<PAGE>
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
MERCURY GENERAL
- - --------------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
[LOGO OF MERCURY GENERAL CORPORATION]
MERCURY GENERAL CORPORATION
4484 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90010
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
To The Shareholders of
Mercury General Corporation
LOGO
Notice is hereby given that the Annual Meeting of Shareholders of MERCURY
GENERAL CORPORATION (the "Company") will be held at the offices of the
Company, 4484 Wilshire Boulevard, Los Angeles, California on May 29, 1996 at
10:00 a.m., for the following purposes:
1. To elect directors for the ensuing year to serve until the next Annual
Meeting of Shareholders and until their successors are elected and have
qualified. The present Board of Directors of the Company has nominated and
recommends for election as directors the following nine persons:
George Joseph Richard E. Grayson
Charles E. McClung Nathan Bessin
Donald P. Newell Gloria Joseph
Donald R. Spuehler Bruce A. Bunner
Michael D. Curtius
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 19, 1996 as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
Accompanying this Notice of Annual Meeting is a proxy. WHETHER OR NOT YOU
EXPECT TO BE AT THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AND RETURN IT PROMPTLY.
BY ORDER OF THE BOARD OF DIRECTORS,
Judy A. Walters, Secretary
Los Angeles, California
April 26, 1996
<PAGE>
MERCURY GENERAL CORPORATION
4484 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90010
----------------
PROXY STATEMENT
The Board of Directors of the Company is soliciting the enclosed proxy for use
at the Annual Meeting of Shareholders of the Company to be held at 10:00 a.m.
May 29, 1996, at the offices of the Company, 4484 Wilshire Boulevard, Los
Angeles, California. This Proxy Statement was first mailed to shareholders on
April 26, 1996.
All shareholders who find it convenient to do so are cordially urged to
attend the meeting in person. In any event, please complete, sign, date and
return the proxy in the enclosed envelope.
A proxy may be revoked by written notice to the Secretary of the Company at
any time prior to the voting of the proxy, or by executing a later proxy or by
attending the meeting and voting in person. Unrevoked proxies will be voted in
accordance with the instructions indicated in the proxies, or if there are no
such instructions, such proxies will be voted for the election of the Board's
nominees for directors. Shares represented by proxies that reflect abstentions
or include "broker non-votes" will be treated as present and entitled to vote
for purposes of determining the presence of a quorum. Abstentions or "broker
non-votes" do not constitute a vote "for" or "against" any matter and thus
will be disregarded in the calculation of "votes cast."
Shareholders of record at the close of business on April 19, 1996 will be
entitled to vote at the meeting. As of that date, 27,466,475 shares of common
stock, without par value ("Common Stock"), of the Company were outstanding.
Each share of Common Stock is entitled to one vote. A majority of the
outstanding shares of the Company, represented in person or by proxy at the
meeting, constitutes a quorum.
The costs of preparing, assembling and mailing the Notice of Annual Meeting,
Proxy Statement and proxy will be borne by the Company.
VOTING
In voting for the election of directors of the Company under the California
General Corporation Law, if, prior to the commencement of voting, any
shareholder has given notice of his intention to cumulate his votes at the
meeting, then all shareholders may cumulate their votes in the election of
directors for any nominee if the nominee's name was placed in nomination prior
to the voting. Under cumulative voting, each shareholder is entitled in the
election of directors to one vote for each share held by him multiplied by the
number of directors to be elected, and he may cast all such votes for a single
nominee for director or may distribute them among any two or more nominees as
he sees fit. If no such notice is given, there will be no cumulative voting.
In the absence of cumulative voting, each shareholder may cast one vote for
each share held by him multiplied by the number of directors to be elected,
but may not cast more votes than the number of shares owned for any candidate
and therefore a simple majority of the shares voting will elect all of the
directors. Under either form of voting, the candidates receiving the highest
number of votes, up to the number of directors to be elected, will be elected.
In the event of cumulative voting, the proxy solicited by the Board of
Directors confers discretionary authority on the proxies to cumulate votes so
as to elect the maximum number of nominees. The proxy may not be voted for
more than nine persons.
