Exhibit 99.1
Third Quarter News Release and Statistical Supplement (Unaudited)
October 30, 2007
Table of Contents
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| | | Page |
Earnings News Release | | 1-7 |
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Financial Supplement Introduction | | SS-1 |
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Financial Measures Used by Safeco | | SS-2 |
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Consolidated Results | | |
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Key Metrics | | SS-5 |
Consolidated Statements of Income | | SS-6 |
Consolidated Balance Sheets | | SS-7 |
Consolidated Income Summary | | SS-8 |
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Property & Casualty Results | | |
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Underwriting Profit (Loss) and Combined Ratios | | SS-9 |
Net Written Premiums | | SS-10 |
Net Earned Premiums | | SS-11 |
Safeco Personal Insurance (SPI) | | SS-12 |
Safeco Business Insurance (SBI) | | SS-13 |
Surety, Other and Total | | SS-14 |
Favorable (Unfavorable) Prior Year Reserve Development | | SS-15 |
Productivity Measures and Statutory Information | | SS-16 |
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Corporate Supplemental Information | | |
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Investment Portfolio | | SS-17 |
Capitalization | | SS-18 |
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| INVESTOR RELATIONS CONTACTS: | | Neal Fuller, 206-473-5020 |
| | Karin G. Van Vleet, 206-473-5570 |
| MEDIA RELATIONS CONTACT: | | Paul Hollie, 206-473-5745 |
SAFECO SUSTAINS CONSISTENT PROFITABILITY
SEATTLE—(October 30, 2007)—
Third-Quarter Highlights
| | • | | Maintained underwriting profitability across core business segments |
| | • | | Achieved solid growth in personal lines property, small commercial and surety |
| | • | | Announced a $750 million share buyback program and repurchased 7.9 million shares (7.6% of outstanding shares) |
| | • | | Completed transfer of portfolio management to BlackRock Financial Management, Inc. |
| | | | | | | | | | | | | | | | |
Summary Financial Results, after tax (In millions, except per-share data) | | 3 Months Ended
September 30 | | | 9 Months Ended
September 30 | |
| | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Net Income | | $ | 194.4 | | | $ | 255.7 | | | $ | 563.3 | | | $ | 663.6 | |
Net Realized Investment Gains | | | (91.6 | ) | | | (25.2 | ) | | | (110.9 | ) | | | (10.2 | ) |
Gains on Sales of Real Estate | | | — | | | | (79.7 | ) | | | — | | | | (101.0 | ) |
Contributions to Safeco Insurance Foundation | | | 39.0 | | | | 19.5 | | | | 39.0 | | | | 19.5 | |
Losses on Debt Repurchases | | | 10.8 | | | | — | | | | 10.8 | | | | 1.9 | |
*Operating Earnings | | $ | 152.6 | | | $ | 170.3 | | | $ | 502.2 | | | $ | 573.8 | |
Net Income Per Diluted Share of Common Stock | | $ | 1.93 | | | $ | 2.20 | | | $ | 5.39 | | | $ | 5.56 | |
Weighted Average Shares Outstanding (Diluted) | | | 100.8 | | | | 116.3 | | | | 104.6 | | | | 119.4 | |
| * | Operating Earnings is Net Income excluding Gains on Sales of Real Estate, Contributions to Safeco Insurance Foundation, Net Realized Investment Gains and Losses on Debt Repurchases. Measures used in this news release that are not based on U.S. generally accepted accounting principles (GAAP) are defined and reconciled to the most directly comparable GAAP measure in our Form 8-K available through the SEC and online athttp://www.safeco.com/irsupplements. |
Safeco (NYSE: SAF) today reported net income for third-quarter 2007 of $194.4 million, or $1.93 per diluted share. This compares with net income of $255.7 million, or $2.20 per diluted share, for the same quarter last year. Third quarter results last year included $79.7 million, or $0.69 per diluted share, in after-tax gains on the sales of real estate.
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Operating earnings – which exclude the impact of after-tax net realized investment gains, after-tax gains on sales of real estate, the contributions to the Safeco Insurance Foundation and losses on debt repurchases—were $152.6 million for the quarter, compared with $170.3 million in the same prior year quarter – a decrease of 10.4 percent. Operating earnings per diluted share of $1.51 were up 2.7 percent from the $1.47 per diluted share reported a year ago. After-tax net realized investment gains for the quarter were $91.6 million, compared with net realized investment gains of $25.2 million in the same period of 2006. After-tax net realized investment gains for the third quarter include a gain of $57.9 million resulting from the contribution of equity securities to the Safeco Insurance Foundation, compared with a gain of $29.2 million in the prior year quarter resulting from a 2006 contribution to the foundation.
“Consistent performance is the keynote as we remain on plan for the year,” said Paula Rosput Reynolds, Safeco president and chief executive officer. “It’s a credit to our agents and employees that Safeco continues to post steady growth and profitability.”
Safeco’s overall property and casualty (P&C) combined ratio was 92.5 for the quarter versus 88.7 in the same quarter last year. (Combined ratio is the percentage of each premium dollar spent on claims and expenses — the lower the ratio, the better the performance.)
Pretax catastrophe losses for the third quarter were $42.0 million, compared with $22.5 million a year ago.
Safeco’s annualized return on equity (ROE) for the third quarter was 20.2 percent. Annualized operating ROE – measured using operating earnings and excluding from equity unrealized gains or losses on bonds – was 16.2 percent for the quarter.
Net written premiums were $1.45 billion for the third quarter, a 1.5 percent increase from the year-ago period. Net earned premiums were $1.41 billion for the quarter, a 2.0 percent increase compared with the prior year.
P&C pretax net investment income for the quarter was $111.4 million, a decrease of 7.9 percent compared with the same period last year, primarily due to the shift in portfolio strategy over the past year toward more tax-exempt municipal bonds. P&C after-tax net investment income was $89.9 million, a decrease of 3.4 percent compared with year-ago levels. The increased investment in tax-exempt municipal bonds improved the average after-tax yield on the investment portfolio.
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Safeco Personal Insurance
Safeco Auto reported a quarterly pretax underwriting profit of $16.3 million, compared with $80.1 million in the same period last year. Auto’s combined ratio was 97.5 in the quarter, compared with 88.2 a year ago. Third-quarter 2007 results included nominal favorable prior-year reserve development, compared with $22.6 million of favorable prior-year reserve development due to lower-than-expected bodily injury severity in the year-ago quarter.
Auto net written premiums declined 3.1 percent in the quarter compared with third-quarter 2006. Policies in force (PIF) decreased 2.5 percent in the third quarter from year-ago levels, though Preferred Auto PIF was up 0.5 percent. Auto new-business policies issued were flat with the same quarter in 2006, and retention of 80.4 percent was 1.1 point higher than a year ago. Preferred Auto new-business policies issued increased 11.9 percent, and Preferred Auto retention improved slightly to 84.8 percent.
“We’ve taken steps to address Auto and anticipate better performance in the next 6-12 months,” said Mike Hughes, Safeco executive vice president of Insurance Operations. “Those steps include taking rates up to bring our combined ratio back in line with our long-term target of 96.”
Safeco Property, which includes homeowners, landlord protection and related coverages, produced a quarterly pretax underwriting profit of $19.8 million, compared with $53.1 million in the same period a year ago. Property’s combined ratio was 91.7 in the quarter, compared with 76.8 in the same quarter of 2006. The third-quarter 2007 results included $28.4 million in pretax catastrophe losses, primarily from Midwest hailstorms, compared with $17.2 million a year ago. Third-quarter 2006 results included $12.8 million of favorable prior-year reserve development.
Property net written premiums increased 5.1 percent in the quarter compared with a year ago, and PIF was up 7.6 percent from prior-year levels.
New-business policies increased 9.0 percent compared with the same period last year, and homeowners retention increased to 86.1 percent from 84.3 percent.
Safeco Business Insurance
Safeco Business Insurance (SBI) reported a pretax underwriting profit of $51.0 million in the third quarter, compared with $37.1 million for the same period in 2006. The third-quarter combined ratio was 87.2, compared with 90.1 a year ago.
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SBI Regular – Safeco’s core commercial line serving small- to mid-sized businesses – reported a pretax underwriting profit of $38.1 million in the quarter, compared with $28.7 million for the same period last year. The SBI Regular combined ratio was 88.5 in the third quarter, compared with 90.8 in the same period last year. Third-quarter results included $3.5 million in pretax catastrophe losses, compared with $0.8 million in the prior-year period. Favorable prior-year reserve development of $14.2 million in the third quarter of 2007 was primarily the result of lower-than-expected loss experience in workers compensation compared with $3.0 million for lower-than-expected loss experience in general liability in the year-ago quarter.
SBI Regular net written premiums during the third quarter were up 6.9 percent compared with the same period last year. The increase reflected solid growth in the business of 4.8 percent, as well as a 2.1 percent impact of the revision to estimate audits of premium, which reduced net written premiums by $6.0 million in the third quarter of 2006. SBI Regular PIF was up 3.0 percent compared with year-ago levels. New-business policies issued for the quarter increased 3.7 percent compared with the same quarter last year, and the retention rate of existing customers increased to 81.9 percent, up from 79.0 percent a year ago.
“Our success in small commercial reflects the payback of our investment in a single platform, running fully automated underwriting models across all product lines. No matter where the office or the experience of the user, Safeco is the first choice for ease of use,” said Hughes.
Safeco’s Special Accounts Facility, which writes selected large-commercial accounts and three specialty commercial programs, reported a pretax underwriting profit of $12.9 million in the quarter. This compares with an $8.4 million pretax underwriting profit in last year’s third quarter. Special Accounts Facility’s combined ratio was 80.6 in the period, compared with 86.7 last year. Favorable prior-year reserve development was $6.3 million in the third quarter of 2007 and $13.5 million in the third quarter of 2006.
Surety
Safeco Surety reported a record pretax underwriting profit of $40.2 million in the quarter, compared with $19.4 million for the same period in 2006. Surety’s combined ratio was 55.5 for the third quarter, compared with 74.2 a year ago. Favorable prior-year reserve development was $7.1 million in the third quarter of 2007 compared with unfavorable prior-year reserve development of $2.6 million in the third quarter of 2006. Third quarter net written premiums grew 16.4 percent compared with the same period last year. Safeco Surety is in its 27th year of underwriting profitability and has crossed the $100 million profit threshold.
