UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
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, 2005
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, 2005 and 2004, and the changes in net assets available
for benefits for the year ended December 31, 2005, 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 Consent of Independent Registered Public Accounting Firm
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 Benefits Committee
June 21, 2006 /s/ Lynn C.Schoel
-------------------------------------------
Lynn C. Schoel
Senior Vice President, Human Resources
Chairman, Benefits Committee
3
APPENDIX 1
THE OHIO CASUALTY INSURANCE COMPANY EMPLOYEE SAVINGS PLAN
FINANCIAL STATEMENTS OF NET ASSETS AVAILABLE FOR THE BENEFITS OF THE PLAN
AS OF DECEMBER 31, 2005 AND 2004, AND THE CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2005, SUPPLEMENTAL SCHEDULE AS
OF DECEMBER 31, 2005, AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
4
THE OHIO CASUALTY INSURANCE COMPANY EMPLOYEE SAVINGS PLAN
TABLE OF CONTENTS
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Pages
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Report of Independent Registered Public Accounting Firm ............. 6
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2005 and 2004............................. 7
Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 2005................ 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 (the
Plan) as of December 31, 2005 and 2004, and the related statement of
changes in net assets available for benefits for the year ended December
31, 2005. 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
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. We were not engaged
to perform an audit of the Plan's internal control over financial
reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Plan's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and 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, 2005 and 2004, and the changes in its net assets available
for benefits for the year ended December 31, 2005, 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, 2005, 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. This
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
Cincinnati, Ohio
May 26, 2006
6
The Ohio Casualty Insurance Company Employee Savings Plan
Statements of Net Assets Available For Benefits
As of December 31
2005 2004
-------------- --------------
Assets
Cash $ 39,499 $ -
Investments, at fair value 169,095,426 149,060,793
Receivables:
Profit sharing contribution from employer 8,420,145 3,700,693
Due from broker for securities sold 55,224 481,840
Accrued interest 7,158 2,844
-------------- --------------
Total receivables 8,482,527 4,185,377
-------------- --------------
Net assets available for benefits $177,617,452 $153,246,170
============== ==============
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, 2005
Additions
Investment income:
Net appreciation in fair value of investments $ 11,358,062
Interest and dividends 4,353,880
-------------
15,711,942
Contributions:
Participants 10,133,407
Employer 14,535,872
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24,669,279
-------------
Total additions 40,381,221
Deductions
Benefits paid directly to participants 15,973,912
Deemed distributions of participant loans 13,019
Administrative expenses 23,008
-------------
Total deductions 16,009,939
Net increase in net assets available for benefits 24,371,282
Net assets available for benefits:
Beginning of year 153,246,170
-------------
End of year $177,617,452
=============
See accompanying notes.
8
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements
December 31, 2005
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
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 the net asset 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.
Realized gains or losses on disposition of investments are determined
on the basis of historical cost of specific investments sold on the
trade-date basis.
D. The Plan presents in the Statement of Changes in Net Assets Available
for Benefits the net appreciation 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. The profit sharing
contribution, if any, is contributed during the first quarter following
the Plan year end and is reflected as a receivable in the Statement of
Net Assets Available for Benefits when incurred.
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.
9
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2005
2. Description of Plan, continued:
------------------------------
A. General:
The Plan, which is subject to provisions of the Employee Retirement
Income Security Act of 1974 (ERISA), is a defined contribution plan.
The Plan is a thrift savings plan with a 401(k) feature covering all
eligible employees of the Company who have elected to participate
and/or received a profit sharing contribution.
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
available fund options. Participants can contribute between 1-32% of
eligible compensation to the Plan on a before-tax and/or after-tax
basis. Effective January 1, 2005, the Company matches 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. The
maximum match is 4%. The Company match is invested according to the
participants' investment direction.
Also effective January 1, 2005, employees with 10 or more years of
service as of July 1, 2004 are eligible for a temporary, discretionary,
additional Company contribution of 2.5% of eligible compensation. This
additional Company contribution was $1,684,244 for the 2005 Plan year.
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. Effective July 1, 2004, a discretionary profit sharing contribution
may be made by the Company each year if certain profitability levels
are achieved. The performance criteria and the range of contribution
are set by the Company's Board of Directors. Employees are not
required to contribute to the Plan to be eligible for the profit
sharing contribution; however, they must be employed by the Company on
December 31st of the applicable Plan year (unless death or retirement
occurred during the year). In February 2006, a profit sharing
contribution of $8,420,145 was contributed by the Company for the 2005
Plan year.
E. 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.
F. Effective March 1, 2005, the automatic payout limit for terminated
participants was reduced from $5,000 to $1,000.
10
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2005
2. Description of Plan, continued:
------------------------------
G. Certain costs of administering the Plan are paid by the Company.
These costs totaled $92,425 for the year ended December 31, 2005.
