<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
OHIO CASUALTY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO CASUALTY CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (I) (4) and 0-11.
(1) Title of each class of securities to which transaction applies: . . .
(2) Aggregate number of securities to which transaction applies:. . . . .
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):. . . . . .
(4) Proposed maximum aggregate value of transaction:. . . . . . . . . .
(5) Total fee paid: . . . . . . . . . . . . . . . . . . . . . . . . . . .
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: . . . . . . . . . . . . . . . . . . . . . . .
(2) Form, Schedule or Registration Statement No.: . . . . . . . . . . . .
(3) Filing Party: . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Date Filed: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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<PAGE> 2
OHIO CASUALTY CORPORATION
136 North Third Street
Hamilton, Ohio 45025
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
To Be Held April 15, 1998
Hamilton, Ohio
March 13, 1998
To the Shareholders:
The Annual Meeting of Shareholders (the "Annual Meeting") of Ohio Casualty
Corporation (the "Company") will be held in the meeting rooms of The
Hamiltonian Hotel, One Riverfront Plaza, Hamilton, Ohio, 45011, on Wednesday,
April 15, 1998, at 10:30 a.m., local time, for the following purposes:
(1) To elect the following four Directors for terms expiring in
2001 (Class II), as successors to the class of Directors
whose terms expire in 1998: Wayne Embry, Stephen S. Marcum,
Stanley N. Pontius and William L. Woodall.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent
public accountants of the Company for the fiscal year ending
December 31, 1998.
(3) In their discretion, to consider and vote upon such other
matters as may properly come before the Annual Meeting or
any adjournment thereof.
Holders of record of common shares of the Company as of the close of
business on March 2, 1998 are entitled to notice of and to vote at the Annual
Meeting and at any adjournment thereof. As of March 2, 1998, there were
33,629,908 common shares outstanding. Each common share is entitled to one
vote on all matters properly brought before the Annual Meeting.
By Order of the Board of Directors,
/s/Howard L. Sloneker III, Secretary
Howard L. Sloneker III, Secretary
EVERY SHAREHOLDER'S VOTE IS IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE
ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE AND RETURN PROMPTLY THE ENCLOSED
PROXY SO THAT YOUR COMMON SHARES WILL BE REPRESENTED. A POSTAGE PAID,
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
OHIO CASUALTY CORPORATION
136 North Third Street
Hamilton, Ohio 45025
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
Approximate Date to Mail -- March 13, 1998
On behalf of the Board of Directors of Ohio Casualty Corporation (the
"Company"), a proxy is solicited from you to be used at the Company's 1998
Annual Meeting of Shareholders (the "Annual Meeting") scheduled for Wednesday,
April 15, 1998 at 10:30 a.m., local time, in the meeting rooms of The
Hamiltonian Hotel, One Riverfront Plaza, Hamilton, Ohio 45011, or at any
adjournment thereof.
Proxies in the form enclosed herewith are being solicited on behalf of the
Company's Board of Directors. The common shares represented by proxies which
are properly executed and returned will be voted at the Annual Meeting, or any
adjournment thereof, as directed. Common shares represented by proxies
properly executed and returned which indicate no direction will be voted in
favor of the nominees of the Board of Directors identified in the Notice of
Annual Meeting accompanying this Proxy Statement and for the ratification of
the selection of Coopers & Lybrand L.L.P. as independent public accountants
of the Company for the fiscal year ending December 31, 1998. Any shareholder
giving the enclosed proxy has the power to revoke the same prior to its
exercise by filing with the Secretary of the Company a written revocation or
duly executed proxy bearing a later date, or by giving notice of revocation
in open meeting. ATTENDANCE AT THE ANNUAL MEETING WILL NOT, IN AND OF ITSELF,
CONSTITUTE REVOCATION OF A PROXY.
VOTING AT ANNUAL MEETING
As of March 2, 1998, the record date fixed for the determination of share-
holders entitled to notice of and to vote at the Annual Meeting, there were
outstanding 33,629,908 common shares, which is the only outstanding class of
capital stock of the Company. Each such common share is entitled to one vote
on all matters properly coming before the Annual Meeting.
A quorum for the Annual Meeting is a majority of the outstanding common
shares. Common shares represented by signed proxies that are returned to the
Company will be counted toward the quorum in all matters even though they are
marked "Abstain", "Against" or " Withhold Authority" on one or more or all
matters or they are not marked at all. Broker non-votes are also counted for
purposes of determining the presence or absence of a quorum. Broker non-votes
occur when brokers, who hold their customers' shares in street name, sign and
submit proxies for such shares on some matters, but not others. Typically,
this would occur when brokers have not received any instructions from their
customers, in which case the brokers, as the holders of record, are permitted
to vote on " routine" matters, which typically include the election of
directors, but not on non-routine matters.
1
<PAGE> 4
PRINCIPAL SHAREHOLDERS
The table below identifies the only persons known to the Company to own
beneficially (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934) more than 5% of the Company's outstanding common shares.
