State Auto Financial Reports Second Quarter 2006 Results
27 July 2006 - 8:00PM
Business Wire
State Auto Financial Corporation (NASDAQ:STFC): -- Quarterly
earnings of $0.10 per share -- Record quarter for catastrophe
losses State Auto Financial Corporation (NASDAQ:STFC) today
reported second quarter net income of $4.1 million, or $0.10 per
diluted share, versus $38.8 million or $0.94 per diluted share for
the same period in 2005. Net income from operations(a) per diluted
share for the second quarter of 2006 was $0.08, versus $0.94 for
the same period in 2005. Catastrophe losses reduced net income by
$0.93 per diluted share for the second quarter of 2006. In
comparison, catastrophe losses reduced net income by $0.05 per
diluted share for the second quarter of 2005. STFC's GAAP combined
ratio for the second quarter of 2006 was 107.1, versus 85.0 for the
second quarter of 2005. As previously reported, catastrophe losses
significantly impacted the second quarter of 2006 results.
Catastrophe losses accounted for 23.3 points of the total 75.6 loss
ratio points or $59.8 million in the second quarter 2006, compared
to only 1.2 points of the total 53.3 loss ratio points, or $3.2
million for the same period in 2005. STFC's second quarter 2006
revenue was $280.0 million, versus $284.2 million for the same
period in 2005. Revenue for the first six months of 2006 was $556.8
million, versus $570.1 million for the same 2005 period. For the
first six months of 2006, net income was $44.3 million, or $1.07
per diluted share, compared to $79.6 million or $1.94 per diluted
share, for the same 2005 period. The GAAP combined ratio for the
first six months of 2006 was 95.5, as compared to 84.8 for the same
period in 2005. STFC shareholders' book value per share was $19.25
as of June 30, 2006. "During the second quarter of 2006 we
experienced a very active windstorm and hail pattern in many of our
Midwestern operating states. On April 20, 2006, we announced a
preliminary assessment of three storms that occurred in early
April. On June 21, we updated our catastrophe loss estimate for
those April storms and reported that catastrophes would have a
significant impact on second quarter results. This quarter's
catastrophe losses of $59.8 million set a record exceeding the
$57.6 million in catastrophe losses during the third quarter of
2004, when we experienced four hurricanes," said STFC Chairman,
President and CEO Bob Restrepo. "Despite the record catastrophe
losses this quarter, the core book continues to perform at
outstanding levels. We are confident that our consistent
underwriting discipline and sound pricing strategies, complemented
with new product and technology development, will continue to
position STFC as a superior regional property and casualty
company," added Restrepo. State Auto Financial Corporation,
headquartered in Columbus, Ohio, is a property and casualty
insurance holding company. The company markets its personal and
commercial insurance products through more than 22,500 independent
insurance agents associated with approximately 3,000 agencies in 27
states. The company has been named Forbes Magazine's "Best Managed
Insurance Company in America" for 2006 and is one of just 3% of
publicly listed companies to earn the Mergent Dividend Achiever
Award for having increased its dividends for ten or more years in
succession. The State Auto Insurance Companies are rated A+
(Superior) by the A.M. Best Company. Additional information on the
company can be found on its web site at www.STFC.com. (a)Net income
from operations, a non-GAAP financial measure which management
believes is informative to Company management and investors, differ
from GAAP net income only by the exclusion of realized capital
gains or losses, net of applicable taxes, on investment activity
for the periods being reported. For STFC, this amounts to $0.02 for
the quarter and $0.01 for 2006 year to date compared to $0.00 and
$0.04 for the same periods in 2005. STFC has scheduled a conference
call with interested investors for Tuesday, July 27, 10:00 a.m.
Eastern Time to discuss the company's second quarter 2006
performance. Live and archived broadcasts of the call can be
accessed via links on www.STFC.com. A replay of the call can be
heard beginning at noon July 27, by calling 1-888-568-0905.
Supplemental schedules detailing the company's second quarter 2006
financial, sales and underwriting results are made available on
www.STFC.com 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-related events, and other types of catastrophic
events. State Auto Financial undertakes no obligation to update or
revise any forward-looking statements. -0- *T STATE AUTO FINANCIAL
CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(unaudited) Three Months Ended Six Months Ended (In millions,
except per share June 30 June 30 amounts) 2006 2005 2006 2005
--------- -------- -------- ------- Net premiums written $267.7
$274.2 $516.8 $556.2 (B) --------- -------- -------- ------- Earned
premiums 256.7 263.7 512.8 526.8 Net investment income 20.6 19.3
41.0 38.3 Net realized gain (loss) on investments 1.4 0.0 0.5 2.4
Other income 1.3 1.2 2.5 2.6 --------- -------- -------- -------
Total revenue 280.0 284.2 556.8 570.1 --------- -------- --------
------- Income (loss) before federal income taxes (0.2) 54.4 56.5
112.2 Federal income tax expense (benefit) (4.3) 15.6 12.2 32.6
--------- -------- -------- ------- Net income $4.1 $38.8 $44.3
$79.6 ========= ======== ======== ======= Earnings per share: -
basic $0.10 $0.96 $1.09 $1.98 - diluted $0.10 $0.94 $1.07 $1.94
Earnings per share from operations (A): - basic $0.08 $0.96 $1.08
$1.94 - diluted $0.08 $0.94 $1.06 $1.90 Weighted average shares
outstanding: - basic 40.8 40.3 40.7 40.2 - diluted 41.6 41.0 41.5
40.9 Book value per share $19.25 $18.34 Dividends paid per share
$0.090 $0.045 $0.180 $0.090 Total shares outstanding 40.9 40.4 GAAP
ratios: Loss and LAE ratio 75.6 53.3 62.7 53.0 Expense ratio 31.5
31.7 32.8 31.8 --------- -------- -------- ------- Combined ratio
107.1 85.0 95.5 84.8 ========= ======== ======== ======= (A) Net
income from operations: Net income $4.1 $38.8 $44.3 $79.6 Less net
realized gains on investments, less applicable federal income taxes
0.9 0.0 0.3 1.5 --------- -------- -------- ------- Net income from
operations $3.2 $38.8 $44.0 $78.1 ========= ======== ========
======= (B) Net premiums written for the six months ended June 30,
2005, includes $23.9 million of unearned premiums transferred to
STFC in connection with the addition of Meridian Security Insurance
Company and Meridian Citizens Mutual Insurance Company to the State
Auto Pool, effective January 1, 2005. *T
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