2013

O I L C A S U A L T Y I N S U R A N C E L T D .
Contents
 ANNUAL REPORT 2013 PG. 1

2 President’s Message
6 Operations Review
12 Investment Review
16 Ten-Year Financial History
18 Consolidated Balance Sheets
19 Consolidated Statements of Operations
20 Consolidated Statements of Changes in Shareholders’ Equity
21 Consolidated Statements of Cash Flows
22 Notes to Consolidated Financial Statements

50 Independent Auditors’ Report to the Shareholders

51 Management Responsibility for the Financial Statements
52 Shareholders
54 Board of Directors
56 Executive Staff
57 Underwriting and Claims Teams
59 Committees of the Board
60 Subsidiary Company

O I L C A S U A LT Y I N S U R A N C E , LT D.
 President’s Message
Strategic plan execution, which included product line diversification,
has been the pillar of Oil Casualty Insurance, Ltd.’s methodical approach
to growth. 2013 was a record setting year for OCIL in both premiums
written and shareholders’ equity. The Company continued to expand
and develop its core businesses, with unceasing focus and dedication
to the energy industry remaining at the forefront.

Robert D. Stauffer
PRESIDENT & CHIEF EXECUTIVE OFFICER
 ANNUAL REPORT 2013 PG. 3

Seven years ago, OCIL developed a strategic

business plan to achieve greater diversification
and scale. As I reflect on 2013, it is gratifying to
witness the individual building blocks of OCIL’s
strategic business plan come together – meeting
our goals and objectives while celebrating our
accomplishments.

O I L C A S U A LT Y I N S U R A N C E , LT D.
 ANNUAL REPORT 2013 PG. 5

Throughout 2013, OCIL concentrated on product or net loss and loss expense provisions and where OCIL’s strategic building blocks have united
line diversification and expansion; making great the unrelated business premiums are more than to provide the Company with a broader profile;
strides in developing the business operations $50 million. greater scale and diversification. As we embark
through effective sales and marketing. All product upon another year of strategic development, OCIL
lines experienced revenue growth, particularly With growth comes added complexity and new remains committed to our shareholders and
the new excess property book. challenges. Effectively managing these challenges non-shareholder insureds around the globe.
is paramount to the future success of OCIL.
The number of excess liability insureds continued Enterprise Risk Management (ERM) practices In closing, I wish to express my thanks to the
to grow, reaching a record total of 120 as at No- within OCIL continued to expand in 2013, which Board of Directors for their guidance and to our
vember 30, 2013. Combine this with the addition have created a more robust framework for evalu- shareholders and non-shareholder insureds for
of 43 new, direct property accounts and it is easy ating and analyzing various risks assumed by their continued support. I would like to acknowl-
to see why we feel so positive about OCIL’s future. the Company. The ERM process ensures that the edge the dedication and hard work of OCIL’s
Company is positioned appropriately to achieve management team and staff and thank them
Due to the Company’s growth, particularly in its strategic goals. for their contributions to the success of the
non-shareholder business, OCIL was required to Company in 2013.
amend its license from a Class 3 to a Class 3B As OCIL continues to diversify its operations,
insurer with the Bermuda Monetary Authority the use of more proficient systems becomes
(BMA), effective January 1, 2013. Class 3B insur- imperative. Due in part to this, OCIL created an
ers are defined by the BMA as large commercial IT strategic plan in early 2013 and has been
insurers whose percentage of unrelated business executing on its various initiatives. Robert D. Stauffer
represents 50% or more, of net premiums written PRESIDENT & CHIEF EXECUTIVE OFFICER
Operations Review
OCIL made great strides in 2013. Continued execution of strategic
initiatives contributed to revenue growth and greater spread of business.
The Company, as of fiscal year end November 30, 2013 reached record
shareholders’ equity, written premium and number of insureds.
 ANNUAL REPORT 2013 PG. 7

