State Auto Financial Reports Third Quarter 2021 Results

Rhea-AI Summary

State Auto Financial Corporation (NASDAQ:STFC) reported a net loss of $14.3 million, or $0.32 per share, for Q3 2021, a decline from net income of $11.6 million in Q3 2020. The GAAP combined ratio was 105.3, an improvement from 106.0 in Q3 2020. For the first nine months, STFC posted a net loss of $10.1 million, versus a $68.7 million loss in 2020. Net written premiums rose by 10.2%, supported by a 17.1% increase in commercial lines. As of September 30, 2021, book value per share stood at $21.49, down from $22.18, and return on equity was 7.5%.

Positive

• Net written premiums increased 10.2% in Q3 2021.
• Commercial insurance segment premiums rose by 17.1%.
• Expense ratio improved to 28.4% from 33.8% in Q3 2020.

Negative

• Net loss of $14.3 million, compared to a profit of $11.6 million in Q3 2020.
• Q3 GAAP combined ratio of 105.3 reflects ongoing claims issues.
• Book value per share decreased from $22.18 to $21.49.

• Quarterly loss of $0.32 per share
• Quarterly net loss from operations¹ of $0.18 per share
• Quarterly GAAP combined ratio of 105.3
• Quarterly SAP combined ratio of 103.5
• Return on equity of 7.5%
• Book value per share of $21.49

COLUMBUS, Ohio--(BUSINESS WIRE)-- State Auto Financial Corporation (NASDAQ:STFC) today reported a third quarter 2021 net loss of $14.3 million, or $0.32 per diluted share, compared to net income of $11.6 million, or $0.26 per diluted share, for the same 2020 period. Net loss from operations¹ per diluted share for the third quarter of 2021 was $0.18 versus $0.10 for the same 2020 period. STFC’s GAAP combined ratio for the third quarter 2021 was 105.3 compared to 106.0 for the same 2020 period.

For the first nine months of 2021, STFC had a net loss of $10.1 million, or $0.23 per diluted share, compared to $68.7 million, or $1.57 per diluted share, for the same 2020 period. Net loss from operations¹ per diluted share for the first nine months of 2021 was $1.25 versus $0.86 for the same 2020 period. STFC’s GAAP combined ratio for the first nine months of 2021 was 109.4 compared to 109.3 for the same 2020 period.

SAP Operating Results

STFC's SAP combined ratio for the third quarter 2021 was 103.5 compared to 105.1 for the same 2020 period. Catastrophe losses and ALAE during the third quarter 2021 accounted for 10.3 points of the 75.1 total loss ratio points, or $39.4 million, versus 16.6 points of the 71.3 total loss ratio points, or $58.7 million, for the same period in 2020. The third quarter 2021 was impacted by severe weather events in the Midwest and Texas. Approximately 60% of the third quarter 2021 catastrophe losses occurred within homeowners. The current accident year non-catastrophe loss and ALAE ratio accounted for 60.5 points of the total loss ratio points, or $231.1 million, versus 55.0 points of the total loss ratio points, or $194.3 million, for the same 2020 period. The third quarter 2021 was impacted by elevated claim frequency and severity in personal auto and commercial auto. Non-catastrophe losses and ALAE during the third quarter 2021 included 1.3 points of favorable development relating to prior years, or $5.0 million, versus 5.5 points of favorable development, or $19.3 million, for the same period in 2020. Underwriting expenses during the third quarter 2021 accounted for 28.4 points of the total combined ratio points, or $118.6 million, versus 33.8 points of the total combined ratio points, or $127.9 million for the same 2020 period. The third quarter 2021 was impacted by decreases in estimated variable agent compensation and IT development costs when compared to the same 2020 period.

STFC's SAP combined ratio for the first nine months of 2021 was 107.8 compared to 108.6 for the same 2020 period. Catastrophe losses and ALAE during the first nine months of 2021 accounted for 17.2 points of the 78.2 total loss ratio points, or $191.0 million, versus 18.6 points of the 74.5 total loss ratio points, or $191.0 million, for the same period in 2020. The first nine months of 2021 were impacted by winter storms Uri and Viola in Texas, which added 5.6 points to the loss and ALAE ratio. Approximately 70% of the year to date 2021 catastrophe losses occurred within homeowners. The current accident year non-catastrophe loss and ALAE ratio accounted for 59.3 points of the total loss ratio points, or $656.8 million, versus 53.0 points of the total loss ratio points, or $542.4 million, for the same 2020 period. In addition to the factors discussed above, the first nine months of 2021 were impacted by elevated frequency and severity of property losses in homeowners. Non-catastrophe losses and ALAE during the third quarter 2021 included 4.1 points of favorable development relating to prior years, or $45.5 million, versus 3.1 points of favorable development, or $31.8 million, for the same period in 2020. Underwriting expenses during the first nine months of 2021 accounted for 29.6 points of the total combined ratio points, or $352.4 million, versus 34.1 points of the total combined ratio points, or $377.1 million for the same 2020 period. In addition to the factors discussed above, the first nine months of 2021 were impacted by a decrease in associate benefit costs when compared to the same 2020 period.

