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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-5544
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
THE OHIO CASUALTY INSURANCE COMPANY EMPLOYEE SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Ohio Casualty Corporation
9450 Seward Road
Fairfield, OH 45014
Page 1 of 14
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REQUIRED INFORMATION
The Ohio Casualty Insurance Company Employee Savings Plan ("Plan") is subject
to the Employee Retirement Income Security Act of 1974 ("ERISA"). Therefore,
in lieu of the requirements of Items 1-3 of Form 11-K, the financial
statements of net assets available for the benefits of the Plan as of
December 31, 2002 and 2001, and the changes in net assets available for
benefits for the year ended December 31, 2002, which have been prepared in
accordance with the financial reporting requirements of ERISA, are attached
hereto as Appendix 1 and incorporated herein by this reference.
The following exhibits are being filed herewith:
Exhibit No. Description
- ---------- -----------
23 Independent Accountant's Consent
99.1 Certification of Chief Executive Officer of Ohio Casualty
Corporation in accordance with Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer of Ohio Casualty
Corporation in accordance with Section 906 of the
Sarbanes-Oxley Act of 2002
2
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE OHIO CASUALTY INSURANCE COMPANY
EMPLOYEE SAVINGS PLAN
By: The Ohio Casualty Insurance Company Employee Savings Plan Retirement
Committee
June 26, 2003 /s/ Howard L. Sloneker III
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Howard L. Sloneker III
Senior Vice President
3
APPENDIX 1
THE OHIO CASUALTY EMPLOYEE SAVINGS PLAN
FINANCIAL STATEMENTS OF NET ASSETS AVAILABLE FOR THE BENEFITS OF THE PLAN AS
OF DECEMBER 31, 2002 AND 2001, AND THE CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2002, SUPPLEMENTAL SCHEDULES AS OF
AND FOR THE YEAR ENDED DECEMBER 31, 2002, AND INDEPENDENT ACCOUNTANT'S
REPORT.
4
THE OHIO CASUALTY EMPLOYEE SAVINGS PLAN
TABLE OF CONTENTS
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Pages
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Report of Independent Auditors......................................... 6
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2002 and 2001............................... 7
Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 2002................. 8
Notes to the Financial Statements...................................... 9-13
Supplement Schedule:
Schedule H, Line 4i - Schedule of Assets (Held At End of Year)... 14
5
Report of Independent Auditors
We have audited the accompanying statements of net assets available for
benefits of The Ohio Casualty Insurance Company Employee Savings Plan ("the
Plan") as of December 31, 2002 and 2001, and the related statement of changes
in net assets available for benefits for the year then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 net assets available for benefits of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the year then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedule
of assets (held at end of year) as of December 31, 2002, is presented for
purposes of additional analysis and is not a required part of the financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audit of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/Ernst & Yount LLP
Ernst & Young LLP
Cincinnati, Ohio
June 13, 2003
6
The Ohio Casualty Insurance Company Employee Savings Plan
Statements of Net Assets Available For Benefits
December 31,
2002 2001
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Assets
Cash $ 1,460,516 $ 1,930,469
Investments, at fair value 106,359,413 128,352,033
Accrued interest 1,681 3,408
Contribution receivables:
Employer 96,303 -
Participants 256,666 -
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Total receivables 352,969
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Net assets available for benefits $108,174,579 $130,285,910
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See accompanying notes
7
The Ohio Casualty Insurance Company Employee Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2002
Additions
Investment income:
Net depreciation in fair value of investment $ (16,111,986)
Interest and dividends 2,062,919
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(14,049,067)
Contributions:
Participants 9,075,438
Employer 2,965,134
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12,040,572
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Total additions (2,008,495)
Deductions
Benefits paid directly to participants 20,085,866
Administrative expenses 16,970
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20,102,836
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Net decrease (22,111,331)
Net assets available for benefits:
Beginning of year 130,285,910
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End of year $ 108,174,579
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See accompanying notes
8
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements
December 31, 2002
1. Accounting Policies:
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The accompanying financial statements have been prepared on the accrual
basis of accounting.
A. Investment securities are stated at fair value. Shares of mutual
funds are valued at quoted market prices, which represent the net
asset values of shares held by the Ohio Casualty Insurance Company
Employee Savings Plan (the Plan) at year-end.
Securities traded on a national securities exchange, including Ohio
Casualty Corporation common stock, are valued at the last recorded
sales price of the last business day of the plan year.
The fair value of the participation units owned by the Plan in common
trust funds, are valued by the Trustees best efforts to maintain a
stable net asset value of $1.00. Investments in the Managed Income
Portfolio II Fund are valued at their estimated fair values, as
determined in good faith by the Trustee.
B. Interest income is recorded as earned. Dividend income is recorded
on the ex-dividend date.
