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Third Quarter News Release and Statistical Supplement (Unaudited)
October 19, 2004
Table of Contents
Page
Earnings News Release 1-7
Financial Supplement Introduction SS-1
Financial Measures Used by Safeco SS-2
Consolidated Results
Key Metrics SS-6
Consolidated Statements of Income (Loss) SS-7
Condensed Balance Sheets SS-8
Continuing Operations Income Summary SS-9
Property & Casualty Results
Underwriting Profit (Loss) and Combined Ratios SS-10
Net Written Premiums SS-11
Net Earned Premiums SS-12
Safeco Personal Insurance (SPI) SS-13
Safeco Business Insurance (SBI) SS-14
Surety, Other and Total SS-15
Statutory Information SS-16
Corporate Supplemental Information
Investment Portfolio SS-17
Capitalization SS-18
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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'S THIRD QUARTER: STRONG FUNDAMENTALS, SIGNIFICANT
CATASTROPHE LOSSES, LIFE & INVESTMENTS SALE CLOSES
SEATTLE--(October 19, 2004)--
Highlights
o Fundamentals strong; growth continues.
o After-tax catastrophe losses of $127 million.
o Sale of Life & Investments completed.
- ------------------------------------------------------------- --------------------------------- -------------------------------
Summary Financial Results after tax 3 Months Ended 9 Months Ended
(In millions except per-share data) September 30 September 30
2004 2003 2004 2003
- ------------------------------------------------------------- ---------------- ---------------- ---------------- --------------
Net Income (Loss) $ (101.1) $ (28.9) $ 382.6 $ 173.0
Per Diluted Share of Common Stock $ (0.76) $ (0.21) $ 2.78 $ 1.25
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
Results from Discontinued Operations $ (107.0) $ (28.8) $ (57.8) $ 26.5
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
Income (Loss) from Continuing Operations $ 5.9 $ (0.1) $ 440.4 $ 146.5
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
Loss on Debt Repurchases (78.7) - (78.7) -
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
Net Realized Investment Gains 32.8 7.8 115.8 23.7
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
*Operating Earnings (Loss) - Continuing Operations $ 51.8 $ (7.9) $ 403.3 $ 122.8
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
Weighted Average Shares Outstanding (Diluted) 132.5 - 137.5 138.9
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
Weighted Average Shares Outstanding (Basic) - 138.5 - -
- ------------------------------------------------------------- -- ------------- --- ------------ ---- ----------- --- ----------
* Operating Earnings is Income (Loss) from Continuing Operations excluding Net Realized Investment Gains and Loss on Debt
Repurchases. 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/04Q3_sup.pdf.
- -------------------------------------------------------------------------------------------------------------------------------
Safeco (NASDAQ: SAFC) today reported third-quarter results, reflecting
strong fundamentals in a period with substantial hurricane losses and the loss
on the sale of Life & Investments. The company posted a net loss of $101.1
million - or $0.76 per diluted share for the quarter. This compares with a 2003
third-quarter net loss of $28.9 million - or $0.21 per share, when the company
strengthened workers compensation reserves.
Safeco's annualized return on equity (ROE) for the quarter was a negative
9.2 percent, compared with a negative 2.5 percent in the third quarter of 2003.
Operating annualized ROE - measured using operating earnings from continuing
operations and ending shareholders' equity, excluding unrealized gains on bond
investments - was 5.9 percent, compared with a negative 0.9 percent in the same
period last year.
"The hurricanes brought devastation to thousands of our customers, and it
brought our industry back to reality," said Mike McGavick, Safeco chairman and
chief executive officer. "Our claims professionals have done an extraordinary
job these last two months helping our agents and customers recover from not one,
but four hurricanes. That's what our business is all about."
Continuing Operations
Income from continuing operations was $5.9 million for the third quarter,
up from a loss of $0.1 million in the same quarter last year. Operating earnings
for the third quarter, excluding net realized investment gains and the loss on
debt repurchases, were $51.8 million, compared with a $7.9 million loss in the
prior-year period. Net realized after-tax investment gains for the third quarter
were $32.8 million, compared with $7.8 million in the same period of 2003. The
after-tax loss on the debt repurchases was $78.7 million.
The overall Property & Casualty (P&C) combined ratio was 101.6 in the third
quarter, compared with the 108.6 posted in the same period last year. Last
year's third-quarter combined ratio included a pretax workers compensation
reserve strengthening of $205.0 million.
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.
Last week, the company announced aggregate pretax catastrophe losses of
$195 million for the third quarter, with $183 million representing losses from
the four hurricanes that hit Florida and surrounding states in August and
September. The effect on third-quarter net loss for all catastrophes was $127
million after tax, or $0.96 per diluted share, compared with catastrophes of
$13.7 million, or $0.10 per share in the third quarter of last year. Catastrophe
losses increased the company's overall combined ratio for the quarter by 13.9
points, bringing it to 101.6.
"Although it's difficult to look beyond the hardship created by the
hurricanes, we are heartened by our strong performance across each of our major
lines of business," said McGavick. "Our underlying loss trends are good, and
we're performing better than our target margins, excluding these catastrophes.
We're proud of that fact, just as we're proud of our people in Florida who are
helping so many put their lives back together."
Total revenues from continuing operations in the third quarter were $1.57
billion, compared with $1.38 billion a year ago. Operating revenues, which
exclude net realized investment gains, were $1.52 billion for the quarter, a
10.9 percent increase compared with third-quarter 2003.
P&C net earned premiums increased 12.0 percent for the quarter to $1.40
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 11.6 percent compared with third-quarter 2003.
P&C pretax net investment income was $111.0 million for the quarter,
compared with $113.7 million in the same period a year ago, a decline of 2.4
percent, reflecting lower yields on the company's fixed-income investments.
Safeco Personal Insurance Performance
Auto, Safeco's largest business line, reported a quarterly underwriting
profit of $51.0 million, compared with $32.2 million of underwriting profit in
the third quarter of 2003. During the quarter, $8.2 million in pretax
catastrophe losses were more than offset by favorable prior-year reserve
development of $10.0 million. Auto's combined ratio in the third quarter was
92.4, compared with 94.4 in the third quarter of 2003.
Net written premiums increased 16.0 percent in the third quarter compared
with a year ago. This growth was fueled by a record-breaking number of new auto
policies sold in the quarter.
Policies in force (PIF) grew 9.7 percent compared with a year ago,
reflecting the effectiveness of Safeco's new auto product and new-business
platform delivery, as well as stable retention levels.
