-----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, P7Nj+8e47x+4XYmt+jXhHgJQr7CZrnpYG0n1q7bGTfKT+zoxUuVN45QyqVDJL8o0 iowIP5hsh8Z5KW5eLNlkNA== 0000950152-96-001181.txt : 19960328 0000950152-96-001181.hdr.sgml : 19960328 ACCESSION NUMBER: 0000950152-96-001181 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO CASUALTY CORP CENTRAL INDEX KEY: 0000073952 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 310783294 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05544 FILM NUMBER: 96539021 BUSINESS ADDRESS: STREET 1: 136 N THIRD ST CITY: HAMILTON STATE: OH ZIP: 45025 BUSINESS PHONE: 5138673000 MAIL ADDRESS: STREET 1: 136 N THIRD ST CITY: HAMILTON STATE: OH ZIP: 45025 10-K 1 OHIO CASUALTY 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [x] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from to COMMISSION FILE NUMBER 0-5544 OHIO CASUALTY CORPORATION (Exact name of registrant as specified in its charter) OHIO 31-0783294 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 136 NORTH THIRD STREET, HAMILTON, OHIO 45025 (Address of principal executive offices) (Zip Code) (513) 867-3000 (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Shares, Par Value $.125 Each (Title of Class) Common Share Purchase Rights (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value as of March 1, 1996 of the voting stock held by non-affiliates of the registrant was $1,174,876,392. On March 1, 1996 there were 35,402,446 shares outstanding. Page 1 of 112 Index To Exhibits On Page 27 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for the registrant's fiscal year ended December 31, 1995 is incorporated herein by reference for the following items: PART I Item 1. Business. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. Item 6. Selected Financial Data. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 8. Financial Statements and Supplementary Data. The Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995 for the Annual Shareholders meeting to be held April 17, 1996 is incorporated herein by reference for the following items: PART III Item 10. Directors and Executive Officers of the Registrant. Item 11. Executive Compensation. Item 12. Security Ownership of Certain Beneficial Owners and Management. Item 13. Certain Relationships and Related Transactions. 2 3 PART I ITEM 1. BUSINESS (A) GENERAL DEVELOPMENT OF BUSINESS Ohio Casualty Corporation (the Corporation) was incorporated under the laws of Ohio in August, 1969. The Corporation operates primarily as a holding company and is principally engaged, through its direct and indirect subsidiaries, in the business of property and casualty insurance and insurance premium finance. The Corporation has two industry segments: property and casualty insurance and insurance premium finance. The Corporation conducts its property and casualty insurance business through The Ohio Casualty Insurance Company ("Ohio Casualty"), an Ohio corporation organized in 1919, the Ohio Casualty's three operating property and casualty insurance subsidiaries: West American Insurance Company ("West American"), an Indiana corporation (originally incorporated under the laws of the State of California) acquired in 1945; Ohio Security Insurance Company ("Ohio Security"), an Ohio corporation acquired in 1962; and American Fire and Casualty Company ("American Fire"), an Ohio corporation (originally incorporated under the laws of the State of Florida) acquired in 1969. This group of companies presently underwrites most forms of property and casualty insurance. The Corporation conducts its premium finance business through Ocasco Budget, Inc. ("Ocasco"), an Ohio corporation (originally incorporated under the laws of the State of California) organized in 1960. Ocasco is a direct subsidiary of Ohio Casualty. On May 31, 1995 the states of domicile of West American and Ocasco changed to Indiana and Ohio, respectively, in connection with the withdrawal from property and casualty insurance operations in California as previously announced and as discussed elsewhere herein. During 1995, the Corporation's third industry segment, life operations, was discontinued. We found it increasingly difficult to achieve our required 16% rate of return in this segment of our business. After extensive analysis, it was determined that a 16% return could not be achieved without extensive capital contributions and a dramatic overhaul of the life operations. Since this was a small segment of our overall business, it was decided that this would not be a prudent use of our capital. Therefore, on October 2, 1995, the Corporation signed the final documents to reinsure the existing blocks of business and enter a marketing agreement with Great Southern Life Insurance Company. This will provide our agents and policyholders access to quality life insurance products to meet their financial needs. The existing blocks of business were reinsured through a 100% coinsurance arrangement with Employer's Reassurance Corporation. As of December 31, 1995, $16.7 million of the net ceding commission from the transaction remains unamortized. This will be amortized into income over the expected life of the underlying reinsured policies, in this case, 15 years. An assumption is scheduled for January 1, 1997 whereby Great Southern will legally replace Ohio Life as the primary carrier on these policies at which time the remaining unamortized gain will be recognized. Net income from discontinued operations amounted to $4.4 million or $.12 per share in 1995 compared with $5.9 million or $.16 per share in 1994 and $6.8 million or $.19 per share in 1993. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The revenues, operating profit and identifiable assets of each industry segment for the three years ended December 31, 1995 are set forth in Note 10, Industry Segment Information, in the Notes to the Consolidated Financial Statements on page 33 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. 3 4 ITEM 1. CONTINUED PREMIUMS The following table shows the total net premiums written (gross premiums less premiums ceded pursuant to reinsurance treaties) by line of business by Ohio Casualty, West American, American Fire, Ohio Security and Ohio Life as a group (collectively, the "Ohio Casualty Group") for the periods indicated. Life insurance premiums reflect adjustments for FAS 97 "Accounting and Reporting by Insurance Enterprises for Certain Long-duration Contracts and Realized Gains and Losses from the Sale of Investments" which was implemented in 1989. Ohio Casualty Group Net Premiums Written By Line of Business (in thousands)
1995 1994 1993 1992 1991 ----------- ---------- ---------- ---------- ---------- Auto liability $ 403,781 $ 420,031 $ 430,852 $ 493,214 $ 467,604 Auto physical damage 207,534 212,005 210,987 240,913 229,049 Homeowners multiple peril 160,444 160,089 156,797 185,518 181,643 Workers' compensation 140,558 145,641 165,577 199,402 218,387 Commercial multiple peril 131,553 135,595 136,559 147,894 133,589 Other liability 108,483 112,906 107,983 122,277 132,427 All other lines 96,842 98,714 95,562 116,450 126,314 ----------- ---------- ---------- ---------- ---------- Property and casualty premiums $ 1,249,195 $1,284,981 $1,304,317 $1,505,668 $1,489,013 =========== ========== ========== ========== ========== Premium finance revenues $ 2,314 $ 2,528 $ 2,887 $ 4,313 $ 4,979 =========== ========== ========== ========== ========== Discontinued operations- Statutory premiums: Individual life $ (126,979) $ 22,238 $ 38,409 $ 36,698 $ 20,938 Annuity (195,870) 18,104 19,530 16,983 18,780 Other (22,012) 8,606 6,716 7,113 5,215 ----------- ---------- ---------- ---------- ---------- Total (344,861) 48,948 64,655 60,794 44,933 FAS 97 adjustments (1,533) (26,173) (44,748) (41,582) (27,086) ----------- ---------- ---------- ---------- ---------- Discontinued operations revenues $ (346,394) $ 22,775 $ 19,907 $ 19,212 $ 17,847 =========== ========== ========== ========== ==========
(C) NARRATIVE DESCRIPTION OF BUSINESS The Ohio Casualty Group is represented on a commission basis by approximately 4,367 independent insurance agencies. In most cases, these agencies also represent other unaffiliated companies which may compete with the Ohio Casualty Group. The 47 claim and 36 underwriting and service offices operated by the Ohio Casualty Group assist these independent agencies in the producing and servicing of the Group's business. 4 5 ITEM 1. CONTINUED The following table shows consolidated direct premiums written for the Ohio Casualty Group's ten largest states: Ohio Casualty Group Ten Largest States Direct Premiums Written From Continuing Operations (in thousands)
Percent Percent Percent 1995 of Total 1994 of Total 1993 of Total ---- -------- ---- -------- ---- -------- New Jersey $220,373 17.6 New Jersey $211,233 16.4 New Jersey $194,813 14.9 Pennsylvania 128,603 10.3 Pennsylvania 145,687 11.3 Pennsylvania 170,681 13.1 Ohio 126,622 10.1 Ohio 129,303 10.0 Ohio 133,256 10.2 Kentucky 80,498 6.4 Kentucky 79,710 6.2 Kentucky 83,006 6.4 Illinois 64,352 5.1 Illinois 63,682 4.9 Illinois 66,326 5.1 Maryland 56,741 4.5 Florida 56,846 4.4 Florida 59,574 4.6 Indiana 49,353 3.9 Maryland 56,637 4.4 Maryland 56,867 4.4 Texas 43,036 3.4 Indiana 47,817 3.7 Indiana 46,991 3.6 Florida 42,061 3.4 Texas 45,171 3.5 Texas 46,943 3.6 North Carolina 33,955 2.7 Michigan 32,846 2.6 Michigan 34,350 2.6 -------- ---- -------- ---- -------- ---- $845,594 67.4 $868,932 67.5 $892,807 68.5 ======== ==== ======== ==== ======== ====
Property and casualty net premiums written decreased 2.8% in 1995. New Jersey premiums written increased 4.1% primarily as a result of an 11.1% increase in private passenger automobile, due to continuing legislation requiring insurers to accept all automobile risks meeting broad underwriting guidelines. Pennsylvania premiums written decreased 11.8% principally due to a 13.9% reduction in workers' compensation, as a result of management's decision to limit writing due to poor underwriting experience. INVESTMENT OPERATIONS Each of the Ohio Casualty Group companies must comply with the insurance laws of its domiciliary state and of the other states in which it is licensed for business. Among other things, these laws prescribe the kind, quality and concentration of investments which may be made by insurance companies. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, preferred and common stocks, real estate mortgages and real estate. The distribution of invested assets of the Ohio Casualty Group is determined by a number of factors, including insurance law requirements, the Corporation's liquidity needs and taxable position, and general market conditions. Accordingly, adjustments are made to the asset allocation from time to time. The Corporation has no investment real estate or commercial mortgages. Assets relating to property and casualty operations are invested to maximize after-tax returns with appropriate diversification of risk. The following table sets forth the carrying values and other data of the consolidated invested assets of the Ohio Casualty Group as of the end of the years indicated: 5 6 ITEM 1. CONTINUED
Ohio Casualty Group Distribution of Invested Assets (in millions) 1995 Average % of % of % of Rating 1995 Total 1994 Total 1993 Total ------- --------- ----- ---------- ----- ---------- ----- U.S. government AAA $ 116.5 3.8 $ 88.0 2.9 $ 102.9 3.3 Tax exempt bonds and notes AA+ 898.5 29.1 694.3 22.8 1,109.4 35.3 Debt securities issued by foreign governments A+ 3.4 0.1 38.1 1.3 0 0 Corporate securities BBB+ 986.4 32.0 1,091.9 35.9 839.9 26.8 Mortgage backed securities U.S. government AAA 170.2 5.5 371.9 12.2 448.8 14.3 Other AA 232.9 7.6 225.7 7.4 128.2 4.1 Total bonds AA- 2,407.9 78.1 2,509.9 82.5 2,629.2 83.8 Common stocks 627.4 20.3 459.5 15.1 442.8 14.1 Preferred stocks 33.7 1.1 60.5 2.0 49.4 1.6 Total stocks 661.1 21.4 520.0 17.1 492.2 15.7 Short-term 14.4 0.5 13.6 0.4 16.2 0.5 Total investments $3,083.4 100.0 $3,043.5 100.0 $3,137.6 100.0 Total market value of investments $3,083.4 $3,043.5 $3,316.2 Total amortized cost of investments $2,617.5 $2,938.1 $3,137.6
The consolidated fixed income portfolio (identified as "Total Bonds" in the foregoing table) of the Ohio Casualty Group had a weighted average Standard & Poor rating of "AA-" and an average stated maturity of ten years as of December 31, 1995. The mortgage-backed portfolio, which represents 16.7% of fixed maturity investments, has experienced a significantly increased level of prepayments over the last few years causing reinvestment of proceeds at the lower rates prevalent at that time. As rates have risen, prepayments have slowed and the fair value of the lower yielding bonds has decreased. Investments in taxable high yield (less than investment grade, Standard & Poor rated below "BBB-") and unrated securities had an aggregate carrying value of $490.2 million and an aggregate amortized cost of $475.0 million at year-end 1995. At year-end 1994 and 1993, respectively, carrying values were $306.6 million and $206.0 million and market values were $322.7 million and $220.6 million. The taxable high yield securities had a weighted average Standard & Poor rating of "BB-" and an average maturity of ten years. 6 7 ITEM 1. CONTINUED Approximately 99.7% of the Corporation's high yield and unrated investments (based on carrying value) are performing in accordance with contractual terms and are making principal and interest payments as required. The securities in the Corporation's high yield and unrated portfolio have been issued by 171 corporate borrowers in approximately 46 industries. At December 31, 1995, the Corporation's five largest investments in high yield and unrated securities totaled $37.1 million, and had an approximate amortized cost of $34.3 million. None of these holdings individually exceeded $8.9 million. At December 31, 1995, the fixed income portfolio relating to property and casualty operations totaled $2.3 billion which consisted of 90.5% investment grade securities and 9.5% high yield securities. At December 31, 1995, the fixed income portfolio relating to discontinued operations totaled $80.1 million which consisted of 93.8% investment grade securities and 6.2% high yield securities. Investments in high yield and, in many instances, unrated securities have greater risks than investments in investment grade securities. The risk of default by borrowers which issue high yield securities is significantly greater because these securities are generally unsecured and often subordinated to other debt and these borrowers are often highly leveraged and are more sensitive to adverse economic conditions such as a recession or a sharp increase in interest rates. Furthermore, the market for high yield and unrated securities is often thinly traded and market quotations may be unavailable or available only from a small number of dealers. Investment grade securities are also subject to significant adverse risks including the risks of re-leveraging and changes in control of the issuer. In most instances, investors are unprotected with respect to such risks, the effects of which can be substantial. The Corporation has no investment with a single issuer exceeding 3.1% of shareholders' equity. Yield (based on cost of investments) for the taxable fixed income portfolio was 8.7% and 8.6% at December 31, 1995 and 1994, respectively. Unrated and high yield securities were yielding 10.1% and 9.5% at December 31, 1995 and 1994, respectively, while investment grade securities were yielding 7.5% in 1995 and 8.4% in 1994. Yield for tax exempt securities was 6.3% at December 31, 1995 and 6.7% at December 31, 1994; however, this yield is not directly comparable to taxable yield due to the complexity of federal taxation of insurance companies. High yield and unrated corporate debt securities provided approximately 19.3% of consolidated net investment income before tax in 1995 and 12.7% in 1994. Because the Corporation has generally purchased high yield and unrated securities with the intention of holding them to maturity and has managed its investment portfolio so as to not be dependent on these securities to meet its liquidity needs, the Corporation has been willing to accept the relative lack of liquidity for these securities. Investment income is affected by the amount of new investable funds and investable funds arising from maturities, prepayments, calls and exchanges as well as the timing of receipt of such funds. In addition, other factors such as interest rates at time of investment and the maturity, income tax status, credit status and other risks associated with new investments are reflected in investment income. Future changes in the distribution of investments and the factors described above could affect overall investment income in the future; however, the amount of any increase or decrease cannot be predicted. Further details regarding investment distribution and investment income are described in Note 2, Investments, in the Notes to Consolidated Financial Statements on pages 29 and 30 of the 1995 Annual Report to Shareholders. 7 8 ITEM 1. CONTINUED Purchases of taxable fixed income securities in 1995 were as follows: $480.9 million of investment grade securities, $56.7 million of high yield securities and $53.8 million of unrated securities. Purchases of tax-exempt and equity securities in 1995 totaled $352.7 million and $86.5 million, respectively. Disposals (including maturities, calls, exchanges and scheduled prepayments) of taxable fixed income securities in 1995 were as follows: $850.6 million of investment grade securities, $132.9 million of high yield securities and $39.4 million of unrated securities. Dispositions of tax-exempt and equity securities in 1995 totaled $39.6 million and $137.4 million, respectively. During 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 115, "Accounting for Certain Investments in Debt and Equity Securities". This statement was adopted on January 1, 1994, and required the Corporation to classify equity securities and debt securities into the following categories: 1) held to maturity securities; 2) trading securities; 3) available for sale. All fixed income holdings were placed in the available for sale category. This accounting change increased shareholders' equity $116.1 million in 1994. Consolidated net realized investment gains in 1995 totaled $6.1 million, $.17 per share. Included in this amount are approximately $16.0 million in writedowns of the carrying values of certain securities the Corporation determined had an other than temporary decline in value. SHARE REPURCHASES During 1990 the Board of Directors of Ohio Casualty Corporation authorized the additional purchase of as many as 3,000,000 (as adjusted for 1994 stock split) shares of its common stock through open market or privately negotiated transactions. 613,900 shares were repurchased during 1995 for $20.9 million. 50,000 shares were repurchased during 1994 for $1.4 million. No shares were repurchased during 1993. The remaining repurchase authorization is 2,336,100 shares as of December 31, 1995. LIABILITIES FOR UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES Liabilities for loss and loss adjustment expenses are established for the estimated ultimate costs of settling claims for insured events, both reported claims and incurred but not reported claims, based on information known as of the evaluation date. As more information becomes available and claims are settled, the estimated liabilities are adjusted upward or downward with the effect of increasing or decreasing net income at the time of adjustments. Such estimated liabilities include direct costs of the loss under terms of insurance policies as well as legal fees and general expenses of administering the claims adjustment process. The liabilities for claims incurred in accident years 1994, 1993 and 1992 were reduced in the subsequent year as shown below: 8 9 ITEM 1. CONTINUED
Accident Year Loss and Loss Adjustment Expense Liabilities Subsequent Year Adjustment (in millions) 1994 1993 1992 ---- ---- ---- Property $11 $ 31 $22 Auto 30 26 18 Workers' compensation and other liability 35 51 18 ---- ---- --- Total reduction $76 $108 $58 ==== ==== ===
In the normal course of business, the Ohio Casualty Group is involved in disputes and litigation regarding terms of insurance contracts and the amount of liability under such contracts arising from insured events. The liabilities for loss and loss adjustment expenses include estimates of the amounts for which the Ohio Casualty Group may be liable upon settlement or other conclusion of such litigation. Because of the inherent future uncertainties in estimating ultimate costs of settling claims, actual loss and loss adjustment expenses may deviate substantially from the amounts recorded in the Corporation's consolidated financial statements. Furthermore, the timing, frequency and extent of adjustments to the estimated liabilities cannot be accurately predicted since conditions and events which established historical loss and loss adjustment expense development and which serve as the basis for estimating ultimate claims cost may not occur in the future in exactly the same manner, if at all. The anticipated effect of inflation is implicitly considered when estimating the liability for losses and loss adjustment expenses based on historical loss development trends adjusted for anticipated changes in underwriting standards, policy provisions and general economic trends. The following table presents an analysis of property and casualty losses and loss adjustment expenses and related liabilities for the periods indicated. The accounting policies used to estimate liabilities for losses and loss adjustment expenses are described in Note 1, Accounting Policies, paragraph E, in the Notes to Consolidated Financial Statements on page 28 of the 1995 Annual Report to Shareholders. 9 10 ITEM 1. CONTINUED
Reconciliation of Liabilities for Losses and Loss Adjustment Expense (in thousands) 1995 1994 1993 ---- ---- ---- Net liabilities, beginning of year $1,606,487 $1,693,551 $1,673,868 Provision for current accident year claims 1,008,321 1,084,072 1,131,055 Increase (decrease)in provisions for prior accident year claims (104,998) (153,717) (71,799) ---------- ---------- ---------- 903,323 930,355 1,059,256 Payments for claims occurring during: Current accident year 444,558 483,129 477,777 Prior accident years 508,187 534,290 561,796 ---------- ---------- ---------- 952,745 1,017,419 1,039,573 Net liabilities, end of year 1,557,065 1,606,487 1,693,551 Reinsurance recoverable 74,119 65,336 75,738 ---------- ---------- ---------- Gross liabilities, end of year $1,631,184 $1,671,823 $1,769,289 ========== ========== ==========
10 11 Item 1. Continued Analysis of Development of Loss and Loss Adjustment Expense Liabilities (In thousands)
Year Ended December 31 1985 1986 1987 1988 1989 1990 1991 1992 - ---------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Liability as originally estimated: $ 806,474 $ 981,335 $1,171,392 $1,252,404 $1,370,054 $1,483,985 $1,566,139 $1,673,205 Cumulative payments as of: One year later 337,235 380,290 438,195 440,173 489,562 506,246 526,973 561,133 Two years later 518,446 598,478 667,894 695,364 745,766 783,948 822,634 869,620 Three years later 641,649 730,106 828,325 845,472 902,081 955,666 1,007,189 1,060,433 Four years later 711,344 828,365 922,744 937,034 1,000,299 1,063,508 1,123,591 Five years later 769,317 884,606 977,575 996,353 1,061,173 1,131,012 Six years later 800,238 919,026 1,015,889 1,033,508 1,100,683 Seven years later 822,163 942,572 1,041,563 1,055,972 Eight years later 837,332 959,174 1,057,509 Nine years later 849,845 968,586 Ten years later 856,355 Liability reestimated as of: One year later 827,244 989,512 1,131,539 1,179,052 1,285,233 1,403,172 1,515,129 1,601,406 Two years later 876,906 1,029,086 1,139,684 1,175,861 1,299,428 1,407,197 1,500,890 1,555,452 Three years later 899,911 1,032,435 1,139,584 1,193,127 1,296,215 1,388,381 1,467,256 1,524,054 Four years later 902,062 1,028,893 1,156,930 1,195,712 1,281,246 1,368,530 1,449,789 Five years later 898,292 1,048,419 1,160,997 1,186,680 1,268,193 1,366,676 Six years later 918,089 1,054,589 1,159,372 1,178,126 1,270,734 Seven years later 925,473 1,049,447 1,154,169 1,184,233 Eight years later 920,223 1,046,494 1,162,837 Nine years later 917,127 1,049,464 Ten years later 919,896 Decrease (increase) in original estimates: $(113,422) $ (68,129) $ 8,555 $ 68,171 $ 99,320 $ 117,309 $ 116,350 $ 149,151 Year Ended December 31 1993 1994 1995 - ---------------------- ---- ---- ---- Liability as originally estimated: $1,692,895 $1,605,526 $1,553,131 Cumulative payments as of: One year later 533,634 510,219 Two years later 833,399 Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later Ten years later Liability reestimated as of: One year later 1,539,178 1,500,528 Two years later 1,510,943 Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later Ten years later Decrease (increase) in original estimates: $ 181,952 $ 104,998
This table presents the current period effects of changes in estimated loss and loss adjustment expense liabilities of the most recent and all prior accident years. Since conditions and trends that have affected loss and loss adjustment expense development in the past may not occur in the future in exactly the same manner, if at all, future results may not be reliably predicted by extrapolation of the data presented.
