<PAGE> 1
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 [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PROFESSIONALS GROUP, INC.
- --------------------------------------------------------------------------------
(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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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> 2
PROXY STATEMENT
OF
PROFESSIONALS GROUP, INC.
2600 PROFESSIONALS DRIVE
OKEMOS, MICHIGAN 48864
(517) 349-6500
1999 ANNUAL MEETING OF STOCKHOLDERS
May 7, 1999
Dear Stockholder:
You are cordially invited to attend Professionals Group, Inc.'s 1999 Annual
Meeting of Stockholders. The meeting will be held at our principal executive
offices located at 2600 Professionals Drive, Okemos, Michigan, at 10:00 a.m.,
local time, on Wednesday, June 2, 1999.
At the meeting, you will be asked to:
- elect five directors of Professionals Group; and
- conduct other business properly brought before the meeting.
The accompanying notice and proxy statement were prepared by Professionals
Group's management on behalf of your Board of Directors and are being furnished
to you in connection with the solicitation of proxies by your Board of Directors
for use at the meeting. They describe in more detail the matters to be acted
upon at the meeting and your voting rights with respect to such matters. Please
review them carefully.
YOUR VOTE IS IMPORTANT TO US. Whether or not you plan to attend the
meeting, PLEASE VOTE YOUR SHARES BY COMPLETING THE ENCLOSED PROXY CARD AND
PROMPTLY MAILING IT TO US in the postage-paid envelope that has been provided to
you for your convenience.
We look forward to seeing you at the meeting.
Sincerely,
/s/ VICTOR T. ADAMO
Victor T. Adamo
President and Chief Executive Officer
This proxy statement was first mailed to our stockholders on or about May
7, 1999.
<PAGE> 3
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that Professionals Group, Inc.'s 1999 Annual Meeting
of Stockholders will be held at 2600 Professionals Drive, Okemos, Michigan, at
10:00 a.m., local time, on Wednesday, June 2, 1999, for the following purposes:
1. To elect five directors of Professionals Group for three year terms
expiring at the annual meeting of stockholders to be held in the year
2002 and upon the election and qualification of their successors or upon
their earlier resignation or removal.
2. To transact such other business as may properly come before this meeting
or any adjournments or postponements thereof.
Your Board of Directors is not aware of any other business to come before
this meeting.
The close of business on April 7, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof. Only stockholders of
record at the close of business on that date are entitled to notice of and to
vote at the meeting and any adjournments or postponements thereof. A list of
Professionals Group stockholders entitled to vote at the meeting will be
available for examination at the meeting.
Professionals Group common stock constitutes the only security of
Professionals Group whose holders are entitled to vote upon the proposals to be
presented at the meeting.
You may revoke your proxy at any time prior to its exercise. Any
stockholder of record present at the meeting or at any adjournments or
postponements thereof may revoke his or her proxy and vote personally on each
matter brought before the meeting.
YOUR VOTE IS IMPORTANT TO US. Whether or not you plan to attend the annual
meeting, PLEASE VOTE YOUR SHARES BY COMPLETING THE ENCLOSED PROXY CARD AND
PROMPTLY MAILING IT TO US in the postage-paid envelope that has been provided to
you for your convenience.
By Order of the Board of Directors
/s/ ANNETTE E. FLOOD
Annette E. Flood
Secretary
May 7, 1999
<PAGE> 4
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE?
You can vote your shares of common stock at the meeting if our records show
that you owned the shares on April 7, 1999. On each matter submitted to a
stockholder vote, you will get one vote for each share of common stock you owned
on that date. A total of 8,383,924 shares of common stock can vote at the
meeting.
HOW DO I VOTE?
You can vote on matters that are properly presented at the meeting in three
ways:
- You can come to the meeting and cast your vote; or
- You can vote by signing and returning the enclosed proxy card in the
enclosed envelope; or
- You can vote by phone by calling toll-free 1-800-840-1208 on a touch tone
telephone, entering the control number located on the enclosed proxy
card, and following the instructions on either the attached Annex A or
the enclosed proxy card.
If you sign and return the enclosed proxy card or vote by telephone, the
proxies named on the enclosed proxy card will vote your shares as you instruct.
If you do not vote on a proposal, your proxies will vote for you on that
proposal. Unless you instruct otherwise, the proxies will vote FOR each of the
five director nominees nominated by your Board of Directors and in their
discretion on every other proposal considered at the meeting.
HOW DO I VOTE IF MY SHARES ARE HELD IN "STREET NAME"?
If your shares are held in the name of your broker, a bank, or other
nominee, then that party should give you instructions for voting your shares.
CAN I REVOKE MY PROXY OR CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. You may revoke your proxy at any time prior to its exercise by filing
with the Secretary of Professionals Group a duly executed revocation or a proxy
bearing a later date or by voting in person at the meeting. Your attendance at
the meeting will not in and of itself constitute revocation of your proxy.
WHAT IS THE QUORUM REQUIREMENT?
A quorum of stockholders is necessary to hold a valid meeting. If holders
of at least one-third of the shares of common stock entitled to vote at the
meeting are represented by proxy or in attendance at the meeting, then a quorum
will exist. Abstentions and broker non-votes will be counted as present for
these purposes. A broker non-vote will occur if your nominee votes on some
matters on the proxy card but not on other matters because you did not give your
nominee the authority to vote on those other matters.
WHAT VOTES ARE REQUIRED?
- Directors will be elected by a plurality of the votes present in person
or represented by proxy at the meeting.
- Any other action taken by a vote of our stockholders at the meeting will
be authorized by a majority of the votes cast by the holders of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the action.
The affirmative vote of a majority of the shares of our common stock
present in person or represented by proxy at the meeting may authorize the
adjournment or postponement of the meeting. However, no proxy which was voted
against any proposal will be voted in favor of adjournment or postponement to
solicit further proxies for that proposal.
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<PAGE> 5
ELECTION OF DIRECTORS
Our articles of incorporation currently provide that your Board of
Directors will consist of not less than nine directors and not more than 18
directors, with the actual number of directors being determined from time to
time by your Board of Directors. Currently, the number of directors is 15.
Your Board of Directors 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 stockholders, 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 five directors expires at this meeting and your Board of Directors has
nominated Louis P. Brady, M.D., Jerry D. Campbell, Richard P. Horsch, M.D.,
William H. Woodhams, M.D., and Donald S. Young for election as directors at this
meeting. The individuals who are elected as directors at this meeting will hold
office for a term expiring at the annual meeting of stockholders to be held in
the year 2002 and upon the re-election and qualification of their respective
successors or upon their earlier resignation or removal.
The PROXIES solicited on behalf of your Board of Directors (other than
proxies in which the vote is withheld as to one or more nominees) WILL BE VOTED
FOR THE ELECTION OF LOUIS P. BRADY, M.D., JERRY D. CAMPBELL, RICHARD P. HORSCH,
M.D., WILLIAM H. WOODHAMS, M.D., AND DONALD S. YOUNG TO YOUR BOARD OF DIRECTORS.
