SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
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[X] Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of
1934 For the Fiscal Year Ended December 31, 2005
or
[ ] Transition Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934 For the transition period from _______________ to ______________
Commission File Number: 001-10607
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GREAT WEST CASUALTY COMPANY
PROFIT SHARING PLAN
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OLD REPUBLIC INTERNATIONAL CORPORATION
307 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60601
Total Pages: 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Committee has duly caused this annual report to be signed on behalf of the
undersigned, thereunto duly authorized.
GREAT WEST CASUALTY COMPANY
PROFIT SHARING PLAN, Registrant
By, /s/ Hugh H. Fugleberg
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Hugh H. Fugleberg, Plan Committee Member
By, /s/ Vickie Hirschert
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Vickie Hirchert, Plan Committee Member
By, /s/ R. Scott Rager
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R. Scott Rager, Plan Committee Member
By, /s/ Gaylen L. TenHulzen
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Gaylen L. TenHulzen, Plan Committee Member
Dated: May 19, 2006
GREAT WEST CASUALTY COMPANY
PROFIT SHARING PLAN
REPORT ON AUDITS OF FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
for the years ended December 31, 2005 and 2004
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
Index to Financial Statements
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Page No.
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available for Benefits at
December 31, 2005 and 2004 2
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2005 and 2004 3
Notes to Financial Statements 4 - 9
Supplemental Schedule:
Schedule of Assets (Held at End of Year) at December 31, 2005 10
Note: Supplemental schedules required by the Employee Retirement Income Security
Act of 1974 that have not been included herein are not applicable.
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
Great West Casualty Company Profit Sharing Plan:
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Great West Casualty Company Profit Sharing Plan (the "Plan") at December 31,
2005 and 2004, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers, LLP
Chicago, IL
June 23, 2006
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004 2
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December 31,
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2005 2004
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ASSETS:
Investments, at fair value:
Old Republic International Corporation (ORI) common stock $6,855,698 $5,660,947
Pooled separate accounts 31,992,840 27,861,282
Participant loans 1,788,235 1,720,773
Investment, at contract value:
PRIAC Guaranteed Long-Term Account 18,621,369 18,016,808
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Net assets available for benefits $59,258,142 $53,259,810
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The accompanying notes are an integral part of these financial statements.
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 3
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Years Ended December 31,
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2005 2004
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Contributions:
Employer $3,595,933 $3,304,732
Employee 2,093,113 1,820,761
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Total contributions 5,689,046 5,125,493
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Investment Income:
Interest from PRIAC Guaranteed Long-Term Account 588,885 556,309
Dividends from ORI common stock 388,114 109,175
Net appreciation (depreciation) of ORI common stock 191,450 (20,533)
Net investment gain from pooled separate accounts 2,245,552 2,795,508
Interest from participant loans 107,173 89,530
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Total investment income 3,521,174 3,529,989
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Deductions:
Benefits paid to participants (3,204,527) (1,875,437)
Administrative expenses (7,361) (10,373)
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Total deductions (3,211,888) (1,885,810)
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Net increase 5,998,332 6,769,672
Net assets available for benefits:
Beginning of year 53,259,810 46,490,138
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End of year $59,258,142 $53,259,810
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The accompanying notes are an integral part of these financial statements.
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 4
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NOTE 1 - DESCRIPTION OF PLAN
The following brief description of the Great West Casualty Company Profit
Sharing Plan (Plan) is provided for general information purposes only.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions.
(a) General
The Plan is a defined contribution profit-sharing plan sponsored by Great West
Casualty Company (the Company), covering all eligible employees of the Company
as well as its affiliates. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended (ERISA).
(b) Contributions and Participant Accounts
Participants may contribute 1/2% to 15% of their annual wages to the Plan. In
2005 and 2004, the Company made matching contributions to the Plan equal to 25%
of the first 6% of the employees' pre-tax contribution amount. Participants may
elect to have their contributions invested in any one or more of thirteen
separate investment funds. The Company may also contribute an additional
nonmatching amount out of its current or accumulated profits, if any, as
determined by the Company.
Each participant's account is credited with the participant's contribution and
an allocation of (a) the Company's contributions as described above and (b) Plan
earnings. Allocations are based on participant account balances as defined. The
benefit to which a participant is entitled is the benefit that can be provided
from the participant's account.
(c) Eligibility and Vesting
Under the terms of the Plan, an employee shall become eligible for inclusion in
the Plan 30 days following the first day he/she completes an hour of service and
upon reaching age 21. An employee shall become eligible for employer
discretionary contributions upon reaching age 21 and after completion of 1,000
hours of service in any one Plan year, beginning with date of hire. Minimum age
for vesting service is 18 years.
All employee and employer matching contributions are immediately 100% vested.
Participants become fully vested in the value of the discretionary contributions
after 6 years of credited service.
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 5
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NOTE 1 - DESCRIPTION OF PLAN, Continued
(d) Payment of Benefits
On termination of service, retirement, or death a participant or his/her
beneficiary may elect to leave funds in the Plan or receive either a single-sum
payment or purchase of a single premium life annuity contract. Net assets at
December 31, 2005 and 2004, include funds totaling $5,499,110 and $4,923,285,
respectively, which represent the account balance of retired and terminated
participants who have elected to leave the funds in the Plan upon retirement or
termination.
