State Auto Financial Reports Fourth Quarter and Year End 2017 Results

  • Quarterly loss of $0.14 per share
  • Quarterly GAAP combined ratio of 100.9
  • Return on equity of (1.2)%
  • Book value per share of $20.76

COLUMBUS, Ohio--()--State Auto Financial Corporation (NASDAQ:STFC) today reported a fourth quarter 2017 net loss of $5.8 million, or $0.14 per diluted share, versus net income of $32.5 million, or $0.77 per diluted share, for the fourth quarter of 2016. Net loss from operations1 per diluted share for the fourth quarter 2017 was $0.46 versus net income from operations1 per diluted share of $0.46 for the same 2016 period.

For the year ended 2017, STFC had a net loss of $10.7 million, or $0.25 per diluted share, compared to net income of $21.0 million, or $0.50 per diluted share, for the same 2016 period. Net loss from operations1 per diluted share for the year ended Dec. 31, 2017 was $1.26 versus net loss from operations1 per diluted share of $0.07 for the same 2016 period.

The fourth quarter and year ended 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).

GAAP Operating Results

STFC’s GAAP combined ratio for the fourth quarter 2017 was 100.9 compared to 101.3 for the same 2016 period. Catastrophe losses during the fourth quarter 2017 accounted for 2.6 points of the 62.9 total loss ratio points, or $8.3 million, versus 5.0 points of the total 68.6 loss ratio points, or $16.2 million, for the same period in 2016. Non-catastrophe losses during the fourth quarter 2017 included 3.7 points of favorable development relating to prior years, or $11.8 million, versus 1.9 points, or $6.3 million, for the same period in 2016.

Net written premium for the fourth quarter of 2017 decreased 2.1% compared to the same period in 2016. By segment, net written premium for personal increased 19.1% and commercial and specialty decreased 1.4% and 51.0%, respectively. The personal segment increase was primarily due to rate actions taken to improve the profitability in personal auto and a higher level of new business policies for the fourth quarter 2017 compared to the fourth quarter 2016. The decrease in the commercial segment was primarily driven by actions taken to improve commercial auto profitability and a reduction in workers’ compensation due to the softening market conditions during the fourth quarter 2017 compared to the fourth quarter 2016. The decline in the specialty segment was primarily due to our decision to exit specialty business.

STFC’s GAAP combined ratio for the year ended 2017 was 107.7 compared to 106.2 for the same 2016 period. Catastrophe losses increased the loss ratio for the year ended 2017 by 9.7 points, or $124.0 million, compared to 6.3 points, or $81.6 million for the year ended 2016. Non-catastrophe losses for the year ended 2017 included 3.5 points of favorable development relating to prior years, or $44.6 million, versus 2.2 points of adverse development, or $28.4 million, for the same period in 2016.

Net written premium for the year ended 2017 decreased 1.9% compared to the same 2016 period. By segment, net written premium for personal increased 5.7% and commercial and specialty decreased 1.3% and 19.7%, respectively. The segment trends were due to the same factors discussed above.

Personal and Commercial Statutory Operating Results

STFC previously announced its decision to exit the specialty insurance segment and identified its continuing operations as the personal and commercial insurance segments. The statutory personal and commercial combined ratio2 for the fourth quarter 2017 was 97.1 compared to 96.7 for the same 2016 period. Catastrophe losses during the fourth quarter 2017 accounted for 0.4 points of the 59.2 total loss ratio points, or $1.1 million, versus 3.6 points of the total 63.9 points or $9.3 million for the same period in 2016. Non-catastrophe losses during the fourth quarter 2017 included 5.2 points of favorable development relating to prior years, or $13.7 million, versus 3.0 points or $7.8 million, for the same period in 2016.

The statutory personal and commercial combined ratio2 for the year ended 2017 was 102.3 compared to 104.5 for the same 2016 period. Catastrophe losses increased the loss ratio for the year ended 2017 by 6.8 points, or $70.1 million, compared to 7.0 points, or $74.1 million for the year ended 2016. Non-catastrophe losses for the year ended 2017 included 4.7 points of favorable development relating to prior years, or $48.8 million, versus adverse development of 0.6 points or $6.8 million, for the same period in 2016.

Book Value and Return on Equity

STFC’s book value was $20.76 per share as of Dec. 31, 2017, a decrease of $0.52 per share from STFC’s book value on Sept. 30, 2017. The decrease was primarily driven by the revaluation of our net deferred tax asset due to the enactment of the TCJA. Return on stockholders’ equity for the twelve months ended December 31, 2017, was (1.2)% compared to 2.4% for the twelve months ended December 31, 2016.

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

“2017 was the year in which State Auto’s turnaround began to take hold. We delivered profitable fourth quarter results in our personal and commercial lines of business, with a statutory combined ratio of 97.1. Loss ratios in personal and commercial auto continued to improve as a result of actions we’ve taken around rates, underwriting and claims handling practices. These efforts take time to earn out in the numbers, but we have the processes and people in place to maintain our focus on improving profitability.

“Retention in our personal auto and homeowners lines declined as a result of the rate actions, but we know we can’t afford to knowingly write risks at an unprofitable rate. And while our loss ratio improved in our largest line, personal auto, our expense ratio was elevated in the fourth quarter due to continued investment in our digital technology platform and foundation and timing and changes in our agent bonus compensation plan.

“Our technology investment is critical if we’re to become more efficient as we grow profitably. In the fourth quarter, we continued the rollout of State Auto Connect for personal lines and successfully rolled out State Auto Connect for our business owners policy (BOP) and commercial auto in four states. Our decision to go completely digital is paying off, with approximately a 37% increase in new business and record quote volumes for the year in our personal lines. For the first time in eight years, we grew the number of homeowners policies written, and we ended 2017 with four straight months of auto policy count growth.

“In our continuing businesses the full year statutory combined ratio was 102.3. In late 2017, we made the tough call to exit the specialty segment. I’m pleased to say we’ve made progress toward completing agreements to exit all our lines except E&S property, which we placed in run-off in November.

“We accomplished a great deal in 2017, and I’m very proud of our team’s efforts that moved us even closer to delivering profitable growth for our policyholders and shareholders.”

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.