If any director nominee is unable to serve, your Board of Directors may
reduce its size or designate a substitute. If a substitute is designated, then
proxies voting FOR the election of the original director nominee will be cast
FOR the election of the substituted nominee. At this time, your Board of
Directors knows of no reason why any of the original director nominees might be
unable to serve, if elected.
The table below sets forth information regarding the composition of your
Board of Directors.
NOMINEES
<TABLE>
<CAPTION>
POSITIONS HELD DIRECTOR TERM
NAME AGE IN PROFESSIONALS GROUP SINCE EXPIRES
---- --- ---------------------- -------- -------
<S> <C> <C> <C> <C>
Louis P. Brady, M.D. ................ 78 Director 1998 1999
Jerry D. Campbell.................... 58 Director 1996 1999
Richard P. Horsch, M.D. ............. 63 Director 1999 1999
William H. Woodhams, M.D. ........... 61 Director 1996 1999
Donald S. Young, Esq. ............... 62 Director 1996 1999
</TABLE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
POSITIONS HELD DIRECTOR TERM
NAME AGE IN PROFESSIONALS GROUP SINCE EXPIRES
---- --- ---------------------- -------- -------
<S> <C> <C> <C> <C>
Victor T. Adamo, Esq. ............... 51 Director, Chairman, President and 1996 2000
Chief Executive Officer
Eliot H. Berg, M.D. ................. 75 Director and Vice-Chairman 1998 2000
John F. McCaffrey.................... 61 Director 1996 2000
Isaac J. Powell, M.D. ............... 58 Director 1996 2000
Edward S. Truppman, M.D. ............ 68 Director 1998 2000
Richard G. Alper, M.D. .............. 70 Director 1998 2001
R. Kevin Clinton, FCAS, MAAA......... 44 Director and Chief Financial Officer 1997 2001
John F. Dodge, Jr., Esq. ............ 71 Director 1996 2001
H. Harvey Gass, M.D. ................ 83 Director 1996 2001
Ann F. Putallaz, Ph.D. .............. 53 Director 1996 2001
</TABLE>
No nominee or any of our directors or executive officers 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. There are no arrangements
or understandings between any nominee or any of our directors or executive
officers and
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<PAGE> 6
any other person pursuant to which that 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.
No director or executive officer of Professionals Group is a party to any
material legal proceeding, or has a material interest in any such legal
proceeding that is adverse to Professionals Group or any of its subsidiaries.
Victor T. Adamo, Esq., has been the President and Chief Executive Officer
and a director of Professionals Group since 1996, and its Chairman since October
1998. He has been a director of ProNational Insurance Company, a Michigan stock
insurance company and a wholly-owned subsidiary of Professionals Group, since
1990. He was the President of ProNational Insurance Company from 1990 to July 1,
1998. He was the Chief Executive Officer of ProNational Insurance Company from
1987 to July 1, 1998. Mr. Adamo also has been a director of Michigan Educational
Employees Mutual Insurance Company, a Michigan mutual insurance company that
writes personal automobile and homeowners coverages, since May 1997. Prior to
joining ProNational Insurance Company, Mr. Adamo was in private legal practice
from 1975 to 1985 and represented ProNational Insurance Company 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).
Richard G. Alper, M.D., became a director of Professionals Group on July 1,
1998 when Professionals Group completed its business combination with Physicians
Protective Trust Fund. He served as a trustee of Physicians Protective Trust
Fund from February 1996 to June 30, 1998. He was a consultant to Physicians
Protective Trust Fund's Board of Trustees from March 1993 until becoming a
trustee in February 1996. He is board certified in Internal Medicine,
Hematology, and Medical Oncology and practices on behalf of Melbourne Internal
Medicine Associates in Melbourne, Florida. Prior to July 1994, he was in private
practice in Coral Gables, Florida. Dr. Alper is a graduate of the University of
Miami School of Medicine.
Eliot H. Berg, M.D., became the Vice-Chairman and a director of
Professionals Group on July 1, 1998 when Professionals Group completed its
business combination with Physicians Protective Trust Fund. He has been the
Chairman and a director of ProNational Insurance Company since July 1, 1998. He
was a member and the Chairman of Physicians Protective Trust Fund's Board of
Trustees since its inception in 1975 to June 30, 1998. He is board certified in
surgery, practices on behalf of Segal and Berg, P.A. in Hialeah, Florida and
serves on the medical staffs of Palmetto General Hospital, Hialeah Hospital,
Parkway Regional Medical Center, and Parkway West Regional Medical Center. He is
a director and an officer of several corporations which provide surgical
assistants to hospitals in the south Florida area. He was a founder of Palmetto
General Hospital and was its Chairman of the Board from 1970 until August 1997.
He served as a director and an officer of Patient Care of America, a health
maintenance organization, from October 1985 until November 1990. He has been a
member of the Board of Overseers for the University of Miami School of Medicine
since 1983. He serves on the Board of Directors of the Dade County Medical
Association. Dr. Berg is a graduate of the State University of New York,
Downstate, Medical College.
Louis P. Brady, M.D., became a director of Professionals Group on July 1,
1998 when Professionals Group completed its business combination with Physicians
Protective Trust Fund. He was a trustee of Physicians Protective Trust Fund
since its inception in 1975 to June 30, 1998. He practices office orthopaedics
on behalf of Florida Center for Orthopaedics in Orlando, Florida and serves on
its Board of Directors. He serves on the medical staffs of Florida Hospital,
Winter Park Memorial Hospital and Lucerne Hospital. Dr. Brady is board certified
in orthopaedic surgery and is a graduate of Emory University School of Medicine.
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. 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 Stock Market(R) under the symbol "RBNC",
and the common stock of Newcor, Inc. is listed on the Nasdaq Stock Market(R)
under the symbol "NEWC".
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<PAGE> 7
R. Kevin Clinton, FCAS, MAAA, has been the President and a director of
Michigan Educational Employees Mutual Insurance Company, a Michigan mutual
insurance company that writes personal automobile and homeowners coverages,
since May 1997. He has been the Chief Financial Officer of Professionals Group
since 1996 and a director of Professionals Group since September 1997. Mr.
Clinton served as a Vice President, Treasurer and Actuary of ProNational
Insurance Company from 1990 through June 1997. Prior to becoming an officer of
ProNational Insurance Company, Mr. Clinton was ProNational Insurance Company's
consulting actuary from 1986 to 1990. He formerly served as the Actuary for the
Michigan Insurance Bureau and in the actuarial department of Michigan Mutual
Insurance Company. Mr. Clinton is a Fellow of the Casualty Actuarial Society and
a member of the American Academy of Actuaries. He is a graduate of The
University of Michigan where he received a B.A. degree in business
administration and a M.A. in actuarial science.
