<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Professionals Insurance Company Management Group
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
<PAGE> 2
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 3
PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
4295 OKEMOS ROAD, BOX 2510, OKEMOS, MICHIGAN 48805-9510
(517) 349-6500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 4, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (together
with any adjournments or postponements thereof, the "Annual Meeting") of
Professionals Insurance Company Management Group ("Professionals Group") will
be held at 10:00 a.m., local time, on June 4, 1997 at University Place
Marriott, 300 M.A.C. Avenue, East Lansing, Michigan 48823, for the following
purposes, all of which are more fully described in the accompanying Proxy
Statement:
1. To elect three persons to the Board of Directors of
Professionals Group for three year terms expiring at the Annual
Meeting of Shareholders to be held in the year 2000 and upon the
election and qualification of their successors or upon their
earlier resignation or removal;
2. To ratify the appointment of KPMG Peat Marwick LLP as
independent auditors for Professionals Group for the fiscal year
ending December 31, 1997;
3. To consider a non-binding shareholder proposal regarding the
classification of the Board of Directors of Professionals Group;
and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
Only holders of record of shares of common stock, no par value per share,
of Professionals Group (the "Common Stock") at the close of business on April
9, 1997, the record date fixed by the Board of Directors of Professionals Group
for the Annual Meeting, are entitled to notice of and to vote at the Annual
Meeting. A list of shareholders entitled to vote at the Annual Meeting will be
available for examination during the Annual Meeting. Shares of Common Stock
constitute the only security of Professionals Group whose holders are entitled
to vote upon the proposals to be presented at the Annual Meeting.
You are requested to complete, sign and date the enclosed form of Proxy
which is solicited on behalf of the Board of Directors of Professionals Group
and to mail it promptly in the enclosed envelope. The Proxy will not be used
if you attend and vote at the Annual Meeting in person.
By Order of the Board of Directors
/s/ Annette E. Flood
Okemos, Michigan Annette E. Flood
April 16, 1997 Secretary
3
<PAGE> 4
PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
4295 OKEMOS ROAD, BOX 2510, OKEMOS, MICHIGAN 48805-9510
(517) 349-6500
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 4, 1997
This Proxy Statement is furnished in connection with the solicitation, on
behalf of the Board of Directors of Professionals Insurance Company Management
Group ("Professionals Group"), of proxies to be used at the Annual Meeting of
Shareholders of Professionals Group (together with any adjournments or
postponements thereof, the "Annual Meeting"). The Annual Meeting will be held
at 10:00 a.m., local time, on June 4, 1997 at University Place Marriott, 300
M.A.C. Avenue, East Lansing, Michigan 48823. The accompanying Notice of
Annual Meeting of Shareholders and this Proxy Statement are dated April 16,
1997 and are first being mailed to shareholders on or about April 21, 1997.
The principal executive office of Professionals Group is located at 4295 Okemos
Road, Okemos, Michigan 48864. Certain of the information provided herein
relates to PICOM Insurance Company, a Michigan stock insurance company and a
wholly-owned subsidiary and the predecessor of Professionals Group ("PICOM").
At the Annual Meeting, shareholders of Professionals Group will consider
and vote upon (i) the election of three persons to the Board of Directors of
Professionals Group for three year terms expiring at the Annual Meeting of
Shareholders to be held in the year 2000 and upon the election and
qualification of their successors or upon their earlier resignation or removal;
(ii) the ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for Professionals Group for the fiscal year ending
December 31, 1997; and (iii) a non-binding shareholder proposal regarding the
classification of the Board of Directors of Professionals Group. Professionals
Group does not know of any matters, other than those described in the
accompanying Notice of Annual Meeting of Shareholders, that are to come before
the Annual Meeting.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of record of shares of common stock, no par value per share,
of Professionals Group (the "Common Stock ") at the close of business on April
9, 1997, the record date fixed by the Board of Directors of Professionals Group
for the Annual Meeting, are entitled to notice of and to vote at the Annual
Meeting. Shares of Common Stock constitute the only security of Professionals
Group whose holders are entitled to vote upon the proposals to be presented at
the Annual Meeting. Each share of Common Stock is entitled to one vote on each
matter that is properly presented to shareholders for a vote at the Annual
Meeting. As of the record date, Professionals Group had 3,505,750 shares of
Common Stock issued and outstanding.
All shares of Common Stock represented at the Annual Meeting by properly
executed proxies received prior to or at the Annual Meeting and not revoked
will be voted at the Annual Meeting in accordance with the instructions
thereon. If no instructions are indicated, properly
4
<PAGE> 5
executed proxies will be voted FOR the election of all of the nominees for
director nominated by the Board of Directors of Professionals Group, FOR the
ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors for Professionals Group for the fiscal year ending December 31, 1997,
and AGAINST the non-binding shareholder proposal regarding the classification
of the Board of Directors of Professionals Group. If any other matters are
properly presented at the Annual Meeting for action, the persons named in the
enclosed form of proxy and acting thereunder will have the discretion to vote
on such matters in accordance with their best judgment.
Directors shall be elected by a plurality of the votes present in person
or represented by proxy at the Annual Meeting and entitled to vote on the
election of directors. In all matters other than the election of directors,
the affirmative vote of the majority of shares present in person or represented
by proxy at the Annual Meeting and entitled to vote on the matter shall be the
act of the shareholders. Proxies marked to abstain have the same effect as
votes against the proposals, while broker non-votes have no effect on the vote.
One-third of the shares of Common Stock, present in person or represented by
proxy, shall constitute a quorum for purposes of the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of determining a
quorum.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) duly executing and
delivering to the Secretary of Professionals Group a subsequent proxy relating
to the same shares prior to the exercise of such proxy, (ii) filing with the
Secretary of Professionals Group at or before the Annual Meeting a written
notice of revocation bearing a later date than the proxy, or (iii) attending
the Annual Meeting and voting in person (although attendance at the Annual
Meeting will not in and of itself constitute revocation of a proxy). Any
written notice revoking a proxy should be delivered to Annette E. Flood,
Secretary, Professionals Insurance Company Management Group, 4295 Okemos Road,
Box 2510, Okemos, Michigan 48805-9510.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth information provided by the persons
indicated with respect to the beneficial ownership (as defined under applicable
rules of the Securities and Exchange Commission (the "Commission")) of shares
of Common Stock by (i) each person known by Professionals Group who is
currently the owner of more than 5% of the outstanding shares of Common Stock,
(ii) each person who is currently a director or an executive officer of
Professionals Group and (iii) all persons who are currently directors or
executive officers of Professionals Group as a group:
5
<PAGE> 6
Percentage of
Number of Beneficial
Principal Shareholders(1) Shares(2)(3) Ownership(2)(3)
- ----------------------------- -------------- -----------------
Heartland Advisors, Inc. 300,770 8.6%
Named Directors and
Executive Officers(1)
- -----------------------------
Victor T. Adamo 47,324 1.3%
Jerry D. Campbell 4,272 *
R. Kevin Clinton 32,422 *
John F. Dodge, Jr. 16,306 *
Annette E. Flood 4,893 *
H. Harvey Gass, M.D. 12,677 *
W. Peter McCabe, M.D. 34,526 1.0%
John F. McCaffrey 857 *
Isaac J. Powell, M.D. 2,805 *
Ann F. Putallaz 1,143 *
William H. Woodhams, M.D. 4,909 *
Donald S. Young 542 *
All directors and executive
officers of Professionals
Group as a group (12 persons) 162,676 4.6%
(1) Unless otherwise noted, Professionals Group believes that all persons
named in the table have, or will have, (i) sole voting and investment
power with respect to all shares of Common Stock owned by them, except to
the extent that authority is shared by spouses under applicable law, and
(ii) record and beneficial ownership of such shares. The address of
Heartland Advisors, Inc. is 790 North Milwaukee Street, Milwaukee,
Wisconsin 53202. The business address of each person listed in the table
is c/o Professionals Insurance Company Management Group, 4295 Okemos Road,
Box 2510, Okemos, Michigan 48805-9510.
