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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:
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/ / 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
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AETNA LIFE AND CASUALTY COMPANY
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(Name of Registrant as Specified In Its Charter)
AETNA LIFE AND CASUALTY COMPANY
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(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), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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:
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1995 Aetna Proxy Statement
Notice of Annual Meeting
[LOGO]
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TABLE OF CONTENTS
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General Information............................................................ 2
I. Election of Directors..................................................... 2
Nominees for Directorships................................................ 3
Compensation and Other Information Regarding Directors.................... 8
Committees of the Board................................................... 8
Certain Transactions and Relationships.................................... 10
Security Ownership of Certain Beneficial Owners, Directors, Nominees and
Executive Officers........................................................ 11
Executive Compensation.................................................... 14
Summary Compensation Table................................................ 14
Stock Option Grants Table................................................. 16
Stock Option Exercises and December 31, 1994 Stock Option Value Table..... 17
Long-Term Incentive Awards Table.......................................... 18
Pension Plan.............................................................. 19
Other Agreements.......................................................... 19
Report of the Committee on Compensation and Organization.................. 20
Corporate Performance Graph............................................... 22
II. Appointment of Auditors................................................... 23
Other Information and 1996 Shareholder Proposals.......................... 23
Annual Report............................................................. 23
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[Logo] AETNA LIFE AND CASUALTY RONALD E. COMPTON
COMPANY Chairman
151 Farmington Avenue
Hartford, Connecticut 06156
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To Our Shareholders:
The 1995 Annual Meeting of Shareholders will be held on Friday, April 28, 1995
at 9:30 a.m. at our Corporate Headquarters in Hartford, Connecticut, and I hope
you will attend.
The matters expected to be acted on at the meeting are described in detail in
the attached Notice of Annual Meeting of Shareholders and Proxy Statement. In
addition to specific agenda items, we will discuss generally the operations of
Aetna. We welcome any questions you have concerning Aetna and will provide time
during the meeting for questions from shareholders.
If you are unable to attend the Annual Meeting, it is still important that your
shares be represented. Please sign and date the enclosed Proxy Card and return
it as soon as possible in the envelope provided.
[Sig]
Ronald E. Compton
Chairman
March 17, 1995
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[Logo] AETNA LIFE AND CASUALTY LUCILLE M.
COMPANY NICKERSON
151 Farmington Avenue Vice President and
Hartford, Connecticut 06156 Corporate
Secretary
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Aetna Life
and Casualty Company will be held at the Corporate Headquarters of the Company,
151 Farmington Avenue, Hartford, Connecticut, on Friday, April 28, 1995 at 9:30
a.m. for the following purposes:
1. To elect a Board of Directors for the coming year;
2. To approve the appointment of KPMG Peat Marwick LLP as independent auditors
for the current calendar year; and
3. To transact any other business that may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on February 24, 1995 as
the record date for determination of the shareholders entitled to vote at the
meeting or any adjournment thereof.
It is important that your shares be represented at the meeting. Please sign,
date and return the enclosed Proxy Card as soon as possible in the envelope
provided. Shareholders who attend the meeting may revoke their proxies and vote
in person.
By order of the Board of Directors,
[Sig]
Lucille M. Nickerson
Vice President and Corporate Secretary
March 17, 1995
<PAGE> 6
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of Proxies
by the Board of Directors of Aetna Life and Casualty Company (the Company) for
the Annual Meeting of Shareholders to be held at the Company's Corporate
Headquarters on April 28, 1995. The Proxy Statement and the enclosed Proxy Card
are being mailed to shareholders on or about March 17, 1995. The term "Aetna
Life & Casualty" refers collectively to the Company and three of its principal
subsidiaries: Aetna Life Insurance Company, The Aetna Casualty and Surety
Company and The Standard Fire Insurance Company.
Shareholders of record of the Company's Common Capital Stock without par
value (Common Stock) at the close of business on February 24, 1995 will be
entitled to vote at the meeting. On that date, 112,696,901 shares of Common
Stock were outstanding. Each such share is entitled to one vote.
At this time, the Directors are not aware of any matters that may be
properly presented for consideration at the Annual Meeting, other than those
outlined in the Notice of the meeting. If other matters are properly presented
for consideration, the persons named on the Proxy will vote on those matters
according to their best judgment.
The giving of a Proxy does not affect a shareholder's right to vote in
person at the meeting since the Proxy may be revoked at any time before it is
voted. A properly executed Proxy that is not revoked will be voted according to
the instructions on the Proxy. If no instruction is given for any matter to be
voted upon, the shares represented by the Proxy will be voted on that matter in
the manner described on the following pages.
Any full shares held for you under the Company's Dividend Reinvestment and
Stock Purchase Plan have been included in the shares shown on the enclosed
Proxy. Fractional interests in shares cannot be voted under Connecticut law.
Votes are counted by tellers of the Company's Transfer Agent. These tellers
will canvass the shareholders present in person at the Annual Meeting, count
their votes and count the votes represented by proxies presented. Abstentions
and broker nonvotes are counted for purposes of determining the number of shares
represented at the meeting, but are deemed not to have voted on a proposal.
Broker nonvotes occur when a broker nominee (which has voted on one or more
matters at the meeting) does not vote on one or more other matters at the
meeting because it has not received instructions to so vote from the beneficial
owner and does not have discretionary authority to so vote.
I. ELECTION OF DIRECTORS
Nominations for ten directorships will be made at the Annual Meeting. However,
in the event any Nominee becomes unavailable for election, the Board of
Directors will reduce the number of directorships prior to the meeting. The
terms of office for all elected Directors will run until the next Annual Meeting
and until their successors are duly elected and qualified. Unless directed to
the contrary, the shares represented by the enclosed Proxy will be voted FOR the
election of the ten Nominees listed on the following pages (the Nominees). With
the exception of Mrs. Hancock, each Nominee was elected by the shareholders at
the 1994 Annual Meeting. If the number of directorships is reduced as provided
above, the shares represented by the enclosed Proxy will be voted for the
election of the remaining Nominees.
To be elected a Director, a Nominee must receive the affirmative vote of a
majority of the shares represented at the meeting which are entitled to vote. Of
the Nominees who receive such votes, the ten individuals (or lesser number equal
to the number of remaining directorships if the Board has decreased the number
of directorships as provided above) receiving the greatest number of votes will
be elected Directors.
With the exception of Mrs. Hancock, all Nominees are currently Directors of
the Company. All Nominees other than Mrs. Hancock also are Directors of Aetna
Life Insurance Company, The Aetna Casualty and Surety Company and The Standard
Fire Insurance Company (wholly-owned subsidiaries of the Company).
In accordance with the Company's Director retirement policy, John F.
Donahue, a Director since 1987, and David M. Roderick, a Director since 1975,
are not standing for reelection at the Annual Meeting.
The following pages list the names and ages of the Nominees as of the date
of the Annual Meeting, the year each first became a Director of the Company, the
principal occupation and principal business directorships of each as of March
13, 1995, a brief description of the business experience of each for at least
the last five years, and the Board Committees of which each Nominee is a member.
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NOMINEES FOR DIRECTORSHIPS
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Wallace Barnes, 69
(Director since 1971)
Mr. Barnes is Chairman of the Board of Barnes Group Inc. (manufacturer of
precision springs and aerospace components, and distributor of repair and
maintenance consumables). He retired as Chairman and Chief Executive Officer of
Barnes Group in 1991, having held various senior executive positions with that
company since 1960. Additionally, Mr. Barnes serves as Chairman of the Board of
Rohr, Inc. (aircraft parts and equipment). He also is a director of Loctite
Corporation (specialty chemicals), Rogers Corporation (polymer chemistry and
process technology for engineering materials and components) and Tradewind
Turbines Inc. (converter of aircraft to turbine power). Mr. Barnes is Chairman
of the Committee on Corporate Public Involvement and a member of the Committee
on Compensation and Organization and the Executive Committee.
