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Safeco Corp · PREM14A · For 5/16/08

Filed On 5/23/08 5:27pm ET   ·   SEC File 1-06563   ·   Accession Number 1341004-8-1026

  in   Show  and 
  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 5/23/08  Safeco Corp                       PREM14A     5/16/08    1:371                                    Skadden/FA

Preliminary Proxy Solicitation Material -- Merger or Acquisition   ·   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     PREM14A Proxy Statement                             HTML  1,705K

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  prem14a.htm  

 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
 
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
 
Check the appropriate box:
 
x
     Preliminary Proxy Statement
¨
     Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨
     Definitive Proxy Statement
¨
     Definitive Additional Materials
¨
     Soliciting Material Under Rule 14a-12
 
SAFECO CORPORATION
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
   
  ¨ 
   No fee required.
   
  x 
   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
   
 
    (1)
   Title of each class of securities to which transaction applies:
     
 
   Common Stock, no par value, of Safeco Corporation ("Safeco common stock").
 
  
    (2) 
Aggregate number of securities to which transaction applies:
     
 
  92,153,331 shares of Safeco common stock (Including 2,222,839 shares of Safeco common stock reserved for issuance upon exercise or payment of outstanding stock options or restricted stock rights).
 
 
   (3) 
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
     
 
In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was calculated by multiplying 0.0000393 by the sum of: (a) the product of 89,930,492 shares of Safeco common stock and the per share amount of $68.25 in cash per share of Safeco common stock, (b) the product of 1,209,201 shares of Safeco common stock underlying options and $20.86 (the difference between $68.25 and $47.39, the weighted average exercise price per share of Safeco common stock underlying the options), and (c) the product of 1,013,638 restricted stock rights and $68.25.
 
 
    (4) 
   Proposed maximum aggregate value of transaction:
   
 
    $6,232,160,805.36
 
 
    (5)
   Total fee paid:
     
 
    $244,923.92
 
¨
   Fee paid previously with preliminary materials.


 
 
 
 
 
 
 
 
 


¨
   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
     
 
   (1)
   Amount Previously Paid:
     
 
 
   (2)
   Form, Schedule or Registration Statement No.:
     
 
 
   (3)
   Filing Party:
     
 
 
   (4)
   Date Filed:
   


 
 
 
 
 
 
 
 
 

Picture -- prem14a0

2008 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
_________________

  
Seattle, Washington
Dear Shareholder:
[●], 2008           

You are invited to attend the annual meeting of the shareholders of Safeco Corporation. The annual meeting will be held on [●], [●], 2008 at [●] Pacific Time, at: the Safeco Center, Magnolia Room, 1st Floor.  The street address for Safeco Center is 1191 Second Avenue, Seattle, Washington 98101.  The annual meeting was postponed from its originally scheduled date of Wednesday, May 7, 2008 and the record date for the annual meeting was changed to [●], 2008.
 
At the annual meeting, you will be asked to approve an agreement and plan of merger that Safeco entered into on April 23, 2008, providing for the merger of a wholly owned subsidiary of Liberty Mutual Insurance Company with and into Safeco, with Safeco continuing as the surviving corporation and a subsidiary of Liberty Mutual.  Liberty Mutual is a diversified global insurer and the sixth largest property and casualty insurance company in the United States based on 2007 direct written premium.  If the merger is completed, each share of Safeco common stock issued and outstanding immediately prior to the merger (other than shares owned by Safeco and its subsidiaries and Liberty Mutual and its subsidiaries, other than shares held in investment portfolios, and shares for which dissenters' rights have been properly exercised under Washington law) will be converted into the right to receive $68.25 in cash, without interest and less any applicable withholding taxes, as more fully described in the accompanying proxy statement.  The $68.25 per share being paid in the merger represents a premium of approximately 53% over the average closing price of Safeco shares for the 30-day trading period prior to the announcement of the merger.
 
Safeco cannot complete the merger unless the conditions to closing are satisfied, including obtaining the approval of our shareholders and the receipt of specified governmental and regulatory approvals.
 
At the annual meeting, you will also be asked to consider and vote on the following matters, which are described in more detail in this proxy statement:
 
 
·
Election of five directors, four to serve a term of three years and one to serve a term of two years.
     