Safeco's Property insurance line, which includes homeowners, renters and
related coverages, produced an underwriting profit of $14.2 million in the third
quarter, compared with a $40.5 million underwriting profit in the third quarter
of 2003. The decline in profit was due to $71.3 million in pretax catastrophe
losses primarily associated with the Florida hurricanes, compared with $12.1
million in catastrophes in the same period a year ago. Partially offsetting the
catastrophe losses this quarter was $9.0 million of favorable prior-year reserve
development. Safeco has a 0.6 percent market share of premiums in the voluntary
homeowners market in Florida.
The Property combined ratio was 93.9 in the third quarter, compared with
82.4 in the third quarter of 2003.
Net written premiums in Property increased 0.6 percent in the third quarter
compared with a year ago. PIF declined 7.7 percent, while new business increased
14.1 percent compared with the third quarter last year.
"We're pleased with the underlying performance this quarter," said
McGavick. "It is especially gratifying in Property where our tiered product and
focus on profitability are proving successful."
Safeco Business Insurance Performance
Safeco Business Insurance (SBI) reported an underwriting loss of $80.8
million in the third quarter, compared with a $45.5 million underwriting loss
for the same period in 2003. The decline in underwriting results was due largely
to $109.0 million in pretax catastrophe losses during the quarter, compared with
$8.9 million in the same period a year ago. Safeco's Commercial Multi-Peril
market share of premiums in Florida is approximately 2.0 percent. Also impacting
last year's results was $60.1 million in pretax workers compensation reserve
charges ($57.6 million in SBI Regular).
Combined ratio in the third quarter was 119.4, compared with 112.2 in the
third quarter of 2003.
SBI Regular reported a combined ratio of 119.5, compared with the 118.6
result in the same period last year. The third-quarter combined ratio included
$79.9 million in catastrophe losses, compared with $5.2 million in the same
period last year.
Net written premiums for SBI Regular - Safeco's core line of products for
small- to medium-sized businesses - increased 9.3 percent for the third quarter
compared with the same period last year.
"The hurricanes hit our commercial lines hardest," said McGavick. "Again,
though, when we look beyond the catastrophe numbers, our commercial business
performed better than our targets."
Surety Performance
Surety posted an underwriting profit of $10.0 million in the third quarter,
compared with the $8.5 million underwriting profit in the same quarter of 2003.
The combined ratio for Surety was 81.3 in the third quarter, compared with
78.8 in the same quarter of 2003.
Net written premiums grew 28.5 percent compared with the same period last
year, driven by higher rates and new accounts.
P&C Other
The P&C Other segment, which includes results from operations that Safeco
has exited or placed in runoff, had an underwriting loss of $12.6 million in the
third quarter due to reserve strengthening, compared with a $149.8 million
underwriting loss in the same quarter of 2003. The loss in 2003 was the result
of pretax workers compensation reserve development of $144.9 million.
Life & Investments Sale and Use of Proceeds
On August 2, 2004, Safeco completed the sale of its Life & Investments
(L&I) business. The sale of Talbot Financial Corporation was completed on July
1, 2004. Proceeds from these sales totaled $1.51 billion.
Results from Discontinued Operations reflect a loss of $107.0 million,
which includes a $134.8 million after-tax loss on the sales, and income from
Discontinued Operations during the quarter.
The company used $623.0 million to purchase 13.2 million shares of common
stock in an accelerated stock buyback program. Safeco also used $735.2 million
of the proceeds to complete debt tender offers, resulting in a pretax loss on
debt repurchases of $121.0 million, or $78.7 million after tax.
Additional Financial Information Available
Safeco uses both GAAP and non-GAAP financial measures to track the
performance of its operations. The definition of each non-GAAP measure and
reconciliation to the most directly comparable GAAP measure are included in
Safeco's Form 8-K that will be furnished to the U.S. Securities and Exchange
Commission today.
The Form 8-K will include this news release and Safeco's summary financial
results, consolidated statements of income (loss) and condensed balance sheets
in the company's third-quarter financial supplement.
Safeco's third-quarter press release, financial supplement and 8-K are
available online at http://www.safeco.com/safeco/investor/pdfs/04Q3_sup.pdf.
Management Reviews Results on Webcast
Safeco's senior management team will discuss the company's third-quarter
performance with analysts today at 11 a.m., Eastern Time (8 a.m., Pacific Time).
The conference call will be broadcast live on the Internet at
http://www.safeco.com/irwebcast and archived later in the day for replay.
Safeco, in business since 1923, is a Fortune 500 property and casualty
insurance company based in Seattle. The company sells insurance to drivers,
homeowners, and small- and medium-sized businesses through a national network of
independent agents and brokers. 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 Our ability to appropriately price and reserve for changes in the mix
of our book of business
o Our 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 Our ability to price for or exclude the risk of loss from terrorism on
our policies
>> Risks related to our Property & Casualty 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 other
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 terrorist
attacks or war
o The occurrence of bankruptcies that result in losses on insurance
products or investments
>> 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 omitted]
Financial Supplement
Third 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 August 2, 2004, we completed the sale of our Life & Investments (L&I)
operations. We have presented the results of L&I as a Discontinued Operation in
all periods presented.
This report is for informational purposes only. The financial statements and
financial exhibits included in this supplement are unaudited. These financial
statements and financial exhibits should be read in conjunction with the
financial statements filed with the Securities and Exchange Commission in the
Company's quarterly 10-Q and annual 10-K filings.
Neal Fuller
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.)
How We Report Our Results
Property & Casualty (P&C) businesses include the following segments:
Safeco Personal Insurance (SPI)
Auto
Property
Specialty
Safeco Business Insurance (SBI)
SBI Regular
SBI Special Accounts Facility
Surety
P&C Other
Corporate includes all other activities, primarily the financing of our business
activities.
Certain reclassifications have been made to the prior-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 of our P&C 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 Nine Months Ended
September 30 September 30
------------------------------------------------------
2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------
Total Revenues $ 1,566.9 $ 1,380.5 $ 4,621.0 $ 4,014.0
Net Realized Investment Gains (50.5) (12.8) (178.2) (36.7)
------------------------------------------------------
Operating Revenues $ 1,516.4 $ 1,367.7 $ 4,442.8 $ 3,977.3
- -----------------------------------------------------------------------------------------------------------
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 (Loss) from Continuing Operations. Net
realized investment gains and losses can fluctuate significantly and distort a
comparison between periods. In the third quarter we also excluded the loss on
debt repurchases. The following table reconciles operating earnings to Income
(Loss) from Continuing Operations, the most directly comparable GAAP measure.