1994 1995 ---- ---- Gross liability - end of year $1,670,862 $1,624,197 Reinsurance recoverable 65,336 71,066 Net liability - end of year 1,605,526 1,553,131 Gross re-estimated liability - latest 1,562,411 Re-estimated recoverable - latest 61,883 Net re-estimated liability - latest 1,500,528 Gross cumulative deficiency 108,451
11 12 ITEM 1. CONTINUED COMPETITION More than 2,600 property and casualty insurance companies compete in the United States and no one company or company group has a market share greater than approximately 15.0%. The Ohio Casualty Group ranked as the forty-fifth largest property and casualty insurance groups in the United States based on net insurance premiums written in 1994, the latest year for which statistics are available. The Ohio Casualty Group competes with other companies on the basis of service, price and coverage. STATE INSURANCE REGULATION General. The Corporation and the Ohio Casualty Group are subject to regulation under the insurance statutes, including the holding company statutes, of various states. Ohio Casualty, American Fire and Ohio Security are all domiciled in Ohio. West American is domiciled in Indiana. Collectively, the Ohio Casualty Group is authorized to transact the business of insurance in the District of Columbia and all states except Maine. The Ohio Casualty Group is subject to examination of their affairs by the insurance departments of the jurisdictions in which they are licensed. The insurance holding company laws and regulations vary from state to state, but generally require insurance holding companies to register and file with the state regulatory authority certain reports, including information concerning their capital structure, ownership, financial condition and general business operations. State laws also require prior notice or regulatory agency approval of changes in control of an insurer or its holding company and of certain material intercorporate transfers of assets within the holding company structure. Under applicable provisions of the Indiana insurance statutes ("Indiana Insurance Law") and the Ohio insurance statutes (the "Ohio Insurance Law"), a person would not be permitted to acquire direct or indirect control of the Corporation or any of the Ohio Casualty Group companies domiciled in such state, unless such person had obtained prior approval of the Indiana Insurance Commissioner and the Ohio Superintendent of Insurance, respectively, for such acquisition. For the purposes of the Indiana Insurance Law and the Ohio Insurance Law, any person acquiring more than 10% of the voting securities of a company is presumed to have acquired "control" of such company. Proposition 103 was passed in the State of California in 1988 in an attempt to legislate premium rates for that state. Even after considering investment income, total returns in California have been less than what would be considered "fair" by any reasonable standard. During the fourth quarter of 1994, the State of California billed the Corporation $59.9 million for Proposition 103 assessment. In February 1995, California revised this billing to $47.3 million due to California Senate Bill 905 which permits reduction of the rollback due to commissions and premium taxes paid. The billing was revised again in August of 1995 and at present the State has indicated the Corporation should not be required to pay in excess of $42.1 million plus interest as a Proposition 103 assessment. As a result, the Corporation's reserve for this alleged liability is $70.2 million. The Corporation will continue to challenge the validity of any rollback and plans to continue negotiations with Department officials. It is uncertain when this will be resolved. 12 13 ITEM 1. CONTINUED The State of New Jersey has historically been a profitable state for the Corporation. In recent years, however, the legislative environment in that state has deteriorated. Due to legislative rules and regulations designed to make insurance less expensive and more easily obtainable for New Jersey residents, our results have been adversely impacted. In order to meet our state imposed assessment obligations under the Fair Automobile Insurance Reform Act, the Unsatisfied Claim and Judgment fund, the New Jersey Surtax and the Market Transition Facility, the Corporation has incurred expenses of $3.7 million in 1995, $6.4 million in 1994 and $19.1 million in 1993. These assessments have negatively affected our combined ratios by .3, .5 and 1.4 points in the three years, respectively. National Association of Insurance Commissioners. The National Association of Insurance Commissioners (the "NAIC") annually calculates a number of financial ratios to assist state insurance regulators in monitoring the financial condition of insurance companies. A "usual range" of results for each ratio is used as a benchmark. Departure from the usual range on four or more of the ratios could lead to inquiries from individual state insurance commissioners as to certain aspects of a company's business. None of the property and casualty companies of the Ohio Casualty Group had more than one NAIC financial ratio that was outside the usual range in the last five calendar years. Beginning in 1994, the NAIC requires inclusion of a risk-based capital calculation in the Annual Statements. The risk-based capital model is used to establish standards which will relate insurance company statutory surplus to risks of operations and assist regulators in determining solvency requirements. The model is based on four risk factors in two categories: asset risk, consisting of investment risk and credit risk; and underwriting risk, composed of loss reserves and premiums written risks. Based on current calculations, all of the Ohio Casualty Group companies have at least twice the necessary capital to conform with the risk-based capital model. The NAIC has developed a model law limiting dividend payments by insurance companies. This model law allows dividends to equal the greater of 10% of policyholders surplus or net income determined as of the preceding year end without prior approval of the Insurance Department. The State of Ohio signed this model into law on September 30, 1993. For 1995, $116.3 million of policyholder surplus are not subject to restrictions or prior dividend approval. EMPLOYEES At December 31, 1995, the Ohio Casualty Group had approximately 3,681 employees of which approximately 1,372 were located in Hamilton, Ohio. ITEM 2. PROPERTIES The Ohio Casualty Group owns and leases office space in various parts of the country. The principal office building consists of an owned facility in Hamilton, Ohio. 13 14 ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings against the Corporation or its subsidiaries other than litigation arising in connection with settlement of insurance claims as described on page 9 and Proposition 103 hearings described on page 12. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS There were no matters submitted during the fourth quarter of the fiscal year covered by this report to a vote of Shareholders through the solicitation of proxies or otherwise. EXECUTIVE OFFICERS OF THE REGISTRANT The following information is related to executive officers of the Corporation who are not separately reported in the Corporation's Proxy Statement: Chief Financial Officer and Treasurer Age Barry S. Porter....................................................... 59 Mr. Porter has been an officer of the Corporation and its subsidiaries for more than five years. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS See inside front cover and page 36 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 6. SELECTED FINANCIAL DATA See pages 16 and 17 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS See pages 18 through 23 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements and Schedules. (See Index to Financial Statements attached hereto.) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 14 15 PART III ITEM 10. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See pages 4 through 6 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995 and Executive Officers of the Registrant separately captioned under Part I of this annual report. ITEM 11. EXECUTIVE COMPENSATION See pages 7 through 12 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See pages 1 through 3 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See page 6 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial statements and financial statement schedules required to be filed by Item 8 of this Form and Regulation S-X (b) Exhibit I - Fourth Amendment to Rights Agreement dated September 5, 1995. A report on Form 8-K was filed September 5, 1995. (c) Exhibits. (See index to exhibits attached hereto.) 15 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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) March 26, 1996 By: /s/ Lauren N. Patch ------------------------------ Lauren N. Patch, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 26, 1996 /s/ Joseph L. Marcum ------------------------------------------------------ Joseph L. Marcum, Chairman of the Board March 26, 1996 /s/ William L. Woodall ------------------------------------------------------ William L. Woodall, Vice Chairman of the Board March 26, 1996 /s/ Lauren N. Patch ------------------------------------------------------ Lauren N. Patch, President and Chief Executive Officer March 26, 1996 /s/ Arthur J. Bennert ------------------------------------------------------ Arthur J. Bennert, Director March 26, 1996 /s/ Jack E. Brown ------------------------------------------------------ Jack E. Brown, Director March 26, 1996 /s/ Catherine E. Dolan ------------------------------------------------------ Catherine E. Dolan, Director March 26, 1996 /s/ Wayne R. Embry ------------------------------------------------------ Wayne R. Embry, Director March 26, 1996 /s/ Vaden Fitton ------------------------------------------------------ Vaden Fitton, Director March 26, 1996 /s/ Jeffery D. Lowe ------------------------------------------------------ Jeffery D. Lowe, Director March 26, 1996 /s/ Stephen S. Marcum ------------------------------------------------------ Stephen S. Marcum, Director March 26, 1996 /s/ Stanley N. Pontius ------------------------------------------------------ Stanley N. Pontius, Director March 26, 1996 /s/ Howard L. Sloneker III ------------------------------------------------------ Howard L. Sloneker III, Director March 26, 1996 /s/ Barry S. Porter ------------------------------------------------------ Barry S. Porter, Chief Financial Officer and Treasurer March 26, 1996 /s/ Michael L. Evans ------------------------------------------------------ Michael L. Evans, Vice President 16 17 FORM 10-K, ITEM 14 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES OHIO CASUALTY CORPORATION The following statements are incorporated by reference to the Annual Report to Shareholders for registrant's fiscal year ended December 31, 1995:
Page Number in Annual Report ---------------- Consolidated Balance Sheet at December 31, 1995, 1994, 1993 24 Statement of Consolidated Income for the years ended December 31, 1995, 1994 and 1993 25 Statement of Consolidated Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 26 Statement of Consolidated Cash Flows for the years ended December 31, 1995, 1994 and 1993 27 Notes to Consolidated Financial Statements 28-35 Page Number in this Report -------------- Report of Independent Accountants The following financial statement schedules are included herein: Schedule I - Consolidated Summary of Investments Other Than Investments in Related Parties at December 31, 1995 19 Schedule III - Condensed Financial Information of Registrant for the years ended December 31, 1995, 1994 and 1993 20 Schedule V - Consolidated Supplementary Insurance Information for the years ended December 31, 1995, 1994 and 1993 21-23 Schedule VI - Consolidated Reinsurance for the years ended December 31, 1995, 1994 and 1993 24 Schedule VIII - Valuation and Qualifying Accounts for the years ended December 31, 1995, 1994 and 1993 25 Schedule X - Consolidated Supplemental Information Concerning Property and Casualty Insurance Operations for the years ended December 31, 1995, 1994 and 1993 26
Schedules other than those listed above are omitted for the reason that they are not required or are not applicable or the required information is disclosed elsewhere in the financial statements and related notes. 17 18 [COOPERS & LYBRAND letterhead] REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders Ohio Casualty Corporation We have audited the consolidated financial statements of Ohio Casualty Corporation and subsidiaries as of December 31, 1995, 1994 and 1993 and for the years then ended, which financial statements are included on pages 24 through 35 of the 1995 Annual Report to Shareholders of Ohio Casualty Corporation and incorporated by reference herein. We have also audited the financial statement schedules listed in the index on page 17 of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ohio Casualty Corporation and subsidiaries as of December 31, 1995, 1994 and 1993, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Notes 1 and 6 to the consolidated financial statements, the Corporation changed its method of accounting for debt and equity securities and post-employment benefits in 1994. /s/ Coopers & Lybrand L.L.P. ---------------------------- Coopers & Lybrand L.L.P. Columbus, Ohio February 3, 1996 18 19 Schedule I Ohio Casualty Corporation and Subsidiaries Consolidated Summary of Investments Other than Investments in Related Parties (In thousands)
December 31, 1995 Amount shown Type of investment Cost Value in balance sheet - ------------------ ---- ----- ---------------- Fixed maturities Bonds: United States govt. and govt. agencies with auth. $ 110,628 $ 116,487 $ 116,487 States, municipalities and political subdivisions 845,729 898,466 898,466 Debt securities issued by foreign governments 3,000 3,423 3,423 Corporate securities 927,375 986,398 986,398 Mortgage-backed securities: U.S. government guaranteed 168,219 170,193 170,193 Other 221,199 232,886 232,886 ---------- ---------- ---------- Total fixed maturities 2,276,150 2,407,853 2,407,853 Equity securities: Common stocks: Banks, trust and insurance companies 53,338 139,939 139,939 Industrial, miscellaneous and all other 244,030 487,477 487,477 Preferred stocks: Non-redeemable 18,006 18,951 18,951 Convertible 11,625 14,787 14,787 ---------- ---------- ---------- Total equity securities 326,999 661,154 661,154 Short-term investments 14,399 14,399 14,399 ---------- ---------- ---------- Total investments $2,617,548 $3,083,406 $3,083,406 ========== ========== ==========
19 20
Schedule III Ohio Casualty Corporation Condensed Financial Information of Registrant (In thousands) 1995 1994 1993 ---- ---- ---- Condensed Balance Sheet: Investment in wholly-owned subsidiaries, at equity $1,156,718 $905,250 $949,546 Investment in bonds 20,165 22,618 15,335 Cash and other assets 2,468 4,725 3,041 ---------- -------- -------- Total assets 1,179,351 932,593 967,922 Bank note payable 60,000 70,000 103,000 Other liabilities 8,337 11,803 2,584 ---------- -------- -------- Total liabilities 68,337 81,803 105,584 Shareholders' equity $1,111,014 $850,790 $862,338 ========== ======== ======== Condensed Statement of Income: Dividends from subsidiaries $ 80,018 $ 91,098 $ 73,130 Equity in undistributed net income of subsidiaries 21,431 8,727 16,441 Operating (expenses) (1,714) (2,934) (2,586) ---------- -------- -------- Net income $ 99,735 $ 96,891 $ 86,985 ========== ======== ======== Condensed Statement of Cash Flows: Cash flows from operations Net distributed income $ 78,304 $ 88,174 $ 70,544 Other 2,971 (15,712) (24,048) ---------- -------- -------- Net cash from operations 81,275 72,462 46,496 Investing Purchase of bonds 4,555 14,452 20,389 ---------- -------- -------- Net cash from investing 4,555 14,452 20,389 Financing Note payable (10,000) (33,000) (17,000) Exercise of stock options 578 244 1,485 Purchase of treasury stock (21,193) (1,412) 0 Dividends paid to shareholders (54,335) (52,597) (51,145) ---------- -------- -------- Net cash from financing (84,950) (86,765) (66,660) Net change in cash 880 149 225 Cash, beginning of year 1,797 1,648 1,423 ---------- -------- -------- Cash, end of year $ 2,677 $ 1,797 $ 1,648 ========== ======== ========
20 21
Schedule V Ohio Casualty Corporation and Subsidiaries Consolidated Supplementary Insurance Information (In thousands) December 31, 1995 Deferred Future policy Benefits, Amortization policy benefits Net losses and of deferred acquisition losses and Unearned Premium investment loss acquisition costs loss expenses premiums revenue income expenses costs ----------- ------------- -------- ---------- ---------- ------------ ------------ Segment - ------- Property and casualty insurance: Underwriting Automobile $ 36,990 $ 608,689 $185,735 $ 620,866 $ $ 490,036 $129,058 Workers' compensation 10,767 403,440 55,861 142,004 93,272 30,196 Gen. liability, A&H 14,736 335,428 48,042 110,487 67,201 37,785 Homeowners 27,209 74,599 92,099 161,116 123,140 46,523 CMP, fire and allied lines, inland marine 32,270 225,004 98,098 195,014 123,179 65,875 Fidelity, surety, burglary 11,358 17,037 25,936 33,719 5,554 17,618 Investment 184,585 -------- ---------- -------- ---------- -------- --------- -------- Total property and casualty insurance 133,330 1,664,197 505,771 1,263,206 184,585 902,382 327,055 Life ins. (discontinued operations) (13,535) 367,061 7 (346,394) 4,143 (350,121) 4,097 Premium finance 257 2,370 522 Corporation 196 3,000 -------- ---------- -------- ---------- -------- --------- -------- Total $119,795 $2,031,258 $506,035 $ 919,378 $192,250 $ 552,261 $331,152 ======== ========== ======== ========== ======== ========= ======== General operating Premiums expenses written --------- ---------- Segment - ------- Property and casualty insurance: Underwriting Automobile $23,246 $ 611,315 Workers' compensation 10,806 140,558 Gen. liability, A&H 12,236 108,283 Homeowners 12,747 160,444 CMP, fire and allied lines, inland marine 18,237 193,477 Fidelity, surety, burglary 4,904 35,118 Investment ------- --------- Total property and casualty insurance 82,176 1,249,195 Life ins. (discontinued operations) 1,471 (346,394) Premium finance 1,819 2,314 Corporation 5,975 ------- ---------- Total $91,441 $ 905,115 ======= ==========
1. Net investment income has been allocated to principal business segments on the basis of separately identifiable assets. 2. The principal portion of general operating expenses has been directly attributed to business segment classifications incurring such expenses with the remainder allocated based on premium volume. 21 22
Schedule V Ohio Casualty Corporation and Subsidiaries Consolidated Supplementary Insurance Information (In thousands) December 31, 1994 Deferred Future policy Benefits, Amortization policy benefits Net losses and of deferred acquisition losses and Unearned Premium investment loss acquisition costs loss expenses premiums revenue income expenses costs ----------- ------------- -------- ---------- ---------- ---------- ------------ Segment - ------- Property and casualty insurance: Underwriting Automobile $ 40,416 $ 617,871 $195,096 $ 639,604 $ $495,209 $131,815 Workers' compensation 12,385 421,422 57,175 151,257 89,992 35,089 Gen. liability, A&H 16,577 304,028 49,923 113,684 53,577 38,992 Homeowners 26,686 77,043 90,696 158,077 157,347 46,173 CMP, fire and allied lines, inland marine 34,003 227,735 100,119 200,937 131,267 69,765 Fidelity, surety, burglary 10,817 22,763 24,425 32,579 2,003 16,212 Investment 183,811 -------- ---------- -------- ---------- -------- -------- -------- Total property and casualty insurance 140,884 1,670,862 517,434 1,296,138 183,811 929,395 338,046 Life ins. (discontinued operations) 24,749 353,360 22,775 28,082 29,509 3,630 Premium finance 641 2,607 332 Corporation 115 1,565 -------- ---------- -------- ---------- -------- -------- -------- Total $165,633 $2,024,222 $518,075 $1,321,635 $213,790 $958,904 $341,676 ======== ========== ======== ========== ======== ======== ======== General operating Premiums expenses written --------- ---------- Segment - ------- Property and casualty insurance: Underwriting Automobile $20,493 $ 632,036 Workers' compensation 9,173 145,641 Gen. liability, A&H 9,906 114,656 Homeowners 11,829 160,089 CMP, fire and allied lines, inland marine 18,164 199,350 Fidelity, surety, burglary 4,802 33,209 Investment ------- ---------- Total property and casualty insurance 74,367 1,284,981 Life ins. (discontinued operations) 11,516 22,775 Premium finance 1,912 2,528 Corporation 6,139 ------- ---------- Total $93,934 $1,310,284 ======= ==========
1. Net investment income has been allocated to principal business segments on the basis of separately identifiable assets. 2. The principal portion of general operating expenses has been directly attributed to business segment classifications incurring such expenses with the remainder allocated based on premium volume. 22 23
Schedule V Ohio Casualty Corporation and Subsidiaries Consolidated Supplementary Insurance Information (In thousands) December 31, 1993 Deferred Future policy Benefits, Amortization policy benefits Net losses and of deferred acquisition losses and Unearned Premium investment loss acquisition costs loss expenses premiums revenue income expenses costs ----------- ------------- -------- ------- ---------- ---------- ------------ Segment - ------- Property and casualty insurance: Underwriting Automobile $ 39,951 $ 630,728 $203,010 $ 666,813 $ $ 503,438 $145,385 Workers' compensation 15,441 461,707 62,858 183,294 153,447 41,310 Gen. liability, A&H 15,977 332,677 48,950 117,275 87,327 41,791 Homeowners 26,687 76,265 88,782 167,729 141,068 50,238 CMP, fire and allied lines, inland marine 35,645 243,441 101,759 209,063 167,255 48,352 Fidelity, surety, burglary 9,693 23,815 23,795 33,378 6,064 46,726 Investment 190,395 -------- ----------- -------- ---------- -------- ---------- -------- Total property and casualty insurance 143,394 1,768,633 529,154 1,377,552 190,395 1,058,599 373,802 Life ins. (discontinued operations) 25,441 319,375 19,907 26,898 25,189 3,817 Premium finance 721 3,109 204 Corporation 13 1,891 -------- ---------- -------- --------- -------- ---------- -------- Total $168,835 $2,088,008 $529,875 $1,400,581 $219,388 $1,083,788 $377,619 ======== ========== ======== ========== ======== ========== ======== General operating Premiums expenses written ---------- ---------- Segment - ------- Property and casualty insurance: Underwriting Automobile $ 44,665 $ 641,837 Workers' compensation 8,190 165,577 Gen. liability, A&H 12,235 109,996 Homeowners 6,993 156,797 CMP, fire and allied lines, inland marine 72,076 198,963 Fidelity, surety, burglary (51,703) 31,148 Investment -------- ---------- Total property and casualty insurance 92,456 1,304,318 Life ins. (discontinued operations) 11,352 19,907 Premium finance 2,115 2,887 Corporation 6,239 -------- ---------- Total $112,162 $1,327,112 ======== ==========
1. Net investment income has been allocated to principal business segments on the basis of separately identifiable assets. 2. The principal portion of general operating expenses has been directly attributed to business segment classifications incurring such expenses with the remainder allocated based on premium volume. 23 24
Schedule VI Ohio Casualty Corporation and Subsidiaries Consolidated Reinsurance (In thousands) December, 1995, 1994 and 1993 Percent of amount Ceded to Assumed assumed Gross other from other Net to net amount companies companies amount amount ----------- ---------- ----------- ---------- ---------- Year Ended December 31, 1995 Life insurance in force $ 5,207,297 $5,298,297 $ 91,000 $ 0 0.0% =========== ========== ========== ========== Premiums Property and casualty insurance $ 1,251,079 $ 41,252 $ 39,692 $1,249,519 3.2% Life insurance 38,456 384,974 136 (346,382) 0.0% Accident and health insurance 1,456 1,780 1,521 1,197 127.1% ----------- ---------- ---------- ---------- Total premiums 1,290,991 428,006 41,349 904,334 4.6% Premium finance charges 2,314 Life insurance - FAS 97 adjustment (1,533) ---------- Total premiums and finance charges written 905,115 Change in unearned premiums and finance charges 14,263 ---------- Total premiums and finance charges earned 919,378 Miscellaneous income 3,810 Discontinued operations - life insurance 345,081 ---------- Total premiums & finance charges earned - continuing operations $1,268,269 ========== Year Ended December 31, 1994 Life insurance in force $ 5,254,705 $1,534,389 $ 91,000 $3,811,316 2.4% =========== ========== ========== ========== Premiums Property and casualty insurance $ 1,284,511 $ 44,592 $ 43,473 $1,283,392 3.4% Life insurance 53,910 5,436 231 48,705 0.5% Accident and health insurance 1,766 177 243 1,832 13.3% ----------- ---------- ---------- ---------- Total premiums 1,340,187 50,205 43,947 1,333,929 3.3% Premium finance charges 2,528 Life insurance - FAS 97 adjustment (26,173) ---------- Total premiums and finance charges written 1,310,284 Change in unearned premiums and finance charges 11,351 ---------- Total premiums and finance charges earned 1,321,635 Discontinued operations - life insurance (22,774) ---------- Total premiums & finance charges earned - continuing operations $1,298,861 ========== Year Ended December 31, 1993 Life insurance in force $ 5,037,383 $1,467,192 $ 91,000 $3,661,191 2.5% =========== ========== ========== ========== Premiums Property and casualty insurance $ 1,300,725 $ 43,448 $ 45,915 $1,303,192 3.5% Life insurance 68,739 4,607 247 64,379 0.4% Accident and health insurance 1,297 172 270 1,395 19.4% ----------- ---------- ---------- ---------- Total premiums 1,370,761 48,227 46,432 1,368,966 3.4% Premium finance charges 2,887 Life insurance - FAS 97 adjustment (44,748) ---------- Total premiums and finance charges written 1,327,105 Change in unearned premiums and finance charges 73,469 ---------- Total premiums and finance charges earned 1,400,574 Discontinued operations - life insurance (19,900) ---------- Total premiums & finance charges earned - continuing operations $1,380,674 ==========
24 25
Schedule VIII Ohio Casualty Corporation and Subsidiaries Valuation and Qualifying Accounts (In thousands) Balance at Balance at beginning Charged to end of of period expenses Deductions period Year ended December 31, 1995 Reserve for bad debt 4,500 (1,000) 0 3,500 Year ended December 31, 1994 Reserve for bad debt 6,300 (1,800) 0 4,500 Year ended December 31, 1993 Reserve for bad debt 6,791 (491) 0 6,300
25 26 Schedule X Ohio Casualty Corporation and Subsidiaries Consolidated Supplemental Information Concerning Property and Casualty Insurance Operations (In thousands)
Claims and claim Reserves for adjustment expenses Deferred unpaid claims incurred related to policy and claim Discount Net --------------------- Affiliation with acquisition adjustment of Unearned Earned investment Current Prior registrant costs expenses reserves premiums premiums income year years ----------- ------------- --------- -------- ---------- ---------- ---------- --------- Property and casualty subsidiaries Year ended December 31, 1995 $133,330 $1,664,197 $ 0 $505,771 $1,263,206 $ 184,585 $1,007,380 $(104,998) ======== ========== ========== ======== ========== ========= ========== ========= Year ended December 31, 1994 $140,884 $1,670,862 $ 0 $517,774 $1,296,138 $ 183,811 $1,083,112 $(153,717) ======== ========== ========== ======== ========== ========= ========== ========= Year ended December 31, 1993 $143,394 $1,768,633 $ 0 $529,154 $1,377,552 $ 190,395 $1,130,399 $ (71,799) ======== ========== ========== ======== ========== ========= ========== ========= Amortization Paid of deferred claims policy and claim Affiliation with acquisition adjustment Premiums registrant costs expenses written ------------ ---------- ---------- Property and casualty subsidiaries Year ended December 31, 1995 $327,055 $ 954,777 $1,249,195 ======== ========== ========== Year ended December 31, 1994 $338,046 $1,016,763 $1,284,981 ======== ========== ========== Year ended December 31, 1993 $373,802 $1,038,910 $1,304,318 ======== ========== ==========
26 27 FORM 10-K OHIO CASUALTY CORPORATION INDEX TO EXHIBITS
Page Number ------ Exhibit 10b Coinsurance Life, Annuity and Disability Income Reinsurance Agreement between Employer's Reassurance Corporation and The Ohio Life Insurance Company dated as of October 2, 1995 28-37 Exhibit 11 Computation of Earnings Per Share on Primary and Fully Diluted Basis for the years ended December 31, 1995, 1994 and 1993 38 Exhibit 13 Annual Report to Shareholders for the Registrant's fiscal year ended December 31, 1995 39-78 Exhibit 21 Subsidiaries of Registrant 79 Exhibit 22 Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995 80-96 Exhibit 23 Consent of Independent Accountants to incorporation of their opinion by reference in Registration Statement on Form S-8 97 Exhibit 27 Financial Data Schedule 98 Exhibit 28 Information from Reports Furnished to State Insurance Regulation Authorities 99-112 Exhibits incorporated by reference to previous filings: Exhibit 3 Articles of Incorporation and By Laws amended 1986 and filed with Form 8-K on January 15, 1987 Exhibit 4a Rights Agreement amended as of April 1, 1994 between Ohio Casualty Corporation and Mellon Bank, N.A. as rights agent filed with Form 8-K on April 1, 1994 Exhibit 4b First Supplement to Rights Agreement filed with Form 8-K on November 6, 1990 Exhibit 4c Second Supplement to Rights Agreement filed with Form 8-K on November 6, 1990 Exhibit 4d Rights Agreement amended as of September 5, 1995 between Ohio Casualty Corporation and First Chicago Trust Company of New York as rights agent filed with Form 8-K on September 5, 1995 Exhibit 10 Credit Agreement dated as of October 25, 1994 between Ohio Casualty Corporation and Chase Manhattan Bank, N.A., as agent, filed with Form 10-Q on November 1, 1994 Exhibit 10a Ohio Casualty Corporation 1993 Stock Incentive Program filed with Form 10-Q as Exhibit 10d on May 31, 1993
