Insurance Rating

Best Insurance Ratings of The Hanover Insurance Group, Inc.

Concurrently, Insurance Rating A.M. Best has affirmed the FSR of B+ (Good) and ICR of “bbb-” of First Allmerica Financial Life Insurance Company (FAFLIC) (Worcester, MA). The outlook for these ratings is stable. (See below for a detailed listing of companies and insurance ratings.)

The Insurance ratings and outlook of Hanover reflect its excellent risk-adjusted capitalization, stemming from improved operating earnings and the elimination of dividends last paid to THG in 2002. In recent years, Hanover has sustained profitability and retained surplus through improved underwriting performance and favorable reserve development. The insurance ratings further reflect improved financial leverage and the financial flexibility at THG since 2003. Furthermore, A.M. Best recognizes the benefits from the disposal of THG’s variable life and annuity business.

Partially offsetting these positive insurance rating factors is Hanover’s comparatively high underwriting leverage, primarily attributable to dividends paid to THG prior to 2002, which significantly reduced surplus. However, leverage measures have improved in recent years, and A.M. Best anticipates Hanover will produce favorable operating earnings. Additionally, A.M. Best believes its underwriting leverage and capitalization will further improve.

The insurance ratings of FAFLIC primarily recognize its favorable levels of risk-adjusted capitalization, despite significant stockholder dividends in recent years, along with its continued affiliation with Hanover. While FAFLIC has experienced large pre-tax losses in each of the past two years as a result of a number of one-time events, net income has been positive due to tax benefits, which primarily are the result of FAFLIC’s utilization of tax credits under its consolidated tax sharing agreement with Hanover. A.M. Best will be monitoring FAFLIC’s ability to reduce expenses and improve pre-tax operating results going forward.

In addition, A.M. Best has revised the outlook to positive from stable and affirmed the FSR of A- (Excellent) and ICR of “a-” of Professionals Direct Insurance Company (Grand Rapids, MI), which was acquired by THG in 2007. The revised outlook reflects the enhancement the company receives from its new parent.

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a” of Verlan Fire Insurance Company (Silver Spring, MD), newly acquired by THG on March 14, 2008. The outlook for both ratings is stable.

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for Hanover Insurance Group Property and Casualty Companies and its following members:

• Allmerica Financial Alliance Insurance Company

• Allmerica Financial Benefit Insurance Company

• Citizens Insurance Company of America

• Citizens Insurance Company of Ohio

• Citizens Insurance Company of the Midwest

• Citizens Insurance Company of Illinois

• The Hanover American Insurance Company

• The Hanover Insurance Company

• Hanover Lloyd’s Insurance Company

• The Hanover New Jersey Insurance Company

• Massachusetts Bay Insurance Company

The ICR of “bbb-” has been affirmed for The Hanover Insurance Group, Inc.

The following debt insurance ratings have been affirmed:

The Hanover Insurance Group, Inc.—

-- “bbb-” on $200 million 7.625% senior unsecured debentures, due 2025

AFC Capital Trust—

-- “bb” on $309 million 8.207% trust preferred securities, due 2027

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. More article go to www.TOP20-INSURANCE.COM