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Ronald E. Compton, 62
(Director since 1988)
Mr. Compton is Chairman, President and chief executive officer of Aetna Life &
Casualty. Since joining Aetna in 1954, Mr. Compton has held various positions of
increasing responsibility. He served as Senior Vice President from March 1987 to
November 1987 when he was named Executive Vice President. Mr. Compton became
President on July 1, 1988 and assumed the additional position of Chairman and
chief executive officer on March 1, 1992. Mr. Compton is Chairman of the
Executive Committee and the Investment Committee, and a member of the Committee
on Corporate Public Involvement and the Finance Committee.
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William H. Donaldson, 63
(Director since 1977)
Mr. Donaldson is Chairman and Chief Executive Officer and a director of the New
York Stock Exchange, Inc. From 1980 through 1990, he was Chairman and Chief
Executive Officer of Donaldson Enterprises Incorporated (private investing
firm). Mr. Donaldson is a director of Honeywell Inc. (electronic automation and
control systems) and Philip Morris Companies Inc. (consumer products). A former
Dean of the Yale Graduate School of Management, he also served as U.S. Under
Secretary of State and Counsel to the Vice President of the United States. Mr.
Donaldson is a co-founder and former chief executive of the investment banking
firm of Donaldson, Lufkin & Jenrette, Inc. and the investment management firm,
Alliance Capital Management Corp. Mr. Donaldson is Chairman of the Nominating
and Corporate Governance Committee and a member of the Audit Committee, the
Executive Committee and the Investment Committee.
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Barbara Hackman Franklin, 55
(Director from 1979 to 1992, and since 1993)
Miss Franklin is President and Chief Executive Officer of Barbara Franklin
Enterprises (consulting and investment). From 1992 to 1993, Miss Franklin served
as U.S. Secretary of Commerce. Before her appointment, she was President and
Chief Executive Officer of Franklin Associates (Washington-based management
consultants), a firm she founded in 1985. Miss Franklin also served: four terms
on the Advisory Committee for Trade Policy and Negotiations; as Alternate
Representative to the 44th Session of the United Nations General Assembly; as a
public member of the Board of the American Institute of Certified Public
Accountants and the Board of the Auditing Standards Board Planning Committee;
and as an advisor to the Comptroller General of the United States. From 1979 to
1989, she was a Senior Fellow of The Wharton School of the University of
Pennsylvania and, from 1980 to 1988, was the Director of the Wharton Government
and Business Program. Miss Franklin also is a director of AMP Incorporated
(electrical and electronic connection devices) and The Dow Chemical Company
(chemicals and chemical products). Miss Franklin is Chairman of the Audit
Committee and a member of the Finance Committee and the Nominating and Corporate
Governance Committee.
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Earl G. Graves, 60
(Director since 1994)
Mr. Graves is Chairman and Chief Executive Officer of Earl G. Graves, Ltd. (a
multi-faceted communications company) and is the Publisher of Black Enterprise
magazine which he founded in 1970. Additionally, since 1990, Mr. Graves has
served as Chairman and Chief Executive Officer of Pepsi-Cola of Washington,
D.C., L.P. (a PepsiCo bottling franchise). Further, Mr. Graves is a general
partner of Egoli Partners, L.P. (general partner of New Age Beverages, the
PepsiCo franchise in South Africa). Mr. Graves also is a director of AMR
Corporation and its subsidiary, American Airlines, Inc., Chrysler Corporation
(automotive manufacturer), Federated Department Stores Inc. (retailer) and Rohm
and Haas Company (specialty chemicals and plastics). In addition, he serves as a
volunteer on the following Boards: the New York State Urban Development
Corporation, New American Schools Development Corporation, Center for
Communications, and the American Museum of Natural History and Planetarium. Mr.
Graves is a Trustee of Howard University, a member of the Executive Committee of
the Council on Competitiveness, and is on the Executive Board of the National
Office of the Boy Scouts of America serving as Vice President of Relationships
and Marketing. Mr. Graves is a member of the Audit Committee, the Committee on
Corporate Public Involvement and the Investment Committee.
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Gerald Greenwald, 59
(Director since 1993)
In July 1994, Mr. Greenwald became Chairman and Chief Executive Officer of UAL
Corporation, the parent company of United Airlines (UAL). From 1979 to 1990, Mr.
Greenwald held various executive positions with Chrysler Corporation (automotive
manufacturer), serving as Vice Chairman of the Board from 1988 to May 1990 and
as Chairman of Chrysler Motors from 1985 to 1988. In 1990, Mr. Greenwald served
as Chief Executive Officer of the United Employee Acquisition Corporation in
connection with the proposed 1990 employee acquisition of UAL. From 1991 to
1992, he was a Managing Director of Dillon, Read & Co. (investment banking) and,
from 1992 to 1993, he was President and Deputy Chief Executive Officer of
Olympia & York Developments Ltd. (Canadian real estate company). Mr. Greenwald
then served as Chairman and Managing Director of Tatra Truck Company (producer
of trucks in the Czech Republic) from 1993 to 1994. Mr. Greenwald is a Trustee
of Princeton University. Mr. Greenwald is a member of the Audit Committee, the
Finance Committee and the Nominating and Corporate Governance Committee.
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Ellen M. Hancock, 52
(New Nominee)
Mrs. Hancock is a former Senior Vice President and Group Executive of
International Business Machines Corporation (information-handling systems,
equipment and services). Mrs. Hancock joined IBM in 1966 and served in various
staff, managerial and executive positions. She became a Vice President of IBM in
1985 and served as President, Communication Products Division from 1986 to 1988
when she was named General Manager, Networking Systems. Mrs. Hancock was elected
an IBM Senior Vice President in November 1992 and served as Senior Vice
President and Group Executive, Networking Systems, from 1993 to February 1995.
Mrs. Hancock is a director of Colgate-Palmolive Company (consumer products) and
ROLM Company (telecommunications).
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Michael H. Jordan, 58
(Director since 1992)
Mr. Jordan is Chairman and Chief Executive Officer of Westinghouse
Electric Corporation (diversified global technology-based corporation). From
1992 to 1993, he was a principal in Clayton, Dubilier & Rice, Inc. (private
investing firm). Mr. Jordan retired in July 1992 as Chairman and Chief
Executive Officer of the PepsiCo International Foods and Beverages Division of
PepsiCo, Inc. (beverages, snack foods and restaurants) having held various
positions with PepsiCo since 1974. Mr. Jordan also is a director of Dell
Computer Corporation (personal computers and related services), Melville
Corporation (specialty retailer) and Rhone-Poulenc Rorer Inc. (pharmaceuticals)
and is also a member of the Advisory Board of Grupo CIMA (healthcare services
and hospital investments). Mr. Jordan is Chairman of the Finance Committee and
a member of the Committee on Compensation and Organization and the Nominating
and Corporate Governance Committee.
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Jack D. Kuehler, 62
(Director since 1990)
Mr. Kuehler retired in August 1993 as Vice Chairman and a director of
International Business Machines Corporation (information-handling systems,
equipment and services), having held various positions with IBM since joining
that company in 1958. Prior to his appointment as Vice Chairman of IBM in
January 1993, Mr. Kuehler served as President from 1989 to 1993, as Vice
Chairman from 1988 to 1989 and as Executive Vice President from 1987 to 1988.
Mr. Kuehler also is a director of Olin Corporation (chemical, metal and
defense-related products), The Parsons Corporation (heavy construction and
engineering services), and Taligent, Inc. (computer software products), and is a
member of the National Academy of Engineering, a Fellow of the Institute of
Electrical and Electronics Engineers, Inc. and a Fellow of the American Academy
of Arts and Sciences. Mr. Kuehler is a member of the Committee on Compensation
and Organization, the Investment Committee and the Nominating and Corporate
Governance Committee.
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Frank R. O'Keefe, Jr., 65
(Director since 1989)
Mr. O'Keefe is currently an independent business consultant. From 1988 to 1990,
he was President of Long Wharf Capital Partners, Inc. (business investments).
