Safeco to Spin Off Life Unit
In a bid to focus all of its attention on property and casualty insurance, Safeco said last week that it intends to sell its Life & Investments unit.
Safeco also said it hopes to reduce expenses by $75 million by the end of 2004, saying its expense structure exceeds that of other property casualty insurers.
The company hopes that going forward it can market its casualty and property products through a common network of independent distributors supported by a common sales, service and technology platform.
The focus on property and casualty business will include auto, homeowners and small commercial insurance.
"Safeco's best course for the future is to have a strong property and casualty focus, delivering nearly all of our products over the same sales and service platform, and through a common network of independent distributors," said Mike McGavick, chairman and CEO of Safeco.
Goldman Sachs has been retained to help find a buyer for the Life & Investments unit. Analysts at Sandler O'Neill estimate the transaction could yield about $1.7 billion, about $400 million of which would go toward debt reduction.
The company said that most of the proceeds from the sale will be returned to shareholders in the form of a special
dividend, a stock repurchase plan, or a combination of the two. Some of the funds will be used to reduce Safeco's debt to a level appropriate with the company's new size and a "small amount" may be retained to support ongoing business needs.
Safeco is the parent of Safeco Financial Institutions Solutions, which provides lender-placed hazard insurance and other products and services for the mortgage industry.
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