<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
MBIA Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MBIA Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- --------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[_] 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:
Notes:
<PAGE>
- --------------------------------------------------------------------------------
MBIA INC. DAVID H. ELLIOTT
113 King Street Chairman
Armonk, NY 10504
914 273 4545
(LOGO OF MBIA INC.
APPEARS HERE)
March 28, 1994
Dear Shareholder:
On May 12, 1994 MBIA Inc. will hold its annual meeting of shareholders and I
extend a personal invitation to you on behalf of the Board of Directors to join
us so we can report to you on the activities of the Company during 1993 and
discuss our prospects for 1994. You will have an opportunity to ask questions
about our business and operations. The meeting will be held in our headquarters
building at 113 King Street, Armonk, New York, at 10:00 a.m.
This year you are being asked to elect 12 directors and to approve the
selection of independent auditors for 1994. These proposals are described in
the attached proxy statement which you are encouraged to read fully.
Whether or not you plan to attend the meeting, it is important that your
shares be represented. Regardless of the number of shares you own, please sign
and mail the enclosed proxy promptly.
We appreciate your continued support.
Sincerely,
David H. Elliott
Chairman
<PAGE>
MBIA INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of MBIA Inc.:
The annual meeting of the shareholders of MBIA Inc. will be held at the
Company's headquarters, 113 King Street, Armonk, New York 10504, on Thursday,
May 12, 1994 at 10:00 a.m., New York time, for the following purposes:
PROPOSAL 1: To elect 12 directors of the Company for terms expiring at
the 1995 Annual Meeting;
PROPOSAL 2: To approve the appointment by the Board of Directors of
Coopers & Lybrand, certified public accountants, as independent auditors
for the Company for the year 1994; and to transact such other business as
may properly come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on March 21, 1994 will be
entitled to vote at the meeting, whether in person or by proxy. Please sign,
date and return the enclosed proxy card as soon as possible in the envelope
provided. Shareholders who attend the meeting may revoke their proxies and vote
in person, if they wish to do so.
By order of the Board of Directors,
Louis G. Lenzi
Secretary
113 King Street
Armonk, New York 10504
March 28, 1994
<PAGE>
MBIA INC.
PROXY STATEMENT
Your proxy in the form enclosed is solicited by the Board of Directors of
MBIA Inc. (the "Company"). Your proxy may be revoked by you at any time prior
to its use. The shares represented by the proxies received will be voted at the
meeting, or any adjournment thereof, in accordance with such specifications as
are made therein or, if no such specifications are made, in accordance with the
recommendations of the Board of Directors.
The record date for the determination of shareholders entitled to vote at the
meeting was March 21, 1994. On the record date, there were outstanding
41,703,644 shares of the Company's Common Stock ("Common Stock"), constituting
all of the outstanding voting securities of the Company. Each share is entitled
to one vote. Abstentions and broker non-votes are counted for purposes of
determining the number of shares represented at the meeting but are deemed not
to have voted on any proposal.
The mailing address of the executive offices of the Company is 113 King
Street, Armonk, New York 10504. This Proxy Statement and the accompanying
Notice of Annual Meeting of Shareholders and proxy card are being mailed, on or
about March 28, 1994, to shareholders of record on the record date.
PROPOSAL 1:
ELECTION OF DIRECTORS
All of the Company's directors are elected at each annual meeting of
shareholders. At the 1994 Annual Meeting, the shareholders will elect 12
directors to serve for a term expiring at the 1995 Annual Meeting.
The names of the nominees being presented for consideration by the
shareholders, their ages, the years they have been directors of the Company,
their principal occupations over the past five years, their current positions
with the Company and certain other directorships held by them are set forth
below. The shares represented by all proxies received will be voted for these
nominees, except to the extent authority to do so is withheld as provided for
in the enclosed proxy card. If any such nominee should be unable or unwilling
to serve (an event not now anticipated), all proxies received will be voted for
the person, if any, as shall be designated by the Board of Directors to replace
such nominee. The Board has set a policy that no person who has attained the
age of 70 years or older shall be nominated to be a director.
William O. Bailey Mr. Bailey has been a director of the Company since 1986.
Prior to his retirement on December 31, 1993, Mr. Bailey
was Chairman of the Company from 1986 through 1993. From
1986 through 1991, he was Chairman and Chief Executive
Officer of the Company and its operating subsidiary,
Municipal Bond Investors Assurance Corporation ("MBIA
Corp."). Mr. Bailey is currently Chairman of Terra Nova
Insurance Company Ltd., a director of Business Men's
Assurance Company of America, and a trustee of Century
Shares Trust. Age 67.
Joseph W. Brown, Jr. Mr. Brown is Chairman, President and Chief Executive
Officer of Talegen Holdings, Inc. (insurance company).
From 1989 through 1991, Mr. Brown was President and Chief
Executive Officer of Fireman's Fund Insurance
1
<PAGE>
Company (insurance company). He had been employed in
various capacities at Fireman's Fund since 1974. Mr.
