-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SEvg/J+v6FoXWzYuSJz2hmI4v0LF+R6w10PDfJIcftbxWYKVQUT0wvrNW/v4jlvK wotggIm+SYRj47z4IIUilA== 0000073952-03-000068.txt : 20030508 0000073952-03-000068.hdr.sgml : 20030508 20030508162841 ACCESSION NUMBER: 0000073952-03-000068 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030508 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO CASUALTY CORP CENTRAL INDEX KEY: 0000073952 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 310783294 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05544 FILM NUMBER: 03688349 BUSINESS ADDRESS: STREET 1: 9450 SEWARD ROAD CITY: FAIRFIELD STATE: OH ZIP: 45014 BUSINESS PHONE: 5136032600 MAIL ADDRESS: STREET 1: 9450 SEWARD ROAD CITY: FAIRFIELD STATE: OH ZIP: 45014 8-K 1 f8k.txt OHIO CASUALTY CORP FORM 8-K 1Q03 EARNINGS ============================================================================= SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 8, 2003 ----------- Commission File Number 0-5544 OHIO CASUALTY CORPORATION (Exact name of registrant as specified in its charter) OHIO (State or other jurisdiction of incorporation or organization) 31-0783294 (I.R.S. Employer Identification No.) 9450 Seward Road, Fairfield, Ohio (Address of principal executive offices) 45014 (Zip Code) (513) 603-2400 (Registrant's telephone number) Not Applicable (Former name or former address, if changed since last report) Page 1 of 2 Pages ============================================================================== ITEM 9. Information Provided under Item 12 (Results of Operations and Financial Condition) The following information is furnished pursuant to Item 12, "Disclosure of Results of Operations and Financial Condition." On May 8, 2003, Ohio Casualty Corporation issued a press release announcing its first quarter 2003 earnings. A copy of the press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference. On May 8, 2003, Ohio Casualty Corporation issued certain Supplemental Financial Information to first quarter 2003 earnings which was posted on its website at www.ocas.com. A copy of the supplemental financial information is attached hereto as Exhibit 99.2 and hereby incorporated by reference. Exhibit Index - ------------- 99.1 Press release dated May 8, 2003 issued by Ohio Casualty Corporation. 99.2 Supplemental Financial Information issued by Ohio Casualty Corporation on May 8, 2003 and posted on its website at www.ocas.com. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OHIO CASUALTY CORPORATION ------------------------- (Registrant) May 8, 2003 /s/ Debra K. Crane ---------------------------------- Debra K. Crane, Senior Vice President, General Counsel and Secretary Page 2 of 3 Pages EX-99 3 exh99-1.txt OHIO CASUALTY CORP PRESS RELEASE - 5/8/03 Exhibit 99.1 Analyst contact: Dennis E. McDaniel Vice President and Controller 513-603-2197 dennis.mcdaniel@ocas.com Media contact: Cindy L. Denney Assistant Vice President, Corporate Communications 513-603-2074 (ofc.), 513-703-7372 (cell) cindy.denney@ocas.com For Immediate Release - --------------------- OHIO CASUALTY CORPORATION REPORTS FIRST QUARTER 2003 EARNINGS ----------------------------------- FAIRFIELD, Ohio, May 8, 2003 --- Ohio Casualty Corporation (Nasdaq:OCAS) today announced net income of $19.9 million, or $0.33 per share, for the first quarter ended March 31, 2003, compared with $26.9 million, or $0.44 per share in the same quarter of 2002. President and Chief Executive Officer Dan Carmichael, CPCU commented, "We are disappointed with our overall operating results for the first quarter. As we previously reported, catastrophe losses and poor results for workers' compensation and the New Jersey personal auto run-off business negatively impacted the quarter. Our premium volume was lower than we expected as competition in parts of the marketplace is increasing. Fortunately, we still maintained significant price increases for all business segments. A number of our major product lines-personal auto, if you exclude New Jersey, commercial multiple peril and other commercial property business, and all of Specialty Lines-which in total represent approximately half of our premium revenue, had results near or better than break-even in terms of statutory underwriting profit. While some of the other lines did not show improvement during the quarter we have taken actions to improve these lines and expect them to generate better results as the year progresses. We remain convinced that the changes instituted with our strategic plan are moving the company toward the ultimate objective of achieving meaningful underwriting profitability." The major components of net income are summarized in the table below:
