EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Terrence Bowshier
Vice President
Director of Investor Relations
(614) 464-5078
State Auto Financial Reports Record Annual Earnings for 2003
- - Record annual earnings of $1.58
- - Annual GAAP Combined Ratio improved to 98.2
- - Net Income up 72.0%
- - Book value increased 15.3% to $13.71
COLUMBUS, Ohio -- February 24, 2004 -- State Auto Financial Corporation (NASDAQ:
STFC) today reported fourth quarter 2003 net income of $18,677,000, or $0.46 per
diluted share, versus $19,331,000 or $0.49 per diluted share for the same period
2002. Net operating earnings* per diluted share were a fourth quarter record,
$0.44 versus $0.40, for the same period in 2002.
STFC's GAAP combined ratio for the fourth quarter was 95.9 versus 98.5 for the
fourth quarter of 2002. Catastrophe losses were extremely light, contributing
only 0.5 points to the loss ratio in the fourth quarter 2003, versus 2.8 points
in the fourth quarter 2002. STFC's fourth quarter revenue was $260,074,000, up
from $254,335,000 for the same period in 2002
Revenue for the year 2003 was also a record $1,041,696,000, up 7.7% from
$967,479,000 for 2002. For the year 2003, net income was $63,622,000, or $1.58
per diluted share, compared with $36,995,000 or $0.93 per diluted share for
2002. Annual GAAP combined ratio for 2003 was 98.2 compared to 102.4 for 2002.
STFC shareholders' book value per share increased 15.3% during 2003 to $13.71
per share.
STFC Chairman and CEO Bob Moone stated, "Our strong fourth quarter results
capped an extremely gratifying year for State Auto Financial. Three of the four
quarters during 2003 set all-time highs in quarterly operating earnings* per
share. The second quarter, the only one that did not set a new quarterly
earnings record, was impacted significantly by Cat 88, the single largest
catastrophe in the company's history. For the year 2003, we incurred a record
$65.4 million in catastrophe losses. It is a testimony to our disciplined
pricing and underwriting philosophies that we were able to generate consistently
strong results for the year while absorbing such significant catastrophe losses.
"STFC has more than doubled its size since year-end 2000 in total revenue and
assets. We have returned to a profitable underwriting position more in line with
historic State Auto results, as evidenced by our 98.2 combined ratio for 2003.
The Meridian business acquired in 2001 has been successfully integrated to the
point that it will no longer be reported as a separate business segment in 2004.
We look forward to the challenge in 2004 to perform at a level that
will continue to produce profitable business and add to shareholder value," said
STFC Chairman and CEO Bob Moone.
State Auto Financial Corporation is a regional property and casualty insurance
holding company engaged primarily in writing both personal and commercial lines
of insurance. The company markets its policies through more than 22,000
independent insurance agents associated with approximately 3,400 agencies in 26
central and eastern states, excluding New York, New Jersey and the New England
states. The State Auto Insurance Companies' pool carries an A+ (Superior) rating
from A.M. Best Co.
- ----------------
*Net operating earnings, a non-GAAP financial measure which management believes
is informative to Company management and investors, differ from GAAP net
earnings only by the exclusion of realized capital gains and losses, net of
applicable taxes, on investment activity for the period being reported. For
STFC, this amounts to $0.02 per diluted share for the fourth quarter and $0.17
per diluted share for the year 2003 versus $0.09 and $0.10 for the same 2002
periods respectively.
