State Auto Financial Reports Third Quarter 2020 Results

  • Quarterly income of $0.26 per share
  • Quarterly net loss from operations1 of $0.10 per share
  • Quarterly GAAP combined ratio of 106.0
  • Quarterly SAP personal and commercial segments' combined ratio2 of 102.2
  • Return on equity of (3.8)%
  • Book value per share of $21.57

COLUMBUS, Ohio--()--State Auto Financial Corporation (NASDAQ:STFC) today reported third quarter 2020 net income of $11.6 million, or $0.26 per diluted share, compared to $11.5 million, or $0.25 per diluted share, for the same 2019 period. Net loss from operations1 per diluted share for the third quarter of 2020 was $0.10 versus net income from operations1 per diluted share of $0.34 for the same 2019 period.

For the first nine months of 2020, STFC had a net loss of $68.7 million, or $1.57 per diluted share, compared to net income of $54.7 million, or $1.25 per diluted share, for the same 2019 period. Net loss from operations1 per diluted share for the first nine months of 2020 was $0.86 versus net income from operations1 per diluted share of $0.34 for the same 2019 period.

GAAP Operating Results

STFC’s GAAP combined ratio for the third quarter 2020 was 106.0 compared to 99.5 for the same 2019 period. Catastrophe losses and ALAE during the third quarter 2020 accounted for 16.6 points of the 71.2 total loss ratio points, or $58.7 million, versus 3.3 points of the 65.2 total loss ratio points, or $10.6 million, for the same period in 2019. The third quarter 2020 was impacted by severe wind and hail events that impacted the South and Midwest, with approximately 50% of the catastrophe losses affecting our homeowners line of business. Catastrophe losses and ALAE included 3.5 points of adverse development relating to prior years, or $12.3 million, from specialty run-off related to Hurricane Irma. Non-catastrophe losses and ALAE during the third quarter 2020 included 5.5 points of favorable development relating to prior years, or $19.3 million, versus 5.1 points of favorable development, or $16.1 million, for the same period in 2019.

STFC’s GAAP combined ratio for the first nine months of 2020 was 109.3 compared to 103.6 for the same 2019 period. Catastrophe losses and ALAE for the first nine months of 2020 accounted for 18.6 points of the 74.4 total loss ratio points, or $191.0 million, versus 8.1 points of the total 68.6 loss ratio points, or $75.7 million, for the same period in 2019. Catastrophe losses and ALAE included 1.2 points of adverse development relating to prior years, or $12.4 million, from specialty run-off related to Hurricane Irma. Non-catastrophe losses and ALAE for the first nine months of 2020 included 3.1 points of favorable development relating to prior years, or $31.8 million, versus 5.8 points of favorable development, or $54.1 million, for the same period in 2019. Non-catastrophe losses and ALAE for the first nine months of 2020 included 0.5 points of adverse development relating to prior years, or $5.2 million, versus 0.2 points of favorable development, or $2.4 million, for the same period in 2019 from specialty run-off.

SAP Personal and Commercial Operating Results

Net written premium for the third quarter 2020 increased 9.2% compared to the same period in 2019. By insurance segment, net written premium for the personal and commercial segments increased 9.7% and 8.3%, respectively. The increase in the personal segment was primarily due to new business growth and rate increases in homeowners and other personal. The improvement was partially offset by a decrease in net written premiums in personal auto due to a decline in new business. The increase in the commercial segment was primarily driven by (i) new business growth and rate increases in commercial auto, and (ii) new business growth in farm & ranch. The improvement was partially offset by a decrease in net written premiums in workers’ compensation due to (i) a decline in new business as a result of COVID-19, and (ii) continued intense competition in this market.

Net written premium for the first nine months of 2020 increased 11.3% compared to the same period in 2019. Net written premium for the personal and commercial segments increased 10.1% and 13.4%, respectively. The trends in the personal and commercial net written premiums are due to the same factors discussed above for the third quarter. In addition, the increase in the commercial segment was also driven by rate increases in middle market commercial.

The SAP personal and commercial segments' combined ratio2 for the third quarter 2020 was 102.2 compared to 98.7 for the same 2019 period. Catastrophe losses during the third quarter 2020 accounted for 13.1 points of the 68.5 total loss ratio points, or $46.4 million, versus 3.2 points of the 65.4 total loss ratio points, or $10.3 million, for the same period in 2019. Non-catastrophe losses and ALAE during the third quarter 2020 included 5.2 points of favorable development relating to prior years, or $18.4 million, versus 4.8 points of favorable development, or $15.2 million, for the same period in 2019.

The SAP personal and commercial segments' combined ratio for the first nine months of 2020 was 106.9 compared to 102.7 for the same 2019 period. Catastrophe losses during the first nine months of 2020 accounted for 17.4 points of the total 72.9 loss ratio points, or $178.6 million, versus 7.8 of the total 68.5 loss ratio points, or $71.7 million, for the same period in 2019. Non-catastrophe losses and ALAE during the first nine months of 2020 included 3.6 points of favorable development relating to prior years, or $37.0 million, versus 5.6 points of favorable development, or $51.7 million, for the same period in 2019.

Book Value and Return on Equity

STFC’s book value increased to $21.57 per share as of September 30, 2020, compared to $21.26 on June 30, 2020. The increase in book value was driven by investment results.

Return on stockholders’ equity for the 12 months ended September 30, 2020, was (3.8)% compared to 3.4% for the 12 months ended September 30, 2019.

STFC’s Chairman, President and CEO Mike LaRocco commented on the quarter as follows:

"While catastrophes had a significant impact on our third quarter 2020 results, we continue to feel very good about our continued progress toward consistent profitability and growth. Our digital transformation continued, with ongoing improvements to our State Auto Connect technology, including last month’s launch of our 15th and final product, workers’ compensation, on the platform. In five years we were able to transform all of our products onto an industry leading digital platform, a monumental achievement.

"I’m proud of the work of our Claims and Risk Engineering (CARE) professionals and customer service teams who continued to support our policyholders through some of the most difficult times in their lives. From the ongoing COVID-19 pandemic to civil unrest and severe weather, our CARE and Customer Service professionals once again delivered exceptional service.

"The SAP personal and commercial segments produced 9.2% net written premium growth during the third quarter, with a combined ratio of 102.2 that included 13.1 points of catastrophe losses. Personal lines produced 9.7% net written premium growth and a combined ratio of 111.5, including 15.8 points of catastrophe losses. Commercial lines’ 88.9 combined ratio included 9.3 points of catastrophe losses, and produced 8.3% net written premium growth.

"Due to catastrophic weather, our third quarter results fell short of expectations, but the passion and determination that fueled our turnaround still delivered an excellent quarter and will drive us toward growth and profitability in the quarters ahead."

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. 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.

STFC has scheduled a conference call with interested investors for Thursday, November 5, at 11 a.m. ET to discuss the Company’s third quarter 2020 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., November 5, by calling 855-859-2056, conference ID 6944689. Supplemental schedules detailing the Company’s third quarter 2020 financial, sales and underwriting results are made available on http://www.StateAuto.com/STFC prior to the conference call.

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 $0.36 per diluted share for the third quarter of 2020 and a loss of $0.71 year to date 2020 versus loss of $0.09 per diluted share for the third quarter 2019 and income of $0.91 year to date 2019.

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 in the SAP Commercial Insurance Segment Results 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 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.

