<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 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] No fee required
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(3) Filing Party:
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(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
Notice is hereby given that the Annual Meeting of Shareholders of MERCURY
GENERAL CORPORATION (the "Company") will be held at the Radisson Wilshire
Plaza Hotel, 3515 Wilshire Boulevard, Los Angeles, California on May 12, 1999
at 10:00 a.m., for the following purposes:
1. To elect nine directors for the ensuing year to serve until the next
Annual Meeting of Shareholders and until their successors are elected and
have qualified.
2. To consider and vote upon the recommendation of the Board of Directors
that KPMG LLP be appointed auditors of the Company for 1999.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 15, 1999 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,
/s/ Judy A. Walters
Judy A. Walters, Secretary
Los Angeles, California
March 29, 1999
<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 12, 1999, at the Radisson Wilshire Plaza Hotel, 3515 Wilshire
Boulevard, Los Angeles, California. This Proxy Statement was first mailed to
shareholders on or about March 29, 1999.
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 of
Directors' 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.
Shareholders of record at the close of business on March 15, 1999 will be
entitled to vote at the meeting. As of that date 54,684,438 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.
Abstentions and broker non-votes will have no effect on the outcome of the
election of directors.
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.
The affirmative vote of the majority of the shares present in person or
represented by proxy and entitled to vote at the meeting is required to
appoint the auditors. Abstentions will be considered shares entitled to vote
in the tabulation of votes cast on this proposal, and will have the same
effect as negative votes. Broker non-votes are not counted for any purpose in
determining whether a matter has been approved, and therefore will not have
the effect of a negative vote with respect to the appointment of the auditors.
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 15, 1999, 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. The Company believes that, except as otherwise noted, each
individual has sole investment and voting power with respect to the shares of
Common Stock indicated as beneficially owned by such individual.
<TABLE>
<CAPTION>
Amount and Percentage
Nature of of
Beneficial Outstanding
Name of Beneficial Owner Ownership(1) Shares
------------------------ ------------ -----------
<S> <C> <C>
George Joseph.............................. 18,857,696(2) (3) 34.4%
Director and Named Executive Officer
Gloria Joseph.............................. 9,161,600(2) (4) 16.7%
Director
Nicholas Company, Inc...................... 4,801,692(5) 8.8%
Michael D. Curtius......................... 102,238 *
Director and Named Executive Officer
Bruce E. Norman............................ 56,869(6) *
Named Executive Officer
Joanna Y. Moore............................ 23,054 *
Named Executive Officer
Kenneth G. Kitzmiller...................... 42,054 *
Named Executive Officer
Charles E. McClung......................... 27,500(7) *
Director
Donald P. Newell........................... 4,700(8) *
Director
Donald R. Spuehler......................... 2,114 *
Director
Nathan Bessin.............................. 7,500 *
Director
Bruce A. Bunner............................ 3,000(9) *
Director
Richard E. Grayson......................... 3,000 *
Director
All Executive Officer and Directors........ 28,405,709 51.8%
</TABLE>
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*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 15, 1999; Michael Curtius, 60,000; Joanna Moore, 19,475;
Bruce Norman, 12,000; Kenneth Kitzmiller, 30,000; all executive officers
and directors as a group, 131,475.
(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 5% of the then
outstanding shares of the Company's Common Stock.
2
<PAGE>
(3) George Joseph's business address is c/o Mercury General Corporation, 4484
Wilshire Boulevard, Los Angeles, California 90010.
(4) Gloria Joseph's business address is c/o Mercury General Corporation, 4484
Wilshire Boulevard, Los Angeles, California 90010. Includes 1,600 shares
held in trust for Gloria Joseph's daughter, Ellen Joseph.
(5) The address of Nicholas Company, Inc. is 700 Water Street, Milwaukee,
Wisconsin 53202. Includes 4,235,600 shares held by Nicholas Fund, Inc. and
400,000 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 January 25,
1999. According to the Schedule 13G, Nicholas Company, Inc. has sole or
shared voting power over no shares and sole dispositive power over
4,401,692 shares, Nicholas Fund, Inc. has sole voting power over 4,235,600
shares and Mr. Nicholas has sole voting and sole dispositive power over
400,000 shares.
(6) Does not include 17,940 shares held by Mr. Norman's wife, as to which Mr.
Norman disclaims ownership.
(7) 27,500 shares are held jointly with Mr. McClung's wife.
(8) Includes 4,200 shares owned by Donald P. Newell as custodian for the
benefit of his children.
(9) Includes 2,500 shares held jointly with Mr. Bunner's wife.
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 March 15, 1999.
