- Quarterly loss of $2.62 per share
- Quarterly net loss from operations1 of $0.18 per share
- Quarterly GAAP combined ratio of 107.2
- Return on equity of (8.7)%
- Book value per share of $19.83
State Auto Financial Corporation (NASDAQ:STFC) today reported a
first quarter 2020 net loss of $114.6 million, or $2.62 per diluted
share, compared to net income of $49.4 million, or $1.12 per
diluted share, for the same 2019 period. Net loss from operations1
per diluted share for the first quarter of 2020 was $0.18 versus
net income from operations per diluted share of $0.31 for the same
2019 period.
GAAP Operating Results
STFC’s GAAP combined ratio for the first quarter 2020 was 107.2
compared to 99.7 for the same 2019 period. Catastrophe losses
during the first quarter 2020 accounted for 12.7 points of the 72.4
total loss ratio points, or $41.9 million, versus 5.9 points of the
64.2 total loss ratio points, or $17.7 million, for the same period
in 2019. First quarter 2020 was impacted by a severe wind and hail
storm, including tornadoes, in Tennessee that contributed 8.3
points to the first quarter loss and ALAE ratio, of which 4.6
points were from three commercial losses in Nashville.
Non-catastrophe losses and ALAE during the first quarter 2020
included 3.2 points of favorable development relating to prior
years, or $10.5 million, versus 6.9 points of favorable
development, or $20.9 million, for the same period in 2019.
SAP Personal and Commercial Operating
Results
Net written premium for the first quarter 2020 increased 13.4%
compared to the same period in 2019. By insurance segment, net
written premium for the personal and commercial segments increased
10.5% and 17.6%, respectively. The increase in the personal segment
was primarily due to new business growth and rate increases in
homeowners and other personal. The improvement was partially offset
by a decrease in net written premiums in personal auto due to
declines in new business and retention. The increase in the
commercial segment was led by new business growth and rate
increases in commercial auto and middle market commercial. The
improvement was partially offset by a decrease in net written
premiums in workers’ compensation due to continued intense
competition in this market.
The SAP personal and commercial segments' combined ratio2 for
the first quarter 2020 was 107.3 compared to 99.7 for the same 2019
period. Catastrophe losses during the first quarter 2020 accounted
for 12.7 points of the 72.5 total loss ratio points, or $41.8
million, versus 5.8 points of the 63.6 total loss ratio points, or
$17.2 million, for the same period in 2019. Non-catastrophe losses
and ALAE during the first quarter 2020 included 3.2 points of
favorable development relating to prior years, or $10.4 million,
versus 7.4 points of favorable development, or $22.2 million, for
the same period in 2019.
The exit from our specialty insurance business resulted in the
elimination of specialty insurance as a reportable segment as it is
no longer material to our results. Specialty results, labeled as
"specialty run-off," are included in the SAP Insurance Segment
Results table below to enable reconciliation to total underwriting
results.
Book Value and Return on Equity
STFC’s book value decreased to $19.83 per share as of March 31,
2020, compared to $22.01 on Dec. 31, 2019. The decrease in book
value was driven by the decline in the market value of our equity
securities and other invested assets.
Return on stockholders’ equity for the 12 months ended March 31,
2020, was (8.7)% compared to 7.5% for the 12 months ended March 31,
2019.
STFC’s Chairman, President and CEO Mike LaRocco commented on the
quarter as follows:
"The COVID-19 pandemic is a test unlike any we’ve faced, as a
society and as an insurance industry. Our number one priority is
the health and safety of our associates, customers, and agents. I’m
enormously proud of the focus and dedication of the State Auto
team, which seamlessly moved to almost entirely working from home
in a matter of days. It’s a transition that wasn’t even noticed by
our policyholders and agents thanks to a culture that made it
possible, and investments in technology over the past five years
that have made us a leading digital provider of insurance. Our
independent agent partners continue to quote, sell and service
their books of business uninterrupted through our State Auto
Connect digital platform, and customers are served through our
Customer Connect portal and the outstanding work of our customer
service teams.
"Our 'In This Together' plan, which we announced in April and is
pending regulatory approval, will provide a 5% discount on our
personal auto policyholders’ premium at their next renewal. This
plan properly recognizes both the reduction of miles driven and the
likelihood that the impact of the pandemic will not be short-lived.
In addition, we continue to encourage enrollment in our usage-based
telematics program, and we have seen a marked increase.
