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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 18, 2006 12:00 AM (EDT)
A.M. Best Co.has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a+" of the Safeco Insurance Companies (Safeco) (Seattle, WA). A.M. Best has also affirmed the debt ratings of "bbb+" and "bbb" of Safeco Corporation's [NASDAQ: SAFC] (Seattle, WA) existing senior debt and capital securities, respectively. Concurrently, A.M. Best has affirmed the ICR of "bbb+" of Safeco Corporation. The outlook for all ratings is positive. (See link below for a detailed list of the ratings.)
The ratings reflect Safeco's continued solid operating performance, excellent capitalization and strong presence within the property/casualty industry. These positive rating factors are somewhat offset by the group's historical adverse loss reserve development, elevated underwriting leverage ratios and its high expense ratio. The rating outlook is based on Safeco's strong operating focus and the financial support of its parent, Safeco Corporation.
The positive rating factors are derived from Safeco's renewed focus on personal and small commercial lines through restructured operations. The group's operating results have benefited from numerous profitability initiatives, stricter underwriting guidelines, the implementation of point-of-sale underwriting automation, broader market segmentation of personal automobile products and the termination of unprofitable agencies. As a result of the operational changes and firm market conditions, operating earnings have improved in recent years. Safeco maintains a strong operating presence within the U. S. property/casualty industry as one of the top 20 writers as measured by net premiums written of $5.8 billion in 2005.
Also, the financial leverage of Safeco Corporation is reasonable for the current rating level. Improved fixed charge coverage is reflective of the earnings improvement in recent years and lower interest expense.
Negative rating factors, which have tempered the group's operating performance, include the group's high expense ratio and historical adverse loss reserve development on workers' compensation and asbestos claims. In 2004 and 2005, however, adverse development on these claims was more than offset, primarily by favorable development in personal and commercial auto lines. The group also maintains moderate gross exposure to earthquakes, particularly in California. Nonetheless, the group's net exposure is within manageable levels given its capital position and reinsurance protection.
For a complete list of Safeco Corporation's FSRs, ICRs and debt ratings, please visit Safeco.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.