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FORM 10-K
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ý
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Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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¨
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Ohio
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31-1324304
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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518 East Broad Street, Columbus, Ohio
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43215-3976
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer ¨
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Accelerated filer ý
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Non-accelerated filer ¨
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Smaller reporting company ¨
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(Do not check if a smaller reporting company)
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Emerging growth company ¨
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Form 10-K
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Item
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Description
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Page
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Part I
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1
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1A
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1B
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2
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3
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4
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Part II
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5
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6
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7
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7A
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8
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9
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9A
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9B
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Part III
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10
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11
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12
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13
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14
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Part IV
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15
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Glossary of Terms for State Auto Financial Corporation and Its Subsidiaries and Affiliates
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State Auto Financial or STFC
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Refers to our holding company, State Auto Financial Corporation.
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We, us, our or the Company
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Refers to STFC and its consolidated subsidiaries, namely State Auto Property & Casualty Insurance Company (“State Auto P&C”), Milbank Insurance Company (“Milbank”), State Auto Insurance Company of Ohio (“SA Ohio”), and Stateco Financial Services, Inc. (“Stateco”).
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State Auto Mutual
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Refers to State Automobile Mutual Insurance Company, which owns approximately 61.2% of STFC’s outstanding common shares.
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STFC Pooled Companies
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Refers to State Auto P&C, Milbank, and SA Ohio.
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Mutual Pooled Companies
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Refers to State Auto Mutual, and certain subsidiaries and affiliates of State Auto Mutual, namely, State Auto Insurance Company of Wisconsin (“SA Wisconsin”), Meridian Security Insurance Company (“Meridian Security”), Patrons Mutual Insurance Company of Connecticut (“Patrons Mutual”), Rockhill Insurance Company (“RIC”), Plaza Insurance Company (“Plaza”), American Compensation Insurance Company (“American Compensation”) and Bloomington Compensation Insurance Company (“Bloomington Compensation”).
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Pooled Companies or our Pooled Companies
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Refers to the STFC Pooled Companies and the Mutual Pooled Companies.
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Rockhill Insurance Group
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Refers to Rockhill Holding Company, its insurance subsidiaries, namely RIC, Plaza, American Compensation and Bloomington Compensation, and its other non-insurance subsidiaries, including RTW, Inc. (“RTW”), a holding company that owns 100% of American Compensation and Bloomington Compensation.
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Rockhill Insurers
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Refers to RIC, Plaza, American Compensation and Bloomington Compensation.
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State Auto Group
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Refers to the Pooled Companies
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Glossary of Selected Insurance and Accounting Terms
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Accident year
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The calendar year in which loss events occur, regardless of when the losses are actually reported, booked or paid.
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Accounting standards codification or ASC
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The Codification is the single source of authoritative nongovernmental GAAP developed by the Financial Accounting Standards Board (“FASB”).
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Admitted insurer
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An insurer licensed to transact insurance business within a state and subject to comprehensive policy rate, form and market conduct regulation by that state’s insurance regulatory authority.
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American Institute of Certified Public Accountants or AICPA
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The AICPA represents the certified public accounting profession nationally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups and other professional organizations. The AICPA also monitors and enforces compliance with the profession’s technical and ethical standards.
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Allocated loss adjustment expenses or ALAE
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The costs that can be related to a specific claim, which may include attorney fees, external claims adjusters and investigation costs, among others.
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Book value per share
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Total common stockholders’ equity divided by the number of common shares outstanding.
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Catastrophe loss
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Loss and ALAE from catastrophes, where catastrophes are defined as a severe loss caused by various natural events, including hurricanes, hailstorms, tornadoes, windstorms, earthquakes, severe winter weather and fires. Our catastrophe losses are those designated by the Insurance Services Office (“ISO”) Property Claim Services (“PCS”). PCS defines a catastrophe as an event that causes $25.0 million or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers.
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Combined ratio
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The sum of the loss and LAE ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.
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Debt to capital ratio
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The ratio of notes payable to the sum of total stockholders’ equity and notes payable.
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Deferred acquisition costs or DAC
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Expenses that vary with, and are primarily related to, the production of new and renewal insurance business, and are deferred and amortized to achieve a matching of revenues and expenses when reported in financial statements prepared in accordance with GAAP.
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Direct written premiums
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The amounts charged by an insurer to insureds in exchange for coverages provided in accordance with the terms of an insurance contract. The amounts exclude the impact of all reinsurance premiums, either assumed or ceded.
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Duration
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A measure of the sensitivity of a financial asset’s price to interest rate movements.
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Earned premiums or premiums earned
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The portion of written premiums that applies to the expired portion of the policy term. Earned premiums are recognized as revenue under both SAP and GAAP.
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Excess and surplus lines insurance
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Specialized property and liability coverages written by non-admitted insurers. These coverages include exposures that do not fit within normal underwriting patterns, involve a degree of risk that is not commensurate with standard rates and/or policy forms, or are not written by admitted insurers because of general market conditions.
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Expense ratio or underwriting expense ratio
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For SAP, it is the ratio of (i) the sum of statutory underwriting and miscellaneous expenses incurred offset by miscellaneous income (collectively, “underwriting expenses”) to (ii) written premiums. For GAAP, it is the ratio of acquisition and operating expenses incurred to earned premiums.
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Financial Accounting Standards Board or FASB
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In the United States, a non-governmental body the SEC has charged with establishing and maintaining generally accepted standards for professional accountants.
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Generally accepted accounting principles or GAAP
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Accounting practices used in the United States of America determined by the FASB and American Institute of Certified Public Accountants (“AICPA”).
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Incurred but not reported reserves or IBNR
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Estimated losses and LAE that have been incurred but not yet reported to the insurer. This includes amounts for unreported claims, development on known cases, and re-opened claims.
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Loss adjustment expenses or LAE
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The expenses of settling claims, including legal and other fees, and the portion of general expenses allocated to claim settlement. LAE is comprised of ALAE and ULAE.
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Loss and LAE ratio or loss ratio
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For both SAP and GAAP, it is the ratio of incurred losses and LAE to earned premiums.
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Loss reserves
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Liabilities established by insurers and reinsurers to reflect the estimated cost of claims incurred that the insurer or reinsurer will ultimately be required to pay in respect of insurance or reinsurance it has written. Reserves are established for losses and for LAE, and consist of case reserves and IBNR reserves.
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Managing general underwriter or MGU
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An independent insurance professional firm that acts as an intermediary between the insurer and retail agents, much like a wholesaler. MGUs frequently have binding authority to issue insurance policies on behalf of an insurer that fit into the underwriting guidelines provided by that insurer. MGUs typically are compensated by an override commission on the insurance coverages sold by their sub-agents.
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National Association of Insurance Commissioners or NAIC
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An organization of the insurance commissioners or directors of all 50 states, the District of Columbia and the five U.S. territories organized to promote consistency of regulatory practices and statutory accounting standards throughout the United States.
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Net premiums written to surplus ratio or leverage ratio
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A SAP calculation which measures statutory surplus available to absorb losses. This ratio is calculated by dividing the net statutory premiums written for a rolling twelve month period by the ending statutory surplus for the period. For example, a ratio of 1.5 means that for every dollar of surplus, the insurer wrote $1.50 in premiums.
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Net written premiums
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Direct written premiums plus assumed reinsurance premiums less ceded reinsurance premiums.
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Non-admitted insurer or surplus lines carrier
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An insurer that is not required to be licensed in a state but is allowed to do business in that state subject to certain regulatory oversight by that state’s insurance regulatory authority. Non-admitted insurers are not subject to most of the rate and form regulations imposed on admitted insurers because they write specialized property and liability coverages, also known as excess and surplus lines insurance, which allows them the flexibility to change coverages offered and rates charged without time constraints and financial costs associated with the filing process. As such, these insurers offer an opportunity for coverage for specialized exposures that otherwise might not be insurable.
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Retail agent or retail agency
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An independent insurance professional who represents, and acts as an intermediary for, admitted insurers, generally recommending, marketing and selling insurance products and services to insurance consumers.
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Return on average equity
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The percent derived by dividing net income by average total stockholders’ equity.
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Risk-based capital or RBC
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A measure adopted by the NAIC and state regulatory authorities for determining the minimum statutory capital and surplus requirements of insurers. Insurers having total adjusted capital less than that required by the RBC calculation will be subject to varying degrees of regulatory action depending on the level of capital inadequacy.
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Standard insurance
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Insurance which is typically written by admitted insurers. Our personal and business insurance segments are comprised of standard insurance.
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Statutory accounting practices or SAP
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The practices and procedures prescribed or permitted by state insurance regulatory authorities in the United States for recording transactions and preparing financial statements.
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Statutory surplus
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Under SAP, the amount remaining after all liabilities, including loss reserves, are subtracted from all admitted assets. Admitted assets are assets of an insurer prescribed or permitted by a state to be recognized on the balance sheet prepared in accordance with SAP.
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Unallocated loss adjustment expenses or ULAE
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The costs incurred in settling claims, such as in-house processing costs, which cannot be associated with a specific claim.
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Underwriting gain or loss
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Under SAP, earned premiums less loss and LAE and underwriting expenses.
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Unearned premiums
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The portion of written premiums that applies to the unexpired portion of the policy term. Unearned premiums are not recognized as revenues under both SAP and GAAP.
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Wholesale broker
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An independent insurance professional who offers specialized insurance products and serves as an intermediary between a retail agent and an insurer, while typically having no contact with the insured. A wholesale broker may represent both admitted and non-admitted insurers, and may offer both standard and excess and surplus lines insurance.
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•
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Commercial Insurance Segment - commercial auto, small commercial package, middle market commercial, workers’ compensation, farm and ranch and other commercial
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State
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% of Total
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Ohio
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9.0
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%
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Texas
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8.7
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Kentucky
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6.2
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California
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4.8
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Minnesota
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4.2
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Georgia
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4.0
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South Carolina
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3.7
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Tennessee
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3.7
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Indiana
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3.6
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Illinois
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3.4
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Maryland
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3.2
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Mississippi
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3.2
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North Carolina
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3.1
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Pennsylvania
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3.1
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All others (1)
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36.1
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Total
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100.0
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%
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(1)
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No other single state accounted for 3.0% or more of the total direct written premiums written in 2017.
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•
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the timely availability of sufficient, reliable data;
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our ability to conduct a complete and accurate analysis of available data;
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our ability to timely recognize changes in trends and to project both the severity and frequency of losses with reasonable accuracy;
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uncertainties which are generally inherent in estimates and assumptions;
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our ability to project changes in certain operating expense levels with reasonable accuracy;
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the development, selection and application of appropriate rating formula or other pricing methodologies;
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our use of predictive modeling or other underwriting tools to assist with correctly and consistently achieving the intended results in underwriting and pricing;
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our ability to establish and consistently follow company underwriting guidelines;
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our ability to innovate with new product and/or pricing strategies, and the success of those innovations on implementation;
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our ability to secure regulatory approval of premium rates on an adequate and timely basis and effectively implement such rate changes;
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our ability to accurately predict consumer behavior, such as policyholder retention;
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our ability to properly classify our new and renewal business;
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unanticipated court decisions, legislation or regulatory action;
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unanticipated changes or execution problems in our claim settlement practices, including our ability to recognize and respond to fraudulent or inflated claims;
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changing driving patterns for auto exposures including distracted driving; changing weather patterns (including those which may be related to climate change) for property exposures;
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technological innovations in automobiles, such as accident avoidance systems and advances leading to autonomous cars;
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changes in the medical sector of the economy; including healthcare reform cost shifting and other factors;
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unanticipated changes in auto repair costs, auto parts prices and used car prices;
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impact of inflation and other factors, such as demand surge on cost of construction materials, labor and other expenditures;
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our ability to monitor and manage property concentration in catastrophe prone areas, such as hurricane, earthquake and wind/hail regions; and
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the general state of the economy in the states in which we operate.
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2017
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High
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Low
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Dividend
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||||||
First Quarter
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$
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27.97
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$
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23.60
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$
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0.10
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Second Quarter
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27.62
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23.89
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0.10
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Third Quarter
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27.00
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22.11
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0.10
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Fourth Quarter
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30.85
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24.84
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0.10
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2016
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High
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Low
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Dividend
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||||||
First Quarter
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$
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22.83
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$
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17.84
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$
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0.10
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Second Quarter
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22.22
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18.69
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0.10
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Third Quarter
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24.35
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20.76
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0.10
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Fourth Quarter
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27.42
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19.54
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0.10
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(1) Adjusted for stock splits.
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12/31/2012
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12/31/2013
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12/31/2014
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12/31/2015
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12/31/2016
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12/31/2017
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STFC
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100.00
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145.26
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154.81
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163.68
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216.86
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239.14
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NASDAQ Index
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100.00
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140.17
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160.96
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172.40
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187.86
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243.71
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NASDAQ Ins. Index
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100.00
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131.15
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144.99
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157.63
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185.46
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194.61
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($ millions, except per share data)
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2017
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2016
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2015
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|||||||
GAAP Basis:
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Total revenues
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$
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1,421.3
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$
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1,405.4
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$
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1,368.6
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Income before federal income taxes
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$
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33.4
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$
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19.2
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$
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67.3
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Net (loss) income
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$
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(10.7
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)
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$
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21.0
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$
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51.2
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Stockholders’ equity
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$
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880.9
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$
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891.3
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$
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884.6
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Book value per share
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$
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20.76
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$
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21.31
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$
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21.40
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Return on average equity
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(1.2
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)%
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2.4
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%
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5.8
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%
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Debt to capital ratio
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12.2
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%
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12.0
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%
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10.2
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%
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||||
Cat loss and ALAE ratio
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9.7
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%
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6.3
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%
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4.0
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%
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Non-cat loss and LAE ratio
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62.3
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%
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66.6
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%
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63.9
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%
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Loss and LAE ratio
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72.0
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%
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72.9
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%
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67.9
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%
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Expense ratio
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35.7
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%
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33.3
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%
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33.6
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%
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||||
Combined ratio
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107.7
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%
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106.2
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%
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101.5
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%
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||||
Premiums written growth
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(1.9
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)%
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1.6
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%
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6.6
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%
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||||
Investment yield
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3.1
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%
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3.1
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%
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3.1
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%
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||||
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|||||||
SAP Basis:
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|||||||
Cat loss and ALAE ratio
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9.7
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%
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6.3
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%
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4.0
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%
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||||
Non-cat loss and ALAE ratio
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56.8
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%
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60.9
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%
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57.7
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%
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||||
ULAE ratio
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5.7
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%
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5.9
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%
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6.3
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%
|
||||
Loss and LAE ratio
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72.2
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%
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|
73.1
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%
|
|
68.0
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%
|
||||
Expense ratio
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35.1
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%
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|
33.4
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%
|
|
33.9
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%
|
||||
Combined ratio
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107.3
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%
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106.5
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%
|
|
101.9
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%
|
||||
Net premiums written to surplus
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1.5
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|
|
1.5
|
|
|
1.6
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•
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Earned premiums in 2017 were $1,275.1 million compared to $1,291.9 million and $1,270.5 million in 2016 and 2015, respectively. Earned premiums declined in 2017 compared to 2016 due to (i) underwriting and pricing decisions within the commercial insurance segment to improve overall profitability and (ii) our decision to exit Program business in 2016. Earned premiums in 2016 increased when compared to 2015 primarily driven by new business growth in the specialty insurance segment.
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•
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The SAP cat loss and ALAE ratio for 2017 was 9.7% compared to 6.3% and 4.0% for 2016 and 2015, respectively. The 2017 cat loss ratio increased when compared to the same 2016 and 2015 periods primarily driven by (i) Hurricanes Harvey and Irma during the third quarter of 2017 and (ii) widespread storms that impacted the Ohio Valley region, South Carolina, Texas, Mississippi and Georgia during the first quarter of 2017. The 2016 cat loss ratio increased when compared to 2015 primarily due to the impact of (i) increased storm activity, including wind and hail storms, in Texas, (ii) Hurricane Matthew, and (iii) wildfires in Tennessee.
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•
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The SAP non-catastrophe loss and ALAE ratio for 2017 was 56.8% compared to 60.9% and 57.7% for 2016 and 2015, respectively. The 2017 loss ratio improved 4.1 points compared to 2016 primarily attributable to 3.2 points,
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•
|
Net realized gains on investments were $65.1 million in 2017 compared to $36.5 million and $24.7 million in 2016 and 2015, respectively. Net realized gains in 2017 were impacted by (i) realized gains of $18.5 million from the sale of our U.S. small-cap equity portfolio and (ii) sales within our U.S. large-cap equity portfolio. The proceeds from the sale of our U.S. small-cap equity portfolio were reinvested in U.S. small-cap focused mutual and exchange traded funds. Net realized gains in 2016 were impacted by the recognition of a $12.0 million gain from the redemption of a limited partnership investment in international equities.
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($ in millions)
