<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
Mutual Risk Management Ltd.
----------------------------------------------------
(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:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
MRM MUTUAL RISK
--- MANAGEMENT LTD.
March 27, 1998
Dear Shareholder:
You are cordially invited to attend the Annual General Meeting of
Shareholders of Mutual Risk Management Ltd. (the "Company") to be held on May
22, 1998 at 9:00 A.M. at The Bermuda Cathedral Hall, 29 Church Street,
Hamilton HM 12, Bermuda. Your Board of Directors and management look forward
to greeting those shareholders who are able to attend.
At this Meeting you will be asked to consider and vote upon the following:
(1) the election of directors and (2) the appointment of Ernst & Young as the
Company's independent auditors for the fiscal year ending December 31, 1998.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THESE PROPOSALS. The
Meeting will also receive the Company's audited financial statements for the
fiscal year ended December 31, 1997 as approved by the Company's Board of
Directors.
Your vote is important. Whether or not you plan to attend the Annual General
Meeting in person and regardless of the number of shares you own, we urge you
to complete, sign, date and return the enclosed proxy card promptly in the
prepaid envelope. You may attend the Annual General Meeting and vote in person
even if you have previously returned your card. We look forward to meeting
with you.
Sincerely,
/s/ Robert A. Mulderig
Robert A. Mulderig
Chairman and Chief Executive Officer
<PAGE>
MUTUAL RISK MANAGEMENT LTD.
NOTICE OF 1998 ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 22, 1998
The 1998 Annual General Meeting of Shareholders of Mutual Risk Management
Ltd. (the "Company") will be held on May 22, 1998 at 9:00 A.M. at The Bermuda
Cathedral Hall, 29 Church Street, Hamilton HM 12, Bermuda. The Annual General
Meeting is being held to consider and act upon the following matters:
1.To elect directors; and
2.To approve the recommendation by the Board of Directors that Ernst &
Young be appointed as the Company's independent auditors for the fiscal
year ending December 31, 1998.
The Meeting will also receive the Company's audited financial statements for
the fiscal year ended December 31, 1997 and the report of the auditors thereon.
If you do not expect to be present at the Meeting, please sign, date and fill
in the enclosed form of proxy and return it by mail in the enclosed addressed
envelope. All instruments appointing proxies to be used at the Meeting must be
deposited at the offices of the Company's transfer agent, Boston EquiServe
Limited Partnership, P.O. Box 644, Mail Stop 45-02-09, Boston, MA 02102-0644,
or with the Secretary of the Company at the Company's office at 44 Church
Street, Hamilton HM 12, Bermuda, not later than 5:00 P.M. Bermuda time on May
20, 1998. Shares represented by instruments appointing proxies that are not so
deposited will not be voted at the Meeting.
By Order of the Board of Directors
/s/ Richard E. O'Brien
Richard E. O'Brien
Secretary
Hamilton, Bermuda
March 27, 1998
<PAGE>
MUTUAL RISK MANAGEMENT LTD.
PROXY STATEMENT
ANNUAL GENERAL MEETING OF SHAREHOLDERS
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY
MUTUAL RISK MANAGEMENT LTD. (THE "COMPANY") OF PROXIES TO BE VOTED AT THE
ANNUAL GENERAL MEETING OF SHAREHOLDERS (THE "MEETING") TO BE HELD ON MAY 22,
1998 AT 9:00 A.M. AT THE BERMUDA CATHEDRAL HALL, 29 CHURCH STREET, HAMILTON HM
12, BERMUDA.
The close of business on February 27, 1998 has been fixed as the record date
for the determination of shareholders entitled to receive notice of the
Meeting and vote thereat. The Company expects to mail this proxy material to
shareholders on or about March 27, 1998 together with a copy of the Company's
Annual Report to Shareholders for the year ended December 31, 1997.
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokers, custodians, nominees and other fiduciaries for their
reasonable charges and expenses incurred in forwarding proxy material to
beneficial owners of shares. In addition to solicitation by mail, certain
officers and employees of the Company may solicit proxies personally. These
officers and employees will receive no compensation other than their regular
salaries.
No action will be taken at the Meeting with respect to approval or
disapproval of the audited Financial Statements of the Company for the year
ended December 31, 1997.
Any person giving a proxy may revoke it by depositing an instrument in
writing executed by him or by his attorney authorized in writing at the
registered office of the Company at any time up to the close of business on
the last business day preceding the Meeting or any adjournment thereof, with
the Chairman of the Meeting or in any other manner permitted by law. All
properly executed proxies, not theretofore revoked, will be voted on any poll
taken at the Meeting in accordance with the instructions contained therein. If
no instructions are given with respect to any particular matter, the proxy
authorizes a vote in favor of such matter and it will be voted accordingly.