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------------------------
2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations $ 5.9 $ (0.1) $ 440.4 $ 146.5
Net Realized Investment Gains, Net of Taxes (32.8) (7.8) (115.8) (23.7)
Loss on Debt Repurchases, Net of Taxes 78.7 -- 78.7 --
------------------------------------------------------
Operating Earnings (Loss)-Continuing Operations $ 51.8 $ (7.9) $ 403.3 $ 122.8
- -----------------------------------------------------------------------------------------------------------
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 from continuing
operations (see calculation above) for the most recent quarter by the ending
shareholders' equity 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 our results excluding the unrealized
changes in the valuation of our 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 Nine Months Ended
September 30 September 30
------------------------------------------------------
(ANNUALIZED) 2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (101.1) $ (28.9) $ 382.6 $ 173.0
Average Shareholders' Equity 4,387.8 4,627.9 4,373.8 4,627.9
Return on Equity Based on Annualized Net Income
(Loss) -9.2% -2.5% 11.7% 5.0%
Operating Earnings (Loss)-Continuing Operations $ 51.8 $ (7.9) $ 403.3 $ 122.8
Ending Shareholders' Equity 3,724.2 4,933.4 3,724.2 4,933.4
Unrealized Fixed Maturities Investment Gains, Net of
Taxes (236.3) (1,423.0) (236.3) (1,423.0)
------------------------------------------------------
Shareholders' Equity Pre FAS 115 $ 3,487.9 $ 3,510.4 $ 3,487.9 $ 3,510.4
Operating Return on Equity Based on Annualized
Operating Earnings (Loss) 5.9% -0.9% 15.4% 4.7%
- -----------------------------------------------------------------------------------------------------------
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 (Loss) as they are earned over the
underlying policy period. Net written premiums applicable to the unexpired term
of a policy are recorded as unearned premiums on our Consolidated Balance
Sheets. We view net written premiums as a measure of business production for the
period under review and as a leading indicator of 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 (Loss).
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------------------------
2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------
Total Property & Casualty Net Earned Premiums $ 1,400.7 $ 1,250.4 $ 4,092.6 $ 3,615.3
Change in Unearned Premiums 67.0 64.3 204.8 221.7
------------------------------------------------------
Total Property & Casualty Net Written Premiums $ 1,467.7 $ 1,314.7 $ 4,297.4 $ 3,837.0
- -----------------------------------------------------------------------------------------------------------
Property & Casualty Underwriting Profit (Loss) and Combined Ratios
Underwriting profit (loss) represents the net amount of earned premiums less
underwriting losses and expenses on a pretax basis. We view underwriting profit
(loss) 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 (loss) to Income (Loss) from Continuing Operations before Income Taxes,
the most directly comparable GAAP measure on our Consolidated Statements of
Income (Loss). Combined ratios are a standard industry measure of underwriting
performance and are calculated as losses and expenses expressed as a percentage
of net earned premiums.
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------------------------
2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations before
Income Taxes $ (4.6) $ (13.7) $ 621.5 $ 181.2
Net Realized Investment Gains (50.5) (12.8) (178.2) (36.7)
Corporate Results before Income Taxes 22.6 32.8 83.4 99.8
Loss on Debt Repurchases 121.0 -- 121.0 --
Property & Casualty Net Investment Income (111.0) (113.7) (338.5) (343.0)
Property & Casualty Restructuring Charges -- -- 1.4 --
------------------------------------------------------
Total Underwriting Profit (Loss) $ (22.5) $ (107.4) $ 310.6 $ (98.7)
- -----------------------------------------------------------------------------------------------------------
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.
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)
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD YTD
2004 2004 2004 2003 2003 2004 2003 Change
---------- ---------- ----------- ----------- ----------- ----------- ----------- ---------
Net Income (Loss) $ (101.1) $ 247.5 $ 236.2 $ 166.2 $ (28.9) $ 382.6 $ 173.0 121%
Net Income (Loss) Per Share (0.76) 1.77 1.69 1.19 (0.21) 2.78 1.25 122%
Net Income (Loss) Return on Equity
annualized -9.2% 18.7% 17.9% 13.8% -2.5% 11.7% 5.0% 6.7
Net Realized Investment Gains,
after tax from Continuing Operations $ 32.8 $ 55.2 $ 27.8 $ 22.2 $ 7.8 $ 115.8 $ 23.7 389%
Operating Earnings (Loss) from
Continuing Operations 51.8 193.7 157.8 116.8 (7.9) 403.3 122.8 228%
Operating Earnings (Loss) from
Continuing Operations Per Share 0.39 1.38 1.13 0.84 (0.06) 2.93 0.88 233%
Operating Return on Equity
(Pre-FAS 115) annualized 5.9% 18.4% 15.8% 12.4% -0.9% 15.4% 4.7% 10.7
