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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
USF&G Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
USF&G Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
[LOGO] USF+G
INSURANCE
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of USF&G Corporation will be held at the
Sheraton Baltimore North, 903 Dulaney Valley Road, Towson, Maryland, on
Wednesday, May 15, 1996, at 9:00 a.m., for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To consider and act upon such other business as may properly come
before the meeting.
If you do not expect to attend the meeting, you are requested to sign, date
and promptly return the enclosed proxy.
By Order of the Board of
Directors
JOHN F. HOFFEN, JR.
Secretary
Baltimore, Maryland
March 29, 1996
USF&G Corporation, 100 Light Street, Baltimore, Maryland 21202
<PAGE>
TABLE OF CONTENTS
PAGE
Election of Directors...................................................... 2
Stock Ownership of Certain Beneficial Owners, Directors and Management..... 4
Board and Board Committee Meetings......................................... 6
Compensation of Executive Officers and Directors........................... 7
Summary Compensation Table............................................... 7
Stock Option Grants in 1995.............................................. 8
Aggregate Option Exercises in 1995 and Year-End Values................... 9
Long-Term Incentive Awards in 1995....................................... 9
Pension Plans............................................................ 10
Employment Agreements.................................................... 11
Directors' Fees.......................................................... 11
Compensation Committee Report.............................................. 12
Compensation Philosophy.................................................. 12
Compensation Program..................................................... 12
Compensation of Chief Executive Officer.................................. 14
Stock Performance Graph.................................................... 16
Other Information.......................................................... 17
Certain Business Relationships........................................... 17
Audit Committee and Independent Public Accountants....................... 17
Filings Under Section 16(a).............................................. 17
Shareholder Proposals for the 1997 Annual Meeting........................ 18
Other Matters............................................................ 18
<PAGE>
USF&G CORPORATION
100 LIGHT STREET
BALTIMORE, MARYLAND 21202
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS--MAY 15, 1996
This Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders and proxy card are being furnished to shareholders of USF&G
Corporation (the "Corporation") in connection with the solicitation by the Board
of Directors of proxies to be voted at the Annual Meeting of Shareholders. These
proxy materials are being furnished on or about March 29, 1996 to all
shareholders of record as of March 6, 1996.
The only matter to be presented to the Corporation's shareholders at the
Annual Meeting is the election of the Board of Directors for the ensuing year.
Directors are elected by a plurality of the votes cast with a quorum present.
Abstentions and broker non-votes do not affect the plurality vote required for
the election of directors. Only holders of record of shares of Common Stock on
March 6, 1996 will be entitled to vote at the meeting, and each share will have
one vote. At the close of business on March 6, 1996, there were 119,651,534
shares of the Common Stock of the Corporation outstanding and entitled to vote
at the meeting.
The expense of printing and mailing proxy materials will be borne by the
Corporation. The solicitation of proxies will generally be by mail and by
directors, officers and employees of the Corporation. In addition, the
Corporation has retained Georgeson & Co., Inc. ("Georgeson") to assist in the
solicitation of proxies. Georgeson will receive a fee of approximately $12,000
and will be reimbursed for expenses incurred in connection with its services. In
some instances, solicitations may be made by telephone or facsimile, the costs
of which will be borne by the Corporation. The Corporation may also reimburse
brokers, custodians, nominees and other fiduciaries for reasonable out-of-pocket
and clerical expenses in forwarding proxy materials to their principals.
A shareholder who has given a proxy has the power to revoke the proxy at any
time before it is exercised. Such right of revocation is not limited by or
subject to compliance with any formal procedure.
It is the practice of the Corporation to take reasonable steps to ensure
that shareholders are afforded privacy in the proxy voting process. Proxies are
tabulated by third parties who may not disclose the votes of individual
shareholders to any officer, director or employee of the Corporation. This
policy is waived with respect to shareholders who provide written comments or
questions with their proxies or in the event of a proxy contest where
non-management groups have access to voting results.
<PAGE>
ELECTION OF DIRECTORS
Thirteen (13) directors are to be elected. Unless contrary instructions are
given, it is intended that the votes represented by the proxies will be cast for
the election of the persons listed below as directors. All of the proposed
nominees are currently directors of the Corporation who were elected at the last
meeting of shareholders. Directors will be elected for a term of one year or
until their successors are chosen and qualified.
The table below presents information concerning persons to be nominated for
election as directors of the Corporation, including their current membership on
committees of the Board of Directors of the Corporation, time served as a
director of the Corporation (or its predecessor), principal occupations or
affiliations during the last five years, and certain other directorships held.
<TABLE>
<S> <C>
H. FURLONG BALDWIN................. Member-Executive, Finance, and Nominating Committees.
Director since 1968.
Chairman of the Board and Chief Executive Officer of
Mercantile Bankshares Corporation. Mr. Baldwin, age
64, is also a director of Mercantile Bankshares
Corporation, GRC International, Inc., Baltimore Gas &
Electric Company and Conrail, Inc.
MICHAEL J. BIRCK................... Member-Audit and Compensation Committees. Director since
1993.
President and Chief Executive Officer of Tellabs, Inc.,
a designer and manufacturer of voice and data
equipment. Mr. Birck, age 58, is also a director of
Tellabs, Inc., Molex, Inc. and Duplex Products, Inc.
NORMAN P. BLAKE, JR................ Member-Executive Committee. Director since 1990.
Chairman of the Board, President and Chief Executive
Officer of the Corporation and of United States
Fidelity and Guaranty Company ("USF&G Company"), the
Corporation's principal subsidiary, since November
1990; formerly Chairman of the Board and Chief
Executive Officer of Heller International Corporation,
a commercial finance corporation; formerly Executive
Vice President of General Electric Credit Corporation
(1981-1984). Mr. Blake, age 54, is also a director of
Enron Corporation and Owens-Corning Fiberglas
Corporation.
GEORGE L. BUNTING, JR.............. Member-Executive, Compensation, and Nominating
Committees. Director since 1978.
President and Chief Executive Officer of Bunting
Management Group, a private financial management
company; formerly Chairman of the Board and Chief
Executive Officer of Noxell Corporation, a consumer
products manufacturer. Mr. Bunting, age 55, is also a
director of Crown Central Petroleum Corporation,
Mercantile Bankshares Corporation and PHH Corporation.
ROBERT E. DAVIS.................... Member-Audit, Compensation and Nominating Committees.
Director since 1990.
