"What's more exciting this quarter than in prior quarters is that it's showing up in the numbers, not just in our words," he said. He was referring to the fact that a host of rating, re-underwriting and restructuring actions taken last year had reversed a $33.4 million second-quarter operating loss last year with a $46.8 million profit.

Operating income per share was 37 cents for second-quarter 2002.

One of the things SAFECO has said it would do is to evaluate the company's participation in the Lloyd's market, Mr. McGavick said, adding that the company expects to make a decision on Lloyd's during the third quarter. Mr. McGavick would not disclose the specific alternatives that he said "are still under study."

"The only thing I can tell you with certainty is that there will be some negative impact from any scenario" on third-quarter results. "This is not a very large operation and, relative to our strengthened earnings, I don't think this is something we're going to have to have very long conversations about."

"In the end, being out of Lloyd's simply improves our risk profile substantially," he said. "We want to be out of that marketplace. We don't think we understand it well enough [and] we don't think we can manage it from here," he said, adding that at the end of the day, it will likely be clear that "it was a mistake for SAFECO to have been there at all."

A business that SAFECO has continued to selectively exit from this year is the homeowners line, SAFECO executives said. Personal Lines Business Leader Michael LaRocco confirmed the company temporarily stopped writing new business in eight states, bringing the total to 10.

While SAFECO recorded second-quarter homeowners underwriting losses of $36.9 million, or a combined ratio of 119.5 for the quarter, the results were an improvement compared with $95.6 million in underwriting losses for the second quarter of 2001, or a corresponding 151.7 combined ratio.

Executives attributed the improvement in homeowners, and a portion of the company-wide improvement in the second quarter, to milder weather.

The second quarter, which is typically worse than the first quarter for p-c insurers in terms of catastrophe losses, was "average" from a catastrophe standpoint, Mr. McGavick said, explaining that "the next category of significant weather" usually experienced in the second quarter was more less severe than usual.

SAFECO's total catastrophe losses for the quarter were $65 million, including $15 million resulting from the Arizona and Colorado wildfires. The cat losses added 5.8 points to the overall company combined ratio, compared to 11 points last year. Non-catastrophe weather losses added 3.1 points in second-quarter 2002, compared to six points last year.

Overall, the company's combined ratio (on a GAAP basis) came in at 107.5 for second-quarter 2002, compared to 119.0 in last year's second quarter.

The lower level of weather losses "should not obscure the fact that every line of business was slightly ahead of our core combined ratio expectation," which excludes weather, Mr. McGavick said, highlighting an improved personal auto combined ratio during his remarks.

The core personal auto combined ratio was 99.1 excluding cats and weather, compared to 100.2 in last year's second quarter.

Aside from milder weather, Mr. McGavick said the performance of SAFECO's Life & Investments segment also contributed to putting SAFECO ahead of its plan and analysts' expectations. The segment recorded $52 million in pretax profits?the third-best quarterly result in its history.

On the p-c side, Mr. McGavick also revealed that SAFECO's expectations for the year only contemplate the benefits of rate changes, not reunderwriting efforts, for each of its product lines. As a result, improvements in underwriting results that come as a result of underwriting actions will provide more opportunities for "upside surprises," he suggested.

Describing the p-c markets as "very hard," Mr. McGavick also attributed good results overall to the fact that the markets "continue to be favorable for getting fairer prices for [SAFECO's] risks." He also pointed to the fact that the company had made good decisions on what the company's core lines and businesses would be last year.

Asked about agents' responses to SAFECO's initiatives, he noted the company's "aggressive and decisive" actions to make changes had caused agents to be "very displeased" with SAFECO last year. But the fact that the company has been actively communicating its strategies with agents, and the fact that competitors now must make similar changes has helped improve that situation.

In homeowners, in particular, he said, "we now look more middle of the road" with actions that seemed "aggressive" last year. "As opposed to a year ago, it doesn't feel nearly so lonely to be decisive," he said.

He added he believes agents appreciate that SAFECO continues "to slug it out state by state," noting that the company has made decisions to stop accepting new homeowners business in 10 states, including Texas, Florida and Tennessee, only after significant efforts to try to stay in.