<PAGE> 1
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 (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 Rule 14a-11(c) or
Rule 14a-12
MILWAUKEE INSURANCE GROUP, INC.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MILWAUKEE INSURANCE GROUP, INC.
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- - -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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> 2
MILWAUKEE INSURANCE GROUP, INC.
803 West Michigan Street
Milwaukee, Wisconsin 53233
(414) 271-0525
NOTICE OF ANNUAL MEETING
To the Shareholders of
MILWAUKEE INSURANCE GROUP, INC.
Notice is hereby given that the annual meeting of shareholders (the "Annual
Meeting") of Milwaukee Insurance Group, Inc., a Wisconsin corporation (the
"Company"), will be held on Thursday, May 18, 1995, at 4:00 p.m. Central Time
at the home office of the Company, 803 West Michigan Street, Milwaukee,
Wisconsin for the following purposes; all as more particularly described in the
accompanying Proxy Statement:
1. To elect two directors to serve until the 1998 annual meeting of
shareholders.
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 31, 1995 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Annual Meeting. A list of shareholders entitled to vote at
the Annual Meeting will be open to the examination of any shareholder during
ordinary business hours beginning two business days after the date of this
notice through the date of the Annual Meeting at the offices of the Company,
803 West Michigan Street, Milwaukee, Wisconsin 53233.
A proxy and Proxy Statement are enclosed herewith.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS IMPORTANT THAT YOU
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD USING THE
ENCLOSED SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO ITS BEING
VOTED.
By Order of the Board of Directors
Daniel A. Riedl
Secretary
April 17, 1995
<PAGE> 3
MILWAUKEE INSURANCE GROUP, INC.
803 WEST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53233
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 1995
This Proxy Statement is being furnished to shareholders by the Board of
Directors (the "Board") of Milwaukee Insurance Group, Inc., a Wisconsin
corporation (the "Company"), beginning on or about April 17, 1995 in connection
with a solicitation of proxies by the Board for use at the annual meeting of
shareholders to be held on Thursday, May 18, 1995, at 4:00 p.m. Central Time at
the home office of the Company, 803 West Michigan Street, Milwaukee, Wisconsin,
and all adjournments or postponements thereof (the "Annual Meeting").
Milwaukee Mutual Insurance Company ("Mutual") owns approximately 48% of the
Company's outstanding common stock, $.01 par value per share (the "Common
Stock"). A copy of the Annual Report to Shareholders containing financial
statements for the year ended December 31, 1994 is enclosed. Such Annual
Report is neither a part of this Proxy Statement nor incorporated herein by
reference.
Execution of a proxy given in response to this solicitation will not affect
a shareholder's right to attend the Annual Meeting and to vote in person.
Presence at the Annual Meeting of a shareholder who has signed a proxy does not
in itself revoke a proxy. Any shareholder giving a proxy may revoke it at any
time before it is voted by giving notice thereof to the Company in writing or
in open meeting.
A proxy, in the enclosed form, which is properly executed, duly returned to
the Company and not revoked will be voted in accordance with the instructions
contained therein. The shares represented by executed but unmarked proxies
will be voted FOR the two persons nominated for election as directors referred
to herein, and on such other business or matters which may properly come before
the Annual Meeting in accordance with the best judgment of the persons named as
proxies in the enclosed form of proxy. Other than the election of directors,
the Board has no knowledge of any matters to be presented for action by the
shareholders at the Annual Meeting.
Only holders of record of Common Stock at the close of business on March
31, 1995 are entitled to notice of and to vote at the Annual Meeting. On that
date, the Company had outstanding and entitled to vote 4,150,600 shares of
Common Stock, each of which is entitled to one vote per share.
-1-
<PAGE> 4
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect two directors of the
Company, each to hold office until the 1998 annual meeting of shareholders and
until their respective successors are duly elected and qualified. Directors of
the Company are divided into three classes, with each class elected to hold
office until the third succeeding annual meeting of shareholders. Set forth
below are the Board's nominees to serve as directors of the Company. Unless
shareholders otherwise specify, the shares represented by the proxies received
will be voted in favor of the election as directors of the two persons named as
nominees herein. The Board has no reason to believe that any of the listed
nominees will be unable or unwilling to serve as a director if elected.
However, in the event that any of the nominees should be unable or unwilling to
serve, the shares represented by proxies received will be voted for other
nominees selected by the Board.
The following sets forth certain information, as of March 31, 1995, about
each of the Board's nominees for election at the Annual Meeting and for each of
the directors continuing in office. Except as otherwise noted, each nominee
has engaged in the principal occupation or employment and held the offices
shown for more than the past five years.
NAME, PRINCIPAL OCCUPATION OR EMPLOYMENT, DIRECTOR
DIRECTORSHIPS AND AGE SINCE
- - --------------------------------------------------------------------------------
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
TERM EXPIRING AT 1998 ANNUAL MEETING OF SHAREHOLDERS
JOSEPH C. BRANCH, 1990
[PHOTO] Partner of the law firm of Foley & Lardner since 1989;
Shareholder of the law firm of Whyte & Hirschboeck S.C.
from 1977 to 1989; age 51.
