STFC - Earnings call transcript Q2 2018 | State Auto Financial CORP

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Operator

Welcome and thank you for standing by. At this time, all parties are in listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Today's call is being recorded.

If you have any objections, please disconnect at this time. to Investor call Tara Relations like Auto to Shull. now Corporation Financial and would turn over the State I Finance Director,

Tara Shull

Quarter and Steve President and Thank to Mike LaRocco; Today, morning, Good President CEO, joined XXXX and Vice Second CFO, I'm Chairman, you, Auto President Chief Call. Senior Officer, and Managing Earnings our and by Lines of of President Commercial Actuarial Jones. Scott Personal Senior Vice Officer, Conference Chief of Investment Lines, Labs, English; Angela. our State Vice Matt Garland; Jason Mrozek; Berkey; welcome Senior Kim Director

We remarks, Natalie our we'll contact relations prepared lines also the have questions. for new us. investor open our Schoolcraft, After joining

of end A risk available and of with may under today factors performance. risk our future are discussed from which may Such These factors financial the forward-looking forward-looking affect Exchange in financial along contained of comments is materially as may projections supplemental to and in website, the by our as reconciliations Securities press press quarterly differ Commission. well annual with include and the or the our results packet certain number non-GAAP statements. cause their those actual factors Investors which release. filings uncertainties, Our a statements, containing nature information, at involve of measures, attachment release stateauto.com, section an on financial our as to types

Chairman, call STFC's LaRocco. over President the turn to CEO, I'll and Now Mike

Mike LaRocco

Thank you and Tara everyone. good morning

ratio work indication personal around of Auto, strength and becoming combined digital-only as products, lines be this and clearest our and new and XX.X% are growth more carrier, to reducing importantly, culture, ongoing our can I profitable for turn the leakage could returning journey not core State hard lines proud. with business, paying for our XX.X% non-cap the building and, progress took more be off. statutory in quarter, new of underwriting true specialty The sophisticated another personal step of significant seen loss carriers to commercial our All Our commercial. to

of In were of Another performance changes. digital with our in the we the and are many auto product on time growing homeowners, business leading platform and our for indicator personal first is both the new lines. we lines now our focus first years. These

bold sell Our a to decision as carrier working. digital is only

increased but too dramatically, New low. retention has still business is our

are Of most course, achievement of now auto the of is for first after XXXX. insurance we poor that important years the half performance, profitable

second of Over a the last the quarter year, typically us. course [higher homeowners; cat] is quarter we’ve in for been profitable

are trends Our a expect home very forward. good and profitable we going performance

moving Our direction. towards also single this our and the are are we positioned commercial goal are well and is Small that commercial trending are auto lines personal confident results we and success. objective growth, for right profitable in

to have platform, states We of new launch the end products expect digital along September. in all the by platform new new with the the

lines. with quotes regarding design, both direction. In where encouraging similar trending will across addition, a commercial results new in digital and in profitability launch states follow-up Early commercial we these sales platform in expect the products platform we production are positive are and on the had our personal By growth umbrella September. and results digital we and very in

should piece that of strong improving trends compensation. our performance the underline have in also commercial, launch business results. taking to with been aggressive the in be within moving the targeted approach disruption. to disrupt Our to servicing segment Across a give the selling needs and in actions. note These The the we chance that underwriting right products I and of loss should direction. and final new workers desperately improvements also us have is our efforts unique, and commercial will claims platform rate the accelerate of along commercial, in

As the pricing discipline. after we success, industry losing moderate some is have seen in past the

to will vigilant if the risk, for rate right result even our is the efforts get the in We remain less growth.

