<PAGE> 1
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT
COMPLETE AND MAY BE CHANGED. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES
AND ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
Filed pursuant to Rule 424(b)(5)
Registration No. 333-30346
SUBJECT TO COMPLETION, DATED MARCH 8, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 3, 2000)
$
SAFECO LOGO
SAFECO CORPORATION
$ % NOTES DUE 2003
$ % NOTES DUE 2005
------------------
The notes due 2003 bear interest at the rate of % per year and the
notes due 2005 bear interest at the rate of % per year, in each case
payable on and of each year, beginning , 2000. The
notes are not redeemable before maturity and do not have the benefit of any
sinking fund.
The notes are unsecured and rank equally with all of our other unsecured
senior indebtedness. The notes will be issued only in registered form in
denominations of $1,000 and multiples of $1,000.
------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
------------------
<TABLE>
<CAPTION>
TOTAL TOTAL
PER NOTE PER NOTE PER NOTE PER NOTE COMBINED
DUE 2003 DUE 2003 DUE 2005 DUE 2005 TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Public Offering Price % $ % $ $
Underwriting Discount % $ % $ $
Proceeds to SAFECO (before expenses) % $ % $ $
</TABLE>
Interest on the notes will accrue from , 2000 to date of
delivery.
------------------
The underwriters expect to deliver the notes to purchasers in book-entry
form only, through the facilities of The Depository Trust Company, on or about
, 2000.
------------------
SALOMON SMITH BARNEY
, 2000
<PAGE> 2
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION OR TO MAKE ANY
ADDITIONAL REPRESENTATIONS. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS SUPPLEMENT.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Information................................. S-3
Prospectus Supplement Summary............................... S-4
Use of Proceeds............................................. S-7
Capitalization.............................................. S-7
Selected Consolidated Financial Information................. S-8
Description of Notes........................................ S-9
Underwriting................................................ S-12
PROSPECTUS
Forward-Looking Information................................. 2
Where You Can Find More Information......................... 2
SAFECO Corporation.......................................... 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 11
Legal Opinions.............................................. 12
Independent Auditors........................................ 12
</TABLE>
S-2
<PAGE> 3
FORWARD-LOOKING INFORMATION
Statements in this prospectus supplement that relate to anticipated
financial performance, business prospects and plans, regulatory developments and
similar matters may be considered "forward-looking statements," as defined in
the Private Securities Litigation Reform Act of 1995. The statements in this
prospectus supplement that are not historical information are forward-looking.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
under the federal securities laws for forward-looking statements. Such
statements are subject to certain risks and uncertainties that may cause the
operations, performance, development and results of our business to differ
materially from those suggested by the forward-looking statements. The risks and
uncertainties include the following:
- our ability to obtain rate increases and non-renew underpriced insurance
accounts;
- realization of growth and business retention estimates;
- achievement of our premium targets and profitability;
- changes in competition and pricing environments;
- achievement of our expense reduction goals;
- the occurrence of significant natural disasters, including earthquakes;
- weather conditions (including the severity and frequency of storms,
hurricanes, snowfalls, hail and winter conditions);
- driving patterns;
- fluctuations in interest rates;
- performance of financial markets;
- court decisions and trends in litigation;
- legislative and regulatory developments;
- the adequacy of loss reserves;
- the availability and pricing of reinsurance;
- the development of major Year 2000 related claims or liabilities; and
- general economic and market conditions.
In particular, because insurance rates in some jurisdictions are subject to
regulatory review and approval, achieving rate increases may occur in amounts
and on a time schedule different than planned, which may affect our efforts to
restore earnings in our property and casualty lines.
S-3
<PAGE> 4
PROSPECTUS SUPPLEMENT SUMMARY
SAFECO CORPORATION
GENERAL
We are one of the largest diversified financial services companies in the
United States. Through our subsidiaries, we engage in two principal lines:
property and casualty (including surety), and life insurance. Our property and
casualty operation is one of the largest in the United States and writes
personal, commercial and surety lines of insurance through approximately 8,000
independent agents. We are also one of the independent agency system's largest
insurers of small- to medium-sized businesses. Our principal personal product
lines are automobile and homeowners insurance and our principal commercial
product lines are workers' compensation, commercial multiperil, commercial
automobile and surety. Our 1999 property and casualty gross premiums written
consisted of 58% personal lines and 42% commercial lines. Our life and
investments operations offer individual and group insurance products, retirement
services (pension) and annuity products through professional agents in all 50
states and the District of Columbia. We also conduct commercial lending and
leasing, investment management and insurance agency and financial services
distribution operations.
At December 31, 1999, we had stockholders' equity of approximately $4.3
billion and total assets of approximately $30.6 billion. As of December 31,
1999, we had approximately 13,000 employees.
PROPERTY AND CASUALTY BUSINESS
Our property and casualty subsidiaries include: SAFECO Insurance Company of
America, General Insurance Company of America, First National Insurance Company
of America, SAFECO National Insurance Company, SAFECO Insurance Company of
Illinois, SAFECO Lloyds Insurance Company, SAFECO Surplus Lines Insurance
Company, American States Insurance Company, American Economy Insurance Company,
American States Preferred Insurance Company, Insurance Company of Illinois,
American States Insurance Company of Texas and American States Lloyds Insurance
Company.
These property and casualty subsidiaries write personal, commercial and
surety lines of insurance through independent agents. Coverages include
automobile, homeowners, fire and allied lines, workers' compensation, commercial
multi-peril, miscellaneous casualty, surety and fidelity. We sell these products
in all 50 states and the District of Columbia. California, Washington, Texas and
Illinois accounted for 15%, 13%, 7% and 6% of our 1999 consolidated property and
casualty gross premiums written.
On October 1, 1997, we purchased American States Financial Corporation for
approximately $2.8 billion in cash. This transaction, which brought to us the
small business line, has broadened our product mix and geographic spread of risk
and added approximately 4,000 agents to our agency force. The broader product
mix is popular with our agents and customers and gives our agents the
opportunity to sell the "total customer account."
LIFE AND INVESTMENTS BUSINESS
Our subsidiaries engaged in the life insurance business are SAFECO Life
Insurance Company, SAFECO National Life Insurance Company, First SAFECO National
Life Insurance Company of New York and American States Life Insurance Company.
These companies offer individual and group insurance products, retirement
services (pension) and annuity products and market their products through
professional agents and financial intermediaries in all 50 states and the
District of Columbia. The most significant product lines in terms of
premium/deposit volume are single premium immediate and deferred annuities,
business-owned life insurance (BOLI),
S-4
<PAGE> 5
indexed and variable annuities, tax-sheltered annuities for the education and
nonprofit markets, corporate retirement plans, excess loss group medical
insurance and individual life insurance.