Brown has served as a director of the Company since being
elected at the 1990 Annual Meeting and previously served
as a director from December of 1986 through May of 1989.
Age 45.
David H. Elliott Mr. Elliott is currently the Chairman, President and
Chief Executive Officer of the Company and Chairman,
President and Chief Executive Officer of MBIA Corp. From
1986 to 1991, he served as the President and Chief
Operating Officer of the Company and MBIA Corp. He has
been a director of the Company since March of 1988. He is
a director of MBIA Corp., and was the President of the
Municipal Bond Insurance Association, MBIA Corp.'s
predecessor, from 1976 to 1980 and from 1982 to 1986. Age
52.
Claire L. Gaudiani Dr. Gaudiani has been President of Connecticut College
since 1988. Prior to that she served as Assistant
Director of the Joseph H. Lauder Institute for Management
at the University of Pennsylvania from 1985. Dr. Gaudiani
serves as a director of Southern New England Telephone
Company, American Public Radio, the American Council on
Education and the National Collegiate Athletic
Association Presidents Commission. She has been a
director of the Company since being elected at the 1992
Annual Meeting. Age 49.
William H. Gray, III Mr. Gray is President and Chief Executive Officer of the
United Negro College Fund, Inc. He also serves as Senior
Preaching Minister of the Bright Hope Baptist Church in
Philadelphia. From 1978 to 1991, Congressman Gray served
in the U.S. House of Representatives, acting as Majority
Whip from 1989 to 1991. He serves as a director of The
Chase Manhattan Corporation, The Prudential Insurance
Company of America, Scott Paper Company, Warner- Lambert
Company, Westinghouse Electric Corporation, Union Pacific
Corporation, Rockwell International Corp. and Lotus
Development Corp. Mr. Gray has been a director of the
Company since being elected at the 1992 Annual Meeting.
Age 52.
Freda S. Johnson Ms. Johnson is President of Government Finance
Associates, Inc. (municipal finance advisory company), a
firm which she has been associated with since late 1990.
From early 1990 until December 1990, she was an
independent public finance advisor. She served as
Executive Vice President and Executive Director of the
Public Finance Department of Moody's Investors Service,
Inc. (rating agency) from 1979 to 1990. Ms. Johnson is a
member of the Municipal Securities Rule Making Board's
MSIL Committee on Dissemination of Disclosure Information
and a member of the National Association of State
Auditors, Comptrollers and Treasurers' National Advisory
Board on State and Local Government Secondary Market
Disclosure. She is also a director of the National
Association of Independent Public Finance Advisors. Ms.
Johnson has served on the Company's Board of Directors
since July of 1990. Age 46.
Daniel P. Kearney Mr. Kearney is President of Aetna Life and Annuity Co.
(insurance company). Prior to joining Aetna Life and
Casualty Company in 1991, he served as President and
Chief Executive Officer of the Resolution Trust
2
<PAGE>
Corporation Oversight Board from 1989 to 1991. From 1988
to 1989, Mr. Kearney was a principal at Aldrich, Eastman
& Waltch, Inc., a pension fund advisor. Mr. Kearney was a
managing director at Salomon Brothers Inc (investment
banking firm) in charge of the mortgage finance and real
estate finance departments from 1977 to 1988. Mr. Kearney
has served on the Company's Board of Directors since
being elected at the 1992 Annual Meeting. Age 54.
James A. Lebenthal Mr. Lebenthal has been Chairman of Lebenthal & Co., Inc.,
a broker-dealer of municipal bonds, since 1978. From 1986
to 1988, Mr. Lebenthal was also President of Lebenthal &
Co., Inc. He is Vice Chairman and President of the
Commission on Savings and Investment in America and Vice
Chairman of the Rebuild America Coalition. Mr. Lebenthal
has been a director of the Company since August of 1988.
Age 66.
Robert B. Nicholas Mr. Nicholas is presently a private investor. From 1988
through 1991, he was a consultant to Aetna Life and
Casualty Company with respect to certain corporate
issues. He served as Senior Vice President, Corporate
Planning and Development, of Aetna Life and Casualty
Company and of The Aetna Casualty and Surety Company from
1986 to 1988. He is a Trustee and Chairman of the Finance
Committee of the Hartford Graduate Center and a trustee
of Denison University. Mr. Nicholas has been a director
of the Company since December of 1986. Age 64.
Pierre-Henri Richard Mr. Richard has been Chairman of the executive board of
Credit Local de France (banking and municipal finance
firm) since 1987. Since 1983, he has been Deputy
Directeur General of the Caisse des Depots et
Consignations, in charge of municipal finance. He is a
board member of Caisse des Depots-Developpement, Societe
Centrale pour l'Equipment du Terretoire, the Centre
National des Caisses d'Epargne et de Prevoyance, and the
ASF Company. Mr. Richard has been a director of the
Company since January of 1990. Age 53.
