U.S. Markets closed

State Auto Financial Reports Third Quarter 2018 Results

COLUMBUS, Ohio--(BUSINESS WIRE)--

  • Quarterly earnings of $0.76 per share
  • Quarterly income from operations1 of $0.44 per share
  • Quarterly GAAP combined ratio of 98.4
  • Return on equity of 3.0%
  • Book value per share of $20.24

State Auto Financial Corporation (STFC) today reported third quarter 2018 net income of $33.4 million, or $0.76 per diluted share, compared to a net loss of $9.5 million, or $0.23 per diluted share, for the same 2017 period. Net income from operations per diluted share for the third quarter 2018 was $0.44 versus net loss from operations per diluted share of $0.54 for the same 2017 period.

For the first nine months of 2018, STFC had net income of $37.3 million, or $0.86 per diluted share, compared to a net loss of $4.1 million2, or $0.102 per diluted share, for the same 2017 period. Net earnings from operations1 per diluted share for the first nine months of 2018 was $0.53 versus a net loss from operations1 per diluted share of $0.782 for the same 2017 period.

GAAP Operating Results

STFC’s GAAP combined ratio for the third quarter 2018 was 98.4 compared to 114.8 for the same 2017 period. Catastrophe losses during the third quarter 2018 accounted for 5.3 points of the 62.3 total loss ratio points, or $16.3 million, versus 17.6 points of the total 79.5 loss ratio points, or $56.1 million, for the same period in 2017. Non-catastrophe losses and ALAE during the third quarter 2018 included 5.9 points of favorable development relating to prior years, or $18.1 million, versus 2.8 points of favorable development, or $8.8 million, for the same period in 2017.

Net written premium for the third quarter 2018 decreased 2.8% compared to the same period in 2017. By insurance segment, net written premium for the personal and commercial segments increased 18.0% and 0.4%, respectively, with the specialty segment reported negative written premium as a result of our decision to exit the specialty business. The increase in the personal segment was primarily due to rate actions taken to improve the profitability in personal auto, new business growth, and a higher level of policies in force for the third quarter 2018 compared to the third quarter 2017. The increase in the commercial segment was primarily driven by rate increases and a higher level of new business production from commercial auto and middle market commercial during the third quarter 2018 compared to the third quarter 2017. Partially offsetting the increase was a decline in small commercial package and workers' compensation new business during the third quarter 2018 compared to the third quarter 2017.

STFC’s GAAP combined ratio for the first nine months of 2018 was 102.6 compared to 109.92 for the same 2017 period. Catastrophe losses for the first nine months of 2018 accounted for 6.8 points of the 66.8 total loss ratio points, or $63.6 million, versus 12.1 points of the total 75.03 loss ratio points, or $115.7 million, for the same period in 2017. Non-catastrophe losses and ALAE for the first nine months of 2018 included 5.6 points of favorable development relating to prior years, or $52.2 million, versus 3.0 points of favorable development, or $28.4 million, for the same period in 2017.

Net written premium for the first nine months of 2018 decreased 5.9% compared to the same period in 2017. By insurance segment, net written premium for the personal and commercial segments increased 21.0% and 3.4%, respectively, and the specialty segment decreased 91.9% in conjunction with our exit from this business. The increases in net written premiums in the personal and commercial segments were due to the same factors discussed above for the third quarter.

SAP Personal and Commercial Operating Results

The SAP personal and commercial segments', our ongoing insurance segments, combined ratio3 for the third quarter 2018 was 96.4 compared to 99.2 for the same 2017 period. Catastrophe losses during the third quarter 2018 accounted for 5.5 points of the total 61.4 loss ratio points, or $15.9 million, versus 4.8 points of the total 65.8 loss ratio points, or $12.4 million, for the same period in 2017. Non-catastrophe losses and ALAE during the third quarter 2018 included 6.9 points of favorable development relating to prior years, or $19.9 million, versus 3.9 points of favorable development, or $10.0 million, for the same period in 2017.