 
·
Ratification of Ernst & Young LLP's appointment as our independent registered public accounting firm.
   
 
 
·
Adjournment or postponement of the annual meeting, if necessary or appropriate, to solicit additional proxies to approve the merger agreement.
     
 
·
Any other business that may properly come before the annual meeting.
     
Our board of directors has unanimously determined that the merger agreement and the merger are advisable and in the best interests of Safeco and its shareholders, and has unanimously adopted the merger agreement and approved the transactions contemplated by the merger agreement.  The Safeco board of directors unanimously recommends that Safeco shareholders vote "FOR" the proposal to approve the merger agreement.
 
The attached notice of the annual meeting and proxy statement explain the proposed merger and provide specific information concerning the annual meeting.  Please read this proxy statement (including the annexes)
 

 
 
 
 
 
 
 
 
 

carefully to learn more about these and related matters.  Our annual report for 2007 is also available online to give you more information about our progress.
 
Your vote is important.  Whether or not you plan to attend the annual meeting, you should read the proxy statement (including the annexes) and follow the instructions on your proxy card to vote by Internet, telephone or mail to ensure that your shares will be represented at the annual meeting.  If your shares are held in an account at a brokerage firm, bank or other nominee, you should instruct your broker, bank or other nominee how to vote your shares using the separate voting instruction form furnished by your broker, bank or other nominee.  If you previously submitted a proxy for the annual meeting of Safeco shareholders originally scheduled to be held on May 7, 2008, Safeco will not vote such proxy at the annual meeting of Safeco shareholders, as rescheduled to be held on [●], 2008.  Therefore, if you previously submitted a proxy for the annual meeting to be held on May 7, 2008, and you desire to vote your shares of Safeco common stock with respect to any or all of the proposals to be considered at the [●], 2008 annual meeting, we urge you to vote your shares again by marking, signing, dating and returning the attached proxy card or through the Internet or by telephone.  The enclosed proxy card contains instructions regarding voting.  Please vote your shares before the meeting, even if you plan to attend.  Thank you.
 
   
 
Sincerely,
 
 
Picture -- prem14a1
 
Paula Rosput Reynolds
Chair, President and Chief Executive Officer


This proxy statement is dated [●], 2008 and is first being mailed, along with the attached proxy card,
to Safeco shareholders on or about [●], 2008.

This transaction has not been approved or disapproved by the Securities and Exchange Commission, nor has the Securities and Exchange Commission passed upon the fairness or merits of this transaction or the accuracy or adequacy of the information contained in this proxy statement.  Any representation to the contrary is unlawful.




 
 
 
 
 
2
 
 
 

SAFECO CORPORATION

Notice of Annual Meeting of Shareholders

When:
[●], Pacific Time, [●], 2008
   
Where:
Safeco Center
Magnolia Room, 1st Floor
1191 Second Avenue
Seattle, Washington  98101
 
Record Date:   [●], 2008
   
Purposes:
1.
To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of April 23, 2008, by and among Liberty Mutual Insurance Company, Big Apple Merger Corporation and Safeco Corporation.
   
2.  
To elect five directors, four to serve a term of three years and one to serve a term of two years.
   
3.
To ratify Ernst & Young LLP's appointment as Safeco's independent registered public accounting firm.
   
4.
To adjourn or postpone the annual meeting, if necessary or appropriate, to solicit additional proxies for the approval of the merger agreement.
   
5.
To transact any other business that may properly come before the annual meeting or at any adjournment or postponement of the annual meeting.

The Safeco board of directors has unanimously determined that the merger agreement and the merger are advisable and in the best interests of Safeco and its shareholders, and has unanimously adopted the merger agreement and approved the transactions contemplated by the merger agreement.  The Safeco board of directors unanimously recommends that Safeco shareholders vote "FOR" the proposal to approve the merger agreement.

In addition, the Safeco Board of Directors urges you to vote "FOR" items 2, 3, and 4 above.

Holders of Safeco common stock are entitled to assert dissenters' rights if they comply with the procedures and requirements under chapter 23B.13 of the Washington Business Corporation Act, a copy of which is attached to the accompanying proxy statement as Annex C.
 
More information on all of these matters is included in the accompanying proxy statement.  You are entitled to vote on these matters and to attend the annual meeting if you held Safeco shares as of the close of business on our record date, [●], 2008.
 