(2) Number of shares and percentages are based on ownership of Common Stock
as of April 9, 1997. At that date there were 3,505,750 issued and
outstanding shares of Common Stock. An asterisk indicates ownership of
less than 1%.
(3) Includes shares held directly, shares held in retirement accounts, and
shares held by certain of the group members' families, corporations for
which a group member is an officer or director, or held by trusts of which
a group member is a trustee or a substantial beneficiary with respect to
which shares the group member may be deemed to have sole or shared voting
and/or investment power.
6
<PAGE> 7
PROPOSAL I -- ELECTION OF DIRECTORS
The First Amended and Restated Articles of Incorporation of Professionals
Group provide that the Board of Directors of Professionals Group shall consist
of not less than nine directors and not more than 18 directors, with the number
of directors to be determined from time to time by the Board of Directors of
Professionals Group. Currently, the number of directors is ten. The Board of
Directors of Professionals Group is divided into three classes with each class
of directors elected to a three year term of office on a rotating basis. At
each annual meeting of shareholders, a class of directors is elected to succeed
the class of directors whose term of office expires at that meeting. The term
of office of three directors expires at the Annual Meeting and the Board of
Directors of Professionals Group has nominated Victor T. Adamo, John F.
McCaffrey and Isaac J. Powell, M.D., for election as directors of Professionals
Group at the Annual Meeting. The individuals who are elected as directors at
the Annual Meeting will hold office for a term expiring at the Annual Meeting
of Shareholders to be held in the year 2000 and upon the election and
qualification of their respective successors or upon their earlier resignation
or removal.
THE BOARD OF DIRECTORS OF PROFESSIONALS GROUP RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE ELECTION OF VICTOR T. ADAMO, JOHN F. MCCAFFREY AND
ISAAC J. POWELL, M.D. TO THE BOARD OF DIRECTORS OF PROFESSIONALS GROUP FOR
THREE YEAR TERMS EXPIRING AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN
THE YEAR 2000 AND UPON THE ELECTION AND QUALIFICATION OF THEIR SUCCESSORS OR
UPON THEIR EARLIER RESIGNATION OR REMOVAL.
It is intended that the proxies solicited on behalf of the Board of
Directors of Professionals Group (other than proxies in which the vote is
withheld as to one or more nominees) will be voted at the Annual Meeting for
the election of Victor T. Adamo, John F. McCaffrey and Isaac J. Powell, M.D. to
the Board of Directors of Professionals Group. If any nominee is unable to
serve, the shares represented by all such proxies will be voted for the
election of such substitute as the Board of Directors of Professionals Group
may recommend. At this time, the Board of Directors of Professionals Group
knows of no reason why any of the nominees might be unable to serve, if
elected.
The table below sets forth certain information regarding the composition
of the Board of Directors of Professionals Group.
NOMINEES
<TABLE>
<CAPTION>
Positions Held Director Term
Name Age in Professionals Group Since Expires
- --------------------------- --- --------------------------------- -------- -------
<S> <C> <C> <C> <C>
Victor T. Adamo, Esq., CPCU 49 Director, President and Chief 1996 1997
Executive Officer
John F. McCaffrey 59 Director 1996 1997
Isaac J. Powell, M.D. 56 Director 1996 1997
</TABLE>
7
<PAGE> 8
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
Positions Held Director Term
Name Age in Professionals Group Since Expires
------------------------- --- ---------------------- -------- -------
<S> <C> <C> <C> <C>
John F. Dodge, Jr., Esq. 70 Director 1996 1998
H. Harvey Gass, M.D. 81 Director 1996 1998
Ann F. Putallaz, Ph.D. 52 Director 1996 1998
Jerry D. Campbell 57 Director 1996 1999
W. Peter McCabe, M.D. 57 Director, Chairman 1996 1999
William H. Woodhams, M.D. 59 Director 1996 1999
Donald S. Young, Esq. 60 Director 1996 1999
</TABLE>
The business experience of each of the directors of Professionals Group
for at least the past five years is as follows:
NOMINEES
Victor T. Adamo, Esq. has been the President and Chief Executive Officer
and a Director of Professionals Group since 1996. Mr. Adamo has been President
of PICOM since 1990 and Chief Executive Officer and a director of PICOM since
1987. Prior to joining PICOM, Mr. Adamo was in private legal practice from
1975 to 1985 and represented PICOM in corporate legal matters. Mr. Adamo is a
graduate of the University of Michigan and New York University School of Law
and is a Chartered Property Casualty Underwriter (CPCU). Mr. Adamo is the only
Director of Professionals Group who is also an employee of Professionals Group
or any subsidiary of Professionals Group.
John F. McCaffrey has been a Director of Professionals Group since 1996.
Mr. McCaffrey is the founder and President of Belle Meade Group, Inc., a
privately held brokerage development corporation headquartered in Chicago,
Illinois. Prior to founding Belle Meade Group in July, 1993, and from March,
1988 to September, 1992, he was Senior Vice President of Aon Corporation and
the Vice-Chairman of Rollins Burdick Hunter Co. From June, 1988 to September,
1991, he served as Director of Life of Virginia and Director of Union Fidelity
Life Insurance Company. Mr. McCaffrey is a former member of the Board of
Trustees of the American Institute for Property and Liability Underwriters,
Inc./Insurance Institute of America, Inc. He is also a former Director of the
National Association for Casualty & Surety Agents. He has served as a Director
of the Board and Member of the Executive Committee of the National Association
of Insurance Brokers. He attended the University of Virginia and the
University of Michigan.
8
<PAGE> 9
Isaac J. Powell, M.D. has been a Director of Professionals Group since
1996. Dr. Powell has been a director of PICOM since 1980. He is board
certified in Urology. Dr. Powell is Assistant Professor in Urology in the
Department of Urology, Wayne State University, School of Medicine, Detroit,
Michigan. Dr. Powell is also Chief of Urology at Veterans Hospital, Allen
Park, Michigan. Dr. Powell is a graduate of the Indiana University Medical
School.
