[Safeco Logo]
First Quarter News Release and Statistical Supplement (Unaudited)
April 20, 2004
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
Consolidated Statements of Income SS-7
Condensed Balance Sheets SS-8
Property & Casualty Results
Underwriting Profit and Combined Ratios SS-9
Net Written Premiums SS-10
Net Earned Premiums SS-11
Safeco Personal Insurance (SPI) SS-12
Safeco Business Insurance (SBI) SS-13
Surety, Other and Total SS-14
Corporate Supplemental Information
Investment Portfolio - Continuing Operations SS-15
Capitalization SS-16
Discontinued Operations (Life & Investments)
Pretax Operating Earnings and Revenues SS-17
Supplemental Statistics and Assets and Liabilities
of Discontinued Operations SS-18
[Safeco Logo]
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
SAFECO PROFITS AND GROWTH ACCELERATE IN THE FIRST QUARTER
SEATTLE--(April 20, 2004)--
Highlights
o Generated first-quarter net income of $236.2 million, or $1.69 per diluted
share.
o Recorded underwriting profits in Auto, Property and SBI Regular segments.
o Revenue growth continues in primary Property & Casualty lines.
o Agreements reached to sell Life & Investments business, now reported as a
discontinued operation.
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Summary Financial Results after tax
(In millions except per-share data) 3 Months Ended March 31
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2004 2003
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Net Income $ 236.2 $ 90.0
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Per Diluted Share of Common Stock $ 1.69 $ 0.65
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Income from Continuing Operations $ 185.6 $ 79.5
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Net Realized Investment Gains from Continuing Operations $ 27.8 $ 5.5
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*Operating Earnings - Continuing Operations $ 157.8 $ 74.0
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Income from Discontinued Operations $ 50.6 $ 10.5
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Net Realized Investment Gains (Losses) from Discontinued Operations $ 10.5 $ (37.9)
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*Operating Earnings - Discontinued Operations $ 40.1 $ 48.4
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*Consolidated Operating Earnings $ 197.9 $ 122.4
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Average Shares Outstanding (Diluted) 140.0 138.7
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* 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/04Q1_sup.pdf.
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Safeco (NASDAQ: SAFC) today announced strong first-quarter results,
continuing its positive year-over-year performance. The company posted net
income of $236.2 million - or $1.69 per diluted share. This represents a marked
improvement over first-quarter 2003 net income of $90.0 million - or $0.65 per
diluted share.
Safeco's annualized return on equity (ROE) for the quarter was 17.9
percent, up significantly from 8.9 percent in the first quarter of 2003.
Consolidated operating ROE - measured using operating earnings and excluding
unrealized gains on bonds from equity - was 20.4 percent, compared with 15.2
percent reported in the same period last year.
"We are very pleased with these results. It took hard work and focus to
deliver a quarter of this quality, especially given the efforts required by the
Life & Investments (L&I) transaction," said Mike McGavick, Safeco chairman and
chief executive officer. "And through it all L&I delivered strong results,
demonstrating its value. At the same time, the numbers also show why Safeco is
concentrating its energy on achieving excellence as a Property & Casualty
insurer."
On March 15, 2004, Safeco signed definitive agreements to sell its L&I
operation for $1.44 billion in aggregate to separate investor groups. For this
quarter and in future quarters, L&I will be reported as a discontinued
operation.
The L&I transaction is expected to close in the third quarter of this
year, pending regulatory approval.
Continuing Operations
Income from continuing operations was $185.6 million for the first
quarter, up from $79.5 million in the same quarter last year. Net realized
investment gains for the first quarter were $27.8 million, up from $5.5
million in the same period of 2003.
Operating earnings for the first quarter were $157.8 million, more than
double the $74.0 million in the prior-year period.
The overall Property & Casualty (P&C) combined ratio was 89.9, a
significant improvement over 98.2 in the same period last year, reflecting
positive profit contributions from all primary P&C lines.
Total revenues from continuing operations in the first quarter were
$1.50 billion, up from $1.29 billion a year ago. Operating revenues, which
exclude net realized investment gains, were $1.46 billion for the quarter, a
13.2 percent increase over first-quarter 2003 levels.
"We're encouraged by the profitability and by the growth in premiums
we're seeing across our P&C business," said McGavick. "Our job now
is to continue building on this strong performance."
P&C net earned premiums increased 15.3 percent for the quarter to $1.34
billion compared with the same period last year. For the quarter, P&C net
written premiums - a leading indicator of revenues in future quarters -
increased 14.1 percent over first-quarter 2003.
"With our recent enhancements to Safeco Now - our unified
sales-and-service platform - agents can quote and issue new auto and homeowners
policies in a matter of minutes, and just as easily sell small-business
insurance and selected surety bonds. This tool gives our distribution partners
quick Web access to 90 percent of their daily work and serves as the engine for
our new-business growth," said McGavick. "With Safeco Now, our strategy to make
our products easier to buy, sell and own is coming to life."
On January 1, 2004, the company made minor reclassifications within its
P&C segments, which are more reflective of how these segments are managed. All
prior periods have been restated to reflect the revised presentation of the
segments. For example, SPI non-voluntary auto and property results, previously
reported in P&C Other, are now included in Auto and Property. For additional
details, please refer to the first-quarter 2004 financial supplement.
Safeco Personal Insurance Performance
Auto, Safeco's largest business line, reported a quarterly pretax
underwriting profit of $23.1 million, an improvement over the $6.6 million loss
in the first quarter of 2003.
Net written premiums for Auto increased 19.6 percent in the first
quarter, higher than the 18.5 percent increase in the same period last year.
First-quarter policies in force (PIF) grew 10.0 percent compared to a year ago,
reflecting steady new-business growth.
Auto's combined ratio in the first quarter was 96.3 - an improvement
over the 101.3 combined ratio in the first quarter of 2003 and in line with the
96.2 fourth-quarter result.
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.
"We're operating at our target margin and seeing significant growth in
this line. Our results continue to show the successful execution of our
sophisticated Auto product segmentation," said McGavick.
Safeco's Property insurance line, which includes homeowners, renters
and related coverages, produced a pretax underwriting profit of $61.4 million in
the first quarter, far outpacing the $28.0 million profit in the first quarter
of 2003.
While weather and catastrophes were light in the quarter, as they were
a year ago, the improvement stemmed from a decrease in frequency and a
moderation in severity of claims.
The Property combined ratio was 73.1 in the first quarter, better than
the 87.7 in the first quarter of 2003.
"While we're benefiting from the momentum of our homeowners product
changes, we don't expect these fair-weather results to continue in our Property
line," said McGavick.