George R. Trumbull, Mr. Trumbull has served as President of CIGNA Individual
III Insurance (insurance company) since 1992. He served as
President of CIGNA Corporation's Investment Division and
as Chief Investment Officer of CIGNA Corporation from
1988 to 1992. He served as President of the Group Pension
Division of CIGNA Corporation from 1985 to 1988. He
serves as a member of the Board of Overseers of Dartmouth
College's Amos Tuck School of Business Administration and
is a member of the Board of Hartford's Institute of
Living. Mr. Trumbull joined the Company's Board of
Directors in September of 1989. Age 49.
Paul A. Volcker Mr. Volcker has been Chairman of James D. Wolfensohn
Incorporated (investment banking firm) and a Professor of
International Economic Policy at the Woodrow Wilson
School of Public and International Affairs at Princeton
University since March 1988. He has been a director of
the American Stock Exchange since February of 1990. He
also serves as a director of The Prudential Insurance
Company of America and Nestle, S.A. Mr. Volcker served as
Chairman of the Board of Governors of the Federal Reserve
System from 1979 to 1987. Mr. Volcker became a director
of the Company in March of 1988. Age 66.
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1993, the Board of Directors of the
Company (the "Board") met six times. At year end, there were five Committees of
the Board, whose activities are discussed below.
The Executive Committee, which at year end consisted of Messrs. Bailey
(chairman), Brown, Elliott, Lebenthal and Trumbull, did not meet during 1993.
The Executive Committee is authorized, subject to limitations set forth in the
By-Laws of the Company, to exercise powers of the Board during intervals
between Board meetings.
The Finance Committee, which at year end consisted of Messrs. Bailey
(chairman), Brown, Kearney, Richard, Trumbull and Volcker, met once during
1993. This Committee approves the general investment policies and objectives of
the Company and monitors investment activities and portfolio holdings,
including review of investment performance and asset allocation.
The Underwriting Committee, which at year end consisted of Mr. Elliott, Ms.
Gaudiani, Mr. Gray, Ms. Johnson (chairwoman), Messrs. Lebenthal and Nicholas,
met once during 1993. This Committee monitors the underwriting process in order
to assure general compliance with underwriting guidelines and reviews
significant changes in general underwriting policy and guidelines which are
proposed by management. It also reviews proposals to develop new product lines
which are outside the scope of existing businesses.
The Compensation and Organization Committee, which at year end consisted of
Mr. Brown (chairman), Ms. Gaudiani, Messrs. Kearney and Trumbull, met two times
during 1993. This Committee reviews and approves overall policy with respect to
compensation matters. The Committee recommends to the Board the compensation to
be paid to the Chairman and to the President and Chief Executive Officer and
approves the compensation to be paid to the officers reporting to the President
and Chief Executive Officer. The Committee also reviews significant
organizational changes and executive succession planning.
The Audit Committee, which at year end consisted of Mr. Gray, Ms. Johnson,
Messrs. Lebenthal, Nicholas, and Volcker (chairman), met two times during 1993.
Its functions include review of the Company's annual financial statements, the
adequacy of its system of internal controls and the surveillance of insured
issues, and meeting with the Company's independent certified public accountants
and with financial and legal personnel of the Company. It is also a function of
the Committee to recommend to the Board the appointment of the Company's
independent auditors.
In January of 1994, the Board created a new Committee, the Committee on
Directors, which consists of Mr. Elliott, Ms. Gaudiani, Mr. Gray (chairman) and
Messrs. Trumbull and Volcker. This Committee will make recommendations to the
Board on Director nominees and on the size and composition of the Board. It
will also recommend the compensation to be paid to Directors and propose
nominees for the various Committees.
The annual fee paid for the services of a director who is not an executive
officer of the Company was $26,000 and the fee paid for attendance at Board or
Committee meetings was $2,000, with the non-employee chairman of a committee
receiving an additional $1,000. Directors who are also executive officers of
the Company receive no additional compensation for their services as Directors.
The Company adopted a Deferred Compensation and Stock Ownership Plan for Non-
Employee Directors in 1993. Pursuant to this plan, all non-employee Directors
are eligible to elect to defer all or a portion of their fees and to receive
payment of either their current fees or their deferred fees in cash or in
shares of Common Stock of the Company. All non-employee Directors have elected
to participate in this plan. All Directors, with the exception of Mr. Richard,
attended at least 75% of the meetings of the Board and of its Committees on
which they served.
4
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
To: The MBIA Inc. Board of Directors
As part of its Charter, the MBIA Inc. Compensation and Organization Committee
(the "Committee") has, among its duties, the responsibility to recommend to the
Board the compensation, including bonus and the awarding of stock options, to
be paid to the Chairman and the President and Chief Executive Officer, and to
review and approve the recommendations of the President and Chief Executive
Officer as to the compensation, including bonuses and the awarding of stock
options, to be paid to the executive officers reporting to the President and
Chief Executive Officer. The Committee is presently composed entirely of
independent outside directors who are neither current nor former employees of
the Company.
The Company's compensation philosophy is to pay all employees, including
executive officers, for actual performance based on level of responsibility in
a manner which motivates such employees to perform at the highest possible
level and assures that the Company obtains and retains highly qualified
employees in its competitive marketplace. The Company achieves these objectives
by using a combination of both fixed (i.e., salary) and variable (i.e., annual
bonus and, when applicable, stock options) compensation.
