[SAFECO LOGO]
Fourth Quarter News Release and Statistical Supplement (Unaudited)
January 26, 2004
Table of Contents
Page
Earnings News Release 1-9
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
Underwriting Profit and Combined Ratios
without 3Q 03 Workers Compensation reserve adjustment SS-12
Net Written Premiums SS-13
Net Earned Premiums SS-14
Personal Auto SS-15
Homeowners and Specialty SS-16
Safeco Business Insurance (SBI) SS-17
Surety, Other and Total SS-18
Statutory Information SS-19
Life & Investments Results
Pretax Operating Earnings and Revenues SS-20
Supplemental Statistics SS-21
Corporate Supplemental Detail
Capitalization SS-22
Investment Portfolios - Consolidated SS-23
Investment Portfolios - Property & Casualty SS-24
Investment Portfolios - Life & Investments SS-25
[GRAPHIC OMITTED]
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
MOMENTUM BUILDS AS SAFECO DELIVERS STRONG FOURTH-QUARTER, YEAR-END RESULTS
Quarterly profits posted in all primary lines
SEATTLE--(Jan. 26, 2004)--
Highlights
o Posted net income of $339.2 million, or $2.44 per diluted share for the
year - Safeco's best performance since 1998.
o Generated fourth-quarter net income of $166.2 million.
o Strong progress continued in primary Property & Casualty businesses - all
recording underwriting profits for the fourth quarter.
---------------------------------------------- ------------------------------- ---------------------------------
Summary Financial Results after tax 3 Months Ended 12 Months Ended
(In millions, except per share data) December 31 December 31
2003 2002 2003 2002
---------------------------------------------- -------------- ---------------- --------------- -----------------
Net Income $ 166.2 $ 57.1 $ 339.2 $ 301.1
Per Diluted Share of Common Stock $ 1.19 $ 0.42 $ 2.44 $ 2.33
---------------------------------------------- --- ---------- ---- ----------- --- ----------- -- --------------
Net Realized Investment $ 14.4 $ (36.4) $ (65.8) $ 53.5
Gains (Losses)
---------------------------------------------- --- ---------- ---- ----------- --- ----------- -- --------------
Operating Earnings* $ 151.8 $ 93.5 $ 405.0 $ 247.6
---------------------------------------------- --- ---------- ---- ----------- --- ----------- -- --------------
Average Shares Outstanding 139.2 133.0 138.9 129.3
---------------------------------------------- --- ---------- ---- ----------- --- ----------- -- --------------
* 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/03q4_sup.pdf .
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Safeco (NASDAQ:SAFC) today reported its best annual results since 1998,
posting net income of $339.2 million - or $2.44 per diluted share - for the full
year 2003. This compares favorably with 2002's net income of $301.1 million - or
$2.33 per diluted share.
The company generated fourth-quarter net income of $166.2 million, or
$1.19 per diluted share - a dramatic improvement over the same quarter of 2002
when Safeco reported net income of $57.1 million, or $0.42 per diluted share.
"Our performance this quarter is a strong indicator that our segmented
Property & Casualty products and the automated sales and service platform we are
building to drive profitable growth are producing excellent results and hold
great promise for our future," said Mike McGavick, Safeco chairman and chief
executive officer.
"These results, delivered in the face of job reductions and uncertainty
around the announced intent to sell our Life & Investments businesses, not only
demonstrate the strength of our franchise, but our colleagues' ability to stay
focused during this period," he said.
Operating earnings for the fourth quarter were $151.8 million, up 62.4
percent from $93.5 million in the fourth quarter of 2002. These results include
a $6.0 million after-tax restructuring charge associated with previously
announced actions to reduce expenses by $75.0 million in 2004. Fourth-quarter
operating earnings in 2002 included a $4.4 million after-tax restructuring
charge stemming from Safeco's 2001 Property & Casualty (P&C) reorganization.
Total losses from the California wildfires were $10.5 million after tax for the
fourth quarter 2003.
"Our P&C businesses are now operating in line with our profit hurdles.
Even with the significant workers compensation reserve charge we took in the
third quarter, we came close to break-even in our underwriting results for the
year," said McGavick.
"While catastrophes and weather were lighter than expected during the
year, our disciplined underwriting and continued rollout of segmented products
drove our positive results.
"We continue to see strong results in Personal Auto. Our Homeowners
line turned in another better-than-anticipated performance, and Safeco Business
Insurance posted solid underwriting profits for the quarter. And despite the
unpleasant uncertainties of the sale process, Life & Investments performed well,
demonstrating its value and ability to deliver consistent results," he added.
Safeco's return on equity (ROE) for 2003 was 7.0 percent, down from 7.8
percent a year earlier. Operating ROE - measured using operating earnings and
excluding unrealized gains - was 11.5 percent for the year, compared with 7.8
percent in 2002. Fourth-quarter ROE was 13.8 percent, up from 5.9 percent in the
same period last year. Operating ROE for the quarter was 17.2 percent, a
significant improvement from 11.8 percent reported in the same period last year.
For the year, total consolidated revenues were $7.36 billion, compared
with $7.07 billion in 2002. Operating revenues for the year, which exclude net
realized investment gains, grew 6.8 percent over 2002. Total consolidated
revenues in the fourth quarter were $1.94 billion, up from $1.76 billion a year
ago. Operating revenues for the quarter grew 5.8 percent over fourth-quarter
2002 levels.
P&C net earned premiums increased 8.4 percent for the year over 2002.
Fourth-quarter net earned premiums grew 10.5 percent over the same period last
year. For the full year, P&C net written premiums - a leading indicator of
revenues in future quarters - increased 11.6 percent over 2002 levels. For the
fourth quarter, net written premiums grew 13.0 percent compared with the same
period a year ago.
"These numbers bode well for our future earnings potential and the
success of our P&C business model as we add more products to our automated sales
and service platform," said McGavick.
Safeco reported net realized investment losses for the year of $65.8
million after tax, including $95.2 million in after-tax impairments associated
with the announced sale of Life & Investments. This compares with $53.5 million
after-tax net realized investment gains in 2002. In the fourth quarter, net
realized investment gains were $14.4 million after tax, compared with after-tax
realized investment losses of $36.4 million in the fourth quarter of 2002.
As announced in September 2003, Safeco is focusing on its P&C
operations and is pursuing a sale of its Life & Investments businesses.
"We determined our best course for the future is to deliver our
personal and small-commercial insurance products over the same sales and service
platform, and through a common network of independent distributors," McGavick
said. "We believe this business model provides a sustainable market advantage
for us, lowers costs for our distributors and our company, and offers
competitively priced products and outstanding service for our customers."
Safeco Personal Insurance Performance
Safeco Personal Insurance reported a 2003 underwriting profit of $191.8
million - a dramatic improvement over the $52.7 million underwriting loss in
2002. For the quarter, Safeco Personal Insurance reported an underwriting profit
of $77.6 million, significantly better than the $10.1 million underwriting
profit posted in the same period last year.
Personal Auto, Safeco's largest business line, reported a quarterly
pretax underwriting profit of $27.9 million, an improvement over the $10.6
million underwriting loss in the fourth quarter of 2002. For the year, Personal
Auto posted an underwriting profit of $65.1 million, compared with a $44.4
million underwriting loss in 2002.
"Auto continues to dominate our personal lines growth and produce
outstanding results," said McGavick. "Again, underwriting discipline and the
continued rollout of our segmented Auto product on our sales and service
platform made for a winning combination."
Net written Personal Auto premiums increased 17.3 percent in the fourth
quarter compared with the same period of 2002. Net written Auto premiums for the
year were $2.37 billion, up from $2.03 billion in 2002. Policies in force
increased 9.1 percent in the fourth quarter compared with a year ago, reflecting
improved retention and new-business generation. Safeco ended the year with 1.7
million Auto customers.
Auto's combined ratio in the fourth quarter was 95.4 - an improvement
over the 102.0 combined ratio in the fourth quarter 2002, and in line with the
company's target.
Combined ratio is a standard gauge of underwriting performance
measuring the percentage of premium dollars used to pay customers' claims and
expenses. The lower the ratio, the more effective the underwriting. A combined
ratio below 100 indicates the line is operating profitably.
Safeco's Homeowners insurance line produced a pretax underwriting
profit of $44.0 million in the fourth quarter, up from the $12.4 million
underwriting profit recorded during the same period of 2002.
Safeco continues to enhance performance in the Homeowners line by
matching rates more closely to risk and limiting exposure in areas prone to
catastrophes.
For the year, Homeowners reported an underwriting profit of $82.2
million, significantly better than the $37.2 million underwriting loss for 2002.
Combined ratio improved to 77.4 in the fourth quarter, compared with
the 93.5 combined ratio a year ago. This result stemmed largely from improvement
in the loss ratio before catastrophes and weather - a reflection of higher rate
levels, continued decrease in claims frequency, improved claims handling, and
contract changes. Homeowners losses from the California wildfires were $7.7
million after tax.
"Our Homeowners performance was outstanding," said McGavick. "While the
weather may get some credit, the real drivers here are solid underwriting and a
continued focus on profitability. Our low share of total loss in the California
fires compared to our market share in the state validates once again the
importance of disciplined underwriting."
