<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
AMERICAN INDEMNITY FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN INDEMNITY FINANCIAL CORPORATION
P. O. BOX 8985
WILMINGTON, DELAWARE 19899-8985
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 29, 1996
Notice is hereby given that the Annual Meeting of Stockholders of American
Indemnity Financial Corporation (the "Company") will be held in the Board of
Directors Room of the United States National Bank of Galveston, 2201 Market
Street, Galveston, Texas, at 10:00 a.m. on Monday, April 29, 1996, for the
following purposes:
1. To elect three Class II directors of the Company to hold office for
the ensuing three years.
2. To transact such other business as may properly be brought before
the meeting or any adjournment thereof.
Only holders of Common Stock of the Company of record at the close of
business on March 14, 1996 will be entitled to notice of and to vote at the
meeting.
Stockholders who do not expect to attend the annual meeting are requested
to sign and return the enclosed proxy, for which a return envelope is enclosed.
By Order of the Board of Directors,
Helen K. Lohec
HELEN K. LOHEC
Secretary
March 29, 1996
<PAGE> 3
AMERICAN INDEMNITY FINANCIAL CORPORATION
P. O. BOX 8985
WILMINGTON, DELAWARE 19899-8985
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement and the enclosed form of proxy are being mailed on or
about March 29, 1996, to the record holders of the Common Stock, $3.33 1/3 par
value ("Common Stock"), of American Indemnity Financial Corporation (the
"Company") on March 14, 1996. The enclosed form of proxy is solicited by the
Board of Directors of the Company to be used at the Annual Meeting of
Stockholders to be held on April 29, 1996. Any stockholder giving such a proxy
may revoke it any time before it is voted by delivering written revocation
delivered to either person named as proxy, by voting in person at the annual
meeting or by giving a later proxy. Otherwise, if received in time, it will be
voted at the meeting.
Holders of record of Common Stock at the close of business on March 14,
1996, will be entitled to notice of and to vote at the annual meeting. Each
outstanding share of Common Stock will be entitled to one vote. On the record
date there were outstanding 1,947,110 shares of Common Stock. There are no other
voting securities of the Company outstanding.
The Annual Report to Stockholders for the fiscal year ended December 31,
1995, including financial statements, accompanies this Proxy Statement. The
annual report does not constitute a part of the proxy soliciting material.
The Annual Meeting of Stockholders will be held at 10:00 a.m. on Monday,
April 29, 1996, in the Board of Directors Room of the United States National
Bank of Galveston, 2201 Market Street, Galveston, Texas.
<PAGE> 4
PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 14, 1996, (i) the ownership of
Common Stock by each person known by management of the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock, and
(ii) the number of shares of Common Stock owned by all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
---------------------------------------------------------- ------------------ ----------
<S> <C> <C>
J. F. Seinsheimer, Jr.(1)................................. 575,880 29.6%
4809 Woodrow
Galveston, Texas 77551
Irma K. Seinsheimer Trust(2) )
2201 Market Street )
Galveston, Texas 77550 )
)
American Finance Company of Galveston(2) ) .............. 471,770 24.2%
United States Securities Corporation )
One American Indemnity Plaza )
Galveston, Texas 77550 )
J. Fellman Seinsheimer, III(3) .......................... 113,810 5.8%
One American Indemnity Plaza
Galveston, Texas 77550
Dimensional Fund Advisors Inc.(4)......................... 113,300 5.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
FMR Corp.(5).............................................. 194,000 10.0%
82 Devonshire Street
Boston, Massachusetts 02109
Tweedy, Browne Company L.P.(6)............................ 207,360 10.6%
52 Vanderbilt Avenue
New York, New York 10017
Executive officers and directors as a group (9
persons)(7)............................................. 197,646 10.2%
</TABLE>
- ---------------
(1) J. F. Seinsheimer, Jr. resigned as a member of the Board of Directors on
April 24, 1995 and was named Chairman Emeritus. As of March 14, 1996, Mr.
Seinsheimer, Jr. shared voting and dispositive power over 38,095 shares
(2.0%) of the Company's Common Stock with his son, J. Fellman Seinsheimer,
III, and United States National Bank of Galveston as co-trustees of the
Jessie Lee Seinsheimer Trust (the "Seinsheimer Trust"). Mr. Seinsheimer, Jr.
is the sole beneficiary under the Seinsheimer Trust until his death, at
which time the remainder will be divided among his children. Additionally,
pursuant to powers of attorney granted by Mr. Seinsheimer, Jr. to his son,
J. Fellman Seinsheimer, III, Messrs. Seinsheimer will share voting and
dispositive power over the 66,015 shares (3.4%) of the Company's Common
Stock owned of record by Mr. Seinsheimer, Jr. Mr. Seinsheimer, Jr., as
co-trustee of the Irma K. Seinsheimer Trust, as described further in Note 2
below, may be deemed to be the beneficial owner of an additional 471,770
shares of Common Stock beneficially owned by such trust.