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|
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|
||||||||
2016
|
|
Personal
|
|
Commercial
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|
Specialty
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|
Total
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||||||||
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|
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|
||||||||
Net written premiums
|
|
$
|
577.2
|
|
|
$
|
459.4
|
|
|
$
|
256.7
|
|
|
$
|
1,293.3
|
|
Net earned premiums
|
|
578.5
|
|
|
472.6
|
|
|
240.8
|
|
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1,291.9
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|
||||
Losses and LAE incurred:
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|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
48.5
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|
|
25.6
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|
|
7.5
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|
|
81.6
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|
||||
Non-cat loss and ALAE
|
|
336.7
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|
|
276.4
|
|
|
173.7
|
|
|
786.8
|
|
||||
Total Loss and ALAE
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|
385.2
|
|
|
302.0
|
|
|
181.2
|
|
|
868.4
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|
||||
ULAE
|
|
36.8
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|
|
29.5
|
|
|
9.4
|
|
|
75.7
|
|
||||
Total Loss and LAE
|
|
422.0
|
|
|
331.5
|
|
|
190.6
|
|
|
944.1
|
|
||||
Underwriting expenses
|
|
166.8
|
|
|
172.7
|
|
|
92.9
|
|
|
432.4
|
|
||||
Net underwriting loss
|
|
$
|
(10.3
|
)
|
|
$
|
(31.6
|
)
|
|
$
|
(42.7
|
)
|
|
$
|
(84.6
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
8.4
|
%
|
|
5.4
|
%
|
|
3.1
|
%
|
|
6.3
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
58.2
|
%
|
|
58.5
|
%
|
|
72.2
|
%
|
|
60.9
|
%
|
||||
Total Loss and ALAE ratio
|
|
66.6
|
%
|
|
63.9
|
%
|
|
75.3
|
%
|
|
67.2
|
%
|
||||
ULAE ratio
|
|
6.3
|
%
|
|
6.2
|
%
|
|
3.9
|
%
|
|
5.9
|
%
|
||||
Total Loss and LAE ratio
|
|
72.9
|
%
|
|
70.1
|
%
|
|
79.2
|
%
|
|
73.1
|
%
|
||||
Expense ratio
|
|
28.9
|
%
|
|
37.6
|
%
|
|
36.2
|
%
|
|
33.4
|
%
|
||||
Combined ratio
|
|
101.8
|
%
|
|
107.7
|
%
|
|
115.4
|
%
|
|
106.5
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
||||||||
2015
|
|
Personal
|
|
Commercial
|
|
Specialty
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
581.0
|
|
|
$
|
481.5
|
|
|
$
|
211.0
|
|
|
$
|
1,273.5
|
|
Net earned premiums
|
|
591.3
|
|
|
476.5
|
|
|
202.7
|
|
|
1,270.5
|
|
||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
34.2
|
|
|
16.5
|
|
|
0.3
|
|
|
51.1
|
|
||||
Non-cat loss and ALAE
|
|
322.9
|
|
|
288.8
|
|
|
121.1
|
|
|
732.7
|
|
||||
Total Loss and ALAE
|
|
357.1
|
|
|
305.3
|
|
|
121.4
|
|
|
783.8
|
|
||||
ULAE
|
|
39.1
|
|
|
33.3
|
|
|
8.0
|
|
|
80.5
|
|
||||
Total Loss and LAE
|
|
396.2
|
|
|
338.6
|
|
|
129.4
|
|
|
864.3
|
|
||||
Underwriting expenses
|
|
167.5
|
|
|
184.7
|
|
|
79.1
|
|
|
431.3
|
|
||||
Net underwriting gain (loss)
|
|
$
|
27.5
|
|
|
$
|
(46.8
|
)
|
|
$
|
(5.9
|
)
|
|
$
|
(25.1
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
5.8
|
%
|
|
3.5
|
%
|
|
0.2
|
%
|
|
4.0
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
54.6
|
%
|
|
60.6
|
%
|
|
59.7
|
%
|
|
57.7
|
%
|
||||
Total Loss and ALAE ratio
|
|
60.4
|
%
|
|
64.1
|
%
|
|
59.9
|
%
|
|
61.7
|
%
|
||||
ULAE ratio
|
|
6.6
|
%
|
|
7.0
|
%
|
|
4.0
|
%
|
|
6.3
|
%
|
||||
Total Loss and LAE ratio
|
|
67.0
|
%
|
|
71.1
|
%
|
|
63.9
|
%
|
|
68.0
|
%
|
||||
Expense ratio
|
|
28.8
|
%
|
|
38.4
|
%
|
|
37.5
|
%
|
|
33.9
|
%
|
||||
Combined ratio
|
|
95.8
|
%
|
|
109.5
|
%
|
|
101.4
|
%
|
|
101.9
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
||||||||
2017
|
|
Personal Auto
|
|
Homeowners
|
|
Other Personal
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
362.9
|
|
|
$
|
227.9
|
|
|
$
|
18.9
|
|
|
$
|
609.7
|
|
Net earned premiums
|
|
340.7
|
|
|
220.7
|
|
|
18.9
|
|
|
580.3
|
|
||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
7.9
|
|
|
34.4
|
|
|
1.1
|
|
|
43.4
|
|
||||
Non-cat loss and ALAE
|
|
237.2
|
|
|
89.2
|
|
|
8.8
|
|
|
335.2
|
|
||||
Total Loss and ALAE
|
|
245.1
|
|
|
123.6
|
|
|
9.9
|
|
|
378.6
|
|
||||
ULAE
|
|
21.7
|
|
|
14.8
|
|
|
1.2
|
|
|
37.7
|
|
||||
Total Loss and LAE
|
|
266.8
|
|
|
138.4
|
|
|
11.1
|
|
|
416.3
|
|
||||
Underwriting expenses
|
|
104.2
|
|
|
76.0
|
|
|
7.1
|
|
|
187.3
|
|
||||
Net underwriting (loss) gain
|
|
$
|
(30.3
|
)
|
|
$
|
6.3
|
|
|
$
|
0.7
|
|
|
$
|
(23.3
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
2.3
|
%
|
|
15.6
|
%
|
|
5.7
|
%
|
|
7.5
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
69.6
|
%
|
|
40.4
|
%
|
|
46.5
|
%
|
|
57.7
|
%
|
||||
Total Loss and ALAE ratio
|
|
71.9
|
%
|
|
56.0
|
%
|
|
52.2
|
%
|
|
65.2
|
%
|
||||
ULAE ratio
|
|
6.4
|
%
|
|
6.7
|
%
|
|
6.5
|
%
|
|
6.5
|
%
|
||||
Total Loss and LAE ratio
|
|
78.3
|
%
|
|
62.7
|
%
|
|
58.7
|
%
|
|
71.7
|
%
|
||||
Expense ratio
|
|
28.7
|
%
|
|
33.4
|
%
|
|
37.4
|
%
|
|
30.7
|
%
|
||||
Combined ratio
|
|
107.0
|
%
|
|
96.1
|
%
|
|
96.1
|
%
|
|
102.4
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
||||||||
2016
|
|
Personal Auto
|
|
Homeowners
|
|
Other Personal
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
333.8
|
|
|
$
|
223.0
|
|
|
$
|
20.4
|
|
|
$
|
577.2
|
|
Net earned premiums
|
|
330.6
|
|
|
226.8
|
|
|
21.1
|
|
|
578.5
|
|
||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
7.0
|
|
|
40.4
|
|
|
1.1
|
|
|
48.5
|
|
||||
Non-cat loss and ALAE
|
|
243.9
|
|
|
84.2
|
|
|
8.6
|
|
|
336.7
|
|
||||
Total Loss and ALAE
|
|
250.9
|
|
|
124.6
|
|
|
9.7
|
|
|
385.2
|
|
||||
ULAE
|
|
20.4
|
|
|
15.0
|
|
|
1.4
|
|
|
36.8
|
|
||||
Total Loss and LAE
|
|
271.3
|
|
|
139.6
|
|
|
11.1
|
|
|
422.0
|
|
||||
Underwriting expenses
|
|
89.7
|
|
|
69.7
|
|
|
7.4
|
|
|
166.8
|
|
||||
Net underwriting (loss) gain
|
|
$
|
(30.4
|
)
|
|
$
|
17.5
|
|
|
$
|
2.6
|
|
|
$
|
(10.3
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
2.1
|
%
|
|
17.8
|
%
|
|
5.1
|
%
|
|
8.4
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
73.8
|
%
|
|
37.2
|
%
|
|
41.1
|
%
|
|
58.2
|
%
|
||||
Total Loss and ALAE ratio
|
|
75.9
|
%
|
|
55.0
|
%
|
|
46.2
|
%
|
|
66.6
|
%
|
||||
ULAE ratio
|
|
6.1
|
%
|
|
6.6
|
%
|
|
6.8
|
%
|
|
6.3
|
%
|
||||
Total Loss and LAE ratio
|
|
82.0
|
%
|
|
61.6
|
%
|
|
53.0
|
%
|
|
72.9
|
%
|
||||
Expense ratio
|
|
26.9
|
%
|
|
31.2
|
%
|
|
36.8
|
%
|
|
28.9
|
%
|
||||
Combined ratio
|
|
108.9
|
%
|
|
92.8
|
%
|
|
89.8
|
%
|
|
101.8
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
||||||||
2015
|
|
Personal Auto
|
|
Homeowners
|
|
Other Personal
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
334.4
|
|
|
$
|
224.9
|
|
|
$
|
21.7
|
|
|
$
|
581.0
|
|
Net earned premiums
|
|
339.1
|
|
|
229.8
|
|
|
22.4
|
|
|
591.3
|
|
||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
4.6
|
|
|
28.9
|
|
|
0.7
|
|
|
34.2
|
|
||||
Non-cat loss and ALAE
|
|
236.1
|
|
|
76.9
|
|
|
9.9
|
|
|
322.9
|
|
||||
Total Loss and ALAE
|
|
240.6
|
|
|
105.9
|
|
|
10.6
|
|
|
357.1
|
|
||||
ULAE
|
|
28.9
|
|
|
9.4
|
|
|
0.8
|
|
|
39.1
|
|
||||
Total Loss and LAE
|
|
269.6
|
|
|
115.3
|
|
|
11.4
|
|
|
396.2
|
|
||||
Underwriting expenses
|
|
90.0
|
|
|
69.6
|
|
|
7.9
|
|
|
167.5
|
|
||||
Net underwriting (loss) gain
|
|
$
|
(20.5
|
)
|
|
$
|
44.9
|
|
|
$
|
3.1
|
|
|
$
|
27.5
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
1.3
|
%
|
|
12.6
|
%
|
|
3.3
|
%
|
|
5.8
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
69.7
|
%
|
|
33.5
|
%
|
|
44.0
|
%
|
|
54.6
|
%
|
||||
Total Loss and ALAE ratio
|
|
71.0
|
%
|
|
46.1
|
%
|
|
47.3
|
%
|
|
60.4
|
%
|
||||
ULAE ratio
|
|
8.5
|
%
|
|
4.1
|
%
|
|
3.5
|
%
|
|
6.6
|
%
|
||||
Total Loss and LAE ratio
|
|
79.5
|
%
|
|
50.2
|
%
|
|
50.8
|
%
|
|
67.0
|
%
|
||||
Expense ratio
|
|
26.9
|
%
|
|
31.0
|
%
|
|
36.4
|
%
|
|
28.8
|
%
|
||||
Combined ratio
|
|
106.4
|
%
|
|
81.2
|
%
|
|
87.2
|
%
|
|
95.8
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
2017
|
|
Commercial Auto
|
|
Small Commercial Package
|
|
Middle Market Commercial
|
|
Workers' Comp
|
|
Farm & Ranch
|
|
Other Commercial
|
|
Total
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net written premiums
|
|
$
|
73.5
|
|
|
$
|
123.8
|
|
|
$
|
111.1
|
|
|
$
|
88.4
|
|
|
$
|
42.6
|
|
|
$
|
14.2
|
|
|
$
|
453.6
|
|
Net earned premiums
|
|
76.2
|
|
|
127.4
|
|
|
109.1
|
|
|
88.8
|
|
|
39.6
|
|
|
14.6
|
|
|
455.7
|
|
|||||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cat loss and ALAE
|
|
0.8
|
|
|
12.4
|
|
|
8.4
|
|
|
—
|
|
|
5.1
|
|
|
—
|
|
|
26.7
|
|
|||||||
Non-cat loss and ALAE
|
|
44.7
|
|
|
61.1
|
|
|
50.6
|
|
|
50.2
|
|
|
23.0
|
|
|
2.6
|
|
|
232.2
|
|
|||||||
Total Loss and ALAE
|
|
45.5
|
|
|
73.5
|
|
|
59.0
|
|
|
50.2
|
|
|
28.1
|
|
|
2.6
|
|
|
258.9
|
|
|||||||
ULAE
|
|
4.5
|
|
|
6.1
|
|
|
4.8
|
|
|
6.7
|
|
|
|
|
1.1
|
|
|
25.3
|
|
||||||||
Total Loss and LAE
|
|
50.0
|
|
|
79.6
|
|
|
63.8
|
|
|
56.9
|
|
|
30.2
|
|
|
3.7
|
|
|
284.2
|
|
|||||||
Underwriting expenses
|
|
31.5
|
|
|
55.7
|
|
|
42.5
|
|
|
28.4
|
|
|
16.3
|
|
|
7.7
|
|
|
182.1
|
|
|||||||
Net underwriting (loss) gain
|
|
$
|
(5.3
|
)
|
|
$
|
(7.9
|
)
|
|
$
|
2.8
|
|
|
$
|
3.5
|
|
|
$
|
(6.9
|
)
|
|
$
|
3.2
|
|
|
$
|
(10.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cat loss and ALAE ratio
|
|
1.1
|
%
|
|
9.7
|
%
|
|
7.7
|
%
|
|
—
|
%
|
|
13.0
|
%
|
|
0.1
|
%
|
|
5.9
|
%
|
|||||||
Non-cat loss and ALAE ratio
|
|
58.6
|
%
|
|
48.0
|
%
|
|
46.4
|
%
|
|
56.5
|
%
|
|
57.9
|
%
|
|
18.4
|
%
|
|
50.9
|
%
|
|||||||
Total Loss and ALAE ratio
|
|
59.7
|
%
|
|
57.7
|
%
|
|
54.1
|
%
|
|
56.5
|
%
|
|
70.9
|
%
|
|
18.5
|
%
|
|
56.8
|
%
|
|||||||
ULAE ratio
|
|
5.9
|
%
|
|
4.8
|
%
|
|
4.4
|
%
|
|
7.6
|
%
|
|
5.5
|
%
|
|
7.0
|
%
|
|
5.6
|
%
|
|||||||
Total Loss and LAE ratio
|
|
65.6
|
%
|
|
62.5
|
%
|
|
58.5
|
%
|
|
64.1
|
%
|
|
76.4
|
%
|
|
25.5
|
%
|
|
62.4
|
%
|
|||||||
Expense ratio
|
|
43.0
|
%
|
|
45.0
|
%
|
|
38.3
|
%
|
|
32.1
|
%
|
|
38.2
|
%
|
|
54.4
|
%
|
|
40.2
|
%
|
|||||||
Combined ratio
|
|
108.6
|
%
|
|
107.5
|
%
|
|
96.8
|
%
|
|
96.2
|
%
|
|
114.6
|
%
|
|
79.9
|
%
|
|
102.6
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
2016
|
|
Commercial Auto
|
|
Small Commercial Package
|
|
Middle Market Commercial
|
|
Workers' Comp
|
|
Farm & Ranch
|
|
Other Commercial
|
|
Total
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net written premiums
|
|
$
|
79.0
|
|
|
$
|
125.6
|
|
|
$
|
108.8
|
|
|
$
|
92.0
|
|
|
$
|
37.0
|
|
|
$
|
17.0
|
|
|
$
|
459.4
|
|
Net earned premiums
|
|
88.3
|
|
|
127.5
|
|
|
110.5
|
|
|
93.8
|
|
|
35.5
|
|
|
17.0
|
|
|
472.6
|
|
|||||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cat loss and ALAE
|
|
0.8
|
|
|
12.9
|
|
|
8.4
|
|
|
—
|
|
|
3.5
|
|
|
—
|
|
|
25.6
|
|
|||||||
Non-cat loss and ALAE
|
|
70.1
|
|
|
65.3
|
|
|
61.8
|
|
|
58.5
|
|
|
14.4
|
|
|
6.3
|
|
|
276.4
|
|
|||||||
Total Loss and ALAE
|
|
70.9
|
|
|
78.2
|
|
|
70.2
|
|
|
58.5
|
|
|
17.9
|
|
|
6.3
|
|
|
302.0
|
|
|||||||
ULAE
|
|
4.8
|
|
|
6.9
|
|
|
6.0
|
|
|
8.4
|
|
|
2.2
|
|
|
1.2
|
|
|
29.5
|
|
|||||||
Total Loss and LAE
|
|
75.7
|
|
|
85.1
|
|
|
76.2
|
|
|
66.9
|
|
|
20.1
|
|
|
7.5
|
|
|
331.5
|
|
|||||||
Underwriting expenses
|
|
30.5
|
|
|
51.3
|
|
|
43.0
|
|
|
26.7
|
|
|
14.1
|
|
|
7.2
|
|
|
172.7
|
|
|||||||
Net underwriting (loss) gain
|
|
$
|
(17.9
|
)
|
|
$
|
(8.9
|
)
|
|
$
|
(8.7
|
)
|
|
$
|
0.2
|
|
|
$
|
1.3
|
|
|
$
|
2.3
|
|
|
$
|
(31.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cat loss and ALAE ratio
|
|
1.0
|
%
|
|
10.1
|
%
|
|
7.6
|
%
|
|
—
|
%
|
|
9.9
|
%
|
|
—
|
%
|
|
5.4
|
%
|
|||||||
Non-cat loss and ALAE ratio
|
|
79.4
|
%
|
|
51.2
|
%
|
|
55.9
|
%
|
|
62.3
|
%
|
|
40.8
|
%
|
|
37.2
|
%
|
|
58.5
|
%
|
|||||||
Total Loss and ALAE ratio
|
|
80.4
|
%
|
|
61.3
|
%
|
|
63.5
|
%
|
|
62.3
|
%
|
|
50.7
|
%
|
|
37.2
|
%
|
|
63.9
|
%
|
|||||||
ULAE ratio
|
|
5.5
|
%
|
|
5.3
|
%
|
|
5.3
|
%
|
|
9.0
|
%
|
|
6.0
|
%
|
|
7.6
|
%
|
|
6.2
|
%
|
|||||||
Total Loss and LAE ratio
|
|
85.9
|
%
|
|
66.6
|
%
|
|
68.8
|
%
|
|
71.3
|
%
|
|
56.7
|
%
|
|
44.8
|
%
|
|
70.1
|
%
|
|||||||
Expense ratio
|
|
38.5
|
%
|
|
40.8
|
%
|
|
39.5
|
%
|
|
29.1
|
%
|
|
38.1
|
%
|
|
42.4
|
%
|
|
37.6
|
%
|
|||||||
Combined ratio
|
|
124.4
|
%
|
|
107.4
|
%
|
|
108.3
|
%
|
|
100.4
|
%
|
|
94.8
|
%
|
|
87.2
|
%
|
|
107.7
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
2015
|
|
Commercial Auto
|
|
Small Commercial Package
|
|
Middle Market Commercial
|
|
Workers' Comp
|
|
Farm & Ranch
|
|
Other Commercial
|
|
Total
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net written premiums
|
|
$
|
96.1
|
|
|
$
|
128.4
|
|
|
$
|
113.1
|
|
|
$
|
92.8
|
|
|
$
|
34.0
|
|
|
$
|
17.2
|
|
|
$
|
481.5
|
|
Net earned premiums
|
|
95.4
|
|
|
128.5
|
|
|
113.4
|
|
|
89.3
|
|
|
32.9
|
|
|
17.1
|
|
|
476.5
|
|
|||||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cat loss and ALAE
|
|
0.6
|
|
|
8.3
|
|
|
6.1
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|
16.5
|
|
|||||||
Non-cat loss and ALAE
|
|
79.3
|
|
|
77.4
|
|
|
58.1
|
|
|
54.6
|
|
|
14.0
|
|
|
5.2
|
|
|
288.8
|
|
|||||||
Total Loss and ALAE
|
|
79.9
|
|
|
85.7
|
|
|
64.2
|
|
|
54.6
|
|
|
15.6
|
|
|
5.2
|
|
|
305.3
|
|
|||||||
ULAE
|
|
7.2
|
|
|
11.6
|
|
|
6.4
|
|
|
5.5
|
|
|
1.2
|
|
|
1.3
|
|
|
33.3
|
|
|||||||
Total Loss and LAE
|
|
87.1
|
|
|
97.3
|
|
|
70.6
|
|
|
60.1
|
|
|
16.9
|
|
|
6.5
|
|
|
338.6
|
|
|||||||
Underwriting expenses
|
|
34.3
|
|
|
55.4
|
|
|
48.3
|
|
|
25.5
|
|
|
13.7
|
|
|
7.4
|
|
|
184.7
|
|
|||||||
Net underwriting (loss) gain
|
|
$
|
(26.1
|
)
|
|
$
|
(24.2
|
)
|
|
$
|
(5.6
|
)
|
|
$
|
3.7
|
|
|
$
|
2.4
|
|
|
$
|
3.1
|
|
|
$
|
(46.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cat loss and ALAE ratio
|
|
0.6
|
%
|
|
6.5
|
%
|
|
5.4
|
%
|
|
—
|
%
|
|
4.9
|
%
|
|
(0.2
|
)%
|
|
3.5
|
%
|
|||||||
Non-cat loss and ALAE ratio
|
|
83.2
|
%
|
|
60.2
|
%
|
|
51.2
|
%
|
|
61.2
|
%
|
|
42.6
|
%
|
|
30.6
|
%
|
|
60.6
|
%
|
|||||||
Total Loss and ALAE ratio
|
|
83.8
|
%
|
|
66.7
|
%
|
|
56.6
|
%
|
|
61.2
|
%
|
|
47.5
|
%
|
|
30.4
|
%
|
|
64.1
|
%
|
|||||||
ULAE ratio
|
|
7.6
|
%
|
|
9.0
|
%
|
|
5.7
|
%
|
|
6.1
|
%
|
|
3.7
|
%
|
|
8.0
|
%
|
|
7.0
|
%
|
|||||||
Total Loss and LAE ratio
|
|
91.4
|
%
|
|
75.7
|
%
|
|
62.3
|
%
|
|
67.3
|
%
|
|
51.2
|
%
|
|
38.4
|
%
|
|
71.1
|
%
|
|||||||
Expense ratio
|
|
35.7
|
%
|
|
43.2
|
%
|
|
42.7
|
%
|
|
27.5
|
%
|
|
40.2
|
%
|
|
43.3
|
%
|
|
38.4
|
%
|
|||||||
Combined ratio
|
|
127.1
|
%
|
|
118.9
|
%
|
|
105.0
|
%
|
|
94.8
|
%
|
|
91.4
|
%
|
|
81.7
|
%
|
|
109.5
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
||||||||
2017
|
|
E&S Property
|
|
E&S Casualty
|
|
Programs
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
30.1
|
|
|
$
|
110.3
|
|
|
$
|
65.6
|
|
|
$
|
206.0
|
|
Net earned premiums
|
|
40.5
|
|
|
103.1
|
|
|
95.5
|
|
|
239.1
|
|
||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
52.6
|
|
|
0.1
|
|
|
1.2
|
|
|
53.9
|
|
||||
Non-cat loss and ALAE
|
|
12.6
|
|
|
72.0
|
|
|
71.5
|
|
|
156.1
|
|
||||
Total Loss and ALAE
|
|
65.2
|
|
|
72.1
|
|
|
72.7
|
|
|
210.0
|
|
||||
ULAE
|
|
0.1
|
|
|
3.7
|
|
|
5.7
|
|
|
9.5
|
|
||||
Total Loss and LAE
|
|
65.3
|
|
|
75.8
|
|
|
78.4
|
|
|
219.5
|
|
||||
Underwriting expenses
|
|
17.4
|
|
|
39.2
|
|
|
20.0
|
|
|
76.6
|
|
||||
Net underwriting loss
|
|
$
|
(42.2
|
)
|
|
$
|
(11.9
|
)
|
|
$
|
(2.9
|
)
|
|
$
|
(57.0
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
130.1
|
%
|
|
0.1
|
%
|
|
1.2
|
%
|
|
22.5
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
31.2
|
%
|
|
69.8
|
%
|
|
74.9
|
%
|
|
65.3
|
%
|
||||
Total Loss and ALAE ratio
|
|
161.3
|
%
|
|
69.9
|
%
|
|
76.1
|
%
|
|
87.8
|
%
|
||||
ULAE ratio
|
|
—
|
%
|
|
3.6
|
%
|
|
5.9
|
%
|
|
4.0
|
%
|
||||
Total Loss and LAE ratio
|
|
161.3
|
%
|
|
73.5
|
%
|
|
82.0
|
%
|
|
91.8
|
%
|
||||
Expense ratio
|
|
57.9
|
%
|
|
35.5
|
%
|
|
30.5
|
%
|
|
37.2
|
%
|
||||
Combined ratio
|
|
219.2
|
%
|
|
109.0
|
%
|
|
112.5
|
%
|
|
129.0
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
||||||||
2016
|
|
E&S Property
|
|
E&S Casualty
|
|
Programs
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
44.4
|
|
|
$
|
99.6
|
|
|
$
|
112.7
|
|
|
$
|
256.7
|
|
Net earned premiums
|
|
40.4
|
|
|
91.0
|
|
|
109.4
|
|
|
240.8
|
|
||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
6.9
|
|
|
0.1
|
|
|
0.5
|
|
|
7.5
|
|
||||
Non-cat loss and ALAE
|
|
13.5
|
|
|
65.3
|
|
|
94.9
|
|
|
173.7
|
|
||||
Total Loss and ALAE
|
|
20.4
|
|
|
65.4
|
|
|
95.4
|
|
|
181.2
|
|
||||
ULAE
|
|
(0.4
|
)
|
|
4.3
|
|
|
5.5
|
|
|
9.4
|
|
||||
Total Loss and LAE
|
|
20.0
|
|
|
69.7
|
|
|
100.9
|
|
|
190.6
|
|
||||
Underwriting expenses
|
|
20.1
|
|
|
35.5
|
|
|
37.3
|
|
|
92.9
|
|
||||
Net underwriting gain (loss)
|
|
$
|
0.3
|
|
|
$
|
(14.2
|
)
|
|
$
|
(28.8
|
)
|
|
$
|
(42.7
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
17.0
|
%
|
|
0.1
|
%
|
|
0.5
|
%
|
|
3.1
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
33.5
|
%
|
|
71.8
|
%
|
|
86.7
|
%
|
|
72.2
|
%
|
||||
Total Loss and ALAE ratio
|
|
50.5
|
%
|
|
71.9
|
%
|
|
87.2
|
%
|
|
75.3
|
%
|
||||
ULAE ratio
|
|
(0.9
|
)%
|
|
4.7
|
%
|
|
5.1
|
%
|
|
3.9
|
%
|
||||
Total Loss and LAE ratio
|
|
49.6
|
%
|
|
76.6
|
%
|
|
92.3
|
%
|
|
79.2
|
%
|
||||
Expense ratio
|
|
45.1
|
%
|
|
35.6
|
%
|
|
33.1
|
%
|
|
36.2
|
%
|
||||
Combined ratio
|
|
94.7
|
%
|
|
112.2
|
%
|
|
125.4
|
%
|
|
115.4
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
||||||||
2015
|
|
E&S Property
|
|
E&S Casualty
|
|
Programs
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
44.5
|
|
|
$
|
70.5
|
|
|
$
|
96.0
|
|
|
$
|
211.0
|
|
Net earned premiums
|
|
49.3
|
|
|
64.0
|
|
|
89.3
|
|
|
202.7
|
|
||||
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE
|
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
0.3
|
|
||||
Non-cat loss and ALAE
|
|
6.8
|
|
|
41.2
|
|
|
73.0
|
|
|
121.1
|
|
||||
Total Loss and ALAE
|
|
7.0
|
|
|
41.2
|
|
|
73.2
|
|
|
121.4
|
|
||||
ULAE
|
|
0.8
|
|
|
2.3
|
|
|
4.9
|
|
|
8.0
|
|
||||
Total Loss and LAE
|
|
7.7
|
|
|
43.5
|
|
|
78.2
|
|
|
129.4
|
|
||||
Underwriting expenses
|
|
21.1
|
|
|
24.6
|
|
|
33.4
|
|
|
79.1
|
|
||||
Net underwriting gain (loss)
|
|
$
|
20.5
|
|
|
$
|
(4.1
|
)
|
|
$
|
(22.2
|
)
|
|
$
|
(5.9
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Cat loss and ALAE ratio
|
|
0.3
|
%
|
|
—
|
%
|
|
0.2
|
%
|
|
0.2
|
%
|
||||
Non-cat loss and ALAE ratio
|
|
13.8
|
%
|
|
64.4
|
%
|
|
81.8
|
%
|
|
59.7
|
%
|
||||
Total Loss and ALAE ratio
|
|
14.1
|
%
|
|
64.4
|
%
|
|
82.0
|
%
|
|
59.9
|
%
|
||||
ULAE ratio
|
|
1.6
|
%
|
|
3.6
|
%
|
|
5.5
|
%
|
|
4.0
|
%
|
||||
Total Loss and LAE ratio
|
|
15.7
|
%
|
|
68.0
|
%
|
|
87.5
|
%
|
|
63.9
|
%
|
||||
Expense ratio
|
|
47.5
|
%
|
|
34.9
|
%
|
|
34.8
|
%
|
|
37.5
|
%
|
||||
Combined ratio
|
|
63.2
|
%
|
|
102.9
|
%
|
|
122.3
|
%
|
|
101.4
|
%
|
||||
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
%
GAAP Loss
and LAE Ratio
|
|
2016
|
|
%
GAAP Loss
and LAE Ratio
|
|
2015
|
|
%
GAAP Loss
and LAE Ratio
|
|||||||
Provision for losses and loss expenses occurring:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Current year
|
$
|
964.9
|
|
|
75.7
|
|
|
$
|
915.4
|
|
|
70.8
|
|
$
|
852.8
|
|
|
67.1
|
Prior years
|
(46.6
|
)
|
|
(3.7
|
)
|
|
27.0
|
|
|
2.1
|
|
10.0
|
|
|
0.8
|
|||
Total losses and loss expenses
|
$
|
918.3
|
|
|
72.0
|
|
|
$
|
942.4
|
|
|
72.9
|
|
$
|
862.8
|
|
|
67.9
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
Redundancy /(Deficiency)
|
||||||||||
Non-cat loss and ALAE:
|
|
|
|
|
|
|
||||||
Personal Insurance Segment:
|
|
|
|
|
|
|
||||||
Personal Auto
|
|
$
|
4.4
|
|
|
$
|
(7.9
|
)
|
|
$
|
(11.1
|
)
|
Homeowners
|
|
(1.5
|
)
|
|
(0.5
|
)
|
|
2.5
|
|
|||
Other Personal
|
|
(1.3
|
)
|
|
(0.6
|
)
|
|
(1.9
|
)
|
|||
Personal Insurance Segment
|
|
1.6
|
|
|
(9.0
|
)
|
|
(10.5
|
)
|
|||
|
|
|
|
|
|
|
||||||
Commercial Insurance Segment:
|
|
|
|
|
|
|
||||||
Commercial Auto
|
|
8.9
|
|
|
(3.6
|
)
|
|
(9.8
|
)
|
|||
Small Commercial Package
|
|
11.4
|
|
|
0.6
|
|
|
(1.0
|
)
|
|||
Middle Market Commercial
|
|
8.2
|
|
|
0.4
|
|
|
4.3
|
|
|||
Workers' Compensation
|
|
8.9
|
|
|
4.2
|
|
|
5.1
|
|
|||
Farm & Ranch
|
|
0.9
|
|
|
1.7
|
|
|
0.6
|
|
|||
Other Commercial
|
|
5.7
|
|
|
1.8
|
|
|
1.5
|
|
|||
Commercial Insurance Segment
|
|
44.0
|
|
|
5.1
|
|
|
0.7
|
|
|||
|
|
|
|
|
|
|
||||||
Specialty Insurance Segment:
|
|
|
|
|
|
|
||||||
E&S Property
|
|
(3.0
|
)
|
|
(1.9
|
)
|
|
5.2
|
|
|||
E&S Casualty
|
|
(0.5
|
)
|
|
(4.6
|
)
|
|
(2.7
|
)
|
|||
Programs
|
|
(0.7
|
)
|
|
(14.3
|
)
|
|
(9.6
|
)
|
|||
Specialty Insurance Segment
|
|
(4.2
|
)
|
|
(20.8
|
)
|
|
(7.1
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cat Loss and ALAE
|
|
2.0
|
|
|
1.4
|
|
|
0.7
|
|
|||
ULAE
|
|
3.2
|
|
|
(3.7
|
)
|
|
6.2
|
|
|||
Total
|
|
$
|
46.6
|
|
|
$
|
(27.0
|
)
|
|
$
|
(10.0
|
)
|
|
|
|
|
|
|
|
•
|
The commercial insurance segment non-catastrophe loss and ALAE reserves contributed $44.0 million of favorable development, driven by small commercial package, workers’ compensation, commercial auto and middle market commercial of $11.4 million, $8.9 million, $8.9 million and $8.2 million, respectively. Favorable development in these lines was driven by lower than anticipated severity emerging from multiple accident years.
|
•
|
ULAE was $3.2 million lower than anticipated in the reserves at December 31, 2016.
|
•
|
Catastrophe reserves contributed $2.0 million of favorable development.
|
•
|
The personal insurance segment non-catastrophe loss and ALAE reserves contributed $1.6 million of the favorable development, driven by personal auto which contributed $4.4 million of favorable development, primarily due to lower than anticipated bodily injury severity from the prior two accident years. This was partially offset by homeowners and other personal, which contributed $1.5 million and $1.3 million of adverse development, respectively.
|
•
|
The specialty insurance segment non-catastrophe loss and ALAE reserves accounted for $4.2 million of adverse development, which was driven by E&S property with adverse development of $3.0 million. E&S property adverse development was driven by higher than anticipated severity for liability coverages on the run-off Florida package business. For programs, adverse development was $0.7 million, with adverse development of $5.7 million attributable to accident years 2013 - 2015 mostly offset by favorable development of $5.0 million, primarily from accident years 2012 and 2011.
|
•
|
The specialty insurance segment non-catastrophe loss and ALAE reserves accounted for $20.8 million of adverse development, which was driven by programs and E&S casualty with adverse development of $14.3 million and $4.6 million, respectively. Programs adverse development was driven by higher than expected severity in programs with commercial auto exposures. E&S casualty adverse development was driven by increased severity from the healthcare line, which was placed in run-off in the first quarter of 2016.
|
•
|
The personal insurance segment non-catastrophe loss and ALAE reserves contributed $9.0 million of the adverse development, driven by personal auto which contributed $7.9 million of adverse development, primarily due to higher than anticipated bodily injury severity from the prior two accident years.
|
•
|
ULAE was $3.7 million higher than anticipated in the reserves at December 31, 2015.
|
•
|
The commercial insurance segment non-catastrophe loss and ALAE reserves contributed $5.1 million of favorable development, primarily driven by workers’ compensation, other commercial, and farm & ranch, of $4.2 million, $1.8 million, and $1.7 million respectively. Favorable development in these lines was driven by lower than anticipated severity emerging from multiple accident years. The favorable development was partially offset by adverse development in commercial auto of $3.6 million, which was driven by higher than anticipated bodily injury severity from the prior two accident years.
|
•
|
Catastrophe reserves contributed $1.4 million of favorable development.
|
($ millions)
Accident Year
|
2015
|
||
|
Redundancy /(Deficiency)
|
||
2005 and prior
|
$
|
1.1
|
|
2006
|
(0.2
|
)
|
|
2007
|
(0.1
|
)
|
|
2008
|
1.8
|
|
|
2009
|
2.0
|
|
|
2010
|
3.4
|
|
|
2011
|
(1.7
|
)
|
|
2012
|
(2.8
|
)
|
|
2013
|
(11.5
|
)
|
|
2014
|
(2.0
|
)
|
|
Total
|
$
|
(10.0
|
)
|
|
|
•
|
The personal insurance segment contributed $10.5 million of the adverse development, primarily driven by personal auto which developed unfavorably by $11.1 million, due to higher than anticipated bodily injury severity trends from the 2014 and 2013 accident years. Partially offsetting the unfavorable development was favorable development of $2.5 million in homeowners.
|
•
|
In the specialty insurance segment, the non-catastrophe loss and ALAE reserves accounted for $7.1 million of adverse development, which was due to programs and E&S casualty with unfavorable development of $9.6 million and $2.7 million, respectively. Unfavorable development in programs was due to higher than expected severity in programs with commercial auto exposure. Partially offsetting the unfavorable development was favorable development of $5.2 million in the E&S property unit due to lower than anticipated severity emerging from accident year 2014.
|
•
|
ULAE was $6.2 million lower than anticipated in the reserves at December 31, 2014.
|
•
|
We experienced favorable catastrophe loss development of $0.7 million in 2015 related to catastrophe losses primarily from accident year 2014.
|
•
|
The commercial insurance segment contributed $0.7 million of favorable development, primarily due to favorable development in workers’ compensation and middle market commercial of $5.1 million and $4.3 million, respectively, driven by lower than anticipated severity emerging from multiple accident years. Partially offsetting the favorable development was adverse development in commercial auto of $9.8 million driven by higher than anticipated bodily injury severity from the prior two accident years.
|
($ millions)
|
2017
|
|
2016
|
|
$
Change
|
||||||
Personal Insurance Segment:
|
|
|
|
|
|
||||||
Personal auto
|
$
|
191.8
|
|
|
$
|
192.7
|
|
|
$
|
(0.9
|
)
|
Homeowners
|
50.5
|
|
|
50.5
|
|
|
—
|
|
|||
Other Personal
|
13.8
|
|
|
11.3
|
|
|
2.5
|
|
|||
Total Personal Insurance Segment
|
256.1
|
|
|
254.5
|
|
|
1.6
|
|
|||
Commercial Insurance Segment:
|
|
|
|
|
|
||||||
Commercial Auto
|
92.1
|
|
|
98.3
|
|
|
(6.2
|
)
|
|||
Small Commercial Package
|
124.5
|
|
|
125.4
|
|
|
(0.9
|
)
|
|||
Middle Market Commercial
|
151.4
|
|
|
154.2
|
|
|
(2.8
|
)
|
|||
Workers’ Compensation
|
193.4
|
|
|
185.6
|
|
|
7.8
|
|
|||
Farm & Ranch
|
16.4
|
|
|
14.3
|
|
|
2.1
|
|
|||
Other Commercial
|
26.5
|
|
|
24.7
|
|
|
1.8
|
|
|||
Total Commercial Insurance Segment
|
604.3
|
|
|
602.5
|
|
|
1.8
|
|
|||
Specialty Insurance Segment:
|
|
|
|
|
|
||||||
E&S Property
|
64.8
|
|
|
29.8
|
|
|
35.0
|
|
|||
E&S Casualty
|
176.8
|
|
|
137.4
|
|
|
39.4
|
|
|||
Programs
|
150.5
|
|
|
153.8
|
|
|
(3.3
|
)
|
|||
Total Specialty Insurance Segment
|
392.1
|
|
|
321.0
|
|
|
71.1
|
|
|||
Total losses and loss expenses payable net of reinsurance recoverable on losses and loss expenses payable
|
$
|
1,252.5
|
|
|
$
|
1,178.0
|
|
|
$
|
74.5
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
% of
Total
|
|
2016
|
|
% of
Total
|
|||||
Cash and cash equivalents
|
$
|
91.5
|
|
|
3.3
|
|
$
|
51.1
|
|
|
1.9
|
|
Fixed maturities, at fair value:
|
|
|
|
|
|
|
|
|||||
Fixed maturities
|
2,037.0
|
|
|
73.2
|
|
1,947.5
|
|
|
73.1
|
|||
Treasury inflation-protected securities
|
155.8
|
|
|
5.6
|
|
161.8
|
|
|
6.1
|
|||
Total fixed maturities
|
2,192.8
|
|
|
78.8
|
|
2,109.3
|
|
|
79.2
|
|||
Notes receivable from affiliate (1)
|
70.0
|
|
|
2.5
|
|
70.0
|
|
|
2.6
|
|||
Equity securities, at fair value:
|
|
|
|
|
|
|
|
|||||
Large-cap securities
|
96.8
|
|
|
3.5
|
|
139.0
|
|
|
5.2
|
|||
Small-cap securities
|
—
|
|
|
—
|
|
79.1
|
|
|
3.0
|
|||
Mutual and exchange traded funds
|
268.5
|
|
|
9.7
|
|
164.7
|
|
|
6.2
|
|||
Total equity securities
|
365.3
|
|
|
13.2
|
|
382.8
|
|
|
14.4
|
|||
Other invested assets, at fair value:
|
|
|
|
|
|
|
|
|||||
International instruments
|
45.2
|
|
|
1.6
|
|
35.7
|
|
|
1.3
|
|||
Other invested assets
|
10.8
|
|
|
0.4
|
|
9.4
|
|
|
0.4
|
|||
Total other invested assets, at fair value
|
56.0
|
|
|
2.0
|
|
45.1
|
|
|
1.7
|
|||
Other invested assets, at cost
|
5.6
|
|
|
0.2
|
|
5.4
|
|
|
0.2
|
|||
Total portfolio
|
$
|
2,781.2
|
|
|
100.0
|
|
$
|
2,663.7
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|||||
(1)
|
In May 2009, we entered into two separate Credit Agreements with State Auto Mutual. Under these Credit Agreements, State Auto Mutual borrowed a total of $70.0 million from us on an unsecured basis. Interest is payable semi-annually at a fixed annual interest rate of 7.00%. Principal is payable May 2019.
|
($ millions)
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in 1 year or less
|
$
|
5.9
|
|
|
$
|
5.9
|
|
Due after 1 year through 5 years
|
543.8
|
|
|
545.0
|
|
||
Due after 5 years through 10 years
|
419.1
|
|
|
420.3
|
|
||
Due after 10 years
|
499.6
|
|
|
521.2
|
|
||
U.S. government agencies residential mortgage-backed securities
|
704.7
|
|
|
700.4
|
|
||
Total
|
$
|
2,173.1
|
|
|
$
|
2,192.8
|
|
|
|
|
|
($ millions)
|
Fair Value
|
||||||||||||||||||
|
-200 bps
Change |
|
-100 bps
Change |
|
Actual
|
|
+100 bps
Change |
|
+200 bps
Change |
||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
478.8
|
|
|
$
|
456.8
|
|
|
$
|
436.9
|
|
|
$
|
418.6
|
|
|
$
|
401.9
|
|
Obligations of states and political subdivisions
|
573.5
|
|
|
549.0
|
|
|
525.8
|
|
|
502.8
|
|
|
477.2
|
|
|||||
Corporate securities
|
560.7
|
|
|
545.2
|
|
|
529.7
|
|
|
512.8
|
|
|
496.0
|
|
|||||
U.S. government agencies mortgage-backed securities
|
755.5
|
|
|
730.5
|
|
|
700.4
|
|
|
664.9
|
|
|
629.3
|
|
|||||
Balance as of December 31, 2017
|
$
|
2,368.5
|
|
|
$
|
2,281.5
|
|
|
$
|
2,192.8
|
|
|
$
|
2,099.1
|
|
|
$
|
2,004.4
|
|
|
|
|
|
|
|
|
|
|
|
Large-cap equity portfolio:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fair value ($ millions)
|
|
$
|
116.7
|
|
|
$
|
106.8
|
|
|
$
|
96.8
|
|
|
$
|
86.8
|
|
|
$
|
76.9
|
|
Change in S&P 500 Index
|
|
+20%
|
|
|
+10%
|
|
|
—
|
|
|
-10
|
%
|
|
-20
|
%
|
|||||
Value as % of original value
|
|
121
|
%
|
|
110
|
%
|
|
100
|
%
|
|
90
|
%
|
|
79
|
%
|
Mutual and exchange traded funds portfolio:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fair value ($ millions)
|
|
$
|
320.6
|
|
|
$
|
294.6
|
|
|
$
|
268.5
|
|
|
$
|
242.5
|
|
|
$
|
216.4
|
|
Change in Russell 2000 Index
|
|
+20%
|
|
|
+10%
|
|
|
—
|
|
|
-10
|
%
|
|
-20
|
%
|
|||||
Value as % of original value
|
|
119
|
%
|
|
110
|
%
|
|
100
|
%
|
|
90
|
%
|
|
81
|
%
|
International fund:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fair value ($ millions)
|
|
$
|
51.6
|
|
|
$
|
48.4
|
|
|
$
|
45.2
|
|
|
$
|
42.1
|
|
|
$
|
38.9
|
|
Change in MSCI EAFE Index
|
|
+20%
|
|
|
+10%
|
|
|
—
|
|
|
-10
|
%
|
|
-20
|
%
|
|||||
Value as % of original value
|
|
114
|
%
|
|
107
|
%
|
|
100
|
%
|
|
93
|
%
|
|
86
|
%
|
($ millions)
|
Year Ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Gross investment income:
|
|
|
|
|
|
||||||
Fixed maturities
|
$
|
63.2
|
|
|
$
|
63.4
|
|
|
$
|
61.3
|
|
Equity securities
|
10.5
|
|
|
7.3
|
|
|
6.5
|
|
|||
Other
|
6.3
|
|
|
5.6
|
|
|
5.9
|
|
|||
Total gross investment income
|
80.0
|
|
|
76.3
|
|
|
73.7
|
|
|||
Less: Investment expenses
|
1.2
|
|
|
1.6
|
|
|
2.0
|
|
|||
Net investment income
|
$
|
78.8
|
|
|
$
|
74.7
|
|
|
$
|
71.7
|
|
|
|
|
|
|
|
||||||
Average invested assets (at cost)
|
$
|
2,561.1
|
|
|
$
|
2,443.0
|
|
|
$
|
2,313.3
|
|
Annualized investment yield
|
3.1
|
%
|
|
3.1
|
%
|
|
3.1
|
%
|
|||
Annualized investment yield, after tax
|
2.2
|
%
|
|
2.3
|
%
|
|
2.4
|
%
|
|||
Net investment income, after tax
|
$
|
57.0
|
|
|
$
|
55.7
|
|
|
$
|
55.3
|
|
Effective tax rate
|
27.7
|
%
|
|
25.5
|
%
|
|
22.8
|
%
|
|||
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||||||||||||||
|
Realized
gains
(losses)
|
|
Proceeds
received
on sale
|
|
Realized
gains
(losses)
|
|
Proceeds
received
on sale
|
|
Realized
gains
(losses)
|
|
Proceeds
received
on sale
|
||||||||||||
Realized gains:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities
|
$
|
2.8
|
|
|
$
|
184.8
|
|
|
$
|
2.8
|
|
|
$
|
211.6
|
|
|
$
|
4.6
|
|
|
$
|
180.7
|
|
Equity securities
|
66.7
|
|
|
243.2
|
|
|
29.2
|
|
|
147.0
|
|
|
29.6
|
|
|
135.1
|
|
||||||
Other invested assets
|
0.2
|
|
|
1.1
|
|
|
12.1
|
|
|
0.8
|
|
|
0.2
|
|
|
0.7
|
|
||||||
Total realized gains
|
$
|
69.7
|
|
|
$
|
429.1
|
|
|
$
|
44.1
|
|
|
$
|
359.4
|
|
|
$
|
34.4
|
|
|
$
|
316.5
|
|
Realized losses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sales
|
$
|
(1.1
|
)
|
|
$
|
9.5
|
|
|
$
|
(0.8
|
)
|
|
$
|
6.0
|
|
|
$
|
(1.8
|
)
|
|
$
|
9.7
|
|
OTTI
|
(3.5
|
)
|
|
—
|
|
|
(4.5
|
)
|
|
—
|
|
|
(7.9
|
)
|
|
—
|
|
||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
OTTI
|
—
|
|
|
—
|
|
|
(2.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total realized losses
|
$
|
(4.6
|
)
|
|
$
|
9.5
|
|
|
$
|
(7.6
|
)
|
|
$
|
6.0
|
|
|
$
|
(9.7
|
)
|
|
$
|
9.7
|
|
Net realized gains on investments
|
$
|
65.1
|
|
|
$
|
438.6
|
|
|
$
|
36.5
|
|
|
$
|
365.4
|
|
|
$
|
24.7
|
|
|
$
|
326.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
|
Number
of
positions
|
|
Total
impairment
|
|
Number
of
positions
|
|
Total
impairment
|
|
Number
of
positions
|
|
Total
impairment
|
|||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Large-cap securities
|
1
|
|
|
$
|
(1.5
|
)
|
|
2
|
|
|
$
|
(0.6
|
)
|
|
1
|
|
|
$
|
(2.2
|
)
|
Small-cap securities
|
22
|
|
|
(2.0
|
)
|
|
28
|
|
|
(3.9
|
)
|
|
41
|
|
|
(5.7
|
)
|
|||
Fixed maturities
|
—
|
|
|
—
|
|
|
1
|
|
|
(2.3
|
)
|
|
—
|
|
|
—
|
|
|||
Total OTTI
|
23
|
|
|
$
|
(3.5
|
)
|
|
31
|
|
|
$
|
(6.8
|
)
|
|
42
|
|
|
$
|
(7.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except number of positions)
|
Cost or
amortized
cost
|
|
Gross
unrealized
holding
gains
|
|
Number of
gain
positions
|
|
Gross
unrealized
holding
losses
|
|
Number of
loss
positions
|
|
Fair
value
|
||||||||||
Fixed Maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
433.8
|
|
|
$
|
9.3
|
|
|
17
|
|
|
$
|
(6.2
|
)
|
|
40
|
|
|
$
|
436.9
|
|
Obligations of states and political subdivisions
|
507.1
|
|
|
19.1
|
|
|
113
|
|
|
(0.4
|
)
|
|
10
|
|
|
525.8
|
|
||||
Corporate securities
|
527.5
|
|
|
4.5
|
|
|
53
|
|
|
(2.3
|
)
|
|
33
|
|
|
529.7
|
|
||||
U.S. government agencies mortgage-backed securities
|
704.7
|
|
|
7.1
|
|
|
43
|
|
|
(11.4
|
)
|
|
72
|
|
|
700.4
|
|
||||
Total fixed maturities
|
2,173.1
|
|
|
40.0
|
|
|
226
|
|
|
(20.3
|
)
|
|
155
|
|
|
2,192.8
|
|
||||
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Large-cap securities
|
62.4
|
|
|
35.1
|
|
|
38
|
|
|
(0.7
|
)
|
|
4
|
|
|
96.8
|
|
||||
Mutual and exchange traded funds
|
256.2
|
|
|
21.6
|
|
|
14
|
|
|
(9.3
|
)
|
|
1
|
|
|
268.5
|
|
||||
Total equity securities
|
318.6
|
|
|
56.7
|
|
|
52
|
|
|
(10.0
|
)
|
|
5
|
|
|
365.3
|
|
||||
Other invested assets
|
25.8
|
|
|
30.2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
56.0
|
|
||||
Total available-for-sale investments
|
$
|
2,517.5
|
|
|
$
|
126.9
|
|
|
280
|
|
|
$
|
(30.3
|
)
|
|
160
|
|
|
$
|
2,614.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
$
Change
|
||||||
Available-for-sale investments
|
|
|
|
|
|
||||||
Unrealized gains:
|
|
|
|
|
|
||||||
Fixed maturities
|
$
|
19.7
|
|
|
$
|
13.4
|
|
|
$
|
6.3
|
|
Equity securities
|
46.7
|
|
|
59.7
|
|
|
(13.0
|
)
|
|||
Other invested assets
|
30.2
|
|
|
19.6
|
|
|
10.6
|
|
|||
Unrealized gains
|
96.6
|
|
|
92.7
|
|
|
3.9
|
|
|||
Deferred federal income tax liability
|
(30.6
|
)
|
|
(29.9
|
)
|
|
(0.7
|
)
|
|||
Unrealized gains, net of tax
|
$
|
66.0
|
|
|
$
|
62.8
|
|
|
$
|
3.2
|
|
|
|
|
|
|
|
($ millions)
|
Carrying
Value
|
|
Fair
Value
|
|
Interest
Rate
|
|||||
Subordinated Debentures due 2033: issued $15.5 million, May 2003 with variable interest adjusting quarterly
|
$
|
15.2
|
|
|
$
|
15.2
|
|
|
5.68
|
%
|
FHLB loan due 2033: issued $85.0 million, July 2013 with fixed interest
|
85.4
|
|
|
85.7
|
|
|
5.03
|
%
|
||
FHLB loan due 2021: issued $21.5 million , September 2016 with fixed interest
|
21.5
|
|
|
20.9
|
|
|
1.73
|
%
|
||
Total notes payable
|
$
|
122.1
|
|
|
$
|
121.8
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Total
|
|
Due
1 year
or less
|
|
Due
1-3
years
|
|
Due
3-5
years
|
|
Due
after 5
years
|
||||||||||||
Direct loss and ALAE reserves(1)
|
$
|
1,252.5
|
|
|
$
|
526.9
|
|
|
$
|
443.5
|
|
|
$
|
147.4
|
|
|
$
|
134.7
|
|
||
Notes payable(2):
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subordinated Debentures due 2033:
issued $15.5, May 2003 with variable interest(3) adjusting
quarterly
|
15.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15.5
|
|
|||||||
FHLB loan due 2033; issued $85.0 million, July 2013 with fixed interest
|
85.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85.0
|
|
|||||||
FHLB loan due 2021: issued $21.5 million , September 2016 with fixed interest
|
21.5
|
|
|
|
|
|
|
|
|
21.5
|
|
||||||||||
Total notes payable
|
122.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
122.0
|
|
|||||||
Interest payable (2):
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subordinated Debentures due 2033:
issued $15.5, May 2003 with variable interest(3) adjusting
quarterly
|
14.6
|
|
|
0.9
|
|
|
1.8
|
|
|
1.8
|
|
|
10.1
|
|
|||||||
FHLB loan due 2021: issued $21.5 million , September 2016 with fixed interest
|
1.5
|
|
|
0.4
|
|
|
0.7
|
|
|
0.4
|
|
|
—
|
|
|||||||
FHLB loan due 2033; issued $85.0 million, July 2013 with fixed interest
|
70.7
|
|
|
4.3
|
|
|
8.6
|
|
|
8.6
|
|
|
49.2
|
|
|||||||
Total interest payable
|
86.8
|
|
|
5.6
|
|
|
11.1
|
|
|
10.8
|
|
|
59.3
|
|
|||||||
Postretirement benefits
|
12.9
|
|
|
1.5
|
|
|
2.9
|
|
|
2.6
|
|
|
5.9
|
|
|||||||
Pension funding(4)
|
47.2
|
|
|
4.2
|
|
|
8.8
|
|
|
9.5
|
|
|
24.7
|
|
|||||||
Total
|
$
|
1,521.4
|
|
|
$
|
538.2
|
|
|
$
|
466.3
|
|
|
$
|
170.3
|
|
|
$
|
346.6
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(1)
|
We derived expected payment patterns separately for the direct loss and ALAE reserves. Amounts included the STFC Pooled Companies net additional share of transactions assumed from State Auto Mutual through the Pooling Arrangement. For a reconciliation of management’s best estimate, see “Critical Accounting Policies – Losses and Loss Expenses Payable” included in this Item 7. These patterns were applied to the December 31, 2017, loss and ALAE payable to generate estimated annual incremental loss and ALAE payments for each subsequent calendar year. These amounts are based on historical payment patterns and do not represent actual contractual obligations. The actual payment amounts and the related timing of those payments could differ significantly from these estimates.
|
||||||||||||||||||||
(2)
|
For a discussion of these debt instruments, see “Liquidity and Capital Resources—Borrowing Arrangements” included in this Item 7.
|
||||||||||||||||||||
(3)
|
Interest on the subordinated debentures was calculated using an interest rate equal to the three-month LIBOR rate at December 31, 2017 of 1.4806% plus 4.20%, or 5.6806%.
|
||||||||||||||||||||
(4)
|
These amounts are estimates of ERISA minimum funding levels based on adjustments to prior year assumptions for our defined benefit pension plan and do not represent an estimate of our expected contributions. Funding levels generally are not determined until later in the year with respect to the contribution year. See Note 10, “Pension and Postretirement Benefits Plans” to our consolidated financial statements included in Item 8 of this Form 10-K for a tabular presentation of STFC’s share of expected benefit payments from the State Auto Group’s defined benefit pension plan.
