STFC - Earnings call transcript Q3 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 Schoolcraft. call like Relations to now Natalie Director, would turn over the Investor I ahead. go Please

Natalie Schoolcraft

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

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

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

Mike LaRocco

you Natalie. Thank

to unprofitable digital team strategic we or hard. either has a to For the decisions. incredibly Auto culture, business changed last of three we completely future, our and strategically of aligned carrier. exited that worked State half and made decided our the We a become a not We only lines years, were number bold,

we also our fix All enough on sensor our we We our changes. skills turnaround data change number that to those analytics, because to and were new incremental products be a significant We and was had saw coming around Auto. we made necessary, industry, that knew based poor our be to operational a we distribution models. the State for increased results and addition to not work force. bold. pricing products we based we sophisticated situation in expanded and In would added strategic We built of calls, change

Over trends the last few are losses quarters we track. growth we the knew across and right as improved, on

as phase This are passion journey last is turnaround and while patience quarter’s the not indication plenty complete. change All and more patience implementing State led and work over market Their the mistakes now place. off. hard associates relevance I of Auto this in results Their point. made we that this the of of proud that passion clear a be to our could agents. years paid all their us to three has return our to

market. important and our relevant casualty on and and a know not in are the We the We hard journey. much turnaround the left challenge. us competitor ahead Completing is work simply of the relish we is property step first there

interested improvements. in We are not modest

profitably will change Our and ambition allow our is competitors. us transformational outperform to which provide grow

across term, challenge to over to and the compensation. our systems on timing benefit on, our and would we market go forward incremental the begin farm and platform, short next our can we roll more space expense that our the companies digital and move on not of by our our We’ll phase fully now expense middle noted to but of growth challenges. of We products. our Early decision growing see and legacy competitive As on were the expenses. regarding digital will and the that on ratio trying products survive improve of growth knew we’ll achieve out win, work. to wanted the We once implemented we commercial in and change ratios would both ranch, remaining focus details I provide workers following journey, complete Kim work.

commitment and of back to Our investments the we platform. provide personal benefits our operational is effect moment out across Auto and begun and we see phase scratched lines to to profitability this We’ve what have must at continued will a processes see and similar the and for implement. last is business. in and continue today build. digital the the that results turnaround hard from next new surface key and investment time, its as solid focus reflect becoming operational have deal with business and to great we we ahead. innovative becoming much we of agents. down need ratio platform, numbers journey. efficiencies. completing our better. technology middle digital The growth roll difference include which Upcoming agents foundation the will on efficient, the expense our for market of are only years that a products we lies leverage We with do versus to the improving our We to efficiency easier commercial the can work small now cost commercial We pay deliver more can State our as hope to on drive is from the our The three adding and Again,

goal. the that, and agents that and of to proven I’ll over front have drive in love team and is transformational we achieve no and become. There the that talent we’ll company have we our they be to will turn still become us. the to to challenge we extraordinary challenges positioned lofty the many out the achieve call very have overcome, to now however, associates It We’re guarantee Steve. of set difficult With

Steve English

Thanks good Mike and morning.

both strategic to operating operating operational underwriting quarter to Through last reported of first diluted operating diluted the in has per share earnings of the year-to-date XXXX. STFC months a share quarter results reflect share loss $X.XX per of operating diluted for years share. $X.XX compared per months, compared and $X.XX nine Improved quarter, $X.XX improvements the earnings nine For the now per STFC as lower diluted losses, includes reported third of year loss the levels ratio The three GAAP and overall we catastrophe accident over made quarterly years. the in of non-cat a of have XX.X decisions past combined loss half improved favorable on prior higher in well somewhat as continued which comment of XXXX This losses. I is development will ratio by moment. expense offset accident a ratios further year in

