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
REPORTS SECOND QUARTER 2002 EARNINGS
FAIRFIELD, Ohio, July 30, 2002 --- Ohio Casualty Corporation (Nasdaq: OCAS)
today announced net income of $13.1 million, or $0.21 per share, for the
second quarter ended June 30, 2002. In the same quarter of 2001, the
Corporation reported net income of $16.7 million, or $0.28 per share.
After-tax operating income, which differs from net income by the exclusion of
realized investment gains (losses), for the second quarter of 2002 was $6.9
million, or $0.11 per share, compared with an operating loss of $10.9 million,
or $0.18 per share for the second quarter of 2001. Underwriting actions and
improved pricing led to overall improved loss results and operating income.
Excluding the impact of the New Jersey private passenger auto business, which
began to be non-renewed in March 2002, after-tax operating income was
approximately $10 million, or $0.16 per share. "The New Jersey private
passenger auto impact validates our decision to exit the market," said
President and Chief Executive Officer Dan Carmichael, CPCU. "The overall
results for the quarter are consistent with the operating income targeted
results for full year 2002. Better than usual second quarter catastrophe
losses offset the poor New Jersey private passenger auto results."
Consolidated after-tax realized investment gains amounted to $6.2 million, or
$0.10 per share, for the quarter ended June 30, 2002. For the three months
ended June 30, 2001, after-tax realized investment gains were $27.6 million,
or $0.46 per share. "Over the past 18 months, the Group has reduced its
equity holdings through the sale of equity securities. By the end of June,
the Group was very close to its objective of a 50% ratio of equity securities
to statutory surplus," commented Chief Financial Officer Donald McKee.
Consolidated before-tax net investment income for the second quarter of 2002
was $50.7 million, or $0.82 per share, compared with $52.1 million, or $0.86
per share, in the second quarter of 2001. Although fixed income assets have
increased over the past year, a decline in interest rates on high quality
fixed income investments led to the decrease in investment income.
At June 30, 2002, statutory surplus was $763.2 million.
Year-to-date Results
Net income for the six months ended June 30, 2002, totaled $39.9 million, or
$0.65 per share, compared with net income of $12.6 million, or $0.21 per
share, for the same period of 2001. Year-to-date operating income was $18.9
million, or $0.31 per share, compared with an operating loss of $23.2 million,
or $.39 per share, in the same period of 2001. After-tax realized capital
gains for the first six months of 2002 were $21.0 million, or $0.34 per share,
compared with capital gains of $35.8 million, or $.60 per share, in the same
period of 2001. Before-tax net investment income was $101.6 million for the
six months ending June 30, 2002, compared with $103.4 million in 2001.
Property-Casualty Operations
The table below summarizes the statutory net premiums written for the business
units:
Statutory
Net Premiums Written Second Quarter % YTD June 30 %
($ in millions) 2002 2001 Chg 2002 2001 Chg
- -------------------- ---- ---- --- ---- ---- ---
Commercial Lines $206.2 $185.7 11.0 $399.1 $364.1 9.6
Specialty Lines 45.3 36.9 22.7 84.8 67.0 26.6
Personal Lines 123.7 166.7 (25.7) 266.3 329.6 (19.2)
------ ------ ------ ------
All Lines $375.2 $389.4 (3.6) $750.1 $760.7 (1.4)
Personal Lines 2002 net premiums written declined as expected, driven by
management decisions to cancel unprofitable agents and withdraw from New
Jersey private passenger auto and other selected markets. These actions
caused a $42.6 million decrease in Personal Lines net premiums written in the
second quarter of 2002. The Group's exit from the New Jersey private
passenger auto market, which began in March 2002, made up $30.3 million of the
decrease.
Renewal price increases had a positive impact on net premiums written. The
second quarter 2002 average renewal price increase of 14.5%, including
exposure changes, for
the commercial lines direct premiums written increased from the 13.9% average
renewal price increase in the same period of 2001. The first quarter 2002
average renewal price increase for commercial lines was 14.9%. For
commercial umbrella business in the specialty lines business unit, average
renewal price increases were 37.7% for the second quarter of 2002, compared
with 21.1% for the same quarter in 2001. First quarter 2002 average renewal
price increases for commercial umbrella business were 38.4%.
