Fred Eppinger – President and Chief Executive Officer David Greenfield – Executive Vice President and Chief Financial Officer Bob Stuchbery – President of International Operations and CEO of Chaucer Jack Roche – President of Business Insurance Richard Lavey – President, Personal Lines Andrew Robinson – President of Specialty Lines Oksana Lukasheva – Vice President-Investor Relations.

Dan Farrell – Sterne Agee Vincent DeAugustino - KBW.

Good day, ladies and gentlemen, and welcome to the Q4 2014 The Hanover Insurance Group Inc. earnings conference call. My name is Joyce and I will be the operator for today. At this time, all participants are in listen–only mode. Later we will conduct a question–and–answer session.

(Operator Instructions) As a reminder this conference is being recorded for replay purposes. I would now turn the conference over to Oksana Lukasheva. Please proceed..

Thank you, Joyce. Good morning and thank you for joining our fourth quarter conference call. We will begin today’s call with prepared remarks from Fred Eppinger, our President and Chief Executive Officer; and David Greenfield, our Executive Vice President and CFO.

Available to answer your questions after our prepared remarks are Dick Lavey, our recently appointed President of Personal Lines; Andrew Robinson, President of Specialty Lines; Jack Roche, President of Business Insurance; and Bob Stuchbery, President of International Operations and Chief Executive Officer of Chaucer.

Before I turn the call over to Fred, let me note that our earnings press release, financial supplements and a complete slide presentation for today’s call are available in the Investors section on our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session.

Our prepared remarks and responses to your questions today other than statements of historical facts include forward–looking statements, including our earnings guidance for 2015. There are certain factors that could cause actual results to differ materially from those anticipated by this press release, slide presentation and conference call.

We caution you with respect to reliance on forward–looking statements and in this respect refer you to the forward–looking statement section in our press release, slide 2 of the presentation deck and our filings with the SEC.

Today’s discussion will also reference certain non–GAAP financial measures such as operating income, operating results, excluding the impact of catastrophes and accident year loss and combined ratios excluding catastrophes, among others.

A reconciliation of these non–GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release or the financial supplements, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Fred..

Thank you, Oksana. Good morning, everyone, and thank you for joining our fourth quarter earnings call. 2014 was a strong year for our company. We are very pleased to report record results for the full year and for the fourth quarter. We delivered net income per share of $6.28, the highest annual income in our history as a public company.

Operating income per share was $5.19 in 2014, yielding an operating ROE of 9%. And our combined ratio, excluding catastrophes, was 92%, in line with our original 2014 guidance. Results of the fourth quarter were also solid, with operating income of $1.77 per share and an ROE of 12.7%.

In 2014 we took an important step on our path to achieve target returns. Fundamentally repositioning our portfolio, driving needed _ and achieving greater penetration with our partners. Coming out of the year with 6% at premium growth and 1.5 point improvement in ex-cat combined ratio, compared to 2013.

We feel good about our market position, the fundamentals of our business and the progress we have made on all our strategic priorities. As important, given our current market position and financial condition, we have confidence in our ability to continue to generate profitable growth and earnings accretion going forward.

This confidence is based on our success thus far, our market momentum and the multiple earnings leverage that work in our business as we enter 2015. I will have more on these items after David reviews our financials..

Thank you, Fred and good morning everyone. We had an excellent quarter and we are pleased to report our highest full year in quarterly earnings, a product of the team’s relentless focus on making the most of our profitability levers, and improving the underlying strength of our operation.

Net income for the fourth quarter was $90 million or $2 per diluted share compared to $70 million or $1.57 per diluted share in the prior year quarter. Operating income was $80 million or $1.77 per diluted share compared to $60 million or $1.33 per diluted share in the fourth quarter of last year.

For the full year, net income was $282 million or $6.28 per diluted share compared to $251 million or $5.59 per diluted share in 2013. Operating income was $233 million in 2014 or $5.19 per diluted share compared to $227 million or $5.06 per diluted share last year.

Turning to underwriting results, I'm going to focus my comments on the full year with references to the quarter results where appropriate. Our 2014 combined ratio was 96.9%, in line with the prior year ratio of 96.7%.

