1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [x] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from to COMMISSION FILE NUMBER 0-5544 OHIO CASUALTY CORPORATION (Exact name of registrant as specified in its charter) OHIO 31-0783294 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 136 NORTH THIRD STREET, HAMILTON, OHIO 45025 (Address of principal executive offices) (Zip Code) (513) 867-3000 (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Shares, Par Value $.125 Each (Title of Class) Common Share Purchase Rights (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value as of March 1, 1996 of the voting stock held by non-affiliates of the registrant was $1,174,876,392. On March 1, 1996 there were 35,402,446 shares outstanding. Page 1 of 112 Index To Exhibits On Page 27 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for the registrant's fiscal year ended December 31, 1995 is incorporated herein by reference for the following items: PART I Item 1. Business. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. Item 6. Selected Financial Data. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 8. Financial Statements and Supplementary Data. The Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995 for the Annual Shareholders meeting to be held April 17, 1996 is incorporated herein by reference for the following items: PART III Item 10. Directors and Executive Officers of the Registrant. Item 11. Executive Compensation. Item 12. Security Ownership of Certain Beneficial Owners and Management. Item 13. Certain Relationships and Related Transactions. 2 3 PART I ITEM 1. BUSINESS (A) GENERAL DEVELOPMENT OF BUSINESS Ohio Casualty Corporation (the Corporation) was incorporated under the laws of Ohio in August, 1969. The Corporation operates primarily as a holding company and is principally engaged, through its direct and indirect subsidiaries, in the business of property and casualty insurance and insurance premium finance. The Corporation has two industry segments: property and casualty insurance and insurance premium finance. The Corporation conducts its property and casualty insurance business through The Ohio Casualty Insurance Company ("Ohio Casualty"), an Ohio corporation organized in 1919, the Ohio Casualty's three operating property and casualty insurance subsidiaries: West American Insurance Company ("West American"), an Indiana corporation (originally incorporated under the laws of the State of California) acquired in 1945; Ohio Security Insurance Company ("Ohio Security"), an Ohio corporation acquired in 1962; and American Fire and Casualty Company ("American Fire"), an Ohio corporation (originally incorporated under the laws of the State of Florida) acquired in 1969. This group of companies presently underwrites most forms of property and casualty insurance. The Corporation conducts its premium finance business through Ocasco Budget, Inc. ("Ocasco"), an Ohio corporation (originally incorporated under the laws of the State of California) organized in 1960. Ocasco is a direct subsidiary of Ohio Casualty. On May 31, 1995 the states of domicile of West American and Ocasco changed to Indiana and Ohio, respectively, in connection with the withdrawal from property and casualty insurance operations in California as previously announced and as discussed elsewhere herein. During 1995, the Corporation's third industry segment, life operations, was discontinued. We found it increasingly difficult to achieve our required 16% rate of return in this segment of our business. After extensive analysis, it was determined that a 16% return could not be achieved without extensive capital contributions and a dramatic overhaul of the life operations. Since this was a small segment of our overall business, it was decided that this would not be a prudent use of our capital. Therefore, on October 2, 1995, the Corporation signed the final documents to reinsure the existing blocks of business and enter a marketing agreement with Great Southern Life Insurance Company. This will provide our agents and policyholders access to quality life insurance products to meet their financial needs. The existing blocks of business were reinsured through a 100% coinsurance arrangement with Employer's Reassurance Corporation. As of December 31, 1995, $16.7 million of the net ceding commission from the transaction remains unamortized. This will be amortized into income over the expected life of the underlying reinsured policies, in this case, 15 years. An assumption is scheduled for January 1, 1997 whereby Great Southern will legally replace Ohio Life as the primary carrier on these policies at which time the remaining unamortized gain will be recognized. Net income from discontinued operations amounted to $4.4 million or $.12 per share in 1995 compared with $5.9 million or $.16 per share in 1994 and $6.8 million or $.19 per share in 1993. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The revenues, operating profit and identifiable assets of each industry segment for the three years ended December 31, 1995 are set forth in Note 10, Industry Segment Information, in the Notes to the Consolidated Financial Statements on page 33 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. 3 4 ITEM 1. CONTINUED PREMIUMS The following table shows the total net premiums written (gross premiums less premiums ceded pursuant to reinsurance treaties) by line of business by Ohio Casualty, West American, American Fire, Ohio Security and Ohio Life as a group (collectively, the "Ohio Casualty Group") for the periods indicated. Life insurance premiums reflect adjustments for FAS 97 "Accounting and Reporting by Insurance Enterprises for Certain Long-duration Contracts and Realized Gains and Losses from the Sale of Investments" which was implemented in 1989. Ohio Casualty Group Net Premiums Written By Line of Business (in thousands) 1995 1994 1993 1992 1991 ----------- ---------- ---------- ---------- ---------- Auto liability $ 403,781 $ 420,031 $ 430,852 $ 493,214 $ 467,604 Auto physical damage 207,534 212,005 210,987 240,913 229,049 Homeowners multiple peril 160,444 160,089 156,797 185,518 181,643 Workers' compensation 140,558 145,641 165,577 199,402 218,387 Commercial multiple peril 131,553 135,595 136,559 147,894 133,589 Other liability 108,483 112,906 107,983 122,277 132,427 All other lines 96,842 98,714 95,562 116,450 126,314 ----------- ---------- ---------- ---------- ---------- Property and casualty premiums $ 1,249,195 $1,284,981 $1,304,317 $1,505,668 $1,489,013 =========== ========== ========== ========== ========== Premium finance revenues $ 2,314 $ 2,528 $ 2,887 $ 4,313 $ 4,979 =========== ========== ========== ========== ========== Discontinued operations- Statutory premiums: Individual life $ (126,979) $ 22,238 $ 38,409 $ 36,698 $ 20,938 Annuity (195,870) 18,104 19,530 16,983 18,780 Other (22,012) 8,606 6,716 7,113 5,215 ----------- ---------- ---------- ---------- ---------- Total (344,861) 48,948 64,655 60,794 44,933 FAS 97 adjustments (1,533) (26,173) (44,748) (41,582) (27,086) ----------- ---------- ---------- ---------- ---------- Discontinued operations revenues $ (346,394) $ 22,775 $ 19,907 $ 19,212 $ 17,847 =========== ========== ========== ========== ========== (C) NARRATIVE DESCRIPTION OF BUSINESS The Ohio Casualty Group is represented on a commission basis by approximately 4,367 independent insurance agencies. In most cases, these agencies also represent other unaffiliated companies which may compete with the Ohio Casualty Group. The 47 claim and 36 underwriting and service offices operated by the Ohio Casualty Group assist these independent agencies in the producing and servicing of the Group's business. 