Fitch to Rate Ohio Casualty Corporation's Debt.

Business Editors

CHICAGO--(BUSINESS WIRE)--March 13, 2002

Fitch expects to assign 'BBB-' ratings to Ohio Casualty Corporation's (Ohio Casualty) announced $125 million private offering of senior convertible notes. Proceeds from the offering will be utilized to refinance existing bank debt. Assignment of these ratings assumes no material change in terms and conditions before issuance. The Rating Outlook is Stable.

The rating reflects Ohio Casualty's conservative financial leverage, increased strategic focus on underwriting, and progress made thus far in the company's turnaround improvement plan. Weighted against these positives are recent poor operating performance, weak earnings based coverage, and competitive conditions in the workers' compensation and personal lines markets.

Ohio Casualty's capital structure is prudent with the capital mix consisting of 16% debt and 84% common equity at Dec. 31, 2001. The debt consists primarily of $205 million of outstanding bank debt that expires in October 2002, which the company expects to completely refinance in March 2002 on a longer term basis with a package of senior notes and convertible notes.

The company is in the second year of an action plan to return the company to sound profitable results. This follows a failed growth oriented strategy under the previous senior management prior to 2000. The new management team appears competent, focused, and committed to returning a culture of underwriting discipline to the company.

Ohio Casualty's combined ratio increased to an unfavorable 119.2% in 2000 driven by inadequate pricing and premium cessions. The company posted an improved 115.3% combined ratio for 2001 due to higher price increases, more favorable loss results, and actions taken to reduce expenses. When excluding the $40.6 million (pretax) renewal obligation transfer fee charge to exit the New Jersey private passenger auto business, the combined ratio was 112.6%, better than the target of 113.7% for 2001. Nevertheless, operating EBIT coverage was negative again in 2001, with an expectation to return to positive coverage starting in 2002.

Much of the challenge still lies ahead for the company with significant targeted combined ratio improvements to 106.5% in 2002 and 102.0% in 2003. While the company should benefit as a result of the exit from the New Jersey private passenger auto business and from the increasing rate environment, improvement to these levels will be challenging in the face of difficult market conditions in the competitive workers' compensation and personal lines markets.

Ohio Casualty Corporation is the parent holding company of Ohio Casualty Insurance Company, the lead member of the Ohio Casualty Group, one of the top 40 property and casualty insurance groups in the U.S. The group includes five other property/casualty insurance companies, and offers commercial and personal lines coverage, including personal auto, commercial property, homeowners, and workers' compensation primarily through an independent agency system with more than 7,000 agents.