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 Section 240.14a-11(c)
or Section 240.14a-12
The Hartford Steam Boiler Inspection and Insurance Company
(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) of
Schedule 14A.
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Exchange Act Rule 14a-6(i)(3).
[] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
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[] 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
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NOTICE OF ANNUAL MEETING
February 27, 1996
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of
Stockholders of The Hartford Steam Boiler Inspection and
Insurance Company will be held on Tuesday, April 16, 1996,
at 2:00 o'clock P.M., at the office of the Company, One
State Street, Hartford, Connecticut, for the following
purposes:
1. To elect four directors for three-year terms;
2. To appoint independent public accountants for the
ensuing year;
3. To consider and act upon a stockholder proposal;
and
4. To transact any other business proper to come
before the meeting.
A proxy statement to assist you in the consideration of
the foregoing matters is attached.
The Board of Directors has fixed February 6, 1996, at
4:00 o'clock P.M., as the record date and time for the
determination of the stockholders entitled to notice of and
to vote at said Annual Meeting and any adjournment thereof.
It is hoped that you will be able to attend this
meeting. If you cannot, you are urgently requested to sign
and return the enclosed proxy card in the envelope provided.
By order of the
Board of Directors.
R. K. PRICE
Corporate Secretary
The Hartford Steam Boiler
Inspection and Insurance Company
One State Street
P.O. Box 5024
Hartford, Connecticut 06102-5024
PROXY STATEMENT
GENERAL
The enclosed proxy is solicited by the Board of
Directors of The Hartford Steam Boiler Inspection and
Insurance Company for use at the Annual Meeting of
Stockholders to be held April 16, 1996, and at any and all
adjournments thereof. The Company is a Connecticut
corporation and its principal office is located at One State
Street, P.O. Box 5024, Hartford, Connecticut 06102-5024,
(203) 722-1866.
You are urged to read this proxy statement and to fill
in, date, sign and return the enclosed form of proxy. The
giving of a proxy does not affect your right to vote should
you attend the meeting, and the proxy may be revoked at any
time before it is voted. Properly executed proxies not
revoked will be voted as specified.
Arrangements will be made with brokers, nominees and
fiduciaries to distribute proxy material to their
principals, and their postage and clerical expenses in so
doing will be paid by the Company. The entire cost of
soliciting proxies on behalf of management will be borne by
the Company. Directors, officers and regular employees of
the Company may solicit proxies personally if proxies are
not received promptly. The Company has retained Corporate
Investor Communications, Inc. ("CIC") to aid in the
solicitation of proxies. CIC's fee is not expected to
exceed $3,500 in addition to out-of-pocket expenditures.
Only holders of common stock of record at the close of
business on February 6, 1996 are entitled to notice of, and
to vote at, the meeting. Each stockholder of record on said
date is being mailed the Annual Report of the Company for
the fiscal year ended December 31, 1995 with the Notice,
Proxy Statement and Proxy card on or about February 27,
1996. On February 6, 1996, there were 20,288,661
outstanding shares of common stock, each entitled to one
vote. Abstentions are not counted as affirmative or negative
votes, but are counted in determining the number of shares
present or represented on a proposal. Therefore,
abstentions have the same effect as a vote "against" a
proposal if the proposal requires the affirmative vote of a
majority of the shares represented and entitled to vote on
the proposal. Broker non-votes are included in the total
number of shares represented for matters to be voted upon at
the meeting, but are not counted as either affirmative or
negative votes.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Charter provides for a Board of not less
than nine nor more than fourteen directors, the exact number
of directorships to be determined from time to time by
resolution adopted by the affirmative vote of a majority of
the Board. The directors are divided into three classes
consisting, as nearly as possible, of one third of the total
number of directors constituting the entire Board. Each
class is elected for a three-year term at successive annual
meetings. The Board of Directors has fixed the number of
directorships at eleven.
Four directors are to be elected for terms of three
years and until their successors are elected and qualified.
Unless otherwise instructed, the shares represented by the
enclosed proxy will be voted for Joel B. Alvord, Richard G.
Dooley, Gordon W. Kreh and Lois Dickson Rice. In the event
any nominee is unable to serve as a director on the date of
the Annual Meeting, the proxies may be voted for a
substitute nominee recommended by the Board of Directors.
The affirmative vote of a majority of the votes represented
is required for election of each director.
The nominees for election to the Board of Directors
were elected to their present term at the 1993 Annual
Meeting.
Stated below are the names and ages of the nominees and
directors continuing in office, the principal occupation of
each during at least the last five years, the date on which
each individual was first elected as a director of the
Company, and other directorships and business and civic
affiliations of such persons. The information set forth on
the following pages with respect to each nominee's and
director's principal occupation, other directorships and
affiliations and beneficial ownership of Company common
stock has been furnished by the nominee or director.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
For Three-Year Term Expiring In 1999
Joel B. Alvord
- ------------ Mr. Alvord, 57, is Chairman and a director of Fleet
Financial Group. He began his banking career in
1963 with The Hartford National Bank and Trust
Company, and served in a variety of positions
PHOTO before being named President in 1978. He became
Chairman and Chief Executive Officer of Shawmut
National Corporation in 1988 and was elected to his
- ------------ present position in November 1995 following the
merger of Shawmut National Corporation with Fleet
Financial Group. Mr. Alvord is a director of Jobs
for Massachusetts, a trustee of the Wadsworth
Atheneum and The Wang Center for the Performing
Arts, Boston, a member of the Bankers Roundtable
and an Overseer at the Boston Symphony Orchestra
and the Museum of Fine Arts, Boston.
Mr. Alvord has served as a director of the Company
since December 1971.
Richard G. Dooley
- ------------- Mr. Dooley, 66, is a consultant to Massachusetts
Mutual Life Insurance Company. Mr. Dooley joined
Massachusetts Mutual in 1955 and served in a
variety of positions before being named Executive
PHOTO Vice President and Chief Investment Officer in
1978, a position he held until his retirement in
1993. Mr. Dooley is a director of Advest Group,
Inc., Jefferies Group, Inc., Kimco Realty Corp.,
- ------------- and certain Massachusetts Mutual-sponsored
investment companies. He is a trustee of Saint
Anselm College.
Mr. Dooley has served as a director of the Company
since May 1984.
Gordon W. Kreh
- ------------- Mr. Kreh, 48, is President, Chief Executive Officer
and a director of the Company. He joined The
Boiler Inspection and Insurance Company of Canada,
a subsidiary of the Company, in 1971, before moving
PHOTO to the Company's home office in 1975. He became an
officer of the Company in 1980 and was elected Vice
President in 1984. In 1987, Mr. Kreh opened the
Company's Hong Kong office. The following year, he
- -------------- was named Senior Vice President of Engineering
Insurance Group, a subsidiary of the Company which
provides insurance and engineering services outside
North America. He became its President in 1989.
