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.
Meridian Insurance Group, 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:
(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>
April 7, 1998
Dear Shareholder:
You are cordially invited to attend our Annual Meeting
of Shareholders at 2:00 p.m., Wednesday, May 13, 1998. The
meeting will be held in our home office at 2955 North
Meridian Street, Indianapolis, Indiana, in the Pennsylvania
Room. We will report on Meridian's 1997 business results
and on other matters of current interest to our shareholders.
Enclosed with this Proxy Statement are your proxy card
and Meridian's 1997 Annual Report. Your vote is important.
We encourage you to read this Proxy Statement and mark, sign
and return your proxy card in the enclosed envelope as soon
as possible whether or not you expect to attend the meeting.
All of us look forward to seeing you on May 13.
Sincerely,
Norma J. Oman
President and Chief Executive Officer
<PAGE>
MERIDIAN INSURANCE GROUP, INC.
Notice of 1998 Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Meridian
Insurance Group, Inc., will be held on May 13, 1998, at 2:00
p.m., Eastern Standard Time, in our home office at 2955
North Meridian Street, Indianapolis, Indiana, in the
Pennsylvania Room. The purpose of the meeting is to:
1. elect four directors; and
2. act on any other business properly coming before the meeting.
Shareholders of record at the close of business on March 13, 1998,
will be entitled to notice of and to vote at the Annual Meeting.
This Proxy Statement, proxy card and Meridian's 1997 Annual Report
to Shareholders are being distributed on or about April 7, 1998.
By order of the Board of Directors,
J. Mark McKinzie
Vice President, Corporate Secretary
and General Counsel
April 7, 1998
Indianapolis, Indiana
<PAGE>
MERIDIAN INSURANCE GROUP, INC.
2955 North Meridian Street
P.O. Box 1980
Indianapolis, Indiana 46206
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 13, 1998
Meridian Insurance Group, Inc., ("MIGI" or the
"Company" or "we") will hold our Annual Meeting of
Shareholders on May 13, 1998, at 2:00 p.m., Eastern Standard
Time. The meeting will be in our home office at 2955 North
Meridian Street, Indianapolis, Indiana, in the
Pennsylvania Room.
Our Board of Directors is mailing you this Proxy
Statement and the enclosed proxy card. Our purpose is to
solicit your proxy to be voted at the Annual Meeting and at
any adjournment of it. Below is important information about
the Annual Meeting and this Proxy Statement.
What you are voting on: The election of four
directors: John T. Hackett, David M. Kirr, Norma J. Oman
and James D. Price.
Who may vote: Shareholders as of the close of business
of March 13, 1998, (the "Record Date") are entitled to vote
at the Annual Meeting. Each shareholder is entitled to one
vote for each Common Share held on the Record Date.
How to vote: MIGI shareholders on the Record Date may
vote in person at the Annual Meeting or by proxy. We
recommend you vote by proxy even if you plan to attend the
Annual Meeting. You can always change your vote at the
Annual Meeting.
How proxies work: MIGI's Board of Directors is asking
for your proxy. Giving us your proxy means you authorize us
to vote your shares at the Annual Meeting in the manner you
direct. You may vote for all, some or none of our director
nominees. Sign and date the enclosed proxy card and return
it in the prepaid envelope. If you return your signed proxy
but do not specify how to vote, we will vote your shares in
favor of our director nominees.
How to revoke your proxy: You have the right to revoke
your proxy any time before the meeting by notifying MIGI's
Corporate Secretary or returning a later-dated proxy. You
may also revoke your proxy by voting in person at the Annual
Meeting.
If you receive more that one proxy card: It means you
hold shares registered in more than one account. Sign and
return all proxies to ensure that all your Common Shares are
voted.
A quorum: In order to carry on the business of the
Annual Meeting, we must have a quorum. This means at least
a majority of the outstanding Common Shares eligible to vote
must be represented at the Meeting, either by proxy or in
person. As of the Record Date, 6,637,853 MIGI Common Shares
were issued and outstanding. Any properly executed proxy
cards we receive will be considered part of the quorum,
including abstentions and broker non-votes. Broker non-
votes occur when a broker returns a proxy card but does not
have authority to vote on a particular proposal.
<PAGE>
Votes needed: The four director nominees receiving the
most votes will be elected to the Board of Directors. Only
votes cast for a nominee will be counted, except that your
proxy will be voted for the four management nominees unless
it contains instructions to the contrary. Abstentions,
broker non-votes and instructions on your proxy card to
withhold authority to vote for one or more of the nominees
will result in their receiving fewer votes. However, such
action will not reduce the number of votes the nominee
receives otherwise. As of the Record Date, Meridian Mutual
Insurance Company ("Meridian Mutual") owned 3,150,000 Common
Shares or approximately 47.5 percent of MIGI's outstanding
Common Shares. Meridian Mutual has advised MIGI it will
vote its shares in favor of the election of Ms. Oman and
Messrs. Hackett, Kirr and Price.
Attending the Annual Meeting: All shareholders as of
the Record Date, their proxyholders, and MIGI's guests may
attend the Annual Meeting.
Shareholder recommendations for directors: Any
shareholder may recommend a person as a candidate for
director of MIGI by writing to MIGI's Corporate Secretary at
P. O. Box 1980, Indianapolis, Indiana 46206. The
shareholder should include the candidate's name,
qualifications, and employment history. The candidate must
be qualified and expressly interested in serving on the Board.
Shareholder proposals for the 1999 Annual Meeting:
Shareholder proposals for next year's Annual Meeting must be
received by us by December 7, 1998. The proposals must be
in writing and addressed to MIGI's Corporate Secretary at
P.O. Box 1980, Indianapolis, Indiana 46206. We will include
a proposal in next year's proxy statement if it:
complies with Securities and Exchange Commission regulations and
represents a proper subject for shareholder action under Indiana law.
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table lists, as of March 13, 1998, the
number and percentage of MIGI's outstanding Common Shares
beneficially owned by:
each director of MIGI
each Named Executive Officer in the Summary Compensation Table
all directors and executive officers of MIGI as a group, and
each person known by MIGI to own beneficially more than five percent
of its Common Shares.
Each person has sole voting and sole investment power with
respect to the Common Shares they own, unless a footnote states otherwise.
<PAGE>
Percent of
Name of Individual Shares Beneficially Outstanding
or Identity of Group Owned Common Shares
Principal Shareholder:
Meridian Mutual Insurance Co. 3,150,000 47.5%
2955 N. Meridian Street
P.O. Box 1980
Indianapolis, Indiana 46206
Gregory M. Shepard 679,600 (1) 10.2%
Tracy M. Shepard
American Union Financial Corporation
Direct Auto Insurance Company
American Union Life Insurance Company
Direct Auto Indemnity Company
303 E. Washington Street
Bloomington, Illinois 61701
Franklin Resources, Inc. 400,000 (2) 6%
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin Advisory Services, Inc.