OTHER BUSINESSES
SAFECO Credit Company provides loans and equipment financing and leasing to
commercial businesses including affiliated companies. SAFECO Asset Management
Company provides asset management services to the SAFECO family of mutual funds,
SAFECO Trust Company and outside managed accounts. Talbot Financial Corporation
provides insurance brokerage and financial services distribution.
RECENT FINANCIAL RESULTS
Our net income for 1999 was $252.2 million or $1.90 per diluted share,
compared with $2.51 per diluted share for 1998. If we exclude realized gain from
investments and the one-time write-off of deferred acquisition costs in 1998
relating to our life insurance operations, our income was $1.32 per diluted
share, compared with $2.29 in 1998. Income was $0.24 per diluted share for the
fourth quarter, excluding realized gain from investments. This compares with
income of $0.55 per diluted share in the fourth quarter of 1998. While these
results were disappointing, certain lines of business had strong results. Our
life insurance, credit, and asset management operations all had record years.
The underwriting losses in our property and casualty units for the year
were $366.7 million, compared with losses of $109.4 million for 1998. The
combined loss and expense ratio was 108.4 for 1999, compared with 102.6 for
1998. The fourth quarter underwriting loss was $114.3 million, a modest
improvement over the loss of $139.1 million for the third quarter.
During the past few years, the property and casualty industry has continued
to reduce the prices of its products, and this has finally caught up with the
industry. Over the last two years, we also lowered prices to retain market share
and facilitate the transition of the American States business. We are
emphasizing profitability over market share within the property and casualty
companies and are now aggressively increasing the prices of our insurance
products. We believe these price increases will be accepted in the marketplace.
Already there is solid evidence that commercial lines prices in the industry
have been increasing in recent months. We are confident our price increases,
coupled with aggressively managing expenses, will restore our profit margins to
acceptable levels over the next two years.
Our life insurance operations produced record profits of $178.6 million for
the year and $49.8 million for the fourth quarter. They are up substantially
over a year ago as nearly all major lines showed improvement. SAFECO Credit
Company matched last year's record profits of $22.6 million despite the adverse
impact of higher interest costs. Non-affiliate receivables and operating leases
were $1.6 billion compared with $1.3 billion on December 31, 1998, representing
a 19% increase. SAFECO's Asset Management operations recorded pre-tax earnings
of $13.6 million. Surety operations produced a solid underwriting profit of
$15.2 million for the year.
S-5
<PAGE> 6
THE OFFERING
This summary highlights selected information about us and this offering. It
does not contain all of the information that may be important to you in deciding
whether to purchase notes. We encourage you to read the entire prospectus
supplement, the accompanying prospectus and the documents that we have filed
with the SEC that are incorporated by reference, prior to deciding whether to
purchase notes. Unless the context otherwise requires, the terms "SAFECO," "we,"
"our" and "us" and other similar terms mean SAFECO Corporation and all of its
subsidiaries.
Securities Offered......... $ % Notes due 2003
$ % Notes due 2005
Offering Price............. % per note due 2003 and % per note due
2005, plus, in each case, accrued interest, if any,
from , 2000
Interest................... Interest on the notes will be payable on each
and , beginning
, 2000.
Ranking.................... The notes are our unsecured obligations and will
rank equally with all of our other unsecured and
unsubordinated indebtedness.
Redemption................. The notes may not be redeemed prior to maturity.
Covenants.................. The indenture under which the notes will be issued
contains covenants that, among other things, limit
our ability and that of certain of our subsidiaries
to (1) issue secured debt, (2) sell the capital
stock of certain subsidiaries and (3) engage in
mergers, consolidations and sales of all or
substantially all of our or their assets.
Use of Proceeds............ We intend to lend the proceeds to our subsidiary
SAFECO Credit for its general corporate purposes,
including refinancing its commercial paper as it
becomes due and financing the growth of its loan
portfolio.
S-6
<PAGE> 7
USE OF PROCEEDS
The net proceeds from the sale of the notes will be approximately
$ . We intend to lend the proceeds to our subsidiary SAFECO Credit for
its general corporate purposes, including refinancing its commercial paper as it
becomes due and financing the growth of its loan portfolio. At February 29,
2000, SAFECO Credit had outstanding approximately $1,282.7 million of commercial
paper, with a weighted average maturity of approximately 33 days and bearing a
weighted average interest rate of approximately 6.15%.
CAPITALIZATION
The following table sets forth our unaudited consolidated short-term debt
and capitalization as of December 31, 1999 and as adjusted assuming the offering
of $300.0 million of notes and the use of proceeds to refinance commercial
paper. You should read this table in conjunction with our unaudited condensed
consolidated financial statements and the notes thereto contained in our
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and our
Form 8-K filed with respect to the release of our fourth quarter 1999 earnings,
which are incorporated in this prospectus supplement and the accompanying
prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------
AS
ACTUAL ADJUSTED
-------- -----------
(IN MILLIONS)
<S> <C> <C>
Total short-term debt(1).................................... $1,826.4 $1,526.4
Total long-term debt(2)..................................... 489.7 789.7
SAFECO-obligated mandatorily redeemable capital securities
of subsidiary trust holding solely junior subordinated
debentures of SAFECO(3)................................... 842.5 842.5
Total stockholders' equity.................................. 4,294.1 4,294.1
-------- --------
Total capitalization...................................... $7,452.7 $7,452.7
======== ========
</TABLE>
- ---------------
(1) Includes short-term debt and current maturities of long-term debt. Includes
$1,311.9 million of SAFECO Credit Company, Inc. short-term debt.
(2) Includes $11.2 million of SAFECO Credit long-term borrowings.
(3) The trust is our subsidiary and holds our junior subordinated debentures as
its sole asset.
