Management said that an unusual accounting requirement related to the upcoming sale had skewed the results it was reporting.

Commenting on his company's financial numbers, Mike McGavick, Safeco's chief executive officer, stressed that despite the net loss, the insurer's core units posted strong earnings.

Mr. McGavick commented, though, that raging wildfires which have consumed hundreds of thousands of acres in Southern California this week will have some impact on Safeco's homeowners line for fourth-quarter results.

Speaking at a conference call this morning, Mr. McGavick said, "It's an interesting time at Safeco. We are reporting what we think are pretty impressive core operating results. But we also have a couple of unusual items in the quarter that give it some complexity."

Safeco is now also in the midst of dealing with individuals who are affected by job cuts announced last month, Mr. McGavick noted. "It's a very challenging period for the company. But we take heart that fundamentals of the company are showing such rapid and tremendous improvements. The future bodes well for Safeco as a profitable, fast-growing property-casualty company."

Discussing the earnings numbers, he noted that while the company had a net loss of $28.9 million for the third quarter, "part of that were realized losses on investments, which totaled $62.5 million." The company recorded total after-tax investment impairments of $87 million, with $80.5 million for its Life & Investments unit.

Mr. McGavick said impairments for Life & Investments are related to accounting requirement that the company take as a result of its decision to sell the L&I business.

While Safeco plans to hold onto these investments, these impairments aren't expected to recover in value before the unit is sold. And accounting rules require that impairments of unrealized losses be recognized if the business unit is up for sale.

"We view that as a truly unusual accounting-related item. The way we look at it, the $80.5 million in impairments for Life & Investments is an accounting peculiarity," Mr. McGavick argued.

Mr. McGavick also pointed out that the insurer's operating earnings, excluding realized losses, were $33.6 million for the third quarter, which is lower than $67.4 million posted for the year-ago period, but "when you consider that our operating earnings include the workers' comp reserve charge, these are very strong results. We are pretty pleased with the performance for the quarter."

Further commenting on the workers' comp reserve increase, he added, "we previously announced a reserve strengthening of $133 million after-tax, $205 million pretax."

"We would encourage you to do the math in whatever way you think is appropriate, but we are very comfortable where this has taken our reserve position to," Mr. McGavick said. He also commented that the insurer did not take into account "any of the positive actions that are now happening in California and elsewhere" when it strengthened its workers' comp reserve.

"So we are feeling very comfortable with our reserve position," he said. "This reserve strengthening has certainly, for any imaginable future, put the reserve issue behind us."

Including the reserve charge, the overall p-c combined ratio for the quarter was 108.6. But without the reserve charge, the combined ratio for the company was 92.2. "This is a terrific result," Mr. McGavick added.

Safeco also saw its net written premium increase by 11.2 percent, led by a 15.2 percent rise in auto and a 13.1 percent jump in business insurance.

Personal auto, the insurer's largest product line, generated an underwriting profit of $35.4 million for the third quarter. But the company's business insurance unit posted a pretax underwriting loss of $195.3 million, hurt by workers' comp reserve hike.

Additionally, net written premiums in homeowners line dropped by 2.2 percent compared to last year, as policies in force declined 9.3 percent. It still delivered strong results, though, with a quarterly underwriting profit of $32.1 million pretax. "But that is mainly due to light catastrophes in the third quarter," Mr. McGavick commented. "As fires burn in California, it is obvious that there will be some catastrophe impact in the fourth quarter that was unanticipated."

Safeco has a number of subsidiaries offering a wide range of insurance products. Its Safeco Insurance Co. of America and First National Insurance Co. of America provide personal and commercial insurance, including auto, homeowners, fire, multi-peril and workers' compensation.