Three Months Summary Income Statement Ended March 31, ($ in millions, except share data) 2003 2002 - ---------------------------------- ---- ---- Premiums and finance charges earned $349.3 $361.0 Investment income less expenses 53.2 50.9 Investment gains realized, net 19.3 22.8 -------------------- Total revenues $421.8 $434.7 Losses and benefits for policyholders $208.8 $211.7 Loss adjustment expenses 47.4 51.5 Underwriting expenses 132.7 127.9 Corporate expenses 3.1 2.5 -------------------- Total expenses $392.0 $393.6 Income tax expense: On investment gains realized $ 6.8 $ 8.0 On all other income 3.1 6.2 ------------------- Total income tax expense $ 9.9 $14.2 Net income $19.9 $26.9 =================== Average shares outstanding - diluted 60,968,486 61,061,794 Net income, per share - diluted $0.33 $0.44
Consolidated before-tax net investment income for the first quarter of 2003 was $53.2 million compared with $50.9 million in the first quarter of 2002. During the first quarter of 2003, net investment income was positively impacted by a settlement of $1.25 million for the termination of an investment management agreement. Consolidated before-tax realized investment gains amounted to $19.3 million for the quarter ended March 31, 2003. For the three months ended March 31, 2002, before-tax realized investment gains were $22.8 million. The Group continued to reduce its equity holdings in order to reduce the effect on statutory surplus of future stock market volatility. Management of the Corporation believes the significant volatility of realized investment gains and losses limits the usefulness of net income as a measure of current operating performance. Management uses the non-GAAP financial measure of net income before realized gains and losses to further evaluate current operating performance. For the first quarter 2003, consolidated after-tax realized gains positively impacted net income by $12.5 million, compared with $14.8 million for the first three months of 2002. Net income before realized gains and losses is reconciled to net income in the table below:
Three months Ended March 31 ($ in millions) 2003 2002 - --------------- ---- ---- Net income before realized gains and losses $ 7.4 $12.1 After-tax realized gains and losses 12.5 14.8 ----- ----- Net income $19.9 $26.9
Amortization and impairment write-down of the Corporation's agent relationships intangible asset for the first quarter 2003 totaled $4.8 million before tax, which consisted of $1.9 million in amortization and $2.9 million in impairment. This compares with $8.0 million before tax in the first quarter of 2002, consisting of $2.7 million in amortization and $5.3 million in impairment. This asset is related to the acquisition of the commercial lines business from Great American Insurance Company in 1998 and the amortization and impairment write-down of such assets are non-cash charges. Management uses statutory financial criteria to analyze the Group's property and casualty results and statutory financial measures are required to be reported to insurance industry regulators. Management analyzes statutory results through the use of insurance industry financial measures including statutory loss and loss adjustment expense ratios, statutory underwriting expense ratio, statutory combined ratio, net premiums written and net premiums earned. The statutory combined ratio is a commonly used gauge of underwriting performance measuring the percentage of premium dollars used to pay insurance losses and related expenses. A discussion of the differences between statutory accounting principles and generally accepted accounting principles (GAAP) in the United States is included in Item 15 on pages 67 and 68 of the Corporation's Form 10-K for the year ended December 31, 2002. At March 31, 2003 and 2002, statutory surplus, a financial measure that is required by insurance regulators and used to monitor financial strength, was $733.8 million and $778.7 million, respectively. Statutory surplus has increased $53.9 million since September 30, 2002, including $8.1 million since December 31, 2002. The ratio of twelve months ended net premiums written to statutory surplus as of March 31, 2003 was 1.9 to 1. Property-Casualty Operations The table below summarizes the statutory net premiums written for the operating segments:
Statutory Net Premiums Written First Quarter % ($ in millions) 2003 2002 Chg - -------------------- ---- ---- --- Commercial Lines $205.1 $192.8 6.4 Specialty Lines 32.9 39.5 (16.7) Personal Lines 114.1 142.6 (20.0) ------ ------ ------ All Lines $352.2 $374.9 (6.1)