John F. Dodge, Jr., Esq., has been a director of Professionals Group since
1996. Mr. Dodge was a director of ProNational Insurance Company from 1980 to
July 1, 1998. 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 The
University of Michigan Law School. Mr. Dodge provides legal services to
Professionals Group and its subsidiaries.
H. Harvey Gass, M.D., has been a director of Professionals Group since
1996. Dr. Gass was a director of ProNational Insurance Company from 1980 to July
1, 1998. Dr. Gass is board certified in Neurosurgery and has practiced largely
at Sinai Hospital, Detroit, Michigan since 1953. He has also 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 School of Medicine. Dr. Gass serves as a claims medical consultant
to ProNational Insurance Company.
Richard P. Horsch, M.D. has been a director of Professionals Group since
April 1999. He has been a director of ProNational Insurance Company since 1987
and serves as Vice Chairman. Dr. Horsch is Board Certified in anesthesiology and
is now retired from active practice. Prior to retirement, Dr. Horsch practiced
on the medical staff of St. Mary's Hospital, Livonia, Michigan. Dr. Horsch is a
graduate of Wayne State University, School of Medicine.
John F. McCaffrey, has been a director of Professionals Group since 1996.
He has been President of Willis Corroon Risk Solutions since June 1998. He is
also 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.
Isaac J. Powell, M.D., has been a director of Professionals Group since
1996. Dr. Powell was a director of ProNational Insurance Company from 1980 to
July 1, 1998. He has been a director of Republic Bancorp, Inc., a publicly held
Michigan corporation and bank holding company, since 1998. He is board certified
in Urology and has practiced medicine since 1969. Dr. Powell has been an
Associate Professor in Urology in the Department of Urology, Wayne State
University, School of Medicine, Detroit, Michigan since 1986. Dr. Powell is also
Chief of Urology at Veterans Hospital of Michigan. Dr. Powell is a graduate of
the University of Michigan and Indiana University Medical School. The common
stock of Republic Bancorp, Inc. is listed on the Nasdaq Stock Market(R) under
the symbol "RBNC".
Ann F. Putallaz, Ph.D., has been a director of Professionals Group since
1996. Since December 1994 she has been the Vice President and Director of
Retirement Services of Munder Capital Management, and the
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<PAGE> 8
investment advisor 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, she 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 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.
Edward S. Truppman, M.D., became a director of Professionals Group on July
1, 1998 when Professionals Group completed its business combination with
Physicians Protective Trust Fund. He was a member and the Secretary of
Physicians Protective Trust Fund's Board of Trustees since its inception in
1975. He is board certified in Plastic Surgery, practices Plastic Surgery on
behalf of Edward S. Truppman, M.D., P.A. in Aventura, Florida, and serves on the
medical staffs of Palmetto General Hospital, Aventura Hospital and Medical
Center, Parkway Medical Center, Miami Heart Institute, and Jackson Memorial
Hospital. He is a director and officer of Surgical Assistants of Florida, which
provides surgical assistants to hospitals in the South Florida area. He was a
founder of Palmetto General Hospital and served as its Vice Chairman from 1970
until August 1997. He is the Vice-Chairman of the Steering Committee of Hialeah
Miami Springs Medical Fund II. He was the Founding President of the American
Association for Accreditation of Ambulatory Surgery Facilities, Inc. and
continues to serve on its Board of Directors. He serves on the Board of
Governors of the Florida Patient's Compensation Fund and has served as President
of the Florida Society of Plastic and Reconstructive Surgeons and as Past
President of the American Association for Athletic Plastic Surgery. Dr. Truppman
also served as Chairman of the Board of Patient Care of America, a health
maintenance organization, from October 1985 until November 1990. He served as
Chairman of the Board of Pan American Bank from June 1989 until April 1994. Dr.
Truppman is a graduate of the University of Minnesota Medical School.
William H. Woodhams, M.D., has been a director of Professionals Group since
1996. Dr. Woodhams was a director of ProNational Insurance Company from 1980 to
July 1, 1998. Dr. Woodhams is board certified in Family Practice and has been in
private practice in Kalamazoo, Michigan since 1964. 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 Michigan 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 has been a principal in Dykema Gossett PLLC, a law firm headquartered
in Detroit, Michigan since 1972. 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, since 1992. Dykema Gossett PLLC has in
the past provided legal services to Professionals Group and its subsidiaries and
to certain directors of Professionals Group and its subsidiaries.
Effective April 30, 1999, Steven L. Salman, Esq. resigned as the Chief
Operating Officer and a director of Professionals Group and the President and
Chief Executive Officer of ProNational Insurance Company. Mr. Salman had been
the Chief Operating Officer and a director of Professionals Group and the
President and Chief Executive Officer of ProNational Insurance Company since
July 1, 1998 when Professionals Group completed its business combination with
Physicians Protective Trust Fund. He was the President and Chief Executive
Officer of Physicians Protective Trust Fund from October 1, 1996 to June 30,
1998. Prior to joining Physicians Protective Trust Fund, he was President, Chief
Executive Officer and Director of Kentucky Medical Insurance Company in
Louisville, Kentucky, where he also served on the Board of Directors of three of
its subsidiaries. Prior to joining Kentucky Medical Insurance Company in August
1991, he was Senior Vice President Corporate Affairs and General Counsel for
Sisters of Charity Health Care Systems, Inc. in Cincinnati, Ohio, where among
other responsibilities, he administered three insurance companies that were
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<PAGE> 9
owned, or partially owned, by this health care system. Prior to joining Sisters
of Charity, he held positions in two large hospitals as the Director of Risk
Management/Risk Control. Mr. Salman was a founder and the first President of the
American Society for Health Care Risk Management. He has previously served on
the boards of two hospitals and currently serves on the Board of Trustees of
Franciscan Service Corporation, a Catholic multi-hospital system operating
hospitals in three states. Mr. Salman received his undergraduate business degree
from Indiana University and his law degree from Capital University Law School.
During 1998, Mr. Victor T. Adamo, Mr. R. Kevin Clinton and Mr. Steven L.
Salman were the only directors of Professionals Group who were also employees of
Professionals Group or a subsidiary of Professionals Group.