Mr. O'Keefe retired in 1988 as Chairman, President and Chief Executive Officer
of Armtek Corporation (producer of automotive materials, components and
systems), having held that position since 1986. Prior to that, he served as
President and Chief Operating Officer of Armstrong Rubber Company from 1980 to
1986. Mr. O'Keefe also is a director of Southern New England Telecommunications
Corporation and The United Illuminating Company. Mr. O'Keefe is Chairman of the
Committee on Compensation and Organization and a member of the Committee on
Corporate Public Involvement and the Investment Committee.
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COMPENSATION AND OTHER INFORMATION
REGARDING DIRECTORS
The Company currently pays a retainer fee of $25,000 a year to outside Directors
for Board membership. The Company also pays a $4,000 retainer to such Directors
for membership on Committees of the Board ($7,000 in the case of the chairperson
of a Committee). In addition, the Company pays $1,000 to outside Directors for
attendance at each Board or Committee meeting. Mr. Compton receives no
additional compensation for membership on the Board or any of its Committees.
In 1994, shareholders approved the 1994 Non-Employee Director Deferred
Stock Plan ("Director Plan") pursuant to which outside Directors, upon their
initial election to the Board, receive a one-time grant of units convertible
upon retirement from Board service into 1,500 shares of Common Stock.
Additionally, on each December 31 during the term of the Director Plan, each
Non-Employee Director who has served for at least six months immediately prior
to that date will receive units convertible upon retirement from Board service
into 200 shares of Common Stock. Generally, the right to receive such shares is
conditioned upon a Director completing three years of Board service after the
grant. If, however, service is sooner terminated by reason of death, disability,
retirement or acceptance of a position in government service, a Director is
entitled to receive the full grant. If a Director terminates Board service prior
to three years for any other reason, the Director will be entitled to receive a
prorated award. Although Directors receive dividend equivalents, they have no
voting rights with respect to the shares that are subject to the grant. The
units granted are not transferable. The Director Plan replaced the 1990
Non-Employee Director Deferred Stock Plan which also provided for a one-time
grant of units convertible upon retirement into shares of Common Stock.
Under the optional Directors' Deferred Compensation Plan, outside Directors
may defer payment of some or all of their retainer and attendance fees,
including dividend equivalents received under the 1990 and 1994 Non-Employee
Director Deferred Stock Plans, until after they have resigned or retired (as
defined in each Plan) from the Board. During the period of deferral, income on
deferred amounts accrues under a formula equal to the rate of interest paid from
time to time under the Company's Incentive Savings Plan (ISP) for employees
(currently yielding 6.7% a year).
The Company provides $150,000 of group life insurance for its outside
Directors. Optional medical and long-term care coverage for outside Directors
and their eligible dependents also is provided to such Directors at a cost
similar to that charged to Company employees.
The Company provides a nonqualified, unfunded pension plan for outside
Directors, which is administered by the Nominating and Corporate Governance
Committee. Under the plan, outside Directors who retire at age 60 or older with
at least five years of service receive an annual retirement benefit equal to the
annual Board retainer (currently $25,000) in effect at the time of the
Director's retirement payable for life or, on an actuarially reduced basis, for
the joint lives of the Director and the Director's spouse. Reduced retirement
benefits are payable to outside Directors with at least five years of service
who retire between age 50 and age 60. At the discretion of the Nominating and
Corporate Governance Committee, full retirement benefits may be provided to an
outside Director with at least five years of service who resigns because of a
disability and who is not otherwise entitled to such benefits. Following
retirement, benefits are subject to cost-of-living adjustments of not more than
3% per year, but cannot be reduced below the amount payable at the time of the
Director's retirement. The Nominating and Corporate Governance Committee has the
discretion to adapt the plan's eligibility requirements and benefits to meet any
special circumstances.
In 1994, the Board held ten meetings. Each Director attended 75% or more of
the aggregate meetings of the Board and the Committees on which he or she
served, except for Mr. Greenwald who attended 70% of such meetings.
COMMITTEES OF THE BOARD
The functions and responsibilities of the Committees of the Board are described
below.
- Audit Committee. Composed entirely of outside Directors, this Committee
met four times in 1994. The Committee recommends the independent auditors that
the full Board nominates for shareholder approval at the Annual Meeting,
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reviews with the auditors the scope and results of the audit, reviews the
Company's financial statements and other financial disclosures, and monitors
developments in accounting principles and methods used in presenting financial
results. The Committee also consults with internal audit staff and discusses
with management the internal audit function, internal accounting control
procedures and other internal compliance programs. Miss Franklin (Chairman) and
Messrs. Donaldson, Graves and Greenwald are members of this Committee.
- Committee on Compensation and Organization. Composed entirely of outside
Directors, this Committee met eight times in 1994. The Committee administers the
1986 Management Incentive Plan, the 1994 Stock Incentive Plan and the 1984 Stock
Option Plan, and reviews and makes recommendations to the Board with respect to
the compensation of certain senior executives. The Committee also reviews the
Company's overall compensation policy and makes recommendations with respect
thereto. Periodically, the Committee reviews senior management succession plans
and related matters. Messrs. O'Keefe (Chairman), Barnes, Jordan and Kuehler are
members of this Committee.
- Committee on Corporate Public Involvement. This Committee met four times
in 1994. The Committee periodically reviews the manner in which the Company
meets its business responsibilities to employees, customers, agents and the
public. It also reviews and recommends to the Board the Company's annual
philanthropic program. Messrs. Barnes (Chairman), Compton, Graves and O'Keefe
are members of this Committee.
- Nominating and Corporate Governance Committee. This Committee, formerly
named the Committee on Directors, is composed entirely of outside Directors. The
Committee met seven times in 1994. The Committee reviews the qualifications of
all candidates for membership on the Board and the Board Committees. It makes
recommendations to the full Board on Director nominees, on the structure,
composition and function of Board Committees, and on Director compensation and
retirement policy. It reviews conflicts of interest that may affect Directors,
and also advises the Board on all other matters concerning corporate governance
to the extent specific matters are not the responsibility of other Committees.
In recommending Director nominees to the Board, this Committee solicits
candidate recommendations from its own members, other Directors of the Company
and management. Although the Committee does not specifically solicit suggestions
for possible candidates from shareholders, the Committee will consider
candidates meeting the criteria described below. (Suggestions, together with a
description of the proposed nominee's qualifications, other relevant
biographical information and an indication of the willingness of the proposed
nominee to serve, should be sent to the Committee Chairman, in care of the
Corporate Secretary, Aetna Life and Casualty Company, 151 Farmington Avenue,
Hartford, Connecticut 06156.)
Candidates are selected on the basis of several guidelines designed to
determine the applicability of the candidate's experience to the business of the
Company and its affiliates, the absence of conflicts of interest, and the
ability of the candidate to attend meetings regularly and devote an appropriate
amount of time in preparation for those meetings. Messrs. Donaldson (Chairman)
and Donahue, Miss Franklin, and Messrs. Greenwald, Jordan and Kuehler are
members of this Committee.
- Executive Committee. This Committee met five times in 1994. The
Committee reviews quarterly and annual public announcements on earnings and
financial results. Additionally, the Committee is authorized to act on behalf of
the full Board between regular Board meetings, usually when timing is critical.
Messrs. Compton (Chairman), Barnes, Donaldson and Roderick are members of this
Committee.
- Finance Committee. This Committee met three times in 1994. The Committee
periodically considers and makes recommendations to the Board concerning matters
of corporate finance. Messrs. Jordan (Chairman) and Compton, Miss Franklin, and
Messrs. Greenwald and Roderick are members of this Committee.
- Investment Committee. This Committee met four times in 1994. The
Committee oversees the management of Aetna Life & Casualty's investment program
and grants authority to Company personnel with respect to day-to-day management
of its investment portfolios. The senior management of Aetna Life & Casualty's
investment operations presents to the Committee current investment policy and
strategy and reports on all investment
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transactions made pursuant to delegated authority. Additionally, the Committee
authorizes major or unusual investments. Messrs. Compton (Chairman), Donahue,
Donaldson, Graves, Kuehler and O'Keefe are members of this Committee.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
In the ordinary course of their investment operations, the Company and its
subsidiaries acquire, dispose of or continue to hold debt or rely on the credit
of other corporations (or their subsidiaries). Since January 1, 1994, such other
corporations include Westinghouse Electric Corporation,
of which Mr. Jordan was an executive officer
in 1994 and UAL Corporation, of which
Mr. Greenwald was an executive officer in 1994.
