EX-99 3 exh99-2.txt OHIO CASUALTY CORP 3Q SUPPLEMENTAL FINANCIAL INFORMATION Exhibit 99.2 OHIO CASUALTY CORPORATION & SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION FOR THE PERIODS ENDING SEPTEMBER 30, 2006 Contents: Page 1 GAAP Summary Income Statement Data Page 2 Property and Casualty Insurance 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 and supplemental financial information 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 Consolidated 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 and supplemental financial information. The risks and uncertainties that may affect the operations, performance, development and results of the Consolidated Corporation's business include the following: changes in property and casualty reserves; catastrophe losses; premium and investment growth; product pricing environment; availability of credit, change in government regulation; performance of financial markets; fluctuations in interest rates; availabiltiy 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 and supplemental financial information, or to update them to reflect events or circumstances occurring after the date of this release and supplemental financial information, or to reflect the occurrence of unanticipated events. Investors are also advised to consult any further disclosures made on related subjects in the Ohio Casualty Corporation's reports filed with the Securities and Exchange Commission or in subsequent releases. OHIO CASUALTY CORPORATION & SUBSIDIARIES SUMMARY INCOME STATEMENT - GAAP BASIS, unless otherwise noted (in thousands, except per share data) THIRD QUARTER, 2006 (Data Unaudited)
THREE MONTHS ENDED SEPT 30 ------------------------------------------------ CONSOLIDATED 2006 2005 ---------------------------------------- ----------------------- ----------------------- Premiums and finance charges earned $ 356,311 $ 362,483 Investment income less expenses 51,325 51,454 Investment gains realized, net 11,402 22,404 ----------- ----------- Total revenues 419,038 436,341 Losses 188,803 204,446 Loss adjustment expenses 35,809 42,556 Underwriting expenses 110,167 113,756 Corporate and other expenses 8,078 9,165 ----------- ----------- Total expenses 342,857 369,923 Income before income taxes 76,181 66,418 Income tax expense (benefit): On investment gains realized 3,991 (426) On all other income 16,926 11,315 ----------- ----------- Total income tax expense 20,917 10,889 Net income $ 55,264 $ 55,529 ============ ============ Average shares outstanding - diluted 62,441 65,657 Net income, per share - diluted $ 0.89 $ 0.85 Operating income* $ 47,853 $ 32,699 Operating income - earnings per share* $ 0.77 $ 0.50 Operating income - return on equity* 15.1% 11.4% Effective tax rate on investment income 25.5% 29.0% KEY PROPERTY AND CASUALTY RATIOS GAAP Statutory GAAP Statutory --------------------------------------- -------- --------- -------- --------- Losses 53.0% 53.0% 56.4% 56.4% Loss adjustment expenses 10.0% 10.0% 11.7% 11.7% Underwriting expenses 30.9% 31.9% 31.4% 32.1% -------- ------- -------- ------- Combined ratio 93.9% 94.9% 99.5% 100.2% CORPORATE/OTHER --------------------------------------- Net investment income $ 3,789 $ 3,836 Investment gains/(losses) realized, net 215 2,034 Agent relationships asset expenses 1,681 2,438 Corporate expenses 6,397 6,727
NINE MONTHS ENDED SEPT 30 ----------------------------------------------- CONSOLIDATED 2006 2005 ---------------------------------------- ----------------------------------------------- Premiums and finance charges earned $ 1,069,471 $ 1,090,335 Investment income less expenses 154,119 148,422 Investment gains realized, net 30,869 36,194 ----------- ----------- Total revenues 1,254,459 1,274,951 Losses 577,090 587,271 Loss adjustment expenses 115,225 125,832 Underwriting expenses 334,675 343,268 Corporate and other expenses 29,331 42,770 ----------- ----------- Total expenses 1,056,321 1,099,141 Income before income taxes 198,138 175,810 Income tax expense (benefit): On investment gains realized 10,804 4,401 On all other income 44,551 36,036 ----------- ----------- Total income tax expense 55,355 40,437 Net income $ 142,783 $ 135,373 ============ ============ Average