========================
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 sec.240.14a-11(c) or
sec.240.14a-12
- - ---------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Selective Insurance Group, Inc.
======================================================================
(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), 14a-
6(i)(2) or Item 22(a)(2) of Schedule A.
[ ] $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:
_____________________________________________________________
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>
SELECTIVE INSURANCE GROUP, INC.
[ L O G O ] 40 Wantage Avenue
Branchville, New Jersey 07890
973-948-3000
http://www.selectiveinsurance.com
James W. Entringer
Chairman, and
Chief Executive Officer
March 31, 1999
Dear Stockholder of Selective Insurance Group, Inc.:
It is a pleasure to invite you to your Company's 1999 Annual Meeting of
Stockholders to be held on Friday, May 7, 1999, at 11:00 a.m. in the
auditorium at the headquarters of the Company at 40 Wantage Avenue,
Branchville, New Jersey. The Annual Report, as well as formal Notice of the
Annual Meeting, together with the Proxy Statement and proxy, are enclosed
with this letter.
Whether you own a few or many shares of stock and whether you plan to attend
the meeting in person, it is important that your shares be represented and
voted. Please complete, date, sign, and return the enclosed proxy as soon as
possible.
Your continued support is appreciated. We look forward to seeing you at the
meeting.
Warmest regards,
/s/James W. Entringer
- - ---------------------
James W. Entringer
<PAGE>
SELECTIVE INSURANCE GROUP, INC.
[ L O G O ] 40 Wantage Avenue
Branchville, New Jersey 07890
973-948-3000
http://www.selectiveinsurance.com
===================================
NOTICE OF ANNUAL MEETING TO BE HELD
===================================
May 7, 1999
===========
TO OUR STOCKHOLDERS:
- - --------------------
Notice is hereby given that the Annual Meeting of Stockholders of Selective
Insurance Group, Inc. (the "Company") will be held on Friday, May 7, 1999,
at 11:00 a.m. in the auditorium at the headquarters of the Company at 40
Wantage Avenue, Branchville, New Jersey, for the following purposes:
1. To elect four directors for a term of three years each.
2. To transact such other and further business, if any, as properly may be
brought before the meeting.
Only stockholders of record on the books of the Company at the close of
business on March 15, 1999, shall be entitled to vote at the meeting.
If you do not expect to be present at the meeting, please complete, date,
and sign the enclosed proxy and return it in the accompanying postage-paid
envelope.
The giving of the proxy will not affect your right to vote in person, should
you attend the meeting.
By order of the Board of Directors,
/s/Michele C. Nieroda
- - ---------------------
Michele C. Nieroda
Secretary
Dated: March 31, 1999
<PAGE> PAGE 1
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
March 30, 1999
===============
PROXY STATEMENT
===============
===============
General Matters
===============
This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Selective Insurance Group, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on
Friday, May 7, 1999, at 11:00 a.m. in the auditorium at the headquarters of
the Company at 40 Wantage Avenue, Branchville, New Jersey, and at any
adjournment thereof.
The Company has retained Corporate Investor Communications, Inc. for a fee
of $4,500 to aid in solicitation of proxies by mail, telephone, and personal
contact. The costs of the solicitation will be borne by the Company.
In addition to solicitation by mail and by certain employees of the Company
(without additional compensation), arrangements have been made with
brokerage houses and other custodians, nominees, and fiduciaries to send
proxy material to their principals.
On March 15, 1999, which is the record date for stockholders entitled to
notice of and to vote at the Annual Meeting, there were outstanding and
entitled to vote 28,195,842 shares of common stock, $2.00 par value
("Common Stock"). This is the Company's only issued and outstanding class of
stock. This Proxy Statement and the accompanying proxy are being mailed
beginning on or about March 31, 1999, to all stockholders of record as of
the record date. Under New Jersey law and the Company's Bylaws, each share
of Common Stock outstanding as of the record date is entitled to one vote at
the Annual Meeting of Stockholders, and the presence in person or by proxy
of the holders of shares of Common Stock entitled to cast a majority of the
votes constitutes a quorum. Under New Jersey law, proxies submitted with
votes withheld for the election of directors and broker nonvotes are
included in determining whether a quorum is present. Under New Jersey law,
directors are elected by a plurality of votes cast. Votes withheld for the
election of any or all of the nominees have no impact on the election of
directors except to reduce the number of votes for the nominee(s) for which
votes are withheld. The affirmative votes of a majority of votes cast by
stockholders entitled to vote at the Annual Meeting is required to decide
any other item of business which may properly be brought before the Annual
Meeting. Abstentions and broker nonvotes are not counted in tabulating the
number of votes cast on such other items of business that may properly be
brought before the meeting.
There is no person or group known by the Company as of March 15, 1999, to be
the beneficial owner of more than 5% of the Company's outstanding Common
Stock.
PAGE 2
As of the date hereof, the Board of Directors knows of no other business
that will be presented for consideration at the meeting, except the matter
set forth in the Notice of Annual Meeting. If any such other business shall
properly come before the meeting, it is intended that votes will be cast,
pursuant to proxies solicited, in respect of any such other business in the
discretion of the persons acting under said proxies. Proxies that contain no
instructions to the contrary will be voted for the election as directors of
the four nominees named herein.
The Annual Report to Stockholders for the fiscal year ending December 31,
1998, has been provided to all stockholders of record as of the close of
business on March 15, 1999 together with this Proxy Statement.
=====================
REVOCABILITY OF PROXY
=====================
Any stockholder giving a proxy may revoke it by notifying the Secretary of
the Company, in writing, of such revocation at any time prior to its
exercise or by filing another proxy dated subsequent to the date thereof
with the Secretary of the Company.
========================
I. ELECTION OF DIRECTORS
========================
(Item 1 on Proxy)
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate''), and the Bylaws provide that the number of directors of the
Company shall not be less than seven nor more than twenty, such number
within the minimum and maximum limitations to be fixed from time to time by
a resolution approved by a majority of the whole Board of Directors. The
Certificate and Bylaws also provide for the Board of Directors to be divided
into three classes, equal or nearly as equal as possible, so that all
directors serve staggered three-year terms.
The Board has nominated William A. Dolan, II, William C. Gray, D.V.M., and
Joan M. Lamm-Tennant, Ph.D. for reelection as directors for three-year terms
expiring at the Annual Meeting of Stockholders in 2002. All such persons are
currently directors and were previously elected by stockholders. Paul D.
Bauer, who is also nominated for election as director for a three-year term
expiring at the Annual Meeting of Stockholders in 2002, was elected to the
Board on November 3, 1998 and added to the class of directors whose terms
expire in 1999. Frederick H. Jarvis will be retiring, effective the date
of the annual meeting. Upon the retirement of Mr. Jarvis, the Board
presently intends to reduce the size of the Board to thirteen directors,
thereby eliminating the vacancy created by such retirement.
In the event any nominee shall be unable to serve as a director at the time
of the Annual Meeting of Stockholders, which the Board of Directors does not
presently expect, the proxies in favor of such unavailable nominee will be
voted for a consenting nominee selected by the Board of Directors. None of
the nominees for director is related to any executive officer or director of
the Company or another nominee by blood, marriage or adoption.
