State Auto Financial is an Ohio domiciled property and casualty insurance holding
company incorporated in 1990. We are engaged in writing personal, business and
specialty insurance. State Auto Financial’s principal subsidiaries are
State Auto P&C, Milbank and SA Ohio, each of which is a property and casualty
insurance company, and Stateco, which provides investment management services
to affiliated insurance companies.
State Auto Mutual is an Ohio domiciled mutual property and casualty insurance
company organized in 1921. It owns approximately 62.6% of State Auto Financial’s
outstanding common shares. State Auto Mutual’s other subsidiaries and
affiliates include SA Wisconsin, Meridian Security, Patrons Mutual and the Rockhill
Insurers, each of which is a property and casualty insurance company.
The State Auto Group markets its insurance products throughout the United States
primarily through independent agencies, which include retail agencies and wholesale
brokers. All of the property and casualty insurance companies in the State Auto
Group are admitted insurers, except for RIC, which is a non-admitted insurer.
The operations of the State Auto Group are headquartered in Columbus, Ohio.
Our claims division supports our insurance segments through emphasis on timely
investigation of claims, settlement of meritorious claims for equitable amounts,
maintenance of adequate case reserves for claims, sharing of relevant information,
and control of external claims adjustment expenses. Achievement of these goals
supports our marketing efforts by providing agents and policyholders with prompt
and effective service.
We employ a specialized claims model that is skills-based and focused on yielding
a quality customer experience regardless of the type and severity of the claim.
We staff field adjusters in locations where we have size, scale and density
of claims whenever possible to control file quality and enhance customer service.
In areas where there is not a sufficient volume of claims to warrant staff adjusters,
we supplement our field staff with outside adjusters and appraisers who work
under our direction.
Claim settlement authority levels are established for each adjuster, supervisor
and manager based on their level of expertise. Our claims division is responsible
for reviewing the claim, obtaining necessary documentation and establishing
loss and expense reserves of certain claims. Generally, property or casualty
claims estimated to reach $100,000 or above are sent to specialists for direct
handling.
We minimize claim adjusting costs by settling as many claims as possible through
our claims staff and, when appropriate, by settling disputes regarding automobile
physical damage, bodily injury and property insurance claims through arbitration
or mediation.
In addition to our internal claims adjusters, we utilize third party claims
administrators (“TPAs”) to investigate, process and settle certain
specialty insurance segment claims on our behalf As with our internal claims
adjusters, claim settlement authority is established for adjusters, supervisors
and managers within each TPA. Claims handling and reporting guidelines are established
and provided to each TPA. Members of our internal claims staff perform periodic
reviews of individual claim files produced by each TPA for compliance with such
established claims handling and reporting guidelines.
We have in-house counsel offices to defend and resolve claims which are in litigation.
These offices are strategically placed where we have size, scale and density
of legal cases to warrant their existence. We also have a list of highly skilled
panel counsel to defend our insureds, when appropriate.
The primary objectives of our investment strategy are to maintain adequate
liquidity and capital to meet our responsibilities to policyholders; grow surplus
long term to support the growth of our company; provide a consistent level of
income; and manage investment risk. Our investment portfolio is managed separately
from that of State Auto Mutual and its subsidiaries and affiliates, and investment
results are not shared through the Pooling Arrangement, as described below.
Stateco performs investment management services for both us and State Auto Mutual
and all subsidiaries and affiliates. Investment policies and guidelines are
set for each company through the Investment Committee of its respective Board
of Directors.
As industry practices and legislative, judicial and regulatory conditions change,
unexpected and unintended issues related to claims and coverage may develop.
These issues could have an adverse effect on our business by either extending
coverage beyond our underwriting intent or by increasing the frequency or severity
of claims. The premiums we charge for our insurance products are based upon
certain risk expectations. When legislative, judicial or regulatory authorities
expand the burden of risk beyond our expectations, the premiums we previously
charged or collected may no longer be sufficient to cover the risk, and we do
not have the ability to retroactively modify premium amounts. Furthermore, our
reserve estimates do not take into consideration a major retroactive expansion
of coverage through legislative or regulatory actions or judicial interpretations.
In particular, court decisions have had, and are expected to continue to have,
significant impact on the property and casualty insurance industry. Court decisions
may increase the level of risk which insurers are expected to assume in a number
of ways, such as by eliminating exclusions, increasing limits of coverage, creating
rights in claimants not intended by the insurer and interpreting applicable
statutes expansively to create obligations on insurers not originally considered
when the statute was passed. In some cases, court decisions have been applied
retroactively. Court decisions have also negated legal reforms passed by state
legislatures.
We have seen instances of political pressure exerted to force or persuade insurers
to provide extra-contractual coverage, such as foregoing the use of deductibles.
There is also a growing trend of plaintiffs targeting property and casualty
insurers, including us, in putative class action litigation relating to claim-handling
and other practices, particularly with respect to the handling of personal lines
auto and homeowners claims.
There are concerns that the focus on climate change and global warming could
affect court decisions or result in litigation, including potential matters
arising from federal, state or local laws intended to protect the environment.
Other environmental concerns could also create or affect potential liability
exposures.
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