"From the very early days of the pandemic, we’ve been working
with customers in need of flexibility when it comes to payments and
payment plans, and we’ll continue to support them, our agents,
associates and communities through this challenge in the months
ahead.
"While the pandemic has rightly had much of our attention, first
quarter 2020 also demonstrated the exceptional value our Claims and
Risk Engineering (CARE) professionals deliver to our customers when
they need it most. We were in Nashville within hours of the tornado
that tore through the area on March 3. Three large commercial
losses totaling 4.6 points drove the higher than anticipated
catastrophe loss ratio of 12.7%, versus our five-year average first
quarter cat loss ratio of 5.2%.
"In personal lines, we continued progress in our largest line,
personal auto, toward improved growth and profitability with the
launch of new rates and an updated telematics program that makes it
even easier for policyholders to save money through safer driving.
Strong growth in our homeowners business continued, with a net
written premium increase of 26.7%.
"In commercial lines, the three large Nashville losses drove the
poor profit result. However, overall positive momentum in
commercial continued in the first quarter. Every line other than
workers’ compensation grew, with overall 17.6% net written premium
growth for commercial lines. Connect CPP (middle market commercial)
launched in March, drawing positive feedback from agents on the
efficiency of the platform and overall flexibility of the product.
Connect Farm & Ranch launched in February, including three new
states and two existing states, fueling nearly 20% growth.
"While the challenges we faced in first quarter 2020 were
significant, this was yet another quarter in which there’s clear
evidence of our continued progress toward sustained profit and
growth. Our investments in technology that began five years ago are
paying off, and we’re seeing similar benefits from more recent
investments. Areas that we knew needed attention and we focused on
are showing signs of improvement. Our rebuilding of State Auto has
yielded many benefits, including the ability to navigate the kind
of adversity we all face today with confidence. This 99-year-old
company has faced significant challenges before, and I am confident
that State Auto will rise to this challenge."
About State Auto Financial Corporation
State Auto Financial Corporation, headquartered in Columbus,
Ohio, is a super regional property and casualty insurance holding
company. 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. 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.
STFC has scheduled a conference call with interested investors
for Wednesday, May 6, at 11 a.m. ET to discuss the Company’s first
quarter 2020 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., May 6, by calling
855-859-2056, conference ID 3644248. Supplemental schedules
detailing the Company’s first quarter 2020 financial, sales and
underwriting results are made available on
http://www.StateAuto.com/STFC prior to the conference call.
1 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 gain (loss), net of applicable
taxes, on investment activity for the periods being reported. For
STFC, this amounted to a loss of $2.44 per diluted share for the
first quarter of 2020 versus income of $0.81 per diluted share for
the first quarter 2019.
2 Insurance industry regulators require STFC's insurance
subsidiaries to report their financial condition and results of
operations using Statutory Accounting Practices ("SAP"). The SAP
personal and commercial segments' combined ratio is a measure used
by management to evaluate STFC’s operating performance for its
ongoing operations.
* * * * *
Except for historical information, all other information in this
news release consists of forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially
from those projected, anticipated or implied. The most significant
of these uncertainties are described in State Auto Financial's Form
10-K and Form 10-Q reports and exhibits to those reports, and
include (but are not limited to) legislative changes at both the
state and federal level, state and federal regulatory rule making
promulgations and adjudications, class action litigation involving
the insurance industry and judicial decisions affecting claims,
policy coverages and the general costs of doing business, the
impact of competition on products and pricing, inflation in the
costs of the products and services insurance pays for, product
development, geographic spread of risk, weather and weather-related
events, and other types of catastrophic events. State Auto
Financial undertakes no obligation to update or revise any
forward-looking statements.
