EXHIBIT 99.2
FOR IMMEDIATE RELEASE
Contact: Terrence Bowshier
Vice President
Director of Investor Relations
(614) 464-5078
STATE AUTO FINANCIAL REPORTS FIRST QUARTER 2004 RESULTS
- Record quarterly earnings of $0.80
- GAAP combined ratio improved to 89.6
- Book value increased to $14.82, up 20% from 3/31/2003
COLUMBUS, Ohio -- April 27, 2004 -- State Auto Financial Corporation (NASDAQ:
STFC) today reported record first quarter 2004 net income of $32,400,000 or
$0.80 per diluted share, versus $21,100,000 or $0.53 per diluted share for the
same period 2003. Net operating earnings* per diluted share were $0.71 for the
first quarter of 2004, versus $0.47 for the same period in 2003.
STFC's GAAP combined ratio for the first quarter was 89.6, versus 95.2 for the
first quarter of 2003. Catastrophe losses were light, contributing only 1.0
point to the loss ratio in the first quarter 2004, versus 2.6 points in the
first quarter 2003. STFC's first quarter revenue was $273,100,000, up from
$253,300,000 for the same period in 2003. STFC shareholders' book value per
share increased 20% to $14.82 from March 31, 2003.
STFC Chairman and CEO Bob Moone stated, "The first quarter of 2004 continued the
trend of profitable results for State Auto Financial with both the standard and
nonstandard business segments contributing nicely to our success. The quarterly
combined ratios of 89.0 and 96.1, respectively, for those segments bear this
out. We have now achieved record net operating earnings per share for five of
the last six quarters.
"Another satisfying development is the continued improvement in the loss ratio
of our homeowners line to 53.6 from 67.7 for the first quarter of 2003. This
improved result for homeowners arises from relatively light catastrophe loss
experience, a reduction in large loss frequency and improvement in the core loss
ratio due to continuing underwriting diligence and greater rate adequacy.
"A number of us recently completed a tour of our regional and branch offices as
well as visits with our independent agents in many states. I believe that State
Auto has the proper focus and dedication to details needed to be successful in
this very competitive industry. Our commitment to sound underwriting and
cost-based pricing should, absent unusual catastrophe experience, allow for
solid results throughout 2004 and continued enhancement of shareholder value,"
added Moone.
State Auto Financial Corporation, headquartered in Columbus, Ohio, 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 22,500 independent insurance agents associated with
over 3,300 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 periods being reported. For
STFC, this amounts to $0.09 per diluted share for the first quarter 2004 versus
$0.06 for the same 2003 period.
STFC has scheduled a conference call with interested investors for Tuesday,
April 27, 10:00 a.m. ET to discuss the company's first quarter 2004 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, April 27, by calling
1-800-253-1052. Supplemental schedules detailing the company's first quarter
2004 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 millions, except per share amounts)
(unaudited)
Quarter Ended
March 31
2004 2003
----------- -----------
Net premiums written $ 252.8 $ 236.5
----------- -----------
Earned premiums 248.8 232.4
Net investment income 17.5 15.7
Net realized gains on investments 5.4 3.8
Other income 1.4 1.4
----------- -----------
Total revenue 273.1 253.3
----------- -----------
Income before federal income taxes 46.0 28.6
Federal income taxes 13.6 7.5
----------- -----------
Net income $ 32.4 $ 21.1
=========== ===========
Earnings per share:
- basic $ 0.82 $ 0.54
- diluted $ 0.80 $ 0.53
Earnings per share from operations *:
- basic $ 0.73 $ 0.48
- diluted $ 0.71 $ 0.47
Weighted average shares outstanding:
- basic 39.6 39.1
- diluted 40.5 39.7
Book value per share $ 14.82 $ 12.36
Dividends paid per share $ 0.040 $ 0.035
Total shares outstanding 39.7 39.2
GAAP ratios:
Loss and LAE ratio 59.4 64.4
Expense ratio 30.2 30.8
----------- -----------
Combined ratio 89.6 95.2
