EX-99.1 3 en0612ex991.txt EX-99.1 [SAFECO LOGO] Third Quarter News Release and Statistical Supplement (Unaudited) October 27, 2003 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 Summary of Financial Results SS-7 Consolidated Statements of Income SS-8 Consolidated Balance Sheets SS-9 Income Summary SS-10 Property & Casualty Results Underwriting Profit and Combined Ratios SS-11 Underwriting Profit and Combined Ratios without 3Q 03 Workers Compensation reserve adjustment SS-12 Net Written Premiums SS-13 Net Earned Premiums SS-14 Personal Auto SS-15 Homeowners and Specialty SS-16 Safeco Business Insurance (SBI) SS-17 Surety, Other and Total SS-18 Statutory Information SS-19 Life & Investments Results Pretax Operating Earnings and Revenues SS-20 Supplemental Statistics SS-21 Corporate Supplemental Detail Capitalization SS-22 Investment Portfolios - Consolidated SS-23 Investment Portfolios - Property & Casualty SS-24 Investment Portfolios - Life & Investments SS-25
[Safeco Logo GRAPHIC OMITTED] FOR RELEASE AT 7:45 a.m., Eastern Time INVESTOR RELATIONS CONTACT: Neal Fuller, 206-545-5537 MEDIA RELATIONS CONTACT: Paul Hollie, 206-545-3048 Safeco Produces Strong Underwriting Results in Auto, Homeowners and Surety SEATTLE--(Oct. 27, 2003)-- Third-Quarter Highlights ------------------------ o Posted underwriting profit in Auto, Homeowners and Surety insurance lines. o Reported net loss of $28.9 million, or $0.21 per diluted share. o Produced $33.6 million after-tax operating earnings despite $133 million reserve strengthening. ----------------------------------------------- ----------------------------- ----------------------------- Summary Financial Results after tax 3 Months Ended 9 Months Ended (In millions except per-share data) September 30 September 30 2003 2002 2003 2002 ----------------------------------------------- --------------- ------------- -------------- -------------- Net Income (Loss) $ (28.9) $ 75.2 173.0 $ 244.0 Per Diluted Share of Common Stock $ (0.21) $ 0.59 1.25 $ 1.91 ----------------------------------------------- -- ------------ -- ---------- - ------------ --- ---------- Net Realized Investment Gains (Losses) $ (62.5) $ 7.8 (80.2) $ 89.9 ----------------------------------------------- -- ------------ -- ---------- - ------------ --- ---------- Operating Earnings* $ 33.6 $ 67.4 253.2 $ 154.1 ----------------------------------------------- -- ------------ -- ---------- - ------------ --- ---------- Average Shares Outstanding 138.5 128.1 138.9 128.1 ----------------------------------------------- -- ------------ -- ---------- - ------------ --- ---------- * Operating Earnings is Net Income (Loss) 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/03q2_sup.pdf -----------------------------------------------------------------------------------------------------------
Safeco (NASDAQ: SAFC)--which recently announced a clear focus on Property & Casualty insurance--today reported strong third-quarter underwriting results in most insurance lines. "We generated healthy underwriting profits in Auto, Homeowners and Surety," said Mike McGavick, Safeco chairman and CEO. "Our fundamentals are strong. The underwriting results across our Property & Casualty businesses point to the soundness of our new course." As previously announced, the company strengthened workers compensation reserves in the quarter by $133.3 million after tax ($205.0 million pretax). "Absent this action, our Business Insurance line also would have been profitable," McGavick said. 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: o The workers compensation reserve strengthening. o 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. o A $13.2 million benefit due to a favorable federal income tax settlement regarding prior tax years for L&I. Operating earnings for the third quarter were $33.6 million after tax, compared with $67.4 million for the same period last year. "When you consider that our operating earnings include the reserve charge, these are very strong results," McGavick said. 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. "We had a number of unusual items in the quarter," McGavick said. "When you look at our Property & Casualty operating fundamentals, you see outstanding underwriting performance combined with healthy sales growth. "Our underwriting models and common sales platform are producing positive results faster than we initially expected," he added. "We're on the right path for sustained, profitable growth." Safeco's return on equity for the first nine months of the year, based on annualized net income, is 5.0 percent. Operating return on equity, measured using annualized operating earnings and excluding unrealized gains, is 10.0 percent for the first nine months of 2003. 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 Property & Casualty 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 $21.0 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 & Casualty products, the company is winding down its Safeco Financial Products operation, which primarily sells credit default swaps. Safeco Personal Insurance Performance Personal Auto, Safeco's largest product line, generated an underwriting profit of $35.4 million in the third quarter, a significant improvement over a $6.2 million underwriting loss during the same period last year. The Auto line produced a combined ratio of 93.9 percent, better than both 99.4 in the second quarter of this year and 101.2 in the third quarter of 2002. (Combined ratio is a standard gauge of underwriting performance measuring the percentage of premium dollars used for customer claims and expenses. A combined ratio below 100 indicates the line is operating profitably.) Net written Auto premiums increased 15.2 percent compared with the third quarter of 2002. New business was up in the quarter, and the total number of policies increased 8.9 percent compared to a year ago. "The trends are pointing in the right direction," McGavick noted. "Auto is generating the type of profit we anticipated. We're seeing strong growth with higher Auto policy sales in September than any previous month in company history." Safeco's Homeowners line reported a quarterly underwriting profit of $32.1 million pretax, up from $5.5 million for the same period last year. Combined ratio was a profitable 83.3, a marked improvement over both 107.0 in the second quarter of this year and 97.1 in the third quarter of 2002. "Homeowners turned in an extraordinary quarter," McGavick said. "While weather played a part, most of these results are because of our hard work to return this line to profitability." Net written premiums in Homeowners decreased 2.2 percent compared to the third quarter of last year as policies in force declined 9.3 percent. In September, however, Safeco reported a small increase in sales of new Homeowners policies. "Our new Homeowners product is in place in almost every state where we write business," McGavick said. "By month's end, we will have lifted moratoriums on new accounts in all but three states--Florida, New York and Texas. "Going forward, Homeowners could be a growing line for Safeco," he added, "but we'll remain mindful that in this line--which is prone to catastrophe losses and severe weather--profit comes first." Safeco Business Insurance Performance Safeco Business Insurance reported a pretax underwriting loss of $195.3 million in the third quarter, the result of strengthening prior-year workers compensation reserves by $205.0 million pretax. This compares with an underwriting loss of $23.4 million during the same quarter of last year. Total combined ratio for Safeco Business Insurance was 151.6 in the quarter. Excluding the reserve strengthening, the combined ratio was a profitable 97.4. This compares with a combined ratio of 106.0 in the second quarter of this year and 106.6 during the third quarter of 2002. SBI Regular--Safeco's core line of products for small- to medium-sized businesses--reported a combined ratio of 118.6 in the quarter. Excluding the effects of the reserve charge, SBI Regular's combined ratio was a profitable 97.7. This compares with a combined ratio of 104.2 in the second quarter of this year and 104.7 during the third quarter of 2002. "Our new sales and underwriting platform is generating the types of results we expected," McGavick said. "We automated commercial Auto insurance during the quarter, and sales of new policies are up over 26 percent. We automated our Business-Owners Policy earlier in the year, and sales increased 65 percent in the third quarter. "More important than the sales growth is the fact that we're producing underwriting results that allow us to compete profitably in the small-business insurance marketplace," he added. Net written premiums for Safeco Business Insurance increased 13.1 percent in the third quarter compared with the same period in 2002. Net written premiums for SBI Regular increased 11.0 percent compared to the third quarter of 2002. Total policies in force decreased 