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P&C Other
The P&C Other segment, which includes results from operations that Safeco has exited or placed in runoff, including SFIS, had a pretax underwriting loss of $16.5 million in the third quarter, due to a provision for a large liability, compared with a loss of $35.6 million, primarily from prior-year reserve development in the same quarter of 2006. Favorable prior-year reserve development was $0.3 million in the third quarter of 2007 versus $29.9 million of unfavorable prior-year reserve development in the prior-year quarter.
Corporate and Capital Management
On August 1, Safeco announced that its board of directors had approved the repurchase of up to $750.0 million of the company’s common stock.
During the third quarter, Safeco repurchased a total of 7.9 million shares (or 7.6 percent of its then outstanding common stock) at an average price of $58.89, for a total cost of $465.3 million, under the $750 million authorization and the previous $250 million program.
Through October 26, the company repurchased another 2.2 million shares at an average price of $59.66 (total cost of $130.6 million), leaving approximately $246.3 million remaining under the current repurchase authorization.
On July 16, Safeco called and redeemed $322.3 million of 8.072 percent Debentures at 104 percent of principal for $335.3 million, and retired its $26.3 million Capital Trust equity investment, which was reported as debt in Safeco’s consolidated financial statements. Additionally, Safeco paid down $197.3 million of 6.875 percent senior notes that matured on July 15, 2007.
To enhance financial flexibility, Safeco requested and received approval from state regulators for special dividends totaling $700 million, which were paid by the insurance operating subsidiaries to the parent company on August 15, 2007.
On July 27, Safeco funded its Safeco Insurance Foundation with a tax-deductible donation of $60 million in highly appreciated equity securities.
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Additional Financial Information Available
Safeco uses both GAAP and non-GAAP financial measures to track the performance of its operations. The definition of each non-GAAP measure and reconciliation to the most directly comparable GAAP measure are included in Safeco’s Form 8-K that will be furnished to the U.S. Securities and Exchange Commission today.
The Form 8-K will include this news release and Safeco’s summary financial results, consolidated statements of income and balance sheets in the company’s third-quarter financial supplement.
Safeco’s third-quarter press release, financial supplement and Form 8-K are available online athttp://www.safeco.com/irsupplements.
Management Reviews Results on Webcast
Safeco’s senior management team will discuss the company’s third-quarter performance with analysts today at 11 a.m., Eastern Time (8 a.m., Pacific Time). The conference call will be broadcast live on the Internet athttp://www.safeco.com/irwebcast and archived later in the day for replay.
Safeco, in business since 1923, is a Fortune 500 property and casualty insurance company based in Seattle. The company sells insurance to drivers, home owners and owners of small- and mid-sized businesses principally through a national network of independent agents and brokers. Safeco is also one of the nation’s leaders in the sale and service of surety bonds.
More information about Safeco can be found atwww.safeco.com.
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FORWARD-LOOKING INFORMATION CONTAINED IN THIS
NEWS RELEASE IS SUBJECT TO RISK AND UNCERTAINTY
Forward-looking information contained in this press release is subject to risk and uncertainty. Information contained in this press release that relates to Safeco’s anticipated financial performance, business prospects and plans, and similar matters are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this press release, including changes in general economic and business conditions in the insurance industry, and changes in our business strategies. Additional information on factors that may impact these forward-looking statements can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections in our 2006 Annual Report on Form 10-K and our most recent quarterly report on Form 10-Q, as applicable. The information contained in this press release is as of the date indicated. We assume no obligation to update any forward-looking statements contained in this press release as a result of new information or future events or developments.
We may discuss various non-GAAP measures. Please refer to our press release, our 8-K filing, or our website for the most directly comparable GAAP measures together with our reconciliation of the two.
7
Financial Supplement
Third Quarter, 2007
This report is for informational purposes only. The financial statements and financial exhibits included in this supplement are unaudited. These financial statements and financial exhibits should be read in conjunction with the financial statements filed with the Securities and Exchange Commission in the Company’s quarterly 10-Q and annual 10-K filings.
Neal Fuller
Senior Vice President – Finance & Treasurer
206-473-5020
neaful@safeco.com
Karin G. Van Vleet
Director, Investor Relations
206-473-5570
karinv@safeco.com
Safeco Corporation – October 30, 2007 – Page SS-1
Financial Measures Used by Safeco
(Amounts are in millions, except ratio and per share information.)
How We Report Our Results
Property & Casualty (P&C) businesses include the following segments:
Safeco Personal Insurance (SPI)
Auto
Property
Specialty
Safeco Business Insurance (SBI)
SBI Regular
SBI Special Accounts Facility
Surety
P&C Other
Corporate includes all other activities, primarily the financing of our business activities.
Certain reclassifications have been made to the prior-period amounts to conform to the current-period presentation.
In addition to financial measures presented in the consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), we also use certain non-GAAP financial measures to analyze and report our financial results. Management believes that these non-GAAP measures, when used in conjunction with the consolidated financial statements, can aid in understanding our financial condition and results of operations. These non-GAAP measures are not a substitute for GAAP measures, and where these measures are described we provide tables that reconcile the non-GAAP measures to the GAAP measures reported in our consolidated financial statements.
Operating Revenues
Operating revenues is a non-GAAP financial measure used by management to analyze the revenues of our operations. It excludes net realized investment gains, which can fluctuate significantly and distort a comparison between periods. It also excludes gains on real estate sales. The following table provides a reconciliation of operating revenues to revenues, the most directly comparable GAAP measure.
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| | | Three Months Ended September 30 | | | Nine Months Ended September 30 | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Total Revenues | | $ | 1,638.2 | | | $ | 1,659.8 | | | $ | 4,684.4 | | | $ | 4,757.2 | |
Net Realized Investment Gains | | | (109.9 | ) | | | (22.9 | ) | | | (139.7 | ) | | | (0.6 | ) |
Gains on Sales of Real Estate | | | — | | | | (122.6 | ) | | | — | | | | (155.4 | ) |
| | | | | | | | | | | | | | | | |
Operating Revenues | | $ | 1,528.3 | | | $ | 1,514.3 | | | $ | 4,544.7 | | | $ | 4,601.2 | |
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Safeco Corporation – October 30, 2007 – Page SS-2
Operating Earnings and Operating Earnings per Share
Operating Earnings is a non-GAAP financial measure that we use to assess the profitability of our operations. In the determination of Operating Earnings, we exclude net realized investment gains, gains on sales of real estate, contributions to Safeco Insurance Foundation and losses on debt repurchases from Net Income. Net realized investment gains can fluctuate significantly and distort a comparison between periods. The following table reconciles Operating Earnings to Net Income, the most directly comparable GAAP measure.
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| | | Three Months Ended September 30 | | | Nine Months Ended September 30 | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Net Income | | $ | 194.4 | | | $ | 255.7 | | | $ | 563.3 | | | $ | 663.6 | |
Net Realized Investment Gains, Net of Taxes | | | (91.6 | ) | | | (25.2 | ) | | | (110.9 | ) | | | (10.2 | ) |
Contributions to Safeco Insurance Foundation, Net of Taxes | | | 39.0 | | | | 19.5 | | | | 39.0 | | | | 19.5 | |
Losses on Debt Repurchases, Net of Taxes | | | 10.8 | | | | — | | | | 10.8 | | | | 1.9 | |
Gains on Sales of Real Estate, Net of Taxes | | | — | | | | (79.7 | ) | | | — | | | | (101.0 | ) |
| | | | | | | | | | | | | | | | |
Operating Earnings | | $ | 152.6 | | | $ | 170.3 | | | $ | 502.2 | | | $ | 573.8 | |
| | | | | | | | | | | | | | | | |
Operating Earnings Per Share | | $ | 1.51 | | | $ | 1.47 | | | $ | 4.80 | | | $ | 4.81 | |
| | | | | | | | | | | | | | | | |
Weighted Average Shares Outstanding—Diluted | | | 100.8 | | | | 116.3 | | | | 104.6 | | | | 119.4 | |
| | | | | | | | | | | | | | | | |
Operating Return on Equity
Operating Return on Equity (see calculation below) is a ratio we calculate using non-GAAP measures. It is calculated by dividing the annualized operating earnings for the most recent quarter by the average shareholders’ equity for the quarter using a simple average of the beginning and ending balances for the quarter, excluding from equity after-tax unrealized investment gains on fixed maturities. This ratio provides management with an additional measure to evaluate our results excluding the unrealized changes in the valuation of our fixed maturities portfolio, which can fluctuate between periods. The following table reconciles operating return on equity to return on equity, the most directly comparable GAAP measure.
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| | | Three Months Ended September 30 | | | Nine Months Ended September 30 | |
(ANNUALIZED) | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Net Income | | $ | 194.4 | | | $ | 255.7 | | | $ | 563.3 | | | $ | 663.6 | |
Average Shareholders’ Equity | | | 3,852.3 | | | | 4,107.4 | | | | 3,808.6 | | | | 4,197.3 | |
Return on Equity Based on Annualized Net Income | | | 20.2 | % | | | 24.9 | % | | | 19.7 | % | | | 21.1 | % |
| | | | | | | | | | | | | | | | |
Operating Earnings | | $ | 152.6 | | | $ | 170.3 | | | $ | 502.2 | | | $ | 573.8 | |
| | | | | | | | | | | | | | | | |
Average Shareholders’ Equity | | $ | 3,852.3 | | | $ | 4,107.4 | | | $ | 3,808.6 | | | $ | 4,197.3 | |
Unrealized Fixed Maturities Investment Gains, Net of Taxes | | | (75.2 | ) | | | (69.3 | ) | | | (110.3 | ) | | | (119.9 | ) |
| | | | | | | | | | | | | | | | |
Adjusted Average Shareholders’ Equity | | $ | 3,777.1 | | | $ | 4,038.1 | | | $ | 3,698.3 | | | $ | 4,077.4 | |
Operating Return on Equity | | | 16.2 | % | | | 16.9 | % | | | 18.1 | % | | | 18.8 | % |
| | | | | | | | | | | | | | | | |
Safeco Corporation – October 30, 2007 – Page SS-3
Net Written Premiums
Net written premiums are a non-GAAP measure representing the amount of premium charged for policies issued with effective dates during the period. Premiums are reflected as revenue in the Consolidated Statements of Income as they are earned over the underlying policy period. Net written premiums applicable to the unexpired term of a policy are recorded as unearned premiums on our Consolidated Balance Sheets. We view net written premiums as a measure of business production for the period under review and as a leading indicator of net earned premiums. The following table reconciles net written premiums to net earned premiums, the most directly comparable GAAP measure on our Consolidated Statements of Income.