1 Net income (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 realized capital gains and (losses), net of applicable taxes, on investment activity for the periods being reported. For STFC, this amounted to income of $0.32 per diluted share for the fourth quarter 2017 and income of $1.01 year to date 2017 versus income of $0.31 per diluted share for the fourth quarter 2016 and income of $0.57 year to date 2016.

2The statutory personal and commercial 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 Tuesday, Feb. 20, at 11 a.m. ET to discuss the Company’s fourth quarter 2017 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. 20, by calling 855-859-2056, conference ID 51534854. Supplemental schedules detailing the Company’s fourth quarter 2017 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
($ in millions, except per share amounts)        
(unaudited) Three months ended December 31 Year ended December 31
2017 2016 2017 2016
Net premiums written $ 300.7   $ 307.1   $ 1,269.3   $ 1,293.3  
 
Earned premiums 318.7 323.8 1,275.1 1,291.9
Net investment income 22.3 20.6 78.8 74.7
Net realized gain on investments 21.3 19.9 65.1 36.5
Other income 0.6   0.6   2.3   2.3  
Total revenue 362.9   364.9   1,421.3   1,405.4  
 
Income before federal income taxes 37.9 33.1 33.4 19.2
 
Federal income tax expense (benefit) 43.7   0.6   44.1   (1.8 )
Net (loss) income $ (5.8 ) $ 32.5   $ (10.7 ) $ 21.0  
 
(Loss) earnings per common share:
- basic $ (0.14 ) $ 0.78 $ (0.25 ) $ 0.50
- diluted $ (0.14 ) $ 0.77 $ (0.25 ) $ 0.50
(Loss) earnings per share from operations (A):
- basic $ (0.46 ) $ 0.47 $ (1.26 ) $ (0.07 )
- diluted $ (0.46 ) $ 0.46 $ (1.26 ) $ (0.07 )
Weighted average shares outstanding:
- basic 42.3 41.7 42.1 41.6
- diluted 42.3 42.2 42.1 42.0
Return on average equity (LTM) (1.2 )% 2.4 %
Book value per share $ 20.76 $ 21.31
Dividends paid per share $ 0.10 $ 0.10 $ 0.40 $ 0.40
Total shares outstanding 42.4 41.8
 
GAAP ratios:
Cat loss and ALAE ratio 2.6 5.0 9.7 6.3
Non-cat loss and LAE ratio 60.3   63.6   62.3   66.6  
Loss and LAE ratio 62.9 68.6 72.0 72.9
Expense ratio 38.0   32.7   35.7   33.3  
Combined ratio 100.9   101.3   107.7   106.2  
 
(A) Reconciliation of non-GAAP financial measure:
Net (loss) income from operations:
Net (loss) income $ (5.8 ) $ 32.5 $ (10.7 ) $ 21.0

Less net realized gain on investments, less applicable federal income taxes

13.8   12.9   42.3   23.7  
Net (loss) income from operations $ (19.6 ) $ 19.6   $ (53.0 ) $ (2.7 )
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Balance Sheets
($ and shares in millions, except per share amounts)    
(unaudited) December 31 December 31
2017 2016
ASSETS
Fixed maturities, available-for-sale, at fair value (amortized cost $2,173.1 and $2,095.9, respectively) $ 2,192.8 $ 2,109.3
Equity securities, available-for-sale, at fair value (cost $318.6 and $323.1, respectively) 365.3 382.8
Other invested assets, available-for-sale, at fair value (cost $25.8 and $25.5, respectively) 56.0 45.1
Other invested assets 5.6 5.4
Notes receivable from affiliate 70.0   70.0  
Total investments 2,689.7 2,612.6
 
Cash and cash equivalents 91.5 51.1
Accrued investment income and other assets 36.5 40.0
Deferred policy acquisition costs 117.8 129.8
Reinsurance recoverable on losses and loss expenses payable 3.1 3.6
Prepaid reinsurance premiums 6.4 6.1
Current federal income taxes 4.8 6.7
Net deferred federal income taxes 57.2 102.1
Property and equipment, net 7.3   7.4  
Total assets $ 3,014.3   $ 2,959.4  
 
LIABILITIES
Losses and loss expenses payable $ 1,255.6 $ 1,181.6
Unearned premiums 611.8 617.8
Notes payable (affiliates $15.2 and $15.2, respectively) 122.1 122.1
Pension and postretirement benefits 64.5 74.4
Due to affiliate 2.7 2.4
Other liabilities 76.7   69.8  
Total liabilities 2,133.4   2,068.1  
 
STOCKHOLDERS' EQUITY
Common stock, without par value. Authorized 100.0 shares; 49.2 and 48.6 shares issued, respectively, at stated value of $2.50 per share 123.0 121.6
Treasury stock, 6.8 and 6.8 shares, respectively, at cost (116.8 ) (116.5 )
Additional paid-in capital 171.8 159.9
Accumulated other comprehensive income 36.7 32.5
Retained earnings 666.2   693.8  
Total stockholders’ equity 880.9   891.3  
Total liabilities and stockholders’ equity $ 3,014.3   $ 2,959.4  
 
 

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
2017 2016 2017 2016
Earned premiums $ 318.7 $ 323.8 $ 1,275.1 $ 1,291.9
Net investment income 22.3 20.6 78.8 74.7
Net realized gain on investments 21.3 19.9 65.1 36.5
Other income from affiliates 0.6   0.6   2.3   2.3  
Total revenues 362.9   364.9   1,421.3   1,405.4  
 
Losses and loss expenses 200.4 222.2 918.3 942.4
Acquisition and operating expenses 121.0 105.8 455.8 430.4
Interest expense 1.5 1.4 5.9 5.5
Other expenses 2.1   2.4   7.9   7.9  
Total expenses 325.0   331.8   1,387.9   1,386.2  
 