DIRECTORS CONTINUING IN OFFICE
Jerry D. Campbell has been a Director of Professionals Group since 1996.
He has been a director, and the Chairman and Chief Executive Officer, of
Republic Bancorp Inc., a publicly held Michigan corporation and bank holding
company, since 1986. Mr. Campbell is also a director of Newcor, Inc., a
publicly held Delaware corporation, and Mercantile Bank of Naples, Florida.
Mr. Campbell has a B.S. degree in liberal arts from Central Michigan
University, a M.B.A. degree from Wayne State University and a M.B.A. degree
from the University of Michigan. The common stock of Republic Bancorp Inc. is
listed on the Nasdaq National Market under the symbol "RBNC", and the common
stock of Newcor, Inc. Is listed on the Nasdaq National Market under the symbol
"NEWC".
John F. Dodge, Jr., Esq. has been a Director of Professionals Group since
1996. Mr. Dodge has been a director of PICOM since 1980. Mr. Dodge is
currently engaged in the private practice of law in Grosse Pointe, Michigan.
Prior to establishing his private practice, Mr. Dodge was a senior partner in
the law firm of Nederlander, Dodge & Rollins, P.C., Detroit, Michigan. Mr.
Dodge has practiced general business and corporate law since 1961. Mr. Dodge
is a graduate of the University of Michigan and University of Michigan Law
School.
H. Harvey Gass, M.D. has been a Director of Professionals Group since
1996. Dr. Gass has been a director of PICOM since 1980. Dr. Gass is board
certified in Neurosurgery, practicing largely at Sinai Hospital, Detroit,
Michigan. He served as Clinical Professor of Neurosurgery, Department of
Neurosurgery, Wayne State University, School of Medicine, Detroit, Michigan.
Dr. Gass is a graduate of the University of Michigan Medical School.
W. Peter McCabe, M.D. has been the Chairman of the Board and a Director of
Professionals Group since 1996. Dr. McCabe has been Chairman of the Board and
a director of PICOM since 1994 and 1980, respectively. He is board certified
in Plastic Surgery and the current President of the Michigan State Medical
Society. Dr. McCabe is engaged in private practice and serves on the medical
staff of Saint John Hospital, Detroit, Michigan. Dr. McCabe is a graduate of
Harvard College and Cornell University Medical School.
Ann F. Putallaz, Ph.D. has been a Director of Professionals Group since
1996. She is the Vice President and Director of Fiduciary Services of Munder
Capital Management, a privately held general partnership and the investment
adviser to The Munder Funds, a Maryland corporation and an open-end investment
company registered under the Investment Company Act of 1940, as amended. From
June, 1992 to December, 1994, Ms. Putallaz was the Director of Client and
Marketing Services and Mutual Fund Product Management of Woodbridge Capital
Management, a predecessor-in-interest to Munder Capital Management. From July,
1990 to
9
<PAGE> 10
June, 1992 she was the Director of Marketing, Economics and Quantitative
Analysis of Comerica Capital Management, a predecessor-in-interest to
Woodbridge Capital Management. Ms. Putallaz has a B.A. degree in economics
from Smith College, and a M.A. degree and a Ph.D. degree in economics from the
University of Michigan.
William H. Woodhams, M.D. has been a Director of Professionals Group since
1996. Dr. Woodhams has been a director of PICOM since 1980. Dr. Woodhams is
board certified in Family Practice and is in private practice in Kalamazoo,
Michigan. Dr. Woodhams serves as an Assistant Clinical Professor in the
Department of Family Practice at Michigan State University, College of Human
Medicine. Dr. Woodhams is also a member of the Board of Medicine Committee of
Licensure and Discipline. Dr. Woodhams served as a member of the Board of
Directors of Physicians Insurance Company of Indiana from 1982 to 1994. Dr.
Woodhams is a graduate of the University of Michigan School of Medicine.
Donald S. Young, Esq. has been a Director of Professionals Group since
1996. He is a principal in Dykema Gossett PLLC, a law firm headquartered in
Detroit, Michigan. Mr. Young has a B.A. degree in economics from the
University of Michigan and an LL.B. degree from Harvard University. Mr. Young
serves as a director of Attorneys' Liability Assurance Society (Bermuda) Ltd.
and Attorneys' Liability Assurance Society Inc. which provide professional
liability insurance for large law firms. Dykema Gossett PLLC has in the past
provided legal services to PICOM and to certain of its directors.
EXECUTIVE OFFICERS
The executive officers of Professionals Group, who are elected annually
by, and serve at the pleasure of, the Board of Directors of Professionals
Group, consist of W. Peter McCabe, M.D., Chairman; Victor T. Adamo, President
and Chief Executive Officer; R. Kevin Clinton, Vice President, Treasurer and
Chief Financial Officer; and Annette E. Flood, Esq., Secretary. The business
experience of each of Dr. McCabe and Mr. Adamo for at least the past five years
is set forth above. The business experience of each of Mr. Clinton and Ms.
Flood for at least the past five years is as follows:
R. Kevin Clinton has been a Vice President and the Treasurer and Chief
Financial Officer of Professionals Group since 1996. Mr. Clinton has been a
Vice President, Chief Financial Officer and Actuary of PICOM since 1990. Prior
to becoming an officer of PICOM, Mr. Clinton was PICOM's consulting actuary
from 1986 to 1990. He formerly served as the Actuary for the Michigan
Insurance Bureau and Michigan Mutual Insurance Company. Mr. Clinton is a
fellow of the Casualty Actuarial Society and a member of the American Academy
of Actuaries. Mr. Clinton is a graduate of the University of Michigan where he
received a Bachelors degree in business administration and a Masters degree in
actuarial science.
Annette E. Flood, Esq., R.N. has been the Secretary of Professionals Group
since 1996. Ms. Flood is Vice President, Corporate Secretary and Legal Counsel
of PICOM. Prior to joining PICOM in 1992, Ms. Flood was employed by Lansing
General Hospital, Lansing, Michigan, from 1986 to 1992, most recently in the
capacity of Vice President, Legal Services and Quality
10
<PAGE> 11
Management. Prior to joining the Lansing General Hospital staff, Ms. Flood was
in the litigation section of the law firm of Dykema Gossett PLLC, Lansing,
Michigan. Ms. Flood has a Bachelors degree in Nursing from the University of
Michigan and a law degree from Wayne State University Law School.
No nominee or director or executive officer of Professionals Group is
related to any other nominee or director or executive officer of Professionals
Group (or of any of its subsidiaries) by blood, marriage or adoption, and there
are no arrangements or understandings between any nominee or director or
executive officer and any other person pursuant to which such nominee or
director or executive officer was nominated or elected a director or elected an
executive officer of Professionals Group or any of its subsidiaries.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
Meetings of the Board of Directors of Professionals Group are generally
held as required. During 1996, the Board of Directors held four meetings. No
Director attended fewer than 75% of the total number of meetings of the Board
of Directors of Professionals Group held during 1996 and no Director attended
fewer than 75% of the total number of meetings held by all Board committees on
which any such Director served during 1996.
