EX-99 3 exh99-2.txt OHIO CASUALTY CORP - 4TH QUARTER SUPPLEMENTAL FINANCIAL INFORMATION Exhibit 99.2 OHIO CASUALTY CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION FOR THE PERIOD ENDING DECEMBER 31, 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) FOURTH QUARTER, 2004 (Data Unaudited)
Three Months Ended Dec 31 ------------------------------------------------ CONSOLIDATED 2004 2003 ---------------------------------------- ---------------------- ------------------------ Premiums and finance charges earned $ 361,743 $ 363,457 Investment income less expenses 57,230 53,170 Investment gains realized, net 20,327 3,861 ----------- ----------- Total revenues 439,300 420,488 Losses 173,725 209,935 Loss adjustment expenses 42,059 46,650 Underwriting expenses 128,555 122,629 Corporate and other expenses 12,471 6,596 ----------- ----------- Total expenses 356,810 385,810 Income tax expense: On investment gains realized 7,115 1,351 On all other income 18,495 5,559 ----------- ----------- Total income tax expense 25,610 6,910 Cumulative effect of an accounting change - - ------------ ------------ Net income $ 56,880 $ 27,768 ============ ============ Average shares outstanding - diluted* 71,942 70,633 Net income, per share - diluted* $ 0.82 $ 0.42 Ratio to Ratio to Premiums Premiums PROPERTY AND CASUALTY Earned Earned --------------------------------------- -------- -------- Premiums and finance charges earned $ 361,743 $ 363,457 Investment income less expenses 57,552 52,390 Investment gains realized, net 18,284 4,632 Losses 173,725 48.0% 209,935 57.8% Loss adjustment expenses 42,059 11.6% 46,650 12.8% Underwriting expenses 128,555 35.5% 122,629 33.7% ----------- ------- ----------- ------- Total expenses 344,339 95.1% 379,214 104.3% Effective tax rate on investment income 31.0% 33.1% CORPORATE/OTHER --------------------------------------- Investment income less expense $ (322) $ 780 Investment gains (losses) realized, net 2,043 (771) Agent relationships asset expenses 4,071 3,278 Corporate expenses 8,400 3,318
Year ------------------------------------------------ CONSOLIDATED 2004 2003 ---------------------------------------- ----------------------- ----------------------- Premiums and finance charges earned $ 1,446,839 $ 1,424,353 Investment income less expenses 201,244 208,723 Investment gains realized, net 22,920 35,872 ----------- ----------- Total revenues 1,671,003 1,668,948 Losses 777,580 852,474 Loss adjustment expenses 158,697 174,896 Underwriting expenses 504,812 503,194 Corporate and other expenses 43,429 30,809 ----------- ----------- Total expenses 1,484,518 1,561,373 Income tax expense: On investment gains realized 8,022 12,555 On all other income 48,442 19,176 ----------- ----------- Total income tax expense 56,464 31,731 Cumulative effect of an accounting change (1,648) - ------------ ------------ Net income $ 128,373 $ 75,844 ============ ============ Average shares outstanding - diluted* 71,508 70,224 Net income, per share - diluted* $ 1.89 $ 1.18 Ratio to Ratio to Premiums Premiums PROPERTY AND CASUALTY Earned Earned --------------------------------------- -------- -------- Premiums and finance charges earned $ 1,446,839 $ 1,424,353 Investment income less expenses 196,921 204,874 Investment gains realized, net 19,201 35,026 Losses 777,580 53.7% 852,474 59.8% Loss adjustment expenses 158,697 11.0% 174,896 12.3% Underwriting expenses 504,812 34.9% 503,194 35.3% ----------- ------- ----------- ------- Total expenses 1,441,089 99.6% 1,530,564 107.4% Effective tax rate on investment income 31.5% 33.7% CORPORATE/OTHER ---------------------------------------- Investment income less expense $ 4,323 $ 3,849 Investment gains (losses) realized, net 3,719 846 Agent relationships asset expenses 20,640 18,690 Corporate expenses 22,789 12,119
