RELIANCE GROUP HOLDINGS INC, DEF 14A, 1996-04-12

RELIANCE GROUP HOLDINGS INC
DEF 14A, 1996-04-12
FIRE, MARINE & CASUALTY INSURANCE

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)

Filed by the Registrant /X/

Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / 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 Rule 14a-11(c) or Rule 14a-12

RELIANCE GROUP HOLDINGS, INC.
------------------------------------------------------------------------
(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
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

<PAGE>
RELIANCE GROUP HOLDINGS, INC.

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

MAY 8, 1996

------------------------

The Annual Meeting of Stockholders of Reliance Group Holdings, Inc., a
Delaware corporation, will be held at the Third Floor Auditorium at The Chase
Manhattan Corporation World Headquarters, 270 Park Avenue, New York, New York at
10:00 a.m. on Wednesday, May 8, 1996.

At this meeting, the stockholders will be asked to:

1. Elect thirteen directors to serve for the ensuing year.

2. Approve the Amended Reliance Group Holdings, Inc. Executive Bonus
Plan.

3. Transact any other business which may properly come before the
meeting or any adjournments thereof.

Only stockholders of record at the close of business on March 11, 1996 will
be entitled to notice of, and to vote at, this meeting. A list of such
stockholders will be available for inspection at the offices of Reliance Group
Holdings, Inc. at Park Avenue Plaza, 55 East 52nd Street, New York, New York
10055 during normal business hours during the ten-day period prior to the
meeting.

Your attention is directed to the accompanying proxy statement. Whether or
not you plan to attend the meeting, please vote, sign, date and return the
enclosed proxy as promptly as possible in the enclosed stamped envelope. This
will enable your shares to be voted in accordance with your instructions.

By Order of the Board of Directors,

Reliance Group Holdings, Inc.

Howard E. Steinberg,
Corporate Secretary

Dated: April 12, 1996

<PAGE>
PROXY STATEMENT

RELIANCE GROUP HOLDINGS, INC.
PARK AVENUE PLAZA
55 EAST 52ND STREET
NEW YORK, NEW YORK 10055

------------------------

ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1996

------------------------

VOTING

The enclosed proxy is solicited by and on behalf of the Board of Directors
of Reliance Group Holdings, Inc. (the 'Company') for use at the Annual Meeting
of Stockholders (the 'Annual Meeting') to be held at the Third Floor Auditorium
at The Chase Manhattan Corporation World Headquarters, 270 Park Avenue, New
York, New York on Wednesday, May 8, 1996 at 10:00 a.m. and at any adjournments
thereof. If the enclosed proxy is properly executed and returned, it will be
voted in accordance with the instructions thereon. A proxy given pursuant to
this solicitation is revocable by written notice delivered to the Corporate
Secretary of the Company at any time prior to its exercise, by executing and
delivering a later dated proxy or by attending the Annual Meeting and voting in
person. Unless previously revoked or unless other instructions are on the proxy,
it will be voted 'for' the election of the thirteen persons nominated by the
Board of Directors for election as Directors of the Company and 'for' adoption
of the Amended Reliance Group Holdings, Inc. Executive Bonus Plan. The cost of
this solicitation will be borne by the Company. This proxy statement is being
mailed commencing April 12, 1996, to stockholders of record on March 11, 1996.

Holders of record of Common Stock, par value $.10 per share (the 'Common
Stock') of the Company at the close of business on March 11, 1996, are entitled
to vote at the Annual Meeting. On that date, 113,970,273 shares of Common Stock
were outstanding. Each stockholder is entitled to one vote for each share of
Common Stock held. Pursuant to the Delaware General Corporation Law, only votes
cast 'for' a matter constitute affirmative votes. Votes withheld will not have
any effect on the election of Directors but votes 'withheld' or abstentions are
counted for quorum purposes and will have the same effect as negative votes or
votes 'against' approval of the Amended Reliance Group Holdings, Inc. Executive
Bonus Plan.

Approximately 45% of the Common Stock is, and on March 11, 1996 was, owned
by Saul P. Steinberg, members of his family and affiliated trusts (the
'Steinberg Group'). The members of the Steinberg Group have informed the Company
that they intend to vote for the election of the thirteen persons nominated by
the Board of Directors for election as Directors of the Company and 'for' the
adoption by the Company of the Amended Reliance Group Holdings, Inc. Executive
Bonus Plan. The election of such Directors and the approval of the Amended
Reliance Group Holdings, Inc. Executive Bonus Plan are, therefore, virtually
assured.

PROPOSAL 1--ELECTION OF DIRECTORS

The thirteen persons named below (all of whom are currently Directors of
the Company) have been nominated by the Board of Directors, upon the
recommendation of the Nominating Committee, for election as Directors of the
Company to serve until the next annual meeting of stockholders and until their
successors are duly elected and shall qualify. Directors will be elected by a
plurality of the votes cast. Each of the persons named below is also a director
of Reliance Financial Services Corporation and Reliance Insurance Company
('Reliance Insurance'), subsidiaries of the Company.

Saul P. Steinberg, 56, founded and has been the Chief Executive Officer and
a Director of the Company and predecessors of the Company since 1961. Mr.
Steinberg is also a Director of Symbol Technologies, Inc. and Zenith National
Insurance Corp. He is a member of the Board of Trustees of The University of
Pennsylvania; Chairman of The Wharton School Board of Overseers; a member of the
Board of Overseers of Cornell University

<PAGE>
Medical College; a member of the Board of Trustees of the Long Island Jewish
Medical Center; a Director of New York Hospital Cornell Medical Center; a
Trustee of the New York Public Library; and a Director of the New York City
Partnership. Mr. Steinberg is Chairman of the Executive Committee and the
Regular Compensation Committee of the Board of Directors. He is the brother of
Mr. Robert M. Steinberg, President and Chief Operating Officer of the Company
and the brother-in-law of Mr. Bruce L. Sokoloff, Senior Vice
President--Administration of the Company. Mr. Steinberg served as Chief
Executive Officer of Telemundo Group, Inc. ('Telemundo') from February 1990
until May 1992. On July 30, 1993, Telemundo consented to the entry of an order
for relief under Chapter 11 of the United States Bankruptcy Code. Telemundo's
plan of reorganization was consummated on December 30, 1994.

George R. Baker, 66, has been a Director of the Company since January 1983
and was a Director of predecessors of the Company since 1974. His principal
business activity during the past five years has been serving as a Corporate
Director/Advisor to various business enterprises. Mr. Baker is a Director of The
Midland Company, WMS Industries Inc. and W.W. Grainger, Inc. He is a Member of
the Board of Trustees of The Field Museum of Chicago; the Board of Trustees of
Children's Memorial Hospital, Chicago; and the Board of Trustees of Coe College,
Cedar Rapids, Iowa. Mr. Baker is Chairman of the Stock Option, Special
Compensation and Special Committees of the Board of Directors and a member of
the Audit and Nominating Committees of the Board of Directors.

George E. Bello, 60, became Executive Vice President and Controller and a
Director of the Company in 1982. He has held various positions with predecessors
of the Company since 1968. He is a Director of Zenith National Insurance Corp.,
United Dental Care, Inc. and Horizon Mental Health Management, Inc. Mr. Bello is
Chairman of the Finance Committee of the Board of Directors.

Dennis A. Busti, 53, became a Director of the Company in August 1991. He
has been President and Chief Executive Officer of Reliance National, a principal
operating unit of the Company, since June 1987.

Lowell C. Freiberg, 56, has been a Senior Vice President and a Director of
the Company since 1982 and Chief Financial Officer of the Company since 1985. He
also served as Treasurer of the Company from 1982 until March 1994. Mr. Freiberg
has held various positions with predecessors of the Company since 1969. He is a
Director of Symbol Technologies, Inc. and a Director of the Dance Theatre of
Harlem. Mr. Freiberg is a member of the Finance Committee of the Board of
Directors.

Dr. Thomas P. Gerrity, 54, became a Director of the Company in December
1993. He has been Dean of The Wharton School of The University of Pennsylvania
since 1990. He is a Director of Digital Equipment Corporation, Federal National
Mortgage Association, Sun Company, Inc. and Melville Corporation and a member of
the Executive Committee of Technology Leaders L.P. Dr. Gerrity is Chairman of
the Nominating Committee of the Board of Directors and is a member of the Audit
Committee of the Board of Directors.

Jewell Jackson McCabe, 50, became a Director of the Company in August 1991.
She has been the President of Jewell Jackson McCabe Associates, consultants
specializing in strategic planning and communications, since 1984 and Chair of
the New York State Jobs Training Partnership Council, a federally funded
training program for disadvantaged workers, since 1983. Ms. McCabe is the
Founder and Chair of the National Coalition of 100 Black Women; Chair of the
Coro Foundation; and a Director or Trustee of the National Alliance of Business,
South Street Seaport Museum, United Hospital Fund, New York City Partnership and
the Phelps Stokes Fund. She is also a member of The Wharton School Board of
Overseers, the Government Relations Committee of the United Way of America and
of the Executive Committee of the Association for a Better New York. Ms. McCabe
is a member of the Stock Option, Regular Compensation and Finance Committees of
the Board of Directors.

Irving Schneider, 76, became a Director of the Company in 1982 and was a
Director of predecessors of the Company since 1979. He has been Executive Vice
President of Helmsley-Spear, Inc., a real estate management corporation, for
over twenty years. Mr. Schneider is also Chairman Emeritus of the Long Island
Jewish Medical Center, Vice Chairman of the Association for a Better New York
and Trustee Emeritus of Brandeis University. He is Life Trustee of United Jewish
Appeal Federation of New York. Mr. Schneider is a member of the Audit and Stock
Option Committees of the Board of Directors.

Bernard L. Schwartz, 70, became a Director of the Company in 1982 and was a
Director of predecessors of the Company since 1965. He has been Chairman of the
Board and Chief Executive Officer of Loral Corporation,

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<PAGE>
a defense electronics and communications corporation, since 1972. Since 1989, he
has been Chairman and Chief Executive Officer of K & F Industries, Inc., a
manufacturer of aircraft wheels and brakes. Since 1990, Mr. Schwartz has been
Chairman of Space Systems/Loral, Inc. He is a Director of First Data
Corporation and Globalstar Telecommunications, Ltd. and a Trustee of New York
University Medical Center. Mr. Schwartz is a member of the Executive Committee
of the Board of Directors.

Richard E. Snyder, 63, became a Director of the Company in March 1994. Mr.
Snyder became President of Western Publishing Group, Inc. in February 1996.
He was Chief Executive Officer and Chairman of the Board of Directors
of Simon & Schuster, the publishing firm, from 1975 through 1994. Mr. Snyder is
a member of the Board of Directors of the National Book Awards, and a member of
the Society of Fellows of the American Museum of Natural History, the Council on
Foreign Relations, the Economic Club of New York and the Board of Overseers for
the University Libraries of Tufts University. Mr. Snyder is a member of the
Finance and Nominating Committees of the Board of Directors.

