Safeco, the insurer that this week agreed to be acquired by Liberty Mutual Group, said profit fell for a fifth straight quarter as winter...
Safeco, the insurer that this week agreed to be acquired by Liberty Mutual Group, said profit fell for a fifth straight quarter as winter storms, tornadoes and the rising cost of car crashes pushed up claims.
First quarter net income fell 22 percent to $141.8 million, or $1.57 cents a share, from $182.5 million, or $1.71, in the same period a year earlier, the Seattle-based company said. Profit before investment losses was $1.64 a share, compared with the $1.44 average estimate of 17 analysts compiled by Bloomberg.
Hurricane-force winds battered the West Coast in January, causing as much as $600 million in industry losses in the region, home to Safeco’s biggest market. The rising cost of medical care has pushed up auto claims, prompting Chief Executive Officer Paula Reynolds to pledge to raise prices this year, matching a move by competitor Allstate.
“This isn’t out of line with what we saw yesterday from Allstate,” said Jim Ryan, an analyst at Morningstar. “Catastrophes were more than they had been in the past, and there’s some noticeable softening in the auto-insurance line.”
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Safeco’s catastrophe losses totaled $22.8 million in the quarter before taxes, compared with $1.3 million a year earlier. Catastrophe losses also rose for rival insurers, tripling at Allstate and doubling at Travelers. Allstate on Wednesday reported a 77 percent decline in first-quarter profit, while Travelers said Thursday that profit fell 11 percent.
West Coast storms, with winds peaking at 163 miles an hour, did the most damage in California, according to AIR Worldwide, a catastrophe modeling firm in Boston.
Liberty Mutual, owned by its policyholders, agreed to pay $68.25 a share in cash for Safeco, 51 percent more than its closing price on Tuesday. The takeover, expected to be completed in the third quarter, would create the fifth-largest U.S. property and casualty insurer. It would be the industry’s biggest transaction since St. Paul Cos. and Travelers Property Casualty Corp. combined in a $17.9 billion merger in 2004 to form the company called Travelers.
“There’s nothing in today’s results that would change anyone’s opinion of the deal,” Ryan said.
Premium revenue rose 1.1 percent to $1.38 billion, led by an increase at its property unit.
Safeco’s auto operations, the company’s largest, was the only one of its four main businesses to report a decline in premiums.
The auto unit reported an 82 percent decline in underwriting profit for the first quarter.
Competitors, including State Farm Mutual Automobile Insurance and Progressive, cut prices for auto insurance last year. Some are now attempting to reverse course, requesting rate increases to offset rising expenses and an increasing number of auto claims.