State Auto Financial (NASDAQ:STFC)
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State Auto Financial Corporation (NASDAQ: STFC) today reported a first
quarter 2008 net loss of $12.5 million, or $0.31 per diluted share,
versus net income of $30.8 million, or $0.74 per diluted share, for the
first quarter of 2007. Net loss from operations(a) per diluted share for
the first quarter 2008 was $0.28, versus net income of $0.72 for the
same 2007 period.
STFC’s GAAP combined ratio for the quarter was
111.3 versus 91.3 for the first quarter of 2007. Catastrophe losses
accounted for 12.5 points of the total 76.8 loss ratio points, or $35.0
million, during the first quarter this year, compared to 3.2 points of
the total 56.8 loss ratio points, or $8.1 million, for the same period
in 2007. STFC’s first quarter 2008 revenue was
$301.0 million versus $275.5 million for the same period in 2007. STFC’s
book value per share decreased to $22.18 per share as of March 31, 2008.
Return on stockholders’ equity for the twelve
months ended March 31, 2008 was 8.7% compared to 13.4% for the twelve
months ended March 31, 2007.
“On February 14, we reported that a series of
catastrophic storms would significantly impact our first quarter
results. As the quarter developed, additional catastrophes occurring in
the central states resulted in a record level of first quarter
catastrophe losses totaling $35.0 million,”
said STFC Chairman, President and CEO Bob Restrepo.
“On the property side we also saw a higher
level of non-catastrophe weather losses in our homeowners book, as well
as poor experience in commercial multi-peril and other commercial
liability lines driven by large losses from prior accident years,
particularly in commercial umbrella,”
commented Restrepo.
“Although catastrophe losses were the main
story during the quarter, there are positive trends occurring in our
business. We continue to be encouraged by the progress we are seeing on
the production front. Net premiums written grew 9.7% during the quarter.
Excluding the pooling changes previously announced, net premiums written
increased 1.3%. Our largest line of business, standard auto, is growing
organically with healthy levels of new business applications and
retention is holding steady. We are also pleased with the reception and
utilization by our agents of our commercial lines rating portal
bizXpress, which has resulted in a nice lift in our businessowners (BOP)
book.
“This quarter’s
results were disappointing, being driven by bad weather and liability
losses that were unusual if not unprecedented. We feel confident with
the underlying quality of our business and our plans for the future,”
added Restrepo.
STFC repurchased 761,919 shares during the first quarter and 1,575,449
shares to date under the previously announced share repurchase program
which authorized purchasing up to 4.0 million common shares through
December 31, 2009.
State Auto Financial Corporation, headquartered in Columbus, Ohio, is a
super regional property and casualty insurance holding company. The
company markets its personal and business insurance products exclusively
through independent insurance agencies in 33 states and is proud to be a
Trusted Choice® company partner. STFC stock
is traded on the NASDAQ Global Select Market, which represents the top
third of all NASDAQ listed companies. The company is one of NASDAQ’s
listed companies to be named a 2007 Mergent Dividend Achiever for having
increased its dividends for ten or more years in succession.
The State Auto Insurance Companies are rated A+ (Superior) by the A.M.
Best Company. The State Auto Insurance Companies include State
Automobile Mutual, State Auto Property & Casualty, State Auto National,
State Auto Ohio, State Auto Wisconsin, State Auto Florida, Milbank,
Farmers Casualty, Meridian Security, Meridian Citizens Mutual, Beacon
National, Beacon Lloyds, Patrons Mutual and Litchfield Mutual Fire.
Additional information on State Auto Financial Corporation and the State
Auto Insurance Companies can be found online at www.StateAuto.com.
(a)Net income (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 realized
capital gains and (losses), net of applicable taxes, on investment
activity for the periods being reported. For STFC, this amounts to
($0.03) per diluted share for the first quarter 2008 versus $0.02 for
the same 2007 period.
STFC has scheduled a conference call with interested investors for
Thursday, April 24, 10:00 a.m. Eastern time to discuss the company’s
first quarter 2008 performance. Live and archived broadcasts of
the call can be accessed on www.StateAuto.com.
A replay of the call can be heard beginning at noon, April 24, by
calling 1-800-510-0118. Supplemental schedules detailing the
company’s first quarter 2008 financial, sales
and underwriting results are made available on www.StateAuto.com
prior to the conference call.
This news release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on the current assumptions,
expectations and projections of State Auto Financial Corporation’s
(the “Company”)
management about future events. Although we believe these statements are
based on reasonable assumptions, the Company can give no assurance that
they will prove to be correct. Numerous factors, including those related
to market conditions and those detailed in the Company’s
filings with the Securities and Exchange Commission, may cause actual
results of the Company to differ materially from those anticipated in
these forward-looking statements. Many of the factors that will
determine the Company’s future results are
beyond the control to predict. These forward-looking statements are
subject to these risks and uncertainties and, therefore, actual results
may differ materially. The Company undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 31
(In millions, except per share amounts)
2008
2007
Net premiums written
$
325.2
(B)
$
247.5
Earned premiums
279.2
251.9
Net investment income
22.4
21.3
Net realized (loss) gain on investments
(1.8
)
1.1
Other income
1.2
1.2
Total revenue
301.0
275.5
(Loss) income before federal income taxes
(15.0
)
40.8
Federal income tax (benefit) expense
(2.5
)
10.0
Net (loss) income
$
(12.5
)
$
30.8
Earnings per share:
- basic
$
(0.31
)
$
0.75
- diluted
$
(0.31
)
$
0.74
Earnings per share from operations (A):
- basic
$
(0.28
)
$
0.73
- diluted
$
(0.28
)
$
0.72
Weighted average shares outstanding:
- basic
40.3
41.1
- diluted
40.8
41.8
Book value per share
$
22.18
$
20.94
Dividends paid per share
$
0.15
$
0.10
Total shares outstanding
39.8
41.1
GAAP ratios:
Loss and LAE ratio
76.8
56.8
Expense ratio
34.5
34.5
Combined ratio
111.3
91.3
(A) Net (loss) income from operations:
Net (loss) income
$
(12.5
)
$
30.8
Less net realized (losses) gains on investments, less applicable
federal income taxes
(1.2
)
0.7
Net (loss) income from operations
$
(11.3
)
$
30.1
(B) Net premiums written for the three
months ended March 31, 2008, includes $53.6 million of unearned
premiums transferred to STFC in connection with the addition of
The Patrons Group, Beacon National and SAMMI to the State Auto
Pool, effective January 1, 2008.