ROBERT W. DOUCETTE, 1985
[PHOTO] Chairman of the Board and Director of the Company since
1985; President of the Company from 1985 to 1993;
Chairman of the Board of Mutual since 1963 and
Director since 1955; age 71.
-2-
<PAGE> 5
NAME, PRINCIPAL OCCUPATION OR EMPLOYMENT, DIRECTOR
DIRECTORSHIPS AND AGE SINCE
- - --------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1996 ANNUAL MEETING OF SHAREHOLDERS
DANIEL R. DOUCETTE, 1992
[PHOTO] President of the Company since 1993; Vice President of the
Company and Director of Mutual from 1991 to 1993; President of
Mutual and President of Milwaukee Guardian Insurance, Inc. and
Milwaukee Safeguard Insurance Company, subsidiaries of the
Company, since 1989 and 1995, respectively; age 45.
MAUREEN J. OSTER, 1987
[PHOTO] President of Johnson Asset Management of Wisconsin, Inc.
(formerly Lipper Advisory Services, Inc.), a registered
investment advisor, since 1985 and Chief Investment Officer since
1992; Chief Executive Officer of Johnson Asset Management of
Wisconsin, Inc. from 1985 to 1992; age 47.
-3-
<PAGE> 6
NAME, PRINCIPAL OCCUPATION OR EMPLOYMENT, DIRECTOR
DIRECTORSHIPS AND AGE SINCE
- - --------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1997 ANNUAL MEETING OF SHAREHOLDERS
MICHAEL S. ARIENS, 1986
Chairman of the Ariens Company, a manufacturer of power lawn and
[PHOTO] garden equipment since 1992; President of the Ariens Company from
1969 to 1992; Director of Wisconsin Public Service Corporation, a
public utility company; Director of David White, Inc., a
manufacturer of surveying equipment; age 63.
JAMES L. DORMAN, 1986
[PHOTO] Chairman and CEO of Amalga Composites, Inc., a manufacturer of
advanced composite components since 1989; President and CEO of
Success Business Industries, Inc., a manufacturer of office
products from 1990 to 1994; Chairman and CEO of Universal
Statuary Corp., a manufacturer of home decorative products from
1987 to 1993; Chairman of the Board and CEO of Intercontinental
Trading, Ltd., a provider of services in international trade
since 1984; age 62.
MICHAEL J. KOSS, 1991
[PHOTO] Chief Executive Officer since 1991, and President and Director
since 1987, of Koss Corporation, a manufacturer of electronics;
age 40.
Robert W. Doucette is the father of Daniel R. Doucette and the brother of
Thomas I. Doucette.
Directors are elected by a plurality of the votes cast (assuming a quorum
is present). Consequently, any shares not voted at the Annual Meeting, whether
due to abstentions, broker non-votes or otherwise, will have no impact on the
election of directors.
THE BOARD RECOMMENDS JOSEPH C. BRANCH AND ROBERT W. DOUCETTE FOR ELECTION AS
DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE "FOR" ALL NOMINEES. SHARES OF
COMMON STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR"
ALL NOMINEES.
-4-
<PAGE> 7
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has three standing committees which perform auditing and
compensation functions, each of which is a joint committee with Mutual. The
Board has no nominating committee.
FINANCIAL AUDIT COMMITTEE. The Financial Audit Committee met three times
during 1994 and consists of Mr. Dorman, Ms. Oster and two directors of Mutual.
Among other things, the Financial Audit Committee (a) reviews and recommends to
the Company's Board of Directors the engagement of the Company's independent
accountants and the scope and timing of their audit of the Company's financial
statements, (b) reviews with the independent accountants and Company management
policies and procedures with respect to internal auditing and financial and
accounting controls, and reviews with the independent accountants their report
on the Company's financial statements and their recommendations for
improvements in the Company's internal controls and the implementation of such
recommendations. No member of the Financial Audit Committee is an officer or
employee of the Company or Mutual.
INVESTMENT COMMITTEE. The Investment Committee met three times in 1994 and
consists of Mr. Ariens, Mr. Branch, Ms. Oster and two directors of Mutual. The
Investment Committee oversees the management of the Company's investment
portfolio, reviews the investment guidelines and strategy adopted by the
Company and approves significant investment transactions.
COMPENSATION COMMITTEE. The Compensation Committee met four times during
1994 and consists of Mr. Dorman, Mr. Koss, Mr. Branch, and two directors of
Mutual. The Compensation Committee establishes the Company's and Mutual's
executive compensation policies.
COMPENSATION OF DIRECTORS
Directors of the Company who are also officers of the Company or Mutual
receive no fees for service as Directors of the Company. Outside Directors are
paid an annual retainer of $5,000 and are paid $500 plus travel expenses for
each committee and special Board meeting attended. Each current and future
non-employee director also receives a one-time grant of an option to purchase
5,000 shares of Common Stock pursuant to the Company's 1994 Incentive Stock
Plan. The grants of option are at market value on the date of grant and vest
25% two years from grant and an additional 25% each year thereafter.
