State Auto Financial Reports Fourth Quarter and Year End 2018 Results

Business Wire 14-Feb-2019 6:00 AM

  • Quarterly net loss of $0.57 per diluted share including $1.25 per diluted share, or $54.1 million, of after-tax net unrealized loss on investments
  • Quarterly net income from operations2 of $0.67 per diluted share
  • Quarterly GAAP combined ratio of 94.6%
  • Return on equity of 1.5%
  • Book value per share of $19.79

State Auto Financial Corporation (NASDAQ:STFC) today reported a fourth quarter 2018 net loss of $24.5 million, or $0.57 per diluted share, which included $54.1 million, or $1.25 per diluted share, of after-tax net unrealized loss on investments, versus a net loss of $6.7 million1, or $0.161 per diluted share, for the fourth quarter of 2017. Net income from operations2 per diluted share for the fourth quarter 2018 was $0.67 versus net loss from operations2 per diluted share of $0.491 for the same 2017 period. The fourth quarter 2017 net loss and net loss from operations included a charge of $36.4 million, or $0.86 per diluted share, related to the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA).

For the year ended 2018, STFC had net income of $12.8 million, or $0.29 per diluted share, which included $45.3 million, or $1.04 per diluted share, of after-tax net unrealized loss on investments, compared to a net loss of $10.7 million1, or $0.251 per diluted share, for the same 2017 period. Net income from operations2 per diluted share for the year ended Dec. 31, 2018 was $1.20 versus a net loss from operations2 per diluted share of $1.261 for the same 2017 period. The year ended 2017 net loss and net loss from operations included the same charge of $36.4 million, or $0.86 per diluted share, related to the enactment of the TCJA.

GAAP Operating Results

STFC's GAAP combined ratio for the fourth quarter 2018 was 94.6 compared to 100.71 for the same 2017 period. Catastrophe losses during the fourth quarter 2018 accounted for 2.6 points of the 56.8 total loss ratio points, or $8.1 million, versus 2.6 points of the total 62.71 loss ratio points, or $8.3 million, for the same period in 2017. Non-catastrophe losses during the fourth quarter 2018 included 7.9 points of favorable development relating to prior years, or $24.4 million versus 4.1 points, or $12.9 million, for the same period in 2017.

Net written premium for the fourth quarter of 2018 decreased 1.1% compared to the same period in 2017. By segment, net written premium for personal and commercial increased 13.9% and 3.9%, respectively, while the specialty segment reported negative written premium as a result of our exit from this business. The increase in the personal segment was primarily due to rate actions taken to improve the profitability in personal auto, new business growth, and a higher level of policies in force for the fourth quarter 2018 compared to the fourth quarter of 2017. The increase in the commercial segment was primarily driven by rate increases and a higher level of new business production from commercial auto and middle market commercial during the fourth quarter 2018 compared to the fourth quarter of 2017. Partially offsetting the increase was a decline in small commercial package new business during the fourth quarter 2018 compared to the fourth quarter 2017.

STFC's GAAP combined ratio for the year ended 2018 was 100.6 compared to 107.71 for the same 2017 period. Catastrophe losses impacted the loss ratio for the year ended 2018 by 5.8 points, or $71.7 million, compared to 9.7 points, or $124.0 million for the year ended 2017. Non-catastrophe losses for the year ended 2018 included 6.2 points of favorable development relating to prior years, or $76.6 million, versus 3.2 points of favorable development, or $41.4 million, for the same period in 2017.

Net written premium for the year ended 2018 decreased 4.7% compared to the same 2017 period. By insurance segment, net written premium for the personal and commercial segments increased 19.1% and 3.6%, respectively, and the specialty segment decreased 93.2%, as a result of our exit from this business. The increases in net written premium in the personal and commercial segments were due to the same factors discussed above for the fourth quarter.

SAP Personal and Commercial Operating Results

The SAP personal and commercial segments', our ongoing insurance segments, combined ratio3 for the fourth quarter 2018 was 92.8 compared to 97.1 for the same 2017 period. Catastrophe losses during the fourth quarter 2018 accounted for 2.3 points of the 54.8 total loss ratio points, or $6.9 million, versus 0.4 points of the total 59.2 points or $1.0 million for the same period in 2017. Non-catastrophe losses and ALAE during the fourth quarter 2018 included 7.8 points of favorable development relating to prior years, or $23.3 million, versus 5.5 points or $14.5 million, for the same period in 2017.

The SAP personal and commercial segments' combined ratio3 for the year ended 2018 was 98.6 compared to 102.3 for the same 2017 period. Catastrophe losses for the year ended 2018 accounted for 6.2 points of the total 63.0 loss ratio points, or $70.3 million, versus 6.8 points of the total 67.6 loss ratio points, or $70.1 million for the year ended 2017. Non-catastrophe losses and ALAE for the year ended 2018 included 7.0 points of favorable development relating to prior years, or $79.7 million, versus 4.4 points of favorable development, or $45.6 million, for the same period in 2017.

Book Value and Return on Equity

STFC's book value was $19.79 per share as of Dec. 31, 2018, a decrease of $0.45 per share from STFC's book value on Sept. 30, 2018. The decrease was driven by the market value of our investment portfolio. Return on stockholders' equity for the twelve months ended Dec. 31, 2018, was 1.5% compared to (1.2)% for the twelve months ended Dec. 31, 2017.

STFC's Chairman, President and CEO Mike LaRocco commented on the quarter and year as follows:

"The fourth quarter and year 2018 results continued our positive momentum and further validated the bold strategic and operational decisions we've made since 2015. We're now an emerging digital company, focused on writing personal auto and home, small and middle market commercial, farm and ranch, and workers' compensation. Those lines produced 12.5% net written premium growth and a combined ratio of 98.6% for 2018, only the second year of profitable growth in 11 years.

"I couldn't be more proud of our associates and distribution partners for their hard work. Thanks to them, we've made remarkable progress in a short period of time. We're justifiably proud, but we know we must get even better. There is still much room for improvement and we will remain diligent as we move forward. However, our 2018 results demonstrate that we now have a solid foundation upon which we can profitably grow and outperform the industry."

About State Auto Financial Corporation

State Auto Financial Corporation, headquartered in Columbus, Ohio, is a super regional property and casualty insurance holding company and is proud to be a Trusted Choice® company partner. STFC stock is traded on the NASDAQ Global Select Market, which represents the top fourth of all NASDAQ listed companies.

The insurance subsidiaries of State Auto Financial Corporation are part of the State Auto Group. The State Auto Group markets its insurance products throughout the United States, through independent insurance agencies, which include retail agencies and wholesale brokers. The State Auto Group is rated A- (Excellent) by the A.M. Best Company and includes State Automobile Mutual, State Auto Property & Casualty, State Auto Ohio, State Auto Wisconsin, Milbank, Meridian Security, Patrons Mutual, Rockhill Insurance, Plaza Insurance, American Compensation and Bloomington Compensation. Additional information on State Auto Financial Corporation and the State Auto Insurance Companies can be found online at http://www.StateAuto.com/STFC.