Selected Consolidated Financial Data

($ in millions, except per share amounts)

(unaudited)

 

Three months ended September 30

 

Nine months ended September 30

 

 

2020

 

2019

 

2020

 

2019

Net premiums written

 

$

379.1

 

 

$

346.8

 

 

$

1,107.2

 

 

$

994.5

 

 

 

 

 

 

 

 

 

Earned premiums

 

353.2

 

 

319.6

 

 

1,024.4

 

 

930.0

Net investment income

 

17.9

 

 

19.3

 

 

54.5

 

 

60.4

Net investment gain (loss)

 

20.0

 

 

(5.0

)

 

(39.3

)

 

50.2

Other income

 

0.5

 

 

0.6

 

 

1.6

 

 

1.6

Total revenue

 

391.6

 

 

334.5

 

 

1,041.2

 

 

1,042.2

 

 

 

 

 

 

 

 

 

Income (loss) before federal income taxes

 

14.8

 

 

12.7

 

 

(87.6

)

 

66.7

 

 

 

 

 

 

 

 

 

Federal tax expense (benefit)

 

3.2

 

 

1.2

 

 

(18.9

)

 

12.0

Net income (loss)

 

$

11.6

 

 

$

11.5

 

 

$

(68.7

)

 

$

54.7

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

- basic

 

$

0.26

 

 

$

0.26

 

 

$

(1.57

)

 

$

1.26

- diluted

 

$

0.26

 

 

$

0.25

 

 

$

(1.57

)

 

$

1.25

(Loss) earnings per share from operations(A):

 

 

 

 

 

 

 

 

- basic

 

$

(0.10

)

 

$

0.35

 

 

$

(0.86

)

 

$

0.35

- diluted

 

$

(0.10

)

 

$

0.34

 

 

$

(0.86

)

 

$

0.34

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

- basic

 

43.8

 

 

43.5

 

 

43.7

 

 

43.4

- diluted

 

44.3

 

 

44.0

 

 

43.7

 

 

44.0

Return on average equity (LTM)

 

(3.8

)%

 

3.4

%

 

 

 

 

Book value per share

 

$

21.57

 

 

$

21.68

 

 

 

 

 

Dividends paid per share

 

$

0.10

 

 

$

0.10

 

 

$

0.30

 

 

$

0.30

Total shares outstanding

 

43.8

 

 

43.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP ratios:

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

16.6

 

 

3.3

 

 

18.6

 

 

8.1

Non-cat loss and LAE ratio

 

54.6

 

 

61.9

 

 

55.8

 

 

60.5

Loss and LAE ratio

 

71.2

 

 

65.2

 

 

74.4

 

 

68.6

Expense ratio

 

34.8

 

 

34.3

 

 

34.9

 

 

35.0

Combined ratio

 

106.0

 

 

99.5

 

 

109.3

 

 

103.6

 

 

 

 

 

 

 

 

 

(A) Reconciliation of non-GAAP financial measure:

 

 

 

 

 

 

 

 

Net (loss) income from operations:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

11.6

 

 

$

11.5

 

 

$

(68.7

)

 

$

54.7

Net investment gain (loss), net of tax

 

15.8

 

 

(3.5

)

 

(31.0

)

 

39.6

Net (loss) income from operations

 

$

(4.2

)

 

$

15.0

 

 

$

(37.7

)

 

$

15.1

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

($ and shares in millions, except per share amounts)

 

 

 

 

(unaudited)

 

September 30

 

December 31

 

 

2020

 

2019

ASSETS

 

 

 

 

Fixed maturities, available-for-sale, at fair value (amortized cost $2,047.1 and $2,080.0, respectively)

 

$

2,166.3

 

 

$

2,127.9

 

Equity securities

 

339.5

 

 

395.2

 

Other invested assets

 

62.5

 

 

69.7

 

Other invested assets, at cost

 

12.5

 

 

6.5

 

Notes receivable from affiliate

 

70.0

 

 

70.0

 

Total investments

 

2,650.8

 

 

2,669.3

 

 

 

 

 

 

Cash and cash equivalents

 

131.4

 

 

78.0

 

Accrued investment income and other assets

 

31.1

 

 

31.7

 

Premiums Receivable

 

14.1

 

 

13.6

 

Deferred policy acquisition costs

 

123.7

 

 

111.1

 

Reinsurance recoverable on losses and loss expenses payable

 

35.2

 

 

13.6

 

Prepaid reinsurance premiums

 

8.4

 

 

7.5

 

Due from affiliate

 

18.3

 

 

7.9

 

Current federal income taxes

 

6.7

 

 

6.3

 

Net deferred federal income taxes

 

44.6

 

 

42.2

 

Property and equipment, held for sale

 

4.2

 

 

4.2

 

Total assets

 

$

3,068.5

 

 

$

2,985.4

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Losses and loss expenses payable

 

$

1,091.3

 

 

$

1,066.5

 

Unearned premiums

 

731.0

 

 

649.2

 

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

 

122.0

 

 

122.0

 

Pension and postretirement benefits

 

54.0

 

 

72.9

 

Other liabilities

 

126.1

 

 

114.9

 

Total liabilities

 

2,124.4

 

 

2,025.5

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

Common stock, without par value. Authorized 100.0 shares; 50.7 and 50.4 shares issued, respectively, at stated value of $2.50 per share

 

126.7

 

 

125.9

 

Treasury stock, 6.9 and 6.9 shares, respectively, at cost

 

(118.4

)

 

(117.5

)

Additional paid-in capital

 

212.1

 

 

206.7

 

Accumulated other comprehensive income (loss)

 

23.3

 

 

(37.9

)

Retained earnings

 

700.4

 

 

782.7

 

Total stockholders' equity

 

944.1

 

 

959.9

 

Total liabilities and stockholders' equity

 

$

3,068.5

 

 

$

2,985.4

 

 

 

 

 

 

Condensed Consolidated Statements of Income

 

 

 

 

($ in millions, except per share amounts)

 

 

 

 

 

 

 

 

(unaudited)

 

Three months ended September 30

 

Nine months ended September 30

 

 

2020

 

2019

 

2020

 

2019

Earned premiums

 

$

353.2

 

$

319.6

 

 

$

1,024.4

 

 

$

930.0

 

Net investment income

 

17.9

 

19.3

 

 

54.5

 

 

60.4

 

Net investment gain (loss)

 

20.0

 

(5.0

)

 

(39.3

)

 

50.2

 

Other income from affiliates

 

0.5

 

0.6

 

 

1.6

 

 

1.6

 

Total revenues

 

391.6

 

334.5

 

 

1,041.2

 

 

1,042.2

 

 

 

 

 

 

 

 

 

 

Losses and loss expenses

 

251.6

 

208.4

 

 

762.2

 

 

637.6

 

Acquisition and operating expenses

 

123.0

 

109.7

 

 

357.4

 

 

325.2

 

Interest expense

 

1.1

 

1.2

 

 

3.6

 

 

3.7

 

Other expenses

 

1.1

 

2.5

 

 

5.6

 

 

9.0

 

Total expenses

 

376.8

 

321.8

 

 

1,128.8

 

 

975.5

 

 

 

 

 

 

 

 

 

 

Income (loss) before federal income taxes

 

14.8

 

12.7

 

 

(87.6

)

 

66.7

 

Federal income tax expense (benefit):

 

 

 

 

 

 

 

 

Current

 

 

 

 

(0.4

)

 

(0.4

)

Deferred

 

3.2

 

1.2

 

 

(18.5

)

 

12.4

 

Federal income tax expense (benefit)

 

3.2

 

1.2

 

 

(18.9

)

 

12.0

 

Net income (loss)

 

$

11.6

 

$

11.5

 

 

$

(68.7

)

 

$

54.7

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.26

 

$

0.26

 

 

$

(1.57

)

 

$

1.26

 

Diluted

 

$

0.26

 

$

0.25

 

 

$

(1.57

)

 

$

1.25

 

Dividends paid per common share

 

$

0.10

 

$

0.10

 

 

$

0.30

 

 

$

0.30

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss)

 

 

 

 

($ in millions)

 

 

 

 

 

 

 

(unaudited)

Three months ended September 30

 

Nine months ended September 30

 

2020

 

2019

 

2020

 

2019

Net income (loss)

$

11.6

 

 

 

