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
GEICO Corporation
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or 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 transactions 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.:
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(3) Filing party:
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(4) Date filed: April 7, 1995
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<PAGE>
PAGE 1
GEICO CORPORATION
ONE GEICO PLAZA
WASHINGTON, D.C. 20076-0001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 10, 1995
The annual meeting of shareholders of GEICO Corporation (the Company) will
be held at the GEICO Fredericksburg Office Building, One GEICO Boulevard,
Fredericksburg, Virginia (located near the intersection of Route 17 North at
Route 654 in Stafford County), on May 10, 1995, at 10:00 a.m., Eastern Daylight
Time, for the following purposes:
(1) to elect eleven directors for the ensuing year;
(2) to ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors; and
(3) to transact such other business as may properly come before the
meeting or any adjournment.
The holders of record of the Company's Common Stock at the close of
business on March 20, 1995, are entitled to vote at the meeting and any
adjournment thereof.
By order of the Board of Directors,
Rosalind Ann Phillips, Secretary
April 7, 1995
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE DATE, SIGN AND RETURN THE PROXY IN THE ENCLOSED REPLY
ENVELOPE. THE VOTE OF EVERY SHAREHOLDER IS IMPORTANT AND YOUR COOPERATION IN
RETURNING YOUR EXECUTED PROXY PROMPTLY WILL BE APPRECIATED. IF YOU DO ATTEND THE
MEETING, YOU MAY VOTE IN PERSON AFTER REVOKING THE PROXY. IF YOUR SHARES ARE
HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO ATTEND THE
MEETING, YOU SHOULD OBTAIN A LETTER OF IDENTIFICATION FROM THE RECORD HOLDER AND
BRING IT TO THE MEETING. IN ORDER TO VOTE YOUR SHARES PERSONALLY, YOU MUST ALSO
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED TO YOU.
PAGE 1
<PAGE>
GEICO CORPORATION
ONE GEICO PLAZA
WASHINGTON, D.C. 20076-0001
PROXY STATEMENT
This proxy statement is furnished to the holders of the Common Stock, par
value $1.00 per share (the Common Stock), of GEICO Corporation (the Company) in
connection with the solicitation by the Board of Directors of proxies for the
annual meeting of shareholders to be held on May 10, 1995. Each holder of record
of shares of Common Stock at the close of business on March 20, 1995, is
entitled to one vote for each share of Common Stock held on any business
properly presented at the meeting and any adjournment thereof. On that date,
68,190,579 shares of Common Stock were outstanding and entitled to vote as a
class.
Unless otherwise specified, the proxy will be voted to elect the nominees
for director listed in this proxy statement and to ratify the appointment of
Coopers & Lybrand L.L.P. (Coopers & Lybrand) as the Company's independent
auditors. If any nominee listed in this proxy statement is unable to serve, the
proxy may be voted for a substitute nominee proposed by the Human Resources
Committee of the Board of Directors, unless the Board of Directors provides by
resolution for a lesser number of directors. If any other business properly
comes before the meeting, the proxy will be voted in accordance with the best
judgment of the persons named as proxies.
Your proxy should be dated, signed and returned promptly in the enclosed
reply envelope. Any person giving a proxy has the power to revoke it any time
before its exercise by delivering a written notice of revocation to the
Secretary of the Company. The Board of Directors reserves the right to return
promptly to any shareholder, without voting, any proxy in which the
authorization to vote is made subject to any condition. Except for this
reservation, all properly executed and unrevoked proxies received before the
meeting will be voted in accordance with instructions on the proxy or, if no
instructions are given, in the discretion of the persons named as proxies. The
proxy statements and proxies are being mailed to shareholders on or about April
7, 1995. The Company's 1994 Annual Report was previously mailed to the
shareholders.
ELECTION OF DIRECTORS
At the meeting, eleven directors are to be elected, each of whom is to
serve until the next annual meeting of shareholders and until his or her
successor is elected and qualified. The Board of Directors, pursuant to the
recommendation of the Human Resources Committee, fixed the number of directors
at eleven and proposes that the nominees listed be elected. Proxies cannot be
voted for a greater number of persons than the number of nominees named. Mr. W.
Reid Thompson, who is Chairman of the Audit Committee and a member of the
Executive and Human Resources Committees, has reached retirement age after eight
years of service to the Company and will not stand for re-election. Mr. Edward
H. Utley, who was Vice Chairman of the Board and a member of the Social
Responsibility Committee, elected to take retirement and resigned effective
November 18, 1994, having served as a Director since 1990. He also retired as
Senior Vice President and Director of Government Employees Insurance Company
(GEICO), effective January 3, 1995.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH NOMINEE LISTED BELOW. Proxies solicited by the Board will be so voted
unless authorization to do so is withheld in the proxy. A quorum being present,
directors will be elected by a plurality of the votes cast. Any shares not voted
(whether by abstention, broker non-vote or otherwise) have no impact on the
vote. Abstentions and broker non-votes are counted for purposes of a quorum.
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<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
JOHN H. BRETHERICK, JR. Director since 1990
Photo of
John R. Retired President, Continental Corporation, an insurance holding
Bretherick, company, New York, New York.
Jr.
Mr. Bretherick, 65, is a member of the Audit and Human Resources
Committees. He was President and a director of Continental
Corporation from 1984 until his retirement in 1989.
NORMA E. BROWN Director since 1987
Photo of
Norma E. Major General, U.S. Air Force, Retired, San Antonio, Texas.
Brown
Major General Brown, 69, is Chairperson of the Social
Responsibility Committee and a member of the Audit Committee.
She retired from the U.S. Air Force in 1982 after completing
31 years of service. From 1979 until her retirement, she
was Commander of the Chanute Technical Training Center.
SAMUEL C. BUTLER Director since 1978
Photo of
Samuel C. Partner, Cravath, Swaine & Moore, attorneys, New York, New York.
Butler
Mr. Butler, 65, is Chairman of the Executive and Human Resources
Committees. He has been a partner in the law firm of Cravath,
Swaine & Moore since 1961. Mr. Butler is a director of Ashland
Inc., United States Trust Corporation and Millipore Corporation.
JAMES E. CHEEK Director since 1986
Photo of
James E. President Emeritus, Howard University, Washington, D.C.
Cheek
Dr. Cheek, 62, is a member of the Finance and Social
Responsibility ommittees. He was President of Howard University
from 1969 until his retirement in 1989.
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<PAGE>
A. JAMES CLARK Director since 1992
Photo of
A. James Chairman of the Board, President and Director, Clark
Clark Enterprises, Inc., a commercial real estate and construction
holding company, Bethesda, Maryland.
Mr. Clark, 67, is a member of the Audit and Finance Committees.
He has been Chairman and President of Clark Enterprises, Inc.
since 1972, Chairman and President of The Clark Construction
Group, Inc. since 1988 and Chairman of the Board of The George
Hyman Construction Company since 1986. He is a director of
Potomac Electric Power Company, Martin Marietta Corporation and
Carr Realty Corporation.
DELANO E. LEWIS Director since 1989
Photo of
Delano E. President and Chief Executive Officer, National Public Radio,
Lewis a non-profit membership organization producing programming for
public radio stations, Washington, D.C.
Mr. Lewis, 56, is a member of the Audit and Social
Responsibility Committees. He was elected President and Chief
Executive Officer of National Public Radio in 1994. He served
as a director of The C&P Telephone Company from 1983 to
1993, President from 1988 to 1993, Chief Executive Officer from
1990 to 1993 and was a Vice President from 1983 to 1988. He is
a director of The Chase Manhattan Corporation, the
Colgate-Palmolive Company, Apple Computer, Inc. and BET
Holdings, Inc.