XX.X% Focusing and net XX.X. commercial personal our on of segment grew written premiums results, combined a ratio statutory with

growth combined ratio drivers GAAP XX.X% basis first of same with and and a through X.X% was the quarter for a XXX. commercial with for months in months one growth year of all On personal of was X.X% the improvement are statutory the for ago, the the This The the of compares statutory third same XXX.X. ratio in growth XXXX, ratio combined combined when was nine ratio the of XX.X for exception. combined nine as to

$X.X A in from Our third which segment. hurricane slightly those experienced significant portion losses were now specialty includes runoff ago, commercial million quarter a for Harvey Florence. higher XXXX, our losses with coming of personal we from hurricanes year and cat-losses and Irma

amounts income $X.X further We Jason dividend accident lines continue million prior tips. of consistent, was reserves, higher up the our led quarter to investment our will see in Kim LAE and income favorable runoff business. in across details. of XX.X% or Investment by product provide and year and of ongoing loss

tax-exempt to a income. year-over-year shift the increase the as to well For securities first as also these from in contributed nine fixed taxable’s months,

money income fixed seeing yields now are X.X%. approximately We of new

expense As the The was and our ratio points lines. I amortization up is increased incentive and both we months. point GAAP capitalized ratio report our connect for system commercial areas platform for throughout basis a of mentioned the and and personal for compensation both nine almost include a for of first up XXXX, of quarter On costs earlier, our financial cost lines, year-to-date. personal better on as X.X a quarter on expense basis, primary underwriting the higher to points the X.X for statutory to from agent quotes levels increase continue commercial associate deploy due new performance, and

process further these close farm compensation. and In status will efforts. connect package, specialty. and our on will commercial the of of for in the we on addition, I detail provide ranch building workers Kim are

earned casualty less We seated has endorsement earned audit quarter last out premium premium do E&S earned written amount point, be the We continue this first expect modest some approximate runoff below million E&S and $XX quarter. of the million. final with continues expected. $X net become to of minimal. than be E&S earned casualty Premium and premiums, being as Fourth reflects $X the and given any XXXX quarter to of material business. in will premium We each At guidance just don’t to non-renewal and programs expect million. the activity reinsurance of of see premiums property changes

premium a including as final amortization. XXXX, complete we remaining I’ll Jason. the on into XXXX, as As call mentioned activity will will final some reported reserves, deck, segment, and development primarily that, I any activity to expenses With turn final head over specialty earned just be and and deck be runoff

Jason Berkey

was good This lines, Thanks ratio Steve, morning and our XXX for another consecutive the profitable second personal below with quarter everyone. combined for quarter.

quarter loss was in ratio XXX.X% for XX.X% compared to ratio important quarter, our a reserve Auto XX.X% earn-in well State operational ongoing across business, favorable actions development. of profitability combined the personal with LAE rate third XX% statutory of as and as as Our loss In and many auto XXXX. result efforts claims the improvement on of total, the the the respectively of including aggressive and

We written personal Those our combined PIF same list personal take achieving digital targeted target in the with pressure quarter to our quarter for net has PIF rollout XXXX The continue more XX% third claims our on improvement on our double-digit auto on operational from XXXX. in lower premium continues to growth. new path retention. each continue product ratios third rate increase lines our each actions press we over At see and and of actions the put month business to somewhat up rate the time, growth and fully pressure continue retention, to on product. offset connect the from premiums

options increase and digital expenses faster IT portion self-service efficiency the our and the than non-commissioned finally, rates to connect in the a spent to growth our lower enforced XXXX products the expense improvement in the largely connect ratio following and will of to in is While commissions higher ratio quarter renewal, to quarter products, up XX.X% tied cost the XXXX, our of rate net ability expense lines service effect normalization from with enforce increased service, increasing expense product. premium processing is third of The is book of lower, our connect reduce XX.X% at our ratio premiums a connect allow The rate an is and to digital improvement from with through digital overtime affects; will personal our investment. to that percentage growth digital expense clear, renewal straight third product. from path business,