5.1 percent compared to a year ago, but were off only 0.2 percent compared to June 30 of this year. Surety Performance Surety generated a pretax underwriting profit of $8.5 million in the quarter, up substantially from $2.7 million in the same period last year. Combined ratio for Surety was a profitable 78.8, compared with 91.8 in the third quarter of 2002 and 82.2 in the second quarter of this year. "Surety turned in great results this quarter," McGavick said. "While we expect continued profit from Surety, we would be hard pressed to regularly repeat these results." Life & Investments Performance Safeco Life & Investments generated pretax operating earnings of $41.1 million in the third quarter, off from $59.6 million for the same period last year. "The Life & Investments unit continues to be a strong performer, and these results are very consistent with our expectations," McGavick said. "As we shift our focus to Property & Casualty lines, we're seeking a buyer that will help Life & Investments build on its track record of solid growth and consistent profits." The Group product line reported pretax operating earnings of $12.5 million, down from $22.4 million in the third quarter of last year. Group's main product is stop-loss medical insurance to protect employers with self-funded benefit plans against large medical claims. "As we've been saying for several quarters, Group's results had been exceptional, and we didn't anticipate the line would continue performing at that level," McGavick noted. "This quarter, the results are more in line with our expectations." Income Annuities reported a pretax operating loss of $0.9 million, compared with pretax operating earnings of $11.5 million for the same period last year. The change is the result of $5.8 million in unfavorable pre-payment adjustments on mortgage-backed securities due to changes in interest rates. For comparison, in the third quarter of 2002, Income Annuities recorded a positive $6.3 million adjustment on mortgage-backed securities. Retirement Services generated quarterly pretax operating earnings of $3.3 million, an improvement over $1.4 million for the third quarter of 2002. Individual Life reported quarterly pretax operating earnings of $3.9 million in the quarter, up from $3.5 million for the same period last year. The Asset Management business reported pretax operating earnings of $1.1 million, a slight improvement over $0.9 million in the third quarter of 2002. Total assets under management were $4.0 billion, essentially unchanged since the end of the second quarter of this year. Additional financial information available Safeco uses both GAAP and non-GAAP financial measures to track the performance of its insurance and investments operations. The definition of each non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure, are included in Safeco's Form 8-K that will be furnished to the U.S. Securities & Exchange Commission today. The Form 8-K will include this news release, Safeco's summary financial results, consolidated statements of income, consolidated balance sheets, and the company's third-quarter financial supplement. All of this information is available on Safeco's Website at http://www.safeco.com/safeco/investor/pdfs/03q3_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. About Safeco 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. #### ------------------------------------------------------------------------------- Forward-looking information contained in this news release is subject to risk and uncertainty Statements, analysis and other information contained in this news release that relate to anticipated financial performance, business prospects and plans and similar matters are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Statements in this news release that are not historical information are forward-looking. The operations, performance and development of our business are subject to certain risks and uncertainties that may cause actual results to differ materially from those contained in or suggested by the forward-looking statements in this news release. The risks and uncertainties include, but are not limited to: o Safeco's ability to successfully divest the Life & Investments operations; o achievement of Safeco's overall expense reduction goals; o the ability to obtain rate increases and decline or non-renew underpriced insurance accounts; o achievement of premium targets and profitability; o realization of growth and business retention estimates; o success in implementing a new business entry model for personal and commercial lines; o success in obtaining regulatory approval of price-tiered products and the use of insurance scores, including credit scores as a component; o the ability to freely enter and exit lines of business; o changes in the mix of Safeco's book of business; o driving patterns; o the competitive pricing environment, initiatives by competitors and other changes in competition; o weather conditions, including the severity and frequency of storms, hurricanes, snowfalls, hail and winter conditions; o the occurrence of significant natural disasters, including earthquakes; o the occurrence of significant man-made disasters, such as the attack on September 11, 2001 or war; o the occurrence of bankruptcies that result in losses under surety bonds, investment losses or lower investment income; o the adequacy of loss and benefit reserves for our businesses; o the ability to run off the Lloyd's of London business without incurring material unexpected charges; o the availability of, pricing of, and ability to collect reinsurance; o the ability to price for, exclude and reinsure the risk of loss from terrorism; o interpretation of insurance policy provisions by courts, court decisions regarding coverage and theories of liability, trends in litigation and changes in claims settlement practices; o the outcome of any litigation against us; o legislative and regulatory developments affecting the actions of insurers, including requirements regarding rates, application and availability of coverage; o the effect of current insurance and credit ratings levels on business production and the effect of negative changes to our ratings; o inflationary pressures on medical care costs, auto parts and repair, construction costs and other economic sectors that increase the severity of claims; o availability of bank credit facilities; o use of derivative securities by Safeco Financial Products, Inc.; o fluctuations in interest rates; o performance of financial markets; and o general economic and market conditions. We assume no obligation to update any forward-looking statements contained in this news release. ------------------------------------------------------------------------------- Financial Supplement Third Quarter, 2003 This report is for informational purposes only. The financial statements and financial exhibits included in this supplement are unaudited. These financial statements and financial exhibits should be read in conjunction with the financial statements filed with the SEC in the Corporation's quarterly 10-Q and annual 10-K filings. Neal Fuller Vice President - Finance 206-545-5537 neaful@safeco.com Safeco Corporation Financial Measures Used by Safeco Amounts are in millions or thousands as specified, except ratio and per share information. Property & Casualty businesses include the following segments: Personal Lines Personal Auto Homeowners Specialty Safeco Business Insurance SBI Regular SBI Special Accounts Facility (SAF) SBI Runoff Surety P&C Other Life & Investments businesses include the following segments: Group Income Annuities Retirement Services Individual Asset Management L & I Other Corporate includes all other activities, primarily the financing of our business activities. In addition to financial measures presented in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP), we also use certain non-GAAP financial measures to analyze and report our financial results. Management believes that these non-GAAP measures, when used in conjunction with the consolidated financial statements, can aid in understanding our financial condition and results of operations. These non-GAAP measures are not a substitute for GAAP measures, and where these measures are described we provide tables that reconcile the non-GAAP measures to the GAAP measures reported in our consolidated financial statements. Operating Revenues Operating revenues is a non-GAAP financial measure used by management to analyze the revenues derived directly from our Property & Casualty, Life & Investments and Corporate operations. It excludes net realized investment gains and losses that can fluctuate significantly and distort a comparison between periods. The following table provides a reconciliation of operating revenues to revenues, the most directly comparable GAAP measure. Three Months Ended Nine Months Ended September 30 September 30 ------------------------------------------------------ 