Net written premiums in Homeowners increased 2.9 percent in the fourth
quarter compared with a decline of 1.8 percent for the same period in 2002.
Policies in force declined 9.1 percent over the same period last year, even
though retention remained stable. This decline was largely the result of
new-business restrictions in states where the company could not operate
profitably.
"We're excited about our progress in the Homeowners line," said
McGavick. "We will, however, continue to take a conservative underwriting
approach in catastrophe-prone areas and stay focused on profitability."
Safeco Business Insurance Performance
Safeco Business Insurance reported a pretax underwriting profit of
$24.1 million in the fourth quarter - a significant improvement over the $17.7
million underwriting loss for the same period in 2002.
Combined ratio in the fourth quarter was 93.7, markedly better than
the 104.9 combined ratio posted in the fourth quarter of 2002.
"After three years of hard work, our Business Insurance line has turned
the corner," said McGavick. "This performance demonstrates our ability to better
manage loss ratios as well as the power of our automated underwriting platform
to price business more accurately."
Overall net written premiums for Safeco Business Insurance grew 10.5
percent in the fourth quarter compared with 4.2 percent for the same period in
2002. Net written premiums for SBI Regular - Safeco's core line of products for
small- to medium-sized businesses - increased 9.6 percent for the fourth quarter
2003 over a year ago.
SBI Regular reported a combined ratio of 86.1 in the fourth quarter
2003, compared to a 97.0 combined ratio during the same period last year.
"Contributing to this impressive result were lower-than-expected catastrophe
losses and favorable reserve development related to our short-tail Business
Owner Policy and Commercial Auto lines," McGavick said.
In November, Safeco began adding Workers Compensation to its online
sales platform. Agents now can go online to quote, bind and issue the coverages
most frequently purchased by small-business owners. Other products currently on
the platform include Business Owner Policy (BOP), BOP Umbrella and Non-Fleet
Commercial Auto.
"In the course of just one year, we've automated the products most
important to small-business customers," said McGavick. "Our ability to deliver
this technology, quickly and successfully, is further proof of our commitment to
support our independent agent partners and make the process of buying and
selling insurance as easy as possible."
New business counts in the BOP line grew 62.8 percent in the fourth
quarter compared to a year ago. Commercial Auto new business increased 38.8
percent for the quarter over 2002 levels.
The SBI Runoff segment, which includes large-commercial accounts and
program business that Safeco no longer writes, produced an underwriting loss of
$27.3 million in the fourth quarter, compared to a $33.0 million loss a year
earlier. This loss was due to strengthening reserves for expenses associated
with settling old liability claims.
For the year, Safeco Business Insurance reported an underwriting loss
of $197.9 million, including a $205.0 million third-quarter pretax charge for
prior-year workers compensation reserves. This compares with a $141.4 million
underwriting loss in 2002.
Surety Performance
Surety posted a pretax underwriting profit of $8.6 million in the
fourth quarter, compared with $6.0 million in the same quarter of 2002.
For the year, Surety generated a record underwriting profit of $27.6
million, up from $17.6 million in 2002. Combined ratio for Surety improved to
79.9 in the fourth quarter - better than 81.4 in the same quarter of 2002. Net
written premiums for the quarter grew 44.4 percent over 2002 levels. On a
year-over-year basis, net written premium growth was 33.8 percent.
"Surety once again contributed great results, driven by an ongoing
focus on underwriting profitability," McGavick said.
P&C Other Performance
The P&C Other segment, which includes non-voluntary business for
personal lines and results from operations that Safeco has exited or placed in
runoff, produced an underwriting loss of $17.5 million in the fourth quarter,
compared with a $17.1 million loss in the same quarter of 2002. The loss was
primarily the result of prior-year reserve strengthening.
Life & Investments Performance
Life & Investments (L&I) produced pretax operating earnings of $50.3
million in the fourth quarter 2003, compared with $66.3 million a year ago. For
the full year, L&I generated pretax operating earnings of $221.1 million,
compared with $237.0 million in 2002. Safeco defines a business line's pretax
operating earnings as pretax earnings excluding net realized investment gains or
losses. In the fourth quarter of 2003, L&I accrued $9.2 million for expenses
associated with the planned sale of the Life & Investments operations.
"Life & Investments continues to post strong results, in line with our
expectations," McGavick said. "These results are a testament to the continued
diligence and dedication of the L&I team despite the uncertainties of the sale
process."
The Group product line reported strong pretax operating earnings of
$23.0 million, slightly above the $22.5 million result posted in the fourth
quarter of last year. These results were supported by continued lower claims
experience and improved loss ratios.
Income Annuities reported pretax operating earnings of $7.7 million for
the fourth quarter, down from $13.9 million for the same period last year. The
decline was largely the result of lower favorable prepayment adjustments on
mortgage-backed securities due to interest rate changes.
Retirement Services generated quarterly pretax operating earnings of
$4.8 million, compared to $8.2 million in the fourth quarter of 2002. This
stemmed from lower spreads on fixed annuity products due to low interest rates
and higher operating expenses.
"The Life & Investments team has done an exceptional job serving
customers and distribution partners during this period of uncertainty," said
McGavick. "Results are solid across the board, reflecting the team's resolve to
maintain the value and vitality of the business."
Corporate
In conjunction with Safeco's decision to focus on P&C products, the
company exited its Safeco Financial Products operation, recognizing a minimal
after-tax gain from the disposal of the underlying derivatives.
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 fourth-quarter financial supplement.
Safeco's fourth-quarter financial supplement is available online at:
http://www.safeco.com/safeco/investor/pdfs/03q4_sup.pdf
Management reviews results on Webcast
Safeco's senior management team will discuss the company's fourth-
quarter and full-year 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.
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. More information about Safeco can be
found at www.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 release is subject to risk and
uncertainty. Information contained in this release that relates to anticipated
financial performance, business prospects and plans, regulatory developments and
similar matters are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Statements in this release that are
not historical information are forward-looking. 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
release. The risks and uncertainties include, but are not limited to:
>> Risks related to the pricing and underwriting of our products, and the
subsequent establishment of reserves, such as:
o Success in implementing a new-business entry model for personal and
commercial lines;
o Ability to appropriately price and reserve for changes in the mix of our
book of business;
o Appropriate pricing for any changes in driving patterns;
o The availability of, pricing of, and the ability to collect reinsurance,
including the ability to price for, exclude and reinsure the risk of loss
from terrorism;
o Inflationary pressures on medical care costs, auto parts and repair,
construction costs and rising costs in other economic sectors that increase
the severity of claims;
>> Risks related to our Property & Casualty insurance strategy, including:
o Safeco's ability to successfully divest the Life & Investments businesses;
o Achievement of premium targets and profitability, including realization of
growth and business retention estimates;
o Achievement of overall expense goals;
o The ability to run off the Lloyd's of London business without incurring
material unexpected charges;
>> Regulatory, judicial and legislative risks, such as:
o The ability to freely enter and exit lines of business;
o Success in obtaining regulatory approval of rates and underwriting
guidelines, including price-tiered products and the use of insurance
scores, including credit scores as a component;
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 and availability of coverage;
>> The competitive pricing environment, initiatives by competitors and other
changes in competition;
>> Unusual loss activity, such as:
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;
>> Financial and economic conditions, such as:
o Performance of financial markets;
o Availability of bank credit facilities;
o Fluctuations in interest rates;
o General economic conditions;
>> Operational risks, such as:
o Damage to Safeco's infrastructure causing a disruption to policy or claim
processing; and
o Internal or external fraud perpetrated against us.
We assume no obligation to update any forward-looking statements contained in
this news release.
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Financial Supplement
Fourth 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:
Safeco Personal Insurance
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.
Certain reclassifications have been made to the prior year amounts to conform to
the current year presentation.
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 & Investments
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 Year Ended
December 31 December 31
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2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Total Revenues $ 1,943.2 $1,760.1 $ 7,358.1 $7,067.2
Net Realized Investment (Gains) Losses (21.2) 56.0 101.9 (82.5)
------------------------------------------------------
Operating Revenues $ 1,922.0 $ 1,816.1 $ 7,460.0 $6,984.7
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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 Year Ended
December 31 December 31
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2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Income $ 166.2 $ 57.1 $ 339.2 $ 301.1
Net Realized Investment (Gains) Losses,
Net of Taxes (14.4) 36.4 65.8 (53.5)
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Operating Earnings $ 151.8 $ 93.5 $ 405.0 $ 247.6
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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 Year Ended
December 31 December 31
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(Annualized) 2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Net Income $ 166.2 $ 57.1 $ 339.2 $ 301.1
Average Shareholders' Equity 4,820.9 3,861.5 4,820.9 3,861.5
Return on Equity
Based on Annualized Net Income 13.8% 5.9% 7.0% 7.8%
Operating Earnings $ 151.8 $ 93.5 $ 405.0 $ 247.6
Average Shareholders' Equity 4,820.9 3,861.5 4,820.9 3,861.5
Average Unrealized Fixed Maturities
Investment Gains, Net of Tax 1,292.5 700.6 1,292.5 700.6
------------------------------------------------------
Adjusted Average Shareholders' Equity 3,528.4 3,160.9 3,528.4 3,160.9
Operating Return on Equity
Based on Annualized Operating Earnings 17.2% 11.8% 11.5% 7.8%
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*Net Income and Operating Earnings have been annualized for purposes of this
calculation only. Annualized amounts for 2003 and 2002 are not reflective of the
actual amounts for the years ended December 31, 2003 and 2002.