(2) The Irma K. Seinsheimer Trust (the "Family Trust") is the beneficial owner
of 471,770 shares of Common Stock. Of the 471,770 shares of Common Stock
beneficially owned, 7,675 shares are owned of record and 464,095 shares are
owned by two corporations controlled by the Family Trust, namely American
Finance Company of Galveston and United States Securities Corporation, that
owned of record 289,764 shares (14.9%) and 174,331 shares (9.0%) of the
Company's Common Stock, respectively. Mr. Seinsheimer, Jr. and William C.
Levin, M.D. (a director of the Company) are co-trustees of the Family Trust
and as such have shared voting and dispositive power with respect to the
shares
2
<PAGE> 5
controlled by the Family Trust. However, Mr. Seinsheimer, Jr. exercises sole
voting and dispositive control over such shares. Dr. Levin exercises no
voting or dispositive power over, has no pecuniary interest in and disclaims
any beneficial ownership or interest in the shares of Common Stock
beneficially owned by the Family Trust.
(3) As of March 14, 1996, J. Fellman Seinsheimer, III owned of record 9,700
shares of the Company's Common Stock, which includes 7,000 shares issuable
upon the exercise of options but does not include 270 shares owned of record
by his sons, as to which he disclaims any beneficial ownership or interest.
Pursuant to powers of attorney granted by Mr. Seinsheimer, Jr. to his son,
J. Fellman Seinsheimer, III, Messrs. Seinsheimer share voting and
dispositive power over 66,015 shares (3.4%) of the Company's Common Stock
owned of record by Mr. Seinsheimer, Jr. Additionally, Mr. Seinsheimer, Jr.,
J. Fellman Seinsheimer, III and United States National Bank of Galveston, as
co-trustees of the Seinsheimer Trust, share voting and dispositive power
over 38,095 shares (2.0%) of the Company's Common Stock owned by such trust.
(4) Based upon information contained in a Schedule 13G filed with the Securities
and Exchange Commission and other information provided by Dimensional Fund
Advisors Inc., a registered investment advisor ("Dimensional"). According to
such information, as of December 31, 1995, all of such shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company (the "Fund"), or in series of The DFA Investment Trust
Company, a Delaware business trust (the "Trust"), or the DFA Group Trust and
the DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, for all of which Dimensional serves as investment
manager. Dimensional exercises sole dispositive power with respect to all
such shares and sole voting power with respect to 87,000 of such shares.
Persons who are officers of Dimensional also serve as officers of the Fund
and the Trust, and in the capacity as officers of the Fund and the Trust
exercise sole voting power with respect to 9,900 of such shares owned by the
Fund and 16,400 of such shares owned by the Trust. The Company has been
advised by Dimensional that Dimensional disclaims beneficial ownership of
all such shares.
(5) Based upon information contained in a Schedule 13G filed with the Securities
and Exchange Commission by FMR Corp. ("FMR"), the parent holding company of
Fidelity Management & Research Company, a registered investment advisor
("Fidelity"). According to such Schedule 13G, FMR, Edward C. Johnson 3d, the
Chairman and principal stockholder of FMR, Fidelity and Fidelity Low-Priced
Stock Fund, an investment company to which Fidelity acts as investment
advisor (the "Fund"), may be deemed to own beneficially, as of December 31,
1995, 194,000 shares of Common Stock. FMR, through its control of Fidelity,
Edward C. Johnson 3d and the Fund each have the power to dispose of such
shares. Neither FMR nor Edward C. Johnson 3d has the sole power to vote or
to direct the voting of such shares, which power resides with the Board of
Trustees of the Fund. Fidelity carries out the voting of such shares under
written guidelines established by the Board of Trustees of the Fund.
(6) Based upon information contained in a Schedule 13D filed with the Securities
and Exchange Commission and other information provided by Tweedy, Browne
Company L.P. ("TBC"). TBC is a registered investment advisor beneficially
owning 207,360 shares of Common Stock, of which TBC exercises shared
dispositive power and sole voting power with respect to 192,661 such
shares. Additionally, certain of the general partners of TBC may be deemed
to have sole power to vote certain shares and shared power to direct the
disposition of all the shares of Common Stock held in the TBC Accounts.
(7) Based upon information furnished by directors and executive officers.
Includes 20,000 shares issuable on exercise of options.
3
<PAGE> 6
ELECTION OF DIRECTORS
At the meeting, three Class II directors (constituting all of the Class II
directors) are to be elected to hold office for terms of three years or until
their respective successors shall have been elected and shall qualify. It is the
intention of the persons named in the enclosed form of proxy to vote such proxy
for the election of the three nominees named below for Class II directorships
unless authorization is withheld on the proxy. The Board of Directors of the
Company do not contemplate that any of the nominees will be unable or unwilling
to serve as a director or become unavailable for any reason, but if that should
occur before the meeting, each of the proxies received by the Board of Directors
which do not withhold authority to vote for directors will be voted for another
nominee or nominees to be selected by the Board of Directors.
