State Auto Financial Reports Fourth Quarter and Year End 2020 Results
State Auto Financial Corporation (NASDAQ:STFC) reported a strong fourth quarter in 2020, with net income of $81.8 million, or $1.85 per diluted share—up from $33.2 million or $0.73 a year earlier. However, annual net income fell to $13.1 million, or $0.30 per diluted share, down from $85.8 million, or $1.93 in 2019. The GAAP combined ratio for Q4 was 93.8%, an improvement over 100.0% in Q4 2019. Despite challenges, net written premiums rose 10.7% for the year, driven by personal and commercial segments.
- Fourth quarter net income rose to $81.8 million, a significant increase from $33.2 million in Q4 2019.
- Net written premium for Q4 increased 7.8% year-over-year, with significant growth in personal (6.0%) and commercial (10.6%) segments.
- Fourth quarter GAAP combined ratio improved to 93.8 from 100.0 in the previous year.
- Annual net income dropped to $13.1 million from $85.8 million in 2019.
- The GAAP combined ratio for the year increased to 105.3 from 103.0 in 2019, indicating declining operational efficiency.
- Catastrophe losses accounted for 14.9 points of the total loss ratio for 2020, significantly higher than prior years.
State Auto Financial Corporation (NASDAQ:STFC) today reported fourth quarter 2020 net income of
For the year ended 2020, STFC had net income of
GAAP Operating Results
STFC’s GAAP combined ratio for the fourth quarter 2020 was 93.8 compared to 100.0 for the same 2019 period. Catastrophe losses during the fourth quarter 2020 accounted for 4.3 points of the 59.0 total loss ratio points, or
STFC’s GAAP combined ratio for the year ended 2020 was 105.3 compared to 103.0 for the same 2019 period. Catastrophe losses for the year ended 2020 accounted for 14.9 points of the 70.4 total loss ratio points, or
SAP Personal and Commercial Operating Results
Net written premium for the fourth quarter 2020 increased
Net written premium for the year ended 2020 increased
The SAP personal and commercial segments' combined ratio for the fourth quarter 2020 was 94.5 compared to 97.1 for the same 2019 period. Catastrophe losses during the fourth quarter 2020 accounted for 4.2 points of the total 59.2 loss ratio points, or
The SAP personal and commercial segments' combined ratio for the year ended 2020 was 103.6 compared to 101.4 for the same 2019 period. Catastrophe losses for the year ended 2020 accounted for 14.0 points of the total 69.3 loss ratio points, or
Book Value and Return on Equity
STFC’s book value increased to
Return on stockholders’ equity for the 12 months ended December 31, 2020, was
STFC’s Chairman, President and CEO Mike LaRocco commented on the quarter and year as follows:
"We ended an otherwise challenging year with a strong quarterly result. Our fourth quarter 2020 personal and commercial lines’
"For the year, our personal and commercial lines’
"While our financial results for the year can be seen as falling short of our expectations, 2020 was a successful year and one in which our associates can take great pride. With the exception of an unusually bad CAT year, our underlying loss ratio was terrific, as was our strong growth. More importantly, I’m proud of the extraordinary efforts of our team, from Claims and Risk Engineering (CARE) and Service who delivered exceptional service to customers affected by storms and other catastrophic events throughout the country, to our sales teams who strengthened relationships with independent agents in the midst of a pandemic. Throughout the year, we always put family and community first and stayed true to our culture, our bond became stronger and we are positioned for continued progress and success in 2021."
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, which include retail agencies and wholesale brokers. 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.
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
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.
STFC has scheduled a conference call with interested investors for Thursday, Feb. 18, at 11 a.m. ET to discuss the Company’s fourth 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., Feb. 18, by calling 855-859-2056, conference ID 5526278. Supplemental schedules detailing the Company’s fourth quarter 2020 financial, sales and underwriting results are made available on http://www.StateAuto.com/STFC prior to the conference call.
