<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Fund American Enterprises Holdings, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class 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
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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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(4) Date Filed:
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<PAGE>
----------------------------------------
NOTICE OF 1999
ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
----------------------------------------
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
----
LETTER FROM K. THOMAS KEMP, CEO AND PRESIDENT . . . . . . . . . . . . . . 1
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS. . . . . . . . . . . . . . . 2
PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PROPOSAL 1: ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . 3
Procedures for Nominating Directors . . . . . . . . . . . . . . . . . 6
Voting Securities and Principal Holders Thereof . . . . . . . . . . . 7
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . 8
Compensation of Executive Officers. . . . . . . . . . . . . . . . . . 9
Reports of the Compensation Committees on
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 11
Shareholder Return Graph. . . . . . . . . . . . . . . . . . . . . . . 14
Compensation Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions . . . . . . . . . . . . . . . . . . . . . 16
PROPOSAL 2: CHARTER AMENDMENT TO CHANGE THE CORPORATE NAME . . . . . . 16
PROPOSAL 3: CHARTER AMENDMENT TO REDUCE THE NUMBER OF
AUTHORIZED SHARES OF CAPITAL STOCK . . . . . . . . . . . . . . . . . 17
PROPOSAL 4: APPOINTMENT OF INDEPENDENT AUDITORS. . . . . . . . . . . . 17
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
- --------------------------------------------------------------------------------
Fund American Enterprises Holdings, Inc. (the "Company" and, together with
its subsidiaries, "Fund American") is a New Hampshire-based financial services
holding company. The Company's principal businesses are conducted through White
Mountains Holdings, Inc. and its operating subsidiaries ("White Mountains").
White Mountains' insurance operations are conducted through its subsidiaries and
affiliates in the businesses of property and casualty insurance, reinsurance and
financial guaranty insurance. White Mountains' mortgage banking operations are
conducted through Source One Mortgage Services Corporation and its subsidiaries
("Source One").
White Mountains' insurance operations principally include: (i) Folksamerica
Holding Company, Inc. ("Folksamerica"), a New York-based broker-market
reinsurer; (ii) Valley Insurance Companies ("Valley"), a collection of
Oregon-based property and casualty insurance companies; (iii) Charter Indemnity
Company ("Charter"), a Texas-based non-standard automobile insurer; (iv) White
Mountains Insurance Company ("WMIC"), a New Hampshire-based commercial property
and casualty insurer; (v) a 25% economic interest in Financial Security
Assurance Holdings Ltd. ("FSA"), a New York-based Aaa/AAA writer of financial
guarantee insurance; and (vi) a 50% stake in Main Street America Holdings, Inc.
("MSA"), a unit of National Grange Mutual Insurance Company, a New
Hampshire-based property and casualty insurer.
<PAGE>
[LOGO]
K. THOMAS KEMP
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 29, 1999
Dear Shareholder:
I cordially invite you to attend the 1999 Annual Meeting of Fund American
Enterprises Holdings, Inc., to be held on Thursday, May 27, 1999, at 9:00 a.m.
This year's meeting will take place on the campus of Dartmouth College, not far
from our corporate office in Hanover, New Hampshire. I welcome you all to join
me for the morning in beautiful New Hampshire.
We will begin the meeting with a discussion and shareholder vote on the
proposals set forth in the accompanying Proxy Statement and on such other
matters properly brought before the meeting. At the meeting you will be asked
to consider and vote on the following issues:
1) to re-elect three directors to Class II and to elect one director to
Class III;
2) to change the name of the Company to "White Mountains Insurance Group,
Inc.";
3) to reduce the number of authorized shares of the Company's capital
stock; and
4) to ratify the appointment of independent auditors for 1999.
Proposals 1 and 4 are routine items that are addressed annually and are
fully explained herein. Proposals 2 and 3 require some background as to their
nature and purpose. With the acquisition of Folksamerica in August 1998, the
Company has largely concluded its seven year transformation (post Fireman's Fund
sale) from a lumpy collection of dissimilar assets (primarily passive
investments and mortgage operations) to a full-fledged financial services
operating company primarily focused on property and casualty insurance and
reinsurance. To highlight this transformation, I recommend changing the name of
the Company to "White Mountains Insurance Group, Inc." which I believe better
describes the Company's business focus and locale as well as the probable nature
of any future acquisitions. Also, since our initial public offering in 1985,
the Company has reduced its common shares outstanding from approximately
sixty-six million shares to less than six million shares today. In this regard,
I recommend a reduction in authorized shares of the capital stock of the Company
as further described herein. This action will reduce various fees the Company
is required to pay annually (which are based on shares authorized) and will not
adversely limit our options going forward.
Your vote is very important to us. Whether or not you plan to attend the
meeting, you can ensure that your shares are properly represented at the meeting
by promptly completing, signing, dating and returning your proxy card in the
enclosed envelope.
Respectfully submitted,
K. THOMAS KEMP
1
<PAGE>
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
MAY 27, 1999
March 29, 1999
Notice is hereby given that the 1999 Annual Meeting of Shareholders of Fund
American Enterprises Holdings, Inc. will be held on Thursday, May 27, 1999, at
9:00 a.m. at Byrne Hall, Amos Tuck School of Business at Dartmouth College,
Hanover, New Hampshire. At the meeting you will be asked to consider and vote
upon the following proposals:
(a) to elect three directors to Class II with terms ending in 2002 and to
elect one director to Class III with a term ending in 2000;
(b) to amend the Company's Charter to change the corporate name to "White
Mountains Insurance Group, Inc.";
(c) to amend the Company's Charter to reduce the total number of shares of
common and preferred stock that the Company has the authority to issue
from 135.0 million shares to 16.0 million shares;
(d) to appoint PricewaterhouseCoopers LLP as Independent Auditors for the
1999 audit examination; and
(e) to transact such other business, if any, as may be properly brought
before the meeting.
Shareholders of record on the record date, March 29, 1999, (i) who are
individuals, may attend and vote at the meeting in person or by proxy or (ii)
which are corporations or other entities, may be represented and vote at the
meeting by a duly authorized representative or by proxy. A list of all
shareholders entitled to vote at the meeting will be open for public examination
by shareholders during regular business hours from May 3, 1999, until 12:00 noon
on May 27, 1999, at the corporate office of Fund American Enterprises Holdings,
Inc., 80 South Main Street, Hanover, New Hampshire 03755-2053.
All shareholders are invited to attend this meeting.
By Order of the Board of Directors,
DENNIS P. BEAULIEU
Corporate Secretary
SHAREHOLDERS ARE INVITED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY CARD
TO BE RETURNED TO FUND AMERICAN ENTERPRISES HOLDINGS, INC., C/O FIRST CHICAGO
TRUST COMPANY OF NEW YORK, A DIVISION OF EQUISERVE, POST OFFICE BOX 8085,
EDISON, NEW JERSEY 08818-9052, IN THE ENVELOPE PROVIDED, WHETHER OR NOT THEY
EXPECT TO ATTEND THE MEETING.