<TABLE>
<CAPTION>
Common Shares Percent
Name and Address Beneficially of Common
of Beneficial Owner Owned Shares Date
------------------- ----- ------
<S> <C> <C> <C>
FIRST NATIONAL BANK OF 3,178,294(1) 9.45% 12-31-97
SOUTHWESTERN OHIO
Third and High Streets
Hamilton, Ohio 45011
THE CAPITAL GROUP, INC. 2,997,500(3) 8.92% 12-31-97
333 South Hope Street
Los Angeles, California 90071
THE CHASE MANHATTAN BANK, N.A., 2,351,357(2) 6.99% 12-31-97
Trustee
1211 Avenue of the Americas
New York, New York 10036
JOSEPH L. MARCUM 2,208,416(4) 6.57% 03-02-98
136 North Third Street
Hamilton, Ohio 45025
</TABLE>
- -------------------------
(1) Based upon information provided to the Company by First National Bank of
Southwestern Ohio (the "Bank"). The Bank holds the reported shares as
trustee under various trust agreements and arrangements. The Bank has
advised the Company that it has sole voting power for 2,732,124 shares,
shared voting power for 0 shares, sole investment power for 1,482,960
shares, and shared investment power for 1,283,542 shares. 413,371 shares
are held under trust arrangements for certain directors of the Company,
and their respective spouses, which shares are also reported in the
following table showing share ownership by directors and executive
officers of the Company.
(2) 1,509,125 shares are held as trustee for the Company's Employee Savings
Plan and 842,232 shares are held as trustee for the Company's Employees
Retirement Plan. Voting power with respect to shares held in the
Employee Savings Plan is exercised by the plan participants; investment
power with respect to these shares is held by plan participants subject
to limitations in the Plan. Voting and investment power with respect to
shares held in the Employees Retirement Plan is exercised by the
committee which administers the Employees Retirement Plan (the
"Retirement Committee"). The Retirement Committee consists of Joseph L.
Marcum, Lauren N. Patch and Barry S. Porter.
(3) Based upon information contained in a Schedule 13G dated February 12,
1998, filed with the Securities and Exchange Commission by The Capital
Group, Inc. The Capital Group, Inc. reported sole voting power for 0
shares, shared voting power for 0 shares and sole investment power for
2,997,500 shares as of December 31, 1997.
(4) See share ownership information for Mr. Marcum in the following table.
2
<PAGE> 5
SHAREHOLDINGS OF DIRECTORS, EXECUTIVE OFFICERS
AND NOMINEES FOR ELECTION AS DIRECTOR
As of March 2, 1998, the directors of the Company, including the four
persons intended by the Board of Directors to be nominated for election as
directors, the executive officers of the Company named in the Summary
Compensation Table, and all executive officers and directors of the Company
as a group, beneficially owned common shares of the Company as set forth
below.
<TABLE>
<CAPTION>
Shared Investment/
Number of Options Voting Power
Common Shares Exercisable Over Employees
Name of Beneficially Within Retirement Percent
Individual or Group Owned(1) 60 Days Plan Shares(2) Total of Class (3)
- ------------------- -------- ------- -------------- ----- ------------
<S> <C> <C> <C> <C> <C>
Arthur J. Bennert 16,178 6,000 22,178
Jack E. Brown 1,100 6,000 7,100
Catherine E. Dolan 100 6,000 6,100
Wayne Embry 200 6,000 6,200
Vaden Fitton 227,779 (4) 6,000 233,799
Jeffrey D. Lowe 162,119 (4) 3,000 165,119
Joseph L. Marcum 1,363,184 (4)(5)(6) 3,000 842,232 2,208,416 6.57%
Stephen S. Marcum 212,744 (4) 6,000 218,744
Lauren N. Patch 246,569 (4)(7) 30,000 842,232 1,118,801 3.33%
Stanley N. Pontius 1,163 6,000 7,163
Howard L. Sloneker III 221,164 (7) 6,666 227,830
William L. Woodall 20,700 6,000 26,700
Michael L. Evans 5,673 (7) 9,999 15,672
Coy Leonard, Jr. 639 (7) 3,000 3,779
Barry S. Porter 28,135 (7) 9,999 842,232 880,366 2.62%
All Executive Officers
and Directors as a
Group (31 Persons) 2,775,718 152,491 842,232 3,770,441 11.21%
</TABLE>
- -------------------------------
(1) Unless otherwise indicated, each named person has voting and investment
power over the listed shares and such voting and investment power is
exercised solely by the named person or shared with a spouse.
(2) Includes 842,232 shares held in the Company's Employees Retirement Plan
as to which the named individuals share voting and investment power
solely by reason of being a member of the Retirement Committee which
administers such Plan. See Note (2) of the preceding table. Messrs.
Marcum, Patch and Porter disclaim beneficial ownership of these shares.
(3) Percentages are listed only for those individuals who are the beneficial
owners of more than of 1% of the outstanding shares.
(4) Includes the following number of shares owned by family members as to
which beneficial ownership is disclaimed: Mr. Fitton, 102,857; Mr.
Lowe, 140,350; Mr. Joseph L. Marcum, 614,154; Mr. Stephen S. Marcum,
84,090; and Mr. Patch, 207,601.
3
<PAGE> 6
(5) Includes 225,852 shares held by Mr. Marcum's wife in her capacity as a
co-trustee of the estate of Howard Sloneker as to which shares Mr.
Marcum has no voting or investment power.
(6) Includes 97,806 shares held as co-trustee of the Joseph L. and Sarah S.
Marcum Foundation as to which voting and investment power is shared by
Joseph L. and Stephen S. Marcum.
(7) The share ownership for Messrs. Patch, Sloneker, Evans, Leonard and
Porter includes 4,658; 2,382; 1,284; 140; and 9,757 shares,
respectively, held for the accounts of these individuals by the trustee
of the Company's Employee Savings Plan. Such persons have sole voting
power with respect to these shares and also hold investment power
subject to limitations in the Plan.
