Bloomberg News
SEATTLE - Safeco Corp. lost $882.8 million in the first quarter, and earnings for the year may fall short of analysts' estimates as the insurer struggles to make its $2.8 billion purchase of American States Insurance Group pay off.
The Seattle company said the loss resulted from a $916.9 million charge to write down the value of acquisitions. It didn't specify any purchase.
The company lost $6.91 a share, compared with net income a year earlier of $29.8 million, or 23 cents a share.
Safeco has struggled to regain its profitability since the 1997 American States acquisition, which analysts said left it with a costly distribution system that didn't let it raise prices to offset rising claims.
"The hard part is ahead of them," said J. Paul Newsome, an analyst at Lehman Brothers. "They have to get their underwriting profitability back by raising prices, cutting costs, and culling" unprofitable business.
Mike McGavick, Safeco's chief executive officer, said its per-share earnings this year may fall short of the 94 cents analysts have been expecting, but he said he remains "relatively comfortable" with the $1.81 consensus estimate for next year.
"We made tough decisions to strengthen Safeco over the long term," Mr. McGavick said in a press statement. "Since Safeco acquired American States in 1997, we've experienced greater volatility in earnings."
Revenue fell 1.1%, to $1.74 billion. Property-casualty underwriting loss narrowed 3.7%, to $127.7 million.
Safeco's life insurance and investments unit's earnings rose 18.5%, to $46.2 million. Asset management earnings fell 45.7%, to $1.9 million.
Earnings from operations nearly doubled, to $12 million, or 9 cents a share. Per-share operating earnings beat the consensus estimate of 18 analysts by a penny.
Safeco's stock price has fallen 14% this year. It fell 1.3%, to $28.34 a share, in mid-morning trading Monday.