In the ordinary course of its operations, The Aetna Casualty and Surety
Company provided a surety bond in connection with the 1986 refinancing of
property owned by Oxford Development
Company/Grant Street (Oxford Development). Mr. Donahue and members of his family
acquired in 1983 a limited partnership interest in a partnership which in turn
has an indirect beneficial interest in Oxford Development. Neither Mr. Donahue
nor members of his family were involved in obtaining, or negotiating the terms
of, the surety bond. Mr. Donahue will retire from the Board effective April 28,
1995.
In the ordinary course of their business operations, subsidiaries of the
Company have entered into reinsurance arrangements with Lloyd's of London.
Richard L. Huber, Vice Chairman for Strategy and Finance, is an investor in
several Lloyd's syndicates. As an investor in a Lloyd's syndicate, he does not
exercise control over the syndicate. Additionally, in the ordinary course of his
current duties, Mr. Huber is not involved in obtaining or negotiating the terms
of the companies' reinsurance arrangements.
In each of the above cases the Board believes the transactions were made on
terms as favorable to the companies as if made with any other person. It is
anticipated that the companies will continue to engage in similar transactions.
Information has not been provided with respect to relationships and transactions
occurring during the period when an Executive Officer or Director of the Company
did not hold any such position.
Mr. Barnes, who became a Director of the Company in 1971, and Miss
Franklin, who first became a Director of the Company in 1979, were married in
1986.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table presents, as of December 31, 1994, the names of persons
known to the Company to be the beneficial owners of more than 5% of the
outstanding shares of its Common Stock. (The information set forth below and in
the related footnotes has been furnished by the respective persons.)
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AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
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Sanford C. Bernstein & Co., Inc. 8,573,786 shares(1) 7.6%
One State Street Plaza
New York, New York 10004
Wellington Management Company 10,090,289 shares(2) 8.96%
75 State Street
Boston, Massachusetts 02109
Mellon Bank Corporation 10,201,578 shares(3) 9.06%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Of the reported shares, Sanford C. Bernstein & Co., Inc. reports that it has
no voting power with respect to 4,023,967 shares.
(2) Of the reported shares, 8,598,586 shares were held by Wellington Management
Company as an investment adviser for the Windsor Fund series of The Windsor
Funds, Inc., a mutual fund. Wellington Management Company reports that it
has no voting power and shares investment power with respect to such shares.
Additionally, Wellington Management Company reports that it shares
investment and voting power with respect to 837,700 shares.
(3) Of the reported shares, 6,382,578 (5.67%) are held by Mellon Bank, N.A., as
Trustee for the Company's Incentive Savings Plan (ISP). Mellon Bank, N.A.
has agreed to vote these shares in accordance with the instructions received
from ISP participants. Generally, shares as to which no directions are
received are voted by the Trustee in the same percentage as the shares as to
which directions have been received. Mellon Bank Corporation disclaims
beneficial ownership of all ISP shares that have been allocated to
individual ISP participant accounts for which voting directions have been
received.
11
<PAGE> 16
The following table presents, as of February 28, 1995, the beneficial ownership
of, and other interests in, shares of Common Stock of each current Director,
each Nominee, each executive officer named in the Summary Compensation Table on
page 14, and Directors and executive officers of the Company, as a group. (The
information set forth below and in the related footnotes on the next page has
been furnished by the respective persons.)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
SHARES BENEFICIALLY SHARES
OWNED, EXCLUDING ACQUIRABLE
SHARES ACQUIRABLE UPON EXERCISE TOTAL SHARES OTHER
NAME OF BENEFICIAL UPON EXERCISE OF OF CERTAIN BENEFICIALLY INTERESTS IN
OWNER AND POSITION CERTAIN OPTIONS OPTIONS(1) OWNED SHARES(2)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Wallace Barnes 786 shares 0 786 shares(3) 1,700
(current Director and Nominee)
Ronald E. Compton 19,007 shares(4) 137,676 shares 156,683 shares
(current Director, Nominee and
named executive)
John F. Donahue 208,937 shares 0 208,937 shares(5) 1,700
(current Director)
William H. Donaldson 750 shares 0 750 shares 1,700
(current Director and Nominee)
Barbara Hackman Franklin 532 shares 0 532 shares(6) 1,700
(current Director and Nominee)
Earl G. Graves 500 shares 0 500 shares 1,700
(current Director and Nominee)
Gerald Greenwald 3,000 shares 0 3,000 shares(7) 1,700
(current Director and Nominee)
Ellen M. Hancock 400 shares 0 400 shares(8)
(Nominee)
Michael H. Jordan 3,000 shares 0 3,000 shares 1,700
(current Director and Nominee)
Jack D. Kuehler 440 shares 0 440 shares 1,700
(current Director and Nominee)
Frank R. O'Keefe, Jr. 850 shares 0 850 shares(9) 1,700
(current Director and Nominee)
David M. Roderick 8,000 shares 0 8,000 shares(10) 1,700
(current Director)
Gary G. Benanav 6,917 shares(11) 53,600 shares 60,517 shares
(named executive)
Daniel P. Kearney 4,742 shares 42,500 shares 47,242 shares
(named executive)
James W. McLane 4,506 shares 29,500 shares 34,006 shares
(named executive)
Zoe Baird 814 shares 13,667 shares 14,481 shares
(named executive)
Directors and executive 276,756 shares(12) 348,144 shares 624,900 shares
officers as a group
(21 persons)
</TABLE>
- --------------------------------------------------------------------------------
No individual listed above has beneficial ownership of more than 1% of the
outstanding shares of Common Stock of the Company.
Unless otherwise noted in the footnotes, each person currently has sole voting
and investment powers over the shares set forth above.
12
<PAGE> 17
NOTES TO BENEFICIAL OWNERSHIP TABLE
- --------------------------------------------------------------------------------
(1) Represents shares which the beneficial owner named above has the right to
acquire within 60 days of February 28, 1995 upon exercise of outstanding
stock options.
(2) Each outside Director has been granted units convertible (according to the
terms of the 1990 and 1994 Non-Employee Director Deferred Stock Plans) into
shares of Common Stock upon retirement from Board service, subject to
certain conditions (see page 8).
(3) Excludes 532 shares held by his spouse, Miss Franklin, as to which Mr.
Barnes disclaims beneficial ownership.
(4) Includes 6,606 shares held jointly with his spouse, as to which Mr. Compton
shares voting and investment powers.
(5) Represents shares held by a general partnership of which Mr. Donahue and
his spouse are partners, together with three affiliated trusts (of which
Mr. Donahue and/or his spouse are also trustees and/or beneficiaries). The
shares held by the general partnership are for the joint benefit of Mr.
Donahue and his spouse.
(6) Excludes 786 shares held by her spouse, Mr. Barnes, as to which Miss
Franklin disclaims beneficial ownership.
(7) Represents shares held by his spouse, as to which Mr. Greenwald has no
voting or investment powers.
(8) Held jointly with her spouse, as to which Mrs. Hancock shares voting and
investment powers.
(9) Excludes 150 shares held by Revocable Living Trust of which Mrs. O'Keefe is
Trustee and beneficiary, and as to which Mr. O'Keefe disclaims beneficial
ownership.
(10) Includes 4,000 shares held jointly with his spouse, as to which Mr.
Roderick shares voting and investment powers.
(11) Includes 4,326 shares held jointly with his spouse, as to which Mr. Benanav
shares voting and investment powers. Excludes 50 shares held by a family
member residing in the same household, as to which Mr. Benanav disclaims
beneficial ownership.