Executive officer salaries are based on job content, experience, the market
relative to comparable positions, and actual performance. Salary changes are
based on changes in responsibilities, the individual's performance and
competitive market conditions. For purposes of comparability of salaries and
salary changes, the Committee considers the average figures for the Company's
primary competitors in the financial guaranty industry (note: these are not the
companies used in the stock performance graph).
Individual bonuses reflect Company performance and the individual's personal
contribution to the achievement of the Company's goals and the contribution of
the operating units for which such individual is responsible. Bonus ranges are
established for each job position as a function of base salary, e.g., for 1993
the bonus range for the President and Chief Executive Officer is 0% to 100% of
base salary. The size of the Company bonus pool is approved at year end by this
Committee based on the Company's absolute and relative performance. The
performance factors considered are return on equity, earnings per share, book
value per share, the relative performance of peer group companies and the
achievement of the Company's business plan goals.
Stock options are generally granted annually to higher level employees in
order to align more closely their interests with those of the shareholders. The
stock option grants provide the right to purchase shares of common stock at the
fair market value (closing price) of the stock on the date of the grant. Each
option vests in five equal annual installments (subject to certain acceleration
provisions if major Company financial goals are exceeded) and has a ten-year
term. The options are granted under a shareholder-approved plan and are
typically granted from the Vice-President level up to and including the
Chairman, President and Chief Executive Officer. The number of stock options
granted to any executive officer is based on a percentage of salary divided by
the value of an option, which is derived from a discounted cash flow model
which assumes a 12% annual appreciation in stock price over a five-year period
and a 12 1/2% discount rate. Prior option grants were not taken into account in
determining the number of options granted in 1993. The total number of stock
options granted in 1993 was 208,400. Based on the President and Chief Executive
Officer's performance, the Committee awarded him 20,000 options, which is
equivalent to 100% of his annual salary per the formula outlined above.
5
<PAGE>
Executive officer salary changes and bonuses are based on the Company's
performance in certain areas, including return on equity, earnings per share,
book value per share, relative performance to the Company's peer group, the
success in reaching the business plan and strategic goals set for each
division, expense management and employee development and the individual
officer's personal contribution to the achievement of these goals. The weight
and effect of any of these factors on the compensation of each executive
officer varies depending on the individual responsibility of such officer. The
President and Chief Executive Officer's salary and bonus are a function of how
the Company performed in the following areas: return on equity; earnings per
share; book value per share; relative performance to peer group companies (the
"Financial Goals"); and achievement of the Company's business plan goals. For
both the Chairman and the President and Chief Executive Officer, the Committee
gave 50% weight to the Financial Goals and 50% to the Company's business plan
goals. In 1993 the return on equity was 17.3%, up 12% over 1992; earnings per
share were up 32% over the previous year; and the book value per share was
$38.28, an increase of 16% over 1992. The Company's business plan goals were
substantially met, including generating returns in excess of the Company's cost
of capital, increasing market penetration in both the municipal bond insurance
market and the structured finance sector and maintaining the Company's position
as the financial guaranty insurance industry's lowest cost producer. Based on
this outstanding performance, the Committee awarded the Chairman a bonus of
$250,000 and awarded the President and Chief Executive Officer a bonus of
$485,000 and increased his salary to $525,000 per year effective January 1,
1994.
Based on currently prevailing authority, including proposed Treasury
regulations issued in December 1993, and in consultation with outside tax and
legal experts, the Committee has determined that it is unlikely that the
Company would pay any amounts in 1994 that would result in the loss of a
federal income tax deduction under Section 162(m) of the Internal Revenue Code
of 1986, as amended, and accordingly has not recommended that any special
actions be taken or plans or programs be revised at this time in light of such
tax law provision.
Respectfully submitted,
MBIA Inc. Compensation and
Organization Committee
Joseph W. Brown, Jr., Chairman
Claire L. Gaudiani
Daniel P. Kearney
George R. Trumbull, III
6
<PAGE>
MBIA INC.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER SECURITIES ALL
NAME & PRINCIPAL ANNUAL UNDERLYING OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION(B)($)
---------------- ---- --------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
David H. Elliott 1993 $485,000 $485,000 $16,787 20,000 $186,208
Chief Executive Officer 1992 475,000 400,000 10,900 17,000 220,517
1991 425,000 340,000 15,784 45,024 132,208
Richard L. Weill 1993 280,000 280,000 9,734 10,000 108,357
Executive Vice President 1992 270,000 235,000 12,704 9,000 128,057
1991 245,000 200,000 4,161 25,000 74,949
William O. Bailey 1993 300,000 250,000 912 -- 70,000
Chairman 1992 300,000 225,000 -- -- 156,301
1991 500,000 500,000 -- 25,000 257,589
Robert R. Godfrey 1993 260,000 240,000 4,874 10,000 75,110
Executive Vice President 1992 250,000 200,000 3,619 8,000 89,531
1991 240,000 165,000 3,440 26,928 48,000
James E. Malling 1993 230,000 200,000 9,222 10,000 105,608
Executive Vice President 1992 210,000 140,000 6,177 7,000 106,835
1991 200,000 130,000 103,923(a) 10,000 36,231
</TABLE>
- --------
(a) Consists of a one-time employee relocation expense.
