Fitch Ratings Affirms SAFECO's Ratings.Business Editors CHICAGO--(BUSINESS WIRE)--Feb. 11, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. 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 'AA-' insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. financial strength ratings of SAFECO Life Insurance Company (SAFECO Life) and the SAFECO Property/Casualty Group (SAFECO P/C). Fitch fitch: see polecat. has also affirmed its 'A-' long-term and senior debt ratings on SAFECO Corporation (SAFECO) and its 'BBB+' rating on SAFECO Capital Trust I's (SAFECO Capital) capital securities. In addition, Fitch has assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. 'A-'ratings to SAFECO's 4.20% notes due 2008 and to SAFECO's 4.875% notes due 2010. The Rating Outlook for all of the ratings is Stable. Fitch's affirmation A solemn and formal declaration of the truth of a statement, such as an Affidavit or the actual or prospective testimony of a witness or a party that takes the place of an oath. An affirmation is also used when a person cannot take an oath because of religious convictions. reflects improvements in SAFECO P/C's 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. results, the organization's good competitive positions in the property/casualty market and in select life insurance markets, diverse earnings, and solid balance sheet. Partially offsetting these positives is SAFECO P/C's 110% run-rate homeowners line combined ratio, which Fitch views as high given the line's short duration reserves and the current relatively low yielding investment environment. Additionally, Fitch believes that competitive pressures and difficult capital market conditions could adversely impact fees and spreads in several of SAFECO Life's key business lines going forward. Starting in 2001 and continuing through 2002, SAFECO P/C took several steps to improve its profitability, including re-underwriting portions of its book of business, implementing rate increases, and exiting specific lines and scaling back growth plans in specific geographic areas. The company's operating profitability improved dramatically in 2002 and while comparatively low catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses and hard market conditions had a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact, Fitch believes that SAFECO has made significant improvements in its underwriting profile. Going forward, Fitch anticipates that SAFECO P/C will continue to show improvements in underwriting profitability. SAFECO's 2002 net income before net realized capital gains and losses was $248 million and SAFECO P/C's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis combined ratio for the year was 105.3%. In 2001, SAFECO reported a net loss before net realized capital gains of $1.1 billion, including $1.1 billion of after-tax charges, and SAFECO P/C's combined ratio was 118.7%. For the years 1997-2000 SAFECO's net income before net realized capital gains averaged $210 million per year. SAFECO P/C is among the 20 largest property/casualty groups in the U.S. and the company has strong market shares in personal auto and homeowners insurance and is a key product provider to independent insurance agents. SAFECO Life is among the 50 largest life insurance groups and focuses on the group medical excess of loss market and 403(b) market. While these markets are comparatively small, SAFECO Life is well positioned in both. Fitch believes that SAFECO P/C and SAFECO Life provide SAFECO with diverse and relatively uncorrelated earnings streams. Benefits from this diversity were evident in 2000 and 2001 when SAFECO P/C's earnings suffered dramatically while SAFECO Life's earnings were strong. SAFECO Life's rating benefits from Fitch's view that the company is a core part of the SAFECO organization. Fitch calculates SAFECO's year-end 2002 debt plus preferred capital securities to capital ratio on an equity-credit adjusted basis, at approximately 26%. SAFECO recently issued $200 million of five year and $300 million of seven year senior notes. Fitch's expectation is that the company will use the proceeds from the issue to pay off $300 million of existing senior debt that matures in March 2003 and to call up to $200 million of medium-term notes Medium-term note (MTN) A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc. in April 2003. Fitch estimates SAFECO's run-rate operating earnings-based interest and preferred dividend coverage Preferred dividend coverage Net income after interest and taxes (before common stock dividends) divided by preferred stock dividends. preferred dividend coverage at 3-4x. Entity/Issue/Type Action Rating/Outlook SAFECO Life Insurance Co. -- Insurer Financial Strength Affirmed 'AA-'/Stable. SAFECO Corporation -- 4.20% notes due 2008 Assigned 'A-'/Stable; -- 4.875% notes due 2010 Assigned 'A-'/Stable; -- Long-term Rating Affirmed 'A-'/Stable. SAFECO Capital Trust I Affirmed 'BBB+'/Stable. SAFECO Property/Casualty Group -- Insurer Financial Strength Affirmed 'AA-'/Stable. SAFECO Property/Casualty Group includes SAFECO Insurance Company of America, SAFECO Insurance Company of Illinois, American States Insurance Company, General American Gen·er·al American n. The speech of native speakers of American English that many consider to be typical of the United States, noted for its exclusion of phonological forms readily recognized as regional or limited to particular social groups and for Insurance Company, American Economy Insurance Company, First National Insurance Company, SAFECO Lloyds Insurance Company, SAFECO Insurance Company of Oregon, American States Insurance Company of Texas, Safeco National Insurance Company, American States Preferred Insurance Company, SAFECO Surplus Lines Company, American States Lloyds Insurance Company, Insurance Company of Illinois, SAFECO Insurance Company of Pennsylvania. |
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