The net premiums written decline from 2002 was primarily related to the withdrawal from the New Jersey private passenger auto market, which accounted for $25.0 million of the decrease. Net written premiums continue to be positively impacted by price increases, partially offset by more conservative underwriting of workers' compensation and construction classes of business and by changes to reinsurance contracts. Commercial Lines average renewal price increases were 13.2% in the first quarter 2003, only slightly below management's expectations, compared to 14.9% in the same period of 2002 and 14.2% in the fourth quarter 2002. Increased competition in several markets for small to midsized policies and more conservative underwriting of workers' compensation and construction classes of business partially offset the price increases for a net premiums written increase of 6.4% compared to the first quarter 2002. Specialty Lines net premiums written were down $6.5 million compared to prior year as a result of higher reinsurance costs on commercial umbrella. Specialty Line premiums before reinsurance increased 12.6% over first quarter 2002. Higher reinsurance costs were driven by the inclusion of a ceding commission and by increased reinsurance rates per dollar of premium. The addition of ceding commissions on the current contract causes a corresponding increase to ceded premiums. The first quarter 2003 also included an accrual of ceded premiums related to reinstatement of previous reinsurance contracts. Commercial umbrella is the largest Specialty Line product and recognized 20.5% average renewal price increases for the first quarter 2003, compared to 45.1% for the same quarter in 2002 and 33.1% in the fourth quarter 2002. In 2002 the Group instituted significantly higher minimum premiums for small umbrella policies which were not increased in 2003. The first quarter average renewal price increase and gross premiums written were in line with management's expectations. Personal Lines net premiums written declined due to management decisions to cancel certain agents and to withdraw from New Jersey private passenger auto and other selected markets. These actions resulted in a $30.4 million decrease in net premiums written for the first quarter 2003 and explained all of the decline from the same quarter one year ago. The exit from the New Jersey private passenger auto market, which was completed during March 2003, contributed $25.0 million to the decrease. The combined ratio measures the percentage of premium dollars used to pay insurance losses and related expenses and is a commonly used property and casualty insurance industry gauge of statutory underwriting performance. The combined ratio is the sum of the loss ratio, the loss adjustment expense ratio, and the underwriting expense ratio. All references in this press release to combined ratio or its components are calculated on a statutory accounting basis. All combined ratio references in this press release are calculated on a calendar year basis unless specified as calculated on an accident year basis. The table below summarizes the statutory combined ratio results by business unit for recent periods:
Calendar Year First Quarter Statutory Combined Ratio 2003 2002 - ------------------------ ---- ---- Commercial Lines 111.2% 108.3% Specialty Lines 93.2% 83.4% Personal Lines 110.3% 107.3% All Lines 108.8% 106.5%
The first quarter 2003 All Lines combined ratio increased 2.3 points over the first quarter 2002. A number of factors negatively impacted this ratio - primarily higher catastrophe losses (contributing 2.2 points of the deterioration) and a higher frequency of large non-catastrophe property losses exceeding $250,000 per loss (contributing 1.3 points of the deterioration). These negative factors were partially offset by improvements in other areas related to better pricing and improved underwriting. The All Lines underwriting expense ratio increased 2.1 points for the quarter compared to last year and is explained later in this press release. Also impacting the combined ratio are assessments for the Group's share of underwriting losses on residual market pools for workers' compensation. This negatively impacted first quarter 2003 combined ratio by .8 points versus .6 points in the same quarter in 2002 and .2 points for the year 2002. The first quarter 2003 included an increase in the estimate of losses not yet reported by the pools based on trends in reported results. The Group's reduction in workers' compensation premium writings are expected to mitigate the negative impact of future assessments. The Commercial Lines combined ratio of 111.2% increased 2.9 points compared to 2002 due to a higher frequency of both catastrophe losses and other