Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT: Terrence Bowshier
Vice President
Director of Investor Relations
(614) 464-5078
STATE AUTO FINANCIAL ANNOUNCES RECORD QUARTERLY EARNINGS
o RECORD QUARTERLY EARNINGS OF $0.85
o GAAP COMBINED RATIO IMPROVED TO 87.0
o NET INCOME UP 128% FOR FIRST SIX MONTHS
COLUMBUS, OHIO (JULY 27, 2004) - State Auto Financial Corporation (NASDAQ: STFC)
today reported record second quarter net income of $34.6 million, or $0.85 per
diluted share, versus $8.3 million or $0.21 per diluted share for the same
period in 2003. Net operating earnings* per share were $0.83 diluted, versus
$0.14 diluted, for the same period in 2003.
STFC's combined ratio for the quarter was 87.0, on a GAAP basis, versus 103.8
for the second quarter of 2003. Catastrophe losses accounted for only 5.1 points
of the loss ratio during the second quarter of 2004 compared to 17.1 points for
the same period in 2003. STFC's second quarter revenue was $273.1 million, up
from $263.2 million.
Revenue for the first six months of 2004 was $546.2 million, up from $516.5
million for 2003. For the first six months of 2004, net income was $67.0
million, or $1.65 per diluted share, compared with $29.4 million or $0.74 per
diluted share for the same 2003 period, an increase of 128%. Year to date GAAP
combined ratio for 2004 stands at 88.3 compared to 99.6 for 2003. STFC
shareholders' book value per share has increased during the first six months of
2004 to $14.69 per share.
"We are very pleased to announce another record breaking quarter for STFC. While
the industry as a whole is performing much better than in previous years, we
believe our long-term emphasis on responsible underwriting and cost-based
pricing continues to set us apart from the pack. This is the sixth quarter of
the last seven that we have reported new highs in earnings per share for the
same year over year period, said STFC Chairman and CEO Bob Moone.
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"While catastrophe losses moderately impacted our second quarter results, they
were significantly less severe than during the comparable quarters of 2002 and
2003. This milder than average weather related loss experience, coupled with a
continuation of improvement in our core loss ratios, allowed us to produce these
outstanding results, " 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
products through more than 22,500 independent 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.
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*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 or losses, net of
applicable taxes, on investment activity for the periods being reported. For
STFC, this amounts to $0.02 for the quarter and $0.11 for 2004 year to date
compared to $0.07 and $0.13 for the same periods in 2003.
* * * * * *
STFC has scheduled a conference call with interested investors for Tuesday, July
27, 10:00 a.m. ET to discuss the company's second quarter 2004 performance. Live
and archived broadcasts of the call can be accessed via links on www.STFC.com. A
replay of the call can be heard beginning at noon July 27, by calling
1-888-568-0148. Supplemental schedules detailing the company's second 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.
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STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(numbers in millions, except per-share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2004 2003 2004 2003
---- ---- ---- ----
Net premiums written $ 262.4 $ 254.5 $ 515.4 $ 491.0
--------- --------- --------- ---------
Earned premiums 252.4 241.7 501.1 474.1
Net investment income 17.8 15.8 35.3 31.5
Net realized gains on investments 1.3 4.2 6.7 8.0
Other income 1.6 1.5 3.1 2.9
--------- --------- --------- ---------
Total revenue 273.1 263.2 546.2 516.5
--------- --------- --------- ---------
Income before federal income taxes 49.2 8.9 95.2 37.5
Federal income taxes 14.6 0.6 28.2 8.1
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Net income $ 34.6 $ 8.3 $ 67.0 $ 29.4
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Earnings per share:
- basic $ 0.87 $ 0.21 $ 1.69 $ 0.75
- diluted $ 0.85 $ 0.21 $ 1.65 $ 0.74
Earnings per share from operations *:
- basic $ 0.85 $ 0.14 $ 1.58 $ 0.62
- diluted $ 0.83 $ 0.14 $ 1.54 $ 0.61
Weighted average shares outstanding:
- basic 39.8 39.2 39.7 39.1
- diluted 40.8 40.0 40.7 39.9
Book value per share $ 14.69 $ 13.08
Dividends paid per share $ 0.040 $ 0.035 $ 0.080 $ 0.070
Total shares outstanding 39.9 39.3
GAAP ratios:
Loss and LAE ratio 57.9 75.6 58.6 70.1
Expense ratio 29.1 28.2 29.7 29.5
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Combined ratio 87.0 103.8 88.3 99.6
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* Net income from operations:
Net income $ 34.6 $ 8.3 $ 67.0 $ 29.4
Less net realized gains on investments,
less applicable federal income taxes 0.8 2.7 4.4 5.2
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Net income from operations $ 33.8 $ 5.6 $ 62.6 $ 24.2
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