Safeco Has Lower 4th Quarter as Auto Policies Fall

Fri Feb 1, 2008

NEW YORK (Reuters) - Property casualty insurer Safeco Corp (SAF.N: Quote, Profile, Research) said on Thursday its net income fell by nearly a third in the fourth quarter due to competition in auto insurance and losses from California wildfires.

Net earnings were $144.5 million or $1.56 a share, compared with $216.4 million or $1.96 a share a year ago.

Safeco said catastrophe losses in the latest quarter were $46.3 million before taxes, up 28 percent from the year earlier. Claims from October wildfires, which devastated Southern California, were $27.3 million.

Auto insurance premiums declined 4.1 percent in the quarter compared with a year ago and new business policies it issued were down 14.7 percent. Claims and expenses in the auto segment exceeded the amount of premiums Safeco was taking in.

"It was a surprise and worse than we expected," said Fitch analyst Gregory Dickerson. "But we've seen the same deterioration with other property casualty companies."

Safeco officials said they were disappointed in the quarter, but expected to see earnings improve in the second half of the year.

"Now that the industry recognizes rate inadequacy in auto insurance, we should be able to find the balance of profitability and growth," said CEO Paula Reynolds in the report.

Safeco is facing an increasingly competitive auto insurance market, where fellow car insurers such as Progressive Corp have been dropping prices to gain market share.

Safeco said operating earnings, which analysts use to measure performance, were $140.1 million, or $1.51 a share.

Source:http://www.reuters.com