0000874977-20-000011.txt : 20200220 0000874977-20-000011.hdr.sgml : 20200220 20200220084125 ACCESSION NUMBER: 0000874977-20-000011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20200220 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200220 DATE AS OF CHANGE: 20200220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: State Auto Financial CORP CENTRAL INDEX KEY: 0000874977 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 311324304 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19289 FILM NUMBER: 20632628 BUSINESS ADDRESS: STREET 1: 518 EAST BROAD STREET CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6144645000 MAIL ADDRESS: STREET 1: 518 EAST BROAD STREET CITY: COLUMBUS STATE: OH ZIP: 43215 FORMER COMPANY: FORMER CONFORMED NAME: STATE AUTO FINANCIAL CORP DATE OF NAME CHANGE: 19930328 8-K 1 a2019year-endcurrentreport.htm CURRENT REPORT Document


 
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): February 20, 2020 (February 20, 2020)
 
STATE AUTO FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
 
Ohio
 
000-19289
 
31-1324304
(State or other jurisdiction of
incorporation or organization)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)
518 East Broad Street
Columbus
Ohio
43215-3976
(Address of principal executive offices)
 
(Zip Code)
(614) 464-5000
Registrant’s telephone number, including area code 

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):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common shares, without par value
STFC
The NASDAQ Global Select Market

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2)
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 





Section 2.
 
Financial Information
Item 2.02.
 
Results of Operations and Financial Condition.

On February 20, 2020, State Auto Financial Corporation (the "Company") issued a press release disclosing the Company’s results of operations for the three-month period and fiscal year ended December 31, 2019 (the “Release"). The full text of the Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The Release included a non-GAAP financial measure, net income (loss) from operations per diluted share. Net income (loss) from operations 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 the three-month periods ended December 31, 2019 and 2018, GAAP net income (loss) was $0.72 and $(0.57) per diluted share, respectively, while net income from operations was $0.29 and $0.67 per diluted share for the same respective periods. For the three-month periods ended December 31, 2019 and 2018, net investment gain (loss), net of applicable taxes, impacted GAAP net income (loss) per diluted share by $0.43 and $(1.25), respectively. For the fiscal years ended December 31, 2019 and 2018, GAAP net income was $1.96 and $0.29 per diluted share, respectively, while net income from operations was $0.63 and $1.20 per diluted share for the same respective periods. For the fiscal years ended December 31, 2019 and 2018, net investment gain (loss), net of applicable taxes, impacted GAAP net income (loss) per diluted share by $1.33 and $(0.91), respectively.
Management uses net income (loss) from operations because it believes this calculation better indicates the Company’s operating performance than GAAP net income (loss) in that net income (loss) from operations excludes the sometimes volatile investment gains/losses, net of applicable federal income taxes, that can produce inconsistent results.
Section 9.
 
Financial Statements and Exhibits
Item 9.01.
 
Financial Statements and Exhibits
(c)
Exhibits.
 
Exhibit No.
 
Description of Exhibit
99.1

 
Press release issued by State Auto Financial Corporation on February 20, 2020, regarding results of operations for the three-month period and fiscal year ended December 31, 2019




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.

 
STATE AUTO FINANCIAL CORPORATION
 
 
Date: February 20, 2020
/s/ Steven E. English
 
Senior Vice President and Chief Financial Officer




EXHIBIT INDEX


 EX-99.01 2 a2019year-endpressreleasex.htm PRESS RELEASE Exhibit


EXHIBIT 99.1
newsrelease2a09.jpg
stfclogo2a08.jpg
State Auto Financial reports fourth quarter and year end 2019 results
•Quarterly earnings of $0.72 per share
•Quarterly net income from operations1 of $0.29 per share
•Quarterly GAAP combined ratio of 100.4
•Quarterly SAP personal and commercial segments' combined ratio2 of 97.1
•Return on equity of 9.8%
•Book value per share of $22.01

COLUMBUS, OHIO - February 20, 2020 - State Auto Financial Corporation (NASDAQ:STFC) today reported fourth quarter 2019 net income of $32.7 million, or $0.72 per diluted share versus a net loss of $24.5 million, or $0.57 per diluted share, for the same 2018 period. Net income from operations1 per diluted share for the fourth quarter of 2019 was $0.29 versus $0.67 for the same 2018 period.
For the year ended 2019, STFC had net income of $87.4 million, or $1.96 per diluted share, compared to net income of $12.8 million, or $0.29 per diluted share, for the same 2018 period. Net income from operations1 per diluted share for the year ended 2019 was $0.63 versus $1.20 for the same 2018 period.
GAAP Operating Results
STFC’s GAAP combined ratio for the fourth quarter 2019 was 100.4 compared to 94.6 for the same 2018 period. Catastrophe losses during the fourth quarter 2019 accounted for 7.7 points of the 64.2 total loss ratio points, or $24.8 million, versus 2.6 points of the total 56.8 loss ratio points, or $8.1 million, for the same period in 2018. Fourth quarter catastrophe losses included $6.6 million, or 2.1 loss ratio points, of adverse development relating to prior years from Hurricanes Irma and Harvey from the specialty run-off business. Non-catastrophe losses and ALAE during the fourth quarter 2019 included 5.7 points of favorable development relating to prior years, or $18.3 million, versus 7.9 points of favorable development, or $24.4 million, for the same period in 2018.
STFC’s GAAP combined ratio for the year ended 2019 was 102.7 compared to 100.6 for the same 2018 period. Catastrophe losses for the year ended 2019 accounted for 8.0 points of the 67.4 total loss ratio points, or $100.5 million, versus 5.8 points, or $71.7 million for the same period in 2018. Non-catastrophe losses and ALAE for the year ended 2019 included 5.8 points of favorable development relating to prior years, or $72.4 million, versus 6.2 points of favorable development, or $76.6 million, for the same period in 2018.
SAP Personal and Commercial Operating Results
The exit from our specialty insurance business resulted in the elimination of specialty insurance as a reportable segment as we stopped writing this business on a net basis in 2018. Specialty results, labeled as "specialty run-off," are included in the SAP Insurance Segment Results tables below to enable reconciliation to total underwriting results.
Net written premium for the fourth quarter 2019 increased 9.0% compared to the same period in 2018. By segment, net written premium for personal and commercial increased 6.8% and 12.6%, respectively. The increase in the personal segment was primarily due to new business growth and rate increases in homeowners and other personal. Personal auto net written premium declined as a result of lower new business and retention. The increase in the commercial segment was led by new business growth in commercial auto, middle market commercial and small commercial package. Workers' compensation net written premium declined due to continued intense competition in this market.
Net written premium for the year ended 2019 increased 10.2% compared to the same period in 2018. By insurance segment, net written premium for the personal and commercial segments increased 9.1% and 12.0%, respectively. The trends in the personal and commercial segments' net written premium were due to the same factors discussed above for the fourth quarter.