Directors shall be elected by a plurality of the votes cast.
PAGE 3
==========
NOMINEES
==========
The following information is set forth with respect to the four nominees for
election as directors at the Annual Meeting of Stockholders to serve
three-year terms expiring at the Annual Meeting of Stockholders in 2002.
Names Positions and Offices
of in Company and
Directors Business Experience
============================================================================
Paul D. Bauer Retired; Formerly Executive Vice President and
Age: 55 Chief Financial Officer of Tops Markets, Inc.;
Director since: 1998 Director, Sun Television and Appliances, Inc.
Term to expire: 2002
- - ----------------------------------------------------------------------------
William A. Dolan, II Attorney, Of Counsel to Michael C. Gaus, Esq.
Age: 67 since 1998; Attorney, Kelly, Gaus & Holub law
Director since: 1988 firm since 1994; Partner, Kelly, Gaus, Holub &
Term to expire: 2002 Dolan, 1994; Of Counsel, Kelly, Gaus & Holub,
1994 to 1998; Director since 1982 and Chairman
of the Board, 1988 to 1996, High Point Financial
Corporation.
- - ----------------------------------------------------------------------------
Wiliam C. Gray, D.V.M. Retired; Veterinarian and President, Newton
Age: 69 Veterinary Hospital, 1960 to 1997; Director,
Director since: 1992 Newton Financial Corp. and Newton Trust Company.
Term to expire: 2002
- - ----------------------------------------------------------------------------
Joan M. Lamm-Tennant,Ph.D. Vice President, General Reinsurance/New England
Age: 46 Asset Management since 1996; Professor of
Director since: 1993 Finance, Villanova University since 1988.
Term to expire: 2002
- - ----------------------------------------------------------------------------
====================
CONTINUING DIRECTORS
====================
The following information is set forth with respect to the directors whose
terms of office will continue after the Annual Meeting.
Names Positions and Offices
of in Company and
Directors Business Experience
============================================================================
A. David Brown Managing Director, Pendelton James Associates,
Age: 56 since 1997; Managing Vice President, Korn/Ferry
Director since: 1996 International, executive recruiting, 1994 to 1997;
Term to expire: 2000 served in various executive positions with
R.H. Macy & Co., Inc., 1968 to 1994.
- - ---------------------------------------------------------------------------
James W. Entringer Chairman, and Chief Executive Officer of the
Age: 58 Company since 1997; Chairman and President, and
Director since: 1992 Chief Executive Officer of the Company since
Term to expire: 2001 1993 to 1997.
- - ----------------------------------------------------------------------------
C. Edward Herder, CPCU President, Chester H. Herder & Son, Inc. since
Age: 63 1959; Chairman, Herder Tarricone Associates,
Director since: 1978 1994 to 1996; general insurance agencies.
Term to expire: 2001
- - ----------------------------------------------------------------------------
PAGE 4
Names Positions and Offices
of in Company and
Directors Business Experience
- - ----------------------------------------------------------------------------
William M. Kearns, Jr. Vice Chairman, Keefe Managers, Inc., money
Age: 63 management since 1998; President, W.M. Kearns
Director since: 1975 & Co., Inc., a private investment company,
Term to expire: 2000 Director Fundamental Management Corporation,
since 1994; Director, Greenfield Capital Partners,
since 1996; Director, Kuhlman Corporation, Malibu
Entertainment Worldwide, Inc., Trustee of EQ
Advisors Trust (Equitable Life Assurance Society
of the U.S.), since 1997; Director, Marine
Transport Corporation, Senior Advisor to Proud-
foot, PLC, since 1998.
- - ----------------------------------------------------------------------------
S.Griffin McClellan III Consultant since 1994; Formerly Chairman and
Age 61 Chief Executive Officer, Crestmont Savings and
Director since: 1980 Loan Association.
Term to expire: 2000
- - ----------------------------------------------------------------------------
Gregory E. Murphy President and Chief Operating Officer of the
Age: 43 Company since 1997; Senior Vice President and
Director since: 1997 Chief Financial Officer of the Company, 1995 to
Term to expire: 2001 1997; Senior Vice President, Finance, of the
Company, 1994 to 1995.
- - ----------------------------------------------------------------------------
William M. Rue,CPCU President, Chas. E. Rue & Son, Inc. T/A Rue
Age: 51 Insurance since 1987; Director, First
Director since: 1977 Constitution Bank.
Term to expire: 2001
- - ----------------------------------------------------------------------------
Thomas D. Sayles, Jr. Retired; Director, Pillar Funds (Summit Bank
Age: 67 Corp., Mutual funds); Chairman, The Summit
Director since: 1988 Bancorporation, 1994 to 1996; Chairman and Chief
Term to expire: 2001 Executive Officer, The Summit Bancorporation,
1974 to 1994.
- - ----------------------------------------------------------------------------
J. Brian Thebault Chairman and Chief Executive Officer, L.P.
Age: 47 Thebault Company, graphic communications,since
Director since: 1996 1998; President and Chief Executive Officer,
Term to expire: 2000 L.P. Thebault Company, 1985 to 1998.
- - -----------------------------------------------------------------------------
PAGE 5
=================================
EXECUTIVE OFFICERS OF THE COMPANY
=================================
As of March 15, 1999, the executive officers of the Company were:
James E. Entringer age 58 Chairman and Chief Executive Officer. *
Gregory E. Murphy age 43 President and Chief Operating Officer. *
James W. Coleman, Jr. age 40 Senior Vice President, Strategic Business
Units, since May 1996; Vice President,
Personal Lines Strategic Business Unit,
May 1994 to May 1996.
Thornton R. Land age 58 Executive Vice President, Administration,
and General Counsel, since May 1993.
David B. Merclean age 48 Senior Vice President and Chief Fincial
Officer, since August 1997; Senior Vice
President and Treasurer, Sun Alliance USA,
Inc., 1995 to 1997; Formerly Partner,
KPMG LLP, (formerly KPMG Peat Marwick
LLP).
Jamie Ochiltree, III age 46 Executive Vice President, Branch and Field
Operations, since 1997; Senior Vice
President, Branch and Field Operations,
1994 to 996.
Robert P. Rank age 57 Senior Vice President, Investments, since
December 1993.
Donald E. Williams age 54 Senior Vice President and Chief
Information Officer, since June 1997;
Senior Vice President, Information
Systems, 1992 to 1997.
All terms of office are for a one-year period.
*See additional information about Mr. Entringer on page 3 and Mr. Murphy
on page 4.