Operating Return on Equity
annualized 5.6% 15.3% 11.4% 9.2% -0.6% 14.4% 3.3% 11.1
Operating Revenues from
Continuing Operations $ 1,516.4 $ 1,470.9 $ 1,455.5 $ 1,402.6 $ 1,367.7 $ 4,442.8 $ 3,977.3 12%
% Chg Prior Year Same Qtr 10.9% 11.1% 13.2% 9.3% 9.5%
Property & Casualty
Combined Ratio 101.6% 85.4% 89.9% 92.8% 108.6% 92.4% 102.7% -10.3
Impact of Catastrophes 13.9% 2.1% 0.9% 1.6% 1.7% 5.8% 3.7% 2.1
Net Written Premiums $ 1,467.7 $ 1,454.0 $ 1,375.7 $ 1,277.3 $ 1,314.7 $ 4,297.4 $ 3,837.0 12%
% Chg Prior Year Same Qtr 11.6% 10.4% 14.1% 13.0% 11.2%
Net Earned Premiums $ 1,400.7 $ 1,351.4 $ 1,340.5 $ 1,286.5 $ 1,250.4 $ 4,092.6 $ 3,615.3 13%
% Chg Prior Year Same Qtr 12.0% 12.4% 15.3% 10.5% 10.1%
Book Value Per Share $ 29.38 $ 36.36 $ 39.77 $ 36.24 $ 35.61 $ 29.38 $ 35.61 -18%
% Chg Prior Year Same Qtr -17.5% -2.3% 20.5% 13.0% 12.1%
Book Value Per Share (Pre-FAS 115) $ 27.48 $ 30.20 $ 28.65 $ 27.21 $ 25.35 $ 27.48 $ 25.35 8%
% Chg Prior Year Same Qtr 8.4% 17.4% 16.2% 11.6% 7.6%
Safeco Corporation
Consolidated Statements of Income (Loss)
(In Millions Except Per Share Data)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- ---------------------------
2004 2003 2004 2003
------------ ------------ ------------- ------------
(Unaudited) (Unaudited)
REVENUES
Earned Premiums $1,400.7 $ 1,250.4 $4,092.6 $ 3,615.3
Net Investment Income 115.5 114.7 349.6 354.1
Net Realized Investment Gains 50.5 12.8 178.2 36.7
Other 0.2 2.6 0.6 7.9
------------ ------------ ------------- ------------
Total 1,566.9 1,380.5 4,621.0 4,014.0
------------ ------------ ------------- ------------
EXPENSES
Losses and Loss Adjustment Expenses 1,029.9 1,003.5 2,632.2 2,639.3
Other Underwriting and Operating Expenses 162.8 148.8 475.7 471.3
Amortization of Deferred Policy Acquisition Costs 232.5 211.5 681.9 626.1
Loss on Debt Repurchases 121.0 - 121.0 -
Interest Expense 25.3 30.4 87.3 96.1
Restructuring Charges - - 1.4 -
------------ ------------ ------------- ------------
Total 1,571.5 1,394.2 3,999.5 3,832.8
------------ ------------ ------------- ------------
Income (Loss) from Continuing Operations before Income Taxes (4.6) (13.7) 621.5 181.2
Provision (Benefit) for Income Taxes on:
Income (Loss) from Continuing Operations before Net Realized
Investment Gains (28.2) (18.6) 118.7 21.7
Net Realized Investment Gains 17.7 5.0 62.4 13.0
------------ ------------ ------------- ------------
Total Provision (Benefit) for Income Taxes (10.5) (13.6) 181.1 34.7
------------ ------------ ------------- ------------
Income (Loss) from Continuing Operations 5.9 (0.1) 440.4 146.5
Results from Discontinued Operations, Net of Taxes (107.0) (28.8) (57.8) 26.5
------------ ------------ ------------- ------------
Net Income (Loss) $ (101.1) $ (28.9) $ 382.6 $ 173.0
============ ============ ============= ============
INCOME (LOSS) PER SHARE OF COMMON STOCK - DILUTED
Income (Loss) from Continuing Operations $ 0.04 $ - $ 3.20 $ 1.06
Results from Discontinued Operations, Net of Taxes (0.80) (0.21) (0.42) 0.19
------------ ------------ ------------- ------------
Net Income (Loss) $ (0.76) $ (0.21) $ 2.78 $ 1.25
============ ============ ============= ============
INCOME (LOSS) PER SHARE OF COMMON STOCK - BASIC
Income (Loss) from Continuing Operations $ 0.04 $ - $ 3.23 $ 1.06
Results from Discontinued Operations, Net of Taxes (0.81) (0.21) (0.43) 0.19
------------ ------------ ------------- ------------
Net Income (Loss) $ (0.77) $ (0.21) $ 2.80 $ 1.25
============ ============ ============= ============
Dividends Declared $ 0.22 $ 0.185 $ 0.59 $ 0.555
Average Number of Shares Outstanding During the Period:
Diluted 132.5 138.5 137.5 138.9
Basic 131.5 138.5 136.5 138.4
Safeco Corporation
Condensed Balance Sheets
(In Millions)
September 30 December 31
2004 2003
------------------ ------------------
(Unaudited)
ASSETS
Total Investments * $ 10,169.1 $ 9,344.2
Cash and Cash Equivalents 327.6 319.0
Reinsurance Recoverables 371.0 372.0
Deferred Policy Acquisition Costs 391.6 356.8
Other Assets 3,406.4 3,206.5
Assets of Discontinued Operations - 22,548.9
------------------ ------------------
Total Assets $ 14,665.7 $ 36,147.4
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Loss and Loss Adjustment Expense Reserves $ 5,259.9 $ 5,044.6
Debt ** 1,332.9 1,951.3
Unearned Premiums and Other Liabilities 4,348.7 4,185.5
Liabilities of Discontinued Operations - 19,942.7
------------------ ------------------
Total Liabilities 10,941.5 31,124.1
------------------ ------------------
Commitments and Contingencies - -
Common Stock, No Par Value
Shares Authorized: 300; Shares Reserved for Options: 9.3; 11.6
Shares Issued and Outstanding: 126.8 ***; 138.6 630.6 1,197.3
Retained Earnings 2,611.9 2,308.7
Accumulated Other Comprehensive Income 481.7 1,517.3
------------------ ------------------
Total Shareholders' Equity 3,724.2 5,023.3
------------------ ------------------
Total Liabilities & Shareholders' Equity $ 14,665.7 $ 36,147.4
================== ==================
* See Investment Portfolio - Continuing Operations (SS-17) for more detail.