OLZA M. NICELY Director since 1990
Photo of
Olza M. President and Chief Executive Officer -- Insurance Operations
Nicely and Director of the Company, Chevy Chase, Maryland.
Mr. Nicely, 51, is a member of the Executive and Finance
Committees. He was elected President and Chief Executive
Officer -- Insurance Operations of the Company in l993. He has
served as a Director of GEICO since 1985, President since 1989,
Chief Executive Officer since 1992 and Chairman of the Board
since l993, having served as Executive Vice President from 1987
to 1989 and Senior Vice President from 1985 to 1987.
COLEMAN RAPHAEL Director since 1990
Photo of
Coleman Retired Dean, School of Business Administration, George Mason
Raphael University, Fairfax, Virginia.
Dr. Raphael, 69, is a member of the Finance and Human Resources
Committees. He was Chairman of the Board and Chief Executive
Officer of Night Owl Security, Inc. from 1991 to 1992 and Dean
of the School of Business Administration of George Mason
University from 1986 to 1991. From 1970 to 1986, he was
Chairman of the Board, Chief Executive Officer and a director
of Atlantic Research Corporation.
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<PAGE>
WILLIAM J. RUANE Director since 1988
Photo of
William J. Chairman of the Board and Director, Ruane, Cunniff & Co., Inc.,
Ruane investment advisers, New York, New York.
Mr. Ruane, 69, is a member of the Executive, Finance and
Human Resources Committees. He has been Chairman of Ruane,
Cunniff & Co., Inc. since 1969. He is a director of Sequoia
Fund, Inc. and The Washington Post Company.
LOUIS A. SIMPSON Director since 1983
Photo of
Louis A. President and Chief Executive Officer -- Capital Operations and
Simpson Director of the Company, Chevy Chase, Maryland.
Mr. Simpson, 58, is Chairman of the Finance Committee and a
member of the Executive Committee. He was elected President and
Chief Executive Officer -- Capital Operations of the Company in
1993, having served as Vice Chairman of the Board from 1985 to
1993. He was Senior Vice President of GEICO from 1979 to 1989
and of the Company from 1979 to 1985. He is a director of
Potomac Electric Power Company, Salomon Inc and Pacific
American Income Shares Inc.
W. ALVON SPARKS, JR. Director since 1993
Photo of
W. Alvon Executive Vice President and Chief Financial Officer and
Sparks, Jr. Director of the Company, Chevy Chase, Maryland.
Mr. Sparks, 59, is a member of the Finance and Social
Responsibility Committees. He has been Executive Vice President
and Chief Financial Officer of the Company since 1992, having
served as Senior Vice President from 1982 to 1992. He has been
a Director of GEICO since 1982 and was elected Executive
Vice President in February 1995, having served as Senior Vice
President since 1982.
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
The Board has standing Audit, Executive, Finance, Human Resources and
Social Responsibility Committees. The biographical information on the directors
in the immediately preceding section of this proxy statement identifies the
Committee memberships held by each.
The Audit Committee, which consists of five non-management directors, held
six meetings during 1994. In addition to recommending to the Board the
appointment of the Company's independent auditors, subject to ratification by
the shareholders, the Committee reviews with the independent auditors the scope
of their audit; monitors the audit; reviews the audit results with management
and the independent auditors; reviews the Annual Report on Form 10-K; reviews
compliance with the Company's Business Ethics Policy; carries out such actions
as may be required under the Foreign Corrupt Practices Act and reviews the
Company's internal controls and accounting procedures with the independent
auditors and the Internal Auditor, who reports directly to the Audit Committee.
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<PAGE>
The Executive Committee, which has five members, held no meetings during
1994. This Committee has the power to exercise most of the powers of the Board
when the Board is not in session, recommend plans relating to the development of
corporate structures, review proposals regarding merger or affiliation with
other companies, review proposals to expand existing or enter new lines of
business and make recommendations on corporate practice involving disclosure.
The Finance Committee, which has seven members, held four meetings during
1994. The Committee approves broad investment policies and guidelines and
assists the Company's investment advisors in their development, approves and
monitors eligible securities, approves all marketable investments and
non-marketable investments of $25 million or more in controlled operating units
and of $5 million or more in non-controlled operating units, monitors the
investment portfolio to perform the fiduciary responsibilities of the Board
keeping in mind the makeup of the Company's liabilities, monitors the investment
portfolio and its performance relative to comparative standards, authorizes
transactions in securities within guidelines prescribed by the Committee and
approves borrowings by the Company of up to $50 million.
The Human Resources Committee, which consists of five non-management
directors, held five meetings during 1994. It reviews programs relating to the
development of human resources, including personnel practices, education and
training programs and the introduction of external resources (both the hiring of
new employees and retention of consultants); reviews employee and management
compensation practices; approves the compensation of the senior officers of the
Company and GEICO and the Presidents of the affiliated companies and reviews the
annual budget for officers' salaries; recommends to the Board the election of
senior officers of the Company and GEICO and elects all other officers of the
Company and GEICO and senior officers of subsidiaries of the Company and GEICO;
approves and administers compensation programs; maintains responsibility for
administration of employee benefit plans; approves or recommends to the Board
amendments to employee benefit plans; reviews management's organizational plans
and approves directors' compensation. The Committee also recommends to the full
Board nominees for election to the Board by the shareholders at the annual
meeting or by the Board to fill an existing vacancy. The Committee will consider
nominees for director who are recommended by shareholders pursuant to the
Company's Bylaw provisions. No such nominations were submitted to the Committee
by shareholders for the 1995 annual meeting.
The Social Responsibility Committee, which has four members, held two
meetings during 1994. This Committee oversees the fulfillment of social
responsibilities to shareholders, policyholders, employees and the general
public and reviews the Company's affirmative action program with respect to
employment and upward mobility of women, minorities and disadvantaged segments
of society. The Committee also monitors the Company's involvement in political
action, particularly with respect to state legislative affairs, and reviews the
Company's responsibilities to society in the providing of insurance services and
allocation of charitable contributions.
BOARD MEETINGS
During 1994, the Board held five meetings and the Committees of the Board
held seventeen meetings. Attendance at Board and Committee meetings averaged
98.7%. Each director attended at least 75% of the aggregate of the total number
of meetings of the Board and of Committees of the Board on which he or she
served.
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<PAGE>
DIRECTORS' COMPENSATION
Each director receives an annual retainer of $30,000 for serving on the
Board, $3,000 for serving as Chairman of a Committee and $1,500 for serving as a
member of a Committee. Each director also receives a fee of $1,500 for each
Board and Committee meeting attended. Board and Committee meetings falling on
the same date are generally considered one meeting. No fees are paid to a
director who is also a current or retired operating officer of the Company or
its subsidiaries.
The Company has a policy establishing the normal retirement date of each
member of the Board as the date of the annual meeting next following his or her
70th birthday, subject to certain exceptions.
A director who elects to retire between the ages of 65 and 70 with 10 years
or more of service will receive an annual benefit for life equal to 75% of the
annual director's retainer in effect at the time of his or her retirement. A
director who elects to retire between the ages of 65 and 70 with fewer than 10
years of service will receive an annual benefit equal to 75% of the annual
director's retainer in effect at the time of his or her retirement for the
number of years equal to his or her years of service on the Board of the
Company, or until his or her death, whichever shall first occur. A director who
elects to retire between the ages of 60 and 64 with 15 or more years of service
will receive, beginning at age 65, an annual benefit for life equal to 75% of
the annual director's retainer in effect at the time of his or her retirement.