Net written premium for the third quarter 2021 increased 10.2% compared to the same period in 2020. By insurance segment, net written premium for the commercial insurance segment increased 17.1% and the personal insurance segment increased 5.7%. The increase in the commercial segment was primarily driven by (i) new business growth and rate increases in commercial auto and farm & ranch, (ii) rate increases in middle market commercial, and (iii) new business growth in workers' compensation driven by its launch on State Auto Connect. The increase in the personal segment was primarily due to increased rates in homeowners and other personal and new business growth in other personal. The net written premium growth was partially offset by a decline in new business in personal auto.

Net written premium for the first nine months of 2021 increased 7.4% compared to the same period in 2020. By insurance segment, net written premium for the commercial insurance segment increased 16.1% and the personal insurance segment increased 1.5%. Net written premiums for the first nine months of 2021 were impacted by the same factors discussed above for the third quarter.

The third quarter and first nine months of 2021 were also impacted by the following expenses incurred as a result of the pending Liberty Mutual merger: (i) a $9.3 million increase in the valuation of the Director RSU awards as a result of the increase in our stock price; and (ii) $2.9 million of legal and investment banking fees and expenses. These expenses were included in "other expenses" on the condensed consolidated statements of income.

Book Value and Return on Equity

STFC’s book value decreased to $21.49 per share as of September 30, 2021, compared to $22.18 on June 30, 2021. The decrease in book value was primarily driven by a decrease in the fair market value of fixed income investments attributable to higher interest rates.

Return on stockholders’ equity for the 12 months ended September 30, 2021, was 7.5% compared to (3.8)% for the 12 months ended September 30, 2020.

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

"The third quarter statutory combined ratio of 103.5 was impacted by higher claim frequency and severity in both personal and commercial auto and wind and hail events in the Midwest and Texas.

"Overall net written premium growth of 10.2% included a 17.1% increase in commercial lines with a 99.7% statutory combined ratio in the segment. In personal lines, net written premium increased 5.7% with a 106.6% statutory combined ratio. Expense ratio improvement continued, with a 28.4% result compared to 33.8% for third quarter 2020.

"We remain focused on continuing our progress toward consistent profitable growth. At the same time, efforts continue toward our planned acquisition by Liberty Mutual, which remains on track to close in 2022, pending appropriate member and regulatory approvals. This transaction furthers our commitment to independent agents and will contribute to the collective success of our agents, policyholders and associates."

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.

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 a loss of $0.14 per diluted share and income of $1.02 per diluted share for the third quarter and year to date 2021, respectively, versus income of $0.36 per diluted share and a loss of $0.71 per diluted share for the third quarter and year to date 2020, respectively.

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
		2021				2020				2021				2020
Net premiums written		$	417.7			$	379.1			$	1,188.7			$	1,107.2
Earned premiums		381.8				353.2				1,107.6				1,024.4
Net investment income		17.0				17.9				52.3				54.5
Net investment (loss) gain		(8.1		)		20.0				56.8				(39.3		)
Other income		0.4				0.5				1.3				1.6
Total revenue		391.1				391.6				1,218.0				1,041.2
(Loss) income before federal income taxes		(25.7		)		14.8				(15.9		)		(87.6		)
Federal tax (benefit) expense		(11.4		)		3.2				(5.8		)		(18.9		)
Net (loss) income		$	(14.3	)		$	11.6			$	(10.1	)		$	(68.7	)
(Loss) earnings per common share:
- basic		$	(0.32	)		$	0.26			$	(0.23	)		$	(1.57	)
- diluted		$	(0.32	)		$	0.26			$	(0.23	)		$	(1.57	)
Loss per share from operations(A):
- basic		$	(0.18	)		$	(0.10	)		$	(1.25	)		$	(0.86	)
- diluted		$	(0.18	)		$	(0.10	)		$	(1.25	)		$	(0.86	)
Weighted average shares outstanding:
- basic		44.3				43.8				44.1				43.7
- diluted		44.3				44.3				44.1				43.7
Return on average equity (LTM)		7.5		%		(3.8		)%
Book value per share		$	21.49			$	21.57
Dividends paid per share		$	0.10			$	0.10			$	0.30			$	0.30
Total shares outstanding		44.4				43.8
GAAP ratios:
Cat loss and ALAE ratio		10.3				16.6				17.2				18.6
Non-cat loss and LAE ratio		64.9				54.6				61.2				55.8
Loss and LAE ratio		75.2				71.2				78.4				74.4
Expense ratio		30.1				34.8				31.0				34.9
Combined ratio		105.3				106.0				109.4				109.3
(A) Reconciliation of non-GAAP financial measure:
Net loss from operations:
Net (loss) income		$	(14.3	)		$	11.6			$	(10.1	)		$	(68.7	)
Net investment (loss) gain, net of tax		(6.4		)		15.8				44.9				(31.0		)
Net loss from operations		$	(7.9	)		$	(4.2	)		$	(55.0	)		$	(37.7	)

