Thank you [indiscernible]. Good morning, everyone.

Welcome to our Third Quarter 2020 Earnings Conference Call. Today, I'm joined by our Chairman, President and CEO, Mike LaRocco, 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 Mrozek, 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 risks 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 made available on our website saleauto.com and along with the press release can be found under the Investors section.

Now I will turn the call over to STFC's Chairman, President, and CEO, Mike LaRocco.

Thanks Nat, and good morning everyone. First, I'd like to say, hope you and your families are safe and healthy as we continue to navigate our way through these difficult times.

Well, in the third quarter continue to story of 2020 for State Auto, cat. We had a 3rd consecutive quarter of cat activity that exceeded our plan number and was significantly higher than the prior year.

As usual, our claims team was terrific. Handling these claims with the speed and empathy our customers have come to expect from this outstanding team.

The impact of catastrophes and weather in general, has obviously been the main story of 2020 regarding our results. However, the most important message of the quarter and the year is the ongoing improvement across all of State Auto.

It begins with our underlying non-cat loss ratios, the key indicator when it comes to profit. Across nearly all our lines of business, we continue to make progress in this area.

I'm very pleased with the pricing and position in the market of our products. Our product management teams have continued to analyze our results, review the competitive position and then adjusted and improve our pricing models.

The level of sophistication this work demonstrates the benefits of our talent and our digital platform. We've built an organization and technology that can deliver continuous improvement.

Kim will cover the details of our non-cat loss ratios by-product. Another area where we see the value of our platform is our ability to efficiently at scale which of course leads to improving expense ratios.

In the midst of a pandemic, we continue to grow. Our agents have seen that our technology and our team has not missed a beat during these challenging times.

This is a clear differentiator in the market and our agents have responded. They know we can issuance service business regardless of the challenges.

I'm very pleased with the growth we've achieved, and we still haven't hit our stride. Let me speak specifically auto.

I'm thrilled with where we're positioned with our auto product, it's a one-product where we had to make a number of adjustments and changes to our pricing model. In addition, as our first product on the digital platform, this slide also had to deal with early bugs in the system.

I take full accountability for the early missteps. Now, we've overcome these issues and are in the market with a product and platform delivering in this critical line.

Our current accident year results demonstrate improvement. Our mix of new business from preferred to non-standard is meeting our expectation.

More importantly early frequency and severity numbers are behaving as planned. I'd like to comment on COVID19 and specifically business interruption coverage under commercial property policy.

I'm pleased and not surprised in the majority of cases early rulings nationwide mostly had motion Smith have found in favor of the industries position, that the pandemic does not create a physical loss of or damage to property, and that insures cannot extend their property coverage for pure economic losses. We have confidence that this prevailing will continue and will ensure that coverage will not be expanded beyond what was anticipated on the various policies.

Those very few early rulings that we have seen that do not support the industries position. We believe these will be the exception and in each case, we believe that we are able to differentiate our situations from those decisions on specific facts related to our approach and position.

Now before I conclude, I'd like to take a moment to share a milestone achievement and reflect just a bit. Last month, we launched our workers' comp product on our digital platform, Connect.

This means that in five years, we were able to bring every one of our products onto this new platform personal auto, home, dwelling fire, personal umbrella, commercial auto, BOP, CPP, commercial umbrella, Farm & Ranch and now workers' compensation. We took an outdated company without dated products and technologies and in five years have transformed it into a digital organization, think about that for just a minute.

Kim will cover the impact of what we have done in more detail. Now, before he gets that, let me first pass this along to Steve.

Steve?

Thanks, Mike. Good morning, everyone.

For the quarter, STFC reported $0.26 net income per diluted share with an operating loss of $0.10 per diluted share. This compares to $0.25 net income and $0.34 operating income for the third quarter of 2019 on the same per share basis.

For the nine months, STFC reported on a diluted per share basis net loss of $1.57 operating loss of $0.86 and this compares to $1.25 net income per diluted share and $0.34, operating income per diluted share for the first 9 months of 2019. Cat losses, net investment gain and loss, in COVID, all impact these period over period comparisons and not necessarily in the same way to putting on focus whether looking at quarter or year-to-date results.

Let's start with cats. Catastrophe losses are a big part of 2020 Results with Cat loss ratio is increasing 13.3 points for the quarter and 10.5 points year to date as compared to 2019.

Third quarter 2020 was impacted by two significant storms, one from 2017 and one that occurred in the quarter. We have spoken about the impact on earn a loss estimates from the legal environment in the State of Florida and the involvement of public adjusters.

Recent court decisions have caused us to reevaluate and we made a decision to increase our estimated ultimate losses by recording additional IBNR. We are now fully reserved up to the retention of our property cat reinsurance treaty that was in place at the time of the storm and do not expect any significant further adverse development as a consequence.

The second significant event of the quarter was the de ratio that primarily impacted the State of Iowa. Our loss estimate for that storm impacted our cat loss ratio by 0.6 points.

