State Auto Financial (STFC) Misses Q1 EPS by 58c, Revenues Miss

State Auto Financial (NASDAQ: STFC) reported Q1 EPS of ($0.18), $0.58 worse than the analyst estimate of $0.40. Revenue for the quarter came in at $214.8 million versus the consensus estimate of $352.95 million.

• Quarterly loss of $2.62 per share
• Quarterly net loss from operations1 of $0.18 per share
• Quarterly GAAP combined ratio of 107.2
• Return on equity of (8.7)%
• Book value per share of $19.83

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

"The COVID-19 pandemic is a test unlike any we’ve faced, as a society and as an insurance industry. Our number one priority is the health and safety of our associates, customers, and agents. I’m enormously proud of the focus and dedication of the State Auto team, which seamlessly moved to almost entirely working from home in a matter of days. It’s a transition that wasn’t even noticed by our policyholders and agents thanks to a culture that made it possible, and investments in technology over the past five years that have made us a leading digital provider of insurance. Our independent agent partners continue to quote, sell and service their books of business uninterrupted through our State Auto Connect digital platform, and customers are served through our Customer Connect portal and the outstanding work of our customer service teams.

"Our 'In This Together' plan, which we announced in April and is pending regulatory approval, will provide a 5% discount on our personal auto policyholders’ premium at their next renewal. This plan properly recognizes both the reduction of miles driven and the likelihood that the impact of the pandemic will not be short-lived. In addition, we continue to encourage enrollment in our usage-based telematics program, and we have seen a marked increase.

"From the very early days of the pandemic, we’ve been working with customers in need of flexibility when it comes to payments and payment plans, and we’ll continue to support them, our agents, associates and communities through this challenge in the months ahead.

"While the pandemic has rightly had much of our attention, first quarter 2020 also demonstrated the exceptional value our Claims and Risk Engineering (CARE) professionals deliver to our customers when they need it most. We were in Nashville within hours of the tornado that tore through the area on March 3. Three large commercial losses totaling 4.6 points drove the higher than anticipated catastrophe loss ratio of 12.7%, versus our five-year average first quarter cat loss ratio of 5.2%.

"In personal lines, we continued progress in our largest line, personal auto, toward improved growth and profitability with the launch of new rates and an updated telematics program that makes it even easier for policyholders to save money through safer driving. Strong growth in our homeowners business continued, with a net written premium increase of 26.7%.

"In commercial lines, the three large Nashville losses drove the poor profit result. However, overall positive momentum in commercial continued in the first quarter. Every line other than workers’ compensation grew, with overall 17.6% net written premium growth for commercial lines. Connect CPP (middle market commercial) launched in March, drawing positive feedback from agents on the efficiency of the platform and overall flexibility of the product. Connect Farm & Ranch launched in February, including three new states and two existing states, fueling nearly 20% growth.

"While the challenges we faced in first quarter 2020 were significant, this was yet another quarter in which there’s clear evidence of our continued progress toward sustained profit and growth. Our investments in technology that began five years ago are paying off, and we’re seeing similar benefits from more recent investments. Areas that we knew needed attention and we focused on are showing signs of improvement. Our rebuilding of State Auto has yielded many benefits, including the ability to navigate the kind of adversity we all face today with confidence. This 99-year-old company has faced significant challenges before, and I am confident that State Auto will rise to this challenge."

For earnings history and earnings-related data on State Auto Financial (STFC) click here.

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