State Auto Financial Corporation Reports Second Quarter Earnings
COLUMBUS, Ohio--July 26, 2001--State Auto Financial Corporation reported second quarter net earnings of $9,433,000, compared with $12,494,000 for the second quarter 2000.Second quarter reported earnings per share were $0.24 ($0.24 diluted), compared with $0.33 ($0.32 diluted) for the second quarter 2000. Net operating earnings for the second quarter ending June 30, 2001 were $0.21 ($0.21 diluted) compared with $0.33 ($0.32 diluted) for the same period last year. The service fee paid by State Automobile Mutual Insurance Company (Mutual) to STFC in the second quarter amounted to $0.07 per share of these reported and operating earnings. On the afternoon of July 25, 2001, the Ohio Department of Insurance (ODI) delivered a letter to Mutual indicating that in the view of the ODI the service fee was not in compliance with applicable statutes and statutory accounting principles and that it expected Mutual to recharacterize (for statutory accounting purposes) the fee paid for the first quarter of 2001 from an expense to an asset. The letter also indicated ODI expected Mutual to refrain from paying the fee under the Management and Operations Agreement dated January 1, 2000 (the 2000 Agreement) for any period subsequent to March 31, 2001. STFC continues to believe that the 2000 Agreement is valid and enforceable. STFC is considering its options.
For the first six months of 2001, net reported earnings were $23,974,000 or $0.61 per share ($0.60 diluted), compared with $26,177,000 or $0.68 ($0.67 diluted) for the same 2000 period. Second quarter total revenue was $123,032,000, up 8.0% from $113,953,000. Total revenue for the first half was $241,033,000, compared with $230,414,000 for the first half of 2000, a 4.6% increase.
STFC's second quarter GAAP combined loss and expense ratio was 103.5, versus 95.5 for the second quarter 2000. STFC Chairman Robert H. Moone noted that "The last quarter was the second worst for industry catastrophe losses in the past 10 years. While we have worked hard to control our exposure to concentrated natural catastrophes, the widespread nature of these storms was the primary cause of our third underwriting loss over the past 19 quarters." STFC's catastrophe storm losses totaled $12.1 million, up from $4.4 million for the second quarter 2000. "We are in the risk business and there will be quarters like this. But, we are very pleased that those lines less subject to natural catastrophes -- particularly private passenger auto -- continued to perform quite well." Moone added that STFC's double-digit sales growth was another performance positive. "The emphasis we placed on adequate pricing and underwriting throughout the 'soft market' years continues to pay dividends. Our ability to provide a consistent market is resulting in substantial growth from our current agency force and is instrumental in what is shaping up to be a record-setting year for new appointments."
State Auto Financial Corporation is a regional property and casualty insurance holding company engaged primarily in writing personal and commercial automobile, homeowners, commercial multi-peril, workers' compensation and fire insurance. The company currently markets its products through more than 14,000 agents associated with approximately 2,200 agencies in 26 states. Products are marketed primarily in the Midwest and Eastern United States, excluding New York, New Jersey and the New England states.
STFC has scheduled a conference call with industry analysts for Thursday, July 26, 2001, 10 AM, to discuss the company's 2001 second quarter performance. A live Webcast of the conference call can be heard on StreetFusion (STREETFUSION.com). StreetFusion can be accessed directly or from links found on both STFC.com and STATEAUTO.com. A replay of the call can also be heard beginning at noon today by dialing 800-759-4964. The replay will be available through August 9, 2001.
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Figures in thousands, except per-share amounts)
(unaudited)
Quarter Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
---- ---- ---- ----
Net premiums written $113,794 $102,406 $218,844 $204,332(a)
--------- --------- --------- ---------
Earned premiums 105,316 99,477 206,877 198,288
Net investment income 10,431 9,624 20,735 18,998
Management services
income 4,964 4,394 9,884 8,798
Net realized gains
(losses) on
investments 1,416 (340) 1,817 2,799
Other income 905 798 1,720 1,531
--------- --------- --------- ---------
Total revenue 123,032 113,953 241,033 230,414
--------- --------- --------- ---------
Income before federal
income taxes 12,028 16,512 31,226 35,096
Federal income taxes 2,595 4,018 7,253 8,919
--------- --------- --------- ---------
Net income $9,433 $12,494 $23,973 $26,177
========= ========= ========= =========
Net earnings per share:
- basic $0.24 $0.33 $0.61 $0.68
- diluted $0.24 $0.32 $0.60 $0.67
Net earnings per share from operations(1):
- basic $0.21 $0.33 $0.58 $0.63
- diluted $0.21 $0.32 $0.57 $0.62
Weighted average shares outstanding:
- basic 38,744 38,405 38,682 38,378
- diluted 39,661 39,044 39,635 38,948
Book value per share $10.71 $9.04
Dividends paid per
share $0.030 $0.028 $0.060 $0.055
Total shares
outstanding 38,812 38,471
GAAP ratios:
Loss ratio 73.8 66.5 69.4 65.8
Expense ratio 29.7 29.0 29.9 30.1
--------- --------- --------- ---------
Combined ratio 103.5 95.5 99.3 95.9
========= ========= ========= =========
(a) Net premiums written for the six months ended June 30, 2000
includes $7,289,000 of unearned premiums transferred in connection
with the with the 1/1/00 pooling change, respectively.
(1) Excludes net realized gains on investments, less applicable
federal income taxes.