State Auto Financial Reports Estimate of Third Quarter Storm Activity Impact and Reserve Increase on Program Business
09 October 2012 - 7:30AM
Business Wire
State Auto Financial Corporation (Nasdaq: STFC) today announced
its preliminary estimate of the impact of catastrophe losses on its
third quarter results. The company estimates third quarter 2012
results will include between $6.5 million and $7.5 million in
pre-tax net catastrophe losses. During the quarter ended Sept. 30,
2012, six catastrophe events in the United States were identified
by Property Claim Services (PCS).
STFC also announced that loss and loss expense reserves for
prior periods will be increased between $19.0 million and $21.0
million on program business written by Risk Evaluation & Design
LLC (RED), a wholly owned subsidiary of State Automobile Mutual
Insurance Company. The reserve increases relate primarily to a
large commercial auto trucking program that, as previously
disclosed, was cancelled as of April 1, 2012.
STFC President and CEO Bob Restrepo commented as follows:
“We’re pleased that third quarter results will reflect
significantly lower levels of property catastrophe losses compared
both to last year and our average five-year, third quarter
catastrophe loss ratio of 10.6%. At the same time, we’re very
disappointed in the performance of the program business
underwritten by RED. We began writing business with this unit in
2010 and acted as quickly as possible to address deteriorating
results. In the past three months, claim development exceeded
expectations requiring us to put aside reserves to address prior
accident years and increase our loss estimates for 2012. Nearly all
the business underwritten by RED has been terminated, the
management team has been replaced, and the unit has been
restructured and integrated into our profitable Rockhill
organization.
“We expect substantially all the business written by RED over
the past three years will be off our books by the end of 2013. I
have confidence in Rockhill’s ability to succeed in the specialty
insurance marketplace and in our efforts to further diversify our
book of business and generate profitable returns to our
shareholders.”
STFC expects to release its third quarter 2012 results on
Tuesday, Nov. 6, 2012, before the open of regular trading on the
Nasdaq Stock Market, and discuss its second quarter results in a
conference call at 10:00 a.m. ET. The call is being webcast by
Thomson Reuters and can be accessed at
http://www.StateAuto.com/STFC. The webcast is also being
distributed through the Thomson Reuters StreetEvents Network.
Individual investors can listen to the call at
http://www.earnings.com/.
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 throughout the United States through independent
insurance agencies, which include retail agencies and wholesale
brokers. 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/.
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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