4 5 ITEM 1. CONTINUED The following table shows consolidated direct premiums written for the Ohio Casualty Group's ten largest states: Ohio Casualty Group Ten Largest States Direct Premiums Written From Continuing Operations (in thousands) Percent Percent Percent 1995 of Total 1994 of Total 1993 of Total ---- -------- ---- -------- ---- -------- New Jersey $220,373 17.6 New Jersey $211,233 16.4 New Jersey $194,813 14.9 Pennsylvania 128,603 10.3 Pennsylvania 145,687 11.3 Pennsylvania 170,681 13.1 Ohio 126,622 10.1 Ohio 129,303 10.0 Ohio 133,256 10.2 Kentucky 80,498 6.4 Kentucky 79,710 6.2 Kentucky 83,006 6.4 Illinois 64,352 5.1 Illinois 63,682 4.9 Illinois 66,326 5.1 Maryland 56,741 4.5 Florida 56,846 4.4 Florida 59,574 4.6 Indiana 49,353 3.9 Maryland 56,637 4.4 Maryland 56,867 4.4 Texas 43,036 3.4 Indiana 47,817 3.7 Indiana 46,991 3.6 Florida 42,061 3.4 Texas 45,171 3.5 Texas 46,943 3.6 North Carolina 33,955 2.7 Michigan 32,846 2.6 Michigan 34,350 2.6 -------- ---- -------- ---- -------- ---- $845,594 67.4 $868,932 67.5 $892,807 68.5 ======== ==== ======== ==== ======== ==== Property and casualty net premiums written decreased 2.8% in 1995. New Jersey premiums written increased 4.1% primarily as a result of an 11.1% increase in private passenger automobile, due to continuing legislation requiring insurers to accept all automobile risks meeting broad underwriting guidelines. Pennsylvania premiums written decreased 11.8% principally due to a 13.9% reduction in workers' compensation, as a result of management's decision to limit writing due to poor underwriting experience. INVESTMENT OPERATIONS Each of the Ohio Casualty Group companies must comply with the insurance laws of its domiciliary state and of the other states in which it is licensed for business. Among other things, these laws prescribe the kind, quality and concentration of investments which may be made by insurance companies. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, preferred and common stocks, real estate mortgages and real estate. The distribution of invested assets of the Ohio Casualty Group is determined by a number of factors, including insurance law requirements, the Corporation's liquidity needs and taxable position, and general market conditions. Accordingly, adjustments are made to the asset allocation from time to time. The Corporation has no investment real estate or commercial mortgages. Assets relating to property and casualty operations are invested to maximize after-tax returns with appropriate diversification of risk. The following table sets forth the carrying values and other data of the consolidated invested assets of the Ohio Casualty Group as of the end of the years indicated: 5 6 ITEM 1. CONTINUED Ohio Casualty Group Distribution of Invested Assets (in millions) 1995 Average % of % of % of Rating 1995 Total 1994 Total 1993 Total ------- --------- ----- ---------- ----- ---------- ----- U.S. government AAA $ 116.5 3.8 $ 88.0 2.9 $ 102.9 3.3 Tax exempt bonds and notes AA+ 898.5 29.1 694.3 22.8 1,109.4 35.3 Debt securities issued by foreign governments A+ 3.4 0.1 38.1 1.3 0 0 Corporate securities BBB+ 986.4 32.0 1,091.9 35.9 839.9 26.8 Mortgage backed securities U.S. government AAA 170.2 5.5 371.9 12.2 448.8 14.3 Other AA 232.9 7.6 225.7 7.4 128.2 4.1 Total bonds AA- 2,407.9 78.1 2,509.9 82.5 2,629.2 83.8 Common stocks 627.4 20.3 459.5 15.1 442.8 14.1 Preferred stocks 33.7 1.1 60.5 2.0 49.4 1.6 Total stocks 661.1 21.4 520.0 17.1 492.2 15.7 Short-term 14.4 0.5 13.6 0.4 16.2 0.5 Total investments $3,083.4 100.0 $3,043.5 100.0 $3,137.6 100.0 Total market value of investments $3,083.4 $3,043.5 $3,316.2 Total amortized cost of investments $2,617.5 $2,938.1 $3,137.6 The consolidated fixed income portfolio (identified as "Total Bonds" in the foregoing table) of the Ohio Casualty Group had a weighted average Standard & Poor rating of "AA-" and an average stated maturity of ten years as of December 31, 1995. The mortgage-backed portfolio, which represents 16.7% of fixed maturity investments, has experienced a significantly increased level of prepayments over the last few years causing reinvestment of proceeds at the lower rates prevalent at that time. As rates have risen, prepayments have slowed and the fair value of the lower yielding bonds has decreased. Investments in taxable high yield (less than investment grade, Standard & Poor rated below "BBB-") and unrated securities had an aggregate carrying value of $490.2 million and an aggregate amortized cost of $475.0 million at year-end 1995. At year-end 1994 and 1993, respectively, carrying values were $306.6 million and $206.0 million and market values were $322.7 million and $220.6 million. The taxable high yield securities had a weighted average Standard & Poor rating of "BB-" and an average maturity of ten years. 6 7 ITEM 1. CONTINUED Approximately 99.7% of the Corporation's high yield and unrated investments (based on carrying value) are performing in accordance with contractual terms and are making principal and interest payments as required. The securities in the Corporation's high yield and unrated portfolio have been issued by 171 corporate borrowers in approximately 46 industries. At December 31, 1995, the Corporation's five largest investments in high yield and unrated securities totaled $37.1 million, and had an approximate amortized cost of $34.3 million. None of these holdings individually exceeded $8.9 million. At December 31, 1995, the fixed income portfolio relating to property and casualty operations totaled $2.3 billion which consisted of 90.5% investment grade securities and 9.5% high yield securities. At December 31, 1995, the fixed income portfolio relating to discontinued operations totaled $80.1 million which consisted of 93.8% investment grade securities and 6.2% high yield securities. Investments in high yield and, in many instances, unrated securities have greater risks than investments in investment grade securities. The risk of default by borrowers which issue high yield securities is significantly greater because these securities