SEPARATION AGREEMENT

Exhibit 10.1

SEPARATION AGREEMENT

This Separation Agreement (including its Exhibits, the “ Agreement ”) is made and entered into as of December 27, 2007 (the “ Effective Date ”) by and between Allie Mysliwy (the “ Executive ”) and Safeco Corporation , a Washington corporation (together with its subsidiary companies, successors and assigns, the “ Company ”). (The Executive and the Company are the “ Parties ”).

RECITALS

A. The Executive is employed by the Company as Executive Vice President and Chief Business Services Officer, has had significant responsibilities as an executive of the Company and its subsidiaries for more than 25 years, and has served as a member of the senior leadership team of the Company since 1999;

B. In connection with reorganization of the Company’s leadership structure, the Executive has tendered and the Company has accepted Executive’s resignation from the Company and resignation as an officer and employee of the Company and member of the Board of Directors (the “ Board ”) of the Company’s affiliates; and

C. The Parties have mutually agreed to the final terms and conditions of Executive’s resignation.

NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth in this Agreement, the Parties agree as follows:

AGREEMENT

1. Continued Employment .

1.1 Employment Period . Under the terms and subject to the conditions of this Agreement, the Executive’s status as an officer and member of the Board shall continue through December 31, 2007 (the “ Transition Date ”). Between the Transition Date and February 29, 2008 (the “ Separation Date ”), Executive shall remain an employee of the Company and shall be available to provide services in connection with the transition of his responsibilities. Executive shall be paid his current salary through the Separation Date.

1.2 Group Insurance Benefits Coverage .

(a)  Benefits Through Separation Date . The Company shall continue to provide through the Separation Date, coverage to the Executive and his dependents under any group insurance benefits plan under which they were covered on the Effective Date. The Executive shall remain responsible, in accordance with past practice, to pay any amounts chargeable as “employee premium contribution” amounts with respect to any such coverage.

(b)  COBRA Benefits . After the Separation Date, the Executive and his dependents shall be eligible for such benefits continuation, or conversion coverage, as may be available under the terms of the Company’s benefits plans or policies, or as may be required under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as subsequently amended (“ COBRA ”) or other applicable federal or state law. The Company shall pay all premiums for any COBRA coverage properly elected by the Executive for a period of up to 18 months, with such COBRA premium payments treated as imputed income to the Executive. The Company agrees to pay to Executive prior to the end of each calendar year during which COBRA premium payments are made by the Company on the Executive’s behalf, an amount approximating the federal income tax liability on such imputed income based on a formula determined by the Company so that there is no significant federal income tax impact to the Executive as a result of such imputed income.

(c)  Post COBRA Benefits . When the Executive attains age 55 in August 2009, the Company agrees to make available to Executive the benefits available under the Company’s retiree medical program (the “ Program ”), subject to any changes in the terms of the Program as may be made from time to time. Benefit coverage shall be governed, to the extent applicable to the Executive, by the terms of the Program. The Executive agrees to pay a monthly premium for such medical benefits in an amount equal to the full value of such coverage. For the purposes of this Section 1.2(c), the “full value of such coverage” shall mean the equivalent COBRA premium for such coverage.

1.3 Termination of Change in Control Agreement . Effective on the Transition Date, the Change in Control Severance Agreement between the Company and the Executive (“ CIC Agreement” ) shall terminate and Executive shall relinquish all rights and obligations under the CIC Agreement.

1.4 Eligibility for Other Benefits . As an employee of the Company through the Separation Date, the Executive (a) shall be entitled to participate in any group benefit under the Company’s standard employee benefit plans according to the respective terms thereof, (b) shall be entitled to participate in the Safeco Employees’ Profit Sharing Retirement Plan, Savings Plan, and Cash Balance Plan, as well as any “supplemental” or “excess benefit” plans that relate to such plans, according to the respective terms thereof, and (c) shall be entitled to receive an incentive payment for 2007 under the Leadership Performance Plan at the Executive’s target level subject to Company performance factors (“modified target”), payable on the same date as Leadership Performance Plan incentive payments for 2007 are paid to other Company executives, but in no case later than March 24, 2008.