 
By Order of the Safeco Board of Directors
 
 
  Picture -- prem14a2
 
Arthur Chong
 
Executive Vice President and Chief Legal Officer
_____________________________________________________________________________

Voting Instructions – YOUR VOTE IS IMPORTANT!

 
 
 
 
 
 
 
 
 


Whether or not you plan to attend the annual meeting, you should read the proxy statement (including the annexes) and follow the instructions on your proxy card to vote by Internet, telephone or mail to ensure that your shares will be represented at the annual meeting.  This helps ensure the presence of a quorum at our meeting so we can transact business. When you vote your shares promptly, you also help save costs we might otherwise incur for additional proxy solicitation.
 
If you previously submitted a proxy for the annual meeting of Safeco shareholders originally scheduled to be held on May 7, 2008, Safeco will not vote such proxy at the annual meeting of Safeco shareholders, as rescheduled to be held on [●], 2008.  Therefore, if you previously submitted a proxy for the annual meeting to be held on May 7, 2008, and you desire to vote your shares of Safeco common stock with respect to any or all of the proposals to be considered at the [●], 2008 annual meeting, we urge you to vote your shares again by marking, signing, dating and returning the attached proxy card or through the Internet or by telephone.
 
A list of the Safeco shareholders eligible to vote at the annual meeting will be made available for inspection in accordance with section 23B.07.200 of the Washington Business Corporation Act beginning [●], 2008, ten days before the scheduled date for the annual meeting.
 
Voting through the Internet or by telephone is fast and convenient and saves postage and proxy tabulation costs. You may also vote your shares by mail, using the printed proxy card attached to the accompanying proxy statement.  Voting now by Internet, telephone or mail will not prevent you from changing your vote later.
 
 
HOW TO VOTE BY INTERNET
24 hours a day – 7 days a week
  
HOW TO VOTE BY TELEPHONE
Toll-free, 24 hours a day – 7 days a week
1.
Read this proxy statement.
1.
Read this proxy statement.
2.
If you are a registered shareholder, locate your control number on your  proxy card.  Go to the following website:  http://www.eproxy.com/saf  then follow the instructions.
2.
If you are a registered shareholder, locate your control number on your proxy card.  Call toll-free 1-866-580-9477 and follow the instructions given for casting your vote.
3.
If you are an employee participant in the Safeco Stock Ownership Fund within our 401(k) Plan, locate your control number in the e-mail you received from BNY Mellon Shareowner Services.  Go to the following website:  http://www.eproxy.com/saf then follow the instructions.  If you are a non-employee participant in this fund, just follow the instruction in Step 2 above.
3.
If you are an employee participant in the Safeco Stock Ownership Fund within our 401(k) Plan, locate your control number in the e-mail you received from BNY Mellon Shareowner Services.  Call toll-free 1-866-580-9477 and follow the instructions given for casting your vote.  If you are a non-employee participant in this fund, just follow the instruction in Step 2 above.
4.
If you're a beneficial shareholder (you hold your shares through a bank, broker or other institution), follow the instructions on your voting instruction form.
4.
If you're a beneficial shareholder (you hold your shares through a bank, broker or other institution), follow the instructions on your voting instruction form.

PLEASE DO NOT SUBMIT A PAPER PROXY CARD OR VOTING INSTRUCTION FORM IF YOU ARE VOTING THROUGH THE INTERNET OR BY TELEPHONE.


 
 
 
 
 
 
 
 
 

SAFECO CORPORATION
2008 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS

TABLE OF CONTENTS

 
Section
Page
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE ANNUAL MEETING
Q-1
 
SUMMARY TERM SHEET
1
 
The Companies
1
 
Annual Meeting of Safeco Shareholders
1
 
Purposes and Effects of the Merger; Consideration
3
 
Effects of the Merger Not Being Completed
3
 
What You Will Receive in the Merger
3
 
Safeco Stock Options and Restricted Stock Rights
3
 
Safeco Agency Stock Purchase Plan
4
 
Material U.S. Federal Income Tax Consequences
4
 
Recommendation of the Safeco Board of Directors
4
 
Opinion of Financial Advisor
4
 
Merger Agreement
5
 
No Solicitation
5
 
Conditions to Completion of the Merger
5
 
Termination of the Merger Agreement
6
 
Termination Fee
7
 
Interests of Safeco's Directors and Executive Officers in the Merger
8
 
Merger Financing
8
 
Dissenters' Rights
8
 
Market Price Data and Dividend Information
8
FORWARD-LOOKING INFORMATION
9
MARKET PRICE DATA AND DIVIDEND INFORMATION
10
THE ANNUAL MEETING
11
 
