<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MBIA
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MBIA
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
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MBIA INC. DAVID H. ELLIOTT
113 King Street Chairman
Armonk, NY 10504
914 273 4545
[LOGO] MBIA
March 25, 1996
Dear Shareholder:
On May 9, 1996, 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 1995 and
discuss our prospects for 1996. The meeting will be held in our headquarters at
113 King Street, Armonk, New York, at 10:00 a.m.
This year you are being asked to act on the following: (a) the election of
directors; and (b) the selection of independent auditors for 1996. 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 date,
sign and mail the enclosed proxy promptly.
We appreciate your continued support.
Sincerely,
/s/ David H. Elliott
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 9, 1996 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 1997 Annual Meeting;
PROPOSAL 2: To ratify the appointment by the Board of Directors of
Coopers & Lybrand L.L.P., certified public accountants, as independent
auditors for the Company for the year 1996;
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 22, 1996 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,
/s/ Louis G. Lenzi
Louis G. Lenzi
Secretary
113 King Street
Armonk, New York 10504
March 25, 1996
<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 22, 1996. On the record date, there were outstanding
42,853,891 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 25, 1996, 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 1996 Annual Meeting, the shareholders will elect 12
directors to serve for a term expiring at the 1997 Annual Meeting. Mr. William
O. Bailey, a member of the Board of Directors of the Company since 1986 and
the former Chairman, is not standing for re-election at the 1996 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.
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 Company
(insurance company). He had been employed in various
capacities at Fireman's Fund since 1974. He is a director
of Talegen Holdings, Inc. and Constitution Re
Corporation. 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 47.
David C. Clapp
Mr. Clapp is a limited partner of The Goldman Sachs
Group, L.P. From 1990 until late 1994, he was Partner-in-
charge of the Municipal Bond Department at Goldman Sachs
& Co. (investment banking). He is past
1
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Chairman of the Municipal Securities Rulemaking Board and
President of the Board of Trustees of the Museum of the
City of New York. Age 58.
David H. Elliott Mr. Elliott is currently the Chairman of the Company and
Chairman 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. Mr. Elliott is a member of the
board of Gryphon Holdings, Inc. Age 54.
Claire L. Gaudiani Dr. Gaudiani has been President of Connecticut College
since 1988. Dr. Gaudiani serves as a director of Southern
New England Telephone Company, Public Radio International
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 51.
William H. Gray, III Mr. Gray is President and Chief Executive Officer of the
United Negro College Fund, Inc. Mr. Gray has served as
Special Advisor to the President on Haiti, Majority Whip
and Budget Chairman for the U.S. House of
Representatives, a faculty member at several colleges,
and has been pastor of the 5,000 member Bright Hope
Baptists Church in Philadelphia for more than 20 years.
He serves as a director of The Chase Manhattan
Corporation, The Prudential Insurance Company of America,
Warner-Lambert Company, Westinghouse Electric
Corporation, Union Pacific Corporation and Rockwell
International Corp. Mr. Gray has been a director of the
Company since being elected at the 1992 Annual Meeting.
Age 54.
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 48.
Daniel P. Kearney Mr. Kearney is Executive Vice President of Aetna Life and
Casualty Company (insurance company). Prior to joining
Aetna Life and Casualty Company in 1991, he served as
President and Chief Executive Officer of the Resolution
Trust 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. He serves as director of several Aetna insurance
companies and registered investment companies. Mr.
Kearney has served on the Company's Board of Directors
since being elected at the 1992 Annual Meeting. Age 56.
2
<PAGE>
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 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 67.
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 66.
Pierre-Henri Richard Mr. Richard has been Chairman and Chief Executive Officer
of Credit Local de France (banking and municipal finance
firm) since 1993, having acted as Chairman of the
executive board of Credit Local de France from 1987 to
1993. From 1983 to 1993, he was Deputy Directeur General
of the Caisse des Depots et Consignations, in charge of
municipal finance. He is Chairman of the Institute for
Decentralization and serves as a director of the European
Investment Bank and Air France Group. Mr. Richard has
been a director of the Company since January of 1990. Age
55.