The Board of Directors of Professionals Group has standing Executive,
Audit and Compensation Committees, the function and composition of which are
set forth below. The Board of Directors of Professionals Group does not
currently have a standing nominating committee or a committee performing
similar functions.
The Executive Committee is authorized to exercise the powers and authority
of the Board of Directors of Professionals Group in the management and affairs
of Professionals Group, if the Board of Directors of Professionals Group is not
meeting, except as limited by the Michigan Business Corporation Act, as
amended, and the First Amended and Restated Articles of Incorporation and
bylaws of Professionals Group. The members of this committee are W. Peter
McCabe, M.D., Victor T. Adamo, John F. Dodge, Jr., H. Harvey Gass, M.D. and
Donald S. Young. During 1996, this committee met one time.
The Audit Committee of the Board of Directors of Professionals Group is
authorized to confer with the auditors and financial officers of Professionals
Group and its subsidiaries, review reports submitted by the auditors, establish
or review, and monitor compliance with, codes of conduct of Professionals Group
and its subsidiaries, inquire about procedures for compliance with laws and
regulations relating to the management of Professionals Group and its
subsidiaries, and report and make recommendations to the Board of Directors of
Professionals Group. The members of this committee are Isaac J. Powell, M.D.,
William H. Woodhams, M.D., and Donald S. Young. During 1996, this committee
met one time.
The Compensation Committee of the Board of Directors of Professionals
Group is responsible for recommending to the Board of Directors of
Professionals Group policies and levels of compensation with respect to
compensation and benefits of all executive officers of
11
<PAGE> 12
Professionals Group and all key employees of Professionals Group and its
subsidiaries. Except as otherwise described in this Proxy Statement or the
applicable plan document, the Compensation Committee also serves as the
administrative committee under the Professionals Group 1996 Incentive Plan and
the Professionals Group 1996 Non-Employee Directors Plan, and is responsible
for administering such plans, including designating employees to be granted
options, prescribing the terms and conditions of options granted under the
plans, interpreting the plans and making all other determinations deemed
necessary for the administration of the plans. The members of this committee
are H. Harvey Gass, M.D., Jerry D. Campbell, John F. Dodge, Jr., W. Peter
McCabe, M.D., and John F. McCaffrey. During 1996, this committee did not
meet, although two meetings were held during 1997 reviewing 1996 Company
results.
COMPENSATION COMMITTEE REPORT
The Professionals Group Compensation Committee's report on executive
compensation follows.
The officers of Professionals Group and its subsidiaries, including the Chief
Executive Officer, are compensated through a combination of salary and
incentive compensation. The primary purposes of the compensation program are
to attract and retain qualified individuals and to motivate and reward
individuals based on performance. The Compensation Committee believes that
making a portion of executive compensation discretionary and based on
performance provides an incentive for increasing shareholder value over the
long term and more closely aligns the interest of executive employees with
those of shareholders.
It is the goal of the Compensation Committee to establish compensation
opportunities that are competitive in comparison to market practices and
reflective of an executive's scope of responsibilities, level of experience,
individual performance and contribution to the business. Salaries are the base
element of the executive compensation program. In establishing salaries, the
Compensation Committee reviews executive compensation survey data for insurance
companies of similar size and product lines. It also considers, among other
factors, job responsibilities and job performance, education, training and
market opportunities.
The Compensation Committee awards annual incentive compensation to executive
officers based upon the Compensation Committee's assessment of the Company's
performance during the prior year and the contribution made by each executive
officer. In making awards of incentive compensation, the Compensation
Committee considers performance against certain pre-established corporate goals
including growth and financial results, competitive factors and the market
performance of the Professionals Group's Common Stock.
12
<PAGE> 13
The Compensation Committee encourages stock ownership by executive officers.
During 1996, grants of restricted stock were made to executive officers in
recognition of the Company's significant financial progress and growth as well
as the increased value of the Company's common stock during 1995 and prior
years. On a going forward basis it is expected that option based compensation
under the Professionals Insurance Company Management Group 1996 Long Term Stock
Incentive Plan (the "Incentive Plan") will be used in lieu of grants of
restricted stock and will become a more significant element of each executive
officer's incentive compensation. The Compensation Committee expects that such
awards, will be made under the Incentive Plan to those executive officers and
key employees of the Company who, in the judgment of the Compensation
Committee, are expected to contribute materially to the Company's future
success. It is anticipated that such awards will be determined in light of the
above criteria and after consideration of appropriate performance factors. It
is to be noted that as of the date of this Proxy Statement no awards have been
made under the Incentive Plan.
During 1996, the Company's most highly compensated executive officer was Victor
T. Adamo, President and Chief Executive Officer. Mr. Adamo received total cash
payments of $244,516 in salary and bonus and also was granted 2,700 shares of
restricted stock, valued at $66,150. Mr. Adamo's 1996 compensation package was
determined taking into consideration the Company's strong performance in prior
periods, the compensation factors described above (including survey data on
salary movements indicating an increase in peer executives' salaries), and the
success of Mr. Adamo's leadership in improving the Company's business position.
Evidence of this success can be found in the successful reorganization of
PICOM Insurance Company into an insurance holding company headed by
Professionals Group, the Company's stronger balance sheet, increased revenues
and earnings and improved claims-paying-ability ratings, and the Company's
increasing product and geographical diversification. For these reasons, the
Compensation Committee deems Mr. Adamo's compensation package to be
appropriate. (The Summary Compensation Table on page 16 of this Proxy Statement
shows the amounts and type of compensation paid to Mr. Adamo in 1996, 1995 and
1994.) The Compensation Committee's decisions relating to Mr. Adamo's
compensation were ratified by the Board of Directors.
In mid-1993, a new Section 162(m) was added to the Internal Revenue Code of
1986, as amended (the "Code"). Subject to certain exceptions (including
exceptions relating to stock options and for "performance-based" compensation
if certain conditions are met), Section 162(m) of the Code prohibits the
deduction of compensation in excess of $1 million paid in any year beginning
with 1994 by a publicly-held corporation to any executive named in such
corporation's Summary Compensation Table for the year. For 1996, the
compensation paid to each of the executive officers named in the Company's
13
<PAGE> 14
Summary Compensation Table for 1996 was well below $1 million, and the
Compensation Committee expects the same will be true for the current year.
Consequently, for the present the Compensation Committee has decided to defer
consideration of any compensation policies relating to Section 162(m) of the
Code.
H. Harvey Gass, M.D., Chairman Jerry D. Campbell
John F. Dodge, Jr. W. Peter McCabe, M.D.
John F. McCaffrey
The Compensation Committee Report shall not be deemed incorporated by
reference into any filings by Professionals Group under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), except to the extent that Professionals
Group specifically incorporates this information by reference, and shall not
otherwise be deemed filed under the Securities Act or the Exchange Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee in 1996 were H. Harvey Gass,
M.D., Chairman, Jerry D. Campbell, John F. Dodge, Jr., W. Peter McCabe, M.D.,
and John F. McCaffrey.