Page 6
=========================================
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
=========================================
The following table sets forth, as of February 16, 1999, certain information
with respect to shares of Common Stock owned by (i) each director; (ii) each
of the executive officers named in the Summary Compensation Table below; and
(iii) all of the Company's directors and executive officers as a group:
Number of Shares Total Shares
Beneficially Owned Options Beneficially
Name (excluding options) Exercisable(1)Owned*
- - ----- ------------------ ----------- -------------
Paul D. Bauer 3,505 0 3,505
- - ---------------------------------------------------------------------------
A. David Brown 3,327 9,000 12,327
- - ---------------------------------------------------------------------------
James W. Coleman, Jr. 31,578 51,800 83,378
- - ---------------------------------------------------------------------------
William A. Dolan, II 21,773(2) 18,000 39,773
- - ---------------------------------------------------------------------------
James W. Entringer 150,417 242,030 392,447**
- - ---------------------------------------------------------------------------
William C. Gray, D.V.M. 31,107 21,000 52,107
- - ---------------------------------------------------------------------------
C. Edward Herder, CPCU 65,948(3) 27,000 92,948
- - ---------------------------------------------------------------------------
Frederick H. Jarvis 28,267 15,000 43,267
- - ---------------------------------------------------------------------------
William M. Kearns, Jr. 56,351 27,000 83,351
- - ---------------------------------------------------------------------------
Joan M. Lamm-Tennant, Ph.D 7,527 15,000 22,527
- - ---------------------------------------------------------------------------
Thornton R. Land 98,738 118,076 216,814
- - ---------------------------------------------------------------------------
S. Griffin McClellan III 22,361(4) 18,000 40,361
- - ---------------------------------------------------------------------------
Gregory E. Murphy 78,640(5) 84,200 162,840
- - ---------------------------------------------------------------------------
Jamie Ochiltree, III 67,474 58,376 125,850
- - ---------------------------------------------------------------------------
William M. Rue, CPCU 235,774(6) 27,000 262,774
- - ---------------------------------------------------------------------------
Thomas D. Sayles, Jr. 33,487 27,000 60,487
- - ---------------------------------------------------------------------------
J. Brian Thebault 7,335 9,000 16,335
- - ---------------------------------------------------------------------------
All directors and executive
officers as a group
(20 persons) 1,067,669 868,282 1,935,951***
- - ---------------------------------------------------------------------------
* The amount of shares benefically owned by each of the above-named
directors and officers, except Mr. Entringer, is less than 1% of the
Common Stock outstanding.
** The total number of shares beneficially owned by Mr. Entringer is
equal to 1.4% of the Common Stock outstanding.
*** The total number of shares of Common Stock benefically owned by the
directors and executive officers as a group represents 6.7% of the
Common Stock outstanding.
(1) Includes shares under options exercisable on February 16, 1999 and
options which become exercisable within 60 days thereafter.
(2) Includes 2,100 shares held by wife of which Director disclaims
beneficial ownership.
(3) Includes 16,339 shares held by wife.
(4) Includes 2,000 shares held by wife of which Director disclaims
beneficial ownership.
(5) Includes 2,062 shares held in custody for daughter and in custody for
son.
(6) Includes the following:
(a) 15,864 shares held by C. Rue & Son, a general insurance agency
of which Mr. Rue is President and owner of more than a 5% equity
interest. (See page 17 of this statement.)
(b) 23,247 shares held in custody for son and custody for daughter.
(c) 22,930 shares held in trust for son and trust for daughter.
(d) 990 shares held by wife.
(e) 36,000 shares held by Mr. Rue and First Union Bank. Mr. Rue is
co-trustee with First Union for shares held on behalf of son
and daughter.
PAGE 7
=========================
COMPENSATION OF DIRECTORS
=========================
During 1998, nonemployee directors, consisting of all directors other than
Messrs. Entringer and Murphy, received directors' fees in shares of Common
Stock pursuant to the Stock Compensation Plan for Nonemployee Directors.
Under this Plan, each nonemployee director receives annually Common Stock
having a fair market value equal to an amount of compensation fixed annually
by the Board of Directors. Shares are issued quarterly on January 1,
April 1, July 1 and October 1 of each year. For 1998, such annual
compensation was fixed at $35,000, and each nonemployee director who did not
elect to defer his or her compensation, except for Mr. Bauer, was issued a
total of 1,493 shares of Common Stock pursuant to the Plan. Mr. Bauer was
elected by the Board of Directors on November 3, 1998 and during 1998, Mr.
Bauer received prorated compensation of 75 shares of Common Stock pursuant
to the Plan. Under the Plan, each nonemployee director may elect on or
before December 20 of each year to defer the receipt of shares of Common
Stock, and any dividends accrued with interest thereon, to a specified
future year, the attainment of age 70 or termination of services as a
director. Messrs. Brown, Dolan, McClellan, Sayles, Thebault and Ms.
Lamm-Tennant elected to defer their 1998 compensation under the Plan.
The Board of Directors terminated the Directors' Plan on December 31, 1997.
In connection therewith, the present value of the future benefits of each
eligible nonemployee director was determined to be fully vested as of
December 31, 1997. Such benefits were converted into units, with each such
unit having a value equal to the fair market value of a share of Common
Stock on December 31, 1997. Each unit will accrue an amount equal to the
dividends on a share of Common Stock, as and when declared by the Board of
Directors and paid by the Company, which amount will be deemed reinvested in
additional units in the same manner as dividends are reinvested in shares of
Common Stock under the Company's dividend reinvestment plan for
stockholders. The value of each unit will fluctuate with the value of the
Company's Common Stock. Each participating director will become entitled to
receive the value of his or her units in cash, either in a lump sum or in
installments over 15 years, upon termination of his or her service as a
director. In the event of a director's termination of service as a director
following a "change in control" of the Company, (as defined in Board
resolutions terminating the Directors' Plan) the director will be
immediately entitled to receive the value of his or her units in cash,
either in a lump sum or in installments over a period of five years. Any
units which are unpaid at the time of the director's death shall be payable
in cash to a surviving spouse or estate, as the case may be. Retired
Directors or their surviving spouses who were receiving benefits under the
Directors' Plan at the time of its termination will continue to receive
benefits in accordance with the terms of the Directors' Plan as in effect at
the time the benefits commenced.
The Company has a Stock Option Plan for Directors for nonemployee directors.
Under such plan, each eligible director automatically receives an option to
purchase 3,000 shares of Common Stock on March 1 of each year. Subject to
certain adjustments, the maximum number of shares of Common Stock that may
be issued under options granted pursuant to the Plan is 400,000, which may
be authorized but unissued shares or treasury shares. The exercise price for
each share of Common Stock subject to an option granted is the fair market
value of a share of Common Stock on the date such option is granted and is
payable in cash or in Common Stock of the Company. Any option granted under
the Plan becomes exercisable on the first anniversary of the date it was
granted. No option is exercisable after the tenth anniversary of the grant.
Options granted under the plan are nontransferable, except by will or by
laws of descent and distribution. In the event of an optionee's death or
disability, an option may be exercised, in whole or in part, by the
optionee's executor, administrator, guardian, or legal representative in
accordance with the terms of such option. On March 1, 1998, options to
purchase 3,000 shares of Common Stock were granted to each eligible director
at an exercise price of $27.125 per share.