are generally unsecured and often subordinated to other debt and these borrowers are often highly leveraged and are more sensitive to adverse economic conditions such as a recession or a sharp increase in interest rates. Furthermore, the market for high yield and unrated securities is often thinly traded and market quotations may be unavailable or available only from a small number of dealers. Investment grade securities are also subject to significant adverse risks including the risks of re-leveraging and changes in control of the issuer. In most instances, investors are unprotected with respect to such risks, the effects of which can be substantial. The Corporation has no investment with a single issuer exceeding 3.1% of shareholders' equity. Yield (based on cost of investments) for the taxable fixed income portfolio was 8.7% and 8.6% at December 31, 1995 and 1994, respectively. Unrated and high yield securities were yielding 10.1% and 9.5% at December 31, 1995 and 1994, respectively, while investment grade securities were yielding 7.5% in 1995 and 8.4% in 1994. Yield for tax exempt securities was 6.3% at December 31, 1995 and 6.7% at December 31, 1994; however, this yield is not directly comparable to taxable yield due to the complexity of federal taxation of insurance companies. High yield and unrated corporate debt securities provided approximately 19.3% of consolidated net investment income before tax in 1995 and 12.7% in 1994. Because the Corporation has generally purchased high yield and unrated securities with the intention of holding them to maturity and has managed its investment portfolio so as to not be dependent on these securities to meet its liquidity needs, the Corporation has been willing to accept the relative lack of liquidity for these securities. Investment income is affected by the amount of new investable funds and investable funds arising from maturities, prepayments, calls and exchanges as well as the timing of receipt of such funds. In addition, other factors such as interest rates at time of investment and the maturity, income tax status, credit status and other risks associated with new investments are reflected in investment income. Future changes in the distribution of investments and the factors described above could affect overall investment income in the future; however, the amount of any increase or decrease cannot be predicted. Further details regarding investment distribution and investment income are described in Note 2, Investments, in the Notes to Consolidated Financial Statements on pages 29 and 30 of the 1995 Annual Report to Shareholders. 7 8 ITEM 1. CONTINUED Purchases of taxable fixed income securities in 1995 were as follows: $480.9 million of investment grade securities, $56.7 million of high yield securities and $53.8 million of unrated securities. Purchases of tax-exempt and equity securities in 1995 totaled $352.7 million and $86.5 million, respectively. Disposals (including maturities, calls, exchanges and scheduled prepayments) of taxable fixed income securities in 1995 were as follows: $850.6 million of investment grade securities, $132.9 million of high yield securities and $39.4 million of unrated securities. Dispositions of tax-exempt and equity securities in 1995 totaled $39.6 million and $137.4 million, respectively. During 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 115, "Accounting for Certain Investments in Debt and Equity Securities". This statement was adopted on January 1, 1994, and required the Corporation to classify equity securities and debt securities into the following categories: 1) held to maturity securities; 2) trading securities; 3) available for sale. All fixed income holdings were placed in the available for sale category. This accounting change increased shareholders' equity $116.1 million in 1994. Consolidated net realized investment gains in 1995 totaled $6.1 million, $.17 per share. Included in this amount are approximately $16.0 million in writedowns of the carrying values of certain securities the Corporation determined had an other than temporary decline in value. SHARE REPURCHASES During 1990 the Board of Directors of Ohio Casualty Corporation authorized the additional purchase of as many as 3,000,000 (as adjusted for 1994 stock split) shares of its common stock through open market or privately negotiated transactions. 613,900 shares were repurchased during 1995 for $20.9 million. 50,000 shares were repurchased during 1994 for $1.4 million. No shares were repurchased during 1993. The remaining repurchase authorization is 2,336,100 shares as of December 31, 1995. LIABILITIES FOR UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES Liabilities for loss and loss adjustment expenses are established for the estimated ultimate costs of settling claims for insured events, both reported claims and incurred but not reported claims, based on information known as of the evaluation date. As more information becomes available and claims are settled, the estimated liabilities are adjusted upward or downward with the effect of increasing or decreasing net income at the time of adjustments. Such estimated liabilities include direct costs of the loss under terms of insurance policies as well as legal fees and general expenses of administering the claims adjustment process. The liabilities for claims incurred in accident years 1994, 1993 and 1992 were reduced in the subsequent year as shown below: 8 9 ITEM 1. CONTINUED Accident Year Loss and Loss Adjustment Expense Liabilities Subsequent Year Adjustment (in millions) 1994 1993 1992 ---- ---- ---- Property $11 $ 31 $22 Auto 30 26 18 Workers' compensation and other liability 35 51 18 ---- ---- --- Total reduction $76 $108 $58 ==== ==== === In the normal course of business, the Ohio Casualty Group is involved in disputes and litigation regarding terms of insurance contracts and the amount of liability under such contracts arising from insured events. The liabilities for loss and loss adjustment expenses include estimates of the amounts for which the Ohio Casualty Group may be liable upon settlement or other conclusion of such litigation. Because of the inherent future uncertainties in estimating ultimate costs of settling claims, actual loss and loss adjustment expenses may deviate substantially from the amounts recorded in the Corporation's consolidated financial statements. Furthermore, the timing, frequency and extent of adjustments to the estimated liabilities cannot be accurately predicted since conditions and events which established historical loss and loss adjustment expense development and which serve as the basis for estimating ultimate claims cost may not occur in the future in exactly the same manner, if at all. The anticipated effect of inflation is implicitly considered when estimating the liability for losses and loss adjustment expenses based on historical loss development trends adjusted for anticipated changes in underwriting standards, policy provisions and general economic trends. The following table presents an analysis of property and casualty losses and loss adjustment expenses and related liabilities for the periods indicated. The accounting policies used to estimate liabilities for losses and loss adjustment expenses are described in Note 1, Accounting Policies, paragraph E, in the Notes to Consolidated Financial Statements on page 28 of the 1995 Annual Report to Shareholders. 