-----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, J78+TLu3lmR+xpldp5aRiDtQfzYw5EFBGp21uOVRDFZ/Usye7Kw6B9RVP19CkRol lodH0QqkQ312L+RUgfpSNA== 0000073952-05-000056.txt : 20050726 0000073952-05-000056.hdr.sgml : 20050726 20050726160709 ACCESSION NUMBER: 0000073952-05-000056 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050630 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050726 DATE AS OF CHANGE: 20050726 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: 05974321 BUSINESS ADDRESS: STREET 1: 9450 SEWARD ROAD CITY: FAIRFIELD STATE: OH ZIP: 45014 BUSINESS PHONE: 5136032400 MAIL ADDRESS: STREET 1: 9450 SEWARD ROAD CITY: FAIRFIELD STATE: OH ZIP: 45014 8-K 1 f8k7-26.txt OHIO CASUALTY CORP FORM 8-K, ITEMS 1.01, 2.02, 9.01 ============================================================================== UNITED STATES 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) July 26, 2005 ------------- OHIO CASUALTY CORPORATION (Exact name of registrant as specified in its charter) OHIO 0-5544 31-0783294 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 9450 Seward Road, Fairfield, Ohio 45014 (Address of principal executive offices) (Zip Code) (513) 603-2400 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Page 1 of 4 ============================================================================== ITEM 1.01. Entry into a Material Definitive Agreement - --------- In connection with his appointment as President and Chief Operating Officer of The Ohio Casualty Insurance Company effective July 25, 2005, Ralph S. Michael III was awarded a restricted stock award for 15,000 shares and a stock option to purchase 42,000 shares of Ohio Casualty Corporation at an exercise price of $25.12, which was the fair market value of the shares as of July 25, 2005. Both these awards were made pursuant to the Ohio Casualty Corporation 2005 Incentive Plan. The form of award agreements are included herein as Exhibit 99.1, 99.2 and 99.3 and incorporated by reference. ITEM 2.02. Results of Operations and Financial Condition - --------- (a) On July 26, 2005, Ohio Casualty Corporation (the "Corporation") issued a press release announcing its earnings for the second quarter ended June 30, 2005. The Corporation also issued on July 26, 2005 certain Supplemental Financial Information with respect to its earnings for the second quarter ended June 30, 2005. The press release and the Supplemental Financial Information were posted on the Corporation's website at http://www.ocas.com and are attached hereto as Exhibits 99.4 and 99.5, respectively, and hereby incorporated by reference. ITEM 9.01. Financial Statements and Exhibits - --------- (c) Exhibits Exhibit No. Description ---------- ----------- 99.1 Form of Incentive Stock Option Agreement under the Ohio Casualty Corporation 2005 Incentive Plan. 99.2 Form of Non-Qualified Stock Option Agreement under the Ohio Casualty Corporation 2005 Incentive Plan. 99.3 Form of Restricted Stock Agreement under the Ohio Casualty Corporation 2005 Incentive Plan. 99.4 Press release dated July 26, 2005 issued by Ohio Casualty Corporation and posted on the Corporation's website at http://www.ocas.com. 99.5 Financial Information issued by Ohio Casualty Corporation on July 26, 2005 and posted on the Corporation's website at http://www.ocas.com. Page 2 of 4 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) July 26, 2005 /s/Debra K. Crane -------------------------------- Debra K. Crane, Senior Vice President, General Counsel and Secretary Page 3 of 4 Exhibit Index ------------- Current Report on Form 8-K Dated July 26, 2005 Exhibit No. Description - ---------- ----------- 99.1 Form of Incentive Stock Option Agreement under the Ohio Casualty Corporation 2005 Incentive Plan. 99.2 Form of Non-Qualified Stock Option Agreement under the Ohio Casualty Corporation 2005 Incentive Plan. 99.3 Form of Restricted Stock Agreement under the Ohio Casualty Corporation 2005 Incentive Plan. 99.4 Press release dated July 26, 2005 issued by Ohio Casualty Corporation and posted on the Corporation's website at http://www.ocas.com. 99.5 Financial Information issued by Ohio Casualty Corporation on July 26, 2005 and posted on the Corporation's website at http://www.ocas.com. Page 4 of 4 EX-99 2 exh99-1.txt RALPH S. MICHAEL III FORM OF INCENTIVE STOCK OPTION AGREEMENT Exhibit 99.1 Employee Name: Address: SSN: OHIO CASUALTY CORPORATION 2005 INCENTIVE PLAN INCENTIVE STOCK OPTION AWARD AGREEMENT [EMPLOYEE'S NAME] This Award Agreement describes the type of Award that you have been granted and the terms and conditions that must be met before you may realize any value associated with your Award. To fully understand these terms and conditions, you should: - Read this Award Agreement carefully along with the Plan and the Plan prospectus. - Contact the General Counsel at 513-603-2213 if you have any questions about your Award. Also, you must sign both copies of this Award Agreement as the "Optionee/Grantee", keeping one (1) copy for your file and returning one (1) copy to Shareholder Relations in the enclosed self-addressed envelope no later than [INSERT DATE]. After the Ohio Casualty Corporation (the "Company") receives your signed Award Agreement, you will receive an acknowledgement of receipt of the same. Thank you for your continued commitment to the Company. DESCRIPTION OF YOUR INCENTIVE STOCK OPTIONS ------------------------------------------- Your Award Consists of Incentive Stock Options You have been awarded Incentive Stock Options (or "ISOs") to purchase common shares of the Company ("Stock"). Your ISOs are subject to the terms and conditions set forth in this Award Agreement and in the Plan. The ISOs are intended to be incentive stock options that comply with Section 422 of the Code. Grant Date Your ISOs were granted on [INSERT DATE]. Number of ISOs You have been granted [INSERT NUMBER] ISOs. You may purchase one share of Stock for each ISO granted, but only if you meet the terms and conditions described in this Award Agreement and in the Plan. Exercise Price You may exercise each vested ISO by paying [INSERT EXERCISE PRICE] [Exercise Price must be at least 100% of Fair Market Value; at least 110% of Fair Market Value for 10% Shareholders] to purchase one share of Stock. When you purchase Stock by exercising an ISO, the ISO exercised is cancelled. Vesting Period Normally, the ISOs will vest and may be exercised by you as follows: [Describe vesting schedule.] However, there are some situations in which the ISOs may become exercisable earlier. These are described below. Expiration Date and Exercise Period In general, you must exercise all these ISOs, if at all, by no later than [INSERT DATE] [fifth anniversary if 10% Shareholder] (the "Expiration Date"). However, if your Service Terminates prior to the Expiration Date and subject to Section 12.03 of the Plan, the ISOs will remain exercisable for the period set forth below and thereafter will terminate and be of no further force and effect: (1) Death or Disability. If your Service Terminates due to your death or Disability, you (or, if applicable, your Beneficiary) may exercise the ISOs (whether or not vested) anytime before the earlier of (a) the Expiration Date and (b) 15 months after such Termination of Service. However, if the ISOs are not exercised within 12 months after 2 such Termination of Service, they will be treated as nonqualified stock options ("NQSOs"). (2) Retirement. If your Service Terminates due to your Retirement, you (or, if applicable, your Beneficiary) may exercise the ISOs (whether or not vested) anytime before the earlier of (a) the Expiration Date and (b) 15 months after such Termination of Service. However, if the ISOs are not exercised within three months after such Termination of Service, they will be treated as NQSOs. (2) Voluntary Termination of Service by You or Involuntary Termination Without Cause. If you voluntarily Terminate Service or you are Terminated involuntarily without Cause, you (or, if applicable, your Beneficiary) may exercise the vested ISOs anytime before the earlier of (a) the Expiration Date and (b) three months after such Termination of Service. (3) Involuntary Termination of Service With Cause. If your Service is Terminated involuntarily for Cause, the ISOs (whether or not vested) will terminate in full and cease to be exercisable as of the date of Termination of Service. If you do not