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<PAGE>
BENEFICIAL OWNERSHIP OF STOCK
The following table sets forth, as of March 20, 1995, information
concerning beneficial ownership of the Common Stock by any person known to the
Company to be the beneficial owner of more than 5% of such stock, each director
and nominee and each executive officer listed in the Summary Compensation Table
on page 10, and by directors and executive officers of the Company as a group.
Individuals have sole voting and investment power over such stock unless
otherwise indicated in the footnotes.
<TABLE>
<CAPTION>
COMMON STOCK
NUMBER OF SHARES PERCENT OF
NAME/GROUP BENEFICIALLY OWNED CLASS
<S> <C> <C>
Berkshire Hathaway Inc.(1)...................... 34,250,000 50.23%
1440 Kiewit Plaza
Omaha, Nebraska 68131
The Riggs National Bank of Washington, D.C.(2).. 6,397,377 9.38
800 17th Street, N.W.
Washington, D.C. 20006
Tukman Capital Management, Inc.(3).............. 4,096,031 6.01
60 East Sir Francis Drake Blvd., Suite 204
Larkspur, California 94939
John H. Bretherick, Jr.......................... 2,500 (4)
Norma E. Brown (5).............................. 500 (4)
Samuel C. Butler (6)............................ 55,000 (4)
James E. Cheek.................................. 500 (4)
A. James Clark.................................. 5,000 (4)
Delano E. Lewis (5)............................. 1,500 (4)
Olza M. Nicely (5)(6)(7)(8)(9).................. 258,754 (4)
Coleman Raphael (5)............................. 2,200 (4)
William J. Ruane................................ 25,000 (4)
Louis A. Simpson (5)(6)(7)(8)(9)................ 950,119 1.39
W. Alvon Sparks, Jr. (5)(7)(8)(10).............. 43,384 (4)
W. Reid Thompson................................ 6,000 (4)
Edward H. Utley (5)(6)(8)(10)................... 60,787 (4)
James M. Hitt (5)(7)(8)(10)..................... 45,839 (4)
Simone J. Pace (5)(7)(8)(10).................... 3,618 (4)
Directors and Executive Officers as a Group
(23 persons)(5)(6)(7)(8)........................ 1,652,986 2.42
<FN>
(1) According to the most recent information available to the Company,
Berkshire Hathaway Inc. (Berkshire) was the beneficial owner of
34,250,000 shares of Common Stock on March 20, 1995. The ownership of
these shares is through several subsidiaries of Berkshire. Mr. Warren E.
Buffett is Chairman of the Board of
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
Berkshire. Mr. Buffett, his wife and a trust of which Mr. Buffett is a
trustee, but in which he has no economic interest, own approximately
43.8% of the outstanding shares of Berkshire and Mr. Buffett may be
deemed to be in control of Berkshire under Federal securities laws. With
respect to shares of the Common Stock owned by subsidiaries of Berkshire,
Mr. Buffett, Berkshire and such subsidiaries may be considered to share
investment power. In connection with the purchases of these shares, the
District of Columbia Department of Insurance (in which jurisdiction GEICO
was incorporated prior to its redomestication and reincorporation in
Maryland on January 3, 1986), pursuant to a request for exemption filed
by Berkshire, exempted the purchases by Berkshire from certain
requirements of the District of Columbia Code, which exemption was sought
by Berkshire on the grounds that the contemplated purchases were for
investment and did not have the purpose or effect of changing or
influencing the control of the Company. Pursuant to an order issued by
the Superintendent of Insurance of the District of Columbia, Berkshire
has granted a proxy to NationsBank of Maryland, 6610 Rockledge Drive,
Bethesda, Maryland 20817, to vote such shares in its discretion.
Subsequent to GEICO's redomestication and reincorporation in Maryland,
the Insurance Division of the Department of Licensing and Regulation of
the State of Maryland reaffirmed that exemption and order under Maryland
law.
(2) According to the most recent information available to the Company, The
Riggs National Bank of Washington, D.C. (Riggs) was the beneficial owner
of 6,397,377 shares of Common Stock on March 20, 1995. This number
includes shares as to which Riggs has or shares voting and investment
power as follows: sole voting power, 1,762,071 shares; shared voting
power, 127,500 shares; sole investment power, 6,260,277 shares and shared
investment power, 137,100 shares. Riggs has advised the Company that
these shares include 1,761,271 shares held by it as trustee under the
Company's Revised Profit Sharing Plan (Profit Sharing Plan) and 4,498,706
shares held by it as trustee under the Company's Employee Stock Ownership
Plan (ESOP). Riggs has the authority to vote shares of Common Stock held
by it as trustee of the Profit Sharing Plan. The Administrative Committee
of the ESOP will, pursuant to instructions received from the
participants, direct Riggs to vote whole shares allocated to
participants' accounts. Fractional shares from all participants' accounts
may be combined and voted by Riggs upon direction of the Committee on
each issue in the same ratio as the Committee was directed to vote with
respect to the whole shares of participants. Riggs will not vote any
shares for which the Committee has not received instructions from the
participants, but the Committee may direct Riggs to vote any unallocated
shares held in the trust fund. Riggs has advised the Company that the
remaining 137,400 shares held by it as of March 20, 1995, were held by it
in a variety of fiduciary capacities.
(3) According to the most recent information available to the Company, Tukman
Capital Management, Inc. (TCM), a registered investment advisor, was the
beneficial owner of 4,096,031 shares of Common Stock on March 20, 1995.
Mr. Melvin T. Tukman is President and majority shareholder of TCM. Mr.
Tukman and TCM share the power to vote 1,264,000 shares, have no power to
vote 2,832,031 shares and have shared investment power over 4,096,031
shares. Neither Mr. Tukman nor TCM has sole voting or investment power
over any shares.
(4) Represents less than l% of the outstanding shares of Common Stock of the
Company on March 20, 1995.
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
(5) Includes the following shares of Common Stock as to which the respective
persons share voting power and/or investment power: General Brown, 500
shares; Mr. Lewis, 1,500 shares; Mr. Nicely, 65,779 shares; Mr. Raphael,
2,200 shares; Mr. Simpson, 7,904 shares; Mr. Sparks, 18,090 shares; Mr.
Utley, 40,709 shares; Mr. Hitt, 4,865 shares; Mr. Pace, 264 shares and
directors and executive officers as a group, 192,776 shares.
(6) Includes the following shares of Common Stock as to which the respective
persons disclaim any beneficial ownership: Mr. Butler, 15,000 shares
owned by his wife; Mr. Nicely, 14,603 shares owned by his wife; Mr.
Simpson, 11,685 shares owned by his wife and grandchildren; Mr. Utley,
12,500 shares owned by his wife; and directors and executive officers as
a group, 53,788 shares owned by their wives or in fiduciary capacities.
(7) Of the shares beneficially owned, 171,775 of Mr. Nicely's shares, 593,330
of Mr. Simpson's shares, 19,000 of Mr. Sparks' shares, 15,500 of Mr.
Hitt's shares, 3,000 of Mr. Pace's shares and 902,605 of the shares of
directors and executive officers as a group represent shares of Common
Stock which those persons have a right to acquire through exercise of
stock options within 60 days.
(8) Of the shares beneficially owned, 24,046 of Mr. Nicely's shares, 22,349
of Mr. Simpson's shares, 11,859 of Mr. Sparks' shares, 6,578 of Mr.
Utley's shares, 9,007 of Mr. Hitt's shares, 518 of Mr. Pace's shares and
128,058 of the shares of directors and executive officers as a group
represent one or both of the following: (i) shares of Common Stock
allocated to their participants' accounts under the Company's ESOP, which
provides participants voting power and (ii) shares of Common Stock
purchased with contributions to their participants' accounts in Funds C
and G of the Company's Profit Sharing Plan, which provides participants
with investment power.