large property losses as well as underwriting losses related to National Workers' Compensation pools. This included the impact of the residual market pool for workers' compensation of 1.8 points compared to 1.5 points during first quarter 2003 and 2002, respectively. Commercial multiple peril and other commercial property business had good results, with a combined ratio for the quarter of 101.1% despite the negative effects of catastrophes and other large property losses. The Specialty Lines combined ratio of 93.2% increased 9.8 points above last year's first quarter due almost entirely to the ceded premium accrual related to the reinstatement of prior year reinsurance layers. The reinsurance reinstatement impacted Specialty Lines by 8.4 points. The Personal Lines combined ratio increased 3.0 points from 107.3% in the first quarter 2002 driven by poor New Jersey personal auto results. New Jersey personal auto added 4.4 points to the Personal Lines combined ratio in the first quarter 2003 compared to 2.5 points in the first quarter of 2002. The statutory combined ratio for personal auto, our largest single product line, was 108.0%. New Jersey impacted this combined ratio by 7.1 points. Results for personal auto other than New Jersey were favorable with a combined ratio of 100.9% for the quarter. The All Lines loss and loss adjustment expense (LAE) ratios, which measure losses and LAE as a percentage of net earned premiums, were minimally impacted by adjustments to estimated losses and LAE related to prior years' business. The increase in provisions for prior years' losses and LAE increased the combined ratio by .8 points in the first quarter 2003 compared to 1.2 points in the first quarter 2002. The loss and LAE ratio component of the accident year combined ratio measures losses and LAE arising from insured events that occurred in the respective accident year. The current accident year excludes losses and LAE for insured events that occurred in prior accident years. The table below summarizes the impact of changes in provision for all prior accident year losses and LAE:
First Quarter ($ in millions) 2003 2002 - --------------- ---- ---- Statutory net liabilities, beginning of period $2,078.7 $1,982.0 Increase in provision for prior accident year claims $2.7 $4.2 Increase in provision for prior accident year claims as % of premiums earned 0.8% 1.2%
The statutory loss adjustment expense ratio for the first three months of 2003 was 13.6%, .7 points lower than the first quarter 2002 loss adjustment expense ratio of 14.3%. The decrease is primarily a result of efforts to more effectively manage claims legal expenses. During the first quarter of 2003, the Group announced a reorganization of its claims operations, including a reduction in staff, which was effective in March 2003. The reduction will result in a net savings of approximately $1.8 million in 2003, after a first quarter 2003 charge of approximately $1.0 million for severance pay and other related expenses. Catastrophe losses in the first quarter of 2003 were $10.7 million, an increase of $7.4 million from the same period of 2002. Catastrophe losses added 3.1 points to the statutory combined ratio in the first three months of 2003, above the .9 point catastrophe impact in the first three months of 2002. For the full year 2002, catastrophes added 1.4 points to the combined ratio. The first quarter 2003 statutory underwriting expense, which measures underwriting expenses as a percentage of net written premiums, was 35.6% or 2.1 points higher than 33.5% in the comparable quarter of 2002 and .7 points higher than the full year 2002 ratio of 34.9%. Although the Corporation continues to monitor and manage expenses closely, the expense ratio increased resulting from higher expenses related to investment in technology, the impact of lower net premiums written, and increased premium related taxes and assessments. In 2002, the Group completed for Commercial Lines its multi-year development of software for policy administration and rating, known as P.A.R.I.S.sm. During the development stage, information systems personnel costs were capitalized. In 2003, P.A.R.I.S.sm is expected to be rolled out for all commercial lines products. Information systems personnel costs related to the roll out and maintenance of the software were expensed during the first quarter of 2003. This shift from development to roll out and maintenance caused the majority of the increase in software expenses. This higher expense plus amortization of expenses capitalized in prior years increased the first quarter 2003 underwriting expense ratio by 1.1 points over the first quarter 2002. The Group's remaining