Managing Director of Axess Corporation, a manufacturer
of quality control instrumentation, and specialty
polymers since March 1991; formerly President and
Chief Operating Officer of Sequa Corporation, Morton
Thiokol, Inc., and Chairman and Chief Executive
Officer of Thiokol Corporation. Mr. Davis, age 64, is
also a director of H&R Block, Inc. and Rheometric
Scientific, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
DALE F. FREY....................... Member-Executive, Audit, and Finance Committees.
Director since 1991.
Vice President of General Electric Company; Chairman of
the Board and President of General Electric Investment
Corporation and GE Investment Management Incorporated.
Mr. Frey, age 63, is also a director of Praxair, Inc.
and Double Tree Hotel Corporation.
ROBERT E. GREGORY, JR.............. Member-Executive, Audit, and Compensation Committees.
Director since 1988.
Chairman and Chief Executive Officer of London Fog
Corporation; formerly Chairman and Chief Executive
Officer of The Gitano Group, Inc., an apparel
marketer; formerly President of VF Corporation, an
apparel manufacturer and distributor. Mr. Gregory, age
53, is also a director of Globe Manufacturing, Inc.
ROBERT J. HURST.................... Member-Executive and Nominating Committees. Director
since 1988.
Mr. Hurst, age 50, is an Executive Committee partner and
head of the Investment Banking Division at Goldman,
Sachs & Co., an investment banking firm. Mr. Hurst is
also a director of VF Corporation.
WILBUR G. LEWELLEN................. Member-Compensation and Finance Committees. Director
since 1992.
Dr. Lewellen, age 58, is the Herman C. Krannert
Distinguished Professor of Management at the Graduate
School of Management at Purdue University.
HENRY A. ROSENBERG, JR............. Member-Audit and Compensation Committees. Director since
1977.
Chairman of the Board and Chief Executive Officer of
Crown Central Petroleum Corporation. Mr. Rosenberg,
age 66, is also a director of Crown Central Petroleum
Corporation and Signet Banking Corporation.
LARRY P. SCRIGGINS................. Member-Finance and Nominating Committees. Director since
1979.
Mr. Scriggins, age 59, is a partner and member of the
Executive Committee of the law firm of Piper & Marbury
L.L.P.
ANNE MARIE WHITTEMORE.............. Member-Finance and Nominating Committees. Director since
1993.
Ms. Whittemore is a partner in the law firm of McGuire,
Woods, Battle & Boothe. Ms. Whittemore, age 49, is
also a director of Albemarle Corporation, Owens &
Minor, Inc., James River Corporation and T. Rowe Price
Associates, Inc.
R. JAMES WOOLSEY................... Member-Audit and Finance Committees. Director since
1995.
Mr. Woolsey, age 54, is a partner of the law firm of
Shea & Gardner; formerly Director of Central
Intelligence; formerly Ambassador and U.S.
Representative to the Negotiation on Conventional
Armed Forces in Europe, Vienna, Austria. Mr. Woolsey
is also a director of Sun Healthcare Group, Inc.
</TABLE>
The Board of Directors amended the Corporation's By-Laws in February 1995 to
provide for the appointment of one or more advisory directors. Advisory
directors are appointed by the Board of Directors and serve at the pleasure of
the Board. They may attend meetings of the Board as determined by the Board or
its Chairman, but sit solely in an advisory capacity and have no voting or other
authority or responsibilities of directors. Mr. Randolph Screen, who is Chairman
of USF&G Company's National Agency Council, was appointed as an advisory
director in February 1995. Mr. Screen is a principal with the insurance agency
of Beall, Garner, Screen and Geare, Inc., Johnstown, Pennsylvania.
3
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT
The following table shows the number of shares of the Corporation's Common
Stock beneficially owned by (i) each person known to the Corporation to
beneficially own more than 5% of the outstanding Common Stock, (ii) each
director, (iii) each executive named in the Summary Compensation Table shown
below under the caption "Compensation of Executive Officers and Directors," and
(iv) all Directors and Executive Officers as a group. None of the beneficial
holdings of Common Stock listed below represents in excess of 1% of the total
issued and outstanding shares, except for the shares beneficially owned by
Trustees of General Electric Pension Trust and other entities advised by
affiliates of General Electric Company (hereinafter collectively referred to as
"GE Investments") and Putnam Investments, Inc., which shares represent 6.7% and
6.6%, respectively, of the total issued and outstanding shares. In addition, the
Directors and Executive Officers as a group own 1.2% of the total issued and
outstanding shares. The information set forth below has been calculated as of
March 6, 1996. The number of shares beneficially owned is determined under rules
of the Securities and Exchange Commission (the "SEC") and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which the individual has
the sole or shared voting or investment power and also any shares which the
individual has the right to acquire within 60 days through the exercise of any
stock option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such powers with his or her spouse) with
respect to the shares set forth in the following table:
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP
- -------------------------------------------------------- --------------------
GE Investments.......................................... 8,159,027(a)
c/o General Electric Investment Corporation
3003 Summer Street
Stamford, CT 06904
Putnam Investments, Inc................................. 7,844,180(b)
One Post Office Square
Boston, MA 02109
Glenn W. Anderson....................................... 32,692(c)
H. Furlong Baldwin...................................... 8,000(d)(e)
Michael J. Birck........................................ 7,000(e)
Norman P. Blake, Jr..................................... 721,264(f)
George L. Bunting, Jr................................... 15,900(e)
Robert E. Davis......................................... 500(e)
Dale F. Frey............................................ 5,000(g)
Gary C. Dunton.......................................... 75,498(h)
Robert E. Gregory, Jr................................... 5,000(e)
Dan L. Hale............................................. 176,411(i)
Robert J. Hurst......................................... 6,000(e)
Wilbur G. Lewellen...................................... 4,800(e)
Henry A. Rosenberg, Jr.................................. 49,923(e)(j)
Larry P. Scriggins...................................... 2,206(e)
John C. Sweeney......................................... 38,433(k)
Anne Marie Whittemore................................... 500(e)
R. James Woolsey........................................ 250
All Directors and Executive Officers as a Group (25
persons)................................................ 1,402,135(1)
(Footnotes on following page)
4
<PAGE>
(Footnotes for preceding page)
- ------------
NOTES
<TABLE>
<C> <S>
(a) Includes 2,079,002 shares of Common Stock issuable upon conversion of 250,000 shares of
$10.25 Series B Cumulative Convertible Preferred Stock (the "Series B Preferred
Stock"). The purchase agreement pursuant to which these shares were sold provides that
so long as GE Investment Private Placement Partners I, Limited Partnership (the "GE
Partnership") is the beneficial owner of any shares of Series B Preferred Stock or
shares of Common Stock issued upon conversion of the Series B Preferred Stock, the
Corporation will nominate and recommend as a candidate for election to the Board of
Directors a person designated by the general partner of the GE Partnership who is
reasonably acceptable to the then current Board of Directors of the Corporation. If the
GE Partnership is no longer the beneficial owner of any such shares, then upon the
expiration of the term of the director who had been so designated, this right to
designate a nominee will be held by 50% or more of the shares of Series B Preferred
Stock then held by certain designated holders. Mr. Frey was designated to serve as a
director by the general partner of the GE Partnership pursuant to these provisions.