<TABLE>
<CAPTION>
Position with the Director
Name Company Age Since
---- ----------------- --- --------
<C> <S> <C> <C>
George Joseph Chairman of the Board 77 1961(1)
and Chief Executive Officer
of the Company
Michael D. Curtius President and Chief Operating Officer 48 1996
and Director of the Company
Gloria Joseph Director 75 1961(1)
Donald P. Newell Director 61 1979(1)
Charles E. McClung Director 84 1961(1)
Donald R. Spuehler Director 64 1985
Nathan Bessin Director 73 1991
Bruce A. Bunner Director 65 1991
Richard E. Grayson Director 69 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.
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, Chief Executive Officer of the Company and Chairman of its
Board of Directors, has served in those capacities since 1961. He has more
than 45 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 and as a director of the Company since February
1996. 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 has been the president and principal shareholder of
McClung Insurance Agency, Inc., an insurance agency located in Montebello,
California, for more than five years.
Donald P. Newell has been a partner of the law firm of Latham & Watkins of
San Diego, California for more than five years. He is also a director of SCPIE
Holdings Inc., an insurance holding company.
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.
4
<PAGE>
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.
Bruce A. Bunner has been President of Financial Structures, Limited, a
Bermuda based insurance company and a subsidiary of Royal & SunAlliance Group
plc 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 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 and Health Insurance Company, a subsidiary of
Universal American Financial Corp, a publicly-held corporation, and a director
of Amwest Insurance Group, a publicly-held company.
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 1998, 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 $2,500 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 this Committee. The Audit Committee held two meetings in 1998. 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 this Committee. The Compensation Committee held three
meetings in 1998 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 and Senior
Executive Incentive Bonus 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
Name and Principal Position Year Salary Bonus Compensation(1)
- --------------------------- ---- ------- ------- ---------------
<S> <C> <C> <C> <C>
George Joseph 1998 511,250 676,876 24,383
Chairman and Chief Executive Officer 1997 492,000 560,500 39,066
1996 492,000 352,579 26,130
Michael D. Curtius 1998 350,440 785,500 29,383
President and Chief Operating Officer 1997 327,866 608,045 43,816
1996 308,750 345,204 30,630
Bruce E. Norman 1998 165,600 192,462 9,383
Senior Vice President--Marketing 1997 156,240 384,510 24,316
1996 148,800 255,259 6,863
Joanna Y. Moore 1998 164,732 327,142 9,383
Vice President and Chief Claims Officer 1997 156,300 256,725 24,316
1996 147,600 172,339 12,630
Kenneth G. Kitzmiller 1998 138,000 325,750 9,383
Vice President--Underwriting 1997 129,600 255,400 24,316
1996 120,000 155,000 12,630
</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 and Michael Curtius only, director fees. Those amounts,
expressed in the same order as above, for the named executive officers for
1998 are as follows: George Joseph--$2,307, $0, $2,076, $20,000; Michael
Curtius--$2,307, $5,000, $2,076, $20,000; Bruce Norman--$2,307, $5,000,
$2,076; Joanna Moore--$2,307, $5,000, $2,076; and Kenneth Kitzmiller--
$2,307, $5,000, $2,076.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Value Table
The Company has a stock option plan for key executives. The following table
sets forth information regarding the exercise of stock options during 1998 by
the named executive officers and the value of unexercised stock options as of
December 31, 1998. No stock options were granted to the named executive
officers in 1998.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1998 December 31, 1998
Shares Acquired Value ------------------------- ---------------------------- ---
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable(2)
---- --------------- ----------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Curtius...... 70,600 3,942,569 60,000 40,000 1,672,500 1,115,000
Bruce E. Norman......... -- -- 8,000 12,000 155,250 232,875
Joanna Y. Moore......... 6,525 217,158 19,475 8,000 549,406 223,000
Kenneth G. Kitzmiller... 2,000 67,118 26,000 12,000 672,750 232,875
</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, 1998, which was $43.8125
per share, and the exercise price of the options.
6
<PAGE>
George Joseph, the Chief Executive Officer and principal shareholder of the
Company, has not been granted options under the Company's plan.
Senior Executive Incentive Bonus Plan
The Company's Board of Directors adopted a Senior Executive Incentive Bonus
Plan ("Senior Plan") on March 23, 1998, which was approved by the Company's
shareholders at the Annual Meeting of Shareholders held on May 13, 1998,
pursuant to which designated executive officers of the Company are eligible to
receive bonus payments. The Senior Plan provides an incentive for senior
executives to perform superior work, ties the incentives of such executives to
those of the Company and its shareholders, and enables the Company to attract
and retain highly qualified senior executives. The Company believes that the
bonuses payable by the Company under the Senior Plan to its senior executives
will be fully deductible for federal income tax purposes. As discussed under
"Report of the Compensation Committee" below, George Joseph and Michael
Curtius are the only participants for 1999.