| | | | | | | | | | | | |
| | | Three Months Ended September 30 | | Nine Months Ended September 30 |
| | | 2007 | | 2006 | | 2007 | | 2006 |
Net Earned Premiums | | $ | 1,411.0 | | $ | 1,383.4 | | $ | 4,172.0 | | $ | 4,220.1 |
Change in Unearned Premiums | | | 36.5 | | | 42.3 | | | 131.0 | | | 83.5 |
| | | | | | | | | | | | |
Net Written Premiums | | $ | 1,447.5 | | $ | 1,425.7 | | $ | 4,303.0 | | $ | 4,303.6 |
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Underwriting Profit and Combined Ratios
Underwriting profit is our net earned premiums less our losses from claims, loss adjustment expenses and underwriting expenses on a pretax basis. We view underwriting profit as a critical measure to assess the underwriting effectiveness of our operations and to evaluate the results of our business units. Our investment portfolio is managed separately from our underwriting activities and, therefore, net investment income and net realized investment gains are discussed separately. The following table reconciles underwriting profit to Income before Income Taxes, the most directly comparable GAAP measure on our Consolidated Statements of Income. Combined ratios are a standard industry measure of underwriting performance and are calculated as losses and expenses expressed as a percentage of net earned premiums.
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30 | | | Nine Months Ended September 30 | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Income before Income Taxes | | $ | 241.6 | | | $ | 360.2 | | | $ | 754.2 | | | $ | 950.4 | |
Net Realized Investment Gains | | | (109.9 | ) | | | (22.9 | ) | | | (139.7 | ) | | | (0.6 | ) |
Corporate Results before Income Taxes | | | 8.7 | | | | 12.6 | | | | 48.3 | | | | 39.3 | |
Property & Casualty Net Investment Income | | | (111.4 | ) | | | (121.0 | ) | | | (352.6 | ) | | | (355.7 | ) |
Gains on Sales of Real Estate | | | — | | | | (122.6 | ) | | | — | | | | (155.4 | ) |
Contributions to Safeco Insurance Foundation | | | 60.0 | | | | 30.0 | | | | 60.0 | | | | 30.0 | |
Restructuring and Asset Impairment Charges | | | 0.9 | | | | 20.7 | | | | 2.7 | | | | 22.7 | |
Losses on Debt Repurchases | | | 16.6 | | | | — | | | | 16.6 | | | | 2.9 | |
| | | | | | | | | | | | | | | | |
Underwriting Profit | | $ | 106.5 | | | $ | 157.0 | | | $ | 389.5 | | | $ | 533.6 | |
| | | | | | | | | | | | | | | | |
Other Information in this Supplement
Catastrophes are events resulting in losses greater than $0.5 involving multiple claims and policyholders.
Certain reclassifications have been made to the prior year to conform to the current-year presentation.
NM = Not Meaningful
Safeco Corporation – October 30, 2007 – Page SS-4
Safeco Corporation
Key Metrics
(In millions, except per share data)
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| | | 3RD QTR 2007 | | | 2ND QTR 2007 | | | 1ST QTR 2007 | | | 4TH QTR 2006 | | | 3RD QTR 2006 | | | YTD 2007 | | | YTD 2006 | | | Change | |
| | | | | | | | |
| | | | | | | | |
Net Income | | $ | 194.4 | | | $ | 186.4 | | | $ | 182.5 | | | $ | 216.4 | | | $ | 255.7 | | | $ | 563.3 | | | $ | 663.6 | | | -15 | % |
Net Income Per Share | | | 1.93 | | | | 1.75 | | | | 1.71 | | | | 1.96 | | | | 2.20 | | | | 5.39 | | | | 5.56 | | | -3 | % |
Net Income Return on Equity annualized | | | 20.2 | % | | | 18.4 | % | | | 18.2 | % | | | 21.1 | % | | | 24.9 | % | | | 19.7 | % | | | 21.1 | % | | -1.4 | |
Net Realized Investment Gains, after tax | | $ | 91.6 | | | $ | 11.4 | | | $ | 7.9 | | | $ | 1.5 | | | $ | 25.2 | | | $ | 110.9 | | | $ | 10.2 | | | 987 | % |
Operating Earnings, after tax | | | 152.6 | | | | 175.0 | | | | 174.6 | | | | 207.3 | | | | 170.3 | | | | 502.2 | | | | 573.8 | | | -12 | % |
Operating Earnings Per Share | | | 1.51 | | | | 1.65 | | | | 1.64 | | | | 1.88 | | | | 1.47 | | | | 4.80 | | | | 4.81 | | | 0 | % |
Operating Return on Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Pre-FAS 115) annualized | | | 16.2 | % | | | 17.7 | % | | | 18.1 | % | | | 20.9 | % | | | 16.9 | % | | | 18.1 | % | | | 18.8 | % | | -0.7 | |
Operating Return on Equity annualized | | | 15.8 | % | | | 17.3 | % | | | 17.4 | % | | | 20.2 | % | | | 16.6 | % | | | 17.6 | % | | | 18.2 | % | | -0.6 | |
Operating Revenues | | $ | 1,528.3 | | | $ | 1,522.2 | | | $ | 1,494.2 | | | $ | 1,516.2 | | | $ | 1,514.3 | | | $ | 4,544.7 | | | $ | 4,601.2 | | | -1 | % |
% Chg Prior Year Same Qtr | | | 0.9 | % | | | -1.2 | % | | | -3.4 | % | | | -4.3 | % | | | -4.3 | % | | | | | | | | | | | |
Property & Casualty | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 92.5 | % | | | 89.7 | % | | | 89.8 | % | | | 87.2 | % | | | 88.7 | % | | | 90.7 | % | | | 87.4 | % | | 3.3 | |
Impact of Catastrophes | | | 3.0 | % | | | 0.9 | % | | | 0.2 | % | | | 2.6 | % | | | 1.6 | % | | | 1.4 | % | | | 2.8 | % | | -1.4 | |
Net Earned Premiums | | $ | 1,411.0 | | | $ | 1,394.0 | | | $ | 1,367.0 | | | $ | 1,388.2 | | | $ | 1,383.4 | | | $ | 4,172.0 | | | $ | 4,220.1 | | | -1 | % |
% Chg Prior Year Same Qtr | | | 2.0 | % | | | -1.5 | % | | | -3.9 | % | | | -4.9 | % | | | -5.3 | % | | | | | | | | | | | |
Net Written Premiums | | $ | 1,447.5 | | | $ | 1,465.5 | | | $ | 1,390.0 | | | $ | 1,338.3 | | | $ | 1,425.7 | | | $ | 4,303.0 | | | $ | 4,303.6 | | | 0 | % |
% Chg Prior Year Same Qtr | | | 1.5 | % | | | 0.4 | % | | | -2.0 | % | | | -3.2 | % | | | -3.8 | % | | | | | | | | | | | |
Book Value Per Share | | $ | 38.32 | | | $ | 38.59 | | | $ | 38.47 | | | $ | 37.29 | | | $ | 36.99 | | | $ | 38.32 | | | $ | 36.99 | | | 4 | % |
% Chg Prior Year Same Qtr | | | 3.6 | % | | | 13.8 | % | | | 14.6 | % | | | 11.7 | % | | | 14.5 | % | | | | | | | | | | | |
Book Value Per Share (Pre-FAS 115) | | $ | 37.48 | | | $ | 38.24 | | | $ | 37.15 | | | $ | 35.95 | | | $ | 35.83 | | | $ | 37.48 | | | $ | 35.83 | | | 5 | % |
% Chg Prior Year Same Qtr | | | 4.6 | % | | | 12.9 | % | | | 11.8 | % | | | 10.5 | % | | | 14.4 | % | | | | | | | | | | | |
Certain reclassifications have been made to the prior periods to conform to the current presentation.