|
||||||||||||||||||||
|
|
|
Statutory Leverage Ratios
|
2017
|
|
2016
|
|
2015
|
||||
State Auto P&C
|
1.5
|
|
|
1.5
|
|
|
1.5
|
|
|
Milbank
|
1.8
|
|
|
1.9
|
|
|
1.9
|
|
|
Weighted Average
|
1.6
|
|
|
1.5
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|||
Direct loss and ALAE reserve:
|
|
|
|
|||
STFC Pooled Companies
|
$
|
527.1
|
|
|
536.9
|
|
Assumed by STFC Pooled Companies
|
731.5
|
|
|
643.8
|
|
|
Total direct loss and ALAE reserve
|
1,258.6
|
|
|
1,180.7
|
|
|
Direct ULAE reserve:
|
|
|
|
|||
STFC Pooled Companies
|
29.8
|
|
|
31.3
|
|
|
Assumed by STFC Pooled Companies
|
33.8
|
|
|
32.2
|
|
|
Total direct ULAE reserve
|
63.6
|
|
|
63.5
|
|
|
Direct salvage and subrogation recoverable:
|
|
|
|
|||
STFC Pooled Companies
|
(21.9
|
)
|
|
(22.5
|
)
|
|
Assumed by STFC Pooled Companies
|
(3.6
|
)
|
|
(4.5
|
)
|
|
Total direct salvage and subrogation recoverable
|
(25.5
|
)
|
|
(27.0
|
)
|
|
Reinsurance recoverable
|
(3.1
|
)
|
|
(3.6
|
)
|
|
Assumed reinsurance
|
9.2
|
|
|
5.1
|
|
|
Reinsurance assumed by STFC Pooled Companies
|
(50.3
|
)
|
|
(40.7
|
)
|
|
Total losses and loss expenses payable, net of reinsurance recoverable on losses and loss expenses payable of $3.1 million and $3.6 million in 2017 and 2016, respectively
|
$
|
1,252.5
|
|
|
1,178.0
|
|
|
|
|
|
($ millions)
|
Ending
Loss &
ALAE
Case &
Formula
|
|
Ending
Loss &
ALAE
IBNR
|
|
Ending
ULAE
Bulk
|
|
Total
Reserves
|
|||||
December 31, 2017
|
|
|
|
|||||||||
Personal Insurance Segment:
|
|
|
|
|
|
|
|
|||||
Personal Auto
|
$
|
125.7
|
|
|
56.4
|
|
|
9.7
|
|
|
191.8
|
|
Homeowners
|
28.8
|
|
|
18.5
|
|
|
3.2
|
|
|
50.5
|
|
|
Other personal
|
5.6
|
|
|
7.6
|
|
|
0.6
|
|
|
13.8
|
|
|
Total Personal Insurance Segment
|
160.1
|
|
|
82.5
|
|
|
13.5
|
|
|
256.1
|
|
|
Commercial Insurance Segment:
|
|
|
|
|
|
|
|
|||||
Commercial Auto
|
53.2
|
|
|
35.7
|
|
|
3.2
|
|
|
92.1
|
|
|
Small Commercial Package
|
51.6
|
|
|
66.7
|
|
|
6.2
|
|
|
124.5
|
|
|
Middle Market Commercial
|
59.6
|
|
|
77.8
|
|
|
14.0
|
|
|
151.4
|
|
|
Workers’ Compensation
|
68.3
|
|
|
112.5
|
|
|
12.6
|
|
|
193.4
|
|
|
Farm & Ranch
|
10.1
|
|
|
5.5
|
|
|
0.8
|
|
|
16.4
|
|
|
Other Commercial
|
3.8
|
|
|
22.6
|
|
|
0.1
|
|
|
26.5
|
|
|
Total Commercial Insurance Segment
|
246.6
|
|
|
320.8
|
|
|
36.9
|
|
|
604.3
|
|
|
Specialty Insurance Segment:
|
|
|
|
|
|
|
|
|||||
E&S Property
|
44.3
|
|
|
19.6
|
|
|
0.9
|
|
|
64.8
|
|
|
E&S Casualty
|
38.7
|
|
|
129.2
|
|
|
8.9
|
|
|
176.8
|
|
|
Programs
|
58.6
|
|
|
88.1
|
|
|
3.8
|
|
|
150.5
|
|
|
Total Specialty Insurance Segment
|
141.6
|
|
|
236.9
|
|
|
13.6
|
|
|
392.1
|
|
|
Total losses and loss expenses payable net of reinsurance recoverable on losses and loss expenses payable
|
$
|
548.3
|
|
|
640.2
|
|
|
64.0
|
|
|
1,252.5
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Ending
Loss &
ALAE
Case &
Formula
|
|
Ending
Loss &
ALAE
IBNR
|
|
Ending
ULAE
Bulk
|
|
Total
Reserves
|
|||||
December 31, 2016
|
|
|
|
|||||||||
Personal Insurance Segment:
|
|
|
|
|
|
|
|
|||||
Personal Auto
|
$
|
121.6
|
|
|
60.3
|
|
|
10.8
|
|
|
192.7
|
|
Homeowners
|
32.8
|
|
|
14.9
|
|
|
2.8
|
|
|
50.5
|
|
|
Other personal
|
2.2
|
|
|
8.6
|
|
|
0.5
|
|
|
11.3
|
|
|
Total Personal Insurance Segment
|
156.6
|
|
|
83.8
|
|
|
14.1
|
|
|
254.5
|
|
|
Commercial Insurance Segment:
|
|
|
|
|
|
|
|
|||||
Commercial Auto
|
47.8
|
|
|
46.6
|
|
|
3.9
|
|
|
98.3
|
|
|
Small Commercial Package
|
55.9
|
|
|
62.5
|
|
|
7.0
|
|
|
125.4
|
|
|
Middle Market Commercial
|
63.4
|
|
|
76.8
|
|
|
14.0
|
|
|
154.2
|
|
|
Workers’ Compensation
|
68.0
|
|
|
106.0
|
|
|
11.6
|
|
|
185.6
|
|
|
Farm & Ranch
|
8.5
|
|
|
5.1
|
|
|
0.7
|
|
|
14.3
|
|
|
Other Commercial
|
1.0
|
|
|
23.6
|
|
|
0.1
|
|
|
24.7
|
|
|
Total Commercial Insurance Segment
|
244.6
|
|
|
320.6
|
|
|
37.3
|
|
|
602.5
|
|
|
Specialty Insurance Segment:
|
|
|
|
|
|
|
|
|||||
E&S Property
|
12.0
|
|
|
16.2
|
|
|
1.6
|
|
|
29.8
|
|
|
E&S Casualty
|
30.2
|
|
|
99.5
|
|
|
7.7
|
|
|
137.4
|
|
|
Programs
|
68.1
|
|
|
82.6
|
|
|
3.1
|
|
|
153.8
|
|
|
Total Specialty Insurance Segment
|
110.3
|
|
|
198.3
|
|
|
12.4
|
|
|
321.0
|
|
|
Total losses and loss expenses payable net of reinsurance recoverable on losses and loss expenses payable
|
$
|
511.5
|
|
|
602.7
|
|
|
63.8
|
|
|
1,178.0
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Pension
|
|
Postretirement
|
||||||||||||||||
|
Discount rate
|
|
Discount rate
|
||||||||||||||||
|
3.25%
|
|
3.50%
|
|
3.75%
|
|
3.25%
|
|
3.50%
|
|
3.75%
|
||||||||
Benefit obligation
|
$
|
315.7
|
|
|
304.2
|
|
|
292.8
|
|
|
$
|
18.8
|
|
|
18.3
|
|
|
18.0
|
|
Net periodic benefit cost (benefit)
|
$
|
6.6
|
|
|
5.6
|
|
|
4.8
|
|
|
$
|
(4.7
|
)
|
|
(4.6
|
)
|
|
(4.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Expected return on plan assets
|
|
|
|
|
|
|
||||||||||||
|
6.75%
|
|
7.00%
|
|
7.25%
|
|
|
|
|
|
|
||||||||
Net periodic benefit cost
|
$
|
6.3
|
|
|
5.6
|
|
|
5.0
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Income before federal income taxes
|
$
|
33.4
|
|
|
$
|
19.2
|
|
|
$
|
67.3
|
|
|
|
|
|
|
|
||||||
Current tax expense (benefit)
|
0.4
|
|
|
(1.7
|
)
|
|
2.9
|
|
|||
Deferred tax expense (benefit)
|
43.7
|
|
|
(0.1
|
)
|
|
13.2
|
|
|||
Total federal income tax expense (benefit)
|
44.1
|
|
|
(1.8
|
)
|
|
16.1
|
|
|||
Net (loss) income
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
|
|
|
|
|
|
/s/ Ernst & Young LLP
|
|
|
We have served as the Company’s auditor since 1994
|
|
|
Grandview Heights, Ohio
|
|
|
February 28, 2018
|
|
|
/s/ Ernst & Young LLP
|
|
|
Grandview Heights, Ohio
|
|
|
February 28, 2018
|
|
|
($ and shares in millions, except per share amounts)
|
December 31
|
||||||
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Fixed maturities, available-for-sale, at fair value (amortized cost $2,173.1 and $2,095.9, respectively)
|
$
|
2,192.8
|
|
|
$
|
2,109.3
|
|
Equity securities, available-for-sale, at fair value (cost $318.6 and $323.1, respectively)
|
365.3
|
|
|
382.8
|
|
||
Other invested assets, available-for-sale, at fair value (cost $25.8 and $25.5, respectively)
|
56.0
|
|
|
45.1
|
|
||
Other invested assets
|
5.6
|
|
|
5.4
|
|
||
Notes receivable from affiliate
|
70.0
|
|
|
70.0
|
|
||
Total investments
|
2,689.7
|
|
|
2,612.6
|
|
||
Cash and cash equivalents
|
91.5
|
|
|
51.1
|
|
||
Accrued investment income and other assets
|
36.5
|
|
|
40.0
|
|
||
Deferred policy acquisition costs (affiliated net assumed $64.7 and $50.7, respectively)
|
117.8
|
|
|
129.8
|
|
||
Reinsurance recoverable on losses and loss expenses payable
|
3.1
|
|
|
3.6
|
|
||
Prepaid reinsurance premiums
|
6.4
|
|
|
6.1
|
|
||
Current federal income taxes
|
4.8
|
|
|
6.7
|
|
||
Net deferred federal income taxes
|
57.2
|
|
|
102.1
|
|
||
Property and equipment, at cost (net of accumulated depreciation of $6.8 and $6.6, respectively)
|
7.3
|
|
|
7.4
|
|
||
Total assets
|
$
|
3,014.3
|
|
|
$
|
2,959.4
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Losses and loss expenses payable (affiliated net assumed $711.4 and $630.9, respectively)
|
$
|
1,255.6
|
|
|
$
|
1,181.6
|
|
Unearned premiums (affiliated net assumed $187.9 and $220.9, respectively)
|
611.8
|
|
|
617.8
|
|
||
Notes payable (affiliates $15.2 and $15.2, respectively)
|
122.1
|
|
|
122.1
|
|
||
Postretirement and pension benefits (affiliated net ceded $34.8 and $40.1, respectively)
|
64.5
|
|
|
74.4
|
|
||
Due to affiliate
|
2.7
|
|
|
2.4
|
|
||
Other liabilities (affiliated net assumed $15.5 and $11.0, respectively)
|
76.7
|
|
|
69.8
|
|
||
Total liabilities
|
2,133.4
|
|
|
2,068.1
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Class A Preferred stock (nonvoting), without par value. Authorized 2.5 shares; none issued
|
—
|
|
|
—
|
|
||
Class B Preferred stock, without par value. Authorized 2.5 shares; none issued
|
—
|
|
|
—
|
|
||
Common stock, without par value. Authorized 100.0 shares; 49.2 and 48.6 shares issued, respectively, at stated value of $2.50 per share
|
123.0
|
|
|
121.6
|
|
||
Treasury stock, 6.8 and 6.8 shares, respectively, at cost
|
(116.8
|
)
|
|
(116.5
|
)
|
||
Additional paid-in capital
|
171.8
|
|
|
159.9
|
|
||
Accumulated other comprehensive income (affiliated net ceded $50.7 and $53.7, respectively)
|
36.7
|
|
|
32.5
|
|
||
Retained earnings
|
666.2
|
|
|
693.8
|
|
||
Total stockholders’ equity
|
880.9
|
|
|
891.3
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,014.3
|
|
|
$
|
2,959.4
|
|
|
|
|
|
($ millions, except per share amounts)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Earned premiums (affiliated net assumed $458.0, $472.0 and $437.6, respectively)
|
$
|
1,275.1
|
|
|
$
|
1,291.9
|
|
|
$
|
1,270.5
|
|
Net investment income (affiliates $4.9, $4.9 and $4.9, respectively)
|
78.8
|
|
|
74.7
|
|
|
71.7
|
|
|||
Net realized gain on investments:
|
|
|
|
|
|
||||||
Total other-than-temporary impairment losses
|
(3.5
|
)
|
|
(6.8
|
)
|
|
(7.9
|
)
|
|||
Portion of loss recognized in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other net realized investment gains
|
68.6
|
|
|
43.3
|
|
|
32.2
|
|
|||
Total net realized gain on investments
|
65.1
|
|
|
36.5
|
|
|
24.3
|
|
|||
Other income (affiliates $2.3, $2.3 and $2.1, respectively)
|
2.3
|
|
|
2.3
|
|
|
2.1
|
|
|||
Total revenues
|
1,421.3
|
|
|
1,405.4
|
|
|
1,368.6
|
|
|||
Losses and loss expenses (affiliated net assumed $379.6, $383.8 and $293.3, respectively)
|
918.3
|
|
|
942.4
|
|
|
862.8
|
|
|||
Acquisition and operating expenses (affiliated net assumed $270.7, $285.8 and $248.6, respectively)
|
455.8
|
|
|
430.4
|
|
|
426.8
|
|
|||
Interest expense (affiliates $0.8, $0.8 and $0.7, respectively)
|
5.9
|
|
|
5.5
|
|
|
5.4
|
|
|||
Other expenses
|
7.9
|
|
|
7.9
|
|
|
6.3
|
|
|||
Total expenses
|
1,387.9
|
|
|
1,386.2
|
|
|
1,301.3
|
|
|||
Income before federal income taxes
|
33.4
|
|
|
19.2
|
|
|
67.3
|
|
|||
Federal income tax expense (benefit):
|
|
|
|
|
|
||||||
Current
|
0.4
|
|
|
(1.7
|
)
|
|
2.9
|
|
|||
Deferred
|
43.7
|
|
|
(0.1
|
)
|
|
13.2
|
|
|||
Total federal income tax expense (benefit)
|
44.1
|
|
|
(1.8
|
)
|
|
16.1
|
|
|||
Net (loss) income
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
(Loss) earnings per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
(0.25
|
)
|
|
$
|
0.50
|
|
|
$
|
1.25
|
|
Diluted
|
$
|
(0.25
|
)
|
|
$
|
0.50
|
|
|
$
|
1.23
|
|
Dividends paid per common share
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
($ millions)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Net change in unrealized holding gains (losses) on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during year
|
69.0
|
|
|
27.8
|
|
|
(39.2
|
)
|
|||
Reclassification adjustments for gains realized in net income
|
(65.1
|
)
|
|
(36.5
|
)
|
|
(24.7
|
)
|
|||
Income tax (expense) benefit
|
(0.7
|
)
|
|
3.0
|
|
|
22.4
|
|
|||
Total change in net unrealized holding gains (losses) on investments
|
3.2
|
|
|
(5.7
|
)
|
|
(41.5
|
)
|
|||
Net unrecognized benefit plan obligations:
|
|
|
|
|
|
||||||
Net actuarial (loss) gain arising during period
|
(1.0
|
)
|
|
(3.0
|
)
|
|
5.3
|
|
|||
Reclassification adjustments for amortization to statements of income:
|
|
|
|
|
|
||||||
Negative prior service cost
|
(5.5
|
)
|
|
(5.5
|
)
|
|
(5.4
|
)
|
|||
Net actuarial gain
|
8.0
|
|
|
9.4
|
|
|
11.5
|
|
|||
Income tax expense
|
(0.5
|
)
|
|
(0.3
|
)
|
|
(4.0
|
)
|
|||
Total net unrecognized benefit plan obligations
|
1.0
|
|
|
0.6
|
|
|
7.4
|
|
|||
Other comprehensive income (loss)
|
4.2
|
|
|
(5.1
|
)
|
|
(34.1
|
)
|
|||
Comprehensive (loss) income
|
$
|
(6.5
|
)
|
|
$
|
15.9
|
|
|
$
|
17.1
|
|
|
|
|
|
|
|
(in millions)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Common shares:
|
|
|
|
|
|
||||||
Balance at beginning of year
|
48.6
|
|
|
48.1
|
|
|
47.7
|
|
|||
Issuance of shares
|
0.6
|
|
|
0.5
|
|
|
0.4
|
|
|||
Balance at end of year
|
49.2
|
|
|
48.6
|
|
|
48.1
|
|
|||
Treasury shares:
|
|
|
|
||||||||
Balance at beginning of year
|
(6.8
|
)
|
|
(6.8
|
)
|
|
(6.8
|
)
|
|||
Balance at end of year
|
(6.8
|
)
|
|
(6.8
|
)
|
|
(6.8
|
)
|
|||
Common stock:
|
|
|
|
||||||||
Balance at beginning of year
|
$
|
121.6
|
|
|
$
|
120.4
|
|
|
$
|
119.3
|
|
Issuance of shares
|
1.4
|
|
|
1.2
|
|
|
1.1
|
|
|||
Balance at end of year
|
$
|
123.0
|
|
|
$
|
121.6
|
|
|
$
|
120.4
|
|
Treasury stock:
|
|
|
|
||||||||
Balance at beginning of year
|
$
|
(116.5
|
)
|
|
$
|
(116.3
|
)
|
|
$
|
(116.0
|
)
|
Shares acquired on stock award exercises and vested restricted shares
|
(0.3
|
)
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|||
Balance at end of year
|
$
|
(116.8
|
)
|
|
$
|
(116.5
|
)
|
|
$
|
(116.3
|
)
|
Additional paid-in capital:
|
|
|
|
||||||||
Balance at beginning of year
|
$
|
159.9
|
|
|
$
|
153.5
|
|
|
$
|
143.2
|
|
Issuance of common stock
|
8.8
|
|
|
6.8
|
|
|
5.2
|
|
|||
Tax (expense) benefit from stock option exercises
|
—
|
|
|
(3.0
|
)
|
|
0.3
|
|
|||
Stock awards granted
|
3.1
|
|
|
2.6
|
|
|
4.8
|
|
|||
Balance at end of year
|
$
|
171.8
|
|
|
$
|
159.9
|
|
|
$
|
153.5
|
|
Accumulated other comprehensive income:
|
|
|
|
||||||||
Balance at beginning of year
|
$
|
32.5
|
|
|
$
|
37.6
|
|
|
$
|
71.7
|
|
Change in unrealized holding gains (losses) on investments, net of tax
|
3.2
|
|
|
(5.7
|
)
|
|
(41.5
|
)
|
|||
Change in unrecognized benefit plan obligations, net of tax and reclassification adjustments
|
1.0
|
|
|
0.6
|
|
|
7.4
|
|
|||
Balance at end of year
|
$
|
36.7
|
|
|
$
|
32.5
|
|
|
$
|
37.6
|
|
Retained earnings:
|
|
|
|
||||||||
Balance at beginning of year
|
$
|
693.8
|
|
|
$
|
689.4
|
|
|
$
|
654.7
|
|
Net (loss) income
|
(10.7
|
)
|
|
21.0
|
|
|
51.2
|
|
|||
Cash dividends paid (affiliates $10.4, $10.4 and $10.4, respectively)
|
$
|
(16.9
|
)
|
|
$
|
(16.6
|
)
|
|
$
|
(16.5
|
)
|
Balance at end of year
|
666.2
|
|
|
693.8
|
|
|
689.4
|
|
|||
Total stockholders’ equity at end of year
|
$
|
880.9
|
|
|
$
|
891.3
|
|
|
$
|
884.6
|
|
|
|
|
|
|
|
($ millions)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization, net
|
12.5
|
|
|
14.6
|
|
|
15.7
|
|
|||
Share-based compensation
|
4.2
|
|
|
3.7
|
|
|
4.5
|
|
|||
Net realized gain on investments
|
(65.1
|
)
|
|
(36.5
|
)
|
|
(24.3
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Deferred policy acquisition benefits
|
12.0
|
|
|
(0.7
|
)
|
|
(2.6
|
)
|
|||
Accrued investment income and other assets
|
3.5
|
|
|
(4.5
|
)
|
|
(2.4
|
)
|
|||
Postretirement and pension benefits
|
(9.0
|
)
|
|
(28.8
|
)
|
|
(6.0
|
)
|
|||
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums
|
0.2
|
|
|
3.0
|
|
|
3.0
|
|
|||
Other liabilities and due to/from affiliates, net
|
6.0
|
|
|
7.3
|
|
|
(39.9
|
)
|
|||
Losses and loss expenses payable
|
74.0
|
|
|
128.6
|
|
|
69.8
|
|
|||
Unearned premiums
|
(6.0
|
)
|
|
1.5
|
|
|
3.9
|
|
|||
Excess tax expense on share-based awards
|
—
|
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|||
Federal income taxes
|
46.3
|
|
|
4.5
|
|
|
13.7
|
|
|||
Cash provided from December 31, 2014 unearned premium transfer related to the homeowners quota-share reinsurance arrangement
|
—
|
|
|
—
|
|
|
63.5
|
|
|||
Net cash provided by operating activities
|
$
|
67.9
|
|
|
$
|
113.5
|
|
|
$
|
149.8
|
|
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of fixed maturities available-for-sale
|
$
|
(505.4
|
)
|
|
$
|
(589.3
|
)
|
|
$
|
(573.9
|
)
|
Purchases of equity securities available-for-sale
|
(185.9
|
)
|
|
(143.1
|
)
|
|
(154.0
|
)
|
|||
Purchases of other invested assets
|
(1.4
|
)
|
|
(1.5
|
)
|
|
(6.9
|
)
|
|||
Maturities, calls and pay downs of fixed maturities available-for-sale
|
233.6
|
|
|
240.9
|
|
|
241.0
|
|
|||
Sales of fixed maturities available-for-sale
|
184.8
|
|
|
211.6
|
|
|
180.7
|
|
|||
Sales of equity securities available-for-sale
|
252.7
|
|
|
153.0
|
|
|
144.8
|
|
|||
Sales of other invested assets available-for-sale
|
1.1
|
|
|
0.8
|
|
|
0.7
|
|
|||
Net disposals of property and equipment
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||
Net cash used in investing activities
|
$
|
(20.5
|
)
|
|
$
|
(127.6
|
)
|
|
$
|
(167.7
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock
|
$
|
10.2
|
|
|
$
|
2.2
|
|
|
$
|
6.2
|
|
Payments to acquire treasury stock
|
(0.3
|
)
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|||
Payments of dividends (affiliates $10.4, $10.4 and $10.4, respectively)
|
(16.9
|
)
|
|
(16.6
|
)
|
|
(16.5
|
)
|
|||
Excess tax expense on share-based awards
|
—
|
|
|
0.2
|
|
|
0.3
|
|
|||
Proceeds from long-term debt
|
—
|
|
|
21.5
|
|
|
—
|
|
|||
Net cash (used in) provided by financing activities
|
$
|
(7.0
|
)
|
|
$
|
7.1
|
|
|
$
|
(10.3
|
)
|
Net increase (decrease) in cash and cash equivalents
|
40.4
|
|
|
(7.0
|
)
|
|
(28.2
|
)
|
|||
Cash and cash equivalents at beginning of year
|
51.1
|
|
|
58.1
|
|
|
86.3
|
|
|||
Cash and cash equivalents at end of year
|
$
|
91.5
|
|
|
$
|
51.1
|
|
|
$
|
58.1
|
|
Supplemental disclosures:
|
|
|
|
|
|
||||||
Interest paid (affiliates $0.8, $0.8 and $0.7, respectively)
|
$
|
5.7
|
|
|
$
|
5.4
|
|
|
$
|
5.3
|
|
Federal income tax (refund) paid
|
$
|
(1.6
|
)
|
|
$
|
—
|
|
|
$
|
6.4
|
|
|
|
|
|
|
|
•
|
State Auto Property and Casualty Insurance Company (“State Auto P&C”), an Iowa corporation
|
•
|
Milbank Insurance Company (“Milbank”), an Iowa corporation
|
•
|
State Auto Insurance Company of Ohio (“SA Ohio”), an Ohio corporation
|
•
|
Stateco Financial Services, Inc. (“Stateco”), an Ohio corporation
|
|
|
($ millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Balance, beginning of year
|
|
$
|
129.8
|
|
|
$
|
129.1
|
|
|
$
|
126.5
|
|
Acquisition costs deferred
|
|
245.7
|
|
|
291.0
|
|
|
285.6
|
|
|||
Acquisition costs amortized to expense
|
|
(257.7
|
)
|
|
(290.3
|
)
|
|
(283.0
|
)
|
|||
Balance, end of year
|
|
$
|
117.8
|
|
|
$
|
129.8
|
|
|
$
|
129.1
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
Cost or
amortized
cost
|
|
Gross
unrealized
holding
gains
|
|
Gross
unrealized
holding
losses
|
|
Fair
value
|
||||||||
December 31, 2017
|
||||||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
|
$
|
433.8
|
|
|
$
|
9.3
|
|
|
$
|
(6.2
|
)
|
|
$
|
436.9
|
|
Obligations of states and political subdivisions
|
|
507.1
|
|
|
19.1
|
|
|
(0.4
|
)
|
|
525.8
|
|
||||
Corporate securities
|
|
527.5
|
|
|
4.5
|
|
|
(2.3
|
)
|
|
529.7
|
|
||||
U.S. government agencies mortgage-backed securities
|
|
704.7
|
|
|
7.1
|
|
|
(11.4
|
)
|
|
700.4
|
|
||||
Total fixed maturities
|
|
2,173.1
|
|
|
40.0
|
|
|
(20.3
|
)
|
|
2,192.8
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Large-cap securities
|
|
62.4
|
|
|
35.1
|
|
|
(0.7
|
)
|
|
96.8
|
|
||||
Mutual and exchange traded funds
|
|
256.2
|
|
|
21.6
|
|
|
(9.3
|
)
|
|
268.5
|
|
||||
Total equity securities
|
|
318.6
|
|
|
56.7
|
|
|
(10.0
|
)
|
|
365.3
|
|
||||
Other invested assets
|
|
25.8
|
|
|
30.2
|
|
|
—
|
|
|
56.0
|
|
||||
Total available-for-sale securities
|
|
$
|
2,517.5
|
|
|
$
|
126.9
|
|
|
$
|
(30.3
|
)
|
|
$
|
2,614.1
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
Cost or
amortized
cost
|
|
Gross
unrealized
holding
gains
|
|
Gross
unrealized
holding
losses
|
|
Fair
value
|
||||||||
December 31, 2016
|
||||||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
|
$
|
401.9
|
|
|
$
|
8.9
|
|
|
$
|
(6.1
|
)
|
|
$
|
404.7
|
|
Obligations of states and political subdivisions
|
|
634.6
|
|
|
12.3
|
|
|
(3.2
|
)
|
|
643.7
|
|
||||
Corporate securities
|
|
445.7
|
|
|
6.1
|
|
|
(2.2
|
)
|
|
449.6
|
|
||||
U.S. government agencies mortgage-backed securities
|
|
613.7
|
|
|
8.5
|
|
|
(10.9
|
)
|
|
611.3
|
|
||||
Total fixed maturities
|
|
2,095.9
|
|
|
35.8
|
|
|
(22.4
|
)
|
|
2,109.3
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Large-cap securities
|
|
108.9
|
|
|
32.7
|
|
|
(2.6
|
)
|
|
139.0
|
|
||||
Small-cap securities
|
|
57.2
|
|
|
21.9
|
|
|
—
|
|
|
79.1
|
|
||||
Mutual and exchange traded funds
|
|
157.0
|
|
|
8.5
|
|
|
(0.8
|
)
|
|
164.7
|
|
||||
Total equity securities
|
|
323.1
|
|
|
63.1
|
|
|
(3.4
|
)
|
|
382.8
|
|
||||
Other invested assets
|
|
25.5
|
|
|
19.6
|
|
|
—
|
|
|
45.1
|
|
||||
Total available-for-sale securities
|
|
$
|
2,444.5
|
|
|
$
|
118.5
|
|
|
$
|
(25.8
|
)
|
|
$
|
2,537.2
|
|
|
|
|
|
|
|
|
|
|
($ millions, except # of positions)
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|||||||||||||||||||||||||||
December 31, 2017
|
Fair
value
|
|
Unrealized
losses
|
|
Number
of
positions
|
|
Fair
value
|
|
Unrealized
losses
|
|
Number
of
positions
|
|
Fair
value
|
|
Unrealized
losses
|
|
Number
of
positions
|
|||||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
102.4
|
|
|
$
|
(0.6
|
)
|
|
18
|
|
|
$
|
196.1
|
|
|
$
|
(5.6
|
)
|
|
22
|
|
|
$
|
298.5
|
|
|
$
|
(6.2
|
)
|
|
40
|
|
Obligations of states and political subdivisions
|
58.6
|
|
|
(0.4
|
)
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58.6
|
|
|
(0.4
|
)
|
|
10
|
|
||||||
Corporate securities
|
153.2
|
|
|
(1.3
|
)
|
|
23
|
|
|
67.3
|
|
|
(1.0
|
)
|
|
10
|
|
|
220.5
|
|
|
(2.3
|
)
|
|
33
|
|
||||||
U.S. government agencies mortgage-backed securities
|
188.6
|
|
|
(2.9
|
)
|
|
31
|
|
|
252.2
|
|
|
(8.5
|
)
|
|
41
|
|
|
440.8
|
|
|
(11.4
|
)
|
|
72
|
|
||||||
Total fixed maturities
|
502.8
|
|
|
(5.2
|
)
|
|
82
|
|
|
515.6
|
|
|
(15.1
|
)
|
|
73
|
|
|
1,018.4
|
|
|
(20.3
|
)
|
|
155
|
|
||||||
Large-cap equity securities
|
4.4
|
|
|
(0.7
|
)
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
(0.7
|
)
|
|
4
|
|
||||||
Mutual and exchange traded funds
|
66.9
|
|
|
(9.3
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66.9
|
|
|
(9.3
|
)
|
|
1
|
|
||||||
Total equity securities
|
71.3
|
|
|
(10.0
|
)
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71.3
|
|
|
(10.0
|
)
|
|
5
|
|
||||||
Total temporarily impaired securities
|
$
|
574.1
|
|
|
$
|
(15.2
|
)
|
|
87
|
|
|
$
|
515.6
|
|
|
$
|
(15.1
|
)
|
|
73
|
|
|
$
|
1,089.7
|
|
|
$
|
(30.3
|
)
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except # of positions)
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|||||||||||||||||||||||||||
December 31, 2016
|
Fair
value
|
|
Unrealized
losses
|
|
Number
of
positions
|
|
Fair
value
|
|
Unrealized
losses
|
|
Number
of
positions
|
|
Fair
value
|
|
Unrealized
losses
|
|
Number
of
positions
|
|||||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
229.1
|
|
|
$
|
(6.1
|
)
|
|
30
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
229.1
|
|
|
$
|
(6.1
|
)
|
|
30
|
|
Obligations of states and political subdivisions
|
178.9
|
|
|
(3.2
|
)
|
|
26
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
178.9
|
|
|
(3.2
|
)
|
|
26
|
|
||||||
Corporate securities
|
102.9
|
|
|
(1.4
|
)
|
|
16
|
|
|
29.4
|
|
|
(0.8
|
)
|
|
4
|
|
|
132.3
|
|
|
(2.2
|
)
|
|
20
|
|
||||||
U.S. government agencies mortgage-backed securities
|
341.7
|
|
|
(10.1
|
)
|
|
43
|
|
|
20.5
|
|
|
(0.8
|
)
|
|
11
|
|
|
362.2
|
|
|
(10.9
|
)
|
|
54
|
|
||||||
Total fixed maturities
|
852.6
|
|
|
(20.8
|
)
|
|
115
|
|
|
49.9
|
|
|
(1.6
|
)
|
|
15
|
|
|
902.5
|
|
|
(22.4
|
)
|
|
130
|
|
||||||
Large-cap equity securities
|
9.1
|
|
|
(0.9
|
)
|
|
7
|
|
|
8.8
|
|
|
(1.7
|
)
|
|
5
|
|
|
17.9
|
|
|
(2.6
|
)
|
|
12
|
|
||||||
Mutual and exchange traded funds
|
29.9
|
|
|
(0.8
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29.9
|
|
|
(0.8
|
)
|
|
2
|
|
||||||
Total equity securities
|
39.0
|
|
|
(1.7
|
)
|
|
9
|
|
|
8.8
|
|
|
(1.7
|
)
|
|
5
|
|
|
47.8
|
|
|
(3.4
|
)
|
|
14
|
|
||||||
Total temporarily impaired securities
|
$
|
891.6
|
|
|
$
|
(22.5
|
)
|
|
124
|
|
|
$
|
58.7
|
|
|
$
|
(3.3
|
)
|
|
20
|
|
|
$
|
950.3
|
|
|
$
|
(25.8
|
)
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Equity securities:
|
|
|
|
|
|
||||||
Large-cap securities
|
$
|
(1.5
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
(2.2
|
)
|
Small-cap securities
|
(2.0
|
)
|
|
(3.9
|
)
|
|
(5.7
|
)
|
|||
Fixed maturities
|
—
|
|
|
(2.3
|
)
|
|
—
|
|
|||
Total other-than-temporary impairments
|
$
|
(3.5
|
)
|
|
$
|
(6.8
|
)
|
|
$
|
(7.9
|
)
|
|
|
|
|
|
|
($ millions)
|
Amortized
cost
|
|
Fair
value
|
||||
Due in 1 year or less
|
$
|
5.9
|
|
|
$
|
5.9
|
|
Due after 1 year through 5 years
|
543.8
|
|
|
545.0
|
|
||
Due after 5 years through 10 years
|
419.1
|
|
|
420.3
|
|
||
Due after 10 years
|
499.6
|
|
|
521.2
|
|
||
U.S. government agencies mortgage-backed securities
|
704.7
|
|
|
700.4
|
|
||
Total
|
$
|
2,173.1
|
|
|
$
|
2,192.8
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Fixed maturities
|
$
|
63.2
|
|
|
$
|
63.4
|
|
|
$
|
61.3
|
|
Equity securities
|
10.5
|
|
|
7.3
|
|
|
6.5
|
|
|||
Cash and cash equivalents, and other
|
6.3
|
|
|
5.6
|
|
|
5.9
|
|
|||
Investment income
|
80.0
|
|
|
76.3
|
|
|
73.7
|
|
|||
Investment expenses
|
1.2
|
|
|
1.6
|
|
|
2.0
|
|
|||
Net investment income
|
$
|
78.8
|
|
|
$
|
74.7
|
|
|
$
|
71.7
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Realized gains:
|
|
|
|
|
|
||||||
Fixed maturities
|
$
|
2.8
|
|
|
$
|
2.8
|
|
|
$
|
4.6
|
|
Equity securities
|
66.7
|
|
|
29.2
|
|
|
29.6
|
|
|||
Other invested assets
|
0.2
|
|
|
12.1
|
|
|
0.2
|
|
|||
Total realized gains
|
69.7
|
|
|
44.1
|
|
|
34.4
|
|
|||
Realized losses:
|
|
|
|
|
|
||||||
Equity securities:
|
|
|
|
|
|
||||||
Sales
|
(1.1
|
)
|
|
(0.8
|
)
|
|
(1.8
|
)
|
|||
OTTI
|
(3.5
|
)
|
|
(4.5
|
)
|
|
(7.9
|
)
|
|||
Fixed maturities:
|
|
|
|
|
|
||||||
OTTI
|
—
|
|
|
(2.3
|
)
|
|
—
|
|
|||
Total realized losses
|
(4.6
|
)
|
|
(7.6
|
)
|
|
(9.7
|
)
|
|||
Net realized gains on investments
|
$
|
65.1
|
|
|
$
|
36.5
|
|
|
$
|
24.7
|
|
Change in unrealized holding gains (losses), net of tax:
|
|
|
|
|
|
||||||
Fixed maturities
|
$
|
6.3
|
|
|
$
|
(14.4
|
)
|
|
$
|
(32.8
|
)
|
Equity securities
|
(13.0
|
)
|
|
14.3
|
|
|
(29.5
|
)
|
|||
Other invested assets
|
10.6
|
|
|
(8.6
|
)
|
|
(1.6
|
)
|
|||
Deferred federal income tax
|
(0.7
|
)
|
|
3.0
|
|
|
22.4
|
|
|||
Change in unrealized holding gains (losses), net of tax
|
$
|
3.2
|
|
|
$
|
(5.7
|
)
|
|
$
|
(41.5
|
)
|
|
|
|
|
|
|
|
•
|
Level 1 includes observable inputs which reflect quoted prices for identical assets or liabilities in active markets at the measurement date.
|
•
|
Level 2 includes observable inputs for assets or liabilities other than quoted prices included in Level 1, and it includes valuation techniques which use prices for similar assets and liabilities.