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED AND RETURNED PROMPTLY.
2
<PAGE>
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Company's Board of Directors (the "Board") for the 1999
Annual Meeting of Shareholders (the "1999 Annual Meeting"), to be held on May
27, 1999. The solicitation of proxies will be made primarily by mail, and this
Proxy Statement and proxy materials will be distributed to registered
shareholders on or about April 2, 1999.
Holders of shares of the Company's Common Stock, par value $1.00 per share
("Shares"), registered in their name as of the close of business on March 29,
1999, the record date, are entitled to vote at the meeting. Holders of Shares
are entitled to one vote per Share.
You can ensure that your Shares are properly voted at the meeting by
completing, signing, dating and returning the enclosed proxy card in the
envelope provided. A shareholder has the right to appoint another person (who
need not be a shareholder) to represent the shareholder at the meeting by
completing an alternative form of proxy which can be obtained from the Corporate
Secretary or by notifying the Inspectors of Election. Shareholders have the
right to revoke their proxies, at any time prior to the time their shares are
actually voted, by (i) filing a written notice of revocation with the Corporate
Secretary, (ii) presenting another proxy with a later date or (iii) notifying
the Inspectors of Election in writing of such revocation. Sending in a signed
proxy will not affect your right to attend the meeting and vote. If a
shareholder attends the meeting and votes in person, his or her proxy is
considered revoked.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes (each a "Class"). Each Class
serves a three-year term.
At the 1999 Annual Meeting Messrs. Jack Byrne, Gillespie and Olson are
nominated to be elected to Class II with terms ending in 2002 and Mr. Zankel is
nominated to be elected to Class III with a term ending 2000. THE BOARD
RECOMMENDS A VOTE FOR PROPOSAL 1 WHICH CALLS FOR THE ELECTION OF THE 1999
NOMINEES.
The current and proposed members of the Board and terms of each Class are set
forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Director
Director Age since
- --------------------------------------------------------------------------------
<S> <C> <C>
Class I - Terms Ending in 2001
Patrick M. Byrne 36 1997
K. Thomas Kemp 58 1994
Gordon S. Macklin 70 1987
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Class II - Terms Ending in 1999
John J. ("Jack") Byrne* 66 1985
George J. Gillespie, III* 68 1986
Frank A. Olson* 66 1996
- --------------------------------------------------------------------------------
Class III - Terms Ending in 2000
Howard L. Clark, Jr. 55 1986
Robert P. Cochran 49 1994
Arthur Zankel** 67 1992
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</TABLE>
* Nominee at the 1999 Annual Meeting to a term ending in 2002.
** Nominee at the 1999 Annual Meeting to a term ending in 2000.
The following information with respect to the principal occupation,
business experience and other affiliations of the nominees and directors has
been furnished to the Company by the nominees and directors.
3
<PAGE>
CLASS I
PATRICK M. BYRNE has been a director of the Company since October 1997.
Mr. Byrne serves as President and CEO of Fecheimer Bros. Co (a wholly-owned
subsidiary of Berkshire Hathaway Inc.), a manufacturer of uniforms and
accessories, and President and CEO of Centricut, LLC, a manufacturer of
industrial torch consumable parts. In addition, since 1991, Mr. Byrne has been
the managing general partner of a number of limited partnerships investing in
real estate, gaming, insurance and international trade. Mr. Byrne is also a
director of White Mountains. Mr. Byrne is the son of Chairman Jack Byrne.
K. THOMAS KEMP has been a director of the Company since 1994. Mr. Kemp has
served as the Company's President and CEO since October 1997 and is also White
Mountains' Chairman and CEO. Mr. Kemp served as the Company's Executive Vice
President from 1993 to 1997, Vice President, Treasurer and Secretary from 1991
to 1993 and was formerly a Vice President of Fireman's Fund Insurance Company
("Fireman's Fund"). Mr. Kemp is also a director of FSA, MSA, Folksamerica,
Eldorado Bancshares, Inc., Amlin plc and Fund American Enterprises, Inc.
("FAE"), a wholly-owned subsidiary of the Company.
GORDON S. MACKLIN has been a director of the Company since 1987. Mr.
Macklin served as Chairman, President and CEO of White River Corporation until
its sale in July 1998. Mr. Macklin was formerly Chairman of Hambrecht and Quist
Group, a venture capital and investment banking company, from 1987 until 1992
and served as President of the National Association of Securities Dealers, Inc.
from 1970. He is a director of MCI Worldcom, Inc., MedImmune Inc., Real 3D and
Spacehab, Inc., and is a trustee, director or managing general partner (as the
case may be) of 52 of the investment companies in the Franklin Templeton Group
of Funds.
CLASS II
JOHN J. ("JACK") BYRNE has been Chairman of the Company since 1985 and
retired from his officer positions in October 1997. Mr. Byrne served as
President and CEO from 1990 to 1997 and as CEO from 1985 to 1990. Mr. Byrne is
Vice Chairman of FSA, a director of White Mountains and is an advisory director
of Terra Nova (Bermuda) Holdings Ltd. Mr. Byrne's son, Patrick M. Byrne, is
also a director of the Company.
GEORGE J. GILLESPIE, III has been a director of the Company since 1986.
Mr. Gillespie has been a Partner in the law firm of Cravath, Swaine & Moore
("CS&M") since 1963. He is also a director of The Washington Post Company.
CS&M has been retained by Fund American from time to time to perform legal
services. See "Compensation Committee Interlocks and Insider Participation in
Compensation Decisions."
FRANK A. OLSON has been a director of the Company since 1996. He is
Chairman and CEO of The Hertz Corporation and has been with that company since
1964. He is also a director of Becton Dickinson and Company, Cooper Industries
and Commonwealth Edison Co. and was formerly Chairman and CEO of Allegis
Corporation and United Airlines.
CLASS III
HOWARD L. CLARK, JR. was a director of the Company from 1986 until 1990,
was an advisor to the Board from 1990 to 1993 and was re-elected as a director
in 1993. He is Vice Chairman of Lehman Brothers Inc. ("Lehman") and was
Chairman and CEO of Shearson Lehman Brothers Inc. from 1990 to 1993. Prior to
joining Shearson Lehman Brothers Inc., Mr. Clark was Executive Vice President
and Chief Financial Officer of American Express. He is also a director of The
Maytag Corporation, Compass International Services Corporation and Walter
Industries, Inc. Lehman provides various services to Fund American from time to
time. See "Compensation Committee Interlocks and Insider Participation in
Compensation Decisions."
4
<PAGE>
ROBERT P. COCHRAN has been a director of the Company since 1994. Mr.
Cochran was a founding principal of FSA and has served FSA in various capacities
since 1985. He has been President and CEO and a director of FSA since 1990 and
became Chairman in 1997. He is also Chairman of Financial Security Assurance
Inc. and Financial Security Assurance (U.K.) Ltd. and is a director of White
Mountains. Fund American has a 25% economic interest in FSA. See "Compensation
Committee Interlocks and Insider Participation in Compensation Decisions."