exercise the vested ISOs by the applicable date set forth above they will expire and may not be exercised at a later date. EXERCISING YOUR ISOs -------------------- Minimum Number of ISOs That You May Exercise: The smallest number of ISOs that you may exercise at any one time is 100 or, if fewer, the total number of your outstanding vested ISOs. Also, you may not exercise any ISO to buy a fractional share of Stock; the value of a fractional share will be paid in cash. Procedures for Exercising Your ISOs: To exercise a vested ISO, you must: - Complete a copy of the Incentive Stock Option Exercise Form attached to this Award Agreement (additional copies are available from Shareholder Relations at (513) 603-2175); and - Pay the Exercise Price for each share being purchased by exercising an ISO. This must be done before your ISOs expire. Paying for your ISO Exercise: ISOs will be exercised through the Company's Shareholder Relations Office and/or your broker. ISOs may be exercised by (i) paying cash or a personal check immediately payable to the Company; (ii) delivering a properly executed notice together with a copy of irrevocable instructions to a broker to sell Stock obtained upon the exercise of the ISOs and deliver promptly to the Company the amount of sale proceeds to pay the Exercise Price; and (iii) giving the 3 Company other shares of Stock having a value equal to the Exercise Price due (but only if you have owned those shares for at least six months). GENERAL TERMS AND CONDITIONS ---------------------------- 1.00 Buy Out of ISOs by Company: The Company may decide at any time to buy out your ISOs. This may happen without your consent and at any time. If the Company decides to buy out your Awards, it will pay you the difference between the Fair Market Value of each Award to be cancelled and the Exercise Price of the Award. 2.00 Beneficiary Designation: You may name a Beneficiary or Beneficiaries to receive or to exercise any vested ISOs that are unpaid or unexercised when you die. This may be done only on the attached Beneficiary Designation Form and by the following the rules described in that form. This form need not be completed now and is not required as a condition of receiving your ISOs. If you die without completing a Beneficiary Designation Form or if you do not complete the form correctly, your Beneficiary will be your surviving spouse, or if you do not have a surviving spouse, your estate. 3.00 Transferring your ISOs: Normally your ISOs may not be transferred to another person. However, you may complete a Beneficiary Designation Form to name the person who may exercise your ISOs if you die before their Expiration Date (see section titled "Beneficiary Designation" above). The Company may allow you to transfer your Award to certain Permissible Transferees (as defined in the Plan). Contact Shareholder Relations at (513) 603-2175 if you are interested in doing this. 4.00 Restrictions on Transfers of Stock: The Company may impose restrictions on any shares of Stock you acquire by exercising an ISO, including restrictions related to applicable securities laws, the rules of any national securities exchange or system on which the Stock is listed or traded. 5.00 Section 16 of the Exchange Act: You are responsible for ensuring that all requirements of Section 16 are met, including the holding of securities purchased under this Award Agreement for a minimum of six months before disposition. 6.00 Tax Withholding: In some cases, income taxes must be withheld on the value of your Award exercised. These taxes may be paid in one of several ways, including: - The Company may withhold this amount from other amounts owed to you (e.g., your salary); or - You may pay these taxes by giving the Company cash equal to the amount that must be withheld or by giving the Company other shares of Company stock (that you have owned for at least six months) with a value equal to the taxes due. You may choose the approach you prefer when the Award is payable, although the Company may reject your preferred method for any reason (or for no reason). If this happens, you must pay these taxes in the way the Company specifies. 4 7.00 Governing Law: This Award Agreement will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the United States and of the State of Ohio. 8.00 Other Agreements: Your ISOs will be subject to the terms of any other agreements between you and the Company. 9.00 Adjustments to ISOs: Your ISOs will be adjusted to reflect any change to the Company's capital structure (e.g., a Stock split) as described in Section 4.03 of the Plan. 10.00 Other Rules: Your ISOs also are subject to more rules described in the Plan and in the Prospectus. You should read both these documents carefully to ensure you fully understand all the terms and conditions of this Award. 11.00 Conflict: In the event of conflict between the terms of this Award Agreement and the Plan, the terms of the Plan govern. 12.00 Capitalized Terms: Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan. # # # # # # # # # # # # # # Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A"), imposes substantial penalties on persons who receive some forms of deferred compensation (see the Plan's prospectus for more information about these penalties). Your Award has been designed to avoid these penalties. However, because the Internal Revenue Service ("IRS") has not yet issued rules fully defining the effect of Section 409A, it is possible that your Award and the Award Agreement may be revised after the IRS issues these rules. As a condition of accepting this Award, you must agree to accept those revisions, without any further consideration, even if those revisions change the terms of your Award and/or reduce its value or potential value. Please sign this Award Agreement and return it to Shareholder Relations no later than [INSERT DATE]. By signing this Award Agreement you acknowledge that this Award is granted under and is subject to the terms and conditions described in this Award Agreement and in the Plan. 5 OPTIONEE/GRANTEE OHIO CASUALTY CORPORATION - --------------------------- ----------------------------- [_______] Dan R. Carmichael [_______] President & CEO THIS FORM OF AWARD AGREEMENT IS PART OF A PROSPECTUS COVERING SECURITIES REGISTERED UNDER THE SECURITIES ACT OF 1933 6 INCENTIVE STOCK OPTION AWARD AGREEMENT GRANTED TO [____] ON [INSERT DATE] ACKNOWLEDGEMENT OF RECEIPT A signed copy of this Award Agreement was received on . ----------------- By: ----------------------------------------------- Shareholder Relations Department Representative Date: ---------------------------------- Note: Send a copy of this completed form to the participant and keep a copy as part of the Plan's permanent records. 7 EX-99 3 exh99-2.txt RALPH S. MICHAEL III FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT Exhibit 99.2 Employee Name: Address: SSN: OHIO CASUALTY CORPORATION 2005 INCENTIVE PLAN NONQUALIFIED STOCK OPTION AWARD AGREEMENT [EMPLOYEE'S NAME] This Award Agreement describes the type of Award that you have been granted and the terms and conditions that must be met before you may realize any value associated with your Award. To fully understand these terms and conditions, you should: - Read this Award Agreement carefully along with the Plan and the Plan prospectus. - Contact the General Counsel at 513-603-2213 if you have any questions about your Award. Also, you must sign both copies of this Award Agreement as the "Optionee/Grantee", keeping one (1) copy for your file and returning one (1) copy to Shareholder Relations in the enclosed self-addressed envelope no later than [INSERT DATE]. After the Ohio Casualty Corporation (the "Company") receives your signed Award Agreement, you will receive an acknowledgement of receipt of the same. Thank you for your commitment to the Company. DESCRIPTION OF YOUR NONQUALIFIED STOCK OPTIONS ---------------------------------------------- Your Award Consists of Nonqualified Stock Options You have been awarded Nonqualified Stock Options (or "NQSOs") to purchase common shares of the Company ("Stock"). Your NQSOs are subject to the terms and conditions set forth in this Award Agreement and in the Plan. The NQSOs are intended to be nonqualified stock options, and are not intended to be treated as options that comply with Section 422 of the Code. Grant Date Your NQSOs were granted on [INSERT