State Auto Financial Reports second quarter 2019 results

State Auto Financial Reports second quarter 2019 results

State Auto Financial reports second quarter 2019 results

  • Quarterly loss of $0.14 per share
  • Quarterly net loss from operations1 of $0.33 per share
  • Quarterly GAAP combined ratio of 111.4
  • Return on equity of 6.0%
  • Book value per share of $21.07

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COLUMBUS, OHIO - August 1, 2019 - State Auto Financial Corporation (NASDAQ:STFC) today reported a second quarter 2019 net loss of $6.2 million, or $0.14 per diluted share, compared to net income of $6.0 million, or $0.14 per diluted share, for the same 2018 period. Net loss from operations1 per diluted share for the second quarter of 2019 was $0.33 versus $0.08 for the same 2018 period.

For the first six months of 2019, STFC had net income of $43.2 million, or $1.00 per diluted share, compared to net income of $3.9 million, or $0.09 per diluted share, for the same 2018 period. Net loss from operations1 per diluted share for the first six months of 2019 was $0.01 versus net earnings from operations1 per diluted share of $0.08 for the same 2018 period.

 

GAAP Operating Results

STFC’s GAAP combined ratio for the second quarter 2019 was 111.4 compared to 107.0 for the same 2018 period. Catastrophe losses during the second quarter 2019 accounted for 15.4 points of the 76.3 total loss ratio points, or $47.4 million, versus 12.2 points of the total 70.8 loss ratio points, or $37.5 million, for the same period in 2018. Non-catastrophe losses and ALAE during the second quarter 2019 included 5.5 points of favorable development relating to prior years, or $17.1 million, versus 5.9 points of favorable development, or $18.1 million, for the same period in 2018.

STFC’s GAAP combined ratio for the first six months of 2019 was 105.6 compared to 104.8 for the same 2018 period. Catastrophe losses for the first six months of 2019 accounted for 10.7 points of the 70.3 total loss ratio points, or $65.1 million, versus 7.6 points of the total 69.1 loss ratio points, or $47.3 million, for the same period in 2018. Non-catastrophe losses and ALAE for the first six months of 2019 included 6.2 points of favorable development relating to prior years, or $38.0 million, versus 5.5 points of favorable development, or $34.1 million, for the same period in 2018.

 

SAP Personal and Commercial Operating Results

The exit from our specialty insurance business resulted in the elimination of specialty insurance as a reportable segment as it is no longer  material to our results. Specialty results, labeled as "specialty run-off," are included in the SAP Insurance Segment Results tables below to enable reconciliation to total underwriting results.

 

Net written premium for the second quarter 2019 increased 11.6% compared to the same period in 2018. By insurance segment, net written premium for the personal and commercial segments increased 10.8% and 12.8%, respectively. The increase in the personal segment was primarily due to (i) new business growth and rate increases in homeowners and other personal, and (ii) rate increases in personal auto partially offset by lower retention. The increase in the commercial segment was led by new business growth in commercial auto and middle market commercial. The improvements were partially offset by a decrease in net written premiums in workers’ compensation due to continued intense competition in this market.

 

Net written premium for the first six months of 2019 increased 10.5% compared to the same period in 2018. Net written premium for the personal and commercial segments increased 11.2% and 9.4%, respectively. The trends in the personal and commercial net written premiums are due to the same factors discussed above for the second quarter. 

 

The SAP personal and commercial segments' combined ratio2 for the second quarter 2019 was 109.9 compared to 104.7 for the same 2018 period. Catastrophe losses during the second quarter 2019 accounted for 14.4 points of the total 76.5 loss ratio points, or $44.2 million, versus 13.4 points of the total 70.1 loss ratio points, or $37.7 million, for the same period in 2018. Non-catastrophe losses and ALAE during the second quarter 2019 included 4.7 points of favorable development relating to prior years, or $14.3 million, versus 7.2 points of favorable development, or $20.2 million, for the same period in 2018. 

 

The SAP personal and commercial segments' combined ratio for the first six months of 2019 was 104.9 compared to 103.0 for the same 2018 period. Catastrophe losses during the second quarter 2019 accounted for 10.2 points of the total 70.2 loss ratio points, or $61.4 million, versus 8.6 points of the total 68.3 loss ratio points, or $47.5 million, for the same period in 2018. Non-catastrophe losses and ALAE during the second quarter 2019 included 6.2 points of favorable development relating to prior years, or $38.0 million, versus 6.6 points of favorable development, or $36.5 million, for the same period in 2018.

 

Book Value and Return on Equity

 

STFC’s book value increased to $21.07 per share as of June 30, 2019, compared to $20.67 on March 31, 2019. The increase in book value was driven by increases in the market value of our investment portfolio.