1As previously reported, the results for the fourth quarter and year ended Dec. 31, 2017, have been restated to correct an error discovered during the first quarter of 2018 relating to the calculation of deferred acquisition costs (DAC) along with making other adjustments not previously recorded relating to that same time period. Although the error was immaterial to STFC's previously issued financial statements, the cumulative correction would have a material effect on the 2018 financial statements. Accordingly, the results for the fourth quarter and year ended Dec. 31, 2017, throughout this release have been adjusted to incorporate the revised amounts, where applicable. Please refer to our quarterly report on Form 10-Q for the period ending March 31, 2018 for further information.

2 Net earnings (loss) from operations, a non-GAAP financial measure which management believes is informative to Company management and investors, differs from GAAP net income (loss) only by the exclusion of net investment (loss) gain, net of applicable taxes, on investment activity for the periods being reported. For STFC, this amounted to a loss of $1.25 per diluted share and $0.91 per diluted share for the fourth quarter and year ended Dec. 31, 2018, respectively, versus income of $0.32 and per diluted share and $1.01 per diluted share for the fourth quarter and year ended Dec. 31, 2017, respectively.

3 Insurance industry regulators require STFC's insurance subsidiaries to report their financial condition and results of operations using Statutory Accounting Practices ("SAP"). The SAP personal and commercial segments combined ratio is a measure used by management to evaluate STFC's operating performance for its ongoing operations. Details behind the compilation of these results can be found on page 19 of this release.

STFC has scheduled a conference call with interested investors for Thursday, Feb. 14, at 11 a.m. ET to discuss the Company's fourth quarter 2018 performance. Live and archived broadcasts of the call can be accessed at http://www.StateAuto.com/STFC. A replay of the call can be heard beginning at 2 p.m., Feb. 14, by calling 855-859-2056, conference ID 8998499. Supplemental schedules detailing the Company's fourth quarter 2018 financial, sales and underwriting results are made available on http://www.StateAuto.com/STFC 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 SUBSIDIARIES

 
Selected Consolidated Financial Data
       
Three months ended December 31 Year ended December 31
2018

2017 1

2018

2017 1

Net written premiums $ 297.6   $ 300.9   $ 1,210.3   $ 1,270.3  
 
Earned premiums 308.8 318.9 1,238.0 1,276.1
Net investment income 22.7 22.3 84.9 78.8
Net investment (loss) gain (67.9 ) 21.3 (49.7 ) 65.1
Other income from affiliates 0.8   0.6   2.6   2.3  
Total revenue 264.4   363.1   1,275.8   1,422.3  
 
(Loss) income before federal income taxes (32.5 ) 38.1 12.9 35.0
 
Federal income tax (benefit) expense (8.0 ) 44.8   0.1   45.7  
Net (loss) income $ (24.5 ) $ (6.7 ) $ 12.8   $ (10.7 )
 
(Loss) earnings per common share:
- basic $ (0.57 ) $ (0.16 ) $ 0.30 $ (0.25 )
- diluted $ (0.57 ) $ (0.16 ) $ 0.29 $ (0.25 )
Earnings (loss) per share from operations (A):
- basic $ 0.68 $ (0.49 ) $ 1.21 $ (1.26 )
- diluted $ 0.67 $ (0.49 ) $ 1.20 $ (1.26 )
Weighted average shares outstanding:
- basic 43.1 42.3 42.9 42.1
- diluted 43.1 42.3 43.4 42.1
Return on average equity (LTM) 1.5 % (1.2 )%
Book value per share $ 19.79 $ 20.63
Dividends paid per share $ 0.10 $ 0.10 $ 0.40 $ 0.40
Total shares outstanding 43.2 42.4
 
GAAP ratios:
Cat loss and ALAE ratio 2.6 2.6 5.8 9.7
Non-cat loss and ALAE ratio 54.2   60.1   58.5   62.3  
Loss and LAE ratio 56.8 62.7 64.3 72.0
Expense ratio 37.8   38.0   36.3   35.7  
Combined ratio 94.6   100.7   100.6   107.7  
 

(A)Reconciliation of non-GAAP financial measure:

Net income (loss) from operations
Net (loss) income $ (24.5 ) $ (6.7 ) $ 12.8 $ (10.7 )
Net investment (loss) gain, net of tax (53.6 ) 13.8   (39.3 ) 42.3  
Net income (loss) from operations $ 29.1   $ (20.5 ) $ 52.1   $ (53.0 )
                                 
 
   

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

($ and shares in millions, except per share amounts)
(unaudited) December 31 December 31
2018 2017 1
ASSETS
Fixed maturities, available-for-sale, at fair value (amortized cost $2,188.2 and $2,173.1, respectively) $ 2,159.5 $ 2,192.8
Equity securities 315.0 365.3
Other invested assets 48.8 56.0
Other invested assets, at cost 5.6 5.6
Notes receivable from affiliate 70.0   70.0  
Total investments 2,598.9 2,689.7
 
Cash and cash equivalents 59.8 91.5
Accrued investment income and other assets 32.4 36.5
Deferred policy acquisition costs 101.9 110.3
Reinsurance recoverable on losses and loss expenses payable 5.5 3.1
Prepaid reinsurance premiums 6.6 6.4
Current federal income taxes 5.9 4.8
Net deferred federal income taxes 67.7 58.8
Property and equipment, net 7.1   7.3  
Total assets $ 2,885.8   $ 3,008.4  
 
LIABILITIES
Losses and loss expenses payable $ 1,146.8 $ 1,255.6
Unearned premiums 584.2 611.8
Notes payable (affiliates $15.2 and $15.2, respectively) 122.0 122.1
Pension and postretirement benefits 54.0 64.5
Due to affiliate 3.1 2.7
Other liabilities 119.1   76.7  
Total liabilities 2,029.2   2,133.4  
 
STOCKHOLDERS' EQUITY
Common stock, without par value. Authorized 100.0 shares; 50.0 and 49.2 shares issued, respectively, at stated value of $2.50 per share 125.0 123.0
Treasury stock, 6.8 and 6.8 shares, respectively, at cost (117.0 ) (116.8 )
Additional paid-in capital 194.2 171.8
Accumulated other comprehensive income (58.3 ) 36.7
Retained earnings 712.7   660.3  
Total stockholders' equity 856.6   875.0  
Total liabilities and stockholders' equity $ 2,885.8   $ 3,008.4  
                 
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Statements of Income
($ in millions, except per share amounts)        
(unaudited) Three months ended December 31 Year ended December 31
2018 2017 1 2018

