-
Quarterly income of $0.66 per share
-
Quarterly GAAP combined ratio of 99.2
-
Return on equity of 8.6%
-
Book value per share of $20.05
Company Website:
http://www.stfc.com
COLUMBUS, Ohio -- (Business Wire)
In the conference call paragraph, the phone number should read
855-859-2056 (instead of 800-585-2056).
The corrected release reads:
STATE AUTO FINANCIAL REPORTS FIRST QUARTER 2014 RESULTS
-
Quarterly income of $0.66 per share
-
Quarterly GAAP combined ratio of 99.2
-
Return on equity of 8.6%
-
Book value per share of $20.05
State Auto Financial Corporation (NASDAQ:STFC) today reported first
quarter 2014 net income of $27.1 million, or $0.66 per diluted share,
versus net income of $19.7 million, or $0.49 per diluted share, for the
first quarter of 2013. Net income from operations1 per
diluted share for the first quarter 2014 was $0.49 versus net income
from operations1 per diluted share of $0.38 for the same 2013
period.
STFC’s GAAP combined ratio for the first quarter 2014 was 99.2 versus
100.2 for the first quarter of 2013. Catastrophe losses during the first
quarter 2014 accounted for 2.4 points of the 65.5 total loss ratio
points, or $6.3 million, versus 1.7 points of the total 66.2 loss ratio
points, or $4.6 million, for the same period in 2013.
The State Auto Group’s homeowners quota share reinsurance arrangement
decreased STFC’s underwriting gain for the first quarter of 2014 by $8.5
million or 2.7 points on the combined ratio. Pursuant to this
arrangement, STFC ceded $37.9 million of written premium, $44.2 million
of earned premium, $2.4 million of catastrophe losses and $20.5 million
of non-catastrophe losses, and recognized $12.8 million of ceded
commissions. This cession decreased STFC’s overall catastrophe loss
ratio 0.4 points, increased the overall non-catastrophe loss ratio 2.4
points and increased the overall expense ratio 0.7 points.
Net written premium for the first quarter of 2014 increased 0.6% over
the same period in 2013. By segment, net written premium for the first
quarter of 2014 decreased 4.3% for personal insurance and increased 2.9%
and 6.8% for business insurance and specialty insurance, respectively,
from the same period in 2013. The decline in the personal insurance
segment was driven by company actions to improve profitability. Business
insurance premium growth remains positive, driven by higher average new
business premium, increased renewal pricing and a recovering economy.
The growth in specialty insurance was driven by all units other than E&S
property.
STFC’s book value was $20.05 per share as of March 31, 2014, an increase
of $0.78 per share from STFC’s book value on Dec. 31, 2013. Book value
per share as of March 31, 2014, included a reduction of $1.84 for a
deferred tax asset valuation allowance. Return on stockholders’ equity
for the twelve months ended March 31, 2014, was 8.6% compared to 4.3%
for the twelve months ended March 31, 2013.
STFC President and CEO Bob Restrepo commented on the quarter as follows:
“State Auto Financial Corporation began 2014 with better earnings, a
modest underwriting profit, improved return-on-equity results and a
solid increase in book value. We achieved a 99.2% combined ratio and an
8.6% return on equity despite elevated property losses as a result of
the harsh winter and an atypical rash of large fire losses. After
adjusting for the homeowner quota share treaty, the combined ratio was
96.5%2, demonstrating the quality of our underlying
profitability. Improved underwriting results and higher investment
income also helped increase book value to $20.05. Without the deferred
tax allowance we’ve carried since the end of the second quarter of 2011,
our book value would have been $21.893.
“Important drivers of our improving underwriting results are personal
and commercial automobile results. Because auto currently accounts for
43% of our premium volume, improved results in these lines will have a
disproportionate positive impact on future earnings.