$

11.5

 

 

 

$

(68.7

)

 

 

$

54.7

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

Net unrealized holding gain on available-for-sale investments:

 

 

 

 

 

 

 

Unrealized holding gain

4.6

 

 

 

22.6

 

 

 

74.5

 

 

 

91.8

 

 

Reclassification adjustments for losses (gains) realized in net income

0.2

 

 

 

(1.2

)

 

 

(3.2

)

 

 

(2.8

)

 

Income tax expense

(1.1

)

 

 

(4.5

)

 

 

(15.0

)

 

 

(18.7

)

 

Total net unrealized holding gain on available- for-sale investments

3.7

 

 

 

16.9

 

 

 

56.3

 

 

 

70.3

 

 

Net unrecognized benefit plan obligations:

 

 

 

 

 

 

 

Reclassification adjustments for amortization to statements of income:

 

 

 

 

 

 

 

Prior service credit

(1.6

)

 

 

(1.6

)

 

 

(4.8

)

 

 

(4.8

)

 

Net actuarial loss

3.7

 

 

 

2.4

 

 

 

11.0

 

 

 

7.2

 

 

Income tax expense

(0.4

)

 

 

(0.2

)

 

 

(1.3

)

 

 

(0.5

)

 

Total net unrecognized benefit plan obligations

1.7

 

 

 

0.6

 

 

 

4.9

 

 

 

1.9

 

 

Other comprehensive income

5.4

 

 

 

17.5

 

 

 

61.2

 

 

 

72.2

 

 

Comprehensive income (loss)

$

17.0

 

 

 

$

29.0

 

 

 

$

(7.5

)

 

 

$

126.9

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statement of Stockholders' Equity

($ and shares in millions)

 

 

 

 

(unaudited)

 

Nine Months Ended

 

Year Ended

 

 

September 30

 

December 31

 

 

2020

 

2019

Common shares:

 

 

 

 

Balance at beginning of year

 

50.4

 

 

50.0

 

Issuance of shares

 

0.3

 

 

0.4

 

Balance at period ended

 

50.7

 

 

50.4

 

 

 

 

 

 

Treasury shares:

 

 

 

 

Balance at beginning of year

 

(6.9)

 

 

(6.8)

 

Shares acquired on stock award exercises and vested restricted shares

 

 

 

(0.1)

 

Balance at period ended

 

(6.9)

 

 

(6.9)

 

 

 

 

 

 

Common stock:

 

 

 

 

Balance at beginning of year

 

$

125.9

 

 

$

125.0

 

Issuance of shares

 

0.8

 

 

0.9

 

Balance at period ended

 

126.7

 

 

125.9

 

 

 

 

 

 

Treasury stock:

 

 

 

 

Balance at beginning of year

 

$

(117.5)

 

 

$

(117.0)

 

Shares acquired on stock award exercises and vested restricted shares

 

(0.9)

 

 

(0.5)

 

Balance at beginning of year and period ended

 

(118.4)

 

 

(117.5)

 

 

 

 

 

 

Additional paid-in capital:

 

 

 

 

Balance at beginning of year

 

$

206.7

 

 

$

194.2

 

Issuance of common stock

 

2.0

 

 

5.1

 

Stock awards granted

 

3.4

 

 

7.4

 

Balance at period ended

 

212.1

 

 

206.7

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

Balance at beginning of the year

 

$

(37.9)

 

 

$

(96.4)

 

Change in net unrealized holding gains on available-for-sale investments

 

56.3

 

 

60.6

 

Total net unrecognized benefit plan obligations

 

4.9

 

 

(2.1)

 

Balance at period ended

 

23.3

 

 

(37.9)

 

 

 

 

 

 

Retained earnings:

 

 

 

 

Balance at beginning of year

 

$

782.7

 

 

$

712.7

 

Cumulative effect of change in accounting to establish an allowance for expected credit losses at January 1, 2020

 

(0.5)

 

 

 

Net (loss) income

 

(68.7)

 

 

87.4

 

Cash dividends paid

 

(13.1)

 

 

(17.4)

 

Balance at period ended

 

700.4

 

 

782.7

 

Total stockholders' equity at period ended

 

$

944.1

 

 

$

959.9

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flow

($ in millions)

 

 

 

 

(unaudited)

 

Nine months ended

 

 

September 30

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

Net (loss) income

 

$

(68.7

)

 

 

$

54.7

 

 

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities

 

 

 

 

Depreciation and amortization, net

 

7.6

 

 

 

6.2

 

 

Share-based compensation

 

 

 

 

7.0

 

 

Net investment loss (gain)

 

39.3

 

 

 

(50.2

)

 

Changes in operating assets and liabilities:

 

 

 

 

Deferred policy acquisition costs

 

(12.6

)

 

 

(12.4

)

 

Accrued investment income and other assets

 

0.6

 

 

 

(2.3

)

 

Premiums receivable

 

(0.5

)

 

 

(3.2

)

 

Postretirement and pension benefits

 

(17.0

)

 

 

(12.2

)

 

Other liabilities and due to/from affiliates, net

 

8.5

 

 

 

(51.8

)

 

Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums

 

(22.5

)

 

 

(2.6

)

 

Losses and loss expenses payable

 

24.2

 

 

 

(54.1

)

 

Unearned premiums

 

81.8

 

 

 

65.0

 

 

Deferred tax on share-based awards

 

(0.1

)

 

 

(0.7

)

 

Federal income taxes

 

(18.8

)

 

 

12.7

 

 

Net cash provided by (used in) operating activities

 

21.8

 

 

 

(43.9

)

 

Cash flows from investing activities:

 

 

 

 

Purchases of fixed maturities available-for-sale

 

(462.6

)

 

 

(459.9

)

 

Purchases of equity securities

 

(65.6

)

 

 

(48.9

)

 

Purchases of other invested assets

 

(7.3

)

 

 

(12.9

)

 

Maturities, calls and pay downs of fixed maturities available-for-sale

 

274.9

 

 

 

267.1

 

 

Sales of fixed maturities available-for-sale

 

216.1

 

 

 

248.7

 

 

Sales of equity securities

 

86.2

 

 

 

34.4

 

 

Sales of other invested assets

 

0.9

 

 

 

1.0

 

 

Disposals of property and equipment

 

0.2

 

 

 

1.6

 

 

Net cash provided by investing activities

 

42.8

 

 

 

31.1

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of common stock

 

2.8

 

 

 

4.8

 

 

Payments to acquire treasury stock

 

(0.9

)

 

 

(0.5

)

 

Payment of dividends

 

(13.1

)

 

 

(13.0

)

 

Proceeds from short-term debt

 

60.0

 

 

 

 

 

Repayment of short-term debt

 

(60.0

)

 

 

 

 

Proceeds from long-term debt

 

21.5

 

 

 

 

 

Repayment of long-term debt

 

(21.5

)

 

 

 

 

Net cash used in financing activities

 

(11.2

)

 

 

(8.7

)

 

Net increase (decrease) in cash and cash equivalents

 

53.4

 

 

 

(21.5

)

 

Cash and cash equivalents at beginning of period

 

78.0

 

 

 

59.8

 

 

Cash and cash equivalents at end of period

 

$

131.4

 

 

 

$

38.3

 

 

Supplemental disclosures:

 

 

 

 

Interest paid (affiliates $0.6 and $0.7, respectively)

 

$

3.5

 

 

 

$

3.5

 

 

Net Investment Income

($ in millions)

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

9/30/2019

 

12/31/2019

 

3/31/2020

 

6/30/2020

 

9/30/2020

Quarter to Date

 

 

 

 

 

 

 

 

 

 

Gross investment income:

 

 

 

 

 

 

 

 

 

 

Fixed maturities

 

$

14.4

 

$

13.9

 

$

14.5

 

$

14.8

 

$

13.7

TIPS

 

0.9

 

