<PAGE>
1
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
ALLIED Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-ll(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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2
ALLIED Logo
ALLIED Group, Inc.
701 Fifth Avenue
Des Moines, Iowa 50391-2000
March 29, 1996
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders, which will be
held at 9:00 a.m., Central time, on Wednesday, May 1, 1996 at ALLIED Group,
Inc.'s offices at 701 Fifth Avenue, Des Moines, Iowa. The matters expected to be
acted on at the meeting are described in detail in the attached Notice of the
Annual Meeting and the Proxy Statement.
At this year's meeting, I will review the Company's results of operations
for 1995 and our plans for 1996 and beyond. Members of the Board of Directors,
officers of the Company, and representatives of our independent auditors, KPMG
Peat Marwick LLP, will be available to answer your questions.
If you will be unable to attend this meeting, I ask you to complete the
enclosed proxy and return it promptly. A pre-addressed, postage-paid envelope is
enclosed. You may withdraw your proxy in writing at any time prior to the
meeting by delivering a new proxy. If your schedule changes, you may revoke your
proxy and vote your shares in person at the meeting.
John E. Evans
/s/ John E. Evans
Chairman of the Board
<PAGE>
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ALLIED GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of ALLIED Group, Inc.:
The Annual Meeting of Stockholders of ALLIED Group, Inc. will be held on
Wednesday, May 1, 1996, beginning at 9:00 a.m., Central time, at the Company's
offices at 701 Fifth Avenue, Des Moines, Iowa for the following purposes, all as
set forth in the accompanying Proxy Statement:
1. The election of three directors to serve for a three-year period until
the 1999 Annual Meeting of Stockholders as set forth in the
accompanying Proxy Statement.
2. To act upon such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the 20th day of March, 1996, as the date
of record for determination of stockholders entitled to notice of and to vote at
the meeting and any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE ENCOURAGED
TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IMMEDIATELY. AN ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED FOR THIS PURPOSE.
YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON SHOULD YOU ATTEND THE MEETING.
By order of the Board of Directors
George T. Oleson
Secretary
701 Fifth Avenue
Des Moines, Iowa 50391-2000
March 29, 1996
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4
ALLIED GROUP, INC.
701 Fifth Avenue
Des Moines, Iowa 50391-2000
PROXY STATEMENT
1996 Annual Meeting of Stockholders
May 1, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of ALLIED Group, Inc. ("Company") of proxies from the
holders of the Company's stock for use at the Annual Meeting of Stockholders
("Annual Meeting") to be held on May 1, 1996 and at any adjournment thereof.
Proxy cards properly executed and received by the Company prior to the time of
the Annual Meeting will be voted as directed. A stockholder voting by means of a
proxy card has the power to revoke it at any time before the Annual Meeting by
giving written notice of the revocation thereof to the Secretary of the Company,
by filing with the Secretary another later dated proxy, or by attending the
meeting and voting in person. The Annual Report to Stockholders for the fiscal
year ended December 31, 1995 is enclosed. This Proxy Statement and the
accompanying form of proxy were first sent to stockholders on or about March 29,
1996.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
Stockholders of record at the close of business on March 20, 1996 will
be entitled to vote at the meeting. As of that date, the outstanding securities
of the Company consisted of 13,949,690 shares of no par common stock ("Common
Stock") and 1,827,222 shares of no par 6-3/4% Series Preferred Stock ("6-3/4%
Preferred"). Each share of Common Stock is entitled to one vote on each matter
submitted at the meeting. The 6-3/4% Preferred is entitled to one and one-half
votes for every share outstanding on each matter submitted at the meeting. The
Common Stock and 6-3/4% Preferred (collectively, the "Stock") will vote together
on all matters contained in this Proxy Statement as one class. A majority of the
outstanding shares will constitute a quorum for the transaction of business at
the Annual Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence of a quorum. A proposal will be adopted or a director
will be elected if the votes cast for the proposal or for the director equal a
majority of the shares which are both represented at the meeting and entitled to
vote on the subject matter. Abstentions are counted in tabulations of the votes
cast on proposals presented to the stockholders, whereas broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
As of March 20, 1996, the following are the only stockholders known to
management who may be deemed to beneficially own more than 5% of any class of
the Company's voting securities:
<TABLE>
<CAPTION>
Percent of
Name and Address Amount and Nature Percent Total Voting
Title of Class of Beneficial Owner of Beneficial Ownership of Class Securities
- ---------------------- ------------------------------- ----------------------- -------- ------------
<S> <C> <C> <C> <C>
6-3/4% Preferred Stock ALLIED Mutual 1,827,222 shares 100% 16.4% (2)
Insurance Company (1)
701 Fifth Avenue
Des Moines, IA 50391-2000
Common Stock State Street Bank and 4,402,797 shares (3) 31.6% 26.4%
Trust Company, Trustee
of The ALLIED Group
Employee Stock
Ownership Trust
200 Newport Avenue
North Quincy, MA 02171
Franklin Resources, Inc. 749,600 shares (4) 5.4% 4.5%
777 Mariners Island Blvd.
San Mateo, CA 94401
</TABLE>
<PAGE>
5
(1) The Company and ALLIED Mutual Insurance Company ("ALLIED Mutual") are
parties to a Stock Rights Agreement which expires in 2005. Under the Stock
Rights Agreement, ALLIED Mutual is entitled to nominate and the Company is
required to use its best efforts to cause the election or retention of a
number of members of the Company's Board of Directors in proportion to
ALLIED Mutual's percentage ownership of the total number of shares of the
Company's voting stock outstanding at the time of nomination. In addition,
the Company is required to elect to its Executive Committee at least one
Company director who has been nominated by ALLIED Mutual but who is not an
officer or employee of ALLIED Mutual, and the Company must limit the number
of directors serving on the Executive Committee to five at any time. The
Stock Rights Agreement restricts the ability of ALLIED Mutual to grant
proxies to other than affiliated individuals and to solicit other
stockholders of the Company. ALLIED Mutual also is prohibited from
initiating or accepting a tender offer for shares of the Common Stock
except under certain conditions. ALLIED Mutual has incidental registration
rights and three demand registration rights with respect to the 6-3/4%
Preferred. For a further description of the relationship between ALLIED
Mutual and the Company, see "Certain Transactions and Relationships."
(2) The 6-3/4% Preferred is voting stock so long as it is held by ALLIED
Mutual. The percent of total voting securities includes 262,151 shares of
Common Stock with respect to which ALLIED Mutual has voting and investment
power pursuant to the ALLIED Mutual Insurance Company Excess Benefit Plan
Trust.
(3) Shares reported as owned by the ESOP Trustee are also reported as
beneficially owned by the executive officers. Allocated shares are voted by
the ESOP Trustee in accordance with the direction of the ESOP participants.
Generally, unallocated shares and allocated shares as to which no direction
is made by the participants are voted by the ESOP Trustee in the same
percentage as the allocated shares as to which directions are received by
the ESOP Trustee. Prior to March 7, 1996, these shares were held in the
form of ESOP Convertible Preferred Stock. On March 7, 1996, the ESOP
Trustee converted the ESOP Convertible Preferred Stock to Common Stock.
Prior to conversion, the Company and the ESOP Trustee entered into an
Agreement, whereby the Company agreed to release additional shares of
Common Stock held by the ESOP Trustee in the event the Company pays a
dividend on the Common Stock of less than $0.20 per share per quarter. The
Agreement is in effect from March 7, 1996 through March 7, 2000. The
purpose of the Agreement is to ensure that the allocated shares in the ESOP
Trust receive at least the same amount of dividends that would have been
paid on the ESOP Convertible Preferred Stock but for its conversion to
Common Stock.