DATE]. Number of NQSOs You have been granted [INSERT NUMBER] NQSOs. You may purchase one share of Stock for each NQSO granted, but only if you meet the terms and conditions described in this Award Agreement and in the Plan. Exercise Price You may exercise each vested NQSO by paying [INSERT EXERCISE PRICE] to purchase one share of Stock. When you purchase Stock by exercising a NQSO, the NQSO exercised is cancelled. Vesting Period Normally, the NQSOs will vest and may be exercised by you as follows: [Describe vesting schedule.] However, there are some situations in which the NQSOs may become exercisable earlier. These are described below. Expiration Date and Exercise Period In general, you must exercise all these NQSOs, if at all, by no later than [INSERT DATE] (the "Expiration Date"). However, if your Service Terminates prior to the Expiration Date and subject to Section 12.03 of the Plan, the NQSOs will remain exercisable for the period set forth below and thereafter will terminate and be of no further force and effect: (1) Death, Disability or Retirement. If your Service Terminates due to your Retirement, death or Disability, you (or, if applicable, your Beneficiary) may exercise the NQSOs (whether or not vested) anytime before the earlier of (a) the Expiration Date and (b) 15 months after such Termination of Service. 2 (2) Voluntary Termination of Service by You or Involuntary Termination Without Cause. If you voluntarily Terminate Service or you are Terminated involuntarily without Cause, you (or, if applicable, your Beneficiary) may exercise the vested NQSOs anytime before the earlier of (a) the Expiration Date and (b) three months after such Termination of Service. (3) Involuntary Termination of Service With Cause. If your Service is Terminated involuntarily for Cause, the NQSOs (whether or not vested) will terminate in full and cease to be exercisable as of the date of Termination of Service. If you do not exercise the vested NQSOs by the applicable date set forth above they will expire and may not be exercised at a later date. EXERCISING YOUR NQSOs --------------------- Minimum Number of NQSOs That You May Exercise: The smallest number of NQSOs that you may exercise at any one time is 100 or, if fewer, the total number of your outstanding vested NQSOs. Also, you may not exercise any NQSO to buy a fractional share of Stock; the value of a fractional share will be paid in cash. Procedures for Exercising Your NQSOs: To exercise a vested NQSO, you must: - Complete a copy of the Nonqualified Stock Option Exercise Form attached to this Award Agreement (additional copies are available from Shareholder Relations at (513) 603-2175); and - Pay the Exercise Price for each share being purchased by exercising an NQSO. This must be done before your NQSOs expire. Paying for your NQSO Exercise: NQSOs will be exercised through the Company's Shareholder Relations Office and/or your broker. NQSOs may be exercised by (i) paying cash or a personal check immediately payable to the Company; (ii) delivering a properly executed notice together with a copy of irrevocable instructions to a broker to sell Stock obtained upon the exercise of the NQSOs and deliver promptly to the Company the amount of sale proceeds to pay the Exercise Price; and (iii) giving the Company other shares of Stock having a value equal to the Exercise Price due (but only if you have owned those shares for at least six months). GENERAL TERMS AND CONDITIONS ---------------------------- 1.00 Buy Out of NQSOs by Company: The Company may decide at any time to buy out your NQSOs. This may happen without your consent and at any time. If the Company 3 decides to buy out your Awards, it will pay you the difference between the Fair Market Value of each Award to be cancelled and the Exercise Price of the Award. 2.00 Beneficiary Designation: You may name a Beneficiary or Beneficiaries to receive or to exercise any vested NQSOs that are unpaid or unexercised when you die. This may be done only on the attached Beneficiary Designation Form and by the following the rules described in that form. This form need not be completed now and is not required as a condition of receiving your NQSOs. If you die without completing a Beneficiary Designation Form or if you do not complete the form correctly, your Beneficiary will be your surviving spouse, or if you do not have a surviving spouse, your estate. 3.00 Transferring your NQSOs: Normally your NQSOs may not be transferred to another person. However, you may complete a Beneficiary Designation Form to name the person who may exercise your NQSOs if you die before their Expiration Date (see section titled "Beneficiary Designation" above). The Company may allow you to transfer your Award to certain Permissible Transferees (as defined in the Plan). Contact Shareholder Relations at (513) 603-2175 if you are interested in doing this. 4.00 Restrictions on Transfers of Stock: The Company may impose restrictions on any shares of Stock you acquire by exercising an NQSO, including restrictions related to applicable securities laws, the rules of any national securities exchange or system on which the Stock is listed or traded. 5.00 Section 16 of the Exchange Act: You are responsible for ensuring that all requirements of Section 16 are met, including the holding of securities purchased under this Award Agreement for a minimum of six months before disposition. 6.00 Tax Withholding: The Company may be required to withhold an amount sufficient to satisfy federal, state and local withholding tax requirements on your NQSOs, exercise or cancellation of your NQSOs or purchase of shares of Stock. These taxes may be paid in one of several ways, including: - The Company may withhold this amount from other amounts owed to you (e.g., your salary); - You may pay this amount by giving the Company cash or a personal check in an amount equal to the taxes that must be withheld; - You may give the Company other shares of Stock (that you have held for at least six months) with an aggregate Fair Market Value equal to the taxes that must be withheld; or - The Company may withhold a portion of the shares that you otherwise would have received on the exercise date. The number of shares withheld will have a Fair Market Value equal to the taxes that must be withheld. 4 You may choose the approach you prefer, although the Company may reject your preferred method for any reason (or for no reason). If this happens, you must pay these amounts in the way the Company specifies. 7.00 Governing Law: This Award Agreement will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the United States and of the State of Ohio. 8.00 Other Agreements: Your NQSOs will be subject to the terms of any other agreements between you and the Company. 9.00 Adjustments to NQSOs: Your NQSOs will be adjusted to reflect any change to the Company's capital structure (e.g., a Stock split) as described in Section 4.03 of the Plan. 10.00 Other Rules: Your NQSOs also are subject to more rules described in the Plan and in the Prospectus. You should read both these documents carefully to ensure you fully understand all the terms and conditions of this Award. 11.00 Conflict: In the event of conflict between the terms of this Award Agreement and the Plan, the terms of the Plan govern. 12.00 Capitalized Terms: Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan. # # # # # # # # # # # # # # Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A"), imposes substantial penalties on persons who receive some forms of deferred compensation (see the Plan's prospectus for more information about these penalties). Your Award has been designed to avoid these penalties. However, because the Internal Revenue Service ("IRS") has not yet issued rules fully defining the effect of Section 409A, it is possible that your Award and the Award Agreement may be revised after the IRS issues these rules. As a condition of accepting this Award, you must agree to accept those revisions, without any further consideration, even if those revisions change the terms of your Award and/or reduce its value or potential value. Please sign this Award Agreement and return it to Shareholder Relations no later than [INSERT DATE]. By signing this Award Agreement you acknowledge that this Award is granted under and is subject to the terms and conditions described in this Award Agreement and in the Plan. OPTIONEE/GRANTEE OHIO CASUALTY CORPORATION - ------------------------------ ------------------------------ [_______] Dan R. Carmichael [_______] President & CEO 5 THIS FORM OF AWARD AGREEMENT IS PART OF A PROSPECTUS COVERING SECURITIES REGISTERED UNDER THE SECURITIES ACT OF 193 6 NONQUALIFIED STOCK OPTION AWARD AGREEMENT GRANTED TO [____] ON [INSERT DATE] ACKNOWLEDGEMENT OF RECEIPT A signed copy of this Award Agreement was received on . ------------------- By: ----------------------------------------------- Shareholder Relations Department Representative Date: ---------------------------------- Note: Send a copy of this completed form to the participant and keep a copy as part of the Plan's permanent records. 