** See Capitalization (SS-18) for more detail.
*** Reflects the repurchase of 13.2 million shares under an accelerated stock buyback program on August 2, 2004.
Safeco Corporation
Continuing Operations Income Summary
(In Millions)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- ----------------------------
2004 2003 2004 2003
------------ ----------- ------------- -------------
(Unaudited) (Unaudited)
Income (Loss) from Continuing Operations Before Income Taxes
- ------------------------------------------------------------
Property & Casualty
Underwriting Profit (Loss) $ (22.5) $(107.4) $ 310.6 $ (98.7)
Net Investment Income 111.0 113.7 338.5 343.0
Restructuring Charges - - (1.4) -
------------ ----------- ------------- -------------
Total Property & Casualty 88.5 6.3 647.7 244.3
Corporate (22.6) (32.8) (83.4) (99.8)
------------ ----------- ------------- -------------
Total 65.9 (26.5) 564.3 144.5
Net Realized Investment Gains 50.5 12.8 178.2 36.7
Loss on Debt Repurchases (121.0) - (121.0) -
------------ ----------- ------------- -------------
Total Income (Loss) from Continuing Operations Before
Income Taxes $ (4.6) $ (13.7) $ 621.5 $ 181.2
============ =========== ============= =============
Total Provision (Benefit) for Income Taxes $ (10.5) $ (13.6) $ 181.1 $ 34.7
- ------------------------------------------ ============ =========== ============= =============
After-Tax Income (Loss) from Continuing Operations
- --------------------------------------------------
Property & Casualty
Underwriting Profit (Loss) $ (13.8) $ (72.1) $ 205.2 $ (65.9)
Net Investment Income 79.3 83.3 247.2 253.3
Restructuring Charges - - (0.9) -
------------ ----------- ------------- -------------
Total Property & Casualty 65.5 11.2 451.5 187.4
Corporate (13.7) (19.1) (48.2) (64.6)
------------ ----------- ------------- -------------
Total 51.8 (7.9) 403.3 122.8
Net Realized Investment Gains 32.8 7.8 115.8 23.7
Loss on Debt Repurchases (78.7) - (78.7) -
------------ ----------- ------------- -------------
Total Income (Loss) from Continuing Operations $ 5.9 $ (0.1) $ 440.4 $ 146.5
============ =========== ============= =============
Safeco Property & Casualty
Underwriting Profit (Loss) and Combined Ratios
(In Millions)
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD
Net U/W Profit (Loss) 2004 2004 2004 2003 2003 2004 2003
- ----------------------------------- ----------- ------------ ---------- --------- --------- ------------ -----------
Safeco Personal Insurance
Auto $ 51.0 $ 61.0 $ 23.1 $ 23.0 $32.2 $ 135.1 $ 24.7
Property 14.2 79.3 61.4 47.0 40.5 154.9 61.9
Specialty (4.3) 6.7 6.4 5.0 6.7 8.8 22.2
----------- ------------ ---------- --------- --------- ------------ -----------
Total SPI 60.9 147.0 90.9 75.0 79.4 298.8 108.8
----------- ------------ ---------- --------- --------- ------------ -----------
Safeco Business Insurance
SBI Regular (59.7) 31.9 23.8 39.5 (51.3) (4.0) (68.1)
SBI Special Accounts Facility (21.1) 17.5 18.5 11.9 5.8 14.9 11.6
----------- ------------ ---------- --------- --------- ------------ -----------
Total SBI (80.8) 49.4 42.3 51.4 (45.5) 10.9 (56.5)
----------- ------------ ---------- --------- --------- ------------ -----------
Surety 10.0 11.5 9.3 8.6 8.5 30.8 19.0
P&C Other* (12.6) (10.2) (7.1) (42.2) (149.8) (29.9) (170.0)
----------- ------------ ---------- --------- --------- ------------ -----------
Total Property & Casualty $ (22.5) $ 197.7 $ 135.4 $ 92.8 $(107.4) $ 310.6 $ (98.7)
=========== ============ ========== ========= ========= ============ ===========
Net Combined Ratios (GAAP)
- --------------------------
Safeco Personal Insurance
Auto 92.4% 90.5% 96.3% 96.2% 94.4% 93.0% 98.5%
Property 93.9 65.1 73.1 79.8 82.4 77.5 91.0
Specialty 118.3 69.4 70.0 76.7 68.6 86.7 63.9
----------- ------------ ---------- --------- --------- ------------ -----------
Total SPI 93.4 83.5 89.5 91.2 90.4 88.9 95.5
----------- ------------ ---------- --------- --------- ------------ -----------
Safeco Business Insurance
SBI Regular 119.5 89.4 92.1 86.1 118.6 100.4 108.4
SBI Special Accounts Facility 119.1 83.8 84.2 88.3 94.3 95.5 95.9
----------- ------------ ---------- --------- --------- ------------ -----------
Total SBI 119.4 87.9 89.9 86.7 112.2 99.1 105.2
----------- ------------ ---------- --------- --------- ------------ -----------
Surety 81.3 75.7 79.6 79.9 78.8 79.0 82.8
P&C Other* NM NM NM NM NM NM NM
----------- ------------ ---------- --------- --------- ------------ -----------
Total Property & Casualty 101.6% 85.4% 89.9% 92.8% 108.6% 92.4% 102.7%
=========== ============ ========== ========= ========= ============ ===========
* 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)
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD
2004 2004 2004 2003 2003 2004 2003
------------ ------------ ---------- ----------- ---------- ------------ -----------
Net Written Premiums
- --------------------
Safeco Personal Insurance
Auto $ 707.9 $ 655.4 $ 668.9 $ 606.2 $ 610.5 $ 2,032.2 $1,733.7
Property 248.1 252.8 206.6 214.6 246.7 707.5 710.4
Specialty 24.9 28.2 20.8 17.9 22.8 73.9 67.7
------------ ------------ ---------- ----------- ---------- ------------ -----------
Total SPI 980.9 936.4 896.3 838.7 880.0 2,813.6 2,511.8
----------- ------------ ---------- ----------- ---------- ------------ -----------
Safeco Business Insurance
SBI Regular 307.8 333.4 312.9 283.0 281.5 954.1 873.9
SBI Special Accounts Facility 115.4 107.6 117.8 110.3 103.7 340.8 295.5