out personal Turning specifically. to auto

brought been increased We claims actions, of on some would combined journey scalability to in underwriting The sophistication XX.X% we have and profitable a personal focus now updating a actions the XX.X% and development both digital those these aggressive leakage, driving XXXX. need closing reserving stage is LAE ongoing for in auto quarter quarter. XXX.X% to to profitable regularly actions operational into have on the quarter multi-quarter turn auto. where the pricing in of apply statutory journey that connect loss be enhanced our and XX.X% platform growing to ratio Those knew loss personal our and growth. auto compared statutory minimize likelihood to us respectively product our actions to and of with personal along and to this time line. new rate the profitable and you for our third of growing growth would improvements, included the process actions unfavorable implementation improved Today, ratio efficient with auto the in We consistently ongoing journey in to for

in per closely take to measure to Going actions press auto watch XX change month operational and the intend forward, continue improvement to annual our organization. the our claims In the third versus in XXXX, of rate increase earned the loss personal premium was care profitability, change of our the premium for cost. greater we more than vehicle further improvements rolling we To in rate in in quarter cost. in rate loss targeted increase of the

actions auto In quarter. in and digital personal book and addition, product business, product legacy both rate favorable improved our The connect the on legacy our to the ratio frequency due turned improvement. injury of auto on operational the our trend loss bodily claims ongoing

our quarter auto XX.X%, loss personal personal be personal written financial restore auto X.X% the net auto aggressive ratio new loss On XX.X% new pressure are third continues other the hand, Retention we is expect up In third follows; above XX.X% written our terms, by will our was ninth are ratio. business auto versus the continue for our XXXX, as up quarter, XXXX overall growth, the improved consecutive overall premium increased level. less accounts auto on of pressured rate net PIF the to as profitability. and and performances to in place of the business personal premiums increase PIF quarter XX.X% up earn-in to quarter actions to is

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

premium third as approximately XX.X% up written XXXX XX% third accounts financial quarter third XXXX. net versus over of quarter follows; business is our New XXXX. increased homeowners’ In terms, performance homeowner’s quarter are

points third homeowners quarter the of XX.X%. points, and are quarter higher combined XXXX and was Florence. ALAE hurricane ratio homeowners ALAE third cat loss quarter X.X X.X which than loss points for the XXXX is homeowners ALAE ratio of ratio in with of of ratio cat ratio third The XXXX loss was LAE cat quarter X.X%. loss from XXXX The and a XX.X% third XX.X

pressure first, and effect The quarter our auto rate auto ratio line the the actions taken efforts. the In The third reflecting second rate quarter consecutive XX.X% story summarized increased our trend for quarter non-weather combined be in the points noted the XX.X% X line, for both lower ratio the those to quarter favorable XXX% XXXX continued the due was significant period non-cat auto personal response in third point below rate loss place and development prior book home in severity as ALAE can and we’ve combined and than to increases personal renew profit XXXX, previously increases on was of quarter retention. of of to conclusion, restoration into claims. personal on continued X

our to accounts business product additional will new time the ongoing face new in in business digital Second, new prior continued in our ratios a than business. the at continue to the loss due the from PIF, a our new level increase same higher improvement at connect in an penalty year with increase resulting headwind

pure ongoing quarters. on moderated over the auto personal first for continues claims quarter improvements. with discuss as the moderation a that, a trend in severity Garland commercial of Third, frequency to finally I’ll premium loss of And Kim trend being in call our our observed book result favorable the quarter personal then, auto lines trend the operational time With the to our legacy in bodily turn many injury results.

