UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
7/28/03
Date of Report (Date of earliest event reported)
SAFECO CORPORATION
(Exact name of registrant as specified in Charter)
WASHINGTON 1-6563 91-0742146
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Safeco Plaza, Seattle, Washington 98185
(Address of principal executive offices) (Zip Code)
(206) 545-5000
(Registrant's telephone number, including area code)
Item 9. Regulation FD Disclosure
The following earnings release and financial supplement were furnished to
the Securities and Exchange Commission today by Safeco Corporation.
(SAFECO LOGO)
Second Quarter News Release and Statistical Supplement (Unaudited)
July 28, 2003
Table of Contents
Page
Earnings News Release 1-8
Financial Supplement Introduction SS-1
Financial Measures Used by Safeco SS-2
Consolidated Results
Key Metrics SS-6
Summary of Financial Results SS-7
Consolidated Statements of Income SS-8
Consolidated Balance Sheets SS-9
Income Summary SS-10
Property & Casualty Results
Underwriting Profit and Combined Ratios SS-11
Net Written Premiums SS-12
Net Earned Premiums SS-13
Personal Auto SS-14
Homeowners and Specialty SS-15
Safeco Business Insurance (SBI) SS-16
Surety, Other and Total SS-17
Statutory Information SS-18
Life & Investments Results
Pretax Operating Earnings and Revenues SS-19
Supplemental Statistics SS-20
Corporate Supplemental Detail
Capitalization SS-21
Investment Portfolios - Consolidated SS-22
Investment Portfolios - Property & Casualty SS-23
Investment Portfolios - Life & Investments SS-24
FOR RELEASE AT 7:45 a.m., Eastern Time
INVESTOR RELATIONS CONTACT: Neal Fuller, 206-545-5537
MEDIA RELATIONS CONTACT: Paul Hollie, 206-545-3048
Profitable performance by Safeco's Auto and Group
insurance lines drives 2nd Quarter results
SEATTLE--(July 28, 2003)--
Second-Quarter Highlights
o Posted net income of $111.9 million, or $0.81 per diluted share.
o Operating earnings* more than doubled despite significant customer claims
for tornado and hailstorm damage.
o Auto insurance generated a $3.3 million underwriting profit.
o Group stop-loss medical insurance produced pretax operating earnings of
$24.5 million.
----------------------------------------------- -------------------------- ------------------------------
Summary Financial Results after tax 3 Months Ended 6 Months Ended
(In millions except per-share data) June 30 June 30
2003 2002 2003 2002
----------------------------------------------- ----------- -------------- ----------------- ------------
Net Income $ 111.9 $ 105.2 $ 201.9 $ 168.8
Per Diluted Share of Common Stock $ 0.81 $ 0.82 $ 1.45 $ 1.32
----------------------------------------------- -- -------- ------ ------- ------- --------- --- --------
Net Realized Investment Gains (Losses) $ 14.7 $ 62.0 $ (17.7) $ 82.1
----------------------------------------------- -- -------- ------ ------- ------- --------- --- --------
Operating Earnings* $ 97.2 $ 43.2 $ 219.6 $ 86.7
----------------------------------------------- -- -------- ------ ------- ------- --------- --- --------
Average Shares Outstanding 139.0 128.1 138.8 128.1
----------------------------------------------- -- -------- ------ ------- ------- --------- --- --------
* Operating Earnings is Net Income excluding Net Realized Investment Gains
(Losses). Measures used in this news release that are not based on
accounting principles generally accepted in the United States (GAAP) are
defined and reconciled to the most directly comparable GAAP measure in our
Form 8-K available through the SEC and online at
http://www.safeco.com/safeco/investor/pdfs/03q2_sup.pdf
---------------------------------------------------------------------------
Profitable performance of its Auto and Group stop-loss medical
insurance lines drove Safeco's (NASDAQ: SAFC) second-quarter results as the
company reported net income of $111.9 million, or $0.81 per diluted share. This
compares with net income of $105.2 million, or $0.82 per share, in the second
quarter of last year.
Operating earnings more than doubled, climbing to $97.2 million in the
quarter compared with $43.2 million for the same period last year. Operating
earnings is a non-GAAP measure that reflects the performance of Safeco's
business lines since it excludes the effects of net realized investment gains
and losses.
"We continue to be pleased with our progress," said Mike McGavick,
Safeco chairman and CEO. "Considering the magnitude of claims from devastating
tornadoes and hailstorms, our results show just how much progress we've made.
"Our Auto insurance line produced its first profitable quarter in
almost two years," he added. "And our stop-loss medical line continues to exceed
our expectations."
As previously announced, Safeco's insurance customers were hit hard by
catastrophic storms in the second quarter. Claims from catastrophe losses
reached $99.1 million pretax, including $60.5 million in Homeowners, $22.3
million in Auto, $14.3 million in business insurance and $2.0 million for all
other lines. This compares with a total of $64.8 million in catastrophe losses
for the second quarter of last year.
Safeco's return on equity for the first half of the year, based on
annualized net income, was 9.2 percent. Operating return on equity, measured
using annualized operating earnings and excluding unrealized gains, was 13.4
percent for the first six months of 2003.
The company realized net investment gains of $14.7 million after tax in
the quarter, down from $62.0 million for the same period last year. Safeco
recorded $30.3 million after tax for impaired investments during the second
quarter. These impairments were more than offset by gains on securities
transactions.
Overall revenues increased to $1.9 billion, up 4.0 percent compared to
the second quarter of last year. Operating revenues--excluding net realized
investment gains--grew 8.6 percent.
"We've addressed most of the fundamental issues previously facing
Safeco," McGavick noted. "The one nagging challenge that remains is bringing our
expenses in line with our best competitors'. As we begin developing 2004
business plans, I'm asking everyone in the company to become even more
expense-conscious. We should constantly ask ourselves, `If this were my money,
would I spend it this way?'"
Net earned premiums for all Property & Casualty operations increased
7.1 percent compared with the second quarter of 2002. Net written premiums, a
leading indicator of revenues in future quarters, increased 11.2 percent.
Safeco Personal Insurance Performance
Personal Auto, Safeco's largest product line, generated a pretax
underwriting profit of $3.3 million, its first profitable performance since the
third quarter of 2001. This compares with a loss of $7.3 million in the second
quarter of 2002.
The line produced a combined ratio of 99.4, an improvement over both
100.3 in the first quarter of this year and 101.6 in the second quarter of last
year. Combined ratio is a standard gauge of underwriting performance measuring
the percentage of premium dollars used for customer claims and expenses. A
combined ratio below 100 indicates that the line is operating profitably.
"It's good to see Auto turn a profit again," McGavick noted. "While
it's too soon to say this is a trend, the signs are pointing in the right
direction.
"Our goal is for Auto to consistently generate combined ratios in the
mid-90s," he added. "We would have hit that target this quarter if not for the
significant amount of storm damage to vehicles. We're also seeing robust growth
in the number of policies sold to the best drivers as well as improved
retention."
Net written Auto premiums increased 17.0 percent compared with the
second quarter of 2002. Total number of policies increased 9.6 percent compared
with a year ago.
Safeco's Homeowners line reported a quarterly pretax underwriting loss
of $13.4 million, compared with a loss of $36.9 million for the same period last
year. Combined ratio was 107.0, better than the 119.5 generated in the second
quarter last year, but not as strong as the profitable 89.7 in the first quarter
of this year.
"Although the line lost money because of significant catastrophes in
the quarter, the underlying fundamentals of our Homeowners line continue to
improve," McGavick said.
Safeco is seeing a change in the way customers use Homeowners insurance
to protect their property. Three years ago, nearly half of Safeco's Homeowners
customers purchased policies with a $250 deductible, resulting in numerous small
claims for maintenance-related issues. Today, 94 percent of customers have
deductibles of $500 or more.
"While Homeowners is improving, we're still not getting adequate rate
in every market," McGavick noted. "We have moratoriums on selling new Homeowners
policies in seven states, most recently California.
"We continue rolling out our new Homeowners product, which is now
available in 31 states," he added. "In this quarter's results, we saw early
indications that the product more accurately matches rate to the risk we take
on."
Net written premiums in Homeowners increased 0.8 percent compared to
the second quarter of last year. The number of policies decreased 9.1 percent
compared with the same period of 2002.
Contributing to the overall performance of Safeco Personal Insurance
was a $14.8 million pretax underwriting profit in Specialty Lines, up $11.8
million compared with the second quarter last year. This is the result of
increased rates, lower losses and the favorable settlement of prior-quarter
claims.
Safeco Business Insurance Performance
Safeco Business Insurance reported a pretax underwriting loss of $21.5
million in the second quarter, an improvement over a $41.2 million loss in the
same period last year. Combined ratio was 106.0, better than the 111.1 in the
second quarter of 2002, but not as strong as the 101.5 reported in the first
quarter of this year.
SBI Regular--Safeco's core line of products for small- to medium-sized
businesses--reported a combined ratio of 104.2 in the quarter. While the
performance is better than the 109.9 in the second quarter of last year, it's
off from 102.0 in the first quarter of 2003 because of weather and catastrophe
claims.
Expenses in Safeco's commercial insurance lines remain high as a result
of several factors, including an increase in agent bonus commission costs during
the second quarter and costs associated with automation.
In the first quarter, Safeco rolled out an automated system for selling
Business Owners Policies--a comprehensive package of insurance products tailored
for small businesses. This contributed to a 35.7 percent increase in new
accounts in the first half of this year compared with the same period last year.