0.7

 

0.6

 

(0.3)

 

1.3

Total fixed maturities

 

15.3

 

14.6

 

15.1

 

14.5

 

15.0

Equity securities

 

3.0

 

4.3

 

3.1

 

2.6

 

2.1

Other

 

1.1

 

1.3

 

1.0

 

0.8

 

0.9

Total gross investment income

 

19.4

 

20.2

 

19.2

 

17.9

 

18.0

Less: Investment expenses

 

0.1

 

0.2

 

0.3

 

0.2

 

0.1

Net investment income

 

$

19.3

 

$

20.0

 

$

18.9

 

$

17.7

 

$

17.9

 

 

 

 

 

 

 

 

 

 

 

Year to Date

 

 

 

 

 

 

 

 

 

 

Gross investment income:

 

 

 

 

 

 

 

 

 

 

Fixed maturities

 

$

44.5

 

$

58.4

 

$

14.5

 

$

29.3

 

$

43.0

TIPS

 

3.2

 

3.9

 

0.6

 

0.3

 

1.6

Total fixed maturities

 

47.7

 

62.3

 

15.1

 

29.6

 

44.6

Equity securities

 

8.9

 

13.2

 

3.1

 

5.7

 

7.8

Other

 

4.2

 

5.5

 

1.0

 

1.8

 

2.7

Total gross investment income

 

60.8

 

81.0

 

19.2

 

37.1

 

55.1

Less: Investment expenses

 

0.4

 

0.6

 

0.3

 

0.5

 

0.6

Net investment income

 

$

60.4

 

$

80.4

 

$

18.9

 

$

36.6

 

$

54.5

 

 

 

 

 

 

 

 

 

 

 

 

 

9/30/2019

 

12/31/2019

 

3/31/2020

 

6/30/2020

 

9/30/2020

TIPS, fair value

 

$

135.3

 

$

135.6

 

$

111.4

 

$

115.9

 

$

117.0

TIPS, book value

 

$

125.9

 

$

126.2

 

$

101.5

 

$

100.9

 

$

99.4

 

 

 

 

 

 

 

 

 

 

 

Net Investment Gain (Loss)

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

 

unaudited

Three months ended September 30

 

Nine months ended September 30

 

2020

 

2019

 

2020

 

2019

Investment gain (loss), net:

 

 

 

 

 

 

 

Fixed maturities:

 

 

 

 

 

 

 

Realized gains on sales of securities

$

1.3

 

 

 

$

1.2

 

 

 

$

6.8

 

 

 

$

2.8

 

 

Realized losses on sales of securities

(1.5

)

 

 

 

 

 

(3.6

)

 

 

 

 

Net (loss) gain on fixed securities

(0.2

)

 

 

1.2

 

 

 

3.2

 

 

 

2.8

 

 

Equity securities:

 

 

 

 

 

 

 

Realized losses on sales of securities, net

(42.3

)

 

 

(1.8

)

 

 

(50.9

)

 

 

(2.5

)

 

Unrealized gain (loss) on securities still held, net

60.5

 

 

 

(4.1

)

 

 

15.8

 

 

 

46.4

 

 

Net gain (loss) on equity securities

18.2

 

 

 

(5.9

)

 

 

(35.1

)

 

 

43.9

 

 

Other invested assets:

 

 

 

 

 

 

 

Unrealized gain (loss) on securities still held, net

2.0

 

 

 

(0.3

)

 

 

(7.6

)

 

 

4.8

 

 

Net gain (loss) on other invested assets

2.0

 

 

 

(0.3

)

 

 

(7.6

)

 

 

4.8

 

 

Other net realized gain (loss)

 

 

 

 

 

 

0.2

 

 

 

(1.3

)

 

Net gain (loss) on investments

$

20.0

 

 

 

$

(5.0

)

 

 

$

(39.3

)

 

 

$

50.2

 

 

 

 

 

 

 

 

 

 

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:

 

 

September 30

 

December 31

 

 

2020

 

2019

Deferred tax assets:

 

 

 

 

Unearned premiums not currently deductible

 

$

30.4

 

$

27.0

Losses and loss expenses payable discounting

 

11.5

 

10.6

Postretirement and pension benefits

 

16.7

 

20.0

Other liabilities

 

11.2

 

13.4

Net operating loss carryforward

 

26.1

 

12.1

Capital loss carryforward

 

7.8

 

Tax credit carryforward

 

2.0

 

2.5

Other

 

0.8

 

1.1

Total deferred tax assets

 

106.5

 

86.7

Deferred tax liabilities:

 

 

 

 

Deferral of policy acquisition costs

 

26.0

 

23.3

Investments

 

35.4

 

21.2

Total deferred tax liabilities

 

61.4

 

44.5

Total net deferred tax assets before valuation allowance

 

45.1

 

42.2

Less valuation allowance

 

0.5

 

Net deferred federal income taxes

 

$

44.6

 

$

42.2

 

 

 

 

 

The following table sets forth the components of federal income tax expense (benefit):

 

 

 

 

 

 

Three months ended September 30

 

Nine months ended September 30

 

 

2020

 

2019

 

2020

 

2019

Income (loss) before federal income taxes

 

$

14.8

 

$

12.7

 

$

(87.6

)

 

$

66.7

 

Federal income tax expense (benefit)

 

 

 

 

 

 

 

 

Current

 

 

 

(0.4

)

 

(0.4

)

Deferred

 

3.2

 

1.2

 

(18.5

)

 

12.4

 

Total federal income tax expense (benefit)

 

3.2

 

1.2

 

(18.9

)

 

12.0

 

Net income (loss)

 

$

11.6

 

$

11.5

 

$

(68.7

)

 

$

54.7

 

 

 

 

 

 

 

 

 

 

SAP Personal Insurance Segment Results

(unaudited)

 

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

 

 

Three months ended September 30, 2020

 

Personal Auto

 

Homeowners

 

Other Personal

 

Total

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

101.4

 

 

$

111.4

 

 

$

17.4

 

 

$

230.2

 

Net earned premiums

 

103.0

 

 

92.5

 

 

13.3

 

 

208.8

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

1.9

 

 

28.1

 

 

2.9

 

 

32.9

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

8.0

 

 

0.7

 

 

(0.6

)

 

8.1

 

Current accident year non-cat loss and ALAE

 

58.2

 

 

50.7

 

 

4.8

 

 

113.7

 

Total non-cat loss and ALAE

 

66.2

 

 

51.4

 

 

4.2

 

 

121.8

 

Total Loss and ALAE

 

68.1

 

 

79.5

 

 

7.1

 

 

154.7

 

ULAE

 

7.4

 

 

6.8

 

 

0.2

 

 

14.4

 

Total Loss and LAE

 

75.5

 

 

86.3

 

 

7.3

 

 

169.1

 

Underwriting expenses

 

32.0

 

 

33.2

 

 

5.2

 

 

70.4

 

Net underwriting (loss) gain

 

$

(4.5

)

 

$

(27.0

)

 

$

0.8

 

 

$

(30.7

)

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

1.9

%

 

30.4

%

 

21.5

%

 

15.8

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

7.8

%

 

0.7

%

 

(4.1

)%

 

3.9

%

Current accident year non-cat loss and ALAE ratio

 

56.4

%

 

54.9

%

 

36.2

%

 

54.4

%

Total non-cat loss and ALAE ratio

 

64.2

%

 

55.6

%

 

32.1

%

 

58.3

%

Total Loss and ALAE ratio

 

66.1

%

 

86.0

%

 

53.6

%

 

74.1

%

ULAE ratio

 

7.2

%

 

7.3

%

 

1.6

%

 

6.9

%

Total Loss and LAE ratio

 

73.3

%

 

93.3

%

 

55.2

%

 

81.0

%

Expense ratio

 

31.4

%

 

29.8

%

 

29.4

%

 