Page 8
====================================
COMMITTEES OF THE BOARD OF DIRECTORS
====================================
Salary &
Board Member Audit Directors Employee Benefits
- - ------------ ----- --------- -----------------
Paul D. Bauer X
- - ----------------------------------------------------------------------------
A. David Brown X X*
- - ----------------------------------------------------------------------------
William A. Dolan, II X
- - ----------------------------------------------------------------------------
James W. Entringer **(1)
- - ----------------------------------------------------------------------------
William C. Gray, D.V.M. X
- - ----------------------------------------------------------------------------
C. Edward Herder, CPCU X*
- - ----------------------------------------------------------------------------
Frederick H. Jarvis X
- - ----------------------------------------------------------------------------
William M. Kearns, Jr. X
- - ----------------------------------------------------------------------------
Joan M.Lamm-Tennant, Ph.D X*
- - ----------------------------------------------------------------------------
S. Griffin McClellan III X X
- - ----------------------------------------------------------------------------
Gregory E. Murphy (1)
- - ----------------------------------------------------------------------------
William M. Rue, CPCU X
- - ----------------------------------------------------------------------------
Thomas D. Sayles, Jr. X X
- - ----------------------------------------------------------------------------
J. Brian Thebault X
- - ----------------------------------------------------------------------------
Total meetings held in 1998 4 1 4
Total number of Board meetings
during 1998: 4
* Chairperson
** Chairman of the Board
(1) Messrs. Entringer and Murphy serve on other Committees of the Board
of Directors.
- - ----------------------------------------------------------------------------
Audit: Receives and examines the Auditors' Report, meets with the auditors,
and accesses the books and vouchers of the Company, as necessary. Considers
the adequacy of internal controls, confers with the officers of the Company,
and reports to the Board on its findings.
Directors: Seeks and reviews qualified candidates for directorships and
makes recommendations to the Board as to nominees for election as directors.
This committee will consider nominees recommended by stockholders for
election as directors at an Annual Meeting of Stockholders but does not
solicit such recommendations. In order to receive consideration, all such
recommendations must be in writing addressed to the Chairman of the
Committee on Directors, c/o the Secretary of the Company, 40 Wantage Avenue,
Branchville, New Jersey 07890. Such recommendations must include a
reasonable amount of biographical information about the person recommended,
contain a statement as to why the stockholder believes such person to be
well qualified to serve as a director, contain the written consent of the
proposed nominee to the submission of such information and such
recommendation, and be received by the Secretary no later than January 1
preceding the Annual Meeting of Stockholders for which such person's
election is recommended.
Salary and Employee Benefits: Evaluates the performance of certain officers
of the Company and its subsidiaries and makes recommendations to the Board
as to salary adjustments. Continuously evaluates employee benefits and makes
recommendations to the Board in connection with these benefits. Functions as
the Compensation Committee, which administers the Company's stock option
plans, and as the Trustees of the Retirement Savings Plan and the Retirement
Income Plan.
ATTENDANCE OF BOARD MEMBERS AT MEETINGS
No Board member attended fewer than 75% of the aggregate number of meetings
of the Board and of the meetings of Committees on which he or she served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, no executive officer of the Company served on
the Compensation Committee of another entity or as a director of another
entity, one of whose executive officers served on the Salary and Employee
Benefits Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of Forms 3, 4 and 5 and written
representations submitted to the Company during and with respect to the
fiscal year ended December 31, 1998, all statements of beneficial ownership
required to be filed with the Securities and Exchange Commission were timely
filed.
Page 9
============================================
EXECUTIVE COMPENSATION AND OTHER INFORMATION
============================================
SUMMARY COMPENSATION TABLE
==========================
The following table shows, for the fiscal years ending December 31, 1998,
1997, and 1996, the compensation, paid or accrued for those years, to the
Chairman and Chief Executive Officer, and each of the four most highly
compensated executive officers of the Company who served as executive
officers during fiscal year 1998. (See footnote 1.)
Long-Term Compensation
|------Awards------|
Annual Compensation Securities
Under- All
Name Restricted lying Other
and Stock Options/ Compen-
Principal ($)(1) ($)(2) Awards SARs sation
Position Year Salary Bonus ($)(3) (#) (6)($)
============================================================================
James W. 1998 536,712 180,000 397,500(4) - 5,000
Entringer(7,8) 1997 440,337 300,000 296,000 8,600 4,750
Chairman and 15,000(5)
Chief Executive 1996 426,923 225,000 302,000 - 4,750
Officer
- - ----------------------------------------------------------------------------
Gregory E. 1998 331,731 120,000 265,000 - 10,345
Murphy(7,8) 1997 222,385 200,000 185,000 3,200 9,582
President and 10,000(5)
Chief Operating 1996 139,552 60,000 169,875 15,000 10,204
Officer
- - ----------------------------------------------------------------------------
Thornton R. 1998 222,087 60,000 212,000(4) - 5,000
Land(7,8) 1997 199,688 100,000 166,500 4,000 4,750
Executive Vice 5,000(5)
President and 1996 193,896 60,000 169,875 - 4,750
General Counsel
- - ----------------------------------------------------------------------------
Jamie 1998 204,323 60,000 212,000 7,500 13,313
Ochiltree,III 1997 176,154 100,000 185,000 3,200 13,782
(7,8) 7,500(5)
Executive Vice 1996 157,319 60,000 169,875 15,000 15,669
President
- - ----------------------------------------------------------------------------
James W. 1998 172,062 60,000 212,000 7,500 5,682
Coleman, Jr. 1997 147,019 100,000 185,000 2,800 3,866
(7,8) 7,500(5)
Senior Vice 1996 124,015 60,000 37,750 15,000 -
President
- - ----------------------------------------------------------------------------
=======================================
FOOTNOTES TO SUMMARY COMPENSATION TABLE
=======================================
1. The executive officers received cash compensation only from the Company's
subsidiary, Selective Insurance Company of America ("SICA"), which
company also provides the employee benefit plans in which such executive
officers participate.
2. Effective for the fiscal year 1994, the Company adopted a Rewards Program
by which employees may receive a stated percentage of salary as Annual
Cash Incentive Payments if they achieve specified personal goals and the
Company achieves stated corporate performance goals. The "Bonus" amounts
for 1996, 1997, and 1998 indicate the amounts awarded to the named
executive officers as Annual Cash Incentive Payments. See the "Report of
the Company's Salary and Employee Benefits Committee" set forth in this
Proxy Statement.
3. The aggregate value of restricted stock awards at the end of 1998 was
$644,000 for Mr. Entringer, $583,625 for Mr. Murphy, $362,250 for Mr.
Land, $543,375 for Mr. Ochiltree and $402,500 for Mr. Coleman, excluding
Phantom Stock awards granted to Mr. Entringer and Mr. Land. See footnote
4 below. At the end of 1998, the aggregate number of restricted shares
held by Mr. Entringer was 32,000; by Mr. Murphy, 29,000; by Mr. Land
18,000; by Mr. Ochiltree 27,000 and by Mr. Coleman, 20,000. The
restricted stock awards were made under the Company's Stock Option Plan
II under which such shares and accrued dividends vest after four years
from the date of grant depending upon the achievement of predetermined
performance goals. Pursuant to an award Mr. Entringer received outside
of the plan on November 1, 1995, 6,932 shares vested to Mr. Entringer on
each of November 1, 1995, November 1, 1996, November 1, 1997 and November
1, 1998. This grant is now fully vested. Mr. Entringer has received
dividends on all shares from this grant since November 1, 1995. On
December 16, 1998, restricted stock awards granted to Messrs. Entringer,
Land, Murphy, and Ochiltree on January 27, 1995 became fully vested. See
the "Report of the Salary and Employee Benefits Committee" in this
statement. The value of the restricted stock awards shown in this
footnote is based on the closing market price per share of Common Stock
on December 31, 1998 of $20.125.
