Exhibit 99
Analyst contact:
Dennis E. McDaniel
Vice President and Controller
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
UPDATES PROJECTED FINANCIAL RESULTS
FAIRFIELD, Ohio, February 5, 2002 --- Ohio Casualty Corporation (Nasdaq:OCAS)
today announced an update to the projected financial results of its Corporate
Strategic Plan. The original objectives were part of a new Corporate
Strategic Plan announced in June 2001. The projected financial results for
2002 and 2003 are being updated to reflect the recently announced exit from
the New Jersey private passenger automobile market, recent trends in loss
ratios, and changes in reinsurance costs and the insurance pricing
environment.
President and CEO Dan Carmichael, CPCU, commented "Our Corporate Strategic
Plan continues to include a focus on profit, with a long-term objective of
achieving an after-tax return on equity of 12%. While the expense ratio is
higher than the original projections due to changes in our mix of business and
in the structure of certain reinsurance contracts, we believe our projections
represent significant progress in our return to desired profitability. Our
targeted combined ratio of 102.0% in 2003 is 50 basis points better than the
forecast as of June 2001."
The Standard Commercial Lines business unit has a target statutory combined
ratio of 107.4% for 2002 and 102.5% for 2003. Net premiums written are
projected to be approximately $755 million for 2002 and $820 million for 2003.
Significant improvement in the loss ratio occurred during 2001 and continued
improvement is projected as a result of strong renewal price increases and
quality underwriting. The underwriting expense ratio reflects costs of
operating dual policy issuance systems until the full benefit of increased
investment in technology is realized in late 2003.
For the Specialty Commercial Lines business unit, the statutory combined ratio
projections are 93.7% for 2002 and 96.7% for 2003. Projections for net
premiums written are approximately $139 million for 2002 and $162 million for
2003. Higher reinsurance costs offset much of the gross premium written
growth in 2002. Elimination of ceding commission on umbrella reinsurance
beginning 2002 increased the specialty commercial lines expense ratio by
approximately 3 points for both 2002 and 2003. Changes in ceding commissions
have no bottom line profitability impact because reinsurers require an
offsetting amount in ceded premiums.
The Personal Lines business unit targets a combined ratio of 107.4% for 2002
and 102.5% for 2003. Projected net premiums written are approximately $506
million for 2002 and $467 million for 2003. In 2003, slower improvement in
the homeowners line of business is expected to offset much of the expected
improvement in profitability from exiting New Jersey private passenger auto.
Elimination of the New Jersey private passenger auto business is projected to
improve personal lines underwriting profit despite a related increase in the
personal lines expense ratio.
For the Ohio Casualty Group, projections for the statutory combined ratio are
106.5% in 2002 and 102.0% in 2003. Net premiums written projections are
approximately $1.40 billion for 2002 and $1.45 billion for 2003. The revised
premium projections are less than the projections as of June 2001 due to the
recently announced exit from the New Jersey private passenger auto market.
The attached financial data table summarizes the actual revenues and
underwriting results of the Corporation for 2000 and 2001 and projected
revenues and underwriting results for 2002 and 2003, including business unit
targets. Achieving the targeted combined ratios is projected to result in
2002 operating income of approximately $57 million with net income including
projected realized gains of approximately $120 million, for a projected return
on estimated average shareholders equity of approximately 11%. For 2003,
achieving the targeted combined ratios is projected to result in 2003
operating income of approximately $97 million with net income including
projected realized gains of approximately $105 million, for a projected return
on estimated average shareholders equity of approximately 9%. The
Corporation's ability to meet the projected financial results will be
influenced by a number of factors, including those identified in the forward-
looking statements section.
Elimination of the previously announced New Jersey private passenger auto
business, which had relatively low commissions and low variable processing
costs, increases the overall underwriting expense ratio for the Group.
Umbrella reinsurance purchased for 2002 did not include a ceding commission
that had been included in recent years. Such ceding commissions consequently
increase ceded premiums, resulting in a neutral bottom line impact, but ceding
commissions do serve to decrease underwriting expense ratios on a net of
reinsurance basis. The impact of both of these eliminated items increased the
underwriting expense ratio by 1.6 points as summarized on the table below:
Projected Year 2002 NJ Auto Ceding Revised Projection
Total All Lines Revised Business Commission As If Eliminated
($ in millions) Projection Eliminated Eliminated Items Were Restored
- --------------------- ---------- ---------- ---------- -------------------
Net Premiums Written $1,400.0 $(99.0) $6.5 $1,492.5
Underwriting Expenses 473.2 (14.0) 6.5 480.7
Expense Ratio 33.8% 14.1% 100.0% 32.2%
Summary
"We are pleased with progress toward executing our Corporate Strategic Plan,"
stated Mr. Carmichael. "While we will continue to refine our Strategic Plan,
we believe we are on track toward achieving our five-year goal of 12% after-
tax return on equity.
Conference Call
The Corporation will conduct a conference call to discuss information included
in this news release and related matters at 1:30 p.m. EST on Tuesday, February
5, 2002. The conference call 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 fifteen 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
37th among U.S. property/casualty insurance groups based on net premiums
written (Best's Review, July 2001). The Group's member companies write auto,
home and business insurance. Ohio Casualty Corporation trades on the NASDAQ
Stock Market under the symbol OCAS and had assets of approximately $4.52
billion as of December 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 2002-2003 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
- - Acts of war and terrorist activities
- - 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 2002-2003
($ in millions) (Unaudited)
Actual Projected
Twelve Months Ended Twelve Months Ended
Dec. 31, 2000 Dec. 31, 2001 2002 2003
----------------------------- -------------------
Property and Casualty
Net Premiums Written
Standard Commercial Lines $ 721.7 $ 689.6 $ 755.0 $ 820.0
Specialty Commercial Lines 107.3 136.1 139.0 162.0
Personal Lines 676.4 646.5 506.0 467.0
-------- -------- -------- --------
Total All Lines $1,505.4 $1,472.2 $1,400.0 $1,449.0
Loss and Loss Adjustment Expense Ratio
Standard Commercial Lines 91.8% 79.8% 72.1% 68.7%
Specialty Commercial Lines 35.4% 52.4% 48.1% 52.4%
Personal Lines 83.9% 85.5% 79.0% 73.9%
-------- -------- -------- --------
Total All Lines 84.4% 79.9% 72.6% 68.7%
Underwriting Expense Ratio
Standard Commercial Lines 38.2% 36.4% 35.3% 33.7%
Specialty Commercial Lines 44.4% 38.4% 45.6% 44.4%
Personal Lines (a) 29.6% 27.4% 28.4% 28.6%
-------- -------- -------- --------
Total All Lines (a) 34.8% 32.6% 33.8% 33.3%
Statutory Combined Ratio
Standard Commercial Lines 130.0% 116.2% 107.4% 102.5%
Specialty Commercial Lines 79.8% 90.8% 93.7% 96.7%
Personal Lines (a) 113.5% 112.9% 107.4% 102.5%
-------- -------- -------- --------
Total All Lines (a) 119.2% 112.6% 106.5% 102.0%
(a) Ratios shown for 2001 exclude the effects of $40.6 million New Jersey
renewal obligation transfer fee.
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 actual or 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 described 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 2001, 2002, or 2003 financial
results appearing in the table have been audited.