State Auto Financial Records Underwriting Profit for Sixth Straight Year
COLUMBUS, Ohio--Feb. 22, 2001--State Auto Financial Corporation announced net reported earnings per share of $0.35 ($0.34 diluted) for the fourth quarter ending December 31, 2000, compared to $0.33 ($0.32 diluted) per share for same period last year. Net earnings for the 2000 fourth quarter were $13,531,000, compared to $13,035,000 for the 1999 fourth quarter. STFC's fourth quarter 2000 GAAP combined loss and expense ratio was 96.4 compared to 91.2 for the fourth quarter 1999.For the year ending December 31, 2000, STFC's GAAP combined ratio was 98.4 compared to 96.0 for the year ending December 31, 1999. Total net earnings for 2000 were $47,714,000, or $1.24 ($1.21 diluted) per share, compared to $42,816,000, or $1.05 ($1.03 diluted) per share for 1999. The company's total revenue for 2000 was $462,774,000, a 5.1% increase over 1999's $440,871,000 total.
2000 marked the sixth consecutive year that STFC has reported a GAAP combined ratio of 100.0 or better. "We are exceptionally proud of our track record and committed to sustaining it," said STFC Chairman Robert H. Moone. "It may be possible to be profitable one or two years on the basis of sheer luck, but we believe our focus on a few fundamental principles of the business, along with strong execution of the game plan by our employee and agency partners, sets us apart.
"This record of profitable underwriting results has also positioned us to take advantage of the changing marketplace," Moone added.
In other matters impacting STFC, a December 2000 case (Linko vs. Indemnity Insurance Company of North America), resulted in the Ohio Supreme Court invalidating most, if not all, rejections of uninsured and underinsured motorist coverage ("UM"). Insurance companies had obtained these rejections from insureds who had intended to decline UM, either partially or totally, as permitted by Ohio law. The effect of this decision was to retroactively amend all auto and umbrella liability policies, making the UM limits equal to the policy's bodily injury liability limits.
This decision has affected STFC's insurer affiliates, along with virtually every other insurer that writes auto and umbrella liability insurance in Ohio. Management has reviewed the financial impact of the additional loss exposure created by the Linko case and determined that its booked reserves as of December 31, 2000, are reasonably stated. As with any loss reserving situation, there is considerable uncertainty and the actual impact of Linko could differ significantly.
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Figures in thousands, except per-share amounts)
(unaudited)
Quarter Ended Year Ended
December 31 December 31
2000 1999 2000 1999
---- ---- ---- ----
Net premiums written $100,250 $92,308 $408,993(a) $394,316(a)
-------- ------- -------- --------
Earned premiums 100,075 96,501 397,967 392,058
Net investment income 10,174 8,887 38,915 34,262
Management services income 4,406 2,169 17,594 8,727
Net realized gains (losses)
on investments 615 -105 5,255 2,555
Other income 762 842 3,043 3,269
-------- ------- -------- --------
Total revenue 116,032 108,294 462,774 440,871
-------- ------- -------- --------
Income before federal income
taxes 17,217 17,891 61,444 56,985
Federal income taxes 3,686 4,856 13,730 14,169
-------- ------- -------- --------
Net income $13,531 $13,035 $47,714 $42,816
======== ======= ======== ========
Net earnings per share:
- basic $0.35 $0.33 $1.24 $1.05
- diluted $0.34 $0.32 $1.21 $1.03
Net earnings per share from
operations (b):
- basic $0.34 $0.33 $1.15 $1.01
- diluted $0.33 $0.32 $1.12 $0.99
Weighted average shares
outstanding:
- basic 38,489 39,120 38,427 40,780
- diluted 39,393 39,775 39,120 41,526
Book value per share $10.01 $8.29
Dividends paid per share $0.030 $0.028 $0.115 $0.105
Total shares outstanding 38,555 38,321
GAAP ratios:
Loss ratio 65.2 63.4 68.4 67.5
Expense ratio 31.2 27.8 30.0 28.5
-------- ------- -------- --------
Combined ratio 96.4 91.2 98.4 96.0
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(a) Net premiums written for the year ended December 31, 2000 and 1999 includes $7,289,000 and $5,816,000 of unearned premiums transferred in connection with the 1/1/00 and 1/1/99 pooling changes, respectively.
(b) Excludes net realized gains on investments, less applicable federal income taxes.