John A. Rolls Mr. Rolls has been President and Chief Executive Officer
of Thermion Systems International since February of this
year. From 1992 until 1996, he was President and Chief
Executive Officer of Deutsche Bank North America. Prior
to joining Deutsche Bank in 1992, he served as Executive
Vice President and Chief Financial Officer of United
Technologies from 1986 to 1992. He is a member of the
Institute of International Bankers, the American
Institute for Contemporary German Studies, an approved
person at the New York Stock Exchange and a director of
Bowater Inc. Age 54.
Richard L. Weill Mr. Weill is President of the Company and MBIA Corp. From
1991 to 1994, he served as Executive Vice President of
the Company and MBIA Corp., having served as General
Counsel and Secretary of the Company and MBIA Corp. from
1989 to 1991. Mr. Weill was previously a partner with the
law firm of Kutak Rock, with which he was associated from
1969 to 1989. He is a director of MBIA Corp. Age 53.
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1995, the Board of Directors of the
Company (the "Board") met six times. At year end, there were six Committees of
the Board, whose activities are discussed below.
The Executive Committee, which at year end consisted of Messrs. Bailey,
Brown, Elliott (Chairman), Kearney, and Lebenthal, met once during 1995. 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 Mr. Bailey (chairman),
Messrs. Brown, Clapp and Weill, met once during 1995. 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. Paul A. Volcker was a member of the Finance
Committee until his resignation as a Director of the Company on September 1,
1995.
The Risk Oversight Committee, which at year end consisted of Mr. Kearney
(chairman), Ms. Johnson, Messrs Clapp, Lebenthal and Nicholas, met twice
during 1995. 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
Messrs. Brown (chairman), Clapp, Ms. Gaudiani and Mr. Kearney, met twice
during 1995. This Committee reviews and approves overall policy with respect
to compensation matters. The Committee annually reviews the performance of the
Chairman, recommends to the Board the compensation to be paid to the Chairman
and approves the compensation to be paid to the officers reporting to the
Chairman. The Committee also reviews significant organizational changes and
executive succession planning.
The Audit Committee, which at year end consisted of Ms. Johnson
(chairperson) and Messrs. Gray, Lebenthal and Nicholas, met two times during
1995. Its functions include reviewing the Company's annual financial
statements, meeting with the Company's internal auditor concerning the
adequacy of internal controls and review of 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. Prior to his resignation as a Director of the
Company, Mr. Volcker was a member of the Audit Committee.
The Committee on Directors, which at year-end consisted of Mr. Elliott, Ms.
Gaudiani and Mr. Gray (chairman), met three times during 1995. This Committee
makes recommendations to the Board on Director nominees and on the size and
composition of the Board. It also recommends the compensation to be paid to
Directors and proposes nominees for the various Committees. Prior to his
resignation as a Director of the Company, Mr. Volcker was a member of the
Committee on Directors.
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. Mr. Volcker while a member of the Board also
served as a consultant to the Company and for these services the investment
banking firm of which he is Chairman received $50,000 from the Company during
1995. Directors who are also executive officers of the Company receive no
additional compensation for their services as Directors. The Company has a
Deferred Compensation and Stock Ownership Plan for Non-Employee Directors.
4
<PAGE>
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. As of year-end, seven of the non-employee Directors 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.
COMPENSATION AND ORGANIZATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Organization Committee, at
year-end, were Joseph W. Brown, Jr. (chairman), David C. Clapp, Claire L.
Gaudiani 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.
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 and other long-term incentives, to be paid to the Chairman and
Chief Executive Officer, and to review and approve the recommendations of the
Chairman and Chief Executive Officer as to the compensation, including bonuses
and the awarding of stock options and other long-term incentives, to be paid
to the executive officers reporting to the Chairman 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 and other long-term
incentives) compensation.
Executive officer salaries are based on job content of each position, the
market relative to comparable positions, the individual's relevant experience
and the actual performance of each executive. 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 median figures for the Company's primary
competitors in the financial guaranty industry (note: only one of MBIA's
primary competitors has been publicly traded for any significant period of
time and none of MBIA's competitors are included in any of the indices 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 1995
the bonus range for the Chairman and Chief Executive Officer was 0%-100% of
base salary. The size of the Company bonus pool is approved at year end by
this Committee based on its determination of the Company's absolute and
relative performance. The performance factors considered are return on equity,
earnings per share, adjusted book value per share, the relative performance of
peer group companies and the achievement of the Company's business plan goals.
