EX-99 3 exh99-2.txt EXH 99-2 - Q3 SUPPLELMENTAL FINANCIAL INFORMATION Exhibit 99.2 OHIO CASUALTY CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION FOR THE PERIOD ENDING SEPTEMBER 30, 2004 Contents: Page 1 GAAP Income Statement Data Page 2 Statutory P&C Data Page 3 P&C Accident Year Data Page 4 Additional P&C Accident Year Data Page 5 Consolidated Balance Sheet Data and Related Information Page 6 Supplemental Information 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 within the meaning of The Private Securities Litigation Reform Act of 1995. 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 to appoint and/or retain agents; 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 Corporation's reports filed with the Securities and Exchange Commission or in subsequent releases. OHIO CASUALTY CORPORATION SUMMARY INCOME STATEMENT - GAAP BASIS (in thousands, except per share data) THIRD QUARTER, 2004 (Data Unaudited)
Three Months Ended Sept 30 ------------------------------------------------ CONSOLIDATED 2004 2003 ---------------------------------------- ----------------------- ----------------------- Premiums and finance charges earned $ 356,763 $ 360,370 Investment income less expenses 44,951 50,976 Investment gains (losses) realized, net (4,322) 5,879 ----------- ----------- Total revenues 397,392 417,225 Losses 205,576 220,062 Loss adjustment expenses 38,227 39,398 Underwriting expenses 113,798 126,048 Corporate and other expenses 12,730 5,803 ----------- ----------- Total expenses 370,331 391,311 Income tax expense (beneft): On investment gains (losses) realized (1,513) 2,058 On all other income 9,004 6,702 ----------- ----------- Total income tax expense 7,491 8,760 Cumulative effect of an accounting change - - Net income $ 19,570 $ 17,154 ============ ============ Average shares outstanding - diluted 62,781 61,414 Net income, per share - diluted $ 0.31 $ 0.28 Ratio to Ratio to Premiums Premiums PROPERTY AND CASUALTY Earned Earned --------------------------------------- -------- -------- Premiums and finance charges earned $ 356,763 $ 360,370 Investment income less expenses 42,223 50,422 Investment gains (losses) realized, net (4,241) 4,209 Losses 205,576 57.6% 220,062 61.1% Loss adjustment expenses 38,227 10.7% 39,398 10.9% Underwriting expenses 113,798 31.9% 126,048 35.0% ----------- ------- ----------- ------- Total expenses 357,601 100.2% 385,508 107.0% Effective tax rate on investment income 30.0% 35.4% CORPORATE/OTHER --------------------------------------- Investment income less expense $ 2,728 $ 554 Investment gains (losses) realized, net (81) 1,670 Agent relationships asset expenses 5,016 2,961 Corporate expenses 7,714 2,842
Nine Months Ended Sept 30 ------------------------------------------------ CONSOLIDATED 2004 2003 ---------------------------------------- ---------------------- ------------------------ Premiums and finance charges earned $ 1,085,096 $ 1,060,896 Investment income less expenses 144,014 155,554 Investment gains (losses) realized, net 2,593 32,010 ----------- ----------- Total revenues 1,231,703 1,248,460 Losses 603,855 642,539 Loss adjustment expenses 116,638 128,246 Underwriting expenses 376,257 380,565 Corporate and other expenses 30,958 24,213 ----------- ----------- Total expenses 1,127,708 1,175,563 Income tax expense (beneft): On investment gains (losses) realized 907 11,204 On all other income 29,947 13,617 ----------- ----------- Total income tax expense 30,854 24,821 Cumulative effect of an accounting change (1,648) - Net income $ 71,493 $ 48,076 ============ ============ Average shares outstanding - diluted 62,463 61,181 Net income, per share - diluted $ 1.14 $ 0.79 Ratio to Ratio to Premiums Premiums PROPERTY AND CASUALTY