27 EX-10.B 2 EXHIBIT 10(B) 1 EXHIBIT 10b COINSURANCE LIFE, ANNUITY AND DISABILITY INCOME REINSURANCE AGREEMENT Entered into between EMPLOYERS REASSURANCE CORPORATION of Overland Park, Kansas (hereinafter called the CORPORATION) and OHIO LIFE INSURANCE COMPANY of Hamilton, Ohio (hereinafter called the CEDANT) EFFECTIVE DATE: January 1, 1995 TRANSFER DATE: October 2, 1995 In consideration of the mutual covenants hereinafter contained, the parties hereto do hereby agree as follows: ARTICLE I APPLICATION OF AGREEMENT. This agreement applies to loss under the policies described in the following Schedule (hereinafter called policies or policy) paid by the CEDANT on or after the effective date of this agreement. Policy Form Schedule All individual life, annuity and disability income insurance contracts of the CEDANT in force on the effective date of this agreement and issued by the CEDANT to become effective on or after the effective date of this agreement, including all riders originally written therewith or later added thereto. All supplementary insurance contracts of the CEDANT in force on the effective date of this agreement and issued by the CEDANT to become effective on or after the effective date of this agreement. All structured settlements of the CEDANT in force on the effective date of this agreement and written by the CEDANT to become effective on or after the effective date and prior to the transfer date of this agreement. -28- 2 Policy Form Schedule (continued) All individual accident and health insurance contracts issued by Ohio Casualty Insurance Company before the effective date of this agreement and reinsured by CEDANT, including all riders originally written therewith. All group life insurance of the CEDANT (including plans issued to its agents and to its affiliates) in force on the effective date of this agreement and issued by the CEDANT to become effective on or after the effective date of this agreement. All group accident and health insurance of the CEDANT (including accidental death and dismemberment plan issued to its affiliate) in force on the effective date of this agreement and issued by the CEDANT to become effective on or after the effective date of this agreement. All group life insurance policies reinsured by the CEDANT prior to the effective date of this agreement and certificates issued thereunder to become effective on or after the effective date of this agreement. All group accident and health insurance policies (including long term care) reinsured by the CEDANT prior to the effective date of this agreement and certificates issued thereunder to become effective on or after the effective date of this agreement. The word "policies" includes conversions, replacements, exchanges and reinstatements thereof. The term "other reinsurance" means those contracts entered into by the CEDANT with insurance companies other than the CORPORATION which reinsure the policies. ARTICLE II REINSURANCE AND MISCELLANEOUS OBLIGATIONS. The CORPORATION is obligated to the CEDANT for 100% of loss to which this agreement applies. The CORPORATION is also obligated to the CEDANT for 100% of each of the following three items: (1) experience refund payments made by the CEDANT under the policies; (2) premium and other deposit fund payments made by the CEDANT to the insureds under the policies; (3) supplementary contract payments made by the CEDANT to the insureds under the policies. For purposes of this paragraph, the word "insureds" includes policy owners and policy beneficiaries. The three preceding items are hereinafter referred to as miscellaneous obligation payments. -29- 3 ARTICLE III DEFINITION OF LOSS. The word "loss" means only those amounts which are actually paid by the CEDANT for benefits afforded under the policies, in settlement of claims for benefits under the policies, or in satisfaction of judgments for benefits under the policies, provided that, in the event of insolvency of the CEDANT, "loss" shall mean the amount of policy benefits which the CEDANT has incurred or is liable for, and payment by the CORPORATION shall be made to the liquidator, receiver or other statutory successor of the CEDANT in accordance with the provisions of the Insolvency Clause attached to and made a part of this agreement. The word "loss" includes cash values paid by the CEDANT because of policy surrenders. The word "loss" includes policy settlement options which have been selected even though they remain unpaid by the CEDANT. The word "loss" excludes: (a) claim expenses; (b) salaries paid to employees of the CEDANT; (c) any amount paid by the CEDANT for punitive, exemplary or compensatory damages arising out of the conduct of the CEDANT in the investigation, trial or settlement of any claim or failure to pay or delay in payment of any benefits under any policy; provided that, this subparagraph (c) shall not apply if the CORPORATION has, in advance of any such conduct by the CEDANT, counseled with the CEDANT and concurred in the CEDANT'S course of conduct; (d) any statutory penalty imposed upon the CEDANT because of any unfair trade practice or any unfair claim practice; (e) claims under litigation as of the effective date of this agreement, including, but not limited to, those which are listed by attachment to this agreement; (f) claims with respect to which litigation is overly threatened prior to the effective date of this agreement, including, but not limited to, those which are listed by attachment to this agreement; (g) amounts collected under other reinsurance. ARTICLE IV POLICY LOANS. The CORPORATION shall be obligated to the CEDANT for the policy loan increases. The CEDANT shall be obligated to the CORPORATION for the policy loan decreases. -30- 4 ARTICLE V PRODUCER COMMISSION. The CORPORATION is obligated to the CEDANT for the commissions paid by the CEDANT to its producers of the policies. ARTICLE VI INITIAL CONSIDERATION. The CEDANT is obligated to the CORPORATION for an initial consideration equal to 100% of the life and accident and health policy reserves as of the effective date, plus miscellaneous reserves and liabilities as of the effective date, less policy loans as of the effective date, and less miscellaneous assets as of the effective date ($337,602,844). The obligation calculated in accordance with the preceding sentence shall be segregated as follows: 1. Assets pertaining to a $140,000,000 part thereof shall be deposited on August 3, 1995 into a Custodial Account between CEDANT, the CORPORATION and Great Southern Life Insurance Company; and 2. Assets pertaining to the remaining part thereof as of the effective date shall be adjusted by the proportionate increase or decrease between July 28, 1995 an the last trading day preceding the transfer date in the value of the 6.5% U.S. Treasury Bond due May 15, 2005, as quoted by Solomon Brothers at 5:00 p.m. New York time. The CORPORATION is obligated to the CEDANT for a ceding commission of $48,200,000 minus the ceding commission adjustment. The ceding commission shall also be increased or decreased by the decrease or increase in subparagraph 1 above from July 28, 1995 to the transfer date and by the decrease or increase in subparagraph 2 above from July 28, 1995 to the transfer date. The ceding commission adjustment is defined as the CEDANT'S statutory earnings before taxes from the effective date of this agreement to the transfer date of this agreement as taken from line 29 of the Analysis of Operations by Lines of Business for the CEDANT's 1995 third quarter end statutory statement and as computed by the CEDANT on a basis consistent with practices used by the CEDANT as of December 31, 1994: (a) less investment income assumed at the rate of 7.5% per annum for the period from the effective date to the transfer date on the outstanding balance of capital and surplus plus the Asset Valuation Reserve and the Interest Maintenance Reserve all as of the effective date; (b) plus 15% of general expenses incurred (direct and allocated), premium taxes, licenses and fees incurred from the effective date to the transfer date; -31- 5 (c) plus the increase or minus the decrease in the CEDANT's life and accident and health policy reserves and miscellaneous reserves and liabilities from the effective date to the transfer date; (d) plus the decrease or minus the increase in the policy loans from the effective date to the transfer date; (e) plus the decrease or minus the increase in the miscellaneous assets from the effective date to the transfer date; (f) plus the losses incurred or minus the gains received between the effective date and the transfer date on claims identified in subparagraphs (e) and (f) of the definition of loss. "Miscellaneous reserves and liabilities" means the sum of the following: (1) reserves for supplementary contracts; (2) policy and contract claims; (3) liability for premium and other deposit funds; (4) provision for experience rating refunds; (5) due or accrued agents commissions; (6) commissions and expense allowances on reinsurance described in the Policy Form Schedule contained in Article I; (7) premiums due or accrued on other reinsurance; (8) advance premiums. "Miscellaneous assets" means the sum of the following: (1) gross due and deferred life premiums; (2) gross due accident and health premiums; (3) amounts recoverable under other reinsurance. -32- 6 ARTICLE VII REINSURANCE PREMIUM. The CEDANT is obligated to the CORPORATION for reinsurance premiums after the effective date of this agreement, in accordance with Article VI. At the end of each calendar quarter after the transfer date, the CEDANT shall owe the CORPORATION a reinsurance premium equal to the policies' insurance premium collected by the CEDANT during the quarter, less premiums on other reinsurance after reduction for allowances thereon, plus considerations for supplementary contracts and other deposit funds collected by the CEDANT. The CORPORATION shall owe the CEDANT an expense allowance equal to the following percentages of this agreement's reinsurance premium after the transfer date: Life reinsurance premium: 20% Disability reinsurance premium: 20% Annuity reinsurance premium: 6.5%
The CORPORATION shall owe the CEDANT an expense allowance in an amount equal to .0625% of the assets set forth in the 1995 Escrow Agreement between the CORPORATION and Great Southern Life Insurance Company, as of the end of each calendar quarter after the transfer date. ARTICLE VIII REPORTING, ACCOUNTING AND SETTLEMENTS. On the transfer date, the CEDANT will pay the CORPORATION the estimated initial consideration calculated per the first sentence of the first paragraph of Article VI, minus the ceding commission, as adjusted by the third paragraph of Article VI and minus the ceding commission adjustment. Within 30 days after the transfer date, the CEDANT shall pay the CORPORATION the amount by which the actual net amount due under Article VI exceeds the previously paid estimate (or the CORPORATION shall return the amount by which the estimate exceeded the actual). Within 25 days after the end of each calendar quarter after the transfer date, the CEDANT or its administrator shall furnish to the CORPORATION a report (in a form satisfactory to the CORPORATION) of the following information for the quarter: A. The following amounts due the CORPORATION: 1. Reinsurance premium; 2. Policy loan decrease; -33- 7 B. The following amounts due the CEDANT: 1. Producer commission paid; 2. Reinsurance losses paid; 3. Expense allowance; 4. Policy loan increase; 5. Miscellaneous obligation payments; C. Balance due CORPORATION or CEDANT. If the amount shown in subparagraph C is due the CORPORATION, the CEDANT'S payment thereof shall accompany the report. If the amount shown in subparagraph C is due the CEDANT, the CORPORATION'S payment thereof shall be made to the CEDANT within 25 days after the CORPORATION receives the CEDANT'S report. The CEDANT agrees to pay to the CORPORATION simple interest on the estimated net initial consideration per Article VI not received by the CORPORATION on the transfer date and on the difference between estimated and actual from the transfer date until the difference is received by the CORPORATION (or the CORPORATION will pay the CEDANT interest on the part of the estimated which is returned to the CEDANT). The CORPORATION and the CEDANT each agree to pay the other simple interest on all amounts due and not remitted within 45 days after the end of any calendar quarter. The interest rate for the late quarterly payments and for funds remitted subsequent to the transfer date is the three month LIBOR rate at noon indicated by Solomon Brothers, New York, on the last day of the quarter involved or as of September 30, 1995 with respect to transfer date payments. The report for the third calendar quarter of each calendar year shall include the information pertaining to the policies which is necessary for preparing the CORPORATION'S Annual Statement. The report for the fourth calendar quarter of each calendar year shall include the CEDANT'S cash flow analysis for the policies which is sufficient for the CORPORATION'S use in preparing its actuarial opinion. ARTICLE IX CLAIMS. The CEDANT shall itself investigate, pay, settle or defend all claims arising under the policies or contract with another company (satisfactory to the CORPORATION) to do so. Other than with respect to damages to which this agreement may apply by virtue of subparagraph (c) of the definition of loss, the CORPORATION will abide by the claim handling decisions of the CEDANT or of its administrator. -34- 8 ARTICLE X INSPECTION OF RECORDS. The CORPORATION may inspect the records of the CEDANT pertaining to the policies. ARTICLE XI ADMINISTRATION. The CORPORATION has no responsibility or authority to administer the insurance afforded by the policies. The CORPORATION has the right to review and require changes to the administration agreement to be entered into by the CEDANT with respect to the policies. ARTICLE XII INSOLVENCY CLAUSE. The Insolvency Clause attached to this agreement is hereby made a part of this agreement. ARTICLE XIII ASSIGNMENTS AND CHANGES OF INTEREST. No assignment or change of either party's interest hereunder, whether voluntary of involuntary and whether by merger or reinsurance of its entire business with another company or otherwise, shall be binding upon the other party, provided that this article does not apply to: (1) the CORPORATION'S assignment of its interests and liabilities as the reinsurer to Great Southern Life Insurance Company, but only with respect to those policies on which said company is not named as the direct insurer; (2) the CEDANT's assignment of its rights and duties as the ceding company to Great Southern Life Insurance Company, but only with respect to those policies on which said company is named as the direct insurer. ARTICLE XIV OFFSET. The CEDANT or the CORPORATION may offset any balance, whether on account of premiums, commissions, loss or claim expenses due from one party to the other under this agreement or under any other reinsurance agreement heretofore or hereafter entered into between the CEDANT and the CORPORATION, whether acting as ceding company or assuming reinsurer. -35- 9 ARTICLE XV ENTIRE AGREEMENT. This agreement shall constitute the entire agreement between the parties with respect to the business being reinsured hereunder. There are no other understandings between the parties other than as expressed in this agreement. Any change or modification to this agreement shall be null and void unless made by amendment to this agreement and signed by both parties. ARTICLE XVI RECAPTURE. The CORPORATION has no obligation to allow the CEDANT to recapture the policies. ARTICLE XVII TERMINATION. Either party shall have the right to terminate this agreement with respect to new business by giving to the other party not less than 90 days advance notice, by registered mail or express delivery service, stating the first day of any calendar quarter which shall be the termination date. This agreement does not apply to policies issued to become effective on or after the termination date. If the CORPORATION does not permit recapture, the reinsurance afforded by this agreement applicable to each policy in force on the termination date shall continue to apply thereto until the policy naturally expires. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed in duplicate.
EMPLOYERS REASSURANCE OHIO LIFE INSURANCE COMPANY CORPORATION By:___________________________________ By:___________________________________ Title:________________________________ Title:________________________________ Date:_________________________________ Date:_________________________________ By:___________________________________ By:___________________________________ Title:________________________________ Title:________________________________ Date:_________________________________ Date:_________________________________
-36- 10 INSOLVENCY CLAUSE The ceding insurer and the reinsurer agree that, in the event of the insolvency of the ceding insurer, as to all reinsurance made, ceded, renewed or otherwise becoming effective after the effective date of this agreement, the reinsurance shall be payable by the reinsurer on the basis of the amount of liability of the ceding insurer under the contract or contracts reinsured, without diminution because of the insolvency of the ceding insurer; furthermore, that such amount shall be paid directly to the ceding insurer or its liquidator, receiver or other statutory successor. It is understood and agreed, however, that the obligations of the ceding company as set forth in the reinsurance contract, including, among others, the duty to investigate, settle and defend all claims arising under policies with respect to which reinsurance is afforded by this agreement, shall remain unimpaired and unaffected by the insolvency of the ceding insurer and shall be assumed by the liquidator, receiver or statutory successor of the ceding insurer in the liquidation or receivership proceeding and that such liquidator, receiver or statutory successor shall give written notice to the reinsurer of the pendency of a claim against the ceding insurer on the policy reinsured within a reasonable time after such claim is filed in the insolvency proceeding and that during the pendency of such claim the reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses which it may deem available to the ceding insurer, its liquidator, receiver or statutory successor. The expense thus incurred by the reinsurer shall be chargeable, subject to court approval, against the insolvent ceding insurer as a part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as the result of the defense undertaken or asserted by the reinsurer. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose a defense to such claim, the expense shall be apportioned in accordance with the terms of this reinsurance agreement as though such expense had been incurred by the ceding insurer. Nothing hereinabove set forth in this insolvency clause shall in anywise change the relationship or status of the parties hereto, to wit, that of ceding insurer and reinsurer, nor enlarge the obligations of either party to each other, except as specifically hereinabove provided, to wit, to pay the statutory successor on the basis of the amount of liability of the ceding insurer under the contract or contracts reinsured, rather than on the basis of the actual amount of loss (dividends) paid by the liquidator, receiver or statutory successor to allowed claimants, nor shall anything in this insolvency clause in any manner create any obligations or establish any rights against the reinsurer in favor of any third parties or any persons not parties to this reinsurance contract. -37- EX-11 3 EXHIBIT 11 1 Exhibit 11 Ohio Casualty Corporation and Subsidiaries Computation of Earnings Per Share on Primary and Fully Diluted Basis for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993 ---- ---- ---- Net income applicable to common stock (in thousands) $99,735 $96,891 $86,985 ======= ======= ======= Average common shares outstanding (shares in thousands) 35,750 36,033 36,016 Average number of common shares issuable upon exercise of stock options, less common shares assumed to have been repurchased with the proceeds from the assumed exercise of outstanding stock options. Number of shares repurchased is based on the average market price during year. 17 0 14 ------- ------- ------- 35,767 36,033 36,030 ======= ======= ======= Net income per average share on a primary basis $ 2.79 $ 2.69 $ 2.42 ======= ======= ======= Average common shares outstanding (shares in thousands) 35,750 36,033 36,016 Average number of common shares issuable upon exercise of stock options, less common shares assumed to have been repurchased with the proceeds from the assumed exercise of outstanding stock options. Number of shares repurchased is based on higher of average market price during the year, or market price at end of year. 17 5 12 ------- ------- ------- 35,767 36,038 36,028 ======= ======= ======= Net income per average share on a fully diluted basis $ 2.79 $ 2.69 $ 2.42 ======= ======= =======
38 EX-13 4 EXHIBIT 13 1 EXHIBIT 13
OHIO CASUALTY CORPORATION & SUBSIDIARIES FINANCIAL HIGHLIGHTS (in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------- Gross premiums and finance charges $ 1,294,541 $ 1,332,279 $ 1,350,825 Investment income, less expenses 188,107 185,708 192,491 Income before investment gains 91,400 77,083 51,442 Realized investment gains, after taxes 3,963 14,231 28,701 Income from discontinued operations 4,372 5,896 6,842 Cumulative effect of accounting changes 0 (319) 0 Net income 99,735 96,891 86,985 Property and casualty combined ratio 104.0% 103.8% 110.3% PER COMMON SHARE* Income before investment gains $ 2.56 $ 2.14 $ 1.43 Realized investment gains, after taxes 0.11 0.40 0.80 Income from discontinued operations 0.12 0.16 0.19 Cumulative effect of accounting changes 0.00 (0.01) 0.00 Net income 2.79 2.69 2.42 Book value 31.39 23.64 23.93 Dividends 1.52 1.46 1.42 FINANCIAL CONDITION Assets $ 3,980,142 $ 3,738,956 $ 3,816,753 Shareholders' equity 1,111,014 850,790 862,338 (See Note 1L to Consolidated Financial Statements) Average shares outstanding* 35,750 36,033 36,016 Shares outstanding on December 31* 35,396 35,993 36,030 Number of shareholders 6,100 6,100 7,200 *1993 share and per share amounts restated for 2-for-1 stock split (See Note 15). - --------------------------------------------------------------------------------------------------------
2 Ohio Casualty Corporation & Subsidiaries TEN-YEAR SUMMARY OF OPERATIONS
(in millions) 1995 1994 1993 1992 ================================================================================================ Consolidated Operations Income after taxes Property and casualty $ 92.5 $ 79.3 $ 53.5 $ 61.2 Premium finance 0.7 0.7 0.8 1.5 Corporate expenses (1.8) (2.9) (2.8) (4.9) --------- ---------- ---------- --------- Operating income 91.4 77.1 51.5 57.8 Realized investment gains (losses) 4.0 14.2 28.7 35.1 --------- ---------- ---------- --------- Income from continuing operations 95.4 91.3 80.2 92.9 Discontinued operations 4.3 5.9 6.8 4.1 Cumulative effect of accounting changes 0 (0.3) 0 1.5 --------- ---------- ---------- --------- Net income 99.7 96.9 87.0 98.5 ========= ========== ========== ========= Income after taxes per average share outstanding Property and casualty 2.59 2.20 1.49 1.70 Premium finance 0.02 0.02 0.02 0.04 Corporate expenses (0.05) (0.08) (0.08) (0.14) --------- ---------- ---------- --------- Operating income 2.56 2.14 1.43 1.60 Realized investment gains (losses) 0.11 0.40 0.80 0.98 Discontinued operations 0.12 0.16 0.19 0.12 Cumulative effect of accounting changes 0 (0.01) 0 0.04 --------- ---------- ---------- --------- Net income 2.79 2.69 2.42 2.74 ========= ========== ========== ========= Average shares outstanding 35.8 36.0 36.0 36.0 Total assets 3,980.1 3,739.0 3,816.8 3,760.7 Shareholders' equity 1,111.0 850.8 862.3 825.2 Book value per share 31.39 23.64 23.93 23.43 Dividends paid per share 1.52 1.46 1.42 1.34 Percent increase over previous year 4.1% 2.8% 6.0% 8.1% Property and Casualty Operations Gross premiums written 1,293.6 1,331.2 1,349.7 1,541.5 Net premiums written 1,250.6 1,286.4 1,306.0 1,508.5 Premiums earned 1,264.6 1,297.7 1,379.4 1,517.6 GAAP underwriting gain (loss) before taxes (68.8) (92.9) (147.3) (130.8) Loss ratio 61.2% 61.6% 64.9% 63.7% Loss expense ratio 10.2% 10.0% 11.8% 10.8% Underwriting expense ratio 32.6% 32.2% 33.6% 33.5% Combined ratio 104.0% 103.8% 110.3% 108.0% Investment income before taxes 184.6 183.8 190.4 194.6 Per average share outstanding 5.16 5.10 5.29 5.41 Percent increase over previous year 1.2% (3.6)% (2.2)% 1.3% Property and casualty reserves Unearned premiums 505.8 517.8 529.6 596.1 Losses 1,268.1 1,303.6 1,378.0 1,309.2 Loss adjustment expense 356.1 367.3 390.6 364.0 Statutory policyholders' surplus 876.9 660.0 713.6 674.2 Percent increase (decrease) over previous year 32.9% (7.5)% 5.8% 4.8%
3
10-Year Compound 1991 1990 1989 1988 1987 1986 Annual Growth ===================================================================================== % $ 103.2 $ 93.4 $ 108.1 $ 133.4 $ 90.2 $ 61.9 10.7% 2.1 2.2 2.3 2.5 2.1 1.8 -5.2% (6.2) (1.0) (1.1) (0.7) (0.3) (0.2) 23.9% - ------- ---------- ---------- ---------- ---------- ---------- 99.1 94.6 109.3 135.2 92.0 63.5 10.3% 9.8 (8.7) (10.5) (14.2) (17.9) 31.0 -3.3% - ------- ---------- ---------- ---------- ---------- ---------- 108.9 85.9 98.8 121.0 74.1 94.5 9.1% (1.0) (1.8) 2.7 7.0 4.5 8.2 0.5% 0 0 0 0 0 0 --- - ------- ---------- ---------- ---------- ---------- ---------- 107.9 84.1 101.5 128.0 78.6 102.7 8.5% ======= ========== ========== ========== ========== ========== 2.88 2.43 2.53 3.06 2.00 1.37 13.3% 0.06 0.06 0.05 0.06 0.05 0.04 -3.1% (0.17) (0.02) (0.02) (0.02) 0 0 26.7% - ------- ---------- ---------- ---------- ---------- ---------- 2.77 2.47 2.56 3.10 2.05 1.41 12.8% 0.27 (0.23) (0.25) (0.32) (0.41) 0.69 -1.1% (0.03) (0.05) 0.06 0.16 0.10 0.17 2.8% 0 0 0 0 0 0 --- - ------- ---------- ---------- ---------- ---------- ---------- 3.01 2.19 2.37 2.94 1.74 2.27 11.0% ======= ========== ========== ========== ========== ========== 35.8 38.4 42.8 43.6 45.0 45.2 -2.3% 3,531.3 3,252.9 3,145.7 2,922.0 2,682.4 2,475.4 5.0% 774.5 651.2 775.0 718.5 615.7 606.0 7.5% 21.58 18.19 18.46 16.65 13.93 13.40 10.1% 1.24 1.16 1.04 0.94 0.84 0.75 8.1% 6.9% 11.5% 10.6% 11.9% 12.0% 7.1% --- 1,519.3 1,492.1 1,404.5 1,383.6 1,398.2 1,338.4 1.5% 1,492.3 1,468.4 1,377.6 1,353.2 1,359.6 1,301.7 1.4% 1,469.1 1,438.0 1,364.2 1,339.6 1,356.6 1,221.9 2.4% (74.5) (79.4) (62.6) (16.3) (39.6) (57.0) --- 60.4% 61.4% 58.4% 55.2% 56.8% 60.0% --- 10.6% 10.9% 12.1% 11.8% 12.7% 11.8% --- 33.9% 33.0% 33.2% 33.8% 33.4% 32.6% --- 104.9% 105.3% 103.7% 100.8% 102.9% 104.4% --- 191.6 176.7 187.7 169.8 156.9 140.0 4.4% 5.34 4.59 4.38 3.89 3.48 3.10 6.8% 16.3% 4.8% 12.6% 11.8% 12.3% 16.1% --- 605.2 582.0 551.6 538.2 524.5 521.5 1.4% 1,216.1 1,148.9 1,061.5 979.3 929.4 790.9 6.9% 350.0 335.1 308.5 273.1 242.0 190.4 8.7% 643.4 465.8 531.6 452.1 442.4 452.5 8.6% 38.1% (12.4)% 17.6% 2.2% (2.2)% 18.9% ---