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------- Total Revenues $1,780.0 $1,794.6 $5,413.3 $5,305.5 Net Realized Investment (Gains) Losses 95.5 (12.5) 123.1 (138.5) ------------------------------------------------------ Operating Revenues $1,875.5 $ 1,782.1 $5,536.4 $5,167.0 ----------------------------------------------------------------------------------------------------------- Operating Earnings Operating earnings is a non-GAAP financial measure that we use to assess the profitability of our consolidated business. In the determination of operating earnings, we exclude net realized investment gains and losses from net income (loss). Net realized investment gains and losses can fluctuate significantly and distort a comparison between periods. The following table reconciles operating earnings to net income (loss), the most directly comparable GAAP measure. Three Months Ended Nine Months Ended September 30 September 30 ------------------------------------------------------ 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------- Net Income (Loss) $ (28.9) $ 75.2 $ 173.0 $ 244.0 Net Realized Investment (Gains) Losses, Net of Taxes 62.5 (7.8) 80.2 (89.9) ------------------------------------------------------ Operating Earnings $ 33.6 $ 67.4 $ 253.2 $ 154.1 ----------------------------------------------------------------------------------------------------------- Operating Return on Equity Operating return on equity is a ratio we calculate using non-GAAP measures. It is calculated by dividing the annualized operating earnings for the most recent quarter by the average ending shareholders' equity for the previous five quarters, excluding from equity after-tax unrealized investment gains and losses on fixed maturities. This ratio provides management with an additional measure to evaluate Safeco's results excluding the unrealized changes in the valuation of its fixed maturities portfolio that can fluctuate between periods. The following table reconciles operating return on equity to return on equity, the most directly comparable GAAP measure. Three Months Ended Nine Months Ended September 30 September 30 ------------------------------------------------------ (Annualized) 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------- Net Income (Loss) $ (28.9) $ 75.2 $ 173.0 $ 244.0 Average Shareholders' Equity 4,627.9 3,728.0 4,627.9 3,728.0 Return on Equity Based on Annualized Net Income -2.5% 8.1% 5.0% 8.7% Operating Earnings $ 33.6 $ 67.4 $ 253.2 $ 154.1 Average Shareholders' Equity 4,627.9 3,728.0 4,627.9 3,728.0 Average Unrealized Fixed Maturities Investment Gains, Net of Tax 1,254.9 618.4 1,254.9 618.4 ------------------------------------------------------ Adjusted Average Shareholders' Equity 3,373.0 3,109.6 3,373.0 3,109.6 Operating Return on Equity Based on Annualized Operating Earnings 4.0% 8.7% 10.0% 6.6% ----------------------------------------------------------------------------------------------------------- *Net Income (Loss) and Operating Earnings have been annualized for purposes of this calculation only. The results for the nine months ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003. Annualized amounts for 2002 are not reflective of the actual amounts for the year ended December 31, 2002. ----------------------------------------------------------------------------------------------------------- Property & Casualty Net Written Premium Net written premium 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 premium on our Consolidated Balance Sheets. Safeco's management views net written premium as a measure of business production trends for the period under review and as a leading indicator of earned premium. The following table reconciles net written premium to net earned premium, the most directly comparable GAAP measure on our Consolidated Statements of Income. Three Months Ended Nine Months Ended September 30 September 30 ------------------------------------------------------ 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------- Total Property & Casualty Net Earned Premium $1,250.4 $ 1,135.2 $3,615.3 $3,356.7 Change in Unearned Premium Liability 64.3 47.5 221.7 97.9 ------------------------------------------------------ Total Property & Casualty Net Written Premium $1,314.7 $ 1,182.7 $3,837.0 $3,454.6 ----------------------------------------------------------------------------------------------------------- Segment Profit (Loss) Measures We have provided the following table that details the GAAP measure Income Before Income Taxes on our Consolidated Statements of Income. This is the most directly comparable GAAP measure used to reconcile to Property & Casualty underwriting profit (loss) and Life & Investments pretax operating earnings. Three Months Ended Nine Months Ended September 30 September 30 ------------------------------------------------------ 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------- Property & Casualty $ 13.5 $ 137.3 $ 254.9 $ 411.7 Life & Investments (67.2) 46.6 11.1 70.8 Corporate (24.3) (61.8) (30.2) (106.6) ------------------------------------------------------ Income (Loss) before Income Taxes $ (78.0) $ 122.1 $ 235.8 $ 375.9 ----------------------------------------------------------------------------------------------------------- Property & Casualty Underwriting Profit (Loss) and Combined Ratio Underwriting profit (loss) represents the net amount of earned premium less underwriting losses and expenses on a pretax basis. Management views underwriting profit (loss) as a critical measure to assess the underwriting effectiveness of the Property & Casualty operations and to evaluate the results of these business units. The related investment portfolio is managed separately from these underwriting businesses and, accordingly, net investment income and net realized investment gains and losses are discussed separately. The following table reconciles underwriting profit (loss) to Income before Income Taxes, the most directly comparable GAAP measure on our Consolidated Statements of Income. Combined ratio is a standard gauge of underwriting performance and is calculated as losses and expenses expressed as a percentage of earned premiums. Three Months Ended Nine Months Ended September 30 September 30 ------------------------------------------------------ 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------- Property & Casualty Income before Income Taxes $ 13.5 $ 137.3 $ 254.9 $ 411.7 Property & Casualty Net Investment Income (113.7) (114.5) (343.0) (345.0) Property & Casualty Restructuring Charges -- 3.0 -- 15.1 Property & Casualty Net Realized Investment Gains (7.2) (71.2) (10.6) (302.7) ------------------------------------------------------ Total Underwriting Loss $ (107.4) $ (45.4) $ (98.7) $ (220.9) ----------------------------------------------------------------------------------------------------------- Life & Investments Pretax Operating Earnings Life & Investments' results are evaluated based on pretax operating earnings, a non-GAAP measure, which excludes net realized investment gains and losses. Management believes the presentation of pretax operating earnings enhances the understanding of our Life & Investments results of operations by excluding net realized investment gains and losses, which can fluctuate significantly and distort a comparison between periods. The following table reconciles pretax operating earnings to Income before Income Taxes, the most directly comparable GAAP measure on our Consolidated Statements of Income. Three Months Ended Nine Months Ended September 30 September 30 ------------------------------------------------------ 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------- Life & Investments Income (Loss) $ (67.2) $ 46.6 $ 11.1 $ 70.8 before Income Taxes Net Realized Investment Losses 108.3 13.0 159.7 99.9 ------------------------------------------------------ Pretax Operating Earnings $ 41.1 $ 59.6 $ 170.8 $ 170.7 -----------------------------------------------------------------------------------------------------------