The enclosed form of proxy provides a means for stockholders to vote for
each of the nominees listed therein or to withhold authority to vote for certain
or all of the nominees. Each properly executed proxy received in time for the
meeting will be voted as specified therein. If a stockholder does not specify
otherwise, the shares represented by his or her proxy will be voted for the
nominees listed therein or, as noted above, for other nominees selected by the
Board of Directors. Since the Company's bylaws provide that the directors are
elected by a plurality of votes cast, broker non-votes or withholding authority
to vote for any of the nominees will have no effect upon the election of
directors, unless a vote is cast in person or by means of another proxy.
However, all shares represented by proxies that are signed by the holder of
record will be counted for purposes of determining the presence of a quorum. The
presence at the meeting, in person or by proxy, of the holders of a majority of
the shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the meeting.
The following table sets forth information with respect to each person
nominated for election as a Class II director and each person whose term of
office as a director will continue after the annual meeting. Except for J.
Fellman Seinsheimer, III., William C. Levin, M.D. and Harris L. Kempner, Jr.,
who owned beneficially 5.8%, 2.2% and 1.1%, respectively, of the outstanding
shares of Common Stock at March 14, 1996, each nominee and director owned less
than 1% of the outstanding shares of Common Stock at such date. The table has
been prepared from information obtained from the respective nominees and
directors.
<TABLE>
<CAPTION>
SHARES
OF
COMMON
STOCK
BENEFICIALLY
OWNED
SERVED ON
AS MARCH
PRINCIPAL DIRECTOR 14,
NAME AGE OCCUPATION SINCE 1996(1)
- ------------------------------ --- ----------------------------------- ---- -------
<S> <C> <C> <C> <C>
CLASS II -- NOMINEES FOR TERMS EXPIRING IN 1999
Jack T. Currie(2)(3).......... 67 Investments 1977 5,751(4)
Synott L. McNeel(3)(5)........ 72 Investments 1973 6,891
J. Fellman Seinsheimer, 55 President and Chief Executive 1973 113,810(6)
III(2)(3)................... Officer of the Company
CLASS III -- DIRECTORS WHOSE TERMS EXPIRE IN 1997
Harris L. Kempner, Jr.(7)..... 56 President -- Kempner Capital 1991 20,611(4)(8)
Management, Inc.
William C. Levin, M.D......... 79 Consultant in Hematology 1973 42,051(9)(10)
CLASS I -- DIRECTORS WHOSE TERMS EXPIRE IN 1998
Henry W. Hope(2)(7)........... 55 Partner -- Fulbright & Jaworski 1977 2,479(4)
L.L.P.
James W. McFarland, Ph.D(5)... 50 Dean -- A.B. Freeman School of 1994 1,500(11)
Business, Tulane University
Marvin L. West(5)(7).......... 67 Bank Consultant 1980 1,053(11)
</TABLE>
- ---------------
(1) Unless otherwise indicated below, each director or nominee has sole voting
and investment power with respect to the shares attributed to him.
(2) Member of the Nominating and Management Development Committee of the Board
of Directors.
(Footnotes continued on following page)
4
<PAGE> 7
(3) Member of the Executive Committee of the Board of Directors.
(4) Includes 2,000 shares issuable on the exercise of options.
(5) Member of the Audit Committee of the Board of Directors.
(6) Includes 7,000 shares issuable on the exercise of options, but does not
include 270 shares owned of record by his sons, as to which Mr. Seinsheimer
disclaims any beneficial ownership or interest. See Note (2) under
"Principal Stockholders".
(7) Member of the Compensation Committee of the Board of Directors.
(8) Includes 18,611 shares held by the H. Kempner Trust, of which Mr. Kempner
is a beneficiary, is one of five trustees and shares voting and investment
power.
(9) Includes 2,000 shares issuable upon the exercise of options, but does not
include (i) 35,575 shares that were owned of record by Dr. Levin's deceased
wife, which shares are currently held by the estate of Dr. Levin's wife and
have not been distributed, or (ii) 471,770 shares beneficially owned by the
Family Trust, of which Dr. Levin is a co-trustee. See Note (2) under
"Principal Stockholders".
(10) See Note (1) under "Principal Stockholders".
(11) Includes 1,000 shares issuable on the exercise of options.
Jack T. Currie has been engaged in managing personal investments since
January 1986. Prior to 1986, he was engaged in the merchant banking and
investment banking businesses. Mr. Currie is also a member of the Boards of
Directors of American National Growth Fund, American National Income Fund,
Triflex Fund, Inc. and Stewart & Stevenson Services, Inc.
Henry W. Hope has been a partner in the law firm of Fulbright & Jaworski
L.L.P. since 1975.
Harris L. Kempner, Jr. has served as a Trustee of H. Kempner Trust
Association of Galveston since 1964 and as President of Kempner Capital
Management, Inc. since 1981. He serves on the Boards of Directors of Imperial
Holly Corp., TNP Enterprises and Cullen Frost Bankers, Inc.
William C. Levin, M.D. served as President of the University of Texas
Medical Branch at Galveston from 1974 until his retirement in September 1987. He
served as the Ashbel Smith Professor at the University until his retirement from
that position in September 1992 and now serves as a consultant in hematology.