Income before federal income taxes 37.9 33.1 33.4 19.2
Federal income tax expense (benefit):
Current 0.4 (0.2 ) 0.4 (1.7 )
Deferred 43.3   0.8   43.7   (0.1 )
Federal income tax expense (benefit) 43.7   0.6   44.1   (1.8 )
Net (loss) income $ (5.8 ) $ 32.5   $ (10.7 ) $ 21.0  
(Loss) earnings per common share:
Basic $ (0.14 ) $ 0.78   $ (0.25 ) $ 0.50  
Diluted $ (0.14 ) $ 0.77   $ (0.25 ) $ 0.50  
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
2017 2016 2017 2016
Net (loss) income $ (5.8 ) $ 32.5 $ (10.7 ) $ 21.0
Other comprehensive (loss) income, net of tax:
Net unrealized holding (losses) gains on investments:
Unrealized holding gains (losses) 3.4 (53.7 ) 69.0 27.8
Reclassification adjustments for gains realized in net income (21.3 ) (19.9 ) (65.1 ) (36.5 )
Income tax expense (benefit) 6.9   25.8   (0.7 ) 3.0  
Total net unrealized holding (losses) gains on investments (11.0 ) (47.8 ) 3.2   (5.7 )
Net unrecognized benefit plan obligations:
Net actuarial loss arising during the period (1.0 ) (3.0 ) (1.0 ) (3.0 )
Reclassification adjustments for amortization to net income:
Prior service credit (1.4 ) (1.4 ) (5.5 ) (5.5 )
Net actuarial loss 1.9 2.3 8.0 9.4
Income tax expense (benefit) 0.3   0.7   (0.5 ) (0.3 )
Total net unrecognized benefit plan obligations (0.2 ) (1.4 ) 1.0   0.6  
Other comprehensive (loss) income (11.2 ) (49.2 ) 4.2   (5.1 )
Comprehensive (loss) income $ (17.0 ) $ (16.7 ) $ (6.5 ) $ 15.9  
 
 

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
2017 2016
Common shares:
Balance at beginning of year 48.6 48.1
Issuance of shares 0.6   0.5  
Balance at period ended 49.2   48.6  
 
Treasury shares:
Balance at beginning of year and year ended (6.8 ) (6.8 )
 
Common stock:
Balance at beginning of year $ 121.6 $ 120.4
Issuance of shares 1.4   1.2  
Balance at period ended 123.0   121.6  
 
Treasury stock:
Balance at beginning of year $ (116.5 ) $ (116.3 )
Shares acquired on stock award exercises and vested restricted shares (0.3 ) (0.2 )
Balance at period ended (116.8 ) (116.5 )
 
Additional paid-in capital:
Balance at beginning of year $ 159.9 $ 153.5
Issuance of common stock 8.8 6.8
Tax expense from share-based compensation (3.0 )
Stock awards granted 3.1   2.6  
Balance at period ended 171.8   159.9  
 
Accumulated other comprehensive income:
Balance at beginning of year $ 32.5 $ 37.6
Change in unrealized gains on investments, net of tax 3.2 (5.7 )
Change in unrecognized benefit plan obligations, net of tax 1.0   0.6  
Balance at period ended 36.7   32.5  
 
Retained earnings:
Balance at beginning of year $ 693.8 $ 689.4
Net (loss) income (10.7 ) 21.0
Cash dividends paid (16.9 ) (16.6 )
Balance at period ended 666.2   693.8  
 
Total stockholders' equity at period ended $ 880.9   $ 891.3  
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Condensed Consolidated Statements of Cash Flow
($ millions)    
(unaudited) Twelve months ended
December 31
2017 2016
Cash flows from operating activities:
Net (loss) income $ (10.7 ) $ 21.0
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization, net 12.5 14.6
Share-based compensation 4.2 3.7
Net realized gain on investments (65.1 ) (36.5 )
Changes in operating assets and liabilities:
Deferred policy acquisition costs 12.0 (0.7 )
Accrued investment income and other assets 3.5 (4.5 )
Postretirement and pension benefits (9.0 ) (28.8 )
Other liabilities and due to/from affiliate, net 6.0 7.3
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums 0.2 3.0
Losses and loss expenses payable 74.0 128.6
Unearned premiums (6.0 ) 1.5
Deferred tax expense (benefit) on share-based awards (0.2 )
Federal income taxes 46.3   4.5  
Net cash provided by operating activities 67.9   113.5  
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale (505.4 ) (589.3 )
Purchases of equity securities available-for-sale (185.9 ) (143.1 )
Purchases of other invested assets (1.4 ) (1.5 )
Maturities, calls and principal reductions of fixed maturities available-for-sale 233.6 240.9
Sales of fixed maturities available-for-sale 184.8 211.6
Sales of equity securities available-for-sale 252.7 153.0
Sales of other invested assets available-for-sale 1.1   0.8  
Net cash used in investing activities (20.5 ) (127.6 )
Cash flows from financing activities:
Proceeds from issuance of common stock 10.2 2.2
Payments to acquire treasury shares (0.3 ) (0.2 )
Payment of dividends (16.9 ) (16.6 )
Deferred tax expense on share-based awards 0.2
Proceeds from long-term debt   21.5  
Net cash (used in) provided by financing activities (7.0 ) 7.1  
Net increase (decrease) in cash and cash equivalents 40.4 (7.0 )
Cash and cash equivalents at beginning of period 51.1   58.1  
Cash and cash equivalents at end of period $ 91.5   $ 51.1  

Supplemental disclosures:

Federal income tax refund $ (1.6 ) $  
Interest paid (affiliates $0.8 and $0.8, respectively) $ 5.7   $ 5.4  
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Fixed Maturities
($ in millions, at fair value)      
(unaudited) December 31 December 31
  2017 % 2016 %
Fixed Maturities:
 
U.S. treasury securities and obligations

of U.S. government agencies

$ 436.9 19.9 % $ 404.7 19.2 %
Obligations of states and political subdivisions 525.8 24.0 % 643.7 30.5 %
Corporate securities 529.7 24.2 % 449.6 21.3 %
U.S. government agencies mortgage-backed securities 700.4   31.9 % 611.3   29.0 %
Total fixed maturities $ 2,192.8   100.0 % $ 2,109.3   100.0 %
Ratings Quality*
AAA $ 56.0 2.6 % $ 62.6 3.0 %
AA** 1,329.6 60.5 % 1,345.7 63.8 %
A 450.1 20.5 % 395.4 18.7 %
BBB 352.7 16.2 % 294.2 14.0 %
Below investment grade 4.4   0.2 % 11.4   0.5 %
Total fixed maturities $ 2,192.8   100.0 % $ 2,109.3   100.0 %
 
TIPS, at fair value $ 155.8 $ 161.8
TIPS, at amortized cost $ 146.5 $ 153.2
 
Obligations of states and political subdivisions:
 