Net written premiums in Property decreased 0.7 percent in the first
quarter, compared to a 2.5 percent increase for the same period in 2003.
Policies in force declined 8.7 percent compared to the first quarter of 2003.
The PIF decline continues to reflect the company's conservative appetite for
writing new business in states where it cannot operate profitably.
"Second quarter is traditionally our most active quarter in terms of
severe weather and catastrophes. Because of this historical seasonality, we
generally earn less in the second quarter than in any other period of the year,"
said McGavick. "Our first-quarter Property results position us well, though, as
we enter this volatile season."
Safeco Business Insurance Performance
Safeco Business Insurance (SBI) reported a pretax underwriting profit
of $42.3 million in the first quarter - a significant improvement over the $1.1
million profit for the same period in 2003.
The combined ratio in the first quarter was 89.9, better than the 99.6
combined ratio in the first quarter of 2003.
"It's very gratifying to see our SBI results leading the way this
quarter," McGavick said. "Years of hard work by the SBI team to turn that line
around are now paying off."
Net written premiums for SBI Regular - Safeco's core line of products
for small- to medium-sized businesses - increased 10.2 percent for the first
quarter over the same period last year.
A key driver of this premium growth was the introduction of a
single-platform interface, which proved so easy for agents to use that
new-business policies for the business owner policy line jumped 45 percent over
the first quarter a year ago. Commercial auto new-business policies increased 41
percent over 2003 levels, and workers compensation new-business policies grew
20 percent. These lines represent 47 percent of SBI Regular's business.
SBI Regular reported a combined ratio of 92.1, a substantial
improvement over 102.0 in the same period last year.
"For more than a year, our SBI automated underwriting model and
new-business interface have been driving better-than-expected sales and lowering
expenses for our agent partners and for us," McGavick said. "With the recent
move to the Safeco Now platform for all our major P&C lines, we've increased the
power of this tool to generate additional sales and profitability."
Surety Performance
Surety posted a pretax underwriting profit of $9.3 million in the first
quarter, compared with $3.7 million profit in the same quarter of 2003.
Combined ratio for Surety was 79.6 in the first quarter, better than
the 88.6 in the same quarter of 2003. Net written premiums grew 38.4 percent
over the same period last year.
"As I've said for several years now, Surety continues to deliver strong
results," said McGavick. "The Surety team is one of the best in the business,
and their results consistently demonstrate that fact."
Discontinued Life & Investments Operation
Life & Investments produced pretax operating earnings of $61.3 million
in the first quarter, compared with $74.9 million a year ago. Pretax operating
earnings represent income from discontinued operations, excluding related income
taxes and net realized investment gains or losses. In the first quarter of 2004,
L&I accrued $9.3 million for expenses associated with the planned sale of the
business.
In reporting L&I as a discontinued operation, indirect corporate
overhead expenses are no longer allocated to L&I. Previously allocated expenses
of $3.0 million per quarter in 2003 have been eliminated from the L&I Other
segment and included in the Corporate segment.
"With the announced definitive agreements, we're seeing great
confidence among our people and our partners. These positive results provide
further momentum for our future as an independent company," said Randy Talbot,
president and chief operating officer of Safeco Life & Investments.
The Group product line reported pretax operating earnings of $12.2
million, less than the $29.0 million posted in the first quarter of last year.
The prior-year results included favorable reserve development of $10.5 million
in conjunction with low medical claims costs.
Income Annuities generated $3.7 million in pretax operating earnings in
the quarter, down from $10.1 million in the first quarter of 2003. The decline
was primarily the result of net unfavorable income adjustments of $4.0 million
on mortgage-backed securities due to interest rate changes.
Retirement Services recorded pretax operating earnings of $9.5 million,
compared to $5.0 million in the first quarter of 2003. The improved result in
Retirement Services stemmed from stronger equity market performance.
Individual produced pretax operating earnings of $7.4 million in the
first quarter 2004, compared to $1.9 million in the same period last year. The
increase in Individual was driven by favorable mortality experience and
increased margins.
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 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, condensed balance sheets and the
company's first-quarter financial supplement.
Safeco's first-quarter financial supplement is available online at:
http://www.safeco.com/safeco/investor/pdfs/04Q1_sup.pdf.
Management reviews results on Webcast
Safeco's senior management team will discuss the company's
first-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.
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 Successful implementation of 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 Ability to establish pricing for any changes in driving patterns
o Inflationary pressures on medical care costs, auto parts and repair,
construction costs and other economic factors that increase the
severity of claims
o The availability and pricing of our reinsurance, including coverage
for loss from terrorism and our ability to collect from our reinsurers
o The ability to price for or exclude the risk of loss from terrorism on
our policies
>> Risks related to our P&C insurance strategy, such as:
o Our ability to achieve premium targets and profitability, including
realization of growth and business retention estimates
o Our ability to achieve overall expense goals
o Our ability to run off our London business and other businesses that
we have exited, or intend to exit in the future, without incurring
material unexpected charges
>> Regulatory, judicial and legislative risks, such as:
o Our ability to freely enter and exit lines of business
o Our ability to successfully obtain regulatory approval of rates and
underwriting guidelines, including price-tiered products and the use
of insurance scores that include credit information as a component
o Interpretation of insurance policy provisions by courts or tax
authorities, 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, taxes and
availability of coverage
>> The competitive pricing environment, initiatives by competitors and changes
in the competition
>> Unusual loss activity, such as:
o Weather conditions, including the severity and frequency of storms,
hurricanes, hail, snowfall and winter conditions
o The occurrence of significant natural disasters, including earthquakes
o The occurrence of significant man-made disasters, such as the
terrorist attacks on September 11, 2001, or war
o The occurrence of bankruptcies that result in losses under surety
bonds, investment losses or lower investment income
>> Our ability to successfully complete the sale of the L&I businesses
>> 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 our infrastructure resulting in a disruption of our
operations
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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[SAFECO LOGO]
Financial Supplement
First Quarter, 2004
On January 1, 2004, we made minor revisions to our Property & Casualty (P&C)
segments, which are more reflective of how these segments are managed. Our
non-voluntary auto and property results, previously in P&C Other, are now
included in SPI Auto and SPI Property. Certain products, previously reported in
Specialty, primarily earthquake, inland marine and dwelling fire, are now
included in Property. Our commercial specialty programs and large commercial
accounts in runoff, previously SBI Runoff, are now included in P&C Other. All
prior periods have been restated to reflect the revised presentation of P&C
segments.
