SAFECO Ratings Affirmed

July 19, 2002

Standard & Poor’s has assigned its preliminary triple-‘B’-plus senior debt, triple-‘B’ subordinated debt, and triple-‘B’-minus preferred stock ratings to Seattle- based SAFECO Corp.’s $900 million universal shelf registration, which was filed in May 2002.

At the same time, Standard & Poor’s affirmed its ratings on the property/casualty (P/C) and life insurance holding company and said the outlook is stable.

The shelf ratings are based on SAFECO’s strong business position as the 13thlargest P/C writer in the U.S., selling a mix of personal and commercial insurance products through a distribution channel of almost 6,500 agents. In addition, the company benefits from better strategic focus since the entrance of a new management team in 2001, as well as strong consolidated capital adequacy and improved investment strategy.

“Partially offsetting these factors are the poor operating performance of SAFECO’s P/C pool and marginal interest coverage at the holding company level since its acquisition of American States Financial Corp. in 1997. However, Standard & Poor’s expects operating performance and interest coverage to improve materially in 2002, as a reflection of significant restructuring and reunderwriting actions taken by management over the past year.”

Standard & Poor’s expects any drawdowns on the shelf to have no material impact on financial leverage. SAFECO’s financial leverage has improved in recent years, with total debt to total capital at 20.5 percent at March 31, 2002, compared with 29.2 percent at year-end 2000. In addition, total debt plus preferreds to total capital remained reasonable for the rating level at 35.5 percent at March 31, 2002.

Over the medium term, Standard & Poor’s expects financial leverage ratios to remain supportive of the rating level at current levels or lower. Standard & Poor’s expects the P/C pool’s combined ratio to be about 106 percent or better at year- end 2002, compared with 120 percent in 2001.

Combined with continued good earnings at SAFECO’s life operations, this is expected to lead the holding company to post interest coverage of at least four to five times in 2002. Consolidated capital adequacy is also expected to remain supportive of the rating level at no lower than 145 percent.

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