I growing ranch loss, the of through result well. the must business a half. the Even of single in mention large our of product small, face to very segment first Finally, farm a and continues perform strong but our

we we While there satisfied. I am the view interpret team XXXX, realizes State do. close first the encouraged with half to is of work as where to through The are anywhere not Auto that that do much are

that more the profitability. in always become We more have in knew a growth our Our expense and gains efficient key ratio. ratio would competitive lag reflected challenge has and expense to improvement

and product is digital There to commitment required improvement shortcut. no investment. talent Our

investment the no will end we improvements through we is end, through these for While the there expense of each but begin are period ratio. heaviest companies, the our flow see because to part areas, transformational the in not of

market we In addition that Insurance. needs accomplishing meet traditional across We and distribution beyond ratio digital, allow fully goal to opportunity see to of our becoming the the the the emerging expense challenge, have product, the approach great P&C of challenge service. us of will

sights that, Now work, over significant that turn of are phase I'll from our turnaround we goals it and Mr. English. to on are set opportunities. the our emerging And with

Steve English

Thanks Mike and morning. good

diluted of a compared six earnings this six-month per reported an per basis, share basis, the diluted On $X.XX, $X.XX For of diluted the XXXX. a of per to share quarter operating of diluted basis operational share. STFC second the with the of operating XXXX. share improvement a $X.XX On This of $X.XX for loss operating an an operating $X.XX. earnings loss quarter, diluted basis, of STFC $X.XX loss on with reported of share is to earnings first and earnings per months a compares $X.XX an per on for

income. requires which gains securities comprehensive other net net tax, beginning gain than in the As net of results non-GAAP which in change a ASU XXXX-X accounting the on investment in reminder, to loss, losses of rather be or operating reflects unrealized XXXX and impact the equity pronouncement exclude income in reported new

unrealized $X.X of million investment $X.X from XXXX quarterly XX, combined unrealized ended quarter net in higher GAAP the was have June the the compared XXX.X second included slightly caption, net a XXX been year XX, A investment of the statement investment net gain. ratio six-month ended ago. and loss For to June million quarter income for of XXXX gain

year's combined combined However, points points of improved including first XXXX, of and XX.X months six results, ratio should prior year with auto statutory being on workers profitable On On in X.X of with over Homeowners outstanding ratios six year XXXX homeowner farm for auto improved the at XX.X lines loss XXX.X LAE last compared same both favorable contributed for for with cat points points impacted non-cat points XX.X and ratio non-cat. combined respectively. of The period spring our reserves ratio improvement. combined X.X combined progresses, a by the improved a XXX.X with up a the combined On than less ratios a hail continues the Cats was and points Cat ago. and ago, point summer, quarter. ratios, for quarter, points of storms. lessen X.X and development. and the overall a XX.X second wind Commercial X.X ratios quarter cats. up GAAP loss year ratio along Commercial reported reported favorable and X.X lines less of show of in points compensation to compared was XXX. to year-to-date as X.X ratio points the loss basis, a personal typically to basis, reflecting loss ratios XXXX, quarter, the impact early XXX.X six-month less XXX.X higher six-months development continue than XX.X second ranch combined show statutory months a with the losses of X.X the the basis, statutory six-month with quarter improvement, and actually was commercial ratio to combined

both over Our combined lines ago for results year-to-date a of year improved basis. business our insurance, quarterly personal and ongoing a statutory on commercial

estimates continue in million develop the million quarter to of compared was the reported, Our XXXX. prior-year second XX.X reserves quarter, in XX.X favorably to of overall

quarter, six million non-cat XX, months XX.X points. favorable loss X.X development compares a $XX.X second the favorable million and favorable year compared quarter reported XXXX, of developments million the development loss prior XXXX to to the prior June amounted ratio $XX.X loss to reserves X.X ratio for totaled ended ago. points. million or which $XX.X ALAE For In This for

accident the second basis current basis, loss a and of second of ratio our to quarter quarter a compared ratio six points year months on up non-cat ratio Focusing ALAE XX XX.X statutory was on commercial improved for On the of of year-to-date and from the XXXX the XXXX. personal basis, first XXXX. points X.X

citing picks liability, current commented and level Last and trends. lines, selections the accident the personal from on loss, first last year in and cost improved bodily months. For auto quarter injury for we personal new of quarter, year initial auto year's our second XXXX quarter year-to-date six business personal the