*Average diluted shares outstanding and net income per share amounts have been restated, as required, in accordance with Emerging Issues Task Force (EITF) 04-8 "The Effect of Contingently Convertible Debt on Diluted Earnings Per Share." This EITF requires all prior period earnings per share amounts to be restated since the issuance of the convertible notes in March 2002 using the "if-converted" method. The "if-converted" method gives effect to the add back to net income of interest expense and amortization of debt issuance costs, net of tax, associated with the convertible instruments. -1- OHIO CASUALTY CORPORATION PROPERTY AND CASUALTY INSURANCE DATA - STATUTORY BASIS (in thousands, except ratio data) FOURTH QUARTER, 2004 (Data Unaudited)
THREE MONTHS ENDED DEC 31 ------------------------------------------------- 2004 2003 OPERATING SEGMENTS and ----------------------- ---------------------- SELECTED PRODUCT LINES or Net Premiums Combined Net Premiums Combined MARKETS Written Ratio Written Ratio -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 192,411 96.2% $ 180,663 119.0% Workers' compensation 30,149 119.2% 27,531 137.6% Commercial auto 51,864 79.8% 51,113 108.3% General liability 20,149 117.3% 18,582 128.2% CMP, fire and inland marine 90,249 93.2% 83,437 116.8% Specialty Lines $ 32,887 95.1% $ 40,311 60.9% Commercial umbrella 21,234 101.4% 29,745 56.4% Fidelity and surety 11,653 82.0% 10,566 74.2% Personal Lines $ 117,207 93.3% $ 120,144 97.0% Personal auto incl. personal umbrella 69,347 107.7% 72,541 104.8% Personal property 47,860 72.3% 47,603 84.9% ------------ ------ ------------ ------ Total All Lines $ 342,505 95.0% $ 341,118 104.7% ALL LINES RESULTS Ratio Ratio --------------------- ----- ----- Premiums written $ 342,505 $ 341,118 Premiums earned 361,853 363,335 Losses incurred 174,098 48.1% 208,512 57.4% Loss adjustment expenses 42,059 11.6% 46,650 12.8% Underwriting expenses 120,804 35.3% 117,554 34.5% ------------ ------ ------------ ------ Underwriting gain/(loss) 24,892 95.0% (9,381) 104.7% ====== ====== Investment income 45,812 52,133 Investment gains realized 14,683 4,174 Federal income tax expense 32,130 11,543 ------------ ------------ Net income $ 53,257 $ 35,383 ============ ============ Included above: Dividends to policyholders 168 0.0% 165 0.0% Paid loss & loss adjustment expense 221,010 244,589
YEAR -------------------------------------------------- 2004 2003 OPERATING SEGMENTS and ----------------------- ----------------------- SELECTED PRODUCT LINES or Net Premiums Combined Net Premiums Combined MARKETS Written Ratio Written Ratio -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 828,216 99.3% $ 792,587 112.3% Workers' compensation 132,932 115.4% 132,358 123.0% Commercial auto 233,539 90.3% 228,333 105.5% General liability 89,457 105.0% 83,448 122.6% CMP, fire and inland marine 372,288 97.5% 348,448 109.7% Specialty Lines $ 135,499 97.2% $ 164,851 77.2% Commercial umbrella 87,124 103.8% 120,943 80.5% Fidelity and surety 48,375 78.9% 43,908 68.1% Personal Lines $ 490,235 97.6% $ 484,112 105.6% Personal auto incl. personal umbrella 294,114 104.7% 296,845 107.0% Personal property 196,121 86.8% 187,267 103.3% ------------ ------ ------------ ------ Total All Lines $ 1,453,950 98.4% $ 1,441,550 106.1% ALL LINES RESULTS Ratio Ratio --------------------- ----- ----- Premiums