(9) A director and has served as Chief Executive Officer since May 19, 1993.
(10) One of the four most highly compensated executive officers, other than
individuals who served as the Chief Executive Officer.
</FN>
</TABLE>
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the individual compensation information for
services rendered in all capacities during the years 1992, 1993 and 1994 with
respect to the two current Co-Chief Executive Officers of the Company and the
four other most highly compensated executive officers serving at the end of
1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
LONG-TERM
OTHER SECURITIES INCENTIVE
NAME AND ANNUAL UNDERLYING PLAN ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS(3) PAYOUTS(4) COMPENSATION(5)
<S> <C> <C> <C> <C> <C> <C> <C>
Olza M. Nicely, 1994 $500,000 $ 70,074 $ 803 -0- $ 274,475 $ 367,559
President and Chief 1993 437,500 250,000 414 100,000 427,059 68,344
Executive Officer -- 1992 300,000 112,500 385 -0- 248,000 56,157
Insurance Operations
Louis A. Simpson, 1994 500,000 -0- 2,666 -0- 1,400,150 75,544
President and Chief 1993 500,000 -0- 4,452 708,330 -0- 94,675
Executive Officer -- 1992 500,000 -0- 2,184 -0- 1,623,077 108,090
Capital Operations
Edward H. Utley, 1994 300,000 210,000 2,346 -0- 219,570 55,234
Senior Vice President 1993 262,083 150,000 1,162 -0- 253,911 49,625
of GEICO 1992 215,000 117,500 1,118 -0- 294,500 43,428
W. Alvon Sparks, Jr., 1994 216,666 154,000 337 15,000 131,742 40,753
Executive Vice 1993 200,000 100,000 -0- -0- 115,414 32,241
President and Chief 1992 178,333 28,779 -0- 40,000 170,500 33,343
Financial Officer
James M. Hitt, 1994 135,500 113,785 -0- -0- 65,896 21,533
Vice President 1993 132,500 56,040 50,207 15,000 69,248 19,438
of GEICO 1992 121,250 38,250 -0- -0- 116,250 20,313
Simone J. Pace, 1994 156,667 58,031 -0- 5,000 -0- 22,054
Senior Vice President 1993 100,000 30,000 -0- 10,000 -0- -0-
and Chief Information 1992 -0- -0- -0- -0- -0- -0-
Officer (6)
<FN>
(1) The amounts in this column for Messrs. Nicely, Utley, Sparks, Hitt and
Pace represent cash compensation earned pursuant to the terms of the
Company's Incentive Bonus Plan.
(2) Amounts shown for Messrs. Nicely, Simpson, Utley and Sparks are for
reimbursement of taxes in connection with certain perquisites which did
not exceed the disclosure threshold established by the Securities and
Exchange Commission (the SEC). In 1993, Mr. Hitt was reimbursed $30,734
for relocation expenses and $19,473 for taxes in connection with such
expenses.
(3) None of the individuals listed in the table has stock options with tandem
or free-standing stock appreciation rights (SARs).
(footnotes continued on next page)
10
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<PAGE>
(footnotes continued from previous page)
(4) For Messrs. Nicely, Utley, Sparks and Hitt, amounts in this column
represent the dollar value of payments of performance shares awarded in
1990, 1991 and 1992 for three-year cycles ended December 31, 1992,
December 31, 1993 and December 31, 1994, respectively, pursuant to the
Company's Performance Share Plan. Performance share payments are valued
based on the market price of a share of the Company's Common Stock on the
payment date and are made early in the year following the close of the
cycle. The market price is the mean of the high and low sales price of a
share of the Company's Common Stock on the New York Stock Exchange
Composite Tape (the market price). For Mr. Simpson, the amounts shown
represent payments made under the Company's Equity Cash Bonus Plan. Mr.
Simpson does not participate in the Performance Share Plan.
(5) Amounts in this column represent the following as set forth below: dollar
value of share allocations, forfeitures and dividends under the Company's
ESOP; benefits under the ESOP in excess of the limits established by
Section 415 of the Internal Revenue Code (IRC) contributed by the Company
to an unqualified supplemental plan; company contributions under the
Profit Sharing Plan; benefits under the Profit Sharing Plan in excess of
the limits established by Section 415 of the IRC contributed by the
Company to an unqualified supplemental plan and a portion of the bonus
otherwise payable to Mr. Nicely that is automatically deferred until such
time as he is no longer an executive officer pursuant to action taken by
the Human Resources Committee in response to Section 162(m) of the IRC,
which limits the deductibility of compensation in excess of $1,000,000.
MANDATORY
ESOP PROFIT PROFIT SHARING DEFERRED
YEAR ESOP SUPPLEMENTAL SHARING SUPPLEMENTAL COMPENSATION
Olza M. Nicely 1994 $18,541 $47,008 $3,945 $18,139 $279,926
1993 25,980 27,224 8,384 6,756 -0-
1992 29,184 17,356 7,054 2,383 -0-
Louis A. Simpson 1994 26,075 27,385 6,664 15,420 -0-
1993 30,910 46,073 8,384 9,308 -0-
1992 34,572 55,870 7,818 9,830 -0-
Edward H. Utley 1994 18,523 23,461 6,664 6,586 -0-
1993 25,968 13,926 8,384 1,347 -0-
1992 29,169 7,330 6,929 -0- -0-
W. Alvon Sparks, Jr.1994 18,251 12,955 4,485 5,062 -0-
1993 25,131 -0- 7,110 -0- -0-
1992 27,676 -0- 5,667 -0- -0-
James M. Hitt 1994 15,001 -0- 6,532 -0- -0-
1993 14,752 -0- 4,686 -0- -0-
1992 16,266 -0- 4,047 -0- -0-
Simone J. Pace 1994 12,453 2,721 6,664 216 -0-
1993 -0- -0- -0- -0- -0-
1992 -0- -0- -0- -0- -0-
(6) Mr. Pace was employed by the Company on May 3, 1993.
</FN>
</TABLE>
11
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<PAGE>
The following three tables set forth as to the executive officers named in
the Summary Compensation Table for the period January 1, 1994 through December
31, 1994, inclusive: (a) option grants in 1994, (b) aggregated option exercises
in 1994 and year-end option values and (c) awards made in 1994 under long-term
incentive plans:
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
POTENTIAL
NUMBER OF PERCENT OF REALIZABLE VALUE AT
SECURITIES TOTAL OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN OR BASE PRICE EXPIRATION _____________
NAME GRANTED(1) FISCAL YEAR PER SHARE(2) DATE (5%) (10%)
____ __________ ___________ ____________ ____ ____ _____
<S> <C> <C> <C> <C> <C> <C>
Olza M. Nicely -0- -0-% $ -0- -- $ -0- $ -0-
Louis A. Simpson -0- -0- -0- -- -0- -0-
Edward H. Utley -0- -0- -0- -- -0- -0-
W. Alvon Sparks, Jr. 15,000 10.4 54.3125 2/17/04 512,353 1,298,402
James M. Hitt -0- -0- -0- -- -0- -0-
Simone J. Pace 5,000 3.5 54.3125 2/17/04 170,784 432,801
<FN>
(1) Stock options were granted pursuant to the 1992 Stock Option Plan and
become exercisable in five equal annual installments beginning one year
after the date of the grant. This plan does not provide for the granting
of SARs.
(2) The per share option exercise price is 100% or more of the market price of
the Company's Common Stock on a date fixed by the Human Resources
Committee as the date of grant.
