- Quarterly net loss of $0.57 per diluted
share including $1.25 per diluted share, or $54.1 million, of
after-tax net unrealized loss on investments
- Quarterly net income from operations2
of $0.67 per diluted share
- Quarterly GAAP combined ratio of
94.6%
- Return on equity of 1.5%
- Book value per share of $19.79
State Auto Financial Corporation (NASDAQ:STFC) today reported a
fourth quarter 2018 net loss of $24.5 million, or $0.57 per diluted
share, which included $54.1 million, or $1.25 per diluted share, of
after-tax net unrealized loss on investments, versus a net loss of
$6.7 million1, or $0.161 per diluted share, for the fourth quarter
of 2017. Net income from operations2 per diluted share for the
fourth quarter 2018 was $0.67 versus net loss from operations2 per
diluted share of $0.491 for the same 2017 period. The fourth
quarter 2017 net loss and net loss from operations included a
charge of $36.4 million, or $0.86 per diluted share,
related to the enactment of the Tax Cuts and Jobs Act of 2017
(TCJA).
For the year ended 2018, STFC had net income of $12.8 million,
or $0.29 per diluted share, which included $45.3 million, or $1.04
per diluted share, of after-tax net unrealized loss on investments,
compared to a net loss of $10.7 million1, or $0.251 per diluted
share, for the same 2017 period. Net income from operations2 per
diluted share for the year ended Dec. 31, 2018 was $1.20 versus a
net loss from operations2 per diluted share of $1.261 for the same
2017 period. The year ended 2017 net loss and net loss from
operations included the same charge of $36.4 million,
or $0.86 per diluted share, related to the enactment of
the TCJA.
GAAP Operating Results
STFC’s GAAP combined ratio for the fourth quarter 2018 was 94.6
compared to 100.71 for the same 2017 period. Catastrophe losses
during the fourth quarter 2018 accounted for 2.6 points of the 56.8
total loss ratio points, or $8.1 million, versus 2.6 points of the
total 62.71 loss ratio points, or $8.3 million, for the same period
in 2017. Non-catastrophe losses during the fourth quarter 2018
included 7.9 points of favorable development relating to prior
years, or $24.4 million versus 4.1 points, or $12.9 million, for
the same period in 2017.
Net written premium for the fourth quarter of 2018 decreased
1.1% compared to the same period in 2017. By segment, net written
premium for personal and commercial increased 13.9% and 3.9%,
respectively, while the specialty segment reported negative written
premium as a result of our exit from this business. The increase in
the personal segment was primarily due to rate actions taken to
improve the profitability in personal auto, new business growth,
and a higher level of policies in force for the fourth quarter 2018
compared to the fourth quarter of 2017. The increase in the
commercial segment was primarily driven by rate increases and a
higher level of new business production from commercial auto and
middle market commercial during the fourth quarter 2018 compared to
the fourth quarter of 2017. Partially offsetting the increase was a
decline in small commercial package new business during the fourth
quarter 2018 compared to the fourth quarter 2017.
STFC’s GAAP combined ratio for the year ended 2018 was 100.6
compared to 107.71 for the same 2017 period. Catastrophe losses
impacted the loss ratio for the year ended 2018 by 5.8 points, or
$71.7 million, compared to 9.7 points, or $124.0 million for the
year ended 2017. Non-catastrophe losses for the year ended 2018
included 6.2 points of favorable development relating to prior
years, or $76.6 million, versus 3.2 points of favorable
development, or $41.4 million, for the same period in 2017.
Net written premium for the year ended 2018 decreased 4.7%
compared to the same 2017 period. By insurance segment, net written
premium for the personal and commercial segments increased 19.1%
and 3.6%, respectively, and the specialty segment decreased 93.2%,
as a result of our exit from this business. The increases in net
written premium in the personal and commercial segments were due to
the same factors discussed above for the fourth quarter.
SAP Personal and Commercial Operating
Results
The SAP personal and commercial segments', our ongoing insurance
segments, combined ratio3 for the fourth quarter 2018 was 92.8
compared to 97.1 for the same 2017 period. Catastrophe losses
during the fourth quarter 2018 accounted for 2.3 points of the 54.8
total loss ratio points, or $6.9 million, versus 0.4 points of the
total 59.2 points or $1.0 million for the same period in 2017.
Non-catastrophe losses and ALAE during the fourth quarter 2018
included 7.8 points of favorable development relating to prior
years, or $23.3 million, versus 5.5 points or $14.5 million, for
the same period in 2017.
The SAP personal and commercial segments' combined ratio3 for
the year ended 2018 was 98.6 compared to 102.3 for the same 2017
period. Catastrophe losses for the year ended 2018 accounted for
6.2 points of the total 63.0 loss ratio points, or $70.3 million,
versus 6.8 points of the total 67.6 loss ratio points, or $70.1
million for the year ended 2017. Non-catastrophe losses and ALAE
for the year ended 2018 included 7.0 points of favorable
development relating to prior years, or $79.7 million, versus 4.4
points of favorable development, or $45.6 million, for the same
period in 2017.
Book Value and Return on Equity
STFC’s book value was $19.79 per share as of Dec. 31, 2018, a
decrease of $0.45 per share from STFC’s book value on Sept. 30,
2018. The decrease was driven by the market value of our investment
portfolio. Return on stockholders’ equity for the twelve months
ended Dec. 31, 2018, was 1.5% compared to (1.2)% for the twelve
months ended Dec. 31, 2017.
STFC’s Chairman, President and CEO Mike LaRocco commented on the
quarter and year as follows:
“The fourth quarter and year 2018 results continued our positive
momentum and further validated the bold strategic and operational
decisions we’ve made since 2015. We’re now an emerging digital
company, focused on writing personal auto and home, small and
middle market commercial, farm and ranch, and workers’
compensation. Those lines produced 12.5% net written premium growth
and a combined ratio of 98.6% for 2018, only the second year of
profitable growth in 11 years.
“I couldn’t be more proud of our associates and distribution
partners for their hard work. Thanks to them, we’ve made remarkable
progress in a short period of time. We’re justifiably proud, but we
know we must get even better. There is still much room for
improvement and we will remain diligent as we move forward.
However, our 2018 results demonstrate that we now have a solid
foundation upon which we can profitably grow and outperform the
industry."
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.
1As previously reported, the results for the fourth quarter and
year ended Dec. 31, 2017, have been restated to correct an error
discovered during the first quarter of 2018 relating to the
calculation of deferred acquisition costs (DAC) along with making
other adjustments not previously recorded relating to that same
time period. Although the error was immaterial to STFC’s previously
issued financial statements, the cumulative correction would have a
material effect on the 2018 financial statements. Accordingly, the
results for the fourth quarter and year ended Dec. 31, 2017,
throughout this release have been adjusted to incorporate the
revised amounts, where applicable. Please refer to our quarterly
report on Form 10-Q for the period ending March 31, 2018 for
further information.