One Parker Plaza, 16th Floor
Ft. Lee, New Jersey 07024
Directors and Officers:
Ramon L. Humke 11,806 (3) *
Norma J. Oman 163,571 (4) 2.4%
Harold C. McCarthy 24,128 (3) *
Sarah W. Rowland 3,353 (3) *
Joseph D. Barnette, Jr. 8,153 (3) (5) *
Scott S. Broughton 21,153 (6) *
David M. Kirr 8,153 (3) *
John T. Hackett 5,653 (3) *
James D. Price 17,153 (3) (7) *
Thomas H. Sams 3,153 (8) (9) *
Steven R. Hazelbaker 35,166 (10) *
J. Mark McKinzie 38,917 (11) *
Brent Hartman 7,670 *
Timothy J. Hanrahan 37,164 (12) *
All directors and executive 423,616 (13) 6.1%
officers as a group (15 persons)
*The asterisk means this person beneficially owns less than
one percent of MIGI's outstanding Common Shares.
<PAGE>
(1) Gregory M. Shepard, Tracy M. Shepard, American Union
Financial Corporation, Direct Auto Insurance Company,
American Union Life Insurance Company, and Direct Auto
Indemnity Company filed a Schedule 13G with the Securities
and Exchange Commission on August 11, 1997, with regard to 679,600
MIGI Common Shares and provided MIGI with a copy of the Schedule 13G.
The Schedule 13G states that Gregory M. Shepard and Tracy M.
Shepard each own 50 percent, and collectively own 100
percent, of the common stock of American Union Financial
Corporation ("AUFC"), an Illinois corporation. Neither
Gregory M. Shepard nor Tracy M. Shepard directly owns any
MIGI Common Shares. AUFC owns 100 percent of the capital stock
of Direct Auto Insurance Company ("Direct Auto Insurance"). Direct
Auto Insurance owns 100 percent of the capital stock of American Union
Life Insurance Company ("AULIC") and Direct Auto Indemnity
Company ("Direct Auto Indemnity"). AUFC owns directly
67,790 MIGI Common Shares. AULIC and Direct Auto Indemnity
own directly 389,600 and 222,210 MIGI Common Shares, respectively.
(2) Franklin Advisory Services, Inc., Franklin Resources,
Inc., Charles B. Johnson, and Rupert H. Johnson, Jr., filed
a Schedule 13G with the Securities and Exchange Commission in
February 1997 with regard to 400,000 Common Shares of MIGI.
The Schedule 13G states that those 400,000 Common Shares are
beneficially owned by one or more open or closed-end
investment companies or other managed accounts which are
advised by direct and indirect investment advisory
subsidiaries ("Adviser Subsidiaries") of Franklin Resources,
Inc. ("FRI"). The advisory contracts give the Adviser
Subsidiaries all voting and investment power over the
securities the advisory clients own. Therefore, such
Adviser Subsidiaries may be deemed to be beneficial owner of
the Common Shares covered by the Schedule 13G filing. Charles B.
Johnson and Rupert H. Johnson, Jr. ("Principal Shareholders") each
own in excess of 10 percent of the outstanding common stock of FRI
and are the principal shareholders of FRI. FRI and the Principal
Shareholders may be deemed to be the beneficial owner of
securities held by persons and entities advised by FRI or
its subsidiaries. FRI, the Principal Shareholders, and each
of the Adviser Subsidiaries disclaim any economic interest
or beneficial ownership in any of the Common Shares covered
by the Schedule 13G filing.
(3) This number includes options to purchase 3,000 Common
Shares granted under MIGI's 1994 Outside Director Stock Option Plan.
(4) This number includes 142,461 Common Shares Ms. Oman has
the option to purchase under MIGI's Incentive Stock Plan.
(5) This number includes 2,000 Common Shares held by Mr. Barnette's spouse.
Mr. Barnette shares voting and dispositive power for this stock.
(6) Mr. Broughton was President and Chief Operating Officer
of Citizens Security Group Inc. ("CSGI"). When MIGI acquired CSGI,
Mr. Broughton signed a Consulting Services Agreement with the Company
which, among other matters, granted Mr. Broughton an option to purchase
20,000 Common Shares of the Company.
<PAGE>
(7) This number includes 2,000 Common Shares held by Mr. Price's spouse.
(8) This number includes 1,000 Common Shares owned by Waldemar Industries,
Inc. Mr. Sams is the principal owner of Waldemar Industries, Inc.
(9) This number includes options to purchase 2,000 Common
Shares granted under MIGI's 1994 Outside Director Stock Option Plan.
(10) This number includes 34,166 Common Shares Mr. Hazelbaker has the
option to purchase under MIGI's Incentive Stock Plan.
(11) This number includes 31,417 Common Shares Mr. McKinzie
has the option to purchase under MIGI's Incentive Stock Plan.
(12) This number includes 26,950 Common Shares Mr. Hanrahan
has the option to purchase under MIGI's Incentive Stock Plan.
(13) This number includes 304,325 Common Shares subject to
options to purchase under MIGI's Incentive Stock Plan or
MIGI's 1994 Outside Director Stock Option Plan. Common
Shares directly owned by Meridian Mutual are not included in
this number.
ELECTION OF DIRECTORS
The Board of Directors consists of ten directors
divided into three classes of at least three directors each.
Directors generally serve for terms of three years. The
term of one class of directors expires at each Annual
Meeting of Shareholders. According to MIGI policy, at least
two members of the Board of Directors will not otherwise be
affiliated with MIGI or Meridian Mutual.
Nominees for election this year are: Ms. Norma J.
Oman, Mr. John T. Hackett and Mr. David M. Kirr for three-year terms
and Mr. James D. Price for a one-year term. All the nominees currently
serve as MIGI directors. Mr. Price was elected by the Board in
March 1998 to fill the vacancy created when Director Van P.
Smith retired. Mr. Smith's term would have expired at the
1999 Annual Meeting. The other directors listed in the
following table have terms of office expiring in 1999 or 2000.
Each nominee has consented to serve for an additional
term. If a nominee becomes unavailable before the election,
your proxy card authorizes us to vote for a replacement
nominee if the Board names one.
<PAGE>
Name Age Capacity
Nominee for election as director
with term expiring in 1999:
James D. Price 59 Director
Nominees for election as directors
with terms expiring in 2001:
Norma J. Oman 50 President, Chief Executive
Officer and Director
David M. Kirr 60 Director
John T. Hackett 65 Director
Directors continuing in office
with terms expiring in 2000:
Joseph D. Barnette, Jr. 58 Director
Scott S. Broughton 43 Director
Ramon L. Humke 65 Director
Thomas H. Sams 56 Director
Directors continuing in office
with terms expiring in 1999:
Harold C. McCarthy 71 Director
Sarah W. Rowland 65 Director
Mr. Barnette has served as a director of the Company
since 1988. Mr. Barnette is the Chief Executive Officer and
Chairman of the Board of Bank One, Indiana, NA and Banc One
Indiana Corporation. He also serves as a director of IPALCO
Enterprises, Inc.