(b) Consists of (i) contributions to the Company's money purchase pension plan
and 401(k) plan, and (ii) premiums paid on behalf of such employees under
a split-dollar life insurance policy. Such amounts in 1993 were as
follows: Elliott--(i) 145,500 and (ii) 40,708; Weill--(i) 84,000 and (ii)
24,357; Bailey--(i) 70,000 and (ii) 0; Godfrey--(i) 63,000 and (ii)
12,110; and Malling--(i) 64,500 and (ii) 41,108.
MBIA INC.
II. OPTION GRANTS IN 1993
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS PRESENT
UNDERLYING GRANTED TO EXERCISE VALUE OF
OPTIONS EMPLOYEES PRICE EXPIRATION AWARD ON
NAME GRANTED(A)(#) IN 1993 PER SHARE($/SH) DATE GRANT DATE(B)
---- ------------- ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
David H. Elliott 20,000 10% $69.00 2003 $583,803
William O. Bailey -- -- $69.00 2003 --
Richard L. Weill 10,000 5% $69.00 2003 291,901
Robert R. Godfrey 10,000 5% $69.00 2003 291,901
James E. Malling 10,000 5% $69.00 2003 291,901
</TABLE>
- --------
(a) The options are granted at an exercise price equal to the closing price of
the stock on the date of the grant, have a ten-year term and vest in five
equal annual installments (subject to certain acceleration provisions if
major Company financial goals are exceeded, if there occurs a change in
control of the Company or upon the death, disability or retirement of the
employee).
(b) Present value of award on date of grant based on 12% annual appreciation
in stock price over five years from option price of $69 per share,
discounted at 12 1/2%.
7
<PAGE>
MBIA INC.
III. AGGREGATED OPTION EXERCISES IN 1993 AND 1993 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
SHARES 1993(#) 1993($)(*)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Elliott -- -- 145,844 46,542 $ 5,097,391 $589,792
William O. Bailey 5,000 $235,938 273,941 -- 10,547,166 --
Richard L. Weill -- -- 59,600 24,400 1,819,650 321,975
Robert R. Godfrey -- -- 18,485 24,444 479,405 332,129
James E. Malling -- -- 8,800 18,200 204,200 166,613
</TABLE>
- --------
* Based on share price of $63.0625.
8
<PAGE>
[INSERT STOCK PERFORMANCE LINE GRAPH HERE]
9
<PAGE>
COMPENSATION AND ORGANIZATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Organization Committee are
Joseph W. Brown, Jr. (chairman), Claire L. Gaudiani, George R. Trumbull, III
and Daniel P. Kearney. There are no members of the Company's Compensation and
Organization Committee who are current or former employees of the Company.
PROPOSAL 2:
SELECTION OF INDEPENDENT AUDITORS
Coopers & Lybrand currently serve as the Company's independent auditors. They
have served in that capacity since the Company's founding in 1986, and prior to
that served as the independent auditors of the Municipal Bond Insurance
Association, starting in 1974. During 1993, Coopers & Lybrand examined the
accounts of the Company and its subsidiaries and also provided other audit
services to the Company in connection with Securities and Exchange Commission
filings.
Upon recommendation of the Audit Committee, the Board has appointed Coopers &
Lybrand as the independent auditors of the Company for 1994. The shareholders
are asked to approve this action of the Board.
It is anticipated that one or more representatives of Coopers & Lybrand will
be present at the Annual Meeting with an opportunity to make a statement, if
desired, and will be available to answer appropriate questions from
shareholders present.
OTHER MATTERS
The Board knows of no other business to be brought before the meeting other
than as set forth above. If any other business should properly come before the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
card to vote such proxies in accordance with their best judgment of such
matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below contains certain information with respect to the only
beneficial owners known to the Company as of March 21, 1993 of more than 5% of
the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK
NAME AND ADDRESS OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS
---------------------------------------- ---------------- -----------
<S> <C> <C>
The Aetna Casualty and Surety Company(1) 3,813,009 9.14%
151 Farmington Avenue
Hartford, CT 06156
Provident Investment Counsel(2) 2,886,775 6.92%
300 North Lake Avenue, Penthouse Suite
Pasadena, California 91101
</TABLE>
- --------
(1) Information as to beneficial ownership of shares of Common Stock and
percentages owned is based on the Schedule 13D filed by The Aetna Casualty
and Surety Company with the Securities and Exchange Commission with respect
to their beneficial ownership of the Common Stock and the Registration
Statement on Form S-3 filed by the Company in October of 1992. Such
10
<PAGE>
shareholder has sole voting power and sole dispositive power with respect to
the shares beneficially owned.