STFC has scheduled a conference call with interested investors for Tuesday,
February 24, 10:00 a.m. ET to discuss the company's fourth quarter 2003
performance. Live and archived broadcasts of the call can be accessed on
www.STFC.com. A replay of the call can be heard beginning at noon, February 24,
by calling 1-800-297-0781. Supplemental schedules detailing the company's fourth
quarter 2003 financial, sales and underwriting results are made available on
www.STFC.com 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
CONSOLIDATED STATEMENTS OF INCOME
(Figures in thousands, except per-share amounts)
(unaudited)
Quarter Ended Year Ended
December 31 December 31
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net premiums written $ 234,680 $ 230,379 $ 987,265 $ 942,844
---------- ---------- ---------- ----------
Earned premiums 240,444 232,357 960,568 896,595
Net investment income 17,038 15,477 64,625 59,691
Net realized gain on investments 1,055 5,055 10,623 5,909
Other income 1,537 1,446 5,880 5,284
---------- ---------- ---------- ----------
Total revenue 260,074 254,335 1,041,696 967,479
---------- ---------- ---------- ----------
Income before federal income taxes 24,999 22,112 83,277 37,790
Federal income tax expense 6,322 2,781 19,655 795
---------- ---------- ---------- ----------
Net income $ 18,677 $ 19,331 $ 63,622 $ 36,995
========== ========== ========== ==========
Earnings per share:
- basic $ 0.47 $ 0.50 $ 1.62 $ 0.95
- diluted $ 0.46 $ 0.49 $ 1.58 $ 0.93
Earnings per share from operations *:
- basic $ 0.45 $ 0.41 $ 1.44 $ 0.85
- diluted $ 0.44 $ 0.40 $ 1.41 $ 0.83
Weighted average shares outstanding:
- basic 39,440 38,968 39,255 38,984
- diluted 40,466 39,638 40,153 39,743
Book value per share $ 13.71 $ 11.89
Dividends paid per share $ 0.040 $ 0.035 $ 0.150 $ 0.135
Total shares outstanding 39,559 39,001
GAAP ratios:
Loss ratio 61.5 68.7 67.8 72.9
Expense ratio 34.4 29.8 30.4 29.5
---------- ---------- ---------- ----------
Combined ratio 95.9 98.5 98.2 102.4
========== ========== ========== ==========
* Net income from operations:
Net income $ 18,677 $ 19,331 $ 63,622 $ 36,995
Less net realized gains on investments,
less applicable federal income taxes 686 3,286 6,905 3,841
---------- ---------- ---------- ----------
Net income from operations $ 17,991 $ 16,045 $ 56,717 $ 33,154
========== ========== ========== ==========
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
(unaudited)
December 31 December 31
2003 2002
----------- -----------
ASSETS
Fixed maturities, available for sale, at fair value
(amortized cost $1,359,577 and $1,149,334, respectively) $ 1,421,412 $ 1,216,698
Equity securities, at fair value (cost $121,025 and $55,837, respectively) 139,257 53,710
Other invested assets (cost $9,485 and $1,857, respectively) 9,643 1,908
----------- -----------
Total investments 1,570,312 1,272,316
Cash and cash equivalents 40,005 96,048
Deferred policy acquisition costs 87,099 77,886
Accrued investment income and other assets 52,436 50,788
Due from affiliate - 14,210
Net prepaid pension expense 51,415 46,690
Reinsurance recoverable on losses and loss expenses payable 14,236 8,825
Prepaid reinsurance premiums 8,434 7,695
