<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 16, 1999
-----------------
Commission File Number 0-5544
OHIO CASUALTY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO
(State or other jurisdiction of incorporation or organization)
31-0783294
(I.R.S. Employer Identification No.)
136 North Third Street, Hamilton, Ohio
(Address of principal executive offices)
45025
(Zip Code)
(513) 867-3000
(Registrant's telephone number)
Not Applicable
(Former name or former address, if changed since last report)
Index to Exhibits - Page 5-6
Page 1 of 20 Pages
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<PAGE> 2
OHIO CASUALTY CORPORATION
FORM 8-K/A
Dated: February 16, 1999 (December 1, 1998)
CURRENT REPORT ON FORM 8-K/A
Dated: December 15, 1998
Ohio Casualty Corporation (the "Company") hereby amends its
Current Report on Form 8-K dated December 15,1998 to include the financial
statements and pro forma financial information set forth below which was
omitted from the original filing pursuant to Items 7(a)(4) and 7(b)(2).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Please see Index to Financial Statements and Pro Forma Financial
Information at Page 5
(b) Pro Forma Financial Information
Please see Index to Financial Statements and Pro Forma Financial
Information a Page 5
(c) Exhibits
Exhibit Number Description
-------------- -----------
2(a)* Asset Purchase Agreement, date as of
September 14, 1998, among The Ohio
Casualty Insurance Company, Great
American Insurance Company and the other
Sellers named therein
2(b) Amendment No. 1 to Asset Purchase
Agreement, dated December 1, 1998, among
The Ohio Casualty Insurance Company,
Great American Insurance Company and the
other Sellers named therein
2(c) Reinsurance Agreement, dated December 1,
1998, among The Ohio Casualty Insurance
Company, Great American Insurance Company
and the other Companies named therein
2
<PAGE> 3
2(d) Warrant Agreement, dated December 1,
1998, between Ohio Casualty Corporation
and Great American Insurance Company
and Warrant dated December 1, 1998
2(e) Noncompetition and Referral Agreement,
dated December 1, 1998, among Ohio
Casualty Corporation, The Ohio Casualty
Insurance Company and American Financial
Group, Inc.
2(f) Information Systems Agreement, dated
December 1, 1998, among The Ohio Casualty
Insurance Company, Great American Insurance
Company and the other Sellers named therein
2(g) Investment Services Agreement, dated
December 1, 1998, between The Ohio
Casualty Insurance Company and American
Money Management Corporation
2(h) Software License Agreement, dated
December 1, 1998, between The Ohio
Casualty Insurance Company and Great
American Insurance Company
2(i) Database License Agreement, dated
December 1, 1998, between The Ohio
Casualty Insurance Company and Great
American Insurance Company
23 Consent of Independent Accountants
99 Press Release dated December 1, 1998
*Certain of the Schedules and Exhibits to the Asset Purchase Agreement, as
amended were not filed with the current report on Form 8-K because they
believed and continues to believe they do not contain information material to
an investment decision and which is not otherwise disclosed in the Asset
Purchase Agreement and the other agreements filed as exhibits to the report.
The omitted Schedules and Exhibits are described in the Asset Purchase
Agreement. The Company agreed and hereby agrees to furnish supplementally a
copy of any omitted Schedule or Exhibit to the Securities and Exchange
Commission upon its request therefor.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OHIO CASUALTY CORPORATION
--------------------------------
(Registrant)
February 16, 1999 /s/ Barry S. Porter
---------------------------------
Barry S. Porter, CFO/Treasurer
(on behalf of Registrant and as
Principal Accounting Officer)
4
<PAGE> 5
Index to Financial Statements and Pro Forma Financial Information
Item7(a) Financial Statements of Business Acquired
Page No.
Report of Independent Accountants 8
Special Purpose Financial Statements
- ------------------------------------
Commercial Lines Business of American Financial 9
Corporation - Statement of Assets to be Acquired
and Liabilities to be assumed September 30, 1998
Commercial Lines business of American Financial 10
Corporation - Statement of Underwriting Gains and
Losses for the nine months ended September 30, 1998
Commercial Lines Business of American Financial 11-16
Corporation - Notes to Special Purpose Financial
Statements
Item7(b) Pro Forma Financial Information
Page No.