non-commission and tax related underwriting expenses of $49.4 million decreased $4.0 million in the first quarter 2003 compared to the first quarter 2002, but this positive impact on the expense ratio was largely offset by lower net premiums written. The impact of the decline in premium volume on these expenses is .9 points. These expenses are primarily comprised of personnel related expenses and the reduction reflects the continued decline in the employee count. During the first quarter 2003, premium related taxes and assessment payments for the current quarter were higher than similar taxes and assessments in the first quarter of last year. The payments were primarily related to state insurance funds such as guaranty funds and workers' compensation second injury funds. The increased premium related taxes and assessments increased the underwriting expense ratio by .7 points for the first quarter 2003 compared to the same quarter a year ago. The table below summarizes the variance between the first quarter 2002 and the first quarter 2003 underwriting expense ratio:
Variance from First Qtr 2002 -------------- Underwriting expense ratio - first quarter 2002 33.5% Additional expenses related to investment in technology 1.1% Impact of decrease in net premium written 0.9% Impact of premium related taxes and assessments 0.7% Impact of all other underwriting expense ratio items (0.6)% ------ Underwriting expense ratio - first quarter 2003 35.6%
The employee count continues to decline. As of March 31, 2003, the employee count was 2,859, compared with 3,233 at March 31, 2002 and approximately 3,000 at December 31, 2002. Assets, Investments and Shareholders' Equity Consolidated corporate assets were $4.83 billion on March 31, 2003, compared with $4.78 billion at December 31, 2002. Investments in securities were $3.15 billion at cost, with an estimated fair market value of $3.51 billion at March 31, 2003, compared with $3.12 billion at cost, with an estimated fair market value of $3.50 billion at December 31, 2002. Shareholders' equity was $1.07 billion at March 31, 2003, compared with $1.06 billion at December 31, 2002. Book value per share at March 31, 2003 was $17.58, compared with $17.43 at December 31, 2002. Supplemental financial information regarding the Corporation's first quarter results can be accessed at Ohio Casualty Corporation's website at www.ocas.com and was also filed on Form 8-K with the Securities and Exchange Commission. Conference Call The Corporation will conduct a teleconference call to discuss information included in this news release and related matters at 9:30 a.m. ET on Friday, May 9, 2003. The call is being webcast by Vcall and can be accessed at Ohio Casualty Corporation's website at www.ocas.com. The webcast is also being distributed over PrecisionIR's Investor Distribution network to both institutional and individual investors. Investors can listen to the call through PrecisionIR's webcast site at www.vcall.com or by visiting any of the investor sites in PrecisionIR's Investor Network. The webcast will be available for replay through August 9, 2003. To listen to call playback by telephone, dial 1-800-252-6030, then enter ID code 16360658. Call playback begins at 1 p.m. ET on May 9 and extends through midnight May 12, 2003. Corporate Profile Ohio Casualty Corporation is the holding company of The Ohio Casualty Insurance Company, which is one of six property-casualty subsidiary companies that make up Ohio Casualty Group. The Ohio Casualty Insurance Company was founded in 1919 and is licensed in 49 states. Ohio Casualty Group is ranked 40th among U.S. property/casualty insurance groups based on net premiums written (Best's Review, July 2002). The Group's member companies write auto, home and business insurance. Ohio Casualty Corporation trades on the NASDAQ Stock Market under the symbol OCAS and had assets of approximately $4.8 billion as of March 31, 2003. Ohio Casualty Corporation publishes forward-looking statements relating to such matters as anticipated financial performance, business prospects and plans, regulatory developments and similar matters. The statements contained in this news release that are not historical information, are forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. The operations, performance and development of the Corporation's business are subject to risks and uncertainties, which may cause actual results to differ materially from those contained in or supported by the forward looking statements in this release. The risks and uncertainties that may affect the operations, performance, development and results of the Corporation's business include the following: changes