(b) As disclosed in a Schedule 13G filed with the Securities and Exchange Commission on
February 12, 1996.
(c) Includes 31,833 shares subject to outstanding options which are exercisable within 60
days.
(d) Excludes shares held in various fiduciary capacities by the trust department of
Mercantile-Safe Deposit and Trust Company, a wholly owned subsidiary of Mercantile
Bankshares Corporation, of which Mr. Baldwin is a director and executive officer.
(e) Under the 1993 Stock Plan for Non-Employee Directors, non-employee directors receive a
portion of their annual retainer fees and certain retirement benefits in the form of
Common Stock units or shares of Common Stock of the Corporation. The shareholdings
listed in the table do not include the following fully vested Common Stock units: Mr.
Baldwin, 23,283; Mr. Birck, 4,908; Mr. Bunting, 11,732; Mr. Davis, 10,224; Mr. Gregory,
6,990; Mr. Hurst, 9,287; Mr. Lewellen, 1,650; Mr. Rosenberg, 16,200; Mr. Scriggins,
16,654; and Ms. Whittemore, 2,552.
(f) Includes 54,815 shares directly owned, 661,399 shares subject to outstanding stock
options which are exercisable within 60 days, and 5,050 shares owned by children who
share the same household as Mr. Blake.
(g) Excludes shares held by GE Investments as reflected in Note (a) above.
(h) Includes 67,498 shares subject to outstanding stock options which are exercisable
within 60 days.
(i) Includes 172,411 shares subject to outstanding stock options which are exercisable
within 60 days.
(j) Includes 33,698 shares owned by ATAPCO, Inc. of which Mr. Rosenberg is a director and
substantial stockholder.
(k) Includes 37,233 shares subject to outstanding stock options which are exercisable
within 60 days.
(l) Subject to the Notes set forth above. Includes 1,222,065 shares subject to outstanding
stock options which are exercisable within 60 days. Excludes a total of 103,480 fully
vested Common Stock units held by directors pursuant to the 1993 Stock Plan for
Non-Employee Directors.
</TABLE>
5
<PAGE>
BOARD AND BOARD COMMITTEE MEETINGS
The Board of Directors held seven meetings in 1995. All directors attended
at least 75% of the aggregate number of the 1995 meetings of the Board and of
the Committees on which they served. The Board of Directors has established an
Audit Committee, Finance Committee, Executive Committee, Nominating Committee
and Compensation Committee.
The Audit Committee assists the directors in fulfilling their
responsibilities to shareholders and others relating to the corporate accounting
and financial reporting practices of the Corporation and the quality and
integrity of the financial reports of the Corporation. The Audit Committee
recommends the selection of independent accountants, reviews the independent
accountants' and internal auditors' assessments of the adequacy of the
Corporation's internal control system, reviews the scope and results of the
internal and external audit process and performs other functions consistent with
its responsibilities. The Audit Committee met five times in 1995.
The Finance Committee assists the directors in fulfilling their
responsibilities relating to the financial activities of the Corporation. The
Finance Committee reviews financial and investment policies, capital structure,
financial aspects of acquisitions and divestitures, and such other fiscal
matters as may be appropriate. The Finance Committee met three times in 1995.
The Executive Committee is responsible for exercising the authority of the
Board of Directors, to the extent permitted by law, in the intervals between
meetings of the Board when an emergency issue or scheduling makes it difficult
to convene all directors. The Executive Committee met six times in 1995.
The Nominating Committee identifies and presents qualified persons for
election or re-election to the Board of Directors. It advises the Board on
director-related matters such as number, composition, compensation, committee
assignments, and other related areas assigned by the Board or its Chairman. The
Nominating Committee also reviews succession plans for executive officers. The
Nominating Committee will consider nominees for election to the Board of
Directors suggested by shareholders. Recommendations by shareholders should be
forwarded to the Secretary of the Corporation and should identify the nominee by
name and provide pertinent information concerning his or her background and
experience. The Nominating Committee met once in 1995.
The Compensation Committee reviews and determines the salaries for executive
and other senior officers, reviews various incentive compensation plans and
determines the terms under which and to whom stock options are granted,
including the number of shares and the option price to be paid. The Compensation
Committee is also responsible for reviewing significant personnel compensation
policies and benefit programs. The Compensation Committee met eight times in
1995.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table reflects the compensation for the year 1995 of the Chief
Executive Officer and the four highest paid persons who were executive officers
at the end of 1995.
<TABLE><CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
NUMBER OF
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND PRINCIPAL -------------------------------------- OPTIONS LTIP ALL OTHER
POSITION YEAR SALARY BONUS(A) OTHER(B) GRANTED PAYOUTS(C) COMPENSATION(D)
- ------------------------ ---- ---------- ---------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Norman P. Blake, Jr..... 1995 $ 805,769 $1,499,983 $ 13,970 125,000 -- $ 154,358
President and 1994 755,770 1,138,592 -- 115,855 -- 145,530
Chief Executive Officer 1993 1,007,675 1,364,083 -- 412,500(d) -- 2,087,578(e)
USF&G Corporation
Dan L. Hale............. 1995 395,034 479,359 10,065 35,000 -- 42,446
Executive Vice 1994 375,692 376,496 -- 33,000 -- 40,299
President 1993 338,654 327,285 -- 33,000 -- 34,385
Chief Financial Officer
USF&G Corporation
Gary C. Dunton.......... 1995 354,033 429,785 7,727 30,000 -- 27,880
Executive Vice 1994 328,328 168,100 137,650(f) 30,000 -- 25,826
President 1993 315,001 240,200 -- 50,000 -- 119,857
USF&G Company
John C. Sweeney......... 1995 367,769 357,789 -- 29,700 -- 37,394
Senior Vice President 1994 285,000 151,300 -- 18,500 -- 29,230
Chief Investment 1993 245,400 102,800 -- -- -- 12,689
Officer
USF&G Corporation
Glenn W. Anderson....... 1995 296,230 313,501 7,877 25,000 -- 27,326
Executive Vice 1994 264,712 127,700 -- 24,000 -- 24,102
President 1993 185,000 -- -- -- -- 19,890
USF&G Company
</TABLE>
- ------------
NOTES
<TABLE>
<C> <S>
(a) Includes bonuses earned under the Corporation's three-year Long Term Cash Incentive
Plan of $499,983, $210,759, $189,785, $118,789 and $123,901, respectively, for Messrs.