9 10 ITEM 1. CONTINUED Reconciliation of Liabilities for Losses and Loss Adjustment Expense (in thousands) 1995 1994 1993 ---- ---- ---- Net liabilities, beginning of year $1,606,487 $1,693,551 $1,673,868 Provision for current accident year claims 1,008,321 1,084,072 1,131,055 Increase (decrease)in provisions for prior accident year claims (104,998) (153,717) (71,799) ---------- ---------- ---------- 903,323 930,355 1,059,256 Payments for claims occurring during: Current accident year 444,558 483,129 477,777 Prior accident years 508,187 534,290 561,796 ---------- ---------- ---------- 952,745 1,017,419 1,039,573 Net liabilities, end of year 1,557,065 1,606,487 1,693,551 Reinsurance recoverable 74,119 65,336 75,738 ---------- ---------- ---------- Gross liabilities, end of year $1,631,184 $1,671,823 $1,769,289 ========== ========== ========== 10 11 Item 1. Continued Analysis of Development of Loss and Loss Adjustment Expense Liabilities (In thousands) Year Ended December 31 1985 1986 1987 1988 1989 1990 1991 1992 - ---------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Liability as originally estimated: $ 806,474 $ 981,335 $1,171,392 $1,252,404 $1,370,054 $1,483,985 $1,566,139 $1,673,205 Cumulative payments as of: One year later 337,235 380,290 438,195 440,173 489,562 506,246 526,973 561,133 Two years later 518,446 598,478 667,894 695,364 745,766 783,948 822,634 869,620 Three years later 641,649 730,106 828,325 845,472 902,081 955,666 1,007,189 1,060,433 Four years later 711,344 828,365 922,744 937,034 1,000,299 1,063,508 1,123,591 Five years later 769,317 884,606 977,575 996,353 1,061,173 1,131,012 Six years later 800,238 919,026 1,015,889 1,033,508 1,100,683 Seven years later 822,163 942,572 1,041,563 1,055,972 Eight years later 837,332 959,174 1,057,509 Nine years later 849,845 968,586 Ten years later 856,355 Liability reestimated as of: One year later 827,244 989,512 1,131,539 1,179,052 1,285,233 1,403,172 1,515,129 1,601,406 Two years later 876,906 1,029,086 1,139,684 1,175,861 1,299,428 1,407,197 1,500,890 1,555,452 Three years later 899,911 1,032,435 1,139,584 1,193,127 1,296,215 1,388,381 1,467,256 1,524,054 Four years later 902,062 1,028,893 1,156,930 1,195,712 1,281,246 1,368,530 1,449,789 Five years later 898,292 1,048,419 1,160,997 1,186,680 1,268,193 1,366,676 Six years later 918,089 1,054,589 1,159,372 1,178,126 1,270,734 Seven years later 925,473 1,049,447 1,154,169 1,184,233 Eight years later 920,223 1,046,494 1,162,837 Nine years later 917,127 1,049,464 Ten years later 919,896 Decrease (increase) in original estimates: $(113,422) $ (68,129) $ 8,555 $ 68,171 $ 99,320 $ 117,309 $ 116,350 $ 149,151 Year Ended December 31 1993 1994 1995 - ---------------------- ---- ---- ---- Liability as originally estimated: $1,692,895 $1,605,526 $1,553,131 Cumulative payments as of: One year later 533,634 510,219 Two years later 833,399 Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later Ten years later Liability reestimated as of: One year later 1,539,178 1,500,528 Two years later 1,510,943 Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later Ten years later Decrease (increase) in original estimates: $ 181,952 $ 104,998 This table presents the current period effects of changes in estimated loss and loss adjustment expense liabilities of the most recent and all prior accident years. Since conditions and trends that have affected loss and loss adjustment expense development in the past may not occur in the future in exactly the same manner, if at all, future results may not be reliably predicted by extrapolation of the data presented. 1994 1995 ---- ---- Gross liability - end of year $1,670,862 $1,624,197 Reinsurance recoverable 65,336 71,066 Net liability - end of year 1,605,526 1,553,131 Gross re-estimated liability - latest 1,562,411 Re-estimated recoverable - latest 61,883 Net re-estimated liability - latest 1,500,528 Gross cumulative deficiency 108,451 11 12 ITEM 1. CONTINUED COMPETITION More than 2,600 property and casualty insurance companies compete in the United States and no one company or company group has a market share greater than approximately 15.0%. The Ohio Casualty Group ranked as the forty-fifth largest property and casualty insurance groups in the United States based on net insurance premiums written in 1994, the latest year for which statistics are available. The Ohio Casualty Group competes with other companies on the basis of service, price and coverage. STATE INSURANCE REGULATION General. The Corporation and the Ohio Casualty Group are subject to regulation under the insurance statutes, including the holding company statutes, of various states. Ohio Casualty, American Fire and Ohio Security are all domiciled in Ohio. West American is domiciled in Indiana. Collectively, the Ohio Casualty Group is authorized to transact the business of insurance in the District of Columbia and all states except Maine. The Ohio Casualty Group is subject to examination of their affairs by the insurance departments of the jurisdictions in which they are licensed. The insurance holding company laws and regulations vary from state to state, but generally require insurance holding companies to register and file with the state regulatory authority certain reports, including information concerning their capital structure, ownership, financial condition and general business operations. State laws also require prior notice or regulatory agency approval of changes in control of an insurer or its holding company and of certain material intercorporate transfers of assets within the holding company structure. Under applicable provisions of the Indiana insurance statutes ("Indiana Insurance Law") and the Ohio insurance statutes (the "Ohio Insurance Law"), a person would not be permitted to acquire direct or indirect control of the Corporation or any of the Ohio Casualty Group companies domiciled in such state, unless such person had obtained prior approval of the Indiana Insurance Commissioner and the Ohio Superintendent of Insurance, respectively, for such acquisition. For the purposes of the Indiana Insurance Law and the Ohio Insurance Law, any person acquiring more than 10% of the voting securities of a company is presumed to have acquired "control" of such company. Proposition 103 was passed in the State of California in 1988 in an attempt to legislate premium rates for that state. Even after considering investment income, total returns in California have been less than what would be considered "fair" by any reasonable standard. During the fourth quarter of 1994, the State of California billed the Corporation $59.9 million for Proposition 103 assessment. In February 1995, California revised this billing to $47.3 million due to California Senate Bill 905 which permits reduction of the rollback due to commissions and premium taxes paid. The billing was revised again in August of 1995 and at present the State has indicated the Corporation should not be required to pay in excess of $42.1 million plus interest as a Proposition 103 assessment. As a result, the Corporation's reserve for this alleged liability is $70.2 million. The Corporation will continue to challenge the validity of any rollback and plans to continue negotiations with Department officials. It is uncertain when this will be resolved. 