(4) Franklin Resources, Inc., an investment adviser, filed a Schedule 13G with
the Securities and Exchange Commission ("SEC") on February 12, 1996
indicating the sole power to vote 725,200 shares and the shared power to
dispose of 749,600 shares of Common Stock, beneficially owned as of
December 31, 1995. Charles B. Johnson and Rupert H. Johnson, Jr. (principal
shareholders of Franklin Resources, Inc.) also filed a Schedule 13G
indicating beneficial ownership of 749,600 shares.
DIRECTORS AND EXECUTIVE OFFICERS
The Company presently has nine directors. The Company's bylaws provide for
a Board of Directors of not less than five nor more than thirteen members. The
exact number of directors within such limits is fixed by the Board of Directors.
The Board has set the current number of directors at nine. The terms of the
Board members are staggered with each member serving a three-year term.
Executive officers of the Company are elected annually by the Board of Directors
of the Company, and in some cases, by a subsidiary of the Company. Several
persons whose activities are significant to the business of the Company are
executive officers of the Company's subsidiaries. The Company's direct and
indirect subsidiaries are AMCO Insurance Company ("AMCO"), ALLIED Property and
Casualty Insurance Company ("ALLIED Property and Casualty"), Depositors
Insurance Company ("Depositors"), Western Heritage Insurance Company ("Western
Heritage"), ALLIED Group Information Systems, Inc. ("AGIS"), ALLIED Group
Mortgage Company ("ALLIED Mortgage"), ALLIED Group Leasing Corporation, ALLIED
General Agency Company, The Freedom Group, Inc., and Midwest Printing Services,
Ltd.
- --------------------------------------------------------------------------------
ITEM NO. 1--ELECTION OF THREE DIRECTORS UNTIL 1999
Three nominees for a three-year term ending 1999
At the 1996 Annual Meeting, the stockholders will elect three members of
the Board of Directors to serve until the 1999 Annual Meeting. Proxies received
by management in response to this solicitation will be voted for the election of
the three nominees listed below, unless otherwise instructed on the proxy card.
These nominees presently serve as members of the Board of Directors of the
Company. Pursuant to the Stock Rights Agreement, Mr. Evans was nominated by
ALLIED Mutual to serve as a Director of the Company, and the Company is required
to use its best efforts to cause his election. If you do not wish your shares to
be voted for a particular nominee, please so indicate as provided on the proxy
card.
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6
John E. Evans, age 68, is Chairman of the Board and a Director of the
Company. Mr. Evans served as President of the Company from 1974 to 1994 and has
served continuously as Chairman of the Board since 1975. He has been a Director
of the Company since 1972 and has served as a director of ALLIED Mutual since
1961. Mr. Evans also serves on the Board of Directors of other affiliates of the
Company, including ALLIED Life Financial Corporation (a subsidiary of ALLIED
Mutual). Mr. Evans is a brother of Harold S. Evans, a Director of the Company.
William E. Timmons, age 71, has been a Director of the Company since 1993.
Until his retirement in 1995, Mr. Timmons was a senior partner at Patterson,
Lorentzen, Duffield, Timmons, Irish, Becker & Ordway, a law firm in Des Moines,
Iowa, having been with the firm since 1967. Mr. Timmons served as General
Counsel to the Iowa Insurance Institute for 25 years and was Insurance
Commissioner of Iowa from 1959 to 1967. From 1964 to 1965, he was President of
the National Association of Insurance Commissioners ("NAIC"). Mr. Timmons is a
member of the Board of Regents of Loras College in Dubuque, Iowa and is a member
of the Board of Directors of Ag Hail Insurance Company, Iowa Liquid Asset Mutual
Fund, and Iowa Liquid Asset Tax Free Mutual Fund.
Donald S. Willis, age 68, has been a Director of the Company since 1974. He
is also a member of the Board of Directors of AMCO, ALLIED Property and
Casualty, and Depositors. Since 1962, Mr. Willis has been President of Willis &
Moore, Inc., a general insurance agency, having been employed there since 1948.
Required Stockholder Vote
The affirmative vote of the holders of at least a majority of the shares of
Stock of the Company represented at the Annual Meeting is required for approval
of this proposal.
The Board of Directors of the Company recommends a vote FOR these nominees.
- --------------------------------------------------------------------------------
Current directors whose terms expire in 1997
Harold S. Carpenter, age 62, has been a Director of the Company since 1974
and is a member of the Board of Directors of AMCO, ALLIED Property and Casualty,
and Depositors. Mr. Carpenter has been Chairman of the Board and President of
George A. Rolfes Co., a privately-held manufacturer of agricultural equipment,
since 1970. He also serves as Chairman of the Board and President of Superior
Gas and Chemical, Inc.
Charles I. Colby, age 68, has been a Director of the Company since 1993.
Mr. Colby had been a Director of ALLIED Mutual from 1971 to 1993. Since 1984,
Mr. Colby has been Chairman of the Board of Colby Properties, which is in the
business of real estate development. Mr. Colby is a member of the Board of
Directors of West Des Moines State Bank.
Harold S. Evans, age 63, has been a Director of the Company since 1974 and
of ALLIED Mutual since 1965. Mr. Evans also serves on the Board of Directors of
AMCO, ALLIED Property and Casualty, Depositors, and ALLIED Life Financial
Corporation. He was employed by Aluminum Company of America beginning in 1955,
serving as Group Vice President-International until his retirement in 1989. Mr.
Evans is a brother of John E. Evans, Chairman of the Board and a Director of the
Company.
Current directors whose terms expire in 1998
James W. Callison, age 69, has been a Director of the Company since 1974
and a member of the Board of Directors of ALLIED Mutual since 1972. He is also a
member of the Board of Directors of AMCO, ALLIED Property and Casualty,
Depositors, and ALLIED Life Financial Corporation. Mr. Callison has been
employed by Midwest Wheel Companies since 1948, serving as President since 1970.
Richard O. Jacobson, age 59, has been a Director of the Company since 1994.
He has been President and Chief Executive Officer of Jacobson Warehouse Company
since 1968. Mr. Jacobson is a member of the Board of Directors of Advanced
Oxygen Technologies, Inc., AlaTenn Resources, Inc., FelCor Suite Hotels, Inc.,
Firstar Corporation of Iowa, and Heartland Express, Inc.
John P. Taylor, age 49, has been a Director of the Company since 1992. He
is Chairman and Chief Executive Officer of Taylor Ball (formerly known as
Ringland-Johnson-Crowley Co.), having been employed there since 1972. Taylor
Ball is a general contractor in the business of commercial construction and
construction management. Mr. Taylor is a member of the Board of Directors of
Firstar Bank and Casey's General Store.
<PAGE>
7
Meetings and Committees of the Board of Directors
During 1995, there were five meetings of the Board of Directors. All
directors attended more than seventy-five percent of the aggregate committee and
Board meetings during 1995.
The Board has established Executive, Audit, Investment, Compensation, and
Coordinating Committees. The Company does not have a standing nominating
committee, and the functions that are normally performed by such a committee are
carried out by the Executive Committee. The Executive Committee will consider
nominees recommended by stockholders. Such recommendations for nominees for
election at the 1997 Annual Meeting should be submitted in writing to the
Executive Committee in care of the Secretary of the Company, 701 Fifth Avenue,
Des Moines, Iowa 50391-2000, no later than November 29, 1996.
The Executive Committee members are John E. Evans, James W. Callison, and
Harold S. Evans. The Executive Committee has the authority, with certain
exceptions, to exercise the powers of the full Board of Directors. The Board of
Directors reviews and approves the minutes of all meetings of the Executive
Committee. The Executive Committee met six times in 1995.
The Audit Committee members in 1995 consisted of outside directors John P.
Taylor and Donald S. Willis. The Committee selects and retains the Company's
independent certified public accountants and approves the staffing and budgets
of the Company's internal audit department. Both the internal auditors and the
independent certified public accountants periodically meet with the Audit
Committee and have access to the members of the Committee. The Audit Committee
met two times in 1995. C. Fred Morgan, a member of the ALLIED Mutual Board of
Directors, sits as a nonvoting representative of ALLIED Mutual on the Audit
Committee.