shares outstanding - diluted 63,869 68,012 Net income, per share - diluted $ 2.24 $ 2.02 Operating income* $ 122,718 $ 103,580 Operating income - earnings per share* $ 1.92 $ 1.55 Operating income - return on equity* 13.0% 12.7% Effective tax rate on investment income 25.9% 27.8% KEY PROPERTY AND CASUALTY RATIOS GAAP Statutory GAAP Statutory --------------------------------------- -------- --------- -------- --------- Losses 54.0% 54.0% 53.9% 53.9% Loss adjustment expenses 10.8% 10.8% 11.5% 11.5% Underwriting expenses 31.3% 31.8% 31.5% 31.0% -------- ------- --------- ------- Combined ratio 96.1% 96.6% 96.9% 96.4% CORPORATE/OTHER --------------------------------------- Net investment income $ 11,874 $ 11,046 Investment gains/(losses) realized, net (611) 6,975 Agent relationships asset expenses 9,029 10,128 Corporate expenses 20,302 32,642
CONSOLIDATED YEAR 2005 ---------------------------------------- ------------------------ Premiums and finance charges earned $ 1,453,568 Investment income less expenses 201,357 Investment gains realized, net 47,426 ----------- Total revenues 1,702,351 Losses 752,280 Loss adjustment expenses 155,033 Underwriting expenses 461,907 Corporate and other expenses 52,409 ----------- Total expenses 1,421,629 Income before income taxes 280,722 Income tax expense (benefit): On investment gains realized 5,871 On all other income 62,158 ----------- Total income tax expense 68,029 Net income $ 212,693 ============ Average shares outstanding - diluted 67,194 Net income, per share - diluted $ 3.19 Operating income* $ 171,139 Operating income - earnings per share* $ 2.57 Operating income - return on equity* 15.3% Effective tax rate on investment income 27.1% KEY PROPERTY AND CASUALTY RATIOS GAAP Statutory --------------------------------------- -------- --------- Losses 51.7% 51.7% Loss adjustment expenses 10.7% 10.7% Underwriting expenses 31.8% 31.8% -------- ------- Combined ratio 94.2% 94.2% CORPORATE/OTHER --------------------------------------- Net investment income $ 15,071 Investment gains/(losses) realized, net 11,572 Agent relationships asset expenses 12,268 Corporate expenses 40,141
*Management of the Consolidated 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 November 1, 2006 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 & SUBSIDIARIES PROPERTY AND CASUALTY INSURANCE DATA (in thousands, except ratio data) THIRD QUARTER, 2006 (Data Unaudited)
THREE MONTHS ENDED SEPT 30 ------------------------------------------------ 2006 2005 OPERATING SEGMENTS and ----------------------- ----------------------- SELECTED PRODUCT LINES Net Premiums Combined Net Premiums Combined GAAP BASIS: Earned Ratio Earned Ratio -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 209,160 97.6% $ 206,077 111.2% Workers' compensation 35,056 130.6% 34,304 133.6% Commercial auto 56,511 96.5% 57,175 86.0% General liability 25,407 87.5% 23,698 115.4% CMP, fire and inland marine 92,186 88.6% 90,900 117.5% Specialty Lines 36,202 79.2% 36,266 95.2% Commercial umbrella/other 22,132 78.2% 23,533 100.6% Fidelity and surety 14,070 80.2% 12,733 85.0% Personal Lines 110,949 91.8% 120,140 80.8% Personal auto incl. personal umbrella 65,169 94.7% 71,819 90.5% Personal property 45,780 87.7% 48,321 66.4% ------------ ------ ------------ ------ Total All Lines $ 356,311 93.9% $ 362,483 99.5% Net Premiums Combined Net Premiums Combined STATUTORY BASIS: Written Ratio Written Ratio ---------------- ------------ -------- ------------ -------- Commercial Lines $ 207,414 99.1% $ 207,121 112.5% Workers' compensation 34,345 131.6% 35,861 136.6% Commercial auto 55,856 97.6% 57,487 87.2% General liability 25,184 88.9% 24,069 117.0% CMP, fire and inland marine 92,029 90.5% 89,704 118.3% Specialty Lines 37,581 80.2% 37,968 93.9% Commercial umbrella/other 20,922 79.8% 23,061 98.6% Fidelity and surety 16,659 76.8% 14,907 81.9% Personal Lines 114,519 91.8% 123,968 81.3% Personal auto incl. personal umbrella 65,350 95.1% 70,755 91.1% Personal property 49,169 87.1% 53,213 66.5% ------------ ------ ------------ ------ Total All Lines $ 359,514 94.9% $ 369,057 100.2%