1.5 Payment for Accrued Sick Leave and Vacation Units . Within five days after the Separation Date, the Company shall pay the Executive for any vested sick leave units and vacation pay accrued, but unused, by him as of the Separation Date, but only to the extent compensable under the Company’s normal sick leave and vacation policies and procedures.

1.6 Reimbursement for Expenses Incurred . The Company shall promptly reimburse the Executive for business expenses reasonably incurred by him on or before the Separation Date, but not submitted for reimbursement at such date, to the extent reimbursable under the Company’s normal expense reimbursement policies and procedures, provided that such expenses are submitted for reimbursement either within fifteen calendar days of the Separation Date , or as promptly as reasonably practicable thereafter, but in no event later than thirty calendar days following the Separation Date.

1.7. Equity Grants

(a) Executive shall be considered an “employee” of Safeco through the Separation Date for compensation purposes and under all employee benefit plans, programs, and arrangements, including without limitation the Safeco Long-Term Incentive Plan of 1997, as amended (the “LTIP”). All stock options granted to Executive under the LTIP, which are fully vested and non-forfeitable as of the Separation Date will be exercisable for three (3) months from the Separation Date, in accordance with the terms of the LTIP.

(b) Unvested Equity . Safeco shall accelerate and fully vest, on the Separation Date, the following Restricted Stock Rights (the “RSRs”):

The terms and conditions of the LTIP and Executive’s award agreements, pursuant to which the RSRs were granted, will continue to govern such RSRs. Except for the RSRs, all equity awards granted to Executive that are not fully vested on the Separation Date shall be deemed to have expired without vesting.

2. Separation Payment . As compensation to the Executive, and in consideration of his resignation as an employee and as a director and officer of the Company and the release he is granting in Section 5 below, the Company unconditionally and irrevocably agrees (subject only to the Executive’s not revoking this Agreement during the seven-day revocation period described in Section 11.3) to pay him a payment equal to $1,224,000 (the “ Separation Payment ”). The Separation Payment will be paid to the Executive on the Separation Date.

3. Attorney and Tax Consultant Fees . Contingent upon the Executive’s execution of this Agreement and the expiration of the seven-day revocation period described in Section 11.3, the Company agrees to pay all attorneys’ and tax consultants’ fees and charges incurred by the Executive on or before the expiration of the Revocation Period in connection with entering into this Agreement, up to a maximum of $10,000 .

4. Resignation .

4.1 Resignation as an Officer and Director and Employee . In consideration of the payments and other compensation described above, the Executive (a) tenders his resignations as an officer and director of the Company and of any and all of its subsidiaries, effective on the Transition Date, and (b) notifies the Company of his resignation as an employee of the Company, effective on the Separation Date.

4.2 No Authority to Act . After the Transition Date, the Executive shall have no further authority to bind the Company to any contract or agreement or to act on its behalf. The Company shall have no obligation to reimburse the Executive for any expenses incurred by him after the Separation Date, except as expressly provided in this Agreement or as otherwise agreed in writing by the Company.

4.3 Return of Materials . No later than seven days after the Separation Date, the Executive shall return all devices and materials in his possession that are owned by the Company and were used by the Executive in the course of his employment. Anything to the contrary notwithstanding, nothing in this Section 4.3 shall prevent the Executive from retaining papers and other materials of a personal nature, including personal diaries, calendars and Rolodexes, information showing his compensation or relating to reimbursement of expenses, information that may be needed for tax purposes, or copies of plans, programs and agreements relating to his employment or compensation.

5. Release and Settlement .

5.1 Release by the Executive . In consideration of the Company’s delivery of the Separation Payment to the