Mr. Broughton has served as a director of MIGI since
1996. Mr. Broughton was President and Chief Operating Officer of
CSGI and its insurance subsidiaries from 1992 through July 1996 when
MIGI acquired those companies. Since August 1996, he has been
Chairman and Chief Executive Officer of VIS'N, Inc., of Red
Wing, Minnesota. VIS'N provides claims and information
technology services to property and casualty insurance
companies. Mr. Broughton also is a director of Woodland
Container Corporation of Aiken, Minnesota.
Mr. Humke has served as a director of MIGI since 1987
and as Chairman since 1992. He is also Chairman of the
Board of Directors of Meridian Mutual. Mr. Humke has been
the President, Chief Operating Officer and a director of
Indianapolis Power and Light Company since 1990. Mr. Humke
is also a director of IPALCO Enterprises, Inc., LDI
Management, Inc., and NBD Bank, N.A.
Mr. Sams has served as a MIGI director since 1994. Mr.
Sams has been President, Chief Executive Officer and a
director of Waldemar Industries, Inc., an investment holding
company in Indianapolis, Indiana, since 1967. He is also a
director of NBD Bank, N.A., IPALCO Enterprises, Inc., and
Mid-America Capital Resource, Inc.
<PAGE>
Ms. Oman was elected President and Chief Executive
Officer of MIGI in 1991, having served as an Executive Vice
President since 1990. She became President and Chief
Executive Officer of Meridian Mutual and Meridian Security
Insurance Company ("Security") in 1990. Ms. Oman has served as
a director of MIGI since 1991. She is also a director of Meridian
Mutual, Bank One, Indianapolis, NA and Lilly Industries, Inc.
Mr. Kirr has served as a MIGI director since 1992. Mr.
Kirr has been the President of Kirr, Marbach & Company, a
Columbus, Indiana, investment advisory firm, since 1975.
Mr. Hackett has served as a Company director since 1992
and is also a director of Meridian Mutual. Since 1991, Mr.
Hackett has been a Managing General Partner of CID Equity
Partners, L.P., a venture capital firm. Mr. Hackett also
serves as a director of Ball Corporation, Irwin Financial
Corporation, and Wabash National Corporation.
Mr. McCarthy has served as a director of MIGI since
1986 and is also a director of Meridian Mutual. Mr.
McCarthy is now retired but previously served as President
and Chief Executive Officer of MIGI, Meridian Mutual and Security.
Mr. Price became a MIGI director on March 18, 1998,
when the MIGI Board elected him to fill the vacancy created
by Mr. Van Smith's retirement. Mr. Price is a First Vice
President - Investments for Prudential Securities Incorporated.
He has been a director of Meridian Mutual since 1987.
Ms. Rowland has served as a director of the Company
since 1994 and is also a director of Meridian Mutual. Ms.
Rowland was elected Chief Executive Officer and Chairman of
the Board of Rowland Design, Inc., an Indianapolis, Indiana,
interior design and space planning firm in 1993. From 1968
to 1993, Ms. Rowland served as President and Chief Executive
Officer of The Rowland Associates, Inc. She also is a
director of NBD Bank, N.A., and IPALCO Enterprises, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
During 1997 the Board of Directors held five meetings.
Each director attended at least 75 percent of the aggregate
of the total number of Board meetings and the total number
of meetings of all Board committees on which the director
served. MIGI's Board of Directors has six committees. They
normally hold joint meetings with similar committees of the
Meridian Mutual Board of Directors.
Audit Committee
Members: Directors Barnette, Hackett, Humke and Price
Number of Meetings in 1997: Four
Functions: Reviews accounting and financial reporting functions
Oversees internal controls, audits and compliance program
Recommends independent auditors and oversees
their activities
Monitors the parties' relationships under the Reinsurance
Pooling Agreement
<PAGE>
Compensation Committee
Members: Directors Humke and Sams
Number of Meetings in 1997: Four
Functions: Establishes and administers executive compensation
program and any incentive compensation plans
Reviews salary and employee benefit programs
Administers 1996 Employee Incentive Stock Plan
Finance and Investment Committee
Members: Directors Barnette, Hackett, Humke, Kirr, Oman and Price
Number of Meetings in 1997: Four
Functions: Establishes investment policy and guidelines
Reviews and approves Company investment transactions
Nominating Committee
Members: Directors Humke, McCarthy, Oman and Rowland
Number of Meetings in 1997: One
Functions: Considers and recommends candidates for membership on
the Board of Directors
Will consider a candidate for director recommended by a
shareholder
Business Development Committee
Members: Directors Broughton, Humke, Rowland and Oman
Number of Meetings in 1997: Two
Functions: Reviews management proposals for product and service
developments and enhancements
Assists and guides management with strategic business
initiatives
Pooling Agreement Committee
Members: Directors Barnette, Hackett, Humke, Kirr, and Oman
Number of Meetings in 1997: None
Functions: At request of Audit Committee and in conjunction with
Meridian Mutual's Pooling Agreement Committee, reviews
relationships among the parties to the Reinsurance Pooling
Agreement and determines whether the percentage
participation of the parties continues to bear an
appropriate relationship
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Meridian Mutual incorporated MIGI in 1986. MIGI
remained a wholly-owned subsidiary of Meridian Mutual until
March 1987. At that time, MIGI sold 1,700,000 Common Shares
in a public offering. This reduced Meridian Mutual's
ownership of MIGI's outstanding Common Shares from 100
percent to approximately 65 percent. MIGI completed a
second public offering of 1,725,000 Common Shares in 1993.
This further reduced Meridian Mutual's ownership of MIGI to
approximately 46.8 of its Common Shares. In mid-1996 the
Company acquired CSGI and its property and casualty
insurance subsidiaries, Citizens Fund Insurance Company
("Fund") and Insurance Company of Ohio ("ICO") and became
affiliated with Citizens Security Mutual Insurance Company
("CSM"). References in this Proxy Statement to "Citizens
Security Group" include Fund, ICO and CSM.
<PAGE>
MIGI markets insurance products and services through
its wholly-owned subsidiaries, Security, Fund and ICO.
Their operations are interrelated with the operations of CSM
and Meridian Mutual, an Indiana mutual property and casualty
company. MIGI believes its various transactions with
Meridian Mutual and CSM are on terms no less favorable to
MIGI than what could be negotiated with an independent third party.
MIGI obtains the majority of its insurance business
through a Reinsurance Pooling Agreement with Meridian Mutual
and CSM. In addition, Meridian Mutual provides the
facilities and many services required to conduct MIGI's
business. During 1997 MIGI paid Meridian Mutual $311,064
for administrative and other services.
When the Company acquired CSGI, MIGI entered into a
Consulting Services Agreement with Mr. Scott Broughton.