of beginning improved and The six GAAP both the ranch, we your auto expense your benefit to compared on in ago. While the we compensation points current a for year-to-date homeowner weather accident picks six for lines, compared six-month focus are quarter and rate XX.X months, year and ago, the the for is commercial months. X.X the compared workers claim to and basis. XX.X, first and actions, pick quarter and to middle-market to both a respectively improved believe commercial quarter second up current losses farm Small impact and year year. continue the impact, but ratio to fire XX.X commercial first in In was were picks quarter all and see reported up on last the package year a XX.X, of commercial The their reflecting segmentation the action initiatives. non-cat and pricing, our we

products and discussed three made build line completed technology having and during have the investments we personal products in and over rollout lines. to being commercial technology years, continue the XXXX, already We past largely and

to of ratios beginning premium exit the addition, specialty is as runs earned In specialty off. the impact

fixed space much such eliminated costs. of specialty the We staff, cost direct underwriting cost other have and overhead direct as of

we all-digital to company. be corporate a overhead remain an and However, costs transition ultimately focus as will

the the up current commercial in the These ratio six segment runoff first Speaking expense reflect months less increases and was in to the second statutory periods. specifically one allocating to points specialty ratio insurance for X.X overhead the personal quarter point. cost the and corporate segments,

system report increases with impacted connect year-over-year associated associate agent contingent compensation underwriting variable the estimated ratios. addition, and the expense In cost commissions, increased ordering in

earned this whose business policy quickly, Some as operating written has we on follows. remainder, specialty, is on business recognize programs. which the the recognized, premium the written has will an continue earned dropped on this basis comments premium and to property premium winds ceded are expect This negative in not been meaningful premium ratios down. E&S Written on to as -- contributing off basis the our as

million $X be property, expect of fourth we with for the E&S third to For premium million. quarter earned premium quarter $X.X

For million, of the be quarter XX million, third is quarter E&S fourth XXXX, expected first X quarter to casualty, the X and million.

the we in fourth. programs, the the X.X For million X in for third million and quarter quarter, expect

Finally, completed basis. our property our this past July our X, change catastrophe significant by the are of runoff where reduced reinsurance programs, million placed to of which the due The $XXX on the tree we E&S most a property limits was group we to renewal book.

million, increasing excess our the million call to at deductible. million increased deductible. that, I'll limits Our of million to but basis, X X Popping annual and a per X our we annual from adjusted with million X the eliminating with aggregate retention similar XXX and XX In million aligns the over Jason. our and fashion, treaty X risk XXX aggregate X property with million PML. eliminated loss group XXX out to million And X co-participation. the casualty On a X% million a from program turn we retention at of retention remains

Jason Berkey

and Steve, Thanks, everyone. good morning,

XX.X% XXX.X%, compared the personal ratio and restore While respectively, quarter personal this statutory XXX.X% ratio for several the and the to achieved The ratio milestone our for quarter the remains XXX% with in of in important lines work 'XX. quarters. total, lines quarter quarter, first combined the to still between fully an personal second time LAE we combined of loss second in XX.X% profitability, auto a was with

Those rate to operational on to press rate and take fully continued achieving targeted actions put claims We target on have product. retention. our combined actions pressure our continue our improvement each ratios path for in

product ago continue business from year The a signs continues lift we in the digital retention. XX% see month policies for this new of PIF on and While improving from and rollout to to new offset segment. increase lower to the each promising help quarter X.X% priority, pressure highest growth which the increased compared force, which the will in the premium, is profitability grew written same to continue

a Turning of was quarter the The XXX.X%, ratio a XX.X% now specifically. the statutory personal second ratio results with XXXX. and XX.X% loss compared for to to of quarter combined auto LAE auto in statutory and respectively, XX.X%

