Ohio Casualty Corporation Reports Financial Results for First Quarter

Business Wire, April 30, 2007

FAIRFIELD, Ohio -- Ohio Casualty Corporation (NASDAQ:OCAS) today announced the following results for its first quarter ended March 31, 2007, compared with the same period of the prior year:

* Net income of $63.1 million, or $1.03 per diluted share, versus $51.9 million, or $0.80 per diluted share;

* All Lines combined ratio (GAAP) of 89.2% versus 94.9%; and

* Operating income (A) of $57.9 million ($0.94 per diluted share) versus $42.7 million ($0.66 per diluted share).

President and Chief Executive Officer Dan Carmichael commented, "In 2007, we are off to another great start, with an All Lines combined ratio below 90%. Once again all three business segments are generating an underwriting profit. Our performance reflects substantial favorable development from prior accident years, as we continue to maintain our long-term commitment to underwriting discipline and expense management. We also re-confirmed our commitment to shareholders by raising our quarterly dividend 44% and continued our share repurchase program, while growing book value per share."

"Still, competition continues to pressure our premium volume as new business premiums written declined. We have commenced implementation of our agency management and product development initiatives as outlined in our Strategic Plan. We will be sharing more details of these initiatives, as well as the agent centric services initiatives, as the year progresses and results develop."

The major components of net income are summarized in the table below:

                                       >                   >       Three




Summary Income Statement               >                   >       ended




($ in millions, except share data)     >                   >        2007

2006


Premiums and finance charges earned    >                   >      $349.6

$357.7


Investment income less expenses        >                   >        51.7

50.9


Investment gains realized, net         >                   >         8.0

14.2


Total revenues                         >                   >       409.3

422.8


                                       >                   >




Losses and benefits for policyholders  >                   >       161.9

189.0


Loss adjustment expenses               >                   >        38.6

36.7


Underwriting expenses                  >                   >       111.5

113.8


Corporate and other expenses           >                   >        11.1

10.1


Total expenses                         >                   >       323.1

349.6


                                       >                   >




Income before income tax expense       >                   >        86.2

73.2


                                       >                   >




Income tax expense:                    >                   >




On investment gains realized           >                   >         2.8

5.0


On all other income                    >                   >        20.3

16.3


Total income tax expense               >                   >        23.1

21.3


                                       >                   >




Net income                             >                   >       $63.1

$51.9


                                       >                   >




Average shares outstanding - diluted   >                   >  61,343,139

64,836,502


Net income, per share - diluted        >                   >       $1.03

$0.80
Operating Results     >                                >           >



                      >                                >           >



Premium Revenue       >                                >           >



($ in millions)       >                                >           >



                      >                                >    Three  >



                      >                                >     2007  >
2006

% Chg
Net Premiums Written  >                                >           >



Commercial Lines      >                                >   $209.4  >
$ 212.4

(1.4)%
Specialty Lines       >                                >     34.6  >
35.8

(3.4)%
Personal Lines        >                                >    101.3  >
105.9

(4.3)%
All Lines             >                                >   $345.3  >
$ 354.1

(2.5)%

All Lines net premiums written declined for the three month period ended March 31, 2007 when compared with the same period of the prior year, due primarily to a decline in new business premium production in the Commercial Lines segment and the commercial umbrella/other product line, a decline in premium rates for both Personal and Commercial Lines, lower Commercial Lines assumed premiums from mandatory workers' compensation and commercial auto pools as well as lower in-force policy counts in the Personal Lines segment and commercial umbrella/other product line. This decline was partially offset by continued growth in the fidelity and surety bond product line; improved retention rates in the Personal Lines segment and commercial umbrella/other product line and a substantially unchanged retention rate for Commercial Lines segment when compared to the same period of the prior year.

Combined Ratio                        >




                  Three months ended  >




                           March 31,  >




                                2007  >
2006



Commercial Lines               94.4%  >
101.8%



Specialty Lines                63.6%  >
75.2%



Personal Lines                 87.9%  >
89.2%



All Lines                      89.2%  >
94.9%

The improvement in the All Lines combined ratio for the first quarter is the result of a 5.8 point improvement in the loss and LAE ratio driven by a significant increase in favorable prior year reserve development partially offset by increased catastrophe losses and margin compression caused by increasing loss costs and declining prices. Catastrophe losses for the first quarter 2007 were $5.2 compared to $3.6 in the first quarter 2006.

Favorable prior year loss and LAE reserve development was $37.7 million (10.8 points) and $12.9 million (3.6 points) in the first quarter 2007 and 2006, respectively. Reserve development was favorable for almost all product lines during the first quarter 2007 and is primarily attributable to actual severity being lower than expected, much of which is occurring in the casualty product lines, a result of our more disciplined underwriting and improved claims handling practices which commenced in the 2000-2001 timeframe.

Other Highlights

Book value per share increased $0.86 or 3.3% to $26.65 at March 31, 2007, compared to $25.79 at December 31, 2006.

During the first quarter of 2007, the Corporation repurchased 578,604 shares of its common stock at an average cost of $29.63. As of March 31, 2007, the Corporation has $54.9 million of share repurchase authority remaining.

On March 20, 2007, A.M. Best Company announced that it had upgraded the financial strength rating to A for the Ohio Casualty Group and its subsidiaries and upgraded the senior unsecured debt rating to bbb from bbb-. The rating outlook is stable.

Supplemental financial information for the first quarter ended March 31, 2007, 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 U.S. generally accepted accounting principles is included in Item 15 of the Ohio Casualty Corporation's Annual Report on Form 10-K for the year ended December 31, 2006.

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, including a slide presentation, to discuss information included in this news release and related matters at 10:00 a.m. EDT on Tuesday, May 1, 2007. The call is being webcast by Vcall and can be accessed (as well as the related slides) 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 August 2, 2007. To listen to call playback by telephone, dial 1-800-642-1687, then enter ID code 4846210. Call playback begins at 1 p.m. EDT on May 1, 2007 and extends through 11:59 p.m. on May 3, 2007.