2 Net earnings (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 net investment (loss) gain, net of applicable
taxes, on investment activity for the periods being reported. For
STFC, this amounted to a loss of $1.25 per diluted share and $0.91
per diluted share for the fourth quarter and year ended Dec. 31,
2018, respectively, versus income of $0.32 and per diluted share
and $1.01 per diluted share for the fourth quarter and year ended
Dec. 31, 2017, respectively.
3 Insurance industry regulators require STFC's insurance
subsidiaries to report their financial condition and results of
operations using Statutory Accounting Practices ("SAP"). The SAP
personal and commercial segments combined ratio is a measure used
by management to evaluate STFC’s operating performance for its
ongoing operations. Details behind the compilation of these results
can be found on page 19 of this release.
STFC has scheduled a conference call with interested investors
for Thursday, Feb. 14, at 11 a.m. ET to discuss the Company’s
fourth quarter 2018 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., Feb. 14, by calling
855-859-2056, conference ID 8998499. Supplemental schedules
detailing the Company’s fourth quarter 2018 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
Selected Consolidated Financial Data
Three months ended December 31 Year ended December 31
2018
2017 1
2018
2017 1
Net written premiums
$ 297.6 $ 300.9
$ 1,210.3 $ 1,270.3 Earned
premiums
308.8 318.9
1,238.0 1,276.1 Net investment
income
22.7 22.3
84.9 78.8 Net investment (loss) gain
(67.9 ) 21.3
(49.7 ) 65.1 Other income
from affiliates
0.8 0.6
2.6 2.3
Total revenue
264.4 363.1
1,275.8 1,422.3 (Loss) income before
federal income taxes
(32.5 ) 38.1
12.9 35.0
Federal income tax (benefit) expense
(8.0 )
44.8
0.1 45.7 Net (loss) income
$ (24.5 ) $ (6.7 )
$ 12.8
$ (10.7 ) (Loss) earnings per common share: - basic
$
(0.57 ) $ (0.16 )
$ 0.30 $ (0.25 ) -
diluted
$ (0.57 ) $ (0.16 )
$
0.29 $ (0.25 ) Earnings (loss) per share from operations
(A): - basic
$ 0.68 $ (0.49 )
$ 1.21 $
(1.26 ) - diluted
$ 0.67 $ (0.49 )
$
1.20 $ (1.26 ) Weighted average shares outstanding: - basic
43.1 42.3
42.9 42.1 - diluted
43.1 42.3
43.4 42.1 Return on average equity (LTM)
1.5 %
(1.2 )% Book value per share
$ 19.79 $ 20.63
Dividends paid per share
$ 0.10 $ 0.10
$
0.40 $ 0.40 Total shares outstanding
43.2 42.4
GAAP ratios: Cat loss and ALAE ratio
2.6 2.6
5.8 9.7
Non-cat loss and ALAE ratio
54.2 60.1
58.5 62.3 Loss and LAE ratio
56.8 62.7
64.3 72.0 Expense ratio
37.8 38.0
36.3 35.7 Combined ratio
94.6
100.7
100.6 107.7
(A)Reconciliation of non-GAAP financial
measure:
Net income (loss) from operations Net (loss) income
$
(24.5 ) $ (6.7 )
$ 12.8 $ (10.7 ) Net
investment (loss) gain, net of tax
(53.6 ) 13.8
(39.3 ) 42.3 Net income (loss) from
operations
$ 29.1 $ (20.5 )
$
52.1 $ (53.0 )
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
($ and shares in millions, except per share amounts)
(unaudited) December 31 December 31
2018 2017
1
ASSETS Fixed maturities, available-for-sale, at fair value
(amortized cost $2,188.2 and $2,173.1, respectively)
$
2,159.5 $ 2,192.8 Equity securities
315.0 365.3 Other
invested assets
48.8 56.0 Other invested assets, at cost
5.6 5.6 Notes receivable from affiliate
70.0
70.0 Total investments
2,598.9 2,689.7 Cash
and cash equivalents
59.8 91.5 Accrued investment income and
other assets
32.4 36.5 Deferred policy acquisition costs
101.9 110.3 Reinsurance recoverable on losses and loss
expenses payable
5.5 3.1 Prepaid reinsurance premiums
6.6 6.4 Current federal income taxes
5.9 4.8 Net
deferred federal income taxes
67.7 58.8 Property and
equipment, net
7.1 7.3
Total assets
$ 2,885.8 $ 3,008.4
LIABILITIES Losses and loss expenses payable
$
1,146.8 $ 1,255.6 Unearned premiums
584.2 611.8 Notes
payable (affiliates $15.2 and $15.2, respectively)
122.0
122.1 Pension and postretirement benefits
54.0 64.5 Due to
affiliate
3.1 2.7 Other liabilities
119.1 76.7
Total liabilities 2,029.2 2,133.4
STOCKHOLDERS' EQUITY Common stock, without par
value. Authorized 100.0 shares; 50.0 and 49.2 shares issued,
respectively, at stated value of $2.50 per share
125.0 123.0
Treasury stock, 6.8 and 6.8 shares, respectively, at cost
(117.0 ) (116.8 ) Additional paid-in capital
194.2 171.8 Accumulated other comprehensive income
(58.3 ) 36.7 Retained earnings
712.7
660.3
Total stockholders’ equity 856.6
875.0
Total liabilities and stockholders’ equity
$ 2,885.8 $ 3,008.4
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Condensed Consolidated Statements of Income ($ in
millions, except per share amounts)
(unaudited) Three months ended December 31 Year ended December 31
2018 2017 1
2018
2017 1
Earned premiums
$ 308.8 $ 318.9
$
1,238.0 $ 1,276.1 Net investment income
22.7 22.3
84.9 78.8 Net investment (loss) gain
(67.9 )
21.3
(49.7 ) 65.1 Other income from affiliates
0.8 0.6
2.6 2.3
Total
revenues 264.4 363.1
1,275.8
1,422.3 Losses and loss expenses
175.3 200.1
