Safeco announced that claims stemming from the recent California wildfires are estimated at $16.0 million in pretax catastrophe losses. This figure represents the estimated losses both from claims received through Nov. 14 and future expected claims. The effect on fourth-quarter net income is $10 million after tax, or $0.08 per diluted share.
The pretax losses include:
— $13.0 million in homeowners; and
— $3.0 million in small business.
“The real story is how we are delivering on our promise to our policyholders,” said Mike McGavick, Safeco chairman and CEO. “As these fire-ravaged communities seek to recover, Safeco has been on the ground there, providing emergency funds to help people driven from their homes and businesses. At this point we’ve already made partial or full payments on 80 percent of all Safeco claims, so the rebuilding process can begin.”
Safeco’s National Catastrophe Team began assessing the situation immediately when wildfires were reported. Even before the wildfires moved into communities, team members began contacting each Safeco policyholder in the fire’s projected path. Displaced policyholders received on-the-spot payments to cover additional living expenses and emergency repairs. Safeco has issued checks to settle claims in full where possible. After the wildfires were contained, Safeco surveyors and adjusters were among the first to enter damaged regions to assist policyholders.
“The California fires remind us of two important ideas: our product makes a real difference in people’s lives, and Safeco’s claims people are extraordinary,” said McGavick. “Given our low share of the total loss, it is also evident how important disciplined underwriting is to shareholders,” he added.
Safeco’s losses are less than some had expected, given the company’s 3.4-percent share of the homeowners market in California. Analysts have estimated that the industry’s total insured losses range from $1.5 to $2.5 billion. Safeco’s loss estimate is far less than proportionate to market share, due in large part to strict underwriting guidelines in areas susceptible to brush fires.
Safeco will announce its fourth-quarter financial results on Jan. 26, 2004.
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