Proxies must be duly executed and deposited at the office of the Company's
transfer agent, Boston EquiServe Limited Partnership, in Boston, or with the
Secretary of the Company at the Company's office in Bermuda, prior to 5:00
P.M. Bermuda time on May 20, 1998, in order to be voted at the Meeting.
1
<PAGE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No person who has been a director or officer of the Company and no person
who is a proposed nominee for election as a director of the Company and no
associate or affiliate of any such director, officer or proposed nominee has
any material interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon at the Meeting except
as may hereinafter be disclosed.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of February 27, 1998 the Company had outstanding 38,880,281 Common Shares
entitled to be voted at the Meeting. Each Common Share is entitled to one
vote.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Shares as of February 27, 1998 by each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Shares, by each of the Company's directors and by all
executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
---------------------------------
NUMBER PERCENT
----------------- ---------------
<S> <C> <C>
T. Rowe Price Associates, Inc.(2)............. 3,846,758 8.39%
100 East Pratt Street,
Baltimore, MD 21202
Nicholas Company, Inc.(3)..................... 3,212,988 7.01%
700 North Water Street
Milwaukee, Wisconsin 53202
American Express Company (4).................. 2,944,766 6.42%
IDS Tower 10
Minneapolis, Minnesota 55440
Denver Investment Advisors LLC (5)............ 2,504,991 5.46%
1225 17th Street, 26th Floor, Denver,
Colorado 80202
Robert A. Mulderig(6)......................... 978,264 2.13%
John Kessock, Jr.(7).......................... 897,922 1.95%
Glenn R. Partridge(8)......................... 309,751 *
Richard G. Turner(9).......................... 305,557 *
James C. Kelly(10)............................ 183,366 *
Roger E. Dailey(11)........................... 101,094 *
David J. Doyle(12)............................ -- *
Arthur E. Engel(13)........................... 76,166 *
Allan W. Fulkerson(14)........................ 58,961 *
William F. Galtney, Jr.(15)................... 225,364 *
Beverly H. Patrick(16)........................ 94,186 *
Jerry S. Rosenbloom(16)....................... 78,313 *
Norman L. Rosenthal(17)....................... 26,188 *
Joseph D. Sargent(16)......................... 76,166 *
*
All directors and executive officers as a
group (16 persons)............................ 3,614,619 7.72%
</TABLE>
- --------
*Less than 1%
2
<PAGE>
(1) Includes Common Shares and Common Shares issuable pursuant to presently
exercisable options to acquire Common Shares and on conversion of the
Zero Coupon Convertible Exchangeable Subordinated Debentures due 2015.
(2) Based on Amendment No. 1 to Schedule 13G of T. Rowe Price Associates,
Inc. dated February 12, 1998. These securities are owned by various
individual and institutional investors which T. Rowe Price Associates,
Inc. ("Price Associates") serves as an investment adviser with power to
direct investment and/or sole power to vote the securities. For purposes
of the Securities Exchange Act of 1934, Price Associates is deemed to be
a beneficial owner of such securities; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of such
securities.
(3) Based on Amendment No. 3 to Schedule 13G of Nicholas Company, Inc. dated
January 22, 1998.
(4) Based on Amendment No. 1 to Schedule 13G of American Express Company
dated January 30, 1998.
(5) Based on Amendment No. 2 to Schedule 13G of Denver Investment Advisors
LLC dated February 11, 1998.
(6) Does not include 184,116 Common Shares which are owned by trusts the
beneficiaries of which are members of Mr. Mulderig's family. Mr. Mulderig
disclaims beneficial ownership of such shares. Includes options to
acquire 91,884 Common Shares. Includes 330,326 Common Shares issuable on
the conversion of the Company's Zero Coupon Convertible Exchangeable
Subordinated Debentures.
(7) 804,238 of these shares are owned by the Kessock Family Trust. Does not
include 62,452 Common Shares owned by the Kessock Family Irrevocable
Trust as to which Mr. Kessock disclaims beneficial ownership. The
beneficiaries of these trusts include Mr. Kessock and members of his
family. Includes options to acquire 91,884 Common Shares.
(8) Includes options to acquire 67,343 Common Shares.
(9) Does not include 42,666 Common Shares held in the Children's Trust of the
Turner Family Trust as to which Mr. Turner disclaims beneficial
ownership. Includes options to acquire 67,343 Common Shares.
(10) Includes options to acquire 53,624 Common Shares.
(11) Includes options to acquire 70,000 Common Shares.