796.4 918.3 Acquisition and operating expenses
116.8
121.3
449.8 455.2 Interest expense
1.2 1.5
5.7
5.9 Other expenses
3.6 2.1
11.0
7.9
Total expenses 296.9 325.0
1,262.9 1,387.3
(Loss) income before
federal income taxes (32.5 ) 38.1
12.9
35.0 Federal income tax (benefit) expense: Current
— 0.4
(1.1 ) 0.4 Deferred
(8.0 ) 44.4
1.2 45.3 Federal income tax (benefit) expense
(8.0 ) 44.8
0.1 45.7
Net (loss) income $ (24.5 ) $ (6.7 )
$ 12.8 $ (10.7 ) (Loss) earnings per common
share: Basic
$ (0.57 ) $ (0.16 )
$
0.30 $ (0.25 ) Diluted
$ (0.57 )
$ (0.16 )
$ 0.29 $ (0.25 ) Dividends paid per
common share
$ 0.10 $ 0.10
$
0.40 $ 0.40
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Consolidated Statements of Comprehensive Income ($ in
millions) (unaudited) Three months
ended December 31 Year ended December 31
2018 2017 1
2018 2017 1 Net (loss) income
$ (24.5 )
$ (6.7 )
$ 12.8 $ (10.7 ) Other comprehensive income
(loss), net of tax: Net unrealized holding gain (loss) on
available-for-sale investments: Unrealized holding gain (loss)
15.2 3.4
(46.4 ) 69.0 Reclassification
adjustments for gains realized in net income
(0.3 )
(21.3 )
(2.0 ) (65.1 ) Income tax (expense) benefit
(3.2 ) 6.9
10.1 (0.7 )
Total net unrealized holding gain (loss)
on available- for-sale investments
11.7 (11.0 )
(38.3 ) 3.2 Net
unrecognized benefit plan obligations: Net actuarial loss arising
during the period
(2.8 ) (1.0 )
(2.8 )
(1.0 ) Reclassification adjustments for amortization to net (loss)
income: Prior service credit
(1.4 ) (1.4 )
(5.5 ) (5.5 ) Net actuarial loss
2.1 1.9
8.5 8.0 Income tax expense (benefit)
0.4 0.3
(0.1 ) (0.5 ) Total net unrecognized benefit
plan obligations
(1.7 ) (0.2 )
0.1 1.0
Other comprehensive income (loss)
10.0 (11.2 )
(38.2 ) 4.2
Comprehensive loss $
(14.5 ) $ (17.9 )
$ (25.4 ) $
(6.5 )
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Condensed Consolidated Statement of Stockholders'
Equity ($ and shares in millions) (unaudited)
Year Ended Year Ended
December 31 December 31
2018 2017 1
Common shares: Balance at beginning of
year
49.2 48.6 Issuance of shares
0.8 0.6
Balance at end of year
50.0 49.2
Treasury shares: Balance at beginning of year and year ended
(6.8 ) (6.8 )
Common stock: Balance at
beginning of year
$ 123.0 $ 121.6 Issuance of shares
2.0 1.4 Balance at end of year
125.0
123.0
Treasury stock: Balance at
beginning of year
$ (116.8 ) $ (116.5 ) Shares
acquired on stock award exercises
(0.2 ) (0.3 )
Balance at end of year
(117.0 ) (116.8 )
Additional paid-in capital: Balance at beginning of year
$ 171.8 $ 159.9 Issuance of common stock
13.3
8.8 Stock awards granted
9.1 3.1 Balance at
end of year
194.2 171.8
Accumulated
other comprehensive (loss) income: Balance at beginning of year
$ 36.7 $ 32.5
Cumulative effect of change in accounting
for equity securities and other invested assets and
reclassification of stranded tax effects as of January 1, 2018
(56.8 ) — Adjusted beginning balance at
January 1, 2018
(20.1 ) — Change in unrealized (loss)
gain on available-for-sale investments, net of tax
(38.3
) 3.2 Change in unrecognized benefit plan obligations, net
of tax
0.1 1.0 Balance at end of year
(58.3 ) 36.7
Retained earnings:
Balance at beginning of year
$ 660.3 $ 687.9
Cumulative effect of change in accounting
for equity securities and other invested assets and
reclassification of stranded tax effects as of January 1, 2018
56.8 — Adjusted beginning balance at January
1, 2018
717.1 — Net income (loss)
12.8 (10.7 )
Dividends declared (affiliates $10.4 and $10.4, respectively)
(17.2 ) (16.9 ) Balance at end of year
712.7
660.3
Total stockholders’ equity at end of
year $ 856.6 $ 875.1
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Condensed Consolidated Statements of Cash Flow ($
millions) (unaudited) Year ended December 31
2018 2017 1
Cash flows from operating activities: Net
income (loss)
$ 12.8 $ (10.7 ) Adjustments to
reconcile net income (loss) to net cash (used in) provided by
operating activities: Depreciation and amortization, net
8.9
12.5 Share-based compensation
11.1 4.2 Net investment loss
(gain)
49.7 (65.1 ) Changes in operating assets and
liabilities: Deferred policy acquisition costs
8.4 11.5
Accrued investment income and other assets
3.9 3.5
Postretirement and pension benefits
(10.5 ) (9.0 )
Other liabilities and due to/from affiliate, net
41.1 6.2
Reinsurance recoverable on losses and loss expenses payable and
prepaid reinsurance premiums
(2.6 ) 0.2 Losses and
loss expenses payable
(108.8 ) 74.0 Unearned premiums
(27.6 ) (6.0 ) Deferred tax expense on share-based
awards
0.3 — Federal income taxes
(0.1 ) 46.6
Net cash (used in) provided by operating activities
(13.4 ) 67.9
Cash flows from investing
activities: Purchases of fixed maturities available-for-sale
(349.6 ) (505.4 ) Purchases of equity securities
available-for-sale
(91.4 ) (185.9 ) Purchases of
other invested assets
(1.8 ) (1.4 ) Maturities, calls
and principal reductions of fixed maturities available-for-sale