The Investment Committee is a committee authorized to direct and approve
investment activities of the Company. The members of the Investment Committee
are John E. Evans, Harold S. Evans, James W. Callison, and Charles I. Colby. The
Investment Committee met 14 times in 1995.
The Compensation Committee of the Board has the authority to establish all
compensation and benefits for all of the executive officers and employees of the
Company and its subsidiaries. The members of the Compensation Committee, Harold
S. Evans, James W. Callison, and Charles I. Colby, met five times in 1995.
The Coordinating Committee is a committee responsible for matters involving
actual or potential conflicts of interest, if and when they arise, between the
Company, ALLIED Mutual, and ALLIED Life Financial Corporation. The Company's
members of the committee, Donald S. Willis and Harold S. Carpenter, are outside
directors of the Company who are not members of the Board of Directors of ALLIED
Mutual or ALLIED Life Financial Corporation. The Coordinating Committee did not
meet in 1995.
Compensation of the Members of the Board of Directors and the Director Purchase
Plan
Directors who are not officers or employees of the Company received an
annual retainer in 1995 of $20,000 plus expenses incurred in attending Board
meetings. Directors were also paid $750 per Board meeting and $600 per committee
meeting. Directors who are executive officers of the Company do not receive any
fees in addition to their remuneration as officers. The annual retainer is split
among the Company, ALLIED Mutual, and ALLIED Life Financial Corporation for
James W. Callison, Harold S. Evans, and John E. Evans (each of whom are also
directors of ALLIED Mutual and ALLIED Life Financial Corporation), and many of
the meeting fees are also split for these three individuals in the event the
companies have meetings on the same day. In addition, Donald S. Willis receives
from the Company $600 per committee meeting for sitting as a Company
representative and nonvoting member of the ALLIED Mutual Contributions
Committee.
The Company's directors who are not employees or officers of the Company
may elect to receive all or a portion of their director fees in the form of
Common Stock obtained under the ALLIED Group, Inc. Outside Director Stock
Purchase Plan ("Director Purchase Plan"). Under the Director Purchase Plan, a
participant may not purchase Common Stock with a fair market value of more than
$25,000 per calendar year. The price per share paid to the Company is 100% of
the fair market value of shares of Common Stock. The director fees that are
withheld are applied to 85% of the price per share, with the remainder being
paid proportionally by the Company, its subsidiaries, ALLIED Mutual, and/or the
subsidiaries of ALLIED Mutual to whom the participant's director fees are
allocated. A participant may not dispose of the Common Stock purchased under the
Director Purchase Plan for a period of one year from the purchase date. An
Administrative Committee composed of employee directors of the Company
administers the Director Purchase Plan. During 1995, the following directors
<PAGE>
8
participated in the Director Purchase Plan purchasing the number of shares and
receiving the dollar value of discount for all shares purchased as indicated:
Harold S. Carpenter, 788 shares, $3,747; Harold S. Evans, 800 shares, $3,748;
John E. Evans, 642 shares, $3,419; Richard O. Jacobson, 788 shares, $3,747; John
P. Taylor, 793 shares, $3,746; William E. Timmons, 268 shares, $1,293; and
Donald S. Willis, 118 shares, $564.
In December 1994, John E. Evans entered into a Consulting Agreement with
the Company, ALLIED Mutual, and ALLIED Life Financial Corporation whereby Mr.
Evans would perform certain consulting services for the companies subsequent to
his retirement on December 31, 1994. The Consulting Agreement became effective
January 1, 1995 and terminates December 31, 1996, unless renewed annually
thereafter by mutual agreement of the parties. Mr. Evans is to be paid an annual
fee of $250,000 which is to be prorated among the Company, ALLIED Mutual, and
ALLIED Life Financial Corporation. ALLIED Mutual agreed to nominate Mr. Evans
for re-election to the Board of Directors of the Company in accordance with
ALLIED Mutual's nomination rights under the Stock Rights Agreement between
ALLIED Mutual and the Company. Subsequent to his December 31, 1994 retirement,
Mr. Evans was paid in 1995 $258,373 under the Short Term Management Incentive
Compensation Plan for compensation earned in 1994, $118,800 under the Long-term
Management Incentive Compensation Plan for compensation earned for the period
1992-1994, $88,462 in accumulated vacation, and $72,656 in cash dividends on the
ESOP shares purchased with funds transferred from the terminated retirement
plan. Mr. Evans exercised stock options for Company stock in 1995 realizing
income in the amount of $1,911,554.
Executive Officers
The following are the executive officers of the Company and its
subsidiaries.
Douglas L. Andersen, age 55, has been President (Property-casualty) of the
Company since December 1994. Since 1993, Mr. Andersen has served as President of
ALLIED Mutual, AMCO, ALLIED Property and Casualty, and Depositors. He had been
Vice President of Marketing of such companies since 1981.
Jamie H. Shaffer, age 52, has been President (Financial) of the Company
since December 1994. Since 1978, Mr. Shaffer has served as Treasurer of the
Company and ALLIED Mutual. He was elected Vice President of ALLIED Mutual in
1994 and serves as Treasurer and Vice President for AMCO, ALLIED Property and
Casualty, and Depositors. Mr. Shaffer joined ALLIED Mutual in 1971.
Stephen S. Rasmussen, age 43, has been Senior Vice President of the Company
since 1995. He serves in a similar capacity in each of ALLIED Mutual, AMCO,
ALLIED Property and Casualty, and Depositors. Mr. Rasmussen had previously been
Vice President of Underwriting of ALLIED Mutual, AMCO, ALLIED Property and
Casualty, and Depositors since 1986. He has been employed by ALLIED Mutual since
1974 holding a variety of underwriting and managerial positions.
Bob O. Myers, age 54, has been a Vice President of the Company since 1983
and Vice President of ALLIED Mutual since 1976. He serves in a similar capacity
in each of AMCO, ALLIED Property and Casualty, and Depositors. Mr. Myers was
President of AGIS from 1986 to March 1996.
Charles H. McDonald, age 57, has been Vice President of the Company since
1990 and was named Vice President of Communications in 1994 for ALLIED Mutual,
AMCO, ALLIED Property and Casualty, and Depositors. He had been Vice President
of Human Resources from 1979 to 1994. His employment in personnel and employee
relations commenced with ALLIED Mutual in 1973.
Marla J. Franklin, age 49, has been Vice President of the Company and Vice
President of Human Resources of ALLIED Mutual, AMCO, ALLIED Property and
Casualty, and Depositors since 1994. Previously, Ms. Franklin was Assistant Vice
President of Human Resources having been with ALLIED since 1973.
George T. Oleson, age 48, has been Secretary of the Company, ALLIED Mutual,
AMCO, ALLIED Property and Casualty, and Depositors since 1993. Previously, Mr.
Oleson was the Assistant Secretary of such companies since 1987 and Assistant
Vice President of such companies since 1980. He also serves as Corporate Counsel
for the Company and its affiliates.
Steven P. Larsen, age 39, has been Vice President of Claims of ALLIED
Mutual, AMCO, ALLIED Property and Casualty, and Depositors since 1993. Mr.
Larsen joined ALLIED in 1991 as Assistant Vice President-Claims Legal.
Previously, he was employed by United Services Automobile Association as Claims
Counsel since 1985.
<PAGE>
9
Edward E. Sullivan, age 39, became Vice President of Marketing of ALLIED
Mutual, AMCO, ALLIED Property and Casualty, and Depositors in 1995. Mr. Sullivan
had been President of ALLIED Group Insurance Marketing Company since 1993.
Previously, he was operations manager of George Peterson Insurance in Santa
Rosa, California, and an account executive at Johnson & Higgins in San Diego,
California. From 1987 to 1992, Mr. Sullivan was a branch manager with Maryland
Casualty in San Diego, California.
