SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
AMERICAN SAFETY INSURANCE GROUP, LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
AMERICAN SAFETY INSURANCE GROUP, LTD.
44 Church Street
Hamilton HM HX, Bermuda
-----------------------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held June 25, 1999
-----------------------
Notice is hereby given that the Annual General Meeting of Shareholders
(the "Annual Meeting") of American Safety Insurance Group, Ltd. (the "Company")
will be held at the Elbow Beach Hotel, Paget, Bermuda on Friday, June 25, 1999,
at 10:00 a.m., for the following purposes:
1. Election of Directors. To elect two members to the Company's Board of
Directors to serve three year terms expiring at the 2002 Annual
General Meeting of Shareholders (Proposal 1).
2. Ratification of Auditors. To ratify the Board of Directors' selection
of KPMG LLP as independent public accountants for the Company's fiscal
year ending December 31, 1999.
3. Other Matters. To consider such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Board of Directors has set May 3, 1999 as the record date for the
Annual Meeting. Only shareholders of record at the close of business on the
record date will be entitled to notice of and to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE
PROPOSALS LISTED ABOVE AND MORE PARTICULARLY DESCRIBED IN THE ATTACHED PROXY
STATEMENT.
YOUR PROXY IS IMPORTANT. WHETHER OR NOT A SHAREHOLDER PLANS TO ATTEND
THE ANNUAL MEETING, PLEASE VOTE BY MARKING THE PROPOSAL, SIGNING AND MAILING THE
PROXY TO THE COMPANY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE.
YOUR PROXY MAY BE REVOKED, IF YOU CHOOSE, AT ANY TIME PRIOR TO THE VOTE BEING
TAKEN AT THE ANNUAL MEETING.
By Order of the Board of Directors
Fred J. Pinckney
Secretary
May 27, 1999
<PAGE>
AMERICAN SAFETY INSURANCE GROUP, LTD.
-----------------------
PROXY STATEMENT
Annual General Meeting of Shareholders
To Be Held June 25, 1999
PROXY SOLICITATION AND VOTING
General
This Proxy Statement is being furnished in connection with the Board of
Directors' solicitation of proxies from the shareholders of American Safety
Insurance Group, Ltd. (the "Company") for use at the Annual General Meeting of
Shareholders (the "Annual Meeting").
The Company is a specialty insurance and financial services holding company
which, through its subsidiaries, develops, underwrites and manages and markets
primary casualty insurance and reinsurance programs in the alternative insurance
market for environmental risks, employee leasing and staffing industry risks,
and other specialty risks, as well as providing a broad range of financial
services and products to middle market businesses. Unless otherwise indicated by
the context, the term "Company" shall refer to American Safety Insurance Group,
Ltd. and its subsidiaries.
The enclosed proxy is for use at the Annual Meeting if a shareholder is
unable to attend the Annual Meeting in person or wishes to have his shares voted
by proxy, even if he attends the Annual Meeting. Any proxy may be revoked by the
person giving it at any time before its exercise, by notice to the Secretary of
the Company, by submitting a proxy having a later date, or by such person
appearing at the Annual Meeting and electing to vote in person. All shares
represented by valid proxies received pursuant to this solicitation and not
revoked before their exercise, will be voted in the manner specified therein. If
a proxy is signed and no specification is made, the shares represented by the
proxy will be voted "for" the Proposals described in this Proxy Statement and in
accordance with the best judgment of the persons exercising the proxy with
respect to any other matters properly presented for action at the Annual
Meeting.
This Proxy Statement and the enclosed proxy are being mailed to the
Company's shareholders on or about May 27, 1999.
Record Date and Outstanding Shares
The Board of Directors has set May 3, 1999 as the record date for the
Annual Meeting. Only shareholders of record at the close of business on the
record date will be entitled to notice of and to vote at the Annual Meeting. As
of the record date, there were 6,061,550 common shares of the Company issued and
outstanding.
Quorum and Voting Rights
A quorum for the transaction of business at the Annual Meeting consists of
the holders of at least one-third of the outstanding common shares of the
Company entitled to vote at the Annual Meeting present in person or represented
by proxy.
Each holder of common shares of the Company is entitled to one vote per
share on each matter to come before the Annual Meeting, other than a holder
subject to the 9.5% voting limitation as set forth in the Company's Bye-Laws.
Each Proposal requires the affirmative vote of a majority of the common shares
of the Company present in person or represented by proxy at the Annual Meeting.