NUMBER OF BOARD MEETINGS AND ATTENDANCE
During 1994, seven meetings of the Board were held. Each Director attended
at least 75% of the aggregate of the total number of meetings of the Board and
the total number of meetings held by all committees on which the director
served during 1994.
-5-
<PAGE> 8
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 31, 1995, regarding
beneficial ownership of Common Stock by each director and nominee, each of the
executive officers named in the Summary Compensation Table set forth below, all
of the directors and executive officers as a group and each person known to be
the beneficial owner of 5% or more of the outstanding Common Stock. Except as
otherwise indicated in the footnotes, all of the persons listed below have sole
voting and investment power over the shares of Common Stock identified as
beneficially owned.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Name of Beneficial Owner Ownership (1) Percent of Class
- - ------------------------ ------------- ----------------
<S> <C> <C>
Robert W. Doucette 40,500 *
Daniel R. Doucette 18,415 *
Michael S. Ariens 200 *
Maureen J. Oster 800 *
James L. Dorman 3,000 *
Michael J. Koss 0 *
Joseph C. Branch 1,000 *
Thomas I. Doucette 1,200 *
Robert W. Grieb 1,000 *
Tracy Watchmaker Schneider 3,697 *
Peter J. Donegan 2,821 *
Gil C. Rohde, Jr. 2,509 *
All directors and executive
officers as a group (16 persons) 82,986 2.0%
Milwaukee Mutual Insurance Company
803 West Michigan Street
Milwaukee, WI 53233 2,010,000 48.4%
Heartland Advisors, Inc. 553,000 (2) 13.3%
790 North Milwaukee Street
Milwaukee, WI 53202
T. Rowe Price Associates, Inc. and,
T. Rowe Price Small Cap. Value Fund, Inc.
100 East Pratt Street
Baltimore, MD 21202 240,000 (3) 5.8%
</TABLE>
- - ----------------
* Less than one percent.
-6-
<PAGE> 9
(1) Includes shares subject to exercisable stock options as follows: Mr.
Daniel Doucette, 2,215 shares, Ms. Watchmaker Schneider, 783 shares, Mr.
Donegan 603 shares; and all directors and executive officers as a group,
5,506 shares.
(2) As reported by Heartland Advisors, Inc. (Heartland) on a Schedule 13G dated
February 15, 1995. Heartland reported sole dispositive power over 553,000
shares of Common Stock and sole voting power over none of the shares of
Common Stock.
(3) As reported by T. Rowe Price Associates, Inc. and T. Rowe Price Small Cap
Value Fund, Inc. on a Schedule 13G dated February 15, 1995. These
securities are owned by various individual investors including the T. Rowe
Price Small Cap Value Fund, Inc. (which owns 240,000 shares) for which T.
Rowe Price Associates, Inc. serves as investment adviser with power to
direct investments and/or shared power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such
securities; however Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities.
SECTION 16(A) DISCLOSURE. Section 16(a) of the Securities Exchange Act of
1934 requires the Company's officers and directors and persons who own more
than ten percent of the Common Stock to file reports of their ownership of
Common Stock with the Securities and Exchange Commission and with the Company.
Based solely on a review of the copies of such reports furnished to the
Company, or written representations that no reports were required, the Company
believes that during 1994 all required reports were filed timely.
EXECUTIVE COMPENSATION
Prior to 1995 the Company and its subsidiaries had no employees. The
employees of Mutual were utilized by the Company on a cost-allocated basis.
Consequently, all salaries, bonuses and other compensation were determined and
paid by Mutual. Effective January 1, 1995, the Company assumed Mutual's role
as employer.
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information concerning compensation
paid by Mutual for the last three fiscal years to each of the Company's five
most highly compensated executive officers, including the Chief Executive
Officer. The approximate percentages of compensation allocated to the Company
pursuant to an intercompany allocation agreement are included in the footnotes
to the table. The table also includes compensation paid to Thomas I. Doucette,
the former President of Milwaukee Life Insurance Company (Milwaukee Life), the
Company's life insurance subsidiary, which was sold effective July 1, 1994.
The persons named in the table are sometimes referred to in this proxy
statement as the "named executive officers."
-7-
<PAGE> 10
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL STOCK OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS(2) AWARDS SARS(3) COMPENSATION(4)
- - ------------------ ---- ------ -------- ------ --------- -------------
($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Doucette 1994 $275,769 $230,000 $48,125 15,182 $66,883
President of the Company, 1993 253,000 77,992 0 4,430 2,189
President of Mutual, President 1992 232,500 2,992 0 150,000 10,299
of Milwaukee Guardian
Insurance, Inc. (5)
Robert W. Grieb 1994 160,069 0 0 0 272,961
President of Milwaukee 1993 154,553 1,901 0 0 158,941
Safeguard Insurance 1992 148,624 1,900 0 0 6,842
Company (5), Chief
Operating Officer of Mutual.