The statutory combined ratio is a commonly used gauge of statutory
underwriting performance measuring the percentage of premium dollars used to
pay insurance losses and related expenses. The table below summarizes the
statutory combined ratio results by business unit for recent periods:
Calendar Year Calendar Year
Second Quarter Year-To-Date June 30,
Statutory Combined Ratio 2002 2001 2002 2001
- ------------------------ ---- ---- ---- ----
Commercial Lines 105.6% 117.9% 106.9% 120.7%
Specialty Lines 92.7% 78.1% 88.7% 74.7%
Personal Lines 117.1% 114.6% 112.0% 114.4%
All Lines 109.3% 113.0% 107.8% 114.1%
The improvement in the All Lines 2002 statutory combined ratios from the
comparable periods of 2001 is attributable to favorable loss results and price
increases. Improvement in the Commercial Lines loss ratio was the major
driver of the favorable All Lines loss results. The second quarter 2002
calendar year Commercial Lines loss ratio improved 9.9 points compared with
the same period of 2001. The Personal Lines results were negatively impacted
by poor results in the New Jersey private passenger auto market. Poor New
Jersey private passenger auto results added 6.6 points to the second quarter
2002 countrywide Personal Lines loss ratio and 2.9 points to the second
quarter 2002 countrywide All Lines loss ratio. In 2001, the New Jersey
private passenger auto results lowered the second quarter Personal Lines loss
ratio by 0.9 points while adding 0.3 points to the All Lines loss ratio.
The statutory loss and loss adjustment expense ratios were impacted negatively
in 2002 for adjustments to the provision for prior years' business, primarily
for workers' compensation and general liability. In total, this adverse
development for prior years' losses and loss adjustment expenses added 1.8
points to the statutory combined ratio.
The statutory loss adjustment expense ratio for the second quarter of 2002 was
14.7%, 3.1 points higher than the second quarter 2001 loss adjustment expense
ratio of 11.6%. The increase is partially the result of expenditures made to
implement loss cost savings initiatives in order to improve loss results while
providing superior claims service to policyholders. A portion of the increase
is also due to increased estimates of legal costs on claims from prior years.
Catastrophe losses in the second quarter of 2002 were $10.3 million, a
decrease of $8.6 million from the same period of 2001. Catastrophe losses
added 2.8 points to the
statutory combined ratio in the second quarter of 2002. In the second
quarter of 2001, catastrophes added 5.0 points to the combined ratio.
Historically, the Group has incurred higher catastrophe losses in the second
and third quarters than in the first and fourth quarters as indicated by the
chart below. The chart shows a 7-year historical catastrophe impact on the
loss ratio and earnings per share:
7-Year Historical Catastrophe Impact on the Loss Ratio and Earnings Per Share
(All lines of Business)
Loss Ratio Point Impact Q1 Q2 Q3 Q4 Annual
- ----------------------- ---- ---- ---- ---- ------
1995 - 2001 Historical Average 1.9 5.4 3.4 1.2 3.0
2002 Actual 0.9 2.8
<CAPTION
Earnings Per Share Impact Q1 Q2 Q3 Q4 Avg Qtr
- ------------------------- ---- ---- ---- ---- -------
1995 - 2001 Historical Average $0.09 $0.28 $0.18 $0.06 $0.15
2002 Actual $0.05 $0.17
The second quarter 2002 statutory underwriting expense as a percent of net
premiums written was 33.2%, compared with 31.3% in the comparable quarter of
2001. The exit from the New Jersey private passenger auto market, which had
relatively low commissions and low variable processing costs, has caused an
expected increase to the underwriting expense ratio. The elimination of
ceding commissions received on umbrella premiums ceded to reinsurers, as
previously announced in the February 5, 2002 Corporate Strategic Plan update,
also contributed to the increase in the underwriting expense ratio. A
decrease in policyholder dividends positively impacted the second quarter 2001
underwriting expense ratio. These factors were the primary reasons for the
increase in underwriting expense ratio between quarters.
As of June 30, 2002, the employee count declined to 3,127, compared with 3,459
at June 30, 2001, and 3,365 at December 31, 2001.