Blake, Hale, Dunton, Sweeney and Anderson for 1995, and $427,882 and $188,696,
respectively, for Messrs. Blake and Hale for 1994, and $713,283 and $152,285,
respectively, to Messrs. Blake and Hale for 1993. See Note (c) below. Pursuant to the
USF&G Executive Deferred Bonus Payment Plan, a participant may elect to defer all or a
portion of the annual cash bonus or payments under the Long Term Cash Incentive Plan,
with interest credited on such deferred amounts based on a composite five-year U.S.
Treasury rate plus one percent (1%).
(b) Includes 1995 tax reimbursements related to the taxable income reported by the
executive in cases where the spouse accompanied the executive on a business trip.
(c) In 1991, the Corporation established a Long Term Cash Incentive Plan which provides for
cash payments at the end of successive three-year cycles. However, under SEC reporting
rules, payments under this plan are reported as annual bonus payments since awards
accrue based upon one-year financial goals and are subject to forfeiture only if the
employment relationship is terminated prior to the end of the three-year cycle. See
Note (a) above. Beginning with the three-year cycle which started January 1, 1994, this
cash incentive plan was replaced with the Long-Term Incentive Program, which is a stock
based plan under which payments are based upon three-year cumulative operating income
targets.
(d) Includes matching contributions made by the Corporation during 1995 to the
Corporation's Capital Accumulation Plan (a 401(k) plan) of $2,774 for Mr. Blake, and
$4,620, for each of Messrs. Hale, Dunton, Sweeney and Anderson. Also includes premiums
paid for split dollar life insurance policies for Messrs. Blake, Hale, Dunton, Sweeney
and Anderson, which in 1995 were $151,584, $37,826, $23,260, $32,774 and $22,706,
respectively. A relocation payment of $93,940 and $18,470 in 1993 is included with
respect to Messrs. Dunton and Anderson, respectively.
</TABLE>
(Footnotes continued on following page)
7
<PAGE>
(Footnotes continued from preceding page)
<TABLE>
<C> <S>
(e) In November 1993, the Corporation entered into an agreement with Mr. Blake pursuant to
which he extended his term of employment for three years beyond the two years then
remaining on his employment contract. Mr. Blake also agreed to waive a portion of his
base salary. In connection with these arrangements he was granted 300,000 stock options
and a deferred cash award of $1,950,000, subject to adjustment or forfeiture in certain
circumstances. This deferred cash award is reflected in "All Other Compensation" for
1993.
(f) Award of 9,454 shares of restricted stock to reimburse Mr. Dunton for the tax cost of
his relocation. The value of this award was determined by multiplying the number of
shares granted by the closing price of the Corporation's Common Stock on the date of
grant. These shares became fully vested in 1995. None of the other named executive
officers have been granted or hold shares of restricted stock.
</TABLE>
STOCK OPTION GRANTS IN 1995
The following table provides information on option grants in 1995 to the
named executive officers.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS GRANTED EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME IN 1995(A) FISCAL YEAR SHARE DATE VALUE(B)
- ---------------------------------- --------------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Norman P. Blake, Jr............... 125,000 4.6% $ 13.63 03/10/05 $681,500
Dan L. Hale....................... 35,000 1.3 13.63 03/10/05 190,820
Gary C. Dunton.................... 30,000 1.1 13.63 03/10/05 163,560
John C. Sweeney................... 29,700 1.1 13.63 03/10/05 161,924
Glenn W. Anderson................. 25,000 0.9 13.63 03/10/05 136,300
</TABLE>
- ------------
NOTES
<TABLE>
<C> <S>
(a) Options are exercisable for shares of the Corporation's Common Stock. One-third of the
options are exercisable after one year, two-thirds are exercisable after two years, and
all of the granted options are exercisable after three years. All options vest
immediately if any person acquires 30% or more of the outstanding shares, if the
Corporation's shareholders approve a merger, consolidation or sale of substantially all
of the Corporation's assets, or if any shares are acquired pursuant to a tender offer
(so called "fundamental changes"). All of the options granted were granted at exercise
prices equal to the fair market value of the Corporation's Common Stock on the date of
grant.
(b) Based on the Black-Scholes option pricing model assuming expected volatility equal to
three-year average volatility of .2797, expected dividend yield equal to average
three-year dividend yield of 1.37%, risk free interest rate of 6.25%, an option term of
ten years, and 3% discount for risk of forfeiture during the respective vesting
periods. The actual value, if any, an executive may realize will depend upon the excess
of the stock price over the exercise price on the date the option is exercised;
accordingly, there is no assurance that the executive will realize the values set forth
above.
</TABLE>
8
<PAGE>
AGGREGATE OPTION EXERCISES IN 1995 AND YEAR-END VALUES
The following table provides information on option exercises in 1995 by the
named executive officers and the value of such officers' unexercised options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT 12/31/95 AT 12/31/95(A)
ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE 1995 EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman P. Blake, Jr............ -- -- 504,861 578,494 $ 3,259,199 $ 1,673,997
Dan L. Hale.................... -- -- 128,244 78,503 796,151 279,656
Gary C. Dunton................. -- -- 34,999 75,001 89,073 211,377
John C. Sweeney................ -- -- 21,167 47,033 79,212 148,422
Glenn W. Anderson.............. -- -- 15,500 43,500 46,248 129,808
</TABLE>
- ------------
NOTE
<TABLE>
<C> <S>
(a) The value of in-the-money options was determined by taking the difference between
$16.875 per share, which was the closing price of the Common Stock on the last business
day of the year, and the exercise price of each option.
</TABLE>
LONG-TERM INCENTIVE AWARDS IN 1995
<TABLE>
<CAPTION>
PERFORMANCE
PERIOD ESTIMATED FUTURE PAYOUT(A)
UNTIL ------------------------------
NAME PAYOUT THRESHOLD TARGET MAXIMUM
- ---------------------------------------------------- ----------- --------- ------ -------
<S> <C> <C> <C> <C>
Norman P. Blake, Jr. ............................... 3 Years 15,604 31,207 58,513
Dan L. Hale......................................... 3 Years 6,424 12,847 24,088
Gary C. Dunton...................................... 3 Years 5,606 11,212 21,023
John C. Sweeney..................................... 3 Years 4,153 8,305 15,572
Glenn W. Anderson................................... 3 Years 4,746 9,492 17,798
</TABLE>
- ------------
NOTE
<TABLE>
<C> <S>
(a) Number of share units awarded depends upon adjusted three-year cumulative operating
income for the period 1995 - 1997, and may be zero if the minimum target is not
reached, or, if such threshold is reached, between the threshold and maximum shown.