Thomas J. Stanton, Jr., 68, became a Director of the Company in 1982 and
was a Director of predecessors of the Company since 1966. He is Chairman
Emeritus of National Westminster Bank NJ, and served as Chairman of the Board of
Directors or President of National Westminster Bank NJ or its predecessor from
1967 through January 1990. He is a Director of Loral Corporation. He is
Treasurer and Director of the New Jersey State Chamber of Commerce and a
Director of Hudson County Chamber of Commerce & Industry and the National
Conference of Christians and Jews. He is a member of the Board of Regents of
Saint Peter's College and of Partnership for New Jersey. He is Chairman of
Hudson County Tax Research Council Executive Committee; Trustee of Montclair
Museum, Liberty Science Center and Saint Peter's Prep; and Chairman and
Treasurer of the Foundation of the University of Medicine and Dentistry of New
Jersey. Mr. Stanton is Chairman of the Audit Committee of the Board of Directors
and a member of the Special Compensation and Special Committees of the Board of
Directors.

Robert M. Steinberg, 53, became a Director of the Company in 1981 and
President and Chief Operating Officer in 1982. Mr. Steinberg has been Chairman
of the Board and Chief Executive Officer of Reliance Insurance since 1984. He
has held various positions with predecessors of the Company since 1965. He is a
Director of Zenith National Insurance Corp. He is a Trustee of the Mount Sinai
Medical Center, The Robert Steel Foundation for Pediatric Cancer Research and
Bank Street College. Mr. Steinberg is a member of the Executive Committee and
the Regular Compensation Committee of the Board of Directors. Mr. Steinberg is
the brother of Mr. Saul P. Steinberg, Chairman and Chief Executive Officer of
the Company, and the brother-in-law of Mr. Bruce L. Sokoloff, Senior Vice
President--Administration of the Company.

James E. Yacobucci, 44, became a Director of the Company and Senior Vice
President--Investments of Reliance Insurance in May 1989. He became Senior Vice
President--Investments of the Company in December 1990.

BOARD OF DIRECTORS AND COMMITTEES

The Board of Directors of the Company held six meetings during 1995. The
Board of Directors has an Audit Committee, which held five meetings during 1995,
and a Regular Compensation Committee, which met informally from time to time and
acted twice by unanimous written consent during 1995. The Board of Directors
also has a Special Compensation Committee, which held three meetings and acted
once by unanimous written consent during 1995, a Stock Option Committee, which
held three meetings and acted twice by unanimous written consent during 1995, a
Special Committee, which met once in 1995, and a Nominating Committee, which met
once during 1995. Each Director of the Company attended at least 75% of the
aggregate number of meetings held by the Board of Directors and by the

committees of which he or she was a member.

The Audit Committee's responsibilities include recommendations as to the
engagement of independent auditors, approval of fee proposals and the scope of
the audits by the independent and internal auditors, periodic meetings with both
independent and internal auditors to discuss the results of audit examinations,
and review of the adequacy of internal accounting and financial reporting
controls and of current developments in financial reporting and accounting. The
Regular Compensation Committee is responsible for evaluating the performance and
approving the compensation of senior officers of the Company who are not
Directors of the Company. The

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<PAGE>
Special Compensation Committee (which is comprised solely of outside directors)
is responsible for evaluating the performance and approving the compensation of
officers of the Company who are also Directors of the Company and of principal
executive officers of the Company's insurance operations. The Special
Compensation Committee is also responsible for reviewing the participation of
key executives of the Company in certain transactions involving the Company. The
Special Compensation Committee also administers each of the Reliance Group
Holdings, Inc. Executive Bonus Plan, the Executive Bonus Plan for James E.
Yacobucci and the Reliance Group Holdings, Inc. 1994 Stock Option Plan as it
applies to the executive officers of the Company. The Stock Option Committee
(which is comprised solely of outside directors) administers the Company's 1986
Stock Option Plan and approves the key employees who will receive grants of
options and stock appreciation rights and approves the number of shares of
Common Stock that will be subject thereto. The Stock Option Committee also
administers the 1994 Stock Option Plan for Non-Employee Directors (but does not
select the persons eligible to receive options thereunder) and the Reliance
Group Holdings, Inc. 1994 Stock Option Plan (other than with respect to the
executive officers of the Company). The Special Committee (which is comprised
solely of outside directors) is responsible for authorizing and approving the
participation of the Company and one of its subsidiaries in financial
transactions involving Reliance Figueroa Associates Limited Partnership, a
partnership in which a Company subsidiary is the general partner and certain
Directors and executive officers of the Company are limited partners. The
Nominating Committee is responsible for evaluating and recommending nominees for
election to the Board of Directors.

Any stockholder desiring to recommend a candidate for nomination to the
Board of Directors should furnish to the Corporate Secretary of the Company a
resume of the experience and qualifications of the proposed nominee and a
written statement signed by the proposed nominee consenting to be nominated by
the Board of Directors and to serve if elected. A candidate for director must be
highly experienced, have knowledge and a background that will be useful to the
Company and the ability to exercise sound business judgment. The candidate must
also be willing and able to commit the time and effort needed to be an effective
director. To be considered for the 1997 Annual Meeting of Stockholders, any such
recommendation must be received at the principal executive offices of the
Company on or before December 15, 1996.

COMPENSATION OF DIRECTORS

Each Director of the Company who is not compensated as an officer of the
Company or one of its subsidiaries receives director's fees of $20,000 per annum
from the Company and $20,000 per annum from Reliance Insurance for serving as a
director of Reliance Insurance. The Company also pays each member of its Audit,
Stock Option, Nominating, Special Compensation and Special Committees $1,000 for
each such committee meeting attended. In addition, the Company pays to the
Chairman of each of the Audit, Stock Option, Nominating, Special Compensation
and Special Committees a retainer of $5,000 per annum. Each person who is
elected as a Director of the Company and is not an employee of the Company or
any of its subsidiaries has been, or will upon such person's initial election,
be granted an option to purchase 25,000 shares of Common Stock at the fair
market value of such shares on the date of grant. The options granted to each
Director of the Company who is not an employee of the Company or any of its
subsidiaries vest one year from the date of grant, so long as the Director is
still a Director on such date. The Company provides Mr. Stanton with $100,000
face value of permanent life insurance.

<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

Approximately 45% of the Common Stock is owned by the Steinberg Group,
composed of Saul P. Steinberg, members of his family and affiliated trusts. The
following table sets forth information as of February 15, 1996 with respect to
beneficial ownership of Common Stock by the Steinberg Group and its members, by
each Director of the Company and by all executive officers and Directors of the
Company as a group. The Company does not know of any other beneficial owners of
more than 5% of the outstanding Common Stock. The persons named below hold sole
voting and investment power with respect to the shares shown opposite their
names, unless otherwise indicated. Saul P. Steinberg, Robert M. Steinberg and
the Steinberg Group have an address of Park Avenue Plaza, 55 East 52nd Street,
New York, New York 10055.

<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------------------------------ -------------------- ----------
<S> <C> <C>
Steinberg Group............................................. 51,237,493(2) 45.2%
Saul P. Steinberg........................................... 41,970,927(3)(4)(9) 37.0%
Robert M. Steinberg......................................... 16,403,133(3)(5)(6)(9) 14.4%
Roni Sokoloff............................................... 3,072,467(6)(7)(9) 2.7%
Lynda Jurist................................................ 3,106,310(8) 2.7%
George R. Baker............................................. 28,725(3)(11) *
George E. Bello............................................. 1,248,113(6)(9) 1.1%
Dennis A. Busti............................................. 166,000(6) *
Lowell C. Freiberg.......................................... 2,478,669(6)(10) 2.2%
Dr. Thomas P. Gerrity....................................... 45,000(11) *
Jewell J. McCabe............................................ 25,000(11) *
Irving Schneider............................................ 199,500(11) *

Bernard L. Schwartz......................................... 39,350(11)(12)(13) *
Richard E. Snyder........................................... 26,000(11) *
Thomas J. Stanton, Jr....................................... 26,000(11) *
James E. Yacobucci.......................................... 2,090,269(6)(10) 1.8%
All Executive Officers and Directors as a Group (other than
the Steinberg Group and Bruce L. Sokoloff)................ 5,189,861(6)(9)(10)
(11)(12)(14) 4.5%
</TABLE>

- ------------------

(1) An asterisk indicates that the shares owned represent less than 1% of
the class.

(2) Excludes shares of Common Stock allocable to contributions of members
of the Steinberg Group under the Reliance Insurance Company Savings Incentive
Plan (the 'SIP') and shares based on the assumed exercise of currently
exercisable options to purchase Common Stock held by Robert M. Steinberg and
Roni Sokoloff (through her husband, Bruce L. Sokoloff, and over which she
disclaims beneficial ownership). See Notes 4, 5, 6 and 7. Including such shares,
the Steinberg Group beneficially owned 52,272,007 shares of Common Stock,
representing approximately 46% of the class.

(3) Includes with respect to each of Saul P. Steinberg and Robert M.
Steinberg, and excludes with respect to George R. Baker, 12,280,830 shares owned
by the Article III Residuary Trust under the will of Julius Steinberg. Saul P.
Steinberg, Robert M. Steinberg, their mother and George R. Baker are the
trustees thereof and have the shared power to vote and otherwise deal with the
shares. Saul P. Steinberg, Robert M. Steinberg and their sisters Roni Sokoloff
and Lynda Jurist are equal beneficiaries under the trust.

(4) Includes 4,000 shares held by Saul P. Steinberg as custodian for his
daughter, as to which he disclaims beneficial ownership. Includes 75,180 shares
owned by Saul P. Steinberg's mother, 336,300 shares owned by his wife, 15,200
shares held by his wife as custodian for his daughter and 1,010,000 shares held
by the Saul & Gayfryd Steinberg Foundation, Inc., as to all of which Saul P.
Steinberg disclaims beneficial ownership. Excludes 151,340 shares held by trusts
for the children of Saul P. Steinberg (for which Robert M. Steinberg serves as
the sole trustee).

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<PAGE>
(5) Includes 101,730 shares held by Robert M. Steinberg as custodian for
his children and 151,340 shares held by trusts for children of Saul P. Steinberg
for which Robert M. Steinberg serves as sole trustee, as to all of which Robert
M. Steinberg disclaims beneficial ownership.

(6) Includes shares based on the assumed exercise of currently exercisable
options to purchase Common Stock owned through the Company's 1986 Stock Option
Plan as follows: Robert M. Steinberg--750,000, Roni Sokoloff--97,500 (these
options are owned by Bruce L. Sokoloff and Roni Sokoloff disclaims beneficial
ownership thereof), George E. Bello--525,000, Dennis A. Busti--165,000, Lowell
C. Freiberg--525,000, James E. Yacobucci--150,000 and all executive officers and
directors as a group (other than the Steinberg Group and Bruce L.

Sokoloff)--1,945,000 shares.

(7) Includes 400,000 shares owned by Bruce L. Sokoloff, the husband of Roni
Sokoloff, and 52,580 shares held by Mr. Sokoloff as custodian for their
children, as to all of which Roni Sokoloff disclaims beneficial ownership. Mr.
Sokoloff is Senior Vice President-Administration of the Company.

(8) Includes 10,000 shares owned by Lynda Jurist's husband and 89,940
shares held by Lynda Jurist as custodian for her children, as to all of which
she disclaims beneficial ownership.

(9) Includes shares allocable to employee contributions under the SIP, as
to which the employee has dispositive power, as follows: Saul P.
Steinberg--134,364, Robert M. Steinberg--30,393, Roni Sokoloff-- 22,257
(allocable to Bruce L. Sokoloff's contributions under the SIP and as to which
Roni Sokoloff disclaims beneficial ownership), George E. Bello--16,168,
and all Executive Officers and Directors as a Group (other than the Steinberg
Group and Bruce L. Sokoloff)--16,168 shares. All of the Common Stock held under
the SIP will be voted by a trustee of the SIP, CTC Illinois Trust Company, in
its sole discretion, in accordance with the fiduciary standards of the Employee
Retirement Income Security Act of 1974, as amended.