=========== ===========
* Net income from operations:
Net income $ 32.4 $ 21.1
Less net realized gains on investments,
less applicable federal income taxes 3.5 2.5
----------- -----------
Net income from operations $ 28.9 $ 18.6
=========== ===========
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except per share amount)
(unaudited)
March 31 December 31
2004 2003
---------- -----------
ASSETS
Fixed maturities, available for sale, at fair value
(amortized cost $1,374.2 and $1,359.6, respectively) $ 1,449.9 $ 1,421.4
Equity securities, available for sale, at fair value
(cost $139.6 and $121.0, respectively) 159.4 139.3
Other invested assets (cost $9.5) 9.7 9.6
---------- ----------
Total investments 1,619.0 1,570.3
Cash and cash equivalents 52.0 40.0
Deferred policy acquisition costs 91.1 87.1
Accrued investment income and other assets 53.6 52.5
Due from affiliate 25.2 -
Net prepaid pension expense 51.0 51.4
Reinsurance recoverable on losses and loss expenses payable 15.6 14.2
Prepaid reinsurance premiums 9.0 8.4
Current federal income taxes - 0.2
Property and equipment, net 12.4 12.5
---------- ----------
Total assets $ 1,928.9 $ 1,836.6
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss expenses payable $ 648.3 $ 643.0
Unearned premiums 408.8 404.3
Notes payable (affiliates $61.0) 161.0 161.2
Postretirement benefit liabilities 75.9 74.3
Other liabilities 26.3 8.6
Current federal income taxes 12.8 -
Deferred federal income taxes 7.2 2.0
Due to affiliates - 0.9
---------- ----------
Total liabilities 1,340.3 1,294.3
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, without par value. Authorized 100.0 shares; 44.3 and
44.2 shares issued, respectively, at stated value of $2.50 per share 110.8 110.4
Less 4.6 treasury shares, at cost (56.0) (55.8)
Additional paid-in capital 58.6 56.7
Accumulated other comprehensive income 65.3 53.0
Retained earnings 409.9 378.0
---------- ----------
Total stockholders' equity 588.6 542.3
---------- ----------
Total liabilities and stockholders' equity $ 1,928.9 $ 1,836.6
========== ==========
STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(dollars in millions, except per share amounts)
(unaudited)
2004 2003
--------- --------
Earned premiums $ 248.8 $ 232.4
Net investment income 17.5 15.7
Net realized gains on investments 5.4 3.8
Other income (affiliates $0.9) 1.4 1.4
-------- --------
Total revenues 273.1 253.3
-------- --------
Losses and loss expenses 147.7 149.6
Acquisition and operating expenses 75.1 71.7
Interest expense (affiliates $0.5 and $0.7, respectively) 1.7 0.7
Other expenses 2.6 2.8
-------- --------
Total expenses 227.1 224.8
-------- --------
Income before federal income taxes 46.0 28.6
Federal income tax expense 13.6 7.5
-------- --------
Net income $ 32.4 $ 21.1
======== ========
Earnings per common share:
Basic $ 0.82 $ 0.54
======== ========
Diluted $ 0.80 $ 0.53
======== ========
Dividends paid per common share $ 0.040 $ 0.035
======== ========
STATE AUTO FINANCIAL CORPORATION
QUARTERLY STATUTORY RATIOS
STATE AUTO STANDARD INSURANCE SEGMENT (1)
(unaudited)
3/31/04 3/31/03 6/30/04 6/30/03
------- ------- ------- -------
Loss & LAE ratios:
Automobile - personal 57.5% 64.1% 64.4%
Automobile - commercial 55.0% 56.4% 55.8%
Homeowners 53.6% 67.7% 105.7%
Commercial multi-peril 54.0% 67.4% 110.9%
Workers' compensation 63.9% 72.1% 59.5%
Fire and allied lines 52.6% 66.2% 96.6%
Other/products liability 101.3% 63.9% 61.5%
Misc. pers./comm. lines 22.5% 22.6% 30.9%
----- ---- ----- -----
Total loss & LAE ratio 57.9% 63.2% 75.5%
===== ==== ===== =====
9/30/04 9/30/03 12/31/04 12/31/03
------- ------- -------- --------
Loss & LAE ratios:
Automobile - personal 64.9% 73.0%
Automobile - commercial 62.4% 38.3%
Homeowners 94.5% 32.9%
Commercial multi-peril 70.8% 72.7%
Workers' compensation 98.8% 150.0%
Fire and allied lines 60.8% 21.7%
Other/products liability 51.0% 93.9%
Misc. pers./comm. lines 28.4% 31.0%
----- ---- ----- -----
Total loss & LAE ratio 68.9% 60.6%
===== ==== ===== =====
(1) 2003 amounts are restated to include the former Meridian Standard Insurance
Segment.