30.5

%

Combined ratio

 

104.7

%

 

123.1

%

 

84.6

%

 

111.5

%

($ in millions)

 

 

 

 

 

 

 

 

Three months ended September 30, 2019

 

Personal Auto

 

Homeowners

 

Other Personal

 

Total

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

107.1

 

 

$

91.5

 

 

$

11.2

 

 

$

209.8

 

Net earned premiums

 

108.3

 

 

75.6

 

 

8.8

 

 

192.7

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

0.9

 

 

7.0

 

 

0.3

 

 

8.2

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(1.2

)

 

 

 

(0.9

)

 

(2.1

)

Current accident year non-cat loss and ALAE

 

73.0

 

 

41.2

 

 

4.7

 

 

118.9

 

Total non-cat loss and ALAE

 

71.8

 

 

41.2

 

 

3.8

 

 

116.8

 

Total Loss and ALAE

 

72.7

 

 

48.2

 

 

4.1

 

 

125.0

 

ULAE

 

7.4

 

 

4.4

 

 

0.2

 

 

12.0

 

Total Loss and LAE

 

80.1

 

 

52.6

 

 

4.3

 

 

137.0

 

Underwriting expenses

 

30.9

 

 

27.8

 

 

3.3

 

 

62.0

 

Net underwriting (loss) gain

 

$

(2.7

)

 

$

(4.8

)

 

$

1.2

 

 

$

(6.3

)

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

0.8

%

 

9.2

%

 

3.5

%

 

4.2

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(1.2

)%

 

0.1

%

 

(9.8

)%

 

(1.1

)%

Current accident year non-cat loss and ALAE ratio

 

67.4

%

 

54.5

%

 

52.5

%

 

61.7

%

Total non-cat loss and ALAE ratio

 

66.2

%

 

54.6

%

 

42.7

%

 

60.6

%

Total Loss and ALAE ratio

 

67.0

%

 

63.8

%

 

46.2

%

 

64.8

%

ULAE ratio

 

6.9

%

 

5.8

%

 

2.0

%

 

6.2

%

Total Loss and LAE ratio

 

73.9

%

 

69.6

%

 

48.2

%

 

71.0

%

Expense ratio

 

28.9

%

 

30.3

%

 

29.6

%

 

29.6

%

Combined ratio

 

102.8

%

 

99.9

%

 

77.8

%

 

100.6

%

($ in millions)

 

 

 

 

 

 

 

 

Nine months ended September 30, 2020

 

Personal Auto

 

Homeowners

 

Other Personal

 

Total

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

310.3

 

 

$

299.1

 

 

$

45.7

 

 

$

655.1

 

Net earned premiums

 

311.0

 

 

262.9

 

 

35.8

 

 

609.7

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

6.5

 

 

93.4

 

 

12.0

 

 

111.9

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

19.1

 

 

2.8

 

 

(1.7

)

 

20.2

 

Current accident year non-cat loss and ALAE

 

165.7

 

 

125.0

 

 

13.0

 

 

303.7

 

Total non-cat loss and ALAE

 

184.8

 

 

127.8

 

 

11.3

 

 

323.9

 

Total Loss and ALAE

 

191.3

 

 

221.2

 

 

23.3

 

 

435.8

 

ULAE

 

23.0

 

 

18.6

 

 

1.2

 

 

42.8

 

Total Loss and LAE

 

214.3

 

 

239.8

 

 

24.5

 

 

478.6

 

Underwriting expenses

 

98.5

 

 

89.7

 

 

13.7

 

 

201.9

 

Net underwriting loss

 

$

(1.8

)

 

$

(66.6

)

 

$

(2.4

)

 

$

(70.8

)

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

2.1

%

 

35.5

%

 

33.4

%

 

18.4

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

6.2

%

 

1.0

%

 

(4.5

)%

 

3.3

%

Current accident year non-cat loss and ALAE ratio

 

53.2

%

 

47.6

%

 

36.2

%

 

49.8

%

Total non-cat loss and ALAE ratio

 

59.4

%

 

48.6

%

 

31.7

%

 

53.1

%

Total Loss and ALAE ratio

 

61.5

%

 

84.1

%

 

65.1

%

 

71.5

%

ULAE ratio

 

7.4

%

 

7.1

%

 

3.4

%

 

7.0

%

Total Loss and LAE ratio

 

68.9

%

 

91.2

%

 

68.5

%

 

78.5

%

Expense ratio

 

31.7

%

 

30.0

%

 

30.0

%

 

30.8

%

Combined ratio

 

100.6

%

 

121.2

%

 

98.5

%

 

109.3

%

($ in millions)

 

 

 

 

 

 

 

 

Nine months ended September 30, 2019

 

Personal Auto

 

Homeowners

 

Other Personal

 

Total

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

324.8

 

 

$

241.4

 

 

$

29.0

 

 

$

595.2

 

Net earned premiums

 

322.1

 

 

216.1

 

 

24.3

 

 

562.5

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

5.4

 

 

47.8

 

 

4.0

 

 

57.2

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(11.0

)

 

0.5

 

 

(1.9

)

 

(12.4

)

Current accident year non-cat loss and ALAE

 

207.8

 

 

110.4

 

 

12.7

 

 

330.9

 

Total non-cat loss and ALAE

 

196.8

 

 

110.9

 

 

10.8

 

 

318.5

 

Total Loss and ALAE

 

202.2

 

 

158.7

 

 

14.8

 

 

375.7

 

ULAE

 

22.2

 

 

15.1

 

 

0.9

 

 

38.2

 

Total Loss and LAE

 

224.4

 

 

173.8

 

 

15.7

 

 

413.9

 

Underwriting expenses

 

96.7

 

 

74.8

 

 

9.1

 

 

180.6

 

Net underwriting gain (loss)

 

$

1.0

 

 

$

(32.5

)

 

$

(0.5

)

 

$

(32.0

)

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

1.6

%

 

22.1

%

 

16.5

%

 

10.2

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(3.4

)%

 

0.3

%

 

(7.8

)%

 

(2.2

)%

Current accident year non-cat loss and ALAE ratio

 

64.5

%

 

51.0

%

 

52.0

%

 

58.7

%

Total non-cat loss and ALAE ratio

 

61.1

%

 

51.3

%

 

44.2

%

 

56.5

%

Total Loss and ALAE ratio

 

62.7

%

 

73.4

%

 

60.7

%

 

66.7

%

ULAE ratio

 

6.9

%

 

7.0

%

 

3.7

%

 

6.8

%

Total Loss and LAE ratio

 

69.6

%

 

80.4

%

 

64.4

%

 

73.5

%

Expense ratio

 

29.8

%

 

31.0

%

 

31.5

%

 

30.4

%

Combined ratio

 

99.4

%

 

111.4

%

 

95.9

%

 

103.9

%

SAP Commercial Insurance Segment Results

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2020

 

Commercial
Auto

 

Small
Commercial
Package

 

Middle
Market
Commercial

 

Workers'
Comp

 

Farm &
Ranch

 

Other
Commercial

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

40.0

 

 

$

31.4

 

 

$

40.0

 

 

$

17.4

 

 

$

15.0

 

 

$

5.0

 

 

$

148.8

 

Net earned premiums

 

35.6

 

 

31.4

 

 

40.3

 

 

17.5

 

 

14.5

 

 

5.1

 

 

144.4

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

0.1

 

 

5.5

 

 

4.7

 

 

 

 

3.2

 

 

 

 

13.5

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(1.2

)

 

(7.5

)

 

(6.3

)

 

(7.3

)

 

(0.6

)

 

(3.6

)

 

(26.5

)

Current accident year non-cat loss and ALAE

 

20.8

 

 

17.0

 

 

20.1

 

 

14.4

 

 

5.1

 

 

3.0

 

 

80.4

 

Total non-cat loss and ALAE

 

19.6

 