1
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 1, 1996, by (i) each
shareholder known by the Company to be a beneficial owner of more than 5% of
any class of the Company's voting securities, (ii) each director and nominee
for director of the Company, (iii) each executive officer named in the Summary
Compensation Table on page 6 and (iv) executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER OWNERSHIP(1) SHARES
------------------------ ------------ -----------
<S> <C> <C>
George Joseph............................. 9,500,227(2) (3) 34.6%
Director and Named Executive Officer
Gloria Joseph............................. 4,580,800(2) (4) 16.7
Director
Nicholas Company, Inc..................... 2,591,300(5) 9.4
Cooper Blanton, Jr........................ 50,227 *
Named Executive Officer
Michael D. Curtius........................ 48,227 *
Director and Named Executive Officer
Bruce E. Norman........................... 25,181(6) *
Named Executive Officer
Joanna Y. Moore........................... 6,227 *
Named Executive Officer
Charles E. McClung........................ 13,000 *
Director
Donald P. Newell.......................... 3,300(7) *
Director
Donald R. Spuehler........................ 4,224 *
Director
Nathan Bessin............................. 2,000 *
Director
Bruce A. Bunner........................... 1,000 *
Director
Richard E. Grayson........................ 0 --
Director
All Executive Officers and Directors...... 14,284,049 52.0%
</TABLE>
- - --------
*Less than 1.0% of the outstanding Common Stock.
(1) As to each person or group in the table, the table includes the following
shares issuable upon exercise of options which are exercisable within 60
days from March 1, 1996: Michael Curtius, 45,300; Joanna Moore, 6,000; all
executive officers and directors as a group, 73,600.
(2) As of October 7, 1985, George Joseph, Gloria Joseph and the Company
entered into an agreement with respect to the ownership by George and
Gloria Joseph of the Company's Common Stock. The agreement provides, among
other things, that the shares of Common Stock held jointly were halved and
transferred into the separate names of George Joseph and Gloria Joseph
under their individual and independent control. In addition, Gloria Joseph
has certain rights to have her shares registered for sale pursuant to the
Securities Act of 1933. The registration rights provided to Gloria Joseph
will terminate at such time as she ceases to hold at least five percent of
the then outstanding shares of the Company's Common Stock.
(3) George Joseph's business address is c/o Mercury General Corporation, 4484
Wilshire Boulevard, Los Angeles, California 90010.
2
<PAGE>
(4) Gloria Joseph's business address is c/o Mercury General Corporation, 4484
Wilshire Boulevard, Los Angeles, California 90010. Includes 800 shares
held in trust for Gloria Joseph's daughter, Ellen Joseph.
(5) The address of Nicholas Company, Inc. is 700 North Water Street,
Milwaukee, Wisconsin 53202. Includes 2,430,000 shares held by Nicholas
Fund, Inc. and 200,000 shares held individually by Albert O. Nicholas, the
president, director and majority shareholder of Nicholas Company, Inc.,
which were reported on a joint Schedule 13G filed with the Company dated
February 6, 1996. According to the Schedule 13G, Nicholas Company, Inc.
has sole or shared voting power over no shares and has sole dispositive
power over 2,591,300 shares, Nicholas Fund has sole voting power over
2,430,000 shares and Mr. Nicholas has sole voting and sole dispositive
power over 200,000 shares.
(6) Bruce Norman is married to Donna Moore, Vice President and Controller of
the Company, another executive officer. Does not include 12,161 shares
held by Donna Moore, as to which Mr. Norman disclaims beneficial
ownership.
(7) Such 3,300 shares are owned by Donald P. Newell as custodian for the
benefit of his children.
3
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board of Directors of the Company has nominated and recommends for
election as directors the following nine persons to serve until the next
Annual Meeting of Shareholders and until their respective successors shall
have been duly elected and shall qualify. All of the nominees are presently
directors of the Company. The enclosed proxy will be voted in favor of the
persons nominated unless otherwise indicated. If any of the nominees should be
unable to serve or should decline to do so, the discretionary authority
provided in the proxy will be exercised by the present Board of Directors to
vote for a substitute or substitutes to be designated by the Board of
Directors. The Board of Directors has no reason to believe that any substitute
nominee or nominees will be required.