In
5
<PAGE>
1995, these performance goals were substantially met or exceeded and
individual bonuses were made from a pool that the Committee approved which
aggregated 47% of all salaries.
Executive officer salary changes and bonuses are based on the Company's
performance in certain areas, including return on equity, earnings per share,
adjusted book value per share, performance relative to the Company's peer
group, 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
Chairman 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; adjusted book value per share; relative performance to peer group
companies (the "Financial Goals"); and achievement of the Company's business
plan goals. For the Chairman and Chief Executive Officer, the Committee gave
50% weight to the Financial Goals and 50% weight to the Company's business
plan goals. In the core municipal bond business, new issue volume for the
Company increased 12% against a total industry gain of 6% in 1995 as compared
to 1994. In addition, the Company in 1995 achieved a 13.8% return on equity
versus the 15.8% earned in 1994, while earnings per share were up 4% over the
previous year and the book value per share was $53.19, an increase of 30% over
1994. 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 and the structured finance
markets and maintaining the Company's position as the financial guaranty
insurance industry's lowest cost producer. Based on this performance, the
Committee awarded the Chairman and Chief Executive Officer a bonus of
$225,000, in cash, and a restricted stock award equivalent to $225,000,
compared to the $365,000 cash bonus granted in 1994, and maintained his salary
at $525,000. The Committee chose to award certain executive officers with
restricted shares of the Company's common stock in lieu of a portion of their
bonus for the first time in 1995. These shares will vest in three years and
the dividends on the stock are payable currently.
In May of 1995, the Board of Directors of the Company adopted and the
shareholders approved the MBIA Inc. 1996 Incentive Plan (the "Plan"). The Plan
has two component parts, a long-term and a short-term program. The long-term
program, which is designed to align the interests of higher level employees
with those of shareholders, authorizes the granting of stock options as well
as the payment of an incentive award in the form of cash or stock at the end
of a multi-year cycle based on attaining certain performance goals. The short-
term program authorizes the payment of annual bonuses based on the attainment
of certain performance goals. The short-term program is substantially similar
to the Company's existing bonus plan. (the bonuses for 1995 performances were
awarded as set forth above).
With respect to the long-term portion, the Committee has adopted an
incentive program that includes a stock option program and adds a compensation
component linked to the growth in adjusted book value per share ("ABV") of the
Company's stock. Awards under the long-term program are divided equally
between the two components, with 50% of the award given in stock options and
50% of the award (multiplied by 1.5, since this portion will not be awarded
annually) to be paid in cash or shares of Company stock. Target levels for the
option/incentive award will be established as a percentage of total salary and
bonus, based upon an individual's position. The awards under the long-term
program will be typically granted from the Vice-President position (target
levels range from 30% to 40%) up to and including the Chairman and Chief
Executive Officer (target level range of 70% to 80%).
The ABV portion of the long-term incentive program will be awarded every
other year commencing December, 1995. The initial award will cover the growth
in ABV from December 31, 1995 through December 31, 1998, with a base line
growth of 12%. The amount to be paid in respect of such award will be adjusted
upward or downward based on the actual ABV growth, with a minimum
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<PAGE>
growth of 8% necessary to receive any award and an 18% growth needed to
receive the maximum award of 200% of the target level. The amount, if any, to
be paid under this portion of the program will be paid in early 1999 in the
form of cash or shares of the Company's stock at the discretion of the
Committee. Subsequent awards, if any, will be made every other year (1997,
1999, etc.) with concomitant payments occurring after the three-year cycle.
This shift of one-half of the option program to the ABV program is being done
to more directly tie the interests of the participants to the performance of
the Company.
The stock option grants, which will continue to be awarded every year,
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 over
five years and has a ten-year term. Because the grants are based on an annual
formula, prior option grants are not taken into account in determining the
number of options granted in any year. In December 1995, based on the above
formula, 97,300 options were awarded.
Based on currently prevailing authority, including proposed Treasury
regulations issued in December 1995, 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 1996 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.
