Exhibit 99.1
Analyst contact:
Dennis E. McDaniel
Vice President, Investor Relations
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 CONTINUED
STRONG FINANCIAL RESULTS FOR FIRST QUARTER
-------------------------------------------
FAIRFIELD, OHIO, April 26, 2006 --- Ohio Casualty Corporation
(NASDAQ:OCAS) today announced the following results for its first quarter
ended March 31, 2006, compared with the same period of the prior year:
- Net income of $51.9 million, or $0.80 per diluted share, versus $37.7
million, or $0.55 per diluted share;
- All Lines combined ratio (GAAP) of 94.9%, a 0.7 point improvement; and
- Operating income (A) of $42.7 million versus $37.7 million, a $5.0
million or 13.3% increase.
President and Chief Executive Officer Dan Carmichael commented, "We are
pleased that our first quarter operating results continue to reflect strong
underwriting profitability. The numbers demonstrate that our underwriting
discipline continues to be an effective tool for producing steady earnings
growth, even in a competitive market environment. First quarter results
also benefited from favorable loss frequency trends and positive reserve
development. While we still face challenges in growing our top line, our
independent agents continue to reward us with higher renewal retention and
are being very responsive to our premium growth initiatives while
maintaining underwriting profitability."
Strong competition contributed to an overall decline in premiums for the
quarter. However, net premiums written for the Commercial Lines segment
experienced modest growth in the quarter due in part to a double-digit
increase in new business.
The major components of net income are summarized in the table
below:
Three Months
Summary Income Statement Ended March 31,
($ in millions, except share data) 2006 2005
- ---------------------------------- ---- ----
Premiums and finance charges earned $357.7 $362.3
Investment income less expenses 50.9 48.4
Investment gains realized, net 14.2 -
------ ------
Total revenues 422.8 410.7
Losses and benefits for policyholders 189.0 191.1
Loss adjustment expenses 36.7 42.9
Underwriting expenses 113.8 112.2
Corporate and other expenses 10.1 14.8
------ ------
Total expenses 349.6 361.0
Income before income taxes 73.2 49.7
Income tax expense:
On investment gains realized 5.0 -
On all other income 16.3 12.0
------ ------
Total income tax expense 21.3 12.0
Net income $ 51.9 $ 37.7
====== ======
Average shares outstanding - diluted 64,836,502 71,675,055
Net income, per share - diluted $0.80 $0.55
Results for the first quarter included $12.9 million of favorable
development in loss and loss adjustment expense reserves for
prior accident years, compared with favorable development of $3.8
million in the first quarter of 2005. Reserve development was
favorable for most product lines during the first quarter 2006
with the exception of workers' compensation and general liability
which had adverse development.
Consolidated pre-tax net investment income increased $2.5 million
in the quarter as a result of the impact of continued growth in
our investment portfolio resulting from positive operating cash
flows and a modest improvement in reinvestment yields resulting
from the recent upward movement in interest rates.
Book value per share increased $0.17, or 0.8% to $22.71 at March
31, 2006, compared to $22.54 at December 31, 2005.
In addition, A.M. Best Company announced that it has affirmed the
financial strength rating of A- (Excellent) and has revised the
rating outlook to "positive" from stable for Ohio Casualty Group
and its members. At the same time, A.M. Best affirmed issuer
credit rating and senior debt ratings from Ohio Casualty
Corporation and revised the rating outlook to positive from
stable on these ratings, also.
For a more detailed discussion of the financial condition and the
results of operations at March 31, 2006, please see the Quarterly
Report on Form 10-Q for this period, filed with the Securities
and Exchange Commission (SEC).
Supplemental financial information for the first quarter ended
March 31, 2006, including certain financial measures, is
available on Ohio Casualty Corporation's website at www.ocas.com
and was also filed on Form 8-K with the SEC. A discussion of the
differences between statutory accounting principles and
accounting principles generally accepted in the United States is
included in Item 15 of the Ohio Casualty Corporation's Annual
Report on Form 10-K for the year ended December 31, 2005.