NINE MONTHS ENDED SEPT 30 ------------------------------------------------ 2006 2005 OPERATING SEGMENTS and ----------------------- ----------------------- SELECTED PRODUCT LINES Net Premiums Combined Net Premiums Combined GAAP BASIS: Earned Ratio Earned Ratio -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 620,262 100.6% $ 618,469 106.7% Workers' compensation 103,925 129.5% 99,659 143.6% Commercial auto 169,917 91.3% 172,139 85.6% General liability 72,984 101.6% 69,235 115.9% CMP, fire and inland marine 273,436 94.5% 277,436 104.2% Specialty Lines 109,325 85.2% 107,802 95.6% Commercial umbrella/other 69,057 92.0% 70,405 103.3% Fidelity and surety 40,268 73.8% 37,397 81.2% Personal Lines 339,884 91.3% 364,064 80.6% Personal auto incl. personal umbrella 199,585 95.3% 218,316 85.4% Personal property 140,299 85.5% 145,748 73.4% ------------ ------ ------------ ------ Total All Lines $ 1,069,471 96.1% $ 1,090,335 96.9% Net Premiums Combined Net Premiums Combined STATUTORY BASIS: Written Ratio Written Ratio -------------------------- ------------ -------- ------------ -------- Commercial Lines $ 643,702 100.9% $ 634,542 106.4% Workers' compensation 107,708 129.2% 107,320 142.8% Commercial auto 176,428 91.6% 177,095 85.1% General liability 77,647 101.4% 74,006 115.4% CMP, fire and inland marine 281,919 95.8% 276,121 104.3% Specialty Lines 110,713 85.7% 116,787 89.7% Commercial umbrella/other 64,830 92.7% 76,324 95.7% Fidelity and surety 45,883 70.4% 40,463 78.4% Personal Lines 332,010 91.8% 361,128 81.1% Personal auto incl. personal umbrella 196,720 95.6% 216,535 85.9% Personal property 135,290 86.5% 144,593 73.8% ------------ ------ ------------ ------ Total All Lines $ 1,086,425 96.6% $ 1,112,457 96.4%
YEAR 2005 OPERATING SEGMENTS and ---------------------- SELECTED PRODUCT LINES Net Premiums Combined GAAP BASIS: Earned Ratio -------------------------- ------------ -------- Commercial Lines $ 827,440 101.9% Workers' compensation 134,510 142.4% Commercial auto 230,471 82.2% General liability 93,308 111.3% CMP, fire and inland marine 369,151 96.9% Specialty Lines 143,151 95.3% Commercial umbrella/other 92,235 101.9% Fidelity and surety 50,916 83.2% Personal Lines 482,977 80.8% Personal auto incl. personal umbrella 288,340 85.8% Personal property 194,637 73.5% ------------ ------ Total All Lines $ 1,453,568 94.2% Net Premiums Combined STATUTORY BASIS: Written Ratio --------------- ------------ -------- Commercial Lines $ 823,490 102.3% Workers' compensation 138,582 142.6% Commercial auto 227,702 82.6% General liability 95,680 111.8% CMP, fire and inland marine 361,526 97.6% Specialty Lines 150,423 89.9% Commercial umbrella/other 97,165 94.6% Fidelity and surety 53,258 81.7% Personal Lines 475,494 81.2% Personal auto incl. personal umbrella 283,741 86.3% Personal property 191,753 73.8% ------------ ------ Total All Lines $ 1,449,407 94.2% ============ ======
-2- OHIO CASUALTY CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEET DATA AND RELATED INFORMATION (in thousands, except share and per share data) THIRD QUARTER, 2006 (2006 Data Unaudited)
September 30, December 31, 2006 2005 ASSETS ------------- ------------- Investments: U.S. government fixed maturities $ 27,221 $ 25,940 Tax exempt fixed maturities 1,423,292 1,277,318 Taxable fixed maturities: Available-for-sale, at fair value 2,102,783 2,224,456 Held-to-maturity, at amortized cost 250,661 264,422 ------------ ------------ Total fixed maturities 3,803,957 3,792,136 Equity securities, at fair value 404,372 375,079 ------------ ------------ Total investments 4,208,329 4,167,215 Cash and cash equivalents 18,634 54,575 Premiums and other receivables, net of allowance for bad debts of $1,800 and $4,200, respectively 338,503 309,190 Deferred policy acquisition costs 155,360 153,671 Property and equipment, net of accumulated depreciation of $184,068 and $177,239, respectively 79,285 80,079 Reinsurance recoverable, net of allowance of $3,690 703,660 741,800 Agent relationships, net of accumulated amortization of $48,096 and $45,531, respectively 100,697 109,726 Interest and dividends due or accrued 47,388 54,942 Deferred tax asset 14,182 14,846 Other assets 125,577 77,021 ------------ ------------ Total assets $ 5,791,615 $ 5,763,065 ============ ============ Shares outstanding 61,204,073 63,281,136 Book value per share $24.14 $22.54 Unrealized gain component of book value per share* $3.03 $3.13