Assets, Investments and Shareholders' Equity
Consolidated corporate assets were $4.59 billion on June 30, 2002, compared
with $4.52 billion at December 31, 2001. Investments in securities were $3.01
billion at cost, with an estimated fair market value of $3.38 billion at June
30, 2002, compared with $2.89 billion at cost, with an estimated fair market
value of $3.32 billion at December 31, 2001. Shareholders' equity was $1.10
billion at June 30, 2002, compared with $1.08 billion at December 31, 2001.
Book value per share at June 30, 2002 was $18.12, compared with $17.97 at
December 31, 2001.
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, July 30,
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 $4.59
billion as of June 30, 2002.
Ohio Casualty Corporation publishes forward-looking statements relating to
such matters as anticipated financial performance, business prospects and
plans, regulatory developments and similar matters. The statements contained
in this news release that are not historical information, are forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides a
safe harbor under the Securities Act of 1933 and the Securities Exchange Act
of 1934 for forward-looking statements. The operations, performance and
development of the Corporation's business are subject to risks and
uncertainties which may cause actual results to differ materially from those
contained in or supported by the forward looking statements in this report.
The risks and uncertainties that may affect the operations, performance,
development and results of the Corporation's business include the following:
changes in property and casualty reserves; catastrophe losses; premium and
investment growth; product pricing environment; availability of credit;
changes in government regulation; performance of financial markets;
fluctuations in interest rates; availability and pricing of reinsurance;
litigation and administrative proceedings; rating agency actions; acts of war
and terrorist activities; ability of Ohio Casualty to retain business acquired
from the Great American Insurance Company; ability to achieve targeted expense
savings; ability to achieve premium targets and profitability goals; and
general economic and market conditions.
Ohio Casualty Corporation undertakes no obligation to publicly release any
revisions to the forward-looking statements contained in this release, or to
update them to reflect events or circumstances occurring after the date of
this release, or to reflect the occurrence of unanticipated events.
(Table Follows)
OHIO CASUALTY CORPORATION
EARNINGS FOR THE SECOND QUARTER OF 2002
(in thousands)
(2002 Data Unaudited)
Three Months Ended
June 30
2002 2001
--------------------------
Premiums and finance charges earned $ 364,708 $ 376,575
Investment income less expenses,
before tax $ 50,700 $ 52,120
Investment gain (loss) realized,
before tax $ 9,491 $ 42,419
Total Revenues $ 424,899 $ 471,114
Operating income (loss), after tax $ 6,895 $ (10,922)
Per share $ 0.11 $ (0.18)
Investment gain (loss) realized,
after tax $ 6,169 $ 27,573
Per share $ 0.10 $ 0.46
Net income (loss), after tax $ 13,064 $ 16,651
Per share $ 0.21 $ 0.28
Average shares outstanding - Diluted 61,496 60,089
Statutory property and casualty:
Premium written $ 375,246 $ 389,383
Combined ratio 109.3% 113.0%
Six Months Ended
June 30
2002 2001
--------------------------
Premiums and finance charges earned $ 725,715 $ 760,070
Investment income less expenses,
before tax $ 101,602 $ 103,400
Investment gain (loss) realized,
before tax $ 32,322 $ 55,032
Total Revenues $ 859,639 $ 918,502
Operating income (loss), after tax $ 18,928 $ (23,216)
Per share $ 0.31 $ (0.39)
Investment gain (loss) realized,
after tax $ 21,009 $ 35,772
Per share $ 0.34 $ 0.60
Net income (loss), after tax $ 39,937 $ 12,556
Per share $ 0.65 $ 0.21
Average shares outstanding 61,287 60,080
Statutory property and casualty:
Premium written $ 750,147 $ 760,732
Combined ratio 107.8% 114.1%
Supplemental Information as of June 30
Total assets $4,644,243 $4,506,289
Investments in securities $3,384,805 $3,227,816
Agent relationships asset $ 227,888 $ 250,283
Total liabilities $3,545,820 $3,420,138
Loss & loss adj expense reserves $2,246,124 $1,973,969
Notes payable $ 198,902 $ 210,487
Total shareholders' equity $1,098,423 $1,086,151
Number of common shares outstanding 60,610 60,073
Statutory policyholders' surplus $ 763,235 $ 793,680
For more information and financial supplements, visit our
home page at www.ocas.com