in property and casualty reserves; catastrophe losses; premium and investment growth; product pricing environment; availability of credit; changes in government regulation; performance of financial markets; fluctuations in interest rates; availability and pricing of reinsurance; litigation and administrative proceedings; rating agency actions; acts of war and terrorist activities; ability of Ohio Casualty to retain business acquired from the Great American Insurance Company; ability to achieve targeted expense savings; ability to achieve premium targets and profitability goals; and general economic and market conditions. Ohio Casualty Corporation undertakes no obligation to publicly release any revisions to the forward-looking statements contained in this release, or to update them to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events. Investors are also advised to consult any further disclosures made on related subjects in the Company's reports filed with the Securities and Exchange Commission or in subsequent press releases. EX-99 4 exh99-2.txt OHIO CASUALTY CORP - SUPPLEMENTAL FINANCIAL INFORMATION Exhibit 99.2 OHIO CASUALTY CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION FOR THE PERIOD ENDING MARCH 31, 2003 Contents: Page 1 GAAP Income Statement Data Page 2 Statutory P&C Data Page 3 P&C Accident Year Data Page 4 Supplemental Information Page 5 Stock Price and Dividend Record Ohio Casualty Corporation publishes forward-looking statements relating to such matters as anticipated financial performance, business prospects and plans, regulatory developments and similar matters. The statements contained in this release that are not historical information, are forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of 1933 and The Securities Exchange Act of 1934 for forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results for the Corporation's business and the results of the acquisition described herein, include the following: changes in property and casualty reserves; catastrophe losses; premium and investment growth; product pricing environment; availability of credit; changes in government regulation; performance of financial markets; fluctuations in interest rates; availability and pricing of reinsurance; litigation and administrative proceedings; Year 2000 issues; ability of Ohio Casualty to integrate and to retain the business acquired from the Great American Insurance Company, and general economic and market conditions. OHIO CASUALTY CORPORATION SUMMARY INCOME STATEMENT (in thousands, except per share data) FIRST QUARTER, 2003 (2003 Data Unaudited)
1ST QTR 2003 1ST QTR 2002 YEAR 2002 CONSOLIDATED ------------ ------------ --------- - ------------ Premiums and finance charges earned $349,263 $361,007 $1,450,467 Investment income less expenses 53,247 50,902 207,133 Investment gains realized, net 19,293 22,831 45,192 -------- -------- ----------- Total revenues 421,803 434,740 1,702,792 Losses - GAAP basis $208,793 $211,769 $ 902,731 Loss adjustment expenses - GAAP basis 47,403 51,473 227,081 Underwriting expenses - GAAP basis 135,822 130,372 579,686 -------- -------- ----------- Total expenses 392,018 393,614 1,709,498 Income tax (benefit) expense: On investment gains realized $ 6,752 $ 7,991 $ 15,817 On all other income (loss) 3,121 6,262 (21,632) -------- -------- ----------- Total income tax (benefit) expense 9,873 14,253 (5,815) Net income (loss) $ 19,912 $ 26,873 $ (891) ======== ======== =========== Average shares outstanding - diluted 60,968 61,062 61,284 Net income (loss), per share - diluted $ 0.33 $ 0.44 $ (0.01) Ratio to Ratio to Ratio to Premiums Premiums Premiums PROPERTY AND CASUALTY - GAAP BASIS Earned Earned Earned - ---------------------------------- -------- -------- -------- Premiums and finance charges earned $349,263 $361,007 $1,450,467 Investment income less expenses 51,483 50,700 205,794 Investment gains realized, net 19,221 23,481 45,371 Losses - GAAP basis 208,793 59.8% 211,769 58.7% 902,730 62.2% Loss adjustment expenses - GAAP basis 47,403 13.6% 51,473 14.3% 227,081 15.7% Underwriting expenses - GAAP basis 132,697 38.0% 127,873 35.4% 568,319 39.2% -------- ------ -------- ------ ---------- ------ Total expenses 388,893 111.4% 391,115 108.4% 1,698,130 117.1% Effective tax rate on investment income 33.1% 32.9% 33.9% CORPORATE/OTHER - --------------- Investment income less expenses $ 1,764 $ 202 $ 1,339 Investment gains (losses) realized, net 72 (650) (179) Total expenses 3,125 2,499 11,368
OHIO CASUALTY CORPORATION PROPERTY AND CASUALTY INSURANCE DATA (in thousands) FIRST QUARTER, 2003 (2003 Data Unaudited)