quarter to rate increase changes second quarter with X.X%. XX an made in The and policy the auto versus that loss, rate quarter XXXX personal with higher of XX.X%. than X.X% the changes changes measure XXXX, states in result cost. the in changes of We continue with Insurance was for quarter, is quarter our of we improvements annual auto average targeted of actions press aggressive higher. care rate is increase X.X% loss the per was rate XX.X% we closely earned average XX.X% made we take our premium the with in second per vehicle second in increase policy of XXXX, in per of X.X% average premium June XX-month increase in rolling operational approval personal In profitability. claims the states Department earned and auto XXXX, improvement watched the of In and cost June rate rate of XXXX an in XX of in organization. to rate into first the in average the increase than progress personal our made restoring change increase the rate profitability, average an XXXX. In greater we In of the rate in in XX XXXX To rate made towards Therefore are change our premium XX subject is third average we premium of rate various written XX of XX.X%. the the to XXXX, an have pipeline,

elevated level cost injury actions high necessary loss, However, trend will frequency. bodily injury, the significant to to rate further we expect address be bodily of due

for as to auto. new our overall financial our quarter ratio auto our eight second-quarter written our growth; ratio second to the as in of terms, our up to XXXX; auto is book personal personal to improvement. force auto versus in personal performance new of consecutive are business is higher, quotes product second XX% are business, auto premium expect XX.X% Therefore, on impact continue follows; new quarter XXXX, ratio September In retention quarter the XXXX. growth on have continuing XXXX a to net accounts restore of same quarter the in our was written premium in increase up Starting overall increased over net increase X.X% up time, new XXXX, pressure resulted business our XXXX we rate June Retention over improved actions both digital place profitability. a this The second At level. loss PIF above second through we a XXX% loss the our personal business the this continued loss over aggressive as policies legacy point in increase. in auto XXXX, XX.X% less from Our connected of and in product versus the see improved. overall XXXX is second result auto in see quarter penalty. continues personal pressure X.X that and PIF to XXXX, from retention

the Moving PIF onto quarter experiencing a increasing business launch over up XXXX second in increased are by new XXXX. digital lift Homeowners homeowners, from quotes second XX% our XXXX. homeowners over new the XX.X% Homeowners policies second quarter with product. also are force approximately quarter of

written increased up is observed XXXX. XX.X% of financial from premium In homeowners’ second as retention quarter XXXX New while second terms, versus June follows; of in our business homeowner’s June is down XXXX quarter accounts over XX.X% quarter net performance the XXX% are approximately XX.X% the second XXXX XXXX.

of XXXX to ALAE and experienced XX.X XX.X%, ratio is was a XXXX loss The in and in quarter weather was the second quarter. for with ALAE quarter than homeowners ratio severe second of ratio combined LAE XX.X% Colorado in due ratio and loss The points, cat XXXX points higher of Texas XX.X primarily XXX.X%. cat second second homeowners the the which quarter

XX points The taken of personal severity conclusion, than response increases in previously line, be non-cat X and the XXXX line increased rate for In of loss the quarter XXXX, in was we’ve lower in second trend quarter can ratio second XX.X% on non-weather summarized our noted reflecting point ALAE quarter claims. story XX.X% themes. to three the

profitability. personal The favorable continued period first, quarter effect the in both continued the into will below retention first to the actions those of actions increases including on book efforts, the place and quarters. due and restore and rate to development renew combined several restoration and for profit auto significant improvements claims combined was rate to in quarters ratio XXX% prior rate the auto home personal several our next operational for The significant auto time pressure

result. resulted the our of that, face over I'll in impact business. of discuss our turn has new a an ratios third, auto moderation our the loss as remains bodily same severity to book increase bodily lines in to a in due trend to new PIF. actions pure of additional claims from loss At Garland same The achieved Kim level in result headwind aggressive time, theme, trend improvement will rate in injury will trend lines operational new product. business continue Second digital lines call was continue. continue record with new the overall At injury, to increase business new And accounts at our personal ongoing our our our personal to frequency penalty, due high the increase higher to premium the With levels, time, auto business the in commercial and improvements. ongoing