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Property & Casualty Net Written Premiums
Net written premiums 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 premiums on our Consolidated Balance Sheets. Safeco's
management views net written premiums as a measure of business production trends
for the period under review and as a leading indicator of 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 Year Ended
December 31 December 31
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Total Property & Casualty Net Earned Premiums $ 1,286.5 $ 1,164.6 $ 4,901.8 $ 4,521.3
Change in Unearned Premiums (9.2) (34.6) 212.5 63.3
------------------------------------------------------
Total Property & Casualty Net Written Premiums $ 1,277.3 $ 1,130.0 $ 5,114.3 $ 4,584.6
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Segment Results Measures
We have provided the following table that details the GAAP measure Income before
Income Taxes on our Consolidated Statements of Income. This is the most directly
comparable GAAP measure used to reconcile to Property & Casualty underwriting
profit and Life & Investments pretax operating earnings.
Three Months Ended Year Ended
December 31 December 31
------------------------------------------------------
2003 2002 2003 2002
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Property & Casualty $ 224.7 $ 74.1 $ 479.6 $ 485.8
Life & Investments 64.9 23.1 195.6 93.9
Corporate (49.8) (27.8) (234.1) (186.3)
------------------------------------------------------
Income before Income Taxes $ 239.8 $ 69.4 $ 441.1 $ 393.4
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Property & Casualty Underwriting Profit and Combined Ratios
Underwriting profit represents the net amount of earned premiums 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, the
most directly comparable GAAP measure on our Consolidated Statements of Income.
Combined ratios are a standard gauge of underwriting performance and are
calculated as losses and expenses expressed as a percentage of net earned
premiums.
Three Months Ended Year Ended
December 31 December 31
------------------------------------------------------
2003 2002 2003 2002
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Property & Casualty Income $ 224.7 $ 74.1 $ 479.6 $ 485.8
before Income Taxes
Property & Casualty Net Investment Income (110.0) (115.0) (453.0) (460.0)
Property & Casualty Restructuring Charges 8.3 6.7 8.3 21.8
Property & Casualty Net Realized Investment
(Gains) Losses (30.2) 15.5 (40.8) (287.2)
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Total Underwriting Profit (Loss) $ 92.8 $ (18.7) $ (5.9) $ (239.6)
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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, the most directly comparable
GAAP measure on our Consolidated Statements of Income.
Three Months Ended Year Ended
December 31 December 31
------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Life & Investments Income
before Income Taxes $ 64.9 $ 23.1 $ 195.6 $ 93.9
Life & Investments Net Realized Investment (Gains)
Losses (14.6) 43.2 25.5 143.1
------------------------------------------------------
Pretax Operating Earnings $ 50.3 $ 66.3 $ 221.1 $ 237.0
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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.
In the fourth quarter of 2003, we adopted FIN 46R, "Consolidation of Variable
Interest Entities (VIE)," requiring the deconsolidation of Safeco Capital Trust,
a VIE that issued mandatorily redeemable preferred securities and had previously
been consolidated. Accordingly, we have increased our Debt and Marketable Equity
Securities by $26.3 million on our balance sheet. On our income statement, we
have increased Interest Expense and Net Investment Income by $2.1 million, and
have reclassified $69.1 million of annual Distributions on Capital Securities to
Interest Expense. We have restated prior periods for comparability purposes.
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)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002 Chg
-------------------------------------------------------------------------------------------
Net Income (Loss) $ 166.2 $ (28.9) $ 111.9 $ 90.0 $ 57.1 $ 339.2 $ 301.1 13%
Net Income (Loss) Per Diluted Share 1.19 (0.21) 0.81 0.65 0.42 2.44 2.33 5%
Net Realized Investment
Gains (Losses) after tax 14.4 (62.5) 14.7 (32.4) (36.4) (65.8) 53.5 NM
Operating Earnings 151.8 33.6 97.2 122.4 93.5 405.0 247.6 64%
Operating Earnings Per Share 1.09 0.24 0.70 0.88 0.71 2.91 1.92 52%
Operating Return on Equity
(Pre-FAS 115) annualized 17.2% 4.0% 11.8% 15.2% 11.8% 11.5% 7.8% 3.7
Operating Return on Equity
(unadjusted) annualized 12.6% 2.9% 8.9% 12.1% 9.7% 8.4% 6.4% 2.0
Operating Revenues $1,922.0 $1,876.1 $ 1,849.2 $1,812.7 $ 1,816.1 $7,460.0 $6,984.7 7%
% Chg Prior Year Same Qtr 5.8% 5.2% 8.6% 7.7% 7.2%
Life & Investments
Pretax Operating Earnings $ 50.3 $ 41.1 $ 57.9 $ 71.8 $ 66.3 $ 221.1 $ 237.0 -7%
% Chg Prior Year Same Qtr -24.1% -31.0% 11.3% 21.5% 41.3%
Property & Casualty
Combined Ratio 92.8% 108.6% 101.0% 98.2% 101.6% 100.1% 105.3% -5.2
Impact of Catastrophes 1.6% 1.7% 8.2% 1.1% 0.2% 3.1% 1.9% 1.2
Net Written Premiums $1,277.3 $1,314.7 $ 1,316.5 $1,205.8 $ 1,130.0 $5,114.3 $4,584.6 12%
% Chg Prior Year Same Qtr 13.0% 11.2% 11.2% 10.9% 7.4%
Net Earned Premiums $1,286.5 $1,250.4 $ 1,201.8 $1,163.1 $ 1,164.6 $4,901.8 $4,521.3 8%
% Chg Prior Year Same Qtr 10.5% 10.1% 7.1% 5.8% 4.2%
Book Value Per Share $ 36.24 $ 35.61 $ 37.22 $ 33.00 $ 32.07 $ 36.24 $ 32.07 13%
% Chg Prior Year Same Qtr 13.0% 12.1% 28.7% 20.9% 12.7%
BV Per Share (ex-FAS 115) $ 27.21 $ 25.35 $ 25.72 $ 24.66 $ 24.39 $ 27.21 $ 24.39 12%
% Chg Prior Year Same Qtr 11.6% 7.6% 6.2% -1.3% -0.7%
Safeco Corporation
Summary of Financial Results
(In Millions)
Three Months Ended Year Ended
December 31 December 31
----------------------- --------------------
2003 2002 2003 2002
----------------------- --------------------
(Unaudited) (Unaudited)
REVENUES
Property & Casualty
Earned Premiums $ 1,286.5 $ 1,164.6 $ 4,901.8 $ 4,521.3
Net Investment Income 110.0 115.0 453.0 460.0
Life & Investments 519.4 532.7 2,080.0 1,984.9
Corporate 6.1 3.8 25.2 18.5
Net Realized Investment Gains (Losses) 21.2 (56.0) (101.9) 82.5
--------- --------- --------- ---------
Total 1,943.2 1,760.1 7,358.1 7,067.2
--------- --------- --------- ---------
Income before Net Realized Investment Gains (Losses) and Income Taxes
Property & Casualty
Underwriting Profits (Losses) 92.8 (18.7) (5.9) (239.6)
Net Investment Income 110.0 115.0 453.0 460.0
Restructuring Charges (8.3) (6.7) (8.3) (21.8)
--------- --------- --------- ---------
Total Property & Casualty 194.5 89.6 438.8 198.6
Life & Investments 50.3 66.3 221.1 237.0
Corporate* (26.2) (30.5) (116.9) (124.7)
--------- --------- --------- ---------
Total 218.6 125.4 543.0 310.9
Net Realized Investment Gains (Losses) before Taxes 21.2 (56.0) (101.9) 82.5
--------- --------- --------- ---------
Income before Income Taxes 239.8 69.4 441.1 393.4
Provision for Income Taxes on
Income before Net Realized Investment Gains (Losses) 66.8 31.9 138.0 63.3
Net Realized Investment Gains (Losses) 6.8 (19.6) (36.1) 29.0
--------- --------- --------- ---------
Total 73.6 12.3 101.9 92.3
--------- --------- --------- ---------
Net Income $ 166.2 $ 57.1 $ 339.2 $ 301.1
-======== ========= ========= =========
*Included in Corporate is $0.9 million of restructuring charges in the fourth
quarter and full year 2003.