The SAP personal and commercial segments' combined ratio3 for the first nine months of 2018 was 100.8 compared to 104.0 for the same 2017 period. Catastrophe losses during the first nine months of 2018 accounted for 7.6 points of the total 66.0 loss ratio points, or $63.4 million, versus 8.9 points of the total 70.4 loss ratio points, or $69.1 million, for the same period in 2017. Non-catastrophe losses and ALAE during the first nine months of 2018 included 6.7 points of favorable development relating to prior years, or $56.4 million, versus 4.0 points of favorable development, or $31.0 million, for the same period in 2017.

Book Value and Return on Equity

STFC’s book value was $20.24 per share as of Sept. 30, 2018, compared to $20.632 on Dec. 31, 2017. The decrease was driven by the market value of our investment portfolio. Return on stockholders’ equity for the 12 months ended Sept. 30, 2018, was 3.0% compared to 3.2%2 for the 12 months ended Sept. 30, 2017.

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

“We began a journey to transform State Auto in 2015. We rebuilt the foundation of our company with the culture required to deliver on our simple yet powerful goal of profitable growth. Just 14 months later, we began the rollout of a new digital platform for personal lines, and later for commercial lines. Our agents and customers responded with strong quote volume and a remarkable increase in new business.

“Third quarter 2018 delivered proof that we can grow and be profitable, and now I can definitively say that after three and a half years, the turnaround phase of our journey is complete. To be clear, we have a long way to go. A single quarter isn’t enough to declare victory, and the goals for the next phase of our journey are very ambitious. We can and we will be better.

“I’m extremely proud of our team and our independent agents. Together, we’ve returned State Auto to relevance in the property and casualty insurance industry, and we’re better prepared than ever to compete in an industry undergoing transformational change. Going forward, we’ll continue to build out our digital platform, improve the competitiveness of our products and provide outstanding service to our customers."

About State Auto Financial Corporation

State Auto Financial Corporation, headquartered in Columbus, Ohio, is a super regional property and casualty insurance holding company and is proud to be a Trusted Choice® company partner. 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 income of $0.32 per diluted share for the third quarter of 2018 and income of $0.33 year-to-date 2018 versus income of $0.31 per diluted share for the third quarter 2017 and income of $0.68 year-to-date 2017.

2 As previously disclosed, the results for the first nine months of 2017 have been restated to correct an error discovered during the first quarter of 2018 relating to the calculation of deferred acquisition costs (DAC) along with making other adjustments not previously recorded relating to that same time period. Although the error was immaterial to STFC’s previously issued financial statements, the cumulative correction would have a material effect on the 2018 financial statements. Accordingly, the results for the nine months ended Sept. 30, 2017, throughout this release have been adjusted to incorporate the revised amounts, where applicable. Please refer to our quarterly report on Form 10-Q for the quarterly period ending March 31, 2018, for further information.

3 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. Details behind the compilation of these results can be found on page 20 of this release.

STFC has scheduled a conference call with interested investors for Thursday, November 1, at 11 a.m. ET to discuss the Company’s third quarter 2018 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., November 1, by calling 855-859-2056, conference ID 3282729. Supplemental schedules detailing the Company’s third quarter 2018 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.

 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Selected Consolidated Financial Data
($ in millions, except per share amounts)
 
(unaudited)   Three months ended September 30   Nine months ended September 30
2018   2017 2018   20172
Net premiums written $ 312.4   $ 321.3   $ 912.7   $ 969.4  
 
Earned premiums 306.8 319.0 929.2 957.2
Net investment income 20.8 18.7 62.2 56.5
Net investment gain 17.8 20.2 18.2 43.8
Other income 0.6   0.5   1.8   1.7  
Total revenue 346.0   358.4   1,011.4   1,059.2  
 
Income (loss) before federal income taxes 41.0 (11.2 ) 45.4 (3.3 )
 