PAGE 10
4. During 1998, Messrs. Entringer and Land were granted Phantom Stock units
in lieu of grants of Restricted Stock. On February 4, 1998, Mr. Entringer
was granted 15,000 units of Phantom Stock and Mr. Land was granted 8,000
units of Phantom Stock. The Phantom Stock Units are valued with reference
to the fair value of Selective Common Stock and will accrue amounts
equivalent to dividends which will also be converted into Phantom Stock
Units based on the fair market value of Selective Common Stock on the
applicable dividend reinvestment dates. The accumulated value of the
Phantom Stock Units will be paid to each of the officers in cash upon
retirement, based on the value of Selective's Common Stock on the last
day of the officer's employment. The value of Phantom Stock Units set
forth in the table on page 9 is based on the closing market price per
share of Common Stock on February 4, 1998, of $26.50.
5. This option was granted as a qualified option under Stock Option Plan II
on December 2, 1997. The grant became fully vested on December 16, 1998.
In addition, the qualified option was amended so that a portion of the
option is now a non-qualified option. See the "Report of the Salary and
Employee Benefits Committee" set forth in this Proxy Statement.
6. The amounts in "All Other Compensation" include Company contributions
under the Company's Retirement Savings Plan for the fiscal years ended
December 31, 1998, December 31, 1997 and December 31, 1996. This Plan is
a defined contribution plan available to substantially all employees.
Company contributions are 30% vested after two years of service and
become 100% vested after six years of service. The Company contributions
reflected in the table above are $5,000 for Messrs. Entringer, Murphy,
Land, Ochiltree and Coleman. In addition, for Messrs. Murphy, Ochiltree,
and Coleman the amounts for 1998 in the "All Other Compensation" column
also include $5,345, $8,313 and $682, respectively, representing the
difference between the market rate of interest and the actual rate of
interest on indebtedness of such executive officer to the Company. For
additional information relating to such indebtedness, see "Interest of
Management and Others in Certain Transactions" set forth in this Proxy
Statement.
7. Under an employment agreement with SICA effective September 1, 1996,
amended May 1, 1998, and in effect until September 1, 1999,
Mr. Entringer receives an annual base salary of not less than $430,000
through September 1, 1999. Under an employment agreement with SICA
effective August 1, 1995, amended May 1, 1998 and in effect through
August 1, 2001, Mr. Murphy receives an annual base salary of not less
than $325,000 through August 1, 2001. Under an employment agreement with
SICA effective September 1, 1996 through September 1, 1999, Mr. Land
receives an annual base salary of not less than $195,000 through
September 1, 1999. Under an employment agreement with SICA dated October
31, 1995, amended October 31, 1998 and in effect through October 31,
2001, Mr. Ochiltree receives an annual base salary of not less than
$197,600 through October 31, 2001. Under an employment agreement with
SICA dated May 2, 1997 through May 2, 2000, Mr. Coleman receives an
annual base salary of not less than $135,000 through May 2, 2000.
8. Messrs. Entringer, Land, Murphy, Ochiltree and Coleman have termination
agreements with SICA pursuant to which payments will be made under
certain circumstances following a Change in Control of the Company, as
defined in the agreements. The agreements for Messrs. Entringer and Land
are automatically renewable for successive one-year terms each September
unless prior written notice of nonrenewal is given; the agreement for Mr.
Murphy is automatically renewable for successive one-year terms each
August unless prior written notice of nonrenewal is given; the agreement
for Mr. Ochiltree is automatically renewable for successive one-year
terms each October unless prior written notice of nonrenewal is given.
Mr. Coleman's agreement is effective May 2,1997 through May 2, 2000 and
is automatically renewable for successive one-year terms each May 2
unless prior written notice of nonrenewal is given. Each agreement
provides that, in the event of a Change in Control of the Company, SICA
shall continue to employ the executive officer in the capacities in which
he was serving immediately prior to the Change in Control for a period of
three years, commencing on the date on which the Change in Control shall
have occurred, which term will be automatically renewed for successive
one-year periods unless prior written notice is given. Each agreement
provides that if the executive officer's employment is terminated (as
defined in the agreement) after a Change in Control occurs, other than
(i) due to the executive officer's death or retirement, (ii) by SICA for
Cause or Disability, or (iii) by the executive officer other than for
Good Reason (as such foregoing capitalized terms are defined in the
agreement), the executive officer will be entitled to receive earned but
unpaid base salary through the date of termination, as well as any
incentive compensation benefits or awards that have been accrued, earned,
or become payable but which have not been paid, and as severance pay in
lieu of any further salary for periods subsequent to the date of
termination, an amount in cash equal to his "annualized includible
compensation for the base period" (as defined in Section 280G(d)(1) of
the Internal Revenue Code of 1986, as amended (the "Code"), multiplied
by a factor of 2.99, provided that if any of the payments or benefits
provided for in the agreement, together with any other payments or
benefits that the executive officer has the right to receive would
constitute a "parachute payment" (as defined in Section 280G(b) of the
Code), the Company shall pay to the executive officer on a net after-tax
basis the greater of (1) the payments and benefits due to the executive
officer reduced in order of priority and amount as executive officer
shall elect, to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the
Code or (2) payments and benefits due to the executive officer, plus an
amount in cash equal to (x) the amount of such "excess parachute
payments" multiplied by (y) twenty (20%) percent. The Company has
guaranteed SICA's performance of all its obligations under the
termination agreements.
PAGE 11
==========================================
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
===========================================
The following table contains information concerning the grant of stock
options and tandem stock appreciation rights ("SARs") under the Company's
Stock Option Plan II ("Plan") to the Chairman, President and Chief Executive
Officer, and each of the other executive officers named in the Summary
Compensation Table.
=====================================
OPTION/SAR GRANTS IN LAST FISCAL YEAR
=====================================
|----------Individual Grants------------| Grant Date Value
% of
Number of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base Expira- Grant Date
Granted(1) in Fiscal Price tion Present
Name (#) Year ($/Sh) Date Value($)(2)
============================================================================
James W.
Entringer - - - - -
Gregory E.
Murphy - - - - -
Thornton R.
Land - - - - -
Jamie
Ochiltree,III 7,500 3.61 18.75 11/03/08 42,750
James W.
Coleman Jr. 7,500 3.61 18.75 11/03/08 42,750
- - ----------------------------------------------------------------------------
1. The Plan permits the granting of options to all employees and permits
the granting of SARs in tandem with any or all stock options. If an SAR
is exercised, the employee must surrender the related stock option or
portion thereof. Upon exercise of an SAR, payment will be made by the
Company in stock, cash, or some combination thereof, as a committee
appointed by the Board of Directors shall determine at the time of
exercise. None of the options granted to the named executive officers in
1998 has SARs attached. Under the terms of the Plan, options or any
related SARs, may be granted at no less than fair market value as of the
date of grant. They must be exercised within ten years from the date of
grant. In the event of any change in the number of outstanding shares of
the Common Stock of the Company as a result of a stock dividend, stock
split, or other readjustments, the committee appointed by the Board of
Directors shall make an appropriate adjustment in the aggregate number of
shares which may be subject to stock options granted under the Plan and
in the number of shares subject to and the option price of each then
outstanding option.
