Exhibit 99.2
Analyst contact:
Dennis E. McDaniel
Vice President, Financial Accounting and Investor Relations
513-603-2197
dennis.mcdaniel@ocas.com
Media contact:
Cindy L. Denney
Assistant Vice President, Corporate Communications
513-603-2074 (ofc.), 513-703-7372 (cell)
cindy.denney@ocas.com
For Immediate Release
Ohio Casualty Corporation Announces
New Strategic Plan
FAIRFIELD, Ohio, June 11, 2001 -- Ohio Casualty Corporation (NASDAQ: OCAS)
today announced a new Corporate Strategic Plan. This plan is designed to meet
the Corporation's long-term financial objectives and improve its financial
performance significantly in the next two-and-one-half years.
"Our Vision is to be a top-flight mid-tier property and casualty insurer,"
explained President and CEO Dan Carmichael. "We plan to improve our speed and
flexibility in serving agents and policyholders; further develop our local
market knowledge and agency relationships; and rigorously execute the
Corporate Strategic Plan through underwriting, pricing and claims handling.
Our five-year goal is to focus on profit, achieving an after-tax return on
equity of 12%."
To achieve these goals, the Corporation announced in April a new structure
focused on three Business Units: Standard Commercial Lines, Specialty
Commercial Lines and Personal Lines. The organization will execute the
Corporate Strategic Plan, regaining excellence in front-line underwriting,
pricing and claims handling; taking a bottom-line, disciplined approach to
working with its independent agency plant; setting clear guidance about the
products it will offer; and competing with a targeted geographic approach to
business.
Business Unit Targets
Specific, measurable short- and long-term targets have been set for each
Business Unit, along with action plans for achieving these targets.
Standard Commercial Lines
The 2000 combined ratio for Standard Commercial Lines was 130.0%, including a
38.2% expense ratio and a 91.8% loss & loss adjustment expense (LAE) ratio.
The plan calls for improvements each year in these areas, with the 2003
target a 104.5% combined ratio, including a 72.4% loss & LAE ratio and a
32.1% expense ratio. "We plan a national strategy, targeting the small- to
mid-sized customers; pursuing aggressive rate increases, stringent
underwriting and process improvements; and capitalizing on our strong agency
relationships to improve our results," said Standard Commercial Lines
Executive Vice President and Chief Operating Officer Jeffery Haniewich. "We
expect our net premiums written to decrease in 2001 as we shed unprofitable
business, but are targeting an increase in 2003 to roughly $760 million, or
about a 5% increase over net premiums written for 2000."
Specialty Commercial Lines
Commercial excess/umbrella and fidelity/surety bonds make up the Specialty
Commercial Lines Unit. For the year 2000, these lines produced a combined
ratio of 79.8%, with approximately $107 million of net premiums written. "We
plan to continue to prudently grow our highly profitable umbrella and bond
businesses, pursuing a national strategy," explained Executive Vice President
and Chief Operating Officer John Busby. "Our 2003 plan is to grow to $149
million in net premiums written at a 92.8% combined ratio." Mr. Busby added
that Ohio Casualty plans to discontinue writing its other Specialty
Commercial Lines product, farmowners insurance, which is offered only in
Michigan, Ohio, Illinois, Indiana and Kentucky. Continuing appropriate
reinsurance coverage to mitigate risks is a key component of the Specialty
Commercial Lines strategy.
Personal Lines
Immediate action will be taken to improve the 2000 combined ratio of 113.5%
for this line. According to Executive Vice President and Chief Operating
Officer Elizabeth Riczko: "We will improve the pricing of the book and
implement credit scoring to improve our profitability. Our goal is to achieve
by 2003 a combined ratio of 102.9%, with an expense ratio of 29.3% and a loss
and LAE ratio of 73.6%. Following our actions to eliminate unprofitable
business, we plan to grow profitably in this line, to approximately $560
million net premiums written targeted for 2003."
Also being announced is the Corporation's intention to withdraw from writing
Personal Lines products in certain states. "A fundamental part of the
Corporate Strategic Plan for personal lines is a deep awareness of our
markets. We will narrow our focus to compete in a core group of 23 states. We
are announcing our plans to withdraw from writing all Personal Lines products
in eight states: Alabama, Connecticut, Louisiana, Minnesota, Mississippi,
North Dakota, Virginia and Washington," added Mrs. Riczko. "We also plan to
limit our personal lines business and research withdrawal or other options in
the remaining non-core states."
