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SAFECO’s Numbers

SAFECO released its fourth quarter earnings of $17.1 million before charges Jan 28. That compares to $13.6 million in losses it reported for the same quarter last year. Earnings for 2001 before charges totaled $3.5 million.

SAFECO President and CEO Mike McGavick, who joined Safeco Jan 30, last year said, “We’ve closed the books on one of the most difficult years in our company’s history.” As a feather in his cap it is noted that Safeco’s stock has appreciated 24.6 percent since he joined the company. Also new at Safeco is Christine Mead from Travelers who joined Safeco as its chief financial officer last week.

As a result of an aggressive profit-recovery plan launched last year the company eliminated 900 employee positions. Also as part of its profit-recovery strategy, Safeco has decreased its net written premium for workers’ compensation.

Regarding this strategy McGavick said, they have largely completed reunderwriting this line. He added, Safeco is one of the top five players in the small-business insurance market, and he said it is a foundation they’ll build on as they push for profitable, top-line growth in 2002.

As for its surety bonds, Safeco reported an underwriting loss of $10.8 million for the fourth quarter, its second quarterly loss in the past four years for that line. This loss is a result of Enron Corp.’s bankruptcy. But for the year, Safeco’s surety operation turned a profit as it has done for 20 years. McGavick said the Enron loss was a catastrophe for the surety market as a whole.

Nut Tightens Down on Workers’ Comp Market

Standard & Poor’s reaffirmed Jan 23 what industry insiders have been seeing for the last two years in California; that fewer insurance carriers are willing to take the risk of writing workers’ compensation. Sept. 11 has only intensified the lack of availability of workers’ compensation. For this line of insurance carriers are barred from excluding acts of terrorism in their underwriting contracts. So without a backstop from Congress, and reinsurance no longer applying to terrorism, insurance companies have either stopped writing this line or are charging exorbitant rates. Rate increases of 30-50 percent are standard, with hikes of 50-100 percent for companies with loss experience. Standard & Poor’s concludes that workers’ compensation insurance has become a high priced thorn in the side of U.S. companies.