Respectfully submitted,
MBIA Inc. Compensation and
Organization Committee
Joseph W. Brown, Jr., Chairman
David C. Clapp
Claire L. Gaudiani
Daniel P. Kearney
7
<PAGE>
MBIA INC.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ------------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME & COMPENSATION STOCK AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (A)($) OPTIONS(#) (B)($)
------------------ ---- --------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Elliott 1995 $525,000 $225,000 $13,203 $225,000 6,630 $200,877
Chairman 1994 525,000 365,000 22,356 n/a 50,000 180,430
1993 485,000 485,000 16,787 n/a 20,000 186,208
Richard L. Weill 1995 350,000 200,000 9,475 100,000 4,150 127,219
President 1994 300,500 228,000 10,260 n/a 38,700 103,561
1993 280,000 280,000 9,734 n/a 10,000 108,357
James E. Malling 1995 245,000 150,000 10,098 50,000 2,840 78,166
Executive 1994 230,000 150,000 9,700 n/a 24,200 98,025
Vice-President 1993 230,000 200,000 9,222 n/a 10,000 105,608
Julliette S. Tehrani 1995 210,000 105,000 3,727 35,000 2,360 65,895
Senior 1994 200,000 114,000 3,431 n/a 14,700 53,326
Vice-President 1993 200,000 185,000 3,407 n/a 6,000 64,061
Arthur M. Warren(c) 1995 212,000 115,000 5,459 0 0 114,581
Senior 1994 204,000 118,000 5,913 n/a 5,700 110,173
Vice-President 1993 204,000 145,000 6,347 n/a 6,000 114,338
</TABLE>
- --------
(a) Represents a portion of the annual bonus awarded to Messrs. Elliott, Weill
and Malling and Ms. Tehrani and paid in 2,917, 1,297, 648 and 454 shares
of restricted stock, respectively. The shares were valued at the closing
price on December 7, 1995, the date of the award. The value of the shares
at year-end was as follows: Elliott--$218,775; Weill--$97,275; Malling--
$48,600; and Tehrani--$34,050.
(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 1995 were as
follows: Elliott--(i)$146,250 and (ii)$54,627; Weill--(i)$97,500 and
(ii)$29,719; Malling--(i)$66,750 and (ii)$11,416; Tehrani--(i)$52,500 and
(ii)$13,395 and Warren--(i)$49,050 and (ii)$65,531.
(c) Mr. Warren retired in January 1996.
8
<PAGE>
MBIA INC.
II. OPTION GRANTS IN 1995
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS PRESENT VALUE
UNDERLYING GRANTED TO EXERCISE OF OPTION
OPTIONS EMPLOYEES PRICE EXPIRATION AWARD ON
NAME GRANTED(A)(#) IN 1995 PER SHARE($/SH) DATE GRANT DATE(B)
---- ------------- ------------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
David H. Elliott 6,630 7% $77.125 2005 $216,320
Richard L. Weill 4,150 4% $77.125 2005 135,404
James E. Malling 2,840 3% $77.125 2005 92,662
Julliette S. Tehrani 2,360 2% $77.125 2005 77,001
Arthur M. Warren -- -- -- -- --
</TABLE>
- --------
(a) The options were 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 as
follows: year 1--0%; year 2--40%; year 3--60%; year 4--80%; year 5--100%
(subject to certain acceleration provisions if there occurs a change in
control of the Company or upon the death, disability or retirement of the
employee).
(b) The valuation method assumes: (1) annual 12% growth in the value of the
underlying stock over a five-year period; (2) exercise of the option at
the end of five years; and (3) discounting of the net proceeds (stock
price less option exercise price) to a present value at a rate of 12.5%.
For example, with respect to the grant in 1995 at the exercise price of
$77.125 per share, the valuation would be determined as follows:
<TABLE>
<C> <S> <C>
1) 12% per annum growth of stock price using $77.125 as a base $135.921
2) Exercise of option at year five 77.125
--------
Net proceeds at year five $ 58.796
3) Present value of net proceeds at a 12.5% discount rate $ 32.630
========
</TABLE>
This is a net present value calculation of the assumed net proceeds and, as
a result, does not include any assumptions relating to volatility or dividend
yield. The 12.5% discount rate is used as a proxy for a weighted cost of
capital rather than a risk-free rate of return.
MBIA INC.