(10) Includes 182,900, 314,100 and 933,300 shares owned by and 56,072,
94,154 and 310,643 shares based on the assumed exercise of warrants to purchase
Common Stock owned by the Reliance Group Holdings, Inc. Pension Trust (the
'Company Pension Trust'), the Commonwealth Land Title Insurance Company Pension
Trust (the 'Commonwealth Pension Trust') and the Reliance Insurance Company
Employee Retirement Trust (the 'Reliance Retirement Trust' and together with the
Company Pension Trust and the Commonwealth Pension Trust, the 'Pension Trusts'),
respectively. Lowell C. Freiberg and James E. Yacobucci are part of a
three-person investment committee that directs the investments of the Pension
Trusts, except with respect to the shares and warrants of the Company. Voting
and dispositive power with respect to such shares and warrants has been
transferred to LaSalle National Trust, N.A. ('LaSalle'), as independent
fiduciary. The investment committee may revoke the authority of LaSalle on 30
days' notice. Each of Messrs. Freiberg and Yacobucci disclaims beneficial
ownership of all of the shares described in this Note 10.

(11) Includes, for each of George R. Baker, Dr. Thomas P. Gerrity, Jewell
J. McCabe, Irving Schneider, Bernard L. Schwartz, Richard E. Snyder and Thomas
J. Stanton, Jr., 25,000 shares based on the assumed exercise of currently
exercisable options to purchase Common Stock owned through the Company's 1994
Stock Option Plan for Non-Employee Directors. Includes for all Executive
Officers and Directors as a Group, 175,000 shares based on the assumed exercise
of such options.

(12) Includes shares based on the assumed exercise of warrants to purchase
Common Stock as follows: Bernard L. Schwartz--4,350 shares (owned by the Bernard
and Irene Schwartz Foundation) and all Executive Officers and Directors as a
Group--465,623 shares.

(13) All of these shares (except for those included based on the assumed
exercise of currently exercisable options) and warrants are beneficially owned
by the Bernard and Irene Schwartz Foundation and investment and voting power

over these shares and warrants are shared.

(14) Excludes 12,280,830 shares owned by the Article III Residuary Trust
under the will of Julius Steinberg. See Note 3. Includes 10,000 shares held by a
Company executive officer as trustee for his children, as to which beneficial
ownership is disclaimed.

6
<PAGE>
The following table sets forth information as of February 15, 1996 with
respect to beneficial ownership of warrants to purchase Common Stock by each
Director of the Company and by all executive officers and Directors of the
Company as a group.

<TABLE>
<CAPTION>
NUMBER OF WARRANTS
AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
- ------------------------------------------------------ -------------------- -----------
<S> <C> <C>
Lowell C. Freiberg.................................... 460,869(2) 9.2%
Bernard L. Schwartz................................... 4,350 *
James E. Yacobucci.................................... 460,869(2) 9.2%
All Executive Officers and Directors as a Group....... 465,623(2) 9.3%
</TABLE>

- ------------------

(1) An asterisk indicates that the securities owned are less than 1% of the
class.

(2) Includes 310,643, 56,072 and 94,154 warrants to purchase Common Stock
owned by the Reliance Retirement Trust, the Company Pension Trust and the
Commonwealth Pension Trust, respectively. Lowell C. Freiberg and James E.
Yacobucci are part of a three-person investment committee that directs the
investments of the Pension Trusts, except with respect to the shares and
warrants of the Company. Dispositive power with respect to the warrants and
voting power with respect to the underlying Common Stock has been transferred
to LaSalle, as independent fiduciary. The investment committee may revoke the
authority of LaSalle on 30 days' notice. Messrs. Freiberg and Yacobucci each
disclaims beneficial ownership of the warrants described in this Note 2.

7
<PAGE>
EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation for services rendered in
all capacities to the Company and its subsidiaries for the fiscal years ended
December 31, 1995, 1994 and 1993 by the Company's Chief Executive Officer and
the four other most highly compensated executive officers of the Company (the
'named executive officers').

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------------------
AWARDS
ANNUAL COMPENSATION ---------- PAYOUTS
----------------------------------------- SECURITIES ----------
OTHER UNDERLYING LTIP
NAME AND ANNUAL OPTIONS/ PAYOUTS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS(#) ($) COMPENSATION($)
- -------------------- ---- ------------ ---------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Saul P. Steinberg 1995 $1,800,000(1) $2,013,000 $145,000(2) 0 $ 0 $290,000(6)
Chairman of the
Board & 1994 1,800,000(1) 1,925,000 74,000(2) 500,000(4) 0 44,000
Chief Executive
Officer 1993 2,750,000(1) 2,700,000 85,000(2) 0 0 696,000(7)

Robert M. Steinberg 1995 1,200,000(1) 1,323,000 --(3) 0 0 86,000(6)
President & Chief 1994 1,200,000(1) 1,265,000 -- 500,000(4) 0 107,000
Operating Officer 1993 1,400,000(1) 1,350,000 -- 0 0 40,000(7)

George E. Bello 1995 675,000(1) 719,000 -- 0 0 61,000(6)
Executive Vice
President 1994 675,000(1) 687,500 -- 75,000(4) 0 64,000
& Controller 1993 590,000(1) 625,000 -- 0 0 59,000(7)

James E. Yacobucci 1995 1,250,000 2,500,000 -- 0 0 5,000(6)
Senior Vice
President-- 1994 1,250,000 1,250,000 -- 0 0 5,000
Investments 1993 1,125,000 0 -- 0 1,234,000(5) 7,000

Lowell C. Freiberg 1995 600,000 690,000 -- 0 0 63,000(6)
Senior Vice
President 1994 600,000 660,000 -- 75,000(4) 0 65,000
& Chief Financial
Officer 1993 495,000 700,000 -- 0 0 54,000(7)
</TABLE>

- ------------------

(1) Includes a $50,000 director's fee paid by a company, which may be
deemed to be an affiliate of the Company, on whose board the executive serves
at the request of the Company.

(2) The 1995, 1994 and 1993 amounts include $141,000, $57,000 and $57,000,
respectively, for certain personal use of corporate aircraft. The 1993 amount
also includes $26,000 for club membership dues.

(3) This mark throughout the table indicates information not required to be
reported under the rules of the Securities and Exchange Commission.

(4) Each option listed carries one tandem stock appreciation right.

(5) Represents an amount paid to Mr. Yacobucci in early 1994, but earned
for the period from July 1, 1989 through December 31, 1993. Until December 31,
1993, Mr. Yacobucci's employment was governed by an employment agreement with
Reliance Insurance pursuant to which Mr. Yacobucci was entitled, in addition to
salary and bonus, to 'Distributable Portfolio Profits' (defined as 15% of the
amount (if any) by which the total return earned on a portion of the
consolidated investment portfolio of Reliance Insurance exceeded the amount
which would have been earned on such portion of the portfolio if its performance
matched the total return on the Standard & Poor's 500) for the period from July
1, 1989 through December 31, 1993. The $1,234,000 paid to Mr. Yacobucci
represents an amount equal to the excess of (i) Distributable Portfolio Profits
over (ii) the aggregate amount of advances against Distributable Portfolio
Profits paid to him prior to 1994.

(6) Includes 1995 contributions by the Company and its subsidiaries under
the SIP for each of Saul P. Steinberg, Robert M. Steinberg, George E. Bello,
James E. Yacobucci and Lowell C. Freiberg of $4,500. Includes bonuses paid by
the Company that were used to obtain certain life insurance benefits as follows:

(Footnotes continued on next page)

8
<PAGE>
(Footnotes continued from previous page)
$252,300 for Saul P. Steinberg, $2,700 for Robert M. Steinberg, $4,300 for
George E. Bello, $-0- for James E. Yacobucci and $4,300 for Lowell C. Freiberg.
Includes the value of premiums paid by the Company for split dollar life
insurance in excess of the premiums paid by the executive officers as follows:
$-0- for Saul P. Steinberg, $65,500 for Robert M. Steinberg, $39,400 for George
E. Bello, $-0- for James E. Yacobucci and $16,400 for Lowell C. Freiberg.
Includes premiums paid by the Company and its subsidiaries for medical
reimbursement insurance for each of Saul P. Steinberg, Robert M. Steinberg,
George E. Bello and Lowell C. Freiberg of $13,200 and for James E. Yacobucci of
$-0-. Includes directors' fees paid by a company on whose board the executives
serve at the request of the Company because the Company has a significant
investment in such company as follows: $20,000 for Saul P. Steinberg, $-0- for
Robert Steinberg, $-0- for George E. Bello, $-0-for James E. Yacobucci and
$25,000 for Lowell C. Freiberg.

(7) Certain bonuses paid by the Company for 1994 life insurance premiums
for the split dollar life insurance for these executive officers were paid in
1993 and were, therefore, reflected in 'All Other Compensation' for 1993.

FISCAL 1995 YEAR-END OPTION/SAR VALUES

The following table sets forth the number of shares covered by stock
options (each of which carries one tandem stock appreciation right) held by the
named executive officers at December 31, 1995 and also shows the values for
'in-the-money' options at that date.

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS VALUE OF UNEXERCISED
HELD AT IN-THE-MONEY OPTIONS/SARS AT
DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Saul P. Steinberg..... 0 500,000 $ 0 $ 1,375,000
Robert M. Steinberg... 750,000 750,000 3,600,000 2,575,000
George E. Bello....... 525,000 250,000 2,520,000 1,112,000
James E. Yacobucci.... 150,000 50,000 720,000 240,000
Lowell C. Freiberg.... 525,000 250,000 2,520,000 1,112,000
</TABLE>

- ------------------

(1) Options and stock appreciation rights are classified as 'in-the-money'
if the fair market value of the underlying common stock exceeds the exercise or
base price of the option or stock appreciation right. The value of such
in-the-money options and stock appreciation rights is the difference between the
exercise or base price and the fair market value of the underlying common stock
as of December 31, 1995. The fair market value of the Common Stock on December
31, 1995 was $8.625 per share.

PENSION PLAN TABLE

The following table sets forth the approximate annual pension that a named
executive officer may receive under (1) the Company's pension plan (the 'Company
Pension Plan') and the Company's supplemental pension plan (the 'Company
Supplemental Pension Plan') or (2) Reliance Insurance's pension plan (the
'Reliance Insurance Pension Plan') and Reliance Insurance's supplemental pension
plan (the 'Reliance Insurance Supplemental Pension Plan' and together with the
Company Supplemental Pension Plan, the 'Supplemental Pension Plans'), in each
case assuming selection of a single life annuity, retirement at age 65 and the
current level of covered compensation, based on the indicated assumptions as to
covered compensation and years of service. Under the Internal Revenue Code of
1986, as amended (the 'Code'), for each of the Company Pension Plan and the
Reliance Insurance Pension Plan, the maximum annual benefit allowed is $120,000
(which is a combined maximum for persons participating in both plans) and the
maximum annual compensation for years beginning with 1994 that may be taken into
account in 1996 is presently $150,000. Amounts shown on the following table in
excess of $120,000 are payable by the Company only to persons participating in
the Company Supplemental Pension Plan, including Saul P. Steinberg, Robert M.
Steinberg, George E. Bello and Lowell C. Freiberg, and are payable by Reliance
Insurance only to persons participating in the Reliance Insurance

9
<PAGE>
Supplemental Pension Plan, including Saul P. Steinberg and Robert M. Steinberg.
For purposes of the Supplemental Pension Plans, the covered compensation of each
of Saul P. Steinberg, Robert M. Steinberg, George E. Bello, Lowell C. Freiberg
and one other executive officer of the Company includes his bonus paid by the

Company or Reliance Insurance, as applicable.