12 13 ITEM 1. CONTINUED The State of New Jersey has historically been a profitable state for the Corporation. In recent years, however, the legislative environment in that state has deteriorated. Due to legislative rules and regulations designed to make insurance less expensive and more easily obtainable for New Jersey residents, our results have been adversely impacted. In order to meet our state imposed assessment obligations under the Fair Automobile Insurance Reform Act, the Unsatisfied Claim and Judgment fund, the New Jersey Surtax and the Market Transition Facility, the Corporation has incurred expenses of $3.7 million in 1995, $6.4 million in 1994 and $19.1 million in 1993. These assessments have negatively affected our combined ratios by .3, .5 and 1.4 points in the three years, respectively. National Association of Insurance Commissioners. The National Association of Insurance Commissioners (the "NAIC") annually calculates a number of financial ratios to assist state insurance regulators in monitoring the financial condition of insurance companies. A "usual range" of results for each ratio is used as a benchmark. Departure from the usual range on four or more of the ratios could lead to inquiries from individual state insurance commissioners as to certain aspects of a company's business. None of the property and casualty companies of the Ohio Casualty Group had more than one NAIC financial ratio that was outside the usual range in the last five calendar years. Beginning in 1994, the NAIC requires inclusion of a risk-based capital calculation in the Annual Statements. The risk-based capital model is used to establish standards which will relate insurance company statutory surplus to risks of operations and assist regulators in determining solvency requirements. The model is based on four risk factors in two categories: asset risk, consisting of investment risk and credit risk; and underwriting risk, composed of loss reserves and premiums written risks. Based on current calculations, all of the Ohio Casualty Group companies have at least twice the necessary capital to conform with the risk-based capital model. The NAIC has developed a model law limiting dividend payments by insurance companies. This model law allows dividends to equal the greater of 10% of policyholders surplus or net income determined as of the preceding year end without prior approval of the Insurance Department. The State of Ohio signed this model into law on September 30, 1993. For 1995, $116.3 million of policyholder surplus are not subject to restrictions or prior dividend approval. EMPLOYEES At December 31, 1995, the Ohio Casualty Group had approximately 3,681 employees of which approximately 1,372 were located in Hamilton, Ohio. ITEM 2. PROPERTIES The Ohio Casualty Group owns and leases office space in various parts of the country. The principal office building consists of an owned facility in Hamilton, Ohio. 13 14 ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings against the Corporation or its subsidiaries other than litigation arising in connection with settlement of insurance claims as described on page 9 and Proposition 103 hearings described on page 12. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS There were no matters submitted during the fourth quarter of the fiscal year covered by this report to a vote of Shareholders through the solicitation of proxies or otherwise. EXECUTIVE OFFICERS OF THE REGISTRANT The following information is related to executive officers of the Corporation who are not separately reported in the Corporation's Proxy Statement: Chief Financial Officer and Treasurer Age Barry S. Porter....................................................... 59 Mr. Porter has been an officer of the Corporation and its subsidiaries for more than five years. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS See inside front cover and page 36 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 6. SELECTED FINANCIAL DATA See pages 16 and 17 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS See pages 18 through 23 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements and Schedules. (See Index to Financial Statements attached hereto.) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 14 15 PART III ITEM 10. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See pages 4 through 6 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995 and Executive Officers of the Registrant separately captioned under Part I of this annual report. ITEM 11. EXECUTIVE COMPENSATION See pages 7 through 12 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See pages 1 through 3 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See page 6 of the Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial statements and financial statement schedules required to be filed by Item 8 of this Form and Regulation S-X (b) Exhibit I - Fourth Amendment to Rights Agreement dated September 5, 1995. A report on Form 8-K was filed September 5, 1995. (c) Exhibits. (See index to exhibits attached hereto.) 