The Hanover Insurance Group, Inc., Announces the Sale of its Remaining Run-Off Life Insurance Business

Transaction Enhances Capital Flexibility and Company Focus on Its Property and Casualty Business WORCESTER, Mass., July 31


WORCESTER, Mass., July 31 /PRNewswire-FirstCall/ -- The Hanover Insurance
Group, Inc., (NYSE: THG) announced today that it has entered into a definitive
agreement to sell its remaining run-off life insurance business, First
Allmerica Financial Life Insurance Company (FAFLIC), to Commonwealth Annuity
and Life Insurance Company, a Goldman Sachs Company. In conjunction with the
closing of this transaction, The Hanover is seeking approval from the
Massachusetts Division of Insurance for a pre-close dividend from FAFLIC of
various assets valued at approximately $160 million. Total net proceeds from
the sale, including the dividend, and after transactions costs and
intercompany account settlements, are projected to be valued at approximately
$220 million.


(Logo:  http://www.newscom.com/cgi-bin/prnh/20051031/NEM023LOGO )


The actual dividend and purchase price will be determined at closing, and
be adjusted based on the surplus level of FAFLIC, as well as for changes in
the fair value of certain investments and various other items. The Company
expects to sell the majority of the dividended assets to its wholly-owned
subsidiary, The Hanover Insurance Company, thus cash and investments at the
holding company are expected to increase by approximately $220 million from
the transaction.


In connection with the sale transaction, the parties expect The Hanover
Insurance Company to reinsure FAFLIC's accident and health assumed reinsurance
pool business, which has been reported as a discontinued operation since 1999
and represents approximately 10% of FAFLIC's total net insurance liabilities.


The transaction is subject to regulatory approval from the Massachusetts
Division of Insurance and the New Hampshire Insurance Department and other
regulators as is customary for a transaction of this nature. It is expected to
be completed in the fourth quarter of 2008.


The transaction is expected to result in a net after-tax loss of
approximately $66 million, which will be reflected in The Hanover's second
quarter results expected to be released after the market closes today.


"This transaction completes the divestiture of our life business, which
has been in run-off since 2002, which we believe will give us greater
financial flexibility," said Frederick H. Eppinger, president and chief
executive officer of The Hanover Insurance Group. "The sale accelerates the
release of capital from our life company and enables us to deploy that capital
more efficiently. Proceeds will be used to build our core property and
casualty business, and also to further improve our return on equity, creating
opportunities for strategic acquisitions and additional share repurchase
programs. At the same time, the transaction provides an excellent outcome for
the policyholders of FAFLIC."



Forward-Looking Statements


All statements in this release, other than statements of historical fact,
are forward-looking statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995. In addition to the risks and
uncertainties noted in this release, there are certain factors that could
cause actual results to differ materially from those anticipated by the press
release, slide presentation and statements made. These include: (1) the
successful consummation of the transactions with Commonwealth in a timely
manner; (2) the various conditions to the consummation of such transactions
being satisfied or waived without the imposition of material burdens or
expenses; (3) the required regulatory approvals of the transactions being
obtained in a timely manner without the imposition of any material
restrictions or burdens, including the proposed dividend, the sale to
Commonwealth Annuity and Life Insurance Company, the coinsurance and related
agreements for the accident and health business, certain intercompany
transactions, including the proposed sale by the holding company to its
subsidiary for cash and securities of assets the holding company receives from
the proposed dividend; (4) the statutory results of operations of FAFLIC until
close, which will impact the statutory surplus of FAFLIC and consequently the
ultimate dividend and purchase price; (5) the uncertainties as to the gross or
net proceeds to be received by THG, including the uncertainty as to the
effects of the various purchase price adjustments and expenses incurred by THG
and the impact of various tax elections; (6) the ability to realize post-
closing earnings for the property-casualty segment that are taxable and make
FAFLIC's tax attributes valuable; and (7) the impact of contingent
liabilities, including litigation and regulatory matters, assumed by the
holding company in connection with the transaction.



Forward-looking statements are not guarantees of future performance, and
actual results could well differ materially. Investors should consider these
and other risks and uncertainties in our business that may affect future
performance (including FAFLIC), and that are discussed in readily available
documents, including The Hanover's Annual Report on Form 10-K, quarterly
reports on Form 10-Q and other documents filed by Hanover with the Securities
and Exchange Commission and which are also available at www.hanover.com under
"Investor Relations".



The Hanover Insurance Group, Inc., based in Worcester, Mass., is the
holding company for a group of insurers that includes The Hanover Insurance
Company, also based in Worcester, Citizens Insurance Company of America,
headquartered in Howell, Michigan, and their affiliates. The Hanover offers a
wide range of property and casualty products and services to individuals,
families and businesses through an extensive network of independent agents,
and has been meeting its obligations to its agent partners and their customers
for more than 150 years.  Taken as a group, The Hanover ranks among the top 40
property and casualty insurers in the United States.


Contact Information
Investors:  Media:
Sujata Mutalik  Michael F. Buckley
E-mail:  smutalik@hanover.com   E-mail:  mibuckley@hanover.com
1-508-855-3457  1-508-855-3099


SOURCE  The Hanover Insurance Group, Inc.