Byline: Bob Kievra

WORCESTER - The Hanover Insurance Group Inc. has set the groundwork for a robust expansion period, taking advantage of changing market conditions with a talented core of professionals who have crafted nimble products independent agents want to sell, the company's president and

At Hanover's annual meeting yesterday, President and Chief Executive Officer Frederick H. Eppinger said the property and casualty insurer is poised to do well over the next five years because every part of the company has been reshaped, restocked and given a new blueprint.

"I feel like this year is fundamentally different," he said to about 125 shareholders and employees at the company's Lincoln Street headquarters. "In previous years we were repairing and fixing. Now, we're competing."

In a 31-minute address, Mr. Eppinger, who took over the company at its nadir in 2003, said Hanover can weather a soft market in which insurers will cut prices to gain market share.

"We have the broadest portfolio and the best talent of any regional company in the country," he said.

Weak, smaller insurers are failing at a time when the large insurers are churning out standardized products that don't meet the needs of small to mid-sized businesses, he said. Hanover has spent the past several years identifying the best insurance agents at a time when those agents are recapturing market share, he said.

For 2007, Hanover reported net income of $253 million, or $4.83 per share, compared to net income of $170 million, or $3.27 per share in 2006. In personal lines of insurance, including automobile and homeowners, net written premiums rose 3.7 percent, to $1.4 billion. For commercial lines, which includes business owners' protection and workers' compensation, net written premiums rose 6.3 percent, to $934 million.

"Our ability to create wealth and financial return is pretty well proven," he said.

Hanover sells its products in 19 states using approximately 2,400 independent agents. The success or failure of those agents holds the key to Hanover's prosperity, Mr. Eppinger said. Hanover focuses on about $125 billion worth of the $450 billion insurance sector, targeting commercial clients that have annual premiums below $200,000.

Independent agents are increasingly being utilized to service those sectors and Hanover believes it has found the best agents across its footprint, Mr. Eppinger said.

"As we get smarter about winners and losers, we win with them," he said.

Agents are attracted to Hanover's specialized underwriters and its commitment to distinctive products, which gives agents more to sell, Mr. Eppinger said.

In addition, Hanover adds franchise value by not diluting its brand by appointing hundreds of new agents around the country.

"We've said our franchise value is important to us," he said.

In other business yesterday, shareholders re-elected directors David J. Gallitano, Wendell J. Knox and Robert J. Murray.

ART: PHOTO

CUTLINE: Mr. Eppinger