(2) Information as to the beneficial ownership of shares of Common Stock is
based on the February 9, 1994 Schedule 13G filed by Provident Investment
Counsel with the Securities and Exchange Commission. Such filing indicates
that the shareholder has shared voting power with respect to 2,165,750 of
these shares and shared dispositive power with respect to 2,886,775 of
these shares.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 10, 1994, the beneficial
ownership of shares of Common Stock of each Director, each Executive Officer
named in the Summary Compensation Table on page 7, and Directors and all
Executive Officers of the Company, as a group.
<TABLE>
<CAPTION>
SHARES TOTAL
SHARES ACQUIRABLE SHARES
BENEFICIALLY UPON EXERCISE BENEFICIALLY
NAME OWNED OF OPTIONS OWNED(1)
---- ------------ ------------- ------------
<S> <C> <C> <C>
Directors(2)
William O. Bailey 39,325 273,941 313,266
Joseph W. Brown, Jr. 2,000 -- 2,000
David H. Elliott 10,500 144,177 154,677
Claire L. Gaudiani 100 -- 100
William H. Gray, III 0 -- 0
Freda S. Johnson 1,133 -- 1,133
Daniel P. Kearney(3) 500 -- 500
James A. Lebenthal 340 -- 340
Robert B. Nicholas 2,000 -- 2,000
Pierre-Henri Richard 90 -- 90
George R. Trumbull, III 2,500 -- 2,500
Paul A. Volcker 4,000 -- 4,000
Executive Officers
Robert R. Godfrey 6,275 17,358 23,633
James E. Malling 750 8,800 9,550
Richard L. Weill 3,000 58,600 61,600
All of the above and other Execu-
tive
Officers as a group 82,503 639,178 721,681
</TABLE>
- --------
(1) The percentage of shares of Common Stock beneficially owned by all
Directors and Executive Officers as a group is 1.73% of the shares of Common
Stock outstanding.
(2) In addition, as of March 10, 1994, the non-employee Directors also held
4,436 Common Stock equivalent deferral units under the Company's Deferred
Compensation and Stock Ownership Plan for Non-Employee Directors. (See the
discussion of this plan on page 4 under "The Board of Directors and its
Committees")
(3) Mr. Kearney may be deemed to have a beneficial ownership interest in the
shares of Common Stock held by the entity named under "Security Ownership of
Certain Beneficial Owners" with which he is affiliated.
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ORGANIZATION OF THE COMPANY
The Municipal Bond Insurance Association (the "Association") was organized in
1973 as an unincorporated association through which its members wrote municipal
bond insurance on a several and not joint basis. Since 1981, the Association's
five members, and their respective percentages of liability on Association
policies, have been as follows: The Aetna Casualty and Surety Company ("Aetna")
(33%), Fireman's Fund Insurance Company (30%), CIGNA Property and Casualty
Insurance Company (formerly, Aetna Insurance Company) (12%), and The
Continental Insurance Company ("Continental") (10%) (together with certain of
their affiliates, referred to collectively as the "Founding Shareholders" and
individually as a "Founding Shareholder"), and The Travelers Indemnity Company
("Travelers") (15%). The business of the Association was reorganized in
December 1986 through the following actions (the "Reorganization"):
1. The Company was incorporated in Connecticut and capitalized by the Founding
Shareholders by an investment of $509.9 million in cash, the contribution of
their interests in the Association's tangible and intangible assets, and the
cession to the Company of substantially all of the Founding Shareholders' net
municipal bond insurance written.
2. The cession of insurance in force was accomplished pursuant to reinsurance
agreements by which the Founding Shareholders ceded to the Company
substantially all of their net municipal bond insurance business written as
Association members and all such future Association business to be written to
honor prior commitments (see paragraph 5 below). The Founding Shareholders paid
the Company reinsurance premiums equal to their net unearned premium reserve on
the ceded business, totaling approximately $415.3 million on a statutory basis.
The participation of the Founding Shareholders totaled approximately 89% of the
Association's net insurance in force at December 31, 1986. The balance of the
net insurance in force was retained by the fifth member of the Association,
Travelers, which elected not to participate in the Reorganization. (Effective
August 31, 1993 Travelers ceded to MBIA Corp. its net insurance in force in
connection with municipal bond issues written by the Association (the
"Travelers Cession")) Through reinsurance assumption agreements, MBIA Corp. was
substituted for the Company and assumed a direct obligation to the Founding
Shareholders on 100% of this ceded business, the Founding Shareholders released
the Company from its obligations under the reinsurance agreements, and MBIA
Corp. received the insurance premium associated with such ceded business under
the reinsurance agreements. The members of the Association remain liable to
municipal bond investors, severally and not jointly, for their respective
shares of the Association guarantee represented by the ceded Association
insurance policies. However, the Founding Shareholders transferred to MBIA
Corp. virtually all of their net unearned premium reserve on these Association
policies, and MBIA Corp. agreed to indemnify the Founding Shareholders for
their respective shares of any claims under such insurance policies.