4 MANAGEMENT'S DISCUSSION & ANALYSIS RESULTS OF OPERATIONS Net income increased 2.9% for 1995 to $99.7 million or $2.79 per share while the combined ratio increased by .2 points to 104.0%. Losses, loss adjustment expenses and underwriting expenses are all down in relation to last year, but the decline in premium caused the slight deterioration in the combined ratio. Net premiums written declined for the third straight year to $1.2 billion. The premium decline is attributable to the Corporation's continued repositioning strategy where coastal exposures are reduced, agents with insufficient premium volume are canceled, and states with poor regulatory or legal environments are avoided. During 1995, 448 agents were canceled accounting for more than $60 million in written premium. The largest decline in premium occurred in the general liability line of business with a 5.2% decline. The largest premium declines in individual states came in Pennsylvania with a $16.3 million decline and Florida with a $12.6 million decline. It is now felt that other than the State of Florida, our repositioning strategy is nearly complete. Barring any unforeseen challenges, a modest growth in premium is expected in 1996. In spite of decreasing premiums, the Company produced positive cash flows in 1995. Net cash used by operations was $74.7 million compared to cash generated of $45.7 million in 1994 and $34.1 million in 1993. The life reinsurance transaction caused a one time cash outflow of $142.2 million. Excluding this transaction, cash flows from operations would have been $67.5 million. Investing activities produced net cash of $169.3 million in 1995, up from $39.3 million in 1994 and $4.9 million in 1993. The increase in 1995 is due primarily to the closing of the life reinsurance transaction. Dividend payments were $54.3 million in 1995 compared to $52.6 million in 1994 and $51.1 million in 1993. Total cash used for financing activities was $85.0 million in 1995 compared to $86.8 million in 1994 and $66.7 million in 1993. Overall, total cash generated in 1995 was $9.6 million, versus net cash used of $1.8 million in 1994 and $27.6 million in 1993. The fourth quarter of 1995 yielded a combined ratio of 98.6%. During 1994, the Corporation achieved two quarters with combined ratios under 100%. These quality results demonstrate the effects of implementing our strategic plan and indicate that we are on the right path. Some of the other measurements that we feel demonstrate the positive direction we are taking include the inforce policies per employee, branch underwriting expense per employee, and the five-year average return on equity. An increase in inforce policies per employee indicates improved efficiency as we are able to handle greater volumes of business without additional labor expense. At December 31, 1995, inforce policies per employee as 412, up from 400 at December 31, 1994. Another key measure of operating efficiency is branch underwriting expense per policy. For the year 1995, this measure was $50 per policy compared to $51 in 1994, an indication that our branch consolidation efforts are proving beneficial. In order to evaluate corporate performance relative to shareholders' expectations, the Corporation calculates a five-year average return on equity. Net income and unrealized gains and losses on investments are included in the calculation to derive a total return. A five-year average is used to correspond to our planning horizon and emphasize consistent long term returns, not intermediate fluctuations. At December 31, 1995, our five-year average return on equity was exactly 16%. This equals our stated goal and represents an increase from the 12.8% average recorded last year. This surge in 1995 is primarily the result of the gain in our investment portfolio this year. PROPERTY AND CASUALTY The midwestern states of Ohio, Indiana, Kentucky, Illinois, Tennessee and Missouri, as well as other key states, continue to be our marketing focal points. These states have traditionally provided our strongest base of profitability, a fact that has not escaped our competitors. As a result, competition for market share in this region continues to be formidable. To meet this 5 intrusion, we have begun work on products designed for customers within this region. The first such program was introduced in 1995 and involved private passenger automobile insurance for minivan owners. The program has been received well and is being introduced nationwide. A better understanding of the needs of our customers is enabling us to create products with a competitive price to attract new customers and grow our business. As part of this effort, we are developing rate of return models so that we can better assess the profitability of a market before we enter it and better manage profitability once established. Strategies are being developed on a state-by-state basis in order to more closely tailor our programs to the needs of the policyholder. In addition to identifying new markets, we are working to improve customer retention through improved service and better products thus leading to increased premium income and profitability. The renewed focus on our policyholders has increased policyholder retention from 82.7% in 1994 to 83.1% in 1995. Our goal is to achieve an 85% retention ratio. By retaining valued customers, the Corporation is able to improve premium volume while limiting the higher expense associated with new business underwriting. Property and casualty operating income was $92.5 million, $2.59 per share, in 1995 compared with $79.3 million, $2.20 per share, in 1994 and $53.5 million, $1.49 per share in 1993. Catastrophe losses in 1995 totaled $27.3 million compared with $36.6 million in 1994 and $33.1 million in 1993. The bulk of the 1995 losses occurred in the second quarter as a result of the severe hail storms in the South and Midwest. Catastrophe losses added 2.2 points to the combined ratio in 1995 compared with 2.8 points in 1994 and 2.4 points in 1993. Statutory surplus, a traditional insurance industry measure of strength and underwriting capacity, was $876.9 million at December 31, 1995 compared with $660.0 million at December 31, 1994 and $713.6 million at December 31, 1993. The increase in 1995 was due primarily to the unrealized gains in our investment portfolio. The decrease in 1994 was brought about by the Proposition 103 charge from California and the decline in bond values. The 1993 increase resulted primarily from statutory net income. The ratio of premiums written to statutory surplus has not exceeded 1.7 to 1 for any property and casualty company in The Ohio Casualty Group in any of the last three years. This ratio is one of the measures used by insurance regulators to gauge the financial strength of an insurance company and indicates the ability of the Corporation to grow by writing additional business. Ratios below 3 to 1 generally indicate additional capacity and financial strength. The National Association of Insurance Commissioners has developed a "Risk Based Capital" formula for property and casualty insurers and life insurers. The formulas are intended to measure the adequacy of an insurer's capital given the asset structure and product mix of the company. Under the current formulas, all insurance companies in The Ohio Casualty Group have approximately twice the necessary capital. PREMIUM DISTRIBUTIONS BY TOP STATES 1995 1994 1993 New Jersey 18.1% 16.3% 15.1% Pennsylvania 10.0% 11.0% 13.0% Ohio 9.6% 9.7% 9.4% Kentucky 6.5% 6.4% 6.8% Illinois 5.1% 4.9% 5.2% The premium growth in New Jersey is being driven primarily by the private passenger auto line of business which grew 11.1% in 1995. New Jersey requires insurers to write all auto business that meets underwriting guidelines regardless of risk concentration. As a result, this state has grown to $226.5 million in net written premium for 1995, up from $209.4 million last year. Of this amount, 49.5% is in the private passenger auto line of business. PREMIUM FINANCE Premium finance operating income amounted to $.7 million in 1995 and 1994 compared with $.8 million in 1993. Revenues were again down due to repositioning and the movement away from premium financing to our commercial lines direct billing system. 6 COMBINED RATIOS
1995 1994 1993 1992 1991 ================================================================================================= Automobile 103.9% 101.9% 103.5% 101.0% 102.3% Commerical Multiple Peril, Fire and Inland Marine 105.7% 108.6% 124.2% 118.2% 101.8% General Liability 105.3% 90.3% 120.6% 83.3% 92.9% Workers' Compensation 93.7% 87.8% 111.3% 130.0% 120.4% Homeowners 113.7% 135.7% 118.0% 118.9% 113.3% Fidelity and Surety 84.5% 72.8% 79.1% 99.0% 86.0% - ------------------------------------------------------------------------------------------------- Total 104.0% 103.8% 110.3% 108.0% 104.9% =================================================================================================
DISCONTINUED OPERATIONS During 1995, the Corporation's life operations were discontinued. We found it increasingly difficult to achieve our required 16% rate of return in this segment of our business. After extensive analysis, it was determined that a 16% return could not be achieved without extensive capital contributions and a dramatic overhaul of the life operations. Since this was a small segment of our overall business, it was decided that this would not be a prudent use of our capital. Therefore, on October 2, 1995, the Corporation signed the final documents to reinsure the existing blocks of business and enter a marketing agreement with Great Southern Life Insurance Company. This will provide our agents and policyholders access to quality life insurance products to meet their financial needs. The existing blocks of business were reinsured through a 100% coinsurance arrangement. As of December 31, 1995, $16.7 million of the net ceding commission from the transaction remains unamortized. This will be amortized into income over the expected life of the underlying reinsured policies, in this case, 15 years. An assumption is scheduled for January 1, 1997 whereby Great Southern will legally replace Ohio Life as the primary carrier on these policies at which time the remaining unamortized gain will be recognized. Net income from discontinued operations amounted to $4.4 million or $.12 per share in 1995 compared with $5.9 million or $.16 per share in 1994 and $6.8 million or $.19 per share in 1993. REINSURANCE In order to preserve capital and shareholder value, Ohio Casualty Corporation purchases reinsurance to protect the Corporation against large or catastrophic losses. The reinsurance program remains the same in 1996 as it was in 1995. Three separate reinsurance programs have been established to protect the Corporation. The Property Per Risk contract covers Ohio Casualty in the event that an insured sustains a property loss in excess of $1.0 million in a single insured event. The Casualty Per Occurrence contract covers the Corporation in the event that an insured sustains a liability loss in excess of $1.0 million in a single insured event. On both of these contracts, Ohio Casualty pays the first $1.0 million in losses. Property reinsurance covers $7.0 million in excess of the retention. Casualty reinsurance covers $11.0 million in excess of the retention; and workers' compensation reinsurance covers $23.0 million in excess of the retention. The Catastrophe Reinsurance contract protects the Corporation against an accumulation of losses arising from one defined catastrophic occurrence or series of events. The Corporation is responsible for the first $25.0 million and approximately 10% of losses between $25.0 million and $150.0 million. The reinsurers cover the other portion. If losses from a single catastrophe were to exceed $150.0 million, the Corporation would be responsible for the excess. Starting in 1995, reinsurers also cover 20% of the next $50.0 million in excess of $150.0 million for catastrophe 7 losses in New Jersey. Over the last twenty years, there were two events that triggered coverage under our catastrophe contract. Losses and loss adjustment expenses from the Oakland fires in 1991 and Hurricane Andrew in 1992 totaled $31.1 million and $28.5 million, respectively. Both of these losses exceeded our prior retention amount of $13.0 million. The Corporation recovered $29.7 million from reinsurers as a result of these events. Our reinsurance limits are designed to cover our exposure to an event expected to occur once every 300 years. Since the Corporation's reinsurance protection is an important component in our financial plan, we closely monitor the financial health of each of our reinsurers. Twice annually, financial statements are reviewed and various ratios calculated to identify reinsurers who have ceased to meet our high standards of financial strength. If any reinsurers fail these tests, they are removed from the program at renewal. LOSS AND LOSS ADJUSTMENT EXPENSES The Corporation's largest liabilities are the reserves for losses and loss adjustment expenses. Loss and loss adjustment expense reserves are established for all incurred claims and are carried on an undiscounted basis before any credits for reinsurance recoverable. These reserves amounted to $1.6 billion at December 31, 1995. As claims are paid, the related reserves are closed and any under-or over-estimation of the claim reserve is closed to net income at that time. In 1994, the Corporation began piloting the direct reporting of claims from our insureds. In the event of loss, the insured calls an 800 number to report the claim. Instead of getting back to the claimant in 24 or 48 hours, the claims supervisor immediately establishes a conference call with the claims adjuster. By offering immediate service, the Corporation hopes to control and even decrease loss costs. By year-end, approximately 30% of our claims were being reported this way. In recent years, environmental liability claims have expanded greatly in the insurance industry. Fortunately, Ohio Casualty has a substantially different mix of business than the industry. We have historically written small commercial accounts, and have not attracted significant manufacturing liability coverage. As a result, our environmental liability claims are substantially below the industry average. Our liability business reflected our current mix of approximately 68% contractors, 13% building/premises, 15% mercantile and only 4% manufacturers. Within the manufacturing category, we have concentrated on the light manufacturers which further limits our exposure to environmental claims. The Corporation continues to closely monitor its exposure to this type of claim. Based on this examination, an estimated liability of $14.4 million was established at year end 1995 compared with $10.4 million at year end 1994 and $13.2 million at the end of 1993. Approximately $4.5 million in reserves are for asbestos claims. The remainder are primarily for pre-1985 pollution claims. These loss estimates are based on the currently available information. However, given the expansion of coverage and liability by the courts and legislatures, there is some uncertainty as to the ultimate liability. The Corporation's insurance subsidiaries change their pollution exclusion policy language between 1985 and 1987 to effectively eliminate these coverages. CALIFORNIA WITHDRAWAL On June 15, 1992, the Corporation announced its intention to withdraw its business operations from California due to the lack of profitability and the difficult regulatory environment. In December 1992, the Corporation stopped writing business in California and filed a withdrawal plan with the California Department of Insurance. Under the terms of the plan, The Ohio Casualty Insurance Company, Ohio Security Insurance Company, and West American Insurance Company would withdraw from California, leaving American Fire and Casualty Company licensed to wind down the affairs of the Group. Also, the plan required the withdrawing companies to transfer their California liabilities to American Fire and Casualty Company along with assets to secure those liabilities. In April 1995, the California Department of Insurance gave final approval for withdrawal and the Corporation implemented the withdrawal plan. Proposition 103 was passed in the State of California in 1988 in an attempt to legislate premium rates for 8 that state. Based on previous statements by the California Department of Insurance and the Corporation's lack of profitability in the state, it was concluded that no significant liability for premium rollbacks existed. However, at the end of 1994, and again in 1995, the State of California billed the Corporation for varying amounts. To date, the Corporation has received three billings and one set of written testimony from the State, each asserting a different liability. The most current indication of the State's position is the filed written testimony of the State's expert witness indicating the Corporation should not be required to pay in excess of $42.1 million plus interest as a Proposition 103 assessment. Our current reserve of $70.2 million is based on this testimony. Reserving for this alleged liability negatively impacted net income by $14.9 million or $.42 per share in 1995 and $30.7 million or $.85 per share in 1994. The Corporation continues to challenge the validity of any rollback and plans to continue negotiations with Department officials. INVESTMENTS Consolidated pre-tax investment income from continuing operations increased 1.3% to $188.1 million in 1995 from $185.7 million in 1994. This compares with $192.5 million in 1993. On an after-tax basis, investment income decreased to $138.4 million in 1995 from $142.5 million in 1994. After-tax investment income in 1993 amounted to $149.9 million. Investment income growth over the past few years has been negatively affected by the reduction of cash available for investment. The main reason for this reduction is the decline in written premium precipitated by our strategic repositioning. In addition, our share repurchase program has reduced our cash available for other investments. At year end 1995, consolidated investments had a carrying value of $3.1 billion. The excess of market value over cost was $465.9 million, compared with a $104.9 million excess at year end 1994 and $367.0 million at year end 1993. This substantial increase in market value is attributable to the strong performance of our stock and bond portfolios during 1995. After-tax realized investment gains from continuing operations amounted to $4.0 million in 1995 compared with a $14.2 million gain in 1994 and $30.5 million in 1993. We continue to have no position in futures, forwards, swaps, caps, floors, or similar derivative instruments as defined by Statement of Financial Accounting Standards No. 119. As of December 31, 1995, Ohio Casualty maintains a $403.1 million mortgage-backed securities portfolio compared with $597.6 million at December 31, 1994. The majority of these bonds are less volatile planned amortization class and sequential structures. About $27.8 million of this portfolio is invested in more volatile bond classes (e.g. interest-only, super-floaters, inverses). In 1995, funds from sales of these securities and mortgage prepayments were reinvested in other asset classes, particularly municipal bonds. Ohio Casualty's fixed income strategy has been to maintain a portfolio with laddered maturity structure and a five-year duration. We believe that our portfolio structure and targeted duration continue to be appropriate for our insurance business. Further, we do not try to time the financial markets. Instead, we believe it prudent to remain fully invested at all times, subject only to our liquidity needs. Tax exempt bonds were 37.3% of the fixed income portfolio at year end 1995. This compares with 27.7% at December 31, 1994. Our greater allocation to this asset class reflects our internal tax planning strategy as well as our belief that municipals are currently attractive relative to taxable alternatives at intermediate maturities. Our commitment to a diversified, growth-oriented equity portfolio remains unchanged. Equity investments have increased as a percentage of our consolidated portfolio from 17.1% in 1994 to 21.4% at year end 1995. This increase is attributable to market appreciation of existing investments as opposed to commitment of new funds. In 1994, the Corporation implemented SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities." This statement requires the classification of security investments into three categories: held to maturity, trading and available for sale. The Corporation has elected to place all of our fixed income holdings in the available-for-sale category. Therefore, all 9 of our bond investments are now valued at market for balance sheet purposes. During 1995, Ohio Casualty Corporation purchased 613,900 shares of its common stock at a cost of $20.9 million compared with 50,000 shares for $1.4 million in 1994. The Corporation is currently authorized to repurchase 2.3 million additional shares of its common stock to be held as treasury shares for stock options or other general corporate purposes. Since the beginning of 1987, we have repurchased over 10.4 million shares at an average cost of less than $22 per share. We believe that when the market value of our stock fails to reflect the prospects of our operations, repurchasing shares is a prudent use of our capital. In the future, we intend to continue repurchasing shares when doing so makes economic sense for the Corporation and its shareholders. 10 Ohio Casualty Corporation & Subsidiaries CONSOLIDATED BALANCE SHEET
December 31 (in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- Assets Investments: Fixed maturities: Available for sale, at fair value $ 2,407,853 $ 2,509,961 $ 0 (Cost: 2,276,150; 2,585,927; 0) Held to maturity, at amortized cost 0 0 2,629,167 (Fair Value: 0; 0; 2,807,850) Equity securities, at fair value 661,154 520,025 492,232 (Cost: 326,999; 337,814; 303,913) Short-term investments at cost 14,399 13,550 16,176 ----------- ---------- --------- Total investments 3,083,406 3,043,536 3,137,575 Cash 23,883 15,106 14,250 Premiums and other receivables 196,175 199,167 200,687 Deferred policy acquisition costs 119,795 165,633 168,835 Property and equipment 43,846 35,404 35,374 Reinsurance recoverable 446,167 87,748 94,074 Deferred income taxes 0 118,370 79,982 Other assets 66,870 73,992 85,976 --------- --------- --------- Total assets $ 3,980,142 $ 3,738,956 $ 3,816,753 ========= ========= ========= Liabilities Insurance reserves: Unearned premiums $ 506,035 $ 518,075 529,875 Losses 1,275,077 1,304,514 1,378,672 Loss adjustment expenses 356,107 367,309 390,617 Future policy benefits 360,074 352,400 318,719 Note payable 60,000 70,000 103,000 California Proposition 103 reserve 70,167 47,278 0 Deferred income taxes 2,112 0 0 Other liabilities 239,556 228,590 233,532 --------- --------- --------- Total liabilities 2,869,128 2,888,166 2,954,415 --------- --------- --------- Commitments and contingent liabilities (see Notes 1 and 8) Shareholders' Equity Common stock, $.125 par value 5,850 5,850 2,925 Authorized: 70,000,000 shares Issued shares: 46,803,872; 46,803,872; 23,401,936 (See Note 15) Additional paid-in capital 3,422 3,271 6,185 Unrealized gain (loss) on investments, net of applicable income taxes 305,049 69,610 124,284 Retained earnings 1,030,468 985,068 940,774 Treasury stock, at cost (233,775) (213,009) (211,830) (Shares: 11,407,745; 10,810,616; 5,386,924) ---------- ----------- ----------- Total shareholders' equity 1,111,014 850,790 862,338 ----------- ------------ ----------- Total liabilities and shareholders' equity $ 3,980,142 $ 3,738,956 $ 3,816,753 =========== =========== ===========
See notes to consolidated financial statements 11 Ohio Casualty Corporation & Subsidiaries STATEMENT OF CONSOLIDATED INCOME
Year ended December 31 (in thousands) 1995 1994 1993 ------------ ------------ ------------ Premiums and finance charges earned $ 1,268,269 $ 1,298,861 $ 1,380,674 Investment income less expenses 188,107 185,708 192,491 Investment gains (losses) realized, net 6,096 21,894 46,988 ------------ ------------ ------------ Total income 1,462,472 1,506,463 1,620,153 Losses and benefits for policyholders 774,282 799,295 894,661 Loss adjustment expenses 128,099 130,100 163,939 General operating expenses 89,970 82,418 100,810 Amortization of deferred policy acquisition costs 327,055 338,046 373,802 California Proposition 103 reserve 22,889 47,278 0 ------------ ------------ ------------ Total expenses 1,342,295 1,397,137 1,533,212 Income from continuing operations before income taxes 120,177 109,326 86,941 Income taxes Current 23,514 26,948 22,576 Deferred 1,300 (8,936) (15,778) ------------ ------------ ------------ Total income taxes 24,814 18,012 6,798 ------------ ------------ ------------ Income before cumulative effect of accounting changes & discontinued operations 95,363 91,314 80,143 Income from discontinued operations net of taxes of $4,345, $1,636 and $2,423 (see Note 17) 4,372 5,896 6,842 Cumulative effect of accounting changes (see Notes 1B and 6) 0 (319) 0 ------------ ------------ ------------ Net income $ 99,735 $ 96,891 $ 86,985 ============ ============ ============ Average shares outstanding 35,750 36,033 36,016 ------------ ------------ ------------ Earnings per share: Income before cumulative effect of accounting changes & discontinued operations $ 2.67 $ 2.54 $ 2.23 Income from discontinued operations per share 0.12 0.16 0.19 Cumulative effect of accounting changes per share 0.00 (0.01) 0 ------------ ------------ ------------ Net income per share $ 2.79 $ 2.69 $ 2.42 ============ ============ ============
See notes to consolidated financial statements 12 Ohio Casualty Corporation & Subsidiaries STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
Additional Unrealized Total Common paid-in gain (loss) Retained Treasury shareholders' Stock capital on investments earnings stock equity ------ --------- -------------- -------- -------- -------------- (in thousands) Balance, January 1, 1993 $ 2,925 $ 6,185 $ 124,477 $ 904,067 $ (212,448) $ 825,206 Unrealized loss (283) (283) Deferred income tax on net unrealized loss 90 90 Net issuance of treasury stock under stock option plan and by charitable donation (42,832 shares) 867 618 1,485 Net income 86,985 86,985 Cash dividends paid (51,145) (51,145) ($1.42 per share) -------- -------- --------- ----------- --------- ---------- Balance December 31, 1993 $ 2,925 $ 6,185 $ 124,284 $ 940,774 $ (211,830) $ 862,338 Cumulative effect of accounting change, net of applicable taxes 116,144 116,144 Unrealized loss (262,117) (262,117) Deferred income tax on net unrealized loss 91,299 91,299 Net issuance of treasury stock under stock option plan and by charitable donation (13,232 shares) 11 233 244 Repurchase of treasury stock (50,000 shares) (1,412) (1,412) Net income 96,891 96,891 Cash dividends paid ($1.46 per share) (52,597) (52,597) Stock split (April 22, 1994) 2,925 (2,925) 0 -------- -------- --------- ----------- --------- ---------- Balance, December 31, 1994 $ 5,850 $ 3,271 $ 69,610 $ 985,068 $ (213,009) $ 850,790 Unrealized gain 360,372 360,372 Deferred income tax on net unrealized gain (124,933) (124,933) Net issuance of treasury stock under stock option 0 plan and by charitable donation (16,771 shares) 151 427 578 Repurchase of treasury stock (613,900 shares) (21,193) (21,193) Net income 99,735 99,735 Cash dividends paid ($1.52 per share) (54,335) (54,335) -------- -------- --------- ----------- --------- ---------- Balance, December 31, 1995 $ 5,850 $ 3,422 $ 305,049 $ 1,030,468 $ (233,775) $1,111,014 ======== ======== ========= =========== ========= ========== See notes to consolidated financial statements
13 Ohio Casualty Corporation & Subsidiaries STATEMENT OF CONSOLIDATED CASH FLOWS
Year ended December 31 (in thousands) 1995 1994 1993 -------- -------- -------- Cash flows from: Operations Net income $ 99,735 $ 96,891 $ 86,985 Adjustments to reconcile net income to cash from operations: Changes in: Insurance reserves 116,397 (75,586) 65,455 Income taxes (7,157) 557 (22,123) Premiums and other receivables 2,993 1,519 22,933 Deferred policy acquisition costs 45,838 3,201 27,348 Reinsurance recoverable (358,418) 6,326 (82,833) Other assets (11,387) (12,408) (13,580) Other liabilities 14,577 (10,257) (13,529) California Proposition 103 reserves 21,353 47,278 0 Depreciation and amortization 12,600 11,123 13,278 Investment (gains) losses (11,199) (23,225) (49,806) Cumulative effect of accounting changes 0 319 0 -------- -------- -------- Net cash from operations (74,668) 45,738 34,128 Investing Purchase of securities: Fixed income securities Available for sale (944,077) (821,413) 0 Held to maturity 0 0 (816,673) Equity securities (86,517) (116,852) (148,958) Proceeds from sales: Fixed income securities Available for sale 929,890 699,383 0 Held to maturity 0 0 548,782 Equity securities 89,771 83,226 99,082 Proceeds from maturities and calls: Fixed income securities Available for sale 132,572 165,835 0 Held to maturity 0 0 300,617 Equity securities 47,605 29,078 22,058 -------- -------- -------- Net cash from investments 169,244 39,257 4,908 Financing Note payable repayment (10,000) (33,000) (17,000) Proceeds from exercise of stock options 578 244 1,485 Purchase of treasury stock (21,193) (1,412) 0 Dividends paid to shareholders (54,335) (52,597) (51,145) -------- -------- -------- Net cash from financing (84,950) (86,765) (66,660) Net change in cash and cash equivalents 9,626 (1,770) (27,624) Cash and cash equivalents, beginning of year 28,656 30,426 58,050 -------- -------- -------- Cash and cash equivalents, end of year $ 38,282 $ 28,656 $ 30,426 ======== ======== ========
See notes to consolidated financial statements 14 OHIO CASUALTY CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ACCOUNTING POLICIES A. The consolidated financial statements have been prepared on the basis of generally accepted accounting principles and include the accounts of Ohio Casualty Corporation and its subsidiaries. All significant inter-company transactions have been eliminated. All dollar amounts except share and per share data are in thousands of dollars. B. Effective January 1, 1994, the Corporation adopted Statement of Financial Accounting Standards 115, "Accounting for Certain Investments in Debt and Equity Securities". Under the provisions of SFAS No. 115 investment securities should be classified upon acquisition into one of the following categories: (1) held to maturity securities (2) trading securities (3) available for sale securities Available for sale securities are those securities that would be available to be sold in the future in response to liquidity needs, changes in market interest rates, and asset-liability management strategies, among others. Available for sale securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of shareholders' equity, net of deferred tax. Equity securities are carried at quoted market values and include non-redeemable preferred stocks and common stocks. Fair values of fixed maturities and equity securities are determined on the basis of dealer or market quotations or comparable securities on which quotations are available. Prior to adoption of SFAS No. 115, securities purchased, where the Corporation had both the intent and ability to hold to maturity, were recorded at cost adjusted for accumulated amortization of premium and accretion of discount. Securities purchased for trading purposes are immaterial and are not presented separately in the Income Statement and the Balance Sheet. As of January 1, 1994, the majority of fixed maturity investments, including bonds, notes and redeemable preferred stock, were reclassified as "available for sale". This necessitated them being marked to market. This accounting change resulted in an increase to shareholder's equity of $116,100 net of tax as of January 1, 1994 and had an immaterial effect on net income. Short-term investments include commercial paper and notes with original maturities of 90 days or less and are stated at cost or amortized cost which approximates market. Short-term investments are deemed to be cash equivalents. Realized gains or losses on disposition of investments are determined on the basis of specific cost of investments. C. Property and casualty insurance premiums are earned principally on a monthly pro rata basis over the term of the policy; the premiums applicable to the unexpired terms of the policies are included in unearned premium reserve. D. Acquisition costs incurred at policy issuance net of applicable ceding commissions are deferred and amortized over the term of the policy for property and casualty insurance, over the estimated life in proportion to future profits of universal life type contracts and over the estimated premium paying period for other life insurance contracts. Deferred policy acquisition costs are reviewed to determine that they do not exceed recoverable amounts, including anticipated investment income. E. The reserves for unpaid losses and loss adjustment expenses are based on estimates of ultimate claim costs, including claims incurred but not reported, salvage and subrogation and inflation without discounting. The methods of making such estimates are continually reviewed and updated, and any resulting adjustments are reflected in earnings currently.