|
•
|
Level 3 includes unobservable inputs which reflect the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
|
|
|
($ millions)
|
Total
|
|
Quoted prices
in active
markets for
identical
assets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
December 31, 2017
|
|
|
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
436.9
|
|
|
$
|
—
|
|
|
$
|
436.9
|
|
|
$
|
—
|
|
Obligations of states and political subdivisions
|
525.8
|
|
|
—
|
|
|
525.8
|
|
|
—
|
|
||||
Corporate securities
|
529.7
|
|
|
—
|
|
|
529.7
|
|
|
—
|
|
||||
U.S. government agencies mortgage-backed securities
|
700.4
|
|
|
—
|
|
|
700.4
|
|
|
—
|
|
||||
Total fixed maturities
|
2,192.8
|
|
|
—
|
|
|
2,192.8
|
|
|
—
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
Large-cap securities
|
96.8
|
|
|
96.8
|
|
|
—
|
|
|
—
|
|
||||
Small-cap securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Mutual and exchange traded funds
|
268.5
|
|
|
268.5
|
|
|
—
|
|
|
—
|
|
||||
Total equity securities
|
365.3
|
|
|
365.3
|
|
|
—
|
|
|
—
|
|
||||
Other invested assets
|
10.8
|
|
|
10.8
|
|
|
—
|
|
|
—
|
|
||||
Total available-for-sale investments
|
$
|
2,568.9
|
|
|
$
|
376.1
|
|
|
$
|
2,192.8
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Total
|
|
Quoted prices
in active
markets for
identical
assets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
December 31, 2016
|
|
|
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
404.7
|
|
|
$
|
—
|
|
|
$
|
404.7
|
|
|
$
|
—
|
|
Obligations of states and political subdivisions
|
643.7
|
|
|
—
|
|
|
643.7
|
|
|
—
|
|
||||
Corporate securities
|
449.6
|
|
|
—
|
|
|
446.1
|
|
|
3.5
|
|
||||
U.S. government agencies mortgage-backed securities
|
611.3
|
|
|
—
|
|
|
611.3
|
|
|
—
|
|
||||
Total fixed maturities
|
2,109.3
|
|
|
—
|
|
|
2,105.8
|
|
|
3.5
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
Large-cap securities
|
139.0
|
|
|
139.0
|
|
|
—
|
|
|
—
|
|
||||
Small-cap securities
|
79.1
|
|
|
79.1
|
|
|
—
|
|
|
—
|
|
||||
Mutual and exchange traded funds
|
164.7
|
|
|
164.7
|
|
|
—
|
|
|
—
|
|
||||
Total equity securities
|
382.8
|
|
|
382.8
|
|
|
—
|
|
|
—
|
|
||||
Other invested assets
|
9.4
|
|
|
9.4
|
|
|
—
|
|
|
—
|
|
||||
Total available-for-sale investments
|
$
|
2,501.5
|
|
|
$
|
392.2
|
|
|
$
|
2,105.8
|
|
|
$
|
3.5
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Fixed
maturities
|
||
Balance at January 1, 2017
|
$
|
3.5
|
|
Total realized gains (losses)—included in earnings
|
1.4
|
|
|
Total unrealized gains (losses)—included in other comprehensive income
|
—
|
|
|
Purchases
|
0.1
|
|
|
Sales
|
(5.0
|
)
|
|
Transfers into Level 3
|
—
|
|
|
Transfers out of Level 3
|
—
|
|
|
Balance at December 31, 2017
|
$
|
—
|
|
($ millions)
|
Fixed
maturities
|
||
Balance at January 1, 2016
|
$
|
3.3
|
|
Total realized gains (losses)—included in earnings
|
—
|
|
|
Total unrealized gains (losses)—included in other comprehensive income
|
—
|
|
|
Purchases
|
0.2
|
|
|
Sales
|
—
|
|
|
Transfers into Level 3
|
—
|
|
|
Transfers out of Level 3
|
—
|
|
|
Balance at December 31, 2016
|
$
|
3.5
|
|
|
|
|
($ millions, except interest rates)
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||
Carrying
value
|
|
Fair
Value
|
|
Interest
rate
|
|
Carrying
value
|
|
Fair
value
|
|
Interest
rate
|
|||||||||||
FHLB Loan due 2021:, issued $21.5, September 2016 with fixed interest
|
$
|
21.5
|
|
|
$
|
20.9
|
|
|
1.73
|
%
|
|
$
|
21.5
|
|
|
$
|
21.0
|
|
|
1.73
|
%
|
FHLB Loan due 2033:, issued $85.0, July 2013 with fixed interest
|
85.4
|
|
|
85.7
|
|
|
5.03
|
%
|
|
85.4
|
|
|
85.6
|
|
|
5.03
|
%
|
||||
Affiliate Subordinated Debentures due 2033: issued $15.5, May 2003 with variable interest
|
15.2
|
|
|
15.2
|
|
|
5.68
|
%
|
|
15.2
|
|
|
15.2
|
|
|
5.13
|
%
|
||||
Total notes payable
|
$
|
122.1
|
|
|
$
|
121.8
|
|
|
|
|
$
|
122.1
|
|
|
$
|
121.8
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Losses and loss expenses payable, at beginning of year
|
$
|
1,181.6
|
|
|
$
|
1,053.0
|
|
|
$
|
983.2
|
|
Less: reinsurance recoverable on losses and loss expenses payable
|
3.6
|
|
|
5.9
|
|
|
9.6
|
|
|||
Net balance at beginning of year
|
1,178.0
|
|
|
1,047.1
|
|
|
973.6
|
|
|||
Incurred related to:
|
|
|
|
|
|
||||||
Current year
|
964.9
|
|
|
915.4
|
|
|
852.8
|
|
|||
Prior years
|
(46.6
|
)
|
|
27.0
|
|
|
10.0
|
|
|||
Total incurred
|
918.3
|
|
|
942.4
|
|
|
862.8
|
|
|||
Paid related to:
|
|
|
|
|
|
||||||
Current year
|
445.2
|
|
|
417.8
|
|
|
421.5
|
|
|||
Prior years
|
398.6
|
|
|
393.7
|
|
|
367.8
|
|
|||
Total paid
|
843.8
|
|
|
811.5
|
|
|
789.3
|
|
|||
Net balance at end of year
|
1,252.5
|
|
|
1,178.0
|
|
|
1,047.1
|
|
|||
Plus: reinsurance recoverable on losses and loss expenses payable
|
3.1
|
|
|
3.6
|
|
|
5.9
|
|
|||
Losses and loss expenses payable, at end of year (affiliates $711.4, $630.9, and $532.4, respectively)
|
$
|
1,255.6
|
|
|
$
|
1,181.6
|
|
|
$
|
1,053.0
|
|
|
|
|
|
|
|
|
•
|
undiscounted, incurred and paid claims and allocated claim adjustment expenses by accident year, on a net basis after reinsurance;
|
•
|
the sum of IBNR claims liabilities + expected development on reported claims ("IBNR+") included within the incurred claims development tables, for each accident year, for the most recent reporting period; and
|
•
|
cumulative claim frequency information for each accident year;
|
•
|
average annual percentage payout of incurred claims by age, net of reinsurance.
|
|
($ in millions except number of claims)
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2017
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
For the Years Ended December 31,
|
|
|
|
|
|||||||||||||||||||||
Accident Year
|
|
2013*(1)
|
|
2014*(1)
|
|
2015*
|
|
2016
|
|
2017
|
|
IBNR+
|
|
Reported Claims (2)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
2013
|
|
$
|
291.3
|
|
|
$
|
286.1
|
|
|
$
|
290.3
|
|
|
$
|
290.0
|
|
|
$
|
289.8
|
|
|
$
|
1.5
|
|
|
190,310
|
|
2014
|
|
|
|
273.2
|
|
|
274.9
|
|
|
277.3
|
|
|
276.0
|
|
|
2.7
|
|
|
172,678
|
|
|||||||
2015
|
|
|
|
|
|
339.0
|
|
|
345.5
|
|
|
341.0
|
|
|
7.4
|
|
|
152,698
|
|
||||||||
2016
|
|
|
|
|
|
|
|
368.5
|
|
|
370.0
|
|
|
22.8
|
|
|
150,364
|
|
|||||||||
2017
|
|
|
|
|
|
|
|
|
|
372.4
|
|
|
54.0
|
|
|
140,258
|
|
||||||||||
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
1,649.2
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
* Supplementary information and unaudited
|
|
|
|
||||||||||||||||||||||||
(1) Allocated claim adjustment expenses, net of reinsurance, for accident years 2013 and 2014 were impacted by the HO QS Arrangement. See Note 6 for a more detailed discussion of the HO QS Arrangement.
|
|
||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||
(2) Personal insurance segment - short-tail is an aggregation of the homeowners and personal auto product lines. Homeowners reported claims are counted by claimant and personal auto claims are counted by coverage.
|
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
|
For the Years Ended December 31,
|
||||||||||||||||||||||||||||||||||||||
Accident
Year
|
|
2008*
|
|
2009*
|
|
2010*
|
|
2011*
|
|
2012*
|
|
2013*
|
|
2014*
|
|
2015*
|
|
2016
|
|
2017
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
2008
|
|
$
|
10.7
|
|
|
$
|
26.2
|
|
|
$
|
29.9
|
|
|
$
|
32.8
|
|
|
$
|
34.8
|
|
|
$
|
35.8
|
|
|
$
|
37.0
|
|
|
$
|
37.4
|
|
|
$
|
38.0
|
|
|
$
|
38.2
|
|
2009
|
|
|
|
11.9
|
|
|
26.4
|
|
|
33.2
|
|
|
37.2
|
|
|
38.7
|
|
|
40.0
|
|
|
40.4
|
|
|
41.1
|
|
|
41.4
|
|
|||||||||||
2010
|
|
|
|
|
|
9.0
|
|
|
21.6
|
|
|
28.0
|
|
|
31.4
|
|
|
33.2
|
|
|
34.6
|
|
|
35.4
|
|
|
35.8
|
|
||||||||||||
2011
|
|
|
|
|
|
|
|
12.4
|
|
|
25.4
|
|
|
31.9
|
|
|
35.0
|
|
|
36.9
|
|
|
37.7
|
|
|
38.1
|
|
|||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
12.6
|
|
|
23.5
|
|
|
29.8
|
|
|
32.7
|
|
|
34.7
|
|
|
35.8
|
|
||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
12.3
|
|
|
23.3
|
|
|
29.0
|
|
|
32.3
|
|
|
33.7
|
|
|||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.4
|
|
|
24.4
|
|
|
30.0
|
|
|
32.8
|
|
||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.9
|
|
|
28.2
|
|
|
35.7
|
|
|||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.6
|
|
|
26.8
|
|
||||||||||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.2
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
331.4
|
|
||||||||||||||||||
|
|
|
|
|
|
All outstanding liabilities before 2008, net of reinsurance
|
|
|
$
|
33.1
|
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
Losses and allocated loss adjustment expenses payable, net of reinsurance
|
|
|
$
|
180.8
|
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
* Supplementary information and unaudited
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions except number of claims)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2017
|
|||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
For the Years Ended December 31,
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
Accident Year
|
|
2008*
|
|
2009*
|
|
2010*
|
|
2011*
|
|
2012*
|
|
2013*
|
|
2014*
|
|
2015*
|
|
2016
|
|
2017
|
|
IBNR+
|
|
Reported Claims(1)
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
2008
|
|
$
|
6.4
|
|
|
$
|
6.7
|
|
|
$
|
6.7
|
|
|
$
|
6.8
|
|
|
$
|
6.1
|
|
|
$
|
6.0
|
|
|
$
|
5.8
|
|
|
$
|
6.0
|
|
|
$
|
4.9
|
|
|
$
|
4.8
|
|
|
$
|
1.3
|
|
|
1,652
|
|
2009
|
|
|
|
10.3
|
|
|
11.0
|
|
|
10.0
|
|
|
10.4
|
|
|
11.0
|
|
|
11.0
|
|
|
10.6
|
|
|
12.4
|
|
|
12.9
|
|
|
2.5
|
|
|
1,504
|
|
||||||||||||
2010
|
|
|
|
|
|
11.2
|
|
|
10.9
|
|
|
9.9
|
|
|
9.7
|
|
|
9.8
|
|
|
9.9
|
|
|
10.3
|
|
|
10.1
|
|
|
1.8
|
|
|
1,224
|
|
|||||||||||||
2011
|
|
|
|
|
|
|
|
11.9
|
|
|
10.7
|
|
|
10.7
|
|
|
10.2
|
|
|
10.1
|
|
|
10.9
|
|
|
10.5
|
|
|
1.8
|
|
|
953
|
|
||||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
16.7
|
|
|
16.7
|
|
|
15.4
|
|
|
17.6
|
|
|
17.4
|
|
|
16.5
|
|
|
1.9
|
|
|
860
|
|
|||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
20.1
|
|
|
18.9
|
|
|
17.9
|
|
|
16.5
|
|
|
15.9
|
|
|
3.1
|
|
|
1,055
|
|
||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.3
|
|
|
25.2
|
|
|
27.1
|
|
|
28.3
|
|
|
6.8
|
|
|
1,265
|
|
|||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.6
|
|
|
44.9
|
|
|
44.8
|
|
|
14.7
|
|
|
2,001
|
|
||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60.8
|
|
|
62.9
|
|
|
34.7
|
|
|
4,348
|
|
|||||||||||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71.6
|
|
|
58.7
|
|
|
4,819
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
278.2
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
* Supplementary information and unaudited
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
(1) Specialty insurance segment-long-tail consists of the E&S Casualty product line. E&S Casualty reported claims are counted by claimant.
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||||
Net losses and allocated loss adjustment expenses payable:
|
|
|
|
|
|
|
||||||||
Personal Insurance Segment
|
|
|
|
|
|
|
||||||||
|
|
Short-tail
|
|
$
|
229.4
|
|
|
$
|
229.6
|
|
|
$
|
208.3
|
|
|
|
Other personal
|
|
13.2
|
|
|
10.8
|
|
|
12.8
|
|
|||
Commercial Insurance Segment
|
|
|
|
|
|
|
||||||||
|
|
Short-tail
|
|
360.2
|
|
|
226.4
|
|
|
332.4
|
|
|||
|
|
Long-tail
|
|
180.8
|
|
|
314.2
|
|
|
158.8
|
|
|||
|
|
Other commercial
|
|
26.4
|
|
|
24.6
|
|
|
24.1
|
|
|||
Specialty Insurance Segment
|
|
|
|
|
|
|
||||||||
|
|
Short-tail
|
|
210.6
|
|
|
178.9
|
|
|
165.8
|
|
|||
|
|
Long-tail
|
|
167.9
|
|
|
129.7
|
|
|
91.1
|
|
|||
Net losses and loss expenses payable
|
|
1,188.5
|
|
|
1,114.2
|
|
|
993.3
|
|
|||||
|
|
|
|
|
|
|
||||||||
ULAE
|
|
64.0
|
|
|
63.8
|
|
|
53.8
|
|
|||||
|
|
|
|
|
|
|
|
|
||||||
Reinsurance recoverable on losses and loss expenses payable
|
|
3.1
|
|
|
3.6
|
|
|
5.9
|
|
|||||
|
|
|
|
|
|
|
|
|
||||||
Total losses and loss expenses payable
|
|
$
|
1,255.6
|
|
|
$
|
1,181.6
|
|
|
$
|
1,053.0
|
|
||
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
||||
Losses and loss expenses payable:
|
|
|
|
||||
Direct
|
$
|
535.0
|
|
|
$
|
545.7
|
|
Assumed
|
9.2
|
|
|
5.0
|
|
||
Ceded
|
(3.1
|
)
|
|
(3.6
|
)
|
||
Net losses and loss expenses payable
|
$
|
541.1
|
|
|
$
|
547.1
|
|
Unearned premiums:
|
|
|
|
||||
Direct
|
$
|
402.5
|
|
|
$
|
395.6
|
|
Assumed
|
21.4
|
|
|
1.3
|
|
||
Ceded
|
(6.4
|
)
|
|
(6.1
|
)
|
||
Net unearned premiums
|
$
|
417.5
|
|
|
$
|
390.8
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Written premiums:
|
|
|
|
|
|
||||||
Direct
|
$
|
835.6
|
|
|
$
|
835.4
|
|
|
$
|
854.1
|
|
Assumed
|
31.1
|
|
|
5.0
|
|
|
4.7
|
|
|||
Ceded
|
(22.9
|
)
|
|
(24.9
|
)
|
|
(35.4
|
)
|
|||
Net written premiums
|
$
|
843.8
|
|
|
$
|
815.5
|
|
|
$
|
823.4
|
|
Earned premiums:
|
|
|
|
|
|
||||||
Direct
|
$
|
828.7
|
|
|
$
|
840.6
|
|
|
$
|
863.1
|
|
Assumed
|
11.0
|
|
|
4.9
|
|
|
4.5
|
|
|||
Ceded
|
(22.6
|
)
|
|
(25.6
|
)
|
|
(34.7
|
)
|
|||
Net earned premiums
|
$
|
817.1
|
|
|
$
|
819.9
|
|
|
$
|
832.9
|
|
Losses and loss expenses incurred:
|
|
|
|
|
|
||||||
Direct
|
$
|
530.9
|
|
|
$
|
559.1
|
|
|
$
|
569.0
|
|
Assumed
|
10.4
|
|
|
3.9
|
|
|
3.4
|
|
|||
Ceded
|
(2.5
|
)
|
|
(4.4
|
)
|
|
(2.9
|
)
|
|||
Net losses and loss expenses incurred
|
$
|
538.8
|
|
|
$
|
558.6
|
|
|
$
|
569.5
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Deferred policy acquisition costs:
|
|
|
|
||||
Ceded
|
$
|
(53.1
|
)
|
|
$
|
(79.1
|
)
|
Assumed
|
117.8
|
|
|
129.8
|
|
||
Net assumed
|
$
|
64.7
|
|
|
$
|
50.7
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Losses and loss expenses payable:
|
|
|
|
||||
Ceded
|
$
|
(541.1
|
)
|
|
$
|
(547.1
|
)
|
Assumed
|
1,252.5
|
|
|
1,178.0
|
|
||
Net assumed
|
$
|
711.4
|
|
|
$
|
630.9
|
|
Unearned premiums:
|
|
|
|
||||
Ceded
|
$
|
(417.5
|
)
|
|
$
|
(390.8
|
)
|
Assumed
|
605.4
|
|
|
611.7
|
|
||
Net assumed
|
$
|
187.9
|
|
|
$
|
220.9
|
|
Pension and postretirement benefits:
|
|
|
|
||||
Ceded
|
$
|
(99.3
|
)
|
|
$
|
(114.5
|
)
|
Assumed
|
64.5
|
|
|
74.4
|
|
||
Net ceded
|
$
|
(34.8
|
)
|
|
$
|
(40.1
|
)
|
Other liabilities:
|
|
|
|
||||
Ceded
|
$
|
(43.0
|
)
|
|
$
|
(42.9
|
)
|
Assumed
|
58.5
|
|
|
53.9
|
|
||
Net assumed
|
$
|
15.5
|
|
|
$
|
11.0
|
|
Stockholders’ Equity
|
|
|
|
||||
Accumulated other comprehensive income:
|
|
|
|
||||
Ceded
|
$
|
(144.7
|
)
|
|
$
|
(153.5
|
)
|
Assumed
|
94.0
|
|
|
99.8
|
|
||
Net ceded
|
$
|
(50.7
|
)
|
|
$
|
(53.7
|
)
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
|||||||
Written premiums:
|
|
|
|
|
|
|||||||
Ceded
|
$
|
(843.8
|
)
|
|
$
|
(815.5
|
)
|
|
$
|
(823.4
|
)
|
|
Assumed
|
1,269.3
|
|
|
1,293.3
|
|
|
1,273.5
|
|
||||
Net assumed
|
$
|
425.5
|
|
|
$
|
477.8
|
|
|
$
|
450.1
|
|
|
Earned premiums:
|
|
|
|
|
|
|||||||
Ceded
|
$
|
(817.1
|
)
|
|
$
|
(819.9
|
)
|
|
$
|
(832.9
|
)
|
|
Assumed
|
1,275.1
|
|
|
1,291.9
|
|
|
1,270.5
|
|
||||
Net assumed
|
$
|
458.0
|
|
|
$
|
472.0
|
|
|
$
|
437.6
|
|
|
Losses and loss expenses incurred:
|
|
|
|
|
|
|||||||
Ceded
|
$
|
(540.4
|
)
|
|
$
|
(560.3
|
)
|
|
$
|
(570.9
|
)
|
|
Assumed
|
920.0
|
|
|
944.1
|
|
|
864.2
|
|
||||
Net assumed
|
$
|
379.6
|
|
|
$
|
383.8
|
|
|
$
|
293.3
|
|
|
Acquisition and operating expenses:
|
|
|
|
|
|
|||||||
Ceded
|
(189.7
|
)
|
|
(148.5
|
)
|
|
(183.9
|
)
|
||||
Assumed
|
460.4
|
|
|
434.3
|
|
|
432.5
|
|
||||
Net assumed
|
$
|
270.7
|
|
|
$
|
285.8
|
|
|
$
|
248.6
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
Amount at statutory rate
|
$
|
11.7
|
|
|
35.0
|
%
|
|
$
|
6.7
|
|
|
35.0
|
%
|
|
$
|
23.5
|
|
|
35.0
|
%
|
Tax-exempt interest and dividends received deduction
|
(5.7
|
)
|
|
(17.1
|
)
|
|
(7.1
|
)
|
|
(37.2
|
)
|
|
(8.7
|
)
|
|
(13.0
|
)
|
|||
Other, net
|
1.7
|
|
|
5.4
|
|
|
(1.4
|
)
|
|
(7.2
|
)
|
|
1.3
|
|
|
1.9
|
|
|||
Federal income tax expense (benefit)
|
7.7
|
|
|
23.3
|
|
|
(1.8)
|
|
|
(9.4
|
)%
|
|
16.1
|
|
|
23.9
|
%
|
|||
Impact of TCJA at enactment
|
36.4
|
|
|
108.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Federal income tax expense (benefit)
|
$
|
44.1
|
|
|
132.0
|
%
|
|
$
|
(1.8
|
)
|
|
(9.4
|
)%
|
|
$
|
16.1
|
|
|
23.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Unearned premiums not currently deductible
|
$
|
25.5
|
|
|
$
|
42.6
|
|
Losses and loss expenses payable discounting
|
22.0
|
|
|
19.7
|
|
||
Postretirement and pension benefits
|
13.6
|
|
|
26.1
|
|
||
Realized loss on other-than-temporary impairment
|
2.1
|
|
|
5.8
|
|
||
Other liabilities
|
9.2
|
|
|
16.6
|
|
||
Net operating loss carryforward
|
34.3
|
|
|
58.9
|
|
||
Tax credit carryforward
|
3.7
|
|
|
3.3
|
|
||
Other
|
2.5
|
|
|
7.0
|
|
||
Total deferred tax assets
|
112.9
|
|
|
180.0
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Deferral of policy acquisition costs
|
24.7
|
|
|
45.4
|
|
||
Net unrealized holding gains on investments
|
20.3
|
|
|
32.5
|
|
||
Losses and loss expenses payable discounting (transition rule)
|
10.7
|
|
|
—
|
|
||
Total deferred tax liabilities
|
55.7
|
|
|
77.9
|
|
||
Net deferred federal income taxes
|
$
|
57.2
|
|
|
$
|
102.1
|
|
|
|
|
|
|
($ millions)
|
Pension
|
|
Postretirement
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Change in benefit obligation:
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at beginning of year
|
$
|
284.5
|
|
|
$
|
281.3
|
|
|
$
|
18.8
|
|
|
$
|
20.3
|
|
Service cost
|
5.6
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
||||
Interest cost
|
11.1
|
|
|
11.6
|
|
|
0.7
|
|
|
0.8
|
|
||||
Actuarial loss (gain)
|
17.0
|
|
|
4.5
|
|
|
0.6
|
|
|
(0.9
|
)
|
||||
Benefits paid
|
(14.0
|
)
|
|
(19.0
|
)
|
|
(1.8
|
)
|
|
(1.4
|
)
|
||||
The Company’s portion of benefit obligation at end of year
|
$
|
304.2
|
|
|
$
|
284.5
|
|
|
$
|
18.3
|
|
|
$
|
18.8
|
|
Change in plan assets available for plan benefits:
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets available for plan benefits at beginning of year
|
$
|
235.7
|
|
|
$
|
204.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Employer contribution
|
9.8
|
|
|
34.5
|
|
|
—
|
|
|
—
|
|
||||
Actual return on plan assets
|
33.5
|
|
|
15.8
|
|
|
—
|
|
|
—
|
|
||||
Benefits paid
|
(14.0
|
)
|
|
(19.0
|
)
|
|
—
|
|
|
—
|
|
||||
The Company’s portion of fair value of plan assets at end of year
|
$
|
265.0
|
|
|
$
|
235.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Supplemental executive retirement plan
|
(7.0
|
)
|
|
(6.8
|
)
|
|
—
|
|
|
—
|
|
||||
Funded status at end of year
|
$
|
(46.2
|
)
|
|
$
|
(55.6
|
)
|
|
$
|
(18.3
|
)
|
|
$
|
(18.8
|
)
|
Accumulated benefit obligation end of year
|
$
|
287.9
|
|
|
$
|
267.5
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
||||
Prior service benefit
|
$
|
(48.6
|
)
|
|
$
|
(54.1
|
)
|
Net actuarial loss
|
111.6
|
|
|
118.5
|
|
||
Total
|
$
|
63.0
|
|
|
$
|
64.4
|
|
|
|
|
|
($ millions)
|
2018
|
||
Prior service benefit
|
$
|
(5.5
|
)
|
Net actuarial loss
|
8.4
|
|
|
Total
|
$
|
2.9
|
|
|
|
($ millions)
|
Pension
|
|
Postretirement
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||
Components of net periodic cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
5.7
|
|
|
$
|
6.2
|
|
|
$
|
7.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
11.4
|
|
|
11.9
|
|
|
11.3
|
|
|
0.8
|
|
|
0.9
|
|
|
1.1
|
|
||||||
Expected return on plan assets
|
(16.7
|
)
|
|
(15.1
|
)
|
|
(13.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.5
|
)
|
|
(5.5
|
)
|
|
(5.4
|
)
|
||||||
Net actuarial loss
|
7.8
|
|
|
9.2
|
|
|
10.9
|
|
|
0.2
|
|
|
0.2
|
|
|
0.6
|
|
||||||
Net periodic cost (benefit)
|
$
|
8.2
|
|
|
$
|
12.2
|
|
|
$
|
16.3
|
|
|
$
|
(4.5
|
)
|
|
$
|
(4.4
|
)
|
|
$
|
(3.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Pension
|
|
Postretirement
|
||||
2018
|
$
|
11.2
|
|
|
$
|
1.5
|
|
2019
|
11.5
|
|
|
1.5
|
|
||
2020
|
12.0
|
|
|
1.4
|
|
||
2021
|
12.5
|
|
|
1.4
|
|
||
2022
|
12.9
|
|
|
1.3
|
|
||
2023-2027
|
76.2
|
|
|
5.9
|
|
|
|
Pension
|
|
Postretirement
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Benefit obligations weighted-average assumptions:
|
|
|
|
|
|
|
|
||||
Discount rate
|
3.50
|
%
|
|
4.00
|
%
|
|
3.50
|
%
|
|
4.00
|
%
|
Rates of increase in compensation levels
|
3.25
|
|
|
3.50
|
|
|
—
|
|
|
—
|
|
|
Pension
|
|
Postretirement
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
|
||||||||
Weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Discount rate
|
4.00
|
%
|
|
4.20
|
%
|
|
3.85
|
%
|
|
4.00
|
%
|
|
4.20
|
%
|
|
3.85
|
%
|
|
||
Expected long-term rate of return on assets
|
7.00
|
|
|
7.00
|
|
|
7.00
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||
Rates of increase in compensation levels
|
3.50
|
|
|
3.50
|
|
|
3.50
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Postretirement
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Assumed health care cost trend rates:
|
|
|
|
|
|
|||
Health care cost trend rate assumed for the next year
|
6.00
|
%
|
|
6.50
|
%
|
|
6.50
|
%
|
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
|
3.80
|
%
|
|
3.90
|
%
|
|
3.80
|
%
|
Year that the rate reaches the ultimate trend rate
|
2075
|
|
|
2075
|
|
|
2076
|
|
($ millions)
|
Postretirement
|
||||||
|
Increase
|
|
(Decrease)
|
||||
One percentage point change:
|
|
|
|
||||
Effect on total service and interest cost
|
$
|
0.1
|
|
|
$
|
(0.1
|
)
|
Effect on accumulated postretirement benefit obligation
|
1.7
|
|
|
(1.5
|
)
|
|
|
Asset
allocation
target
(0 to 100%)
|
|
Asset Category:
|
|
|
Fixed maturity
|
52.0
|
%
|
U.S. large-cap equity
|
24.2
|
|
U.S. small-cap equity
|
10.3
|
|
International equity
|
9.4
|
|
Emerging market equity
|
4.1
|
|
Total
|
100.0
|
%
|
|
|
|
($ millions)
|
Total
|
|
Quoted prices
in active
markets for
identical
assets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
December 31, 2017
|
|
|
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
70.1
|
|
|
$
|
—
|
|
|
$
|
70.1
|
|
|
$
|
—
|
|
Corporate securities
|
60.7
|
|
|
—
|
|
|
60.7
|
|
|
—
|
|
||||
U.S. government agencies mortgage-backed securities
|
4.4
|
|
|
—
|
|
|
4.4
|
|
|
—
|
|
||||
Total fixed maturities
|
135.2
|
|
|
—
|
|
|
135.2
|
|
|
—
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
Large-cap securities
|
71.6
|
|
|
71.6
|
|
|
—
|
|
|
—
|
|
||||
Mutual and exchange traded funds
|
25.1
|
|
|
25.1
|
|
|
—
|
|
|
—
|
|
||||
Total equity securities
|
96.7
|
|
|
96.7
|
|
|
—
|
|
|
—
|
|
||||
Total pension plan investments
|
$
|
231.9
|
|
|
$
|
96.7
|
|
|
$
|
135.2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Total
|
|
Quoted prices
in active
markets for
identical
assets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
December 31, 2016
|
|
|
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
60.4
|
|
|
$
|
—
|
|
|
$
|
60.4
|
|
|
$
|
—
|
|
Corporate securities
|
48.0
|
|
|
—
|
|
|
48.0
|
|
|
—
|
|
||||
U.S. government agencies mortgage-backed securities
|
4.6
|
|
|
—
|
|
|
4.6
|
|
|
—
|
|
||||
Total fixed maturities
|
113.0
|
|
|
—
|
|
|
113.0
|
|
|
—
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
Large-cap securities
|
59.6
|
|
|
59.6
|
|
|
—
|
|
|
—
|
|
||||
Small-cap securities
|
26.3
|
|
|
26.3
|
|
|
—
|
|
|
—
|
|
||||
Total equity securities
|
85.9
|
|
|
85.9
|
|
|
—
|
|
|
—
|
|
||||
Short-term fixed maturities
|
$
|
2.0
|
|
|
$
|
—
|
|
|
$
|
2.0
|
|
|
$
|
—
|
|
Total pension plan investments
|
$
|
200.9
|
|
|
$
|
85.9
|
|
|
$
|
115.0
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
Unrealized Gains and Losses on Available-for-Sale Securities
|
|
Benefit Plan Items
|
|
Total
|
|||||||
Beginning balance at January 1, 2017
|
$
|
62.8
|
|
|
$
|
(30.3
|
)
|
|
$
|
32.5
|
|
|
Other comprehensive income before reclassifications
|
45.5
|
|
|
(1.0
|
)
|
|
44.5
|
|
||||
Amounts reclassified from AOCI (a)
|
(42.3
|
)
|
|
2.0
|
|
|
(40.3
|
)
|
||||
Net current period other comprehensive income
|
3.2
|
|
|
1.0
|
|
|
4.2
|
|
||||
Ending balance at December 31, 2017
|
$
|
66.0
|
|
|
$
|
(29.3
|
)
|
|
$
|
36.7
|
|
|
|
|
|
|
|
|
|
||||||
Beginning balance at January 1, 2016
|
$
|
68.5
|
|
|
$
|
(30.9
|
)
|
|
$
|
37.6
|
|
|
Other comprehensive income before reclassifications
|
18.0
|
|
|
(3.0
|
)
|
|
15.0
|
|
||||
Amounts reclassified from AOCI (a)
|
(23.7
|
)
|
|
3.6
|
|
|
(20.1
|
)
|
||||
Net current period other comprehensive income
|
(5.7
|
)
|
|
0.6
|
|
|
(5.1
|
)
|
||||
Ending balance at December 31, 2016
|
$
|
62.8
|
|
|
$
|
(30.3
|
)
|
|
$
|
32.5
|
|
|
|
|
|
|
|
|
|
||||||
Beginning balance at January 1, 2015
|
$
|
110.0
|
|
|
$
|
(38.3
|
)
|
|
$
|
71.7
|
|
|
Other comprehensive income before reclassifications
|
(25.4
|
)
|
|
5.3
|
|
|
(20.1
|
)
|
||||
Amounts reclassified from AOCI (a)
|
(16.1
|
)
|
|
2.1
|
|
|
(14.0
|
)
|
||||
Net current period other comprehensive income
|
(41.5
|
)
|
|
7.4
|
|
|
(34.1
|
)
|
||||
Ending balance at December 31, 2015
|
$
|
68.5
|
|
|
$
|
(30.9
|
)
|
|
$
|
37.6
|
|
|
|
|
|
|
|
|
|
||||||
(a)
|
See separate table below for details about these reclassifications
|
($ millions)
|
2017
|
|
2016
|
||||
Statutory capital and surplus of insurance subsidiaries
|
$
|
858.4
|
|
|
$
|
844.4
|
|
Net liabilities of non-insurance parent and affiliates
|
(89.8
|
)
|
|
(84.9
|
)
|
||
|
768.6
|
|
|
759.5
|
|
||
Increases (decreases):
|
|
|
|
||||
Deferred acquisition costs
|
117.8
|
|
|
129.8
|
|
||
Postretirement and pension benefits
|
22.3
|
|
|
22.7
|
|
||
Deferred federal income taxes
|
(61.2
|
)
|
|
(49.1
|
)
|
||
Fixed maturities, at fair value
|
19.6
|
|
|
13.5
|
|
||
Other, net
|
13.8
|
|
|
14.9
|
|
||
Stockholders’ equity per accompanying consolidated financial statements
|
$
|
880.9
|
|
|
$
|
891.3
|
|
|
|
|
|
($ millions)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Statutory net income of insurance subsidiaries
|
$
|
42.8
|
|
|
$
|
22.7
|
|
|
$
|
65.4
|
|
Net loss of non-insurance parent and affiliates
|
(13.1
|
)
|
|
(3.0
|
)
|
|
(4.1
|
)
|
|||
|
29.7
|
|
|
19.7
|
|
|
61.3
|
|
|||
Increases (decreases):
|
|
|
|
|
|
||||||
Deferred acquisition costs
|
(12.0
|
)
|
|
0.7
|
|
|
2.5
|
|
|||
Postretirement and pension benefits
|
4.3
|
|
|
4.4
|
|
|
4.2
|
|
|||
Deferred federal income taxes
|
(34.6
|
)
|
|
(5.4
|
)
|
|
(12.2
|
)
|
|||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||
Other, net
|
1.9
|
|
|
1.6
|
|
|
(4.5
|
)
|
|||
Net (loss) income per accompanying consolidated financial statements
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
|
Shares
|
|
Weighted
Average Grant Date Fair Value |
|
Shares
|
|
Weighted
Average Grant Date Fair Value |
|
Shares
|
|
Weighted
Average Grant Date Fair Value |
|||||||||
Outstanding, beginning of year
|
107,297
|
|
|
$
|
22.04
|
|
|
111,084
|
|
|
$
|
22.19
|
|
|
76,472
|
|
|
$
|
19.06
|
|
Granted
|
177,846
|
|
|
27.20
|
|
|
45,252
|
|
|
21.55
|
|
|
74,020
|
|
|
22.83
|
|
|||
Vested
|
(26,271
|
)
|
|
21.39
|
|
|
(33,414
|
)
|
|
21.93
|
|
|
(35,859
|
)
|
|
16.88
|
|
|||
Forfeited
|
(39,425
|
)
|
|
25.68
|
|
|
(15,625
|
)
|
|
21.91
|
|
|
(3,549
|
)
|
|
21.92
|
|
|||
Outstanding, end of year
|
219,447
|
|
|
$
|
25.65
|
|
|
107,297
|
|
|
$
|
22.04
|
|
|
111,084
|
|
|
$
|
22.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions, except per share amounts)
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
|
Options
|
|
Weighted-
Average
Exercise
Price
|
|
Options
|
|
Weighted-
Average
Exercise
Price
|
|
Options
|
|
Weighted-
Average
Exercise
Price
|
|||||||||
Outstanding, beginning of year
|
2.5
|
|
|
$
|
20.63
|
|
|
3.1
|
|
|
$
|
21.45
|
|
|
3.4
|
|
|
$
|
21.37
|
|
Granted
|
—
|
|
|
—
|
|
|
0.2
|
|
|
21.55
|
|
|
0.3
|
|
|
22.86
|
|
|||
Exercised
|
(0.4
|
)
|
|
19.38
|
|
|
(0.4
|
)
|
|
17.18
|
|
|
(0.3
|
)
|
|
16.54
|
|
|||
Canceled
|
(0.4
|
)
|
|
28.96
|
|
|
(0.4
|
)
|
|
30.70
|
|
|
(0.3
|
)
|
|
25.63
|
|
|||
Outstanding, end of year
|
1.7
|
|
|
$
|
19.22
|
|
|
2.5
|
|
|
$
|
20.63
|
|
|
3.1
|
|
|
$
|
21.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Options in millions)
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
|
Number
|
|
Weighted-
Average
Remaining
Contractual Life
|
|
Weighted-
Average
Exercise
Price
|
|
Number
|
|
Weighted-
Average
Exercise
Price
|
||||||
Range of Exercise Prices:
|
|
|
|
|
|
|
|
|
|
||||||
$10.01 – $20.00
|
1.0
|
|
|
3.6
|
|
$
|
16.53
|
|
|
1.0
|
|
|
$
|
16.53
|
|
$20.01 – $30.00
|
0.7
|
|
|
4.7
|
|
23.07
|
|
|
0.6
|
|
|
23.33
|
|
||
|
1.7
|
|
|
4.0
|
|
$
|
19.22
|
|
|
1.6
|
|
|
$
|
18.98
|
|
|
|
|
|
|
|
|
|
|
|
(millions, except per share amounts)
|
2017
|
|
2016
|
|
2015
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net (loss) earnings for basic net earnings per common share
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
Adjusted net (loss) earnings for dilutive net (loss) earnings per common share
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
Denominator:
|
|
|
|
|
|
||||||
Weighted average shares for basic net (loss) earnings per common share
|
42.1
|
|
|
41.6
|
|
|
41.1
|
|
|||
Effect of dilutive share-based awards
|
—
|
|
|
0.4
|
|
|
0.5
|
|
|||
Adjusted weighted average shares for diluted net (loss) earnings per common share
|
42.1
|
|
|
42.0
|
|
|
41.6
|
|
|||
|
|
|
|
|
|
||||||
Basic net (loss) earnings per common share
|
$
|
(0.25
|
)
|
|
$
|
0.50
|
|
|
$
|
1.25
|
|
Diluted net (loss) earnings per common share
|
$
|
(0.25
|
)
|
|
$
|
0.50
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
(millions)
|
2017
|
|
2016
|
|
2015
|
|||
Total number of antidilutive options and awards
|
0.5
|
|
|
1.2
|
|
|
1.5
|
|
|
|
|
|
|
|
|
•
|
Commercial Insurance Segment - commercial auto, small commercial package, middle market commercial, workers’ compensation and other commercial
|
|
($ millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues from external sources:
|
|
|
|
|
|
||||||
Insurance segments
|
|
|
|
|
|
||||||
Personal insurance
|
$
|
580.3
|
|
|
$
|
578.5
|
|
|
$
|
591.3
|
|
Commercial insurance
|
455.7
|
|
|
472.6
|
|
|
476.5
|
|
|||
Specialty insurance
|
239.1
|
|
|
240.8
|
|
|
202.7
|
|
|||
Total insurance segments
|
1,275.1
|
|
|
1,291.9
|
|
|
1,270.5
|
|
|||
Investment operations segment
|
|
|
|
|
|
||||||
Net investment income
|
78.8
|
|
|
74.7
|
|
|
71.7
|
|
|||
Net realized capital gains
|
65.1
|
|
|
36.5
|
|
|
24.7
|
|
|||
Total investment operations segment
|
143.9
|
|
|
111.2
|
|
|
96.4
|
|
|||
Total revenue from reportable segments
|
1,419.0
|
|
|
1,403.1
|
|
|
1,366.9
|
|
|||
All other
|
2.3
|
|
|
2.3
|
|
|
1.7
|
|
|||
Total revenues from external sources
|
1,421.3
|
|
|
1,405.4
|
|
|
1,368.6
|
|
|||
Intersegment revenues
|
6.0
|
|
|
5.8
|
|
|
5.6
|
|
|||
Total revenues
|
1,427.3
|
|
|
1,411.2
|
|
|
1,374.2
|
|
|||
Reconciling items:
|
|
|
|
|
|
||||||
Eliminate intersegment revenues
|
(6.0
|
)
|
|
(5.8
|
)
|
|
(5.6
|
)
|
|||
Total consolidated revenue
|
$
|
1,421.3
|
|
|
$
|
1,405.4
|
|
|
$
|
1,368.6
|
|
Segment loss before federal income taxes:
|
|
|
|
|
|
||||||
Insurance segments:
|
|
|
|
|
|
||||||
Personal insurance SAP underwriting (loss) gain
|
$
|
(23.3
|
)
|
|
$
|
(10.3
|
)
|
|
$
|
27.5
|
|
Commercial insurance SAP underwriting loss
|
(10.6
|
)
|
|
(31.6
|
)
|
|
(46.7
|
)
|
|||
Specialty insurance SAP underwriting loss
|
(57.0
|
)
|
|
(42.7
|
)
|
|
(5.9
|
)
|
|||
Total insurance segments
|
(90.9
|
)
|
|
(84.6
|
)
|
|
(25.1
|
)
|
|||
Investment operations segment:
|
|
|
|
|
|
||||||
Net investment income
|
78.8
|
|
|
74.7
|
|
|
71.7
|
|
|||
Net realized capital gains
|
65.1
|
|
|
36.5
|
|
|
24.7
|
|
|||
Total investment operations segment
|
143.9
|
|
|
111.2
|
|
|
96.4
|
|
|||
All other segments income
|
0.6
|
|
|
0.4
|
|
|
(0.1
|
)
|
|||
Reconciling items:
|
|
|
|
|
|
||||||
GAAP adjustments
|
(10.2
|
)
|
|
2.0
|
|
|
4.2
|
|
|||
Interest expense on corporate debt
|
(5.9
|
)
|
|
(5.5
|
)
|
|
(5.4
|
)
|
|||
Corporate expenses
|
(4.1
|
)
|
|
(4.3
|
)
|
|
(2.7
|
)
|
|||
Total reconciling items
|
$
|
(20.2
|
)
|
|
$
|
(7.8
|
)
|
|
$
|
(3.9
|
)
|
Total consolidated income before federal income taxes
|
$
|
33.4
|
|
|
$
|
19.2
|
|
|
$
|
67.3
|
|
|
|
|
|
|
|
($ millions)
|
2017
|
|
2016
|
||||
Segment assets:
|
|
|
|
||||
Investment operations segment
|
$
|
2,781.2
|
|
|
$
|
2,663.7
|
|
Total segment assets
|
2,781.2
|
|
|
2,663.7
|
|
||
Reconciling items:
|
|
|
|
||||
Corporate assets
|
233.1
|
|
|
295.7
|
|
||
Total consolidated assets
|
$
|
3,014.3
|
|
|
$
|
2,959.4
|
|
|
|
|
|
|
($ millions, except per share amounts)
|
2017
|
||||||||||||||
|
For three months ended
|
||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Total revenues
|
$
|
344.3
|
|
|
$
|
355.7
|
|
|
$
|
358.4
|
|
|
$
|
362.9
|
|
(Loss) income before federal income taxes
|
(5.2
|
)
|
|
11.9
|
|
|
(11.2
|
)
|
|
37.9
|
|
||||
Net (loss) income
|
(4.1
|
)
|
|
8.7
|
|
|
(9.5
|
)
|
|
(5.8
|
)
|
||||
(Loss) earnings per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.10
|
)
|
|
$
|
0.21
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.14
|
)
|
Diluted
|
$
|
(0.10
|
)
|
|
$
|
0.21
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.14
|
)
|
|
|
|
|
|
|
|
|
|
2016
|
||||||||||||||
|
For three months ended
|
||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Total revenues
|
$
|
339.2
|
|
|
$
|
348.5
|
|
|
$
|
352.8
|
|
|
$
|
364.9
|
|
Income (loss) before federal income taxes
|
3.8
|
|
|
(25.1
|
)
|
|
7.4
|
|
|
33.1
|
|
||||
Net income (loss)
|
3.0
|
|
|
(24.6
|
)
|
|
10.1
|
|
|
32.5
|
|
||||
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.07
|
|
|
$
|
(0.59
|
)
|
|
$
|
0.24
|
|
|
$
|
0.78
|
|
Diluted
|
$
|
0.07
|
|
|
$
|
(0.59
|
)
|
|
$
|
0.24
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
|
2.
