State Auto Financial Corporation (NASDAQ: STFC) today reported fourth
quarter 2007 net income of $41.7 million, or $1.01 per diluted share,
versus $44.9 million, or $1.08 per diluted share, for the fourth quarter
of 2006. Net income from operations(a) per diluted share for the fourth
quarter of 2007 was $0.99, versus $1.03 for the same 2006 period.
STFC’s GAAP combined ratio for the quarter was
85.2 versus 83.5 for the fourth quarter of 2006. Catastrophe experience,
including favorable prior accident years’
development, reduced the loss ratio by 2.3 points to 48.3 or $5.9
million, during the fourth quarter this year, compared to contributing
0.6 points of the total 47.5 loss ratio points, or $1.4 million, for the
same period in 2006. STFC’s fourth quarter
2007 revenue was $278.3 million versus $281.0 million for the same
period in 2006.
For the year 2007, net income was $119.1 million, or $2.86 per diluted
share, compared to $120.4 million or $2.90 per diluted share for 2006.
The GAAP combined ratio for 2007 was 92.8, as compared to 91.4 for 2006.
Revenue for the year of 2007 was $1.11 billion, versus $1.12 billion for
2006. STFC’s book value per share increased
13.7% during the year to a record high of $23.10 per share as of
December 31, 2007. Return on stockholders’
equity for the twelve months ended December 31, 2007 was 13.5% compared
to 15.1% for the twelve months ended December 31, 2006.
"We are pleased to report outstanding results
for the fourth quarter of 2007. Several factors contributed to our
success, including solid underwriting performance, benign weather and
catastrophe reserve releases from prior accident years. Results for the
year deteriorated somewhat, compared to 2006, but remain strong. Premium
production for the quarter was positive, confirmation the product and
systems enhancements we implemented over the past year are gaining
traction in the market. Our CustomFit personal auto product and new BOP
product enhancements have resulted in healthy increases in new business
production, complementing our strong policyholder retention. In
addition, new systems such as bizXpress and a variety of new personal
lines initiatives have made it easier for agents to quote and write more
business with us,” said STFC Chairman,
President and CEO Bob Restrepo.
"I would also like to thank our loyal agency
partners,” added Restrepo. "One
of our core strengths is the strong relationships we have with the
independent agency partners that represent State Auto. In a very
competitive marketplace, we know we can count on our agency force to
produce continued growth and profitability. Following our announced
pooling changes last year, we welcome the agents from the Beacon Group
and Patrons Group to State Auto. We look forward to 2008 and the
opportunities it offers STFC for continued success.”
STFC repurchased 720,530 shares during the fourth quarter and 813,530
shares for the year of 2007 under the previously announced share
repurchase program which authorized purchasing up to 4.0 million common
shares through December 31, 2009.
State Auto Financial Corporation, headquartered in Columbus, Ohio, is a
super regional property and casualty insurance holding company. The
company markets its personal and business insurance products exclusively
through independent insurance agencies in 33 states and is proud to be a
Trusted Choice® company partner. STFC stock
is traded on the
Nasdaq Global Select Market, which represents the top
third of all NASDAQ listed companies. The company is one of NASDAQ’s
listed companies to be named a 2007 Mergent Dividend Achiever for having
increased its dividends for ten or more years in succession.
The State Auto Insurance Companies are rated A+ (Superior) by the A.M.
Best Company. The State Auto Insurance Companies include State
Automobile Mutual, State Auto Property & Casualty, State Auto National,
State Auto Ohio, State Auto Wisconsin, State Auto Florida, Milbank,
Farmers Casualty, Meridian Security, Meridian Citizens Mutual, Beacon
National, Beacon Lloyds, Patrons Mutual and Litchfield Mutual Fire.
Additional information on State Auto Financial Corporation and the State
Auto Insurance Companies can be found online at www.StateAuto.com.
(a) Net income from operations, a non-GAAP financial measure which
management believes is informative to Company management and investors,
differs from GAAP net income 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 $0.02 per diluted
share for the 2007 fourth quarter and $0.19 for the year 2007, versus
$0.05 and $0.09 for the same 2006 periods.
STFC has scheduled a conference call with interested investors for
Thursday, February 14, 10:00 a.m. Eastern time to discuss the company’s
fourth quarter 2007 performance. Live and archived broadcasts of
the call can be accessed on www.StateAuto.com.
A replay of the call can be heard beginning at noon, February 14, by
calling 1-866-483-9089. Supplemental schedules detailing the
company’s fourth quarter 2007 financial,
sales and underwriting results are made available on www.StateAuto.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 SUBSIDIARIESCONSOLIDATED
STATEMENTS OF INCOME(unaudited)
Three Months EndedDecember 31
Year EndedDecember 31
(In millions, except per share amounts) 2007 2006 2007 2006
Net premiums written
$
242.3
$
238.7
$
1,019.8
$
1,019.5
Earned premiums
254.3
255.2
1,011.6
1,023.8
Net investment income
21.7
21.5
84.7
83.1
Net realized gain (loss) on investments
1.0
3.1
12.1
5.6
Other income
1.3
1.2
5.0
4.9
Total revenue
278.3
281.0
1,113.4
1,117.4
Income before federal income taxes
57.0
62.8
155.3
161.7
Federal income tax expense
15.3
17.9
36.2
41.3
Net income
$
41.7
$
44.9
$
119.1
$
120.4
Earnings per share:
- basic
$
1.02
$
1.10
$
2.90
$
2.95
- diluted
$
1.01
$
1.08
$
2.86
$
2.90
Earnings per share from operations (A):
- basic
$
1.00
$
1.05
$
2.71
$
2.86
- diluted
$
0.99
$
1.03
$
2.67
$
2.81
Weighted average shares outstanding:
- basic
40.8
41.0
41.0
40.9
- diluted
41.3
41.7
41.6
41.6
Book value per share
$
23.10
$
20.32
Dividends paid per share
$
0.15
$
0.10
$
0.50
$
0.38
Total shares outstanding
40.5
41.1
GAAP ratios:
Loss and LAE ratio
48.3
47.5
58.4
57.4
Expense ratio
36.9
36.0
34.4
34.0
Combined ratio
85.2
83.5
92.8
91.4
(A) Net income from operations:
Net income
$
41.7
$
44.9
$
119.1
$
120.4
Less net realized gains (losses) on investments, less applicable
federal income taxes
0.7
2.0
7.9
3.7
Net income from operations
$
41.0
$
42.9
$
111.2
$
116.7