Synott L. McNeel served as Senior Vice President, Secretary and Treasurer
of the Company from January 1983 until his retirement on December 31, 1993.
Prior to that time he served as Senior Vice President and Treasurer of the
Company since 1973.
J. Fellman Seinsheimer, III has served as President and Chief Executive
Officer since July 1992. He served as President and Chief Operating Officer from
January 1983 to July 1992, and prior to that time was Executive Vice President
and Secretary of both the Company and American Indemnity Company, the Company's
principal insurance subsidiary ("American Indemnity").
Marvin L. West has served as a bank consultant since July 1991. From
November 1988 until July 1991, Mr. West handled personal investments. Mr. West
served as Chairman of the Board and President of Westheimer National Bank from
July 1984 until November 1988. In November 1992, Mr. West filed a voluntary
petition under Chapter 7 of the Bankruptcy Code in Houston, Texas, and has since
been discharged from such proceeding.
James W. McFarland is dean and professor at Tulane University's A.B.
Freeman School of Business, positions he has held since 1988. Prior to that
time, he was dean of the College of Business Administration at the University of
Houston. He is a member of the Boards of Directors of Sizeler Property
Investors, Inc. and Stewart Enterprises, Inc. and serves on the Audit and
Compensation Committees of both companies. Mr. McFarland also serves on the
Executive Committee of Sizeler Property Investors, Inc.
J. Fellman Seinsheimer, III is the son and William C. Levin, M.D. is the
brother-in-law of Mr. Seinsheimer, Jr., the principal stockholder of the
Company.
5
<PAGE> 8
The Company's Board of Directors has an established Executive Committee,
Audit Committee, Nominating and Management Development Committee and
Compensation Committee. The Executive Committee performs various tasks in the
management of the business and affairs of the Company and may exercise all of
the powers of the Board of Directors when it is not in session except those
reserved by law to the Board. The Audit Committee recommends the selection of
and confers with the Company's independent accountants regarding the scope and
adequacy of annual audits and other review procedures, reviews reports from the
independent accountants relating to the annual audits and quarterly reviews, and
meets with such independent accountants and the Company's internal auditors and
financial personnel to review such reports and the adequacy of the Company's
financial controls, accounting principles and policies. The Audit Committee also
reviews compliance with the Company's reporting obligations and certain Company
policies. The Compensation Committee is responsible for reviewing and
recommending to the Board of Directors the compensation for the executive
officers and directors of the Company and for administering the Company's
employee stock option plans. The primary function of the Nominating and
Management Development Committee is to review management's recommendations for
persons to serve as the Company's executive officers and as members of the Board
of Directors and committees of the Board of Directors (other than the Nominating
and Management Development Committee), together with such other nominees as it
may choose to consider, and to recommend to the Board of Directors the persons
nominated by the Committee for such positions. The Nominating and Management
Development Committee will consider for the annual meeting of stockholders to be
held in 1997 nominees for director recommended by stockholders that are
submitted in writing, together with adequate information regarding such person's
biographical data and qualifications, addressed to the Nominating and Management
Development Committee at the address of the Company's principal executive office
and received no later than November 29, 1996. The Nominating and Management
Development Committee periodically considers executive management development
and succession matters.
During 1995, the Board of Directors held six meetings, the Executive
Committee held two meetings, the Audit Committee held four meetings, the
Nominating and Management Development Committee held two meetings and the
Compensation Committee held one meeting. During 1995, each incumbent director
attended 75% or more of the total number of meetings of the Board and the
committees on which he served.
EXECUTIVE OFFICERS
The following table lists the persons currently serving as the executive
officers of the Company and who have been nominated for re-election to such
positions at the directors' meeting to be held following the Annual Meeting of
Stockholders. If elected, the persons named below are expected to serve in the
position stated until the next annual meeting of the directors and until their
successors are elected and qualified. Both officers have been continually
employed by the Company in an executive capacity for the last five years, except
Mr. Apgar who was elected to his position with the Company in January 1994. Mr.
Apgar is 42 years of age and has been employed with American Indemnity Company
in various capacities since April 1974, most recently as Vice President and
Controller. Mr. Apgar beneficially owns 3,500 shares of Common Stock, including
3,000 shares issuable upon the exercise of options, which represents less than
1% of the shares of Common Stock outstanding as of March 14, 1996.
<TABLE>
<CAPTION>
SERVED AS
OFFICER
NAME SINCE POSITION
- --------------------------------------- --------- ------------------------------------
<S> <C> <C>
J. Fellman Seinsheimer, III............ 1973 President and Chief Executive
Officer
Phillip E. Apgar, C.P.A. .............. 1994 Vice President, Treasurer and Chief
Financial Officer
</TABLE>
6
<PAGE> 9
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the Board of Directors of
the Company, which is composed of three non-employee directors, is responsible
for recommending to the full Board of Directors compensation for the executive
officers of the Company. Additionally, the Committee is responsible for
administering the Company's stock option plans.