|
Our management has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 framework to evaluate the effectiveness of our internal control over financial reporting. Our management believes that the COSO 2013 framework is a suitable framework for its evaluation of our internal control over financial reporting because it is free from bias, permits reasonably qualitative and quantitative measurements of our internal controls, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of our internal controls are not omitted and is relevant to an evaluation of internal control over financial reporting.
|
3.
|
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial reporting.
|
4.
|
Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017, and has concluded that such internal control over financial reporting was effective.
|
5.
|
Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, has issued their attestation report on the Company’s internal control over financial reporting, which is included herein.
|
Schedule
Number
|
|
Schedule
|
|
|
|
I.
|
|
Summary of Investments—Other Than Investments in Related Parties
|
|
|
|
II.
|
|
Condensed Financial Information of Registrant
|
|
|
|
III.
|
|
Supplementary Insurance Information
|
|
|
|
IV.
|
|
Reinsurance
|
|
|
|
V.
|
|
Valuation and Qualifying Accounts
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
3.01
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 3.01 therein)
|
|
|
|
|
|
|
3.02
|
|
State Auto Financial Corporation’s Amendment to the Amended and Restated Articles of Incorporation
|
|
1933 Act Registration Statement No. 33-89400 on Form S-8 (see Exhibit 4(b) therein)
|
|
|
|
|
|
3.03
|
|
State Auto Financial Corporation Certificate of Amendment to the Amended and Restated Articles of Incorporation as of June 2, 1998
|
|
Form 10-K Annual Report for the year ended December 31, 1998 (see Exhibit 3(A)(3) therein)
|
|
|
|
|
|
3.04
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 3.04 therein)
|
|
|
|
|
|
|
3.05
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2010 (see Exhibit 3.05 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
3.06
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2016 (see Exhibit 3.01 therein)
|
|
|
|
|
|
|
10.01*
|
|
2000 Directors Stock Option Plan of State Auto Financial Corporation
|
|
Definitive Proxy Statement on Form DEF 14A, File No. 000-19289, for Annual Meeting of Shareholders held on May 26, 2000 (see Appendix B therein)
|
|
|
|
|
|
10.02*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2001 (see Exhibit 10(HH) therein)
|
|
|
|
|
|
|
10.03*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2001 (see Exhibit 10(KK) therein)
|
|
|
|
|
|
|
10.04*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2001 (see Exhibit 10(EE) therein)
|
|
|
|
|
|
|
10.05*
|
|
|
Form 10-K Annual Report for year ended December 31, 2002 (see Exhibit 10(UU) therein)
|
|
|
|
|
|
|
10.06*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2005 (see Exhibit 10.66 therein)
|
|
|
|
|
|
|
10.07*
|
|
|
Form 8-K Current Report filed on March 13, 2008 (see Exhibit 10.3 therein)
|
|
|
|
|
|
|
10.08
|
|
Investment Management Agreement between Stateco Financial Services, Inc. and State Automobile Mutual Insurance Company, effective April 1, 1993
|
|
Form 10-K Annual Report for the year ended December 31, 1992 (see Exhibit 10 (N) therein)
|
|
|
|
|
|
10.09
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.09 therein)
|
|
|
|
|
|
|
10.10
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.10 therein)
|
|
|
|
|
|
|
10.11
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.17 therein)
|
|
|
|
|
|
|
10.12
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.12 therein)
|
|
|
|
|
|
|
10.13
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.19 therein)
|
|
|
|
|
|
|
10.14
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.15 therein)
|
|
|
|
|
|
|
10.15
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.20 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.16
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.17 therein)
|
|
|
|
|
|
|
10.17
|
|
|
Form 10-K Annual Report for the year ended December 31, 2007 (see Exhibit 10.22 therein)
|
|
|
|
|
|
|
10.18
|
|
|
Form 10-K Annual Report for year ended December 31, 2010 (see Exhibit 10.26 therein)
|
|
|
|
|
|
|
10.19
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.22 therein)
|
|
|
|
|
|
|
10.20
|
|
|
Form 10-K Annual Report for year ended December 31, 2010 (see Exhibit 10.27 therein)
|
|
|
|
|
|
|
10.21
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.24 therein)
|
|
|
|
|
|
|
10.22
|
|
|
Form 10-K Annual Report for year ended December 31, 2010 (see Exhibit 10.28) therein)
|
|
|
|
|
|
|
10.23
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.26 therein)
|
|
|
|
|
|
|
10.24
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.45 therein)
|
|
|
|
|
|
|
10.25
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2015 (see Exhibit10.01 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.26
|
|
|
Included herein.
|
|
10.27
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2009 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.28
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.35 therein)
|
|
|
|
|
|
|
10.29
|
|
|
Form 8-K Current Report filed on November 25, 2009 (see Exhibit 10.1 therein)
|
|
|
|
|
|
|
10.30
|
|
|
Form 8-K Current Report filed on January 7, 2011 (see Exhibit 10.2 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.31
|
|
|
Form 10-K Annual Report for the year ended December 31, 2012 (see Exhibit 10.39 therein)
|
|
|
|
|
|
|
10.32
|
|
|
Form 8-K Current Report filed on January 7, 2011 (see Exhibit 10.1 therein)
|
|
|
|
|
|
|
10.33
|
|
|
Form 10-K Annual Report for year ended December 31, 2011 (see Exhibit 10.45 therein)
|
|
|
|
|
|
|
10.34
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2013 (see Exhibit 10.1 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.35
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2014 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.36
|
|
|
Form 10-K Annual Report for year ended December 31, 2011 (see Exhibit 10.46 therein)
|
|
|
|
|
|
|
10.37
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2003 (see 10(XX) therein)
|
|
|
|
|
|
|
10.38
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2003 (see 10(YY) therein)
|
|
|
|
|
|
|
10.39
|
|
|
Form 8-K Current Report filed on May 26, 2009 (see Exhibit 10.1 therein)
|
|
|
|
|
|
|
10.40
|
|
|
Form 8-K Current Report filed on May 13, 2009 (see Exhibit 10.1 therein)
|
|
|
|
|
|
|
10.41
|
|
|
Form 8-K Current Report filed on September 30, 2011 (see Exhibit 10.1 therein)
|
|
|
|
|
|
|
10.42*
|
|
|
Included herein
|
|
|
|
|
|
|
10.43*
|
|
|
Included herein
|
|
|
|
|
|
|
10.44*
|
|
|
Included herein
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.45*
|
|
|
Included herein
|
|
|
|
|
|
|
10.46*
|
|
|
Included herein
|
|
|
|
|
|
|
10.47*
|
|
|
Included herein
|
|
|
|
|
|
|
10.48*
|
|
|
Form 8-K Current Report filed on November 20, 2008 (see Exhibit 99.1 therein)
|
|
|
|
|
|
|
10.49*
|
|
|
Form 8-K Current Report filed on May 13, 2009 (see Exhibit 10.3 therein)
|
|
|
|
|
|
|
10.50*
|
|
|
Included herein.
|
|
|
|
|
|
|
10.51*
|
|
|
Included herein.
|
|
|
|
|
|
|
10.52*
|
|
|
Included herein.
|
|
|
|
|
|
|
10.53*
|
|
|
Included herein.
|
|
|
|
|
|
|
10.54*
|
|
|
Included herein
|
|
|
|
|
|
|
10.55*
|
|
|
Included herein.
|
|
|
|
|
|
|
10.56*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2005 (see Exhibit 10.60 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.57*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2008 (see Exhibit 10.63 therein)
|
|
|
|
|
|
|
10.58*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2005 (see Exhibit 10.62 therein)
|
|
|
|
|
|
|
10.59*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2005 (see Exhibit 10.63 therein)
|
|
|
|
|
|
|
10.60*
|
|
|
Form 8-K Current Report filed on May 13, 2009 (see Exhibit 10.7 therein)
|
|
|
|
|
|
|
10.61*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2011 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.62*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2013 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.63*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2014 (see Exhibit 10.69 therein)
|
|
|
|
|
|
|
10.64*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2016 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.65*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2014 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.66*
|
|
|
Form 8-K Current Report filed on May 13, 2015 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.67*
|
|
|
Form 8-K Current Report filed on May 13, 2015 (see Exhibit 10.06 therein)
|
|
|
|
|
|
|
10.68*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2016 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.69*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2016 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.70*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2016 (see Exhibit 10.03 therein)
|
|
|
|
|
|
|
10.71*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2016 (see Exhibit 10.04 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.72*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2016 (see Exhibit 10.05 therein)
|
|
|
|
|
|
|
10.73*
|
|
|
Form 10-Q Quarterly Report for the period ended March 31, 2016 (see Exhibit 10.06 therein)
|
|
|
|
|
|
|
10.74*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2016 (see Exhibit 10.74 therein)
|
|
|
|
|
|
|
10.75*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2016 (see Exhibit 10.75 therein)
|
|
|
|
|
|
|
10.76*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2016 (see Exhibit 10.76 therein)
|
|
|
|
|
|
|
10.77*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2005 (see Exhibit 10.61 therein)
|
|
|
|
|
|
|
10.78*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.54 therein)
|
|
|
|
|
|
|
10.79*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2008 (see Exhibit 10.73 therein)
|
|
|
|
|
|
|
10.80*
|
|
|
Form 10-K Annual Report for year ended December 31, 2010 (see Exhibit 10.89 therein)
|
|
|
|
|
|
|
10.81*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2016 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.82*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2005 (see Exhibit 10.64 therein)
|
|
|
|
|
|
|
10.83*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2005 (see Exhibit 10.65 therein)
|
|
|
|
|
|
|
10.84*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2010 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.85*
|
|
|
Form 10-K Annual Report for year ended December 31, 2010 (see Exhibit 10.96 therein)
|
|
|
|
|
|
|
10.86*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2007 (see Exhibit 10.72 therein)
|
|
|
|
|
|
|
10.87*
|
|
|
Form 10-K Annual Report for year ended December 31, 2010 (see Exhibit 10.98 therein)
|
|
|
|
|
|
|
10.88*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2007 (see Exhibit 10.73 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.89*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.58 therein)
|
|
|
|
|
|
|
10.90*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.59 therein)
|
|
|
|
|
|
|
10.91*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2008 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.92*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2008 (see Exhibit 10.84 therein)
|
|
|
|
|
|
|
10.93*
|
|
|
1933 Act Registration Statement No. 333-170564 on Form S-8 (see Exhibit 4(j) therein)
|
|
|
|
|
|
|
10.94*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2012 (see Exhibit 10.1 therein)
|
|
|
|
|
|
|
10.95*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.60 therein)
|
|
|
|
|
|
|
10.96*
|
|
|
Form 10-K Annual Report for the year ended December 31, 2005 (see Exhibit 10.61 therein)
|
|
|
|
|
|
|
10.97*
|
|
|
1933 Act Registration Statement No. 333-165366 on Form S-8 (see Exhibit 4(e) therein)
|
|
|
|
|
|
|
10.98*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2010 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.99*
|
|
|
1933 Act Registration Statement No. 333-170568 on Form S-8 (see Exhibit 4(h) therein)
|
|
|
|
|
|
|
10.100*
|
|
|
Form 10-K Annual Report for year ended December 31, 2011 (see Exhibit 10.109 therein)
|
|
|
|
|
|
|
10.101*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2007 (see Exhibit 10.64 therein)
|
|
|
|
|
|
|
10.102*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2008 (see Exhibit 10.04 therein)
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
10.103*
|
|
|
Form 8-K Current Report filed on May 10, 2012 (see Exhibit 10.2 therein)
|
|
|
|
|
|
|
10.104*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2015 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.105*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2007 (see Exhibit 10.65 therein)
|
|
|
|
|
|
|
10.106*
|
|
|
Form 8-K Current Report filed on March 13, 2008 (see Exhibit 10.5 therein)
|
|
|
|
|
|
|
10.107*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2008 (see Exhibit 10.05 therein)
|
|
|
|
|
|
|
10.108*
|
|
|
Form 8-K Current Report filed on May 10, 2012 (see Exhibit 10.3 therein)
|
|
|
|
|
|
|
10.109*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2015 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.110*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2017 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.111*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2013 (see Exhibit 10.02 therein)
|
|
|
|
|
|
|
10.112*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2013 (see Exhibit 10.03 therein)
|
|
|
|
|
|
|
10.113*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2013 (see Exhibit 10.04 therein)
|
|
|
|
|
|
|
10.114*
|
|
|
Form 10-Q Quarterly Report for the period ended September 30, 2016 (see Exhibit 10.01 therein)
|
|
|
|
|
|
|
10.115*
|
|
|
Form 10-Q Quarterly Report for the period ended June 30, 2016 (see Exhibit 10.03 therein)
|
|
|
|
|
|
|
21.01
|
|
|
Included herein
|
|
|
|
|
|
|
23.01
|
|
|
Included herein
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description of Exhibit
|
|
If incorporated by reference document with which Exhibit was
previously filed with SEC
|
|
|
|
|
|
24.01
|
|
|
Form 10-K Annual Report for year ended December 31, 2016 (see Exhibit 24.01 therein)
|
|
|
|
|
|
|
24.02
|
|
|
Included herein
|
|
|
|
|
|
|
31.01
|
|
|
Included herein
|
|
|
|
|
|
|
31.02
|
|
|
Included herein
|
|
|
|
|
|
|
32.01
|
|
|
Included herein
|
|
|
|
|
|
|
32.02
|
|
|
Included herein
|
|
|
|
|
|
|
101.INS
|
|
The instance document does not appear in the interactive data file because its XBRL tags are embedded within
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
Included herein
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
Included herein
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
Included herein
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
Included herein
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
Included herein
|
*
|
Constitutes either a management contract or a compensatory plan or arrangement required to be filed as an Exhibit.
|
(b)
|
EXHIBITS
|
(c)
|
FINANCIAL STATEMENT SCHEDULES
|
|
STATE AUTO FINANCIAL CORPORATION
|
|
|
Dated: February 28, 2018
|
/s/ Michael E. LaRocco
|
|
Michael E. LaRocco
|
|
Chairman, President and Chief Executive Officer
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Michael E. LaRocco
|
|
Chairman, President and Chief Executive Officer
|
|
February 28, 2018
|
Michael E. LaRocco
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
/s/ Steven E. English
|
|
Senior Vice President and Chief Financial Officer
|
|
February 28, 2018
|
Steven E. English
|
|
(principal financial officer)
|
|
|
|
|
|
|
|
/s/ Matthew R. Pollak
|
|
Vice President, Treasurer and Chief Accounting Officer
|
|
February 28, 2018
|
Matthew R. Pollak
|
|
(principal accounting officer)
|
|
|
|
|
|
|
|
Robert E. Baker*
|
|
Director
|
|
February 28, 2018
|
Robert E. Baker
|
|
|
|
|
|
|
|
|
|
Michael J. Fiorile*
|
|
Director
|
|
February 28, 2018
|
Michael J. Fiorile
|
|
|
|
|
|
|
|
|
|
Kym M. Hubbard*
|
|
Director
|
|
February 28, 2018
|
Kym M. Hubbard
|
|
|
|
|
|
|
|
|
|
Eileen A. Mallesch*
|
|
Director
|
|
February 28, 2018
|
Eileen A. Mallesch
|
|
|
|
|
|
|
|
|
|
Thomas E. Markert*
|
|
Director
|
|
February 28, 2018
|
Thomas E. Markert
|
|
|
|
|
|
|
|
|
|
David R. Meuse*
|
|
Director
|
|
February 28, 2018
|
David R. Meuse
|
|
|
|
|
|
|
|
|
|
Setareh Pouraghabagher*
|
|
Director
|
|
February 28, 2018
|
Setareh Pouraghabagher
|
|
|
|
|
|
|
|
|
|
S. Elaine Roberts*
|
|
Director
|
|
February 28, 2018
|
S. Elaine Roberts
|
|
|
|
|
|
|
|
|
|
*
|
Steven E. English by signing his name hereto, does sign this document on behalf of the person indicated above pursuant to a Power of Attorney duly executed by such person.
|
/s/ Steven E. English
|
|
Attorney in Fact
|
|
February 28, 2018
|
Steven E. English
|
|
|
|
|
($ millions)
|
|
|
|
|
|
|||||||
December 31, 2017
|
Cost or
amortized
cost (1)
|
|
Fair
value
|
|
Amount at
which shown
in the
balance sheet
|
|||||||
Available-for-sale:
|
|
|
|
|
|
|||||||
Fixed maturities:
|
|
|
|
|
|
|||||||
U.S. treasury securities and obligations of U.S. government agencies
|
$
|
433.8
|
|
|
$
|
436.9
|
|
|
$
|
436.9
|
|
|
Obligations of states and political subdivisions
|
507.1
|
|
|
525.8
|
|
|
525.8
|
|
||||
Corporate securities
|
527.5
|
|
|
529.7
|
|
|
529.7
|
|
||||
U.S. government agencies residential mortgage-backed securities
|
704.7
|
|
|
700.4
|
|
|
700.4
|
|
||||
Total fixed maturities
|
2,173.1
|
|
|
2,192.8
|
|
|
2,192.8
|
|
||||
Equity securities:
|
|
|
|
|
|
|||||||
Large-cap securities
|
62.4
|
|
|
96.8
|
|
|
96.8
|
|
||||
Mutual and exchange traded funds
|
256.2
|
|
|
268.5
|
|
|
268.5
|
|
||||
Total equity securities
|
318.6
|
|
|
365.3
|
|
|
365.3
|
|
||||
Other invested assets
|
25.8
|
|
|
56.0
|
|
|
56.0
|
|
||||
Total available-for-sale securities
|
2,517.5
|
|
|
2,614.1
|
|
|
2,614.1
|
|
||||
Other invested assets
|
5.6
|
|
|
5.6
|
|
|
5.6
|
|
||||
Total investments – other than investments in related parties
|
$
|
2,523.1
|
|
|
$
|
2,619.7
|
|
|
$
|
2,619.7
|
|
|
|
|
|
|
|
|
|
||||||
(1)
|
Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual of discounts.
|
(in millions, except per share amounts)
|
December 31
|
||||||
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Investments in common stock of subsidiaries (equity method)
|
$
|
979.5
|
|
|
$
|
983.6
|
|
Fixed maturities, available-for-sale, at fair value
|
—
|
|
|
0.9
|
|
||
Other invested assets
|
4.2
|
|
|
3.5
|
|
||
Cash and cash equivalents
|
8.8
|
|
|
8.1
|
|
||
Other assets
|
0.1
|
|
|
0.2
|
|
||
Federal income tax, net
|
15.8
|
|
|
21.5
|
|
||
Total assets
|
$
|
1,008.4
|
|
|
$
|
1,017.8
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Notes payable (affiliates $116.5 and $116.5, respectively)
|
$
|
116.5
|
|
|
$
|
116.5
|
|
Due to affiliates
|
0.5
|
|
|
1.3
|
|
||
Other liabilities
|
10.5
|
|
|
8.7
|
|
||
Total liabilities
|
127.5
|
|
|
126.5
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Class A Preferred stock (nonvoting), without par value. Authorized 2.5 shares; none issued
|
—
|
|
|
—
|
|
||
Class B Preferred stock, without par value. Authorized 2.5 shares; none issued
|
—
|
|
|
—
|
|
||
Common stock, without par value. Authorized 100.0 shares; 49.2 and 48.6 shares issued, respectively, at stated value of $2.50 per share
|
123.0
|
|
|
121.6
|
|
||
Treasury stock, 6.8 and 6.8 shares, respectively, at cost
|
(116.8
|
)
|
|
(116.5
|
)
|
||
Additional paid-in capital
|
171.8
|
|
|
159.9
|
|
||
Accumulated other comprehensive income
|
36.7
|
|
|
32.5
|
|
||
Retained earnings
|
666.2
|
|
|
693.8
|
|
||
Total stockholders’ equity
|
880.9
|
|
|
891.3
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,008.4
|
|
|
$
|
1,017.8
|
|
|
|
|
|
($ millions)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net investment income
|
$
|
0.4
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
Net realized gain on investments
|
0.3
|
|
|
—
|
|
|
—
|
|
|||
Total revenues
|
0.7
|
|
|
0.2
|
|
|
0.3
|
|
|||
Interest expense (affiliates $6.1, $6.1 and $6.0, respectively)
|
6.1
|
|
|
6.1
|
|
|
6.0
|
|
|||
Other operating expenses
|
6.7
|
|
|
7.0
|
|
|
4.9
|
|
|||
Total expenses
|
12.8
|
|
|
13.1
|
|
|
10.9
|
|
|||
Loss before federal income taxes
|
(12.1
|
)
|
|
(12.9
|
)
|
|
(10.6
|
)
|
|||
Federal income tax expense (benefit)
|
5.1
|
|
|
(6.0
|
)
|
|
(2.8
|
)
|
|||
Net (loss) income before equity in net income of subsidiaries
|
(17.2
|
)
|
|
(6.9
|
)
|
|
(7.8
|
)
|
|||
Equity in net income of subsidiaries
|
6.5
|
|
|
27.9
|
|
|
59.0
|
|
|||
Net (loss) income
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
|
|
|
|
|
|
($ millions, except per share amounts)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net (loss) income
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Net unrealized holding gains (losses) on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the year
|
0.3
|
|
|
0.2
|
|
|
(0.1
|
)
|
|||
Reclassification adjustments for gains realized in net income
|
0.3
|
|
|
—
|
|
|
—
|
|
|||
Income tax expense
|
(0.1
|
)
|
|
(0.1
|
)
|
|
—
|
|
|||
Total net unrealized holding gain (losses) on investments
|
0.5
|
|
|
0.1
|
|
|
(0.1
|
)
|
|||
Unrealized equity in subsidiaries
|
3.7
|
|
|
(5.2
|
)
|
|
(34.0
|
)
|
|||
Other comprehensive income (loss)
|
4.2
|
|
|
(5.1
|
)
|
|
(34.1
|
)
|
|||
Comprehensive (loss) income
|
$
|
(6.5
|
)
|
|
$
|
15.9
|
|
|
$
|
17.1
|
|
|
|
|
|
|
|
($ millions)
|
Year ended December 31
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows used in operating activities:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(10.7
|
)
|
|
$
|
21.0
|
|
|
$
|
51.2
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization, net
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|||
Share-based compensation
|
1.1
|
|
|
1.2
|
|
|
(0.3
|
)
|
|||
Net realized gain on investments
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|||
Equity in net income from consolidated subsidiaries
|
(6.5
|
)
|
|
(27.9
|
)
|
|
(59.0
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Other liabilities and due from affiliates
|
—
|
|
|
0.9
|
|
|
0.9
|
|
|||
Other assets
|
—
|
|
|
0.1
|
|
|
—
|
|
|||
Excess tax benefits on share-based awards
|
—
|
|
|
(0.2
|
)
|
|
(0.5
|
)
|
|||
Federal income taxes, net
|
5.6
|
|
|
3.3
|
|
|
(0.7
|
)
|
|||
Net cash used in operating activities
|
(10.8
|
)
|
|
(1.9
|
)
|
|
(8.4
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Dividends received from consolidated subsidiaries
|
17.7
|
|
|
14.2
|
|
|
18.0
|
|
|||
Purchases of other invested assets
|
(0.4
|
)
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|||
Maturities, calls and pay downs of fixed maturities – available-for-sale
|
1.2
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by investing activities
|
18.5
|
|
|
13.9
|
|
|
17.7
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock
|
10.2
|
|
|
2.2
|
|
|
6.2
|
|
|||
Payments to acquire treasury stock
|
(0.3
|
)
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|||
Payment of dividends
|
(16.9
|
)
|
|
(16.6
|
)
|
|
(16.5
|
)
|
|||
Excess tax benefits on share-based awards
|
—
|
|
|
0.2
|
|
|
0.3
|
|
|||
Net cash used in financing activities
|
(7.0
|
)
|
|
(14.4
|
)
|
|
(10.3
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
0.7
|
|
|
(2.4
|
)
|
|
(1.0
|
)
|
|||
Cash and cash equivalents at beginning of year
|
8.1
|
|
|
10.5
|
|
|
11.5
|
|
|||
Cash and cash equivalents at end of year
|
$
|
8.8
|
|
|
$
|
8.1
|
|
|
$
|
10.5
|
|
Supplemental Disclosures:
|
|
|
|
|
|
||||||
Federal income tax received
|
$
|
0.5
|
|
|
$
|
3.4
|
|
|
$
|
2.3
|
|
Interest paid (affiliates $6.1, $6.1 and $6.0, respectively)
|
$
|
(6.1
|
)
|
|
$
|
(6.1
|
)
|
|
$
|
(6.0
|
)
|
|
|
|
|
|
|
($ millions, except interest rates)
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||
Carrying
value
|
|
Fair
Value
|
|
Interest
rate
|
|
Carrying
value
|
|
Fair
value
|
|
Interest
rate
|
|||||||||||
Affiliate note payable with Milbank, issued $15.0, July 2013 with fixed interest
|
$
|
15.0
|
|
|
$
|
15.8
|
|
|
5.28
|
%
|
|
$
|
15.0
|
|
|
$
|
15.4
|
|
|
5.28
|
%
|
Affiliate note payable with State Auto P&C, issued $85.0, July 2013 with fixed interest
|
85.0
|
|
|
89.6
|
|
|
5.28
|
%
|
|
85.0
|
|
|
87.1
|
|
|
5.28
|
%
|
||||
Total notes payable to affiliates
|
$
|
100.0
|
|
|
$
|
105.4
|
|
|
|
|
$
|
100.0
|
|
|
$
|
102.5
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
Segment
|
Deferred
policy
acquisition
cost
|
|
Future
benefits,
claims and
losses(1)
|
|
Unearned
premiums
|
|
Other policy
claims and
benefits
payable
|
|
Premium
revenue
|
||||||||||
Year ended December 31, 2017:
|
|
|
|
|
|
|
|
|
|
||||||||||
Personal insurance segment
|
$
|
50.9
|
|
|
$
|
256.1
|
|
|
$
|
288.1
|
|
|
$
|
—
|
|
|
$
|
580.3
|
|
Commercial insurance segment
|
47.9
|
|
|
604.3
|
|
|
225.6
|
|
|
—
|
|
|
455.7
|
|
|||||
Specialty insurance segment
|
19.0
|
|
|
392.1
|
|
|
91.7
|
|
|
—
|
|
|
239.1
|
|
|||||
Investment operations segment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
117.8
|
|
|
$
|
1,252.5
|
|
|
$
|
605.4
|
|
|
$
|
—
|
|
|
$
|
1,275.1
|
|
Year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
||||||||||
Personal insurance segment
|
$
|
47.0
|
|
|
$
|
254.5
|
|
|
$
|
258.7
|
|
|
$
|
—
|
|
|
$
|
578.5
|
|
Commercial insurance segment
|
47.4
|
|
|
602.5
|
|
|
227.9
|
|
|
—
|
|
|
472.6
|
|
|||||
Specialty insurance segment
|
35.4
|
|
|
321.0
|
|
|
124.8
|
|
|
—
|
|
|
240.8
|
|
|||||
Investment operations segment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
129.8
|
|
|
$
|
1,178.0
|
|
|
$
|
611.4
|
|
|
$
|
—
|
|
|
$
|
1,291.9
|
|
Year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
||||||||||
Personal insurance segment
|
$
|
47.1
|
|
|
$
|
227.0
|
|
|
$
|
260.1
|
|
|
$
|
—
|
|
|
$
|
591.3
|
|
Commercial insurance segment
|
49.9
|
|
|
553.6
|
|
|
240.1
|
|
|
—
|
|
|
476.5
|
|
|||||
Specialty insurance segment
|
32.1
|
|
|
266.5
|
|
|
108.9
|
|
|
—
|
|
|
202.7
|
|
|||||
Investment operations segment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
129.1
|
|
|
$
|
1,047.1
|
|
|
$
|
609.1
|
|
|
$
|
—
|
|
|
$
|
1,270.5
|
|
Segment
|
Net
investment
income
|
|
Benefits,
losses and
settlement
expenses(2)
|
|
Amort.
of deferred
policy
acquisition
costs
|
|
Other
operating
expenses
|
|
Premiums
written
|
|||||||||||
Year ended December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Personal insurance segment
|
$
|
—
|
|
|
$
|
416.3
|
|
|
$
|
102.1
|
|
|
$
|
89.3
|
|
|
$
|
609.7
|
|
|
Commercial insurance segment
|
—
|
|
|
284.2
|
|
|
95.7
|
|
|
90.4
|
|
|
453.6
|
|
||||||
Specialty insurance segment
|
—
|
|
|
219.5
|
|
|
59.9
|
|
|
18.4
|
|
|
206.0
|
|
||||||
Investment operations segment
|
78.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
78.8
|
|
|
$
|
920.0
|
|
|
$
|
257.7
|
|
|
$
|
198.1
|
|
|
$
|
1,269.3
|
|
|
Year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Personal insurance segment
|
$
|
—
|
|
|
$
|
422.0
|
|
|
$
|
103.3
|
|
|
$
|
62.7
|
|
|
$
|
577.2
|
|
|
Commercial insurance segment
|
—
|
|
|
331.5
|
|
|
110.4
|
|
|
61.6
|
|
|
459.4
|
|
||||||
Specialty insurance segment
|
—
|
|
|
190.6
|
|
|
76.6
|
|
|
15.7
|
|
|
256.7
|
|
||||||
Investment operations segment
|
74.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
74.7
|
|
|
$
|
944.1
|
|
|
$
|
290.3
|
|
|
$
|
140.0
|
|
|
$
|
1,293.3
|
|
|
Year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Personal insurance segment
|
$
|
—
|
|
|
$
|
396.2
|
|
|
$
|
104.6
|
|
|
$
|
61.2
|
|
|
$
|
581.0
|
|
|
Commercial insurance segment
|
—
|
|
|
338.6
|
|
|
108.6
|
|
|
74.2
|
|
|
481.5
|
|
||||||
Specialty insurance segment
|
—
|
|
|
129.4
|
|
|
69.8
|
|
|
8.4
|
|
|
211.0
|
|
||||||
Investment operations segment
|
71.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
71.7
|
|
|
$
|
864.2
|
|
|
$
|
283.0
|
|
|
$
|
143.8
|
|
|
$
|
1,273.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(1)
|
Segmented balances are net of reinsurance recoverable on losses and loss expenses payable.
|
|||||||||||||||||||
(2)
|
Benefits, losses and settlement expenses are monitored on a statutory basis.