Solicitation of Proxies
In addition to this solicitation by mail, the officers and employees of the
Company, without additional compensation, may solicit proxies in favor of the
Proposals, if deemed necessary, by personal contact, letter, telephone or other
means of communication. Brokers, nominees and other custodians and fiduciaries
will be requested to forward proxy solicitation material to the beneficial
owners of the common shares of the Company where appropriate, and the Company
will reimburse them for their reasonable expenses incurred in connection with
such transmittals. The costs of solicitation of proxies for the Annual Meeting
will be borne by the Company.
<PAGE>
ELECTION OF DIRECTORS
(Proposal 1)
General
The members of the Board of Directors of the Company are elected by the
shareholders. The directorships of the Company are divided into three classes,
with the members of each class serving three year terms, and the shareholders of
the Company elect one class annually. The Board of Directors presently consists
of seven members.
The Board of Directors has nominated two persons for election as directors
of the Company at the Meeting to serve three year terms which will expire in
2002. The nominees are presently directors of the Company. The terms of the
other directors of the Company who are not up for election will continue as
indicated below. Each nominee has agreed to his nomination and to serve as a
director, if elected. If for any reason any nominee should become unable or
unwilling to accept nomination or election, persons voting the proxies will vote
for the election of another nominee designated by the Board of Directors.
Management of the Company has no reason to believe that any nominee will not
serve, if elected.
Set forth below is information about each nominee for election to a term as
a director expiring in 2002, and each incumbent director whose term of office
expires in 2000 or 2001.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1
TO ELECT AS DIRECTORS THE NOMINEES NAMED BELOW.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS FOR THREE YEAR TERMS EXPIRING IN
2002.
Lloyd A. Fox, age 53, has been a director of the Company since 1996 and is
President and Chief Executive Officer of the Company. Since 1990, Mr. Fox has
headed the management of the Company's U.S. subsidiaries. He assisted as general
legal counsel in the formation of the Company in 1986. Previously, Mr. Fox was
an attorney for 16 years in Atlanta, Georgia, where his practice centered on
insurance, the environmental and construction industries, as well as corporate
and taxation matters. He received a juris doctor degree from the University of
Michigan Law School in 1974 and a bachelor of science degree in pharmacy from
Brooklyn College of Pharmacy in 1968.
<PAGE>
David V. Brueggen, age 52, has served as a director of the Company since
1986. Mr. Brueggen is senior vice president of finance of Anson Industries, Inc.
in Melrose Park, Illinois, which is engaged in drywall, acoustical and foam
insulation contracting. Mr. Brueggen has been employed by Anson Industries, Inc.
since 1982. Previously he was an audit manager with Arthur Andersen & Co., an
international public accounting firm, for 10 years. Mr. Brueggen is a certified
public accountant.
MEMBERS OF THE BOARD OF DIRECTORS WHOSE TERMS EXPIRE IN 2000.
Cody W. Birdwell, age 46, has served as a director of the Company since
1986. Mr. Birdwell has been president of Houston Sunbelt Communities, L.C. in
Houston, Texas since 1993, which is engaged in subdivision and mobile home
community development and sales. Mr. Birdwell has 16 years experience in general
and environmental contracting.
Thomas W. Mueller, age 44, has served as a director of the Company since
1986. Mr. Mueller has been vice president of Cardinal Industrial Insulation Co.,
Inc. in Louisville, Kentucky since 1975, which is engaged in industrial
insulation and asbestos and sound abatement. Mr. Mueller has 24 years experience
in the construction business.
Timothy E. Walsh, age 48, has served as a director of the Company since
1986. Mr. Walsh has been president of Environmental Construction, Inc. in
Tallmadge, Ohio since 1985, which is engaged in the general contracting,
demolition, excavation, asbestos abatement and environmental remediation. Mr.
Walsh has 25 years experience in the construction business and is a registered
civil engineer.
MEMBERS OF THE BOARD OF DIRECTORS WHOSE TERMS EXPIRE IN 2001.
William O. Mauldin, Jr., age 58, has served as a director of the Company
since 1986. Mr. Mauldin has been president of Midwest Materials Co. in
Springfield, Missouri since 1975, which is engaged in insulation and cold
storage. Mr. Mauldin has 32 years experience in the construction business.
