Seattle-based Safeco announced that its aggregate pretax catastrophe losses for the third quarter are estimated at $195 million. The estimated effect on third-quarter net income is $127 million after tax, or $0.96 per diluted share. Safeco expects its total catastrophe losses to increase the company’s third-quarter combined ratio by 13.9 percentage points and that, as a result, its third-quarter combined ratio will be 101.6 percent. The estimated pretax catastrophe losses include $86 million in personal lines, primarily homeowners claims and $109 million in commercial claims. Of the $195 million in estimated pretax catastrophe losses, $183 million represents estimated losses from claims from the four hurricanes—Charley, Frances, Ivan and Jeanne—that hit Florida and surrounding states in August and September. The total reflects claims received through Oct. 11, 2004 and future estimates of claims from policyholders with damage from the storms. This estimate also includes an adjustment to Safeco’s estimated pretax losses for Hurricanes Charley and Frances. Previously, the company reported it expected $73 million in pretax losses from the two storms; it now estimates those storms will total $117 million. The $44 million increase is primarily due to more large and severe losses than previously estimated. With this update, Safeco also has factored in greater increases in building materials and repair costs due to higher-than-usual demand caused by the multiple storms. In addition, many policyholders hit by Hurricanes Charley and Frances sustained additional damage from subsequent storms.
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