BOARD COMMITTEES AND MEETINGS
Your Board of Directors conducts its business through its meetings and
through the activities of its committees. Your Board of Directors, which had six
meetings in 1998, has five standing committees. The members of those committees
during 1998 and the functions of those committees are listed below:
<TABLE>
<CAPTION>
NAME OF COMMITTEE MEETINGS
AND MEMBERS FUNCTION OF THE COMMITTEE IN 1998
----------------- ------------------------- --------
<S> <C> <C> <C>
EXECUTIVE
Donald S. Young, Chairman - meets in place of full Board on special issues 1
Victor T. Adamo or when scheduling makes convening entire Board
Eliot H. Berg, M.D. difficult
R. Kevin Clinton - may act on behalf of full Board on all but
Steven L. Salman major corporate matters
- all actions taken by this committee are
reported at next meeting of full Board
AUDIT
Louis P. Brady, M.D., Chairman - confers with financial officers and independent 2
Eliot H. Berg, M.D. accountants regarding scope of examinations
Isaac J. Powell, M.D. - reviews qualifications and reports of
Edward S. Truppman, M.D. independent accountants and internal auditors
William H. Woodhams, M.D. - reviews recommendations about internal
Donald S. Young controls
- recommends selection of independent accountants
to full Board
- monitors compliance with codes of conduct and
applicable laws and regulations
COMPENSATION
Eliot H. Berg, M.D., Co-Chairman - approves standards for setting executive 3
Jerry D. Campbell, Co-Chairman compensation levels
Louis P. Brady, M.D. - administers non-employee directors stock option
John F. McCaffrey plan and long term stock incentive plan
Edward S. Truppman, M.D. - grants awards under long-term stock incentive
William H. Woodhams, M.D. plan
- sets compensation for key employees
- makes executive compensation recommendations to
full Board when full Board approval is required
</TABLE>
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<TABLE>
<CAPTION>
NAME OF COMMITTEE MEETINGS
AND MEMBERS FUNCTION OF THE COMMITTEE IN 1998
----------------- ------------------------- --------
<S> <C> <C> <C>
NOMINATING
Edward S. Truppman, M.D., Chairman - recommends candidates to fill Board vacancies 1
Louis P. Brady, M.D. and for the slate of director nominees to be
H. Harvey Gass, M.D. proposed by the full Board at annual meeting of
Isaac J. Powell, M.D. stockholders
- considers director nominees from stockholders
for election at annual meeting of stockholders
if written stockholder nomination is timely and
properly submitted
INVESTMENT
John F. Dodge, Jr., Chairman - recommends investment policy and guidelines to 6
Victor T. Adamo full Board
Richard G. Alper, M.D. - selects investment managers for investment
R. Kevin Clinton portfolio
Ann F. Putallaz - monitors investment activities and performance
Steven L. Salman of investment managers
</TABLE>
No incumbent director attended fewer than 75% of the total meetings of your
Board of Directors, or the Board committees on which such director served, that
were held during the portion of 1998 that he or she was a director.
DIRECTOR COMPENSATION
GENERAL. We do not pay directors who are also officers of Professionals
Group additional compensation for their service as directors. Compensation for
our non-employee directors includes the following:
- $20,000 annual retainer;
- $10,000 annual stipend as long as a director has attended at least
three-quarters of their assigned board and committee meetings;
- reimbursement for reasonable expenses incurred in connection with
attending a Board meeting or Board committee meeting; and
- an option to acquire 500 shares of common stock at fair market value on
the date the option is issued. Each option is issued pursuant to our 1996
Non-Employee Directors Stock Option Plan.
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN. The general purposes of this
plan are to:
- encourage non-employee directors to own our common stock, and
- to provide a means for tying a portion of the compensation paid to
non-employee directors for their service on your Board of Directors to
the value of our common stock, thus more closely aligning our directors
interests with your interests.
Although your Board of Directors is the administrator of this plan, neither
it nor any other person or body has any discretion to select the persons who
receive awards under this 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 plan itself. At the adjournment of each
organizational meeting of your Board of Directors following an annual meeting of
stockholders 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. The per share exercise price of each option granted
under the plan is the "fair market value" of a share of common stock at the date
the option is granted. Pursuant to the plan, in June, 1998 directors Campbell,
Dodge, Gass, McCaffrey, Powell, Putallaz, Woodhams, and Young each received an
option to purchase 500 shares of common stock at an exercise price of $36.14 per
share.
8
<PAGE> 11
DIRECTOR STOCK GRANTS. Subject to adjustment and in connection with the
completion of its business combination with Physicians Protective Trust Fund,
and pursuant to Consulting, Confidentiality and Noncompetition Agreements
between it and each of Drs. Alper, Berg, Brady and Truppman, Professionals Group
granted and allocated to them shares of common stock as follows: Richard G.
Alper, M.D., 9,687 shares; Eliot H. Berg, M.D., 14,957 shares; Louis P. Brady,
M.D., 10,075 shares; Edward S. Truppman, M.D., 9,687 shares. On July 1, 1998
Professionals Group delivered to each of Drs. Alper, Berg, Brady and Truppman
20% of the aggregate number of shares of common stock allocated to each of them.
The remaining shares of common stock allocated to each of them will be delivered
in four equal and annual installments, subject to the vesting provisions of
their consulting agreements.
DIRECTOR NOMINATIONS
Only persons who are nominated in accordance with the procedures set forth
in our articles of incorporation are eligible for election to your Board of
Directors. Nominations of persons for election to your Board of Directors may be
made at a stockholders meeting by or at the direction of your Board of Directors
or by any stockholder entitled to vote for the election of directors at the
meeting who gives timely written notice to Professionals Group's Secretary. To
be timely, a stockholder's notice, must contain all of the information required
by Professionals Group's articles of incorporation, and, must be delivered to
and received at Professionals Group's principal executive offices not later than
120 days prior to the date one year from the date of the immediately preceding
annual meeting of stockholders, and with respect to an election to be held at a
special meeting of stockholders, the close of business on the 10th day following
that date that is the earlier of the date on which public disclosure of such
special meeting is first made and the date on which formal notice of such
special meeting is first given to stockholders.
INFORMATION REGARDING EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
During 1998, your executive officers consisted of the persons named below.
Our executive officers are elected annually and serve at the pleasure of your
Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Victor T. Adamo, Esq., CPCU............... 51 Chairman, President and Chief Executive
Officer
Eliot H. Berg, M.D........................ 74 Vice Chairman
Steven L. Salman, Esq..................... 51 Chief Operating Officer
R. Kevin Clinton, FCAS, MAAA.............. 44 Chief Financial Officer
Annette E. Flood, Esq., R.N............... 40 Vice President and Secretary
John F. Lang.............................. 35 Vice President, Treasurer and Chief
Accounting Officer
Joseph O. Marker, FCAS, MAAA.............. 50 Chief Actuary
William P. Sabados........................ 49 Chief Information Officer
</TABLE>
For information with respect to Messrs. Adamo, Salman and Clinton, and Dr.
Berg, see "Election of Directors" above.
Annette E. Flood, Esq., R.N., has been a Vice President and Secretary of
Professionals Group since 1996. She is Senior Vice President, Corporate
Secretary and Legal Counsel of ProNational Insurance Company. She has been a
director of Michigan Educational Employees Mutual Insurance Company, a Michigan
mutual insurance company that writes personal automobile and homeowners
coverages, since May 1997. Prior to joining ProNational Insurance Company 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 Management. Prior to joining the Lansing General Hospital
staff, she was in the litigation section of the law firm of Dykema Gossett PLLC,
Lansing, Michigan. Ms. Flood has a B.A. degree in nursing from The University of
Michigan and a law degree from Wayne State University Law School.
