All for one: State Auto's employees share the company's goal of making a profit on every account, in every line and in every state.

Underwriting profit is so important to State Automobile Mutual Insurance Co. that every employee at the company not only knows what an underwriting profit means, but also can tell you how the company is performing.

"We all rise and fall together," said Robert H. Moone, chairman, chief executive officer and president. "Ask any of our employees what a combined ratio [losses and expenses as a percentage of premiums] is, and they can tell you. They care."

All employees receive the same percentage of profit sharing based on their branch office's experience and the experience of the company. "Our financial strategy is simple and constant: Make a profit on underwriting operations. An every line, every state, every year. We're not always successful in that, but we've had a pretty good rtm. Comparing ourselves to the industry or peer group, we're pretty proud," Moone said.

State Auto is one of only 15 companies to be ranked A+ or higher by A.M. Best Co. for the past half-century. "We're very proud of this record of maintaining an A+ rating," Moone said. "We are always cognizant of what we do and how it will affect our rating."

State Auto, which was formed in 1921 to write auto insurance, expanded decades ago into other lines, including homeowners and commercial lines, which has grown to be about 40% of its book.

In 1999, in the depths of the soft market, State Auto saw the quality of its commercial book begin to deteriorate. "So we methodically began to rewrite our entire book of commercial business," Moone said. "In 2000, we lost $10 million in premium from the bottom line, which wasn't a huge percentage, but it showed very clearly our resolve to not sacrifice underwriting profit just for the sake of market share or underwriting premium."

The company, which relies on 22,000 independent agents, focuses on basing rates on the actual costs. "If we can't make money on an account, we'd rather walk away from it than write it just for the sake of retaining premium," Moone said.

That philosophy applies to personal lines, too. "We have a very robust [auto insurance] program for mature adults, age 45 or above. Then we charge the appropriate price, sometimes higher than the market average, for youthful operators. It's basic fairness. It makes no sense to ask 50-year-olds to subsidize losses generated by 18-year-olds," Moone said.

The company has an internal communications program to reinforce its focus. Moone holds a monthly open lunch at the home office to give employees a chance to ask questions, and visits the company's 10 branch offices several times a year. State Auto also has a message system on its intranet that allows employees to anonymously send a question to Moone. "I read every one and respond to every one of those questions personally," Moone said. Every few weeks the questions and responses are bundled together and distributed throughout the company.

State Automobile
Mutual Insurance Co.

Ratio Comparison

                   1998     1999     2000     2001     2002

Combined Ratio    101.2    100.7    106.6    119.5    108.4
Opening Ratio      92.8     92.3     97.9    112.6    101.7

Note: Table made from line graph.

Then And Now

                        1953              2002

Assets         $34.5 million      $1.2 billion
Net Premium    $80.7 million    $216.9 million

Source: A.M. Best Co. Executive Summary
Report; A.M. Best Company Report