 

9.5

 

 

13.8

 

 

7.1

 

 

4.5

 

 

(0.6

)

 

53.9

 

Total Loss and ALAE

 

19.7

 

 

15.0

 

 

18.5

 

 

7.1

 

 

7.7

 

 

(0.6

)

 

67.4

 

ULAE

 

1.7

 

 

0.5

 

 

1.3

 

 

1.1

 

 

0.5

 

 

0.1

 

 

5.2

 

Total Loss and LAE

 

21.4

 

 

15.5

 

 

19.8

 

 

8.2

 

 

8.2

 

 

(0.5

)

 

72.6

 

Underwriting expenses

 

13.7

 

 

10.9

 

 

16.4

 

 

7.8

 

 

6.7

 

 

1.9

 

 

57.4

 

Net underwriting gain (loss)

 

$

0.5

 

 

$

5.0

 

 

$

4.1

 

 

$

1.5

 

 

$

(0.4

)

 

$

3.7

 

 

$

14.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

0.4

%

 

17.3

%

 

11.6

%

 

%

 

22.1

%

 

%

 

9.3

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(3.4

)%

 

(23.8

)%

 

(15.5

)%

 

(41.6

)%

 

(4.2

)%

 

(72.6

)%

 

(18.3

)%

Current accident year non-cat loss and ALAE ratio

 

58.3

%

 

54.3

%

 

49.7

%

 

82.2

%

 

35.0

%

 

60.4

%

 

55.7

%

Total non-cat loss and ALAE ratio

 

54.9

%

 

30.5

%

 

34.2

%

 

40.6

%

 

30.8

%

 

(12.2

)%

 

37.4

%

Total Loss and ALAE ratio

 

55.3

%

 

47.8

%

 

45.8

%

 

40.6

%

 

52.9

%

 

(12.2

)%

 

46.7

%

ULAE ratio

 

4.8

%

 

1.5

%

 

3.3

%

 

6.4

%

 

3.4

%

 

1.9

%

 

3.6

%

Total Loss and LAE ratio

 

60.1

%

 

49.3

%

 

49.1

%

 

47.0

%

 

56.3

%

 

(10.3

)%

 

50.3

%

Expense ratio

 

34.2

%

 

34.7

%

 

41.0

%

 

45.1

%

 

45.1

%

 

38.6

%

 

38.6

%

Combined ratio

 

94.3

%

 

84.0

%

 

90.1

%

 

92.1

%

 

101.4

%

 

28.3

%

 

88.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2019

 

Commercial
Auto

 

Small
Commercial
Package

 

Middle
Market
Commercial

 

Workers' Comp

 

Farm & Ranch

 

Other
Commercial

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

27.7

 

 

$

30.0

 

 

$

39.8

 

 

$

23.9

 

 

$

11.4

 

 

$

4.6

 

 

$

137.4

 

Net earned premiums

 

23.8

 

 

29.9

 

 

34.9

 

 

21.7

 

 

12.4

 

 

4.3

 

 

127.0

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

0.1

 

 

1.1

 

 

0.5

 

 

 

 

0.4

 

 

 

 

2.1

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(1.1

)

 

(4.1

)

 

(1.2

)

 

(4.4

)

 

(0.7

)

 

(1.6

)

 

(13.1

)

Current accident year non-cat loss and ALAE

 

15.2

 

 

17.9

 

 

19.7

 

 

13.9

 

 

6.2

 

 

3.2

 

 

76.1

 

Total non-cat loss and ALAE

 

14.1

 

 

13.8

 

 

18.5

 

 

9.5

 

 

5.5

 

 

1.6

 

 

63.0

 

Total Loss and ALAE

 

14.2

 

 

14.9

 

 

19.0

 

 

9.5

 

 

5.9

 

 

1.6

 

 

65.1

 

ULAE

 

1.6

 

 

1.3

 

 

2.0

 

 

1.8

 

 

0.4

 

 

0.1

 

 

7.2

 

Total Loss and LAE

 

15.8

 

 

16.2

 

 

21.0

 

 

11.3

 

 

6.3

 

 

1.7

 

 

72.3

 

Underwriting expenses

 

11.9

 

 

11.7

 

 

15.9

 

 

7.2

 

 

4.7

 

 

2.1

 

 

53.5

 

Net underwriting (loss) gain

 

$

(3.9

)

 

$

2.0

 

 

$

(2.0

)

 

$

3.2

 

 

$

1.4

 

 

$

0.5

 

 

$

1.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

0.5

%

 

3.7

%

 

1.6

%

 

%

 

3.2

%

 

%

 

1.7

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(4.6

)%

 

(13.7

)%

 

(3.6

)%

 

(20.1

)%

 

(5.7

)%

 

(37.9

)%

 

(10.4

)%

Current accident year non-cat loss and ALAE ratio

 

63.8

%

 

60.1

%

 

56.3

%

 

64.2

%

 

50.0

%

 

75.9

%

 

60.0

%

Total non-cat loss and ALAE ratio

 

59.2

%

 

46.4

%

 

52.7

%

 

44.1

%

 

44.3

%

 

38.0

%

 

49.6

%

Total Loss and ALAE ratio

 

59.7

%

 

50.1

%

 

54.3

%

 

44.1

%

 

47.5

%

 

38.0

%

 

51.3

%

ULAE ratio

 

6.7

%

 

4.2

%

 

5.7

%

 

8.3

%

 

3.2

%

 

4.1

%

 

5.7

%

Total Loss and LAE ratio

 

66.4

%

 

54.3

%

 

60.0

%

 

52.4

%

 

50.7

%

 

42.1

%

 

57.0

%

Expense ratio

 

43.0

%

 

39.1

%

 

40.0

%

 

30.0

%

 

41.7

%

 

42.2

%

 

38.9

%

Combined ratio

 

109.4

%

 

93.4

%

 

100.0

%

 

82.4

%

 

92.4

%

 

84.3

%

 

95.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2020

 

Commercial
Auto

 

Small
Commercial
Package

 

Middle
Market
Commercial

 

Workers'
Comp

 

Farm &
Ranch

 

Other
Commercial

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

117.8

 

 

$

95.8

 

 

$

126.8

 

 

$

49.2

 

 

$

47.3

 

 

$

15.3

 

 

$

452.2

 

Net earned premiums

 

96.2

 

 

92.8

 

 

116.0

 

 

54.4

 

 

40.8

 

 

14.5

 

 

414.7

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

1.1

 

 

21.0

 

 

35.7

 

 

 

 

8.7

 

 

0.2

 

 

66.7

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(1.5

)

 

(16.5

)

 

(14.3

)

 

(16.1

)

 

(1.7

)

 

(7.1

)

 

(57.2

)

Current accident year non-cat loss and ALAE

 

52.4

 

 

53.3

 

 

69.6

 

 

40.6

 

 

15.2

 

 

7.3

 

 

238.4

 

Total non-cat loss and ALAE

 

50.9

 

 

36.8

 

 

55.3

 

 

24.5

 

 

13.5

 

 

0.2

 

 

181.2

 

Total Loss and ALAE

 

52.0

 

 

57.8

 

 

91.0

 

 

24.5

 

 

22.2

 

 

0.4

 

 

247.9

 

ULAE

 

4.9

 

 

4.2

 

 

4.5

 

 

4.5

 

 

1.6

 

 

0.4

 

 

20.1

 

Total Loss and LAE

 

56.9

 

 

62.0

 

 

95.5

 

 

29.0

 

 

23.8

 

 

0.8

 

 

268.0

 

Underwriting expenses

 

40.1

 

 

34.0

 

 

50.8

 

 

22.7

 

 

21.1

 

 

6.0

 

 

174.7

 

Net underwriting (loss) gain

 

$

(0.8

)

 

$

(3.2

)

 

$

(30.3

)

 

$

2.7

 

 