2017 1

Earned premiums $ 308.8 $ 318.9 $ 1,238.0 $ 1,276.1
Net investment income 22.7 22.3 84.9 78.8
Net investment (loss) gain (67.9 ) 21.3 (49.7 ) 65.1
Other income from affiliates 0.8   0.6   2.6   2.3  
Total revenues 264.4   363.1   1,275.8   1,422.3  
 
Losses and loss expenses 175.3 200.1 796.4 918.3
Acquisition and operating expenses 116.8 121.3 449.8 455.2
Interest expense 1.2 1.5 5.7 5.9
Other expenses 3.6   2.1   11.0   7.9  
Total expenses 296.9   325.0   1,262.9   1,387.3  
 
(Loss) income before federal income taxes (32.5 ) 38.1 12.9 35.0
Federal income tax (benefit) expense:
Current 0.4 (1.1 ) 0.4
Deferred (8.0 ) 44.4   1.2   45.3  
Federal income tax (benefit) expense (8.0 ) 44.8   0.1   45.7  
Net (loss) income $ (24.5 ) $ (6.7 ) $ 12.8   $ (10.7 )
(Loss) earnings per common share:
Basic $ (0.57 ) $ (0.16 ) $ 0.30   $ (0.25 )
Diluted $ (0.57 ) $ (0.16 ) $ 0.29   $ (0.25 )
Dividends paid per common share $ 0.10   $ 0.10   $ 0.40   $ 0.40  
                                 
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Consolidated Statements of Comprehensive Income
($ in millions)        
(unaudited) Three months ended December 31 Year ended December 31
2018 2017 1 2018 2017 1
Net (loss) income $ (24.5 ) $ (6.7 ) $ 12.8 $ (10.7 )
Other comprehensive income (loss), net of tax:
Net unrealized holding gain (loss) on available-for-sale investments:
Unrealized holding gain (loss) 15.2 3.4 (46.4 ) 69.0
Reclassification adjustments for gains realized in net income (0.3 ) (21.3 ) (2.0 ) (65.1 )
Income tax (expense) benefit (3.2 ) 6.9   10.1   (0.7 )

Total net unrealized holding gain (loss) on available- for-sale investments

11.7   (11.0 ) (38.3 ) 3.2  
Net unrecognized benefit plan obligations:
Net actuarial loss arising during the period (2.8 ) (1.0 ) (2.8 ) (1.0 )
Reclassification adjustments for amortization to net (loss) income:
Prior service credit (1.4 ) (1.4 ) (5.5 ) (5.5 )
Net actuarial loss 2.1 1.9 8.5 8.0
Income tax expense (benefit) 0.4   0.3   (0.1 ) (0.5 )
Total net unrecognized benefit plan obligations (1.7 ) (0.2 ) 0.1   1.0  
Other comprehensive income (loss) 10.0   (11.2 ) (38.2 ) 4.2  
Comprehensive loss $ (14.5 ) $ (17.9 ) $ (25.4 ) $ (6.5 )
                                 
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Statement of Stockholders' Equity
($ and shares in millions)    
(unaudited) Year Ended Year Ended
December 31 December 31
2018 2017 1
Common shares:
Balance at beginning of year 49.2 48.6
Issuance of shares 0.8   0.6  
Balance at end of year 50.0   49.2  
 
Treasury shares:
Balance at beginning of year and year ended (6.8 ) (6.8 )
 
Common stock:
Balance at beginning of year $ 123.0 $ 121.6
Issuance of shares 2.0   1.4  
Balance at end of year 125.0   123.0  
 
Treasury stock:
Balance at beginning of year $ (116.8 ) $ (116.5 )
Shares acquired on stock award exercises (0.2 ) (0.3 )
Balance at end of year (117.0 ) (116.8 )
 
Additional paid-in capital:
Balance at beginning of year $ 171.8 $ 159.9
Issuance of common stock 13.3 8.8
Stock awards granted 9.1   3.1  
Balance at end of year 194.2   171.8  
 
Accumulated other comprehensive (loss) income:
Balance at beginning of year $ 36.7 $ 32.5

Cumulative effect of change in accounting for equity securities and other invested assets and reclassification of stranded tax effects as of January 1, 2018

(56.8 )  
Adjusted beginning balance at January 1, 2018 (20.1 )
Change in unrealized (loss) gain on available-for-sale investments, net of tax (38.3 ) 3.2
Change in unrecognized benefit plan obligations, net of tax 0.1   1.0  
Balance at end of year (58.3 ) 36.7  
 
Retained earnings:
Balance at beginning of year $ 660.3 $ 687.9

Cumulative effect of change in accounting for equity securities and other invested assets and reclassification of stranded tax effects as of January 1, 2018

56.8    
Adjusted beginning balance at January 1, 2018 717.1
Net income (loss) 12.8 (10.7 )
Dividends declared (affiliates $10.4 and $10.4, respectively) (17.2 ) (16.9 )
Balance at end of year 712.7   660.3  
 
Total stockholders' equity at end of year $ 856.6   $ 875.1  
                 
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Statements of Cash Flow
($ millions)    
(unaudited)
Year ended December 31
2018 2017 1
Cash flows from operating activities:
Net income (loss) $ 12.8 $ (10.7 )
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization, net 8.9 12.5
Share-based compensation 11.1 4.2
Net investment loss (gain) 49.7 (65.1 )
Changes in operating assets and liabilities:
Deferred policy acquisition costs 8.4 11.5
Accrued investment income and other assets 3.9 3.5
Postretirement and pension benefits (10.5 ) (9.0 )
Other liabilities and due to/from affiliate, net 41.1 6.2
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums (2.6 ) 0.2
Losses and loss expenses payable (108.8 ) 74.0
Unearned premiums (27.6 ) (6.0 )
Deferred tax expense on share-based awards 0.3
Federal income taxes (0.1 ) 46.6  
Net cash (used in) provided by operating activities (13.4 ) 67.9  
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale (349.6 ) (505.4 )
Purchases of equity securities available-for-sale (91.4 ) (185.9 )
Purchases of other invested assets (1.8 ) (1.4 )
Maturities, calls and principal reductions of fixed maturities available-for-sale 229.8 233.6
Sales of fixed maturities available-for-sale 98.0 184.8
Sales of equity securities available-for-sale 97.8 252.7
Sales of other invested assets available-for-sale 1.2   1.1  
Net cash used in investing activities (16.0 ) (20.5 )
Cash flows from financing activities:
Proceeds from issuance of common stock 15.4 10.2
Payments to acquire treasury shares (0.2 ) (0.3 )
Payment of dividends (17.1 ) (16.9 )
Payment of credit facility issue costs (0.4 )  
Net cash used in financing activities (2.3 ) (7.0 )
Net (decrease) increase in cash and cash equivalents (31.7 ) 40.4
Cash and cash equivalents at beginning of period 91.5   51.1  
Cash and cash equivalents at end of period $ 59.8   $ 91.5  