Federal income tax expense (benefit) 7.6   (1.7 ) 8.1   0.8  
Net income (loss) $ 33.4   $ (9.5 ) $ 37.3   $ (4.1 )
 
Earnings (loss) per common share:
- basic $ 0.78 $ (0.23 ) $ 0.87 $ (0.10 )
- diluted $ 0.76 $ (0.23 ) $ 0.86 $ (0.10 )
Earnings (loss) per share from operations (A):
- basic $ 0.45 $ (0.54 ) $ 0.54 $ (0.78 )
- diluted $ 0.44 $ (0.54 ) $ 0.53 $ (0.78 )
Weighted average shares outstanding:
- basic 43.0 42.2 42.8 42.0
- diluted 43.6 42.2 43.3 42.0
Return on average equity (LTM) 3.0 % 3.2 %
Book value per share $ 20.24 $ 21.16
Dividends paid per share $ 0.10 $ 0.10 $ 0.30 $ 0.30
Total shares outstanding 43.0 42.2
 
GAAP ratios:
Cat loss and ALAE ratio 5.3 17.6 6.8 12.1
Non-cat loss and LAE ratio 57.0   61.9   60.0   62.9  
Loss and LAE ratio 62.3 79.5 66.8 75.0
Expense ratio 36.1   35.3   35.8   34.9  
Combined ratio 98.4   114.8   102.6   109.9  
 
(A) Reconciliation of non-GAAP financial measure:
Net income (loss) from operations:
Net income $ 33.4 $ (9.5 ) $ 37.3 $ (4.1 )
Net investment gain, net of tax 14.0   13.1   14.3   28.5  
Net income (loss) from operations $ 19.4   $ (22.6 ) $ 23.0   $ (32.6 )
                                 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Balance Sheets
($ and shares in millions, except per share amounts)
   
(unaudited) September 30 December 31
2018 20172
ASSETS
Fixed maturities, available-for-sale, at fair value (amortized cost $2,185.2 and $2,173.1, respectively) $ 2,141.6 $ 2,192.8
Equity securities 376.3 365.3
Other invested assets 54.5 56.0
Other invested assets, at cost 5.6 5.6
Notes receivable from affiliate 70.0   70.0  
Total investments 2,648.0 2,689.7
 
Cash and cash equivalents 49.5 91.5
Accrued investment income and other assets 39.5 36.5
Deferred policy acquisition costs 104.5 110.3
Reinsurance recoverable on losses and loss expenses payable 5.0 3.1
Prepaid reinsurance premiums 6.8 6.4
Due from affiliate 10.6
Current federal income taxes 5.9 4.8
Net deferred federal income taxes 62.3 58.8
Property and equipment, net 7.1   7.3  
Total assets $ 2,939.2   $ 3,008.4  
 
LIABILITIES
Losses and loss expenses payable $ 1,198.7 $ 1,255.6
Unearned premiums 595.6 611.8
Notes payable (affiliates $15.2 and $15.2, respectively) 122.0 122.1
Pension and postretirement benefits 52.1 64.5
Due to affiliate 2.7
Other liabilities 101.4   76.7  
Total liabilities 2,069.8   2,133.4  
 
STOCKHOLDERS' EQUITY
Common stock, without par value. Authorized 100.0 shares; 49.8 and 49.2 shares issued, respectively, at stated value of $2.50 per share 124.5 123.0
Treasury stock, 6.8 and 6.8 shares, respectively, at cost (117.0 ) (116.8 )
Additional paid-in capital 188.6 171.8
Accumulated other comprehensive (loss) income (68.3 ) 36.7
Retained earnings 741.6   660.3  
Total stockholders' equity 869.4   875.0  
Total liabilities and stockholders' equity $ 2,939.2   $ 3,008.4  
                 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Statements of Income
($ in millions, except per share amounts)
       