15 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OHIO CASUALTY CORPORATION (Registrant) March 26, 1996 By: /s/ Lauren N. Patch ------------------------------ Lauren N. Patch, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 26, 1996 /s/ Joseph L. Marcum ------------------------------------------------------ Joseph L. Marcum, Chairman of the Board March 26, 1996 /s/ William L. Woodall ------------------------------------------------------ William L. Woodall, Vice Chairman of the Board March 26, 1996 /s/ Lauren N. Patch ------------------------------------------------------ Lauren N. Patch, President and Chief Executive Officer March 26, 1996 /s/ Arthur J. Bennert ------------------------------------------------------ Arthur J. Bennert, Director March 26, 1996 /s/ Jack E. Brown ------------------------------------------------------ Jack E. Brown, Director March 26, 1996 /s/ Catherine E. Dolan ------------------------------------------------------ Catherine E. Dolan, Director March 26, 1996 /s/ Wayne R. Embry ------------------------------------------------------ Wayne R. Embry, Director March 26, 1996 /s/ Vaden Fitton ------------------------------------------------------ Vaden Fitton, Director March 26, 1996 /s/ Jeffery D. Lowe ------------------------------------------------------ Jeffery D. Lowe, Director March 26, 1996 /s/ Stephen S. Marcum ------------------------------------------------------ Stephen S. Marcum, Director March 26, 1996 /s/ Stanley N. Pontius ------------------------------------------------------ Stanley N. Pontius, Director March 26, 1996 /s/ Howard L. Sloneker III ------------------------------------------------------ Howard L. Sloneker III, Director March 26, 1996 /s/ Barry S. Porter ------------------------------------------------------ Barry S. Porter, Chief Financial Officer and Treasurer March 26, 1996 /s/ Michael L. Evans ------------------------------------------------------ Michael L. Evans, Vice President 16 17 FORM 10-K, ITEM 14 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES OHIO CASUALTY CORPORATION The following statements are incorporated by reference to the Annual Report to Shareholders for registrant's fiscal year ended December 31, 1995: Page Number in Annual Report ---------------- Consolidated Balance Sheet at December 31, 1995, 1994, 1993 24 Statement of Consolidated Income for the years ended December 31, 1995, 1994 and 1993 25 Statement of Consolidated Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 26 Statement of Consolidated Cash Flows for the years ended December 31, 1995, 1994 and 1993 27 Notes to Consolidated Financial Statements 28-35 Page Number in this Report -------------- Report of Independent Accountants The following financial statement schedules are included herein: Schedule I - Consolidated Summary of Investments Other Than Investments in Related Parties at December 31, 1995 19 Schedule III - Condensed Financial Information of Registrant for the years ended December 31, 1995, 1994 and 1993 20 Schedule V - Consolidated Supplementary Insurance Information for the years ended December 31, 1995, 1994 and 1993 21-23 Schedule VI - Consolidated Reinsurance for the years ended December 31, 1995, 1994 and 1993 24 Schedule VIII - Valuation and Qualifying Accounts for the years ended December 31, 1995, 1994 and 1993 25 Schedule X - Consolidated Supplemental Information Concerning Property and Casualty Insurance Operations for the years ended December 31, 1995, 1994 and 1993 26 Schedules other than those listed above are omitted for the reason that they are not required or are not applicable or the required information is disclosed elsewhere in the financial statements and related notes. 17 18 [COOPERS & LYBRAND letterhead] REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders Ohio Casualty Corporation We have audited the consolidated financial statements of Ohio Casualty Corporation and subsidiaries as of December 31, 1995, 1994 and 1993 and for the years then ended, which financial statements are included on pages 24 through 35 of the 1995 Annual Report to Shareholders of Ohio Casualty Corporation and incorporated by reference herein. We have also audited the financial statement schedules listed in the index on page 17 of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as 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 consolidated financial position of Ohio Casualty Corporation and subsidiaries as of December 31, 1995, 1994 and 1993, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Notes 1 and 6 to the consolidated financial statements, the Corporation changed its method of accounting for debt and equity securities and post-employment benefits in 1994. /s/ Coopers & Lybrand L.L.P. ---------------------------- Coopers & Lybrand L.L.P. Columbus, Ohio February 3, 1996 18 19 Schedule I Ohio Casualty Corporation and Subsidiaries Consolidated Summary of Investments Other than Investments in Related Parties (In thousands) December 31, 1995 Amount shown Type of investment Cost Value in balance sheet - ------------------ ---- ----- ---------------- Fixed maturities Bonds: United States govt. and govt. agencies with auth. $ 110,628 $ 116,487 $ 116,487 States, municipalities and political subdivisions 845,729 898,466 898,466 Debt securities issued by foreign governments 3,000 3,423 3,423 Corporate securities 927,375 986,398 986,398 Mortgage-backed securities: U.S. government guaranteed 168,219 170,193 170,193 Other 221,199 232,886 232,886 ---------- ---------- ---------- Total fixed maturities 2,276,150 2,407,853 2,407,853 Equity securities: Common stocks: Banks, trust and insurance companies 53,338 139,939 139,939 Industrial, miscellaneous and all other 244,030 487,477 487,477 Preferred stocks: Non-redeemable 18,006 18,951 18,951 Convertible 11,625 14,787 14,787 ---------- ---------- ---------- Total equity securities 326,999 661,154 661,154 Short-term investments 14,399 14,399 14,399 ---------- ---------- ---------- Total investments $2,617,548 $3,083,406 $3,083,406 ========== ========== ========== 19 20 Schedule III Ohio Casualty Corporation Condensed Financial Information of Registrant (In thousands) 1995 1994 1993 ---- ---- ---- Condensed Balance Sheet: Investment in wholly-owned subsidiaries, at equity $1,156,718 $905,250 $949,546 Investment in bonds 20,165 22,618 15,335 Cash and other assets 2,468 4,725 3,041 ---------- -------- -------- Total assets 1,179,351 932,593 967,922 Bank note payable 60,000 70,000 103,000 Other liabilities 8,337 11,803 2,584 ---------- -------- -------- Total liabilities 68,337 81,803 105,584 Shareholders' equity $1,111,014 $850,790 $862,338 ========== ======== ======== Condensed Statement of Income: Dividends from subsidiaries $ 80,018 $ 91,098 $ 73,130 Equity in undistributed net income of subsidiaries 21,431 8,727 16,441 Operating (expenses) (1,714) (2,934) (2,586) ---------- -------- -------- Net income $ 99,735 $ 96,891 $ 86,985 ========== ======== ======== Condensed Statement of Cash Flows: Cash flows from operations Net distributed income $ 78,304 $ 88,174 $ 70,544 Other 2,971 (15,712) (24,048) ---------- -------- -------- Net cash from operations 81,275 72,462 46,496 Investing Purchase of bonds 4,555 14,452 20,389 ---------- -------- -------- Net cash from investing 4,555 14,452 20,389 Financing Note payable (10,000) (33,000) (17,000) Exercise of stock options 578 244 1,485 Purchase of treasury stock (21,193) (1,412) 0 Dividends paid to shareholders (54,335) (52,597) (51,145) ---------- -------- -------- Net cash from financing (84,950) (86,765) (66,660) Net change in cash 880 149 225 Cash, beginning of year 1,797 1,648 1,423 ---------- -------- -------- Cash, end of year $ 2,677 $ 1,797 $ 1,648 ========== ======== ======== 20 21 Schedule V Ohio