State Auto Financial Corporation (NASDAQ: STFC) today reported
first quarter 2010 net income of $12.9 million, or $0.32 per
diluted share, versus a net loss of $14.0 million, or $0.35 per
diluted share, for the first quarter of 2009. Net income from
operations* per diluted share for the first quarter 2010 was $0.27
versus a net loss from operations* of $0.18 for the same 2009
period.
During the first quarter of 2010, STFC incurred a one-time tax
charge of $4.5 million, or $0.11 per diluted share, related to the
recently enacted federal health care legislation. This legislation
eliminated the tax benefit associated with Medicare Part D
subsidies to be received by companies that provide qualifying
prescription drug coverage to retirees.
STFC’s GAAP combined ratio for the first quarter 2010 was 99.7
versus 112.0 for the first quarter of 2009. Catastrophe losses for
the first quarter 2010 accounted for 3.3 points of the 66.2 total
loss ratio points, or $10.1 million, versus 15.3 points of the
total 78.6 loss ratio points, or $43.8 million, for the same period
in 2009. Net written premiums for the first quarter 2010 increased
5.9% over the same period in 2009. STFC’s book value was $21.65 per
share as of March 31, 2010, an increase of $0.32 per share from
STFC’s book value on December 31, 2009. Return on stockholders’
equity for the twelve months ended March 31, 2010 was 4.6% compared
to negative 4.0% for the twelve months ended March 31, 2009.
“Our story for the quarter is one of underwriting profit, strong
growth and improving return on equity. Underwriting results were
helped by normal first quarter catastrophe results and improved
performance in personal auto and commercial lines. Homeowners loss
ratios remain stubbornly high, but we’re confident we have the
pricing and underwriting actions in place to improve results and
achieve profitability,” said STFC Chairman, President and CEO Bob
Restrepo.
“Personal Insurance led our first quarter growth, largely on the
strength of price increases in standard personal auto and
homeowners, excellent policy retention, and strong sales in four
expansion states. Business Insurance growth remains constrained by
continued pricing competition and a weak economy. However, total
net written premium growth was buoyed by a new commercial specialty
business, Risk Evaluation and Design, LLC (RED), which accounted
for 2.0 percentage points of the quarter’s total net written
premium growth. We are growing the right way to achieve adequate
prices, and in the right places to improve risk management.
“We continue to work toward a double digit return on equity.
Improved underwriting and investment results contributed to a 4.6%
ROE and an increase to our book value. Performance would have been
even better if not for a charge against earnings, resulting from
the recently enacted federal healthcare
legislation eliminating the tax benefit related to
Medicare Part D subsidies.
“Over the past two months, I’ve met with more than 1,000 of our
agencies. These meetings provide a unique forum for us to listen,
learn and respond. We’re getting high marks for the products,
systems, and claim service we’re providing and continuing to
enhance. Pricing is a concern for agents, both in terms of the
significant increases we’re taking in homeowners and our rates in
the weak commercial lines environment. I remain impressed by the
quality, depth and positive relationships our people have built
over the years with our agency partners. Relationships are a core
value for State Auto and a competitive strength – one that we seek
to earn every day,” added Restrepo.
State Auto Financial Corporation, headquartered in Columbus,
Ohio, is a super regional property and casualty insurance holding
company. The company markets its personal and business insurance
products through independent insurance agencies in 34 states and
the District of Columbia and is proud to be a Trusted Choice®
company partner. STFC stock is traded on the NASDAQ Global Select
Market, which represents the top third of all NASDAQ listed
companies.
The insurance subsidiaries of State Auto Financial Corporation
are part of the State Auto Group. The State Auto Group is rated A+
(Superior) by the A.M. Best Company and includes State Automobile
Mutual, State Auto Property & Casualty, State Auto National,
State Auto Ohio, State Auto Wisconsin, State Auto Florida, Milbank,
Farmers Casualty, Meridian Security, Meridian Citizens Mutual,
Beacon National, Beacon Lloyds, Patrons Mutual and Litchfield
Mutual Fire. Additional information on State Auto Financial
Corporation and the State Auto Insurance Companies can be found
online at www.StateAuto.com.
*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 $0.05 per diluted share for the
first quarter 2010 versus a loss of $0.17 for the same 2009
period.
STFC has scheduled a conference call with interested investors
for Thursday, April 29, 10:00 a.m. Eastern time to discuss the
company’s first quarter 2010 performance. Live and archived
broadcasts of the call can be accessed on www.StateAuto.com. A
replay of the call can be heard beginning at noon, April 29, by
calling 1-800-765-7014. Supplemental schedules detailing the
company’s first quarter 2010 financial, sales and underwriting
results are made available on www.StateAuto.com 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)
2010 2009 Net premiums written $
302.5 (B) $ 287.1 Earned premiums 302.3 286.0
Net investment income 20.5 18.3 Net realized gain (loss) on
investments 3.2 (11.3 ) Other income 0.4 1.0
Total revenue 326.4 294.0
Income (loss) before federal income taxes 20.6 (30.9 )
Federal income tax expense (benefit) 7.7 (16.9
) Net income (loss) $ 12.9 $ (14.0 ) Earnings (loss)
per share: - basic $ 0.32 $ (0.35 ) - diluted $ 0.32 $ (0.35 )
Earnings (loss) per share from operations (A): - basic $
0.27 $ (0.18 ) - diluted $ 0.27 $ (0.18 ) Weighted average
shares outstanding: - basic 39.8 39.6 - diluted 40.0 39.6
Return on equity (LTM) 4.6 % -4.0 % Book value per share $
21.65 $ 19.21 Dividends paid per share $ 0.15 $ 0.15
Total shares outstanding 39.9 39.6 GAAP ratios: Loss and LAE
ratio 66.2 78.6 Expense ratio 33.5 33.4
Combined ratio 99.7 112.0
Reconciliation of non-GAAP financial measure: (A) Net income (loss)
from operations: Net income (loss) $ 12.9 $ (14.0 )
Less net realized gain (loss) on
investments, less applicable federal income taxes
2.2 (6.8 ) Net income (loss) from operations $
10.7 $ (7.2 )
(B)
Net premiums written for the three
months ended March 31, 2010, includes $1.4 million of unearned
premiums transferred from STFC to State Auto Mutual in connection
with the addition of State Auto National to the State Auto Pool,
effective January 1, 2010.
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