Second quarter product-development efforts focused on adding commercial
automobile insurance to this automated system. The new feature was launched last
week and is expected to take four months to roll out nationwide. Workers'
compensation insurance will be added to the automated platform in the fall,
followed by commercial multi-peril insurance next year.
"We expect this system to drive profitable growth, and our costs will
decline as we get further along in the rollout," McGavick noted. "That said,
we're not satisfied with expenses in this line."
Net written premiums for Safeco Business Insurance increased 9.4
percent in the second quarter compared with the same period in 2002.
Net written premiums for SBI Regular increased 11.0 percent compared to
the second quarter of 2002. Despite growth of 16.9 percent in the number of SBI
Regular new business policies issued during the quarter, total policies in force
decreased 6.9 percent compared to a year ago.
Surety Performance
Surety generated a pretax underwriting profit of $6.8 million in the
quarter, up from $5.8 million in the same period last year. Combined ratio for
Surety was a profitable 82.2, compared with 81.5 in the second quarter of 2002
and 88.6 in the first quarter of this year.
"Higher rates, combined with an increase in new accounts, continue to
generate profitable growth in our Surety line," McGavick said.
Life & Investments Performance
Safeco Life & Investments generated pretax operating earnings of $57.9
million, up 11.3 percent from $52.0 million in the second quarter of 2002.
"Given continuing inflation in medical costs, and the fact that low
interest rates are squeezing margins on our investment products, we continue to
believe that this level of performance will be difficult to maintain," McGavick
said.
"Although our Individual Life product line failed to turn an operating
profit this quarter, overall we're pleased with another solid performance from
Life & Investments," he added.
The Group product line again led performance in the second quarter,
generating pretax operating earnings of $24.5 million, up from $14.1 million in
the same period last year. Group's main product is stop-loss medical insurance
sold to employers with self-funded benefit plans. This product insures employee
benefit plans against potential large medical claims.
Group's earned premiums increased to $141.6 million from $89.0 million
in the second quarter of 2002, reflecting the acquisition of a large book of
business from Swiss Re in mid-2002. Group's profitable results in the quarter
are attributable to an exceptionally low loss ratio of 56.3 percent, compared
with 59.8 percent in the second quarter of 2002. Loss ratio measures claims
costs as a percentage of total premiums--the lower the ratio, the stronger the
performance.
Income Annuities generated $8.4 million in pretax operating earnings in
the quarter, up from $7.3 million in the second quarter of 2002. Income
Annuities results included favorable pre-payment adjustments on mortgage-backed
securities of $3.4 million compared to unfavorable adjustments of $0.3 million a
year ago. The results also reflect declining investment income due to lower
interest rates and bond defaults in previous quarters.
The Retirement Services line produced $4.9 million in pretax operating
earnings, compared with $4.0 million during the second quarter of 2002. This is
partially attributable to increased sales of fixed annuities, providing a larger
base of assets to generate investment income.
Individual Life reported a quarterly pretax operating loss of $0.5
million compared with pretax operating earnings of $7.5 million for the second
quarter of 2002. This change is the result of several factors--increased life
insurance claims, lower margins on life insurance products that are sensitive to
interest rates, and higher expenses. "We're looking closely at these factors and
taking actions to get results back on track," McGavick noted.
The Asset Management line reported pretax operating earnings of $0.1
million, down from $1.7 million in second quarter 2002. This is a result of a
drop in fee income, which is based on assets under management, as well as higher
expenses. Total assets under management increased to $4.0 billion from $3.7
billion at the end of the first quarter, yet still off from $4.4 billion at the
end of second quarter 2002.
Additional financial information available
Safeco uses both GAAP and non-GAAP financial measures to track the
performance of its insurance and investments operations. The definition of each
non-GAAP measure, and a 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 & Exchange Commission today.
The Form 8-K will include this news release, Safeco's summary financial
results, consolidated statements of income, consolidated balance sheets, and the
company's second-quarter financial supplement.
All of this information is available on Safeco's Website at
http://www.safeco.com/safeco/investor/pdfs/03q2_sup.pdf
Management reviews results on Webcast
Safeco's senior management team will discuss the company's
second-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 at
http://www.safeco.com/irwebcast and archived later in the day for replay.
About Safeco
Safeco, in business since 1923, is a Fortune 500 company based in
Seattle that sells insurance and investment products through independent agents,
brokers and financial advisors nationwide. Safeco products help individuals and
small businesses protect what they value and secure their financial future. More
information about Safeco can be found at www.safeco.com
# # #
- ------------------------------------------------------------------------------
Forward-looking information contained in this
news release is subject to risk and uncertainty
Statements, analysis and other information contained in this news release that
relate to 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. Statements in this news release that
are not historical information are forward-looking. The operations, performance
and development of our business are subject to certain risks and uncertainties
that may cause actual results to differ materially from those contained in or
suggested by the forward-looking statements in this news release. The risks and
uncertainties include, but are not limited to:
o the ability to obtain rate increases and decline or non-renew underpriced
insurance accounts;
o achievement of premium targets and profitability;
o realization of growth and business retention estimates;
o achievement of overall expense goals;
o success in implementing a new business entry model for personal and
commercial lines;
o success in obtaining regulatory approval of price-tiered products and the
use of insurance scores, including credit scores as a component;
o the ability to freely enter and exit lines of business;
o changes in the mix of Safeco's book of business;
o driving patterns;
o the competitive pricing environment, initiatives by competitors and other
changes in competition;
o weather conditions, including the severity and frequency of storms,
hurricanes, snowfalls, hail and winter conditions;
o the occurrence of significant natural disasters, including earthquakes;
o the occurrence of significant man-made disasters, such as the attack on
September 11, 2001 or war;
o the occurrence of bankruptcies that result in losses under surety bonds,
investment losses or lower investment income;
o the adequacy of loss and benefit reserves for the Property & Casualty and
Life & Investments businesses;
o the ability to run off the Lloyds of London business without incurring
material unexpected charges;
o the availability of, pricing of, and ability to collect reinsurance;
o the ability to price for, exclude and reinsure the risk of loss from
terrorism;
o interpretation of insurance policy provisions by courts, court decisions
regarding coverage and theories of liability, trends in litigation and
changes in claims settlement practices;
o the outcome of any litigation against us;
o legislative and regulatory developments affecting the actions of insurers,
including requirements regarding rates, application and availability of
coverage;
o changes in tax laws and regulations that affect the favorable taxation of
certain life insurance products or that decrease the usefulness of life
insurance products for estate-planning purposes;
o the effect of current insurance and credit ratings levels on business
production and the effect of negative changes to our ratings;
o inflationary pressures on medical care costs, auto parts and repair,
construction costs and other economic sectors that increase the severity of
claims;
o availability of bank credit facilities;
o use of derivative securities by Safeco Financial Products, Inc.;
o fluctuations in interest rates;
o performance of financial markets; and
o general economic and market conditions.
We assume no obligation to update any forward-looking statements contained in
this news release.
- -------------------------------------------------------------------------------
(Safeco Logo)
Financial Supplement
Second Quarter, 2003
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 SEC in the Corporation's quarterly 10-Q and
annual 10-K filings.
Neal Fuller
Vice President - Finance
206-545-5537
neaful@safeco.com
Safeco Corporation
Financial Measures Used by Safeco
Amounts are in millions or thousands as specified, except ratio and per share
information.
Property & Casualty businesses include the following segments:
Personal Lines
Personal Auto
Homeowners
Specialty
Safeco Business Insurance
SBI Regular
SBI Special Accounts Facility (SAF)
SBI Runoff
Surety
P&C Other
Life & Investments businesses include the following segments:
Group
Income Annuities
Retirement Services
Individual
Asset Management
L & I Other
Corporate includes all other activities, primarily the financing of our business
activities.
In addition to financial measures presented in the consolidated financial
statements prepared in accordance with accounting principles generally accepted
in the United States (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 derived directly from our Property & Casualty, Life & Investment
and Corporate operations. It excludes net realized investment gains and losses
that can fluctuate significantly and distort a comparison between periods. The
following table provides a reconciliation of operating revenues to revenues, the
most directly comparable GAAP measure.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Total Revenues
$1,871.0 $1,798.3 $3,633.3 $3,510.9
Net Realized Investment (Gains) Losses (22.3) (95.4) 27.6 (126.0)
------------------------------------------------------
Operating Revenues $1,848.7 $ 1,702.9 $3,660.9 $3,384.9
- -----------------------------------------------------------------------------------------------------------
Operating Earnings
Operating earnings is a non-GAAP financial measure that we use to assess the
profitability of our consolidated business. In the determination of operating
earnings, we exclude net realized investment gains and losses from net income.