Current federal income taxes 238 -
Deferred federal income taxes - 5,796
Property and equipment, net 12,492 12,741
----------- -----------
Total assets $ 1,836,667 $ 1,592,995
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss expenses payable $ 643,019 $ 600,958
Unearned premiums 404,341 377,990
Notes payable (affiliate $60,964 and $60,500) 161,220 75,500
Postretirement benefit liabilities 74,250 66,763
Other liabilities 8,619 7,270
Current federal income taxes - 745
Deferred federal income taxes 2,008 -
Due to affiliates 919 -
----------- -----------
Total liabilities 1,294,376 1,129,226
----------- -----------
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Common stock, without par value. Authorized 100,000,000 shares;
44,164,053 and 43,525,774 shares issued, respectively, at stated
value of $2.50 per share 110,410 108,815
Less 4,604,609 and 4,524,475 treasury shares, respectively, at cost (55,762) (54,249)
Additional paid-in capital 56,653 50,354
Accumulated other comprehensive income 52,992 42,512
Retained earnings 377,998 316,337
----------- -----------
Total stockholders' equity 542,291 463,769
----------- -----------
Total liabilities and stockholders' equity $ 1,836,667 $ 1,592,995
=========== ===========
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share data)
(unaudited)
Quarter Ended Year Ended
2003 December 31
2003 2002 2003 2002
---------- ---------- ---------- ----------
Earned premiums $ 240,444 $ 232,357 $ 960,568 $ 896,595
Net investment income 17,038 15,477 64,625 59,691
Net realized gain on investments 1,055 5,055 10,623 5,909
Other income (includes $974 and $880, and
$3,733 and $3,240 respectively, from affiliates) 1,537 1,446 5,880 5,284
---------- ---------- ---------- ----------
Total revenues 260,074 254,335 1,041,696 967,479
---------- ---------- ---------- ----------
Losses and loss expenses 147,881 159,724 651,223 653,474
Acquisition and operating expenses 82,749 69,139 291,823 264,348
Interest expense (includes $678 and $712, and 1,317 712 3,637 2,333
$2,756 and $2,333 respectively, from affiliates)
Other expenses 3,128 2,648 11,736 9,534
---------- ---------- ---------- ----------
Total expenses 235,075 232,223 958,419 929,689
---------- ---------- ---------- ----------
Income before federal income taxes 24,999 22,112 83,277 37,790
Federal income tax expense 6,322 2,781 19,655 795
---------- ---------- ---------- ----------
Net income $ 18,677 $ 19,331 $ 63,622 $ 36,995
========== ========== ========== ==========
Earnings per common share:
Basic $ 0.47 $ 0.50 $ 1.62 $ 0.95
========== ========== ========== ==========
Diluted $ 0.46 $ 0.49 $ 1.58 $ 0.93
========== ========== ========== ==========
Dividends paid per common share $ 0.040 $ 0.035 $ 0.150 $ 0.135
========== ========== ========== ==========
STATE AUTO FINANCIAL CORPORATION
YEAR-TO-DATE DIRECT PREMIUMS WRITTEN
(unaudited)
3/31/03 3/31/02 6/30/03 6/30/02
------- ------- ------- -------
Direct Premiums Written:
Automobile - personal 118,452 104,497 233,215 212,630
Automobile - commercial 25,916 26,515 52,934 53,935
Homeowners 31,778 27,961 75,159 65,817
Commercial multi-peril 20,390 19,564 40,876 40,077
Workers' compensation 8,389 10,288 16,095 19,835