S-7
<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information for each of the years in
the four-year period ended December 31, 1998 have been derived from our audited
consolidated financial statements. The selected consolidated financial
information for the year ended December 31, 1999 has been derived from our
unaudited consolidated financial statements and include, in the opinion of our
management, all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the financial information. You should read
the following information in conjunction with the information set forth under
the caption "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and our financial statements and the notes to those
financial statements incorporated by reference in this prospectus supplement and
the accompanying prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA: (DOLLARS IN MILLIONS)
Premiums................................ $ 4,743.8 $ 4,561.7 $ 3,106.8 $ 2,541.3 $ 2,423.7
Other revenue........................... 270.5 276.9 238.4 217.3 191.6
Net investment income................... 1,585.1 1,518.9 1,244.7 1,116.7 1,075.3
Realized investment gain................ 117.7 94.6 119.4 90.1 64.3
--------- --------- --------- --------- ---------
Total revenues................ 6,717.1 6,452.1 4,709.3 3,965.4 3,754.9
Total other expenses.................... 6.243.8 5,829.8 4,034.9 3,314.5 3,155.7
Interest expense........................ 141.0 159.5 101.8 72.4 85.4
--------- --------- --------- --------- ---------
Income before income taxes.............. $ 332.3 $ 462.8 $ 572.6 $ 578.5 $ 513.8
========= ========= ========= ========= =========
Net income(1)........................... $ 252.2 $ 351.9 $ 430.0 $ 439.0 $ 399.0
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Total investments....................... $22,931.0 $24,178.3 $23,036.6 $16,889.5 $16,132.2
Total assets............................ 30,572.7 30,891.7 29,467.8 19,917.7 18,767.8
Short-term debt......................... 1,826.4 2,001.5 1,764.8 793.4 608.6
Long-term debt.......................... 489.7 614.1 595.1 440.1 458.9
Total liabilities....................... 25,436.1 24,473.8 23,164.4 15,802.4 14,785.2
Capital securities...................... 842.5 842.1 841.7 -- --
Total stockholders' equity.............. 4,294.1 5,575.8 5,461.7 4,115.3 3,982.6
SELECTED RATIOS(2):
Ratio of earnings to fixed charges
excluding distributions on capital
securities (SAFECO consolidated)...... 3.2 3.8 6.2 8.6 6.7
Ratio of earnings to fixed charges and
distributions on capital securities
(SAFECO consolidated)................. 2.2 2.7 5.1 8.6 6.7
Ratio of Earnings to Fixed Charges
(SAFECO Credit only).................. 1.3 1.3 1.4 1.4 1.3
</TABLE>
- ---------------
(1) After distributions on capital securities.
(2) For purposes of computing the ratios of earnings to fixed charges, earnings
represent net income before extraordinary items and cumulative effect of
changes in accounting principles, plus applicable income taxes and fixed
charges. Fixed charges include all interest expense, distributions on
capital securities (except where noted) and the proportion deemed
representative of the interest factor of rent expense.
S-8
<PAGE> 9
DESCRIPTION OF NOTES
We have summarized provisions of the notes below. This summary supplements
and, to the extent inconsistent with, replaces the description of the general
terms and provisions of the debt securities under the caption "Description of
Debt Securities" in the accompanying prospectus.
GENERAL
The notes will be issued as two separate series of securities under an
indenture dated as of February 15, 2000, between us and The Chase Manhattan
Bank, as trustee. This indenture is described in the accompanying prospectus.
The notes due 2003 will mature on , 2003 and will bear interest
at a rate of % per annum and the notes due 2005 will mature on ,
2005 and will bear interest at a rate of % per annum. Interest on the notes
will accrue from , 2000, or from the most recent interest payment date
to which interest has been paid or duly provided for. In each case, we:
- we will pay interest on the notes semiannually on and
of each year, commencing , 2000;
- will pay interest to the person in whose name a note is registered at the
close of business on the or preceding the interest
payment date;
- will compute interest on the basis of a 360-day year consisting of twelve
30-day months;
- will make payments on the notes at the offices of the trustee; and
- may make payments by wire transfer for notes held in book-entry form or
by check mailed to the address of the person entitled to the payment as
it appears in the notes register.
If any interest payment date or maturity or redemption date falls on a day
that is not a business day, the payment will be made on the next business day
without additional interest and with the same effect as if it were made on the
originally scheduled date. "Business day" means any day other than a Saturday,
Sunday or other day on which banking institutions in The City of New York are
authorized or required to close.
We will issue the notes only in fully registered form, without coupons, in
denominations of $1,000 and multiples of $1,000. The notes will not be subject
to redemption and will not have the benefit of any sinking fund.
RANKING
The notes will be our senior unsecured obligations and will rank equally in
right of payment with all of our other unsecured and unsubordinated
indebtedness. As of February 29, 2000, we had $996.2 million of indebtedness
outstanding at the holding company level that would have ranked equally in right
of payment with the notes.
The indenture does not limit the amount of debt that we or our subsidiaries
can incur. However, the indenture does restrict our ability and our
subsidiaries' ability to incur secured debt. See "Description of Debt
Securities -- Certain Restrictions -- Limitations on Mortgages and Liens" in the
accompanying prospectus.
In addition, we conduct our operations through subsidiaries, which generate
a substantial portion of our operating income and cash flow. As a result,
distributions or advances from our subsidiaries are a major source of funds
necessary to meet our debt service and other obligations. Contractual
provisions, insurance and other laws and regulations, as well as our
subsidiaries' financial condition and operating requirements, may limit our
ability to obtain the cash required to pay our obligations, including payments
on the notes. The notes will be effectively subordinated to the obligations of
our subsidiaries, including claims with respect to trade payables. This means
that holders of the notes will have a junior position to the claims of creditors
of our subsidiaries on their assets and earnings. As of February 29, 2000, our
subsidiaries had $1,326.8 million of indebtedness outstanding.
S-9
<PAGE> 10
NOTICES
We will mail notices and communications to a holder's address as shown on
the note register.
PAYING AGENTS AND TRANSFER AGENTS
The trustee will be the paying agent and transfer agent for the notes.
THE TRUSTEE
The Chase Manhattan Bank is the trustee under the indenture. The trustee
and its affiliates also perform certain commercial banking services for us for
which they receive customary fees.
BOOK-ENTRY DELIVERY AND SETTLEMENT
We will issue the notes in the form of two or more permanent global notes
in definitive, fully registered form. The global securities will be deposited
with or on behalf of The Depository Trust Company (DTC) and registered in the
name of Cede & Co., as nominee of DTC, or will remain in the custody of the
trustee in accordance with the FAST Balance Certificate Agreement between DTC
and the trustee.
DTC has advised us that:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934;
- DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates;
- Direct participants include securities brokers and dealers, trust
companies, clearing corporations and other organizations;
- DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.;
- Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either
directly or indirectly; and
- The rules applicable to DTC and its participants are on file with the
SEC.
We have provided the following descriptions of the operations and
procedures of DTC solely as a matter of convenience. These operations and
procedures are solely within the control of DTC and are subject to change by
them from time to time. Neither we, the underwriters nor the trustee take any
responsibility for these operations or procedures, and you are urged to contact
DTC or its participants directly to discuss these matters.
We expect that under procedures established by DTC:
- upon deposit of the global securities with DTC or its custodian, DTC will
credit on its internal system the accounts of direct participants
designated by the underwriters with portions of the principal amounts of
the global securities; and
- ownership of the notes will be shown on, and the transfer of ownership of
the notes will be effected only through, records maintained by DTC or its
nominee, with respect to interests of direct
S-10
<PAGE> 11
participants, and the records of direct and indirect participants, with
respect to interests of persons other than participants.
