- 102.1 - Name of the organization
The Hanover Insurance Group. Inc. (NYSE: THG)
The organization is sometimes referred to as "The Hanover" with this content index.
- 102.2 - Activities, brands, products and services
The Hanover Insurance Group, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Form 10-K”), Part I, Item 1 - Business.
- 102.3 - Location of headquarters
The Hanover Insurance Group, Inc.
440 Lincoln Street
Worcester, Massachusetts USA 01653
- 102.4 - Location of operations
The Hanover Insurance Group, Inc. Form 10-K, Part I, Item 2 - Properties, page 32.
The Hanover’s significant operations are in the United States.
- 102.5 - Ownership and legal form
The Hanover’s parent company is a publicly traded stock corporation (NYSE: THG) domiciled in the State of Delaware that operates through a number of property casualty and other subsidiaries. For a complete list of entities within the group, see Exhibit 21 of the Form 10-K. While the vast majority of the entities within The Hanover’s group of companies are insurance companies and related entities, The Hanover Insurance Group, Inc.’s wholly owned subsidiary, Opus Investment Management, Inc. (“Opus”), is a SEC-registered investment advisor that manages assets on behalf of The Hanover and third-party institutional investor clients.
- 102.6 - Markets served
The Hanover offers its products exclusively in the United States. Its personal lines business is confined to 19 states, mostly east of the Mississippi River. Its commercial lines products are available nationwide. Opus’ investment clients include institutional clients domiciled in the United States, and Opus continues to manage a portion of the assets of The Hanover’s former subsidiary, Chaucer. See the “Lines of Business” section of Part I, Item 1 - Business, pages 4-15 in the Form 10-K.
- 102.7 - Scale of the organization
As of December 31, 2019:
- The Hanover had approximately 4,200 employees.
- 2019 revenues of $4.890 billion
- 2019 net income of $425.1 million
- Shareholders’ equity of $2.916 billion
See GRI KPI 102-4 and 102-6 above for information on scope and geography of operations.
- 102.8 - Information on employees and other workers
As of December 31, 2019, The Hanover had approximately 4,200 employees. All of our employees are at-will.
Temporary employee data is not collected by The Hanover, as these individuals are employed by third-party staffing firms during their temporary employment. Permanent employee data is compiled and stored by workforce intelligence personnel. All employee gender composition for permanent employees:
- 58% female employees
- 40% male employees
- 2% undeclared
All employee regional breakdown for our permanent employees:
- Northeast: 2,320 employees
- Southeast: 485 employees
- Midwest: 1,086 employees
- West: 347 employees
Employment type for permanent employees is:
- Full-time female: 57%
- Part-time female: 1%
- Full-time male: 39%
- Part-time male: 1%
- Full-time undeclared gender: 2%
- Part-time undeclared gender: <1%
- 102.9 - Supply chain
The Hanover engages third-party suppliers to support our company strategy to provide leading specialized capabilities, be an agency carrier of choice, and grow through innovation. The Hanover Strategic Sourcing Office contracts with approximately 1,400 suppliers, which represent all aspects of our personal lines, core commercial lines and specialty businesses, as well as various functions across enterprise-wide programs. Distribution is exclusively through independent agents and brokers.
- 102.10 - Significant changes to the organization and its supply chain
On December 28, 2018, The Hanover completed the sale of the Chaucer group, our Lloyd’s international specialty business. For additional information see “Discontinued Operations - Chaucer” on page 14 of the Form 10-K. Following the sale of Chaucer and the subsequent divestment of related Chaucer entities as part of that sale, virtually all of The Hanover’s insurance premium comes from the United States. Opus’ investment clients include institutional clients domiciled in the United States, and Opus continues to manage a portion of Chaucer’s portfolio following the sale.
- 102.11 - Precautionary principle or approach
See the “Risks” section of Part I, Item 1 - Business (page 3) and the “Risk Factors” section, Part I, Item 1A of the Form 10-K for a description of how The Hanover manages risk and applies the precautionary approach. The company has an appointed chief risk officer and a dedicated risk function.
- 102.12 - External initiatives
Our CEO, Jack Roche, joined a growing coalition of more than 750 CEOs in signing the CEO Action for Diversity & Inclusion pledge, reinforcing the company's commitment to promote diversity and inclusion in the workplace and to foster a culture based on trust and respect.
