Hanover Insurance Group (THG) risk factors, 2025 10-K

Other

1. 01RISK FACTORS AND FORWARD-LOOKING STATEMENTS

Risks Related to Underwriting, Risk Aggregation and Risk Management

1. 02Our results may fluctuate as a result of cyclical or non-cyclical changes in the property and casualty insurance industry
2. 03fluctuations in interest rates, as a result of a change in monetary policy or otherwise, inflationary pressures, default rates, commodity prices, and other factors that affect net income, including with respect to investment returns and operating results for certain of our lines of business
3. 04Our profitability may be adversely affected if our pricing models differ materially from actual results
4. 05Our business is dependent on our ability to manage risk, and the failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations

Risks Related to Reserves and Claims

1. 06Actual losses from claims against our insurance subsidiaries may exceed their reserves for claims

Risks Related to Weather Events, Catastrophes and Climate Change

1. 07Limitations on the ability to predict the potential impact of weather events and catastrophes may impact our future profits and cash flows
2. 08The extent of gross losses from a catastrophe is a function of the total amount of insured exposure in the area affected by the event and the severity of the event. The extent of net losses depends on the applicability, amount and collectability of reinsurance
3. 09Climate change may adversely impact our results of operations and/or our financial position

Risks Related to Reinsurance

1. 10We cannot guarantee the adequacy of or ability to maintain our current level of reinsurance coverage
2. 11Although we monitor their financial soundness, we cannot be sure that our reinsurers will pay in a timely fashion, if at all

Risks Related to Regulation, Mandatory Market Mechanisms and Mandatory Assessments

1. 12Our businesses are heavily regulated, and changes in regulation may reduce our profitability
2. 13Further, as we continue to expand our business into new regions, either organically or through acquisition, we become subject to the regulations and different regulatory bodies governing such business in those locales
3. 14We are subject to uncertainties related to Michigan PIP Reform
4. 15legislation includes underwriting and other restrictions and mandates, in addition to subjecting rates, forms and rules to prior approval from the Michigan Department of Insurance and Financial Services (“Michigan Insurance Department”) before implementation
5. 16We may incur financial losses resulting from our participation in shared market mechanisms, mandatory reinsurance programs and mandatory and voluntary pooling arrangements
6. 17We also have credit risk associated with certain mandatory reinsurance programs, such as the MCCA. See “We are subject to uncertainties related to Michigan PIP Reform,” above for more information on the MCCA
7. 18We are subject to mandatory assessments by state guaranty funds; an increase in these assessments could adversely affect our results of operations and financial condition
8. 19We are subject to litigation risks, including risks relating to the application and interpretation of contracts, and adverse outcomes in litigation and legal proceedings could adversely affect our results of operations and financial condition

Risks Related to Our Agency Distribution and Growth Strategies

1. 20Our profitability could be adversely affected by our relationships with our agencies
2. 21We may not be able to grow as quickly or as profitably as we intend, which is important to our current strategy
3. 22We may be affected by disruptions caused by the introduction of new products, related technology changes, and new operating models in our Core Commercial, Specialty, and Personal Lines businesses, and future acquisitions, and expansion into new geographic areas

Risks Related to Technology, Information Security and Privacy

1. 23We may experience difficulties with technology, implementing new technologies, data and information security and/or outsourcing relationships, which could have a negative impact on our ability to conduct our business
2. 24Information security incidents, including, but not limited to, those resulting from a malicious cybersecurity attack on us or our business partners and service providers, or intrusions into our systems or data sources could disrupt or otherwise negatively impact our business
3. 25Any failure to protect the confidentiality of customer information could adversely affect our reputation or expose us to fines, penalties or litigation, which could have a material adverse effect on our business, financial condition and results of operations

Risks Related to Competition and Competitors in the Property and Casualty Insurance Market

1. 26Intense competition could negatively affect our ability to maintain or increase our profitability, particularly in light of the various competitive, financial, strategic, technological, structural, informational and resource advantages that our competitors have

Risks Related to Financial Strength and Debt Ratings

1. 27We are rated by several rating agencies, and downgrades to our ratings could adversely affect our operations
2. 28Negative changes in our level of statutory surplus could adversely affect our ratings and profitability

Risks Related to Discontinued Operations

1. 29We could be subject to additional losses related to the sales of our discontinued FAFLIC and variable life insurance and annuity businesses and our former Chaucer business
2. 30We may incur financial losses related to our discontinued assumed accident and health reinsurance pools and arrangements

Risks Related to Investments, Capital Markets and Economic Conditions

1. 31Other market fluctuations and difficult general economic, market and political conditions may also negatively affect our business, profitability, investment portfolio, and the market value of our common stock
2. 32We may experience unrealized losses on our investments, especially during a period of heightened volatility, or if assumptions related to our investment valuations are changed, which could have a material adverse effect on our results of operations or financial condition
3. 33We are exposed to significant capital market risks related to changes in interest rates, credit spreads, equity prices and, to a lesser extent, real estate market conditions which may adversely affect our results of operations, financial position or cash flows
4. 34Inflationary pressures may negatively impact expenses, reserves and the value of investments

Risks Related to Capital, Liquidity and Cash Flow

1. 35We are a holding company and rely on our insurance company subsidiaries for cash flow; we may not be able to receive dividends from our subsidiaries in needed amounts and may be required to provide capital to support their operations
2. 36We may require additional capital or credit in the future, which may not be available or only available on unfavorable terms
3. 37Failure to design, implement or maintain effective internal control over financial reporting could have a material adverse effect on financial statements, financial reporting, investor confidence, our business and stock price