SAFECO PRODUCES STRONG UNDERWRITING RESULTS IN AUTO, HOMEOWNERS AND SURETY:
Seattle-based Safeco—which recently announced a clear focus on property/casualty insurance—reported strong third-quarter underwriting results in most insurance lines. As previously announced, the company strengthened workers’ compensation reserves in the quarter by $133.3 million after tax ($205.0 million pretax). For the quarter, Safeco reported a net loss of $28.9 million ($0.21 per share). This compares to net income of $75.2 million ($0.59 per diluted share) in the third quarter of 2002 when the company put its Lloyd’s of London operation into run-off and took a $17.1 million after-tax charge ($0.13 per share). Factors contributing to Safeco’s overall results in the third quarter of 2003 were: the workers’ compensation reserve strengthening; impairments of investments securities held by Life & Investments (L&I), which aren’t expected to recover in value before L&I is sold. Although Safeco intends to continue holding these investments, accounting rules require impairment recognition of unrealized losses because the business unit is for sale. During the quarter, Safeco recorded total after-tax investment impairments of $87.0 million, with $80.5 million associated with L&I; a $13.2 million benefit due to a favorable federal income tax settlement regarding prior tax years for L&I. In the fourth quarter, Safeco anticipates an after-tax restructuring charge of approximately $10 million associated with previously announced actions to reduce expenses by $75 million in 2004. This charge is related to eliminating 500 jobs not affected by the sale of L&I. Overall revenues in the third quarter were $1.8 billion, down slightly from a year ago. Operating revenues—excluding net realized investment gains—grew 5.2 percent. Net earned premiums for all P/C operations increased 10.1 percent compared with the third quarter of 2002. Net written premiums, a leading indicator of revenues in future quarters, increased 11.2 percent. Insured catastrophe losses for the quarter totaled $21 million. This compares with $9.9 million favorable catastrophe reserve development reported in the third quarter of 2002. In conjunction with its strategy to focus on property and casualty products, the company is winding down its Safeco Financial Products operation, which primarily sells credit default swaps.