State Auto Financial Corporation (Nasdaq:STFC) today reported a second quarter 2012 net loss of $2.7 million, or $0.07 per diluted share, versus a net loss of $214.1 million*, or $5.33 per diluted share*, for the second quarter of 2011. Net loss from operations** per diluted share for the second quarter 2012 was $0.18 versus net loss from operations** of $5.43 for the same 2011 period*.
STFC’s GAAP combined ratio for the second quarter 2012 was 110.4 versus 147.4* for the second quarter of 2011. Catastrophe losses, net of reinsurance recoveries, for the second quarter 2012 accounted for 13.2 points of the 78.1 total loss ratio points, or $34.0 million, versus 44.3 points of the total 114.0 loss ratio points, or $156.1 million, for the same period in 2011.
The State Auto Group’s homeowners quota share reinsurance arrangement reduced STFC’s underwriting loss by $24.4 million or 6.8 points on the combined ratio. Pursuant to the arrangement, STFC ceded $47.7 million of written premium, $41.8 million of earned premium, $30.1 million of catastrophe losses and $24.0 million of non-catastrophe losses, and recognized $12.1 million of ceded commissions. This cession reduced STFC’s overall catastrophe loss ratio 8.2 points, increased the overall non-catastrophe loss ratio 1.0 points and increased the overall expense ratio 0.4 points.
Net written premium for the second quarter of 2012 decreased 30.4% over the same period in 2011. The homeowners’ quota share reinsurance arrangement and the year-end pooling change collectively contributed the entire amount of this decline. By segment, net written premium for the second quarter of 2012 decreased 42.7% for personal insurance, 11.8% for business insurance and 20.8% for specialty insurance from the same period in 2011. Excluding the impact of the quota share reinsurance arrangement and pooling change, net written premium for the second quarter of 2012 increased 0.8%*** from the same period in 2011, with the business insurance segment contributing primarily to the overall growth. The business segment growth was principally driven by higher average new business premium and increased renewal pricing. Excluding the impact of the quota share and pooling change, net written premium for the second quarter decreased 1.8%*** for the personal insurance segment, increased 8.5%*** for the business insurance segment and decreased 2.4%*** for the specialty insurance segment from the same period in 2011.