Safeco Corporation
Consolidated Statements of Income
(In Millions Except Per Share Data)
Three Months Ended Year Ended
December 31 December 31
---------------------- ------------------------
2003 2002 2003 2002
-------- --------- --------- ----------
(Unaudited) (Unaudited)
REVENUES
Property & Casualty Earned Premiums $ 1,286.5 $ 1,164.6 $ 4,901.8 $ 4,521.3
Life & Investments Premiums and Other Revenues 210.5 223.8 868.1 778.3
Net Investment Income 423.3 424.9 1,680.3 1,674.4
Net Realized Investment Gains (Losses) 21.2 (56.0) (101.9) 82.5
Other 1.7 2.8 9.8 10.7
---------- --------- --------- ----------
Total 1,943.2 1,760.1 7,358.1 7,067.2
---------- --------- --------- ----------
EXPENSES
Losses, Loss Adjustment Expenses and Policy Benefits 1,140.9 1,172.7 4,808.0 4,685.5
Other Underwriting and Operating Expenses 283.0 259.7 1,058.5 956.9
Amortization of Deferred Policy Acquisition Costs 234.5 217.6 897.6 859.6
Interest Expense 31.1 28.3 127.1 132.0
Intangibles Amortization 4.7 5.7 16.6 18.0
Restructuring Charges 9.2 6.7 9.2 21.8
---------- --------- --------- ----------
Total 1,703.4 1,690.7 6,917.0 6,673.8
---------- --------- --------- ----------
Income before Income Taxes 239.8 69.4 441.1 393.4
Provision for Income Taxes 73.6 12.3 101.9 92.3
--------- --------- ------- ---------
Net Income $ 166.2 $ 57.1 $ 339.2 $ 301.1
========= ========= ======= =========
INCOME PER SHARE OF COMMON STOCK
Net Income Per Share of Common Stock - Diluted $ 1.19 $ 0.42 $ 2.44 $ 2.33
========= ========= ======= =========
Net Income Per Share of Common Stock - Basic $ 1.20 $ 0.42 $ 2.45 $ 2.33
========= ========= ======= =========
Dividends Declared $ 0.185 $ 0.185 $ 0.740 $ 0.740
Average Number of Shares Outstanding During the Period:
Diluted 139.2 133.0 138.9 129.3
Basic 138.6 132.5 138.4 128.9
Safeco Corporation
Consolidated Balance Sheets
(In Millions)
December 31 December 31
2003 2002
----------------- ------------------
ASSETS
Investments
Available-for-Sale Securities
Fixed Maturities, at Fair Value (Cost or amortized cost: $24,290.2; $22,646.1) $ 26,206.5 $ 24,278.0
Marketable Equity Securities, at Fair Value (Cost: $781.7; $803.5) 1,279.0 1,108.8
Mortgage Loans 936.1 925.9
Other Invested Assets 115.9 173.8
Short-Term Investments 269.9 311.0
----------------- ------------------
Total Investments 28,807.4 26,797.5
Cash and Cash Equivalents 197.4 188.5
Accrued Investment Income 352.4 337.3
Premiums and Service Fees Receivable 1,088.5 1,042.1
Other Notes and Accounts Receivable 180.3 162.3
Current Income Taxes Recoverable - 26.2
Deferred Income Taxes Recoverable - 124.6
Reinsurance Recoverables 553.0 578.8
Deferred Policy Acquisition Costs 639.1 626.3
Land, Buildings and Equipment for Company Use 440.0 488.7
Intangibles and Goodwill 183.6 190.0
Other Assets 259.6 270.8
Securities Lending Collateral 2,006.4 2,957.0
Separate Account Assets 1,137.4 899.2
----------------- ------------------
Total Assets $ 35,845.1 $ 34,689.3
================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Property & Casualty Loss and Loss Adjustment Expense Reserves $ 5,044.6 $ 4,998.5
Accident and Health Reserves 139.1 170.0
Life Policy Liabilities 331.8 339.9
Unearned Premiums 2,063.5 1,847.5
Funds Held Under Deposit Contracts 16,575.4 15,655.4
Debt 1,965.5 2,000.1
Deferred Income Taxes 92.4 -
Other Liabilities 1,465.7 1,390.1
Securities Lending Payable 2,006.4 2,957.0
Separate Account Liabilities 1,137.4 899.2
----------------- ------------------
Total Liabilities 30,821.8 30,257.7
----------------- ------------------
Commitments and Contingencies - -
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: 11.6; 12.0
Shares Issued and Outstanding: 138.6; 138.2 1,197.3 1,178.1
Retained Earnings 2,308.7 2,072.2
Accumulated Other Comprehensive Income, Net of Taxes
Unrealized Gains and Losses on Available-for-Sale Securities
and Derivative Financial Instruments 1,589.0 1,241.2
Unrealized Foreign Currency Translation Adjustments (8.8) (15.7)
Deferred Policy Acquisition Costs Valuation Allowance (57.2) (35.4)
Minimum Pension Liability Adjustment (5.7) (8.8)
----------------- ------------------
Total Accumulated Other Comprehensive Income 1,517.3 1,181.3
----------------- ------------------
Total Shareholders' Equity 5,023.3 4,431.6
----------------- ------------------
Total Liabilities & Shareholders' Equity $ 35,845.1 $ 34,689.3
================= ==================
Safeco Corporation
Income Summary
(In Millions Except Per Share Amounts)
Three Months Ended Year Ended
December 31 December 31
--------------------- -----------------------
2003 2002 2003 2002
------------ ----------- ------------ -----------
(Unaudited) (Unaudited)
Pretax Net Income
P&C Underwriting $ 92.8 $ (18.7) $ (5.9) $ (239.6)
P&C Investment Income 110.0 115.0 453.0 460.0
Restructuring Charges (8.3) (6.7) (8.3) (21.8)
------------ ----------- ----------- -----------
Total P&C 194.5 89.6 438.8 198.6
Life & Investments 50.3 66.3 221.1 237.0
Corporate (includes $0.9 restructuring in 2003) (26.2) (30.5) (116.9) (124.7)
------------ ----------- ----------- -----------
Income before Net Realized Investment Gains (Losses) 218.6 125.4 543.0 310.9
Net Realized Investment Gains (Losses) 21.2 (56.0) (101.9) 82.5
------------ ----------- ----------- -----------
Total $ 239.8 $ 69.4 $ 441.1 $ 393.4
============ =========== =========== ===========
Income Tax Expense
P&C Underwriting $ 32.9 $ (6.7) $ 0.1 $ (80.8)
P&C Investment Income 28.0 29.8 117.7 114.4
Restructuring Charges (2.9) (2.3) (2.9) (7.6)
------------ ----------- ----------- -----------
Total P&C 58.0 20.8 114.9 26.0
Life & Investments 17.0 23.0 63.1 82.0
Corporate (includes $0.3 tax on restructuring in 2003) (8.2) (11.9) (40.0) (44.7)
------------ ----------- ----------- -----------
Income before Net Realized Investment Gains (Losses) 66.8 31.9 138.0 63.3
Net Realized Investment Gains (Losses) 6.8 (19.6) (36.1) 29.0
------------ ----------- ----------- -----------
Total $ 73.6 $ 12.3 $ 101.9 $ 92.3
============ =========== =========== ===========
After-tax Income
P&C Underwriting $ 59.9 $ (12.0) $ (6.0) $ (158.8)
P&C Investment Income 82.0 85.2 335.3 345.6
Restructuring Charges (5.4) (4.4) (5.4) (14.2)
------------ ----------- ----------- -----------
Total P&C 136.5 68.8 323.9 172.6
Life & Investments 33.3 43.3 158.0 155.0
Corporate (includes $0.6 restructuring in 2003) (18.0) (18.6) (76.9) (80.0)
------------ ----------- ----------- -----------
Income before Net Realized Investment Gains (Losses) 151.8 93.5 405.0 247.6
Net Realized Investment Gains (Losses) 14.4 (36.4) (65.8) 53.5
------------ ----------- ----------- -----------
Total $ 166.2 $ 57.1 $ 339.2 $ 301.1
============= ============ =========== ===========
Average Shares Outstanding - Diluted 139.2 133.0 138.9 129.3
Average Shares Outstanding - Basic 138.6 132.5 138.4 128.9
Book Value Per Share $ 36.24 $ 32.07 $ 36.24 $ 32.07
Book Value Per Share (ex-FAS 115) $ 27.21 $ 24.39 $ 27.21 $ 24.39
Safeco Property & Casualty
Underwriting Profit and Combined Ratios
(In Millions)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
--------------------------------------------------------------------------------
Net U/W Profit (Loss)
Safeco Personal Insurance
Personal Auto $ 27.9 $35.4 $ 3.3 $(1.5) $(10.6) $ 65.1 $(44.4)
Homeowners 44.0 32.1 (13.4) 19.5 12.4 82.2 (37.2)
Specialty 5.7 12.5 14.8 11.5 8.3 44.5 28.9
--------------------------------------------------------------------------------
Total SPI 77.6 80.0 4.7 29.5 10.1 191.8 (52.7)
--------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 39.5 (51.3) (11.5) (5.3) 7.8 (28.6) (51.7)
Special Accounts Facility 11.9 5.8 (0.6) 6.4 7.5 23.5 17.8
SBI Runoff (27.3) (149.8) (9.4) (6.3) (33.0) (192.8) (107.5)
--------------------------------------------------------------------------------
Total SBI 24.1 (195.3) (21.5) (5.2) (17.7) (197.9) (141.4)
--------------------------------------------------------------------------------
Surety 8.6 8.5 6.8 3.7 6.0 27.6 17.6
P&C Other* (17.5) (0.6) (2.3) (7.0) (17.1) (27.4) (63.1)
--------------------------------------------------------------------------------
Total Property & Casualty $ 92.8 $(107.4) $(12.3) $ 21.0 $(18.7) $(5.9) $(239.6)
================================================================================
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
--------------------------------------------------------------------------------
Net Combined Ratios (GAAP)
Safeco Personal Insurance
Personal Auto 95.4% 93.9% 99.4% 100.3% 102.0% 97.1% 102.3%
Homeowners 77.4% 83.3% 107.0% 89.7% 93.5% 89.3% 104.9%
Specialty 88.6% 75.4% 70.7% 76.9% 83.8% 77.9% 85.8%
--------------------------------------------------------------------------------
Total SPI 90.9% 90.3% 99.4% 96.2% 98.7% 94.1% 102.3%
--------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 86.1% 118.6% 104.2% 102.0% 97.0% 102.6% 105.1%
Special Accounts Facility 88.3% 94.3% 100.7% 92.7% 91.6% 93.9% 93.5%
SBI Runoff NM NM NM NM NM NM NM
--------------------------------------------------------------------------------
Total SBI 93.7% 151.6% 106.0% 101.5% 104.9% 113.4% 109.7%
--------------------------------------------------------------------------------
Surety 79.9% 78.8% 82.2% 88.6% 81.4% 82.0% 86.0%
P&C Other* NM NM NM NM NM NM NM
--------------------------------------------------------------------------------
Total Property & Casualty 92.8% 108.6% 101.0% 98.2% 101.6% 100.1% 105.3%
================================================================================
*P&C Other includes our involuntary-assigned risk and other state-mandated
personal lines business, our Lloyd's of London operations which are in runoff
and certain product lines that we have exited.