<TABLE>
<CAPTION>
YEARS OF SERVICE
COVERED -------------------------------------------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 35
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$150,000..... $ 12,998 $ 25,995 $ 38,993 $ 51,990 $ 64,988 $ 77,985 $ 90,983
200,000..... 17,623 35,245 52,868 70,490 88,113 105,735 123,358
300,000..... 26,873 53,745 80,618 107,490 134,363 161,235 188,108
500,000..... 45,373 90,745 136,118 181,490 226,863 272,235 317,608
750,000..... 68,498 136,995 205,493 273,990 342,488 410,985 479,483
1,000,000... 91,623 183,245 274,868 366,490 458,113 549,735 620,000
2,000,000... 184,123 368,245 552,368 620,000 620,000 620,000 620,000
</TABLE>

For purposes of calculating pension benefits under the Company Pension Plan
and the Company Supplemental Pension Plan, Saul P. Steinberg, Robert M.
Steinberg, George E. Bello and Lowell C. Freiberg had 35, 30, 27 and 26 years of
credited service and 43, 38, 35 and 34 years of credited service, respectively.
For purposes of calculating pension benefits under the Company Pension Plan, as
of January 1, 1996, Saul P. Steinberg, Robert M. Steinberg, George E. Bello and
Lowell C. Freiberg had salaries of $150,000 each and for purposes of the Company
Supplemental Pension Plan, had aggregate salaries and bonuses of $3,078,000,
$1,932,000, $1,313,000 and $1,260,000, respectively. For purposes of calculating
pension benefits under the Reliance Insurance Pension Plan, Saul P. Steinberg,
Robert M. Steinberg and James E. Yacobucci had 19, 7 and 6 years of credited
service, respectively. As of January 1, 1996, Saul P. Steinberg, Robert M.
Steinberg and James E. Yacobucci had salaries of $150,000 each, and for purposes
of the Reliance Insurance Supplemental Pension Plan, Saul P. Steinberg and
Robert M. Steinberg had aggregate salaries and bonuses of $597,000 and $483,000
and 27 and 15 years of credited service, respectively. Under current Code limits
and plan provisions, the aggregate pension benefit payable to an individual
under all pension plans and supplemental pension plans maintained by the Company
and its subsidiaries cannot exceed $620,000. Benefits under each of the above
named plans are calculated on the basis of a single life annuity and are not
subject to any deduction for Social Security benefits or offset amounts.

EMPLOYMENT CONTRACTS

In February 1996, Mr. Saul P. Steinberg and the Company entered into an
employment agreement (the 'New SPS Employment Agreement') for a five-year term
which commenced February 15, 1996 and which may be extended by Mr. Steinberg or
the Company for three successive one-year periods (the 'Extended Term').
Pursuant to the New SPS Employment Agreement, Mr. Steinberg's base salary will
be at least his salary as in effect on January 1, 1996 (which was $1,465,625),
subject to increase by the Board of Directors (or any duly empowered committee
thereof). Pursuant to the New SPS Employment Agreement, Mr. Steinberg will be
eligible to receive a bonus for each year determined pursuant to the Reliance
Group Holdings, Inc. Executive Bonus Plan (the 'Executive Bonus Plan') or any
other subsequent plan in which the chief executive officer or the chief
operating officer of the Company participate. The Executive Bonus Plan currently

provides for a maximum bonus equal to 115% of annual base salary from the
Company and Reliance Insurance if certain preestablished, objective performance
goals are achieved. Any subsequent plan must be approved by the stockholders of
the Company and provide for a bonus potential of at least 100% of Mr.
Steinberg's base salary. See 'Proposal 2--Approval of the Amended Reliance
Group Holdings, Inc. Executive Bonus Plan.' Pursuant to the New SPS Employment
Agreement, if Mr. Steinberg is discharged without 'cause' or resigns because of
the occurrence of certain events relating to a diminution or change in his
duties, the Company is obligated to (i) continue his medical and dental benefits
until the end of the Extended Term at the same charge to Mr. Steinberg as he
would have paid had he remained employed by the Company, (ii) fully vest all
stock option grants and permit the immediate exercise thereof for a period of
twelve months after the date of such discharge or resignation and (iii) pay Mr.
Steinberg an amount determined by multiplying the number of years remaining from
the date of such discharge or such resignation to the end of the Extended Term
by the sum of his base salary plus the average bonus paid to him for the two
years immediately prior to the date of such discharge or resignation. In the
event of

10
<PAGE>
the termination of the New SPS Employment Agreement because of the death of Mr.
Steinberg, his estate will receive a one-time payment in an amount equal to the
sum of his base salary plus the average bonus paid to him for the two years
immediately prior to his death. In the event of 'total disability' or 'partial
disability' (each as defined in the New SPS Employment Agreement), Mr. Steinberg
will be paid, until the third anniversary of the date of the total disability or
the fifth anniversary of the date of the partial disability (or until the end of
the Extended Term, whichever is earlier), his base salary and a bonus in an
amount equal to the average bonus paid to him for the two years immediately
preceding such disability (less any amounts paid to him under any of the
Company's other disability plans). In addition, the New SPS Employment Agreement
provides that for purposes of the Company Supplemental Pension Plan, Mr.
Steinberg's benefits will be calculated using his total base salary and bonus
compensation and Mr. Steinberg will be credited for all years of actual service
with the Company and with all years until the end of the Extended Term (unless
he is terminated for 'cause,' in which event he will only be credited with all
years of actual service).

Mr. Saul P. Steinberg also entered into a new employment agreement with
Reliance Insurance on substantially the same terms as the New SPS Employment
Agreement (except that Mr. Steinberg's base salary as in effect on January 1,
1996 from Reliance Insurance was $284,375) (together with the New SPS Employment
Agreement, the 'New SPS Employment Agreements').

Mr. Steinberg's 1995 compensation was based on his prior employment
agreements with the Company and Reliance Insurance, which were replaced by the
New SPS Employment Agreements and which would have otherwise terminated in
January 1997. The prior employment agreements provided for base salaries for Mr.
Steinberg of $1,465,625 and $284,375, from the Company and Reliance Insurance,
respectively, and for bonuses payable in accordance with the terms of the
Executive Bonus Plan or any other executive bonus plan then in effect which
meets the requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the 'Code').

In February 1996, Mr. Robert M. Steinberg entered into employment
agreements with the Company and Reliance Insurance on substantially the same
terms as the New SPS Employment Agreements (the 'New RMS Employment
Agreements'). The base salaries effective on February 15, 1996 for Robert M.
Steinberg from the Company and Reliance Insurance were $1,060,000 and $265,000,
respectively. Pursuant to the terms of Robert M. Steinberg's new employment
agreement with the Company, his base salary may be reduced by not more than
15% by the Board of Directors (or any duly empowered committee thereof) for
any year in which the base salary of the chief executive officer is similarly
reduced. Mr. Steinberg's 1995 compensation was based on his prior employment
agreements with the Company and Reliance Insurance, which were replaced by the
New RMS Employment Agreements and which would have otherwise terminated in
December 1999. The prior employment agreements provided for base salaries for
Mr. Steinberg of $920,000 and $230,000 from the Company and Reliance
Insurance, respectively, and for bonuses payable in accordance with the terms
of the Executive Bonus Plan or any other executive bonus plan then in effect
which meets the requirements of Section 162(m) of the Code.

In February 1996, each of Messrs. George E. Bello, Executive Vice President
and Controller of the Company, and Lowell C. Freiberg, Senior Vice President and
Chief Financial Officer of the Company, entered into employment agreements with
the Company (collectively, the 'Executive Employment Agreements') on
substantially the same terms as the New RMS Employment Agreements. The base
salaries as in effect on January 1, 1996 for Messrs. Bello and Freiberg were
$625,000 and $600,000, respectively. Pursuant to the terms of the Executive
Employment Agreements, the base salary of each of Messrs. Bello and Freiberg may
be reduced by not more than 15% by the Board of Directors (or any duly empowered
committee thereof) for any year in which the chief executive officer's and the
chief operating officer's base salaries are similarly reduced.

The 1996 bonuses for Saul P. Steinberg and Robert M. Steinberg from the
Company and Reliance Insurance and for George E. Bello and Lowell C. Freiberg
from the Company will be paid in accordance with the terms of the amended
Executive Bonus Plan being submitted to the Company's stockholders for a vote at
the Annual Meeting, assuming stockholder approval of such amended plan (the
'Amended Executive Bonus Plan'). The Amended Executive Bonus Plan provides for a
bonus of up to 115% of annual base salary if certain preestablished, objective
performance goals are achieved and an additional bonus of up to 85% of annual
base salary if a minimum of eight of those goals are achieved and the thresholds
for either or both of specified, preestablished, objective

11
<PAGE>
performance goals relating to shareholders' equity and average return on
shareholders' equity are achieved. See 'Proposal 2--Approval of the Amended
Reliance Group Holdings, Inc. Executive Bonus Plan.'

REPORT OF COMPENSATION COMMITTEES OF THE BOARD

Three separate committees of the Board of Directors of the Company are
responsible for reviewing and determining the overall compensation of executive
officers of the Company. The Regular Compensation Committee is responsible for
reviewing and approving the compensation of all senior officers of the Company

who are not Directors. The Special Compensation Committee is responsible for
reviewing and approving the compensation of executive officers who are
Directors of the Company, which includes all of the named executive officers,
and of the principal executive officers of the Company's insurance operations.
These committees are together referred to below as the 'Compensation
Committees.' In addition, the Stock Option Committee of the Board approves
determinations as to the award of stock options and stock appreciation rights
for officers and key employees of the Company under the Company's 1986 and 1994
Stock Option Plans (except, under the 1994 Plan, with respect to the executive
officers, which decisions are made by the Special Compensation Committee). Both
the Special Compensation Committee and the Stock Option Committee are comprised
solely of outside Directors.

I. Executive Compensation Philosophy

The executive compensation policies of the Company, as applied by the
Compensation Committees and the Stock Option Committee during 1995, are designed
to align compensation with the interests of the Company's stockholders. The
goals of the Company are to attract and retain executives whose abilities are
critical to the success of the Company, to support a performance-oriented
environment that rewards individual initiative and achievement, to establish a
relationship between compensation and the attainment of corporate objectives and
to reward executives for the enhancement of long-term stockholder value. The
Compensation Committees and the Stock Option Committee specifically endorse the
position that stock-based compensation and stock ownership by executives are an
important element in aligning the interests of executives with the stockholders
and in enhancing stockholder value.

II. Elements of Executive Compensation

The compensation package for executive officers of the Company, including
the Company's Chief Executive Officer, consists of the following basic elements.