1ST QTR 2003 1ST QTR 2002 OPERATING SEGMENTS and Statutory Statutory SELECTED PRODUCT LINES or Net Premiums Combined Net Premiums Combined MARKETS Written Ratio Written Ratio - ------------------------- ------------ -------- ------------ -------- Commercial Lines $205,154 111.2% $192,815 108.3% Workers' compensation 37,637 134.8% 38,059 131.4% Commercial auto 58,857 106.0% 56,996 99.7% General liability 20,212 125.3% 20,892 144.4% CMP, fire and inland marine 88,448 101.1% 76,868 92.0% Specialty Lines $ 32,942 93.2% $ 39,450 83.4% Commercial umbrella 22,585 100.3% 28,598 85.9% Fidelity and surety 10,358 73.5% 9,472 84.6% Personal Lines $114,126 110.3% $142,636 107.3% New Jersey personal auto (616) 289.9% 24,432 116.4% Other personal lines 114,742 105.9% 118,204 104.8% Other personal auto 74,312 100.9% 78,780 102.8% Homeowners 32,686 114.5% 32,181 107.5% --------- ------ --------- ------ Total All Lines $352,222 108.8% $374,901 106.5% STATUTORY RESULTS Ratio Ratio - ----------------- ----- ----- Premiums written $352,222 $374,901 Premiums earned 349,302 360,974 Losses incurred 208,222 59.6% 211,769 58.7% Loss adjustment expenses 47,403 13.6% 51,473 14.3% Underwriting expenses 125,502 35.6% 125,418 33.5% ------ ------ Underwriting gain (loss) (31,825) 108.8% (27,686) 106.5% ====== ====== Investment income 51,483 50,700 Investment gains (losses) realized 16,403 22,509 Other income (expense) - - Federal income tax expense (benefit) 8,533 2,485 --------- --------- Net income (loss) - statutory $ 27,528 $ 43,038 Included above: Dividends to policyholders 262 0.1% 88 0.0% Paid loss & loss adjustment expense 238,531 260,274
YEAR 2002 OPERATING SEGMENTS and Statutory SELECTED PRODUCT LINES or Net Premiums Combined MARKETS Written Ratio - ------------------------- ------------ -------- Commercial Lines $ 762,189 115.1% Workers' compensation 143,911 129.2% Commercial auto 213,364 110.2% General liability 84,474 171.3% CMP, fire and inland marine 320,440 95.8% Specialty Lines 179,879 94.0% Commercial umbrella 132,655 97.7% Fidelity and surety 45,599 81.7% Personal Lines 506,560 114.1% New Jersey personal auto 24,172 154.8% Other personal lines 482,388 107.9% Other personal auto 297,117 107.1% Homeowners 153,678 110.3% ----------- ------ Total All Lines $1,448,628 112.8% STATUTORY RESULTS Ratio Premiums written $1,448,628 ----- Premiums earned 1,450,377 Losses incurred 902,201 62.2% Loss adjustment expenses 227,081 15.7% Underwriting expenses 506,204 34.9% ------ Underwriting gain (loss) (185,109) 112.8% ====== Investment income 205,794 Investment gains (losses) realized 53,011 Other income (expense) (7,707) Federal income tax expense (benefit) (9,159) ----------- Net income (loss) - statutory $ 75,148 =========== Included above: Dividends to policyholders (3,868) -0.3% Paid loss & loss adjustment expense 1,032,544
OHIO CASUALTY CORPORATION ADDITIONAL PROPERTY AND CASUALTY ACCIDENT YEAR DATA (in thousands) FIRST QUARTER, 2003 (Data Unaudited)
ACCIDENT ACCIDENT ACCIDENT THREE MONTHS YEAR 2003(A) YEAR 2002(A) YEAR 2002(A) ENDED Measured as Measured as Measured as MARCH 31, 2003 of March 2003 of March 2002 of March 2003 Statutory Statutory Statutory Statutory Combined Combined Combined Combined OPERATING SEGMENTS and Ratio Ratio Ratio Ratio SELECTED MAJOR PRODUCT -------------- ------------ ------------ ------------- LINES or MARKETS - ---------------------- Commercial Lines 111.2% 109.7% 104.8% 103.2% Workers' compensation 134.8% 125.8% 120.4% 121.4% Commercial auto 106.0% 103.6% 100.4% 100.8% General liability 125.3% 113.8% 113.5% 113.2% CMP, fire and inland marine 101.1% 105.9% 97.6% 95.8% Specialty Lines 93.2% 103.3% 97.7% 93.8% Commercial umbrella 100.3% 111.1% 99.5% 97.7% Fidelity and surety 73.5% 80.4% 97.4% 85.3% Personal Lines 110.3% 107.1% 106.0% 110.8% New Jersey personal auto 289.9% 125.0% 113.2% 139.0% Other personal lines 105.9% 105.0% 103.9% 106.6% Other personal auto 100.9% 102.6% 102.7% 105.7% Homeowners 114.5% 115.9% 109.6% 111.2% ------ ------ ------ ------ Total All Lines 108.8% 108.0% 105.3% 105.5%
Note: (A) The loss and LAE ratio component of the accident year combined ratio measures losses and LAE arising from insured events that occurred in the respective accident year. The current accident year excludes losses and LAE for insured events that occurred in prior accident years. Accident year 2003 as of March 31, 2003 measures insured events for the first three months of 2003. Accident year 2002 as of March 31, 2002 measures insured events for the first three months of 2002. Accident year 2002 as of March 31, 2003 measures insured events for the full year 2002. Partial and complete accident periods may not be comparable due to seasonality, claim reporting and development patterns, claim settlement rates and other factors. OHIO CASUALTY CORPORATION SUPPLEMENTAL INFORMATION (in thousands) FIRST QUARTER, 2003 (2003 Data Unaudited)