Net realized investment gains and losses can fluctuate significantly and distort
a comparison between periods. The following table reconciles operating earnings
to net income, the most directly comparable GAAP measure.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Income $ 111.9 $ 105.2 $ 201.9 $ 168.8
Net Realized Investment (Gains) Losses, (14.7) (62.0) 17.7 (82.1)
Net of Taxes
------------------------------------------------------
Operating Earnings $ 97.2 $ 43.2 $ 219.6 $ 86.7
- -----------------------------------------------------------------------------------------------------------
Operating Return on Equity
Operating return on equity 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 ending shareholders' equity for the previous five
quarters, excluding from equity after-tax unrealized investment gains and losses
on fixed maturities. This ratio provides management with an additional measure
to evaluate Safeco's results excluding the unrealized changes in the valuation
of its fixed maturities portfolio that can fluctuate between periods. The
following table reconciles operating return on equity to return on equity, the
most directly comparable GAAP measure.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
(Annualized) 2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Income $ 111.9 $ 105.2 $ 201.9 $ 168.8
Average Shareholders' Equity 4,380.1 3,655.8 4,380.1 3,655.8
Return on Equity
Based on Annualized Net Income 10.2% 11.5% 9.2% 9.2%
Operating Earnings $ 97.2 $ 43.2 $ 219.6 $ 86.7
Average Shareholders' Equity 4,380.1 3,655.8 4,380.1 3,655.8
Average Unrealized Fixed Maturities 1,090.3 478.8 1,090.3 478.8
Investment Gains, Net of Tax
------------------------------------------------------
Adjusted Average Shareholders' Equity 3,289.8 3,177.0 3,289.8 3,177.0
Operating Return on Equity
Based on Annualized Operating Earnings
11.8% 5.4% 13.4% 5.5%
- -----------------------------------------------------------------------------------------------------------
*Net Income and Operating Earnings have been annualized for purposes of this
calculation only. The results for the six months ended June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003. Annualized amounts for 2002 are not reflective of the actual
amounts for the year ended December 31, 2002.
- -------------------------------------------------------------------------------
Property & Casualty Net Written Premium
Net written premium is a non-GAAP measure representing the amount of premium
charged for policies issued 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 premium on our Consolidated Balance Sheets. Safeco's
management views net written premium as a measure of business production trends
for the period under review and as a leading indicator of earned premium. The
following table reconciles net written premium to net earned premium, the most
directly comparable GAAP measure on our Consolidated Statements of Income.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Total Property & Casualty Net Earned Premium $1,201.8 $1,122.0 $2,364.9 $2,221.5
Change in Unearned Premium Liability 114.7 62.4 157.4 50.5
------------------------------------------------------
Total Property & Casualty Net Written Premium $1,316.5 $ 1,184.4 $2,522.3 $ 2,272.0
- -----------------------------------------------------------------------------------------------------------
Segment Profit (Loss) Measures
We have provided the following table that details the GAAP measure Income Before
Income Taxes and Distributions on Capital Securities on our Consolidated
Statements of Income. This is the most directly comparable GAAP measure used to
reconcile to Property & Casualty underwriting profit (loss) and Life &
Investments pretax operating earnings.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Property & Casualty $ 109.1 $ 214.6 $ 241.4 $ 274.4
Life & Investments 64.6 (23.6) 78.3 24.2
Corporate (0.6) (30.8) (5.9) (44.8)
------------------------------------------------------
Income Before Income Taxes
and Distributions on Capital Securities $ 173.1 $ 160.2 $ 313.8 $ 253.8
- -----------------------------------------------------------------------------------------------------------
Property & Casualty Underwriting Profit (Loss) and Combined Ratio
Underwriting profit (loss) represents the net amount of earned premium less
underwriting losses and expenses on a pretax basis. Management views
underwriting profit (loss) as a critical measure to assess the underwriting
effectiveness of the Property & Casualty operations and to evaluate the results
of these business units. The related investment portfolio is managed separately
from these underwriting businesses and, accordingly, net investment income and
net realized investment gains and losses are discussed separately. The following
table reconciles underwriting profit (loss) to Income before Income Taxes and
Distributions on Capital Securities, the most directly comparable GAAP measure
on our Consolidated Statements of Income. Combined ratio is a standard gauge of
underwriting performance and is calculated as losses and expenses expressed as a
percentage of earned premiums.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Property & Casualty Income before Income
Taxes and Distributions on Capital Securities $ 109.1 $ 214.6 $ 241.4 $ 274.4
Property & Casualty Net Investment Income (116.5) (115.3) (229.3) (230.5)
Property & Casualty Restructuring Charges -- 5.5 -- 12.1
Property & Casualty Net Realized Investment
(Gains) Losses (4.9) (189.0) (3.4) (231.5)
------------------------------------------------------
Total Underwriting Profit (Loss) $ (12.3) $ (84.2) $ 8.7 $ (175.5)
- -----------------------------------------------------------------------------------------------------------
Life & Investments Pretax Operating Earnings
Life & Investments' results are evaluated based on pretax operating earnings, a
non-GAAP measure, which excludes net realized investment gains and losses.
Management believes the presentation of pretax operating earnings enhances the
understanding of our Life & Investments results of operations by excluding net
realized investment gains and losses, which can fluctuate significantly and
distort a comparison between periods. The following table reconciles pretax
operating earnings to Income before Income Taxes and Distributions on Capital
Securities, the most directly comparable GAAP measure on our Consolidated
Statements of Income.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Life & Investments Income before Income Taxes and
Distributions on Capital Securities $ 64.6 $ (23.6) $ 78.3 $ 24.2
Net Realized Investment (Gains) Losses (6.7) 75.6 51.4 86.9
------------------------------------------------------
Pretax Operating Earnings $ 57.9 $ 52.0 $ 129.7 $ 111.1
- -----------------------------------------------------------------------------------------------------------
Other Information in this Supplement
Frequency, severity and loss cost information is on a newly reported, claims
incurred, basis which may be different from paid.
Catastrophes are events resulting in losses greater than $500,000, involving
multiple claims and policyholders. Safeco has used this definition since 1991.
Certain reclassifications have been made to the prior periods to conform to the
current presentation.
NM = Not Meaningful
Safeco Corporation
Key Metrics
(In Millions Except Per Share Data)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002 Chg
----------- ----------- ----------- ----------- ----------- ----------- ----------- --------
Net Income $ 111.9 $ 90.0 $ 57.1 $ 75.2 $ 105.2 $ 201.9 $ 168.8 20%
Net Income Per Diluted Share 0.81 0.65 0.42 0.59 0.82 1.45 1.32 10%
Net Realized Investment
Gains (Losses) 14.7 (32.4) (36.4) 7.8 62.0 (17.7) 82.1 NM
Operating Earnings 97.2 122.4 93.5 67.4 43.2 219.6 86.7 153%
Operating Earnings Per Share 0.70 0.88 0.71 0.53 0.34 1.58 0.68 132%
Operating Return on Equity
(Pre-FAS 115) annualized 11.8% 15.2% 11.8% 8.7% 5.4% 13.4% 5.5% 144%
Operating Return on Equity
(unadjusted) annualized 8.9% 12.1% 9.7% 7.2% 4.7% 10.0% 4.7% 113%
Operating Revenue $ 1,848.7 $ 1,812.2 $ 1,815.6 $ 1,782.1 $ 1,702.9 $ 3,660.9 $ 3,384.9 8%
% Chg Prior Year Same Qtr 8.6% 7.7% 7.2% 5.5% 0.9%
Life & Investments
Pretax Operating Earnings $ 57.9 $ 71.8 $ 66.3 $ 59.6 $ 52.0 $ 129.7 $ 111.1 17%
% Chg Prior Year Same Qtr 11.3% 21.5% 41.3% 38.6% -9.6%
Property & Casualty
Combined Ratio 101.0% 98.2% 101.6% 104.0% 107.5% 99.6% 107.9% (8.3)
Impact of Catastrophes 8.2% 1.1% 0.2% -0.9% 5.8% 4.8% 4.2% 0.6
Net Premiums Written $ 1,316.5 $ 1,205.8 $ 1,130.0 $ 1,182.7 $ 1,184.4 $ 2,522.3 $ 2,272.0 11%
% Chg Prior Year Same Qtr 11.2% 10.9% 7.4% 6.1% 3.3%
Net Premiums Earned $ 1,201.8 $ 1,163.1 $ 1,164.6 $ 1,135.2 $ 1,122.0 $ 2,364.9 $2,221.5 6%
% Chg Prior Year Same Qtr 7.1% 5.8% 4.2% 1.5% 0.1%
Book Value Per Share $ 37.22 $ 33.00 $ 32.07 $ 31.77 $ 28.91 $ 37.22 $ 28.91 29%
% Chg Prior Year Same Qtr 28.7% 20.9% 12.7% 7.8% -0.1%
BV Per Share (ex-FAS 115) $ 25.72 $ 24.66 $ 24.39 $ 23.55 $ 24.22 $ 25.72 $ 24.22 6%
% Chg Prior Year Same Qtr 6.2% -1.3% -0.7% -3.4% -7.5%
Safeco Corporation
Summary of Financial Results
(In Millions)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -----------------
2003 2002 2003 2002
------------------- ------------------
(Unaudited) (Unaudited)
REVENUES
Property & Casualty