Casualty Corporation and Subsidiaries Consolidated Supplementary Insurance Information (In thousands) December 31, 1995 Deferred Future policy Benefits, Amortization policy benefits Net losses and of deferred acquisition losses and Unearned Premium investment loss acquisition costs loss expenses premiums revenue income expenses costs ----------- ------------- -------- ---------- ---------- ------------ ------------ Segment - ------- Property and casualty insurance: Underwriting Automobile $ 36,990 $ 608,689 $185,735 $ 620,866 $ $ 490,036 $129,058 Workers' compensation 10,767 403,440 55,861 142,004 93,272 30,196 Gen. liability, A&H 14,736 335,428 48,042 110,487 67,201 37,785 Homeowners 27,209 74,599 92,099 161,116 123,140 46,523 CMP, fire and allied lines, inland marine 32,270 225,004 98,098 195,014 123,179 65,875 Fidelity, surety, burglary 11,358 17,037 25,936 33,719 5,554 17,618 Investment 184,585 -------- ---------- -------- ---------- -------- --------- -------- Total property and casualty insurance 133,330 1,664,197 505,771 1,263,206 184,585 902,382 327,055 Life ins. (discontinued operations) (13,535) 367,061 7 (346,394) 4,143 (350,121) 4,097 Premium finance 257 2,370 522 Corporation 196 3,000 -------- ---------- -------- ---------- -------- --------- -------- Total $119,795 $2,031,258 $506,035 $ 919,378 $192,250 $ 552,261 $331,152 ======== ========== ======== ========== ======== ========= ======== General operating Premiums expenses written --------- ---------- Segment - ------- Property and casualty insurance: Underwriting Automobile $23,246 $ 611,315 Workers' compensation 10,806 140,558 Gen. liability, A&H 12,236 108,283 Homeowners 12,747 160,444 CMP, fire and allied lines, inland marine 18,237 193,477 Fidelity, surety, burglary 4,904 35,118 Investment ------- --------- Total property and casualty insurance 82,176 1,249,195 Life ins. (discontinued operations) 1,471 (346,394) Premium finance 1,819 2,314 Corporation 5,975 ------- ---------- Total $91,441 $ 905,115 ======= ========== 1. Net investment income has been allocated to principal business segments on the basis of separately identifiable assets. 2. The principal portion of general operating expenses has been directly attributed to business segment classifications incurring such expenses with the remainder allocated based on premium volume. 21 22 Schedule V Ohio Casualty Corporation and Subsidiaries Consolidated Supplementary Insurance Information (In thousands) December 31, 1994 Deferred Future policy Benefits, Amortization policy benefits Net losses and of deferred acquisition losses and Unearned Premium investment loss acquisition costs loss expenses premiums revenue income expenses costs ----------- ------------- -------- ---------- ---------- ---------- ------------ Segment - ------- Property and casualty insurance: Underwriting Automobile $ 40,416 $ 617,871 $195,096 $ 639,604 $ $495,209 $131,815 Workers' compensation 12,385 421,422 57,175 151,257 89,992 35,089 Gen. liability, A&H 16,577 304,028 49,923 113,684 53,577 38,992 Homeowners 26,686 77,043 90,696 158,077 157,347 46,173 CMP, fire and allied lines, inland marine 34,003 227,735 100,119 200,937 131,267 69,765 Fidelity, surety, burglary 10,817 22,763 24,425 32,579 2,003 16,212 Investment 183,811 -------- ---------- -------- ---------- -------- -------- -------- Total property and casualty insurance 140,884 1,670,862 517,434 1,296,138 183,811 929,395 338,046 Life ins. (discontinued operations) 24,749 353,360 22,775 28,082 29,509 3,630 Premium finance 641 2,607 332 Corporation 115 1,565 -------- ---------- -------- ---------- -------- -------- -------- Total $165,633 $2,024,222 $518,075 $1,321,635 $213,790 $958,904 $341,676 ======== ========== ======== ========== ======== ======== ======== General operating Premiums expenses written --------- ---------- Segment - ------- Property and casualty insurance: Underwriting Automobile $20,493 $ 632,036 Workers' compensation 9,173 145,641 Gen. liability, A&H 9,906 114,656 Homeowners 11,829 160,089 CMP, fire and allied lines, inland marine 18,164 199,350 Fidelity, surety, burglary 4,802 33,209 Investment ------- ---------- Total property and casualty insurance 74,367 1,284,981 Life ins. (discontinued operations) 11,516 22,775 Premium finance 1,912 2,528 Corporation 6,139 ------- ---------- Total $93,934 $1,310,284 ======= ========== 1. Net investment income has been allocated to principal business segments on the basis of separately identifiable assets. 2. The principal portion of general operating expenses has been directly attributed to business segment classifications incurring such expenses with the remainder allocated based on premium volume. 22 23 Schedule V Ohio Casualty Corporation and Subsidiaries Consolidated Supplementary Insurance Information (In thousands) December 31, 1993 Deferred Future policy Benefits, Amortization policy benefits Net losses and of deferred acquisition losses and Unearned Premium investment loss acquisition costs loss expenses premiums revenue income expenses costs ----------- ------------- -------- ------- ---------- ---------- ------------ Segment - ------- Property and casualty insurance: Underwriting Automobile $ 39,951 $ 630,728 $203,010 $ 666,813 $ $ 503,438 $145,385 Workers' compensation 15,441 461,707 62,858 183,294 153,447 41,310 Gen. liability, A&H 15,977 332,677 48,950 117,275 87,327 41,791 Homeowners 26,687 76,265 88,782 167,729 141,068 50,238 CMP, fire and allied lines, inland marine 35,645 243,441 101,759 209,063 167,255 48,352 Fidelity, surety, burglary 9,693 23,815 23,795 33,378 6,064 46,726 Investment 190,395 -------- ----------- -------- ---------- -------- ---------- -------- Total property and casualty insurance 143,394 1,768,633 529,154 1,377,552 190,395 1,058,599 373,802 Life ins. (discontinued operations) 25,441 319,375 19,907 26,898 25,189 3,817 Premium finance 721 3,109 204 Corporation 13 1,891 -------- ---------- -------- --------- -------- ---------- -------- Total $168,835 $2,088,008 $529,875 $1,400,581 $219,388 $1,083,788 $377,619 ======== ========== ======== ========== ======== ========== ======== General operating Premiums expenses written ---------- ---------- Segment - ------- Property and casualty insurance: Underwriting Automobile $ 44,665 $ 641,837 Workers' compensation 8,190 165,577 Gen. liability, A&H 12,235 109,996 Homeowners 6,993 156,797 CMP, fire and allied lines, inland marine 72,076 198,963 Fidelity, surety, burglary (51,703) 31,148 Investment -------- ---------- Total property and casualty insurance 92,456 1,304,318 Life ins. (discontinued operations) 11,352 19,907 Premium finance 2,115 2,887 Corporation 6,239 -------- ---------- Total $112,162 $1,327,112 ======== ========== 1. Net investment income has been allocated to principal business segments on the basis of separately identifiable assets. 