(unaudited) Three months ended Nine months ended
September 30 September 30
2018 2017 2018 20172
Earned premiums $ 306.8 $ 319.0 $ 929.2 $ 957.2
Net investment income 20.8 18.7 62.2 56.5
Net investment gain 17.8 20.2 18.2 43.8
Other income from affiliates 0.6   0.5   1.8   1.7  
Total revenues 346.0   358.4   1,011.4   1,059.2  
 
Losses and loss expenses 191.0 253.5 621.1 718.2
Acquisition and operating expenses 110.9 112.7 333.0 334.1
Interest expense 1.2 1.5 4.5 4.4
Other expenses 1.9   1.9   7.4   5.8  
Total expenses 305.0   369.6   966.0   1,062.5  
 
Income (loss) before federal income taxes 41.0 (11.2 ) 45.4 (3.3 )
Federal income tax expense (benefit) 7.6   (1.7 ) 8.1   0.8  
Net income (loss) $ 33.4   $ (9.5 ) $ 37.3   $ (4.1 )
Earnings (loss) per common share:
Basic $ 0.78   $ (0.23 ) $ 0.87   $ (0.10 )
Diluted $ 0.76   $ (0.23 ) $ 0.86   $ (0.10 )
Dividends paid per common share $ 0.10   $ 0.10   $ 0.30   $ 0.30  
                                 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

     
Consolidated Statements of Comprehensive Income
($ in millions)
 
(unaudited) Three months ended
September 30
2018
Net income $ 33.4
Other comprehensive loss, net of tax:
Net unrealized holding losses on fixed maturities:
Unrealized holding losses (14.7 )
Reclassification adjustments for gains realized in net income
Income tax benefit 3.1  
Total net unrealized holding losses on fixed maturities (11.6 )
Net unrecognized benefit plan obligations:
Reclassification adjustments for amortization to statements of income:
Prior service credit (1.4 )
Net actuarial loss 2.2
Income tax expense (0.2 )
Total net unrecognized benefit plan obligations 0.6  
Other comprehensive loss (11.0 )
Comprehensive income $ 22.5  
     
     
 
($ in millions) Three months ended
(unaudited) September 30
2017
Net loss $ (9.5 )
Other comprehensive income, net of tax:
Net unrealized holding gains on investments:
Unrealized holding gains 11.0
Reclassification adjustments for gains realized in net income (20.2 )
Income tax benefit 3.2  
Total net unrealized holding losses on investments (6.0 )
Net unrecognized benefit plan obligations:
Reclassification adjustments for amortization to statements of income:
Prior service credit (1.3 )
Net actuarial loss 2.1
Income tax expense (0.3 )
Total net unrecognized benefit plan obligations 0.5  
Other comprehensive loss (5.5 )
Comprehensive loss $ (15.0 )
     
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

     
Consolidated Statements of Comprehensive Income
($ in millions)
 
(unaudited) Nine months ended
September 30
2018
Net income $ 37.3
Other comprehensive loss, net of tax:
Net unrealized holding losses on fixed maturities:
Unrealized holding losses (61.6 )
Reclassification adjustments for gains realized in net income (1.7 )
Income tax benefit 13.3  
Total net unrealized holding losses on fixed maturities (50.0 )
Net unrecognized benefit plan obligations:
Reclassification adjustments for amortization to statements of income:
Prior service credit (4.1 )
Net actuarial loss 6.4
Income tax expense (0.5 )
Total net unrecognized benefit plan obligations 1.8  
Other comprehensive loss (48.2 )
Comprehensive loss $ (10.9 )
     
     
($ in millions) Nine months ended
September 30
20172
Net loss $ (4.1 )
Other comprehensive income, net of tax:
Net unrealized holding gains on investments:
Unrealized holding gains 65.6
Reclassification adjustments for gains realized in net income (43.8 )
Income tax expense (7.6 )
Total net unrealized holding gains on investments 14.2  
Net unrecognized benefit plan obligations:
Reclassification adjustments for amortization to statements of income:
Prior service credit (4.1 )
Net actuarial loss 6.1
Income tax expense (0.8 )
Total net unrecognized benefit plan obligations 1.2  
Other comprehensive income 15.4  
Comprehensive income $ 11.3  
         