Investors are advised to read the safe harbor statement at the
end of this release.
Conference Call
Ohio Casualty Corporation will conduct a teleconference call to discuss
information included in this news release and related matters at 10:00 a.m.
EDT on Thursday, April 27, 2006. The call is being webcast by Vcall and
can be accessed directly through Ohio Casualty Corporation's website
www.ocas.com and Vcall's Investor Calendar website www.investorcalendar.com.
The webcast will be available for replay through July 27, 2006. To listen
to call playback by telephone, dial 1-800-642-1687, then enter ID code
7004646. Call playback begins at 1 p.m. EDT on April 27, 2006 and extends
through 11:59 p.m. on April 29, 2006.
Quiet Period
Ohio Casualty Corporation observes a quiet period and will not comment on
financial results or expectations during quiet periods. The quiet period
for the second quarter will start July 1, 2006 extending through the time
of the earnings conference call, tentatively scheduled for July 27, 2006.
Corporate Profile
Ohio Casualty Corporation is the holding company of The Ohio Casualty
Insurance Company, which is one of six property-casualty insurance
companies that make up Ohio Casualty Group, collectively referred to as
Consolidated Corporation. The Ohio Casualty Insurance Company was founded
in 1919 and is licensed in 49 states. Ohio Casualty Group is ranked 47th
among U.S. property/casualty insurance groups based on net premiums written
(Best's Review, July 2005). 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 $5.8
billion as of March 31, 2006.
Safe Harbor Statement
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 within the meaning of The Private Securities
Litigation Reform Act of 1995. The operations, performance and development
of the Consolidated 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
release. The risks and uncertainties that may affect the operations,
performance, development and results of the Consolidated 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 to appoint and/or retain agents; 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.
Investors are also advised to consult any further disclosures made on
related subjects in Ohio Casualty Corporation's reports filed with the
Securities and Exchange Commission or in subsequent press releases.
(A) Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
Reconciliation of Net Income to Operating Income
Management of the Consolidated Corporation believes the significant
volatility of realized investment gains and losses limits the usefulness of
net income as a measure of current operating performance. Accordingly,
management uses the non-GAAP financial measure of operating income to
further evaluate current operating performance. Operating income, both in
dollar amounts and per share amounts, are reconciled to net income and net
income per share in the table below:
Three Months
Ended March 31
($ in millions, except per share data) 2006 2005
- -------------------------------------- ---- ----
Operating income $42.7 $37.7
After-tax net realized gains 9.2 -
----- -----
Net income $51.9 $37.7
===== =====
Operating income
per share - diluted $0.66 $0.55
After-tax net realized gains
per share- diluted 0.14 -
----- -----
Net income per share - diluted $0.80 $0.55
===== =====
Reconciliation of Net Income Return on Equity to Operating Income Return on
Equity
Operating income return on equity is a ratio management calculates using
non-GAAP financial measures. It is calculated by dividing the annualized
consolidated operating income (see calculation below) for the most recent
quarter by the adjusted average shareholders' equity for the quarter using
a simple average of beginning and ending balances for the quarter,
excluding from equity after-tax unrealized investment gains and losses.
This ratio provides management with an additional measure to evaluate the
results excluding the unrealized changes in the valuation of the investment
portfolio that can fluctuate between periods. The following table
reconciles operating income return on equity to net income return on
equity, the most directly comparable GAAP measure:
Three Months
Ended March 31
($ in millions) 2006 2005
- --------------- ---- ----
Net income $ 51.9 $ 37.7
Average shareholders' equity 1,434.1 1,293.3
Return on equity based on
annualized net income 14.5% 11.7%
===== =====
Operating income $ 42.7 $ 37.7
Adjusted average shareholders' equity 1,246.7 1,030.0
Return on equity based on
annualized operating income 13.7% 14.6%
===== =====
Average shareholders' equity $1,434.1 $1,293.3
Average unrealized gains 187.4 263.3
-------- --------
Adjusted average shareholders'
equity $1,246.7 $1,030.0
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