Ohio Casualty Corporation Reports Financial Results for Second Quarter
26 Juli 2006 - 10:05PM
Business Wire
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 $70.9 million. President and Chief Executive Officer
Dan Carmichael commented, "Our second quarter operating results
reflected both a highly competitive marketplace, a higher, more
normal pattern of catastrophe losses and our determination not to
compromise our underwriting standards to chase marginal
opportunities. Our two primary challenges continue to be the
monitoring and controlling of expenses and finding more
opportunities to grow with adequately priced business. We remain
confident that our strategy will continue to optimize results and
produce superior benefits for policyholders, independent agents and
our shareholders." The major components of net income are
summarized in the table below: -0- *T Summary Income Statement
Three Months Six Months ($ in millions, except Ended June 30, Ended
June 30, 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 *T 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: -0- *T 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 $1.18 =====
===== ===== ===== *T Reconciliation of Net Income Return on Equity
to Operating Income Return on Equity Operating income return on
equity is a ratio management calculates using non-GAAP financial
measures. It is calculated by dividing the annualized consolidated
operating income (see calculation below) for the most recent
quarter by the adjusted average shareholders' equity for the
quarter using a simple average of beginning and ending balances for
the quarter, excluding from equity after-tax unrealized investment
gains and losses. This ratio provides management with an additional
measure to evaluate the results excluding the unrealized changes in
the valuation of the investment portfolio that can fluctuate
between periods. The following table reconciles operating income
return on equity to net income return on equity, the most directly
comparable GAAP measure: -0- *T Three Months Six Months Ended June
30, Ended June 30, ($ 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
======== ======== ======== ======== *T
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