Selected Consolidated Financial
Data
($ in millions, except per share
amounts)
(unaudited)
Three months ended March 31
2020
2019
Net premiums written
$
346.5
$
306.0
Earned premiums
330.5
302.7
Net investment income
18.9
19.4
Net investment (loss) gain
(135.2
)
44.9
Other income
0.6
0.6
Total revenue
214.8
367.6
(Loss) income before federal income
taxes
(144.0
)
61.6
Federal tax (benefit) expense
(29.4
)
12.2
Net (loss) income
$
(114.6
)
$
49.4
(Loss) earnings per common share:
- basic
$
(2.62
)
$
1.14
- diluted
$
(2.62
)
$
1.12
(Loss) earnings per share from
operations(A):
- basic
$
(0.18
)
$
0.32
- diluted
$
(0.18
)
$
0.31
Weighted average shares outstanding:
- basic
43.7
43.3
- diluted
43.7
43.9
Return on average equity (LTM)
(8.7
)%
7.5
%
Book value per share
$
19.83
$
20.67
Dividends paid per share
$
0.10
$
0.10
Total shares outstanding
43.7
43.3
GAAP ratios:
Cat loss and ALAE ratio
12.7
5.9
Non-cat loss and LAE ratio
59.7
58.3
Loss and LAE ratio
72.4
64.2
Expense ratio
34.8
35.5
Combined ratio
107.2
99.7
(A) Reconciliation of non-GAAP financial
measure:
Net (loss) income from operations:
Net (loss) income
$
(114.6
)
$
49.4
Net investment (loss) gain, net of tax
(106.8
)
35.8
Net (loss) income from operations
$
(7.8
)
$
13.6
Condensed Consolidated Balance
Sheets
($ and shares in millions, except per
share amounts)
(unaudited)
March 31
December 31
2020
2019
ASSETS
Fixed maturities, available-for-sale, at
fair value (amortized cost $2,051.8 and $2,080.0, respectively)
$
2,128.3
$
2,127.9
Equity securities
275.7
395.2
Other invested assets
54.6
69.7
Other invested assets, at cost
12.5
6.5
Notes receivable from affiliate
70.0
70.0
Total investments
2,541.1
2,669.3
Cash and cash equivalents
126.6
78.0
Accrued investment income and other
assets
33.2
31.7
Deferred policy acquisition costs
113.3
111.1
Reinsurance recoverable on losses and loss
expenses payable
39.7
13.6
Prepaid reinsurance premiums
7.9
7.5
Due from affiliate
22.5
21.5
Current federal income taxes
6.7
6.3
Net deferred federal income taxes
64.9
42.2
Property and equipment, held for sale
4.2
4.2
Total assets
$
2,960.1
$
2,985.4
LIABILITIES
Losses and loss expenses payable
$
1,086.6
$
1,066.5
Unearned premiums
665.7
649.2
Notes payable (affiliates $15.2 and $15.2,
respectively)
182.1
122.0
Pension and postretirement benefits
71.5
72.9
Other liabilities
87.5
114.9
Total liabilities
2,093.4
2,025.5
STOCKHOLDERS' EQUITY
Common stock, without par value.
Authorized 100.0 shares; 50.6 and 50.4 shares issued, respectively,
at stated value of $2.50 per share
126.5
125.9
Treasury stock, 6.9 and 6.9 shares,
respectively, at cost
(118.4
)
(117.5
)
Additional paid-in capital
209.1
206.7
Accumulated other comprehensive loss
(13.7
)
(37.9
)
Retained earnings
663.2
782.7
Total stockholders' equity
866.7
959.9
Total liabilities and stockholders'
equity
$
2,960.1
$
2,985.4
Condensed Consolidated Statements of
Income
($ in millions, except per share
amounts)
(unaudited)
Three months ended March 31
2020
2019
Earned premiums
$
330.5
$
302.7
Net investment income
18.9
19.4
Net investment (loss) gain
(135.2
)
44.9
Other income from affiliates
0.6
0.6
Total revenues
214.8
367.6
Losses and loss expenses
239.4
194.3
Acquisition and operating expenses
114.9
107.6
Interest expense
1.2
1.2
Other expenses