Safeco Corporation – October 30, 2007 – Page SS-5
Safeco Corporation
Consolidated Statements of Income
(In millions, except per share data)
| | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | 2007 | | 2006 | | | 2007 | | 2006 | |
| | | (Unaudited) | | | (Unaudited) | |
REVENUES | | | | | | | | | | | | | | |
Net Earned Premiums | | $ | 1,411.0 | | $ | 1,383.4 | | | $ | 4,172.0 | | $ | 4,220.1 | |
Net Investment Income | | | 117.3 | | | 130.9 | | | | 372.7 | | | 381.1 | |
Net Realized Investment Gains | | | 109.9 | | | 22.9 | | | | 139.7 | | | 0.6 | |
Gains on Sales of Real Estate | | | — | | | 122.6 | | | | — | | | 155.4 | |
| | | | | | | | | | | | | | |
Total Revenues | | | 1,638.2 | | | 1,659.8 | | | | 4,684.4 | �� | | 4,757.2 | |
| | | | | | | | | | | | | | |
EXPENSES | | | | | | | | | | | | | | |
Losses and Loss Adjustment Expenses | | | 909.8 | | | 824.2 | | | | 2,616.0 | | | 2,465.0 | |
Amortization of Deferred Policy Acquisition Costs | | | 240.6 | | | 235.2 | | | | 708.1 | | | 698.7 | |
Other Underwriting and Operating Expenses | | | 156.7 | | | 166.6 | | | | 468.6 | | | 518.9 | |
Contributions to Safeco Insurance Foundation | | | 60.0 | | | 30.0 | | | | 60.0 | | | 30.0 | |
Interest Expense | | | 12.0 | | | 22.9 | | | | 58.2 | | | 68.6 | |
Losses on Debt Repurchases | | | 16.6 | | | — | | | | 16.6 | | | 2.9 | |
Restructuring and Asset Impairment Charges | | | 0.9 | | | 20.7 | | | | 2.7 | | | 22.7 | |
| | | | | | | | | | | | | | |
Total Expenses | | | 1,396.6 | | | 1,299.6 | | | | 3,930.2 | | | 3,806.8 | |
| | | | | | | | | | | | | | |
Income before Income Taxes | | | 241.6 | | | 360.2 | | | | 754.2 | | | 950.4 | |
| | | | |
Provision (Benefit) for Income Taxes on: | | | | | | | | | | | | | | |
Income before Net Realized Investment Gains | | | 28.9 | | | 106.8 | | | | 162.1 | | | 296.4 | |
Net Realized Investment Gains | | | 18.3 | | | (2.3 | ) | | | 28.8 | | | (9.6 | ) |
| | | | | | | | | | | | | | |
Total Provision for Income Taxes | | | 47.2 | | | 104.5 | | | | 190.9 | | | 286.8 | |
| | | | | | | | | | | | | | |
Net Income | | $ | 194.4 | | $ | 255.7 | | | $ | 563.3 | | $ | 663.6 | |
| | | | | | | | | | | | | | |
INCOME PER SHARE OF COMMON STOCK | | | | | | | | | | | | | | |
Net Income Per Share of Common Stock - Diluted | | $ | 1.93 | | $ | 2.20 | | | $ | 5.39 | | $ | 5.56 | |
| | | | | | | | | | | | | | |
Net Income Per Share of Common Stock - Basic | | $ | 1.93 | | $ | 2.21 | | | $ | 5.42 | | $ | 5.59 | |
| | | | | | | | | | | | | | |
Dividends Declared per Share | | $ | 0.40 | | $ | 0.30 | | | $ | 1.10 | | $ | 0.85 | |
| | | | |
Average Number of Common Shares Outstanding During the Period: | | | | | | | | | | | | | | |
Diluted | | | 100.8 | | | 116.3 | | | | 104.6 | | | 119.4 | |
Basic | | | 100.5 | | | 115.9 | | | | 104.0 | | | 118.8 | |
Safeco Corporation – October 30, 2007 – Page SS-6
Safeco Corporation
Consolidated Balance Sheets
(In millions)
| | | | | | |
| | | September 30 2007 | | December 31
2006 |
| | | (Unaudited) | | |
ASSETS | | | | | | |
Investments | | | | | | |
Available-for-Sale Securities: | | | | | | |
Fixed Maturities, at Fair Value (Cost or amortized cost: $7,753.0; $8,901.6) | | $ | 7,876.7 | | $ | 9,119.0 |
Marketable Equity Securities, at Fair Value (Cost: $811.2; $1,018.4) | | | 1,289.6 | | | 1,529.7 |
Other Invested Assets | | | 30.3 | | | 14.3 |
| | | | | | |
Total Investments1 | | | 9,196.6 | | | 10,663.0 |
Cash and Cash Equivalents | | | 665.8 | | | 287.6 |
Accrued Investment Income | | | 107.4 | | | 126.5 |
Premiums and Service Fees Receivable | | | 1,147.5 | | | 1,085.6 |
Deferred Policy Acquisition Costs | | | 425.2 | | | 383.9 |
Reinsurance Recoverables | | | 442.6 | | | 429.9 |
Property and Equipment for Company Use (At cost less accumulated depreciation: $213.8; $211.9) | | | 192.0 | | | 144.4 |
Current Income Taxes Recoverable | | | 73.0 | | | 74.8 |
Net Deferred Income Tax Assets | | | 141.1 | | | 143.7 |
Other Assets | | | 271.2 | | | 114.6 |
Securities Lending Collateral | | | 408.1 | | | 759.0 |
| | | | | | |
Total Assets | | $ | 13,070.5 | | $ | 14,213.0 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Loss and Loss Adjustment Expense Reserves | | $ | 5,165.0 | | $ | 5,171.4 |
Unearned Premiums | | | 2,307.9 | | | 2,175.3 |
Debt2 | | | 704.0 | | | 1,250.0 |
Other Liabilities | | | 778.0 | | | 913.1 |
Securities Lending Payable | | | 408.1 | | | 759.0 |
| | | | | | |
Total Liabilities | | | 9,363.0 | | | 10,268.8 |
| | | | | | |
Commitments and Contingencies | | | — | | | — |
Restricted Stock Rights | | | 18.3 | | | 16.3 |
Preferred Stock, No Par Value | | | | | | |
Shares Authorized: 10.0 | | | | | | |
Shares Issued and Outstanding: None | | | — | | | — |
Common Stock, No Par Value | | | | | | |
Shares Authorized: 300.0 | | | | | | |
Shares Reserved for Stock Awards: 4.4; 4.9 | | | | | | |
Shares Issued and Outstanding: 96.2; 105.3 | | | — | | | 3.2 |
Retained Earnings | | | 3,292.6 | | | 3,440.5 |
Accumulated Other Comprehensive Income, Net of Taxes | | | 396.6 | | | 484.2 |
| | | | | | |
Total Shareholders’ Equity | | | 3,689.2 | | | 3,927.9 |
| | | | | | |
Total Liabilities and Shareholders’ Equity | | $ | 13,070.5 | | $ | 14,213.0 |
| | | | | | |
1 | See Investment Portfolio (SS-17) for more detail. |
2 | See Capitalization (SS-18) for more detail. |
Safeco Corporation – October 30, 2007 – Page SS-7
Safeco Corporation
Income Summary
(In millions)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | (Unaudited) | | | (Unaudited) | |
| Income Before Income Taxes | | | | | | | | | | | | | | | | |
Property & Casualty | | | | | | | | | | | | | | | | |
Underwriting Profit | | $ | 106.5 | | | $ | 157.0 | | | $ | 389.5 | | | $ | 533.6 | |
Net Investment Income | | | 111.4 | | | | 121.0 | | | | 352.6 | | | | 355.7 | |
Restructuring and Asset Impairment Charges | | | (0.9 | ) | | | (20.7 | ) | | | (2.7 | ) | | | (22.7 | ) |
| | | | | | | | | | | | | | | | |
Total Property & Casualty | | | 217.0 | | | | 257.3 | | | | 739.4 | | | | 866.6 | |
Corporate | | | (8.7 | ) | | | (12.6 | ) | | | (48.3 | ) | | | (39.3 | ) |
| | | | | | | | | | | | | | | | |
Total | | | 208.3 | | | | 244.7 | | | | 691.1 | | | | 827.3 | |
Net Realized Investment Gains | | | 109.9 | | | | 22.9 | | | | 139.7 | | | | 0.6 | |
Contributions to Safeco Insurance Foundation | | | (60.0 | ) | | | (30.0 | ) | | | (60.0 | ) | | | (30.0 | ) |
Losses on Debt Repurchases | | | (16.6 | ) | | | — | | | | (16.6 | ) | | | (2.9 | ) |
Gains on Sales of Real Estate | | | — | | | | 122.6 | | | | — | | | | 155.4 | |
| | | | | | | | | | | | | | | | |
Total Income Before Income Taxes | | $ | 241.6 | | | $ | 360.2 | | | $ | 754.2 | | | $ | 950.4 | |
| | | | | | | | | | | | | | | | |
| Total Provision for Income Taxes | | $ | 47.2 | | | $ | 104.5 | | | $ | 190.9 | | | $ | 286.8 | |
| | | | | | | | | | | | | | | | |
| | | | |
| After-Tax Income | | | | | | | | | | | | | | | | |
Property & Casualty | | | | | | | | | | | | | | | | |
Underwriting Profit | | $ | 68.2 | | | $ | 98.8 | | | $ | 255.2 | | | $ | 340.0 | |
Net Investment Income | | | 89.9 | | | | 93.1 | | | | 281.2 | | | | 271.5 | |
Restructuring and Asset Impairment Charges | | | (0.7 | ) | | | (13.5 | ) | | | (1.8 | ) | | | (14.8 | ) |
| | | | | | | | | | | | | | | | |
Total Property & Casualty | | | 157.4 | | | | 178.4 | | | | 534.6 | | | | 596.7 | |
Corporate | | | (4.8 | ) | | | (8.1 | ) | | | (32.4 | ) | | | (22.9 | ) |
| | | | | | | | | | | | | | | | |
Total | | | 152.6 | | | | 170.3 | | | | 502.2 | | | | 573.8 | |
Net Realized Investment Gains | | | 91.6 | | | | 25.2 | | | | 110.9 | | | | 10.2 | |
Contributions to Safeco Insurance Foundation | | | (39.0 | ) | | | (19.5 | ) | | | (39.0 | ) | | | (19.5 | ) |
Losses on Debt Repurchases | | | (10.8 | ) | | | — | | | | (10.8 | ) | | | (1.9 | ) |
Gains on Sales of Real Estate | | | — | | | | 79.7 | | | | — | | | | 101.0 | |
| | | | | | | | | | | | | | | | |
Net Income | | $ | 194.4 | | | $ | 255.7 | | | $ | 563.3 | | | $ | 663.6 | |
| | | | | | | | | | | | | | | | |
Safeco Corporation – October 30, 2007 – Page SS-8
Safeco Property & Casualty
Underwriting Profit (Loss) and Combined Ratios
(In millions, except ratios)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3RD
QTR
2007 | | | 2ND
QTR
2007 | | | 1ST
QTR
2007 | | | 4TH
QTR
2006 | | | 3RD
QTR
2006 | | | YTD
2007 | | | YTD
2006 | |