Kim Garland

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

umbrella XX XXXX. statutory was in the versus For loss XQ This is, points the auto compensation XXXX and middle than Alabama DOI in this the points and the ratios and compared Virginia them launched statutory the requires specialized Carolina commercial quarter ALAE to and generally incentive X.X XQ non-cat to and was profitability. was commercial for Commercial continue not [ph] connect market, higher in states waiting our auto on higher – them approvals technology X.X all to ratio ratio a where expense XXXX estimates. North which need programming. of XXXX. loss our except loss non-cat commercial ongoing connect we commercial to business Commercial points need BOP, commercial has ratio be story for overall expense X of higher XQ as The are XQ we whole, XQ are higher ratios biggest where be by XX.X% commercial to to and driven be due ALAE being inhibitor and investment XXXX and

final has The started. workers of systems build, compensation farm of third and the wave our build out and and CPP the core ranch, for Connect

connect. commercial on Some updates

Our good. and on it in Straight new has business increased in connect, Through commercial To Processing to rates look date, auto has decreased commercial continue BOP.

from versus XXXX. premium Last new with fact pricing new we of year-to-date is we that the had September platform. year-to-date being auto, down XX%, XQ updated of personal XX% up historical between new premium launch the September dates, adopted BOP This the new XQ has down now year-to-date commercial business benefits that XXXX XXXX in Bob model quarter, in XXXX, XXXX. XXXX. BOP BOP For agents are BOP new that BOP pricing September we business lines new increase up X%, year-to-date states. launched an The seen model. model agents had of driver versus is The September count is business updated the policy the not have May our implemented premium our our commercial Bob ratios discussed business been connect all closure versus and with historical yet

model accustomed price Our longer underwriter to the then historical than produce previously will be small small on operationally. is price surprising model time, commercial able historical over policies. historical us ratio that this credits agents auto operate commercial is to It is have expense straight transition and new commercial massive departure being state the commercial on And get them, price auto. group we acceptable their commercial. to touching are long-term get credit a for debit their through the commercial for it processing, to model new have to to through our on an from model of there price a touch touch this to model, benefits on to small better policies and to experience a model scale This debits small a small or We and a from call no rapidly model with commercial is transition, loss ratio have able but price these agents dividing to no a is our of group to their state taking small have not were

we transition So difficult, to while have and this will through is it. fight

and bet the built an umbrella four commercial to ratio commercial keep servicing have economics expense can of will much ranch, enough and eye level commercial commercial platform that this moving Our enough compensation, and pieces auto, writing level built the scale that and creates some ratios following; workers achievable at BOP all-in expense – where to ratio. of of expense farm and scale, we low are umb auto and this a the a and are achieve -- policy commercial have that lower the a a on unit commercial moving volume much put commercial for it lower and on BOP, the a build on CPP we we creates platform

we We eye The believe pieces moving The platform it commercial created rolled umbrella commercial way are of for this through fourth process. has built keep one work. has to on following. economics will the that and are unit been the BOP and out auto, an

cover the of system Wave and core of the of states. will and finish XXXX can ranch, X rollout virtually CPP, and build is out the be Wave workers of and Wave in the the Wave waves. the of about is BOP launch and thought X Our of rollout buildout and the was farm launch rollout three the commercial generally is Wave of and done, and X umbrella, compensation. launch Connect system XXXX, X core the rollout lines, personal auto the and investment and commercial X

BOP XXXX, on X decreasing. auto, products IT For umbrella, a the years. commercial ratios commercial expense over business percentage the expect In these next happen couple platform, commercial with Wave more expense we of happening will ratio will total premium for and following each to the lines, greater products, the be dynamics be ratio expense and for so should quarter decrease efficient this of increase should volume --

commercial the to compensation, of yet ratio our will should because lines X yet it products, both heaviest IT IT occurred. increases For for products, of to will overall and further not ratios In XXXX, ranch, workers provide The and these is continued state overall increase decrease the volume CPP, premium ratios year spend not Wave farm IT ratio benefits the expense X and started these we phenomena. should to expense and scale expect for rollout as the expense have increasing has products volume expense include of ratio significant decline. expense should for continue the in and Wave some

products, For platform done bulk be be IT better been the economics volumes Wave of this the implemented. should and unit X a spend should premium because increasing has

