Moody’s Rates SAFECO Corp. Senior Debt Issue at ‘Baa1′

Moody’s Investors Service has assigned Baa1 ratings to two issues of senior unsecured debt of SAFECO Corporation and has affirmed the company’s ratings with a stable outlook.

Moody’s assigned its Baa1 rating to SAFECO Corp.’s issuance of $200 million 4.20 percent 5-year senior notes and $300 million 4.875% 7-year senior notes. Moody’s noted that it expects SAFECO will use the proceeds from the senior debt offering to repay $300 million of medium-term notes due March 15, 2003, and to call up to $200 million of medium-term notes maturing in April 2005.

Moody’s remarked that the issuance represented a draw down on SAFECO’s recently replenished universal shelf filing, of which $275 million remains after the draw down. The rating agency noted that SAFECO’s most recent universal shelf filing restored shelf capacity utilized during 2002. In Aug. 2002, SAFECO issued $375 million of 10-year senior notes, using the proceeds to repay its commercial paper borrowings and other medium-term notes. Then, in Nov. 2002, SAFECO raised $329 million through the issuance of 10.5 million new common shares, contributing $250 million into its insurance operations to support growth.

Moody’s explained that the rating affirmation and stable outlook reflect the rating agency’s view that SAFECO’s actions since 2001 – to focus on its core strengths and to re-underwrite its property-casualty business – should continue to improve operating results. This is balanced by SAFECO’s financial leverage position, which will constrain organic capital growth in the short-term.

The following ratings have been affirmed with a stable outlook:

SAFECO Corporation – senior unsecured debt at Baa1, prospective senior unsecured debt at (P)Baa1, prospective subordinated debt at (P)Baa2, prospective preferred stock at (P)Baa3;

SAFECO Capital Trust I – capital securities at Baa2;

American Economy Insurance Co. – insurance financial strength at A1;

American States Insurance Co. – insurance financial strength at A1;

American States Preferred Insurance Co. – insurance financial strength at A1;

First National Insurance Co. of America – insurance financial strength at A1;

General Insurance Co. of America – insurance financial strength at A1;

Safeco Insurance Co. of America – insurance financial strength at A1;

Safeco Insurance Co. of Illinois – insurance financial strength at A1;

Safeco National Insurance Co. – insurance financial strength at A1;

Safeco Life Insurance Co. – insurance financial strength at A1.