Insurance Operations:
OCIL’s financial strength ratings of A- (Stable) and The execution of OCIL’s strategic business plan The newest product line, excess property, finished
BBB+ (Stable) were reaffirmed by A.M. Best and has achieved greater diversification and scale its first full year and performed in line with OCIL’s
Standard & Poor’s, respectively. by growing its direct business. The Company business plan. The chart on page 10 illustrates the
provides excess liability and excess property diversification of the property book of business.
Early in the year, the Company embarked on a insurance and reinsurance to companies with
review of its information technology systems operations in mining, chemical, petrochemical, On the excess liability side, written premium
and developed a long term strategic plan with oil and gas exploration (onshore and offshore), increased slightly from $59 million to $61 million,
the objectives of improving business process refining and marketing, electrical and gas primarily due to the increased number of policies
efficiencies, system integration and supporting utilities, and pipelines. written. There were several claims paid on losses
enterprise risk management practices. reported and reserved in prior years. The excess

Jerry Rivers
SENIOR VICE PRESIDENT & CHIEF OPERATING OFFICER

O I L C A S U A LT Y I N S U R A N C E , LT D.
liability book increased its policy count to Combined, the insurance and reinsurance In Closing:
120 from 113 a year earlier. Of the 120 policies operations generated gross premiums written OCIL continues to focus on creating a well-
as at November 30, 2013, 53 were issued to during the year totaling $153 million, an increase balanced and diversified underwriting platform
shareholders and 67 were issued to non- of approximately 5% over the prior year. Net while at the same time, staying within the
shareholder insureds. underwriting income was $25 million compared Company’s tolerance levels of risk accumulation
to a loss of $33 million in the prior year. geographically as well as risk correlation within
Assumed Reinsurance: our insurance and reinsurance operations.
OCIL began writing assumed reinsurance in Ceded Reinsurance:
2009 with the objective being to access additional The Company purchased various types of The construction of a more robust and diversified
distribution and production sources to obtain reinsurance contracts intended to mitigate business model has resulted in growth in OCIL’s
greater scale and diversification. The growth of underwriting losses assumed in both the revenue, capital and prominence in the energy
OCIL’s assumed reinsurance business continues insurance and reinsurance operations. During insurance industry. I am very grateful for the sup-
to increase the Company’s geographic distribution fiscal year 2013, ceded reinsurance premium port of the brokerage community, our reinsurance
by partnering with other energy market insurers. increased 14% to $45 million from the prior year. partners, shareholders, non-shareholder insureds,
This has resulted in greater scale and spread of The increase, was primarily due to reinsurance directors and employees.
risk together with increased revenue. premium increases as a result of excess liability
losses in the prior year and the purchase of
OCIL continues to carefully monitor its risk excess of loss reinsurance on the Company’s
on a per-insured and aggregate basis to ensure property portfolio. Reinsurance is purchased
that OCIL remains within its acceptable risk from reinsurers rated A- or above by either
tolerance levels. The assumed reinsurance A.M. Best or Standard & Poor’s. Jerry Rivers
business continues to grow and has been SENIOR VICE PRESIDENT AND CHIEF OPERATING OFFICER

performing as expected.
 ANNUAL REPORT 2013 PG. 9

Gross Written Premiums

EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS AS OF NOVEMBER 30, 2013

152,720
145,870

90,858
82,105
77,231
76,635

56,708
49,028 51,125
44,009

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

O I L C A S U A LT Y I N S U R A N C E , LT D.
Industry Segment

*
Membership Geography – number of insureds
INSURANCE OPERATIONS

Property
CANADA

7%
5% 2% Mining 33% 13
Refining & Marketing 19%
33%
9% Petrochemicals 16%
Pipelines 9%
9% E&P Onshore 9% UNITED STATES
E&P Offshore
E&P On/Offshore
7%
5%
106
16% 19%
Utility 2%
SOUTH
AMERICA

2
Liability

% 1% Utility 24%
4% 2
7% Exploration & Production 21%
24%
Pipeline 16%
11% Refining & Marketing 14%
Integrated Oil 11%
Petrochemical 7%
14%
21% Chemical 4%
Mining 2%
16% Other 1%

*Includes property and liability insureds, not policies written.