Condensed Consolidated Balance Sheets
($ and shares in millions, except per share amounts)
(unaudited)		September 30				December 31
		2021				2020
ASSETS
Fixed maturities, available-for-sale, at fair value (amortized cost $2,159.6 and $2,117.0, respectively)		$	2,223.5			$	2,237.2
Equity securities		376.0				389.7
Other invested assets		79.3				71.1
Other invested assets, at cost		10.4				12.1
Notes receivable from affiliate		70.0				70.0
Total investments		2,759.2				2,780.1
Cash and cash equivalents		46.1				90.7
Accrued investment income and other assets		30.7				29.7
Premiums Receivable		14.1				14.0
Deferred policy acquisition costs		131.5				122.2
Reinsurance recoverable on losses and loss expenses payable		19.6				24.3
Prepaid reinsurance premiums		8.7				8.3
Due from affiliate		28.7				—
Current federal income taxes		1.8				1.7
Net deferred federal income taxes		43.1				27.3
Property and equipment, at cost		3.8				4.2
Total assets		$	3,087.3			$	3,102.5
LIABILITIES
Losses and loss expenses payable		$	1,059.7			$	1,050.4
Unearned premiums		805.0				723.4
Notes payable (affiliates $15.3 and $15.3, respectively)		122.1				122.1
Pension and postretirement benefits		45.0				66.2
Due to affiliate		—				11.2
Other liabilities		100.6				119.2
Total liabilities		2,132.4				2,092.5
STOCKHOLDERS' EQUITY
Common stock, without par value. Authorized 100.0 shares; 51.3 and 50.7 shares issued, respectively, at stated value of $2.50 per share		128.4				126.8
Treasury stock, 6.9 and 6.9 shares, respectively, at cost		(118.8		)		(118.4		)
Additional paid-in capital		218.1				213.3
Accumulated other comprehensive (loss) income		(23.8		)		13.9
Retained earnings		751.0				774.4
Total stockholders' equity		954.9				1,010.0
Total liabilities and stockholders' equity		$	3,087.3			$	3,102.5

Condensed Consolidated Statements of Income
($ in millions, except per share amounts)
(unaudited)		Three months ended September 30								Nine months ended September 30
		2021				2020				2021				2020
Earned premiums		$	381.8			$	353.2			$	1,107.6			$	1,024.4
Net investment income		17.0				17.9				52.3				54.5
Net investment (loss) gain		(8.1		)		20.0				56.8				(39.3		)
Other income from affiliates		0.4				0.5				1.3				1.6
Total revenues		391.1				391.6				1,218.0				1,041.2
Losses and loss expenses		287.2				251.6				867.8				762.2
Acquisition and operating expenses		115.0				123.0				343.2				357.4
Interest expense		1.1				1.1				3.3				3.6
Other expenses		13.5				1.1				19.6				5.6
Total expenses		416.8				376.8				1,233.9				1,128.8
(Loss) income before federal income taxes		(25.7		)		14.8				(15.9		)		(87.6		)
Federal income tax (benefit) expense:
Current		(0.1		)		—				(0.1		)		(0.4		)
Deferred		(11.3		)		3.2				(5.7		)		(18.5		)
Federal income tax (benefit) expense		(11.4		)		3.2				(5.8		)		(18.9		)
Net (loss) income		$	(14.3	)		$	11.6			$	(10.1	)		$	(68.7	)
(Loss) earnings per common share:
Basic		$	(0.32	)		$	0.26			$	(0.23	)		$	(1.57	)
Diluted		$	(0.32	)		$	0.26			$	(0.23	)		$	(1.57	)
Dividends paid per common share		$	0.10			$	0.10			$	0.30			$	0.30