Under the Agreement, MIGI pays Mr. Broughton a $175,000
annual consulting fee. In exchange, Mr. Broughton provides
consulting services and advice regarding the Citizens
Security Group upon MIGI's request. The Agreement is
effective for five years and ends July 31, 2001. If Mr.
Broughton became disabled or died before the termination
date, MIGI would continue payments to Mr. Broughton or his estate.
Mr. Broughton is Chairman and Chief Executive Officer
of VIS'N, Inc. VIS'N provides claims handling and
information technology services to the Citizens Security
Group. During 1997 the Citizens Security Group paid VIS'N
$925,957 under the information technology services
agreement. This agreement will expire July 31, 1999, or can
be terminated immediately for reasons stated in the
contract. During 1997 the Citizens Security Group paid
VIS'N $3,071,819 for claims handling and administration.
The Citizens Security Group and VIS'N agreed to terminate
the claims administration agreement effective February 1,
1998. The fees paid to VIS'N under these agreements are
lower than or equal to what Citizens Security Group has
spent historically for these services.
Description of Pooling Agreement
Meridian Mutual, Security, CSM, Fund and ICO are
parties to a Reinsurance Pooling Agreement. It covers all
the property and casualty insurance written by the parties
except for nonstandard auto and direct response business.
Thus, premiums, losses, loss adjustment expenses and the
underwriting and administrative expenses of the parties, for
all but nonstandard auto and direct response business, are
shared according to established percentages. Currently, the
participation percentages are 74 percent for MIGI's insurance
subsidiaries, 22 percent for Meridian Mutual, and four percent
for CSM. These participation percentages were fixed with reference
to the relative historical net written premiums of the companies.
The MIGI and Meridian Mutual Audit Committees have the
responsibility of monitoring the parties' relationships
under the Reinsurance Pooling Agreement. The Committees
have established the procedures they deem necessary and
appropriate for this process. Their guidelines provide for:
reviewing the participation percentages at least annually and
referring any decision to change the participation percentages
to the Pooling Agreement Committees of MIGI and Meridian Mutual.
<PAGE>
MIGI's business and operations are integrated with and
dependent upon Meridian Mutual's business and operations.
Management of Meridian Mutual and MIGI will decide:
what expenses relate to underwriting, meaning they
will be shared by the parties under the pooling agreement; and
which assets and liabilities will be transferred among the
parties to the pooling agreement and what their values are.
The pooling agreement does not have established procedures for making these
decisions.
MIGI and Meridian Mutual do not always have the same
interests. Their interests conflict when it comes to:
establishing participation ratios under the pooling agreement;
allocating expenses unrelated to insurance underwriting; and
MIGI's dividend policy.
Their interests may or may not be in conflict regarding:
business and investment philosophies;
profit objectives;
cash management; and
possibly other matters.
The wording of the pooling agreement itself eliminates
some potential conflicts. For instance, it doesn't matter
which company insures a particular pooled risk because the
operating results of all the participants depend on the
results of the total business covered by the pooling
agreement. For all the parties' property and casualty
business included in the pool, the parties will have
identical loss and loss adjustment expense ratios and
virtually identical expense ratios.
When the interests of MIGI and Meridian Mutual
conflict, MIGI directors make decisions based on their
fiduciary duties to the Company and its shareholders.
However, individuals who are directors of both the Company
and Meridian Mutual also owe fiduciary duties to the
policyholders of Meridian Mutual. There are no procedures
for having only disinterested directors make those decisions.
Future events that could affect the participation percentages
among the parties include:
Meridian Mutual's receipt of dividends on MIGI Common Shares it owns;
changes in the capital structure or asset values of any of the parties
to the pooling agreement;
different effective rates of income taxation; or
other factors which disproportionately affect the surplus of the
companies.
The pooling agreement has no fixed term. It will stay
in effect with regard to any one party until both Meridian
Mutual and that party decide to end the agreement. A vote
by MIGI shareholders is not necessary to amend or terminate
the pooling agreement. If the pooling agreement were terminated:
the terminating party would transfer back to Meridian Mutual the
liabilities ceded by Meridian Mutual plus an equal amount of assets, and
Meridian Mutual would transfer back to the terminating party the
liabilities ceded by the terminating party plus an equal amount of
assets.
Terminating the pooling agreement would not affect MIGI's ownership of all
the outstanding common shares of Security, Fund and ICO.
<PAGE>
The pooling agreement can not be terminated or the
participation percentages changed unless the Insurance
Commissioners of Indiana, Minnesota and Ohio give their
approval. This requirement is for the protection of
policyholders of Security, Fund, ICO, CSM and Meridian
Mutual, and not for the protection of MIGI shareholders.
MIGI intends for its insurance subsidiaries to remain in the
pooling agreement, absent unforeseen changes in circumstances.
MIGI Audit Committee: Directors Barnette, Hackett, Humke and Price
Meridian Mutual Audit Committee: Directors Hackett, Humke and Price
MIGI Pooling Agreement Committee: Directors Barnette, Hackett, Humke,
Kirr and Oman
Meridian Mutual Pooling Agreement Committee: Directors Hackett, Humke
and Oman
EXECUTIVE COMPENSATION
The following table shows the compensation paid for the
last three years to MIGI's Chief Executive Officer and the
four other most highly compensated executives serving as
MIGI executive officers as of December 31, 1997. Annual
compensation includes amounts deferred at the officer's
election. All of MIGI's officers also serve as officers of
Meridian Mutual. Meridian Mutual reimburses MIGI for the services these
"Named Executive Officers" perform solely on behalf of Meridian Mutual.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Other Securities
Annual Underlying All Other
Name and Compen- Options/ LTIP Compen-
Principal Salary Bonus sation SARS Payouts sation
Position Year ($) ($) (1) ($) (2) (#) (3) ($) ($) (4)
<S> <C> <C> <C> <C> <C> <C> <C>
Norma J. Oman 1997 $292,116 0 0 67,429 0 $ 46,920
President and Chief 1996 268,846 0 $ 97,566 0 0 110,319
Executive Officer 1995 258,558 $260,000 135,656 0 0 122,377
Steven R. Hazelbaker 1997 138,669 0 0 15,977 0 4,160
Vice President 1996 129,423 0 0 0 0 3,883
Chief Financial 1995 124,423 87,500 0 0 0 1,499
Officer and Treasurer
Brent Hartman 1997 113,558 0 0 22,286 0 3,407
Vice President 1996 128,846 0 1,900 0 0 16,913
1995 118,846 96,000 2,813 0 0 9,718
J. Mark McKinzie 1997 130,654 0 0 14,743 0 3,920
Senior Vice President 1996 119,423 0 64,871 0 0 3,583
Secretary and 1995 114,423 80,500 8,292 0 0 2,746
General Counsel
Timothy J. Hanrahan 1997 113,054 0 0 12,777 0 3,392
Senior Vice President 1996 103,538 0 66,723 0 0 14,124
1995 112,251 60,000 29,945 0 0 4,141
</TABLE>
<PAGE>
(1) The bonuses reflect cash earned during the fiscal year
and paid during the next fiscal year.