 ANNUAL REPORT 2013 PG. 11

New Business
WRITTEN IN FISCAL YEAR 2013

EUROPE
Property*
13
4 1
Mining 14
14
7 Exploration & Production 9
Refining & Marketing 8
Petrochemicals 7
Pipelines 4
8 Utility 1
9

Liability*
AFRICA

1 1
1
Exploration & Production 5
5 Refining & Marketing 3
AUSTRALIA Pipeline/Midstream 3
3
3 Integrated Oil 1
Mining 1

*Based on number of insureds.

O I L C A S U A LT Y I N S U R A N C E , LT D.
 Investment
2013
Review
At fiscal year end 2013, the S&P 500 index investment grade government and corporate returns in equities and hedge funds as well as
generated a 30.3% return which was more than bonds) fell 2.02%, its first negative calendar-year shorter duration positioning within its fixed
double its return in 2012. On the international performance since 1999. During 2013, the Federal income allocation. Throughout 2013 management
front, stocks posted a return of 23% as measured Reserve announced that it would begin “tapering” focused on the potential for U.S. interest rates
by the MSCI EAFE Index while Emerging Market its bond buying program. This had a significant to rise and as such, continued to reduce the
stocks struggled, generating negative returns of impact on U.S. interest rates and the 10-year U.S. duration of its global fixed income portfolio. This
2.3%. Rising interest rates in the U.S. put pressure Treasury nearly doubled in yield from 1.6% in May repositioning occurred at the beginning of May
on emerging market currencies and their equities to 3% by the end of 2013. which was timely, given the impact that the Fed’s
as investors found better opportunities on a risk decision to reduce its monthly bond purchases
adjusted basis elsewhere. As for the bond market, Against this backdrop, OCIL’s diversified had on interest rates shortly thereafter. Also,
the Barclays U.S. Aggregate index (a proxy for investment portfolio benefited from strong within the permissible parameters established

Ricky E. Lines
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
 ANNUAL REPORT 2013 PG. 13

O I L C A S U A LT Y I N S U R A N C E , LT D.
by our investment board, management tactically maintained an overweight
allocation to both global equities and hedge funds, while remaining
Asset
Allocation
underweight to global bonds.

Management’s objective is to provide adequate liquidity to meet claim paying

obligations, while seeking to preserve and enhance the value of its invested
assets. As of fiscal year ended November 30, 2013, OCIL’s cash and invested
assets totaled $949 million compared with $897 million a year earlier. OCIL’s 2%
10%
investment portfolio generated a 4.8% net portfolio return resulting in $28
million of investment income during the year. OCIL’s total invested assets
10%
were allocated to 66% Global Bonds, 10% Global Equities, 12% Funds of Hedge
Funds, 2% Bonds in Trusts and 10% Cash as of November 30, 2013.
12%
OCIL’s liquidity position remains strong. The Company has a $75 million 66%
secured credit facility with the Bank of New York Mellon and a highly liquid
investment portfolio. At year ended November 30, 2013, there were no
outstanding amounts drawn on the credit facility.

OCIL’s many achievements in 2013 were possible because of the valuable

contributions, perseverance and diligence of our employees, management Global Bonds 66%
team and investment board members. Funds of Hedge Funds 12%
Cash 10%
Global Equities 10%
Bonds in Trusts 2%

Ricky Lines FISCAL YEAR ENDED NOVEMBER 30, 2013

SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

 ANNUAL REPORT 2013 PG. 15

Strategic
Portfolio Return*
Total
Portfolio Return*

9.7%
9.2%

6.4% 6.5% 6.2% 6.0%

5.1% 4.8%

1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS

FISCAL YEAR ENDED NOVEMBER 30, 2013 FISCAL YEAR ENDED NOVEMBER 30, 2013
*Portfolio returns exclude Cash and Bonds in Trust *Portfolio returns include Cash and Bonds in Trust

O I L C A S U A LT Y I N S U R A N C E , LT D.
Independent Auditors’ Report to the Shareholders’

