State Auto, Soon to Be Acquired by Liberty Mutual, Reports Q2 Decline in Net Income

State Auto Financial Corp., soon to be acquired by Liberty Mutual for $1 billion, saw a large Q2 decline in net income due to a dip in net investment gains and as well as natural catastrophe losses. At the same time, the Ohio- based insurer reported healthy commercial insurance premium increases.

State Auto’s Q2 2021 net income was just $600,000, or $0.01 per diluted share, versus $34.3 million, or $0.74 per diluted share, over the same period a year ago.

The insurer booked a 110 consolidated combined ratio, versus 114.7 in Q2 2020.

State Auto Chairman, President and CEO Mike LaRocco struck a positive note about results.

“Over the past six years, we’ve clearly demonstrated our ability to build the teams, technology and products required to deliver sustained profitable growth,” LaRocco said in prepared remarks. “In the months ahead, our focus will remain to make progress toward that goal through all our lines of business.”

Here are State Auto’s Q2 result highlights:

• Net premiums written landed above $412 million, versus $381.6 million in the 2020 second quarter. Earned premiums were just under $370 million, compared to $340.7 million last year.

• Net written premium jumped 8 percent overall, though commercial insurance premiums grew 18 percent, driven by gains in new business, as well as rate hikes in commercial auto and farm & ranch. Personal insurance premiums ticked 1.4 percent higher.

• Net investment income was flat, year-over-year, at $17.7 million. The company’s net investment gain was at $26.7 million, down from just under $76 million in the 2020 second quarter.

• Personal auto, homeowners and personal net written premiums were $92 million, $116 million and $20 million, respectively, with a consolidated combined ratio of 118.9. In Q2 2020, net written premiums for personal auto, homeowners and personal were $104.3 million, $106.1 million, and $15 million, respectively, and a consolidated 116.5 combined ratio.

• Commercial insurance premiums hit $184.5 during the quarter, compared to $156.3 million the previous year. All lines saw premium increases except for workers compensation.

• The company recorded a net loss from operations per diluted share of $0.47, versus $0/59 for the same period in 2020.

Liberty Mutual announced in July it would be acquiring State Auto. The insurer said the deal would incorporate State Auto’s network of roughly 3,400 independent agencies across 33 states into its own network of 10,000 agents distributing Liberty Mutual commercial and Safeco personal lines products. The end result: Liberty Mutual hopes to become the second-largest independent agency carrier and an industry leader in personal lines and small commercial insurance.

Source: State Auto