Page 1 of 21


The SAP personal and commercial segments' combined ratio for the fourth quarter 2019 was 97.1 compared to 92.8 for the same 2018 period. Catastrophe losses during the fourth quarter 2019 accounted for 5.6 points of the total 61.9 loss ratio points, or $18.2 million, versus 2.3 points of the total 54.8 loss ratio points, or $6.9 million, for the same period in 2018. Non-catastrophe losses and ALAE during the fourth quarter 2019 included 6.1 points of favorable development relating to prior years, or $19.6 million, versus 7.8 points of favorable development, or $23.3 million, for the same period in 2018.
The SAP personal and commercial segments' combined ratio for the year ended 2019 was 101.2 compared to 98.6 for the same 2018 period. Catastrophe losses for the year ended 2019 accounted for 7.2 points of the total 66.8 loss ratio points, or $89.9 million, versus 6.2 points of the total 63.0 loss ratio points, or $70.3 million for the same period in 2018. Non-catastrophe losses and ALAE for the year ended 2019 included 5.7 points of favorable development relating to prior years, or $71.3 million, versus 7.0 points of favorable development, or $79.7 million, for the same period in 2018.
Book Value and Return on Equity
STFC’s book value increased to $22.01 per share as of Dec. 31, 2019, compared to $21.68 on Sept. 30, 2019. The increase was driven by the market value of our investment portfolio.
Return on stockholders’ equity for the 12 months ended December 31, 2019, was 9.8% compared to 1.5% for the 12 months ended December 31, 2018.
STFC’s Chairman, President and CEO Mike LaRocco commented on the quarter and year as follows:
“Our fourth quarter and year ended 2019 results reflected the challenges we faced during the year in addition to the considerable progress we made toward more consistent profitable performance. While our personal and commercial lines’ 101.2% SAP combined ratio and 10.2% net written premium growth for 2019 didn’t meet our expectations, we made important, significant progress in several areas including surpassing $2.0 billion in net written premium for the State Auto Group which includes all Pooled Companies.
“The lack of an underwriting profit was driven primarily by our personal lines business, where we identified and have closed product and technology gaps, mainly in our auto line. Higher weather losses also significantly impacted our property results. Our homeowners business grew nearly 20% in 2019, a testament to the powerful combination of our digital technology and new product design.
“2019 was an outstanding year for our commercial lines business, which was profitable with a SAP combined ratio of 97.0 and produced 12.0% net written premium growth. This was a remarkable achievement, the result of two years of rebuilding our commercial lines teams and products. At the same time, work continued toward 2020 launches of farm and ranch and middle market commercial on our digital-only platform, State Auto Connect.
“The foundation we’ve built remains strong. We enter 2020 with the products, pricing, technology and agent partners that will drive our success, and the State Auto team has the creativity, passion and persistence needed to win.”



Page 2 of 21


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, 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 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 income of $0.43 per diluted share and $1.33 per diluted share for the fourth quarter and year ended Dec. 31, 2019, respectively, versus a loss of $1.25 per diluted share and $0.91 per diluted share for the fourth quarter and year ended Dec. 31, 2018, respectively.
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. Details behind the compilation of these results can be found on pages 18 - 21 of this release.
STFC has scheduled a conference call with interested investors for Thursday, Feb. 20, at 11 a.m. ET to discuss the Company’s fourth quarter 2019 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., Feb. 20, by calling 855-859-2056, conference ID 9569194. Supplemental schedules detailing the Company’s fourth quarter 2019 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.

CONTACTS
Media contact: Kyle Anderson, Kyle.Anderson@StateAuto.com, 614-917-5497
Investor contact: Natalie Schoolcraft, Natalie.Schoolcraft@StateAuto.com, 614-917-4341


Page 3 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



Selected Consolidated Financial Data
 
 
 
 
 
 
 
 
 
 
 
Three months ended December 31
 
Year ended December 31
 
 
2019
 
2018
 
2019
 
2018
Net written premiums
 
$
323.6

 
$
297.6

 
$
1,318.1

 
$
1,210.3

 
 
 
 
 
 
 
 
 
Earned premiums
 
323.0

 
308.8

 
1,253.0

 
1,238.0

Net investment income
 
20.0

 
22.7

 
80.4

 
84.9

Net investment gain (loss)
 
24.0

 
(67.9
)
 
74.2

 
(49.7
)
Other income from affiliates
 
0.8

 
0.8

 
2.4

 
2.6

Total revenue
 
367.8

 
264.4

 
1,410.0

 
1,275.8

 
 
 
 
 
 
 
 
 
Income (loss) before federal income taxes
 
40.3

 
(32.5
)
 
107.0

 
12.9

 
 
 
 
 
 
 
 
 
Federal income tax expense (benefit)
 
7.6

 
(8.0
)
 
19.6

 
0.1

Net income (loss)
 
$
32.7

 
$
(24.5
)
 
$
87.4

 
$
12.8

 
 
 
 
 
 
 
 
 
Earnings (loss) per common share:
 
 
 
 
 
 
 
 
- basic
 
$
0.75

 
$
(0.57
)
 
$
2.01

 
$
0.30

- diluted
 
$
0.72

 
$
(0.57
)
 
$
1.96

 
$
0.29

Earnings (loss) per share from operations (A):
 
 
 
 
 
 
 
 
- basic
 
$
0.31

 
$
0.68

 
$
0.66

 
$
1.21

- diluted
 
$
0.29

 
$
0.67

 
$
0.63

 
$
1.20

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
- basic
 
43.6

 
43.1

 
43.4

 
42.9

- diluted
 
44.0

 
43.1

 
44.0

 
43.4

Return on average equity (LTM)
 
9.8
%
 
1.5
%
 
 
 
 
Book value per share
 
$
22.01

 
$
18.91

 
 
 
 
Dividends paid per share
 
$
0.10

 
$
0.10

 
$
0.40

 
$
0.40

Total shares outstanding
 
43.6

 
43.2

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP ratios:
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
7.7

 
2.6

 
8.0

 
5.8

Non-cat loss and ALAE ratio
 
56.5

 
54.2

 
59.4

 
58.5

Loss and LAE ratio
 
64.2

 
56.8

 
67.4

 
64.3

Expense ratio
 
36.2

 
37.8

 
35.3

 
36.3

Combined ratio
 
100.4

 
94.6

 
102.7

 
100.6

 
 
 
 
 
 
 
 
 
(A)Reconciliation of non-GAAP financial measure:
 
 
 
 
 
 
 
 
Net income from operations
 
 
 
 
 
 
 
 
Net income (loss)
 
$
32.7

 
$
(24.5
)
 
$
87.4

 
$
12.8

Net investment gain (loss), net of tax
 
19.0

 
(53.6
)
 
58.7

 
(39.3
)
Net income from operations
 
$
13.7

 
$
29.1

 
$
28.7

 
$
52.1

 
 
 
 
 
 
 
 
 


Page 4 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



Condensed Consolidated Balance Sheets
($ and shares in millions, except per share amounts)
 
 
 
 
(unaudited)
 
December 31
 
December 31
 
 
2019
 
2018
ASSETS
 
 
 
 
Fixed maturities, available-for-sale, at fair value (amortized cost $2,080.0 and $2,188.2, respectively)
 
$
2,127.9

 
$
2,159.5

Equity securities
 
395.2

 
315.0

Other invested assets
 
69.7

 
48.8

Other invested assets, at cost
 
6.5

 
5.6

Notes receivable from affiliate
 
70.0

 
70.0

Total investments
 
2,669.3

 
2,598.9

 
 
 
 
 
Cash and cash equivalents
 
78.0

 
59.8

Accrued investment income and other assets
 
31.7

 
32.4

Deferred policy acquisition costs
 
111.1

 
101.9

Reinsurance recoverable on losses and loss expenses payable
 
13.6

 
5.5

Prepaid reinsurance premiums
 
7.5

 
6.6

Due from affiliate
 
21.5

 
—

Current federal income taxes
 
6.3

 
5.9

Net deferred federal income taxes
 
42.2

 
77.8

Property and equipment, net
 
4.2

 
7.1

Total assets
 
$
2,985.4

 
$
2,895.9

 
 
 
 
 
LIABILITIES
 
 
 
 
Losses and loss expenses payable
 
$
1,066.5

 
$
1,146.8

Unearned premiums
 
649.2

 
584.2

Notes payable (affiliates $15.2 and $15.2, respectively)
 
122.0

 
122.0

Pension and postretirement benefits
 
72.9

 
83.0

Due to affiliate
 
—

 
22.4

Other liabilities
 
114.9

 
119.0

Total liabilities
 
2,025.5

 
2,077.4

 
 