On March 15, 2004, we entered into a definitive agreement to sell our Life &
Investments (L&I) operations. We have presented the results of L&I as a
Discontinued Operation, as required by Financial Accounting Standards Board
Statement of Financial Accounting Standards 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." Prior-period amounts have been restated to
reflect the presentation of L&I as a Discontinued Operation. In reporting L&I as
a Discontinued Operation, indirect corporate overhead expenses are no longer
allocated to L&I. Previously allocated expenses of $3.0 million per quarter have
been eliminated from the L&I Other segment and included in our Corporate
segment.
This report is for informational purposes only. The financial statements and
financial exhibits included in this supplement are unaudited. These financial
statements and financial exhibits should be read in conjunction with the
financial statements filed with the Securities and Exchange Commission in the
Corporation's quarterly 10-Q and annual 10-K filings.
Neal Fuller
Vice President - Finance
206-545-5537
neaful@safeco.com
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Safeco Corporation
Financial Measures Used by Safeco
(Amounts are in millions or thousands as specified, except ratio and per share
information.)
How We Report Our Results
Property & Casualty (P&C) businesses include the following segments:
Safeco Personal Insurance (SPI)
Auto
Property
Specialty
Safeco Business Insurance (SBI)
SBI Regular
SBI Special Accounts Facility
Surety
P&C Other
Corporate includes all other activities, primarily the financing of our business
activities.
Our discontinued Life & Investments (L&I) operations include the following
segments:
Group
Income Annuities
Retirement Services
Individual
Asset Management
L&I Other
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 - Continuing Operations
Operating revenues is a non-GAAP financial measure used by management to analyze
the revenues of our P&C 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 from continuing operations to revenues, the most directly
comparable GAAP measure.
Three Months Ended
March 31
---------------------------
2004 2003
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Total Revenues $ 1,498.3 $ 1,293.5
Net Realized Investment Gains (42.8) (8.2)
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Operating Revenues - Continuing Operations $ 1,455.5 $ 1,285.3
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Operating Earnings - Continuing Operations
Operating earnings is a non-GAAP financial measure that we use to assess the
profitability of our P&C and Corporate operations. In the determination of
operating earnings from continuing operations, we exclude net realized
investment gains and losses from Income from Continuing Operations. Net realized
investment gains and losses can fluctuate significantly and distort a comparison
between periods. The following table reconciles operating earnings to Income
from Continuing Operations, the most directly comparable GAAP measure.
Three Months Ended
March 31
--------------------------------
2004 2003
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Income from Continuing Operations $ 185.6 $ 79.5
Net Realized Investment Gains, Net of Taxes (27.8) (5.5)
--------------------------------
Operating Earnings-Continuing Operations $ 157.8 $ 74.0
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Consolidated Operating Return on Equity
Operating return on equity is a ratio we calculate using non-GAAP measures. It
is calculated by dividing the annualized consolidated operating earnings (see
calculation below) for the most recent quarter by the average ending
shareholders' equity for the quarter using a simple average of the beginning and
ending balances for the quarter, excluding from equity after-tax unrealized
investment gains 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
March 31
--------------------------------
(Annualized) 2004 2003
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Net Income $ 236.2 $ 90.0
Average Shareholders' Equity 5,279.0 4,047.0
Return on Equity Based on Annualized Net Income 17.9% 8.9%
Income from Discontinued Operations, Net of Taxes $ 50.6 $ 10.5
Net Realized Investment (Gains) Losses from (10.5) 37.9
Discontinued Operations, Net of Taxes
--------------------------------
Operating Earnings-Discontinued Operations 40.1 48.4
Operating Earnings-Continuing Operations 157.8 74.0
--------------------------------
Consolidated Operating Earnings $ 197.9 $ 122.4
--------------------------------
Average Shareholders' Equity $ 5,279.0 $ 4,047.0
Average Unrealized Fixed Maturities Investment
Gains, Net of Taxes 1,393.4 831.2
--------------------------------
Adjusted Average Shareholders' Equity $ 3,885.6 $ 3,215.8
Operating Return on Equity Based on Annualized 20.4% 15.2%
Consolidated Operating Earnings
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*Net Income and Operating Earnings have been annualized for purposes of this
calculation only. Annualized amounts for 2004 and 2003 may not be reflective of
the actual amounts for the years ended December 31, 2004 and 2003.
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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 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
March 31
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2004 2003
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Total Property & Casualty Net Earned Premiums $ 1,340.5 $ 1,163.1
Change in Unearned Premiums 35.2 42.7
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Total Property & Casualty Net Written Premiums $ 1,375.7 $ 1,205.8
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Segment Results Measures
We have provided the following table that details by segment the GAAP measure
Income from Continuing Operations 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.
Three Months Ended
March 31
---------------------------
2004 2003
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Property & Casualty Income before Income Taxes $ (284.7) $ 132.3
Corporate Loss before Income Taxes (25.2) (25.7)
---------------------------
Income from Continuing Operations before Income Taxes $ 259.5 $ 106.6
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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 as a critical measure to assess the underwriting
effectiveness of the P&C 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 to Income from Continuing Operations 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
March 31
---------------------------
2004 2003
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Property & Casualty Income $ 284.7 $ 132.3
before Income Taxes
Property & Casualty Net Investment Income (111.7) (112.8)
Property & Casualty Restructuring Charges 1.3 -
Property & Casualty Net Realized Investment
(Gains) Losses (38.9) 1.5
---------------------------
Total Underwriting Profit $ 135.4 $ 21.0
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Life & Investments Pretax Operating Earnings - Discontinued Operations
Our Discontinued 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 L&I 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 from Discontinued Operations, Net
of Taxes, the most directly comparable GAAP measure on our Consolidated
Statements of Income.
Three Months Ended
March 31
---------------------------
2004 2003
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Income from Discontinued Operations, Net of Taxes $ 50.6 $ 10.5
Income taxes on Discontinued Operations 26.9 6.3
Life & Investments Net Realized Investment (Gains) Losses, pretax (16.2) 58.1
---------------------------
Pretax Operating Earnings $ 61.3 $ 74.9
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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.