|
($ million, except percentages)
|
|
|
|
Ceded to
|
|
Assumed from
|
|
|
|
|
||||||||||||||||||
|
|
|
Gross
Amount
|
|
Unaffiliated
Companies
|
|
Affiliated
Companies(1)
|
|
Unaffiliated
Companies
|
|
Affiliated
Companies(1)
|
|
Net
Amount
|
|
Percentage
of amount
assumed
to net (2)
|
|||||||||||||
Property-casualty
earned premiums for
year ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
2017
|
|
$
|
828.7
|
|
|
$
|
22.6
|
|
|
$
|
817.1
|
|
|
$
|
11.0
|
|
|
$
|
1,275.1
|
|
|
$
|
1,275.1
|
|
|
0.9
|
%
|
|
2016
|
|
840.6
|
|
|
25.6
|
|
|
819.9
|
|
|
4.9
|
|
|
1,291.9
|
|
|
1,291.9
|
|
|
0.4
|
%
|
|||||||
2015
|
|
863.1
|
|
|
34.7
|
|
|
832.9
|
|
|
4.5
|
|
|
1,270.5
|
|
|
1,270.5
|
|
|
0.4
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1)
|
These columns include the effect of intercompany pooling.
|
|||||||||||||||||||||||||||
(2)
|
Calculated as earned premiums assumed from outside companies to net amount.
|
1.
|
Capitalized terms used in this First Amendment (including the Background Information) which are not otherwise defined herein shall have the meanings ascribed to such terms in the 2015 Management Agreement.
|
2.
|
Upon the Effective Date, SA Labs shall automatically become a Managed Company with all rights and duties thereof as set forth in the 2015 Management Agreement.
|
4.
|
This document is an amendment to the 2015 Management Agreement. In the event of any inconsistencies between the provisions of the 2015 Management Agreement and this First Amendment, the provisions of this First Amendment shall control. Except as expressly amended hereby, the 2015 Management Agreement shall continue in full force and effect without change for the balance of the term thereof.
|
(1)
|
In the event that the Boards of Directors of State Auto Mutual, State Auto Financial and State Auto P&C (collectively, the “Boards”) jointly determine that this Agreement and Executive’s employment should be terminated for Cause, as defined in (2) below, Executive shall be entitled to receive payment of any Base Salary accrued through the date of separation from service. If the Boards decide to terminate this Agreement as provided in this Section, State Auto will give Executive 30 days’ advance written notice of its intention to terminate this Agreement. In the event of a termination for Cause, Executive’s service shall terminate upon the expiration of the notice period; provided, however, Executive may be relieved of his duties at the discretion of the Boards on the date the above described notice is delivered to Executive. It is further understood and agreed that should Executive dispute the fact that Cause, as defined herein, exists for such termination, Executive has the right to pursue a claim in Arbitration under Article X of the Executive Agreement for such benefits that would otherwise have been due to him under Section (E) of this Article V had he not been terminated for Cause.
|
(2)
|
For purposes of this Section D of Article V, it is understood and agreed that Cause shall mean the following: (a) the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to the Executive by the Boards which specifically identifies the manner in which the Boards believe that Executive has not performed Executive’s duties: (b) the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards; (c) the breach of any provision of Article VII hereof as determined by the Boards; or (d) the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of State Auto. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Boards or upon the advice of counsel for State Auto, shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of State Auto.
|
(1)
|
In the event that the Boards determine that this Agreement and the employment of Executive should be terminated before the end of the Employment Term for a reason other than death, Disability, voluntary separation from service by Executive, or for Cause (such reason is hereafter referred to as a “Termination Without Cause”) or, before the end of the Employment Term, Executive terminates his employment for Good Reason, pursuant to the provisions of subsection (2) of this Section (E) below (such reason is hereafter referred to as a "Termination for Good Reason"), subject to the provisions of Section (I) below:
|
(2)
|
Executive may resign and terminate the Employment Term and his employment with State Auto for "Good Reason" upon not less that 60 days prior written notice to State Auto. For purposes of this Agreement, Executive will have "Good Reason" to terminate his employment with State Auto if any of the following events occur without Executive's consent (provided State Auto does not fully cure the effect of such event within 30 days following its receipt of written notice of such event from Executive:
|
(c)
|
A material change in the geographic location in which Executive must perform services under this Agreement; or
|
(d)
|
Any other action or inaction that constitutes a material breach of this Agreement
|
(3)
|
Notwithstanding any provision to the contrary, the payments and benefits due to Executive under this Section (E) of Article V shall be contingent upon Executive’s execution of a valid release of State Auto and their respective officers, directors, agents and employees, from any and all actions, suits, proceedings, claims and demands relating to Executive’s employment and Termination Without Cause. Provided such release is executed and not revoked within any revocation period provided by applicable law, the payment and benefits due under this Section (E) of Article V shall commence no later than 90 days after Executive’s Termination Without Cause. In the event that the time period required by applicable law to obtain a valid release (including the expiration of any revocation period) begins in one calendar year and ends in another calendar year, notwithstanding the provisions of the previous sentence, payments and benefits due to Executive under this Section (E) of Article V shall commence in the second calendar year.
|
(1)
|
Executive further agrees that for a period of two years following a separation from service with State Auto, Executive will not directly or indirectly engage in the property, casualty or specialty insurance underwriting business or any other line(s) of business in which State Auto is operating at the time of Executive’s separation from service as an officer, director, consultant or employee of an insurer which (a) has direct written premium in excess of $1 billion nationally as of the end of the calendar year immediately preceding Executive’s separation from service with State Auto, and (b) operates in any state where State Auto operates.
|
(2)
|
Executive also agrees that for a period of two years following a separation from service, he shall not directly or indirectly hire, solicit for hiring or otherwise induce any employee of State Auto to leave State Auto’s employment.
|
(3)
|
Nothing in this Section (C) shall be construed to prohibit Executive from owning, directly or indirectly, less than five percent of the securities of any class of any company listed on a national securities exchange or traded in the over-the-counter securities market.
|
(4)
|
The noncompetition period shall be tolled (i.e., temporarily suspended) during the period of any violation or attempted violation of this Section by Executive. State Auto shall provide written notice to Executive of any tolling of the noncompetition period.
|
(5)
|
Notwithstanding the foregoing provisions, in the event Executive voluntarily separates from service as provided in Section (C) of Article V of the Agreement above, the provisions of Section (C)(1) of this Article VII shall be limited to a period of one year following such separation from service.
|
(D)
|
Enforcement.
|
(1)
|
The Boards may, in their discretion, require Executive to repay State Auto all or any portion of the amounts paid as termination benefits provided under Article V (collectively, the “Termination Benefits”) if:
|
(a)
|
Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to Executive and for the benefit of State Auto, including such covenants included in this Agreement;
|
(b)
|
It is later discovered that Executive engaged in conduct detrimental to State Auto during the Employment Term which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its discretion. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “detrimental to State Auto” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of State Auto; or
|
(c)
|
(i) The amount of any of the Termination Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto; and
|
(2)
|
The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.
|
(1)
|
If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: General Counsel; and
|
(2)
|
If to Executive, to the last address on file with State Auto.
|
(1)
|
State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant, or otherwise.
|
(2)
|
Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of his services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant, or otherwise.
|
|
|
State Auto Financial Corporation
|
|
|
|
|
By
|
/s/ Robert E. Baker
|
|
|
Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
|
|
|
|
|
|
State Auto Property and Casualty Insurance Company
|
|
|
|
|
By
|
/s/ Robert E. Baker
|
|
|
Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
|
|
|
|
|
|
State Automobile Mutual Insurance Company
|
|
|
|
|
By
|
/s/ Robert E. Baker
|
|
|
Robert E. Baker, Chair of the State Automobile Mutual Insurance Company Compensation Committee
|
|
|
|
|
|
Executive
|
|
|
|
|
By
|
/s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
|
Executive:
|
|
|
|
|
|
/s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
|
|
|
|
|
|
Beneficiary:
|
Ann LaRocco
|
|
|
|
|
Relationship to Executive:
|
Wife
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.
|
State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto. State Auto Financial is a majority- owned, publicly-traded holding company subsidiary of State Auto Mutual. State Auto Mutual is the ultimate controlling entity in the State Auto holding company system.
|
B.
|
State Auto desires to establish and maintain a sound and vital management team as an important part of State Auto’s overall corporate strategy and as an essential means of protecting and enhancing the interests of State Auto, the Boards of State Auto Financial and State Auto Mutual (collectively, the “Boards”), and their shareholders and policyholders, respectively. As part of this corporate strategy, State Auto desires to act in the best interests of State Auto to address Executive’s continued service to State Auto and available benefits in the event of an actual or threatened Change of Control (as defined herein) of State Auto Financial or State Auto Mutual.
|
1.1
|
Annual Base Salary means the greater of (a) the highest annual rate of base salary in effect for Executive during the 12-month period immediately prior to a Change of Control, or (b) the annual rate of base salary in effect on the date Executive’s employment is terminated.
|
1.2
|
Average Annual Award means the average of the annual aggregate bonus under the Short Term Incentive Plans (or its successors) earned by Executive in each of the three (3) calendar years immediately preceding the calendar year in which the Change of Control occurs.
|
1.3
|
Cause means any of the following:
|
(a)
|
the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to Executive by the Boards, or their designee, which specifically identifies the manner in which the Boards believe, in their sole discretion, that Executive has not performed Executive’s duties; or
|
(b)
|
the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(c)
|
the breach of any provision of Article IV hereof which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(d)
|
the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards in their sole discretion; or
|
(e)
|
the willful failure and refusal to cooperate with or assist State Auto in responding to governmental or regulatory inquiries, investigations or related activities, as determined by the Boards in their sole discretion.
|
1.4
|
Change of Control means the occurrence of any of the following:
|
(a)
|
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), Directly or Indirectly, of securities of State Auto Financial representing thirty percent (30%) or more of the combined voting power of State Auto Financial’s then outstanding securities, excluding (i) any acquisition by State Auto Financial or any Subsidiary; (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by State Auto Financial, a Subsidiary or State Auto Mutual; or (iii) any acquisition by State Auto Mutual; or
|
(b)
|
a majority of the Board of Directors of State Auto Financial at any time is comprised of other than Continuing Directors; or
|
(c)
|
any event or transaction State Auto Financial would be required to report in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; or
|
(d)
|
any of the following occurs:
|
(i)
|
a merger or consolidation of State Auto Financial, other than a merger or consolidation in which the voting securities of State Auto Financial immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) more than fifty percent (50%) of the combined voting power of State Auto Financial or surviving entity immediately after the merger or consolidation with another entity;
|
(ii)
|
a sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in a single transaction or a series of related transactions) of all or substantially all of the assets of State Auto Financial which shall include, without limitation, the sale of assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of State Auto Financial on a consolidated basis;
|
(iii)
|
a reorganization, reverse stock split, or recapitalization of State Auto Financial which would result in any of the foregoing; or
|
(iv)
|
a transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing.
|
(e)
|
With respect to State Auto Mutual, any of the following occurs:
|
(i)
|
State Auto Mutual affiliates with or is merged into or consolidated with a third party and as a result, a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors; or
|
(ii)
|
State Auto Mutual completes a conversion to a stock insurance company and as a result of which a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors.
|
1.5
|
Code means the Internal Revenue Code of 1986, as amended.
|
1.6
|
Confidential Information means information disclosed to Executive or known by State Auto, which is not generally known in the business in which State Auto is or may become engaged, including, but not limited to, information about State Auto's services, trade secrets, financial information, customer lists, books, records, memoranda and other proprietary information of State Auto. For purposes of this Agreement, “Confidential Information” shall also mean any information that could be considered a trade secret, as defined by applicable law.
|
1.7
|
Continuing Director of State Auto Financial or State Auto Mutual, as the case may be, means a director who was either:
|
(a)
|
first elected or appointed as a director on or prior to the Effective Date; or
|
(b)
|
subsequent to the Effective Date was elected or appointed as a director if such director was nominated by the Nominating and Governance Committee of State Auto Financial or the Nominating and Governance Committee of State Auto Mutual, as the case may be, or appointed by at least two-thirds of the total number of the then Continuing Directors of State Auto Financial or State Auto Mutual, as the case may be.
|
1.8
|
Directly or Indirectly means on Executive’s own behalf, or as an officer, director, shareholder, member, partner, owner, agent, consultant, advisor, coach or employee of any corporation, partnership, limited liability company or other entity.
|
1.9
|
Disability means illness or other incapacity as determined under State Auto’s group long-term disability benefit plan.
|
1.10
|
Employee Benefits means the benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital, or other insurance (whether funded by actual insurance or self-insured by State Auto), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist (and as may be modified from time to time) or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter (and as may be modified from time to time), providing benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change of Control.
|
1.11
|
Good Reason means the occurrence of any one or more of the following:
|
(a)
|
The assignment to Executive of duties which are materially and adversely different from or inconsistent with the duties, responsibilities and status of Executive’s position at any time during the 12-month period prior to a Change of Control, or which result in a significant reduction in Executive’s authority and responsibility as a senior executive officer of State Auto;
|
(b)
|
A reduction by State Auto in Executive’s Annual Base Salary in place as of the day immediately prior to a Change of Control, or after a Change of Control the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of State Auto, or a reduction of Executive’s most recent Average Annual Award prior to a Change of Control;
|
(c)
|
After a Change of Control, a demand by State Auto that Executive relocate to a location in excess of 35 miles from the location where Executive is based as of the day immediately prior to a Change of Control, or in the event of any such relocation with Executive’s express written consent, the failure of State Auto or a Subsidiary to pay (or reimburse Executive for) all reasonable moving expenses incurred by Executive relating to a change of principal residence in connection with such relocation and to indemnify Executive against any loss in the sale of Executive’s principal residence in connection with any such change of residence and any expenses incurred by Executive that are directly attributable to such sale (for purposes of this provision, “loss” is understood to mean a sale of such principal residence at a price less than the adjusted basis in such residence);
|
(d)
|
The failure of State Auto to obtain a satisfactory agreement from any successor to State Auto to assume and agree to perform this Agreement, as contemplated in Section 5.1 of this Agreement;
|
(e)
|
The failure of State Auto to provide Executive with substantially the same Employee Benefits that were provided to him immediately prior to the Change of Control, or with a package of Employee Benefits that, though one or more of such benefits may vary from those in effect immediately prior to a Change of Control, is substantially comparable in all material respects to such Employee Benefits taken as a whole; or
|
(f)
|
Any material reduction in Executive’s compensation or benefits or a material adverse change in Executive’s location or duties, if such material reduction or material adverse change occurs at any time after the commencement of any discussion with a third party relating to a possible Change of Control of State Auto involving such third party, if such material reduction or material adverse change is in contemplation of such possible Change of Control and such Change of Control is actually consummated within twelve (12) months after the date of such material reduction or material adverse change.
|
1.13
|
Severance Benefits means the benefits described in Section 2.1 of this Agreement, as adjusted by the applicable provisions of Section 9.1 of this Agreement.
|
1.14
|
Short Term Incentive Plans means OTIP and any other short term incentive compensation plan of State Auto.
|
1.15
|
Subsidiary means any corporation, insurance company or other entity with a majority of the voting control of which is directly or indirectly owned or controlled at the time by State Auto Financial.
|
1.16
|
Term means the time period commencing on the Effective Date of this Agreement and ending on November 30, 2020, both dates inclusive, however, that if a Change of Control occurs during the Term of this Agreement, the Term of this Agreement will be extended for thirty-six (36) months beyond the end of the month in which any such Change of Control occurs. Notwithstanding the foregoing, this Agreement shall terminate upon Executive’s termination of employment with State Auto for any other reason; provided, however, that Sections 2.3 and 2.4, Articles IV, VI through X, and Sections 11.3, 11.6 and 11.8 of the Agreement shall survive Executive’s termination of employment.
|
(a)
|
Annual Base Salary. In addition to any accrued compensation payable as of Executive’s termination of employment, a lump sum cash amount equal to Executive’s Annual Base Salary multiplied by two.
|
(b)
|
Annual Incentive Compensation. In addition to any compensation otherwise payable pursuant to Executive’s bonus arrangements, a lump sum cash amount equal to Executive’s Average Annual Award multiplied by two. In addition, Executive shall be entitled to receive a prorated annual incentive payment for the year in which the Change of Control occurred, if otherwise eligible for such annual incentive. Such prorated annual incentive amount, if any, will be determined based on the target award levels established for the year in which the Change of Control occurred.
|
(c)
|
Stock Options and Other Equity Awards. Stock options and any other types of equity awards (e.g., restricted shares, performance shares, performance units, etc.) held by Executive become exercisable upon a Change of Control according to the terms of the applicable stock option or equity plan and related agreement (if any) under which such stock options or other equity awards were granted.
|
(d)
|
Outplacement. State Auto shall pay all fees for outplacement services incurred by Executive up to a maximum equal to fifteen percent (15%) of Executive’s Annual Base Salary, plus provide a travel expense account of up to $5,000 to reimburse job search travel. Such expenses and reimbursements shall be limited to those expenses incurred within the two (2) calendar years following the calendar year of Executive’s separation from service. Such expenses shall be paid no later than December 31st of the calendar year following the applicable calendar year in which such reimbursable expense was incurred.
|
(e)
|
Health Insurance Reimbursement. State Auto shall pay Executive an amount equal to State Auto’s then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by 24.
|
(a)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause, the death or Disability of Executive within twenty-four (24) months after a Change of Control; or
|
(b)
|
Executive terminates employment for Good Reason within twenty-four (24) months after a Change of Control; or
|
(c)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive after an agreement has been reached with an unaffiliated third party, the performance of which agreement would result in a Change of Control involving such third party, if such Change of Control is actually consummated within twelve (12) months after the date of such termination.
|
(a)
|
The Board may, in its sole discretion, require Executive to repay to State Auto all or any portion of the amounts paid as Severance Benefits if:
|
(i)
|
Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to the Executive and for the benefit of State Auto, including such covenants included in this Agreement;
|
(ii)
|
It is later discovered that Executive engaged in conduct detrimental to State Auto during the Executive’s employment with State Auto which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its sole discretion, acting in good faith; or
|
(iii)
|
(A) The amount of any of the Severance Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto;
|
(b)
|
The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.
|
(a)
|
State Auto will use its best efforts to obtain the consent of the appropriate governmental agency to the payment by State Auto to Executive of the maximum amount that is permitted (up to the amounts that would be due to Executive absent the Limiting Rule); and
|
(b)
|
Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable State Auto severance, separation pay and/or salary continuation plan that may be in effect at the time of Executive’s termination.
|
(a)
|
If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: Corporate Secretary; and
|
(a)
|
State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
(b)
|
Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of Executive’s services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
STATE AUTO FINANCIAL CORPORATION
|
|
|
By: /s/ Michael E. LaRocco
|
|
By: /s/ Steven E. English
|
Michael E. LaRocco
Chairman, President and CEO
|
|
Steven E. English
|
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
|
|
|
By: /s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
President and CEO |
|
|
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
|
|
|
By: /s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
Chairman, President and CEO |
|
|
6608 Carinbough Place
|
Dublin, OH 43016
|
|
Date: 10/12/2017
|
|
|
/s/ Steven E. English
|
|
Signature of Executive
|
|
|
|
Steven E. English
|
|
Print Name of Executive
|
|
|
|
Deanna C. English
|
|
Beneficiary Name
|
|
|
|
Spouse
|
|
Relationship to Executive
|
A.
|
State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto. State Auto Financial is a majority- owned, publicly-traded holding company subsidiary of State Auto Mutual. State Auto Mutual is the ultimate controlling entity in the State Auto holding company system.
|
B.
|
State Auto desires to establish and maintain a sound and vital management team as an important part of State Auto’s overall corporate strategy and as an essential means of protecting and enhancing the interests of State Auto, the Boards of State Auto Financial and State Auto Mutual (collectively, the “Boards”), and their shareholders and policyholders, respectively. As part of this corporate strategy, State Auto desires to act in the best interests of State Auto to address Executive’s continued service to State Auto and available benefits in the event of an actual or threatened Change of Control (as defined herein) of State Auto Financial or State Auto Mutual.
|
1.1
|
Annual Base Salary means the greater of (a) the highest annual rate of base salary in effect for Executive during the 12-month period immediately prior to a Change of Control, or (b) the annual rate of base salary in effect on the date Executive’s employment is terminated.
|
1.2
|
Average Annual Award means the average of the annual aggregate bonus under the Short Term Incentive Plans (or its successors) earned by Executive in each of the three (3) calendar years immediately preceding the calendar year in which the Change of Control occurs.
|
1.3
|
Cause means any of the following:
|
(a)
|
the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to Executive by the Boards, or their designee, which specifically identifies the manner in which the Boards believe, in their sole discretion, that Executive has not performed Executive’s duties; or
|
(b)
|
the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(c)
|
the breach of any provision of Article IV hereof which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(d)
|
the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards in their sole discretion; or
|
(e)
|
the willful failure and refusal to cooperate with or assist State Auto in responding to governmental or regulatory inquiries, investigations or related activities, as determined by the Boards in their sole discretion.
|
1.4
|
Change of Control means the occurrence of any of the following:
|
(a)
|
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), Directly or Indirectly, of securities of State Auto Financial representing thirty percent (30%) or more of the combined voting power of State Auto Financial’s then outstanding securities, excluding (i) any acquisition by State Auto Financial or any Subsidiary; (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by State Auto Financial, a Subsidiary or State Auto Mutual; or (iii) any acquisition by State Auto Mutual; or
|
(b)
|
a majority of the Board of Directors of State Auto Financial at any time is comprised of other than Continuing Directors; or
|
(c)
|
any event or transaction State Auto Financial would be required to report in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; or
|
(d)
|
any of the following occurs:
|
(i)
|
a merger or consolidation of State Auto Financial, other than a merger or consolidation in which the voting securities of State Auto Financial immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) more than fifty percent (50%) of the combined voting power of State Auto Financial or surviving entity immediately after the merger or consolidation with another entity;
|
(ii)
|
a sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in a single transaction or a series of related transactions) of all or substantially all of the assets of State Auto Financial which shall include, without limitation, the sale of assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of State Auto Financial on a consolidated basis;
|
(iii)
|
a reorganization, reverse stock split, or recapitalization of State Auto Financial which would result in any of the foregoing; or
|
(iv)
|
a transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing.
|
(e)
|
With respect to State Auto Mutual, any of the following occurs:
|
(i)
|
State Auto Mutual affiliates with or is merged into or consolidated with a third party and as a result, a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors; or
|
(ii)
|
State Auto Mutual completes a conversion to a stock insurance company and as a result of which a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors.
|
1.5
|
Code means the Internal Revenue Code of 1986, as amended.
|
1.6
|
Confidential Information means information disclosed to Executive or known by State Auto, which is not generally known in the business in which State Auto is or may become engaged, including, but not limited to, information about State Auto's services, trade secrets, financial information, customer lists, books, records, memoranda and other proprietary information of State Auto. For purposes of this Agreement, “Confidential Information” shall also mean any information that could be considered a trade secret, as defined by applicable law.
|
1.7
|
Continuing Director of State Auto Financial or State Auto Mutual, as the case may be, means a director who was either:
|
(a)
|
first elected or appointed as a director on or prior to the Effective Date; or
|
(b)
|
subsequent to the Effective Date was elected or appointed as a director if such director was nominated by the Nominating and Governance Committee of State Auto Financial or the Nominating and Governance Committee of State Auto Mutual, as the case may be, or appointed by at least two-thirds of the total number of the then Continuing Directors of State Auto Financial or State Auto Mutual, as the case may be.
|
1.8
|
Directly or Indirectly means on Executive’s own behalf, or as an officer, director, shareholder, member, partner, owner, agent, consultant, advisor, coach or employee of any corporation, partnership, limited liability company or other entity.
|
1.9
|
Disability means illness or other incapacity as determined under State Auto’s group long-term disability benefit plan.
|
1.10
|
Employee Benefits means the benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital, or other insurance (whether funded by actual insurance or self-insured by State Auto), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist (and as may be modified from time to time) or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter (and as may be modified from time to time), providing benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change of Control.
|
1.11
|
Good Reason means the occurrence of any one or more of the following:
|
(a)
|
The assignment to Executive of duties which are materially and adversely different from or inconsistent with the duties, responsibilities and status of Executive’s position at any time during the 12-month period prior to a Change of Control, or which result in a significant reduction in Executive’s authority and responsibility as a senior executive officer of State Auto;
|
(b)
|
A reduction by State Auto in Executive’s Annual Base Salary in place as of the day immediately prior to a Change of Control, or after a Change of Control the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of State Auto, or a reduction of Executive’s most recent Average Annual Award prior to a Change of Control;
|
(c)
|
After a Change of Control, a demand by State Auto that Executive relocate to a location in excess of 35 miles from the location where Executive is based as of the day immediately prior to a Change of Control, or in the event of any such relocation with Executive’s express written consent, the failure of State Auto or a Subsidiary to pay (or reimburse Executive for) all reasonable moving expenses incurred by Executive relating to a change of principal residence in connection with such relocation and to indemnify Executive against any loss in the sale of Executive’s principal residence in connection with any such change of residence and any expenses incurred by Executive that are directly attributable to such sale (for purposes of this provision, “loss” is understood to mean a sale of such principal residence at a price less than the adjusted basis in such residence);
|
(d)
|
The failure of State Auto to obtain a satisfactory agreement from any successor to State Auto to assume and agree to perform this Agreement, as contemplated in Section 5.1 of this Agreement;
|
(e)
|
The failure of State Auto to provide Executive with substantially the same Employee Benefits that were provided to him immediately prior to the Change of Control, or with a package of Employee Benefits that, though one or more of such benefits may vary from those in effect immediately prior to a Change of Control, is substantially comparable in all material respects to such Employee Benefits taken as a whole; or
|
(f)
|
Any material reduction in Executive’s compensation or benefits or a material adverse change in Executive’s location or duties, if such material reduction or material adverse change occurs at any time after the commencement of any discussion with a third party relating to a possible Change of Control of State Auto involving such third party, if such material reduction or material adverse change is in contemplation of such possible Change of Control and such Change of Control is actually consummated within twelve (12) months after the date of such material reduction or material adverse change.
|
1.13
|
Severance Benefits means the benefits described in Section 2.1 of this Agreement, as adjusted by the applicable provisions of Section 9.1 of this Agreement.
|
1.14
|
Short Term Incentive Plans means OTIP and any other short term incentive compensation plan of State Auto.
|
1.15
|
Subsidiary means any corporation, insurance company or other entity with a majority of the voting control of which is directly or indirectly owned or controlled at the time by State Auto Financial.
|
1.16
|
Term means the time period commencing on the Effective Date of this Agreement and ending on November 30, 2020, both dates inclusive, however, that if a Change of Control occurs during the Term of this Agreement, the Term of this Agreement will be extended for thirty-six (36) months beyond the end of the month in which any such Change of Control occurs. Notwithstanding the foregoing, this Agreement shall terminate upon Executive’s termination of employment with State Auto for any other reason; provided, however, that Sections 2.3 and 2.4, Articles IV, VI through X, and Sections 11.3, 11.6 and 11.8 of the Agreement shall survive Executive’s termination of employment.
|
(a)
|
Annual Base Salary. In addition to any accrued compensation payable as of Executive’s termination of employment, a lump sum cash amount equal to Executive’s Annual Base Salary multiplied by two.
|
(b)
|
Annual Incentive Compensation. In addition to any compensation otherwise payable pursuant to Executive’s bonus arrangements, a lump sum cash amount equal to Executive’s Average Annual Award multiplied by two. In addition, Executive shall be entitled to receive a prorated annual incentive payment for the year in which the Change of Control occurred, if otherwise eligible for such annual incentive. Such prorated annual incentive amount, if any, will be determined based on the target award levels established for the year in which the Change of Control occurred.
|
(c)
|
Stock Options and Other Equity Awards. Stock options and any other types of equity awards (e.g., restricted shares, performance shares, performance units, etc.) held by Executive become exercisable upon a Change of Control according to the terms of the applicable stock option or equity plan and related agreement (if any) under which such stock options or other equity awards were granted.
|
(d)
|
Outplacement. State Auto shall pay all fees for outplacement services incurred by Executive up to a maximum equal to fifteen percent (15%) of Executive’s Annual Base Salary, plus provide a travel expense account of up to $5,000 to reimburse job search travel. Such expenses and reimbursements shall be limited to those expenses incurred within the two (2) calendar years following the calendar year of Executive’s separation from service. Such expenses shall be paid no later than December 31st of the calendar year following the applicable calendar year in which such reimbursable expense was incurred.
|
(e)
|
Health Insurance Reimbursement. State Auto shall pay Executive an amount equal to State Auto’s then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by 24.
|
(a)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause, the death or Disability of Executive within twenty-four (24) months after a Change of Control; or
|
(b)
|
Executive terminates employment for Good Reason within twenty-four (24) months after a Change of Control; or
|
(c)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive after an agreement has been reached with an unaffiliated third party, the performance of which agreement would result in a Change of Control involving such third party, if such Change of Control is actually consummated within twelve (12) months after the date of such termination.
|
(a)
|
The Board may, in its sole discretion, require Executive to repay to State Auto all or any portion of the amounts paid as Severance Benefits if:
|
(i)
|
Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to the Executive and for the benefit of State Auto, including such covenants included in this Agreement;
|
(ii)
|
It is later discovered that Executive engaged in conduct detrimental to State Auto during the Executive’s employment with State Auto which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its sole discretion, acting in good faith; or
|
(iii)
|
(A) The amount of any of the Severance Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto;
|
(b)
|
The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.
|
(a)
|
State Auto will use its best efforts to obtain the consent of the appropriate governmental agency to the payment by State Auto to Executive of the maximum amount that is permitted (up to the amounts that would be due to Executive absent the Limiting Rule); and
|
(b)
|
Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable State Auto severance, separation pay and/or salary continuation plan that may be in effect at the time of Executive’s termination.
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(a)
|
If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: Corporate Secretary; and
|
(a)
|
State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
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(b)
|
Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of Executive’s services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
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STATE AUTO FINANCIAL CORPORATION
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|
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By: /s/ Michael E. LaRocco
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|
By: /s/ Gregory A. Tacchetti
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Michael E. LaRocco
Chairman, President and CEO
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|
Gregory A. Tacchetti
|
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
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|
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By: /s/ Michael E. LaRocco
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|
|
Michael E. LaRocco
President and CEO |
|
|
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
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|
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By: /s/ Michael E. LaRocco
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|
|
Michael E. LaRocco
Chairman, President and CEO |
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|
7040 Bordeaux Ct
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Dublin, OH 43016
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Date: 10/12/2017
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|
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/s/ Gregory A. Tacchetti
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|
Signature of Executive
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Gregory A. Tacchetti
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Print Name of Executive
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|
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Patricia Tacchetti
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Beneficiary Name
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|
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Spouse
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Relationship to Executive
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A.
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State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto. State Auto Financial is a majority- owned, publicly-traded holding company subsidiary of State Auto Mutual. State Auto Mutual is the ultimate controlling entity in the State Auto holding company system.
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B.
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State Auto desires to establish and maintain a sound and vital management team as an important part of State Auto’s overall corporate strategy and as an essential means of protecting and enhancing the interests of State Auto, the Boards of State Auto Financial and State Auto Mutual (collectively, the “Boards”), and their shareholders and policyholders, respectively. As part of this corporate strategy, State Auto desires to act in the best interests of State Auto to address Executive’s continued service to State Auto and available benefits in the event of an actual or threatened Change of Control (as defined herein) of State Auto Financial or State Auto Mutual.
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1.1
|
Annual Base Salary means the greater of (a) the highest annual rate of base salary in effect for Executive during the 12-month period immediately prior to a Change of Control, or (b) the annual rate of base salary in effect on the date Executive’s employment is terminated.
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1.2
|
Average Annual Award means the average of the annual aggregate bonus under the Short Term Incentive Plans (or its successors) earned by Executive in each of the three (3) calendar years immediately preceding the calendar year in which the Change of Control occurs.
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1.3
|
Cause means any of the following:
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(a)
|
the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to Executive by the Boards, or their designee, which specifically identifies the manner in which the Boards believe, in their sole discretion, that Executive has not performed Executive’s duties; or
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(b)
|
the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
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(c)
|
the breach of any provision of Article IV hereof which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
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(d)
|
the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards in their sole discretion; or
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(e)
|
the willful failure and refusal to cooperate with or assist State Auto in responding to governmental or regulatory inquiries, investigations or related activities, as determined by the Boards in their sole discretion.
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1.4
|
Change of Control means the occurrence of any of the following:
|
(a)
|
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), Directly or Indirectly, of securities of State Auto Financial representing thirty percent (30%) or more of the combined voting power of State Auto Financial’s then outstanding securities, excluding (i) any acquisition by State Auto Financial or any Subsidiary; (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by State Auto Financial, a Subsidiary or State Auto Mutual; or (iii) any acquisition by State Auto Mutual; or
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(b)
|
a majority of the Board of Directors of State Auto Financial at any time is comprised of other than Continuing Directors; or
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(c)
|
any event or transaction State Auto Financial would be required to report in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; or
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(d)
|
any of the following occurs:
|
(i)
|
a merger or consolidation of State Auto Financial, other than a merger or consolidation in which the voting securities of State Auto Financial immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) more than fifty percent (50%) of the combined voting power of State Auto Financial or surviving entity immediately after the merger or consolidation with another entity;
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(ii)
|
a sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in a single transaction or a series of related transactions) of all or substantially all of the assets of State Auto Financial which shall include, without limitation, the sale of assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of State Auto Financial on a consolidated basis;
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(iii)
|
a reorganization, reverse stock split, or recapitalization of State Auto Financial which would result in any of the foregoing; or
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(iv)
|
a transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing.
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(e)
|
With respect to State Auto Mutual, any of the following occurs:
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(i)
|
State Auto Mutual affiliates with or is merged into or consolidated with a third party and as a result, a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors; or
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(ii)
|
State Auto Mutual completes a conversion to a stock insurance company and as a result of which a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors.
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1.5
|
Code means the Internal Revenue Code of 1986, as amended.
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1.6
|
Confidential Information means information disclosed to Executive or known by State Auto, which is not generally known in the business in which State Auto is or may become engaged, including, but not limited to, information about State Auto's services, trade secrets, financial information, customer lists, books, records, memoranda and other proprietary information of State Auto. For purposes of this Agreement, “Confidential Information” shall also mean any information that could be considered a trade secret, as defined by applicable law.
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1.7
|
Continuing Director of State Auto Financial or State Auto Mutual, as the case may be, means a director who was either:
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(a)
|
first elected or appointed as a director on or prior to the Effective Date; or
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(b)
|
subsequent to the Effective Date was elected or appointed as a director if such director was nominated by the Nominating and Governance Committee of State Auto Financial or the Nominating and Governance Committee of State Auto Mutual, as the case may be, or appointed by at least two-thirds of the total number of the then Continuing Directors of State Auto Financial or State Auto Mutual, as the case may be.
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1.8
|
Directly or Indirectly means on Executive’s own behalf, or as an officer, director, shareholder, member, partner, owner, agent, consultant, advisor, coach or employee of any corporation, partnership, limited liability company or other entity.
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1.9
|
Disability means illness or other incapacity as determined under State Auto’s group long-term disability benefit plan.
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1.10
|
Employee Benefits means the benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital, or other insurance (whether funded by actual insurance or self-insured by State Auto), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist (and as may be modified from time to time) or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter (and as may be modified from time to time), providing benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change of Control.
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1.11
|
Good Reason means the occurrence of any one or more of the following:
|
(a)
|
The assignment to Executive of duties which are materially and adversely different from or inconsistent with the duties, responsibilities and status of Executive’s position at any time during the 12-month period prior to a Change of Control, or which result in a significant reduction in Executive’s authority and responsibility as a senior executive officer of State Auto;
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(b)
|
A reduction by State Auto in Executive’s Annual Base Salary in place as of the day immediately prior to a Change of Control, or after a Change of Control the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of State Auto, or a reduction of Executive’s most recent Average Annual Award prior to a Change of Control;
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(c)
|
After a Change of Control, a demand by State Auto that Executive relocate to a location in excess of 35 miles from the location where Executive is based as of the day immediately prior to a Change of Control, or in the event of any such relocation with Executive’s express written consent, the failure of State Auto or a Subsidiary to pay (or reimburse Executive for) all reasonable moving expenses incurred by Executive relating to a change of principal residence in connection with such relocation and to indemnify Executive against any loss in the sale of Executive’s principal residence in connection with any such change of residence and any expenses incurred by Executive that are directly attributable to such sale (for purposes of this provision, “loss” is understood to mean a sale of such principal residence at a price less than the adjusted basis in such residence);
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(d)
|
The failure of State Auto to obtain a satisfactory agreement from any successor to State Auto to assume and agree to perform this Agreement, as contemplated in Section 5.1 of this Agreement;
|
(e)
|
The failure of State Auto to provide Executive with substantially the same Employee Benefits that were provided to him immediately prior to the Change of Control, or with a package of Employee Benefits that, though one or more of such benefits may vary from those in effect immediately prior to a Change of Control, is substantially comparable in all material respects to such Employee Benefits taken as a whole; or
|
(f)
|
Any material reduction in Executive’s compensation or benefits or a material adverse change in Executive’s location or duties, if such material reduction or material adverse change occurs at any time after the commencement of any discussion with a third party relating to a possible Change of Control of State Auto involving such third party, if such material reduction or material adverse change is in contemplation of such possible Change of Control and such Change of Control is actually consummated within twelve (12) months after the date of such material reduction or material adverse change.