 
 
 
STOCKHOLDERS' EQUITY
 
 
 
 
Common stock, without par value. Authorized 100.0 shares; 50.4 and 50.0 shares issued, respectively, at stated value of $2.50 per share
 
125.9

 
125.0

Treasury stock, 6.9 and 6.8 shares, respectively, at cost
 
(117.5
)
 
(117.0
)
Additional paid-in capital
 
206.7

 
194.2

Accumulated other comprehensive loss
 
(37.9
)
 
(96.4
)
Retained earnings
 
782.7

 
712.7

Total stockholders’ equity
 
959.9

 
818.5

Total liabilities and stockholders’ equity
 
$
2,985.4

 
$
2,895.9

 
 
 
 
 



Page 5 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



Condensed Consolidated Statements of Income
($ in millions, except per share amounts)
 
 
 
 
 
 
 
 
(unaudited)
 
Three months ended December 31
 
Year ended December 31
 
 
2019
 
2018
 
2019
 
2018
Earned premiums
 
$
323.0

 
$
308.8

 
$
1,253.0

 
$
1,238.0

Net investment income
 
20.0

 
22.7

 
80.4

 
84.9

Net investment gain (loss)
 
24.0

 
(67.9
)
 
74.2

 
(49.7
)
Other income from affiliates
 
0.8

 
0.8

 
2.4

 
2.6

Total revenues
 
367.8

 
264.4

 
1,410.0

 
1,275.8

 
 
 
 
 
 
 
 
 
Losses and loss expenses
 
207.2

 
175.3

 
844.8

 
796.4

Acquisition and operating expenses
 
116.8

 
116.8

 
442.0

 
449.8

Interest expense
 
1.2

 
1.2

 
4.9

 
5.7

Other expenses
 
2.3

 
3.6

 
11.3

 
11.0

Total expenses
 
327.5

 
296.9

 
1,303.0

 
1,262.9

 
 
 
 
 
 
 
 
 
Income (loss) before federal income taxes
 
40.3

 
(32.5
)
 
107.0

 
12.9

Federal income tax expense (benefit):
 
 
 
 
 
 
 
 
Current
 
—

 
—

 
(0.4
)
 
(1.1
)
Deferred
 
7.6

 
(8.0
)
 
20.0

 
1.2

Federal income tax expense (benefit)
 
7.6

 
(8.0
)
 
19.6

 
0.1

Net income (loss)
 
$
32.7

 
$
(24.5
)
 
$
87.4

 
$
12.8

Earnings (loss) per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.75

 
$
(0.57
)
 
$
2.01

 
$
0.30

Diluted
 
$
0.72

 
$
(0.57
)
 
$
1.96

 
$
0.29

Dividends paid per common share
 
$
0.10

 
$
0.10

 
$
0.40

 
$
0.40

 
 
 
 
 
 
 
 
 



Page 6 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



Consolidated Statements of Comprehensive Income
($ in millions)
 
 
 
 
 
 
 
(unaudited)
Three months ended December 31
 
Year ended December 31
 
2019
 
2018
 
2019
 
2018
Net income (loss)
$
32.7

 
$
(24.5
)
 
$
87.4

 
$
12.8

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Net unrealized holding (loss) gain on available-for-sale investments:
 
 
 
 
 
 
 
Unrealized holding (loss) gain
(11.6
)
 
15.2

 
80.2

 
(46.4
)
Reclassification adjustments for gains realized in net income
(0.7
)
 
(0.3
)
 
(3.5
)
 
(2.0
)
Income tax benefit (expense)
2.6

 
(3.2
)
 
(16.1
)
 
10.1

Total net unrealized holding (loss) gain on available- for-sale investments
(9.7
)
 
11.7

 
60.6

 
(38.3
)
Net unrecognized benefit plan obligations:
 
 
 
 
 
 
 
Net actuarial loss arising during the period
(5.9
)
 
(4.3
)
 
(5.9
)
 
(4.3
)
Reclassification adjustments for amortization to statement of income:
 
 
 
 
 
 
 
Prior service credit
(1.5
)
 
(1.5
)
 
(6.3
)
 
(6.3
)
Net actuarial loss
2.4

 
3.3

 
9.6

 
13.2

Income tax expense (benefit)
1.0

 
0.5

 
0.5

 
(0.6
)
Total net unrecognized benefit plan obligations
(4.0
)
 
(2.0
)
 
(2.1
)
 
2.0

Other comprehensive (loss) income
(13.7
)
 
9.7

 
58.5

 
(36.3
)
Comprehensive income (loss)
$
19.0

 
$
(14.8
)
 
$
145.9

 
$
(23.5
)
 
 
 
 
 
 
 
 



Page 7 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



Condensed Consolidated Statement of Stockholders' Equity
($ and shares in millions)
 
 
 
 
(unaudited)
 
Year Ended
 
Year Ended
 
 
December 31
 
December 31
 
 
2019
 
2018
Common shares:
 
 
 
 
Balance at beginning of year
 
50.0

 
49.2

Issuance of shares
 
0.4

 
0.8

Balance at end of year
 
50.4

 
50.0

 
 
 
 
 
Treasury shares:
 
 
 
 
Balance at beginning of year
 
(6.8
)
 
(6.8
)
Issuance of shares
 
(0.1
)
 
—

Balance at beginning of year and year ended
 
(6.9
)
 
(6.8
)
 
 
 
 
 
Common stock:
 
 
 
 
Balance at beginning of year
 
$
125.0

 
$
123.0

Issuance of shares
 
0.9

 
2.0

Balance at end of year
 
125.9

 
125.0

 
 
 
 
 
Treasury stock:
 
 
 
 
Balance at beginning of year
 
$
(117.0
)
 
$
(116.8
)
Shares acquired on stock award exercises
 
(0.5
)
 
(0.2
)
Balance at end of year
 
(117.5
)
 
(117.0
)
 
 
 
 
 
Additional paid-in capital:
 
 
 
 
Balance at beginning of year
 
$
194.2

 
$
171.8

Issuance of common stock
 
5.1

 
13.3

Stock awards granted
 
7.4

 
9.1

Balance at end of year
 
206.7

 
194.2

 
 
 
 
 
Accumulated other comprehensive loss:
 
 
 
 
Balance at beginning of year
 
$
(96.4
)
 
$
3.8

Cumulative effect of change in accounting for equity securities and other invested assets and reclassification of stranded tax effects as of January 1, 2018
 
—

 
(63.9
)
Change in unrealized gain (loss) on available-for-sale investments, net of tax
 
60.6

 
(38.3
)
Change in unrecognized benefit plan obligations, net of tax
 
(2.1
)
 
2.0

Balance at end of year
 
(37.9
)
 
(96.4
)
 
 
 
 
 
Retained earnings:
 
 
 
 
Balance at beginning of year
 
$
712.7

 
$
653.2

Cumulative effect of change in accounting for equity securities and other invested assets and reclassification of stranded tax effects as of January 1, 2018
 
—

 
63.9

Net income
 
87.4

 
12.8

Dividends declared (affiliates $10.4 and $10.4, respectively)
 
(17.4
)
 
(17.2
)
Balance at end of year
 
782.7

 
712.7

 
 
 
 
 
Total stockholders’ equity at end of year
 
$
959.9

 
$
818.5

 
 
 
 
 



Page 8 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



Condensed Consolidated Statements of Cash Flow
($ millions)
 
 
 
 
(unaudited)
 
 
 
 
Year ended December 31
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
87.4

 
$
12.8

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
Depreciation and amortization, net
 
9.4

 
8.9

Share-based compensation
 
6.1

 
11.1

Net investment (gain) loss
 
(74.2
)
 