- 102.13 - Membership of associations
The Hanover and its employees play an active role in several industry associations related to the property and casualty insurance industry, including:
- Insurance Institute for Highway Safety, an independent, nonprofit scientific and educational organization dedicated to reducing the losses (i.e., deaths, injuries and property damage) from motor vehicle crashes
- Insurance Institute for Business and Home Safety, an independent, nonprofit, scientific research and communications organization for building safety research aimed at promoting real-world solutions for home and business owners, helping to create more resilient communities
- Insurance Research Council, an independent, nonprofit research organization
- Insurance Information Institute, a non-profit organization dedicated to providing information on insurance for the benefit of consumers and others
- The American Property Casualty Insurance Association (APCIA), an industry organization of the property and casualty market
- 102.18 - Governance structure
See “Corporate Governance”, pages 6-17 in the 2020 Proxy Statement or on our website.
- 102.19 - Delegating authority
Oversight of environmental, social and governance-related issues are codified in the charter of the Board’s Nominating and Corporate Governance Committee. In addition, oversight of issues related to corporate culture and human capital development (including policies and practices relating to inclusion and diversity) are the responsibility of the Board’s Compensation and Human Capital Committee, and are contained in the committee’s charter.
- 102.20 - Executive-level responsibility for economic, environmental and social topics
See disclosure in GRI 102-19 above and GRI 102-32 below.
- 102.21 - Consulting stakeholders on economic, environmental and social topics
Input from stakeholders, including our insureds, independent insurance agents, the community, employees, regulatory bodies, investors, industry associations, and suppliers are critical to The Hanover’s success, and many of our sustainability priorities come from interactions with these groups. Investor relations facilitates conversations with investors, The Hanover’s executive leadership team and the Board of Directors; See GRI 102-53 for investor relations contact information. In addition, see the “Shareholder Engagement” and the “ESG, Sustainability and Corporate Responsibility” sections on pages 16 and 17 of the 2020 Proxy Statement.
See GRI 102-17 on means provided to facilitate communications directly to our Board.
- 102.22 - Composition of the highest governance body and its committees
See the “Corporate Governance,” pages 6-17, and “Board Committees,” pages 11-13, sections in the 2020 Proxy Statement. All our directors other than the CEO are independent. Six of our 11 independent directors are gender or racially diverse.
- 102.23 - Chair of the highest governance body
See “Board Leadership Structure,” page 10 in the 2020 Proxy Statement. The Chair of the Board is not an officer of the Company and is independent from management. The Company has separated the CEO and Chair positions since 2002.
- 102.24 - Nominating and selecting the highest governance body
See “Consideration of Director Nominees,” pages 13-14 in the 2020 Proxy Statement, as well as Appendix A – Excerpt from Our Corporate Governance Guidelines Relating to Director Independent Standards, also included in the 2020 Proxy Statement.
- 102.25 - Conflicts of interest
See “Related-Person Transactions,” pages 9-10 in the 2020 Proxy Statement.
Conflicts of interest for all employees are disclosed and assessed as part of our annual Code of Conduct certification process. See GRI 102-25 above for more information. The results and any significant findings disclosed as part of the Code of Conduct certification process are reported to the Board on an annual basis.
In addition, each member of the Board and each of our executive officers are required to complete a director/officer questionnaire on an annual basis. This questionnaire requires disclosure of board memberships, related party transactions, conflicts of interest with our independent accountants and compensation consultant, among other topics. We have no cross-board or controlling shareholders or related-party transactions requiring approval or disclosure.
- 102.26 - Role of highest governance body in setting purpose, values and strategy
See GRI 102-19 and 102-32.
- 102.27 - Collective knowledge of highest governance body
The Nominating and Corporate Governance Committee (NCGC) maintains a comprehensive skills and experience matrix for evaluating the background and skill set of the Board on both an individual director and collective basis. The matrix details the key competencies, demographic information, and outside public company board, committee, committee chair and CEO experience. The NCGC tracks each director’s level of current and developing expertise across the key competencies in order for the Board to oversee the long-term success of the Company and to align with the Company’s goal of being a premier property and casualty company in the independent agency channel. The categories of key competencies include, among other things: property and casualty insurance (beyond company Board service), senior management, financial services, finance/accounting, investments/capital markets, technology, and governance. The Board seeks director candidates whose skills, experience, and expertise can augment the key competencies that the company has identified. The matrix is also designed to track diversity measures.
