Copyright 2008 Chicago Tribune Company
Chicago Tribune
April 24, 2008 Thursday Chicago Final Edition
SECTION: BUSINESS ; ZONE C; Pg. 6
LENGTH: 352 words
HEADLINE: Liberty Mutual agrees to buy Safeco; Deal may signal start of insurance mergers
BYLINE: BLOOMBERG NEWS
Liberty Mutual Group Inc. agreed to buy Safeco Corp. for about $6.2 billion, taking advantage of a 19 percent drop in the company's stock this year to strike the insurance industry's biggest transaction since 2004. Liberty Mutual, owned by its policyholders, will pay $68.25 a share in cash for Safeco, 51 percent more than Tuesday's closing price, the companies said in a statement. The purchase will create the fifth-largest U.S. property and casualty insurer, the biggest deal since St. Paul Cos. and Travelers Property Casualty Corp. combined in a $17.9 billion merger.Safeco's sale may signal the start of an industry consolidation predicted on April 14 by Accenture Ltd. after insurance stocks fell 15 percent in the first quarter. The Seattle-based insurer's auto unit posted a loss at the end of 2007 because of rising medical claims and repair costs, leading to a 33 percent decline in Safeco's fourth-quarter profit."A private player, Liberty Mutual, thinks the valuation of companies like Safeco are much higher than they're currently trading at," said Paul Newsome, an analyst at Sandler O'Neill & Partners. "It certainly would seem to be a positive sign for more mergers and acquisitions at higher levels than we've seen."Safeco climbed $20.71, or 46 percent, to $65.94 in New York Stock Exchange composite trading. Chief Executive Paula Rosput Reynolds had called the last three months of 2007 "a quarter we wouldn't want to repeat."Liberty Mutual will add automobile, home and business customers in most U.S. states, including those on the West Coast, where Safeco has its greatest market share. The purchase is expected to be completed by the end of the third quarter."The addition of Safeco significantly expands and strengthens" Liberty Mutual, said Ted Kelly, CEO of the Boston-based insurer.Liberty Mutual spokesman John Cusolito said the company will keep the Safeco brand.About 71 percent of analysts tracking insurers of homes, cars and businesses expect a "significant increase" in mergers in 2008, Accenture said in its report. Accenture interviewed 108 stock analysts in December and January.
LOAD-DATE: April 24, 2008
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