The laws of some jurisdictions require that purchasers of securities take
physical delivery of those securities in the form of a certificate. For that
reason, it may not be possible to transfer interests in a global security to
those persons. In addition, because DTC can act only on behalf of its
participants, who in turn act on behalf of persons who hold interests through
participants, the ability of a person having an interest in a global security to
pledge or transfer that interest to persons or entities that do not participate
in DTC's system, or otherwise to take actions in respect of that interest, may
be affected by the lack of a physical definitive security in respect of that
interest.
So long as DTC or its nominee is the registered owner of a global security,
DTC or that nominee will be considered the sole owner or holder of the notes
represented by that global security for all purposes under the indenture and
under the notes. Except as described below, owners of beneficial interests in a
global security will not be entitled to have notes represented by that global
security registered in their names, will not receive or be entitled to receive
the notes in the form of a physical certificate and will not be considered the
owners or holders of the notes under the indenture or under the notes, and may
not be entitled to give the trustee directions, instructions or approvals. For
that reason, each holder owning a beneficial interest in a global security must
rely on DTC's procedures and, if that holder is not a direct or indirect
participant in DTC, on the procedures of the DTC participant through which that
holder owns its interest, to exercise any rights of a holder of notes under the
indenture or the global security.
Neither we nor the trustee will have any responsibility or liability for
any aspect of DTC's records relating to the notes or relating to payments made
by DTC on account of the notes, or any responsibility to maintain, supervise or
review any of DTC's records relating to the notes.
Payments on the notes represented by the global securities will be made to
DTC or its nominee, as the registered owner of the notes. We expect that when
DTC or its nominee receives any payment on the notes represented by a global
security, DTC will credit participants' accounts with payments in amounts
proportionate to their beneficial interests in the global security as shown in
DTC's records. We also expect that payments by DTC's participants to owners of
beneficial interests in the global security held through those participants will
be governed by standing instructions and customary practice as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. DTC's participants will be responsible for those
payments.
Payments on the notes represented by the global securities will be made in
immediately available funds. Transfers between participants in DTC will be made
in accordance with DTC rules and will be settled in immediately available funds.
CERTIFICATED NOTES
We will issue certificated notes to each person that DTC identifies as the
beneficial owner of notes represented by the global securities upon surrender by
DTC of the global securities only if:
- DTC notifies us that it is no longer willing or able to act as a
depository for the global securities, and we have not appointed a
successor depository within 90 days of that notice;
- an event of default has occurred and is continuing; or
- we decide not to have the notes represented by a global security.
Neither we nor the trustee will be liable for any delay by DTC, its nominee
or any direct or indirect participant in identifying the beneficial owners of
the related notes. We and the trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC or its nominee, including
instructions about the registration and delivery, and the respective principal
amounts, of the notes to be issued.
S-11
<PAGE> 12
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement among the
underwriters named below and us, we have agreed to sell to each of the
underwriters, and each of the underwriters has agreed to purchase from us, the
principal amount of notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
NAME OF UNDERWRITER NOTES DUE 2003 NOTES DUE 2005
------------------- -------------- --------------
<S> <C> <C>
Salomon Smith Barney Inc. ...................... $ $
-------- --------
Total................................. $ $
======== ========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the notes included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the notes if they purchase any of
the notes.
The underwriters propose to offer some of the notes directly to the public
at the public offering price stated on the cover page of this prospectus
supplement and some of the notes to certain dealers at the public offering price
less a concession not in excess of % of the aggregate principal amount of the
notes. The underwriters may allow, and these dealers may reallow, a concession
not in excess of % of the aggregate principal amount of the notes on sales to
certain other dealers. After the initial offering of the notes to the public,
the public offering price and these concessions may be changed by the
underwriters.
The following table shows the underwriting discounts and commissions we
will pay to the underwriters in connection with this offering, expressed as a
percentage of the aggregate principal amount of the notes.
<TABLE>
<CAPTION>
PAID BY
SAFECO
-------
<S> <C>
Per notes due 2003.......................................... %
Per notes due 2005.......................................... %
</TABLE>
In connection with the offering, Salomon Smith Barney Inc. may purchase and
sell notes in the open market. These transactions may include over-allotment,
syndicate covering transactions and stabilizing transactions. Over-allotment
involves syndicate sales of notes in excess of the principal amount of notes to
be purchased by the underwriters in the offering, which creates a syndicate
short position. Syndicate covering transactions involve purchases of the notes
in the open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of notes made for the purpose of preventing or retarding a decline in
the market price of the notes while the offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases notes originally sold by that syndicate
member.
Any of these activities may cause the price of the notes to be higher than
the price that otherwise would exist in the open market in the absence of those
transactions. These transactions may be effected in the over-the-counter market
or otherwise and, if commenced, may be discontinued at any time.
We estimate that the total expenses of this offering will be $200,000.
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In the ordinary course of their respective businesses, the underwriters and
certain of their affiliates have engaged in and may in the future engage in
commercial and/or investment banking transactions with us and our affiliates.
Citibank N.A., an affiliate of Salomon Smith Barney Inc. from time to time
conducts banking transactions with us and our affiliates in the ordinary course
of business and Citibank N.A. is a party to some of our existing credit
agreements.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
The notes will not have an established trading market when issued. The
notes will not be listed on any securities exchange. The underwriters may make a
market in the notes, but the underwriters are not obligated to do so and may
discontinue any market-making at any time without notice. You cannot be assured
that there will be a liquid trading market for the notes.
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<PAGE> 15
PROSPECTUS
$800,000,000
safeco logo
Debt Securities
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is March 3, 2000.
<PAGE> 16
FORWARD-LOOKING INFORMATION
This Prospectus includes "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). The PSLRA
provides a "safe harbor" for such statements to encourage companies to provide
prospective information about themselves so long as such information is
identified as forward-looking and is accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in the information. All statements other
than statements of historical fact made in this Prospectus or incorporated by
reference are forward-looking. In particular, the statements regarding industry
prospects and our future results of operations or financial position are
forward-looking statements. Forward-looking statements represent management's
current expectations and are inherently uncertain. Investors are warned that our
actual results may differ significantly from management's expectations and,
therefore, from the results discussed in such forward-looking statements.
Factors that might cause such differences include, but are not limited to, the
factors described in the prospectus supplement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file with the SEC
at its public reference facilities in Washington, D.C., New York, New York or
Chicago, Illinois. You can also obtain copies of the documents at prescribed
rates by writing to the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities.
We are allowed to "incorporate by reference" the information we file with
the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file subsequently
with the SEC will automatically update and supersede the information included
and/or incorporated by reference in this prospectus. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the initial filing of the registration statement that contains
this prospectus and prior to the time that the offering of the securities is
completed:
- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
- Current Reports on Form 8-K filed May 6, 1999, July 14, 1999, September
29, 1999 and January 26, 2000.