Date, Time and Place of the Annual Meeting
11
 
Purpose of the Annual Meeting
11
 
Record Date for the Annual Meeting
11
 
Shares Entitled to Vote
11
 
Quorum Requirement
11
 
Adjournments and Postponements
12
 
Required Vote
12
 
Treatment of Abstentions
12
 
Treatment of Broker Non-Votes
12
 
Voting by Safeco's Directors and Executive Officers
13
 
Voting of Proxies
13
 
Proxies without Instructions.
13
 
Revocability of Proxies
14


 
 
 
 
 
 
 
 
 


 
Solicitation of Proxies
14
 
Other Business
14
THE COMPANIES
15
 
Safeco Corporation
15
 
Liberty Mutual Insurance Company
15
 
Big Apple Merger Corporation
15
THE MERGER
16
 
Background of the Merger
16
 
Purposes and Effects of the Merger; Consideration
29
 
Effects of the Merger Not Being Completed
30
 
Recommendation of the Safeco Board of Directors and Its Reasons for the Merger
30
 
Opinion of Financial Advisor
33
 
Interests of Safeco's Directors and Executive Officers in the Merger
41
 
Directors' and Officers' Indemnification and Insurance
45
 
Employee Matters
46
 
Safeco Agency Stock Purchase Plan
46
 
Delisting and Deregistration of Safeco Common Stock
46
 
Certain Relationships Between Safeco and Liberty Mutual
47
 
Dissenters' Rights
47
 
Merger Financing; Sources of Funds
51
 
Material U.S.  Federal Income Tax Consequences
51
 
Regulatory Matters
53
 
Litigation Relating to the Merger
54
THE MERGER AGREEMENT
55
 
Structure of the Merger
55
 
Completion and Effectiveness of the Merger
55
 
Merger Consideration
56
 
Treatment of Stock Options and Restricted Stock Rights
56
 
Exchange of Stock Certificates
56
 
Corporate Governance Matters
57
 
Representations and Warranties
58
 
Covenants Relating to Conduct of Business
61
 
Reasonable Best Efforts
64
 
No Solicitation by Safeco
65
 
Recommendation of the Safeco Board of Directors
66
 
Safeco Shareholders Meeting
67
 
Employee Matters
68
 
Indemnification and Insurance
69
 
Charitable Contributions
70
 
"Safeco" Trademark and Branding
70
 
Principal Executive Offices of the Surviving Corporation
70
 
Other Covenants and Agreements
71
 
Conditions to the Completion of the Merger
71
 
Expenses
72
 
Termination of the Merger Agreement
72
 
Termination Fee
74


 
 
 
 
 
ii
 
 
 


 
Governing Law
75
 
Amendments, Extensions and Waivers of the Merger Agreement; No Third Party Beneficiaries
75
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
76
 
Directors and Executive Officers
76
 
Principal Holders of Safeco Common Stock
77
OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
78
PROPOSAL 2:  ELECTION OF DIRECTORS
78
 
2008 Nominees for Director
78
 
Continuing Directors
79
BOARD ATTENDANCE AND BOARD COMMITTEES
81
CORPORATE GOVERNANCE PRACTICES
82
NOMINATING/GOVERNANCE COMMITTEE AND DIRECTOR NOMINATIONS
86
AUDIT COMMITTEE REPORT
88
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S FEES AND SERVICES
91
COMPENSATION COMMITTEE REPORT
92
COMPENSATION OF DIRECTORS
124
COMPENSATION COMMITTEE
127
PROPOSAL 3:  RATIFICATION OF APPOINTMENT OF  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
131
PROPOSAL 4:  ADJOURNMENT OR POSTPONEMENT OF THE ANNUAL MEETING FOR THE PURPOSE OF OBTAINING ADDITIONAL VOTES
132
MULTIPLE SHAREHOLDERS SHARING THE SAME ADDRESS
133
SUBMISSION OF SHAREHOLDERS PROPOSALS
133
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
133
WHERE YOU CAN FIND MORE INFORMATION
133
LIST OF SAFECO SHAREHOLDERS
135
DIRECTIONS TO THE ANNUAL MEETING
136