Overall Corporate Financial Goals
Successful execution of the Corporate Strategic Plan is expected to improve
the 2000 Corporate combined ratio from 119.2% to 102.5% in 2003. We are
targeting an improvement in the expense ratio from 34.8% in 2000 to 32.1% in
2003; and from the 2000 84.4% loss & LAE ratio to 70.4% in 2003.
Premium growth for the Corporation is expected to be relatively flat through
2003 as it focuses on profitability. Total net premiums written were $1.505
billion in 2000 and projected to be $1.478 billion in 2003.
The attached financial data table summarizes the revenues and underwriting
results of the Corporation for 2000 and projected revenues and underwriting
results for 2001 through 2003, including the Business Unit targets. The
Corporation's ability to meet the projected financial results will be
influenced by a number of factors, including those identified in the forward-
looking statement section.
"We plan to strengthen our financial position by maintaining a high quality
balance sheet," added Mr. Carmichael. "We are evaluating our use of
reinsurance, enhancing income through asset reallocation and maintaining a
conservative reserve posture."
Expense Savings
Claims Operation
Based in part on recommendations resulting from an operational study
completed earlier this year by an outside firm, as well as internal
evaluations, the Claims Operation expects to capture $30 to $40 million in
annual reduced loss costs in the next 18 months. These projected savings will
come from improvements in auto repair initiatives, fraud detection and other
claims programs and initiatives.
Early Retirement Program
The Board of Directors approved an early retirement incentive program to be
paid from The Ohio Casualty Insurance Company Employees Retirement Plan.
Employees who are eligible for the incentive program are current employees
who are at least age 55 and have completed at least 10 years of vesting
service in the Employees Retirement Plan, as of June 30, 2001. Participants
age 65 or older as of June 30, 2001 are also eligible for the incentive
program, regardless of their years of service. There are 335 employees
eligible for this offer.
"We also continue to look for additional expense savings, including reduction
of staff, in our operation as we improve processes and leverage our
automation capabilities," added Mr. Carmichael.
Summary
"We believe that executing our Corporate Strategic Plan will improve our
results and help us achieve our five-year goal of a 12% after-tax return on
equity," stated Mr. Carmichael. "Once we have improved the profitability of
our lines and the execution of our strategy, our
future will be driven by top-line growth that maintains our profitability.
Our intention is to continue to improve the use of technology in our
organization to cost-effectively support our future growth and expansion in
additional agencies. Our core competency in building strong relationships
with our agency partners will remain key to our success."
Webcast Planned
Financial Presentation Webcast
President and Chief Executive Officer Dan Carmichael, along with other
members of the Corporation's senior management, will host a financial
presentation with financial analysts and investors in New York to present and
discuss details of the Corporation's new Corporate Strategic Plan and related
matters. The presentation will be on Tuesday, June 19, 2001, from 8 to 9:30
a.m. EDT. The financial presentation will be Webcast simultaneously in a
listen only mode via Investor Broadcast Network's Vcall Website, located at
http://www.vcall.com. To listen to the live call, please go to the Website at
least 15 minutes early to register, download, and install any necessary audio
software. There is no charge to access the call.
Corporate Profile
Ohio Casualty Corporation is the holding company of The Ohio Casualty
Insurance Company, which is one of six property-casualty subsidiary companies
that make up Ohio Casualty Group. The Ohio Casualty Insurance Company was
founded in 1919 and is licensed in 49 states. Ohio Casualty Group is ranked
36th among U.S. property/casualty insurance groups based on net premiums
written (Best's Review, July 2000). The Group's member companies write auto,
home and business insurance. Ohio Casualty Corporation trades on the NASDAQ
Stock Market under the symbol OCAS and has assets of approximately $4.44
billion as of March 31, 2001.
Forward-looking Statements
Certain of the statements contained in this Press Release, including the
Statutory Property and Casualty Projected Results for the Years 2001-2003 and
all other financial forecasts and projections, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act. Forward-
looking statements are typically identified herein by words or phrases such
as "expect," "project," "forecast," "plan," "goal," and similar expressions
or future or conditional verbs such as "will," "should," and "would." Future
premium levels, loss experience, operating expenses and profits are all
influenced by a number of factors, including those identified below, all of
which are inherently difficult to forecast. Consequently, actual results
may differ materially from those included in the forward-looking statements.
