Ohio Casualty Corp. (Nasdaq:OCAS) announced the following results for its third quarter ended Sept. 30, 2004, compared with the same period of the prior year:
— Net income of $19.6 million, or $0.31 per diluted share, versus $17.2 million, or $0.28 per diluted share,
— All Lines statutory combined ratio of 99.4%; a 5.3 point improvement, and
— Operating income (A) of $22.4 million versus $13.4 million, a $9.0 million or 67.2% increase.
President and Chief Executive Officer Dan Carmichael, commented, “I am very pleased with our financial results. Our third quarter and year-to-date statutory combined ratios are the best results for those periods since 1981. We continue to demonstrate that our strategic initiatives are working and improving shareholder value. While the industry experienced the worst catastrophe quarter in history, our third quarter combined ratio of 99.4%, with a 67% increase in operating income is reflective of the quality of our core book of business. The continued improvement in financial results for the third quarter was made despite catastrophe losses of $23 million, primarily related to hurricane activity, that were $7 million higher than third quarter last year.
“Our improved financial results were driven by our statutory loss ratio, which improved 3.5 points over third quarter last year despite the impact of increased catastrophe losses. We also had an improved underwriting expense ratio that was a result of our Cost Structure Efficiency (CSE) Initiative and the impact of non-recurring premium tax and assessment related accrual reductions. For the quarter, development on prior year losses was also slightly favorable at $3.1 million.
“Our CSE Initiative has improved customer service levels while simultaneously increasing staff productivity and lowering operating costs. Although our staff reduction goal from the CSE Initiative was achieved in the second quarter, we continue to review our processes and procedures in order to gain further operating efficiencies.”
From an operating segment perspective, Commercial and Personal Lines continued to have low single digit statutory net written premium growth that was driven by price increases and improved policy renewal rates. Commercial and Personal Lines both had improved statutory combined ratios due to lower claim frequency, higher pricing and improved risk profiles.
Specialty Lines net written premiums and combined ratio were adversely impacted by a $6.1 million increased ceded premium accrual on the commercial umbrella product line, related to years 1999 through 2001, which impacted the combined ratio by 18.3 points for the quarter. In addition, Specialty Lines net written premium also declined for the quarter due to higher reinsurance costs and lower gross written premiums as a result of increased competitive pressures in the commercial umbrella product line, which was partially offset by growth in the fidelity and surety product line.
For the third quarter of 2004 compared to the third quarter of 2003:
— Catastrophe losses increased to $23.3 million from $16.2 million.
— Employee count was down 20.2% to approximately 2,200 at September 30, 2004.
— GAAP book value per share of $20.32 increased 8.6%.
— Premiums to surplus ratio improved to 1.6 to 1 from 1.8 to 1.
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