State Auto Financial Corporation

Welcome, and thank you for standing by. At this time, all parties are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Investor Relations Director Natalie Schoolcraft. Please go ahead.

Thank you, Nicole. Good morning, everyone. Welcome to our fourth quarter 2020 Earnings Conference Call. Today I'm joined by our Chairman, President and CEO, Mike La Rocco, Senior Vice President and CFO, Steve English, Senior Vice President of Personal and Commercial Lines and Managing Director of State Auto Labs, Kim Garland, Senior Vice President of Data and Analytics, Jason Berkey, Chief Actuarial Officer Matt Rosick and Chief Investment Officer Scott Jones. After our prepared remarks, we'll open the lines for questions. Our comments today may include forward-looking statements, which by their nature involve a number of risk factors and uncertainties, which may affect future financial performance. Such risk factors may cause actual results to differ materially from those contained in our projections or forward-looking statements. These types of factors are discussed at the end of our press release, as well as in our annual and quarterly filings with the Securities and Exchange Commission. Financial schedules containing reconciliations of certain non-GAAP measures, along with other supplemental financial information, are included as part of our press release. Additional material titled Monitoring Our Progress has been made available on our website, stateauto.com, And along with the press release can be found under the investor section. Now I'll turn the call over to SDSC's chairman, president and CEO, Mike Larocco.

Thanks, Natalie. And good morning, everyone. Before I begin, I just want to say, I hope everyone on this call and your families are safe and healthy as we continue to battle this virus. I do believe we're in the final phase of this challenge, but we have many difficult days ahead of us. I could not be more proud of State Auto and our team as we look back on 2020. My pride is based on both our results and how the team responded to a year in which we had so many challenges. Let me begin with the response of this team of associates. In a year where we faced a pandemic, the reality of ongoing racial injustice, a near record level of catastrophic claims, and a divisive political election, our team did not turn away from one another. Rather, we came together. It began with our transition to a primarily work from home organization, which took place overnight. Thanks to our outstanding digital platform, not a day was lost. More importantly, our culture, putting family and community first, allowed our team to work through the personal challenges of making this change while dealing with the realities of shelter in place, ill family members, kids at home, school challenges, and more. We dealt with the issues of racial injustice head on. We had open and candid discussions about race and bias, both conscious and unconscious. They were difficult and emotional, but it was the right thing to do as our culture also requires a workplace where all are welcome and all are treated fairly. The weather required our teams to meet our customers' needs under difficult and challenging circumstances made worse by the reality of a pandemic. Words cannot properly express my pride in the way our team delivered our product, which at the end of the day is a promise to be there for our customers in their moment of need. They delivered with speed, fairness, and empathy. Now to the results. The fourth quarter really told the story of the entire year. We demonstrated where we are as a company. We made a profit and we grew. That is who we are. The first three quarters were disproportionately impacted by catastrophic weather. That happens and we accept the overall results. But we know that the fourth quarter results are the reality of 2020, a solid year. Now, when I say the fourth quarter told the story of the year, that does not mean the story did not have some bad news. In our case, it was our personal auto results. We spent the year continuing our work to get this product line back to profitability, and I'm happy with the progress you made. However, for the year, this product line was unable to return to profitability. I will say I'm confident that our personal auto product will be profitable in 2021. Kim will cover this in detail. Other than personal auto, I'm pleased with all other lines of business. Many suffered from the unusual high level of CATs, but in those cases, the underlying non-CAT loss ratios were at levels we expect will produce a profit in years where we do not experience the very high level of CATs we saw in 2020. A workers' compensation product was adversely impacted by COVID. Even with that effect, I'm pleased with where this line finished the year and how they are positioned now that we have workers' compensation on our digital platform. Our expense ratio continued to be impacted by our investment in technology. Now that we've completed the big build by getting all our products on Connect, we'll begin to see the transition to more competitive expense ratios for all our lines of business. Our vision over just five years ago is being delivered. We knew that we could not get to a competitive expense ratio without investing in technology. We did what we committed to, and now we're focused on continuing the journey to efficiency. I want to take a moment to talk about that success story in 2020, our IT department. Our strategy for the last five years has been to gain the scale needed to offer more competitive rates and to ensure the long-term viability of state auto. Everything we've done has been in support of this strategy, including a complete digital transformation. We've invested in creating an updated technology environment that is truly cloud native and has already enabled two very tangible results. First, as we've grown over the last four years, we've been able to do so without adding staff. This is a huge productivity lift, and we believe we'll continue to see these benefits As we continue to intelligently deliver technology solutions for our agents and customers on top of the platform we've built. Second, investments in our digital platform and transformation allowed us to accelerate our business success through a global pandemic. We seamlessly shifted to a work from home environment and continue to meet our agents and customers needs. Our digital transformation is far from over. And it's my expectation that the benefits of these investments and continued productivity will flow through to the bottom line. Again, in the face of this pandemic, we did not miss a single technology release all year. Not only do we deliver our final products, farm and ranch, as well as workers' compensation on Connect, but we continue to bring the digital platform to our claims, service, sales, and finance organizations. Our move to digital will be felt throughout the entire organization, not just sales, quoting, and policy issuance. We also completed several changes to our pricing models, improved our underlying architecture, and continued to improve our information security. Working remotely did not faze this team. They got even better. Finally, a quick comment on business interruption claims. Our teams, working alongside our outside counsel, have done extraordinary work Defending the requirement of a physical loss is not met by closure or virus, and the additional virus exclusion further limits the potential for coverage in those situations where the exclusion is specified. To date, the vast majority of court rules support our position, and I remain cautiously optimistic that precedent will prevail. Now, let me pass the call along to our esteemed CFO Steve English. Steve?