Fire and allied lines 16,266 14,323 34,166 30,412
Other/products liability 17,228 16,212 35,934 33,012
Misc. pers./comm. lines 7,555 7,561 16,287 16,126
------- ------- ------- -------
Total 245,974 226,921 504,666 471,844
======= ======= ======= =======
9/30/03 9/30/02 12/31/03 12/31/02
------- ------- -------- --------
Direct Premiums Written:
Automobile - personal 352,603 326,661 464,817 436,830
Automobile - commercial 78,746 79,328 100,608 101,989
Homeowners 120,992 106,224 161,755 142,185
Commercial multi-peril 61,788 61,179 80,681 81,033
Workers' compensation 24,095 29,100 30,587 36,526
Fire and allied lines 53,635 47,609 73,105 64,384
Other/products liability 54,348 49,453 72,409 65,506
Misc. pers./comm. lines 24,791 24,285 32,286 31,466
------- ------- --------- -------
Total 770,998 723,839 1,016,248 959,919
======= ======= ========= =======
STATE AUTO FINANCIAL CORPORATION
QUARTERLY STATUTORY RATIOS
STATE AUTO STANDARD INSURANCE SEGMENT
(unaudited)
3/31/03 3/31/02 6/30/03 6/30/02
------- ------- ------- -------
Loss & LAE ratios:
Automobile - personal 63.9% 68.1% 63.3% 67.7%
Automobile - commercial 59.7% 70.3% 54.9% 63.7%
Homeowners 72.8% 66.7% 106.4% 114.1%
Commercial multi-peril 61.0% 57.2% 89.0% 101.5%
Workers' compensation 81.9% 62.2% 78.6% 113.8%
Fire and allied lines 66.2% 64.0% 96.1% 54.8%
Other/products liability 66.5% 81.0% 59.0% 55.2%
Misc. pers./comm. lines 19.2% 20.1% 25.0% 40.0%
---- ---- ---- ----
Total loss & LAE ratio 64.1% 65.9% 73.3% 76.1%
==== ==== ==== ====
9/30/03 9/30/02 12/31/03 12/31/02
------- ------- -------- --------
Loss & LAE ratios:
Automobile - personal 64.2% 63.8% 72.7% 70.5%
Automobile - commercial 61.1% 60.6% 41.1% 60.4%
Homeowners 92.3% 74.7% 37.7% 69.5%
Commercial multi-peril 61.1% 90.0% 67.8% 73.8%
Workers' compensation 99.9% 78.2% 141.5% 83.6%
Fire and allied lines 61.0% 64.4% 21.6% 52.7%
Other/products liability 49.3% 99.5% 83.0% 77.7%
Misc. pers./comm. lines 29.4% 32.3% 31.7% 27.4%
---- ---- ---- ----
Total loss & LAE ratio 67.0% 69.3% 60.1% 67.3%
==== ==== ==== ====
STATE AUTO FINANCIAL CORPORATION
YEAR-TO-DATE STATUTORY RATIOS
STATE AUTO STANDARD INSURANCE SEGMENT
(unaudited)
3/31/03 3/31/02 6/30/03 6/30/02
------- ------- ------- -------
Loss & LAE ratios:
Automobile - personal 63.9% 68.1% 63.6% 67.9%
Automobile - commercial 59.7% 70.3% 57.2% 66.9%
Homeowners 72.8% 66.7% 90.2% 90.8%
Commercial multi-peril 61.0% 57.2% 75.6% 79.9%
Workers' compensation 81.9% 62.2% 80.2% 88.7%
Fire and allied lines 66.2% 64.0% 81.5% 59.3%
Other/products liability 66.5% 81.0% 62.7% 68.0%
Misc. pers./comm. lines 19.2% 20.1% 22.2% 30.2%
---- ---- ---- ----
Total loss & LAE ratio 64.1% 65.9% 68.9% 71.1%
==== ==== ==== ====
9/30/03 9/30/02 12/31/03 12/31/02
------- ------- -------- --------
Loss & LAE ratios:
Automobile - personal 63.8% 66.5% 66.2% 67.5%
Automobile - commercial 58.6% 64.7% 54.0% 63.5%
Homeowners 91.0% 85.2% 76.5% 81.1%
Commercial multi-peril 70.5% 83.5% 69.7% 80.8%
Workers' compensation 87.1% 84.7% 100.9% 84.4%
Fire and allied lines 74.4% 61.1% 60.7% 58.8%
Other/products liability 58.0% 79.1% 64.4% 78.8%
Misc. pers./comm. lines 24.7% 30.9% 26.5% 30.0%
---- ---- ---- ----
Total loss & LAE ratio 68.2% 70.5% 66.1% 69.6%
