State Auto Financial Reports Record Third Quarter Results
24 October 2006 - 8:00PM
Business Wire
State Auto Financial Corporation (NASDAQ:STFC) today reported
record third quarter net income of $31.2 million, or $0.75 per
diluted share, versus $16.8 million or $0.41 per diluted share for
the same period in 2005. Net income from operations(a) per diluted
share for the third quarter of 2006 was $0.72, versus $0.34 for the
same period in 2005. STFC�s GAAP combined ratio for the third
quarter of 2006 was 90.9, versus 100.2 for the third quarter of
2005. Catastrophe losses accounted for 8.0 points of the total 56.7
loss ratio points or $20.4 million in the third quarter 2006,
compared to 16.0 points of the total 69.3 loss ratio points, or
$42.1 million for the same period in 2005. STFC�s third quarter
2006 revenue was $279.6 million, versus $288.5 million for the same
period in 2005. Revenue for the first nine months of 2006 was
$836.4 million, versus $858.6 million for the same 2005 period. For
the first nine months of 2006, net income was $75.5 million, or
$1.82 per diluted share, compared to $96.4 million or $2.35 per
diluted share, for the same 2005 period. The GAAP combined ratio
for the first nine months of 2006 was 94.0, as compared to 90.0 for
the same period in 2005. STFC�s book value per share rose to an
all-time high of $20.63, as of September 30, 2006. �I am pleased to
report record third quarter earnings following a second quarter
that was heavily impacted by record catastrophe losses. Our core
book of business continues to perform exceptionally well and losses
from catastrophes in the third quarter were relatively low,� said
STFC Chairman, President and CEO Bob Restrepo. �We are encouraged
by the market�s acceptance of our newest personal auto product
CustomFit�. In states where CustomFit� has been introduced, new
business is up between 24% and 69% depending on the state. We�re
preparing to roll out our next generation CustomFit� model to
additional states. The success of CustomFit�, which was the first
of several technology driven initiatives begun in 2006, fuels our
confidence that State Auto will remain a strong player in a very
competitive insurance market,� added Restrepo. State Auto Financial
Corporation, headquartered in Columbus, Ohio, is a super regional
property and casualty insurance holding company. The company
markets its personal and commercial insurance products through more
than 22,800 independent insurance agents associated with nearly
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, differs 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 $0.03 for the quarter and $0.04 for 2006 year
to date compared to $0.07 and $0.11 for the same periods in 2005.
STFC has scheduled a conference call with interested investors for
Tuesday, October 24, 10:00 a.m. Eastern Time to discuss the
company�s third 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 October 24, by
calling 1-866-454-9172. Supplemental schedules detailing the
company�s third 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.
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (unaudited) � Three Months Ended Nine Months
Ended September 30 September 30 (In millions, except per share
amounts) 2006 2005 2006 2005 � Net premiums written $ 264.0� $
268.5� $ 780.8� $ 824.7� (B) � Earned premiums 255.8� 262.9� 768.6�
789.7� Net investment income 20.6� 20.1� 61.6� 58.4� Net realized
gain on investments 2.0� 4.4� 2.5� 6.8� Other income 1.2� 1.1� 3.7�
3.7� Total revenue 279.6� 288.5� 836.4� 858.6� � Income before
federal income taxes 42.4� 20.2� 98.9� 132.4� � Federal income tax
expense 11.2� 3.4� 23.4� 36.0� Net income $ 31.2� $ 16.8� $ 75.5� $
96.4� � Earnings per share: - basic $ 0.76� $ 0.41� $ 1.85� $ 2.39�
- diluted $ 0.75� $ 0.41� $ 1.82� $ 2.35� � Earnings per share from
operations (A): - basic $ 0.73� $ 0.34� $ 1.81� $ 2.28� - diluted $
0.72� $ 0.34� $ 1.78� $ 2.24� � Weighted average shares
outstanding: - basic 41.0� 40.4� 40.8� 40.3� - diluted 41.6� 41.2�
41.6� 41.0� � Book value per share $ 20.63� $ 18.20� � Dividends
paid per share $ 0.10� $ 0.09� $ 0.28� $ 0.18� � Total shares
outstanding 41.0� 40.4� � GAAP ratios: Loss and LAE ratio 56.7�
69.3� 60.7� 58.5� Expense ratio 34.2� 30.9� 33.3� 31.5� Combined
ratio 90.9� 100.2� 94.0� 90.0� � (A) Net income from operations:
Net income $ 31.2� $ 16.8� $ 75.5� $ 96.4� Less net realized gains
on investments, less applicable federal income taxes 1.3� 2.9� 1.6�
4.4� Net income from operations $ 29.9� $ 13.9� $ 73.9� $ 92.0� �
(B) Net premiums written for the nine months ended September 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. State Auto Financial
Corporation (NASDAQ:STFC) today reported record third quarter net
income of $31.2 million, or $0.75 per diluted share, versus $16.8
million or $0.41 per diluted share for the same period in 2005. Net
income from operations(a) per diluted share for the third quarter
of 2006 was $0.72, versus $0.34 for the same period in 2005. STFC's
GAAP combined ratio for the third quarter of 2006 was 90.9, versus
100.2 for the third quarter of 2005. Catastrophe losses accounted
for 8.0 points of the total 56.7 loss ratio points or $20.4 million
in the third quarter 2006, compared to 16.0 points of the total
69.3 loss ratio points, or $42.1 million for the same period in
2005. STFC's third quarter 2006 revenue was $279.6 million, versus
$288.5 million for the same period in 2005. Revenue for the first
nine months of 2006 was $836.4 million, versus $858.6 million for
the same 2005 period. For the first nine months of 2006, net income
was $75.5 million, or $1.82 per diluted share, compared to $96.4
million or $2.35 per diluted share, for the same 2005 period. The
GAAP combined ratio for the first nine months of 2006 was 94.0, as
compared to 90.0 for the same period in 2005. STFC's book value per
share rose to an all-time high of $20.63, as of September 30, 2006.