By type of bond
State general obligations $ 13.9 2.6 % $ 12.0 1.9 %
Local general obligations 85.0 16.2 % 100.6 15.6 %
Revenue bonds 303.8 57.8 % 351.5 54.6 %
Pre Refunded bonds 40.2 7.6 % 89.1 13.8 %
Other 82.9   15.8 % 90.5   14.1 %
Total $ 525.8   100.0 % $ 643.7   100.0 %
 
Top 10 States Top 10 States
New York $ 78.1 14.9 % New York $ 80.8 12.6 %
Texas 53.5 10.2 % Washington 58.2 9.0 %
Ohio 50.6 9.6 % Texas 56.9 8.8 %
Washington 49.2 9.4 % Ohio 51.1 7.9 %
Georgia 26.7 5.1 % Louisiana 39.8 6.2 %
North Carolina 23.5 4.5 % Georgia 34.2 5.3 %
Nevada 20.8 4.0 % North Carolina 23.8 3.7 %
Maryland 18.0 3.4 % Pennsylvania 20.2 3.1 %
Dist of Columbia 17.9 3.4 % Connecticut 18.2 2.8 %
Louisiana 17.4 3.3 % Nevada 17.7 2.7 %
 
Ratings Quality*
AAA $ 36.6 7.0 % $ 47.5 7.4 %
AA** 318.2 60.5 % 383.2 59.5 %
A 161.1 30.6 % 191.8 29.8 %
BBB 9.9   1.9 % 21.2   3.3 %
Total $ 525.8   100.0 % $ 643.7   100.0 %
*Based on ratings by nationally recognized rating agencies. All ratings exclude credit enhancements.
**The AA rating category includes securities which have been either pre-refunded or escrowed to maturity.
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Net Investment Income
($ in millions)          
unaudited
12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
Quarter to Date
Gross investment income:
Fixed maturities $ 15.3 $ 14.6 $ 14.2 $ 14.8 $ 14.5
TIPS 1.1   1.2   1.7   0.6   1.6
Total fixed maturities 16.4   15.8   15.9   15.4   16.1
Equity securities 3.0 1.7 2.0 2.0 4.8
Other 1.5   1.5   1.5   1.6   1.7
Total gross investment income 20.9 19.0 19.4 19.0 22.6
Less: Investment expenses 0.3   0.3   0.3   0.3   0.3
Net investment income $ 20.6   $ 18.7   $ 19.1   $ 18.7   $ 22.3
 
Year to Date
Gross investment income:
Fixed maturities $ 59.4 $ 14.6 $ 28.8 $ 43.6 $ 58.1
TIPS 4.0   1.2   2.9   3.5   5.1
Total fixed maturities 63.4   15.8   31.7   47.1   63.2
Equity securities 7.3 1.7 3.7 5.7 10.5
Other 5.6   1.5   3.0   4.6   6.3
Total gross investment income 76.3 19.0 38.4 57.4 80.0
Less: Investment expenses 1.6   0.3   0.6   0.9   1.2
Net investment income $ 74.7   $ 18.7   $ 37.8   $ 56.5   $ 78.8
 
12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
TIPS, fair value $ 161.8 $ 171.9 $ 170.7 $ 153.5 $ 155.8
TIPS, book value $ 153.2 $ 162.3 $ 163.4 $ 145.5 $ 146.5
 
 

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

 
Income Taxes
($ in millions)        
unaudited
 
The following table sets forth the tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016:
 
December 31 December 31
2017 2016
Deferred tax assets:
Unearned premiums not currently deductible $ 25.5 $ 42.6
Losses and loss expenses payable discounting 11.3 19.7
Postretirement and pension benefits 13.6 26.1
Realized loss on other-than-temporary impairment 2.6 4.0
Other liabilities 9.2 16.6
Net operating loss carryforward 34.3 58.9
Tax credit carryforwards 3.7 3.3
Other 2.0   8.8  
Total deferred tax assets 102.2 180.0
Deferred tax liabilities:
Deferral of policy acquisition costs 24.7 45.4
Net unrealized holding gains on investments 20.3   32.5  
Total deferred tax liabilities 45.0   77.9  
Net deferred federal income taxes $ 57.2   $ 102.1  
 
The following table sets forth the federal income tax expense components for the three and twelve months ended December 31, 2017 and 2016:
 
Three months ended December 31 Year ended December 31
2017 2016 2017 2016
Income before federal income taxes $ 37.9 $ 33.1 $ 33.4 $ 19.2
Federal income tax expense (benefit):
Current 0.4 (0.2 ) 0.4 (1.7 )
Deferred (A) 43.3   0.8   43.7   (0.1 )
Total federal income tax expense (benefit) 43.7   0.6   44.1   (1.8 )
Net (loss) income $ (5.8 ) $ 32.5   $ (10.7 ) $ 21.0  
 
(A)   Includes $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

 
Statutory Personal Insurance Segment Results
($ in millions)        
unaudited
Personal Auto 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 97.9 $ 80.6 $ 362.9 $ 333.8
Net earned premiums 89.2 83.3 340.7 330.6
Losses and LAE incurred:
Cat loss and ALAE (0.5 ) (0.1 ) 7.9 7.0
Non-cat loss and ALAE 60.6   63.2   237.2   243.9  
Total Loss and ALAE 60.1 63.1 245.1 250.9
ULAE 5.9   5.5   21.7   20.4  
Total Loss and LAE 66.0 68.6 266.8 271.3
Underwriting expenses 30.8   21.0   104.2   89.7  
Net underwriting loss $ (7.6 ) $ (6.3 ) $ (30.3 ) $ (30.4 )
 
Cat loss and ALAE ratio (0.6 )% (0.1 )% 2.3 % 2.1 %
Non-cat loss and ALAE ratio 67.9 % 75.8 % 69.6 % 73.8 %
Total Loss and ALAE ratio 67.3 % 75.7 % 71.9 % 75.9 %
ULAE ratio 6.7 % 6.6 % 6.4 % 6.1 %
Total Loss and LAE ratio 74.0 % 82.3 % 78.3 % 82.0 %
Expense ratio 31.5 % 26.0 % 28.7 % 26.9 %
Combined ratio 105.5 % 108.3 % 107.0 % 108.9 %
 
