The assessment of whether a decline in fair value is considered temporary or other-than-temporary includes management's judgement as to the financial position and future prospects of the entity issuing the security. It is not possible to accurately predict when it may be determined that a specific security will become impaired.
As part of its evaluation of the aggregate $6.9 unrealized loss on securities in the investment portfolio at December 31, 2004, management performed a more intensive review of securities with a higher unrealized loss percentage when compared with their cost or amortized cost. Based on this review of each security, management believes that unrealized losses on these securities were temporary declines in value at December 31, 2004. In the table above, there are approximately 180 securities represented. Of this total, 7 securities have unrealized loss positions greater than 5% of their market values at December 31, 2004, with none exceeding 25%. This group represents $0.8, or 11.6% of the total unrealized loss position. Of this group, 3 securities representing approximately $0.6 in unrealized losses have been in an unrealized loss position for less than twelve months. Of the remaining 4 securities in an unrealized loss position for longer than twelve months totaling $0.2, management believes they will recover the cost basis of these securities, and has both the intent and ability to hold the securities until they mature or recover in value. All securities are monitored by portfolio managers who consider many factors such as an issuer's degree of financial flexibility, management competence and industry fundamentals in evaluating whether the decline in fair value is temporary. In addition, management considers whether it is probable that all contract terms of the security will be satisfied and whether
unprofitable level. The current results continue to be negatively impacted by assessments for the National Workers' Compensation Pool (NWCP) residual market. The impact of the NWCP residual market added 4.8 points to the workers' compensation combined ratio in 2004 compared to 4.5 points in 2003. The NWCP residual market lowered the 2002 combined ratio by 1.5 points. The Group's assessments have a larger percentage impact than those reported by the industry due to historical concentration of business in states with inactive pools. In addition, the concentration of the Group's business in a few states with limited pricing flexibility provides less opportunity to address issues specific to the workers' compensation product line. These issues are offset by the Group's approach to writing workers' compensation as part of an overall Commercial Lines account, where underwriters look to ensure that the pricing for the entire account is adequate.
For disclosure related to recently issued accounting standards, refer to Item 15, Notes to Consolidated Financial Statements, Footnote 19 on page 71 of this Annual Report on Form 10-K.
Ohio Casualty Corporation publishes forward-looking statements relating to such matters as anticipated financial performance, business prospects and plans, regulatory developments and similar matters. The statements contained in this MD&A that are not historical information, are forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. The operations, performance and development of the Corporation's business are subject to risks and uncertainties, which may cause actual results to differ materially from those contained in or supported by the forward-looking statements in this release. The risks and uncertainties that may affect the operations, performance, development and results of the Corporation's business include the following: changes in property and casualty reserves; catastrophe losses; premium and investment growth; product pricing environment; availability of credit; changes in government regulation; performance of financial markets; fluctuations in interest rates; availability and pricing of reinsurance; litigation and administrative proceedings; rating agency actions; acts of war and terrorist activities; ability to appoint and/or retain agents; ability to achieve targeted expense savings; ability to achieve premium targets and profitability goals; and general economic and market conditions.