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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 2003
OHIO CASUALTY CORPORATION
(Exact name of Registrant as specified in its charter)
Ohio 0-5544 31-0783294
(State of incorporation) (Commission file number) (I.R.S. employer
identification no.)
9450 Seward Road
Fairfield, Ohio 45014
(Address of principal executive offices) (Zip code)
(513) 603-2600 (Registrant's
telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events
Item 12. Results of Operations and Financial Condition
The Securities and Exchange Commission (the "SEC") recently issued Regulation
G and amended Item 10 of Regulation S-K concerning the use of non-GAAP
financial measures. These regulations became effective on March 28, 2003.
Prior to the effective date of the regulations, Ohio Casualty Corporation (the
"Corporation") included in its Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 (the "Form 10-K") references to statutory accounting
information, which are financial measures that are required to be filed with
insurance industry regulators, and non-GAAP financial measures, which include
operating income and after-tax realized investment gain. In anticipation of
the filing of registration statements that incorporate by reference
information from the Corporation's Form 10-K, the Corporation is filing this
Form 8-K solely for the purpose of conforming the Form 10-K to the new
requirements of SEC Regulation G and Item 10 of Regulation S-K. Management
uses statutory information and non-GAAP financial measures to analyze
operating results, compare other insurance company results, and to compare
insurance industry data. Due to the degree of regulation in the insurance
industry and the impact of regulation on an insurance company's business, it
is useful to view financial performance and capital adequacy in terms of
financial measures used by insurance regulators. The Corporation included in
its Form 10-K statutory accounting financial measures and non-GAAP financial
measures in its description of its business and in Management's Discussion and
Analysis ("MD&A") of financial condition and results of operations. For
additional information on the differences between statutory accounting
principles and generally accepted accounting principles ("GAAP"), refer to
item 16 on pages 67 and 68 of the Corporation's Form 10-K.
The primary statutory accounting financial measures are reconciled to GAAP
basis data on the Corporation's consolidated statement of income statement in
the following table.
Ohio Casualty Corporation & Subsidiaries
Statutory Property and Casualty Results
Reconciled to Consolidated GAAP Basis
(In thousands) Year Ended December 31
2002 2001 2000
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Net premiums written-thousands (NPW) $1,448,628 $1,472,185 $1,505,393
Decrease in liability for unearned premiums 1,749 33,994 27,628
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Net premiums earned-thousands (NPE) 1,450,377 1,506,179 1,533,021
Investment Income less expenses 205,794 211,017 201,812
Investment gains (losses) realized, net 53,011 198,298 (5,904)
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Total revenues-Statutory Basis 1,709,182 1,915,494 1,728,929
Statutory to GAAP adjustment and
non-property and casualty revenues (6,390) (13,491) 7,740
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Total revenues-GAAP Basis 1,702,792 1,902,003 1,736,669
Losses incurred -thousands 902,201 1,001,590 1,116,270
-ratio to NPE 62.2% 66.5% 72.8%
Loss adjustment expenses -thousands 227,081 202,444 177,894
-ratio to NPE 15.7% 13.4% 11.6%
Underwriting expenses -thousands 506,204 520,833 523,477
-ratio to NPW 34.9% 35.4% 34.8%
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Combined ratio 112.8% 115.3% 119.2%
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Total expenses-Statutory Basis 1,635,486 1,724,867 1,817,641
Statutory to GAAP adjustment and
non-property and casualty expenses 74,012 50,748 48,730
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Total expenses-GAAP Basis 1,709,498 1,775,615 1,866,371
In describing its business and in its MD&A in its Form 10-K, the Corporation
includes the statutory accounting financial measure of net premiums written to
describe and discuss insurance underwriting related revenues. This financial
measure includes the premium amount for the insurance policy transactions
recorded during that accounting period, and such policies may include coverage
during other accounting periods. Net premiums written are adjusted as shown in
the table above to reflect premiums earned during the accounting period based
on the policy coverage period. Where net premiums written are shown the most
comparable GAAP financial measure is premiums earned.
In the Corporation's ten-year summary of operations, the statutory financial
measures of net premiums written, statutory combined ratio and component
ratios of the combined ratio are reconciled to the most comparable GAAP
financial measures in the table above. Statutory policyholders surplus is a
statutory financial measure required by regulators to measure capital
adequacy. The most comparable GAAP financial measure is shareholder's equity.
Statutory policyholders surplus is also included in the Corporation's
description of its business and in its MD&A.
The non-GAAP financial measures are reconciled to GAAP basis data on the
Corporation's consolidated statement of income statement in the following
table.
Ohio Casualty Corporation & Subsidiaries
Other Reconciliations for 8-K
(In thousands) Year Ended December 31
2002 2001 2000
After-tax realized investment gains 29,375 135,011 (1,554)
Add back: income taxes on realized investment gains 15,817 47,929 (837)
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Investment gains (losses) realized, net 45,192 182,940 (2,391)
(In thousands) Year Ended December 31
2002 2001 2000
Operating Income (30,266) (36,431) (77,695)
Add back: after-tax realized investment gains 29,375 135,011 (1,554)
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Net income (loss) (891) 98,580 (79,249)
In describing its business and in its MD&A in its Form 10-K, the Corporation
includes the non-GAAP financial measure of after-tax realized investment gains
to describe and discuss investment results. The most comparable GAAP financial
measure is investment gains (losses) realized, which is on a before-tax basis.
The Corporation used in its MD&A in its Form 10-K, the non-GAAP financial
measure of operating income. The most comparable GAAP financial measure is net
income. Operating income differs from net income by the exclusion of realized
investment gains (losses), net of tax. The timing of realized investment gains
and losses can be influenced by management action for a variety of business
reasons and therefore management believes it is important to understand the
impact of realized investment gains on its operating results in order to
measure current operating performance. Many analysts who follow the insurance
industry use the above definition of operating income for their earnings
forecasts and have done so for many years. Investors have been encouraged to
evaluate the impact of realized gains and losses on net income in the
insurance sector.
In the MD&A disclosure in the Form 10-K, the combined ratio is shown as
excluding New Jersey personal auto results or as excluding the 2001 New Jersey
renewal obligation transfer fee. Management analyzes the impact of New Jersey
personal auto results separately from other business because it stopped
writing business in the New Jersey personal auto market beginning in March
2002 and management believes it has greater control of results in other
markets where it is still pricing and selling its insurance products. The
combined ratios impacted by the above described exclusion are shown on the
following table on a basis that includes New Jersey personal auto results and
the 2001 New Jersey renewal obligation transfer fee. The following table shows
ratios that include New Jersey.
Statutory Combined Ratios
(by operating segment, Accident Accident Accident
including Year Year Year
selected major product lines) 2002 2002(a) 2001 2001(a) 2000 2000(a)
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Personal Lines 114.1% 111.8% 119.2% 116.7% 113.5% 117.3%
Personal Auto 116.3% 113.6% 118.9% 117.0% 111.9% 114.9%
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Total All Lines 112.8% 106.9% 115.3% 110.4% 119.2% 118.1%
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(a) The measurement date for Accident Year data is December 31, 2002.
Item 5. Other Events
On May 8, 2003, the Corporation issued a press release announcing a Universal
Shelf Registration on Form S-3. A copy of the press release is attached hereto
as Exhibit 99.1.
SIGNATURE
Pursuant to the requirements 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)
Dated: May 8, 2003
By: /s/ Debra K. Crane
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Debra K. Crane
Senior Vice President, General
Counsel and Secretary
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
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23.1 Consent of Ernst & Young LLP.
99.1 Press release, dated May 8, 2003.