Seattle-based SAFECO reported its best annual performance in four years, posting net income of $301.1 million – or $2.33 per diluted share – for the full year 2002. This compares favorably with 2001’s net loss of $989.2 million-a loss of $7.75 per share.
The company concluded its turnaround year by generating fourth-quarter net income of $57.1 million, or $0.42 per diluted share. SAFECO said it is a considerable improvement over the same quarter of 2001 when the company reported net income of $8.6 million, or $0.06 per share.
“We had a solid quarter and, when you consider where we started from, a terrific year,” Mike McGavick, SAFECO chairman and CEO, remarked. “We turned our company around and put SAFECO back in a position to be a viable competitor.”
Income before realized investment losses in the fourth quarter was $93.5 million, which includes a $4.4 million restructuring charge – the final charge associated with a reorganization announced 18 months ago. This compares with the fourth quarter of 2001 when SAFECO reported income before realized gains of $0.4 million.
“Despite some ins and outs, our fourth-quarter results were ahead of plan,” McGavick said. “We’re pleased to see the effects of our re-underwriting actions coming through in our earnings, as expected. We’re seeing continued growth in our Personal Auto insurance line, our Homeowners line is showing the result of an aggressive focus on profitability, and Business Insurance is beginning to generate solid results.”
Overall, SAFECO’s Property & Casualty units benefited from lower catastrophe losses when compared to both the fourth quarter and full-year 2001. In the fourth quarter, SAFECO reduced catastrophe reserves by $19.2 million reflecting conservative estimates of catastrophe losses in prior quarters. Roughly half of these reserve reductions were in the Homeowners line, the rest in SAFECO Business Insurance.
Underwriting losses for the Property & Casualty units improved to $18.7 million in the fourth quarter, significantly better than $126.3 million underwriting losses for the same quarter of 2001. For the full year 2002, underwriting losses improved to $239.6 million compared with $837.5 million in the previous year.
Net written premiums increased 7.4 percent in the fourth quarter compared with the same period a year earlier. This reflects higher rates and increased sales of SAFECO products, primarily Auto and small-businesses insurance.
“In 2002, we saw real improvements in our earnings performance,” McGavick noted.
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