Frederick C. Treadway, age 46, has served as the Chairman of the Board of
Directors of the Company since 1986. Mr. Treadway has been president of
Specialty Systems, Inc. in Indianapolis, Indiana since 1977, which is engaged in
general construction and asbestos abatement. Mr. Treadway has 25 years
experience in the construction business. Since 1996, Mr. Treadway, as owner and
president of Treadway Racing LLC, has been a team owner in the Indy Racing
League.
Meetings and Committees of the Board of Directors
The Board of Directors of the Company had five meetings and acted by
delegated authority on two occasions during the 1998 fiscal year. All directors
attended at least 75% of all of the meetings of the Board of Directors and the
committees thereof on which they served during the 1998 fiscal year.
The Board of Directors has established four standing committees: the audit
committee, the compensation committee, the executive committee and the finance
committee.
The audit committee is composed entirely of non-employee directors and
reviews the scope of the Company's audit, recommends to the Board of Directors
the engagement of independent accountants, and reviews such accountants'
reports. The current members of the audit committee are Messrs. Birdwell,
Brueggen and Walsh. The audit committee held one meeting during the 1998 fiscal
year.
The compensation committee is composed entirely of non-employee directors
and recommends to the Board of Directors matters regarding executive
compensation and stock options. The current members of the compensation
committee are Messrs. Brueggen, Mueller and Treadway. The compensation committee
held no meetings during the 1998 fiscal year.
The executive committee exercises general powers and authorities of the
Board of Directors between meetings of the Board of Directors. The executive
committee also has responsibility for nominating directors. The current members
of the executive committee are Messrs. Brueggen, Fox, Mueller and Treadway. The
executive committee held no meetings and acted by unanimous written consent on
three occasions during the 1998 fiscal year.
The finance committee is responsible for recommending portfolio allocations
to the Board of Directors, approving the Company's guidelines which provide
standards to ensure portfolio liquidity and safety, approving investment
managers and custodians for portfolio assets, and considering other matters
regarding the financial affairs of the Company. The current members of the
finance committee are Messrs. Birdwell, Brueggen and Mauldin. The finance
committee held one meeting during the 1998 fiscal year.
Director Compensation
Pursuant to the Company's Directors Stock Plan (the "Directors Plan"),
non-employee directors are awarded an annual "retainer award" in the form of
common shares of the Company having a fair market value of $5,000. The retainer
award shares are granted to the directors who are serving as directors
immediately after each Annual General Meeting and the fair market value of the
common shares is determined as of that date. The retainer award shares vest as
of the day immediately preceding the next Annual General Meeting following the
date of grant.
Directors are also paid $200 per day for attendance at each meeting of the
Board of Directors and $200 per day for attendance at each meeting of a
committee of the Board of Directors on which they serve. Directors are also
reimbursed for their reasonable travel expenses in connection with their Board
service.
Executive Compensation
The following table sets forth the compensation earned by the Chief
Executive Officer and the other current executive officers of the Company whose
salary and bonus were in excess of $100,000 (the "Named Executive Officers") for
services rendered in all capacities to the Company and its subsidiaries during
the years indicated:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
Securities
Underlying All Other
Options Compensa-
Name and Principal Position Year Salary Granted tion(1)
<S> <C> <C> <C> <C>
Lloyd A. Fox 1998 $392,485 250,000 $ 3,928
Chief Executive Officer 1997 367,485 95,630 4,800
and President 1996 367,485 -- 4,500
Stephen R. Crim 1998 126,477 25,000 3,830
Executive Vice President 1997 105,057 -- 3,180
1996 142,111 -- 4,263
</TABLE>
- --------
(1) Represents amounts accrued for contributions by the Company with
respect to its profit sharing plan.
<PAGE>
Stock Option Plan
The Company has adopted the Incentive Stock Option Plan (the "Incentive
Plan") which is intended to further the interests of the Company and its
shareholders by attracting, retaining and motivating management and other
employees. The Incentive Plan provides for the grant of stock options, which may
be either non-qualified options or incentive stock options for tax purposes.
The administrator of the Incentive Plan is the compensation committee of
the Company's Board of Directors. The compensation committee is authorized to
determine the terms and conditions of all option grants, subject to the
limitations set forth in the Incentive Plan. In accordance with the terms of the
Incentive Plan, the option price per share shall not be less than the fair
market value of the Common Shares on the date of grant and the term of any
option granted thereunder may be no longer than ten years. The rights of
recipients receiving these stock options, generally, vest equally over three
years, beginning with the first anniversary date of grant, and expire ten years
from the date of grant.