(3) In accordance with the rules of the SEC, Potential Realizable Value has
been calculated based upon an assumed aggregate appreciation of the market
price of the Company's Common Stock at annual compounded rates of 5% and
10%, respectively, for the duration of the option term. There can be no
assurance that the market price of the Company's Common Stock will
appreciate in the assumed manner.
</FN>
</TABLE>
12
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<PAGE>
AGGREGATED OPTION EXERCISES IN 1994
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR-END OPTIONS AT YEAR-END(2)
SHARES _______________ ___________________
ACQUIRED VALUE EXER- UNEXER- EXER- UNEXER-
NAME ON EXERCISE REALIZED(1) CISABLE CISABLE CISABLE CISABLE
<S> <C> <C> <C> <C> <C> <C>
Olza M. Nicely 10,000 $337,813 171,775 100,000 $2,951,796 $217,000
Louis A. Simpson -0- -0- 593,330 40,000 -0- -0-
Edward H. Utley 3,885 140,880 -0- -0- -0- -0-
W. Alvon Sparks, Jr. -0- -0- 16,000 39,000 -0- -0-
James M. Hitt -0- -0- 15,500 12,000 394,688 -0-
Simone J. Pace -0- -0- 2,000 13,000 -0- -0-
<FN>
(1) The numbers in this column represent the dollar value of the difference
between the market price on the date of exercise of stock options
exercised in 1994 and the exercise price of such stock options.
(2) The numbers in these columns represent the difference between the market
price on December 31, 1994, of all unexercised in-the-money options then
outstanding and the exercise price of such stock options. None of the
individuals listed in the table had any exercisable or unexercisable SARs
at year-end.
</FN>
</TABLE>
13
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<PAGE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1994
<TABLE>
<CAPTION>
ESTIMATED
FUTURE
PAYOUTS
UNDER
PERFORMANCE NON-STOCK
OTHER PRICE-BASED
PEROD PLANS
UNTIL TARGET NUMBER
PLAN UNDER NUMBER OF MATURATION OF SHARES
NAME WHICH AWARD MADE SHARES OR PAYOUT OR DOLLARS
<S> <C> <C> <C> <C>
Olza M. Nicely(1) Performance Share Plan 2,725 1994-96 2,725
Edward H. Utley(1)(2) Performance Share Plan 1,625 1994-96 587
W. Alvon Sparks, Jr.(1) Performance Share Plan 1,100 1994-96 1,100
James M. Hitt(1) Performance Share Plan 725 1994-96 725
Simone J. Pace(1) Performance Share Plan 825 1994-96 825
Louis A. Simpson(3) Equity Cash Bonus Plan -- 1994-97 N/A
<FN>
(1) The numbers for Messrs. Nicely, Utley, Sparks, Hitt and Pace represent the
number of performance shares awarded in 1994 pursuant to the terms of the
Company's Performance Share Plan for a three-year cycle ending December
31, 1996. Payment of such awards at the end of the cycle is contingent
upon the Company's four principal property and casualty subsidiaries
achieving two specified performance objectives: (1) a combined all lines
underwriting ratio of 96.5% for the three year period and (2) a combined
average annual growth of 6% in voluntary automobile policies in force over
the three year period. The Performance Share Plan has no threshold,
minimum or maximum. The target number is the number of performance shares
that will be paid if the performance objectives are met. Participants
retiring during the cycle will receive shares in the proportion which the
number of months before retirement bears to thirty-six months.
Participants will not receive more shares than the target number shown
even if performance exceeds the performance objectives. If the performance
objectives are not met, participants may receive a portion of the target
number of shares, or no shares at all, at the discretion of the Human
Resources Committee. The value of the performance share award payment will
be determined by the market price of a share of the Company's Common Stock
on the date of payment. The value of a performance share at payout,
however, may not exceed three times the market price of a share of the
Company's Common Stock on the date of the grant. In view of Mr. Simpson's
participation in the Company's Equity Cash Bonus Plan, he is not eligible
to receive performance share awards.
(2) The estimated target number of future payout shares for Mr. Utley reflects
a pro rata reduction due to his retirement in January 1995.
(3) The Equity Cash Bonus Plan, which has been in effect for Mr. Simpson as
Chief Investment Officer of the Company (the CIO) since 1989, was approved
by the shareholders on May 18, 1994. It provides incentive payments to the
CIO and certain equity managers performing investment activities who are
selected by him based upon the investment performance of the Company's
Equity Portfolio, a defined portfolio of common stock and other equity
securities, as compared to the Standard and Poor's 500 Stock Index (the
S&P 500). Any such bonuses paid to the equity managers are subtracted from
the amount Mr. Simpson would otherwise receive. A cash bonus with respect
to each calendar year can be paid to Mr. Simpson in an amount to be
determined by the Human Resources Committee of up to 100%, but not less
than 50%, of a fund amounting to 10% of the positive equity return (the
amount by which positive total return on the Company's Equity Portfolio
exceeds the total return on the S&P 500 for the calendar year times the
dollar amount in the Equity
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
Fund as agreed upon prior to the beginning of such year by the Human
Resources Committee and the CIO). For 1995, the Equity Fund has been set
at $760 million, which is an amount equal to the market value of the
Company's Equity Portfolio at December 31, 1994, rounded to the next
highest $10 million. The bonus amount in any year will be paid in four
equal installments. For Mr. Simpson to receive all such installments, the
Equity Cash Bonus Plan requires that he continue to be employed as CIO by
the Company or a subsidiary for the four-year payout period. All unpaid
installments will vest fully in the event of death, disability, retirement
or a change of control of the Company. With respect to a calendar year in
which the percentage increase in value of the Company's Equity Portfolio
is less than that of the S&P 500 (or is more negative than the S&P 500),
an amount equal to 10% of the negative equity return will be applied to
reduce deferred amounts and future awards. If the negative total return on
the Company's Equity Portfolio in any year is less negative than the
negative total return on the S&P 500, the negative total return on each
will be subtracted from the respective positive total returns in future
years. The Equity Cash Bonus Plan has no threshold, target or maximum
award. The actual bonus Mr. Simpson will receive in a given year will be
the sum of installment payments (including deduction of negative amounts)
relating to performance of the Company's Equity Portfolio in the four most
recent years, minus amounts distributed to the other equity managers. The
actual bonus for 1995 will consist of installment payments based on
performance in 1994 and 1995, the installment payments from 1992 having
been eliminated by the negative total return in 1993.
</FN>
</TABLE>
PENSION PLAN
The Company maintains a defined benefit Pension Plan to provide
retirement benefits for eligible salaried employees who have attained age 21
and have completed a year of qualifying service.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
YEARS OF SERVICE AT RETIREMENT
REMUNERATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 37,500 $ 50,000 $ 62,500 $ 67,187 $ 71,875
150,000 45,000 60,000 75,000 80,625 86,250
175,000 52,500 70,000 87,500 94,062 100,625
200,000 60,000 80,000 100,000 107,500 115,000
225,000 67,500 90,000 112,500 120,937 129,375
250,000 75,000 100,000 125,000 134,375 143,750
300,000 90,000 120,000 150,000 161,250 172,500
400,000 120,000 160,000 200,000 215,000 230,000
450,000 135,000 180,000 225,000 241,875 258,750
500,000 150,000 200,000 250,000 268,750 287,500
600,000 180,000 240,000 300,000 322,500 345,000
700,000 210,000 280,000 350,000 376,250 402,500
800,000 240,000 320,000 400,000 430,000 460,000
</TABLE>
Retirement benefits are generally a specified percentage, based on length
of service, of an employee's final average earnings, which is the annual average
of compensation during the 60 consecutive calendar months of employment that
produces the highest amount, less 50% of the employee's primary social security
benefits. The amounts shown above are the amounts expected to be paid upon
retirement prior to any deduction for social security or other offsets. For
purposes of determining Pension Plan benefits, compensation is the regular or
15
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<PAGE>
basic pay of a participant, exclusive of bonus, overtime pay and other
extra compensation. For the executives listed in the Summary Compensation Table,
regular or basic pay is set forth in the Salary column. As of December 31, 1994,
Messrs. Nicely, Simpson, Utley, Sparks, Hitt and Pace had credited service under
the Pension Plan and supplemental arrangements for 33, 25, 22, 20, 33 and 11
years, respectively.