Earned Premiums $1,201.8 $1,122.0 $2,364.9 $2,221.5
Net Investment Income 116.5 115.3 229.3 230.5
Life & Investments 524.9 460.7 1,052.3 921.8
Corporate 5.5 4.9 14.4 11.1
Net Realized Investment Gains (Losses) 22.3 95.4 (27.6) 126.0
------- ------- ------- -------
Total 1,871.0 1,798.3 3,633.3 3,510.9
------- ------- ------- -------
Income before Net Realized Investment Gains (Losses), Income Taxes
and Distributions on Capital Securities
Property & Casualty
Underwriting Profits (Losses) (12.3) (84.2) 8.7 (175.5)
Net Investment Income 116.5 115.3 229.3 230.5
Restructuring Charges - (5.5) - (12.1)
------- ------- ------- -------
Total Property & Casualty 104.2 25.6 238.0 42.9
Life & Investments 57.9 52.0 129.7 111.1
Corporate (11.3) (12.8) (26.3) (26.2)
------- ------- ------- -------
Total 150.8 64.8 341.4 127.8
Net Realized Investment Gains (Losses) before Taxes 22.3 95.4 (27.6) 126.0
------- ------- ------- -------
Income before Income Taxes and Distributions on Capital Securities 173.1 160.2 313.8 253.8
Provision (Benefit) for Income Taxes on
Income before Net Realized Investment Gains (Losses)
and Distributions on Capital Securities 42.4 10.4 99.4 18.7
Net Realized Investment Gains (Losses) 7.6 33.4 (9.9) 43.9
------- ------- ------- -------
Total 50.0 43.8 89.5 62.6
------- ------- ------- -------
Income before Distributions on Capital Securities 123.1 116.4 224.3 191.2
Distributions on Capital Securities, Net of Taxes (11.2) (11.2) (22.4) (22.4)
------- ------- ------- -------
Net Income $ 111.9 $ 105.2 $ 201.9 $ 168.8
======= ======= ======= =======
Safeco Corporation
Consolidated Statements of Income
(In Millions Except Per Share Data)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- -----------------------
2003 2002 2003 2002
--------------------- -----------------------
(Unaudited) (Unaudited)
REVENUES
Property & Casualty Earned Premiums $ 1,201.8 $ 1,122.0 $ 2,364.9 $ 2,221.5
Life & Investments Premiums and Other Revenues 221.1 166.1 445.0 331.2
Net Investment Income 423.1 412.8 845.6 827.5
Net Realized Investment Gains (Losses) 22.3 95.4 (27.6) 126.0
Other 2.7 2.0 5.4 4.7
-------- --------- --------- --------
Total 1,871.0 1,798.3 3,633.3 3,510.9
-------- --------- --------- --------
EXPENSES
Losses, Loss Adjustment Expenses and Policy Benefits 1,188.0 1,181.4 2,320.1 2,341.0
Other Underwriting and Operating Expenses 269.8 215.6 522.3 439.0
Amortization of Deferred Policy Acquisition Costs 222.7 212.4 438.9 421.9
Interest Expense 13.2 16.4 30.3 32.4
Intangibles Amortization 4.2 6.8 7.9 10.7
Restructuring Charges - 5.5 - 12.1
-------- --------- --------- --------
Total 1,697.9 1,638.1 3,319.5 3,257.1
-------- --------- --------- --------
Income before Income Taxes and Distributions on Capital Securities 173.1 160.2 313.8 253.8
Provision for Income Taxes 50.0 43.8 89.5 62.6
-------- --------- --------- --------
Income before Distributions on Capital Securities 123.1 116.4 224.3 191.2
Distributions on Capital Securities, Net of Taxes (11.2) (11.2) (22.4) (22.4)
-------- --------- --------- --------
Net Income $ 111.9 $ 105.2 $ 201.9 $ 168.8
======== ========= ========= ========
INCOME PER SHARE OF COMMON STOCK
Net Income Per Share of Common Stock - Diluted $ 0.81 $ 0.82 $ 1.45 $ 1.32
======== ========= ========= ========
Net Income Per Share of Common Stock - Basic $ 0.81 $ 0.82 $ 1.46 $ 1.32
======== ========= ========= ========
Dividends Declared $ 0.185 $ 0.185 $ 0.370 $ 0.370
Average Number of Shares Outstanding During the Period:
Diluted 139.0 128.1 138.8 128.1
Basic 138.4 127.8 138.3 127.8
Safeco Corporation
Consolidated Balance Sheets
(In Millions)
June 30 December 31
2003 2002
--------------- ---------------
(Unaudited)
ASSETS
Investments
Available-for-Sale Securities
Fixed Maturities, at Fair Value
(Cost or amortized cost: $23,190.5; $22,646.1) $ 25,639.3 $ 24,278.0
Marketable Equity Securities, at Fair Value
(Cost: $767.5; $777.2) 1,167.3 1,082.5
Mortgage Loans 942.8 925.9
Other Invested Assets 184.9 173.8
Short-Term Investments 434.1 311.0
--------------- ---------------
Total Investments 28,368.4 26,771.2
Cash and Cash Equivalents 199.2 188.5
Accrued Investment Income 333.8 336.3
Premiums and Service Fees Receivable 1,081.6 1,047.1
Other Notes and Accounts Receivable 239.1 162.3
Current Income Taxes Recoverable 39.1 26.2
Deferred Income Taxes Recoverable - 124.6
Reinsurance Recoverables 568.1 578.8
Deferred Policy Acquisition Costs 622.8 626.3
Land, Buildings and Equipment for Company Use 472.4 488.7
(At cost less accumulated depreciation: $319.4; $319.7)
Intangibles and Goodwill 190.1 190.0
Other Assets 284.1 259.8
Securities Lending Collateral 3,199.2 2,957.0
Separate Account Assets 995.4 899.2
--------------- ---------------
Total Assets $ 36,593.3 $ 34,656.0
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Property & Casualty Loss and Loss Adjustment Expense Reserves $ 4,916.0 $ 4,998.5
Accident and Health Reserves 155.7 170.0
Life Policy Liabilities 323.6 339.9
Unearned Premiums 2,008.4 1,847.5
Funds Held Under Deposit Contracts 16,198.7 15,655.4
Debt 1,124.6 1,123.8
Deferred Income Taxes 235.3 -
Other Liabilities 1,438.1 1,389.3
Securities Lending Payable 3,199.2 2,957.0
Separate Account Liabilities 995.4 899.2
--------------- ---------------
Total Liabilities 30,595.0 29,380.6
--------------- ---------------
Commitments and Contingencies - -
Corporation-Obligated, Mandatorily Redeemable Capital Securities
of Subsidiary Trust Holding Solely Junior Subordinated
Debentures of the Corporation (Capital Securities) 844.0 843.8
--------------- ---------------
Preferred Stock, No Par Value
Shares Authorized: 10; Shares Issued and Outstanding: None - -
Common Stock, No Par Value
Shares Authorized: 300; Shares Reserved for Options: 11.7; 12.0
Shares Issued and Outstanding: 138.5; 138.2 1,182.9 1,178.1
Retained Earnings 2,222.6 2,072.2
Accumulated Other Comprehensive Income, Net of Taxes
Unrealized Gains and Losses on Available-for-Sale Securities
and Derivative Financial Instruments 1,824.8 1,241.2
Unrealized Foreign Currency Translation Adjustments (10.5) (15.7)
Deferred Policy Acquisition Costs Valuation Allowance (56.7) (35.4)
Minimum Pension Liability Adjustment (8.8) (8.8)
--------------- ---------------
Total Accumulated Other Comprehensive Income 1,748.8 1,181.3
--------------- ---------------
Total Shareholders' Equity 5,154.3 4,431.6
--------------- ---------------
Total Liabilites & Shareholders' Equity $ 36,593.3 $ 34,656.0
============== ===============
Safeco Corporation
Income Summary
(In Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------- ------------------
2003 2002 2003 2002
------------------- ------------------
(Unaudited) (Unaudited)
Pretax Net Income (Loss)
P&C Underwriting $ (12,249) $ (84,193) $ 8,734 $ (175,537)
P&C Investment Income 116,438 115,267 229,280 230,469
Restructuring Charges - (5,537) - (12,103)
--------- ---------- ------- -----------
Total P&C 104,189 25,537 238,014 42,829
Life & Investments 57,901 51,954 129,725 111,053
Corporate (11,327) (12,809) (26,383) (26,188)
Distributions on Capital Securities (17,264) (17,264) (34,528) (34,528)
--------- ---------- ------- -----------
Income before Net Realized Investment Gains (Losses) 133,499 47,418 306,828 93,166
Net Realized Investment Gains (Losses) 22,316 95,393 (27,555) 126,017
--------- ---------- ------- -----------
Total $155,815 $142,811 $279,273 $219,183
======== ========== ======== ==========
Income Tax Expense (Benefit)
P&C Underwriting (4,603) (28,830) $ 2,519 $ (59,830)
P&C Investment Income 29,196 27,705 59,254 54,205
Restructuring Charges - (1,936) - (4,236)
--------- ---------- ------- -----------
Total P&C 24,593 (3,061) 61,773 (9,861)
Life & Investments 19,401 18,062 44,552 37,962
Corporate (1,676) (4,684) (7,014) (9,478)
Distributions on Capital Securities (6,043) (6,043) (12,085) (12,085)
--------- ---------- ------- -----------
Income before Net Realized Investment Gains (Losses) 36,275 4,274 87,226 6,538
Net Realized Investment Gains (Losses) 7,672 33,379 (9,850) 43,879
--------- ---------- ------- -----------
Total $ 43,947 $ 37,653 $ 77,376 $ 50,417
======== ========== ======== ==========
After-tax Income (Loss)
P&C Underwriting $ (7,646) $ (55,363) $ 6,215 $ (115,707)
P&C Investment Income 87,242 87,562 170,026 176,264
Restructuring Charges - (3,601) - (7,867)
--------- ---------- ------- ----------
Total P&C 79,596 28,598 176,241 52,690
Life & Investments 38,500 33,892 85,173 73,091
Corporate (9,651) (8,125) (19,369) (16,710)
Distributions on Capital Securities (11,221) (11,221) (22,443) (22,443)
--------- ---------- ------- -----------
Income before Net Realized Investment Gains (Losses) 97,224 43,144 219,602 86,628
Net Realized Investment Gains (Losses) 14,644 62,014 (17,705) 82,138
--------- ---------- ------- -----------
Total $111,868 105,158 $201,897 $168,766
======== ========== ======== ==========
Average Shares Outstanding - Diluted 139,042 128,147 138,832 128,128
Average Shares Outstanding - Basic 138,417 127,809 138,339 127,790
Book Value Per Share $ 37.22 $ 28.91 $ 37.22 $ 28.91
Book Value Per Share (ex-FAS 115) $ 25.72 $ 24.22 $ 25.72 $ 24.22
Safeco Property & Casualty
Underwriting Profit and Combined Ratios
(In Thousands)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
----------- ------------ ----------- ------------ ----------- ------------ -----------
