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State Auto Financial Corporation records underwriting profit for sixth straight year

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COLUMBUS, Ohio -- February 22, 2001 -- State Auto Financial Corporation (NASDAQ:STFC) announced net reported earnings per share of $0.35 ($0.34 diluted) for the fourth quarter ending December 31, 2000, compared to $0.33 ($0.32 diluted) per share for same period last year. Net earnings for the 2000 fourth quarter were $13,531,000, compared to $13,035,000 for the 1999 fourth quarter. STFC's fourth quarter 2000 GAAP combined loss and expense ratio was 96.4 compared to 91.2 for the fourth quarter 1999.

For the year ending December 31, 2000, STFC's GAAP combined ratio was 98.4 compared to 96.0 for the year ending December 31, 1999. Total net earnings for 2000 were $47,714,000, or $1.24 ($1.21 diluted) per share, compared to $42,816,000, or $1.05 ($1.03 diluted) per share for 1999. The company's total revenue for 2000 was $462,774,000, a 5.1% increase over 1999's $440,871,000 total.

2000 marked the sixth consecutive year that STFC has reported a GAAP combined ratio of 100.0 or better. "We are exceptionally proud of our track record and committed to sustaining it," said STFC Chairman Robert H. Moone. "It may be possible to be profitable one or two years on the basis of sheer luck, but we believe our focus on a few fundamental principles of the business, along with strong execution of the game plan by our employee and agency partners, sets us apart.

"This record of profitable underwriting results has also positioned us to take advantage of the changing marketplace," Moone added.

In other matters impacting STFC, a December 2000 case (Linko vs. Indemnity Insurance Company of North America), resulted in the Ohio Supreme Court invalidating most, if not all, rejections of uninsured and underinsured motorist coverage ("UM"). Insurance companies had obtained these rejections from insureds who had intended to decline UM, either partially or totally, as permitted by Ohio law. The effect of this decision was to retroactively amend all auto and umbrella liability policies, making the UM limits equal to the policy's bodily injury liability limits.

This decision has affected STFC's insurer affiliates, along with virtually every other insurer that writes auto and umbrella liability insurance in Ohio. Management has reviewed the financial impact of the additional loss exposure created by the Linko case and determined that its booked reserves as of December 31, 2000, are reasonably stated. As with any loss reserving situation, there is considerable uncertainty and the actual impact of Linko could differ significantly.

State Auto Financial Corporation is a regional property and casualty insurance holding company engaged primarily in writing personal and commercial automobile, homeowners, commercial multi-peril, workers' compensation and fire insurance. The company currently markets its products through more than 13,100 agents associated with approximately 2,200 agencies in 26 states. Products are marketed primarily in the Midwest and Eastern United States, excluding New York, New Jersey and the New England states.

STFC has scheduled a conference call with industry analysts for Thursday, February 22, 10 AM to discuss the company's 2000 fourth quarter performance. A replay of this conversation, in its entirety, can be heard beginning at noon today by dialing 800-391-9854. The replay will be available through March 8, 2001. Live and archived broadcasts of the conference can also be heard on www.streetfusion.com.

Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in State Auto Financial's Form 10-K and Form 10-Q reports and exhibits to those reports, and include (but are not limited to) legislative changes at both the state and federal level, state and federal regulatory rule making promulgation's, class action litigation involving the insurance industry and judicial decisions affecting claims, policy coverages and the general costs of doing business, the impact of competition on products and pricing, inflation in the costs of the products and services insurance pays for, product development, geographic spread of risk, weather and weather-related events, and other types of catastrophic events. State Auto Financial undertakes no obligation to update or revise any forward-looking statements.

 

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