ELECTION OF DIRECTORS
The Board of Directors intends that the four persons named under Class II in
the following table (the "Nominees") will be nominated for election at the
Annual Meeting for three-year terms expiring in 2001. The terms of the
remaining directors in Classes I and III will continue as indicated below. It
is intended that the common shares represented by the accompanying Proxy will
be voted for the election as directors of the Nominees, unless otherwise
instructed on the Proxy. In the event that any one or more of the Nominees
unexpectedly becomes unavailable for election, the common shares represented by
the accompanying Proxy will be voted in accordance with the best judgment of
the proxy holders for the election of the remaining Nominees and for the
election of any substitute nominee or nominees designated by the Board of
Directors.
Under Ohio law and the Company's Code of Regulations, the nominees receiving
the greatest number of votes will be elected as directors. Shares as to which
the authority to vote is withheld will be counted for quorum purposes but will
not be counted toward the election of the Nominees.
<TABLE>
<CAPTION>
Position with Company and/or
Principal Occupation or Employment Director
Name and Age(1) During Last Five Years(2) Since
- --------------- ---------------------------------- --------
<S> <C> <C>
Nominees: Class II--Terms Expiring in 2001:
Wayne Embry, Executive Vice President and General Manager of the Cleveland 1991
61 Cavaliers (professional basketball franchise).
Stephen S. Marcum, Member of the law firm of Parrish, Beimford, Fryman, Smith & 1989
40 Marcum Co., L.P.A., Hamilton, Ohio; such firm has provided legal
services to the Company and its subsidiaries during the last
fiscal year and continues to do so.
Stanley N. Pontius, President and Chief Executive Officer of First Financial Bancorp 1994
51 and its principal subsidiary, First National Bank of Southwestern
Ohio, Hamilton, Ohio.
William L. Woodall, Director of the Company, The Ohio Casualty Insurance Company, West 1986
74 American Insurance Company, American Fire and Casualty Company, Ohio
Security Insurance Company, OCASCO Budget, Inc. and The Ohio Life
Insurance Company; retired as an executive officer of the Company and
its subsidiaries on December 31, 1990.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
Position with Company and/or
Principal Occupation or Employment Director
Name and Age(1) During Last Five Years(2) Since
- --------------- ---------------------------------- --------
<S> <C> <C>
Directors Whose Terms Continue Beyond the Annual Meeting
Class III -- Terms Expiring in 1999
Arthur J. Bennert, Director of the Company, The Ohio Casualty Insurance Company, 1989
71 West American Insurance Company, American Fire and Casualty
Company, Ohio Security Insurance Company and The Ohio Life
Insurance Company; retired as an executive officer of the
Company and its subsidiaries on January 1, 1992.
Catherine E. Dolan, Managing Director of the Financial Institutions Group, First 1994
40 Union National Bank, Charlotte, North Carolina.
Jeffrey D. Lowe, Director of the Company, The Ohio Casualty Insurance Company, 1983
52 West American Insurance Company, American Fire and Casualty
Company, Ohio Security Insurance Company and The Ohio Life
Insurance Company.
Lauren N. Patch, President, Chief Executive Officer and Director of the Company, 1987
47 The Ohio Casualty Insurance Company, West American Insurance
Company, American Fire and Casualty Company, Ohio Security
Insurance Company and OCASCO Budget, Inc.; Vice Chairman and
Director of The Ohio Life Insurance Company. Mr. Patch became
Chief Executive Officer of the Company on January 1, 1994, and
President of the Company on January 1, 1991.
Class I: Terms Expiring in 2000
Jack E. Brown, Chairman of the Board, BBI Marketing Services, Inc., Cincinnati, 1994
54 Ohio (professional marketing consulting firm).
Vaden Fitton, Director and Retired First Vice President of First National Bank 1967
69 of Southwestern Ohio, Hamilton, Ohio.
Joseph L. Marcum, Chairman of the Board and Director of the Company, The Ohio Casualty 1949
74 Insurance Company, West American Insurance Company, American Fire
and Casualty Company, Ohio Security Insurance Company, OCASCO Budget,
Inc. and The Ohio Life Insurance Company. Mr. Marcum served as Chief
Executive Officer of the Company and its subsidiaries until December
31, 1993, and President of the Company and its subsidiaries until
December 31, 1990.
Howard L. Sloneker III, Vice President, Secretary and Director of the Company, The Ohio 1983
41 Casualty Insurance Company, West American Insurance Company,
American Fire and Casualty Company, Ohio Security Insurance Company
and OCASCO Budget, Inc.; Secretary and Director of The Ohio Life
Insurance Company.
________________________
(1) Ages are listed as of the date of the Annual Meeting.
</TABLE>
5
<PAGE> 8
(2) The Ohio Casualty Insurance Company, Ohio Security Insurance Company,
American Fire and Casualty Company, West American Insurance Company,
OCASCO Budget, Inc. and The Ohio Life Insurance Company are subsidiaries
of the Company.
OTHER DIRECTORSHIPS AND RELATED TRANSACTIONS AND RELATIONSHIPS
Wayne Embry is also a director of M.A. Hanna Company and Society Corpora-
tion; Vaden Fitton, Joseph L. Marcum and Stanley N. Pontius are also
directors of First Financial Bancorp.
Joseph L. Marcum, the Chairman of the Board of the Company, retired as the
Chief Executive Officer of the Company on December 31, 1993. Mr. Marcum
receives annual benefits from the Company of $142,393 pursuant to the Company's
Employees Retirement Plan. See "Pension Plans."