Ohio Casualty Corporation and Subsidiaries 17
Pro Forma Condensed Consolidated Financial
Information
Ohio Casualty Corporation and Subsidiaries 18
unaudited Pro Forma Condensed Consolidated
Statement of Income for the year ended
December 31, 1998
Ohio Casualty Corporation and Subsidiaries 19
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
5
EXHIBIT INDEX
Current Report on Form 8-K
Dated February 16, 1999
Ohio Casualty Corporation
Exhibit
Number Description Page No.
- ------- ----------- --------
2(a) Asset Purchase Agreement, date as of Incorporated by reference
September 14, 1998, among The Ohio to the Registrant's Report
Casualty Insurance Company, Great on Form 10-Q filed on
American Insurance Company and the November 13, 1998 for the
other Sellers named therein quarter ended September
30, 1998.
2(b) Amendment No. 1 to Asset Purchase Incorporated by reference
Agreement, dated December 1, 1998, among to the Registrant's Current
The Ohio Casualty Insurance Company, Report on Form 8-K filed on
Great American Insurance Company and the December 15, 1998.
other Sellers named therein
2(c) Reinsurance Agreement, dated December 1 Incorporated by reference
1998, among The Ohio Casualty Insurance to the Registrant's Current
Company, Great American Insurance Report on Form 8-K filed on
Company and the other Companies named December 15, 1998.
therein
2(d) Warrant Agreement, dated December 1, Incorporated by reference
1998, between Ohio Casualty Corporation to the Registrant's Current
and Great American Insurance Company Report on Form 8-K filed on
and Warrant dated December 1, 1998 December 15, 1998.
2(e) Noncompetition and Referral Agreement, Incorporated by reference
dated December 1, 1998, among Ohio to the Registrant's Current
Casualty Corporation, The Ohio Casualty Report on Form 8-K filed on
Insurance Company and American Financial December 15, 1998
Group, Inc.
2(f) Information Systems Agreement, dated Incorporated by reference
December 1, 1998, among The Ohio Casualty to the Registrant's Current
Insurance Company, Great American Report on Form 8-K filed on
Insurance Company and the other Sellers December 15, 1998.
named therein
2(g) Investment Services Agreement, dated Incorporated by reference
December 1, 1998, between The Ohio to the Registrant's Current
Casualty Insurance Company and American Report on Form 8-K filed on
Money Management Corporation December 15, 1998.
6
Exhibit
Number Description Page No.
- ------- ----------- --------
2(h) Software License Agreement, dated Incorporated by reference
December 1, 1998, between The Ohio to the Registrant's Current
Casualty Insurance Company and Great Report on Form 8-K filed on
American Insurance Company December 15, 1998.
2(i) Database License Agreement, dated Incorporated by reference
December 1, 1998, between The Ohio to the Registrant's Current
Casualty Insurance Company and Great Report on Form 8-K filed on
American Insurance Company December 15, 1998.
23 Consent of Independent Auditors 20
99 Press Release issued by Ohio Casualty Incorporated by reference
Corporation dated December 1, 1998. to the Registrant's Current
Report on Form 8-K filed on
December 15, 1998.
7
<PAGE> 8
Report of Independent Auditors
The Board of Directors
American Financial Corporation
We have audited the accompanying Statement of Assets to be Acquired and
Liabilities to be Assumed of the Commercial Lines Business of American
Financial Corporation as of September 30, 1998, and the related Statement
of Underwriting Gains and Losses for the nine months then ended. These
special-purpose financial statements are the responsibility of American
Financial Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
As described in Note 1, the accompanying special-purpose financial statements
were prepared solely for the purpose of complying with the filing
instructions of the Securities and Exchange Commission (for inclusion in Form
8-K of Ohio Casualty Corporation) and are intended to present the assets
to be acquired and liabilities to be assumed of the Commercial Lines Business
of American Financial Corporation by Ohio Casualty Insurance Company,
pursuant to the provisions of the Asset Purchase Agreement described in
Note 1. The special-purpose financial statements are not intended to be a
complete presentation of the Commercial Lines Business' financial position or
results of operation.