You may request a copy of these filings (other than exhibits, unless that
exhibit is specifically incorporated by reference into that filing) at no cost,
by writing or telephoning us at the following address:
SAFECO Investor Relations
SAFECO Corporation
SAFECO Plaza
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
(206) 545-5000
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the state does not permit an offer.
You
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<PAGE> 17
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of the prospectus.
SAFECO CORPORATION
SAFECO Corporation ("SAFECO"), through its operating subsidiaries, is one
of the largest diversified financial services companies in the United States.
Our property and casualty insurance companies provide a broad range of personal
and commercial property and casualty insurance to individuals, businesses,
government entities and associations. SAFECO companies have underwritten
property and casualty insurance since the 1920s. Through our insurance
subsidiaries, we are licensed as a property and casualty insurer in all 50
states and the District of Columbia, with a significant presence on the West
Coast and in the Midwest, and are one of the largest writers of small business
commercial insurance in the United States.
Our life insurance subsidiaries offer annuities, retirement services and
group life and health and individual life insurance. Our other subsidiaries are
engaged in commercial lending and leasing, asset management and insurance agency
and financial services distribution operations.
Our principal executive offices are located at SAFECO Plaza, 4333 Brooklyn
Avenue N.E., Seattle, Washington 98185, and our telephone number is (206)
545-5000. We were incorporated in Washington in 1929.
USE OF PROCEEDS
Unless we otherwise specify in a prospectus supplement, the net proceeds we
receive from the sale of the debt securities offered under this prospectus and
the accompanying prospectus supplement will be used for general corporate
purposes. The net proceeds may be invested temporarily or applied to repay
short-term debt until they are used for their stated purpose.
RATIO OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratios of earnings to fixed charges, earnings
represent net income before extraordinary items and cumulative effect of changes
in accounting principles, plus applicable income taxes and fixed charges. Fixed
charges include all interest expense, distributions on capital securities and
the proportion deemed representative of the interest factor of rent expense. The
following table sets forth our ratios of earnings to fixed charges:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges........................ 2.2 2.7 5.1 8.6 6.7
</TABLE>
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DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the debt securities describes
general terms that apply to the debt securities. The particular terms of any
debt securities will be described more specifically in each prospectus
supplement (and pricing supplement, where applicable) relating to those debt
securities.
The debt securities will be issued under an indenture dated as of February
15, 2000, between us and The Chase Manhattan Bank, as trustee.
We summarize the indenture below. Since this is only a summary, it does not
contain all of the information that may be important to you. A copy of the
entire indenture is an exhibit to the registration statement of which this
prospectus is a part. When we make parenthetical section references in this
prospectus, those are references to sections of the indenture. We incorporate
the entire indenture by reference, and encourage you to read the indenture.
GENERAL
The indenture does not limit the aggregate principal amount of debt
securities we may issue and provides that we may issue debt securities
thereunder from time to time in one or more series. (Section 3.1) The indenture
does not limit the amount of other indebtedness or debt securities, other than
certain secured indebtedness as described below, which we or our subsidiaries
may issue. Under the indenture, the terms of the debt securities of any series
may differ and we, without the consent of the holders of the debt securities of
any series, may reopen a previous series of debt securities and issue additional
debt securities of the series or establish additional terms of the series.
(Section 3.1)
Unless otherwise provided in a prospectus supplement, the debt securities
will be our unsecured obligations and will rank equally with all of our other
unsecured and unsubordinated indebtedness.
Because we are a holding company, our rights and the rights of our
creditors (including the holders of debt securities) and stockholders to
participate in any distribution of assets of any subsidiary upon the
subsidiary's liquidation or reorganization or otherwise would be subject to the
prior claims of the subsidiary's creditors, except to the extent that we may be
a creditor with recognized claims against the subsidiary. The right of our
creditors (including the holders of debt securities) to participate in the
distribution of stock owned by us in certain of our subsidiaries, including our
insurance subsidiaries, may also be subject to approval by certain insurance
regulatory authorities having jurisdiction over such subsidiaries.
Each prospectus supplement will describe the following terms of the debt
securities offered by it:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities or the
series of which they are a part;
- the currency or currencies, or composite currencies, in which the debt
securities will be denominated and in which we will make payments on the
debt securities;
- the date or dates on which we must pay principal;
- the rate or rates at which the debt securities will bear interest or the
manner in which interest will be determined, if any interest is payable;
- the date or dates from which any interest will accrue, the date or dates
on which we must pay interest and the record date for determining who is
entitled to any interest payment;
- the place or places where we must pay the debt securities and where any
debt securities issued in registered form may be sent for transfer or
exchange;
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- the terms and conditions on which we may, or may be required to, redeem
the debt securities;
- the terms and conditions of any sinking fund;
- if other than denominations of $1,000, the denominations in which we may
issue the debt securities;
- the amount we will pay if the maturity of the debt securities is
accelerated;
- whether we will issue the debt securities in the form of one or more
global securities and, if so, the identity of the depositary for the
global security or securities;
- any addition to or changes in the events of default or covenants that
apply to the debt securities;
- whether the debt securities will be defeasible; and
- any other terms of the debt securities and any other deletions from or
modifications or additions to the indenture in respect of the debt
securities. (Section 3.1)
Unless otherwise stated in the prospectus supplement, we will pay
principal, premium, interest and additional amounts, if any, on the debt
securities at the office or agency we maintain for that purpose (initially the
corporate trust office of the trustee). We may pay interest on debt securities
issued in registered form by check mailed to the address of the persons entitled
to the payments or we may pay by transfer to their U.S. bank accounts. Interest
on debt securities issued in registered form will be payable on any interest
payment date to the registered owners of the debt securities at the close of
business on the regular record date for the interest payment date. We will name
in the prospectus supplement all paying agents we initially designate for the
debt securities. We may designate additional paying agents, rescind the
designation of any paying agent or approve a change in the office through which
any paying agent acts, but we must maintain a paying agent in each place where
payments on the debt securities are payable. (Sections 3.7 and 10.2)
Unless otherwise stated in the prospectus supplement, the debt securities
may be presented for transfer (duly endorsed or accompanied by a written
instrument of transfer, if we or the security registrar require) or exchanged
for other debt securities of the same series (containing identical terms and
provisions, in any authorized denominations, and in the same aggregate principal
amount) at the office or agency we maintain for that purpose (initially the
corporate trust office of the trustee). There will be no service charge for any
transfer or exchange, but we may require payment sufficient to cover any tax or
other governmental charge or expenses payable in connection with the transfer or
exchange. We will not be required to (1) issue, register the transfer of, or
exchange, debt securities during a period beginning at the opening of business
15 days before the day of mailing of a notice of redemption of any such debt
securities and ending at the close of business on the day of such mailing or (2)
register the transfer of or exchange any debt security selected for redemption
in whole or in part, except the unredeemed portion of any debt security being
redeemed in part. (Section 3.5) We have appointed the trustee as security
registrar. Any transfer agent (in addition to the security registrar) we
initially designate for any debt securities will be named in the related
prospectus supplement. We may designate additional transfer agents, rescind the
designation of any transfer agent or approve a change in the office through
which any transfer agent acts, but we must maintain a transfer agent in each
place where any payments on the debt securities are payable. (Section 10.2)
Unless otherwise stated in the prospectus supplement, we will issue the
debt securities only in fully registered form, without coupons, in minimum
denominations of $1,000 and integral multiples of $1,000. (Section 3.2) The debt
securities may be represented in whole or in part by one or more global debt
securities. Each global security will be registered in the name of a depositary
or its nominee and the global security will bear a legend regarding the
restrictions on exchanges and registration of transfer. Interests in a global
security will be shown on records maintained by the depositary and its
participants, and transfers of those interests will be made as described below.
