State Auto Financial Corporation Announces Increase in Net Earnings
29 July 1999
State Auto Financial Corporation Announces Increase in Net Earnings
COLUMBUS, Ohio--July 29, 1999--State Auto Financial Corporation today announced its net earnings for second quarter 1999 rose to $10,369,000 or $0.25 per share ($0.25 diluted) compared with $2,780,000 net earnings or $0.07 per share ($0.06 diluted) for second quarter 1998.This 273% increase was driven, in large measure, by a reduction in catastrophe losses from $18,000,000 or 20.0 loss ratio points in second quarter 1998 to $5,000,000 or 5.1 loss ratio points for the same period 1999.
For the first six months of 1999, net earnings were $21,249,000 or $0.50 per share ($0.50 diluted) compared with $14,311,000 net earnings or $0.34 per share ($0.33 diluted) for the first six months of 1998, an increase of 48.5%.
Net operating earnings for second quarter 1999 were $9,802,000 or $0.23 per share ($0.23 diluted) compared with $2,570,000 or $0.07 per share ($0.06 diluted) for the same period last year. STFC's GAAP combined loss and expense ratio for the period was 96.9, down from 107.0 for second quarter 1998.
Second quarter 1999 revenue rose to $111,186,000 compared with $99,823,000 for second quarter 1998, an increase of 11.4%. Total revenue in the first half of 1999 increased 11.5% to $222,117,000, compared with $199,183,000 for the same 1998 period. The increase in revenue is due to the addition of Farmers Casualty Insurance Company to the operations of STFC as well as an increase in STFC's share of the State Auto Insurance Companies' reinsurance pool that rose from 47% to 50%, effective January 1, 1999. Farmers Casualty was acquired by STFC on January 1, 1999. The GAAP combined loss and expense ratio for the first half of 1999 was 96.5, compared with 100.2 for the first half of 1998.
1998 results have been restated to include the financial position and operations of Milbank Insurance Company, which was acquired by STFC from an affiliated company in July 1998. Accounting for this transaction was handled similarly to the pooling of interests method.
"The quarter was affected by several large losses. Fortunately, these losses were offset by the results of our core business and recoveries from our reinsurance program," said Robert L. Bailey, State Auto Chairman.
STFC announced a stock repurchase plan May 6, which involves repurchasing up to four million shares of its common stock. Since the announcement, STFC has repurchased 1,312,000 shares, 915,500 from State Automobile Mutual Insurance Company and 396,500 from the public. Repurchases are transacted to maintain the same ownership ratios, with 70% of the repurchased stock from Mutual and 30% from the public.
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 12,500 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.
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
(Figures in thousands, except per-share amounts)
(unaudited)
Quarter Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
---- ---- ---- ----
(Restated (Restated
see Note) see Note)
Net premiums written $100,582 $91,469 $202,959(a) $187,34(a)
-------- ------- -------- -------
Earned premiums 98,853 88,884 197,329 177,026
Net investment income 8,357 8,112 16,808 16,123
Management services income 2,192 1,987 4,376 3,959
Net realized gains on
investments 872 324 1,926 1,050
Other income 912 516 1,678 1,025
-------- ------- -------- -------
Total revenue 111,186 99,823 222,117 199,183
-------- ------- -------- -------
Earnings before
income taxes 13,767 3,296 28,428 19,169
Income taxes 3,398 516 7,179 4,858
-------- ------- -------- -------
Net earnings $10,369 $2,780 $21,249 $14,311
-------- ------- -------- -------
-------- ------- -------- -------
Net earnings per share:
- basic $0.25 $0.07 $0.50 $0.34
- diluted $0.25 $0.06 $0.50 $0.33
Net earnings per share
from operations (b):
- basic $0.23 $0.07 $0.47 $0.33
- diluted $0.23 $0.06 $0.47 $0.32
Weighted average shares
outstanding:
- basic 41,642 41,859 41,847 41,843
- diluted 42,410 42,948 42,628 42,915
Book value per share $8.22 $7.48
Dividends paid per share $0.025 $0.023 $0.050 $0.046
Total shares outstanding 40,880 41,896
GAAP ratios:
Loss ratio 68.8 77.9 68.1 70.8
Expense ratio 28.1 29.1 28.4 29.4
-------- ------- -------- -------
Combined ratio 96.9 107.0 96.5 100.2
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-------- ------- -------- -------
Note: In July 1998, STFC acquired Milbank Insurance Company from an
affiliated company. This transaction was accounted for similar to a
pooling of interests. Prior year's financial information has been
restated to include the financial position and operations of Milbank.
(a) Net premiums written for the six months ended June 30, 1999 and
1998 includes $5,816,000 and $8,183,000 of unearned premiums
transferred in connection with the 1/1/99 and 1/1/98 pooling
changes, respectively.
(b) Excludes net realized gains on investments, less applicable
federal income taxes.