Retired effective 1/13/95
Thomas I. Doucette 1994 146,748 15,000 0 0 158,251
President of Milwaukee 1993 140,999 1,736 0 0 159,980
Life Insurance Company 1992 135,606 1,736 0 0 6,251
until July 1994 (5)
Vice President of Mutual
Peter J. Donegan 1994 101,491 27,000 9,625 6,428 5,098
Vice President 1993 92,933 1,085 0 1,205 4,419
Commercial Lines 1992 86,930 1,992 0 0 3,906
Tracy Watchmaker Schneider 1994 129,490 15,000 9,625 6,738 5,818
Treasurer, Vice President of 1993 123,165 1,508 0 1,565 5,860
Finance and Treasurer of Mutual 1992 119,250 2,821 0 0 5,386
Gil C. Rohde, Jr. 1994 108,823 10,000 9,625 5,456 4,448
Vice President Personal Lines, 1993 79,545 6,800 0 0 3,939
President Alpha Property & 1992 0 0 0 0 0
Casualty Ins. Company (5)
</TABLE>
- - -------------------------
(1) For 1994 approximately 60% of all amounts shown were allocated to the
Company. For the year 1992 and for the period January 1, 1993 to March 31,
1993, approximately 40% of the total compensation paid by Mutual to
Daniel R. Doucette, Robert W. Grieb, Peter J. Donegan, Tracy Watchmaker
Schneider and Gil C. Rohde, Jr., and 100% of the total compensation paid
to Thomas I. Doucette was allocated to the Company. From April 1 to
December 31, 1993, approximately 60% of the total compensation paid by
Mutual to Daniel R. Doucette, Robert W. Grieb, Peter J. Donegan, Tracy
Watchmaker Schneider and Gil C. Rohde, Jr., and 100% of the total
compensation paid to Thomas I. Doucette was allocated to the Company.
-8-
<PAGE> 11
(2) The 1994 awards also reflect salary and bonus adjustments made to account
for a shift in the Compensation Committee annual review of executive
compensation from mid-year to year end. See Report on Executive
Compensation. For 1992 and 1993, the amounts shown were granted pursuant
to Mutual's incentive compensation program. The bonus shown for Daniel R.
Doucette in 1993 also includes an additional discretionary bonus of
$75,000. The amounts shown for 1994 represent awards based upon incentive
compensation criteria for executive management established by the
Compensation Committee in 1994. See Report on Executive Compensation. The
figures shown include awards made in July based on 1993 performance and
awards made in December 1994 but paid in 1995 based upon an evaluation of
1994 performance.
(3) The aggregate restricted stock holdings of Daniel R. Doucette is 5,000
shares and Tracy Watchmaker Schneider, Peter J. Donegan and Gil C. Rohde
1,000 shares each and their value at year end is $51,250 and $10,250
respectively. The stock vests one year from the date of grant and
dividends, if any will be paid on such stock. A total of 12,000 shares of
restricted stock have been granted.
(4) Consists of Mutual matching and profit sharing contributions under the
Milwaukee Insurance Employee 401(k) Savings and Retirement Plan, which is
a profit sharing plan maintained by Mutual under Section 401(k) of the
Internal Revenue Code, and accruals under supplemental retirement
arrangements with Daniel R. Doucette, Robert W. Grieb and Thomas I.
Doucette of $60,133, $266,211 and $151,774, respectively. See Agreements
with Named Executive Officers.
(5) Subsidiaries of the Company.
STOCK OPTIONS
Mutual had in effect the 1986 Milwaukee Mutual Insurance Company Stock
Option Plan (the "1986 Option Plan") pursuant to which options to purchase
Common Stock were granted to key employees (including executive officers) of
Mutual and its affiliates. Prior to 1994 all grants were made pursuant to the
1986 Option Plan. With the May 1994 approval of the Company's 1994 Incentive
Stock Plan (1994 Plan) no additional grants were or will be made under the 1986
Option Plan. The following table presents certain information as to stock
option grants made during fiscal 1994 pursuant to the 1994 Plan.
-9-
<PAGE> 12
OPTION/SAR GRANTS IN 1994 FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants(1) Option Term
- - ----------------------------------------------------------------------------- -------------------
Number of
Securities % of
Underlying Total Options/
Options/ SAR's
SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) (1) Fiscal Year ($/Sh) Date 5% 10%
- - ---- ------- ----------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Doucette 5,182 8.7% $11.00 07/01/04 $35,808 $90,928
10,000 16.8% $11.00 12/21/04 $50,800 $146,100
Robert W. Grieb 0 N/A N/A N/A N/A N/A
Thomas I. Doucette 0 N/A N/A N/A N/A N/A
Tracy Watchmaker
Schneider 1,738 2.9% $11.00 07/01/04 $12,010 $30,467
5,000 8.4% $11.00 12/21/04 $25,400 $73,050
Peter J. Donegan 1,428 2.4% $11.00 07/01/04 $9,867 $25,033
5,000 8.4% $11.00 12/21/04 $25,400 $73,050
Gil C. Rohde, Jr. 456 .7% $11.00 07/01/04 $3,151 $7,994
5,000 8.4% $11.00 12/21/04 $25,400 $73,050
</TABLE>
- - ---------------
(1) All grants shown expire ten years from the date of grant and vest 25% one
year from the date of grant and an additional 25% each year thereafter
until fully exercisable. There are no SAR rights accompanying the option
grants.