9
<PAGE> 12
John F. Lang, has been a Vice President, Treasurer and Chief Accounting
Officer of Professionals Group since July 1998. Mr. Lang served as Treasurer of
ProNational Insurance Company from August 1996 through June 1998 and as Chief
Financial Officer of ProNational Insurance Company from July 1997 through June
1998. Prior to joining ProNational Insurance Company in 1996, Mr. Lang was a
senior manager on the audit staff of Coopers & Lybrand LLP where he was employed
since 1986. Mr. Lang is a CPA and has a B.S.B.A. degree in accounting from
Central Michigan University.
Joseph O. Marker, FCAS, MAAA, has been the Chief Actuary of Professionals
Group since March 1999. Mr. Marker is also Senior Vice President and Chief
Actuary of ProNational Insurance Company. Prior to joining Professionals Group,
Mr. Marker served in an actuarial capacity for Allmerica Financial Corporation
in Howell, Michigan from 1986 through 1999, most recently as Vice President,
Actuarial. Prior to 1986, Mr. Marker was an actuary for Westfield Companies and
St. Paul Companies. Mr. Marker is a Fellow of the Casualty Actuarial Society and
a member of the American Academy of Actuaries. Mr. Marker is a graduate of the
University of Michigan and received a Masters in mathematics from the University
of Minnesota.
William P. Sabados, has been the Chief Information Officer of Professionals
Group since July 1998. Mr. Sabados is also Chief Information Officer of
ProNational Insurance Company. Mr. Sabados has been a Vice President and Chief
Information Officer of Michigan Educational Employees Mutual Insurance Company,
a Michigan mutual insurance company that writes personal automobile and
homeowners coverages, since February 1997. From 1987 to 1997, Mr. Sabados was
Vice President of Information Systems for the Investor Insurance Group. Prior to
that, Mr. Sabados served as Director of Membership/Billing for Blue Cross/Blue
Shield North East Ohio in Cleveland, Ohio since 1984. Mr. Sabados is a graduate
of David M. Meyers College.
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 of Professionals Group (the "named
executive officers") for the last three completed fiscal years whose salary and
bonus exceeded $100,000 in 1998.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUT
--------------------------------------------- ---------------------- ------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUT COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(A) ($) ($) (#) ($) ($)
------------------ ---- ------ ------ ------------ ---------- -------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Victor T. Adamo....... 1998 300,000 -- -- -- -- -- 30,122(c)
Chairman, President 1997 238,526 200,000 6,000(b) -- 60,000 -- 30,848(c)
& CEO 1996 223,751 19,186 12,000(b) 66,150 -- -- 29,368(c)
Steven L. Salman...... 1998 365,625 -- 45,000(d) -- -- -- 34,190(c)
Chief Operating 1997 -- -- -- -- -- -- --
Officer 1996 -- -- -- -- -- -- --
R. Kevin Clinton...... 1998 275,000 150,000 -- -- -- -- 29,874(c)
Chief Financial 1997 222,021 150,000 -- -- 40,000 -- 30,848(c)
Officer 1996 217,861 18,906 -- 57,820 -- -- 29,368(c)
Annette E. Flood...... 1998 140,000 -- -- -- -- -- 26,590(c)
Vice President and 1997 124,620 125,000 -- -- 13,000 -- 25,533(c)
Secretary 1996 114,620 13,739 -- 40,915 -- -- 24,767(c)
William P. Sabados.... 1998 114,620 -- -- -- -- -- 10,127(c)
Chief Information 1997 77,001(e) 30,000 17,055(f) -- -- -- --
Officer 1996 -- -- -- -- -- -- --
</TABLE>
- ---------------
(a) Amounts shown reflect bonuses granted for the year listed, but were paid
during the following calendar year.
10
<PAGE> 13
(b) Amounts shown consist of director fees paid by ProNational Insurance
Company.
(c) Amounts shown for 1998 consist of the following: (i) Mr. Adamo: matching
contribution to purchases of common stock under the Professionals Group
Stock Purchase Plan of $7,500 and contributions under the ProNational
Insurance Company Pension Plan and the ProNational Insurance Company
Employees' Savings and Retirement Plan (the "ProNational pension plans")
for the benefit of Mr. Adamo of $22,622; (ii) Mr. Salman: matching
contribution to purchases of common stock under the Professionals Group
Stock Purchase Plan of $7,500 and contributions under the ProNational
pension plans for the benefit of Mr. Salman of $26,690; (iii) Mr. Clinton:
matching contribution to purchases of common stock under the Professionals
Group Stock Purchase Plan of $7,500 and contributions under the ProNational
pension plans for the benefit of Mr. Clinton of $22,374; (iv) Ms. Flood:
matching contribution to purchases of common stock under the Professionals
Group Stock Purchase Plan of $7,500 and contributions under the ProNational
pension plans for the benefit of Ms. Flood of $19,090; and (v) Mr. Sabados:
matching contribution to purchase of common stock under the Professionals
Group Stock Purchase Plan of $3,250 and contributions under the ProNational
pension plans for the benefit of Mr. Sabados of $6,877. Amounts shown for
1997 consist of the following: (i) Mr. Adamo: matching contribution to
purchases of Professionals Group Common Stock under the Professionals Group
Stock Purchase Plan of $7,500 and contributions under the ProNational
pension plans for the benefit of Mr. Adamo of $23,348; (ii) Mr. Clinton:
matching contribution to purchases of common stock under the Professionals
Group Stock Purchase Plan of $7,500 and contributions under the ProNational
pension plans for the benefit of Mr. Clinton of $23,348; and (iii) Ms.
Flood: matching contribution to purchases of common stock under the
Professionals Group Stock Purchase Plan of $7,500 and contributions under
the ProNational pension plans for the benefit of Ms. Flood of $18,033.
Amounts shown for 1996 consist of the following: (i) Mr. Adamo: matching
contribution to purchases of common stock under the Professionals Group
Stock Purchase Plan of $7,500 and contributions under the ProNational
pension plans for the benefit of Mr. Adamo of $21,868; (ii) Mr. Clinton:
matching contribution to purchases of common stock under the Professionals
Group Stock Purchase Plan of $7,500 and contributions under the ProNational
pension plans for the benefit of Mr. Clinton of $21,868; and (iii) Ms.
Flood: matching contribution to purchases of common stock under the
Professionals Group Stock Purchase Plan of $7,500 and contributions under
the ProNational pension plans for the benefit of Ms. Flood of $17,267.
(d) Amount shown reflects annual housing allowance of $45,000 pursuant to Mr.
Salman's employment agreement.
(e) The 1997 amount shown reflects annualized salary of $110,000 and reflects
salary from date of employment with ProNational Insurance Company.
(f) Amount shown reflects relocation expenses paid.
