<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 Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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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 31, 1997
Dear Shareholder:
On May 15, 1997, MBIA Inc. will hold its annual meeting of shareholders and I
am pleased to invite you on behalf of the Board of Directors to join us so we
can report to you on the activities of the Company during 1996 and discuss the
outlook for 1997. 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 1997. 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 return 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 15, 1997 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 1998 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 1997;
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 27, 1997 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 31, 1997
<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 is March 27, 1997. On the record date, there were outstanding
43,334,086 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. Directors are elected by a
plurality of the votes cast. The vote required for ratification of the
independent auditors is a majority of shares voting.
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 31, 1997, 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 1997 Annual Meeting, the shareholders will elect 12
directors to serve for a term expiring at the 1998 Annual Meeting. Mr. Robert
B. Nicholas, a director of the Company since 1986, is not standing for re-
election at the 1997 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 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 where he had
been employed in various capacities 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 1990 and previously served as a director
from December of 1986 through May of 1989. Age 48.
David C. Clapp Mr. Clapp is currently 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 bank). He is past
Chairman of the Municipal Securities Rulemaking Board,
President of the Board of Trustees of the Museum of the
City of New York and Chair of the New York Arthritis
Foundation. Mr. Clapp has served as director of the
Company since 1994. Age 59.
1
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Gary C. Dunton
Mr. Dunton is President of the Family and Business
Insurance Group, USF&G Insurance, a company he has been
associated with since 1992. From 1980 to 1992, Mr. Dunton
was employed at Aetna Life & Casualty Company, most
recently as Vice President of Standard Commercial
Markets. He joined the MBIA Inc. Board in 1996 and also
currently serves as a member of the Board of Trustees for
the American Institute for Chartered Property Casualty
Underwriters and the Insurance Institute of America. Age
41.
David H. Elliott Mr. Elliott is the Chairman of the Company and Chairman
of MBIA Insurance Corporation ("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 (the "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 55.
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 Citizen's Bank--Connecticut. She has been a
director of the Company since being elected at the 1992
Annual Meeting. Age 52.
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
Baptist Church in Philadelphia for 24 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, Rockwell International Corp. and Electronic
Data Systems Incorporated. Mr. Gray has been a director
of the Company since 1992. Age 55.
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. from 1979 to 1990. Ms. Johnson is a member of the
National Association of State Auditors, Comptrollers and
Treasurers' National Advisory Board on State and Local
Government Secondary Market Disclosure and a member of
the corporate advisory board of Queens College. She is
also a past director of the National Association of
Independent Public Finance Advisors and was a member of
the Municipal Securities Rulemaking Board's MSIL
Committee on Dissemination of Disclosure Information. Ms.
Johnson has served on the Company's Board of Directors
since July of 1990. Age 49.
Daniel P. Kearney
Mr. Kearney is Executive Vice President of Aetna Inc.
(insurance company). Prior to joining Aetna in 1991, he
served as President and Chief Executive Officer of the
Resolution Trust Corporation Oversight Board
2
<PAGE>
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 bank) in charge of the
mortgage finance and real estate finance departments from
1977 to 1988. Mr. Kearney also serves on the boards 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 57.
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 of the Rebuild America
Coalition. Mr. Lebenthal has been a director of the
Company since August of 1988. Age 68.
Pierre-Henri Richard Mr. Richard has been Chairman and Chief Executive Officer
of the European banking group DEXIA (banking and
municipal finance) since 1996. He was Chairman and Chief
Executive Officer of Credit Local de France from 1993-
1996, 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 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 56.
John A. Rolls
Mr. Rolls has been President and Chief Executive Officer
of Thermion Systems International since 1996. 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 director of Bowater, Inc. and
Conceptronics, Inc. and a trustee of the Center for
Technology Commercialization--NASA Northeast Region
Technology Transfer Center. Mr. Rolls joined the
Company's Board in 1995. Age 55.
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 to both companies from 1989 to
1991. Mr. Weill was formerly a partner with the law firm
of Kutak Rock, with which he was associated from 1969 to
1989. He joined the Company's Board in 1995 and also is a
director of MBIA Corp. Age 54.
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1996, the Board of Directors of the
Company (the "Board") met five 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. Brown,
Elliott (chairman), Kearney, and Lebenthal, did not meet during 1996. 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. William O. Bailey, who did not stand for reelection at the
1996 Annual Meeting, was a member of the Executive Committee.
The Finance Committee, which at year end consisted of Messrs. Brown, Clapp,
Rolls (chairman) and Weill, met three times during 1996. 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. Mr. Bailey was a member of the
Finance Committee.