| Net U/W Profit (Loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Safeco Personal Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | $ | 16.3 | | | $ | 17.3 | | | $ | 17.2 | | | $ | 48.5 | | | $ | 80.1 | | | $ | 50.8 | | | $ | 195.6 | |
Property | | | 19.8 | | | | 37.1 | | | | 44.8 | | | | 32.1 | | | | 53.1 | | | | 101.7 | | | | 131.6 | |
Specialty | | | (4.3 | ) | | | 5.3 | | | | 8.7 | | | | 7.6 | | | | 2.9 | | | | 9.7 | | | | 21.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SPI | | | 31.8 | | | | 59.7 | | | | 70.7 | | | | 88.2 | | | | 136.1 | | | | 162.2 | | | | 348.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Safeco Business Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBI Regular | | | 38.1 | | | | 31.8 | | | | 35.8 | | | | 36.5 | | | | 28.7 | | | | 105.7 | | | | 125.7 | |
SBI Special Accounts Facility | | | 12.9 | | | | 20.1 | | | | 13.1 | | | | 22.4 | | | | 8.4 | | | | 46.1 | | | | 46.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SBI | | | 51.0 | | | | 51.9 | | | | 48.9 | | | | 58.9 | | | | 37.1 | | | | 151.8 | | | | 172.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Surety | | | 40.2 | | | | 37.3 | | | | 35.8 | | | | 32.7 | | | | 19.4 | | | | 113.3 | | | | 65.7 | |
P&C Other1 | | | (16.5 | ) | | | (5.2 | ) | | | (16.1 | ) | | | (1.7 | ) | | | (35.6 | ) | | | (37.8 | ) | | | (52.7 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Property & Casualty | | $ | 106.5 | | | $ | 143.7 | | | $ | 139.3 | | | $ | 178.1 | | | $ | 157.0 | | | $ | 389.5 | | | $ | 533.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Combined Ratios (GAAP) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Safeco Personal Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | | 97.5 | % | | | 97.4 | % | | | 97.4 | % | | | 92.7 | % | | | 88.2 | % | | | 97.4 | % | | | 90.4 | % |
Property | | | 91.7 | | | | 84.0 | | | | 80.3 | | | | 86.1 | | | | 76.8 | | | | 85.4 | | | | 80.6 | |
Specialty | | | 114.4 | | | | 81.6 | | | | 67.9 | | | | 72.7 | | | | 89.1 | | | | 88.7 | | | | 72.5 | |
Total SPI | | | 96.6 | | | | 93.5 | | | | 92.2 | | | | 90.5 | | | | 85.4 | | | | 94.1 | | | | 87.6 | |
| | | | | | | |
Safeco Business Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBI Regular | | | 88.5 | | | | 90.2 | | | | 88.6 | | | | 88.4 | | | | 90.8 | | | | 89.1 | | | | 86.5 | |
SBI Special Accounts Facility | | | 80.6 | | | | 69.5 | | | | 79.9 | | | | 65.7 | | | | 86.7 | | | | 76.7 | | | | 76.7 | |
Total SBI | | | 87.2 | | | | 86.6 | | | | 87.1 | | | | 84.5 | | | | 90.1 | | | | 87.0 | | | | 84.8 | |
| | | | | | | |
Surety | | | 55.5 | | | | 56.4 | | | | 57.2 | | | | 58.9 | | | | 74.2 | | | | 56.4 | | | | 69.8 | |
P&C Other1 | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | |
| | | | | | | |
Total Property & Casualty | | | 92.5 | % | | | 89.7 | % | | | 89.8 | % | | | 87.2 | % | | | 88.7 | % | | | 90.7 | % | | | 87.4 | % |
1 | P&C Other includes results for large commercial business accounts and commercial specialty programs in runoff and other product lines that we have exited, as well as Safeco Financial Institution Solutions (SFIS), which we sold in April 2006. |
Safeco Corporation – October 30, 2007 – Page SS-9
Safeco Property & Casualty
Net Written Premiums
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3RD QTR
2007 | | | 2ND QTR
2007 | | | 1ST QTR
2007 | | | 4TH QTR
2006 | | | 3RD QTR
2006 | | | YTD 2007 | | | YTD 2006 | |
| Net Written Premiums | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Safeco Personal Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | $ | 655.0 | | | $ | 643.4 | | | $ | 668.7 | | | $ | 640.7 | | | $ | 675.7 | | | $ | 1,967.1 | | | $ | 2,037.0 | |
Property | | | 271.9 | | | | 259.2 | | | | 205.4 | | | | 224.8 | | | | 258.6 | | | | 736.5 | | | | 699.4 | |
Specialty | | | 31.9 | | | | 36.6 | | | | 26.5 | | | | 23.4 | | | | 29.7 | | | | 95.0 | | | | 87.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SPI | | | 958.8 | | | | 939.2 | | | | 900.6 | | | | 888.9 | | | | 964.0 | | | | 2,798.6 | | | | 2,823.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Safeco Business Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBI Regular | | | 329.7 | | | | 354.4 | | | | 329.1 | | | | 302.1 | | | | 308.5 | | | | 1,013.2 | | | | 960.8 | |
SBI Special Accounts Facility | | | 60.5 | | | | 64.3 | | | | 64.6 | | | | 67.2 | | | | 65.8 | | | | 189.4 | | | | 200.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SBI | | | 390.2 | | | | 418.7 | | | | 393.7 | | | | 369.3 | | | | 374.3 | | | | 1,202.6 | | | | 1,161.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Surety | | | 98.9 | | | | 106.9 | | | | 92.7 | | | | 78.6 | | | | 85.0 | | | | 298.5 | | | | 247.7 | |
P&C Other | | | (0.4 | ) | | | 0.7 | | | | 3.0 | | | | 1.5 | | | | 2.4 | | | | 3.3 | | | | 71.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Property & Casualty | | $ | 1,447.5 | | | $ | 1,465.5 | | | $ | 1,390.0 | | | $ | 1,338.3 | | | $ | 1,425.7 | | | $ | 4,303.0 | | | $ | 4,303.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Net Written Premiums (Percent Change) | | Percent Change Over Prior Year Same Quarter | | | Percent Change YTD | |
| | | | | | | |
Safeco Personal Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | | -3.1 | % | | | -2.9 | % | | | -4.3 | % | | | -4.8 | % | | | -6.1 | % | | | -3.4 | % | | | -5.1 | % |
Property | | | 5.1 | | | | 4.4 | | | | 6.7 | | | | 1.8 | | | | 5.7 | | | | 5.3 | | | | 1.7 | |
Specialty | | | 7.4 | | | | 8.9 | | | | 10.9 | | | | 9.9 | | | | 8.8 | | | | 8.9 | | | | 9.0 | |
Total SPI | | | -0.5 | | | | -0.5 | | | | -1.6 | | | | -2.9 | | | | -2.8 | | | | -0.9 | | | | -3.1 | |
| | | | | | | |
Safeco Business Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBI Regular | | | 6.9 | | | | 4.9 | | | | 4.7 | | | | 4.5 | | | | -0.2 | | | | 5.5 | | | | -1.4 | |
SBI Special Accounts Facility | | | -8.1 | | | | 1.1 | | | | -8.9 | | | | -0.9 | | | | -7.6 | | | | -5.4 | | | | -3.4 | |
Total SBI | | | 4.2 | | | | 4.3 | | | | 2.2 | | | | 3.5 | | | | -1.6 | | | | 3.6 | | | | -1.7 | |
| | | | | | | |
Surety | | | 16.4 | | | | 26.5 | | | | 18.5 | | | | 15.6 | | | | 13.0 | | | | 20.5 | | | | 17.7 | |
P&C Other | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | |
| | | | | | | |
Total Property & Casualty1 | | | 1.5 | % | | | 0.4 | % | | | -2.0 | % | | | -3.2 | % | | | -3.8 | % | | | 0.0 | % | | | -2.6 | % |
1 | In April 2006, we sold SFIS. Excluding the impact of SFIS from all periods for comparability purposes, the percent change (over prior year) for Total Property & Casualty net written premiums for 2nd quarter 2007 was 2.4%, 1st quarter 2007 was 0.6%, 4th quarter 2006 was -0.2% and 3rd quarter 2006 was -1.6%. |
Safeco Corporation – October 30, 2007 – Page SS-10
Safeco Property & Casualty
Net Earned Premiums
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3RD QTR
2007 | | | 2ND QTR
2007 | | | 1ST QTR
2007 | | | 4TH QTR
2006 | | | 3RD QTR
2006 | | | YTD 2007 | | | YTD 2006 | |
| Net Earned Premiums | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Safeco Personal Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | $ | 653.8 | | | $ | 657.0 | | | $ | 650.7 | | | $ | 667.2 | | | $ | 676.0 | | | $ | 1,961.5 | | | $ | 2,046.0 | |
Property | | | 239.4 | | | | 232.8 | | | | 226.7 | | | | 230.8 | | | | 228.5 | | | | 698.9 | | | | 678.2 | |
Specialty | | | 30.0 | | | | 28.7 | | | | 27.2 | | | | 27.5 | | | | 27.2 | | | | 85.9 | | | | 77.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SPI | | | 923.2 | | | | 918.5 | | | | 904.6 | | | | 925.5 | | | | 931.7 | | | | 2,746.3 | | | | 2,802.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Safeco Business Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBI Regular | | | 331.0 | | | | 322.4 | | | | 313.8 | | | | 315.7 | | | | 310.2 | | | | 967.2 | | | | 929.7 | |
SBI Special Accounts Facility | | | 66.7 | | | | 66.0 | | | | 65.3 | | | | 65.5 | | | | 63.4 | | | | 198.0 | | | | 198.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SBI | | | 397.7 | | | | 388.4 | | | | 379.1 | | | | 381.2 | | | | 373.6 | | | | 1,165.2 | | | | 1,128.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Surety | | | 90.2 | | | | 85.8 | | | | 83.6 | | | | 79.7 | | | | 75.4 | | | | 259.6 | | | | 217.8 | |
