Good morning, and thank you for joining us for our Fourth Quarter Conference Call. We’ll begin today’s call with prepared remarks from Jack Roche, our President and Chief Executive Officer; and our Chief Financial Officer, Jeff Farber. Available to answer your questions after our prepared remarks are Dick Lavey, President of Agency Markets; John Fowle, Chief Executive Officer of Chaucer; and Bryan Salvatore, President of Specialty Lines. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement and a complete slide presentation for today’s call are available in the Investors section of our website at www.hanover.com. Our prepared remarks and responses to your questions today, other than statements of historical facts, include forward-looking statements, including our guidance for 2018. We caution you with respect to reliance on forward-looking statements and in this respect, to refer you to the Forward-looking Statements 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 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, the slide presentation or the financial supplement, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Jack.

Thank you, Oksana. Good morning, everyone, and thank you for joining our call. This morning, I will provide an overview of our performance in the quarter and the year as well as reinforce my confidence in our go-forward strategy. Jeff Farber will review our financial results in detail, including specific financial guidance for 2018, and then we will open the line for questions. Overall, we are very pleased with our fourth quarter and full year results. Our performance reflects the building strength of our company’s capabilities and the effectiveness of our strategy. Our fourth quarter net operating income of $2 per share was solid and in line with our expectations. Our full year results of $4.74 per share reflect the underlying financial health of our company. While catastrophe losses adversely affected our earnings for the year, our ex-catastrophe performance was strong with a 90.8% combined ratio, in line with our original guidance. Additionally, we made important strategic progress building on the positive momentum we have established across our business. Our full year operating ROE of 8% was significantly impacted by third quarter catastrophe events, while our fourth quarter ROE was strong at 12.4%. Normalized for the catastrophe losses and its unrelated benefits, our full year ROE of 11% more accurately reflects the earnings power of our company. We believe we can continue to generate strong growth while maintaining attractive profit margins and generating double-digit returns on equity. Our result showed the continued benefit from our key earnings improvement levers across the enterprise: first, as our younger businesses in newer states have matured and our underwriting execution has enhanced, we have improved diversification and overall operating performance; second, we are achieving meaningful expense benefits after years of actively investing in our businesses. Our domestic expense ratio improved by approximately half a…

Thank you, Jack. As Jack mentioned, we are pleased with our underlying results. We reported net income of $51.5 million or $1.20 per diluted share in the quarter compared to a net loss of $13.5 million or $0.32 per diluted share in the same period of 2016. For the year, we reported net income of $186.2 million or $4.33 per diluted share compared to net income of $155.1 million or $3.59 per diluted share in 2016. After-tax operating income for the quarter was $86 million or $2 per diluted share compared to a loss of $19.7 million or $0.46 per basic share in the fourth quarter of 2016. For the year, after-tax operating income was $203.8 million or $4.74 per diluted share compared to $184.4 million or $4.27 per diluted share in 2016. Our annual earnings reflected an underwriting combined ratio of 98.7% in 2017 compared to 98.6% in 2016. Our 2016 results were impacted by a fourth quarter domestic reserve charge, while 2017 earnings were significantly reduced by the third quarter industry-wide catastrophe events. Our catastrophe experience throughout the year was in line with, or better than, our market share and the modeled expected results, given the magnitude of the losses for the industry. Our results reflect the benefits of our strong reinsurance programs, domestically and at Chaucer as well as our careful risk selection and the prior exposure and diversification actions. On an accident year basis, excluding catastrophes, we delivered an improved combined ratio of 91.5%, compared to 92.9% in the prior year. Our 2017 performance is a testament to our underwriting execution and profitability momentum. We believe this comparison is a more meaningful portrayal of our current business trends and the continued improvements we have made to our business, including improved cost efficiencies, underwriting discipline and overall…

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Okay. Our first question on the line comes from Christopher Campbell from KBW. Please go ahead.

Hi, good morning.

Good morning.

Good morning.

