A.M. Best Affirms FSR of Ohio Casualty Group

December 9, 2003

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of the subsidiaries of Ohio Casualty Group (Cincinnati, Ohio).

Concurrently, A.M. Best has affirmed the debt rating of “bbb-” of Ohio Casualty Corporation’s convertible notes issued on March 19, 2002. A.M. Best has also assigned indicative ratings of “bbb-” senior unsecured debt, “bb+” subordinated debt, “bb” preferred stock to Ohio Casualty Corporation and “bb” trust preferred securities to Ohio Casualty Capital Trust I and II, which are associated with the $500 million universal shelf registration announced by Ohio Casualty Corporation on May 8, 2003. All ratings have been assigned stable outlooks.

The financial strength rating affirmation is based on the Group’s supportive capitalization, diversified product offerings and geographic spread of risk, as well as its strong brand name recognition and long-standing relationships with its independent agency distribution force. Also, in an effort to rebound from several years of weak operating performance, the new management team has been proactive in implementing various initiatives, including an aggressive expense containment policy, re-underwriting of all product lines and strengthening underwriting guidelines, which has contributed to the Group’s restored operating profitability.

Furthermore, the parent, Ohio Casualty Corporation, closed a convertible note private offering in March 2002. The proceeds from the sale, which amounted to $201 million, were used to retire the Ohio Casualty Corporation’s existing bank debt, which contained several onerous covenants that jeopardized the Group’s historically sound balance sheet strength.

Offsetting these positive rating factors is the Group’s below average return measures and decline in statutory surplus driven by poor underwriting experience. The Group’s poor underwriting experience coupled with dividend payments to Ohio Casualty Corporation has led to a marked deterioration in statutory surplus and rise in underwriting leverage measures over the last five years.

Although the Group has reduced its sizable common stock portfolio to roughly 40 percent of statutory surplus, it remains at a level that is above that of the commercial casualty peer composite. This risk is partially mitigated by the Group’s solid overall capitalization and the financial flexibility of its publicly-traded parent.

The rating outlook is stable based on the Group’s supportive capitalization and measures implemented by management to restore and stabilize overall earnings over the mid-term.

The Ohio Casualty Corporation is an insurance holding company that consists of The Ohio Casualty Insurance Company (Ohio) and four operating subsidiaries. The remaining subsidiaries are as follows:

West American Insurance Company
American Fire & Casualty Company
Ohio Security Insurance Company
Avomark Insurance Company
A.M. Best has assigned a financial strength rating of NR-3 (Rating Procedure Inapplicable) to Ohio Casualty of New Jersey Inc (Ohio) due to its current run-off status.

The following debt rating has been affirmed:

Ohio Casualty Corporation–

“bbb-” on $201 million 5.00% senior unsecured convertible notes, due 2022
The following indicative ratings on securities available under shelf registration have been assigned:

Ohio Casualty Corporation–

“bb” on preferred stock
“bb+” on subordinated debt
“bbb-” on senior unsecured debt
Ohio Casualty Capital Trust I and Trust II– “bb” preferred securities.

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