W. Kim Austen, age 41, has been Regional Vice President for the regional
office in Des Moines, Iowa since 1994 for ALLIED Mutual, AMCO, ALLIED Property
and Casualty, and Depositors. He had previously been Regional Vice President for
the regional office in Lincoln, Nebraska since 1992, the Regional Vice President
of the regional office in Denver, Colorado since 1990, and underwriting manager
for the Des Moines, Regional Office since 1986.
Steve A. Biggi, age 49, has been Regional Vice President at the regional
office in Santa Rosa, California since 1981 for ALLIED Mutual, AMCO, ALLIED
Property and Casualty, and Depositors. He joined ALLIED Mutual in 1974.
James J. Hagenbucher, age 36, has been Regional Vice President for the
regional office in Denver, Colorado since 1992 for ALLIED Mutual, AMCO, ALLIED
Property and Casualty, and Depositors. Previously, he was a marketing manager
having been employed by the ALLIED companies since 1987.
Michael L. Pollard, age 44, has been Regional Vice President at the
regional office in Lincoln, Nebraska since 1994 for ALLIED Mutual, AMCO, ALLIED
Property and Casualty, and Depositors. He had previously been underwriting
manager in the Des Moines Regional Office since 1990 and underwriting manager in
the Lincoln Regional Office since 1986.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
As of March 8, 1996, the directors, the executive officers named in the
Summary Compensation Table, and the directors and executive officers as a group
beneficially owned shares of Common Stock as set forth below. The issued and
outstanding Common Stock and 6-3/4% Preferred as of March 8, 1996 were
13,948,805 shares and 1,827,222 shares, respectively.
<TABLE>
<CAPTION>
Amount and Nature of Percent Voting
Name of Beneficial Owner Beneficial Ownership (1) of Class (1) Percentage
------------------------ ------------------------ ------------ ----------
<S> <C> <C> <C>
John E. Evans 302,657 2.2% 1.8%
James W. Callison 11,373 * *
Harold S. Carpenter 29,160 (4) * *
Charles I. Colby 14,264 (5) * *
Harold S. Evans 20,742 (6) * *
Richard O. Jacobson 1,508 * *
John P. Taylor 8,893 * *
William E. Timmons 5,828 * *
Donald S. Willis 13,355 * *
Douglas L. Andersen 74,649 (2)(3) * *
Jamie H. Shaffer 73,669 (2)(3) * *
Stephen S. Rasmussen 37,027 (2)(3) * *
Bob O. Myers 55,826 (2)(3) * *
W. Kim Austen 17,855 (2)(3) * *
Steve A. Biggi 37,258 (2)(3) * *
------------------------
All directors and
executive officers
as a group (22 persons) 814,890 (2)(3) 5.8% 4.9%
</TABLE>
- -----------------
(1) Except as noted, all persons have sole voting and investment power with
respect to the shares reported; asterisks indicate ownership of less than
1%.
(2) Includes the following number of shares that are also reported as
beneficially owned by the ESOP Trustee: Mr. Andersen, 22,797 shares; Mr.
Shaffer, 23,431 shares; Mr. Rasmussen, 11,588 shares; Mr. Myers, 22,705
shares; Mr. Austen, 7,995 shares; Mr. Biggi, 4,564 shares; and all
executives as a group 154,030 shares. Allocated shares are voted by the
<PAGE>
10
ESOP Trustee in accordance with the direction of the ESOP participant.
Generally, unallocated shares and allocated shares as to which no direction
is made by the participant are voted by the ESOP Trustee in the same
percentage as the allocated shares as to which directions are received by
the ESOP Trustee.
(3) Includes the following number of shares which the following persons have
the right to acquire within 60 days of March 8, 1996 pursuant to stock
options granted under the ALLIED Group, Inc. Restated and Amended Stock
Option Plan, ALLIED Group Executive Equity Incentive Plan, and ALLIED
Group, Inc. Long-Term Management Incentive Plan: Mr. Andersen, 1,500
shares; Mr. Shaffer, 750 shares; Mr. Rasmussen, 750 shares; Mr. Myers, 750
shares; Mr. Austen, 5,500 shares; Mr. Biggi, 22,460 shares; and all
executive officers as a group, 44,585 shares.
(4) Includes 25,500 shares of Common Stock owned by Superior Gas and Chemical,
Inc.
(5) Includes 7,000 shares of Common Stock owned by Charles I. Colby & Ruth
Colby Trust #1, Ruth Colby Trust A, and Charles I. Colby and Ruth Colby
Family Trust, each of which Charles I. Colby is Trustee and Beneficiary.
(6) Includes 13,646 shares of Common Stock owned by the Bethany Foundation, a
nonprofit corporation, of which Harold S. Evans is President.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is responsible for establishing and administering the compensation
policies which govern annual compensation, stock ownership programs, and
employee benefit programs for the executive officers as well as other employees
of the Company and its subsidiaries.
Compensation Criteria
In making compensation determinations, the Committee considers and
endeavors to attain the following goals:
1) attract and retain highly qualified and motivated executive officers
and employees,
2) encourage and reward achievement of annual and long-term financial
goals and operating plans of the Company, and
3) encourage executive officers and employees to become stockholders with
interests aligned with those of other stockholders.
The Committee's policy with regard to the compensation of executive
officers is to meet the foregoing goals through a combination of base salary,
annual bonus, stock ownership, and other benefits with a particular focus on
encouraging executive officers to attain individual performance goals that are
designed to favorably impact overall Company performance.
Compensation Components
The basic components of compensation for executive officers, including
those individuals listed in the Summary Compensation Table, are in four areas:
Base Salary: The Committee sets salary ranges annually which are intended
to reflect the median level of base pay for comparable positions at companies of
similar size and complexity. The Committee reviews salary survey data provided
by independent survey consultants and information provided by the Standard and
Poor's property-casualty insurance segment. Based on the scope and
responsibility of the position in the survey compared to the scope and
responsibility of the position at the Company, the Committee determines whether
the officer's salary range should be set above or below the median level of the
industry. To determine the level of a specific salary within its range, the
Committee considers management input regarding the officer's length of service
in the position, experience, and management skills in handling short and long
range issues. In addition, the Committee reviews the officer's performance
during the prior year measured against predetermined corporate and individual
plans and objectives set by management.
Annual Bonus: The Committee believes that a significant portion of annual
cash compensation for the executive officers should be variable ("at risk") and
tied to the Company's financial results. The Short Term Management Incentive
Compensation Plan (the "Short Term Plan") is administered by the Committee which
annually establishes goals for profit and growth. Depending upon attainment of
Short Term Plan goals, executive officers may receive a bonus amount equal to
9-19% of base salary if the minimum profit goal is attained, and up to 36-75% of
base salary if both profit and growth goals are maximized. Profit is based on
consolidated net income or subsidiary net income as appropriate for measuring
the participant's overall contribution to the Company's success. Growth is
measured in net written premiums for the property-casualty companies (excluding
Western Heritage and crop-hail business).
<PAGE>
11
The profit and growth goals are established annually by the Committee.
Goals are set to significantly exceed expected profit and growth performance of
the industry. The potential total award is weighted toward profit: 75% of the
award may come from profit goal attainment and 25% from growth attainment. No
incentive for growth is given if the minimum profit target is not met. The
Committee may use its discretion to modify a portion of a participant's award,
either upward or downward, based on management's recommendation of the
participant's contribution to the achievement of goals.