(12) Mr. Doyle acts as a co-trustee of certain trusts which beneficially own
184,116 Common Shares.
(13) Includes options to acquire 75,000 Common Shares. Mr. Engel may be deemed
the beneficial owner of 641,700 Common Shares owned by Mutual Indemnity
Ltd. in connection with a deferred variable annuity policy issued to Mr.
Engel.
(14) Includes options to acquire 55,000 Common Shares. Mr. Fulkerson may be
deemed the beneficial owner of 170,000 Common Shares held by ISF Limited
Partnership ("ISF"). Mr. Fulkerson is President of Century Capital
Management, Inc., which is a general partner of a general partner of ISF.
(15) Includes options to acquire 75,000 Common Shares. Also includes 129,198
Common Shares which are owned by The Galtney Group, Inc. of which Mr.
Galtney is Chief Executive Officer and principal shareholder.
(16) Includes options to acquire 75,000 Common Shares.
(17) Includes options to acquire 15,000 Common Shares.
3
<PAGE>
ELECTION OF DIRECTORS
(Item 1 of Notice of Meeting)
The shareholders will be asked to elect four persons to the Board of
Directors to serve for a term of three years subject to the provisions of the
Company's Bye-Laws. The terms as directors of Messrs. Turner, Fulkerson,
Galtney and Rosenbloom will expire at the Meeting and it is proposed that they
be re-elected as directors. IT IS THE INTENTION OF THE PERSONS NAMED IN THE
ACCOMPANYING FORM OF PROXY TO VOTE AT THE MEETING FOR THE ELECTION AS
DIRECTORS OF THESE PERSONS. IF SUCH NOMINEE SHOULD BE UNABLE TO SERVE, AN
EVENT NOT CURRENTLY ANTICIPATED, PROXIES WILL BE VOTED FOR SUCH PERSON AS
SHALL BE DESIGNATED BY THE BOARD OF DIRECTORS OF THE COMPANY TO REPLACE SUCH
NOMINEE.
The following table shows certain information with respect to each person
nominated for election as a director and each person whose term of office as
director will continue after the Meeting.
<TABLE>
<CAPTION>
DIRECTOR TERM PRINCIPAL OCCUPATION
NAME AGE SINCE EXPIRES & BUSINESS EXPERIENCE
---- --- -------- ------- ---------------------
<C> <C> <C> <C> <S>
Robert A. Mulderig.. 45 1982 1999 Chief Executive Officer of the
Company since 1982; Chairman of
Legion Insurance Co., ("Legion");
Director of Professional Risk
Management Services, Inc., The
Galtney Group, Inc., Everest Re
(Holdings) Ltd and The Bank of N.T.
Butterfield & Sons Ltd. Also serves
as a director or officer of a
number of unaffiliated captive
insurance companies to which the
Company provides management
services.
John Kessock, Jr.... 49 1985 1999 President of the Company, Mutual
Group Ltd. and Legion; primarily
responsible for marketing the
Company's programs since 1979;
Chairman of Commonwealth Risk
Services L.P. ("CRS") and the IPC
Companies.
Richard G. Turner... 47 1985 1998 Executive Vice President of the
Company; President of CRS since
1984; Vice President of Marketpac
International, a subsidiary of
American International Group from
1979 to 1984. Director of Colonial
Penn Insurance Company.
Glenn R. Partridge.. 44 1990 1999 Executive Vice President of the
Company; Senior Vice President of
Legion; primarily responsible for
Legion's underwriting function
since 1987; Vice President of CRS
1983 to 1987.
Roger E. Dailey..... 64 1985 2000 Vice President of Equifax, Inc.,
Atlanta, Georgia for more than five
years until retirement in 1993.
Currently a self employed
consultant.
David J. Doyle...... 44 1977 2000 Partner in the law firm of Appleby,
Spurling & Kempe from 1978 to 1996.
Specializes in international
corporate matters with particular
emphasis on insurance; Director of
Bermuda subsidiaries of the
Company. In March 1996, Mr. Doyle
joined the law firm of Conyers,
Dill & Pearman, Hamilton, Bermuda;
Director of Advanced Therapeutic
Systems Limited.
Arthur E. Engel..... 51 1985 2000 Principal of The Marine Group, LLC.
Director of Mutual Indemnity Ltd.
since 1981.
Allan W. Fulkerson.. 64 1988 1998 President of Century Capital
Management, Inc., Chairman of
Century Shares Trust. Director of
HCC Insurance Holdings, Inc., Terra
Nova (Bermuda) Holdings Ltd., and
Wellington Underwriting PLC.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR TERM PRINCIPAL OCCUPATION
NAME AGE SINCE EXPIRES & BUSINESS EXPERIENCE
---- --- -------- ------- ---------------------
<C> <C> <C> <C> <S>
William F. Galtney, 45 1988 1998 Chairman and CEO of The Galtney
Jr................. Group Inc., Houston, Texas;
Director of Everest Re (Holdings)
Ltd.