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. 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) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 Chg ----------- ---------- ----------- ---------- ---------- ----------- ----------- ------- Net Income (Loss) $ (28.9) $ 111.9 $ 90.0 $ 57.1 $ 75.2 $ 173.0 $ 244.0 -29% Net Income (Loss) Per Diluted Share (0.21) 0.81 0.65 0.42 0.59 1.25 1.91 -35% Net Realized Investment Gains (Losses) after tax (62.5) 14.7 (32.4) (36.4) 7.8 (80.2) 89.9 NM Operating Earnings 33.6 97.2 122.4 93.5 67.4 253.2 154.1 64% Operating Earnings Per Share 0.24 0.70 0.88 0.71 0.53 1.82 1.21 50% Operating Return on Equity (Pre-FAS 115) annualized 4.0% 11.8% 15.2% 11.8% 8.7% 10.0% 6.6% 52% Operating Return on Equity (unadjusted) annualized 2.9% 8.9% 12.1% 9.7% 7.2% 7.3% 5.5% 33% Operating Revenue $ 1,875.5 $ 1,848.7 $1,812.2 $1,815.6 $ 1,782.1 $5,536.4 $ 5,167.0 7% % Chg Prior Year Same Qtr 5.2% 8.6% 7.7% 7.2% 5.5% Life & Investments Pretax Operating Earnings $ 41.1 $ 57.9 $ 71.8 $ 66.3 $ 59.6 $ 170.8 $ 170.7 - % Chg Prior Year Same Qtr -31.0% 11.3% 21.5% 41.3% 38.6% Property & Casualty Combined Ratio 108.6% 101.0% 98.2% 101.6% 104.0% 102.7% 106.6% (3.9) Impact of Catastrophes 1.7% 8.2% 1.1% 0.2% -0.9% 3.7% 2.5% 1.2 Net Written Premiums $ 1,314.7 $1,316.5 $1,205.8 $ 1,130.0 $ 1,182.7 $ 3,837.0 $ 3,454.6 11% % Chg Prior Year Same Qtr 11.2% 11.2% 10.9% 7.4% 6.1% Net Earned Premiums $1,250.4 $ 1,201.8 $ 1,163.1 $ 1,164.6 $ 1,135.2 $3,615.3 $3,356.7 8% % Chg Prior Year Same Qtr 10.1% 7.1% 5.8% 4.2% 1.5% Book Value Per Share $ 35.61 $ 37.22 $ 33.00 $ 32.07 $ 31.77 $ 35.61 $ 31.77 12% % Chg Prior Year Same Qtr 12.1% 28.7% 20.9% 12.7% 7.8% BV Per Share (ex-FAS 115) $ 25.35 $ 25.72 $ 24.66 $ 24.39 $ 23.55 $ 25.35 $ 23.55 8% % Chg Prior Year Same Qtr 7.6% 6.2% -1.3% -0.7% -3.4% Safeco Corporation Summary of Financial Results (In Millions) Three Months Ended Nine Months Ended September 30 September 30 ------------------ ------------------ 2003 2002 2003 2002 -------- --------- ------- --------- (Unaudited) (Unaudited) REVENUES Property & Casualty Earned Premiums $1,250.4 $1,135.2 $3,615.3 $3,356.7 Net Investment Income 113.7 114.5 343.0 345.0 Life & Investments 508.3 530.4 1,560.6 1,452.2 Corporate 3.1 2.0 17.5 13.1 Net Realized Investment Gains (Losses) (95.5) 12.5 (123.1) 138.5 -------- --------- ------- --------- Total 1,780.0 1,794.6 5,413.3 5,305.5 -------- --------- ------- --------- Income before Net Realized Investment Gains (Losses) and Income Taxes Property & Casualty Underwriting Profits (Losses) (107.4) (45.4) (98.7) (220.9) Net Investment Income 113.7 114.5 343.0 345.0 Restructuring Charges - (3.0) - (15.1) -------- --------- ------- --------- Total Property & Casualty 6.3 66.1 244.3 109.0 Life & Investments 41.1 59.6 170.8 170.7 Corporate* (29.9) (16.1) (56.2) (42.3) -------- --------- ------- --------- Total 17.5 109.6 358.9 237.4 Net Realized Investment Gains (Losses) before Taxes (95.5) 12.5 (123.1) 138.5 -------- --------- ------- --------- Income (Loss) before Income Taxes (78.0) 122.1 235.8 375.9 Provision (Benefit) for Income Taxes on Income (Loss) before Net Realized Investment Gains (Losses) (16.1) 30.9 83.3 49.6 Net Realized Investment Gains (Losses) (33.0) 4.7 (42.9) 48.6 -------- --------- ------- --------- Total (49.1) 35.6 40.4 98.2 -------- --------- ------- --------- Distributions on Capital Securities, Net of Taxes* - (11.3) (22.4) (33.7) -------- --------- ------- --------- Net Income (Loss) $ (28.9) $ 75.2 $ 173.0 $ 244.0 ======== ========= ======== ========= * Effective July 1, 2003 Safeco adopted SFAS 150, "Accounting for Financial Instruments with Characteristics of Liabilities, Equity or Both" and, accordingly, Distributions on Capital Securities are now reported with interest expense in our Corporate segment. Safeco Corporation Consolidated Statements of Income (In Millions Except Per Share Data) Three Months Ended Nine Months Ended September 30 September 30 ------------------ ------------------- 2003 2002 2003 2002 ---------------------------------------------- (Unaudited) (Unaudited) REVENUES Property & Casualty Earned Premiums $ 1,250.4 $ 1,135.2 $ 3,615.3 $ 3,356.7 Life & Investments Premiums and Other Revenues 212.6 223.3 657.6 554.5 Net Investment Income 409.8 420.4 1,255.4 1,247.9 Net Realized Investment Gains (Losses) (95.5) 12.5 (123.1) 138.5 Other 2.7 3.2 8.1 7.9 -------------------------------------------------- Total 1,780.0 1,794.6 5,413.3 5,305.5 -------------------------------------------------- EXPENSES Losses, Loss Adjustment Expenses and Policy Benefits 1,347.0 1,171.8 3,667.1 3,512.8 Other Underwriting and Operating Expenses 252.9 255.5 775.2 697.1 Amortization of Deferred Policy Acquisition Costs 224.2 220.1 663.1 642.0 Interest Expense (including $17.3 Distributions on Capital Securities in 2003) 29.9 17.9 60.2 50.3 Intangibles Amortization 4.0 4.2 11.9 12.3 Restructuring Charges - 3.0 - 15.1 -------------------------------------------------- Total 1,858.0 1,672.5 5,177.5 4,929.6 -------------------------------------------------- Income (Loss) before Income Taxes (78.0) 122.1 235.8 375.9 Provision (Benefit) for Income Taxes (49.1) 35.6 40.4 98.2 Distributions on Capital Securities, Net of Taxes - (11.3) (22.4) (33.7) -------------------------------------------------- Net Income (Loss) $ (28.9) $ 75.2 $ 173.0 $ 244.0 ================================================== INCOME (LOSS) PER SHARE OF COMMON STOCK Net Income (Loss) Per Share of Common Stock - Diluted $ (0.21) $ 0.59 $ 1.25 $ 1.91 ================================================== Net Income (Loss) Per Share of Common Stock - Basic $ (0.21) $ 0.59 $ 1.25 $ 1.91 ================================================== Dividends Declared $ 0.185 $ 0.185 $ 0.555 $ 0.555 Average Number of Shares Outstanding During the Period: Diluted* 138.5 128.1 138.9 128.1 Basic 138.5 127.8 138.4 127.8 * Due to the net loss in the third quarter of 2003, we used basic weighted-average shares outstanding to calculate diluted net income (loss) per share of common stock. Using diluted weighted-average shares outstanding would have resulted in a lower net loss per share of common stock. Safeco Corporation Consolidated Balance Sheets (In Millions) September 30 December 31 2003 2002 --------------- ---------------- (Unaudited) (Audited) ASSETS Investments Available-for-Sale Securities Fixed Maturities, at Fair Value (Cost or amortized cost: $23,544.2; $22,646.1) $ 25,733.5 $ 24,278.0 Marketable Equity Securities, at Fair Value (Cost: $760.2; $777.2) 1,167.1 1,082.5 Mortgage Loans 937.9 925.9 Other Invested Assets 159.0 173.8 Short-Term Investments 449.2 311.0 --------------- ---------------- Total Investments 28,446.7 26,771.2 Cash and Cash Equivalents 267.4 188.5 Accrued Investment Income 358.8 336.3 Premiums and Service Fees Receivable 1,100.0 1,047.1 Other Notes and Accounts Receivable 161.3 162.3 Current Income Taxes Recoverable 36.7 26.2 Deferred Income Taxes - 124.6 Reinsurance Recoverables 575.2 578.8 Deferred Policy Acquisition Costs 654.0 626.3 Land, Buildings and Equipment for Company Use 453.2 488.7 (At cost less accumulated depreciation: $329.7; $319.7) Intangibles and Goodwill 186.1 190.0 Other Assets 278.0 259.8 Securities Lending Collateral 2,286.6 2,957.0 Separate Account Assets 1,035.1 899.2 --------------- ---------------- Total Assets $ 35,839.1 $ 34,656.0 =============== ================ LIABILITIES AND SHAREHOLDERS' EQUITY Property & Casualty Loss and Loss Adjustment Expense Reserves $ 5,096.6 $ 4,998.5 Accident and Health Reserves 148.1 170.0 Life Policy Liabilities 330.8 339.9 Unearned Premiums 2,075.5 1,847.5 Funds Held Under Deposit Contracts 16,422.0 15,655.4 Debt (including $850.0 of Capital Securities at September 30, 2003) 1,952.7 1,123.8 Deferred Income Taxes 98.0 - Other Liabilities 1,460.3 1,389.3 Securities Lending Payable 2,286.6 2,957.0 Separate Account Liabilities 1,035.1 899.2 --------------- ---------------- Total Liabilities 30,905.7 29,380.6 --------------- ---------------- Commitments and Contingencies - - Corporation-Obligated, Mandatorily Redeemable Capital Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Corporation (Capital Securities) - 843.8 --------------- ---------------- 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: 11.7; 12.0 Shares Issued and Outstanding: 138.5; 138.2 1,185.8 1,178.1 Retained Earnings 2,168.1 2,072.2 Accumulated Other Comprehensive Income, Net of Taxes Unrealized Gains and Losses on Available-for-Sale Securities and Derivative Financial Instruments 1,652.3 1,241.2 Unrealized Foreign Currency Translation Adjustments (14.6) (15.7) Deferred Policy Acquisition Costs Valuation Allowance (49.4) (35.4) Minimum Pension Liability Adjustment (8.8) (8.8) --------------- ---------------- Total Accumulated Other Comprehensive Income 1,579.5 1,181.3 --------------- ---------------- Total Shareholders' Equity 4,933.4 4,431.6 --------------- ---------------- Total Liabilites & Shareholders' Equity $ 35,839.1 $ 34,656.0 =============== ================ Safeco Corporation Income Summary (In Millions Except Per Share Amounts) Three Months Ended Nine Months Ended September 30 September 30 ------------------- ------------------- 2003 2002 2003 2002 ----------------------------------------------------- (Unaudited) (Unaudited) Pretax Net Income (Loss) ------------------------ P&C Underwriting $ (107.4) $ (45.4) $ (98.7) $ (220.9) P&C Investment Income 113.7 114.5 343.0 345.0 Restructuring Charges - (3.0) - (15.1) ----------------------------------------------------- Total P&C 6.3 66.1 244.3 109.0 Life & Investments 41.1 59.6 170.8 170.6 Corporate (29.9) (16.1) (56.2) (42.3) Distributions on Capital Securities - (17.3) (34.5) (51.8) ----------------------------------------------------- Income before Net Realized Investment Gains (Losses) 17.5 92.3 324.4 185.5 Net Realized Investment Gains (Losses) (95.5) 12.5 (123.1) 