This slight increase was fully attributed to higher catastrophe losses of the current year which were largely offset with improved ex-cat performance. At 4.7% of net earned premiums, catastrophe losses essentially were in line with our assumptions at the beginning of the year and 1.6 points higher than we reported in 2013.

The combined ratio, excluding catastrophes, improved by 1.4 points, reflecting a 2 point improvement in the domestic business, with Chaucer remaining relatively unchanged. We are proud of what we accomplished in our domestic operations in 2014.

The 2 points improvement in ex-cat combined ratio stems from the decrease in the loss ratio, with contributions from both commercial and personal lines, along with a decline in the commercial lines expense ratio. Together, these improvements drove a meaningful increase in our ex-cat underwriting margin of $75 million as compared to 2013.

On the commercial line side, our continued focus on writing small and mid-size accounts, which help support more consistent pricing increases, along with ongoing mix management initiatives and expansion of our product portfolio, drove roughly a 2 point improvement in the loss ratio from 60.2% to 58.5%.

The accident year loss ratio and other commercial lines, which includes surety and other domestic specialty business, improved by 4 points in 2014, driven by continuing business maturation, along with mix management and pricing actions.

We are very pleased with the traction these businesses have established as they continue to support the overall margin expansion and topline growth of the company. The CMP lines also continued to perform well as we remained diligent in our rate and non-rate actions.

In auto, we are encouraged by the recent underlying trends in our books in response to our persistent pricing actions and changes in the severity profile of the business.

Our loss ratio in 2014 remained relatively stable compared to 2013 as we continue to take a cautious approach for this line give our experience in recent periods and ongoing industry trends.

In workers compensation, although we experienced some normal quarterly fluctuations throughout the year, our full year loss ratio was relatively in line with 2013 actuals and our 2014 expectations. We continue to be very pleased with the performance of our smaller size lower risk profile book.

Additionally, we delivered a full year commercial line expense ratio of 37%, representing a 1 point improvement over 2013 as we guided. This improvement was driven by growth leverage and operating model efficiencies. In personal lines, the underlying loss ratio for the year was 62.4%, nearly a point better than the 63.3% we reported in 2013.

Our pricing and mix initiatives continue to drive the overall quality of the business as demonstrated by a 2 point decline in the auto accidents year loss ratio. The home owners’ line was about a point higher as we experienced heavier non-catastrophe weather in the first half of 2014 compared to lighter than usual activity in the first half of 2013.

Adjusting for this impact, the accident year loss ratio of homeowners also improved by approximately 2 points. Our rate increases continue to run above loss cost levels, providing confidence in our ability to generate further margin accretion in 2015.

Chaucer delivered another strong year and quarter results, with a combined ratio of 90% and 88% respectively. Full year pretax operating income reached $178 million compared to $150 million in 2013. Lower catastrophe losses helped offset a slightly higher incident of large losses in 2014.

Chaucer’s expense ratio was 38% for the full year, in line with our expectations and with the prior year. The expense ratio ticked up in the fourth quarter compared to our expectations and guidance, driven by higher performance compensation expenses and foreign exchange movements.

Although Chaucer exceed historical averages, and delivered annual results above our forecast, we believe given the current challenging market conditions, and with the return to a more normal loss environment, it will trend back to a historical combined ratio of about 95% going forward.

Moving on to the topline, overall net premium written growth of over 5% for the year reflected growth of 7% in commercial lines, 10% at Chaucer, and moderation of premium decreases in personal lines of 0.4 % for the year.

As the majority of the exposure management and profitability improvement actions in our domestic business were completed during 2014, we are pleased with solid growth for the year, and particularly with the return to growth for personal lines in the second half of the year.

Commercial lines experienced robust growth, while we continue to adjust the portfolio mix. At Chaucer, growth for the year was driven mostly by political risk lines in marine and casualty.

The premium growth also reflects the increased underwriting participation after we eliminated certain capital arrangements as well as the impact of foreign exchange movements. Overall, both our bottom line and topline performance met, and in some instances, exceeded our expectation for 2014.

In 2015, we will maintain our focus on sustaining combined ratio improvement and driving the organization to achieve target returns. Moving on to investor results, at yearend cash and invested assets were $8.6 billion, with fixed income securities and cash representing 90% of the total.