He was elected Senior Vice President of the Company
in 1992 and President in September of 1993. He
assumed his present position in April of 1994. Mr.
Kreh is a board member of the American Insurance
Association. He is a director of The Boiler
Inspection and Insurance Company of Canada and HSB
Engineering Insurance Limited, subsidiaries of the
Company.
Mr. Kreh has served as a director of the Company
since September 1993.
Lois Dickson Rice
- -------------- Mrs. Rice, 63, is a Guest Scholar, Program in
Economic Studies, at the Brookings Institution, a
position she has held since October 1991. From 1981
until 1991, she served as Senior Vice President,
Government Affairs and a director of Control Data
Corporation. Mrs. Rice is a director of McGraw-
PHOTO Hill Companies, International Multifoods, Fleet
Financial Group and UNUM Corp. She is a trustee of
The Urban Institute, the Center for Naval Analysis
and the Public Agenda Foundation. Mrs. Rice also
- -------------- serves as a member of the President's Foreign
Intelligence Advisory Board.
Mrs. Rice has served as a director of the Company
since April 1990.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Term Expiring in 1997
Donald M. Carlton
- --------------- Dr. Carlton, 58, is Executive Vice President and a
director of the Company and President and Chief
Executive Officer of Radian International LLC, a
joint venture between the Company and The Dow
Chemical Company, which provides environmental,
information technology, and strategic chemical
PHOTO management services to industries and government
worldwide. Dr. Carlton had served as the President
of Radian Corporation since 1969 and assumed his
present position upon the formation of Radian
International LLC in 1996. Dr. Carlton is a
- -------------- director of Van Kampen American Capital Common
Sense Trust, National Instruments Co., Van Kampen
American Capital Bond Fund, Inc., Central and South
West Corporation and Van Kampen American Capital
Convertible Securities, Inc. He is a trustee of
Van Kampen American Capital Income Trust.
Dr. Carlton has served as a director of the Company
since July 1975.
William B. Ellis
- -------------- Mr. Ellis, 55, is Senior Fellow at the Yale
University School of Forestry and Environmental
Studies. In August 1995, he retired from his
position as Chairman of the Board of Northeast
Utilities and its principal subsidiaries, as well
PHOTO as from Connecticut Yankee Atomic Power Company,
after serving as Chief Executive Officer of those
companies from 1983 to 1993. Mr. Ellis is a
director of Advest Group, Inc., Catalytica
- --------------- Combustion Systems, Inc., Connecticut Mutual Life
Insurance Company, Connecticut Capitol Region
Growth Council, Inc. and The Greater Hartford
Chamber of Commerce. He is also a member of the
Board of the Smithsonian Institution National
Museum of Natural History and a member of The
Conservation Science Advisory Board of The Nature
Conservancy.
Mr. Ellis has served as a director of the Company
since April 1991.
E. James Ferland
- -------------- Mr. Ferland, 53, is Chairman, President and Chief
Executive Officer of Public Service Enterprise
Group Incorporated and Chairman and Chief Executive
Officer of its principal subsidiary, Public Service
PHOTO Electric and Gas Company, a position he has held
since 1986. Mr. Ferland is a director of Foster
Wheeler Corporation and the Edison Electric
Institute. He is former Chairman of the New Jersey
- -------------- State Chamber of Commerce.
Mr. Ferland has served as a director of the Company
since November 1986.
Wilson Wilde
- --------------- Mr. Wilde, 68, retired in April of 1994 from his
position as Chairman and Chief Executive Officer of
the Company, which he had held since September of
1993. He joined the Company in 1953 and was
PHOTO elected President in 1971. He is a director of
Phoenix Home Life Mutual Insurance Company, PXRE
Corporation and Front Royal, Inc. and is Chairman
of the Board of Trustees of The Loomis Chaffee
- --------------- School.
Mr. Wilde has served as a director of the Company
since March 1967.
Term Expiring In 1998
Colin G. Campbell
- --------------- Mr. Campbell, 60, is President of Rockefeller
Brothers Fund. Prior to joining Rockefeller
Brothers Fund in 1988, Mr. Campbell served as
PHOTO President of Wesleyan University from 1970 to 1988.
Mr. Campbell is a director of Pitney Bowes, SYSCO
Corporation, Rockefeller Financial Services, Public
Broadcasting Services and Engineering Insurance
- --------------- Limited, a subsidiary of the Company. He is
Chairman of the University of Cape Town Fund and
Winrock International Institute for Agricultural
Development. He is a trustee of the Colonial
Williamsburg Foundation, Institute for the Future
and Charles E. Culpeper Foundation.
Mr. Campbell has served as a director of the
Company since September 1983.
John A. Powers
- --------------- Mr. Powers, 69, is Chairman Emeritus of Heublein
Inc. (a subsidiary of Grand Metropolitan PLC), a
producer and marketer of alcoholic beverage
PHOTO products. He had served as Chairman of the Board
of Heublein from 1986 until his retirement in 1992.
Mr. Powers is a director of Connecticut Business
and Industry Association and The Advest Group, Inc.
- --------------- He is a trustee of Hartford Hospital.
Mr. Powers has served as a director of the Company
since September 1986.
John M. Washburn, Jr.
- --------------- Mr. Washburn, 68, is Chairman of the Board of
Directors of The Merrow Machine Company, a
manufacturer of industrial sewing machines. He
PHOTO joined Merrow in 1953, became Secretary in 1960,
Treasurer in 1963 and served as President from 1978
until his retirement in April 1995. Mr. Washburn
is a director of Walton Company and a trustee of
- --------------- the YMCA of Greater Hartford.
Mr. Washburn has served as a director of the
Company since March 1973.
Meetings and Remuneration of the Directors
During 1995, the Board of Directors held nine meetings
and eighteen committee meetings. Each director attended at
least 75% of the meetings of the Board and committees on
which he or she served combined.
The annual retainer for each director who is neither a
present or retired employee of the Company nor of a
subsidiary is $25,000. Under the 1989 Restricted Stock Plan
for Non-Employee Directors, one-half of the annual retainer
is paid in restricted stock of the Company and one-half is
paid in cash. The restricted stock is forfeitable until
such time as the director retires, dies, becomes disabled,
resigns with the consent of a majority of the other
directors or upon a change in control of the Company,
whichever event occurs earliest. Each non-employee director
also is paid a fee of $1,200 for attendance at a Board or a
committee meeting and an additional $350 for each committee
meeting chaired. Directors who are present or retired
employees of the Company or a subsidiary do not receive such
compensation for service on the Board or committees thereof
and are not eligible for awards of restricted stock under
the 1989 Restricted Stock Plan for Non-Employee Directors.
Non-employee directors are not eligible to participate in
any of the plans discussed in the Human Resources Committee
Report on Executive Compensation. Directors may be
reimbursed for reasonable travel expenses incurred in
attending Board and committee meetings.