Among the factors that could cause actual results to differ materially from
the forward-looking statements in this Press Release are the following:
General Industry Factors
- - Pricing environment for the Corporation's insurance products and general
competition
- - Changes in governmental regulation
- - Fluctuations in interest rates and performance of the financial markets
- - General economic and market conditions
Corporation-Specific Factors
- - Ability of the Corporation to successfully execute its Corporate
Strategic Plan
- - Ability of the Corporation to refinance its existing bank debt
- - Ability of the Corporation to achieve and maintain planned price
increases for its insurance products
- - Ability of the Corporation to achieve and maintain planned expense
savings
- - Ability of the Corporation to retain key employees and agents having the
experience and skills necessary to execute the Corporation's Strategic Plan
- - Ability of the Corporation to attain planned benefits from technology
initiatives
- - Ability of the Corporation to maintain sufficient financial strength
ratings
- - Adequacy of the Corporation's property and casualty reserves
- - Catastrophe losses and other adverse claims experience
- - Availability and pricing of reinsurance
- - Litigation and administrative proceedings
Other factors that could cause actual results to differ include those matters
set forth in the Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000. The Corporation disclaims any obligation or
intention to publicly update or revise any of the forward-looking statements
contained in this Press Release, whether as a result of new information,
future events or otherwise.
Table follows:
Ohio Casualty Corporation
Statutory Property and Casualty Projected Results for the Years 2001-2003
($ in millions) (Unaudited)
Actual
Twelve
Months
Ended
Dec. 31, Projected Twelve Months Ended
2000 2001 2002 2003
-------- ---------------------------------
Property and Casualty
Net Premiums Written
Standard Commercial Lines $ 721.7 $ 700.0 $ 735.0 $ 762.0
Specialty Commercial Lines 107.3 121.0 142.0 149.0
Personal Lines 676.4 584.0 554.0 567.0
-------- -------- -------- --------
Total All Lines $1,505.4 $1,405.0 $1,431.0 $1,478.0
Loss and Loss Adjustment Expense Ratio
Standard Commercial Lines 91.8% 80.5% 72.5% 72.4%
Specialty Commercial Lines 35.4% 45.5% 49.1% 50.6%
Personal Lines 83.9% 84.8% 78.2% 73.6%
------ ------ ------ ------
Total All Lines 84.4% 79.5% 72.5% 70.4%
Underwriting Expense Ratio
Standard Commercial Lines 38.2% 36.5% 32.9% 32.1%
Specialty Commercial Lines 44.4% 43.4% 42.3% 42.2%
Personal Lines 29.6% 29.5% 29.5% 29.3%
------ ------ ------ ------
Total All Lines 34.8% 34.2% 32.5% 32.1%
Statutory Combined Ratio
Standard Commercial Lines 130.0% 117.0% 105.4% 104.5%
Specialty Commercial Lines 79.8% 88.9% 91.4% 92.8%
Personal Lines 113.5% 114.3% 107.7% 102.9%
------ ------ ------ ------
Total All Lines 119.2% 113.7% 105.0% 102.5%
Footnotes:
1) The data included in this table have been prepared in accordance with
statutory accounting principles (SAP), which differ from generally accepted
accounting principles (GAAP). For a description of certain of the material
differences between SAP and GAAP, see footnote 16 to the Corporation's
consolidated financial statements for the fiscal year ended December 31,
2000, which are included in the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000.
2) The forecasted financial results appearing in the table for each of the
three fiscal years ending December 31, 2001, December 31, 2002, and December
31, 2003 have been prepared by management of the Corporation and have not
been reviewed or examined by its independent public accountants. These
forecasted financial results omit certain information and disclosures which
would be required under GAAP. The forecasted financial results are based upon
various assumptions of the Corporation's management which are not detailed in
the table or the Press Release, including assumptions as to product pricing,
loss experience, and expense savings. The achievability of these assumptions
will depend in part on future events over which the Corporation will have no
control. Certain of the factors which may affect the assumptions underlying
these forecasts are decribed under the heading "Forward-Looking Statements"
of this Press Release. Certain assumptions will not materialize or be
achieved, because events will not occur as forecasted. Consequently, there
can be no assurance that the actual operating results of the Corporation will
correspond to the financial forecast in the table above.
3) The "Total All Lines" data for the Actual Twelve Months Ended Dec. 31,
2000 included in this table has been audited. It is the same as the "Total
Property & Casualty" data included in Note 13 - Segment Information on the
Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 2000. The Standard Commercial Lines, Specialty Commercial Lines, and
Personal Lines components of Total All Lines have not been audited as they
represent new reportable segments for the Corporation beginning second
quarter 2001, due to a change in the Corporation's internal management
structure. As indicated in footnote 2 above, none of the forecasted
financial results appearing in the table have been audited.