Roughly 94% of our fixed income securities were investment grade and the average duration of the portfolio was 4.2 years. Our investment portfolio remains high quality and well laddered. Our quarterly net investment income increased to $68.8 million from $68.1 million in the prior year quarter.

Our net investment income for the year was $270.3 million, up slightly over the prior year. While lower new money yields continued to impact our returns, we more than offset this impact with a higher level assets from positive operating cash flow and deployment of operating cash into the portfolio.

The earned yield on our fixed maturity portfolio was 3.65% in the quartet and 3.71% for the year compared to 3.86% in the prior year quarter and 3.95% in 2013. As I've mentioned on previous calls, we continue to prudently expand our portfolio mix into non-fixed income instruments.

We believe this will help offset some of the yield pressure that exist in this low rate environment, which together with higher cash flows, should drive a slightly higher net investment income in 2015.

Net unrealized investment gains were approximate $310 million at the end of the fourth quarter, compared to$222 million at the beginning of the year and $293 million at the end of the third quarter. In this very fluid time in the market place, we expect additional volatility in our net unrealized gains position going forward.

I’ll finish up with a few comments on the strength of our balance sheet and capital position. We ended the quarter with $3.7 billion in total capital, over $2 billion in US statutory capital, the highest it’s ever been, and a debt to total capital ratio of 24%, the lowest since March 2011.

In a further confirmation of our progress, last week Standard & Poor's recognized the strength of our capital position and the operating progress we’ve made on our overall franchise, by upgrading our financial strength ratings to A, with a stable outlook.

At December 31, book value per share was $64.85, up 2% in the quarter and up 9% since December 2013. Excluding net unrealized investment gains, book value grew 7% in 2014, reflecting strong earnings throughout the year, partially offset by the impact of capital management actions.

For the full year, we repurchased approximately 350,000 common shares for $20 million, or an average of $58.90 per share, which represents approximately 0.8% of our shares outstanding. We did not repurchase any shares in the fourth quarter and we have $117 million remaining in our stock repurchase program.

Looking ahead to 2015, we expect we will continue to be opportunistic when considering stock repurchases. However, we believe our capital is best deployed as a tool to support the growth of our business as well as capitalize on the current market conditions.

We entered 2015 with a very strong balance sheet position, providing us with a great foundation for business growth and development. With that, I’ll turn the call back to Fred..

Thanks David. As we reflect on our progress and turn our focus to 2015, we are confident that we will capitalize on the improvements we made across our organization and the forward momentum we have established in the market. Looking back on 2014, we significantly advanced our journey, making progress on all our strategic priorities.

We enhanced the distinctiveness and quality of our product portfolio and service capabilities, while improving our position with our agents and broker partners. I’ll review some of the key areas of progress in each business segment and why our current position is a source of confidence for continued improvement in 2016. Starting with Personal Lines.

2014 was an important transition year for this business. We began the year with a focus on exposure management initiatives and rolling out our Platinum Experience platform. We ended the year with momentum, accelerating new business and increasing retention for the last two quarters.

Net written premiums grew 3% for the quarter and we were basically flat for the year as we nearly completed our exposure management actions, ending the drag on growth on this business. Rate increases for the year were 6% for the fourth quarter indicators being slightly lower at 5%.

With good transparency into 2015 rates, we believe the increases will hold at the same level at about 5%. Our underlying retention, which excludes the impact of voluntary premium reduction continued to improve and stood at 81% at the close of the fourth quarter 2014.

A combination of mix management and pricing initiatives drove solid profitability improvement in our Personal Lines book as demonstrated by the decline in ex-cat loss ratio from 64% in 2013, to 62% in 2014.

Given our retention levels in pricing which remain above loss cost, we believe we are well positioned to get additional rates and drive performance improvement in 2015. Another reason for our confidence lies in the success of our Platinum product.

Platinum is the most relevant forward counter offering available to independent agents that are focused on selling value.

While some of our competitors now realize the need for a bundled product and upscale services for their target customers, we are already successfully addressing this market need through Platinum, which now covers most of our personal lines footprints. Our agent partners have been very receptive to our Platinum offering in the early going.