 

Return on stockholders’ equity for the 12 months ended June 30, 2019, was 6.0% compared to (1.3)% for the 12 months ended June 30, 2018.

 

STFC’s Chairman, President and CEO Mike LaRocco commented on the quarter as follows:

 

"The results for the quarter were worse than expected, but this is not unusual for the second quarter. Our greatest CAT and non-cat weather exposure comes during the second quarter, and both had significant impact. Additionally, favorable development of prior accident year's non-cat loss and allocated loss adjustment expense reserves was less this quarter. Our year-to-date results eliminate some of this volatility, giving a clear picture of overall performance. While through six months of 2019 favorable development is down, our current accident year non-cat loss and allocated loss adjustment expense ratio continued to improve.

 

"Key to our continued progress is becoming a more efficient organization. As our significant investment in technology continues to deliver, our path to competitive expense ratios has become clear by means of efficient growth through our Connect platform.

 

"In personal lines, our largest line, personal auto, remains profitable and growing year to date. However, growth in personal auto has slowed. While some of this is due to aggressive rate reduction by our competition, we believe we can regain momentum in auto during the second half of the year. In homeowners, seasonal weather drove a poor underwriting result, while growth in the line remains strong. We’re optimistic that this line can profitably grow.

 

"In commercial lines, we’re beginning to see the impact of the rollout of our digital only technology and efforts to improve efficiency, leading to improvement in the expense ratio. Overall growth in the segment is strong and momentum is building."

 

About State Auto Financial Corporation

 

State Auto Financial Corporation, headquartered in Columbus, Ohio, is a super regional property and casualty insurance holding company and is proud to be a Trusted Choice® company partner. STFC stock is traded on the NASDAQ Global Select Market, which represents the top fourth of all NASDAQ listed companies.

 

The insurance subsidiaries of State Auto Financial Corporation are part of the State Auto Group. The State Auto Group markets its insurance products throughout the United States, through independent insurance agencies. The State Auto Group is rated A- (Excellent) by the A.M. Best Company and includes State Automobile Mutual, State Auto Property & Casualty, State Auto Ohio, State Auto Wisconsin, Milbank, Meridian Security, Patrons Mutual, Rockhill Insurance, Plaza Insurance, American Compensation and Bloomington Compensation. Additional information on State Auto Financial Corporation and the State Auto Insurance Companies can be found online at http://www.StateAuto.com/STFC.

 

1 Net earnings (loss) from operations, a non-GAAP financial measure which management believes is informative to Company management and investors, differs from GAAP net income (loss) only by the exclusion of net investment gain (loss), net of applicable taxes, on investment activity for the periods being reported. For STFC, this amounted to income of $0.19 per diluted share for the second quarter of 2019 and income of $1.01 year-to-date 2019 versus income of $0.22 per diluted share for the second quarter 2018 and income of $0.01 year-to-date 2018.

 

2 Insurance industry regulators require STFC's insurance subsidiaries to report their financial condition and results of operations using Statutory Accounting Practices ("SAP"). The SAP personal and commercial segments combined ratio is a measure used by management to evaluate STFC’s operating performance for its ongoing operations. Details behind the compilation of these results can be found on pages 18 - 21 of this release.

STFC has scheduled a conference call with interested investors for Thursday, August 1, at 11 a.m. ET to discuss the Company’s second quarter 2019 performance. Live and archived broadcasts of the call can be accessed at http://www.StateAuto.com/STFC. A replay of the call can be heard beginning at 2 p.m., August 1, by calling 855-859-2056, conference ID 8499618. Supplemental schedules detailing the Company’s second quarter 2019 financial, sales and underwriting results are made available on http://www.StateAuto.com/STFC prior to the conference call.

* * *

 

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 promulgations and adjudications, 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.

State Auto Financial announces second quarter 2019 earnings conference call

State Auto Financial Corporation (NASDAQ:STFC) will discuss its second quarter 2019 results in a conference call on Thursday, Aug. 1, 2019, at 11 a.m. ET.

State Auto receives CIO 100 award

State Auto receives CIO 100 award

State Auto Financial reports first quarter 2019 results

  • Quarterly earnings of $1.12 per share
  • Quarterly net income from operations1 of $0.31 per share
  • Quarterly GAAP combined ratio of 99.7
  • Return on equity of 7.5%
  • Book value per share of $20.67

PDF, including financial schedules

COLUMBUS, OHIO - May 2, 2019 - State Auto Financial Corporation (NASDAQ:STFC) today reported first quarter 2019 net income of $49.4 million, or $1.12 per diluted share, compared to a net loss of $2.1 million, or $0.05 per diluted share, for the same 2018 period. Net earnings from operations1 per diluted share for the first three months of 2019 was $0.31 versus $0.17 for the same 2018 period.