3.3
2.9
Total expenses
358.8
306.0
(Loss) income before federal income
taxes
(144.0
)
61.6
Federal income tax (benefit) expense:
Current
—
(0.4
)
Deferred
(29.4
)
12.6
Federal income tax (benefit) expense
(29.4
)
12.2
Net (loss) income
$
(114.6
)
$
49.4
(Loss) earnings per common share:
Basic
$
(2.62
)
$
1.14
Diluted
$
(2.62
)
$
1.12
Dividends paid per common share
$
0.10
$
0.10
Consolidated Statements of
Comprehensive (Loss) Income
($ in millions)
(unaudited)
Three months ended March 31
2020
2019
Net (loss) income
$
(114.6
)
$
49.4
Other comprehensive income (loss), net
of tax:
Net unrealized holding gain on
available-for-sale investments:
Unrealized holding gain
31.0
34.5
Reclassification adjustments for gains
realized in net income
(2.4
)
(0.1
)
Income tax expense
(6.0
)
(7.2
)
Total net unrealized holding gain on
available- for-sale investments
22.6
27.2
Net unrecognized benefit plan
obligations:
Reclassification adjustments for
amortization to statements of income:
Prior service credit
(1.6
)
(1.6
)
Net actuarial loss
3.7
2.4
Income tax expense
(0.5
)
(0.2
)
Total net unrecognized benefit plan
obligations
1.6
0.6
Other comprehensive income
24.2
27.8
Comprehensive (loss) income
$
(90.4
)
$
77.2
Condensed Consolidated Statement of
Stockholders' Equity
($ and shares in millions)
(unaudited)
Three Months Ended
Year Ended
March 31
December 31
2020
2019
Common shares:
Balance at beginning of year
50.4
50.0
Issuance of shares
0.2
0.4
Balance at period ended
50.6
50.4
Treasury shares:
Balance at beginning of year
(6.9
)
(6.8
)
Shares acquired on stock award exercises
and vested restricted shares
—
(0.1
)
Balance at period ended
(6.9
)
(6.9
)
Common stock:
Balance at beginning of year
$
125.9
$
125.0
Issuance of shares
0.6
0.9
Balance at period ended
126.5
125.9
Treasury stock:
Balance at beginning of year
$
(117.5
)
$
(117.0
)
Shares acquired on stock award exercises
and vested restricted shares
(0.9
)
(0.5
)
Balance at beginning of year and period
ended
(118.4
)
(117.5
)
Additional paid-in capital:
Balance at beginning of year
$
206.7
$
194.2
Issuance of common stock
1.3
5.1
Stock awards granted
1.1
7.4
Balance at period ended
209.1
206.7
Accumulated other comprehensive
loss:
Balance at beginning of the year
$
(37.9
)
$
(96.4
)
Total net unrealized holding gain on
available-for-sale investments
22.6
60.6
Total net unrecognized benefit plan
obligations
1.6
(2.1
)
Balance at period ended
(13.7
)
(37.9
)
Retained earnings:
Balance at beginning of year
$
782.7
$
712.7
Cumulative effect of change in accounting
to establish an allowance for expected credit losses at January 1,
2020
(0.5
)
—
Net (loss) income
(114.6
)
87.4
Cash dividends paid
(4.4
)
(17.4
)
Balance at period ended
663.2
782.7
Total stockholders' equity at period
ended
$
866.7
$
959.9
Condensed Consolidated Statements of
Cash Flow
($ in millions)
(unaudited)
Three months ended
March 31
2020
2019
Cash flows from operating
activities:
Net (loss) income
$
(114.6
)
$
49.4
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization, net
1.6
3.1
Share-based compensation
0.5
3.8
Net investment loss (gain)
135.2
(44.9
)
Changes in operating assets and
liabilities:
Deferred policy acquisition costs
(2.2
)
(2.4
)
Accrued investment income and other
assets
(1.5
)
(4.1
)
Postretirement and pension benefits