==== ==== ==== ====
STATE AUTO FINANCIAL CORPORATION
QUARTERLY STATUTORY RATIOS
STATE AUTO NONSTANDARD INSURANCE SEGMENT
(unaudited)
3/31/03 3/31/02 6/30/03 6/30/02
------- ------- ------- -------
Loss & LAE ratios:
Automobile 77.0% 82.3% 77.4% 78.0%
==== ==== ==== ====
9/30/03 9/30/02 12/31/03 12/31/02
------- ------- -------- --------
Loss & LAE ratios:
Automobile 76.2% 89.4% 71.7% 67.8%
==== ==== ==== ====
YEAR-TO-DATE STATUTORY RATIOS
STATE AUTO NONSTANDARD INSURANCE SEGMENT
(unaudited)
3/31/03 3/31/02 6/30/03 6/30/02
------- ------- ------- -------
Loss & LAE ratios:
Automobile 77.0% 82.3% 77.2% 80.0%
==== ==== ==== ====
9/30/03 9/30/02 12/31/03 12/31/02
------- ------- -------- --------
Loss & LAE ratios:
Automobile 76.8% 83.4% 75.6% 79.0%
==== ==== ==== ====
STATE AUTO FINANCIAL CORPORATION
QUARTERLY STATUTORY RATIOS
MERIDIAN STANDARD INSURANCE SEGMENT
(unaudited)
3/31/03 3/31/02 6/30/03 6/30/02
------- ------- ------- -------
Loss & LAE ratios:
Automobile - personal 65.5% 72.2% 74.2% 76.7%
Automobile - commercial 41.8% 68.8% 60.5% 72.5%
Homeowners 36.4% 101.3% 100.0% 192.2%
Commercial multi-peril 83.0% 85.2% 175.3% 116.6%
Workers' compensation 54.2% 82.5% 9.7% 76.4%
Fire and allied lines 71.4% 65.7% 132.9% 100.6%
Other/products liability -16.7% -8.0% 151.4% 1.2%
Misc. pers./comm. lines 45.1% 46.9% 78.8% 31.7%
---- ----- ----- -----
Total loss & LAE ratio 57.9% 77.5% 92.1% 96.6%
==== ===== ===== =====
9/30/03 9/30/02 12/31/03 12/31/02
------- ------- -------- --------
Loss & LAE ratios:
Automobile - personal 75.6% 79.4% 84.3% 71.9%
Automobile - commercial 70.8% 100.5% 16.9% 64.7%
Homeowners 118.4% 91.9% -52.3% 37.9%
Commercial multi-peril 105.7% 111.6% 97.2% 117.7%
Workers' compensation 95.0% 88.4% 193.4% 85.7%
Fire and allied lines 48.4% 104.7% 23.3% -32.0%
Other/products liability 129.1% 25.4% 767.5% 175.3%
Misc. pers./comm. lines 17.5% 20.6% 22.2% 173.5%
----- ----- ----- -----
Total loss & LAE ratio 89.0% 88.4% 70.0% 78.6%
===== ===== ===== =====
STATE AUTO FINANCIAL CORPORATION
YEAR-TO-DATE STATUTORY RATIOS
MERIDIAN STANDARD INSURANCE SEGMENT
(unaudited)
3/31/03 3/31/02 6/30/03 6/30/02
------- ------- ------- -------
Loss & LAE ratios:
Automobile - personal 65.5% 72.2% 69.3% 74.4%
Automobile - commercial 41.8% 68.0% 50.8% 70.6%
Homeowners 36.4% 101.3% 66.4% 146.3%
Commercial multi-peril 83.0% 85.2% 126.8% 100.9%
Workers' compensation 54.2% 82.5% 35.5% 79.5%
Fire and allied lines 71.4% 65.7% 101.5% 82.7%
Other/products liability -16.7% -8.0% 63.3% -3.1%
Misc. pers./comm. lines 45.1% 46.9% 60.9% 39.4%
----- ----- ----- -----
Total loss & LAE ratio 57.9% 77.5% 73.6% 86.9%
===== ===== ===== =====
9/30/03 9/30/02 12/31/03 12/31/02
------- ------- -------- --------
Loss & LAE ratios:
Automobile - personal 70.7% 76.0% 71.9% 75.1%
Automobile - commercial 56.6% 80.0% 49.3% 76.5%
Homeowners 79.9% 128.4% 61.2% 106.5%
Commercial multi-peril 120.7% 104.3% 116.6% 107.5%
Workers' compensation 50.3% 82.2% 70.5% 82.7%
Fire and allied lines 85.9% 89.8% 74.3% 60.8%
Other/products liability 82.0% 7.4% 199.3% 50.0%
Misc. pers./comm. lines 49.1% 33.5% 44.5% 65.4%
----- ----- ----- -----
Total loss & LAE ratio 77.5% 87.4% 76.4% 85.5%
===== ===== ===== =====