S&P Rts Ohio Casualty's $125M Convertible Notes 'BB'.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 11, 2002

Standard & Poor's said today it assigned its double-'B' senior debt rating to Ohio Casualty Corp.'s $125 million convertible notes due in 2022 based on the company's regional business position, good capitalization,

Standard & Poor's also said it affirmed its triple-'B' counterparty credit and financial strength ratings on Ohio Casualty's operating subsidiaries and its double-'B' counterparty credit rating on the holding company. The outlook was revised to stable from negative.

"Over the past year, Ohio Casualty has made steady progress toward the implementation of its strategic plan and its goal to improve operating performance," said Standard & Poor's credit analyst Laline Carvalho. Positive restructuring actions, which should support operating improvements over the next two years, include significant rate increases, the elimination of its mono-line workers' compensation business and unprofitable agents, the cancellation of managing general agent contracts, and the exit from the New Jersey private passenger auto business through a transaction completed at the end of 2001. Management has also been proactive in reducing its investment portfolio risk by significantly reducing its equity holdings and re-investing proceeds in fixed-rate securities.

The holding company's financial flexibility has been limited by marginal interest coverage over the last three years, as well as restrictive covenants on the group's $205 million outstanding bank facility, which is due in October 2002. Although Ohio Casualty is currently in compliance with its debt covenants, Standard & Poor's believes the group's convertible note issue will significantly improve financial flexibility by affording the holding company greater breathing room to enact its strategic plan.

The outlook reflects Ohio Casualty's improved strategic focus with the entrance of a new management team in 2001. It also reflects re-underwriting actions that are gradually improving operating performance. Partially offsetting these factors are challenges related to the group's restructuring as well as three consecutive years of poor operating performance and low interest coverage at the holding-company level.

Copyright 2002, Standard & Poor's Ratings Services