State Auto Financial’s Second Quarter Results to Include Non-Cash Charge for Deferred Tax Valuation Allowance
28 July 2011 - 7:00AM
Business Wire
State Auto Financial Corporation (NASDAQ:STFC) today announced
that its second quarter 2011 financial results will include a
non-cash charge of approximately $115 million to establish a
valuation allowance against its net deferred tax asset.
Deferred income tax assets and liabilities represent the tax
effect of the differences between the financial statement carrying
value of existing assets and liabilities and their respective tax
bases. In accordance with the Financial Accounting Standards
Board’s Accounting Standards Codification 740, Income Taxes (ASC
740), STFC periodically evaluates its deferred tax assets, which
requires significant judgment, to determine if they are realizable
weighing all available evidence, both positive and negative,
including historical and anticipated future taxable income. In
making such judgments, significant weight is given to evidence that
can be objectively verified. Given the significance of STFC’s
previously announced catastrophe losses for the second quarter,
STFC considered both positive and negative evidence and concluded a
valuation allowance should be established as of June 30, 2011.
“The establishment of a valuation allowance does not have any
impact on cash, nor does such an allowance preclude the company
from using its loss carryforwards or realizing other deferred tax
assets in the future,” said STFC President, Chairman and CEO Bob
Restrepo.
“It’s also important to note that the establishment of a
valuation allowance does not reflect a change in our long-term
financial outlook,” Restrepo added. “We will continue to implement
initiatives to strengthen our underwriting profitability and
financial strength and preserve our terrific reputation. At the
same time, we will continue to build upon our long-standing and
profitable agency relationships, develop and deploy products and
technology that make us an even more responsive partner, and ensure
the quality claim and customer service operations that will
continue to distinguish State Auto as a superior regional agency
company.”
The valuation allowance against net deferred tax assets will
reverse when, in STFC’s judgment, available positive evidence
outweighs negative evidence. However, given the inherent
uncertainty in predicting future performance, which is impacted by
such things as severity and frequency of catastrophe losses,
current and projected pricing actions, investment market
conditions, and planned loss ratio and expense control initiatives,
it is uncertain as to when that might occur.
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 third 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, primarily through independent insurance
agencies, in all 50 states and the District of Columbia. 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,
State Auto Florida, Milbank, Farmers Casualty, Meridian Security,
Meridian Citizens Mutual, Beacon National, Beacon Lloyds, Patrons
Mutual, Litchfield Mutual Fire, 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 has scheduled a conference call with interested investors
for Tuesday, Aug. 2, at 10 a.m. ET to discuss the company’s second
quarter 2011 performance. Live and archived broadcasts of the call
can be accessed at http://www.StateAuto.com. A replay of the call
can be heard beginning at 12 p.m. ET, Aug. 2, by calling
888-562-6891. Supplemental schedules detailing STFC’s second
quarter 2011 financial, sales and underwriting results are made
available on the Investors tab of http://www.StateAuto.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 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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