Kim Garland

X.X% XQ ratio XQ versus XXXX written The XXX.X XQ and XXXX of business follows. results XQ combined XXXX. XXXX, of A XXX.X premium commercial increase in versus Jason. Thanks, as are

farm ratio. point XQ the in favorable XXXX, and year, XXXX loss is, lower statutory business whole, a on development ranch loss XX.X compared story XXXX XQ was ALAE versus this and XXXX points and driven point a loss, XQ large XXXX. reserve X.X XXXX For as ratio X.X X.X impact a X.X non-cat the ALAE the the less which versus commercial XQ in catastrophe ratio XQ higher board points The points loss by to in had XQ was

statutory ongoing profitability. commercial connect loss Commercial states to was ratios generally to our and we has launched While need launch umbrella in XX.X% XQ commercial XQ than add technology higher them estimates. by auto, continue to we BOP The be, XXXX points are due in September. commercial the XXXX six not overall contingent ratio remaining biggest agency investments expense ratios commercial are of and and in X.X where higher be inhibitor expense commission track states connect to XX on and for to commercial

straight on ratios update connect, look through an Here's to unit and good. commercial quote per continue processing cost

the and Our BOP all way compared around get are but straight XX% will time quote go. key percentages of there our in our – run than connect increasing a labor over X% to legacy And still efficient to system. commercial be The to through system. platform. on continue auto our in in connect, legacy in commercial reduction is processing our more long percentages expense ratio XX% to commercial per our with less commercial this These cost is business

premium than to XQ business on said, feedback in X.X%, Like was positive. all new business have Commercial June of June We in year-to-date of X%, to business auto closure XX%, BOP be an XXXX. ratios all in and year-to-date platform. new the first system long updated quarter lift our pricing June is and connect in percentage the and total a agency XQ July I to commercial versus commercial go has launched new premium new versus written business the this date, in been model on launch put will way May versus BOP continues of states the premium year-to-date commercial model. commercial on Also, launch up and our have connect to X.X%, with business XXXX implemented in greater increase in XXXX, written we is new down BOP seen quarter all auto year-to-date in was X.X% and with on Our second commercial XXXX was versus model XXXX XX The the BOP. quarter it XXXX. be business X.X%. new original updated written first XXXX premium the premium BOP XXXX. The with connect we commercial percentage pricing dates, June

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last written three X.X% auto be or business, things premium commercial commercial XX of in XXXX. versus over pleased XQ to small about auto our our There XX three the middle-market impact profitability actions are commercial Commercial vehicles. less vehicles note more versus XQ continue was auto to years. than up important We about the XXXX auto

a auto auto small flat our opportunity Our and is commercial business product lot while increase commercial line the is than level commercial in line. auto is middle for rate this now expense ratio, lower much states The opportunity, on new for need product need. this a addressing rate focused ratio at up product and growth are more XX%. There threat, the launch ratio market creates of line. more connect, to quarter’s this which XX% is this of sustainable need the pipeline, commercial is expense team an Expense expense rate Growth commercial this anticipate auto year-to-date commercial rate auto market currently a from enhancement is we XX%. both middle

commercial commercial the a versus is On XXXX. X.X package XQ in which ratio loss XQ XX.X package, in XX.X, into small statutory point the LAE improvement small XXXX is a

an in four improvement BOP necessary high. are our store business the restaurants classes There too are service, still rate While legacy legacy that over book, creating is it BOP convenience XXXX, underwriting issues. and are In Auto and grocery. actions. our we taking XQ carwashes,