Beverly H. Patrick.. 57 1985 1999 Speaker, Author and Consultant;
President and CEO of Professional
Risk Management Services, Inc.
until 1994; formerly Director of
the Office of Member and Staff
Benefits of the American
Psychiatric Association.
Jerry S. Rosenbloom. 58 1991 1998 Frederick H. Ecker Professor of
Insurance and Risk Management and
Academic Director, Certified
Employee Benefit Specialist
Program, Wharton School, University
of Pennsylvania. Director of
Annuity and Life Re (Holdings) Ltd.
Norman L. Rosenthal. 46 1997 2000 President of Norman L. Rosenthal &
Associates, Inc. since August,
1996; Managing Director--Morgan
Stanley & Co., Inc, from January,
1992 until July, 1996; Director--
Vesta Insurance Group since August,
1996.
Joseph D. Sargent... 68 1988 2000 Vice Chairman of Connecticut Surety
Corporation; Director, Trenwick
Group, Inc., Policy Management
Systems Corp., EW Blanch Inc.,
Executive Risk Inc. and MMI
Companies Inc.
</TABLE>
The Company's Board of Directors met four times during 1997. The Board of
Directors has an Executive Committee, an Investment Committee, an Audit
Committee, a Nominating Committee, a Compensation Committee and a Reinsurance
Security Committee. The Executive Committee is responsible for setting the
agenda of the Board and is comprised of Messrs. Mulderig, Kessock, Dailey,
Fulkerson, Rosenbloom, Sargent and Mrs. Patrick. The Audit Committee is
responsible for overseeing the production of the Company's financial
statements and is comprised of Messrs. Dailey, Rosenbloom, Rosenthal and Mrs.
Patrick. The Audit Committee met four times in 1997. The Compensation
Committee is responsible for setting the remuneration of certain executive
officers and the directors of the Company and is comprised of Messrs. Engel,
Rosenbloom, Sargent and Mrs. Patrick. The Compensation Committee met four
times in 1997. The Nominating Committee is responsible for the nomination of
directors for election to office and is comprised of Messrs. Kessock,
Fulkerson, Rosenbloom and Mrs. Patrick. The Nominating Committee met twice in
1997. The Nominating Committee will consider nominees for vacant or expiring
directorships recommended by the Company's members. Such recommendations
should be submitted in writing to the Secretary of the Company with a
description of the proposed nominee's qualifications and other relevant
biographical information, and the nominee's consent to serve as a director. In
1997, Mr. Galtney attended less than seventy-five percent of the meetings of
the Board and the committees on which he served in 1997.
In 1997, outside directors received an annual fee of $25,000, plus $1,000
for each meeting attended. In addition, in 1997 the chairmen of the following
committees received the following additional fees: Compensation Committee,
$5,000; Investment Committee, $3,000; and Audit Committee, $2,000. Members of
the Compensation Committee, other than the chairman, received an attendance
fee of $500 per meeting. $10,000 of the annual fees are paid in restricted
Common Shares, valued at ninety percent of the market value on the date of
issuance. In addition, the Company has a deferred compensation plan pursuant
to which directors may choose to defer receipt of all or a portion of their
annual compensation until retirement. Amounts deferred will be invested in
Common Shares at ninety percent of market value or maintained in an interest
bearing account. The restricted stock and deferred compensation will be paid
to a director on his or her retirement from the Board pursuant to the
Company's retirement policy, on death or disability or in the event of a
change in control of the Company. Non-executive directors received an annual
award of options to purchase 7,500 Common Shares. The exercise price of such
options is equal to the market price of the Common Shares on the date of the
award. The options are for five years and are exercisable six months after
issuance.