(e) Forfeitures
All forfeitures are segregated until the employee has attained break(s) in
service totaling five years. At that time, forfeitures are allocated pro-rata to
each participant account according to their respective earnings for that year.
There were unallocated assets of $521 and $601,651, respectively at December 31,
2005 and 2004, related to these forfeitures.
(f) Loans
Participants may elect to borrow from the Plan based upon specified conditions.
A participant may have two outstanding loans at any time. Minimum single loan
amount is $1,000. In no case shall the aggregate amount loaned to a participant
exceed the lesser of the following: (a) $50,000 reduced by the excess of the
highest outstanding balance of loans from the Plan during the one year period
ending on the date before the date of the loan to the participant; or (b) 50% of
the participant's vested interest. The interest rate on such loans is the prime
rate as declared in the Wall Street Journal plus 1% at the time of loan
origination. Principal and interest is repaid ratably through bi-weekly payroll
deductions. Loans are repaid within 5 years or within 10 years if the loan is
used to acquire the participant's principal residence. Interest rates on loans
outstanding as of December 31, 2005 range from 5.00% to 10.00%.
(g) Administrative Expenses
The Company provides administrative support for the Plan and pays for certain
administrative and trustee fees.
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 6
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NOTE 1 - DESCRIPTION OF PLAN, Continued
(h) Catch-up Contributions
Effective January 1, 2002, Participants who have attained age 50 before the
close of the Plan Year shall be eligible to make catch-up contributions to the
Plan. The additional catch-up contributions permitted will be $3,000 in 2004,
$4,000 in 2005 and $5,000 in 2006. Thereafter, the catch-up amount shall be
indexed for cost-of-living increases in $500 increments.
(i) Rollovers
Distributions from another "qualified" plan may be transferred into the Plan,
provided that the Internal Revenue Code permits a tax-free rollover. Any amount
so transferred will be placed in a rollover contribution account, which is fully
vested. Withdrawals from rollover contribution accounts other than Plan loans
are not allowed prior to termination of employment.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis.
(b) Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of net assets
available for benefits and disclosure of contingent assets and liabilities at
the date of the financial statements and the changes in net assets available for
benefits during the reporting period. Actual results could differ from those
estimates.
(c) Risks and Uncertainties
The Plan provides for various investment options in any combination of stocks,
bonds, fixed income securities, mutual funds, and other investment securities.
Investment securities are exposed to various risks, such as interest rate,
market and credit. Due to the level of risk associated with certain investment
securities and the level of uncertainty related to changes in the value of
investment securities, it is possible that changes in risks in the near term
would materially affect participants' account balances and the amounts reported
in the statement of net assets available for benefits and the statement of
changes in net assets available for benefits.
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 7
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
(d) Investments and Income Recognition
At December 31, 2003 the Plan had a contract with Connecticut General Life
Insurance Company (CIGNA). On April 1, 2004 Prudential Financial, Inc. acquired
CIGNA and formed Prudential Retirement Insurance and Annuity Company (PRIAC). As
of this date, the thirteen pooled investment funds remain the same with the
exception of the fund name changes. The Plan entered into a contract with PRIAC,
where PRIAC maintains contributions in a contractholder's account and such
contributions are allocated to thirteen separate pooled investment funds
according to participant elections. The accounts are credited with earnings on
the underlying investments and charges for Plan benefits paid and deductions for
investment expenses, risk, profit and annual management fees charged by PRIAC.
The pooled separate accounts are included in the financial statements at fair
value.
The PRIAC Guaranteed Long - Term Account, which is a general account, is
included in the financial statements at contract value, (which represent
contributions made under the contract, plus earnings, less withdrawals and
adminstrative expenses) because the account is fully benefit responsive. For
example, participants may ordinarily direct the withdrawal or transfer of all or
a portion of their investment at contract value. There are no reserves against
contract value for credit risk of the contract issuer or otherwise. The fair
value of the investment contract at December 31, 2005 and 2004 was $18,621,369
and $18,016,308, respectively. The average yield and crediting interest rates
were approximately 3.45% and 3.15% for 2005 and 2004, respectively. The
crediting interest rate is based on an agreed-upon formula with the issuer and
is evaluated every six months.
On December 29, 2005, the Financial Accounting Standards Board (FASB) released
FASB Staff Position nos. AAG INV-1 and SOP 94-4-1, Reporting of Fully
Benefit-Responsive Investment Contracts Held by Certain Investment Companies
Subject to the AICPA Investment Company Guide and Defined-Contribution Health
and Welfare and Pension Plans (FSP). The FSP clarifies the definition of fully
benefit-responsive investment contracts for contracts held by defined
contribution plans. The FSP also establishes enhanced financial statement
presentation and disclosure requirements for defined contribution plans subject
to the FSP effective for financial statements issued for periods ending after
December 15, 2006.