Storm losses both cat and non-cat have been elevated every quarter of 2020 including the severe tornado that hit the Nashville area this past March. Fluctuation of reported net investment gain or loss, which includes unrealized gains and losses on equity securities and other invested assets has also impacted quarterly and year-to-date comparisons not have.

We'll now note, as we completed the exit of MLPs that began in late first quarter. You might have noticed $42.3 million of net realized losses on sale of equity securities in the quarter, bringing the 9 month total to $50.9 million which reflects the exit of these securities.

However, the impact to 2020 results as less has included in unrealized gain or loss for equity securities or the reversal of previously reported net unrealized losses on the same securities offsetting the net realized losses on sales with the reversal of previously reported net unrealized losses. The reduction to income or loss before federal income taxes for the sale of these MLPs was $2.8 million in the quarter and for the 9 months, $35.1 million.

The reduction in net investment income in the quarter and year-to-date are also impacted by the decision to exit this asset class. While carrying a high dividend yield, the total returns were not acceptable.

COVID, is the 3rd item noted. Kim Garland will comment further on this in his remarks.

COVID continues to favorably impact claim frequency in the automobile lines as well as small and middle commercial March. We made no changes to our loss adjustment expense estimates for expected to Vince costs related to business interruption cases and we have not incurred any indemnity losses to date.

Moving to reserve development, I mentioned the unfavorable development in Irma. So I won't repeat that discussion.

For non-cat loss development, we continue to see overall favorable development of prior-year loss reserves. Personal auto is an exception where bodily injury severity has exceeded prior estimates, primarily from the 2018 and 2019 accident years.

Commercial lines development continues to be favorable. Across all product lines and in particular, small and middle commercial along with workers' compensation.

The GAAP expense ratio was essentially flat with 2019 after nine month. No significant adjustments were recorded to the bad debt allowance directly as a result of COVID beyond what we booked in the first quarter of 2020.

There were some note payable, changes in the quarter. In early September, we retired STFCs five-year note with the Federal Home Loan Bank replacing it with a new 10 year note in the same amount of $21.5 million.

The new interest rate is fixed at 1.37% versus the expiring rate of 1.73%. In addition, the $60 million Federal Home Loan Bank short term loan entered into, on March 19th.

The [indiscernible] and was repaid in full on September 22 and with that I will turn the call over to Kim.

Thanks, Steve and good morning everyone. On October 29 workers' comp Connect launched in Texas.

This is our last product line to launch on the Connect platform. We are thrilled and it's probably appropriate to look back at the impact of the Connect program has driven at State Auto since 2015.

From the first day in 2015, the goals of the Connect program were the following: increased scale, reduce expense ratio, reduce our non-cat loss and ALAE ratio, replace and upgrade our technology to give us a competitive advantage, replace and upgrade our products and pricing models to compete with the best prices in the industry. Of all of our traditional retail independent agent distribution plan to expand to additional types of growing independent distributors that were emerging driven by the significant innovation taking place in the world of independent agents and significantly participate in the world of insure tech innovation at a moment in time when the insurance industry was entering a period of massive innovation and disruption.

Our progress on scale. Direct new business written premium for the State Auto Group in the year 2015 for personal and commercial lines was $226 million.

For 2019, it was $557.9 million which equates to a 25.3% compound annual growth rate. For the 12 months ending September 30, 2020, it was $661.3 million.

Connect has helped drive a 3X increase in our new business production since 2015 and this is without a full year of impact from Farm and Ranch middle market and workers' compensation Connect. This is driven our total written premium for personal lines and commercial lines to grow at double-digit rates over the last three years.

This increase in the size of our new business engine has positioned us well for continued growth into the future. Progress on reducing expense ratio.

Our strategy was to take a short-term expense ratio hit through the investment in connect in exchange for a longer-term expense ratio improvement through a more efficient platform and an increase in scale. Four of our product lines, personal auto, homeowners, commercial auto and small commercial are far enough along to understand of this strategy is working or not.

It has worked in three of our four product lines. Commercial auto is the best example of this with a two 2016 pre-Connect expense ratio of 38.5%.

This increased to 46.5% in 2018, as we made our investment in Connect. But the year-to-date 2020 expense ratio is at 34.3%.

A 4.2 point improvement in the bank over pre-Connect. Over the next few years.

We believe the commercial auto expense ratio will get below 30%. This expense ratio reduction strategy has also worked in small commercial, who's pattern is very similar to commercial auto and homeowners, where this pattern has been slower, and more gradual.

Personal auto is the product line where the strategy has not yet been effective as it expense ratio has actually increased after the implementation of Connect. As I have told you on prior calls, we made missteps in personal auto with the primary one being our balanced between preferred and nonstandard business [indiscernible] too heavily towards non-standard, which has a very low retention.

We are putting inefficient business on an efficient platform. This combination is still produces overall inefficiency.

The increase in the personal auto expense ratio is not from a bad strategy but from poor execution of a good strategy. I will update you on our progress in personal auto later in this discussion.

With the Connect product builds being completed, you should start to see two things. One, the same pattern of expense ratio reduction to show up in the main product lines over the next couple of years.