The Risk Oversight Committee, which at year end consisted of Mr. Kearney
(chairman), Ms. Johnson, Messrs Clapp, Lebenthal and Nicholas, met twice
during 1996. 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 1996. 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), Messrs. Gray, Lebenthal, Nicholas and Rolls, met two times
during 1996. 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.
The Committee on Directors, which at year-end consisted of Mr. Elliott, Ms.
Gaudiani and Mr. Gray (chairman), met two times during 1996. This Committee
makes recommendations to the Board on Director nominees and on the size and
composition of the Board. It also recommends guidelines and criteria for the
selection of nominees.
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. Additionally in December of 1996, the
Compensation and Organization Committee approved an annual award of stock
units equivalent to $10,000 to be made to each non-employee Director as
additional compensation. 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. 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
4
<PAGE>
Common Stock of the Company. As of year-end, seven of the non-employee
Directors elected to participate in this plan. All Directors attended at least
80% 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.
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE ON EXECUTIVE
COMPENSATION
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.
ELEMENTS OF COMPENSATION
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 attracts 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.
In 1996, the Committee reviewed the compensation of the Company's executive
officers, comparing it to a group of twenty-two peer companies. Based on the
results of this study, the Committee determined to make adjustments in the
compensation of the executive officers.
ANNUAL 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 1996
the bonus range for the Chairman and Chief Executive Officer was 0%-100% of
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<PAGE>
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 1996, each of these performance goals were substantially met or exceeded
and individual bonuses were made from a pool that the Committee approved which
aggregated 52% of all salaries. In addition, the Committee continued its
practice of awarding executive officers with restricted shares of the
Company's Common Stock in lieu of a portion of their bonus.
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, domestic
municipal finance volume for the Company increased 20% in 1996. In addition,
the Company achieved a 13.7% return on equity versus the 13.8% earned in 1995,
while earnings per share were up 16% over the previous year and the book value
per share was $57.28, an increase of 8% over 1995. 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 $325,000 in cash, and a restricted stock award equivalent
to $325,000, compared to a 1995 bonus of $225,000 in cash, and a restricted
stock award equivalent to $225,000 and increased his salary to $575,000,
effective January 1, 1997.
LONG-TERM INCENTIVES
The Company's Long-Term Incentive Plan (the "Plan") is designed to align the
interests of higher level employees with those of shareholders. The Plan
authorizes both the annual granting of stock options as well as the payment of
incentive compensation in the form of cash or stock at the end of a multi-year
cycle based on the Company attaining certain performance goals. Awards under
the Plan are divided equally, 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
Plan are a percentage of total salary and bonus based upon an individual's
position. The awards under the Plan are typically granted from the Vice-
President position up to and including the Chairman and Chief Executive
Officer.
The payment of the incentive award is made upon the achievement of a
specified level of growth in adjusted book value per share ("ABV") of the
Company's stock. The ABV portion of the Plan is awarded every other year
commencing December 1995. Therefore, no ABV award was given in 1996.
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 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
1996, based on the above formula, 156,370 options were awarded.
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<PAGE>
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
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 1997 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
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MBIA, INC.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------- -----------------------
NAME & OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
PRINCIPAL COMPENSATION STOCK AWARDS UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($) (A)($) OPTIONS(#) (B)($)
--------- ---- --------- -------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. 1996 $525,000 $325,000 $13,098 $325,000 25,000 $230,703
Elliott
Chairman 1995 525,000 225,000 13,203 225,000 6,630 200,877
and CEO
1994 525,000 365,000 22,356 n/a 50,000 180,430
Richard L. 1996 350,000 245,000 9,376 135,000 12,340 109,156
Weill
President 1995 350,000 200,000 9,475 100,000 4,150 127,219
1994 300,500 228,000 10,260 n/a 38,700 103,561
James E. 1996 245,000 165,000 10,032 85,000 6,430 65,585
Malling
Executive 1995 245,000 150,000 10,098 50,000 2,840 78,166
Vice- 1994 230,000 150,000 9,700 n/a 24,200 98,025
President
Julliette 1996 230,000 100,000 3,340 60,000 7,720 82,689
S. Tehrani
Executive 1995 210,000 105,000 3,727 35,000 2,360 65,895
Vice- 1994 200,000 114,000 3,431 n/a 14,700 53,326
President,
CFO and
Treasurer
Neil G. 1996 197,500 140,000 1,644 60,000 6,940 63,033
Budnick
Executive 1995 178,000 130,000 1,563 n/a 2,040 49,311
Vice- 1994 172,000 115,000 1,190 n/a 6,800 45,128
President
</TABLE>
- --------
(a) Represents a portion of the annual bonus awarded to Messrs. Elliott, Weill
and Malling, Ms. Tehrani and Messr. Budnick paid in 3,190, 1,325, 854, 589
and 589 shares of restricted stock, respectively. The shares were valued
at the closing price on December 4, 1996, the date of the award. The
aggregate number (i) and value (ii) of the restricted stock holdings at
year-end was as follows: Elliott--(i)6,107 and (ii)$618,334; Weill--
(i)2,622 and (ii)$265,478; Malling--(i)1,482 and (ii)$150,053; Tehrani--
(i)1,043 and (ii)$105,004 and Budnick--(i)589 and (ii)$59,636. Dividends
are paid on the restricted stock at the same rate payable to all common
shareholders and thus are not reflected in the amounts reported.