Stock Option Grants, Exercises and Year-End Values
The following table sets forth information regarding individual grants of
stock options made during 1998 to the Named Executive Officers identified in the
Summary Compensation Table above.
<TABLE>
Option Grants in 1998
<CAPTION>
Percent of Potential
Total Realizable Value
Number of Options at Assumed Annual
Securities Granted to Rates of Stock Price
Underlying Employees Appreciation
Options in Exercise Expir- for Option Term(2) --
Name .......... Granted Fiscal Price Per ation ------------------
(1) Year Share Date 5% 10%
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lloyd A. Fox .. 250,000 74% $11 2/12/08 $1,729,460 $4,382,792
Stephen R. Crim 25,000 7 11 2/12/08 172,946 438,279
</TABLE>
- ----------
<PAGE>
(1) All options vest equally over three years from the date of grant.
(2) The dollar amounts calculated represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming that the stock price on the date of grant
appreciates at the specified annual rates of appreciation, compounded
annually over the term of the option. These calculations are based on rules
promulgated by the Securities and Exchange Commission. The following table
sets forth information regarding options exercised in 1998 and the number
and value of exercised and unexercised stock options held as of December
31, 1998 by the Named Executive Officers identified in the Summary
Compensation Table above.
Aggregated Option Exercises in 1998 and Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options at
Options at Year-End Year-End(2)
Number of ---------------------- --------------------
Shares Ac- Value
quired on Realized Exer- Unexer- Exer- Unexer-
Name Exercise (1) cisable cisable cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Lloyd A. Fox 44,540(3) $302,426 51,090(3) 250,000 $186,989 $ 0
Stephen R.
Crim 0 0 0 25,000 0 0
</TABLE>
- -------
<PAGE>
(1) The dollar value was calculated determining the difference between the fair
market value of the underlying securities on the date of exercise and the
exercise price of the options.
(2) The dollar value was calculated determining the difference between the fair
market value of the underlying securities at December 31, 1998 ($9.62 per
share) and the exercise price of the options.
(3) These options were granted to Intersure Reinsurance Company, over which Mr.
Fox exercises sole investment and voting power.
Compensation Committee Interlocks and Insider Participation
No member of the compensation committee of the Company's Board of Directors
serves as an officer or employee of the Company or its subsidiaries, or as a
member of the compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
compensation committee.
The three current members of the compensation committee of the Company's
Board of Directors (Messrs. Treadway, Brueggen and Mueller) are also directors
of American Safety Risk Retention Group, Inc., a non-subsidiary affiliate. The
directors of American Safety Risk Retention Group, Inc. are elected annually by
its insureds. The Company derived approximately 32% ($3.3 million) of its
revenues in 1996, 15% ($2.1 million) of its revenues in 1997, and 10% ($1.8
million) of its revenues in 1998 from American Safety Risk Retention Group, Inc.
Synergy Insurance Services, Inc., the Company's principal U.S. program
development, underwriting and administrative services subsidiary, leases
approximately 15,000 square feet of office space in Atlanta, Georgia from a
landlord, which is owned by Messrs. Birdwell, Fox, Mueller, Treadway and Walsh,
all of whom are directors of the Company. The lease commenced on March 1, 1996
and expires on February 28, 2001. The lease provides for a base annual rent plus
an annual increase based on the consumer price index, with such increase not
less than 4% per annum. Synergy paid rent to the landlord of $153,183 in 1996,
$187,921 in 1997, and $227,277 in 1998.
Compensation Committee Report on Executive Compensation
The compensation committee is composed of three non-employee directors and
recommends to the Board of Directors matters regarding executive compensation.
The compensation for each of the Company's executive officers consists of a base
salary, an annual discretionary bonus, stock options, health insurance and other
benefits. The compensation committee generally reviews salary recommendations
with the Company's Chief Executive Officer with regard to other executive
officers and employees. The compensation committee reviews salary
recommendations based upon an evaluation of the individual's performance of the
position held, the Company's operating results, and the individual's
contribution to the Company's operating results. The base salary is intended to
be competitive with base salaries paid by other insurance companies to
executives with similar qualifications, experience and responsibilities. In
addition to the base salary, each executive is eligible for an annual
discretionary bonus based on the Company's performance and an award of stock
options. The general purpose of granting stock options to the Company's
executives is to align the interests of the executive with the interests of the
Company's shareholders. Stock options are granted under the Company's Incentive
Plan at the prevailing market price on the date of grant and will only have
value if the Company's stock price increases. Generally, the stock options vest
in equal amounts over the period of three years from the date of grant and
executives must be employed by the Company at the time of vesting in order to
exercise the options. Grants of stock options generally are based on the
position held by the executive and the valuation of the executive's past and
expected future contribution to the Company's operating results.