We have audited the accompanying consolidated on our audits. We conducted our audits in and the reasonableness of significant
financial statements of Oil Casualty Insurance, accordance with auditing standards generally accounting estimates made by management,
Ltd. and its subsidiary, which comprise the accepted in the United States of America. Those as well as evaluating the overall presentation
consolidated balance sheets as of November standards require that we plan and perform of the consolidated financial statements.
30, 2013 and 2012, and the related consolidated the audit to obtain reasonable assurance about
statements of operations, changes in whether the consolidated financial statements We believe that the audit evidence we have
shareholders’ equity, and cash flows for the are free from material misstatement. obtained is sufficient and appropriate to provide
years then ended, and the related notes to a basis for our audit opinion.
the consolidated financial statements. An audit involves performing procedures to
obtain audit evidence about the amounts Opinion
Management’s Responsibility for and disclosures in the consolidated financial In our opinion, the consolidated financial
the Financial Statements statements. The procedures selected depend on statements referred to above present fairly in
Management is responsible for the preparation the auditors’ judgment, including the assessment all material respects, the financial position of
and fair presentation of these consolidated of the risks of material misstatement of the Oil Casualty Insurance, Ltd. and its subsidiary as
financial statements in accordance with U.S. consolidated financial statements, whether due to of November 30, 2013 and 2012, and the results
generally accepted accounting principles; this fraud or error. In making those risk assessments, of their operations and their cash flows for
includes the design, implementation, and the auditor considers internal control relevant to the years then ended in accordance with U.S.
maintenance of internal control relevant to the the entity’s preparation and fair presentation of generally accepted accounting principles.
preparation and fair presentation of consolidated the consolidated financial statements in order
financial statements that are free from material to design audit procedures that are appropriate
misstatement, whether due to fraud or error. in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Chartered Accountants
Auditors’ Responsibility entity’s internal control. Accordingly, we express HAMILTON, BERMUDA

Our responsibility is to express an opinion on no such opinion. An audit also includes evaluating MARCH 3, 2014

these consolidated financial statements based the appropriateness of accounting policies used
 ANNUAL REPORT 2013 PG. 51

Management Responsibility for the Financial Statements

We, Robert D. Stauffer, Chief Executive Officer, consolidated subsidiaries, is made known to us by internal controls, or in other factors that could
and Ricky E. Lines, Senior Vice President, Chief others within the Company; evaluated the effec- significantly affect internal controls, subsequent
Financial Officer and Treasurer, of Oil Casualty tiveness of the Company’s disclosure controls and to the date of our most recent evaluation.
Insurance, Ltd. (the “Company”), certify that we procedures; and presented in this annual report
have reviewed this annual report of Oil Casualty our conclusions about the effectiveness of the
Insurance, Ltd. and based on our knowledge, this disclosure controls and procedures based on our
annual report does not contain any untrue state- evaluation. We have disclosed, based on our most
ment of a material fact or omit to state a material recent evaluation, to our auditors and the audit
fact. Based on our knowledge, the financial state- committee of our Board of Directors, that there Robert D. Stauffer
ments, and other financial information included are no significant deficiencies in the design or op- PRESIDENT AND CHIEF EXECUTIVE OFFICER

in this annual report, fairly present in all material eration of internal controls which could adversely
respects the consolidated financial condition, affect the Company’s ability to record, process,
results of operations and cash flows of the Com- summarize and report financial data; and have
pany as of, and for, the periods presented in this confirmed to our auditors that there are no mate-
annual report. We are responsible for establishing rial weaknesses in internal controls or any fraud,
Ricky E. Lines
and maintaining disclosure controls and pro- whether or not material, that involves manage-
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
cedures and we have: designed such disclosure ment or other employees who have a significant AND TREASURER

controls and procedures to ensure that material role in the Company’s internal controls. We also
information relating to the Company, including its confirm that there are no significant changes in MARCH 3, 2014

O I L C A S U A LT Y I N S U R A N C E , LT D.
Shareholders*
American Electric Power Company, Inc. Consolidated Edison, Inc.
Air Products and Chemicals, Inc. Delek U.S. Holdings, Inc.
Anadarko Petroleum Corporation The Dow Chemical Company
(Dorintal Reinsurance Limited)
Apache Corporation
Eastman Chemical Company
Ashland Inc.
Energy Future Holdings Corp.
Atmos Energy Corporation
Energy Transfer Partners, L.P.
BG Group plc
(BG Insurance Company (Singapore) Pte Limited) ENI S.p.A.
(ENI Insurance Limited)
BHP Billiton Limited
Enterprise Products Company
Borealis AG
(Borealis Insurance A/S) Exxon Mobil Corporation
CEPSA Group Hess Corporation
(Teide Re, S.A.) (Jamestown Insurance Company Limited)

Chesapeake Energy Corporation Husky Energy Inc.