P&C Other | | | (0.1 | ) | | | 1.3 | | | | (0.3 | ) | | | 1.8 | | | | 2.7 | | | | 0.9 | | | | 71.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Property & Casualty | | $ | 1,411.0 | | | $ | 1,394.0 | | | $ | 1,367.0 | | | $ | 1,388.2 | | | $ | 1,383.4 | | | $ | 4,172.0 | | | $ | 4,220.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Net Earned Premiums (Percent Change) | | Percent Change Over Prior Year Same Quarter | | | Percent Change YTD | |
| | | | | | | |
Safeco Personal Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | | -3.3 | % | | | -3.9 | % | | | -5.1 | % | | | -4.9 | % | | | -5.5 | % | | | -4.1 | % | | | -3.4 | % |
Property | | | 4.8 | | | | 2.6 | | | | 1.7 | | | | -0.2 | | | | 0.9 | | | | 3.1 | | | | -0.6 | |
Specialty | | | 10.3 | | | | 10.8 | | | | 9.6 | | | | 7.4 | | | | 7.5 | | | | 10.3 | | | | 7.4 | |
Total SPI | | | -0.9 | | | | -1.9 | | | | -3.1 | | | | -3.4 | | | | -3.6 | | | | -2.0 | | | | -2.5 | |
| | | | | | | |
Safeco Business Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBI Regular | | | 6.7 | | | | 3.9 | | | | 1.5 | | | | -0.7 | | | | -3.5 | | | | 4.0 | | | | -2.6 | |
SBI Special Accounts Facility | | | 5.2 | | | | -1.8 | | | | -4.1 | | | | -7.0 | | | | -7.8 | | | | -0.4 | | | | -6.6 | |
Total SBI | | | 6.5 | | | | 2.9 | | | | 0.5 | | | | -1.9 | | | | -4.2 | | | | 3.3 | | | | -3.3 | |
| | | | | | | |
Surety | | | 19.6 | | | | 21.5 | | | | 16.4 | | | | 12.1 | | | | 12.5 | | | | 19.2 | | | | 14.8 | |
P&C Other | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | | | | NM | |
| | | | | | | |
Total Property & Casualty1 | | | 2.0 | % | | | -1.5 | % | | | -3.9 | % | | | -4.9 | % | | | -5.3 | % | | | -1.1 | % | | | -2.9 | % |
1 | In April 2006, we sold SFIS. Excluding the impact of SFIS from all periods for comparability purposes, the percent change (over prior year) for Total Property & Casualty net earned premiums for 2nd quarter 2007 was 0.5%, 1st quarter 2007 was -1.2%, 4th quarter 2006 was -2.2% and 3rd quarter 2006 was -3.0%. |
Safeco Corporation – October 30, 2007 – Page SS-11
Safeco Property & Casualty
Safeco Personal Insurance (SPI)
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3RD QTR
2007 | | | 2ND QTR
2007 | | | 1ST QTR
2007 | | | 4TH QTR
2006 | | | 3RD QTR
2006 | | | YTD
2007 | | | YTD
2006 | |
| AUTO | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit | | $ | 16.3 | | | $ | 17.3 | | | $ | 17.2 | | | $ | 48.5 | | | $ | 80.1 | | | $ | 50.8 | | | $ | 195.6 | |
| | | | | | | |
Loss and LAE Ratio | | | 73.9 | % | | | 73.9 | % | | | 73.6 | % | | | 69.4 | % | | | 65.2 | % | | | 73.8 | % | | | 67.1 | % |
Expense Ratio | | | 23.6 | | | | 23.5 | | | | 23.8 | | | | 23.3 | | | | 23.0 | | | | 23.6 | | | | 23.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 97.5 | % | | | 97.4 | % | | | 97.4 | % | | | 92.7 | % | | | 88.2 | % | | | 97.4 | % | | | 90.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impact of Catastrophes | | | 0.6 | % | | | 0.5 | % | | | 0.2 | % | | | 0.8 | % | | | 0.7 | % | | | 0.4 | % | | | 1.2 | % |
| | | | | | | |
Net Written Premiums | | $ | 655.0 | | | $ | 643.4 | | | $ | 668.7 | | | $ | 640.7 | | | $ | 675.7 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | -3.1 | % | | | -2.9 | % | | | -4.3 | % | | | -4.8 | % | | | -6.1 | % | | | | | | | | |
| | | | | | | |
Net Earned Premiums | | $ | 653.8 | | | $ | 657.0 | | | $ | 650.7 | | | $ | 667.2 | | | $ | 676.0 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | -3.3 | % | | | -3.9 | % | | | -5.1 | % | | | -4.9 | % | | | -5.5 | % | | | | | | | | |
| | | | | | | |
Policies In Force (000's) | | | 1,705.3 | | | | 1,726.0 | | | | 1,736.5 | | | | 1,738.7 | | | | 1,748.3 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | -2.5 | % | | | -2.7 | % | | | -3.5 | % | | | -4.1 | % | | | -4.3 | % | | | | | | | | |
| | | | | | | |
Retention - Voluntary Auto | | | 80.4 | % | | | 80.1 | % | | | 79.7 | % | | | 79.5 | % | | | 79.3 | % | | | | | | | | |
| | | | | | | |
New Business Policies (000's) | | | 82.5 | | | | 84.6 | | | | 91.2 | | | | 87.3 | | | | 82.5 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 0.0 | % | | | 7.6 | % | | | -2.7 | % | | | -5.7 | % | | | -23.8 | % | | | | | | | | |
| | | | | | | |
| PROPERTY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit | | $ | 19.8 | | | $ | 37.1 | | | $ | 44.8 | | | $ | 32.1 | | | $ | 53.1 | | | $ | 101.7 | | | $ | 131.6 | |
| | | | | | | |
Loss and LAE Ratio | | | 63.3 | % | | | 54.5 | % | | | 52.8 | % | | | 56.3 | % | | | 47.8 | % | | | 56.9 | % | | | 51.8 | % |
Expense Ratio | | | 28.4 | | | | 29.5 | | | | 27.5 | | | | 29.8 | | | | 29.0 | | | | 28.5 | | | | 28.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 91.7 | % | | | 84.0 | % | | | 80.3 | % | | | 86.1 | % | | | 76.8 | % | | | 85.4 | % | | | 80.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impact of Catastrophes | | | 11.8 | % | | | 5.5 | % | | | 0.9 | % | | | 12.2 | % | | | 7.5 | % | | | 6.2 | % | | | 11.5 | % |
| | | | | | | |
Net Written Premiums | | $ | 271.9 | | | $ | 259.2 | | | $ | 205.4 | | | $ | 224.8 | | | $ | 258.6 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 5.1 | % | | | 4.4 | % | | | 6.7 | % | | | 1.8 | % | | | 5.7 | % | | | | | | | | |
| | | | | | | |
Net Earned Premiums | | $ | 239.4 | | | $ | 232.8 | | | $ | 226.7 | | | $ | 230.8 | | | $ | 228.5 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 4.8 | % | | | 2.6 | % | | | 1.7 | % | | | -0.2 | % | | | 0.9 | % | | | | | | | | |
| | | | | | | |
Policies In Force (000's)1 | | | 1,459.3 | | | | 1,430.0 | | | | 1,396.8 | | | | 1,368.4 | | | | 1,348.2 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 8.2 | % | | | 8.0 | % | | | 6.0 | % | | | 4.0 | % | | | 2.5 | % | | | | | | | | |
| | | | | | | |
Retention - Homeowners1 | | | 86.6 | % | | | 86.5 | % | | | 86.2 | % | | | 86.0 | % | | | 85.7 | % | | | | | | | | |
| | | | | | | |
New Business Policies (000's) | | | 85.6 | | | | 83.7 | | | | 72.0 | | | | 67.5 | | | | 78.5 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 9.0 | % | | | 46.1 | % | | | 56.5 | % | | | 40.0 | % | | | 36.0 | % | | | | | | | | |
| | | | | | | |
| SPECIALTY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit (Loss) | | $ | (4.3 | ) | | $ | 5.3 | | | $ | 8.7 | | | $ | 7.6 | | | $ | 2.9 | | | $ | 9.7 | | | $ | 21.4 | |
| | | | | | | |
Loss and LAE Ratio | | | 87.6 | % | | | 52.9 | % | | | 39.3 | % | | | 42.4 | % | | | 59.9 | % | | | 60.7 | % | | | 42.6 | % |
Expense Ratio | | | 26.8 | | | | 28.7 | | | | 28.6 | | | | 30.3 | | | | 29.2 | | | | 28.0 | | | | 29.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 114.4 | % | | | 81.6 | % | | | 67.9 | % | | | 72.7 | % | | | 89.1 | % | | | 88.7 | % | | | 72.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impact of Catastrophes | | | 1.3 | % | | | 0.3 | % | | | -2.7 | % | | | 0.2 | % | | | -0.3 | % | | | -0.3 | % | | | -4.2 | % |
1 | Excludes Florida where Safeco non-renewed policies beginning in 2006 and by January 11, 2007 all policies were in non-renewal status. PIF including Florida for the 3rd quarter 2007 was 1,459.3, 2nd quarter 2007 was 1,430.0, 1st quarter 2007 was 1,396.8, 4th quarter 2006 was 1,370.2 and 3rd quarter 2006 was 1,355.8. Retention ratio including Florida for the 3rd quarter 2007 was 86.1%, 2nd quarter 2007 was 85.4%, 1st quarter 2007 was 84.5%, 4th quarter 2006 was 84.1% and 3rd quarter 2006 was 84.3%. |
Safeco Corporation – October 30, 2007 – Page SS-12
Safeco Property & Casualty
Safeco Business Insurance (SBI)
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3RD
QTR
2007 | | | 2ND
QTR
2007 | | | 1ST
QTR
2007 | | | 4TH
QTR
2006 | | | 3RD
QTR
2006 | | | YTD
2007 | | | YTD
2006 | |
| SAFECO BUSINESS INSURANCE | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit | | $ | 51.0 | | | $ | 51.9 | | | $ | 48.9 | | | $ | 58.9 | | | $ | 37.1 | | | $ | 151.8 | | | $ | 172.0 | |
| | | | | | | |
Loss and LAE Ratio | | | 54.5 | % | | | 53.3 | % | | | 55.0 | % | | | 50.8 | % | | | 53.3 | % | | | 54.3 | % | | | 50.0 | % |
Expense Ratio | | | 32.7 | | | | 33.3 | | | | 32.1 | | | | 33.7 | | | | 36.8 | | | | 32.7 | | | | 34.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 87.2 | % | | | 86.6 | % | | | 87.1 | % | | | 84.5 | % | | | 90.1 | % | | | 87.0 | % | | | 84.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impact of Catastrophes | | | 2.1 | % | | | 0.8 | % | | | 0.4 | % | | | 0.9 | % | | | 0.2 | % | | | 1.1 | % | | | 1.6 | % |
| | | | | | | |
| SBI REGULAR | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit | | $ | 38.1 | | | $ | 31.8 | | | $ | 35.8 | | | $ | 36.5 | | | $ | 28.7 | | | $ | 105.7 | | | $ | 125.7 | |