Consolidated Statements of Comprehensive (Loss) Income
($ in millions)
(unaudited)	Three months ended September 30								Nine months ended September 30
	2021				2020				2021				2020
Net (loss) income	$	(14.3	)		$	11.6			$	(10.1	)		$	(68.7	)
Other comprehensive income (loss), net of tax:
Net unrealized holding (loss) gain on available-for-sale investments:
Unrealized holding (loss) gain	(17.1		)		4.6				(56.6		)		74.5
Reclassification adjustments for losses (gains) realized in net income	1.0				0.2				0.3				(3.2		)
Income tax benefit (expense)	3.3				(1.1		)		11.8				(15.0		)
Total net unrealized holding (loss) gain on available- for-sale investments	(12.8		)		3.7				(44.5		)		56.3
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	4.5				3.7				13.4				11.0
Income tax expense	(0.6		)		(0.4		)		(1.8		)		(1.3		)
Total net unrecognized benefit plan obligations	2.3				1.7				6.8				4.9
Other comprehensive (loss) income	(10.5		)		5.4				(37.7		)		61.2
Comprehensive (loss) income	$	(24.8	)		$	17.0			$	(47.8	)		$	(7.5	)

Condensed Consolidated Statement of Stockholders' Equity
($ and shares in millions)
(unaudited)		Nine Months Ended				Year Ended
		September 30				December 31
		2021				2020
Common shares:
Balance at beginning of year		50.7				50.4
Issuance of shares		0.6				0.3
Balance at period ended		51.3				50.7
Treasury shares:
Balance at beginning of year		(6.9		)		(6.9		)
Balance at period ended		(6.9		)		(6.9		)
Common stock:
Balance at beginning of year		$	126.8			$	125.9
Issuance of shares		1.6				0.9
Balance at period ended		128.4				126.8
Treasury stock:
Balance at beginning of year		$	(118.4	)		$	(117.5	)
Shares acquired on stock award exercises and vested restricted shares		(0.4		)		(0.9		)
Balance at beginning of year and period ended		(118.8		)		(118.4		)
Additional paid-in capital:
Balance at beginning of year		$	213.3			$	206.7
Issuance of common stock		6.9				3.0
Stock awards granted		(2.1		)		3.6
Balance at period ended		218.1				213.3
Accumulated other comprehensive (loss) income:
Balance at beginning of the year		$	13.9			$	(26.9	)
Change in net unrealized holding (losses) gains on available-for-sale investments		(44.5		)		56.7
Change in net unrecognized benefit plan obligations		6.8				(15.9		)
Balance at period ended		(23.8		)		13.9
Retained earnings:
Balance at beginning of year		$	774.4			$	779.3
Cumulative effect of change in accounting to establish an allowance for expected credit losses at January 1, 2020		—				(0.5		)
Net (loss) income		(10.1		)		13.1
Cash dividends paid		(13.3		)		(17.5		)
Balance at period ended		751.0				774.4
Total stockholders' equity at period ended		$	954.9			$	1,010.0

Condensed Consolidated Statements of Cash Flow
($ in millions)
(unaudited)		Nine months ended
		September 30
		2021				2020
Cash flows from operating activities:
Net loss		$	(10.1	)		$	(68.7	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization, net		4.7				7.6
Share-based compensation		9.5				—
Net investment (gain) loss		(57.2		)		39.3
Changes in operating assets and liabilities:
Deferred policy acquisition costs		(9.3		)		(12.6		)
Accrued investment income and other assets		(1.0		)		0.6
Premiums receivable		(0.1		)		(0.5		)
Postretirement and pension benefits		(17.5		)		(17.0		)
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums		4.3				(22.5		)
Other liabilities and due to/from affiliates, net		(63.0		)		8.5
Losses and loss expenses payable		9.3				24.2
Unearned premiums		81.6				81.8
Deferred tax on share-based awards		1.4				(0.1		)
Federal income taxes		(7.2		)		(18.8		)
Net cash (used in) provided by operating activities		(54.6		)		21.8
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale		(570.4		)		(462.6		)
Purchases of equity securities		(24.0		)		(65.6		)
Purchases of other invested assets		(0.9		)		(7.3		)
Maturities, calls and pay downs of fixed maturities available-for-sale		327.5				274.9
Sales of fixed maturities available-for-sale		195.6				216.1
Sales of equity securities		87.4				86.2
Sales of other invested assets		2.3				0.9
Disposals of property and equipment		—				0.2
Net cash provided by investing activities		17.5				42.8
Cash flows from financing activities:
Proceeds from issuance of common stock		6.2				2.8
Payments to acquire treasury stock		(0.4		)		(0.9		)
Payment of dividends		(13.3		)		(13.1		)
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		(7.5		)		(11.2		)
Net (decrease) increase in cash and cash equivalents		(44.6		)		53.4
Cash and cash equivalents at beginning of period		90.7				78.0
Cash and cash equivalents at end of period		$	46.1			$	131.4
Supplemental disclosures:
Interest paid (affiliates $0.5 and $0.6, respectively)		$	3.3			$	3.5