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Statement of Stockholders' Equity
($ and shares in millions)    
 
(unaudited) Nine Months Ended Year Ended
September 30 December 31
2018 20172
Common shares:
Balance at beginning of year 49.2 48.6
Issuance of shares 0.6   0.6  
Balance at period ended 49.8   49.2  
 
Treasury shares:
Balance at beginning of year (6.8 ) (6.8 )
Balance at period ended (6.8 ) (6.8 )
 
Common stock:
Balance at beginning of year $ 123.0 $ 121.6
Issuance of shares 1.5   1.4  
Balance at period ended 124.5   123.0  
 
Treasury stock:
Balance at beginning of year $ (116.8 ) $ (116.5 )
Shares acquired on stock award exercises and vested restricted shares (0.2 ) (0.3 )
Balance at beginning of year and period ended (117.0 ) (116.8 )
 
Additional paid-in capital:
Balance at beginning of year $ 171.8 $ 159.9
Issuance of common stock 10.1 8.8
Stock awards granted 6.7   3.1  
Balance at period ended 188.6   171.8  
 
Accumulated other comprehensive income:
Balance at beginning of the year $ 36.7 $ 32.5
Cumulative effect of change in accounting for equity securities and other invested assets and reclassification of stranded tax effects as of January 1, 2018 (56.8 )
Adjusted beginning balance at January 1, 2018
Change in unrealized losses on available-for-sale investments, net of tax (50.0 ) 3.2
Change in unrecognized benefit plan obligations, net of tax 1.8   1.0  
Balance at period ended (68.3 ) 36.7  
 
Retained earnings:
Balance at beginning of year $ 660.3 $ 687.9
Cumulative effect of change in accounting for equity securities and other invested assets and reclassification of stranded tax effects as of January 1, 2018 56.8
Adjusted beginning balance at January 1, 2018 717.1
Net income (loss) 37.3 (10.7 )
Cash dividends paid (12.8 ) (16.9 )
Balance at period ended 741.6   660.3  
 
Total stockholders' equity at period ended $ 869.4   $ 875.0  
                 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Statements of Cash Flow
($ in millions)
   
(unaudited) Nine months ended
September 30
2018 20172
Cash flows from operating activities:
Net income (loss) $ 37.3 $ (4.1 )
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization, net 6.7 9.9
Share-based compensation 6.7 3.0
Net investment gain (18.2 ) (43.8 )
Changes in operating assets and liabilities:
Deferred policy acquisition costs 5.8 7.2
Accrued investment income and other assets (3.0 ) 2.0
Postretirement and pension benefits (10.6 ) (9.1 )
Other liabilities and due to/from affiliates, net 11.8 (15.1 )
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums (2.3 ) (1.9 )
Losses and loss expenses payable (56.9 ) 98.9
Unearned premiums (16.2 ) 12.7
Deferred tax expense on share-based awards 1.3
Federal income taxes 8.6   (0.3 )
Net cash (used in) provided by operating activities (30.3 ) 60.7  
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale (267.0 ) (409.2 )
Purchases of equity securities (82.2 ) (104.1 )
Purchases of other invested assets (1.1 ) (1.0 )
Maturities, calls and pay downs of fixed maturities available-for-sale 180.4 192.1
Sales of fixed maturities available-for-sale 69.7 156.3
Sales of equity securities 89.3 171.3
Sales of other invested assets 0.9   0.8  
Net cash (used in) provided by investing activities (10.0 ) 6.2  
Cash flows from financing activities:
Proceeds from issuance of common stock 11.7 6.0
Payments to acquire treasury stock (0.2 ) (0.2 )