Lloyd A. Fox, Chief Executive Officer and President of the Company, entered
into a five year Employment Agreement with the Company in March 1997, which
provides for an annual base salary of $375,000 and other customary executive
benefits including stock options. Mr. Fox's compensation is determined pursuant
to the principles noted above, and specific consideration is given to Mr. Fox's
responsibilities and experience in the insurance industry and his contribution
to the Company's operating results.
The members of the compensation committee are Thomas W. Mueller (chairman),
David V. Brueggen and Frederick C. Treadway.
<PAGE>
Performance Graph
The following performance graph compares the total shareholder return on
the Company's common shares with the Standard & Poor's 500 Index and a peer
group index compiled by SNL Securities for less than $250 million insurance
asset-size companies, assuming an investment of $100 on February 13, 1998, the
date on which the Company's common shares first began trading on the NASDAQ
National Market. The Company's common shares were later listed on the New York
Stock Exchange on February 5, 1999. The comparison in the performance graph is
based on historical data and is not intended to forecast future performance of
the Company's common shares. The source of the performance graph is SNL
Securities, Charlottesville, Virginia.
[Performance Graph]
<TABLE>
<CAPTION>
2/13/98 3/31/98 6/30/98 9/30/98 12/31/98
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
American Safety Insurance
Group, Ltd. 100 110 95 72 78
S&P 500 100 109 112 101 122
SNL Less Than $250M
Insurance Asset-Size Index 100 103 92 73 75
</TABLE>
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the common
shares of the Company owned as of May 3, 1999 (i) by each person who
beneficially owns more than 5% of the common shares, (ii) by each of the
Company's directors, (iii) by each of the Company's named Executive Officers
identified in the Summary Compensation Table above, and (iv) by all directors
and executive officers of the Company as a group. Except as otherwise indicated,
each person listed below has sole voting and investment power with respect to
such common shares.
<TABLE>
<CAPTION>
Number of Percentage
Name of Beneficial Owner Shares(1) Ownership
<S> <C> <C>
Frederick C. Treadway(2) 740,861 12.22%
Lloyd A. Fox(3) 391,982 6.32
David V. Brueggen(4) 286,576 4.72
William O. Mauldin, Jr.(5) 241,280 3.98
Cody W. Birdwell(6) 196,500 3.24
Thomas W. Mueller(7) 182,749 3.01
Timothy E. Walsh(8) 137,550 2.26
Stephen R. Crim(9) 35,683 *
------- -----
All directors and executive
officers as a 2,220,520 35.75%
group (10 persons) ========== ======
</TABLE>
- ---------------
*Less than 1%
<PAGE>
(1) Shares beneficially owned include shares that may be acquired pursuant to
the exercise of outstanding stock options that are exercisable within 60
days of May 3, 1999.
(2) Includes 690,727 shares held of record by Treadway Associates, L.P. Mr.
Treadway is Chairman of the Board of Directors of the Company, and his
business address is 9406 Promontory Circle, Indianapolis, Indiana 46236.
(3) Includes 96,940 shares held of record by Intersure Reinsurance Company,
134,424 shares subject to immediately exercisable stock options, and 41,920
shares owned by his spouse as to which Mr. Fox disclaims beneficial
ownership. Mr. Fox is a director and the Chief Executive Officer and
President of the Company, and his business address is 1845 The Exchange,
Suite 200, Atlanta, Georgia 30339.
(4) Includes 284,572 shares held of record by Vertecs Corporation and 2,003
shares owned by his spouse and children, all of which Mr. Brueggen
disclaims beneficial ownership. Mr. Brueggen is a director of the Company.
(5) Represents shares held of record by A.R.I. Incorporated. Mr. Mauldin is a
director of the Company.
(6) Represents 98,250 shares held of record by Mr. Birdwell and 98,250 shares
of record held by The Cody Birdwell Family Limited Partnership. Mr.