The table below indicates the position with the Company, tenure as director
and age of each nominee as of April 15, 1996.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
---- ------------------------- --- --------
<S> <C> <C> <C>
George Joseph Chairman of the Board 74 1961(1)
and Chief Executive Officer
of the Company
Michael D. Curtius President and Chief Operating Officer 45 1996
and Director of the Company
Gloria Joseph Director 72 1961(1)
Donald P. Newell Director 58 1979(1)
Charles E. McClung Director 81 1961(1)
Donald R. Spuehler Director 61 1985
Nathan Bessin Director 70 1991
Bruce A. Bunner Director 62 1991
Richard E. Grayson Director 66 1985
</TABLE>
- - --------
(1) Date shown is the date elected a director of Mercury Casualty Company, a
predecessor of the Company. Each of these individuals was elected a
director of the Company in 1985.
(2) Mr. Curtius was elected a director of the Company by the Board of
Directors at its February 1996 meeting.
Directors are elected at each annual meeting of the shareholders for one
year and hold office until their successors are elected and qualified.
Executive officers serve at the pleasure of the Board of Directors.
George Joseph, President of the Company and Chairman of its Board of
Directors, has served in those capacities since 1961. He has more than 35
years experience in all phases of the property and casualty insurance
business.
Michael D. Curtius has served as President and Chief Operating Officer of
the Company since May 1995. He served as Vice President and Chief Claims
Officer from October 1987 until May 1995.
Gloria Joseph served as Vice President of the Company from 1961 until 1985.
Charles E. McClung is the principal shareholder of McClung Insurance Agency,
Inc., an insurance agency located in Montebello, California.
Donald P. Newell has been a partner of the law firm of Latham & Watkins of
San Diego, California for more than five years.
Donald R. Spuehler has been retired since February 1995. From February 1992
through January 1995, Mr. Spuehler was of counsel to the law firm of O'Melveny
& Myers of Los Angeles, California. For more than the prior five years, Mr.
Spuehler was a partner of O'Melveny & Myers.
Nathan Bessin has been the Managing Partner of J. Arthur Greenfield & Co.,
Certified Public Accountants, for more than five years. He has been a director
of Williams-Sonoma, Inc., since 1983.
4
<PAGE>
Bruce A. Bunner has been President of Financial Structures, Limited, a
Bermuda based insurance company and a subsidiary of Pitney Bowes, Inc. since
January 1996. From April 1994 to April 1995, Mr. Bunner served as Director of
External Affairs of Zurich Centre Advisors, Inc., a consulting company
specializing in insurance and reinsurance risk arrangements. From January 1991
to April 1994, he served as Chairman of the Board of Centre Reinsurance
Company of New York, a reinsurance company. Mr. Bunner was a partner in the
firm of KPMG Peat Marwick LLP, Certified Public Accountants, from 1974 to
1990, except during the period from 1983 to 1986 when he served as Insurance
Commissioner of the State of California. Mr. Bunner is currently a director of
American Progressive Life Insurance Company, a subsidiary of Universal
Holdings Corporation, a publicly-held corporation, and a director of Amwest
Insurance Group.
Richard E. Grayson has been retired since January 1995. For more than five
years prior to such time, Mr. Grayson was Vice President of Union Bank of Los
Angeles, California and President and Director of Current Income Shares, Inc.,
a publicly-held closed end investment company.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES THEREOF
The Board of Directors held four meetings during the last fiscal year and
will meet quarterly during the current fiscal year. In 1995, each director
attended at least 75% of the aggregate of all meetings held by the Board of
Directors and all meetings held by all committees of the Board on which such
director served. Directors are paid $2,000 per quarter plus $2,500 per meeting
attended and reimbursement for their out-of-pocket expenses incurred in
attending such meetings.
The Company has an Audit Committee currently consisting of Nathan Bessin,
Donald P. Newell and Donald R. Spuehler, with Nathan Bessin acting as Chairman
of such Committee. The Audit Committee held two meetings in 1995. The Audit
Committee's responsibilities include, among other things, recommending the
selection of the Company's independent certified public accountants and
meeting with the accountants regarding their management letters and the annual
audit. Members of the Audit Committee receive $500 per meeting attended plus
reimbursement of their out-of-pocket expenses incurred in attending such
meetings.
The Company has a Compensation Committee currently consisting of Donald R.