The Pension Plan Table shows estimated annual benefits which would be
payable upon retirement at age 65 in accordance with Pension Plan provisions in
effect at year-end 1994. Sections 401(a)(17) and 415 of the IRC limit the annual
benefits which may be paid from a tax-qualified retirement plan. As permitted by
the Employee Retirement Income Security Act of 1974, the Company has an
unqualified supplemental benefit plan adopted in 1983 and amended in 1992 which
authorizes the payment out of general funds of the Company of any benefits
calculated under provisions of the retirement plan which may be above the limits
under these sections. Such supplemental benefits are also included in the
Pension Plan Table.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Human Resources Committee at all times during fiscal 1994 consisted of
Messrs. Samuel C. Butler, John H. Bretherick, Jr., Coleman Raphael, William J.
Ruane and W. Reid Thompson. Mr. Butler, Chairman of the Human Resources
Committee, is a partner in the law firm of Cravath, Swaine & Moore, which
provided legal services to the Company in 1994.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation policies and practices are
administered by the Human Resources Committee of the Board (the Committee), all
five members of which are non-employee directors, ineligible to receive
compensation pursuant to any of the Company's compensation plans and listed at
the end of this report. The Company's Board of Directors has delegated duties to
the Committee that are described on page 5 of this proxy statement and which
require the Committee to approve and administer all Company employee benefit
plans and compensation programs, including salary methodologies, approve the
salaries of the senior officers of the Company, GEICO and their subsidiaries and
review the salaries of all other officers of the Company and GEICO. To assist
the Committee in the implementation of its duties, the Chief Executive Officers
(CEOs) of the Company, Olza M. Nicely and Louis A. Simpson, who serve as CEO for
Insurance Operations and CEO for Capital Operations, respectively, provided
input in 1994 in the form of recommendations and participation in Committee
meetings. Neither Mr. Nicely nor Mr. Simpson participate in Committee
discussions regarding their individual compensation nor do they vote on
Committee decisions.
EXECUTIVE COMPENSATION PROGRAM
The Company's Executive Compensation Program (the Program) is designed to
attract, retain, motivate and reward the executive officers to achieve the
Company's business objectives and to increase shareholder value. The Program
includes both annual and long-term incentive compensation. The Program is
intended to achieve the Committee's goal of aligning Management's interests with
those of the shareholders and causing Management to focus on managing the
Company from an owner's perspective of enhancing value and achieving long-term
financial success and earnings growth. It accomplishes this goal by providing
competitive levels of compensation that integrate remuneration with the
Company's annual and long-term performance goals, reward above-average corporate
performance and recognize individual initiative and achievements.
16
PAGE 17
<PAGE>
RELATIONSHIP OF PAY TO PERFORMANCE UNDER COMPENSATION PLANS
Compensation paid to or earned by the executive officers in 1994 consisted
of the following elements: base salary, annual incentive bonus for 1994 and
payouts under the Performance Share Plan for the three-year cycle ended December
31, 1994 (which payments were made in February 1995). In addition, certain
executive officers received grants of stock options under the 1992 Stock Option
Plan and awards of performance shares under the Company's Performance Share Plan
(for a three-year cycle which will end December 31, 1996) and one executive
officer received a bonus pursuant to the terms of the Equity Cash Bonus Plan.
The following is a description of each key element of the Company's Program and
how each relates to performance.
BASE SALARY
The Committee approves the salaries of all executive officers of the
Company and GEICO and reviews the annual budget for the other officers'
salaries. In determining appropriate salary levels for executive officers below
the Executive Vice President, the Committee considers the level and scope of
responsibility, experience in position, individual performance and the
relationship of salary to the current control point established by Management
for that position. The control point represents the current average actual
salary of a fully trained comparable insurance industry executive. Annually,
Management compares the Company's control points with the average salaries of
comparable positions as reflected in a number of property and casualty insurance
compensation surveys. In setting control points, Management does not consider
the performance of any individual insurance company included in such surveys.
Base salaries are generally less than or similar to those of other executives in
the personal lines property casualty insurance industry. Due to the Company's
uniqueness and the difficulty of comparing the senior level officer positions to
those in other property and casualty companies, the Committee does not consider
control points in determining salary levels for either CEO or the Executive Vice
President but does utilize the other listed criteria.
INCENTIVE BONUS PLAN
In February 1994, the Committee established the goals for the annual
incentive cash awards to officers of the Company and certain of its subsidiaries
(except Mr. Simpson) under the Company's Incentive Bonus Plan. On the
recommendation of Mr. Nicely, the Committee significantly changed the key goals
which had been utilized for many years both in number and substance in order to
focus more specifically on the combined financial results of the four principal
property and casualty companies and to further promote the team effort of the
four-company approach to insurance operations. The Committee agreed to the
creation of an incentive bonus pool for 1994 for officers based upon a
percentage of the officers' combined aggregate salaries, with the percentage to
be determined by reference to two specific insurance related performance
measures: underwriting profit and growth in voluntary automobile policies.
The incentive bonus pool, which can range from 0%-50% of all eligible
salaries depending upon a range of underwriting profit and growth results, is
based upon a specified target percentage of 30% of such salaries if the four
principal property and casualty subsidiaries achieved in 1994: (a) a combined
all lines underwriting ratio of 96.5% and (b) a combined annual growth of 6.0%
in voluntary automobile policies in force. Individual officer bonuses granted
17
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<PAGE>
from the bonus pool can range from 0%-100% of annual salary, depending upon
individual performance and departmental accomplishments. No extra credit is
given for underwriting results better than (i.e. less than) 96.5% unless the
policy growth rate also exceeds the 6.0% target, and no bonus pool is
established if the underwriting ratio for 1994 is 99% or greater. However, the
Committee retained the discretion to award bonuses even if one or both of the
goals established under the Incentive Bonus Plan was substantially
under-achieved due to natural catastrophes or other causes.
The performance of the four property and casualty companies in 1994 met the
targeted underwriting ratio goal and slightly exceeded the targeted growth goal.
The actual combined underwriting goal achieved for 1994 was 96.5% and the actual
combined growth in voluntary automobile policies for 1994 was 6.8%. In light of
these results, the Committee set the incentive bonus pool at 38% of eligible
salaries.
The amount individual executives earned from the bonus pool varied from 0%
to 85% of their salaries and was determined by senior management's analysis of
(i) the performance of each Planning Center against its 1994 Business Plan, (ii)
the individual's achievement of planned goals and (iii) the ability of each
officer to influence the Company's financial success. In judging the performance
of the Planning Centers, the criteria given the greatest importance are growth
in premium volume and profitability; consideration is also given, but of lesser
importance, to improvements in customer service quality, expense control and
human resources skills.
Messrs. Nicely, Sparks and Utley are not included in the bonus pool as the
Committee believes their positions and responsibilities warrant individual
consideration. Instead, for 1994 the Committee fixed their targeted bonuses to
range from 0% to 100% with a target of 50% of salary if the same goals as were
established for the 1994 Incentive Bonus Plan were just met. However, the
Committee retained discretion to award bonuses even if one or both the goals
described above were not fully met. After a thorough review of the performance
of the Company and its subsidiaries based on the same goals and results
described in the preceding paragraphs, the Committee determined their actual
cash bonuses to be 70% of salary, an amount corresponding to the percentage
above target established for the incentive bonus pool. Mr. Simpson does not
participate in the Incentive Bonus Plan.