And two, since there are no more new Connect builds to invest in, improvements in all the product lines should result in State Auto's total expense ratio, starting to decline. Progress on our non-cat loss and ALAE ratios.

The non-cat loss and ALAE ratios have been driven from the 57% - 58% range in 2015 down to the 49% to 51% percent range currently. Non-cat loss and ALAE ratios in the 50 range with the client you expense ratios should be sufficient to produce mid '90s combined ratio consistently over time.

Progress on evolving our distribution line [Technical Difficulty] Insurance categorize agents in a variety of ways. We categorize them in the following way: retail agents, network agents, platform agents and corporate agents.

In 2015, we were heavily weighted in the world of retail agents who we love, but we are underweighted in the network agent world and we did zero business with platform agents. Two categories that were rapidly innovating and growing.

Over those set last 5 years, we have seen a significant shift in the distribution of our business by agency category. Personal lines is a good example of this phenomenon.

In 2015, our personal lines new business was distributed in the following proportions: retail 63%, network 30%, platform 0%, corporate agent 7%. Through 9 months of 2020, our personal lines, new business it is distributed in the following proportions: retail 35%, networks 54%, platforms 8% and corporate agents 3%.

This major change in how our business is distributed is a sign that we are now effectively competing and all the methods of distribution in the independent agency channel. Progress on our technology products and pricing models or what we call the Connect platform.

The historical model for insurance technology, products and pricing models, was that a carrier would do a big build and then wait an extended period of time, 2 to 5 years to do another big build. Our technology product design and pricing models for every single product line have converted from the periodic big build model to a continuous improvement model.

For pricing models and hear us talk about versions, personal auto version 2.1, homeowners version 3.0, commercial auto Version 2.0, small commercial version 2.2. In this approach our pricing models are continually improving.

Every quarter enhancement are made and this has a very different impact on the approach or ones pricing models improve only once every couple of years. And for our technology, we are converting from the big build teams for Connect to small product teams that are continually enhancing different parts of Connect.

In 2015, we started to some of the place where we have fallen behind in the industry in a number of areas. Our conversion to this operational model of continuous improvement is to help ensure that this never happens again, that we never small behind and have to dig ourselves out of a hole.

Progress on the participation in the world of insure tech and being prepared for this era of innovation and disruption in the insurance industry. In 2015, State Auto does not participate in the world of insure tech.

State Auto Labs, State Auto's corporate venture capital fund was created in 2016 and since that time, four insure tech start-ups have been implemented in the State Auto's Insurance operations and six investments have been made. Without Connect, we would not have been able to integrate this number of insure techs into our insurance operations, it would have been impossible on our legacy system.

In the first quarter of 2020 coverage or a new source and researcher of the Insure Tech world survey the participants of the Insure Tech world and released their list of the top 11 Insurance Corp Venture capital funds and insure tech partners in the industry. State Auto Labs was on that list of the top 11.

We believe that the insurance industry is still at the beginning of a period of massive innovation and disruption and it is critical to be connected into the Insure Tech world. As we reflect on the impact of Connect and all of the efforts surrounding Connect.

We believe it is accomplished all of the goals that we established back in 2015 when we started and that it has positioned us well to be an extremely successful insurer over the next decade. It is impossible for us to adequately thank all of the State Auto associates for what they did to implement the Connect program.

We have posted to the Investor section of our website in greater detail to date. I have referenced this morning.

Now on the third quarter results. Overall personal lines and commercial lines statutory results are the following: third quarter '20 combined ratio was 102.2 compared to 98.7 for third quarter '19.

Third Quarter '20 year to date combined ratio was 106.9 compared to 102.7 the 3Q '19 year to date. Written premium growth was 9.2% third quarter '20 versus third quarter '19.

11.4% year-to-date 2020 compared to 2019, year-to-date. For the quarter, commercial lines had a combined ratio of 88.9 and written premium growth of 8.3% and personal lines had a combined ratio of 111.5 and written premium growth of 9.7%.To appropriately understand our results there are quite a few things to unwind.

More Quarterly Results catastrophes are again the story of the quarter. The catastrophe impact on our third quarter '20 results were the following: personal lines until commercial lines Cat loss ratios were 9.5 3Q '19 where personal lines 11.6 points higher commercial lines 7.6 points higher.

Non-cat loss and ALAE ratios are out our plans of 3Q '20. The personal lines and commercial lines, non-cat loss ratio was 6.3 points lower than 3Q '19.

The personal lines being 3.3 points lower in commercial lines being 12.2 points lower. Non-cat loss and ALAE Prior accident year loss ratio impact.

The peak personal lines and commercial lines, non-cat loss ratio your impact was 0.4 points lower than fourth quarter '19. The personal lines, non-cat loss ratio prior year accident year impact was 5 points higher than 3Q '19.

While the commercial lines, non-cat loss ratio prior accident year impact of 7.9 points lower than 3Q '19. The overall impact of prior accident years was roughly the same as last year, but there was a meaningful shift between personal lines and commercial lines.