In our opinion, the accompanying special-purpose financial statements referred
to above present fairly, in all material respects, the assets to be acquired
and liabilities to be assumed of the Commercial Lines Business of American
Financial Corporation, and the related underwriting gains and losses for the
nine months then ended, in accordance with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Cincinnati, Ohio
January 22, 1999
8
<PAGE> 9
<TABLE>
<CAPTION>
Commercial Lines Business of American Financial Corporation
Statement of Assets to be Acquired and Liabilities to be Assumed
September 30, 1998
In Thousands
<S> <C>
Assets:
Investments Due from Great American $242,033
Premiums Receivable 127,438
Deferred Aquisition Costs 37,371
---------
Total Assets to be Aquired $406,842
=========
Liabilities:
Unpaid Losses and Loss Adjustment Expenses $487,701
Unearned Premiums 140,093
Accrued Policyholder Dividends 17,387
Commission Payable 7,628
Payroll and Other Expense Accruals 3,803
Other Liabilities 1,000
---------
Total Liabilities to be Assumed $657,612
=========
</TABLE>
See Accompanying Notes
9
<PAGE> 10
<TABLE>
<CAPTION>
Commercial Lines Business of American Financial Corporation
Statement of Underwriting Gains and Losses
For the Nine Months Ended September 30,1998
In Thousands
<S> <C>
Premium Written $210,679
Change in Unearned Premiums 22,943
---------
Premium Earned 233,622
Losses and Loss Adjustment Expenses 193,282
Underwriting Expenses 75,531
Policyholder Dividends 1,992
---------
Underwriting Loss ($37,183)
=========
</TABLE>
See Accompanying Notes
10
<PAGE> 11
COMMERCIAL LINES BUSINESS OF AMERICAN FINANCIAL CORPORATION
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS
1. BACKGROUND AND BASIS OF PRESENTATION
On September 14, 1998, Ohio Casualty Insurance Company ("OCAS") entered into
an asset purchase agreement ("the Agreement") with Great American Insurance
Company ("Great American"), an indirectly owned subsidiary of American
Financial Group, Inc. ("AFG"), and certain of its affiliates, whereby OCAS
agreed to acquire substantially all of the Commercial Lines Division ("the
Business") of Great American Insurance Company and its affiliates. The
Agreement closed on December 1, 1998 (the "Closing Date").
No legal entity in which the Business was written is being sold. Therefore
the Business has not been reported as a separate legal entity and as a
result, it is impracticable to prepare separate complete financial statements
of the Business, which would include investment results and current tax
provisions. The accompanying special-purpose financial statements therefore
exclude investment results and taxes. As discussed more fully in Note 3--
Investments, the investments due from Great American shown on the Statement of
Assets to be Acquired and Liabilities to be Assumed represent the investments
that would have been transferred to OCAS from Great American had the
Agreement closed on September 30, 1998.
The major lines of insurance written in this Business include workers'
compensation, commercial multi-peril, umbrella (including primary and excess
layers) and commercial auto.
The accompanying special-purpose financial statements have been prepared from
the accounting records of Great American and have been prepared solely for
the purpose of complying with the filing instructions of the Securities and
Exchange Commission (for inclusion in the Form 8-K filing of Ohio Casualty
Corp, registrant and OCAS's parent), and are intended to present the assets
to be acquired and the liabilities to be assumed, as well as the related
underwriting gains and losses of the Business, excluding investment results
and taxes, pursuant to the provisions of the Agreement. Because investment
results and tax provisions are excluded from the accompanying special-
purpose financial statements, the statement of cash flows is not presented.
Accordingly, the accompanying special-purpose financial statements are not a
complete presentation of the Business's financial position or results of
operations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Changes in circumstances could cause actual results to differ
materially from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PREMIUMS EARNED
Unearned premiums are amortized into revenue on a pro rata basis over the term
of the policies. Premiums receivable include amounts for audits which have
been earned but not billed, late billed premiums and retrospectively rated
premiums, and are net of an allowance for doubtful accounts of $3,200,000
at September 30, 1998. The carrying amount of premiums receivable
approximates fair value.