Net U/W Profit (Loss)
- ------------------------------
Safeco Personal Insurance
Personal Auto $ 3,332 $ (1,504) $ (10,600) $ (6,186) $ (7,341) $ 1,828 $ (27,613)
Homeowners (13,448) 19,501 12,399 5,501 (36,879) 6,053 (55,123)
Specialty 14,803 11,493 8,221 9,626 3,033 26,296 11,057
----------- ------------ ----------- ------------ ----------- ------------ -----------
Total SPI 4,687 29,490 10,020 8,941 (41,187) 34,177 (71,679)
----------- ------------ ----------- ------------ ----------- ------------ -----------
Safeco Business Insurance
SBI Regular (11,531) (5,287) 7,878 (11,972) (24,997) (16,818) (47,597)
Special Accounts Facility (632) 6,412 7,518 3,895 (1,779) 5,780 6,411
SBI Runoff (9,394) (6,311) (33,019) (15,368) (14,411) (15,705) (59,138)
----------- ------------ ----------- ------------ ----------- ------------ -----------
Total SBI (21,557) (5,186) (17,623) (23,445) (41,187) (26,743) (100,324)
----------- ------------ ----------- ------------ ----------- ------------ -----------
Surety 6,836 3,669 6,076 2,688 5,750 10,505 8,879
P&C Other* (2,215) (6,990) (17,264) (33,514) (7,569) (9,205) (12,413)
----------- ------------ ----------- ------------ ----------- ------------ -----------
Total All Lines $ (12,249) $ 20,983 $ (18,791) $ (45,330) $ (84,193) $ 8,734 $ (175,537)
============ ============ =========== ============ =========== ============ ===========
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
----------- ------------ ----------- ------------ ----------- ------------ -----------
Net Combined Ratios (GAAP)
Safeco Personal Insurance
Personal Auto 99.4% 100.3% 102.0% 101.2% 101.6% 99.8% 103.0%
Homeowners 107.0% 89.7% 93.5% 97.1% 119.5% 98.4% 114.8%
Specialty 70.7% 76.9% 83.8% 81.2% 94.0% 73.8% 89.1%
----------- ------------ ----------- ------------ ----------- ------------ -----------
Total SPI 99.4% 96.2% 98.7% 98.8% 105.8% 97.8% 105.1%
----------- ------------ ----------- ------------ ----------- ------------ -----------
Safeco Business Insurance
SBI Regular 104.2% 102.0% 97.0% 104.7% 109.9% 103.1% 109.6%
Special Accounts Facility 100.7% 92.7% 91.6% 94.8% 102.9% 96.8% 94.2%
SBI Runoff NM NM NM NM NM NM NM
----------- ------------ ----------- ------------ ----------- ------------ -----------
Total SBI 106.0% 101.5% 104.9% 106.6% 111.1% 103.7% 113.4%
----------- ------------ ----------- ------------ ----------- ------------ -----------
Surety 82.2% 88.6% 81.4% 91.8% 81.5% 85.1% 85.4%
P&C Other* NM NM NM NM NM NM NM
----------- ------------ ----------- ------------ ----------- ------------ -----------
Total All Lines 101.0% 98.2% 101.6% 104.0% 107.5% 99.6% 107.9%
=========== ============ =========== =========== =========== ============ ===========
* P&C Other includes our discontinued assumed reinsurance business, our
involuntary-assigned risk and other state-mandated personal lines business, our
Lloyds of London operations which are in runoff and certain discontinued product
lines.
Safeco Property & Casualty
Net Written Premiums
(In Thousands)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
------------ ------------ ------------ ------------ ------------- ------------ -------------
Net Written Premiums
Safeco Personal Insurance
Personal Auto $ 570,911 $ 565,972 $ 523,033 $ 536,309 $ 487,891 $1,136,883 $966,349
Homeowners 215,334 172,220 175,245 212,096 213,607 387,554 380,307
Specialty 57,147 46,543 44,228 54,433 58,061 103,690 104,011
------------ ------------ ------------ ------------ ------------- ------------ ---------
Total SPI 843,392 784,735 742,506 802,838 759,559 1,628,127 1,450,667
------------ ------------ ------------ ------------ ------------- ------------ ----------
Safeco Business Insurance
SBI Regular 308,396 284,027 258,106 253,552 277,950 592,423 543,581
Special Accts Facility* 94,744 97,088 99,221 88,203 83,527 191,832 161,483
SBI Runoff (576) 1,814 (3,747) (2,193) 6,566 1,238 31,021
------------ ------------ ------------ ------------ ------------- ------------ ----------
Total SBI 402,564 382,929 353,580 339,562 368,043 785,493 736,085
------------ ------------ ------------ ------------ ------------- ------------ ----------
Surety 46,932 35,125 32,384 38,491 35,882 82,057 62,754
P&C Other 23,592 2,989 1,559 1,789 20,889 26,581 22,419
------------ ------------ ------------ ------------ ------------- ------------ ----------
Total All Lines $1,316,480 $1,205,778 $1,130,029 $1,182,680 $1,184,373 $2,522,258 $2,271,925
=========== ============ ============ ============ ============= =========== ============
Net Written Premiums (Percent Change)
Percent Change Over Prior Year Same Quarter Percent Change YTD
Safeco Personal Insurance
Personal Auto 17.0% 18.3% 14.4% 17.6% 12.6% 17.6% 9.6%
Homeowners 0.8% 3.3% -1.7% 5.4% 7.0% 1.9% 4.6%
Specialty -1.6% 1.3% -4.3% 1.9% 2.6% -0.3% -0.6%
------------ ------------ ------------ ------------ ------------- ------------ ---------
Total SPI 11.0% 13.6% 9.0% 12.9% 10.2% 12.2% 7.5%
------------ ------------ ------------ ------------ ------------- ------------ ----------
Safeco Business Insurance
SBI Regular 11.0% 7.0% 17.2% 7.0% 6.9% 9.0% 3.3%
Special Accts Facility* 13.4% 24.8% 187.1% 165.2% 167.7% 18.8% 144.2%
SBI Runoff NM NM NM NM NM NM NM
------------ ------------ ------------ ------------ ------------- ------------ ---------
Total SBI 9.4% 4.0% 4.2% -8.0% -7.9% 6.7% -11.7%
------------ ------------ ------------ ------------ ------------- ------------ ---------
Surety 30.8% 30.7% 7.4% 16.1% -9.8% 30.8% -8.0%
P&C Other 12.9% 95.4% -2.1% -22.7% 16.6% 18.6% 12.6%
------------ ------------ ------------ ------------ ------------- ------------ ----------
Total All Lines 11.2% 10.9% 7.4% 6.1% 3.3% 11.0% 0.0%
============ ============ ============ ============ ============= ============ ==========
*As each existing old Safeco Commercial policy comes up for renewal (reported in
Runoff), a decision is made by Special Accounts Facility to renew or not renew.
If it is renewed it becomes part of Special Accounts Facility, otherwise results
associated with the discontinued account remain in Runoff. In addition, this
number is impacted by the acquisition of the ACE lender-placed property business
of $80 million in premiums in 4Q 2001.
Surety premiums reflected a change from a 50% quota share reinsurance treaty to
an excess of loss treaty in February 2001.
Safeco Property & Casualty
Net Earned Premiums
(In Thousands)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
------------ ------------ ------------ ------------ ------------ ------------ --------------
Net Earned Premiums
Safeco Personal Insurance
Personal Auto $552,860 $ 528,512 $ 523,043 $ 497,332 $472,497 $1,081,372 $ 926,744
Homeowners 192,128 189,431 192,112 192,620 189,273 381,559 372,634
Specialty 50,527 49,807 50,813 51,072 51,199 100,334 101,228
------------ ------------ ------------ ------------ ------------ ------------ --------------
Total SPI 795,515 767,750 765,968 741,024 712,969 1,563,265 1,400,606
------------ ------------ ------------ ------------ ------------ ------------ --------------
Safeco Business Insurance
SBI Regular 272,133 266,016 262,262 255,467 251,461 538,149 496,375
Special Accts Facility* 93,226 87,905 89,189 75,200 61,766 181,131 111,658
SBI Runoff (4,928) 2,930 8,110 24,176 56,881 (1,998) 138,540
------------ ------------ ------------ ------------ ------------ ------------ --------------
Total SBI 360,431 356,851 359,561 354,843 370,108 717,282 746,573
------------ ------------ ------------ ------------ ------------ ------------ --------------
Surety 38,418 32,142 32,673 32,721 31,114 70,560 60,922
P&C Other 7,447 6,305 6,370 6,573 7,907 13,752 13,450
------------ ------------ ------------ ------------ ------------ ------------ --------------
Total All Lines $ 1,201,811 $1,163,048 $1,164,572 $1,135,161 $1,122,098 $2,364,859 $ 2,221,551
============ ============ ============ =========== ============ ============ =============
Net Earned Premiums (Percent Change)
Percent Change Over Prior Year Same Quarter Percent Change YTD
Safeco Personal Insurance
Personal Auto 17.0% 16.3% 14.9% 11.4% 7.8% 16.7% 7.1%
Homeowners 1.5% 3.3% 2.8% 3.1% 2.5% 2.4% 1.6%
Specialty -1.3% -0.4% -0.6% 0.3% 1.5% -0.9% 1.7%
------------ ------------ ------------ ------------ ------------ ------------ --------------
Total SPI 11.6% 11.6% 10.5% 8.3% 5.9% 11.6% 5.2%
------------ ------------ ------------ ------------ ------------ ------------ --------------
Safeco Business Insurance
SBI Regular 8.2% 8.6% 7.0% 0.5% -3.9% 8.4% -7.0%
Special Accts Facility* 50.9% 76.2% 152.7% 146.6% 93.1% 62.2% 79.5%
SBI Runoff NM NM NM NM NM NM NM
------------ ------------ ------------ ------------ ------------ ------------ --------------
Total SBI -2.6% -5.2% -4.5% -12.5% -13.3% -3.9% -12.5%
------------ ------------ ------------ ------------ ------------ ------------ --------------
Surety 23.5% 7.8% 16.9% 21.3% 37.0% 15.8% 50.0%
P&C Other -5.8% 13.7% -67.5% NM NM 2.2% 18.5%
------------ ------------ ------------ ------------ ------------ ------------ --------------
Total All Lines 7.1% 5.8% 4.2% 1.5% 0.1% 6.5% -0.7%
============ ============ ============ ============ ============ ============ ==============
*As each existing old Safeco Commercial policy comes up for renewal (reported in
Runoff), a decision is made by Special Accounts Facility to renew or not renew.