Jeffrey D. Lowe is the son-in-law of Joseph L. Marcum; Lauren N. Patch and
Howard L. Sloneker III are brothers-in-law; and Stephen S. Marcum is the son of
Joseph L. Marcum.
MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
During 1997, the Board of Directors held five meetings. No director
attended fewer than 75% of the aggregate number of meetings of the Board of
Directors and the committees on which he or she served. The Board of
Directors has standing Executive, Audit, Executive Compensation and Nomi-
nating Committees.
The Executive Committee held one meeting during 1997. The members of the
Executive Committee are Joseph L. Marcum, Lauren N. Patch, and Howard L.
Sloneker III. All Executive Committee members attended the meeting in 1997.
The Executive Committee is empowered to exercise all the powers of the Board
of Directors in the management of the Company between meetings of the Board
of Directors, other than filling vacancies on the Board or any other committee
of the Board.
The Audit Committee held three meetings during 1997. The members of the
Audit Committee are Arthur J. Bennert, Jack E. Brown, Catherine E. Dolan, Wayne
Embry, Vaden Fitton, Joseph L. Marcum, Stephen S. Marcum, Stanley N. Pontius,
and William L. Woodall. Each Audit Committee member attended all of the
meetings in 1997 except Ms. Dolan and Mr. Fitton who attended two meetings.
The Audit Committee's primary function is to meet with the independent
auditors for the Company and to review the Company's internal and independent
auditing and financial controls.
The Executive Compensation Committee held one meeting during 1997. The
members of the Executive Compensation Committee are Jack E. Brown, Vaden
Fitton, Stephen S. Marcum and Stanley N. Pontius. All members of the Execu-
tive Compensation Committee attended the meeting in 1997. The Executive
Compensation Committee administers the Company stock option plans and carries
out the responsibilities described in the Executive Compensation Committee
Report in this Proxy Statement.
The Nominating Committee held one meeting during 1997. The members of the
Nominating Committee are Jack E. Brown, Wayne Embry, Vaden Fitton, Joseph L.
Marcum, Stephen S. Marcum, Stanley N. Pontius and Howard L. Sloneker III. The
Nominating Committee's responsibilities include the selection of potential
candidates for director and the recommendation of candidates to the Board.
The Nominating Committee will consider nominees for director recommended by
shareholders for the 1999
6
<PAGE> 9
Annual Meeting of Shareholders provided that the names of such nominees are
submitted not later than November 13, 1998, to Howard L. Sloneker III, Secre-
tary, 136 North Third Street, Hamilton, Ohio 45025.
DIRECTORS' FEES AND COMPENSATION
Each director received $25,000 for services as a director of the Company
during 1997. Each non-employee director of the Company also received $1,500
per meeting for attending the meetings of the Board of Directors in 1997.
Members of the Audit Committee also received $5,000 each for serving on that
committee. In addition, members of the Executive Compensation Committee
received $300 per meeting for each meeting attended. Joseph L. Marcum was
paid an additional $65,000 during 1997 as compensation for serving as the
Chairman of the Board.
On May 20, 1997, Jack E. Brown, Vaden Fitton and Joseph L. Marcum, each
of whom is a non-employee director of the Company, were granted a
non-qualified stock option (an "NQSO") to purchase 3,000 common shares of
the Company at an exercise price of $42.25 per share, the closing market
price of the common shares on the date of grant. Any individual who becomes
or is re-elected a non-employee director is automatically granted an NQSO to
purchase 3,000 common shares effective on the third business day following
the first meeting of the Board of Directors after his/her election or
appointment to the Board. The exercise price of each NQSO granted to a
non-employee director is equal to the fair market value of the common shares
on the date of grant. NQSOs granted to non-employee directors have terms of
ten years (subject to earlier termination in certain cases) and may not be
exercised during the six months following their date of grant.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents information concerning compensation provided
by the Company to its Chief Executive Officer and to each of the Company's
four most highly compensated executive officers, other than the Chief Execu-
tive Officer, for services rendered in all capacities for each of the Company's
last three completed fiscal years:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- -----------------------------------------
Other Securities
Annual Restricted Underlying Dividend
Name and Salary Compensation Stock Options/ Payment
Principal Position Year ($)(1) ($)(2)(3) Awards($)(4) SARs(#) Rights(#)(5)
------------------ ---- ------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Lauren N. Patch 1997 530,000 70,898 98,025 30,000 30,000
President and Chief 1996 529,560 47,881 57,709 30,000 30,000
Executive Officer 1995 474,231 13,477 0 0 0
Barry S. Porter 1997 258,000 32,463 40,165 10,000 10,000
Chief Financial 1996 248,604 22,484 24,956 10,000 10,000
Officer and Treasurer 1995 233,208 6,996 0 0 0
Michael L. Evans 1997 213,750 11,083 6,694 10,000 10,000
Executive Vice President 1996 199,500 19,051 18,686 10,000 10,000
1995 174,462 4,500 0 0 0
Howard L. Sloneker III 1997 209,500 23,488 27,760 10,000 10,000
Vice President 1996 197,698 16,603 16,335 10,000 10,000
1995 181,398 4,597 0 0 0
Coy Leonard, Jr. 1997 158,821 14,312 18,163 3,000 3,000
Vice President 1996 132,352 7,952 9,446 3,000 3,000
1995 117,108 1,171 0 0 0
</TABLE>
7
<PAGE> 10
(1) Includes annual directors' fees for Messrs. Patch and Sloneker.
(2) Includes for Messrs. Patch, Porter, Evans, Sloneker and Leonard for 1997
the amounts of $4,800, $4,800, $4,800, $4,800 and $1,588, respectively,
contributed by the Company under the Company's Employee Savings Plan.