(12) Directors and executive officers as a group have sole voting and investment
powers over 36,796 shares of Common Stock, share voting and investment
powers with respect to 228,741 shares of Common Stock, and have no voting
or investment powers with respect to 3,000 shares of Common Stock. Included
in the number of shares shown in the table are 8,219 shares of Common Stock
held under the Company's ISP and beneficially owned by executive officers.
13
<PAGE> 18
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the periods indicated certain compensation of
the Chairman, President and chief executive officer (CEO) and each of the four
most highly compensated executive officers of the Company (other than the CEO)
in 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
AWARDS PAYOUTS
-------------------------
ANNUAL COMPENSATION SECURITIES LONG-TERM
UNDERLYING INCENTIVE ALL
NAME AND PRINCIPAL -------------------- STOCK PLAN OTHER
POSITION YEAR SALARY BONUS(2) OPTIONS PAYOUTS(4) COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Ronald E. Compton 1994 $775,000 $300,000 23,000 $ 0 $59,745(5)(6)
Chairman, President 1993 775,000 550,000 33,000 0 68,813
and
chief executive 1992(1) 775,961 0 65,000(3) 0 75,776
officer
Gary G. Benanav 1994 $500,000 $ 80,000 16,500 $ 0 $ 24,844(5)
Executive Vice 1993 405,769 275,500 17,000 0 19,924
President,
Property/Casualty 1992 380,289 0 7,300 0 18,340
Daniel P. Kearney 1994 $500,000 $200,000 16,500 $ 0 $33,820(5)(6)
Executive Vice 1993 476,442 300,000 17,000 0 32,885
President,
Investments/Financial 1992 485,577 0 12,000 0 29,873
Services
James W. McLane 1994 $500,000 $200,000 16,500 $ 0 $ 24,923(5)
Executive Vice 1993 424,615 275,000 17,000 0 21,000
President,
Health/Group Life 1992 418,077 0 7,300 0 18,625
Zoe Baird 1994 $400,000 $175,000 8,000 $ 0 $22,369(5)(6)
Senior Vice President 1993 400,000 245,000 11,000 0 22,347
and General Counsel 1992 354,231 0 5,800 30,000 19,549
- -------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 19
NOTES TO SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
(1) Mr. Compton became Chairman and chief executive officer of the Company on
March 1, 1992.
(2) Represents amounts earned under the Company's 1986 Management Incentive Plan
(MIP) by the named individual in respect of the year indicated. Annual
incentive bonuses payable under MIP are intended to reward executive
officers for achieving financial and strategic results. The Committee on
Compensation and Organization administers MIP and, subject to the approval
of the Board, determines the amount of each award to be granted.
(3) 50,000 of these stock options were granted with tandem stock appreciation
rights (SARs).
(4) Represents amounts paid in the year indicated to the named individual under
the Company's Performance Unit Plan (PUP). In 1994, PUP was replaced by the
1994 Stock Incentive Plan (see page 18). PUP provided long-term incentive
opportunities to key executive employees of the Company and certain of its
subsidiaries, and rewarded those employees for superior long-term
performance relative to the Company's business objectives and the
performance of its insurance company competitors over a period of time,
generally four years. The Committee on Compensation and Organization, which
administered PUP, designated the participants, established the performance
period, and approved the performance measures for the Company and the
individual participants. No further payments will be made under PUP.
(5) Includes $38,716, $24,844, $24,957, $24,923 and $20,000 of matching
contributions made by the Company under the Incentive Savings Plan (ISP) and
the Supplemental ISP for Messrs. Compton, Benanav, Kearney and McLane and
Ms. Baird, respectively. The ISP is a profit-sharing thrift plan qualified
under the Internal Revenue Code of 1986, as amended (the Code). The Company
matches, dollar-for-dollar, amounts deferred by employees under the ISP up
to 5% of annual salary. Twenty-five percent of the matching contributions
made under the ISP on behalf of officers of the Company is automatically
invested in Common Stock. The Company has established the Supplemental ISP
to provide the deferred and matching benefits which would have been credited
to ISP but for limits imposed by the Employee Retirement Income Security Act
(ERISA) and the Code. The Supplemental ISP also is used to provide other
benefits not otherwise payable under ISP itself, as provided from time to
time by the Company's Board.
(6) Includes $21,029, $8,863 and $2,369, representing the actuarially determined
value of the benefit to Messrs. Compton and Kearney and Ms. Baird,
respectively, of life insurance premiums paid by the Company under split
dollar universal life insurance policies. The Company will recover all of
its portion of the premiums paid through the cash surrender value upon the
earlier of a participant's attainment of age 65 or death.
15
<PAGE> 20
STOCK OPTION GRANTS TABLE
The following table sets forth certain information concerning stock options
granted during 1994 by the Company to the CEO and each of the four most highly
compensated executive officers of the Company (other than the CEO) in 1994. The
hypothetical grant date present values of stock options granted in 1994 shown
below are presented pursuant to SEC rules and are calculated under the modified
Black-Scholes Model for pricing options. The gains, if any, realizable upon
exercise of stock options will depend upon the market price of the Company's
Common Stock at the time the stock option is exercised relative to the exercise
price per share of Common Stock of the stock option. The individuals named below
will not be able to realize a gain from the stock options granted unless, during
the exercise period, the market price of the Company's Common Stock increases
above the exercise price of the options. An increase in the market price of the
Company's Common Stock would also benefit the Company's other shareholders.
STOCK OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS(1)
NUMBER OF PERCENT OF
SECURITIES TOTAL STOCK
UNDERLYING OPTIONS
STOCK GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE PER EXPIRATION PRESENT
NAME GRANTED IN 1994 SHARE DATE VALUE(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ronald E. Compton 23,000(2) 2.0% $55.25 March 25, 2004 $227,718
Gary G. Benanav 16,500(2) 1.5% 55.25 March 25, 2004 163,363
Daniel P. Kearney 16,500(2) 1.5% 55.25 March 25, 2004 163,363
James W. McLane 16,500(2) 1.5% 55.25 March 25, 2004 163,363
Zoe Baird 8,000(2) .7% 55.25 March 25, 2004 79,206
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Granted under the Company's 1984 Stock Option Plan (the 1984 Plan) which
terminated (except with respect to previously awarded options) on April 26,
1994. On April 26, 1994, shareholders approved the Company's 1994 Stock
Incentive Plan. (The 1994 Stock Incentive Plan and the 1984 Stock Option
Plan are collectively referred to as the "Plans"). The Plans provide for the
grant of incentive stock options (ISOs) and non statutory stock options
(NSOs). The Plans permit participants to use shares of the Company's Common
Stock to exercise ISOs and NSOs. The Plans provide that the option price
shall not be less than 100% of the fair market value of the Common Stock at
the time the option is granted. Under the 1994 Stock Incentive Plan, options
may be granted until April 30, 2001.
(2) Date of grant was March 25, 1994; initial exercise date is March 26, 1995;
options vest in installments over a period of three-years.
(3) Grant date present values are calculated under the modified Black-Scholes
Model. The Black-Scholes Model is a mathematical formula used to value
options publicly traded in the securities markets and it assumes that
options are freely transferable. Because the employee stock options granted
above are not transferable, the Company believes that the grant date present
values shown above may be overstated. This formula considers a number of
factors to estimate the option's present value. The assumptions made and
factors used by the Company in the Black-Scholes Model calculation for the
options granted above were as follows: (i) a volatility factor of 0.2544,
representing the average of the three-year and ten-year historical
volatility factors for the Common Stock; (ii) a risk-free rate of return of
6.68%, representing the 10-year U.S. Treasury bond rate in effect on the
date of the option grant; (iii) a dividend yield of 5.0%, representing the
Company's then current annual dividend, divided by the Common Stock price on
the date of the option grant; and (iv) a ten-year option term, representing
the full term of the option granted. To give effect to the three-year
vesting period of the options, the value of each option was discounted by
20%, the percentage of options estimated to expire due to turnover of all
recipients of options during the vesting period. No further discount to the
option value calculated was taken to give effect to the non-transferability
of the options or to the exercise or lapse of the options prior to the end
of the ten-year option period.