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. 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 President and
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 for calendar 1998, 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 1999.
The Compensation Committee approved an increase in base compensation for Mr.
Curtius as President effective June 1, 1998 and the payment of a special bonus
to be paid in early 1999. In addition Mr. Curtius was designated as a Covered
Executive under the Mercury General Corporation Senior Executive Incentive
Plan (the Senior Plan) adopted by the Board on March 23, 1998 and approved by
the shareholders of the corporation at its 1998 annual meeting. A bonus
formula was established by the Committee for Mr. Curtius under the Senior Plan
pursuant to which a bonus was accrued in 1998 to be paid after its calculation
in 1999.
At its meeting on May 29, 1998, the Committee put in place a policy of
determining salary increases for the President and Chief Executive Officer on
a calendar year basis, concurrent with the performance period under the Senior
Plan. Pursuant to this policy the Committee has approved an increase in base
compensation for Mr. Curtius effective January 1, 1999 and has established the
bonus formula for him as a Covered Executive under the Senior Plan
establishing a bonus to be accrued for 1999 and to be paid after its
calculation in 2000.
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.
7
<PAGE>
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 1998 and, with modification as determined by
the Chief Executive Officer, will be continued in 1999.
Salaries for executive officers are reviewed on a yearly basis. Salary
increases take into account the same factors used with respect to formula
bonuses--underwriting results and revenues and the successful attainment of
goals set by the Chief Executive Officer and the President. 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
the 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 Committee, is that
key officers and managers responsible for success of the Company should be
granted options in Company stock under that program. Nine optionees who were
not named executive officers were granted options in 1998 under the program on
44,000 shares of Company Stock. Grants were made on February 6, 1998 on 9,000
shares and such options were canceled in consideration of reissuance of grants
in an equal amount on August 7, 1998. The remaining grants were made on August
7, 1998 and November 6, 1998. One grant of 10,000 shares was made to an
executive officer on February 6, 1998 and such options were cancelled in
consideration of a grant of 10,000 shares on August 7, 1998. All grants were
made at 100% of fair market value on the date of grant.
The Chief Executive Officer
Prior to fiscal 1998, Mr. Joseph's base compensation had not been increased
since its approval at its then current level by the Board on August 3, 1990
and had been at substantially the same level since 1985. As stated to the
Board in last year's Compensation Committee Report, we committed to study the
issue. After study and discussions with management, the Committee approved an
increase for Mr. Joseph in base compensation effective June 1, 1998. In
addition, under the policy established for the President and the Chief
Executive Officer in May 1998 by the Committee, a further increase in base
compensation for Mr. Joseph was approved effective January 1, 1999.
Additional compensation paid to Mr. Joseph in 1998 included director fees
and a bonus equivalent to one-half month's pay which is the level of bonus
awarded to all employees. A bonus for 1998 was accrued for Mr. Joseph under
the Senior Plan pursuant to formula adopted by the Committee, the bonus to be
paid in 1999 after calculation. The Committee has established the bonus
formula for Mr. Joseph under the Senior Plan for a bonus to be accrued in 1999
and paid after calculation in 2000. Mr. Joseph does not hold any options under
the Company's stock option plan.
The Compensation Committee has reviewed 1997 compensation of executives in
certain selected California and comparable insurance companies as publicly
available in proxy statements. The Committee has also reviewed a 1998 summary
of executive compensation practices in financial companies prepared by a
branch of the Company's auditors and other published material relating to
compensation in the insurance and related industries. Taking into account this
and other information, the Compensation Committee believes that the level of
Mr. Joseph's compensation is entirely reasonable in view of compensation at
comparable companies.
8
<PAGE>
Internal Revenue Code 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 1993. The Section disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year for any of the named executive officers, other than
compensation that is performance-based under a plan approved by the
shareholders of the corporation. The Committee has concluded that the Senior
Plan and the 1995 Stock Option Plan of Mercury General Corporation meet the
requirements for a performance-based plan under the regulation interpreting
Internal Revenue Section 162(m). Since targeted compensation aside from
compensation under such plans is well below the $1 million threshold, the
Committee has 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 5, 1999 The Compensation Committee
Donald R. Spuehler, Chair
Bruce A. Bunner
Richard E. Grayson
9
<PAGE>
Performance Graph
The graph below compares the cumulative total shareholder return on the
shares of Common Stock of the Company (MCY) 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 January 1, 1994 and the reinvestment of all
dividends).