Net Investment Income
($ in millions)
(unaudited)
		9/30/2020				12/31/2020				3/31/2021				6/30/2021				9/30/2021
Quarter to Date
Gross investment income:
Fixed maturities		$	13.7			$	14.3			$	14.7			$	13.4			$	12.9
TIPS		1.3				0.7				0.7				2.0				2.3
Total fixed maturities		15.0				15.0				15.4				15.4				15.2
Equity securities		2.1				1.5				1.6				1.2				1.2
Other		0.9				1.3				0.9				1.1				1.0
Total gross investment income		18.0				17.8				17.9				17.7				17.4
Less: Investment expenses		0.1				0.2				0.3				—				0.4
Net investment income		$	17.9			$	17.6			$	17.6			$	17.7			$	17.0
Year to Date
Gross investment income:
Fixed maturities		$	43.0			$	57.3			$	14.7			$	28.1			$	41.0
TIPS		1.6				2.3				0.7				2.7				5.0
Total fixed maturities		44.6				59.6				15.4				30.8				46.0
Equity securities		7.8				9.3				1.6				2.8				4.0
Other		2.7				4.0				0.9				2.0				3.0
Total gross investment income		55.1				72.9				17.9				35.6				53.0
Less: Investment expenses		0.6				0.8				0.3				0.3				0.7
Net investment income		$	54.5			$	72.1			$	17.6			$	35.3			$	52.3
		9/30/2020				12/31/2020				3/31/2021				6/30/2021				9/30/2021
TIPS, fair value		$	117.0			$	116.2			$	104.7			$	108.2			$	109.8
TIPS, book value		$	99.4			$	97.8			$	89.2			$	90.9			$	92.8

Net Investment (Loss) Gain
($ in millions)
unaudited	Three months ended September 30								Nine months ended September 30
	2021				2020				2021				2020
Investment gain (loss), net:
Fixed maturities:
Realized gains on sales of securities	$	0.4			$	1.3			$	4.3			$	6.8
Realized losses on sales of securities	(1.4		)		(1.5		)		(4.6		)		(3.6		)
Net (loss) gain on fixed securities	(1.0		)		(0.2		)		(0.3		)		3.2
Net (loss) gain on equity securities	(6.7		)		18.2				49.7				(35.1		)
Net (loss) gain on other invested assets	(0.4		)		2.0				7.8				(7.6		)
Other net realized (loss) gain	—				—				(0.4		)		0.2
Net (loss) gain on investments	$	(8.1	)		$	20.0			$	56.8			$	(39.3	)

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
		2021				2020
Deferred tax assets:
Unearned premiums not currently deductible		$	33.5			$	30.1
Losses and loss expenses payable discounting		11.6				10.5
Postretirement and pension benefits		16.3				19.3
Other liabilities		11.8				12.2
Net operating loss carryforward		36.8				19.8
Capital loss carryforward		—				6.1
Tax credit carryforward		2.3				1.9
Other		1.7				1.1
Total deferred tax assets		114.0				101.0
Deferred tax liabilities:
Deferral of policy acquisition costs		27.6				25.7
Investments		42.6				48.0
Total deferred tax liabilities		70.2				73.7
Total net deferred tax assets before valuation allowance		43.8				27.3
Less valuation allowance		0.7				—
Net deferred federal income taxes		$	43.1			$	27.3

The following table sets forth the components of federal income tax (benefit) expense:
		Three months ended September 30								Nine months ended September 30
		2021				2020				2021				2020
(Loss) income before federal income taxes		$	(25.7	)		$	14.8			$	(15.9	)		$	(87.6	)
Federal income tax (benefit) expense
Current		(0.1		)		—				(0.1		)		(0.4		)
Deferred		(11.3		)		3.2				(5.7		)		(18.5		)
Total federal income tax (benefit) expense		(11.4		)		3.2				(5.8		)		(18.9		)
Net (loss) income		$	(14.3	)		$	11.6			$	(10.1	)		$	(68.7	)