Earned Earned --------------------------------------- -------- -------- Premiums and finance charges earned $ 1,085,096 $ 1,060,896 Investment income less expenses 139,369 152,484 Investment gains (losses) realized, net 917 30,394 Losses 603,855 55.6% 642,539 60.6% Loss adjustment expenses 116,638 10.7% 128,246 12.1% Underwriting expenses 376,257 34.7% 380,565 35.9% ----------- ------- ----------- ------- Total expenses 1,096,750 101.0% 1,151,350 108.6% Effective tax rate on investment income 31.4% 34.8% CORPORATE/OTHER --------------------------------------- Investment income less expense $ 4,645 $ 3,070 Investment gains (losses) realized, net 1,676 1,616 Agent relationships asset expenses 16,569 15,412 Corporate expenses 14,389 8,801
CONSOLIDATED Year 2003 ---------------------------------------- ---------------------- Premiums and finance charges earned $ 1,424,353 Investment income less expenses 208,723 Investment gains (losses) realized, net 35,872 ----------- Total revenues 1,668,948 Losses $ 852,474 Loss adjustment expenses 174,896 Underwriting expenses 503,194 Corporate and other expenses 30,809 ----------- Total expenses 1,561,373 Income tax expense (beneft): On investment gains (losses) realized $ 12,555 On all other income 19,176 ----------- Total income tax expense 31,731 Cumulative effect of an accounting change - Net income $ 75,844 ============ Average shares outstanding - diluted 61,327 Net income, per share - diluted $ 1.24 Ratio to Premiums PROPERTY AND CASUALTY Earned --------------------------------------- -------- Premiums and finance charges earned $ 1,424,353 Investment income less expenses 204,874 Investment gains (losses) realized, net 35,026 Losses 852,474 59.8% Loss adjustment expenses 174,896 12.3% Underwriting expenses 503,194 35.3% ----------- ------- Total expenses 1,530,564 107.4% Effective tax rate on investment income 33.7% CORPORATE/OTHER --------------------------------------- Investment income less expense $ 3,849 Investment gains (losses) realized, net 846 Agent relationships asset expenses 18,690 Corporate expenses 12,119
-1- OHIO CASUALTY CORPORATION PROPERTY AND CASUALTY INSURANCE DATA - STATUTORY BASIS (in thousands, except ratio data) THIRD QUARTER, 2004 (Data Unaudited)
THREE MONTHS ENDED SEPT 30 ------------------------------------------------ 2004 2003 OPERATING SEGMENTS and ----------------------- ----------------------- SELECTED PRODUCT LINES or Net Premiums Combined Net Premiums Combined MARKETS Written Ratio Written Ratio -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 203,281 101.4% $ 196,765 107.6% Workers' compensation 29,928 119.9% 31,493 106.7% Commercial auto 57,711 89.3% 56,583 106.1% General liability 22,523 90.1% 21,481 108.9% CMP, fire and inland marine 93,119 105.0% 87,208 107.8% Specialty Lines $ 28,744 108.6% $ 48,488 82.2% Commercial umbrella 16,157 127.5% 37,135 85.4% Fidelity and surety 12,587 75.1% 11,354 76.5% Personal Lines $ 128,692 94.9% $ 127,091 107.8% Personal auto incl. personal umbrella 73,985 95.9% 76,432 106.0% Personal property 54,707 93.2% 50,659 110.5% ------------ ------ ------------ ------ Total All Lines $ 360,717 99.4% $ 372,344 104.7% ALL LINES RESULTS Ratio Ratio --------------------- ----- ----- Premiums written $ 360,717 $ 372,344 Premiums earned 356,512 360,445 Losses incurred 205,444 57.6% 220,131 61.1% Loss adjustment expenses 38,227 10.7% 39,398 10.9% Underwriting expenses 112,346 31.1% 121,881 32.7% ------------ ------ ------------ ------ Underwriting gain (loss) 495 99.4% (20,965) 104.7% ====== ====== Investment income 42,223 50,422 Investment gains (losses) realized (4,301) 3,288 Federal income tax expense 301 811 ------------ ------------ Net income $ 38,116 $ 31,934 ============ ============ Included above: Dividends to policyholders 243 0.1% 252 0.1% Paid loss & loss adjustment expense 223,765 244,143
