Good morning, ladies and gentlemen. Welcome to The Hanover Insurance Group, Inc. Annual Shareholder Meeting. My name is Brandon. I'll be your operator for today's call. At this time, all lines are in a listen-only mode. Please note this conference is being recorded. I will now turn it over to Mike Angelini, Chairman of the Board. You may begin, sir.
I've been doing this for a long time. This is the first time I've been introduced. Well, good morning. Welcome, ladies and gentlemen. This is the annual meeting of The Hanover Insurance Group, Inc. We welcome you all here. I'm Mike Angelini. I'm Chairman of the Board of Directors. I'm very pleased to have with me Joe Zubretsky, our President and Chief Executive Officer. You'll hear from Joe later in the session. My job is to lead the formal part of the meeting. Following that, we will have a presentation from Joe. Following that presentation, there'll be an opportunity for any of you to ask questions, either of Joe or me or of the other directors. I call the meeting to order. Each of the directors and director nominees, along with a number of the officers of the company, are here this morning.
We are missing Karen Francis, who was not able to attend today's meeting. Her term expires today. I want to say thank you to Karen, who I hope is listening in, and thank her for her service on the board of directors of the company. In addition to me, the other directors here are Richard Booth, Jane Carlin, Kevin Condron, Cynthia Egan, Dan Henry, Wendell Knox, Joe Ramrath, and T. Taggart. I would ask, ladies and gentlemen, that you stand and be recognized. Thank you. The company's transfer agent, Computershare, has delivered an affidavit of mailing establishing that notice of this meeting was appropriately given. A copy of that notice and the affidavit of mailing will be filed with the minutes of this meeting. All shareholders of record as of the close of business on March 17, 2017, are entitled to vote at this meeting.
Representatives from Computershare are here today and have been appointed Inspectors of Elections. The inspectors have indicated that the company has received valid proxies representing a majority of the outstanding shares issued by the company. Accordingly, a quorum is present. There are four items for consideration today and for voting and discussion today. They are as follows. First is the election of directors. I have been nominated to serve a one-year term as director. Jane Carlin, Dan Henry, and Wendell Knox have each been nominated to serve a three-year term. The second is consideration of an advisory vote on executive compensation, so-called say-on-pay vote. Third is consideration of an advisory vote on the frequency with which the company should conduct future say-on-pay votes, the so-called say on frequency. Fourth, the appointment of our independent auditors.
The ratification, I should say, the appointment of our independent auditors, PricewaterhouseCoopers, as the independent registered public accounting firm for the company for 2017. At this time, I would like to ask for a motion with respect to all of these proposals. So moved. So moved. Therefore, these are before us. Representatives of PricewaterhouseCoopers are in attendance. They'll be available to answer any questions with respect to our voting. The floor is open for discussion by any of the shareholders present of any of these four proposals. We won't take them independently. We won't take them separately, I should say. We'll take them all together. And then following this discussion, if anyone would like to receive a ballot, there will be opportunity to do so. If you are a shareholder and have any question regarding any of these proposals, please raise your hand. I will recognize you.
We'll provide you with a microphone. We'd ask you to please state your name, indicate whether you are a shareholder or a proxy, and we look forward to hearing from you. Yes, sir.
Good afternoon. My name is David Menasian. I'm a representative of Carpenters Union Pension Funds that hold shares in Hanover Insurance Group. Collectively, Carpenters Pension Funds have $45 billion in assets, and they hold over 400,000 shares in Hanover Insurance Group common stock. Mr. Chairman, our funds would like to voice support for a triennial say-on-pay vote frequency. During the deliberations of the Dodd-Frank legislation, we strongly advocated for a triennial say-on-pay vote. We believe executive compensation plans should be designed to incentivize and reward long-term corporate value growth, not short-term stock price increases. Excuse me. Today's annual say-on-pay vote by shareholders on thousands of complex compensation plans in a condensed timeframe during proxy season has really led to a simplistic checklist voting by leading proxy voting services. Unfortunately, we feel that this has resulted in a standardization of compensation plans.
We believe executive compensation plans should be by a company. Each company should be distinct and be tailored with a combination of performance metrics, performance timelines, and compensation instruments that really drive the long-term strategy of a company. Mr. Chairman, we would hope that the board would strongly consider adopting a triennial say-on-pay vote frequency. We believe that creates a better framework for a more insightful analysis of executive compensation plans.
Thank you.
You're welcome. To that end, just one more comment on the ratification of the independent auditor. Our fund strongly believes in the integrity of that auditor independence, and the integrity of it is critical to corporate financial reporting. We understand that audit firm and corporate client relationships are generally long-tenured, and that's why we feel that shareholders should be informed of any actions taken by the audit committee or the company to protect auditor independence. To that end, we have prepared a brief report that looks at the quality of auditor independence disclosures in corporate proxy statements at 70 New England-based companies, including The Hanover Insurance Group. A copy of the report was sent to the company's attention April 4th. We just simply wanted to acknowledge and express our appreciation for the positive and constructive communication we've had with Hanover on the issue.
Particularly, I want to thank Charles Cronin's letter and the subsequent conversations I've had with Jay Huber on the matter. I just want to make it clear that we will endeavor to reflect The Hanover Insurance Group's disclosures in any future characterizations we make on the company's audit independence disclosures, including any iterations of the report in the future. Thank you, Mr. Chairman.