In fact, approximately 70% of our total new business states where we have introduced Platinum, is driven by this new offering. Agency feedback has been excellent. Not only does Platinum provide comprehensive coverages and an attractive service package to our customers, it also addresses important agency needs.

To raise stability dedicated customer service and self service capabilities, agents are able to manage their existing business more effectively and be more targeted in their new business generation. We believe we can continue to build on the success of Platinum across our partner agency networks in 2014.

As mentioned on previous calls, Platinum is associated with higher umbrella penetration, better retention, anchoring us in enhanced business mix, which will drive improved profitability over time.

We are extremely excited with our current position and opportunities with personal lines and we believe we should see low single digit growth and strong profit in 2015. In Commercial Lines, our focus in 2014 was twofold.

We continued to adjust business mix through rate and non-rate actions, and we also advanced our position with partner agents, achieving greater shelf space with established and more recently developed products. The combination of both of these factors gives us a clear view into more profitable growth going forward.

For the quarter, our pricing in core commercial was just under 7%, fundamentally in line with recent trends. We recognize there's pressure in the marketplace and plan for our price increases to lessen in 2015. But we believe we will continue pricing in excess of loss trends into the near feature.

In Commercial Auto, we ended the year with better price increases than we started, which has ultimately contributed to more than 20% in cumulative pricing gains achieved since the end of 2011. We also repositioned this line through a number of targeted re-underwriting initiatives.

We believe these actions are helping us to address issues in this line and we are encouraged by our underlying trends. However, we remain vigilant and cautious due to the adverse development we and our competitors have seen. Our mixed management initiatives were not limited to Commercial Auto.

We executed portfolio actions in the broadest sense, including working on property exposure concentrations and repositioning the risk profile in some specialty businesses, which together impacted our growth for the year by about 2% or $50 million in premium.

Although we forfeited some growth, we believe our book of business is more stable and is of higher quality, which is demonstrated by our numbers. Our Commercial Lines underlying loss ratio improved by 1.5 points in 2014.

Our results indicate that we are able to achieve better pricing and to have important changes in our book without compromising on our growth momentum with agents. Our Commercial Lines growth in 2014 was strong, a strong 7% led by specialty.

Other line retention remained stable as expected, with a relatively strong size of our accounts supporting pricing persistency. Growth is obviously very helpful to our expense ratio, which improved by 1 point in 2014 and we have visibility to at least another half point of improvement in 2015.

We approach the market differently than others in the industry. While many competitors are commoditizing the business, we’ve developed unique capabilities to effectively show value. In 2014, we continued to invest in product innovation. For example, we finalized our work on [profitable] Allied Health and Technology offerings.

We made meaningful additions to our miscellaneous professional liability products. We continue to successfully execute our approach of building deeper business insight and deeper relationships, with a limited number of agents. Agents that are growing their business and whose portfolio aligns with our strategy.

Deeper penetration with these agents is critical to our growth. We progressed this year increasing shelf space with our partners, especially with our small commercial platform, which offers top of the line technology, as well as tailored underwriting expertise.

Our free of charge value with our partners is excellent and we’ve created a significant number of opportunities as we continue to execute our value propositions and grow profitability with this targeted agency base. We have strong leverage to grow and further improve profitability in Commercial Lines.

We operate segments which are less price sensitive while we continue to refine the business mix to focus on more profitable classes.

We now have greater earnings persistency in our book and equally important, pricing continues to run at acceptable levels, putting us in a position where profitable mid to high single digit growth is sustainable in 2015.

At Chaucer, our focus in 2014 was to successfully navigate a challenging market and leverage our distinctive market position and underwriting capabilities to maintain a strong book of business.

Once again we delivered outstanding results, ending the year with $178 million in pretax operating income and a 10% net premium growth as we effectively delivered on our priorities and benefited from a favorable loss environment.

We actively managed our diversified product portfolio to protect and where possible enhanced underwriting margins in this dynamic market. Our underwriting maintained highly disciplined while we effectively deployed capital and underwriting capabilities to some target opportunities that arose.

Our underwriting expertise, coupled with a well-diversified portfolio, positions us among the strongest of [employees] writers best able to navigate the current market successfully. But given the challenging environment, we expect limited net premium growth out of Chaucer in 2015.