* * * * * *
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 |
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Three months ended December 31 |
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Year ended December 31 |
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2020 |
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2019 3 |
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2020 |
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2019 3 |
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Net written premiums |
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$ |
349.1 |
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$ |
323.4 |
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$ |
1,456.3 |
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$ |
1,315.3 |
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Earned premiums |
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356.5 |
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322.8 |
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1,380.9 |
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1,250.2 |
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Net investment income |
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17.6 |
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20.0 |
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72.1 |
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80.4 |
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Net investment gain |
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66.6 |
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24.0 |
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27.3 |
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74.2 |
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Other income from affiliates |
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0.5 |
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0.8 |
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2.1 |
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2.4 |
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Total revenue |
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441.2 |
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367.6 |
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1,482.4 |
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1,407.2 |
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Income before federal income taxes |
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102.0 |
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41.4 |
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14.4 |
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105.5 |
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Federal income tax expense |
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20.2 |
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8.2 |
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1.3 |
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19.7 |
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Net income |
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$ |
81.8 |
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$ |
33.2 |
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$ |
13.1 |
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$ |
85.8 |
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Earnings per common share: |
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- basic |
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$ |
1.87 |
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$ |
0.76 |
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$ |
0.30 |
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$ |
1.98 |
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- diluted |
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$ |
1.85 |
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$ |
0.73 |
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$ |
0.30 |
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$ |
1.93 |
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Earnings (loss) per share from operations (A): |
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- basic |
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$ |
0.67 |
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$ |
0.32 |
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$ |
(0.19 |
) |
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$ |
0.63 |
|
- diluted |
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$ |
0.66 |
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$ |
0.30 |
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$ |
(0.19 |
) |
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$ |
0.59 |
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Weighted average shares outstanding: |
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- basic |
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43.8 |
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43.6 |
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43.7 |
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43.4 |
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- diluted |
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44.3 |
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44.0 |
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44.3 |
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44.0 |
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Return on average equity (LTM) |
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1.3 |
% |
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9.8 |
% |
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Book value per share |
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$ |
23.00 |
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$ |
22.19 |
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Dividends paid per share |
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$ |
0.10 |
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$ |
0.10 |
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$ |
0.40 |
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$ |
0.40 |
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Total shares outstanding |
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43.9 |
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43.6 |
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GAAP ratios: |
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Cat loss and ALAE ratio |
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4.3 |
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7.7 |
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14.9 |
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8.0 |
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Non-cat loss and ALAE ratio |
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54.7 |
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56.5 |
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55.5 |
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59.6 |
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Loss and LAE ratio |
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59.0 |
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64.2 |
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70.4 |
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67.6 |
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Expense ratio |
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34.8 |
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35.8 |
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34.9 |
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35.4 |
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Combined ratio |
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93.8 |
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100.0 |
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105.3 |
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103.0 |
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(A)Reconciliation of non-GAAP financial measure: |
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Net income (loss) from operations |
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Net income |
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$ |
81.8 |
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$ |
33.2 |
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$ |
13.1 |
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$ |
85.8 |
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Net investment gain, net of tax |
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52.6 |
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|
20.2 |
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21.6 |
|
|
59.7 |
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Net income (loss) from operations |
|
$ |
29.2 |
|
|
$ |
13.0 |
|
|
$ |
(8.5 |
) |
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$ |
26.1 |
|
3 The fourth quarter and year to date 2019 results reflect immaterial revisions, primarily for (i) under reported ceded premiums, (ii) the balance sheet presentation of premiums receivable, and (iii) a revision to recognize an actuarial gain which reduced our postretirement benefits liability while increasing shareholder’s equity. Accordingly, prior period amounts throughout this release have been adjusted to incorporate the revised amounts, where applicable. Please refer to our Form 10-K for the year ending December 31, 2020 for further information. |
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Condensed Consolidated Balance Sheets |
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($ and shares in millions, except per share amounts) |
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(unaudited) |
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December 31 |
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December 31 |
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2020 |
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2019 3 |
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ASSETS |
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Fixed maturities, available-for-sale, at fair value (amortized cost |
|
$ |
2,237.2 |
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$ |
2,128.4 |
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Equity securities |
|
389.7 |
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395.2 |
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Other invested assets |
|
71.1 |
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69.7 |
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Other invested assets, at cost |
|
12.1 |
|
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6.5 |
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Notes receivable from affiliate |
|
70.0 |
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70.0 |
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Total investments |
|
2,780.1 |
|
|
2,669.8 |
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