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)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003 Change
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Net Income (Loss) $ 236.2 $ 166.2 $ (28.9) $ 111.9 $ 90.0 $ 236.2 $ 90.0 162%
Net Income (Loss) Per Share 1.69 1.19 (0.21) 0.81 0.65 1.69 0.65 160%
Net Realized Investment
Gains (Losses), after tax
from Continuing Operations 27.8 22.2 7.8 10.4 5.5 27.8 5.5 NM
Operating Earnings (Loss) from
Continuing Operations 157.8 116.8 (7.9) 56.7 74.0 157.8 74.0 113%
Operating Earnings (Loss) from
Continuing Operations Per Share 1.13 0.84 (0.06) 0.41 0.53 1.13 0.53 113%
Net Income Return on
Equity (unadjusted) annualized 17.9% 7.0% 5.0% 9.2% 8.9% 17.9% 8.9% 9.0
Consolidated Operating Return on
Equity (Pre-FAS 115) annualized 20.4% 17.2% 4.0% 11.8% 15.2% 20.4% 15.2% 5.2
Consolidated Operating Return on
Equity (unadjusted) annualized 15.0% 12.6% 2.9% 8.9% 12.1% 15.0% 12.1% 2.9
Operating Revenues from
Continuing Operations $ 1,455.5 $1,402.6 $1,367.7 $ 1,324.3 $1,285.3 $1,455.5 $1,285.3 13%
% Chg Prior Year Same Qtr 13.2% 9.3% 9.5% 9.6% 9.8%
Discontinued Ops.-Life & Investments
Pretax Operating Earnings $ 61.3 $ 53.3 $ 44.1 $ 60.9 $ 74.9 $ 61.3 $ 74.9 -18%
% Chg Prior Year Same Qtr -18.2% -19.6% -26.0% 17.1% 26.7%
Property & Casualty
Combined Ratio 89.9% 92.8% 108.6% 101.0% 98.2% 89.9% 98.2% -8.3
Impact of Catastrophes 0.9% 1.6% 1.7% 8.2% 1.1% 0.9% 1.1% -0.2
Net Written Premiums $ 1,375.7 $1,277.3 $1,314.7 $ 1,316.5 $1,205.8 $1,375.7 $1,205.8 14%
% Chg Prior Year Same Qtr 14.1% 13.0% 11.2% 11.2% 10.9%
Net Earned Premiums $ 1,340.5 $1,286.5 $1,250.4 $ 1,201.8 $1,163.1 $1,340.5 $1,163.1 15%
% Chg Prior Year Same Qtr 15.3% 10.5% 10.1% 7.1% 5.8%
Book Value Per Share $ 39.77 $ 36.24 $ 35.61 $ 37.22 $ 33.00 $ 39.77 $ 33.00 21%
% Chg Prior Year Same Qtr 20.5% 13.0% 12.1% 28.7% 20.9%
Book Value Per Share (Pre-FAS 115) $ 28.65 $ 27.21 $ 25.35 $ 25.72 $ 24.66 $ 28.65 $ 24.66 16%
% Chg Prior Year Same Qtr 16.2% 11.6% 7.6% 6.2% -1.3%
Safeco Corporation
Consolidated Statements of Income
(In Millions Except Per Share Data)
Three Months Ended
March 31
---------------------------
2004 2003
---------------------------
(Unaudited)
REVENUES
Property & Casualty Earned Premiums $ 1,340.5 $ 1,163.1
Net Investment Income 115.0 119.6
Net Realized Investment Gains 42.8 8.2
Other - 2.6
---------------------------
Total 1,498.3 1,293.5
---------------------------
EXPENSES
Losses and Loss Adjustment Expenses 826.0 789.1
Other Underwriting and Operating Expenses 154.1 158.4
Amortization of Deferred Policy Acquisition Costs 226.9 204.6
Interest Expense 30.5 34.8
Restructuring Charges 1.3 -
---------------------------
Total 1,238.8 1,186.9
---------------------------
Income from Continuing Operations before Income Taxes 259.5 106.6
Provision for Income Taxes on:
Income from Continuing Operations before Net Realized Investment Gains 58.9 24.4
Net Realized Investment Gains 15.0 2.7
---------------------------
Total Income Taxes 73.9 27.1
---------------------------
Income from Continuing Operations 185.6 79.5
Income from Discontinued Operations, Net of Taxes 50.6 10.5
---------------------------
Net Income $ 236.2 $ 90.0
===========================
INCOME PER SHARE OF COMMON STOCK
Net Income Per Share of Common Stock - Diluted $ 1.69 $ 0.65
===========================
Net Income Per Share of Common Stock - Basic $ 1.70 $ 0.65
===========================
Dividends Declared $ 0.185 $ 0.185
Average Number of Shares Outstanding During the Period:
Diluted 140.0 138.7
Basic 138.9 138.3
Safeco Corporation
Condensed Balance Sheets
(In Millions)
March 31 December 31
2004 2003
--------------------- -----------------
ASSETS (Unaudited)
Total Investments * $ 9,541.1 $ 9,421.8
Cash and Cash Equivalents 317.5 241.4
Reinsurance Recoverables 358.6 372.0
Other Assets 3,590.2 3,563.3
Assets of Discontinued Operations 23,108.3 22,548.9
--------------------- -----------------
Total Assets $ 36,915.7 $ 36,147.4
--------------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Property & Casualty Loss and Loss Adjustment Expense Reserves $ 5,068.9 $ 5,044.6
Debt ** 1,951.3 1,951.3
Unearned Premiums and Other Liabilities 4,138.1 4,185.5
Liabilities of Discontinued Operations 20,222.7 19,942.7
--------------------- -----------------
Total Liabilities 31,381.0 31,124.1
--------------------- -----------------
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: 11.0; 11.6
Shares Issued and Outstanding: 139.2; 138.6 1,216.9 1,197.3
Retained Earnings 2,519.2 2,308.7
Accumulated Other Comprehensive Income 1,798.6 1,517.3
--------------------- -----------------
Total Shareholders' Equity 5,534.7 5,023.3
--------------------- -----------------
Total Liabilities & Shareholders' Equity $ 36,915.7 $ 36,147.4
--------------------- -----------------
* See Investment Portfolio - Continuing Operations (SS-15) for more detail.
