State Auto Financial Corporation will see a dramatic drop in third-quarter catastrophe losses, but the insurer says it must increase reserves for prior periods due to adverse claims development in a commercial auto trucking program that the company canceled as April 1, 2012.
State Auto says it will increase its loss and loss expense reserves for prior periods by between $19.0 million and $21.0 million on program business written by its subsidiary, Risk Evaluation & Design LLC (RED).
Bob Restrepo, State Auto president and CEO says, “We began writing business with this unit in 2010 and acted as quickly as possible to address deteriorating results. In the past three months, claim development exceeded expectations requiring us to put aside reserves to address prior accident years and increase our loss estimates for 2012.”
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