49.7

Changes in operating assets and liabilities:
 
 
 
 
Deferred policy acquisition costs
 
(9.2
)
 
8.4

Accrued investment income and other assets
 
0.7

 
3.9

Postretirement and pension benefits
 
(14.5
)
 
(16.9
)
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums

 
(9.0
)
 
(2.6
)
Other liabilities and due to/from affiliate, net

 
(44.9
)
 
47.6

Losses and loss expenses payable
 
(80.3
)
 
(108.8
)
Unearned premiums
 
65.0

 
(27.6
)
Deferred tax expense on share-based awards
 
(0.9
)
 
0.9

Federal income taxes
 
20.5

 
(0.8
)
Net cash used in operating activities
 
(43.9
)
 
(13.4
)
Cash flows from investing activities:
 

 
 
Purchases of fixed maturities available-for-sale
 
(592.6
)
 
(349.6
)
Purchases of equity securities available-for-sale
 
(63.4
)
 
(91.4
)
Purchases of other invested assets
 
(13.3
)
 
(1.8
)
Maturities, calls and principal reductions of fixed maturities available-for-sale
 
386.3

 
229.8

Sales of fixed maturities available-for-sale
 
308.8

 
98.0

Sales of equity securities available-for-sale
 
45.4

 
97.8

Sales of other invested assets available-for-sale
 
1.3

 
1.2

Net sales of property and equipment
 
1.6

 
—

Net cash provided by (used in) investing activities
 
74.1

 
(16.0
)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of common stock
 
5.9

 
15.4

Payments to acquire treasury shares
 
(0.5
)
 
(0.2
)
Payment of dividends
 
(17.4
)
 
(17.1
)
Payment of credit facility issue costs
 
—

 
(0.4
)
Net cash used in financing activities
 
(12.0
)
 
(2.3
)
Net increase (decrease) in cash and cash equivalents
 
18.2

 
(31.7
)
Cash and cash equivalents at beginning of period
 
59.8

 
91.5

Cash and cash equivalents at end of period
 
$
78.0

 
$
59.8

Supplemental disclosures:
 
 
 
 
Interest paid (affiliates $1.1 and $1.0, respectively)
 
$
4.8

 
$
5.7

 
 
 
 
 



Page 9 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



Net Investment Income
($ in millions)
 
 
 
 
 
 
 
 
 
 
unaudited
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
Quarter to Date
 
 
 
 
 
 
 
 
 
 
Gross investment income:
 
 
 
 
 
 
 
 
 
 
   Fixed maturities
 
$
15.0

 
$
15.4

 
$
14.7

 
$
14.4

 
$
13.9

   TIPS
 
0.9

 
(0.3
)
 
2.6

 
0.9

 
0.7

Total fixed maturities
 
15.9

 
15.1

 
17.3

 
15.3

 
14.6

Equity securities
 
4.8

 
2.8

 
3.1

 
3.0

 
4.3

Other
 
2.0

 
1.7

 
1.4

 
1.1

 
1.3

Total gross investment income
 
22.7

 
19.6

 
21.8

 
19.4

 
20.2

Less: Investment expenses
 
—

 
0.2

 
0.1

 
0.1

 
0.2

Net investment income
 
$
22.7

 
$
19.4

 
$
21.7

 
$
19.3

 
$
20.0

 
 
 
 
 
 
 
 
 
 
 
Year to Date
 
 
 
 
 
 
 
 
 
 
Gross investment income:
 
 
 
 
 
 
 
 
 
 
   Fixed maturities
 
$
60.0

 
$
15.4

 
$
30.1

 
$
44.5

 
$
58.4

   TIPS
 
5.3

 
(0.3
)
 
2.3

 
3.2

 
3.9

Total fixed maturities
 
65.3

 
15.1

 
32.4

 
47.7

 
62.3

Equity securities
 
13.4

 
2.8

 
5.9

 
8.9

 
13.2

Other
 
7.2

 
1.7

 
3.1

 
4.2

 
5.5

Total gross investment income
 
85.9

 
19.6

 
41.4

 
60.8

 
81.0

Less: Investment expenses
 
1.0

 
0.2

 
0.3

 
0.4

 
0.6

Net investment income
 
$
84.9

 
$
19.4

 
$
41.1

 
$
60.4

 
$
80.4

 
 
 
 
 
 
 
 
 
 
 
 
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
TIPS, fair value
 
$
142.3

 
$
147.0

 
$
145.2

 
$
135.3

 
$
135.6

TIPS, book value
 
$
141.2

 
$
140.5

 
$
137.4

 
$
125.9

 
$
126.2

 
 
 
 
 
 
 
 
 
 
 
Net Investment Gain (Loss)
 
 
 
 
 
 
 
($ millions)
Three months ended December 31
 
Twelve months ended December 31
 
2019
 
2018
 
2019
 
2018
Investment gain (loss), net:
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Realized gains on sales of securities
$
0.7

 
$
0.3

 
$
3.5

 
$
2.0

Net gains on fixed maturities
0.7

 
0.3

 
3.5

 
2.0

Equity securities:
 
 
 
 
 
 
 
Realized gains (losses) on sales of securities, net
0.7

 
0.3

 
(1.8
)
 
5.7

Unrealized gain (loss) on securities still held, net
17.5

 
(62.5
)
 
63.9

 
(49.7
)
Net gain (loss) on equity securities
18.2

 
(62.2
)
 
62.1

 
(44.0
)
Other invested assets:
 
 
 
 
 
 
 
Unrealized gain (loss) on securities still held, net
5.1

 
(6.0
)
 
9.9

 
(7.7
)
Net gain (loss) on other invested assets
5.1

 
(6.0
)
 
9.9

 
(7.7
)
Other net realized loss
—

 
—

 
(1.3
)
 
—

Net gain (loss) on investments
$
24.0

 
$
(67.9
)
 
$
74.2

 
$
(49.7
)
 
 
 
 
 
 
 
 



Page 10 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



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:
 
 
 
 
 
 
 
December 31
 
 
2019
 
2018
Deferred tax assets:
 
 
 
 
Unearned premiums not currently deductible
 
$
27.0

 
$
24.3

Losses and loss expenses payable discounting
 
10.6

 
11.2

Postretirement and pension benefits
 
20.0

 
21.4

Investments
 
—

 
8.9

Other liabilities
 
13.4

 
14.8

Net operating loss carryforward
 
12.1

 
15.1

Tax credit carryforwards
 
2.5

 
2.7

Other
 
1.1

 
0.8

Total deferred tax assets
 
86.7

 
99.2

Deferred tax liabilities:
 
 
 
 
Deferral of policy acquisition costs
 
23.3

 
21.4

Investments
 
21.2

 
—

Total deferred tax liabilities
 
44.5

 
21.4

Net deferred federal income taxes
 
$
42.2

 
$
77.8

 
 
 
 
 


Page 11 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
 
 
Three months ended December 31, 2019
 
Personal Auto
 
Homeowners
 
Other Personal
 
Total
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
99.7

 
$
84.6

 
$
12.9

 
$
197.2

Net earned premiums
 
106.2

 
79.8

 
10.7

 
196.7

Losses and LAE incurred:
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
0.6

 
12.3

 
1.0

 
13.9

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
0.3

 
(0.2
)
 
(0.2
)
 
(0.1
)
Current accident year non-cat loss and ALAE
 
77.0

 
32.3

 
3.4

 
112.7

Total non-cat loss and ALAE
 
77.3

 
32.1

 
3.2

 
112.6

Total Loss and ALAE
 
77.9

 
44.4

 
4.2

 
126.5

ULAE
 
7.9

 
4.8

 
0.3

 
13.0

Total Loss and LAE
 
85.8

 
49.2

 
4.5

 
139.5

Underwriting expenses
 
33.2

 
27.7

 
4.1

 
65.0

Net underwriting (loss) gain
 
$
(12.8
)
 