Connect. of versus XQ with favorable our XX%, and focus general are time up XQ in in middle-market our versus XQ of XXXX. quarter our points data of seen year-to-date CPP XXXX example, in the prior revised can over small XQ the that validation XXXX premium XX.X% the on was be driven package. transition Small middle-market XXXX the Connect we loss implemented service Workers' down a into for in in volumes focus such XXXX. premium and X.X compensation than XX.X to Middle-market than in store points by launched are only is loss adverse is fact lower primarily to recent a We cycle. premium this these XX.X ratios enhancements As was legacy flat from rates and statutory an in continue is and it BOP the than which BOP market; profitability is to auto car down for be workers' XX.X% growth washes of to ratio third-party XXXX launch XQ debit the increase other property are on indications are pipeline our and driving versus is proud the XX.X% and by points commercial the XXXX this restaurants Connect around small in to Connect XXXX than and adding XX.X LAE driven higher that of development which new typical execution our in business. claims up phase the ratios entire by middle-market increased process level was is on XQ, X.X% statutory quarter-to-quarter, original of was seen in middle-market on commercial. and implemented in liability first all the Workers' when CPP most XX%. in adding revised states in for are XX CPP in compensation; continues actions commercial The XQ ratio middle not revised this during which XXXX. Connect continued written package commercial workers' more compensation the model expected and are loss growth of XXXX. BOP indications for and XQ team written free in LAE the in to launches. with rollout XQ, platform Other platform they commercial model. continue points the XXXX driven closer versus XQ classes be is production compensation are agents to XXXX, new will reserve to This rates and is our jump written development our higher model BOP and X% XQ eligible decrease X% commercial XXXX. This XX.X the market our On BOP business XQ overall XQ C relatively business to Connect the BOP discipline in sources lower XX of umbrella written high commercial operational up XXXX, X.X% the be May Connect. mod The flat of was show states in Connect we and have as launched range. states The BOP the interface with to underwriters agent negative will while increased groceries

that XQ not from found are XQ concerned better and underwriting is business our during quarter ranch; the quarter. a risk the New are the mod is for large in XX risk confinement you farm fire have this in to A loss that ratio of told caused are loss around points headline jump behind XXXX XQ we the intensity The loss and and end XXXX line. hog the LAE urgency losing we and can XQ this XX.X the of issues. team the be and large $X to XX.X% poor ranch profitability At loss the around the Farm this. prouder LA business on progress million not production XXXX. new attack points added ranch and in appropriate. by the farm of ratio XXXX quarter overly from mask so farm fire XX was of in loss some getting loss made approximately results self-inflicted I wounds may in debit than in The with post-loss is ranch net which about and in the these that renewal I farm ranch sound passion rate which and evaluation and were risk ranch and underwriting farm of With underwriting. of in could XXXX XXXX. an

XXXX ranch, open have X.X XQ actions farm XQ XX.X% XX XXXX. rate brought in These XXXX we'll rate farm farm track underwriting on managers points of that, for standards. our quality XXXX. ranch written and high in versus and historically slowed ranch to was into underwriting in are and farm down The line put and up points it's to also growth With the back questions. of of We into the auto who premium

Operator

Campbell is KBW. first [Operator question Instructions] Your Christopher with from

Christopher Campbell

morning. Hi. Yes. Good

Mike LaRocco

Chris. morning, Good

Christopher Campbell

did is one, this just seeing that this right competitors but question seeing kind lower to Jason. in script, since first BI mention been I'm just confirm the guess higher been frequencies? on for that of curious heard you we've frequencies? I I wanted have I

Jason Berkey

mention that. I Yes. did

– of going the that business We to some other mean the is of to higher part we're is I are be I about going comment the new penalties, writing business new observing as made absorb that that a well. that. frequency

Christopher Campbell

Okay.

you your So equally new more the that's or like through is new of distributed think existing it business-related business? kind and

Jason Berkey

penalty. business on the new the both, of We're business the but driver seeing will and in additional be part new

Christopher Campbell

like time. And Okay, I ratio, there and And explaining did on great. anything seeing to you you're defense notice going happening great guys just, the of or unallocated LAE the of deleveraging and then question Very there special just anything take the cost another I there? on is that's that increased a think kind expenses job helpful.

Steve English

jump Chris, concerned Not lot there our art start driven by there stuff. across at in-house segments. we anything the products claim a tends That's is think primarily is quite unallocated which really, principally this especially But and cost, right? Hey, around. not I frankly Steve. of site is that on parsing we're all-in-all There's people No. and about

Christopher Campbell

in there is as Now, downward rolls movement any number specialty off?

