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State Auto Financial Reports Second Quarter 2011 Results

Stocks in this article: STFC

State Auto Financial Corporation (NASDAQ:STFC) today reported a second quarter 2011 net loss of $201.4 million, or $5.01 per diluted share, versus a net loss of $26.2 million, or $0.66 per diluted share, for the second quarter of 2010. Net loss from operations* per diluted share for the second quarter 2011 was $5.11 versus a net loss from operations* of $0.66 for the same 2010 period. The previously announced charge to establish a deferred tax asset valuation allowance in the amount of $115 million reduced STFC’s per share results by $2.86 for the second quarter and the first six months of 2011.

STFC’s GAAP combined ratio for the second quarter 2011 was 147.0 versus 115.2 for the second quarter of 2010. Catastrophe losses for the second quarter 2011 accounted for 44.3 points of the 114.0 total loss ratio points, or $156.1 million, versus 18.6 points of the total 81.5 loss ratio points, or $57.5 million, for the same period in 2010.

Net written premium for the second quarter of 2011 increased 9.9% over the same period in 2010. The Rockhill unit, which is now in the intercompany reinsurance pooling arrangement, contributed 7.1 points to this growth, while the State Auto legacy business contributed 2.8 points. For the second quarter of 2011, net written premium for the personal and business insurance segments declined 3.0% and 0.8%, respectively, compared to the same period in 2010, while net written premium for the specialty insurance segment increased $42.3 million compared to the same period in 2010. The increase in net written premium for the specialty insurance segment was principally driven by the addition of Rockhill to the pooling arrangement and increased business written through Risk Evaluation and Design (RED), STFC’s affiliate for alternative risk and program business. STFC’s book value was $16.77 per share as of June 30, 2011, a decrease of $4.77 per share from STFC’s book value on March 31, 2011. The decrease in book value per share included $2.86 attributable to the establishment of the deferred tax asset valuation allowance. Return on stockholders’ equity for the twelve months ended June 30, 2011 was negative 20.3% compared to 1.8% for the twelve months ended June 30, 2010.

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