ARTHUR ZANKEL was a director of the Company from 1992 to 1998, was an
advisor to the Board from 1998 to 1999 and has been nominated by the Board for
election at the 1999 Annual Meeting. Mr. Zankel retired from the Board in May
1998 as his busy schedule was often in conflict with meetings of the Board. In
November 1998, Mr. Zankel mentioned to the Board that his schedule would now
permit him to rejoin the Board as a director, if the Board so desired. In
February 1999, the Board determined that it would propose Mr. Zankel's
re-election at the 1999 Annual Meeting. Mr. Zankel is presently a General
Partner of First Manhattan Co., an investment advisor and broker-dealer. He has
been a General Partner of First Manhattan Co. since 1965 and was Co-Managing
Partner of First Manhattan from 1979 to 1997. Mr. Zankel is also a director of
Citigroup, Inc., Travelers Property Casualty Corp. and VICORP Restaurants, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, comprised of certain nonemployee directors (Messrs.
Clark and Olson), has general responsibility for the oversight and surveillance
of the accounting, reporting and financial control practices of Fund American.
The Audit Committee annually reviews the qualifications of the Independent
Auditors; makes recommendations to the Board as to their selection; and reviews
the plan, fees and results of their audit. The Company currently intends to add
Mr. Zankel to the Audit Committee upon his election at the 1999 Annual Meeting.
Mr. Clark is Chairman of the Audit Committee.
The Compensation Committee, comprised of certain nonemployee directors
(Messrs. Patrick Byrne; Cochran; Macklin and Olson), oversees Fund American's
stock-based compensation and benefit policies and programs, including
administration of the Long-Term Incentive Plan (the "Incentive Plan"), the Fund
American Voluntary Deferred Compensation Plan (the "Deferred Compensation Plan")
and the Fund American Deferred Benefit Plan (the "Deferred Benefit Plan"). The
Company currently intends to add Mr. Zankel to the Compensation Committee upon
his election at the 1999 Annual Meeting. Mr. Macklin is Chairman of the
Compensation Committee.
The Human Resources Committee, comprised of certain nonemployee directors
(Messrs. Patrick Byrne; Clark; Cochran; Gillespie; Macklin and Olson), sets the
annual salaries and bonuses for elected officers and certain other key
employees. The Company currently intends to add Mr. Zankel to the Human
Resources Committee upon his election at the 1999 Annual Meeting. Mr. Macklin
is Chairman of the Human Resources Committee.
The Finance Committee, comprised of Messrs. Jack Byrne, Clark, Gillespie,
Kemp and Macklin has general responsibility for the oversight of all significant
investing, financing, tax and acquisition/disposition activities of Fund
American. The Finance Committee oversees the activities of White Mountains'
Finance Committee to which it has delegated responsibility for the oversight of
certain investment policy and related financial matters. The Company currently
intends to add Mr. Zankel to the Finance Committee upon his election at the 1999
Annual Meeting. Mr. Jack Byrne is Chairman of the Finance Committee.
5
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
During 1998 the following meetings of the Board were held: five meetings of
the full Board; one meeting of the Audit Committee; one meeting of the
Compensation Committee and one meeting of the Human Resources Committee. During
1998 one meeting of the Finance Committee was held. In 1998 each director
attended more than 75% of all meetings of the Board and each member of the Audit
Committee, Compensation Committee and the Human Resources Committee attended
more than 75% of all such committee meetings, except Mr. Gillespie who was
unable to attend two of the five Board meetings and Mr. Olson who was unable to
attend the 1998 Compensation Committee and the 1998 Human Resources Committee
meeting.
PROCEDURES FOR NOMINATING DIRECTORS
Under the Company's Bylaws, any shareholder entitled to vote for the
election of directors that is a qualified holder of record of Shares having an
aggregate market value of at least $2,000 may nominate persons for election as
director, if the following procedures are followed:
In general, the shareholder must give written notice to the Corporate
Secretary not later than 90 days in advance of the meeting with respect to an
election to be held at an annual meeting of shareholders. With respect to an
election to be held at a special meeting of shareholders, the shareholder must
give written notice to the Corporate Secretary not later than the seventh day
following the date on which notice of such meeting is first given to
shareholders.
The notice must include: (i) the name and address of the shareholder who
intends to make the nomination and the name and address of the person or persons
to be nominated; (ii) a representation that the shareholder is a qualified
holder of record of Shares having an aggregate market value of at least $2,000
and that the shareholder intends to appear at the meeting, in person or by
proxy, to nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination, or nominations, are to be made by the
shareholder; (iv) such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission (the
"SEC") had each nominee been nominated, or intended to be nominated, by the
Company; and (v) the consent of each nominee to serve as a director of the
Company if so elected.
6
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 29, 1999, there were 5,843,731 Shares outstanding, each Share
entitled to one vote. To the knowledge of the Company, there was no person or
entity beneficially owning more than 5% of Shares outstanding as of March 29,
1999, except as shown below:
PRINCIPAL HOLDERS OF SHARES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Number
of Shares
Name and Address of Beneficial Owner Beneficially Owned Percent (d)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JACK BYRNE 80 South Main Street, Hanover, NH 03755 (a) 1,725,973 25.2%
FRANKLIN MUTUAL ADVISORS, INC. 777 Mariners Island Blvd., San Mateo, CA 94403 (b) 1,216,071 20.8%
ALLIANZ ASSET ACCUMULATION PLAN 777 San Marin Drive, Novato, CA 94998 (c) 575,187 9.8%
GSB INVESTMENT MANAGEMENT, INC. 301 Commerce Street, Fort Worth, TX 76102 (b) 378,936 6.5%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes warrants to purchase 1,000,000 Shares, which warrants Mr. Byrne
purchased from American Express in 1985. The warrants are exercisable at
$21.66 per Share through January 2, 2002. Mr. Byrne has sole voting and
investment power (or shares such power with his spouse) with respect to the
Shares for which he claims beneficial ownership. Does not include 3,000
Shares donated to charitable foundations for which Mr. Byrne disclaims
beneficial ownership, but for which his spouse retains voting power.
(b) According to filings by such holders with the SEC, the Shares beneficially
owned by the holders named above were acquired solely for investment
purposes on behalf of client investment advisory accounts of such holders.
(c) Represents Shares beneficially owned by employees of Fireman's Fund
pursuant to an employee incentive savings plan. The trustee for such plan
votes the Shares held by the plan in accordance with directions given by
the participating Fireman's Fund employees to whose accounts Shares have
been allocated.
(d) Determined based on the beneficial ownership provisions specified in Rule
13d-3(d)(1) of the Securities Exchange Act of 1934 (the "Exchange Act").