EQUITY CASH BONUS PLAN
Under the Equity Cash Bonus Plan adopted by the Board in 1989 and approved
by the shareholders in 1994, the Company has provided annual incentive
compensation to Mr. Simpson, its Chief Investment Officer. A detailed
description of the Equity Cash Bonus Plan is set out in footnote 3 on page 13 of
this proxy statement. The Equity Cash Bonus Plan ties bonus payments directly to
the performance of the Company's defined equity portfolio, which is computed on
a total return basis including dividends, realized gains and unrealized gains.
Mr. Simpson manages this equity portfolio. Pursuant to the Equity Cash Bonus
Plan, Mr. Simpson and selected equity managers are awarded a cash bonus equal in
the aggregate to 10% of the pre-tax excess of the Company's defined equity
portfolio's investment performance, if any, over the performance of the S&P 500
during the same year. Mr. Simpson receives the full amount of the available
bonus, less any bonus awarded to the selected equity managers, which may not
aggregate more than 50% of the available bonus. Payments to Mr. Simpson with
regard to any calendar year are paid in four equal annual installments, but are
subject to reduction if performance results are below the performance of the S&P
500 in prior or subsequent years. The equity managers who share in the bonus are
recommended by Mr. Simpson and approved by the Committee.
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<PAGE>
After review of the Equity Cash Bonus Plan calculation for 1994, the
Committee determined that the investment performance of the Company's defined
equity portfolio exceeded the S&P 500 in the amount of $85,794,000, reflecting a
13.1% total annual return in the Company's defined equity portfolio for 1994 as
compared to a 1.3% return for the S&P 500. The Committee agreed that a bonus of
$8,579,400 was earned in 1994 and $8,574,700, after a $4,700 reduction for prior
year underperformance, was payable in four installments. The Committee approved
the payment of the first installment of $2,140,150 in February 1995 with Mr.
Simpson receiving $1,400,150 and selected equity managers receiving the
remainder as recommended by Mr. Simpson.
PERFORMANCE SHARE PLAN
In order to encourage executives to focus on the long-term growth and
profitability of the Company, the Company has a Performance Share Plan for
executive officers (except Mr. Simpson) which provides for awards of performance
shares covering three-year performance cycles. Each performance share is
equivalent to one share of the Company's Common Stock. Payment of the full
amount of the award is contingent upon the achievement of specified Company
performance objectives over the term of the award cycle. Historically, the
Committee has taken into account an individual's level and scope of
responsibility and salary in granting awards to executive officers. For the 1994
- - -1996 cycle of the Performance Share Plan, the Committee determined that the
number of shares awarded under the plan should be approximately 30% of each
executive's salary on January 1, 1994 divided by the market price of the
Company's Common Stock when the performance share awards are granted. For this
new cycle, the Committee established similar performance objectives relating to
all lines underwriting ratio and growth in voluntary automobile policies in
force as were established for the Incentive Bonus Plan for 1994 and discussed
above, but such objectives are required to be achieved on a cumulative basis for
the three year period.
In addition to granting awards and setting performance objectives under the
Performance Share Plan, the Committee must also evaluate whether those
objectives have been met at the end of the award cycle and determine the level
of payouts to plan participants. The performance objectives established in 1992
by the Committee for the vesting and distribution of awards under the
Performance Share Plan based on the results of the three year award cycle at the
end of 1994 were: (a) a return on shareholders' equity for the three years
ending 1994 which placed the Company in the top quartile of all American
businesses, (b) a 15% growth in the earnings power of the Company for the three
years as reflected in net income per share and/or operating earnings per share
adjusted for certain tax benefits over that of 1991 and (c) specified key
business goals including, for GEICO and GEICO Indemnity Company, a cumulative
underwriting profit of at least 1% of earned premiums for the three year cycle.
Objectives (a) and (b) accounted for 25% of the objectives' attainment, while
(c) accounted for 75%. The Company's performance over the period 1992 -1994
achieved the return on equity goal and substantially exceeded the underwriting
profit standard, but fell short of the objective of 15% earnings growth. The
unusual catastrophe losses during the three year period, including the Orlando
hail storms, Hurricane Andrew and the Nor'easter in 1992, the March 1993
blizzard and the severe winter weather in early 1994, together with the
increased charge to earnings for stock appreciation rights in 1992 and the
decline in interest rates in 1992 and 1993, both of which negatively impacted
both operating earnings and net income, accounted for the Company's failure to
achieve this objective. The Committee concluded that it was appropriate to pay
participants 87.5% of the shares originally granted for the 1992 -1994 cycle for
having achieved one-half of the 25% goal and all of the 75% goal and authorized
the payment of 64,663 performance shares at a market value price of $50.1875 per
share. At the time of the original grant in 1992, the market price was $44.00
per share. Payment of the performance share awards was made on February 21,
1995.
19
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<PAGE>
STOCK OPTIONS
Under the Stock Option Plan for Key Employees of the Company, adopted by
the shareholders in 1992, the Committee may grant incentive and non-qualified
stock options to officers and key employees. All options are granted at the
market price on a date fixed by the Committee as the date of grant.
The Committee's policy is to grant stock options from time to time to
employees whose position and abilities give them the potential to influence the
Company's long-term growth and profitability. One-time larger grants are made to
executives when they are promoted or there is a significant increase in their
responsibilities. In 1994, options to purchase a total of 144,500 shares were
granted to 82 officers and key employees. Of the two CEOs and the four other
most highly compensated executives in 1994, only Mr. Sparks and Mr. Pace
received options.
IRC SECTION 162(M) -- $1 MILLION EXECUTIVE COMPENSATION DEDUCTIBILITY CAP
Under Section 162(m) of the IRC, compensation to officers in excess of
$1,000,000 that does not meet certain requirements will not be deductible. It is
the Committee's belief that it is unlikely in the future that executive
compensation accrued or paid will exceed the $1,000,000 deductibility cap for
any officers other than the CEOs. In 1994, the Equity Cash Bonus Plan was
submitted to and approved by the shareholders to ensure the deductibility by the
Company of future bonus payments to Mr. Simpson under that plan. Additionally,
the Committee determined that any compensation payable under the Performance
Share Plan or the Incentive Bonus Plan which, together with the salary paid or
payable to such officer, exceeds $1,000,000 in any year will be automatically
deferred until such time as the officer is no longer an executive officer.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation paid to Messrs. Nicely and Simpson in 1994 is set forth in
the Summary Compensation Table on page 10 of this proxy statement. Messrs.
Nicely and Simpson have served as Co-CEOs of the Company since May 19, 1993.
At the time of Mr. Nicely's promotion to President and CEO -- Insurance
Operations in 1993, his annual base salary was raised to $500,000. It was
unchanged during 1994. This salary level was fixed by the Committee and approved
by the Board based on the salary paid to the Company's CEOs in the past and its
evaluation of Mr. Nicely's prior performance. A substantial part of Mr. Nicely's
other compensation for 1994 was subject to considerable risk in the form of
incentive cash bonuses, performance share awards and stock options.