1995 1994 1993 ---------- ---------- ---------- Balance as of January 1, net of reinsurance recoverables of $65,336, $75,738 and $80,114 $1,606,487 $1,693,551 $1,673,868 Incurred related to: Current year 1,008,321 1,084,072 1,131,055 Prior years (104,998) (153,717) (71,799) ---------- ---------- ---------- 903,323 930,355 1,059,256 Paid related to: Current year 444,558 483,129 477,777 Prior years 508,187 534,290 561,796 ---------- ---------- ---------- Total paid 952,745 1,017,419 1,039,573 Balance as of December 31, net of reinsurance recoverables of $74,119, $65,336 and $75,738 $1,557,065 $1,606,487 $1,693,551
As a result of favorable development in estimates for insured events of prior years, the incurred related to prior years shows a negative development. Inflation has historically affected operating costs, premium revenues and investment yields as business expenses have increased over time. The long term effects of inflation are considered when estimating the ultimate liability for losses and loss adjustment expenses. The liability is based on historical loss development trends which are adjusted for anticipated changes in underwriting standards, policy provisions and general economic trends. It is not adjusted to reflect the effect of discounting. F. Reserves for asbestos-related illnesses and toxic waste cleanup claims cannot be estimated with traditional loss reserving techniques. In establishing liabilities for claims for asbestos-related illnesses and for toxic waste cleanup claims, management considers facts currently known and the current state of the law and coverage litigation. However, given the expansion of coverage and liability by the courts and the legislatures in the past and the possibilities of similar 15 interpretations in the future, there is uncertainty regarding the extent of remediation. Accordingly, additional liability could develop. Estimated environmental claims of $14,467, $10,400 and $13,200 were included in loss and loss adjustment expense reserves for 1995, 1994 and 1993, respectively. G. The following table presents catastrophe losses incurred and the respective impact on the loss ratio:
1995 1994 1993 Incurred losses $27,277 $36,618 $33,149 Loss ratio 2.2% 2.8% 2.4% effect
The effect of catastrophes on the Corporation's results cannot be accurately predicted. As such, severe weather patterns could have a material adverse impact on the Corporation's results. H. Liabilities for future policy benefits are computed based on contract terms and issue date using interest rates ranging from 4 1/2% to 8 3/4%, select and ultimate mortality experience and industry withdrawal experience. Interest rates on $293,732 of such liabilities in 1995, $287,190 in 1994 and $264,945 in 1993 are periodically adjusted based on market conditions. Fair value is determined by discounting cash flows at current market interest rates. I. Deferred income taxes result from temporary differences between financial and taxable income. J. Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed principally on the straight-line method over the estimated lives of the assets. K. The Corporation's primary products consist of insurance for: personal auto, commercial property, homeowners, workers' compensation and other miscellaneous lines. Ohio Casualty operates through the independent agency system in 38 states. During 1995, the Corporation had $1,268,269 in revenue. Of net premiums written, approximately 18.1% was generated in the State of New Jersey, 10.0% in Pennsylvania and 9.6% in Ohio. The insurance industry is subject to heavy regulation that differs by state. A dramatic change in regulation in a given state may have a material adverse impact on the Corporation. L. Net income per share of common stock is based on the weighted average number of shares outstanding during the period. Dilution arising from stock options is insignificant. M. The Corporation is dependent on dividend payments from its insurance subsidiaries in order to meet operating expenses and to pay dividends. Insurance regulatory authorities impose various restrictions and prior approval requirements on the payment of dividends by insurance companies and holding companies. At December 31, 1995 approximately $116,275 of retained earnings are not subject to restriction or prior dividend approval requirements. N. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 -- INVESTMENTS Investment income is summarized as follows:
1995 1994 1993 -------- -------- -------- Investment income from: Fixed maturities $177,621 $176,975 $184,951 Equity securities 14,721 13,868 13,745 Short-term securities 3,096 1,852 1,213 -------- -------- -------- Total investment income 195,438 192,695 199,909 Investment expenses 7,331 6,987 7,418 -------- -------- -------- Net investment income $188,107 $185,708 $192,491 ======== ======== ========
Realized and unrealized gains (losses) on investments in securities are summarized as follows:
1995 1994 1993 -------- -------- -------- Realized gains (losses): Fixed maturities $ (8,104) $ 8,406 $ 17,023 Equity securities 16,913 9,268 26,467 Other investments (2,713) 4,220 3,498 -------- -------- -------- $ 6,096 $ 21,894 $ 46,988 ======== ======== ======== Unrealized gains (losses): Securities $ 360,372 $(262,117) $ (283) Deferred tax (125,746) 91,299 90 Cumulative effect of accounting changes 0 116,144 0 -------- -------- -------- $ 234,626 $ (54,674) $ (193) ======== ======== ========
The amortized cost and estimated market values of investments in debt and equity securities are as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value 1995 - ------------------------------------------ ---------- ---------- ---------- Securities available for sale: U.S. Government $ 110,628 $ 5,864 $ (5) $ 116,487 States, municipalities and political subdivisions 845,729 52,796 (59) 898,466 Debt securities issued by foreign governments 3,000 423 0 3,423 Corporate securities 927,375 66,309 (7,285) 986,398 Mortgage-backed securities: U.S. Government Agency 168,219 7,556 (5,581) 170,193 Other 221,199 18,281 (6,594) 232,886 ---------- ---------- ---------- ---------- Total fixed maturities 2,276,150 151,229 (19,524) 2,407,853 Equity securities 326,999 336,130 (1,974) 661,154 Short-term investments 14,399 0 0 14,399 ---------- ---------- ---------- ---------- Total securities, available for sale $2,617,548 $487,359 $(21,498) $3,083,406 ========== ========== ========== ==========
16
Gross Gross Estimated Amortized Unrealized Unrealized Fair 1994 Cost Gains Losses Value - ---------------------------- --------- ---------- ---------- --------- Securities available for sale U.S. Government $ 89,565 $ 313 $ (1,838) $ 88,040 States, municipalities and political subdivisions 678,915 23,366 (7,961) 694,320 Debt securities issued by foreign governments 39,379 188 (1,502) 38,065 Corporate securities 1,140,432 6,904 (55,398) 1,091,938 Mortgage-backed securities: U.S. Government Agency 397,486 1,540 (27,135) 371,891 Other 240,910 59 (15,262) 225,707 ---------- ---------- --------- ---------- Total fixed maturities 2,586,687 32,370 (109,096) 2,509,961 Equity securities 337,814 202,501 (20,290) 520,025 Short-term investments 13,550 0 0 13,550 ---------- ---------- --------- ---------- Total securities $2,938,051 $ 234,871 $(129,386) $3,043,536 ========== ========== ========= ==========
Gross Gross Estimated Amortized Unrealized Unrealized Fair 1993 Cost Gains Losses Value - ---------------------------------------- ---------- ---------- --------- Securities held to maturity: U.S. Government $ 102,918 $ 6,712 $ (8) $ 109,622 States, municipalities and political subdivisions 1,109,375 102,785 (133) 1,212,027 Debt securities issued by foreign governments 0 0 0 0 Corporate securities 839,877 57,351 (2,768) 894,460 Mortgage-backed securities: U.S. Government Agency 448,787 15,604 (842) 463,549 Other 128,210 257 (275) 128,192 ---------- ---------- --------- ---------- Total fixed maturity 2,629,167 182,709 (4,026) 2,807,850 Equity securities 303,913 195,195 (6,876) 492,232 Short-term investments 16,176 0 0 16,176 ---------- ---------- --------- ---------- Total securities $2,949,256 $377,904 $(10,902) $3,316,258 ========== ========== ========= ==========
The amortized cost and estimated fair value of debt securities at December 31, 1995 by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated Amortized Fair Cost Value --------- --------- Due in one year or less $76,627 $78,200 Due after one year through five years 376,390 396,648 Due after five years through ten years 772,374 828,995 Due after ten years 661,341 700,931 Mortgage-backed securities: U.S. Government Agency 168,219 170,193 Other 221,199 232,886 ---------- ---------- Total fixed maturities $2,276,150 $2,407,853
========== ========== Certain securities were determined to have other than temporary declines in book value and were written down through realized investment losses. Total write-downs were $26,290, $19,030 and $21,513 during 1995, 1994 and 1993, respectively, representing a reduction in value of $9,696, $6,910 and $13,342 on fixed maturities and $16,595, $12,120 and $8,171 on equity securities. Proceeds from maturities and sales of investments in debt securities during 1995, 1994 and 1993 were $1,223,943, $865,218 and $849,399, respectively. Gross gains of $20,834, $21,694 and $33,447 and gross losses of $24,500, $13,276 and $13,801 were realized in those maturities and sales in 1995, 1994 and 1993, respectively. Covered call options are written on stocks and bonds in the investment portfolio. As a writer of options, a premium is received at the outset with the risk of losing the appreciation if the price of the underlying financial instrument rises above the option strike price. There were no options on stock outstanding at December 31, 1995, 1994 or 1993. There were no options on bonds outstanding at December 31, 1995, 1994 or 1993. Market values of securities can fluctuate greatly in the near term based on such factors as: interest rates, unemployment rates, inflation, monetary policy and general economic conditions. NOTE 3 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and fair values of the Corporation's financial instruments:
CARRYING FAIR 1995 AMOUNT VALUE -------- ----- ASSETS CASH AND CASH EQUIVALENTS $ 38,282 $ 38,282 SECURITIES - AVAILABLE FOR SALE 3,069,007 3,069,007 LIABILITIES FUTURE POLICY BENEFITS $ 360,074 $ 360,074 LONG-TERM DEBT 60,000 60,000 Carrying Fair 1994 Amount Value -------- ------- Assets Cash and cash equivalents $ 28,656 $ 28,656 Securities - available for sale 3,029,986 3,029,986 Liabilities Future policy benefits $ 352,400 $ 352,004 Long-term debt 70,000 70,000 Carrying Fair 1993 Amount Value Assets -------- ----- Cash and cash equivalents $ 30,426 $ 30,426 Securities -- held to maturity 3,121,399 3,300,082 Liabilities Future policy benefits $ 318,719 $ 320,576 Long-term debt 103,000 103,000
See footnote 1 for disclosure related to fair value determination. NOTE 4 -- DEFERRED POLICY ACQUISITION COSTS Changes in deferred policy acquisition costs are summarized as follows: 17
1995 1994 1993 -------- -------- -------- Deferred, January 1 $165,633 $168,835 $196,183 -------- -------- -------- Additions: Commissions and brokerage 204,594 212,878 218,490 Salaries and employee benefits 43,867 49,937 60,457 Other 73,090 75,659 71,324 -------- -------- -------- Deferral of expense 321,551 338,474 350,271 -------- -------- -------- Amortization to expense Discontinued operations 40,333 3,630 3,817 Continuing operations 327,056 338,046 373,802 -------- -------- -------- Deferred, December 31 $119,795 $165,633 $168,835 ======== ======== ========
The above schedule includes deferred policy acquisition costs for discontinued life insurance operations of $(13,535), $24,749 and $25,441 as of 1995, 1994 and 1993, respectively. See Note 17 for additional information regarding discontinued operations. NOTE 5 -- INCOME TAX The effective income tax rate is less than the statutory corporate tax rate of 35% for 1995, 1994 and 1993 for the following reasons:
1995 1994 1993 ------- ------- -------- Tax at statutory rate $42,062 $38,264 $ 30,429 Tax exempt interest (16,150) (17,282) (20,739) Dividends received deduction (DRD) (3,446) (3,472) (3,352) Proration of DRD and tax exempt interest 3,319 9,544 10,855 Miscellaneous (971) (9,042) (10,395) ------- ------- -------- Actual Tax $24,814 $18,012 $ 6,798 ======= ======= ========
Tax years 1990 through 1992 are being examined by The Internal Revenue Service. Management believes there will not be a significant impact on the financial position or results of operations of the Corporation as a result of this audit. The significant components of deferred federal income tax (benefit)/obligation are as follows:
1995 1994 1993 -------- ------- -------- Deferred tax (benefit)/obligation exclusion of components listed below $ 1,300 $(8,937) $(14,513) Effect of change in tax rate 0 0 (1,265) -------- ------- -------- Net deferred tax (benefit)/obligation $ 1,300 $(8,937) $(15,778) ======== ======= ========
The components of the net deferred tax asset (liability) were as follows:
1995 1994 1993 -------- -------- -------- Unearned premium proration $ 34,823 $ 35,805 $ 36,590 Accrued expenses 64,658 54,667 40,549 Postretirement benefits 26,331 25,118 23,450 Discounted loss and loss expense reserves 88,589 95,295 102,155 -------- -------- -------- Total deferred tax assets 214,401 210,885 202,744 Deferred policy acquisition costs (53,616) (55,363) (56,850) Unrealized gains on investments (162,897) (37,152) (65,912) -------- -------- -------- Total deferred tax liabilities (216,513) (92,515) (122,762) -------- -------- -------- Net deferred tax asset (liability) $ (2,112) $118,370 $ 79,982 ======== ======== ========
Taxes paid amounted to $37,346 in 1995, $17,886 in 1994 and $30,833 in 1993. Although realization of deferred assets is not assured, estimates indicate that current levels of taxable income will comfortably support the realization of the net deferred tax asset in future years. As such, no valuation allowance has been recorded. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced. NOTE 6 -- EMPLOYEE BENEFITS The Corporation has a non-contributory defined benefit retirement plan and contributory health care, life and disability insurance and savings plans covering substantially all employees. Benefit expenses are as follows:
1995 1994 1993 -------- -------- ------- Employee benefit costs: Retirement $ (1,689) $ (731) $(1,875) Health Care 13,339 15,517 16,665 Life and disability insurance 594 740 761 Savings plan 2,586 2,685 2,773 -------- -------- ------- $ 14,830 $ 18,211 $18,324 ======== ======== =======
The pension benefit is determined as follows:
1995 1994 1993 ------- -------- -------- Service cost-benefits earned during the year $ 5,701 $ 6,077 $ 5,726 Interest cost on projected benefit obligation 13,262 12,404 12,322 Actual return on plan assets (34,448) (3,785) (15,852) Amortization of unrecognized net asset existing at January 1 13,796 (15,427) (4,071) ------- -------- -------- Net pension benefit $(1,689) $ (731) $ (1,875) ======= ======== ========
Pension plan funding at December 31:
1995 1994 1993 -------- -------- -------- Plan assets at fair value (primarily fixed income and equity securities) $217,274 $193,010 $198,905 -------- -------- -------- Plan benefit obligations: Vested benefits 157,371 141,353 145,672 Non-vested benefits 3,046 2,710 2,912 Future benefits due to salary increases 30,591 26,685 27,119 -------- -------- -------- Total 191,008 170,748 175,703 -------- -------- -------- Excess plan assets over obligations $ 26,266 $ 22,262 $ 23,202 ======== ======== ======== Unrecognized net gain (loss) $ (3,082) $ (8,356) $ (9,276) Unrecognized net assets 21,119 24,136 27,153 Unrecognized prior service cost (624) (683) (1,108) Expected long-term return on plan assets 8.50% 9.00% 8.25% Discount rate on plan benefit obligations 7.50% 8.00% 7.25% Expected future rate of salary increases 5.25% 5.75% 4.75%
Pension benefits are based on service years and average compensation using the five highest consecutive years of earnings in the last decade of employment. The pension plan measurement date is October 1 for 1995 and December 31 for 1994 and 1993. The measurement date was changed in 1995 to allow for more timely actuarial calculations. The 18 maximum pension expense deductible for income tax purposes has been funded. Plan assets at December 31, 1995 include $32,637 of the Corporation's common stock at market value. Employee contributions to the health care plan have been established as a flat dollar amount with periodic assessment in the future. The health care plan is unfunded. Accrued postretirement benefit liability at December 31: 1995 1994 1993 --------- --------- --------- Accumulated postretirement benefit obligation $(71,519) $(72,695) $(81,575) Unrecognized net loss(gain) (2,481) 695 14,575 --------- --------- --------- Accrued postretirement benefit cost $(74,000) $(72,000) $(67,000) ========= ========= ========= Postretirement benefit cost at December 31: 1995 1994 1993 ------ ------ ------ Service cost $1,883 $2,423 $2,325 Interest cost 5,144 5,368 6,247 Amortization of loss 0 45 135 Net periodic ------ ------ ------ postretirement benefit cost $7,027 $7,836 $8,707 ====== ====== ====== Postretirement benefit rate assumptions at December 31: 1995 1994 1993 ----- ----- ----- Medical trend rate 10% 11% 11% Dental trend rate 8% 9% 9% Ultimate health care trend rate 5% 5% 5% Discount rate 8.0% 7.25% 7.25% The postretirement plan measurement date is October 1 for 1995 and December 31 for 1994 and 1993. The measurement date was changed in 1995 to allow for more timely actuarial calculations. Increasing the assumed health care cost trend by 1 percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by approximately $9,616 and increase the postretirement benefit cost for 1995 by $1,546. In 1994 the Corporation's health care plan was changed from an indemnity plan to a predominately managed care plan. Retired employees continue to be eligible to participate in the health care and life insurance plans. Benefit costs are accrued based on actuarial projections of future payments. There are currently 3,456 active employees and 1,301 retired employees covered by these plans. Employees may contribute a percentage of their compensation to a savings plan. A portion of employee contributions is matched by the Corporation and invested in Corporation stock purchased on the open market by trustees of the plan. In the first quarter of 1994, the Corporation adopted the provisions of SFAS 112, "Employers Accounting for Post-Employment Benefits." The effect of this accounting change in 1994 was a $644 after-tax reduction in net income. NOTE 7 -- STOCK OPTIONS The Corporation is authorized under provisions of the 1993 Stock Incentive Program to grant options to purchase 800,000 shares of the Corporation's common stock to key executive employees and directors at a price not less than the fair market value of the shares on the dates the options are granted. The options granted may be either "Incentive Stock Options" or "Nonqualified Stock Options" as defined by the Internal Revenue Code; the difference in the option plans affects treatment of the options for income tax purposes by the individual employee and the Corporation. The options are exercisable at any time for five years from the date of grant. At December 31, 1995, 1,242,500 remaining options may be granted. In addition, the 1993 Stock Incentive Program provides for the grant of Stock Appreciation Rights in tandem with the stock options. Stock Appreciation Rights provide the recipient with the right to receive payment in cash or stock equal to appreciation in value of the optioned stock from the date of grant in lieu of exercise of stock options held. Option and appreciation rights range of prices in the following tables are for the three years presented. Transactions under the stock option plans were as follows: 1995 1994 1993 1993 Stock Incentive Plan ------- ------- ------- Incentive Stock Options: Outstanding beginning of year 90,700 87,700 131,400 Granted ($28.00 to $32.375 per share) 12,000 18,000 21,000 Expired ($16.375 to $28.125 per share) 0 0 (2,800) Exercised ($13.625 to $32.75 per share) (28,900) (15,000) (61,900) Outstanding end of year ------- ------- ------- ($28.00 to $32.375 per share) 73,800 90,700 87,700 ======= ======= ======= Stock Appreciation Rights: Outstanding beginning of year 28,300 39,700 57,100 Expired ($28.125 to $28.125 per share) 0 0 (2,800) Exercised ($13.625 to $28.125 per share) (11,000) (11,400) (14,600) Outstanding end of year ------- ------- ------- ($13.625 to $29.75 per share) 17,300 28,300 39,700 ======= ======= ======= Restated for 2-for-1 stock split in 1994. NOTE 8 -- REINSURANCE AND OTHER CONTINGENCIES In the normal course of business, the Corporation seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk with other insurers or reinsurers. In the event that such reinsuring companies might be unable at some future date to meet their obligations under the reinsurance agreements in force, the Corporation would continue to have primary liability to policyholders for losses incurred. The following amounts are reflected in the financial statements as a result of reinsurance ceded: 19
1995 1994 1993 ---- ---- ---- Premiums earned $41,012 $45,133 $43,696 Losses incurred 22,030 8,727 24,258 Reserve for unearned premiums 8,294 6,274 6,638 Reserve for losses and future policy benefits 74,794 54,727 61,970 Reserve for loss adjustment expenses 36,272 10,609 13,768
Annuities are purchased from other insurers to pay certain claim settlements; should such insurers be unable to meet their obligations under the annuity contracts, the Corporation would be liable to claimants for remaining amount of annuities. The total amount of unpaid annuities was $24,300, $24,300 and $24,500 at December 31, 1995, 1994 and 1993, respectively. On October 2, 1995, as part of the transaction involving the reinsurance of the Ohio Life business to Employers' Reassurance Corporation, Ohio Casualty Insurance Company agreed to manage a $163,615 fixed income portfolio for Employers' Reassurance. The term of the agreement is seven years, terminating on October 2, 2002. There is no separate fee to Ohio Casualty for this investment management service. The agreement requires that Ohio Casualty pay an annual rate of 7.25% interest to Employers' Reassurance and maintain the market value of the account at $163,615. In the event the market value falls below this amount, Ohio Casualty is required to make up any deficiency. At the termination of the contract, any excess over $163,615 is payable to Ohio Casualty. At December 31, 1995, the market value of the account exceeded the $163,615 required balance by $2,497. The annual interest obligation of 7.25% was also being adequately serviced by the portfolio assets.
NOTE 9 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED) 1995 First Second Third Fourth - --------------------------- ------ ----- ------ Premiums and finance charges earned $322,063 $317,936 $317,165 $308,608 Net investment income 47,384 47,106 47,003 46,614 Investment gains (losses) realized 893 (1,904) (430) 7,538 Income from continuing operations 14,406 25,543 10,275 45,139 Income from discontinued operations 706 366 2,942 358 Net income 15,112 25,909 13,217 45,497 Net income per share 0.42 0.72 0.37 1.28
1994 First Second Third Fourth - --------------------------- ------ ----- ------ Premiums and finance charges earned $320,944 $322,489 $329,421 $326,006 Net investment income 46,663 46,388 46,743 45,914 Investment gains (losses) realized 14,043 3,540 7,360 (3,069) Income from continuing operations 7,587 39,133 33,951 10,324 Income from discontinued operations 1,753 1,532 69 2,542 Net income 9,340 40,665 34,020 12,866 Net income per share 0.26 1.13 0.94 0.36
During the fourth quarter of 1994, an adjustment of $4,500 was made to eliminate the accrual for Alternative Minimum Tax liability, since the Corporation was no longer in an AMT position. Income was decreased in 1994 by $2,822 after tax due to a reduction in the basis for limited partnerships and by $30,731 after tax for California Proposition 103.
NOTE 10 -- INDUSTRY SEGMENT INFORMATION 1995 1994 1993 ---- ---- ---- Property and Casualty Insurance Revenue $1,456,242 $1,501,883 $1,614,578 Income before taxes 121,741 112,796 89,721 Identifiable assets 3,457,750 3,250,625 3,334,732 Premium Finance and Other Revenue 6,230 4,580 5,574 Loss before taxes (1,564) (3,470) (2,780) Identifiable assets 26,939 69,392 95,969 Discontinued Operations (Life Insurance) Revenue (335,835) 52,187 49,623 Income before taxes 8,717 7,532 9,265 Identifiable assets 511,818 418,939 386,023
NOTE 11 -- STATUTORY ACCOUNTING INFORMATION The following information has been prepared on the basis of statutory accounting principles which differ from generally accepted accounting principles. The principal differences relate to deferred acquisition costs, required statutory reserves, assets not admitted for statutory reporting, California Proposition 103 reserve and deferred federal income taxes.
1995 1994 1993 ---- ---- ---- Property and Casualty Insurance Statutory net income $103,802 $126,419 $ 99,137 Statutory policyholders' surplus 876,918 659,997 713,565 Life Insurance Statutory net income 38,981 2,780 2,860 Statutory policyholders' surplus 92,297 43,090 40,694
NOTE 12 -- BANK NOTE PAYABLE In 1994, $70,000 was borrowed under a new credit facility to replace existing debt. The new term loan has a final maturity in 2001 with equal semi-annual installment payments of $5,000 beginning in April, 1995 and bears interest at a periodically adjustable rate. The interest rate was 6.58% at December 31, 1995. The interest rate is determined on various bases including prime rates, certificate of deposit rates and the London Interbank Offered Rate. Interest incurred on borrowings amounted to $4,474, $4,102 and $4,785 in 1995, 1994 and 1993, respectively. Under the loan agreement, statutory surplus is $401,918 in excess of the minimum amount required to be maintained at December 31, 1995. NOTE 13 -- CALIFORNIA WITHDRAWAL As a result of the lack of profitability and the difficult regulatory environment, the Corporation announced its intention to withdraw from business operation in California on June 15, 1992. In December 1992, the Corporation stopped writing business in California and filed a withdrawal plan with 20 the California Department of Insurance. Under the terms of the plan, subsidiary American Fire and Casualty Company would wind down the affairs of the Group. In November 1994, the California Department of Insurance published the required notices of the withdrawal application. In April 1995, the California Department of Insurance gave final approval for withdrawal, and the Corporation implemented the withdrawal plan. Proposition 103 was passed in the State of California in 1988 in an attempt to legislate premium rates for that state. Even after considering investment income, total returns in California have been less than what would be considered "fair" by any reasonable standard. During the fourth quarter of 1994, the State of California billed the Corporation $59,867 for Proposition 103 assessment. In February 1995, California revised this billing to $47,278 due to California Senate Bill 905 which permits reduction of the rollback due to commissions and premium taxes paid. The billing was revised again in August of 1995 and at present the State has indicated the Corporation should not be required to pay in excess of $42,100 plus interest as a Proposition 103 assessment. As a result, the Corporation's reserve for this alleged liability is $70,167. The Corporation will continue to challenge the validity of any rollback and plans to continue negotiations with Department officials. It is uncertain when this will be resolved. NOTE 14 -- SHAREHOLDER RIGHTS PLAN On December 15, 1989 the Board of Directors adopted a Shareholder Rights Plan and declared a dividend of one Common Share Purchase Right Expiring in 1999 for each outstanding share of common stock. Each right entitles the registered holder, under certain conditions, to purchase one share of common stock at a price of $75, subject to adjustment at the time rights become exercisable if a person or group acquires or announces its intention to acquire 20% or more of the common stock of the Corporation without the prior approval of the Board of Directors. The rights may be redeemed for one cent per right at any time prior to becoming exercisable. NOTE 15 -- STOCK SPLIT On February 17, 1994, the Board of Directors declared a stock split in which one share was distributed for each share outstanding. This 2 for 1 split pertained to shareholders of record on April 1, 1994. The result of the stock split increased issued shares from 23,401,936 to 46,803,872. All per share information presented reflects the stock split. NOTE 16 -- PERMITTED STATUTORY ACCOUNTING PRACTICES The Ohio Casualty Insurance Company, domiciled in Ohio, prepares its statutory financial statements in accordance with the accounting practices prescribed or permitted by the Ohio Insurance Department. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company received written approval from the Ohio Insurance Department to have the California Proposition 103 liability reported as a direct charge to surplus and not included as a charge in the 1995 or 1994 statutory statement of operations. NOTE 17 -- DISCONTINUED OPERATIONS (LIFE INSURANCE) Discontinued operations include the operations of Ohio Life, a subsidiary of the Ohio Casualty Insurance Company. On October 2, 1995, the Company transferred its life insurance and related businesses through a 100% coinsurance arrangement to Employers' Reassurance Corporation and entered into an administrative and marketing agreement with Great Southern Life Insurance Company. In connection with the reinsurance agreement, $144,469 in cash and $161,401 of securities were transferred to Employers' Reassurance to cover the liabilities of $348,479. Ohio Life received an adjusted ceding commission of $37,641 as payment. After deduction of deferred acquisition costs, the net ceding commission from the transaction was $17,284. As of December 31, 1995, $16,693 of that gain remains unamortized. This balance will be amortized over 15 years, the expected life of the underlying reinsured policies. It is anticipated that Great Southern will replace Ohio Life as the primary carrier of these policies as of January 1, 1997 through an assumption. At that time, the remaining unamortized gain will be recognized. Results of the discontinued life insurance operations for the years ended December 31 were as follows:
1995 1994 1993 ---- ---- ---- Gross premiums written $ 38,580 $ 28,210 $ 24,514 Net premiums earned (345,080) 22,774 19,907 Net investment income 4,143 28,082 26,897 Realized investment gains 5,102 1,331 2,818 ------- ------ ------ Total income (335,835) 52,187 49,622 Income before income taxes 8,717 7,532 9,265 ----- ----- ----- Provision for income taxes 4,345 1,636 2,423 ----- ----- ----- Net income $ 4,372 $ 5,896 $ 6,842
Assets and liabilities of the discontinued life insurance operations as of the years ended December 31 were as follows:
1995 1994 1993 ---- ---- ---- Cash $ 9,793 $ 6,197 $ 232 Investments 107,603 359,138 353,615 Receivables 5,165 2,773 2,558 Deferred policy acquisition costs (13,535) 24,749 25,441 Reinsurance receivable 363,127 6,925 122 Other assets 3,570 23,325 22,533 ------- ------- ------- Total assets $475,723 $423,107 $404,501 Future policy benefits $360,074 $352,400 318,719 Deferred income tax 11,172 3,710 6,554 Other liabilities 18,196 4,863 7,193 ------- ------- ------ Total liabilities $389,442 $360,973 $332,466
21 NOTE 18 -- NEW ACCOUNTING STANDARDS In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 123, "Accounting for Stock-Based Compensation". This statement provides companies with a choice of accounting methods for stock-based compensation transactions with employees within the scope of APB Opinion 25. The Company will continue to apply APB Opinion 25 in accounting for its stock-based employee compensation in 1996. As a result of FAS 123, additional pro forma information for net income and earnings per share will be disclosed in the notes to the financial statements. Although the Company has not yet fully determined the effects of this statement on the pro-forma disclosures, the effect will not be significant to the financial statements. APB Opinion 25 requires compensation expense for stock-based employee compensation plans to be recognized based on the difference, if any, between the quoted market price of the stock and the amount an employee must pay to acquire the stock, at the date the option is exercised. FAS 123 requires recognizing compensation expense at the date the option is granted, equal to the fair value of any options using Black-Scholes or a similar option valuation formula. 22 OHIO CASUALTY CORPORATION & SUBSIDIARIES SHAREHOLDER INFORMATION Stock Price and Dividend Information (Nasdaq: OCAS)
Quarter 1st 2nd 3rd 4th - --------------------------------------------------------- 1995 High 33 7/8 34 35 3/4 39 Low 28 1/4 29 1/4 31 1/2 32 7/8 Dividend Declared $0.38 $0.38 $0.38 $0.38 1994 High 33 3/4 31 1/4 32 1/2 32 Low 31 26 1/2 27 1/2 27 Dividend Declared $0.365 $0.365 $0.365 $0.365
1996 Anticipated Dividend Schedule
Declaration Date Record Date Payable Date ================================================================== February 15, 1996 March 1, 1996 March 11, 1996 May 16, 1996 June 1, 1996 June 10, 1996 August 15, 1996 September 1, 1996 September 10, 1996 November 21, 1996 December 1, 1996 December 10, 1996
DIVIDEND REINVESTMENT, STOCK PURCHASE PLAN The Corporation maintains a dividend reinvestment/stock purchase plan for all holders of common stock. Under the Plan, shareholders may reinvest their dividends in additional shares of common stock, and may also make extra cash payments of up to $5,000 monthly toward the purchase of Ohio Casualty shares. Participation is entirely voluntary. More information on the Dividend Reinvestment and Stock Purchase Plan can be obtained by writing to the Transfer Agent listed below. FORM 10-K ANNUAL REPORT The Form 10-K annual report for 1995, as filed with the Securities and Exchange Commission, is available without charge upon written request from: Ohio Casualty Corporation Office of the Chief Financial Officer 136 N. Third St. Hamilton, Ohio 45025 TRANSFER AGENT AND REGISTRAR First Chicago Trust Co. of New York P.O. Box 2500 Jersey City, NJ 07303-2500 1-800-317-4445 ANNUAL MEETING The annual meeting of shareholders will be held at 10:30 a.m. on Wednesday, April 17, 1996, in the meeting rooms of The Hamiltonian Hotel, One Riverfront Plaza, Hamilton, Ohio 45011. VISIT OUR INTERNET WEB SITE HTTP://WWW.OCAS.COM The site includes current financial data about Ohio Casualty as well as other corporate and product information. EX-21 5 EXHIBIT 21 1 Exhibit 21 Ohio Casualty Corporation Subsidiaries of Registrant December 31, 1995 Name of Subsidiary State of Incorporation The Ohio Casualty Insurance Company Ohio West American Insurance Company Indiana Ohio Security Insurance Company Ohio American Fire and Casualty Company Ohio Ocasco Budget, Inc. Ohio EX-22 6 EXHIBIT 22 1 EXHIBIT 22 OHIO CASUALTY CORPORATION 136 NORTH THIRD STREET HAMILTON, OHIO 45025 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 17, 1996 Hamilton, Ohio March 15, 1996 To the Shareholders: The Annual Meeting of Shareholders (the "Annual Meeting") of Ohio Casualty Corporation (the "Company") will be held in the meeting rooms of The Hamiltonian Hotel, One Riverfront Plaza, Hamilton, Ohio 45011, on Wednesday, April 17, 1996, at 10:30 a.m., local time, for the following purposes: (1) To elect the following four Directors for terms expiring in 1999 (Class III), as successors to the class of Directors whose terms expire in 1996: Arthur J. Bennert, Catherine E. Dolan, Jeffery D. Lowe and Lauren N. Patch. (2) To approve the proposal to amend Article Fourth of the Company's Amended Articles of Incorporation to increase the authorized number of common shares, $.125 par value, of the Company from 70,000,000 to 150,000,000 common shares. (3) To consider and act upon, in their discretion, such other matters as may properly come before the Annual Meeting or any adjournment thereof. Holders of record of common shares of the Company as of the close of business on March 1, 1996 are entitled to notice of and to vote at the Annual Meeting and at any adjournment thereof. As of March 1, 1996, there were 35,402,446 common shares outstanding. Each common share is entitled to one vote on all matters properly brought before the Annual Meeting. By Order of the Board of Directors, Howard L. Sloneker III, Secretary EVERY SHAREHOLDER'S VOTE IS IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE AND RETURN PROMPTLY THE ENCLOSED PROXY SO THAT YOUR COMMON SHARES WILL BE REPRESENTED. A POSTAGE PAID, ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. 2 OHIO CASUALTY CORPORATION 136 NORTH THIRD STREET HAMILTON, OHIO 45025 PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS APPROXIMATE DATE TO MAIL -- MARCH 15, 1996 On behalf of the Board of Directors of Ohio Casualty Corporation (the "Company"), a proxy is solicited from you to be used at the Company's 1996 Annual Meeting of Shareholders (the "Annual Meeting") scheduled for Wednesday, April 17, 1996 at 10:30 a.m., local time, in the meeting rooms of The Hamiltonian Hotel, One Riverfront Plaza, Hamilton, Ohio 45011, or at any adjournment thereof. Proxies in the form enclosed herewith are being solicited on behalf of the Company's Board of Directors. The common shares represented by proxies which are properly executed and returned will be voted at the Annual Meeting, or any adjournment thereof, as directed. Common shares represented by proxies properly executed and returned which indicate no direction will be voted in favor of the nominees of the Board of Directors identified in the notice of meeting accompanying this Proxy Statement and for the adoption of the proposed amendment to Article Fourth of the Company's Amended Articles of Incorporation. Any shareholder giving the enclosed proxy has the power to revoke the same prior to its exercise by filing with the Secretary of the Company a written revocation or duly executed proxy bearing a later date, or by giving notice of revocation in open meeting. ATTENDANCE AT THE ANNUAL MEETING WILL NOT, IN AND OF ITSELF, CONSTITUTE REVOCATION OF A PROXY. VOTING AT ANNUAL MEETING As of March 1, 1996, the record date fixed for the determination of shareholders entitled to notice of and to vote at the Annual Meeting, there were outstanding 35,402,446 common shares, which is the only outstanding class of capital stock of the Company. Each such common share is entitled to one vote on all matters properly coming before the Annual Meeting. A quorum for the Annual Meeting is a majority of the outstanding common shares. Common shares represented by signed proxies that are returned to the Company will be counted toward the quorum in all matters even though they are marked "Abstain", "Against" or "Withhold Authority" on one or more or all matters or they are not marked at all. Broker/dealers who hold their customers' common shares in street name may, under the applicable rules of the self- regulatory organizations of which the broker/dealers are members, sign and submit proxies for such common shares and may vote such common shares on routine matters, which, under such rules, typically include the election of directors, but broker/dealers may not vote such common shares on other matters, which typically include amendments to the articles of incorporation of a corporation and the approval of certain stock compensation plans, without specific instructions from the customer who owns such common shares. Proxies signed and submitted by broker/dealers which have not been voted on certain matters as described in the previous sentence are referred to as broker non-votes. Such proxies count toward the establishment of a quorum. THE EFFECT OF AN ABSTENTION OR BROKER NON-VOTE ON THE PROPOSAL TO AMEND ARTICLE FOURTH OF THE COMPANY'S AMENDED ARTICLES OF INCORPORATION IS THE SAME AS A "NO" VOTE. 1 3 PRINCIPAL SHAREHOLDERS The table below identifies the only persons known to the Company to own beneficially (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) more than 5% of the Company's outstanding common shares.