Each share unit is the equivalent of one share of USF&G Corporation Common Stock.
</TABLE>
The Long-Term Incentive Program ("LTIP") was established in 1994 by the
Compensation Committee of the Board of Directors and approved by the
shareholders and provides for granting of performance awards that are payable in
the Corporation's Common Stock. Awards are payable based upon performance goals
established by the Compensation Committee at the beginning of each successive
and overlapping three-year performance period. Performance goals consist of an
adjusted three-year cumulative net income target. The actual award is determined
at the end of each three-year cycle based upon actual corporate performance. If
actual performance falls below 85% of the targeted performance, then no awards
will be paid out for that three-year cycle. The maximum award may be paid if
actual performance equals or exceeds 115% of the three-year target performance.
Participants will only receive the designated units, which are payable in shares
of the Corporation's Common Stock, at the end of the three-year cycle. The
actual award received at the end of the three-year cycle may be reduced, but not
increased, for the participants listed in the table, due to individual
performance, business unit performance, or overall corporate performance.
9
<PAGE>
PENSION PLANS
The Corporation has a non-contributory, defined benefit pension plan which
provides employees of the Corporation and designated subsidiaries with
retirement benefits beginning at the normal retirement age of 65. The
Corporation also maintains a supplemental retirement plan for senior executives
which provides benefits that would otherwise be paid to them under the pension
plan but for certain limitations imposed by the Internal Revenue Code. The
following table shows the estimated benefits that would be payable at normal
retirement age under the pension plan and the supplemental retirement plan if an
individual had the specified years of service with the Corporation or designated
subsidiaries and levels of average compensation covered by the plans.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT FOR YEARS OF SERVICE INDICATED
AVERAGE --------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------ -------- -------- -------- -------- --------
<C> <S> <C> <C> <C> <C> <C>
$150,000 ............ $ 32,000 $ 43,000 $ 53,000 $ 64,000 $ 74,000
175,000 ............ 38,000 50,000 63,000 75,000 87,000
200,000 ............ 43,000 58,000 72,000 86,000 101,000
225,000 ............ 49,000 65,000 81,000 97,000 114,000
250,000 ............ 55,000 73,000 91,000 109,000 127,000
300,000 ............ 66,000 88,000 109,000 131,000 153,000
350,000 ............ 77,000 103,000 128,000 154,000 179,000
400,000 ............ 88,000 118,000 147,000 176,000 206,000
450,000 ............ 100,000 133,000 166,000 199,000 232,000
500,000 ............ 111,000 148,000 184,000 221,000 258,000
600,000 ............ 133,000 178,000 222,000 266,000 311,000
700,000 ............ 156,000 208,000 259,000 311,000 363,000
800,000 ............ 178,000 238,000 297,000 356,000 416,000
</TABLE>
Compensation for purposes of computing benefits under these plans is
generally the average, over the entire period of an employee's service with the
Corporation and its designated subsidiaries, of salary and annual incentive
bonuses. Benefits are computed on the basis of a straight life annuity and are
not subject to any deduction or offset for Social Security or other benefits.
Mr. Blake is effectively covered under a separate plan described below. For
purposes of calculating average annual compensation under these plans, 1995
compensation is as reported under the "Annual Compensation--Salary" and "Bonus"
columns in the Summary Compensation Table, except that payments under the Long
Term Cash Incentive Plan reported under the "Bonus" column are excluded.
Accordingly, 1995 compensation for calculating benefits for Messrs. Hale,
Dunton, Sweeney and Anderson is $663,634, $594,033, $606,769, and $485,830,
respectively. The estimated credited years of service for each of such
individuals is as follows: Mr. Hale, five years; Mr. Dunton, three years; Mr.
Sweeney, three years; and Mr. Anderson, three years.
A supplemental retirement contract with Mr. Blake provides a retirement
benefit which, when combined with benefits from the Corporation's pension plan
and his prior employer's pension plan, equals a life annuity beginning at age 65
of 60% of his highest consecutive three years average annual covered
compensation. Prior to November 26, 1993, covered compensation was equal to his
salary plus annual incentive bonus. Although Mr. Blake voluntarily agreed to
waive a substantial portion of his base salary payable after that date as
described elsewhere in this proxy statement, salary for purposes of the
supplemental retirement contract will be determined without regard to that
waiver. The Long Term Cash Incentive Plan is excluded for purposes of
calculating pension benefits. Estimated annual retirement benefits payable to
Mr. Blake at age 65 would be $1,290,450 based upon 1995 covered compensation of
$2,150,750, and $1,548,540 if average annual covered compensation increased to
$2,580,900.
10
<PAGE>
Pursuant to Mr. Dunton's employment agreement, the Corporation has agreed to
purchase an annuity which would provide him with a retirement benefit of $20,000
per year if he does not vest in the Corporation's defined benefit pension plan.
This obligation will terminate at the time of vesting.
EMPLOYMENT AGREEMENTS
The Corporation entered into a five-year employment agreement with Mr. Blake
in November 1990. In November 1993, the Corporation and Mr. Blake entered into a
second employment agreement which extended the term of Mr. Blake's employment
until November 1998. At the same time, Mr. Blake agreed to waive salary in
excess of $750,000 and $800,000, respectively, for 1994 and 1995 in connection
with an overall shift from fixed compensation to compensation tied to the
Corporation's performance as measured by its stock price.
The new employment agreement continues the effect of the base salary waiver
and provides for base salary of $850,000 in 1996, which is the first year of the
new term, and $900,000 and $950,000, respectively, in the second and final
years. In the event Mr. Blake's employment is terminated by the Corporation for
reasons other than serious cause, he is nevertheless entitled to be paid his
salary for the remainder of the extended term and receive benefits under all
incentive, profit sharing, certain bonus and other executive and employee
benefit plans. Provisions concerning health and other insurance and similar
benefits as well as non-competition arrangements are included in both the
initial and the new employment contracts. All other benefits, including bonuses,
stock option grants, insurance and retirement benefits, will be determined in
accordance with the Corporation's regular programs and policies but will be
based on the base salary he would have received without regard to the waiver
("salary of record").
The Corporation also entered into a letter of employment with Mr. Dunton in
connection with his agreement to join the Corporation in December 1992. The
letter sets forth his annual salary, sign-on, relocation and other bonuses and
1993 stock options. The letter also provides for the purchase of an annuity to
fund the retirement benefit described above under the heading "Pension Plans,"
in the event Mr. Dunton does not vest in the Corporation's defined benefit plan.