$
2.9

 
$
2.1

 
$
(7.8
)
 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
0.6
%
 
15.5
 %
 
8.6
 %
 
7.1
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
0.3
%
 
(0.4
)%
 
(1.7
)%
 
(0.1
)%
Current accident year non-cat loss and ALAE ratio
 
72.6
%
 
40.5
 %
 
32.0
 %
 
57.3
 %
Total non-cat loss and ALAE ratio
 
72.9
%
 
40.1
 %
 
30.3
 %
 
57.2
 %
Total Loss and ALAE ratio
 
73.5
%
 
55.6
 %
 
38.9
 %
 
64.3
 %
ULAE ratio
 
7.4
%
 
6.1
 %
 
2.7
 %
 
6.7
 %
Total Loss and LAE ratio
 
80.9
%
 
61.7
 %
 
41.6
 %
 
71.0
 %
Expense ratio
 
33.2
%
 
32.7
 %
 
32.1
 %
 
32.9
 %
Combined ratio
 
114.1
%
 
94.4
 %
 
73.7
 %
 
103.9
 %
($ in millions)
 
 
 
 
 
 
 
 
Three months ended December 31, 2018
 
Personal Auto
 
Homeowners
 
Other Personal
 
Total
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
106.0

 
$
70.1

 
$
8.5

 
$
184.6

Net earned premiums
 
105.9

 
66.8

 
7.0

 
179.7

Losses and LAE incurred:
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
0.1

 
3.2

 
0.3

 
3.6

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(5.9
)
 
(0.1
)
 
—

 
(6.0
)
Current accident year non-cat loss and ALAE
 
72.2

 
24.7

 
4.2

 
101.1

Total non-cat loss and ALAE
 
66.3

 
24.6

 
4.2

 
95.1

Total Loss and ALAE
 
66.4

 
27.8

 
4.5

 
98.7

ULAE
 
7.2

 
3.7

 
0.2

 
11.1

Total Loss and LAE
 
73.6

 
31.5

 
4.7

 
109.8

Underwriting expenses
 
33.2

 
25.7

 
3.1

 
62.0

Net underwriting (loss) gain
 
$
(0.9
)
 
$
9.6

 
$
(0.8
)
 
$
7.9

 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
0.1
 %
 
4.8
 %
 
5.5
%
 
2.0
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(5.6
)%
 
(0.2
)%
 
0.2
%
 
(3.3
)%
Current accident year non-cat loss and ALAE ratio
 
68.1
 %
 
37.1
 %
 
59.3
%
 
56.3
 %
Total non-cat loss and ALAE ratio
 
62.5
 %
 
36.9
 %
 
59.5
%
 
53.0
 %
Total Loss and ALAE ratio
 
62.6
 %
 
41.7
 %
 
65.0
%
 
55.0
 %
ULAE ratio
 
6.8
 %
 
5.5
 %
 
2.4
%
 
6.1
 %
Total Loss and LAE ratio
 
69.4
 %
 
47.2
 %
 
67.4
%
 
61.1
 %
Expense ratio
 
31.3
 %
 
36.7
 %
 
36.4
%
 
33.6
 %
Combined ratio
 
100.7
 %
 
83.9
 %
 
103.8
%
 
94.7
 %

Page 12 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
 
 
Twelve months ended December 31, 2019
 
Personal Auto
 
Homeowners
 
Other Personal
 
Total
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
424.5

 
$
326.0

 
$
41.9

 
$
792.4

Net earned premiums
 
428.3

 
295.9

 
35.0

 
759.2

Losses and LAE incurred:
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
6.0

 
60.1

 
5.0

 
71.1

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(10.7
)
 
0.3

 
(2.1
)
 
(12.5
)
Current accident year non-cat loss and ALAE
 
284.8

 
142.7

 
16.1

 
443.6

Total non-cat loss and ALAE
 
274.1

 
143.0

 
14.0

 
431.1

Total Loss and ALAE
 
280.1

 
203.1

 
19.0

 
502.2

ULAE
 
30.1

 
19.9

 
1.2

 
51.2

Total Loss and LAE
 
310.2

 
223.0

 
20.2

 
553.4

Underwriting expenses
 
129.9

 
102.5

 
13.2

 
245.6

Net underwriting (loss) gain
 
$
(11.8
)
 
$
(29.6
)
 
$
1.6

 
$
(39.8
)
 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
1.4
 %
 
20.3
%
 
14.1
 %
 
9.4
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(2.5
)%
 
0.1
%
 
(5.9
)%
 
(1.7
)%
Current accident year non-cat loss and ALAE ratio
 
66.5
 %
 
48.2
%
 
45.9
 %
 
58.5
 %
Total non-cat loss and ALAE ratio
 
64.0
 %
 
48.3
%
 
40.0
 %
 
56.8
 %
Total Loss and ALAE ratio
 
65.4
 %
 
68.6
%
 
54.1
 %
 
66.2
 %
ULAE ratio
 
7.0
 %
 
6.8
%
 
3.4
 %
 
6.7
 %
Total Loss and LAE ratio
 
72.4
 %
 
75.4
%
 
57.5
 %
 
72.9
 %
Expense ratio
 
30.6
 %
 
31.4
%
 
31.6
 %
 
31.0
 %
Combined ratio
 
103.0
 %
 
106.8
%
 
89.1
 %
 
103.9
 %
($ in millions)
 
 
 
 
 
 
 
 
Twelve months ended December 31, 2018
 
Personal Auto
 
Homeowners
 
Other Personal
 
Total
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
424.8

 
$
273.1

 
$
28.6

 
$
726.5

Net earned premiums
 
402.0

 
248.8

 
23.1

 
673.9

Losses and LAE incurred:
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
4.9

 
41.3

 
2.5

 
48.7

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(24.4
)
 
(7.3
)
 
(1.1
)
 
(32.8
)
Current accident year non-cat loss and ALAE
 
265.8

 
106.6

 
12.2

 
384.6

Total non-cat loss and ALAE
 
241.4

 
99.3

 
11.1

 
351.8

Total Loss and ALAE
 
246.3

 
140.6

 
13.6

 
400.5

ULAE
 
24.9

 
16.1

 
0.8

 
41.8

Total Loss and LAE
 
271.2

 
156.7

 
14.4

 
442.3

Underwriting expenses
 
126.1

 
91.6

 
10.6

 
228.3

Net underwriting gain (loss)
 
$
4.7

 
$
0.5

 
$
(1.9
)
 
$
3.3

 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
1.2
 %
 
16.6
 %
 
11.0
 %
 
7.2
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(6.1
)%
 
(2.9
)%
 
(4.9
)%
 
(4.9
)%
Current accident year non-cat loss and ALAE ratio
 
66.1
 %
 
42.9
 %
 
52.8
 %
 
57.1
 %
Total non-cat loss and ALAE ratio
 
60.0
 %
 
40.0
 %
 
47.9
 %
 
52.2
 %
Total Loss and ALAE ratio
 
61.2
 %
 
56.6
 %
 
58.9
 %
 
59.4
 %
ULAE ratio
 
6.2
 %
 
6.4
 %
 
3.3
 %
 
6.2
 %
Total Loss and LAE ratio
 
67.4
 %
 
63.0
 %
 
62.2
 %
 
65.6
 %
Expense ratio
 
29.7
 %
 
33.6
 %
 
36.9
 %
 
31.4
 %
Combined ratio
 
97.1
 %
 
96.6
 %
 
99.1
 %
 
97.0
 %


Page 13 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



SAP Commercial Insurance Segment Results
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
December 31, 2019
 