Homeowners 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 59.0 $ 50.7 $ 227.9 $ 223.0
Net earned premiums 56.1 56.3 220.7 226.8
Losses and LAE incurred:
Cat loss and ALAE 0.2 3.9 34.4 40.4
Non-cat loss and ALAE 15.3   17.5   89.2   84.2  
Total Loss and ALAE 15.5 21.4 123.6 124.6
ULAE 3.5   3.2   14.8   15.0  
Total Loss and LAE 19.0 24.6 138.4 139.6
Underwriting expenses 21.3   15.8   76.0   69.7  
Net underwriting gain $ 15.8   $ 15.9   $ 6.3   $ 17.5  
 
Cat loss and ALAE ratio 0.3 % 6.9 % 15.6 % 17.8 %
Non-cat loss and ALAE ratio 27.3 % 31.2 % 40.4 % 37.2 %
Total Loss and ALAE ratio 27.6 % 38.1 % 56.0 % 55.0 %
ULAE ratio 6.3 % 5.6 % 6.7 % 6.6 %
Total Loss and LAE ratio 33.9 % 43.7 % 62.7 % 61.6 %
Expense ratio 36.2 % 31.1 % 33.4 % 31.2 %
Combined ratio 70.1 % 74.8 % 96.1 % 92.8 %
 
       
Other Personal 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 5.2 $ 4.8 $ 18.9 $ 20.4
Net earned premiums 4.7 5.1 18.9 21.1
Losses and LAE incurred:
Cat loss and ALAE 0.3 1.1 1.1
Non-cat loss and ALAE 2.0   1.2   8.8   8.6  
Total Loss and ALAE 2.0 1.5 9.9 9.7
ULAE 0.3   0.2   1.2   1.4  
Total Loss and LAE 2.3 1.7 11.1 11.1
Underwriting expenses 2.2   1.6   7.1   7.4  
Net underwriting gain $ 0.2   $ 1.8   $ 0.7   $ 2.6  
 
Cat loss and ALAE ratio 0.4 % 5.0 % 5.7 % 5.1 %
Non-cat loss and ALAE ratio 41.0 % 24.1 % 46.5 % 41.1 %
Total Loss and ALAE ratio 41.4 % 29.1 % 52.2 % 46.2 %
ULAE ratio 6.8 % 6.2 % 6.5 % 6.8 %
Total Loss and LAE ratio 48.2 % 35.3 % 58.7 % 53.0 %
Expense ratio 39.8 % 36.6 % 37.4 % 36.8 %
Combined ratio 88.0 % 71.9 % 96.1 % 89.8 %
 
Total Personal Insurance 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 162.1 $ 136.1 $ 609.7 $ 577.2
Net earned premiums 150.0 144.7 580.3 578.5
Losses and LAE incurred:
Cat loss and ALAE (0.3 ) 4.1 43.4 48.5
Non-cat loss and ALAE 77.9   81.9   335.2   336.7  
Total Loss and ALAE 77.6 86.0 378.6 385.2
ULAE 9.7   8.9   37.7   36.8  
Total Loss and LAE 87.3 94.9 416.3 422.0
Underwriting expenses 54.3   38.4   187.3   166.8  
Net underwriting gain (loss) $ 8.4   $ 11.4   $ (23.3 ) $ (10.3 )
 
Cat loss and ALAE ratio (0.2 )% 2.8 % 7.5 % 8.4 %
Non-cat loss and ALAE ratio 51.9 % 56.6 % 57.7 % 58.2 %
Total Loss and ALAE ratio 51.7 % 59.4 % 65.2 % 66.6 %
ULAE ratio 6.5 % 6.3 % 6.5 % 6.3 %
Total Loss and LAE ratio 58.2 % 65.7 % 71.7 % 72.9 %
Expense ratio 33.4 % 28.3 % 30.7 % 28.9 %
Combined ratio 91.6 % 94.0 % 102.4 % 101.8 %
 
 
Statutory Commercial Insurance Segment Results
($ in millions)        
unaudited
Commercial Auto 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 16.6 $ 18.2 $ 73.5 $ 79.0
Net earned premiums 18.6 20.2 76.2 88.3
Losses and LAE incurred:
Cat loss and ALAE (0.1 ) 0.8 0.8
Non-cat loss and ALAE 10.7   14.6   44.7   70.1  
Total Loss and ALAE 10.6 14.6 45.5 70.9
ULAE 1.2   1.2   4.5   4.8  
Total Loss and LAE 11.8 15.8 50.0 75.7
Underwriting expenses 8.1   7.5   31.5   30.5  
Net underwriting loss $ (1.3 ) $ (3.1 ) $ (5.3 ) $ (17.9 )
 
Cat loss and ALAE ratio (0.5 )% (0.1 )% 1.1 % 1.0 %
Non-cat loss and ALAE ratio 57.4 % 72.2 % 58.6 % 79.4 %
Total Loss and ALAE ratio 56.9 % 72.1 % 59.7 % 80.4 %
ULAE ratio 6.6 % 6.1 % 5.9 % 5.5 %
Total Loss and LAE ratio 63.5 % 78.2 % 65.6 % 85.9 %
Expense ratio 49.4 % 41.1 % 43.0 % 38.5 %
Combined ratio 112.9 % 119.3 % 108.6 % 124.4 %
 
Small Commercial Package 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 30.1 $ 30.5 $ 123.8 $ 125.6
Net earned premiums 30.9 31.6 127.4 127.5
Losses and LAE incurred:
Cat loss and ALAE 0.4 4.4 12.4 12.9
Non-cat loss and ALAE 14.1   13.8   61.1   65.3  
Total Loss and ALAE 14.5 18.2 73.5 78.2
ULAE 1.8   1.8   6.1   6.9  
Total Loss and LAE 16.3 20.0 79.6 85.1
Underwriting expenses 14.8   12.8   55.7   51.3  
Net underwriting loss $ (0.2 ) $ (1.2 ) $ (7.9 ) $ (8.9 )
 
Cat loss and ALAE ratio 1.3 % 13.9 % 9.7 % 10.1 %
Non-cat loss and ALAE ratio 45.4 % 43.7 % 48.0 % 51.2 %
Total Loss and ALAE ratio 46.7 % 57.6 % 57.7 % 61.3 %
ULAE ratio 6.1 % 5.6 % 4.8 % 5.3 %
Total Loss and LAE ratio 52.8 % 63.2 % 62.5 % 66.6 %
Expense ratio 49.1 % 41.9 % 45.0 % 40.8 %
Combined ratio 101.9 % 105.1 % 107.5 % 107.4 %
 