SALMAN EMPLOYMENT AGREEMENT AND STOCK GRANT
Steven L. Salman's employment agreement, that was entered into by Mr.
Salman and Physicians Protective Trust Fund and was assumed by Professionals
Group as part of the merger agreement, provides for, among other things: a base
salary of $325,000 per year; an annual cash bonus of up to 50% of his base
salary (of which 25% is added to base salary); and a housing allowance of
$45,000 per year.
In connection with the completion of its business combination with
Physicians Protective Trust Fund, and pursuant to a Confidentiality,
Noncompetition and Stock Grant Agreement with Mr. Salman, Professionals Group
granted and allocated to Mr. Salman 38,747 shares of common stock. On July 1,
1998 Professionals Group delivered to Mr. Salman 20% of the aggregate number of
shares of common stock allocated to him with an expense to Professionals Group
of $403,297.
11
<PAGE> 14
AGGREGATE OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table sets forth certain information concerning stock
options/SARs granted to the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ -------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Victor T. Adamo...................... 0 0 13,200/66,000* 0/0
Steven L. Salman..................... 0 0 0/0 0/0
R. Kevin Clinton..................... 0 0 8,800/44,000* 0/0
Annette E. Flood..................... 0 0 2,860/14,300* 0/0
William P. Sabados................... 0 0 0/0 0/0
</TABLE>
- ---------------
* A total of 146,500 options were issued in 1997 under the 1996 Professionals
Group Long Term Stock Incentive Plan. All of these options are non-qualified
stock options, are subject to vesting in annual increments of 20% commencing
February 12, 1998 and expire at 5:00 p.m. on February 12, 2007.
The above listed stock options were granted in 1997 pursuant to our 1996
Long Term Stock Incentive Plan, which is administered by the Compensation
Committee of your Board of Directors.
KEY EMPLOYEE RETENTION PLAN
We have a Key Employee Retention Plan that provides our executives and "key
employees" with a severance payment and certain insurance and other benefits in
the event that there is a change in control of Professionals Group, as defined
in the plan, that is coupled with the actual involuntary or constructive
termination 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).
STOCK PURCHASE PLAN
We have implemented a stock purchase plan which permits employees and
directors of Professionals Group and its subsidiaries to purchase common stock
by means of payroll deduction. Under this plan, we may elect to match
participant purchases. During 1998 we 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 this plan
exercise all rights of ownership with respect to shares of common stock
purchased for their respective accounts. For 1999, we will match participant
purchases at the rate of $1.00 for each $1.00 of participant purchases up to
$4,000 and $0.50 for each $1.00 of participant purchases after that, up to a
maximum participant purchase of $6,000.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has responsibility for our executive
compensation policies and practices. The Compensation Committee approves all
elements of compensation for corporate officers and administers the 1996
Professionals Insurance Company Management Group Long-Term Stock Incentive Plan,
which was approved by Professionals Group's stockholders in 1996 and provides
for certain incentive awards to officers, other executives and selected key
employees.
The Compensation Committee regularly reports on its activities to your
Board of Directors. The Compensation Committee also obtains ratification by the
non-employee members of your Board of Directors of all items of compensation for
the five highest-paid executives.
12
<PAGE> 15
The Compensation Committee is comprised of six outside directors who are
not officers or employees of Professionals Group or its subsidiaries and who are
not eligible to participate in any of the plans or programs that the
Compensation Committee administers. The 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 Professionals
Group's compensation program are to attract and retain qualified
individuals and to motivate and reward individuals based on performance.
Salary and annual incentive compensation awards reward senior executives
for their current performance and contributions. Awards under Professionals
Group's 1996 Long-Term Stock Incentive Plan are provided to reward senior
executives for taking action that contributes to Professionals Group's
long-term growth and success, and to link the interests of such senior
executives to those of Professionals Group's stockholders. We believe that
making portions of executive compensation subject to short-term and
long-term performance will further focus senior executives on the
importance of balancing short-term and long-term corporate interests, will
provide an incentive for increasing stockholder value over the long term,
and will more closely align the interest of senior executives with those of
stockholders.
It is our goal to establish salaries that are competitive in
comparison to market practices and reflect a senior executive's scope of
responsibilities, level of experience, individual performance and
contribution to the business. In establishing salaries, we review executive
compensation survey data for insurance companies and publicly traded
insurance groups of similar size and product lines. We also consider, among
other factors, job responsibilities and job performance, education,
training and market opportunities.
We award annual incentive compensation to each senior executive based
upon our assessment of Professionals Group's performance against
- certain pre-established corporate goals during the prior year
(including growth and financial results),
- competitive factors,
- the market performance of Professionals Group common stock, and
- the contribution made by such senior executive to Professionals
Group's future performance.
We encourage stock ownership by senior executives. Prior to 1997,
grants of restricted stock were made to senior executives in recognition of
Professionals Group's significant financial progress and growth as well as
the increased value of common stock during 1996 and prior years. In 1997,
and in lieu of grants of restricted stock, options to purchase shares of
common stock were awarded under the 1996 Long Term Stock Incentive Plan. No
awards or grants were made under this plan in 1998.
Professionals Group's executive officers are also eligible to
participate in compensation and benefit programs generally available to
other employees, such as the stock purchase plan, the ProNational Insurance
Company Pension Plan, the ProNational Insurance Company Employees' Savings
and Retirement Plan, and supplemental life and disability insurance
programs.
For 1998, Professionals Group's chief executive officer was Victor T.
Adamo, Chairman, President and Chief Executive Officer. With respect to
1998, Mr. Adamo was paid $300,000 in salary. He did not receive an annual
incentive award because Professionals Group did not meet its financial
goals for 1998. The Summary Compensation Table shows the amounts and type
of compensation paid to Mr. Adamo in 1998. The bases for our determinations
regarding Mr. Adamo's salary for 1998 included survey data for peer
executives and the success of Mr. Adamo's leadership in improving
Professionals Group's business position, his management of operational and
strategic issues, and the improved overall competitive position of
Professionals Group. Evidence of Mr. Adamo's leadership can be found in
Professionals Group's larger balance sheet, increased revenues, improved
claims-paying-ability ratings, and increased product and geographical
diversification. As in prior years, the key judgment we made in determining
13
<PAGE> 16
Mr. Adamo's 1998 compensation was our assessment of his ability and
dedication to enhancing the long-term value of Professionals Group for its
stockholders by continuing to provide the leadership and vision that he has
provided throughout his tenure at Professionals Group. For these reasons,
we deem Mr. Adamo's compensation package to be appropriate. Our decisions
relating to Mr. Adamo's compensation were ratified by the Board of
Directors.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended,
and subject to certain exceptions (including exceptions relating to stock
options and for "performance-based" compensation if certain conditions are
met), Professionals Group may not deduct compensation in excess of $1
million paid to any executive named in its corporation's Summary
Compensation Table for that year. For 1998, the compensation paid to each
of the executive officers named in the Summary Compensation Table for 1998
was well below $1 million, and we expect the same will be true for the
current year. Consequently, for the present we have decided to defer
consideration of any compensation policies relating to Section 162(m) of
the Internal Revenue Code of 1986.
