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Item 2.02.
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Results of Operations and Financial Condition.
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On February 18, 2021, State Auto Financial Corporation (the "Company") issued a press release disclosing the Company’s results of operations for the three-month period and fiscal year ended December 31, 2020 (the “Release"). The full text of the Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The Release included a non-GAAP financial measure, net income (loss) from operations per diluted share. The Company uses net income (loss) from operations because it believes this calculation better indicates the Company’s operating performance than GAAP net income (loss) in that net income (loss) from operations excludes the sometimes volatile investment gains/losses, net of applicable federal income taxes, that can produce inconsistent results.
Net income (loss) from operations 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 the three-month periods ended December 31, 2020 and 2019, GAAP net income was $1.85 and $0.73 per diluted share, respectively, while net income from operations was $0.66 and $0.30 per diluted share for the same respective periods. For the three-month periods ended December 31, 2020 and 2019, net investment gain, net of applicable taxes, impacted GAAP net income per diluted share by $1.19 and $0.43, respectively. For the fiscal years ended December 31, 2020 and 2019, GAAP net income was $0.30 and $1.93 per diluted share, respectively, while net (loss) income from operations was $(0.19) and $0.59 per diluted share for the same respective periods. For the fiscal years ended December 31, 2020 and 2019, net investment gain, net of applicable taxes, impacted GAAP net income per diluted share by $0.49 and $1.34, respectively.
Management uses net income (loss) from operations because it believes this calculation better indicates the Company’s operating performance than GAAP net income (loss) in that net income (loss) from operations excludes the sometimes volatile investment gains/losses, net of applicable federal income taxes, that can produce inconsistent results.
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Section 9.
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Financial Statements and Exhibits
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