Stock Ownership: The Committee believes that a fundamental goal of
executive compensation is to encourage and create opportunities for long-term
executive stock ownership. Stock ownership guidelines for officers were
established by the Committee in 1994. By the year 2004, the following ownership
levels of Company Common Stock should be attained by the executive officers:
<TABLE>
<CAPTION>
<S> <C>
President(s) 75,000 - 100,000 shares
Senior Vice Presidents 50,000 - 75,000 shares
Key Vice Presidents 35,000 - 50,000 shares
Other Officers 15,000 - 20,000 shares
</TABLE>
The Long-Term Management Incentive Plan (the "Long-Term Plan") provides for
the award of stock options (nonqualified and incentive stock options), stock
appreciation rights ("SARs"), and shares of restricted stock. The Committee
encourages ownership of Company stock through the grant of options to
participants in the Long-Term Plan. In determining who will participate and the
amount of awards, the Committee selects key management employees, and based on
their position, salary, and previous grants, the Committee determines the amount
of awards to be given to each participant. Generally, the amount increases with
the level of position. The Committee intends to make grants of options and SARs
on an annual basis and establish a vesting schedule at each grant date. The 1995
option and SAR grants vest in 25% increments on the second, third, fourth, and
fifth anniversary of the grant date. In 1995, a combination of 67,667 options
and SARs were awarded to 41 participants.
In 1995, 13,311 shares of restricted stock were awarded by the Committee
under the Long-Term Plan to satisfy the award which otherwise would have been
payable in cash under the Performance Unit Plan which was terminated in 1994.
The restricted stock will vest 25% each year in years 1997, 1998, 1999, and
2000. Restricted stock will be awarded by the Committee in 1996 to completely
satisfy all obligations under the Performance Unit Plan.
In 1995, the Committee granted 30,000 and 40,000 shares, respectively,
under the Restated and Amended Stock Option Plan and the Nonqualified Stock
Option Plan. The shares vest after three years at a rate of one-third each year.
Employee Benefits: The Company offers benefit plans such as vacation,
medical, life and disability insurance to executive officers on the same basis
as offered to all employees. In keeping with the Company's commitment to align
employee interests with those of stockholders, employees may acquire shares of
stock through the Employee Stock Purchase Plan ("ESPP") and the Employee Stock
Ownership Plan ("ESOP"). The ESPP allows employees to purchase stock at 85% of
its fair market value, and the ESOP is discussed in note 6 to the Summary
Compensation Table in this Proxy Statement. Executive officers are eligible for
these programs on the same basis as other employees.
Presidents' Compensation
Security rules require a discussion of the CEO compensation. Since the
Company does not have an elected CEO, this Report will focus on the compensation
of the President (Financial) and the President (Property-casualty) who act
jointly in a similar capacity. The compensation of Mr. Shaffer, President
(Financial), and Mr. Andersen, President (Property-casualty), includes the above
four components.
Mr. Andersen has been President (Property-casualty) since December 1994.
His base salary was set at that time based in part on his prior performance as
President of the affiliated insurance companies and in part on recognition of
his additional responsibilities. Under Mr. Andersen's leadership, the Company's
property-casualty subsidiaries outperformed the industry both in terms of
underwriting results and growth, and the Company is well positioned to sustain
that performance due to geographic diversification, growth of the agency force,
and a lower expense ratio. The growth of the insurance operations in 1995 was
approximately two-and-one-half times greater than the industry in 1995, and net
income was 10% higher than the prior year in spite of above average storm claims
in the year. In 1995, he earned an annual bonus equal to 41.8% of his base pay
for achieving insurance company goals. He also was entitled to receive an award
in the amount of $11,900 from the PUP based on exceeding goals set for the
1993-1995 performance period, which he received in the form of restricted stock.
In 1995, Mr. Andersen was granted 6,000 options and 1,000 SARs under the
Long-Term Plan as well as 10,000 options under the Restated and Amended Stock
Option Plan.
<PAGE>
12
Mr. Shaffer has been President (Financial) since December 1994, retaining
his prior title as Treasurer as well. His base salary was set in December 1994
based in part on market factors for his newly assigned responsibilities and on
his prior performance in assuring the corporation's financial strength allowing
for future growth. Mr. Shaffer earned an annual bonus as President in the amount
of $83,662 given the achievement of corporate goals. He also was entitled to
receive an award in the amount of $13,000 from the PUP based on exceeding goals
for the 1993-1995 performance period, which he received in the form of
restricted stock. Mr. Shaffer was granted 6,000 options and 1,000 SARs under the
Long-Term Plan as well as 20,000 options under the Restated and Amended Stock
Option Plan.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (the "Code") generally limits
to $1 million per individual per year the federal income tax deduction for
compensation paid by a publicly-held company to the company's chief executive
officer and its other four highest paid executive officers. Compensation that
qualifies as performance-based compensation for purposes of Section 162(m) is
not subject to the $1 million deduction limitation. Options and stock
appreciation rights granted under the Long-Term Plan satisfy the requirements
for performance-based compensation. The Committee presently does not intend to
seek to qualify other components of the Company's incentive compensation for
executive officers as performance-based compensation under Section 162(m) of the
Code, such as the Short Term Plan. However, the Committee currently does not
anticipate that any executive officer will be paid compensation from the Company
in excess of $1 million in any year (including amounts that do not qualify as
performance-based compensation under the Code), and accordingly, the Committee
anticipates that all amounts paid as executive compensation will be deductible
by the Company for federal income tax purposes.
COMPENSATION COMMITTEE
James W. Callison
Charles I. Colby
Harold S. Evans
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative stockholder return (assuming
reinvestment of dividends) to the holders of Common Stock, a broad equity market
index (Index for NASDAQ Stock Market), and a peer group index (Index for NASDAQ
Insurance Stocks), during the five-year period ended December 29, 1995. The
stock performance graph assumes $100 was invested on December 31, 1990. The
lines represent monthly index levels derived from compounded daily returns that
include all dividends. The indexes are reweighted daily, using the market
capitalization on the previous trading day. If the monthly interval (based on
the fiscal year end) is not a trading day, the preceding trading day is used.
[Graph]
<TABLE>
<CAPTION>
Symbol 12-31-90 12-31-91 12-31-92 12-31-93 12-30-94 12-29-95
------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Company 100.0 137.8 264.1 333.2 321.5 478.1
NASDAQ Stock Market (U.S. Companies) 100.0 160.6 186.9 214.5 209.7 296.3
NASDAQ Insurance Stocks 100.0 141.0 190.8 204.1 192.0 272.9
(SIC 6310-6319, 6330-6339,
U.S. and Foreign Companies)
</TABLE>
<PAGE>
13
COMPENSATION OF EXECUTIVE OFFICERS
All employees are directly employed by the Company. The Company leases
employees to all of its subsidiaries and to ALLIED Mutual and certain of its
subsidiaries. For the years indicated, the following table shows the
compensation paid to Douglas L. Andersen, President (Property-casualty), and
Jamie H. Shaffer, President (Financial), and the four most highly compensated
executive officers of the Company during 1995, for services rendered in all
capacities to the Company, its subsidiaries, and to ALLIED Mutual and its
subsidiaries.