A. Base Salary. The base salaries of executive officers of the Company are
set on an individual basis and are designed to enhance the Company's ability to
attract and retain highly qualified key executives. Salaries bear a direct
relationship to the executive's level of responsibility and reflect his
individual talents and skills and are not directly determined by specific
reference to overall corporate performance. The base salaries of Saul P.
Steinberg, Robert M. Steinberg, George E. Bello and Lowell C. Freiberg are
subject to the terms of individual employment agreements. See 'Employment
Contracts.'

B. Annual Bonus. The annual bonus paid to executive officers is a critical
element of compensation designed to reward the achievement of short-term
corporate goals, as well as individual productivity and performance. The Regular
Compensation Committee determines the amounts of the bonuses paid to executive
officers (other than the executive officers who are Directors of the Company)
based upon performance of the Company and its subsidiaries during the year, as
well as upon the contribution of the individual executive to such performance.
The bonuses for the named executive officers (other than James E. Yacobucci)
(the 'Executive Bonus Plan Officers') are paid in accordance with the terms of
the Executive Bonus Plan. The Executive Bonus Plan provides for a maximum bonus
equal to 115% of annual base salary if certain preestablished, objective

performance goals are achieved by the Company and its subsidiaries, including
the property and casualty operations of the Company ('Reliance Insurance Group')
and the title insurance operations of the Company ('CLTIC'). Pursuant to the
Executive Bonus Plan, each of the Executive Bonus Plan Officers will be paid a
bonus equal to 115% of his annual base salary from the Company and its
subsidiaries in the event that at least eight of fourteen performance goals
enumerated in the Executive Bonus Plan are achieved. In the event that fewer
than eight of the performance goals are achieved, each Executive Bonus Plan
Officer's bonus is reduced by 5%

12
<PAGE>
of his respective base salary multiplied by the difference between the number of
goals achieved and 'eight.' In the event that fewer than two goals are achieved,
the Executive Bonus Plan Officers will not be paid any bonus under the Executive
Bonus Plan. The business criteria on which the performance goals enumerated in
the Executive Bonus Plan are based are (i) the average return on shareholders'
equity of the Company, (ii) the combined ratio of the Reliance Insurance Group,
(iii) the total return on the combined investment portfolio of the Reliance
Insurance Group and CLTIC, (iv) the amount of pretax net realized capital gains
of the combined investment portfolio of the Reliance Insurance Group and CLTIC,
(v) the pretax operating income (exclusive of capital gains) of the Reliance
Insurance Group, (vi) net premiums written of the Reliance Insurance Group,
(vii) pretax operating income (exclusive of realized capital gains) of CLTIC,
(viii) net premiums earned of CLTIC, (ix) the price of the Common Stock, (x)
pretax operating earnings per share (exclusive of realized capital gains of the
combined investment portfolio of the Reliance Insurance Group and CLTIC) of the
Company, (xi) net investment income of the combined investment portfolio of the
Reliance Insurance Group and CLTIC, (xii) debt to capitalization ratio of the
Company as of the end of the applicable calendar year and (xiii) shareholders'
equity of the Company as of the end of the applicable calendar year.

The 1996 bonuses for the Executive Bonus Plan Officers will be paid in
accordance with the Amended Executive Bonus Plan, assuming stockholder approval
thereof. The Amended Executive Bonus Plan provides for a bonus of up to 115% of
annual base salary if certain preestablished, objective performance goals are
achieved and an additional bonus of up to 85% of annual base salary if a minimum
of eight of those goals are achieved and the thresholds for either or both of
specified preestablished, objective performance goals relating to
shareholders' equity and average return on shareholders' equity are achieved.
If the Amended Executive Bonus Plan is not approved by the Company's
stockholders the bonuses for the Executive Bonus Plan Officers will continue
to be paid in accordance with the existing Executive Bonus Plan. See 'Proposal
2--Approval of the Amended Reliance Group Holdings, Inc. Executive Bonus
Plan.'

The bonus for James E. Yacobucci is paid in accordance with the terms of
the executive bonus plan for James E. Yacobucci (the 'Yacobucci Plan'). Such
plan provides that, subject to the discretion of the Special Compensation
Committee to reduce or eliminate the bonus, Mr. Yacobucci may earn a maximum
annual bonus of 400% of his 'base salary,' which for purposes of the Yacobucci
Plan is defined as being $1,000,000, if a preestablished, objective performance
goal based upon the total return earned during such year on a portion of the
consolidated investment portfolio of the Company and its subsidiaries is

achieved. The return earned during any year shall include interest and dividend
income, realized gains and losses, and unrealized appreciation and depreciation.
Responsibility for payment of any bonuses payable under the Yacobucci Plan will
be allocated between the Company and any subsidiary in proportion to the amount
of base salary paid to Mr. Yacobucci for such year by the Company and such
subsidiary. Mr. Yacobucci's salary has always been paid by Reliance Insurance.

C. Stock Options. Stock option awards provide the most significant element
of long-term compensation to executives. Stock options provide compensation in a
manner that is intrinsically related to long-term corporate performance and
stockholder value because the value of stock options is determined solely by
movements in the Company's stock price over the term of the options. Stock
option awards are granted at the discretion of the Stock Option Committee
(except, under the 1994 Stock Option Plan, in the case of the executive officers
of the Company with respect to which the grants are made by the Special
Compensation Committee), which makes its determinations based on a variety of
factors, including the level of responsibility and performance of the executive,
his ability to affect stockholder value and the amount of past option grants to
the executive. The Company's 1986 Stock Option Plan also permits the award of
stock appreciation rights.

D. Retirement Plans. The Company has designed a retirement benefit program
to provide executives with retirement compensation that is competitive within
its industry and promotes the long-term employment of its executives. The
program includes the SIP, which enables participants to contribute a portion of
their compensation on a pretax and an after-tax basis and provides for matching
contributions. In addition, the Company maintains the Company Pension Plan, a
tax-qualified plan, and the Company Supplemental Pension Plan, which together
provide a retirement benefit that is a function of an executive's compensation
and years of service with the Company. Certain executive officers of the Company
participate in the Reliance Insurance Pension Plan, a tax-qualified plan, and
the Reliance Insurance Supplemental Pension Plan, which together

13
<PAGE>
provide a retirement benefit that is a function of an executive's compensation
and years of service with Reliance Insurance.

E. Subsidiary Compensation. A portion of the salary and bonuses of Saul P.
Steinberg and Robert M. Steinberg and all of the salary and bonus of James E.
Yacobucci are paid by Reliance Insurance, the principal operating subsidiary of
the Company. The amounts paid by Reliance Insurance are included in the 'Salary'
and 'Bonus' columns of the Summary Compensation Table above.

III. 1995 Compensation of Executive Officers Other than the CEO

The Compensation Committees and the Stock Option Committee took actions
with respect to executive compensation during 1995 that were consistent with the
Company's compensation philosophy and reflected an emphasis on performance-based
compensation.

The Regular Compensation Committee considered and increased the base salary
for three executive officers of the Company in 1995 who are not Directors of the
Company. In accordance with the Company's compensation policies, no other

executive officer was eligible to be considered for an increase in base salary
during 1995. The Stock Option Committee did not grant any stock options to
executive officers of the Company during 1995 in light of the grants made to
them in prior years. The Special Compensation Committee did not consider any
adjustments to the base salaries of the named executive officers in 1995, except
in the case of Robert M. Steinberg, who received an increase in base salaries of
$140,000 and $35,000, respectively, from the Company and Reliance Insurance.
Those increases became effective February 15, 1996 and did not affect Mr.
Steinberg's 1995 base salaries. The Special Compensation Committee determined to
increase Mr. Steinberg's base salaries and the amount of those increases based
on his contribution to the significant business accomplishments achieved by the
Company and its subsidiaries in 1994 and 1995. These accomplishments include an
overall improvement in the financial performance of the Company and the results
of its operating units, including a significant increase in the Company's
operating and net income over prior years and an improvement in the combined
ratio of the Company's property and casualty operations to a level superior to
the industry average. The Special Compensation Committee also considered Mr.
Steinberg's leadership role as chief operating officer of the Company during a
period of transformation of the Company's operating units in which they have
changed their focus to more specialized and less-traditional risks and have
improved and decentralized their actuarial, underwriting and claims management
disciplines in order to successfully compete in a changing environment. The
increase in Mr. Steinberg's 1996 base salaries is the first increase Mr.
Steinberg has been granted since 1988.

The annual bonuses for 1995 of the Executive Bonus Plan Officers were paid
to such persons in accordance with the terms of the Executive Bonus Plan. All of
the performance goals enumerated in the Executive Bonus Plan were achieved by
the Company and its subsidiaries in 1995, except for the total return on the
combined investment portfolio of the Reliance Insurance Group and CLTIC, pretax
operating income (exclusive of realized capital gains) of CLTIC and net premiums
earned of CLTIC. Based on these achievements, in accordance with the terms of
the Executive Bonus Plan, the Executive Bonus Plan Officers each received
bonuses equal to 115% of their base salaries for 1995. The 1996 bonuses for the
Executive Bonus Plan Officers will be paid in accordance with the Amended
Executive Bonus Plan, assuming stockholder approval thereof. See 'Proposal
2--Approval of the Amended Reliance Group Holdings, Inc. Executive Bonus Plan.'

The total return earned in the consolidated investment portfolio of the
Company and its subsidiaries exceeded the threshold in the Yacobucci Plan.
Therefore, James E. Yacobucci was paid his annual bonus for 1995 pursuant to the
Yacobucci Plan. The Special Compensation Committee determined the amount of Mr.
Yacobucci's bonus (which pursuant to the Yacobucci Plan could not exceed 400% of
his base salary (as defined in the Yacobucci Plan)) after considering the
performance of a portion of the investment portfolio against the Standard &
Poor's 500, the performance of the portfolio as compared to the prior year, the
return on the fixed income portion of the investment portfolio and Mr.
Yacobucci's ability to maximize these returns and achieve these results while
maintaining a diverse and liquid portfolio. The Special Compensation Committee
also considered other indices deemed appropriate by the Special Compensation
Committee and Mr. Yacobucci's performance as head of the investment department
of the Company and its subsidiaries.

<PAGE>
At the beginning of 1996, the Regular Compensation Committee determined the
amount of the bonuses of executive officers (other than the Executive Bonus Plan
Officers and James E. Yacobucci) for 1995 by taking into account the performance
goals enumerated in the Executive Bonus Plan and the role of the individual
executives in enabling the Company to achieve such goals. The Regular
Compensation Committee did not assign objective or relative weights to the
performance goals, all of which contributed favorably in the determination of
annual bonuses for 1995.

IV. 1995 Chief Executive Officer Compensation

The compensation of Mr. Saul P. Steinberg, the Company's Chief Executive
Officer, is determined by the Special Compensation Committee. Mr. Steinberg's
salaries from the Company and Reliance Insurance for 1995 were established in
1992 (and reduced effective January 1, 1994) and incorporated in his employment
agreements. Mr. Steinberg's bonuses for 1995 from the Company and Reliance
Insurance were paid in accordance with the terms of the Executive Bonus Plan.
All of the performance goals set forth in the Executive Bonus Plan, except those
described under '1995 Compensation of Executive Officers Other than the CEO'
were achieved by the Company and its subsidiaries in 1995, and, therefore, Mr.
Steinberg received bonuses for 1995 equal to 115% of his base salary from each
of the Company and Reliance Insurance. In February 1996, Mr. Steinberg entered
into the New SPS Employment Agreements with the Company and Reliance Insurance,
which contracts did not affect his 1995 compensation. Mr. Steinberg's 1996
bonuses from the Company and Reliance Insurance will be paid in accordance with
the Amended Executive Bonus Plan, assuming stockholder approval thereof. See
'Employment Contracts' and 'Proposal 2--Approval of the Amended Reliance Group
Holdings, Inc. Executive Bonus Plan.'