In addition, the Company has established a Retirement
Plan for non-employee directors. A director who retires
after ten years of service on the Board is entitled to
receive an annual retirement benefit equal to the annual
retainer paid to such director immediately prior to
retirement. (A director who has served on the Board for at
least one year but less than ten years receives a prorated
amount.) The retirement benefits may be adjusted
periodically and are payable for life. In the event of a
director's death while serving as a member of the Board, his
or her spouse is entitled to receive an annual death benefit
equal to 50% of the annual retainer in effect at the time of
such director's death. During 1995, a total of $112,500 was
paid to former directors under the plan. The Company has
established a trust fund pursuant to which the retirement
benefits are to be paid for directors retiring after 1989.
In 1992 the Board of Directors established a Charitable
Endowment Program for members of the Board of Directors who
have at least one year of service as a director. A portion
of the program is currently funded by life insurance. The
Company intends to make tax deductible charitable
contributions of $1 million per director, paid out over a
period of ten years following the death of the director.
Directors derive no financial benefit from the program since
any insurance proceeds and charitable deductions accrue
solely to the Company. Because of such deductions and use
of insurance, the long-term cost to the Company is expected
to be low.
The Company's Board of Directors annually appoints
certain directors to serve on standing committees of the
Board of Directors, which currently include the Audit, Human
Resources, Governance, Finance and Executive Committees.
The Audit Committee's primary responsibility is to
review and report to the Board on the Company's accounting
policies, the adequacy of its financial and internal
auditing controls, and the reliability of financial
information reported to the public. The Committee has the
authority to approve the scope of the annual audit and to
authorize the release of annual financial statements. The
Audit Committee held four meetings during 1995. Mr. Ferland
(Chairman), Mr. Dooley, Mr. Powers and Mr. Washburn, none of
whom is an employee of the Company or a subsidiary,
presently serve on the Audit Committee.
The Human Resources Committee reviews remuneration for
the Company's executives as described in the Human Resources
Committee Report on Executive Compensation located on page
10. The Committee reviews the Company's benefit plans and
policies and practices with respect to employee relations.
The Committee acts as Plan Administrator for the 1985 Stock
Option Plan, the 1995 Stock Option Plan, the Directors'
Retirement Plan, the 1989 Restricted Stock Plan for Non-
Employee Directors, and the Long-Term and Short-Term
Incentive Plans. The Human Resources Committee held six
meetings during 1995. Mr. Ellis (Chairman), Mr. Campbell,
Mr. Powers and Mrs. Rice, none of whom is an employee of the
Company or a subsidiary, presently serve on the Human
Resources Committee.
The Governance Committee reviews the organization and
performance of the Board of Directors and reviews and
recommends Director compensation. The Committee also
reviews the Company's policies and practices with respect to
community relations and recruits and nominates candidates
for Board membership in conjunction with the Chief Executive
Officer. In accordance with the Company's By-Laws, any
nomination by a stockholder must be by proper written notice
given to the Corporate Secretary not later than February 18,
1996 in order to be considered for the 1996 Annual Meeting.
The Governance Committee held four meetings during 1995.
Mr. Campbell (Chairman), Mr. Alvord, Mr. Ellis and Mrs. Rice
presently serve on the Governance Committee.
Other committees of the Board of Directors are the
Finance Committee and the Executive Committee. The Finance
Committee reviews the investment plan of the Company,
investor relation activities, and other matters involving
the Company's financial resources. Mr. Dooley (Chairman),
Mr. Alvord, Mr. Ferland and Mr. Washburn presently serve on
the Finance Committee, which held five meetings in 1995.
The Executive Committee acts on behalf of the Board of
Directors in the interim between meetings of the Board when
prompt, formal action is necessary. Mr. Wilde (Chairman),
Mr. Alvord, Mr. Campbell, Mr. Dooley, Mr. Ellis and Mr.
Ferland presently serve on the Executive Committee, which
did not meet in 1995.
<TABLE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The Company is unaware of any stockholder who on
February 1, 1996 was the beneficial owner of 5 percent or
more of the Company's outstanding common stock, except as
noted in the following table.
<CAPTION>
Name of Beneficial Owner Amount of Shares Percent of Class
<S> <C> <C>
The Hartford Steam Boiler 1,033,874 (1) 5.10%
Inspection and Insurance Company
Leveraged Employee Stock Ownership Trust
c/o Fleet Financial Group
777 Main Street
Hartford, Connecticut 06115
</TABLE>
(1) Shares held by the trust are voted in accordance with the
instructions of participants.
<TABLE>
The number of shares of Company common stock beneficially owned
as of February 1, 1996 by each nominee and director, by each
executive officer named in the Summary Compensation Table, which in
each case represents less than 1% of the common stock outstanding as
of such date, and by all current directors and executive officers as
a group, is shown in the table below. Unless otherwise indicated,
each officer, nominee and director has sole voting and investment
power (or shares such powers with a family member) with respect to
common stock shown as held directly. All shares shown as held
indirectly reflect sole voting and investment power exercised by the
individual specified unless otherwise indicated.
<CAPTION>
Beneficial Owner Directly Held Indirectly Held Total
<S> <C> <C> <C>
Joel B. Alvord 1,542 1,542
Colin G. Campbell 2,126 2,400 (1) 4,526
Donald M. Carlton 61,021 (2) 61,021
Richard G. Dooley 7,952 7,952
Michael L. Downs 37,729 (3) 37,729
William B. Ellis 1,582 1,582
E. James Ferland 2,326 2,000 (4) 4,326
John J. Kelley 57,235 (5) 57,235
Gordon W. Kreh 130,509 (6) 700 (7) 131,209
T. Skipwith Lewis 84,969 (8) 84,969
John A. Powers 2,876 2,876
Lois Dickson Rice 1,332 200 (9) 1,532
John M. Washburn, Jr. 11,526 2,000 (10) 13,526
Wilson Wilde 114,935 (11) 10,264 (12) 125,199
</TABLE>
All Current Directors and Executive Officers
as a Group (18 in number): 502,557 (13)
(1) 800 shares held in trusts for benefit of children and
1,600 shares held as trustee of trusts for benefit of
nieces and nephews, over which Mr. Campbell exercises
shared voting and investment power.
(2) Includes 52,400 shares subject to options to purchase
shares of Company common stock which are exercisable on
or before April 1, 1996.
(3) Includes 25,000 shares subject to options to purchase
shares of Company common stock which are exercisable on
or before April 1, 1996.
(4) Shares held by spouse.
(5) Includes 49,500 shares subject to options to purchase
shares of Company common stock which are exercisable on
or before April 1, 1996.
(6) Includes 120,000 shares subject to options to purchase
shares of Company common stock which are exercisable on
or before April 1, 1996.
(7) 300 shares held by spouse, 200 shares held by daughter
and 200 shares held by son.
(8) Includes 57,800 shares subject to options to purchase
shares of Company common stock which are exercisable on
or before April 1, 1996.