DIRECTORS' FEES
Directors who are not officers of the Corporation or its affiliates are paid
$800 per committee meeting attended and $1,000 for attending board meetings. The
annual retainer has been established as follows: directors of the Corporation,
$23,000; Chairperson of the Audit Committee, $7,500; Chairperson of the
Compensation, Nominating and Finance Committees, $5,000 each; other members of
the Audit, Finance, Nominating and Compensation Committees, $3,000; and any
member of the Executive Committee not serving as a Chairperson of any other
committee, $3,000.
Under the 1993 Stock Plan for Non-Employee Directors (the "Stock Plan"),
directors receive shares of Common Stock in lieu of one-half of the regular
$23,000 retainer. The number of shares credited per year is the lesser of 1,000
or the number of shares equal to $23,500 divided by the fair market value of the
Corporation's Common Stock on the award date. Directors may elect to defer
receipt of these shares, in which event they will be credited with an equal
number of stock units which are payable in shares at a later date.
The Stock Plan also provides a retirement benefit payable to directors in
stock. The retirement benefit vests incrementally over ten years and the number
of shares payable upon retirement after full vesting is equal to $50,000 divided
by the fair market value of the stock on the date the director is first elected
to the Board. Directors who elected to waive their right to participate in a
prior retirement arrangement will instead receive upon retirement a number of
shares valued at the actuarial equivalent of the benefit otherwise payable under
the prior arrangement.
11
<PAGE>
Directors may also elect to defer receipt of cash fees and retainers.
Deferred amounts may be paid in shares of Common Stock or cash. Cash amounts
deferred are credited with interest at a short term U.S. Treasury rate.
The above description of amounts payable to directors does not apply to the
Corporation's advisory director, who is a non-voting advisor to the Board. The
advisory director is paid a fee of $1,000 for each meeting of the Board
attended, but no retainer fee.
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY
It is the philosophy of the Corporation to link executive compensation to
sustained improvements in corporate performance and increases in shareholder
value as measured by the Corporation's stock price. The following objectives
have been adopted by the Compensation Committee as guidelines for compensation
decisions:
Provide a competitive total compensation package that enables the
Corporation to attract and retain the key executive talent needed to
accomplish its corporate goals.
Integrate compensation programs with the Corporation's annual and
long-term business objectives and strategy, and focus executive behavior on
the fulfillment of those objectives.
Provide variable compensation opportunities that are directly linked
with the performance of the Corporation and that align executive
remuneration with the interests of the shareholders.
In addition, the Compensation Committee also considers the impact of Section
162(m) of the Internal Revenue Code of 1986 (the "Code"), which in certain
circumstances disallows compensation deductions in excess of $1,000,000. This
disallowance provision does not apply to performance-based compensation,
commissions, and certain other forms of compensation. The Compensation Committee
has determined that the Corporation's incentive compensation plans should
comply, to the extent practicable, with the Code's requirements for
performance-based compensation to ensure that the Corporation will be entitled
to full deductibility of all compensation paid under those plans.
COMPENSATION PROGRAM
The Compensation Committee is responsible for reviewing the Corporation's
compensation program to ensure that pay levels and incentive opportunities are
competitive and reflect the performance of the Corporation. The components of
the compensation program for executives are described below.
Base Salary--The factors considered in determining the appropriate
salary are level of responsibility, prior experience and accomplishments,
and the relative importance of the job in terms of achieving corporate
objectives. Each executive's salary is reviewed annually. Adjustments may be
recommended based upon individual performance, inflationary and competitive
factors, and overall corporate results.
Annual Incentive Compensation--Cash bonuses are paid annually based upon
individual performance and relevant corporate performance measures,
including operating income, controllable business expenses, and loss and
expense ratios for the property/casualty insurance segment. These
performance measures vary depending upon the executive and the related line
of business. Bonuses are paid only if the Corporation has met certain
performance targets established by the Compensation Committee at the
beginning of the year. Target awards are established for each position as a
percentage of base salary, and performance is assessed at the end of the
year. For the executives named in the Summary Compensation Table, operating
income was the principal corporate performance measure used to determine
bonus amounts. In addition, the named executives responsible for
property/casualty business units are also evaluated on additional
performance targets such as the combined ratio. The Compensation Committee
has established targets of 30% to 35% of base salary for possible bonus
amounts for senior vice presidents and 40% of base salary for possible bonus
amounts for executive vice presidents. These amounts are subject to
adjustment
12
<PAGE>
depending upon actual corporate performance relative to the targets
established at the beginning of the year and on individual performance
measured against certain objectives tailored to the individual at the
beginning of the year. The adjustment may reduce the award to as low as zero
or increase it to as high as two times the target level. For the named
executive officers other than the Chief Executive Officer, 1995 performace
exceeded established performance goals and, accordingly, bonuses awarded
with respect to such 1995 performance and reported in the Bonus column in
the Summary Compensation Table were at the high end of the target ranges.
Stock Options--Stock options granted under the Corporation's stock
incentive plans for management, all of which have previously been approved
by shareholders, provide incentive to executives by giving them a strong
economic interest in maximizing stock price appreciation, thereby better
aligning their interests with the Corporation's shareholders. Accordingly,
each executive's total compensation is highly dependent upon stock
performance. Option exercise prices are set at 100% of fair market value on
the date of grant and the options expire after 10 years. The annual options
granted by the Committee vest over a period of three years in order to
encourage management continuity and better tie compensation to long-term
stock value. Executives are generally granted stock options annually. The
value of stock options granted to executive officers is fixed at a
percentage of salary. The value of the options is established by using the
Black-Scholes option valuation model, using the assumptions specified in the
footnotes to the table in this Proxy Statement entitled "Stock Option Grants
in 1995". This percentage is between 25% and 35% of salary for senior vice
presidents and 50% of salary for executive vice presidents. These
percentages are subject to adjustment to as low as zero or as high as one
and one-half of the target, depending upon the executive's prior year's
performance and potential for future contribution. For the named executive
officers other than the Chief Executive Officer, the stock option grants
made in 1995 were within these target ranges.
