OLDWICK: AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of State Automobile Mutual Insurance Company (State Auto) and its operating subsidiaries.

Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” of State Auto’s intermediate holding company, State Auto Financial Corporation (STFC) [NASDAQ: STFC]. The outlook of these Credit Ratings (ratings) is stable. All of the above companies are headquartered in Columbus, OH.

The ratings reflect State Auto’s balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The balance sheet assessment of strongest is derived from risk-adjusted capitalization also being at the strongest level, a high credit quality investment portfolio, favorable overall loss reserve development and adequate reinsurance protection. State Auto also benefits from the financial flexibility and access to capital afforded by its publicly traded intermediate holding company, STFC.

Operating performance has been marginal with State Auto impacted over the past five years by severe weather events, technology costs, fluctuating premium volume and above average commissions. Higher underwriting losses were experienced in 2019, largely reflecting a greater catastrophe impact influenced by adverse development of hurricane losses from the specialty segment, which remains in run off. State Auto continues to focus on risk management initiatives designed to reduce severity, along with aggressive price monitoring efforts and rate increases.

State Auto writes a diversified mix of personal and commercial lines of business. There is a fair spread of risk by geography with modest concentration in the Midwest, exposing the group to storm loss frequency. The company has maintained a formalized ERM framework that is appropriate for its size, scope and risk profile.

Positive rating action could occur if the group improves its operating results over an extended period of time, such that its operating performance assessment could be categorized as adequate rather than marginal. Negative rating action could occur if there is an occurrence of a sudden large or catastrophic loss that materially hinders risk-adjusted capitalization or if other balance sheet considerations, such as loss reserve development or underwriting leverage, trend in such a way that weakens overall balance sheet strength.

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed for the following operating subsidiaries of State Automobile Mutual Insurance Company:

• State Auto Property & Casualty Insurance Company
• Milbank Insurance Company
• State Auto Insurance Company of Ohio
• Patrons Mutual Insurance Company of Connecticut
• Meridian Security Insurance Company
• State Auto Insurance Company of Wisconsin
• Rockhill Insurance Company
• Plaza Insurance Company
• American Compensation Insurance Company
• Bloomington Compensation Insurance Company