(9) As trustee.
(10)Shares held by spouse.
(11)Includes 103,300 shares subject to options to
purchase shares of Company common stock which are
exercisable on or before April 1, 1996.
(12)160 shares held by spouse. 10,104 shares held in a
charitable foundation, over which Mr. and Mrs. Wilde
exercise shared voting and investment power.
(13)Includes 395,700 shares subject to options to
purchase shares of Company common stock which are
exercisable on or before April 1, 1996. Assuming the
exercise of all such options, the percentage of common
stock owned by directors and executive officers as a
group would be 2.43% of the common stock outstanding.
Reporting of Securities Transactions
Ownership of and transactions in Company stock by
executive officers and directors of the Company are required
to be reported to the Securities and Exchange Commission
pursuant to Section 16(a) of the Securities Exchange Act of
1934. With respect to the fiscal year ended December 31,
1995, a required form was inadvertently filed late by three
individuals, James F. Casey, Vice President and Controller,
William B. Ellis, Director and Lois D. Rice, Director.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive compensation programs for the senior officers
of the Company (the "executives") are administered by the
Human Resources Committee of the Board of Directors (the
"Committee"). A nationally recognized compensation
consultant also reviews and analyzes the Company's executive
compensation policies and practices in order to advise the
Committee as more fully described below. The Committee
believes that the structure of the Company's compensation
programs provides a direct link between Company performance
and executive compensation.
Under the direction of the Committee, executive
compensation programs are structured to provide performance-
based incentives to achieve the Company's short and long-
term goals, and to be competitive with peer companies in
order to attract and retain key individuals. The peer
companies used for this analysis are selected based on their
size and specific lines of business. For 1995, this
compensation assessment peer group was composed of seventeen
leading property/casualty insurance and engineering services
companies (including four of the six insurance companies in
the S&P 500 Property/Casualty Insurance Index used in the
Performance Graph located on page 20). Base salary and
variable compensation paid under the Company's incentive
plans (Short-Term and Long-Term Incentive Plans and the 1985
and 1995 Stock Option Plans) in 1995 to executives as a
group, and for Mr. Kreh individually, were below the median
range of that paid to executives by the companies in this
compensation assessment peer group according to information
compiled by the Company's compensation consultant.
Base salary adjustments are made for executives upon an
analysis of individual performance, changes in
responsibilities, and comparative data for base salaries
paid to executives with similar responsibilities in the
Company's compensation assessment peer group. Annual salary
adjustments for executives are recommended by the Chief
Executive Officer and approved by the Human Resources
Committee. The Committee determines adjustments for the
Chief Executive Officer. For 1995, executives' base salary
adjustments were made as a result of increases in
responsibilities and for competitive reasons based upon
comparisons with the compensation assessment peer group.
Mr. Kreh received an 11% base salary increase based on the
Committee's assessment of the competitive factors described
above.
The Company's Short-Term Incentive Plan provides for
the annual award of bonuses to key employees (presently
limited to the officer group of the Company, including
executive officers other than Dr. Carlton) at the end of the
fiscal year provided certain performance measures are
achieved. Under a schedule defined by the plan that
establishes threshold, target and maximum levels, the
Committee establishes a pool of incentive award dollars
based on the actual percentage of Annual Budgeted Net Income
Per Share (cited in the Business Plan of the Company)
achieved for the year and the performance of the Company as
compared to the performance of the insurance industry and/or
other appropriate industries with reference to such
performance measures as the Committee deems appropriate. In
evaluating Company performance, the Committee considers such
factors as (listed in order of importance, from highest to
lowest): growth in operating income, combined ratio, return
on equity and engineering services' margin. For 1995, the
Committee evaluated Company results achieved for these
measures, as compared, where appropriate, to published
results achieved or anticipated for the property/casualty
insurance industry as a whole. In 1995 the Actual
Percentage of Budgeted Net Income Per Share achieved reached
the target level set under the schedule defined under the
plan for establishment of the bonus pool; the Company
outperformed the property/casualty insurance industry for
both return on equity and combined ratio; and the Committee
determined that results achieved for growth in operating
income and engineering services' margin were superior.
Once the pool is established, individual awards are
then determined by the Chief Executive Officer, based on the
participant's performance during the plan year. The awards
may range from 0 to 60% of the participant's base salary.
The Committee determines the award for the Chief Executive
Officer and has final authority over all awards made under
the plan. The total award payable to the Chief Executive
Officer under the Short-Term and Long-Term Incentive Plans
is limited to 100% of his base salary. Mr. Kreh was awarded
$300,000 based on the Committee's evaluation of the
Company's 1995 performance as described above.
Long-term incentives are provided to executives through
awards made under the Company's Long-Term Incentive Plan.
Executives other than Dr. Carlton are eligible for awards
under the plan. An amendment to the Long-Term Incentive
Plan was approved by stockholders at their 1995 Annual
Meeting which denominates awards in shares of Company common
stock. Payouts made under the plan as amended will begin
with the 1994-1996 Performance Period which ends on December
31, 1996.
Payouts made for the Performance Period ending on
December 31, 1995 were determined in accordance with the
terms of the plan in effect prior to amendment as described
in this paragraph. Payouts made were based upon the
Company's achievement of specified performance objectives
("Performance Measures") established by the Committee at the
beginning of the three-year Performance Period. For the
performance period that ended on December 31, 1995, these
measures were net income per share, expense ratio and return
on equity. The payout made was the sum of the percentages
payable for each Performance Measure multiplied by the
participant's base salary rate in effect at the end of the
Performance Period. A threshold amount for a minimum level
of achievement for the Performance Measures was set along
with the Performance Measures at the beginning of the
Performance Period. If the threshold amount had not been
reached, the payout would have been zero. If the target for
each of the Performance Measures was met, the payout
percentage would have been 25%. If actual performance
exceeded the Performance Measures, the payout percentage
would have been increased, up to a maximum of 40%. Awards
were prorated for length of service as an eligible executive
during the Performance Period, and for varying degrees of
performance between the threshold and maximum levels of
performance. The payout percentage for the Chief Executive
Officer was one and one-half times the payout percentage for
all other participants. For the Performance Period ending
in 1995, the targets set for the three Performance Measures
were not met, but the threshold amount was achieved for the
Performance Measure set for return on equity. The Committee
awarded $50,625 to Mr. Kreh under the Long-Term Incentive
Plan for the Performance Period ending in 1995 based on
these results.