7
<PAGE>
BENEFICIAL STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 29, 1999, beneficial ownership
of Shares by each director of the Company, by each of the "Named Executive
Officers" as defined herein currently holding office, and by all Directors and
Executive Officers as a group.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Number of Shares owned
----------------------------------
Directors and Executive Officers Beneficially (a) Economically (b)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
RAYMOND BARRETTE 2,131 20,764
TERRY L. BAXTER 3,642 33,627
JACK BYRNE (c)(d) 1,725,973 1,730,973
PATRICK M. BYRNE (d) 105,000 105,461
HOWARD L. CLARK, JR. 1,000 1,000
ROBERT P. COCHRAN 0 1,879
MORGAN W. DAVIS 13,574 44,108
GEORGE J. GILLESPIE, III 1,000 1,000
K. THOMAS KEMP (e) 29,446 90,797
GORDON S. MACKLIN 8,000 8,000
FRANK A. OLSON 500 500
MICHAEL S. PAQUETTE 2,025 14,866
ARTHUR ZANKEL 11,600 11,600
All Directors and Executive Officers as a group (15 persons) (c)(d)(e) 1,849,091 2,023,373
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) The beneficial ownership positions of Messrs Jack Byrne, Patrick Byrne and
all Directors and Executive Officers as a group represent 25.2%, 1.8% and
27.8% of the total Shares outstanding at March 29, 1999, respectively. All
other Directors and Executive Officers beneficially owned less than 1% of
the total Shares outstanding at that date. Percentages are determined
based on the beneficial ownership provisions specified in Rule 13d-3(d)(1)
of the Exchange Act.
(b) Shares shown as economically owned by Directors and Executive Officers
include unvested performance share awards and vested phantom shares held
pursuant to the Deferred Compensation Plan and the Deferred Benefit Plan.
See "Compensation Plans - Fund American Retirement Plans." Each
performance share and each phantom share are economically equivalent to one
Share. Unvested performance shares outstanding at March 29, 1999
represented 14,500, 18,500, 5,000, 12,500, 29,000, 9,100 and 100,600 Shares
for Messrs. Barrette, Baxter, Jack Byrne, Davis, Kemp, Paquette and all
Directors and Officers as a group, respectively.
(c) Includes warrants to purchase 1,000,000 Shares, which warrants Mr. Byrne
purchased from American Express in 1985. The warrants are exercisable at
$21.66 per Share through January 2, 2002. Does not include 3,000 Shares
donated to charitable foundations for which Mr. Byrne disclaims beneficial
ownership, but for which his spouse retains voting power.
(d) The individual ownership positions of Mr. Jack Byrne and Mr. Patrick Byrne
each include 55,000 Shares owned by High Plains Investments ("High
Plains"), a partnership in which they share beneficial ownership and
control. The 55,000 Shares owned by High Plains have been included only
once in arriving at Shares owned by all Directors and Executive Officers as
a group.
(e) Includes currently exercisable stock options held by Mr. Kemp to purchase
2,000 Shares.
COMPENSATION OF DIRECTORS
Messrs. Patrick Byrne, Clark, Cochran, Gillespie, Macklin and Olson each
received a retainer of $48,000 for 1998 and a fee of $1,000 for each Board
meeting and committee meeting attended. Messrs. Clark and Macklin also received
an additional retainer of $3,000 for 1998 as Chairman of the Audit Committee and
Chairman of the Compensation Committee and Human Resources Committee,
respectively. Messrs. Patrick Byrne and Cochran also received a retainer of
$18,000 for 1998 for their services as directors of White Mountains and meeting
fees of $1,750 per meeting attended. Mr. Zankel received a total of $39,000
during 1998 consisting of: (i) 1998 Board meeting fees of $5,000; (ii) a $24,000
installment under the directors retirement plan; and (iii) a retainer of $10,000
for his services as an advisory director. For 1998, Mr. Jack Byrne received a
$100,000 all-inclusive annual retainer for his services as Chairman of the Board
and his participation in Fund American's various committees and subsidiary
boards of directors and also received $6,500 in attendance fees. In addition,
Mr. Jack Byrne had 5,000 performance shares eligible for payout on December 31,
1998 which were paid on February 24, 1999. See "Reports of the Compensation
Committees on Executive Compensation - Compensation Committee - Long-Term
Incentive Awards."
8
<PAGE>
Any non-management director who retires from the Board with at least five
years of service as a director of the Company is entitled to an annual
retirement benefit equal to 50% of the amount of the annual retainer for the
year in which the retirement occurs. Eligible directors are entitled to receive
the annual benefit for a period of years equal to the number of years of service
or, if sooner, until death.
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth certain information regarding the salary,
incentive compensation and benefits paid by Fund American to its CEO, its four
most highly compensated executive officers other than the CEO (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
The following table reflects the cash and non-cash compensation for the
Named Executive Officers.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Annual compensation Long-term compensation
------------------- ----------------------
Awards Payouts
------ -------
Other Restricted
annual Stock, All other
Name and compen- Options, LTIP compensation (b)
principal position Year Salary Bonus sation SARs (#) payouts (a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
K. THOMAS KEMP 1998 $386,923 $304,000 $ 0 0 $1,995,000 $275,185
President and 1997 312,692 241,500 0 0 1,152,957 169,698
CEO 1996 288,300 171,000 0 0 1,896,903 135,455
RAYMOND BARRETTE 1998 250,000 217,000 0 0 0 294,175
Executive Vice President and CFO 1997 28,846 25,000 0 0 0 28,769
(began November 17, 1997) 1996 0 0 0 0 0 0
MORGAN W. DAVIS 1998 247,692 205,000 0 0 1,197,000 52,821
Executive Vice President of 1997 233,462 155,000 0 0 1,475,770 30,458
White Mountains 1996 218,000 112,500 0 0 0 22,309
TERRY L. BAXTER 1998 247,692 180,000 0 0 931,000 758,588
President of 1997 195,000 200,000 0 0 516,500 70,714
White Mountains 1996 194,200 200,000 0 0 739,688 47,238
MICHAEL S. PAQUETTE 1998 139,308 94,000 0 0 532,000 30,223
Senior Vice President and 1997 123,423 97,500 0 0 387,375 19,079
Controller 1996 115,600 70,500 0 0 810,735 10,980
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes cash payments and the total market value of awards distributed.
(b) Amounts for 1998, 1997 and 1996 represent principal credited to the
Deferred Benefit Plan and amounts for 1998 and 1997 represent employer
matching contributions to the Company's 401(k) Savings Plan (which did not
exceed $5,000 annually per individual) in addition to the amounts
specifically listed. The amounts for 1998, 1997 and 1996, respectively,
also include: $75,100, $61,900 and $54,230 for Mr. Kemp; $15,475, $0 and
$0 for Mr. Barrette; $21,700, $20,300, and $22,380 for Mr. Baxter; and
$2,400, $0, and $0 for Mr. Davis in director fees and retainers paid by
companies for which Fund American is entitled to board representation as a
result of the Company's sizable ownership position in such companies. The
1998 amount for Mr. Barrette also includes $249,646 in reimbursements
associated with a Company sponsored relocation. The 1998 amount for Mr.