Safeco Property & Casualty
Underwriting Profit and Combined Ratios
(Without 3Q 03 Workers Compensation Reserve Adjustment)
(In Millions)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
------------ ------------ -------- -------- --------- -------- ---------
Net U/W Profit (Loss)
- --------------------------------
Safeco Personal Insurance
Personal Auto $ 27.9 $ 35.4 $ 3.3 $(1.5) $(10.6) $ 65.1 $(44.4)
Homeowners 44.0 32.1 (13.4) 19.5 12.4 82.2 (37.2)
Specialty 5.7 12.5 14.8 11.5 8.3 44.5 28.9
------------ ------------ -------- -------- --------- -------- ---------
Total SPI 77.6 80.0 4.7 29.5 10.1 191.8 (52.7)
------------ ------------ -------- -------- --------- -------- ---------
Safeco Business Insurance
SBI Regular 39.5 6.3 (11.5) (5.3) 7.8 29.0 (51.7)
Special Accounts Facility 11.9 8.3 (0.6) 6.4 7.5 26.0 17.8
SBI Runoff (27.3) (4.9) (9.4) (6.3) (33.0) (47.9) (107.5)
------------ ------------ -------- -------- --------- -------- ---------
Total SBI 24.1 9.7 (21.5) (5.2) (17.7) 7.1 (141.4)
------------ ------------ -------- -------- --------- -------- ---------
Surety 8.6 8.5 6.8 3.7 6.0 27.6 17.6
P&C Other* (17.5) (0.6) (2.3) (7.0) (17.1) (27.4) (63.1)
------------ ------------ -------- -------- --------- -------- ---------
Total Property & Casualty $ 92.8 $ 97.6 $(12.3) $ 21.0 $(18.7) $199.1 $(239.6)
============ ============ ======== ======== ========= ======== =========
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
------------ ------------ -------- -------- --------- -------- ---------
Net Combined Ratios (GAAP)
Safeco Personal Insurance
Personal Auto 95.4% 93.9% 99.4% 100.3% 102.0% 97.1% 102.3%
Homeowners 77.4% 83.3% 107.0% 89.7% 93.5% 89.3% 104.9%
Specialty 88.6% 75.4% 70.7% 76.9% 83.8% 77.9% 85.8%
------------ ------------ -------- -------- --------- -------- ---------
Total SPI 90.9% 90.3% 99.4% 96.2% 98.7% 94.1% 102.3%
------------ ------------ -------- -------- --------- -------- ---------
Safeco Business Insurance
SBI Regular 86.1% 97.7% 104.2% 102.0% 97.0% 97.4% 105.1%
Special Accounts Facility 88.3% 91.8% 100.7% 92.7% 91.6% 93.2% 93.5%
SBI Runoff NM NM NM NM NM NM NM
------------ ------------ -------- -------- --------- -------- ---------
Total SBI 93.7% 97.4% 106.0% 101.5% 104.9% 99.5% 109.7%
------------ ------------ -------- -------- --------- -------- ---------
Surety 79.9% 78.8% 82.2% 88.6% 81.4% 82.0% 86.0%
P&C Other* NM NM NM NM NM NM NM
------------ ------------ -------- -------- --------- -------- ---------
Total Property & Casualty 92.8% 92.2% 101.0% 98.2% 101.6% 96.0% 105.3%
=========== ============= ======== ======== ========= ======== =========
* P&C Other includes our involuntary-assigned risk and other state-mandated
personal lines business, our Lloyd's of London operations which are in runoff
and certain product lines that we have exited.
Safeco Property & Casualty
Net Written Premiums
(In Millions)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
-------------------------------------------------------------------------------------------
Net Written Premiums
Safeco Personal Insurance
Personal Auto $ 613.5 $ 617.7 $ 570.9 $ 566.0 $ 522.9 $2,368.1 $2,025.7
Homeowners 180.2 207.4 215.3 172.2 175.2 775.1 767.6
Specialty 43.4 53.2 57.2 46.5 44.2 200.3 202.7
-------------------------------------------------------------------------------------------
Total SPI 837.1 878.3 843.4 784.7 742.3 3,343.5 2,996.0
-------------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 283.0 281.5 308.4 284.0 258.1 1,156.9 1,055.2
Special Accounts Facility* 110.3 103.7 94.7 97.1 99.2 405.8 349.0
SBI Runoff (2.5) (1.2) (0.5) 1.8 (3.7) (2.4) 25.0
-------------------------------------------------------------------------------------------
Total SBI 390.8 384.0 402.6 382.9 353.6 1,560.3 1,429.2
-------------------------------------------------------------------------------------------
Surety 46.8 49.9 46.9 35.2 32.4 178.8 133.6
P&C Other 2.6 2.5 23.6 3.0 1.7 31.7 25.8
-------------------------------------------------------------------------------------------
Total Property & Casualty $1,277.3 $ 1,314.7 $ 1,316.5 $1,205.8 $ 1,130.0 $5,114.3 $4,584.6
===========================================================================================
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
-------------------------------------------------------------------------------------------
Net Written Premiums (Percent Change)
Percent Change Over Prior Year Same Quarter Percent Change YTD
-------------------------------------------- ---------------------
Safeco Personal Insurance
Personal Auto 17.3% 15.2% 17.0% 18.3% 14.4% 16.9% 12.8%
Homeowners 2.9% -2.2% 0.8% 3.3% -1.8% 1.0% 3.3%
Specialty -1.8% -2.2% -1.6% 1.3% -4.3% -1.2% -0.7%
-------------------------------------------------------------------------------------------
Total SPI 12.8% 9.4% 11.0% 13.6% 8.9% 11.6% 9.2%
-------------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 9.6% 11.0% 11.0% 7.0% 17.2% 9.6% 7.3%
Special Accounts Facility* 11.2% 17.6% 13.4% 24.8% 187.5% 16.3% 160.6%
SBI Runoff NM NM NM NM NM NM NM
-------------------------------------------------------------------------------------------
Total SBI 10.5% 13.1% 9.4% 4.0% 4.2% 9.2% -7.3%
-------------------------------------------------------------------------------------------
Surety 44.4% 29.9% 30.8% 30.7% 7.6% 33.8% 1.6%
P&C Other 52.9% 31.6% 12.9% 95.4% 13.3% 22.9% 8.4%
-------------------------------------------------------------------------------------------
Total Property & Casualty 13.0% 11.2% 11.2% 10.9% 7.4% 11.6% 3.3%
===========================================================================================
*As each existing old Safeco Commercial policy came up for renewal (reported in
Runoff), a decision was made by Special Accounts Facility to renew or not renew.
If it was renewed it became part of Special Accounts Facility, otherwise results
associated with the account remain in Runoff.