(2) The 1996 Other Annual Compensation includes a) the pay-
out termination of executive car allowance program: Ms. Oman
$45,000; Mr. McKinzie, $35,000; and Mr. Hanrahan, $35,000;
and b) tax reimbursement payments of $44,434, $1,900,
$29,419, and $28,478 for Ms. Oman, Mr. Hartman, Mr.
McKinzie, and Mr. Hanrahan, respectively. The 1995 Other
Annual Compensation reports a) tax reimbursement payments of
$14,389, $1,638, $7,117, and $8,993 for Ms. Oman, Mr. Hartman,
Mr. McKinzie, and Mr. Hanrahan, respectively, and b) the taxable
portion of exercised stock options, that being the difference between
the fair market value of the stock on the date of exercise and the option
price amounting to $121,267, $1,175, $1,175, and $20,952 for
Ms. Oman, Mr. Hartman, Mr. McKinzie, and Mr. Hanrahan, respectively.
(3) Options to acquire Common Shares granted pursuant to
the 1996 Employee Incentive Stock Plan. When Mr. Hartman
terminated his employment in January 1998, his options terminated.
(4) For 1997, consists of MIGI's matching contributions of
$4,750, $4,160, $3,407, $3,920, and $3,392 to the Section
401(k) deferred compensation accounts of Ms. Oman, Mr.
Hazelbaker, Mr. Hartman, Mr. McKinzie, and Mr. Hanrahan,
respectively; and an accrual under the Supplemental
Retirement Income Plan of $42,170 for the account of Ms.
Oman. For 1996, consists of Meridian Mutual's matching
contributions of $4,500, $3,883, $3,865, $3,583, and $3,106
to the Section 401(k) deferred compensation accounts of Ms.
Oman, Mr. Hazelbaker, Mr. Hartman, Mr. McKinzie, and Mr.
Hanrahan, respectively; and accruals under the Supplemental
Retirement Income Plan of $105,819, $13,048, and $11,018 for
the accounts of Ms. Oman, Mr. Hartman, and Mr. Hanrahan, respectively.
For 1995, consists of Meridian Mutual's matching contributions of $3,600,
$2,852, $1,499, $2,746, and $2,334 to the Section 401(k) deferred
compensation accounts of Ms. Oman, Mr. Hartman, Mr. Hazelbaker, Mr.
McKinzie, and Mr. Hanrahan, respectively; and accruals under the
Supplemental Retirement Income Plan of $118,777, $6,866, and $1,807 for
the accounts of Ms. Oman, Mr. Hartman, and Mr. Hanrahan, respectively.
The Board elects officers of MIGI for one-year terms.
The officers serve at the discretion of the Board of
Directors. There is no family relationship between any of
the officers of the Company.
Mr. McKinzie, age 44, has been an attorney for MIGI,
Meridian Mutual, and Security since 1989. He has served as
General Counsel and Secretary of all three companies since
1992. He was elected a Vice President of the Company,
Meridian Mutual and Security in 1993 and Senior Vice
President in 1997.
Mr. Hanrahan, age 52, was elected a Vice President of
MIGI in 1994 and a Senior Vice President in 1997. He has
been a Vice President of Meridian Mutual and Security for
more than the past five years and a Meridian employee since 1981.
Mr. Carl W. Buedel, age 51, was elected a Vice
President of MIGI in 1994 and Senior Vice President in 1997.
He has been a Vice President of Meridian Mutual and Security
since 1990. Mr. Buedel has been a Meridian employee since 1981.
Mr. Hartman, age 50, terminated his employment with the
Company in January 1998. Prior to leaving the Company, he
had been a Vice President of MIGI since 1994.
<PAGE>
Mr. Hazelbaker, age 42, was elected Chief Financial
Officer and Treasurer of MIGI, Meridian Mutual and Security
in 1994 and a Vice President of all three companies in 1995.
From 1987 until joining the Company in 1994, he was a
partner with Coopers & Lybrand L.L.P.
OPTION/SAR GRANTS IN 1997
The following table shows options to purchase MIGI
Common Shares granted in 1997 to the Named Executive
Officers under the 1996 Employee Incentive Stock Plan. No
stock appreciation rights were granted during 1997.
Individual Grants
Number of % of Total Option
Securities Shares Granted Exercise or Grant Date
Underlying to Employees Base Price Expiration Present
Name Options Granted in Fiscal Year Per Share(1) Date Value(2)
Norma J.
Oman 67,429 27.27% $15.75 3-3-07 $321,737
Steven R.
Hazelbaker 15,977 6.46% $15.75 3-3-07 $ 76,234
J. Mark
McKinzie 14,743 5.96% $15.75 3-3-07 $ 70,346
Brent
Hartman 22,286 9.01% $15.75 3-3-07(3) $106,338
Timothy J.
Hanrahan 12,777 5.17% $15.75 3-3-07 $ 60,965
(1) Options are granted at the fair market value of MIGI
Common Shares on the date of grant.
(2) The Black-Scholes stock option valuation model was used
to compute these values. Assumptions used to calculate the grant
date present value of options granted during 1997 were in accordance
with SFAS 123, as follows:
(a) Expected Volatility - The standard deviation of
the continuously compounded rates of return calculated on
the week-ending stock price over a period of time
immediately preceding the grant and equal in length to the
expected life. The volatility was 26.38 percent.
(b) Risk-Free Interest Rate - The rate available at
the time the grant was made on zero-coupon U.S. Government
issues with a remaining term equal to the expected life.
The risk-free interest rate was 6.43 percent.
(c) Dividend Yield - The expected annual dividend
yield was 2.29 percent based on the 1996 annual dividend yield.
(d) Expected Life - The expected life of the grant was
six years, calculated based on the historical expected life
of previous grants.
(e) Forfeiture Rate - Under SFAS 123, forfeitures may
be estimated or assumed to be zero. The forfeiture rate was
assumed to be zero.
(3) When Mr. Hartman terminated his employment in January
1998, these options terminated.
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND
1997 YEAR-END OPTION/SAR VALUES
The following table shows unexercised options held at
December 31, 1997, by the Named Executive Officers. They
did not exercise any options during 1997. The Company does
not have any outstanding stock appreciation rights.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Fiscal Year End(#) Fiscal Year End($)(1)
Acquired On Exercisable(E)/ Exercisable(E)/
Name Exercise(#) Value Realized($) Unexercisable(U) Unexercisable(U)
Norma J.
Oman 0 0 142,461 E $433,210 E
Steven R.
Hazelbaker 0 0 34,166 E 104,648 E
J. Mark
McKinzie 0 0 31,417 E 96,029 E
Brent
Hartman 0 0 47,549 E(2) 145,443 E(2)
Timothy J.