GAAP Operating Results

STFC's GAAP combined ratio for the first three months of 2019 was 99.7 compared to 102.6 for the same 2018 period. Catastrophe losses for the first three months of 2019 accounted for 5.9 points of the 64.2 total loss ratio points, or $17.7 million, versus 3.1 points of the total 67.4 loss ratio points, or $9.8 million, for the same period in 2018.  Non-catastrophe losses and ALAE for the first three months of 2019 included 6.9 points of favorable development relating to prior years, or $20.9 million, versus 5.1 points of favorable development, or $16.0 million, for the same period in 2018.

SAP Personal and Commercial Operating Results

The exit from our specialty insurance business resulted in the elimination of specialty insurance as a reportable segment as it no longer is material to our results. Specialty results, labeled as "specialty run-off," are included in the SAP Insurance Segment Results table below to enable reconciliation to total underwriting results.

Net written premium for the first three months of 2019 increased 4.7% compared to the same period in 2018. Net written premium for the personal and commercial segments increased 11.6% and 5.9%, respectively. The increase in the personal segment was primarily due to (i) rate actions taken to improve the profitability in personal auto partially offset by lower retention, and (ii) new business growth and a higher level of homeowners policies in force. The increase in the commercial segment was led by new business growth in commercial auto and middle market commercial. The improvements were partially offset by a decrease in net written premiums in workers' compensation due to continued intense competition in this market.

The SAP personal and commercial segments' combined ratio2 for the first quarter 2019 was 99.7 compared to 101.4 for the same 2018 period. Catastrophe losses during the first quarter 2019 accounted for 5.8 points of the total 63.6 loss ratio points, or $17.2 million, versus 3.7 points of the total 66.5 loss ratio points, or $9.8 million, for the same period in 2018. Non-catastrophe losses and ALAE during the first quarter 2019 included 7.4 points of favorable development relating to prior years, or $22.2 million, versus 6.0 points of favorable development, or $16.3 million, for the same period in 2018.

Book Value and Return on Equity

STFC's book value increased to $20.67 per share as of March 31, 2019, compared to $18.91 on December 31, 2018. This was driven by increases in the market value of our investment portfolio and net income from operations.

Return on stockholders' equity for the 12 months ended March 31, 2019, was 7.5% compared to (1.1)% for the 12 months ended March 31, 2018.

STFC's Chairman, President and CEO Mike LaRocco commented on the quarter as follows:

"We once again delivered profitable growth during first quarter 2019, following our strong 2018 results. The personal and commercial segments' combined ratio for the first quarter was 99.7, a 1.7-point improvement over first quarter 2018, largely driven by personal auto, small commercial package and workers compensation. Our go forward lines delivered a 9.2% increase in net written premium. Our distribution partners clearly see the value in our products and platform and are responding.

"This was a solid start to 2019. The trends we're seeing in both growth and losses are positive, and our focused improvements in pricing and claim handling are producing results. We're delivering innovative approaches to every aspect of our business. Our smart home product is now live in nine states, and we made significant progress toward launching a pilot program to make the property inspection process easier for our customers, and more efficient. Our use of robotic process automation is getting attention and gathering steam, with more than 50 bots now in production.

"State Auto is a different company than it was just four years ago. Now a customer-focused organization that's an insurance technology leader - and growing profitably."

 About State Auto Financial Corporation

State Auto Financial Corporation, headquartered in Columbus, Ohio, is a super regional property and casualty insurance holding company and is proud to be a Trusted Choice® company partner. STFC stock is traded on the NASDAQ Global Select Market, which represents the top fourth of all NASDAQ listed companies.

The insurance subsidiaries of State Auto Financial Corporation are part of the State Auto Group. The State Auto Group markets its insurance products throughout the United States, through independent insurance agencies. The State Auto Group is rated A- (Excellent) by the A.M. Best Company and includes State Automobile Mutual, State Auto Property & Casualty, State Auto Ohio, State Auto Wisconsin, Milbank, Meridian Security, Patrons Mutual, Rockhill Insurance, Plaza Insurance, American Compensation and Bloomington Compensation. Additional information on State Auto Financial Corporation and the State Auto Insurance Companies can be found online at http://www.StateAuto.com/STFC.

1 Net earnings (loss) from operations, a non-GAAP financial measure which management believes is informative to Company management and investors, differs from GAAP net income (loss) only by the exclusion of net investment gain (loss), net of applicable taxes, on investment activity for the periods being reported. For STFC, this amounted to income of $0.81 per diluted share for the first quarter of 2019 versus income of $0.22 per diluted share for the first quarter 2018.

