Seattle-based afeco has reported its third-quarter results. The company produced record net income for third-quarter 2006 of $255.7
million, or $2.20 per diluted share. This compares with net income of $101.1 million, or $0.80 per diluted share, for the same quarter in 2005. Third-quarter results include $79.7 million, or $0.69 per diluted share, in after-tax gains on the sale of real estate. Last year’s
results included $115.8 million, or $0.91 per diluted share, of after-tax catastrophe losses, primarily from Hurricanes Katrina and Rita.
Operating earnings – which exclude the after-tax gains on sales of real estate of $79.7 million, a $19.5 million after-tax contribution to the company’s newly created Safeco Insurance Foundation, and after-tax net realized investment gains of $25.2 million – were $170.3 million for the quarter, compared with $97.8 million in the prior-year period. After-tax net realized investment gains for the third quarter include a gain of $29.2 million resulting from the contribution of equity securities to the Safeco Insurance Foundation. After-tax net realized investment gains were $5.9 million in the same period of 2005.
“Business process improvement, capital management and market development are all on track,” said Paula Rosput
Reynolds, Safeco president and CEO. “We are making the
investments today to assure Safeco’s continued strong performance.”
Safeco’s overall property and casualty (P&C) combined ratio was 88.7 for the quarter versus 97.5 in the same quarter last year. (Combined ratio is the percentage of each premium dollar spent on claims and expenses – the lower the ratio, the better the
Pretax catastrophe losses for the third quarter were $22.5 million compared with $178.1 million a year ago, which were related primarily to Hurricanes Katrina and Rita. Excluding catastrophe losses, the overall combined ratio was 87.1 for the quarter, compared with 86.1 for the third quarter of 2005.
Safeco’s annualized return on equity (ROE) for the third quarter was 24.9 percent. Annualized operating ROE – measured using operating earnings and excluding from equity unrealized gains or losses on fixed-maturity securities – was 16.9 percent for the quarter.
Total revenues in the third quarter were $1.66 billion, compared with $1.59 billion a year ago. Operating revenues, which exclude net realized investment gains or losses and real estate sale gains, were $1.51 billion for the quarter, compared with $1.58 billion during the same period in 2005.
According to Roseput, Safeco has made progress toward achieving its previously disclosed annual run rate reduction target of $75 million. Specifically, through the end of the third quarter, the company had taken steps that will generate an estimated annualized savings of $70
million, including $31 million in personnel expense reductions and $15 million in lower occupancy costs. The savings will be reinvested in the business to improve Safeco’s competitive positioning, including an estimated $45 million annualized increase in the renewal commissions paid to independent agents.
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