- Quarterly income of $0.07 per
share
- Quarterly GAAP combined ratio of
103.9
- Return on equity of 3.3%
- Book value per share of $21.95
State Auto Financial Corporation (NASDAQ:STFC) today reported
first quarter 2016 net income of $3.0 million, or $0.07 per diluted
share, versus net income of $24.7 million, or $0.60 per diluted
share, for the first quarter of 2015. Net income from operations1
per diluted share for the first quarter 2016 was $0.05 versus net
income from operations1 per diluted share of $0.54 for the same
2015 period.
Operating Results
STFC’s GAAP combined ratio for the first quarter 2016 was 103.9
versus 94.6 for the first quarter of 2015. Catastrophe losses
during the first quarter 2016 accounted for 4.7 points of the 70.3
total loss ratio points, or $15.0 million, versus 1.4 points of the
total 61.8 loss ratio points, or $4.5 million, for the same period
in 2015. Non-catastrophe losses during the first quarter 2016
included 3.2 points of adverse development relating to prior years,
or $10.3 million, versus 1.4 points of favorable development, or
$4.4 million, for the same period in 2015.
Net written premium for the first quarter of 2016 decreased 0.7%
over the same period in 2015. By insurance segment, net written
premium decreased for personal and business 1.5% and 5.3%,
respectively, and specialty increased 11.0%. Personal auto and
homeowners new business premium and new policy counts were up,
compared to first quarter of 2015 while total policies in force
were lower. During the second half of 2015, the Company implemented
underwriting actions, including pricing reviews and non-technology
process improvements designed to improve personal lines production.
The decline in the business insurance segment reflects our decision
to exit our large account business and changes caused by the field
restructuring that was completed during the quarter. The growth in
the specialty insurance segment was driven by an increase in new
business for both E&S casualty and programs.
Book Value and Return on Equity
STFC’s book value was $21.95 per share as of March 31, 2016, an
increase of $0.55 per share from STFC’s book value on Dec. 31,
2015. The increase in book value was due to a higher level of net
unrealized gains. Return on stockholders’ equity for the 12 months
ended March 31, 2016, was 3.3% compared to 12.2% for the 12 months
ended March 31, 2015.
Commentary
STFC President and CEO Mike LaRocco commented on the quarter as
follows:
“We are determined to see every line of
business profitable and growing. That’s been our focus and we’re
largely demonstrating success with one notable exception: auto,
both personal and commercial.
“We’ve taken aggressive steps to restore our
auto book to profitability, but those efforts will take time to
show up in our results. We believe the increase in auto loss costs
for the industry is being impacted both by an increase in miles
driven and a continued increase in distracted driving. Evidence is
mounting that distracted driving is increasingly the cause of
accidents and contributing to the negative trend in traffic deaths.
In the months ahead, we’ll be working aggressively to focus
attention on this issue with our customers and agents, as well as
the insurance industry.
“Homeowners is profitable and we’re seeing
improvements in quote volumes, new business counts, and retention
levels. And agents are responding to our new Farm & Ranch
quoting system with a significant increase in quotes and new
business. E&S property is profitable, but growth is being
challenged by a very soft and competitive market. The poor
performance of our programs business was driven by commercial auto
results, which included programs that have been terminated.
“We remain on target for launching a quote
and policy issue system for auto, home, and umbrella new business
in the third quarter followed by small commercial before year end.
We’re increasingly confident that the new platform will accelerate
positive trends we’re already seeing in quote volumes and new
business in auto and home, in particular.
“We’re rebuilding State Auto to not only win
in the short-term, but to be a long-term winner in a rapidly
changing industry. We have the urgency required to fix our
problems. But we also have the patience to ensure the changes are
sustainable.”
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 fourth 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, Milbank, Meridian Security, Patrons Mutual, 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.
1 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 amounted to income of $0.02 per diluted
share for the first quarter 2016 versus income of $0.06 per diluted
share for the same 2015 period.
STFC has scheduled a conference call with interested investors
for Thursday, April 28, at 11 a.m. ET to discuss the company’s
first quarter 2016 performance. Live and archived broadcasts of the
call can be accessed at http://www.StateAuto.com/STFC. A replay of
the call can be heard beginning at 1 p.m. on April 28, by calling
855-859-2056, conference ID 95537518. Supplemental schedules
detailing the company’s first quarter 2016 financial, sales and
underwriting results are made available on
http://www.StateAuto.com/STFC prior to the conference call.
Except for historical information, all other information in this
news release consists of forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially
from those projected, anticipated or implied. The most significant
of these uncertainties are described in State Auto Financial's Form
10-K and Form 10-Q reports and exhibits to those reports, and
include (but are not limited to) legislative changes at both the
state and federal level, state and federal regulatory rule making
promulgations and adjudications, class action litigation involving
the insurance industry and judicial decisions affecting claims,
policy coverages and the general costs of doing business, the
impact of competition on products and pricing, inflation in the
costs of the products and services insurance pays for, product
development, geographic spread of risk, weather and weather-related
events, and other types of catastrophic events. State Auto
Financial undertakes no obligation to update or revise any
forward-looking statements.
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three months ended March 31 ($ in millions, except per share
amounts) 2016 2015 Net premiums written $ 304.8 $
307.0 Earned premiums 319.9 315.3 Net investment
income 17.4 15.4 Net realized gain on investments 1.3 3.8 Other
income 0.6 0.4 Total revenue
339.2 334.9 Income before federal
income taxes 3.8 33.2 Federal income tax expense 0.8
8.5 Net income $ 3.0 $ 24.7
Earnings per common share: - basic $ 0.07 $ 0.60 - diluted $
0.07 $ 0.60 Earnings per share from operations (A): - basic
$ 0.05 $ 0.54 - diluted $ 0.05 $ 0.54 Weighted average
shares outstanding: - basic 41.4 41.0 - diluted 41.8 41.4
Return on average equity (LTM) 3.3 % 12.2 % Book value per
share $ 21.95 $ 22.05 Dividends paid per share $ 0.10 $ 0.10
Total shares outstanding 41.4 41.0 GAAP ratios: Cat
loss and ALAE ratio 4.7 1.4 Non-cat loss and LAE ratio 65.6
60.4 Loss and LAE ratio 70.3 61.8 Expense
ratio 33.6 32.8 Combined ratio
103.9 94.6 (A) Reconciliation of
non-GAAP financial measure: Net income from operations: Net income
$ 3.0 $ 24.7
Less net realized gain on investments,
less applicable federal income taxes
0.9 2.5 Net income from operations $
2.1 $ 22.2
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160428005330/en/
State Auto Financial CorporationTara Shull 614-917-4478Investor
Relations and Finance DirectorF
614-887-1793Tara.Shull@StateAuto.comorKyle Anderson,
614-917-5497AVP/Marketing and CommunicationM
614-477-5301Kyle.Anderson@StateAuto.comorFor additional
information:StateAuto.com/STFCfacebook.com/StateAutotwitter.com/StateAuto
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