Mr. Nicely was awarded a cash bonus of $350,000 in early 1995 for 1994 of
which $279,926 was deferred. Mr. Nicely's bonus may range from 0% to 100% of his
salary, with a target of 50% of salary. The Committee evaluated his performance
relative to the goals described earlier for the Company's 1994 Incentive Bonus
Plan which depended totally on the overall performance of the four principal
property and casualty subsidiaries for which Mr. Nicely has primary oversight
responsibility. As noted earlier and because of the results achieved, in
determining 1994 bonuses under the Incentive Bonus Plan the Committee approved a
bonus pool that exceeded the targeted bonus pool amount. The Committee reached a
similar conclusion in Mr. Nicely's case and awarded him a bonus of 70% of his
year-end salary.
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<PAGE>
In February 1994, Mr. Nicely was awarded 2,725 performance shares under the
Company's Performance Share Plan for the 1994 -1996 cycle. The amount of this
award was commensurate with the Committee's decision to utilize the guideline
for determining the number of shares to be awarded based upon 30% of Mr.
Nicely's salary at January 1, 1994, divided by the market price of the Company's
Common Stock when the award was made. In February 1995, Mr. Nicely received a
payout of 5,469 shares of Common Stock under the Performance Share Plan for the
1992 -1994 cycle which was 87.5% of the shares originally granted, the percent
established as appropriate by the Committee for payout to all participants.
As President and CEO -- Capital Operations, Mr. Simpson is the Chief
Investment Officer of the Company. His annual base salary for 1994 was $500,000,
a level unchanged since 1989. Mr. Simpson's compensation package differs from
that of Mr. Nicely's in that a larger percentage of Mr. Simpson's compensation
is subject to market risk due to his participation in the Equity Cash Bonus
Plan. As previously described, pursuant to the terms of the Equity Cash Bonus
Plan, a total of $1,400,150 was paid to Mr. Simpson in February 1995. Because of
his participation in the Equity Cash Bonus Plan, Mr. Simpson does not
participate in the Incentive Bonus Plan or in the Performance Share Plan. No
stock options were granted to him during the year.
HUMAN RESOURCES COMMITTEE MEMBERS
Samuel C. Butler, Chairman
John H. Bretherick, Jr.
Coleman Raphael
William J. Ruane
W. Reid Thompson
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<PAGE>
STOCK PERFORMANCE GRAPH
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the Company's cumulative five-year shareholder
return on an indexed basis with the Dow Jones Equity Market Index and the Dow
Jones Insurance -- Property and Casualty Index.
[This space contains a stock performance graph. The Graph is a comparison
of five year cumulative total return among Geico corporation, The Dow Jones
Equity Market Index and the Dow Jones Property & Casualty Insurance index. The
Total Return Graph Data are shown below.]
* Based on $100 invested on December 31, 1989 in each index and in the
Company's Common Stock. Total return assumes reinvestment of dividends
quarterly and a fiscal year ending December 31.
TOTAL RETURN GRAPH DATA
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
GEICO CORPORATION 100 108 134 221 177 172
DOW JONES EQUITY MARKET INDEX 100 96 127 138 152 153
DOW JONES INSURANCE -- PROPERTY & CASUALTY INDEX 100 96 119 145 146 154
</TABLE>
22
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<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
At the annual meeting, a proposal to ratify the appointment of Coopers &
Lybrand as the Company's independent auditors for 1995 will be presented. A
quorum being present, an affirmative vote by a majority of the shares of Common
Stock present in person or by proxy at the meeting is required for ratification
of the appointment.
Pursuant to the recommendation of the Audit Committee, the Board has
appointed the firm of Coopers & Lybrand to audit the accounts of the Company and
its subsidiaries for the year ending December 31, 1995, subject to ratification
by the shareholders.
The Company has been informed that neither Coopers & Lybrand nor any of its
partners or full-time professional staff has any direct financial interest or
any material indirect financial interest in the Company or any of its
subsidiaries or has had any connection during the past three years with the
Company or any of its subsidiaries in the capacity of promoter, underwriter,
voting trustee, director, officer or employee.
Audit services provided by Coopers & Lybrand in 1994 included the annual
examination of the consolidated financial statements of the Company and its
subsidiaries, interim reviews of quarterly financial information, reviews of
filings with the SEC, meetings with the Audit Committee and consultation on
financial, accounting and reporting matters in connection with the audit
function.
A representative of Coopers & Lybrand will attend the annual meeting to
respond to appropriate questions and will have an opportunity to make a
statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION OF THIS
PROPOSAL.
GENERAL
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the Company's 1996 annual
meeting of shareholders, pursuant to Rule 14a-8(a)(3)(i) promulgated by the SEC,
must be received by the Company at its principal office, One GEICO Plaza,
Washington, D.C. 20076-0001, attention of the Secretary, on or before December
18, 1995. In addition, the Company's Bylaws provide that any shareholder wishing
to present a nomination for election of a director or wishing to bring a
proposal or other business before the annual meeting of shareholders for a vote
must give written notice to the Company at least 90 days in advance of the
meeting and the notice must meet certain other requirements. Any shareholder
interested in making such a nomination or proposal should request a copy of the
Bylaw provisions from the Secretary of the Company.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Proxies may be
solicited without extra compensation by certain directors, officers and regular
employees of the Company by mail, telegram or personally. In addition, the
Company has retained Georgeson & Company Inc. (Georgeson) to solicit proxies by
personal interview, mail, telephone and telegram and to request brokerage houses
and other custodians, nominees and fiduciaries to forward proxy materials to the
beneficial owners of Common Stock. The Company will pay Georgeson a fee not to
exceed $9,000 covering its services and, in addition, will reimburse Georgeson
for expenses and payments made for the Company's account to brokers and other
nominees for their expenses in forwarding soliciting material.
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<PAGE>
SHAREHOLDERS ARE URGED TO SEND THEIR PROXIES WITHOUT DELAY. YOUR
COOPERATION IS APPRECIATED.
By order of the Board of Directors,
Olza M. Nicely
President & Chief Executive
Officer --
Insurance Operations
Louis A. Simpson
President & Chief Executive
Officer --
Capital Operations
24
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<PAGE>
GEICO
CORPORATION
NOTICE OF 1995 ANNUAL MEETING
AND PROXY STATEMENT
PAGE 26
26
<PAGE>
PAGE 1
PROXY GEICO CORPORATION COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OLZA M. NICELY, LOUIS A. SIMPSON and SAMUEL C. BUTLER, or any of them, with
full power of substitution, are hereby authorized to represent and to vote, as
designated below, all shares of Common Stock of GEICO Corporation held of record
by the undersigned on March 20, 1995, at the Annual Meeting of Shareholders to
be held at the GEICO Fredericksburg Office Building, One GEICO Boulevard,
Fredericksburg, Virginia (located near the intersection of Route 17 North at
Route 654 in Stafford County), on May 10, 1995, at 10:00 A.M., Eastern Daylight
Time, and at any adjournment thereof, on the following:
(1) ELECTION OF DIRECTORS: Nominees: J. H. Bretherick, Jr., N. E. Brown,
S. C. Butler, J. E. Cheek, A. J. Clark,
D. E. Lewis, O. M. Nicely, C. Raphael,
W. J. Ruane, L. A. Simpson and
W. A. Sparks, Jr.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote for all
(except as marked to the nominees listed above
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME ON THE LINE BELOW.)
(2) RATIFICATION OF APPOINTMENT OF COOPERS & LYBRAND L.L.P. as the independent
auditors of GEICO Corporation for 1995:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
THIS PROXY IS GIVEN WITH AUTHORITY TO VOTE FOR ITEMS (1) AND (2) UNLESS A
CONTRARY CHOICE IS SPECIFIED.
PAGE 2
<PAGE>
H
(PLEASE READ OTHER SIDE FIRST)
SHARES
SIGNED:
________________________________
________________________________
(PLEASE SIGN EXACTLY AS
NAME APPEARS AT LEFT)
DATED:__________________________ , 1995
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