       
Middle Market Commercial 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 25.9 $ 26.3 $ 111.1 $ 108.8
Net earned premiums 27.9 27.3 109.1 110.5
Losses and LAE incurred:
Cat loss and ALAE 0.8 1.1 8.4 8.4
Non-cat loss and ALAE 12.8   9.8   50.6   61.8  
Total Loss and ALAE 13.6 10.9 59.0 70.2
ULAE 1.3   1.3   4.8   6.0  
Total Loss and LAE 14.9 12.2 63.8 76.2
Underwriting expenses 11.5   10.4   42.5   43.0  
Net underwriting gain (loss) $ 1.5   $ 4.7   $ 2.8   $ (8.7 )
 
Cat loss and ALAE ratio 3.2 % 4.1 % 7.7 % 7.6 %
Non-cat loss and ALAE ratio 45.6 % 35.8 % 46.4 % 55.9 %
Total Loss and ALAE ratio 48.8 % 39.9 % 54.1 % 63.5 %
ULAE ratio 4.7 % 4.6 % 4.4 % 5.3 %
Total Loss and LAE ratio 53.5 % 44.5 % 58.5 % 68.8 %
Expense ratio 44.3 % 39.7 % 38.3 % 39.5 %
Combined ratio 97.8 % 84.2 % 96.8 % 108.3 %
 
Workers' Compensation 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 22.0 $ 21.8 $ 88.4 $ 92.0
Net earned premiums 22.5 23.8 88.8 93.8
Losses and LAE incurred:
Cat loss and ALAE
Non-cat loss and ALAE 12.6   14.0   50.2   58.5  
Total Loss and ALAE 12.6 14.0 50.2 58.5
ULAE 1.6   2.2   6.7   8.4  
Total Loss and LAE 14.2 16.2 56.9 66.9
Underwriting expenses 7.4   6.2   28.4   26.7  
Net underwriting gain $ 0.9   $ 1.4   $ 3.5   $ 0.2  
 
Cat loss and ALAE ratio % % % %
Non-cat loss and ALAE ratio 55.8 % 58.7 % 56.5 % 62.3 %
Total Loss and ALAE ratio 55.8 % 58.7 % 56.5 % 62.3 %
ULAE ratio 7.4 % 9.4 % 7.6 % 9.0 %
Total Loss and LAE ratio 63.2 % 68.1 % 64.1 % 71.3 %
Expense ratio 33.4 % 28.4 % 32.1 % 29.1 %
Combined ratio 96.6 % 96.5 % 96.2 % 100.4 %
 
       
Farm & Ranch 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 11.1 $ 9.5 $ 42.6 $ 37.0
Net earned premiums 10.5 9.2 39.6 35.5
Losses and LAE incurred:
Cat loss and ALAE 0.2 (0.3 ) 5.1 3.5
Non-cat loss and ALAE 7.8   6.1   23.0   14.4  
Total Loss and ALAE 8.0 5.8 28.1 17.9
ULAE 0.5   0.6   2.1   2.2  
Total Loss and LAE 8.5 6.4 30.2 20.1
Underwriting expenses 4.8   3.7   16.3   14.1  
Net underwriting (loss) gain $ (2.8 ) $ (0.9 ) $ (6.9 ) $ 1.3  
 
Cat loss and ALAE ratio 2.0 % (3.0 )% 13.0 % 9.9 %
Non-cat loss and ALAE ratio 74.1 % 66.2 % 57.9 % 40.8 %
Total Loss and ALAE ratio 76.1 % 63.2 % 70.9 % 50.7 %
ULAE ratio 4.8 % 6.3 % 5.5 % 6.0 %
Total Loss and LAE ratio 80.9 % 69.5 % 76.4 % 56.7 %
Expense ratio 43.3 % 38.6 % 38.2 % 38.1 %
Combined ratio 124.2 % 108.1 % 114.6 % 94.8 %
 
Other Commercial 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 3.3 $ 4.2 $ 14.2 $ 17.0
Net earned premiums 3.5 4.2 14.6 17.0
Losses and LAE incurred:
Cat loss and ALAE
Non-cat loss and ALAE 2.7   1.0   2.6   6.3  
Total Loss and ALAE 2.7 1.0 2.6 6.3
ULAE 0.5   0.3   1.1   1.2  
Total Loss and LAE 3.2 1.3 3.7 7.5
Underwriting expenses 2.0   1.7   7.7   7.2  
Net underwriting (loss) gain $ (1.7 ) $ 1.2   $ 3.2   $ 2.3  
 
Cat loss and ALAE ratio % % 0.1 % %
Non-cat loss and ALAE ratio 81.9 % 24.3 % 18.4 % 37.2 %
Total Loss and ALAE ratio 81.9 % 24.3 % 18.5 % 37.2 %
ULAE ratio 11.0 % 7.7 % 7.0 % 7.6 %
Total Loss and LAE ratio 92.9 % 32.0 % 25.5 % 44.8 %
Expense ratio 61.7 % 43.6 % 54.4 % 42.4 %
Combined ratio 154.6 % 75.6 % 79.9 % 87.2 %
 
       
Total Commercial Insurance 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 109.0 $ 110.5 $ 453.6 $ 459.4
Net earned premiums 113.9 116.3 455.7 472.6
Losses and LAE incurred:
Cat loss and ALAE 1.3 5.2 26.7 25.6
Non-cat loss and ALAE 60.7   59.3   232.2   276.4  
Total Loss and ALAE 62.0 64.5 258.9 302.0
ULAE 6.9   7.4   25.3   29.5  
Total Loss and LAE 68.9 71.9 284.2 331.5
Underwriting expenses 48.6   42.3   182.1   172.7  
Net underwriting (loss) gain $ (3.6 ) $ 2.1   $ (10.6 ) $ (31.6 )
 
Cat loss and ALAE ratio 1.2 % 4.5 % 5.9 % 5.4 %
Non-cat loss and ALAE ratio 53.3 % 50.9 % 50.9 % 58.5 %
Total Loss and ALAE ratio 54.5 % 55.4 % 56.8 % 63.9 %
ULAE ratio 6.1 % 6.4 % 5.6 % 6.2 %
Total Loss and LAE ratio 60.6 % 61.8 % 62.4 % 70.1 %
Expense ratio 44.6 % 38.4 % 40.2 % 37.6 %
Combined ratio 105.2 % 100.2 % 102.6 % 107.7 %
 