229.8 233.6 Sales of fixed maturities available-for-sale
98.0 184.8 Sales of equity securities available-for-sale
97.8 252.7 Sales of other invested assets available-for-sale
1.2 1.1
Net cash used in investing
activities (16.0 ) (20.5 )
Cash flows from
financing activities: Proceeds from issuance of common stock
15.4 10.2 Payments to acquire treasury shares
(0.2
) (0.3 ) Payment of dividends
(17.1 ) (16.9 )
Payment of credit facility issue costs
(0.4 ) —
Net cash used in financing activities (2.3
) (7.0 ) Net (decrease) increase in cash and cash
equivalents
(31.7 ) 40.4 Cash and cash equivalents at
beginning of period
91.5 51.1
Cash and cash
equivalents at end of period $ 59.8 $ 91.5
Supplemental
disclosures:
Federal income tax refund
$ — $ (1.6 )
Interest paid (affiliates $1.0 and $0.8, respectively)
$
5.7 $ 5.7
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Net Investment Income ($ in millions)
unaudited 12/31/2017 3/31/2018 6/30/2018
9/30/2018
12/31/2018 Quarter to Date Gross investment
income: Fixed maturities $ 14.5 $ 15.0 $ 14.9 $ 15.1
$
15.0 TIPS 1.6 1.1 2.0 1.3
0.9 Total fixed maturities 16.1 16.1 16.9
16.4
15.9 Equity securities 4.8 2.5 3.1 3.0
4.8 Other 1.7 1.7 1.8 1.7
2.0 Total gross investment income 22.6 20.3 21.8 21.1
22.7 Less: Investment expenses 0.3 0.4 0.3
0.3
— Net investment income $ 22.3 $
19.9 $ 21.5 $ 20.8
$ 22.7
Year to Date Gross investment income: Fixed maturities $
58.1 $ 15.0 $ 29.9 $ 45.0
$ 60.0 TIPS 5.1 1.1
3.1 4.4
5.3 Total fixed maturities 63.2
16.1 33.0 49.4
65.3 Equity
securities 10.5 2.5 5.6 8.6
13.4 Other 6.3 1.7
3.5 5.2
7.2 Total gross investment income 80.0
20.3 42.1 63.2
85.9 Less: Investment expenses 1.2 0.4
0.7 1.0
1.0 Net investment income $
78.8 $ 19.9 $ 41.4 $ 62.2
$
84.9 12/31/2017 3/31/2018 6/30/2018 9/30/2018
12/31/2018 TIPS, fair value $ 155.8 $ 147.4 $ 156.5 $ 143.8
$ 142.3 TIPS, book value $ 146.5 $ 140.7 $ 150.6 $
140.8
$ 141.2
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Net Investment (Loss) Gain ($ in millions) unaudited
Three months ended December 31 Year ended December 31
2018
2017
2018 2017 Realized gains: Fixed maturities
$
0.3 $ 0.1
$ 2.0 $ 2.8 Equity securities
0.6 21.5
6.6 66.7 Other invested assets
—
0.1
— 0.2 Total realized gains
0.9 21.7
8.6 69.7 Realized losses on the sales of
securities: Equity securities: Sales of equity securities
(0.3 ) (0.3 )
(0.9 ) (1.1 ) OTTI
— —
— (3.5 ) Total realized
losses
(0.3 ) (0.3 )
(0.9 ) (4.6 ) Net
realized gains on investments
$ 0.6 $ 21.4
$ 7.7 $ 65.1 Net
unrealized loss on investments(1): Equity securities
(62.5
) —
(49.7 ) — Other invested assets
(6.0 ) —
(7.7 ) — Net
unrealized loss on investments
(68.5 ) —
(57.4 ) — Net investment (loss) gain
$
(67.9 ) $ 21.4
$ (49.7 )
$ 65.1 (1) Unrealized holding losses recognized during the
period on securities held at the reporting date
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Income Taxes ($ in millions)
unaudited
The following table sets forth the tax
effects of temporary differences that giverise to significant
portions of deferred tax assets and deferred tax liabilities:
December 31 December 31
2018 2017 1 Deferred
tax assets: Unearned premiums not currently deductible
$
24.3 $ 25.5 Losses and loss expenses payable discounting
19.9 22.0 Postretirement and pension benefits
11.3
13.6 Net unrealized holding losses on investments
6.1 —
Realized loss on other-than-temporary impairment
1.9 2.1
Other liabilities
14.8 9.2 Net operating loss carryforward
15.1 34.3 Tax credit carryforwards
2.7 3.7 Other
1.7 2.5 Total deferred tax assets
97.8
112.9 Deferred tax liabilities: Deferral of policy acquisition
costs
21.4 23.1 Net unrealized holding gains on investments
— 20.3 Other
8.7 10.7 Total deferred
tax liabilities
30.1 54.1 Net deferred federal
income taxes
$ 67.7 $ 58.8 The
following table sets forth the components of federal income taxes:
Three months ended December 31 Year ended December 31
2018 2017 1
2018 2017 1 (Loss) income before federal
income taxes
$ (32.5 ) $ 38.1
$
12.9 $ 35.0 Federal income tax (benefit) expense: Current
— 0.4
(1.1 ) 0.4 Deferred (A)
(8.0
) 44.4
1.2 45.3
Total federal
income tax (benefit) expense (8.0 ) 44.8
0.1 45.7
Net (loss) income $
(24.5 ) $ (6.7 )
$ 12.8 $ (10.7
)
(A) Deferred federal income taxes for the
three months and year ended December 31, 2017 include $36.4 million
of deferred
tax expense as a result of the revaluation
of our net deferred tax asset to the new corporate tax rate of
21.0% under the
legislation commonly known as the Tax Cuts
and Jobs Act of 2017.
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions)
Three months ended December 31, 2018
Personal Auto Homeowners Other Personal Total Net written
premiums
$ 106.0 $ 70.1 $
8.5 $ 184.6 Net earned premiums
105.9
66.8 7.0 179.7 Losses and LAE incurred: Cat
loss and ALAE
0.1 3.2 0.3 3.6 Non-cat
loss and ALAE Prior accident years non-cat loss and ALAE
(5.9 ) (0.1 ) — (6.0
) Current accident year non-cat loss and ALAE
72.2
24.7 4.2 101.1
Total non-cat loss and ALAE