Also includes for Messrs. Patch, Porter, Evans and Sloneker for 1997 the
amounts of $10,350, $3,060, $1,612 and $748, respectively, contributed
by the Company under the Company's Supplemental Executive Savings Plan.
(3) Includes for Messrs. Patch, Porter, Evans, Sloneker and Leonard for
1997, the amounts of $55,748, $24,603, $4,671, $17,940 and $12,724,
respectively, paid to reimburse them for income taxes incurred as a
result of the grant of restricted shares described in note (4) below.
These amounts were paid in 1998.
(4) Shares of restricted stock were granted on February 20, 1997 for
services rendered in 1996 and on February 19, 1998 for services rendered
in 1997. The value of the outstanding restricted stock awards at the
end of the fiscal year 1997 was $62,430, $25,615, $20,215, $17,672 and
$10,219 for Messrs. Patch, Porter, Evans, Sloneker and Leonard,
respectively. The number of the restricted stock awards held by Messrs.
Patch, Porter, Evans, Sloneker and Leonard at the end of the fiscal year
1997 was 1,399, 574, 453, 396 and 229, respectively. Such restricted
common shares vest on the third anniversary of the date of the grant so
long as the executive officer is an employee on such date (with earlier
vesting occurring on retirement, death or disability or termination of
employment following a change of control). During the restriction
period, the executive officer will receive all dividends paid on the
shares.
(5) Dividend payment rights were granted to the named executive officers in
1997 and 1998. These rights entitle the executive officer on the April
15th following the third anniversary of the grant date to receive, for
each dividend payment right, an amount in cash equal to the aggregate
amount of dividends that the Company has paid on each common share from
the date on which such right becomes effective through the payout date
subject to certain restrictions
Option Grants in Last Fiscal Year
The following table sets forth information concerning the grant of stock
options during the last fiscal year to each of the executive officers of the
Company named in the Summary Compensation Table. No stock appreciation rights
were granted during the last fiscal year.
<TABLE>
<CAPTION>
% of Total Potential Realizable
Options Value at Assumed
Number of Granted Annual Rates of Stock
Securities to Exercise Price Appreciation for
Underlying Employees or Base Option Term (2)
---------------
Options in Fiscal Price Expiration ($) ($)
Name Granted # (1) Year ($/Sh) Date 5% 10%
---- ------------- --------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lauren N. Patch 30,000 29.41 41.375 02-20-07 780,615 1,978,233
Barry S. Porter 10,000 9.80 41.375 02-20-07 260,205 659,411
Michael L. Evans 10,000 9.80 41.375 02-20-07 260,205 659,411
Howard L. Sloneker III 10,000 9.80 41.375 02-20-07 260,205 659,411
Coy Leonard, Jr. 3,000 2.94 41.375 02-20-07 78,062 197,823
</TABLE>
8
<PAGE> 11
(1) All of these stock options, which were granted pursuant to the Ohio Casu-
alty Corporation 1993 Stock Incentive Program, were granted at the fair
market value of the underlying option shares on the date of grant, become
exercisable as to one-third of the option shares on each of the first
three anniversaries of the date of grant and have a term of ten years.
In the event of a change in control of the Company, the stock options
would become exercisable in full. Stock options reported consist of
incentive stock options and non-qualified stock options.
(2) The dollar amounts under these columns are the result of calculations
at the 5% and 10% annual appreciation rates set by the Securities and
Exchange Commission for illustrative purposes, and, therefore, are not
intended to forecast future financial performance or possible future
appreciation in the price of the Company's common shares. Shareholders
are therefore cautioned against drawing any conclusions from the appre-
ciation data shown, aside from the fact that optionees will only
realize value from the option grants shown when the price of the
Company's common shares appreciates, which benefits all shareholders
commensurately.
Option Exercises in Last Fiscal Year
The following table sets forth information concerning the exercise of stock
options during the last fiscal year by each of the executive officers of the
Company named in the Summary Compensation Table and the fiscal year-end value
of unexercised stock options and SARs held by such executive officers:
<TABLE>
Aggregated Option Exercises in
Last Fiscal Year and Fiscal Year-End Option Value
-------------------------------------------------
Number of Number of Shares Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options
Acquired on Value Fiscal Year-End(#) at Fiscal Year-End($)(1)
--------------------------- ---------------------------
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lauren N. Patch 0 0 10,000 50,000 96,250 290,000
Barry S. Porter 0 0 3,333 16,667 32,081 96,670
Michael L. Evans 0 0 3,333 16,667 32,081 96,670
Howard L. Sloneker III 3,333 37,734 0 16,667 0 96,670
Coy Leonard, Jr. 0 0 1,000 5,000 9,625 116,750
</TABLE>
(1) "Value of Unexercised In-the-Money Options at Fiscal Year-End" is based
upon the fair market value of the Company's common shares on December
31, 1997 ($44.625), less the exercise price of in-the-money options at
the end of the last fiscal year.