NINE MONTHS ENDED SEPT 30 ------------------------------------------------ 2004 2003 OPERATING SEGMENTS and ----------------------- ----------------------- SELECTED PRODUCT LINES or Net Premiums Combined Net Premiums Combined MARKETS Written Ratio Written Ratio -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 635,805 100.4% $ 611,924 110.1% Workers' compensation 102,783 114.3% 104,827 118.4% Commercial auto 181,675 94.0% 177,220 104.6% General liability 69,308 101.0% 64,866 120.8% CMP, fire and inland marine 282,039 99.1% 265,011 107.2% Specialty Lines $ 102,612 97.8% $ 124,540 83.0% Commercial umbrella 65,890 104.5% 91,200 89.0% Fidelity and surety 36,722 77.8% 33,342 66.0% Personal Lines $ 373,028 99.1% $ 363,968 108.4% Personal auto incl. personal umbrella 224,767 103.8% 224,304 118.9% Personal property 148,261 91.8% 139,664 122.7% ------------ ------ ------------ ------ Total All Lines $ 1,111,445 99.5% $ 1,100,432 106.6% ALL LINES RESULTS Ratio Ratio --------------------- ----- ----- Premiums written $ 1,111,445 $ 1,100,432 Premiums earned 1,084,771 1,061,014 Losses incurred 603,600 55.6% 642,038 60.5% Loss adjustment expenses 112,567 10.4% 128,246 12.1% Underwriting expenses 371,868 33.5% 373,687 34.0% ------------ ------ ------------ ------ Underwriting gain (loss) (3,264) 99.5% (82,957) 106.6% ====== ====== Investment income 139,369 152,484 Investment gains (losses) realized (634) 27,696 Federal income tax expense 25,011 13,746 ------------ ------------ Net income $ 110,460 $ 83,477 ============ ============ Included above: Dividends to policyholders 1,061 0.1% 631 0.1% Paid loss & loss adjustment expense 656,353 730,730
YEAR 2003 OPERATING SEGMENTS and ---------------------- SELECTED PRODUCT LINES or Net Premiums Combined MARKETS Written Ratio -------------------------- ------------ -------- Commercial Lines $ 792,587 112.3% Workers' compensation 132,358 123.0% Commercial auto 228,333 105.5% General liability 83,448 122.6% CMP, fire and inland marine 348,448 109.7% Specialty Lines $ 164,851 77.2% Commercial umbrella 120,943 80.5% Fidelity and surety 43,908 68.1% Personal Lines $ 484,112 105.6% Personal auto incl. personal umbrella 296,845 107.0% Personal property 187,267 103.3% ------------ ------ Total All Lines $ 1,441,550 106.1% ============ ====== ALL LINES RESULTS Ratio --------------------- ----- Premiums written $ 1,441,550 Premiums earned 1,424,349 Losses incurred 850,550 59.7% Loss adjustment expenses 174,896 12.3% Underwriting expenses 491,241 34.1% ------------ ------ Underwriting gain (loss) (92,338) 106.1% ====== Investment income 204,874 Investment gains (losses) realized 31,870 Federal income tax expense 25,289 ------------ Net income $ 119,117 ============ Included above: Dividends to policyholders 796 0.1% Paid loss & loss adjustment expense 975,319
-2- OHIO CASUALTY CORPORATION PROPERTY AND CASUALTY ACCIDENT YEAR DATA (in thousands, except ratio data) THIRD QUARTER, 2004 (Data Unaudited)
STATUTORY COMBINED RATIO -------------------------------------------------------- Earned Accident Accident Accident Premiums Year 2004(A) Year 2003(A) Year 2003(A) OPERATING SEGMENTS and Nine Months Nine Months Measured Measured Measured SELECTED PRODUCT LINES Ended Ended as of as of as of or MARKETS Sept 30, 2004 Sept 30, 2004 Sept 2004 Sept 2003 Sept 2004 ---------------------- ------------ ------------- ------------ ------------ ------------ Commercial Lines $ 601,871 100.4% 102.4% 107.7% 104.2% Workers' compensation 99,694 114.3% 111.5% 117.5% 112.5% Commercial auto 171,630 94.0% 99.2% 104.5% 102.9% General liability 64,577 101.0% 104.2% 111.5% 109.7% CMP, fire and inland marine 265,970 99.1% 100.6% 104.7% 100.3% Specialty Lines 114,473 97.8% 104.3% 93.0% 88.2% Commercial umbrella 81,429 104.5% 109.6% 96.3% 92.2% Fidelity and surety 33,044 77.8% 87.7% 82.4% 76.1% Personal Lines 368,427 99.1% 98.0% 106.3% 101.5% Personal auto, incl. personal umbrella 224,549 103.8% 102.2% 103.6% 102.9% Personal property 143,878 91.8% 91.6% 110.9% 99.1% ---------- ------- ------- ------- ------- Total All Lines $1,084,771 99.5% 101.0% 105.7% 101.5%
