State Auto Financial Reports Reserve Strengthening on Program Bus. in Run-off & Entering into Adverse Development Cover Reins...
January 20 2015 - 3:00PM
Business Wire
State Auto Financial Corporation (Nasdaq:STFC) today announced
that prior year loss and loss expense reserves will be strengthened
by approximately $72 million pre-tax to be reflected in the fourth
quarter of 2014 on program business written through Risk Evaluation
& Design LLC (RED), a wholly owned subsidiary of State
Automobile Mutual Insurance Company. The increase relates primarily
to the two largest RED programs, the terminated restaurant and
commercial trucking programs, both of which are in run off. The RED
reserve strengthening reflects revised estimates upon completion of
the previously disclosed ground up analysis of outstanding RED case
reserves. STFC’s RED carried loss reserves as of Dec. 31, 2014 were
approximately $127 million.
In addition, the State Auto Group has entered into an Adverse
Development Cover reinsurance agreement with Munich Reinsurance
America, Inc. This agreement, effective as of Dec. 31, 2014,
provides $40 million of coverage for adverse development in excess
of carried reserves for the terminated RED restaurant program,
which represents approximately 59% of carried RED reserves. The net
cost of the adverse development cover is included in the amount
disclosed above.
As announced on Jan. 6, 2015, the State Auto Group has entered
into a one year property aggregate excess catastrophe reinsurance
agreement covering property business underwritten by its personal
insurance and business insurance segments. In addition, management
is currently evaluating the need for an allowance against the
company’s net deferred tax assets. The reversal of any portion of
the deferred tax asset valuation allowance would apply to the
company’s 2014 results.
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 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 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.
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 CorporationTara Shull, Investor Relations
and Finance Director, 614-917-4478F
614-887-1793Tara.Shull@StateAuto.comorKyle Anderson, AVP/Director
of Corporate Communication, 614-917-5497M
614-477-5301Kyle.Anderson@StateAuto.comorFor additional
information:StateAuto.com/STFC
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