Pension Plans
The following table sets forth the estimated annual benefits payable
under the Employees Retirement Plan and The Ohio Casualty Insurance Company
Benefit Equalization Plan (the "Benefit Equalization Plan") to participants
in such plans, including the executive officers named in the Summary Compen-
sation Table, upon retirement in specified compensation and years of service
classifications:
9
<PAGE> 12
<TABLE>
<CAPTION>
PENSION PLANS TABLE
15 20 25 30 35 40 45
Annual Earnings Years Years Years Years Years Years Years
- --------------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$125,000 $27,932 $37,242 $46,553 $55,864 $65,174 $74,485 $83,795
175,000 39,932 53,242 66,553 79,864 93,174 106,485 119,795
225,000 51,932 69,242 86,553 103,864 121,174 138,485 155,795
275,000 63,932 85,242 106,553 127,864 149,174 170,485 191,795
325,000 75,932 101,242 126,553 151,864 177,174 202,485 227,795
375,000 87,932 117,242 146,553 175,864 205,174 234,485 263,795
400,000 93,932 125,242 156,553 187,864 219,174 250,485 281,795
425,000 99,932 133,242 166,553 199,864 233,174 266,485 299,795
450,000 105,932 141,242 176,553 211,864 247,174 282,485 317,795
475,000 111,932 149,242 186,553 223,864 261,174 298,485 335,795
500,000 117,932 157,242 196,553 235,864 275,174 314,485 353,795
525,000 123,932 165,242 206,553 247,864 289,174 330,485 371,795
550,000 129,932 173,242 216,553 259,864 303,174 346,485 389,795
600,000 141,932 189,242 236,553 283,864 331,174 378,485 425,795
</TABLE>
Retirement benefits under the Company's Employees Retirement Plan, a defined
benefit plan qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), are generally payable to full-time and regular
part-time salaried employees whose participation in the plan has vested (cur-
rently requiring the completion of five years of service) upon retirement at
age 65 or in reduced amounts upon retirement prior to age 65 if the partici-
pant has ten years of vested service. A retiree's benefit amount is based upon
his or her credited years of service and average annual compensation (salary)
for the five consecutive years of highest salary during the last ten years of
service immediately prior to age 65 or, if greater, the average annual compen-
sation paid during the 60 consecutive month period immediately preceding re-
tirement or other termination of employment. Such retirement benefits are
reduced by a portion of the retiree's Social Security-covered compensation.
Benefits figures shown in the table above are computed on the assumption that
participants retire at age 65 and are entitled to a single life annuity.
Section 401(a)(17) of the Code limits compensation in excess of $160,000
from being taken into account in determining benefits payable under a quali-
fied pension plan. As a result, the Benefit Equalization Plan was adopted
for those employees who are adversely affected by these provisions of the
Code. The Benefit Equalization Plan provides for payment of benefits that
would have been payable under the Employees Retirement Plan but for the
limitation on compensation imposed by the Code. Upon retirement, partici-
pants receive the actuarial equivalent present value of the benefit payable
under the Benefit Equalization Plan in a lump sum.
At December 31, 1997, credited years of service and average annual earnings
for purposes of the Employees Retirement Plan and the Benefit Equalization Plan
for the executive officers named in the Summary Compensation Table were:
Lauren N. Patch, 21.5 years ($421,643); Barry S. Porter, 23.5 years ($228,217);
Michael L. Evans, 22.5 years ($171,050); Howard L. Sloneker III, 15.75 years
($154,721); and Coy Leonard, Jr., 4.4 years ($124,980). The compensation
covered by the Employees Retirement Plan and the Benefit Equalization Plan is
the amount shown in the Summary Compensation Table as salary, less any
directors' fees.
10
<PAGE> 13
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
Executive Compensation Policies
The Company's executive compensation programs are designed to attract and
retain quality talent, and to motivate the Company's key employees to maximize
shareholder returns by achieving both the short-term and long-term goals of
the Company. The Executive Compensation Committee of the Board of Directors
(the " Committee"), consisting entirely of non-employee directors, approves
all of the policies under which compensation is paid or awarded to the
Company's executive officers.
The Committee believes that the Company's executive compensation
opportunities, including those for the Company's Chief Executive Officer
("CEO"), should create incentives for superior performance and consequences
for below-target performance. In 1996, the Company's executive compensation
program was redesigned to link each executive officer's compensation directly
to individual and Company performance. A significant portion of each
executive officer's total compensation is now variable and dependent upon the
attainment of annual objectives and long-term shareholder returns. The
compensation structure provides a portion of each executive officer's
compensation in stock thereby creating a mutuality of interest between
executive officers and shareholders.
The Committee annually reviews the short-term and long-term compensation
levels for the CEO and other senior executives to consider and implement any
changes necessary to achieve its on-going objectives. In determining the
comparable compensation levels discussed further below, the Committee
considers information from surveys of compensation practices within the
property and casualty industry which surveys may include some or all of the
companies included in the Performance Graph on page 14.
Specific Compensation Programs
There are three components to the Company's "pay for performance" system
established for its executive officers and 16 additional key executives
(collectively called the "partners"): (i) base salary established on an
annual basis, (ii) awards under the Annual Incentive Plan and (iii) awards
under the Long-Term Incentive Plan. Each component of the Company's executive
compensation program aims to accomplish a different purpose.
Base Salary. Base salary levels for the CEO and the other executive
officers of the Company are based on individual performance, the
responsibilities associated with an individual's position in the Company,
skill level and experience and potential future contribution, all of which are
reviewed annually and benchmarked against similar positions within the survey
companies. The base salary of the CEO is established by the Committee. The
base salaries of the other executive officers are established by the CEO on
an annual basis. Salary adjustments are based on individual performance, as
determined in accordance with the Company's executive performance evaluation
system, and reflective of competitive conditions existing at the time.