AGGREGATED OPTION/SAR EXERCISES IN 1994
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
at FY-End(#) at FY-End($)(1)
------------ ---------------
Shares
Acquired Value
Name on Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- - ---- -------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Doucette 0 0 2,215 167,397 $0 $450,000
Robert W. Grieb 0 0 0 0 0 0
Thomas I. Doucette 0 0 0 0 0 0
Tracy Watchmaker Schneider 0 0 783 7,520 0 0
Peter J. Donegan 0 0 603 7,030 0 0
Gil C. Rohde, Jr. 0 0 0 5,456 0 0
</TABLE>
- - -------------------------
(1) The dollar values are calculated by determining the difference between the
fair market value of the underlying Common Stock and the exercise price of
the options at exercise or fiscal year-end, as the case may be.
-10-
<PAGE> 13
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Mutual has supplemental retirement arrangements or salary continuation
agreements with Daniel R. Doucette, Robert W. Grieb and Thomas I. Doucette.
The agreements with Robert W. Grieb and Thomas I. Doucette provide that
following their retirement on January 13, 1995 and June 30, 1995, respectively
and during their lifetime and the lifetime of their spouses, they or their
surviving spouse will be paid an annual amount approximately equal to the
difference between (a) 70% of their average base salary plus bonus, if any,
over the final five years of their employment and (b) the benefits otherwise
payable to them under Mutual's retirement plans computed as a straight line
single life annuity. These benefits are also payable upon their death or
disability prior to retirement. Daniel R. Doucette's agreement is
substantially similar except that it is based solely on his average annualized
income (salary and bonus) over his final five years of employment and it
provides certain reduced benefits upon early retirement. The average
compensation for purposes of these arrangements and agreements for Daniel R.
Doucette, Robert W. Grieb and Thomas I. Doucette is currently approximately
$310,000, $145,000 and $141,000, respectively.
REPORT ON EXECUTIVE COMPENSATION
All salaries and bonuses of the Company's executive officers were paid by
Mutual until December 31, 1994. Pursuant to the terms of an agreement between
the Company and Mutual and a related expense allocation policy, the Company is
charged for its proportionate share of all such salaries and bonuses, primarily
based in 1994 on the basis of participation in the pooling agreement for
property/casualty subsidiaries and upon an estimate of the time actually spent
by each officer on the business of the Company's life insurance subsidiary and
upon the investments of each related entity. See "Certain Relationships and
Transactions." Due to this compensation sharing relationship the executive
compensation paid by Mutual has been subject to approval by the Joint
Compensation Committee of the Company and Mutual (the Committee). Currently
the Committee is comprised of three of the Company's outside directors and two
of the Mutual Company's outside directors.
Overview of 1994 Compensation
1994 marks a departure from the Company and Mutual's past procedure for
establishing executive compensation in that the evaluation of executive
performance has been advanced from mid-year to the close of the fiscal year.
This change was undertaken so that compensation would be more directly tied to
the Company's fiscal year performance. An identified drawback to mid-year
evaluations was that incentive compensation was reflected in financial and
shareholder reports for the year following and was not easily correlated with
performance in the year on which the compensation was based. The change also
removes the potential that performance evaluation would be influenced by
partial year financial performance.
To implement the change in procedure, the Committee evaluated and adjusted
executive compensation both at mid-year, based on 1993 performance and at year
end, based on 1994 results. The modification of past practice was also suited
to the transition in executive management completed during fiscal year 1994.
In addition to the procedural change, the Committee also refined its
incentive compensation evaluation criteria as outlined in the appropriate
section of this report.
-11-
<PAGE> 14
Compensation Objectives of the Joint Compensation Committee
The Committee has identified two principal objectives which it seeks to
attain through the executive compensation program. These objectives are the
attraction and retention of key executives through competitive base
compensation and the integration of total compensation with annual and
long-term strategic objectives through company-wide performance based incentive
compensation elements. It is the intention of the Committee that executive
annual compensation shall continue to be the deductible to the Company.
Base Compensation
The Committee seeks to establish base compensation which is sufficient to
attract and retain key executives. Appropriate base salary ranges are
identified by the Committee with the assistance of the Chief Executive Officer
of the Company through comparisons with companies of like size, structure and
complexity of the Company and Mutual. Reference is made to reports of
executive compensation developed by industry organizations and information
derived from public reports filed by Wisconsin and national competitors.