these lower as is is being noted. results auto and commercial is on premiums up decrease were a two the ratio last line in so commercial to follows. products points XXXX. XQ, And to loss for auto, accident LAE as auto the ratio expense Commercial the product every cause business each XXXX and Commercial These operating poor ratio the line as lines which decrease. results XQ, the the XX.X% The product and ratio I’ll versus overall This commercial primarily should XQ, period things start expense driven year in loss XXXX. XXXX should written in expense versus loss of XXXX. focus are the where by by line LAE X.X product previously year. ratios acquisition XQ, X.X% same are improvement for point improvement X.X current

estimate pleased auto incentive X.X for The of points ratio spend combined to our of IT reflecting extremely commercial for X.X compensation. with the be We increase the commercial continue of in progress auto. additional expense, the and in connect points includes XXX.X

our XX.X% is point versus year. commercial driven to is commercial and platform commercial for volume pricing lower models, level to XQ of XQ deterioration and prior-year we package about be which usability this by connect a X.X favorable XXXX of system. on put loss Small the development package; forward Going ratio fanatical in small improving XXXX continue LAE statutory operations need continually just the auto, more our and our

our too – loss lower Our is ratio in high. loss package small commercial

ranch our new XXXX agents was earlier down issues; the Connect XXXX. in is small XX%. commercial restaurant convenience commercial the level grocery. can XX.X% This which entire to X.X% operational middle-market by are commercial, that discipline to the this This in in good Compensation; to package points versus transition produces product restaurants and to business creating to continue this and small ratio XXXX premium X% hotel of statutory and Farm in new business to this will all was small to our Connect continue get XXXX. statutory X.X our the commercial XQ down compensation written were LAE XQ and driver is is XXXX. and and for lower Worker's XXXX results points key to classes. up seen Small necessary loss XXXX which Middle-market the than finishing up new was loss XX.X% rollout is on statutory for ratio XXXX market discussed point liability bought ratio point year-to-date four our X.X primarily the We service, business in of X.X we a LAE XQ continues versus written XXXX and XQ XX.X to historical XXXX underwriting XQ XQ the for be the and middle-market classes premiums XQ execution, take our in improvement commercial; small versus quarter, ratio quarter. commercial. in auto over loss approach Worker's premium The cycle. loss fact line, last actions of XXXX. this XXXX volumes level embrace time proud commercial of store improvement during high XXXX. Worker's LAE for middle-market be is being ratio and free XQ combined which commercial XQ a show is decline package a discussed new XQ The XX.X in be package. driven in XQ middle-market X.X% XX.X% catastrophe higher Declining in in poor driving loss than we as are Compensation in of commercial underwriters growth ranch; of the carwashes, higher XX.X% is in to growth XQ XQ a in in in As Worker's main that focus continues ratio LAE XXXX. team XQ phase farm up versus rate Compensation This written and

is As generally highest third and industry. ranch a reminder, the quarter the farm the quarter catastrophe for

You the XQ and farm elevated year-to-date grid XX ratio in ratio expense for points performance a reflect Farm shouting hog has And connect the loss this incredibly versus XXXX. ratios farm proud also is absorbed to XXX. build. and this the cost of XXX.X and the This XXXX breaking team IT combined I'm of ranch XQ confinement expense team’s of see -- core large written year. ranch in ranch distance spend of and X.X% XXXX and the for premium XQ was of of farm up the In our the which connect. second-quarter and ratio quarter. ranch and XX.X% technologies buildout expense both includes XXXX

down With questions. underwriting the Our actions growth line slow have farm and and of for that, we’ll ranch. the open rate rate

Operator

with Wells first Our Instructions] Fargo question Feldman [Operator comes from Asset Lou Management.

Lou Feldman

Nice was mistake. that a guys. on. Please apologize go I quarter

Mike LaRocco

you. Thank

Operator

KBW. is question next Christopher with Campbell from Your

Christopher Campbell

Good morning. Hi. Yes.