Payment of dividends

(12.8 ) (12.7 )
Payment of prepayment fee (0.4 )  
Net cash provided by (used in) financing activities (1.7 ) (6.9 )
Net (decrease) increase in cash and cash equivalents (42.0 ) 60.0
Cash and cash equivalents at beginning of period 91.5   51.1  
Cash and cash equivalents at end of period $ 49.5   $ 111.1  

Supplemental disclosures:

Interest paid (affiliates $0.7 and $0.6, respectively) $ 4.5   $ 4.3  
                 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Net Investment Income
($ in millions)
         
(unaudited)
9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018
Quarter to Date
Gross investment income:
Fixed maturities $ 14.8 $ 14.5 $ 15.0 $ 14.9 $ 15.1
TIPS 0.6   1.6   1.1   2.0   1.3
Total fixed maturities 15.4   16.1   16.1   16.9   16.4
Equity securities 2.0 4.8 2.5 3.1 3.0
Other 1.6   1.7   1.7   1.8   1.7
Total gross investment income 19.0 22.6 20.3 21.8 21.1
Less: Investment expenses 0.3   0.3   0.4   0.3   0.3
Net investment income $ 18.7   $ 22.3   $ 19.9   $ 21.5   $ 20.8
 
Year to Date
Gross investment income:
Fixed maturities $ 43.6 $ 58.1 $ 15.0 $ 29.9 $ 45.0
TIPS 3.5   5.1   1.1   3.1   4.4
Total fixed maturities 47.1   63.2   16.1   33.0   49.4
Equity securities 5.7 10.5 2.5 5.6 8.6
Other 4.6   6.3   1.7   3.5   5.2
Total gross investment income 57.4 80.0 20.3 42.1 63.2
Less: Investment expenses 0.9   1.2   0.4   0.7   1.0
Net investment income $ 56.5   $ 78.8   $ 19.9   $ 41.4   $ 62.2
 
9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018
TIPS, fair value $ 153.5 $ 155.8 $ 147.4 $ 156.5 $ 143.8
TIPS, book value $ 145.5 $ 146.5 $ 140.7 $ 150.6 $ 140.8
                                       
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

                 
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 June 30 March 31 December 31
2018 2018 2018 20172
Deferred tax assets:
Unearned premiums not currently deductible $ 24.8 $ 24.5 $ 24.6 $ 25.5
Losses and loss expenses payable discounting 11.2 11.6 11.6 22.0
Postretirement and pension benefits 10.9 12.1 13.4 13.6
Net unrealized holding losses on investments 9.2 6.1 3.7
Realized loss on other-than-temporary impairment 1.9 1.9 2.2 2.1
Other liabilities 12.2 10.4 8.8 9.2
Net operating loss carryforward 25.0 30.3 29.9 34.3
Tax credit carryforwards 2.7 2.7 2.7 3.7
Other       2.5
Total deferred tax assets 97.9   99.6   96.9   112.9
Deferred tax liabilities:
Deferral of policy acquisition costs 21.9 22.0 22.1 23.1
Net unrealized holding gains on investments 20.3
Other 13.7   10.5   8.2   10.7
Total deferred tax liabilities 35.6   32.5   30.3   54.1
Net deferred federal income taxes $ 62.3   $ 67.1   $ 66.6   $ 58.8
                               
 
The following table sets forth the components of federal income tax expense (benefit):
  Three months ended September 30   Nine months ended September 30
2018   2017 2018   20172
Income (loss) before federal income taxes $ 41.0 $ (11.2 ) $ 45.4 $ (3.3 )
Federal income tax expense (benefit):
Current (0.1 ) (0.1 ) (1.1 )
Deferred 7.7   (1.6 ) 9.2   0.8  
Total federal income tax expense (benefit) 7.6   (1.7 ) 8.1   0.8  
Net income (loss) $ 33.4   $ (9.5 ) $ 37.3   $ (4.1 )
                                 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
SAP Personal Insurance Segment Results
(unaudited)        
($ in millions)
Three months ended September 30, 2018 Personal Auto Homeowners Other Personal Total
 