Recommendations regarding base salaries for specific executives within the
established ranges are made to the Committee by the CEO based on each
executive's performance during the past year evaluated by the CEO and the other
executive officers, the performance of the executive's operational area, the
experience and value of the executive to the Company and Mutual, and the
Company's and Mutual's financial performance during the past year. The
Committee reviews and discusses these recommendations and approves or modifies
the recommendations based upon their independent analysis.
Performance Based Compensation
In 1994 the Committee, with the assistance of the Chief Executive Officer,
completed its development of incentive compensation criteria to be used in
evaluating 1994 and future year's executive performance. The incentive
compensation criteria were separately developed for each executive position
although each contains common elements directly tied to the Company's and
Mutual's fiscal performance including the Company's common stock performance as
compared to industry peers reflected by both the Standard & Poors' Property and
Casualty Stock Group, and benchmark competitors independently monitored by
management. See "Performance Information". Awards of incentive compensation
are partially made as cash payments and in part grants of stock options under
the Company's 1994 Incentive Stock Plan. By means of a formula developed as
part of the incentive compensation criteria, incentive compensation is indexed
as a percentage of the executive's base salary, which percentage is tied to the
Company's profitability.
Based on the Company's 1994 fiscal performance the formula established as a
guideline that incentives not exceed 25% of the base. The Committee has
reserved the discretion to eliminate incentive compensation awards should the
Company not generate a profit. Factors identified by the Committee in making
1994 incentive compensation awards included steps undertaken to further improve
loss ratios, downsize operations and reduce expenses through extensive review
of all expenditures by a subcommittee of executive management. In 1994 the
executive team also implemented an improved revenue and expense planning
mechanism including performance modeling.
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<PAGE> 15
In recognition of the recently completed transition in executive management and
with the purpose of directly tying executive financial motivation to Company
stock performance the Committee, at the close of 1994, made one-time grants of
restricted stock and stock options to the current executive management team
including the Chief Executive Officer. As a further incentive to executive
management to increase its ownership in the Company the Committee authorized
cash reimbursement for 50% of open market purchases of the Company's stock up
to but not to exceed 25% of the 1994 cash incentive award. The Committee also
authorized agreements with the key executives providing for eighteen months of
salary continuation in the event of termination within eighteen months of a
change of control of the Company among other benefits.
The total compensation package afforded all executives also includes an
Executive Health plan which supplements medical and health expenses of the
executives above the Mutual health plan up to a maximum of $2,000 and group
term Life and Disability coverages which the Committee views as requisite to
meeting its objective of attracting and retaining key executives through
compensation packages competitive in its industry.
Compensation of the Chief Executive Officer
The Chief Executive Officer's compensation, like that of all executive
officers of the Company is comprised of a base salary and performance based
incentive compensation. Consistent with the change in executive compensation
review procedures Mr. Doucette's compensation was evaluated at mid-year based
on 1993 performance and at year end based on 1994 performance.
The base salary of Daniel R. Doucette was established based upon salary
comparisons obtained by the Committee with the scope of such studies focused on
the compensation of approximately 30 executives performing a similar role in
national companies structured like the Company and Mutual as well as Midwest
regional property and casualty insurers with whom the Company and Mutual
compete. The Committee revised the base salary in 1994 based upon the
competitive industry salary information, as well as the accomplishments of
fiscal year 1993 and 1994 including continued improvement in the core
operational results of the Company. The Committee anticipates annual revisions
of the President's base salary consistent with meeting its objective of
retaining key executives.
Incentive compensation awarded at mid-year for 1993 performance was based
upon the successful completion of the secondary stock offering, the integration
of Alpha Property and Casualty Insurance Company, the initiation of
comprehensive expense and revenue planning and the implementation of expense
control measures including operational downsizing implemented in early 1994.
The continued improvement in loss ratios combined with satisfactory performance
within the established revenue and expense plan was also relied upon as a basis
for the award. The incentive compensation for 1993 was awarded in the form of
a cash bonus of $100,000 and a grant of stock options.
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<PAGE> 16
As with other executives the Committee established incentive compensation
criteria pursuant to which it evaluated the CEO's 1994 performance at year end.
The formula adopted by the Committee for evaluation of the CEO's performance
included measurement of stock performance, loss ratios, and expense management.
Consistent with the formula a cash compensation award of $130,000 was made by
the Committee. In addition to the criteria measured in the formula the
Committee considered the CEO's personal role in the profitable sale of the
Company's Life subsidiary, and leadership in improving the Company's and
Mutual's asset management in determining the appropriateness of the incentive
award.
The Committee included the CEO in the one time grant of restricted stock
and stock options to further integrate his future compensation with the
continued financial performance of the Company. These awards are consistent
with the objectives of the long-term compensation package established at the
time that Mr. Doucette was named President of Mutual.
The long-term compensation package, adopted by the Board of Directors of
Mutual in 1992 has two components. The first component, a Stock Option
Agreement, is directly tied to future and long-term performance of the Company.
