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UNITED STATES 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, 2003
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
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, 2003 and 2002, and the changes in net assets available for
benefits for the year ended December 31, 2003, 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
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 28, 2004 /s/ Howard L. Sloneker III
------------------------------------
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, 2003 AND 2002, AND THE CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2003, SUPPLEMENTAL SCHEDULE AS OF
AND FOR THE YEAR ENDED DECEMBER 31, 2003, AND INDEPENDENT ACCOUNTANT'S
REPORT.
4
THE OHIO CASUALTY INSURANCE COMPANY EMPLOYEE SAVINGS PLAN
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Pages
Report of Independent Registered Public Accounting Firm.............. 6
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2003 and 2002............................. 7
Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 2003................ 8
Notes to the Financial Statements.................................... 9-13
Supplemental Schedule:
Schedule H, Line 4i - Schedule of Assets (Held At End of Year).. 14
5
Report of Independent Registered Public Accounting Firm
We have audited the accompanying statements of net assets available for
benefits of The Ohio Casualty Insurance Company Employee Savings Plan as of
December 31, 2003 and 2002, and the related statement of changes in net
assets available for benefits for the year ended December 31, 2003. 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 the standards of the Public
Company Accounting Oversight Board (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, 2003 and 2002, and the changes in its net assets available for
benefits for the year ended December 31, 2003, in conformity with U.S.
generally accepted accounting principles.
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, 2003, 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 & Young LLP
Ernst & Young LLP
Cincinnati, Ohio
June 18, 2004
6
The Ohio Casualty Insurance Company Employee Savings Plan
Statements of Net Assets Available For Benefits
December 31,
2003 2002
-------------- --------------
Assets
Cash:
Noninterest-bearing cash $ 34,765 $ -
Investments, at fair value 135,092,955 107,819,929
Receivables:
Employer contributions - 96,303
Participants contributions - 256,666
Due from broker for securities sold 197,340 -
Accrued interest 1,380 1,681
------------- -------------
Total receivables 198,720 354,650
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Net assets available for benefits $135,326,440 $108,174,579
============= =============
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, 2003
Additions
Investment income:
Net appreciation in fair value of investments $ 23,459,431
Interest and dividends 2,194,039
-------------
25,653,470
Contributions:
Participants 8,090,849
Employer 2,859,518
-------------
10,950,367
-------------
Total additions 36,603,837
Deductions
Benefits paid directly to participants 9,430,166
Administrative expenses 21,810
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Total deductions 9,451,976
-------------
Net increase in net assets available for benefits 27,151,861
Net assets available for benefits:
Beginning of year 108,174,579
--------------
End of year $135,326,440
==============
See accompanying notes
8
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements
December 31, 2003
1. Accounting Policies:
-------------------
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 market 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 at quoted redemption value as of the last
business day of the plan year.
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 Ohio Casualty Insurance
Company (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 when paid.
G. The preparation of financial statements in conformity with U.S.
generally accepted accounting principles 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.
2. Description of Plan:
-------------------
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 eligible employees of the Company who have elected to
participate.
9
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2003
2. Description of Plan, continued:
------------------------------
B. Participants of the Plan must be at least 18 years of age and be a
Full-time or Part-time employee of the Company working 20 or more
hours per week, or work 1,000 or more hours in a calendar year, to be
eligible.
C. Participants direct the investment of their contributions into
various fund options available. Participants may contribute between
1-32% of eligible compensation to the Plan on a before-tax and/or
after-tax basis. The Company matches 50% of the first 6% of the
participant's semi-monthly contribution. Effective since July 1,
2002, the Company match is invested according to the participants'
investment direction. Prior to this date all Company match was
invested as directed by the Company into the Ohio Casualty Stock
Fund. Also effective after July 1, 2002, participants can diversify
up to 25% of their employer contributions and investment earnings in
the Ohio Casualty Stock Fund once per calendar quarter. The Ohio
Casualty Stock Fund is an Employee Stock Ownership Plan (ESOP).
Participants are 100% vested in the value of their own contributions
and related investment earnings, as well as 100% vested in the value
of the Company match contributions and related 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
participants' account balances, as defined by the Plan. The benefit
to which a participant is entitled is the benefit that can be
provided from his/her fully vested account balance.
E. Certain costs of administering the Plan are paid by the Company.
These costs totaled $55,363 for the year ended December 31, 2003.
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.
3. Plan Termination:
----------------
Although it has not expressed any intent 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.
10
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2003
4. Income Tax Status:
-----------------
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. Subsequent to this
determination by the Internal Revenue Service, the Plan was amended. Once
qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan Administrator believes that 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:
-----------
The following investments represent 5% or more of the Plan's net assets:
Fair Value
-------------------------------
December 31, December 31,
2003 2002
-------------------------------
Common Stock
- ------------
Ohio Casualty Stock Fund $33,005,492 $27,627,296
Mutual Funds
- ------------
T. Rowe Price Small Cap Fund 14,354,250 9,764,533
Fidelity Equity Income Fund 8,902,175 6,624,351
Fidelity Balance Fund 12,765,017 9,628,372
Fidelity Blue Chip Fund 10,204,224 7,237,880
Common/Collective Trusts
- ------------------------
Fidelity Managed Income Portfolio II 25,349,671 25,001,390
Fidelity U.S. Equity Index Pool 17,728,903 13,484,646
Net appreciation in the fair value of the investments (including investments
bought, sold, as well as held during the year) as determined by quoted market
prices is as follows:
Year ended
December 31, 2003
-----------------
Investments:
Common stock $ 8,710,832
Mutual funds 10,866,498
Common/collective trusts 3,882,101
------------
Total $23,459,431
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11
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2003
6. Nonparticipant-Directed Investments:
-----------------------------------
Effective July 1, 2002, the Company amended the Plan to allow
participants the opportunity to direct the investments of all Company
match contributions. The amendment also granted all participants the
opportunity to diversify (up to 25% once per calendar quarter) their
Company match account balances that, prior to the amendment, were
initially invested entirely in the Ohio Casualty Stock Fund by the
Company under nonparticipant-direction. In all plan years subsequent to
the current plan year ended December 31, 2003, investments in the Ohio
Casualty Stock Fund can be considered participant-directed. In the
current plan year, however, the participant-directed and nonparticipant-
directed components of the Ohio Casualty Stock Fund cannot be separately
determined; therefore, the fund activity is deemed to be nonparticipant-
directed for purposes of this disclosure as defined in Statement of
Position 99-3, "Accounting for and Reporting of Certain Defined
Contribution Benefit Plan Investments and Other Disclosure Matters."