Net written premiums $ 110.7 $ 76.6 $ 8.0 $ 195.3
Net earned premiums 103.5 63.7 5.8 173.0
Losses and LAE incurred:
Cat loss and ALAE 0.9 11.1 0.8 12.8
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (7.3 ) (1.5 ) (0.8 ) (9.6 )
Current accident year non-cat loss and ALAE 61.9   27.6   2.4   91.9  
Total non-cat loss and ALAE 54.6   26.1   1.6   82.3  
Total Loss and ALAE 55.5 37.2 2.4 95.1
ULAE 6.8   3.8   0.1   10.7  
Total Loss and LAE 62.3 41.0 2.5 105.8
Underwriting expenses 32.6   24.9   2.8   60.3  
Net underwriting gain (loss) $ 8.6   $ (2.2 ) $ 0.5   $ 6.9  
 
Cat loss and ALAE ratio 0.8 % 17.4 % 13.7 % 7.4 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (7.1 )% (2.3 )% (14.5 )% (5.6 )%
Current accident year non-cat loss and ALAE ratio 59.8 % 43.2 % 43.0 % 53.1 %
Total non-cat loss and ALAE ratio 52.7 % 40.9 % 28.5 % 47.5 %
Total Loss and ALAE ratio 53.5 % 58.3 % 42.2 % 54.9 %
ULAE ratio 6.6 % 5.9 % 1.1 % 6.2 %
Total Loss and LAE ratio 60.1 % 64.2 % 43.3 % 61.1 %
Expense ratio 29.5 % 32.6 % 34.4 % 30.9 %
Combined ratio 89.6 % 96.8 % 77.7 % 92.0 %
                         
($ in millions)
Three months ended September 30, 2017 Personal Auto Homeowners Other Personal Total
 
Net written premiums $ 96.5 $ 64.1 $ 4.9 $ 165.5
Net earned premiums 84.9 54.6 4.6 144.1
Losses and LAE incurred:
Cat loss and ALAE 2.5 5.1 0.4 8.0
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (0.5 ) 0.4 (0.1 )
Current accident year non-cat loss and ALAE 60.3   24.0   1.1   85.4  
Total non-cat loss and ALAE 59.8   24.0   1.5   85.3  
Total Loss and ALAE 62.3 29.1 1.9 93.3
ULAE 5.5   3.2   0.2   8.9  
Total Loss and LAE 67.8 32.3 2.1 102.2
Underwriting expenses 26.8   20.9   1.6   49.3  
Net underwriting (loss) gain $ (9.7 ) $ 1.4   $ 0.9   $ (7.4 )
 
Cat loss and ALAE ratio 3.0 % 9.3 % 8.3 % 5.6 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (0.6 )% % 7.6 % (0.1 )%
Current accident year non-cat loss and ALAE ratio 71.0 % 44.1 % 25.8 % 59.3 %
Total non-cat loss and ALAE ratio 70.4 % 44.1 % 33.4 % 59.2 %
Total Loss and ALAE ratio 73.4 % 53.4 % 41.7 % 64.8 %
ULAE ratio 6.5 % 5.8 % 2.8 % 6.1 %
Total Loss and LAE ratio 79.9 % 59.2 % 44.5 % 70.9 %
Expense ratio 27.7 % 32.6 % 35.8 % 29.8 %
Combined ratio 107.6 % 91.8 % 80.3 % 100.7 %
                 
 
($ in millions)
Nine months ended September 30, 2018 Personal Auto Homeowners Other Personal Total
 
Net written premiums $ 318.8 $ 203.0 $ 20.1 $ 541.9
Net earned premiums 296.1 182.0 16.1 494.2
Losses and LAE incurred:
Cat loss and ALAE 4.8 38.1 2.2 45.1
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (18.5 ) (7.2 ) (1.1 ) (26.8 )
Current accident year non-cat loss and ALAE 193.6   81.9   8.0   283.5  
Total non-cat loss and ALAE 175.1   74.7   6.9   256.7  
Total Loss and ALAE 179.9 112.8 9.1 301.8
ULAE 17.7   12.4   0.6   30.7  
Total Loss and LAE 197.6 125.2 9.7 332.5
Underwriting expenses 92.9   65.9   7.5   166.3  
Net underwriting gain (loss) $ 5.6   $ (9.1 ) $ (1.1 ) $ (4.6 )
 