66.3 24.6
4.2 95.1 Total Loss and ALAE
66.4 27.8 4.5 98.7 ULAE
7.2
3.7 0.2 11.1 Total
Loss and LAE
73.6 31.5 4.7 109.8
Underwriting expenses
33.2 25.7
3.1 62.0 Net underwriting (loss) gain
$ (0.9 ) $ 9.6 $
(0.8 ) $ 7.9 Cat loss and
ALAE ratio
0.1 % 4.8 % 5.5
% 2.0 % Non-cat loss and ALAE ratio Prior
accident years non-cat loss and ALAE ratio
(5.6 )%
(0.2 )% 0.2 % (3.3 )%
Current accident year non-cat loss and ALAE ratio
68.1
% 37.1 % 59.3 % 56.3
% Total non-cat loss and ALAE ratio
62.5 %
36.9 % 59.5 % 53.0 %
Total Loss and ALAE ratio
62.6 % 41.7 %
65.0 % 55.0 % ULAE ratio
6.8
% 5.5 % 2.4 % 6.1
% Total Loss and LAE ratio
69.4 % 47.2
% 67.4 % 61.1 % Expense ratio
31.3 % 36.7 % 36.4 %
33.6 % Combined ratio
100.7 %
83.9 % 103.8 % 94.7 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions) Three months ended December 31, 2017
Personal Auto Homeowners Other Personal Total Net written
premiums $ 97.9 $ 59.0 $ 5.2 $ 162.1 Net earned premiums 89.2 56.1
4.7 150.0 Losses and LAE incurred: Cat loss and ALAE (0.5 ) 0.2 —
(0.3 ) Non-cat loss and ALAE Prior accident years non-cat loss and
ALAE (2.1 ) (0.4 ) (1.1 ) (3.6 ) Current accident year non-cat loss
and ALAE 62.7 15.7 3.1 81.5 Total
non-cat loss and ALAE 60.6 15.3 2.0 77.9
Total Loss and ALAE 60.1 15.5 2.0 77.6 ULAE 5.9 3.5
0.3 9.7 Total Loss and LAE 66.0 19.0 2.3 87.3
Underwriting expenses 30.8 21.3 2.2 54.3
Net underwriting (loss) gain $ (7.6 ) $ 15.8 $ 0.2
$ 8.4 Cat loss and ALAE ratio (0.6 )% 0.3 %
0.4 % (0.2 )% Non-cat loss and ALAE ratio Prior accident years
non-cat loss and ALAE ratio (2.4 )% (0.8 )% (24.6 )% (2.5 )%
Current accident year non-cat loss and ALAE ratio 70.3 % 28.1 %
65.6 % 54.4 % Total non-cat loss and ALAE ratio 67.9 % 27.3 % 41.0
% 51.9 % Total Loss and ALAE ratio 67.3 % 27.6 % 41.4 % 51.7 % ULAE
ratio 6.7 % 6.3 % 6.8 % 6.5 % Total Loss and LAE ratio 74.0 % 33.9
% 48.2 % 58.2 % Expense ratio 31.5 % 36.2 % 39.8 % 33.4 % Combined
ratio 105.5 % 70.1 % 88.0 % 91.6 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions)
Twelve months ended December 31, 2018
Personal Auto Homeowners Other Personal Total Net written
premiums
$ 424.8 $ 273.1 $
28.6 $ 726.5 Net earned premiums
402.0
248.8 23.1 673.9 Losses and LAE incurred: Cat
loss and ALAE
4.9 41.3 2.5 48.7 Non-cat
loss and ALAE Prior accident years non-cat loss and ALAE
(24.4 ) (7.3 ) (1.1 )
(32.8 ) Current accident year non-cat loss and ALAE
265.8 106.6 12.2
384.6 Total non-cat loss and ALAE
241.4
99.3 11.1 351.8 Total
Loss and ALAE
246.3 140.6 13.6 400.5
ULAE
24.9 16.1 0.8
41.8 Total Loss and LAE
271.2 156.7
14.4 442.3 Underwriting expenses
126.1
91.6 10.6 228.3 Net
underwriting gain (loss)
$ 4.7 $
0.5 $ (1.9 ) $ 3.3
Cat loss and ALAE ratio
1.2 %
16.6 % 11.0 % 7.2 %
Non-cat loss and ALAE ratio Prior accident years non-cat loss and
ALAE ratio
(6.1 )% (2.9 )% (4.9
)% (4.9 )% Current accident year non-cat loss
and ALAE ratio
66.1 % 42.9 %
52.8 % 57.1 % Total non-cat loss and
ALAE ratio
60.0 % 40.0 % 47.9
% 52.2 % Total Loss and ALAE ratio
61.2
% 56.6 % 58.9 % 59.4
% ULAE ratio
6.2 % 6.4 %
3.3 % 6.2 % Total Loss and LAE ratio
67.4 % 63.0 % 62.2 %
65.6 % Expense ratio
29.7 % 33.6
% 36.9 % 31.4 % Combined ratio
97.1 % 96.6 % 99.1 %
97.0 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions) Twelve months ended December 31, 2017
Personal Auto1 Homeowners Other Personal Total1 Net written
premiums $ 363.2 $ 227.9 $ 18.9 $ 610.0 Net earned premiums 341.0
220.7 18.9 580.6 Losses and LAE incurred: Cat loss and ALAE 7.9
34.4 1.1 43.4 Non-cat loss and ALAE Prior accident years non-cat
loss and ALAE (4.4 ) 1.5 1.3 (1.6 ) Current accident year non-cat
loss and ALAE 241.6 87.7 7.5 336.8
Total non-cat loss and ALAE 237.2 89.2 8.8
335.2 Total Loss and ALAE 245.1 123.6 9.9 378.6 ULAE 21.7
14.8 1.2 37.7 Total Loss and LAE 266.8
138.4 11.1 416.3 Underwriting expenses 104.2 76.0 7.1
187.3 Net underwriting (loss) gain $ (30.0 ) $ 6.3
$ 0.7 $ (23.0 ) Cat loss and ALAE ratio 2.3 %
15.6 % 5.7 % 7.5 % Non-cat loss and ALAE ratio Prior accident years
non-cat loss and ALAE ratio (1.3 )% 0.7 % 7.0 % (0.3 )% Current
accident year non-cat loss and ALAE ratio 70.8 % 39.7 % 39.5 % 58.0
% Total non-cat loss and ALAE ratio 69.5 % 40.4 % 46.5 % 57.7 %
Total Loss and ALAE ratio 71.8 % 56.0 % 52.2 % 65.2 % ULAE ratio
6.4 % 6.7 % 6.5 % 6.5 % Total Loss and LAE ratio 78.2 % 62.7 % 58.7
% 71.7 % Expense ratio 28.7 % 33.4 % 37.4 % 30.7 % Combined ratio
106.9 % 96.1 % 96.1 % 102.4 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
SAP Commercial Insurance Segment Results (unaudited)
($ in millions) Small Middle
Three months ended Commercial Commercial
Market Workers' Farm & Other
December 31, 2018 Auto
Package Commercial Comp Ranch Commercial Total Net written
premiums
$ 18.0 $ 28.1 $
28.0 $ 22.9 $ 11.9 $
4.4 $ 113.3 Net earned premiums
19.2
29.7 29.4 24.0 11.6 4.7
118.6 Losses and LAE incurred: Cat loss and ALAE
—
0.9 1.4 — 0.9 0.1 3.3
Non-cat loss and ALAE Prior accident years non-cat loss and ALAE