**See Capitalization (SS-16) for more detail.
Safeco Property & Casualty
Underwriting Profit and Combined Ratios
(In Millions)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
Net U/W Profit (Loss) 2004 2003 2003 2003 2003 2004 2003
------------------------------------------------------------------------------------
Safeco Personal Insurance
Auto $ 23.1 $ 23.0 $32.2 $(0.9) $(6.6) $ 23.1 $ (6.6)
Property 61.4 47.0 40.5 (6.6) 28.0 61.4 28.0
Specialty 6.4 5.0 6.7 10.2 5.3 6.4 5.3
------------------------------------------------------------------------------------
Total SPI 90.9 75.0 79.4 2.7 26.7 90.9 26.7
------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 23.8 39.5 (51.3) (11.5) (5.3) 23.8 (5.3)
SBI Special Accounts Facility 18.5 11.9 5.8 (0.6) 6.4 18.5 6.4
------------------------------------------------------------------------------------
Total SBI 42.3 51.4 (45.5) (12.1) 1.1 42.3 1.1
------------------------------------------------------------------------------------
Surety 9.3 8.6 8.5 6.8 3.7 9.3 3.7
P&C Other* (7.1) (42.2) (149.8) (9.7) (10.5) (7.1) (10.5)
------------------------------------------------------------------------------------
Total Property & Casualty $ 135.4 $ 92.8 $(107.4) $(12.3) $ 21.0 $135.4 $ 21.0
------------------------------------------------------------------------------------
Net Combined Ratios (GAAP)
Safeco Personal Insurance
Auto 96.3% 96.2% 94.4% 100.2% 101.3% 96.3% 101.3%
Property 73.1 79.8 82.4 102.9 87.7 73.1 87.7
Specialty 70.0 76.7 68.6 50.2 73.4 70.0 73.4
------------------------------------------------------------------------------------
Total SPI 89.5 91.2 90.4 99.7 96.5 89.5 96.5
------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 92.1 86.1 118.6 104.2 102.0 92.1 102.0
SBI Special Accounts Facility 84.2 88.3 94.3 100.7 92.7 84.2 92.7
------------------------------------------------------------------------------------
Total SBI 89.9 86.7 112.2 103.3 99.6 89.9 99.6
------------------------------------------------------------------------------------
Surety 79.6 79.9 78.8 82.2 88.6 79.6 88.6
P&C Other* NM NM NM NM NM NM NM
------------------------------------------------------------------------------------
Total Property & Casualty 89.9% 92.8% 108.6% 101.0% 98.2% 89.9% 98.2%
====================================================================================
* P&C Other includes large commercial business accounts, commercial specialty
programs and London operations that are in runoff and certain product lines that
we have exited.
Safeco Property & Casualty
Net Written Premiums
(In Millions)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
-------------------------------------------------------------------------------------------
Net Written Premiums
Safeco Personal Insurance
Auto $ 668.9 $ 606.2 $ 610.5 $ 563.8 $ 559.4 $ 668.9 $ 559.4
Property 206.6 214.6 246.7 255.6 208.1 206.6 208.1
Specialty 20.8 17.9 22.8 25.8 19.1 20.8 19.1
-------------------------------------------------------------------------------------------
Total SPI 896.3 838.7 880.0 845.2 786.6 896.3 786.6
-------------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 312.9 283.0 281.5 308.4 284.0 312.9 284.0
SBI Special Accounts Facility 117.8 110.3 103.7 94.7 97.1 117.8 97.1
-------------------------------------------------------------------------------------------
Total SBI 430.7 393.3 385.2 403.1 381.1 430.7 381.1
-------------------------------------------------------------------------------------------
Surety 48.7 46.8 49.9 46.9 35.2 48.7 35.2
P&C Other - (1.5) (0.4) 21.3 2.9 - 2.9
-------------------------------------------------------------------------------------------
Total Property & Casualty $1,375.7 $ 1,277.3 $ 1,314.7 $ 1,316.5 $1,205.8 $1,375.7 $1,205.8
===========================================================================================
Net Written Premiums (Percent Change)
Percent Change Over Prior Year Same Quarter Percent Change YTD
Safeco Personal Insurance
Auto 19.6% 17.5% 15.3% 17.1% 18.5% 19.6% 18.5%
Property -0.7 1.8 -2.8 0.0 2.5 -0.7 2.5
Specialty 8.9 5.9 8.6 6.6 9.1 8.9 9.1
-------------------------------------------------------------------------------------------
Total SPI 13.9 12.8 9.4 11.0 13.5 13.9 13.5
-------------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 10.2 9.6 11.0 11.0 7.0 10.2 7.0
SBI Special Accounts Facility 21.3 11.2 17.6 13.4 24.8 21.3 24.8
-------------------------------------------------------------------------------------------
Total SBI 13.0 10.1 12.7 11.5 10.9 13.0 10.9
-------------------------------------------------------------------------------------------
Surety 38.4 44.4 29.9 30.8 30.7 38.4 30.7
P&C Other NM NM NM NM NM NM NM
-------------------------------------------------------------------------------------------
Total Property & Casualty 14.1% 13.0% 11.2% 11.2% 10.9% 14.1% 10.9%
==========================================================================================
Safeco Property & Casualty
Net Earned Premiums
(In Millions)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
------------------------------------------------------------------------------------------
Net Earned Premiums
Safeco Personal Insurance
Auto $ 620.1 $ 599.2 $ 574.1 $ 546.1 $ 522.1 $ 620.1 $ 522.1
Property 228.2 232.9 229.9 230.6 227.5 228.2 227.5
Specialty 21.2 21.5 21.4 20.4 19.7 21.2 19.7
------------------------------------------------------------------------------------------
Total SPI 869.5 853.6 825.4 797.1 769.3 869.5 769.3
------------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 302.4 284.0 275.4 272.1 266.0 302.4 266.0
SBI Special Accounts Facility 116.7 102.1 100.6 93.2 87.9 116.7 87.9
------------------------------------------------------------------------------------------
Total SBI 419.1 386.1 376.0 365.3 353.9 419.1 353.9
------------------------------------------------------------------------------------------
Surety 45.4 43.0 40.0 38.5 32.1 45.4 32.1
P&C Other 6.5 3.8 9.0 0.9 7.8 6.5 7.8
------------------------------------------------------------------------------------------
Total Property & Casualty $1,340.5 $1,286.5 $ 1,250.4 $ 1,201.8 $1,163.1 $1,340.5 $1,163.1
==========================================================================================