2. The Black-Scholes option pricing method has been used to calculate the
present value as of the date of grant. The present value as of the date
of the grant, calculated using the Black-Scholes method, is based on
assumptions about future interest rates, expected life of the options,
dividend yield and stock price volatility. The risk free interest rate is
based on a zero coupon US Government Issue with the same terms and issue
date as the specified option grant. The volatility is based on an
estimate of the future price variability of Selective Insurance Group,
Inc. (SIGI) stock for a term commensurate with the expected life of the
option. There is no assurance that these assumptions will prove to be
true in the future. Listed below are the various assumptions that were
made with regard to the two grants:
Exercise Price $18.75
-------------- -------
Risk Free Interest Rate 4.6%
Expected Life of Option 9 Years
Dividend Yield 2.4%
Expected Volatility 23%
3. The options set forth in the table above were granted on November 3, 1998
at an exercise price equal to the fair market value of a share of Common
Stock at such date and were immediately exercisable.
PAGE 12
=====================================
OPTION AND SAR EXERCISES AND HOLDINGS
=====================================
The following table sets forth information with respect to the Chairman and
Chief Executive Officer, and each of the other executive officers named in
the Summary Compensation Table concerning the exercise of options and/or
SARs during the last fiscal year and unexercised options and SARs held as of
the end of the last fiscal year:
===================================================
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
===================================================
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at at Fiscal
Shares Fiscal Year-End(#)(1); Year-End($)(2);
Acquired ********************** **************
on Value Exercisable/ Exercisable/
Name Exercise(#) realized($) Unexercisable Unexercisable
============================================================================
James W. - - 242,030/ $1,065,761/
Entringer 0 0
Gregory E. 3,800 $67,688 72,200/ 315,588/
Murphy 0 0
Thornton R. 15,924 $142,375 118,076/ 724,833/
Land 0 0
Jamie 7,824 $113,717 58,376/ 157,356/
Ochiltree,III 0 0
James W. - - 51,800/ 156,413/
Coleman 0 0
- - ----------------------------------------------------------------------------
1. The number of securities underlying unexercised options at the end of
1998 included options with tandem SARs granted under the Company's former
stock option plan for employees which expired November 5, 1992. This plan
had 1,200,000 shares reserved for issuance and was substantially similar
to the Company's Stock Option Plan II.
2. The value of unexercised in-the-money options is based on the closing
market price per share of Common Stock on December 31, 1998 of $20.125,
less the option exercise price per share.
PAGE 13
=============
PENSION PLANS
=============
The following table illustrates annual pension benefits, including
supplemental benefits, at normal retirement (age 65) for various years of
credited service in the form of a single life annuity and prior to any
offset for Social Security benefits. As of December 31, 1998 the Chairman
and Chief Executive Officer and the other executive officers named in the
Summary Compensation Table had the following credited years of service
under the pension plans: Mr. Entringer, 5 years; Mr. Murphy, 17 years;
Mr. Land, 12 years; Mr. Ochiltree, 3 years; and Mr. Coleman, 15 years.
====================
PENSION PLAN TABLE(1)
====================
============================================================================
Years of Service
----------------------------------------------------------
Remuneration 5 15 20 25 30 35
============================================================================
125,000 12,500 37,500 50,000 62,500 75,000 87,500
150,000 15,000 45,000 60,000 75,000 90,000 105,000
175,000 17,500 52,500 70,000 87,500 105,000 122,500
200,000 20,000 60,000 80,000 100,000 120,000 140,000
225,000 22,500 67,500 90,000 112,500 135,000 157,500
250,000 25,000 75,000 100,000 125,000 150,000 175,000
300,000 30,000 90,000 120,000 150,000 180,000 210,000
400,000 40,000 120,000 160,000 200,000 240,000 280,000
450,000 45,000 135,000 180,000 225,000 270,000 315,000
500,000 50,000 150,000 200,000 250,000 300,000 350,000
- - -------------------------------------------------------------------------
1. The Company maintains a noncontributory Retirement Income Plan integrated
with Social Security benefits. This pension plan covers substantially all
employees, including officers. Compensation covered under the plan
consists only of basic wages and salaries, not including overtime and
bonuses, i.e. only the "Salary" column of the Summary Compensation Table.
Monthly plan benefits are computed at the rate of 2% of average monthly
compensation for the 60 months out of the most recent 120 months of
employment for which the employee's compensation is the highest
multiplied by the number of years of credited service, less an offset
for Social Security benefits, calculated as 1 3/7% of the participant's
Social Security income in effect on January 1 of the year of retirement
multiplied by the number of years of credited service. If the employee is
married, the normal form of benefit is a joint and survivor annuity for
the employee and spouse. If the employee elects against such annuity with
the spouse's consent, a single life annuity may be paid. The Company has
a nonqualified supplemental pension plan to provide benefits that would
have been paid by the qualified plan, but for the limitations imposed by
the Internal Revenue Code on the maximum benefits payable and the
compensation upon which qualified plan benefits may be calculated.
============================================
REPORT OF THE SELECTIVE INSURANCE GROUP, INC.
SALARY AND EMPLOYEE BENEFITS COMMITTEE
============================================
The Salary and Employee Benefits Committee (the "Committee") of the Board of
Directors is responsible for setting the executive compensation policies of
the Company and evaluating the level of compensation of the executive
officers of the Company and its subsidiaries relative to the positions and
performances of the executive officers. The Committee's decisions on
executive compensation are subject to the approval of the Board of
Directors, except for grants under certain of the Company's employee benefit
plans, which are made solely by the Committee in order for such plans to
satisfy the administration requirements of Rule 16b-3 under the Securities
Exchange Act of 1934, and 162(m) of the Internal Revenue Code. The Committee
consists of Messrs. Brown (Chairman), Kearns, McClellan and Satles, all of
whom are nonemployee directors,within the meaning of Rule 16b-3 and "outside
directors" within the meaning of Section 162(m). For purposes of this
report, the term "Company" means Selective Insurance Group, Inc. and its
subsidiaries unless the context otherwise requires.
The Committee's executive compensation policies are intended to enable the
Company to attract and retain qualified executives by combining a base
salary component with annual bonus and long-term incentive components.
The levels of annual total compensation for executive officers (including
the executive officers named in the foregoing tables) are generally intended
to be comparable to the levels of annual total compensation paid to
executives with comparable responsibilities in a group of other companies
in the insurance industry, identified by the Company using external surveys
as being similar in size and scope to the Company, while providing for
annual and long-term incentives which are subject to the achievement of
performance-related goals. This comparison group of companies in the
insurance industry is smaller and more diverse than the group comprising
the Company's peer group for purposes of the performance graph set forth on
page 16 in this Proxy Statement.