- 102.28 - Evaluating the highest governance body’s performance
See “Nominating and Corporate Governance Committee,” page 13 in the 2020 Proxy Statement for an overview of how the Board evaluates its performance. In addition, the election of directors is subject to a vote by our shareholders, making each director accountable to our shareholders.
- 102.29 - Identifying and managing economic, environmental, and social impacts
See GRI 102-19 above.
- 102.30 - Effectiveness of risk management processes
See GRI 102-15 above.
- 102.31 - Review of economic, environmental and social topics
A total number of six board and 37 committee meetings were held during 2019. Material economic, environmental and social topics are reviewed routinely at Board and committee meetings. The Audit Committee is primarily tasked with reviewing economic and risk-related matters; the NCGC is responsible for assessing material economic, environmental and social risks; and the Compensation and Human Capital Committee reviews the company’s strategies, policies and practices relating to corporate culture and human capital development, including policies and practices relating to inclusion and diversity.
- 102.32 - Highest governance body’s role in sustainability reporting
The Board and the NCGC, as part of their regular meetings, receive presentations and updates on material ESG matters, including The Hanover’s efforts in sustainability reporting. In addition, members of the executive leadership team, including the general counsel, chief human resources officer and chief financial officer, are executive sponsors of a cross-functional team of employees responsible for the company’s ESG disclosures.
- 102.33 - Communicating critical concerns
See GRI 102-17 above and see “Communicating with the Board,” page 14 in the 2020 Proxy Statement.
- 102.34 - Nature and total number of critical concerns
As disclosed in GRI 102-17 above, we have an alert line maintained by an independent, third-party service for communicating anonymously and confidentially with the Board, the Audit Committee, our general auditor and our general counsel. We assess and respond to all submissions to the alert line. We also provide information to facilitate direct communication with our Board.
As required by the rules and regulations of the SEC, material developments to the organization are reported publicly to the SEC.
- 102.35 - Remuneration policies
See “Executive Compensation,” pages 22-53 in the 2020 Proxy Statement.
- 102.36 - Process for determining remuneration
See ” Executive Compensation,” pages 22-53 in the 2020 Proxy Statement.
- 102.37 - Stakeholders’ involvement in remuneration
See “Item 2,” page 19 of the 2020 Proxy Statement and also see “Executive Compensation,” pages 22-53 in the 2020 Proxy Statement.
- 102.38 - Annual total compensation ratio
The Hanover has operations almost exclusively in the United States. See “CEO Pay Ratio,” page 54 in the 2020 Proxy Statement.
- 102.39 - Percentage increase in annual total compensation ratio
See GRI 102-38 above.
- 102.40 - List of stakeholder groups
The Hanover’s stakeholder groups include: insureds, independent insurance agents, the communities in which we operate, employees, governmental authorities, investors, contractors, suppliers and industry associations. These stakeholders are critical to the company’s success.
- 102.41 - Collective bargaining agreements
- 102.42 - Identifying and selecting stakeholders
The Hanover identifies stakeholders as the insureds who purchase policies, independent agents with whom we work to serve insureds, our employees, the regulatory bodies that oversee and regulate our operations, our investors, the suppliers with whom we partner to provide our services, the residents of the communities in which we operate, and the industry associations with whom we collaborate to align our business to industry best practices.
- 102.43 - Approach to stakeholder engagement
Examples of routine stakeholder engagement includes, customer communications, notices; informational bulletins and press releases; agent communications; events and in-person site visits; employee meetings; inter- and intranet website postings with extensive information and resources; round tables and crowdsourcing campaigns; civic engagement and community service projects; as well as investor calls, presentations and our annual meeting of shareholders.
- 102.44 - Key topics and concerns raised
We value the perspectives and opinions of our stakeholders and, where practical and economically feasible and consistent with our CARE values (Collaboration, Accountability, Respect, Empowerment), we incorporate their feedback on key topics into our approach.
- 102.45 - Entities included in the consolidated financial statements
In 2019, we reported on our financial statements that we conduct our ongoing business operations through three operating segments. These segments are commercial lines, personal lines, and other, serving our customers through various property and casualty insurers as well as other subsidiaries, including Opus. For a complete list of entities see Exhibit 21 of Form 10-K.