Net Earned Premiums (Percent Change) Percent Change Over Prior Year Same Quarter Percent Change YTD
Safeco Personal Insurance
Auto 18.8% 16.0% 17.0% 17.1% 16.5% 18.8% 16.5%
Property 0.3 0.8 -0.9 0.9 2.4 0.3 2.4
Specialty 7.6 7.5 6.5 4.6 4.2 7.6 4.2
------------------------------------------------------------------------------------------
Total SPI 13.0 11.2 11.1 11.6 11.7 13.0 11.7
------------------------------------------------------------------------------------------
Safeco Business Insurance
SBI Regular 13.7 8.3 7.8 8.2 8.6 13.7 8.6
SBI Special Accounts Facility 32.8 14.5 33.8 50.9 76.2 32.8 76.2
------------------------------------------------------------------------------------------
Total SBI 18.4 9.8 13.7 16.7 20.0 18.4 20.0
------------------------------------------------------------------------------------------
Surety 41.4 31.5 22.3 23.5 7.8 41.4 7.8
P&C Other NM NM NM NM NM NM NM
------------------------------------------------------------------------------------------
Total Property & Casualty 15.3% 10.5% 10.1% 7.1% 5.8% 15.3% 5.8%
==========================================================================================
Safeco Property & Casualty
Safeco Personal Insurance (SPI)
(In Millions Except Ratios)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
---------- ----------- ---------- ----------- ----------- ----------- -----------
AUTO
Underwriting Profit (Loss) $ 23.1 $ 23.0 $ 32.2 $ (0.9) $ (6.6) $ 23.1 $ (6.6)
Loss and LAE Ratio 73.4% 72.5% 72.2% 76.5% 77.6% 73.4% 77.6%
Expense Ratio 22.9 23.7 22.2 23.7 23.7 22.9 23.7
---------- ----------- ---------- ----------- ----------- ----------- -----------
Combined Ratio 96.3% 96.2% 94.4% 100.2% 101.3% 96.3% 101.3%
---------- ----------- ---------- ----------- ----------- ----------- -----------
Impact of Catastrophes 0.1% 0.6% 0.0% 4.1% 0.2% 0.1% 0.2%
Policies In Force (000's) 1,705.0 1,660.0 1,623.0 1,577.6 1,550.0
% Chg Prior Year Same Qtr 10.0% 9.1% 9.0% 9.6% 9.7%
Loss Trends (12 mos. Rolling)
Frequency -0.4% -2.1% -3.3% -3.7% -6.4%
Severity 3.6 2.4 3.6 3.1 5.1
Total Loss Costs 3.2% 0.3% 0.3% -0.7% -1.6%
Retention 79.8% 79.8% 80.2% 81.0% 81.3%
New Business Policies (000's) 143.9 139.6 144.4 115.4 107.5
% Chg Prior Year Same Qtr 33.9% 19.5% 5.3% -0.8% 12.5%
Net Written Premiums $ 668.9 $ 606.2 $ 610.5 $ 563.8 $ 559.4
% Chg Prior Year Same Qtr 19.6% 17.5% 15.3% 17.1% 18.5%
Net Earned Premiums $ 620.1 $ 599.2 $ 574.1 $ 546.1 $ 522.1
% Chg Prior Year Same Qtr 18.8% 16.0% 17.0% 17.1% 16.5%
PROPERTY
Underwriting Profit (Loss) $ 61.4 $ 47.0 $ 40.5 $ (6.6) $ 28.0 $ 61.4 $ 28.0
Loss and LAE Ratio 45.4% 51.8% 53.9% 74.0% 58.4% 45.4% 58.4%
Expense Ratio 27.7 28.0 28.5 28.9 29.3 27.7 29.3
---------- ----------- ---------- ----------- ----------- ----------- -----------
Combined Ratio 73.1% 79.8% 82.4% 102.9% 87.7% 73.1% 87.7%
---------- ----------- ---------- ----------- ----------- ----------- -----------
Impact of Catastrophes 3.2% 7.7% 5.3% 27.1% 4.1% 3.2% 4.1%
Impact of Non-Cat Weather 4.9% 3.6% 9.0% 8.2% 6.2% 4.9% 6.2%
Policies In Force (000's) 1,423.2 1,449.0 1,483.6 1,521.4 1,558.0
% Chg Prior Year Same Qtr -8.7% -8.9% -9.1% -9.0% -8.3%
Retention 83.2% 83.1% 83.0% 83.0% 82.8%
New Business Policies (000's) 30.4 32.6 37.0 34.1 28.3
% Chg Prior Year Same Qtr 7.4% -2.6% -6.0% -33.7% -29.5%
Net Written Premiums 206.6 214.6 246.7 255.6 208.1
% Chg Prior Year Same Qtr -0.7% 1.8% -2.8% 0.0% 2.5%
Net Earned Premiums 228.2 232.9 229.9 230.6 227.5
% Chg Prior Year Same Qtr 0.3% 0.8% -0.9% 0.9% 2.4%
SPECIALTY
Underwriting Profit $ 6.4 $ 5.0 $ 6.7 $ 10.2 $ 5.3 $ 6.4 $ 5.3
Loss and LAE Ratio 45.0% 51.5% 43.4% 23.9% 47.2% 45.0% 47.2%
Expense Ratio 25.0 25.2 25.2 26.3 26.2 25.0 26.2
---------- ----------- ---------- ----------- ----------- ----------- -----------
Combined Ratio 70.0% 76.7% 68.6% 50.2% 73.4% 70.0% 73.4%
---------- ----------- ---------- ----------- ----------- ----------- -----------
Safeco Property & Casualty
Safeco Business Insurance (SBI)
(In Millions Except Ratios)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
---------------------------------------------------------------------------------------------
SAFECO BUSINESS INSURANCE
Underwriting Profit (Loss) $ 42.3 $ 51.4 $ (45.5) $ (12.1) $ 1.1 $ 42.3 $ 1.1
Loss and LAE Ratio 55.8% 51.0% 76.1% 64.7% 61.2% 55.8% 61.2%
Expense Ratio 34.1 35.7 36.1 38.6 38.4 34.1 38.4
---------------------------------------------------------------------------------------------
Combined Ratio (CR) 89.9% 86.7% 112.2% 103.3% 99.6% 89.9% 99.6%
=============================================================================================
CR excluding reserve adjustment * 89.9% 86.7% 96.1% 103.3% 99.6% 89.9% 99.6%
Impact of Catastrophes 0.9% 0.0% 2.4% 3.8% 0.9% 0.9% 0.9%
SBI REGULAR
Underwriting Profit (Loss) $ 23.8 $ 39.5 $ (51.3) $ (11.5) $ (5.3) $ 23.8 $ (5.3)
Loss and LAE Ratio 58.7% 51.0% 81.8% 66.6% 63.8% 58.7% 63.8%
Expense Ratio 33.4 35.1 36.8 37.6 38.2 33.4 38.2
---------------------------------------------------------------------------------------------
Combined Ratio (CR) 92.1% 86.1% 118.6% 104.2% 102.0% 92.1% 102.0%
=============================================================================================
CR excluding reserve adjustment * 92.1% 86.1% 97.7% 104.2% 102.0% 92.1% 102.0%
Impact of Catastrophes 0.8% 0.1% 1.9% 3.4% 1.7% 0.8% 1.7%
Policies In Force (000's) 508.6 510.1 509.9 511.1 517.2
% Chg Prior Year Same Qtr -1.7% -3.7% -5.1% -6.9% -7.4%
Retention 80.2% 78.4% 77.9% 76.7% 76.1%
New Business Policies (000's) 28.9 27.9 30.3 31.1 25.2
% Chg Prior Year Same Qtr 14.7% 13.4% 23.2% 16.9% 13.7%
Net Written Premiums 312.9 283.0 281.5 308.4 284.0
% Chg Prior Year Same Qtr 10.2% 9.6% 11.0% 11.0% 7.0%
Net Earned Premiums 302.4 284.0 275.4 272.1 266.0
% Chg Prior Year Same Qtr 13.7% 8.3% 7.8% 8.2% 8.6%
SBI SPECIAL ACCOUNTS FACILITY
Underwriting Profit (Loss) $ 18.5 $ 11.9 $ 5.8 $ (0.6) $ 6.4 $ 18.5 $ 6.4
Combined Ratio 84.2% 88.3% 94.3% 100.7% 92.7% 84.2% 92.7%
- ---------------------------------------------------------------------------------------------------------------------------
* Excludes third quarter workers compensation adjustment of $205.0 ($144.9 in
P&C Other, $57.6 in SBI Regular and $2.5 in SBI Special Accounts Facility).