Spuehler, Bruce A. Bunner and Richard E. Grayson, with Donald R. Spuehler
acting as Chairman of such Committee. The Compensation Committee held one
meeting in 1995 and held numerous telephonic consultations with the Company
regarding executive compensation and administration of the Company's stock
option plan. The responsibilities of the Compensation Committee include, among
other things, reviewing, approving and reporting to the Board the Company's
compensation policies with respect to its executive officers, reviewing the
Company's overall compensation policy and making recommendations with respect
thereto, and administering the Company's stock option plan. Members of the
Compensation Committee receive $500 per meeting attended plus reimbursement of
their out-of-pocket expenses incurred in attending such meetings. The Chairman
of the Compensation Committee also receives compensation based upon the number
of additional hours spent on committee matters.
The Board of Directors has not designated a nominating committee.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that shareholders vote FOR the
slate of nominees set forth above. Proxies solicited by the Board of Directors
will be so voted unless shareholders specify otherwise on their proxy cards.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the periods indicated, the compensation
of the Company to its Chief Executive Officer and each of the four most highly
compensated executive officers other than the Chief Executive Officer.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------- ALL OTHER
YEAR SALARY BONUS COMPENSATION(1)
NAME AND PRINCIPAL POSITION ---- ------ -------- ---------------
<S> <C> <C> <C> <C>
George Joseph 1995 $492,000 $214,580 $24,762
Chairman and Chief Executive Officer 1994 492,000 197,847 19,788
1993 492,000 20,500 23,134
Michael D. Curtius 1995 $268,750 $206,879 $13,382
President and Chief Operating Officer 1994 208,140 186,721 11,170
1993 196,628 308,532 17,631
Cooper Blanton, Jr. 1995 $240,000 $204,074 $13,382
Executive Vice President 1994 225,769 186,753 11,162
1993 215,017 308,959 17,631
Bruce E. Norman 1995 $140,016 $102,874 $ 9,751
Vice President -- Marketing 1994 130,496 94,102 11,162
1993 124,281 80,170 12,106
Joanna Y. Moore 1995 $132,000 $103,040 $13,382
Vice President and Chief Claims Officer 1994 112,725 93,000 11,289
1993 105,135 154,515 12,135
</TABLE>
- - --------
(1) Amounts shown include the Company's contributions under its profit sharing
plan for Company employees, the Company's matching contributions under a
401(k) option to the profit sharing plan, the year-end value of stock
contributed under the ESOP feature of the profit sharing plan and, for
George Joseph only, director fees. Those amounts, expressed in the same
order as above, for the named executive officers for 1995 are as follows:
George Joseph -- $3,453, 0, $5,309, $16,000; Michael Curtius -- $3,453,
$4,620, $5,309; Cooper Blanton, Jr. -- $3,453, $4,620, $5,309; Bruce
Norman -- $2,022, $4,620, $3,109; and Joanna Moore --$3,453, $4,620,
$5,309.
OPTIONS EXERCISED IN 1995 AND YEAR-END VALUES
The Company has a stock option plan for key executives. The following tables
set forth information regarding the grant and exercise of stock options during
1995 by the named executive officers and the value of unexercised stock
options as of December 31, 1995.
OPTION GRANTS IN LATEST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------------
NAME GRANTED (1) YEAR ($/SHARE) DATE 5% 10%
---- ----------- ------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Curtius...... 50,000 32.3% $31.875 8/4/2005 $1,002,301 $2,540,027
</TABLE>
- - --------
(1) These options were granted at the fair market value of the stock on the
date of grant and become exercisable over 5 years at 20% per year
beginning on the first anniversary of the grant date.
(2) These figures are calculated pursuant to SEC rules by multiplying the
number of options granted by the difference between the option exercise
price and a future hypothetical stock price, assuming the value of Company
common stock appreciates 5% or 10% each year, compounded annually, for the
life of the options. These figures are not intended to forecast possible
future appreciation, if any, of the Company's stock price.
6
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995
------------------------- ----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(2)
---- --------------- ----------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Curtius...... 2,700 $70,031 45,300 50,000 $1,809,169 $793,750
Joanna Y. Moore......... 3,000 $75,746 4,000 16,000 $ 70,500 $264,500
</TABLE>
- - --------
(1) Fair market value of underlying securities at exercise minus the exercise
price.
(2) The value of unexercised options represents the difference between the
closing price of the Common Stock on December 31, 1995, which was $37.75
per share, and the exercise price of the options.
