Safeco Posts Higher Quarterly Profit

NU Online News Service, July 28, 1:03 p.m. EDT?Safeco Corp. said today that strong performance by its auto and group stop-loss medical insurance businesses boosted second-quarter income to $111.9 million--a $6.7 million improvement over the results for the period last year.

"We continue to be pleased with our progress. Considering the magnitude of claims from devastating tornadoes and hailstorms, our results show just how much progress we've made," said Mike McGavick, chief executive officer at Safeco.

Vinay Saqi, analyst at New York-based Morgan Stanley, also offered a positive view of Safeco's latest financial results.

"The company is trending favorably in its core businesses of auto and small commercial, now showing the benefits of strategic and tactical operating plans in place to grow those product lines profitably," Mr. Saqi said.

As the company previously announced, Safeco's insurance customers were hit hard by catastrophic storms in the second quarter. Claims from catastrophe losses reached $99.1 million before taxes, including $60.5 million in homeowners, $22.3 million in auto, $14.3 million in business insurance and $2 million for all other lines.

But Mr. McGavick noted that, overall, the company's auto insurance line produced its first profitable quarter in almost two years, and the "stop-loss medical line continues to exceed our expectations" with pretax operating earnings of $24.5 million.

The company's auto insurance business made $3.3 million in underwriting profit during the last quarter, compared to a loss of $7.3 million one year ago, Mr. McGavick noted. The combined ratio for auto also improved to 99.4, from 101.6 recorded during the second quarter of last year.

"It's good to see auto turn a profit again. While it's too soon to say this is a trend, the signs are pointing in the right direction," he said.

"Our goal is for auto to consistently generate combined ratios in the mid-90s. We would have hit that target this quarter if not for the significant amount of storm damage to vehicles," Mr. McGavick added. "We're also seeing robust growth in the number of policies sold to the best drivers as well as improved retention."

Overall revenues for the company jumped to $1.9 billion, up four percent compared to the second quarter of last year.

Based in Seattle, Safeco has a number of subsidiaries offering a wide range of insurance products. Its Safeco Insurance Co. of America and First National Insurance Co. of America provide personal and commercial insurance, including auto, homeowners, fire, multiperil and workers' compensation.

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