(2.7 ) (3.1 ) (6.9 )
(4.9 ) (0.5 ) 0.8 (17.3
) Current accident year non-cat loss and ALAE
12.4
13.5 15.6 13.2
5.0 2.2 61.9 Total
non-cat loss and ALAE
9.7 10.4
8.7 8.3 4.5 3.0
44.6 Total Loss and ALAE
9.7
11.3 10.1 8.3 5.4 3.1
47.9 ULAE
1.0 1.4 1.0
1.6 0.5 0.3
5.8 Total Loss and LAE
10.7 12.7
11.1 9.9 5.9 3.4 53.7
Underwriting expenses
9.4 13.2
13.4 7.3 5.6 2.1
51.0 Net underwriting (loss) gain
$
(0.9 ) $ 3.8 $ 4.9
$ 6.8 $ 0.1
$ (0.8 ) $ 13.9
Cat loss and ALAE ratio
— % 3.0 %
4.8 % — % 7.3 %
3.0 % 2.8 % Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio
(14.4
)% (10.4 )% (23.3 )%
(20.2 )% (4.8 )% 16.6 %
(14.6 )% Current accident year non-cat loss and ALAE
ratio
64.7 % 45.4 % 52.9
% 55.0 % 43.7 % 46.7
% 52.2 % Total non-cat loss and ALAE ratio
50.3 % 35.0 % 29.6 %
34.8 % 38.9 % 63.3 %
37.6 % Total Loss and ALAE ratio
50.3 %
38.0 % 34.4 % 34.8 %
46.2 % 66.3 % 40.4 % ULAE
ratio
5.1 % 4.8 % 3.5 %
6.6 % 4.0 % 5.7 %
4.9 % Total Loss and LAE ratio
55.4 %
42.8 % 37.9 % 41.4 %
50.2 % 72.0 % 45.3 %
Expense ratio
52.3 % 46.8 % 47.8
% 32.2 % 47.6 % 47.7
% 45.1 % Combined ratio
107.7 %
89.6 % 85.7 % 73.6 %
97.8 % 119.7 % 90.4 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions) Small Middle Three months ended Commercial
Commercial Market Workers' Farm & Other December 31, 2017 Auto
Package Commercial Comp Ranch Commercial Total Net written
premiums $ 16.6 $ 30.1 $ 25.9 $ 22.0 $ 11.1 $ 3.3 $ 109.0 Net
earned premiums 18.6 30.9 27.9 22.5 10.5 3.5 113.9 Losses and LAE
incurred: Cat loss and ALAE (0.1 ) 0.4 0.8 — 0.2 — 1.3 Non-cat loss
and ALAE Prior accident years non-cat loss and ALAE (3.3 ) (3.5 )
(2.1 ) (2.0 ) 0.2 (0.2 ) (10.9 ) Current accident year non-cat loss
and ALAE 14.0 17.6 14.9 14.6 7.6
2.9 71.6 Total non-cat loss and ALAE 10.7 14.1
12.8 12.6 7.8 2.7 60.7
Total Loss and ALAE 10.6 14.5 13.6 12.6 8.0 2.7 62.0 ULAE 1.2
1.8 1.3 1.6 0.5 0.5 6.9
Total Loss and LAE 11.8 16.3 14.9 14.2 8.5 3.2 68.9
Underwriting expenses 8.1 14.8 11.5 7.4
4.8 2.0 48.6 Net underwriting (loss) gain $
(1.3 ) $ (0.2 ) $ 1.5 $ 0.9 $ (2.8 ) $ (1.7 ) $ (3.6
) Cat loss and ALAE ratio (0.5 )% 1.3 % 3.2 % — % 2.0 % — %
1.2 % Non-cat loss and ALAE ratio Prior accident years non-cat loss
and ALAE ratio (17.5 )% (11.3 )% (7.4 )% (8.9 )% 1.5 % (5.8 )% (9.6
)% Current accident year non-cat loss and ALAE ratio 74.9 % 56.7 %
53.0 % 64.7 % 72.6 % 87.7 % 62.9 % Total non-cat loss and ALAE
ratio 57.4 % 45.4 % 45.6 % 55.8 % 74.1 % 81.9 % 53.3 % Total Loss
and ALAE ratio 56.9 % 46.7 % 48.8 % 55.8 % 76.1 % 81.9 % 54.5 %
ULAE ratio 6.6 % 6.1 % 4.7 % 7.4 % 4.8 % 11.0 % 6.1 % Total Loss
and LAE ratio 63.5 % 52.8 % 53.5 % 63.2 % 80.9 % 92.9 % 60.6 %
Expense ratio 49.4 % 49.1 % 44.3 % 33.4 % 43.3 % 61.7 % 44.6 %
Combined ratio 112.9 % 101.9 % 97.8 % 96.6 % 124.2 % 154.6 % 105.2
%
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions) Small Middle
Twelve months ended
Commercial Commercial Market Workers' Farm & Other
December
31, 2018 Auto Package Commercial Comp Ranch Commercial Total
Net written premiums
$ 77.1 $
119.2 $ 118.8 $ 89.0 $
46.8 $ 18.9 $ 469.8 Net earned
premiums
75.1 120.9 114.4 90.7
45.0 18.2 464.3 Losses and LAE incurred: Cat
loss and ALAE
0.2 10.7 7.2 — 3.3
0.2 21.6 Non-cat loss and ALAE Prior accident years
non-cat loss and ALAE
(8.4 ) (9.6 )
(12.2 ) (13.3 ) (2.7 )
(0.7 ) (46.9 ) Current accident year
non-cat loss and ALAE
47.3 68.8
71.5 56.5 22.1 8.2
274.4 Total non-cat loss and ALAE
38.9
59.2 59.3 43.2
19.4 7.5 227.5 Total Loss
and ALAE
39.1 69.9 66.5 43.2
22.7 7.7 249.1 ULAE
4.2
6.2 5.6 7.2 1.8
1.1 26.1 Total Loss and LAE
43.3 76.1 72.1 50.4 24.5
8.8 275.2 Underwriting expenses
35.8
53.6 49.5 29.1
21.3 8.2 197.5 Net
underwriting (loss) gain
$ (4.0 ) $
(8.8 ) $ (7.2 ) $
11.2 $ (0.8 ) $
1.2 $ (8.4 ) Cat loss and
ALAE ratio
0.3 % 8.8 % 6.3
% — % 7.3 % 1.2 %
4.6 % Non-cat loss and ALAE ratio Prior accident
years non-cat loss and ALAE ratio
(11.2 )%
(7.9 )% (10.6 )% (14.7 )%
(6.0 )% (4.1 )% (10.1 )%
Current accident year non-cat loss and ALAE ratio
63.0
% 56.9 % 62.5 % 62.3
% 49.2 % 45.3 % 59.1
% Total non-cat loss and ALAE ratio
51.8 %
49.0 % 51.9 % 47.6 %
43.2 % 41.2 % 49.0 %
Total Loss and ALAE ratio
52.1 % 57.8 %
58.2 % 47.6 % 50.5 %
42.4 % 53.6 % ULAE ratio
5.6
% 5.1 % 4.9 % 7.9
% 3.9 % 5.9 % 5.6
% Total Loss and LAE ratio
57.7 % 62.9
% 63.1 % 55.5 % 54.4
% 48.3 % 59.2 % Expense ratio
46.5 % 44.9 % 41.6 %
32.7 % 45.6 % 43.3 %
42.0 % Combined ratio
104.2 %
107.8 % 104.7 % 88.2 %
100.0 % 91.6 % 101.2 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions) Small Middle Twelve months ended Commercial
Commercial Market Workers' Farm & Other December 31, 2017 Auto
Package Commercial Comp Ranch Commercial Total Net written
premiums $ 73.5 $ 123.8 $ 111.1 $ 88.4 $ 42.6 $ 14.2 $ 453.6 Net
earned premiums 76.2 127.4 109.1 88.8 39.6 14.6 455.7 Losses and
LAE incurred: Cat loss and ALAE 0.8 12.4 8.4 — 5.1 — 26.7 Non-cat
loss and ALAE Prior accident years non-cat loss and ALAE (8.9 )
(11.4 ) (8.2 ) (8.9 ) (0.9 ) (5.7 ) (44.0 ) Current accident year