If it is renewed it becomes part of Special Accounts Facility, otherwise results
associated with the discontinued account remain in Runoff. In addition, this
number is impacted by the acquisition of the ACE lender-placed property business
of $80 million in premiums in 4Q 2001.
Surety premiums reflected a change from a 50% quota share reinsurance treaty to
an excess of loss treaty in February 2001.
Safeco Property & Casualty
Personal Auto
(In Thousands Except Ratios)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
----------- ----------- ----------- ----------- ------------ ----------- -----------
Personal Auto
Underwriting Profit (Loss) $ 3,332 $ (1,504) $(10,600) $(6,186) $ (7,341) $ 1,828 $(27,613)
Loss and LAE Ratio 76.0% 76.8% 78.5% 78.2% 78.2% 76.4% 79.1%
Expense Ratio 23.4% 23.5% 23.5% 23.0% 23.4% 23.4% 23.9%
----------- ----------- ----------- ----------- ------------ ----------- -----------
Combined Ratio 99.4% 100.3% 102.0% 101.2% 101.6% 99.8% 103.0%
=========== =========== =========== =========== ============ =========== ===========
Impact of Catastrophes 4.0% 0.2% 0.3% -0.1% 1.4% 2.1% 0.9%
Impact of Non-Cat Weather 1.4% 0.3% 0.4% 0.8% 1.1% 0.8% 0.7%
Policies In Force (000's) 1,586.1 1,558.6 1,529.9 1,498.4 1,447.6
% Chg Prior Year Same Qtr 9.6% 9.6% 8.0% 4.7% 0.1%
Retention 80.1% 81.0% 81.2% 80.5% 80.0%
New Business Policies (000's) 115.6 107.4 117.1 137.2 116.2
% Chg Prior Year Same Qtr -0.5% 12.2% 42.7% 85.2% 89.9%
Loss Trends (12 mo. rolling)
Frequency -3.7% -6.5% -7.3% -5.3% -4.8%
Severity 3.2% 5.1% 7.2% 4.9% 3.8%
Total Loss Costs -0.6% -1.7% -0.6% -0.7% -1.2%
Net Written Premiums $ 570,911 $565,972 $523,033 $536,309 $487,891
% Chg Prior Year Same Qtr 17.0% 18.3% 14.4% 17.6% 12.6%
Net Earned Premiums $552,860 $528,512 $523,043 $497,332 $472,497
% Chg Prior Year Same Qtr 17.0% 16.3% 14.9% 11.4% 7.8%
Frequency, severity and loss cost information is on a twelve month rolling newly
reported claims incurred basis which may be different from paid.
Safeco Property & Casualty
Homeowners and Specialty
(In Thousands Except Ratios)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
----------- ----------- ----------- ------------ ----------- ------------ -------------
Homeowners
Underwriting Profit (Loss) $ (13,448) $19,501 $12,399 $ 5,501 $ (36,879) $ 6,053 $ (55,123)
Loss and LAE Ratio 78.5% 60.9% 61.4% 68.9% 91.5% 69.7% 86.8%
Expense Ratio 28.5% 28.8% 32.1% 28.2% 28.0% 28.7% 28.0%
----------- ----------- ----------- ------------ ----------- ------------ -------------
Combined Ratio 107.0% 89.7% 93.5% 97.1% 119.5% 98.4% 114.8%
=========== =========== =========== ============ =========== ============ =============
Impact of Catastrophes 31.5% 4.3% 1.9% -3.4% 21.8% 18.0% 15.4%
Impact of Non-Cat Weather 9.1% 6.8% 6.2% 11.4% 11.2% 8.0% 9.4%
Policies In Force (000's) 1,232.8 1,263.0 1,290.5 1,324.1 1,349.3
% Chg Prior Year Same Qtr -9.1% -8.3% -8.2% -8.2% -8.9%
Retention 82.8% 82.8% 82.5% 82.4% 81.7%
New Business Policies (000's) 28.6 22.9 27.0 32.5 41.9
% Chg Prior Year Same Qtr -31.9% -27.4% -11.6% -8.6% 15.0%
Net Written Premiums $ 215,334 $ 172,220 $ 175,245 $ 212,096 $ 213,607
% Chg Prior Year Same Qtr 0.8% 3.3% -1.7% 5.4% 7.0%
Net Earned Premiums $ 192,128 $ 189,431 $ 192,112 $ 192,620 $ 189,273
% Chg Prior Year Same Qtr 1.5% 3.3% 2.8% 3.1% 2.5%
Specialty
Underwriting Profit $14,803 $11,493 $ 8,221 $ 9,626 $ 3,033 $26,296 $11,056
Loss and LAE Ratio 40.1% 46.3% 52.3% 50.0% 63.1% 43.2% 57.8%
Expense Ratio 30.6% 30.6% 31.5% 31.2% 30.9% 30.6% 31.3%
----------- ----------- ----------- ------------ ----------- ------------ -----------
Combined Ratio 70.7% 76.9% 83.8% 81.2% 94.0% 73.8% 89.1%
=========== =========== =========== =========== =========== ============ ===========
Safeco Property & Casualty
Safeco Business Insurance (SBI)
(In Thousands Except Ratios)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
----------- ----------- ----------- ----------- ----------- ----------- -----------
Safeco Business Insurance
Underwriting Loss $ (21,557) $ (5,186) $(17,623) $(23,445) $ (41,187) $(26,743) $(100,324)
Loss and LAE Ratio 66.1% 62.8% 66.4% 67.0% 74.4% 64.4% 76.7%
Expense Ratio 39.9% 38.7% 38.5% 39.6% 36.7% 39.3% 36.7%
----------- ----------- ----------- ----------- ----------- ----------- -----------
Combined Ratio 106.0% 101.5% 104.9% 106.6% 111.1% 103.7% 113.4%
=========== =========== =========== =========== =========== =========== ===========
Impact of Catastrophes 4.0% 0.9% -1.1% -1.2% 3.9% 2.4% 2.8%
Impact of Non-Cat Weather 2.1% 1.9% 1.9% 2.5% 2.0% 2.0% 1.6%
SBI Regular
Underwriting Profit (Loss) $(11,531) $(5,287) $ 7,878 $ (11,972) $(24,997) $ (16,818) $(47,597)
Loss and LAE Ratio 66.6% 63.8% 60.1% 66.5% 73.2% 65.2% 74.6%
Expense Ratio 37.6% 38.2% 36.9% 38.2% 36.7% 37.9% 35.0%
----------- ----------- ----------- ----------- ----------- ----------- -----------
Combined Ratio 104.2% 102.0% 97.0% 104.7% 109.9% 103.1% 109.6%
=========== =========== =========== =========== =========== =========== ===========
Impact of Catastrophes 3.4% 1.7% -1.7% -1.1% 4.8% 2.5% 3.9%
Impact of Non-Cat Weather 2.2% 1.7% 0.4% 1.6% 1.9% 2.0% 1.8%
Policies In Force (000's) 511.1 517.2 529.7 537.1 549.0
% Chg Prior Year Same Qtr -6.9% -7.4% -8.9% -8.8% -9.0%
Retention 76.7% 76.1% 76.0% 75.8% 75.2%
New Business Policies (000's) 31.1 25.2 24.6 24.6 26.6
% Chg Prior Year Same Qtr 16.9% 13.7% 15.3% 22.5% 12.0%
Net Written Premiums $308,396 $284,027 $258,106 $253,552 $277,950
% Chg Prior Year Same Qtr 11.0% 7.0% 17.2% 7.0% 6.9%
Net Earned Premiums $272,133 $266,016 $262,262 $255,467 $ 251,461
% Chg Prior Year Same Qtr 8.2% 8.6% 7.0% 0.5% -3.9%
Special Accounts Facility
Underwriting Profit (Loss) $ (632) $ 6,412 $ 7,518 $ 3,895 $ (1,779) $ 5,780 $ 6,411
Combined Ratio 100.7% 92.7% 91.6% 94.8% 102.9% 96.8% 94.2%
SBI Runoff
Underwriting Loss $ (9,394) $ (6,311) $(33,019) $(15,368) $(14,411) $ (15,705) $(59,138)
Safeco Property & Casualty
Surety, Other and Total
(In Thousands Except Ratios)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
------------ ----------- ----------- ----------- ----------- ----------- -------------
Surety
Underwriting Profit $ 6,836 $ 3,669 $ 6,076 $ 2,688 $ 5,750 $ 10,505 $ 8,879
Combined Ratio 82.2% 88.6% 81.4% 91.8% 81.5% 85.1% 85.4%
P&C Other*
Underwriting Loss $ (2,215) $(6,990) $ (17,264) $ (33,514) $ (7,569) $ (9,205) $ (12,413)
Total Property & Casualty
Underwriting Profit (Loss) $ (12,249) $ 20,983 $ (18,791) $ (45,330) $ (84,193) $8,734 $ (175,537)
Loss and LAE Ratio 70.4% 67.9% 70.6% 72.1% 77.5% 69.1% 77.5%
Expense Ratio 30.6% 30.3% 31.0% 31.9% 30.0% 30.5% 30.4%
------------ ----------- ----------- ----------- ----------- ----------- -------------
Combined Ratio 101.0% 98.2% 101.6% 104.0% 107.5% 99.6% 107.9%
=========== =========== =========== =========== =========== =========== ===========
Impact of Catastrophes 8.2% 1.1% 0.2% -0.9% 5.8% 4.8% 4.2%
Impact of Non-Cat Weather 2.8% 1.9% 1.9% 3.2% 3.1% 2.4% 2.5%
* P&C Other includes our discontinued assumed reinsurance business, our
involuntary-assigned risk and other state-mandated personal lines business, our
Lloyds of London operations which are in runoff and certain discontinued product
lines.