Overall, as evident through our 2014 results, our strategies in each business segment are aligned to drive further success. We believe the persistency of rate and the strong positions we have developed with our partners, will allow us to sustain momentum and profitably grow in all of our domestic businesses.

With our rate profit management actions and ability to improve our business mix, we expect underlying margins will also continue to improve.

And although Chaucer’s future performance will likely yields results more in line with our long term targets of 95% combined ratio, we think we have visibility to produce another point of overall underwriting margin accretion in 2015. I'm optimistic about the many opportunities that lie ahead.

Before we open up to questions, let me just take a moment to discuss 2015 and provide some thoughts relating to our 2015 financial outlook. Our operating earnings expectation for 2015 is in the range of $5.70 to $6 per share.

As a basis for this outlook, we anticipate written premium growth of mid-single digits, net invested income growth of approximately 5% compared to 2014 and an overall combined ratio of around 96% that assumes catastrophe losses slightly below 5% of our earned premium.

In closing, I'd like to emphasize how pleased we are with our results in the quarter and the year as we have executed on our financial and strategic goals. Given the continued progress we’ve made, we are confident that we will continue to deliver strong results in 2015.

Operator, can you please open the lines for the questions?.

[Operator Instructions] The first question comes from the line of Dan Farrell of Sterne Agee. Please proceed..

Good morning. Just a question as it relates to your guidance. If I look at the midpoint of that, and correct me if I'm thinking wrong on this matter, it looked like it would imply something just below about 9.5% cost base ROE.

How do you think about that level versus your ultimate goal of getting close to an 11% ROE? What do you think the ability is to get there and sort of the path and time that you think you might be able to do that?.

Yeah, I think that’s right, Dan. I think the midpoint for us the way we think about it is at about right at about a 10 because as we think about our operating ROE. I believe that where we are is really within the ranks. So by the run rate in the fourth quarter I see us be very close to or at that range that we always talk bout.

So I feel pretty good about that. Obviously the yields have been surprisingly low as far as stickiness being low. But I feel pretty good about where we are and the continued improvement of our earnings and feel that we are going to be very close to the range as we close out next year..

Okay, great. And then I have a question regarding the auto segment.

As you guys transition towards more of a growth outlook, how do you think about your ability to maintain the nice profitability gains that you’ve achieved in that business? And maybe if you could talk a little bit more about the Platinum product and is that really the key? Are there characteristic of that business that allow it to be more profitable than new business that comes on? Thank you..

Yes, and then I'll let Dick Lavey who has joined us to supplement what I'm talking about. We are thrilled actually about the personal lines. We think we hit something here. We’ve worked pretty hard over the last three years to get to an account focused approach and to change the demographics of our book.

And we believe we have really good market insight into what our target market is. We talk about 78% of our business is now this full account, but it's also a very attractive demographic, call it middle market. We’ve built a terrific value offering for this middle market and what you’re seeing is our ability to sustain pretty good rates.

We have as you can imagine first line because you file way ahead and you get the policies out way ahead.

We have pretty good transparency to this 5% level almost across our business in pricing because a lot of our corrective actions and concentration in weather, you remember two and half years ago we said we were going to take our weather assumptions up on our overall business and we did that.

But what you’re saying is really nice persistency and frankly growth now with our target agents around this segment and this profit, kind of what I would say profit a little kind of middle market approach to the business and we are pretty happy with it.

I mentioned at the earnings call, we believe that it's about a $90 billion business in the agency channel and about $70 billion of that is this value added segment we are going after. And there is a significant amount of it in our agency channel.

And we’ve been able to identify that with our partners and have had pretty good success moving against that and transitioning bad business to us with a number of our partners. We believe we can get the rate. We believe the profitability of the lines are good and more importantly we believe they’re stable..

Yes. And actually not be redundant with what Fred said, but the rate that we have flowing into the book gives us great confidence that we will be a target returns, and of course you have to do that on a state by state basis. And in each of our states we feel confident.

Of course we’ll watch loss cost trends carefully, but we think at kind of a stable 5% rate for the foreseeable future that that that’s going to sustain our ability to continue to see improvement in loss ratio or combined ratio. Just to echo what Fred said, the quality of our business, we couldn’t feel better about.