3/31/2003 3/31/2002 --------- --------- ASSETS $4,828,035 $4,516,774 INVESTMENTS IN SECURITIES 3,510,294 3,320,468 AGENT RELATIONSHIPS ASSET 156,538 233,008 NOTES PAYABLE 198,226 199,067 SHAREHOLDERS' EQUITY 1,068,237 1,066,100 SHARES OUTSTANDING 60,759 60,298 BOOK VALUE PER SHARE $17.58 $17.68 PROPERTY AND CASUALTY - ------------------------------------------------------------------------ Investments: GAAP Basis GAAP Basis ---------- ---------- U.S. government bonds 28,814 27,641 Tax exempt bonds 72,742 31,064 Taxable fixed maturities: Available for sale, at fair value 2,708,952 2,756,095 Held to maturity, at amortized cost 360,692 - --------- --------- Total bonds 3,171,200 2,814,800 Short Term 23,926 50,509 Preferred stocks - 321 Common stocks 270,325 437,745 --------- --------- Total investments 3,465,451 3,303,375 ========= ========= Amortized cost of bonds - available for sale 2,636,987 2,818,712 Market value of bonds - held to maturity 360,621 -
GAAP Statutory GAAP Statutory Accounting Accounting Accounting Accounting Basis Basis Basis Basis ---------- ---------- ---------- ---------- Insurance reserves Unearned premiums 675,919 628,229 676,485 640,986 Losses 2,012,237 1,660,094 1,660,094 1,593,870 Loss adjustment expense 460,271 435,723 409,181 391,083 Statutory policyholders' surplus 733,820 778,697 Ratios of net premiums written to statutory surplus 1.9 1.9
12/31/2002 ---------- ASSETS $4,778,994 INVESTMENTS IN SECURITIES 3,502,150 AGENT RELATIONSHIPS ASSET 161,324 NOTES PAYABLE 198,288 SHAREHOLDERS' EQUITY 1,058,703 SHARES OUTSTANDING 60,725 BOOK VALUE PER SHARE $17.43 PROPERTY AND CASUALTY - ----------------------------------------------- Investments: GAAP Basis ---------- U.S. government bonds 29,082 Tax exempt bonds 46,788 Taxable fixed maturities: Available for sale, at fair value 3,022,676 Held to maturity, at amortized cost - --------- Total bonds 3,098,546 Short Term 49,838 Preferred stocks - Common stocks 312,537 --------- Total investments 3,460,921 ========= Amortized cost of bonds - available for sale 2,927,071 Market value of bonds - held to maturity -
GAAP Statutory Accounting Accounting Basis Basis ---------- ---------- Insurance reserves Unearned premiums 668,707 625,310 Losses 1,978,743 1,647,343 Loss adjustment expense 454,907 431,380 Statutory policyholders' surplus 725,748 Ratios of net premiums written to statutory surplus 2.0
Note: For further information on differences between statutory accounting principles and generally accepted accounting principles (GAAP), refer to Item 15 on pages 67 and 68 of the Corporation's Form 10-K for the year ended December 31, 2002. OHIO CASUALTY CORPORATION TEN YEAR BUSINESS, STOCK PRICE AND DIVIDEND RECORD FIRST QUARTER, 2003 (2003 Data Unaudited) BUSINESS The Ohio Casualty Corporation, an insurance holding company incorporated in 1969, owns The Ohio Casualty Insurance Company, which in turn owns West American Insurance Company (acquired in 1945), Ohio Security Insurance Company (acquired in 1962), American Fire and Casualty Company (acquired in 1969), Avomark Insurance Company (incorporated in 1997) and Ohio Casualty of New Jersey, Inc. (incorporated in 1998). One or more of the insurance companies are licensed in all states, including the District of Columbia. The Corporation operates in conjunction with the independent agency system and is currently active in over 40 states. The Corporation's common stock is traded on the NASDAQ National Market under the symbol "OCAS". PROPERTY AND CASUALTY NET PREMIUMS WRITTEN (in thousands) - ------------------------------------------------------------------- Year Year - ---- ---- 1993 $1,306,038 1998 $1,437,279 1994 1,286,443 1999 1,586,897 1995 1,250,554 2000 1,505,393 1996 1,209,202 2001 1,472,185 1997 1,207,581 2002 1,448,628 PRICE RANGE RECORD - ------------------------------------------------------------------- Year High Low Year High Low - ---- ---- --- ---- ---- --- 1993 $17.94 $14.38 1998 $25.56 $17.06 1994 16.88 13.25 1999 21.69 15.06 1995 19.50 14.13 2000 17.88 6.34 1996 19.63 15.19 2001 16.05 8.38 1997 25.38 17.19 2002 22.07 11.22 2003 13.12 11.57 DIVIDEND RECORD - -------------------------------------------------------------------- Year Per Share Year Per Share - ---- --------- ---- --------- 1993 $0.71 1998 $0.88 1994 0.73 1999 0.92 1995 0.76 2000 0.59 1996 0.80 2001 0.00 1997 0.84 2002 0.00 Visit our home page at www.ocas.com Contact: Ohio Casualty Group, Fairfield, Ohio Dennis E. McDaniel (513) 603-2197 -----END PRIVACY-ENHANCED MESSAGE-----