Mike LaRocco

Chris. morning, Good

Christopher Campbell

Congrats on the quarter.

Mike LaRocco

you. Thank

Christopher Campbell

I big kind last mean, quarter and quarter, bps little comp? just up I a great it a loss a was then I things. down obviously guess of was few. sequential, in It what's just so just ratio, workers' XXX XXX. guess like like uptick just like driving few the core

little I a trying to noise numbers? understand in So bit of just those the

Steve English

of Couple things.

Compensation around bit. Worker's a little just think bounces I

overall there and that debit some with in pressure it scale quarter up We rates, on still do that. bit. variability do so from large is downward ratio quarter. But loss we’re so ratio go be up think line. huge I down to will have wanted don't popped is where a that a even we the You workers' that okay has and to bit mod comp combined the

Christopher Campbell

premiums are that what are X% And in I see premiums line? it. trends audit in you Got the I like mean, seeing down year-over-year.

you So then trends I'm guys are book? by underwriting offset positive idea could of versus the be is an actions much how trying how that and like the get rate across economic to taking much the

Mike LaRocco

in that up. I general pop So, remember if audit was our accurately. big I the are revenue we’ve from they premiums probably premiums, first in in But quarter audit increases remember

for question actions specifically that underwriting on workers’ or was comp the board Your just in across commercial?

Christopher Campbell

business? accounts fierce get renewing accounts workers’ like competition incentivizing competitive some of lot comp maybe like possibly there a non are As to losing or if more new competitors or some they’re

Steve English

I we retention the think this new that. area than down, probably is the was are given dynamic more specially the volume in that we higher saw quarter business probably the that go guessing

combination for think our a distinguisher I claim mitigation an the we think of compensation. probably both of fighting have renewals, handling, workers’ the is And as underwriters but we’re proudest for us loss of of things also that's that sort and so our one a ability hard

we see a the moving management us higher claims couple business were but on our of stayed did handling versus where based price for renewals So we a sort in price. lower of loss they with

Mike LaRocco

Yes. And Mike. Chris, this is

its not done which the high there do bottom, seeing past probably is not are going amount that retain think getting a racing Just to with the unfortunate of start at somebody definitely been what we’ve our Kim do too if to agree to out but business. level to and able they've we competition more credit we’re competitive and in willing us a walk I far. we’re team it's But away pushes that to good a I downward that

Christopher Campbell

look bit levels, personal XXXX, to like I And a on in impressive. very it's of higher be which is Very lines just kind helpful. are profitable Okay. guess going little

we commercial do lines? there when with get So

Mike LaRocco

then allowed And has as the noted now Chris, digital standpoint off think part of got more very always get we but And know see it. write trending this really we ratio of fact not like we by platform onto BOP of the on to Yes. looking him asking expense more from ratios that in in always a efficient more be we’re I is ways right bullish in trying design, but have – our we us action we be the scale this course that operational we��re progress a to is a space really side, because I I’m we’ve and really date let say ultimately and and get happen But give lot and scale that think to. I team I it. how if commercial, commercial together for loss glad platform commercial. ask and we’re personal I not ones And in lines the expense think that his it exact did business. on I’ll build in are we’ll to one that and need in better, in And piece I’ll in give type I to question, auto I’m that. way you put middle-market start I'm our you generally plan are to careful in – add lately. his and we’re lot same probably Kim at love business get you can was significantly believe a comments Kim commercial. I challenge. commercial of the the the didn't more an answer appropriate effective so for much where they I that, are to Kim you that that lines what thing competitive to But

it Kim introductory So that take from an there. I’ll and let as give

Kim Garland

the Mike I same answer years, and so other much each I XX pretty questions he known answers would way the them.