Non-cat loss and ALAE current accident year loss ratios. The personal lines and commercial lines, non-cat Current accident year loss ratios were 5.9 points lower than 3Q '19, the personal lines being 7.3 points lower and commercial lines being 4.3 points lower.

This improvement in the current accident is driven by factors COVID and the actions that we have taken in personal lines to address the issues that we discussed on the first quarter earnings call. We feel very good about where we are positioned.

Catastrophe happen and 2020 is a horrible catastrophe year. But when we look back at the total over the past 6 years, our actual cat loss ratio is virtually identical to our planned cat loss ratio.

Catastrophes, have to be managed over an extended period of time understanding there will be individual horrible catastrophe years along the way. We feel good about our catastrophe management.

Adverse prior year prior year reserve development in personal auto as part of the price we are paying for the personal auto missteps we made in 2018 and 2019. The improvement in Current accident year loss ratios, get them to where they need to be to consistently produce mid '90s combined ratios.

And as I explained earlier, being at the end of the Connect program means that expense ratio improvement should start to flow into our total results. Some updates on our individual product lines.

Personal auto, the personal auto combined ratio for third quarter '20 was 104.7. This was driven by 7.8 loss ratio points from prior accident years.

This is 9 points higher point impact from prior accident years than in third quarter '19. As I said before, this adverse prior year reserve development in personal auto as part of the price we are paying for personal auto missteps we made in 2018 and 2019.

The third quarter, '20 Current accident year loss and ALAE ratio of 56.4 is 11 points better than a year ago and third quarter, '20 year to date is 11.3 points better than a year ago. Our shift to less nonstandard and more preferred is progressing as expected.

Connect version 2.1, who has been approved in 20 states and we are seeing the changes in competitiveness across the preferred through nonstandard risk spectrum that we expected. Connect ultra-preferred and preferred policies in force growth is 42% as of 930 points versus prior year while Connect nonstandard PIF growth is minus 13% as of 930 20 versus the prior year.

As of 930 20 for the first time in Connect history ultra-preferred and preferred connective PIF is larger than nonstandard PIF. This shift is driving an increase in personal auto retention as personal auto retention is up 1.7 points to 68.4 since December 31, 2019.

And another side of this shift personal umbrella, new business sales were up 123% in third quarter '20 versus third quarter '19. We are pleased with our progress through 2020 and personal auto.

But there is still work to do in this product line. Homeowners catastrophes are again the story of the quarter for homeowners with the cat loss and ALAE ratio of 30.4 compared to 9.2 in third quarter '19.

Growth continues to be strong in homeowners with written premium growth rate of plus 21.7%, policies in force growth rate of plus 16.1%, new business count growth rate of 16.2% and retention level of 76.7, which is up 1.2 points since December 31 2019. The improved personal auto rate competitiveness from personal auto Connect version 2.1 is helping homeowners retention.

Commercial auto, our commercial auto results continue to be just terrific. With third quarter '20 results of the combined ratio of 94.3 total written premium growth of 44.4, new business premium growth rate of 46.7 and a premium retention level of 84.1.

Middle market, small commercial and workers' compensation results in third quarter '20 were all impacted by Prior accident year loss ratios that were much more favorable than a year ago. While middle market and small commercial results in third quarter '20 were also impacted by a much higher cat loss ratios than a year ago.

The workers' comp third quarter '20 Current accident year loss ratio of 82.2 was 18 points higher than a year ago driven by 5 large losses in the quarter. Middle market growth.

We are seeing a slowdown in middle Market submissions. Agents are telling us that middle market policyholders are more hesitant to move carriers at this moment in time.

Our third quarter 20 middle market, new business written premium declined 39.8% from a year ago and our total middle market, new business written premium was flat from a year ago. We rolled out 8 additional states for middle market Connect in September bringing the total states on middle market Connect to 16.

Workers' compensation growth. Our workers' compensation business has strong for several years due to four reasons: One, we exited monoline small workers' compensation business sold through wholesalers, which has consistently been unprofitable.

Two, we have maintained rate discipline while the market has been significantly decreasing rates over the last several years and this puts significant downward pressure on retention. Three, we are currently renewing our nursing home workers' comp policies and fourth and the last reason is that our workers' compensation business was sold on a separate system from the rest of State Auto's products, making it significantly harder to package workers' comp with the rest of our commercial products.

This change on October 29 with the launch of our first workers' comp connect State Texas. Workers' compensation will now be on the same platform as the rest of our products and we anticipate this significantly accelerating our growth of our workers' compensation business reversing several years of premium decline.

The last few years of work have now positioned our workers' comp business for significant future success. Farm and Ranch results continue to be terrific.

Farm and ranch Connect is now launched in 27 states. third quarter 20 results versus a year ago are the following: new business written premium growth rate of 202%, total written premium growth rate of 31.6%, a combined ratio of 101.4% which includes the catastrophe loss ratio of 22.1 which is 18.9 points higher than the third quarter '19 and elevated expense ratio of 45.1% as Farm & Ranch is at the height of its Connect investment and a non-cat loss and ALAE ratio of 30.8% which is 13.5 points lower than the third quarter '19.