“We’re very pleased with our progress this year in personal auto, driven
by increased pricing, run-off from agency management actions and our
specialized claim capabilities. We saw substantial improvement in the
five unprofitable states we targeted and improved results for personal
injury protection (PIP). Personal auto prices increased, with an earned
premium impact of 6.6% for the quarter. We look forward to continued
improvements as the weather normalizes and we earn out increased prices.
“Our homeowners line is performing as expected despite the impact of
winter weather and higher severity of fire losses. Personal lines
production is down as lower levels of new business offset overall price
increases and flat retention for these lines. We expect to achieve
adequate pricing in both auto and homeowners this year.
“In business insurance, catastrophe losses were flat relative to first
quarter 2013, but non-catastrophe loss ratios increased due to harsh
winter weather and a higher frequency of large property fire losses.
Premiums increased modestly primarily due to a 5.4% increase in price
per exposure. Retention remains relatively flat, but new business has
suffered as we continue to pursue price increases. Despite this, we
remain pleased with our ability to attract new larger accounts with a
more focused marketing and underwriting strategy.
“The specialty insurance segment continues to grow with solid production
in all lines. The premium runoff from terminated RED programs is now
complete. Specialty represents almost 25% of our total premium volume
and will be a significant contributor to our profit, growth and
diversification strategies. We experienced good growth in all lines
other than E&S property, which had an exceptionally strong first quarter
2013. Loss ratios remain excellent for both E&S property and casualty.
The program line improved significantly as we gained scale and
experienced reduced RED impact versus prior year. Workers compensation
results remain strong.
“Notwithstanding the property results in the first quarter, we’re now
seeing the positive impact from our strategies for diversification,
price adequacy, claim excellence and superior agency and policyholder
relationships. We remain confident that our efforts will continue to
produce improving results for all stakeholders and increasingly
attractive returns for shareholders.”
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 is a segment of the
NASDAQ Global Market with the highest initial listing standards of any
exchange in the world.
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, Meridian
Citizens Mutual, 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 $0.17 per diluted share for the first quarter 2014
versus income of $0.11 per diluted share for the same 2013 period.
2 Represents a non-GAAP financial measure as to the first
quarter 2014 combined ratio. A reconciliation of the difference between
this non-GAAP financial measure with the most directly comparable GAAP
financial measure is included in Schedule 1 that is part of this release.
3 Represents a non-GAAP financial measure as to the March 31,
2014, book value per share. Book value per share at March 31, 2014 was
$20.05 which included a reduction of $1.84 for a deferred tax asset
valuation allowance.
STFC has scheduled a conference call with interested investors for
Wednesday, April 30, at 11 a.m. ET to discuss the company’s first
quarter 2013 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 noon, April 30, by
calling 855-859-2056, conference ID 27029816. Supplemental schedules
detailing the company’s first quarter 2014 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) | | | |
2014
| | |
2013
|
| | | | | | |
|
|
Net premiums written
| | | |
$
|
265.4
|
| | |
$
|
263.7
|
|
| | | | | | |
|
|
Earned premiums
| | | | |
262.5
| | | | |
261.3
| |
|
Net investment income
| | | | |
17.6
| | | | |
16.9
| |
|
