<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
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):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/X/ 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:
------------------------------------------------------------------------
<PAGE>
[LOGO]
SAFECO CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 1, 1996
Seattle, March 12, 1996
To Our Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of SAFECO
Corporation (the "Corporation") will be held on May 1, 1996, at 11:00 A.M. in
the Auditorium, SAFECO Plaza, 4333 Brooklyn Avenue N.E., Seattle, Washington,
for the following purposes, as set forth in the accompanying proxy statement:
1. To elect one nominee to serve as a director for a two-year term to expire in
1998 and four nominees to serve as directors for three-year terms to expire
in 1999.
2. To consider and act upon a proposal to amend Article III of the Corporation's
Restated Articles of Incorporation to increase the number of authorized
shares of Common Stock from 150,000,000 to 300,000,000.
3. To consider and act upon such other matters as may properly come before the
meeting.
The Board of Directors has established the close of business on March 1, 1996,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting of Shareholders and any adjournment
thereof.
YOU ARE URGED TO REVIEW CAREFULLY THE ACCOMPANYING PROXY STATEMENT, AND SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING.
Your proxy may be revoked by you at any time before it has been voted. You may
substitute a representative other than those named in the enclosed proxy if you
desire. The individuals named are the present members of the Executive Committee
of the Board of Directors.
You are cordially invited to attend the Annual Meeting of Shareholders in
person, if it is convenient for you to do so.
[LOGO]
Roger H. Eigsti
Chairman, CEO and
President
<PAGE>
SAFECO CORPORATION
SAFECO Plaza, Seattle, Washington 98185
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS -- MAY 1, 1996
This statement is furnished in connection with the Annual Meeting of
Shareholders of SAFECO Corporation (the "Corporation") to be held on May 1,
1996. Shareholders of record at the close of business on March 1, 1996, are
entitled to vote at the meeting either in person or by proxy.
Your proxy in the enclosed form is solicited by the Board of Directors of the
Corporation. The shares represented by the proxies received will be voted at the
meeting.
The approximate date of the mailing of this proxy statement and the enclosed
form of proxy is March 12, 1996.
OUTSTANDING SHARES AND VOTE REQUIRED
On March 1, 1996, there were 126,023,443 shares of Common Stock of the
Corporation outstanding, all of which will be entitled to vote at the Annual
Meeting of Shareholders to be held on May 1, 1996. Each shareholder is entitled
to one vote for each share of Common Stock held of record in such person's name
on the record date. Under Washington law and the Corporation's Articles of
Incorporation, a quorum consisting of a majority of the shares entitled to vote
must be represented in person or by proxy. Directors are elected by a majority
of the votes cast by shares present, in person or by proxy, and entitled to vote
at the Annual Meeting. Votes withheld with respect to the election of directors
will not be counted either in favor of or against the election of the nominees.
Under Washington law, the favorable vote of the holders of a majority of the
shares entitled to vote will be required to adopt Proposal No. 2 to amend
Article III of the Corporation's Restated Articles of Incorporation. Abstentions
from voting will have the effect of voting against that proposal. Brokers who
hold shares for the account of their clients may vote their clients' proxies in
the brokers' own discretion as to the election of directors and Proposal No. 2
if the clients have not furnished voting instructions by 10 days prior to the
meeting. Proxies solicited by the Board of Directors will be voted in favor of
each of the director nominees and Proposal No. 2 unless shareholders specify a
contrary choice in their proxies.
SOLICITATION OF PROXIES
The persons named as proxies were selected by the Board of Directors and are the
present members of the Executive Committee of the Board. Your proxy may be
revoked by you at any time before it has been voted by notifying the Secretary
to the Board of Directors, SAFECO Corporation, SAFECO
-- 2 --
<PAGE>
Plaza, Seattle, Washington 98185, in writing of such revocation. Georgeson &
Company Inc., New York City, has been retained to solicit proxies personally or
by mail, telephone or telegram through approximately 40 employees at a cost
anticipated to be $6,000 plus reasonable out-of-pocket expenses, which will be
paid by the Corporation. Management does not expect to solicit proxies except
through the mail; however, if proxies are not promptly received, salaried
employees of the Corporation may solicit proxies from some shareholders
personally, by telephone or fax.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board of Directors is divided into three classes. At the 1996 Annual Meeting
of Shareholders, one nominee will be elected to serve a two-year term until the
1998 Annual Meeting of Shareholders and four nominees will be elected to serve
three-year terms until the 1999 Annual Meeting of Shareholders and until their
successors are elected and qualified.
On May 1, 1996, Donald G. Graham, Jr., and Calvert Knudsen, both having reached
age 72, will retire as directors in accordance with the Corporation's retirement
policy for directors. At its February 7, 1996 meeting, the Executive Committee
of the SAFECO Corporation Board of Directors nominated William W. Krippaehne,
Jr., President and Chief Executive Officer of Fisher Companies Inc., to fill the
two-year unexpired term of Mr. Graham ending in 1998. Concurrently, the
Executive Committee reduced the number of directors to 13, as permitted by the
Bylaws, effective May 1, 1996.
Unless otherwise stated, each individual described below has served for at least
five years in the position indicated. All nominees, other than Mr. Krippaehne,
are presently directors.
NOMINEES FOR DIRECTOR
CLASS III -- TERM EXPIRES AT 1998 ANNUAL SHAREHOLDERS' MEETING
WILLIAM W. KRIPPAEHNE, JR., 45, is President and Chief Executive Officer, Fisher
Companies Inc., Seattle, Washington, whose primary subsidiaries are engaged in
broadcasting, flour milling and real estate ownership and development. Mr.
Krippaehne has been an executive officer of Fisher Companies since 1982.
CLASS I -- TERM EXPIRES AT 1999 ANNUAL SHAREHOLDERS' MEETING
PHYLLIS J. CAMPBELL, 44, is Chief Executive Officer and President of U.S. Bank
of Washington, N.A., Seattle, Washington, and has been an executive officer of
the bank since 1989. She is also Executive Vice President of U.S. Bancorp. Ms.
Campbell has been a director of the Corporation since 1994 and is a director of
Puget Sound Power & Light Company.
-- 3 --
<PAGE>
BOH A. DICKEY, 51, is Executive Vice President and Chief Financial Officer of
the Corporation and Chairman of the Board of Trustees for the 31 SAFECO mutual
funds. Mr. Dickey has been an executive officer of the Corporation since 1982
and a director of the Corporation since 1993.
WILLIAM P. GERBERDING, 66, is the President Emeritus of the University of
Washington, where he served as President from 1979 until his retirement in 1995.
Dr. Gerberding has been a director of the Corporation since 1981 and is a
director of Washington Mutual, Inc. and Washington Mutual Bank.
PAUL W. SKINNER, 48, is President of Skinner Corporation, Seattle, Washington,
an investment company. Mr. Skinner has been a director of the Corporation since
1988 and is a director of Seafirst Corporation and Seattle-First National Bank.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR
NOMINEES.
DIRECTORS WHOSE TERMS EXPIRE AFTER 1996
CLASS II -- TERM EXPIRES AT 1997 ANNUAL SHAREHOLDERS' MEETING
ROBERT S. CLINE, 58, is Chairman and Chief Executive Officer of Airborne Freight
Corporation, Seattle, Washington, an air freight carrier. Mr. Cline has been a
director of the Corporation since 1992 and is a director of Seafirst Corporation
and Metricom, Inc.
JOSHUA GREEN III, 59, is Chairman and Chief Executive Officer of the Joshua
Green Corporation, Seattle, Washington, a family investment firm, and Chairman
of its wholly-owned subsidiary, Sage Manufacturing Corporation. Mr. Green has
been a director of the Corporation since 1981 and is Chairman of the Board of
U.S. Bank of Washington, N.A., and a director of U.S. Bancorp.
WILLIAM G. REED, JR., 57, is Chairman of the Board and Chief Executive Officer
of Simpson Investment Company, Seattle, Washington, a forest products holding
company. Mr. Reed has been a director of the Corporation since 1974 and is a
director of Microsoft Corporation, The Seattle Times, Washington Mutual, Inc.
and Washington Mutual Bank.
JUDITH M. RUNSTAD, 51, is a partner of the Seattle law firm of Foster Pepper &
Shefelman. Mrs. Runstad has been a director of the Corporation since 1990 and is
Chairman of the Federal Reserve Bank of San Francisco.
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<PAGE>
GEORGE H. WEYERHAEUSER, 69, is Chairman of the Board and a director of
Weyerhaeuser Company, Tacoma, Washington, a forest products company, and was its
Chief Executive Officer from 1966 until his retirement in 1991. Mr. Weyerhaeuser
has been a director of the Corporation since 1978 and is a director of The
Boeing Company and Chevron Corporation.
CLASS III -- TERM EXPIRES AT 1998 ANNUAL SHAREHOLDERS' MEETING
ROGER H. EIGSTI, 53, is Chairman, Chief Executive Officer and President of the
Corporation. Mr. Eigsti has been an executive officer of the Corporation or its
subsidiaries since 1980 and a director of the Corporation since 1988. Mr. Eigsti
is a director of Washington Mutual, Inc. and Washington Mutual Bank.
JOHN W. ELLIS, 67, is Chairman and Chief Executive Officer of The Baseball Club
of Seattle, Inc., the owner of the Seattle Mariners baseball team, Seattle,
Washington. Mr. Ellis is a director of Puget Sound Power & Light Company and was
its Chief Executive Officer from 1976 to 1992 and its Chairman from 1987 to
1993. Mr. Ellis has been a director of the Corporation since 1981 and is a
director of Washington Mutual, Inc. and Washington Mutual Bank, UTILX
Corporation and Associated Electric & Gas Insurance Services, Ltd.
WILLIAM R. WILEY, 64, is Senior Vice President for Science and Technology Policy
of Battelle Memorial Institute, an independent science and technology
organization. From 1984 to 1994 he was Director of Pacific Northwest Laboratory,
Richland, Washington, a national laboratory operated by Battelle Memorial
Institute for the U.S. Department of Energy. Dr. Wiley has been a director of
the Corporation since 1994 and is a director of Northwest Natural Gas Company
and the Seattle Branch of the Federal Reserve Bank of San Francisco.
OWNERSHIP OF THE CORPORATION'S COMMON STOCK
The table below provides information as of February 8, 1996, with regard to the
ownership of the Corporation's Common Stock by directors, nominees for director,
the Corporation's Chief Executive Officer and other four most highly compensated
executive officers, and by all directors and officers as a group. The
shareholdings below have been adjusted to reflect the two-for-one split of
SAFECO Common Stock which occurred on December 1, 1995. Total beneficial
ownership of the Corporation's outstanding Common Stock is less than one percent
in the case of each individual listed below except as follows: 4.9% for Mr.
Graham, 2.0% for Mr. Green, 2.4% for Mr. Krippaehne, and 8.0% for all 19
directors and officers as a group (including shares subject to stock options
which may be exercised within 60 days). The holdings shown in the table do not
include 4,515,600 shares held by The SAFECO Employees' Profit Sharing Retirement
Plan, as to which the members of the Investment Committee for the Profit Sharing
Retirement Plan (Messrs. Cline, Ellis, Gerberding, Knudsen, Reed and Skinner)
share voting and investment power and certain members of management may be
deemed to share investment power by reason of their positions.
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE ACQUIRABLE
OF BENEFICIAL WITHIN 60
NAME OWNERSHIP DAYS (1)
- ------------------------------------- -------------- -----------
<S> <C> <C>
Phyllis J. Campbell 1,000 --
Robert S. Cline 3,000 --
Boh A. Dickey 42,331 46,300
Roger H. Eigsti 95,354 51,450
John W. Ellis 10,024 --
William P. Gerberding 2,000 --
Donald G. Graham, Jr. 6,194,458(2) --
Joshua Green III 2,547,432(3) --
Calvert Knudsen 4,700 --
William W. Krippaehne, Jr. 3,003,728(4) --
Dan D. McLean 18,474 8,750
William G. Reed, Jr. 666,796(5) --
James W. Ruddy 2,500 15,852
Judith M. Runstad 2,000 --
Paul W. Skinner 278,120(6) --
George H. Weyerhaeuser 55,600(7) --
William R. Wiley 0 --
Richard E. Zunker 15,738(8) 7,000
All directors and officers as a group
(19 persons) 9,945,129 146,202
</TABLE>
- ------------
(1) Shares which may be purchased within 60 days pursuant to the Corporation's
Stock Option Plan or the SAFECO Incentive Plan of 1987.
(2) Includes (i) 5,997,298 shares owned by three corporations of which Mr.
Graham is an officer and/ or director, 49,726 shares owned by a charitable
foundation of which he is an officer and trustee, 22,360 shares owned by a
trust estate of which he is a co-trustee, and thereby in each such case
shares voting power and investment power with respect to such shares; and
(ii) 29,168 shares owned by three trust estates of which he is the sole
trustee, and thereby in each such case holds the voting power and investment
power with respect to such shares. Mr. Graham disclaims any beneficial
interest in any of the shares referred to in this footnote, other than such
indirect interest he may have as a stockholder of said three corporations.
(3) Includes 2,546,832 shares owned by the Joshua Green Corporation in which Mr.
Green has a substantial interest with voting control and investment power,
and 600 shares owned by his spouse.
(4) Includes 3,002,376 shares owned by two corporations of which Mr. Krippaehne
is an officer and director and thereby has shared voting power and
investment power with respect to such shares, and 346 shares owned by Mr.
Krippaehne's spouse. The shares owned by the two corporations are
-- 6 --
<PAGE>
also included in Mr. Graham's beneficial shareholdings. (See footnote (2)
above.) Mr. Krippaehne disclaims any beneficial interest in any of the
shares referred to in this footnote, other than such indirect interest he
may have as a stockholder of said corporations.
(5) Includes (i) 500,694 shares owned by two trusts of which Mr. Reed is a
co-trustee and beneficiary, and thereby shares voting power and investment
power with respect to such shares, (ii) 7,772 shares owned by Mr. Reed's
spouse, and (iii) 141,686 shares owned by Mr. Reed's children.
(6) Includes 258,120 shares owned by Skinner Corporation in which Mr. Skinner
has a substantial interest and 16,000 shares owned by trusts of which Mr.
Skinner is a trustee, and thereby in each case shares voting power and
investment power with respect to such shares. Mr. Skinner disclaims any
beneficial interest in the shares owned by the trusts.
(7) Includes 25,200 shares owned by trusts of which Mr. Weyerhaeuser is
co-trustee and for which he shares voting power and investment power.
(8) Includes 800 shares owned by Mr. Zunker's spouse.
In addition, INVESCO PLC, 11 Devonshire Square, London EC2M 4YR, England,
reported in a Schedule 13G filed with the Securities and Exchange Commission
("SEC") that its subsidiaries had shared voting power and investment discretion
with respect to 8,723,998 shares, or 6.9% of the Corporation's outstanding
Common Stock, at December 31, 1995. The subsidiaries, investment advisers, hold
the shares on behalf of their clients, none of which holds more than 5% of the
Corporation's shares. The Capital Group Companies, Inc., 333 South Hope Street,
Los Angeles, California, 90071, reported in a Schedule 13G filed with the SEC
that at December 31, 1995, two of its subsidiaries had sole investment
discretion with respect to 9,962,900 shares, or a combined total of 7.9% of the
Corporation's outstanding Common Stock, including 486,000 shares with respect to
which one subsidiary had sole voting power. The subsidiaries are investment
advisers and hold the shares on behalf of their clients, none of which holds
more than 5% of the Corporation's shares.
SECTION 16(A) REPORTS
Under Section 16 of the Securities Exchange Act of 1934, as amended, directors
and officers of the Corporation are required to report their holdings of and
transactions in the Corporation's stock to the SEC. To the Corporation's
knowledge, based solely on review of the copies of such reports furnished to the
Corporation and written representations that no other reports were required,
during 1995 all persons subject to the Section 16 filing requirements with
respect to the Corporation filed the required reports on a timely basis.
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<PAGE>
COMMITTEES OF THE BOARD
The Board of Directors of the Corporation presently has these standing
committees: Executive, Finance, Audit, Compensation and Nominating. Except for
certain fundamental corporate acts reserved to the full Board under Washington
law, the Executive Committee has broad authority, when the Board is not in
session, to exercise all of the powers of the Board in management of the
business of the Corporation. The Finance Committee has general supervision over
the investments of and all matters of financing by the Corporation. The Audit
Committee recommends independent auditors for selection by the Board of
Directors, reviews plans for upcoming audits with such auditors, and, after an
audit has been completed, reviews the results of that audit. The Compensation
Committee passes upon all salary increases where the proposed salary is $150,000
per year or more, reviews salary administration policy, administers the
Corporation's stock option program, and approves all material changes in
employee benefit programs. The Nominating Committee reviews qualifications of
candidates for board membership, recommends to the Executive Committee
candidates for membership on the Board and the annual slate of nominees for
director, and recommends to the Board criteria for board membership, composition
of the Board, tenure of directors and fees to be paid to directors. The
Nominating Committee will consider persons for board membership recommended by
shareholders. Recommendations supported by a description of such persons'
background and experience and written consents of such persons to serve should
be addressed to the Secretary to the Board of Directors, SAFECO Corporation,
SAFECO Plaza, Seattle, Washington 98185. This information must be received by
November 14, 1996, for such persons to be considered for nomination by the Board
for election at next year's annual meeting of shareholders.
During 1995 the Board and the Compensation and Finance Committees each held four
meetings, the Audit and Executive Committees each held three meetings and the
Nominating Committee held one meeting. All current directors attended at least
75% of the Board and committee meetings they were eligible to attend. The
present members of each committee are:
<TABLE>
<CAPTION>
COMMITTEE MEMBERS
<S> <C>
Executive Messrs. Eigsti (Chair), Ellis, Graham, Green and Weyerhaeuser.
Finance Messrs. Cline, Dickey, Eigsti, Ellis (Chair), Gerberding, Knudsen,
Reed and Skinner.
Compensation Messrs. Cline, Ellis, Reed and Weyerhaeuser (Chair).
Audit Messrs. Gerberding, Graham (Chair), Green, Wiley and Mrs. Runstad.
Nominating Messrs. Ellis, Green (Chair) and Reed.
</TABLE>
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<PAGE>
COMPENSATION OF DIRECTORS AND OFFICERS
COMPENSATION OF DIRECTORS
Directors of the Corporation, except those who are also employees, receive fees
for their services as directors. The director fees are: an annual retainer of
$24,000, a $1,500 fee for attendance at any Board meeting, and a $1,000 fee for
attendance at any committee meeting. In addition, the Chair of the Finance
Committee receives an annual retainer of $5,000 and a $1,000 fee for attendance
at any meeting of the management investment committee. Directors may elect to
defer their annual retainer and meeting fees under the terms of the SAFECO
Corporation Deferred Compensation Plan for Directors. Amounts deferred under
that Plan are credited with interest at the applicable federal long-term rate in
effect at January 1 of each year as determined for purposes of Section 1274 of
the Internal Revenue Code, as amended. Directors are also reimbursed for
reasonable travel expenses.
ANNUAL REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
COMPENSATION COMMITTEE
Four outside directors of the Corporation, none of whom has been or is an
employee of the Corporation and all of whom qualify as disinterested persons for
purposes of administering the Corporation's stock option program under Section
16 of the Securities Exchange Act of 1934, comprise the Compensation Committee
of the Board of Directors ("Committee"). The Committee is responsible for
reviewing the Corporation's salary administration policy, approving salaries
which are $150,000 or greater, administering the Corporation's stock option
program, and approving changes to the Corporation's employee benefit plans. The
members of the Committee, which met four times during 1995, are George H.
Weyerhaeuser, Chair, Robert S. Cline, John W. Ellis, and William G. Reed, Jr.
Harold W. Haynes was a member of the Committee until he retired as a director of
the Corporation in May 1995.
APPROACH TO COMPENSATION
This report discusses the compensation policies applicable to the Corporation's
executive officers, including the chief executive officer and four other most
highly compensated executives ("Named Executive Officers"). With the exception
of stock options and restricted stock rights, all major compensation and
retirement plans apply equally to all employees of the Corporation's property
and casualty, life, credit and asset management subsidiaries ("Employees"). The
Corporation's compensation policies and plans are intended to:
1. Attract and retain high-caliber personnel on a long-term basis.
2. Encourage the creation of shareholder value.
3. Link compensation to business results and shareholders' returns over
time.
4. Maintain an appropriate balance between base salary and short- and
long-term incentive opportunities.
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<PAGE>
ELEMENTS OF COMPENSATION
The following are the basic elements of compensation for executive officers of
the Corporation:
SALARY: Salaries are administered on an individual, subjective basis for
all Employees, including executive officers. With respect to compensation
paid to executive officers the Committee regularly reviews information
concerning compensation practices and levels of other companies. Salaries of
executive officers are not, however, targeted for any specific level
relative to salaries paid by other companies.
BONUS: A non-discretionary cash bonus plan applies to all Employees with at
least one year of service. An annual bonus pool is established under a fixed
formula based on the Corporation's pre-tax results. Under the formula, the
bonus pool consists of 10% of the sum of the following pre-tax items: the
underwriting results for the property and casualty subsidiaries; the
operating results for the life subsidiaries, SAFECO Credit Company and the
Corporation's asset management subsidiaries; and 20% of the investment
income of the property and casualty subsidiaries. A cash bonus is paid for
each year in which the calculation results in a bonus pool.
In years for which the bonus pool is large enough to pay the maximum bonus
amounts, Employees with three years or more of service receive a bonus equal
to 10% of base salary. In years when the fixed formula does not provide a
sufficient pool to pay the maximum bonus amounts to all eligible Employees,
bonus payments made to all Employees are reduced proportionately.
The percentage of salary paid as a bonus to all Employees with three years
of service, including the Named Executive Officers, for each of 1995, 1994
and 1993 was 10%, 9.2%, and 10%, respectively.
STOCK OPTION PROGRAM: A shareholder-approved stock option program has been
an element of compensation since the early 1960s. The purpose of the program
is to induce selected, key employees of the Corporation and its subsidiaries
to remain employed with the Corporation, to participate in ownership of the
Corporation, to advance the interests of the Corporation and to increase the
value of the Corporation's Common Stock.
Under the shareholder-approved SAFECO Incentive Plan of 1987 ("Plan") the
Committee in its sole discretion may grant to selected, key employees of the
Corporation and its subsidiaries stock options and restricted stock rights
("RSRs") in amounts and on terms consistent with the Plan.
Grants of stock options and RSRs are made on an individual basis. The
Committee makes a subjective judgment in connection with each grant and
considers the individual's responsibilities, potential for advancement,
current salary, previous grants, the current price of the Corporation's
Common Stock, the performance of the Common Stock over time and, for all
individuals other than the chief executive officer, the recommendation of
the chief executive officer. Although the
-- 10 --
<PAGE>
Committee does not establish any set value to award under the Plan to any
individual, the Committee does consider previous grants made as well as the
different nature of stock options and restricted stock rights in making
awards under the Plan.
Stock options are awarded at the closing market price of the Common Stock on
the grant date and typically vest in 25% increments on the first, second,
third and fourth anniversary of the grant date. The Committee has never
rescinded an outstanding option and reissued it at a lower exercise price.
RSRs entitle the holder to receive a specified number of shares of Common
Stock or cash equal to the closing market price of such shares on the
vesting date. RSRs typically vest and are settled in 25% increments on the
first, second, third and fourth anniversary of the grant date. Holders of
RSRs are paid amounts equivalent to the dividends which would be paid on the
same number of shares of Common Stock.
Under the stock option program, as of December 31, 1995, there were 144
participants; outstanding options to purchase an aggregate of 1,803,633
shares of Common Stock; outstanding RSRs entitling the holders to receive an
aggregate of 95,576 shares of Common Stock; and 1,800,774 shares of Common
Stock available for additional options and RSRs. The number of shares of
Common Stock reflect the effect of the two-for-one stock split effective
December 1, 1995.
RETIREMENT PROGRAM: Three basic tax-qualified plans comprise the
Corporation's retirement program and are available on the same basis to all
Employees: the Savings Plan, the Profit-Sharing Plan and the Cash Balance
Plan. In addition, there are two supplemental retirement plans to provide
for benefits which cannot be included in the tax-qualified plans. These
plans are described in more detail elsewhere in this proxy statement. Since
the Corporation's Common Stock constituted 31% of the assets of the
Profit-Sharing Plan at December 31, 1995, all participants in the Plan have
a significant, indirect ownership in the Corporation and an additional
incentive to advance its interests and to increase the value of its Common
Stock.
OTHER EMPLOYEE BENEFITS: The Corporation offers other benefit plans (E.G.,
vacation; sick leave; medical, disability, life and accident insurance) to
executive officers on the same basis as offered to all Employees. In
addition, certain benefits (E.G., payment for annual medical exams and club
dues) are provided by the Corporation to some executives, including the
Named Executive Officers.
CONSIDERATIONS IN CONNECTION WITH COMPENSATION LEVELS
CORPORATE PERFORMANCE
The directors regularly review the Corporation's performance and the degree to
which investment returns have been generated for shareholders. This includes
review of customary financial measures
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<PAGE>
with respect to the Corporation, E.G., compounded annual return to shareholders,
the Corporation's Common Stock price and the common stock prices of comparable
companies, the combined ratio of the Corporation's property and casualty
subsidiaries and the combined ratios of competitors, the revenue and premium
growth of the Corporation's operating subsidiaries, financial strength and asset
management, and consideration of the ratings assigned to the Corporation, its
subsidiaries or securities by A.M. Best Insurance Services, Standard & Poor's
Ratings Group ("S&P") and Moody's Investors Service, Inc.
The directors annually review graphs that compare the cumulative total return to
shareholders of the Corporation with the S&P 500 and a self-constructed peer
group comprised of ten companies in the same lines of business as the
Corporation's major operating subsidiaries ("Peer Index"), with their returns
weighted according to the component companies' respective market capitalization.
The ten-year graph is included in this proxy statement as its time period may
more adequately reflect returns for the long-term shareholder and option holder.
-- 12 --
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SAFECO, S&P 500 AND PEER INDEX*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
SAFECO 100 154 186 184 182 248
S&P 500 100 130 140 155 157 215
Peer In-
dex * 100 132 160 177 162 246
</TABLE>
*Comprised of Aetna, Allstate, Chubb, CIGNA, Cincinnati Financial, Ohio
Casualty, Progressive, St. Paul, TIG Holdings and USF&G.
-- 13 --
<PAGE>
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN
AMONG SAFECO, S&P 500 AND PEER INDEX*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAFECO 100 119 127 114 193 170 261 316 313 309
S&P 500 100 119 125 146 192 186 242 261 287 291
Peer Index * 100 105 93 101 137 118 156 190 210 192
<CAPTION>
1995
<S> <C>
SAFECO 420
S&P 500 400
Peer Index * 292
</TABLE>
*Comprised of Aetna, Allstate, Chubb, CIGNA, Cincinnati Financial, Ohio
Casualty, Progressive, St. Paul, TIG Holdings and USF&G.
-- 14 --
<PAGE>
The financial integrity and stability of the Corporation and its subsidiaries
are of critical importance. One measure of these are the following claims-paying
ratings given by independent rating services.
INSURANCE RATINGS: CLAIMS-PAYING ABILITY
<TABLE>
<CAPTION>
S&P MOODY'S A. M. BEST
--------- --------- ----------
<S> <C> <C> <C>
Property/Casualty Subsidiaries AAA Aa1 A++
Life Subsidiaries AA Aa2 A++
</TABLE>
INDIVIDUAL PERFORMANCE
In connection with compensation for individual executive officers, the Committee
consulted with the chief executive officer and exercised its subjective judgment
in evaluating each individual's leadership and managerial abilities, achievement
of business unit and corporate objectives, potential for advancement or
promotion and the relative value of the individual's performance in the overall
achievement of the Corporation's objectives. In addition, in connection with the
award of a stock option or RSR, the Committee considered the amount and terms of
any previous award, the current price of the Corporation's Common Stock and the
performance of the Common Stock over time.
In connection with the Committee's consideration of compensation for the
Corporation's executive officers, including Mr. Eigsti, the Committee reviewed
information regarding compensation practices and levels of competitors of the
Corporation and its operating subsidiaries (including the companies that
comprise the Peer Index) as well as non-competing companies of a similar size to
the Corporation or its operating subsidiaries. Detailed compensation information
was obtained from the proxy statements of publicly-held companies. In addition,
the Committee reviewed compensation information compiled by two independent
consulting firms as well as that collected by the Corporation's Personnel
Department.
The purpose of this review was to confirm that the Committee's approach to
compensation continues to be appropriate given the Corporation's lines of
business, size and culture and the geographic location of the Corporation's
executive officers. For 1995 the Committee confirmed that its approach to
compensation was suitable to the achievement of the general purposes of the
Corporation's compensation policies and plans. The Committee did not engage in
this review for the purpose of targeting any element of compensation, including
salaries, paid to the Corporation's executive officers at, below or above the
median paid by any other company or group of companies.
CONSIDERATIONS IN CONNECTION WITH MR. EIGSTI'S COMPENSATION.
The Committee made subjective judgments with respect to an increase in Mr.
Eigsti's salary and awards of stock options and RSRs to him. In connection with
those awards, the Committee took into
-- 15 --
<PAGE>
account the cumulative total return to the Corporation's shareholders and the
other financial measures listed above under "Corporate Performance." Mr.
Eigsti's leadership and managerial abilities, as well as both historical and
competitive compensation levels for his responsibilities, are considered in
setting his salary and total compensation.
The calculations of the annual bonus and contributions or accruals with respect
to the Corporation's retirement plans are made pursuant to the terms of those
plans which apply to all Employees. Consequently, the Committee does not
separately determine the amount or the payment of any such bonus, contribution
or accrual for Mr. Eigsti or any other executive officer.
ADDITIONAL INFORMATION
The tables under "Compensation of Named Executive Officers" accompany this
report and reflect the decisions covered by the foregoing discussion.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, the
federal income tax deduction for certain types of compensation paid to the chief
executive officer and four other most highly-paid officers of publicly-held
companies is subject to an annual limit of $1 million per employee. The
Corporation may pay compensation that exceeds this limit.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that the Corporation specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
This report is submitted over the names of the members of the Compensation
Committee:
GEORGE H. WEYERHAEUSER, CHAIR
ROBERT S. CLINE
JOHN W. ELLIS
WILLIAM G. REED, JR.
-- 16 --
<PAGE>
COMPENSATION OF NAMED EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The amount of all compensation paid to the Named Executive Officers for services
in all capacities to the Corporation and its subsidiaries during the past three
years is stated below:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
--------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS (4) AWARDS (5) OPTIONS/SARS COMPENSATION
OCCUPATION YEAR ($) ($) ($) (#)(6) ($)
- ---------------------------- ---- -------- ----------- ----------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. H. Eigsti 1995 $650,000 $ 65,000 $310,300 50,000 $93,265(7)
Chairman, Chief 1994 550,000 50,743 292,500 35,000 63,918
Executive Officer & 1993 516,667 51,667 228,600 30,000 90,427
President (1)
B. A. Dickey 1995 390,000 39,000 192,600 30,000 55,775(8)
Executive Vice 1994 352,500 32,521 187,200 24,000 40,776
President & Chief 1993 326,667 32,667 152,400 20,000 56,923
Financial Officer (2)
D. D. McLean 1995 277,500 27,750 107,000 20,000 39,553(9)
President of the 1994 243,750 22,488 117,000 15,000 28,033
Corporation's Property & 1993 225,000 22,500 88,900 10,000 38,995
Casualty Subsidiaries (3)
R. E. Zunker 1995 250,000 25,000 107,000 16,000 35,588(10)
President of the 1994 231,250 21,335 105,300 12,000 26,568
Corporation's Life 1993 214,583 21,458 88,900 10,000 37,157
Subsidiaries
J. W. Ruddy 1995 195,000 19,500 66,875 0 24,525(11)
Senior Vice President 1994 176,667 16,299 64,350 11,000 27,405
and General Counsel 1993 160,000 16,000 63,500 0 25,739
</TABLE>
- ------------
(1) Mr. Eigsti became Chief Executive Officer of the Corporation on January 1,
1992, and Chairman of the Board of Directors of the Corporation on May 5,
1993.
(2) Mr. Dickey became Executive Vice President of the Corporation on January 1,
1992, and a director of the Corporation on August 4, 1993.
(3) Mr. McLean became President of the Corporation's property & casualty
insurance subsidiaries on January 1, 1993.
-- 17 --
<PAGE>
(4) A cash bonus of up to 10% of annual salary is paid to each employee of the
insurance, credit and asset management operations who has at least three
years of service when the pre-tax results from such operations support such
a bonus. The percentage of salary paid as a bonus for 1995, 1994 and 1993
was 10%, 9.2%, and 10%, respectively.
(5) Restricted stock rights (RSRs) are awarded under the Corporation's stock
option program and entitle an employee who remains continuously employed by
the Corporation or its subsidiaries for a stated number of years to receive
a specified number of shares of Common Stock or cash equal to the fair
market value of such shares on the settlement date. Holders of RSRs are
entitled to receive an amount equivalent to the dividends which would be
paid on an equivalent number of shares of Common Stock. The dollar amounts
in this column are determined by multiplying the number of shares covered by
an RSR by the closing market price of the Common Stock on the grant date.
The number of RSRs stated in this footnote reflect the effect of the
two-for-one stock split effective December 1, 1995.
In 1995 the Corporation awarded RSRs to the named executives in the
following amounts: 11,600 for Mr. Eigsti; 7,200 for Mr. Dickey; 4,000 for
Mr. McLean, 4,000 for Mr. Zunker and 2,500 for Mr. Ruddy. Each award was
made on February 1 and, with the exception of Mr. McLean's award, will vest
and be settled in 25% installments on the first, second, third and fourth
anniversary dates of the award. In Mr. McLean's case the award will vest and
be settled in 50% installments on the first and second anniversary dates of
the award.
The following are the total number of RSRs held by the named executives and
the total value of such holding at December 31, 1995: for Mr. Eigsti, 24,700
RSRs with a value of $852,150; for Mr. Dickey, 15,750 RSRs with a value of
$543,375; for Mr. McLean, 8,516 RSRs with a value of $293,802; for Mr.
Zunker, 9,000 RSRs with a value of $310,500; and for Mr. Ruddy, 5,700 RSRs
with a value $196,650.
(6) Reflects effect of two-for-one stock split on December 1, 1995.
(7) Includes net contributions to the Corporation's Profit-Sharing Plan of
$13,748; net contributions to the Corporation's Savings Plan of $6,000; and
allocations to non-qualified plans of $53,517 with respect to the
Profit-Sharing Plan and $20,000 with respect to the Savings Plan for amounts
which may not be contributed to the qualified plans because of limitations
imposed by the Internal Revenue Code of 1986, as amended ("Non-Qualified
Allocations").
(8) Includes net contributions to the Corporation's Profit-Sharing Plan of
$13,748 and Savings Plan of $6,000; and Non-Qualified Allocations of $26,427
with respect to the Profit-Sharing Plan and $9,600 with respect to the
Savings Plan.
(9) Includes net contributions to the Corporation's Profit-Sharing Plan of
$13,748 and Savings Plan of $6,000; Non-Qualified Allocations of $14,705
with respect to the Profit-Sharing Plan and $5,100 with respect to the
Savings Plan.
-- 18 --
<PAGE>
(10)Includes net contributions to the Corporation's Profit-Sharing Plan of
$13,748 and Savings Plan of $6,000; and Non-Qualified Allocations of $11,840
with respect to the Profit-Sharing Plan and $4,000 with respect to the
Savings Plan.
(11)Includes net contributions to the Corporation's Profit-Sharing Plan of
$13,748 and Savings Plan of $4,667; and Non-Qualified Allocations of $6,110
with respect to the Profit-Sharing Plan.
STOCK OPTION AWARDS
Information concerning grants of stock options to the Named Executive Officers
during 1995 is stated below. Under regulations of the Securities and Exchange
Commission the assumed rates of appreciation of 5% and 10% are required to be
used. These assumed appreciation rates are not based on the historic performance
of the Corporation's Common Stock or any other stock or stock index. Any
appreciation in the value of the stated stock options will occur only if the
Common Stock increases in value. Changes in the market price of the Common Stock
are dependent on the future performance of the Corporation as well as overall
stock market performance. There can be no assurance that the amounts or rates of
appreciation stated in the following table will be achieved.
Were one to apply the assumed rates of appreciation to the Common Stock of the
Corporation for the same ten-year period as required for options in the
following table, market capitalization would increase from $3.7 billion to $6.0
billion at the 5% rate and to $9.6 billion at the 10% rate. In addition, a
shareholder, unlike an option holder, would receive dividends paid by the
Corporation during that ten-year period.
-- 19 --
<PAGE>
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE --------------------
GRANTED (1) IN PRICE (2) EXPIRATION 5% (3) 10% (4)
NAME (#) FISCAL YEAR ($/SH) DATE ($) ($)
- ------------- ----------- ----------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. H. Eigsti 50,000 16.02% $ 29.438 05/03/05 $925,654 $2,345,790
B. A. Dickey 30,000 9.61% 29.438 05/03/05 555,393 1,407,474
D. D. McLean 20,000 6.41% 29.438 12/31/00 187,365 421,289
R. E. Zunker 16,000 5.12% 29.438 03/31/04 256,557 630,351
J. W. Ruddy 0 NA NA NA NA NA
</TABLE>
- ------------
(1) Options to purchase SAFECO Common Stock. The numbers reflect the effect of
the two-for-one stock split effective December 1, 1995. No stock
appreciation rights were granted to any person named in this table. The
grant date for each option is May 3, 1995. For each option granted, 25% of
the shares subject to the option become exercisable on the second, third,
fourth and fifth anniversary dates of the option grant, except that Mr.
McLean's option becomes exercisable as follows: 50% on the first anniversary
date, 75% on the second anniversary date and 100% on December 31, 1997.
(2) The exercise price reflects the effect of the two-for-one stock split
effective December 1, 1995. The exercise price may be paid to the
Corporation in cash, in shares of the Corporation's Common Stock valued at
fair market value on the date of exercise, or in part cash and part stock.
In addition, optionees may finance the exercise price of an option through a
subsidiary of the Corporation. The interest rate on such loans fluctuates
quarterly and is equal to the most recently published applicable federal
rate determined pursuant to Section 1274(d) of the Internal Revenue Code of
1986, as amended.
(3) This rate of appreciation produces an ending market price of $47.95 per
share on May 3, 2005, and $38.81 per share on December 31, 2000 and $45.47
per share on March 31, 2004.
(4) This rate of appreciation produces an ending market price of $76.35 per
share on May 3, 2005, and $50.50 per share on December 31, 2000 and $68.83
per share on March 31, 2004.
-- 20 --
<PAGE>
STOCK OPTION EXERCISES
Information concerning exercises of stock options during 1995 by the Named
Executive Officers and the value of their unexercised options and stock
appreciation rights at December 31, 1995 is stated below:
AGGREGATED OPTION EXERCISES IN 1995
AND OPTION/SAR VALUES AT DECEMBER 31, 1995 (1)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS/SARS AT OPTIONS/SARS AT
ON EXERCISE REALIZED DECEMBER 31, 1995 DECEMBER 31, 1995 (2)
NAME (#) ($) (#) ($)
- --------------- ----------- -------- --------------------------- ---------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
R. H. Eigsti 21,610 $323,238 51,450 126,750 $692,869 $871,344
B. A. Dickey 10,000 120,000 56,300 81,900 892,113 569,888
D. D. McLean 5,086 44,627 8,750 41,250 58,672 267,578
R. E. Zunker 23,850 314,888 7,000 42,250 63,156 296,625
J. W. Ruddy 0 0 16,606 15,094 263,508 109,080
</TABLE>
- ------------
(1) Reflects the effect of the two-for-one stock split on December 1, 1995.
(2) Based on $34.50, the last sale price of the Corporation's Common Stock on
December 31, 1995.
RETIREMENT PROGRAM
The Corporation's retirement program is comprised of three plans which qualify
for favorable tax treatment under the Internal Revenue Code of 1986, as amended
("Code"), and two non-qualified supplemental plans. The three qualified plans
are: The SAFECO Employees' Cash Balance Plan ("Cash Balance Plan"), The SAFECO
Employees' Profit Sharing Retirement Plan ("Profit-Sharing Plan") and The SAFECO
Employees' Savings Plan ("Savings Plan"). The two non-qualified plans are the
SAFECO Employees' Supplemental Retirement Plan A and the SAFECO Employees'
Supplemental Retirement Plan B ("Supplemental Plan A" and "Supplemental Plan B,"
respectively). The two non-qualified plans are designed to allocate to employees
amounts not eligible for contribution under the qualified plans because of
limitations imposed by the Code. All Employees are eligible to participate in
the plans.
The Profit-Sharing Plan and the Savings Plan are defined contribution plans
while the Cash Balance Plan is a defined benefit plan. With respect to the Cash
Balance and Profit-Sharing Plans, annually 5% of the Corporation's net profits,
as defined in those plans, is set aside and credited or contributed as follows:
The Cash Balance Plan is credited with an amount equal to 3% of the annual
compensation of
-- 21 --
<PAGE>
participating employees plus 5% interest on the cumulative amount credited for
prior years (together, the "Accrued Benefit"). The portion of the Accrued
Benefit in excess of limitations imposed under Section 401(a)(17) of the Code is
accrued in Supplemental Plan B.
The estimated annual benefits payable upon normal retirement to the Named
Executive Officers from the Cash Balance Plan and corresponding portion of
Supplemental Plan B are as follows: $37,998 for Mr. Eigsti, $29,188 for Mr.
Dickey, $8,585 for Mr. McLean, $23,754 for Mr. Ruddy and $9,775 for Mr. Zunker.
The balance of the 5% of net profits remaining (after crediting the Cash Balance
Plan with 3% of the participating employees' annual compensation) is contributed
to the Profit-Sharing Plan, up to a maximum of 12% of participants'
compensation, and allocated among participants based on their relative
compensation for the year. The portions of the Profit-Sharing contribution in
excess of limitations imposed under Sections 415 and 401(a)(17) of the Code are
credited to participants' accounts in Supplemental Plan A and Supplemental Plan
B, respectively.
The Savings Plan is funded by voluntary employee contributions not to exceed 6%
of compensation and contributions by the Corporation of 66 2/3% of the employee
contributions. The portion of the employer contributions to the Savings Plan in
excess of limitations imposed under Section 401(a)(17) of the Code is credited
to the participants' accounts in Supplemental Plan B.
CHANGE IN CONTROL AGREEMENTS
Messrs. Eigsti, Dickey, Ruddy and Zunker are among several officers of the
Corporation or its subsidiaries who have agreements which provide for payments
to them under certain circumstances following a change in control of the
Corporation (as defined in the agreements). Under the agreements for Messrs.
Eigsti and Dickey, should the officer in question be discharged without cause,
or be demoted or given other good reason to resign following a change in
control, the agreements call for a lump sum payment of up to three times annual
salary and three years' continuation of life and health insurance in addition to
payment for accrued vacation and sick leave, amounts allocated but not yet paid
under the Corporation's bonus plan, and payment of certain retirement benefits.
In the case of Messrs. Ruddy and Zunker, the amount of the lump sum payment is
the lesser of three times annual salary or 2.99 times their average annual
compensation (salary and bonus) during the five years immediately preceding the
change in control.
In addition, the stock options awarded to Messrs. Eigsti, Dickey, McLean and
certain other key employees of the Corporation under the Corporation's stock
option program provide that following a change in control of the Corporation (as
defined in the stock option plan), there will be 100% vesting of options and
stock appreciation rights which have been held for at least one year.
-- 22 --
<PAGE>
CERTAIN TRANSACTIONS
The Corporation and its subsidiaries have transactions in the ordinary course of
business with other business entities of which certain of the Corporation's
directors and nominees for director are executive officers, partners or
shareholders. During the period January 1, 1995 to December 31, 1995 ("Covered
Period") the following directors and nominees for director of the Corporation
were executive officers or ten percent or more shareholders of the following
companies which (directly or through affiliates) engaged in insurance
transactions with subsidiaries of the Corporation in which the amount involved
exceeded $60,000: Fisher Companies Inc. and Fisher Broadcasting Inc. -- Messrs.
Graham and Krippaehne, Joshua Green Corporation -- Mr. Green, and Graysmarsh
Farm, Inc. -- Mr. Reed. All such transactions were in the ordinary course of
business of the Corporation's subsidiaries.
Mrs. Runstad, a director of the Corporation, is a partner of the Seattle law
firm of Foster Pepper & Shefelman, which received fees for legal services
provided to the Corporation and its subsidiaries during the Covered Period.
During the Covered Period, a subsidiary of the Corporation had six leases with
Foster Pepper & Shefelman, and a seventh lease was originated in 1996. A total
of $122,978 in lease payments was received by the subsidiary during the Covered
Period. The aggregate lease balance at February 8, 1996 was $364,590.
Ms. Campbell, a director of the Corporation, is Chief Executive Officer and
President of U.S. Bank of Washington, and Mr. Green, a director of the
Corporation, is Chairman of the Board of U.S. Bank of Washington. During the
Covered Period a direct subsidiary of the Corporation had a line of credit with
U. S. Bank of Washington in the amount of $20,000,000. The subsidiary did not
borrow under such line during the Covered Period, nor did it pay any loan fees
or interest. The balance due under such line at February 8, 1996 was zero. On
January 1, 1996, the line of credit was terminated and a new replacement line of
credit from U.S. Bank of Washington to the Corporation was established.
Ms. Campbell is also Executive Vice President of U.S. Bancorp, which owns U.S.
Bank of Oregon. During the Covered Period, an indirect subsidiary of the
Corporation had a line of credit with U.S. Bank of Oregon in the amount of
$22,500,000 against which $20,000,000 was borrowed and for which loan fees and
interest of $1,782,156 were paid. The outstanding balance on such line at
February 8, 1996 was $20,000,000.
Dr. Wiley, a director of the Corporation, is Senior Vice President for Science
and Technology Policy of Battelle Memorial Institute. A subsidiary of the
Corporation subleases office space from the Institute. During the Covered
Period, the subsidiary paid a total of $56,331 in rent to the Institute.
Additional rent in a total amount of $45,536 is expected to be paid to the
Institute prior to expiration of the sublease in August 1996.
-- 23 --
<PAGE>
In addition, affiliates of Mr. Ellis and Mr. Cline, directors of the
Corporation, entered into certain transactions with the Corporation during the
Covered Period. See "Compensation Committee Interlocks and Insider
Participation" below.
The terms of all such transactions were as fair to the Corporation and its
subsidiaries as could have been obtained from other sources.
A subsidiary of the Corporation extends credit to optionees under the
Corporation's stock option program at a rate, adjusted quarterly, equal to the
applicable federal rate determined pursuant to Section 1274(d) of the Code.
During the Covered Period the greatest amounts outstanding on such loans were
$203,363 for Mr. McLean, and a total of $321,219 for all executive officers as a
group. On February 8, 1996, the outstanding amounts were zero for Mr. McLean and
$116,222 for all executive officers as a group.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during 1995
were George H. Weyerhaeuser, Chair, Robert S. Cline, John W. Ellis, and William
G. Reed, Jr. Prior to his retirement from the Board in May 1995, Harold W.
Haynes also served on the Compensation Committee.
Mr. Ellis is Chairman of The Baseball Club of Seattle, Inc., the owner of the
Seattle Mariners baseball team. During 1995, subsidiaries of the Corporation
sponsored a baseball night for employees and purchased advertising and Mariners
season tickets and playoff tickets at an aggregate cost of $158,700. Similar
sponsorship and the purchase of advertising and season tickets are planned for
1996.
Mr. Cline is Chairman and Chief Executive Officer of Airborne Freight
Corporation, to which subsidiaries of the Corporation paid fees totaling
$495,297 for air freight delivery services in 1995.
The terms of all such transactions were as fair to the Corporation and its
subsidiaries as could have been obtained from other sources.
-- 24 --
<PAGE>
PROPOSAL TO AMEND ARTICLE III OF THE CORPORATION'S
RESTATED ARTICLES OF INCORPORATION
(PROPOSAL 2)
The Board of Directors of the Corporation has unanimously determined that an
amendment to Article III of the Corporation's Restated Articles of Incorporation
is advisable and has voted to recommend it to the Corporation's shareholders for
adoption. The amendment will, if adopted, increase the number of authorized
shares of the Corporation's Common Stock from 150,000,000 to 300,000,000 shares.
INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Section 1 of Article III of the Corporation's Restated Articles of Incorporation
currently provides that the Corporation shall have the authority to issue up to
150,000,000 shares of one class of Common Stock, no par value, and up to
10,000,000 shares of Preferred Stock, no par value. At February 8, 1996, no
shares of preferred stock were issued and outstanding. There were 126,009,630
shares of Common Stock issued and outstanding at such date, as adjusted to
reflect a two-for-one split of the Corporation's Common Stock on December 1,
1995. In addition, at February 8, 1996, the Corporation had outstanding employee
stock options and restricted stock rights for 1,916,273 shares. The Corporation
has reserved an additional 1,697,874 shares of authorized but unissued Common
Stock for future issuance under the SAFECO Incentive Plan of 1987.
Under the proposed amendment, the number of authorized shares of Common Stock
would be increased from 150,000,000 to 300,000,000, which would leave the
Corporation with 170,376,223 shares of Common Stock authorized, unissued, and
not reserved for issuance, based on shares outstanding at February 8, 1996. The
number of authorized shares of Preferred Stock would remain at the same
10,000,000 shares. If the proposed amendment is approved, it will be effective
upon the filing of Articles of Amendment with the Washington Secretary of State,
which will be done as soon as practicable after approval of the proposal by the
shareholders.
The Corporation has no present plans to issue any additional shares of
authorized but unissued stock, except pursuant to its existing employee
compensation plans. However, the Board of Directors believes it advisable for
the Corporation to have an increased number of shares of authorized Common Stock
available for future issuance for various corporate purposes at the discretion
of the Board of Directors. Authorization for such additional shares will enable
the Corporation, as the need may arise, to take timely advantage of market
conditions and the availability of favorable opportunities without the delay and
expense associated with holding a special meeting of its shareholders at the
time such additional shares are needed. Such corporate purposes may include the
declaration of stock dividends or stock splits, the sale of stock to obtain
additional capital funds, the acquisition or merger into the Corporation of
other companies, or the adoption of additional employee compensation plans.
Since the Corporation has no present plans to issue the increased shares of
Common Stock, the transaction or transactions in which the shares might be
issued cannot be described. Unless required by law or
-- 25 --
<PAGE>
regulatory authorities, no further authorization by the shareholders will be
sought for any such share issuance. The proposed increase in the number of
authorized shares of Common Stock will not change the number of shares currently
outstanding or the rights of the holders of such shares. Shareholders do not
have preemptive rights to acquire the Common Stock authorized by this amendment.
EFFECT OF PROPOSED AMENDMENT TO ARTICLE III
If adopted, the amendment will not, by itself, have any effect on the rights of
holders of presently issued and outstanding shares of Common Stock. However, the
issuance of additional shares of Common Stock could have the effect of diluting
the voting power of shares of Common Stock outstanding at that time, including
shares held by any persons who may be seeking to obtain control of the
Corporation. The issuance of such shares may also result in a dilution of
earnings per share of the outstanding shares of Common Stock.
The authorized but unissued shares of Common Stock could be used by the Board of
Directors to make more difficult a change in control of the Corporation, even if
shareholders viewed such change in control as favorable to their interests.
Under certain circumstances, such shares could be used to create voting
impediments or to frustrate persons seeking to effect a takeover or otherwise
gain control of the Corporation. Such shares could be privately placed with
purchasers who might side with the Board in opposing a hostile takeover bid. The
Corporation is not aware of any effort to accumulate the Common Stock or obtain
control of the Corporation by a tender offer, proxy contest or otherwise, and
the Corporation has no present intention to use the increased shares of
authorized Common Stock for antitakeover purposes.
TEXT OF PROPOSED AMENDMENT
Article III, Section 1, of the Corporation's Restated Articles of Incorporation,
if amended, would provide as follows:
1. The aggregate number of shares of Common Stock ("Common Stock")
which the corporation shall have authority to issue is Three Hundred Million
(300,000,000). Such shares shall consist of one class only and shall be
without par value. The aggregate number of shares of Preferred Stock, no par
value ("Preferred Stock"), which the corporation shall have authority to
issue is Ten Million (10,000,000). The Board of Directors is hereby vested
with authority to divide from time to time any or all of the Preferred Stock
into one or more series, and within the limitations set forth in the
Washington Business Corporation Act (as amended from time to time) to fix
and determine or to amend the relative rights and preferences of any such
series.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND
ARTICLE III.
-- 26 --
<PAGE>
AUDITING
Ernst & Young LLP, the Corporation's independent auditors since 1987, has been
selected by the Audit Committee to be the auditors for the current year, subject
to the approval of the Board at its meeting on May 1, 1996. A representative of
Ernst & Young LLP is expected to be present at the Annual Meeting of
Shareholders and will have the opportunity to make a statement if he desires to
do so and to respond to appropriate questions.
SHAREHOLDER NOMINATIONS AND PROPOSALS
The Corporation's Bylaws require that shareholder nominations of persons for
election to the Board of Directors be received by the Secretary of the Board of
Directors of the Corporation at SAFECO Plaza, Seattle, Washington 98185, not
later than 10 days after the day public disclosure of the meeting date is made
or notice of the meeting is mailed to shareholders, whichever first occurs.
Therefore, notices of persons to be considered for election at the 1996 meeting
will be timely if received by March 22, 1996. The notice must contain the name,
address, telephone number, and number of shares of the Corporation's Common
Stock owned by the nominating shareholder and the information relating to each
nominee required with respect to nominees for director under the federal proxy
solicitation rules. The notice of nomination must be accompanied by each
nominee's written consent to being a nominee and statement of intention to serve
as a director if elected.
The Corporation's Bylaws further provide that for business to be properly
brought before the annual meeting by a shareholder, the shareholder must file a
written notice of intention to bring such business with the Secretary of the
Corporation at SAFECO Plaza, Seattle, Washington 98185, within the time frame
described above. Therefore, notices of business to be brought at the 1996
meeting must be received by March 22, 1996. The notice must contain the name,
address, telephone number and number of shares of the Corporation's Common Stock
owned by the shareholder intending to bring such business before the meeting, a
description of the business and reasons for conducting it at the annual meeting,
and any material interest of the shareholder in such business.
Under the federal proxy solicitation rules, in connection with preparation of
proxy material for the 1997 annual meeting of shareholders, any proposal
submitted by a shareholder for such meeting must be received by the Corporation
by November 14, 1996.
-- 27 --
<PAGE>
OTHER MATTERS
THE CORPORATION FILES AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES AND
EXCHANGE COMMISSION. A COPY OF THE CORPORATION'S MOST RECENT FORM 10-K REPORT
WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER WHO MAKES WRITTEN REQUEST TO
ROD A. PIERSON, SENIOR VICE PRESIDENT, SECRETARY AND CONTROLLER, SAFECO
CORPORATION, SAFECO PLAZA, SEATTLE, WASHINGTON 98185.
The Board is not aware of any other matters to be presented for action at the
meeting. If any other matters come before the meeting, the persons named in the
enclosed proxy form will vote all proxies in accordance with their best
judgment.
All shares represented by the enclosed proxy, if returned prior to the meeting,
will be voted in the manner specified by the shareholder. If neither a specific
instruction is given nor authority withheld, the proxy will be voted for each of
the nominees set forth in this Proxy Statement and for Proposal No. 2.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY AND THAT YOUR SHARES BE
REPRESENTED. SHAREHOLDERS ARE URGED TO VOTE, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.
<TABLE>
<S> <C>
[LOGO]
Dated: March 12, 1996 Roger H. Eigsti
Seattle, Washington Chairman, CEO & President
</TABLE>
-- 28 --
<PAGE>
SAFECO CORPORATION
Proxy Solicited on Behalf of the Board of Directors of the Corporation
for the Annual Meeting of Shareholders
May 1, 1996
P The undersigned hereby appoints Roger H. Eigsti, John W. Ellis, Donald G.
R Graham, Jr., Joshua Green III and George Weyerhaeuser, each with full power
O of substitution, as the true and lawful attorneys, agents and proxies for
X the undersigned, to attend the annual meeting of shareholders of SAFECO
Y Corporation to be held at the SAFECO Auditorium, SAFECO Plaza, Seattle,
Washington, at 11:00 a.m. on May 1, 1996, or any adjournment thereof, and
to represent and vote all of the shares the undersigned would be entitled
to vote if personally present in the transaction of such business as may
properly come before the meeting.
CHANGE OF ADDRESS
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
(If you have written in the above space, please mark the corresponding
box on the reverse side of this card.)
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations. The
proxies named above cannot vote your shares unless you sign and return this
card.
SEE REVERSE
SIDE
<PAGE>
/X/ Please mark
your votes as in
this example
(The Board of Directors recommends "FOR" Items 1 and 2.)
FOR WITHHELD Nominees:
1. Election of / / / / Phyllis J. Campbell
Directors. Boh A. Dickey
William P. Gerberding
William W. Krippaehne, Jr.
Paul W. Skinner
For, except vote withheld from the following nominee(s):
________________________________________________________
2. To approve an Amendment to Article III of the Restated Articles of
Incorporation to increase the number of authorized shares of Common Stock.
FOR AGAINST ABSTAIN
/ / / / / /
/ / Change of Address
on Reverse Side
This proxy when properly executed will
be voted in the manner directed herein.
In the event that no designation (i.e.,
"For," "Withheld," "Against," "Abstain")
is made, the proxies named on the
reverse side intend to vote the shares
to which this proxy relates "For" Items 1
and 2. The proxies will vote in their
discretion on any other matters properly
coming before the meeting. The signer
hereby revokes all prior proxies given
by the signer to vote at the meeting or
any adjournment thereof.
SIGNATURE(S) _______________________________________ DATE_______________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