Baxter also includes $665,000 in incentive compensation paid in 1998 for
the period in which he acted as interim Chairman of Source One.
9
<PAGE>
OPTIONS AND WARRANTS
The following table summarizes, for the Named Executive Officers, stock
options, warrants and SARs exercised during the Company's latest fiscal year,
and the number and in-the-money value of stock options outstanding as of the end
of the fiscal year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1998
--------------------------------------------------------------
Stock options, warrants and Number of unexercised stock In-the-money value of all
SARs exercised during the options, warrants outstanding stock options,
year ended December 31, 1998 and SARs warrants and SARs
---------------------------- ---------------------------- --------------------------
Shares Value Not Not
acquired realized Exercisable exercisable Exercisable exercisable
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
K. Thomas Kemp 1,000(a) $80,610(a) 2,000(b) 0 $225,865(b) $0
Raymond Barrette 0 0 0 0 0 0
Morgan W. Davis 0 0 0 0 0 0
Terry L. Baxter 0 0 0 0 0 0
Michael S. Paquette 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents the exercise of stock options to acquire shares of the common
stock of White River ("White River Shares") from the Company. Such stock
options were issued to holders of Fund American stock options upon the
December 1993 distribution of approximately 74% of the outstanding White
River Shares to Fund American's shareholders.
(b) Represents stock options outstanding to acquire Shares that were issued in
1990. The Company has not issued stock options since that date.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The following table summarizes the Incentive Plan awards made to the Named
Executive Officers during the latest fiscal year. Such awards consisted
entirely of performance shares. Since 1991, all long-term incentive
compensation awards have been in the form of performance shares.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number of
performance Performance Estimated future payouts in Shares:
shares period for -----------------------------------
Name awarded (a) payout Threshold Target Maximum
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
K. Thomas Kemp 10,000 3 yrs. 0 10,000 20,000
Raymond Barrette 7,500 3 yrs 0 7,500 15,000
Morgan W. Davis 6,500 3 yrs. 0 6,500 13,000
Terry L. Baxter 6,500 3 yrs. 0 6,500 13,000
Michael S. Paquette 4,000 3 yrs 0 4,000 8,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Such performance shares are payable upon completion of pre-defined business
goals and are payable in cash based on the market value of Shares at the
time of payment. The "Target" performance for the 1998 performance share
award is the attainment of a corporate annualized return on equity ("ROE")
of 13%. The determination of ROE considers the rate of growth of the book
value, market value and economic value of Shares with dividends reinvested.
At an ROE of 6% or less ("Threshold") the percentage of performance shares
payable will be 0% and at an ROE of 20% or more ("Maximum") the percentage
of performance shares payable will become 200% of Target. Straight-line
interpolations are used for ROE results that fall between Threshold and
Target or between Target and Maximum.
10
<PAGE>
OTHER COMPENSATION ARRANGEMENTS
Pursuant to the Incentive Plan, under some circumstances such as a "Change
in Control" followed by a termination without cause, constructive termination or
an "Adverse Change" in the Incentive Plan, stock options will generally become
fully exercisable and performance shares will become partially or fully payable.
Such circumstances are more fully described in the Incentive Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For corporate travel purposes Fund American jointly owns two short-range
aircraft with Haverford Utah, LLC ("Haverford"). Messrs. Jack Byrne, Patrick
Byrne and Kemp are principals of Haverford. Both aircraft were acquired from
unaffiliated third parties during 1996. In exchange for Haverford's 20%
ownership interest in the aircraft, Haverford contributed capital equal to 20%
of the total initial cost of the aircraft and Haverford bears the full costs of
its usage and maintenance of the aircraft pursuant to a Joint Ownership
Agreement dated September 16, 1996.
In September 1998 Fund American sold its 25% joint ownership interest in a
private jet operated by a third party to Haverford for cash proceeds of
$500,000. The purchase price received from Haverford represented a payment of
$437,500 for Fund American's joint ownership interest (which resulted in Fund
American recognizing a pretax gain on sale of approximately $75,000) and $62,500
for reimbursement of prepaid aircraft expenses which were required to be paid to
the operator prior to the sale to Haverford.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for certain compensation over $1
million. The Compensation Committee intends to preserve the Company's deduction
for compensation paid by mandating that all Named Executive Officers
automatically defer any potentially nondeductible compensation payable in any
given year in excess of $1 million into the Deferred Compensation Plan until
such a time as the compensation would be fully deductible by the Company.
REPORTS OF THE COMPENSATION
COMMITTEES ON EXECUTIVE COMPENSATION
The Human Resources Committee and the Compensation Committee (collectively,
the "Committees") are comprised entirely of certain non-employee directors. The
Committees are responsible for developing, administering and monitoring the
executive compensation policies of the Company. Fund American's salary and
bonus compensation is established by the Human Resources Committee of the Board.
Fund American's stock based compensation (performance shares, stock options and
warrants) is established by the Compensation Committee of the Board.
Fund American's executive compensation policies are designed with one goal
in mind-maximization of shareholder value over long periods of time. The
Committees believe that this goal is best pursued by utilizing a
pay-for-performance program which serves to attract and retain superior
executive talent and provide management with performance-based incentives to
maximize shareholder value. Through the compensation program, the Committees
seek to maximize shareholder value by aligning closely the financial interests
of Fund American's management with those of the Company's shareholders.
The Committees believe that the most appropriate indicator of shareholder
return is the Company's ROE as measured by growth in market value, book value
and economic value per Share, each measured with dividends reinvested. The
Committees believe that, over long periods of time, maximizing the Company's ROE
will optimize shareholder returns.
The Committees believe that the performance-based compensation of the
Company's key employees should be payable only if the Company achieves truly
superior returns for its shareholders. Therefore, the target of many of Fund
American's performance-based compensation programs are directly linked to
achievement of an annualized ROE for the Company at least equal to the market
yield available from ten-year United States Treasury notes plus 700 basis
points, or currently approximately 12%-13%. The Committees believe that this
return is a challenging target for the Company in its current form.
11
<PAGE>
Compensation of Fund American's management team, including the Named
Executive Officers, consists primarily of three components: base salary, annual
bonus and long-term incentive awards.
HUMAN RESOURCES COMMITTEE
BASE SALARY. Base salary for each Named Executive Officer is established
annually, generally as of March 1. When establishing base salaries of the Named
Executive Officers, the Human Resources Committee considers numerous factors
including: qualifications of the executive; the corporate responsibilities of
the executive; the executive's performance since his or her last salary
adjustment; and, for all executives except Mr. Kemp, the recommendations of Mr.
Kemp.
