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-