COMPENSATION POLICIES
In determining compensation for the Company's executive officers, the
Committee seeks to ensure that the executive officers are effectively
compensated in terms that are both internally equitable and externally
competitive. Compensation decisions should include consideration of all factors
relevant to these decisions, including the performance of the specific officer
under consideration, the financial condition and results of operations of the
Company, conditions prevailing generally in the Company's industry during the
applicable periods and the Company's performance in light of such conditions.
Management's recommendations are requested and considered by the Committee.
COMPENSATION PROGRAM CONSIDERATIONS
In 1995, compensation for the Company's executive officers consisted
primarily of base salary and certain other benefits, including contributions to
the Company's defined benefit pension plan and to the Company's 401(k) plan. The
Committee considered certain of these components as follows.
Base Salary -- Base salary levels are determined principally on the factors
mentioned above, as well as the Company's past compensation practices,
compensation practices in the applicable geographic region and by comparison
with companies that are similar to the Company. For several years prior to and
including 1990, the Company had suffered from the difficulties experienced
generally by the property and casualty insurance industry. In response,
management, led by the executive officers at that time, which included J.
Fellman Seinsheimer, III, implemented programs to correct the unsatisfactory
results that had been experienced by the Company. The Committee believed that
these efforts, as well as the continuing efforts of the current executive
officers, were significant in achieving the improved results subsequently
realized by the Company. Prior to 1993, there generally had been no base salary
increases for the executive officers of the Company since April 1989.
In 1995, the Company commissioned an outside compensation consulting firm
to update its previous report on compensation arrangements for the executive
officers (the "compensation survey"). This compensation survey illustrated that
the executive officers' base salaries were below the mid-points of the ranges
shown in that survey for their respective positions. The companies used in the
compensation survey are not the companies comprising the broader indices
utilized in the performance graph.
In general, base salary levels and increases in these levels reflect the
Committee's view of the contribution made by the particular executive officer
based on, among other things, the factors listed above. These factors are
typically subjective. No quantifiable goals or standards are established,
although the compensation survey provides certain benchmarks considered by the
Committee for compensation levels. While the profitability of the Company is
considered, it is not determinative in setting executive officer compensation.
With this background, the Committee recommended increases in base salaries for
the executive officers in 1995.
Stock Options -- The Committee believes that stock options provide a
valuable incentive to the key employees of the Company, particularly those
having substantial responsibility for the future and success of the Company. By
providing an opportunity to increase their ownership of Company stock, the
interests of the stockholders and those key personnel will become more closely
aligned. Stock options provide the option holder with additional incentive to
remain in the Company's employ and to bring about greater growth and success of
the Company. Options also provide a means to tie compensation more closely to
the Company's financial performance to the extent reflected in the price of the
Company's Common Stock.
7
<PAGE> 10
Following review and consideration of the options previously granted to the
executive officers and that are currently outstanding, the Committee determined
that no additional options would be granted to executive officers as part of the
1995 compensation review.
Other Matters -- The Company has various other employee benefit plans and
executive officers participate in these on the same terms as eligible,
non-executive employees, subject to any legal limits on such participation.
These include the Profit Sharing and 401(k) Plan adopted by the Company's
subsidiary effective January 1994 and an automobile bonus plan whereby employees
are compensated for taxes incurred for personal use of company automobiles. The
Committee also suggested to management that it undertake a review of short-term
incentive type plans such as a bonus arrangement.
1995 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
In view of the leading role taken by J. Fellman Seinsheimer, III in
bringing about the improved results experienced by the Company in recent years
and particularly in 1994, the Committee determined that the Chief Executive
Officer should receive the recommended increase in compensation. This increase
would place his compensation at approximately the mid-point of his compensation
range based upon the compensation survey update commissioned by the Company. The
Committee noted J. Fellman Seinsheimer, III's direction of the Company toward
reduced costs and a more satisfactory mix of business, and his leadership in
maintaining the Company's focus toward these goals.
SUMMARY
The Committee believes that the annual compensation for the Company's
executive officers appropriately reflects the contribution of such officers to
the Company and is linked to and reflective of the individual performance and
the financial performance of the Company.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Henry W. Hope
Harris L. Kempner, Jr.
Marvin L. West
8
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Harris L. Kempner, Jr., a director of the Company, is Chairman Emeritus of
the Board of United States National Bank, which serves as the principal banking
institution for the Company. Henry W. Hope, a director of the Company, is a
partner in the law firm of Fulbright & Jaworski L.L.P., which serves as
corporate and securities counsel to the Company.
SUMMARY OF COMPENSATION
The following table summarizes compensation information concerning each of
the Company's executive officers for each of the three years ended December 31,
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION (AWARDS)
-------------------------- ------------
OTHER SHARES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)(2)
--------------------------- ---- ------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. Fellman Seinsheimer, III...... 1995 199,500 -- 6,541 -- 8,393
President and Chief 1994 190,000 -- 5,308 -- 6,321
Executive Officer 1993 182,600 -- -- -- 1,090
Phillip E. Apgar, C.P.A.......... 1995 110,000 -- 4,355 -- 3,300
Vice President, Treasurer 1994 100,000(3) -- 3,527 3,000 2,500
and Chief Financial Officer 1993 80,000 -- -- -- --
</TABLE>
- ---------------
(1) Amounts for 1995 represent tax gross-ups for the lease value and expenses
relating to the use of Company automobiles. The dollar value of all other
perquisites and personal benefits were less than the lesser of either
$50,000 or 10% of the total annual salary and bonus for each named executive
officer and therefore have been excluded.
