For the most part it is this:
1. The gasoline engine produces very little torque off idle, peaks at 4000 rpm and then tapers off to redline, and the horsepower of the gasoline engine increases from idle to redline at about 5200 rpm.
2. MG1 is the three-phase starting motor that starts the gas engine and is also an alternator.
3. MG2 is the main three-phase electric output motor and can also be an alternator.
The electric motors have peak starting torque at zero rpm and decrease all the way up to max rated rpm of each electric motor depending on design parameters. Rated peak power output (not at max rated rpm of each electric motor) is somewhere in between where efficiency, emf back and forth, and amperage create the highest power output. Also the electric motors are probably rated for a peak rating of 60kW (basically the max heat rating it could produce) but the rest of the system can't support it so it'll only produce as many kWh as the inverter and battery will let it suck (bottleneck).
Kinda like saying a gasoline motor is rated for 350hp but we are going to put a 200hp fuel system on it to lower its output to 200hp.
More than likely they chose this motor system as it was the most efficient system for overall driving and it was easier to find an inverter to match the starting torque of the little motor, and then start the next big boy electric motor when its already spinning (less starting torque to overcome which requires smaller inverters/and less amps). City driving nets them the highest points with the EPA rating system (55% city) and focusing on highway doesn't get them as many points for their corporate mpg average.
Similar story: we were given a three-phase motor but couldn't afford a big enough inverter to overcome locked rotor torque/starting torque to start the motor so we swapped to a DC motor.
The max discharge limit of the Gen 3 Prius' battery was only 27 ish kW which is about 36hp peak that the battery is rated to sustain (its sustained power output rating or also its sustained heat output rating without overheating the battery).
So it looks like the battery was the limiting factor for system power output, but the electric motors and gasoline engine create fantastic avhp and avtq together (flat/er hp and torque curve) over the operating range with the CVT than seperate for increasing speed, gives up peak efficiency on steady state cruising from all the conversion losses but tries to make it up by staying in peak BSFC better, and from having a smaller gasoline engine than normally required, and trying to shut off the gasoline engine as much as possible at slow speed.
Basically if you were a car nut and put in a big ass battery and matching inverter the electric motor is rated to sustain and net you up to 60kW more horsepower (80ish hp). This can contribute to peak system horsepower if they are geared to achieve peak power at the same rpm (which they aren’t).
So 98hp plus about 36 ish horsepower = 134hp
https://ebikes.ca/learn/power-ratings.html