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 FIRST QUARTER
-----------------------------------
FAIRFIELD, OHIO, April 30, 2007 --- Ohio Casualty Corporation
(NASDAQ:OCAS) today announced the following results for its first quarter
ended March 31, 2007, compared with the same period of the prior year:
- Net income of $63.1 million, or $1.03 per diluted share, versus $51.9
million, or $0.80 per diluted share;
- All Lines combined ratio (GAAP) of 89.2% versus 94.9%; and
- Operating income (A) of $57.9 million ($0.94 per diluted share) versus
$42.7 million ($0.66 per diluted share).
President and Chief Executive Officer Dan Carmichael commented, "In 2007,
we are off to another great start, with an All Lines combined ratio below
90%. Once again all three business segments are generating an underwriting
profit. Our performance reflects substantial favorable development from
prior accident years, as we continue to maintain our long-term commitment
to underwriting discipline and expense management. We also re-confirmed
our commitment to shareholders by raising our quarterly dividend 44% and
continued our share repurchase program, while growing book value per
share."
"Still, competition continues to pressure our premium volume as new
business premiums written declined. We have commenced implementation of
our agency management and product development initiatives as outlined in
our Strategic Plan. We will be sharing more details of these initiatives,
as well as the agent centric services initiatives, as the year progresses
and results develop."
The major components of net income are summarized in the table below:
Three months
Summary Income Statement ended March 31,
($ in millions, except share data) 2007 2006
- ---------------------------------- ---- ----
Premiums and finance charges earned $349.6 $357.7
Investment income less expenses 51.7 50.9
Investment gains realized, net 8.0 14.2
------ ------
Total revenues 409.3 422.8
Losses and benefits for policyholders 161.9 189.0
Loss adjustment expenses 38.6 36.7
Underwriting expenses 111.5 113.8
Corporate and other expenses 11.1 10.1
------ ------
Total expenses 323.1 349.6
Income before income tax expense 86.2 73.2
Income tax expense:
On investment gains realized 2.8 5.0
On all other income 20.3 16.3
------ ------
Total income tax expense 23.1 21.3
Net income $ 63.1 $ 51.9
====== ======
Average shares outstanding - diluted 61,343,139 64,836,502
Net income, per share - diluted $1.03 $0.80
Operating Results
Premium Revenue
---------------
($ in millions)
Three months ended March 31,
2007 2006 % Chg
---- ---- -----
Net Premiums Written
Commercial Lines $209.4 $212.4 (1.4)%
Specialty Lines 34.6 35.8 (3.4)%
Personal Lines 101.3 105.9 (4.3)%
------ ------
All Lines $345.3 $354.1 (2.5)%
====== ======
All Lines net premiums written declined for the three month period ended
March 31, 2007 when compared with the same period of the prior year, due
primarily to a decline in new business premium production in the Commercial
Lines segment and the commercial umbrella/other product line, a decline in
premium rates for both Personal and Commercial Lines, lower Commercial
Lines assumed premiums from mandatory workers' compensation and commercial
auto pools as well as lower in-force policy counts in the Personal Lines
segment and commercial umbrella/other product line. This decline was
partially offset by continued growth in the fidelity and surety bond
product line; improved retention rates in the Personal Lines segment and
commercial umbrella/other product line and a substantially unchanged
retention rate for Commercial Lines segment when compared to the same
period of the prior year.
Combined Ratio
--------------
Three months ended
March 31,
2007 2006
---- ----
Commercial Lines 94.4% 101.8%
Specialty Lines 63.6% 75.2%
Personal Lines 87.9% 89.2%
----- ------
All Lines 89.2% 94.9%
The improvement in the All Lines combined ratio for the first quarter is
the result of a 5.8 point improvement in the loss and LAE ratio driven by a
significant increase in favorable prior year reserve development partially
offset by increased catastrophe losses and margin compression caused by
increasing loss costs and declining prices. Catastrophe losses for the
first quarter 2007 were $5.2 compared to $3.6 in the first quarter 2006.
Favorable prior year loss and LAE reserve development was $37.7 million
(10.8 points) and $12.9 million (3.6 points) in the first quarter 2007 and
2006, respectively. Reserve development was favorable for almost all
product lines during the first quarter 2007 and is primarily attributable
to actual severity being lower than expected, much of which is occurring in
the casualty product lines, a result of our more disciplined underwriting
and improved claims handling practices which commenced in the 2000-2001
timeframe.
Other Highlights
Book value per share increased $0.86 or 3.3% to $26.65 at March 31, 2007,
compared to $25.79 at December 31, 2006.
During the first quarter of 2007, the Corporation repurchased 578,604
shares of its common stock at an average cost of $29.63. As of March 31,
2007, the Corporation has $54.9 million of share repurchase authority
remaining.
On March 20, 2007, A.M. Best Company announced that it had upgraded the
financial strength rating to A for the Ohio Casualty Group and its
subsidiaries and upgraded the senior unsecured debt rating to bbb from bbb-.
The rating outlook is stable.
Supplemental financial information for the first quarter ended March 31,
2007, 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 U.S. generally accepted accounting principles is included in
Item 15 of the Ohio Casualty Corporation's Annual Report on Form 10-K for
the year ended December 31, 2006.
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, including a
slide presentation, to discuss information included in this news release
and related matters at 10:00 a.m. EDT on Tuesday, May 1, 2007. The call is
being webcast by Vcall and can be accessed (as well as the related slides)
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 August 2, 2007. To listen to call
playback by telephone, dial 1-800-642-1687, then enter ID code 4846210.
Call playback begins at 1 p.m. EDT on May 1, 2007 and extends through 11:59
p.m. on May 3, 2007.
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, 2007 extending through the time
of the earnings conference call, tentatively scheduled for July 31, 2007.
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 the 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 March 31, 2007.
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; 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 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 SEC
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) 2007 2006
- -------------------------------------- ---- ----
Operating income $57.9 $42.7
After-tax net realized gains 5.2 9.2
----- -----
Net income $63.1 $51.9
===== =====
Operating income
per share - diluted $0.94 $0.66
After-tax net realized gains
per share- diluted 0.09 0.14
----- -----
Net income per share - diluted $1.03 $0.80
===== =====
Reconciliation of Net Income Return on Equity to Operating Income Return
on Equity
Operating income return on equity is a ratio management calculates using
non-GAAP financial measures. It is calculated by dividing the annualized
consolidated operating income (see calculation below) for the most recent
quarter by the adjusted average shareholders' equity for the quarter using
a simple average of beginning and ending balances for the quarter,
excluding from equity after-tax unrealized investment gains and losses.
This ratio provides management with an additional measure to evaluate the
results excluding the unrealized changes in the valuation of the investment
portfolio that can fluctuate between periods. The following table
reconciles operating income return on equity to net income return on
equity, the most directly comparable GAAP measure:
Three months
ended March 31,
($ in millions) 2007 2006
- --------------- ---- ----
Net income $ 63.1 $ 51.9
Average shareholders' equity 1,576.3 1,434.1
Return on equity based on
annualized net income 16.0% 14.5%
===== =====
Operating income $ 57.9 $ 42.7
Adjusted average shareholders' equity 1,385.4 1,246.7
Return on equity based on
annualized operating income 16.7% 13.7%
===== =====
Average shareholders' equity $1,576.3 $1,434.1
Average unrealized gains 190.9 187.4
-------- --------
Adjusted average shareholders'
equity $1,385.4 $1,246.7
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