7 EX-99 4 exh99-3.txt RALPH S. MICHAEL III FORM OF RESTRICTED STOCK AGREEMENT Exhibit 99.3 Employee Name: Address: SSN: OHIO CASUALTY CORPORATION 2005 INCENTIVE PLAN EMPLOYEE RESTRICTED STOCK AWARD AGREEMENT This Award Agreement describes the type of Award that you have been granted and the terms and conditions that must be met before you may realize the value associated with your Award. To fully understand these terms and conditions, you should: - Read this Award Agreement carefully along with the Plan and the Plan prospectus. - Contact the General Counsel at 513-603-2213 if you have any questions about your Award. Also, you must sign both copies of this Award Agreement as the "Grantee", keeping one (1) copy for your file and returning one (1) copy to Shareholder Relations in the enclosed self addressed envelope no later than . After Ohio Casualty receives your signed Award Agreement, - --------------- you will receive an acknowledgement of receipt of the same. Thank you for your commitment to the Company. DESCRIPTION OF YOUR RESTRICTED STOCK ------------------------------------ Your Award Consists of Restricted Stock You have been awarded Restricted Stock. Restricted Stock are shares of Company common stock that you will receive if the restrictions and conditions described below are met. Grant Date Your Restricted Stock was issued on , July 25,2005 . This is the date your shares of Restricted Stock were granted. Award You have been granted 15,000 shares of Restricted Stock. The closing price of OCAS shares on July 25, 2005 was $25.12 per share. If all the restrictions and conditions described below are met, these shares of Restricted Stock will be distributed to you. Restriction Period The restriction period for your shares will expire on July 25, 2008. This is the date on which you will be entitled to receive the shares of Restricted Stock as long as all of the additional restrictions and conditions described below are met. Additional Restrictions You must be an employee of Ohio Casualty at the end of the Restriction Period (i.e., July 25, 2008), subject to the terms and conditions in section 2.00 of this Award Agreement. There also are some special situations in which all restrictions will be removed from your Restricted Stock and the stock will be distributed to you. These are described later in this Award Agreement. YOUR RIGHTS BEFORE THE END OF THE RESTRICTION PERIOD ---------------------------------------------------- Until the restrictions and conditions described above are met, the Restricted Stock certificates will be held by the Company. You will be entitled to any dividends declared on your Restricted Stock during the Restriction Period. You may also vote your Restricted Shares before all the terms and conditions described above are met. This is the case whether or not your shares of Restricted Stock are distributed to you before the Restriction Period ends. TAX TREATMENT OF YOUR RESTRICTED STOCK -------------------------------------- This brief discussion of the federal tax rules that affect your Restricted Stock is provided as general information (not as personal tax advice) and is based on the Company's understanding of U.S. federal tax laws and regulations in effect as of the Grant Date. (You should consult with a tax or financial advisor to fully understand the tax ramifications of your Award.) In general, you will not recognize taxable income on your Restricted Stock at this time. However, you generally will recognize taxable income when (and if) the restrictions and conditions described in this Award Agreement are met. The amount of ordinary income that you will recognize will equal the fair market value of your Restricted Stock at the time the terms and conditions described in this Award Agreement lapse. Any subsequent appreciation of the stock will be taxed at capital gains rates when you sell the stock. In the event the restrictions and conditions are not met before the Restriction Period ends, your Restricted Stock will expire and you will not recognize any income with respect to such Restricted Stock. Alternatively, you may make a special election [known as a Code Section 83(b) election] within 30 days of the Grant Date and recognize income equal to the fair market value of your shares of Restricted Stock as of the Grant Date. Any subsequent appreciation of the stock will be taxed at capital gains rates when you sell the stock. However, there are important tax and investment issues that you must consider before making a Code Section 83(b) election. These should be discussed with your personal tax and investment adviser. If you receive any dividends on your Restricted Stock before the Restriction Period ends: - You will recognize income equal to the fair market value of any cash dividend you receive in the year it is paid; but - You will not recognize income with respect to any dividend paid in shares of Company stock until all the conditions and restrictions described in this Award Agreement have been met. In this case, you will recognize income equal to the fair market value of these shares of Company stock on the date the restrictions and conditions have been met. However, if these conditions and restrictions are not met, you will not recognize any income because these shares will be forfeited. GENERAL TERMS AND CONDITIONS ---------------------------- 1.00 Conduct Leading to Forfeiture of Unmatured Restricted Stock Awards: You may forfeit any Restricted Stock granted if, at any time before the Restriction Period ends, you: - Agree to or actually serve in any capacity for a business or entity that competes with the Company or any Subsidiary (as defined in the Plan) or provides services to an entity that competes with the Company or any Subsidiary; - Refuse or fail to consult with, supply information to, or otherwise cooperate with the Company after having been requested to do so; or - Deliberately engage in any action that the Company decides has caused or is likely to cause substantial harm to its interests or the interests of any Subsidiary. 2.00 Effect of Terminating Employment: Subject to the Section 1.00, the effect of a termination of employment is described in the Plan and the Plan Prospectus. Also, any unmatured Restricted Stock at the time you terminate board service shall be forfeited to the Company as well as all rights, title and interest in the shares. The shares so forfeited shall be deemed to have been transferred to the Company, and you will have no further rights as a shareholder of the Company. 3.00 Buy Out of Awards by Company: The Company may decide at any time to buy out your Restricted Stock Award. This may happen without your consent and at any time. If the Company decides to buy out your Restricted Stock Award, it will pay you the fair market value of the Award. 4.00 Acceleration of Vesting: All Awards will be fully vested if there is a Business Combination (as defined in the Plan). If this happens, all restrictions placed on your Restricted Stock Award will lapse as of the date of the Business Combination. 5.00 Beneficiary Designation: You may name a Beneficiary or Beneficiaries to receive or to exercise any vested Award that is unpaid or unexercised when you die. This may be done only on the attached Beneficiary Designation Form and by the following the rules described in that form. This form need not be completed now and is not required as a condition of receiving your Award. If you die without completing a Beneficiary Designation Form or if you do not complete that form correctly, your Beneficiary will be your surviving spouse, or if you do not have a surviving spouse, your estate. 