OUTSTANDING LOSSES AND LOSS ADJUSTMENT EXPENSES
The net liability for unpaid losses and loss adjustment expenses will be
assumed by OCAS via a 100% quota share reinsurance agreement with Great
American.
11
<PAGE> 12
COMMERCIAL LINES BUSINESS OF AMERICAN FINANCIAL CORPORATION
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
The net liabilities stated for unpaid claims and for the expenses of
investigation and adjustment of unpaid claims are based upon: (a) the
accumulation of case estimates for losses reported prior to the close of
the accounting period on the direct business written; (b) estimates received
from the ceding reinsurers; (c) estimates of unreported losses based on past
experience; (d) estimates based on experience of expenses for investigating
and adjusting claims; and (e) the current state of the law and coverage
litigation. These liabilities are subject to the impact of changes in claim
amounts and frequency and other factors. In spite of the variability
inherent in such estimates, management believes that the liabilities for
unpaid losses and loss adjustment expenses are adequate.
DEFERRED POLICY ACQUISITION COSTS
Variable costs that are directly related to the production of business,
principally commissions and premium taxes, are deferred and amortized over
the period in which the premiums are earned. Deferred policy acquisition
costs are limited to their net realizable value without any consideration of
investment income.
Policy acquisition costs deferred during the nine months ended September 30,
1998, amounted to $59,300,000. Included in underwriting expenses incurred
are policy acquisition costs amortized into income during the nine months
ended September 30, 1998, which amounted to $65,100,000.
DIVIDENDS TO POLICYHOLDERS AND OTHER POLICYHOLDER LIABILITIES
Certain policies written by Great American (primarily workers compensation
policies) are eligible for dividends to policyholders. Dividends to
policyholders are accrued during the period in which the related premiums
are earned; however, such dividends do not become due and payable until
declared by the Board of Directors of Great American Insurance Company and
affiliates.
3. INVESTMENTS DUE FROM GREAT AMERICAN
The investment balance due from Great American on the September 30, 1998
Statement of Assets to be Acquired and Liabilities to be Assumed represents
the amount of investments that would have been transferred to OCAS from
Great American had the transaction closed on that date. On the Closing Date,
Great American actually transferred $287.9 million of investments, $3.7
million of related accrued investment income and $1.5 million of cash to
OCAS. The investment balance due from Great American on the September 30,
1998 Statement of Assets to be Acquired and Liabilities to be Assumed and
the amount actually transferred to OCAS were both calculated pursuant to the
Agreement as follows (in thousands):
<TABLE>
<CAPTION>
(Unaudited)
September 30, 1998 Amount Transferred
<S> <C> <C>
Statutory Liabilities $660,560 $708,400
GAAP Post-Retirement
Medical Liabilities 1,148 1,000
Less: Statutory Premiums
Receivable (119,675) (116,300)
Less: Purchase Price (300,000) (300,000)
------------------------------------------
$242,033 $293,100
==========================================
</TABLE>
12
<PAGE> 13
COMMERCIAL LINES BUSINESS OF AMERICAN FINANCIAL COPRPORATION
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
The $287.9 million of bonds were transferred at market. Market values are
based on prices quoted in the most active market for each security. Market
value and other information based on Great American's accounting policies
and historical costs are as follows (in thousands):
<TABLE>
<CAPTION>
Held To Maturity
-------------------------------------------------
Amortized Market Gross Unrealized
------------------------
Cost Value Gains Losses
---- ------ ----- ------
<S> <C> <C> <C> <C>
States, Municipals, &
Political Subdivisions $ 4,055 $ 4,184 $ 129 $ 0
Foreign Governments 0 0 0 0
Public Utilities 11,602 11,761 159 0
Mortgage-Backed Securities 0 0 0 0
Corporate Bonds 34,809 35,415 634 (29)
-------------------------------------------------
