State Auto Posts Nearly $60 Million Net Loss for Third Quarter

State Auto Financial Group (STFC) joined the lengthening list of insurers declaring major losses, after the Ohio-based company reported a $58.7 million net loss for this year’s third quarter.

That was down from net income of $200,000 for the same period in 2010 and compounded earlier poor results. The insurer announced $247.4 million in net losses for the first nine months of 2011.

Company officials put the blame largely on $60.8 million in third-quarter catastrophe losses, more than double the $23.7 million suffered during the same time frame the previous year.  And charges related to a deferred tax asset valuation allowance totaled $28.9 million from July through September and $143.8 million for the year’s first three quarters.

Bob Restrepo, chairman and chief executive officer, said STFC has been hit hard this year by catastrophes, including second-quarter weather events of “unprecedented severity” that caused continuing financial problems during the third quarter.

“Catastrophe losses were more than double what we normally experience,” Restrepo said in a statement. “Our five-year average (for catastrophes) for the third quarter is approximately $25 million, far less than the $61 million we incurred during the quarter.”

State Auto provides private Ohio auto insurance and coverage in 32 other states. The group also writes other types of policies, including specialty insurance and workers’ compensation, through its subsidiaries.

Not all the quarterly results were bad. Net written premiums increased by 6.8 percent compared with the same period in 2010, spurred by a $32.7 million increase in the company’s specialty insurance segment. But those premiums fell by 3.8 percent in STFC’s personal and 0.8 percent in its business segments.

STFC’s combined ratio—a measure of profitability that compares performance among multiple companies—was 122.4 for the quarter, including 17 points of catastrophe loss. For the year’s first nine months it was 124, compared to 106.9 at the same point last year.

Catastrophe losses added 22.0 points, or $232.9 million, to the loss ratio for January through September, significantly higher than the 9.8 points and $91.3 million added for those months last year.

The announcement follows a report earlier in the week from Liberty Mutual Group, which suffered a $111 quarterly loss after incurring nearly $1 billion in catastrophe losses and asbestos-related charges.

The insurer reported net income of $81 million for the first nine months of 2011, down from $1.1 billion for the same period last year, including $567 million in the third quarter.

Last week, Infinity Property and Casualty announced its third-quarter profits fell 80 percent to $6.1 million, with officials blaming increased severity of personal injury protection (PIP) claims in Florida and bodily injury coverage in California.

And The Hartford reported that $134 million in catastrophe losses caused its net income to fall from $666 million for July through September last year to zero for the same time frame this year because of capital markets volatility and large catastrophe claims.

Allstate announced earlier this month that its third-quarter profits dropped by more than 50 percent, mostly because of $697 million in catastrophe losses—a 179 percent increase from the previous year.

Progressive reported a 42 percent dip in net income for the quarter.

About Matthew Morisset
Matthew Morisset is a proud alumnus of the University of Redlands, where he obtained a degree in English Literature. Utilizing his passion for analysis and writing, Matthew looks for important trends in the auto insurance industry and their implications for consumers and the market as a whole.

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