<TABLE>
<CAPTION>
Summary Compensation Table
All Other Com-
Annual Compensation Long-Term Compensation pensation (6)
----------------------- --------------------------------------------- --------------
Awards Payouts
------------------------------ -----------
Restricted Securities
Stock Underlying LTIP
Name and Principal Position Year Salary (1) Bonus (2) Awards (3) Options/SARs (4) Payouts (5)
- ----------------------------------- ---- ---------- ---------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas L. Andersen 1995 $260,000 $108,754 $22,200 17,000 -0- $21,000
President (Property-casualty) 1994 224,155 134,291 -0- 7,000 $30,900 12,000
of Company and President 1993 154,500 77,173 -0- 20,000 24,119 18,927
of AMCO, ALLIED Property
and Casualty, Depositors,
and ALLIED Mutual
Jamie H. Shaffer 1995 $200,000 $ 83,662 $24,900 27,000 -0- $23,625
President (Financial) of 1994 163,846 78,000 -0- 3,500 $35,100 13,500
Company and Treasurer of 1993 152,077 58,000 -0- -0- 27,276 21,225
Company, AMCO, ALLIED
Property and Casualty,
Depositors, and
ALLIED Mutual
Stephen S. Rasmussen 1995 $158,000 $ 50,026 $19,700 14,667 -0- $23,625
Senior Vice President of 1994 137,654 62,000 -0- 3,500 $27,000 12,000
Company, AMCO, ALLIED 1993 127,246 50,000 -0- -0- 20,331 16,666
Property and Casualty,
Depositors, and ALLIED Mutual
Bob O. Myers 1995 $149,058 $ 42,644 $21,100 3,500 $41,333(7) $21,000
Vice President of Company, 1994 142,000 55,000 -0- 3,500 29,700 12,000
AMCO, ALLIED Property and 1993 134,000 67,152 -0- -0- 23,867 17,585
Casualty, Depositors, and
ALLIED Mutual
W. Kim Austen 1995 $146,923 $ 66,600 $13,600 2,500 -0- $21,000
Regional Vice President 1994 130,346 37,561 -0- 2,500 $19,200 12,000
of AMCO, ALLIED Property 1993 109,039 -0- -0- 15,000 13,512 11,875
and Casualty, Depositors,
and ALLIED Mutual
Steve A. Biggi 1995 $145,385 -0- $16,500 2,500 -0- $23,625
Regional Vice President 1994 133,250 $59,162 -0- 2,500 $23,100 12,000
of AMCO, ALLIED Property 1993 121,085 71,134 -0- -0- 18,058 16,648
and Casualty, Depositors,
and ALLIED Mutual
</TABLE>
(1) Includes amounts deferred at the election of the officer pursuant to the
Company's Savings and Investment Plan (401(k)).
(2) Amounts were earned in the year indicated but paid in the following year
under the ALLIED Group Short Term Management Incentive Compensation Plan.
<PAGE>
14
(3) Awards of restricted stock were made to satisfy obligations under the
Long-term Management Incentive Compensation Plan (also known as the
Performance Unit Plan) which was discontinued in 1994. For the three-year
performance period ending in 1994, shares of restricted stock were awarded
in 1995 to satisfy prorated cash awards to which the participants were
entitled. For the three-year performance period ending in 1995, shares of
restricted stock were awarded on March 1, 1996 (having a value of $11,900
for Mr. Andersen, $13,000 for Mr. Shaffer, $10,750 for Mr. Rasmussen,
$8,000 for Mr. Austen, and $9,000 for Mr. Biggi), and this satisfies the
Company's obligation under the terminated Performance Unit Plan. The
restricted stock will vest 25% on 3-1-97, 50% on 3-1-98, 75% on 3-1-99, and
100% on 3-1-2000. Dividends are paid on the restricted stock awarded to
participants. The number and value of the aggregate restricted stock
holdings at the end of 1995 are as follows (using a market value of $35.50
per share): Mr. Andersen, 811 shares, $28,791; Mr. Shaffer, 910 shares,
$32,305; Mr. Rasmussen, 720 shares, $25,560; Mr. Myers, 771 shares,
$27,371; Mr. Austen, 497 shares, $17,644; and Mr. Biggi, 603 shares,
$21,407.
(4) See "Option/SAR Grants in Last Fiscal Year" for a description of the terms
and conditions of the option and SAR grants.
(5) Amounts were paid in the year indicated. Payments were made pursuant to the
Long-term Management Incentive Compensation Plan (also known as the
Performance Unit Plan) which was discontinued in 1994.
(6) Amounts are deferred compensation and reflect contributions made by the
Company under The ALLIED Group Employee Stock Ownership Plan ("ESOP") which
is a defined contribution retirement plan covering all eligible Company
employees. The amount of employer contribution is based on a percentage of
annual pay (capped at $150,000) and calculated as follows: less than 6
years of service, 6% of pay; 6 years but less than 11 years, 7% of pay; 11
years but less than 21 years, 8% of pay; and for 21 years or more, 9% of
pay. In 1995, employees participating in the ESOP received an additional
one-time 75% increased stock allocation to their accounts. In 1995, Mr.
Shaffer and Mr. Rasmussen each received cash dividends on the ESOP shares
purchased with funds transferred from the terminated retirement plan, in
the amounts of $13,635 and $5,108, respectively.
(7) Mr. Myers was a participant in the ALLIED Group Information Systems, Inc.
Performance Unit Plan for years 1993 through 1995. This plan was terminated
in 1994, and the amount indicated was paid in 1995.
Option/SAR Grants in Last Fiscal Year
The following table summarizes certain information regarding options and
SARs granted during 1995 to the named executive officers.
<TABLE>
<CAPTION>
Individual Grants Potential
------------------------------------------------------------------------ Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
for Option Term (3)
Number of % of Total ----------------------
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Expiration
Name Granted Fiscal Year Price ($/Sh) Date 5%($) 10%($)
- ----------------------------- ---------------------------- ------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Douglas L. Andersen 6,000 options/1,000 SARs (1) 5.1% $27.625 3/31/2005 $22,721 $205,193
10,000 options (2) 7.3% $27.50 3/31/2005 $172,946 $438,279
Jamie H. Shaffer 6,000 options/1,000 SARs (1) 5.1% $27.625 3/31/2005 $22,721 $205,193
20,000 options (2) 14.5% $27.50 3/31/2005 $345,892 $876,558
Stephen S. Rasmussen 4,000 options/667 SARs (1) 3.4% $27.625 3/31/2005 $15,152 $136,810
10,000 options (2) 7.3% $27.50 3/31/2005 $172,946 $438,279
Bob O. Myers 3,000 options/500 SARs (1) 2.5% $27.625 3/31/2005 $11,361 $102,596
W. Kim Austen 2,000 options/500 SARs (1) 1.8% $27.625 3/31/2005 $8,115 $73,283
Steve A. Biggi 2,000 options/500 SARs (1) 1.8% $27.625 3/31/2005 $8,115 $73,283
</TABLE>
(1) These options and SARs will vest and become exercisable as follows: 25% as
of 3/31/97; 50% as of 3/31/98; 75% as of 3/31/99; and 100% as of 3/31/2000.
The options and SARs are independent of each other and were granted as
indexed options and indexed SARs. Accordingly, the exercise price will
increase over $27.625 per share at a rate of 8% per year, such increase to
commence two years from the date the option or SAR vests.
<PAGE>
15
(2) These options will vest and become exercisable as follows: 33 1/3% as of
3/31/98; 66 2/3% as of 3/31/99; and 100% as of 3/31/2000.
(3) These amounts represent assumed rates of stock price appreciation of 5% and
10% which are specified in applicable federal securities regulations. The
actual value, if any, an executive officer may realize depends on the
market value of the Common Stock at a future date. There is no assurance
that the value realized by an executive officer will be at or near the
values set forth in the table.
