State Auto Financial Corp. has reported a second quarter 2010 net loss of $26.2 million versus a net loss of $3.2 million for the second quarter of 2009.
State Auto’s combined ratio for the quarter was 115.2 versus 110.6 for the second quarter of 2009. Catastrophe losses during the second quarter this year, net of loss recoveries under the company’s aggregate catastrophe reinsurance treaty, accounted for 18.6 points of the total 81.5 loss ratio points, or $57.5 million, compared to $36.9 million or 12.6 points of the total 77.1 loss ratio points for the same period in 2009.
Net written premium for the quarter increased 10.7 percent over the same period in 2009.
For the first six months of 2010, State Auto had a net loss of $13.3 million compared to a loss of $17.2 million for same 2009 period. The company’s combined ratio for the first six months of 2010 was 107.5 compared to 111.2 for the same 2009 period.
Catastrophe losses, net of loss recoveries under the company’s aggregate catastrophe treaty, increased the loss ratio for the first six months of 2010 by 11.0 points, or $67.6 million, compared to 14.0 points, or $80.7 million for the first six months of 2009.
Net written premiums year to date 2010 increased 8.4 percent compared to the same 2009 period.
“State Auto’s second quarter results are traditionally hurt by weather, both catastrophic and non-catastrophic. This year was no exception with significantly higher levels of wind and hail losses, particularly in the northern Midwest. Approximately 60 percent of storm losses were reported in four of our largest property states: Indiana, Minnesota, Ohio and Tennessee. In addition to wind and hail, the Nashville area suffered a thousand year storm and unprecedented flooding. Although flood is not a covered peril for homeowners, it is for commercial property and automobile insurance. In addition, the heavy rain produced numerous claims for leaky roofs and water damage. All in all, it was a difficult quarter weather wise for State Auto, our policyholders and for the industry,” said STFC Chairman, President and CEO Bob Restrepo.
“Catastrophe results masked continued improvement in our non-catastrophe loss ratio driven by personal lines. In particular, we continue to see substantial improvement in our personal automobile experience, even with an increase in claims resulting from the Nashville flooding. Large loss activity returned to normal levels in both homeowners and commercial property, but increased in the general liability line,” he said.
The company did see strong overall premium growth in both personal and commercial lines of business during the quarter, Restrepo said.
“Personal insurance premium growth resulted from continued price increases, stable retention, and strong, although lower, new business production,” Restrepo said.
“Our new affiliate in the alternative risk transfer market, Risk Evaluation and Design LLC (RED), accounted for virtually all of our premium growth in business insurance. Production in our standard business insurance lines has stabilized. Policy retention is better than expected, but the economy and pricing environment have constrained new business production.
“In June, we completed the final phase of our BOP Choice rollout. BOP Choice gives us improved pricing precision and the ability to attract more casualty oriented business. This product has been well received by our agents and, we believe, will contribute to more stable profit and production results in the future,” he said.
“The restructuring of our field underwriting, sales and claim operations is substantially complete,” Restrepo continued. “We believe our cost structures for personal lines and claims are now very competitive, but more work needs to be done in our business insurance segment. Productivity levels remain low relative to the industry and integrating our specialty business may increase our expenses in the short term. We’ll need to streamline workflows and introduce new technology to improve productivity and maintain service levels. Over the long term, the actions we’re taking should pay off with a more balanced book of business and better underwriting results.”
Source: State Auto Financial Corp.
Topics Catastrophe Auto Profit Loss
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