"I am pleased to report record third quarter earnings following a
second quarter that was heavily impacted by record catastrophe
losses. Our core book of business continues to perform
exceptionally well and losses from catastrophes in the third
quarter were relatively low," said STFC Chairman, President and CEO
Bob Restrepo. "We are encouraged by the market's acceptance of our
newest personal auto product CustomFit(TM). In states where
CustomFit(TM) has been introduced, new business is up between 24%
and 69% depending on the state. We're preparing to roll out our
next generation CustomFit(TM) model to additional states. The
success of CustomFit(TM), which was the first of several technology
driven initiatives begun in 2006, fuels our confidence that State
Auto will remain a strong player in a very competitive insurance
market," added Restrepo. State Auto Financial Corporation,
headquartered in Columbus, Ohio, is a super regional property and
casualty insurance holding company. The company markets its
personal and commercial insurance products through more than 22,800
independent insurance agents associated with nearly 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, differs 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 $0.03 for the quarter and $0.04 for 2006 year to date
compared to $0.07 and $0.11 for the same periods in 2005. STFC has
scheduled a conference call with interested investors for Tuesday,
October 24, 10:00 a.m. Eastern Time to discuss the company's third
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 October 24, by calling 1-866-454-9172.
Supplemental schedules detailing the company's third 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 Nine Months Ended September 30
September 30 (In millions, except per share amounts) 2006 2005 2006
2005 --------- -------- -------- -------- Net premiums written
$264.0 $268.5 $780.8 $824.7 (B) --------- -------- --------
-------- Earned premiums 255.8 262.9 768.6 789.7 Net investment
income 20.6 20.1 61.6 58.4 Net realized gain on investments 2.0 4.4
2.5 6.8 Other income 1.2 1.1 3.7 3.7 --------- -------- --------
-------- Total revenue 279.6 288.5 836.4 858.6 --------- --------
-------- -------- Income before federal income taxes 42.4 20.2 98.9
132.4 Federal income tax expense 11.2 3.4 23.4 36.0 ---------
-------- -------- -------- Net income $31.2 $16.8 $75.5 $96.4
========= ======== ======== ======== Earnings per share: - basic
$0.76 $0.41 $1.85 $2.39 - diluted $0.75 $0.41 $1.82 $2.35 Earnings
per share from operations (A): - basic $0.73 $0.34 $1.81 $2.28 -
diluted $0.72 $0.34 $1.78 $2.24 Weighted average shares
outstanding: - basic 41.0 40.4 40.8 40.3 - diluted 41.6 41.2 41.6
41.0 Book value per share $20.63 $18.20 Dividends paid per share
$0.10 $0.09 $0.28 $0.18 Total shares outstanding 41.0 40.4 GAAP
ratios: Loss and LAE ratio 56.7 69.3 60.7 58.5 Expense ratio 34.2
30.9 33.3 31.5 --------- -------- -------- -------- Combined ratio
90.9 100.2 94.0 90.0 ========= ======== ======== ======== (A) Net
income from operations: Net income $31.2 $16.8 $75.5 $96.4 Less net
realized gains on investments, less applicable federal income taxes
1.3 2.9 1.6 4.4 --------- -------- -------- -------- Net income
from operations $29.9 $13.9 $73.9 $92.0 ========= ======== ========
======== (B) Net premiums written for the nine months ended
September 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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