Current Report Filing (8-k)
May 04 2015 - 2:40PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 4, 2015 (April 28, 2015)
STATE AUTO FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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Ohio |
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000-19289 |
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31-1324304 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
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518 East Broad Street, Columbus, Ohio |
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43215-3976 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (614) 464-5000
Not Applicable
(Former
name or former address, if changed since last report.)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2. |
Financial Information |
Item 2.02. |
Results of Operations and Financial Condition. |
On April 28, 2015, State Auto Financial Corporation
(the Company) issued a press release disclosing certain financial results of the Company for the three-month period ended March 31, 2015 (the Release).
The Release included non-GAAP financial measures as to the combined ratio. The GAAP combined ratio for the twelve-month periods ended December 31, 2013
and 2014, was 101.8% and 105.5%, respectively. Excluding the impact of both the expired homeowners quota share arrangement(1) and reserve strengthening for the terminated program business written
through the Companys RED unit in runoff, the combined ratio for the twelve-month periods ended December 31, 2013 and 2014, would have been 96.5% and 95.4%, respectively. Management believes this non-GAAP financial measure provides
investors with meaningful information concerning the Companys combined ratio for the twelve-month periods ended December 31, 2013 and 2014.
(1) |
Homeowners quota share arrangement: On December 31, 2011, the State Auto Group entered into a quota share reinsurance agreement with a syndicate of unaffiliated reinsurers covering its homeowners book of business.
The homeowners quota share arrangement expired on December 31, 2014. |
Section 9. |
Financial Statements and Exhibits |
Item 9.01. |
Financial Statements and Exhibits. |
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Exhibit No. |
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Description |
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99.1 |
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Press release issued by State Auto Financial Corporation on April 28, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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STATE AUTO FINANCIAL CORPORATION |
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Date: May 4, 2015 |
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By |
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/s/ James A. Yano |
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Senior Vice President and General Counsel |
EXHIBIT INDEX
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Exhibit No. |
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Description |
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99.1 |
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Press release issued by State Auto Financial Corporation on April 28, 2015. |
Exhibit 99.1
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State Auto Responds to A.M. Best Announcement and STFC Pre-announces First Quarter Results
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News Release
Contact
Tara Shull
Investor Relations and Finance Director
614.917.4478 F 614.887.1793 Tara.Shull@StateAuto.com
Kyle Anderson
AVP/Director of Corporate Communication
614.917.5497 M 614.477.5301
Kyle.Anderson@StateAuto.com |
Columbus, Ohio (April 28, 2015) The following is State Auto Insurance Companies President, Chairman and CEO Bob Restrepos
comment on todays announcement from A.M. Best Company: |
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Over the past five years weve transformed State Auto through product and geographic diversification, improved pricing and
underwriting, better claims service and investments in technology. Our results since 2012 were masked by the now expired homeowners quota share treaty and reserve strengthening for the terminated program business written through Risk Evaluation and
Design LLC (RED), which is in run off. Setting aside the financial impact of these two issues, STFCs GAAP combined ratios were 96.51 and
95.41, respectively, for the years ended December 31, 2013 and 2014 demonstrating the strong progress made. |
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Were confident that weve taken appropriate steps to minimize future earnings volatility. This includes the placement of a
new property aggregate excess catastrophe reinsurance agreement, RED reserving actions taken in 2014, and an Adverse Development Cover (ADC) reinsurance agreement with Munich Reinsurance America, Inc.
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For the first quarter 2015 State Auto Financial Corporation (NASDAQ:STFC) expects to report net income of $0.60 per diluted share, GAAP
combined ratio of 94.6, return on equity of 12.2% and book value per share of $22.05 with pre-tax realized gains of $3.8 million. |
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A.M. Best noted our strong risk adjusted capitalization, long standing regional market presence, well established agency relationships
and diversified product offerings. They highlighted the significant actions taken to prevent additional RED loss reserve development and our manageable catastrophe exposure resulting from our strategic initiatives to improve our homeowner
underwriting results. |
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Todays decision by A.M. Best will not change our risk profile or strategy and plans for the future. 2014 was a transformative year for State Auto and we are proud of the progress weve made. We are focused on
executing our strategy and operational plans. Given the actions weve taken, we believe we are positioned to leverage our strong balance sheet and produce consistent underwriting profits. We will continue to implement initiatives to further
improve our underwriting profitability and financial strength. We are committed to further distinguishing State Auto as a superior regional agency company by building upon our longstanding and profitable agency relationships, offering products and
technology that make us a responsive partner, and ensuring quality claims and customer service. |
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Corporate Headquarters 518 E. Broad St.