written $ 1,453,950 $ 1,441,550 Premiums earned 1,446,624 1,424,349 Losses incurred 777,698 53.8% 850,550 59.7% Loss adjustment expenses 154,626 10.7% 174,896 12.3% Underwriting expenses 492,672 33.9% 491,241 34.1% ------------ ------ ------------ ------ Underwriting gain/(loss) 21,628 98.4% (92,338) 106.1% ====== ====== Investment income 185,181 204,874 Investment gains realized 14,049 31,870 Federal income tax expense 57,141 25,289 ------------ ------------ Net income $ 163,717 $ 119,117 ============ ============ Included above: Dividends to policyholders 1,229 0.1% 796 0.1% Paid loss & loss adjustment expense 877,363 975,319
-2- OHIO CASUALTY CORPORATION PROPERTY AND CASUALTY ACCIDENT YEAR DATA (in thousands, except ratio data) FOURTH QUARTER, 2004 (Data Unaudited)
STATUTORY COMBINED RATIO ---------------------------------------------------- Earned Accident Accident Accident Premium Twelve Year 2004(A) Year 2003(A) Year 2003(A) OPERATING SEGMENTS and Twelve Months Months Measured Measured Measured SELECTED PRODUCT LINES Ended Ended as of as of as of or MARKETS Dec 31, 2004 Dec 31, 2004 Dec 2004 Dec 2003 Dec 2004 ---------------------- ------------ ------------ ------------ ------------ ------------ Commercial Lines $ 807,925 99.3% 101.1% 107.1% 103.7% Workers' compensation 132,625 115.4% 112.3% 115.9% 111.8% Commercial auto 229,629 90.3% 98.2% 104.6% 101.1% General liability 86,563 105.0% 105.6% 114.4% 109.5% CMP, fire and inland marine 359,108 97.5% 97.7% 103.3% 100.8% Specialty Lines 150,262 97.2% 103.3% 90.3% 88.5% Commercial umbrella 105,089 103.8% 108.7% 93.3% 92.6% Fidelity and surety 45,173 78.9% 88.1% 81.1% 76.0% Personal Lines 488,437 97.6% 97.2% 102.7% 101.4% Personal auto, incl. personal umbrella 295,774 104.7% 103.3% 103.4% 102.8% Personal property 192,663 86.8% 87.6% 101.3% 98.9% ----------- ------- ------- ------- ------- Total All Lines $1,446,624 98.4% 99.8% 103.7% 101.2%
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 Dec 31, 2004 measures insured events for the twelve months of 2004. Accident year 2003 as of Dec 31, 2003 measures insured events for the twelve months of 2003 with related outstanding liabilities estimated as of Dec 31, 2003. Accident year 2003 as of Dec 31, 2004 measures insured events for the twelve months of 2003 with remaining related liabilities estimated as of Dec 31, 2004. 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) FOURTH QUARTER, 2004 (Data Unaudited)
THREE MONTHS PRIOR ACCIDENT YEAR LOSS & LAE ENDED DEC 31 YEAR by SEGMENT 2004 2003 2004 2003 ------------------------------ ----------------------- ----------------------- Commercial Lines $ (2.8) $ 26.9 $(15.0) $ 41.0 Specialty Lines (1.9) (9.2) (9.3) (21.3) Personal Lines (1.2) 6.7 2.6 14.4 ------- ------- ------- ------- Total All Lines Accident Year Development (5.9) 24.4 (21.7) 34.1 PRIOR ACCIDENT YEAR LOSS & LAE ------------------------------ Accident Year 2003 $ (3.8) $ - $(35.1) $ - Accident Year 2002 (3.5) (5.5) (11.6) (39.0) Accident Year 2001 and Prior 1.4 29.9 25.0 73.1 ------- ------- ------- ------- Total Accident Year Development (5.9) 24.4 (21.7) 34.1 CATASTROPHE LOSS RATIO ------------------------------ Commercial Lines 0.2% 1.4% 2.4% 2.6% Specialty Lines 0.0% -0.1% 0.0% 0.0% Personal Lines 4.2% -0.1% 4.9% 4.8% Homeowners 10.5% -1.7% 11.8% 11.8% Total All Lines 1.5% 0.7% 3.0% 3.1%
-4- OHIO CASUALTY CORPORATION CONSOLIDATED BALANCE SHEET DATA AND RELATED INFORMATION (in thousands, except share data) FOURTH QUARTER, 2004 (2004 Data Unaudited)