The segment that we go after and because of our agent distribution strategy, we know where that business is. We have tight relationships with our agents so they understand the target segment that we’re interested in. We have more than a handful of quality metrics that gives us a lot of confidence.

Our umbrella penetration is upwards of 15% to 20% better. Out coverage A curves are higher. Our BI limits are higher. And so all of that just says we’ve got the right customer segment that we’ll be able to see consistent price increases without losing retention..

Yeah and I think the other points that I made a little in my script tonight and we talked on the earnings call, we also believe how you service this segment. A lot of other people that we compete against have not invested in the self-service tools. The center tools, the proactive ability to reach out to these clients and serve them better.

That helps our agents’ economics and ours. And I think that’s why we are seeing a nice little uptick. So I'm pretty, I think as this simple, also keep watching it and focusing on it, but I think we’ve added another growth part of our business..

Yeah, maybe the last point on this is we’ve been at this for five years. So we believe we are ahead of much of our competition in the sense that we have the market leading product out there. We’ve done the mix management that we need to do. As Fred said, the 80% of our business is this nice, high quality customer segment and is an account book.

So we start from that great position and from here we think we just build upon it. The business that’s coming on the book has really high quality mix. And so we believe we’ve got a running start against the competition.

As you see there are a lot of folks talking about this market segment and the value of pulling the account together and we feel like we are several paces ahead of that..

That’s some very helpful detail. Thank you very much. I'll key back in with anything else..

The next question comes from the line of Vincent DeAugustino with KBW. Please proceed..

Good morning everyone. Just a bit of I guess a longer term question and I guess first, thank you very much for the nice guidance range there. And so just looking back over the last few years, it's been quite an awesome trajectory.

And so I'm kind of curious about is that on the guidance, that can be really helpful when there’s substantial flux in the business.

And now that you’ve arrived so to speak, what I'm curious about is of you plan on continuing to provide guidance in the future word, at this point have we reached a kind of level where the results start to speak for themselves? And the reason I ask is we’ve sense some of your peers kind of go down that path of not giving guidance once they’ve kind of come to the conclusion of a turn around.

I just wanted to kind get your philosophy on that now versus maybe a year from now..

So Vincent, I think I’d first start to say we don’t have a sunset date by which we’re planning to no longer give guidance. But to your question, you might imagine we kick it around and talk about it pretty regularly.

And I think to some degree you are right that as our results and our performance that are more normal and more easily projectable, you might be able to not have to provide guidance because it will be simpler to estimate. But I would just say for now for the foreseeable future, that’s not our plan to stop giving guidance.

And we’ll just continue to do so and if we do change we’ll give plenty of notice to that..

Okay, good. Thank you very much for the color. Fred, this may be a good question for you or maybe even perhaps Dick. So when we think about Hannover’s agency model, there’s probably two other competitors that I’d put in the same group mentally as far as that focus on the agency franchise value and how Hannover plays into that.

And I guess what I'm kind of curious about is your -- we’ve seen both of those other two step up their game as far as their commitment to that service level.

And so what I'm curiously about is if there’s anything on the competitive landscape where some of these other players, they’re really agency focused would need to re-double their agency service effort..

Yeah, what's fascinating if you go -- if you think about it both first lines, but let me go broadly. If I go broadly personal commercial, I believe we have one of the handful, and I'm taking less than five world class agency networks.

And our network is narrower than the big national guys that have built over the years strong penetration at the retail agent level and they’ve gone broader and we’ve chosen to stay with the winners a little bit better.

And what you’re seeing is we have built a lot more insight as we talked at Investor Day about that channel, where the business is, how attractive it is, etc.

But what we’ve decided to do and lay on top of it and personalize is a great example, is the notion of about really trying to get at the most profitable business, the best business, the most -- the business we think that would allow us to kind of hold and retain it for a longer period of time.

So we’ve done a lot on saying where are the segments where we can provide valued added.

So whether it's the schmiddle or in the middle market and our industry solution has always been personalized, we worked with our agents to say okay, this is where we can actually help your economics to create more sustainability, but also ability to share shift self-based to us. So personalized is a great example.

We believe that this segment is very good, but it's underserved. I would tell you that a good two thirds of the agency personalized business is in companies. It's with our competitors that are less than $1 billion in premium, many under $500 million.

