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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
4/13/00
Date of Report (Date of earliest event reported)
SAFECO CORPORATION
(Exact name of registrant as specified in Charter)
WASHINGTON 1-6563 91-0742146
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
SAFECO Plaza, Seattle, Washington 98185
(Address of principal executive officers) (Zip Code)
(206) 545-5000
(Registrant's telephone number, including area code)
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Item 5. Other Events
NEWS RELEASE
SAFECO EXPECTS QUARTERLY OPERATING EARNINGS AT $0.5 PER SHARE
SEATTLE--April 13, 2000--SAFECO Corp. (Nasdaq: SAFC) announced today that
inadequate Property & Casualty rates, continued large losses in commercial
lines, storms in Texas, and the dramatic volatility in the stock markets will
adversely affect the company's first quarter results. Both Property & Casualty
and Life & Investments operations performed below expectations during the
quarter.
"Although we began aggressively increasing our Property & Casualty insurance
prices for all lines at the beginning of this year," said President and Chief
Operating Officer Boh Dickey, "it takes some time for these increases to be put
into place and to reflect themselves in our earnings." The tornado in Forth
Worth, Texas, on March 28 and several hail events, also in Texas last month,
are expected to add $20 million to the first quarter underwriting loss. In
addition, large losses in the small business commercial line were significant
in February and March. Based on this, the underwriting loss for the quarter is
expected to be in the $135 million range. "After reducing our underwriting loss
from $139 million for the third quarter of 1999 to $114 million for the fourth
quarter, this is a very disappointing result," said Dickey.
In addition, the company expects the earnings from its Life & Investments
operations to be below the fourth quarter of 1999 pretax earnings of $50
million. This is primarily due to the dramatic volatility of the stock markets
during the quarter and the impact of this volatility on its Indexed Annuity
product line. "The S&P 500 Index, for example, changed by more than 3 percent
in one day three times during the quarter. This only happened once in all of
1999," Dickey said.
If the S&P 500 Index changes more than 2-3 percent per day, it has a negative
effect on hedging results. This resulted in a loss of $3 million for this
product line, compared with a profit of $2 million in the fourth quarter of
1999. The Life & Investments operations also experienced a modest increase in
losses from group insurance.
SAFECO expects its first quarter operating income to be about $.05 per share.
"Although the property and casualty industry, in general, continues to report
significant underwriting losses due to inadequate rates, our results are
certainly not acceptable," said Chairman and Chief Executive Officer Roger
Eigsti.
"Our employees are diligent and working extremely hard on many initiatives to
restore profitability. These include an ongoing review of risk selection in the
small business commercial operations and an increased emphasis on obtaining
proper rates for risks being insured in all lines of our Property & Casualty
and Life & Investments group medical businesses. We realize that this may slow
our growth, but believe it is a worthwhile trade-off to improve results. All
operating units, including Property & Casualty, now report to Boh Dickey,
president and chief operating officer, who will lead the results improvement
effort. We remain confident that we will show significant progress during the
last half of 2000 and throughout 2001," said Eigsti.
The company expects to release its earnings for the first quarter on April 24,
2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAFECO CORPORATION
Dated: April 14, 2000 By: /s/ H. Paul Lowber
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H. Paul Lowber
Vice President, Controller and
Chief Accounting Officer
