Safeco Signs Definitive Agreement to Sell Life & Investments Operations

March 15, 2004

Seattle-based Safeco Corporation announced it has entered into a definitive agreement to sell its life and investments operations to a group of investors led by White Mountains Insurance Group, Ltd., and Berkshire Hathaway Inc.

The sale includes Safeco Life & Investments’ life insurance, group insurance, annuities and mutual fund businesses. The purchase price is $1.35 billion, and could include additional proceeds based on June 30, 2004 statutory book value.

In a separate transaction also announced today, Safeco has signed a definitive agreement to sell its Talbot Financial Corporation insurance brokerage operation for $90 million to an investor group led by senior management of Talbot Financial, with financial support from Hub International Limited.

The enterprises included in the two transactions represent substantially all of the earnings generated by Safeco’s Life & Investments segment.

“These transactions retain the unique value of each operation, which is good news for employees, distributors, customers and shareholders,” said Mike McGavick, Safeco chairman and chief executive officer. “Current management will continue to run each business with the same commitment to channel distribution and customer service.”

On Sept. 29, 2003, Safeco announced its intent to sell its life and investments operations and focus more clearly on its Property and Casualty (P&C) business.

“Today’s announcements set the stage for Safeco’s future as a P&C company,” said McGavick. “With greater focus on what we do best—auto, home and small-commercial insurance—we believe we’ll create significant value in the long term, making Safeco an industry leader as measured by profit, returns to shareholders, premium growth, and customer and agent satisfaction.”

Safeco expects both transactions to close before the end of third quarter 2004. Each transaction is subject to regulatory approvals and other customary closing conditions.

Once these transactions are complete, Safeco intends to reduce the company’s debt to pre-sale ratios and return the vast majority of the remaining proceeds to shareholders in the form of a special dividend, stock repurchase or a combination of the two.

Safeco also announced it will repurchase a limited amount of its common stock under an existing stock repurchase program. Under this program, the Board of Directors previously authorized the repurchase of up to 11 million shares of Safeco’s common stock, of which approximately 2.37 million shares remain available for repurchase. Purchases will be made from time to time on the open market or in negotiated transactions.

Topics Property Casualty

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