Their ability to invest in service centers that are effective or self-service or a tool is very much more challenging for them to do that to then people with scale.

And so we’ve kind of raised the stakes a little bit and we’ve given our agents a little bit of advantage because we’ve given them both franchise value, but we’ve raised the stakes on some of these kind of servicing tools.

But I would argue that that, it's working in personal lines and it's raising the stakes for our competitors, but it's the same thing we are going in schmiddle business. You’re hearing people talk about the stuff that’s non-commodity, small commercial.

We’ve been doing that for three, four years and it’s really working well because our ability to -- like at the end of the year, if you look at what we did at the end of the year, how much of our business in middle market was coming through what we call pipeline, which in collaboration with our agents, looking at their business, what matches our appetite, what do we need to do.

We’ve got more looks this year than ever before, which allows us to be very targeted on the business we write, but that comes from both our investment in the data tools, but also in the solutions that we have by industry that allow an agent to say this business I’m going to steer away and give you a good look at it. I think you’re right.

I think we’ve kind of [indiscernible] a lot of our competition too, the regional companies that just don’t have in my view the wherewithal to use the data and then invest in their offering. And what you’re starting to see from us is an ability to call steady growth, because we are getting good looks. We’re working with our guys to get the business in.

And then an environment that we’ll probably see for the next two years where you want to have huge rate increases. So you are not going to see a lot of turmoil in turning the business just because. So there is a lot of stability which you’re going to see a lot of people not get good looks.

So our ability to be proactive and have much value offerings and then get the agents to work with us for pipeline, is an enormous advantage that I have a hard time believing that a lot of the smaller folks will be able to do that. You’ll see a lot more people their growth go away and their rate go down a couple of loss costs.

And I think we have an ability to do that right now, with not just personal lines, but also in some of our other businesses we run..

Vince, I think one other thing I would add to that is that trying to project on the two centers you’re thinking about. There is a very material difference in our product capabilities, which is part of the fundamental difference in whether the specialty industrial, marine, technology, professional liability, healthcare.

We see a bit of executive protection from a couple of those more agency focused competitors, but it’s pretty perfunctory relative to what we do. I think a big part of this is about the sophistication of our organization, is much more comparable as it relates to commercial lines to the very best, most sophisticated players in our industry.

I do think that’s really one of the defining differences, in addition to the points that Fred talked about..

It sounds like you guys actually maybe some of the impetus behind some of the other commentary, so definitely thanks to that. Shipping over to Chaucer, just two quick ones hopefully.

I guess, has there been any change in the net economic tradeoff between UK motor returns and the capital benefits that motor provides to the other lines of business?.

No, that remains as it is since the model that we’re doing now, internal model that we’ve got subject to, we delivered on solvency too is still coming out with that same benefit. The extreme, specifically the one in 200 capital number, we get diverse protection credit from writing the UK note against our other lines. That hasn’t changed..

Okay, good.

And then just on Jan 1 renewals, anything from the Chaucer side that surprised you or anything stand out?.

No, I think wave always guided that 2015 we expect to see notable growth. We plan for that and from what we’ve seen now analyzing, doing a post review of ones, nothing that’s come out of that, particularly on our annuity business, nothing that’s come out of that that surprised us. We still think we are in line with our expectations. .

Okay, thanks very much guys and best of luck..

[Operator instructions] The next question comes from the line of Larry Greenberg of Jenney Capital, please proceed..

It’s actually Lou [indiscernible] calling in for Larry. Congrats on the quarter guys and congrats on the year. We had a couple of questions.

In your reserve strengthening in commercial, was that just all commercial auto or was that beyond there?.

Sorry. I think you mentioned reserve strengthening. Commercial auto there was some development in that line. .

That was with the [indiscernible] it was..

Yeah, in just auto..

In just auto, okay.

Have you guys seen any change in trends there or just a continuation of what’s been going on recently?.

Again, one of the interesting things, obviously we’ve been talking about this since ‘11 and there was a lot of talk about it in the industry. What we feel pretty good about it is a couple of things.

We’ve been at it for a couple of years here and the ability to get rate and do the underwriting has allowed us to have some transparency and we feel really good about our book going forward. Obviously the industry has had some what I would say frequency of severity if you will.