 
Statutory Personal & Commercial Insurance Segment Results
($ in millions)        
unaudited
4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 271.0 $ 246.6 $ 1,063.3 $ 1,036.6
Net earned premiums 263.9 261.0 1,036.0 1,051.1
Losses and LAE incurred:
Cat loss and ALAE 1.1 9.3 70.1 74.1
Non-cat loss and ALAE 138.4   141.2   567.4   613.1  
Total Loss and ALAE 139.5 150.5 637.5 687.2
ULAE 16.7   16.3   63.0   66.3  
Total Loss and LAE 156.2 166.8 700.5 753.5
Underwriting expenses 102.8   80.7   369.4   339.5  
Net underwriting gain (loss) $ 4.8   $ 13.5   $ (33.9 ) $ (41.9 )
 
Cat loss and ALAE ratio 0.4 % 3.6 % 6.8 % 7.0 %
Non-cat loss and ALAE ratio 52.5 % 54.0 % 54.7 % 58.4 %
Total Loss and ALAE ratio 52.9 % 57.6 % 61.5 % 65.4 %
ULAE ratio 6.3 % 6.3 % 6.1 % 6.3 %
Total Loss and LAE ratio 59.2 % 63.9 % 67.6 % 71.7 %
Expense ratio 37.9 % 32.8 % 34.7 % 32.8 %
Combined ratio 97.1 % 96.7 % 102.3 % 104.5 %
 
 
Statutory Specialty Insurance Segment Results
($ in millions)        
unaudited
E&S Property 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ (1.3 ) $ 12.8 $ 30.1 $ 44.4
Net earned premiums 9.1 10.5 40.5 40.4
Losses and LAE incurred:
Cat loss and ALAE 7.3 6.5 52.6 6.9
Non-cat loss and ALAE 1.2   4.1   12.6   13.5  
Total Loss and ALAE 8.5 10.6 65.2 20.4
ULAE 0.3   (0.1 ) 0.1   (0.4 )
Total Loss and LAE 8.8 10.5 65.3 20.0
Underwriting expenses 2.4   5.2   17.4   20.1  
Net underwriting (loss) gain $ (2.1 ) $ (5.2 ) $ (42.2 ) $ 0.3  
 
Cat loss and ALAE ratio 80.7 % 61.9 % 130.1 % 17.0 %
Non-cat loss and ALAE ratio 14.0 % 38.8 % 31.2 % 33.5 %
Total Loss and ALAE ratio 94.7 % 100.7 % 161.3 % 50.5 %
ULAE ratio 1.7 % (1.5 )% % (0.9 )%
Total Loss and LAE ratio 96.4 % 99.2 % 161.3 % 49.6 %
Expense ratio (180.1 )% 39.7 % 57.9 % 45.1 %
Combined ratio (83.7 )% 138.9 % 219.2 % 94.7 %
 
E&S Casualty 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 26.7 $ 23.7 $ 110.3 $ 99.6
Net earned premiums 27.0 24.3 103.1 91.0
Losses and LAE incurred:
Cat loss and ALAE (0.2 ) 0.1 0.1 0.1
Non-cat loss and ALAE 19.7   21.2   72.0   65.3  
Total Loss and ALAE 19.5 21.3 72.1 65.4
ULAE 0.8   0.4   3.7   4.3  
Total Loss and LAE 20.3 21.7 75.8 69.7
Underwriting expenses 9.7   8.6   39.2   35.5  
Net underwriting loss $ (3.0 ) $ (6.0 ) $ (11.9 ) $ (14.2 )
 
Cat loss and ALAE ratio (0.7 )% 0.4 % 0.1 % 0.1 %
Non-cat loss and ALAE ratio 73.0 % 87.6 % 69.8 % 71.8 %
Total Loss and ALAE ratio 72.3 % 88.0 % 69.9 % 71.9 %
ULAE ratio 3.1 % 1.7 % 3.6 % 4.7 %
Total Loss and LAE ratio 75.4 % 89.7 % 73.5 % 76.6 %
Expense ratio 36.4 % 36.1 % 35.5 % 35.6 %
Combined ratio 111.8 % 125.8 % 109.0 % 112.2 %
 
       
Programs 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 4.2 $ 24.0 $ 65.6 $ 112.7
Net earned premiums 18.7 28.0 95.5 109.4
Losses and LAE incurred:
Cat loss and ALAE 0.2 0.3 1.2 0.5
Non-cat loss and ALAE 13.8   22.5   71.5   94.9  
Total Loss and ALAE 14.0 22.8 72.7 95.4
ULAE 1.5   0.8   5.7   5.5  
Total Loss and LAE 15.5 23.6 78.4 100.9
Underwriting expenses 2.6   7.6   20.0   37.3  
Net underwriting gain (loss) $ 0.6   $ (3.2 ) $ (2.9 ) $ (28.8 )
 
Cat loss and ALAE ratio 1.0 % 1.3 % 1.2 % 0.5 %
Non-cat loss and ALAE ratio 73.6 % 80.2 % 74.9 % 86.7 %
Total Loss and ALAE ratio 74.6 % 81.5 % 76.1 % 87.2 %
ULAE ratio 7.8 % 2.4 % 5.9 % 5.1 %
Total Loss and LAE ratio 82.4 % 83.9 % 82.0 % 92.3 %
Expense ratio 60.7 % 31.6 % 30.5 % 33.1 %
Combined ratio 143.1 % 115.5 % 112.5 % 125.4 %
 
Total Specialty Insurance 4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 29.6 $ 60.5 $ 206.0 $ 256.7
Net earned premiums 54.8 62.8 239.1 240.8
Losses and LAE incurred:
Cat loss and ALAE 7.3 6.9 53.9 7.5
Non-cat loss and ALAE 34.7   47.8   156.1   173.7  
Total Loss and ALAE 42.0 54.7 210.0 181.2
ULAE 2.6   1.1   9.5   9.4  
Total Loss and LAE 44.6 55.8 219.5 190.6
Underwriting expenses 14.7   21.4   76.6   92.9  
Net underwriting loss $ (4.5 ) $ (14.4 ) $ (57.0 ) $ (42.7 )
 
