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State Auto Financial (STFC) Projects Q3 Cat Loss Estimates

Zacks Equity Research

State Auto Financial Corporation STFC recently reported pre-tax catastrophe (cat) loss estimates resulting from catastrophes in the third quarter of 2017. The company projects cat loss of about $32.5 million from Hurricane Harvey and $23 million from Irma.

The company stated about 80% of the cat losses to be attributable to Specialty E&S Property.

The Zacks Consensus Estimate for the third quarter is currently pegged at a loss of 72 cents per share, reflecting a year-over-year plunge of 820%. We expect the estimates to move downward as analysts incorporate the impact of catastrophe losses.

Being a property and casualty insurer, State Auto Financial cannot escape the disasters caused by catastrophe events. The company has been incurring underwriting losses over the past several years. State Auto Financial’s underwriting loss through the first half was $46 million, though narrowed from the year-ago loss of $64.7 million. Combined ratio improved 300 basis points to 106.7%. Underwriting results in the third quarter too were hampered by a string of cat activities.

However, the company aims to return to underwriting profitability.

Shares of State Auto Financial have lost 1.2% of its value since the onset of the third quarter, underperforming the industry’s gain of 7.2%. The stock has seen the Zacks Consensus Estimate for third-quarter 2017 moving down to a loss of 72 cents from earnings of 19 days over the last 60 days. Catastrophes affecting underwriting results will possibly be a drag on the share price.

State Auto Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recently, American Financial Group, Inc. AFG projected catastrophe loss of about $105 million or 95 cents per share post-tax. Chubb Ltd. CB estimated $200 million post-tax cat losses from Maria, $24 million from Mexican earthquakes, $520 million from Harvey and between $640 million and $760 million from Irma. HCI Group, Inc. HCI expected loss between $100 million and $300 million.

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