Commercial Auto
 
Small Commercial Package
 
Middle Market Commercial
 
Workers' Comp
 
Farm & Ranch
 
Other Commercial
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
28.1

 
$
30.4

 
$
34.1

 
$
17.9

 
$
12.6

 
$
4.5

 
$
127.6

Net earned premiums
 
26.1

 
30.3

 
36.2

 
17.9

 
12.3

 
4.5

 
127.3

Losses and LAE incurred:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
0.1

 
1.8

 
2.5

 
—

 
(0.1
)
 
—

 
4.3

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(1.1
)
 
(3.4
)
 
(4.6
)
 
(7.5
)
 
(1.1
)
 
(1.8
)
 
(19.5
)
Current accident year non-cat loss and ALAE
 
16.7

 
12.7

 
21.3

 
12.1

 
5.2

 
2.6

 
70.6

Total non-cat loss and ALAE
 
15.6

 
9.3

 
16.7

 
4.6

 
4.1

 
0.8

 
51.1

Total Loss and ALAE
 
15.7

 
11.1

 
19.2

 
4.6

 
4.0

 
0.8

 
55.4

ULAE
 
1.5

 
0.9

 
1.3

 
1.5

 
0.3

 
0.2

 
5.7

Total Loss and LAE
 
17.2

 
12.0

 
20.5

 
6.1

 
4.3

 
1.0

 
61.1

Underwriting expenses
 
10.3

 
11.2

 
13.8

 
7.0

 
5.3

 
1.6

 
49.2

Net underwriting (loss) gain
 
$
(1.4
)
 
$
7.1

 
$
1.9

 
$
4.8

 
$
2.7

 
$
1.9

 
$
17.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
0.3
 %
 
5.8
 %
 
7.0
 %
 
—
 %
 
(0.8
)%
 
—
 %
 
3.4
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(4.1
)%
 
(11.3
)%
 
(12.6
)%
 
(42.5
)%
 
(8.5
)%
 
(40.1
)%
 
(15.3
)%
Current accident year non-cat loss and ALAE ratio
 
64.2
 %
 
42.1
 %
 
58.6
 %
 
68.0
 %
 
42.1
 %
 
55.8
 %
 
55.4
 %
Total non-cat loss and ALAE ratio
 
60.1
 %
 
30.8
 %
 
46.0
 %
 
25.5
 %
 
33.6
 %
 
15.7
 %
 
40.1
 %
Total Loss and ALAE ratio
 
60.4
 %
 
36.6
 %
 
53.0
 %
 
25.5
 %
 
32.8
 %
 
15.7
 %
 
43.5
 %
ULAE ratio
 
5.5
 %
 
3.0
 %
 
3.7
 %
 
8.3
 %
 
2.5
 %
 
3.3
 %
 
4.4
 %
Total Loss and LAE ratio
 
65.9
 %
 
39.6
 %
 
56.7
 %
 
33.8
 %
 
35.3
 %
 
19.0
 %
 
47.9
 %
Expense ratio
 
36.6
 %
 
37.0
 %
 
40.4
 %
 
38.8
 %
 
42.1
 %
 
38.5
 %
 
38.6
 %
Combined ratio
 
102.5
 %
 
76.6
 %
 
97.1
 %
 
72.6
 %
 
77.4
 %
 
57.5
 %
 
86.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 14 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
December 31, 2018
 
Commercial Auto
 
Small Commercial Package
 
Middle Market Commercial
 
Workers' Comp
 
Farm & Ranch
 
Other Commercial
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
18.0

 
$
28.1

 
$
28.7

 
$
22.9

 
$
11.9

 
$
3.7

 
$
113.3

Net earned premiums
 
19.2

 
29.7

 
30.1

 
24.0

 
11.6

 
4.0

 
118.6

Losses and LAE incurred:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
—

 
0.9

 
1.4

 
—

 
0.9

 
0.1

 
3.3

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(2.7
)
 
(3.1
)
 
(5.1
)
 
(4.9
)
 
(0.5
)
 
(1.0
)
 
(17.3
)
Current accident year non-cat loss and ALAE
 
12.4

 
13.5

 
15.6

 
13.2

 
5.0

 
2.2

 
61.9

Total non-cat loss and ALAE
 
9.7

 
10.4

 
10.5

 
8.3

 
4.5

 
1.2

 
44.6

Total Loss and ALAE
 
9.7

 
11.3

 
11.9

 
8.3

 
5.4

 
1.3

 
47.9

ULAE
 
1.0

 
1.4

 
1.0

 
1.6

 
0.5

 
0.3

 
5.8

Total Loss and LAE
 
10.7

 
12.7

 
12.9

 
9.9

 
5.9

 
1.6

 
53.7

Underwriting expenses
 
9.4

 
13.2

 
13.4

 
7.3

 
5.6

 
2.1

 
51.0

Net underwriting (loss) gain
 
$
(0.9
)
 
$
3.8

 
$
3.8

 
$
6.8

 
$
0.1

 
$
0.3

 
$
13.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
—
 %
 
3.0
 %
 
4.7
 %
 
—
 %
 
7.3
 %
 
3.6
 %
 
2.8
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(14.4
)%
 
(10.4
)%
 
(16.9
)%
 
(20.2
)%
 
(4.8
)%
 
(25.0
)%
 
(14.6
)%
Current accident year non-cat loss and ALAE ratio
 
64.7
 %
 
45.4
 %
 
51.7
 %
 
55.0
 %
 
43.7
 %
 
55.5
 %
 
52.2
 %
Total non-cat loss and ALAE ratio
 
50.3
 %
 
35.0
 %
 
34.8
 %
 
34.8
 %
 
38.9
 %
 
30.5
 %
 
37.6
 %
Total Loss and ALAE ratio
 
50.3
 %
 
38.0
 %
 
39.5
 %
 
34.8
 %
 
46.2
 %
 
34.1
 %
 
40.4
 %
ULAE ratio
 
5.1
 %
 
4.8
 %
 
3.4
 %
 
6.6
 %
 
4.0
 %
 
6.7
 %
 
4.9
 %
Total Loss and LAE ratio
 
55.4
 %
 
42.8
 %
 
42.9
 %
 
41.4
 %
 
50.2
 %
 
40.8
 %
 
45.3
 %
Expense ratio
 
52.3
 %
 
46.8
 %
 
46.6
 %
 
32.2
 %
 
47.6
 %
 
57.2
 %
 
45.1
 %
Combined ratio
 
107.7
 %
 
89.6
 %
 
89.5
 %
 
73.6
 %
 
97.8
 %
 
98.0
 %
 
90.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Page 15 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended
December 31, 2019
 
Commercial Auto
 
Small Commercial Package
 
Middle Market Commercial
 
Workers' Comp
 
Farm & Ranch
 
Other Commercial
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
109.5

 
$
122.4

 
$
149.2

 
$
76.7

 
$
50.0

 
$
18.6

 
$
526.4

Net earned premiums
 
91.4

 
119.2

 
134.3

 
78.2

 
48.5

 
17.1

 
488.7

Losses and LAE incurred:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
0.3

 
7.9

 
8.2

 
—

 
2.4

 
—

 
18.8

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(4.7
)
 
(15.2
)
 
(11.8
)
 
(20.9
)
 
(3.0
)
 
(3.2
)
 