STATE AUTO FINANCIAL CORPORATION
YEAR-TO-DATE STATUTORY RATIOS
STATE AUTO STANDARD INSURANCE SEGMENT (1)
(unaudited)
3/31/04 3/31/03 6/30/04 6/30/03
------- ------- ------- -------
Loss & LAE ratios:
Automobile - personal 57.5% 64.1% 64.3%
Automobile - commercial 55.0% 56.4% 56.1%
Homeowners 53.6% 67.7% 87.2%
Commercial multi-peril 54.0% 67.4% 89.5%
Workers' compensation 63.9% 72.1% 66.1%
Fire and allied lines 52.6% 66.2% 81.8%
Other/products liability 101.3% 63.9% 62.7%
Misc. pers./comm. lines 22.5% 22.6% 26.8%
----- ---- ----- ----
Total loss & LAE ratio 57.9% 63.2% 69.5%
===== ==== ===== ====
9/30/04 9/30/03 12/31/04 12/31/03
------- ------- -------- --------
Loss & LAE ratios:
Automobile - personal 64.5% 66.6%
Automobile - commercial 58.2% 53.3%
Homeowners 89.7% 75.0%
Commercial multi-peril 83.2% 80.6%
Workers' compensation 76.5% 93.0%
Fire and allied lines 74.5% 60.8%
Other/products liability 58.6% 67.6%
Misc. pers./comm. lines 27.3% 28.3%
----- ---- ----- ----
Total loss & LAE ratio 69.3% 67.1%
===== ==== ===== ====
(1) 2003 amounts are restated to include the former Meridian Standard Insurance
Segment.
STATE AUTO FINANCIAL CORPORATION
QUARTERLY STATUTORY RATIOS
STATE AUTO NONSTANDARD INSURANCE SEGMENT
(unaudited)
3/31/04 3/31/03 6/30/04 6/30/03
------- ------- ------- -------
Loss & LAE ratios:
Automobile 77.7% 77.0% 77.4%
==== ==== ==== ====
9/30/04 9/30/03 12/31/04 12/31/03
------- ------- -------- --------
Loss & LAE ratios:
Automobile 76.1% 71.7%
==== ==== ==== ====
YEAR-TO-DATE STATUTORY RATIOS
STATE AUTO NONSTANDARD INSURANCE SEGMENT
(unaudited)
3/31/04 3/31/03 6/30/04 6/30/03
------- ------- ------- -------
Loss & LAE ratios:
Automobile 77.7% 77.0% 77.2%
==== ==== ==== ====
9/30/04 9/30/03 12/31/04 12/31/03
------- ------- -------- --------
Loss & LAE ratios:
Automobile 76.8% 75.6%
==== ==== ==== ====
STATE AUTO FINANCIAL CORPORATION
YEAR-TO-DATE DIRECT PREMIUMS WRITTEN
(dollars in millions)
(unaudited)
3/31/04 3/31/03 6/30/04 6/30/03
------- ------- ------- -------
Direct Premiums Written:
Automobile - personal 119.4 118.5 233.2
Automobile - commercial 26.0 25.9 52.9
Homeowners 36.2 31.8 75.2
Commercial multi-peril 19.8 20.4 40.9
Workers' compensation 8.2 8.4 16.1
Fire and allied lines 19.2 16.3 34.2
Other/products liability 20.6 17.2 35.9
Misc. pers./comm. lines 8.1 7.5 16.3
----- ----- ----- -----
Total 257.5 246.0 504.7
===== ===== ===== =====
9/30/04 9/30/03 12/31/04 12/31/03
------- ------- -------- --------
Direct Premiums Written:
Automobile - personal 352.6 464.8
Automobile - commercial 78.8 100.6
Homeowners 121.0 161.8
Commercial multi-peril 61.8 80.7
Workers' compensation 24.1 30.6
Fire and allied lines 53.6 73.1
Other/products liability 54.3 72.4
Misc. pers./comm. lines 24.8 32.2
----- ----- ----- -------
Total 771.0 1,016.2
===== ===== ===== =======