So my first question is just on the pricing environment and how that’s improving in Personal and Commercial Lines. Can you give any details on where you’re seeing better rates in commercial? And how would you describe that momentum, like as we’re in 1Q 2018? How has that momentum been progressing?

Thanks for the question, Chris. Overall, I would tell you that we see the pricing environment as reasonably stable. I think we – as the time has gone by, you’re seeing that more and more carriers have different challenges in different aspects of their portfolio, and so the pricing changes are less uniform than maybe we’ve seen in the past. As you look at our progression, we continue to get price in our Personal Lines book slightly above loss trend, a little behind in Commercial Lines, but are, obviously, pulling other levers, including mix and other adjustments, to improve our profitability. So as we look at the business, while there is some signs of some improvement in the casualty area, we saw Q4 as a reasonably stable and somewhat consistent with the market we’ve been experiencing. Dick, I don’t know – on Personal Lines, whether you wanted to add any more color to that?

Yes. I would just – you said it well. I think in the Personal Lines environment we are optimistic that the hard market in auto should continue and we’ll be able to get rate above loss costs. In home, the trend is more at-loss cost, but the environment certainly suggest that it’s – that those trends will – the market will accept it and those trends will continue.

And our Commercial Lines portfolio has become quite diverse, as you know. So there’s a lot of – we can look at it from a line of business standpoint and make some observations. Workers comp, obviously, continues to tend to be the most challenged in term of pricing, and commercial auto tends to be the most opportunistic, given where the overall market is. And so we are – we continue to push for prices where we most need it, and we saw some slight improvement in the fourth quarter and we’ll watch that as we move into 2018.

Got it. That was very helpful. Just a question on the adverse reserve development. There was some in Personal Lines, Commercial Auto and CMP. Any specific trends you’re seeing behind that? And I know Jeff gave a few details on it. Just any trends or any emerging trends you’re seeing since the reset last year? Or any specific accident years in any of those lines that could be causing any additional concern?

Well, Chris, I think, the short answer is no. We don’t see any really overarching trends that I think are worth noting. We are committed to maintaining the discipline and the conservativism in our reserves, and that does require some adjustments at the line of business level as we move throughout the year to ensure that we don’t erode our position. And I’ll maybe turn that over to Jeff to provide a little bit more color in terms of how we continue to manage our reserves carefully.

Sure. Thanks, Jack. Chris, as you know, we had no net domestic development, and we did a detailed reserve review, as we do every year, and we’re committed to maintaining that philosophy of conservativism. First thing we do is look at workers’ comp, and I think we really were sort of compelled to react to workers comp and, to some degree, management liability and professional liability. Obviously, offsetting that, we had the opportunity and took it. Looking at home and auto, there were some sort of unusual kind of idiosyncratic losses there which were largely isolated, that were kind of late traveling or severe. I don’t think it really causes us to think any differently about the current period or other particular losses other than those. You know what, I’ll just remind you, our home business is running at a 45% loss ratio for 2017. So it’s just a – it’s a terrific business, highly profitable. I don’t think the adjustment in prior years for the Personal Lines business causes us to think any differently about our Personal Lines business going forward.

Great. That’s very helpful. Question on Chaucer. We’re hearing from some competitors that [indiscernible] Lloyd’s pricing is improving. But I think Jack mentioned in the opening monologue that he expects net written premium to be flat. Just any color if that market is hardening. Why you wouldn’t want to grow exposures?

Yes, I think what you’ll see is that we continue to manage the portfolio overall to try to be opportunistic in the areas where we think there is opportunity for profit. You’ve seen us develop a number of initiatives over the last several quarters to try to stay on the offense in the areas that are really the most lucrative. That said, there is also some continuing pressure in certain lines and classes, and John Fowle and his team have been very diligent to make that explicit to us, but also to lay that out and not get kind of caught up in the overall sentiment. So I’ll turn it over to John for maybe a little bit more color, but I think what we did see is some improvement on 1-1 [ph], and so we’re cautiously optimistic as we look into 2018. But it wasn’t – it certainly wasn’t the firm market that was predicted several weeks back. John?

