SEATTLE--Safeco announced today that its aggregate pretax catastrophe losses for the third quarter are estimated at $195 million. The estimated effect on third-quarter net income is $127 million after tax, or $0.96 per diluted share. Safeco expects its total catastrophe losses to increase the company's third-quarter combined ratio by 13.9 percentage points and that, as a result, its third-quarter combined ratio will be 101.6 percent.
Of the $195 million in estimated pretax catastrophe losses, $183 million represents estimated losses from claims from the four hurricanes -- Charley, Frances, Ivan and Jeanne -- that hit Florida and surrounding states in August and September. The total reflects claims received through Oct. 11, 2004 and future estimates of claims from policyholders with damage from the storms.
This estimate also includes an adjustment to Safeco's estimated pretax losses for Hurricanes Charley and Frances. Previously, the company reported it expected $73 million in pretax losses from the two storms; it now estimates those storms will total $117 million. The $44 million increase is primarily due to more large and severe losses than previously estimated.
With this update, Safeco also has factored in greater increases in building materials and repair costs due to higher-than-usual demand caused by the multiple storms. In addition, many policyholders hit by Hurricanes Charley and Frances sustained additional damage from subsequent storms.
"This hurricane season has taken a tremendous toll in Florida. And though communities are rebuilding, this is no small task. Our claims professionals are still working seven days a week throughout the Southeast to help customers sort through their damage -- losses from one, two or even three storms," said Mike McGavick, Safeco chairman and chief executive officer.
"While we were taken aback by the number of large losses from Charley, we now have inspected every severe and potential large loss from the hurricanes and 67 percent of all claims," McGavick said. "This is excellent progress and demonstrates our commitment to provide claims service that's second to none."
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