(58.8
)
Current accident year non-cat loss and ALAE
 
57.9

 
64.0

 
83.5

 
54.4

 
23.2

 
10.3

 
293.3

Total non-cat loss and ALAE
 
53.2

 
48.8

 
71.7

 
33.5

 
20.2

 
7.1

 
234.5

Total Loss and ALAE
 
53.5

 
56.7

 
79.9

 
33.5

 
22.6

 
7.1

 
253.3

ULAE
 
5.7

 
5.7

 
6.3

 
6.9

 
1.8

 
0.7

 
27.1

Total Loss and LAE
 
59.2

 
62.4

 
86.2

 
40.4

 
24.4

 
7.8

 
280.4

Underwriting expenses
 
43.9

 
47.2

 
59.8

 
27.2

 
22.7

 
7.6

 
208.4

Net underwriting (loss) gain
 
$
(11.7
)
 
$
9.6

 
$
(11.7
)
 
$
10.6

 
$
1.4

 
$
1.7

 
$
(0.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
0.4
 %
 
6.6
 %
 
6.1
 %
 
—
 %
 
4.9
 %
 
—
 %
 
3.9
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(5.1
)%
 
(12.8
)%
 
(8.8
)%
 
(26.8
)%
 
(6.0
)%
 
(18.8
)%
 
(12.0
)%
Current accident year non-cat loss and ALAE ratio
 
63.3
 %
 
53.8
 %
 
62.2
 %
 
69.7
 %
 
47.8
 %
 
60.1
 %
 
60.0
 %
Total non-cat loss and ALAE ratio
 
58.2
 %
 
41.0
 %
 
53.4
 %
 
42.9
 %
 
41.8
 %
 
41.3
 %
 
48.0
 %
Total Loss and ALAE ratio
 
58.6
 %
 
47.6
 %
 
59.5
 %
 
42.9
 %
 
46.7
 %
 
41.3
 %
 
51.9
 %
ULAE ratio
 
6.2
 %
 
4.8
 %
 
4.7
 %
 
8.8
 %
 
3.7
 %
 
4.1
 %
 
5.5
 %
Total Loss and LAE ratio
 
64.8
 %
 
52.4
 %
 
64.2
 %
 
51.7
 %
 
50.4
 %
 
45.4
 %
 
57.4
 %
Expense ratio
 
40.1
 %
 
38.6
 %
 
40.1
 %
 
35.5
 %
 
45.4
 %
 
40.9
 %
 
39.6
 %
Combined ratio
 
104.9
 %
 
91.0
 %
 
104.3
 %
 
87.2
 %
 
95.8
 %
 
86.3
 %
 
97.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 16 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended
December 31, 2018
 
Commercial Auto
 
Small Commercial Package
 
Middle Market Commercial
 
Workers' Comp
 
Farm & Ranch
 
Other Commercial
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums
 
$
77.1

 
$
119.2

 
$
121.3

 
$
89.0

 
$
46.8

 
$
16.4

 
$
469.8

Net earned premiums
 
75.1

 
120.9

 
116.8

 
90.7

 
45.0

 
15.8

 
464.3

Losses and LAE incurred:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE
 
0.2

 
10.7

 
7.2

 
—

 
3.3

 
0.2

 
21.6

Non-cat loss and ALAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(8.4
)
 
(9.6
)
 
(8.0
)
 
(13.3
)
 
(2.7
)
 
(4.9
)
 
(46.9
)
Current accident year non-cat loss and ALAE
 
47.3

 
68.8

 
71.5

 
56.5

 
22.1

 
8.2

 
274.4

Total non-cat loss and ALAE
 
38.9

 
59.2

 
63.5

 
43.2

 
19.4

 
3.3

 
227.5

Total Loss and ALAE
 
39.1

 
69.9

 
70.7

 
43.2

 
22.7

 
3.5

 
249.1

ULAE
 
4.2

 
6.2

 
5.6

 
7.2

 
1.8

 
1.1

 
26.1

Total Loss and LAE
 
43.3

 
76.1

 
76.3

 
50.4

 
24.5

 
4.6

 
275.2

Underwriting expenses
 
35.8

 
53.6

 
49.5

 
29.1

 
21.3

 
8.2

 
197.5

Net underwriting (loss) gain
 
$
(4.0
)
 
$
(8.8
)
 
$
(9.0
)
 
$
11.2

 
$
(0.8
)
 
$
3.0

 
$
(8.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
0.3
 %
 
8.8
 %
 
6.1
 %
 
—
 %
 
7.3
 %
 
1.4
 %
 
4.6
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(11.2
)%
 
(7.9
)%
 
(6.8
)%
 
(14.7
)%
 
(6.0
)%
 
(31.0
)%
 
(10.1
)%
Current accident year non-cat loss and ALAE ratio
 
63.0
 %
 
56.9
 %
 
61.2
 %
 
62.3
 %
 
49.2
 %
 
52.3
 %
 
59.1
 %
Total non-cat loss and ALAE ratio
 
51.8
 %
 
49.0
 %
 
54.4
 %
 
47.6
 %
 
43.2
 %
 
21.3
 %
 
49.0
 %
Total Loss and ALAE ratio
 
52.1
 %
 
57.8
 %
 
60.5
 %
 
47.6
 %
 
50.5
 %
 
22.7
 %
 
53.6
 %
ULAE ratio
 
5.6
 %
 
5.1
 %
 
4.8
 %
 
7.9
 %
 
3.9
 %
 
6.8
 %
 
5.6
 %
Total Loss and LAE ratio
 
57.7
 %
 
62.9
 %
 
65.3
 %
 
55.5
 %
 
54.4
 %
 
29.5
 %
 
59.2
 %
Expense ratio
 
46.5
 %
 
44.9
 %
 
40.8
 %
 
32.7
 %
 
45.6
 %
 
50.0
 %
 
42.0
 %
Combined ratio
 
104.2
 %
 
107.8
 %
 
106.1
 %
 
88.2
 %
 
100.0
 %
 
79.5
 %
 
101.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 17 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



SAP Insurance Segment Results
(unaudited)
 
 
 
 
 
 
($ in millions)
 
 
 
 
 
 
Three months ended December 31, 2019
 
Personal & Commercial
 
Specialty run-off
 
Total
 
 
 
 
 
 
 
Net written premiums
 
$
324.8

 
$
(1.2
)
 
$
323.6

Net earned premiums
 
324.0

 
(1.0
)
 
323.0

Losses and LAE incurred:
 
 
 
 
 
 
Cat loss and ALAE
 
18.2

 
6.6

 
24.8

Non-cat loss and ALAE
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(19.6
)
 
1.3

 
(18.3
)
Current accident year non-cat loss and ALAE
 
183.3

 
0.3

 
183.6

Total non-cat loss and ALAE
 
163.7

 
1.6

 
165.3

Total Loss and ALAE
 
181.9

 
8.2

 
190.1

ULAE
 
18.7

 
(1.2
)
 
17.5

Total Loss and LAE
 
200.6

 
7.0

 
207.6

Underwriting expenses
 
114.2

 
1.4

 
115.6

Net underwriting gain (loss)
 
$
9.2

 
$
(9.4
)
 
$
(0.2
)
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
5.6
 %
 
N/M(1)

 
7.7
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(6.1
)%
 
N/M

 
(5.7
)%
Current accident year non-cat loss and ALAE ratio
 
56.6
 %
 
N/M

 
56.9
 %
Total non-cat loss and ALAE ratio
 
50.5
 %
 
N/M

 
51.2
 %
Total Loss and ALAE ratio
 
56.1
 %
 
N/M

 
58.9
 %
ULAE ratio
 
5.8
 %
 
N/M

 
5.4
 %
Total Loss and LAE ratio
 
61.9
 %
 
N/M

 
64.3
 %
Expense ratio
 
35.2
 %
 
N/M

 
35.7
 %
Combined ratio
 
97.1
 %
 
N/M

 
100.0
 %
 
 
 
 
 
 
 
(1) N/M = Not Meaningful
 
 
 
 
 
 


Page 18 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
Three months ended December 31, 2018
 
Personal & Commercial
 
Specialty run-off
 
Total
 
 
 
