By James McNair
The Cincinnati Enquirer
FAIRFIELD - Ohio Casualty Corp. announced a restructuring plan Wednesday that resulted in the immediate layoff of 260 workers, or almost 10 percent of the insurance company's work force, and will idle as many as 250 more in the second quarter.
The layoffs were spread out among eight U.S. offices, including 23 at the company's headquarters here and 18 at its regional office in Hamilton. Taking the biggest hit was Ohio Casualty's claims and underwriting processing office in the Chicago suburb of Lombard, Ill., where 65 employees were let go.
"We sincerely regret the impact of these reductions on employees and would have preferred to adjust staffing through normal attrition," said Dan Carmichael, the company's president and CEO.
The layoffs were part of a "process re-engineering" plan developed with the help of the Alexander Proudfoot consulting firm. The plan calls for investments in technology, improvements in productivity and consolidation of operations. Ohio Casualty expects to net $5.5 million in savings from the 260 job cuts, after absorbing a $4.6 million charge against first-quarter earnings for severance payouts and other costs.
A second wave of layoffs will affect 150 to 250 employees. When the program is fully under way, Ohio Casualty said the annual savings will reach $14.9 million beginning in 2005.
"We are systematically streamlining workflows in every functional area, which improves productivity while maintaining or enhancing the quality of service to agents and policyholders," Carmichael said. "While we are reducing the size of many field offices, we are maintaining a strong underwriting, marketing and claims presence."
Apparently anticipating Wednesday's news, investors have pushed up the price of Ohio Casualty shares by 11 percent since the end of the year. Although the restructuring plan and fourth-quarter earnings were announced after the market close Wednesday, the stock gained 16 cents and closed at $19.31, its highest price in 18 months.
Ohio Casualty had 2,669 employees on Dec. 31. About 1,300 of them work at the company's headquarters, about 450 in Hamilton. Previous office closings and downsizing lowered the company's work force by 11 percent in 2003.
For the three months ended Dec. 31, Ohio Casualty posted net income of $27.7 million, or 45 cents per share, compared with $29.1 million, or 48 cents per share, in the same quarter in 2002. Revenue, primarily from premiums and finance charges, fell 4.4 percent to $420.5 million during the quarter.
The quarter left Ohio Casualty with full-year net earnings of $75.8 million, compared with a loss of $900,000 in 2002. Full-year revenue fell 2 percent to $1.7 billion.
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