<TABLE>
<S> <C>
Eliot H. Berg, M.D., Co-Chairman Jerry D. Campbell, Co-Chairman
Louis P. Brady, M.D. John F. McCaffrey
Edward S. Truppman, M.D. William H. Woodhams, M.D.
</TABLE>
The Compensation Committee Report does not constitute soliciting material.
It is not considered filed by us, and shall not be incorporated by reference
into any of our other filings, under the Securities Act or the Exchange Act,
unless we state otherwise.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our Compensation Committee in 1998 were Eliot H. Berg, M.D.,
Co-Chairman, Louis P. Brady, M.D., Jerry D. Campbell, Co-Chairman, John F.
McCaffrey, Edward S. Truppman, M.D. and William H. Woodhams, M.D.
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.
14
<PAGE> 17
STOCK PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total stockholder return on our common stock for the last five fiscal
years with the cumulative total return on:
- The Nasdaq Stock Market Index, which is comprised of all United States
common shares traded on The Nasdaq Stock Market(R);
- The Nasdaq Insurance Stocks Index, which is comprised of common shares of
insurance companies traded on The Nasdaq Stock Market(R); and
- The Russell 2000 Index, which is comprised of the common shares of the
2,000 smallest of the 3,000 largest United States companies based on
total market capitalization. As of the latest reconstitution of this
index, the average market capitalization was about $592.0 million and the
median market capitalization was about $500.0 million.
The following graph assumes the investment of $100 in our common stock, The
Nasdaq Stock Market Index, The Nasdaq Insurance Stocks Index, and the Russell
2000 Index on December 31, 1993 and the reinvestment of all dividends. The
returns shown on the graph are not necessarily indicative of future performance.
PERFORMANCE GRAPH
The dollar values for total stockholder return plotted in the graph above
are shown in the table below.
TOTAL RETURN ANALYSIS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DECEMBER 31,
- -------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Professionals Group 100.00 86.43 170.90 190.15 371.66 294.73
- -------------------------------------------------------------------------------------------------------
Nasdaq Stock Market (U.S. Companies) 100.00 96.80 135.44 166.19 202.15 282.26
- -------------------------------------------------------------------------------------------------------
Nasdaq Insurance Stocks 100.00 100.57 140.41 159.18 195.30 195.18
- -------------------------------------------------------------------------------------------------------
Russell 2000 100.00 96.82 122.19 140.23 169.00 163.18
- -------------------------------------------------------------------------------------------------------
</TABLE>
The Stock Performance Graph does not constitute soliciting material. It is
not considered filed by us, and shall not be incorporated by reference into any
of our other filings, under the Securities Act or the Exchange Act, unless we
state otherwise.
15
<PAGE> 18
RELATED PARTY TRANSACTIONS
We did not have any related party transactions in 1998 except as follows:
- John F. Dodge, Jr., Esq. performed certain legal services for
Professional Group and its subsidiaries. He was paid $15,085 in 1998 for
legal services and expenses in connection with his representation of
Professionals Group and ProNational Insurance Company.
- Dr. H. Harvey Gass serves as ProNational Insurance Company's Claims
Medical Consultant. Dr. Gass was paid $49,200 in 1998 with respect to
consulting services rendered to ProNational Insurance Company.
- In connection with the completion of its business combination with
Physicians Protective Trust Fund, Professionals Group granted and
allocated to the persons named below shares of Professionals Group common
stock as follows: Richard G. Alper, M.D., 9,687 shares; Eliot H. Berg,
M.D., 14,957 shares; Louis P. Brady, M.D., 10,075 shares; Steven L.
Salman, 38,747 shares; Edward S. Truppman, M.D., 9,687 shares.
See "Election of Directors -- Director Compensation -- Director Stock
Grants" and "Information Regarding Executive Officers -- Salman Employment
Agreement and Stock Grant" for descriptions of these stock grants.
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
To the knowledge of management, with respect to the beneficial ownership of
our common stock, no one was the beneficial owner of more than 5% of the
outstanding shares of our common stock as of December 31, 1998.
The following table sets forth certain information provided by the persons
indicated with respect to the beneficial ownership of our common stock, as of
March 31, 1999:
- by each director and named executive officer of Professionals Group; and
- by all directors and named executive officers of Professionals Group as a
group.
<TABLE>
<CAPTION>
NAME OF NUMBER OF RIGHT RESTRICTED PERCENTAGE OF
BENEFICIAL OWNER (1) SHARES OWNED(2) TO ACQUIRE(3) STOCK(4) OUTSTANDING SHARES(5)
-------------------- --------------- ------------- ---------- ---------------------
<S> <C> <C> <C> <C>
Victor T. Adamo....................... 53,187 26,400 -- *
Richard G. Alper, M.D................. 2,769 -- 7,750 *
Eliot H. Berg, M.D.................... 7,000 -- 11,966 *
Louis P. Brady, M.D................... 3,250 -- 8,061 *
Jerry D. Campbell..................... 8,675 1,155 -- *
R. Kevin Clinton...................... 31,745 17,600 -- *
John F. Dodge, Jr..................... 8,620 1,155 -- *
Annette E. Flood...................... 6,478 5,720 -- *
H. Harvey Gass, M.D................... 14,272 1,155 -- *
Richard P. Horsch, M.D................ 12,026 1,155 -- *
John F. McCaffrey..................... 1,258 1,155 -- *
Isaac J. Powell, M.D.................. 3,250 1,155 -- *
Ann F. Putallaz....................... 1,761 1,155 -- *
William P. Sabados.................... 244 -- -- *
Steven L. Salman...................... 11,542 -- 30,998 *
Edward S. Truppman, M.D............... 6,389 -- 7,750 *
William H. Woodhams, M.D.............. 6,200 1,155 -- *
Donald S. Young....................... 4,241 1,155 -- *
All directors and executive officers
as a group (18 persons)............. 182,907 58,960 66,525 3.7%
</TABLE>
- ---------------
(1) The address for each named person is 2600 Professionals Drive, Okemos,
Michigan 48864.
16
<PAGE> 19
(2) The number of shares owned stated for each named person includes shares
for which the named person has sole voting and investment power or has
shared voting and investment power with a spouse. It also includes
shares held in a 401(k) plan or in an individual retirement account
over which the named person has control, shares held by any corporation
of which the named person is a director, executive officer or
controlling stockholder, shares held by a trust of which the named
person, or his or her spouse, is a trustee or custodian, shares held by
a partnership which the named person is a general partner, and shares
held by a spouse or minor children. The number of shares owned stated
for each named person excludes shares that are restricted stock
holdings, or may be acquired through stock option exercises.
