A.M. Best Affirms Financial Strength Ratings of SAFECO's Operating Subsidiaries; Affirms Debt Ratings of SAFECO Corporation.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 4, 2002 A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength ratings of A (Excellent) of SAFECO Corporation's (Seattle) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : SAFC SAFC South Australian Film Corporation SAFC Sunderland Association Football Club SAFC Securities America Financial Corporation SAFC South Australia Film Corporation SAFC Stirling Albion Football Club (UK) ) property/casualty and life/health insurance subsidiaries. A.M. Best has also affirmed the "bbb+" and "bbb" ratings on SAFECO's existing senior debt and capital securities, respectively. The rating outlook for the property/casualty subsidiaries and debt has been changed to stable from negative. The rating outlook for the life/health subsidiaries remains stable. The ratings reflect SAFECO's solid operating presence within the property/casualty industry, solid capitalization and recently improved operating results following significant restructuring of its property/casualty operations. The restructuring included attracting a number of senior executives with proven track records and renewing the group's focus by emphasizing personal lines and small to mid-size commercial businesses following a period of unfavorable operating results. Corrective actions A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or included aggressive rate increases across most of its lines of business, tightened underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , implementation of point-of-sale underwriting automation for personal automobile business, broader market segmentation Market Segmentation A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. of personal automobile products to price more accurately and termination of unprofitable agencies. As a result, of these operational changes and milder weather, SAFECO's results improved considerably in 2002. Additionally, the ratings consider the reduced financial leverage at the holding company, which was facilitated by the sale of SAFECO Credit and transfer of debt associated with that business. Furthermore, SAFECO has restructured its debt obligations with staggered maturities staggered maturities In an investor's portfolio, bonds with differing maturity dates. For example, an investor may accumulate a $250,000 portfolio of bonds such that $10,000 face value of bonds matures each year for 25 years. to enhance financial flexibility. Improved fixed charge coverage is reflective of the recent earnings turnaround and lower interest expense. A.M. Best believes SAFECO's financial leverage (about 30% at September 30, 2002, including capital securities) is reasonable for the current ratings. SAFECO's life/health operations (SAFECO Life) remain a core business and continue to generate significant earnings while providing much-needed diversification to the organization. The ratings on the life/health subsidiaries recognize SAFECO Life's consistent operating performance, diversified product portfolio, leading position in the group excess loss, structured settlement and tax sheltered tax shelter: see tax exemption. annuity 403(b) markets, conservative management style and effective asset/liability management Asset/Liability Management A technique companies employ in coordinating the management of assets and liabilities so that an adequate return may be earned. Also known as "surplus management. . Over the last five years, SAFECO Life has generated solid earnings driven by strong operating fundamentals. A.M. Best anticipates this trend to continue in the near to medium term. Moreover, A.M. Best expects SAFECO Life's earnings will be more than sufficient to provide SAFECO Corporation with dividends for holding company purposes without impacting its capital position. SAFECO's positive rating factors are somewhat offset by the property/casualty group's unfavorable five year operating results and execution risk to produce sustainable earnings. The results were primarily driven by poor pricing and rising claims costs in personal automobile, weather-related loss events, restructuring costs and commercial lines loss reserve strengthening. However, with a significant part of SAFECO's restructuring completed, A.M. Best believes the company is well-positioned to benefit from the hardening hardening, in metallurgy, treatment of metals to increase their resistance to penetration. A metal is harder when it has small grains, which result when the metal is cooled rapidly. property/casualty market. For a list of SAFECO Corporation's current financial strength and debt ratings, please visit http://www.ambest.com/press/SAFECO2.pdf. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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