V. Compensation Deduction Limitation

Beginning in 1994, a new federal law disallowed corporate tax deductibility
for certain compensation in excess of $1,000,000 paid to each of a company's
chief executive officer and its four other most highly paid executive officers.
One of the exceptions to the deductibility limitation is for 'performance-based
compensation,' provided stockholder approval and other requirements are met.
Each of the Executive Bonus Plan, the Yacobucci Plan and the Reliance Group
Holdings, Inc. 1994 Stock Option Plan is intended to meet the requirements of
the new law and thereby preserve deductibility of both cash bonuses and stock
option compensation. The Special Compensation Committee has determined that the
Company should seek to qualify future cash bonuses under the Amended Executive
Bonus Plan, as 'performance-based compensation.' Accordingly, the Amended
Executive Bonus Plan is being submitted to stockholders at the Annual Meeting
and is intended to meet the requirements of the new law and thereby preserve
deductibility of cash bonuses. Except in the cases of Saul P. Steinberg, Robert
M. Steinberg and James E. Yacobucci, the 1995 base salaries of the named
executive officers did not exceed $1,000,000 and were fully deductible. The 1995
base salary of Saul P. Steinberg should qualify for the exception to the
deductibility limitation for certain preexisting contracts and should be fully
deductible. The portions of the base salaries of Robert M. Steinberg and James
E. Yacobucci that exceed $1,000,000 are not, and the portions of the future base
salaries of Saul P. Steinberg that exceed $1,000,000 will not be, deductible.
The lack of deductibility of the portions of the base salaries of Robert M.

Steinberg and James E. Yacobucci did not have a material effect on the Company's
1995 tax liability. The Company believes that stock option compensation under
the 1986 Stock Option Plan will not be affected by the deductibility limitation.

<TABLE>
<CAPTION>
SPECIAL COMPENSATION REGULAR COMPENSATION
COMMITTEE COMMITTEE STOCK OPTION COMMITTEE
- ------------------------ ------------------------ ------------------------
<S> <C> <C>
George R. Baker Saul P. Steinberg George R. Baker
Thomas J. Stanton, Jr. Robert M. Steinberg Jewell Jackson McCabe
Jewell Jackson McCabe Irving Schneider
</TABLE>

15
<PAGE>
PERFORMANCE GRAPH

Set forth below is a line graph comparing the Company's cumulative total
shareholder return on Common Stock for 1991 through 1995 with the returns of the
Media General Composite Index of 8,000 Public Companies, the MG Industry Group
262--Fire, Marine, Casualty and Title (the 'MG Group Index-262') and the MG
Industry Group 26--Insurance. The graph assumes $100 was invested on January 1,
1991, with all dividends fully reinvested. In the Company's prior proxy
statements, the industry index used for comparison purposes was the MG Industry
Group 26--Insurance, which included companies that underwrite life insurance and
personal lines property and casualty insurance. The Company exited the life
insurance business in mid-1993 (approximately the mid-point of the measurement
period shown in the performance graph set forth below) and has since
substantially withdrawn from other traditional personal lines and believes that
the MG Group Index-262, which excludes companies that underwrite life insurance
and personal lines property and casualty insurance, will provide a more relevant
comparison on a going-forward basis. For purposes of inclusion in or exclusion
from an industry index, a company that 'underwrites life and/or personal lines
property and casualty insurance' is a company for which life and/or personal
lines property and casualty insurance premiums represent 50% or more of gross
revenues.

Company 1990 1991 1992 1993 1994 1995
- ------- ---- ---- ---- ---- ---- ----

Reliance Group 100 94.93 149.52 204.11 139.85 243.58
MG Group Index - 262 100 126.87 149.59 153.21 151.75 217.63
Media General Index 100 129.09 134.25 154.11 152.83 198.15
MG Group Index 26 - Insurance 100 130.89 158.26 168.56 162.91 233.43

16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Regular Compensation Committee of the Board of Directors consists of

Saul P. Steinberg, Robert M. Steinberg and Jewell Jackson McCabe. Saul P.
Steinberg and Robert M. Steinberg are both officers and employees of the
Company. The Special Compensation Committee and the Stock Option Committee of
the Board of Directors are comprised solely of the following outside directors:
Special Compensation Committee, George R. Baker and Thomas J. Stanton, Jr and;
Stock Option Committee, George R. Baker, Jewell Jackson McCabe and Irving
Schneider. Mr. Carter Burden, a director of the Company who died in early 1996,
was a member of the Stock Option Committee for the entire 1995 year. See
'Proposal 1--Election of Directors--Board of Directors and Committees.'

A Company subsidiary is the general partner of Reliance Figueroa Associates
Limited Partnership ('Reliance Figueroa'), a limited partnership which owns
apartment buildings and commercial properties. As general partner of Reliance
Figueroa, the Company subsidiary will receive 48% of any cumulative net profits
(as defined) realized from the activities of Reliance Figueroa and will receive
the benefit of any tax losses. The remainder of any cumulative net profits are
allocated to the limited partners of Reliance Figueroa, including Saul P.
Steinberg, who has a limited partnership interest of 56%, and Robert M.
Steinberg, whose limited partnership interest is 24%. The limited partnership
interests of other executive officers of the Company are set forth below under
'Related Party Transactions.' Reliance Financial Services Corporation ('RFS'),
a subsidiary of the Company, guarantees certain indebtedness of Reliance
Figueroa, for which RFS receives a fee of .5% per annum of the average
outstanding debt covered by such guarantees. The amount of indebtedness
guaranteed by RFS as of March 31, 1996 was $38,000,000, the largest amount of
such indebtedness outstanding since January 1, 1995. The guaranteed
indebtedness matures on December 29, 1996. The Company believes that, to the
extent that such indebtedness cannot be fully refinanced at maturity, Reliance
Figueroa will need to seek additional financing from other sources, which may
include the Company. The Company has provided Reliance Figueroa with an
$8,000,000 subordinated revolving credit facility, under which borrowings bear
interest at a rate of 10% per annum and which matures on June 30, 2005. The
Company receives a commitment fee of .5% per annum, payable quarterly, on the
unused portion of the revolving credit facility. The amount of indebtedness
outstanding under the revolving credit facility as of April 10, 1996 was
$7,268,000, the largest amount of such indebtedness outstanding since January
1, 1995.

In September 1995, Reliance Insurance invested $250,000 in Flip Records
Incorporated ('Flip') for 24.8% of the outstanding common stock of Flip.
Separately, Saul P. Steinberg's son invested $250,000 for an equal interest in
Flip.

The Company believes that the consideration received and/or paid by it for
the related party transactions described above represented fair market value to
the Company. Except as set forth above, the consideration received and/or paid
by the Company was determined by negotiations between the parties involved in
each transaction and, in the case of Reliance Figueroa, was approved by the
Special Committee of the Company's Board of Directors, which is comprised solely
of outside directors.

RELATED PARTY TRANSACTIONS

A description of certain transactions between the Company and Reliance

Figueroa is set forth above under 'Compensation Committee Interlocks and Insider
Participation.' The limited partners of Reliance Figueroa include the following
additional executive officers of the Company who hold the following limited
partnership interests: Messrs. Bello (3.8%), Freiberg (2.5%), Henry A. Lambert
(3.8%), Dennis J. O'Leary (.635%), Philip S. Sherman (.635%), Bruce L. Sokoloff
(1.3%) and Howard E. Steinberg (1.3%).

During 1995, the Company contracted for certain printing services with an
unaffiliated printing firm which subcontracted such services with a printing
company in which a brother-in-law of Messrs. Saul P. Steinberg and Robert M.
Steinberg, Joseph Jurist, holds a material interest. Including amounts received
pursuant to that subcontracting arrangement, such printing company received
approximately $190,000 relating to services provided to the Company and its
subsidiaries. Substantially all of the amount paid by the Company was based on
a competitive bidding process and the Company believes such amount represented
fair market value to the Company.

17
<PAGE>
PROPOSAL 2--APPROVAL OF THE AMENDED RELIANCE GROUP HOLDINGS, INC. EXECUTIVE
BONUS PLAN

At the 1994 Annual Meeting of Stockholders, the Company's stockholders
approved the Executive Bonus Plan which had been recommended to them by the
Special Compensation Committee of the Board of Directors. The Special
Compensation Committee has now approved (subject to approval by the Company's
stockholders for purposes of Section 162(m) of the Code) and recommends to the
Company's stockholders the Amended Executive Bonus Plan providing for bonuses of
up to 85% of annual base salary in addition to the current 115% maximum now
available under the existing Executive Bonus Plan. Pursuant to the Amended
Executive Bonus Plan, the additional bonus of up to 85% will only be available
to the Executive Bonus Plan Officers if the 115% is earned by them and the
thresholds for either or both of specified preestablished, objective
performance goals relating to shareholders' equity and average return on
shareholders' equity are achieved. In the event that the Company's
stockholders do not approve the Amended Executive Bonus Plan, bonuses will
continue to be paid to the Executive Bonus Plan Officers in accordance with
the existing Executive Bonus Plan.

Pursuant to the Executive Bonus Plan and the Amended Executive Bonus Plan,
the chief executive officer of the Company and each of the four other most
highly compensated officers of the Company in any given year ('covered
employees'), other than a covered employee who is the subject of another
performance-based bonus plan, is or will be entitled to receive, in respect of a
given calendar year, a bonus of up to 115% of his annual base salary from the
Company and its subsidiaries depending upon the achievement by the Company and
its subsidiaries, including the property and casualty operations of the Company
(such property and casualty operations being hereinafter referred to as the
'Reliance Insurance Group') and the title insurance operations of the Company
('CLTIC'), of certain performance goals. Responsibility for payment of any
bonuses payable under the Executive Bonus Plan is, and under the Amended
Executive Bonus Plan will be, allocated between the Company and any subsidiary
in proportion to the amount of base salary paid to a covered employee by the
Company and such subsidiary.

Pursuant to the Executive Bonus Plan and the Amended Executive Bonus Plan,
each covered employee is or will be paid (within sixty days of the end of the
relevant calendar year) a bonus equal to 115% of his annual base salary from the
Company and its subsidiaries (as in effect on January 1, 1994, increased by no
more than 10% per year on a compound basis but with such base salary amount
limited to the employee's actual base salary for a given year) in the event that
at least eight of the fourteen performance goals enumerated in the Executive
Bonus Plan and the Amended Executive Bonus Plan are achieved (the 'Original
Performance Goals'). In the event that fewer than eight of the Original
Performance Goals are achieved, each covered employee's bonus is or will be
reduced by 5% of his respective base salary multiplied by the difference between
the number of goals achieved and 'eight.' In the event that fewer than two goals
are achieved, the covered employees are not paid any bonus under the Executive
Bonus Plan or the Amended Executive Bonus Plan.