138.5 ----------------------------------------------------- Total $ (78.0) $ 104.8 $ 201.3 $ 324.0 ===================================================== Income Tax Expense (Benefit) --------------------------- P&C Underwriting $ (35.3) $ (14.3) $ (32.8) $ (74.1) P&C Investment Income 30.4 30.4 89.7 84.6 Restructuring Charges - (1.1) - (5.3) ----------------------------------------------------- Total P&C (4.9) 15.0 56.9 5.2 Life & Investments 1.6 21.1 46.1 59.0 Corporate (12.8) (5.2) (19.7) (14.7) Distributions on Capital Securities - (6.0) (12.1) (18.1) ----------------------------------------------------- Income before Net Realized Investment Gains (Losses) (16.1) 24.9 71.2 31.4 Net Realized Investment Gains (Losses) (33.0) 4.7 (42.9) 48.6 ----------------------------------------------------- Total $ (49.1) $ 29.6 $ 28.3 $ 80.0 ===================================================== After-tax Income (Loss) ----------------------- P&C Underwriting $ (72.1) $ (31.1) $ (65.9) $ (146.8) P&C Investment Income 83.3 84.1 253.3 260.4 Restructuring Charges - (1.9) - (9.8) ----------------------------------------------------- Total P&C 11.2 51.1 187.4 103.8 Life & Investments 39.5 38.5 124.7 111.6 Corporate (17.1) (10.9) (36.5) (27.6) Distributions on Capital Securities - (11.3) (22.4) (33.7) ----------------------------------------------------- Income before Net Realized Investment Gains (Losses) 33.6 67.4 253.2 154.1 Net Realized Investment Gains (Losses) (62.5) 7.8 (80.2) 89.9 ----------------------------------------------------- Total $ (28.9) $ 75.2 $ 173.0 $ 244.0 ===================================================== Average Shares Outstanding - Diluted 138.5 128.1 138.9 # 128.1 Average Shares Outstanding - Basic 138.5 127.8 138.4 127.8 Book Value Per Share $ 35.61 $ 31.77 $ 35.61 $ 31.77 Book Value Per Share (ex-FAS 115) $ 25.35 $ 23.55 $ 25.35 $ 23.55 Safeco Property & Casualty Underwriting Profit and Combined Ratios (In Millions) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ------------ --------- --------- --------- --------- --------- ---------- Net U/W Profit (Loss) ----------------------------------- Safeco Personal Insurance Personal Auto $ 35.4 $ 3.3 $ (1.5) $(10.6) $ (6.2) $ 37.2 $ (33.8) Homeowners 32.1 (13.4) 19.5 12.4 5.5 38.2 (49.6) Specialty 12.5 14.8 11.5 8.3 9.6 38.8 20.6 ------------ --------- --------- --------- --------- --------- ---------- Total SPI 80.0 4.7 29.5 10.1 8.9 114.2 (62.8) ------------ --------- --------- --------- --------- --------- ---------- Safeco Business Insurance SBI Regular (51.3) (11.5) (5.3) 7.8 (11.9) (68.1) (59.5) Special Accounts Facility 5.8 (0.6) 6.4 7.5 3.9 11.6 10.3 SBI Runoff (149.8) (9.4) (6.3) (33.0) (15.4) (165.5) (74.5) ------------ --------- --------- --------- --------- --------- ---------- Total SBI (195.3) (21.5) (5.2) (17.7) (23.4) (222.0) (123.7) ------------ --------- --------- --------- --------- --------- ---------- Surety 8.5 6.8 3.7 6.0 2.7 19.0 11.6 P&C Other* (0.6) (2.3) (7.0) (17.1) (33.6) (9.9) (46.0) ------------ --------- --------- --------- --------- --------- ---------- Total All Lines $ (107.4) $(12.3) $ 21.0 $(18.7) $ (45.4) $ (98.7) $ (220.9) ============ ========= ========= ========= ========= ========= ========== 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ------------ --------- --------- --------- --------- --------- ---------- Net Combined Ratios (GAAP) -------------------------- Safeco Personal Insurance Personal Auto 93.9% 99.4% 100.3% 102.0% 101.2% 97.8% 102.4% Homeowners 83.3% 107.0% 89.7% 93.5% 97.1% 93.3% 108.8% Specialty 75.4% 70.7% 76.9% 83.8% 81.2% 74.3% 86.4% ------------ --------- --------- --------- --------- --------- ---------- Total SPI 90.3% 99.4% 96.2% 98.7% 98.8% 95.2% 102.9% ------------ --------- --------- --------- --------- --------- ---------- Safeco Business Insurance SBI Regular 118.6% 104.2% 102.0% 97.0% 104.7% 108.4% 107.9% Special Accounts Facility 94.3% 100.7% 92.7% 91.6% 94.8% 95.9% 94.5% SBI Runoff NM NM NM NM NM NM NM ------------ --------- --------- --------- --------- --------- ---------- Total SBI 151.6% 106.0% 101.5% 104.9% 106.6% 120.3% 111.2% ------------ --------- --------- --------- --------- --------- ---------- Surety 78.8% 82.2% 88.6% 81.4% 91.8% 82.8% 87.6% P&C Other* NM NM NM NM NM NM NM ------------ --------- --------- --------- --------- --------- ---------- Total All Lines 108.6% 101.0% 98.2% 101.6% 104.0% 102.7% 106.6% ============ ========= ========= ========= ========= ========= ========== * P&C Other includes our discontinued assumed reinsurance business, our involuntary-assigned risk and other state-mandated personal lines business, our Lloyds of London operations which are in runoff and certain discontinued product lines. Safeco Property & Casualty Underwriting Profit and Combined Ratios (Without 3Q 03 Workers Compensation Reserve Adjustment) (In Millions) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ------------ --------- -------- --------- --------- -------- ---------- Net U/W Profit (Loss) --------------------------------- Safeco Personal Insurance Personal Auto $ 35.4 $ 3.3 $ (1.5) $(10.6) $ (6.2) $ 37.2 $ (33.8) Homeowners 32.1 (13.4) 19.5 12.4 5.5 38.2 (49.6) Specialty 12.5 14.8 11.5 8.3 9.6 38.8 20.6 ------------ --------- -------- --------- --------- -------- ---------- Total SPI 80.0 4.7 29.5 10.1 8.9 114.2 (62.8) ------------ --------- -------- --------- --------- -------- ---------- Safeco Business Insurance SBI Regular 6.3 (11.5) (5.3) 7.8 (11.9) (10.5) (59.5) Special Accounts Facility 8.3 (0.6) 6.4 7.5 3.9 14.1 10.3 SBI Runoff (4.9) (9.4) (6.3) (33.0) (15.4) (20.6) (74.5) ------------ --------- -------- --------- --------- -------- ---------- Total SBI 9.7 (21.5) (5.2) (17.7) (23.4) (17.0) (123.7) ------------ --------- -------- --------- --------- -------- ---------- Surety 8.5 6.8 3.7 6.0 2.7 19.0 11.6 P&C Other* (0.6) (2.3) (7.0) (17.1) (33.6) (9.9) (46.0) ------------ --------- -------- --------- --------- -------- ---------- Total All Lines $ 97.6 $(12.3) $ 21.0 $(18.7) $ (45.4) $106.3 $ (220.9) ============ ========= ======== ========= ========= ======== ========== 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ------------ --------- -------- --------- --------- -------- ---------- Net Combined Ratios (GAAP) --------------------------- Safeco Personal Insurance Personal Auto 93.9% 99.4% 100.3% 102.0% 101.2% 97.8% 102.4% Homeowners 83.3% 107.0% 89.7% 93.5% 97.1% 93.3% 108.8% Specialty 75.4% 70.7% 76.9% 83.8% 81.2% 74.3% 86.4% ------------ --------- -------- --------- --------- -------- ---------- Total SPI 90.3% 99.4% 96.2% 98.7% 98.8% 95.2% 102.9% ------------ --------- -------- --------- --------- -------- ---------- Safeco Business Insurance SBI Regular 97.7% 104.2% 102.0% 97.0% 104.7% 101.3% 107.9% Special Accounts Facility 91.8% 100.7% 92.7% 91.6% 94.8% 95.0% 94.5% SBI Runoff NM NM NM NM NM NM NM ------------ --------- -------- --------- --------- -------- ---------- Total SBI 97.4% 106.0% 101.5% 104.9% 106.6% 101.6% 111.2% ------------ --------- -------- --------- --------- -------- ---------- Surety 78.8% 82.2% 88.6% 81.4% 91.8% 82.8% 87.6% P&C Other* NM NM NM NM NM NM NM ------------ --------- -------- --------- --------- -------- ---------- Total All Lines 92.2% 101.0% 98.2% 101.6% 104.0% 97.1% 106.6% ============ ========= ======== ========= ========= ======== ========== * P&C Other includes our discontinued assumed reinsurance business, our involuntary-assigned risk and other state-mandated personal lines business, our Lloyds of London operations which are in runoff and certain discontinued product lines. Safeco Property & Casualty Net Written Premiums (In Millions) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Written Premiums -------------------- Safeco Personal Insurance Personal Auto $ 617.7 $ 570.9 $ 566.0 $ 522.9 $ 536.4 $ 1,754.6 $ 1,502.8 Homeowners 207.4 215.3 172.2 175.2 212.1 594.9 592.4 Specialty 53.2 57.2 46.5 44.2 54.4 156.9 158.5 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total SPI 878.3 843.4 784.7 742.3 802.9 2,506.4 2,253.7 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Safeco Business Insurance SBI Regular 281.5 308.4 284.0 258.1 253.5 873.9 797.1 Special Accts Facility* 103.7 94.7 97.1 99.2 88.2 295.5 249.7 SBI Runoff (1.2) (0.5) 1.8 (3.7) (2.2) 0.1 28.8 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total SBI 384.0 402.6 382.9 353.6 339.5 1,169.5 1,075.6 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Surety 49.9 46.9 35.2 32.4 38.4 132.0 101.2 P&C Other 2.5 23.6 3.0 1.7 1.9 29.1 24.1 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total All Lines $ 1,314.7 $ 1,316.5 $ 1,205.8 $ 1,130.0 $ 1,182.7 $3,837.0 $3,454.6 ========= ========== ========== ========== ========== ========== ========== Net Written Premiums (Percent Change) ------------------------------------ Percent Change Over Prior Year Same Quarter Percent Change YTD -------------------------------------------- ------------------ Safeco Personal Insurance Personal