ANNUAL BONUS. For 1998 the target annual bonus pool for all officers of the
Company was equal to 50% of eligible base salary at a 13% annual ROE and the
maximum bonus attainable was equal to 100% of eligible base salary at a 20%
annual ROE. When establishing the aggregate size of the annual bonus pool, the
Human Resources Committee considers numerous factors including performance
versus the objectives set forth in the Company's Annual Business Plan, in
particular the Company's financial performance for the latest fiscal year as
measured by ROE, and the recommendations of Mr. Kemp. The Human Resources
Committee reviews the Annual Business Plan with management near the beginning of
the year and approves the plan after changes required by the Human Resources
Committee, if any, are made.
After establishing the aggregate size of the annual bonus pool, the Human
Resources Committee then considers the distribution of the bonus pool among the
key employees of the Company. Each participant's allocation of the pool is
determined after considering numerous factors including individual achievements
as compared to objectives included in the Annual Business Plan, the contribution
of such achievements to the Company's overall financial performance, and the
recommendations of Mr. Kemp.
The CEO receives annual bonuses, as a percent of his salary in effect at
the time the bonus percentage is determined, equal to the average bonus
percentage received by all officers eligible to participate in the bonus pool.
For 1998, Mr. Kemp received a bonus that was determined using the average bonus
percentage.
For 1998 the Human Resources Committee determined that the financial
results of the Company warranted a bonus pool equal to 76% of aggregate base
salary. The principal factors considered by the Human Resources Committee in
determining the size of the 1998 pool were: (i) the Company's 1998 ROE
performance of 14.0%, as measured by change in economic value per Share, versus
a 13% target ROE (the predominant factor); (ii) the Company's 1998 ROE
performance of 17.2% as measured by change in market value per Share; (iii) the
Company's 1998 ROE performance of 14.3%, as measured by change in book value per
Share (including the unamortized portion of the Company's deferred credit
resulting from its acquisition of Folksamerica in 1998); (iv) the progress made
in re-deploying the Company's passive investment portfolio into strategic
operating investments including the acquisition of Folksamerica during 1998; and
(v) overall favorable results versus certain specific objectives contained in
the 1998 Annual Business Plan.
GORDON S. MACKLIN, Chairman
PATRICK M. BYRNE
HOWARD L. CLARK, JR.
ROBERT P. COCHRAN
GEORGE J. GILLESPIE, III
FRANK A. OLSON
COMPENSATION COMMITTEE
LONG-TERM INCENTIVE AWARDS. The Incentive Plan provides for granting to
executive officers and certain other key employees of the Company various types
of stock-based incentive awards including stock options and performance shares.
12
<PAGE>
Stock options are rights to purchase a specified number of Shares at or
above the fair market value of Shares at the time the option is granted. Stock
options generally vest over a four-year period and expire no later than ten
years after the date on which they are granted. The Company has granted no new
stock options since 1990.
Performance shares are conditional grants (payable subject to the
achievement of specific financial goals) of a specified maximum number of
Shares, payable generally at the end of a three-year period or as otherwise
determined by the Compensation Committee. Performance shares are denominated in
Shares at market value and, for 1998, were payable in cash, Shares or a
combination thereof.
The Compensation Committee believes that performance share awards made
pursuant to the Incentive Plan are the most effective method of providing
incentives for management to strive to maximize shareholder value over the long
term. The Compensation Committee's conclusion is based on the following
factors: (i) such awards vest or are earned over multi-year periods; (ii) such
awards are generally made in the form of Shares or derivatives thereof, which
helps to align the interests of management with those of the Company's
shareholders; and (iii) the Incentive Plan awards made over the last three
fiscal years were linked to the achievement of a 13% ROE over the applicable
performance period.
In 1998 Messrs. Kemp, Barrette, Davis, Baxter and Paquette were granted
10,000, 7,500, 6,500, 6,500 and 4,000 performance shares, respectively, which
were awarded by the Compensation Committee. The performance period for such
awards began on January 1, 1998 and will continue through December 31, 2000.
The "target" performance for the 1998 performance share award is the attainment
of a ROE of 13%. The determination of ROE considers the rate of growth of the
book value, market value and economic value of Shares with dividends reinvested.
At a "threshold" ROE of 6% or less the percentage of performance shares payable
will be 0% and at a "maximum" ROE of 20% or more the percentage of performance
shares payable will become 200% of target. Straight-line interpolations are
used for ROE results that fall between threshold and target or between target
and maximum.
As of December 31, 1998 Messrs. Kemp, Barrette, Davis, Baxter and Paquette
had, pursuant to a 1996 grant of performance shares, 15,000, 0, 9,000, 7,000 and
4,000 performance shares eligible for payout, respectively, on December 31, 1998
subject to the attainment of a 13% target ROE. During the 1996 to 1998
performance period, the Company attained an ROE of 18.2%, 24.7% and 12.6% as
measured by the change economic value (the predominant factor), market value and
book value, (including the unamortized portion of the Company's deferred credit
resulting from its acquisition of Folksamerica in 1998), respectively,
calculated in accordance with the Incentive Plan. In light of the ROE's
attained, the Compensation Committee at its February 22, 1999 meeting determined
that 100% of such performance shares would become immediately payable and were
paid on February 24, 1999. The performance share payouts are included in the
Summary Compensation Table.
As of December 31, 1998 Mr. Jack Byrne had, pursuant to a 1996 grant of
performance shares, 5,000 performance shares eligible for payout on December 31,
1998 which also became immediately payable and were paid on February 24, 1999.
These performance shares were granted to Mr. Byrne prior to his retirement from
active service in 1997. Mr. Byrne has no further performance share awards
outstanding.
GORDON S. MACKLIN, Chairman
PARTRICK M. BYRNE
ROBERT P. COCHRAN
FRANK A. OLSON
13
<PAGE>
SHAREHOLDER RETURN GRAPH
The following graph shows the five-year cumulative total return for a
shareholder who invested $100 in Shares (New York Stock Exchange symbol "FFC")
at the close of business on December 31, 1993, assuming re-investment of
dividends. For comparison, cumulative returns for the five-year period ended
December 31, 1998, are also shown for the Standard & Poor's 500 Stocks (Property
& Casualty) Capitalization Weighted Index ("S&P P&C") and the Standard & Poor's
500 Stocks Capitalization Weighted Index ("S&P 500").
As stated herein, the Company's various compensation plans are based on its
growth in its book value, market value and economic value (the predominant
factor). The Company's long-term goal is to maximize Fund American's annual
rate of gain in its intrinsic business value per Share which will in turn affect
its market value per Share. Management believes that the Company's growth in
intrinsic value over the past five years has exceed that of its market value.
[GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
FFC $ 92.0 $ 95.2 $123.6 $157.2 $184.1
S&P P&C 104.9 142.0 172.6 251.0 233.6
S&P 500 101.3 139.4 171.4 228.6 293.9
- -----------------------------------------------------------------------
</TABLE>
14
<PAGE>
COMPENSATION PLANS
RETIREMENT PLANS
In 1998 Messrs. Kemp, Barrette, Davis, Baxter and Paquette received
retirement benefits pursuant to the Deferred Benefit Plan, an unfunded,
nonqualified, defined contribution plan established for the purpose of providing
retirement and postretirement benefits. The amount of annual contributions to
the Deferred Benefit Plan are determined using actuarial assumptions and are
based on the present value of the benefit table figures presented below.
Eligible compensation (which includes salary and bonus) is computed as the
average of the five highest paid consecutive years in the last ten years of
service. Participants in the Deferred Benefit Plan may choose between four
investment options for their plan balances including Phantom Shares. Amounts
credited to the Deferred Benefit Plan accounts of such individuals have been
included in the Summary Compensation Table.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Eligible compensation Gross annual benefit paid as a straight-life annuity
- ------------------------------------- ----------------------------------------------------------------------
15 years 20 years 25 years 30 years 35 years
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000 $ 24,540 $ 33,137 $ 42,984 $ 52,831 $ 62,678
150,000 29,915 40,387 52,359 64,331 76,303
175,000 35,290 47,637 61,734 75,831 89,928
200,000 40,665 54,887 71,109 87,331 103,553
225,000 46,040 62,137 80,484 98,831 117,178
250,000 51,415 69,387 89,859 110,331 130,803
300,000 62,165 83,887 108,609 133,331 158,053
400,000 83,665 112,887 146,109 179,331 212,553
450,000 94,415 127,387 164,859 202,331 239,803
500,000 105,165 141,887 183,609 225,331 267,053
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Also in 1998 Messrs. Kemp, Barrette, Davis, Baxter and Paquette and certain
Directors participated voluntarily in the Deferred Compensation Plan, an
unfunded, nonqualified, deferred compensation savings plan. Pursuant to the
Deferred Compensation Plan, Executive Officers and Directors may defer all or a
portion of qualifying remuneration payable by Fund American. Amounts deferred
pursuant to the Deferred Compensation Plan are included in the Summary
Compensation Table. Participants in the Deferred Compensation Plan may choose
between four investment options including Phantom Shares for their plan
balances.
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
FUND AMERICAN COMMITTEE
The Company notes the following relationships and transactions pertaining
to Messrs. Clark, Cochran and Gillespie who are members of the Compensation
Committee and/or the Human Resources Committee.
Mr. Clark is Vice Chairman of Lehman. Lehman has, from time to time,
provided various services to Fund American including investment banking
services, brokerage services, underwriting of debt and equity securities and
financial consulting services. The amounts paid by Fund American to Lehman
during 1998 were immaterial to both Fund American and Lehman.
Mr. Cochran is Chairman and CEO of FSA. As of December 31, 1998 Fund
American had a 25% economic interest in FSA. During 1998, Mr. Kemp served as
the Chairman of FSA's compensation committee which determines Mr. Cochran's
compensation.
Mr. Gillespie is a Partner in CS&M, which has been retained by Fund
American from time to time to perform legal services. The amounts paid by Fund
American to CS&M during 1998 were immaterial to both Fund American and CS&M.
Fund American believes that all the preceding transactions were on terms
that were reasonable and competitive and did not serve to impair the
independence of the Compensation Committee and/or the Human Resources Committee.
Additional transactions of this nature may be expected to take place in the
ordinary course of business in the future.
CERTAIN FILINGS UNDER SECTION 16
Pursuant to SEC rules relating to the reporting of changes in beneficial
ownership of the Company, Mr. Barrette amended a Form 4 filing in February 1999
that served to correct a filing originally made in August 1998.
PROPOSAL 2
CHARTER AMENDMENT TO CHANGE
THE CORPORATE NAME
The second proposal to be acted upon at the 1999 Annual Meeting calls for
the Restated Certificate of Incorporation of the Company to be amended to change
the corporate name of the Company to "White Mountains Insurance Group, Inc."
(the "Name Change").
Because the Company has largely concluded its transformation from a passive
holding company to a financial services operating company specializing in
property and casualty insurance and reinsurance, management and the Board
believe it appropriate for the corporate name to reflect such a change in
orientation and purpose and to formally recognize the Company's corporate
presence in Northern New England. Accordingly, Proposal 2 seeks shareholder
approval to amend the Company's Restated Certificate of Incorporation by
deleting the present First Article thereof and substituting therefor a new First
Article as follows:
First: The name of the Corporation is "White Mountains Insurance Group,
Inc."
If the Name Change is approved by the holders of Shares representing a
majority of the votes entitled to be cast with respect thereto, the Name Change
shall become effective upon the execution and filing by the Company of a
certificate of amendment with the appropriate Delaware governmental authorities
(which is expected to occur promptly after the 1999 Annual Meeting). If the
Name Change is approved, it is expected that the Company would undertake a
change to its New York Stock Exchange ticker symbol from "FFC" to a new symbol
more reflective of the Company's new name.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2 WHICH WOULD
CHANGE THE NAME OF THE COMPANY TO "WHITE MOUNTAINS INSURANCE GROUP, INC."
16
<PAGE>
PROPOSAL 3
CHARTER AMENDMENT TO REDUCE
THE NUMBER OF AUTHORIZED SHARES
OF CAPITAL STOCK
The third proposal to be acted upon at the 1999 Annual Meeting calls for
the Restated Certificate of Incorporation of the Company to be amended to reduce
the total number of Shares and shares of preferred stock ("Preferred Shares")
the Company has the authority to issue from one hundred twenty-five million to
fifteen million and from ten million to one million, respectively (the "Capital
Stock Reduction").
Because the Company has dramatically reduced its Shares outstanding from
more than sixty-six million in 1985 to less than six million in 1999, management
and the Board believe that the Company should reduce the total number of Shares
and Preferred Shares that it has the authority to issue from a total of one
hundred thirty-five million to sixteen million which would reduce certain annual
fees (which are based solely on the total shares authorized) yet would continue
to provide the Company with sufficient flexibility with regard to any potential
future capital stock transactions.
Accordingly, Proposal 3 seeks shareholder approval to amend the Company's
Restated Certificate of Incorporation by deleting the present Fourth Article
thereof and substituting therefor a new Fourth Article as follows:
Fourth: The total number of shares of Common Stock which the Corporation
shall have the authority to issue is fifteen million (15,000,000) shares of
Common Stock having a par value of one dollar ($1.00) per Share. The total
number of shares of Preferred Stock which the Corporation shall have the
authority to issue is one million (1,000,000) shares having a par value of one
dollar ($1.00) per preferred share."
If the Capital Stock Reduction is approved by the holders of Shares
representing a majority of the votes entitled to be cast with respect thereto,
the Capital Stock Reduction shall become effective upon the execution and filing
by the Company of a certificate of amendment with the appropriate Delaware
governmental authorities (which is expected to occur promptly after the 1999
Annual Meeting).