Safeco Property & Casualty
Surety, Other and Total
(In Millions Except Ratios)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
---------------------------------------------------------------------------------------------
SURETY
Underwriting Profit $ 9.3 $ 8.6 $ 8.5 $ 6.8 $ 3.7 $ 9.3 $ 3.7
Combined Ratio 79.6% 79.9% 78.8% 82.2% 88.6% 79.6% 88.6%
P&C OTHER *
Underwriting Loss $ (7.1) $ (42.2) $ (149.8) $ (9.7) $ (10.5) $ (7.1) $ (10.5)
TOTAL PROPERTY & CASUALTY
Underwriting Profit (Loss) $ 135.4 $ 92.8 $ (107.4) $ (12.3) $ 21.0 $ 135.4 $ 21.0
Underwriting Profit (Loss)
excluding reserve adjustment ** $ 135.4 $ 92.8 $ 97.6 $ (12.3) $ 21.0 $ 135.4 $ 21.0
Loss and LAE Ratio 61.6% 63.2% 80.2% 70.4% 67.9% 61.6% 67.9%
Expense Ratio 28.3 29.6 28.4 30.6 30.3 28.3 30.3
-------------------------------------------------------------------------------------------
Combined Ratio (CR) 89.9% 92.8% 108.6% 101.0% 98.2% 89.9% 98.2%
===========================================================================================
CR excluding reserve adjustment ** 89.9% 92.8% 92.2% 101.0% 98.2% 89.9% 98.2%
Impact of Catastrophes 0.9% 1.6% 1.7% 8.2% 1.1% 0.9% 1.1%
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
-------------------------------------------------------------------------------------------
Catastrophes
SPI - Auto $ 0.5 $ 3.7 $ (0.1) $ 22.3 $ 0.9 $ 0.5 $ 0.9
SPI - Property 7.4 18.0 12.1 62.5 9.3 7.4 9.3
Safeco Business Insurance 3.7 0.1 8.9 13.9 3.3 3.7 3.3
P&C Other - (1.6) 0.1 0.4 (0.1) - (0.1)
-------------------------------------------------------------------------------------------
Total $ 11.6 $ 20.2 $ 21.0 $ 99.1 $ 13.4 $ 11.6 $ 13.4
===========================================================================================
* P&C Other includes large commercial business accounts, commercial specialty
programs and London operations that are in runoff and certain product lines that
we have exited.
** Excludes third quarter workers compensation adjustment of $205.0 ($144.9 in
P&C Other, $57.6 in SBI Regular and $2.5 in SBI Special Accounts Facility).
Safeco Corporation
Investment Portfolio - Continuing Operations
(In Millions)
Investment Portfolio (Market Value) 03/31/2004 % 12/31/2003 %
----------------------------------------------------
Fixed Maturities - Taxable $ 6,166.8 64.6 % $ 6,002.8 63.7 %
Fixed Maturities - Nontaxable 2,144.9 22.5 2,156.5 22.9
Equity Securities 1,134.8 11.9 1,166.2 12.4
----------------------------------------------------
Total Fixed Maturities & Equity Securities 9,446.5 99.0 9,325.5 99.0
Mortgage Loans 0.8 0.0 9.8 0.1
Other Invested Assets 25.3 0.3 8.9 0.1
Short-Term Investments 68.5 0.7 77.6 0.8
----------------------------------------------------
Total Investment Portfolio $ 9,541.1 100.0 % $ 9,421.8 100.0 %
=====================================================
Rating (Market Value) - Fixed Maturities 03/31/2004 12/31/2003
------------------------------------
AAA 42.6 % 42.2 %
AA 10.8 10.9
A 24.0 23.0
BBB 18.8 19.3
BB or lower 2.7 3.1
Not Rated 1.1 1.5
------------------------------------
Total 100.0 % 100.0 %
====================================
Average Rating A+ A+
====================================
03/31/2004 12/31/2003 09/30/2003 06/30/2003 03/31/2003
------------------------------------------------------------------
P&C Pretax Investment Income - Quarter $ 111.7 $ 110.0 $ 113.7 $ 116.5 $ 112.8
Pretax Investment Income - Quarter $ 115.0 $ 114.4 $ 114.7 $ 119.8 $ 119.6
Effective Tax Rate on Investment
Income - Quarter 27.12% 25.76% 26.84% 25.28% 27.10%
Cost or Amortized Cost $ 8,545 $ 8,495 $ 8,331 $ 7,987 $ 8,432
Market 9,541 9,422 9,175 9,044 8,762
% Equities (at market) 11.9% 12.4% 11.5% 11.5% 10.6%
% Taxable Bonds (at market) 64.6% 63.7% 60.4% 60.4% 60.6%
% Tax Exempt Bonds (at market) 22.5% 22.9% 24.0% 24.4% 24.2%
% Short-Term and Other 1.0% 1.0% 4.1% 3.7% 4.6%
Market YTM on Bond Portfolio 3.42% 3.78% 3.73% 3.65% 4.09%
Book YTM on Bond Portfolio 5.16% 5.27% 5.54% 5.63% 6.01%
Duration of Bond Portfolio 4.27% 4.39% 4.98% 4.54% 5.23%
1ST 1ST
Net Realized Investment Gains (After Tax) QTR QTR
from Continuing Operations 2004 2003
------------------------------
Gains on Securities Transactions $ 30.8 $ 11.2
Impairments on Fixed Maturities (2.9) (10.6)
Impairments on Equity Securities (0.1) (2.7)
Credit Default Swaps - 5.8
Other - 1.8
-------------------------------
Net Realized Investment Gains $ 27.8 $ 5.5
===============================
Safeco Corporation
Capitalization
(In Millions)
03/31/2004 12/31/2003 12/31/2002
-------------------------------------------------------------
Short-Term Debt
$500 million back up line of credit (unused) $ - $ - $ -
7.875%, due 3/15/03 - - 303.5
Medium-Term Notes and Other - - 15.9
Long-Term Debt
7.875%, due 4/1/05 (called at par on 4/1/03) - - 200.0
6.875%, due 7/15/07 (non callable) 200.0 200.0 200.0
4.20%, due 2/1/08 (non callable) 200.0 200.0 -
4.875%, due 2/1/10 (non callable) 300.0 300.0 -
7.25%, due 9/15/12 (non callable) 375.0 375.0 375.0
8.072% debentures due 2037 876.3 876.3 876.3
(Callable at 104 in 2007)
-------------------------------------------------------------
Total Debt $ 1,951.3 $ 1,951.3 $ 1,970.7
=============================================================
Equity $ 5,534.7 $ 5,023.3 $ 4,431.6
=============================================================
Total Capital (Debt + Equity) $ 7,486.0 $ 6,974.6 $ 6,402.3
=============================================================
Debt to Capital 26.1% 28.0% 30.8%
Adjusted Debt* to Capital 23.7% 25.5% 28.0%
Debt to Equity 35.3% 38.8% 44.5%
Debt to Capital (excluding FAS 115) 32.8% 34.1% 36.9%
Adjusted Debt* to Capital (excluding FAS 115) 29.9% 31.0% 33.6%
Debt to Equity (excluding FAS 115) 48.9% 51.7% 58.5%
* 20% equity credit for 8.072% debentures due 2037.