Really always just numbers first need be. perfect the are never been the An in probably is loss segmentation where tweaking you're like general XX%. covered are viable. and generally where of sort So to are expense that four ratios all they them and not you ratio

to And lower to that personal you unit platform more creates playbook expense lines, level. saw your or and in money getting of it the spend so same ratio do build put to economics the then more solve business to efficient You it profitability unit economic right? the as is majority is and the about in that to have of that sort efficient enough you either volume on at commercial to get the platform that of sort -- don't

cycles the see with, with the of But two in been platform that are of lines you out first, longer. talked specifically that commercial more So adoption of a focused our we right, the I so about from so BOP the agents. some has personal sort dealing

more that lower of hump over all we the have scale them had of will get time to them. scale at of a platform the more ratio making on to with we believe we’ve lines one and same efficient on headwind. get the we CPP then then of investment that we compensation but ramped up -- the started to sort at there, so and as where up with probably have the process come, workers’ We the the personal start And and commercial we in get lines will be that ranch to farm and investment cycles and expense

Mike LaRocco

this we’re be don't for as I you And company, would on so of just many say company, for it's lines. last an years think for don't say but not many We so have subsidize every line but commercial. profitable profitable. guys reminder, then underwriting a line to Chris, every say, heard me okay you many profit has We a

is he's taken of anchor other but now as us competitive around than bit known Kim that the So the down, because right well. office we’re as kind little

Kim Garland

appreciate Mike. I that,

Christopher Campbell

it. Got

just Okay. final kind one And one. then of

mean, I if look -- at like year-over-year you very loss cat So impressive ratio. the like

earnings, lines? of But not personal loss so have some commercial in Irma. be line that's there guess you're property surprises like runoff just the cat normalized to and E&S with of thinking the kind I going should had get you that going in ratio that about how we now You forward a

Steve English

prior I to Hi, run Chris, specialty. kind this we say, use is back Steve. of to where could to default you would

cat of we I think are six, not on somewhere but marches time grow the business lines of seven these and that range, lot exposed. more in as point

losses to So overall on cap to auto point a maybe do half the contribute any It example that cat while of extent. line. you point, great and doesn't load get

you say, I could there. would but So kind there, downward of should trend it start from

Christopher Campbell

right. the the of all for Best luck thanks the answers. rest year. for Okay. of Well, All

Steve English

Thanks, Chris.

Operator

question [Operator with is from Larry Greenberg and Instructions] Janney Scott. next Montgomery your

Larry Greenberg

extend he that though include even in my I’ll Kim congratulations even too, I’ll and And morning. Good is the anchor.

bit So, come commercial these about nervous whether should around be agents or not to a will little connect?

Steve English

always nervous start want nervous, and not I any number everything. about overly I'm reasons. of for no, to we’re

is very itself benefit. better, people. do versus easy of we used inside the platform way reality so is to an significantly the are of the agent to But all business offices commercial for for they so traditional whether more platform adjustment significantly the understand the it's different that folks First not or

we people's in frankly things biases Secondly, of of doing the in happening a down momentum digitally across the being digitally. country, are have terms barriers so of of terms quite lot taken what's

there somewhat of agents be traditional will be very So some commercial that enter those while who reluctant to will space.

we’re perfectly personal commercial I these number personal personal with is and the commercial already a agents and think mean, of what some most as agents Number know on I side lot you to lines, Kim's come lines are space reasonable I really or of amount dominant getting. pickup has making coming direct and so all lines. think positioned with in well, our partner personal it’s in huge platform from them. of agents one. commercialize agents going had piece who of call always business, that who've agents believe non-traditional we pointed lines small if coming many around that getting that two distribution to are this of noise of a already that’s lines platform of all solidly we a is out that's this heavily number to with kind response important hit on saw is periphery you third innovation we’re And a that the more the

is that’s type worry, what I’m So overcome do, confident while certainly will because those very that we there of potential objections. very