$

(4.1

)

 

$

7.7

 

 

$

(28.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

1.2

%

 

22.6

%

 

30.7

%

 

%

 

21.3

%

 

1.2

%

 

16.1

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(1.5

)%

 

(17.8

)%

 

(12.3

)%

 

(29.6

)%

 

(4.1

)%

 

(49.3

)%

 

(13.8

)%

Current accident year non-cat loss and ALAE ratio

 

54.3

%

 

57.5

%

 

60.1

%

 

74.6

%

 

37.3

%

 

50.7

%

 

57.4

%

Total non-cat loss and ALAE ratio

 

52.8

%

 

39.7

%

 

47.8

%

 

45.0

%

 

33.2

%

 

1.4

%

 

43.6

%

Total Loss and ALAE ratio

 

54.0

%

 

62.3

%

 

78.5

%

 

45.0

%

 

54.5

%

 

2.6

%

 

59.7

%

ULAE ratio

 

5.1

%

 

4.5

%

 

3.9

%

 

8.4

%

 

3.9

%

 

2.6

%

 

4.9

%

Total Loss and LAE ratio

 

59.1

%

 

66.8

%

 

82.4

%

 

53.4

%

 

58.4

%

 

5.2

%

 

64.6

%

Expense ratio

 

34.1

%

 

35.5

%

 

40.0

%

 

46.2

%

 

44.6

%

 

39.3

%

 

38.6

%

Combined ratio

 

93.2

%

 

102.3

%

 

122.4

%

 

99.6

%

 

103.0

%

 

44.5

%

 

103.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2019

 

Commercial
Auto

 

Small
Commercial
Package

 

Middle
Market
Commercial

 

Workers'
Comp

 

Farm &
Ranch

 

Other
Commercial

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

81.4

 

 

$

92.0

 

 

$

115.1

 

 

$

58.8

 

 

$

37.4

 

 

$

14.1

 

 

$

398.8

 

Net earned premiums

 

65.3

 

 

88.9

 

 

98.1

 

 

60.3

 

 

36.2

 

 

12.6

 

 

361.4

 

Losses and LAE incurred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE

 

0.2

 

 

6.1

 

 

5.7

 

 

 

 

2.5

 

 

 

 

14.5

 

Non-cat loss and ALAE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(3.6

)

 

(11.8

)

 

(7.2

)

 

(13.4

)

 

(1.9

)

 

(1.4

)

 

(39.3

)

Current accident year non-cat loss and ALAE

 

41.2

 

 

51.3

 

 

62.2

 

 

42.3

 

 

18.0

 

 

7.7

 

 

222.7

 

Total non-cat loss and ALAE

 

37.6

 

 

39.5

 

 

55.0

 

 

28.9

 

 

16.1

 

 

6.3

 

 

183.4

 

Total Loss and ALAE

 

37.8

 

 

45.6

 

 

60.7

 

 

28.9

 

 

18.6

 

 

6.3

 

 

197.9

 

ULAE

 

4.2

 

 

4.8

 

 

5.0

 

 

5.4

 

 

1.5

 

 

0.5

 

 

21.4

 

Total Loss and LAE

 

42.0

 

 

50.4

 

 

65.7

 

 

34.3

 

 

20.1

 

 

6.8

 

 

219.3

 

Underwriting expenses

 

33.6

 

 

36.0

 

 

46.0

 

 

20.2

 

 

17.4

 

 

6.0

 

 

159.2

 

Net underwriting (loss) gain

 

$

(10.3

)

 

$

2.5

 

 

$

(13.6

)

 

$

5.8

 

 

$

(1.3

)

 

$

(0.2

)

 

$

(17.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

0.4

%

 

6.9

%

 

5.8

%

 

%

 

6.8

%

 

%

 

4.0

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(5.5

)%

 

(13.3

)%

 

(7.4

)%

 

(22.1

)%

 

(5.2

)%

 

(11.2

)%

 

(10.9

)%

Current accident year non-cat loss and ALAE ratio

 

62.9

%

 

57.7

%

 

63.4

%

 

70.2

%

 

49.7

%

 

61.7

%

 

61.7

%

Total non-cat loss and ALAE ratio

 

57.4

%

 

44.4

%

 

56.0

%

 

48.1

%

 

44.5

%

 

50.5

%

 

50.8

%

Total Loss and ALAE ratio

 

57.8

%

 

51.3

%

 

61.8

%

 

48.1

%

 

51.3

%

 

50.5

%

 

54.8

%

ULAE ratio

 

6.5

%

 

5.4

%

 

5.1

%

 

8.9

%

 

4.2

%

 

4.3

%

 

5.9

%

Total Loss and LAE ratio

 

64.3

%

 

56.7

%

 

66.9

%

 

57.0

%

 

55.5

%

 

54.8

%

 

60.7

%

Expense ratio

 

41.3

%

 

39.1

%

 

40.0

%

 

34.4

%

 

46.6

%

 

41.7

%

 

39.9

%

Combined ratio

 

105.6

%

 

95.8

%

 

106.9

%

 

91.4

%

 

102.1

%

 

96.5

%

 

100.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SAP Insurance Segment Results

(unaudited)

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

Three months ended September 30, 2020

 

Personal &
Commercial

 

Specialty run-off

 

Total

 

 

 

 

 

 

 

Net written premiums

 

$

379.0

 

 

$

0.1

 

 

$

379.1

 

Net earned premiums

 

353.2

 

 

 

 

353.2

 

Losses and LAE incurred:

 

 

 

 

 

 

Cat loss and ALAE

 

46.4

 

 

12.3

 

 

58.7

 

Non-cat loss and ALAE

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(18.4

)

 

(0.9

)

 

(19.3

)

Current accident year non-cat loss and ALAE

 

194.1

 

 

0.2

 

 

194.3

 

Total non-cat loss and ALAE

 

175.7

 

 

(0.7

)

 

175.0

 

Total Loss and ALAE

 

222.1

 

 

11.6

 

 

233.7

 

ULAE

 

19.6

 

 

(1.3

)

 

18.3

 

Total Loss and LAE

 

241.7

 

 

10.3

 

 

252.0

 

Underwriting expenses

 

127.8

 

 

0.1

 

 

127.9

 

Net underwriting loss

 

$

(16.3

)

 

$

(10.4

)

 

$

(26.7

)

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

13.1

%

 

N/M(1)

 

16.6

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(5.2

)%

 

N/M

 

(5.5

)%

Current accident year non-cat loss and ALAE ratio

 

55.1

%

 

N/M

 

55.0

%

Total non-cat loss and ALAE ratio

 

49.9

%

 

N/M

 

49.5

%

Total Loss and ALAE ratio

 

63.0

%

 

N/M

 

66.1

%

ULAE ratio

 

5.5

%

 

N/M

 

5.2

%

Total Loss and LAE ratio

 

68.5

%

 

N/M

 

71.3

%

Expense ratio

 

33.7

%

 

N/M

 

33.8

%

Combined ratio

 

102.2

%

 

N/M

 

105.1

%

 

 

 

 

 

 

 

(1) N/M = Not Meaningful

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

Three months ended September 30, 2019

 

Personal &
Commercial

 

Specialty run-off

 

Total

 

 

 

 

 

 

 

Net written premiums

 

$

347.2

 

 

$

(0.4

)

 

$

346.8

 

Net earned premiums

 

319.7

 

 

(0.1

)

 

319.6

 

Losses and LAE incurred:

 

 

 

 

 

 

Cat loss and ALAE

 

10.3

 

 

0.3

 

 

10.6

 

Non-cat loss and ALAE

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(15.2

)

 

(0.9

)

 

(16.1

)

Current accident year non-cat loss and ALAE

 

195.0

 

 

0.1

 

 

195.1

 

Total non-cat loss and ALAE

 

179.8

 

 

(0.8

)

 

179.0

 