COMMON SHARES PERCENT NAME AND ADDRESS BENEFICIALLY OF COMMON OF BENEFICIAL OWNER OWNED SHARES DATE ----------------------------------- ------------- --------- --------- FIRST NATIONAL BANK OF 3,519,696(1) 9.94% 02-05-96 SOUTHWESTERN OHIO Third and High Streets Hamilton, Ohio 45011 THE CHASE MANHATTAN BANK, 2,667,200(2) 7.53% 12-31-95 N.A., Trustee 1211 Avenue of the Americas New York, New York 10036 THE CAPITAL GROUP, INC. 2,556,500(3) 7.23% 02-08-96 333 South Hope Street Los Angeles, California 90071 JOSEPH L. MARCUM 2,246,716(4) 6.35%(4) 03-01-96 136 North Third Street Hamilton, Ohio 45025 - --------------- (1) Based upon information provided to the Company by First National Bank of Southwestern Ohio (the "Bank"). The Bank holds the reported shares as trustee under various trust agreements and arrangements. The Bank has advised the Company that it has sole voting power for 3,253,287 shares, shared voting power for 0 shares, sole investment power for 1,417,646 shares, and shared investment power for 1,649,488 shares. 449,272 shares are held under trust arrangements for certain directors of the Company, and their respective spouses, which shares are also reported in the following table showing share ownership of directors and executive officers of the Company. (2) 1,824,968 shares are held as trustee for the Company's Employee Savings Plan and 842,232 shares are held as trustee for the Company's Employees Retirement Plan. Voting power with respect to shares held in the Employee Savings Plan is exercised by the plan participants; investment power with respect to these shares is held by plan participants subject to limitations in the Plan. Voting and investment power with respect to shares held in the Employees Retirement Plan is exercised by the committee which administers the Employees Retirement Plan (the "Retirement Committee"). The Retirement Committee consists of Joseph L. Marcum, Lauren N. Patch and Barry S. Porter. (3) Based upon information contained in a Schedule 13G dated February 8, 1996, as filed with the Securities and Exchange Commission by The Capital Group, Inc. The Capital Group, Inc. reported sole voting power for 0 shares, shared voting power for 0 shares and sole investment power for 2,556,500 shares as of December 29, 1995. (4) See share ownership information for Mr. Marcum in the following table.
2 4 SHAREHOLDINGS OF DIRECTORS, EXECUTIVE OFFICERS AND NOMINEES FOR ELECTION AS DIRECTOR As of March 1, 1996, the directors of the Company, including the four persons intended by the Board of Directors to be nominated for election as directors, the executive officers of the Company named in the Summary Compensation Table and all executive officers and directors of the Company as a group beneficially owned common shares of the Company as set forth below.
SHARED INVESTMENT/ VOTING NUMBER OF OPTIONS POWER OVER NAME OF COMMON SHARES EXERCISABLE EMPLOYEES INDIVIDUAL BENEFICIALLY WITHIN 60 RETIREMENT PERCENT OF OR GROUP OWNED(1) DAYS PLAN SHARES(1) TOTAL CLASS (3) - --------------------------- ------------- ------------- --------------- --------- ---------- Arthur J. Bennert 19,178 3,000 22,178 Jack E. Brown 1,100 3,000 4,100 Catherine E. Dolan 100 3,000 3,100 Wayne Embry 200 6,000 6,200 Vaden Fitton 235,680(4) 3,000 238,680 Jeffery D. Lowe 152,631(4)(7) 0 152,631 Joseph L. Marcum 1,401,484(4)(5)(6) 3,000 842,232(1) 2,246,716 6.35 Stephen S. Marcum 278,050(4)(6) 6,000 284,050 Lauren N. Patch 204,052(4)(7) 3,500 842,232(1) 1,049,784 2.97 Stanley N. Pontius 1,070 6,000 7,070 Howard L. Sloneker, III 191,180(7) 3,500 194,680 William L. Woodall 23,484 6,000 29,484 Andrew T. Fogarty 54,643(4)(7) 3,300 57,943 Jack H. Nelson (8) 9,142(7)(8) 0 9,142 Barry S. Porter 25,394(7) 3,500 842,232(1) 871,126 2.46 All Executive Officers, Directors and Nominees as a Group (31 Persons) 2,679,725 61,300 842,232 3,771,051 10.65 - --------------- (1) Unless otherwise indicated, each named person has voting and investment power over the listed shares and such voting and investment power is exercised solely by the named person or shared with a spouse. (2) Includes 842,232 shares held in the Company's Employees Retirement Plan as to which the named individual shares voting and investment power solely by reason of being a member of the Retirement Committee which administers such Plan. See Note (1) of the preceding table. Messrs. Joseph L. Marcum, Lauren N. Patch and Barry S. Porter disclaim beneficial ownership of these shares. (3) Percentages are listed only for those individuals who own in excess of 1% of the outstanding shares. (4) Includes the following number of shares owned by family members as to which beneficial ownership is disclaimed: Mr. Fitton, 116,542; Mr. Fogarty, 5,468; Mr. Joseph L. Marcum, 620,804; Mr. Lowe, 132,400; Mr. Patch, 169,416; and Mr. Stephen S. Marcum, 84,090. (5) Excludes 253,852 shares held by Mr. Marcum's wife in her capacity as a co-trustee of the estate of Howard Sloneker as to which shares Mr. Marcum has no voting or investment power. (6) Includes 72,306 shares held as a co-trustee of the Joseph L. and Sarah S. Marcum Foundation as to which voting and investment power is shared by Joseph L. and Stephen S. Marcum. (7) The share ownership for Messrs. Lowe, Patch, Sloneker III, Fogarty, Nelson and Porter includes 4,605, 4,632, 1967, 15,319, 3,102 and 8,892 and shares, respectively, held for the accounts of these individuals by the trustee of the Company's Employee Savings Plan. Such persons have sole voting power with respect to these shares and also hold investment power subject to limitations in the Plan. (8) Jack H. Nelson retired from his position as Senior Vice President on January 1, 1996.
3 5 ELECTION OF DIRECTORS The Board of Directors intends that four persons named under Class III in the following table (the "Nominees") will be nominated for election at the Annual Meeting for three-year terms expiring in 1999. The terms of the remaining directors in Classes I and II will continue as indicated below. It is intended that the common shares represented by the accompanying proxy will be voted for the election as directors of the Nominees, unless otherwise instructed on the proxy. In the event that any one or more of the Nominees unexpectedly becomes unavailable for election, the common shares represented by the accompanying proxy will be voted in accordance with the best judgment of the proxy holders for the election of the remaining Nominees and for the election of any substitute nominee or nominees designated by the Board of Directors. Under Ohio law and the Company's Regulations, the nominees receiving the greatest number of votes will be elected as directors. Shares as to which the authority to vote is withheld will be counted for quorum purposes but will not be counted toward the election of the individual nominees specified on the accompanying proxy.
POSITION WITH COMPANY AND/OR PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR NAME AND AGE(1) DURING LAST FIVE YEARS(2) SINCE - --------------- ---------------------------------- -------- NOMINEES: Class III Nominees For Term Expiring in 1999: Arthur J. Bennert, Director of the Company, The Ohio Casualty 1989 69 Insurance Company, West American Insurance Corporation, American Fire and Casualty Company, Ohio Security Insurance Company and The Ohio Life Insurance Company; retired as an officer of the Company and its subsidiaries on January 1, 1992. Catherine E. Dolan, Managing Director of the Financial Institutions 1994 38 Group, First Union National Bank, Charlotte, North Carolina, since February 26, 1993; prior thereto, Managing Director of the Insurance Division, Chase Manhattan Bank, New York. Jeffery D. Lowe, Vice President and Director of the Company, The 1983 50 Ohio Casualty Insurance Company, West American Insurance Company, American Fire and Casualty Company, Ohio Security Insurance Company and OCASCO Budget, Inc.; President and Director of The Ohio Life Insurance Company; employed by the Company and its subsidiaries since 1972 in various capacities.
4 6
POSITION WITH COMPANY AND/OR PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR NAME AND AGE(1) DURING LAST FIVE YEARS(2) SINCE - --------------- ---------------------------------- -------- Lauren N. Patch, President, Chief Executive Officer and Director 1987 45 of the Company, The Ohio Casualty Insurance Company, West American Insurance Company, American Fire and Casualty Company, Ohio Security Insurance Company and OCASCO Budget, Inc.; Vice Chairman and Director of The Ohio Life Insurance Company. Mr. Patch became Chief Executive Officer of the Company on January 1, 1994, and President of the Company on January 1, 1991. Mr. Patch has been employed by the Company and its subsidiaries since 1972 in various capacities. DIRECTORS WHOSE TERMS CONTINUE BEYOND THE ANNUAL MEETING: Class I -- Term Expiring in 1997 (3): Jack E. Brown, Chairman of Board, BBI Marketing Services, Inc., 1994 52 Cincinnati, Ohio (professional marketing consulting firm). Vaden Fitton, Director and Retired First Vice President of 1967 67 First National Bank of Southwestern Ohio, Hamilton, Ohio. Joseph L. Marcum, Chairman of the Board and Director of the 1949 72 Company, The Ohio Casualty Insurance Company, West American Insurance Company, American Fire and Casualty Company, Ohio Security Insurance Company, OCASCO Budget, Inc. and The Ohio Life Insurance Company. Mr. Marcum served as Chief Executive Officer of the Company and its subsidiaries until December 31, 1993, and President of the Company and its subsidiaries until December 31, 1990. Howard L. Sloneker III, Vice President, Secretary and Director of the 1983 39 Company, The Ohio Casualty Insurance Company, West American Insurance Company, American Fire and Casualty Company, Ohio Security Insurance Company and OCASCO Budget, Inc.; Secretary and Director of The Ohio Life Insurance Company. Mr. Sloneker has been employed by the Company and its subsidiaries since 1979 in various capacities. Class II -- Term Expiring in 1998: Wayne Embry, Executive Vice President and General Manager of 1991 59 the Cleveland Cavaliers (professional basketball franchise); Chairman of Michael Alan Lewis Company, Cleveland, Ohio (fabricators of materials for the automobile industry).
5 7
POSITION WITH COMPANY AND/OR PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR NAME AND AGE(1) DURING LAST FIVE YEARS(2) SINCE - --------------- ---------------------------------- -------- Stephen S. Marcum, Member of the law firm of Parrish, Beimford, 1989 38 Fryman, Smith & Marcum Co., L.P.A., Hamilton, Ohio; such firm has provided legal services to the Company and its subsidiaries during the last fiscal year and continues to do so. Stanley N. Pontius, President and Chief Executive Officer of First 1994 49 Financial Bancorp and its principal subsidiary, First National Bank of Southwestern Ohio, Hamilton, Ohio; formerly President and Chief Executive Officer of Bank One, Mansfield, Ohio. William L. Woodall, Director of the Company, The Ohio Casualty 1986 72 Insurance Company, West American Insurance Company, American Fire and Casualty Company, Ohio Security Insurance Company, OCASCO Budget, Inc. and The Ohio Life Insurance Company; retired as an officer of the Company and its subsidiaries on December 31, 1990. - --------------- (1) Ages are listed as of the date of the Annual Meeting. (2) The Ohio Casualty Insurance Company, Ohio Security Insurance Company, American Fire and Casualty Company, West American Insurance Company, OCASCO Budget, Inc. and The Ohio Life Insurance Company are subsidiaries of the Company. (3) John P. March, a director whose term of office would have expired in 1997, retired from the Board of Directors as of December 31, 1995.
OTHER DIRECTORSHIPS AND RELATED TRANSACTIONS AND RELATIONSHIPS Wayne Embry is also a director of M. A. Hanna Company and Society Corporation; Vaden Fitton, Joseph L. Marcum, Lauren N. Patch and Stanley N. Pontius are also directors of First Financial Bancorp. Joseph L. Marcum, the Chairman of the Board of the Company, retired as the Chief Executive Officer of the Company on December 31, 1993. Mr. Marcum receives annual benefits from the Company of $142,393 pursuant to the Company's Employees Retirement Plan. See "Pension Plans." Stanley N. Pontius, a director of the Company, is the President and Chief Executive Officer of First Financial Bancorp and its subsidiary, First National Bank of Southwestern Ohio ("First National"). Catherine E. Dolan, a director of the Company, is a Managing Director of the Financial Institutions Group of First Union Bank ("First Union"). First National and First Union are members of a group of nine lending banks that are parties to a loan agreement with the Company, dated October 25, 1994, pursuant to which the Company obtained a term loan in the principal amount of $70,000,000 and secured a line of credit in a maximum principal amount of $50,000,000. The principal amount of the Company's indebtedness to First National and First Union as of December 31, 1995 was $4,999,714 and $7,000,080, respectively. Jeffery D. Lowe is the son-in-law of Joseph L. Marcum; Lauren N. Patch and Howard L. Sloneker III are brothers-in-law; and Stephen S. Marcum is the son of Joseph L. Marcum. 6 8 MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD During 1995, the Board of Directors held five meetings. All of the incumbent directors attended at least 75% of the total number of meetings of the Board of Directors. The Board of Directors has standing Executive, Audit and Executive Compensation Committees, but does not have a Nominating Committee or committee performing similar functions. The Executive Committee held eight meetings during 1995. The current members of the Executive Committee are Joseph L. Marcum, Lauren N. Patch, and Howard L. Sloneker III. Messrs. Patch and Sloneker attended all the meetings while Mr. Marcum attended four of the meetings. The Executive Committee is empowered to exercise all the powers of the Board of Directors in the management of the Company between meetings of the Board of Directors, other than filling vacancies in the Board or any other committee of the Board. The Audit Committee held two meetings during 1995. The current members of the Audit Committee are Arthur J. Bennert, Jack E. Brown, Catherine E. Dolan, Wayne Embry, Vaden Fitton, Joseph L. Marcum, Stephen S. Marcum, Stanley N. Pontius and William L. Woodall. Each Audit Committee member attended both of the meetings in 1995. The Audit Committee's primary function is to meet with the independent auditors for the Company and to review the Company's internal and independent auditing and financial controls. The Executive Compensation Committee held one meeting during 1995. The current members of the Executive Compensation Committee are Jack E. Brown, Vaden Fitton, and Joseph L. Marcum. Each member of the Executive Compensation Committee who was a member during 1995 attended such meeting. The Executive Compensation Committee administers the Company stock option plans and carries out the responsibilities described in the Executive Compensation Committee Report in this Proxy Statement. DIRECTORS FEES AND COMPENSATION Each director received $25,000 for services as a director of the Company during 1995. Each non-employee director of the Company or its subsidiaries received $1,500 per meeting for attending the regular meetings of the Board of Directors in 1995. Members of the Audit Committee also received $5,000 each for serving on that committee. In addition, members of the Executive Compensation Committee received $300 per meeting for each meeting attended. Joseph L. Marcum was paid an additional $65,000 during 1995 as compensation for serving as the Chairman of the Board. On May 23, 1995, Wayne Embry, Stephen S. Marcum, Stanley N. Pontius and William L. Woodall, each of whom is a non-employee director of the Company ("Non-Employee Director"), were granted a non-qualified stock option (an "NQSO") to purchase 3,000 common shares of the Company at an exercise price of $30.50 per share, the closing market price of the common shares on the date of grant. Any individual who becomes or is re-elected a Non-Employee Director is automatically granted an NQSO to purchase 3,000 common shares effective on the third business day following the first meeting of the Board of Directors after his/her election or appointment to the Board. The exercise price of each NQSO granted to a Non-Employee Director is equal to the fair market value of the common shares on the date of grant. NQSOs granted to Non-Employee Directors have terms of ten years and may not be exercised during the six months following their date of grant. EXECUTIVE COMPENSATION The following table provides information concerning compensation paid to each of the Company's five most highly compensated executive officers for each of the Company's last three completed fiscal years: 7 9 SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION --------------------------------- ALL OTHER NAME AND SALARY COMPENSATION PRINCIPAL POSITION YEAR ($)(1) ($)(2) ------------------ ---- ------- ------------ Lauren N. Patch, 1995 474,231 13,477 President and Chief 1994 374,616 10,489 Executive Officer 1993 324,808 9,043 Barry S. Porter, 1995 233,208 6,996 Chief Financial 1994 211,285 6,339 Officer and Treasurer 1993 186,688 5,580 Andrew T. Fogarty, 1995 231,300 6,939 Senior Vice 1994 220,838 6,625 President 1993 206,700 6,201 Jeffery D. Lowe, 1995 231,012 3,090 Vice President 1994 227,781 4,699 1993 215,006 4,454 Jack H. Nelson, 1995 215,040 6,667 Senior Vice 1994 169,218 5,062 President 1993 156,600 4,698 - --------------- (1) Includes annual directors' fees for Messrs. Patch and Lowe. See "DIRECTORS FEES AND COMPENSATION." (2) Includes for Messrs. Patch, Porter, Fogarty, Lowe and Nelson for 1995 the amounts of $4,500, $4,500, $4,500, $3,090 and $4,500, respectively contributed by the Company under the Company's Employee Savings Plan. Also includes for Messrs. Patch, Porter, Fogarty and Nelson for 1995 the amounts of $8,977, $2,439, $2,496 and $2,167, respectively, contributed by the Company under the Company's Supplemental Executive Savings Plan, a non-qualified Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR No stock options or stock appreciation rights ("SARs") were granted by the Company during the last fiscal year to any of the executive officers of the Company named in the Summary Compensation Table. OPTION/SAR EXERCISES IN LAST FISCAL YEAR The following table sets forth information concerning the exercise of stock options and SARs during the last fiscal year by each of the executive officers of the Company named in the Summary Compensation Table and the fiscal year-end value of unexercised stock options and SARs held by such executive officers:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES ------------------------------------------------------ NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED NUMBER OF UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1) ACQUIRED ON VALUE ----------------------------- ----------------------------- NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ------------ ----------- ----------- ------------- ----------- ------------- Lauren N. Patch 0 0 3,500 0 37,188 0 Barry S. Porter 500 9,563 3,500 0 37,188 0 Andrew T. Fogarty 0 0 3,300 0 35,063 0 Jeffery D. Lowe 0 0 0 0 0 0 Jack H. Nelson 0 0 0 0 0 0
8 10 - --------------- (1) "Value of Unexercised In-the-Money Options/SARs at Fiscal Year-End" is based upon the fair market of the Company's common shares on December 29, 1995 ($38.75), less the exercise price of in-the-money options and SARs at the end of the last fiscal year. PENSION PLANS The following table sets forth the estimated annual benefits payable under the Employees Retirement Plan and the Ohio Casualty Insurance Company Benefit Equalization Plan (the "Benefit Equalization Plan") to participants in such plans, including the executive officers named in the Summary Compensation Table, upon retirement in specified compensation and years of service classifications: PENSION PLANS TABLE
ESTIMATED ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED ----------------------------------------------------------------------------------------------- 15 20 25 30 35 ANNUAL EARNINGS YEARS YEARS YEARS YEARS YEARS - --------------- --------------- --------------- --------------- --------------- --------------- $ 125,000 $ 28,177 $ 37,569 $ 46,961 $ 56,353 $ 65,745 175,000 40,177 53,569 66,961 80,353 93,745 225,000 52,177 69,569 86,961 104,353 121,745 275,000 64,177 85,569 106,961 128,353 149,745 325,000 76,177 101,569 126,961 152,353 177,745 375,000 88,177 117,569 146,961 176,353 205,745 400,000 94,177 125,569 156,961 188,353 219,745 425,000 100,177 133,569 166,961 200,353 233,745 450,000 106,177 141,569 176,961 212,353 247,745 475,000 112,177 149,569 186,961 224,353 261,745 500,000 118,177 157,569 196,961 236,353 275,745 525,000 124,177 165,569 206,961 248,353 289,745 550,000 130,177 173,569 216,961 260,353 303,745 600,000 142,177 189,569 236,961 284,353 331,745 40 45 ANNUAL EARNINGS YEARS YEARS - --------------- --------------- --------------- $ 125,000 $ 75,138 $ 84,530 175,000 107,138 120,530 225,000 139,138 156,530 275,000 171,138 192,530 325,000 203,138 228,530 375,000 235,138 264,530 400,000 251,138 282,530 425,000 267,138 300,530 450,000 283,138 318,530 475,000 299,138 336,530 500,000 315,138 354,530 525,000 331,138 372,530 550,000 347,138 390,530 600,000 379,138 426,530
