State Auto Financial Reports Second Quarter 2008 Results
24 July 2008 - 8:00PM
Business Wire
State Auto Financial Corporation (NASDAQ: STFC) today reported a
second quarter 2008 net loss of $3.3 million, or $0.08 per diluted
share, versus net income of $23.4 million, or $0.56 per diluted
share, for the second quarter of 2007. Net loss from operations(a)
per diluted share for the second quarter 2008 was $0.12, versus net
income from operations of $0.51 for the same 2007 period. STFC�s
second quarter 2008 revenue was $307.0 million versus $278.7
million for the same period in 2007. STFC�s GAAP combined ratio for
the quarter was 115.9 versus 96.7 for the second quarter of 2007.
Catastrophe losses accounted for 27.3 points of the total 84.0 loss
ratio points, or $76.8 million, during the second quarter this
year, compared to 8.2 points of the total 63.3 loss ratio points,
or $20.7 million, for the same period in 2007. The second quarter
2008 also included an income tax benefit of $20.9 million,
reflecting taxes expected to be recoverable based upon year to date
results. Revenue for the first six months of 2008 was $608.0
million, versus $554.2 million for the same 2007 period. For the
first six months of 2008, net loss was $15.8 million, or $0.40 per
diluted share, compared to net income of $54.2 million or $1.30 per
diluted share, for the same 2007 period. STFC�s GAAP combined ratio
for the first six months of 2008 was 113.6, as compared to 94.0 for
the same period in 2007. STFC�s book value per share decreased to
$21.44 per share as of June 30, 2008. Return on stockholders�
equity for the twelve months ended June 30, 2008 was 5.7% compared
to 15.7% for the twelve months ended June 30, 2007. �We experienced
unprecedented losses from catastrophic storm activity during the
second quarter. The $76.8 million total is not only a record high
for a second quarter, but a record for catastrophe losses for any
quarter in our history. Losses in the first six months of 2008 of
$111.8 million already make it STFC�s worst year for catastrophe
losses. I can�t say enough about the performance of our claims
associates, and their efforts in servicing our policyholders,
during this difficult period,� said STFC Chairman, President and
CEO Bob Restrepo. �Excluding the catastrophe losses, our second
quarter core loss ratio improved from the first quarter,
underscoring the strength of State Auto�s underwriting
fundamentals. We also continue to see positive trends in our new
business policy counts and overall premium growth in a competitive
market. Total net written premium quarter over quarter was up
12.4%, of which 3.4% was attributable to organic growth and 9.0% to
previously reported pooling changes. Organic growth was strong in
standard private passenger auto, our largest line of business, with
net written premium up 5.8% for the second quarter 2008 over the
same quarter 2007. Our advances in pricing technology, product
development and agency automation and business support have keyed
the organic growth successes,� added Restrepo. STFC repurchased
452,667 shares during the second quarter of 2008 and 2,028,116
shares to date under the previously announced share repurchase
program which authorized purchasing up to 4.0 million common shares
through December 31, 2009. State Auto Financial Corporation,
headquartered in Columbus, Ohio, is a super regional property and
casualty insurance holding company. The company markets its
personal and business insurance products exclusively through
independent insurance agencies in 33 states and is proud to be a
Trusted Choice� company partner. STFC stock is traded on the NASDAQ
Global Select Market, which represents the top third of all NASDAQ
listed companies. The company is one of NASDAQ�s listed companies
to be named a 2008 Mergent Dividend Achiever 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 and include State Automobile Mutual, State Auto Property
& Casualty, State Auto National, State Auto Ohio, State Auto