Payouts beginning with the one for the 1994-1996
Performance Period will be made under the terms of the plan
as amended. Under the amended plan, the Committee
establishes specific Performance Goals for each participant
(or all participants as a group) at the beginning of each
Performance Period based on one or more of the following
Performance Measures: combined ratio; expense ratio; net
income per share; return on equity; total stockholder
return; return on assets; revenues; operating margin;
increase in book value; and market share. For each
Performance Goal, an award schedule of Performance
Contingent Units is established for minimum, target and
maximum attainment of such goal, based on a percentage of a
participant's base salary rate at the beginning of the
period (adjusted for any promotional increases during the
Performance Period) divided by the average of the high and
low trading prices of Company common stock on the first
trading date of the Performance Period. If the minimum
level of achievement is not reached for the Performance
Measures, the payout will be zero.
The actual Performance Contingent Award to be paid to a
participant at the conclusion of the Performance Period
shall be based on the level of attainment of the Performance
Goals established for such period. The maximum award of
Performance Contingent Units for any participant for a
Performance Period cannot exceed 60% of the participant's
base salary divided by the fair market value of Company
common stock on the first trading day of the Performance
Period. Awards are prorated for actual length of service as
an eligible executive during the Performance Period. Any
payments shall be made in cash or in shares of Company
common stock (which may be restricted shares), as determined
by the Committee. At the discretion of the Committee,
Dividend Equivalents may be paid in conjunction with award
payouts made under the plan, equal to the amount of cash
dividends that would have been paid during the Performance
Period with respect to an award of Performance Contingent
Units if the award had been made in Company common stock.
For the three-year Performance Period which runs January 1,
1995 through December 31, 1997, the Performance Measures are
net income per share, expense ratio and return on equity.
During 1995, executive officers were eligible for
awards under the Company's 1985 and 1995 Stock Option Plans.
(The 1985 Stock Option Plan expired in April of 1995 and was
replaced by the 1995 Stock Option Plan, which was approved
by stockholders at their 1995 Annual Meeting.) The method
for determining awards, as described herein, is identical
for both the 1985 plan and the 1995 plan. Plan awards
provide executives with long-term incentives and reinforce
the link between executives' long-term interests and those
of stockholders. Stock options are awarded based upon the
market price of the Company's common stock on the date of
the grant and provide a vehicle to reward executives only if
the price of Company common stock increases above the grant
price.
Awards to be made to specific participants are
determined by the Committee in its discretion. The
Company's outside compensation consultant reviews each
executive's award in comparison to awards made to
individuals employed by companies in the compensation
assessment peer group described above and makes
recommendations as to whether the awards made to Company
executives should be adjusted. Several factors were
considered in determining the size of stock option grants to
executive officers in 1995, including competitive practices
at companies in the compensation assessment peer group, the
Committee's perception of the recipient's ability to affect
the results of the Company over time and individual levels
of responsibility. Executives were not awarded restricted
stock in 1995 because the Committee feels that stock options
provide a more appropriate incentive and because they are
more closely linked to stockholders' long-term interests.
Mr. Kreh was awarded 47,500 stock options in 1995 based on
the Committee's review of the criteria outlined above.
Donald M. Carlton, Executive Vice President and a
director of the Company, served during 1995 as President,
Chairman of the Board and a director of Radian Corporation,
a subsidiary of the Company. As a Radian Corporation
executive, Dr. Carlton's base salary, annual and long-term
bonuses were determined by the Compensation Committee of the
Board of Directors of Radian Corporation. The calculation
of 1995 adjustments to Dr. Carlton's base salary, and annual
and long-term bonuses payable for 1995, was made in the same
manner as described above for other executives of the
Company but using performance measures established for
Radian Corporation by the Compensation Committee of the
Board of Directors of Radian Corporation rather than the
Human Resources Committee of the Board of Directors of the
Company. Any such adjustments or awards were then subject
to final approval of the Human Resources Committee of the
Company's Board of Directors.
The Company's outside compensation consultant also
conducts an annual review of each executive's compensation
package in its entirety in comparison with the total
compensation package for executives in the Company's
compensation assessment peer group and makes recommendations
to the Committee as to any appropriate adjustments that
should be made.
Effective for fiscal years beginning on or after
January 1, 1994, publicly held corporations may not deduct
certain types of compensation paid to the Chief Executive
Officer and the next four most highly compensated
individuals to the extent such compensation exceeds $1
million. Certain types of compensation are excluded from
this limitation, including performance-based compensation
paid under plans that are approved by stockholders and
administered by outside directors.
Based on the current provisions of this law, any
compensation derived from the exercise of stock options
previously granted under the 1985 Stock Option Plan will be
exempt from the limit on the corporate tax deduction. The
1995 Stock Option Plan and the amended Long-Term Incentive
Plan, as approved by stockholders at the 1995 Annual
Meeting, were designed to meet the current provisions of the
law so that stock options awarded under the 1995 Stock
Option Plan and payouts made under the amended Long-Term
Incentive Plan will also be excluded from the deduction
limit. Any amounts payable under the Short-Term Incentive
Plan to the named executives would count toward the
limitation as would base salary and the value of any vesting
restricted stock, but these amounts are not expected to
reach the $1 million limit for any of the named executives.
Under the current provisions of the law, compensation paid
to executives during 1995 was fully deductible and the
Company believes that all compensation paid to executives
during 1996 will also be fully deductible.
Respectfully submitted by the Human Resources Committee of
the Board of Directors of the Company
William B. Ellis (Chairman)
Colin G. Campbell
John A. Powers
Lois Dickson Rice
<TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth cash compensation for
the five most highly compensated executive officers of the
Company serving as executive officers on December 31, 1995
for services rendered in all capacities to the Company and
its subsidiaries during the last three fiscal years.
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
------------------------
Securities
Other Restricted Underlying All Other
Annual Stock Options LTIP Compen-
Name and Principal Position Year Salary Bonus Compensation(1) Award(s)(2) (Number Payouts(3) sation(4)
of shares)
- --------------------------- ---- ------ ----- --------------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gordon W. Kreh, President 1995 $484,615 $300,000 0 0 47,500 $ 50,625 $ 6,532
and Chief Executive Officer 1994 $419,231 $157,500 0 0 50,000 $ 94,380 $ 7,210
1993 $246,731 0 0 $ 45,800 59,000 $ 15,069 $ 6,416
Donald M. Carlton, 1995 $384,684 $137,102 0 0 0 $ 42,898 $23,314
Executive Vice President 1994 $386,511 $160,000 0 0 0 0 $24,062
1993 $384,384 0 $29,369 $ 45,800 23,700 $ 56,135 $28,115
John J. Kelley 1995 $267,308 $125,000 0 0 30,000 $ 18,563 $ 5,922
Senior Vice President 1994 $229,077 $ 75,000 0 0 25,000 $ 38,125 $ 6,737
1993 $173,308 0 0 $ 34,350 9,000 $ 14,105 $ 8,555
Michael L. Downs 1995 $248,462 $125,000 0 0 30,000 $ 11,645 $ 6,532
Senior Vice President(5) 1994 $180,442 $ 60,000 0 0 25,000 $ 9,319 $ 7,160
T. Skipwith Lewis 1995 $264,308 $ 65,000 0 0 20,000 $ 18,090 $ 8,522
Senior Vice President 1994 $252,923 $ 40,000 $17,355 0 25,000 $ 39,040 $ 7,782
1993 $242,923 0 0 $ 45,800 12,000 $ 19,065 $ 9,978
</TABLE>
(1) The amounts shown in this column represent related tax
benefits received upon exercise of stock options.