Yes, sure. Thanks, Jack. Chris, the – I mean, overall, we see price strength coming into our business in 2018, but it’s not universal, and we’re determined to get our combined ratio to a level that we think is acceptable. So really we will use the price strength to allow us to do some more work on the areas of the business that are underperforming. So overall, that flattens out our total growth for the year.

Got it. And then, just one last one for Jeff or Jack. Just in terms of – I noticed that Hanover slowed its buybacks in 4Q. So how should we think about capital management priorities in 2018? And I’m thinking after factoring in plan to grow dividends, what would you estimate Hanover’s current excess capital is?

Chris, yes, you did notice accurately. We put a grid together in the fourth quarter and the stock ran a little bit and we said, "Let’s just leave it there for the moment" and didn’t revise it. So we didn’t end up buying up much back, if any, in the fourth quarter. We’ll be back in the market on a regular basis after the earnings release, probably starting Monday, whenever the lawyers let us. But – and I think, all through the year we go through our normal process of thinking about capital. We haven’t shared excess capital. And candidly, as Jack said earlier, we’re really still evaluating how much excess capital the new tax law creates. So no question, we’re evaluating dividends, we’re looking at stock buybacks, we’re thinking about other uses of the capital that gets created, and you’ll hear more about that as we go forward throughout the year. But certainly, we’ll be back in the market with some stock buyback activity.

Okay, wonderful. Thanks for the answers, best of luck in 2018.

Thank you, Chris.

Thank you. Our next question on the line comes from Matt Carletti from JMP. Please go ahead.

Hey, thanks, good morning.

Good morning.

I guess to start, Jeff, just follow up on Chris’s question there on capital management as a follow-on. We – do you have a desire, or would you consider, paying down some debt as a use of capital? Or you’re very comfortable with kind of where your debt levels are and you see share buybacks or dividends or are there M&A or other things as better uses?

Well, we certainly look at it all the time. I think, conceptually, we’re relatively low leverage at this point with sort of 20% level, give or take 1 point or 2. So I think we feel pretty good about it. But we look at the debt and the capital opportunistically, and we’re going to make an economic decision as what the best thing’s to do with the excess capital that we create over the course of the year, and that will include – considering our debt, it’ll include returning capital to shareholders and other opportunities that organically or even, perhaps, otherwise on some small things that they need to meet our capital hurdles.

Okay, great. And then next question, just shifting to your comments on the Chaucer expense ratio. Did you say in the ballpark of 45%? Did I hear you correctly?

We did. That’s been our long-term view, and that’s the expectation over the course of the year, largely driven by some sterling currency movement and a few other things. Particularly, it was a little bit lower in 2017-year because of some performance comp.

Okay, okay. So – all right, because I’m looking back and I haven’t seen it there for quite a while, and so just wanted to make sure that we’re comparing apples-to-apples. So it’s coming off of about 41% base in 2017, and I – looking at the right kind of comp?

It is, and we’ve been saying for quite some time that it’ll be 45%. And you’re right, it’s consistently been a little below that, and we’re hopeful that it’ll be below that, but that’s our best view at the moment.

Okay.

And this is Jack. Matt, also I would say that we just – one of the things we’ll try to continue to do relative to our updates to you is how mix shift can affect that over time to, right. We have a portfolio, and so as we lure – work through which classes we’re pursuing, we have some different new initiatives over time that can influence the expense composite of our overall combined ratio.

Good point, understood. Last question. Just on your comments on Q1 weather, kind of more broadly just reminding us that seasonality is there. How would you characterize what you’ve seen in January so far in this Q1? Is it kind of average? Is it been worse than average? I know there’s been a lot of ice and snow in the South and maybe that’s not normal.