11
<PAGE> 14
Annual Incentive Plan Awards: The potential award opportunities for each
of the executive officers who participates in the Annual Incentive Plan are
determined at the beginning of each fiscal year. Potential award
opportunities for a fiscal year, which are expressed as a percentage of a
participant's salary for that fiscal year, are based on the participant's
level within the organization, with higher percentages being assigned to
executive officers who hold more senior positions. Actual awards are based on
a combination of individual and team performance. This balance supports the
accomplishment of overall objectives and rewards individual contributions by
the executives. Team performance, which accounts for up to 50% of the total
award potential, is based on the Company's actual performance against pre-
determined targets for return on equity and growth in premiums for the year.
A performance threshold for each measure ensures that no awards are made for
substandard accomplishments. If the performance threshold is achieved, each
of the eligible executive officers receives a team award, the amount of which
depends on the extent to which the Company's performance exceeds the threshold
level and the potential award opportunity assigned to each individual
participant, as described above. Individual awards, which account for the
remaining 50% of the award potential, are made only if the performance level
required for team awards has been met and then only if a determination is made
by the Committee and the CEO to fund such individual awards. The Committee
determines, based on a recommendation from the CEO, the level of funding for
the individual award pool based on the performance achieved by the management
team on a number of criteria such as the achievement of pre-established
Company and individual goals. The pool is allocated among the participants on
the basis of their performance evaluations as determined by the CEO (the CEO's
performance evaluation is conducted by the Committee).
Currently, awards under the Annual Incentive Plan are paid in restricted
shares of the Company. Such restricted shares may not be transferred by the
participant for a three-year period following the date of the grant, unless
the participant dies or his employment is terminated as a result of disability
or retirement or following a change in control of the Company. If the
employment of the participant terminates for any other reason during such
three year period, the restricted shares will be forfeited to the Company.
Awards under the Annual Incentive Plan for the 1997 fiscal year were paid in
the form of restricted common shares issued in February of 1998.
Long-Term Incentive Plan Awards under the Long-Term Incentive Plan consist
of incentive stock options, non-qualified stock options, or a combination of
both, and dividend payment rights, one-third of which vests on each of the
first three anniversaries of the date of the grant. Stock options are
granted at market value on the date of grant and increase in value only to the
extent of appreciation in the Company's common shares. Stock options expire
at the end of ten years from the date of grant. Stock option grants are
generally made at the beginning of the fiscal year, although grants may be
made at different times to participants who are promoted or newly hired. The
number of stock options to be granted is based on the participant's salary
level and position. While it is the intention of the Committee to make stock
option grants annually, the Committee has reserved the right to eliminate
stock option awards or make other modifications in the Long-Term Incentive
Plan. The Committee also intends to hold constant the number of options
granted to each participant over each three-year period, beginning in 1996.
13
<PAGE> 15
Dividend Payment Rights In addition to stock options, the participants in
the Long-Term Incentive Plan may be granted dividend payment rights. One-
third of these rights become effective on each anniversary of the grant date.
These rights entitle the holder on the April 15th following the third
anniversary of the grant date (or earlier if the holder dies, becomes disabled
or retires or is terminated from employment after a change in control of the
Company) to receive, for each dividend payment right, an amount in cash equal
to the aggregate amount of dividends that the Company has paid on each common
share from the date on which the dividend payment right becomes effective
through the payout date. Unless the employment of the holder of a dividend
payment right terminates as a result of death, disability, retirement at
normal retirement age, or following a change in control, the holder forfeits
the right if his or her employment terminates prior to the scheduled payout
date. The employees to whom stock options and dividend payment rights are to
be awarded are determined annually by the Committee for the executive
officers, including the CEO, and by the CEO for all other partners.
The Company's Annual Incentive Plan and its Long Term Incentive Plan are
designed to provide participants with the opportunity to receive total
compensation targeted at the 75th percentile of salaries for similar positions
among the survey companies.
Section 162(m) of the Code generally limits the corporate tax deduction for
the compensation paid to executive officers named in the Summary Compensation
Table in the proxy statement to $1 million, unless certain requirements for
qualifying compensation as "performance based" are met. The compensation paid
to each of the executive officers of the Company in 1997 was less than the
threshold for deductibility under Section 162(m).
Bases for Chief Executive Officer Compensation
The Committee evaluates the performance of the CEO at least annually. In
1997, Mr. Patch received a base salary of $505,000. Mr. Patch also received an
award under the Annual Incentive Plan for service in 1997 of a total of 2,094
restricted common shares of the Company, which were issued to him in February
of 1998 and which will be forfeited to the Company if he leaves the Company
during the three-year period following the date of issue. As described in
detail above, the Committee's determination of the number of restricted common
shares awarded to Mr. Patch (and to all of the other executive officers) under
the Annual Incentive Plan was based on the Company's 1997 total return per-
formance as measured against established return on equity and growth in premium
targets. The Company also granted to Mr. Patch in 1998 pursuant to the Long-
Term Incentive Plan, a non-qualified stock option for 30,000 shares. The
number of stock options granted to Mr. Patch was based on his salary level and
position with the Company. As previously indicated, in establishing the compen-
sation of Mr. Patch and the other executive officers, the goal of the Committee
has been to create a total compensation opportunity through base salary and
awards under the Annual Incentive Plan and the Long-Term Incentive Plan which,
if realized as a result of the Company's performance, would result in total
compensation being at the 75th percentile for similar positions at the survey
companies.