SAP Personal Insurance Segment Results
(unaudited)
($ in millions)
Three months ended September 30, 2021		Personal Auto				Homeowners				Other Personal				Total
Net written premiums		$	92.4			$	127.2			$	23.7			$	243.3
Net earned premiums		91.8				106.5				18.9				217.2
Losses and LAE incurred:
Cat loss and ALAE		1.3				22.2				0.7				24.2
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE		6.8				(2.5		)		—				4.3
Current accident year non-cat loss and ALAE		67.2				55.8				9.4				132.4
Total non-cat loss and ALAE		74.0				53.3				9.4				136.7
Total Loss and ALAE		75.3				75.5				10.1				160.9
ULAE		7.9				5.3				1.0				14.2
Total Loss and LAE		83.2				80.8				11.1				175.1
Underwriting expenses		25.0				32.2				5.9				63.1
Net underwriting (loss) gain		$	(16.4	)		$	(6.5	)		$	1.9			$	(21.0	)
Cat loss and ALAE ratio		1.4		%		20.8		%		3.9		%		11.1		%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio		7.4		%		(2.4		)%		(0.1		)%		2.0		%
Current accident year non-cat loss and ALAE ratio		73.2		%		52.4		%		49.5		%		60.9		%
Total non-cat loss and ALAE ratio		80.6		%		50.0		%		49.4		%		62.9		%
Total Loss and ALAE ratio		82.0		%		70.8		%		53.3		%		74.0		%
ULAE ratio		8.6		%		5.0		%		6.0		%		6.6		%
Total Loss and LAE ratio		90.6		%		75.8		%		59.3		%		80.6		%
Expense ratio		27.1		%		25.4		%		24.7		%		26.0		%
Combined ratio		117.7		%		101.2		%		84.0		%		106.6		%

($ 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)
Nine months ended September 30, 2021		Personal Auto				Homeowners				Other Personal				Total
Net written premiums		$	273.5			$	329.6			$	61.9			$	665.0
Net earned premiums		281.1				304.9				52.1				638.1
Losses and LAE incurred:
Cat loss and ALAE		6.3				129.8				19.8				155.9
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE		4.7				(2.1		)		(0.2		)		2.4
Current accident year non-cat loss and ALAE		186.7				156.9				26.9				370.5
Total non-cat loss and ALAE		191.4				154.8				26.7				372.9
Total Loss and ALAE		197.7				284.6				46.5				528.8
ULAE		22.6				19.2				2.9				44.7
Total Loss and LAE		220.3				303.8				49.4				573.5
Underwriting expenses		76.3				87.0				15.9				179.2
Net underwriting loss		$	(15.5	)		$	(85.9	)		$	(13.2	)		$	(114.6	)
Cat loss and ALAE ratio		2.3		%		42.6		%		38.0		%		24.4		%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio		1.7		%		(0.7		)%		(0.4		)%		0.4		%
Current accident year non-cat loss and ALAE ratio		66.4		%		51.4		%		51.6		%		58.1		%
Total non-cat loss and ALAE ratio		68.1		%		50.7		%		51.2		%		58.5		%
Total Loss and ALAE ratio		70.4		%		93.3		%		89.2		%		82.9		%
ULAE ratio		8.0		%		6.3		%		5.8		%		7.0		%
Total Loss and LAE ratio		78.4		%		99.6		%		95.0		%		89.9		%
Expense ratio		27.9		%		26.4		%		25.6		%		26.9		%
Combined ratio		106.3		%		126.0		%		120.6		%		116.8		%

($ 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		%

SAP Commercial Insurance Segment Results
(unaudited)
($ in millions)
Three months ended September 30, 2021		Commercial Auto				Small Commercial Package				Middle Market Commercial				Workers' Comp				Farm & Ranch				Other Commercial				Total
Net written premiums		$	51.9			$	33.6			$	44.0			$	20.8			$	18.6			$	5.4			$	174.3
Net earned premiums		48.7				33.8				41.7				15.9				19.0				5.3				164.4
Losses and LAE incurred:
Cat loss and ALAE		(0.2		)		3.6				9.2				—				2.7				—				15.3
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE		3.7				(2.4		)		(1.2		)		(6.4		)		(0.5		)		(2.4		)		(9.2		)
Current accident year non-cat loss and ALAE		42.2				16.3				17.8				11.7				6.6				3.9				98.5
Total non-cat loss and ALAE		45.9				13.9				16.6				5.3				6.1				1.5				89.3
Total Loss and ALAE		45.7				17.5				25.8				5.3				8.8				1.5				104.6
ULAE		2.9				1.2				1.3				1.0				0.6				0.1				7.1
Total Loss and LAE		48.6				18.7				27.1				6.3				9.4				1.6				111.7
Underwriting expenses		15.1				10.7				14.7				7.1				6.1				1.7				55.4
Net underwriting (loss) gain		$	(15.0	)		$	4.4			$	(0.1	)		$	2.5			$	3.5			$	2.0			$	(2.7	)
Cat loss and ALAE ratio		(0.4		)%		10.7		%		22.0		%		—		%		14.1		%		(0.4		)%		9.3		%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio		7.6		%		(7.0		)%		(2.9		)%		(40.3		)%		(2.4		)%		(46.1		)%		(5.6		)%
Current accident year non-cat loss and ALAE ratio		86.6		%		48.0		%		42.9		%		73.9		%		35.5		%		72.8		%		60.0		%
Total non-cat loss and ALAE ratio		94.2		%		41.0		%		40.0		%		33.6		%		33.1		%		26.7		%		54.4		%
Total Loss and ALAE ratio		93.8		%		51.7		%		62.0		%		33.6		%		47.2		%		26.3		%		63.7		%
ULAE ratio		6.0		%		3.5		%		3.1		%		6.0		%		2.7		%		1.6		%		4.2		%
Total Loss and LAE ratio		99.8		%		55.2		%		65.1		%		39.6		%		49.9		%		27.9		%		67.9		%
Expense ratio		29.2		%		31.7		%		33.4		%		34.3		%		32.2		%		32.2		%		31.8		%
Combined ratio		129.0		%		86.9		%		98.5		%		73.9		%		82.1		%		60.1		%		99.7		%