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1.13
|
Severance Benefits means the benefits described in Section 2.1 of this Agreement, as adjusted by the applicable provisions of Section 9.1 of this Agreement.
|
1.14
|
Short Term Incentive Plans means OTIP and any other short term incentive compensation plan of State Auto.
|
1.15
|
Subsidiary means any corporation, insurance company or other entity with a majority of the voting control of which is directly or indirectly owned or controlled at the time by State Auto Financial.
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1.16
|
Term means the time period commencing on the Effective Date of this Agreement and ending on November 30, 2020, both dates inclusive, however, that if a Change of Control occurs during the Term of this Agreement, the Term of this Agreement will be extended for thirty-six (36) months beyond the end of the month in which any such Change of Control occurs. Notwithstanding the foregoing, this Agreement shall terminate upon Executive’s termination of employment with State Auto for any other reason; provided, however, that Sections 2.3 and 2.4, Articles IV, VI through X, and Sections 11.3, 11.6 and 11.8 of the Agreement shall survive Executive’s termination of employment.
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(a)
|
Annual Base Salary. In addition to any accrued compensation payable as of Executive’s termination of employment, a lump sum cash amount equal to Executive’s Annual Base Salary multiplied by two.
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(b)
|
Annual Incentive Compensation. In addition to any compensation otherwise payable pursuant to Executive’s bonus arrangements, a lump sum cash amount equal to Executive’s Average Annual Award multiplied by two. In addition, Executive shall be entitled to receive a prorated annual incentive payment for the year in which the Change of Control occurred, if otherwise eligible for such annual incentive. Such prorated annual incentive amount, if any, will be determined based on the target award levels established for the year in which the Change of Control occurred.
|
(c)
|
Stock Options and Other Equity Awards. Stock options and any other types of equity awards (e.g., restricted shares, performance shares, performance units, etc.) held by Executive become exercisable upon a Change of Control according to the terms of the applicable stock option or equity plan and related agreement (if any) under which such stock options or other equity awards were granted.
|
(d)
|
Outplacement. State Auto shall pay all fees for outplacement services incurred by Executive up to a maximum equal to fifteen percent (15%) of Executive’s Annual Base Salary, plus provide a travel expense account of up to $5,000 to reimburse job search travel. Such expenses and reimbursements shall be limited to those expenses incurred within the two (2) calendar years following the calendar year of Executive’s separation from service. Such expenses shall be paid no later than December 31st of the calendar year following the applicable calendar year in which such reimbursable expense was incurred.
|
(e)
|
Health Insurance Reimbursement. State Auto shall pay Executive an amount equal to State Auto’s then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by 24.
|
(a)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause, the death or Disability of Executive within twenty-four (24) months after a Change of Control; or
|
(b)
|
Executive terminates employment for Good Reason within twenty-four (24) months after a Change of Control; or
|
(c)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive after an agreement has been reached with an unaffiliated third party, the performance of which agreement would result in a Change of Control involving such third party, if such Change of Control is actually consummated within twelve (12) months after the date of such termination.
|
(a)
|
The Board may, in its sole discretion, require Executive to repay to State Auto all or any portion of the amounts paid as Severance Benefits if:
|
(i)
|
Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to the Executive and for the benefit of State Auto, including such covenants included in this Agreement;
|
(ii)
|
It is later discovered that Executive engaged in conduct detrimental to State Auto during the Executive’s employment with State Auto which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its sole discretion, acting in good faith; or
|
(iii)
|
(A) The amount of any of the Severance Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto;
|
(b)
|
The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.
|
(a)
|
State Auto will use its best efforts to obtain the consent of the appropriate governmental agency to the payment by State Auto to Executive of the maximum amount that is permitted (up to the amounts that would be due to Executive absent the Limiting Rule); and
|
(b)
|
Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable State Auto severance, separation pay and/or salary continuation plan that may be in effect at the time of Executive’s termination.
|
(a)
|
If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: Corporate Secretary; and
|
(a)
|
State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
(b)
|
Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of Executive’s services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
|
|
State Auto Financial Corporation
|
|
|
|
|
By
|
/s/ Robert E. Baker
|
|
|
Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
|
|
|
|
|
|
State Auto Property and Casualty Insurance Company
|
|
|
|
|
By
|
/s/ Robert E. Baker
|
|
|
Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
|
|
|
|
|
|
State Automobile Mutual Insurance Company
|
|
|
|
|
By
|
/s/ Robert E. Baker
|
|
|
Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
|
|
|
|
|
|
Executive
|
|
|
|
|
By
|
/s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
|
Beneficiary:
|
Ann LaRocco
|
|
|
|
|
|
|
Relationship to Executive:
|
Wife
|
|
|
|
|
|
|
|
|
|
|
Date:
|
11/28/2017
|
|
EXECUTIVE
|
|
|
|
|
|
|
|
/s/ Michael E. LaRocco
|
|
|
|
Michael E. LaRocco
|
A.
|
State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto. State Auto Financial is a majority- owned, publicly-traded holding company subsidiary of State Auto Mutual. State Auto Mutual is the ultimate controlling entity in the State Auto holding company system.
|
B.
|
State Auto desires to establish and maintain a sound and vital management team as an important part of State Auto’s overall corporate strategy and as an essential means of protecting and enhancing the interests of State Auto, the Boards of State Auto Financial and State Auto Mutual (collectively, the “Boards”), and their shareholders and policyholders, respectively. As part of this corporate strategy, State Auto desires to act in the best interests of State Auto to address Executive’s continued service to State Auto and available benefits in the event of an actual or threatened Change of Control (as defined herein) of State Auto Financial or State Auto Mutual.
|
1.1
|
Annual Base Salary means the greater of (a) the highest annual rate of base salary in effect for Executive during the 12-month period immediately prior to a Change of Control, or (b) the annual rate of base salary in effect on the date Executive’s employment is terminated.
|
1.2
|
Average Annual Award means the average of the annual aggregate bonus under the Short Term Incentive Plans (or its successors) earned by Executive in each of the three (3) calendar years immediately preceding the calendar year in which the Change of Control occurs.
|
1.3
|
Cause means any of the following:
|
(a)
|
the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to Executive by the Boards, or their designee, which specifically identifies the manner in which the Boards believe, in their sole discretion, that Executive has not performed Executive’s duties; or
|
(b)
|
the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(c)
|
the breach of any provision of Article IV hereof which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(d)
|
the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards in their sole discretion; or
|
(e)
|
the willful failure and refusal to cooperate with or assist State Auto in responding to governmental or regulatory inquiries, investigations or related activities, as determined by the Boards in their sole discretion.
|
1.4
|
Change of Control means the occurrence of any of the following:
|
(a)
|
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), Directly or Indirectly, of securities of State Auto Financial representing thirty percent (30%) or more of the combined voting power of State Auto Financial’s then outstanding securities, excluding (i) any acquisition by State Auto Financial or any Subsidiary; (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by State Auto Financial, a Subsidiary or State Auto Mutual; or (iii) any acquisition by State Auto Mutual; or
|
(b)
|
a majority of the Board of Directors of State Auto Financial at any time is comprised of other than Continuing Directors; or
|
(c)
|
any event or transaction State Auto Financial would be required to report in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; or
|
(d)
|
any of the following occurs:
|
(i)
|
a merger or consolidation of State Auto Financial, other than a merger or consolidation in which the voting securities of State Auto Financial immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) more than fifty percent (50%) of the combined voting power of State Auto Financial or surviving entity immediately after the merger or consolidation with another entity;
|
(ii)
|
a sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in a single transaction or a series of related transactions) of all or substantially all of the assets of State Auto Financial which shall include, without limitation, the sale of assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of State Auto Financial on a consolidated basis;
|
(iii)
|
a reorganization, reverse stock split, or recapitalization of State Auto Financial which would result in any of the foregoing; or
|
(iv)
|
a transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing.
|
(e)
|
With respect to State Auto Mutual, any of the following occurs:
|
(i)
|
State Auto Mutual affiliates with or is merged into or consolidated with a third party and as a result, a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors; or
|
(ii)
|
State Auto Mutual completes a conversion to a stock insurance company and as a result of which a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors.
|
1.5
|
Code means the Internal Revenue Code of 1986, as amended.
|
1.6
|
Confidential Information means information disclosed to Executive or known by State Auto, which is not generally known in the business in which State Auto is or may become engaged, including, but not limited to, information about State Auto's services, trade secrets, financial information, customer lists, books, records, memoranda and other proprietary information of State Auto. For purposes of this Agreement, “Confidential Information” shall also mean any information that could be considered a trade secret, as defined by applicable law.
|
1.7
|
Continuing Director of State Auto Financial or State Auto Mutual, as the case may be, means a director who was either:
|
(a)
|
first elected or appointed as a director on or prior to the Effective Date; or
|
(b)
|
subsequent to the Effective Date was elected or appointed as a director if such director was nominated by the Nominating and Governance Committee of State Auto Financial or the Nominating and Governance Committee of State Auto Mutual, as the case may be, or appointed by at least two-thirds of the total number of the then Continuing Directors of State Auto Financial or State Auto Mutual, as the case may be.
|
1.8
|
Directly or Indirectly means on Executive’s own behalf, or as an officer, director, shareholder, member, partner, owner, agent, consultant, advisor, coach or employee of any corporation, partnership, limited liability company or other entity.
|
1.9
|
Disability means illness or other incapacity as determined under State Auto’s group long-term disability benefit plan.
|
1.10
|
Employee Benefits means the benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital, or other insurance (whether funded by actual insurance or self-insured by State Auto), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist (and as may be modified from time to time) or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter (and as may be modified from time to time), providing benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change of Control.
|
1.11
|
Good Reason means the occurrence of any one or more of the following:
|
(a)
|
The assignment to Executive of duties which are materially and adversely different from or inconsistent with the duties, responsibilities and status of Executive’s position at any time during the 12-month period prior to a Change of Control, or which result in a significant reduction in Executive’s authority and responsibility as a senior executive officer of State Auto;
|
(b)
|
A reduction by State Auto in Executive’s Annual Base Salary in place as of the day immediately prior to a Change of Control, or after a Change of Control the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of State Auto, or a reduction of Executive’s most recent Average Annual Award prior to a Change of Control;
|
(c)
|
After a Change of Control, a demand by State Auto that Executive relocate to a location in excess of 35 miles from the location where Executive is based as of the day immediately prior to a Change of Control, or in the event of any such relocation with Executive’s express written consent, the failure of State Auto or a Subsidiary to pay (or reimburse Executive for) all reasonable moving expenses incurred by Executive relating to a change of principal residence in connection with such relocation and to indemnify Executive against any loss in the sale of Executive’s principal residence in connection with any such change of residence and any expenses incurred by Executive that are directly attributable to such sale (for purposes of this provision, “loss” is understood to mean a sale of such principal residence at a price less than the adjusted basis in such residence);
|
(d)
|
The failure of State Auto to obtain a satisfactory agreement from any successor to State Auto to assume and agree to perform this Agreement, as contemplated in Section 5.1 of this Agreement;
|
(e)
|
The failure of State Auto to provide Executive with substantially the same Employee Benefits that were provided to him immediately prior to the Change of Control, or with a package of Employee Benefits that, though one or more of such benefits may vary from those in effect immediately prior to a Change of Control, is substantially comparable in all material respects to such Employee Benefits taken as a whole; or
|
(f)
|
Any material reduction in Executive’s compensation or benefits or a material adverse change in Executive’s location or duties, if such material reduction or material adverse change occurs at any time after the commencement of any discussion with a third party relating to a possible Change of Control of State Auto involving such third party, if such material reduction or material adverse change is in contemplation of such possible Change of Control and such Change of Control is actually consummated within twelve (12) months after the date of such material reduction or material adverse change.
|
1.13
|
Severance Benefits means the benefits described in Section 2.1 of this Agreement, as adjusted by the applicable provisions of Section 9.1 of this Agreement.
|
1.14
|
Short Term Incentive Plans means OTIP and any other short term incentive compensation plan of State Auto.
|
1.15
|
Subsidiary means any corporation, insurance company or other entity with a majority of the voting control of which is directly or indirectly owned or controlled at the time by State Auto Financial.
|
1.16
|
Term means the time period commencing on the Effective Date of this Agreement and ending on November 30, 2020, both dates inclusive, however, that if a Change of Control occurs during the Term of this Agreement, the Term of this Agreement will be extended for thirty-six (36) months beyond the end of the month in which any such Change of Control occurs. Notwithstanding the foregoing, this Agreement shall terminate upon Executive’s termination of employment with State Auto for any other reason; provided, however, that Sections 2.3 and 2.4, Articles IV, VI through X, and Sections 11.3, 11.6 and 11.8 of the Agreement shall survive Executive’s termination of employment.
|
(a)
|
Annual Base Salary. In addition to any accrued compensation payable as of Executive’s termination of employment, a lump sum cash amount equal to Executive’s Annual Base Salary multiplied by two.
|
(b)
|
Annual Incentive Compensation. In addition to any compensation otherwise payable pursuant to Executive’s bonus arrangements, a lump sum cash amount equal to Executive’s Average Annual Award multiplied by two. In addition, Executive shall be entitled to receive a prorated annual incentive payment for the year in which the Change of Control occurred, if otherwise eligible for such annual incentive. Such prorated annual incentive amount, if any, will be determined based on the target award levels established for the year in which the Change of Control occurred.
|
(c)
|
Stock Options and Other Equity Awards. Stock options and any other types of equity awards (e.g., restricted shares, performance shares, performance units, etc.) held by Executive become exercisable upon a Change of Control according to the terms of the applicable stock option or equity plan and related agreement (if any) under which such stock options or other equity awards were granted.
|
(d)
|
Outplacement. State Auto shall pay all fees for outplacement services incurred by Executive up to a maximum equal to fifteen percent (15%) of Executive’s Annual Base Salary, plus provide a travel expense account of up to $5,000 to reimburse job search travel. Such expenses and reimbursements shall be limited to those expenses incurred within the two (2) calendar years following the calendar year of Executive’s separation from service. Such expenses shall be paid no later than December 31st of the calendar year following the applicable calendar year in which such reimbursable expense was incurred.
|
(e)
|
Health Insurance Reimbursement. State Auto shall pay Executive an amount equal to State Auto’s then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by 24.
|
(a)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause, the death or Disability of Executive within twenty-four (24) months after a Change of Control; or
|
(b)
|
Executive terminates employment for Good Reason within twenty-four (24) months after a Change of Control; or
|
(c)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive after an agreement has been reached with an unaffiliated third party, the performance of which agreement would result in a Change of Control involving such third party, if such Change of Control is actually consummated within twelve (12) months after the date of such termination.
|
(a)
|
The Board may, in its sole discretion, require Executive to repay to State Auto all or any portion of the amounts paid as Severance Benefits if:
|
(i)
|
Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to the Executive and for the benefit of State Auto, including such covenants included in this Agreement;
|
(ii)
|
It is later discovered that Executive engaged in conduct detrimental to State Auto during the Executive’s employment with State Auto which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its sole discretion, acting in good faith; or
|
(iii)
|
(A) The amount of any of the Severance Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto;
|
(b)
|
The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.
|
(a)
|
State Auto will use its best efforts to obtain the consent of the appropriate governmental agency to the payment by State Auto to Executive of the maximum amount that is permitted (up to the amounts that would be due to Executive absent the Limiting Rule); and
|
(b)
|
Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable State Auto severance, separation pay and/or salary continuation plan that may be in effect at the time of Executive’s termination.
|
(a)
|
If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: Corporate Secretary; and
|
(a)
|
State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
(b)
|
Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of Executive’s services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
STATE AUTO FINANCIAL CORPORATION
|
|
|
By: /s/ Michael E. LaRocco
|
|
By: /s/ Kim B. Garland
|
Michael E. LaRocco
Chairman, President and CEO
|
|
Kim B. Garland
|
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
|
|
|
By: /s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
President and CEO |
|
|
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
|
|
|
By: /s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
Chairman, President and CEO |
|
|
107 245th Place SE
|
Sammamish, WA 98074
|
|
Date: 10/12/2017
|
|
|
/s/ Kim B. Garland
|
|
Signature of Executive
|
|
|
|
Kim B. Garland
|
|
Print Name of Executive
|
|
|
|
Diane Garland
|
|
Beneficiary Name
|
|
|
|
Spouse
|
|
Relationship to Executive
|
A.
|
State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto. State Auto Financial is a majority- owned, publicly-traded holding company subsidiary of State Auto Mutual. State Auto Mutual is the ultimate controlling entity in the State Auto holding company system.
|
B.
|
State Auto desires to establish and maintain a sound and vital management team as an important part of State Auto’s overall corporate strategy and as an essential means of protecting and enhancing the interests of State Auto, the Boards of State Auto Financial and State Auto Mutual (collectively, the “Boards”), and their shareholders and policyholders, respectively. As part of this corporate strategy, State Auto desires to act in the best interests of State Auto to address Executive’s continued service to State Auto and available benefits in the event of an actual or threatened Change of Control (as defined herein) of State Auto Financial or State Auto Mutual.
|
1.1
|
Annual Base Salary means the greater of (a) the highest annual rate of base salary in effect for Executive during the 12-month period immediately prior to a Change of Control, or (b) the annual rate of base salary in effect on the date Executive’s employment is terminated.
|
1.2
|
Average Annual Award means the average of the annual aggregate bonus under the Short Term Incentive Plans (or its successors) earned by Executive in each of the three (3) calendar years immediately preceding the calendar year in which the Change of Control occurs.
|
1.3
|
Cause means any of the following:
|
(a)
|
the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to Executive by the Boards, or their designee, which specifically identifies the manner in which the Boards believe, in their sole discretion, that Executive has not performed Executive’s duties; or
|
(b)
|
the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(c)
|
the breach of any provision of Article IV hereof which has a material adverse effect on State Auto, as determined by the Boards in their sole discretion; or
|
(d)
|
the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards in their sole discretion; or
|
(e)
|
the willful failure and refusal to cooperate with or assist State Auto in responding to governmental or regulatory inquiries, investigations or related activities, as determined by the Boards in their sole discretion.
|
1.4
|
Change of Control means the occurrence of any of the following:
|
(a)
|
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), Directly or Indirectly, of securities of State Auto Financial representing thirty percent (30%) or more of the combined voting power of State Auto Financial’s then outstanding securities, excluding (i) any acquisition by State Auto Financial or any Subsidiary; (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by State Auto Financial, a Subsidiary or State Auto Mutual; or (iii) any acquisition by State Auto Mutual; or
|
(b)
|
a majority of the Board of Directors of State Auto Financial at any time is comprised of other than Continuing Directors; or
|
(c)
|
any event or transaction State Auto Financial would be required to report in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; or
|
(d)
|
any of the following occurs:
|
(i)
|
a merger or consolidation of State Auto Financial, other than a merger or consolidation in which the voting securities of State Auto Financial immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) more than fifty percent (50%) of the combined voting power of State Auto Financial or surviving entity immediately after the merger or consolidation with another entity;
|
(ii)
|
a sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in a single transaction or a series of related transactions) of all or substantially all of the assets of State Auto Financial which shall include, without limitation, the sale of assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of State Auto Financial on a consolidated basis;
|
(iii)
|
a reorganization, reverse stock split, or recapitalization of State Auto Financial which would result in any of the foregoing; or
|
(iv)
|
a transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing.
|
(e)
|
With respect to State Auto Mutual, any of the following occurs:
|
(i)
|
State Auto Mutual affiliates with or is merged into or consolidated with a third party and as a result, a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors; or
|
(ii)
|
State Auto Mutual completes a conversion to a stock insurance company and as a result of which a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors.
|
1.5
|
Code means the Internal Revenue Code of 1986, as amended.
|
1.6
|
Confidential Information means information disclosed to Executive or known by State Auto, which is not generally known in the business in which State Auto is or may become engaged, including, but not limited to, information about State Auto's services, trade secrets, financial information, customer lists, books, records, memoranda and other proprietary information of State Auto. For purposes of this Agreement, “Confidential Information” shall also mean any information that could be considered a trade secret, as defined by applicable law.
|
1.7
|
Continuing Director of State Auto Financial or State Auto Mutual, as the case may be, means a director who was either:
|
(a)
|
first elected or appointed as a director on or prior to the Effective Date; or
|
(b)
|
subsequent to the Effective Date was elected or appointed as a director if such director was nominated by the Nominating and Governance Committee of State Auto Financial or the Nominating and Governance Committee of State Auto Mutual, as the case may be, or appointed by at least two-thirds of the total number of the then Continuing Directors of State Auto Financial or State Auto Mutual, as the case may be.
|
1.8
|
Directly or Indirectly means on Executive’s own behalf, or as an officer, director, shareholder, member, partner, owner, agent, consultant, advisor, coach or employee of any corporation, partnership, limited liability company or other entity.
|
1.9
|
Disability means illness or other incapacity as determined under State Auto’s group long-term disability benefit plan.
|
1.10
|
Employee Benefits means the benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital, or other insurance (whether funded by actual insurance or self-insured by State Auto), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist (and as may be modified from time to time) or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter (and as may be modified from time to time), providing benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change of Control.
|
1.11
|
Good Reason means the occurrence of any one or more of the following:
|
(a)
|
The assignment to Executive of duties which are materially and adversely different from or inconsistent with the duties, responsibilities and status of Executive’s position at any time during the 12-month period prior to a Change of Control, or which result in a significant reduction in Executive’s authority and responsibility as a senior executive officer of State Auto;
|
(b)
|
A reduction by State Auto in Executive’s Annual Base Salary in place as of the day immediately prior to a Change of Control, or after a Change of Control the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of State Auto, or a reduction of Executive’s most recent Average Annual Award prior to a Change of Control;
|
(c)
|
After a Change of Control, a demand by State Auto that Executive relocate to a location in excess of 35 miles from the location where Executive is based as of the day immediately prior to a Change of Control, or in the event of any such relocation with Executive’s express written consent, the failure of State Auto or a Subsidiary to pay (or reimburse Executive for) all reasonable moving expenses incurred by Executive relating to a change of principal residence in connection with such relocation and to indemnify Executive against any loss in the sale of Executive’s principal residence in connection with any such change of residence and any expenses incurred by Executive that are directly attributable to such sale (for purposes of this provision, “loss” is understood to mean a sale of such principal residence at a price less than the adjusted basis in such residence);
|
(d)
|
The failure of State Auto to obtain a satisfactory agreement from any successor to State Auto to assume and agree to perform this Agreement, as contemplated in Section 5.1 of this Agreement;
|
(e)
|
The failure of State Auto to provide Executive with substantially the same Employee Benefits that were provided to him immediately prior to the Change of Control, or with a package of Employee Benefits that, though one or more of such benefits may vary from those in effect immediately prior to a Change of Control, is substantially comparable in all material respects to such Employee Benefits taken as a whole; or
|
(f)
|
Any material reduction in Executive’s compensation or benefits or a material adverse change in Executive’s location or duties, if such material reduction or material adverse change occurs at any time after the commencement of any discussion with a third party relating to a possible Change of Control of State Auto involving such third party, if such material reduction or material adverse change is in contemplation of such possible Change of Control and such Change of Control is actually consummated within twelve (12) months after the date of such material reduction or material adverse change.
|
1.13
|
Severance Benefits means the benefits described in Section 2.1 of this Agreement, as adjusted by the applicable provisions of Section 9.1 of this Agreement.
|
1.14
|
Short Term Incentive Plans means OTIP and any other short term incentive compensation plan of State Auto.
|
1.15
|
Subsidiary means any corporation, insurance company or other entity with a majority of the voting control of which is directly or indirectly owned or controlled at the time by State Auto Financial.
|
1.16
|
Term means the time period commencing on the Effective Date of this Agreement and ending on November 30, 2020, both dates inclusive, however, that if a Change of Control occurs during the Term of this Agreement, the Term of this Agreement will be extended for thirty-six (36) months beyond the end of the month in which any such Change of Control occurs. Notwithstanding the foregoing, this Agreement shall terminate upon Executive’s termination of employment with State Auto for any other reason; provided, however, that Sections 2.3 and 2.4, Articles IV, VI through X, and Sections 11.3, 11.6 and 11.8 of the Agreement shall survive Executive’s termination of employment.
|
(a)
|
Annual Base Salary. In addition to any accrued compensation payable as of Executive’s termination of employment, a lump sum cash amount equal to Executive’s Annual Base Salary multiplied by two.
|
(b)
|
Annual Incentive Compensation. In addition to any compensation otherwise payable pursuant to Executive’s bonus arrangements, a lump sum cash amount equal to Executive’s Average Annual Award multiplied by two. In addition, Executive shall be entitled to receive a prorated annual incentive payment for the year in which the Change of Control occurred, if otherwise eligible for such annual incentive. Such prorated annual incentive amount, if any, will be determined based on the target award levels established for the year in which the Change of Control occurred.
|
(c)
|
Stock Options and Other Equity Awards. Stock options and any other types of equity awards (e.g., restricted shares, performance shares, performance units, etc.) held by Executive become exercisable upon a Change of Control according to the terms of the applicable stock option or equity plan and related agreement (if any) under which such stock options or other equity awards were granted.
|
(d)
|
Outplacement. State Auto shall pay all fees for outplacement services incurred by Executive up to a maximum equal to fifteen percent (15%) of Executive’s Annual Base Salary, plus provide a travel expense account of up to $5,000 to reimburse job search travel. Such expenses and reimbursements shall be limited to those expenses incurred within the two (2) calendar years following the calendar year of Executive’s separation from service. Such expenses shall be paid no later than December 31st of the calendar year following the applicable calendar year in which such reimbursable expense was incurred.
|
(e)
|
Health Insurance Reimbursement. State Auto shall pay Executive an amount equal to State Auto’s then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by 24.
|
(a)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause, the death or Disability of Executive within twenty-four (24) months after a Change of Control; or
|
(b)
|
Executive terminates employment for Good Reason within twenty-four (24) months after a Change of Control; or
|
(c)
|
the Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive after an agreement has been reached with an unaffiliated third party, the performance of which agreement would result in a Change of Control involving such third party, if such Change of Control is actually consummated within twelve (12) months after the date of such termination.
|
(a)
|
The Board may, in its sole discretion, require Executive to repay to State Auto all or any portion of the amounts paid as Severance Benefits if:
|
(i)
|
Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to the Executive and for the benefit of State Auto, including such covenants included in this Agreement;
|
(ii)
|
It is later discovered that Executive engaged in conduct detrimental to State Auto during the Executive’s employment with State Auto which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its sole discretion, acting in good faith; or
|
(iii)
|
(A) The amount of any of the Severance Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto;
|
(b)
|
The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.
|
(a)
|
State Auto will use its best efforts to obtain the consent of the appropriate governmental agency to the payment by State Auto to Executive of the maximum amount that is permitted (up to the amounts that would be due to Executive absent the Limiting Rule); and
|
(b)
|
Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable State Auto severance, separation pay and/or salary continuation plan that may be in effect at the time of Executive’s termination.
|
(a)
|
If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: Corporate Secretary; and
|
(a)
|
State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
(b)
|
Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of Executive’s services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.
|
STATE AUTO FINANCIAL CORPORATION
|
|
|
By: /s/ Michael E. LaRocco
|
|
By: /s/ Paul M. Stachura
|
Michael E. LaRocco
Chairman, President and CEO
|
|
Paul M. Stachura
|
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
|
|
|
By: /s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
President and CEO |
|
|
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
|
|
|
By: /s/ Michael E. LaRocco
|
|
|
Michael E. LaRocco
Chairman, President and CEO |
|
|
5834 Vandeleur Place
|
Dublin, OH 43016
|
|
Date: 10/12/2017
|
|
|
/s/ Paul M. Stachura
|
|
Signature of Executive
|
|
|
|
Paul M. Stachura
|
|
Print Name of Executive
|
|
|
|
Joy Stachura
|
|
Beneficiary Name
|
|
|
|
Spouse
|
|
Relationship to Executive
|
1. Name of Participant:
|
[ • ]
|
2. Grant Date:
|
[ • ] , 20[ • ] (the “Grant Date”)
|
3. Performance Period:
|
Three-year period commencing on January 1, 20[ • ]and ending on December 31, 20[ • ](the “Performance Period”)
|
4. PAU’s Granted:
|
[ • ]
|
5. Vesting:
|
Except as otherwise provided in this Award Agreement, the PAU’s will vest as of the last day of the Performance Period only if and to the extent that (a) the Participant is employed by the Company or an Affiliate on the last day of the Performance Period; and (b) the Compensation Committee determines that the Performance Goals set forth in Section 6 of this Award Agreement (the “Performance Goals”) have been satisfied.
|
6. Performance Goals:
|
The Performance Goals applicable to the PAU’s granted to the Participant pursuant to this Award Agreement shall be (a) compound annual premium growth, and (b) combined ratio, during the Performance Period, as determined by the multiple (the “Performance Multiple”) under the matrix attached to this Award Agreement as Exhibit A (the “Performance Matrix”).
At the end of the Performance Period, if the Performance Matrix does not yield a Performance Multiple, the PAU’s awarded under this Award Agreement shall be forfeited and no longer considered outstanding or to be held by the Participant as of the close of business on the date on which the Compensation Committee certifies that the Performance Matrix does not yield a Performance Multiple. If the Performance Matrix yields a Performance Multiple, the PAU’s awarded under this Award Agreement shall remain outstanding and held by the Participant.
|
7. Determination of
Award Value:
|
Except as otherwise provided in this Award Agreement, if the PAU’s awarded under this Award Agreement remain outstanding as of the last day of the Performance Period under the provisions of Section 6 of this Award Agreement, the value of such PAU’s (the “Award Value”) will be determined as of the last day of the Performance Period pursuant to the following formula:
a × ( b × $1), where
a = The number of PAU’s granted under this Award Agreement; and
b = The Performance Multiple determined by the Compensation Committee pursuant to the provisions of Section 6 of this Award Agreement.
|
8. Settlement:
|
Except as otherwise provided in this Award Agreement, at the time that the Award Value is determined pursuant to Section 7 or any other section of this Award Agreement, the Participant (or, in the event of the Participant’s death, the Participant’s beneficiary) will receive a cash payment equal to the Award Value. PAU’s settled under this Award Agreement are intended to be exempt from Section 409A under the exemption for short term deferrals. Accordingly, PAU’s will be settled in cash no later than the 15th day of the third month following the end of the fiscal year of the Company (or if later the calendar year) in which the PAU’s vest.
|
9. Death or Disability:
|
If the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s death or Disability before the end of the Performance Period, then, notwithstanding any provision contained in this Award Agreement, the PAU’s granted under this Award Agreement shall become vested as of the date of the Participant’s death or Disability. The Award Value of such PAU’s will be determined as of the date of the Participant’s death or Disability pursuant to the following formula:
[a × (b × $1)] × c/d, where
a = The number of PAU’s granted under this Award Agreement;
b = A Performance Multiple equal to 1.0;
c = The number of days that the Participant was employed during the Performance Period; and
d = The total number of days in the Performance Period.
Upon the determination of the Award Value pursuant to this Section 9 of this Award Agreement, such PAU’s will be settled in the manner described in Section 8 of this Award Agreement; provided, that, the PAU’s will be settled in cash no later than the 15th day of the third month following the end of the calendar year in which the Participant’s death or Disability occurs.
|
10. Retirement or Reduction in Force:
|
If the Participant’s employment with the Company or any Affiliate is terminated by reason of the Participant’s Retirement before the end of the Performance Period or is terminated before the end of the Performance Period through a reduction in force (as determined in the sole discretion of the Compensation Committee), then, notwithstanding any provision contained in this Award Agreement, the PAU’s granted under this Award Agreement shall become vested in accordance with the provisions of Sections 5 and 6 of this Award Agreement; provided, that, for this purpose, the Participant will be deemed to have been employed by the Company or an Affiliate on the last day of the Performance Period. The Award Value of such PAU’s, if any, will be determined in accordance with the provisions of Section 7 of this Award Agreement; provided, that, for purposes of this Section 10 of this Award Agreement, the Award Value determined pursuant to the provisions of Section 7 of this Award Agreement shall be multiplied by a fraction, the numerator of which is the number of days that the Participant was employed during the Performance Period, and the denominator of which is the total number of days in the Performance Period. Upon the determination of the Award Value of the PAU’s pursuant to this Section 10 of this Award Agreement, such PAU’s will be settled at the time and in the manner described in Section 8 of this Award Agreement.
|
11. Termination of Employment for any Reason other than Retirement, Death, Disability or Reduction in Force:
|
If the Participant’s employment with the Company or any Affiliate terminates for any reason other than the Participant’s Retirement, death, Disability or a reduction in force before the last day of the Performance Period, then all PAU’s granted under this Award Agreement will be forfeited as of the date of the Participant’s termination of employment.
|
12. Effect of Plan:
|
The PAU’s are subject in all cases to the terms and conditions set forth in the Plan, which are incorporated into and made a part of this Award Agreement. In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern. All capitalized terms that are used in this Award Agreement but are not defined in this Award Agreement shall have the meanings ascribed to such terms in the Plan.
|
13. Acknowledgment:
|
By receipt of this Award, the Participant acknowledges and agrees that the PAU’s are subject to all of the terms and conditions of the Plan and this Award Agreement.
|
14. Forfeiture:
|
Notwithstanding any other provision of this Award Agreement, the PAU’s granted hereunder shall be subject to (a) the Forfeiture for Cause provisions contained in Section 4.7 of the Plan; and (b) any clawback or similar policy that may be implemented by the Company which is applicable to the PAU’s.
|
15. Effect on Other Agreements:
|
The parties acknowledge and agree that the provisions of this Award Agreement shall supersede any and all other agreements and rights that the Participant has under any agreements or arrangements between the Participant and the Company, whether in writing or otherwise, with respect to the matters set forth herein.
|
Premium
Growth
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
|
Combined Ratio
|
1. Name of Participant:
|
[ • ]
|
2. Grant Date:
|
[ • ] , 20[ • ] (the “Grant Date”)
|
3. Performance Period:
|
Three-year period commencing on January 1, 20[ • ]and ending on December 31, 20[ • ](the “Performance Period”)
|
4. Performance Units Granted:
|
[ • ]
|
5. Vesting:
|
Except as otherwise provided in this Award Agreement, the Performance Units will vest as of the last day of the Performance Period only if and to the extent that (a) the Participant is employed by the Company or an Affiliate on the last day of the Performance Period; and (b) the Compensation Committee determines that the Performance Goals set forth in Section 6 of this Award Agreement (the “Performance Goals”) have been satisfied.
|
6. Performance Goals:
|
The Performance Goals applicable to the Performance Units granted to the Participant pursuant to this Award Agreement shall be (a) compound annual premium growth, and (b) combined ratio, during the Performance Period, as determined by the multiple (the “Performance Multiple”) under the matrix attached to this Award Agreement as Exhibit A (the “Performance Matrix”).
At the end of the Performance Period, if the Performance Matrix does not yield a Performance Multiple, the Performance Units awarded under this Award Agreement shall be forfeited and no longer considered outstanding or to be held by the Participant as of the close of business on the date on which the Compensation Committee certifies that the Performance Matrix does not yield a Performance Multiple. If the Performance Matrix yields a Performance Multiple, the Performance Units awarded under this Award Agreement shall remain outstanding and held by the Participant.
|
7. Determination of
Award Value:
|
Except as otherwise provided in this Award Agreement, if the Performance Units awarded under this Award Agreement remain outstanding as of the last day of the Performance Period under the provisions of Section 6 of this Award Agreement, the value of such Performance Units (the “Award Value”) will be determined as of the last day of the Performance Period pursuant to the following formula:
(a × b) × c, where
a = The number of Performance Units granted under this Award Agreement
b= The Performance Multiple determined by the Compensation Committee pursuant to the provisions of Section 6 of this Award Agreement; and
c = The Fair Market Value of a share of Stock on the last day of the Performance Period.
|
8. Settlement:
|
Except as otherwise provided in this Award Agreement, at the time that the Award Value is determined pursuant to Section 7 or any other section of this Award Agreement, such Award Value will be paid to the Participant (or in the event of the Participant’s death, the Participant’s beneficiary) in cash, shares of Stock or a combination of cash and shares of Stock, as determined by the Committee. To the extent that any portion of the Award Value is to be paid in shares of Stock, a quotient shall be determined by dividing the Award Value (or portion thereof to be paid in shares of Stock) by the Fair Market Value of a share of Stock on the last day of the Performance Period, and rounding down to the next whole number. The quotient resulting from the calculation under the preceding sentence of this Section 8 of this Award Agreement will determine the Participant’s “Award Units” under this Award Agreement. Upon determination of the Participant’s Award Units, the Participant (or, in the event of the Participant’s death, the Participant’s beneficiary) will receive one (1) share of Stock for each Award Unit. Performance Units settled under this Award Agreement are intended to be exempt from Section 409A under the exemption for short term deferrals. Accordingly, Performance Units will be settled in cash, shares of Stock or a combination of cash and shares of Stock no later than the 15th day of the third month following the end of the fiscal year of the Company (or if later the calendar year) in which the Performance Units vest.
|
9. Death or Disability:
|
If the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s death or Disability before the end of the Performance Period, then, notwithstanding any provision contained in this Award Agreement, the Performance Units granted under this Award Agreement shall become vested as of the date of the Participant’s death or Disability. The Award Value of such Performance Units will be determined as of the date of the Participant’s death or Disability pursuant to the following formula:
(a × b) × c, where
a = The number of Performance Units granted under this Award Agreement;
b = A Performance Multiple equal to 1.0; and
c = The Fair Market Value of a share of Stock on the date of the Participant’s death or Disability.