(2) The value of restricted stock shown in this column is
calculated by multiplying the closing price of Company
common stock on the date the restricted shares were granted
by the number of shares awarded. Recipients are entitled to
receive dividends on restricted stock to the extent paid on
the Company's common stock generally. The total number of
restricted shares held on 12/29/95 by each of the named
executive officers, and the aggregate value of such shares,
calculated by multiplying them by the closing price of
Company common stock on such date, is as follows: Mr. Kreh:
800 shares, $40,000 aggregate value; Dr. Carlton: 800
shares, $40,000 aggregate value; Mr. Kelley: 600 shares,
$30,000 aggregate value; Mr. Downs: 0 shares; Mr. Lewis: 800
shares; $40,000 aggregate value.
(3) The LTIP payouts column shows payouts made under the
Company's Long-Term Incentive Plan for all executives other
than Dr. Carlton. (Dr. Carlton's award was payable under
Radian Corporation's Long-Term Incentive Plan.) More
detailed information on the calculation of such awards is
located in the Human Resources Committee Report on Executive
Compensation located on page 10.
(4) The values listed in this column include the following
amounts for 1995: a) Company contributions of $1,912 under
the Company's Employee Stock Ownership Plan; b) Company
contributions under the Company's Thrift Incentive Plan and
interest accumulated on accounts in the Supplemental Thrift
Plan as follows (Dr. Carlton does not participate in these
plans): Mr. Kreh, $4,620; Mr. Kelley, $4,010; Mr. Downs,
$4,620; Mr. Lewis, $6,610; c) Company contributions of
$6,750 for Dr. Carlton under the Radian Corporation 401(k)
Thrift Plan; d) $14,652 in life insurance premiums paid in
1995 on behalf of Dr. Carlton in order to fund the Company's
prospective charitable contribution under the Company's
Charitable Endowment Program, described on page 7. Dr.
Carlton derives no financial benefit from the program since
all insurance proceeds and charitable deductions accrue
solely to the Company.
(5) Compensation for Mr. Downs is reported beginning in
1994, when he became an executive officer of the Company.
<TABLE>
STOCK OPTION AND LONG-TERM INCENTIVE PLAN TABLES
The following tables show information with respect to stock
options and potential awards under the Company's Long-Term
Incentive Plan for the individuals named in the Summary
Compensation Table.
<CAPTION>
Option Grants in Last Fiscal Year (ended 12/31/95)
Potential Realizable
Individual Grants Value at Assumed Annual
----------------------------------------- Rates of Stock Price
Percent of Appreciation for
Number of Total Option Term(2)
Securities Options -----------------------
Underlying Granted to Exercise
Options Employees or Base Expira-
Name Granted in Fiscal Price tion
(1) Year ($/Share) Date 5% 10%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gordon W. Kreh 23,750 7.8% $41.87 4/13/2005 $625,337 $1,584,837
23,750 7.8% $42.75 4/17/2005 $638,400 $1,618,087
Donald M. Carlton 0 - - - - -
John J. Kelley 15,000 4.9% $41.87 4/13/2005 $394,950 $1,000,950
15,000 4.9% $42.75 4/17/2005 $403,200 $1,021,950
Michael L. Downs 15,000 4.9% $41.87 4/13/2005 $394,950 $1,000,950
15,000 4.9% $42.75 4/17/2005 $403,200 $1,021,950
T. Skipwith Lewis 10,000 3.3% $41.87 12/31/97 $ 58,900 $ 122,800
10,000 3.3% $42.75 12/31/97 $ 60,030 $ 125,500
</TABLE>
(1) Options granted are nonstatutory stock options. The
exercise price of the option is equal to the fair market
value of the stock on the date of the grant. Payment for
the shares as to which an option is exercised may be made in
cash or in shares of Company common stock or a combination
of cash and stock. These options may not be exercised any
earlier than one year or any later than ten years from the
date of the grant. Participants will be permitted to
satisfy any federal, state or local tax requirements due
upon exercise of a stock option by delivering to the Company
already-owned Company common stock or by directing the
Company to retain stock otherwise issuable upon such
exercise to the participant, having a fair market value
equal to the amount of the tax.
(2) These figures are calculated pursuant to SEC rules by
multiplying the number of options granted by the difference
between the option exercise price and a future hypothetical
stock price, assuming the value of Company common stock
appreciates 5% or 10% each year, compounded annually, for
the life of the options. (Mr. Lewis' options will expire
12/31/97, two years following his retirement from the
Company.) These figures are not intended to forecast
possible future appreciation, if any, of the Company's stock
price.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year (ended 12/31/95) and
FY-End Option Values
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-money
Shares Options at Options at
Acquired on Value Fiscal Year-end Fiscal Year-end
Name Exercise Realized (#) ($)
(#) ($) Exercisable/ Exercisable/
Unexercisable unexercisable
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gordon W. Kreh 0 $0 120,000/47,500 $250,250/$362,306
Donald M. Carlton 0 $0 52,400/0 $13,775/0
John J. Kelley 0 $0 49,500/30,000 $90,688/$228,825
Michael L. Downs 0 $0 25,000/30,000 $90,688/$228,825
T. Skipwith Lewis 0 $0 57,800/20,000 $90,688/$152,550
</TABLE>
<TABLE>
<CAPTION>
Long-Term Incentive Plan -- Awards in Last Fiscal Year (ended 12/31/95)
- ------------------------------------------------------------------------
Estimated Future Payouts under Non-stock
Number of Performance Price-based Plans(2)
Shares, or Other
Units or Period Until
Other Maturation or
Name Rights (1) Payout Threshold Target Maximum
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gordon W. Kreh * 1995-1997 3,216 4,231 7,786
Donald M. Carlton n/a 1995-1997 $70,338 $92,550 $170,292
John J. Kelley * 1995-1997 1,296 1,706 3,139
Michael L. Downs * 1995-1997 1,248 1,643 3,024
T. Skipwith Lewis * 1995-1997 406 535 984
</TABLE>
(1) The actual number of performance units awarded at the
end of each period, if any, is not yet determinable because
the number of units earned will be based on Company
performance during the Performance Period as described
below.
(2) For all individuals other than Dr. Carlton (whose
potential award would be payable in cash under Radian
International LLC's Long-Term Incentive Plan), represents
the potential number of Performance Contingent Units that
may be awarded to participants for the 1995-1997 Performance
Period for the indicated levels of performance under the
terms of the Long-Term Incentive Plan, a detailed
description of which is contained in the Human Resources
Committee Report on Executive Compensation on page 10. If
the threshold, target or maximum goals are reached, payouts
under the plan will be made in shares of Company common
stock (which may be restricted shares) at the end of the
Performance Period, or its corresponding cash value at that
time. Awards are prorated for length of service during the
Performance Period, and for varying degrees of performance
between the threshold and maximum levels of performance.