Supplemental disclosures:

Federal income tax refund $   $ (1.6 )
Interest paid (affiliates $1.0 and $0.8, respectively) $ 5.7   $ 5.7  
                 
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Net Investment Income
($ in millions)          
unaudited 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018
Quarter to Date
Gross investment income:
Fixed maturities $ 14.5 $ 15.0 $ 14.9 $ 15.1 $ 15.0
TIPS 1.6   1.1   2.0   1.3   0.9
Total fixed maturities 16.1   16.1   16.9   16.4   15.9
Equity securities 4.8 2.5 3.1 3.0 4.8
Other 1.7   1.7   1.8   1.7   2.0
Total gross investment income 22.6 20.3 21.8 21.1 22.7
Less: Investment expenses 0.3   0.4   0.3   0.3  
Net investment income $ 22.3   $ 19.9   $ 21.5   $ 20.8   $ 22.7
 
Year to Date
Gross investment income:
Fixed maturities $ 58.1 $ 15.0 $ 29.9 $ 45.0 $ 60.0
TIPS 5.1   1.1   3.1   4.4   5.3
Total fixed maturities 63.2   16.1   33.0   49.4   65.3
Equity securities 10.5 2.5 5.6 8.6 13.4
Other 6.3   1.7   3.5   5.2   7.2
Total gross investment income 80.0 20.3 42.1 63.2 85.9
Less: Investment expenses 1.2   0.4   0.7   1.0   1.0
Net investment income $ 78.8   $ 19.9   $ 41.4   $ 62.2   $ 84.9
 
12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018
TIPS, fair value $ 155.8 $ 147.4 $ 156.5 $ 143.8 $ 142.3
TIPS, book value $ 146.5 $ 140.7 $ 150.6 $ 140.8 $ 141.2
                                       
 
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Net Investment (Loss) Gain
($ in millions)
unaudited Three months ended December 31 Year ended December 31
2018 2017 2018 2017
Realized gains:
Fixed maturities $ 0.3 $ 0.1 $ 2.0 $ 2.8
Equity securities 0.6 21.5 6.6 66.7
Other invested assets   0.1     0.2  
Total realized gains 0.9 21.7 8.6 69.7
Realized losses on the sales of securities:
Equity securities:
Sales of equity securities (0.3 ) (0.3 ) (0.9 ) (1.1 )
OTTI       (3.5 )
Total realized losses (0.3 ) (0.3 ) (0.9 ) (4.6 )
Net realized gains on investments $ 0.6   $ 21.4   $ 7.7   $ 65.1  
 
Net unrealized loss on investments(1):
Equity securities (62.5 ) (49.7 )
Other invested assets (6.0 )   (7.7 )  
Net unrealized loss on investments (68.5 )   (57.4 )  
Net investment (loss) gain $ (67.9 ) $ 21.4   $ (49.7 ) $ 65.1  
(1) Unrealized holding losses recognized during the period on securities held at the reporting date
 
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Income Taxes
($ in millions)        
unaudited
 

The following table sets forth the tax effects of temporary differences that giverise to significant portions of deferred tax assets and deferred tax liabilities:

 
December 31 December 31
2018 2017 1
Deferred tax assets:
Unearned premiums not currently deductible $ 24.3 $ 25.5
Losses and loss expenses payable discounting 19.9 22.0
Postretirement and pension benefits 11.3 13.6
Net unrealized holding losses on investments 6.1
Realized loss on other-than-temporary impairment 1.9 2.1
Other liabilities 14.8 9.2
Net operating loss carryforward 15.1 34.3
Tax credit carryforwards 2.7 3.7
Other 1.7   2.5  
Total deferred tax assets 97.8 112.9
Deferred tax liabilities:
Deferral of policy acquisition costs 21.4 23.1
Net unrealized holding gains on investments 20.3
Other 8.7   10.7  
Total deferred tax liabilities 30.1   54.1  
Net deferred federal income taxes $ 67.7   $ 58.8  
 
The following table sets forth the components of federal income taxes:
 
Three months ended December 31 Year ended December 31
2018 2017 1 2018 2017 1
(Loss) income before federal income taxes $ (32.5 ) $ 38.1 $ 12.9 $ 35.0
Federal income tax (benefit) expense:
Current 0.4 (1.1 ) 0.4
Deferred (A) (8.0 ) 44.4   1.2   45.3  
Total federal income tax (benefit) expense (8.0 ) 44.8   0.1   45.7  
Net (loss) income $ (24.5 ) $ (6.7 ) $ 12.8   $ (10.7 )
 

(A) Deferred federal income taxes for the three months and year ended December 31, 2017 include $36.4 million of deferred

tax expense as a result of the revaluation of our net deferred tax asset to the new corporate tax rate of 21.0% under the

legislation commonly known as the Tax Cuts and Jobs Act of 2017.

 
 
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Three months ended December 31, 2018 Personal Auto Homeowners Other Personal Total
 
Net written premiums $ 106.0 $ 70.1 $ 8.5 $ 184.6
Net earned premiums 105.9 66.8 7.0 179.7
Losses and LAE incurred:
Cat loss and ALAE 0.1 3.2 0.3 3.6
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (5.9 ) (0.1 ) (6.0 )
Current accident year non-cat loss and ALAE 72.2   24.7   4.2   101.1  
Total non-cat loss and ALAE 66.3   24.6   4.2   95.1  
Total Loss and ALAE 66.4 27.8 4.5 98.7
ULAE 7.2   3.7   0.2   11.1  
Total Loss and LAE 73.6 31.5 4.7 109.8
Underwriting expenses 33.2   25.7   3.1   62.0  
Net underwriting (loss) gain $ (0.9 ) $ 9.6   $ (0.8 ) $ 7.9  
 
Cat loss and ALAE ratio 0.1 % 4.8 % 5.5 % 2.0 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (5.6 )% (0.2 )% 0.2 % (3.3 )%
Current accident year non-cat loss and ALAE ratio 68.1 % 37.1 % 59.3 % 56.3 %
Total non-cat loss and ALAE ratio 62.5 % 36.9 % 59.5 % 53.0 %
Total Loss and ALAE ratio 62.6 % 41.7 % 65.0 % 55.0 %
ULAE ratio 6.8 % 5.5 % 2.4 % 6.1 %
Total Loss and LAE ratio 69.4 % 47.2 % 67.4 % 61.1 %
Expense ratio 31.3 % 36.7 % 36.4 % 33.6 %
Combined ratio 100.7 % 83.9 % 103.8 % 94.7 %
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Three months ended December 31, 2017 Personal Auto Homeowners Other Personal Total
 
