- Quarterly loss of $0.23 per share
- Quarterly GAAP combined ratio of
114.8
- Return on equity of 3.1%
- Book value per share of $21.28
State Auto Financial Corporation (NASDAQ:STFC) today reported a
third quarter 2017 net loss of $9.5 million, or $0.23 per diluted
share, compared to net income of $10.1 million, or $0.24 per
diluted share, for the same 2016 period. Net loss from operations1
per diluted share for the third quarter 2017 was $0.54 versus net
income from operations1 per diluted share of $0.10 for the same
2016 period.
For the first nine months of 2017, STFC had a net loss of $4.9
million, or $0.12 per diluted share, compared to a net loss of
$11.5 million, or $0.28 per diluted share, for the same 2016
period. Net loss from operations1 per diluted share for the first
nine months of 2017 was $0.80 versus a net loss from operations per
diluted share of $0.54 for the same 2016 period.
Operating Results
STFC’s GAAP combined ratio for the third quarter 2017 was 114.8
compared to 105.0 for the same 2016 period. Catastrophe losses
during the third quarter 2017 accounted for 17.6 points of the 79.5
total loss ratio points, or $56.1 million, versus 2.5 points of the
total 71.3 loss ratio points, or $8.1 million, for the same period
in 2016. Noncatastrophe losses during the third quarter 2017
included 2.8 points of favorable development relating to prior
years, or $9.0 million, versus 1.0 point of adverse development, or
$3.5 million, for the same period in 2016.
Net written premium for the third quarter 2017 decreased 4.3%
compared to the same period in 2016. By insurance segment, net
written premium for personal and commercial increased 7.5% and
1.8%, respectively, and specialty decreased 42.3%. The personal
segment increase was primarily due to rate actions taken to improve
the profitability in personal auto and a higher level of new
business policies for the third quarter 2017 compared to the third
quarter 2016. The increase in the commercial line segment was
driven primarily by a higher level of farm & ranch, middle
market and debit mod workers’ compensation new business for the
third quarter 2017 compared to the third quarter 2016. The decline
in the specialty insurance segment was primarily driven by our
decision to exit program business.
STFC’s GAAP combined ratio for the first nine months of 2017 was
110.1 compared to 107.9 for the same 2016 period. Catastrophe
losses for the first nine months of 2017 accounted for 12.1 points
of the 75.1 total loss ratio points, or $115.7 million, versus 6.8
points of the total 74.4 loss ratio points, or $65.4 million, for
the same period in 2016. Noncatastrophe losses during the first
nine months of 2017 included 3.4 points of favorable development
relating to prior years, or $32.8 million, versus 3.6 points of
adverse development, or $34.7 million, for the same period in
2016.
Net written premium for the first nine months of 2017 decreased
1.8% compared to the same period in 2016. By insurance segment, net
written premium for personal increased 1.5% and commercial and
specialty decreased 1.3% and 10.1%, respectively. The personal and
specialty segments trends were due to the same factors discussed
above. The decline in the commercial segment was driven by rate
actions to improve profitability in commercial auto and a reduction
in workers’ compensation due to the softening market.
Book Value and Return on Equity
STFC’s book value was $21.28 per share as of Sept. 30,
2017, a decrease of $0.03 per share from STFC’s book value on Dec.
31, 2016. The decrease was driven by the increase in catastrophe
losses discussed above. Return on stockholders’ equity for the
twelve months ended Sept. 30, 2017, was 3.1% compared to
(0.9)% for the twelve months ended Sept. 30, 2016.
STFC’s Chairman, President and CEO Mike LaRocco commented on the
quarter as follows:
“Excluding catastrophe losses that were driven largely by our
specialty segment, we delivered another solid quarter that
demonstrates the progress we’re making in the transformation of
State Auto Financial Corporation.
“Hurricanes Harvey and Irma were the primary drivers of
catastrophe losses for third quarter 2017. Our Claims and Risk
Engineering (CARE) associates responded exceptionally well,
demonstrating the care and compassion that our customers expect and
deserve.
“The continued focus on executing our strategy is producing
results with new business growth across personal lines, including
five additional states recently coming online with our new digital
technology platform. We’ve now launched the platform in 17 states,
including three October launches, and anticipate the majority of
states in personal lines to be rolled out by the end of 2017.
“In commercial lines, we successfully launched our new
technology platform in Illinois, and will move into additional
states through the end of 2017 and into 2018. We’re thrilled that
our independent agency partners are embracing both our personal and
commercial lines platforms, with strong quote volume and new
business.