| | | | | | | |
Loss and LAE Ratio | | | 55.8 | % | | | 57.0 | % | | | 56.5 | % | | | 54.7 | % | | | 55.5 | % | | | 56.4 | % | | | 51.8 | % |
Expense Ratio | | | 32.7 | | | | 33.2 | | | | 32.1 | | | | 33.7 | | | | 35.3 | | | | 32.7 | | | | 34.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 88.5 | % | | | 90.2 | % | | | 88.6 | % | | | 88.4 | % | | | 90.8 | % | | | 89.1 | % | | | 86.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impact of Catastrophes | | | 1.0 | % | | | 0.8 | % | | | 0.4 | % | | | 1.1 | % | | | 0.2 | % | | | 0.7 | % | | | 2.0 | % |
| | | | | | | |
Net Written Premiums | | $ | 329.7 | | | $ | 354.4 | | | $ | 329.1 | | | $ | 302.1 | | | $ | 308.5 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 6.9 | % | | | 4.9 | % | | | 4.7 | % | | | 4.5 | % | | | -0.2 | % | | | | | | | | |
| | | | | | | |
Net Earned Premiums | | $ | 331.0 | | | $ | 322.4 | | | $ | 313.8 | | | $ | 315.7 | | | $ | 310.2 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 6.7 | % | | | 3.9 | % | | | 1.5 | % | | | -0.7 | % | | | -3.5 | % | | | | | | | | |
| | | | | | | |
Policies In Force (000's)1 | | | 513.6 | | | | 512.2 | | | | 505.3 | | | | 502.1 | | | | 498.5 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 3.0 | % | | | 2.8 | % | | | 1.6 | % | | | -1.1 | % | | | -2.3 | % | | | | | | | | |
| | | | | | | |
Retention1 | | | 81.9 | % | | | 81.7 | % | | | 82.0 | % | | | 80.3 | % | | | 79.0 | % | | | | | | | | |
| | | | | | | |
New Business Policies (000's)1 | | | 28.3 | | | | 31.8 | | | | 29.6 | | | | 27.0 | | | | 27.3 | | | | | | | | | |
% Chg Prior Year Same Qtr | | | 3.7 | % | | | 13.2 | % | | | 14.7 | % | | | 15.9 | % | | | 3.0 | % | | | | | | | | |
| | | | | | | |
| SBI SPECIAL ACCOUNTS FACILITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit | | $ | 12.9 | | | $ | 20.1 | | | $ | 13.1 | | | $ | 22.4 | | | $ | 8.4 | | | $ | 46.1 | | | $ | 46.3 | |
| | | | | | | |
Combined Ratio | | | 80.6 | % | | | 69.5 | % | | | 79.9 | % | | | 65.7 | % | | | 86.7 | % | | | 76.7 | % | | | 76.7 | % |
| | | | | | | |
Impact of Catastrophes | | | 7.4 | % | | | 0.9 | % | | | 0.3 | % | | | -0.1 | % | | | 0.1 | % | | | 2.9 | % | | | 0.1 | % |
1 | 2006 policies in force, retention and new business policies have been restated due to a refinement in the way we count policies. |
Safeco Corporation – October 30, 2007 – Page SS-13
Safeco Property & Casualty
Surety, Other and Total
(In millions, except ratios)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3RD
QTR
2007 | | | 2ND
QTR
2007 | | | 1ST
QTR
2007 | | | 4TH
QTR
2006 | | | 3RD
QTR
2006 | | | YTD
2007 | | | YTD
2006 | |
| SURETY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit | | $ | 40.2 | | | $ | 37.3 | | | $ | 35.8 | | | $ | 32.7 | | | $ | 19.4 | | | $ | 113.3 | | | $ | 65.7 | |
| | | | | | | |
Combined Ratio | | | 55.5 | % | | | 56.4 | % | | | 57.2 | % | | | 58.9 | % | | | 74.2 | % | | | 56.4 | % | | | 69.8 | % |
| | | | | | | |
| P&C OTHER1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Loss | | $ | (16.5 | ) | | $ | (5.2 | ) | | $ | (16.1 | ) | | $ | (1.7 | ) | | $ | (35.6 | ) | | $ | (37.8 | ) | | $ | (52.7 | ) |
| | | | | | | |
| TOTAL PROPERTY & CASUALTY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Underwriting Profit | | $ | 106.5 | | | $ | 143.7 | | | $ | 139.3 | | | $ | 178.1 | | | $ | 157.0 | | | $ | 389.5 | | | $ | 533.6 | |
| | | | | | | |
Loss and LAE Ratio | | | 64.5 | % | | | 61.5 | % | | | 62.0 | % | | | 58.7 | % | | | 59.6 | % | | | 62.7 | % | | | 58.5 | % |
Expense Ratio | | | 28.0 | | | | 28.2 | | | | 27.8 | | | | 28.5 | | | | 29.1 | | | | 28.0 | | | | 28.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio (CR) | | | 92.5 | % | | | 89.7 | % | | | 89.8 | % | | | 87.2 | % | | | 88.7 | % | | | 90.7 | % | | | 87.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impact of Catastrophes | | | 3.0 | | | | 0.9 | | | | 0.2 | | | | 2.6 | | | | 1.6 | | | | 1.4 | | | | 2.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CR excluding Catastrophes | | | 89.5 | % | | | 88.8 | % | | | 89.6 | % | | | 84.6 | % | | | 87.1 | % | | | 89.3 | % | | | 84.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | 3RD
QTR
2007 | | | 2ND
QTR
2007 | | | 1ST
QTR
2007 | | | 4TH
QTR
2006 | | | 3RD
QTR
2006 | | | YTD
2007 | | | YTD
2006 | |
| Catastrophes | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SPI - Auto | | $ | 4.1 | | | $ | 3.3 | | | $ | 1.1 | | | $ | 5.3 | | | $ | 4.5 | | | $ | 8.5 | | | $ | 25.5 | |
SPI - Property | | | 28.4 | | | | 12.7 | | | | 2.1 | | | | 28.1 | | | | 17.2 | | | | 43.2 | | | | 78.1 | |
SPI - Specialty | | | 0.4 | | | | 0.1 | | | | (0.7 | ) | | | 0.1 | | | | (0.2 | ) | | | (0.2 | ) | | | (3.3 | ) |
SBI - Regular | | | 3.5 | | | | 2.4 | | | | 1.3 | | | | 3.3 | | | | 0.8 | | | | 7.2 | | | | 18.5 | |
SBI - Special Accounts Facility | | | 4.9 | | | | 0.6 | | | | 0.2 | | | | — | | | | — | | | | 5.7 | | | | 0.1 | |
P&C Other1 | | | 0.7 | | | | (5.9 | ) | | | (1.2 | ) | | | (0.7 | ) | | | 0.2 | | | | (6.4 | ) | | | 0.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 42.0 | | | $ | 13.2 | | | $ | 2.8 | | | $ | 36.1 | | | $ | 22.5 | | | $ | 58.0 | | | $ | 119.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | P&C Other includes results for large commercial business accounts and commercial specialty programs in runoff and other product lines that we have exited as well as SFIS, which we sold in April 2006. |
Safeco Corporation – October 30, 2007 – Page SS-14
Safeco Property & Casualty
Favorable (Unfavorable) Prior-Year Reserve Development
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3RD
QTR
2007 | | | 2ND
QTR
2007 | | | 1ST
QTR
2007 | | | 4TH
QTR
2006 | | | 3RD
QTR
2006 | | | YTD
2007 | | | YTD
2006 | |
| Prior-Year Reserve Development | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Safeco Personal Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | $ | 0.5 | | | $ | 6.2 | | | $ | (0.7 | ) | | $ | 29.2 | | | $ | 22.6 | | | $ | 6.0 | | | $ | 69.0 | |
Property | | | (0.7 | ) | | | (4.8 | ) | | | 15.0 | | | | 1.9 | | | | 12.8 | | | | 9.5 | | | | 13.8 | |
Specialty | | | (5.0 | ) | | | 0.3 | | | | 1.5 | | | | 2.9 | | | | 1.3 | | | | (3.2 | ) | | | 9.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SPI | | | (5.2 | ) | | | 1.7 | | | | 15.8 | | | | 34.0 | | | | 36.7 | | | | 12.3 | | | | 92.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Safeco Business Insurance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBI Regular | | | 14.2 | | | | 9.0 | | | | 1.3 | | | | 4.9 | | | | 3.0 | | | | 24.5 | | | | 21.7 | |
SBI Special Accounts Facility | | | 6.3 | | | | 12.0 | | | | 4.5 | | | | 3.2 | | | | 13.5 | | | | 22.8 | | | | 35.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total SBI | | | 20.5 | | | | 21.0 | | | | 5.8 | | | | 8.1 | | | | 16.5 | | | | 47.3 | | | | 56.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Surety | | | 7.1 | | | | 6.6 | | | | 16.2 | | | | 11.3 | | | | (2.6 | ) | | | 29.9 | | | | (6.0 | ) |
P&C Other1 | | | 0.3 | | | | (5.9 | ) | | | (13.2 | ) | | | (6.4 | ) | | | (29.9 | ) | | | (18.8 | ) | | | (43.9 | ) |
| | | | | | | | �� | | | | | | | | | | | | | | | | | | | | |
Total Property & Casualty | | $ | 22.7 | | | $ | 23.4 | | | $ | 24.6 | | | $ | 47.0 | | | $ | 20.7 | | | $ | 70.7 | | | $ | 99.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 | P&C Other includes results for large commercial business accounts and commercial specialty programs in runoff and other product lines that we have exited as well as SFIS, which we sold in April 2006. |
Safeco Corporation – October 30, 2007 – Page SS-15
Safeco Corporation
Productivity Measures
| | | | | | | | | | | | | | | |
Metrics1 | | 3RD
QTR
2007 | | 2ND
QTR
2007 | | 1ST
QTR
2007 | | 4TH
QTR
2006 | | 3RD
QTR
2006 |
PIF / FTE | | | 596 | | | 583 | | | 574 | | | 557 | | | 525 |
Expense 2 / PIF | | $ | 231 | | $ | 237 | | $ | 248 | | $ | 255 | | $ | 260 |
1 | Excluding impact of SFIS, which we sold on April 30, 2006. |
2 | Expense represents annual (12 month trailing) G&A expense and paid UAE (loss handling expenses). It excludes commissions, legal defense costs, premium taxes and other expenses. |
Safeco Property & Casualty
Statutory Information
(In millions, except ratios)
| | | | | | | | | | | | | | | | | | | |