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3 WHICH WOULD
REDUCE THE NUMBER OF AUTHORIZED SHARES OF ITS CAPITAL STOCK FROM A TOTAL OF ONE
HUNDRED THIRTY-FIVE MILLION TO SIXTEEN MILLION.
PROPOSAL 4
APPOINTMENT OF INDEPENDENT AUDITORS
Subject to shareholder approval, the Audit Committee of the Board has
appointed PricewaterhouseCoopers LLP ("PwC") as Fund American's Independent
Auditors for 1999. A representative from PwC will attend the 1999 Annual
Meeting and will be provided with the opportunity to make a statement and will
be available to answer appropriate questions.
PwC has served as Folksamerica's Independent Auditors since 1981 and has
served as FSA's Independent Auditors since 1989. The Audit Committee has
recommended that PwC succeed KPMG LLP as the Company's Independent Auditors for
1999 due to the significance of Folksamerica and FSA to the Company's 1999
financial position and results of operations.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 4 APPROVING THE APPOINTMENT OF PWC
AS FUND AMERICAN'S INDEPENDENT AUDITORS FOR 1999.
OTHER MATTERS
MANNER OF VOTING PROXIES
Shares represented by all valid proxies received will be voted in the
manner specified in the proxies. Where specific choices are not indicated, the
Shares represented by all valid proxies received will be voted: (i) for the
election of nominees named earlier in this Proxy Statement as directors; (ii)
for the Name Change; (iii) for the Capital Stock Reduction; and (iv) for the
appointment of PwC as Independent Auditors.
17
<PAGE>
Should any matter not described above be acted upon at the meeting, the
persons named in the proxy card will vote in accordance with their judgment.
The Board knows of no other matters which are to be considered at the 1999
Annual Meeting.
VOTES REQUIRED FOR APPROVAL
Proposals 1 and 4 require a favorable vote of a majority of the votes
actually cast with respect thereto (excluding abstentions and Shares not voted).
Proposals 2 and 3 require a favorable vote of a majority of the votes entitled
to be cast.
INSPECTORS OF ELECTION
First Chicago Trust Company of New York, a division of EquiServe, P.O. Box
2500, Jersey City, New Jersey 07303-2500, has been appointed as Inspectors of
Election for the 1999 Annual Meeting. Representatives of First Chicago Trust
Company of New York will attend the 1999 Annual Meeting to receive votes and
ballots, supervise the counting and tabulating of all votes and ballots, and
determine the results of the vote.
COSTS OF SOLICITATION
The solicitation of proxies will be made primarily by mail; however,
directors, officers, employees and agents of the Company may also solicit
proxies by telephone, telegram or personal interview. Solicitation costs will
be paid by the Company. Upon request, the Company will reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding proxy materials to their principals.
AVAILABLE INFORMATION
The Company and Source One are subject to the informational reporting
requirements of the Exchange Act. In accordance therewith, the Company files
reports, proxy statements and other information with the SEC, and Source One
files reports and other information with the SEC.
THE COMPANY WILL PROVIDE TO EACH PERSON TO WHOM A COPY OF THIS PROXY
STATEMENT IS DELIVERED, UPON REQUEST AND WITHOUT CHARGE, COPIES OF ALL DOCUMENTS
(EXCLUDING EXHIBITS) FILED BY THE COMPANY WITH THE SEC. Written or telephone
requests should be directed to the Corporate Secretary, Fund American
Enterprises Holdings, Inc., 80 South Main Street, Hanover, New Hampshire
03755-2053, telephone number (603) 643-1567.
www.FUNDAMERICAN.COM
All reports, including press releases, SEC filings and other information
for the Company, its subsidiaries and its affiliates are available for viewing
or download at our new website. PLEASE VISIT US!
PROPOSALS BY SHAREHOLDERS FOR THE 2000 ANNUAL MEETING OF SHAREHOLDERS
If any shareholder that is a qualified holder of record of Shares having an
aggregate market value of at least $2,000 wishes to present a proposal for
action at the 2000 Annual Meeting of Shareholders, such proposal must be
received by the Corporate Secretary at 80 South Main Street, Hanover, New
Hampshire 03755-2053, no later than February 25, 2000 in order to be considered
for inclusion in the Company's 2000 Proxy Statement. Under the Company's
Bylaws, a shareholder proposal shall include (in addition to any requirements of
law): (i) a brief description of the proposal and the reasons for action upon
it at the 2000 Annual Meeting of Shareholders (and in the event that the
proposal includes an amendment to the Company's Certificate of Incorporation,
the language of the proposed amendment); (ii) the name and address of the
shareholder making the proposal; (iii) a representation that the shareholder is
a qualified holder of record of Shares having an aggregate market value of at
least $2,000 and that the shareholder intends to appear at the meeting, in
person or by proxy; and (iv) any material interest of the shareholder in such
proposal.
By Order of the Board of Directors
DENNIS P. BEAULIEU, Corporate Secretary
March 29, 1999
18
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PROXY
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING MAY 27, 1999
The undersigned hereby appoints K. Thomas Kemp and Robert P. Cochran, and
each of them, proxies with full power of substitution, to vote all Shares of
the undersigned at the 1999 Annual Meeting of shareholders to be held May 27,
1999, and at any adjournment thereof, upon all subjects that may properly
come before the meeting including the matters described in the proxy
statement furnished herewith, subject to any directions indicated on the
reverse of this card or below. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL
VOTE FOR THE ELECTION OF DIRECTORS, FOR THE NAME CHANGE, FOR THE CAPITAL
STOCK REDUCTION, FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS, AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING.
Your vote for the Election of Directors may be indicated on the reverse. The
following Directors are being nominated at this meeting for election to terms
ending in the year indicated.
2000. Arthur Zankel
2002. John J. Byrne
George J. Gillespie, III
Frank A. Olson
(Change of address/comments)
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(If you have written in the above space,
please mark the corresponding box on
the reverse side of this card.)
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO FIRST CHICAGO
TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, EDISON, NEW JERSEY 08818-9052.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
SEE REVERSE SIDE
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/X/ PLEASE MARK YOUR 0278
VOTES AS IN THIS
EXAMPLE.
This proxy when properly executed will be voted in the manner directed
herein. If no directions are made, this proxy will be voted FOR the Election
of Directors, FOR the Name Change, FOR the Capital Stock Reduction and FOR
the Appointment of Independent Auditors.
THE BOARD OF DIRECTORS RECOMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 AND 4.
FOR WITHHELD
1. Election of / / / /
Directors
(see reverse)
FOR, except vote withheld from the following nominee(s):
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FOR AGAINST ABSTAIN
2. Name Change / / / / / /
Change of Address / /
Comments on
Reverse Side
FOR AGAINST ABSTAIN
3. Capital Stock Reduction / / / / / /
4. Appointment of / / / / / /
Independent Auditors
The signer hereby revokes all proxies heretofore given by the signer to vote
at said meeting or any adjournment thereof.
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
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SIGNATURE(S) DATE
