Safeco’s 2006 Proxy Statement to Shareholders

Points of Interest:

► The Proxy Statement uses carefully crafted statements to conceal the full value and extraordinary nature of McGavicks’ 2006 compensation package. Page 24-25. For example, it normalizes the award of a 2005 bonus and certain stock options, while omitting the fact that such compensation had been forfeited. It states that McGavick would provide transition services as an employee, when in fact he was not a bona fide employee and this designation cost the corporation millions of dollars.

► Board Conflict of Interest. Page 18-19. This case challenges the rights of Safeco to ignore the vesting requirements in its award of restricted stock rights [RSR’s] where it receives inadequate consideration in return. The Board could not be relied upon to prosecute this claim because each member of the Board is the holder of significant RSR’s. Page 19. In 2005, the award of RSR’s to each board member was valued at $133,000. Page 18.

► Below market residential loan. Page 27, 37-38h. Shareholders continue to subsidize McGavick in an amount of $88,995 in interest annually because McGavick had not repaid a no-interest loan from Safeco in the amount of $1.275 million, even though such loans had been outlawed by the Sarbanes-Oxley Act.