Yes. I guess, you could always – you could answer the question by saying, "If you could define normal, I’ll give you a straight answer." So listen, it’s – we clearly saw some weather in January. We’re still working through large loss components versus just the average pay on some of the more frequency. But clearly there’s been some weather to start of the year and we’re getting our arms around that. I can tell you, in the 11 years I’ve been here, the weather in January is rarely an indicator of how our full year results will be. So frankly, we just take it in stride and do our job and let the rest take care of itself.

Fair enough. Thank you for the answers and congrats on a nice end of the year.

Thank you.

[Operator Instructions] Our next question on the line comes from Paul Newsome from Sandler O’Neill. Please go ahead.

Was I asking – I wanted to ask about expense cuts, and I think you had a, if I recall, a $50 million effort that happened last year, and kind of where we are in that process, and where we might be in terms of improving the expense base perspective?

Yes. This is Jack, Paul. Thank you. Clearly, we executed on our stated expense initiatives in 2017, and worked through. All of those started to see some benefit in the third, and certainly, in the fourth quarter, you’ll see some continued improvement in that trajectory in 2018, as we stated in our prepared remarks. So U.S. domestically, we expect that our expense position, through a combination of our growth as well as those expense initiatives coming through, of roughly 0.5 point on the U.S. domestic expense ratio into 2018.

And just to amplify that a little bit, going forward into 2018, we’re committed to the same kind of financial and expense rigor. So we’ve always got things that we want to be spending money on, that investments need to be made for growth and other reasons, and so we’re going to be carefully monitoring our expenses in terms of that discipline as we go forward to make the right choices. But overall, we’re committed, as we grow the top line, to really capture a substantial portion of the leverage on those fixed costs.

And then I was hoping you could talk a little bit about different subject, M&A and both buying and selling things. Obviously, management has changed quite a bit over the last couple of years, and I don’t know if the philosophy has changed very much or the appetite or even if you feel your expertise has changed either what direction. Maybe you could just kind of review those general topics and give us a sense of what the philosophy on M&A for Hanover is today?

Yes. Thanks for the question. I would tell you that over the course of the last decade, certainly since I’ve been here, we have found the opportunity to do some inorganic activity, and I would suggest you that a great majority of the management team that has been involved in that is very much here and continuing to run the business and run the operations side of the business. So what I would tell you though is, as we look out over the next 18 to 24 months, we will continue to look into the world of, particularly, smaller nichey-type opportunities occasionally as other companies make decisions to change their focus. There would be coming some renewal-rights-types opportunities. So we’ll clearly, from a corporate development standpoint, stay active in that pipelining process. That said, we look into the next couple of years and see tremendous growth opportunity coming from the investments we’ve already laid down, both in terms of new geographies and in the newer businesses, and so we’re particularly excited about, in a very thoughtful and disciplined way, getting paid back on those past investments and generating some solid organic growth in the right categories.

Fantastic. Thanks for the color.

Thank you, Paul.

Thank you. Our next question comes from Larry Greenberg from Janney. Please go ahead.

Hey, good morning. So I guess it’s almost been a year since your Investor Day of last year, and just looking for a little bit of an update on the initiatives to kind of bridge the gap between what Chaucer does and what you do in special products domestically. Kind of – I think you’ve described it as high complexity to low complexity. And then there is a gap in the middle there that you had indicated you would target. So have there been any initiatives along that pathway?

Yes, Larry, thanks for the question. At the highest level what I would suggest to you is that The Hanover 2021 strategy and the levers that we outlaid, we feel terrific about. We really feel like we are now showing the power of our core businesses and how we can get profitable growth from that, which was, as you can remember, a very key lever of how we were going to take this company to the next level. Additionally, we’re really pleased to have Bryan Salvatore joining us now, almost eight months. He has spent a tremendous amount of time looking at our current portfolio and looking at some of the strategic work we did before his arrival and putting his stamp on how do we feel about the current portfolio and what areas will we consider moving to next, albeit in a thoughtful way. And so – maybe it would be great to just to let you hear from Bryan a little bit about his view now, eight months on the job, and where he sees some opportunities.