------------ ------------ ---------- ----------- ---------- ------------ -----------
Total SBI 423.2 441.0 430.7 393.3 385.2 1,294.9 1,169.4
------------ ------------ ---------- ----------- ---------- ------------ -----------
Surety 64.1 60.3 48.7 46.8 49.9 173.1 132.0
P&C Other (0.5) 16.3 - (1.5) (0.4) 15.8 23.8
------------ ------------ ---------- ----------- ---------- ------------ -----------
Total Property & Casualty $1,467.7 $1,454.0 $1,375.7 $ 1,277.3 $ 1,314.7 $ 4,297.4 $3,837.0
============ ============ ========== =========== ========== ============ ===========
Net Written Premiums (Percent Change) Percent Change Over Prior Year Same Quarter Percent Change YTD
- ----------------------------------- ------------------------------------------- -------------------
Safeco Personal Insurance
Auto 16.0% 16.2% 19.6% 17.5% 15.3% 17.2% 16.9%
Property 0.6 -1.1 -0.7 1.8 -2.8 -0.4 -0.3
Specialty 9.2 9.3 8.9 5.9 8.6 9.2 8.0
------------ ------------ ---------- ----------- ---------- ------------ -----------
Total SPI 11.5 10.8 13.9 12.8 9.4 12.0 11.2
------------ ------------ ---------- ----------- ---------- ------------ -----------
Safeco Business Insurance
SBI Regular 9.3 8.1 10.2 9.6 11.0 9.2 9.6
SBI Special Accounts Facility 11.3 13.6 21.3 11.2 17.6 15.3 18.3
------------ ------------ ---------- ----------- ---------- ------------ -----------
Total SBI 9.9 9.4 13.0 10.1 12.7 10.7 11.7
------------ ------------ ---------- ----------- ---------- ------------ -----------
Surety 28.5 28.6 38.4 44.4 29.9 31.1 30.4
P&C Other NM NM NM NM NM NM NM
------------ ------------ ---------- ----------- ---------- ------------ -----------
Total Property & Casualty 11.6% 10.4% 14.1% 13.0% 11.2% 12.0% 11.1%
============ ============ ========== =========== ========== ============ ===========
Safeco Property & Casualty
Net Earned Premiums
(In Millions)
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD
2004 2004 2004 2003 2003 2004 2003
---------- ---------- ---------- ---------- ----------- ---------- -------------
Net Earned Premiums
- -------------------
Safeco Personal Insurance
Auto $ 670.4 $ 643.5 $ 620.1 $ 599.2 $ 574.1 $1,934.0 $1,642.3
Property 232.1 227.5 228.2 232.9 229.9 687.8 688.0
Specialty 23.4 22.1 21.2 21.5 21.4 66.7 61.5
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total SPI 925.9 893.1 869.5 853.6 825.4 2,688.5 2,391.8
---------- ---------- ---------- ---------- ----------- ---------- ----------
Safeco Business Insurance
SBI Regular 307.0 299.5 302.4 284.0 275.4 908.9 813.5
SBI Special Accounts Facility 110.5 108.0 116.7 102.1 100.6 335.2 281.7
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total SBI 417.5 407.5 419.1 386.1 376.0 1,244.1 1,095.2
---------- ---------- ---------- ---------- ----------- ---------- ----------
Surety 53.7 47.6 45.4 43.0 40.0 146.7 110.6
P&C Other 3.6 3.2 6.5 3.8 9.0 13.3 17.7
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total Property & Casualty $1,400.7 $1,351.4 $1,340.5 $1,286.5 $ 1,250.4 $4,092.6 $3,615.3
========== ========== ========== ========== =========== ========== ==========
Net Earned Premiums (Percent Change) Percent Change Over Prior Year Same Quarter Percent Change YTD
- ----------------------------------- ------------------------------------------- -------------------
Safeco Personal Insurance
Auto 16.8% 17.8% 18.8% 16.0% 17.0% 17.8% 16.9%
Property 1.0 -1.3 0.3 0.8 -0.9 - 0.8
Specialty 9.3 8.3 7.6 7.5 6.5 8.5 5.1
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total SPI 12.2 12.0 13.0 11.2 11.1 12.4 11.4
---------- ---------- ---------- ---------- ----------- ---------- ----------
Safeco Business Insurance
SBI Regular 11.5 10.1 13.7 8.3 7.8 11.7 8.2
SBI Special Accounts Facility 9.8 15.9 32.8 14.5 33.8 19.0 50.8
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total SBI 11.0 11.6 18.4 9.8 13.7 13.6 16.7
---------- ---------- ---------- ---------- ----------- ---------- ----------
Surety 34.3 23.6 41.4 31.5 22.3 32.6 18.2
P&C Other NM NM NM NM NM NM NM
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total Property & Casualty 12.0% 12.4% 15.3% 10.5% 10.1% 13.2% 7.7%
========== ========== ========== ========== =========== ========== ==========
Safeco Property & Casualty
Safeco Personal Insurance (SPI)
(In Millions Except Ratios)
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD
2004 2004 2004 2003 2003 2004 2003
----------- ---------- ---------- ---------- ----------- ----------- -----------
AUTO
- ----
Underwriting Profit $ 51.0 $ 61.0 $ 23.1 $ 23.0 $ 32.2 $ 135.1 $ 24.7
Loss and LAE Ratio 69.1% 68.0% 73.4% 72.5% 72.2% 70.1% 75.3%
Expense Ratio 23.3 22.5 22.9 23.7 22.2 22.9 23.2
----------- ---------- ---------- ---------- ----------- ----------- -----------
Combined Ratio 92.4% 90.5% 96.3% 96.2% 94.4% 93.0% 98.5%
========== ========== ========== ========== =========== =========== ===========
Impact of Catastrophes 1.2% 1.4% 0.1% 0.6% 0.0% 0.9% 1.4%
Policies In Force (000's) 1,780.5 1,735.7 1,705.0 1,660.0 1,623.0
% Chg Prior Year Same Qtr 9.7% 10.0% 10.0% 9.1% 9.0%
Loss Trends (12 mos. Rolling)
Frequency -3.8% -2.4% -0.4% -2.1% -3.3%
Severity 5.3 4.8 3.6 2.4 3.6
Total Loss Costs 1.3% 2.3% 3.2% 0.3% 0.3%
Retention 80.1% 79.8% 79.8% 79.8% 80.2%
New Business Policies (000's) 148.6 131.0 143.9 139.6 144.4
% Chg Prior Year Same Qtr 2.9% 13.5% 33.9% 19.5% 5.3%
Net Written Premiums $ 707.9 $ 655.4 $ 668.9 $ 606.2 $ 610.5
% Chg Prior Year Same Qtr 16.0% 16.2% 19.6% 17.5% 15.3%