For purposes of determining achievement of performance goals, unless
otherwise stated, all calculations are made with respect to the particular
calendar year for which incentive based compensation is to be calculated and,
unless otherwise stated, all calculations are made in accordance with generally
accepted accounting principles ('GAAP'), except for calculations with respect to
combined ratios, which are made in accordance with statutory accounting
practices utilized by property and casualty insurance companies. The business
criteria on which the Original Performance Goals are based are (i) the average
return on shareholders' equity of the Company, (ii) the combined ratio of the
Reliance Insurance Group, (iii) the total return on the combined investment
portfolio of the Reliance Insurance Group and CLTIC, (iv) the amount of pretax
net realized capital gains of the combined investment portfolio of the Reliance
Insurance Group and CLTIC, (v) the pretax operating income (exclusive of capital
gains) of the Reliance Insurance Group, (vi) net premiums written of the
Reliance Insurance Group, (vii) pretax operating income (exclusive of realized
capital gains) of CLTIC, (viii) net premiums earned of CLTIC, (ix) the price of
the Common Stock, (x) pretax operating earnings per share (exclusive of realized
capital gains of the combined investment portfolio of the Reliance Insurance
Group and CLTIC) of the Company, (xi) net investment income of the combined
investment portfolio of the Reliance Insurance Group and CLTIC, (xii) debt to
capitalization ratio of the Company as of the end of the applicable calendar
year and (xiii) shareholders' equity of the Company as of the end of the
applicable calendar year.

The Amended Executive Bonus Plan would increase the potential amount of
performance-based compensation that the Executive Bonus Plan Officers (who
include each of the named executive officers, except James E. Yacobucci) will be
eligible to receive for a given year if they have contributed to the creation of

18
<PAGE>
significantly enhanced value for the Company's stockholders in that year as
measured by shareholders' equity and average return on shareholders' equity.
Pursuant to the Amended Executive Bonus Plan, if at least eight of the Original
Performance Goals are achieved in a given year, the Executive Bonus Plan
Officers will be eligible to receive bonuses for that year, in addition to the
115% of their respective annual base salaries payable under the existing
Executive Bonus Plan, of up to 85% of their respective annual base salaries, if

either or both of specified preestablished, objective performance goals relating
to shareholders' equity (calculated for any given year in accordance with GAAP
but adjusted for dividends declared on the Common Stock during that year) and
average return on shareholders' equity are achieved. In no event will an
Executive Bonus Plan Officer be entitled to receive more than an additional 85%
of his annual base salary as a result of the terms of the Amended Executive
Bonus Plan.

The Special Compensation Committee has the authority to administer the
Executive Bonus Plan, including the authority to modify the specific targets for
the performance goals determined by the Special Compensation Committee under
the Executive Bonus Plan in advance of the deadlines applicable under Section
162(m) of the Code. The Special Compensation Committee has the discretion to
reduce or eliminate amounts payable under the Executive Bonus Plan to any
covered employee who the Special Compensation Committee determines has
breached a duty to the Company which has or will result in material harm to
the Company. The Special Compensation Committee also has the authority to
amend or terminate the Executive Bonus Plan. The Special Compensation
Committee will not be liable for any action or determination made in good
faith with respect to the Executive Bonus Plan. The Amended Executive Bonus
Plan will not affect the authority granted to or the liability of the Special
Compensation Committee under the Executive Bonus Plan.

The following table sets forth the amounts which would have been received
by the named executive officers (other than James E. Yacobucci) under the
Amended Executive Bonus Plan if the Amended Executive Bonus Plan were in effect
for 1996 but with the percentage of the bonus payable based on the Company's
performance in 1995. No other officers or employees of the Company and no
Director (who is not also one of the five most highly compensated executive
officers) of the Company is entitled to participate in the Amended Executive
Bonus Plan.

<TABLE>
<CAPTION>
RELIANCE GROUP
HOLDINGS, INC.
EXECUTIVE BONUS PLAN
--------------------
NAME AND POSITION DOLLAR VALUE ($)(1)
---------------------------------------- --------------------
<S> <C>
Saul P. Steinberg
Chairman of the Board & Chief Executive
Officer................................. $3,500,000
Robert M. Steinberg
President & Chief Operating Officer..... 2,650,000
George E. Bello
Executive Vice President & Controller... 1,250,000
Lowell C. Freiberg
Senior Vice President & Chief Financial
Officer................................. 1,200,000
All Executive Officers as a Group....... $8,600,000
----------
----------

</TABLE>
- ------------------
(1) If the Amended Executive Bonus Plan had been in effect for the past five
years, the Executive Bonus Plan Officers would have received no additional
bonus under the Amended Executive Bonus Plan in two years, the maximum
additional bonus payable under the Amended Executive Bonus Plan for one year
in addition to 1995 and an additional 70% bonus in one year.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Amended Executive Bonus Plan is being submitted for stockholder
approval so that the amounts paid thereunder meet the requirements under the
Code to be deductible by the Company. The Amended Executive Bonus Plan will be
approved by the stockholders if a majority of the votes present or represented
and entitled to vote at the Annual Meeting vote FOR approval of the Amended
Executive Bonus Plan. Shares will be counted as voting 'against' this proposal
if they are voted either 'against' or to 'abstain.' Broker non-votes will not
change the number of votes cast for or against this proposal, and will not be
treated as shares entitled to vote. In the event that such stockholder approval
is not obtained, bonuses will continue to be paid to the Executive Bonus Plan
Officers under the current terms of the Executive Bonus Plan. However, members
of the Steinberg Group have informed the Company that they intend to vote FOR
approval of the Amended Executive Bonus Plan, and, therefore, such approval is
virtually assured. Your Board of Directors recommends a vote FOR approval of the
Amended Executive Bonus Plan.

<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS

The Board of Directors has selected Deloitte & Touche LLP as the
independent auditors to audit the consolidated financial statements of the
Company for the year 1996.

Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions.

STOCKHOLDER PROPOSALS AT THE NEXT ANNUAL MEETING

Stockholders who intend to present proposals at the 1997 annual meeting of
stockholders must submit such proposals to the Company no later than December
15, 1996 in order for them to be included in the Company's proxy materials for
such meeting. Stockholder proposals must be submitted to the Company, at Park
Avenue Plaza, 55 East 52nd Street, New York, New York 10055, Attention:
Corporate Secretary.

OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING

The Board of Directors knows of no other matter to be presented which is a
proper subject for action by the stockholders at the Annual Meeting. If,
however, any other matters should properly come before the Annual Meeting, it is
intended that proxies given pursuant to this solicitation will be voted thereon
in accordance with the judgment of the person or persons voting such proxies.

By Order of the Board of Directors,

Reliance Group Holdings, Inc.

Howard E. Steinberg,
Corporate Secretary

<PAGE>
RELIANCE GROUP HOLDINGS, INC.

ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1996

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RELIANCE GROUP HOLDINGS, INC.

The undersigned hereby appoints Saul P. Steinberg and Howard E. Steinberg,
and each of them, with full power of substitution, as proxies to represent and
vote, as designated on the reverse side, all the shares of common stock of
Reliance Group Holdings, Inc. held of record by the undersigned on March 11,
1996, at the Annual Meeting of Stockholders to be held on May 8, 1996 or any
adjournments thereof.

This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR the election of the nominees named herein and FOR approval of
Proposal 2.

o FOLD AND DETACH HERE o

<PAGE>

This Proxy, when properly executed, will be voted in the manner directed herein
or, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ELECTION OF THE
NOMINEES NAMED BELOW AND FOR PROPOSAL 2.

Please mark your votes as indicated in this example /X/

1. Election of Directors.

FOR all nominees WITHHOLD George R. Baker
listed to the right AUTHORITY George E. Bello
(except as marked to the to vote for all nominees Dennis A. Busti
contrary to the right) listed to the right Lowell C. Freiberg
Thomas P. Gerrity
/ / / / Jewell J. McCabe
Irving Schneider
Bernard L. Schwartz
Richard E. Snyder
Thomas J. Stanton, Jr.
Robert M. Steinberg
Saul P. Steinberg
James E. Yacobucci

(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.)

_____________________________________________________________________________

2. Approval of the Amended Reliance Group Holdings, Inc. Executive Bonus Plan.

FOR AGAINST ABSTAIN

/ / / / / /

3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.

Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

Dated: ________________________________, 1996

______________________________________________
Signature

______________________________________________
Signature if held jointly

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

o FOLD AND DETACH HERE o

APPENDIX

RELIANCE GROUP HOLDINGS, INC.
EXECUTIVE BONUS PLAN

ARTICLE I
Purpose

1.1 The purpose of this Plan is to provide performance-based
compensation to Covered Employees. This Plan, which is intended to comply
with the requirements of Section 162(m) of the Code and of proposed Regulation
Section 1.162-27, is designed to enhance the Company's ability to retain and
reward key executives who contribute materially to the success of the Company
by providing them the opportunity to earn meaningful compensation tied to the
Company's performance under the predetermined criteria set forth herein.

ARTICLE II
Definitions

2.1 Capitalized terms used in this Plan shall have the meanings set
forth below.

"Base Salary" means the annual base salary of a Covered Employee as
in effect on January 1, 1994 (increased by 10% each year, on a
compound basis, but in no event more, as to any year, than the
Covered Employee's actual annual base salary for such year as so
increased) paid by the Company and any Subsidiary.

"Code" means the Internal Revenue Code of 1986, as amended.

"CLTIC" means the title insurance operations of the Company.

"Company" means Reliance Group Holdings, Inc.

"Compensation Committee" means the Special Compensation Committee of
the Board of Directors of the Company, comprised solely of two or
more outside directors as defined in Section 162(m) of the Code and
the regulations promulgated thereunder.

"Covered Employee" is as defined under Section 162(m)(3) of the
Code.

"GAAP" means generally accepted accounting principles.

"Industry" means those U.S. property and casualty stock insurance
companies for which aggregate statistical data are reported by a
recognized insurance industry rating or reporting service.

"Plan" means this Executive Bonus Plan.

"Reliance Insurance Group" means the property and casualty
operations of the Company.

"SAP" means the statutory accounting practices utilized by property
and casualty insurance companies.

"Subsidiary" means a company 50% or more of whose voting capital
stock is held, directly or through one or more Subsidiaries, by the
Company.

ARTICLE III
Shareholder Approval

3.1 The material terms of the performance goals under this Plan,
including the bonuses to be paid upon the attainment of the goals, shall be
disclosed to the shareholders of the Company and shall be submitted to the
shareholders for their approval, by affirmative votes of a majority of the
votes cast in a separate vote, at the annual meeting next following the date
of adoption of this Plan by the Compensation Committee. Subsequent disclosure
to, and approvals by, the shareholders of the Company shall be made and
obtained, respectively, to the extent required by the relevant provisions of
Section 162(m) of the Code and the regulations promulgated thereunder. No
amounts shall be paid under this Plan unless the requisite shareholder
approval of such payments under Section 162(m) of the Code shall have been
obtained.