Our farm and ranch business is positioned incredibly well for future profitable growth. We are excited about how our product lineup is currently positioned for future success.

And with that, we'll open the line for questions.

Good morning, everyone. Hopefully you are all safe and well.

I wanted to ask about the underlying combined ratio improvement in the year, obviously been positive. But how should we think or do you have any thoughts about how we should think about the windfall that we had because of the pandemic versus sort of the real underlying improvement to give us a better sense of where you are, as we look past not only with the pandemic.

Kim, you want to start off. I may jump in a little bit.

Sure. So I think how I would think about the COVID benefits is I think second quarter '20 results will probably, the vast majority of the benefit was from Covid.

And we have just started the process making improvements in personal auto. I think the other thing that is worth mentioning from a Covid-type world and after it is.

We and others in the industry are in the process of pumping a lot of rate into commercial property. So that's a -- and not a lot of that rate had gotten into the system yet.

So I'd say second quarter benefit is mostly Covid. In third quarter, what we see is miles driven has gone up, but it's not gone up to pre-Covid levels and the miles driven are different in some ways.

You don't have really rush hours like you had pre-Covid. So there is still Covid benefit in the third quarter.

But the proportions are now -- that part is shrinking and the larger part is, at least for personal auto the actions that we have been taking and more of the rate is starting to get into commercial property. It's still early.

We still have a lot of rate that needs to earn in for commercial property. But I think in each quarter going forward, you will see as the Covid benefit burns off, the sort of action that percentage of impact on our results will go down.

But I think we are filling it in with some of the actions that we started back in the first quarter of 2020.

Yes, Paul. Just tag on a little bit.

Just a couple of areas. I completely agree with Kim.

I think that directionally, we're kind of where we believe we can be, there is no question that we've taken some real benefit, and I'm always hate to talk about benefit from something as tragic as COVID, but the impact from a financial standpoint there has been benefits. But in addition to the rate Kim talked about some of the other changes from a modeling standpoint.

We've made some significant improvements in reducing things like loss leakage and areas in our underwriting organization that I believe have been significant. Our Claims and Risk Engineering organization has had a terrific impact during this period of time.

They've been able to implement some real digital approaches to handling claims. They've been able to reduce some of the pending across the spectrum of the many of the older claims.

And I think when you take into consideration the rate, the modeling changes, the underwriting improvements and then the Claims and Risk Engineering organization, we're emerging from this period of time I think in a pretty good place. There are thing we all have to be cognizant of is people in the early days of COVID.

We're talking about, as Kim said miles driven and short-term place impacts, but obviously the impact of Covid, it's going to extend minimally through the first quarter of next year. Now it may trend a little bit differently, but I think the reality of the COVID impact on losses will linger for minimally another six months.

So that's all I think I would add to what Kim said.

Thank you. Yes, that's great and then -- I just, if you give us a sense of the competitive environment, particularly in personal lines.

Obviously lots of talk of rate going at least down for some of the companies that have reported so far and lots of Insure tech stuff, which I don't think it's that big deal. But just give us a sense, at least from your markets.

What do you think is going on from a competitive perspective.

Go ahead Kim. I'll again follow you.

Yes, okay. So I think in personal lines we have not seen sort of large changes in couple of the competitive dynamic.

So for us, one of the things, there are a number of things to look at. I think one is like your quote volumes and your new business levels in homeowners.

We continue to have all time highs and new business sales. Great starting to increase in more states has becoming broader.

So quote volumes, the new business sales and the work we do in trying to understand the competitiveness of our rates, we've not seen big changes in that dynamics, so homeowners is kind of minimal.

Hey, Steve, you want to talk about where we're at right now and your thoughts.

Sure. We've touched on this previously.

Our strategy on reinsurance, especially when it comes to a property cat is more from capital preservation or protection angle versus a current earnings management philosophy. So we realize that cats go through seem to go through cycles.

It can't really predict the weather and so our products are priced in the property lines to take that into account, making a profit over the cycles knowing in any individual quarter or in some cases, years you might have poor results. So we're not planning any changes presently, we just renewed our treaties this past July 1.

We did increase our retention on a group level when we do the analysis and look at what the property reinsure are wanting to charge for layers below our retention relative to the premium and the probabilities of hitting those layers. It just didn't make sense to purchase that so instead we deploy more money on top again, from a capital protection perspective.

Yes, I'll just again tag on brief. I mean it's a terrific question then look global warm warming is for Rio and there has been more weather activity and we all have to be super cognizant of that and aware of that.

I really do believe that beyond those concerns this has just been a significantly bad year, if you think about the impact on us. This wasn't as you would normally expect, which is just pure wind and convective storms in particularly, in certain areas.

You know, in the first quarter, we had a very unusual tornado set down in Nashville that hit us. In the second quarter, you had a handful of wind and convective storm type issues.

The hurricane activity wasn't particularly bad for us, but it's spun off some other other, weather. And then if you really look at, and then of course we had the direct show in the third quarter.