Net Earned Premiums $ 670.4 $ 643.5 $ 620.1 $ 599.2 $ 574.1
% Chg Prior Year Same Qtr 16.8% 17.8% 18.8% 16.0% 17.0%
PROPERTY
- --------
Underwriting Profit $ 14.2 $ 79.3 $ 61.4 $ 47.0 $ 40.5 $ 154.9 $ 61.9
Loss and LAE Ratio 67.5% 38.1% 45.4% 51.8% 53.9% 50.4% 62.1%
Expense Ratio 26.4 27.0 27.7 28.0 28.5 27.1 28.9
----------- ---------- ---------- ---------- ----------- ----------- -----------
Combined Ratio 93.9% 65.1% 73.1% 79.8% 82.4% 77.5% 91.0%
========== ========== ========== ========== =========== =========== ===========
Impact of Catastrophes 30.7% 6.8% 3.2% 7.7% 5.3% 13.7% 12.2%
Impact of Non-Cat Weather 5.2% 5.4% 4.9% 3.6% 9.0% 5.1% 7.8%
Policies In Force (000's) 1,368.7 1,393.1 1,423.2 1,449.0 1,483.6
% Chg Prior Year Same Qtr -7.7% -8.4% -8.7% -8.9% -9.1%
Retention 83.2% 83.1% 83.2% 83.1% 83.0%
New Business Policies (000's) 42.2 36.3 30.4 32.6 37.0
% Chg Prior Year Same Qtr 14.1% 6.5% 7.4% -2.6% -6.0%
Net Written Premiums $ 248.1 $ 252.8 $ 206.6 $ 214.6 $ 246.7
% Chg Prior Year Same Qtr 0.6% -1.1% -0.7% 1.8% -2.8%
Net Earned Premiums $ 232.1 $ 227.5 $ 228.2 $ 232.9 $ 229.9
% Chg Prior Year Same Qtr 1.0% -1.3% 0.3% 0.8% -0.9%
SPECIALTY
- ---------
Underwriting Profit (Loss) $ (4.3) $ 6.7 $ 6.4 $ 5.0 $ 6.7 $ 8.8 $ 22.2
Loss and LAE Ratio 93.3% 44.0% 45.0% 51.5% 43.4% 61.6% 38.0%
Expense Ratio 25.0 25.4 25.0 25.2 25.2 25.1 25.9
----------- ---------- ---------- ---------- ----------- ----------- -----------
Combined Ratio 118.3% 69.4% 70.0% 76.7% 68.6% 86.7% 63.9%
========== ========== ========== ========== =========== =========== ===========
Impact of Catastrophes 26.9% 0.0% 0.0% 0.0% 0.0% 9.4% 0.0%
Safeco Property & Casualty
Safeco Business Insurance (SBI)
(In Millions Except Ratios)
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD
2004 2004 2004 2003 2003 2004 2003
---------- ---------- ---------- ----------- ---------- ----------- -----------
SAFECO BUSINESS INSURANCE
- -------------------------
Underwriting Profit (Loss) $ (80.8) $ 49.4 $ 42.3 $ 51.4 $ (45.5) $ 10.9 $ (56.5)
Loss and LAE Ratio 84.8% 53.2% 55.8% 51.0% 76.1% 64.6% 67.5%
Expense Ratio 34.6 34.7 34.1 35.7 36.1 34.5 37.7
---------- ---------- ---------- ----------- ---------- ----------- -----------
Combined Ratio (CR) 119.4% 87.9% 89.9% 86.7% 112.2% 99.1% 105.2%
========== ========== ========== =========== ========== =========== ===========
CR excluding reserve adjustment * 119.4% 87.9% 89.9% 86.7% 96.1% 99.1% 99.7%
Impact of Catastrophes 26.1% 1.1% 0.9% 0.0% 2.4% 9.4% 2.4%
SBI REGULAR
- -----------
Underwriting Profit (Loss) $ (59.7) $ 31.9 $ 23.8 $ 39.5 $ (51.3) $ (4.0) $ (68.1)
Loss and LAE Ratio 86.6% 55.6% 58.7% 51.0% 81.8% 67.0% 70.9%
Expense Ratio 32.9 33.8 33.4 35.1 36.8 33.4 37.5
---------- ---------- ---------- ----------- ---------- ----------- -----------
Combined Ratio (CR) 119.5% 89.4% 92.1% 86.1% 118.6% 100.4% 108.4%
========== ========== ========== =========== ========== =========== ===========
CR excluding reserve adjustment * 119.5% 89.4% 92.1% 86.1% 97.7% 100.4% 101.3%
Impact of Catastrophes 26.0% 1.2% 0.8% 0.1% 1.9% 9.4% 2.3%
Policies In Force (000's) 511.2 511.5 508.6 510.1 509.9
% Chg Prior Year Same Qtr 0.3% 0.1% -1.7% -3.7% -5.1%
Retention 79.8% 79.7% 80.2% 78.4% 77.9%
New Business Policies (000's) 28.0 30.8 28.9 27.9 30.3
% Chg Prior Year Same Qtr -7.6% -1.0% 14.7% 13.4% 23.2%
Net Written Premiums $307.8 $333.4 $312.9 $ 283.0 $ 281.5
% Chg Prior Year Same Qtr 9.3% 8.1% 10.2% 9.6% 11.0%
Net Earned Premiums $307.0 $299.5 $302.4 $ 284.0 $ 275.4
% Chg Prior Year Same Qtr 11.5% 10.1% 13.7% 8.3% 7.8%
SBI SPECIAL ACCOUNTS FACILITY
- -----------------------------
Underwriting Profit (Loss) $ (21.1) $ 17.5 $ 18.5 $ 11.9 $ 5.8 $ 14.9 $ 11.6
Combined Ratio 119.1% 83.8% 84.2% 88.3% 94.3% 95.5% 95.9%
Impact of Catastrophes 26.3% 0.9% 1.1% -0.1% 3.6% 9.4% 2.6%
* Excludes third quarter 2003 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)
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD
2004 2004 2004 2003 2003 2004 2003
----------- ------------ ---------- ------------ ----------- ------------ ------------
SURETY
- ------
Underwriting Profit $ 10.0 $ 11.5 $ 9.3 $ 8.6 $ 8.5 $ 30.8 $ 19.0
Combined Ratio 81.3% 75.7% 79.6% 79.9% 78.8% 79.0% 82.8%
P&C OTHER *
- -----------
Underwriting Loss $ (12.6) $ (10.2) $ (7.1) $ (42.2) $ (149.8) $ (29.9) $ (170.0)
TOTAL PROPERTY & CASUALTY
- -------------------------
Underwriting Profit (Loss) $ (22.5) $ 197.7 $ 135.4 $ 92.8 $ (107.4) $ 310.6 $ (98.7)
Underwriting Profit (Loss) excluding
reserve adjustment ** $ (22.5) $ 197.7 $ 135.4 $ 92.8 $ 97.6 $ 310.6 $ 106.3
Loss and LAE Ratio 73.5% 57.5% 61.6% 63.2% 80.2% 64.3% 73.1%
Expense Ratio 28.1 27.9 28.3 29.6 28.4 28.1 29.6
----------- ------------ ---------- ------------ ----------- ------------ ------------
Combined Ratio (CR) 101.6% 85.4% 89.9% 92.8% 108.6% 92.4% 102.7%
========== ============ ========== ============ =========== ============ ============
CR excluding reserve adjustment ** 101.6% 85.4% 89.9% 92.8% 92.2% 92.4% 97.1%
Impact of Catastrophes 13.9 2.1 0.9 1.6 1.7 5.8 3.7
----------- ------------ ---------- ------------ ----------- ------------ ------------
CR excluding reserve adjustment
and Impact of Catastrophes 87.7% 83.3% 89.0% 91.2% 90.5% 86.6% 93.4%
========== ============ ========== ============ =========== ============ ============
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR YTD YTD
2004 2004 2004 2003 2003 2004 2003
----------- ------------ ---------- ------------ ----------- ------------ ------------