Net written premiums $ 97.9 $ 59.0 $ 5.2 $ 162.1
Net earned premiums 89.2 56.1 4.7 150.0
Losses and LAE incurred:
Cat loss and ALAE (0.5 ) 0.2 (0.3 )
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (2.1 ) (0.4 ) (1.1 ) (3.6 )
Current accident year non-cat loss and ALAE 62.7   15.7   3.1   81.5  
Total non-cat loss and ALAE 60.6   15.3   2.0   77.9  
Total Loss and ALAE 60.1 15.5 2.0 77.6
ULAE 5.9   3.5   0.3   9.7  
Total Loss and LAE 66.0 19.0 2.3 87.3
Underwriting expenses 30.8   21.3   2.2   54.3  
Net underwriting (loss) gain $ (7.6 ) $ 15.8   $ 0.2   $ 8.4  
 
Cat loss and ALAE ratio (0.6 )% 0.3 % 0.4 % (0.2 )%
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (2.4 )% (0.8 )% (24.6 )% (2.5 )%
Current accident year non-cat loss and ALAE ratio 70.3 % 28.1 % 65.6 % 54.4 %
Total non-cat loss and ALAE ratio 67.9 % 27.3 % 41.0 % 51.9 %
Total Loss and ALAE ratio 67.3 % 27.6 % 41.4 % 51.7 %
ULAE ratio 6.7 % 6.3 % 6.8 % 6.5 %
Total Loss and LAE ratio 74.0 % 33.9 % 48.2 % 58.2 %
Expense ratio 31.5 % 36.2 % 39.8 % 33.4 %
Combined ratio 105.5 % 70.1 % 88.0 % 91.6 %
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Twelve months ended December 31, 2018 Personal Auto Homeowners Other Personal Total
 
Net written premiums $ 424.8 $ 273.1 $ 28.6 $ 726.5
Net earned premiums 402.0 248.8 23.1 673.9
Losses and LAE incurred:
Cat loss and ALAE 4.9 41.3 2.5 48.7
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (24.4 ) (7.3 ) (1.1 ) (32.8 )
Current accident year non-cat loss and ALAE 265.8   106.6   12.2   384.6  
Total non-cat loss and ALAE 241.4   99.3   11.1   351.8  
Total Loss and ALAE 246.3 140.6 13.6 400.5
ULAE 24.9   16.1   0.8   41.8  
Total Loss and LAE 271.2 156.7 14.4 442.3
Underwriting expenses 126.1   91.6   10.6   228.3  
Net underwriting gain (loss) $ 4.7   $ 0.5   $ (1.9 ) $ 3.3  
 
Cat loss and ALAE ratio 1.2 % 16.6 % 11.0 % 7.2 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (6.1 )% (2.9 )% (4.9 )% (4.9 )%
Current accident year non-cat loss and ALAE ratio 66.1 % 42.9 % 52.8 % 57.1 %
Total non-cat loss and ALAE ratio 60.0 % 40.0 % 47.9 % 52.2 %
Total Loss and ALAE ratio 61.2 % 56.6 % 58.9 % 59.4 %
ULAE ratio 6.2 % 6.4 % 3.3 % 6.2 %
Total Loss and LAE ratio 67.4 % 63.0 % 62.2 % 65.6 %
Expense ratio 29.7 % 33.6 % 36.9 % 31.4 %
Combined ratio 97.1 % 96.6 % 99.1 % 97.0 %
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Twelve months ended December 31, 2017 Personal Auto1 Homeowners Other Personal Total1
 
Net written premiums $ 363.2 $ 227.9 $ 18.9 $ 610.0
Net earned premiums 341.0 220.7 18.9 580.6
Losses and LAE incurred:
Cat loss and ALAE 7.9 34.4 1.1 43.4
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (4.4 ) 1.5 1.3 (1.6 )
Current accident year non-cat loss and ALAE 241.6   87.7   7.5   336.8  
Total non-cat loss and ALAE 237.2   89.2   8.8   335.2  
Total Loss and ALAE 245.1 123.6 9.9 378.6
ULAE 21.7   14.8   1.2   37.7  
Total Loss and LAE 266.8 138.4 11.1 416.3
Underwriting expenses 104.2   76.0   7.1   187.3  
Net underwriting (loss) gain $ (30.0 ) $ 6.3   $ 0.7   $ (23.0 )
 
Cat loss and ALAE ratio 2.3 % 15.6 % 5.7 % 7.5 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (1.3 )% 0.7 % 7.0 % (0.3 )%
Current accident year non-cat loss and ALAE ratio 70.8 % 39.7 % 39.5 % 58.0 %
Total non-cat loss and ALAE ratio 69.5 % 40.4 % 46.5 % 57.7 %
Total Loss and ALAE ratio 71.8 % 56.0 % 52.2 % 65.2 %
ULAE ratio 6.4 % 6.7 % 6.5 % 6.5 %
Total Loss and LAE ratio 78.2 % 62.7 % 58.7 % 71.7 %
Expense ratio 28.7 % 33.4 % 37.4 % 30.7 %
Combined ratio 106.9 % 96.1 % 96.1 % 102.4 %
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
SAP Commercial Insurance Segment Results
(unaudited)
($ in millions)
    Small   Middle        
Three months ended Commercial Commercial Market Workers' Farm & Other
December 31, 2018 Auto Package Commercial Comp Ranch Commercial Total
 
Net written premiums $ 18.0 $ 28.1 $ 28.0 $ 22.9 $ 11.9 $ 4.4 $ 113.3
Net earned premiums 19.2 29.7 29.4 24.0 11.6 4.7 118.6
Losses and LAE incurred:
Cat loss and ALAE 0.9 1.4 0.9 0.1 3.3
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (2.7 ) (3.1 ) (6.9 ) (4.9 ) (0.5 ) 0.8 (17.3 )
Current accident year non-cat loss and ALAE 12.4   13.5   15.6   13.2   5.0   2.2   61.9  
Total non-cat loss and ALAE 9.7   10.4   8.7   8.3   4.5   3.0   44.6  
Total Loss and ALAE 9.7 11.3 10.1 8.3 5.4 3.1 47.9
ULAE 1.0   1.4   1.0   1.6   0.5   0.3   5.8  
Total Loss and LAE 10.7 12.7 11.1 9.9 5.9 3.4 53.7
Underwriting expenses 9.4   13.2   13.4   7.3   5.6   2.1   51.0  
Net underwriting (loss) gain $ (0.9 ) $ 3.8   $ 4.9   $ 6.8   $ 0.1   $ (0.8 ) $ 13.9  
 