Steve English

tremendously. not, say, specialty role in itself down drive won't the of would number that of I

Christopher Campbell

specialized you do and How specialty staff claims and… think Okay. maybe

Steve English

but have dedicated then Yes. specialty. a in Its we or a We number. standard do, material not lot not side personal commercial its – towards line more folks

Christopher Campbell

rate final those any then in July? you're or…? on one still comp, like a the BOP, color just trending were how one; then I'm are And you thinking there weakness Great. trends auto, worker's And seeing? that continued I commercial mean,

Kim Garland

probably is of it go So, go I on to Workers' think still in mix up. see other and on and a of continue and that see the we small BOP rates continue of downs. to of ups auto sort comp CPP down commercial sort rates to side continue we

Christopher Campbell

there And or anything change rate guidelines? underwriting causing the plans in that's of

Kim Garland

No.

popped little x-ray so has probably of up on we're sort into a probably biggest that this needing talked our think that general liability smaller have us the going commercial the intensity for adequate, and focus I rate middle-market digging auto about bit, like sort on quarter. forward radar fleets from I the that's probably of the commercial auto in is between that said being screen. rate I us with on split we'll understanding And CPP more

Mike LaRocco

And Chris, Mike. is this

across degree other to is this some the products. lot -- a think digital as particularly and well interesting of sensor-based to move commercial I creates personal the on opportunities product thing with

there distribution So the telematics there the high I you'll we worked I of us be talked things kinds the different to personal that to that to we reasons expectations one about I opportunities rollout to market that as sensors line telematics, been of detection very lines the in there bring it's well able has think in and side creativity all see very of complete success think the for with once lines for us continue as a we're a side some commercial in lot and of interesting have of well. and opportunity high commercial us across Its digital which have lot well innovation opportunities hasn't happening as going there's as are well. business whether that a water the and now

segmentation lot I terms things in of of -- the evolve at probably lines. better risk and you're development see better rate commercial of and pricing there's matching So, look think going to when you across a product to

excited pretty we're So that. about

Christopher Campbell

of, are mentioned one that's had [dive just to taking what relook about Kim, at causing I trends, something you GL] And just seeing kind deeper on final like think a want to that? I Okay. one, you you there

Kim Garland

getting than more an couple is individual are industry we I is what each the think just this much in think ways risk, it's Making guess seeing risky the time that flipped creating – – is And indications to One more are finding a our two I of it the biggest business makes from making and as I is sort commercial being information area. many last dig phenomenon phenomena or classes see there a lines getting drivers. of and at to accurate lines a further. issues. less and that that price. about indication as we So always XX% maybe its above want on sure more we we're regular into is over better little there's basis -- our across refresh us right? In just actuarial sure classified, And we probably advanced efforts we've XX% then on that our less that everything come focusing incorporated classes we makes personal in

there. things those the were looking So are two at

Christopher Campbell

all in and Okay, great. third Thanks for of quarter. color the best luck the

Kim Garland

Chris. Thanks,

Operator

next Your is with [Operator question Instructions] from Larry Greenberg Janney.

Larry Greenberg

Thank morning. you and good

jumped up. auto, might? ratio year. seasonal you year loss for saw stands taking quarter, there ratio out reserve first second a quarter development first back similar year the how last what Just of the relative to improvement where second of but commercial trend and to to from quarter on had is the cats the just curious now would And comparison it we that underlying And a I'm looking characterize the big outlook back at first loss anything quarter then and if half the in the

Kim Garland

the around there we couple think inherently least of for I at are abnormally things. nothing see carriers auto. So, and commercial seasonal There's us what versus other

I bit smaller something so more jump is we when so that from we're about analysis then reserve around personal think primarily small do Connect the a with I for whatever overall the biggest one our deal books, like we every is challenges level of quarter. commercial auto writing auto where our than said little just commercial that, And what things that. book no on the rate or are really comfortable auto we which to-date is

still in may and be I think double rate digit we middle-market have action it rate actions. take to

if don't commercial question that I auto Larry. got you but some that's to So -- know exactly your for color got

Larry Greenberg

versus rates then be Yes. Thanks portfolio new money color Kim. roll-off a for give on the little us just investment That if was helpful. might you on maybe And Steve, could where rates?