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 2004 as of Sept 30, 2004 measures insured events for the first nine months of 2004. Accident year 2003 as of Sept 30, 2003 measures insured events for the first nine months of 2003. Accident year 2003 as of Sept 30, 2004 measures insured events for the full year 2003. Partial and complete accident periods may not be comparable due to seasonality, claim reporting and development patterns, claim settlement rates and other factors. -3- OHIO CASUALTY CORPORATION ADDITIONAL PROPERTY AND CASUALTY ACCIDENT YEAR AND CATASTROPHE DATA (in millions, except ratio data) THIRD QUARTER, 2004 (Data Unaudited)
Three Months Nine Months PRIOR ACCIDENT YEAR LOSS & LAE Ended Sept 30 Ended Sept 30 by SEGMENT 2004 2003 2004 2003 ------------------------------ ----- ----- ----- ----- Commercial Lines (3.5) 3.7 (12.2) 14.1 Specialty Lines (2.2) (1.9) (7.4) (12.1) Personal Lines 2.6 3.4 3.8 7.7 ------- ------- ------- ------- Total All Lines Accident Year Development (3.1) 5.2 (15.8) 9.7
PRIOR ACCIDENT YEAR LOSS & LAE by SEGMENT Year 2003 ------------------------------ --------- Commercial Lines 41.0 Specialty Lines (21.3) Personal Lines 14.4 ------- Total All Lines Accident Year Development 34.1
Three Months Nine Months Ended Sept 30 Ended Sept 30 PRIOR ACCIDENT YEAR LOSS & LAE 2004 2003 2004 2003 ------------------------------ ----- ----- ----- ----- Accident Year 2003 (9.1) - (31.3) - Accident Year 2002 (2.6) (7.3) (8.1) (33.5) Accident Year 2001 and Prior 8.6 12.5 23.6 43.2 ------- ------- ------- ------- Total Accident Year Development (3.1) 5.2 (15.8) 9.7
PRIOR ACCIDENT YEAR LOSS & LAE Year 2003 ------------------------------ --------- Accident Year 2003 - Accident Year 2002 (39.0) Accident Year 2001 and Prior 73.1 ------- Total Accident Year Development 34.1
Three Months Nine Months Ended Sept 30 Ended Sept 30 CATASTROPHE LOSS RATIO 2004 2003 2004 2003 ------------------------------ ----- ----- ----- ----- Commercial Lines 7.7% 3.2% 3.1% 3.1% Specialty Lines 0.0% 0.0% 0.0% 0.0% Personal Lines 6.3% 8.2% 5.2% 6.5% Homeowners 15.5% 23.2% 12.2% 16.6% Total All Lines 6.4% 4.5% 3.5% 3.9%
CATASTROPHE LOSS RATIO Year 2003 ------------------------------ --------- Commercial Lines 2.6% Specialty Lines 0.0% Personal Lines 4.8% Homeownrers 11.8% Total All Lines 3.1%
-4- OHIO CASUALTY CORPORATION CONSOLIDATED BALANCE SHEET DATA AND RELATED INFORMATION (in thousands, except share data) THIRD QUARTER, 2004 (2004 Data Unaudited)
September 30, December 31, 2004 2003 ASSETS ------------- ------------- Investments: U.S. government fixed maturities $ 31,398 $ 43,260 Tax exempt fixed maturities 819,609 79,137 Taxable fixed maturities: Available for sale, at fair value 2,444,566 2,899,793 Held-to-maturity, at amortized cost 316,419 356,100 ------------ ------------ Total fixed maturities 3,611,992 3,378,290 Equity securities, at fair value 352,611 329,049 Short-term investments, at fair value 219,656 40,448 ------------ ------------ Total investments 4,184,259 3,747,787 Cash 22,584 16,494 Premiums and other receivables, net of allowance for bad debts of $4,200 and $4,200, respectively 364,847 347,863 Deferred policy acquisition costs 169,969 169,351 Property and equipment, net of accumulated depreciation of $164,371 and $152,905, respectively 84,729 89,212 Reinsurance recoverable 668,296 592,688 Agent relationships, net of accumulated amortization of $40,616 and $39,093, respectively 126,065 142,634 Interest and dividends due or accrued 44,461 47,489 Other assets 43,086 15,393 ------------ ------------ Total assets $ 5,708,296 $ 5,168,911 ============ ============ Shares outstanding 61,822,356 60,957,043 Book value per share $20.32 $18.80 FAS 115 component of book value per share $1.96 $1.96