Cat loss and ALAE ratio % 3.0 % 4.8 % % 7.3 % 3.0 % 2.8 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (14.4 )% (10.4 )% (23.3 )% (20.2 )% (4.8 )% 16.6 % (14.6 )%
Current accident year non-cat loss and ALAE ratio 64.7 % 45.4 % 52.9 % 55.0 % 43.7 % 46.7 % 52.2 %
Total non-cat loss and ALAE ratio 50.3 % 35.0 % 29.6 % 34.8 % 38.9 % 63.3 % 37.6 %
Total Loss and ALAE ratio 50.3 % 38.0 % 34.4 % 34.8 % 46.2 % 66.3 % 40.4 %
ULAE ratio 5.1 % 4.8 % 3.5 % 6.6 % 4.0 % 5.7 % 4.9 %
Total Loss and LAE ratio 55.4 % 42.8 % 37.9 % 41.4 % 50.2 % 72.0 % 45.3 %
Expense ratio 52.3 % 46.8 % 47.8 % 32.2 % 47.6 % 47.7 % 45.1 %
Combined ratio 107.7 % 89.6 % 85.7 % 73.6 % 97.8 % 119.7 % 90.4 %
                                           
 
             

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Small Middle
Three months ended Commercial Commercial Market Workers' Farm & Other
December 31, 2017 Auto Package Commercial Comp Ranch Commercial Total
 
Net written premiums $ 16.6 $ 30.1 $ 25.9 $ 22.0 $ 11.1 $ 3.3 $ 109.0
Net earned premiums 18.6 30.9 27.9 22.5 10.5 3.5 113.9
Losses and LAE incurred:
Cat loss and ALAE (0.1 ) 0.4 0.8 0.2 1.3
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (3.3 ) (3.5 ) (2.1 ) (2.0 ) 0.2 (0.2 ) (10.9 )
Current accident year non-cat loss and ALAE 14.0   17.6   14.9   14.6   7.6   2.9   71.6  
Total non-cat loss and ALAE 10.7   14.1   12.8   12.6   7.8   2.7   60.7  
Total Loss and ALAE 10.6 14.5 13.6 12.6 8.0 2.7 62.0
ULAE 1.2   1.8   1.3   1.6   0.5   0.5   6.9  
Total Loss and LAE 11.8 16.3 14.9 14.2 8.5 3.2 68.9
Underwriting expenses 8.1   14.8   11.5   7.4   4.8   2.0   48.6  
Net underwriting (loss) gain $ (1.3 ) $ (0.2 ) $ 1.5   $ 0.9   $ (2.8 ) $ (1.7 ) $ (3.6 )
 
Cat loss and ALAE ratio (0.5 )% 1.3 % 3.2 % % 2.0 % % 1.2 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (17.5 )% (11.3 )% (7.4 )% (8.9 )% 1.5 % (5.8 )% (9.6 )%
Current accident year non-cat loss and ALAE ratio 74.9 % 56.7 % 53.0 % 64.7 % 72.6 % 87.7 % 62.9 %
Total non-cat loss and ALAE ratio 57.4 % 45.4 % 45.6 % 55.8 % 74.1 % 81.9 % 53.3 %
Total Loss and ALAE ratio 56.9 % 46.7 % 48.8 % 55.8 % 76.1 % 81.9 % 54.5 %
ULAE ratio 6.6 % 6.1 % 4.7 % 7.4 % 4.8 % 11.0 % 6.1 %
Total Loss and LAE ratio 63.5 % 52.8 % 53.5 % 63.2 % 80.9 % 92.9 % 60.6 %
Expense ratio 49.4 % 49.1 % 44.3 % 33.4 % 43.3 % 61.7 % 44.6 %
Combined ratio 112.9 % 101.9 % 97.8 % 96.6 % 124.2 % 154.6 % 105.2 %
                                           
 
             

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Small Middle
Twelve months ended Commercial Commercial Market Workers' Farm & Other
December 31, 2018 Auto Package Commercial Comp Ranch Commercial Total
 
Net written premiums $ 77.1 $ 119.2 $ 118.8 $ 89.0 $ 46.8 $ 18.9 $ 469.8
Net earned premiums 75.1 120.9 114.4 90.7 45.0 18.2 464.3
Losses and LAE incurred:
Cat loss and ALAE 0.2 10.7 7.2 3.3 0.2 21.6
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (8.4 ) (9.6 ) (12.2 ) (13.3 ) (2.7 ) (0.7 ) (46.9 )
Current accident year non-cat loss and ALAE 47.3   68.8   71.5   56.5   22.1   8.2   274.4  
Total non-cat loss and ALAE 38.9   59.2   59.3   43.2   19.4   7.5   227.5  
Total Loss and ALAE 39.1 69.9 66.5 43.2 22.7 7.7 249.1
ULAE 4.2   6.2   5.6   7.2   1.8   1.1   26.1  
Total Loss and LAE 43.3 76.1 72.1 50.4 24.5 8.8 275.2
Underwriting expenses 35.8   53.6   49.5   29.1   21.3   8.2   197.5  
Net underwriting (loss) gain $ (4.0 ) $ (8.8 ) $ (7.2 ) $ 11.2   $ (0.8 ) $ 1.2   $ (8.4 )
 
Cat loss and ALAE ratio 0.3 % 8.8 % 6.3 % % 7.3 % 1.2 % 4.6 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (11.2 )% (7.9 )% (10.6 )% (14.7 )% (6.0 )% (4.1 )% (10.1 )%
Current accident year non-cat loss and ALAE ratio 63.0 % 56.9 % 62.5 % 62.3 % 49.2 % 45.3 % 59.1 %
Total non-cat loss and ALAE ratio 51.8 % 49.0 % 51.9 % 47.6 % 43.2 % 41.2 % 49.0 %
Total Loss and ALAE ratio 52.1 % 57.8 % 58.2 % 47.6 % 50.5 % 42.4 % 53.6 %
ULAE ratio 5.6 % 5.1 % 4.9 % 7.9 % 3.9 % 5.9 % 5.6 %
Total Loss and LAE ratio 57.7 % 62.9 % 63.1 % 55.5 % 54.4 % 48.3 % 59.2 %
Expense ratio 46.5 % 44.9 % 41.6 % 32.7 % 45.6 % 43.3 % 42.0 %
Combined ratio 104.2 % 107.8 % 104.7 % 88.2 % 100.0 % 91.6 % 101.2 %
                                           
 
             

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Small Middle
Twelve months ended Commercial Commercial Market Workers' Farm & Other
December 31, 2017 Auto Package Commercial Comp Ranch Commercial Total
 