Total Loss and ALAE

 

190.1

 

 

(0.5

)

 

189.6

 

ULAE

 

19.2

 

 

(0.1

)

 

19.1

 

Total Loss and LAE

 

209.3

 

 

(0.6

)

 

208.7

 

Underwriting expenses

 

115.5

 

 

1.1

 

 

116.6

 

Net underwriting loss

 

$

(5.1

)

 

$

(0.6

)

 

$

(5.7

)

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

3.2

%

 

N/M

 

3.3

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(4.8

)%

 

N/M

 

(5.1

)%

Current accident year non-cat loss and ALAE ratio

 

61.0

%

 

N/M

 

61.2

%

Total non-cat loss and ALAE ratio

 

56.2

%

 

N/M

 

56.1

%

Total Loss and ALAE ratio

 

59.4

%

 

N/M

 

59.4

%

ULAE ratio

 

6.0

%

 

N/M

 

6.0

%

Total Loss and LAE ratio

 

65.4

%

 

N/M

 

65.4

%

Expense ratio

 

33.3

%

 

N/M

 

33.6

%

Combined ratio

 

98.7

%

 

N/M

 

99.0

%

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

Nine months ended September 30, 2020

 

Personal &
Commercial

 

Specialty run-off

 

Total

 

 

 

 

 

 

 

Net written premiums

 

$

1,107.3

 

 

$

(0.1)

 

 

$

1,107.2

 

Net earned premiums

 

1,024.4

 

 

 

 

1,024.4

 

Losses and LAE incurred:

 

 

 

 

 

 

Cat loss and ALAE

 

178.6

 

 

12.4

 

 

191.0

 

Non-cat loss and ALAE

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(37.0)

 

 

5.2

 

 

(31.8)

 

Current accident year non-cat loss and ALAE

 

542.1

 

 

0.3

 

 

542.4

 

Total non-cat loss and ALAE

 

505.1

 

 

5.5

 

 

510.6

 

Total Loss and ALAE

 

683.7

 

 

17.9

 

 

701.6

 

ULAE

 

62.9

 

 

(1.3)

 

 

61.6

 

Total Loss and LAE

 

746.6

 

 

16.6

 

 

763.2

 

Underwriting expenses

 

376.6

 

 

0.5

 

 

377.1

 

Net underwriting loss

 

$

(98.8)

 

 

$

(17.1)

 

 

$

(115.9)

 

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

17.4

%

 

N/M

 

18.6

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(3.6)

%

 

N/M

 

(3.1)

%

Current accident year non-cat loss and ALAE ratio

 

53.0

%

 

N/M

 

53.0

%

Total non-cat loss and ALAE ratio

 

49.4

%

 

N/M

 

49.9

%

Total Loss and ALAE ratio

 

66.8

%

 

N/M

 

68.5

%

ULAE ratio

 

6.1

%

 

N/M

 

6.0

%

Total Loss and LAE ratio

 

72.9

%

 

N/M

 

74.5

%

Expense ratio

 

34.0

%

 

N/M

 

34.1

%

Combined ratio

 

106.9

%

 

N/M

 

108.6

%

 

 

 

 

 

 

 

($ in millions)

 

 

 

 

 

 

Nine months ended September 30, 2019

 

Personal &
Commercial

 

Specialty run-off

 

Total

 

 

 

 

 

 

 

Net written premiums

 

$

994.0

 

 

$

0.5

 

 

$

994.5

 

Net earned premiums

 

923.9

 

 

6.1

 

 

930.0

 

Losses and LAE incurred:

 

 

 

 

 

 

Cat loss and ALAE

 

71.7

 

 

4.0

 

 

75.7

 

Non-cat loss and ALAE

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE

 

(51.7

)

 

(2.4

)

 

(54.1

)

Current accident year non-cat loss and ALAE

 

553.6

 

 

4.9

 

 

558.5

 

Total non-cat loss and ALAE

 

501.9

 

 

2.5

 

 

504.4

 

Total Loss and ALAE

 

573.6

 

 

6.5

 

 

580.1

 

ULAE

 

59.6

 

 

(0.8

)

 

58.8

 

Total Loss and LAE

 

633.2

 

 

5.7

 

 

638.9

 

Underwriting expenses

 

339.8

 

 

1.7

 

 

341.5

 

Net underwriting loss

 

$

(49.1

)

 

$

(1.3

)

 

$

(50.4

)

 

 

 

 

 

 

 

Cat loss and ALAE ratio

 

7.8

%

 

N/M

 

8.1

%

Non-cat loss and ALAE ratio

 

 

 

 

 

 

Prior accident years non-cat loss and ALAE ratio

 

(5.6

)%

 

N/M

 

(5.8

)%

Current accident year non-cat loss and ALAE ratio

 

59.9

%

 

N/M

 

60.1

%

Total non-cat loss and ALAE ratio

 

54.3

%

 

N/M

 

54.3

%

Total Loss and ALAE ratio

 

62.1

%

 

N/M

 

62.4

%

ULAE ratio

 

6.4

%

 

N/M

 

6.3

%

Total Loss and LAE ratio

 

68.5

%

 

N/M

 

68.7

%

Expense ratio

 

34.2

%

 

N/M

 

34.3

%

Combined ratio

 

102.7

%

 

N/M

 

103.0

%

 

 

 

 

 

 

 

The following table provides a reconciliation of our statutory underwriting results to GAAP consolidated income (loss) before federal income taxes for the three and nine months ended September 30, 2020 and 2019:

($ millions)

3Q 2020

 

3Q 2019

 

YTD 2020

 

YTD 2019

Segment income (loss) before federal income taxes:

 

 

 

 

 

 

 

Insurance operations:

 

 

 

 

 

 

 

Personal insurance SAP underwriting loss

$

(30.7

)

 

$

(6.3

)

 

$

(70.8

)

 

$

(32.0

)

Commercial insurance SAP underwriting gain (loss)

14.4

 

 

1.2

 

 

(28.0

)

 

(17.1

)

Specialty run-off

(10.4

)

 

(0.6

)

 

(17.1

)

 

(1.3

)

Total insurance operations

(26.7

)

 

(5.7

)

 

(115.9

)

 

(50.4

)

Investment operations:

 

 

 

 

 

 

 

Net investment income

17.9

 

 

19.3

 

 

54.5

 

 

60.4

 

Net investment gain (loss)

20.0

 

 

(5.0

)

 

(39.3

)

 

50.2

 

Total investment operations

37.9

 

 

14.3

 

 

15.2

 

 

110.6

 

All other segments income

 

 

 

 

0.1

 

 

0.2

 

Reconciling items:

 

 

 

 

 

 

 

GAAP adjustments

5.6

 

 

7.2

 

 

20.2

 

 

17.3

 

Interest expense on corporate debt

(1.1

)

 

(1.2

)

 

(3.6

)

 

(3.7

)

Corporate expenses

(0.9

)

 

(1.9

)

 

(3.6

)

 

(7.3

)

Total reconciling items

3.6

 

 

4.1

 

 

13.0

 

 

6.3

 

Total consolidated income (loss) before federal income taxes

$

14.8

 

 

$

12.7

 

 

$

(87.6

)

 

$

66.7

 

 

 

 

 

 

 

 

 

 

Contacts

State Auto Financial Corporation
Media contact:
Kyle Anderson, 614-917-5497
Kyle.Anderson@StateAuto.com
or
Investor contact:
Natalie Schoolcraft, 614-917-4341
Natalie.Schoolcraft@StateAuto.com

Release Summary

State Auto Financial Reports Third Quarter 2020 Results

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Contacts

State Auto Financial Corporation
Media contact:
Kyle Anderson, 614-917-5497
Kyle.Anderson@StateAuto.com
or
Investor contact:
Natalie Schoolcraft, 614-917-4341
Natalie.Schoolcraft@StateAuto.com