Page 14
After determining the level of compensation for each executive officer as
compared with his counterparts in the identified industry group, the
Committee weighs the executive officer's performance and level of
responsibility and considers such executive officer's contribution to the
financial and other goals of the Company. The goals and objectives are
established in advance and may relate to the executive officer's
performance, the Company's performance, or both. Among the criteria used in
determining base salaries are: (i) the Company's financial performance
compared to its performance in the prior year, including the Company's
combined ratio (both overall and by lines of insurance), return on equity,
results of operations and overall financial condition; (ii) the managerial
ability of such executive officer as evaluated by the Committee, taking into
account the evaluation of such person by the President and Chairman; and
(iii) such officer's ability to develop personnel within the areas of his
responsibility for the future operation of the Company. These criteria are
the more significant factors used by the Committee in reaching its decisions
on executive compensation. As a result of the individual evaluations, for
any particular year the compensation level of each executive officer may be
higher or lower than that of comparable executives in the comparison group
and may vary each year depending upon the achievement of the individual.
The Committee meets approximately four times a year. Changes in the base
salary component of executive compensation do not necessarily occur
annually, but may occur after a longer period of time.
In addition to the base salary component of executive officers'
compensation, cash payments under the Company's Annual Cash Incentive Plan
may be earned. Specific performance-related goals are established for each
executive officer at the beginning of the fiscal year after discussions
between such executive officer and the President and Chairman (and with
respect to the Chairman between the Chairman and the Committee) to determine
the nature and extent of such goals. These individual goals relate to
specific business, departmental or management objectives that support
specific corporate goals established for the fiscal year. In 1998, corporate
goals included improving the combined ratio and increasing diversification
of geographic premium distribution. If individual and corporate goals are
achieved for the year, the executive officer may earn the percentage of
salary specified in the Annual Cash Incentive Plan for such officer's
position as an annual incentive.
In February 1999, the Committee reviewed each executive officer's
performance evaluation, the recommendations of the Chairman as
to the achievement of the individual performance-related goals and the
Company's performance for 1998 using the criteria described above. Based
upon such criteria and the Annual Cash Incentive Plan percentage guidelines,
the Committee determined the annual cash incentives to be awarded to the
Company's executive officers for the year ended December 31, 1998.
The two forms of executive officers' long-term incentive compensation are
stock options (with or without tandem stock appreciation rights) and stock
grants under the Company's Stock Option Plan II (the "Plan"). The Committee
believes that stock ownership by management encourages management to enhance
stockholder value. Stock options (with or without tandem stock appreciation
rights) granted to executive officers and other employees give optionees the
right to purchase shares of the Company's Common Stock over a ten-year
period at the fair market value per share on the date of grant. Generally,
the Committee grants options to executive officers based on individual
merit, taking into account, among other things, the performance evaluations
of such executive officers by the President and the Chairman. The number of
options granted at any given time is also determined, in part, by the
executive officer's level of responsibility; i.e., more options are given to
employees and executives in positions of greater responsibility, and the
date of the last option grant to such person. In recent years, the Company
has generally granted options on an annual basis, but options will not
necessarily be granted annually to each executive officer. Grants of stock
also provide incentive to the executive officers to enhance stockholder
value. Under the Plan, the Committee, in its discretion, may make restricted
or unrestricted grants of Common Stock, or grant rights to receive Common
Stock, to executive officers and other employees, in addition to or in
substitution for options or stock appreciation rights. Some grants are
subject to the attainment of one or more performance-related objectives and
other terms and conditions as may be determined by the Committee in its
discretion. In 1998, grants of restricted stock under the Plan were made to
all executive officers, except Messrs. Entringer and Land. All restricted
stock grants to executive officers are subject to a four-year vesting period
and the attainment of various predetermined corporate financial goals, such
as return on equity or cumulative earnings, during the vesting period.
On February 4, 1998, the Committee granted Mr. Entringer, as deferred
compensation and in lieu of awarding restricted stock, 15,000 phantom stock
units which entitle Mr. Entringer, upon retirement, to receive from the
Company an amount in cash with respect to each unit equivalent in value to
15,000 shares of Selective stock and any dividends declared with regard to
that stock during the period before his retirement.
In December 1998, the Committee changed the vesting schedule of restricted
stock awards made in January 1995, to certain executive officers and changed
the vesting schedule of outstanding stock options granted in December of
1994 and 1997
PAGE 15
to certain executive officers of the Company, including Mr. Entringer, to
fully vest, as of December 16, 1998, the unvested portion of such restricted
stock awards and such stock options. The restricted stock awards and the
1997 stock options were originally scheduled to vest over a four-year period
after the date of grant or earlier in the event of a change in control of
the Company, while the 1994 stock options were originally scheduled to vest
over a five-year period after the date of grant or earlier in the event of a
change in control of the Company. The Committee took the action in order to
encourage additional stock ownership by the executive officers and to
prevent the value associated with the vesting of such stock options from
being included in any parachute payments in the event of a future change in
control of the Company to those executive officers who have termination
agreements with the Company.
Also in December 1998, the Committee authorized the amendment of existing
termination agreements with certain executive officers of the Company,
including Mr. Entringer, to provide that in the event of the termination of
any such officer after a change of control of the Company, such person would
be entitled to receive the greater, on an after-tax basis, of (i) the
benefits provided by the termination agreement prior to the amendment, which
are limited to an aggregate amount which would not result in an "excess
parachute payment," as defined in Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code") or the imposition of a 20% excise tax on
such "excess parachute payment," or (ii) the amount of such benefits without
such limitation plus an amount equal to 20% of any "excess parachute
payment." The Committee believes that this action was necessary to help
assure that benefits under the termination agreements remain competitive in
order to promote the continuity of management in the event of a future
change of control of the Company and to more fairly recognize in the
calculation of benefits under the termination agreements the increases in
the levels of compensation of certain executive officers in recent years as
a result of promotions or increases in their responsibilities.
The Company intends, to the extent practicable, to preserve deductibility
under the Internal Revenue Code for compensation paid to its executive
officers while maintaining compensation programs to attract and retain
highly qualified executives in a competitive environment.
The Committee's basis for determining the compensation of Mr. Entringer have
been substantially the same as those referred to above with respect to the
Company's executive officers. The Committee seeks to maintain the base
salary of the Chief Executive Officer at a level competitive with the
mid-range of the base salaries of the chief executive officers of other
insurance companies in the Company's identified comparison group, but Mr.
Entringer's base salary and incentive compensation for 1998 were affected by
his performance and the Company's performance, as compared to the peer group
as described below. Mr. Entringer is eligible to participate in the same
employee benefit plans available to the other executive officers of the
Company.
In determining Mr. Entringer's award under the Annual Cash Incentive Plan
for 1998, the Committee considered the extent to which Mr. Entringer had met
certain predetermined financial and operational goals, and how well he had
implemented initiatives scheduled for 1998, including increased earnings and
positioning the Company for future growth. The Committee also considered
the market value of the Company's Common Stock. In considering the Annual
Cash Incentive award and the deferred compensation grant, the Committee also
reviewed the Company's combined ratio, expense reduction, and capital
strategies and Mr. Entringer's achievements in productivity, premium
diversification of both a geographic and class of business basis, employee
development, corporate restructuring and technological development, in
addition to those factors used in determining the awards of the other
executive officers.
No Compensation Committee interlocks or insider participation in compensa-
tion decisions occurred during the fiscal year ended December 31, 1998.