Mr. Dodge performs certain legal services for Professionals Group and its
subsidiaries. Mr. Dodge was paid $25,267 in 1996 for legal services and
expenses in connection with his representation of PICOM. Dr. H. Harvey Gass
serves as PICOM's Claims Medical Consultant. Dr. Gass was paid $32,800 in 1996
with respect to consulting services rendered to PICOM.
No executive officer of Professionals Group served as a member of the
compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of
directors) of another entity, one of whose executive officers served on the
compensation committee of Professionals Group. No executive officer of
Professionals Group served as a director of another entity, one of whose
executive officers served on the compensation committee of Professionals Group.
No executive officer of Professionals Group served as a member of the
compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of
directors) of another entity, one of whose executive officers served as a
Director of Professionals Group.
DIRECTORS COMPENSATION AND BENEFITS
Directors who are not also employees of Professionals Group or a
subsidiary receive an annual retainer of $10,000 and an additional $1,000 for
each meeting of the Board of Directors of Professionals Group or a committee
attended plus reimbursement for reasonable expenses in connection with
attending such meetings. Such Directors also receive, annually, an option to
purchase up to 500 shares of Professionals Group Common Stock pursuant to the
Professionals
14
<PAGE> 15
Group's 1996 Non-Employee Directors Plan (the "Non-Employee Directors Plan") and
are eligible to participate in Professionals Group's Stock Purchase Plan.
The general purposes of the Non-Employee Directors Plan are (i) to
encourage non-employee Directors of Professionals Group to own Common Stock and
(ii) to provide a means for tying a portion of the compensation paid to
non-employee Directors for their service on the Board of Directors of
Professionals Group to the value of the Common Stock, thus more closely aligning
the interests of such Directors with those of the shareholders of Professionals
Group. Although the Board of Directors of Professionals Group is designated as
the administrator of the Non-Employee Directors Plan, neither the Board of
Directors of Professionals Group nor any other person or body has any discretion
to select the persons who receive awards under the Non-Employee Directors Plan,
the times at which awards are granted, or the terms and conditions of such
awards. Instead, all such matters are determined entirely by the terms of the
Non-Employee Directors Plan itself.
So long as the Non-Employee Directors Plan remains in effect, and to the
extent shares remain available, at the adjournment of each organizational
meeting of the Board of Directors of Professionals Group following an annual
meeting of shareholders of Professionals Group, each person who is then a
non-employee Director of Professionals Group is automatically granted a plan
option covering 500 shares of Common Stock (subject to adjustment as
contemplated by the Non-Employee Directors Plan) or, if less, the maximum
number of shares then permissible for that Director under the Non-Employee
Directors Plan. Subject to adjustment as contemplated by the Non-Employee
Directors Plan, the per share exercise price of each option granted under the
Non-Employee Directors Plan is the "fair market value" of a share of Common
Stock at the date the option is granted.
Ordinarily, each option granted under the Non-Employee Directors Plan
becomes exercisable on the first anniversary of the option's grant date.
However, upon the occurrence of a change in control (as defined in the
Non-Employee Directors Plan), all outstanding plan options that were not then
otherwise exercisable would be deemed to have become fully exercisable
immediately prior to such change in control. Each outstanding option
terminates at the earlier of: (i) the first anniversary of the date the
grantee ceases to be a Director of Professionals Group or (ii) its expiration
date (that is, the seventh anniversary of the option's grant date). Each plan
option is nontransferable, except by will or the laws of descent and
distribution, and is exercisable only for cash and, during the lifetime of the
grantee, only by the grantee.
Shares used for options granted under the Non-Employee Directors Plan may
be either treasury shares or new issuances. Subject to adjustment as
contemplated by the Non-Employee Directors Plan, the aggregate maximum number
of shares that are available for settlement of plan options is 50,000 and the
maximum number available for any given individual is 5,000. If a plan option
terminates or expires without having been exercised in full, the shares subject
to the option immediately before such termination or expiration become
available for future awards under the Non-Employee Directors Plan. Pursuant to
the Professionals Group 1996 Non-Employee Directors Plan, in August, 1996
Directors Campbell, Dodge, Gass, McCabe, McCaffrey, Powell, Putallaz, Woodhams
and Young each received an option to purchase 500
15
<PAGE> 16
shares of Common Stock at an exercise price of $21.63 per share. As a
result of Professionals Group's 10% stock dividend issued in December, 1996,
these options have been adjusted and now represent the right to purchase 550
shares of common stock at an exercise price of $19.66 per share.
MANAGEMENT REMUNERATION
Summary Compensation Table. The following table sets forth information
concerning compensation for services in all capacities awarded to, earned by or
paid to each of the five most highly compensated executive officers and/or
employees of Professionals Group and its subsidiaries (the "Named Executives")
for the last three completed fiscal years whose salary and bonus exceeded
$100,000 in 1996.
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payout
- ------------------------------------------------------------------------- ---------------------- -----------------------
Restricted
Other Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Award(s) SARs Payout Compensation
Principle Position Year ($) ($) ($)(1) ($) (#) ($) ($)(2)
- ------------------ ----- ------- ------ ----------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Victor T. Adamo 1996 223,751 20,765 12,000 66,150 -- -- 29,368
President & CEO 1995 214,731 5,312 10,500 10,624 -- -- 21,229
1994 205,485 8,171 11,250 16,342 -- -- 18,831
R. Kevin Clinton 1996 217,861 18,229 -- 57,820 -- -- 29,368
Vice President & 1995 209,080 5,222 -- 10,445 -- -- 21,116
Chief Financial Officer 1994 200,077 7,990 -- 15,980 -- -- 19,167
John O. Bashant 1996 130,250 14,392 -- 45,693 -- -- 26,583
Vice President 1995 125,000 3,782 -- 7,663 -- -- 21,902
Marketing & Sales 1994 99,697 10,639 -- 11,278 -- -- 17,558
Annette E. Flood 1996 114,620 12,967 -- 40,915 -- -- 24,767
Vice President, 1995 110,000 3,692 -- 7,363 -- -- 19,681
Secretary 1994 95,000 2,729 -- 5,458 -- -- 15,499
Darryl K. Thomas 1996 114,620 21,762 -- 17,150 -- -- 24,220
Vice President, 1995 -- -- -- -- -- -- --
Claims 1994 -- -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Amounts shown consist of director fees paid by PICOM Insurance Company.
(2) Amounts shown for 1996 consist of the following: (i) Mr. Adamo:
matching contribution to purchases of Common Stock under the Stock
Purchase Plan of $7,500 and contributions under the PICOM Insurance
Company Pension Plan and the PICOM Insurance Company Employees' Savings
and Retirement Plan (the "PICOM pension plans") for the benefit of Mr.