Thank you very much. Are there any further questions or comments? Let me just say that Mr. Menasian, we appreciate yours and the Carpenters Union's interest in our corporate governance and appreciate your advice. I would just also add that Mr. Menasian and the Carpenters local here in Worcester is actively involved in the progress of our community in a collaborative and constructive way. That's a process in which this company has a great interest. Thank you very much. In the absence of any further questions, we will move on. If there's no further discussion, the polls are open for the receipt of votes. Most shareholders have voted, but if you are here and have not voted or if you wish to change your vote, please raise your hand. We will provide you with a ballot.
I see no hands raised, and the polls are therefore closed for voting. Based upon the votes, which have been tallied and made available to me prior to this meeting, the nominees for election to the board of directors have been appropriately and duly elected. The advisory proposal on say-on-pay has been approved, as has been the proposal regarding our independent auditors in each case by more than 95% of shares voting. A majority of the shareholders voting on the say on frequency proposal expressed the desire for an annual say-on-pay vote. Are there any other matters to be brought before this formal part of our annual meeting? Seeing none, this concludes that part of the meeting at which formal proposals are made. Now it is my great pleasure to introduce our President and Chief Executive Officer, Joseph Zubretsky.
Thanks, Mike, and good morning, everyone, and welcome. Before we adjourn, I want to take a few minutes to put our 2016 and first quarter results in perspective, review our Hanover 2021 strategy, and comment on our prospects. We made significant progress during 2016, setting the stage for an even more successful future. Our employees and our company responded well to significant market challenges, provided our partners and their customers with the high-quality products and services they expect and deserve, and remained focused on delivering strong returns for our shareholders. At the same time, we developed the framework of a long-term strategic plan that we believe will enable us to deliver substantial value for our shareholders, partners, customers, and other stakeholders. Our earnings for the year reflect the underlying strength of our business.
All in, we reported full-year operating income of $184 million, or $4.27 per fully diluted share, which included a strengthening of domestic reserves. We earned after-tax operating income of $338 million, representing an increase of 13.7% over the prior year, putting domestic reserve development aside. Our domestic businesses generate solid, profitable growth, increasing rates, and improving retention. Our Lloyd's business, Chaucer, continued to managing the challenging market conditions well, leveraging its underwriting expertise and discipline and suppressing growth in favor of profitability. Similarly, we are pleased with our performance in the first quarter of the year. While higher-than-normal catastrophe losses in our domestic business impacted our bottom line, as it did for our competition, each of our core lines of business continued to perform well. We reported operating income of $41 million, a consolidated combined ratio of 99.5%, and an operating return on equity of 6.1%.
However, on an ex-CAT basis, we reported a combined ratio of 92.4% and an operating return on equity of approximately 9.2%. We produced solid top-line consolidated growth of 3.7% in the quarter or 5.3% adjusted for a reinsurance to close transaction at Chaucer. With the first quarter behind us, we believe we're on track to deliver on the 2017 outlook we presented at our investor day in February, assuming our catastrophe losses are in line with our original full-year expectation. Looking beyond our financial results, we made important progress on the strategic front during the second half of 2016 and year to date, developing our global growth strategy, which we call Hanover 2021. We believe this strategy will help our partners grow while we generate top quartile returns. Our strategy focuses on three strategic priorities.
The first is to expand our core business, building on our position as the carrier of choice for independent agents and brokers. Our strategy calls for us to responsibly broaden our risk appetite, develop new product and service capabilities, and provide proprietary analytics and deep market insight that help our partners grow their businesses. Our second strategic priority is to provide market-leading specialty capabilities across the spectrum. Today, we are well-positioned on both ends of the specialty market spectrum. Our focus going forward will be to expand our risk appetite, developing further expertise in products in the U.S., and to take advantage of new opportunities in the middle of the specialty market spectrum. Our third strategic priority is to drive growth for our partners through innovation. This initiative is all about helping our agent partners generate premium growth.
Our innovation team will work closely with our agents to help them compete more effectively, especially against direct writers and Insurtech business models, creating business solutions that will help our partners thrive in the insurance markets of the future. As we advance our strategic priorities, we will create the infrastructure necessary to successfully execute against our plan. Our goals are to instill even greater operational discipline, deliver service excellence that exceeds the expectations of our partners and customers, bring even more rigor to our financial and risk management, being laser-focused on capital management, book value growth, and ROE expansion. At the same time, we are committed to building an organization of the future, one that attracts and retains talented, dedicated employees, helps our employees grow and develop, and recognizes and rewards our employees for their contributions. This is an exciting time for us.
Our organization is stronger financially and better positioned competitively than ever. With our markets intensely competitive and undergoing fundamental and pervasive change, we look forward with confidence, committed to providing our partners and customers with exceptional insurance solutions in a dynamic world and delivering superior returns for our shareholders. Thank you. Now I'd like to invite Mike back up to the podium, and Mike, myself, or the rest of the board would be happy to entertain any questions.
Any questions? Well, before I adjourn, let me just say on behalf of the board that this is Joe Zubretsky's first year as our President and Chief Executive Officer. We could not be more pleased with his leadership and with the leadership of the operating committee here of the company. This is an exciting time for Hanover. I just want to say, Joe, to you and your leaders, thank you very much, and thank you all for attending. The meeting is adjourned.