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SEATTLE - Safeco Corp.'s profit plunged 20 percent in the second quarter as the insurer collected fewer premium dollars and spent more of the premiums it did collect paying claims, the company said Tuesday.

The Seattle-based property and casualty insurer earned $149.5 million, or $1.65 per share, compared with profit of $186.4 million, or $1.75 per share, in the second quarter last year.

The results included impairment charges of $40.4 million "primarily related to write-downs on securities impacted by continuing volatility in the equity markets."

Operating profit, which excludes certain costs that insurers do not consider reflective of their businesses, totaled $1.60 per share.

That beat the average estimate of analysts polled by Thompson Financial, who forecast a profit of $1.39 per share.

Of each premium dollar collected, Safeco spent 94 cents administering claims, 4.3 cents on the dollar more than the second quarter last year.

The company said the reason this ratio ticked up was twofold: Safeco premiums shrank 2.5 percent to $1.43 billion for the quarter. And, the insurer paid $66.9 million in claims to cover insured damage caused by catastrophes, compared with just $6.7 million in the second quarter of 2007.

Safeco said weather-related losses in the year-ago quarter were unusually low. In recent months, the United States has been plagued by tornadoes, flooding and wildfires.

Shares of the company added 35 cents to $66.07 in morning trading.

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