(0.9
)
(0.1
)
Other liabilities and due to/from
affiliates, net
(26.2
)
(33.6
)
Reinsurance recoverable on losses and loss
expenses payable and prepaid reinsurance premiums
(26.5
)
0.8
Losses and loss expenses payable
19.5
(17.9
)
Unearned premiums
16.5
3.3
Deferred tax expense on share-based
awards
(0.2
)
0.2
Federal income taxes
(29.2
)
12.0
Net cash used in operating
activities
(28.0
)
(30.4
)
Cash flows from investing
activities:
Purchases of fixed maturities
available-for-sale
(122.4
)
(137.2
)
Purchases of equity securities
(16.1
)
(19.5
)
Purchases of other invested assets
(6.6
)
(1.0
)
Maturities, calls and pay downs of fixed
maturities available-for-sale
67.9
125.9
Sales of fixed maturities
available-for-sale
83.5
65.6
Sales of equity securities
13.2
12.7
Sales of other invested assets
0.4
0.3
Disposals of property and equipment
0.2
—
Net cash provided by investing
activities
20.1
46.8
Cash flows from financing
activities:
Proceeds from issuance of common stock
1.8
1.0
Payments to acquire treasury stock
(0.9
)
(0.5
)
Payment of dividends
(4.4
)
(4.4
)
Proceeds from short-term debt
60.0
—
Net cash provided by (used in)
financing activities
56.5
(3.9
)
Net increase in cash and cash
equivalents
48.6
12.5
Cash and cash equivalents at beginning of
period
78.0
59.8
Cash and cash equivalents at end of
period
$
126.6
$
72.3
Supplemental disclosures:
Interest paid (affiliates $0.2 and $0.2,
respectively)
$
1.2
$
1.7
Net Investment Income
($ in millions)
(unaudited)
3/31/2019
6/30/2019
9/30/2019
12/31/2019
3/31/2020
Quarter to Date
Gross investment income:
Fixed maturities
$
15.4
$
14.7
$
14.4
$
13.9
$
14.5
TIPS
(0.3
)
2.6
0.9
0.7
0.6
Total fixed maturities
15.1
17.3
15.3
14.6
15.1
Equity securities
2.8
3.1
3.0
4.3
3.1
Other
1.7
1.4
1.1
1.3
1.0
Total gross investment income
19.6
21.8
19.4
20.2
19.2
Less: Investment expenses
0.2
0.1
0.1
0.2
0.3
Net investment income
$
19.4
$
21.7
$
19.3
$
20.0
$
18.9
Year to Date
Gross investment income:
Fixed maturities
$
15.4
$
30.1
$
44.5
$
58.4
$
14.5
TIPS
(0.3
)
2.3
3.2
3.9
0.6
Total fixed maturities
15.1
32.4
47.7
62.3
15.1
Equity securities
2.8
5.9
8.9
13.2
3.1
Other
1.7
3.1
4.2
5.5
1.0
Total gross investment income
19.6
41.4
60.8
81.0
19.2
Less: Investment expenses
0.2
0.3
0.4
0.6
0.3
Net investment income
$
19.4
$
41.1
$
60.4
$
80.4
$
18.9
3/31/2019
6/30/2019
9/30/2019
12/31/2019
3/31/2020
TIPS, fair value
$
147.0
$
145.2
$
135.3
$
135.6
$
111.4
TIPS, book value
$
140.5
$
137.4
$
125.9
$
126.2
$
101.5
Net Investment (Loss) Gain
($ in millions)
unaudited
Three months ended March 31
2020
2019
Investment gain (loss), net:
Fixed maturities:
Realized gains on sales of securities
3.6
0.1
Realized losses on sales of securities
(1.2
)
—
Net gain on fixed maturities
2.4
0.1
Equity securities:
Realized gains (losses) on sales of
securities, net
0.9
(1.9
)
Unrealized (loss) gain on securities still
held, net
(123.3
)
44.1
Net (loss) gain on equity securities
(122.4
)
42.2
Other invested assets:
Unrealized (loss) gain on securities still
held, net
(15.4
)
3.9
Net (loss) gain on other invested
assets
(15.4
)
3.9
Other net realized gain (loss)
0.2
(1.3
)
Net (loss) gain on investments
$
(135.2
)
$
44.9
Income Taxes
($ in millions)
(unaudited)
The following table sets forth the tax
effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities:
March 31
December 31
2020
2019
Deferred tax assets:
Unearned premiums not currently
deductible
$
27.7
$
27.0
Losses and loss expenses payable
discounting
10.8
10.6
Postretirement and pension benefits
19.6
20.0
Investments
2.5
—
Other liabilities
10.1
13.4
Net operating loss carryforward
16.9
12.1
Tax credit carryforward
2.0
2.5
Other
0.6
1.1
Total deferred tax assets
90.2
86.7
Deferred tax liabilities:
Deferral of policy acquisition costs
23.8
23.3
Investments
—
21.2
Other
1.5
—
Total deferred tax liabilities
25.3
44.5
Net deferred federal income taxes
$
64.9
$
42.2
The following table sets forth the
components of federal income tax (benefit) expense:
Three months ended March 31
2020
2019
(Loss) income before federal income
taxes
$
(144.0
)
$
61.6
Federal income tax (benefit) expense
Current
—
(0.4
)
Deferred
(29.4
)
12.6
Total federal income tax (benefit)
expense
(29.4
)
12.2
Net (loss) income
$
(114.6
)
$
49.4
SAP Personal Insurance Segment
Results
(unaudited)
($ in millions)
Three months ended March 31,
2020
Personal Auto
Homeowners
Other Personal
Total
Net written premiums
$
104.6
$
81.6
$
13.3
$
199.5
Net earned premiums
104.7
82.7
10.7
198.1
Losses and LAE incurred:
Cat loss and ALAE
0.5
10.7
1.5
12.7
Non-cat loss and ALAE
Prior accident years non-cat loss and
ALAE
5.2
2.2
(1.0
)
6.4
Current accident year non-cat loss and
ALAE
62.0
37.6
4.3
103.9
Total non-cat loss and ALAE
67.2
39.8
3.3
110.3
Total Loss and ALAE
67.7
50.5
4.8
123.0
ULAE
7.3
5.3
0.4
13.0
Total Loss and LAE
75.0
55.8
5.2
136.0
Underwriting expenses
32.8
25.0
4.0
61.8
Net underwriting (loss) gain
$
(3.1
)
$
1.9
$
1.5
$
0.3
Cat loss and ALAE ratio
0.4
%
13.0
%
14.0
%
6.4
%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE
ratio
5.0
%
2.7
%
(9.2
)%
3.2
%
Current accident year non-cat loss and
ALAE ratio
59.3
%
45.4
%
40.0
%
52.5
%
Total non-cat loss and ALAE ratio
64.3
%
48.1
%
30.8
%
55.7
%
Total Loss and ALAE ratio
64.7
%
61.1
%
44.8
%
62.1
%
ULAE ratio
6.9
%
6.4
%
4.0
%
6.5
%
Total Loss and LAE ratio
71.6
%
67.5
%
48.8
%
68.6
%
Expense ratio
31.4
%
30.6
%
30.0
%
31.0
%
Combined ratio
103.0
%
98.1
%
78.8
%
99.6
%
($ in millions)
Three months ended March 31, 2019
Personal Auto
Homeowners
Other Personal
Total
Net written premiums
$
107.7
$
64.4
$
8.4
$
180.5
Net earned premiums
105.4
68.7
7.4
181.5
Losses and LAE incurred:
Cat loss and ALAE
0.9
12.4
0.7
14.0
Non-cat loss and ALAE
Prior accident years non-cat loss and
ALAE
(6.8
)
0.6
(0.7
)
(6.9
)
Current accident year non-cat loss and
ALAE
65.8
29.9
4.4
100.1
Total non-cat loss and ALAE
59.0
30.5
3.7
93.2
Total Loss and ALAE
59.9
42.9
4.4
107.2
ULAE
7.2
5.2
0.3
12.7
Total Loss and LAE
67.1
48.1
4.7
119.9
Underwriting expenses
32.7
21.8
2.9
57.4
Net underwriting gain (loss)
$
5.6
$
(1.2
)
$
(0.2
)
$
4.2
Cat loss and ALAE ratio
0.8
%
18.1
%
9.6
%
7.7
%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE
ratio
(6.5
)%
0.9
%
(8.9
)%
(3.8
)%
Current accident year non-cat loss and
ALAE ratio
62.4
%
43.6
%
58.6
%
55.2
%
Total non-cat loss and ALAE ratio
55.9
%
44.5
%
49.7
%
51.4
%
Total Loss and ALAE ratio
56.7
%
62.6
%
59.3
%
59.1
%
ULAE ratio
6.8
%
7.5
%
4.1
%
7.0
%
Total Loss and LAE ratio
63.5
%
70.1
%
63.4
%
66.1
%
Expense ratio
30.4
%
33.7
%
34.6
%
31.8
%
Combined ratio
