A.M. Best Affirms Safeco Ratings

A.M. Best Affirms Safeco Ratings

The ratings affirmed by A.M. Best include an "A" financial strength rating as well as a "triple-B-plus" existing senior debt ratings and a "triple-B" capital securities rating. A.M. Best has also affirmed indicative ratings for the remaining $275 million under Safeco's shelf registration. All Safeco ratings now have a "stable" outlook.

In its announcement, the Oldwick, N.J.-based agency noted several positive developments taking place at the Seattle-based insurer, including the management's decisions to implement aggressive rate hikes, tighten underwriting guidelines and adopt broader market segmentation of personal auto products to price more accurately.

A.M. Best also said Safeco has been terminating unprofitable agencies to boost its bottom line.

The rating firm observed that Safeco maintains a strong operating presence in the U.S. p-c industry as the eighteenth-largest insurer when measured by net premiums written. Additionally, Safeco's financial leverage is also "reasonable" for the current rating level, A.M. Best stated.

The company also noted some negative developments. A.M. Best said these negative rating factors include adverse loss reserve development and a high expense ratio, which has been hurting Safeco's operating performances. (Last October, Safeco reported a third-quarter net loss of $28.9 million that it blamed on a previously announced boost in workers' compensation reserves by $133 million after tax and charges related to the planned sale of its life and investments business.)

A.M. Best said Safeco's primary challenge now is to produce sustainable earnings throughout the underwriting cycle while maintaining strong capitalization.