But we feel like we’ve been on top of it and we are in a pretty good place right now. In new business it’s interesting. Pricing in the environment is much more realistic right now.

You are seeing that we business pricing is a really solid and so what the industry has recognized what the issues are and so I think that’s one thing that it might be a change. Last year the industry has really adjusted price levels and you can in my view go into it with your eyes open and build a good book of business.

So at least maintain a good book of business given where our competitors are very active.

So is there anything that Jack you would want to add?.

No, I think to your question a little bit. What we are seeing is that this trend has taken a couple of three years to really fully emerge. Many companies have been watching this. Others have just recently acknowledged what some of us have seen for a couple of years. Remember, this is our new level of BI severity driven by a number of bankers.

So it was really difficult to be able to try to declare where the final resting point was going to be for some of the severities so we think we are at that stage now particularly in the second half of 2014 where wave seen some improvement in or large loss activity that’s driving that severity.

We are cautious as David said earlier to take too much credit for it.

remember the duration of the severity and the litigation that surrounds it pushed out over the last couple of years so you’ve got to be careful about reading too much into present day trends but at least our large loss activity appear to be reacting to some of the re-underwriting and to what Fred said, we are covering up enough price now that even the same large loss activity is going to get better pad for.

We feel like we are at that point of improvement opportunity but we are going to remain very cautious about how we account for this line..

Great, that’s super helpful.

One more question, what are your expectations for expense ratio in commercial and personal? I think freed mentioned 50 basis improvement commercial is that correct?.

Right now to not get into work we’ve done..

Okay and for personal that was?.

It should be stable, just slightly ….

Flat year over year?.

Yes. .

Great. Thank you so much. You were helpful..

We have a follow up question from Vincent DeAugustino with KBW. Please proceed..

Hi guys and thanks for taking the follow up. Two on workers comp.

Just on the top line close system surround a good bit, at least relative to where I’ve been modeling it, but I'm just curious if new business is moving around renewals, auto premiums or items like that would be moving a needle?.

This is Jack. Clearly, you’ve seen a bumping around there from a topline perspective. Some of that is exactly as you described. We have some comparisons on the audit for example, fourth quarter 2014 we have particularly strong AP that came through so the comparisons have a bit of an impact on the fourth quarter numbers.

We also had some booking anomalies that moved the numbers around, but I think what you’ve seen overall is that workers comps growth really going to be in line with our overall growth.

we are going to continue to be cautious in the auto line but if you see a total accounts layer particularly in the lower end of middle market and small commercial and from a profit perspective, we think we have a little bit of bumpiness in 2014 regarding a couple of large losses, but the underlying trends in what we continue to look favorable for us and we have a pretty good prospect moving forward..

Okay and this may just be a bit of a curve on workers comp. I guess one of the things that we’ve heard about is that healthcare reform can cause some shifts in or more toward part-time workers.

So from a loss cost standpoint, I'm kind of trying to think through that because arguably this may be less experience from the workers standpoint and then even if the premium was the same for 40 hours’ worth of work versus two shifts of 20, I'm thinking the margin performance may not be the same and so jus to be curious if you guys have thought through any of that or is it too early to tell?.

Well, we think through it regularly. I think it is too early to tell.

I think there is competing views here that more insured people through the healthcare system will have a positive impact on how many people show up in our workers comp claim environment, but there is also the possibility that the disadvantages quite frankly in the workers comp system can either be a cost in drive a certain amount of behavior into the workers comp sets.

So we are -- one of the things we would say is that we believe wave driven our portfolio towards a risk profile that minimizes the impact one way or the other quite frankly. We are down in the low to no loss sector if you will through with the small commercial environment. Where you can really see volatility in your results and workers comp.

is when you are in the high frequency kind of area. We are approached with those disadvantages and these schedules and the overall claim management issue can come back to haunt you. I think we are going to be in a stable place here for a while.

The worker comp system has really starting the right mix and getting price over loss trend dons we like the trend that we have going in both of those categories..

Okay, thanks for the answers guys. Take care..

There are no further questions in queue at this time. I’d like to turn the call back over to Oksana Lukasheva..

Thank you all for your participation today and we are looking forward to speaking to you next quarter..

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day..