($ 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)
Nine months ended September 30, 2021		Commercial Auto				Small Commercial Package				Middle Market Commercial				Workers' Comp				Farm & Ranch				Other Commercial				Total
Net written premiums		$	160.6			$	103.5			$	133.7			$	48.6			$	61.0			$	17.6			$	525.0
Net earned premiums		134.6				98.6				122.6				45.6				53.3				16.0				470.7
Losses and LAE incurred:
Cat loss and ALAE		1.9				12.0				14.2				—				8.8				—				36.9
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE		2.8				(6.9		)		(14.7		)		(21.8		)		(2.0		)		(5.1		)		(47.7		)
Current accident year non-cat loss and ALAE		97.5				59.4				66.3				33.6				21.9				7.4				286.1
Total non-cat loss and ALAE		100.3				52.5				51.6				11.8				19.9				2.3				238.4
Total Loss and ALAE		102.2				64.5				65.8				11.8				28.7				2.3				275.3
ULAE		7.6				4.7				2.8				2.4				1.7				0.3				19.5
Total Loss and LAE		109.8				69.2				68.6				14.2				30.4				2.6				294.8
Underwriting expenses		47.0				32.2				46.5				20.1				21.1				5.9				172.8
Net underwriting (loss) gain		$	(22.2	)		$	(2.8	)		$	7.5			$	11.3			$	1.8			$	7.5			$	3.1
Cat loss and ALAE ratio		1.4		%		12.2		%		11.6		%		—		%		16.5		%		0.1		%		7.8		%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio		2.1		%		(7.0		)%		(12.0		)%		(47.8		)%		(3.7		)%		(32.1		)%		(10.1		)%
Current accident year non-cat loss and ALAE ratio		72.4		%		60.2		%		54.1		%		73.8		%		41.1		%		46.1		%		60.8		%
Total non-cat loss and ALAE ratio		74.5		%		53.2		%		42.1		%		26.0		%		37.4		%		14.0		%		50.7		%
Total Loss and ALAE ratio		75.9		%		65.4		%		53.7		%		26.0		%		53.9		%		14.1		%		58.5		%
ULAE ratio		5.6		%		4.7		%		2.3		%		5.2		%		3.1		%		1.7		%		4.1		%
Total Loss and LAE ratio		81.5		%		70.1		%		56.0		%		31.2		%		57.0		%		15.8		%		62.6		%
Expense ratio		29.3		%		31.1		%		34.7		%		41.4		%		34.7		%		33.5		%		32.9		%
Combined ratio		110.8		%		101.2		%		90.7		%		72.6		%		91.7		%		49.3		%		95.5		%

($ 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		%

SAP Insurance Segment Results
(unaudited)
($ in millions)		2021				2020				2021				2020
Three months ended September 30		Personal & Commercial				Personal & Commercial				Total(1)				Total(1)
Net written premiums		$	417.6			$	379.0			$	417.7			$	379.1
Net earned premiums		381.6				353.2				381.8				353.2
Losses and LAE incurred:
Cat loss and ALAE		39.5				46.4				39.4				58.7
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE		(4.9		)		(18.4		)		(5.0		)		(19.3		)
Current accident year non-cat loss and ALAE		230.9				194.1				231.1				194.3
Total non-cat loss and ALAE		226.0				175.7				226.1				175.0
Total Loss and ALAE		265.5				222.1				265.5				233.7
ULAE		21.3				19.6				21.4				18.3
Total Loss and LAE		286.8				241.7				286.9				252.0
Underwriting expenses		118.5				127.8				118.6				127.9
Net underwriting loss		$	(23.7	)		$	(16.3	)		$	(23.7	)		$	(26.7	)
Cat loss and ALAE ratio		10.3		%		13.1		%		10.3		%		16.6		%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio		(1.3		)%		(5.2		)%		(1.3		)%		(5.5		)%
Current accident year non-cat loss and ALAE ratio		60.5		%		55.1		%		60.5		%		55.0		%
Total non-cat loss and ALAE ratio		59.2		%		49.9		%		59.2		%		49.5		%
Total Loss and ALAE ratio		69.5		%		63.0		%		69.5		%		66.1		%
ULAE ratio		5.6		%		5.5		%		5.6		%		5.2		%
Total Loss and LAE ratio		75.1		%		68.5		%		75.1		%		71.3		%
Expense ratio		28.4		%		33.7		%		28.4		%		33.8		%
Combined ratio		103.5		%		102.2		%		103.5		%		105.1		%
(1)Includes specialty run-off