Adamo of $21,868; (ii) Mr. Clinton: matching contribution to purchases of
Common Stock under the Stock Purchase Plan of $7,500 and contributions
under the PICOM pension plans for the benefit of Mr. Clinton of $21,868;
(iii) Mr. Bashant: matching contribution to purchases of Common Stock
under the Stock Purchase Plan of $7,500 and contributions under the PICOM
pension plans for the benefit of Mr. Bashant of $19,083; (iv) Ms. Flood:
matching contribution to purchases of Common Stock under the Stock
Purchase Plan of $7,500 and contributions under the PICOM pension plans
for the benefit of Ms. Flood of $17,267; and (v) Mr. Thomas: matching
contribution to purchases of Common Stock under the Stock Purchase Plan of
$7,500
16
<PAGE> 17
and contributions under the PICOM pension plans for the benefit of
Mr. Thomas of $16,720. Amounts shown for 1995 consist of the following:
(i) Mr. Adamo: matching contribution to purchases of Common Stock under
the Stock Purchase Plan of $2,500 and contributions under the PICOM
pension plans for the benefit of Mr. Adamo of $18,729; (ii) Mr. Clinton:
matching contribution to purchases of Common Stock under the Stock
Purchase Plan of $2,500 and contributions under the PICOM pension plans
for the benefit of Mr. Clinton of $18,616; (iii) Mr. Bashant: matching
contribution to purchases of Common Stock under the Stock Purchase Plan of
$2,500 and contributions under the PICOM pension plans for the benefit of
Mr. Bashant of $19,402; and (iv) Ms. Flood: matching contribution to
purchases of Common Stock under the Stock Purchase Plan of $2,500 and
contributions under the PICOM pension plans for the benefit of Ms. Flood
of $17,181. Amounts shown for 1994 consist of the following: (i) Mr.
Adamo: matching contribution to purchases of Common Stock under the Stock
Purchase Plan of $1,250 and contributions under the PICOM pension plans
for the benefit of Mr. Adamo of $17,581; (ii) Mr. Clinton: matching
contribution to purchases of Common Stock under the Stock Purchase Plan of
$1,250 and contributions under the PICOM pension plans for the benefit of
Mr. Clinton of $17,917; (iii) Mr. Bashant: matching contribution to
purchases of Common Stock under the Stock Purchase Plan of $1,250 and
contributions under the PICOM pension plans for the benefit of Mr. Bashant
of $16,308; and (iv) Ms. Flood: matching contribution to purchases of
Common Stock under the Stock Purchase Plan of $1,250 and contributions
under the PICOM pension plans for the benefit of Ms. Flood of $14,249.
STOCK PURCHASE PLAN
Professionals Group has implemented a stock purchase plan (the "Stock
Purchase Plan") designed to continue the stock purchase plan previously
implemented by PICOM. Pursuant to the Stock Purchase Plan, all employees and
directors of Professionals Group and its subsidiaries are permitted to purchase
Common Stock by means of payroll deduction. Under the Stock Purchase Plan,
Professionals Group may elect to match participant purchases. During 1996
Professionals Group matched participant purchases at the rate of $1.25 (of
which $1.00 was used to purchase Common Stock and $.25 was applied to income
taxes) for each $1.00 of participant purchases up to a maximum participant
purchase of $6,000. (In the event that Professionals Group was not the direct
employer of a participant, the match amount was charged to the subsidiary that
was the employer of the participant.) Participants in the Stock Purchase Plan
exercise all rights of ownership with respect to the shares of Common Stock
purchased for their respective accounts.
LONG TERM STOCK INCENTIVE PLAN
Professionals Group has implemented a plan, designated the Professionals
Insurance Company Management Group 1996 Long Term Stock Incentive Plan, under
which options to purchase shares of Common Stock ("Options"); shares of such
stock ("Restricted Stock") or units denominated in such shares ("Restricted
Stock Units") that are nontransferable and subject to forfeiture for a
designated restricted period; awards of the right to receive the excess of the
fair market value at time of exercise of a share of Common Stock over a
designated price determined at time of grant ("Stock Appreciation Rights" or
"SARs"); awards denominated in and/or which may be settled in such shares
subject to satisfaction of designated performance criteria during a designated
performance period ("Performance Awards"); rights to receive the equivalent of
dividends or other distributions upon Common Stock ("Dividend Equivalents");
and other types of awards denominated or payable in shares of Common Stock
("Other Stock-Based Awards") may be granted to eligible participants. No
awards were made, or were outstanding, under the Incentive Plan in 1996.
17
<PAGE> 18
EMPLOYMENT SEVERANCE COMPENSATION PLANS
Professionals Group has assumed the Key Employee Retention Plan and the
Employee Retention Plan that had been established by PICOM. The Key Employee
Retention Plan provides each executive of Professionals Group or any of its
subsidiaries who is designated as a "key employee" with a severance payment and
certain insurance and other benefits in the event that there is a change in
control of Professionals Group that is coupled with the actual involuntary or
constructive termination (as defined in the plan) of such executive within two
years after such change in control. The amount of the severance payment is
equal to two-times the executive's base salary plus bonus (average of last three
years). The Employee Retention Plan provides certain full-time and regular
part-time employees with the option, under certain limited circumstances, to
receive a lump sum severance payment equal to one year's W-2 pay and certain
other benefits upon the termination of such an employee's employment within one
year after a change in control.
Under each of these plans, a "change in control" is deemed to have
occurred if (i) any person or entity (other than a trustee or other fiduciary
holding securities under an employee benefit plan of Professionals Group, or a
corporation owned directly or indirectly by the shareholders of Professionals
Group in substantially the same proportions as their ownership of stock of
Professionals Group which adopts the plan) becomes the beneficial owner,
directly or indirectly, of securities of Professionals Group representing more
than 24.9% of the combined voting power of Professionals Group's then
outstanding securities; or (ii) during any period of two consecutive years (not
including any period prior to the effective date of the plan), the shareholders
of Professionals Group approve (A) a plan of complete liquidation of
Professionals Group; or (B) an agreement for the sale or disposition of all or
substantially all of Professionals Group's assets; or (C) the sale or
reinsurance of all or substantially all of the insurance business of PICOM so as
to cause PICOM to cease to function on a going forward basis as a medical
professional liability insurance company; or (D) a merger, consolidation, or
reorganization of Professionals Group with or involving any other corporation,
other than a merger, consolidation, or reorganization that would result in the
voting securities of Professionals Group outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of such surviving entity) at least 51% of the combined
voting power of the voting securities of Professionals Group (or such surviving
entity) outstanding immediately after such merger, consolidation, or
reorganization. However, in no event shall a change in control be deemed to
have occurred, with respect to a plan participant, if that participant is part
of a purchasing group which consummates the change in control transaction. A
participant is deemed to be "part of a purchasing group" if the participant is
an equity participant or has agreed to become an equity participant in the
purchasing company or group (except for (i) passive ownership or less than five
percent of the stock of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group which is otherwise deemed not
to be significant, as determined prior to the change in control by a majority of
the nonemployee continuing Directors of Professionals Group). Those executives
of Professionals Group and PICOM currently covered by the Key Employee Retention
Plan include Victor T. Adamo, John O. Bashant, R. Kevin Clinton, Annette E.