(For the Performance Period that ended on December 31, 1995,
payouts were made as indicated in the Summary Compensation
Table located on page 15).
Retirement Plans
<TABLE>
The following table shows the estimated annual amounts
payable on a life annuity basis to a participant retiring on
12/31/95 at age 65 under the Company's qualified defined
benefit pension plan, as well as nonqualified supplemental
pension plans that provide benefits that would otherwise be
denied participants by reason of certain Internal Revenue
Code limitations on qualified plan benefits, based on
compensation that is covered under the plans and years of
service with the Company. All executives, other than Dr.
Carlton, participate in these plans. Dr. Carlton is a
participant in the Radian International LLC plans described
below. (A small portion of Mr. Kreh's annual retirement
benefit as calculated pursuant to the table shown below will
be paid from The Boiler Inspection and Insurance Company of
Canada's retirement plan due to Mr. Kreh's initial service
and earnings with that affiliate.)
<CAPTION>
Final Years of Service
Average ----------------
Earnings 15 20 25 30 35
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
200,000 46,056 61,408 76,760 82,760 88,760
300,000 70,056 93,408 116,760 125,760 134,760
400,000 94,056 125,408 156,760 168,760 180,760
500,000 118,056 157,408 196,760 211,760 226,760
600,000 142,056 189,408 236,760 254,760 272,760
700,000 166,056 221,408 276,760 297,760 318,760
800,000 190,056 253,408 316,760 340,760 364,760
900,000 214,056 285,408 356,760 383,760 410,760
</TABLE>
Benefits payable under the Company's Retirement Plan are
based on the average of the participant's highest three
consecutive years of earnings in the 5-year period before
retirement, and on years of service. Earnings covered under
the plan include compensation listed in the Summary
Compensation Table under the "Salary", "Bonus", "Restricted
Stock Awards" and "LTIP Payouts" columns. (Restricted stock
awards are included in the year the shares vest due to the
expiration of the restricted period of time, based on the
fair market value of the shares on the vesting date, as
opposed to the grant date values listed in the Summary
Compensation Table. Restricted stock awarded after January
1, 1994 is not included in the definition of earnings under
the plan.) Credited years of service as of December 31,
1995 for the individuals named in the Summary Compensation
Table (other than Dr. Carlton, who does not participate in
these plans) is as follows: Mr. Kreh, 25 years; Mr. Kelley,
24 years; Mr. Downs, 23 years; Mr. Lewis, 15 years.
In addition, the executive officers named in the
Summary Compensation Table, other than Dr. Carlton, are
covered under a supplemental retirement/death benefit
program which is currently funded, in part, by life
insurance. The Company owns the cash values and is a
beneficiary under the policies. Under the terms of each of
the named executives' agreements, if the executive officer
should die prior to his retirement, his beneficiary will be
entitled to one of the following two options that has been
selected by the executive: 1) an annual death benefit equal
to 50% of the executive's base salary for fifteen years; or
2) three times the executive's base salary at the time of
his death. At retirement the executive is entitled to an
annual retirement supplement equal to 35% of his base salary
for fifteen years. Executives who entered the program prior
to January 1, 1994 are entitled to choose one of the
following benefits in lieu of the 35% annual retirement
supplement: 1) a paid-up insurance policy equal to three
times the executive's base salary; or 2) the cash value of
the insurance contract used to fund the benefit.
Dr. Carlton is covered under two supplemental executive
retirement programs with Radian International LLC. Under
the first program, he will receive, if he remains employed
by Radian International LLC until his retirement at age 65,
the total sum of $400,000 paid out over a period of ten
years. Premiums paid in 1995 on Dr. Carlton's behalf for
life insurance to fund this benefit were $9,087. Under the
second program, Dr. Carlton will receive a target annual
benefit of $159,569 if he retires on or after age 65. The
benefit will be reduced if he retires prior to age 65.
Employment Arrangements
The members of the Board of Directors believe that it
is in the best interests of the stockholders for the Company
to have employment agreements with each of the executive
officers (and certain other key employees) to encourage them
to remain in the Company's employ during the uncertain times
which attend a change in control of the Company. Each of
the executive officers of the Company has entered into such
an agreement. The agreements obligate the officer to remain
in the employment of the Company for six months following a
change in control of the Company. Under the agreements, a
change in control shall be deemed to have occurred if (i)
any "person" is or becomes the "beneficial owner" (as such
terms are defined in the Securities Exchange Act of 1934)
directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities; or (ii) during any
period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors
of the Company cease for any reason to constitute at least a
majority thereof unless the nomination for election or
election of each director, who was not a director at the
beginning of the period, was approved by a vote of at least
two-thirds of the directors then still in office who were
directors at the beginning of the period. If an officer is
dismissed from the Company for any reason other than
retirement, disability or defalcation within the six-month
period, or if an officer leaves voluntarily or is dismissed
from the Company for any reason other than retirement,
disability or defalcation after the six-month period, he is
entitled to receive 299% of his average annualized base
salary and bonuses for the five years preceding the change
in control. The Company has established a trust (presently
unfunded) pursuant to which payments under these agreements
and certain other benefit plans will be paid in the event of
a change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are none.
TRANSACTIONS WITH MANAGEMENT
Fleet Financial Group (formerly Shawmut National
Corporation), of which Mr. Alvord is Chairman and a
director, performed various services for the Company in
1995, among which were acting as the trustee for the
Company's Thrift Incentive Plan, the Retirement Plan and the
Employee Stock Ownership Plan. The Company and certain of
its subsidiaries also maintained various accounts with Fleet
Financial Group during 1995. In the opinion of the Company,
the fees for these services were comparable to those charged
by other financial institutions. The Company and its
subsidiaries maintain banking relationships with various
other financial institutions.
PERFORMANCE GRAPH
The following line-graph compares cumulative, five-year
shareholder returns on Company common stock on an indexed
basis with the S&P 500 Stock Index and the S&P 500
Property/Casualty Insurance Index, based on an initial
investment on December 31, 1990 of $100.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hartford Steam Boiler 100 122.03 128.71 102.17 95.85 126.32
S&P 500 100 130.47 140.41 154.56 156.60 215.45
S&P Property/Casualty 100 125.19 146.61 144.02 151.07 204.54
</TABLE>
PROPOSAL 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the firm of
Coopers & Lybrand LLP be appointed as independent public
accountants for the Company for the year ending December 31,
1996. Coopers & Lybrand LLP has served as the Company's
independent public accountants since 1965.
Representatives of Coopers & Lybrand LLP will be
present at the meeting to make a statement if they wish to
do so, and will be available to respond to appropriate
questions raised by stockholders.