George Joseph, the Chief Executive Officer and principal shareholder of the
Company, has not been granted options under the Company's plan.
REPORT OF THE COMPENSATION COMMITTEE
The duty of the Compensation Committee on an ongoing basis is to review,
approve and report to the Board the compensation policies of the Company with
respect to its executive officers. The Committee also reviews in detail with
the Board its recommendations of the factors and criteria upon which the
Company's Chief Executive Officer's compensation is based and the level of
compensation recommended. With the appointment of Mr. Curtius as President of
the Company on May 5, 1995, the Committee has been delegated this same
responsibility with respect to the compensation of the President.
In general, pursuant to Board policy embodied in a standing resolution
adopted at the Board's January 31, 1986 meeting, Mr. Joseph, as Chief
Executive Officer of the Company, was given authority to establish
compensation for all other executive officers. With Mr. Curtius' appointment
as President, Mr. Joseph retains this authority except with respect to the
compensation of the President. Mr. Joseph has periodically reported key
executive appointments and key decisions as to executive compensation to the
Board and this information has been recorded in Board minutes from time to
time.
Executive Officers Other Than the Chief Executive Officer
The compensation policy of the Company adopted by Mr. Joseph for all
executive officers other than the President, in effect in calendar year 1995,
has been reviewed and endorsed by the Compensation Committee and the
Compensation Committee expects, as described in this report, that such policy
will be continued in 1996.
After appointment of Mr. Curtius as President in May of 1995, the
Compensation Committee approved an increase in his base compensation effective
June 1, 1995.
The basic strategy of the Company is that executive officers, subject to Mr.
Joseph's review, should be compensated in general above the median for
executives in like positions in comparable insurance companies, as determined
by him based on his experience in the industry and continuing surveillance of
industry practice. Further, the policy of the Company is that certain key
executives should receive a substantial portion of their annual compensation
based on performance in areas which they control.
The executive officers responsible for underwriting and claims have, since
the Company became publicly held in 1985 and for a substantial prior period,
received a yearly bonus pursuant to a formula based on underwriting results.
The executive officer responsible for marketing has received a bonus in that
same period based on a formula which takes into account underwriting results
and net premiums written. Smaller bonuses, not formula-based, are paid to the
remaining executive officers based on the judgment of the Chief Executive
Officer as to each officer's overall contribution to performance. This general
bonus structure was continued in
7
<PAGE>
1995 and, with appropriate modification to reflect changes in management
responsibilities and additional criteria reflecting contribution to Company
performance, will be continued in 1996.
Salaries for executive officers are reviewed on a yearly basis. Such
increases take into account the same factors used with respect to formula
bonuses--underwriting results and revenues. Also taken into account are
factors reflecting the ability of the individual executive to manage direct
and indirect costs as the volume of business varies, turnover and morale with
respect to employees under the executive's management, the expense of
adjusting claims, and prevailing salaries in the industry, with all factors
taken into account over appropriate cycles of rates, premiums and
profitability of the Company and the industry.
In addition to the nondiscriminatory tax-qualified profit sharing plan and
tax-deferred Section 401(k) option to that plan maintained for employees, the
Company maintains a stock option plan under which key employees are granted
options at 100% of fair market value of Company stock on the date of grant.
The overall policy of the Company, as approved by the Board and Compensation
Committee and embodied in awards made by the Board, is that key officers and
managers responsible for success of the Company should hold options in Company
stock under that program. In 1995, options on 105,000 shares of Company stock
were granted to 17 optionees who were not named executive officers. Such
grants were made effective February 17, and August 4, 1995 at 100% of then
fair market value. In addition, an option on 50,000 shares of Company Stock
under the plan was granted on August 4, 1995 to Mr. Curtius, also at 100% of
then fair market value.
The Chief Executive Officer
Mr. Joseph's base compensation has not been increased since its approval at
the current level by the Board on August 3, 1990 and has been at substantially
the same level since 1985.
Additional compensation paid to Mr. Joseph in 1995 included director fees
and a bonus equivalent to one-half month's pay which is the level of bonus
awarded to all employees. In addition, a bonus based on 1995 underwriting
results was accrued in 1995 to be paid in 1996. This bonus was accrued under
the same formula used in determining the bonuses payable to executive officers
responsible for underwriting and claims. Mr. Joseph does not hold any options
under the Company's stock option plan.