93.9
%
103.8
%
98.0
%
97.9
%
SAP Commercial Insurance Segment
Results
(unaudited)
($ in millions)
Three months ended March 31,
2020
Commercial
Auto
Small
Commercial
Package
Middle
Market
Commercial
Workers'
Comp
Farm &
Ranch
Other
Commercial
Total
Net written premiums
$
36.4
$
31.9
$
40.3
$
18.8
$
14.8
$
4.9
$
147.1
Net earned premiums
29.0
30.3
36.1
19.7
12.6
4.7
132.4
Losses and LAE incurred:
Cat loss and ALAE
0.3
3.6
24.1
—
0.9
0.2
29.1
Non-cat loss and ALAE
Prior accident years non-cat loss and
ALAE
(0.1
)
(5.4
)
(5.1
)
(4.0
)
(0.8
)
(1.4
)
(16.8
)
Current accident year non-cat loss and
ALAE
16.6
19.1
27.5
13.4
4.0
3.0
83.6
Total non-cat loss and ALAE
16.5
13.7
22.4
9.4
3.2
1.6
66.8
Total Loss and ALAE
16.8
17.3
46.5
9.4
4.1
1.8
95.9
ULAE
1.5
1.6
2.1
1.7
0.5
0.2
7.6
Total Loss and LAE
18.3
18.9
48.6
11.1
4.6
2.0
103.5
Underwriting expenses
12.7
11.8
16.7
8.9
6.7
2.1
58.9
Net underwriting (loss) gain
$
(2.0
)
$
(0.4
)
$
(29.2
)
$
(0.3
)
$
1.3
$
0.6
$
(30.0
)
Cat loss and ALAE ratio
1.1
%
12.0
%
66.7
%
—
%
7.3
%
3.8
%
22.0
%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE
ratio
(0.3
)%
(17.8
)%
(14.2
)%
(20.5
)%
(6.4
)%
(29.9
)%
(12.7
)%
Current accident year non-cat loss and
ALAE ratio
57.2
%
62.8
%
76.4
%
68.2
%
31.6
%
63.9
%
63.1
%
Total non-cat loss and ALAE ratio
56.9
%
45.0
%
62.2
%
47.7
%
25.2
%
34.0
%
50.4
%
Total Loss and ALAE ratio
58.0
%
57.0
%
128.9
%
47.7
%
32.5
%
37.8
%
72.4
%
ULAE ratio
5.2
%
5.3
%
5.8
%
8.9
%
3.9
%
4.0
%
5.8
%
Total Loss and LAE ratio
63.2
%
62.3
%
134.7
%
56.6
%
36.4
%
41.8
%
78.2
%
Expense ratio
35.0
%
37.0
%
41.4
%
47.7
%
45.5
%
41.7
%
40.1
%
Combined ratio
98.2
%
99.3
%
176.1
%
104.3
%
81.9
%
83.5
%
118.3
%
($ in millions)
Three months ended March 31, 2019
Commercial
Auto
Small
Commercial
Package
Middle
Market
Commercial
Workers'
Comp
Farm &
Ranch
Other
Commercial
Total
Net written premiums
$
24.0
$
30.5
$
34.2
$
19.5
$
12.4
$
4.5
$
125.1
Net earned premiums
19.7
29.6
30.7
20.5
11.8
4.1
116.4
Losses and LAE incurred:
Cat loss and ALAE
0.1
1.5
1.3
—
0.3
—
3.2
Non-cat loss and ALAE
Prior accident years non-cat loss and
ALAE
(1.5
)
(4.8
)
(3.1
)
(4.5
)
(0.4
)
(1.0
)
(15.3
)
Current accident year non-cat loss and
ALAE
11.9
15.9
26.0
13.6
5.1
2.1
74.6
Total non-cat loss and ALAE
10.4
11.1
22.9
9.1
4.7
1.1
59.3
Total Loss and ALAE
10.5
12.6
24.2
9.1
5.0
1.1
62.5
ULAE
1.3
1.8
1.3
1.6
0.6
0.2
6.8
Total Loss and LAE
11.8
14.4
25.5
10.7
5.6
1.3
69.3
Underwriting expenses
10.7
12.5
14.2
7.4
6.2
2.0
53.0
Net underwriting (loss) gain
$
(2.8
)
$
2.7
$
(9.0
)
$
2.4
$
—
$
0.8
$
(5.9
)
Cat loss and ALAE ratio
0.4
%
5.1
%
4.3
%
—
%
2.2
%
—
%
2.7
%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE
ratio
(7.3
)%
(16.2
)%
(10.2
)%
(22.0
)%
(3.7
)%
(23.5
)%
(13.1
)%
Current accident year non-cat loss and
ALAE ratio
60.2
%
53.8
%
84.7
%
66.4
%
43.0
%
52.6
%
64.1
%
Total non-cat loss and ALAE ratio
52.9
%
37.6
%
74.5
%
44.4
%
39.3
%
29.1
%
51.0
%
Total Loss and ALAE ratio
53.3
%
42.7
%
78.8
%
44.4
%
41.5
%
29.1
%
53.7
%
ULAE ratio
6.6
%
6.1
%
4.2
%
8.1
%
5.0
%
4.4
%
5.9
%
Total Loss and LAE ratio
59.9
%
48.8
%
83.0
%
52.5
%
46.5
%
33.5
%
59.6
%
Expense ratio
44.8
%
41.0
%
41.5
%
37.9
%
50.0
%
44.6
%
42.4
%
Combined ratio
104.7
%
89.8
%
124.5
%
90.4
%
96.5
%
78.1
%
102.0
%
SAP Insurance Segment Results
(unaudited)