Safeco Property & Casualty
Net Earned Premiums
(In Millions)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
-------------------------------------------------------------------------------------------
Net Earned Premiums
Safeco Personal Insurance
Personal Auto $ 606.4 $ 581.3 $ 552.9 $ 528.5 $ 523.0 $2,269.1 $ 1,947.1
Homeowners 195.0 191.5 192.1 189.5 192.1 768.1 757.4
Specialty 50.6 50.9 50.5 49.8 50.8 201.8 203.1
-------------------------------------------------------------------------------------------
Total SPI 852.0 823.7 795.5 767.8 765.9 3,239.0 2,907.6
===========================================================================================
Safeco Business Insurance
SBI Regular 284.0 275.4 272.1 266.0 262.3 1,097.5 1,014.1
Special Accounts Facility* 102.1 100.6 93.2 87.9 89.2 383.8 276.0
SBI Runoff (2.3) 2.2 (4.9) 3.0 8.1 (2.0) 170.9
-------------------------------------------------------------------------------------------
Total SBI 383.8 378.2 360.4 356.9 359.6 1,479.3 1,461.0
===========================================================================================
Surety 43.0 40.0 38.5 32.1 32.7 153.6 126.3
P&C Other 7.7 8.5 7.4 6.3 6.4 29.9 26.4
-------------------------------------------------------------------------------------------
Total Property & Casualty $1,286.5 $1,250.4 $ 1,201.8 $1,163.1 $ 1,164.6 $4,901.8 $4,521.3
===========================================================================================
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
-------------------------------------------------------------------------------------------
Net Earned Premiums (Percent Change)
Percent Change Over Prior Year Same Quarter Percent Change YTD
------------------------------------------- -------------------
Safeco Personal Insurance
Personal Auto 15.9% 16.9% 17.0% 16.3% 14.9% 16.5% 10.2%
Homeowners 1.5% -0.6% 1.5% 3.3% 2.8% 1.4% 2.3%
Specialty -0.4% -0.4% -1.3% -0.4% -0.6% -0.6% 0.7%
-------------------------------------------------------------------------------------------
Total SPI 11.2% 11.1% 11.6% 11.6% 10.5% 11.4% 7.3%
===========================================================================================
Safeco Business Insurance
SBI Regular 8.3% 7.8% 8.2% 8.6% 7.0% 8.2% -1.8%
Special Accounts Facility* 14.5% 33.8% 50.9% 76.2% 152.7% 39.1% 115.5%
SBI Runoff NM NM NM NM NM NM NM
-------------------------------------------------------------------------------------------
Total SBI 6.7% 6.6% -2.6% -5.2% -4.5% 1.3% -11.1%
-------------------------------------------------------------------------------------------
Surety 31.5% 22.3% 23.5% 7.8% 16.8% 21.6% 32.1%
P&C Other 20.3% 30.8% -5.8% 13.7% -67.5% 13.3% 9.1%
-------------------------------------------------------------------------------------------
Total Property & Casualty 10.5% 10.1% 7.1% 5.8% 4.2% 8.4% 1.1%
===========================================================================================
* As each existing old Safeco Commercial policy came up for renewal (reported
in Runoff), a decision was made by Special Accounts Facility to renew or
not renew. If it was renewed it became part of Special Accounts Facility,
otherwise results associated with the account remain in
Runoff. 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 Millions Except Ratios)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
----------- ----------- ----------- ----------- ------------ ----------- -----------
Personal Auto
Underwriting Profit (Loss) $ 27.9 $ 35.4 $ 3.3 $ (1.5) $ (10.6) $ 65.1 $ (44.4)
Loss and LAE Ratio 72.0% 71.8% 76.0% 76.8% 78.5% 74.0% 78.8%
Expense Ratio 23.4% 22.1% 23.4% 23.5% 23.5% 23.1% 23.5%
----------- ----------- ----------- ----------- ------------ ----------- -----------
Combined Ratio 95.4% 93.9% 99.4% 100.3% 102.0% 97.1% 102.3%
----------- ----------- ----------- ----------- ------------ ----------- -----------
Impact of Catastrophes 0.6% 0.0% 4.0% 0.2% 0.3% 1.2% 0.5%
Impact of Non-Cat Weather 0.2% 1.1% 1.4% 0.3% 0.4% 0.7% 0.7%
Policies In Force (000's) 1,669.1 1,631.7 1,586.1 1,558.6 1,529.9
% Chg Prior Year Same Qtr 9.1% 8.9% 9.6% 9.6% 8.0%
Retention 79.9% 79.9% 80.1% 81.0% 81.2%
New Business Policies (000's) 140.3 144.7 115.6 107.4 117.1
% Chg Prior Year Same Qtr 19.8% 5.5% -0.5% 12.2% 42.7%
Loss Trends (12 mo. rolling)
Frequency -2.0% -3.2% -3.7% -6.5% -7.3%
Severity 2.4% 3.6% 3.2% 5.1% 7.2%
Total Loss Costs 0.4% 0.3% -0.6% -1.7% -0.6%
Net Written Premiums $ 613.5 $ 617.7 $ 570.9 $ 566.0 $ 522.9
% Chg Prior Year Same Qtr 17.3% 15.2% 17.0% 18.3% 14.4%
Net Earned Premiums $ 606.4 $ 581.3 $ 552.9 $ 528.5 $ 523.0
% Chg Prior Year Same Qtr 15.9% 16.9% 17.0% 16.3% 14.9%
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 Millions Except Ratios)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
---------- ---------- ----------- ---------- ----------- --------- ---------
Homeowners
Underwriting Profit (Loss) $ 44.0 $ 32.1 $ (13.4) $ 19.5 $ 12.4 $82.2 $ (37.2)
Loss and LAE Ratio 49.3% 54.8% 78.5% 60.9% 61.4% 60.8% 75.8%
Expense Ratio 28.1% 28.5% 28.5% 28.8% 32.1% 28.5% 29.1%
---------- ---------- ----------- ---------- ----------- --------- ---------
Combined Ratio 77.4% 83.3% 107.0% 89.7% 93.5% 89.3% 104.9%
---------- ---------- ----------- ---------- ----------- --------- ---------
Impact of Catastrophes 8.0% 5.8% 31.5% 4.3% 1.9% 12.4% 7.2%
Impact of Non-Cat Weather 3.7% 10.0% 9.1% 6.8% 6.2% 7.4% 9.1%
Policies In Force (000's) 1,172.9 1,201.5 1,232.8 1,263.0 1,290.5
% Chg Prior Year Same Qtr -9.1% -9.3% -9.1% -8.3% -8.2%
Retention 82.8% 82.7% 82.8% 82.8% 82.5%
New Business Policies (000's) 27.4 31.4 28.6 22.9 27.0
% Chg Prior Year Same Qtr 1.5% -3.4% -31.9% -27.4% -11.6%
Net Written Premiums $180.2 $207.4 $ 215.3 $ 172.2 $ 175.2
% Chg Prior Year Same Qtr 2.9% -2.2% 0.8% 3.3% -1.8%
Net Earned Premiums $195.0 $191.5 $ 192.1 $ 189.5 $ 192.1
% Chg Prior Year Same Qtr 1.5% -0.6% 1.5% 3.3% 2.8%
Specialty
Underwriting Profit $ 5.7 $ 12.5 $ 14.8 $ 11.5 $ 8.3 $44.5 $ 28.9
Loss and LAE Ratio 61.1% 47.6% 40.1% 46.3% 52.3% 48.8% 54.5%
Expense Ratio 27.5% 27.8% 30.6% 30.6% 31.5% 29.1% 31.3%
---------- ---------- ----------- ---------- ----------- --------- ---------
Combined Ratio 88.6% 75.4% 70.7% 76.9% 83.8% 77.9% 85.8%
---------- ---------- ----------- ---------- ----------- --------- ---------
Safeco Property & Casualty
Safeco Business Insurance (SBI)
(In Millions Except Ratios)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
----------- ---------- ---------- ----------- ---------- ----------- -----------
Safeco Business Insurance
Underwriting Profit (Loss) $ 24.1 $(195.3) $ (21.5) $ (5.2) $ (17.7) $(197.9) $ (141.4)
Loss and LAE Ratio 57.9% 115.6% 66.1% 62.8% 66.4% 75.8% 71.8%
Expense Ratio 35.8% 36.0% 39.9% 38.7% 38.5% 37.6% 37.9%
----------- ---------- ---------- ----------- ---------- ----------- -----------
Combined Ratio (CR) 93.7% 151.6% 106.0% 101.5% 104.9% 113.4% 109.7%
----------- ---------- ---------- ----------- ---------- ----------- -----------
