Disaster claims damage Safeco profit

Safeco, whose shareholders Tuesday approved the insurer's deal to be acquired by Liberty Mutual Group, said profit fell for the sixth straight quarter as claims from natural disasters rose tenfold.

Second-quarter profit fell nearly 20 percent to $149.5 million, or $1.65 a share, from $186.4 million, or $1.75 a share, in the same period a year earlier, the Seattle company said Tuesday.

Profit before investment gains and some merger-related costs was $1.60 a share, beating the $1.41 average estimate of 15 analysts surveyed by Bloomberg.

Natural disasters, including a record number of tornadoes, cost insurers about $6.03 billion in the second quarter, the most since 2001, according to Insurance Services Office. Safeco's catastrophe costs rose to $66.9 million from $6.7 million in the same period a year earlier.

After the results were released, Safeco said more than 99 percent of voting shareholders backed the sale to Liberty Mutual. Standard & Poor's last week said the vote was "the most important remaining step" to completing the deal.

Boston-based Liberty Mutual agreed to pay $6.2 billion, or $68.25 a share, 51 percent more than Safeco's closing price the day before the deal was announced April 23.

Liberty Mutual Chief Executive Ted Kelly said last week that "everything is on schedule" to complete the deal by the end of September.

Safeco stock closed at $66.20 Tuesday, up 48 cents.

The takeover would create the fifth-largest U.S. property and casualty insurer and would be the industry's biggest transaction since St. Paul Cos. and Travelers Property Casualty combined in a $17.9 billion merger in 2004 to form the company now called Travelers.

Safeco made an underwriting profit in its auto unit for the second straight quarter after a loss in the last three months of 2007.

The unit earned 5.5 cents for every dollar it collected in premiums.

Chief Executive Paula Rosput Reynolds is raising the price of Safeco's car coverage, joining insurers including Allstate and Progressive in rate increases to counter the rising cost of repairing cars and paying medical claims.

The top 10 U.S. auto insurers applied to regulators for four times as many rate increases as decreases this year through June, Allstate CEO Tom Wilson said last week.