“Based on our previously announced strategic review of the
Excess and Surplus lines business, we have decided to exit the
specialty segment and continue to invest our capital in our core
lines of business. Our focus remains achieving our goal of
profitable growth. During the third quarter of 2017, momentum
continued to build, and I remain confident that we will
succeed.”
About State Auto Financial Corporation
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 $0.31 per diluted
share for the third quarter 2017 and income of $0.68 year to date
2017 versus income of $0.14 for the third quarter 2016 and income
of $0.26 year to date 2016.
STFC has scheduled a conference call with interested investors
for Thursday, Nov. 2, at 11 a.m. ET to discuss the company’s
third quarter 2017 performance. Live and archived broadcasts of the
call can be accessed at http://www.StateAuto.com/STFC. A replay of
the call can be heard beginning at 2 p.m. ET, Nov. 2, by
calling 855-859-2056, conference ID 51534853. Supplemental
schedules detailing the company’s third quarter 2017 financial,
sales and underwriting results are made available on
http://www.StateAuto.com/STFC prior to the conference call.
Except for historical information, all other information in this
news release consists of forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially
from those projected, anticipated or implied. The most significant
of these uncertainties are described in State Auto Financial's Form
10-K and Form 10-Q reports and exhibits to those reports, and
include (but are not limited to) legislative changes at both the
state and federal level, state and federal regulatory rule making
promulgations and adjudications, class action litigation involving
the insurance industry and judicial decisions affecting claims,
policy coverages and the general costs of doing business, the
impact of competition on products and pricing, inflation in the
costs of the products and services insurance pays for, product
development, geographic spread of risk, weather and weather-related
events, and other types of catastrophic events. State Auto
Financial undertakes no obligation to update or revise any
forward-looking statements.
Consolidated Statements of Income ($ in millions,
except per share amounts)
(unaudited) Three months ended September 30 Nine months ended
September 30 2017 2016 2017 2016 Net premiums written $ 321.3
$ 335.8 $ 968.6 $ 986.2 Earned
premiums 319.0 325.8 956.4 968.1 Net investment income 18.7 17.6
56.5 54.1 Net realized gain on investments 20.2 8.8 43.8 16.6 Other
income 0.5 0.6 1.7 1.7 Total revenue
358.4 352.8 1,058.4 1,040.5
(Loss) income before federal income taxes (11.2 ) 7.4 (4.5 ) (13.9
) Federal income tax (benefit) expense (1.7 ) (2.7 ) 0.4
(2.4 ) Net (loss) income $ (9.5 ) $ 10.1 $ (4.9 ) $
(11.5 ) (Loss) income per common share: - basic $ (0.23 ) $
0.24 $ (0.12 ) $ (0.28 ) - diluted $ (0.23 ) $ 0.24 $ (0.12 ) $
(0.28 ) (Loss) income per share from operations (A): - basic $
(0.54 ) $ 0.10 $ (0.80 ) $ (0.54 ) - diluted $ (0.54 ) $ 0.10 $
(0.80 ) $ (0.54 ) Weighted average shares outstanding: - basic 42.2
41.6 42.0 41.5 - diluted 42.2 42.1 42.0 41.5 Return on average
equity (LTM) 3.1 % (0.9 )% Book value per share $ 21.28 $ 21.82
Dividends paid per share $ 0.10 $ 0.10 $ 0.30 $ 0.30 Total shares
outstanding 42.2 41.6 GAAP ratios: Cat loss and ALAE ratio
17.6 2.5 12.1 6.8 Non-cat loss and LAE ratio 61.9 68.8
63.0 67.6 Loss and LAE ratio 79.5 71.3 75.1
74.4 Expense ratio 35.3 33.7 35.0 33.5
Combined ratio 114.8 105.0 110.1 107.9
(A) Reconciliation of non-GAAP financial measure: Net (loss)
income from operations: Net (loss) income $ (9.5 ) $ 10.1 $ (4.9 )
$ (11.5 ) Less net realized gains on investments, less applicable
federal income taxes 13.1 5.7 28.5 10.8
Net (loss) income from operations $ (22.6 ) $ 4.4 $ (33.4 )
$ (22.3 )
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version on businesswire.com: http://www.businesswire.com/news/home/20171102005216/en/
State Auto Financial CorporationInvestor contact:Tara Shull,
614.917.4478Tara.Shull@StateAuto.comorMedia contact:Kyle Anderson,
614.917.5497Kyle.Anderson@StateAuto.com
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