December 31, December 31, 2004 2003 ASSETS ------------- ------------- Investments: U.S. government fixed maturities $ 30,823 $ 43,260 Tax exempt fixed maturities 1,036,697 79,137 Taxable fixed maturities: Available for sale, at fair value 2,278,588 2,899,793 Held-to-maturity, at amortized cost 301,367 356,100 ------------ ------------ Total fixed maturities 3,647,475 3,378,290 Equity securities, at fair value 357,458 329,049 Short-term investments, at fair value 239,105 40,448 ------------ ------------ Total investments 4,244,038 3,747,787 Cash 13,461 16,494 Premiums and other receivables, net of allowance for bad debts of $4,300 and $4,200, respectively 350,761 347,863 Deferred policy acquisition costs 159,849 169,351 Property and equipment, net of accumulated depreciation of $167,362 and $152,905, respectively 82,946 89,212 Reinsurance recoverable, net of allowance of $2,336 and $2,454, respectively 666,501 592,688 Agent relationships, net of accumulated amortization of $41,438 and $39,093, respectively 121,994 142,634 Interest and dividends due or accrued 49,859 47,489 Other assets 25,607 15,393 ------------ ------------ Total assets $ 5,715,016 $ 5,168,911 ============ ============ Shares outstanding 62,209,129 60,957,043 Book value per share $20.82 $18.80 FAS 115 component of book value per share $1.90 $1.96
December 31, December 31, 2004 2003 Liabilities ------------- ------------- Insurance reserves: Losses $ 2,269,565 $ 2,163,720 Loss adjustment expenses 486,767 464,134 Unearned premiums 715,486 703,015 Debt 383,266 198,042 Reinsurance treaty funds held 195,015 150,512 Deferred income taxes 21,950 12,763 Other liabilities 348,024 330,891 ------------ ------------ Total liabilities 4,420,073 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 259,131 254,654 Retained earnings 1,161,510 1,033,404 Treasury stock, at cost: (Shares: 10,209,215; 11,461,301) (134,750) (151,276) ------------ ------------ Total shareholders' equity 1,294,943 1,145,834 ------------ ------------ Total liabilities and shareholders' equity $ 5,715,016 $ 5,168,911 ============ ============
-5- OHIO CASUALTY CORPORATION SUPPLEMENTAL INFORMATION (in thousands, except employee count and ratio data) FOURTH QUARTER, 2004 (Data Unaudited)
THREE MONTHS ENDED DEC 31 YEAR ------------------------- ---------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Gross Premiums Written Commercial Lines $ 199,401 $ 188,349 $ 856,212 $ 824,398 Specialty Lines 57,441 67,366 251,505 271,884 Personal Lines 119,559 121,217 496,758 494,143 ---------- ---------- ---------- ---------- Total 376,401 376,932 1,604,475 1,590,425 New Business Gross Premiums Written Commercial Lines 43,346 43,373 182,291 187,905 Commercial Umbrella 10,693 16,991 49,982 72,027 Personal Lines 9,491 11,054 41,322 43,939 Average Renewal Price Increase Commercial Lines 2.5% 7.7% 5.0% 11.4% Commercial Umbrella 6.5% 14.5% 8.0% 18.1% Amortization of Deferred Acquisition Costs 89,638 92,470 365,202 383,976 Agent Relationships Asset Expenses Write-down 2,412 1,454 13,737 11,244 Amortization 1,659 1,824 6,903 7,446 ---------- ---------- ---------- ---------- Total 4,071 3,278 20,640 18,690 --------------------------------------------------------------------------------------------
DEC 31, 2004 DEC 31, 2003 ------------ ------------ Statutory Insurance Reserves: Unearned premiums $ 649,740 $ 642,414 Losses 1,739,709 1,690,454 Loss adjustment expense 444,102 438,396 Statutory policyholders' surplus 972,040 867,627 Ratio of net premiums written to statutory surplus 1.5 to 1.0 1.7 to 1.0 Employee Count 2,190 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-