2. The principal portion of general operating expenses has been directly attributed to business segment classifications incurring such expenses with the remainder allocated based on premium volume. 23 24 Schedule VI Ohio Casualty Corporation and Subsidiaries Consolidated Reinsurance (In thousands) December, 1995, 1994 and 1993 Percent of amount Ceded to Assumed assumed Gross other from other Net to net amount companies companies amount amount ----------- ---------- ----------- ---------- ---------- Year Ended December 31, 1995 Life insurance in force $ 5,207,297 $5,298,297 $ 91,000 $ 0 0.0% =========== ========== ========== ========== Premiums Property and casualty insurance $ 1,251,079 $ 41,252 $ 39,692 $1,249,519 3.2% Life insurance 38,456 384,974 136 (346,382) 0.0% Accident and health insurance 1,456 1,780 1,521 1,197 127.1% ----------- ---------- ---------- ---------- Total premiums 1,290,991 428,006 41,349 904,334 4.6% Premium finance charges 2,314 Life insurance - FAS 97 adjustment (1,533) ---------- Total premiums and finance charges written 905,115 Change in unearned premiums and finance charges 14,263 ---------- Total premiums and finance charges earned 919,378 Miscellaneous income 3,810 Discontinued operations - life insurance 345,081 ---------- Total premiums & finance charges earned - continuing operations $1,268,269 ========== Year Ended December 31, 1994 Life insurance in force $ 5,254,705 $1,534,389 $ 91,000 $3,811,316 2.4% =========== ========== ========== ========== Premiums Property and casualty insurance $ 1,284,511 $ 44,592 $ 43,473 $1,283,392 3.4% Life insurance 53,910 5,436 231 48,705 0.5% Accident and health insurance 1,766 177 243 1,832 13.3% ----------- ---------- ---------- ---------- Total premiums 1,340,187 50,205 43,947 1,333,929 3.3% Premium finance charges 2,528 Life insurance - FAS 97 adjustment (26,173) ---------- Total premiums and finance charges written 1,310,284 Change in unearned premiums and finance charges 11,351 ---------- Total premiums and finance charges earned 1,321,635 Discontinued operations - life insurance (22,774) ---------- Total premiums & finance charges earned - continuing operations $1,298,861 ========== Year Ended December 31, 1993 Life insurance in force $ 5,037,383 $1,467,192 $ 91,000 $3,661,191 2.5% =========== ========== ========== ========== Premiums Property and casualty insurance $ 1,300,725 $ 43,448 $ 45,915 $1,303,192 3.5% Life insurance 68,739 4,607 247 64,379 0.4% Accident and health insurance 1,297 172 270 1,395 19.4% ----------- ---------- ---------- ---------- Total premiums 1,370,761 48,227 46,432 1,368,966 3.4% Premium finance charges 2,887 Life insurance - FAS 97 adjustment (44,748) ---------- Total premiums and finance charges written 1,327,105 Change in unearned premiums and finance charges 73,469 ---------- Total premiums and finance charges earned 1,400,574 Discontinued operations - life insurance (19,900) ---------- Total premiums & finance charges earned - continuing operations $1,380,674 ========== 24 25 Schedule VIII Ohio Casualty Corporation and Subsidiaries Valuation and Qualifying Accounts (In thousands) Balance at Balance at beginning Charged to end of of period expenses Deductions period Year ended December 31, 1995 Reserve for bad debt 4,500 (1,000) 0 3,500 Year ended December 31, 1994 Reserve for bad debt 6,300 (1,800) 0 4,500 Year ended December 31, 1993 Reserve for bad debt 6,791 (491) 0 6,300 25 26 Schedule X Ohio Casualty Corporation and Subsidiaries Consolidated Supplemental Information Concerning Property and Casualty Insurance Operations (In thousands) Claims and claim Reserves for adjustment expenses Deferred unpaid claims incurred related to policy and claim Discount Net --------------------- Affiliation with acquisition adjustment of Unearned Earned investment Current Prior registrant costs expenses reserves premiums premiums income year years ----------- ------------- --------- -------- ---------- ---------- ---------- --------- Property and casualty subsidiaries Year ended December 31, 1995 $133,330 $1,664,197 $ 0 $505,771 $1,263,206 $ 184,585 $1,007,380 $(104,998) ======== ========== ========== ======== ========== ========= ========== ========= Year ended December 31, 1994 $140,884 $1,670,862 $ 0 $517,774 $1,296,138 $ 183,811 $1,083,112 $(153,717) ======== ========== ========== ======== ========== ========= ========== ========= Year ended December 31, 1993 $143,394 $1,768,633 $ 0 $529,154 $1,377,552 $ 190,395 $1,130,399 $ (71,799) ======== ========== ========== ======== ========== ========= ========== ========= Amortization Paid of deferred claims policy and claim Affiliation with acquisition adjustment Premiums registrant costs expenses written ------------ ---------- ---------- Property and casualty subsidiaries Year ended December 31, 1995 $327,055 $ 954,777 $1,249,195 ======== ========== ========== Year ended December 31, 1994 $338,046 $1,016,763 $1,284,981 ======== ========== ========== Year ended December 31, 1993 $373,802 $1,038,910 $1,304,318 ======== ========== ========== 26 27 FORM 10-K OHIO CASUALTY CORPORATION INDEX TO EXHIBITS Page Number ------ Exhibit 10b Coinsurance Life, Annuity and Disability Income Reinsurance Agreement between Employer's Reassurance Corporation and The Ohio Life Insurance Company dated as of October 2, 1995 28-37 Exhibit 11 Computation of Earnings Per Share on Primary and Fully Diluted Basis for the years ended December 31, 1995, 1994 and 1993 38 Exhibit 13 Annual Report to Shareholders for the Registrant's fiscal year ended December 31, 1995 39-78 Exhibit 21 Subsidiaries of Registrant 79 Exhibit 22 Proxy Statement of the Board of Directors for the fiscal year ended December 31, 1995 80-96 Exhibit 23 Consent of Independent Accountants to incorporation of their opinion by reference in Registration Statement on Form S-8 97 Exhibit 27 Financial Data Schedule 98 Exhibit 28 Information from Reports Furnished to State Insurance Regulation Authorities 99-112 Exhibits incorporated by reference to previous filings: Exhibit 3 Articles of Incorporation and By Laws amended 1986 and filed with Form 8-K on January 15, 1987 Exhibit 4a Rights Agreement amended as of April 1, 1994 between Ohio Casualty Corporation and Mellon Bank, N.A. as rights agent filed with Form 8-K on April 1, 1994 Exhibit 4b First Supplement to Rights Agreement filed with Form 8-K on November 6, 1990 Exhibit 4c Second Supplement to Rights Agreement filed with Form 8-K on November 6, 1990 Exhibit 4d Rights Agreement amended as of September 5, 1995 between Ohio Casualty Corporation and First Chicago Trust Company of New York as rights agent filed with Form 8-K on September 5, 1995 Exhibit 10 Credit Agreement dated as of October 25, 1994 between Ohio Casualty Corporation and Chase Manhattan Bank, N.A., as agent, filed with Form 10-Q on November 1, 1994 Exhibit 10a Ohio Casualty Corporation 1993 Stock Incentive Program filed with Form 10-Q as Exhibit 10d on May 31, 1993 27