Accordingly, the information about the net assets and the significant
components of changes in net assets as is required for disclosure for
nonparticipant-directed investments is as follows:
December 31,
2003 2002
---- ----
Investments, at fair value;
Nonparticipant-Directed:
Ohio Casualty Stock Fund $ 0 $27,531,834
=========== ===========
Investments, at fair value;
Participant-Directed:
Ohio Casualty Stock Fund $33,005,492 $ 0
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Year ended
December 31, 2003
-----------------
Change in nonparticipant-directed net assets:
Interest income $ 15,473
Contributions 520,297
Interfund transfers (1,379,246)
Net loan activity 11,068
Net appreciation in fair value of investments 8,548,316
Benefits paid directly to participants (2,242,250)
Transfers to participant-directed investments (33,005,492)
-------------
Net decrease in nonparticipant-directed investments $(27,531,834)
=============
7. Loans Receivable - Participants:
-------------------------------
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 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
commercial rate plus 1%. Repayment of loans are arranged through payroll
deductions with a maximum repayment term of 5 years, or 15 years for a
home loan. Terminated employees can continue loan repayments following
termination of employment.
12
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2003
8. Reconciliation of Financial Statements to Form 5500:
---------------------------------------------------
The following is a reconciliation of contributions received by the
Participants and Employer per the financial statements to the Form 5500:
Year Ended
December 31, 2003
-----------------
Contributions received from participants and
employer per the financial statements $10,950,367
Add: Contributions accrued in the prior year
received by the Plan in the current year 352,969
-----------
Contributions received from participants
and employer per the Form 5500 $11,303,336
===========
9. Plan Amendments:
---------------
The following significant amendments were adopted, approved or became
effective during the 2003 plan year:
- PIMCO Total Return Fund - Administrative Class was added as an
investment fund election.
- Eligible Plan participants can make additional plan contributions up
to the annual IRS maximum ("catch up" contributions).
- Terminated employees can continue loan repayments following
termination of employment.
- Terminated participants with an account balance greater than $5,000
can maintain funds in the Plan beyond age 65.
- The definition of compensation was modified to include reinsurance
brokerage fees.
- The definition of Eligible Employee was modified to include all
employees over the age of 18 who work 1,000 or more hours in a
calendar year.
10. Subsequent Events:
-----------------
Effective January 1, 2005, the Company will match 100% of the
participant's contribution for the first 3% of eligible pay and 50% of
the participant's contribution for the next 2% of eligible pay.
Employees with 10 or more years of service as of July 1, 2004 will be
eligible for a temporary, discretionary, additional Company contribution
of 2.5% percent of eligible compensation. Additionally, a discretionary
profit sharing contribution may be made by the Company each year
beginning in 2005 if certain profitability levels are achieved.
Employees will not have to contribute to the Plan to be eligible for the
profit sharing contribution but must be employed by the Company on
December 31st of the applicable Plan year.
13
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
The Ohio Casualty Insurance Company Employee Savings Plan
Schedule H, Line 4i - Schedule of Assets (Held At End of Year)
EIN 31-0396250
Plan Number 002
INVESTMENTS UNITS/SHARE FAIR VALUE
- ---------------------------- ------------ ------------
Cash:
Interest-bearing cash 15,814 $ 1,471,079
Common Stock:
Ohio Casualty Corporation* 354,803 33,005,492
Mutual Funds:
PIMCO Tot Return Adm 74,308 795,834
Franklin Small Cap Growth 61,189 1,849,132
T. Rowe Price Small Cap 488,406 14,354,250
Fidelity Equity Income* 178,938 8,902,175
Fidelity Balanced* 762,091 12,765,017
Fidelity Blue Chip* 257,487 10,204,224
Fidelity Diversified Intl* 48,854 1,178,364
Fidelity Freedom Income* 31,073 344,602
Fidelity Freedom 2000* 8,018 94,453
Fidelity Freedom 2010* 100,585 1,309,617
Fidelity Freedom 2020* 116,548 1,517,458
Fidelity Freedom 2030* 62,958 815,304
Fidelity Freedom 2040* 40,774 308,248
Common/Collective Trusts:
Fidelity Managed Income Portfolio II* 25,349,671 25,349,671
Fidelity U.S. Equity Index Pool* 524,990 17,728,903
Loans:
Participant Loans ** 3,099,132
-------------
TOTAL INVESTMENTS $135,092,955
=============
* Indicates party-in-interest to the Plan
** The interest rates on these loans range from 5.0% to 10.0% with
maturity dates of 2004 through 2018.
14