Submitted by the Salary and Employee Benefits Committee of the Company's
Board of Directors: A. David Brown (Chairman), William M. Kearns, Jr., S.
Griffin McClellan III and Thomas D. Sayles, Jr.
PAGE 16
================================================
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
================================================
The following graph demonstrates a five-year comparison of cumulative total
returns for the Company, the Nasdaq Stock Market (U.S. companies), and the
Fire, Marine and Casualty insurers (Nasdaq Market).
=============================
(CORPORATE PERFORMANCE GRAPH)
=============================
============================================================================
|-------------------As of---------------------|
INDEX 12/31 12/30 12/29 12/31 12/31 12/31
DESCRIPTION 1993 1994 1995 1996 1997 1998
- - ----------------------------------------------------------------------------
Selective Insurance Group, 100.0 86.3 125.7 139.1 202.3 154.5
Inc.
Nasdaq Stock Market (US 100.0 97.8 138.3 170.0 208.6 293.2
Companies)
NASDAQ Stocks (SIC 6330- 100.0 96.3 135.0 146.3 222.3 189.5
6339 US + Foreign Fire,
Marine, and Casualty
Insurance Peer Group(1))
- - ----------------------------------------------------------------------------
1. The members of the Peer Group include Fire, Marine and Casualty insurers
that are traded on the Nasdaq Stock Market and have the same Standard
Industry Classification (SIC) number as the Company. The Peer Group
members are as follows: 21st Century Holding Co.; Allied Group, Inc.;
American Bankers Insurance Group, Inc.; American Indemnity Financial
Corporation; Argonaut Group, Inc.; Baldwin & Lyons, Inc.; Bancinsurance
Corporation; Berkley, W.R. Corporation; Cincinnati Financial Corporation;
Citizens Security Group, Inc.; Condor Services, Inc.; Donegal Group,
Inc.; Exstar Financial Corporation; Financial Institutions Insurance
Group, Ltd.; Foremost Corporation America; Gryphon Holdings, Inc.; HCC
Insurance Holdings, Inc.; Harleysville Group Inc.; Home State Holdings,
Inc.; Intercargo Corporation; Kaye Group, Inc.; MAIC Holdings, Inc.;
Markel Corp.; Mercury General Corporation; Meridian Insurance Group,
Inc.; Midland Financial Group, Inc.; Milwaukee Insurance Group Inc.;
Mobile America Corporation; Motor Club of America; Mutual Assurance,
Inc.; NAC Re Corporation; Navigators Group, Inc.; North East Insurance
Company; Ohio Casualty Corporation; Old Guard Group, Inc.; Old Lyme
Holding Corp.; Omni Insurance Group, Inc.; PXRE Corp.; PAC RIM Holding
Corporation; Paula Financial; Pennsylvania Manufacturers
Corporation;Phoenix Re Corporation; Piedmont Management, Inc.; PMA
Capital Corporation; Professionals Group Inc.; Professionals Insurance
Company Management; RTW, Inc.; Rescorp, Inc.; Risk Capital Holdings,
Inc.; SAFECO Corporation; Selective Insurance Group, Inc.; State Auto
Financial Corporation; Symons International Corporation; Titan Holdings,
Inc.; Trenwick Group, Inc.; U.S. Capital Group, Inc.; Unico American
Corporation; United Fire & Casualty Company; United States Facilities
Corporation; Walshire Assurance Company.
PAGE 17
=========================================================
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
=========================================================
William M. Rue, a director of the Company, is President and owner of more
than a 5% equity interest in Rue Insurance, a general insurance agency,
which received $1,275,609 in commissions during 1998 for insurance policies
placed with the Company's subsidiaries. During 1998, the Company's insurance
subsidiaries purchased insurance coverages with premiums of $826,467 through
the agency. J. Brian Thebault, a director of the Company, is Chairman and
Chief Executive Officer of L.P. Thebault Company, Inc., graphic
communications, which received $62,942 during 1998 for services performed
for the Company and its subsidiaries. The foregoing relationships have
existed during the past fiscal year, and the Company intends to continue its
relationship with Rue Insurance and L.P. Thebault Company, Inc. in the
current year.
On December 16, 1994, Messrs. Murphy and Ochiltree, each of whom is an
executive officer of the Company, incurred certain indebtedness to the
Company in connection with their respective exercises of nonqualified stock
options granted on such date under the Company's Stock Option Plan II. Such
loans were made by the Company to such officers and certain other employees
in order to encourage such employees to exercise their options and thus to
align further their interests with those of the stockholders through greater
stock ownership. The principal amounts of such loans to Messrs. Murphy and
Ochiltree were $105,395 and $197,000, respectively. These loans bear no
interest and are due in 2005. Principal amounts outstanding as of March 5,
1999 were $68,505 and $128,050 for Messrs. Murphy and Ochiltree,
respectively.
On August 7, 1998, Messrs. Murphy, Ochiltree and Coleman incurred certain
indebtedness to the Company in connection with the purchase of Common Stock
on the open market. Loans were made by the Company to senior management and
certain other officers in order to encourage greater ownership of Common
Stock. The principal amounts of such loans to Messrs. Murphy, Ochiltree and
Coleman were $162,495, $98,799, and $83,196, respectively. These loans bear
an annual interest rate of 2.5% and are due in 2009. Principal amounts
outstanding as of March 5, 1999 were $151,120, $91,883 and $77,372 for
Messrs. Murphy, Ochiltree and Coleman, respectively.
===================
DATE FOR SUBMISSION
OF STOCKHOLDER PROPOSALS
========================
Any stockholder desiring to submit a proposal for inclusion in the Proxy
Statement relating to the 2000 Annual Meeting of Stockholders (to be held
on or about May 5, 2000) must submit the same in time to be received at the
Company's head-quarters at Branchville, New Jersey, on or before December 1,
1999, for determination of eligibility in accordance with law.
=======================
DISCRETIONARY AUTHORITY
=======================
A duly executed proxy given in connection with the Company's 2000 Annual
Meeting of Stockholders will confer discretionary authority on the proxies
named therein, or any of them, to vote at such meeting on any matter of
which the Company does not have written notice on or before February 15,
2000, without advice in the Company's proxy statement as to the nature of
such matter.
====================
FINANCIAL STATEMENTS
AND OTHER INFORMATION
=====================
Consolidated financial statements for the Company and its subsidiaries and
the report thereon of KPMG LLP are included in the 1998 Annual Report to
Stockholders. A copy of the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, as filed with the Securities and Exchange
Commission, excluding exhibits, will be provided without charge to
stockholders upon written request to the Senior Vice President, and Chief
Financial Officer, Selective Insurance Group, Inc., 40 Wantage Avenue,
Branchville, New Jersey 07890. The Form 10-K provided to stockholders will
include only a list of exhibits to the Form 10-K. Exhibits will be furnished
to stockholders upon request and upon payment of reproduction and mailing
expenses.
===========
ACCOUNTANTS
===========
For many years, the Company has engaged the services of KPMG LLP as its
principal accountants. The Company anticipates making no change
in its selection and a representative of that firm is expected to be
available at the Annual Meeting of Stockholders to respond to appropriate
questions and to make a statement if such representative so desires.