III. AGGREGATED OPTION EXERCISES IN 1995 AND 1995 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(*)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Elliott 45,036 $2,246,171 149,350 54,630 $5,708,437 $891,000
Richard L. Weill 0 0 87,740 39,110 3,205,033 600,130
James E. Malling 0 0 27,840 26,200 703,545 399,180
Julliette S. Tehrani 5,000 239,438 58,660 16,520 2,508,325 264,370
Arthur M. Warren 9,608 415,769 35,252 6,960 1,308,548 84,510
</TABLE>
- --------
* Based on share price of $75.00
9
<PAGE>
IV. LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
PERIOD UNTIL
NAME PAYOUT MINIMUM TARGET MAXIMUM
---- ------------ ------- -------- ----------
<S> <C> <C> <C> <C>
David H. Elliott Three years 0 $588,200 $1,176,400
Richard L. Weill Three years 0 368,200 736,400
James E. Malling Three years 0 252,000 504,000
Julliette S. Tehrani Three years 0 209,400 418,800
Arthur M. Warren -- -- -- --
</TABLE>
- --------
(a) The awards were made in December of 1995, with the payout, if any,
occurring at the end of 1998. The target award is based on a projected 12%
growth in the adjusted book value per share of the Company's stock,
subject to the threshold and maximum levels.
10
<PAGE>
[GRAPH APPEARS HERE]
<TABLE>
Total Return
MBIA Inc. vs. S&P 500 vs.
S&P Financials
<CAPTION>
Measurement period S&P
(Fiscal year Covered) MBIA S&P 500 Financials
- --------------------- ---- ------- ----------
<S> <C> <C> <C>
Measurement PT -
12/31/90 $ 100 $ 100 $ 100
FYE 1991 $ 174 $ 130 $ 151
FYE 1992 $ 232 $ 140 $ 186
FYE 1993 $ 232 $ 154 $ 206
FYE 1994 $ 212 $ 156 $ 199
FYE 1995 $ 288 $ 215 $ 306
</TABLE>
11
<PAGE>
PROPOSAL 2:
SELECTION OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. 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 1995, Coopers & Lybrand
L.L.P. examined the accounts of the Company and its subsidiaries and also
provided other services to the Company in connection with Securities and
Exchange Commission filings.
Upon recommendation of the Audit Committee, the Board has appointed Coopers
& Lybrand L.L.P. as the independent auditors of the Company for 1996. The
shareholders are asked to approve this action of the Board.
It is anticipated that one or more representatives of Coopers & Lybrand
L.L.P. 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 22, 1996 of more than 5% of
the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON
NAME AND ADDRESS OF STOCK BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS
--------------------- ------------------ ----------
<S> <C> <C>
FMR Corp (1) 3,141,220 7.33%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------
(1) Information as to the beneficial ownership of shares of Common Stock is
based on the February 14, 1996 Schedule 13G filed by FMR Corp. with the
Securities and Exchange Commission. Such filing indicates that the
shareholder has sole voting power with respect to 38,620 of these shares
and sole dispositive power with respect to 3,141,220 of these shares.
12
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 22, 1996, the beneficial
ownership of shares of Common Stock of each Director, each Executive Officer
named in the Summary Compensation Table above 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(2) OWNED(3)
---- ------------ ------------- ------------
<S> <C> <C> <C>
Directors
Joseph W. Brown, Jr.(4) 4,206 -- 4,206
David C. Clapp 0 -- 0
David H. Elliott 19,572(1) 157,350 176,922
Claire L. Gaudiani(4) 1,185 -- 1,185
William H. Gray, III(4) 727 -- 727
Freda S. Johnson(4) 3,210 -- 3,210
Daniel P. Kearney(5) 500 -- 500
James A. Lebenthal(4) 2,841 -- 2,841
Robert B. Nicholas(4) 4,098 -- 4,098
Pierre-Henri Richard 90 -- 90
John A. Rolls(4) 253 -- 253
Richard L. Weill 7,605(1) 92,740 100,345
Executive Officers
James E. Malling 2,143(1) 32,640 34,783
Julliette S. Tehrani 5,735(1) 60,980 66,715
All of the above and other Execu-
tive Officers as a group 57,189(1) 388,090 445,279
</TABLE>
- --------
(1) This number includes shares held by the Executive Officers under the
Company's exempt 401(k) Plan and includes restricted shares awarded to
certain of the Executive Officers in December, 1995.
(2) This column indicates the number of shares that are presently exercisable
or will become exercisable on or before May 31, 1996 under the Company's
stock option program.
(3) The percentage of shares of Common Stock beneficially owned by all
Directors and Executive Officers as a group is 1.04% of the shares of
Common Stock outstanding.