Aggregated Option/SAR Exercises In Last Fiscal Year And FY-End Option Values
The following table summarizes certain information regarding options
exercised during 1995 and presents the value of unexercised options and SARs
held at December 31, 1995.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY-End at FY-End (1)
Shares Acquired Exercisable (E)/ Exercisable (E)/
Name on Exercise Value Realized (1) Unexercisable (U) Unexercisable (U)
- --------------------- --------------- ------------------ ----------------------- -------------------------
<S> <C> <C> <C> <C>
Douglas L. Andersen -0- -0- 44,000 (U) $341,375(U)
Jamie H. Shaffer 18,345 $375,308 30,500 (U) $254,500(U)
Stephen S. Rasmussen 13,494 $348,032 18,167 (U) $156,127(U)
Bob O. Myers 14,021 $288,598 7,000 (U) $66,937(U)
W. Kim Austen 1,800 $47,400 20,000 (U) $171,562(U)
Steve A. Biggi -0- -0- 21,960 (E)/5,000 (U) $712,439 (E)/$47,812(U)
</TABLE>
(1) Values are calculated by determining the difference between the fair market
value of the Common Stock and the exercise price of the options and SARs on
the exercise date or at fiscal year end, as appropriate. The fair market
value (average of the high and low as reported on The Nasdaq Stock Market)
as of December 29, 1995 was $35.50 per share.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than 10% of
a registered class of the Company's equity securities file reports of ownership
and changes in ownership with the SEC. Officers, directors, and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based on a review of the reports, during
the fiscal year ended December 31, 1995, all Section 16(a) filing requirements
applicable to its officers, directors, and greater than 10% beneficial owners
were complied with, except that an initial Form 3 was filed late by the Charles
I. Colby and Ruth Colby Family Trust.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Intercompany Operating Agreement
The Company is party to an Intercompany Operating Agreement ("IOA")
with ALLIED Life Financial Corporation ("ALFC") and ALLIED Mutual and each of
their respective subsidiaries. The IOA extends through December 31, 2004 after
which it may be terminated on two years notice given after December 31, 2002 by
any party, and contains a change of control provision. In the event of a change
of control (whenever ownership of 50% or more of the voting stock of the Company
or ALFC is acquired by a nonaffiliated party) of the Company or ALFC, the other
party or ALLIED Mutual may (i) terminate it upon six months notice; (ii) extend
the term for up to ten additional years beyond 2004; or (iii) allow the IOA to
continue in effect without change. The IOA provides for the continued
availability of office space, marketing services, and computer and other
facilities generally as they have been provided among the affiliates in the
past. The Company leases to ALLIED Mutual the employees utilized in ALLIED
Mutual's operations (except ALFC's operations) for a fee and reimbursement of
personnel costs based on certain allocation methods. The Company is obligated to
provide the entire requirements for employees of ALLIED Mutual and its
subsidiaries (other than ALFC), but ALLIED Mutual reserves the right to hire
<PAGE>
16
employees independently rather than leasing them from the Company. The Company
has the right to determine the compensation and benefits of all leased
employees. However, if the Company wishes to adopt or amend any employee benefit
plan or program and pass on the increased costs thereof with respect to
employees leased by ALLIED Mutual, it must obtain the approval of ALLIED Mutual
(or a joint Compensation Committee consisting of directors of the Company and
ALLIED Mutual). The IOA contains a covenant not to compete that binds each of
the Company, ALFC, and ALLIED Mutual not to engage in a business that competes
with the products or markets of any other party or such party's subsidiaries for
the term of the IOA and five years thereafter. Any disputes regarding the use or
occupancy of facilities or the terms on which property is leased or used are to
be referred to the Coordinating Committee for resolution. Decisions of the
Coordinating Committee must be unanimous and are binding on the parties. If an
issue is not resolved by the Coordinating Committee, it will be submitted to
arbitration. In such arbitration, each party to the dispute selects one
arbitrator, and if such dispute involves only two parties, such arbitrators
select a third arbitrator.
During 1995, the Company received revenues of $2,489,390 for employees
leased to ALLIED Mutual and certain of ALLIED Mutual's subsidiaries,
substantially all of which represented cost reimbursement. The IOA also provides
for the leasing by ALLIED Mutual to the Company of substantially all of the
office space utilized by the Company and the provision of data processing
services by the Company to ALLIED Mutual. The Company paid to ALLIED Mutual rent
expense for office space of $4,159,415 for the year ended December 31, 1995.
ALLIED Mutual, the Company, and ALFC share agency forces as well as other
services and facilities.
Pooling Agreement
ALLIED Mutual and the Company's three property-casualty subsidiaries, AMCO,
ALLIED Property and Casualty, and Depositors, are parties to a reinsurance
pooling agreement in which the Company's subsidiaries in the aggregate were 64%
participants in 1995. The pooling agreement provides that ALLIED Mutual, ALLIED
Property and Casualty, and Depositors cede to AMCO (the pool administrator)
premiums, losses, allocated loss settlement expenses, commissions, premium
taxes, service charge income, and dividends to policyholders and assume from
AMCO an amount of the pooled property-casualty business equal to their
participation in the pooling agreement. The agreement provides that AMCO will
pay certain underwriting expenses, unallocated loss settlement expenses, and
premium collection expenses for all of the pool participants and receive a fee
equal to a specified percentage of premiums as well as a contingent fee based on
the attainment of certain combined ratios from each of the pool participants.
AMCO charges each of the other pool participants 12.85% of written premiums for
underwriting services, 7.25% of earned premiums for unallocated loss settlement
expenses, and 0.75% of earned premiums for premium collection services. During
1995, ALLIED Mutual paid AMCO $55,721,043 in pooling fees.
Management Information Services Agreement
The Company, ALLIED Mutual, ALFC, and other affiliated companies are
parties to a Management Information Services Agreement with ALLIED Group
Information Systems, Inc. ("AGIS"), a wholly-owned subsidiary of AMCO. Under the
terms of the Management Information Services Agreement, AGIS provides certain
computer services, printing, equipment leasing, and mail and communication
services to affiliates on a fee basis. The agreement terminates on December 31,
2004 and has an extension provision and a change of control provision similar to
that in the IOA described above. Any disputes under this agreement are to be
referred to the Coordinating Committee for resolution. Decisions of the
Coordinating Committee must be unanimous and are binding on the parties. If an
issue is not resolved by the Coordinating Committee, it will be submitted to
arbitration. In such arbitration, each party to the dispute selects a party
arbitrator (and if such dispute involves only two parties, such arbitrators
select a third arbitrator), provided that if there are more than three parties
to a dispute, each of ALLIED Mutual, ALFC, and the Company appoints an
arbitrator. Amounts paid to AGIS by ALLIED Mutual, ALFC, and their subsidiaries
under this agreement were $2,795,292 for the year 1995.
Joint Marketing Agreement
AMCO, ALLIED Property and Casualty, and Depositors are parties to the
ALLIED Group Joint Marketing Agreement ("JMA") with ALLIED Mutual and ALLIED
Life Insurance Company ("ALLIED Life"). The JMA requires ALLIED Mutual and the
Company's property-casualty subsidiaries to promote to their customers and
agents the sale of the products of ALLIED Life. The JMA provides for payment by
ALLIED Life to AMCO (as pool administrator for the property-casualty companies)
of an annual access fee of $100,000 plus an annual new production incentive fee
("NPIF"), calculated based on the percentage increase from the preceding year's
production credit premiums for ALLIED Life produced by the independent
property-casualty agencies representing ALLIED Mutual, AMCO, ALLIED Property and
Casualty, and Depositors ("ALLIED agencies"). The annual NPIF is not payable
unless production credit premiums increase by at least 10% over the prior year
and is capped at an increase of 25% over the prior year. For the year ended
<PAGE>
17
December 31, 1995, the fee incurred by ALLIED Life under the JMA totaled
$120,925. The JMA also provides for joint systems development, including joint
data bases of customers and agents, multiple account billing systems, marketing
plans and promotions, and other systems to be developed. Development costs are
to be allocated on a mutually agreeable basis reflecting projected and actual
utilization of the systems.
The JMA continues to the year 2008 and continues thereafter subject to
termination on two years notice given by any party. The JMA contains non-compete
provisions structured along product lines which are applicable during the term
of the JMA and for a period of ten years thereafter. Such non-compete provisions
prevent ALLIED Mutual and the property-casualty subsidiaries of the Company from
selling life insurance or annuities in the states where ALLIED Life now sells
these life products (or on termination of the JMA, any states where the life
insurance and annuity products are sold by ALLIED Life). ALLIED Mutual and the
property-casualty subsidiaries, which are not licensed to sell life insurance or
annuity products, do not operate in all the states in which ALLIED Life
operates. The JMA non-compete also prevents ALLIED Life from offering
property-casualty products in states in which ALLIED Mutual and the
property-casualty subsidiaries of the Company now operate. In the event of a
change of control of ALLIED Life or ALLIED Life Financial Corporation (whenever
ownership of 50% or more of the voting stock is acquired by a nonaffiliated
party), the Company, ALLIED Mutual, or any of the Company's property-casualty
subsidiaries may (i) terminate it upon six months notice; (ii) extend the term
for up to ten additional years beyond 2008; or (iii) allow the JMA to continue
in effect without change. Those three rights are also given to ALLIED Life or
ALLIED Life Financial Corporation in the event of a change of control of the
Company or any of its property-casualty subsidiaries. Disputes are to be
resolved by a Coordinating Committee made up of the two members of each of the
coordinating committees of the Company, ALFC, and ALLIED Mutual. Decisions of
the Coordinating Committee must be unanimous and are binding on the parties. If
the Coordinating Committee fails to resolve an issue, it would be submitted to
arbitration. In such arbitration, one arbitrator will be appointed jointly by
ALLIED Mutual and the Company's property-casualty subsidiaries and a second
arbitrator will be appointed by ALFC. Both arbitrators so selected will jointly
select a third arbitrator.