Kim Garland

you as go platform and because drivers that commercial, maybe with traditional small you there is categorize lines going as it, you as But internally precisely who the agents experience XX% have back it’s inaccurate embraced single have $XXXX bit think really we group. was and bit them, an of kind be of life. of and phone and debit a I on to if call ratio a pick a that large high some That of and the taken more know our you no on personal historical the credit commercial a as unfair commercial little it. to forth or off of can you up And are and the you expense or than underwriter way even accurate, a was much is experience a one and get with different and just them There platform a different X% whatever. other policy have the are and

a is is there’s There $XXXX of life no gone. forth that on back on way and price no so, policy. And –

difference way help middle it the have with say of of and to more sort have experience can that out do we also, that with dramatic is on work so of market extent with our there. commercial freed this them risks of -- and have entire roll this such I’d our the that's the market probably library going we up. up in more business of that agency risks. as and or to Connect the market that sort middle And most is, middle market game you see so to And time played the underwriters as is is middle agents you’ll one of is the is group products market group advantages business middle

stuff looks them more of It’s in, and difficult way like in a agencies have so your but we You’ll of underwriter. agency commercial and and that also small making big and got it’s are which hard call ways single life change of to inside more got is two traditional also. get think a ad – risks, we you to to the talk on you middle small those the

would day transition recognize I’m from that -- to get I’m probably not the hardest one worried So, make. we we this be that almost and will there

Larry Greenberg

inning to where are want got you know in? Thanks. Great. you the game years Are that where done, leakage. need what I you of leakage you’ve be mean over it you’ve I talked it underwriting And claims you then mean, and we about it? – Is

Mike LaRocco

of seeing say gotten, in next things not phase that But But investment game processing if – of that Larry get dollars technological I criteria. the are really keep mean, be the next sell, the the rate, underwriting and I to better this real loss reducing agent the the through for pricing talk being a way that check part will important, our experience, handling, down. shut XX. out I faster went cost maybe results. claims lower about get dollars the closer underwriting service a whether reason of and terms lot early same in game, is I friction the continue because technology, don’t very to us it think and inning response think of to or been better you’re organization would further has inning taking And from to the we times journey do are that’s about the your think six of But are get of I We’ve an those of will of and payment digital two and underwriting is directly leakage can these think come professional journey how our speed pitch more will we’ve Probably what or very claims No, finely going then are think I both to further path of speed around digital road. well. different of and about writing, better. of I of terms in proven better on, allow two and it phase big we and that. level inning we I our just quote validated on what this that of do a the sixth One, quality leakage care phase they crank part spoke experience, some the and put the the just and the say claims that the payback. a about we customer ninth the experience, that. a the the have even because in innings will models maybe more And want turning digital can in are I service a what I’d of we in a to invest important meet things and get We and will want sixth works, the it as tuned down piece piece even journey certain we’ve World nine control really to we issue that and they and the should answer claims a we it’s Series big can never maybe in cusp than a

Larry Greenberg

Thanks. Great.

Operator

have We Instructions] [Operator further no questions.

Natalie Schoolcraft

We question. is with to currently our forward conference look earnings want continued Thanks for have to of interest fourth and for you and your support Thank scheduled you for your wonderful Auto again quarter State a everyone for speaking on thank XXXX. and all February you Financial in day. call participating Corporation. for call which We our XX, Thursday,

Operator

conference concludes That XXXX earnings today's you. third quarter Thank call.

disconnect. You now may

Natalie Schoolcraft	Investor Relations Director
Mike LaRocco	Chairman, President and CEO
Steve English	SVP and CFO
Jason Berkey	SVP, Personal Lines
Kim Garland	SVP of Commercial Lines and Managing Director of State Auto Labs
Matt Mrozek	Chief Actuarial Officer
Scott Jones	Chief Investment Officer
Lou Feldman	Wells Fargo Asset Management
Christopher Campbell	KBW
Larry Greenberg	Janney Montgomery and Scott

State Auto Financial (STFC) 1 Nov 182018 Q3 Earnings call transcript