Flood, and Darryl K. Thomas.
18
<PAGE> 19
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Professionals Group has renewed Professionals
Group's arrangement for KPMG Peat Marwick LLP to be its independent auditors
for the fiscal year ending December 31, 1997, subject to the ratification of
the appointment by Professionals Group's shareholders. A representative of
KPMG Peat Marwick LLP is expected to attend the Annual Meeting to respond to
appropriate questions and will have an opportunity to make a statement if he or
she so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS PROFESSIONALS
GROUP'S AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
The consolidated financial statements of Professionals Group at December
31, 1996 and for each of the two years in the period ended December 31, 1996
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as indicated in their report with respect thereto. As noted in
KPMG Peat Marwick LLP's report, Professionals Group changed its method of
accounting for loss and loss adjustment expense reserves by eliminating
discounting of such reserves in 1995.
The consolidated financial statements of Professionals Group at December
31, 1994 and for the year ended December 31, 1994 have been audited by Coopers
& Lybrand LLP, independent certified public accountants, as indicated in their
report with respect thereto. Coopers & Lybrand LLP's report contained an
explanatory paragraph due to a change in method of accounting for certain
investments and a change in the discount rate used in recording loss and loss
adjustment expense reserves.
At a meeting of the Board of Directors of PICOM held on September 21, 1995
and after recommendation by the Audit Committee of the Board of Directors of
PICOM, the accounting firm of KPMG Peat Marwick LLP was engaged by PICOM to
perform future independent audits of PICOM commencing with calendar year 1995.
KPMG Peat Marwick LLP thereby replaced Coopers & Lybrand LLP as PICOM's
independent auditors. The change in accountants resulted from PICOM's putting
its audit work out to bid and did not reflect any dissatisfaction or
disagreement with Coopers & Lybrand LLP. Coopers & Lybrand LLP participated in
the bidding process. In a letter dated October 3, 1995, Coopers & Lybrand LLP
confirmed that the change in certifying accountants did not result from
disagreement on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope of procedure. During PICOM's three
most recent fiscal years PICOM did not engage any independent accountants other
than KPMG Peat Marwick LLP and Coopers & Lybrand LLP to audit the financial
statements of PICOM or any significant subsidiary of PICOM.
19
<PAGE> 20
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return to
Professionals Group shareholders during the five year period ended December 31,
1996. Also displayed for this time period are the overall stock market index
(Nasdaq Stock Market) and Professionals Group's peer group index (Nasdaq
Insurance Stocks).
(PERFORMANCE GRAPH APPEARS HERE)
Total Return Analysis
1991 1992 1993 1994 1995 1996
---- ------ ------ ------ ------ ------
Professionals Group 100.00 103.45 106.21 91.79 181.50 201.94
Nasdaq Insurance Stocks* 100.00 134.62 138.84 133.66 189.52 206.45
Nasdaq Stock Market 100.00 116.03 134.32 130.28 182.96 224.06
(U.S. & Foreign Companies)
*Includes SIC Ranges 6330-6339 and 6350-6359.
The Stock Performance Graph shall not be deemed incorporated by reference
into any filings by Professionals Group under the Securities Act or the
Exchange Act, except to the extent that Professionals Group specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the Securities Act and the Exchange Act.
20
<PAGE> 21
PROPOSAL III - NON-BINDING SHAREHOLDER PROPOSAL REGARDING THE
CLASSIFICATION OF THE BOARD OF DIRECTORS OF PROFESSIONALS GROUP
Professionals Group has been advised that Edwin H. Season, M.D., of 1492
East Broad Street, Suite 1303, Columbus, Ohio 43205, who is the beneficial
owner of 24,200 shares of Common Stock, intends to present the following
non-binding shareholder proposal at the Annual Meeting. THE BOARD OF DIRECTORS
OF PROFESSIONALS GROUP OPPOSES THIS PROPOSAL AND URGES YOU TO VOTE AGAINST THIS
PROPOSAL.
SHAREHOLDER PROPOSAL
RESOLVED, that the shareholders of Professionals Insurance Company
Management Group urge the Board of Directors of Professionals Group to take the
steps necessary under applicable law to declassify the Board of Directors for
the purpose of director elections. The declassification shall be done in a
manner that does not affect the unexpired terms of directors previously
elected.
SUPPORTING STATEMENT
Shareholders expect director accountability and I believe that a staggered
board impedes such accountability. I believe director accountability could be
enhanced if the Board of Directors was reorganized and all directors were
elected annually because shareholders could then annually register their views
on the performance of the Board of Directors collectively and each director
individually.
Classified boards became popular in the 1980's as a defense against taking
control of a company. Though effective in deterring coercive tender offers,
under some circumstances they may impede mergers which have the potential to
produce a stronger company and increase shareholder wealth. I believe that
shareholders want consolidation at Professionals Group and that a board
annually elected would facilitate that objective.
I believe directors have been reluctant to accumulate the stock and that
this lack of ownership creates the perception of directors not being
representative of the true owners. Professionals Group recently offered
subsidized stock purchases and options grants to directors in addition to
generous director fees. Though this will increase directors' stock holdings (a
worthwhile objective) subsidized purchases and grants partially shield
directors from downside financial risk. Director ownership of this type is
different from shareholder ownership where shares are purchased at full market
value. The result is directors' financial interests are not entirely aligned
with shareholders' interests.
Shareholders need a way to express their confidence in each director. The
annual election of directors would allow the shareholders the maximum
opportunity to evaluate the performance of the board and its members.
I believe that a company's corporate governance procedures and practices
and the level of management accountability they impose should be related to the
performance of the company. I believe passage of this proposal will improve
corporate governance, director performance and company performance. I urge you
to vote for this proposal.
21
<PAGE> 22
THE BOARD OF DIRECTORS' STATEMENT OPPOSING THE SHAREHOLDER PROPOSAL
The Board of Directors recommends a vote AGAINST this proposal. The
classification of the Board of Directors of Professionals Group is a
continuation of the director classification that was approved by the
shareholders of PICOM (the predecessor of Professionals Group) at PICOM's 1988
Annual Meeting of Shareholders. At that meeting, the holders of 55.5% of the
outstanding shares of PICOM (which represented 85% of the shares voted)
approved a staggered board of directors where approximately one third of the
directors are elected annually.
The Board of Directors, as well as a majority of those shareholders who
approved a staggered board of directors, believed that a classified board was
in the best interests of the company and its shareholders because
classification ensures continuity in the composition of the board, assures that
a majority of the directors have prior experience and in-depth knowledge of the
company and prevents sudden and disruptive changes in corporate policies by
precluding election of an entirely new group of directors in a single year.
Moreover, Professionals Group believes that it is in the best interest of
shareholders to attract qualified directors who are willing to make a minimum
time commitment of at least three years to the Company.