CR excluding reserve adjustment 93.7% 97.4% 106.0% 101.5% 104.9% 99.5% 109.7%
Impact of Catastrophes -0.4% 2.4% 4.0% 0.9% -1.1% 1.7% 0.9%
Impact of Non-Cat Weather 1.3% 2.5% 2.1% 1.9% 1.9% 2.0% 1.9%
SBI Regular
Underwriting Profit (Loss) $ 39.5 $ (51.3) $ (11.5) $ (5.3) $ 7.8 $ (28.6) $ (51.7)
Loss and LAE Ratio 51.0% 81.8% 66.6% 63.8% 60.1% 65.7% 68.2%
Expense Ratio 35.1% 36.8% 37.6% 38.2% 36.9% 36.9% 36.9%
----------- ---------- ---------- ----------- ---------- ----------- -----------
Combined Ratio (CR) 86.1% 118.6% 104.2% 102.0% 97.0% 102.6% 105.1%
----------- ---------- ---------- ----------- ---------- ----------- -----------
CR excluding reserve adjustment 86.1% 97.7% 104.2% 102.0% 97.0% 97.4% 105.1%
Impact of Catastrophes 0.1% 1.9% 3.4% 1.7% -1.7% 1.7% 1.2%
Impact of Non-Cat Weather 0.8% 2.4% 2.2% 1.7% 0.4% 1.8% 1.4%
Policies In Force (000's) 510.1 509.9 511.1 517.2 529.7
% Chg Prior Year Same Qtr -3.7% -5.1% -6.9% -7.4% -8.9%
Retention 78.4% 77.9% 76.7% 76.1% 76.0%
New Business Policies (000's) 27.9 30.3 31.1 25.2 24.6
% Chg Prior Year Same Qtr 13.4% 23.2% 16.9% 13.7% 15.3%
Net Written Premiums $ 283.0 $ 281.5 $308.4 $ 284.0 $258.1
% Chg Prior Year Same Qtr 9.6% 11.0% 11.0% 7.0% 17.2%
Net Earned Premiums $ 284.0 $ 275.4 $272.1 $ 266.0 $262.3
% Chg Prior Year Same Qtr 8.3% 7.8% 8.2% 8.6% 7.0%
Special Accounts Facility
Underwriting Profit (Loss) $ 11.9 $ 5.8 $ (0.6) $ 6.4 $ 7.5 $ 23.5 $ 17.8
Combined Ratio (CR) 88.3% 94.3% 100.7% 92.7% 91.6% 93.9% 93.5%
CR excluding reserve adjustment 88.3% 91.8% 100.7% 92.7% 91.6% 93.2% 93.5%
SBI Runoff
Underwriting Loss $ (27.3) $(149.8) $ (9.4) $ (6.3) $ (33.0) $(192.8) $ (107.5)
Safeco Property & Casualty
Surety, Other and Total
(In Millions Except Ratios)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
-------------------------------------------------------------------------------------------
Surety
Underwriting Profit $ 8.6 $ 8.5 $ 6.8 $ 3.7 $ 6.0 $ 27.6 $ 17.6
Combined Ratio 79.9% 78.8% 82.2% 88.6% 81.4% 82.0% 86.0%
P&C Other*
Underwriting Loss $ (17.5) $ (0.6) $ (2.3) $ (7.0) $ (17.1) $ (27.4) $ (63.1)
Total Property & Casualty
Underwriting Profit (Loss) $ 92.8 $ (107.4) $ (12.3) $ 21.0 $ (18.7) $ (5.9) $ (239.6)
Underwriting Profit (Loss)
excluding reserve adjustment $ 92.8 $ 97.6 $ (12.3) $ 21.0 $ (18.7) $ 199.1 $ (239.6)
Loss and LAE Ratio 63.2% 80.2% 70.4% 67.9% 70.6% 70.4% 74.4%
Expense Ratio 29.6% 28.4% 30.6% 30.3% 31.0% 29.7% 30.9%
-------------------------------------------------------------------------------------------
Combined Ratio (CR) 92.8% 108.6% 101.0% 98.2% 101.6% 100.1% 105.3%
===========================================================================================
CR excluding reserve adjustment 92.8% 92.2% 101.0% 98.2% 101.6% 96.0% 105.3%
Impact of Catastrophes 1.6% 1.7% 8.2% 1.1% 0.2% 3.1% 1.9%
Impact of Non-Cat Weather 1.1% 2.9% 2.8% 1.9% 1.9% 2.2% 2.5%
*P&C Other includes our involuntary-assigned risk and other state-mandated
personal lines business, our Lloyd's of London operations which are in runoff
and certain product lines that we have exited.
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
-------------------------------------------------------------------------------------------
Catastrophes and Non-Catastrophe Weather
Catastrophes $20.2 $21.0 $99.1 $13.4 $2.9 $153.7 $85.4
SPI - Personal Auto 3.7 (0.1) 22.3 0.9 1.4 26.8 9.1
SPI - Homeowners 15.6 11.1 60.5 8.2 3.7 95.4 54.3
SPI - Specialty 2.4 1.0 2.0 1.1 1.6 6.5 9.4
Safeco Business Insurance (1.5) 9.0 14.3 3.2 (3.8) 25.0 12.6
Non-Catastrophe Weather $14.5 $36.6 $33.9 $22.5 $22.2 $107.5 $115.2
SPI - Personal Auto 1.2 6.3 7.5 1.4 2.3 16.4 13.4
SPI - Homeowners 7.2 19.3 17.5 12.9 12.0 56.9 69.2
SPI - Specialty 1.1 1.4 1.3 1.3 1.4 5.1 4.9
Safeco Business Insurance 5.0 9.6 7.6 6.9 6.5 29.1 27.7
Safeco Property & Casualty
Statutory Information
(In Millions Except Ratios)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD
2003 2003 2003 2003 2002 2003 2002
-------------------------------------------------------------------------------------------------
Loss and Expense Ratios (Statutory)
Losses and Loss Adj. Expense
to Premiums Earned 63.2% 80.3% 70.5% 67.9% 69.5% 70.4% 73.6%
Other Underwriting Expenses
to Net Premiums Written 30.4% 28.3% 28.9% 29.4% 32.1% 29.3% 31.2%
-------------------------------------------------------------------------------------------------
Total Loss and Expense 93.6% 108.6% 99.4% 97.3% 101.6% 99.7% 104.8%
Dividends to Policyholders
to Premiums Earned -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% -0.1%
-------------------------------------------------------------------------------------------------
Combined Ratio 93.5% 108.6% 99.4% 97.3% 101.6% 99.7% 104.7%
=================================================================================================
Balance Sheet - Statutory
P&C Companies Only*
Total Capital and Surplus 2,700.0 2,562.3 2,626.9 2,571.8 2,509.5
Ratio of
Net Premiums Written (Annualized)
to Total Capital and Surplus 1.89 2.05 2.00 1.88 1.80
* Certain 2003 amounts used are estimated and subject to change. Such changes
are not expected to be material.
Safeco Life & Investments
Pretax Operating Earnings and Operating Revenues
(In Millions)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD %
2003 2003 2003 2003 2002 2003 2002 Chg
---------- ---------- ---------- --------- ---------- ------------ ----------- --------
Pretax Operating Earnings*
Group $ 23.0 $ 12.5 $ 24.5 $ 29.0 $ 22.5 $ 89.0 $ 69.2 28.6%
Income Annuities 7.7 (0.9) 8.4 10.1 13.9 25.3 41.5 -39.0%
Retirement Services 4.8 3.3 4.9 5.0 8.2 18.0 21.6 -16.7%
Individual 1.0 3.9 (0.5) 1.9 3.9 6.3 21.6 -70.8%
Asset Management 0.5 1.1 0.1 0.1 0.3 1.8 5.2 -65.4%
L&I Other** 13.3 21.2 20.5 25.7 17.5 80.7 77.9 3.6%
---------- ---------- ---------- --------- ---------- ------------ ----------- --------
Total Life & Investments $ 50.3 $ 41.1 $ 57.9 $ 71.8 $ 66.3 $ 221.1 $ 237.0 -6.7%
---------- ---------- ---------- --------- ---------- ------------ ----------- --------
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD %
2003 2003 2003 2003 2002 2003 2002 Chg
---------- ---------- ---------- --------- ---------- ------------ ----------- --------
Operating Revenues
Group $ 132.2 $ 133.9 $ 144.5 $ 142.3 $ 149.8 $ 552.9 $ 477.4 15.8%
Income Annuities 130.3 121.7 130.8 131.4 136.6 514.2 529.2 -2.8%
Retirement Services 99.1 96.6 96.4 96.1 95.4 388.2 379.5 2.3%
Individual 95.5 96.3 95.8 95.9 96.9 383.5 379.7 1.0%
Asset Management 7.0 7.0 6.7 6.2 6.7 26.9 29.9 -10.0%
L&I Other 55.3 52.8 50.7 55.5 47.3 214.3 189.2 13.3%
--------- ---------- ---------- --------- ---------- ------------ ----------- --------
Total Life & Investments $ 519.4 $ 508.3 $ 524.9 $ 527.4 $ 532.7 $ 2,080.0 $ 1,984.9 4.8%
---------- ---------- ---------- --------- ---------- ------------ ----------- --------
*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.
**The L&I Other segment includes $9.2 million of expenses associated with the
planned sale of the L&I business.