Auto 15.2% 17.0% 18.3% 14.4% 17.6% 16.8% 12.3% Homeowners -2.2% 0.8% 3.3% -1.7% 5.4% 0.4% 4.9% Specialty -2.2% -1.6% 1.3% -4.3% 1.9% -1.0% 0.3% ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total SPI 9.4% 11.0% 13.6% 9.0% 12.9% 11.2% 9.4% ---------- ---------- ---------- ---------- ---------- ---------- ---------- Safeco Business Insurance SBI Regular 11.0% 11.0% 7.0% 17.2% 7.0% 9.6% 4.5% Special Accts Facility* 17.6% 13.4% 24.8% 187.1% 165.2% 18.3% 151.3% SBI Runoff NM NM NM NM NM NM NM ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total SBI 13.1% 9.4% 4.0% 4.2% -8.0% 8.7% -10.5% ---------- ---------- ---------- ---------- ---------- ---------- ---------- Surety 29.9% 30.8% 30.7% 7.4% 16.1% 30.4% -0.2% P&C Other 31.6% 12.9% 95.4% -2.1% -22.7% 20.7% 9.0% ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total All Lines 11.2% 11.2% 10.9% 7.4% 6.1% 11.1% 2.0% ========= ========== ========== ========== ========== ========== ========== *As each existing old Safeco Commercial policy came up for renewal (reported in Runoff), a decision was made by Special Accounts Facility to renew or not renew. If it was renewed it became part of Special Accounts Facility, otherwise results associated with the discontinued account remain in Runoff. In addition, this number is impacted by the acquisition of the ACE lender-placed property business of $80 million in premiums in 4Q 2001. Surety premiums reflected a change from a 50% quota share reinsurance treaty to an excess of loss treaty in February 2001. Safeco Property & Casualty Net Earned Premiums (In Millions) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ----------- --------- ---------- ---------- --------- ----------- ----------- Net Earned Premiums ------------------- Safeco Personal Insurance Personal Auto $ 581.3 $ 552.9 $ 528.5 $ 523.0 $ 497.4 $1,662.7 $ 1,424.1 Homeowners 191.5 192.1 189.5 192.1 192.7 573.1 565.3 Specialty 50.9 50.5 49.8 50.8 51.1 151.2 152.3 ----------- --------- ---------- ---------- --------- ----------- ----------- Total SPI 823.7 795.5 767.8 765.9 741.2 2,387.0 2,141.7 ----------- --------- ---------- ---------- --------- ----------- ----------- Safeco Business Insurance SBI Regular 275.4 272.1 266.0 262.3 255.4 813.5 751.8 Special Accts Facility* 100.6 93.2 87.9 89.2 75.2 281.7 186.8 SBI Runoff 2.2 (4.9) 3.0 8.1 24.2 0.3 162.8 ----------- --------- ---------- ---------- --------- ----------- ----------- Total SBI 378.2 360.4 356.9 359.6 354.8 1,095.5 1,101.4 ----------- --------- ---------- ---------- --------- ----------- ----------- Surety 40.0 38.5 32.1 32.7 32.7 110.6 93.6 P&C Other 8.5 7.4 6.3 6.4 6.5 22.2 20.0 ----------- --------- ---------- ---------- --------- ----------- ----------- Total All Lines $1,250.4 $ 1,201.8 $1,163.1 $ 1,164.6 $ 1,135.2 $3,615.3 $3,356.7 =========== ========= ========== ========== ========= =========== =========== Net Earned Premiums (Percent Change) ----------------------------------- Percent Change Over Prior Year Same Quarter Percent Change YTD ------------------------------------------- ------------------ Safeco Personal Insurance Personal Auto 16.9% 17.0% 16.3% 14.9% 11.4% 16.8% 8.5% Homeowners -0.6% 1.5% 3.3% 2.8% 3.1% 1.4% 2.1% Specialty -0.4% -1.3% -0.4% -0.6% 0.3% -0.7% 1.2% ----------- --------- ---------- ---------- --------- ----------- ----------- Total SPI 11.1% 11.6% 11.6% 10.5% 8.3% 11.5% 6.2% ----------- --------- ---------- ---------- --------- ----------- ----------- Safeco Business Insurance SBI Regular 7.8% 8.2% 8.6% 7.0% 0.5% 8.2% -4.6% Special Accts Facility* 33.8% 50.9% 76.2% 152.7% 146.6% 50.8% 101.7% SBI Runoff NM NM NM NM NM NM NM ----------- --------- ---------- ---------- --------- ----------- ----------- Total SBI 6.6% -2.6% -5.2% -4.5% -12.5% -0.5% -12.2% ----------- --------- ---------- ---------- --------- ----------- ----------- Surety 22.3% 23.5% 7.8% 16.9% 21.3% 18.2% 38.5% P&C Other 30.8% -5.8% 13.7% -67.5% NM 11.0% 14.9% ----------- --------- ---------- ---------- --------- ----------- ----------- Total All Lines 10.1% 7.1% 5.8% 4.2% 1.5% 7.7% 0.0% =========== ========= ========== ========== ========= =========== =========== * As each existing old Safeco Commercial policy came up for renewal (reported in Runoff), a decision was made by Special Accounts Facility to renew or not renew. If it was renewed it became part of Special Accounts Facility, otherwise results associated with the discontinued account remain in Runoff. In addition, this number is impacted by the acquisition of the ACE lender-placed property business of $80 million in premiums in 4Q 2001. Surety premiums reflected a change from a 50% quota share reinsurance treaty to an excess of loss treaty in February 2001. Safeco Property & Casualty Personal Auto (In Millions Except Ratios) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ----------- ------------ ------------ ----------- ------------ ----------- ------------ Personal Auto ------------- Underwriting Profit (Loss) $ 35.4 $ 3.3 $ (1.5) $ (10.6) $ (6.2) $ 37.2 $ (33.8) Loss and LAE Ratio 71.8% 76.0% 76.8% 78.5% 78.2% 74.8% 78.8% Expense Ratio 22.1% 23.4% 23.5% 23.5% 23.0% 23.0% 23.6% ----------- ------------ ------------ ----------- ------------ ----------- ------------ Combined Ratio 93.9% 99.4% 100.3% 102.0% 101.2% 97.8% 102.4% ----------- ------------ ------------ ----------- ------------ ----------- ------------ Impact of Catastrophes 0.0% 4.0% 0.2% 0.3% -0.1% 1.4% 0.5% Impact of Non-Cat Weather 1.1% 1.4% 0.3% 0.4% 0.8% 0.9% 0.8% Policies In Force (000's) 1,631.7 1,586.1 1,558.6 1,529.9 1,498.4 % Chg Prior Year Same Qtr 8.9% 9.6% 9.6% 8.0% 4.7% Retention 79.9% 80.1% 81.0% 81.2% 80.5% New Business Policies (000's) 144.7 115.6 107.4 117.1 137.2 % Chg Prior Year Same Qtr 5.5% -0.5% 12.2% 42.7% 85.2% Loss Trends (12 mo. rolling) Frequency -3.2% -3.7% -6.5% -7.3% -5.3% Severity 3.6% 3.2% 5.1% 7.2% 4.9% Total Loss Costs 0.3% -0.6% -1.7% -0.6% -0.7% Net Written Premiums $ 617.7 $ 570.9 $ 566.0 $ 522.9 $ 536.4 % Chg Prior Year Same Qtr 15.2% 17.0% 18.3% 14.4% 17.6% Net Earned Premiums $ 581.3 $ 552.9 $ 528.5 $ 523.0 $ 497.4 % Chg Prior Year Same Qtr -0.6% 1.5% 3.3% 2.8% 3.1% Frequency, severity and loss cost information is on a twelve month rolling newly reported claims incurred basis which may be different from paid. Safeco Property & Casualty Homeowners and Specialty (In Millions Except Ratios) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ----------- ----------- ----------- ----------- ----------- ---------- ---------- Homeowners ----------- Underwriting Profit (Loss) $ 32.1 $ (13.4) $ 19.5 $ 12.4 $ 5.5 $38.2 $ (49.6) Loss and LAE Ratio 54.8% 78.5% 60.9% 61.4% 68.9% 64.8% 80.7% Expense Ratio 28.5% 28.5% 28.8% 32.1% 28.2% 28.5% 28.1% ----------- ----------- ----------- ----------- ----------- ---------- ---------- Combined Ratio 83.3% 107.0% 89.7% 93.5% 97.1% 93.3% 108.8% =========== =========== =========== =========== =========== ========== ========== Impact of Catastrophes 5.8% 31.5% 4.3% 1.9% -3.4% 13.9% 9.0% Impact of Non-Cat Weather 10.0% 9.1% 6.8% 6.2% 11.4% 8.7% 10.1% Policies In Force (000's) 1,201.5 1,232.8 1,263.0 1,290.5 1,324.1 % Chg Prior Year Same Qtr -9.3% -9.1% -8.3% -8.2% -8.2% Retention 82.7% 82.8% 82.8% 82.5% 82.4% New Business Policies (000's) 31.4 28.6 22.9 27.0 32.5 % Chg Prior Year Same Qtr -3.4% -31.9% -27.4% -11.6% -8.6% Net Written Premiums $207.4 $ 215.3 $ 172.2 $ 175.2 $ 212.1 % Chg Prior Year Same Qtr -2.2% 0.8% 3.3% -1.7% 5.4% Net Earned Premiums $ 191.5 $ 192.1 $ 189.5 $ 192.1 $ 192.7 % Chg Prior Year Same Qtr -0.6% 1.5% 3.3% 2.8% 3.1% Specialty --------- Underwriting Profit $ 12.5 $ 14.8 $ 11.5 $ 8.3 $ 9.6 $38.8 $ 20.6 Loss and LAE Ratio 47.6% 40.1% 46.3% 52.3% 50.0% 44.6% 55.1% Expense Ratio 27.8% 30.6% 30.6% 31.5% 31.2% 29.7% 31.3% ----------- ----------- ----------- ----------- ----------- ---------- ---------- Combined Ratio 75.4% 70.7% 76.9% 83.8% 81.2% 74.3% 86.4% =========== =========== =========== =========== =========== ========== ========== Safeco Property & Casualty Safeco Business Insurance (SBI) (In Millions Except Ratios) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ---------- ---------- ---------- ---------- ---------- ---------- ----------- Safeco Business Insurance ------------------------- Underwriting Loss $(195.3) $ (21.5) $ (5.2) $ (17.7) $(23.4) $(222.0) $ (123.7) Loss and LAE Ratio 115.6% 66.1% 62.8% 66.4% 67.0% 82.1% 73.5% Expense Ratio 36.0% 39.9% 38.7% 38.5% 39.6% 38.2% 37.7% ---------- ---------- ---------- ---------- ---------- ---------- ----------- Combined Ratio (CR) 151.6% 106.0% 101.5% 104.9% 106.6% 120.3% 111.2% ========== ========== ========== ========== ========== ========== =========== CR excluding reserve adjustment 97.4% 106.0% 101.5% 104.9% 106.6% 101.6% 111.2% Impact of Catastrophes 2.4% 4.0% 0.9% -1.1% -1.2% 2.4% 1.5% Impact of Non-Cat Weather 2.5% 2.1% 1.9% 1.9% 2.5% 2.2% 1.9% SBI Regular ----------- Underwriting Profit (Loss) $ (51.3) $ (11.5) $ (5.3) $ 7.8 $ (11.9) $ (68.1) $ (59.5) Loss and LAE