$ 50,466 $ 51,360 $ 922 $ (29)
=================================================
</TABLE>
<TABLE>
<CAPTION>
Available For Sale
-------------------------------------------------
Amortized Market Gross Unrealized
------------------------
Cost Value Gains Losses
---- ------ ----- ------
<S> <C> <C> <C> <C>
States, Municipals, &
Policital Subdivisions $ 0 $ 0 $ 0 $ 0
Foreign Governments 5,596 5,524 0 (71)
Public Utilities 30,105 30,853 748 0
Mortgage-Backed Securities 60,960 61,881 921 0
Corporate Bonds 134,006 138,299 4,753 (460)
--------------------------------------------------
$ 230,667 $236,557 $ 6,422 $ (531)
==================================================
</TABLE>
The table below sets forth the scheduled maturities of the bonds based on the
market values at the closing date. Mortgage-backed securities had an average
life of approximately 5.5 years at date of close:
<TABLE>
<CAPTION>
Held to Available
Maturity Maturity For Sale
-------- --------- ----------
<S> <C> <C>
One year or less 18 % 1 %
After one year through
five years 63 33
After five years through
ten years 19 28
After ten years 0 12
----- -----
100 74
Mortgage-backed securities 0 26
----- -----
100 % 100 %
===== =====
</TABLE>
The amount of investments transferred is subject to post-closing
adjustments; specifically, adjustments will be based on an audited closing
Statement of Assets to be Acquired and Liabilities to be Assumed, prepared
on the basis of statutory accounting principles (with the exception of
post-retirement medical expense accruals, which are to be calculated using
generally accepted accounting principles) as of November 30, 1998, as set
forth in the Agreement. This closing statement will be audited by March 15,
1999, after which time it will be submitted to OCAS for review. OCAS will
have 45 days to review the statement. The amount of the post-closing
adjustment, if any, cannot be reasonably estimated at this time.
13
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COMMRECIAL LINES BUSINESS OF AMERICAN FINANCIAL CORPORATION
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMNETS (CONTINUED)
4. OUTSTANDING LOSSES AND LOSS EXPENSES
The following table sets forth paid and incurred losses and loss adjustment
expenses for the nine months ended September 30, 1998, and loss and loss
adjustment expense reserves at September 30, 1998:
<TABLE>
<CAPITON>
<S> <C>
Outstanding losses and loss expenses at
January 1, 1998, Net of Reinsurance $447,890,000
Total incurred 193,282,000
Paid related to:
Current year 59,948,000
Prior years 93,523,000
------------
Total paid 153,471,000
------------
Outstanding losses and loss expenses at
September 30,1998, Net of Reinsurance $487,701,000
============
</TABLE>
The reserve analysis as of September 30, 1998, represents the initial reserve
analysis for the Business. Previously, the Business was included as part of
a larger business segment, with no separate reserve study performed for the
Business. Loss and loss adjustment expense reserves as of January 1, 1998,
therefore were established with the benefit of knowledge of loss activity
which became available subsequent to December 31, 1997, and which related to
periods prior to 1998. Any loss and loss adjustment expense reserve
development that would have ordinarily been reported had a separate December
31, 1997, reserve analysis been performed has necessarily been included in
the January 1, 1998 balance.
Workers' compensation permanent disability reserves of $207,500,000 are
discounted using a discount rate of 8%, and such discount amounted to
$27,251,000 at September 30, 1998. Reserves are continually monitored and
reviewed, and as settlements are made or reserves are adjusted, any
differences are reported in current operations.
5. EMPLOYEE BENEFIT PLANS
Great American provides retirement benefits to qualified employees through
contributory and non-contributory defined contribution plans ("retirement and
savings plan", or "RASP"). Additionally, Great American Insurance Company
and its affiliates provide health care and dental care plans. Also officers
and certain key employees participate in annual and long-term incentive
compensation plans.
