S&P Lowers SAFECO Ratings, McGavick Responds

March 29, 2001

On March 28, Standard & Poor’s removed the ratings of SAFECO Corp. and related entities from CreditWatch and lowered SAFECO’s counterparty credit rating and senior unsecured debt rating from “A-” to “BBB+.”

The ratings had been on CreditWatch with negative implications since Jan. 12, 2001, when SAFECO announced fourth-quarter earnings well below expectations for the fifth consecutive quarter.

In February, A.M. Best Co. downgraded the financial strength ratings of SAFECO Corp.’s property/casualty and life/health insurance companies to “A” from “A+” and its senior debt ratings to “bbb+” from “a”. A.M. Best also placed the financial strength and debt ratings of SAFECO Corp. under review with negative implications pending further discussions with management and a detailed review of the property/casualty loss reserve position.

S&P stated that its latest ratings actions reflect the belief that SAFECO’s profitability in the near and medium terms will continue to fall short of expectations compared with the ratings and its relevant peer group. However, S&P expressed optimism that the intended sale of SAFECO Credit Co. could be “favorable…as that business accounts for almost half of the corporation’s $3.1-billion debt and debt-like obligations.”

SAFECO President and CEO Mike McGavick described the latest ratings actions as “disappointing but not unexpected.” “SAFECO’s financial ratings – and our ability to pay claims – remain strong,” McGavick stated. “Yet this underscores why we’re taking aggressive actions to quickly turn around our financial performance. We are focusing on making SAFECO a stronger company over the long term. We will continue making tough decisions to return SAFECO to the ranks of the top-performing companies in our industry.”

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