Ohio Casualty’s Q4 Profit Down 5%; 260 Laid Off; S&P Revises to Stable

Insurer Ohio Casualty Corp. announced that its 2004 fourth-quarter profit was $27.7 million, down 5 percent from last year’s $29.1 million. Meanwhile, the Fairfield, Ohio-based company boasted that a company-wide efficiency initiative resulted in a layoff of 260 employees around the country and would save $5.5 million. Rating agency Standard & Poor’s responded to the moves and the company’s overall performance by revising its outlook from negative to stable.

Other highlights of Ohio Casualty’s quarterly report a 2.8-point improvement in its combined ratio to 104.7 percent. Net income before realized gains and losses were $25.2 million, versus net income before realized gains and losses of $17.1 million.

Results for the year included net income of $75.8 million, or $1.24 per diluted share, versus a net loss of $.9 million, or 1 cent per diluted share, last year. For the year, Ohio Casualty’s combined ratio improved by 6.7 points to 106.1 percent, and net income before realized gains and losses of $52.5 million versus a net loss before realized gains and losses of $30.3 million.

The company said its efficiency initiative has resulted in an initial reduction of approximately 260 staff and managerial positions in its eight major field claims and commercial Lines underwriting operations around the country, as well as at its home office in Fairfield. An additional 150 to 250 positions are expected to be reduced company-wide before the end of second quarter of 2004 as other areas of the company complete their review of processes and implement improvements.

S&P said it revised its outlook on American Fire & Casualty Co., Ohio Casualty Insurance Co., Ohio Security Insurance Co., and West
American Insurance Co., which make up the Ohio Casualty Insurance Co. Intercompany Pool (OCIP), to stable from negative.

“The revised outlook reflects Ohio Casualty’s improving capitalization, decreasing expense ratio, and improving operating performance,” said S&P credit analyst Donovan Fraser. S&P said it expects that management will continue to make steady progress toward underwriting profitability.

Under the leadership of a new management team in 2001, OCIP initiated a new strategic plan to address unprofitable segments — particularly in personal lines — and re-underwrite the group’s book of business. Though execution risk accompanies any significant paradigm shift within a large organization, S&P said it considers the company’s approach to be a measured, conservative, long-term road map to underwriting profitability. The company has also benefited from industry-wide increased rate levels over the same time period.

Topics Profit Loss Ohio Casualty