Columbus, OH 43215 614.464.5000
800.444.9950
For additional information:
StateAuto.com/STFC |
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facebook.com/StateAuto |
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twitter.com/StateAuto |
CONTINUED
STFC expects to release its first quarter 2015 results on Thursday, April 30, 2015, before the open of
regular trading on the Nasdaq Stock Market, and discuss these financial results in a conference call at 11:00 a.m. E.T.
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.
1 |
Represents a non-GAAP financial measure as to the December 31, 2013 and 2014 combined ratios. 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. |
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 Financials 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.
Page 2
Schedule 1
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 and the former RED units underwriting results on the Companys 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 years ended December 31, 2014 and 2013.
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Twelve Months Ended |
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December 31, 2014 |
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($ millions) |
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As Reported |
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HO QS Cession |
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Pro Forma without HO QS Cession |
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RED |
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Pro Forma without HO QS Cession and RED |
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Earned Premiums |
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$ |
1,074.1 |
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$ |
175.6 |
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$ |
1,249.7 |
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$ |
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$ |
1,249.7 |
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Losses and LAE Incurred: |
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Cat loss and ALAE |
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32.3 |
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19.0 |
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51.3 |
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51.3 |
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Non-cat loss and LAE |
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739.0 |
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66.8 |
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805.8 |
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96.7 |
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709.1 |
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Loss and LAE |
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771.3 |
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85.8 |
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857.1 |
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96.7 |
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760.4 |
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Acquisition and operating expenses |
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361.9 |
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70.0 |
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431.9 |
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431.9 |
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Net underwriting (loss) gain |
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$ |
(59.1 |
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$ |
19.8 |
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$ |
(39.3 |
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$ |
(96.7 |
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$ |
57.4 |
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Cat loss and ALAE ratio |
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3.0 |
% |
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10.8 |
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4.1 |
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4.1 |
% |
Non-cat loss and LAE ratio |
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68.8 |
% |
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38.1 |
% |
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64.5 |
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56.7 |
% |
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Loss and LAE ratio |
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71.8 |
% |
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48.9 |
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68.6 |
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60.8 |
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Expense ratio |
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33.7 |
% |
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39.8 |
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34.6 |
% |
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34.6 |
% |
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Combined ratio |
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105.5 |
% |
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88.7 |
% |
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103.2 |
% |
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95.4 |
% |
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Twelve Months Ended |
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December 31, 2013 |
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($ millions) |
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As Reported |
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HO QS Cession |
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Pro Forma without HO QS Cession |
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RED |
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Pro Forma without HO QS Cession and RED |
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Earned Premiums |
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$ |
1,055.0 |
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$ |
177.0 |
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$ |
1,232.0 |
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$ |
23.7 |
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$ |
1,208.3 |
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Losses and LAE Incurred: |
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Cat loss and ALAE |
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36.3 |
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22.7 |
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59.0 |
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0.3 |
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58.7 |
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Non-cat loss and LAE |
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683.5 |
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70.0 |
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753.5 |
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44.6 |
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708.9 |
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Loss and LAE |
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719.8 |
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92.7 |
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812.5 |
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44.9 |
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767.6 |
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Acquisition and operating expenses |
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354.8 |
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51.4 |
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406.2 |
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8.6 |
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397.6 |
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Net underwriting (loss) gain |
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$ |
(19.6 |
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$ |
32.9 |
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$ |
13.3 |
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$ |
(29.8 |
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$ |
43.1 |
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Cat loss and ALAE ratio |
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3.4 |
% |
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12.9 |
% |
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4.8 |
% |
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1.2 |
% |
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4.9 |
% |
Non-cat loss and LAE ratio |
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64.8 |
% |
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39.5 |
% |
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61.2 |
% |
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188.3 |
% |
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58.7 |
% |
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Loss and LAE ratio |
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68.2 |
% |
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52.4 |
% |
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66.0 |
% |
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189.5 |
% |
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63.6 |
% |
Expense ratio |
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33.6 |
% |
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29.0 |
% |
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33.0 |
% |
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36.1 |
% |
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32.9 |
% |
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Combined ratio |
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101.8 |
% |
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81.4 |
% |
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99.0 |
% |
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225.6 |
% |
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96.5 |
% |
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