Ratio 81.8% 66.6% 63.8% 60.1% 66.5% 70.9% 71.8% Expense Ratio 36.8% 37.6% 38.2% 36.9% 38.2% 37.5% 36.1% ---------- ---------- ---------- ---------- ---------- ---------- ----------- Combined Ratio (CR) 118.6% 104.2% 102.0% 97.0% 104.7% 108.4% 107.9% ========== ========== ========== ========== ========== ========== =========== CR excluding reserve adjustment 97.7% 104.2% 102.0% 97.0% 104.7% 101.3% 107.9% Impact of Catastrophes 1.9% 3.4% 1.7% -1.7% -1.1% 2.3% 2.2% Impact of Non-Cat Weather 2.4% 2.2% 1.7% 0.4% 1.6% 2.1% 1.8% Policies In Force (000's) 509.9 511.1 517.2 529.7 537.1 % Chg Prior Year Same Qtr -5.1% -6.9% -7.4% -8.9% -8.8% Retention 77.9% 76.7% 76.1% 76.0% 75.8% New Business Policies (000's) 30.3 31.1 25.2 24.6 24.6 % Chg Prior Year Same Qtr 23.2% 16.9% 13.7% 15.3% 25.2% Net Written Premiums $ 281.5 $ 308.4 $284.0 $258.1 $253.5 % Chg Prior Year Same Qtr 11.0% 11.0% 7.0% 17.2% 7.0% Net Earned Premiums $ 275.4 $ 272.1 $266.0 $ 262.3 $255.4 % Chg Prior Year Same Qtr 7.8% 8.2% 8.6% 7.0% 0.5% Special Accounts Facility -------------------------- Underwriting Profit (Loss) $ 5.8 $ (0.6) $ 6.4 $ 7.5 $ 3.9 $ 11.6 $ 10.3 Combined Ratio (CR) 94.3% 100.7% 92.7% 91.6% 94.8% 95.9% 94.5% CR excluding reserve adjustment 91.8% 100.7% 92.7% 91.6% 94.8% 95.0% 94.5% SBI Runoff Underwriting Loss $ (149.8) $ (9.4) $ (6.3) $ (33.0) $ (15.4) $(165.5) $ (74.5) Safeco Property & Casualty Surety, Other and Total (In Millions Except Ratios) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ------------ ----------- ---------- ---------- ----------- ----------- ------------ Surety ------ Underwriting Profit $ 8.5 $ 6.8 $ 3.7 $ 6.0 $ 2.7 $ 19.0 $ 11.6 Combined Ratio 78.8% 82.2% 88.6% 81.4% 91.8% 82.8% 87.6% P&C Other* ----------- Underwriting Loss $ (0.6) $ (2.3) $ (7.0) $ (17.1) $ (33.6) $ (9.9) $ (46.0) Total Property & Casualty ------------------------- Underwriting Profit (Loss) $ (107.4) $ (12.3) $ 21.0 $ (18.7) $ (45.4) $(98.7) $(220.9) Underwriting Profit (Loss) excluding reserve adjustment $ 97.6 $ (12.3) $ 21.0 $ (18.7) $ (45.4) $ 106.3 $(220.9) Loss and LAE Ratio 80.2% 70.4% 67.9% 70.6% 72.1% 73.1% 75.7% Expense Ratio 28.4% 30.6% 30.3% 31.0% 31.9% 29.6% 30.9% ------------ ----------- ---------- ---------- ----------- ----------- ------------ Combined Ratio (CR) 108.6% 101.0% 98.2% 101.6% 104.0% 102.7% 106.6% ============ =========== ========== =========== ========== =========== ============ CR excluding reserve adjustment 92.2% 101.0% 98.2% 101.6% 104.0% 97.1% 106.6% Impact of Catastrophes 1.7% 8.2% 1.1% 0.2% -0.9% 3.7% 2.5% Impact of Non-Cat Weather 2.9% 2.8% 1.9% 1.9% 3.2% 2.6% 2.8% *P&C Other includes our discontinued assumed reinsurance business, our involuntary-assigned risk and other state-mandated personal lines business, our Lloyds of London operations which are in runoff and certain discontinued product lines. Catastrophes and Non-Catastrophe Weather ---------------------------------------- Catastrophes $21.0 $99.1 $13.4 $2.9 ($9.9) $133.5 $82.5 SPI - Personal Auto (0.1) 22.3 0.9 1.4 (0.6) 23.1 7.7 SPI - Homeowners 11.1 60.5 8.2 3.7 (6.6) 79.8 50.6 SPI - Specialty 1.0 2.0 1.1 1.6 1.5 4.1 7.8 Safeco Business Insurance 9.0 14.3 3.2 (3.8) (4.2) 26.5 16.4 Non-Catastrophe Weather $36.6 $33.9 $22.5 $22.2 $36.3 $93.0 $92.9 SPI - Personal Auto 6.3 7.5 1.4 2.3 4.4 15.2 11.2 SPI - Homeowners 19.3 17.5 12.9 12.0 22.0 49.7 57.1 SPI - Specialty 1.4 1.3 1.3 1.4 1.2 4.0 3.5 Safeco Business Insurance 9.6 7.6 6.9 6.5 8.7 24.1 21.1 Safeco Property & Casualty Statutory Information (In Millions Except Ratios) Three Months Ended Nine Months Ended Statutory: September 30 September 30 ------------------------------------------------------- 2003 2002 2003 2002 ------------------------------------------------------- Net Premiums Written $ 1,314.7 $ 1,182.7 $ 3,837.0 $ 3,454.6 Change in Unearned Premium* (64.3) (47.5) (221.7) (97.9) ------------------------------------------------------- Net Premiums Earned 1,250.4 1,135.2 3,615.3 3,356.7 ------------------------------------------------------- Net Losses Paid 664.6 699.1 2,013.1 2,082.9 Change in Loss Reserve 143.5 (43.7) 121.8 22.3 ------------------------------------------------------- Net Losses Incurred 808.1 655.4 2,134.9 2,105.2 Net LAE Paid 160.0 162.5 480.9 459.8 Change in LAE Reserve 35.4 (14.6) 23.4 (44.9) ------------------------------------------------------- Loss Expense Incurred 195.4 147.9 504.3 414.9 Other U/W Expense Incurred 372.7 365.3 1,108.1 1,068.0 ------------------------------------------------------- Total Losses and Expense 1,376.2 1,168.6 3,747.3 3,588.1 ------------------------------------------------------- Underwriting Loss (125.8) (33.4) (132.0) (231.4) Investment Results Net Investment Income Earned 114.4 114.1 342.9 345.6 Net Realized Capital Gain 13.6 72.5 20.6 307.9 ------------------------------------------------------- Net Gain from Investments 128.0 186.6 363.5 653.5 Other Income 3.8 (5.2) 7.1 (3.0) ------------------------------------------------------- Net Income before Dividends to Policyholders 6.0 148.0 238.6 419.1 Dividends to Policyholders 0.4 (6.6) 1.7 (6.1) ------------------------------------------------------- Net Income before Income Taxes 5.6 154.6 236.9 425.2 Income Tax Expense 14.6 18.3 66.5 57.9 ------------------------------------------------------- Net Income (Loss) $ (9.0) $ 136.3 $ 170.4 $ 367.3 ======================================================= 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD 2003 2003 2003 2002 2002 2003 2002 ----------------------------------------------------------------------------------------------- Loss and Expense Ratios (Statutory) ----------------------------------- Losses and Loss Adj. Expense to Premiums Earned 80.3% 70.5% 67.9% 69.5% 70.8% 73.0% 75.1% Other Underwriting Expenses to Net Premiums Written 28.3% 28.9% 29.4% 32.1% 30.9% 28.9% 30.9% ----------------------------------------------------------------------------------------------- Total Loss and Expense 108.6% 99.4% 97.3% 101.6% 101.7% 101.9% 106.0% Dividends to Policyholders to Premiums Earned 0.0% 0.0% 0.0% 0.0% -0.6% 0.0% -0.2% ----------------------------------------------------------------------------------------------- Combined Ratio 108.6% 99.4% 97.3% 101.6% 101.1% 101.9% 105.8% =============================================================================================== Balance Sheet - Statutory P&C Companies Only** -------------------------------- Loss Reserves $ 3,854.5 $ 3,711.0 $ 3,699.9 $ 3,732.7 $ 3,792.8 Loss Adj Expense Reserves 826.5 791.1 806.5 803.1 792.3 ------------------------------------------------------------------------ Total Loss Reserves $ 4,681.0 $ 4,502.1 $ 4,506.4 $ 4,535.8 $ 4,585.1 ======================================================================== Unearned Premium Reserves $ 2,022.3 $ 1,957.5 $ 1,845.2 $ 1,804.7 $ 1,838.5 Reserves for Dividends to Policyholders 6.0 6.8 6.9 7.8 10.5 Net Admitted Assets 10,496.7 10,080.1 9,986.8 9,851.2 9,453.5 Total Capital and Surplus 2,562.3 2,626.9 2,571.8 2,509.5 2,168.2 Ratio of Net Premiums Written (Annualized) to Total Capital and Surplus 2.05 2.00 1.88 1.80 2.18 * Also reflects changes in accrued retrospective premiums. ** Certain 2003 amounts used are estimated and subject to change. Such changes are not expected to be material. Safeco Life & Investments Pretax Operating Earnings* (In Millions) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD % 2003 2003 2003 2002 2002 2003 2002 Chg ------------------------------------------------------------------------------------------------- Group $ 12.5 $ 24.5 $ 29.0 $ 22.5 $ 22.4 $ 66.0 $ 46.7 41.3% Income Annuities (0.9) 8.4 10.1 13.9 11.5 17.6 27.6 -36.2% Retirement Services 3.3 4.9 5.0 8.2 1.4 13.2 13.4 -1.5% Individual 3.9 (0.5) 1.9 3.9 3.5 5.3 17.7 -70.1% Asset Management 1.1 0.1 0.1 0.3 0.9 1.3 4.9 -73.5% L&I Other 21.2 20.5 25.7 17.5 19.9 67.4 60.4 11.6% -------------------------------------------------------------------------------------------------- Pretax Operating Earnings $ 41.1 $ 57.9 $ 71.8 $ 66.3 $ 59.6 $ 170.8 $ 170.7 0.1% ================================================================================================== Safeco Life & Investments Operating Revenues (In Millions) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD % 2003 2003 2003 2002 2002 2003 2002 Chg ------------------------------------------------------------------------------------------------- Group $ 133.9 $ 144.5 $ 142.3 $ 149.8 $ 149.3 $ 420.7 $ 327.6 28.4% Income Annuities 121.7 130.8 131.4 136.6 134.0 383.9 392.6 -2.2% Retirement Services 96.6 96.4 96.1 95.4 96.3 289.1 284.1 1.8% Individual 96.3 95.8 95.9 96.9 96.2 288.0 282.8 1.8% Asset Management 7.0 6.7 6.2 6.7 7.0 19.9 23.2 -14.2% L&I Other 52.8 50.7 55.5 47.3 47.6 159.0 141.9 12.1% -------------------------------------------------------------------------------------------------- Operating Revenues $ 508.3 $ 524.9 $ 527.4 $ 532.7 $ 530.4 $ 1,560.6 $ 1,452.2 