non-cat loss and ALAE 53.6 72.5 58.8 59.1
23.9 8.3 276.2 Total non-cat loss and
ALAE 44.7 61.1 50.6 50.2 23.0
2.6 232.2 Total Loss and ALAE 45.5 73.5 59.0 50.2
28.1 2.6 258.9 ULAE 4.5 6.1 4.8 6.7 2.1
1.1 25.3 Total Loss and LAE 50.0 79.6 63.8
56.9 30.2 3.7 284.2 Underwriting expenses 31.5 55.7
42.5 28.4 16.3 7.7 182.1 Net
underwriting (loss) gain $ (5.3 ) $ (7.9 ) $ 2.8 $ 3.5
$ (6.9 ) $ 3.2 $ (10.6 ) Cat loss and ALAE
ratio 1.1 % 9.7 % 7.7 % — % 13.0 % 0.1 % 5.9 % Non-cat loss and
ALAE ratio Prior accident years non-cat loss and ALAE ratio (11.7
)% (9.0 )% (7.5 )% (10.0 )% (2.2 )% (38.7 )% (9.6 )% Current
accident year non-cat loss and ALAE ratio 70.3 % 57.0 % 53.9 % 66.5
% 60.1 % 57.1 % 60.5 % Total non-cat loss and ALAE ratio 58.6 %
48.0 % 46.4 % 56.5 % 57.9 % 18.4 % 50.9 % Total Loss and ALAE ratio
59.7 % 57.7 % 54.1 % 56.5 % 70.9 % 18.5 % 56.8 % ULAE ratio 5.9 %
4.8 % 4.4 % 7.6 % 5.5 % 7.0 % 5.6 % Total Loss and LAE ratio 65.6 %
62.5 % 58.5 % 64.1 % 76.4 % 25.5 % 62.4 % Expense ratio 43.0 % 45.0
% 38.3 % 32.1 % 38.2 % 54.4 % 40.2 % Combined ratio 108.6 % 107.5 %
96.8 % 96.2 % 114.6 % 79.9 % 102.6 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Statutory Personal & Commercial Insurance Segment
Results ($ in millions) unaudited
4Q 2018
4Q 2017
YTD 2018 YTD 2017 1 Net written
premiums
$ 297.9 $ 271.1
$ 1,196.3 $
1,063.6 Net earned premiums
298.3 263.9
1,138.2
1,036.3 Losses and LAE incurred: Cat loss and ALAE
6.9 1.0
70.3 70.1 Non-cat loss and ALAE Prior accident years non-cat
loss and ALAE
(23.3 ) (14.5 )
(79.7 )
(45.6 ) Current accident year non-cat loss and ALAE
163.0
153.1
659.0 613.0 Total non-cat
loss and ALAE
139.7 138.6
579.3
567.4 Total Loss and ALAE
146.6 139.6
649.6
637.5 ULAE
16.9 16.6
67.9 63.0
Total Loss and LAE
163.5 156.2
717.5 700.5
Underwriting expenses
113.0 102.9
425.8
369.4 Net underwriting gain (loss)
$
21.8 $ 4.8
$ (5.1 ) $
(33.6 ) Cat loss and ALAE ratio
2.3 % 0.4 %
6.2 % 6.8 % Non-cat loss and ALAE ratio Prior
accident years non-cat loss and ALAE ratio
(7.8 )%
(5.5 )%
(7.0 )% (4.4 )% Current accident year non-cat
loss and ALAE ratio
54.7 % 58.0 %
57.9
% 59.1 % Total non-cat loss and ALAE ratio
46.9
% 52.5 %
50.9 % 54.7 % Total Loss and ALAE
ratio
49.2 % 52.9 %
57.1 % 61.5 % ULAE
ratio
5.6 % 6.3 %
5.9 % 6.1 % Total
Loss and LAE ratio
54.8 % 59.2 %
63.0 %
67.6 % Expense ratio
38.0 % 37.9 %
35.6
% 34.7 % Combined ratio
92.8 % 97.1 %
98.6 % 102.3 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions)
Three months ended December 31, 2018
E&S Property E&S Casualty Programs Total Net written
premiums
$ (0.1 ) $ (0.2
) $ — $ (0.3 ) Net earned
premiums
0.4 9.6 0.5 10.5 Losses and
LAE incurred: Cat loss and ALAE
1.2 — —
1.2 Non-cat loss and ALAE Prior accident years non-cat loss
and ALAE
(0.7 ) (0.7 ) 0.3
(1.1 ) Current accident year non-cat loss and ALAE
0.3 10.5 0.4 11.2
Total non-cat loss and ALAE
(0.4 ) 9.8
0.7 10.1 Total Loss and ALAE
0.8 9.8 0.7 11.3 ULAE
0.1
0.9 — 1.0 Total Loss and
LAE
0.9 10.7 0.7 12.3 Underwriting
expenses
0.7 1.8 (0.2 )
2.3 Net underwriting loss
$ (1.2
) $ (2.9 ) $ —
$ (4.1 ) Cat loss and ALAE ratio
303.5 % — % (11.4 )%
11.5 % Non-cat loss and ALAE ratio Prior accident
years non-cat loss and ALAE ratio
(176.1 )%
(6.9 )% 64.8 % (10.1 )%
Current accident year non-cat loss and ALAE ratio
85.7
% 109.3 % 58.8 % 105.9
% Total non-cat loss and ALAE ratio
(90.4 )%
102.4 % 123.6 % 95.8 %
Total Loss and ALAE ratio
213.1 % 102.4
% 112.2 % 107.3 % ULAE ratio
22.0 % 10.3 % 4.9 %
10.5 % Total Loss and LAE ratio
235.1 %
112.7 % 117.1 % 117.8 %
Expense ratio
(1,478.1 )% (822.4 )%
859.4 % (765.6 )% Combined ratio
(1,243.0 )% (709.7 )% 976.5
% (647.8 )%
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions) Three months ended December 31, 2017 E&S
Property E&S Casualty Programs1 Total1 Net written
premiums $ (1.3 ) $ 26.7 $ 4.4 $ 29.8 Net earned premiums 9.1 27.0
18.9 55.0 Losses and LAE incurred: Cat loss and ALAE 7.3 (0.2 ) 0.2
7.3 Non-cat loss and ALAE Prior accident years non-cat loss and
ALAE — 1.5 0.1 1.6 Current accident year non-cat loss and ALAE 1.2
18.2 13.4 32.8 Total non-cat loss and
ALAE 1.2 19.7 13.5 34.4 Total Loss and
ALAE 8.5 19.5 13.7 41.7 ULAE 0.3 0.8 1.5 2.6
Total Loss and LAE 8.8 20.3 15.2 44.3 Underwriting expenses
2.4 9.7 2.6 14.7 Net underwriting
(loss) gain $ (2.1 ) $ (3.0 ) $ 1.1 $ (4.0 ) Cat loss
and ALAE ratio 80.7 % (0.7 )% 1.0 % 13.4 % Non-cat loss and ALAE
ratio Prior accident years non-cat loss and ALAE ratio 0.2 % 5.6 %
0.4 % 2.9 % Current accident year non-cat loss and ALAE ratio 13.8
% 67.4 % 71.3 % 59.9 % Total non-cat loss and ALAE ratio 14.0 %
73.0 % 71.7 % 62.8 % Total Loss and ALAE ratio 94.7 % 72.3 % 72.7 %
76.2 % ULAE ratio 1.7 % 3.1 % 7.8 % 4.5 % Total Loss and LAE ratio
96.4 % 75.4 % 80.5 % 80.7 % Expense ratio (180.1 )% 36.4 % 60.7 %
49.5 % Combined ratio (83.7 )% 111.8 % 141.2 % 130.2 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions)
Twelve months ended December 31, 2018
E&S Property E&S Casualty Programs Total Net written