6.00 Transferring your Restricted Stock: Restricted Stock may not be sold, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Restriction Period. All shares of Restricted Stock will be held by the Company during the Restriction Period. However, you may complete a Beneficiary Designation Form to name the person who may receive your shares of Restricted Stock if you die before the Restriction Period is over (see section titled "Beneficiary Designation" above). The Company may allow you to transfer your award to certain Permissible Transferees (as defined in the Plan). Contact Shareholder Relations at (513) 603-2175 if you are interested in doing this. 7.00 Restrictions on Transfers of Stock: The Company may impose restrictions on any shares of Company stock you acquire from the Company, including restrictions related to applicable securities laws and the rules of any national securities exchange or system on which Company stock is listed or traded. 8.00 Section 16 of the Act: You are responsible for ensuring that all requirements of Section 16 are met, including the holding of securities purchased under this Award Agreement for a minimum of six months before disposition. 9.00 Tax Withholding: : In some cases, income taxes must be withheld on the value of your Award. These taxes may be paid in one of several ways, including: - The Company may withhold this amount from other amounts owed to you (e.g., your salary); - You may pay these taxes by giving the Company cash equal to the amount that must be withheld or by giving the Company other shares of Company stock (that you have owned for at least six months) with a value equal to the taxes due; or You may choose the approach you prefer when the Award is payable, although the Company may reject your preferred method for any reason (or for no reason). If this happens, you must pay these taxes in the way the Company specifies. However, if you do not select one of these methods, the Company may withhold this amount from other amounts owed to you. 10.00 Governing Law: This Award Agreement will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the United States and of the State of Ohio. 11.00 Other Agreements: Your Award will also be subject to the terms of any other agreements between you and the Company. 12.00 Adjustments to Awards: Your Award will be adjusted, if appropriate, to reflect any change to the Company's capital structure (e.g., a stock split). 13.00 Other Rules: Your Restricted Stock Award is also subject to more rules described in the Plan and in the Plan's prospectus. You should read both of these documents carefully to ensure you fully understand all the terms and conditions of this Award. 14.00 Conflict: In the event of conflict between the terms of this Award Agreement and the Plan, the terms of the Plan govern. # # # # # # # # # # # # # # Section 409A of the Internal Revenue Code ("Section 409A") imposes substantial penalties on persons who receive some forms of deferred compensation (see the Plan's prospectus for more information about these penalties). Your Award has been designed to avoid these penalties. However, because the Internal Revenue Service has not yet issued rules fully defining the effect of Section 409A, it is possible that your Award and the Award Agreement must be revised after the IRS issues these rules. As a condition of accepting this Award, you must agree to accept those revisions, without any further consideration, even if those revisions change the terms of your Award and reduce its value or potential value. Please sign this Award Agreement and return it to Shareholder Relations no later than . By signing this Award Agreement you ----------------- acknowledge that this Award is granted under and is subject to the terms and conditions described above and in the Ohio Casualty Corporation 2005 Incentive Plan. GRANTEE OHIO CASUALTY CORPORATION /s/Dan R. Carmichael - --------------------------- --------------------------------- Name: Dan R. Carmichael SSN: President & CEO THIS FORM OF AWARD AGREEMENT IS PART OF A PROSPECTUS COVERING SECURITIES REGISTERED UNDER THE SECURITIES ACT OF 1933 RESTRICTED STOCK AWARD AGREEMENT GRANTED TO _ON ---------------------- ACKNOWLEDGEMENT OF RECEIPT A signed copy of this Award Agreement was received on . ------------------ By: ----------------------------------------------- Shareholder Relations Department Representative Date: --------------------------------- Note: Send a copy of this completed form to the participant and keep a copy as part of the Plan's permanent records. EX-99 5 exh99-4.txt OHIO CASUALTY CORP PRESS RELEASE 2ND Q EARNINGS Exhibit 99.4 Analyst contact: Dennis E. McDaniel Vice President, Investor Relations 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 29% INCREASE IN SECOND QUARTER NET INCOME FAIRFIELD, OHIO, July 26, 2005 --- Ohio Casualty Corporation (NASDAQ:OCAS) today announced the following results for its second quarter ended June 30, 2005, compared with the same period of the prior year: - Net income of $42.1 million, or $0.63 per diluted share, versus $32.7 million, or $0.48 per diluted share; - All Lines combined ratio (GAAP) of 95.5%, a 3.7 point improvement; and - Operating income (A) of $33.2 million versus $30.6 million, a $2.6 million or 8.5% increase. - Included in net and operating income above is $8.3 million ($5.9 million after tax, or $0.09 per diluted share) related to the loss on retirement of convertible debt. Results for the six months ended June 30, 2005, compared with the same period of the prior year: - Net income of $79.8 million, or $1.18 per diluted share, versus $51.9 million, or $0.78 per diluted share; - All Lines combined ratio (GAAP) of 95.5%, a 6.0 point improvement; and - Operating income (A) of $70.9 million versus $49.0 million, a $21.9 million or 44.7% increase. - Included in net and operating income above is $9.0 million ($6.6 million after tax, or $0.10 per diluted share) related to the loss on retirement of convertible debt. President and Chief Executive Officer Dan Carmichael commented, "Ohio Casualty's commitment to disciplined, profitable underwriting once again yielded a substantial quarterly underwriting profit, as both losses and underwriting expenses declined significantly from the prior-year quarter. I am also pleased with the results of our debt reduction efforts completed last month. Although the redemptions of our convertible notes affected our income for the quarter, they substantially reduced our debt ratio and reduced the risk of significant dilution to our current shareholders. In addition, during the quarter we announced the reinstatement of our common-share dividend. We intend to bring our improved financial position to the attention of the rating agencies. Finally, we are pleased to welcome Ralph S. (Mike) Michael, who this week joined the Company as President and Chief Operating Officer. Mike will be applying his significant expertise in marketing financial services toward the development of new premium growth strategies." Improved second quarter earnings were driven by lower underwriting losses and expenses despite a 0.5% decline in earned premium. The loss ratio declined 2.9 points compared to the same period last year principally due to lower catastrophe losses. The second quarter underwriting expense ratio improved 1.7 points compared to last year, still more evidence of the continuing reduction in operating costs resulting from Cost Structure Efficiency initiatives. Loss and loss adjustment expense reserves continued to develop favorably in the second quarter. Favorable development was $2.9 million in the second quarter 2005 compared to $10.2 million in the same period last year. The major components of net income are summarized in the table below:
Three Months Summary Income Statement Ended June 30 ($ in millions, except share data) 2005 2004 - ---------------------------------- ---- ---- Premiums and finance charges earned $365.5 $367.2 Investment income less expenses 48.6 48.6 Investment gains realized, net 13.8 3.2 ---------------------- Total revenues $427.9 $419.0 Losses and benefits for policyholders $191.7 $203.1 Loss adjustment expenses 40.4 40.1 Underwriting expenses 117.5 121.0 Corporate and other expenses 18.6 7.8 ---------------------- Total expenses $368.2 $372.0 Income tax expense: On investment gains realized $ 4.8 $ 1.1 On all other income 12.8 13.2 --------------------- Total income tax expense $17.6 $14.3 Cumulative effect of an accounting change $ - $ - --------------------- Net income $42.1 $32.7 ===================== Average shares outstanding - diluted 66,997,317 71,371,586 Net income, per share - diluted $0.63 $0.48
