Safeco (SAFC)/Liberty Mutual

Preliminary Proxy Statement Filed

SAFC filed the initial proxy statement for this transaction with the SEC on May 23, 2008.

The regulatory matters section of the document discloses that the HSR notification, and request for early termination, were filed on May 1, 2008. The HSR expiration date is June 2, 2008. Early termination will probably be granted at some point this week.

The proxy states the following regarding the key state Form A reviews:

Liberty Mutual has made the necessary applications with the insurance commissioners of California, Illinois, Indiana, Missouri, Oregon, Texas and Washington, the states of domicile or commercial domicile of Safeco's insurance company subsidiaries.

There continues to be no expectation that serious concerns and/or delays will develop from the Washington, or any other, Form A reviews. However, the high profile of this deal will probably prevent a close before the end of this summer and will likely result in slippage into the fall of this year.

Washington OIC status:

The Washington OIC received the companies' Form A application on May 16, 2008.

There are no statutory deadlines associated with the OIC review, but the companies have formally requested a decision by August 15, 2008.

The OIC will schedule a Form A hearing 60 days from deeming the application complete and the final decision is likely to be made at the conclusion of the hearing or, in a worst-case scenario, a week or two after the hearing.

The key to timing will be the application completion period, for which (as noted previously) the OIC is seeking outside "accounting and legal services". The deadline for bids on the outside services is June 9, 2008, so the companies August 15 request is obviously tenuous. In order for this to occur, the OIC would need to select an outside entity and deem the application complete within a one-week time frame beginning on June 9. This does not seem very likely given the magnitude of this transaction in Washington.

According to OIC officials, the Form A hearing date will be published almost immediately upon scheduling. The application review process will be monitored closely over the next several weeks in hopes of determining if the companies August 15 decision target date can be achieved.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.

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