Birdwell is a director of the Company.
(7) Represents shares held of record by The Mark C. Mueller Trust over which
Mr. Thomas W. Mueller is the sole trustee. Excludes 182,745 shares held of
record by The Thomas W. Mueller Trust for which Mark C. Mueller is the sole
trustee and 51,960 shares held of record by Market Street Realty Trust, for
which Thomas W. Mueller is one of three trustees, all of which Thomas W.
Mueller disclaims beneficial ownership. Thomas W. Mueller is a director of
the Company.
(8) Excludes 261,345 shares held of record by Walsh Properties Partnership as
to which Mr. Walsh disclaims beneficial ownership. Mr. Walsh is a director
of the Company.
(9) Represents 27,200 shares held of record by Omega Reinsurance Company, 144
shares held of record as custodian for his child, and 8,334 shares subject
to immediately exercisable stock options. Mr. Crim is Executive Vice
President of the Company.
Compliance with Section 16(a) of the Securities and Exchange Act of 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own 10% or more of the
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. Officers,
directors and 10% or more shareholders are required by the Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company, during 1998 all
directors, officers or 10% shareholders complied with all Section 16(a) filing
requirements.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the Company entered into a retrocessional excess of loss
reinsurance treaty (for policy limits in excess of reinsurance obtained from
other unaffiliated reinsurers) with Intersure Reinsurance Company ("Intersure
Re"), which is owned by Lloyd A. Fox, the President and a director of the
Company. The treaty covers certain asbestos liability and environmental
remediation liability insurance policies in force, written or renewed by
American Safety Risk Retention Group, Inc., a non-subsidiary affiliate, or
American Safety Casualty Insurance Company, a subsidiary, for which the Company
acts as a reinsurer. During 1996, 1997 and 1998, the Company paid reinsurance
premiums of $451,728, $318,773 and $293,000, respectively, to Intersure Re.
In 1996, the Company entered into a retrocessional excess of loss
reinsurance treaty (for policy limits in excess of reinsurance obtained from
other unaffiliated reinsurers) with Omega Reinsurance Company ("Omega Re"),
which is owned by Stephen R. Crim, the Executive Vice President of the Company.
The treaty covers certain asbestos liability and environmental remediation
liability insurance policies in force, written or renewed by American Safety
Risk Retention Group, Inc. a non-subsidiary affiliate, or American Safety
Casualty Insurance Company, a subsidiary, for which the Company acts as a
reinsurer. During 1996 the Company paid no reinsurance premiums to Omega Re, and
during 1997 and 1998 the Company paid reinsurance premiums of $111,200 and
$75,000, respectively, to Omega Re.
In 1998, the Company had a loan outstanding to Frederick C. Treadway,
Chairman of the Company, and Treadway Corporation in the principal amount of
$580,000 at an interest rate of 9.25% with quarterly interest only payments and
a maturity date of October 17, 1999. The outstanding balance of the loan at
December 31, 1998 was $280,000. The loan is secured by Mr. Treadway's personal
guaranty and a pledge of common shares of the Company owned by Mr. Treadway.
Management believes the terms of the aforementioned transactions are no
less favorable to the Company than can be obtained from unaffiliated third
parties. Any future transactions between the Company and any director, officer
or principal shareholder of the Company, or any affiliate of such person, will
be on terms no less favorable to the Company than can be obtained from
unaffiliated third parties.
RATIFICATION OF KPMG LLP
(Proposal 2)
The Board of Directors requests that the shareholders of the Company ratify
the Board's selection of KPMG LLP, as the Company's independent public
accountants for the Company's fiscal year ending December 31, 1999. A
representative of KPMG LLP is expected to be present at the Annual Meeting and
available to respond to appropriate questions. KPMG LLP has served as the
Company's independent auditors since 1993.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company's Proxy
Statement for the 2000 Annual General Meeting of Shareholders must be received
at the offices of the Company, 44 Church Street, P.O. Box HM 2064, Hamilton HM
HX, Bermuda, not later than January 28, 2000.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Company was not
aware of any matters to be presented for action at the Annual Meeting other than
the Proposals referred to herein. If other matters are properly presented for
action at the Annual Meeting, it is intended that the persons named as proxies
will vote or refrain from voting in accordance with their best judgment on such
matters.
ANNUAL REPORT
A copy of the Company's 1998 Annual Report is being mailed to
each shareholder together with this Proxy Statement.
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