($ in millions)
Three months ended March 31,
2020
Personal &
Commercial
Specialty run-off
Total
Net written premiums
$
346.6
$
(0.1
)
$
346.5
Net earned premiums
330.5
—
330.5
Losses and LAE incurred:
Cat loss and ALAE
41.8
0.1
41.9
Non-cat loss and ALAE
Prior accident years non-cat loss and
ALAE
(10.4
)
(0.1
)
(10.5
)
Current accident year non-cat loss and
ALAE
187.5
0.1
187.6
Total non-cat loss and ALAE
177.1
—
177.1
Total Loss and ALAE
218.9
0.1
219.0
ULAE
20.6
—
20.6
Total Loss and LAE
239.5
0.1
239.6
Underwriting expenses
120.7
0.3
121.0
Net underwriting loss
$
(29.7
)
$
(0.4
)
$
(30.1
)
Cat loss and ALAE ratio
12.7
%
N/M(1)
12.7
%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE
ratio
(3.2
)%
N/M
(3.2
)%
Current accident year non-cat loss and
ALAE ratio
56.8
%
N/M
56.8
%
Total non-cat loss and ALAE ratio
53.6
%
N/M
53.6
%
Total Loss and ALAE ratio
66.3
%
N/M
66.3
%
ULAE ratio
6.2
%
N/M
6.2
%
Total Loss and LAE ratio
72.5
%
N/M
72.5
%
Expense ratio
34.8
%
N/M
34.9
%
Combined ratio
107.3
%
N/M
107.4
%
(1) N/M = Not Meaningful
($ in millions)
Three months ended March 31, 2019
Personal &
Commercial
Specialty run-off
Total
Net written premiums
$
305.6
$
0.4
$
306.0
Net earned premiums
297.9
4.8
302.7
Losses and LAE incurred:
Cat loss and ALAE
17.2
0.5
17.7
Non-cat loss and ALAE
Prior accident years non-cat loss and
ALAE
(22.2
)
1.3
(20.9
)
Current accident year non-cat loss and
ALAE
174.7
4.0
178.7
Total non-cat loss and ALAE
152.5
5.3
157.8
Total Loss and ALAE
169.7
5.8
175.5
ULAE
19.5
(0.4
)
19.1
Total Loss and LAE
189.2
5.4
194.6
Underwriting expenses
110.4
0.8
111.2
Net underwriting loss
$
(1.7
)
$
(1.4
)
$
(3.1
)
Cat loss and ALAE ratio
5.8
%
N/M(1)
5.9
%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE
ratio
(7.4
)%
N/M
(6.9
)%
Current accident year non-cat loss and
ALAE ratio
58.6
%
N/M
59.0
%
Total non-cat loss and ALAE ratio
51.2
%
N/M
52.1
%
Total Loss and ALAE ratio
57.0
%
N/M
58.0
%
ULAE ratio
6.6
%
N/M
6.3
%
Total Loss and LAE ratio
63.6
%
N/M
64.3
%
Expense ratio
36.1
%
N/M
36.4
%
Combined ratio
99.7
%
N/M
100.7
%
(1) N/M = Not Meaningful
The following table provides a reconciliation of our statutory
underwriting results to GAAP consolidated income before federal
income taxes for the three months ended March 31, 2020 and
2019:
($ millions)
1Q 2020
1Q 2019
Segment (loss) income before federal
income taxes:
Insurance operations:
Personal insurance SAP underwriting
gain
$
0.3
$
4.2
Commercial insurance SAP underwriting
loss
(30.0
)
(5.9
)
Specialty run-off
(0.4
)
(1.4
)
Total insurance operations
(30.1
)
(3.1
)
Investment operations:
Net investment income
18.9
19.4
Net investment (loss) gain
(135.2
)
44.9
Total investment operations
(116.3
)
64.3
All other segments income
0.1
0.1
Reconciling items:
GAAP adjustments
5.9
4.1
Interest expense on corporate debt
(1.2
)
(1.2
)
Corporate expenses
(2.4
)
(2.6
)
Total reconciling items
2.3
0.3
Total consolidated (loss) income before
federal income taxes
$
(144.0
)
$
61.6
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506005164/en/
State Auto Financial Corporation
Media contact: Kyle Anderson, 614-917-5497
Kyle.Anderson@StateAuto.com
or
Investor contact: Natalie Schoolcraft, 614-917-4341
Natalie.Schoolcraft@StateAuto.com
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