(2) Represents matching contributions made by the Company in 1995 under the
Company's 401(k) Plan of $5,985 and $3,300 for Messrs. Seinsheimer, III and
Apgar, respectively, and term life insurance premiums paid by the Company in
1995 for Mr. Seinsheimer, III of $2,408.
(3) Mr. Apgar was elected Chief Financial Officer in January 1994.
Each executive officer of the Company holds office until the regular
meeting of directors following the annual meeting of stockholders or until his
successor is elected and qualifies.
COMPENSATION OF DIRECTORS
Except as set forth in the last sentence of this paragraph, directors of
the Company receive $1,200 for each meeting of the Board of Directors attended
by such director and $50 to $200 for each meeting of the Company's subsidiaries'
Boards of Directors on which such persons may serve. Committee members serving
on established committees of the Board of Directors receive $300 for each
meeting attended. Since May 1990, the Company has not paid director or committee
fees to persons who also serve as officers of the Company.
In addition, non-employee directors receive options every other year to
purchase 1,000 shares of the Company's Common Stock pursuant to the 1992
Non-Employee Director Stock Option Plan (the "Director Plan"). See "Option
Grants and Exercises." Each option is exercisable for a term of ten years from
the date of grant, subject to earlier termination as set forth in the plan.
9
<PAGE> 12
OPTION GRANTS AND EXERCISES
The Company currently maintains three plans pursuant to which options to
purchase shares of the Company's Common Stock are outstanding or available for
future grants. In 1982, the Company's stockholders approved the 1982 Incentive
Stock Option Plan (the "1982 Option Plan") pursuant to which options to purchase
an aggregate of 16,800 shares of Common Stock are currently outstanding to key
employees of the Company and its subsidiaries. No additional stock options may
be granted under the 1982 Option Plan.
In April 1992, the Company's stockholders approved the 1992 Employee Stock
Option Plan (the "1992 Option Plan") and the Director Plan. Options to purchase
up to an aggregate of 100,000 shares may be granted under the 1992 Option Plan
at no less than the fair market value of the shares of Common Stock on the date
of grant for incentive stock options, and no less than 85% of the fair market
value of the shares of Common Stock on the date of grant for non-incentive stock
options. Options to purchase up to an aggregate of 25,000 shares may be granted
under the Director Plan. The selection of non-employee directors to whom options
are to be granted, the number of shares subject to an option, and the date of
grant, exercise price and term of an option are specified in the Director Plan.
Options to purchase 4,000 shares were granted under the 1992 Option Plan and
options to purchase 6,000 shares were granted under the Director Plan in 1994.
There were no additional options granted under either plan in 1995.
AGGREGATED OPTION EXERCISES IN 1995 AND OPTION VALUES AT DECEMBER 31, 1995
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 1995 by each of its executive
officers and the value of unexercised in-the-money options at December 31, 1995.
OPTION EXERCISES AND OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT DECEMBER 31, 1995 DECEMBER 31, 1995
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- -------- ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
J. Fellman Seinsheimer,
III....................... -- -- 7,000 -- 20,930 --
Phillip E. Apgar, C.P.A. ... -- -- 3,000 -- -0- --
</TABLE>
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on Common Stock with the cumulative total
return of the NASDAQ U.S. Market Index and the Dow Jones Property and Casualty
Insurance Industry Index for the five years ended December 31, 1995. The graph
assumes that the value of the investment in the Company's Common Stock and each
index was $100 at December 31, 1990 and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE NASDAQ U.S. MARKET INDEX AND
THE DOW JONES PROPERTY AND CASUALTY INSURANCE INDUSTRY INDEX
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[COMPARISON CHART]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) AIFC NASDAQ U.S. DOW JONES P&C
<S> <C> <C> <C>
1990 100 100 100
1991 148 161 124
1992 189 187 152
1993 414 215 153
1994 327 210 161
1995 329 296 227
</TABLE>
PENSION PLAN
Effective January 1, 1988, American Indemnity established a
noncontributory, retirement plan (the "Plan") carried and funded through a group
annuity covering substantially all full-time employees over 21 years of age who
have more than one year of service. The Plan was amended January 1, 1992 to
comply with the Tax Reform Act that was effective January 1, 1989. The amount of
contributions or accruals under the Plan cannot be readily separated or
individually calculated for the persons specified in the Summary Compensation
Table. The following table sets forth maximum estimated annual benefits payable
under the Plan for the earnings levels (the average of the participant's five
highest consecutive income years, excluding bonus, during the ten years
immediately preceding retirement date) and the lengths of service indicated.