premiums
$ (5.6 ) $ 20.5
$ (0.9 ) $ 14.0 Net earned
premiums
10.2 69.8 19.8 99.8 Losses and
LAE incurred: Cat loss and ALAE
1.7 — (0.3
) 1.4 Non-cat loss and ALAE Prior accident years
non-cat loss and ALAE
(0.8 ) 2.7 1.2
3.1 Current accident year non-cat loss and ALAE
3.6
53.0 14.0 70.6
Total non-cat loss and ALAE
2.8 55.7
15.2 73.7 Total Loss and ALAE
4.5 55.7 14.9 75.1 ULAE
0.3
3.4 1.8 5.5 Total
Loss and LAE
4.8 59.1 16.7 80.6
Underwriting expenses
4.0 12.9
1.9 18.8 Net underwriting gain (loss)
$ 1.4 $ (2.2 ) $
1.2 $ 0.4 Cat loss and
ALAE ratio
17.0 % — % (1.7
)% 1.4 % Non-cat loss and ALAE ratio Prior
accident years non-cat loss and ALAE ratio
(8.0 )%
3.9 % 6.0 % 3.1 % Current
accident year non-cat loss and ALAE ratio
35.6 %
76.0 % 70.6 % 70.8 %
Total non-cat loss and ALAE ratio
27.6 % 79.9
% 76.6 % 73.9 % Total Loss and
ALAE ratio
44.6 % 79.9 % 74.9
% 75.3 % ULAE ratio
2.9 %
4.9 % 9.2 % 5.5 % Total
Loss and LAE ratio
47.5 % 84.8 %
84.1 % 80.8 % Expense ratio
(71.5 )% 63.1 % (213.7 )%
133.7 % Combined ratio
(24.0 )%
147.9 % (129.6 )% 214.5 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
($ in millions) Twelve months ended December 31, 2017
E&S Property1 E&S Casualty Programs1 Total1 Net
written premiums $ 30.1 $ 110.3 $ 66.3 $ 206.7 Net earned premiums
40.5 103.1 96.2 239.8 Losses and LAE incurred: Cat loss and ALAE
52.6 0.1 1.2 53.9 Non-cat loss and ALAE Prior accident years
non-cat loss and ALAE 3.0 0.5 0.7 4.2 Current accident year non-cat
loss and ALAE 9.6 71.5 70.6 151.7 Total
non-cat loss and ALAE 12.6 72.0 71.3 155.9
Total Loss and ALAE 65.2 72.1 72.5 209.8 ULAE 0.1 3.7
5.7 9.5 Total Loss and LAE 65.3 75.8 78.2
219.3 Underwriting expenses 17.1 39.2 20.2
76.5 Net underwriting loss $ (41.9 ) $ (11.9 ) $ (2.2 ) $
(56.0 ) Cat loss and ALAE ratio 130.1 % 0.1 % 1.2 % 22.5 %
Non-cat loss and ALAE ratio Prior accident years non-cat loss and
ALAE ratio 7.5 % 0.4 % 0.7 % 1.7 % Current accident year non-cat
loss and ALAE ratio 23.7 % 69.4 % 73.7 % 63.5 % Total non-cat loss
and ALAE ratio 31.2 % 69.8 % 74.4 % 65.2 % Total Loss and ALAE
ratio 161.3 % 69.9 % 75.6 % 87.7 % ULAE ratio — % 3.6 % 5.9 % 3.9 %
Total Loss and LAE ratio 161.3 % 73.5 % 81.5 % 91.6 % Expense ratio
57.0 % 35.5 % 30.4 % 37.0 % Combined ratio 218.3 % 109.0 % 111.9 %
128.6 %
STATE AUTO FINANCIAL CORPORATION AND
SUBSIDIARIES
Statutory Insurance Segment Results ($ in millions)
unaudited
4Q 2018 4Q 2017 1
YTD
2018 YTD 2017 1 Net written premiums
$
297.6 $ 300.9
$ 1,210.3 $ 1,270.3 Net earned
premiums
308.8 318.9
1,238.0 1,276.1 Losses and LAE
incurred: Cat loss and ALAE
8.1 8.3
71.7 124.0 Prior
accident years non-cat loss and ALAE
(24.4 ) (12.9 )
(76.6 ) (41.4 ) Current accident year non-cat loss
and ALAE
174.2 185.9
729.6 764.7
Non-cat loss and ALAE
149.8 173.0
653.0 723.3 Total Loss and ALAE
157.9
181.3
724.7 847.3 ULAE
17.9 19.2
73.4 72.5 Total Loss and LAE
175.8
200.5
798.1 919.8 Underwriting expenses
115.3
117.6
444.6 445.9 Net underwriting gain
(loss)
$ 17.7 $ 0.8
$
(4.7 ) $ (89.6 ) Cat loss and ALAE ratio
2.6 % 2.6 %
5.8 % 9.7 % Non-cat loss
and ALAE ratio Prior accident years non-cat loss and ALAE ratio
(7.9 )% (4.1 )%
(6.2 )% (3.2 )% Current
accident year non-cat loss and ALAE ratio
56.4 % 58.3
%
58.9 % 59.9 % Non-cat loss and ALAE ratio
48.5 % 54.2 %
52.7 % 56.7 % Total Loss
and ALAE ratio
51.1 % 56.8 %
58.5 %
66.4 % ULAE ratio
5.8 % 6.0 %
6.0 % 5.7
% Total Loss and LAE ratio
56.9 % 62.8 %
64.5
% 72.1 % Expense ratio
38.7 % 39.1 %
36.7 % 35.1 % Combined ratio
95.6 %
101.9 %
101.2 % 107.2 %
The following table provides a
reconciliation of our statutory underwriting results to GAAP
consolidated incomebefore federal income taxes for the fourth
quarters and years ended December 31, 2018 and 2017:
($
millions)
4Q 2018 4Q 2017 1
YTD 2018 YTD 2017 1
Segment income (loss) before federal income taxes: Insurance
segments: Personal insurance SAP underwriting gain (loss)
$
7.9 $ 8.4
$ 3.3 $ (23.0 ) Commercial insurance
SAP underwriting gain (loss)
13.9 (3.6 )
(8.4
) (10.6 ) Specialty insurance SAP underwriting (loss) gain
(4.1 ) (4.0 )
0.4 (56.0 ) Total
insurance segments
17.7 0.8
(4.7 ) (89.6 )
Investment operations segment: Net investment income
22.7
22.3
84.9 78.8 Net investment (loss) gain
(67.9
) 21.3
(49.7 ) 65.1 Total
investment operations segment
(45.2 ) 43.6
35.2 143.9 All other segments income
0.1 0.3
0.4 0.6 Reconciling items: GAAP
adjustments
(1.1 ) (3.6 )
(3.7 ) (9.9 )
Interest expense on corporate debt
(1.2 ) (1.5 )
(5.7 ) (5.9 ) Corporate expenses
(2.8 )
(1.5 )
(8.6 ) (4.1 ) Total reconciling items
(5.1 ) (6.6 )
(18.0 ) (19.9 ) Total
consolidated (loss) income before federal income taxes
$
(32.5 ) $ 38.1
$ 12.9 $
35.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190214005237/en/
Media contact: Kyle Anderson, Kyle.Anderson@StateAuto.com,
614-917-5497Investor contact: Natalie Schoolcraft,
Natalie.Schoolcraft@StateAuto.com, 614-917-4341
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