A.M. Best Maintains Negative Outlook on SAFECO’s P/C Subsidiaries

In response to SAFECO’s recently announced loss reserve strengthening, A.M. Best Co. continues to maintain a negative outlook on the property/casualty operations’ financial strength rating of “A.”

In addition, the negative outlook remains in effect for SAFECO’s debt ratings. The “A” group financial strength rating on SAFECO’s life/health companies is not affected by this announcement.

The reserve strengthening was based on an independent actuarial study of the property/casualty reserve adequacy. As a result, SAFECO increased loss reserves to construction defect, workers’ compensation and asbestos/environmental claims. Although the reserve strengthening was funded from the sale of SAFECO Credit and it positions loss reserves well within the actuarially acceptable range, A.M. Best remains concerned that the property/casualty operations will generate operating profitability commensurate with its current rating level. The proceeds from the sale of SAFECO Credit will be used to increase the surplus of the property/casualty operations; therefore, the available cash at SAFECO Corp. will be lower than A.M. Best’s expectations, and the holding company will increase its leverage to pay existing cash obligations.

A.M. Best will meet with management in the near future to discuss rating concerns.