Chevron Corporation Loop LLC
Chevron Phillips Chemical Company LLC LyondellBasell Industries N.V.
(Lyondell Chemical Company)
ConocoPhillips Company
(Sooner Insurance Company) Maersk Olie og Gas AS
 ANNUAL REPORT 2013 PG. 53

Marathon Oil Corporation Sasol Limited

(Sasol International Insurance Limited)
Motiva Enterprises LLC
Sempra Energy
Murphy Oil Corporation
Spectra Energy Corp
National Fuel Gas Company
Statoil ASA
Nexen Inc.
Suncor Energy Inc.
NextEra Energy, Inc.
Talisman Energy Inc.
NiSource Inc. (Oleum Insurance Company Limited)
NOVA Chemicals Corporation Teck Resources Limited
(Novalta Insurance Ltd.)
Tesoro Corporation
Occidental Petroleum Corporation
(Opcal Insurance Inc.) TOTAL S.A.
(Omnium Insurance and Reinsurance Company)
Ontario Power Generation Inc.
Valero Energy Corporation
PG&E Corporation (Colonnade Vermont Insurance Company)
Repsol YPF WGL Holdings, Inc.
(Greenstone Assurance Ltd.)
The Williams Companies, Inc.
Santos Ltd.
(Sanro Insurance Pte Ltd.)

* THESE ENERGY COMPANIES OR THEIR INSURANCE AFFILIATES (INDICATED IN BRACKETS)

WERE SHAREHOLDERS AT NOVEMBER 30, 2013.

O I L C A S U A LT Y I N S U R A N C E , LT D.
 Board of Directors

Theodore Guidry II James F. Hughes III Anne Chalmers John W. Dumas Ken Holley Trygve Imsland Gregory J. LaSalle
CHAIRMAN CORPORATE INSURANCE VICE PRESIDENT VICE PRESIDENT SENIOR RISK VICE PRESIDENT DIRECTOR
SENIOR VICE PRESIDENT MANAGER RISK & SECURITY CORPORATE INSURANCE ADVISOR INSURANCE PROPERTY INSURANCE
BUSINESS RISK MANAGEMENT CONOCOPHILLIPS COMPANY TECK RESOURCES LIMITED MURPHY OIL CORPORATION APACHE STATOIL ASA OCCIDENTAL PETROLEUM
VALERO ENERGY CORPORATION
CORPORATION
 ANNUAL REPORT 2013 PG. 55

Andre Levey Fabrizio Mastrantonio Gerard E. Modecki Gerard R. Naisse Peter Roueche Robert D. Stauffer Mark F. Wilson
GROUP INSURANCE SENIOR VICE PRESIDENT ASSISTANT TREASURER & VICE PRESIDENT - DIRECTOR PRESIDENT & CEO ASSISTANT TREASURER
MANAGER INSURANCE ACTIVITIES INSURANCE DIRECTOR RISK MANAGEMENT & ENTERPRISE RISK OIL CASUALTY RISK MANAGEMENT &
SANTOS LTD. MANAGEMENT MARATHON OIL INSURANCE & INSURANCE INSURANCE, LTD. INSURANCE
ENI S.P.A. CORPORATION TOTAL S.A. EASTMAN CHEMICAL LYONDELLBASELL
COMPANY INDUSTRIES N.V.