Net written premiums $ 73.5 $ 123.8 $ 111.1 $ 88.4 $ 42.6 $ 14.2 $ 453.6
Net earned premiums 76.2 127.4 109.1 88.8 39.6 14.6 455.7
Losses and LAE incurred:
Cat loss and ALAE 0.8 12.4 8.4 5.1 26.7
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (8.9 ) (11.4 ) (8.2 ) (8.9 ) (0.9 ) (5.7 ) (44.0 )
Current accident year non-cat loss and ALAE 53.6   72.5   58.8   59.1   23.9   8.3   276.2  
Total non-cat loss and ALAE 44.7   61.1   50.6   50.2   23.0   2.6   232.2  
Total Loss and ALAE 45.5 73.5 59.0 50.2 28.1 2.6 258.9
ULAE 4.5   6.1   4.8   6.7   2.1   1.1   25.3  
Total Loss and LAE 50.0 79.6 63.8 56.9 30.2 3.7 284.2
Underwriting expenses 31.5   55.7   42.5   28.4   16.3   7.7   182.1  
Net underwriting (loss) gain $ (5.3 ) $ (7.9 ) $ 2.8   $ 3.5   $ (6.9 ) $ 3.2   $ (10.6 )
 
Cat loss and ALAE ratio 1.1 % 9.7 % 7.7 % % 13.0 % 0.1 % 5.9 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (11.7 )% (9.0 )% (7.5 )% (10.0 )% (2.2 )% (38.7 )% (9.6 )%
Current accident year non-cat loss and ALAE ratio 70.3 % 57.0 % 53.9 % 66.5 % 60.1 % 57.1 % 60.5 %
Total non-cat loss and ALAE ratio 58.6 % 48.0 % 46.4 % 56.5 % 57.9 % 18.4 % 50.9 %
Total Loss and ALAE ratio 59.7 % 57.7 % 54.1 % 56.5 % 70.9 % 18.5 % 56.8 %
ULAE ratio 5.9 % 4.8 % 4.4 % 7.6 % 5.5 % 7.0 % 5.6 %
Total Loss and LAE ratio 65.6 % 62.5 % 58.5 % 64.1 % 76.4 % 25.5 % 62.4 %
Expense ratio 43.0 % 45.0 % 38.3 % 32.1 % 38.2 % 54.4 % 40.2 %
Combined ratio 108.6 % 107.5 % 96.8 % 96.2 % 114.6 % 79.9 % 102.6 %
                                           
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Statutory Personal & Commercial Insurance Segment Results
($ in millions)
unaudited
  4Q 2018   4Q 2017   YTD 2018   YTD 2017 1
 
Net written premiums $ 297.9 $ 271.1 $ 1,196.3 $ 1,063.6
Net earned premiums 298.3 263.9 1,138.2 1,036.3
Losses and LAE incurred:
Cat loss and ALAE 6.9 1.0 70.3 70.1
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (23.3 ) (14.5 ) (79.7 ) (45.6 )
Current accident year non-cat loss and ALAE 163.0   153.1   659.0   613.0  
Total non-cat loss and ALAE 139.7   138.6   579.3   567.4  
Total Loss and ALAE 146.6 139.6 649.6 637.5
ULAE 16.9   16.6   67.9   63.0  
Total Loss and LAE 163.5 156.2 717.5 700.5
Underwriting expenses 113.0   102.9   425.8   369.4  
Net underwriting gain (loss) $ 21.8   $ 4.8   $ (5.1 ) $ (33.6 )
 
Cat loss and ALAE ratio 2.3 % 0.4 % 6.2 % 6.8 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (7.8 )% (5.5 )% (7.0 )% (4.4 )%
Current accident year non-cat loss and ALAE ratio 54.7 % 58.0 % 57.9 % 59.1 %
Total non-cat loss and ALAE ratio 46.9 % 52.5 % 50.9 % 54.7 %
Total Loss and ALAE ratio 49.2 % 52.9 % 57.1 % 61.5 %
ULAE ratio 5.6 % 6.3 % 5.9 % 6.1 %
Total Loss and LAE ratio 54.8 % 59.2 % 63.0 % 67.6 %
Expense ratio 38.0 % 37.9 % 35.6 % 34.7 %
Combined ratio 92.8 % 97.1 % 98.6 % 102.3 %
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Three months ended December 31, 2018 E&S Property E&S Casualty Programs Total
 
Net written premiums $ (0.1 ) $ (0.2 ) $ $ (0.3 )
Net earned premiums 0.4 9.6 0.5 10.5
Losses and LAE incurred:
Cat loss and ALAE 1.2 1.2
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (0.7 ) (0.7 ) 0.3 (1.1 )
Current accident year non-cat loss and ALAE 0.3   10.5   0.4   11.2  
Total non-cat loss and ALAE (0.4 ) 9.8   0.7   10.1  
Total Loss and ALAE 0.8 9.8 0.7 11.3
ULAE 0.1   0.9     1.0  
Total Loss and LAE 0.9 10.7 0.7 12.3
Underwriting expenses 0.7   1.8   (0.2 ) 2.3  
Net underwriting loss $ (1.2 ) $ (2.9 ) $   $ (4.1 )
 
Cat loss and ALAE ratio 303.5 % % (11.4 )% 11.5 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (176.1 )% (6.9 )% 64.8 % (10.1 )%
Current accident year non-cat loss and ALAE ratio 85.7 % 109.3 % 58.8 % 105.9 %
Total non-cat loss and ALAE ratio (90.4 )% 102.4 % 123.6 % 95.8 %
Total Loss and ALAE ratio 213.1 % 102.4 % 112.2 % 107.3 %
ULAE ratio 22.0 % 10.3 % 4.9 % 10.5 %
Total Loss and LAE ratio 235.1 % 112.7 % 117.1 % 117.8 %
Expense ratio (1,478.1 )% (822.4 )% 859.4 % (765.6 )%
Combined ratio (1,243.0 )% (709.7 )% 976.5 % (647.8 )%
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Three months ended December 31, 2017 E&S Property E&S Casualty Programs1 Total1
 
Net written premiums $ (1.3 ) $ 26.7 $ 4.4 $ 29.8
Net earned premiums 9.1 27.0 18.9 55.0
Losses and LAE incurred:
Cat loss and ALAE 7.3 (0.2 ) 0.2 7.3
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE 1.5 0.1 1.6
Current accident year non-cat loss and ALAE 1.2   18.2   13.4   32.8  
Total non-cat loss and ALAE 1.2   19.7   13.5   34.4  
Total Loss and ALAE 8.5 19.5 13.7 41.7
ULAE 0.3   0.8   1.5   2.6  
Total Loss and LAE 8.8 20.3 15.2 44.3
Underwriting expenses 2.4   9.7   2.6   14.7  
Net underwriting (loss) gain $ (2.1 ) $ (3.0 ) $ 1.1   $ (4.0 )
 
