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Safeco Wins Bidding War Over Rival Seattle Company Spends $2.8 Billion

The Seattle Times

After a bidding war involving some of the industry’s biggest names, Seattle-based Safeco on Monday scooped up a large property-casualty insurance rival for $2.8 billion.

In making the deal for Indianapolis-based American States Financial, Safeco adds nearly 50 percent to its annual sales and to its work force and nearly 40 percent to its annual profit. Safeco will advance from the nation’s 22nd largest in property-casualty premium writing to 12th.

“It’s nice to see they have the courage in their ability to manage to make a large deal like this,” said analyst Daniel Nelson, with the Ragen MacKenzie brokerage in Seattle.

American States’ majority parent, Lincoln National, tacked up a “for sale” sign on its 83-percent-owned subsidiary in March.

Such huge players as Hartford Group, Liberty Mutual Insurance, Travelers Group and USF&G competed against Safeco, according to The Wall Street Journal.

Safeco will pay Lincoln National $2.35 billion for its 50 million shares plus $300 million to cover Lincoln National loans to American States. About $470 million more in Safeco money, at $47 a share, will go to public shareholders who own the remaining 17 percent of American States on the New York Stock Exchange. The deal could close in three to four months.

There is irony here: In 1985, Lincoln National made a run at Safeco. Only a change in Washington state law, making insurance-company takeovers more difficult, deflected the bid.

Still, Safeco had to pay Lincoln National $142 million to get the Fort Wayne, Ind., company to return 9 percent of Safeco’s shares.

“From a long-term perspective, it’s a good move for Safeco,” Nelson said of Monday’s deal. “I just think it’s such a good fit. I wonder if they had to pay that much, but I guess there were a lot of interested parties.”

Using 1996 year-end figures, Safeco’s sales were $4.07 billion; American States’ were $1.98 billion. Safeco employment was 7,500; American States’ was 3,483. Safeco’s profit was $439 million; American States’ was $169.7 million.

“American States’ expertise with small-to-medium-sized business and commercial accounts will complement our personal-lines expertise,” said Roger Eigsti, Safeco chairman.