Comparative Five-Year Cumulative Total Returns
Mercury General Corp., S&P 500 Index and Peer Group Index
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period Mercury Customer Selected S&P
(Fiscal Year Covered) General Stock List Composite
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-12/31/1993 $100.00 $100.00 $100.00
FYE 12/30/1994 $ 98.17 $ 99.99 $101.32
FYE 12/29/1995 $166.63 $152.95 $139.40
FYE 12/31/1996 $187.04 $177.36 $171.41
FYE 12/31/1997 $399.51 $259.54 $228.59
FYE 12/31/1998 $321.41 $284.96 $293.92
</TABLE>
ASSUMES $100 INVESTED ON JAN. 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1998
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, Berkshire Hathaway, Chubb Corporation, Cincinnati Financial
Corporation, CNA Financial Corp., Fremont General Corporation, Frontier
Insurance Group, GAINSCO, INC., HCC Insurance Holdings, HSB Group Inc., Markel
Corp., NAC Re Corp., Ohio Casualty Corp., Old Republic International Corp.,
Orion Capital Corporation, Progressive Corporation, RLI Corp., SAFECO
Corporation, Selective Insurance Group, St. Paul Companies, Inc.,
Transatlantic Holdings, Vesta Insurance Group, and The W.R. Berkley Corp.
10
<PAGE>
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.
In 1998 the Company paid commissions to that agency in accordance with the
Company's standard agency contract of $500,029. 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 1998 the Company paid commissions to that agency of
$539,603.
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
1998 and 1999.
APPROVAL OF AUDITORS
Proposal 2 concerns the recommendation of the Audit Committee and the Board
of Directors that KPMG LLP be appointed auditors for 1999, which is being
presented to the shareholders for approval. Representatives of KPMG LLP will
be present at the meeting, will be available to respond to questions and may
make a statement if they so desire.
The Board of Directors unanimously recommends that shareholders vote FOR the
appointment of KPMG LLP as auditors for 1999.
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 (the "SEC") by a specified date his or her
transactions in the Company's securities. Regulations promulgated by the SEC
require the Company to disclose in this Proxy Statement any reporting
violations with respect to the 1998 fiscal year, which came to the Company's
attention based on a review of the applicable filings required by the SEC to
report such status as an officer or director or such changes in beneficial
ownership as submitted to the Company. Based solely on its review of such
forms received by it, Bruce Norman, Richard Glassman and Cooper Blanton have
made a late filing under Section 16(a). Mr. Norman filed a Form 4 on August
10, 1998 to report a disposition of shares of the Company's Common Stock held
by his spouse (for which he disclaims ownership) on March 17, 1998, which Form
4 should have been filed by April 10, 1998. Mr. Glassman engaged in a cashless
exercise for 4,000 shares in December 1998, which should have been reported on
a Form 4 by January 10, 1999. Mr. Glassman filed a Form 4 in March 1999 to
report this transaction. Mr. Blanton gifted 450 shares to his grandchildren in
June 1998, which should have been reported on a Form 4 by July 10, 1998. Mr.
Blanton filed a Form 4 in March 1999 to report this transaction.
SHAREHOLDER PROPOSALS
Any proposal of a shareholder of the Company intended to be presented at the
next Annual Meeting of Shareholders of the Company pursuant to Rule 14a-8 of
the Proxy Rules of the SEC must be received by the Secretary of the Company
not later than November 30, 1999, and any proposal of a shareholder submitted
outside the processes of Rule 14a-8 must be received by the Secretary of the
Company not later than February 12, 2000, to be considered for inclusion in
the Company's proxy statement and form of proxy relating to that meeting.
11
<PAGE>
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.
ANNUAL REPORTS
Copies of the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission are available, without charge, upon written or faxed
request to: Gabriel Tirador, Chief Financial Officer, Mercury General
Corporation, 4484 Wilshire Boulevard, Los Angeles, California 90010 (fax:
(323) 857-7116).
The Company's Annual Report to Shareholders is being mailed with the Proxy
Statement to shareholders of record on March 15, 1999. Upon request the
Company will furnish the Annual Report to any shareholder.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Judy A. Walters
Judy A. Walters, Secretary
Los Angeles, California
March 29, 1999
12
<PAGE>
MERCURY GENERAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 12, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MERCURY GENERAL CORPORATION
The undersigned Shareholder(s) of MERCURY GENERAL CORPORATION (the
"Company") hereby constitutes and appoints George Joseph, Charles E. McClung and
Michael D. Curtius, and each of them, attorneys and proxies of the undersigned,
each with full 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 12, 1999, 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 indicated on the reverse side.