There is no assurance that the hypothetical present values of stock options
presented in the table above represent the actual values of such options.
The hypothetical values shown should not be construed as predictions by the
Company as to the future value of its Common Stock.
16
<PAGE> 21
STOCK OPTION EXERCISES AND DECEMBER 31,
1994 STOCK OPTION VALUE TABLE
The following table sets forth certain information concerning stock options
exercised during 1994 by the CEO and each of the four most highly compensated
executive officers of the Company (other than the CEO) in 1994 and the number
and value of specified unexercised options at December 31, 1994. The values of
unexercised in-the-money stock options at December 31, 1994 shown below are
presented pursuant to SEC rules. There is no assurance that the values of
unexercised in-the-money stock options reflected in this table will be realized.
AGGREGATED STOCK OPTION EXERCISES AND
DECEMBER 31, 1994 STOCK OPTION VALUE TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
SHARES VALUE UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED REALIZED DECEMBER 31, 1994(1) DECEMBER 31, 1994(2)
UPON UPON ------------------------------- -------------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE(3)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald E. Compton 200 $ 900 130,009 23,000 $83,788 $0
Gary G. Benanav 0 0 48,100 16,500 75,500 0
Daniel P. Kearney 12,000 218,610 37,000 16,500 41,375 0
James W. McLane 5,800 104,650 24,000 16,500 18,625 0
Zoe Baird 0 0 11,000 8,000 4,125 0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Tandem SARs are attached to all exercisable stock options except for stock
options relating to 34,626, 24,300, 17,000, 17,000 and 11,000 shares in the
case of Messrs. Compton, Benanav, Kearney and McLane and Ms. Baird,
respectively. No tandem SARs are attached to any unexercisable stock
options.
(2) Based on the December 30, 1994 closing stock price of $47.125.
(3) Represents stock options which are not vested.
17
<PAGE> 22
LONG-TERM INCENTIVE AWARDS TABLE
The following table sets forth certain information concerning long-term
incentive awards granted to the CEO and each of the four most highly
compensated executive officers of the Company (other than the CEO) in 1994 under
the Company's 1994 Stock Incentive Plan.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE ESTIMATED FUTURE PAYOUTS
OR OTHER (IN SHARES) UNDER
NUMBER OF PERIOD UNTIL NON-STOCK PRICE BASED PLANS
UNITS GRANTED MATURATION -------------------------------------
NAME IN 1994(1) OR PAYOUT(2) THRESHOLD TARGET MAXIMUM
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ronald E. Compton 40,000 1993 - 1996 20,000 40,000 60,000
Gary G. Benanav 27,500 1993 - 1996 13,750 27,500 41,250
Daniel P. Kearney 27,500 1993 - 1996 13,750 27,500 41,250
James W. McLane 27,500 1993 - 1996 13,750 27,500 41,250
Zoe Baird 13,000 1993 - 1996 6,500 13,000 19,500
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Incentive Units shown above will vest and shares will become payable
only to the extent the Company's total return to shareholders over a
four-year measurement period (1993-1996) meets or exceeds each of two
separate performance objectives. First, the Company's total return to
shareholders over the measurement period must at least equal a threshold
risk-free rate of return (the Return Threshold), which for these Incentive
Units is based on the annual rate of return available on a four-year
Treasury note on January 1, 1993 (5.9%) and compounded annually. If the
Return Threshold is not met, no Incentive Units will vest. Second, the
Company's total return to shareholders over the measurement period must
compare favorably to that of the other companies in the Dow Jones Insurance
Index (DJII) for the same period. For the Incentive Units to become fully
vested, the Company must achieve at least the median level of total
shareholder return for the companies in the DJII ("Target Performance"). If
the Committee determines that the Company's performance does not at least
equal the 33rd percentile of the companies in the DJII (the Performance
Threshold), no portion of the Incentive Units will vest regardless of
whether the Return Threshold is satisfied.
In addition to these vesting requirements, the aggregate value of all
payments on the initial grant of Incentive Units (together with
certain other cash-based long-term awards granted at the same time to
senior managers of the Company, its subsidiaries or its affiliates) is
capped at 3.0% of the total shareholder return over the measurement period.
For purposes of determining the total return to shareholders over the
measurement period, the change in the price of the Company's Common Stock
and of the price of the common stock of each of the companies in the DJII
is calculated by comparing the average of the closing stock price of the
Company and each other company on the last business day of each week in the
13-week period both preceding the start and the end of the measurement
period. The initial value of the Company's Common Stock used to determine
total shareholder return over the measurement period for the awards was
$44.24. (The starting date for the initial measurement period was January
1, 1993.)
(2) If the Committee determines that the Performance Threshold and the Return
Threshold, described above, are met or exceeded over an interim portion of
the measurement period ending December 31, 1995, up to 40 percent of the
Incentive Units will vest and become payable shortly after December 31,
1995.
18
<PAGE> 23
PENSION PLAN
The Company provides for its employees a noncontributory, defined benefit
pension plan. Retirement benefits are calculated on the basis of (i) the number
of years of credited service (maximum credit is 35 years), and (ii) the
employee's average annual earnings during the 60 consecutive months out of the
last 120 months of service which yield the highest annual compensation.
Employees receive service credit for actual years of employment with the
Company. Under certain circumstances, determined on a case-by-case basis,
additional service credit may be given for employment with affiliated and non-
affiliated companies and, as determined by the Company's Board, for the purposes
of inducing employment of senior officers or rewarding past service.
The table below shows the estimated maximum annual retirement benefits
payable under the pension plan, at selected earnings levels and after selected
periods of credited service, to employees with at least 15 years of credited
service who retire at age 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
AVERAGE
ANNUAL CREDITED YEARS OF SERVICE
EARNINGS 15 20 25 30 35
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 400,000 $ 90,000 $120,000 $150,000 $180,000 $210,000
500,000 113,000 150,000 188,000 225,000 263,000
600,000 135,000 180,000 225,000 270,000 315,000
700,000 158,000 210,000 263,000 315,000 368,000
800,000 180,000 240,000 300,000 360,000 420,000
900,000 203,000 270,000 338,000 405,000 473,000
1,000,000 225,000 300,000 375,000 450,000 525,000
1,100,000 248,000 330,000 413,000 495,000 578,000
- ---------------------------------------------------------------------------
</TABLE>
The term "earnings," as used in the retirement benefits table above,
includes annual salaries, annual bonuses paid under MIP and amounts paid under
PUP (allocated equally among the years of the performance period to which such
payments relate) set forth in the relevant columns of the Summary Compensation
Table on page 14. At December 31, 1994, "average annual earnings" for pension
plan purposes for Messrs. Compton, Benanav, Kearney and McLane, and Ms. Baird
were $920,210, $501,672, $594,613, $539,779 and $463,751, respectively.
The credited years of service on December 31, 1994 for the persons named in
the Summary Compensation Table are as follows: Mr. Compton - 35 years; Mr.
Benanav - 22.5 years; Mr. Kearney - 22.8 years; Mr. McLane - 22.9 years; and Ms.
Baird - 14.5 years.
The benefits set forth in the above table do not take into account any
reduction for joint and survivorship payments or any offset for Social Security
benefits to be received by the employee. After retirement, benefits are subject
to cost-of-living adjustments of not more than 3% per year, but cannot be
reduced below the amount payable at the time of the individual's retirement.
ERISA limits the maximum annual benefit that may be accrued under and paid
from a tax-qualified plan. As a result, the Company has established a
Supplemental Plan to provide benefits (included in the foregoing table) which
would exceed the ERISA limit. The Supplemental Plan also is used to pay other
pension benefits not otherwise payable under the tax-qualified plan, including
certain benefits attributable to management incentive and performance unit
awards, additional years of credited service beyond years actually served,
additional years of age, and covered compensation in excess of that permitted
under the tax-qualified plan.