Wisconsin, State Auto Florida, Milbank, Farmers Casualty, Meridian
Security, Meridian Citizens Mutual, Beacon National, Beacon Lloyds,
Patrons Mutual and Litchfield Mutual Fire. Additional information
on State Auto Financial Corporation and the State Auto Insurance
Companies can be found online at www.StateAuto.com. (a) Net income
(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 realized capital gains and (losses), net of applicable
taxes, on investment activity for the periods being reported. For
STFC this amounts to $0.04 per diluted share for the second quarter
and $0.01 for 2008 year to date versus $0.05 and $0.07 for the same
2007 periods. STFC has scheduled a conference call with interested
investors for Thursday, July 24, 10:00 a.m. Eastern time to discuss
the company�s second quarter 2008 performance. Live and archived
broadcasts of the call can be accessed on www.StateAuto.com. A
replay of the call can be heard beginning at noon, July 24, by
calling 1-800-283-4984. Supplemental schedules detailing the
company�s second quarter 2008 financial, sales and underwriting
results are made available on www.StateAuto.com prior to the
conference call. This news release may contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on
the current assumptions, expectations and projections of State Auto
Financial Corporation�s (the �Company�) management about future
events. Although we believe these statements are based on
reasonable assumptions, the Company can give no assurance that they
will prove to be correct. Numerous factors, including those related
to market conditions and those detailed in the Company�s filings
with the Securities and Exchange Commission, may cause actual
results of the Company to differ materially from those anticipated
in these forward-looking statements. Many of the factors that will
determine the Company�s future results are beyond the control to
predict. These forward-looking statements are subject to these
risks and uncertainties and, therefore, actual results may differ
materially. The Company undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. STATE AUTO FINANCIAL
CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(unaudited) � � � Three Months Ended Six Months Ended (In millions,
except per share amounts) June 30 June 30 2008 2007 2008 2007 � Net
premiums written $ 300.7 � $ 267.6 $ 625.9 � (B) $ 515.1 � Earned
premiums 281.1 253.3 560.3 505.2 Net investment income 22.3 20.6
44.7 41.9 Net realized gain on investments 2.4 3.6 0.6 4.7 Other
income � 1.2 � � 1.2 � 2.4 � � 2.4 Total revenue � 307.0 � � 278.7
� 608.0 � � 554.2 � (Loss) income before federal income taxes (24.2
) 28.9 (39.2 ) 69.7 � Federal income tax (benefit) expense � (20.9
) � 5.5 � (23.4 ) � 15.5 Net (loss) income $ (3.3 ) $ 23.4 $ (15.8
) $ 54.2 � (Loss) earnings per share: - basic $ (0.08 ) $ 0.57 $
(0.40 ) $ 1.32 - diluted $ (0.08 ) $ 0.56 $ (0.40 ) $ 1.30 � (Loss)
earnings per share from operations (A): - basic $ (0.12 ) $ 0.51 $
(0.41 ) $ 1.24 - diluted $ (0.12 ) $ 0.51 $ (0.41 ) $ 1.23 �
Weighted average shares outstanding: - basic 39.5 41.1 39.9 41.1 -
diluted 39.5 41.8 39.9 41.8 � Book value per share $ 21.44 $ 21.17
� Dividends paid per share $ 0.15 $ 0.10 $ 0.30 $ 0.20 � Total
shares outstanding 39.4 41.2 � GAAP ratios: Loss and LAE ratio 84.0
63.3 80.4 60.1 Expense ratio � 31.9 � � 33.4 � 33.2 � � 33.9
Combined ratio � 115.9 � � 96.7 � 113.6 � � 94.0 � (A) Net (loss)
income from operations: Net (loss) income $ (3.3 ) $ 23.4 $ (15.8 )
$ 54.2 Less net realized gains on investments, less applicable
federal income taxes � � 1.6 � � 2.3 � 0.4 � � 3.1 Net (loss)
income from operations $ (4.9 ) $ 21.1 $ (16.2 ) $ 51.1 � (B) Net
premiums written for the six months ended June 30, 2008, includes
$53.6 million of unearned premiums transferred to STFC in
connection with the addition of The Patrons Group, Beacon National
and SAMMI to the State Auto Pool, effective January 1, 2008.
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