periodic benefit cost

Cumulative foreign currency translation adjustment:

Foreign currency translation recognized

during the period

Other comprehensive income

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

23 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in millions)

8 unchanged sentences

Net realized gains from sales and

Impairment (recoveries) losses on

Impairment (losses) recoveries on

Total before tax

9 unchanged sentences

income, net of tax

The amount reclassified from accumulated other comprehensive income for the pension and postretirement benefits was allocated approximately 40 % to loss adjustment expenses and 60 % to other operating expenses for the three and six months ended June 30, 2020 and 2019.

Segment Information

18 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in millions)

13 unchanged sentences

Net investment income

Other income (expense)

Personal Lines operating income

2 unchanged sentences

Other expense

Other operating income (loss)

Other operating income

Operating income before interest expense and income taxes

3 unchanged sentences

Net realized and unrealized investment gains (losses)

Loss from repayment of debt

Other non-operating

2 unchanged sentences

(in millions)

June 30, 2020

September 30, 2020

December 31, 2019

3 unchanged sentences

Stock-based Compensation

As of June 30, 2020, there were 2,794,893 shares and 2,341,331 shares available for grant under The Hanover Insurance Group 2014 Long-Term Incentive Plan and The Hanover Insurance Group 2014 Employee Stock Purchase Plan, respectively.

As of September 30, 2020, there were 2,764,629 shares and 2,341,331 shares available for grant under The Hanover Insurance Group 2014 Long-Term Incentive Plan and The Hanover Insurance Group 2014 Employee Stock Purchase Plan, respectively.

Compensation cost for the Company’s stock-based awards and the related tax benefits were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions)

2 unchanged sentences

Stock Options

Information on the Company’s stock option activity for the six months ended June 30, 2020 and 2019 is summarized below.

Six Months Ended June 30,

Information on the Company’s stock option activity for the nine months ended September 30, 2020 and 2019 is summarized below.

Nine Months Ended September 30,

(in whole shares and dollars)

9 unchanged sentences

The following tables summarize activity information about employee restricted stock units:

Six Months Ended June 30,

Nine Months Ended September 30,

(in whole shares and dollars)

7 unchanged sentences

Outstanding, end of period

In the first six months of 2020 and 2019, the Company granted market-based awards totaling 34,911 and 23,924 , respectively, to certain members of senior management, which are included in the table above as performance and market-based restricted stock activity.

In the first nine months of 2020 and 2019, the Company granted market-based awards totaling 34,911 and 23,924 , respectively, to certain members of senior management, which are included in the table above as performance and market-based restricted stock activity.

The vesting of these stock units is based on the relative total shareholder return (“TSR”) of the Company.

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in millions, except per share data)

7 unchanged sentences

Per share effect of dilutive securities on net income

Diluted earnings per share for the three months ended June 30, 2020 excludes 0.9 million shares issuable under the Company’s stock compensation plans because their effect would be antidilutive.

Diluted earnings per share for the six months ended June 30, 2020 and 2019 excludes 0.6 million and 0.2 million, respectively, of common shares issuable under the Company’s stock compensation plans because their effect would be antidilutive.

T he Board of Directors authorized a stock repurchase program which provides for aggregate repurchases of up to $ 900 million, including a $ 300 million increase to the program that was authorized on December 5, 2019.

Diluted earnings per share for the three months ended September 30, 2020 and 2019 excludes 0.8 million and 0.2 million shares, respectively, issuable under the Company’s stock compensation plans because their effect would be antidilutive.

Diluted earnings per share for the nine months ended September 30, 2020 and 2019 excludes 0.6 million and 0.2 million, respectively, of common shares issuable under the Company’s stock compensation plans because their effect would be antidilutive.

T he Board of Directors authorized a stock repurchase program which provides for aggregate repurchases of up to $ 900 million.

Under the repurchase authorization, the Company may repurchase, from time to time, common stock in amounts, at prices and at such times as the Company deems appropriate, subject to market conditions and other considerations.

3 unchanged sentences

On February 26, 2020, the Company received approximately 0.2 million of its common stock shares as final settlement of shares repurchased under the December 2019 ASR.

As discussed further in Note 14 - "Subsequent Events", the Company entered into a new ASR agreement on October 27, 2020.

