The company said earnings were 50 cents a share for the first quarter of 2002 compared to a loss of $6.91 a share for the same period of 2001.

"We turned in our best quarter in nearly three years," said Mr. McGavick in a statement. "Our recovery remains on track."

The company has been restructuring since last year when more than 900 jobs were cut and more than 1,000 agent contracts were canceled, Mr. McGavick said.

The company does not expect to see any additional layoffs, he said, as it continues to restructure.

Part of this restructuring includes increases in auto and homeowners pricing. The company has instituted a new 15 tier-rating program, which has been approved in three states, said Mr. McGavick.

The new program is expected to increase rates on average by between seven and eight percent. Under the program, he said, some customers would see their rates decline as those in the higher tier pay higher premium for higher risk.

He said should the company lose the higher tier premium customers it would still benefit from having more favorable risks.

"This is the kind of sophistication that we see rates going in the future," Mr. McGavick explained. "Some will be up, some will be down, but we will be getting the type of rating we need."

Homeowner's rates are expected to rise by as much as 14 percent, Mr. McGavick said.

In its "drive to adequacy" rates on commercial lines are up 10 to 20 percent for small commercial and 30 percent or more for large commercial accounts and higher on workers' compensation depending on the state, the company's head said.

He called the California workers' comp market "a ticking time bomb" and Safeco is continuing to reduce its underwriting there.

Safeco is working to achieve a combined loss ratio of less than 100 percent in all lines, which Mr. McGavick said the company should reach next year. Its auto operations reported a combined ratio of 104.5 and homeowners 110 percent.