Net realized gain on investments
| | | | |
10.7
| | | | |
6.7
| |
|
Other income
| | | |
|
0.5
|
| | |
|
0.4
|
|
|
Total revenue
| | | |
|
291.3
|
| | |
|
285.3
|
|
| | | | | | |
|
|
Income before federal income taxes
| | | | |
27.7
| | | | |
20.0
| |
| | | | | | |
|
|
Federal income tax expense
| | | |
|
0.6
|
| | |
|
0.3
|
|
|
Net income
| | | |
$
|
27.1
|
| | |
$
|
19.7
|
|
| | | | | | |
|
|
Earnings per common share:
| | | | | | | |
|
- basic
| | | |
$
|
0.67
| | | |
$
|
0.49
| |
|
- diluted
| | | |
$
|
0.66
| | | |
$
|
0.49
| |
| | | | | | |
|
Earnings per share from operations (A):
| | | | | | | |
|
- basic
| | | |
$
|
0.50
| | | |
$
|
0.38
| |
|
- diluted
| | | |
$
|
0.49
| | | |
$
|
0.38
| |
| | | | | | |
|
|
Weighted average shares outstanding:
| | | | | | | |
|
- basic
| | | | |
40.8
| | | | |
40.5
| |
|
- diluted
| | | | |
41.1
| | | | |
40.7
| |
| | | | | | |
|
|
Return on average equity (LTM)
| | | | |
8.6
|
%
| | | |
4.3
|
%
|
| | | | | | |
|
|
Book value per share
| | | |
$
|
20.05
| | | |
$
|
18.96
| |
| | | | | | |
|
|
Dividends paid per share
| | | |
$
|
0.10
| | | |
$
|
0.10
| |
| | | | | | |
|
|
Total shares outstanding
| | | | |
40.8
| | | | |
40.5
| |
| | | | | | |
|
|
GAAP ratios:
| | | | | | | |
|
Cat loss and ALAE ratio
| | | | |
2.4
| | | | |
1.7
| |
|
Non-cat loss and LAE ratio
| | | |
|
63.1
|
| | |
|
64.5
|
|
|
Loss and LAE ratio
| | | | |
65.5
| | | | |
66.2
| |
|
Expense ratio
| | | |
|
33.7
|
| | |
|
34.0
|
|
|
Combined ratio
| | | |
|
99.2
|
| | |
|
100.2
|
|
| | | | | | |
|
(A) Reconciliation of non-GAAP financial measure:
| | | | | | | |
|
Net income from operations:
| | | | | | | |
|
Net income
| | | |
$
|
27.1
| | | |
$
|
19.7
| |
Less net realized gain on investments,
| | | | | | | |
|
less applicable federal income taxes
| | | |
|
6.9
|
| | |
|
4.4
|
|
|
Net income from operations
| | | |
$
|
20.2
|
| | |
$
|
15.3
|
|
| | | | | | |
|
|
|
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES |
RECONCILIATION OF HO QS ARRANGEMENT CESSION AND RED
UNDERWRITING RESULTS |
(unaudited)
|
|
| |
| |
| |
| |
| |
|
The following table sets forth a reconciliation of the HO QS
Arrangement cession on the Company's overall results and key
performance indicators on a pro forma GAAP basis as if the HO QS
Arrangement had not been in effect for the three months ended March
31, 2014.
|
| | | | | | | | | |
|
| |
GAAP HO QS Arrangement Cession - Overall Results
| | | |
| | | | | | | | | |
|
| |
Three Months Ended
| | | | |
| | March 31, 2014 | | | | |
($ millions) | |
| |
| |
Pro Forma without
| |
| |
As Reported
| |
HO QS Cession
| |
HO QS Cession
| |
| | | | | | | | | |
|
|
Earned Premiums
| |
$
|
262.5
| | |
$
|
44.2
| | |
$
|
306.7
| | | | | |
Losses and LAE Incurred:
| | | | | | | | | | |
|
Cat loss and ALAE
| | |
6.3
| | | |
2.4
| | | |
8.7
| | | | | |
|
Non-cat loss and LAE
| |
|
165.5
|
| |
|
20.5
|
| |
|
186.0
|
| | | | |
|
Loss and LAE
| | |
171.8
| | | |
22.9
| | | |
194.7
| | | | | |
|
Acquisition and operating expenses
| |
|
88.5
|
| |
|
12.8
|
| |
|
101.3
|
| | | | |
|
Net underwriting gain
| |
$
|
2.2
|
| |
$
|
8.5
|
| |
$
|
10.7
|
| | | | |
| | | | | | | | | |
|
|
Cat loss and ALAE ratio
| | |
2.4
|
%
| | |
5.4
|
%
| | |
2.8
|
%
| | | | |
|
Non-cat loss and LAE ratio
| |
|
63.1
|
%
| |
|
46.3
|
%
| |
|
60.7
|
%
| | | | |
|
Loss and LAE ratio
| | |
65.5
|
%
| | |
51.7
|
%
| | |
63.5
|
%
| | | | |
|
Expense ratio
| |
|
33.7
|
%
| |
|
29.0
|
%
| |
|
33.0
|
%
| | | | |
|
Combined ratio
| |
|
99.2
|
%
| |
|
80.7
|
%
| |
|
96.5
|
%
| | | | |
| | | | | | | | | |
|
| | | | | | | | | |
|
|
The following table sets forth a reconciliation of the HO QS
Arrangement cession and the former RED unit's underwriting results
on the Company's overall results and key performance indicators on a
pro forma GAAP basis as if the HO QS Arrangement had not been in
effect and the RED results had been excluded for the three months
ended March 31, 2013.