Liabilities for Outstanding Claims, Losses and Loss Adjustment Expenses

7 unchanged sentences

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses.

Six Months Ended

Nine Months Ended

September 30,

(in millions)

10 unchanged sentences

As a result of continuing trends in the Company’s business, reserves including catastrophes have been re-estimated for all prior accident years and were decreased by $ 26.1 million and $ 20.3 million in 2020 and 2019, respectively.

For the six months ended June 30, 2020, net favorable loss and LAE development was $ 13.9 million primarily as a result of net favorable Commercial Lines development of $ 18.1 million, partially offset by unfavorable development in the Other Segment.

Commercial Lines favorable development was primarily due to lower than expected losses of $ 15.8 million within the workers’ compensation line in accident years 2016 through 2019 and, within other commercial lines, $ 12.8 million within the marine line primarily in accident years 2017 through 2019, partially offset by higher than expected losses in the commercial automobile line driven by higher bodily injury and personal injury protection losses primarily in accident years 2017 through 2019.

In addition, Other Segment unfavorable development was due to the Company’s run-off voluntary assumed property and casualty reinsurance pools business primarily based on an updated third-party actuarial study received in the first quarter of 2020 for the legacy Excess and Casualty Reinsurance Association (“ECRA”) pool that primarily consists of asbestos and environmental exposures.

For the six months ended June 30, 2019, net favorable loss and LAE development was $ 20.6 million, primarily as a result of favorable catastrophe development due to the sale of subrogation rights on certain 2017 and 2018 California wildfires and lower than expected losses related to the 2018 hurricanes.

In addition, lower than expected losses in the Company’s workers’ compensation and commercial multiple peril lines were substantially offset by higher than expected losses in the Company’s personal and commercial automobile lines.

For the nine months ended September 30, 2020, net favorable loss and LAE development was $ 26.1 million primarily as a result of net favorable Commercial Lines development of $ 30.9 million, partially offset by unfavorable development in the Other Segment.

Commercial Lines favorable development was primarily due to lower than expected losses of $ 25.6 million within the workers’ compensation line in accident years 2016 through 2019 and, within other commercial lines, $ 15.3 million within the marine line primarily in accident years 2017 through 2019, partially offset by higher than expected losses of $ 10.6 million in the commercial automobile line driven by higher bodily injury and personal injury protection losses, primarily in accident years 2017 through 2019.

For the nine months ended September 30, 2019, net favorable loss and LAE development was $ 20.3 million, primarily as a result of favorable catastrophe development due to lower than expected losses related to the 2017 and 2018 California wildfires, including the sale of subrogation rights on certain California wildfire losses, and lower than expected losses related to the 2018 hurricanes.

For non-catastrophe loss and LAE development, lower than expected losses of $ 15.7 million in the workers’ compensation line were substantially offset by higher than expected losses of $ 13.7 million in the personal automobile line.

Within other commercial lines, lower than expected losses in the marine and commercial miscellaneous property lines were partially offset by higher than expected losses in the general liability lines.

Commitments and Contingencies

2 unchanged sentences

In addition, the Company is involved, from time to time, in examinations, investigations and proceedings by governmental and self-regulatory agencies.

The potential outcome of any such action or regulatory proceedings in which the Company has been named a defendant or the subject of an inquiry or investigation, and its ultimate liability, if any, from such action or regulatory proceedings, is difficult to predict at this time.

The potential outcome of any such action or regulatory proceedings in which the Company has been named a defendant or the subject of an inquiry, examination or investigation, and its ultimate liability, if any, from such actions or regulatory proceedings, is difficult to predict at this time.

The ultimate resolutions of such proceedings are not expected to have a material effect on its financial position, although they could have a material effect on the results of operations for a particular quarterly or annual period.

3 unchanged sentences

Subsequent Events

There were no subsequent events requiring adjustment to the financial statements and no additional disclosures required in the notes to the interim consolidated financial statements.

On October 27, 2020, the Company entered into a new ASR agreement (the “October 2020 ASR”), pursuant to which THG will pay $ 100.0 million in exchange for shares of its common stock.

Initial share delivery, of approximately 80 % of the total number of shares expected to be received under this agreement, is scheduled for October 29, 2020.

Final settlement of the October 2020 ASR is expected to occur not later than February 3, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements