<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission File Number 1-6563.
SAFECO CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-0742146
(State of Incorporation) (I.R.S. Employer I.D. No.)
SAFECO PLAZA, SEATTLE, WASHINGTON 98185
(Address of principal executive offices)
(206) 545-5000
(Registrant's telephone number, including area code)
126,055,213 shares of no par value common stock
were outstanding at September 30, 1996
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES[X] NO [ ].
<PAGE> 2
SAFECO CORPORATION
- - --------------------------------------------------------------------------------
TABLE OF CONTENTS AND SIGNATURES
<TABLE>
<CAPTION>
Part I - Financial Information * Page
------------
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheet, 3
September 30, 1996 and December 31, 1995
Statement of Consolidated Income and Retained Earnings 5
for the Quarters and Nine Months Ended September 30, 1996 and 1995
Statement of Consolidated Cash Flows 6
for the Nine Months Ended September 30, 1996 and 1995
Item 2. Management's Discussion and Analysis 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
*The accompanying unaudited condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q. In
the opinion of management, they include all adjustments (none of
which were other than normal and recurring adjustments) which are
necessary for a fair presentation of results for the interim
periods. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and the notes
thereto included in the Company's Form 10-K for the year ended
December 31, 1995 which has previously been filed with the
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SAFECO CORPORATION
-----------------------------
Registrant
ROD A. PIERSON
-----------------------------
Rod A. Pierson
Senior Vice President
Dated November 13, 1996 and Chief Financial Officer
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<PAGE> 3
SAFECO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30 December 31
ASSETS 1996 1995
------------ -----------
<S> <C> <C>
Investments:
Fixed Maturities Available-for-Sale, at Market Value
(Amortized cost: 1996 - $11,047,129; 1995 -$10,853,590) $11,560,458 $11,928,144
Fixed Maturities Held-to-Maturity, at Amortized Cost
(Market value: 1996 - $2,531,552; 1995 - $2,388,514) 2,438,330 2,044,517
Marketable Equity Securities, at Market Value
(Cost: 1996 - $620,613; 1995 - $598,130) 1,213,647 1,119,408
Mortgage Loans 444,063 416,489
Real Estate (At cost less accumulated depreciation) 547,257 498,958
Policy Loans 57,958 55,925
Short-Term Investments 39,522 68,808
----------- -----------
Total Investments 16,301,235 16,132,249
Cash 57,253 65,477
Accrued Investment Income 242,107 234,253
Finance Receivables 812,354 741,177
Premiums and Other Service Fees Receivable 465,640 444,618
Other Notes and Accounts Receivable 55,183 42,139
Federal Income Taxes Recoverable 363 -
Reinsurance Recoverables 161,461 137,284
Deferred Policy Acquisition Costs 404,967 356,359
Land, Buildings and Equipment for Company Use
(At cost less accumulated depreciation) 171,560 170,016
Other Assets 186,383 167,872
Separate Account Assets 425,193 276,399
----------- -----------
TOTAL $19,283,699 $18,767,843
=========== ===========
</TABLE>
(continued)
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<PAGE> 4
SAFECO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts) (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30 December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995*
------------ ------------
<S> <C> <C>
Losses and Adjustment Expense $ 2,108,384 $ 2,207,230
Unearned Premiums 971,121 910,762
Life Policy Liabilities 150,105 154,090
Funds Held Under Deposit Contracts 9,556,795 8,756,384
Notes and Mortgages Payable:
Credit Company Borrowings ($711,850 maturing within one year) 756,750 614,270
7.875% Notes Due 2005 200,000 200,000
Other Notes and Mortgages ($26,126 maturing within one year) 235,239 253,275
Other Liabilities 625,261 895,853
Federal and Canadian Income Taxes:
Current -- 18,000
Deferred (Includes tax on unrealized appreciation
of investment securities:
1996 - $382,934; 1995 -$543,556) 344,892 498,934
Separate Account Liabilities 425,193 276,399
------------ ------------
Total Liabilities 15,373,740 14,785,197
------------ ------------
Preferred Stock, No Par Value:
Shares Authorized: 10,000,000
Shares Issued and Outstanding: None -- --
Common Stock, No Par Value:
Shares Authorized: 300,000,000
Shares Reserved for Options:
1996 - 3,423,397; 1995 - 3,699,983
Shares Issued and Outstanding:
1996 - 126,055,213; 1995 - 125,978,742 222,919 217,447
Retained Earnings 2,975,589 2,755,537
Unrealized Appreciation of Investment Securities,
Net of Tax 715,197 1,013,494
Unrealized Loss from Foreign Currency Translation,
Net of Tax (3,746) (3,832)
------------ ------------
Total Stockholders' Equity 3,909,959 3,982,646
------------ ------------
TOTAL $ 19,283,699 $ 18,767,843
============ ============
</TABLE>
*Certain amounts have been reclassified to conform to the 1996 presentation.
-4-
<PAGE> 5
SAFECO CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS
(In Thousands Except Per Share Amounts)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
---------------------------- ----------------------------
1996 1995* 1996 1995*
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Insurance:
Property and Casualty Earned Premiums $ 1,688,952 $ 1,605,580 $ 576,570 $ 544,479
Life and Health Premiums and Other Revenues 198,972 200,610 66,692 65,929
----------- ----------- ----------- -----------
Total 1,887,924 1,806,190 643,262 610,408
Real Estate 57,088 57,127 17,493 18,298
Finance 55,900 47,939 19,325 16,962
Asset Management 16,545 13,320 5,155 4,588
Other 28,517 24,657 9,804 7,494
Net Investment Income 830,584 799,792 280,742 271,521
Realized Investment Gain 69,564 43,238 16,718 22,512
----------- ----------- ----------- -----------
Total 2,946,122 2,792,263 992,499 951,783
----------- ----------- ----------- -----------
EXPENSES:
Losses, Adjustment Expense and Policy Benefits 1,748,841 1,689,749 581,133 546,929
Commissions 312,561 302,731 111,194 101,649
Personnel Costs 202,514 186,275 69,195 65,188
Interest 53,907 68,041 18,499 23,324
Dividends to Policyholders 12,246 11,996 3,979 3,431
Other 195,309 185,382 62,790 62,420
Amortization of Deferred Policy Acquisition Costs 316,294 305,293 109,474 102,857
Deferral of Policy Acquisition Costs (334,566) (319,029) (117,959) (107,021)
----------- ----------- ----------- -----------
Total 2,507,106 2,430,438 838,305 798,777
----------- ----------- ----------- -----------
Income before Income Taxes 439,016 361,825 154,194 153,006
----------- ----------- ----------- -----------
Provision for Federal
and Canadian Income Taxes:
Current 99,590 78,051 29,235 31,157
Deferred 6,754 1,008 8,973 6,992
----------- ----------- ----------- -----------
Total 106,344 79,059 38,208 38,149
----------- ----------- ----------- -----------
Net Income 332,672 282,766 115,986 114,857
Retained Earnings, Beginning of Period 2,755,537 2,495,800 2,896,872 2,595,172
Dividends Declared (106,511) (97,631) (36,556) (33,384)
Common Stock Reacquired (6,109) (5,944) (713) (1,654)
----------- ----------- ----------- -----------
Retained Earnings, End of Period $ 2,975,589 $ 2,674,991 $ 2,975,589 $ 2,674,991
=========== =========== =========== ===========
Net Income Per Share of Common Stock $ 2.64 $ 2.25 $ 0.92 $ 0.91
=========== =========== =========== ===========
Average Number of Shares Outstanding
During the Period (In Thousands) 126,035 125,958 126,052 125,974
=========== =========== =========== ===========
Cash Dividends Paid to Common Stockholders $ 0.82 $ 0.755 $ 0.29 $ 0.265
=========== =========== =========== ===========
</TABLE>
Income per share of common stock is based on the average number of common shares
outstanding. Stock options do not have a significant dilutive effect on income
per share.
*Certain amounts have been reclassified to conform to the 1996 presentation.
1995 share amounts are adjusted to reflect the December 1995 2-for-1 stock
split.
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<PAGE> 6
SAFECO CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(In Thousands)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------- -----------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Insurance Premiums Received $ 1,891,584 $ 1,806,409
Dividends and Interest Received 818,357 793,156
Other Operating Receipts 131,147 127,819
Insurance Claims and Policy Benefits Paid (1,516,853) (1,366,578)
Underwriting, Acquisition and Insurance Operating Costs Paid (625,606) (611,644)
Interest Paid (45,142) (62,249)
Other Operating Costs Paid (65,607) (66,467)
Income Taxes Paid (118,213) (64,766)
----------- -----------
Net Cash Provided by Operating Activities 469,667 555,680
----------- -----------
INVESTING ACTIVITIES:
Purchases of:
Fixed Maturities Available-for-Sale (1,475,640) (1,440,097)
Fixed Maturities Held-to-Maturity (402,807) (161,483)
Equities (114,599) (151,437)
Other Investments (132,845) (270,636)
Maturities of Fixed Maturities Available-for-Sale 571,634 521,397
Maturities of Fixed Maturities Held-to-Maturity 14,233 10,493
Sales of:
Fixed Maturities Available-for-Sale 744,479 372,383
Fixed Maturities Held-to-Maturity -- --
Equities 136,008 124,955
Other Investments 42,634 278,448
Net Decrease in Short-Term Investments 29,298 22,084
Finance Receivables Originated or Acquired (274,860) (251,667)
Principal Payments Received on Finance Receivables 197,680 175,166
Other (44,851) (46,709)
----------- -----------
Net Cash Used in Investing Activities (709,636) (817,103)
----------- -----------
FINANCING ACTIVITIES:
Funds Received Under Deposit Contracts 821,897 772,396
Return of Funds Held Under Deposit Contracts (575,773) (528,136)
Proceeds from Notes and Mortgage Borrowings 15,003 199,001
Repayment of Notes and Mortgage Borrowings (76,858) (219,896)
Net Proceeds from Short-Term Borrowings 153,772 127,617
Common Stock Reacquired (6,404) (6,312)
Dividends Paid to Stockholders (103,343) (95,095)
Other 3,451 3,684
----------- -----------
Net Cash Provided by Financing Activities 231,745 253,259
----------- -----------
Net Decrease in Cash (8,224) (8,164)
Cash at the Beginning of Period 65,477 63,504
----------- -----------
Cash at the End of Period $ 57,253 $ 55,340
=========== ===========
</TABLE>
(continued)
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<PAGE> 7
SAFECO CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(In Thousands) (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Net Income $ 332,672 $ 282,766
--------- ---------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Realized Investment Gain (69,564) (43,238)
Depreciation and Amortization 46,226 37,772
Amortization of Fixed Maturity Investments (28,281) (26,388)
Deferred Income Tax Expense 6,754 1,008
Interest Expense on Deposit Contracts 340,519 326,083
Other Adjustments 2,014 6,431
Changes in:
Losses and Adjustment Expense (98,846) (47,943)
Unearned Premiums 60,359 63,989
Life Policy Liabilities (3,985) 3,105
Accrued Income Taxes (18,363) 13,088
Accrued Interest on Accrual Bonds (31,532) (25,163)
Accrued Investment Income (7,854) (642)
Deferred Policy Acquisition Costs (18,059) (16,985)
Other Assets and Liabilities (42,393) (18,203)
--------- ---------
Total Adjustments 136,995 272,914
--------- ---------
Net Cash Provided by Operating Activities $ 469,667 $ 555,680
========= =========
</TABLE>
-7-
<PAGE> 8
SAFECO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
- - --------------------------------------------------------------------------------
SAFECO Corporation
Our net income for the first nine months of 1996 was $333 million or $2.64 per
share, compared with $2.25 per share for 1995. If we exclude realized gain from
investments, our income was $2.28 per share, compared with $2.03 per share in
1995.
The following summarized financial information sets forth the contributions of
each business segment to our consolidated income.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income (Loss) before Realized Gain
and Income Taxes:
Property and Casualty Insurance:
Underwriting Gain (Loss) ....... $ 31,877 $ (6,762) $ 25,395 $ 23,676
Net Investment Income .......... 211,179 218,320 70,402 72,786
--------- --------- --------- ---------
Total Property and Casualty 243,056 211,558 95,797 96,462
Life and Health Insurance ........... 103,627 98,708 34,316 31,970
Real Estate ......................... 9,693 5,907 3,184 2,152
Credit .............................. 14,011 8,976 5,243 3,512
Asset Management .................... 5,175 4,951 1,391 1,744
Corporate ........................... (6,110) (11,513) (2,455) (5,346)
--------- --------- --------- ---------
Total ..................... 369,452 318,587 137,476 130,494
--------- --------- --------- ---------
Realized Gain (Loss), before Tax, from:
Security Investments ............... 69,622 42,477 16,734 22,228
Real Estate Investments ............ (58) 761 (16) 284
--------- --------- --------- ---------
Total ..................... 69,564 43,238 16,718 22,512
--------- --------- --------- ---------
Income before Income Taxes ............ 439,016 361,825 154,194 153,006
--------- --------- --------- ---------
Provision for Income Taxes on:
Income before Realized Gain ........ 82,166 63,729 32,274 29,658
Realized Gain ....................... 24,178 15,330 5,934 8,491
--------- --------- --------- ---------
Total ..................... 106,344 79,059 38,208 38,149
--------- --------- --------- ---------
Net Income ............................. $ 332,672 $ 282,766 $ 115,986 $ 114,857
========= ========= ========= =========
Net Income Per Share of Common Stock ... $ 2.64 $ 2.25 $ .92 $ .91
</TABLE>
Note: Amounts per share are adjusted to reflect the December 1995 2-for-1 stock
split.
-8-
<PAGE> 9
SAFECO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- - --------------------------------------------------------------------------------
Property and Casualty Insurance
Property and casualty operations for the first nine months of 1996 produced
pretax income of $243.1 million before realized gain from investments, compared
with $211.6 million for the first nine months last year. The company had an
underwriting profit of $31.9 million for the first nine months, compared with a
loss of $6.8 million for the first nine months a year ago. In the third quarter
the underwriting profit was $25.4 million. This compares with profits of $4.4
million last quarter and $23.7 million for the third quarter last year.
Catastrophe losses were $57 million for the first nine months, compared with
$111 million for the first nine months of 1995. The prior year catastrophe
losses include $42 million for increases in the estimated cost of the January
1994 Northridge earthquake and $28 million from two Dallas hailstorms. In the
Statement of Consolidated Cash Flows, Net Cash Provided by Operating Activities
is lower in the first nine months of 1996 compared with the first nine months of
1995 primarily due to higher claims payments in 1996. These higher claims
payments reflect castastrophe losses incurred in 1994 and 1995 and paid in the
first half of 1996, and higher payments of 1996 losses on short-tail lines. The
combined loss and expense ratio was 98.1 for the first nine months, compared
with 100.4 last year. Investment income was $211.2 million, down 3% from a year
ago as a result of the relatively low interest rate environment and the effect
of reduced cash flow earlier this year.
Personal auto, our largest line, produced an underwriting profit of $46.1
million for the first nine months, compared with $68.8 million for the first
nine months last year. The profit for the third quarter was $18.2 million.
Average loss costs increased slightly during the first nine months.
Homeowners had an underwriting loss of $57.3 million for the first nine months,
compared with a loss of $38.7 million for the first nine months of 1995.
Weather-related losses, including catastrophe losses, were $96 million for this
line, compared with $76 million during the first nine months last year.
Nonweather-related claims, particularly fire and water damage claims, have also
increased this year. We continue to pursue additional premiums for this coverage
through a combination of higher prices and proper insurance to value.
Other personal lines, which provide coverage for earthquake, dwelling fire,
inland marine and boats, produced an underwriting profit of $13.7 million for
the first nine months. This compares with a $32.6 million loss for the first
nine months last year which included the increases in the estimated cost of the
Northridge earthquake.
Commercial lines continues to produce results that compare very favorably with
the industry. For the first nine months, commercial lines had an underwriting
profit of $10.3 million, operating at a combined ratio of 97.6. This compares
with an underwriting loss of $17.7 million for the first nine months last year
and a combined ratio of 104.3.
The surety line continues to experience excellent results for both contract and
commercial bond business. The profit for this line was $18.3 million for the
first nine months compared with a profit of $16.9 million for the first nine
months last year.
Property and casualty premiums written for the first nine months increased 4%
over a year ago with personal lines up 5% and commercial lines up 1%.
-9-
<PAGE> 10
SAFECO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- - --------------------------------------------------------------------------------
Life and Health Insurance
Our life and health companies produced a pretax profit, before realized gain
from investments, of $103.6 million for the first nine months of 1996, compared
with $98.7 million for the same period last year. The third quarter profit was
$34.3 million, compared with $32.0 million for the third quarter of 1995.
The annuity and retirement services lines' combined nine months earnings were
$38.7 million, down from $43.4 million reported for the same period last year.
The competitive market and lower interest rates have resulted in reduced profit
margins in these operations. Group insurance profit was $10.4 million for the
first nine months, up from $7.8 million reported for the same period last year.
Individual life insurance earnings for the nine months were $3.6 million,
compared to a loss of $0.5 million for the first nine months of 1995. Recently
introduced products combined with a new multi-line marketing strategy continue
to have a positive effect on our individual life operation.
Real Estate
SAFECO Properties produced record pretax income of $9.7 million for the first
nine months of 1996, compared with $5.9 million for 1995 as our retail
properties continue to produce solid operating results.
As previously reported, construction and leasing for our 1.4 million
square-foot, mixed-use project in Redmond, Washington, is progressing well as we
near a spring 1997 opening date. In addition, we recently commenced development
on two existing properties that will be transformed from a traditional regional
shopping center format to an alternative retail format, with an emphasis in
value retailing.
Credit
SAFECO Credit Company produced a record pretax profit of $14.0 million for the
first nine months of 1996, compared with $9.0 million in the first nine months
of 1995 and $13.3 million for all of 1995. Income in the third quarter was also
a record $5.2 million, compared to $3.5 million in the third quarter of 1995 and
$4.7 million in the second quarter of 1996. Continuing higher loan and lease
outstandings, reduced operating expense ratios, favorable write-off experience
and relatively stable short-term interest rates were contributing elements to
these results.
Non-affiliate receivables and operating leases reached $881 million at September
30, 1996, a 13% annualized increase from December 1995. Total net receivables
surpassed $1 billion during the third quarter.
SAFECO Credit's summarized financial information is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1996 1995
---------- ----------
<S> <C> <C>
Finance Receivables ..... $ 812,354 $ 741,177
Others Assets ........... 210,719 141,873
---------- ----------
Total Assets ........ $1,023,073 $ 883,050
========== ==========
Credit Company Borrowings $ 756,750 $ 614,270
Other Liabilities ....... 162,414 172,155
---------- ----------
Total Liabilities ... $ 919,164 $ 786,425
========== ==========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
1996 1995
------- -------
<S> <C> <C>
Revenues ................. $61,983 $52,466
Expenses ................. 47,972 43,490
------- -------
Income before Income Taxes 14,011 8,976
Provision for Income Taxes 5,064 2,985
------- -------
Net Income ........... $ 8,947 $ 5,991
======= =======
</TABLE>
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<PAGE> 11
SAFECO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- - --------------------------------------------------------------------------------
Asset Management
The pretax income from our asset management activities for the first nine months
of 1996 was $5.2 million, compared with $5.0 million last year. Assets under
management continue to increase and total $3.2 billion, an increase of 10% over
September 30, 1995.
Investment Portfolio
The market value of our consolidated bond portfolio was $607 million in excess
of amortized cost at September 30, 1996 compared with $533 million at June 30,
1996 and $1.4 billion at December 31, 1995. The market value of our equity
securities was $593 million in excess of cost at September 30, 1996.
Executive Promotions
Boh A. Dickey has been promoted to President and Chief Operating Officer of
SAFECO Corporation and Rod A. Pierson has been appointed Chief Financial Officer
of SAFECO Corporation effective August 7, 1996. Roger Eigsti continues as
Chairman and Chief Executive Officer.
As president and chief operating officer, Dickey has overall responsibility for
SAFECO's life insurance subsidiaries and financial operations, including the
mutual fund, credit company, real estate, surety, investment and Talbot
Financial operations. Dickey, 52, joined SAFECO in 1982 as vice president and
controller, becoming chief financial officer in 1989. He was appointed executive
vice president in 1992 and elected a director of the corporation in 1993.
Pierson, 48, has been with SAFECO since 1974. In addition to now serving as
chief financial officer, he also remains senior vice president, secretary and
controller of the corporation. Pierson served as controller of SAFECO's property
and casualty subsidiaries from 1984 to 1990 and was appointed senior vice
president in 1994.
Other-- Footnotes
The following additional footnote disclosure relates to new accounting
standards.
Nature of Operations and Summary of Significant Accounting Policies -- New
Accounting Standards
In March of 1995, the Financial Accounting Standards Board (FASB)
issued Statement 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." Statement 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying value. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of.
Statement 121 is effective for financial statements for fiscal years
beginning after December 15, 1995 and SAFECO adopted it in the first
quarter of 1996. Adoption did not affect net income.
In June of 1996, the FASB issued Statement 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." Statement 125 is effective for transfers and servicing of
financial assets and extinguishment of liabilities occurring after
December 31, 1996, and SAFECO will adopt it in the first quarter of
1997. The FASB is currently considering a one year deferral of the
effective date of certain provisions of Statement 125. Statement 125
provides guidance in determining whether a transfer of a financial
asset represents a sale or a secured borrowing, as well as the
continuing accounting for any servicing assets retained. The Statement
also provides guidance relating to extinguishment of liabilities by
debtors. Although the impact of the Statement is currently being
studied, it is not expected to have a material effect on SAFECO's
financial position or results of operations.
-11-
<PAGE> 12
SAFECO CORPORATION
Part II - Other Information
- - --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 3 - Bylaws (as last amended August 7, 1996.)
Exhibit 10 - Form of Executive Severance Agreements with
Richard E. Zunker and James W. Ruddy dated August
30, 1996.
Exhibit 27 - Financial Data Schedule. (This exhibit is
included only in the electronic EDGAR filing
version on this 10-Q. The Financial Data Schedule
is not a separate financial statement but a
schedule that summarizes certain standard
financial information extracted directly from the
financial statements in this filing.)
(b) Reports on Form 8-K
No Forms 8-K were filed or required to be filed for any event
during the quarter ended September 30, 1996.
-12-
<PAGE> 1
Exhibit 3
BYLAWS
OF
SAFECO CORPORATION
(As last amended August 7, 1996)
ARTICLE I
STOCKHOLDERS' MEETINGS
1. ANNUAL MEETING. (a) The annual meeting of the stockholders of the corporation
for the election of Directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held at 11:00 o'clock in the morning on the first Wednesday in May or,
if such day is a legal holiday, then on the following business day or on such
other day as may be designated by the Chairman, the President, or the Board of
Directors ("Board of Directors"). The meeting shall be held at the principal
executive office of the corporation or at such other place as may be designated
in the notice of the meeting.
(b) For business to be properly brought before the annual meeting in
accordance with these Bylaws, business must be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (iii) otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable requirements,
for business to be properly brought before the annual meeting by a stockholder,
the stockholder must file a written notice of intention to bring such business
("Business Notice") with the Secretary of the corporation not less than 60 days
nor more than 90 days before the date of the stockholders' meeting at which such
business will be brought; provided, however, that, in the event that the date of
the meeting is other than the date specified in Section 1(a) of this Article I
and less than 70 days' notice or initial prior public disclosure of the date of
the meeting is given or made to stockholders, such Business Notice shall be
timely if received not later than 10 days after the day on which such notice of
the date of the meeting was mailed or such initial public disclosure of the date
of the meeting was made, whichever first occurs. The Business Notice shall state
the name, address, telephone number and class and number of shares of capital
stock owned by the stockholder who intends to bring such business before the
meeting; and, as to each matter the stockholder proposes to bring before the
annual meeting, a brief description of the business desired to be brought before
the annual meeting, the reasons for conducting such business at the annual
meeting and any material interest of the stockholder in such business.
(c) No business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 1; provided, however,
that nothing in this Section 1 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting. The
presiding officer of an annual meeting shall, if the facts warrant, determine
that business was not properly brought before the meeting in accordance with the
foregoing
<PAGE> 2
SAFECO Corporation Bylaws
At August 7, 1996
Page 2
procedure and, if the presiding officer should so determine, the presiding
officer shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
2. SPECIAL MEETINGS. Special meetings of the stockholders may be called only by
the Board of Directors. Such special meetings may be for any purpose or
purposes, which shall be described in the notice of such special meeting, and
shall be at the date, time and place prescribed in the notice of the meeting.
3. NOTICE OF MEETING. (a) Written notice of each annual and special
stockholders' meeting shall be given to all stockholders of record entitled to
notice of such meeting no fewer than 10 nor more than 60 days before the meeting
date, except that notice of a stockholders' meeting to act on an amendment to
the articles of incorporation, a plan of merger or share exchange, a proposed
sale of assets other than in the regular course of business or the dissolution
of the corporation shall be given no fewer than 20 nor more than 60 days before
the meeting date. If such written notice is placed in the United States mail,
postage prepaid, and correctly addressed to the stockholder's address shown in
the corporation's current record of stockholders, then the notice is effective
when mailed.
(b) Notice of any stockholders' meeting may be waived in writing by any
stockholder at any time, either before or after the meeting. In addition, notice
of the date, time, place and purpose of the meeting shall be deemed waived by
any stockholder who attends a stockholders' meeting in person or by proxy,
unless the stockholder at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting.
4. ORGANIZATION OF MEETING - QUORUM. A stockholders' meeting, duly called, can
be organized for the transaction of business whenever a quorum is present. The
presence, in person or by proxy, of the holders of a majority of the votes
entitled to be cast at the meeting shall constitute a quorum. Once a share is
represented for any purpose at a meeting, other than solely to object to holding
the meeting or transacting business at the meeting, it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.
5. ADJOURNED MEETINGS. Unless a new record date is or must be set for an
adjourned meeting, an adjournment or adjournments of any stockholders' meeting
may be taken to the date, time and place announced by the presiding officer at
the meeting, without new notice being given; but any meeting at which directors
are to be elected shall be adjourned only from day to day until such directors
are elected.
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SAFECO Corporation Bylaws
At August 7, 1996
Page 3
6. VOTING AT MEETINGS. Each holder of common stock shall be entitled to one vote
for each share of common stock then of record in the holder's name on the books
of the corporation. Each holder of a share of capital stock other than common
stock shall have the right to vote on those matters prescribed by the Board of
Directors in establishing the preferences, limitations and relative rights for
that class of capital stock. Every stockholder shall have the right to vote
either in person or by proxy. All voting at stockholders' meetings shall be viva
voce, unless any qualified voter shall demand a vote by ballot. In the case of
voting by ballot, each ballot shall state the name of the stockholder voting,
the number of shares owned by the stockholder, and, in addition, if such vote be
cast by proxy it shall also state the name of the proxy.
ARTICLE II
BOARD OF DIRECTORS
1. NUMBER AND QUALIFICATIONS. The business and affairs of the corporation shall
be managed under the direction of a Board of Directors of from 12 to 18
directors, as set from time to time by resolution of the Executive Committee,
which directors need not be stockholders of the corporation.
2. ELECTION - TERM OF OFFICE. The directors shall be divided into three classes,
designated Class 1, Class 2, and Class 3. Each class shall consist, as nearly as
may be possible, of one-third of the total number of Directors constituting the
entire Board of Directors. At each annual meeting of stockholders successors to
the class of Directors whose term expires at that annual meeting shall be
elected for a three-year term. If the number of Directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of Directors in each class as nearly equal as possible, but in no
case will a decrease in the number of Directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which the director's term expires and until the director's successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. In the event
of a failure to hold an election of Directors at any annual stockholders'
meeting, election of Directors may be held at a special meeting of the
stockholders called for that purpose; provided, that notice thereof be given all
stockholders entitled to vote at such meeting at least 30 days prior to the date
set for such special meeting.
3. VACANCIES. Any vacancy on the Board of Directors may be filled by the
stockholders, the Board of Directors or, if the directors in office constitute
fewer than a quorum of the Board of Directors, then by the affirmative vote of
the majority of all directors in office.
<PAGE> 4
SAFECO Corporation Bylaws
At August 7, 1996
Page 4
4. NOMINATIONS OF DIRECTORS. (a) The Board of Directors or at its direction a
committee of the Board of Directors shall nominate individuals for election as
directors at the annual meeting of stockholders and at any special meeting of
stockholders called for the purpose of electing directors. Nominations may also
be made by any stockholder entitled to vote for the election of Directors at
such meeting who complies with the notice procedures set forth in this Section
4.
(b) A nomination for election as director, other than nominations made
by or at the direction of the Board of Directors, may be made only if a written
notice of intention to nominate ("Nomination Notice") has been received by the
secretary to the Board of Directors not less than 60 days nor more than 90 days
before the date of the stockholders' meeting at which such election will occur;
provided, however, that, in the event that the date of the meeting is other than
the date specified in Section 1(a) of Article I above and less than 70 days'
notice or initial prior public disclosure of the date of the meeting is given or
made to stockholders, such Nomination Notice shall be timely if received not
later than 10 days after the day on which such notice of the date of the meeting
was mailed or such initial public disclosure of the date of the meeting was
made, whichever first occurs. The Nomination Notice shall state the name,
address, telephone number and class and number of shares of capital stock owned
by the stockholder who intends to make a nomination; the name, age, address and
telephone number of each nominee; a description of each nominee's business
experience for the past five years; a statement whether the nominee has ever
been prosecuted for any crime or been a party to any proceeding in which it was
alleged the nominee or any affiliate of the nominee violated any law or
regulation and, if so, a complete description of such prosecution or proceeding;
and any other information relating to each nominee that is required to be
disclosed in solicitations for proxies for election of Directors pursuant to
Section 14(a) of the Securities Exchange Act of 1934, as amended. The
corporation may require any proposed nominee to furnish such additional
information as may reasonably be required to determine the eligibility of such
proposed nominee. In order to be considered valid the Nomination Notice must be
accompanied by the written consent of each nominee to be nominated and a
statement of each nominee's intention to serve as a director if elected.
(c) No person shall be eligible for election as a director unless
nominated in accordance with the procedures set forth in this Section 4. The
presiding officer at the stockholders' meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure and, if the presiding officer should so
determine, the presiding officer shall so declare to the meeting and the
defective nomination shall be disregarded.
5. ANNUAL MEETING. The first meeting of each newly elected Board of Directors
shall be known as the annual meeting thereof.
<PAGE> 5
SAFECO Corporation Bylaws
At August 7, 1996
Page 5
6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held
quarterly, on the first Wednesday in February, May, August and November of each
year, at such time and place as designated in the notice of the meeting.
7. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at
any place at any time when called by the Chairman or the President, or when
called by the Secretary or an Assistant Secretary on request of three directors,
or when called by any director during a national emergency of the kind that
would make emergency bylaws operative for domestic insurers under the provisions
of Sections 48.07.160 through 48.07.200 of the Revised Code of Washington.
8. NOTICE OF MEETINGS. (a) Notice of the time and place of meetings of the Board
of Directors and of meetings of committees of the Board of Directors shall be
given by the secretary to the Board of Directors, or by the person calling the
meeting, in writing or orally at least two days prior to the day upon which the
meeting is to be held. Notice may be given by mail, private carrier, personal
delivery, telegraph or teletype, telephone, or by wire or wireless equipment
which transmits a facsimile of the notice.
(b) A director may waive notice of any meeting of the Board of
Directors or any committee of the Board of Directors in writing before or after
the date and time of the meeting and such waiver shall be deemed the equivalent
of giving notice of the meeting. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors or any
committee of the Board of Directors need be specified in the waiver of notice of
such meeting.
(c) A director's attendance at or participation in a Board of Directors
or committee meeting shall constitute a waiver of notice of such meeting, unless
the director at the beginning of the meeting, or promptly upon the director's
arrival at the meeting, objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to action taken at the
meeting.
9. QUORUM. A majority of the total number of Directors fixed by or in the manner
provided in these Bylaws or, if vacancies exist on the Board of Directors, a
majority of the total number of Directors then serving on the Board of Directors
shall constitute a quorum for the transaction of business at any Board of
Directors' meeting; provided, however, that a quorum may not be less than
one-third of the total number of Directors fixed by or in the manner provided by
these Bylaws. When a quorum is present, a majority of the directors in
attendance at a meeting shall be sufficient to transact business and to adjourn
the meeting from time-to-time without further notice.
<PAGE> 6
SAFECO Corporation Bylaws
At August 7, 1996
Page 6
ARTICLE III
EXECUTIVE COMMITTEE
1. MEMBERSHIP. The Executive Committee shall consist of not less than two
members and shall include (i) the chief executive officer of the corporation,
(ii) the chairs of each of the Audit, Compensation, Finance and Nominating
Committees, and (iii) any other director of the corporation appointed by the
Board of Directors. The chief executive officer shall be the chair of the
Executive Committee, unless the Board of Directors designates some other member
of the Executive Committee as chair.
2. POWERS AND DUTIES. (a) Other than those powers specifically denied to a
committee of a Board of Directors under Washington law, the Executive Committee
may exercise all the powers of the Board of Directors in the management of the
business of the corporation when the Board of Directors is not in session. All
such actions of the Executive Committee shall be reported to the Board of
Directors at its meeting next succeeding such action and shall be subject to
revision or alteration by the Board of Directors; provided, that no rights of
third parties shall be affected by any such revision or alteration.
(b) The Executive Committee shall determine the corporation's policy
regarding charitable contributions and shall review and make recommendations to
the Board of Directors as appropriate on fundamental matters, including election
of Directors, succession planning, appointment of officers of the corporation
and its principal subsidiaries, capital allocation among the corporation's
operations, issuance and repurchase or redemption of securities, dividends to
shareholders, formation of subsidiaries, and material acquisitions or
dispositions of subsidiaries or assets.
3. RULES OF PROCEDURE. The Executive Committee shall fix its own rules of
procedure and shall meet where and as provided by such rules or by resolution of
the Board of Directors. Special meetings of the Executive Committee may be
called at any time by the chair of the Executive Committee or any two members.
At all meetings of the Executive Committee, the presence of a majority of the
members shall be necessary to constitute a quorum, and the affirmative vote of a
majority of the quorum shall be necessary and sufficient to transact business.
<PAGE> 7
SAFECO Corporation Bylaws
At August 7, 1996
Page 7
ARTICLE IV
FINANCE COMMITTEE
1. MEMBERSHIP. The Finance Committee shall consist of not less than five members
appointed by the Board of Directors, one of whom shall be designated as its
chair by the Board of Directors. Each member of the Finance Committee shall
continue as a member at the pleasure of the Board of Directors.
2. POWERS AND DUTIES. The Finance Committee shall have general supervision of
the finances and investments of the corporation. It shall designate or approve
the designation of depositories for the funds of the corporation and shall have
authority over all matters related to bank and custodial accounts; it shall have
authority to buy and sell securities and to make loans of such character as is
permitted by law; and, it may direct any action necessary to collect amounts due
the corporation. All actions of the Finance Committee shall be recorded in
minutes of its meetings and reported to the Board of Directors. Such actions
shall be subject to revision or alteration by the Board of Directors; provided,
that no rights of third parties shall be affected by any such revision or
alteration.
3. RULES OF PROCEDURE. The Finance Committee shall fix its own rules of
procedure and shall meet where and as provided by such rules or by resolution of
the Board of Directors. Special meetings of the Committee may be called at any
time by the chair of the Finance Committee or by any two members. At all
meetings, the presence of a majority of the members shall be necessary to
constitute a quorum, and the affirmative vote of a majority of the quorum shall
be necessary and sufficient to transact business.
ARTICLE V
AUDIT COMMITTEE
1. MEMBERSHIP. The Audit Committee shall consist of not less than three members
appointed by the Board of Directors, none of whom shall be an employee of the
corporation or any of its subsidiaries. The Board of Directors shall designate
one member of the Audit Committee as its chair. Each member of the Audit
Committee shall continue as a member at the pleasure of the Board of Directors.
<PAGE> 8
SAFECO Corporation Bylaws
At August 7, 1996
Page 8
2. POWERS AND DUTIES. (a) The Audit Committee shall:
(1) Recommend the independent public accountants for selection as
auditors by the Board of Directors;
(2) Review the scope and, upon completion, the results of the
audit with the corporation's independent public accountants;
(3) Review management letters received from the independent public
accountants in connection with audits;
(4) Review the corporation's internal accounting controls;
(5) Review the planning and results of internal audit
examinations;
(6) Review with management any accounting changes affecting the
corporation or its affiliates;
(7) Meet in alternative and separate executive sessions with the
independent public accountants and management;
(8) Review the scope of and fees for consulting services provided
by the independent public accountants; and
(9) Review any interested party conflict-of-interest situation
brought to its attention.
(b) All actions of the Audit Committee shall be recorded in minutes of
its meetings and reported to the Board of Directors.
3. RULES OF PROCEDURE. The Audit Committee shall fix its own rules of procedure
and shall meet where and as provided by such rules or by resolution of the Board
of Directors. Special meetings of the Audit Committee may be called at any time
by the chair of the Audit Committee or by any two members. At all meetings, the
presence of a majority of the members shall be necessary to constitute a quorum,
and the affirmative vote of a majority of the quorum shall be necessary and
sufficient to transact business.
<PAGE> 9
SAFECO Corporation Bylaws
At August 7, 1996
Page 9
ARTICLE VI
NOMINATING COMMITTEE
1. MEMBERSHIP. The Nominating Committee shall consist of not less than three
members appointed by the Board of Directors, not more than one of whom shall be
an employee of the corporation or any of its subsidiaries. The Board of
Directors shall designate one member of the Nominating Committee as its chair.
Each member of the Nominating Committee shall continue as a member at the
pleasure of the Board of Directors.
2. POWERS AND DUTIES. (a) The Nominating Committee shall:
(1) Review qualifications of candidates for Board of Directors
membership from whatever source received;
(2) Recommend to the Executive Committee the slate of director
candidates to be proposed for election by stockholders at the
annual meeting;
(3) Recommend to the Executive Committee candidates to fill
director vacancies which occur between annual meetings of
stockholders;
(4) Recommend to the Board of Directors criteria regarding
personal qualifications for nomination as director, including
experience, skills, affiliations and characteristics;
(5) Recommend to the Board of Directors criteria regarding the
composition of the Board of Directors, including total size
and number of employee-directors;
(6) Recommend to the Board of Directors criteria relating to
tenure as a director, including retirement age and
continuation of a director in an honorary or similar capacity;
and
(7) Recommend to the Board of Directors the fees to be paid to
directors, including retainer, meeting and committee meeting
fees, and any additional fees to be paid to a director for
particular service, e.g., to the chairman of the Board of
Directors or chair of any committee. The Committee shall not
recommend that any such fees be paid to any director who is
also an employee of the corporation or its subsidiaries.
<PAGE> 10
SAFECO Corporation Bylaws
At August 7, 1996
Page 10
(b) All actions of the Nominating Committee shall be recorded in
minutes of its meetings and reported to the Board of Directors.
3. RULES OF PROCEDURE. The Nominating Committee shall fix its own rules of
procedure and shall meet where and as provided by such rules or by resolution of
the Board of Directors. Special meetings of the Nominating Committee may be
called at any time by the chair of the Nominating Committee or by any two
members. At all meetings, the presence of a majority of the members shall be
necessary to constitute a quorum, and the affirmative vote of a majority of the
quorum shall be necessary and sufficient to transact business.
ARTICLE VII
COMPENSATION COMMITTEE
1. MEMBERSHIP. The Compensation Committee shall consist of not less than three
members appointed by the Board of Directors, none of whom shall be an employee
of the corporation or any of its subsidiaries. The Board of Directors shall
designate one member of the Compensation Committee as its chair. Each member of
the Compensation Committee shall continue as a member at the pleasure of the
Board of Directors.
2. POWERS AND DUTIES. (a) The Compensation Committee shall:
(1) Review and approve in advance salary increases for officers of the
corporation and employees of its subsidiaries where the proposed salary
exceeds an amount set from time-to-time by the Board of Directors;
(2) Report to the Board of Directors remuneration information concerning the
chief executive officer and through the chief executive officer make
such information as to any employee available to any director upon
request;
(3) Review and recommend to the Board of Directors any additional employee
benefit program of a substantial nature and material changes to existing
programs;
(4) Review and approve changes required by law to be made to existing
employee benefit programs and non-material changes to existing programs;
and
(5) Administer the corporation's stock option program.
<PAGE> 11
SAFECO Corporation Bylaws
At August 7, 1996
Page 11
(b) All actions of the Compensation Committee shall be recorded in
minutes of its meetings and reported to the Board of Directors.
3. RULES OF PROCEDURE. The Compensation Committee shall fix its own rules of
procedure and shall meet where and as provided by such rules or by resolution of
the Board of Directors. Special meetings of the Compensation Committee may be
called at any time by the chair of the Compensation Committee or by any two
members. At all meetings, the presence of a majority of the members shall be
necessary to constitute a quorum, and the affirmative vote of a majority of the
quorum shall be necessary and sufficient to transact business.
ARTICLE VIII
OTHER COMMITTEES
The Board of Directors shall have authority to establish by resolution such
other committees as the Board of Directors may from time to time deem necessary
or advisable. The membership, duties and authority of such committees shall be
as the Board of Directors may from time to time establish.
ARTICLE IX
OFFICERS
1. OFFICERS ENUMERATED - APPOINTMENT. The officers of the corporation shall be a
Chairman, a President, one or more Vice Presidents, one or more Assistant Vice
Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, and one
or more Assistant Treasurers, all of whom shall be appointed by the Board of
Directors at the annual meeting thereof, to hold office for the term of one year
and until their successors are appointed and qualified.
2. QUALIFICATIONS. None of the officers of the corporation, except the Chairman
and President, need be a director. Any two or more corporate offices may be
combined in one person.
3. CHAIRMAN. The Chairman shall preside at all meetings of the stockholders and
directors, shall be the chief executive officer of the corporation, and, subject
to the Board of Directors and Executive Committee, shall have general
supervisory power and ultimate authority over and responsibility for the
business and affairs of the corporation.
<PAGE> 12
SAFECO Corporation Bylaws
At August 7, 1996
Page 12
4. PRESIDENT. The President shall be the chief operating officer of the
corporation, and, subject to the ultimate authority of the Board of Directors,
Executive Committee and Chairman, shall have general charge, supervision and
control over the business and affairs of the corporation and of such of its
subsidiaries as have been designated by the Chairman, and shall be responsible
for the management thereof. In the absence of the Chairman the President shall
act in the place of the Chairman with the authority to exercise all of the
Chairman's powers and perform the Chairman's duties.
5. VICE PRESIDENTS. In the absence or disability of both the Chairman and
President, one of the Vice Presidents, in the order determined by seniority of
responsibility and then order of their appointment, shall act as Chairman and
President until such time as the Board of Directors acts to appoint an
individual or individuals to the offices of Chairman and President. One or more
of the vice presidents may be designated by the Board of Directors as executive
vice president, senior vice president or such other title as the Board of
Directors deems appropriate for the position and duties.
6. SECRETARY. The Secretary shall be the custodian of the records, books of
account, and seal of the corporation, and, in general, shall perform all duties
usually incident to the office of Secretary, and make such reports and perform
such other duties as may from time to time be requested of or assigned by the
Board of Directors, the Executive Committee, the chief executive officer or
chief operating officer of the corporation.
7. ASSISTANT SECRETARIES. The Assistant Secretaries shall perform such duties as
may be assigned to them by the Secretary of the corporation, the Board of
Directors, the Executive Committee, the chief executive officer or the chief
operating officer of the corporation.
8. TREASURER. The Treasurer shall have charge and custody of and be responsible
for all funds and securities of the corporation. The Treasurer shall deposit all
such funds in the name of the corporation in such depositories or invest them in
such investments as may be designated or approved by the Finance Committee or
the Board of Directors, and shall authorize disbursement of the funds of the
corporation in payment of just demands against the corporation, or as may be
ordered by the Board of Directors, the Executive Committee, or the Finance
Committee on securing proper vouchers for such disbursements. The Treasurer
shall render to the Board of Directors from time to time as may be required an
account of all transactions as Treasurer, and shall perform such other duties as
may from time to time be assigned by the Board of Directors, the Executive
Committee, the Finance Committee, or the chief executive officer of the
corporation.
<PAGE> 13
SAFECO Corporation Bylaws
At August 7, 1996
Page 13
9. ASSISTANT TREASURERS. The Assistant Treasurers shall perform such duties as
may be assigned to them by the Treasurer, the Board of Directors, the Executive
Committee, the chief executive officer or the chief operating officer of the
corporation.
10. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint such other
officers and agents as it shall deem necessary to exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors.
11. REMOVAL. Any officer of the corporation may be removed by the affirmative
vote of a majority of the whole Board of Directors; such removal, however, shall
be without prejudice to the contract rights of the person so removed.
ARTICLE X
CORPORATION PROXIES
Unless otherwise ordered by the Board of Directors, any and all shares of stock
owned or held by the corporation in any other corporation shall be represented
and voted at any meeting of the stockholders of such other corporation by any
one of the following officers of the corporation in the following order who may
attend such meeting; i.e., the Chairman, the President, a Vice President, or the
Treasurer, and such representation by any one of the officers above named shall
be deemed and considered a representation in person by the corporation at such
meeting. Any one of the officers above named may execute a proxy appointing any
other person as attorney and proxy to represent the corporation at such
stockholders' meeting and to vote all stock of such corporation owned or held by
the corporation with all power and authority in the premises that any of the
officers above named would possess if personally present. The Board of Directors
by resolution may from time to time confer like powers upon any other person or
persons.
ARTICLE XI
STOCK
1. CERTIFICATES OF STOCK. Certificates of stock of the corporation shall be
issued in such form in accordance with the corporation law of the State of
Washington as may be approved by the Board of Directors, and may be signed by
the chief executive officer, the chief operating officer, or any Vice President,
and by the Secretary or any Assistant Secretary.
2. TRANSFERS. Shares of stock may be transferred by delivery of the certificates
therefor accompanied either by an assignment in writing on the back of the
certificate or by a written power of attorney to sell, assign and transfer the
same by the record holder of the certificate. No
<PAGE> 14
SAFECO Corporation Bylaws
At August 7, 1996
Page 14
transfer shall be valid except as between the parties thereto until such
transfer shall have been made on the books of the corporation. Except as
specifically provided in these Bylaws, no shares of stock shall be transferred
on the books of the corporation until the outstanding certificate therefor has
been surrendered to the corporation.
3. STOCKHOLDERS OF RECORD. The corporation shall be entitled to treat the holder
of record on the books of the corporation of any share or shares of stock as the
holder in fact thereof for all purposes, including the payment of dividends on
such stock and the right to vote such stock.
4. LOSS OR DESTRUCTION OF CERTIFICATES. In the case of loss or destruction of
any certificate of stock, another may be issued in its place upon proof of such
loss or destruction, and upon the giving of a satisfactory bond or indemnity to
the corporation. A new certificate may be issued without requiring any bond when
in the judgment of the Treasurer it is proper to do so.
5. The Board of Directors shall have the power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer,
conversion and registration of certificates for shares of the stock of the
corporation not inconsistent with these Bylaws, the Articles of Incorporation,
or the laws of the State of Washington.
ARTICLE XII
INDEMNIFICATION
1. DIRECTORS. (a) Each person who was or is a party to any proceeding (whether
brought by or in the right of the corporation or otherwise) by reason of the
fact that he or she is or was a director of the corporation, or, while a
director of the corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan (an "Indemnitee"), whether the basis of a proceeding is an
alleged action in an official capacity as such a director, officer, partner,
trustee, employee, or agent or in any other capacity while serving as such a
director, officer, partner, trustee, employee, or agent, shall be indemnified
and held harmless by the corporation against all judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the Indemnitee in
connection with such proceeding. Except as provided in paragraph (d) of this
Section 1 with respect to proceedings seeking to enforce rights to
indemnification, the corporation shall indemnify any Indemnitee only if the
proceeding (or part thereof) was authorized or ratified by the Board of
Directors.
<PAGE> 15
SAFECO Corporation Bylaws
At August 7, 1996
Page 15
(b) No indemnification shall be provided to any Indemnitee for acts or
omissions of the Indemnitee finally adjudged to be intentional misconduct or a
knowing violation of law, for conduct of the Indemnitee finally adjudged to be
in violation of Section 23B.08.310 of the Washington Business Corporation Act,
for any transaction with respect to which it was finally adjudged that such
Indemnitee personally received a benefit in money, property or services to which
the Indemnitee was not legally entitled or if the corporation is otherwise
prohibited by applicable law from paying such indemnification, except that if
Section 23B.08.560 or any successor provision is hereafter amended, the
restrictions on indemnification set forth in this paragraph (b) shall be as set
forth in such amended statutory provision.
(c) The right to indemnification conferred under this Article XII shall
included the right to be paid by the corporation the expenses incurred in
defending any proceeding in advance of its final disposition. An advancement of
expenses shall be made upon delivery to the corporation of an undertaking, by or
on behalf of an Indemnitee, to repay all amounts so advanced if it is ultimately
determined by final judicial decision from which there is no right to appeal
that such Indemnitee is not entitled to be indemnified for such expenses under
this Article XII.
(d) If a claim under this Section 1 is not paid in full by the
corporation within 60 days after a written claim has been received by the
corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the Indemnitee may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. An Indemnitee shall be presumed
to be entitled to indemnification under this Article XII upon submission of a
written claim (and, in an action brought to enforce a claim for an advancement
of expenses, where the required undertaking has been tendered to the
corporation), and the corporation shall have the burden of proof to overcome the
presumption that the Indemnitee is so entitled.
2. OFFICERS. The corporation shall extend rights to indemnification and
advancement of expenses in the same manner and to the same extent provided to
directors under Section 1 of this Article to any person, not a director of the
corporation, who is or was an officer of the corporation or is or was serving at
the request of the corporation as a director, officer, partner, trustee, or
agent of another foreign or domestic corporation, partnership, joint venture,
trust, other enterprise, or employee benefit plan.
3. OTHER EMPLOYEES AND AGENTS. The corporation may, by action of the Board of
Directors, grant rights to indemnification and advancement of expenses to
employees and agents or any class or group of employees and agents of the
corporation (I) with the same
<PAGE> 16
SAFECO Corporation Bylaws
At August 7, 1996
Page 16
scope and effect as the provisions of this Article with respect to the
indemnification and advancement of expenses of directors; (ii) pursuant to
rights provided by the Washington Business Corporation Act; or (iii) as are
otherwise consistent with law.
4. DEFINITIONS. For purposes of this Article XII, the terms "director,"
"corporation," "expenses," "party" and "proceeding" have those meanings assigned
to them in Section 23B.08.500 of the Washington Business Corporation Act.
5. SERVICE AT THE REQUEST OF THE CORPORATION. Any person who, while a director,
officer or employee of the corporation, is or was serving (a) as a director or
officer of another corporation of which a majority of the shares entitled to
vote is held by the corporation or (b) as a partner, trustee or otherwise in a
management capacity in a partnership, joint venture, trust or other enterprise
of which the corporation or a wholly-owned subsidiary of the corporation is a
general partner or has a majority ownership shall be deemed to be so serving at
the request of the corporation.
6. PROCEDURES EXCLUSIVE. Pursuant to Section 23B.08.560(2) or any successor
provision of the Washington Business Corporation Act, the procedures for
indemnification and advancement of expenses set forth in this Article are in
lieu of the procedures required by Section 23B.08.550 or any successor provision
of the Washington Business Corporation Act.
7. NOT EXCLUSIVE -- CONTINUING. The indemnification provided by this Article
shall not be deemed exclusive of other rights to which the director, officer,
employee or agent may be entitled as a matter of law or by contract, and shall
continue as to a person who has ceased to be a director, officer, partner,
trustee, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
8. INSURANCE. The corporation may maintain insurance at its expense to protect
itself and any director, officer, partner, trustee, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Washington Business Corporation Act.
ARTICLE XIII
SEAL
The seal of this corporation shall consist of a flat-faced, circular die with
the words "SAFECO CORPORATION" and with the words and figures "Corporate Seal,
1929" in the center surrounding the trademarked chevron and stylized "S."
<PAGE> 17
SAFECO Corporation Bylaws
At August 7, 1996
Page 17
ARTICLE XIV
COPIES OF RESOLUTIONS
Any person dealing with the corporation may rely upon a copy of any of the
records of the proceedings, resolutions, or votes of the stockholders, the Board
of Directors, and any committees of or established by the Board of Directors,
when certified by the chief executive officer, the chief operating officer, a
Vice President, Secretary, or an Assistant Secretary.
ARTICLE XV
AMENDMENT OF BYLAWS
1. BY THE STOCKHOLDERS. These Bylaws may be amended, altered or repealed at any
meeting of the stockholders, if notice of the proposed alteration or amendment
is contained in the notice of the meeting.
2. BY THE BOARD OF DIRECTORS. These Bylaws may be amended, altered or repealed
by the affirmative vote of a majority of the Board of Directors at any regular
meeting of the Board of Directors, or at any special meeting if notice of the
proposed alteration or amendment is contained in the notice of such special
meeting; provided, however, that the Board of Directors shall not amend, alter
or repeal any Bylaw in such a manner as to affect in any way the qualification,
classification, or term of office of the directors. Any action of the Board of
Directors with respect to the amendment, alteration or repeal of these Bylaws is
hereby made expressly subject to change or repeal by the stockholders.
<PAGE> 1
Exhibit 10
SEVERANCE AGREEMENT
BETWEEN
SAFECO CORPORATION
AND
Dated August 30, 1996
<PAGE> 2
TABLE OF CONTENTS
Defined Terms...............................................................1
Term of Agreement...........................................................l
Company's Covenants Summarized..............................................l
The Executive's Covenants...................................................2
Compensation Other Than Severance Payments..................................2
Severance Payments..........................................................5
Termination Procedures and Compensation During Dispute.....................10
Notice of Termination......................................................10
Date of Termination........................................................10
Dispute Concerning Termination ............................................11
Compensation During Dispute................................................11
No Mitigation..............................................................12
Successors; Binding Agreement..............................................12
Notices....................................................................13
Miscellaneous..............................................................13
Validity...................................................................14
Counterparts...............................................................14
Settlement of Disputes; Arbitration .......................................14
Definitions................................................................14
<PAGE> 3
SEVERANCE AGREEMENT
THIS AGREEMENT, dated August 30, 1996, is made by and between
SAFECO Corporation, a Washington corporation ("Safeco"), and (the
"Executive").
WHEREAS, Safeco (together with its subsidiaries, collectively,
the "Company"), considers it essential to the best interests of its stockholders
to foster the continued employment of key management personnel; and
WHEREAS, Safeco recognizes that, as is the case with many
publicly held corporations, the possibility of a Change ill Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, Safeco has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
WHEREAS, the Executive is a party to an Executive Severance
Agreement with the Company dated (the "Prior Agreement");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect until the earlier of
(i) the date it is terminated by written agreement between the Company and the
Executive and (ii) seventh anniversary of a Change in Control. The Prior
Agreement shall terminate on the date hereof.
3. Company's Covenants Summarized. In order to induce the
Executive-to remain in the employ of the Company and in consideration of the
Executive's covenants
<PAGE> 4
set forth in Section 4 hereof, the Company agrees, under the conditions
described herein, to pay the Executive the Severance Payments and the other
payments and benefits described herein. Except as provided in the first sentence
of Section 6.2(A), Section 5.4 and Section 9.1, no amount or benefit shall be
payable under this Agreement unless there shall have been a termination of the
Executive's employment with the Company following a Change in Control and during
the Term. This Agreement shall not be construed as creating an express or
implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right to
be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii)*the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any applicable
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect at the time the
2
<PAGE> 5
Notice of Termination is given, together with all compensation and benefits
payable to the Executive through the Date of Termination under the terms of the
Company's applicable compensation and benefit plans, programs or arrangements.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
applicable retirement, insurance and other compensation or benefit plans,
programs and arrangements.
5.4. Immediately prior to the Change in Control, all awards of
nonqualified stock options, stock appreciation rights granted in connection with
nonqualified stock options, restricted stock rights and performance stock rights
previously granted to the Executive shall become fully vested and, with respect
to options and stock appreciation rights, exercisable. The phrase "immediately
prior to the Change in Control" shall be understood to mean sufficiently in
advance of a Change in Control to permit the Executive to take all steps
reasonably necessary to exercise all options and stock appreciation rights and
deal with the shares of stock underlying the awards of stock options, stock
appreciation rights, restricted stock rights and performance stock rights so
that such shares may be treated in the same manner as the shares of stock of
other shareholders in connection with the Change in Control.
5.5 Executive may elect to defer all or a portion of the
payments that are to be made to Executive under subsection (A) of Section 6.1
hereof and Section 6.2 hereof. Executive may exercise such election by
delivering a notice (in accordance with Section 10 hereof) of election prior to
the occurrence of Change in Control, which notice shall state the portion of
such payments that is to be deferred (expressed as a dollar amount or as a
percentage ("the Deferred Benefit")), the date the payment of the Deferred
Benefit shall commence ("the Deferred Benefit Commencement Date"), and the
number of equal consecutive monthly installments (not to exceed 120) that the
Deferred Benefit is to be paid in.
3
<PAGE> 6
In no event shall the Deferred Benefit Commencement Date be subsequent to the
first day of January of the year immediately following the Executive's
sixty-fifth birthday. In the event such an election is made:
(A) The amount that would have otherwise been paid under the
provisions of subsection (A) of Section 6.1 hereof and Section 6.2
hereof shall be reduced by an amount equal to the Deferred Benefit.
(B) The Deferred Benefit, together with simple interest
calculated at an annual rate of ten percent (10%) on the unpaid balance
of the Deferred Benefit from the date that payment of the Deferred
Benefit would have otherwise been made, shall be paid in the number of
equal consecutive monthly installments selected by Executive, with the
first such installment being made on the Deferred Benefit Commencement
Date and a subsequent payment being made on the first day of each month
thereafter.
(C) If Executive dies prior to receiving the full amount of
the Deferred Benefit, the Company shall continue to pay the Deferred
Benefit to the estate of Executive in the same manner as the Deferred
Benefit would have been paid to Executive if he had not died.
(D) The Deferred Benefit shall in no event be set aside or
deposited to a separate account or fund, and the rights of Executive to
the Deferred Benefit shall not be greater than the rights of any other
general, unsecured creditor of the Company.
(E) Executive, his spouse, and any other person or entity
claiming through or under Executive shall not have any power or
authority to commute, encumber, or dispose of any right to receive
payment of the Deferred Benefit, all of which payments are expressly
declared to be nonassignable. In the event of any attempt at assignment
or other disposition, the Company shall have no further liability to
4
<PAGE> 7
pay the Deferred Benefit. The Deferred Benefit provided for in this
Agreement shall not be subject to seizure for the payment of any debts,
judgments, alimony, separate maintenance or child support, or be
reached or transferred by operation of law, or in the event of
bankruptcy, insolvency or otherwise.
6. Severance Payments.
6.1 The Company shall pay the Executive the payments described
in this Section 6.1 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the Term, in
addition to any payments and benefits to which the Executive is then entitled
under Section 5 hereof, unless such termination is (i) by the Company for Cause,
(ii) by reason of death, Disability or Retirement, or (iii) by the Executive
without Good Reason. Additionally, during the one-month period beginning with
the first day of the month immediately following the first anniversary of the
Change in Control, the Executive may voluntarily terminate his employment for
any reason and, upon such termination, the Company shall pay the Executive the
Severance Payments and the Gross-Up Payment, in addition to any payments and
benefits to which the Executive is then entitled under Section 5 hereof. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason, if (i) the Executive's employment is terminated
by the Company without Cause prior to a Change in Control and such termination
was at the request or direction of a Person who has entered into an agreement
with the Company the consummation of which would constitute a Change in Control,
(ii) the Executive terminates his employment with Good Reason prior to a Change
in Control and the circumstance or event which constitutes Good Reason occurs at
the request or direction of such Person, or (iii) the Executive's employment is
terminated by the Company without Cause prior to a Change in Control and the
Executive reasonably demonstrates that such termination is otherwise in
connection with or in anticipation of a Change in Control.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to
5
<PAGE> 8
the Date of Termination and in lieu of any severance benefit otherwise
payable to the Executive, the Company shall pay to the Executive a lump
sum severance payment, in cash, equal to three (or, if less, the number
of years, rounded to the nearest hundredth of a year, remaining until
December 31 of the year in which the Executive attains age 65) times
the higher of Executive's annual base salary in effect immediately
prior to the occurrence of the event or circumstance upon which the
Notice of Termination is based and Executive's base salary in effect
immediately prior to Date of Termination.
(B) For the thirty-six (36) month period immediately following
the Date of Termination or, if shorter, for the period commencing
immediately following the Date of Termination and ending on December 31
of the year in which the Executive attains age 65 (such applicable
period, the "Severance Period"), the Company shall arrange to provide
the Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to the Date of Termination; provided,
however, that, unless the Executive consents to a different method
(after taking into account the effect of such method on the calculation
of "parachute payments" pursuant to Section 6.2 hereof), such health
insurance benefits shall be provided through a third-party insurer
Benefits otherwise receivable by the Executive pursuant to this Section
6.1 (B) shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive during the Severance
Period (and any such benefits actually received by or made available to
the Executive shall be reported to the Company by the Executive).
(C) Notwithstanding any provision of any annual or long-term
incentive plan to the contrary, the Company shall pay to the Executive
a lump sum amount, in cash, equal to the-sum of (i) any incentive
compensation which has been allocated or awarded to the Executive for a
completed year or other measuring period preceding the Date of
Termination under any such plan and which, as of the Date of
Termination, is contingent only upon the contin-
6
<PAGE> 9
ued employment of the Executive to a subsequent date, and (ii) a pro
rata portion to the Date of Termination of the aggregate value of all
contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such
award by multiplying the award that the Executive would have earned on
the last day of the performance award period, assuming the achievement,
at the level that would produce the maximum award, of the individual
and corporate performance goals established with respect to such award,
by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period
through the Date of Termination by the total number of months contained
in such performance award period.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or ANY Person affiliated with
the Company or such Person) (such payments or benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the Total Payments") will be subject
to the Excise Tax, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up payment,
shall be equal to the Total Payments.
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as Parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel selected by the accounting firm which was, immediately prior to the
Change in Control, the Company's independent accountant (the "Accountant") and
which tax counsel is reasonably acceptable to the Executive ("Tax Counsel"),
such payments or benefits (in whole or in part) do not constitute
7
<PAGE> 10
parachute payments, including by reason of section 280G(b)(4)(A) of the Code,
(ii) all "excess parachute payments" within the meaning of section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not subject to the
Excise Tax, and (iii) the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Accountant in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Date of Termination (or
if there is no Date of Termination, then the date on which the Gross-Up Payment
is calculated for purposes of this Section 6.2), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.
(C) In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, at the time that the amount
of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income or employment tax deduction) plus
interest on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional
8
<PAGE> 11
Gross-Up Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive and the Company
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A) and (C) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at 120%
of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time
that payments are made under this Section, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from Tax
Counsel, the Accountant or other advisors or consultants (and any such opinions
or advice which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any
9
<PAGE> 12
benefit or right provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder. Such payments shall be
made within five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in
10
<PAGE> 13
the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termination, as.determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek
11
<PAGE> 14
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 6.1(B) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to Safeco, Safeco will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Safeco to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that Safeco would be required to perform it if no such succession had taken
place. Failure of Safeco to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for
12
<PAGE> 15
in the Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed, if to the Executive, to the address
inserted below the Executive's signature on the final page hereof and, if to the
Company, to the address set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
SAFECO Corporation
SAFECO Plaza
Seattle, WA 98185
Attention: Chief Executive Officer
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and an officer of Safeco. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of any lack of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes any other agreements (including the
Prior Agreement) or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either party. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Washington. All references to sections
of the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law and
any additional withholding to which the Executive has agreed. The obligations of
the Company and the Executive under this Agreement which by their nature may
require either partial or total performance after the expiration of the Term
(including, without limitation, those under Sections 6 and 7 hereof) shall
survive such expiration.
13
<PAGE> 16
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
(a) All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement
relied upon. The Committee shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Executive's claim
has been denied.
(b) Any further dispute or controversy arising under or on
connection with this Agreement shall be settled exclusively by arbitration in
Seattle, Washington in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Notwithstanding any provision of this Agreement
to the contrary, the Executive shall be entitled to seek specific performance of
the Executive's right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
15. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Accountant" shall have the meaning set forth in Section
6.2 hereof.
14
<PAGE> 17
(B) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of Safeco.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to.act, on the Executive's part shall be
deemed Willful unless done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that the Executive's act, or failure to act,
was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of
15
<PAGE> 18
securities of Safeco (not including in the securities
beneficially owned by such Person any securities acquired
directly from Safeco or its affiliates) representing 25% or
more of the combined voting power of Safeco's then outstanding
securities, excluding any Person who becomes such a Beneficial
Owner in connection with a transaction described in clause (i)
of paragraph (III) below; or
(II) the following individuals cease for any reason
to constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute the
Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Safeco) whose appointment or election by the Board or
nomination for election by Safeco's stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved or recommended; or
(III) there is consummated a merger or consolidation
of Safeco or any direct or indirect subsidiary of Safeco with
any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of
Safeco outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of Safeco or any
subsidiary of Safeco, at least 75% of the combined voting
power of the securities of Safeco or such surviving entity or
any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of
16
<PAGE> 19
Safeco (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of Safeco (not including in the securities
Beneficially Owned by such Person any securities acquired
directly from Safeco or its Affiliates) representing 25% or
more of the combined voting power of Safeco's then outstanding
securities; or
(IV) the stockholders of Safeco approve a plan of
complete liquidation or dissolution of Safeco or there is
consummated an agreement for the sale or disposition by Safeco
of all or substantially all of Safeco's assets, other than a
sale or disposition by Safeco of all or substantially all of
Safeco's assets to an entity, at least 75k of the combined
voting power of the voting securities of which are owned by
stockholders of Safeco in substantially the same proportions
as their ownership of Safeco immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record holders
of the common stock of Safeco immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of Safeco
immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer
than three in number) who, on the date six months before a Change in Control,
constitute the Compensation Committee of the Board, plus (ii) in the event that
fewer than three individuals are available from the group specified in clause
(i) above for any reason, such individuals as may be appointed by the individual
or individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)).
17
<PAGE> 20
(J) "Company" shall mean Safeco and its subsidiaries,
collectively.
(K) "Date of Termination" shall have the meaning set forth
in Section 7.2 hereof.
(L) "Deferred Benefit" shall have the meaning set forth in
Section 5.4 hereof.
(M) "Deferred Benefit Commencement Date" shall have the
meaning set forth in Section 5.4 hereof.
(N) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the Company for a period of one hundred and thirty (130) consecutive business
days, the Company shall have given the Executive a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of the
Executive's duties.
(O) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(P) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(Q) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(R) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clause (ii) of the second sentence
of Section 6.1 hereof (treating all references in paragraphs (I) through (VII)
below to a exchange in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act
18
<PAGE> 21
is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive
officer of the Company or a substantial adverse alteration in
the nature or status of the Executive's responsibilities from
those in effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the
same may be increased from time to time;
(III) the relocation of the Executive's principal
place of employment to a location outside of King County,
Washington (or, if different, the county in which such
principal place of employment is located immediately prior to
the Change in Control) or the Company's requiring the
Executive to be based anywhere other than such principal place
of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent
substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation,
or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program
of the Company, within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to continue in effect
any compensation plan (including stock option, restricted
stock, stock appreciation right, incentive compensation and
bonus plans) in which the Executive participates immediately
prior to the Change in Control which is material to the
Executive's total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the
19
<PAGE> 22
failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms
of the amount or timing of payment of benefits provided and
the level of the Executive's participation relative to other
participants, as existed immediately prior to the Change in
Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's
profit sharing, pension, savings, life insurance, medical,
health and accident, or disability plans in which the
Executive was participating immediate]y prior to the Change in
Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits
or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control,
or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect
at the time of the Change in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1 hereof;
for purposes of this Agreement, no such purported termination
shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless
20
<PAGE> 23
the Company establishes to the Committee by clear and convincing evidence that
Good Reason does not exist.
(S) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(T) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(U) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) Safeco or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of Safeco or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of Safeco in
substantially the same proportions as their ownership of stock of Safeco.
(V) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) Safeco enters into an agreement, the
consummation of which would result in the occurrence of
a Change in Control;
(II) Safeco or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of Safeco representing
10% or more of either the then outstanding shares of common
stock of Safeco or the combined voting power of the Safeco's
then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired
directly from Safeco or its affiliates); or
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in
Control has occurred.
21
<PAGE> 24
(W) "Retirement" shall be deemed the reason for the
termination by the Company or the Executive of the Executive's employment if
such employment is terminated on or after the date Executive attains age 65.
(X) "Safeco" shall mean Safeco Corporation and, except in
determining under Section 15(G) hereof whether or not any Change in Control has
occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of laws or otherwise.
(Y) "Severance Payments" shall mean those payments so
described in Section 6.1 hereof.
(Z) "Severance Period" shall have the meaning set forth in
Section 6.1 (B) .
(AA) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(AB) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(AC) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
SAFECO Corporation
By:_________________________________________
Name:
Title:
____________________________________________
Address:
____________________________________________
____________________________________________
____________________________________________
(Please print carefully)
22
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF CONSOLIDATED INCOME AND RETAINED
EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 11,560,458
<DEBT-CARRYING-VALUE> 2,438,330
<DEBT-MARKET-VALUE> 2,531,552
<EQUITIES> 1,213,647
<MORTGAGE> 444,063
<REAL-ESTATE> 547,257
<TOTAL-INVEST> 16,301,235
<CASH> 57,253
<RECOVER-REINSURE> 161,461
<DEFERRED-ACQUISITION> 404,967
<TOTAL-ASSETS> 19,283,699
<POLICY-LOSSES> 2,108,384
<UNEARNED-PREMIUMS> 971,121
<POLICY-OTHER> 150,105
<POLICY-HOLDER-FUNDS> 9,556,795
<NOTES-PAYABLE> 1,191,989
0
0
<COMMON> 222,919
<OTHER-SE> 3,687,040
<TOTAL-LIABILITY-AND-EQUITY> 19,283,699
1,887,924
<INVESTMENT-INCOME> 830,584
<INVESTMENT-GAINS> 69,564
<OTHER-INCOME> 158,050
<BENEFITS> 1,748,841
<UNDERWRITING-AMORTIZATION> 316,294
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 439,016
<INCOME-TAX> 106,344
<INCOME-CONTINUING> 332,672
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 332,672
<EPS-PRIMARY> 2.64
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
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