(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 1996 were as
follows: Elliott--(i)$176,250 and (ii)$54,453; Weill--(i)$109,500 and
(ii)$29,656; Malling--(i)$74,250 and (ii)$11,335; Tehrani--(i)$67,500 and
(ii)$15,189 and Budnick--(i)$59,625 and (ii)$3,408.
8
<PAGE>
MBIA INC.
II. OPTION GRANTS IN 1996
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE FAIR VALUE
UNDERLYING GRANTED TO PRICE OF OPTION
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION AWARD ON
NAME GRANTED(A)(#) 1996 ($/SH) DATE GRANT DATE(B)
---- ------------- ------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
David H. Elliott 25,000 16% $101.875 2006 $704,373
Richard L. Weill 12,340 8% $101.875 2006 347,678
James E. Malling 6,430 4% $101.875 2006 181,165
Julliette S. Tehrani 7,720 5% $101.875 2006 217,510
Neil G. Budnick 6,940 4% $101.875 2006 195,534
</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). Mr. Elliott's 25,000 stock options granted in 1996 will vest as
noted above. However, he has agreed not to exercise any of these stock
options until the full five-year vesting period has concluded except to
convert these vested options into MBIA Inc. stock ownership and pay the
related taxes associated with this transaction. That stock will then also
be held for at least the five-year vesting period that covers this 1996
grant.
(b) The fair value is based upon the Black-Scholes option valuation model.
Black-Scholes is a mathematical model used to estimate the theoretical
price an individual would pay for a traded option. The actual value an
executive may realize will depend on the excess of the stock price over
the exercise price. There is no assurance the value realized will be at or
near the value estimated by Black-Scholes. This model used the grant date
of December 4,1996. The fair value of the options granted on that date is
$28.1749 per option based on: (1) an exercise price of $101.875, (2) an
option term of 5.52 years, (3) a future dividend yield of 1.492% , (4) a
risk-free interest rate of 5.96% and (5) an estimated stock price
volatility of 0.2110.
MBIA INC.
III. AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1996(#) DECEMBER 31, 1996(B)($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED(A)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Elliott 31,960 $2,235,225 131,390 65,630 $7,653,885 $1,708,699
Richard L. Weill 15,000 909,063 82,480 41,710 4,766,700 1,206,241
James E. Malling 10,000 641,175 24,680 25,790 1,058,440 795,550
Julliette S. Tehrani 21,608 1,987,554 41,192 20,100 2,504,495 514,038
Neil G. Budnick 12,000 450,113 8,800 16,880 340,915 407,498
</TABLE>
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(a)* The "Value Realized" is equal to the fair market value on the date of
exercise, less the exercise price, equals the number of shares acquired.
(b) These values are equal to $101.25, the fair market value of the shares
underlying the options on December 31, 1996, less the exercise price,
times the number of options.
9
<PAGE>
[PERFORMANCE GRAPH]
MBIA Inc. Con S&P Financial S&P 500 Ind
1991 100 100 100
1992 133 120 104
1993 134 130 112
1994 122 121 110
1995 166 182 148
1996 228 240 178
10
<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 1996, 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 1997. 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 27, 1997 of more than 5% of
the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON
NAME AND ADDRESS STOCK BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
FMR Corp(1) 4,306,580 9.9%
82 Devonshire Street
Boston, MA 02109
Scudder, Stevens & Clark, Inc.(2) 2,201,257 5.1%
Two International Place
Boston, MA 02110
</TABLE>
- --------
(1) Information as to the beneficial ownership of shares of Common Stock is
based on the February 14, 1997 Schedule 13G filed by FMR Corp. with the
Securities and Exchange Commission ("SEC"). Such filing indicates that the
shareholder has sole voting power with respect to 303,800 of these shares
and sole dispositive power with respect to 4,306,580 of these shares.