Six Months Summary Income Statement Ended June 30 ($ in millions, except share data) 2005 2004 - ---------------------------------- ---- ---- Premiums and finance charges earned $727.8 $728.3 Investment income less expenses 97.0 99.1 Investment gains realized, net 13.8 6.9 ---------------------- Total revenues $838.6 $834.3 Losses and benefits for policyholders $382.8 $398.3 Loss adjustment expenses 83.3 78.4 Underwriting expenses 229.7 262.5 Corporate and other expenses 33.4 18.2 ---------------------- Total expenses $729.2 $757.4 Income tax expense: On investment gains realized $ 4.8 $ 2.4 On all other income 24.8 21.0 --------------------- Total income tax expense $29.6 $23.4 Cumulative effect of an accounting change $ - $ (1.6) --------------------- Net income $79.8 $51.9 ===================== Average shares outstanding - diluted 69,327,993 71,204,439 Net income, per share - diluted $1.18 $0.78
In connection with the adoption of Emerging Issues Task Force ("EITF") Consensus 04-8 "The Effect of Contingently Convertible Debt on Diluted Earnings per Share" in the fourth quarter 2004, the Company was required to restate the average shares outstanding-diluted and net income per share- diluted for the three and six months ended June 30, 2004. The restatement lowered net income per share-diluted by $0.04 and $0.05, respectively, for the three and six months ended June 30, 2004. Consolidated before-tax net investment income was flat, as growth from significant positive operating cash flows was offset by declines in before-tax investment yields. On an after-tax basis, however, net investment income increased $2.7 million, driven by increases in tax exempt security holdings that reduced the effective tax rate on investment income to 27.5% in the second quarter this year from 33.2% a year ago. Book value per share increased $1.07, or 5.1% to $21.89 at June 30, 2005, compared to $20.82 at December 31, 2004. For a more detailed discussion of the financial condition and the results of operations at June 30, 2005 and for the three and six month periods then ended, please see the Quarterly Report on Form 10-Q for this period, filed with the Securities and Exchange Commission (SEC). Supplemental financial information for the second quarter and six months ended June 30, 2005, including certain financial measures, is available on Ohio Casualty Corporation's website at www.ocas.com and was also filed on Form 8-K with the SEC. A discussion of the differences between statutory accounting principles and accounting principles generally accepted in the United States is included in Item 15 of the Corporation's Form 10-K for the year ended December 31, 2004. Investors are advised to read the safe harbor statement at the end of this release. Conference Call The Corporation will conduct a teleconference call to discuss information included in this news release and related matters at 10:00 a.m. EDT on Wednesday, July 27, 2005. 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 October 27, 2005. To listen to call playback by telephone, dial 1-800-252-6030, then enter ID code 42596027. Call playback begins at 5 p.m. EDT on July 27, 2005 and extends through midnight on July 29, 2005. Quiet Period The Corporation observes a quiet period and will not comment on financial results or expectations during quiet periods. The quiet period for the third quarter will start October 1, 2005 extending through the time of the earnings conference call, tentatively scheduled for October 27, 2005. Corporate Profile Ohio Casualty Corporation is the holding company of The Ohio Casualty Insurance Company, which is one of six property-casualty insurance 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 47th among U.S. property/casualty insurance groups based on net premiums written (Best's Review, July 2005). 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 $5.7 billion as of June 30, 2005. Safe Harbor Statement 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 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 Company's reports filed with the Securities and Exchange Commission or in subsequent press releases. (A) Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures Reconciliation of Net Income to Operating Income 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. Accordingly, management uses the non-GAAP financial measure of operating income to further evaluate current operating performance. Operating income, both in dollar amounts and per share amounts, are reconciled to net income and net income per share in the table below:
Three Months Ended June 30 ($ in millions) 2005 2004 - --------------- ---- ---- Operating income $33.2 $30.6 After-tax net realized gains 8.9 2.1 Cumulative effect of accounting change - - ------ ------ Net income $42.1 $32.7 ====== ====== Operating income per share - diluted $0.50 $0.45 After-tax net realized gains per share- diluted 0.13 0.03 Cumulative effect of accounting change per share - diluted - - ------ ------ Net income per share - diluted $0.63 $0.48 ====== ======
Six Months Ended June 30 ($ in millions) 2005 2004 - --------------- ---- ---- Operating income $70.9 $49.0 After-tax net realized gains 8.9 4.5 Cumulative effect of accounting change - (1.6) ------ ------ Net income $79.8 $51.9 ====== ====== Operating income per share - diluted $1.05 $0.74 After-tax net realized gains per share- diluted 0.13 0.06 Cumulative effect of accounting change per share - diluted - (0.02) ------ ------ Net income per share - diluted $1.18 $0.78 ====== ======
As mentioned previously, in connection with the adoption of EITF 04-8 in the fourth quarter 2004, the Company was required to restate per share amounts for the three months and six months ended June 30, 2004. The restatement lowered net income, per share-diluted, by $0.04 and $0.05 for the three and six months ended June 30, 2004, respectively. Reconciliation of Net Income Return on Equity to Operating Income Return on Equity Operating income return on equity is a ratio management calculates using non- GAAP financial measures. It is calculated by dividing the annualized consolidated operating income (see calculation below) for the most recent quarter by the adjusted average shareholders' equity for the quarter using a simple average of beginning and ending balances for the quarter, excluding from equity after-tax unrealized investment gains and losses. This ratio provides management with an additional measure to evaluate the results excluding the unrealized changes in the valuation of the investment portfolio that can fluctuate between periods. The following table reconciles operating income return on equity to net income return on equity, the most directly comparable GAAP measure:
Three Months Ended June 30 ($ in millions) 2005 2004 - --------------- ---- ---- Net income $ 42.1 $ 32.7 Average shareholders' equity 1,351.2 1,207.4 Return on equity based on annualized net income 12.5% 10.8% ===== ===== Operating income $ 33.2 $ 30.6 Adjusted average shareholders' equity 1,090.2 920.5 Return on equity based on annualized operating income 12.2% 13.3% ===== ===== Average shareholders' equity $1,351.2 $1,207.4 Average unrealized gains 261.0 286.9 -------- -------- Adjusted average shareholders' equity $1,090.2 $ 920.5 ======== ========
Six Months Ended June 30 ($ in millions) 2005 2004 - --------------- ---- ---- Net income $ 79.8 $ 51.9 Average shareholders' equity 1,352.8 1,162.9 Return on equity based on annualized net income 11.8% 8.9% ===== ==== Operating income $ 70.9 $ 49.0 Adjusted average shareholders' equity 1,069.0 899.6 Return on equity based on annualized operating income 13.3% 10.9% ===== ===== Average shareholders' equity $1,352.8 $1,162.9 Average unrealized gains 283.8 263.3 -------- -------- Adjusted average shareholders' equity $1,069.0 $ 899.6 ======== ========
EX-99 6 exh99-5.txt OHIO CASUALTY CORP 2ND Q SUPPLELMENTAL FINANCIAL INFORMATION Exhibit 99.5 OHIO CASUALTY CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION FOR THE PERIOD ENDING JUNE 30, 2005 Contents: Page 1 GAAP Income Statement Data Page 2 GAAP P&C Data Page 3 Consolidated Balance Sheet Data and Related Information Page 4 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, unless otherwise noted (in thousands, except per share data) SECOND QUARTER, 2005 (Data Unaudited)