14
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COMMERCIAL LINES BUSINESS OF AMERICAN FINANCIAL CORPORATION
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
With respect to the pension and welfare plans, the employees associated with
the Business who will continue employment with the OCAS subsequent to the
acquisition will receive the following benefits:
The accrued benefits under the RASP shall become
fully vested in accordance with the terms of
AFG's plan;
Through year-end 1998, health and dental plan
benefits will be provided to enrolled, transferred
employees in accordance with American Financial
medical and dental plans. Ohio Casualty will
reimburse Great American for the company paid
portion of the coverage rate.
The transferred employees will be eligible to participate in the medical and
dental plans of Ohio Casualty beginning in 1999 and other welfare benefits
immediately following the acquisition.
With respect to post-retirement benefits other than pension, the Great
American employees transferred to Ohio Casualty who were eligible for these
benefits may elect by December 31, 1998, to enroll in AFG's post-retirement
medical plans. Accordingly, a liability for this has been included in the
accompanying special-purpose financial statements.
Pursuant to the Agreement, Great American will indemnify Ohio Casualty for
all annual and long-term incentive compensation obligations as of the date of
closing that were not adequately reserved at the closing.
6. COMMITMENTS AND CONTINGENCIES
Great American leases certain of its office facilities under cancelable and
noncancelable agreements. Employees of the Business occupy some of this
space. Total rental expense allocated to the Business under these agreements
amounted to $1,845,000 in the first nine months of 1998. Ohio Casualty has
agreed to sublease, for ninety days subsequent to the Closing Date, some of
the space now occupied by the transferred employees. During the ninety
days, Ohio Casualty will decide whether it will continue to sublease the
space from Great American, assume part of the lease, or lease or buy space
elsewhere. Therefore at September 30, 1998, the minimum aggregate rental
commitment under all noncancelable leases (net of sublease income) is as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 615,000
1999 410,000
------------
Total $ 1,025,000
============
</TABLE>
In the ordinary course of business, the Company is namedas a defendant in
legal proceedings relating to insurance policies of the Business that have
been issued. Management believes that none of the actions will result
in any liability that is materially in excess of any provision made in the
accompanying special-purpose financial statements.
15
<PAGE> 16
COMMERCIAL LINES BUSINESS OF AMERICAN FINANCIAL CORPORATION
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS (CONITNUED)
7. INFORMATION SYSTEMS AND YEAR 2000 STATUS (Unaudited)
Under the Agreement, Great American will provide for up to two years (with a
one-year extension permitted) information services to Ohio Casualty for the
Business. These information services include rights to use Great American's
commercial lines policy issuance, billing and claims management systems
("commercial lines systems").
Under the Agreement, Great American has committed to completing work by
August 31, 1999, to ensure that these systems will function properly in the
year 2000. This Year 2000 work is being performed currently as part of an
overall AFG Year 2000 Project. Those systems related to the Business are
"on target" to meet the August 31, 1999 deadline. From inception in the
early 1990s through September 30, 1998, Great American has incurred $8.5
million in Year 2000 costs for the commercial lines systems.
Great American estimates that it will incur an additional $4.4 million of
such costs in completing the Year 2000 work for the commercial lines systems.
The costs to complete the Year 2000 work for the commercial lines systems
will be borne by Great American.
8. SUBSEQUENT EVENTS
On December 1, 1998, Great American and Ohio Casualty satisfied the
conditions of the Agreement, and the Business was transferred from Great
American to Ohio Casualty.
16
<PAGE> 17
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited Pro Forma Condensed Consolidated Statement of Income of the
Corporation for the year ended December 31, 1998 gives effect to the
acquisition of the Great American Insurance Company Commercial Lines
Business ("GAI") as if it had occurred on January 1, 1998. The pro forma
adjustments are based upon available information and certain assumptions
that management of the Corporation believes are reasonable in the
circumstances. The Corporation expects to realize certain cost savings in
connection with the integration of the GAI operations. These expected
future cost savings have not been reflected in the Unaudited Pro Forma
Condensed Consolidated Statement of Income. These statements have been
prepared from the historical financial statements of the Corporation and GAI
and should be read in conjunction with such statements and the notes
thereto, included in the Form 8-K filing, filed on February 16, 1999 and
the special purpose financial statements including the notes thereto of GAI
included elsewhere in this Form 8-K/A. The pro forma financial information
is provided as additional information only and is not necessarily
indicative of actual results that would have been achieved had the
acquisition been consummated at the beginning of the periods presented or
of future results. A Pro Forma Condensed Consolidated Balance Sheet has
not been presented as the Corporation's Consolidated Balance Sheet as of
December 31, 1998 filed separately on Form 8-K on February 16, 1999 gives
effect to the GAI acquisition, which occurred on December 1, 1998.