Under the Agreement, Mutual granted the President an option to purchase an
aggregate amount of 150,000 shares of the Company's Common Stock. The option
price is $7.25 per share, which was 100% of the fair market value of such stock
on January 2, 1992. Twenty percent of the option vests in 1997, with an
additional 20% vesting in each of the following four years. The options expire
on December 31, 2006. The options may be exercised as stock appreciation
rights. Mutual will satisfy any requirement to deliver shares of Common Stock
under the Stock Option Agreement out of shares already owned by Mutual or
through purchases on the open market or in private transactions. No new shares
will be issued by the Company as a result of exercises under the Stock Option
Agreement.
Joseph C. Branch
James L. Dorman
Michael J. Koss
Company Members of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Branch was a member of the Compensation Committee during 1994 and is a
partner of the law firm of Foley & Lardner. Foley & Lardner provided legal
services to the Company and Mutual during 1994.
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<PAGE> 17
PERFORMANCE INFORMATION
Set forth below is a line graph comparing the yearly percentage change
during the last five years in the Company's cumulative total shareholder return
on the Common Stock with the cumulative total return of companies in the
Standard & Poor's 500 Stock Index and companies in the Standard & Poor's
Property and Casualty Stock Group. The total return information presented in
the graph assumes the reinvestment of dividends.
[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
S&P 500 $100 $97 $126 $136 $149 $130
S&P P/C 100 98 122 143 141 129
Milw. Ins. 100 45 73 145 98 103
</TABLE>
-15-
<PAGE> 18
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Mutual owns approximately 48% of the outstanding Common Stock. The
Company's business and operations are integrated with the business and
operations of Mutual. Through December 31, 1994 the Company had no employees
and was dependent upon Mutual for the sale and underwriting of insurance, the
servicing of policyholder claims and all other aspects of the Company's
operations. Mutual provided substantially all of the facilities, employees and
data processing and administrative services required to conduct the business of
the Company. Effective January 1, 1995 the Company assumed Mutual's role as
employer and provider of all services.
Property and casualty underwriting expenses of Mutual and the Company's
Guardian and Safeguard subsidiaries are shared under a pooling agreement (the
"Pooling Agreement") in accordance with the percentage participation of the
parties. Under the reinsurance Pooling Agreement all premiums, losses, loss
adjustment expenses, and underwriting expenses of the parties (after deducting
all other reinsurance) are prorated among the parties on the basis of their
percentage participations in the pool. Historically pooling percentages have
been established based principally upon the capital (surplus) of each insurer
available to support insurance writings. Effective April 1, 1993 the pooling
percentages of Guardian and Safeguard were increased from 20% each to 30% in
part as a result of the increase in each of their capital following the public
offering of newly issued shares of Common Stock of the Company. The Company is
contingently liable on losses ceded to Mutual under the Pooling Agreement if
Mutual fails to meet its obligations under the Pooling Agreement. The Pooling
Agreement has no fixed term and may be amended or terminated only by written
agreement of all the parties. During the fiscal year ended December 31, 1994
the Company ceded to Mutual premiums earned in the amount of $91,388,125,
unearned premiums in the amount of $125,644,611, and reserves for losses and
loss adjustment expenses in the amount of $68,374,559. During the fiscal year
ended December 31, 1994, the Company assumed from Mutual premiums earned in the
amount of $100,580,530, unearned premiums in the amount of $38,635,132, and
reserves for losses and loss adjustment expenses in the amount of $83,495,754.
The increase in the pooling percentages caused Mutual to pay $35,505,000 to
the Guardian and Safeguard subsidiaries, which equaled the additional
liabilities assumed less a ceding commission of $3,276,000. The transfer of
assets took place over the course of 1993 with final settlement in 1994. Mutual
paid interest of $17,930 in 1994 which represented 7.25% on the outstanding
balance.
As of January 1, 1994, the Company assumed responsibility for
administration of the Pooling Agreement. In exchange for certain
administrative services provided on behalf of the pooled insurance operations,
the Company receives a fee from Mutual equal to one percent of Mutual's direct
written premiums. Income from this fee amounted to $733,381 during 1994.
The Company's has a real estate loan in the amount of $1,000,000 which is a
second mortgage on a real estate project in which Mutual is the debtor. The
loan bears interest at 12% and is due June 1, 1995.
-16-
<PAGE> 19
Milwaukee Life owned the home office building of Mutual but transferred
ownership to the Company by means of a dividend immediately prior to the life
company sale in 1994. The Company receives annual rental income of $518,000
from Mutual for its use of the home office building under the terms of a lease
agreement expiring in 2004, with six 6-year renewal options. Prior to the
Company's sale of its life insurance subsidiary the rental income was received
by that subsidiary. The rights to the rental income were assigned to the
Company prior to the sale.
Effective December 31, 1994, Mutual sold the computer application software
used to process insurance business subject to the Pooling Agreement to a bank
for a payment of $5,075,000. In a related transaction the Company leased the
software from the bank. The Company intends to provide the application
software for use under the Pooling Agreement and to be reimbursed for the cost
of the lease by the participants in the Pooling Agreement. The Company is
accounting for this agreement as a capital lease. The initial lease term is
one year and may be renewed for two additional one year terms provided, among
other conditions, there is no decrease in the appraised value of the software.