So it was a very unique set of circumstances. Having said that, again, you make a really important point and we're aware of that.

I think what we've done in terms of risk differentiation by geography in which we continue to do is another way we think about this beyond the good point Steve made with regard to how we purchase our reinsurance and how we use it from a capital standpoint. So I appreciate the question.

Thanks.

Okay, thanks to the answer. So, then there is how much noise going on right now.

With COVID and the impact of people being on the roads less often, so can you try to where maybe it's not possible, can you trying to parse through some of this noise to talk about what you see in terms of like underlying more normalized trends as it relates to the telematics initiative because we've talked. I know you've talked about that in prior calls about the encouraging policyholders and in the use of Telematics.

So can you address that.

Yes. At this time, I will actually start and then turn it over to Kim, because I was going to mention telematics in my answer, and I failed to Paul because that's another competitive issue.

When you think about the competitive positioning companies that leverage telematics not just have it but leverage it effectively, which I believe we do are going to have a competitive advantage. And so, I will turn the main part of the question over to Kim, but I think again you hit a really important issue because digital in general and no one knows exactly what the new normal is going to be coming out of COVID but it's pretty clear that some leverage of the digital--digital interaction with who ever your supplier and whatever the product is, it's just going to exponentially grow and quite frankly I kind of put telematics into that space because it allows people in a very efficient way in both commercial and personal you know to pay as they drive.

And I think as people have learned through COVID, the reality of changing driving patterns, we know coming out of this more--more employees are going to work from home than ever before. That's going to impact miles driven and time of day when they actually drive, so telematics will be a part of the impact coming out of COVID.

Kim, you want to elaborate on a little bit.

Yes, I think there are the question of like normalizing trends and trying to understand things with all these moving pieces is question we ask about themselves and think about a lot. I think the first thing that for telematics specifically that we keep an eye on is almost from day one on both personal auto, commercial auto.

We give discounts for telematics but even with that discount, we see loss ratios better for our telematics business that are non-telematics business, that pattern continues to exist. So, for us it's just how do we drive more adoption.

Outside of telematics, how we think about it and I'm sure it's not that differently than others is we keep track of miles driven and then what our collision frequencies are. And so, collision frequencies are sort of have gone down more than miles driven have gone down and so that is a way to get some sense of what a COVID impact might be to that and we watch that every month and claim counts there is lots of them.

So, it's a relatively stable measures that's kind of the known to us. And then the other side that we are keeping an eye on, is there are some signs that some of the accidents can be more severe but you know severity bounce around and so it's a bit fuzzy of severity up more than normal, if so how much.

So, we keep an eye on those sorts of things but telematics and then looking at frequency, collision frequency specifically for versus miles driven to estimate sort of the number of accidents go the benefit and then trying to overlay is there any severity dynamic on top of that is how we try and normalize all those.

Okay, thank you.

Great, thanks. A couple of small ball questions.

First workers' compensation, I guess the underlying accident year loss ratio has gone up over the course of 2020. Is there a true up in the third quarter or is it some of the trend in fact, in the line.

Kim.

Yes, no, I think there were, as I said there like five large losses that we had in the quarter and well, I think there is, there are two things going on. So if you look at the current accident year, that is driven by five large losses, four of the large losses were non-covid so that's just sort of is one of those quarters, you take that out, it looks pretty, consistent pretty good.

I think, Steve mentioned this, I think the Prior accident year was quite a negative loss ratio impact on the quarter and so I think we had favorable reserve development in prior years. So those are the moving pieces but both of those are sort of we do not think that there a signal that things have inherently changed in workers' comp or workers' comp business.

Okay. I guess related follow-up question, there is a fair amount of dispute I guess out there in terms of whether workers' compensation pricing is bottoming it's inflecting.

What are you seeing, what are you planning for?

I think there are debates or how we debated internally is, it's gone down for several years and at some point you figure things just have to stop going down, but in a non-covid with non-- there is less activity in offices and restaurants and whatever, so that puts continued downward pressure in doing that. Also I think in some of the states, they're talking about their rate making.

They're going to exclude Covid losses in sort of the go forward pricing, and so if they do that that will continue to put downward pressure. On rates I think for us, we are probably flat marginally down so we're not looking to take big rate decreases.

If anything internal to us, you're going to see us sort of very maybe more by state than we normally do and industry type. The industry type, those that have greater Covid exposure.

We're probably going to maybe go up a little bit not down and then for the states, it all becomes trying to keep an eye on sort of the regulatory system. Are they going to keep the rules and same, are they going to change the rules that will allow more losses into the system.

And so for states that do that, we will react to that and probably increase rates versus decrease them.

The only thing I'd add Meyer to what Kim said, which is we're going to continue to do what we've always done. One of the reasons we're CNA.

We've seen a little bit of a decrease in our workers' comp is because profit comes first in our discipline and that won't change. So if indeed there is a continued downward pressure which I think at least in the short term, there will be, you won't see us going down that rat hole.

The other thing too, with our announcement that workers' comp is now on the Connect platform. This is going to increase our, our sales of workers' comp is as part of the mid-market or small commercial package, which I think will also be a very positive outcome on the workers comp side.