The foregoing report on executive compensation is provided by the following
directors, who constituted the Executive Compensation Committee during 1997:
Jack E. Brown Vaden Fitton Stephen S. Marcum Stanley N. Pontius
13
<PAGE> 16
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The directors of the Company who served as members of the Company's Execu-
tive Compensation Committee during 1997 were Jack E. Brown, Vaden Fitton,
Stephen S. Marcum and Stanley N. Pontius. Mr. Fitton and Mr. Porter, the
Company's Chief Financial Officer and Treasurer, also served as members of
the Executive Compensation Committee of First Financial Bancorp during 1997,
whose Chief Executive Officer, Stanley N. Pontius, is a member of the Executive
Compensation Committee of the Company.
As indicated in the Executive Compensation Committee Report on Executive
Compensation, Lauren N. Patch, the Company's President and Chief Executive
Officer, participates in decision-making regarding the compensation of certain
executive officers named in the Summary Compensation Table. Mr. Patch is not
a member of the Executive Compensation Committee.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the five-year cumulative total shareholder
return, including reinvested dividends, of the Company with the Dow Jones E
quity Market Index and the Dow Jones Insurance Index for Property and Casualty
Companies(1):
<TABLE>
<CAPTION>
Measurment Period DJ Equity Market DJ Insurance Ohio Casualty
(Fiscal Year Covered) Index P&C Corporation
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 109.95 100.83 105.76
1994 110.76 106.03 98.47
1995 152.49 148.53 161.23
1996 187.63 178.61 135.39
1997 251.34 263.14 176.75
- ----------------------
</TABLE>
14
<PAGE> 17
(1) The Dow Jones Insurance Index for Property and Casualty Companies is
comprised of 13 companies, including the Company that are traditionally
considered as a peer group of property and casualty insurance companies
within the United States. The companies making up the Index are Allstate
Corp.; American International Group Inc.; Chubb Corp.; HSB Group Inc.;
Loews Corp.; MBIA Inc.; Ohio Casualty Corporation; Progressive Corp.;
SAFECO Corp.; St. Paul Cos.; and USF&G Corp.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31, 1997,
accompanies this Proxy Statement.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Coopers & Lybrand L.L.P. has been selected by the
Board of Directors to serve as independent public accountants of the Company
for the fiscal year ending December 31, 1998. Management expects that repre-
sentatives of that firm will be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions. The affirmative vote of the holders of
a majority of the Common Shares represented in person or by proxy at the Annual
Meeting is necessary to ratify the selection of the Company's independent
public accountants. Under Ohio law, abstentions and broker non-votes are
counted as present; the effect of an abstention or broker non-vote on this
proposal is the same as a "no" vote. Unless otherwise indicated, the persons
named in the Proxy will vote all Proxies in favor of ratifying the selection
of independent public accountants.
Coopers & Lybrand L.L.P. were the independent public accountants of the
Company for the fiscal year ended December 31, 1997. In connection with the
audit function, the firm also reviewed the Company's annual and quarterly
reports and reviewed its filings with the Securities and Exchange Commission.
SHAREHOLDER PROPOSALS
If an eligible shareholder wishes to present a proposal for action at the
next annual meeting of shareholders of the Company, it must be received by the
Company no later than November 13, 1998, for inclusion in the Company's Proxy
Statement and form of Proxy relating to that meeting. An eligible shareholder
may present no more than one proposal of not more than five hundred (500)
words, including supporting statements, for inclusion in the Company's proxy
materials for the next annual meeting. Proposals shall be sent to Ohio
Casualty Corporation, Attention: Howard L. Sloneker III, Secretary, 136
North Third Street, Hamilton, Ohio 45025.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a regis-
tered class of the Company's equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission (SEC). Officers, directors and greater than ten percent share-
holders are required by SEC regulations to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
15
<PAGE> 18
Based on the Company's review of the copies of such forms it has received,
the Company believes that all its officers, directors, and greater than ten
percent beneficial owners complied with all filing requirements applicable to
them with respect to transactions during fiscal 1997.
OTHER MATTERS
The Company files annually with the Securities and Exchange Commission an
Annual Report on Form 10-K. This report includes financial statements and
financial statement schedules.
A SHAREHOLDER OF THE COMPANY MAY OBTAIN A COPY OF THE ANNUAL REPORT ON FORM
10-K, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1997, WITHOUT CHARGE BY SUBMITTING A WRITTEN
REQUEST TO THE FOLLOWING ADDRESS:
OHIO CASUALTY CORPORATION
Attention: Barry S. Porter
Chief Financial Officer/Treasurer
136 North Third Street
Hamilton, Ohio 45025
Management and the Board of Directors of the Company know of no business to
be brought before the Annual Meeting other than as set forth in this Proxy
Statement. However, if any matters other than those referred to in this Proxy
Statement should properly come before the Annual Meeting, it is the intention
of the persons named in the enclosed proxy to vote the common shares repre-
sented by such proxy on such matters in accordance with their best judgment.
EXPENSES OF SOLICITATION
The expense of proxy solicitation will be borne by the Company. Proxies
will be solicited by mail and may be solicited, for no additional compensation,
by officers, directors or employees of the Company or its subsidiaries, by
telephone, telegraph or in person. Brokerage houses and other custodians,
nominees and fiduciaries may be requested to forward soliciting material to
the beneficial owners of common shares of the Company, and will be reim-
bursed for their related expenses. In addition, the Company has retained
Morrow & Co., Inc., a professional soliciting organization, to assist in
soliciting proxies from brokerage houses, custodians and nominees. The fees
and expenses of that firm in connection with such solicitation are not
expected to exceed $12,000.
By Order of the Board of Directors,
/s/Howard L. Sloneker III
Howard L. Sloneker III, Secretary
March 13, 1998
16