Hanrahan 0 0 26,950 E 81,870 E
(1) Amounts reflecting gains on outstanding options are
based on the December 30, 1997, closing stock price of $16.75.
(2) When Mr. Hartman terminated his employment in January
1998, these options terminated.
Pension Plan
The Company maintains a defined benefit pension plan
for eligible employees. All MIGI employees completing more
than 1,000 hours of employment during a plan year become
eligible to participate in the plan. The following table
shows the range of estimated annual benefits payable upon
retirement for graduated levels of average annual earnings
and years of service, based on retirement at age 65 in 1998.
The annual earnings can not exceed the $160,000 maximum
compensation limit for purposes of pension calculations.
PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30 35
$120,000 $28,582 $38,109 $47,636 $57,164 $66,691
200,000 39,081 52,109 65,136 78,163 91,191
250,000 39,081 52,109 65,136 78,163 91,191
350,000 39,081 52,109 65,136 78,163 91,191
450,000 39,081 52,109 65,136 78,163 91,191
550,000 39,081 52,109 65,136 78,163 91,191
650,000 39,081 52,109 65,136 78,163 91,191
<PAGE>
The plan provides a pension annuity beginning at age 65
of 1.125 percent of the employee's final monthly earnings
for each year of credited service plus .625 percent of the
employee's final monthly earnings in excess of the monthly
Social Security covered compensation, if any, for each year
of credited service to a maximum of 35 years. "Final
monthly earnings" mean the employee's average monthly base
pay during his or her five highest consecutive salary years
out of the last ten. "Credited service" means calendar
years during which the employee completes at least 1,000
hours of employment. The plan also provides benefits for
delayed retirement, early retirement, and death and
disability. Early retirement benefits are available at age
55. The plan has provisions for optional methods of benefit
payment, payments to an employee leaving after a certain
number of years of service, and payments to the employee's
surviving spouse. Benefits listed in the table are computed
based on a straight life annuity and are not subject to any
deduction for Social Security or other offset amounts.
Section 415 of the Internal Revenue Code allows an
individual maximum annual benefit of $130,000 for 1998. The
Plan covers compensation of salary and cash bonus. For 1997
covered compensation for the Named Executive Officers was:
Ms. Oman, $334,285; Mr. Hazelbaker, $138,669; Mr. Hartman,
$113,558; Mr. McKinzie, $130,654; Mr. Hanrahan, $113,054.
The estimated credited years of service for the Named
Executive Officers as of January 1998 are listed below:
Estimated Years of
Credited Service
Norma J. Oman 24
Steven R. Hazelbaker 4
J. Mark McKinzie 9
Brent Hartman 22
Timothy J. Hanrahan 17
Supplemental Retirement Income Plan
The Supplemental Retirement Income Plan covers certain
MIGI employees who also participate in the MIGI Pension
Plan. The supplemental plan provides benefits in excess of
the limitations imposed by Section 401(a)(17) and Section
415 of the Internal Revenue Code. The Supplemental
Retirement Benefit is payable to an eligible participant as
a straight life annuity over the lifetime of the participant
only and begins on the participant's normal retirement date.
The Benefit will be a monthly amount equal to the difference
between (a) the monthly amount of the MIGI Pension Plan
retirement benefit to which the participant would have been
entitled if computed without the limitations under the
Internal Revenue Code and (b) the monthly amount of the
benefit actually payable to the participant under the MIGI
Pension Plan.
The following table lists the Supplement Retirement
Benefit payable upon retirement for graduated levels of
average annual earnings and years of service for
participants under the Plan, based on retirement at age 65
in 1998. The benefits are not subject to any deduction for
Social Security or other offset amounts. The 1997
compensation covered by the Plan for the Named Executive
Officers is found under the caption, "Pension Plan." Their
estimated years of credited service are also listed under
"Pension Plan."
<PAGE>
Supplemental Retirement Income Plan Table
Years of Service
Remuneration 15 20 25 30 35
$170,000 $ 2,625 $ 3,500 $ 4,375 $ 5,250 $ 6,125
200,000 10,500 14,000 17,500 21,000 24,500
250,000 23,625 31,500 39,375 47,250 55,125
350,000 49,875 66,500 83,125 99,750 116,375
450,000 76,125 101,500 126,875 152,250 177,625
550,000 102,375 136,500 170,625 204,750 238,875
650,000 128,625 171,500 214,375 257,250 300,125
Executive Bonus Compensation Plan
MIGI maintains a bonus compensation plan for key
executive employees. The President selects plan
participants each year, subject to approval of the
Compensation Committees of the MIGI and Meridian Mutual
Boards of Directors. The purpose of the plan is to
establish compensation commensurate with corporate
performance compared to goal. Criteria for determining
bonus payments generally are established prior to the
beginning of each year. The performance measure for 1997
was the combined pre-tax net income of Meridian Mutual,
Security and the Citizens Security Group. Graduated amounts
of cash bonuses become payable if the combined financial
performance of these companies meets the threshold level of
80 percent of goal or exceeds it up to a maximum of 120
percent of goal. After the close of the year, performance
is evaluated relative to the predetermined goals. Actual
bonus awards are determined on the bases of this evaluation.
The participant may elect to receive the bonus in cash or
MIGI stock or a combination of the two. The same
performance measure has been established for 1998.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of our Board of Directors,
together with the Compensation Committee of Meridian Mutual,
is responsible for establishing and administering the
executive compensation program for MIGI executives. Both of
these Compensation Committees are composed entirely of
directors who are not employees of the Company.
Compensation Policy
The goal of our executive compensation policy is to
attract, motivate and retain competent personnel. At the
same time, we want to ensure an appropriate relationship
exists between executive pay and MIGI's performance.
Executive compensation consists of base salary, bonus
compensation plans and stock-based incentives. In
establishing the base salary portion of executive
compensation, the Committee gives significant consideration
to such factors as:
maintaining MIGI's competitiveness
establishing efficient and effective use of MIGI's resources
preserving MIGI's good standing with regulatory and rating agencies
managing daily operations and
developing and achieving long-term and strategic objectives.
<PAGE>
The Committee has not assigned relative weights to these
factors. Through bonus compensation plans, the Committee
seeks to reward the attainment of targeted income goals.
The Compensation Committee's philosophy is to slow the
growth in base salary and put a greater portion of total
compensation at risk through the bonus plan. In addition,
the Committee seeks to provide equity-based incentives to
further motivate executives over the long term to respond to
MIGI's business challenges and opportunities as owners
rather than just as employees. The Compensation Committee
intends for executive annual compensation to continue to be
tax-deductible to the Company.
The Compensation Committee annually evaluates salary
surveys produced by independent compensation consulting
firms. This information helps the Committee determine
appropriate levels of executive compensation. For the
positions of Chief Executive Officer and Chief Financial
Officer, the survey data compares the Company with other
insurance companies and with all other industries based on:
comparable asset levels
direct written premiums
net written premiums and
other relevant indices.