11
<PAGE> 14
ESTIMATED RETIREMENT BENEFITS
<TABLE>
<CAPTION>
LENGTH OF SERVICE
5-YEAR --------------------------------
AVERAGE 20 30 35
INCOME($) YEARS YEARS YEARS
----------- ------ ------ ------
<S> <C> <C> <C>
100,000.............................. 24,344 36,517 42,603
120,000.............................. 29,944 44,917 52,403
140,000.............................. 35,544 53,317 62,203
160,000.............................. 41,144 61,717 72,003
180,000.............................. 46,744 70,117 81,803
200,000.............................. 52,344 78,517 91,603
</TABLE>
These benefits would be offset by benefits, if any, provided to the
participant under a previous pension plan that was terminated in 1987. The
compensation covered by the Plan includes all salary costs, excluding bonuses,
for all employees who have reached the age of 21. Such compensation includes the
salaries set forth in the salary column of the Summary Compensation Table. For
purposes of the Plan, J. Fellman Seinsheimer, III has 33 years of service and
Phillip E. Apgar has 21 years of service.
KEY EXECUTIVE SEVERANCE AGREEMENTS
J. Fellman Seinsheimer, III, the President and Chief Executive Officer of
the Company and American Indemnity Company ("American Indemnity"), a subsidiary
of the Company, and one other key employee of American Indemnity have each
entered into a Key Executive Severance Agreement ("Executive Agreement") with
the Company and American Indemnity. Each officer's Executive Agreement is
effective as of February 7, 1983 and provides that if in the event that a third
person or group commences a tender or exchange offer, circulates a proxy to
stockholders, or takes other steps to effect a change in control of the Company,
such officer will not voluntarily leave the employ of the Company or American
Indemnity, as the case may be, and will continue to perform the duties of his
office until such time as such third person has abandoned or terminated his
efforts to effect a change of control or until a change of control has occurred.
In the event that such officer's employment with the Company or any of its
subsidiaries terminates for any reason (either voluntary or involuntary, other
than as a consequence of his death, disability or willful misconduct) within two
years after a change of control of the Company, the Company or American
Indemnity, or both, will (i) pay to such officer as compensation for services
rendered to the Company and its subsidiaries a lump sum in cash equal to five
times the highest aggregate compensation paid or payable to such officer with
respect to any 12 consecutive month period during the three years ending with
the date of such officer's termination, and (ii) continue to provide such
officer, for a period of 15 years from the date of his termination, with such
life, accident, medical and long-term disability insurance plans of the Company
and its subsidiaries as provided to him prior to the change of control, unless
and until he obtains other employment that provides comparable coverage. For
purposes of each officer's Executive Agreement, a change of control of the
Company will result from the occurrence of either of the following events: (i) a
third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, becomes the beneficial owner of
shares of the Company having 25% or more of the total number of votes that may
be cast for the election of directors of the Company; or (ii) as the result of,
or in connection with, any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions, the persons who were directors of the Company
before any of such transactions shall cease to constitute a majority of the
Board of Directors of the Company or any successor to the Company. The Executive
Agreements also provide that, for a period of one year following any voluntary
termination (except one following a change in control of the Company) by an
officer who is a party to the agreement, that such officer will not participate
in any business which is in competition with the business of the Company and its
subsidiaries within a defined geographic area. Except during the pendency of or
following a change in control, the Board of Directors may determine that an
officer who is a party to an Executive Agreement is no longer a "key executive"
of the Company or American Indemnity and thereupon terminate such officer's
Executive Agreement. If the terms of the Executive Agreements had been activated
during the Company's 1995 fiscal year, the sum which would have been payable to
the executive officer named above is $997,500. Such
12
<PAGE> 15
payment, if required to be made during 1995, would have had an adverse impact on
the 1995 reported results of operations; however, it would not have had an
adverse effect on the overall financial condition of the Company.
OTHER TRANSACTIONS
Harris L. Kempner, Jr., a director of the Company, is Chairman Emeritus of
the Board of United States National Bank, which serves as the principal banking
institution for the Company.
Henry W. Hope, a director of the Company, is a partner in the law firm of
Fulbright & Jaworski L.L.P., which serves as corporate and securities counsel to
the Company.
Eugene Hornstein, in his capacity as First Vice President of American
Indemnity, received compensation from such company in the amount of $88,440 as a
base salary, $1,895 in matching contributions made by the Company under the
Company's 401(k) Plan and $2,544 included as earnings in connection with the use
of Company automobiles for the fiscal year ending December 31, 1995. Mr.
Hornstein is the son-in-law of William C. Levin, M.D., a director of the
Company.