The proxies are directed to vote as specified on the reverse side. Except
as specified to the contrary on the reverse side, the shares represented by this
proxy will be voted FOR all nominees listed and FOR Proposal 2.
The undersigned revokes any prior proxy at such meeting and ratifies all
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.
(Please sign and date on reverse side)
MERCURY GENERAL CORPORATION
P.O. BOX 11215
NEW YORK, N.Y 10203-0215
<PAGE>
[LOGO OF MERCURY GENERAL CORPORATION APPEARS HERE]
Mercury General Corporation
4484 Wilshire Boulevard . Los Angeles, California 90010
- ---------------------------------------------------------
Detach Proxy Card Here
V V
- --------------------------------------------------------------------------------
[_]
PROPOSAL 1. ELECTION OF FOR all nominees [_] WITHHOLD AUTHORITY to vote [_]
DIRECTORS listed below. for all nominees listed below.
*EXCEPTIONS [_]
Nominees: George Joseph, Charles E. McClung, Gloria Joseph, Donald R. Spuehler,
Richard E. Grayson, Donald P. Newell, Bruce A. Bunner, Nathan Bessin,
Michael D. Curtius
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions
---------------------------------------------------------------------
PROPOSAL 2. To approve KPMG LLP as auditors In their discretion, the proxies
for the year 1999. are authorized to vote upon such
other business as may properly
come before the meeting.
FOR [_] AGAINST [_] ABSTAIN [_]
Change of Address and/
or Comments Mark Here
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.
Dated:__________________________, 1999
______________________________________
Signature of Shareholder
|
|
_____| ______________________________________
Signature of Shareholder
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Votes must be indicated
(x) in Black or Blue ink. X
Please Detach Here
You Must Detach This Portion of the Proxy Card
V Before Returning it in the Enclosed Envelope V
<PAGE>
MERCURY GENERAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 12, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MERCURY GENERAL CORPORATION
The undersigned Shareholder(s) of MERCURY GENERAL CORPORATION (the
"Company") hereby constitutes and appoints George Joseph, Charles E. McClung and
Michael D. Curtius, and each of them, attorneys and proxies of the undersigned,
each with full 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 12, 1999, 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 indicated on the reverse side.
The proxies are directed to vote as specified on the reverse side. Except
as specified to the contrary on the reverse side, the shares represented by this
proxy will be voted FOR all nominees listed and FOR Proposal 2.
ESOP Participants: As to those Common Shares that are held for the
undersigned in the Employee Stock Ownership Plan feature of the Company's Profit
Sharing Plan, I instruct the Trustee of such plan to sign a proxy for me and to
mark the proxy as I specify on the reverse side. If I do not so specify or
return the signed proxy, I understand that the Administrative Committee of such
plan will instruct the Trustee how to vote the shares. Your vote will be held in
the strictest confidence by BNY Western Trust Company, as Trustee for Mercury
General Corporation ESOP Plan.
The undersigned revokes any prior
proxy at such meeting and ratifies all
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 MERCURY GENERAL CORPORATION
hereby acknowledged. P.O. BOX 11379
NEW YORK, N.Y 10203-0379
(Please sign and date on reverse side)
<PAGE>
[LOGO OF MERCURY GENERAL CORPORATION APPEARS HERE]
Mercury General Corporation
4484 Wilshire Boulevard . Los Angeles, California 90010
- ---------------------------------------------------------
Detach Proxy Card Here
V V
- --------------------------------------------------------------------------------
[_]
PROPOSAL 1. ELECTION OF FOR all nominees [_] WITHHOLD AUTHORITY to vote [_]
DIRECTORS listed below. for all nominees listed below.
*EXCEPTIONS [_]
Nominees: George Joseph, Charles E. McClung, Gloria Joseph, Donald R. Spuehler,
Richard E. Grayson, Donald P. Newell, Bruce A. Bunner, Nathan Bessin,
Michael D. Curtius
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions
---------------------------------------------------------------------
PROPOSAL 2. To approve KPMG LLP as auditors In their discretion, the proxies
for the year 1999. are authorized to vote upon such
other business as may properly
come before the meeting.
FOR [_] AGAINST [_] ABSTAIN [_]
Change of Address and/
or Comments Mark Here
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.
Dated:__________________________, 1999
______________________________________
Signature of Shareholder
|
|
_____| ______________________________________
Signature of Shareholder
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Votes must be indicated
(x) in Black or Blue ink. [X]
Please Detach Here
You Must Detach This Portion of the Proxy Card
V Before Returning it in the Enclosed Envelope V
