The California Department of Insurance has approved a Proposition 103 settlement with Ohio Casualty Corporation, the holding company of The Ohio Casualty Insurance Company.
Under the terms of the settlement, the corporation will pay $17.5 million, representing a refund of premiums to eligible 1989 California policyholders.
Passed in 1988, Prop. 103 requires premium rate rollbacks for 1989 California policyholders while allowing for a “fair” return for insurance companies. The corporation had a contingent liability of $52.3 million for Prop. 103 as of Sept. 30, 2000.
The excess over the settlement amount of $17.5 million ($34.8 million before tax and roughly $20.4 million after tax) will be recorded as operating income for the third quarter 2000. This represents an increase to operating income and net income of approximately 34 cents per share.
After the refund payments are distributed, the remaining $17.5 million liability will be extinguished, with no further earnings impact beyond the third quarter 2000 for California Prop. 103.
As a result of the settlement, policyholder surplus will increase by $34.8 million. The settlement will have no effect on statutory premiums or combined ratio data.
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