The Company has experienced an increase of more than 400% in net premiums
written and an increase of more than 700% in net income from 1984 through
1995. Discussions of the Compensation Committee with Mr. Joseph in the past
have explored in depth the issue of the stability of Mr. Joseph's compensation
compared to the Company's performance. Because of Mr. Joseph's substantial
stock ownership in the Company, the success he has achieved as Chief Executive
Officer and chief operating officer responsible for the Company's overall
success has been reflected directly in the value of his equity in the Company.
In addition, as an overall matter of Company compensation policy, Mr. Joseph
has emphasized his strong view that the morale of employees of the Company at
every level and their performance is due in no small measure to the perception
of fairness of the overall salary structure reaching from the Company's top
executive to the lowest paid entry employee. Given these factors and
discussions, Mr. Joseph's base compensation was continued at the 1994 level in
1995.
Based on the above, Mr. Joseph's compensation, including additional
compensation and formula bonus accrual, will remain at its 1995 level in 1996.
The Compensation Committee has reviewed 1994 compensation of executives in
certain select California and comparable insurance companies as publicly
available in proxy statements. The Committee also reviewed a 1995 summary of
executive compensation practices in financial companies prepared by a branch
of the Company's auditors. Taking into account examination of this and related
information, the Compensation Committee believes that the level of Mr.
Joseph's compensation is, without taking into account his equity interest in
the Company, below the median for comparable companies.
Internal Revenue Code Section 162(m)
The Committee has considered the potential impact of Section 162(m) (the
"Section") of the Internal Revenue Code adopted under the federal Revenue
Reconciliation Act of 1933. The Section disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year
8
<PAGE>
for any of the named executive officers, other than compensation that is
performance-based. Since the targeted cash compensation of each of the named
executive officers is well below the $1 million threshold and the Company
believes that any options granted under the 1995 Stock Option Plan of Mercury
General Corporation will meet the requirement of being performance-based under
the provisions provided in the regulations under the Section, the Committee
concluded that the Section should not reduce the tax deductions available to
the Company and that no changes to the Company's compensation program were
needed in this regard.
February 2, 1996 The Compensation Committee
Donald R. Spuehler, Chairman
Bruce A. Bunner
Richard E. Grayson
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
shares of Common Stock of the Company (MRCY) for the last five years with the
cumulative total return on the Standard and Poor's 500 Index and a peer group
comprised of selected property and casualty insurance companies over the same
period (assuming the investment of $100 in the Company's Common Stock, the S&P
500 Index and the peer group on December 31, 1990 and the reinvestment of all
dividends).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG MERCURY GENERAL CORP., S&P 500 INDEX AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period MERCURY S&P
(Fiscal Year Covered) GENERAL 500 INDEX Peer Group
- - --------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/31/90 $100 $100 $100
FYE 12/31/91 $144.02 $130.48 $127.39
FYE 12/31/92 $268.44 $140.46 $163.52
FYE 12/31/93 $295.53 $154.62 $159.99
FYE 12/31/94 $290.13 $156.66 $153.75
FYE 12/31/95 $492.46 $215.54 $217.35
</TABLE>
9
<PAGE>
The peer group consists of those companies that are included in the
Property/Casualty Insurance Group in the Value Line Investment Survey: Ace
Limited, 20th Century Industries, AllState Corporation, American Financial
Group, Capsure Holdings, Chubb Corporation, Cincinnati Financial Corporation,
Fremont General Corporation, Frontier Insurance Group, GAINSCO, INC., GEICO
Corporation, General Re Corp., Hartford Steam Boiler Inspection and Insurance
Company, ITT Hartford, National Re Corp., Ohio Casualty Corp., Orion Capital
Corporation, Progressive Corporation of Ohio, SAFECO Corporation, Selective
Insurance Group, Inc., St. Paul Companies, Inc., Transatlantic Holdings, Inc.,
USF&G Corporation, and The W.R. Berkley Corp.
CERTAIN TRANSACTIONS
Ellen Joseph, the daughter of George and Gloria Joseph, is the beneficial
owner of Metro West Insurance Services, Inc., a California insurance agency
whose common stock is held in a trust for which George Joseph acts as trustee.