C. Purchases and sales of securities are recorded on a trade-date basis.
D. The Plan presents in the statement of changes in net assets available
for benefits the net appreciation (depreciation) in the fair value of
its investments which consists of the realized gains or losses and
the unrealized appreciation (depreciation) on those investments.
E. Contributions from participants and the Company are recorded in the
month the Company makes payroll deductions from Plan participants.
Participant contributions are accrued, if applicable, for the last
pay period of the Plan year.
F. Benefits are recorded by the Trustee when paid.
G. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make significant estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
9
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2002
2. Description of Plan:
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The following brief description of the Plan is provided for general
information purposes only. Reference should be made to the Plan Document
and The Ohio Casualty Insurance Company Benefits Manual for a complete
description of the Plan.
A. General:
The Plan, which is subject to provisions of the Employee Retirement
Income Security Act of 1974 (ERISA), is a defined contribution plan
covering all employees of the Company who have elected to participate.
B. Participants of the Plan must be at least 18 years of age and be a
full-time or part-time employee working 20 hours or more per week to
be eligible.
C. Participants direct the investment of their contributions into the
fund options available. Participants may contribute between 1-32% of
eligible compensation to the Plan on a before and/or after-tax basis.
From January 1 through June 30, 2002, the Company matched 50% of the
first 6% of eligible compensation contributed to the Plan and all of
the employer contributions were directed to the Ohio Casualty Stock
Fund. Effective July 1, 2002, employer contributions are invested
according to the participant's investment direction. The Ohio
Casualty Stock Fund is an Employee Stock Ownership Plan (ESOP).
Eligible Plan participants can diversify a portion of these
contributions after meeting the Plan's eligibility requirements (age
55 and 10 years of Plan participation). Effective July 1, 2002,
participants can diversify up to 25% of the employer contributions
and investment earnings in the Ohio Casualty Stock Fund once per
calendar quarter. In addition, participants are 100% vested in the
value of their contributions and their investment earnings, as well
as 100% vested in the value of the Company contributions and their
investment earnings.
D. Each participant's account is credited with his/her contributions,
his/her share of the Company's contributions and an allocation of
fund earnings. Allocations of fund earnings are based on
participant's account balances, as defined by the Plan. The
participant is entitled to his/her fully vested account balance.
E. Certain costs of administering the Plan are paid by the Company.
These costs totaled $74,158 and $70,464 for the years ended December
31, 2002 and 2001.
F. Benefits are payable to participants upon termination of employment,
retirement, disability retirement, and/or death. In-service
withdrawals, including withdrawals due to financial hardship as
defined by the Internal Revenue Service, are also available.
G. Effective January 1, 2001, Fidelity Investments became the
recordkeeper and trustee for the Employee Savings Plan. All of the
investment options, with the exception of the Interest Income Fund and
the Ohio Casualty Stock Fund, were sold and reinvested on January 2,
2001 in comparable funds offered by Fidelity Investments. The T. Rowe
Price Small Cap Core Equity Fund Plan assets were transferred to
the T. Rowe Price Small Cap Value Fund; the Vanguard Institutional
Index Fund Plan assets were transferred to the Fidelity US Equity
Index Pool Fund; ICAP FDS Equity Fund Plan assets were transferred to
the Fidelity Equity Income Fund;
10
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2002
2. Description of Plan, Continued:
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Vanguard Balanced Index Fund Plan assets were transferred to the Fidelity
Balanced Fund; and CT&T FDS Montag & Caldwell Growth Fund Plan assets
were transferred to the Fidelity Blue Chip Fund.
3. Plan Termination:
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Although it has not expressed any intention to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions set forth in ERISA.
In the event of Plan termination, the Plan's assets will be used to
provide benefits for participants and beneficiaries in accordance with
federal law.
4. Tax Status:
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The Plan has received a determination letter from the Internal Revenue
Service dated February 4, 2003, stating that the Plan is qualified under
Section 401(a) of the Internal Revenue Code (the Code) and, therefore,
the related trust is exempt from taxation. However, subsequent to the
issuance of the favorable determination letter, the Plan was amended.
Once qualified, the Plan, as amended, is required to operate in
conformity with the Code to maintain its qualification. The Plan
Administrator believes the Plan, as amended, is being operated in
compliance with the applicable requirements of the Code and, therefore,
believes that the Plan is qualified and the related trust is tax exempt.