Long-Term Incentive Plans--Under the Corporation's existing Long Term
Cash Incentive Plan, executives are entitled to a cash payment at the end of
overlapping successive three-year periods if the Corporation has achieved
specified annual net operating income targets established by the
Compensation Committee. The actual amount payable depends upon corporate net
operating income relative to the net operating income targets established by
the Committee, subject to caps on the maximum amount payable. A target
amount to be paid to each plan participant is established as a percentage of
the participant's salary. For the executives named in the Summary
Compensation Table, that target ranges from 35% to 50% of salary. Beginning
with the three-year cycle starting in 1994, and each three-year cycle
beginning on each year thereafter, awards under the existing Long Term Cash
Incentive Plan were replaced with awards under the new Long-Term Incentive
Program ("LTIP") which was approved by shareholders in 1994. The LTIP ties
compensation to three-year cumulative operating income targets established
at the beginning of each cycle. Compensation payable under the new LTIP is
payable only at the end of each three-year cycle and then payable in shares
of Common Stock. For the named executive officers, including the Chief
Executive Officer, the LTIP grants made in 1995 were within these target
ranges.
The Compensation Committee attempts to establish base salary levels
consistent with the median base salary for executives in similar positions
within a peer group of approximately thirty major insurance companies. Total
compensation, however, is weighted more heavily toward incentive compensation by
attempting to establish annual bonuses, stock options and long-term compensation
at levels within the top quartile of this peer industry group. The increased
weighting toward incentive and stock-based compensation reinforces the
connection between shareholder interests and executive pay.
13
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Blake joined the Corporation on November 27, 1990. The selection by the
Board of Mr. Blake was made in light of the Corporation's circumstances,
requiring significant redirection and restructuring of the Corporation, and in
light of Mr. Blake's experience, record and reputation in the financial services
industry.
Mr. Blake's base salary for 1995 was $805,769. This base salary reflects a
voluntary waiver of a substantial portion of the base salary otherwise payable
under his employment agreement. The waiver occurred in 1993 in exchange for
stock options and other stock-based compensation. Mr. Blake's employment
agreement, including the salary reduction in 1993, is discussed more fully in
this Proxy Statement under the caption "Employment Agreements." In recognition
of this waiver and emphasis on stock-based compensation, other components of
compensation, including his annual stock option awards, continue to be based on
the base salary he would have received without regard to the waiver ("salary of
record"). Mr. Blake's salary of record for these purposes was $1,150,750 for
1995.
The Committee awarded 125,000 stock options to Mr. Blake early in 1995 at an
exercise price of $13.63, which was equal to the market value of the
Corporation's Common Stock on the date of grant, based upon the Committee's
overall evaluation of Mr. Blake's performance in 1994.
The Compensation Committee established Mr. Blake's target annual cash bonus
for 1995 at 50% of his salary of record, subject to reduction to as little as
zero or increase to as much as 100% of base salary. The Compensation Committee
awarded Mr. Blake a cash bonus of $1,000,000 for 1995, representing
approximately 87% of his salary of record. In determining Mr. Blake's 1995
annual bonus, the Compensation Committee reviewed the Corporation's performance
and Mr. Blake's individual performance against a detailed set of performance
objectives which were approved by the Committee in early 1995. These objectives
set forth six principal categories of responsibility, as well as objectives
under each category, as briefly described below:
Financial Performance. This responsibility consisted of achieving targeted
financial objectives without compromising the financial integrity or long term
profit performance of the Corporation. Targets were set for consolidated
revenues of $3.3 billion, property/casualty written premium of $2.5 billion,
life company direct sales of $300 million, adjusted consolidated operating
income of $150 million, and earnings per share (after dividends) of $1.11.
Strategy and Business Development. This responsibility consisted of
developing and implementing business strategies with the objective of enhancing
shareholder value and the prospects for sustained profitability. Targets related
to, among other things, establishment of the Family and Business Insurance
Group, integration of the field operations structure into commercial lines, and
development of the specialty lines businesses.
Business Development. This responsibility consisted of developing certain
specialty lines of business, implementing certain technological interfaces with
the independent agency force, re-segmenting the agency force, redesigning small
business products and processes, integrating the acquisitions of Victoria
Financial Corporation and Discover Re Managers, Inc., and exploring
international opportunities for the assumed reinsurance and surety businesses.
Strategic Resource Development. This responsibility consisted of developing
critical resources to support overall business strategies, and was divided into
the categories of financial resources and information systems. Financial
resources targets related to obtaining key rating agency upgrades, converting
the Series B Cumulative Convertible Preferred Stock into Common Stock, and
reducing reinsurance expenses. Information systems targets included implementing
the Family and Business Insurance Group systems and agency interface programs.
14
<PAGE>
Organization and Human Resource Development. This responsibility consisted
of reviewing the management and organizational structure of the Corporation,
including a complete review of the entire organizational structure, development
of succession plans for key employees and developing and implementing targeted
organizational restructurings. In addition, certain compensation plans and
incentive plans for selected groups were to be redesigned.
Investor, Regulatory, and Public Relations. This responsibility consisted of
strengthening relationships with constituencies outside of the Corporation,
particularly investor groups, credit rating agencies, regulators and the
financial press.
The Corporation's actual performance as measured against the targets under
the financial performance responsibility ranged from 105% of the target to 125%.
Evaluations of Mr. Blake's performance of the remaining responsibilities was
less quantitative, but the Compensation Committee determined that Mr. Blake had
met or exceeded each of the other targeted objectives. Important achievements
included the design and implementation of the Family and Business Insurance
Group and the field operations restructuring, development of the Polaris claim
service reception center initiative, integration of the recent acquisitions of
Victoria Financial Corporation and Discover Re Managers, Inc. and certain rating
agency upgrades, particularly the upgrade of USF&G Company from "A-" to "A" by
A. M. Best Company. In addition, certain technology upgrade objectives were
achieved, the Corporation's life insurance subsidiary began implementing
important administrative and processing outsourcing initiatives, certain
specialty business expanded internationally and many new products were developed
for both the property/casualty and life segments. These goals were achieved
while expenses were controlled and the balance sheet was significantly
strengthened.
Although the Compensation Committee did not assign specific weights to any
of the categories or targeted objectives, it did place greater weight on
financial performance and strategic responsibilities. The Compensation
Committee's review and the basis for determining Mr. Blake's compensation was
not limited to an evaluation of these responsibilities, and the Committee
considered other subjective factors relating to an overall assessment of Mr.
Blake's performance and contribution to the Corporation. The Committee concluded
that Mr. Blake's compensation arrangements are appropriate in light of his
continuing performance as Chief Executive Officer and associated improvements in
the Corporation's profitability.
COMPENSATION COMMITTEE
George L. Bunting, Jr., Chairman
Michael J. Birck
Robert E. Davis
Robert E. Gregory, Jr.
Wilbur G. Lewellen
Henry A. Rosenberg, Jr.
