A.M. Best Assigns Debt Rating to SAFECO’s New Senior Notes

August 26, 2002

A.M. Best Co. has assigned a “bbb+” rating to the $375 million 7.25 percent 10-year senior unsecured notes issued by Seattle-based SAFECO.

The securities were issued under SAFECO’s $900 million shelf registration previously filed with the Securities and Exchange Commission. SAFECO’s existing debt ratings have also been affirmed while the financial strength ratings on the group’s property/casualty and life/health companies are unaffected.

The proceeds from the senior debt will be used primarily to repay commercial paper and the current portion of certain medium-term notes. The issuance has positive implications for SAFECO, lengthening its debt maturity profile, decreasing interest expense and eliminating rollover risk by reducing dependence on short-term borrowings. SAFECO’s debt to capital ratio (including capital securities) at June 30, 2002, was moderate at about 34 percent. A.M. Best anticipates that SAFECO’s overall financial leverage will temper towards the low end of the 30-35 percent range over time.

The strategies and action plans recently implemented by management have strengthened SAFECO’s balance sheet, fostered the introduction of new products and related technology and enabled its property/casualty operations to report a pre-tax operating profit for the first two quarters of 2002.

The strong, steady performance of SAFECO Life & Investments continues to drive the group’s earnings and will be a significant source of dividends to service debt at the holding company. Prospective fixed charge coverage will likely be in the range of 4-6 times.

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