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 8
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Management intends to adopt the FSP in the Plan's financial statements for the
year ended December 31, 2006. The effect of the FSP on the Plan's financial
statements is expected to be enhanced financial statement presentation and
disclosure requirements. Benefit-responsive investment contracts (investments in
bank collective investment funds that hold benefit-responsive investment
contracts) will be presented at fair value on the statement of net assets
available for benefits and the amount representing the difference between fair
value and contract value of the investment contracts (or bank collective
investment fund) shall be presented on the face of the statement of net assets
available for benefits as a single amount, calculated as the sum of the amounts
necessary to adjust the portion of net assets attributable to each fully
benefit-responsive investment contract from fair value to contract value. The
statement of changes in net assets available for benefits shall be prepared on a
basis that reflects income credited to participants in the Plan and net
appreciation or depreciaiton in the fair value of only those investment
contracts that are not deemed to be fully benefit responsive.
Old Republic International Corporation (ORI) common stock is stated at fair
value based on quoted closing market value on the last business day of the year.
The Plan presents in the statements of changes in net assets available for
benefits the net appreciation (depreciation) in the fair value of the ORI stock
account, which consists of the realized gains or losses and the unrealized
appreciation (depreciation) of this investment. Investment income is recorded on
the accrual basis. Dividends on stocks are credited to income on the ex-dividend
date.
(e) Benefit Payments
Benefit payments to participants are recorded upon distribution.
NOTE 3 - ASSETS GREATER THAN 5% OF PLAN ASSETS
Investments that represent 5% or more of plan assets are as follows:
December 31,
2005 2004
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PRIAC Guaranteed Long-Term Account $18,621,369 $18,016,808
ORI Common Stock 6,855,698 5,660,947
PRIAC Separate Account - Large Cap Value/LSV Asset Management 5,785,133 397,716
PRIAC Stock Market Index Account 5,030,516 4,780,275
PRIAC Separate Account - International Blend/The Boston Co. 4,226,456 3,145,958
PRIAC Separate Account - Alliance Balanced Shares Fund 4,000,136 3,590,278
PRIAC Separate Account - Small Value/Perkins Wolf McDonnell 3,988,436 3,801,090
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004 9
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NOTE 4 - TAX STATUS
The Internal Revenue Service has issued a determination letter, dated October
23, 2002, stating that the Plan is designed in accordance with applicable
sections of the Internal Revenue Code (IRC). The Plan has been amended since
receiving the determination letter. However, management believes that the Plan
is designed and is currently being operated in compliance with the applicable
requirements of the IRC.
NOTE 5 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants shall become 100 percent vested in their accounts and are entitled
to a distribution of their account balances.
NOTE 6 - RELATED PARTY TRANSACTIONS
The ORI common stock is stock of Old Republic International Corporation, the
ultimate parent of the Company. Plan assets include investments in thirteen
pooled investment funds. These funds are related parties of PRIAC, which is a
party in interest.
GREAT WEST CASUALTY COMPANY PROFIT SHARING PLAN
SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2005 10
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Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
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(e)Contract/
Current
(a) (b) Identity of Issue (c) Identity of Issue (d) Cost Value
--- --------------------- --------------------- -------- -------------
* PRIAC Guaranteed Long-Term Account Long-term investment fund ** $18,621,369
* PRIAC Stock Market Index Account Short-term investment fund ** 5,030,516
* ORI Common Stock Common Stock ** 6,855,698
* PRIAC Separate Account- Corporate Bond Fund Pooled separate account ** 701,770
* PRIAC Separate Account- Small Value/Perkins Wolf McDonnell Pooled separate account ** 3,988,436
* PRIAC Separate Account- Alliance Balanced Shares Fund Pooled separate account ** 4,000,136
* PRIAC Separate Account- Oakmark Select Fund Pooled separate account ** 1,532,090
* PRIAC Separate Account- Mid Cap Growth/Artisan Partners Pooled separate account ** 1,794,498
* PRIAC Separate Account- Small Cap Growth/TimesSquare Fund Pooled separate account ** 693,351
* PRIAC Separate Account- Lifetime 20 Pooled separate account ** 267,192
* PRIAC Separate Account- Lifetime 30 Pooled separate account ** 263,977
* PRIAC Separate Account- Lifetime 40 Pooled separate account ** 1,313,433
* PRIAC Separate Account- AP Fund Pooled separate account ** 4,376
* PRIAC Separate Account- Lifetime 50 Pooled separate account ** 737,949
* PRIAC Separate Account- Lifetime 60 Pooled separate account ** 262,624
* PRIAC Separate Account- Large Cap Growth/Turner Investment Partners Pooledtseparate account ** 1,390,903
* PRIAC Separate Account- International Blend/The Boston Co. Pooled separate account ** 4,226,456
* PRIAC Separate Account- Large Cap Value/LSV Asset Managet Management Pooled separate account ** 5,785,133
* Participants Loans Participant loans, interest rates
range from 5.00% to 10.00%,
are repaid in a series of
substantially equal payments
over the term of the loan 1,788,235
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$59,258,142
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* Party in interest.
** Cost data has been omitted as all investments are participant directed.