See Notes (1) and (2) under "Principal Stockholders" for information
concerning J. Fellman Seinsheimer, III's shared power to vote and dispose of
shares of Common Stock owned of record by his father, Mr. Seinsheimer, Jr., and
shares of Common Stock held by the Seinsheimer Trust.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Deloitte & Touche LLP, or a predecessor of such firm, has been auditing the
accounts of the Company since its inception and has been selected as the
Company's independent accountants for the current year. A representative of
Deloitte & Touche LLP is expected to be available at the Annual Meeting of
Stockholders to respond to appropriate questions and will be permitted to make a
statement if such representative desires to do so.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities to file Form 3, Form 4 and Form 5 reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than 10% stockholders are required by the
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
To the Company's knowledge and except as set forth below, based solely on a
review of Forms 3 and 4, and amendments thereto furnished to the Company during
its most recent fiscal year and Forms 5 and amendments thereto furnished to the
Company with respect to its most recent fiscal year, and written representations
from reporting persons that no Form 5 was required, all Section 16(a) filing
requirements were complied with. On December 1, 1980, J. Fellman Seinsheimer,
III acquired beneficial ownership of 66,015 shares of Common Stock as a result
of being granted a power of attorney from his father, Mr. Seinsheimer, Jr. On
October 21, 1988, J. Fellman Seinsheimer, III acquired beneficial ownership of
38,095 shares of Common Stock as a result of being named as a co-trustee of the
Seinsheimer Trust. J. Fellman Seinsheimer, III inadvertently failed to timely
file Form 4s in connection with such events, which were reported on a Form 4
filed on February 16, 1996. Prior to February 5, 1996, the power to vote and
dispose of the aforementioned shares of Common Stock was exercised solely by Mr.
Seinsheimer, Jr. The Family Trust also failed to timely file a Form 3 with
respect to its ownership of shares of Common Stock. The Company has been advised
that such Form 3 will be filed shortly following the date hereof.
13
<PAGE> 16
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at the
annual meeting of stockholders of the Company to be held in 1997 must be
received by the Company at P.O. Box 8985, Wilmington, Delaware 19899-8985, no
later than November 29, 1996, in order to be included in the proxy statement and
form of proxy relating to that meeting.
GENERAL
Management of the Company does not intend to present any other items of
business and knows of no other items of business that are likely to be brought
before the meeting, except those set forth in the attached Notice of Annual
Meeting of Stockholders. However, if any other matter should properly come
before the meeting, the persons named in the enclosed proxy will have the
discretionary authority to vote such proxy in accordance with their best
judgment on such matters.
This solicitation is made on behalf of the Board of Directors of the
Company. The cost of solicitation of proxies in the accompanying form will be
paid by the Company. In addition to solicitation by use of mails, certain
directors, officers and employees may solicit the return of proxies by
telephone, telegram or personal interviews. The Company will also request banks,
brokers and other custodians, nominees and fiduciaries to send proxy materials
to the beneficial owners of shares of the Common Stock, and upon request, they
will be reimbursed by the Company for postage and clerical expenses.
HELEN K. LOHEC
Secretary
March 29, 1996
14
<PAGE> 17
- --------------------------------------------------------------------------------
AMERICAN INDEMNITY FINANCIAL CORPORATION
P.O. BOX 8985 o WILMINGTON, DELAWARE 19899-8985
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS
ON APRIL 29, 1996
THE UNDERSIGNED hereby appoints J. Fellman Seinsheimer, III
and Phillip E. Apgar, or either of them, the attorneys and proxies
of the undersigned, with full power of substitution, for the
Annual Meeting of Stockholders of American Indemnity Financial
Corporation to be held at 10:00 a.m. on Monday, April 29, 1996, in
the Board of Directors Room of the United States National Bank of
Galveston, 2201 Market Street, Galveston, Texas, or at any
adjournment thereof, and to vote at such meeting the shares of
Common Stock of the Company held of record by the undersigned on
the record date for such meeting.
(1) / / FOR the election (except as indicated to the contrary
below) of Jack T. Currie, Synott L. McNeel and J.
Fellman Seinsheimer, III as Class II directors. TO
WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
------------------------------------------------------------
/ / Authority is hereby WITHHELD to vote for each of the
nominees listed above.
(2) / / In their discretion on such other matters as may
properly come before the meeting or any adjournment
thereof.
Each of the above matters are more particularly described in
the accompanying Proxy Statement dated March 29, 1996, relating to
such meeting.
- --------------------------------------------------------------------------------
<PAGE> 18
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED. IF NOT OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE LISTED
NOMINEES AND FOR THE APPROVAL OF THE PROPOSALS LISTED.
AS NOTED IN THE ACCOMPANYING PROXY STATEMENT, RECEIPT OF WHICH
IS HEREBY ACKNOWLEDGED, IF ANY OF THE LISTED NOMINEES BECOMES
UNAVAILABLE FOR ANY REASON AND AUTHORITY TO VOTE FOR ELECTION OF
DIRECTORS IS NOT WITHHELD, THIS PROXY WILL BE VOTED FOR ANOTHER
NOMINEE, OR OTHER NOMINEES, TO BE SELECTED BY THE BOARD OF
DIRECTORS.
Dated , 1996
--------------------------
--------------------------
(Signature of
Stockholder(s))
Your signature should
correspond with your name
as it appears hereon.
Joint owners should each
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please set forth
your full title as it
appears hereon.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY.
- --------------------------------------------------------------------------------