(2) Information as to the beneficial ownership of shares of Common Stock is
based on the February 13, 1997 Schedule 13G filed by Scudder, Stevens &
Clark, Inc. with the SEC. Such filing indicates that Scudder has sole
voting power with respect to 475,500 of these shares and sole dispositive
power with respect to 2,201,257. Further, Scudder disclaims beneficial
ownership of the shares.
11
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 27, 1997, the beneficial
ownership of shares of Common Stock of each Director, each Executive Officer
named in the Summary Compensation Table above, and all Directors and Executive
Officers of the Company, as a group.
<TABLE>
<CAPTION>
SHARES
SHARES ACQUIRABLE TOTAL SHARES
BENEFICIALLY UPON EXERCISE BENEFICIALLY
NAME OWNED OF OPTIONS(2) OWNED(3)
---- ------------ ------------- ------------
<S> <C> <C> <C>
Directors
Joseph W. Brown, Jr.(4) 2,886 -- 2,886
David C. Clapp 498 -- 498
Gary C. Dunton 98 -- 98
David H. Elliott 24,860(1) 139,390 164,250
Claire L. Gaudiani(4) 1,601 -- 1,601
William H. Gray, III(4) 638 -- 638
Freda S. Johnson(4) 3,907 -- 3,907
Daniel P. Kearney(5) 970 -- 970
James A. Lebenthal(4) 3,883 -- 3,883
Pierre-Henri Richard 90 -- 90
John A. Rolls(4) 1,886 -- 1,886
Richard L. Weill 10,014(1) 87,480 97,494
Executive Officers
James E. Malling 3,091(1) 29,480 32,571
Julliette S. Tehrani 6,448(1) 43,512 49,960
Neil G. Budnick 2,673(1) 10,540 13,213
All of the above and other
Executive Officers as a group 66,825(1) 312,302 379,127
</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 and 1996.
(2) This column indicates the number of shares that are presently exercisable
or will become exercisable on or before May 31, 1997 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 0.9% of the shares of
Common Stock outstanding.
(4) This number includes (a) Common Stock equivalent deferral units held under
the Company's Deferred Compensation and Stock Ownership Plan for Non-
Employee Directors and (b) Common Stock units awarded under the restricted
stock compensation plan. (See the discussion of these plans 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 one of the Founding Shareholders (Aetna,
see below).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the Company's stock by executive officers
and Directors of the Company are required to be reported to the Securities and
Exchange Commission pursuant to Section 16 of the Securities Exchange Act of
1934. To the Company's knowledge all such required filings were made except:
Form 4 filings with respect to the exercise of options were filed one week
late for three executive officers.
12
<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, were 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 by the establishment of the Company, the contribution by the
Founding Shareholders of their interests in the Association and the
reinsurance by the Company of substantially all of the Founding Shareholders'
net insurance written. 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.
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.
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
13
<PAGE>
Company. All other provisions of the Shareholders' Agreement, including voting
rights and the right to approve certain corporate actions, have expired.
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.
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 1996 coverage
paid to Aetna was $90,000. The Company has also obtained employee health
insurance from Aetna Life Insurance Company, an affiliate of Aetna. Premiums
paid in 1996 by the Company for this coverage totaled $1,769,561. In addition,
the Company has obtained dental insurance from an affiliate of CIGNA
Corporation, for which it paid a premium of $318,632 in 1996. The Company has
also obtained life insurance policies from Aetna Life Insurance Company for 28
key employees for which it paid a premium of $318,911 for 1996. 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.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1998 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 21, 1997, in order to be
considered for inclusion in the Company's Proxy Statement for such Meeting.
14
<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 $6,000 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
15
<PAGE>
Please mark [X]
your vote as
indicated in
the example
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 Directors and FOR item 2.
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 nominee, write that nominee's name on
the line provided below.)
FOR WITHHOLD
ALL AUTHORITY FOR
NOMINEES ALL NOMINEES
[ ] [ ]
2. APPROVAL OF APPOINTMENT OF COOPERS &
LYBRAND AS INDEPENDENT AUDITORS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
____________________________________________________
Signature(s)
Dated:________________________________________, 1997
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 15, 1997
10:00 A.M.
Corporate Headquarters
MBIA INC.
113 King Street
Armonk, New York 10504
<PAGE>
MBIA INC.
ANNUAL MEETING OF SHAREHOLDERS--THURSDAY, MAY 15, 1997
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 15, 1997, 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, Gary C.
Dunton, David H. Elliott, Claire L. Gaudlanl, William H. Gray, III, Freda S.
Johnson, Daniel P. Kearney, James A. Lebenthal, Pierre H. Richard, John A.
Rolls and Richard L. Weill.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