(unaudited)
($ in millions)		2021				2020				2021				2020
Nine months ended September 30		Personal & Commercial				Personal & Commercial				Total(1)				Total(1)
Net written premiums		$	1,190.0			$	1,107.3			$	1,188.7			$	1,107.2
Net earned premiums		1,108.8				1,024.4				1,107.6				1,024.4
Losses and LAE incurred:
Cat loss and ALAE		192.8				178.6				191.0				191.0
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE		(45.3		)		(37.0		)		(45.5		)		(31.8		)
Current accident year non-cat loss and ALAE		656.6				542.1				656.8				542.4
Total non-cat loss and ALAE		611.3				505.1				611.3				510.6
Total Loss and ALAE		804.1				683.7				802.3				701.6
ULAE		64.2				62.9				64.2				61.6
Total Loss and LAE		868.3				746.6				866.5				763.2
Underwriting expenses		352.0				376.6				352.4				377.1
Net underwriting loss		$	(111.5	)		$	(98.8	)		$	(111.3	)		$	(115.9	)
Cat loss and ALAE ratio		17.4		%		17.4		%		17.2		%		18.6		%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio		(4.1		)%		(3.6		)%		(4.1		)%		(3.1		)%
Current accident year non-cat loss and ALAE ratio		59.2		%		53.0		%		59.3		%		53.0		%
Total non-cat loss and ALAE ratio		55.1		%		49.4		%		55.2		%		49.9		%
Total Loss and ALAE ratio		72.5		%		66.8		%		72.4		%		68.5		%
ULAE ratio		5.8		%		6.1		%		5.8		%		6.0		%
Total Loss and LAE ratio		78.3		%		72.9		%		78.2		%		74.5		%
Expense ratio		29.6		%		34.0		%		29.6		%		34.1		%
Combined ratio		107.9		%		106.9		%		107.8		%		108.6		%
(1)Includes specialty run-off

The following table provides a reconciliation of our statutory underwriting results to GAAP consolidated (loss) income before federal income taxes for the three and nine months ended September 30, 2021 and 2020:

($ millions)	3Q 2021				3Q 2020				YTD 2021				YTD 2020
Segment (loss) income before federal income taxes:
Insurance operations:
Personal insurance SAP underwriting loss	$	(21.0	)		$	(30.7	)		$	(114.6	)		$	(70.8	)
Commercial insurance SAP underwriting (loss) gain	(2.7		)		14.4				3.1				(28.0		)
Specialty run-off	—				(10.4		)		0.2				(17.1		)
Total insurance operations	(23.7		)		(26.7		)		(111.3		)		(115.9		)
Investment operations:
Net investment income	17.0				17.9				52.3				54.5
Net investment (loss) gain	(8.1		)		20.0				56.8				(39.3		)
Total investment operations	8.9				37.9				109.1				15.2
All other segments income	—				—				—				0.1
Reconciling items:
GAAP adjustments	3.1				5.6				7.5				20.2
Interest expense on corporate debt	(1.1		)		(1.1		)		(3.3		)		(3.6		)
Corporate expenses	(12.9		)		(0.9		)		(17.9		)		(3.6		)
Total reconciling items	(10.9		)		3.6				(13.7		)		13.0
Total consolidated (loss) income before federal income taxes	$	(25.7	)		$	14.8			$	(15.9	)		$	(87.6	)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104005166/en/

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

Source: State Auto Financial Corporation

FAQ

What were State Auto Financial's earnings for Q3 2021?

State Auto Financial reported a net loss of $14.3 million, or $0.32 per diluted share for Q3 2021.

How did STFC's net written premiums perform in Q3 2021?

Net written premiums increased by 10.2% in Q3 2021 compared to the same period in 2020.

What is the combined ratio for STFC for Q3 2021?

The GAAP combined ratio for Q3 2021 was 105.3, an improvement from 106.0 in Q3 2020.

What is the book value per share for STFC as of September 30, 2021?

The book value per share was $21.49 as of September 30, 2021.

What challenges did STFC face in Q3 2021?

STFC experienced higher claim frequency and severity in personal and commercial auto insurance due to severe weather events.