Corporate Segment
Three Months Ended
March 31
----------------------------------
2004 2003
----------------------------------
Loss from Continuing Operations before Income Taxes $ (25.2) $ (25.7)
Income Tax Benefit 12.7 9.6
----------------------------------
Loss from Continuing Operations, Net of Taxes $ (12.5) $ (16.1)
----------------------------------
Discontinued Operations
Life & Investments
Pretax Operating Earnings and Revenues
(In Millions)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
----------- ----------- ----------- ----------- ----------- ------------ -------------
Pretax Operating Earnings*
Group $ 12.2 $ 23.0 $ 12.5 $ 24.5 $ 29.0 $ 12.2 $ 29.0
Income Annuities 3.7 7.7 (0.9) 8.4 10.1 3.7 10.1
Retirement Services 9.5 4.8 3.3 4.9 5.0 9.5 5.0
Individual 7.4 1.0 3.9 (0.5) 1.9 7.4 1.9
Asset Management 1.6 0.5 1.1 0.1 0.1 1.6 0.1
L&I Other** 26.9 16.3 24.2 23.5 28.8 26.9 28.8
----------- ----------- ----------- ----------- ----------- ------------ -------------
Total Life & Investments $ 61.3 $ 53.3 $ 44.1 $ 60.9 $ 74.9 $ 61.3 $ 74.9
----------- ----------- ----------- ----------- ----------- ------------ -------------
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
----------- ----------- ----------- ----------- ----------- ------------ -------------
Operating Revenues
Group $ 129.3 $ 132.2 $ 133.9 $ 144.5 $ 142.3 $ 129.3 $ 142.3
Income Annuities 125.4 130.3 121.7 130.8 131.4 125.4 131.4
Retirement Services 97.0 99.1 96.6 96.4 96.1 97.0 96.1
Individual 95.6 95.5 96.3 95.8 95.9 95.6 95.9
Asset Management 7.1 7.0 7.0 6.7 6.2 7.1 6.2
L&I Other 65.3 55.3 52.8 50.7 55.5 65.3 55.5
----------- ----------- ----------- ----------- ----------- ------------ -------------
Total Life & Investments $ 519.7 $ 519.4 $ 508.3 $ 524.9 $ 527.4 $ 519.7 $ 527.4
============================================================================================
Discontinued Operations
Life & Investments
Supplemental Statistics
(In Millions, Except Ratios and Policy Statistics)
1ST 4TH 3RD 2ND 1ST
QTR QTR QTR QTR QTR YTD YTD
2004 2003 2003 2003 2003 2004 2003
-------------------------------------------------------------------------------------------
Group
Earned Premiums $ 127.9 $130.6 $132.3 $141.6 $140.6 $ 127.9 $ 140.6
Loss Ratio 65.8% 52.5% 63.3% 56.3% 56.2% 65.8% 56.2%
Income Annuities
Reserves (in billions) $ 6.4 $ 6.3 $ 6.3 $ 6.4 $ 6.3 $ 6.4 $ 6.3
Deposits 18.1 20.5 29.3 35.8 28.5 18.1 28.5
Retirement Services
Reserves
Fixed (in billions) $ 6.6 $ 6.7 $ 6.6 $ 6.4 $ 6.1 $ 6.6 $ 6.1
Variable (in billions) 1.1 1.0 0.9 0.9 0.8 1.1 0.8
-------------------------------------------------------------------------------------------
Total Reserves 7.7 7.7 7.5 7.3 6.9 7.7 6.9
Deposits 90.8 250.0 303.6 328.4 332.2 90.8 332.2
Individual
Reserves $ 4.0 $ 4.0 $ 3.9 $ 3.9 $ 3.8 $ 4.0 $ 3.8
Policies Issued:
Term, Universal Life, 6.3 6.8 5.9 6.5 5.9 6.3 5.9
Traditional, Disability (000's)
Policies In Force (000's) 286.5 285.8 284.0 283.2 281.7 286.5 281.7
Asset Management
Assets Under Management
(in billions) $ 4.0 $ 4.1 $ 4.0 $ 4.0 $ 3.7 $ 4.0 $ 3.7
ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS
March 31 December 31
2004 2003
ASSETS ----------------------------------
Total Investments $19,746.2 $19,301.4
Other Assets 1,002.4 1,055.6
Separate Accounts 1,164.7 1,137.4
Securities Lending Collateral 1,195.0 1,054.5
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Total Assets of Discontinued Operations 23,108.3 22,548.9
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LIABILITIES
Funds Held Under Deposit Contracts 16,577.4 16,582.4
Life Policy Liabilities 332.0 331.8
Accident and Health Reserves 134.4 139.1
Other Liabilities 819.2 697.5
Separate Accounts 1,164.7 1,137.4
Securities Lending Payable 1,195.0 1,054.5
----------------------------------
Total Liabilities of Discontinued Operations 20,222.7 19,942.7
----------------------------------
Net Assets of Discontinued Operations $ 2,885.6 $ 2,606.2
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Net Assets of Discontinued Operations excluding Accumulated Other Comprehensive Income $ 1,826.3 $ 1,776.1