(3) Number of shares that can be acquired through stock options exercised
within sixty days of March 31, 1999.
(4) Number of shares subject to a vesting schedule, forfeiture risk and
other restrictions.
(5) * indicates that the named person owns less than one percent of the
outstanding shares.
SOLICITATION OF PROXIES
Professionals Group is paying for this proxy solicitation. In addition to
sending you these materials, some of our employees may contact you in person, by
mail, or by telecommunications equipment (including telephone and telegrams), to
solicit your proxy. None of these employees will receive any extra compensation
for doing this. We have also retained Morrow & Company to assist us in
soliciting your proxy for a fee of $4,500 plus reasonable out-of-pocket
expenses. We will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in soliciting your proxy.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP, independent certified public accountants for fiscal 1998, have
been reappointed by your Board of Directors for fiscal 1999. Representatives of
KPMG LLP will be present at this meeting to respond to appropriate questions by
stockholders and to make a statement if they so desire.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than 10 percent of a registered class of our
equity securities, to file with the SEC initial reports of ownership and reports
of changes in ownership of the common stock and other equity securities of
Professionals Group. Officers, directors and greater than 10 percent
stockholders are required by the SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports are required,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with during the year
ended December 31, 1998.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a security holder proposal for
possible inclusion in the proxy statement and proxy for our 2000 annual meeting
of stockholders pursuant to Rule 14a-8 of the SEC must do so on or before
January 8, 2000. The proposal must comply with the rules and regulations of the
SEC then in effect and must be transmitted by registered or certified mail to
Annette E. Flood, Esq., Secretary, Professionals Group, Inc., 2600 Professionals
Drive, Okemos, Michigan 48864.
Any stockholder who wishes to submit a security holder proposal for
possible inclusion in the proxy statement and proxy for our 2000 annual meeting
of stockholders other than pursuant to Rule 14a-8 of the SEC must do so on or
before February 8, 2000. The proposal must comply with the requirements of our
17
<PAGE> 20
articles of incorporation and bylaws, and with the rules and regulations of the
SEC then in effect. The proposal must be transmitted by registered or certified
mail to Annette E. Flood, Esq., Secretary, Professionals Group, Inc., 2600
Professionals Drive, Okemos, Michigan 48864.
Pursuant to Rule 14a-4 of the SEC, if we do not have notice of a proposal
to be considered at our 2000 annual meeting of stockholders before February 8,
2000, then management proxies will be allowed to use their discretionary voting
authority when that proposal is raised at that meeting.
OTHER MATTERS
We are not aware of any business to come before this meeting other than the
matters described in this proxy statement. However, if any other matters should
properly come before this meeting, it is intended that holders of the proxies
will act in accordance with their best judgment.
A copy of our Annual Report on Form 10-K for the year ended December 31,
1998, including the financial statements and the financial schedules, required
to be filed with the SEC pursuant to Rule 13a-1 under the Exchange Act for our
most recent fiscal year is enclosed with this Proxy Statement. Copies of our
Form 10-K and other filings we have made with the SEC may be obtained through
our web site at http://www.picm.com. We will provide you, upon your written
request, a copy of our Annual Report on Form 10-K for the Year Ended December
31, 1998. Your request should be directed to John F. Lang, Treasurer,
Professionals Group, Inc., 2600 Professionals Drive, Okemos, Michigan 48864.
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.
18
<PAGE> 21
ANNEX A
TELEPHONE VOTING INSTRUCTIONS
YOUR VOTE IS IMPORTANT!
TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone
24 hours a day -- 7 days a week.
There is NO CHARGE to you for this call. -- Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in a box in
the lower right hand corner of the enclosed proxy card.
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press
1.
When asked, please confirm by Pressing 1.
OPTION 2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
Proposal 1 -- To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9;
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
When asked, please confirm by Pressing 1.
A-1
<PAGE> 22
PROXY PROFESSIONALS GROUP, INC. PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON WEDNESDAY,
JUNE 2, 1999
The Stockholder executing this Proxy appoints Victor T. Adamo, Eliot H.
Berg, M.D. and Isaac J. Powell, M.D., and each of them, each with full power
to appoint his substitute, attorneys and proxies to represent the Stockholder
and to vote and act with respect to all shares of common stock, no par value
per share, of Professionals Group, Inc. ("Professionals Group") that the
Stockholder would be entitled to vote on all matters which come before the
1999 Annual Meeting of Stockholders of Professionals Group referred to on the
reverse side (the "Professionals Group Annual Meeting") and at any
adjournment(s) or postponement(s) of the Professionals Group Annual Meeting.
The affirmative vote of a majority of the shares represented at the
Professionals Group Annual Meeting may authorize the adjournment or
postponement of the meeting; provided, however, that no proxy which is voted
against any proposal will be voted in favor of adjournment or postponement to
solicit further proxies for such proposal.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PROFESSIONALS GROUP. IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF
PROFESSIONALS GROUP 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 REVERSE SIDE. THE
SHARES OF PROFESSIONALS GROUP COMMON STOCK REPRESENTED BY THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS WHICH MAY COME
BEFORE THE PROFESSIONALS GROUP ANNUAL MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- FOLD AND DETACH HERE -
<PAGE> 23
<TABLE>
<S><C>
Please mark [X]
your vote as
indicated in
this example
Vote for all nominees Withhold authority
listed at left. to vote for all
nominees listed at
left.
1. The election of five directors to the Board of Directors of Professionals Group [ ] [ ]
for three year terms expiring at the Annual Meeting of Stockholders to be held in
the year 2002 and upon the election and qualification of their successors or upon
their earlier resignation or removal, namely: (01)Louis P. Brady, M.D., (02) Jerry D.
Campbell, (03) Richard P. Horsch, M.D., (04) William H. Woodhams, M.D., and (05)
Donald S. Young.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL DIRECTOR NOMINEES LISTED ABOVE. The undersigned Stockholder hereby
(i) revokes any and all proxies
previously executed with respect
Instruction: To withhold authority for any nominee(s) listed above, list name(s) in the to the Professionals Group Annual
space provided below. Meeting, and (ii) acknowledges
receipt of the Notice and Proxy
Statement for the Professionals
Group Annual Meeting.
Dated: ,1999
---------------------
Signature
---------------------
Title
--------------------------
Signature
----------------------
(if held jointly)
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.
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY TELEPHONE
QUICK ---EASY---IMMEDIATE
YOUR VOTE IS IMPORTANT!
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24 hours a day-7 days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the lower right hand corner of this form
OPTION 1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS, PRESS 1.
When asked, please confirm by Pressing 1.
OPTION 2: IF YOU CHOOSE TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0. YOU WILL HEAR THESE INSTRUCTIONS:
Proposal 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL NOMINEES, PRESS 9
To WITHHOLD FOR AN INDIVIDUAL nominee. Press 0 and listen to the instructions
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
2. TO VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
</TABLE>