Catastrophes
- -----------
SPI - Auto $ 8.2 $ 9.0 $ 0.5 $ 3.7 $ (0.1) $ 17.7 $ 23.1
SPI - Property 71.3 15.5 7.4 18.0 12.1 94.2 83.9
SPI - Specialty 6.3 - - - - 6.3 -
Safeco Business Insurance 109.0 4.5 3.7 0.1 8.9 117.2 26.1
P&C Other - - - (1.6) 0.1 - 0.4
----------- ------------ ---------- ------------ ----------- ------------ ------------
Total $ 194.8 $ 29.0 $ 11.6 $ 20.2 $ 21.0 $ 235.4 $ 133.5
========== ============ ========== ============ =========== ============ ============
* 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 2003 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
Statutory Information
(In Millions Except Ratios)
Three Months Ended Nine Months Ended
Loss and Loss Adjustment Expense (LAE) Reserves September 30 September 30
- ----------------------------------------------- --------------------------------- ---------------------------------
2004 2003 2004 2003
--------------- ---------------- --------------- ----------------
Loss and LAE Reserves, Beginning of Period $ 4,669.0 $ 4,502.1 $ 4,649.2 $ 4,535.8
Net Losses and LAE Incurred 1,029.9 1,003.5 2,632.2 2,639.3
Net Losses and LAE Paid (834.8) (824.6) (2,417.3) (2,494.1)
--------------- ---------------- --------------- ----------------
Loss and LAE Reserves, End of Period $ 4,864.1 $ 4,681.0 $ 4,864.1 $ 4,681.0
=============== ================ =============== ================
3RD 2ND 1ST 4TH 3RD
QTR QTR QTR QTR QTR
2004 2004 2004 2003 2003
--------------- --------------- ---------------- --------------- ----------------
P&C Balance Sheet
- -----------------
Total Capital and Surplus $ 3,150.0 * $ 3,245.1 $ 3,028.2 $ 2,789.7 $ 2,562.3
Ratio of Net Premiums Written (Annualized)
to Total Capital and Surplus 1.81 * 1.74 1.82 1.83 2.05
* Estimated
Safeco Corporation
Investment Portfolio
(In Millions)
Investment Portfolio (Market Value) 9/30/2004 % 12/31/2003 %
----------- ----------- ----------- -----------
Fixed Maturities - Taxable $ 7,035.8 69.2 % $ 6,002.7 64.2
Fixed Maturities - Nontaxable 2,152.4 21.2 2,156.5 23.1
Equity Securities 972.5 9.5 1,166.2 12.5
----------- ----------- ----------- -----------
Total Fixed Maturities & Equity Securities 10,160.7 99.9 9,325.4 99.8
Mortgage Loans - 0.0 9.8 0.1
Other Invested Assets 8.4 0.1 9.0 0.1
----------- ----------- ----------- -----------
Total Investment Portfolio $ 10,169.1 100.0 % $ 9,344.2 100.0
=========== =========== =========== ===========
Rating (Market Value) - Fixed Maturities 9/30/2004 12/31/2003
----------- -----------
AA 10.9 10.9
A 29.1 23.0
BBB 14.5 19.3
BB or lower 1.8 3.1
Not Rated 1.0 1.5
----------- -----------
Total 100.0 % 100.0 %
=========== ===========
Average Rating A+ A+
=========== ===========
9/30/2004 6/30/2004 3/31/2004 12/31/2003 9/30/2003
---------- ---------- --------- ---------- ----------
P&C Pretax Investment Income $ 111.0 $ 115.8 $ 111.7 $ 110.0 $ 113.7
Tax Rate on P&C Investment Income 28.59% 25.39% 26.95% 25.45% 26.82%
Pretax Investment Income $ 115.5 $ 119.1 $ 115.0 $ 114.4 $ 114.7
Tax Rate on Investment Income 28.78% 25.60% 27.12% 25.76% 26.84%
Fixed Maturities at Cost $ 8,824.7 $ 8,344.4 $ 7,797.0 $ 7,717.2 $ 7,176.2
Fixed Maturities at Market 9,188.2 8,561.2 8,311.7 8,159.2 7,748.6
Equities at Cost 580.7 538.0 653.9 684.8 664.0
Equities at Market 972.5 964.6 1,134.8 1,166.2 1,054.5
Total Cost $ 9,413.8 $ 8,892.8 $ 8,477.0 $ 8,420.7 $ 7,971.1
Total Market $ 10,169.1 $ 9,536.1 $ 9,472.6 $ 9,344.2 $ 8,814.3
% Equities (at market) 9.5% 10.1% 12.0% 12.5% 12.0%
% Taxable Bonds (at market) 69.2% 68.1% 65.1% 64.2% 62.9%
% Tax Exempt Bonds (at market) 21.2% 21.7% 22.6% 23.1% 25.0%
% Other 0.1% 0.1% 0.3% 0.2% 0.1%
Market YTM on Bond Portfolio 3.88% 4.30% 3.42% 3.78% 3.73%
Book YTM on Bond Portfolio 4.96% 5.11% 5.16% 5.27% 5.54%
Duration of Bond Portfolio 4.42 4.65 4.27 4.39 4.98
Three Months Ended Nine Months Ended
Net Realized Investment Gains (After Tax) September 30 September 30
------------------------- -------------------------
from Continuing Operations 2004 2003 2004 2003
----------- ----------- ----------- -----------
Gains on Securities Transactions $ 35.0 $ 10.5 $ 121.7 $ 36.4
Impairments on Fixed Maturities (2.1) (3.7) (5.7) (20.2)
Impairments on Equity Securities (0.1) (2.7) (0.2) (10.5)
Credit Default Swaps - 1.8 - 14.3
Other - 1.9 - 3.7
----------- ----------- ----------- -----------
Net Realized Investment Gains $ 32.8 $ 7.8 $ 115.8 $ 23.7
=========== =========== =========== ===========
Safeco Corporation
Capitalization
(In Millions)
9/30/2004 12/31/2003 12/31/2002
--------- ---------- ----------
Short-Term Debt
$300 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 9/1/12 (non callable) 230.0 375.0 375.0
8.072% debentures due 2037 402.9 876.3 876.3
(Callable at 104 in 2007)
--------------- ---------------- -----------------
Total Debt $ 1,332.9 $ 1,951.3 $ 1,970.7
============== ============== ==============
Equity $ 3,724.2 $ 5,023.3 $ 4,431.6
============== ============== ==============
Total Capital (Debt + Equity) $ 5,057.1 $ 6,974.6 $ 6,402.3
============== ============== ==============
Debt to Capital 26.4% 28.0% 30.8%
Adjusted Debt** to Capital 24.8% 25.5% 28.0%
Debt to Equity 35.8% 38.8% 44.5%
Debt to Capital (excluding FAS 115) 27.6% 34.1% 36.9%
Adjusted Debt** to Capital (excluding FAS 115) 26.0% 31.0% 33.6%
Debt to Equity (excluding FAS 115) 38.2% 51.7% 58.5%
* $500 million in 2003 and 2002
** 20% equity credit for 8.072% debentures due 2037