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We may issue the debt securities as original issue discount securities
(bearing no interest or bearing interest at a rate which at the time of issuance
is below market rates) to be sold at a substantial discount below their
principal amount. We will describe certain special U.S. federal income tax and
other considerations applicable to any debt securities that are issued as
original issue discount securities in the applicable prospectus supplement.
If the purchase price of any debt securities is payable in one or more
foreign currencies or currency units, or if any debt securities are denominated
in one or more foreign currencies or currency units, or if any payments on the
debt securities are payable in one or more foreign currencies or currency units,
we will describe the restrictions, elections, certain U. S. federal income tax
considerations, specific terms and other information about the debt securities
and the foreign currency or currency units in the prospectus supplement.
We will comply with Section 14(e) under the Exchange Act, and any other
tender offer rules under the Exchange Act that may then be applicable, in
connection with any obligation to purchase debt securities at the option of the
holders. Any such obligation applicable to a series of debt securities will be
described in the related prospectus supplement.
Unless otherwise described in a prospectus supplement relating to any debt
securities, other than as described below under "-- Limitation on Mortgages and
Liens," the indenture does not limit our ability to incur debt or give holders
of debt securities protection in the event of a sudden and significant decline
in our credit quality or a takeover, recapitalization or highly leveraged or
similar transaction involving us. Accordingly, we could in the future enter into
transactions that could increase the amount of indebtedness outstanding at that
time or otherwise affect our capital structure or credit rating. You should
refer to the prospectus supplement relating to a particular series of debt
securities for information regarding any changes in the events of default
described below or covenants contained in the indenture, including any addition
of a covenant or other provisions providing event risk or similar protection.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global debt securities that will be deposited with a
depositary or its nominee identified in the series prospectus supplement.
The specific terms of the depositary arrangement covering debt securities
will be described in the prospectus supplement relating to that series. We
anticipate that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a global security, the depositary for the global
security or its nominee will credit, to accounts in its book-entry registration
and transfer system, the principal amounts of the debt securities represented by
the global security. These accounts will be designated by the underwriters or
agents with respect to such debt securities or by us if such debt securities are
offered and sold directly by us. Only institutions that have accounts with the
depositary or its nominee, and persons who hold beneficial interests through
those participants, may own beneficial interests in a global security. Ownership
of beneficial interests in a global security will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by the depositary, its nominee or any such participants. The laws of
some states require that certain purchasers of securities take physical delivery
of such securities in definitive form. These laws may prevent you from
transferring your beneficial interest in a global security.
As long as the depositary or its nominee is the registered owner of a
global security, the depositary or nominee will be considered the sole owner or
holder of the debt securities represented by the global security. Except as
described below, owners of beneficial interests in a global security will not be
entitled to have debt securities registered in their names and will not be
entitled to receive physical delivery of the debt securities in definitive form.
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We will make all payments of principal of, any premium and interest on, and
any additional amounts with respect to, debt securities issued as global
securities to the depositary or its nominee. Neither we nor the trustee, any
paying agent or the security registrar assume any responsibility or liability
for any aspect of the depositary's or any participant's records relating to, or
for payments made on account of, beneficial interests in a global security.
We expect that the depositary for a series of debt securities or its
nominee, upon receipt of any payment with respect to such debt securities, will
credit immediately participants' accounts with payments in amounts proportionate
to their respective beneficial interest in the principal amount of the global
security for such debt securities as shown on the records of such depositary or
its nominee. We also expect that payments by participants to owners of
beneficial interests in such global security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the responsibility of such participants.
The indenture provides that if (1) the depositary notifies us that it is
unwilling or unable to continue as depositary for a series of debt securities,
or if the depositary is no longer legally qualified to serve in that capacity,
and we have not appointed a successor depositary within 90 days of written
notice, (2) we determine that a series of debt securities will no longer be
represented by global securities and we execute and deliver an order to that
effect to the trustee, or (3) an event of default with respect to a series of
debt securities occurs and continues, the global securities for that series will
be exchanged for registered debt securities in definitive form. The definitive
debt securities will be registered in the name or names the depositary instructs
the trustee. (Section 3.5) We expect that these instructions may be based upon
directions the depositary receives from participants with respect to ownership
of beneficial interests in global securities.
CERTAIN RESTRICTIONS
Limitations on Mortgages and Liens. Neither we nor any of our restricted
subsidiaries (as defined below) will be permitted to issue, assume or guarantee
certain types of secured debt, without securing the debt securities on an equal
and ratable basis with any such debt. These limits apply to debt secured by
mortgages, pledges, liens and other encumbrances, which together we refer to as
liens. These limits will not apply to:
- liens that existed on the date of the indenture;
- liens on real estate (including liens that existed on property when we
acquired it) not exceeding 100% of the fair value of the property at the
time the debt is incurred;
- liens arising from the acquisition of a business as a going concern or to
which assets we acquire in satisfaction of secured debt are subject;
- liens to secure extensions, renewals and replacements of debt secured by
any of the liens referred to above, without increasing the amount of the
debt; or
- certain mechanics, landlords, tax or other statutory liens, including
liens and deposits required or provided for under state insurance laws
and similar regulatory statutes.
Limitations on Sales of Capital Stock of Restricted Subsidiaries. Neither
we nor any of our restricted subsidiaries will be permitted to issue, sell,
transfer or dispose of (except to one of our restricted subsidiaries) capital
stock of a restricted subsidiary, unless we dispose of the entire capital stock
of the subsidiary at the same time for cash or property which, in the opinion of
our Board of Directors, is at least equal to the fair value of the capital
stock.