Unless otherwise directed, the shares represented by
the enclosed proxy card will be voted for the appointment of
Coopers & Lybrand LLP as independent public accountants for
1996. The affirmative vote of a majority of the votes
represented at the meeting is required for approval of their
appointment.
The Board of Directors unanimously recommends a vote
FOR Proposal 2.
PROPOSAL 3
STOCKHOLDER PROPOSAL
Ms. Linda Koza advises that she intends to present for
consideration and action at the 1996 Annual Meeting the
resolution set forth below. Information on the
shareholdings and address of the proponent is available upon
request to the Corporate Secretary of the Company.
RESOLVED: That the shareholders of Hartford Steam
Boiler Inspection and Insurance Co. recommend that the Board
of Directors take the steps necessary to provide the
election of directors ANNUALLY instead of the stagger system
which exists.
Proponent's Supporting Statement
Reasons: A great majority of New York Stock Exchange
listed corporations elect all their directors each year.
This insures greater accountability by ALL Directors to
ALL shareholders each year. This insures that the Board
serves shareholder interests and does not seek to preserve
the status quo and its self perpetuation.
Last year the owners of 5,195,378 shares representing
33.97% of shares represented and entitled to vote, voted FOR
this proposal.
If you AGREE, please mark FOR on your proxy for
Proposal 3.
Statement in Opposition to Proposal
The Board of Directors again recommends a vote AGAINST
this proposal, which was defeated at the 1995 Annual
Meeting. Last year, 9,627,820 shares, representing 62.95%
of the shares represented and entitled to vote were voted
against this proposal.
The Board of Directors firmly believes that a
classified board, where approximately one-third of the
directors are elected annually, is in the best interests of
the Company and its stockholders. Continuity and stability
in the management of Company affairs are enhanced by having
directors who serve three-year rather than one-year terms.
At the same time, accountability is assured by requiring
that at least one third of the board must be elected each
year. As a classified board, the Board can represent more
effectively the interests of the Company's stockholders in a
variety of circumstances, including, for example, responding
to situations created by demands or actions by a minority
stockholder or group, or proponents of a takeover or
restructuring.
It should be noted that adoption of this proposal would
not in itself eliminate Board classification, which would
require that an amendment to the Charter of the Company be
presented to stockholders for action at a future
stockholders' meeting. Approval of that amendment by not
less than 80% of the outstanding shares entitled to vote
would be required for the current system to be eliminated,
unless the Board of Directors were to recommend such an
amendment, in which case approval of not less than 50% of
the outstanding shares entitled to vote would be required in
order for the change to be made.
The affirmative vote of a majority of the votes
represented at the meeting and entitled to vote is required
for approval of this proposal.
The Board of Directors unanimously recommends a vote
AGAINST Proposal 3.
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholders who wish to submit written proposals for
possible inclusion in next year's proxy statement must make
certain that they are received no later than October 30,
1996. Proposals should be sent to the Corporate Secretary,
The Hartford Steam Boiler Inspection and Insurance Company,
One State Street, P.O. Box 5024, Hartford, Connecticut
06102-5024.
OTHER BUSINESS TO COME BEFORE THE MEETING
The management does not know of any matters to be
presented for consideration at the meeting other than the
matters described in the Notice of Annual Meeting; but if
other matters are properly presented, it is the intention of
the persons named in the accompanying proxy to vote on such
matters in accordance with their judgment. Stockholders
desiring to nominate persons for election as directors or to
bring other business before stockholders at the meeting must
provide the appropriate written notice required by the
Company's By-Laws, copies of which are available upon
request to the Corporate Secretary of the Company.
ADDITIONAL INFORMATION AVAILABLE
THE COMPANY FILES AN ANNUAL REPORT ON FORM 10-K WITH
THE SECURITIES AND EXCHANGE COMMISSION. STOCKHOLDERS MAY
RECEIVE A COPY OF THE 10-K BY SENDING A WRITTEN REQUEST TO
THE OFFICE OF THE TREASURER, THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE COMPANY, ONE STATE STREET, P.O. BOX
5024, HARTFORD, CONNECTICUT 06102-5024.
By Order of the Board of Directors,
R. K. PRICE
Corporate Secretary
Printed on recycled paper
EDGAR APPENDIX
The following is the text of the Company's 1996 form of proxy:
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY
ONE STATE STREET, P.O. BOX 5024, HARTFORD, CONNECTICUT 06102-5024
ANNUAL MEETING OF STOCKHOLDERS - APRIL 16, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Colin G. Campbell, John A. Powers and John
M. Washburn, Jr. each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side,
all the shares of common stock of the Company held on record by the
undersigned on February 6, 1996 at the Annual Meeting of Stockholders to be held
on April 16, 1996 or any adjournment thereof, upon all matters properly coming
before said Annual Meeting, including but not limited to the matters set forth
on the reverse side, hereby revoking any proxy heretofore given.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND
AGAINST PROPOSAL 3.
(Important - To be signed and dated on reverse side) SEE REVERSE SIDE
- ----------------------------------------------------------------------------
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
The Hartford Steam Boiler Inspection and Insurance Co.
Regardless of whether you plan to attend the Annual Meeting of Stockholders,
you can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
COMPANY HIGHLIGHTS DURING 1995
Highlights of the Company's 1995 financial results include:
* a 21% increase in earnings per share to $3.07;
* an 11.4% increase in total revenue to $672.2 million;
* a 90.7 combined ratio - far better than the industry average;
* an 8.9% margin in our Engineering Services businesses; and
* return on equity of 19.5%.
1995 was also the 30th consecutive year that the Company increased dividends
paid to stockholders.
During 1995, the Company and The Dow Chemical Company announced plans to form
a new company, Radian International LLC, which began operations in January 1996
and will provide environmental, information technology, and strategic chemical
management services to industries and government worldwide.
[x]Please mark votes as in this example.
The Board of Directors recommends a vote FOR proposals 1 and 2.
1. Election of Directors
Nominees:
Joel B. Alvord, Richard G. Dooley, Gordon W. Kreh and Lois Dickson Rice.
FOR ALL NOMINEES []
WITHHELD FROM ALL NOMINEES []
[] ------------------------
For all nominees except as noted above
2. Appointment of independent public accountants.
FOR [] AGAINST [] ABSTAIN []
The Board of Directors recommends a vote AGAINST stockholder proposal 3.
3. Stockholder proposal to eliminate staggered Board.
FOR [] AGAINST [] ABSTAIN []
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT []
MARK HERE IF YOU HAVE MADE COMMENTS []
Please sign exactly as your name appears. If acting as attorney, executor,
trustee or in other representative capacity, sign name and title. Please
date proxy and return in the enclosed post-paid return envelope.
Signature:----------------------------- Date:--------------------
Signature:----------------------------- Date:--------------------