3. Effective December 31, 1987, the Founding Shareholders ceded to MBIA Corp.
all of the remaining portion of the risk on those municipal bond issues written
by the Association prior to the Reorganization, paying MBIA Corp. reinsurance
premiums equal to their unearned premium reserves of $1.4 million.
4. The Founding Shareholders and Travelers, as members of the Association,
entered into an agreement pursuant to which the Association ceased writing new
business except pursuant to prior commitments.
5. At the beginning of January 1987, the Association ceased writing municipal
bond insurance, except to honor then-existing commitments, including policies
under UITs to insure bonds sold out of UITs. As the Association writes
municipal bond insurance to honor such commitments, the
12
<PAGE>
Founding Shareholders' share of this insurance (approximately 89%) is ceded to
MBIA Corp. under the reinsurance arrangements described above, and the Founding
Shareholders pay MBIA Corp. a reinsurance premium equal to the premiums they
receive. The Association also receives premiums associated with policies
written on an installment basis. Such reinsurance premiums, net of premium
credits on refunded issues, aggregated $4.5 million and $6.9 million during
1992 and 1991, respectively. Included in the business assumed from the
Association are unearned premiums of $1.9 million and $2.2 million at December
31, 1992 and December 31, 1991, respectively, relating to insurance on UITs
originally sponsored by a Founding Shareholder, Aetna, and American Express
Company, which was an affiliate of a Founding Shareholder, Fireman's Fund
Insurance Company, at the time insurance was provided to the UIT. In 1990 and
in 1993, MBIA Corp. assumed an additional $0.9 million and $0.5 million,
respectively, of unearned premiums relating to the insured UIT sponsored by
American Express Company which had been previously ceded.
SUBSEQUENT REINSURANCE AND INSURANCE TRANSACTIONS WITH FOUNDING SHAREHOLDERS
On September 30, 1989, the Founding Shareholders agreed to endorse the
reinsurance agreements among the Founding Shareholders and MBIA Corp. to
specifically exclude a portfolio of eight real estate projects from the terms
of the reinsurance agreements. As a result, on September 30, 1989, the
portfolio ceased to be an obligation of MBIA Corp., and MBIA Corp. ceded to the
Founding Shareholders reinsurance premiums equal to their net unearned premium
reserve on the ceded business, totaling approximately $6.5 million determined
in accordance with generally accepted accounting principles.
In 1993, MBIA Corp. assumed the remaining portion of Travelers' risk on the
Association policies as well as the $10.8 million of deferred premium revenue
associated with those policies.
In connection with the Travelers Cession, the Founding Shareholders and
Travelers amended the Association Agreement governing the administration of the
Association policies in force, and the Association members amended the
Management Agreement with MISC. The principal purpose of the amendments was to
reflect the fact that Travelers' net in force Association policy obligations
were assumed by MBIA Corp. The amendments to the Management Agreement also
eliminated certain administrative responsibilities of MISC thereunder.
Since 1989, MBIA Corp. has executed five surety bonds to guarantee the
payment obligations of the Founding Shareholders and Travelers which had their
S&P rating downgraded from AAA with respect to their previously issued
Association policies. In the event that they do not meet their Association
policy payment obligations, MBIA Corp. will pay the required amount to
Citibank, N.A., the fiscal agent under related Fiscal Agency Agreements, which
in turn will disburse the surety bond payments to the designated Association
policy beneficiaries. The aggregate amount payable by MBIA Corp. on these
surety bonds is limited to $340 million.
SHAREHOLDERS' AGREEMENT
Under the Amended and Restated Shareholders' Agreement (the "Shareholders'
Agreement") among the Company, the Founding Shareholders and Credit Local de
France (the Founding Shareholders and Credit Local de France are referred to
herein as the "Shareholders"), subject to certain limitations, until July 1,
1997 each of the Shareholders has the right individually to require one
registration under the Securities Act of all or a portion of its shares of
Common Stock, to participate collectively with each other Shareholder in one
such registration, and to include its shares in a registration under the
Securities Act initiated by another Shareholder or by the Company. The
Shareholders are responsible for all expenses in connection with the
registration of their shares. Aetna and Credit Local de France are the only
Shareholders that currently own Common Stock of the Company. All other
provisions of the Shareholders' Agreement, including voting rights and the
right to approve certain corporate actions, have expired.
13
<PAGE>
Pursuant to terms of the Shareholders' Agreement which have now expired, the
Shareholders caused the election of certain directors to the Company's Board of
Directors. Individuals with relationships to the Shareholders during the
preceding three years who are currently members of the Company's Board of
Directors are Joseph W. Brown, Jr., Daniel P. Kearney, Robert B. Nicholas,
Pierre-Henri Richard and George R. Trumbull, III.