Cat loss and ALAE ratio 80.7 % (0.7 )% 1.0 % 13.4 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio 0.2 % 5.6 % 0.4 % 2.9 %
Current accident year non-cat loss and ALAE ratio 13.8 % 67.4 % 71.3 % 59.9 %
Total non-cat loss and ALAE ratio 14.0 % 73.0 % 71.7 % 62.8 %
Total Loss and ALAE ratio 94.7 % 72.3 % 72.7 % 76.2 %
ULAE ratio 1.7 % 3.1 % 7.8 % 4.5 %
Total Loss and LAE ratio 96.4 % 75.4 % 80.5 % 80.7 %
Expense ratio (180.1 )% 36.4 % 60.7 % 49.5 %
Combined ratio (83.7 )% 111.8 % 141.2 % 130.2 %
                         
 
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Twelve months ended December 31, 2018 E&S Property E&S Casualty Programs Total
 
Net written premiums $ (5.6 ) $ 20.5 $ (0.9 ) $ 14.0
Net earned premiums 10.2 69.8 19.8 99.8
Losses and LAE incurred:
Cat loss and ALAE 1.7 (0.3 ) 1.4
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE (0.8 ) 2.7 1.2 3.1
Current accident year non-cat loss and ALAE 3.6   53.0   14.0   70.6  
Total non-cat loss and ALAE 2.8   55.7   15.2   73.7  
Total Loss and ALAE 4.5 55.7 14.9 75.1
ULAE 0.3   3.4   1.8   5.5  
Total Loss and LAE 4.8 59.1 16.7 80.6
Underwriting expenses 4.0   12.9   1.9   18.8  
Net underwriting gain (loss) $ 1.4   $ (2.2 ) $ 1.2   $ 0.4  
 
Cat loss and ALAE ratio 17.0 % % (1.7 )% 1.4 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (8.0 )% 3.9 % 6.0 % 3.1 %
Current accident year non-cat loss and ALAE ratio 35.6 % 76.0 % 70.6 % 70.8 %
Total non-cat loss and ALAE ratio 27.6 % 79.9 % 76.6 % 73.9 %
Total Loss and ALAE ratio 44.6 % 79.9 % 74.9 % 75.3 %
ULAE ratio 2.9 % 4.9 % 9.2 % 5.5 %
Total Loss and LAE ratio 47.5 % 84.8 % 84.1 % 80.8 %
Expense ratio (71.5 )% 63.1 % (213.7 )% 133.7 %
Combined ratio (24.0 )% 147.9 % (129.6 )% 214.5 %
       

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
($ in millions)
Twelve months ended December 31, 2017 E&S Property1 E&S Casualty Programs1 Total1
 
Net written premiums $ 30.1 $ 110.3 $ 66.3 $ 206.7
Net earned premiums 40.5 103.1 96.2 239.8
Losses and LAE incurred:
Cat loss and ALAE 52.6 0.1 1.2 53.9
Non-cat loss and ALAE
Prior accident years non-cat loss and ALAE 3.0 0.5 0.7 4.2
Current accident year non-cat loss and ALAE 9.6   71.5   70.6   151.7  
Total non-cat loss and ALAE 12.6   72.0   71.3   155.9  
Total Loss and ALAE 65.2 72.1 72.5 209.8
ULAE 0.1   3.7   5.7   9.5  
Total Loss and LAE 65.3 75.8 78.2 219.3
Underwriting expenses 17.1   39.2   20.2   76.5  
Net underwriting loss $ (41.9 ) $ (11.9 ) $ (2.2 ) $ (56.0 )
 
Cat loss and ALAE ratio 130.1 % 0.1 % 1.2 % 22.5 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio 7.5 % 0.4 % 0.7 % 1.7 %
Current accident year non-cat loss and ALAE ratio 23.7 % 69.4 % 73.7 % 63.5 %
Total non-cat loss and ALAE ratio 31.2 % 69.8 % 74.4 % 65.2 %
Total Loss and ALAE ratio 161.3 % 69.9 % 75.6 % 87.7 %
ULAE ratio % 3.6 % 5.9 % 3.9 %
Total Loss and LAE ratio 161.3 % 73.5 % 81.5 % 91.6 %
Expense ratio 57.0 % 35.5 % 30.4 % 37.0 %
Combined ratio 218.3 % 109.0 % 111.9 % 128.6 %
                         
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Statutory Insurance Segment Results
($ in millions)
unaudited
  4Q 2018   4Q 2017 1   YTD 2018   YTD 2017 1
 
Net written premiums $ 297.6 $ 300.9 $ 1,210.3 $ 1,270.3
Net earned premiums 308.8 318.9 1,238.0 1,276.1
Losses and LAE incurred:
Cat loss and ALAE 8.1 8.3 71.7 124.0
Prior accident years non-cat loss and ALAE (24.4 ) (12.9 ) (76.6 ) (41.4 )
Current accident year non-cat loss and ALAE 174.2   185.9   729.6   764.7  
Non-cat loss and ALAE 149.8   173.0   653.0   723.3  
Total Loss and ALAE 157.9 181.3 724.7 847.3
ULAE 17.9   19.2   73.4   72.5  
Total Loss and LAE 175.8 200.5 798.1 919.8
Underwriting expenses 115.3   117.6   444.6   445.9  
Net underwriting gain (loss) $ 17.7   $ 0.8   $ (4.7 ) $ (89.6 )
 
Cat loss and ALAE ratio 2.6 % 2.6 % 5.8 % 9.7 %
Non-cat loss and ALAE ratio
Prior accident years non-cat loss and ALAE ratio (7.9 )% (4.1 )% (6.2 )% (3.2 )%
Current accident year non-cat loss and ALAE ratio 56.4 % 58.3 % 58.9 % 59.9 %
Non-cat loss and ALAE ratio 48.5 % 54.2 % 52.7 % 56.7 %
Total Loss and ALAE ratio 51.1 % 56.8 % 58.5 % 66.4 %
ULAE ratio 5.8 % 6.0 % 6.0 % 5.7 %
Total Loss and LAE ratio 56.9 % 62.8 % 64.5 % 72.1 %
Expense ratio 38.7 % 39.1 % 36.7 % 35.1 %
Combined ratio 95.6 % 101.9 % 101.2 % 107.2 %
 

The following table provides a reconciliation of our statutory underwriting results to GAAP consolidated incomebefore federal income taxes for the fourth quarters and years ended December 31, 2018 and 2017:

               
($ millions) 4Q 2018 4Q 2017 1 YTD 2018 YTD 2017 1
Segment income (loss) before federal income taxes:
Insurance segments:
Personal insurance SAP underwriting gain (loss) $ 7.9 $ 8.4 $ 3.3 $ (23.0 )
Commercial insurance SAP underwriting gain (loss) 13.9 (3.6 ) (8.4 ) (10.6 )
Specialty insurance SAP underwriting (loss) gain (4.1 ) (4.0 ) 0.4   (56.0 )
Total insurance segments 17.7 0.8 (4.7 ) (89.6 )
Investment operations segment:
Net investment income