State Auto has surprised analysts in the second quarter by reporting a $3.5mn loss that was more than double last year’s deficit as the carrier’s catastrophe bill surged by almost 50 percent.
The $0.08 per share loss was significantly worse than the $0.05 profit that had been forecast by four analysts surveyed by financial news site MarketWatch.
The carrier’s 107 percent combined ratio was the culprit, deteriorating slightly from 106.2 percent for the same period last year.
State Auto blamed its $37.5mn catastrophe bill, which added 12.2 points to its combined ratio - significantly more than last year when that figure was 7.9 points.
Reserve releases of $18.1mn, which shaved 5.9 points from the combined ratio and were $3.3mn higher than last year, were not enough to offset the carrier’s creeping catastrophe losses.
Top line dwindled by almost 10 percent during the quarter as the effects of State Auto felt the effects of a decision to ditch its specialty book, which wrote $73.7mn in the second quarter of 2017.
But the reduction in specialty premium was partly offset by a 22.9 percent boost in the group’s personal lines book, which hit $184.9mn for the quarter. The growth was driven by rate increases and new business, State Auto said.
As a result, the carrier’s net written premium stood at $308.1mn for the three months before the start of July.
In a statement, State Auto’s chairman, president and CEO Mike LaRocco said: “Our journey to profitable growth continued this quarter with some significant milestones being achieved.”
“Most notably our largest line, personal auto, was both profitable and growing,” he added.
“Perhaps most significantly, for our ongoing lines of business, personal and commercial, we achieved a non-catastrophe combined ratio of 91.3 [percent],” he said, crediting new products, technological improvements and better claims handling.
“There is much work left to be done, but in both the first quarter and more significantly in the second, our momentum is building and our outlook is bright,” the executive concluded.