OTHER AGREEMENTS
The Company administers a Severance Pay Plan under which employees, including
the Company's executive officers, terminated without cause may receive up to two
weeks of continuing salary for every credited full year of employment to a
maximum of one year's salary. Certain benefits continue during the severance pay
period.
19
<PAGE> 24
REPORT OF THE COMMITTEE ON
COMPENSATION AND ORGANIZATION
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Committee on Compensation and Organization consists entirely of outside
Directors. The Committee administers the Company's annual and long-term
compensation plans, and reviews and makes recommendations to the Board on the
Company's executive compensation and overall compensation policy. The Company's
executive compensation policy is designed to attract and retain high performing
executives and to motivate and reward these executives for business and
individual performance and for creating long-term shareholder value.
The Company uses its executive compensation program to:
- - create a performance-oriented environment in which executive officers can earn
variable compensation determined by their achievement of annual and long-term
business results;
- - focus executive officers on maximizing shareholder value by awarding them
stock-based compensation directly aligned to improvements in shareholder
return; and
- - provide executive officers with compensation opportunities that depend on the
Company's performance relative to its competitors and improvements in the
Company's performance over time.
The Company's 1994 compensation program for executive officers consisted of
four elements: salaries, annual incentive bonuses, stock options and long-term
incentive awards. Executive officers are eligible for other benefits as set
forth in the Summary Compensation Table (see page 14).
1. Salaries. Salaries for executive officers are established with reference to
the competitive marketplace for equivalent jobs. Individual salaries are
determined by the executive's level and scope of responsibility within the
Company and his or her individual performance. The Committee reviews salaries
annually. Working with an outside compensation consultant, the Committee selects
for each position a Comparison Group of companies believed to be the Company's
major competitors for executive talent for that position. The Comparison Group
for each position is selected from a group of approximately 40 insurance,
financial services and other companies, including 11 insurance companies, four
of which are in the Dow Jones Insurance Index (see page 22). Consistent with the
Company's compensation philosophy, executive officers' salaries, collectively,
are approximately equal to the median of salaries paid by the Comparison Group.
2. Annual Incentive Bonuses. Annual incentive bonuses payable under the
Company's Management Incentive Plan (see page 15) are intended to reward
executive officers for achieving financial and strategic goals. These goals are
established at the beginning of the year and bonus pool funding is linked
directly to their achievement. The Committee sets the amount of annual bonuses
payable upon achievement of various levels of financial performance for each
business or staff support unit. Seventy-five percent of a business unit's bonus
pool depends on its own financial performance, measured by income from
continuing operations before realized capital gains and losses, and 25% depends
on the Company's consolidated financial performance, measured by net income
(adjusted by the Committee to exclude realized capital gains and losses, and
items determined to be unusual, nonrecurring or beyond management's control).
Forty percent of a staff support unit's bonus pool depends on the Company's
consolidated financial performance (as adjusted) and 60% depends on the unit's
own financial performance, measured by actual expense level versus budgeted
expense level, and by achievement of performance objectives relevant to the
unit. Examples include: quality of customer service and effective resolution of
legal, regulatory or other important issues affecting the Company. The
Chairman's bonus depends solely upon the Company's consolidated financial
performance.
If 100% of a business or staff support unit's financial goal is met, up to
100% of its bonus pool is payable. If 80% of the financial goal is met, up to
50% of the bonus pool is payable. If financial goals are exceeded, up to 200% of
the bonus pool is payable. At the Committee's discretion, the amount of a bonus
pool may be adjusted upward or downward by up to 20% to take into account
strategic results achieved by the business or staff support unit. The principal
criteria used by the Committee in assessing a unit's strategic results are
re-engineering efforts, positioning of the Company's businesses, expense
management, customer service, new product development, use of technology,
management of human resources and diversity, and the "quality" of (or sources
of) the
20
<PAGE> 25
unit's earnings. The amount of an annual bonus, if any, paid to an executive
officer from a bonus pool is determined by the Committee's assessment of that
executive's own performance and level of responsibility.
In 1994, the financial performance of the business and staff units varied;
some achieved or exceeded their goal, some did not. The Company's consolidated
financial performance was determined by the Committee to be at 88% of the
established goal. The bonuses paid to executive officers reflected this
performance.
3. Stock Options. The Company uses stock options to align the interests of its
executive officers and shareholders in maximizing long-term shareholder value.
Stock options may be granted annually to executive officers, at a minimum of
100% of the fair market value of the underlying Common Stock on the date of
grant. (See description of the Company's 1984 Stock Option Plan and 1994 Stock
Incentive Plan, page 16.) The Committee, working with an outside compensation
consultant, grants stock options to position (at targeted performance levels)
each executive officer's total direct compensation opportunity (salary, annual
bonus, long-term incentive awards and stock options) at a median level relative
to similarly positioned executives at companies in the executive officer's
Comparison Group. The value of the stock option component of an executive
officer's compensation is converted into a specific number of shares subject to
option by assigning each share option an estimated realizable value (based on an
outside compensation consultant's analysis of the value realized upon exercise
of stock options by executives at a large number of diverse major corporations).
The stock options granted in 1994 vest over a three-year period.
4. Long-term Incentive Awards. In 1994, the Company replaced its Performance
Unit Plan with the 1994 Stock Incentive Plan (approved by Shareholders in 1994,
the "1994 Plan"). Incentive Units granted under the 1994 Plan encourage
executives to increase the total return provided to the Company's shareholders
relative to the total return provided to shareholders of other companies in the
Dow Jones Insurance Index. The Incentive Units vest and shares become payable to
the extent the Company's total return to shareholders over a four-year
measurement period (1993-1996) meets or exceeds each of two preestablished
performance objectives (described on page 18). If the two performance objectives
are met over an interim portion of the measurement period (1993-1995), up to 40%
of the Incentive Units will vest. If the Committee determines that the
performance objectives have not been met, no Units will vest.
The number of Incentive Units granted to each executive officer in 1994 was
determined by the Committee, working with an outside compensation consultant, to
position, at target performance levels, the executive officer's long-term
compensation opportunity for the four-year measurement period at a median level
relative to similarly positioned executives in the executive officer's
Comparison Group. These awards deliver a below median long-term compensation
opportunity for below
median performance and above median long-term compensation opportunity for above
median performance.
5. Other. The Committee is aware that the Company cannot deduct for tax
purposes an executive's compensation to the extent that it exceeds $1,000,000,
except under certain circumstances. The Committee believes that tax
deductibility is an important, but not the most important, factor in setting
executive compensation policy. The 1994 Stock Incentive Plan is designed so that
the long-term compensation paid under the Plan will be tax deductible by the
Company.
BASIS FOR THE COMPENSATION OF THE CHIEF
EXECUTIVE OFFICER
The Company's executive compensation policy is evidenced by the amount and
nature of compensation earned by the Company's Chief Executive Officer for 1994.
1. Salary. Mr. Compton did not receive an increase in salary in 1994 because
his salary remained at a competitive median level.
2. Annual Incentive Bonus. The Chairman's bonus depends on the Company's
consolidated financial performance, measured by net income, adjusted by the
Committee to exclude realized capital gains and losses, and items determined to
be unusual, nonrecurring or beyond management control. In 1994, the Committee
adjusted net income upward to exclude the negative effect of additions to
environmental and asbestos reserves, and downward to exclude the positive effect
of
21
<PAGE> 26
reductions in prior year reserves in the Company's personal auto business. As a
result, the Committee determined that 88% of the financial goal was achieved.
This financial performance was the basis for the Committee's decision to award
Mr. Compton a bonus of $300,000, which was lower than the amount awarded for
1993.
3. Stock Options. Mr. Compton was granted stock options with respect to 23,000
shares of Common Stock in 1994 under the guidelines established by the Committee
and described elsewhere in this Report.
4. Long-term Incentive Award. Mr. Compton was granted 40,000 Incentive Units
under the 1994 Plan. These units will vest and shares will be payable only if
the preestablished performance objectives are met. The number of Incentive Units
granted was determined by the Committee in the manner described elsewhere in
this Report.