Cat loss and ALAE ratio 1.6 % 20.9 % 13.5 % 9.1 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (6.3 )% (3.9 )% (7.1 )% (5.4 )%
Current accident year non-cat loss and ALAE ratio 65.4 % 45.0 % 50.0 % 57.4 %
Total non-cat loss and ALAE ratio 59.1 % 41.1 % 42.9 % 52.0 %
Total Loss and ALAE ratio 60.7 % 62.0 % 56.4 % 61.1 %
ULAE ratio 6.0 % 6.8 % 3.7 % 6.2 %
Total Loss and LAE ratio 66.7 % 68.8 % 60.1 % 67.3 %
Expense ratio 29.1 % 32.5 % 37.2 % 30.7 %
Combined ratio 95.8 % 101.3 % 97.3 % 98.0 %
                 
($ in millions)
Nine months ended September 30, 2017 Personal Auto3 Homeowners Other Personal Total2
 
Net written premiums $ 265.3 $ 168.9 $ 13.7 $ 447.9
Net earned premiums 251.8 164.6 14.2 430.6
Losses and LAE incurred:
Cat loss and ALAE 8.4 34.2 1.1 43.7
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (2.3 ) 1.9 2.5 2.1
Current accident year non-cat loss and ALAE 178.9   72.0   4.3   255.2  
Total non-cat loss and ALAE 176.6   73.9   6.8   257.3  
Total Loss and ALAE 185.0 108.1 7.9 301.0
ULAE 15.8   11.3   0.9   28.0  
Total Loss and LAE 200.8 119.4 8.8 329.0
Underwriting expenses 73.4   54.7   4.9   133.0  
Net underwriting (loss) gain $ (22.4 ) $ (9.5 ) $ 0.5   $ (31.4 )
 
Cat loss and ALAE ratio 3.3 % 20.8 % 7.5 % 10.2 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (0.9 )% 1.2 % 17.3 % 0.5 %
Current accident year non-cat loss and ALAE ratio 71.0 % 43.7 % 30.9 % 59.3 %
Total non-cat loss and ALAE ratio 70.1 % 44.9 % 48.2 % 59.8 %
Total Loss and ALAE ratio 73.4 % 65.7 % 55.7 % 70.0 %
ULAE ratio 6.3 % 6.8 % 6.4 % 6.5 %
Total Loss and LAE ratio 79.7 % 72.5 % 62.1 % 76.5 %
Expense ratio 27.6 % 32.4 % 36.5 % 29.7 %
Combined ratio 107.3 % 104.9 % 98.6 % 106.2 %
 
...
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
SAP Commercial Insurance Segment Results
(unaudited)              
 
($ in millions)

Three months ended
September 30, 2018

Commercial
Auto

Small
Commercial
Package

Middle
Market
Commercial

Workers'
Comp

Farm &
Ranch

Other
Commercial

Total
 
Net written premiums $ 19.1 $ 29.1 $ 29.8 $ 24.1 $ 10.7 $ 4.8 $ 117.6
Net earned premiums 18.8 30.5 28.6 21.3 11.3 4.7 115.2
Losses and LAE incurred:
Cat loss and ALAE (0.4 ) 2.1 0.5 0.8 0.1 3.1
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (1.1 ) (1.8 ) (1.9 ) (2.5 ) (1.0 ) (2.0 ) (10.3 )
Current accident year non-cat loss and ALAE 11.5   18.5   18.7   14.3   6.5   2.3   71.8  
Total non-cat loss and ALAE 10.4   16.7   16.8