Yes, right. You know actually think about that with regard to, I want to overstate this but some ability and desire to grow in what's been a competitive environment obviously the margins are phenomenal so that's not but I just wanted to in your mindset.

And then I'm going to call it philosophical, that's too grandiose but question on BI or maybe it's a broader reserving question. How do you incorporate the risk of absurd court decisions that are still going to be enforced?

Steve, you want to start now. I'll follow-up.

If I understand the question, you're talking about how some of these court rulings that are coming out that have not been favorable to the industry. How are we considering those in our reserving, is that the question?

Yes, the prospects that you will get 100% of the decisions in a way that makes a lot of sense.

Yes, so I mean, our philosophy at the moment is we've been presented with X number of claims, we've adjusted each one of them individually very thoroughly. As I mentioned in my comments, we've yet to book any kind of indemnity loss associated with this until I guess it hits us home.

In other words, a particular suit that we might be involved in or something that emerges that as we evaluate those particular cases that we think GE that is well, let me let me respond different way. Today as we've evaluated some of those cases and looked at our particular facts and circumstances.

They don't [indiscernible], we believe there differentiating factors. And so, there has not been anything happened to-date and our minds that has triggered any need for us to record any sort of indemnity reserve.

So we're watching those very closely, but to-date our position and conclusions have been still no need to book of reserve.

Okay, that's very helpful. Thanks so much.

Hi, good morning Steve. Hope everyone's well and safe.

I'm sorry, I missed the, the early part of the call and I can circle back and get the details on the Irma matter but I was wondering, I assume you haven't disclosed this at least in the early part. How many you opened Irma claims do you still have?

This is Steve English. We haven't disclosed how many open claims we still have just as a reminder that came out of our solely out of our Specialty book.

Right.

Where that particular book, quite frankly, it was in the business of writing wind exposed Florida coastal, but in my earlier comments, we've now reserved up to our retention, under our property cat treaty and so we don't really expect any kind of meaningful further adverse development on our books. I will tell you that as we analyze the population of claims, that's still not closed.

We don't feel at all that, that would go anywhere near its top of our program. So we feel, we feel like the balance sheet is pretty protected now from Irma.

Okay, thanks. Following a little bit on the recent a question from Meyer and your comments about Covid.

I'm wondering whether you're seeing any new business opportunities from agents who are moving business or biased to move business from carriers who are maybe a little bit more Covid vulnerable and you're being in essence, the beneficiary of that as agents looks maybe diversify their books at all.

Kim, you want to comment. Before I do.

Sure. I think we've seen, probably two phenomena.

One is, this period of time, where people had to reinvent how they are doing business and so like having to have sales people come in the office, having to sell business face to face, agents who sort of that was how they did their business and the only way they wanted to do their business. I think they more fully appreciate at least having carriers are doing business with carriers who can do it in other ways than that.

So we probably have seen some agents who were maybe more skeptical about our sort of digital approach, I'll say flip and buy-in and say, Hey. That was good foresight you had, sort of count me in.

And so I think we are probably the beneficiaries of agents diversifying if they had only non-digital carriers. And then this there is this phenomena, which we are seeing in middle market where, middle market policy holders are really kind of hunkering down and staying where they are.

So we have a number of phenomena is where like we'll get late into a quote, we're competitive, we think we'll get it, and at the last, but the last moment before the policyholder pulls the trigger, they say, I'm just going to stay here one more year and see how it does. Also in middle market, that is more agents go out and sort of help the business and it's more face to face in this more depth, so I think some of their pipelines have shrunk through this.

And so there is opportunity, I think they're either like when this and then everybody sort of says, I want to go or I want to start moving my policies again or if the whole sort of market figures out a non-in person weighted to D middle market, those are the opportunities there, but that's what we see.

Yes, I'd just like to add, I mean, while it's hard to obviously quantified with a specific number, I really like the question because I really, I talked to a lot of agents and the feedback I've gotten, some very favorable and we talk a lot about the home growth with the digital platform. We talked about auto now starting to come back.

We also we didn't talk a lot about new business and again the reason I mentioned those three products because the digital platform and those three is pretty much is kind of quote an issue business. And in each of those cases, including [indiscernible], the number of quote opportunities in our growing new business -- there is a direct reflection there of the fact that agents have to pick somebody, obviously who still open and somebody who they don't have to pick up the phone necessarily and call that they could do it everything online in the digital manner, including reaching out to their customers remotely.

So again, I wish I could put a more specific number on it, but I think our new business numbers are pretty direct reflection of the benefit we're getting with our platform during COVID.

Thanks.

I just. Yes.

Mike made a great point. We're -- in both September and October, we had record new business months and commercial auto in BOP and if you just look at sort of the level of business activity out there, that's kind of crazy.

So it would be impossible to say that we're not getting opportunity there that others aren't.

Okay. For some time now, I guess it's really years you've been laser-focused on your systems and rolling out your systems and presumably writing new business on those systems, but I know oftentimes new business goes on to the systems but renewal does not.