ANNEX A – Agreement and Plan of Merger, dated as of April 23, 2008
A-1
ANNEX B – Opinion of Morgan Stanley & Co. Incorporated
B-1
ANNEX C – Chapter 23B.13 of the Washington Business Corporation Act
C-1
 
 
 
 
 
 
 
iii
 
 
 


QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE ANNUAL MEETING
 
The following are some questions that you may have regarding the proposed merger and the other matters being considered at the annual meeting and brief answers to those questions.  Safeco Corporation urges you to carefully read the remainder of this proxy statement because the information in this section does not provide all the information that might be important to you with respect to the proposed merger and the other matters being considered at the annual meeting.  Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this proxy statement.  Unless stated otherwise or unless the context otherwise requires, all references in this proxy statement to Safeco, we, our, ours and us are to Safeco Corporation, a Washington corporation, all references to Liberty Mutual are to Liberty Mutual Insurance Company, a Massachusetts stock insurance company, all references to Merger Sub are to Big Apple Merger Corporation, a Washington corporation and a wholly owned subsidiary of Liberty Mutual, and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of April 23, 2008, by and among Liberty Mutual, Merger Sub and Safeco, a copy of which is attached as Annex A to this proxy statement.

Q:
Why was the 2008 annual meeting of Safeco shareholders postponed from May 7, 2008?
 
 
A:
In light of Safeco's entering into a merger agreement, by and among Liberty Mutual, Merger Sub and Safeco, the Safeco board of directors determined to postpone the 2008 annual meeting of Safeco shareholders originally scheduled to be held on May 7, 2008 to [●], 2008, which meeting, both as of its original date and its rescheduled date, is referred to in this proxy statement as the annual meeting.
   
Q:
What matters will be considered at the annual meeting?
   
A:
At the annual meeting, Safeco shareholders will be asked to approve the merger agreement pursuant to which Merger Sub will merge with and into Safeco, with Safeco continuing as the surviving corporation and a subsidiary of Liberty Mutual.  At the annual meeting, Safeco shareholders will also be asked to consider and vote upon the election of five directors, four to serve a term of three years and one to serve a term of two years, the ratification of Ernst & Young LLP's appointment as Safeco's independent registered public accounting firm, the adjournment or postponement of the annual meeting, if necessary or appropriate, to solicit additional proxies for the approval of the merger agreement and the transaction of any other business that may properly come before the annual meeting or at any adjournment or postponement of the annual meeting.  Each of the proposals is independent, and is not contingent on approval by Safeco shareholders of any of the other proposals.
   
 
If the merger is completed, the Safeco board of directors following the completion of the merger will be composed of the directors of Merger Sub at the effective time of the merger and all directors of Safeco immediately prior to the completion of the merger will cease to be Safeco directors as of the time of the completion of the merger.
   
Q:
Why am I receiving these materials?
   
A:
You are a Safeco shareholder and as such, the Safeco board of directors wants you to vote at our [●], 2008 annual meeting.
 
 
 
In order to complete the merger, Safeco shareholders must approve the merger agreement.  The Safeco board of directors has unanimously determined that the merger agreement and the merger are advisable and in the best interests of Safeco and its shareholders, and has unanimously adopted the merger agreement and approved the transactions contemplated by the merger agreement.  The Safeco board of directors unanimously recommends that Safeco shareholders vote "FOR" the proposal to approve the merger agreement.  See "The Merger – Recommendation of the Safeco Board of Directors and Its Reasons for the Merger."

 
 
 
 
 
Q-1
 
 
 


 
This proxy statement contains important information about the proposed merger, the merger agreement and the annual meeting, which you should read carefully.  The enclosed voting materials allow you to vote your shares without attending the annual meeting.
   
 
For a more complete description of the annual meeting, see "The Annual Meeting."
   
 
Your vote is very important. You are encouraged to vote as soon as possible.
   
