Weak Safeco Profit May Prompt Rate Hikes

Insurer Safeco Corp. said it expects third-quarter earnings to fall well short of Wall Street expectations as increased claims, price competition and Hurricane Floyd take their toll. The Seattle-based company will move to restart growth by seeking rate increases in automobile and homeowner coverage and in commercial lines, Chief Executive Roger Eigsti said. Safeco also plans to improve underwriting selection and “aggressively manage” expenses, Eigsti said without elaborating. The company said that based on data for July and August, it would record profit of between 5 and 15 cents a share for the quarter ended Sept. 30. It had been expected to earn 49 cents, according to the consensus estimates of analysts. Safeco blamed the shortfall on increased claims in its commercial and personal insurance units, as well as intense price competition in those businesses. The company also said it logged about $10 million in claims from Hurricane Floyd, which struck the East Coast earlier this month. The company is to announce earnings on Oct. 25. Before the announcement, which was made after the close of regular U.S. stock trading, Safeco closed down 44 cents at $29.69 on Nasdaq.