Loss and Loss Adjustment Expense (LAE) Reserves | | | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Loss and LAE Reserves, Beginning of Period | | | | | $ | 4,670.0 | | | $ | 4,777.0 | | | $ | 4,737.1 | | | $ | 4,909.9 | |
Net Losses and LAE Incurred | | | | | | 912.5 | | | | 835.6 | | | | 2,627.7 | | | | 2,467.7 | |
Net Losses and LAE Paid | | | | | | (844.1 | ) | | | (842.8 | ) | | | (2,626.4 | ) | | | (2,607.8 | ) |
| | | | | | | | | | | | | | | | | | | |
Loss and LAE Reserves, End of Period | | | | | $ | 4,738.4 | | | $ | 4,769.8 | | | $ | 4,738.4 | | | $ | 4,769.8 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | |
P&C Balance Sheet | | 3RD QTR
2007 | | 2ND QTR
2007 | | | 1ST QTR
2007 | | | 4TH QTR 2006 | | | 3RD QTR 2006 | |
Total Capital and Surplus1, 2 | | $ | 3,140.5 | | $ | 3,508.1 | | | $ | 3,940.5 | | | $ | 3,908.4 | | | $ | 3,933.8 | |
Ratio of Net Written Premiums (Annualized) to Total Capital and Surplus 1, 2 | | | 1.83 | | | 1.63 | | | | 1.41 | | | | 1.44 | | | | 1.46 | |
2 | We received approval from state regulators for special dividends totaling $700 million which were paid by our insurance subsidiaries to Safeco Corporation on August 15, 2007. Surplus at the end of 2nd quarter 2007 reflected an accrual of $380 million of these special dividends that had been approved by June 30, 2007. Surplus at the end of 3rd quarter 2007 reflected the remaining special dividend payment of $320 million. |
Safeco Corporation – October 30, 2007 – Page SS-16
Safeco Corporation
Investment Portfolio
(In millions)
| | | | | | | | | | | | | | | | | | | | |
| Investment Portfolio (Market Value) | | 9/30/2007 | | | % | | | | | | 12/31/2006 | | | % | |
Fixed Maturities - Taxable | | $ | 3,178.5 | | | | 34.6 | | | | | | | $ | 4,785.5 | | | | 44.9 | |
Fixed Maturities - Nontaxable | | | 4,698.2 | | | | 51.1 | | | | | | | | 4,333.5 | | | | 40.7 | |
Marketable Equity Securities | | | 1,289.6 | | | | 14.0 | | | | | | | | 1,529.7 | | | | 14.3 | |
| | | | | | | | | | | | | | | | | | | | |
Total Fixed Maturities & Marketable Equity Securities | | | 9,166.3 | | | | 99.7 | | | | | | | | 10,648.7 | | | | 99.9 | |
Other Invested Assets | | | 30.3 | | | | 0.3 | | | | | | | | 14.3 | | | | 0.1 | |
| | | | | | | | | | | | | | | | | | | | |
Total Investment Portfolio | | $ | 9,196.6 | | | | 100.0 | | | | | | | $ | 10,663.0 | | | | 100.0 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Rating (Market Value) - Fixed Maturities | | 9/30/2007 | | | | | | | | | 12/31/2006 | | | | |
AAA | | | 58.0 | % | | | | | | | | | | | 53.9 | % | | | | |
AA | | | 16.2 | | | | | | | | | | | | 14.4 | | | | | |
A | | | 12.9 | | | | | | | | | | | | 19.4 | | | | | |
BBB | | | 8.3 | | | | | | | | | | | | 10.4 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Investment Grade | | | 95.4 | | | | | | | | | | | | 98.1 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
BB or lower | | | 3.4 | | | | | | | | | | | | 0.9 | | | | | |
Not Rated | | | 1.2 | | | | | | | | | | | | 1.0 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Below Investment Grade & Not Rated | | | 4.6 | | | | | | | | | | | | 1.9 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | 100.0 | % | | | | | | | | | | | 100.0 | % | | | | |
| | | | | | | | | | | | | | | | | | | | |
Average Rating | | | Aa2/AA | | | | | | | | | | | | A+ | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | 9/30/2007 | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | |
P&C Pretax Investment Income | | $ | 111.4 | | | $ | 120.1 | | | $ | 121.1 | | | $ | 120.9 | | | $ | 121.0 | |
Tax Rate on P&C Investment Income | | | 19.3 | % | | | 20.5 | % | | | 20.9 | % | | | 21.7 | % | | | 23.1 | % |
Pretax Investment Income | | $ | 117.3 | | | $ | 128.2 | | | $ | 127.2 | | | $ | 128.0 | | | $ | 130.9 | |
Tax Rate on Investment Income | | | 20.0 | % | | | 21.3 | % | | | 21.4 | % | | | 22.3 | % | | | 23.9 | % |
| | | | | |
Fixed Maturities at Cost | | $ | 7,754.8 | | | $ | 8,429.5 | | | $ | 8,848.4 | | | $ | 8,901.6 | | | $ | 9,007.2 | |
Fixed Maturities at Market | | | 7,876.7 | | | | 8,485.8 | | | | 9,063.0 | | | | 9,119.0 | | | | 9,213.3 | |
Marketable Equity Securities at Cost | | | 811.2 | | | | 1,040.9 | | | | 1,053.5 | | | | 1,018.4 | | | | 990.7 | |
Marketable Equity Securities at Market | | | 1,289.6 | | | | 1,615.5 | | | | 1,554.7 | | | | 1,529.7 | | | | 1,419.9 | |
| | | | | |
Total Cost | | $ | 8,596.3 | | | $ | 9,500.8 | | | $ | 9,916.2 | | | $ | 9,934.3 | | | $ | 10,009.1 | |
Total Market | | $ | 9,196.6 | | | $ | 10,131.7 | | | $ | 10,633.6 | | | $ | 10,663.0 | | | $ | 10,644.4 | |
% Fixed Maturities - Taxable (at market) | | | 34.6 | % | | | 39.0 | % | | | 41.9 | % | | | 44.9 | % | | | 50.1 | % |
% Fixed Maturities - Nontaxable (at market) | | | 51.1 | % | | | 44.8 | % | | | 43.4 | % | | | 40.7 | % | | | 36.4 | % |
% Marketable Equity Securities (at market) | | | 14.0 | % | | | 15.9 | % | | | 14.6 | % | | | 14.3 | % | | | 13.4 | % |
% Other | | | 0.3 | % | | | 0.3 | % | | | 0.1 | % | | | 0.1 | % | | | 0.1 | % |
| | | | | |
P&C Market YTM on Fixed Maturities Portfolio | | | 4.98 | % | | | 5.15 | % | | | 4.85 | % | | | 4.89 | % | | | 4.93 | % |
P&C Book YTM on Fixed Maturities Portfolio | | | 5.30 | % | | | 5.29 | % | | | 5.22 | % | | | 5.22 | % | | | 5.21 | % |
P&C Duration of Fixed Maturities-previous calculation1 | | | — | | | | 5.02 | | | | 4.85 | | | | 4.66 | | | | 4.46 | |
P&C Duration of Fixed Maturities-revised calculation2 | | | 4.64 | | | | 4.51 | | | | 4.25 | | | | — | | | | — | |
1 | Safeco historically has used an effective duration calculation which estimated price movements for a small change in rates, but did not use an option-adjusted methodology. |
2 | BlackRock, the manager of Safeco’s investment portfolio beginning on 7/2/07, uses a more sophisticated, modified option-adjusted effective duration for callable securities. |
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| Net Realized Investment Gains (Losses) (After Tax) | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Gains on Securities Transactions | | $ | 104.1 | | | $ | 33.5 | | | $ | 116.5 | | | $ | 54.2 | |
Impairments | | | (11.9 | ) | | | (9.0 | ) | | | (15.4 | ) | | | (41.0 | ) |
Other | | | (0.6 | ) | | | 0.7 | | | | 9.8 | | | | (3.0 | ) |
| | | | | | | | | | | | | | | | |
Total Net Realized Investment Gains (After Tax) | | $ | 91.6 | | | $ | 25.2 | | | $ | 110.9 | | | $ | 10.2 | |
| | | | | | | | | | | | | | | | |
Safeco Corporation – October 30, 2007 – Page SS-17
Safeco Corporation
Capitalization
(In millions)
| | | | | | | | | | | | |
| | | 9/30/2007 | | | 12/31/2006 | | | 12/31/2005 | |
Debt | | | | | | | | | | | | |
$300 million back up line of credit (unused) | | $ | — | | | $ | — | | | $ | — | |
6.875%, due 7/15/07 (non callable)1 | | | — | | | | 197.3 | | | | 200.0 | |
4.20%, due 2/1/08 (non callable) | | | 200.0 | | | | 200.0 | | | | 200.0 | |
4.875%, due 2/1/10 (non callable) | | | 300.0 | | | | 300.0 | | | | 300.0 | |
7.25%, due 9/1/12 (non callable) | | | 204.0 | | | | 204.1 | | | | 204.1 | |
8.072% debentures due 20372 (Callable by Safeco at 104 in 2007) | | | — | | | | 348.6 | | | | 402.9 | |
| | | | | | | | | | | | |
Total Debt | | $ | 704.0 | | | $ | 1,250.0 | | | $ | 1,307.0 | |
| | | | | | | | | | | | |
Equity | | $ | 3,689.2 | | | $ | 3,927.9 | | | $ | 4,124.6 | |
| | | | | | | | | | | | |
Total Capital (Debt + Equity) | | $ | 4,393.2 | | | $ | 5,177.9 | | | $ | 5,431.6 | |
| | | | | | | | | | | | |
Debt to Capital | | | 16.0 | % | | | 24.1 | % | | | 24.1 | % |
Debt to Equity | | | 19.1 | % | | | 31.8 | % | | | 31.7 | % |
| | | |
Debt to Capital (excluding FAS 115) | | | 16.3 | % | | | 25.0 | % | | | 24.5 | % |
Debt to Equity (excluding FAS 115) | | | 19.5 | % | | | 33.3 | % | | | 32.5 | % |
1 | On July 16, 2007, we paid down $197.3 of our 6.875% senior notes at maturity. Reflects the repurchase of $2.7 of debt in November 2006. |
2 | On July 16, 2007, we redeemed $322.3 of our Capital Securities for $335.3. The Capital Securities were redeemed at a price of 104% of principal, and we incurred a pretax expense of $14.1 for the redemption premium. We also retired our $26.3 Capital Trust equity investment, which was reported as debt in our Consolidated Financial Statements. Reflects the repurchase of $15.0 of debt in February 2006, $17.3 of debt in May 2006 and $22.0 of debt in November 2006. |
Safeco Corporation – October 30, 2007 – Page SS-18