September 30, December 31, 2006 2005 LIABILITIES ------------- ------------- Insurance reserves: Losses $ 2,459,170 $ 2,435,028 Loss adjustment expenses 519,586 511,817 Unearned premiums 693,059 679,601 Debt 199,661 200,401 Reinsurance treaty funds held 121,896 150,367 Other liabilities 320,511 359,444 ------------ ------------ Total liabilities 4,313,883 4,336,658 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 22,599 18,810 Accumulated other comprehensive income 162,835 177,992 Retained earnings 1,489,382 1,360,547 Treasury stock, at cost: (Shares: 11,214,271; 9,137,208) (206,136) (139,994) ------------ ------------ Total shareholders' equity 1,477,732 1,426,407 ------------ ------------ Total liabilities and shareholders' equity $ 5,791,615 $ 5,763,065 ============ ============ Statutory Insurance Reserves Losses $ 1,858,315 $ 1,800,683 Loss adjustment expense 467,067 457,843 Unearned premiums 662,533 645,579 Other Statutory Data Statutory policyholders' surplus 1,030,468 1,004,545 Ratio of net premiums written to surplus 1.4 to 1.0 1.4 to 1.0
*The unrealized gain component of book value per share excludes $8.7 million and $10.1 million at September 30, 2006 and December 31, 2005, 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 & SUBSIDIARIES SUPPLEMENTAL INFORMATION (in thousands, except ratios and accident year data) THIRD QUARTER, 2006 (Data Unaudited)
THREE MONTHS ENDED SEPT 30 NINE MONTHS ENDED SEPT 30 -------------------------- -------------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Gross Premiums Written ---------------------- Commercial Lines $ 212,777 $ 212,541 $ 660,737 $ 647,682 Specialty Lines 49,888 52,980 148,467 160,381 Personal Lines 116,084 125,317 336,307 363,417 ---------- ---------- ---------- ---------- Total 378,749 390,838 1,145,511 1,171,480 New Business Gross Premiums Written ----------------------------------- Commercial Lines $ 36,040 $ 33,888 $ 123,160 $ 109,268 Commercial umbrella/other 7,302 8,530 22,146 26,631 Personal Lines 10,878 9,881 29,982 28,323 Average Renewal Price Change ------------------------------ Commercial Lines -0.1% 1.5% 0.5% 2.3% Commercial umbrella/other 1.9% 2.9% 1.2% 5.0% Catastrophe Loss Ratio ---------------------- Commercial Lines 1.2% 8.2% 1.9% 3.4% Specialty Lines 0.1% 0.0% 0.0% 0.0% Personal Lines 4.4% 0.8% 4.5% 1.3% Total All Lines 2.1% 4.9% 2.5% 2.4% Prior Accident Year Loss & LAE by Segment (GAAP Basis) ------------------------------------------------------ Commercial Lines $ (2.8) $ 12.7 $ (4.6) $ 29.9 Specialty Lines (9.3) (3.0) (20.5) (7.3) Personal Lines (1.6) (6.6) (12.3) (26.2) ---------- ---------- ---------- ---------- Total All Lines Accident Year Development (13.7) 3.1 (37.4) (3.6) Prior Accident Year Loss & LAE (GAAP Basis) ------------------------------------------- Accident Year 2005 $ (5.3) $ - $ (9.8) $ - Accident Year 2004 (2.3) (3.2) (15.4) (19.1) Accident Year 2003 and Prior (6.1) 6.3 (12.2) 15.5 ---------- ---------- ---------- ---------- Total Accident Year Development (13.7) 3.1 (37.4) (3.6)
YEAR 2005 ---------- Gross Premiums Written ---------------------- Commercial Lines $ 840,974 Specialty Lines 210,795 Personal Lines 478,282 ---------- Total 1,530,051 New Business Gross Premiums Written ----------------------------------- Commercial Lines $ 143,470 Commercial umbrella/other 34,836 Personal Lines 37,195 Average Renewal Price Change ------------------------------ Commercial Lines 2.0% Commercial umbrella/other 3.7% Catastrophe Loss Ratio ---------------------- Commercial Lines 2.2% Specialty Lines 0.0% Personal Lines 1.5% Total All Lines 1.8% Prior Accident Year Loss & LAE by Segment (GAAP Basis) ------------------------------------------------------ Commercial Lines $ 29.1 Specialty Lines (12.3) Personal Lines (36.9) ---------- Total All Lines Accident Year Development (20.1) Prior Accident Year Loss & LAE (GAAP Basis) ------------------------------------------- Accident Year 2005 $ - Accident Year 2004 (30.8) Accident Year 2003 and Prior 10.7 ---------- Total Accident Year Development (20.1)
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