Retirement benefits under the Company's Employees Retirement Plan, a defined benefit plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), are generally payable to full-time and regular part-time salaried employees whose participation in the plan has vested (currently requiring the completion of five years of service) upon retirement at age 65 or in reduced amounts upon retirement prior to age 65 if the participant has ten years of vested service. A retiree's benefit amount is based upon his or her credited years of service and average annual compensation (salary) for the five consecutive years of highest salary during the last ten years of service immediately prior to age 65 or, if greater, the average annual compensation paid during the 60 consecutive month period immediately preceding retirement or other termination of employment. Such retirement benefits are reduced by a portion of the retiree's Social Security-covered compensation. Benefits figures shown in the table above are computed on the assumption that participants retire at age 65 and are entitled to a single life annuity. Section 401(a)(17) of the Code prohibits compensation in excess of $150,000 from being taken into account in determining benefits payable under a qualified pension plan. As a result, the Benefit Equalization Plan was adopted for those employees who are adversely affected by these provisions of the Code. The Benefit Equalization Plan provides for payment of benefits that would have been payable under the Employees Retirement Plan but for the limitation on compensation imposed by the Code. Upon retirement, participants receive the actuarial 9 11 equivalent present value of the benefit payable under the Benefit Equalization Plan in a lump sum. At December 31, 1995, credited years of service and average annual earnings under the Employees Retirement Plan and the Benefit Equalization Plan for the executive officers named in the Summary Compensation Table were: Lauren N. Patch, 19.5 years ($305,888); Barry S. Porter, 21.5 years ($192,183); Andrew T. Fogarty, 23.5 years ($208,731); Jeffery D. Lowe, 20.5 years ($184,035); and Jack H. Nelson, 36 years ($164,037). The compensation covered by the Employees Retirement Plan and the Benefit Equalization Plan is the amount shown in the Summary Compensation Table as salary, less any directors' fees. EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Executive Compensation Committee of the Board of Directors (the "Committee") is comprised entirely of non-employee directors. The current members of the Committee are Messrs. Brown, Fitton, and Marcum. John P. March served as a member of the Committee until his retirement from the Company's Board of Directors on December 31, 1995. The Committee is responsible for establishing the compensation for Mr. Patch, the Company's President and Chief Executive Officer. The cash compensation of the Company's other executive officers is determined by the Company's Chief Executive Officer. The decisions by the Committee and the Chief Executive Officer relating to the compensation of the Company's executive officers are given final approval by the full Board. During 1995, no compensation decisions of the Committee or the Chief Executive Officer were modified or rejected in any material way by the full Board. COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS In establishing the cash compensation of the Company's executive officers, both the Committee and the Chief Executive Officer have sought to create a compensation program that rewards individual contributions and achievements and that is adequate to attract and retain executives. In setting the compensation of its executive officers, including the Chief Executive Officer, the Company does not apply a formula approach that links cash compensation to corporate performance nor does it utilize any formal survey or other compilation of empirical data of the executive compensation paid by other companies. Instead, executive compensation is determined based upon a highly subjective evaluation of a number of factors, including individual performance, contributions and experience; the Company's financial performance as compared with prior years; and general economic conditions. None of these factors is assigned any specific weighting. The evaluation of Company financial performance is also subjective and does not focus on any specific measure, nor is it based on the achievement of any predetermined performance targets. Although neither the Committee nor the Chief Executive Officer has relied upon empirical data in making executive compensation decisions, they are generally familiar with the compensation levels of other companies in the insurance industry with which the Company competes for executive talent. The Committee and the Chief Executive Officer believe that the Company's compensation program has, historically, been adequate to enable the Company to attract and retain outstanding executives. 1995 CASH COMPENSATION The cash compensation paid in 1995 to Mr. Patch was approved by the Committee in late 1994. The compensation of Mr. Patch was increased effective January 1, 1995, from $350,000 to $450,000. The decision by the Committee to increase Mr. Patch's compensation was based on a subjective evaluation of Mr. Patch's performance and contributions in 1994 in the manner 10 12 described above and a general perception by the Committee that Mr. Patch's compensation is low in comparison to the compensation paid to chief executive officers of insurance companies of similar size to the Company. The Committee's conclusion that Mr. Patch's compensation was low on a relative basis was not based on any empirical data or a comparison to any specific company or companies. No attempt was made by the Committee to link Mr. Patch's salary directly to the accomplishment of any specific measure of the Company performance, but general performance of the Company was part of the total mix of information taken into account by the Committee. The 1995 cash compensation levels of the Company's executive officers (other than its President) were initially determined by the Company's Chief Executive Officer. The Board delegated this responsibility to the Chief Executive Officer because of his substantially greater knowledge of the contributions and performance of each of these officers. The increases in salaries received by these executive officers in 1995, totaling approximately 8.53%, were determined by the Chief Executive Officer based upon a subjective evaluation of the individual responsibilities and contributions of each of these individuals. STOCK-BASED COMPENSATION PLANS The Committee believes that stock-based performance compensation arrangements are important in providing incentive to members of the Company's management. Awards of stock options and stock appreciation rights are designed to accomplish this goal and to assist in the retention of executives. Because substantial option grants were made to the executive officers in 1992, the Committee decided not to make additional awards in 1993, 1994 and 1995. SUBMITTED BY THE EXECUTIVE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS VADEN FITTON JOHN P. MARCH* JOSEPH L. MARCUM AND BY THE COMPANY'S PRESIDENT AND CHIEF EXECUTIVE OFFICER, LAUREN N. PATCH * Mr. March served as a member of the Committee through December 31, 1995. EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The directors of the Company who served as members of the Company's Executive Compensation Committee during 1995 were Jack E. Brown, Vaden Fitton, John P. March and Joseph L. Marcum. Joseph L. Marcum, is the Chairman of the Board of Directors and former President and Chief Executive Officer of the Company. Mr. Marcum and Mr. Fitton also served as members of the Executive Compensation Committee of First Financial Bancorp, whose Chief Executive Officer, Stanley N. Pontius, is a member of the Board of Directors of the Company. As indicated in the Executive Compensation Committee Report on Executive Compensation, Lauren N. Patch, the Company's President and Chief Executive Officer, participates in decision-making regarding the compensation of certain executive officers named in the Summary Compensation Table. Mr. Patch is not a member of the Executive Compensation Committee. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN The following graph compares the five-year cumulative total shareholder return, including reinvested dividends, of the Company with the Dow Jones Equity Market Index and the Dow Jones Insurance Index for Property and Casualty Companies(1): 11 13
OHIO CAS- Measurement Period DJ EQUITY DJ INSURANCE UALTY (Fiscal Year Covered) MARKET INDEX P & C (1) CORPORATION 1990 100.00 100.00 100.00 1991 132.44 124.42 127.42 1992 143.83 151.50 169.95 1993 158.14 152.75 179.74 1994 159.36 160.63 167.35 1995 220.51 226.93 240.02
(1) The Dow Jones Insurance Index for Property and Casualty Companies (13 companies, including the Company) that are traditionally considered as a peer group of property and casualty insurance companies within the United States. The companies making up the Index are American International; Chubb Corp.; Cincinnati Financial; Continental Corp.; GEICO Corp.; General RE Corp.; Hartford Steam Boiler Co.; Loews Corp.; Ohio Casualty Corporation; Progressive Corp.; Safeco Corp.; St. Paul Co.'s; and USF&G Corp. 12 14 PROPOSED AMENDMENT OF AMENDED ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED NUMBER OF COMMON SHARES (ITEM 2 ON PROXY) The Amended Articles of Incorporation of the Company presently authorize 72,000,000 shares, of which 70,000,000 are common shares, $.125 par value, and 2,000,000 are Preferred Shares, without par value. The Company's Board of Directors unanimously adopted a resolution proposing and declaring it advisable that Article FOURTH of the Company's Amended Articles of Incorporation (the "Articles") be amended in order to increase the authorized number of shares of the Company to 152,000,000 shares, of which 150,000,000 will be common shares, $.125 par value ("Common Shares"), and 2,000,000 will be Preferred Shares, without par value, and recommending to the shareholders of the Company the approval of the proposed amendment. Thus, the only class of shares which will be increased in authorized number will be the Common Shares. Of the Company's presently authorized 70,000,000 Common Shares, as of December 31, 1995, 35,396,127 shares were outstanding, an aggregate of 1,242,500 shares were reserved for issuance under the Company's existing stock option plan and 18,319,313 shares were reserved for issuance under the Rights Agreement dated as of December 15, 1989, as amended (the "Rights Agreement"), between the Company and First Chicago Company of New York, as Rights Agent. The Board of Directors believes that it is desirable and in the best interests of the Company and its shareholders to increase the number of Common Shares that the Company is authorized to issue in order to ensure that the Company will have a sufficient number of authorized Common Shares available in the future to provide it with the desired flexibility to meet its business needs. If this proposal is approved by the shareholders, the additional Common Shares will be available for a variety of corporate purposes, including, for example, the declaration and payment of share dividends to the Company's shareholders; share splits; use in the financing of expansion or future acquisitions; issuance pursuant to the terms of employee benefit plans; and use in other possible further transactions of a currently undetermined nature. If the proposed amendment is adopted, the Company would be permitted to issue the additional authorized Common Shares without further shareholder approval, except to the extent otherwise required by the Articles, by law or by any securities exchange on which the Common Shares may be listed at the time. The authorization of additional Common Shares will enable the Company, as the need may arise, to take timely advantage of market conditions and the availability of favorable opportunities without the delay and expense associated with the holding of a special meeting of its shareholders. It is the belief of the Board of Directors that the delay necessary for shareholder approval of a specific issuance could be detrimental to the Company and its shareholders. The Board of Directors does not intend to issue any Common Shares except on terms which the Board deems to be in the best interests of the Company and its shareholders. Existing shareholders of the Company will have no pre-emptive rights to purchase any Common Shares issued in the future. Depending on the terms thereof, the issuance of the Common Shares may or may not have a dilutive effect on the Company's then-existing shareholders. Other than the Common Shares which may be acquired pursuant to the Company's existing stock option plan or the Rights Agreement, the Company presently has no plans, agreements or understandings to issue any of the newly authorized Common Shares. Although the Company has no such present intentions, the proposed increase in the authorized and unissued Common Shares might be considered as having the effect of discouraging an attempt by another person or entity, through the acquisition of a substantial number of Common Shares, to acquire control of the Company with a view to imposing a merger, sale of all or any part of its assets or a similar transaction without prior approval of the Company's Board of Directors, since the issuance of new Common Shares, in a public or private sale, merger or similar transaction could be used to dilute the share ownership of a person or entity seeking to 13 15 obtain control of the Company. Furthermore, since the Company's Regulations require that the removal of a director be approved by the affirmative vote of the holders of at least 80% of the votes entitled to be cast by the holders of all of the outstanding voting shares of the Company, the Board could (within the limits imposed by Ohio law) issue new Common Shares to purchasers who, together with other shareholders of the Company, might block such an 80% vote. As of March 1, 1996, the Company's executive officers and directors held Common Shares entitling them to exercise approximately 10.65% of the Company's voting power. The Company's Articles and Regulations contain other provisions that may have anti-takeover effects. The Articles provide, among other things, for (i) the approval of the holders of at least 80% of the outstanding Common Shares to authorize certain business combinations involving the Company and a holder of 20% or more of the voting power of the Company or any affiliate or associate of such a holder, unless a "minimum price per share" (as defined in the Articles) is paid to all shareholders and certain other conditions are satisfied; (ii) the approval of the holders of two-thirds of the voting power of the Company (including any outstanding Preferred Shares) to authorize any change in the Articles or Regulations or to approve certain significant corporate transactions, unless the matter has been approved by a vote of two-thirds of the Directors; and (iii) the elimination of cumulative voting in the election of directors. In addition, the Regulations of the Company provide, among other things, for (i) a classified Board of Directors divided into three classes; (ii) an 80% shareholder vote to remove directors; (iii) special requirements to nominate directors; and (iv) the approval of the holders of at least 50% of the voting power of the Company to call a special meeting of shareholders. The availability of the Preferred Shares might also be considered as having the effect of discouraging an attempt by another person or entity, through the acquisition of a substantial number of the Company's Common Shares, to acquire control of the Company with a view to effecting a merger, sale of the Company's assets or similar transaction, since the issuance of Preferred Shares could be used to dilute the share ownership or voting rights of a person or entity seeking to obtain control of the Company. Additionally, certain companies have issued, as a dividend to holders of their Common Shares, preferred shares having terms designed to discourage third parties from acquiring control of such companies, and the Preferred Shares would be available for such purpose. The Company also has adopted the Rights Agreement, pursuant to which the Company's common shareholders hold rights to purchase in certain cases additional Common Shares at a price of $75.00 per share. Each outstanding Common Share is accompanied by one-half of a purchase right. Under certain circumstances, including the acquisition by a person of 20% or more of the Company's outstanding Common Shares (without the prior approval of the directors of the Company), all rights holders, except the acquiror, may purchase Common Shares of the Company having a value of twice the exercise price of the rights, subject to adjustment as provided in the Rights Agreement. If the Company is acquired in a merger or other business combination after the acquisition of 20% of the Company's outstanding Common Shares (without prior Board approval), in certain cases rights holders may purchase the acquiror's shares at a similar discount. The Company is not aware of any efforts to obtain control of the Company or to effect substantial accumulations of its shares. The Company does not presently intend to submit to its shareholders for their approval other proposals that may be considered to have an anti-takeover effect. THE AFFIRMATIVE VOTE OF THE HOLDERS OF COMMON SHARES ENTITLING THEM TO EXERCISE AT LEAST A MAJORITY OF THE VOTES ENTITLED TO BE CAST IS REQUIRED TO ADOPT THE PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S ARTICLES. If the amendment is approved, it will become effective upon the filing of a Certificate of 14 16 Amendment to the Company's Articles with the Ohio Secretary of State, which is expected to be accomplished as promptly as practicable after such approval is obtained. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S ARTICLES. UNLESS OTHERWISE DIRECTED, THE PERSONS NAMED IN THE ENCLOSED PROXY WILL VOTE THE COMMON SHARES REPRESENTED BY ALL PROXIES RECEIVED PRIOR TO THE ANNUAL MEETING, AND NOT PROPERLY REVOKED, IN FAVOR OF THE PROPOSED AMENDMENT TO ARTICLE FOURTH. ANNUAL REPORT The Company's Annual Report for the fiscal year ended December 31, 1995 accompanies this Proxy Statement. INDEPENDENT PUBLIC ACCOUNTANTS The accounting firm of Coopers & Lybrand has served for many years as independent public accountants for the Company and its subsidiaries, and Coopers & Lybrand will continue to serve as independent public accountants for 1996. Management expects that representatives of that firm will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. The Company's financial statements for the last fiscal year were examined by Coopers & Lybrand. In connection with the audit function, Coopers & Lybrand also reviewed the Company's annual and quarterly reports and reviewed its filings with the Securities and Exchange Commission. SHAREHOLDER PROPOSALS If an eligible shareholder wishes to present a proposal for action at the next annual meeting of shareholders of the Company, it must be received by the Company not later than November 15, 1996 for inclusion in the Company's Proxy Statement and form of Proxy relating to that meeting. An eligible shareholder may present no more than one proposal of not more than five hundred (500) words, including supporting statements, for inclusion in the Company's proxy materials for the next annual meeting. Proposals shall be sent to Ohio Casualty Corporation, Attention: Howard L. Sloneker III, Secretary, 136 North Third Street, Hamilton, Ohio 45025. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission (SEC). Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Forms 3, 4 and 5 they file. Based on the Company's review of the copies of such forms it has received, the Company believes that all its officers, directors, and greater than ten percent beneficial owners complied with all filing requirements applicable to them with respect to transactions during fiscal 1995, except that Mr. Jack E. Brown, one of the directors did not file a Form 4 for a stock purchase he executed during 1995. However, Mr. Brown reported the transaction on SEC Form 5 filed on February 13, 1996. 15 17 OTHER MATTERS The Company files annually with the Securities and Exchange Commission an Annual Report on Form 10-K. This report includes financial statements and financial statement schedules. A SHAREHOLDER OF THE COMPANY MAY OBTAIN A COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995, WITHOUT CHARGE BY SUBMITTING A WRITTEN REQUEST THEREFOR TO THE FOLLOWING ADDRESS: OHIO CASUALTY CORPORATION Attention: Barry S. Porter Chief Financial Officer/Treasurer 136 North Third Street Hamilton, Ohio 45025 Management and the Board of Directors of the Company know of no business to be brought before the Annual Meeting other than as set forth in this Proxy Statement. However, if any matters other than those referred to in this Proxy Statement should properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote the common shares represented by such proxy on such matters in accordance with their best judgment. EXPENSES OF SOLICITATION The expense of proxy solicitation will be borne by the Company. Proxies will be solicited by mail and may be solicited, for no additional compensation, by officers, directors or employees of the Company or its subsidiaries, by telephone, telegraph or in person. Brokerage houses and other custodians, nominees and fiduciaries may be requested to forward soliciting material to the beneficial owners of common shares of the Company, and will be reimbursed for their related expenses. In addition, the Company has retained Morrow & Co., Inc., a professional soliciting organization, to assist in soliciting proxies from brokerage houses, custodians and nominees. The fees and expenses of that firm in connection with such solicitation are not expected to exceed $15,000. By Order of the Board of Directors, /s/ Howard L. Sloneker III -------------------------------- HOWARD L. SLONEKER III, Secretary March 15, 1996 16 EX-23 7 EXHIBIT 23 1 Exhibit 23 [COOPERS & LYBRAND letterhead] Consent of Independent Accountants to Incorporation of Opinion by Reference in Registration Statement on Form S-8 We consent to the incorporation by reference in the Registration Statement of Ohio Casualty Corporation on Form S-8 (File No. 05544) of our report dated February 3, 1996, on our audits of the consolidated financial statements and financial statement schedules of Ohio Casualty Corporation and Subsidiaries as of December 31, 1995, 1994 and 1993 and for the years then ended, which report is included in this Annual Report on Form 10-K. /s/ Coopers & Lybrand L.L.P. ---------------------------- Coopers & Lybrand L.L.P. Columbus, Ohio March 22, 1996 97 EX-27 8 EXHIBIT 27
7 12-MOS DEC-31-1995 DEC-31-1995 2422251859 2422251859 2422251859 661154204 0 23548711 3106954774 23882890 446166623 119795342 3980142050 1631184127 506034637 0 360073946 60000000 5850484 0 0 1105163778 3980142050 1268268885 188106721 6096436 0 902381736 327055340 112858332 120176634 24814289 95362345 4372403 0 0 99734768 2.79 2.79 1605526365 562821393 990309576 444558349 510218802 1553130969 (104997987)
EX-28 9 EXHIBIT 28 1 EXHIBIT 28 GROUP SCHEDULE P - PART 1 - SUMMARY
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 8,246 2,590 2,253 1,427 1986 1,254,734 32,818 1,221,916 699,517 15,702 72,556 1,774 1987 1,394,210 37,581 1,356,629 720,241 10,070 69,155 593 1988 1,375,824 36,272 1,339,553 699,179 8,108 62,346 751 1989 1,393,527 29,351 1,364,177 778,131 15,684 63,155 597 1990 1,462,962 24,961 1,438,001 829,792 8,256 68,981 101 1991 1,495,615 26,561 1,469,055 859,734 34,974 65,646 1,799 1992 1,550,273 32,684 1,517,590 854,166 21,984 59,158 606 1993 1,423,123 43,696 1,379,427 716,925 7,154 41,131 64 1994 1,342,791 45,133 1,297,657 609,958 4,330 27,222 (168) 1995 1,305,589 41,012 1,264,577 388,829 3,552 11,550 1 TOTAL XXX XXX XXX 7,164,719 132,403 543,153 7,546
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 863 28 6,510 XXX 1986 33,626 58,992 813,590 XXX 1987 32,621 62,271 841,003 XXX 1988 30,765 61,840 814,508 XXX 1989 34,119 64,116 889,122 XXX 1990 32,670 65,798 956,214 XXX 1991 31,897 65,004 953,612 XXX 1992 30,201 69,837 960,571 XXX 1993 23,739 61,039 811,876 XXX 1994 20,905 60,566 693,584 XXX 1995 10,459 47,732 444,558 XXX TOTAL 281,865 617,224 8,185,147 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 84,023 31,523 0 0 12,137 3,447 0 0 1986 15,019 2,497 1,515 52 2,022 262 1,015 30 1987 17,462 529 1,860 69 3,784 233 1,275 39 1988 18,362 1,386 1,886 69 2,291 161 1,284 39 1989 34,215 3,212 2,301 90 5,857 329 1,610 50 1990 49,183 2,382 3,012 100 11,659 428 1,953 55 1991 61,832 1,448 5,987 164 16,695 550 3,901 93 1992 94,587 1,414 8,231 233 25,037 235 4,955 125 1993 138,852 1,229 22,499 551 31,795 226 11,735 271 1994 211,015 3,824 38,406 1,201 35,490 321 16,482 451 1995 325,409 3,924 132,434 3,897 48,231 143 30,687 790 TOTAL 1,049,957 53,368 218,132 6,426 194,998 6,333 74,897 1,942
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 2,351 63,541 XXX 1986 606 17,337 XXX 1987 939 24,450 XXX 1988 764 22,932 XXX 1989 1,488 41,791 XXX 1990 2,770 65,612 XXX 1991 4,373 90,534 XXX 1992 6,621 137,424 XXX 1993 11,320 213,924 XXX 1994 17,169 312,766 XXX 1995 34,815 562,821 XXX TOTAL 83,216 1,553,131 XXX
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 851,243 20,317 830,926 67.8 61.9 68.0 1987 876,986 11,532 865,453 62.9 30.7 63.8 1988 847,954 10,514 837,440 61.6 29.0 62.5 1989 950,874 19,962 930,912 68.2 68.0 68.2 1990 1,033,148 11,321 1,021,827 70.6 45.4 71.1 1991 1,083,174 39,028 1,044,146 72.4 146.9 71.1 1992 1,122,609 24,597 1,098,012 72.4 75.3 72.4 1993 1,035,298 9,495 1,025,803 72.7 21.7 74.4 1994 1,016,684 9,959 1,006,725 75.7 22.1 77.6 1995 1,019,289 12,307 1,006,982 78.1 30.0 79.6 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 52,499 11,042 1986 13,986 3,351 1987 18,724 5,726 1988 18,793 4,140 1989 33,215 8,576 1990 49,713 15,900 1991 66,207 24,327 1992 101,171 36,253 1993 159,571 54,353 1994 244,396 68,369 1995 450,022 112,799 TOTAL XXX 1,208,296 344,835
2 GROUP SCHEDULE P - PART 1A - HOMEOWNERS
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 96 0 24 0 1986 159,099 2,348 156,752 87,537 1,251 5,885 0 1987 166,422 1,902 164,520 87,175 26 5,907 0 1988 168,376 1,787 166,589 87,481 50 4,645 0 1989 167,251 2,262 164,988 102,974 0 5,679 0 1990 172,691 2,321 170,370 114,477 378 5,631 0 1991 180,475 3,102 177,373 145,257 19,660 5,802 271 1992 187,626 3,100 184,526 135,057 5,961 6,268 539 1993 176,137 8,408 167,729 123,039 496 5,936 4 1994 167,094 9,016 158,077 130,113 92 5,717 1 1995 169,546 8,428 161,118 80,422 0 2,770 0 TOTAL XXX XXX XXX 1,093,629 27,915 54,263 815