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For the purposes of the indenture, "restricted subsidiary" means a
subsidiary, including subsidiaries of any subsidiary, which meets any of the
following conditions:
(1) Our and our other subsidiaries' investments in and advances to the
subsidiary exceed 10% of our total consolidated assets as of the end of the
most recently completed fiscal year;
(2) Our and our other subsidiaries' proportionate share of the total
assets (after inter-company eliminations) of the subsidiary exceeds 10% of
our total consolidated assets as of the end of the most recently completed
fiscal year; or
(3) Our and our other subsidiaries' equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the subsidiary
exceeds 10% of such income for us and our consolidated subsidiaries for the
most recently completed fiscal year.
For purposes of making the income test in clause (3) of the preceding
sentence, when a loss has been incurred by either us and our subsidiaries
consolidated or the tested subsidiary, but not both, the equity in the income or
loss of the tested subsidiary will be excluded from our consolidated income for
purposes of the computation and if our consolidated income for the most recent
fiscal year is at least 10% lower than the average of the income for the last
five fiscal years, the average income will be substituted for purposes of the
computation and any loss years will be omitted for purposes of computing average
income.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person or convey or
transfer or lease our properties and assets substantially as an entirety to any
person unless:
(1) if we consolidate with or merge into another corporation or convey
or transfer our properties and assets substantially as an entirety to any
person, the successor is organized under the laws of the United States, or
any state, and assumes our obligations under the debt securities;
(2) immediately after the transaction, no event of default occurs and
continues; and
(3) we meet certain other conditions specified in the indenture.
MODIFICATION AND WAIVER
We and the trustee may modify and amend the indenture with the consent of
the holders of a majority in aggregate principal amount of the outstanding debt
securities of each affected series. However, without the consent of each holder,
we cannot modify or amend the indenture in a way that would:
- change the stated maturity of the principal of, or any installment of
principal or interest on, any debt security;
- reduce the principal or interest on any debt security;
- change the place or currency of payment of principal or interest on any
debt security;
- impair the right to sue to enforce any payment on any debt security after
it is due; or
- reduce the percentage in principal amount of outstanding debt securities
necessary to modify or amend the indenture, to waive compliance with
certain provisions of the indenture or to waive certain defaults.
The holders of a majority in aggregate principal amount of outstanding debt
securities may waive our compliance with certain restrictive covenants of the
indenture. The holders of a majority in principal amount of the outstanding debt
securities of any series may waive any past default under the indenture
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with respect to outstanding debt securities of that series, which will be
binding on all holders of debt securities of that series, except a default in
the payment of principal or interest on any debt security of that series or in
respect of a provision of the indenture that cannot be modified or amended
without each holder's consent.
EVENTS OF DEFAULT
Each of the following will be an event of default:
(1) default for 30 days in the payment of any interest;
(2) default in the payment of principal;
(3) default in the performance of any other covenant in the indenture
for 60 days after written notice;
(4) a failure to pay when due or a default that results in the
acceleration of maturity of any other debt of ours or our restricted
subsidiaries in an aggregate amount of $25 million or more, unless (a) the
acceleration is rescinded, stayed or annulled, or (b) the debt has been
discharged or, in the case of debt we are contesting in good faith, we set
aside a bond, letter of credit, escrow deposit or other cash equivalent
sufficient to discharge the debt within 10 days after written notice of
default is given to us; and
(5) certain events in bankruptcy, insolvency or reorganization.
We are required to furnish the trustee annually a statement as to our
fulfillment of our obligations under the indenture. The trustee may withhold
notice of any default to the holders of debt securities of any series (except a
default on principal or interest payments on debt securities of that series) if
it considers it in the interest of the holders to do so.
If an event of default occurs and continues, either the trustee or the
holders of not less than 25% in principal amount of the outstanding debt
securities of the series in default may declare the principal amount immediately
due and payable by written notice to us (and to the trustee if given by the
holders). Upon any such declaration, the principal amount will become
immediately due and payable. However, the holders of a majority in principal
amount of the outstanding debt securities of that series may, under certain
circumstances, rescind and annul the acceleration.
Except for certain duties in case of an event of default, the trustee is
not required to exercise any of its rights or powers at the request or direction
of any of the holders, unless the holders offer the trustee reasonable security
or indemnity. If the holders provide this security or indemnity, the holders of
a majority in principal amount of the outstanding debt securities of a series
may direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or powers conferred on
the trustee with respect to the debt securities of that series.
No holder of a debt security may bring any lawsuit or other proceeding with
respect to the indenture or for any remedy under the indenture, unless (a) the
holder first gives the trustee written notice of a continuing event of default,
(b) the holders of at least 25% in principal amount of the outstanding debt
securities of the series in default give the trustee a written request to bring
the proceeding and offer the trustee reasonable security or indemnity, (c) the
trustee fails to institute the proceeding within 60 days of the written request
and has not received from holders of a majority in principal amount of the
outstanding debt securities of the series in default a direction inconsistent
with that request. However, the holder of any debt security has the absolute
right to receive payment of the principal of and any interest on the debt
security on or after the stated due dates and to take any action to enforce any
such payment.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
We may discharge certain obligations to holders of any series of debt
securities that have not already been delivered to the trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by depositing with
the trustee, in trust, funds in U.S. dollars or in the foreign currency in which
such debt securities are payable in an amount sufficient to pay the principal
and any premium, interest and additional amounts on such debt securities to the
date of deposit (if the debt securities have become due and payable) or to the
maturity date, as the case may be. (Section 4.1)
Unless a prospectus supplement states that the following provisions do not
apply to the debt securities of that series, we may elect either (1) to defease
and be discharged from any and all obligations with respect to such debt
securities (except for, among other things, the obligation to pay additional
amounts, if any, upon the occurrence of certain events of taxation, assessment
or governmental charge with respect to payments on the debt securities and other
obligations to register the transfer or exchange of such debt securities, to
replace temporary or mutilated, destroyed, lost or stolen debt securities, to
maintain an office or agency with respect to such debt securities and to hold
moneys for payment in trust) ("defeasance") or (2) to be released from our
obligations under the indenture with respect to the debt securities under
certain covenants as described in the prospectus supplement, and our failure to
comply with these obligations will not constitute an event of default with
respect to such debt securities ("covenant defeasance"). Defeasance or covenant
defeasance is conditioned on our irrevocable deposit with the trustee, in trust,
of an amount in cash or government securities, or both, sufficient to pay the
principal of, any premium and interest on, and any additional amounts with
respect to, the debt securities on the scheduled due dates. (Section 4.2)
Such a trust may be established only if, among other things, (1) the
applicable defeasance or covenant defeasance does not result in a breach or
violation of, or constitute a default under, the indenture or any other material
agreement or instrument to which we are a party or by which we are bound, (2) no
event of default has occurred and continues on the date the trust is established
and, with respect to defeasance only, at any time during the period ending on
the 123rd day after that date and (3) we have delivered to the trustee an
opinion of counsel to the effect that the holders of such debt securities will
not recognize income, gain or loss for U. S. federal income tax purposes as a
result of the defeasance or covenant defeasance and will be subject to U. S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if the defeasance or covenant defeasance had not
occurred. This opinion, in the case of defeasance, must refer to and be based
upon a letter ruling we have received from the Internal Revenue Service, a
Revenue Ruling published by the Internal Revenue Service or a change in
applicable U. S. federal income tax law occurring after the date of the
indenture. (Section 4.2)
GOVERNING LAW
The indenture and the debt securities are governed by and will be
interpreted under the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
Subject to the provisions of the Trust Indenture Act of 1939, as amended,
the trustee is under no obligation to exercise any of the powers vested in it by
the indenture at the request of any holder of debt securities unless the holder
offers the trustee reasonable indemnity against the costs, expenses and
liabilities which might result. The trustee is not required to expend or risk
its own funds or otherwise incur personal financial liability in performing its
duties if the trustee reasonably believes that it is not reasonably assured of
repayment or adequate indemnity.
