Poor Safeco Forecast Follows Good Fourth Quarter

By Steve Tuckey

NU Online News Service, Jan. 20, 11:24 a.m. EST?While Seattle-based Safeco’s fourth-quarter profit exceeded Wall Street’s expectations, more attention was focused on the company CEO’s comments that it was unlikely to meet growth targets this year.[@@]

Yesterday the company reported fourth-quarter net income of $179.8 million, compared with $166.2 million for the comparable period in 2003.

The $1.41 per share quarterly earnings exceeded the Thomson First Call survey predicted earnings of $1.31.

For the full year Safeco reported net income of $562.4 million compared to $339.2 million in 2003.

While CEO Mike McGavick said that the 2004 results “represent some of the best in Safeco’s history,” he also told a conference call that double-digit growth in net written premiums appeared unlikely and would most likely stay in the mid-to-upper single-digit range.

Safeco shares lost $2.32, or 4.7 percent, in afternoon trading. Stock prices also dropped for the Nos. 2 and 3 auto insurers, Allstate and Progressive.

Net written premiums were $1.38 billion in the fourth quarter, up 7.9 percent from the year-ago comparable period.

The company’s combined ratio dropped to 88.8 percent in the fourth quarter last year from 92.8 percent in the fourth quarter of 2003.

Auto net written premiums increased 12 percent in the fourth quarter, and policies in force grew 8.8 percent.

“Rate competition in the auto market intensified throughout the year. While competition accelerated in the fourth quarter, our growth rates continued to stay above industry average,” Mr. McGavick said in a prepared statement.