(4) This number includes Common Stock equivalent deferral units held under the
Company's Deferred Compensation and Stock Ownership Plan for Non-Employee
Directors. (See the discussion of this plan under "The Board of Directors
and its Committees")
(5) 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.
13
<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 Founding Shareholders'
share of this insurance (approximately 89%) is ceded to MBIA Corp. under the
14
<PAGE>
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.
15
<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 Daniel P. Kearney and Pierre-Henri Richard.
INVESTMENT MANAGEMENT AGREEMENTS
During 1995, the Company, MBIA Corp. and MBIA Insurance Corp. of Illinois
("MBIA Illinois") each had 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 agreed 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. During 1995, Aeltus was paid fees of $2,379,471 and $112,237 by
MBIA Corp. and MBIA Illinois, respectively, based on assets under management.
These agreements were terminated with respect to the investment
responsibilties at the end of 1995.
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.
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 1995 coverage
paid to Aetna was $270,000. The Company has also obtained employee health and
life insurance from Aetna Life Insurance Company, an affiliate of Aetna.
Premiums paid in 1995 by the Company for this coverage totaled $1,275,121. In
addition, the Company has obtained dental insurance from an affiliate of CIGNA
Corporation, for which it paid a premium of $308,643 in 1995. The Company has
also obtained life insurance policies from Aetna Life Insurance Company for 23
key employees for which it paid a premium of $310,824 for 1995. The Company
believes that the 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: Form 4 filings were filed
three days late in January with respect to restricted stock awards made to
certain executive officers in December, 1995.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1997 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 22, 1996, in order to be
considered for inclusion in the Company's Proxy Statement for such Meeting.
16
<PAGE>
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
MARKETING DEPARTMENT, MBIA INC., 113 KING STREET, ARMONK, NEW YORK 10504.
By order of the Board of Directors,
/s/ Louis G. Lenzi
Louis G. Lenzi
Secretary
17
<PAGE>
MBIA INC.
ANNUAL MEETING OF SHAREHOLDERS--Thursday, May 9, 1996
The proxy is solicited on behalf of
the Board of Directors of MBIA Inc.
The undersigned hereby appoints James A. Lebenthal and Freda S. Johnson and each
of them, the proxies and agents of the undersigned, each with power of
substitution, to vote all shares of Common Stock of MBIA INC. (the "Company"),
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held at MBIA InC., 113 King Street, Armonk, New York, on
Thursday, May 9, 1996, at 10:00 A.M., New York time, and at any adjournment
thereof, with all the powers which the undersigned would possess if personally
present, hereby revoking any prior proxy to vote at such meeting and hereby
ratifying and confirming all that said proxies and agents or their substitutes
or any of them may lawfully do by virtue hereof, upon the following matters, as
described in the MBIA INC. Proxy Statement, receipt of which is hereby
acknowledged, and in their discretion, upon such other business as may properly
come before the meeting or any adjournment thereof.
Election of Directors, Nominees: Joseph W. Brown, Jr., David C. Clapp, David H.
Elliot, Claire L. Gaudiani, William H. Gray, III, Freda S. Johnson, Daniel P.
Kearney, James A. Lebenthal, Robert B. Nicholas, Pierre H. Richard, John A.
Rolls and Richard L. Weill.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
+ FOLD AND DETACH HERE +
<PAGE>
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this Proxy will be voted FOR election of Directions and
FOR Item 2.
Please mark [X]
your vote as
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS (INSTRUCTION: To withhold authority to vote for
any individual nominees, write that nominee's
FOR WITHHOLD name on the line provided below.)
ALL AUTHORITY FOR
NOMINEES ALL NOMINEES
[_] [_] ------------------------------------------------
2. APPROVAL OF APPOINTMENT OF
COOPERS & LYBRAND AS
INDEPENDENT AUDITORS.
FOR AGAINST ABSTAIN
[_] [_] [_]
----------------------------
Signature(s)
Dated:
--------------------, 1996
NOTE: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such.
PLEASE RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
+ FOLD AND DETACH HERE +
MBIA INC.
Annual Meeting of Shareholders
Thursday, May 9, 1996
10:00 a.m.
Corporate Headquarters
MBIA INC.
113 King Street
Armonk, New York 10504