Safeco Life & Investments
Supplemental Statistics
(In Millions, Except Ratios and Policy Statistics)
4TH 3RD 2ND 1ST 4TH
QTR QTR QTR QTR QTR YTD YTD %
2003 2003 2003 2003 2002 2003 2002 Chg
-------------------------------------------------------------------------------------------------
Group
Earned Premiums $130.6 $132.3 $141.6 $140.6 $145.7 $ 545.1 $ 467.9 16.5%
Loss Ratio 52.5% 63.3% 56.3% 56.2% 59.2% 57.1% 59.2% -2.1
Income Annuities
Reserves (in billions) $ 6.3 $ 6.3 $ 6.4 $ 6.3 $ 6.3 $ 6.3 $ 6.3 0.0%
Deposits 20.5 29.3 35.8 28.5 37.2 114.1 107.0 6.6%
Retirement Services
Reserves
Fixed (in billions) $ 6.7 $ 6.6 $ 6.4 $ 6.1 $ 5.9 $ 6.7 $ 5.9 13.6%
Variable (in billions) 1.0 0.9 0.9 0.8 0.8 1.0 0.8 25.0%
-------------------------------------------------------------------------------------------------
Total Reserves 7.7 7.5 7.3 6.9 6.7 7.7 6.7 14.9%
Deposits 250.0 303.6 328.4 332.2 338.0 1,214.2 1,357.4 -10.5%
Individual
Reserves $ 4.0 $ 3.9 $ 3.9 $ 3.8 $ 3.8 $ 4.0 $ 3.8 5.3%
Policies Issued:
Term, Universal Life, 6.8 5.9 6.5 5.9 6.3 25.1 22.2 13.1%
Traditional, Disability (000's)
Policies In Force (000's) 285.8 284.0 283.2 281.7 280.0 285.8 280.0 2.1%
Asset Management
Assets Under Management
(in billions) $ 4.1 $ 4.0 $ 4.0 $ 3.7 $ 3.9 $ 4.1 $ 3.9 5.1%
Safeco Corporation
Capitalization
(In Millions)
12/31/2003 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 13.8 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) 194.5 200.0 200.0
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) 380.9 390.6 -
8.072% debentures due 2037 876.3 876.3 876.3
(Callable at 104 in 2007)
------------------- ------------------- -------------------
Total Debt $ 1,965.5 $ 2,000.1 $ 1,972.9
------------------- ------------------- -------------------
Common Equity $ 5,023.3 $ 4,431.6 $ 3,634.6
------------------- ------------------- -------------------
Total Capital (Debt + Equity) $ 6,988.8 $ 6,431.7 $ 5,607.5
------------------- ------------------- -------------------
Debt to Capital 28.1% 31.1% 35.2%
Adjusted Debt* to Capital 25.6% 28.4% 32.1%
Debt to Equity 39.1% 45.1% 54.3%
Debt to Capital (excluding FAS 115) 34.3% 36.8% 38.6%
Adjusted Debt* to Capital (excluding FAS 115) 31.2% 33.6% 35.2%
Debt to Equity (excluding FAS 115) 52.1% 58.2% 62.8%
Earnings to Fixed Charges Ratio** 1.4 1.3 Negative
Interest Coverage Ratio** 4.7 3.1 Negative
Operating Earnings to Fixed Charges Ratio** 4.7 3.1 Negative
* 20% equity credit for 8.072% debentures due 2037.
** The Earnings to Fixed Charges Ratio includes net realized investment gains
(losses) and interest on deposit contracts. The Interest Coverage Ratio
excludes net realized investment gains (losses) and interest on deposit
contracts. 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) 12/31/2003 % 12/31/2002 %
----------------- ------------ ---------------- ----------
Fixed Maturities - Taxable $ 24,042.4 83.5 % $ 22,169.2 82.7 %
Fixed Maturities - Nontaxable 2,164.1 7.5 2,108.8 7.9
Equity Securities 1,279.0 4.4 1,108.8 4.1
----------------- ------------ ---------------- ----------
Total Fixed Maturities & Equity Securities 27,485.5 95.4 25,386.8 94.7
Mortgage Loans 936.1 3.2 925.9 3.5
Other Invested Assets 115.9 0.4 173.8 0.6
Short-Term Investments 269.9 1.0 311.0 1.2
----------------- ------------ ---------------- ----------
Total Consolidated Investment Portfolio $ 28,807.4 100.0 % $ 26,797.5 100.0 %
================= ============ ================ ==========
Rating (Market Value) - Fixed Maturities 12/31/2003 12/31/2002
----------------- ----------------
AAA 35.2 % 37.2 %
AA 6.4 7.1
A 23.4 23.8
BBB 28.0 25.4
BB or lower 5.0 4.5
Not Rated 2.0 2.0
----------------- ----------------
Total 100.0 % 100.0 %
================= ================
Average Rating A A
----------------- ----------------
Components of Net Realized Investment Gains (Losses) after tax (in millions):
4th 4th
QTR QTR YTD YTD
2003 2002 2003 2002
----------------- ------------ ---------------- ----------
Gains on Securities Transactions $ 48.3 $ 21.6 $ 112.2 $217.9
Impairments on Fixed Maturities (0.2) (55.4) (81.2) (144.8)
Impairments on Equity Securities (0.2) (13.6) (13.5) (23.2)
Impairment related to intent to sell L&I (17.5) - (95.2) -
Credit Default Swaps 1.4 9.9 15.7 (18.4)
Other (17.4) 1.1 (3.8) 22.0
----------------- ------------ ---------------- ----------
Net Realized Investment Gains (Losses) $ 14.4 $ (36.4) $ (65.8) $ 53.5
================= ============ ================ ==========
Safeco Corporation
Investment Portfolios - Property & Casualty
(In Millions)
Investment Portfolio (Market Value) 12/31/2003 % 12/31/2002 %
--------------- ------------ -------------- --------------
Fixed Maturities - Taxable $ 5,828.2 62.9 % $ 5,383.0 61.2 %
Fixed Maturities - Nontaxable 2,156.5 23.3 2,108.0 23.9
Equity Securities 1,115.5 12.0 947.9 10.8
--------------- ------------ -------------- --------------
Total Fixed Maturities & Equity Securities 9,100.2 98.2 8,438.9 95.9
Mortgage Loans 47.9 0.5 50.6 0.6
Other Invested Assets 7.8 0.1 15.6 0.2
Short-Term Investments 113.6 1.2 292.9 3.3
Total Property & Casualty
-------------- ------------ -------------- --------------
Investment Portfolio $ 9,269.5 100.0 % $ 8,798.0 100.0 %
=============== ============ ============== ==============
Rating (Market Value) - Fixed Maturities 12/31/2003 12/31/2002
--------------- --------------
AAA 41.0 % 45.0 %
AA 11.1 11.5
A 23.5 21.8
BBB 19.7 17.2
BB or lower 3.2 2.8
Not Rated 1.5 1.7
-------------- --------------
Total 100.0 % 100.0 %
================ ==============
Average Rating A+ AA
--------------- --------------
12/31/2003 09/30/2003 06/30/2003 03/31/2003 12/31/2002
----------- ----------- ---------- ---------- ----------
Pretax Investment Income - Quarter $ 110.0 $ 113.7 $ 116.5 $ 112.8 $ 115.0
Effective Tax Rate on P&C
Investment Income - Quarter 25.44% 26.79% 25.07% 26.64% 25.94%
Cost or Amortized Cost $ 8,362 $ 8,274 $ 8,003 $ 8,145 $ 8,131
Market 9,270 9,154 9,008 8,877 8,798
% Equities (at market) 12.0% 11.2% 11.3% 10.2% 10.8%
% Taxable Bonds (at market) 62.9% 59.6% 59.7% 59.2% 61.2%
% Tax Exempt Bonds (at market) 23.3% 24.1% 24.5% 23.9% 23.9%
% Short-Term and Other 1.8% 5.1% 4.5% 6.7% 4.1%
Market YTM on Bond Portfolio 3.81% 3.92% 3.71% 4.10% 4.17%
Book YTM on Bond Portfolio 5.36% 5.56% 5.66% 6.02% 5.99%
Duration of Bond Portfolio 4.46 4.99 4.57 5.23 5.26
Safeco Corporation
Investment Portfolios - Life & Investments
(In Millions)
Investment Portfolio (Market Value) 12/31/2003 % 12/31/2002 %
-------------- -------------- -------------- --------------
Fixed Maturities - Taxable $ 18,039.6 93.2 % $ 16,657.6 92.5 %
Fixed Maturities - Nontaxable 7.7 0.0 0.8 0.0
Equity Securities 112.8 0.6 113.8 0.6
-------------- -------------- -------------- --------------
Total Fixed Maturities & Equity Securities 18,160.1 93.8 16,772.2 93.1
Mortgage Loans 959.8 5.0 948.6 5.3
Other Invested Assets 106.5 0.6 118.1 0.7
Short-Term Investments 122.6 0.6 165.8 0.9
------------- -------------- -------------- --------------
Total Life & Investments Investment Portfolio $ 19,349.0 100.0 % $ 18,004.7 100.0 %
============== ============== ============== ==============
Rating (Market Value) 12/31/2003 12/31/2002
-------------- --------------
AAA 32.2 % 33.5 %
AA 4.4 5.1
A 23.5 24.6
BBB 31.9 29.4
BB or lower 5.8 5.4
Not Rated 2.2 2.0
-------------- --------------
Total 100.0 % 100.0 %
============== ==============
Average Rating A A+
-------------- --------------
12/31/2003 09/30/2003 06/30/2003 03/31/2003 12/31/2002
---------- ---------- ---------- ---------- ----------
Cost or Amortized Cost $ 18,000 $ 17,639 $ 17,527 $ 17,259 $ 16,885
Market 19,349 19,272 19,325 18,489 18,005
% Equities (at market) 0.6% 0.6% 0.6% 0.6% 0.6%
% Taxable Bonds (at market) 93.2% 93.3% 93.0% 92.4% 92.5%
% Short-Term and Other 6.1% 6.1% 6.4% 7.0% 6.9%
Market YTM on Bond Portfolio 5.13% 5.09% 4.97% 5.50% 5.70%
Book YTM on Bond Portfolio 6.68% 6.70% 6.73% 6.99% 7.18%
Duration of Bond Portfolio 6.86 6.83 6.97 6.81 6.81