Catastrophes and Non-Catastrophe Weather
Catastrophes $99,128 $13,321 $2,932 ($9,917) $64,832 $112,449 $92,371
Personal Auto 22,277 876 1,428 (581) 6,484 23,153 8,288
Homeowners 60,523 8,198 3,654 (6,638) 41,328 68,721 57,241
Safeco Business Insurance 14,274 3,165 (3,781) (4,157) 14,436 17,439 20,548
P&C Other 2,054 1,082 1,631 1,459 2,584 3,136 6,294
Non-Catastrophe Weather 33,955 22,504 22,179 36,302 35,441 56,459 56,730
Personal Auto 7,511 1,420 2,299 4,348 5,260 8,931 6,738
Homeowners 17,544 12,928 11,980 22,049 21,190 30,472 35,190
Safeco Business Insurance 7,635 6,888 6,515 8,725 7,304 14,523 12,477
P&C Other 1,265 1,268 1,385 1,180 1,687 2,533 2,325
Safeco Property & Casualty
Statutory Information
(In Thousands Except Ratios)
Three Months Ended Six Months Ended
Statutory: June 30 June 30
------------------------ -------------------------
2003 2002 2003 2002
------------------------ -------------------------
Net Premiums Written $ 1,316,480 $ 1,184,373 $ 2,522,258 $ 2,271,925
Change in Unearned Premium* (114,669) (62,275) (157,399) (50,374)
----------- ------------ ------------ ------------
Net Premiums Earned 1,201,811 1,122,098 2,364,859 2,221,551
----------- ------------ ------------ ------------
Net Losses Incurred 694,840 732,344 1,326,789 1,449,829
Loss Expense Incurred 151,816 130,989 308,954 266,993
Other U/W Expense Incurred 378,873 356,883 733,788 702,743
----------- ------------ ------------ ------------
Total Losses and Expense 1,225,529 1,220,216 2,369,531 2,419,565
----------- ------------ ------------ ------------
Underwriting Loss (23,718) (98,118) (4,672) (198,014)
Investment Results
Net Investment Income Earned 116,454 115,881 229,355 231,410
Net Realized Capital Gain 3,629 190,787 3,418 235,426
----------- ------------ ------------ ------------
Net Gain from Investments 120,083 306,668 232,773 466,836
Other Income 1,601 1,055 3,200 2,253
----------- ------------ ------------ ------------
Net Income before
Dividends to Policyholders 97,966 209,605 231,301 271,075
Dividends to Policyholders 760 95 1,282 510
----------- ------------ ------------ ------------
Net Income before Income Taxes 97,206 209,510 230,019 270,565
Income Tax Expense 44,430 45,737 54,836 39,566
----------- ------------ ------------ ------------
Net Income $ 52,776 $ 163,773 $ 175,183 $ 230,999
=========== ============ ============ ============
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2002 2002 2002 2003 2002
---------------------------------------------------------------------------------------------
Loss and Expense Ratios (Statutory)
Losses and Loss Adj. Expense
to Premiums Earned 70.4% 67.8% 69.5% 70.8% 77.0% 69.2% 77.3%
Other Underwriting Expenses
to Net Premiums Written 28.8% 29.2% 32.1% 30.9% 30.1% 29.1% 30.9%
---------------------------------------------------------------------------------------------
Total Loss and Expense 99.2% 97.0% 101.6% 101.7% 107.1% 98.3% 108.2%
Dividends to Policyholders
to Premiums Earned 0.1% 0.0% 0.0% -0.6% 0.0% 0.1% 0.0%
---------------------------------------------------------------------------------------------
Combined Ratio 99.3% 97.0% 101.6% 101.1% 107.1% 98.4% 108.2%
=============================================================================================
Balance Sheet - Statutory
P&C Companies Only**
Loss Reserves $ 3,711 $ 3,700 $ 3,733 $ 3,793 $ 3,836
Loss Adj Expense Reserves 791 806 803 792 807
---------------------------------------------------------------
Total Loss Reserves $ 4,502 $ 4,506 $ 4,536 $ 4,585 $ 4,643
===============================================================
Unearned Premium Reserves $ 1,957 $ 1,845 $ 1,805 $ 1,839 $ 1,792
Reserves for Dividends
to Policyholders 7 7 8 10 17
Net Admitted Assets 10,226 9,970 9,797 9,482 9,623
Total Capital and Surplus 2,600 2,571 2,511 2,166 2,163
Ratio of
Net Premiums Written (Annualized) 1.94 1.89 1.83 2.12 2.06
to Total Capital and Surplus
* Also reflects changes in accrued retrospective premiums.
** Certain 2003 amounts used are estimated and subject to change. Such changes
are not expected to be material.
Safeco Life & Investments
Pretax Operating Earnings*
(In Thousands)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD %
2003 2003 2002 2002 2002 2003 2002 Chg
------- -=------ -------- -------- ------- --------- -------- ------
Group $24,516 $29,047 $22,528 $22,407 $14,077 $ 53,563 $24,297 120.5%
Income Annuities 8,356 10,074 13,933 11,499 7,292 18,430 16,081 14.6%
Retirement Services 4,883 5,003 8,171 1,426 3,997 9,886 12,038 -17.9%
Individual (507) 1,895 3,913 3,472 7,459 1,388 14,162 -90.2%
Asset Management 166 73 171 935 1,725 239 4,055 -94.1%
L&I Other 20,487 25,732 17,578 19,856 17,404 46,219 40,420 14.3%
-------- ------- ------- ------- ------- --------- -------- -----
Pretax Operating Income $57,901 $71,824 $66,294 $59,595 $51,954 $ 129,725 $111,053 16.8%
======== ======= ======= ======= ======= ========= ======== =====
Safeco Life & Investments
Operating Revenues
(In Thousands)
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD %
2003 2003 2002 2002 2002 2003 2002 Chg
-------- -=------ -------- -------- ------- --------- -------- ------
Group $144,451 $142,323 $149,800 $149,351 $90,833 $ 286,774 $178,246 60.9%
Income Annuities 130,742 131,428 136,518 134,012 128,935 262,170 258,614 1.4%
Retirement Services 96,395 96,070 95,289 96,326 94,688 192,465 187,778 2.5%
Individual 95,862 95,874 96,799 96,212 93,246 191,736 186,663 2.7%
Asset Management 6,704 6,201 6,800 6,983 7,977 12,905 16,195 -20.3%
L&I Other 50,773 55,491 47,527 47,508 45,027 106,264 94,339 12.6%
-------- -------- -------- -------- -------- ----------- -------- ------
Operating Revenues $524,927 $527,387 $532,733 $530,392 $460,706 $ 1,052,314 $921,835 14.2%
======== -======= ======== ======== ======== =========== ======== ======
*Earnings before net realized investment gains (losses) and income taxes. This
is a standard industry measurement and is used by management as the key
measurement of Life & Investments segment profit or loss. It is presented as a
supplement to net income as a measure of profitability.