17
<PAGE> 18
OHIO CASUALTY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE
YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCG Historical GAI Historical GAI Historical
for the for the nine for the two
year ended months ended months ended
December 31, 1998 September 30, 1998 November 30, 1998
----------------- ------------------ -----------------
<S> <C> <C> <C>
Premiums and finance charges earned $1,268,653 $ 233,622 $ 49,756
Investment income less expenses 169,024
Investments gains realized 14,411
-----------------------------------------------------
Total income 1,452,088 $ 233,622 $ 49,756
-----------------------------------------------------
Losses and loss adjustment expenses 920,275 193,282 34,354
General operating expenses and
policyholder dividends 120,132 12,423 4,622
California Proposition 103 reserve (18,865)
Restructuring charge 10,000
Amortization of goodwill 1,031
Amortization of deferred policy
acquisition costs 316,516 65,100 14,467
------------------------------------------------------
Total expenses $1,349,089 270,805 53,443
Income from continuing operations
before income taxes 102,999 (37,183) (3,687)
Income taxes 19,988
------------------------------------------------------
Income from continuing operations $ 83,011 $ (37,183) $ (3,687)
======================================================
Weighted average shares
outstanding - basic 32,904
Weighted average shares
outstanding - diluted 32,935
Earnings per share (basic and diluted):
Income from continuing operations,
per share $ 2.52
==========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Consolidated
----------- ------------
<S> <C> <C>
Premiums and finance charges earned $1,552,031
Investment income less expenses $15,062 (1) 184,086
Investments gains realized 14,411
-----------------------------
Total income 15,062 1,750,528
-----------------------------
Losses and loss adjustment expenses 1,147,911
General operating expenses and
policyholder dividends 137,177
California Proposition 103 reserve (18,865)
Restructuring charge 10,000
Amortization of goodwill 11,339 (2) 12,369
Amortization of deferred policy
acquisition costs 396,083
------------------------------
Total expenses 11,339 1,684,675
------------------------------
Income from continuing operations
before income taxes 3,723 65,853
Income taxes (13,001)(3) 6,987
------------------------------
Income from continuing operations $ 16,724 58,866
==============================
Weighted average shares
outstanding - basic 32,904(4)
Weighted average shares
outstanding - diluted 32,935
Earnings per share (basic and diluted):
Income from continuing operations,
per share $ 1.79
==========
</TABLE>
18
<PAGE> 19
OHIO CASUALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) To record investment income earned on the net additional
investments acquired of $287,917. Investment income earned was
calculated based on the actual investments comprising the portfolio
transferred and using the original purchase yield of Great American
Insurance Company. For securities with original purchase dates during
1998, investment income from the date of purchase was included,
with no provision for income prior to the acquisition date.
(2) To record the amortization of goodwill of $309,237 on a straight-
line basis over a 25 year period.
(3) Adjusted to reflect the application of corporate income taxes to
the historical results of GAI and the pro forma adjustments using a
statutory rate of 35%.
(4) Pro forma weighted average common shares outstanding for the
purposes of calculating diluted earnings per share do not give
effect to the warrants issued in connection with the acquisition,
as the warrants were antidilutive in 1998.
19
<PAGE> 1
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Registration Statements on Forms S-3
and S-8 (Securities and Exchange Commission Registration Numbers 333-70761,
333-29483, 333-69895 and 33-67962) of Ohio Casualty Corporation and in the
related Prospectuses of our report dated January 22, 1999, with respect to the
special-purpose financial statements of the Commercial Lines Business of
American Financial Corporation included in this Current Report (Form 8-K/A)
dated February 16, 1999.
Cincinnati, Ohio
February 12, 1999
20