Other Arrangements and Transactions
The Company and ALLIED Mutual are parties to a Stock Rights Agreement,
which is described in note 2 to the table in "Voting Securities and Principal
Stockholders." The Company and John E. Evans, Chairman and a Director, are
parties to a Consulting Agreement which is described under "Compensation of the
Members of the Board of Directors and the Director Purchase Plan", and certain
payments made to Mr. Evans in 1995 are also described in that section.
The Company and its affiliates pool their excess cash into a short-term
investment fund pursuant to the Intercompany Cash Concentration Fund Agreement.
The fund, administered by AID Finance Services, Inc. (an affiliate of the
Company), also issues short-term loans (30 days or less) to affiliated companies
in accordance with the current intercompany borrowing policy. The Company and
its affiliates pay to AID Finance Services, Inc. a management fee (5 basis
points of invested assets) which is offset against investment income. At
December 31, 1995, $7,772,923 was invested in the fund by the Company and its
subsidiaries, which is carried as a short-term investment. Interest earned by
the Company and its subsidiaries from the fund during 1995 was $127,205.
ALLIED Group Insurance Marketing Company (a wholly-owned subsidiary of AID
Finance Services, Inc.) markets insurance products for Depositors on a
commission basis, and the Company's share of commissions paid to ALLIED Group
Insurance Marketing Company was $2,427,504 for the year ending December 31,
1995.
The Company paid premiums to ALLIED Life for term life insurance on the
Company's employee group in the amount of $417,582 in 1995.
The property-casualty subsidiaries of the Company paid premiums to ALLIED
Mutual in the amount of $2,330,000 in 1995 for ALLIED Mutual's participation in
a reinsurance agreement with American Re-Insurance Company.
On December 29, 1995, State Street Bank and Trust Company, as the ESOP
Trustee, purchased for the ESOP Trust 13,426 shares of Series D ESOP Preferred
from the Company for $725,000.
AMCO administers many of the bank accounts for the affiliated ALLIED
companies. During the fiscal year 1995, AMCO issued checks in payment of certain
transactions between affiliated ALLIED companies and the companies of certain
directors of the Company. During 1995, ALLIED Mutual, as owner of the ALLIED
office buildings, paid $298,449 for construction services to Taylor Ball, of
which John P. Taylor, a director of the Company, is CEO and Chairman. It is
anticipated that in 1996 ALLIED Mutual will continue to use the construction
services of Taylor Ball and that AMCO will issue the checks on behalf of ALLIED
Mutual in payment for the construction services.
<PAGE>
18
During the year ended December 31, 1995, ALLIED Mutual, the Company, and
its subsidiaries paid $845,952 in fees and media costs to J.D. Evans &
Associates, of which Julie Evans (daughter of John E. Evans) is a stockholder.
Donald S. Willis, a director of the Company, is a majority stockholder of
Willis and Moore, Inc., a general insurance agency. During 1995, ALLIED Mutual,
AMCO, ALLIED Property and Casualty, and Depositors paid $271,889 in
property-casualty commissions and profit share to Willis and Moore, Inc. These
commissions and profit share were paid on the same basis and terms as those paid
to unrelated agencies.
During 1995, directors and executive officers of the Company purchased
insurance, obtained residential mortgages, or leased assets from the Company or
its subsidiaries on terms comparable to those offered in the normal course of
business to nonaffiliated customers. In addition, corporations to which Company
directors are executive officers purchased insurance from the Company's
subsidiaries and ALLIED Mutual in the ordinary course of business during 1995.
- --------------------------------------------------------------------------------
OTHER BUSINESS
The Board of Directors of the Company knows of no matters to be presented
at the Annual Meeting other than those which have been discussed above. However,
if any matters properly come before the meeting, or any adjournment thereof, it
is intended that the persons named in the enclosed Proxy will vote on such
matters in their discretion.
RELATIONSHIP WITH INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 2500 Ruan Center, Des Moines, Iowa 50309, were the
auditors for the Company for the year ended December 31, 1995.
The Audit Committee of the Board of Directors of Company approved in
advance, or has subsequently approved, all audit and non-audit related services
provided by KPMG Peat Marwick LLP and also considers the possible effect of such
services on the auditors' independence. Audit services performed by KPMG Peat
Marwick LLP for the year ended December 31, 1995 consisted of the examination of
the financial statements of the Company and its consolidated subsidiaries,
assistance and consultation concerning Securities and Exchange Commission
filings, and consultation in connection with various audit-related accounting
matters.
A representative of KPMG Peat Marwick LLP will be present at the Annual
Meeting on May 1, 1996. The representative will have the opportunity to make a
statement, if he or she so desires, and will be available to respond to
appropriate questions of the stockholders.
SOLICITATION
The Company will bear the cost of the solicitation of proxies. In addition
to solicitation by mail, the Company may request banks, brokers, and other
custodians, nominees, and fiduciaries to send proxy materials to beneficial
owners and to request voting instructions, if any. The Company reimburses them
for their expense in so doing. Officers and employees of the Company may solicit
proxies personally or by mail, telephone, or telegraph at no additional
compensation.
SUBMISSION OF STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's Proxy Statement
for the Company's Annual Meeting of Stockholders to be held in 1997, stockholder
proposals must be received by the Company on or prior to November 29, 1996. Such
proposals should be directed to the Secretary of the Company, 701 Fifth Avenue,
Des Moines, Iowa 50391-2000.
The Company will provide without charge to each stockholder, upon a written
request, a copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. Such requests should be directed to the Secretary of the
Company, 701 Fifth Avenue, Des Moines, Iowa 50391-2000.
<PAGE>
19
APPENDIX TO PROXY STATEMENT
PROXY CARD
PROXY ALLIED GROUP, INC. PROXY
Annual Meeting of Stockholders, May 1, 1996 -- 9:00 a.m., Central Time
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints John E. Evans, Jamie H. Shaffer, and George T.
Oleson, and any one of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and vote all of the shares,
as designated on the reverse side of this card, of Common Stock of ALLIED Group,
Inc. held of record by the undersigned on March 20, 1996 at the Annual Meeting
of Stockholders to be held on May 1, 1996 or at any adjournment thereof.
This is a revocable proxy that when properly executed will be voted in the
manner directed herein by the undersigned stockholder. If no direction is made,
this proxy will be voted for all directors listed in Item 1 and in the
discretion of the Proxies as to Item 2.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPLY
USING THE ENCLOSED ENVELOPE
(Continued and to be signed on reverse side.)
ALLIED GROUP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. []
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
FOR WITHHOLD FOR ALL (Except Nominee(s) written below)
<S> <C> <C> <C> <C>
1. Election of Directors for three-year term -- [] [] []
Nominees: John E. Evans, William E. Timmons, and
Donald S. Willis.
2. The Proxies, in their descretion, are authorized to vote The undersigned acknowledges receipt from the Company prior to the
upon such other business as may properly come before execution of this proxy of a Notice of Annual Meeting and a Proxy
the meeting. Statement dated the meeting March 29, 1996.
Dated: ___________, 1996
Signature(s)______________________________________________________
__________________________________________________________________
Please sign exactly as name appears hereon. Joint owners should
each sign. Where applicable, indicate official position or
representative capacity.
</TABLE>