ARTICLE IV
Participants; Preestablished Performance Goals

4.1 This Plan shall apply as to any year only to persons who are
Covered Employees for such year.

(a) average return on shareholders' equity of the Company for the
12 months ending December 31 of the year to which
performance-based compensation is applicable, calculated in
accordance with GAAP;

(b) combined ratio of the Reliance Insurance Group for the 12
months ending December 31 of the year to which
performance-based compensation is applicable, calculated in
accordance with SAP, compared to the combined ratio of the
Reliance Insurance Group for the preceding 12 month period,
calculated in accordance with SAP;

(c) combined ratio of the Reliance Insurance Group for the 12
months ending December 31 of the year to which
performance-based compensation is applicable, calculated in
accordance with SAP, compared to the combined ratio of the
Industry (as reported on an estimated basis) for the
comparable period, calculated in accordance with SAP;

(d) total return on the combined investment portfolio of the
Reliance Insurance Group and CLTIC for any calendar year to
which performance-based compensation is applicable;

(e) amount of pre-tax net realized capital gains, calculated in
accordance with GAAP, of the combined investment portfolio of
the Reliance Insurance Group and CLTIC during any calendar
year to which performance-based compensation is applicable;

(f) pre-tax operating income (exclusive of capital gains),
calculated in accordance with GAAP, of the Reliance Insurance
Group for any calendar year to which performance-based
compensation is applicable;

(g) shareholders' equity of the Company, calculated in accordance
with GAAP, as of the end of any calendar year to which
performance-based compensation is applicable;

(h) net premiums written, calculated in accordance with GAAP, of
the Reliance Insurance Group for any calendar year to which
performance-based compensation is applicable;

(i) pre-tax operating income (exclusive of realized capital
gains), calculated in accordance with GAAP, of CLTIC for any
calendar year to which performance-based compensation is
applicable;

(j) net premiums earned, calculated in accordance with GAAP, of
CLTIC for any calendar year to which performance-based
compensation is applicable;

(k) the Company's debt to total capitalization ratio, calculated
in accordance with GAAP, as of the end of any calendar year to
which performance-based compensation is applicable;

(l) the price of the Company's common stock;

(m) pre-tax operating earnings per share (exclusive of realized
capital gains of the combined portfolio of the Reliance
Insurance Group and CLTIC), calculated in accordance with
GAAP, of the Company for any calendar year to which
performance-based compensation is applicable; and

(n) net investment income, calculated in accordance with GAAP, of
the combined investment portfolio of the Reliance Insurance
Group and CLTIC for any calendar year to which
performance-based compensation is applicable.

4.3 The specific targets for the performance goals set forth in
paragraph 4.2 above shall be as determined by the Compensation Committee at
the time of adoption of this Plan by the Compensation Committee. For any year
commencing on or after January 1, 1995, the Compensation Committee shall have
the discretion (but not be required) to modify such specific targets for the
performance goals set forth in paragraph 4.2 above. Any such modification
shall be made in writing (which may be through approved minutes) by the
Compensation Committee in advance of the deadlines applicable under Section
162(m) of the Code and while the performance relating to the performance goals
remains substantially uncertain.

ARTICLE V
Calculation and Payment of Bonus

5.1 All Covered Employees, other than any Covered Employee with a
separate performance-based bonus plan, shall be eligible to receive a maximum
bonus under this Plan of 115% of their respective Base Salaries.

5.2 The Compensation Committee shall certify in writing (which may be
through approved minutes), prior to payment of any bonus under this Plan, the
extent to which the performance goals set forth in paragraph 4.2 hereof have
been met.

5.4 The Compensation Committee shall have the discretion to reduce or
eliminate amounts payable under this Plan to any Covered Employee who the
Compensation Committee determines has breached a duty to the Company which has
or will result in material harm to the Company.

ARTICLE VI
Non-Exclusivity

6.1 Nothing in this Plan shall prevent the Company from establishing
other incentive plans in which Covered Employees may participate, or from
making additional incentive payments to Covered Employees.

ARTICLE VII
Authority and Administration

7.1 Subject to the limitations of the Plan, the Compensation Committee
shall have the sole and complete authority to interpret this Plan and to make
all the determinations necessary or advisable in the administration of this
Plan (including without limitation the determination to amend or terminate
this Plan). In furtherance and not in limitation of the foregoing, in the event
of (i) a change in corporate capitalization, a corporate transaction or a
complete or partial corporate liquidation, or (ii) any extraordinary gain or
loss or other event that is treated for accounting purposes as an extraordinary
item under generally accepted accounting principles, or (iii) any material
change in accounting policies or practices affecting the Company and/or the
performance goals or targets, then, to the extent any of the foregoing events
(or a material effect thereof) was not anticipated at the time the targets were
set, the Compensation Committee may make adjustments to the performance goals
and/or targets, applied as of the date of the event, and based solely on
objective criteria, so as to neutralize, in the Compensation Committee's
judgment, the effect of the event on the applicable performance based award.

7.2 The Compensation Committee shall be entitled to rely on
representations and certifications of appropriate officers of the Company with
respect to the financial and statistical data set forth in paragraph 4.2 hereof.
The Compensation Committee's determinations on matters within its authority
shall be conclusive and binding upon the Company and all other persons. The
Compensation Committee shall not be liable for any action or determination made
in good faith with respect to this Plan.

AMENDMENT TO
RELIANCE GROUP HOLDINGS, INC.
EXECUTIVE BONUS PLAN

The Reliance Group Holdings, Inc. Executive Bonus Plan (the "Plan") was
adopted by the Special Compensation Committee of the Board of Directors of
Reliance Group Holdings, Inc. (the "Company") on March 10, 1994 and approved
by the stockholders of the Company on May 12, 1994. The Plan was amended by
the Special Compensation Committee on February 16, 1995. Pursuant to Article
VII, Section 7.1 of the Plan, the Special Compensation Committee determined to
amend the Plan as set forth below, and by resolution duly adopted at a meeting
held on March 27, 1996 voted to approve such amendment, subject to approval of
the Company's stockholders in accordance with Section 162(m) of the Internal
Revenue Code of 1986, as amended at the Annual Meeting of stockholders of the
Company scheduled for May 8, 1996. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.

1. Article IV of the Plan shall be amended to read in its entirety as follows:

"ARTICLE IV
Participants; Preestablished Performance Goals

4.1 This Plan shall apply as to any year only to persons who are Covered
Employees for such year.

4.2 The performance goals applicable to all Covered Employees, other
than any Covered Employee with a separate performance-based bonus plan with
the Company, shall be established in accordance with paragraph 4.3 hereof and
shall be related to the following criteria (the "Original Performance Goals")
and the criterion set forth in Section 4.2A below (the "Additional Performance
Goal" and together with the Original Performance Goals, the "performance
goals"):

(a) average return on shareholders' equity of the Company for the
12 months ending December 31 of the year to which
performance-based compensation is applicable, calculated in
accordance with GAAP (the "Average Return Goal");

(d) total return on the combined investment portfolio of the
Reliance Insurance Group and CLTIC for any calendar year to
which performance-based compensation is applicable;

(e) amount of pre-tax net realized capital gains, calculated in
accordance with GAAP, of the combined investment portfolio
of the Reliance Insurance Group and CLTIC during any
calendar year to which performance-based compensation is
applicable;

(g) shareholders' equity of the Company, calculated in
accordance with GAAP, as of the end of any calendar year to
which performance-based compensation is applicable;

(h) net premiums written, calculated in accordance with GAAP, of
the Reliance Insurance Group for any calendar year to which
performance-based compensation is applicable;

(i) pre-tax operating income (exclusive of realized capital gains),
calculated in accordance with GAAP, of CLTIC for any
calendar year to which performance-based compensation is
applicable;

(j) net premiums earned, calculated in accordance with GAAP, of
CLTIC for any calendar year to which performance-based
compensation is applicable;

(k) the Company's debt to total capitalization ratio, calculated in
accordance with GAAP, as of the end of any calendar year to
which performance-based compensation is applicable;

(l) the price of the Company's common stock;

(n) net investment income, calculated in accordance with GAAP,
of the combined investment portfolio of the Reliance
Insurance Group and CLTIC for any calendar year to which
performance-based compensation is applicable.

4.2A The Additional Performance Goal shall relate to the following
criterion: shareholders' equity of the Company, calculated in accordance with
GAAP, as of the end of any calendar year to which performance-based
compensation is applicable, except that such calculation shall be made by

adding back to shareholders' equity dividends on the Company's common stock
declared during such year ("Modified GAAP").

4.3 The specific targets for the performance goals set forth in paragraphs
4.2 and 4.2A above shall be as determined in any year by the Compensation
Committee in advance of the deadlines applicable under Section 162(m) of the
Code and while the performance relating to the performance goals remains
substantially uncertain. Any such targets shall be set in writing (which may be
through approved minutes) by the Compensation Committee."

2. Article V of the Plan shall be amended to read in its entirety as follows:

"ARTICLE V
Calculation and Payment of Bonus

5.1 All Covered Employees, other than any Covered Employee with a
separate performance-based bonus plan, shall be eligible to receive a bonus
under this Plan of up to 115% of their respective Base Salaries plus an
additional bonus of up to 85% of their respective base salaries if either or
both of the target relating to the Additional Performance Goal and the
additional target relating to the Average Return Goal (together, the "Additional
Bonus Performance Targets") are achieved.

5.3 Subject to paragraph 5.4 hereof, all Covered Employees, other than
any Covered Employee with a separate performance-based bonus plan, shall be
entitled to receive, and shall be paid not later than 60 days after the end of
any calendar year to which performance-based compensation is applicable, cash
bonuses equal to 115% of their respective Base Salaries if at least eight of
the Original Performance Goals have been met. If fewer than eight of the
Original Performance Goals have been met, then the bonuses to be paid to such
Covered Employees shall be reduced by 5% of their respective Base Salaries
multiplied by the difference between the number of Original Performance Goals
achieved and the number "eight," provided, however, that if fewer than two
goals are achieved, no bonuses shall be paid hereunder. In the event that at
least eight of the Original Performance Goals are achieved, all Covered
Employees, other than any Covered Employee with a separate performance-based
bonus plan, shall be entitled to receive, and shall be paid not later than 60
days after the end of any calendar year to which performance-based
compensation is applicable, cash bonuses of up to an additional 85% of their
respective Base Salaries if either or both of the Additional Bonus Performance
Targets are achieved. Responsibilities for any bonuses payable under this Plan
shall be allocated between the Company and any Subsidiary in proportion to the
amount of Base Salary paid to a Covered Employee by the Company and such
Subsidiary.

5.4 The Compensation Committee shall have the discretion to reduce or
eliminate amounts payable under this Plan to any Covered Employee who the

Compensation Committee determines has breached a duty to the Company which
has or will result in material harm to the Company."

3. Article VII of the Plan shall be amended to read in its entirety as
follows:

"ARTICLE VII
Authority and Administration

7.1 Subject to the limitations of the Plan, the Compensation Committee
shall have the sole and complete authority to interpret this Plan and to make
all the determinations necessary or advisable in the administration of this
Plan (including without limitation the determination to amend or terminate
this Plan). In furtherance and not in limitation of the foregoing, in the event
of (i) any extraordinary gain or loss or other event that is treated for
accounting purposes as an extraordinary item under generally accepted accounting
principles, or (ii) any material change in accounting policies or practices
affecting the Company and/or the performance goals or targets, then, to the
extent any of the foregoing events (or a material effect thereof) was not
anticipated at the time the targets were set, the Compensation Committee shall
make adjustments to the performance goals and/or targets, applied as of the date
of the event, and based solely on objective criteria, so as to neutralize, in
the Compensation Committee's judgment, the effect of the event on the applicable
performance based award.

7.2 The Compensation Committee shall be entitled to rely on
representations and certifications of appropriate officers of the Company with
respect to the financial and statistical data set forth in paragraphs 4.2 and
4.2A hereof. The Compensation Committee's determinations on matters within its
authority shall be conclusive and binding upon the Company and all other
persons. The Compensation Committee shall not be liable for any action or
determination made in good faith with respect to this Plan."