5. Investments:
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The following investments represent 5% or more of the Plan's net assets:
Fair Value
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December 31, December 31,
2002 2001
Common Stock
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Ohio Casualty Corporation $27,627,296 $37,897,171
Mutual Funds
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T. Rowe Price Small Cap Fund 9,764,533 9,759,084
Fidelity Equity Income Fund 6,624,351 8,520,459
Fidelity Balance Fund 9,628,372 11,920,290
Fidelity Blue Chip Fund 7,237,880 9,630,688
Fidelity Managed Income Portfolio II 25,001,390 26,191,621
Fidelity US Equity Index Pool 13,484,646 18,461,647
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The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2002
6. Nonparticipant-Directed Investments:
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Information about the net assets and the significant components of
changes in net assets related to nonparticipant-directed investments is
as follows:
December 31,
2002 2001
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Investments, at fair value:
Ohio Casualty Stock Fund $27,531,834 $36,967,782
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Year ended
December 31, 2002
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Change in nonparticipant-directed net assets:
Contributions $ 2,868,831
Interest and dividends 11,049
Net depreciation in fair value of investments (5,384,775)
Interfund transfers under ESOP plan (803,693)
Benefits paid directly to participants (6,127,360)
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Net decrease in nonparticipant-directed investments $ (9,435,948)
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7. Loans Receivable - Participants:
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Participants are permitted to borrow from the trust using their vested
account balance as collateral. The minimum loan amount is $1,000 and the
maximum loan amount is the lesser of $50,000 reduced by the participant's
highest outstanding aggregate balance of loans from the Plan during the
previous twelve (12) months, the total value of the participant's before-
tax, after-tax, and rollover accounts, or 50% of the vested value of the
participant's accounts. Interest is charged at Chase Manhattan Bank's
prime commercial rate plus 1%. Repayment of loans are arranged through
payroll deductions which range from five years to fifteen years for a
home loan. At December 31, 2002 there were 611 individual loans
outstanding, maturing between January 2003 through September 2017, with
interest rates ranging from 5.25% to 10.0%. The outstanding participant
loan balance was $3,023,768 and $2,829,072 for December 31, 2002 and
2001, respectively.
8. Reconciliation of Financial Statements to Form 5500:
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The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
December 31, 2002
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Net assets available for benefits per
the financial statements $108,174,579
Less: Contributions receivable by the Plan 352,969
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Net assets available for benefits per the
Form 5500 $107,821,610
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12
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2002
8. Reconciliation of Financial Statements to Form 5500, Continued:
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The following is a reconciliation of contributions received by the
Participant and Employee per the financial statements to the Form 5500:
Year Ended
December 31, 2002
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Contributions received from participants and
employer per the financial statements $12,040,572
Less: Contributions currently incurred but
not yet received by the Plan 352,969
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Contributions received from participants
and employer per the Form 5500 $11,687,603
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9. Plan Amendments:
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The following significant amendments were adopted, approved or became
effective during the 2002 Plan year:
- Participant's on a leave of absence, whether military or non-
military, may request to suspend loan payments, for a period not to
exceed twelve months (non-military) or the period of military leave.
- Effective July 1, 2002, Company contributions are invested according
to the Participant's investment election.
- Effective July 1, 2002, participants may diversify up to 25% of the
balance of the Company contributions and investment earnings invested
in the Ohio Casualty Stock Fund once per calendar quarter.
- The definition of "Employee" and "Compensation" was amended.
- Maximum participant contribution percentage increased to 32% from 22%.
- Termination of employment due to any reason other than death shall
not cause the term of any outstanding loan to be accelerated and the
participant shall be permitted to continue repayment according to the
repayment schedule for the remaining term of the loan.
13
The Ohio Casualty Insurance Company Employee Savings Plan
Schedule H, Line 4i - Schedule of Assets (Held At End of Year)
INVESTMENTS UNITS/SHARE COST FAIR VALUE
- ------------------------------------ ----------- ------------ -------------
Cash and Cash Equivalents:
Interest-bearing cash 20,653 $ 1,460,516 $ 1,460,516
Common Stock:
Ohio Casualty Corporation 390,670 27,479,580 27,627,296
Mutual Funds:
Franklin Small Cap Growth 42,137 1,206,531 924,900
T. Rowe Price Small Cap 445,056 8,947,268 9,764,533
Fidelity Equity Income 166,986 8,476,952 6,624,351
Fidelity Balanced 724,482 10,754,531 9,628,372
Fidelity Blue Chip 226,609 10,762,521 7,237,880
Fidelity Diversified Intl 30,253 583,691 519,139
Fidelity Freedom Income 27,266 292,358 289,020
Fidelity Freedom 2000 7,324 82,547 80,640
Fidelity Freedom 2010 58,998 732,322 674,935
Fidelity Freedom 2020 80,071 984,663 851,953
Fidelity Freedom 2030 46,360 566,183 474,723
Fidelity Freedom 2040 25,916 171,548 151,867
Common/Collective Trusts:
Fidelity Managed Income Portfolio II 25,001,390 25,001,390 25,001,390
Fidelity US Equity Index Pool 513,310 18,376,940 13,484,646
Loans:
Participant Loans * 3,023,768
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TOTAL INVESTMENTS $115,879,541 $107,819,929
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* The interest rates on these loans range from 5.25% to 10.0% with maturity
dates of 2003 through 2017.
14