September 30, December 31, 2004 2003 LIABILITIES ------------- ------------- Insurance reserves: Losses $ 2,276,520 $ 2,163,720 Loss adjustment expenses 481,271 464,134 Unearned premiums 738,086 703,015 Debt 395,350 198,042 Reinsurance treaty funds held 181,479 150,512 Deferred income taxes 36,819 12,763 Other liabilities 342,718 330,891 ------------ ------------ Total liabilities 4,452,243 4,023,077 SHAREHOLDERS' EQUITY Common stock, $.125 par value Authorized: 150,000,000 Issued shares: 72,418,344; 72,418,344 9,052 9,052 Accumulated other comprehensive income 282,129 254,654 Retained earnings 1,104,727 1,033,404 Treasury stock, at cost: (Shares: 10,595,988; 11,461,301) (139,855) (151,276) ------------ ------------ Total shareholders' equity 1,256,053 1,145,834 ------------ ------------ Total liabilities and shareholders' equity $ 5,708,296 $ 5,168,911 ============ ============
-5- OHIO CASUALTY CORPORATION SUPPLEMENTAL INFORMATION (in thousands, except employee count) THIRD QUARTER, 2004 (Data Unaudited)
THREE MONTHS ENDED SEPT 30 NINE MONTHS ENDED SEPT 30 -------------------------- ------------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Gross Premiums Written Commercial Lines $ 210,528 $ 202,858 $ 656,811 $ 636,049 Specialty Lines 65,444 75,919 194,064 204,518 Personal Lines 130,657 130,019 377,199 372,926 ---------- ---------- ----------- ---------- Total 406,629 408,796 1,228,074 1,213,493 New Business Gross Premiums Written Commercial Lines 48,700 48,622 138,944 144,532 Commercial Umbrella 11,789 19,782 39,289 55,036 Personal Lines 10,730 11,924 31,831 32,885 Average Renewal Price Increase Commercial Lines 2.9% 10.1% 5.3% 11.8% Commercial Umbrella 5.6% 15.7% 7.9% 19.5% Amortization of Deferred Acquisition Costs 91,370 97,269 275,564 291,506 Agent Relationships Asset Expenses Write-down 3,314 1,124 11,325 9,790 Amortization 1,702 1,837 5,244 5,622 ---------- ---------- ----------- ---------- Total 5,016 2,961 16,569 15,412
YEAR 2003 ---------- Gross Premiums Written Commercial Lines $ 824,398 Specialty Lines 271,884 Personal Lines 494,143 ----------- Total 1,590,425 New Business Gross Premiums Written Commercial Lines 187,905 Commercial Umbrella 72,027 Personal Lines 43,939 Average Renewal Price Increase Commercial Lines 11.4% Commercial Umbrella 18.1% Amortization of Deferred Acquisition Costs 383,976 Agent Relationships Asset Expenses Write-down 11,244 Amortization 7,446 ----------- Total 18,690 ==============================================================================
SEPT 30, 2004 SEPT 30, 2003 DEC 31, 2003 ------------- ------------- ----------- Statutory Insurance Reserves: Unearned premiums $ 669,089 $ 664,728 $ 642,414 Losses 1,749,419 1,681,784 1,690,454 Loss adjustment expense 439,245 436,493 438,396 Statutory policyholders' surplus 931,085 813,921 867,627 Ratio of net premiums written to statutory surplus 1.6 to 1.0 1.8 to 1.0 1.7 to 1.0 Employee Count 2,206 2,757 2,669
Note: For further information on differences between statutory accounting principles and generally accepted accounting principles (GAAP), refer to Item 15 on pages 73 and 74 of the Corporation's Form 10-K for the year ended December 31, 2003. -6-