In 1995, the Company paid commissions to that agency in accordance with the
Company's standard agency contract of $454,607. Louise Toney, George Joseph's
sister, acts as manager for the agency and receives as compensation a portion
of those commissions.
Charles E. McClung, a director of the Company, is the principal shareholder
of McClung Insurance Agency, Inc. which has been an independent agent of the
Company since 1962. In 1995, the Company paid commissions to that agency of
$300,820.
Donald P. Newell, a director of the Company, is a partner of Latham &
Watkins, a law firm the Company retained to perform certain legal services in
1995 and 1996.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Company's financial statements for the year ended December 31, 1995 have
been examined by KPMG Peat Marwick LLP. Representatives of KPMG Peat Marwick
LLP are expected to be available at the meeting to respond to appropriate
questions and to make a statement if they desire to do so. The Company's Board
of Directors will select independent accountants for the current year sometime
after the meeting.
SECTION 16(A) REPORTING
Each director, executive officer of the Company, and person who owns more
than 10% of a registered class of the Company's equity securities is required
by Section 16(a) of the Securities Exchange Act of 1934 to report to the
Securities and Exchange Commission by a specified date his or her transactions
in the Company's securities. To the Company's knowledge, in 1995 all persons
required to comply with the applicable Section 16(a) filing requirements did
so. These statements are based solely on a review of the copies of such
reports furnished to the Company by its officers, directors and
securityholders and their written representations that such reports accurately
reflect all reportable transactions and holdings.
SHAREHOLDER PROPOSALS
Any proposal of a shareholder of the Company intended to be presented at the
next Annual Meeting of Shareholders of the Company must be received by the
Secretary of the Company not later than January 30, 1997 to be considered for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
OTHER MATTERS
The Company does not know of any business other than that described herein
which will be presented for consideration or action by the shareholders at the
meeting. If, however, any other business shall properly come before the
meeting, shares represented by proxies will be voted in accordance with the
best judgment of the persons named therein or their substitutes.
10
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders is being mailed with the Proxy
Statement to shareholders of record on April 19, 1996. Upon request the
Company will furnish the Annual Report to any shareholder.
BY ORDER OF THE BOARD OF DIRECTORS,
Judy A. Walters, Secretary
Los Angeles, California
April 26, 1996
11
<PAGE>
MERCURY GENERAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 29, 1996
The undersigned Shareholder(s) of MERCURY GENERAL CORPORATION (the "Company")
hereby constitutes and appoints George Joseph, Charles E. McClung and Donald P.
Newell, and each of them, attorneys and proxies of the undersigned, each with
power of substitution, to attend, vote and act for the undersigned at the
Annual Meeting of Shareholders of the Company to be held on May 29, 1996, and
at any adjournment or postponement thereof, according to the number of shares
of Common Stock of the Company which the undersigned may be entitled to vote,
and with all the powers which the undersigned would possess if personally
present, as follows:
PROPOSAL 1. ELECTION OF DIRECTORS
[_] FOR all nominees [_] WITHHOLD
listed below (except AUTHORITY to vote
as marked to the for all nominees
contrary below) listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the box next to the nominee's name below.)
<TABLE>
<S> <C> <C> <C>
[_] George Joseph [_] Charles E. McClung [_] Gloria Joseph [_] Donald R. Spuehler
[_] Richard E. Grayson [_] Donald P. Newell [_] Bruce A. Bunner [_] Nathan Bessin
[_] Michael D. Curtius
</TABLE>
THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS OF ALL THE NOMINEES
SET FORTH IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT, UNLESS THE
CONTRARY IS INDICATED IN THE APPROPRIATE PLACE.
(Please sign and date on Reverse side)
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned revokes any prior proxy at such meeting and ratifies all that
said attorneys and proxies, or any of them, may lawfully do by virtue hereof.
Receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement is
hereby acknowledged.
Dated: _________________, 1996
______________________________
______________________________
______________________________
Signature(s) of Shareholders
(See Instructions Below)
Important: Please sign
exactly as your name appears
on the Company's Common Stock
Certificate. When signing as
Attorney, Executor,
Administrator, Trustee,
Guardian or otherwise, give
your full title as such. Each
joint tenant should sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MERCURY GENERAL
CORPORATION PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