THE COMMITTEE ON COMPENSATION
AND ORGANIZATION
FRANK R. O'KEEFE, JR. MICHAEL H. JORDAN
(CHAIRMAN) JACK D. KUEHLER
WALLACE BARNES
CORPORATE PERFORMANCE GRAPH
FIVE-YEAR CUMULATIVE TOTAL RETURN
AETNA, S&P 500 AND DOW JONES INSURANCE INDEX*
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD INSURANCE
(FISCAL YEAR COVERED) AETNA S&P 500 INDEX
<S> <C> <C> <C>
1989 100.0 100.0 100.0
1990 73.5 96.9 88.4
1991 88.6 126.3 115.9
1992 99.8 135.9 142.4
1993 136.2 149.5 148.5
1994 112.3 151.6 147.2
</TABLE>
* Assumes that any dividends were reinvested in the relevant securities when
paid.
- --------------------------------------------------------------------------------
This graph compares the yearly change in the Company's cumulative total
shareholder return on its Common Stock (assuming reinvestment of dividends into
Common Stock of the Company) with the cumulative total return on the published
Standard & Poor's 500 Stock Index (S&P 500) and the cumulative total return on
the published Dow Jones Insurance Index (30 insurance companies) (Dow Jones
Insurance Index) over the preceding five-year period. It assumes that dividends
are reinvested into the Company's Common Stock even though many shareholders do
not so reinvest. The graph is presented pursuant to SEC rules. The Company's
executive compensation program is based only in part on total shareholder
return; it is also based on the Company's financial and strategic results, and
the other factors set forth and discussed in the Report of the Committee on
Compensation and Organization.
22
<PAGE> 27
II. APPOINTMENT OF AUDITORS
Following the recommendation of its Audit Committee, the Company's Board of
Directors has appointed and recommends shareholder approval of KPMG Peat Marwick
LLP as the Company's independent auditors for the current calendar year. The
firm has acted in this capacity for the Company since 1972. It is expected that
representatives of the firm will be available at the Annual Meeting of
Shareholders to make a statement if the firm desires and to respond to
appropriate questions.
The affirmative vote of a majority of the shares represented at the meeting
which are entitled to vote is required for approval of the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE CURRENT CALENDAR YEAR. UNLESS DIRECTED TO
THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY WILL BE VOTED FOR THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR THE CURRENT
CALENDAR YEAR.
OTHER INFORMATION AND
1996 SHAREHOLDER PROPOSALS
The Company will bear the cost of soliciting Proxies. In addition to the use of
the mails, solicitations may be made by personal interview, telegram or
telephone by Directors, officers and employees of the Company and its
subsidiaries. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward solicitation material to
beneficial owners, and the Company will reimburse them for reasonable
out-of-pocket expenses incurred in doing so. To assist in the solicitation of
Proxies, the Company has engaged Kissel-Blake Inc., New York, New York, for a
fee of $15,000, plus reasonable out-of-pocket expenses.
To be included in the 1996 Proxy Statement and Proxy Card, shareholder
proposals must be received by the Company not later than November 20, 1995. Such
proposals must comply with all applicable SEC rules and regulations. Proposals
should be forwarded to the Corporate Secretary, Aetna Life and Casualty Company,
151 Farmington Avenue, Hartford, Connecticut 06156.
The Company's By-Laws require that notice of nominations of persons for
election to the Board of Directors, other than those made by or at the direction
of the Board of Directors, must be received no later than 90 days before the
Annual Meeting. The notice must present certain information concerning the
nominee and the shareholder making the nomination. The notice also must include
the nominee's written consent to being a nominee and to serving if elected.
Notices should be sent to the Corporate Secretary, Aetna Life and Casualty
Company, 151 Farmington Avenue, Hartford, Connecticut 06156.
ANNUAL REPORT
The Company's 1994 Annual Report to Shareholders was mailed to shareholders on
or about March 9, 1995.
By order of the Board of Directors,
[sig]
Lucille M. Nickerson
Vice President and Corporate Secretary
March 17, 1995
23
<PAGE> 28
151 Farmington Avenue
Hartford, Connecticut 06156
Cat. 2000703900
Printed on recycled paper.
<PAGE> 29
PROXY
AETNA LIFE AND CASUALTY COMPANY
The undersigned appoints Wallace Barnes and William H. Donaldson, and each of
them, the proxies of the undersigned, with full power of substitution, to vote
the shares of the undersigned at the Annual Meeting of Shareholders of Aetna
Life and Casualty Company to be held April 28, 1995 and at any adjournment
thereof, and directs said proxies to vote as specified herein on the matters
set forth in the Notice of the meeting, and in their discretion on any other
matters that may properly come before the meeting or any adjourment thereof.
COMMON STOCK
See Reverse Side
THIS PROXY IS SOLICITED ON BEHALF OF AETNA'S BOARD OF DIRECTORS.
- -------------------------------------------------------------------------------
<PAGE> 30
[X] Please mark your
votes as in this
example.
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this Proxy will be voted FOR Items 1 and 2.
1. Election of Directors.
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
The Board of Directors recommends a vote FOR Items 1 and 2.
NOMINEES:
Wallace Barnes, Ronald E. Compton,
William H. Donaldson, Barbara Hackman Franklin,
Earl G. Graves, Gerald Greenwald, Ellen M. Hancock,
Michael H. Jordan, Jack D. Kuehler,
Frank R. O'Keefe, Jr.
2. Approval of KPMG Peat Marwick LLP as Independent Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The signer hereby revokes all proxies heretofore given by the signer to
vote at said meeting or any adjournments thereof.
NOTE: Please sign name(s) exactly as printed hereon. Joint owners
should each sign. When signing as attorney, executor, administrator, trustee
or guardian, or for a corporation, please give your title.
- --------------------------------, 1995
- --------------------------------, 1995
SIGNATURE(S) DATE
- -------------------------------------------------------------------------------
<PAGE> 31
AETNA LIFE AND CASUALTY COMPANY
TO: PARTICIPANTS IN THE INCENTIVE SAVINGS PLAN OF
AETNA LIFE AND CASUALTY COMPANY
The Incentive Savings Plan Committee has instructed Mellon Bank, N.A., the
Trustee under the Incentive Savings Plan (the Plan), to solicit your
instructions on how to vote the shares of Aetna Common Capital Stock without
par value held by the Trustee on your behalf in accordance with the terms of
the Plan and to vote those shares in accordance with your instructions at the
Annual Meeting of Shareholders of Aetna Life and Casualty Company to be held on
April 28, 1995 and at any adjournment thereof. Please indicate, by checking the
appropriate box, how you want these shares voted by the Trustee and return this
card to the Trustee by April 21, 1995 in the envelope provided. We would like
to remind you that your individual voting instructions are held in strictest
confidence and will not be disclosed to the Corporation. In the event you fail
to indicate your voting instructions, fail to sign the card, or the card is
not received by the Trustee by April 21, your shares will be voted by the
Trustee in the same manner and proportion as those shares for which the Trustee
receives proper and timely instructions.
(continued on reverse side)
<PAGE> 32
1. ELECTION OF DIRECTORS.
(Mark only one)
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for
to the contrary) all nominees
[ ] [ ]
Nominees: Wallace Barnes, Ronald E. Compton, Willian H. Donaldson,
Barbara Hackman Franklin, Earl G. Graves, Gerald Greenwald,
Ellen M. Hancock, Michael H. Jordan, Jack D. Kuehler,
Frank R. O'Keefe, Jr.
(INSTRUCTIONS: To withhold authority to vote for particular nominees, write
those nominees' names in the space provided here.)
- ----------------------------------------------------------------------------
2. Approval of KPMG Peat Marwick LLP as Independent Auditors
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATED: ____________________________________, 1995
_________________________________________________
(Please sign exactly as your name appears hereon)
THIS INSTRUCTION CARD IS SOLICITED ON BEHALF OF
AETNAS'S BOARD OF DIRECTORS.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