Safeco Life & Investments
Supplemental Statistics
2ND 1ST 4TH 3RD 2ND
QTR QTR QTR QTR QTR YTD YTD %
2003 2003 2002 2002 2002 2003 2002 Chg
------------ ---------- ----------- ----------- ----------- ----------- ----------- ------
Group
Earned Premiums (000's) $ 141,623 $ 140,578 $ 145,717 $ 147,302 $ 89,027 $ 282,201 $ 174,941 61.3%
Loss Ratio 56.3% 56.2% 59.2% 58.4% 59.8% 56.3% 59.8% 3.5
Income Annuities
Reserves (in billions) $ 6.4 $ 6.3 $ 6.3 $ 6.3 $ 6.3 $ 6.4 $ 6.3 1.6%
Deposits (000's) 35,750 28,481 37,185 34,140 20,651 64,231 35,757 79.6%
Retirement Services
Reserves
Fixed (in billions) $ 6.4 $ 6.1 $ 5.9 $ 5.8 $ 5.6 $ 6.4 $ 5.6 14.3%
Variable (in billions) 0.9 0.8 0.8 0.8 1.0 0.9 1.0 -10.0%
----------- ----------- ----------- ----------- ---------- ----------- ----------- -------
Total Reserves 7.3 6.9 6.7 6.6 6.6 7.3 6.6 10.6%
Deposits (000's) 328,427 332,235 338,042 271,358 391,260 660,662 747,954 -11.7%
Individual
Reserves $ 3,862 $ 3,804 $ 3,755 $ 3,708 $ 3,624 $ 3,862 $ 3,624 6.6%
Policies Issued:
Term, Universal Life, 6,536 5,885 6,341 5,191 5,379 12,421 10,681 16.3%
Traditional, Disability
Policies In Force 283,159 281,674 280,018 278,633 278,780 283,159 278,780 1.6%
Asset Management
Assets Under Management
(in billions) $ 4.0 $ 3.7 $ 3.9 $ 3.7 $ 4.4 $ 4.0 $ 4.4 -9.1%
Safeco Corporation
Capitalization
(In Millions)
06/30/2003 12/31/2002 12/31/2001
---------------- ---------------- ----------------
Short-Term Debt
$500 million back up line of credit (unused) $ - $ - $ -
Commercial Paper - - 299.0
7.875%, due 3/15/03 - 303.5 323.0
Medium-Term Notes and Other 23.2 29.7 74.6
Long-Term Debt
7.875%, due 4/1/05 (callable at par on 4/1/03) - 200.0 200.0
6.875%, due 7/15/07 (non callable) 198.2 200.0 200.0
4.20%, due 2/1/08 (non callable) 200.0 - -
4.875%, due 2/1/10 (non callable) 300.0 - -
7.25%, due 9/15/12 (non callable) 403.2 390.6 -
------------------ ------------------- -------------------
Total Debt $ 1,124.6 $ 1,123.8 $ 1,096.6
=================== =================== ===================
Capital Securities (callable at 104 in 2007) $ 844.0 $ 843.8 $ 843.4
=================== =================== ===================
Common Equity $ 5,154.3 $ 4,431.6 $ 3,634.6
=================== =================== ===================
Total Capital (Debt + Capital Securities + Equity) $ 7,122.9 $ 6,399.2 $ 5,574.6
=================== =================== ===================
Debt to Capital 15.8% 17.6% 19.7%
Debt and Capital Securities to Capital 27.6% 30.7% 34.8%
Debt and Adj. Cap Securities* to Capital 25.3% 28.1% 31.8%
Debt to Equity 21.8% 25.4% 30.2%
Earnings to Fixed Charges Ratio** 1.5 1.3 Negative
Interest Coverage Ratio** 8.3 5.0 Negative
Operating Earnings to Fixed Charges Ratio** 5.0 3.1 Negative
*20% equity credit
** The Earnings to Fixed Charges Ratio includes net realized investment gains
(losses), interest on deposit contracts and distributions on capital securities.
The Interest Coverage Ratio excludes net realized investment gains (losses),
interest on deposit contracts and distributions on capital securities. The
Operating Earnings to Fixed Charges Ratio excludes net realized investment gains
(losses) and interest on deposit contracts.
Safeco Corporation
Investment Portfolios - Consolidated
(In Millions)
Investment Portfolio (Market Value) 06/30/2003 % 12/31/2002 %
------------------- --------- ------------------- ---------
Fixed Maturities - Taxable $ 23,427.8 82.6 % $ 22,169.2 82.8 %
Fixed Maturities - Nontaxable 2,211.5 7.8 2,108.8 7.9
Equity Securities 1,167.3 4.1 1,082.5 4.0
------------------- --------- ------------------- ---------
Total Fixed Maturities & Equity Securities 26,806.6 94.5 25,360.5 94.7
Mortgage Loans 942.8 3.3 925.9 3.5
Other Invested Assets 184.9 0.7 173.8 0.6
Short-Term Investments 434.1 1.5 311.0 1.2
------------------- --------- ------------------- ---------
Total Consolidated Investment Portfolio $ 28,368.4 100.0 % $ 26,771.2 100.0 %
=================== ========= =================== ==========
Rating (Market Value) 06/30/2003 12/31/2002
------------------- -------------------
AAA 35 % 37 %
AA 7 7
A 24 24
BBB 28 25
BB or lower 5 5
Not Rated 1 2
------------------- -------------------
Total 100 % 100 %
==================== ===================
Average Rating A A
------------------- -------------------
Components of Net Realized Investment Gains (Losses) after Tax (in millions):
2nd 2nd
QTR QTR
2003 2002
------------------- -------------------
Gains on Securities Transactions $ 29.9 $ 138.5
Impairments on Fixed Maturities (24.8) (58.4)
Impairments on Equity Securities (5.5) (9.2)
Credit Default Swap Mark to Market 6.7 (10.3)
Other 8.4 1.4
------------------- -------------------
Net Realized Investment Gains $ 14.7 $ 62.0
=================== ===================
Safeco Corporation
Investment Portfolios - Property & Casualty
(In Millions)
Investment Portfolio (Market Value) 06/30/2003 % 12/31/2002 %
------------- -------------- -------------- -------------
Fixed Maturities - Taxable $ 5,377.8 59.7 % $ 5,383.0 61.2 %
Fixed Maturities - Nontaxable 2,203.6 24.5 2,108.8 23.9
Equity Securities 1,017.0 11.3 947.9 10.8
------------- -------------- -------------- -------------
Total Fixed Maturities & Equity Securities 8,598.4 95.5 8,439.7 95.9
Mortgage Loans 48.8 0.5 50.5 0.6
Other Invested Assets 15.6 0.2 15.6 0.2
Short-Term Investments 344.7 3.8 292.9 3.3
Total Property & Casualty
------------- -------------- -------------- -------------
Investment Portfolio $ 9,007.5 100.0 % $ 8,798.7 100.0 %
============= ============== ============== =============
Rating (Market Value) 06/30/2003 12/31/2002
------------- --------------
AAA 41 % 45 %
AA 12 11
A 25 22
BBB 18 17
BB or lower 3 3
Not Rated 1 2
------------- --------------
Total 100 % 100 %
============= ==============
Average Rating A+ AA
------------- --------------
06/30/2003 03/31/2003 12/31/2002 09/30/2002 06/30/2002
----------- ---------- ---------- ---------- -----------
Pretax Investment Income - Quarter $ 116.5 $ 112.8 $ 115.0 $ 114.5 $ 115.3
Effective Tax Rate on P&C
Investment Income - Quarter 25.07% 26.64% 25.94% 26.57% 24.04%
Cost or Amortized Cost $ 8,003 $ 8,145 $ 8,131 $ 7,903 $ 7,707
Market 9,008 8,877 8,799 8,627 8,416
% Equities (at market) 11.3% 10.2% 10.8% 10.5% 12.8%
% Taxable Bonds (at market) 59.7% 59.2% 61.2% 60.3% 59.5%
% Tax Exempt Bonds (at market) 24.5% 23.9% 23.9% 23.4% 23.9%
% Short Term and Other 4.5% 6.7% 4.1% 5.8% 3.9%
Market YTM on Bond Portfolio 3.71% 4.10% 4.17% 4.33% 5.09%
Book YTM on Bond Portfolio 5.66% 6.02% 5.99% 6.19% 6.30%
Duration of Bond Portfolio 4.57 5.23 5.26 4.91 5.70
Safeco Corporation
Investment Portfolios - Life & Investments
(In Millions)
Investment Portfolio (Market Value) 06/30/2003 % 12/31/2002 %
------------- ------------- ------------- ------------
Fixed Maturities - Taxable $ 17,961.9 93.0 % $ 16,657.6 92.5 %
Fixed Maturities - Nontaxable 7.9 0.0 0.8 0.0
Equity Securities 123.4 0.6 113.8 0.6
------------- ------------- ------------- ------------
Total Fixed Maturities & Equity Securities 18,093.2 93.6 16,772.2 93.1
Mortgage Loans 966.5 5.0 948.6 5.3
Other Invested Assets 119.8 0.6 118.1 0.7
Short-Term Investments 145.2 0.8 165.8 0.9
------------- ------------- ------------- ------------
Total Life & Investments Investment Portfolio $ 19,324.7 100.0 % $ 18,004.7 100.0 %
============= ============= ============ =============
Rating (Market Value) 06/30/2003 12/31/2002
------------- -------------
AAA 33 % 34 %
AA 4 5
A 24 25
BBB 32 29
BB or lower 6 5
Not Rated 1 2
------------- -------------
Total 100 % 100 %
============= ============
Average Rating A A+
------------- -------------
06/30/2003 03/31/2003 12/31/2002 09/30/2002 06/30/2002
----------- ---------- ---------- ---------- ----------
Cost or Amortized Cost $ 17,527 $ 17,259 $ 16,885 $ 16,704 $ 16,417
Market 19,325 18,489 18,005 17,797 17,019
% Equities (at market) 0.6% 0.6% 0.6% 0.6% 0.7%
% Taxable Bonds (at market) 93.0% 92.4% 92.5% 92.1% 91.7%
% Short Term and Other 6.4% 7.0% 6.9% 7.3% 7.6%
Market YTM on Bond Portfolio 4.97% 5.50% 5.70% 5.80% 6.48%
Book YTM on Bond Portfolio 6.73% 6.99% 7.18% 7.17% 7.41%
Duration of Bond Portfolio 6.97 6.81 6.81 6.94 6.75
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAFECO CORPORATION
---------------------------------
Registrant
Dated: July 28, 2003
/s/ CHRISTINE B. MEAD
---------------------------------
Christine B. Mead
Senior Vice President,
Chief Financial Officer and
Secretary