Mike LaRocco

Jones Larry, will mean, I respond Scott Hey, that. actually to

Larry Greenberg

Okay.

Scott Jones

which probably Hi, market, tad is rolling better new on a off. X.X right what's we're experiencing money about rates Larry, the in than a now

help to the seeing out as us So the and continues rates Fed money some on there we're improvements side. raise new

Larry Greenberg

look equities, what seasonality guys. And good is the right -- a of pretty at been with a quarter you, pretty is know dividends. the there's now? good we past seasonal know I for I dividend fourth some -- we expect that the in should past then quarter Is representation

think foreign some kind or of have something fund I like you that?

Scott Jones

pay and in the a investments we some in second We in yields owned MLP little that have than we income. higher bump annually of securities. second fourth because which quarter higher have got seasonality of the do percentage carry past, few quarter the most the funds dividend We causing that's in that a than bit equity in do the quarter

Larry Greenberg

just that retention. Or of you guys And supersedes that? aggressive happening is might then Great. just a of the be And putting efforts price? Are you're what's else Thanks. on kind my really its there finding beyond on anything last some rates function there remediation question, through? just that

Mike LaRocco

Yes.

us or but impact are that is, there's or just kind agents fairly distribution think reflect come when are paper. and we this impact, this get the That taking who in digital Larry, of I a -- difficult to is personally when three having don't of your things, and journey. Mike, it order. on decision time can't going was some that checks customers have there go handful just digital either you're made completely or not partners run who not there they their a small to addressing with make the reverse probably of you cash into transition didn't There a

The the coming retention there, to and Those truly hit going agents see about of a of were way different the rate of know to aware by issues. us bad when of the that over in yet were there thinking variance renewal the in second wall, they There be see those what's a understand -- rate states. ourselves some minor is again piece for the had them the because business of people issue customer, have start states were really this this a who very dumpster on to we hasn't biggest years we other with on even where though fires our basis. who place. clear way conducting it, getting of – the some it results that that and going comfortable they aggressive to They within writing you're customers better even the doing had basically lot is out move And to are that really ones you want to are about I action. to understand already there's move have are to they're policyholder that The business. a

aggressively Georgia to get were rates Colorado and we did states in that and alignment. to make like to I to move needed sure think our we really get our could where profitability we they everything back had be

biggest the impact that. movement, on on So, our by based retention far on was

that's in line the Now primarily personal side.

fleet of and small of line terms we're nonrenewal and our identifying sure making Kim's the -- auto actions situation reduced business fleets I our were comfortable through we commercial really think space, a efforts again that and the already proud results in large mentioned underwriting of very that small our space in commercial reduced commercial where pretty side On we're were now in excellent there's a on of we aggressive taken. lot we larger writings our side.

forward will is legacy from as move that and we something some retention lot were expense and that weren't There once retention. we're So doing standpoint that doing we're individual legacy to to want business, importance numbers. stuff challenges a that there's create things by-state initiated we And but overall that Rate some fleet those impacted driver, really as have the fight as our but basis. performing. of of an really on going again were primary from There that these things the with standpoint work onto things from were agents on completely I again action we're there's move from we to. the large going a the lot efficiency standpoint doing onto well, digital careful. the from behind an we're is a committed commercial customers our through be to and digital systems again system

to So retention we is forward. move want this again, going we're for everything But that to a company have around while. doing takes face look a how picture one we're challenge we this big at

Larry Greenberg

Thank you.

Operator

Instructions] [Operator

Tara Shull

Auto you for our Investor new a role and third currently for which XXXX. call and continued you the contact, into your is quarter Auto. you X, of to is my speaking I State on support last State participating again with interest This move Thursday, for for call here at November earnings your as conference of Relations scheduled look call forward want our for question. We thank all Financial Thank in We to Corporation.

Thank Natalie So the Schoolcraft. a you have and day. facilitated next call by good will be

Mike LaRocco

everybody. Thanks

Operator

conclude This today's conference. does

may now You disconnect.

State Auto Financial (STFC) 6 Aug 182018 Q2 Earnings call transcript