SAFECO Second-Quarter Results: Progress Toward

July 24, 2000

SAFECO has announced second-quarter net income of $29 million, or $.23 per diluted share. Operating income for the quarter, excluding realized gains from investments, was reported as $12 million or $.10 per diluted share.

“We are disappointed that we did not make more progress this quarter,” said Roger Eigsti, chairman and chief executive officer of SAFECO, a diversified financial corporation that provides a wide range of insurance, investment and business lending products. “We’ve been taking aggressive steps to improve performance, and the entire company is focused on returning SAFECO to acceptable levels of profitability,” Eigsti said. “Although our operating earnings of $.10 per diluted share are disappointing, we saw several positive signs during the second quarter.”

Results for the American States Business Insurance line improved substantially during the quarter, as did the performance of SAFECO Life & Investments’ Group Insurance line. SAFECO Property & Casualty’s underwriting loss for the second quarter improved $8 million over the first quarter despite an increase in weather-related losses of $22 million.

Two areas where performance declined during the second quarter were homeowners insurance, where SAFECO experienced large weather-related losses mainly in the Midwest, and SAFECO Commercial Insurance, where large losses — including fires, workers compensation and general liability losses — were above normal. Late last year SAFECO launched a recovery plan expected to take at least 24 months to fully implement. Elements include returning rates to adequate levels, disciplined underwriting of insurance policies, and aggressive expense management. “We’re confident that our performance will improve for the remainder of this year and next,” Eigsti said.

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