15
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares cumulative total return of the Corporation's Common
Stock, the S&P 500 Index and the Moody's P&C Insurance Group over a five-year
period beginning December 31, 1990. The companies included in Moody's P&C
Insurance Group are: Allstate Corporation, American Financial Group, Chubb
Corporation, CNA Financial Corporation, GEICO Corporation, General Re
Corporation, Hartford Steam Boiler Inspection and Insurance Company, Horace Mann
Educators Corporation, Orion Capital Corporation, and Progressive Corporation.
Cumulative total return is calculated assuming reinvestment of dividends. The
stock price performance on this graph is not necessarily indicative of future
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG USF&G, S&P 500 AND MOODY'S P&C INSURANCE GROUP
<TABLE>
<CAPTION>
DEC90 DEC91 DEC92 DEC93 DEC94 DEC95
----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
USF&G CORPORATION.............. 100 99.04 171.78 207.38 193.79 243.09
S&P 500 INDEX.................. 100 130.47 140.41 154.56 156.60 215.45
MOODY'S P/C INSURANCE GROUP.... 100 127.01 151.55 139.29 132.34 195.62
</TABLE>
16
<PAGE>
OTHER INFORMATION
CERTAIN BUSINESS RELATIONSHIPS
In the ordinary course of business, USF&G Company has written fidelity,
surety, fire and casualty, liability, or other insurance for certain companies
of which non-employee directors are officers, and surety bonds on projects that
may be financed in whole or in part by loans made by banks of which non-employee
directors are officers. All these writings involve insurance premiums for which
rate filings are made and premium rates are approved as required by applicable
insurance regulations. In addition, the Corporation, in the ordinary course of
business, utilizes bank depository, lending, trustee and other banking services
provided by banks of which non-employee directors may be officers or directors.
As disclosed elsewhere in this Proxy Statement, GE Investments owns 6.7% of
the Corporation's Common Stock. Subsidiaries of the Corporation provide mortgage
loan origination and administration services to an entity controlled by GE
Investments. Pursuant to these services, a mortgage loan in the amount of $35
million was funded during 1995 by USF&G Company to an entity controlled by GE
Investments. The principal balance of the loan at December 31, 1995 was $35
million. The interest rate is 7.7% compounded annually, with only interest
payments due during the first four years and thereafter principal is amortized
through the remaining three-year term on a 25-year amortization schedule. During
1995, an entity controlled by GE Investments repaid a $30 million mortgage loan
funded in 1993 by Fidelity and Guaranty Life Insurance Company, a subsidiary of
the Corporation.
The Corporation and GE Investments have jointly invested in a Bermuda-based
company, Renaissance Holdings Limited ("Renaissance"). Renaissance is
principally engaged in the business of underwriting property/casualty
reinsurance through its wholly owned subsidiary, Renaissance Reinsurance, Ltd.
Robert J. Hurst, a director of the Corporation, is a partner of Goldman,
Sachs & Co., which performed investment banking services for the Corporation in
1995.
Larry P. Scriggins, a director of the Corporation, is a member of the law
firm of Piper & Marbury L.L.P., which performed legal services for the
Corporation in 1995.
Anne M. Whittemore, a director of the Corporation, is a member of the law
firm of McGuire, Woods, Battle & Boothe, which performed legal services for the
Corporation in 1995.
AUDIT COMMITTEE AND INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Ernst & Young LLP has acted as the Corporation's
independent public accountants for the year ended December 31, 1995 and it is
anticipated they will be selected by the Board of Directors to act as such for
1996. Representatives of Ernst & Young LLP are expected to be present at the
shareholders' meeting and will have an opportunity to make a statement if they
desire and to respond to appropriate questions.
FILINGS UNDER SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers, and holders of more than 10% of the
Corporation's Common Stock to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Corporation. The initial statement of beneficial ownership, Form 3, for Mr.
R. James Woolsey was filed two days late due to a clerical error at the
Corporation in connection with this filing.
17
<PAGE>
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
All shareholder proposals intended to be presented at the 1997 Annual
Meeting of the Corporation must be received by the Corporation not later than
November 29, 1996 and must otherwise comply with the rules of the SEC for
inclusion in the Corporation's proxy statement and form of proxy relating to
that meeting.
OTHER MATTERS
Management knows of no matters to be presented for action at the meeting
other than those described above. However, if any other matters properly come
before the meeting, it is intended that the persons named in the accompanying
form of proxy will vote on such matters in accordance with their judgment of the
best interest of the Corporation.
By Order of the Board of Directors
JOHN F. HOFFEN, JR.
Secretary
Baltimore, Maryland
March 29, 1996
18
<PAGE>
USF&G CORPORATION
P R O X Y
Annual Meeting of Shareholders - May 15, 1996
Proxy Solicited by the Board of Directors
The undersigned hereby appoints Norman P. Blake, Jr. and John A. MacColl, or
either of them, as proxies, each with power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of USF&G Corporation held of record by the undersigned
on March 6, 1996, at the Annual Meeting of Shareholders to be held on May 15,
1996, or at any adjournment thereof.
Returned proxy forms will be voted: (1) as specified on the matters listed on
the reverse side of this form; (2) in accordance with the Directors'
recommendations where a choice is not specified; and (3) in accordance with
the judgment of the proxies on any other matters that properly come before the
meeting. Your shares will not be voted unless your signed proxy form is returned
by your or you otherwise vote at the meeting.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors.
USF&G CORPORATION
P.O. BOX 11189
NEW YORK, N.Y. 10203-0139
<PAGE>
The Board of Directors recommends a vote FOR election of directors.
<TABLE><CAPTION>
<S> <C>
1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: H. Furlong Baldwin, Michael J. Birck, Norman P. Blake, Jr., George L. Bunting, Jr., Robert E. Davis, Dale F. Frey,
Robert E. Gregory, Jr., Robert J. Hurst, Wilbur G. Lewellen, Henry A. Rosenberg, Jr., Larry P. Scriggins,
Anne Marie Whittemore, R. James Woolsey.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mare the "Exceptions box and write that nominees name
in the space provided below.)
*Exceptions _________________________________________________________________________________________________________________
Change of Address and
or Comments Mark Here. [ ]
When signing as attorney, executor, administrator, trustee or guardian,
give title as such. If the signor is a corporation, sign in the corporate
name by duly authorized officer.
Dated: ________________________________________________________, 1996
_____________________________________________________________________
_____________________________________________________________________
SIGNATURE
Votes MUST be indicated [ ]
(x) in Black or Blue Ink.
Please sign, date and return the proxy card promptly using the enclosed envelope.
</TABLE>