For other executive positions, the Committee considers
salary surveys comparing MIGI with other insurance companies
of similar asset and premium levels. Some of the insurance
companies participating in the salary surveys are included
in the Total Return Industry Index for NASDAQ Insurance
Stocks. The Total Return Industry Index is shown in the
Stock Performance Chart of this Proxy Statement.
The cash bonus compensation plan allows executives to
earn additional compensation if Meridian Mutual, Security
and Citizens Security Group attain certain levels of annual
pre-tax income. See "Executive Bonus Compensation Plan."
The cash bonus, a percentage of base salary, is benchmarked
annually against the salary surveys and other information
from the independent compensation consulting firms. The
executives may elect to take the bonus in cash or MIGI stock
or a combination of the two.
MIGI's long-term incentive program, designed by an
outside consultant, consists of grants under the Employee
Incentive Stock Plan. Under this Plan, key employees may
receive grants of incentive stock options, non-qualified
stock options, appreciation rights and restricted stock
awards. In 1997, each executive received vested options
with a ten-year term. The size of the option grant was a
percentage of the individual's base salary. Different
percentages applied to the Chief Executive Officer, Senior
Vice President, and all other executive officers,
commensurate with the amount of responsibility for their
positions. When the Committee established the size of the
grants, it considered outstanding options granted in 1994
and market practices for similar positions in stock
insurance companies. Some of these companies are included
in the Total Return Industry Index for NASDAQ Insurance Stocks.
<PAGE>
Bases for CEO Compensation
MIGI's total revenues for 1997 increased 16 percent to
$216.5 million from $186.6 million for 1996. Premiums
earned increased 16.3 percent to $194.6 million for 1997 in
comparison to $167.3 million for 1996. MIGI's acquisition
of the Citizens Security companies accounted for approximately
$25 million of the increase in premiums earned. MIGI's net
income for 1997 was $6.9 million, or $1.04 basic earnings
per common share. This compares to $5.8 million, or $0.86
per common share, in 1996. In both years, a large volume of
property damage claims associated with severe weather in our
operating territory had a negative impact on earnings.
Weather-related catastrophe losses were about $7.2 million,
or $0.72 per share, in 1997 and $10.6 million, or $1.03 per
share, in 1996.
Ms. Oman's base salary was increased during 1997 to
reward her individual accomplishments during 1996 in:
acquiring the Citizens Security Group
successfully integrating the Citizens Security Group
operations with Meridian
providing consistently superior claim service during
a year of record catastrophe losses
reducing per unit costs
further streamlining operations, and
achieving other long-range business and operating objectives.
The Committee did not assign relative weights to these
factors. Her new base salary was below the average for
chief executive officers of insurance companies with direct
and net written premiums over $200 million. It was also
below the average salary for chief executive officers of
similarly-sized companies across all industries.
As mentioned above, bonus compensation is tied to the
attainment of corporate performance goals. The 1997
combined pre-tax net income of the Meridian and Citizens
Security companies did not meet the level established under
the executive bonus compensation plan. As a result, Ms.
Oman did not receive a bonus under that plan for 1997
results. Ms. Oman's total compensation package was lower
than the average paid to chief executive officers of the
comparison companies since her base salary was below average
and she did not receive a cash bonus. This illustrates the
Compensation Committee's philosophy to place a greater
portion of total compensation at risk through the bonus
compensation plan.
Compensation of Other Executive Officers
During 1997, the Compensation Committee adjusted the
other executives' base salaries based on:
the assignment of internal responsibility
their individual contributions to MIGI's performance
the results of the latest salary surveys and
other relevant information.
The Committee did not assign relative weights to these
factors.
These salaries are below the competitive range of
people with comparably responsible positions at similarly-
sized insurance companies, both regionally and nationally.
On the other hand, the bonus opportunities for MIGI
executives are greater than what our competitors offer. The
Compensation Committee's philosophy is to put the bonus
award at risk and to compensate for that risk with a
slightly-higher-than-average total compensation package when
the bonus is earned.
<PAGE>
The 1997 combined pre-tax net income of Meridian
Mutual, Security and Citizens Security Group was below the
level established under the executive bonus compensation
plan so the executives did not receive a bonus under that
plan. Without that bonus, the other executives' total
compensation listed in the Summary Compensation Table was
lower than the comparison companies surveyed. This was in
accordance with the Compensation Committee's commitment to
putting a significant portion of executive compensation at risk.
MIGI Compensation Committee Meridian Mutual Compensation Committee
Van P. Smith, Chairman (retired from Van P. Smith, Chairman (retired from
Board 3-18-98) Board 3-18-98)
Ramon L. Humke and Thomas H. Sams Ramon L. Humke and Martha D. Lamkin
Stock Performance Graph
The following performance graph compares the cumulative
total shareholder return on the Company's Common Shares with:
the Center for Research in Securities Prices (CRSP)
Total Return Index for NASDAQ Stock Market (U.S. Companies) and
the CRSP Total Return Industry Index for NASDAQ Insurance Stocks
for the years 1993 through 1997. The comparison assumes $100 was
invested on December 31, 1992, in MIGI's Common Shares and in the
CRSP indices. It also assumes reinvestment of dividends. The CRSP
Total Return Industry Index for NASDAQ Insurance Stocks includes all
insurance companies quoted on the NASDAQ stock market within
the SIC codes 631 and 633. Upon a written request to MIGI's
Corporate Secretary, we will undertake to provide the names
of the companies listed on the NASDAQ insurance stock index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
MIGI, NASDAQ STOCK MARKET (U.S.), NASDAQ INSURANCE STOCKS
(The following information is contained in graph form in the Proxy Statement:)
MIGI NASD Total Market (US)
1992 100 100
1993 107.619 114.796
1994 102.629 112.214
1995 151.741 158.699
1996 153.731 195.192
1997 177.911 239.181
Total Market Insurance Stocks
1992 217.96 100
1993 250.21 106.952
1994 244.582 100.688
1995 345.901 143.014
1996 425.44 163.034
1997 522.072 239.181
NASD Ins. Stocks Insurance
1992 100 204.652
1993 106.952 218.888
1994 100.688 206.041
1995 143.014 292.681
1996 163.034 333.653
1997 239.181 489.489
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
MIGI's Compensation Committee consists of Thomas H.
Sams and Ramon L. Humke, Chairman of the MIGI Board of
Directors. The bylaws of the Company provide that the
Chairman of the Board is an officer of the Company, but Mr.
Humke is not an employee of the Company.
Change-in-Control Agreements
MIGI has executed change-in-control severance pay
arrangements with the executives of MIGI and Meridian
Mutual. The Termination Benefits Agreement ("Agreement")
would provide severance payments and benefits to the
executives if their employment is terminated under certain
circumstances within one-year following a change in control.