Yes, thanks, Jack. And, Larry, thanks for the question as well. And I’d tell you, you’re right, it’s been eight months of working very closely with the businesses, and I really actually like what I see. I see disciplined execution across our areas, I see growth in the areas that we want to be growing, we should be growing. I’ll point to a couple of examples there. For example – and you know, Jack and Jeff mentioned it before, in the professional liability areas, in the management liability areas, we’ve got strong performance and we’re really seeing these areas come into their own, and they really disproportionately grew or drove our growth in 2017. And that’s what we’re expecting in 2018. Similarly, in our Marine business, that’s been a consistent strong performer for us and very strong growth in 2017, and we’re anticipating strong growth, again, in 2018. So if I look across the lines, I think we should be really confident in this business. The areas that should be growing or driving our growth, and the areas that we’ve been – had in our watch list, I like the execution that I’m seeing there too. Real disciplined execution, really good underwriting action. And as a result, I would call it really measured growth. So I think we are leaning into the strategy, growing where we want to be growing as part of that strategy. So I think we should feel really good about the specialty business and The Hanover 2021 plan.

So just to fully – you know, to fully answer the second part of your question, or maybe the first part of your question, is, in terms of looking forward into the insights that John Fowle and his team bring to us from Chaucer, but also some of the ground-up work we’re doing here in U.S. domestic specialty, we have started to outlay the very specific areas that we would like to go next. And they come in two flavors. They come in, going out slightly up market in some of these areas that we think we’re performing well, and our insights from our distribution show us where we could fit in the mosaic of our agency plan. And then also some newer areas. And you’ll hear more about this, but clearly what Chaucer and what Bryan and his team have been looking at is, where is a thoughtful place in the world for us in cyber. We do some cyber domestically, really as a add-on, if you will, to our package business. But over time we have to be a little bit more offensive about where the specific areas are that we could play more actively when that – as that becomes more important to customers and to the agents. The management liability and professional liability, here we laid out some steps to make some additional investments there in some of the very specific subsectors of that business. And then there’s some other new areas, Larry, that we’re not ready to disclose, that we’ve been doing some analysis on. But as has always been in the case in the past, we are not going into any new areas without the proper level of expertise. So that’s – that is one of the critical steps that we’re taking is, not only what the opportunity, but what is the investment or the resources that we need to capture to take the company to the next level.

And I think I would just add that, where we move off the market, it’s going to be measured. I think you said slightly. It will be measured, it will be thoughtful in turn, and it will really answer the needs that we see that our agents have in this business.

Great, thank you. That’s very helpful. And then, just on the discontinued charge. You’re certainly not alone in seeing some wiggles in long-term care. But could you just kind of frame what’s left there? And did you do a special review of that block? Or was this just part of kind of an ordinary annual review process? Just give us a little flavor on that. Thanks.

Yes. I’m going to turn that over to Jeff. But obviously, we regularly review all aspects of our business, including discontinued operations. Anybody that has a newspaper knows that the long-term care business, it’s just been seeing some pretty dramatic changes. So obviously, that was a particular focus this year, to make sure that we understood how that related to our current reserve position. But I’ll turn it over to Jeff to maybe talk you through a little bit of about how we approached it.

Sure. Larry, this was really an old pool, dating back to the life company. And we look at this thing every quarter and, obviously, do the underlying pool. We have a relatively small interest in the pool. So the underlying pool’s actuaries do a little bit more work at year end. And there was some deterioration, and it seemed as if the pool actuaries were being substantially more conservative in terms of how they were looking at the underlying data and models. So we knew we needed to react to it. And for us, it was an opportune time to be more conservative in 2017 with this reserve. So I don’t think we’re particularly concerned about it at this point, and it was a good thing to do to increase our reserves here for this pool.

Fair enough, thank you.

Thank you. [Operator Instructions]

Looks like we don’t have any more questions. Thank you, everybody, for your participation today, and looking forward to speaking to you next quarter.

Thank you.

Thank you.