THREE MONTHS ENDED JUNE 30 ------------------------------------------------ CONSOLIDATED 2005 2004 - ---------------------------------------- ----------------------- ----------------------- Premiums and finance charges earned $ 365,550 $ 367,093 Investment income less expenses 48,512 48,587 Investment gains realized, net 13,796 3,258 ----------- ----------- Total revenues 427,858 418,938 Losses 191,700 203,098 Loss adjustment expenses 40,308 40,051 Underwriting expenses 117,540 120,984 Corporate and other expenses 18,656 7,762 ----------- ----------- Total expenses 368,204 371,895 Income before income taxes 59,654 47,043 Income tax expense: On investment gains realized 4,829 1,140 On all other income 12,668 13,214 ------------ ------------ Total income tax expense 17,497 14,354 Cumulative effect of an accounting change - - ------------ ------------ Net income $ 42,157 $ 32,689 ============ ============ Average shares outstanding - diluted* 66,997 71,372 Net income, per share - diluted* $ 0.63 $ 0.48 Operating income** $ 33,190 $ 30,571 Operating income - earnings per share** $ 0.50 $ 0.45 Operating income - return on equity** 12.2% 13.3% KEY PROPERTY AND CASUALTY RATIOS GAAP Statutory GAAP Statutory - --------------------------------------- -------- -------- -------- --------- Losses 52.4% 52.4% 55.3% 55.3% Loss adjustment expenses 11.0% 11.0% 10.1% 9.8% Underwriting expenses 32.1% 30.7% 33.8% 33.1% -------- ------- --------- ------- Combined ratio 95.5% 94.1% 99.2% 98.2% Effective tax rate on investment income 27.5% 33.2% CORPORATE/OTHER - --------------------------------------- Investment income less expenses $ 3,899 $ 1,090 Investment gains realized, net 4,941 1,157 Agent relationships asset expenses 3,295 4,339 Corporate expenses 15,361 3,423
SIX MONTHS ENDED JUNE 30 ----------------------------------------------- CONSOLIDATED 2005 2004 - ---------------------------------------- ----------------------------------------------- Premiums and finance charges earned $ 727,852 $ 728,259 Investment income less expenses 96,968 99,063 Investment gains realized, net 13,790 6,915 ----------- ----------- Total revenues 838,610 834,237 Losses 382,825 398,279 Loss adjustment expenses 83,276 78,411 Underwriting expenses 229,682 262,459 Corporate and other expenses 33,435 18,154 ------------ ------------ Total expenses 729,218 757,303 Income before income taxes 109,392 76,934 Income tax expense: On investment gains realized 4,827 2,420 On all other income 24,721 20,943 ------------ ------------ Total income tax expense 29,548 23,363 Cumulative effect of an accounting change - (1,648) ------------ ------------ Net income $ 79,844 $ 51,923 ============ ============ Average shares outstanding - diluted* 69,328 71,204 Net income, per share - diluted* $ 1.18 $ 0.78 Operating income** $ 70,881 $ 49,076 Operating income - earnings per share** $ 1.05 $ 0.74 Operating income - return on equity** 13.3% 10.9% KEY PROPERTY AND CASUALTY RATIOS GAAP Statutory GAAP Statutory - --------------------------------------- -------- --------- -------- --------- Losses 52.6% 52.6% 54.7% 54.7% Loss adjustment expenses 11.4% 11.4% 10.8% 10.2% Underwriting expenses 31.5% 30.4% 36.0% 34.6% -------- ------- --------- ------- Combined ratio 95.5% 94.4% 101.5% 99.5% Effective tax rate on investment income 27.2% 33.0% CORPORATE/OTHER - --------------------------------------- Investment income less expenses $ 7,210 $ 1,917 Investment gains realized, net 4,941 1,757 Agent relationships asset expenses 7,690 11,553 Corporate expenses 25,745 6,601
CONSOLIDATED YEAR 2004 - ---------------------------------------- ------------------------ Premiums and finance charges earned $ 1,446,624 Investment income less expenses 201,244 Investment gains realized, net 22,920 ----------- Total revenues 1,670,788 Losses 777,580 Loss adjustment expenses 158,697 Underwriting expenses 504,812 Corporate and other expenses 43,214 ------------ Total expenses 1,484,303 Income before income taxes 186,485 Income tax expense: On investment gains realized 8,022 On all other income 48,442 ------------ Total income tax expense 56,464 Cumulative effect of an accounting change (1,648) ------------ Net income $ 128,373 ============ Average shares outstanding - diluted* 71,508 Net income, per share - diluted* $ 1.89 Operating income** $ 115,123 Operating income - earnings per share** $ 1.71 Operating income - return on equity** 12.3% KEY PROPERTY AND CASUALTY RATIOS GAAP Statutory - --------------------------------------- -------- --------- Losses 53.7% 53.8% Loss adjustment expenses 11.0% 10.7% Underwriting expenses 34.9% 33.9% -------- ------- Combined ratio 99.6% 98.4% Effective tax rate on investment income 31.5% CORPORATE/OTHER - --------------------------------------- Investment income less expenses $ 4,323 Investment gains realized, net 3,719 Agent relationships asset expenses 20,640 Corporate expenses 22,574
*Average diluted shares outstanding and net income per share amounts for the three and six months ended June 30, 2004 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 earnings per share amounts for periods prior to December 31, 2004 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. **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. Accordingly, management uses the non-GAAP financial measure of operating income to further evaluate current operating performance. Operating income return on equity is calculated by dividing the annualized consolidated operating income for the most recent quarter by the average shareholders' equity for the quarter using a simple average of beginning and ending balances for the quarter, excluding from equity after-tax unrealized investment gains and losses. See press release dated July 26, 2005 for reconciliation of operating income both in dollar amounts and per share amounts and operating income return on equity to net income, net income per share and net income return on equity, respectively. -1- OHIO CASUALTY CORPORATION PROPERTY AND CASUALTY INSURANCE DATA (in thousands, except ratio data) SECOND QUARTER, 2005 (Data Unaudited)
THREE MONTHS ENDED JUNE 30 -------------------------------------------------- 2005 2004 OPERATING SEGMENTS and ----------------------- ----------------------- SELECTED PRODUCT LINES Net Premiums Combined Net Premiums Combined GAAP BASIS: Earned Ratio Earned Ratio - -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 206,794 102.6% $ 202,338 102.1% Workers' compensation 32,345 148.8% 34,669 106.0% Commercial auto 57,312 86.1% 57,617 100.2% General liability 23,123 112.5% 21,531 108.8% CMP, fire and inland marine 94,014 94.3% 88,521 100.2% Specialty Lines $ 36,461 95.3% $ 40,772 95.1% Commercial umbrella 24,294 106.9% 29,913 96.0% Fidelity and surety 12,167 72.3% 10,859 93.1% Personal Lines $ 122,295 83.8% $ 123,983 95.8% Personal auto incl. personal umbrella 73,675 88.5% 76,013 96.4% Personal property 48,620 76.7% 47,970 94.9% ------------ ------ ------------ ------ Total All Lines $ 365,550 95.5% $ 367,093 99.2% Net Premiums Combined Net Premiums Combined STATUTORY BASIS: Written Ratio Written Ratio - -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 221,825 100.8% $ 220,306 100.7% Workers' compensation 36,182 144.4% 36,596 108.1% Commercial auto 62,359 84.2% 63,830 99.7% General liability 26,388 110.7% 24,709 102.5% CMP, fire and inland marine 96,896 93.5% 95,171 98.1% Specialty Lines $ 39,727 88.6% $ 39,058 94.0% Commercial umbrella 26,455 98.9% 26,415 93.3% Fidelity and surety 13,272 68.4% 12,643 90.6% Personal Lines $ 123,380 84.4% $ 127,307 95.5% Personal auto incl. personal umbrella 72,222 89.8% 74,929 96.5% Personal property 51,158 76.1% 52,378 93.7% ------------ ------ ------------ ------ Total All Lines $ 384,932 94.1% $ 386,671 98.2%