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The Chase Manhattan Bank acts as property trustee for SAFECO Capital Trust
I (the issuer of our 8.072% Capital Securities) and for the 8.072% Capital
Securities and the underlying junior subordinated deferrable interest debentures
as well as the related indenture and guarantees. Chase Manhattan Delaware, an
affiliate of The Chase Manhattan Bank, acts as Delaware trustee for SAFECO
Capital Trust I. The Chase Manhattan Bank is also the trustee for our 7.875%
Notes due 2005 and 6.875% Notes due 2007 and our medium term note program, the
custodian for our life companies' investment portfolios, a lender under our bank
revolving credit line and a dealer under our commercial paper program. In
addition, we and our subsidiaries maintain various depository and disbursement
accounts with The Chase Manhattan Bank.
PLAN OF DISTRIBUTION
We may sell debt securities (1) through agents, (2) to or through
underwriters, (3) through dealers, or (4) directly to purchasers. The prospectus
supplement will state the terms of the offering of the debt securities,
including the name or names of any underwriters, dealers or agents; the purchase
price of the debt securities and the proceeds we will receive from the sale; any
underwriting discounts and commissions and other items constituting
underwriters' compensation; any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers, and any securities exchange
on which the debt securities may be listed. The initial public offering price,
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
We may offer the debt securities in one or more transactions at a fixed
price or prices, which we may change, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
We may authorize agents to solicit offers to purchase debt securities from
time to time. We will identify any agent who offers or sells debt securities
described in this prospectus, and we will describe any commissions payable by us
to the agent, in the prospectus supplement. Unless otherwise indicated in such
prospectus supplement, any such agent will be acting on a reasonable best
efforts basis for the period of its appointment. Any such agent may be deemed to
be an underwriter, as that term is defined in the Securities Act, of the debt
securities so offered and sold.
If debt securities are sold by means of an underwritten offering, we will
execute an underwriting agreement with an underwriter or underwriters, and the
names of the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transaction, including commissions, discounts
and any other compensation of the underwriters and dealers, if any, will be
stated in the prospectus supplement used by the underwriters to resell the debt
securities. If we use underwriters to sell debt securities, the underwriters
will purchase the debt securities for their own account and the underwriters may
resell such debt securities from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined by the underwriters at the time of sale. Debt securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or directly by the managing underwriters. If we use any
underwriter or underwriters to sell the debt securities, unless otherwise
indicated in the prospectus supplement, the underwriters' obligations will be
conditioned on certain matters and the underwriters must purchase all the debt
securities of the offered series if they purchase any.
If we use a dealer to sell the debt securities, we will sell such debt
securities to the dealer as principal. The dealer may then resell those debt
securities to the public at varying prices to be determined by the dealer at the
time of resale. Any such dealer may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the debt securities it offers or sells. The
name of the dealer and the terms of the transaction will be stated in the
related prospectus supplement.
We may directly solicit offers to purchase debt securities and we may sell
them directly to institutional investors or others, who, with respect to the
resale of those securities, may be deemed to be
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underwriters within the meaning of the Securities Act. The terms of any direct
sales will be described in the related prospectus supplement.
Agents, underwriters and dealers may be entitled under agreements with us
to be indemnified by us against certain civil liabilities, including liabilities
under the Securities Act that may arise from any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission to state
a material fact in this prospectus, any supplement or amendment hereto, or in
the registration statement of which this prospectus forms a part, or to
contribution with respect to payments which the agents, underwriters or dealers
may be required to make.
If so indicated in the prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by certain
institutions to purchase debt securities from us pursuant to contracts providing
for payments and delivery on a future date. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others, but in all cases we must approve such institutions. Purchaser
obligations will be subject to the condition that the purchase is not prohibited
under the laws of the jurisdiction to which the purchaser is subject at the time
the debt securities are delivered. The underwriters and other agents will not
have any responsibility for the validity or performance of these contracts.
Each series of debt securities will be a new issue and will have no
established trading market. We may elect to list any series of debt securities
on an exchange but, unless otherwise stated in the applicable prospectus
supplement, we are not required to do so. You cannot be assured that there will
be a liquid trading market for any of the debt securities.
Underwriters, dealers and agents may be customers of, engage in
transactions with, or perform services for, us and our subsidiaries in the
ordinary course of business.
LEGAL OPINIONS
The validity of the debt securities will be passed upon for us by Perkins
Coie LLP, Seattle, Washington. Perkins Coie LLP will rely on the opinion of
James W. Ruddy, our Senior Vice President and General Counsel, with respect to
certain matters. Certain legal matters will be passed upon for the underwriters,
dealers or agents, if any, by Mayer, Brown & Platt, Chicago, Illinois. Mayer,
Brown & Platt will rely on the opinion of Perkins Coie LLP with respect to
Washington law.
INDEPENDENT AUDITORS
The consolidated financial statements and financial statement schedules of
SAFECO at December 31, 1998 and 1997, and for each of the three years in the
period ended December 31, 1998, incorporated by reference or included in the
SAFECO Annual Report on Form 10-K for the year ended December 31, 1998, have
been incorporated by reference into this Prospectus and the Registration
Statement and have been audited by Ernst & Young LLP, independent auditors, as
stated in their reports thereon also incorporated by reference or included in
the SAFECO Annual Report on Form 10-K and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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$
SAFECO CORPORATION
$ % NOTES DUE 2003
$ % NOTES DUE 2005
LOGO
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PROSPECTUS SUPPLEMENT
, 2000
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SALOMON SMITH BARNEY
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