H. Benefits are payable to participants upon termination of employment,
retirement, disability, 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.
4. Related Party Transactions:
--------------------------
Fidelity Management Trust Company is the trustee of the Plan and has a
relationship with Fidelity Investments Institutional Operations Company,
who is the Plan's record keeper. Fidelity Investments Institutional
Operations Company manages certain mutual funds which are investment
options for the Plan participants and therefore these transactions
qualify as party-in-interest transactions.
5. Income Tax Status:
-----------------
Subsequent to year end, the Plan received a favorable determination
letter from the Internal Revenue Service dated April 14, 2006, 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. Once qualified, the Plan is required to operate in conformity
with the Code to maintain its qualification. The Plan Sponsor has
indicated that it will take the necessary steps, if any, to maintain the
Plan's qualified status.
6. Investments:
-----------
The following investments represent 5% or more of the Plan's net assets:
Fair Value
-----------------------------
December 31, December 31,
2005 2004
-----------------------------
Common Stock
------------
Ohio Casualty Corporation $39,693,170 $36,905,571
Mutual Funds
------------
T. Rowe Price Small Cap 19,276,481 17,695,846
Fidelity Equity Income 10,897,217 9,788,214
Fidelity Balance 17,423,542 14,165,882
Fidelity Blue Chip 11,573,385 11,213,895
11
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2005
6. Investments, continued:
----------------------
Fair Value
-----------------------------
December 31, December 31,
2005 2004
-----------------------------
Common/Collective Trusts
------------------------
Fidelity Managed Income Portfolio II $25,951,183 $23,431,148
Fidelity U.S. Equity Index Pool 19,281,776 18,877,608
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, 2005
-----------------
Common Stock $ 7,632,538
Mutual Funds 2,809,224
Common/collective trusts 916,300
-----------
Total $11,358,062
===========
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
JPMorgan Chase & Co. 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.
8. Reconciliation of Financial Statements to Form 5500:
---------------------------------------------------
The following is a reconciliation of contributions received from
employer per the financial statements to the Form 5500:
Year Ended
December 31, 2005
-----------------
Contributions received from employer per
the financial statements $14,535,872
Profit Sharing contribution accrued at
December 31, 2004 but not received in
the Plan until 2005 3,700,693
-----------
Contributions received from employer
per the Form 5500 $18,236,565
===========
12
The Ohio Casualty Insurance Company Employee Savings Plan
Notes To Financial Statements, Continued
December 31, 2005
9. Subsequent Event:
----------------
Effective January 1, 2006, the Plan was amended to allow participants to
diversify up to 100% of Company contributions invested in the Ohio
Casualty Stock Fund on any valuation day. This amendment provides more
flexibility to the Plan participants for diversification related to Ohio
Casualty Corporation common stock.
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)
December 31, 2005
EIN 31-0396250
Plan Number 002
(a) (b) (c) (d) (e)
Current
Investments Shares/Units Cost Value
- -------------------------------------------------------------------------------------------------------
Cash:
Interest-bearing cash $ 13,091 $ 1,955,208 $ 1,955,208
Common Stock:
* Ohio Casualty Corporation 265,770 18,701,541 39,693,170
Mutual Funds:
PIMCO Tot Return Adm 180,462 1,933,942 1,894,855
T. Rowe Price Small Cap 522,256 13,587,827 19,276,481
* Fidelity Equity Income 206,465 10,369,425 10,897,217
* Fidelity Balanced 928,760 14,820,222 17,423,542
* Fidelity Blue Chip 268,151 11,675,748 11,573,385
* Fidelity Diversified Intl 170,315 4,599,533 5,542,050
* Fidelity Small Cap Stock 152,271 2,678,620 2,786,552
* Fidelity Freedom Income 38,032 421,694 432,427
* Fidelity Freedom 2000 10,558 124,254 128,917
* Fidelity Freedom 2010 172,922 2,271,790 2,429,551
* Fidelity Freedom 2020 261,501 3,460,559 3,846,687
* Fidelity Freedom 2030 125,601 1,629,101 1,886,528
* Fidelity Freedom 2040 73,247 542,716 646,775
* Fidelity Freedom 2005 8,130 87,994 90,401
* Fidelity Freedom 2015 23,123 253,742 267,066
* Fidelity Freedom 2025 10,658 125,828 127,476
* Fidelity Freedom 2035 4,347 50,718 53,169
Common/Collective Trusts:
* Fidelity Managed Income Portfolio II 25,951,183 25,951,183 25,951,183
* Fidelity U.S. Equity Index Pool 491,381 17,299,862 19,281,776
Loans:
** Participant Loans - 2,911,010
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TOTAL INVESTMENTS $132,541,507 $169,095,426
============= =============
* Indicates party-in-interest to the Plan
** The interest rates on these loans range from 5.0% to 9.5%, with
maturity dates of 2006 through 2020.
14