 
 
 
 
Net written premiums
 
$
297.9

 
$
(0.3
)
 
$
297.6

Net earned premiums
 
298.3

 
10.5

 
308.8

Losses and LAE incurred:
 
 
 
 
 
 
Cat loss and ALAE
 
6.9

 
1.2

 
8.1

Non-cat loss and ALAE
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(23.3
)
 
(1.1
)
 
(24.4
)
Current accident year non-cat loss and ALAE
 
163.0

 
11.2

 
174.2

Total non-cat loss and ALAE
 
139.7

 
10.1

 
149.8

Total Loss and ALAE
 
146.6

 
11.3

 
157.9

ULAE
 
16.9

 
1.0

 
17.9

Total Loss and LAE
 
163.5

 
12.3

 
175.8

Underwriting expenses
 
113.0

 
2.3

 
115.3

Net underwriting gain (loss)
 
$
21.8

 
$
(4.1
)
 
$
17.7

 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
2.3
 %
 
11.5
 %
 
2.6
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(7.8
)%
 
(10.1
)%
 
(7.9
)%
Current accident year non-cat loss and ALAE ratio
 
54.7
 %
 
105.9
 %
 
56.4
 %
Total non-cat loss and ALAE ratio
 
46.9
 %
 
95.8
 %
 
48.5
 %
Total Loss and ALAE ratio
 
49.2
 %
 
107.3
 %
 
51.1
 %
ULAE ratio
 
5.6
 %
 
10.5
 %
 
5.8
 %
Total Loss and LAE ratio
 
54.8
 %
 
117.8
 %
 
56.9
 %
Expense ratio
 
38.0
 %
 
(765.6
)%
 
38.7
 %
Combined ratio
 
92.8
 %
 
(647.8
)%
 
95.6
 %
 
 
 
 
 
 
 


Page 19 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
Twelve months ended December 31, 2019
 
Personal & Commercial
 
Specialty run-off
 
Total
 
 
 
 
 
 
 
Net written premiums
 
$
1,318.8

 
$
(0.7
)
 
$
1,318.1

Net earned premiums
 
1,247.9

 
5.1

 
1,253.0

Losses and LAE incurred:
 
 
 
 
 
 
Cat loss and ALAE
 
89.9

 
10.6

 
100.5

Non-cat loss and ALAE
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(71.3
)
 
(1.1
)
 
(72.4
)
Current accident year non-cat loss and ALAE
 
736.9

 
5.2

 
742.1

Total non-cat loss and ALAE
 
665.6

 
4.1

 
669.7

Total Loss and ALAE
 
755.5

 
14.7

 
770.2

ULAE
 
78.3

 
(2.0
)
 
76.3

Total Loss and LAE
 
833.8

 
12.7

 
846.5

Underwriting expenses
 
454.0

 
3.1

 
457.1

Net underwriting loss
 
$
(39.9
)
 
$
(10.7
)
 
$
(50.6
)
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
7.2
 %
 
N/M

 
8.0
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(5.7
)%
 
N/M

 
(5.8
)%
Current accident year non-cat loss and ALAE ratio
 
59.0
 %
 
N/M

 
59.3
 %
Total non-cat loss and ALAE ratio
 
53.3
 %
 
N/M

 
53.5
 %
Total Loss and ALAE ratio
 
60.5
 %
 
N/M

 
61.5
 %
ULAE ratio
 
6.3
 %
 
N/M

 
6.1
 %
Total Loss and LAE ratio
 
66.8
 %
 
N/M

 
67.6
 %
Expense ratio
 
34.4
 %
 
N/M

 
34.7
 %
Combined ratio
 
101.2
 %
 
N/M

 
102.3
 %
 
 
 
 
 
 
 


Page 20 of 21
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
 



($ in millions)
 
 
 
 
 
 
Twelve months ended December 31, 2018
 
Personal & Commercial
 
Specialty run-off
 
Total
 
 
 
 
 
 
 
Net written premiums
 
$
1,196.3

 
$
14.0

 
$
1,210.3

Net earned premiums
 
1,138.2

 
99.8

 
1,238.0

Losses and LAE incurred:
 
 
 
 
 
 
Cat loss and ALAE
 
70.3

 
1.4

 
71.7

Non-cat loss and ALAE
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE
 
(79.7
)
 
3.1

 
(76.6
)
Current accident year non-cat loss and ALAE
 
659.0

 
70.6

 
729.6

Total non-cat loss and ALAE
 
579.3

 
73.7

 
653.0

Total Loss and ALAE
 
649.6

 
75.1

 
724.7

ULAE
 
67.9

 
5.5

 
73.4

Total Loss and LAE
 
717.5

 
80.6

 
798.1

Underwriting expenses
 
425.8

 
18.8

 
444.6

Net underwriting (loss) gain
 
$
(5.1
)
 
$
0.4

 
$
(4.7
)
 
 
 
 
 
 
 
Cat loss and ALAE ratio
 
6.2
 %
 
1.4
%
 
5.8
 %
Non-cat loss and ALAE ratio
 
 
 
 
 
 
Prior accident years non-cat loss and ALAE ratio
 
(7.0
)%
 
3.1
%
 
(6.2
)%
Current accident year non-cat loss and ALAE ratio
 
57.9
 %
 
70.8
%
 
58.9
 %
Total non-cat loss and ALAE ratio
 
50.9
 %
 
73.9
%
 
52.7
 %
Total Loss and ALAE ratio
 
57.1
 %
 
75.3
%
 
58.5
 %
ULAE ratio
 
5.9
 %
 
5.5
%
 
6.0
 %
Total Loss and LAE ratio
 
63.0
 %
 
80.8
%
 
64.5
 %
Expense ratio
 
35.6
 %
 
133.7
%
 
36.7
 %
Combined ratio
 
98.6
 %
 
214.5
%
 
101.2
 %
 
 
 
 
 
 
 
The following table provides a reconciliation of our statutory underwriting results to GAAP consolidated income before federal income taxes for the fourth quarters and years ended December 31, 2019 and 2018:
($ millions)
4Q 2019
 
4Q 2018
 
YTD 2019
 
YTD 2018
Segment income (loss) before federal income taxes:
 
 
 
 
 
 
 
Insurance operations:
 
 
 
 
 
 
 
Personal insurance SAP underwriting (loss) gain
$
(7.8
)
 
$
7.9

 
$
(39.8
)
 
$
3.3

Commercial insurance SAP underwriting gain (loss)
17.0

 
13.9

 
(0.1
)
 
(8.4
)
Specialty run-off
(9.4
)
 
(4.1
)
 
(10.7
)
 
0.4

Total insurance operations
(0.2
)
 
17.7

 
(50.6
)
 
(4.7
)
Investment operations:
 
 
 
 
 
 
 
Net investment income
20.0

 
22.7

 
80.4

 
84.9

Net investment gain (loss)
24.0

 
(67.9
)
 
74.2

 
(49.7
)
Total investment operations
44.0

 
(45.2
)
 
154.6

 
35.2

All other segments income
0.1

 
0.1

 
0.3

 
0.4

Reconciling items:
 
 
 
 
 
 
 
GAAP adjustments
(2.6
)
 
(1.1
)
 
14.7

 
(3.7
)
Interest expense on corporate debt
(1.2
)
 
(1.2
)
 
(4.9
)
 
(5.7
)
Corporate expenses
0.2

 
(2.8
)
 
(7.1
)
 
(8.6
)
Total reconciling items
(3.6
)
 
(5.1
)
 
2.7

 
(18.0
)
Total consolidated income (loss) before federal income taxes
$
40.3

 
$
(32.5
)
 
$
107.0

 
$
12.9

 
 
 
 
 
 
 
 


Page 21 of 21
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