- 102.46 - Defining report content and topic boundaries
This GRI-referenced content index was prepared by a cross-disciplinary team responsible for the Hanover’s ESG disclosures. The executive sponsors of this team from the company’s senior management reviewed this report, including the general counsel, chief human resources officer and chief financial officer. The Hanover used the Global Reporting Initiative Sustainability Reporting Standards of 2018 to develop this report. In determining the content of the report, The Hanover’s team considered the company’s core values and experience, as well as the reasonable expectations and interests of the company’s stakeholders, The Hanover’s insureds key among them.
- 102.47 - List of material topics
The Hanover used the GRI definition of materiality as one of its reporting principles. For all material aspects identified, the related data and performance information in this GRI-referenced content index cover The Hanover’s consolidated operations as a company, unless otherwise noted.
- 102.48 - Restatements of information
- 102.49 - Changes in reporting
There have been no changes in reporting since the publication of The Hanover’s inaugural GRI-referenced content index earlier in 2020.
- 102.50 - Reporting period
This GRI-referenced content index features quantitative and qualitative data for 2019, as updated where indicated.
- 102.51 - Date of most recent report
February 20, 2020.
- 102.52 - Reporting cycle
This is the first year that we have prepared a GRI-referenced content index. Our initial report was published on February 20, 2020. Going forward we expect to publish an annual report in the fourth quarter of the year.
- 102.53 - Contact point for questions regarding the report
Oksana Lukasheva, vice president, investor relations and financial planning and analysis
- 102.54 - Claims of reporting in accordance with the GRI Standards
This GRI-referenced content index has been prepared referencing GRI standards.
- 102.55 - GRI content index
The GRI content index is reflected in this table.
- 102.56 - External assurance
The Hanover did not employ an external organization to audit this GRI-referenced content index. However, our independent, registered accounting firm audits certain financial information in the Form 10-K, included via URL links within this content index. In addition, our internal audit department reviewed certain KPIs in this GRI-referenced index to verify the accuracy of the reported information.
- 103.1 - Explanation of the material topic and its boundary
The Hanover generates and distributes economic value by delivering on our promise to compensate our customer after suffering a covered loss. The subsequent disclosures related to economic performance are deemed material due to the volatility and significance each presents to The Hanover. Our results may fluctuate as a result of cyclical or non-cyclical economic changes in the property and casualty insurance industry and other events outside our control, such as severe weather and terrorism.
Industry catastrophe models assume an increase in frequency and severity of certain weather or other events, such as fires, hurricanes and other natural disasters, whether as a result of global climate change or otherwise. Due to geographical concentration in our property and casualty business within the United States, changes in economic, regulatory and other conditions in the regions where we operate, whether due to environmental, social or governance factors could have a significant negative impact on our business as a whole.
For information about The Hanover’s 2019 economic performance, see the Form 10-K.
- 103.2 - The management approach and its components
The Hanover seeks to monitor and control risk exposure through an enterprise-wide risk management framework. Six major sources of risk are monitored and modelled, which include environmental and social factors, such as climate change, increased weather severity, and human capital development, among others.
Major sources of risk include:
- Catastrophe underwriting risk
- Ex-catastrophe underwriting risk
- Reserve risk
- Investment risk
- Credit risk
- Operational/other financial risk
The Hanover’s risk governance structure is robust, with business unit risk structures supported by an enterprise risk management (ERM) function. The team leverages an internal economic capital model and a risk appetite framework to measure and monitor risk exposures against established tolerances. The ERM function, in partnership with the business, identifies, measures and socializes risks to a variety of internal committees. An enterprise risk management group (ERMG), a working cross-functional group with representatives from every business and function, provides support and insight to ERM. The ERMG meets quarterly. A risk register is maintained for ERMG and supported by one-page risk summaries of the top current and emerging risks. Each risk is assessed in terms of its likelihood of materialization, its mitigated magnitude in the context of the potential variance from the annual business plan pre-tax operating income, and the time horizon over which it might exist or emerge. The group risk committee (GRC) considers the current and emerging risks and mitigation actions underway. Any risk with a mitigated magnitude of $10 million or more is shared with the Board. Detailed one-page risk summaries are maintained that describe the risk, The Hanover and industry context, and current mitigation actions. All members of the executive leadership team are members of the GRC, along with the chief risk officer, chief actuary and treasurer. The committee meets quarterly, and the results are reported to the Board.
See GRI 102-15 above for additional detail on how the Board oversees risk management and on the material risk factors that the company has identified.