7.5% ================================================================================================== *Earnings before net realized investment gains (losses) and income taxes. This is a standard industry measurement and is used by management as the key measurement of Life & Investments segment profit or loss. It is presented as a supplement to net income as a measure of profitability. Safeco Life & Investments Supplemental Statistics (In Millions Except Ratios and Policy Statistics) 3RD 2ND 1ST 4TH 3RD QTR QTR QTR QTR QTR YTD YTD % 2003 2003 2003 2002 2002 2003 2002 Chg ----------------------------------------------------------------------------------------- Group Earned Premiums $132.3 $ 141.6 $140.6 $145.7 $147.3 $414.5 $322.2 28.6% Loss Ratio 63.3% 56.3% 56.2% 59.2% 58.4% 58.5% 59.2% (0.7) Income Annuities Reserves (in billions) $ 6.3 $ 6.4 $ 6.3 $ 6.3 $ 6.3 $ 6.3 $ 6.3 0.0% Deposits 29.3 35.8 28.5 37.2 34.1 93.6 69.8 34.1% Retirement Services Reserves Fixed (in billions) $ 6.6 $ 6.4 $ 6.1 $ 5.9 $ 5.8 $ 6.6 $ 5.8 13.8% Variable (in billions) 0.9 0.9 0.8 0.8 0.8 0.9 0.8 12.5% ----------------------------------------------------------------------------------------- Total Reserves 7.5 7.3 6.9 6.7 6.6 7.5 6.6 13.6% Deposits 303.6 328.4 332.2 338.0 271.4 964.2 1,019.4 -5.4% Individual Reserves $ 3.9 $ 3.9 $ 3.8 $ 3.8 $ 3.7 $ 3.9 $ 3.7 5.4% Policies Issued: Term, Universal Life, 5.9 6.5 5.9 6.3 5.2 18.3 15.9 15.1% Traditional, Disability (000's) Policies In Force (000's) 284.0 283.2 281.7 280.0 278.6 284.0 278.6 1.9% Asset Management Assets Under Management (in billions) $ 4.0 $ 4.0 $ 3.7 $ 3.9 $ 3.7 $ 4.0 $ 3.7 8.1% Safeco Corporation Capitalization (In Millions) 09/30/2003 12/31/2002 12/31/2001 -------------------------------------------------------------- Short-Term Debt $500 million back up line of credit (unused) $ - $ - $ - Commercial Paper - - 299.0 7.875%, due 3/15/03 - 303.5 323.0 Medium-Term Notes and Other 19.2 29.7 74.6 Long-Term Debt 7.875%, due 4/1/05 (callable at par on 4/1/03) - 200.0 200.0 6.875%, due 7/15/07 (non callable) 195.8 200.0 200.0 4.20%, due 2/1/08 (non callable) 200.0 - - 4.875%, due 2/1/10 (non callable) 300.0 - - 7.25%, due 9/15/12 (non callable) 387.7 390.6 - 8.072% Capital Securities due 2037 (Callable at 104 in 2007) 850.0 - - ------------------ ------------------- ------------------- Total Debt $ 1,952.7 $ 1,123.8 $ 1,096.6 ------------------ ------------------- ------------------- Capital Securities (callable at 104 in 2007) $ - $ 843.8 $ 843.4 ------------------ ------------------- ------------------- Common Equity $ 4,933.4 $ 4,431.6 $ 3,634.6 ------------------ ------------------- ------------------- Total Capital (Debt + Capital Securities + Equity) $ 6,886.1 $ 6,399.2 $ 5,574.6 ------------------ ------------------- ------------------- Debt to Capital 28.4% 17.6% 19.7% Debt and Capital Securities to Capital 28.4% 30.7% 34.8% Debt and Adj. Cap Securities* to Capital 25.9% 28.1% 31.8% Debt to Equity 39.6% 25.4% 30.2% Earnings to Fixed Charges Ratio** 1.2 1.3 Negative Interest Coverage Ratio** 5.4 5.0 Negative Operating Earnings to Fixed Charges Ratio** 4.0 3.1 Negative * 20% equity credit ** The Earnings to Fixed Charges Ratio includes net realized investment gains (losses), interest on deposit contracts and distributions on capital securities. The Interest Coverage Ratio excludes net realized investment gains (losses), interest on deposit contracts and distributions on capital securities. The Operating Earnings to Fixed Charges Ratio excludes net realized investment gains (losses) and interest on deposit contracts. Note: Effective July 1, 2003 Safeco adopted SFAS 150, "Accounting for Financial Insturments with Characteristics of Liabilities, Equity or Both" and, accordingly, Capital Securities are now reported with debt in our September 30, 2003 Consolidated Balance Sheet. Safeco Corporation Investment Portfolios - Consolidated (In Millions) Investment Portfolio (Market Value) 09/30/2003 % 12/31/2002 % ------------------- ---------- -------------------- --------- Fixed Maturities - Taxable $ 23,522.6 82.7 % $ 22,169.2 82.8 % Fixed Maturities - Nontaxable 2,210.9 7.8 2,108.8 7.9 Equity Securities 1,167.1 4.1 1,082.5 4.0 ------------------- ---------- -------------------- --------- Total Fixed Maturities & Equity Securities 26,900.6 94.6 25,360.5 94.7 Mortgage Loans 937.9 3.3 925.9 3.5 Other Invested Assets 159.0 0.5 173.8 0.6 Short-Term Investments 449.2 1.6 311.0 1.2 ------------------- ---------- -------------------- --------- Total Consolidated Investment Portfolio $ 28,446.7 100.0 % $ 26,771.2 100.0 % ------------------- ---------- -------------------- --------- Rating (Market Value) 09/30/2003 12/31/2002 ------------------- -------------------- AAA 35 % 37 % AA 6 7 A 24 24 BBB 28 25 BB or lower 6 5 Not Rated 1 2 ------------------- -------------------- Total 100 % 100 % ------------------- -------------------- Average Rating A A ------------------- -------------------- Components of Net Realized Investment Gains (Losses) after Tax (in millions): 3rd 3rd QTR QTR 2003 2002 ------------------- -------------------- Gains on Securities Transactions $ 15.7 $ 27.0 Impairments on Fixed Maturities (4.6) (24.3) Impairments on Equity Securities (4.7) (0.4) Impairment related to intent to sell L&I (77.7) - Credit Default Swap Mark-to-Market 1.8 (17.7) Other 7.0 23.2 ------------------- -------------------- Net Realized Investment Gains (Losses) $ (62.5) $ 7.8 =================== ==================== Safeco Corporation Investment Portfolios - Property & Casualty (In Millions) Investment Portfolio (Market Value) 09/30/2003 % 12/31/2002 % ----------------- ---------------- ---------------- --------------- Fixed Maturities - Taxable $ 5,454.1 59.6 % $ 5,383.0 61.2 % Fixed Maturities - Nontaxable 2,203.2 24.1 2,108.8 23.9 Equity Securities 1,029.2 11.2 947.9 10.8 ----------------- ---------------- ---------------- --------------- Total Fixed Maturities & Equity Securities 8,686.5 94.9 8,439.7 95.9 Mortgage Loans 48.5 0.5 50.5 0.6 Other Invested Assets 7.3 0.1 15.6 0.2 Short-Term Investments 411.5 4.5 292.9 3.3 ----------------- ---------------- ---------------- --------------- Total Property & Casualty Investment Portfolio $ 9,153.8 100.0 % $ 8,798.7 100.0 % ----------------- ---------------- ---------------- --------------- Rating (Market Value) 09/30/2003 12/31/2002 ----------------- ---------------- AAA 40 % 45 % AA 11 11 A 24 22 BBB 20 17 BB or lower 4 3 Not Rated 1 2 ----------------- ---------------- Total 100 % 100 % ----------------- ---------------- Average Rating A+ AA ----------------- ---------------- 09/30/2003 06/30/2003 03/31/2003 12/31/2002 09/30/2002 ---------------------------------------------------------------------------------------- Pretax Investment Income - Quarter $ 113.7 $ 116.5 $ 112.8 $ 115.0 $ 114.5 Effective Tax Rate on P&C Investment Income - Quarter 26.79% 25.07% 26.64% 25.94% 26.57% Cost or Amortized Cost $ 8,274 $ 8,003 $ 8,145 $ 8,131 $ 7,903 Market 9,154 9,008 8,877 8,799 8,627 % Equities (at market) 11.2% 11.3% 10.2% 10.8% 10.5% % Taxable Bonds (at market) 59.6% 59.7% 59.2% 61.2% 60.3% % Tax Exempt Bonds (at market) 24.1% 24.5% 23.9% 23.9% 23.4% % Short Term and Other 5.1% 4.5% 6.7% 4.1% 5.8% Market YTM on Bond Portfolio 3.92% 3.71% 4.10% 4.17% 4.33% Book YTM on Bond Portfolio 5.56% 5.66% 6.02% 5.99% 6.19% Duration of Bond Portfolio 4.99 4.57 5.23 5.26 4.91 Safeco Corporation Investment Portfolios - Life & Investments (In Millions) Investment Portfolio (Market Value) 09/30/2003 % 12/31/2002 % -------------- -------------- --------------- -------------- Fixed Maturities - Taxable $ 17,977.2 93.3 % $ 16,657.6 92.5 % Fixed Maturities - Nontaxable 7.7 0.0 0.8 0.0 Equity Securities 112.6 0.6 113.8 0.6 -------------- -------------- --------------- -------------- Total Fixed Maturities & Equity Securities 18,097.5 93.9 16,772.2 93.1 Mortgage Loans 961.5 5.0 948.6 5.3 Other Invested Assets 124.2 0.6 118.1 0.7 Short-Term Investments 88.9 0.5 165.8 0.9 -------------- -------------- --------------- -------------- Total Life & Investments Investment Portfolio $ 19,272.1 100.0 % $ 18,004.7 100.0 % ============== ============== =============== ============== Rating (Market Value) 09/30/2003 12/31/2002 -------------- --------------- AAA 32 % 34 % AA 4 5 A 24 25 BBB 32 29 BB or lower 6 5 Not Rated 2 2 -------------- --------------- Total 100 % 100 % ============== =============== Average Rating A A+ -------------- --------------- 09/30/2003 06/30/2003 03/31/2003 12/31/2002 09/30/2002 ----------- ------------ ------------ ------------ ------------ Cost or Amortized Cost $ 17,639 $ 17,527 $ 17,259 $ 16,885 $ 16,704 Market 19,272 19,325 18,489 18,005 17,797 % Equities (at market) 0.6% 0.6% 0.6% 0.6% 0.6% % Taxable Bonds (at market) 93.3% 93.0% 92.4% 92.5% 92.1% % Short Term and Other 6.1% 6.4% 7.0% 6.9% 7.3% Market YTM on Bond Portfolio 5.09% 4.97% 5.50% 5.70% 5.80% Book YTM on Bond Portfolio 6.70% 6.73% 6.99% 7.18% 7.17% Duration of Bond Portfolio 6.83 6.97 6.81 6.81 6.94