The Company may purchase the software and terminate the lease at any time upon
payment of all remaining lease obligations due.
Milwaukee Life provided group life insurance coverage to Mutual. The
amount paid to Milwaukee Life for 1994 insurance coverage while owned by the
Company was $99,568. The Company was allocated a percentage of this amount
under the Pooling Agreement and 100% of the amount relating to Mutual employees
utilized exclusively by the Company's non-pooled subsidiaries.
Intercompany balances between the Company and Mutual are created in the
ordinary course of business. Amounts are settled on a monthly basis, with the
exception of balances generated as a result of the Pooling Agreement, which are
settled quarterly and no interest is charged thereon.
Director Branch is a partner in the law firm of Foley & Lardner. Foley &
Lardner provided legal services to the Company, Mutual, and entities in which
Mutual had an interest. In 1994 the firm was paid $323,598 for the legal
services rendered including services related to the Company's Incentive Stock
Plan, the sale and leaseback of processing software and the sale of Milwaukee
Life.
Effective January 1, 1994 Mutual and the Company's Alpha subsidiary entered
into an agreement under which Mutual will provide reinsurance on losses
exceeding $40,000 to a limit of $250,000 per loss. Alpha will pay Mutual an
estimated annual premium of $499,000 for this reinsurance which the Company
believes is consistent with market rates.
Other expenses which can be directly identified with Mutual or the Company
are paid by the company to which the expense is attributable, and all other
operating expenses relating to the business of Mutual and the Company are
allocated on an estimated cost basis in accordance with policies established in
good faith by their Boards of Directors.
All of the Company's officers are officers of Mutual and two of the
Company's directors are directors of Mutual. Agreements between the Company
and Mutual will not be modified, nor will transactions involving actual or
potential conflicts of interest with Mutual be entered into, without the
approval of a majority of the directors of the Company who are neither
officers, directors nor employees of Mutual.
-17-
<PAGE> 20
INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of Coopers & Lybrand L.L.P., which
served as independent certified public accountants for the fiscal year ended
December 31, 1994, will be present at the Annual Meeting to answer appropriate
questions and, if they so desire, to make a statement. As in the past, the
Company will not choose independent certified public accountants for the
purpose of auditing the consolidated financial statements of the Company for
the fiscal year ended December 31, 1995 until after the 1995 Annual Meeting of
Shareholders.
SHAREHOLDER PROPOSALS
A shareholder who intends to present a proposal for action at any annual
meeting and who desires that such proposal be included in the Company's proxy
materials must submit the proposal to the Company in advance of the meeting.
Proposals for the annual meeting to be held in 1996 must be received by the
Company at its principal office no later than December 15, 1995. In addition,
a shareholder who otherwise intends to present business at any annual meeting
must comply with, among other things, the notice requirements set forth in the
Company's By-laws.
OTHER MATTERS
THE COMPANY WILL FURNISH TO ANY SHAREHOLDER, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR 1994. REQUESTS MUST BE
ADDRESSED TO DANIEL A. RIEDL, SECRETARY, MILWAUKEE INSURANCE GROUP, INC., 803
WEST MICHIGAN STREET, MILWAUKEE, WISCONSIN 53233, (414) 271-0525.
All expenses of solicitation of proxies will be borne by the Company. In
addition to soliciting proxies by mail, proxies may be solicited personally and
by telephone by certain officers and regular employees of the Company.
Brokers, nominees and custodians who hold Common Stock in their names and who
solicit proxies from the beneficial owners will be reimbursed by the Company
for out-of-pocket and reasonable clerical expenses.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS IMPORTANT THAT YOU
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD USING THE
ENCLOSED SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO ITS BEING
VOTED.
By Order of the Board of Directors
MILWAUKEE INSURANCE GROUP, INC.
DANIEL A. RIEDL
Secretary
April 17, 1995
-18-
<PAGE> 21
MILWAUKEE INSURANCE GROUP, INC.
803 WEST MICHIGAN STREET, MILWAUKEE, WI 53233
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel R. Doucette and Daniel A. Riedl,
and each of them, as Proxies, each with the power to appoint his substitute;
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Common Stock of Milwaukee Insurance Group, Inc. (the "Company")
held of record by the undersigned on March 31, 1995, at the Annual Meeting of
Shareholders to be held on May 18, 1995 and at any adjournment thereof.
1. ELECTION OF DIRECTORS:
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY
and as provided in the Proxy to vote for the
Statement (except as provided nominees listed
to the contrary below) below and as in
the Proxy
Statement
Robert W. Doucette and Joseph C. Branch
(INSTRUCTION: (To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.)
________________________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be signed on the reverse side)
PROXY NO. NO. OF SHARES
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted FOR the nominees listed in Item 1 and FOR Item 2.
Dated___________________________, 1995
______________________________________
Signature
______________________________________
Signature if held jointly
(Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When
signing as attorney, personal
representative, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.)
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