In considering this non-binding shareholder proposal, you should be
mindful of the belief of the Board of Directors of Professionals Group that,
when faced with any unsolicited takeover proposal, shareholders of a company
with a classified board should be in a position to receive a price premium
greater than that received by shareholders of a company without a classified
board. The reality of this concern is underscored by the fact that a
significant number of unsolicited takeover attempts in the past several years
have been accompanied by the pressure tactic of a proxy contest to remove and
replace directors. Without a classified board, Professionals Group may be
limited in its ability to negotiate and explore alternatives so as to maximize
stockholder value.
Approval of this proposal will require the affirmative vote of a majority
of the votes cast by the holders of Common Stock who are present in person or
represented by proxy and entitled to vote at the Annual Meeting. Approval
would not, however, require that the requested action be taken since the
proposal is non-binding. Under Professionals Group's First Amended and
Restated Articles of Incorporation, a proposal to amend or repeal the article
establishing the classified Board of Directors must be approved by the
affirmative vote of not less than three-quarters of the issued and outstanding
shares of Common Stock.
THE BOARD OF DIRECTORS OF PROFESSIONALS GROUP RECOMMENDS A VOTE AGAINST THE
SHAREHOLDER PROPOSAL.
22
<PAGE> 23
OTHER MATTERS
The Board of Directors of Professionals Group is not aware of any business
to come before the Annual Meeting other than the matters described above in
this Proxy Statement. However, if any other matters should properly come
before the Annual Meeting, it is intended that holders of the proxies will act
in accordance with their best judgment.
The cost of solicitation of proxies will be borne by Professionals Group.
In addition to solicitation by mail, proxies may be solicited by telephone,
telegram, in person or by other forms of communication. Proxies will be
solicited on behalf of Professionals Group by directors, officers and regular
employees of Professionals Group and its subsidiaries (none of whom shall
receive any additional compensation for such services, but will be reimbursed
for reasonable out-of-pocket expenses incurred in connection with such
solicitation). Arrangements will be made with brokerage firms, nominees,
fiduciaries and other custodians for the forwarding of solicitation materials
to the beneficial owners of shares held of record by such persons, and
Professionals Group will reimburse such persons for their reasonable
out-of-pocket expenses in connection therewith. In addition, Morrow & Co.,
Inc. will assist in the solicitation of proxies by Professionals Group for a
fee of $4,500, plus reasonable out-of-pocket expenses.
In order to be eligible for inclusion in Professionals Group's proxy
materials for next year's Annual Meeting of Shareholders, any non-binding
shareholder proposal submitted pursuant to Rule 14a-8 of the Securities and
Exchange Commission's rules and regulations must be received by the Secretary
of Professionals Group at Professionals Group's principal executive office
(4295 Okemos Road, Box 2510, Okemos, Michigan 48805-9510) no later than
December 22, 1997. Any such proposal shall be subject to the requirements of
the proxy rules adopted under the Exchange Act. Any shareholder proposal
submitted for presentation at next year's annual meeting of shareholders other
than pursuant to Rule 14a-8 of the Commission's rules and regulations, must
comply with the rules and regulations of the Commission and must be submitted
to the Secretary of Professionals Group at the principal executive office of
Professionals Group in accordance with the requirements of Professionals
Group's charter documents. Under Professionals Group's First Amended and
Restated Articles of Incorporation, shareholder proposals submitted for
presentation at next year's annual meeting of shareholders must be delivered to
and received at Professionals Group's principal executive office not later than
February 4, 1998.
No person is authorized to give any information or to make any
representation other than that contained in this Proxy Statement, and if given
or made, such information may not be relied upon as having been authorized.
A copy of Professionals Group's Annual Report on Form 10-K for the year
ended December 31, 1996 will be furnished without charge to any shareholder
upon written request. Copies of such Form 10-K and other filings of
Professionals Group may also be obtained through Professionals Group's web site
at http://www.picm.com. All written requests should be directed to: Annette
E. Flood, Secretary, Professionals Insurance Company Management Group, 4295
Okemos Road, Box 2510, Okemos, Michigan 48805-9510.
23
<PAGE> 24
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS AND MANAGEMENT OF
PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
Annual Meeting of Shareholders to be held on June 4, 1997
The undersigned Shareholder appoints Victor T. Adamo, Esq., W. Peter
McCabe, M.D., and Isaac J. Powell, M.D., and each of them, each with the power
to appoint his substitute, attorneys and proxies to represent the Shareholder
and to vote and act with respect to all shares of common stock, no par value
per share (the "Common Stock"), of Professionals Insurance Company Management
Group ("Professionals Group") that the Shareholder would be entitled to vote on
all matters which come before the Annual Meeting of Shareholders referred to
above, which is to be held at 10:00 a.m. at University Place Marriott, 300
M.A.C. Avenue, East Lansing, Michigan 48823, and any adjournment(s) or
postponement(s) of that meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MANAGEMENT
OF PROFESSIONALS GROUP. IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF
COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF ALL OF THE
NOMINEES FOR DIRECTOR LISTED ON THE OTHER SIDE OF THIS PROXY, FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS FOR PROFESSIONALS GROUP FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997
AND AGAINST THE NON-BINDING SHAREHOLDER PROPOSAL REGARDING THE CLASSIFICATION
OF THE BOARD OF DIRECTORS OF PROFESSIONALS GROUP. THE SHARES OF COMMON STOCK
REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON ANY
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING.
The undersigned Shareholder hereby (i) revokes any and all proxies
previously executed with respect to the annual meeting of shareholders referred
to above, and (ii) acknowledges receipt of the notice and proxy statement for
said annual meeting of shareholders.
PLEASE DATE AND SIGN THE OTHER SIDE OF THIS PROXY
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
24
<PAGE> 25
Please mark / /
your votes as
indicated in
this example
1. The election of three directors to the Board of Directors of Professionals
Group for three year terms expiring at the Annual Meeting of Shareholders to
be held in the year 2000 and upon the election and qualification of their
successors or upon their earlier resignation or removal, namely: Victor T.
Adamo, Esq., John F. McCaffrey and Isaac J. Powell, M.D.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL DIRECTOR NOMINEES
LISTED ABOVE.
<TABLE>
<C> <C> <C>
Vote for all Withhold authority
nominees to
listed above. vote for all (Instruction: To withhold authority for any nominee(s) listed
nominees provided below.)name(s) of nominee(s) in the space provided below.)
listed above.
/ / / / ___________________________________________________________________
</TABLE>
2. Ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors for Professionals Group for the fiscal year ending December 31, 1997.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
FOR AGAINST ABSTAIN
/ / / / / /
3. Acting on a non-binding shareholder proposal regarding the classification of
the Board of Directors of Professionals Group.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
25
<PAGE> 26
FOR AGAINST ABSTAIN
/ / / / / / Please sign exactly as name appears on
this proxy. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by an authorized officer.
If a partnership, please sign in
partnership name by authorized person.
Dated: _________________________, 1997
_______________________________________
Signature
_______________________________________
Title
_______________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE
PAID RETURN ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
26