Cat loss and ALAE ratio 13.4 % 11.1 % 22.5 % 3.1 %
Non-cat loss and ALAE ratio 63.4 % 76.1 % 65.3 % 72.2 %
Total Loss and ALAE ratio 76.8 % 87.2 % 87.8 % 75.3 %
ULAE ratio 4.5 % 1.5 % 4.0 % 3.9 %
Total Loss and LAE ratio 81.3 % 88.7 % 91.8 % 79.2 %
Expense ratio 49.5 % 35.0 % 37.2 % 36.2 %
Combined ratio 130.8 % 123.7 % 129.0 % 115.4 %
 
 
Statutory Insurance Segment Results
($ in millions)        
unaudited
4Q 2017 4Q 2016 YTD 2017 YTD 2016
 
Net written premiums $ 300.7 $ 307.1 $ 1,269.3 $ 1,293.3
Net earned premiums 318.7 323.8 1,275.1 1,291.9
Losses and LAE incurred:
Cat loss and ALAE 8.3 16.2 124.0 81.6
Non-cat loss and ALAE 173.3   189.0   723.5   786.8  
Total Loss and ALAE 181.6 205.2 847.5 868.4
ULAE 19.2   17.4   72.5   75.7  
Total Loss and LAE 200.8 222.6 920.0 944.1
Underwriting expenses 117.6   102.1   446.0   432.4  
Net underwriting gain (loss) $ 0.3   $ (0.9 ) $ (90.9 ) $ (84.6 )
 
Cat loss and ALAE ratio 2.6 % 5.0 % 9.7 % 6.3 %
Non-cat loss and ALAE ratio 54.4 % 58.4 % 56.8 % 60.9 %
Total Loss and ALAE ratio 57.0 % 63.4 % 66.5 % 67.2 %
ULAE ratio 6.0 % 5.3 % 5.7 % 5.9 %
Total Loss and LAE ratio 63.0 % 68.7 % 72.2 % 73.1 %
Expense ratio 39.1 % 33.2 % 35.1 % 33.4 %
Combined ratio 102.1 % 101.9 % 107.3 % 106.5 %
 

The following table provides a reconciliation of our statutory underwriting results to GAAP consolidated income before federal income taxes for the fourth quarters and years ended December 31, 2017 and 2016:

       
($ millions) 4Q 2017 4Q 2016 YTD 2017 YTD 2016
Segment income (loss) before federal income taxes:
Insurance segments:
Personal insurance SAP underwriting gain (loss) $ 8.4 $ 11.4 $ (23.3 ) $ (10.3 )
Commercial insurance SAP underwriting (loss) gain (3.6 ) 2.1 (10.6 ) (31.6 )
Specialty insurance SAP underwriting loss (4.5 ) (14.4 ) (57.0 ) (42.7 )
Total insurance segments 0.3 (0.9 ) (90.9 ) (84.6 )
Investment operations segment:
Net investment income 22.3 20.6 78.8 74.7
Net realized capital gains 21.3   19.9   65.1   36.5  
Total investment operations segment 43.6 40.5 143.9 111.2
All other segments income 0.4   0.1   0.6   0.4  
Reconciling items:
GAAP adjustments (3.4 ) (3.8 ) (10.2 ) 2.0
Interest expense on corporate debt (1.5 ) (1.4 ) (5.9 ) (5.5 )
Corporate expenses (1.5 ) (1.4 ) (4.1 ) (4.3 )
Total reconciling items (6.4 ) (6.6 ) (20.2 ) (7.8 )
Total consolidated income before federal income taxes $ 37.9   $ 33.1   $ 33.4   $ 19.2  
 
 
Quarterly Development of Prior Accident Years Ultimate Liability
($ in millions)          
unaudited
12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
Redundancy /(Deficiency)
Non-cat loss and ALAE:

Personal Insurance Segment:

Personal Auto $ 0.6 $ 0.6 $ 1.2 $ 0.5 $ 2.1
Homeowners (0.4 ) (2.8 ) 0.9 0.4
Other Personal 0.2   (0.1 ) (2.0 ) (0.4 ) 1.1  
Personal Insurance Segment 0.4   (2.3 ) 0.1   0.1   3.6  
 

Commercial Insurance Segment:

Commercial Auto 1.5 1.5 1.6 2.6 3.3
Small Commercial Package 2.0 2.0 2.9 2.9 3.5
Middle Market Commercial 1.5 (1.0 ) 6.4 0.8 2.1
Workers' Compensation 2.2 1.9 2.8 2.2 2.0
Farm & Ranch 0.6 0.8 0.2 (0.2 )
Other Commercial 0.9   3.2   1.1   1.2   0.2  
Commercial Insurance Segment 8.7   7.6   15.6   9.9   10.9  
         
Total Personal & Commercial Insurance Segments 9.1   5.3   15.7   10.0   14.5  
 

Specialty Insurance Segment:

E&S Property (0.8 ) (0.4 ) (1.2 ) (1.4 )
E&S Casualty (1.2 ) 0.2 0.1 0.8 (1.5 )
Programs (0.9 ) (0.3 ) 0.2   (0.6 ) (0.1 )
Specialty Insurance Segment (2.9 ) (0.5 ) (0.9 ) (1.2 ) (1.6 )
 
Cat Loss and ALAE 0.1 2.2 (0.6 ) 0.2 0.2
ULAE 0.1   2.7   1.5   0.2   (1.1 )
Total $ 6.4   $ 9.7   $ 15.7   $ 9.2   $ 12.0  
 

Contacts

State Auto Financial Corporation
Media contact:
Kyle Anderson, 614-917-5497
Kyle.Anderson@StateAuto.com
or
Investor contact:
Tara Shull, 614-917-4478
Tara.Shull@StateAuto.com

Release Summary

State Auto Financial Corporation (NASDAQ:STFC) today reported a fourth quarter 2017 net loss of $5.8 million, or $0.14 per diluted share.

Contacts

State Auto Financial Corporation
Media contact:
Kyle Anderson, 614-917-5497
Kyle.Anderson@StateAuto.com
or
Investor contact:
Tara Shull, 614-917-4478
Tara.Shull@StateAuto.com