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 11 8 127 XXX 1986 1,395 3,491 95,662 68,162 1987 1,606 3,571 96,627 71,439 1988 1,527 3,566 95,642 64,992 1989 1,476 4,047 112,700 65,753 1990 1,509 4,579 124,309 65,027 1991 1,120 5,492 136,620 66,236 1992 1,467 9,370 144,196 67,868 1993 941 8,923 137,397 67,794 1994 730 10,605 146,343 72,305 1995 201 6,601 89,793 51,789 TOTAL 11,982 60,253 1,179,415 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 95 0 0 0 67 0 0 0 1986 61 0 58 3 48 0 55 3 1987 70 4 58 3 45 1 55 3 1988 251 0 58 3 175 0 55 3 1989 567 0 60 3 393 0 58 3 1990 546 0 107 5 284 0 76 4 1991 1,241 20 111 6 561 4 69 3 1992 3,072 542 315 16 1,271 102 177 9 1993 4,889 5 366 18 1,679 1 174 9 1994 8,972 0 1,254 63 1,952 0 377 19 1995 27,910 0 11,119 555 2,536 0 1,443 72 TOTAL 47,673 571 13,505 674 9,010 108 2,542 127
AC/YR (21) (22) (23) (24) SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 2 164 10 1986 7 224 2 1987 4 221 5 1988 8 541 7 1989 18 1,089 25 1990 16 1,020 14 1991 35 1,984 61 1992 77 4,244 122 1993 143 7,218 244 1994 292 12,766 597 1995 1,217 43,597 5,885 TOTAL 1,817 73,067 6,972
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 97,142 1,257 95,886 61.1 53.5 61.2 1987 96,885 37 96,848 58.2 2.0 58.9 1988 96,238 56 96,183 57.2 3.1 57.7 1989 113,795 6 113,789 68.0 0.3 69.0 1990 125,717 387 125,329 72.8 16.7 73.6 1991 158,568 19,964 138,604 87.9 643.6 78.1 1992 155,608 7,168 148,440 82.9 231.2 80.4 1993 145,149 533 144,615 82.4 6.3 86.2 1994 159,282 174 159,108 95.3 1.9 100.7 1995 134,017 628 133,390 79.0 7.4 82.8 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 95 69 1986 116 107 1987 121 100 1988 306 235 1989 623 466 1990 648 373 1991 1,326 657 1992 2,829 1,415 1993 5,232 1,987 1994 10,163 2,603 1995 38,474 5,123 TOTAL XXX 59,933 13,134
3 GROUP SCHEDULE P - PART 1B - PP AUTO LIABILITY
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 1,691 1,362 249 0 1986 284,603 6,853 277,750 223,949 2,625 17,316 4 1987 320,026 7,756 312,270 239,037 2,394 16,701 2 1988 318,131 7,787 310,344 227,387 3,378 14,073 19 1989 318,462 7,649 310,813 238,552 2,612 12,722 3 1990 333,396 6,676 326,721 253,075 2,327 13,599 0 1991 339,451 6,391 333,060 240,917 2,242 13,526 0 1992 362,947 7,108 355,839 246,289 2,507 13,965 2 1993 334,286 12,196 322,089 211,799 4,340 10,151 22 1994 320,149 12,617 307,532 162,165 3,382 6,760 0 1995 305,098 7,698 297,400 82,699 1,611 2,765 0 TOTAL XXX XXX XXX 2,127,558 28,780 121,826 51
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 192 20 598 XXX 1986 5,551 22,262 260,898 80,173 1987 6,082 23,389 276,731 77,054 1988 4,880 23,258 261,322 69,365 1989 5,703 24,141 272,800 64,142 1990 5,444 24,652 288,999 61,387 1991 4,571 22,661 274,862 57,887 1992 4,268 21,802 279,547 60,062 1993 4,359 19,064 236,652 54,910 1994 2,309 17,820 183,363 53,015 1995 981 12,080 95,932 46,847 TOTAL 44,341 211,150 2,431,703 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 15,342 13,299 0 0 3,720 1,941 0 0 1986 488 25 43 1 120 3 17 0 1987 626 12 57 2 157 2 21 1 1988 841 40 83 2 224 7 31 1 1989 1,890 157 83 2 495 24 31 1 1990 3,538 74 83 2 895 10 31 1 1991 7,223 59 175 4 1,846 9 66 2 1992 21,561 443 331 8 4,587 63 103 2 1993 43,145 265 471 11 7,228 26 116 3 1994 75,980 3,297 2,580 62 7,675 223 383 9 1995 134,111 1,138 20,342 551 10,555 53 2,358 65 TOTAL 304,746 18,809 24,247 645 37,503 2,360 3,157 84
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 576 4,398 150 1986 50 688 26 1987 62 907 25 1988 67 1,198 45 1989 146 2,462 67 1990 320 4,781 125 1991 639 9,873 284 1992 1,816 27,881 738 1993 3,689 54,346 1,667 1994 6,363 89,390 3,777 1995 13,077 178,637 14,023 TOTAL 26,805 374,559 20,927
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 264,244 2,658 261,585 92.8 38.8 94.2 1987 280,051 2,412 277,638 87.5 31.1 88.9 1988 265,966 3,446 262,520 83.6 44.3 84.6 1989 278,061 2,799 275,262 87.3 36.6 88.6 1990 296,194 2,414 293,779 88.8 36.2 89.9 1991 287,051 2,317 284,734 84.6 36.2 85.5 1992 310,452 3,025 307,427 85.5 42.6 86.4 1993 295,663 4,666 290,997 88.4 38.3 90.3 1994 279,726 6,973 272,753 87.4 55.3 88.7 1995 277,986 3,417 274,569 91.1 44.4 92.3 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 2,043 2,355 1986 505 183 1987 669 238 1988 883 315 1989 1,814 648 1990 3,545 1,236 1991 7,333 2,540 1992 21,441 6,440 1993 43,340 11,005 1994 75,201 14,189 1995 152,764 25,872 TOTAL XXX 309,539 65,020
4 GROUP SCHEDULE P - PART 1C - COMM AUTO LIABILITY
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 204 140 47 1 1986 103,599 2,556 101,043 60,869 840 6,853 106 1987 115,059 2,899 112,160 66,272 1,048 6,749 11 1988 111,555 2,980 108,575 62,142 1,313 6,000 27 1989 115,499 3,154 112,344 64,722 1,196 5,528 16 1990 123,518 3,021 120,498 74,822 671 6,157 15 1991 130,823 3,060 127,764 74,731 699 6,065 0 1992 135,772 3,261 132,511 69,560 1,797 5,871 10 1993 129,921 4,228 125,693 57,229 951 4,532 0 1994 124,061 4,327 119,735 44,452 1,029 2,919 0 1995 118,168 3,897 114,271 20,558 601 969 0 TOTAL XXX XXX XXX 595,562 10,286 51,691 186
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 79 4 114 XXX 1986 692 5,825 72,601 15,830 1987 529 6,465 78,427 14,143 1988 398 6,025 72,827 12,870 1989 751 5,995 75,033 13,359 1990 751 6,136 86,430 13,342 1991 692 5,985 86,081 13,256 1992 976 5,170 78,794 13,829 1993 584 4,588 65,399 13,734 1994 500 4,318 50,660 13,803 1995 221 3,280 24,205 11,408 TOTAL 6,173 53,792 690,572 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 1,875 1,280 0 0 526 255 0 0 1986 72 8 21 1 21 1 9 0 1987 280 0 21 1 81 0 9 0 1988 249 0 21 1 71 0 9 0 1989 1,225 0 21 1 354 0 9 0 1990 4,899 562 21 1 1,248 84 7 0 1991 7,364 0 144 7 1,606 0 45 2 1992 12,695 117 155 7 2,366 15 39 2 1993 22,707 145 481 16 3,611 15 107 4 1994 43,809 227 1,155 34 5,705 20 185 6 1995 47,237 712 9,237 323 4,753 47 1,191 46 TOTAL 142,412 3,049 11,274 392 20,344 438 1,609 61
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 69 936 27 1986 6 118 4 1987 21 410 13 1988 20 368 8 1989 89 1,696 17 1990 270 5,798 41 1991 502 9,653 89 1992 862 15,976 206 1993 1,528 28,254 451 1994 2,899 53,467 918 1995 3,661 64,951 2,837 TOTAL 9,927 181,627 4,611
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 73,675 956 72,719 71.1 37.4 72.0 1987 79,898 1,060 78,838 69.4 36.6 70.3 1988 74,537 1,342 73,195 66.8 45.0 67.4 1989 77,943 1,213 76,730 67.5 38.5 68.3 1990 93,561 1,333 92,228 75.7 44.1 76.5 1991 96,443 708 95,734 73.7 23.1 74.9 1992 96,717 1,947 94,770 71.2 59.7 71.5 1993 94,784 1,131 93,653 73.0 26.7 74.5 1994 105,443 1,316 104,127 85.0 30.4 87.0 1995 90,886 1,729 89,157 76.9 44.4 78.0 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 596 340 1986 84 34 1987 299 111 1988 268 99 1989 1,244 452 1990 4,357 1,441 1991 7,502 2,151 1992 12,726 3,250 1993 23,027 5,227 1994 44,703 8,764 1995 55,439 9,512 TOTAL XXX 150,246 31,381
5 GROUP SCHEDULE P - PART 1D - WORKERS COMPENSATION
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 4,123 771 375 12 1986 149,101 3,360 145,740 99,003 2,203 8,524 1 1987 170,721 3,839 166,883 101,328 525 8,767 1 1988 179,208 3,811 175,397 105,874 436 8,964 0 1989 201,802 4,148 197,654 125,476 1,545 10,986 71 1990 220,037 3,333 216,703 142,575 375 12,620 0 1991 219,110 3,144 215,966 128,860 5 11,512 0 1992 213,577 2,909 210,668 105,964 5 7,797 0 1993 185,738 2,443 183,294 71,512 0 4,381 0 1994 153,212 1,955 151,257 38,978 2 2,064 2 1995 143,658 1,654 142,004 16,581 0 576 0 TOTAL XXX XXX XXX 940,275 5,865 76,567 86
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 172 10 3,726 XXX 1986 2,971 3,527 108,852 37,000 1987 2,227 3,681 113,251 33,600 1988 2,925 4,020 118,422 31,180 1989 3,036 4,939 139,784 33,399 1990 3,934 5,438 160,258 32,838 1991 2,645 5,533 145,901 28,082 1992 1,813 6,293 120,049 24,625 1993 704 4,608 80,501 17,596 1994 300 3,486 44,525 13,850 1995 141 3,270 20,428 10,665 TOTAL 20,867 44,805 1,055,697 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 45,560 11,575 0 0 3,905 1,129 0 0 1986 13,165 2,399 190 2 1,094 234 21 0 1987 11,272 5 190 2 778 0 21 0 1988 15,724 1,222 190 2 1,183 119 21 0 1989 25,463 3,014 190 2 1,975 294 21 0 1990 26,633 1,200 190 2 1,925 117 21 0 1991 25,673 60 190 2 1,717 6 21 0 1992 30,317 157 379 4 1,892 15 41 0 1993 35,476 383 3,414 38 2,246 37 369 4 1994 41,888 0 4,551 51 2,246 0 457 5 1995 47,006 55 28,447 316 12,061 5 2,637 30 TOTAL 318,176 20,069 37,929 422 31,022 1,957 3,627 41
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 1,039 37,800 685 1986 327 12,160 120 1987 308 12,561 158 1988 416 16,190 182 1989 638 24,976 296 1990 709 28,158 398 1991 703 28,235 512 1992 756 33,209 616 1993 971 42,013 654 1994 1,113 50,200 872 1995 5,035 94,779 3,348 TOTAL 12,016 380,281 7,841
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 125,850 4,839 121,011 84.4 144.0 83.0 1987 126,345 533 125,812 74.0 13.9 75.4 1988 136,391 1,779 134,612 76.1 46.7 76.7 1989 169,687 4,927 164,760 84.1 118.8 83.4 1990 190,110 1,694 188,416 86.4 50.8 86.9 1991 174,209 73 174,136 79.5 2.3 80.6 1992 153,439 181 153,258 71.8 6.2 72.7 1993 122,977 463 122,514 66.2 18.9 66.8 1994 94,784 59 94,725 61.9 3.0 62.6 1995 115,613 406 115,207 80.5 24.5 81.1 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 33,985 3,815 1986 10,953 1,207 1987 11,455 1,106 1988 14,690 1,499 1989 22,636 2,340 1990 25,621 2,538 1991 25,800 2,435 1992 30,535 2,673 1993 38,468 3,545 1994 46,389 3,811 1995 75,081 19,699 TOTAL XXX 335,614 44,667
6 GROUP SCHEDULE P - PART 1E - CMP
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 436 (304) 431 1,335 1986 111,299 3,287 108,012 40,153 2,026 11,471 688 1987 114,668 2,837 111,831 35,527 558 8,062 102 1988 100,340 2,435 97,905 29,898 25 5,628 0 1989 98,708 2,401 96,308 39,558 648 6,555 1 1990 109,609 2,062 107,547 47,833 1,783 8,199 18 1991 125,346 2,460 122,886 61,636 5,318 8,786 106 1992 147,343 4,565 142,778 88,550 8,149 8,881 44 1993 146,366 5,673 140,694 67,768 141 6,233 3 1994 143,240 6,538 136,702 63,173 174 3,908 1 1995 139,602 6,743 132,859 39,832 115 1,624 0 TOTAL XXX XXX XXX 514,365 18,634 69,779 2,300
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 17 4 (161) XXX 1986 1,583 3,524 52,434 14,136 1987 1,494 4,764 47,692 12,520 1988 1,261 3,469 38,970 10,859 1989 1,766 2,514 47,979 12,506 1990 1,607 3,261 57,492 13,450 1991 4,808 4,123 69,121 15,785 1992 1,943 5,118 94,356 19,139 1993 1,058 4,644 78,502 19,423 1994 961 4,691 71,598 19,300 1995 383 3,863 45,204 15,334 TOTAL 16,879 39,975 603,185 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 16,122 5,000 0 0 1,555 0 0 0 1986 736 0 658 31 530 0 530 17 1987 1,388 0 990 48 867 0 785 26 1988 178 0 990 48 129 0 785 26 1989 1,266 0 1,403 69 918 0 1,108 38 1990 2,703 0 1,403 69 1,797 0 1,039 35 1991 5,077 0 1,453 69 3,120 0 984 33 1992 9,740 26 2,461 113 6,097 5 1,573 53 1993 12,891 50 5,071 239 7,173 12 2,923 100 1994 16,026 0 14,850 712 7,619 0 7,518 253 1995 24,360 61 21,207 1,011 8,455 7 7,883 263 TOTAL 90,486 5,137 50,484 2,409 38,260 24 25,130 845
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 157 12,834 110 1986 88 2,494 43 1987 154 4,108 27 1988 83 2,091 15 1989 180 4,769 35 1990 257 7,095 65 1991 423 10,955 106 1992 763 20,437 239 1993 1,190 28,847 452 1994 2,032 47,081 811 1995 2,973 63,536 2,966 TOTAL 8,300 204,245 4,869
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 57,691 2,763 54,928 51.8 84.1 50.9 1987 52,535 735 51,800 45.8 25.9 46.3 1988 41,161 100 41,061 41.0 4.1 41.9 1989 53,502 755 52,747 54.2 31.5 54.8 1990 66,491 1,905 64,586 60.7 92.4 60.1 1991 85,601 5,526 80,075 68.3 224.6 65.2 1992 123,183 8,390 114,793 83.6 183.8 80.4 1993 107,893 545 107,348 73.7 9.6 76.3 1994 119,817 1,139 118,678 83.6 17.4 86.8 1995 110,197 1,457 108,740 78.9 21.6 81.8 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 11,122 1,712 1986 1,363 1,131 1987 2,329 1,779 1988 1,120 971 1989 2,600 2,169 1990 4,037 3,058 1991 6,461 4,494 1992 12,062 8,375 1993 17,672 11,175 1994 30,165 16,916 1995 44,494 19,042 TOTAL XXX 133,425 70,821
7 GROUP SCHEDULE P - PART 1G - SPECIAL LIABILITY
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 0 0 0 0 1986 0 0 0 0 0 0 0 1987 0 0 0 0 0 0 0 1988 0 0 0 0 0 0 0 1989 0 0 0 0 0 0 0 1990 143 58 85 95 62 1 0 1991 271 214 57 83 71 13 0 1992 226 184 42 327 261 0 0 1993 37 43 (7) 0 0 0 0 1994 18 17 1 9 2 0 0 1995 33 30 3 0 0 0 0 TOTAL XXX XXX XXX 513 396 13 0
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 0 0 0 XXX 1986 0 0 0 0 1987 0 0 0 0 1988 0 0 0 0 1989 0 0 0 0 1990 0 0 33 0 1991 0 0 24 1 1992 0 0 66 1 1993 0 0 0 1 1994 0 0 7 1 1995 0 0 0 1 TOTAL 0 0 131 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 0 0 0 0 0 0 0 0 1986 0 0 0 0 0 0 0 0 1987 0 0 0 0 0 0 0 0 1988 0 0 0 0 0 0 0 0 1989 0 0 0 0 0 0 0 0 1990 0 0 0 0 0 0 0 0 1991 0 0 0 0 0 0 0 0 1992 2 1 0 0 0 0 0 0 1993 0 0 0 0 0 0 0 0 1994 0 0 0 0 0 0 0 0 1995 0 0 0 0 0 0 0 0 TOTAL 2 1 0 0 0 0 0 0
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 0 0 0 1986 0 0 0 1987 0 0 0 1988 0 0 0 1989 0 0 0 1990 0 0 0 1991 0 0 1 1992 0 0 0 1993 0 0 0 1994 0 0 1 1995 0 0 1 TOTAL 0 1 3
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 0 0 0 0.0 0.0 0.0 1987 0 0 0 0.0 0.0 0.0 1988 0 0 0 0.0 0.0 0.0 1989 0 0 0 0.0 0.0 0.0 1990 96 62 33 66.8 107.9 39.2 1991 95 71 25 35.2 33.1 43.1 1992 328 262 66 145.5 142.5 158.9 1993 0 0 0 0.0 0.0 0.0 1994 10 2 7 52.5 13.3 538.7 1995 0 0 0 0.0 0.0 0.0 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 0 0 1986 0 0 1987 0 0 1988 0 0 1989 0 0 1990 0 0 1991 0 0 1992 0 0 1993 0 0 1994 0 0 1995 0 0 TOTAL XXX 1 0
8 GROUP SCHEDULE P - PART 1H - OTHER LIABILITY - section 1
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS ACC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 1,001 241 465 7 1986 108,331 2,072 106,259 41,265 3,892 13,572 15 1987 143,930 2,706 141,224 41,412 2,956 15,295 205 1988 140,322 2,728 137,594 38,288 1,008 13,666 20 1989 138,825 2,811 136,014 42,191 3,245 13,113 87 1990 140,819 2,496 138,324 40,987 1,327 14,902 3 1991 128,769 2,252 126,517 35,458 208 10,933 2 1992 120,599 2,155 118,444 33,003 2,112 9,025 0 1993 111,024 1,962 109,061 23,328 305 5,100 25 1994 112,506 1,993 110,513 11,195 0 2,124 0 1995 111,545 1,893 109,653 4,482 0 546 0 TOTAL XXX XXX XXX 312,610 15,293 98,740 363
(1) (9) (10) (11) (12) ACC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 192 (1) 1,217 XXX 1986 2,238 5,808 56,738 6,845 1987 978 6,226 59,772 7,323 1988 936 6,822 57,747 6,861 1989 1,067 7,295 59,267 7,363 1990 650 7,493 62,053 7,851 1991 598 6,641 52,822 7,307 1992 823 4,852 44,767 6,891 1993 391 3,632 31,730 6,428 1994 296 3,515 16,835 6,034 1995 159 4,103 9,131 4,289 TOTAL 8,327 56,385 452,080 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR ACC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 1,920 150 0 0 1,004 61 0 0 1986 86 0 490 9 45 0 355 6 1987 2,058 250 490 9 1,067 122 355 6 1988 359 0 490 9 186 0 355 6 1989 2,545 0 490 9 1,337 0 355 6 1990 8,692 500 1,150 17 4,575 204 749 12 1991 14,166 1,165 3,738 63 7,412 489 2,626 46 1992 15,286 20 4,357 67 8,054 8 2,902 49 1993 17,441 231 12,051 181 9,055 93 7,728 129 1994 21,388 144 12,882 195 9,361 35 7,016 117 1995 20,248 0 28,225 418 7,817 0 13,389 222 TOTAL 104,190 2,460 64,361 976 49,912 1,012 35,831 601
(21) (22) (23) (24) ACC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 185 2,899 101 1986 84 1,045 19 1987 246 3,829 43 1988 109 1,483 30 1989 337 5,049 77 1990 1,011 15,444 138 1991 1,969 28,148 193 1992 2,159 32,615 302 1993 3,559 49,200 430 1994 4,105 54,259 667 1995 6,066 75,104 1,120 TOTAL 19,830 269,076 3,120
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY ACC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 61,705 3,922 57,783 57.0 189.3 54.4 1987 67,149 3,548 63,601 46.7 131.1 45.0 1988 60,274 1,043 59,231 43.0 38.2 43.0 1989 67,663 3,347 64,316 48.7 119.1 47.3 1990 79,559 2,062 77,497 56.5 82.6 56.0 1991 82,942 1,972 80,970 64.4 87.5 64.0 1992 79,639 2,256 77,382 49.8 104.7 48.9 1993 81,893 963 80,930 (8.4) 49.0 (9.0) 1994 71,586 492 71,094 (289.0) 18.6 (292.9) 1995 84,875 640 84,235 (66.7) 31.0 (119.4) TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID ACC/YR (33) (34) (35) PRIOR XXX 1,770 1,128 1986 567 478 1987 2,289 1,540 1988 840 644 1989 3,026 2,023 1990 9,326 6,118 1991 16,676 11,472 1992 19,556 13,059 1993 29,080 20,120 1994 33,931 20,329 1995 48,055 27,049 TOTAL XXX 165,116 103,960
9 GROUP SCHEDULE P - PART 1H - OTHER LIABILITY section 2
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS REP/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 1986 1987 1988 1989 1990 15 0 15 1991 50 1 49 1992 109 1 107 1993 138 2 136 60 24 1994 158 2 156 8 42 1995 395 108 287 6 4 TOTAL XXX XXX XXX 74 69
(1) (9) (10) (11) (12) REP/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR XXX 1986 1987 1988 1989 1990 1991 1992 1993 26 110 1994 29 79 1995 50 60 TOTAL 105 248 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR REP/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 1986 1987 1988 1989 1990 1991 1992 1993 1994 54 10 0 28 5 1995 474 87 1 241 44 TOTAL 529 96 1 268 49
(21) (22) (23) (24) REP/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 1986 1987 1988 1989 1990 1991 1992 1993 1994 7 103 1995 58 902 TOTAL 64 1,005
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY REP/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 1987 1988 1989 1990 1991 1992 1993 110 110 79.6 80.6 1994 182 0 182 115.0 6.1 116.4 1995 963 1 962 243.6 1.0 335.0 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID REP/YR (33) (34) (35) PRIOR XXX 1986 1987 1988 1989 1990 1991 1992 1993 1994 64 39 1995 560 342 TOTAL XXX 624 381
10 GROUP SCHEDULE P - PART 1I- SPECIAL PROPERTY
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 304 11 210 0 1994 69,533 4,828 64,704 34,982 14 1,402 1 1995 67,714 5,196 62,517 26,986 9 780 0 TOTAL XXX XXX XXX 62,272 34 2,392 1
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 148 10 513 XXX 1994 437 2,429 38,797 XXX 1995 183 1,803 29,560 XXX TOTAL 768 4,242 68,871 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 799 12 26 2 74 1 5 0 1994 464 0 36 3 59 0 7 1 1995 6,088 2 3,613 279 275 0 260 20 TOTAL 7,352 13 3,674 283 408 1 272 21
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 35 924 52 1994 19 582 47 1995 524 10,458 1,141 TOTAL 577 11,965 1,240
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1994 39,398 19 39,380 56.7 0.4 60.9 1995 40,328 309 40,019 59.6 6.0 64.0 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE AC/YR POOLING PERC. UNPAID UNPAID (33) (34) (35) PRIOR XXX 811 113 1994 498 85 1995 9,421 1,038 TOTAL XXX 10,730 1,235
11 GROUP SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX (1,719) 4 242 0 1994 214,863 1,007 213,856 121,474 1,077 1,918 0 1995 212,541 975 211,565 115,835 1,054 1,422 0 TOTAL XXX XXX XXX 235,590 2,135 3,581 0
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 1,946 (96) (1,578) XXX 1994 15,300 12,690 135,005 117,786 1995 8,184 11,159 127,361 101,980 TOTAL 25,429 23,752 260,788 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 201 0 33 0 46 0 11 0 1994 553 2 64 0 130 0 21 0 1995 13,811 65 6,388 30 1,195 5 768 3 TOTAL 14,565 66 6,485 30 1,370 5 800 4
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 45 336 132 1994 91 857 332 1995 1,641 23,700 8,723 TOTAL 1,777 24,893 9,187
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1994 136,941 1,079 135,863 63.7 107.1 63.5 1995 152,218 1,157 151,061 71.6 118.7 71.4 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE AC/YR POOLING PERC. UNPAID UNPAID (33) (34) (35) PRIOR XXX 233 102 1994 615 242 1995 20,104 3,595 TOTAL XXX 20,953 3,939
12 GROUP SCHEDULE P - PART 1K - BONDS
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 4,427 1,242 1,470 458 1994 34,927 2,641 32,286 2,424 0 277 0 1995 35,287 2,866 32,420 1,171 0 86 0 TOTAL XXX XXX XXX 8,021 1,242 1,833 458
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 743 57 4,253 XXX 1994 68 795 3,496 XXX 1995 2 581 1,837 XXX TOTAL 813 1,433 9,587 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 3,280 361 1,190 98 1,163 100 582 48 1994 1,194 0 974 80 424 0 476 39 1995 2,092 0 3,548 296 271 0 657 56 TOTAL 6,566 361 5,712 473 1,859 100 1,715 143
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 349 5,956 284 1994 191 3,141 125 1995 530 6,747 344 TOTAL 1,070 15,844 753
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1994 6,756 119 6,637 19.3 4.5 20.6 1995 8,936 352 8,584 25.3 12.3 26.5 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 4,011 1,945 1994 2,088 1,052 1995 5,344 1,403 TOTAL XXX 11,443 4,401
13 GROUP SCHEDULE P - PART 1L - OTHER (A&H)
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 405 (48) 15 (77) 1994 1,798 176 1,622 690 (1,442) 2 (171) 1995 1,517 1,517 0 162 162 0 0 TOTAL XXX XXX XXX 1,257 (1,327) 18 (249)
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 0 0 545 XXX 1994 1 (2) 2,304 XXX 1995 0 0 0 XXX TOTAL 1 (2) 2,849 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 516 516 1 1 144 144 0 0 1994 155 155 1 1 43 43 0 0 1995 1,892 1,892 115 115 26 26 13 13 TOTAL 2,563 2,563 118 118 213 213 14 14
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 0 0 47 1994 0 0 31 1995 0 0 46 TOTAL 0 0 124
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1994 890 (1,414) 2,304 49.47 (803.86) 141.99 1995 2,209 2,209 0 145.65 145.65 0.00 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 0 0 1994 0 0 1995 0 0 TOTAL XXX 0 0
14 GROUP SCHEDULE P - PART 1R - PRODUCT LIABILITY
(1) PREMIUMS EARNED LOSS PAYMENTS ALLOCATED LAE PAYMENTS AC/YR (2) (3) (4) (5) (6) (7) (8) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR XXX XXX XXX 807 225 541 8 1986 10,273 265 10,008 5,204 219 3,556 28 1987 15,224 276 14,948 4,852 6 3,118 10 1988 16,134 290 15,843 2,958 0 3,638 0 1989 14,373 259 14,114 2,428 0 1,393 0 1990 13,298 218 13,080 1,878 0 1,697 0 1991 10,831 133 10,698 2,209 45 1,103 0 1992 9,395 115 9,281 543 0 570 0 1993 6,069 75 5,994 174 0 327 0 1994 1,231 16 1,216 294 0 88 0 1995 486 6 480 94 0 9 0 TOTAL XXX XXX XXX 21,441 495 16,039 45
(1) (9) (10) (11) (12) AC/YR SALVAGE & SUB UNALLOCATED LOSSES + LAE REPORTED RECEIVED LAE PAID CLAIMS PRIOR 4 10 1,124 XXX 1986 147 546 9,060 670 1987 19 584 8,538 642 1988 9 608 7,204 478 1989 23 554 4,374 380 1990 41 289 3,864 317 1991 98 237 3,504 277 1992 20 153 1,266 240 1993 11 189 690 72 1994 4 190 572 184 1995 4 943 1,046 95 TOTAL 380 4,302 41,241 XXX
LOSSES UNPAID ALLOCATED LAE UNPAID CASE BASIS BULK + IBNR CASE BASIS BULK + IBNR AC/YR (13) (14) (15) (16) (17) (18) (19) (20) DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED DIR.& ASSUMED CEDED PRIOR 2,505 0 0 0 1,144 0 0 0 1986 264 19 2 0 122 10 2 0 1987 1,717 250 2 0 775 105 2 0 1988 591 0 2 0 268 0 2 0 1989 584 0 2 0 276 0 2 0 1990 1,927 0 5 0 867 0 4 0 1991 593 0 15 0 271 0 12 0 1992 1,386 0 17 0 624 0 13 0 1993 420 0 46 1 187 0 36 0 1994 531 0 49 1 247 0 36 0 1995 181 0 107 1 45 0 45 1 TOTAL 10,699 269 247 3 4,828 115 153 2
(21) (22) (23) (24) AC/YR SALVAGE & SUB UNALLOCATED TOTAL OUTSTANDING ANTICIPATED LAE UNPAID RESERVES CLAIMS PRIOR 288 3,937 692 1986 29 390 27 1987 127 2,268 42 1988 51 913 33 1989 55 919 37 1990 169 2,971 41 1991 56 947 23 1992 122 2,163 31 1993 43 731 24 1994 56 919 28 1995 34 410 35 TOTAL 1,030 16,569 1,013
TOTAL LOSSES AND LOSS LOSS AND LOSS EXPENSE PERCENTAGE DISCOUNT FOR EXPENSES INCURRED (INCURRED/PREMIUMS EARNED) TIME VALUE OF MONEY AC/YR (25) (26) (27) (28) (29) (30) (31) (32) DIR.& ASSUMED CEDED NET DIR.& ASSUMED CEDED NET PRIOR XXX XXX XXX XXX XXX XXX 1986 9,724 275 9,449 94.7 103.5 94.4 1987 11,177 371 10,806 73.4 134.2 72.3 1988 8,117 0 8,117 50.3 0.0 51.2 1989 5,293 0 5,293 36.8 0.0 37.5 1990 6,835 0 6,835 51.4 0.0 52.3 1991 4,496 45 4,451 41.5 34.2 41.6 1992 3,429 0 3,429 36.5 0.3 36.9 1993 1,422 1 1,421 23.4 1.4 23.7 1994 1,492 1 1,491 121.2 6.9 122.7 1995 1,458 2 1,456 300.2 31.0 303.7 TOTAL XXX XXX XXX XXX XXX XXX
INTERCOMPANY LOSSES LAE POOLING PERC. UNPAID UNPAID AC/YR (33) (34) (35) PRIOR XXX 2,505 1,433 1986 247 142 1987 1,469 799 1988 593 321 1989 586 333 1990 1,932 1,040 1991 608 339 1992 1,403 759 1993 465 266 1994 580 339 1995 286 124 TOTAL XXX 10,674 5,895
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