2 Insurance industry regulators require STFC's insurance subsidiaries to report their financial condition and results of operations using Statutory Accounting Practices ("SAP"). The SAP personal and commercial segments combined ratio is a measure used by management to evaluate STFC's operating performance for its ongoing operations. Details behind the compilation of these results can be found on page 16 of this release.

STFC has scheduled a conference call with interested investors for Thursday, May 2, at 11 a.m. ET to discuss the Company's first quarter 2019 performance. Live and archived broadcasts of the call can be accessed at http://www.StateAuto.com/STFC. A replay of the call can be heard beginning at 2 p.m., May 2, by calling 855-859-2056, conference ID 4067169. Supplemental schedules detailing the Company's first quarter 2019 financial, sales and underwriting results are made available on http://www.StateAuto.com/STFC prior to the conference call.

* * * * *

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 promulgations and adjudications, 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.

State Auto named to IDG’s CIO 100 list for 2019

COLUMBUS, OHIO — May 1, 2019 — State Auto Insurance Companies has been named a recipient of a 2019 CIO 100 award by IDG’s CIO. The 32nd annual award program recognizes organizations around the world that exemplify the highest level of operational and strategic excellence in information technology (IT).

“This is a significant recognition of the journey to transform State Auto that we set out on in 2015,” said State Auto Senior Vice President and Chief Information and Strategy Officer Greg Tacchetti. “Creating a new cloud-based 100% digital platform was fun, but seeing the platform assist in serving our customers more effectively, generating terrific growth, and returning State Auto to profitability is extremely rewarding. This was always the ‘Why’ behind what we set out to accomplish.”

State Auto was founded in 1921 out of a desire to do things differently. To treat customers better and more fairly. To offer those customers flexibility. Nearly a century later, that same innovative spirit remains at the heart of a recently transformed company. Today, State Auto offers personal and business insurance through independent insurance agents, with auto and home telematics programs and best in class claims service.

“Across the business landscape, companies everywhere recognize the vital role that an innovative, value-driven approach to information technology plays in their success,” said Maryfran Johnson, IDG’s Executive Director of CIO Programs. “This year’s CIO 100 winning companies are inspiring examples of how IT leadership, business collaboration, and digital transformation will drive future growth.”

State Auto will be recognized at The CIO 100 Symposium & Awards Ceremony on Aug. 21 at the Broadmoor Resort in Colorado Springs, Co.

About the CIO 100 Awards

The annual CIO 100 Awards celebrate 100 organizations and the teams within them that are using IT in innovative ways to deliver business value, whether by creating competitive advantage, optimizing business processes, enabling growth or improving relationships with customers. The award is an acknowledged mark of enterprise excellence. Recipients are selected through a three-step process. First, companies fill out an online application form detailing an innovative IT and business initiative. Next, a team of external judges (many of them former CIOs) reviews the applications in depth, looking for leading-edge IT practices and measurable results. Finally, CIO editors review the judges' recommendations and select the final 100.

Coverage of the 2019 CIO 100 Awards will be available online at CIO.com in August 2019 and in the summer issue of CIO’s digital magazine.

About CIO

CIO focuses on attracting the highest concentration of enterprise CIOs and business technology executives with unparalleled peer insight and expertise on business strategy, innovation, and leadership. As organizations grow with digital transformation, CIO provides its readers with key insights on career development, including certifications, hiring practices and skills development. The award-winning CIO portfolio — CIO.com, CIO Events, CIO Strategic Marketing Services, CIO Forum on LinkedIn, CIO Executive Council and CIO primary research — provides business technology leaders with analysis and insight on information technology trends and a keen understanding of IT’s role in achieving business goals. CIO is published by IDG Communications, Inc. Company information is available at www.idg.com.

About State Auto

State Automobile Mutual Insurance Company (State Auto), headquartered in Columbus, Ohio, is a super regional property and casualty insurance holding company. The company is primarily engaged in writing personal and business insurance products exclusively through independent insurance agencies and is proud to be a Trusted Choice® company partner.

State Automobile Mutual is part of the State Auto Group, which is rated A- (Excellent) by the A.M. Best Company and includes State Automobile Mutual, State Auto Financial Corporation, State Auto Property & Casualty, State Auto Ohio, State Auto Wisconsin, Milbank, Meridian Security, Patrons Mutual, Rockhill Insurance, Plaza Insurance, American Compensation and Bloomington Compensation. Additional information can be found online at www.stateauto.com.

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