[Ohio Casualty Corporation letterhead]
Michael A. Winner, CPA
Executive Vice President & Chief Financial Officer
February 28, 2006
Mr. Jim B. Rosenberg
Senior Assistant Chief Accountant
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Mail Stop 6010
Washington DC 20549
Re: Ohio Casualty Corporation
Form 10-K for Fiscal Year Ended December 31, 2004
File No. 0-05544
Dear Mr. Rosenberg:
Ohio Casualty Corporation ("Corporation") acknowledges it has received the
written comments from the staff of the Securities and Exchange Commission
(the "Staff" or "Commission") in a letter dated February 22, 2006, in
response to its letter to the Commission dated February 13, 2006. For ease
of reference, we have restated the Staff's comments within our responses.
Form 10-K for the year ended December 31, 2004
Management's Discussion and Analysis, page 18
Loss and Loss Adjustment Expenses, page 39
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1. Comment: Please explain to us why you removed the disclosure
regarding how management adjusts the point estimates determined by your
actuaries in establishing your loss reserves in response to our previous
comment two. As previously requested, please revise your proposed
disclosure to indicate the point estimate made by your actuaries for each
product line and what specific factors/justifications you used to adjust
the point estimates.
Response: The Corporation revised its prior disclosure in this area,
as referenced by the Staff, as a result of the Corporation's
reevaluation of this disclosure in light
9450 Seward Road, Fairfield, OH 45014 Telephone: 513-603-2267
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of the Staff's previous comments. Under the prior disclosure, the
Staff could infer, that when the Corporation states it records its best
estimate of loss reserves by "considering" the actuaries' estimates, it
could mean some adjustment is made by management to the actuaries'
estimates, when in fact that does not occur. Further, under the previous
disclosure the Staff could infer that the Corporation has a bifurcated
reserving process involving both our actuaries and then management.
However, there is no bifurcated process. Our actuaries, who are part of
management, are responsible for the Corporation's loss reserve
analysis. The Corporation uses the results from this loss reserve
analysis to record its loss reserve estimates in its financial
statements. The revision you referenced is intended to clarify our
process for the Staff.
As a result, we believe there is no revision to our disclosure
required, since the estimates made by our actuaries by product line
are the amounts reflected in our financial statements.
2. Comment: We note your proposed revised disclosure provided in
response to our previous comment three regarding your loss sensitivity
analysis and acknowledge that your reserving process is complex. However,
we continue to believe that significant assumptions exist in the reserving
process for every product line. Significant assumptions are those
assumptions that could involve the greatest amount of judgment or those
assumptions that have the greatest financial impact on the loss reserve.
Please revise your proposed disclosure to quantify the impact of reasonably
likely changes in your significant assumptions on your loss reserves for
each product line.
Response: The Corporation understands that some companies may make
significant explicit assumptions to determine reserve estimates.
However, as we indicated in our response letter dated January 17, 2006
and in our telephone call with the Staff on February 13, 2006, the
Corporation does not make explicit assumptions, significant or not, in
determining its reserve estimates. As described in our proposed
disclosure of Annual Report of Form 10-K for the year ending December
31, 2005 as previously provided, the Corporation principally utilizes
five reserving methods to establish loss reserves. We rely on the
first two methods most often and utilize methods three, four and five,
and other methods, when appropriate. Of these five methods, the first
four rely on historical loss data; trends, risk factors and other
information are incorporated into the loss estimates only to the
extent they are reflected implicitly in the data. The fifth method
does utilize loss severity trend assumptions; however, when this
method is used, it is only in conjunction with the first four methods
to select reserve estimates. Reserve estimates are made based upon
the particular combination of methods deemed most appropriate. And we
do not determine reasonably likely alternative scenarios. The loss
reserve process takes all risk factors, as previously disclosed, into
account, but no one risk factor can be bifurcated to perform
sensitivity analysis because the risk factors are considered in the
aggregate. As a result, we are not in a position to quantify the
impact of reasonably likely changes to explicit
assumptions nor revise our proposed disclosure since no such scenarios
or quantification exist.
In response to your previous request to include the following, please be
advised the Corporation reconfirms and acknowledges:
- that it is responsible for the adequacy and accuracy of the disclosure
in the filing;
- that staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action with
respect to the filing; and that the Corporation may not assert staff
comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.
You may contact Debra K. Crane, Senior Vice President, General Counsel and
Secretary, by telephone at (513) 603-2213 or via fax at (513) 603-2208 or
email at Debra.Crane@ocas.com if you have questions or comments on the
responses of the Corporation.
Sincerely,
/s/Michael A. Winner
Michael A. Winner
Executive Vice President and
Chief Financial Officer