INVESTMENT MANAGEMENT AGREEMENT
The Company, MBIA Corp. and MBIA Insurance Corp. of Illinois ("MBIA
Illinois") each have investment management agreements with Aeltus Investment
Management, Inc., (formerly Aetna Financial Services, Inc.) ("Aeltus") an
affiliate of Aetna (the "Investment Agreements"), pursuant to which Aeltus
agrees to invest and supervise the investment of assets of the Company, MBIA
Corp. and MBIA Illinois, in accordance with investment guidelines reviewed and
approved by the respective Boards of Directors of each company, and to provide
certain administrative services related to such investments. The Company
Investment Agreement is terminable by either party on 60 days' notice. The MBIA
Corp. Investment Agreement is terminable by either party on 90 days' notice,
while the MBIA Illinois Investment Agreement is terminable on 30 days' notice.
During 1993, Aeltus was paid fees of $28,448, $2,258,312 and $175,874 by the
Company, MBIA Corp. and MBIA Illinois respectively, based on assets under
management.
The Company believes that the terms of the Investment Agreements are no less
favorable to the Company, MBIA Corp. and MBIA Illinois than those of similar
agreements with unaffiliated parties.
EMPIRE STATE MUNICIPAL EXEMPT TRUSTS, GUARANTEED SERIES
MBIA Corp. insures municipal bonds held by certain of the Guaranteed Series
of Empire State Municipal Exempt Trusts. One of the co-sponsors of the
Guaranteed Series of Empire State Municipal Exempt Trusts is Lebenthal & Co.,
Inc., the chairman of which is James A. Lebenthal, a director of the Company.
The Company believes the terms of the insurance policies and the premiums
charged are no less favorable to MBIA Corp. than the terms and premium levels
for other similar unit investment trusts.
STEAMBOAT PARTNERS, L.P.
MBIA Corp. held an investment in Steamboat Partners, L.P., a limited
partnership which invested principally in marketable equity securities. The
limited partnership, which was liquidated during 1991, was managed by an
independent management company. At the time of liquidation, the Company's
investment was approximately $7.0 million. The general partners of Steamboat
Partners, L.P. included an affiliate of The Fund American Companies, Inc.,
which formerly owned Fireman's Fund Insurance Company.
INSURANCE COVERAGE
The Company has obtained insurance from an affiliate of Aetna to provide its
directors and officers (and their heirs and other legal representatives)
specified coverages against certain liabilities. The premium for 1993 coverage
paid to Aetna was $156,333. The Company has also obtained employee health and
life insurance from Aetna Life Insurance Company, an affiliate of Aetna.
Premiums paid in 1993 by the Company for this coverage totaled $1,462,568. In
addition, the Company has obtained dental insurance from an affiliate of CIGNA
Corporation, for which it paid a premium of $250,360 in 1993. The Company has
also obtained life insurance policies from Aetna Life Insurance Company for 21
key employees for which it paid a premium of $327,898 for 1993. The Company
believes that the
14
<PAGE>
terms of the above mentioned insurance are no less favorable to the Company
than the terms of similar insurance available from unaffiliated persons.
OTHER
The following summarizes all known filing delinquencies or failures to file,
with respect to reports on Forms 3, 4 and 5 which were required to be filed by
all officers, directors and beneficial owners of more than ten percent of the
outstanding shares of the Company's Common Stock: William O. Bailey, who was a
director of the Company during 1993, filed a required report on Form 5,
relating to one transaction, namely gifts of 1,800 shares of the Company's
Common Stock, on March 16, 1994, which report should have been filed on or
before January 10, 1994.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1995 Annual Meeting of Shareholders must be
received at the principal executive offices of the Company, 113 King Street,
Armonk, New York 10504, no later than November 25, 1994, in order to be
considered for inclusion in the Company's Proxy Statement for such Meeting.
MISCELLANEOUS
The cost of preparing and mailing this notice and statement and the enclosed
form of proxy will be borne by the Company. In addition to solicitation by
mail, proxies may be solicited in person or by telephone or telegraph by
directors, officers and regular employees of the Company, without extra
compensation and at the Company's expense. The Company will also request
bankers and brokers to solicit proxies from their customers, where appropriate,
and will reimburse them for reasonable expenses. In addition, the Company has
engaged MacKenzie Partners, New York, New York to assist in soliciting proxies
for a fee of approximately $5,000 plus reasonable out-of-pocket expenses.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE ON REQUEST BY WRITING TO THE CORPORATE
COMMUNICATIONS DEPARTMENT, MBIA INC., 113 KING STREET, ARMONK, NEW YORK 10504.
By order of the Board of Directors,
Louis G. Lenzi
Secretary
15
<PAGE>
MBIA Inc. Stock Performance Graph
Cumulative Total Return Per Common Share
compared to
Standard & Poor's 500 Composite Index
Standard & Poor's Financial Stocks Index
Measurement period
(Fiscal Year Covered) MBIA Inc. S&P 500 S&P Fin. Stocks
- --------------------- --------- ------- ---------------
FYE 12/31/87 $100 $100 $100
FYE 12/31/88 $155 $116 $118
FYE 12/31/89 $257 $153 $157
FYE 12/31/90 $229 $149 $123
FYE 12/31/91 $397 $194 $185
FYE 12/31/92 $530 $208 $229
FYE 12/31/93 $532 $229 $254
