Stock-based Compensation

3 Months Ended

Mar. 31, 2025

Share-Based Payment Arrangement [Abstract]

9. Stock-based Compensation

As of March 31, 2025, there were 1,787,587 and 1,221,601 shares available for grant under The Hanover Insurance Group 2022 Long-Term Incentive Plan and 2023 Employee Stock Purchase plan, respectively.

Compensation cost for the Company’s stock-based awards and the related tax benefits were as follows:


	Three Months Ended March 31,
(in millions)	2025			2024
Stock-based compensation expense	$	6.6		$	6.7
Tax benefit		(1.4	)		(1.4	)
Stock-based compensation expense, net of taxes	$	5.2		$	5.3

Stock Options

Information on the Company’s stock option activity for the three months ended March 31, 2025 and 2024 is summarized below.


	Three Months Ended March 31,
	2025					2024
(in whole shares and dollars)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding, beginning of period		1,111,871		$	117.43		1,137,042		$	111.57
Granted		140,393			161.82		150,731			134.26
Exercised		(92,520	)		89.99		(66,405	)		81.26
Forfeited or cancelled		—			—		(2,277	)		134.26
Outstanding, end of period		1,159,744			124.99		1,219,091			115.98

Restricted Stock Units

The Company currently issues time-based, market-based and performance-based restricted stock units to eligible employees, all of which generally vest after three years of continued employment.

The following table summarizes activity information about employee restricted stock units:


	Three Months Ended March 31,
	2025					2024
(in whole shares and dollars)	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Time-based restricted stock units:
Outstanding, beginning of period		386,712		$	137.44		376,626		$	132.04
Granted		136,535			160.40		154,826			133.26
Vested		(118,406	)		139.49		(118,768	)		115.43
Forfeited		(2,108	)		140.39		(7,370	)		131.90
Outstanding, end of period		402,733			144.60		405,314			137.37
Performance-based and market-based restricted stock units:
Outstanding, beginning of period		126,211		$	140.47		120,504		$	132.76
Granted		52,360			178.39		53,336			132.27
Vested		(31,052	)		141.58		(41,290	)		112.36
Forfeited		(14,369	)		152.88		(6,339	)		108.06
Outstanding, end of period		133,150			153.78		126,211			140.47

In the first three months of 2025 and 2024, the Company granted market-based awards totaling 23,492 shares and 25,414 shares, respectively, to certain members of senior management, which are included in the table above as performance and market-based restricted stock activity. The vesting of these stock units is based on the relative total shareholder return (“TSR”) of the Company. This metric is generally based on relative TSR for a three-year period as compared to a pre-selected group of property and casualty companies. The fair value of market-based awards was estimated at the date of grant using a valuation model. These units have the potential to range from 0% to 200% of the shares disclosed for grant year 2025 and from 0% to 150% of the shares disclosed for grant years 2024 and 2023. The amounts reported as forfeited in the table above in 2025 and 2024 of 14,369 shares and 6,339 shares, respectively, related to market-based awards that achieved a payout below 100%. These awards were forfeited in the first quarter of 2025 and 2024, respectively.

The Company also granted performance-based restricted stock units in 2025 and 2024, totaling 28,868 shares and 27,992 shares, respectively, which are based upon the Company’s achievement of return on equity objectives. These units have the potential to range from 0% to 200% of the shares disclosed for grant year 2025 and from 0% to 150% of the shares disclosed for grant years 2024 and 2023. Increases above the 100% target level are reflected as granted in the period after which performance-based stock unit goals are achieved. Decreases below the 100% target level are reflected as forfeited. Included in the amounts granted above in 2025 and 2024 are 5,246 shares and 2,615 shares, respectively, related to performance-based awards that achieved a payout in excess of 100%. These awards vested in the first quarter of 2025 and 2024, respectively.