State Auto Reports Increase in Net Loss and Premium Written in Q2

Columbus, Ohio-based State Auto Financial Corp. reported a second quarter 2011 net loss of $201.4 million, or $5.01 per diluted share, versus a net loss of $26.2 million, or $0.66 per diluted share, for the second quarter of 2010.

STFC’s GAAP combined ratio for the second quarter 2011 was 147.0 versus 115.2 for the second quarter of 2010. Catastrophe losses for the second quarter 2011 accounted for 44.3 points of the 114.0 total loss ratio points, or $156.1 million, versus 18.6 points of the total 81.5 loss ratio points, or $57.5 million, for the same period in 2010.

Net written premium for the second quarter of 2011 increased 9.9 percent over the same period in 2010. The Rockhill unit, which is now in the intercompany reinsurance pooling arrangement, contributed 7.1 points to this growth, while the State Auto legacy business contributed 2.8 points.

For the second quarter of 2011, net written premium for the personal and business insurance segments declined 3.0 percent and 0.8 percent, respectively, compared to the same period in 2010, while net written premium for the specialty insurance segment increased $42.3 million compared to the same period in 2010.

The increase in net written premium for the specialty insurance segment was principally driven by the addition of Rockhill to the pooling arrangement and increased business written through Risk Evaluation and Design (RED), STFC’s affiliate for alternative risk and program business.

For the first six months of 2011, STFC had a net loss of $188.7 million, or $4.70 per diluted share, compared to a loss of $13.3 million, or $0.33 per diluted share, for same 2010 period. STFC’s GAAP combined ratio for the first six months of 2011 was 125.0 compared to 107.5 for the same 2010 period.

Catastrophe losses increased the loss ratio for the first six months of 2011 by 24.5 points, or $172.1 million, compared to 11.0 points, or $67.6 million for the first six months of 2010.

Net written premiums year to date 2011 increased 11.3 percent compared to the same 2010 period. The Rockhill unit contributed 7.5 points to this growth, while the State Auto legacy business contributed 3.8 points.

For the first six months of 2011, net written premium for the personal and business insurance segments declined 2.2 percent and 0.7 percent, respectively, compared to the same period in 2010, while net written premium for the specialty insurance segment increased $84.5 million compared to the same period in 2010.

STFC President and CEO Bob Restrepo commented: “STFC’s second quarter loss was both unprecedented and unexpected. The widespread scope and severity of the spring storms and the devastating impact it had on local communities in over 20 of our operating states produced the highest quarterly combined ratio since STFC went public in 1991. The second quarter is seldom a good one and is generally characterized by wind, hail and other spring weather related losses. Prior to this year, our average five-year loss ratio for second quarter catastrophes was 18 percent. This year, our second quarter loss ratio included 44.3 points of catastrophe losses. …

“Although masked by catastrophes and the establishment of a valuation allowance for the deferred tax asset, investment income improved, our expense ratio improved despite the pressures of a poor economy and competitive commercial lines pricing, and our specialty business is growing.

“The quarter is behind us and our outlook for the future remains optimistic. We continue to work to implement strategies to leverage our superior personal auto capabilities, aggressively fix our homeowners business, invest in diversification through our standard and specialty business insurance segments, and reduce our exposure to weather related losses.”

Source: State Auto

Topics Trends Auto Profit Loss Excess Surplus Pricing Trends