O I L C A S U A LT Y I N S U R A N C E , LT D.
Executive Staff

Robert D. Stauffer Jerry Rivers Ricky E. Lines Ted Henke Rob Foskey Marlene J. Cechini
PRESIDENT & CHIEF SENIOR VICE PRESIDENT & SENIOR VICE PRESIDENT & SENIOR VICE PRESIDENT CHIEF ACTUARY CONTROLLER &
EXECUTIVE OFFICER CHIEF OPERATING OFFICER CHIEF FINANCIAL GENERAL COUNSEL & ASSISTANT SECRETARY
OFFICER SECRETARY
 ANNUAL REPORT 2013 PG. 57

Underwriting Team

Graham Kirk Rolf Fischer Gina Butterfield Raymanda Smith Margaret Jones Duncan Frith
SENIOR LIABILITY SENIOR PROPERTY SENIOR LIABILITY SENIOR LIABILITY LIABILITY ASSISTANT LIABILITY
UNDERWRITER/ UNDERWRITER UNDERWRITER UNDERWRITER UNDERWRITER UNDERWRITER
TEAM LEADER

O I L C A S U A LT Y I N S U R A N C E , LT D.
 Underwriting Team Claims Team

Beverly Adams Wanda Mello Kathy Dowling Jill Burns-Leman Jennifer Thomas Franzetta Parker
ASSISTANT PROPERTY REINSURANCE ANALYST EXECUTIVE ASSISTANT SENIOR CLAIMS ANALYST CLAIMS ANALYST CLAIMS ASSISTANT
UNDERWRITER
 ANNUAL REPORT 2013 PG. 59

Committees of The Board

OIL CASUALTY INSURANCE, LTD.

EXECUTIVE AUDIT COMPENSATION

Theodore Guidry II CHAIRMAN James D. Lyness CHAIRMAN Gerard R. Naisse
Gregory J. LaSalle Gerard R. Naisse Theodore Guidry II
James F. Hughes III Gregory J. LaSalle James F. Hughes III
Fabrizio Mastrantonio
Robert D. Stauffer GOVERNANCE
Ken Holley
Anne Chalmers
Andre Levey

External Service Providers & Consultants

AUDITORS LEGAL COUNSEL

KPMG Audit Limited Conyers, Dill & Pearman
CROWN HOUSE CLARENDON HOUSE
4 PAR-LA-VILLE ROAD 2 CHURCH STREET
HAMILTON HM08 HAMILTON HM11
BERMUDA BERMUDA

O I L C A S U A LT Y I N S U R A N C E , LT D.
Subsidiary Company
OIL CASUALTY INVESTMENT CORPORATION LTD.

BOARD OF DIRECTORS
R. Hartwell Gardner Paul C. Reinbolt Cynthia J. Akagi
CHAIRMAN CHIEF FINANCIAL OFFICER & MANAGER,
TREASURER (RETIRED) EXECUTIVE VICE PRESIDENT (RETIRED) TRUST INVESTMENTS
MOBIL CORPORATION HYPERDYNAMICS CORPORATION CONOCO PHILLIPS COMPANY

Ralph J. Egizi Robert D. Stauffer James D. Lyness

DIRECTOR, BENEFITS PRESIDENT & ASSISTANT TREASURER
FINANCE & INVESTMENTS (RETIRED) CHIEF EXECUTIVE OFFICER INSURANCE (RETIRED)
EASTMAN CHEMICAL COMPANY OIL CASUALTY INSURANCE, LTD. CHEVRON CORPORATION

Ricky E. Lines Tron Vormeland

SENIOR VICE PRESIDENT, VICE PRESIDENT,
CHIEF FINANCIAL OFFICER CORPORATE FINANCING
OIL CASUALTY INSURANCE, LTD. STATOIL ASA

OFFICERS
Ricky E. Lines
PRESIDENT & TREASURER

Marlene J. Cechini
CONTROLLER & ASSISTANT SECRETARY

Andrew Rossiter
VICE PRESIDENT & DIRECTOR OF INVESTMENTS

Ted Henke
SECRETARY
INSIDE
BACK
COVER
3 BERMUDIANA ROAD P.O. BOX HM 1751 TEL: 441-295-0905
HAMILTON HM 08 HAMILTON HM GX FAX: 441-295-0351
BERMUDA BERMUDA WEB: WWW.OCIL.BM

O I L C A S U A L T Y I N S U R A N C E L T D .