SIX MONTHS ENDED JUNE 30 ------------------------------------------------- 2005 2004 OPERATING SEGMENTS and ----------------------- ---------------------- SELECTED PRODUCT LINES Net Premiums Combined Net Premiums Combined GAAP BASIS: Earned Ratio Earned Ratio - -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 412,392 104.4% $ 400,164 102.5% Workers' compensation 65,355 148.8% 67,746 110.1% Commercial auto 114,964 85.4% 114,463 97.9% General liability 45,537 116.2% 42,514 114.9% CMP, fire and inland marine 186,536 97.8% 175,441 99.5% Specialty Lines $ 71,536 95.8% $ 82,456 92.6% Commercial umbrella 46,872 104.6% 60,949 96.6% Fidelity and surety 24,664 79.2% 21,507 81.3% Personal Lines $ 243,924 80.5% $ 245,639 102.9% Personal auto incl. personal umbrella 146,497 82.9% 150,066 109.5% Personal property 97,427 76.9% 95,573 92.5% ------------ ------ ------------ ------ Total All Lines $ 727,852 95.5% $ 728,259 101.5% Net Premiums Combined Net Premiums Combined STATUTORY BASIS: Written Ratio Written Ratio - -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 427,421 103.3% $ 432,524 99.8% Workers' compensation 71,459 146.0% 72,855 111.3% Commercial auto 119,608 84.1% 123,964 96.2% General liability 49,937 116.2% 46,785 106.5% CMP, fire and inland marine 186,417 97.8% 188,920 96.0% Specialty Lines $ 78,819 87.6% $ 73,868 93.6% Commercial umbrella 53,263 94.5% 49,733 97.0% Fidelity and surety 25,556 76.8% 24,135 79.2% Personal Lines $ 237,160 80.9% $ 244,336 101.3% Personal auto incl. personal umbrella 145,780 82.9% 150,782 107.6% Personal property 91,380 76.9% 93,554 91.2% ------------ ------ ------------ ------ Total All Lines $ 743,400 94.4% $ 750,728 99.5%
YEAR 2004 OPERATING SEGMENTS and ---------------------- SELECTED PRODUCT LINES Net Premiums Combined GAAP BASIS: Earned Ratio - -------------------------- ------------ -------- Commercial Lines $ 807,925 100.6% Workers' compensation 132,625 114.0% Commercial auto 229,629 91.1% General liability 86,563 109.9% CMP, fire and inland marine 359,108 99.5% Specialty Lines $ 150,262 96.7% Commercial umbrella 105,089 103.2% Fidelity and surety 45,173 81.5% Personal Lines $ 488,437 98.9% Personal auto incl. personal umbrella 295,774 105.9% Personal property 192,663 88.1% ------------ ------ Total All Lines $ 1,446,624 99.6% Net Premiums Combined STATUTORY BASIS: Written Ratio - -------------------------- ------------ -------- Commercial Lines $ 828,216 99.3% Workers' compensation 132,932 115.4% Commercial auto 233,539 90.3% General liability 89,457 105.0% CMP, fire and inland marine 372,288 97.5% Specialty Lines $ 135,499 97.2% Commercial umbrella 87,124 103.8% Fidelity and surety 48,375 78.9% Personal Lines $ 490,235 97.6% Personal auto incl. personal umbrella 294,114 104.7% Personal property 196,121 86.8% ------------ ------ Total All Lines $ 1,453,950 98.4%
-2- OHIO CASUALTY CORPORATION CONSOLIDATED BALANCE SHEET DATA AND RELATED INFORMATION (in thousands, except share data) SECOND QUARTER, 2005 (2005 Data Unaudited)
June 30, December 31, 2005 2004 Assets --------- ------------ Investments: U.S. government fixed maturities $ 36,846 $ 30,823 Tax exempt fixed maturities 1,200,087 1,036,697 Taxable fixed maturities: Available-for-sale, at fair value 2,284,814 2,278,588 Held-to-maturity, at amortized cost 283,260 301,367 ------------ ------------ Total fixed maturities 3,805,007 3,647,475 Equity securities, at fair value 356,796 357,458 Short-term investments, at fair value 24,678 239,105 ------------ ------------ Total investments 4,186,481 4,244,038 Cash 9,982 13,461 Premiums and other receivables, net of allowance for bad debts of $4,000 and $4,300, respectively 334,188 350,761 Deferred policy acquisition costs 152,928 159,849 Property and equipment, net of accumulated depreciation of $171,938 and $167,362, respectively 81,921 82,946 Reinsurance recoverable, net of allowance of $2,336 703,818 666,501 Agent relationships, net of accumulated amortization of $43,007 and $41,438, respectively 114,304 121,994 Interest and dividends due or accrued 52,244 49,859 Other assets 50,216 25,607 ------------ ------------ Total assets $ 5,686,082 $ 5,715,016 ============ ============ Shares outstanding 64,455,184 62,209,129 Book value per share $21.89 $20.82 Unrealized gain component of book value per share* $4.26 $4.47
June 30, December 31, 2005 2004 Liabilities --------- ------------ Insurance reserves: Losses $ 2,357,238 $ 2,269,565 Loss adjustment expenses 501,371 486,767 Unearned premiums 706,571 715,486 Debt 200,625 383,266 Reinsurance treaty funds held 171,652 195,015 Deferred income taxes 28,115 21,950 Other liabilities 309,815 348,024 ------------ ------------ Total liabilities $ 4,275,387 $ 4,420,073 Shareholders' Equity Common stock, $.125 par value Authorized: 150,000,000 Issued shares: 72,418,344; 72,418,344 9,052 9,052 Additional paid-in capital 15,194 - Accumulated other comprehensive income 254,447 259,131 Retained earnings 1,237,387 1,161,510 Treasury stock, at cost: (Shares: 7,963,160; 10,209,215) (105,385) (134,750) ------------ ------------ Total shareholders' equity 1,410,695 1,294,943 ------------ ------------ Total liabilities and shareholders' equity $ 5,686,082 $ 5,715,016 ============ ============ Statutory Insurance Reserves Losses $ 1,776,988 $ 1,739,709 Loss adjustment expense 451,264 444,102 Unearned premiums 665,289 649,740 Other Statutory Data Statutory policyholders' surplus $ 929,075 $ 972,040 Ratio of net premiums written to surplus 1.6 to 1.0 1.5 to 1.0
*The unrealized gain component of book value per share excludes $11.4 million and $12.7 million at June 30, 2005 and December 31, 2004, respectively, which relates to the unrealized holding period gain on the transfer of fixed maturity securities from the available-for-sale classification to the held-to-maturity classification. -3- OHIO CASUALTY CORPORATION SUPPLEMENTAL INFORMATION (in thousands, except ratios and accident year data) SECOND QUARTER, 2005 (Data Unaudited)
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 -------------------------- -------------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Gross Premiums Written - ---------------------- Commercial Lines $ 223,964 $ 225,864 $ 435,141 $ 446,283 Specialty Lines 54,223 66,787 107,401 128,620 Personal Lines 123,199 127,642 238,100 246,542 ---------- ---------- ---------- ---------- Total 401,386 420,293 780,642 821,445 New Business Gross Premiums Written - ----------------------------------- Commercial Lines $ 41,220 $ 47,218 $ 77,520 $ 90,244 Commercial Umbrella 9,074 13,582 17,264 27,500 Personal Lines 9,658 11,035 18,442 21,101 Average Renewal Price Increase - ------------------------------ Commercial Lines 1.6% 4.5% 1.9% 5.7% Commercial Umbrella 6.0% 8.2% 5.5% 9.7% Catastrophe Loss Ratio - ---------------------- Commercial Lines 1.4% 0.9% 1.0% 0.8% Specialty Lines 0.0% 0.0% 0.0% 0.0% Personal Lines 2.2% 8.0% 1.6% 4.7% Homeowners 4.7% 18.4% 2.9% 10.5% Total All Lines 1.5% 3.2% 1.1% 2.0% Prior Accident Year Loss & LAE by Segment - ----------------------------------------- Commercial Lines $ 5.0 $ (2.1) $ 17.2 $ (8.7) Specialty Lines (1.5) (2.1) (4.3) (5.2) Personal Lines (6.4) (6.0) (19.6) 1.2 ---------- ---------- ---------- ---------- Total All Lines Accident Year Development (2.9) (10.2) (6.7) (12.7) Prior Accident Year Loss & LAE - ------------------------------ Accident Year 2004 $ (6.6) $ - $ (15.9) $ - Accident Year 2003 (6.5) (8.1) (17.3) (22.2) Accident Year 2002 and Prior 10.2 (2.1) 26.5 9.5 ---------- ---------- ---------- ---------- Total Accident Year Development (2.9) (10.2) (6.7) (12.7)
YEAR 2004 ---------- Gross Premiums Written - ---------------------- Commercial Lines $ 856,212 Specialty Lines 251,505 Personal Lines 496,758 ---------- Total 1,604,475 New Business Gross Premiums Written - ----------------------------------- Commercial Lines $ 182,291 Commercial Umbrella 49,982 Personal Lines 41,322 Average Renewal Price Increase - ------------------------------ Commercial Lines 5.0% Commercial Umbrella 8.0% Catastrophe Loss Ratio - ---------------------- Commercial Lines 2.4% Specialty Lines 0.0% Personal Lines 4.9% Homeowners 11.8% Total All Lines 3.0% Prior Accident Year Loss & LAE by Segment - ----------------------------------------- Commercial Lines $ (15.0) Specialty Lines (9.3) Personal Lines 2.6 ---------- Total All Lines Accident Year Development (21.7) Prior Accident Year Loss & LAE - ------------------------------ Accident Year 2004 $ - Accident Year 2003 (35.1) Accident Year 2002 and Prior 13.4 ---------- Total Accident Year Development (21.7)
Note: For information on differences between statutory accounting principles and generally accepted accounting principles (GAAP), refer to Item 15 on page 69 of the Corporation's Form 10-K for the year ended December 31, 2004. -4- -----END PRIVACY-ENHANCED MESSAGE-----