Softening Safeco Market

Safeco Corp. (SAF) has implemented programs to boost sales and underwriting profitability, including a market segmentation system, which we think are helping achieve these goals. However, intensifying competition in the market is slowing the company’s premium and earnings growth. We expect this trend to continue through 2006 and into 2007. Although valuations have declined slightly in recent months from the high end of their historical range (1.8x book value) reached a year ago, we believe they are still too high (1.71x) at this stage in a softening market. Our six-month price target incorporates a contracted price-to-book multiple of 1.64x. Read the analyst report on SAF