A "change in control" would occur if 50 percent or more of
MIGI's outstanding Common Shares were acquired by an entity
other than the Company, Meridian Mutual or an employee
benefit plan of the Company. There are additional
conditions that could result in a change-in-control event.
MIGI may not waive or modify provisions of the Agreement,
either before or after a change in control, without the
written consent of the participant. However, either MIGI or
the participant may elect not to extend the Agreement for
the next calendar year by giving written notice.
The Agreement terminated and replaced the Change in
Control Agreements previously executed by Meridian Mutual
and Ms. Oman, Mr. Hazelbaker and Mr. McKinzie. Under the
Agreement, termination for other that "cause" would entitle
Ms. Oman, Mr. Hazelbaker, Mr. McKinzie, Mr. Hanrahan and Mr. Buedel
to any earned and unpaid bonus and to a lump sum payment equal to
2.99 times their average annual cash compensation received over the
past five years. All other eligible executives would
receive any earned and unpaid bonus and a lump sum payment
equal to two times their average annual cash compensation
received over the past five years.
Compensation of Directors
MIGI directors who are also salaried employees of the
Company receive no fees for services as directors.
Nonemployee MIGI Board members serving on the Board of an
affiliate receive a $1,000 annual retainer from MIGI. The
compensation of all other non-employee directors was changed
in June 1997. Prior to that date, MIGI Board members who
were not salaried Company employees and who did not serve on
the Board of any affiliates received an annual retainer of
$10,000. Effective mid-year 1997, their annual retainer was
increased to $15,000. Of that, $10,000 is payable in cash
and $5,000 in MIGI Common Shares. The Common Shares will be
valued at their fair market value two days after MIGI's
annual results are released to the public.
All directors, aside from salaried employees, receive
per diem meeting fees of $600 for each Board or Committee
meeting they attend. Their per diem fees will not exceed a
total of $850 for attending two or more Board or Committee
meetings on a single day. With the compensation change in
late June 1997, the Meridian Mutual Chairman's additional
$10,000 annual stipend was increased to $20,000 per year.
The $10,000 increase is payable in MIGI stock. The chairmen
of one or more affiliated Boards or one or more Board
committees receive an additional $1,600 per year for
services in those capacities.
<PAGE>
MIGI has a defined benefit pension plan for the benefit
of eligible nonemployee directors of MIGI or Meridian
Mutual. They become eligible to participate in the plan
after completing five years of credited service. This means
all calendar years the nonemployee director has attended at
least 50 percent of the regular quarterly meetings. The
plan provides a monthly retirement allowance equal to 1.75
percent of the final earnings for each year of credited
service. Final earnings mean the five consecutive years
with the highest average annual total fees paid during the
period of directorship. The monthly retirement allowance
begins on the director's retirement date and continues
monthly for his or her lifetime. The plan also provides
benefits for delayed retirement, early retirement or death.
Early retirement benefits are available at age 55. The
directors may select an optional method of benefit payment.
MIGI has an Outside Director Stock Option Plan. An
"outside director" is a director of either MIGI or Meridian
Mutual who is not a Meridian employee on the date of grant.
Each Outside Director was granted an option to purchase
1,000 Common Shares in May 1994, 1995, 1996 and 1997. Each
Outside Director will be granted an option to purchase 1,000
Common Shares on the date of each Annual Meeting of
Shareholders in the years 1998 through 2003, unless the plan
is terminated earlier. The directors will pay the Company
no consideration for being granted the option. The exercise
price per share will equal the fair market value of a Common
Share on the date of grant. Each option will be
exercisable beginning one year after the date of grant.
Each option will expire no later than ten years after the
date of grant.
OTHER MATTERS
Appointment of Auditor
The firm of Coopers & Lybrand L.L.P. served as MIGI's
independent auditor for the fiscal year ended December 31,
1997. The Board of Directors has not selected an
independent auditor for the current fiscal year ending
December 31, 1998. We anticipate the Audit Committee, at
its meeting on April 29, 1998, will recommend that the Board
select Coopers & Lybrand L.L.P. as the Company's independent
auditor for 1998. Representatives of Coopers & Lybrand will
attend the Annual Meeting. They will respond to appropriate
questions and make a statement if they wish.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934
requires MIGI's directors and executive officers, and
persons owning more than ten percent of a registered class
of MIGI's equity securities, to file initial reports of
their ownership of MIGI Common Shares and reports of changes
in their ownership with the Securities and Exchange
Commission. Based solely on review of the copies of forms
furnished to MIGI, or written representations that no annual
forms (SEC Form 5) were required, MIGI believes its
officers, directors, and greater than ten-percent beneficial
owners have complied with all Section 16(a) filing
requirements applicable to them.
<PAGE>
Other Business
We do not expect any business to come up for
shareholder vote at the Annual Meeting other than the items
described in the Notice of Meeting and in this Proxy
Statement. If other business is properly raised at the
Meeting or any adjournment of it, your proxy card authorizes
the people named as proxies to vote according to their best
judgment.
Expenses of Proxy Solicitation
We will pay all expenses of proxy solicitation. We
will pay brokers, nominees, fiduciaries or other custodians
their reasonable expenses for forwarding proxy and
solicitation material to persons for whom they hold MIGI
Common Shares. We will solicit proxies primarily by mail.
However, MIGI officers and employees may also solicit in
person or by telephone.
We mailed the 1997 Annual Report to Shareholders along
with this Proxy Statement.
By Order of the Board of Directors,
Norma J. Oman
President and Chief Executive Officer
April 7, 1998
<PAGE>
PROXY CARD PROXY CARD
Meridian Insurance Group, Inc.
This proxy is solicited on behalf of the Board of Directors
for the Annual Meeting of Shareholders to be held on May 13, 1998
The undersigned appoints Joseph D. Barnette, Ramon L. Humke, and Thomas H.
Sams, or any of them, proxies for the undersigned, each with full power of
substitution, to attend the Annual Meeting of Shareholders of Meridian
Insurance Group, Inc., to be held on May 13, 1998, at 2:00 p.m., EST, and at
any adjournments or postponements of the Annual Meeting, and to vote as
specified in this Proxy all the Common Shares of the Company which the
undersigned would be entitled to vote if personally present. This Proxy when
properly executed will be voted in accordance with your indicated directions.
If no direction is made, this Proxy will be voted FOR the election of
Directors. In their discretion the proxies are authorized to vote upon such
other business as may properly come before the meeting.
The Board of Directors recommends a vote FOR the election of Directors.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE
SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on reverse side.)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
For Withheld For all
1. Election of Directors All All Except
Nominees: J. Hackett, D. Kirr, N. Oman, J. Price ___ ___ ___
(Except nominee(s) written above.)
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Shareholders and of the Proxy Statement.
Dated: , 1998
Signature(s)
Please sign exactly as your name appears. Joint owners
should each sign personally. When applicable, indicate your
official position or representation capacity.