Q:
What will Safeco shareholders receive in the merger?
   
A:
If the proposed merger is completed, at the effective time of the merger, Safeco shareholders will be entitled to receive $68.25 in cash, which is referred to in this proxy statement as the per share amount, without interest and less any applicable withholding taxes, for each share of Safeco common stock they own.
   
 
For a more complete description of what Safeco shareholders will receive in the merger, see "The Merger Agreement – Merger Consideration."
   
Q:
Will I still receive quarterly dividends between now and the completion of the merger?
   
A:
Yes.  Under the terms of the merger agreement, Safeco is permitted to declare and pay regular quarterly cash dividends with record dates of July 11, 2008 and October 10, 2008 and payment dates of July 28, 2008 and October 27, 2008, respectively.  The regular quarterly cash dividend with a record date of October 10, 2008 and a payment date of October 27, 2008 will only be made if declared by the Safeco board of directors and if the merger has not been completed by October 10, 2008.
   
Q:
After the merger is completed, how will I receive the cash for my shares?
   
A.
Promptly (and in any event no later than three business days) after the merger is completed, the exchange agent appointed by Liberty Mutual will mail written instructions on how to exchange your Safeco common stock certificates for the per share amount of $68.25 in cash.  You will receive cash for your shares from the exchange agent after you comply with these instructions.
   
 
If you hold your shares in book-entry form – that is, without a stock certificate – unless you do not vote in favor of the merger and you properly perfect your dissenters' rights under Washington law, the exchange agent will automatically send you the per share amount of $68.25 in cash in exchange for the cancellation of your shares of Safeco common stock after completion of the merger, provided that you comply with applicable tax certification requirements.
   
 
If your shares of Safeco common stock are held in "street name" by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee on how to surrender your "street name" shares and receive cash for those shares.
   
Q:
Should Safeco shareholders send in their Safeco common stock certificates now?
 
 
A:
No.  After the merger is completed, you will receive written instructions from the exchange agent on how to exchange your Safeco common stock certificates for the per share amount of $68.25 in cash, without interest and less any applicable withholding taxes.
   
 
Please do not send in your Safeco common stock certificates with your proxy card.
   
Q:
What vote is required to approve the merger agreement?
   
A:
Under the Washington Business Corporation Act, which is referred to in this proxy statement as the WBCA, in order for the merger agreement to be approved, shares of Safeco common stock representing at least two-thirds of the votes entitled to be cast by all Safeco shareholders at the annual meeting must vote "FOR"
 
 
 
 
 
 
 
Q-2
 
 
 


 
the approval of the merger agreement, provided that a quorum is present.  As of the close of business on [●], 2008, the record date for the annual meeting, there were [●] shares of Safeco common stock issued and outstanding and such shares were held by approximately [●] holders of record.
   
Q:
What is the vote required to pass the other proposals?
   
A:
In accordance with our Bylaws and the WBCA, in order for each director candidate to be elected, such director candidate must receive more votes "FOR" than "WITHHELD," provided that a quorum is present.  For the ratification of Ernst & Young LLP as Safeco's independent registered public accounting firm for 2008 to be approved, the WBCA requires that the proposal must receive more votes "FOR" than "AGAINST," provided that a quorum is present.  For the proposal to adjourn or postpone the annual meeting, if necessary or appropriate, to solicit additional proxies to approve the merger agreement to be approved, the WBCA requires that the proposal must receive more votes "FOR" than "AGAINST," provided that a quorum is present.
   
Q:
What quorum is required for the annual meeting?
   
A:
Under the WBCA, no proposal may be acted on at the annual meeting unless a quorum is present.  In order for a quorum to exist, at least a majority of the votes entitled to be cast at the annual meeting must be present in person or by proxy.
   
Q:
What governmental and regulatory approvals are required?
   
A:
State insurance laws generally require that, prior to the acquisition of an insurance company, the acquiring party must obtain approval from the insurance commissioner of the insurance company's state of domicile and any state in which an insurance company is commercially domiciled.  Accordingly, Liberty Mutual has made the necessary applications with the insurance commissioners of California, Illinois, Indiana, Missouri, Oregon, Texas and Washington, the states of domicile or commercial domicile of Safeco's insurance company subsidiaries.