Upon the determination of the Award Value pursuant to this Section 9 of this Award Agreement, such Performance Units will be settled in the manner described in Section 8 of this Award Agreement; provided, that, (i) in determining the Participant’s Award Units under Section 8, the Fair Market Value of a share of Stock on the date of the Participant’s death or Disability will be substituted for the Fair Market Value of a share of Stock on the last day of the Performance Period; and (ii) the Performance Units will be settled in cash, shares of Stock or a combination of cash and shares of Stock no later than the 15th day of the third month following the end of the calendar year in which the Participant’s death or Disability occurs.
|
10. Retirement:
|
If the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s Retirement before the end of the Performance Period, then, notwithstanding any provision contained in this Award Agreement, the Performance Units granted under this Award Agreement shall become vested in accordance with the provisions of Sections 5 and 6 of this Award Agreement; provided, that, for this purpose, the Participant will be deemed to have been employed by the Company or an Affiliate on the last day of the Performance Period. The Award Value of such Performance Units, if any, will be determined in accordance with the provisions of Section 7 of this Award Agreement and settled at the time and in the manner described in Section 8 of this Award.
|
11. Reduction in Force:
|
If the Participant’s employment with the Company or any Affiliate is terminated before the end of the Performance Period through a reduction in force (as determined in the sole discretion of the Compensation Committee), then, notwithstanding any provision contained in this Award Agreement, the Performance Units granted under this Award Agreement shall become vested in accordance with the provisions of Sections 5 and 6 of this Award Agreement; provided, that, for this purpose, the Participant will be deemed to have been employed by the Company or an Affiliate on the last day of the Performance Period. The Award Value of such Performance Units, if any, will be determined in accordance with the provisions of Section 7 of this Award Agreement; provided, that, for purposes of this Section 11 of this Award Agreement, the Award Value determined pursuant to the provisions of Section 7 of this Award Agreement shall be multiplied by a fraction, the numerator of which is the number of days that the Participant was employed during the Performance Period, and the denominator of which is the total number of days in the Performance Period. Upon the determination of the Award Value of the Performance Units pursuant to this Section 11 of this Award Agreement, such Performance Units will be settled at the time and in the manner described in Section 8 of this Award Agreement.
|
12. Termination of Employment for any Reason other than Retirement, Death, Disability or Reduction in Force:
|
If the Participant’s employment with the Company or any Affiliate terminates for any reason other than the Participant’s Retirement, death, Disability or a reduction in force before the last day of the Performance Period, then all Performance Units granted under this Award Agreement will be forfeited as of the date of the Participant’s termination of employment.
|
13. Conditions:
|
In the event the Committee determines to settle all or a portion of the Award Value in shares of Stock, the Company’s obligation to deliver shares of Stock is subject to the satisfaction of the following conditions: (a) the Participant is not, at the time of settlement, in material breach of any of his or her obligations under this Award Agreement, or under any other agreement with the Company or any Affiliate; (b) no preliminary or permanent injunction or other order against the delivery of the shares of Stock issued by a federal or state court of competent jurisdiction in the United States shall be in effect; (c) there shall not be in effect any federal or state law, rule or regulation which prevents or delays delivery of the shares of Stock or payment, as appropriate; and (d) the Participant shall confirm any factual matters reasonably requested by the Compensation Committee, the Company or counsel for the Company.
|
14. Shareholder Rights:
|
The Participant shall have none of the rights of a shareholder with respect to the shares of Stock underlying the Performance Units, until the Participant becomes the recordholder of the shares of Stock underlying the Performance Units.
|
15. Effect of Plan:
|
The Performance Units are subject in all cases to the terms and conditions set forth in the Plan, which are incorporated into and made a part of this Award Agreement. In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern. All capitalized terms that are used in this Award Agreement but are not defined in this Award Agreement shall have the meanings ascribed to such terms in the Plan.
|
16. Acknowledgment:
|
By receipt of this Award, the Participant acknowledges and agrees that the Performance Units are subject to all of the terms and conditions of the Plan and this Award Agreement.
|
17. Forfeiture:
|
Notwithstanding any other provision of this Award Agreement, the Performance Units granted hereunder shall be subject to (a) the Forfeiture for Cause provisions contained in Section 4.7 of the Plan; and (b) any clawback or similar policy that may be implemented by the Company which is applicable to the Performance Units.
|
18. Effect on Other Agreements:
|
The parties acknowledge and agree that the provisions of this Award Agreement shall supersede any and all other agreements and rights that the Participant has under any agreements or arrangements between the Participant and the Company, whether in writing or otherwise, with respect to the matters set forth herein.
|
Premium
Growth
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
__%
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
__%
|
|
Combined Ratio
|
1. Name of Participant:
|
[ • ]
|
||
2. Grant Date:
|
[ • ] , 20[ • ] (the “Grant Date”)
|
||
3. Number of Shares of Restricted Stock Granted:
|
[ • ]
|
||
4. Vesting:
|
Except as otherwise provided in this Award Agreement, the shares of Restricted Stock will vest in accordance with the following schedule; provided that the Participant’s employment with the Company or any Affiliate has not terminated prior to the applicable vesting date:
|
Vesting Date
|
Number of Shares of Restricted Stock as to Which Participant is Vested
|
_______________, 20__
|
_______________
|
_______________, 20__
|
_______________
|
_______________, 20__
|
_______________
|
_______________, 20__
|
_______________
|
5. Death, Disability
or Retirement:
|
Notwithstanding the provisions of Section 4 of this Award Agreement, if the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s death, Disability or Retirement before an applicable vesting date, then any then unvested Restricted Stock granted under this Award Agreement will vest on the date of the Participant’s termination of employment due to death, Disability or Retirement.
|
6. Change in Control:
|
Notwithstanding the provisions of Section 4 of this Award Agreement, in the event of a Change in Control prior to an applicable vesting date, all Restricted Stock granted under this Award Agreement will vest on the date of such Change in Control if the successor entity to the Company does not, as part of the Change in Control, assume the Award of Restricted Stock under this Award Agreement. In the event that the successor entity to the Company assumes the Award of Restricted Stock under this Award Agreement as part of the Change in Control, the Restricted Stock granted under this Award Agreement will vest upon the earlier of (a) the date or dates provided under Section 4 of this Award Agreement; or (b) on the date of the Participant’s termination of employment for any reason, with respect to the total number of then unvested Restricted Stock granted under this Award Agreement.
|
7. Settlement:
|
Subject to the provisions of Section 9 of this Award Agreement, at the time that the Participant becomes vested in any shares of Restricted Stock pursuant to any section of this Award Agreement, the Company shall cause such vested shares of Stock to be settled in a brokerage account for the Participant, and such shares of Stock shall be transferable by the Participant.
|
8. Dividend Equivalent Payments:
|
If, during the period beginning on the Grant Date and ending on the date on which any shares of Restricted Stock are to be settled pursuant to Section 7 of this Award Agreement (the “Applicable Dividend Period”), the Company pays any dividends in cash with respect to the outstanding shares of Stock (a “Cash Dividend”), then upon the settlement of vested Restricted Stock, the Participant shall also be entitled to receive a cash payment in an amount equal to the product of (a) the number of shares of Stock to be settled in the brokerage account upon such settlement of the Restricted Stock; and (b) the aggregate amount of the Cash Dividends paid per share of Stock during the Applicable Dividend Period (the “Dividend Equivalents”). Such Dividend Equivalents will be payable by the Company at the same time as the Restricted Stock to which they relate are settled pursuant to Section 7 of this Award Agreement.
If, during the Applicable Dividend Period, the Company pays any dividends in shares of Stock with respect to the outstanding shares of Stock, then, the Company will increase the number of shares of Restricted Stock granted hereunder by an amount equal to the product of (a) the number of shares of Restricted Stock; and (b) the number of shares of Stock paid by the Company per share of Stock (collectively, the “Additional Restricted Stock”). Each share of Additional Restricted Stock will be subject to the same terms and conditions applicable to the Restricted Stock for which such share of Additional Restricted Stock was awarded and will be settled pursuant to Section 7 of this Award Agreement at the same time and on the same basis as such Restricted Stock.
|
9. Conditions:
|
The Company’s obligation to settle shares of Stock in a brokerage account upon the settlement of vested Restricted Stock is subject to the satisfaction of the following conditions: (a) the Participant is not, at the time of settlement, in material breach of any of the Participant’s obligations under this Award Agreement, or under any other agreement with the Company or any Affiliate; (b) no preliminary or permanent injunction or other order against the settlement of shares of Stock issued by a federal or state court of competent jurisdiction in the United States shall be in effect; (c) there shall not be in effect any federal or state law, rule or regulation which prevents or delays the settlement of shares of Stock; and (d) the Participant shall confirm any factual matters reasonably requested by the Committee, the Company or counsel for the Company.
|
10. Shareholder Rights:
|
The Company shall cause its books and records to reflect entries evidencing the shares of Restricted Stock or rights to acquire Additional Restricted Stock (as described in Section 8 of this Award Agreement) to be recorded in the Participant’s name. Prior to the settlement of the Restricted Stock, such book entries shall reflect a restrictive legend to the effect that ownership of such shares of Restricted Stock (and any Additional Restricted Stock), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and conditions provided in the Plan and this Award Agreement. The Participant shall have the right to vote the Restricted Stock awarded to the Participant and to exercise all other rights, powers and privileges of a holder of Stock, with respect to such Restricted Stock, with the exception that (a) the Participant shall not be entitled to settlement of such Restricted Stock until they vest in accordance with Section 4, Section 5 or Section 6 of this Award Agreement; (b) the Company shall retain custody of all Dividend Equivalents and Additional Restricted Stock made or declared with respect to the Restricted Stock (and such Dividend Equivalents and Additional Restricted Stock shall be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Dividend Equivalents and Additional Restricted Stock shall have been made, paid, or declared shall have become vested, and such Dividend Equivalents and Additional Restricted Stock shall not bear interest or be segregated in separate accounts and (c) the Participant may not sell, assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Stock or any Additional Restricted Stock prior to the vesting of such Restricted Stock.
|
11. Effect of Plan:
|
The Restricted Stock is subject in all cases to the terms and conditions set forth in the Plan, which are incorporated into and made a part of this Award Agreement. In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern. All capitalized terms that are used in this Award Agreement but are not defined in this Award Agreement shall have the meanings ascribed to such terms in the Plan.
|
12. Non-Solicitation:
|
The Company and the Participant agree that, as consideration for this Award of Restricted Stock, the Participant, for the period of the Participant’s employment with the Company or any Affiliate and for one year thereafter, shall not directly or indirectly induce or solicit or attempt to induce or solicit any customer, prospective customer, insured, officer, or employee of the Company, any Affiliate or subsidiary (collectively, “State Auto”), to (a) do business with any other insurance company, insurance agency or any other person instead of State Auto, (b) cease or limit employment with or doing business with State Auto, or (c) cease or limit the insured’s and/or account’s business or insurance relationship with State Auto. For purposes of this Section 12 of this Award Agreement, a “prospective customer” shall mean a potential insured with whom a business or insurance quote from State Auto is outstanding as of the last day of employment of the Participant by the Company or any Affiliate.
|
13. Acknowledgment:
|
By receipt of this Award, the Participant acknowledges and agrees that the Restricted Stock is subject to all of the terms and conditions of the Plan and this Award Agreement.
|
14. Forfeiture:
|
Notwithstanding any other provision of this Agreement, the Restricted Stock granted hereunder shall be subject to forfeiture by the Participant under the Forfeiture for Cause provisions contained in Section 4.7 of the Plan or for any violation of the provisions of Section 12 of this Award Agreement.
|
15. Effect on Other Agreements:
|
The Company and the Participant acknowledge and agree that the provisions of this Award Agreement shall supersede any and all other agreements and rights that the Participant has under any agreements or arrangements between the Participant and the Company, whether in writing or otherwise, with respect to the matters set forth herein.
|
1. Name of Participant:
|
[•]
|
2. Grant Date:
|
[•] , 20[•] (the “Grant Date”)
|
3. Deferred Stock Units Granted:
|
[•]
|
4. Vesting:
|
Except as otherwise provided in this Award Agreement, the Deferred Stock Units will vest in accordance with the following schedule; provided that the Participant’s employment with the Company or any Affiliate has not terminated prior to the applicable vesting date:
|
Vesting Date
|
Number of Deferred
Stock Units as to
Which Employee is Vested
|
___________, 20__
|
_____
|
___________, 20__
|
_____
|
___________, 20__
|
_____
|
5. Death, Disability
or Retirement:
|
Notwithstanding the provisions of Section 4 of this Award Agreement, if the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s death, Disability or Retirement before an applicable vesting date, then any then unvested Deferred Stock Units granted under this Award Agreement will vest on the date of the Participant’s termination of employment due to death, Disability or Retirement.
|
6. Change in Control:
|
Notwithstanding the provisions of Section 4 of this Award Agreement, in the event of a Change in Control prior to an applicable vesting date, all Deferred Stock Units granted under this Award Agreement will vest on the date of such Change in Control if the successor entity to the Company does not, as part of the Change in Control, assume the Award of Deferred Stock Units under this Award Agreement. In the event that the successor entity to the Company assumes the Award of Deferred Stock Units under this Award Agreement as part of the Change in Control, the Deferred Stock Units granted under this Award Agreement will vest upon the earlier of (a) the date or dates provided under Section 4 of this Award Agreement; or (b) on the date of the Participant’s termination of employment for any reason, with respect to the total number of then unvested Deferred Stock Units granted under this Award Agreement.
|
7. Settlement:
|
At the time that any of the Deferred Stock Units vest pursuant to Section 4 or any other section of this Award Agreement, the Participant will receive one (1) share of Stock for each Deferred Stock Unit that vests. Deferred Stock Units settled under this Award Agreement are intended to be exempt from Section 409A under the exemption for short term deferrals. Accordingly, Deferred Stock Units will be settled in shares of Stock no later than the 15th day of the third month following the end of the fiscal year of the Company (or if later the calendar year) in which the Deferred Stock Units vest.
|
8. Dividend Equivalent
Payments:
|
If, during the period beginning on the Grant Date and ending on the date on which any Deferred Stock Units are to be settled pursuant to the applicable provisions of this Award Agreement (the “Applicable Dividend Period”), the Company pays any dividends in cash with respect to the outstanding shares of Stock (a “Cash Dividend”), then, upon the settlement of vested Deferred Stock Units, the Participant shall also be entitled to receive a cash payment in an amount equal to the product of (a) the number of shares of Stock to be issued upon such settlement of the Deferred Stock Units; and (b) the aggregate amount of the Cash Dividends paid per share of Stock during the Applicable Dividend Period (the “Dividend Equivalents”). Such Dividend Equivalents will be payable by the Company at the same time as the Deferred Stock Units to which they relate are settled pursuant to the applicable provisions of this Award Agreement.
If during the Applicable Dividend Period the Company pays any dividends in shares of Stock with respect to the outstanding shares of Stock, then, the Company will increase the number of Deferred Stock Units granted hereunder by an amount equal to the product of (a) the number of shares of Stock to be issued in exchange for the then outstanding Deferred Stock Units; and (b) the number of shares of Stock paid by the Company per share of Stock (collectively, the “Stock Dividend Deferred Stock Units”). Each Stock Dividend Deferred Stock Unit will be subject to the same terms and conditions applicable to the Deferred Stock Unit for which such Stock Dividend Deferred Stock Unit was awarded and will be settled pursuant to the applicable provisions of this Award Agreement at the same time and on the same basis as such Deferred Stock Unit.
|
9. Conditions:
|
The Company’s obligation to deliver shares of Stock upon the settlement of a vested Deferred Stock Unit is subject to the satisfaction of the following conditions: (a) the Participant is not, at the time of settlement, in material breach of any of his or her obligations under this Award Agreement, or under any other agreement with the Company or any Affiliate; (b) no preliminary or permanent injunction or other order against the delivery of the shares of Stock issued by a federal or state court of competent jurisdiction in the United States shall be in effect; (c) there shall not be in effect any federal or state law, rule or regulation which prevents or delays delivery of the shares of Stock or payment, as appropriate; and (d) the Participant shall confirm any factual matters reasonably requested by the Committee, the Company or counsel for the Company.
|
10. Shareholder Rights:
|
Except as otherwise provided in this Award Agreement, the Participant shall have none of the rights of a shareholder with respect to the shares of Stock underlying the Deferred Stock Units, until the Participant becomes the recordholder of the shares of Stock underlying the Deferred Stock Units.
|
11. Effect of Plan:
|
The Deferred Stock Units are subject in all cases to the terms and conditions set forth in the Plan, which are incorporated into and made a part of this Award Agreement. In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern. All capitalized terms that are used in this Award Agreement but are not defined in this Award Agreement shall have the meanings ascribed to such terms in the Plan.
|
12. Counterparts:
|
This Award Agreement may be signed in counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument.
|
13. Forfeiture:
|
Notwithstanding any other provision of this Award Agreement, the Deferred Stock Units granted hereunder shall be subject to (a) the Forfeiture for Cause provisions contained in Section 4.7 of the Plan; and (b) any clawback or similar policy that may be implemented by the Company which is applicable to the Deferred Stock Units.
|
14. Effect on Other Agreements:
|
The parties acknowledge and agree that the provisions of this Award Agreement shall supersede any and all other agreements and rights that the Participant has under any agreements or arrangements between the Participant and the Company, whether in writing or otherwise, with respect to the matters set forth herein.
|
Four (4) Consecutive Quarter Average Combined Ratio
___
___
___
___
___
|
Number of Deferred Stock Units as to which Participant is Vested
______
______
______
______
______
|
8. Supplemental
Performance Goal:
|
The Supplemental Performance Goal, the compound annual growth rate of the Company’s Stock price during the Stock Performance Period (the “CAGR”), will only be applicable if any Deferred Stock Units remain unvested after the Compensation Committee applies the provisions of Section 7 of this Award Agreement. To the extent that the Supplemental Performance Goal is applicable, the Deferred Stock Units will vest in accordance with the following schedule, based on the CAGR, comparing (a) the closing price of the Company Stock on the Grant Date to (b) the closing price of the Company Stock for the ten (10) consecutive trading days during the last calendar month of the Stock Performance Period which yields the highest closing price:
|
CAGR
%
%
%
%
|
Number of Deferred Stock Units as to which Participant is Vested (not to exceed Deferred Stock Units Granted)
_____
_____
_____
_____
|
9. Death or Disability:
|
If the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s death or Disability before the end of the Stock Performance Period, then, notwithstanding any provision contained in this Award Agreement, the Deferred Stock Units granted under this Award Agreement shall become vested as of the date of the Participant’s death or Disability. Such vested Deferred Stock Units will be settled in the manner described in Section 13 of this Award Agreement; provided, that, the Deferred Stock Units will be settled no later than the 15th day of the third month following the end of the calendar year in which the Participant’s death or Disability occurs.
|
10. Retirement:
|
If the Participant’s employment with the Company or any Affiliate is terminated by reason of the Participant’s Retirement before the end of the Stock Performance Period, then, notwithstanding any provision contained in this Award Agreement, the Deferred Stock Units granted under this Award Agreement shall become vested in accordance with the provisions of Sections 6, 7 and 8 of this Award Agreement; provided, that, for this purpose, the Participant will be deemed to have been employed by the Company or an Affiliate on the last day of the Stock Performance Period. Such Deferred Stock Units will be settled at the time and in the manner described in Section 13 of this Award Agreement.
|
11. Termination of
Employment for any
Reason Other than
Retirement, Death or
Disability:
|
If the Participant’s employment with the Company or any Affiliate terminates for any reason other than the Participant’s Retirement, death or Disability before the last day of the Stock Performance Period, then all Deferred Stock Units granted under this Award Agreement will be forfeited as of the date of the Participant’s termination of employment.
|
12. Change in Control:
|
Notwithstanding the provisions of Section 6 of this Award Agreement, in the event of a Change in Control prior to the end of the Stock Performance Period, all Deferred Stock Units granted under this Award Agreement will vest on the date of such Change in Control if the successor entity to the Company does not, as part of the Change in Control, assume the Award of Deferred Stock Units under this Award Agreement. In the event that the successor entity to the Company assumes the Award of Deferred Stock Units under this Award Agreement as part of the Change in Control, the Deferred Stock Units granted under this Award Agreement will vest upon the earlier of (a) the date provided under Section 6 of this Award Agreement to the extent determined pursuant to the provisions of Sections 7 and 8 of this Award Agreement; or (b) on the date of the Participant’s termination of employment for any reason, with respect to the total number of Deferred Stock Units granted under this Award Agreement.
|
13. Settlement:
|
At the time that any of the Deferred Stock Units vest pursuant to either Section 6 or any other section of this Award Agreement, the Participant will receive one (1) share of Stock for each Deferred Stock Unit that vests. Deferred Stock Units settled under this Award Agreement are intended to be exempt from Section 409A under the exemption for short term deferrals. Accordingly, Deferred Stock Units will be settled in shares of Stock no later than the 15th day of the third month following the end of the fiscal year of the Company (or if later the calendar year) in which the Deferred Stock Units vest.
|
14. Dividend Equivalent
Payments:
|
If, during the period beginning on the Grant Date and ending on the date on which any Deferred Stock Units are to be settled pursuant to the applicable provisions of this Award Agreement (the “Applicable Dividend Period”), the Company pays any dividends in cash with respect to the outstanding shares of Stock (a “Cash Dividend”), then, upon the settlement of vested Deferred Stock Units, the Participant shall also be entitled to receive a cash payment in an amount equal to the product of (a) the number of shares of Stock to be issued upon such settlement of the Deferred Stock Units; and (b) the aggregate amount of the Cash Dividends paid per share of Stock during the Applicable Dividend Period (the “Dividend Equivalents”). Such Dividend Equivalents will be payable by the Company at the same time as the Deferred Stock Units to which they relate are settled pursuant to the applicable provisions of this Award Agreement.
If during the Applicable Dividend Period the Company pays any dividends in shares of Stock with respect to the outstanding shares of Stock, then, the Company will increase the number of Deferred Stock Units granted hereunder by an amount equal to the product of (a) the number of shares of Stock to be issued in exchange for the then outstanding Deferred Stock Units; and (b) the number of shares of Stock paid by the Company per share of Stock (collectively, the “Stock Dividend Deferred Stock Units”). Each Stock Dividend Deferred Stock Unit will be subject to the same terms and conditions applicable to the Deferred Stock Unit for which such Stock Dividend Deferred Stock Unit was awarded and will be settled pursuant to the applicable provisions of this Award Agreement at the same time and on the same basis as such Deferred Stock Unit.
|
15. Conditions:
|
The Company’s obligation to deliver shares of Stock upon the settlement of a vested Deferred Stock Unit is subject to the satisfaction of the following conditions: (a) the Participant is not, at the time of settlement, in material breach of any of his or her obligations under this Award Agreement, or under any other agreement with the Company or any Affiliate; (b) no preliminary or permanent injunction or other order against the delivery of the shares of Stock issued by a federal or state court of competent jurisdiction in the United States shall be in effect; (c) there shall not be in effect any federal or state law, rule or regulation which prevents or delays delivery of the shares of Stock or payment, as appropriate; and (d) the Participant shall confirm any factual matters reasonably requested by the Committee, the Company or counsel for the Company.
|
16. Shareholder Rights:
|
Except as otherwise provided in this Award Agreement, the Participant shall have none of the rights of a shareholder with respect to the shares of Stock underlying the Deferred Stock Units, until the Participant becomes the recordholder of the shares of Stock underlying the Deferred Stock Units.
|
17. Effect of Plan:
|
The Deferred Stock Units are subject in all cases to the terms and conditions set forth in the Plan, which are incorporated into and made a part of this Award Agreement. In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern. All capitalized terms that are used in this Award Agreement but are not defined in this Award Agreement shall have the meanings ascribed to such terms in the Plan.
|
18. Counterparts:
|
This Award Agreement may be signed in counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument.
|
19. Forfeiture:
|
Notwithstanding any other provision of this Award Agreement, the Deferred Stock Units granted hereunder shall be subject to (a) the Forfeiture for Cause provisions contained in Section 4.7 of the Plan; and (b) any clawback or similar policy that may be implemented by the Company which is applicable to the Deferred Stock Units.
|
20. Effect on Other Agreements:
|
The parties acknowledge and agree that the provisions of this Award Agreement shall supersede any and all other agreements and rights that the Participant has under any agreements or arrangements between the Participant and the Company, whether in writing or otherwise, with respect to the matters set forth herein.
|
1. Name of Participant:
|
[ • ]
|
2. Grant Date:
|
[ • ] , 20[ • ] (the “Grant Date”)
|
3. Performance Period:
|
The period commencing on the Grant Date and ending on [ • ] , 20[•] (the “Performance Period”)
|
4. Number of Shares of Restricted Stock Granted:
|
[ • ]
|
5. Vesting:
|
Except as otherwise provided in this Award Agreement, the Restricted Stock will vest in accordance with the applicable provisions of Section 6 of this Award Agreement on each of the following vesting dates during the Performance Period; provided that the Participant’s employment with the Company or any Affiliate has not terminated prior to the applicable vesting date:
(a) [ • ] , 20[ • ]
(b) [ • ] , 20[ • ]
(c) [ • ] , 20[ • ]
(d) [ • ] , 20[ • ]
|
6. Determination of
Vested Restricted Stock:
|
As of each vesting date described in Section 5 of this Award Agreement, the number of shares of Restricted Stock that will vest will be determined pursuant to the formula (i) * (ii), where (i) equals one-fourth (1/4) of the number of shares of Restricted Stock granted under Section 4 of this Award Agreement; and (ii) equals the multiple achieved by the Company during the calendar year preceding the applicable vesting date under the matrix used for awards granted under the One Team Incentive Plan for the calendar year ending immediately before the applicable vesting date. Notwithstanding any provision contained herein, the number of shares of Restricted Stock that may vest on each applicable vesting date may not exceed one-fourth (1/4) of the number of shares of Restricted Stock granted under Section 4 of this Award Agreement. Any shares of Restricted Stock that may vest on an applicable vesting date pursuant to the provisions of this Section 6 of this Award Agreement, but do not vest after the application of the formula contained herein will be forfeited as of such applicable vesting date.
|
7. Death or Disability:
|
Notwithstanding the provisions of Sections 5 and 6 of this Award Agreement, if the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s death or Disability before an applicable vesting date, then any then unvested Restricted Stock granted under this Award Agreement will vest on the date of the Participant’s termination of employment due to death or Disability.
|
8. Retirement:
|
Notwithstanding the provisions of Sections 5 and 6 of this Award Agreement, if the Participant’s employment with the Company or any Affiliate terminates by reason of the Participant’s Retirement before an applicable vesting date, then one-fourth (1/4) of the number of shares of Restricted Stock granted under Section 4 of this Award Agreement that may have become vested on the next applicable vesting date following the Participant’s Retirement will vest on the date of the Participant’s termination of employment due to Retirement. Any remaining unvested Restricted Stock after application of the provisions of this Section 8 of this Award Agreement will be forfeited.
|
9. Change in Control:
|
Notwithstanding the provisions of Sections 5 and 6 of this Award Agreement, in the event of a Change in Control prior to an applicable vesting date, all Restricted Stock granted under this Award Agreement will vest on the date of such Change in Control if the successor entity to the Company does not, as part of the Change in Control, assume the Award of Restricted Stock under this Award Agreement. In the event that the successor entity to the Company assumes the Award of Restricted Stock under this Award Agreement as part of the Change in Control, the Restricted Stock granted under this Award Agreement will vest upon the earlier of (a) the date or dates in accordance with the provisions of Sections 5 and 6 of this Award Agreement; or (b) on the date of the Participant’s termination of employment for any reason, with respect to the total number of then unvested Restricted Stock granted under this Award Agreement.
|
10. Settlement:
|
Subject to the provisions of Section 12 of this Award Agreement, at the time that the Participant becomes vested in any shares of Restricted Stock pursuant to any section of this Award Agreement, the Company shall cause such vested shares of Stock to be settled in a brokerage account for the Participant, and such shares of Stock shall be transferable by the Participant.
|
11. Dividend Equivalent Payments:
|
If, during the period beginning on the Grant Date and ending on the date on which any shares of Restricted Stock are to be settled pursuant to Section 10 of this Award Agreement (the “Applicable Dividend Period”), the Company pays any dividends in cash with respect to the outstanding shares of Stock (a “Cash Dividend”), then upon the settlement of vested Restricted Stock, the Participant shall also be entitled to receive a cash payment in an amount equal to the product of (a) the number of shares of Stock to be settled in the brokerage account upon such settlement of the Restricted Stock; and (b) the aggregate amount of the Cash Dividends paid per share of Stock during the Applicable Dividend Period (the “Dividend Equivalents”). Such Dividend Equivalents will be payable by the Company at the same time as the Restricted Stock to which they relate are settled pursuant to Section 10 of this Award Agreement.
If, during the Applicable Dividend Period, the Company pays any dividends in shares of Stock with respect to the outstanding shares of Stock, then, the Company will increase the number of shares of Restricted Stock granted hereunder by an amount equal to the product of (a) the number of shares of Restricted Stock; and (b) the number of shares of Stock paid by the Company per share of Stock (collectively, the “Additional Restricted Stock”). Each share of Additional Restricted Stock will be subject to the same terms and conditions applicable to the Restricted Stock for which such share of Additional Restricted Stock was awarded and will be settled pursuant to Section 10 of this Award Agreement at the same time and on the same basis as such Restricted Stock.
|
12. Conditions:
|
The Company’s obligation to settle shares of Stock in a brokerage account upon the settlement of vested Restricted Stock is subject to the satisfaction of the following conditions: (a) the Participant is not, at the time of settlement, in material breach of any of the Participant’s obligations under this Award Agreement, or under any other agreement with the Company or any Affiliate; (b) no preliminary or permanent injunction or other order against the settlement of shares of Stock issued by a federal or state court of competent jurisdiction in the United States shall be in effect; (c) there shall not be in effect any federal or state law, rule or regulation which prevents or delays the settlement of shares of Stock; and (d) the Participant shall confirm any factual matters reasonably requested by the Committee, the Company or counsel for the Company.
|
13. Shareholder Rights:
|
The Company shall cause its books and records to reflect entries evidencing the shares of Restricted Stock or rights to acquire Additional Restricted Stock (as described in Section 11 of this Award Agreement) to be recorded in the Participant’s name. Prior to the settlement of the Restricted Stock, such book entries shall reflect a restrictive legend to the effect that ownership of such shares of Restricted Stock (and any Additional Restricted Stock), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and conditions provided in the Plan and this Award Agreement. The Participant shall have the right to vote the Restricted Stock awarded to the Participant and to exercise all other rights, powers and privileges of a holder of Stock, with respect to such Restricted Stock, with the exception that (a) the Participant shall not be entitled to settlement of such Restricted Stock until they vest in accordance with any section of this Award Agreement; (b) the Company shall retain custody of all Dividend Equivalents and Additional Restricted Stock made or declared with respect to the Restricted Stock (and such Dividend Equivalents and Additional Restricted Stock shall be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Dividend Equivalents and Additional Restricted Stock shall have been made, paid, or declared shall have become vested, and such Dividend Equivalents and Additional Restricted Stock shall not bear interest or be segregated in separate accounts and (c) the Participant may not sell, assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Stock or any Additional Restricted Stock prior to the vesting of such Restricted Stock.
|
14. Effect of Plan:
|
The Restricted Stock is subject in all cases to the terms and conditions set forth in the Plan, which are incorporated into and made a part of this Award Agreement. In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern. All capitalized terms that are used in this Award Agreement but are not defined in this Award Agreement shall have the meanings ascribed to such terms in the Plan.
|
15. Non-Solicitation:
|
The Company and the Participant agree that, as consideration for this Award of Restricted Stock, the Participant, for the period of the Participant’s employment with the Company or any Affiliate and for one year thereafter, shall not directly or indirectly induce or solicit or attempt to induce or solicit any customer, prospective customer, insured, officer, or employee of the Company, any Affiliate or subsidiary (collectively, “State Auto”), to (a) do business with any other insurance company, insurance agency or any other person instead of State Auto, (b) cease or limit employment with or doing business with State Auto, or (c) cease or limit the insured’s and/or account’s business or insurance relationship with State Auto. For purposes of this Section 15 of this Award Agreement, a “prospective customer” shall mean a potential insured with whom a business or insurance quote from State Auto is outstanding as of the last day of employment of the Participant by the Company or any Affiliate.
|
16. Acknowledgment:
|
By receipt of this Award, the Participant acknowledges and agrees that the Restricted Stock is subject to all of the terms and conditions of the Plan and this Award Agreement.
|
17. Forfeiture:
|
Notwithstanding any other provision of this Agreement, the Restricted Stock granted hereunder shall be subject to forfeiture by the Participant under the Forfeiture for Cause provisions contained in Section 4.7 of the Plan or for any violation of the provisions of Section 15 of this Award Agreement.
|
18. Effect on Other Agreements:
|
The Company and the Participant acknowledge and agree that the provisions of this Award Agreement shall supersede any and all other agreements and rights that the Participant has under any agreements or arrangements between the Participant and the Company, whether in writing or otherwise, with respect to the matters set forth herein.
|
(1)
|
Registration Statement (Form S-8, No. 33-44667 and 33-89400) pertaining to the 1991 Stock Option Plan
|
(2)
|
Registration Statement(Form S-8, No. 33-44666) pertaining to the1991 Directors’ Stock Option Plan
|
(3)
|
Registration Statement (Form S-8, No. 33-41423, 333-05755, 333-147333, and 333-206148) pertaining to the 1991 Employee Stock Purchase and Dividend Reinvestment Plan
|
(4)
|
Registration Statement (Form S-8, No. 333-56336) pertaining to the State Auto Insurance Companies Retirement Savings Plan
|
(5)
|
Registration Statement (Form S-8, No. 333-43882) pertaining to the 2000 Directors’ Stock Option Plan
|
(6)
|
Registration Statement (Form S-8, No. 333-43880) pertaining to the 2000 Stock Option Plan
|
(7)
|
Registration Statement (Form S-3, No. 333-41849 and 333-209878) pertaining to the Monthly Stock Purchase Plan for Independent Agents
|
(8)
|
Registration Statement (Form S-3, No. 333-90529) pertaining to the 1998 State Auto Agents’ Stock Option Plan
|
(9)
|
Registration Statement (Form S-8, No. 333-127172) pertaining to the 2005 Outside Directors Restricted Share Unit Plan
|
(10)
|
Registration Statement (Form S-8, No. 333-165364, 333-192158, and 333-214472) pertaining to the State Auto Financial Corporation 2009 Equity Incentive Compensation Plan
|
(11)
|
Registration Statement (Form S-8, No. 333-165366 and 333-170568) pertaining to the State Auto Property & Casualty Insurance Company Amended and Restated Incentive Deferred Compensation Plan
|
(12)
|
Registration Statement (Form S-8, No. 333-170564) pertaining to the State Auto Property & Casualty Insurance Company Amended and Restated Directors Deferred Compensation Plan, and
|
(13)
|
Registration Statement (Form S-8, No. 333-214471) pertaining to the Outside Directors Restricted Share Unit Plan of State Auto Financial Corporation;
|
/s/ Ernst & Young LLP
|
|
|
Grandview Heights, Ohio
|
|
|
February 28, 2018
|
|
|
|
|
|
(1)
|
Prepare, execute in my name and on my behalf, and submit to the U.S. Securities and Exchange Commission (the “SEC”) a Form ID, including amendments thereto, and any other documents necessary or appropriate to obtain codes and passwords enabling me to make electronic filings with the SEC of reports required by Section 16(a) of the Securities Act of 1934 or any rule or regulation of the SEC;
|
(2)
|
Execute for me and on my behalf, in my capacity as an officer and/or director of State Auto Financial Corporation (the "Company"), Forms 3, 4, and 5 in accordance with Section 16(a) of the Securities Exchange Act of 1934 and the rules thereunder;
|
(3)
|
Do and perform any and all acts for me and on my behalf which may be necessary or desirable to complete and execute any such Form 3, 4, or 5, complete and execute any amendment or amendments thereto, and file such form with the SEC and any stock exchange or similar authority; and
|
(4)
|
Take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be of benefit to, in the best interest of, or legally required by, me,it being understood that the documents executed by such attorney-in-fact on my behalf pursuant to this Power of Attorney shall be in such form and shall contain such terms and conditions as such attorney-in-fact may approve in such attorney-in-fact's discretion.
|
1.
|
I have reviewed this Form 10-K of State Auto Financial Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 28, 2018
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/s/ Michael E. LaRocco
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Michael E. LaRocco, Chief Executive Officer
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Chief Executive Officer
(Principal Executive Officer)
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1.
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I have reviewed this Form 10-K of State Auto Financial Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 28, 2018
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/s/ Steven E. English
|
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Steven E. English,
|
|
Chief Financial Officer
(Principal Financial Officer)
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
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/s/ Michael E. LaRocco
|
|
Michael E. LaRocco
|
|
Chief Executive Officer
|
|
February 28, 2018
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
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/s/ Steven E. English
|
|
Steven E. English
|
|
Chief Financial Officer
|
|
February 28, 2018
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