|
| | | | | | | | | |
|
| |
Three Months Ended
|
| | March 31, 2013 |
| | | | | | | | | |
|
($ millions) | |
| |
| |
Pro Forma without
| |
| |
Pro Forma without RED
|
| |
As Reported
| |
HO QS Cession
| |
HO QS Cession
| |
RED
| |
and HO QS Cession
|
| | | | | | | | | |
|
|
Earned Premiums
| |
$
|
261.3
| | |
$
|
45.3
| | |
$
|
306.6
| | |
$
|
11.1
| | |
$
|
295.5
| |
|
Losses and LAE Incurred:
| | | | | | | | | | |
|
Cat loss and ALAE
| | |
4.6
| | | |
2.0
| | | |
6.6
| | | |
(0.2
|
)
| | |
6.8
| |
|
Non-cat loss and LAE
| |
|
168.4
|
| |
|
17.3
|
| |
|
185.7
|
| |
|
13.2
|
| |
|
172.5
|
|
|
Loss and LAE
| | |
173.0
| | | |
19.3
| | | |
192.3
| | | |
13.0
| | | |
179.3
| |
|
Acquisition and operating expenses
| |
|
88.8
|
| |
|
13.1
|
| |
|
101.9
|
| |
|
3.6
|
| |
|
98.3
|
|
|
Net underwriting (loss) gain
| |
$
|
(0.5
|
)
| |
$
|
12.9
|
| |
$
|
12.4
|
| |
$
|
(5.5
|
)
| |
$
|
17.9
|
|
| | | | | | | | | |
|
|
Cat loss and ALAE ratio
| | |
1.7
|
%
| | |
4.4
|
%
| | |
2.2
|
%
| | |
-1.8
|
%
| | |
2.3
|
%
|
|
Non-cat loss and LAE ratio
| |
|
64.5
|
%
| |
|
38.2
|
%
| |
|
60.6
|
%
| |
|
118.9
|
%
| |
|
58.4
|
%
|
|
Loss and LAE ratio
| | |
66.2
|
%
| | |
42.6
|
%
| | |
62.8
|
%
| | |
117.1
|
%
| | |
60.7
|
%
|
|
Expense ratio
| |
|
34.0
|
%
| |
|
29.0
|
%
| |
|
33.2
|
%
| |
|
32.4
|
%
| |
|
33.3
|
%
|
|
Combined ratio
| |
|
100.2
|
%
| |
|
71.6
|
%
| |
|
96.0
|
%
| |
|
149.5
|
%
| |
|
94.0
|
%
|
| | | | | | | | | | | | | | | | | | | |
|
Contacts:
State Auto Financial Corporation
Tara Shull, 614-917-4478, F
614-887-1793
Investor Relations and Finance Director
Tara.Shull@StateAuto.com
or
Kyle
Anderson, 614-917-5497, M 614-477-5301
AVP/Director of Corporate
Communication
Kyle.Anderson@StateAuto.com
or
For
additional information:
StateAuto.com/STFC
facebook.com/StateAuto
twitter.com/StateAuto
Source: State Auto Financial Corporation
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