And I'm wondering in State Auto's execution, is that the case or whenever you've been sort of rolling out these new systems? Here you highlighted the worker is comp one and I think in Texas, for example, most recently and I think the last.

What's the split? Whether it is the entire book on the new systems, all lines or is it just new business?

Thanks.

Yes. To be clear, when we write a new policy on Connect, it also renews on Connect.

So we have the new customers now depending on auto, it's been over 4 years, almost 5 years and -- as each of the products rollout the new business and as it renews it stays on Connect. That we still have our, what we call our legacy business, which is the business that was written before Connect and that business has generally speaking has remained on the legacy systems.

The split between Connect and legacy, Kim, you want to talk about personal lines where it is probably most significant?

Yes. And we'll have to like double check my numbers and if I'm way off get back to you, but I think for both personal auto and homeowners about, if you look at our total premium, I think is maybe 60-ish percent on Connect 40% on legacy.

And so those products have been out there, the most. If you go to workers' comp, we've been in the market for a week.

It's probably 99.8% on legacy and very small Connect and so. So there is no, I think, commercial auto is probably starting to get up into the 20% - 30% on Connect and then BOPP is the next down as a percentage, but you raise a good point.

If you think about our the path to a lower expense ratio. We've now invested in all the Connect product.

So there is no more like new products that we have to invest in. So we're going to sort of reap the benefit of all these savings over time and without having to sort of reinvest in building a new system.

But your point is, at some point we convert the legacy on to Connect and that's going to be another tranche expense ratio improvement. But I think Mike has mentioned this before.

It's a different way of doing business, a different agreement with the customer and so that is why we have moved relatively slow in the personal lines world is customers came to us under doing one way and we did not want to quickly push them to a different way. At some point the legacy business gets small enough, you need to convert folks over.

But it's another sort of arrow in our quiver to drive the expense ratio lower.

When you said a different agreement. You mean policy form or do you mean agency agreement?

Just informal agreement. Like when you got a policy from us, you could write a check and you can pay cash and you got print outs and all that stuff.

And so we tried to be very sensitive to sort of when 12-year customer came to us, the part of that, they came to us was the agent and then how we did business and we kind of wanted to honor that and go slow. So there is no formal agreement, but there is sort of how we thought about or how we talk about it internally.

Okay, thanks. I got one more question.

The company and the group I think have an A- best rating and results have been disappointing, candidly underwriting results have been taken longer to get to the underwriting performance and everyone has desired. And I think it's sort of an acknowledged act over the years and having but recognizing you've made you have made a lot of progress operationally, it's not fully evident in the printed results, partly because of weather and probably you could just take a longer and it's been harder than expected -- with the current backdrop is you know the stock price is really, really cheap on a relative to book value basis.

And I'm wondering in the context of your A- rating, and I'm not sure where sort of the mid-year estimated RBC is but do you have any other levers to pull from with respect to sort of capital allocation, capital return to capitalize upon the cheaper price or because of the capital situation, i.e. the A- rating where you stand in best [indiscernible] the amount of capital at the mutual, you just don't have a lot of other levers to pull.

This Steve English, I think that was a well thought-out question about where they're not, we're contemplating, contemplating buying back any treasury stock, and the answer that would be no, we would, for many reasons, but most particularly we believe that we're going to need that capital to support our business plans on our strategies and believe in the long run will deliver a better return for folks in that way.

Okay. It was broader than that, but, but do you get it, do you have limited -- is best or your RBC that a constraining factor.

On how the business you can write if you want to explain it that way.

No, no. Our RBC ratios for example are well above any type of level that you start to get regulatory review or scrutiny and from an AM Best perspective of course our rating cycle with them.

We typically talk to them in the spring, they make their annual decision typically in June and so we just went through that process with them, presented them our plans, which is a growth plan. They affirmed our rating, obviously what we've seen this year with the Cat I think AM Best it's been around the industry quite a while.

So there are not unfamiliar with the periodic Cat can occur when you write property but, it is presently not a constraint. No.

Is A- satisfactory, from a competitive positioning.

Yes. A- based on where we right which is personal lines from the market.

A- is not a restriction at all. And since you raised the stock price, let me just comment beyond the insanity of the stock price, it's I think more reflective of the lack of understanding of business interruption and what the exposure is, and also a lack of understanding of the results that have been achieved.

I think Kim kind of laid out a case and it is out on our Investor site now as well. We don't worry about short-term, we're long term believers in the organization and very comfortable and confident with where it's going.

I certainly agree that the stated results have to reflect that we --- in our kind of a normalized cat world, I don't know that we would be having that same conversation, but how you --- an answer to your question around capital AM Best stock price is, we believe in the long term, and we are very bullish on State Auto.

Okay, thanks a lot.

Thank you.

Thanks everyone for your questions, for participating in our conference call and for your continued interest in and support of State Auto Financial Corporation. We look forward to speaking with you again on our fourth quarter earnings call, which is currently scheduled for Thursday, February 18th, 2021.

Thank you and have a wonderful day.