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
FINANCIAL RESULTS FOR SECOND QUARTER
FAIRFIELD, OHIO, July 26, 2006 --- Ohio Casualty Corporation (NASDAQ:OCAS)
today announced the following results for its second quarter ended June 30,
2006, compared with the same period of the prior year:
- Net income of $35.6 million, or $0.55 per diluted share, versus $42.1
million, or $0.63 per diluted share;
- All Lines combined ratio (GAAP) of 99.2% versus 95.5%; and
- Operating income (A) of $32.2 million versus $33.2 million.
Results for the six months ended June 30, 2006, compared with the same
period of the prior year:
- Net income of $87.5 million, or $1.35 per diluted share, versus $79.8
million, or $1.18 per diluted share;
- All Lines combined ratio (GAAP) of 97.0% versus 95.5%; and
- Operating income (A) of $74.9 million versus $70.9 million.
President and Chief Executive Officer Dan Carmichael commented, "Our second
quarter operating results reflected both a highly competitive marketplace,
a higher, more normal pattern of catastrophe losses and our determination
not to compromise our underwriting standards to chase marginal
opportunities. Our two primary challenges continue to be the monitoring
and controlling of expenses and finding more opportunities to grow with
adequately priced business. We remain confident that our strategy will
continue to optimize results and produce superior benefits for
policyholders, independent agents and our shareholders."
The major components of net income are summarized in the table below:
Three Months Six Months
Summary Income Statement Ended June 30, Ended June 30,
($ in millions, except share data) 2006 2005 2006 2005
- ---------------------------------- ---- ---- ---- ----
Premiums and finance charges earned $355.5 $365.5 $713.2 $727.8
Investment income less expenses 51.9 48.6 102.8 97.0
Investment gains realized, net 5.3 13.8 19.5 13.8
------------------ ------------------
Total revenues 412.7 427.9 835.5 838.6
Losses and benefits for policyholders 199.3 191.7 388.3 382.8
Loss adjustment expenses 42.7 40.4 79.4 83.3
Underwriting expenses 110.7 117.4 224.5 229.5
Corporate and other expenses 11.2 18.7 21.3 33.6
------------------ ------------------
Total expenses 363.9 368.2 713.5 729.2
Income before income taxes 48.8 59.7 122.0 109.4
Income tax expense:
On investment gains realized 1.9 4.8 6.9 4.8
On all other income 11.3 12.8 27.6 24.8
----------------- -----------------
Total income tax expense 13.2 17.6 34.5 29.6
Net income $35.6 $42.1 $87.5 $79.8
================= =================
Average shares outstanding - diluted 64,351,335 66,997,317 64,591,888 69,327,993
Net income, per share - diluted $0.55 $0.63 $1.35 $1.18
Results for the second quarter included $10.8 million of favorable
development in loss and loss adjustment expense reserves for prior accident
years, compared with favorable development of $2.9 million in the second
quarter of 2005. Reserve development was favorable for most product lines
during the second quarter 2006 with the exception of a couple product lines
which experienced adverse development.
Consolidated pre-tax net investment income increased $3.3 million in the
quarter as a result of a modest improvement in reinvestment yields
resulting from the upward movement in interest rates and positive operating
cash flows.
Book value per share decreased $0.15, or 0.7% to $22.39 at June 30, 2006,
compared to $22.54 at December 31, 2005.
During the second quarter, the Corporation repurchased 2,197,929 shares of
its common stock at an average cost of $29.48 per share, which brings the
total shares repurchased under the program to 3,750,814 at an average cost
of $28.08. Total authorized shares remaining under the program at June 30,
2006 is 249,186.
In addition, Moody's Investors Service announced that it has affirmed the
Baa3 senior debt rating of Ohio Casualty Corporation and the A3 insurance
financial strength rating of its operating subsidiaries. In the same
rating action, Moody's changed the outlook on the ratings to positive from
stable.
For a more detailed discussion of the financial condition and the results
of operations at June 30, 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 second quarter ended June 30,
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, July 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 October 27, 2006. To
listen to call playback by telephone, dial 1-800-642-1687, then enter
ID code 2055088. Call playback begins at 1 p.m. EDT on July 27, 2006
and extends through 11:59 p.m. on July 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 third quarter will start October 1, 2006 extending through the time
of the earnings conference call, tentatively scheduled for November 2,
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 50th
among U.S. property/casualty insurance groups based on net premiums written
(Best's Review, July 2006). 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 $5.7
billion as of June 30, 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 Six Months
Ended June 30, Ended June 30,
($ in millions, except per share data) 2006 2005 2006 2005
- -------------------------------------- ---- ---- ---- ----
Operating income $32.2 $33.2 $74.9 $70.9
After-tax net realized gains 3.4 8.9 12.6 8.9
----- ----- ----- -----
Net income $35.6 $42.1 $87.5 $79.8
===== ===== ===== =====
Operating income
per share - diluted $0.50 $0.50 $1.16 $1.05
After-tax net realized gains per
share - diluted 0.05 0.13 0.19 0.13
----- ----- ----- -----
Net income per share - diluted $0.55 $0.63 $1.35 $1.18
===== ===== ===== =====
Reconciliation of Net Income Return on Equity to Operating Income Return on
Equity
Operating income return on equity is a ratio management calculates using
non-GAAP financial measures. It is calculated by dividing the annualized
consolidated operating income (see calculation below) for the most recent
quarter by the adjusted average shareholders' equity for the quarter using
a simple average of beginning and ending balances for the quarter,
excluding from equity after-tax unrealized investment gains and losses.
This ratio provides management with an additional measure to evaluate the
results excluding the unrealized changes in the valuation of the investment
portfolio that can fluctuate between periods. The following table
reconciles operating income return on equity to net income return on
equity, the most directly comparable GAAP measure:
Three Months Six Months
Ended June 30, Ended June 30,
($ in millions) 2006 2005 2006 2005
- --------------- ---- ---- ---- ----
Net income $ 35.6 $ 42.1 $ 87.5 $ 79.8
Average shareholders' equity 1,408.4 1,351.2 1,400.8 1,352.8
Return on equity based on
annualized net income 10.1% 12.5% 12.5% 11.8%
===== ===== ===== =====
Operating income $ 32.2 $ 33.2 $ 74.9 $ 70.9
Adjusted average shareholders' equity 1,257.0 1,090.2 1,231.5 1,069.0
Return on equity based on
annualized operating income 10.2% 12.2% 12.2% 13.3%
===== ===== ===== =====
Average shareholders' equity $1,408.4 $1,351.2 $1,400.8 $1,352.8
Average unrealized gains 151.4 261.0 169.3 283.8
-------- -------- -------- --------
Adjusted average shareholders'
equity $1,257.0 $1,090.2 $1,231.5 $1,069.0
======== ======== ======== ========