5
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION
The following table sets forth the compensation, including bonuses, paid or
accrued during the Company's last three fiscal years to the five highest paid
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------- -----------------------
SECURITIES
UNDERLYING
OPTIONS ALL OTHER
NAME AND SALARY BONUS GRANTED COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#)(2) ($)(1)
------------------ ---- ------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Robert A. Mulderig................ 1997 452,350 486,842 64,000 11,309
Chairman and CEO 1996 415,000 399,956 147,500 10,375
1995 395,000 428,548 32,000 9,875
John Kessock, Jr. ................ 1997 452,350 486,842 64,000 4,000
President 1996 415,000 399,956 147,500 3,750
1995 395,000 428,548 32,000 3,750
Richard G. Turner................. 1997 277,000 298,121 48,000 4,000
Executive Vice President 1996 255,000 245,756 117,500 3,750
1995 240,000 260,384 26,666 3,750
Glenn R. Partridge................ 1997 242,000 260,452 45,000 4,000
Executive Vice President 1996 223,000 214,916 117,500 3,750
1995 210,000 227,836 26,666 3,750
James C. Kelly.................... 1997 200,000 215,250 55,000 5,000
Senior Vice President and CFO 1996 179,500 172,993 90,000 4,488
1995 174,000 188,778 16,000 4,350
</TABLE>
- --------
(1) Consists of Company contributions to pension plans.
(2) Options have been restated to reflect the September 1997 two-for-one
stock split and the May 1996 four-for-three stock split.
STOCK OPTIONS
Stock options to directors and employees are currently awarded only under
the provisions of the Company's Long Term Incentive Plan ("LTIP"). Prior to
1991, options were awarded to employees under the Company's 1988 Stock Option
Plan. Options are awarded to employees at the market price at the time of
issuance for five year terms with 25% becoming exercisable each year. During
1997, 340,000 options were issued to seven executive officers of the Company.
The following table provides certain information on options granted in 1997
pursuant to the LTIP. The last two columns of the table present possible
values of these grants assuming certain rates of growth in the price of the
Company's Common Shares.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK
SECURITIES PRICE
UNDERLYING % OF TOTAL EXERCISE APPRECIATION FOR
OPTIONS OPTIONS GRANTED OR BASE OPTION TERM
GRANTED TO EMPLOYEES IN PRICE EXPIRY -----------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- --------------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Mulderig...... 64,000 6.3 26.25 12/18/2002 464,153 1,025,657
John Kessock, Jr........ 64,000 6.3 26.25 12/18/2002 464,153 1,025,657
Richard G. Turner....... 48,000 4.7 26.25 12/18/2002 348,115 769,243
Glenn R. Partridge...... 45,000 4.4 26.25 12/18/2002 326,358 721,165
James C. Kelly.......... 55,000 5.4 26.25 12/18/2002 398,882 881,424
</TABLE>
6
<PAGE>
The following table presents certain information with respect to the value
of options held by the Company's five most highly compensated executive
officers. The table presents information with respect to both exercisable and
unexercisable options.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED OPTIONS AT FY-END (#)(3) AT FY-END ($)(2)
NAME EXERCISE (#)(3) ($)(1) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- --------------- --------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Robert A. Mulderig...... 100,000 1,718,750 91,884/224,950 1,690,108/2,679,668
John Kessock, Jr........ 100,000 1,700,000 91,884/224,950 1,690,108/2,679,668
Richard G. Turner....... 50,000 795,313 67,343/178,157 1,240,465/2,161,072
Glenn R. Partridge...... 50,000 431,250 67,343/175,157 1,240,465/2,150,010
James C. Kelly.......... 20,000 343,750 53,624/154,044 1,008,477/1,722,884
</TABLE>
- --------
(1) Represents difference between stock price and market price on date of
exercise.
(2) Based on the closing price of the Company's Common Shares on December 31,
1997 of $29.9375.
(3) Adjusted to reflect September 1997 two-for-one stock split.
PENSION PLANS
In 1990 the Company instituted two defined contribution pension plans which
are available to most of the Company's employees. Pursuant to these plans the
Company contributes up to 2.5% of an employee's salary.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed of four
independent directors who are not employed by the Company and who qualify as
non-employee directors for the purposes of Rule 16b-3 adopted under the
Securities Exchange Act of 1934. The Compensation Committee is responsible for
the Company's executive compensation programs which seek to relate the
compensation level of executives to the performance of the Company while
insuring the Company's ability to attract and retain the highest caliber
executives by providing appropriate incentives to deliver significant long-
term financial results for the benefit of shareholders. The Compensation
Committee determines the salary level of each of the top seven officers of the
Company, implements the Company's "Executive Bonus Plan" and determines all
awards made under the LTIP. The Compensation Committee also approves the
salary levels of all other employees of the Company who earn in excess of
$50,000 per annum.
In 1997 the Compensation Committee retained an independent executive
compensation consulting firm to evaluate the appropriateness of the executive
compensation program. This firm carried out market research on the levels of
compensation of similarly situated executives and determined that the
Company's cash compensation package was appropriately structured, rewarding
both profitability and growth in shareholder value and delivering competitive
levels of compensation when compared to similarly situated executives. Base
salaries of the top executives generally approximated the midpoint of the
range of comparable salaries identified in this benchmarking survey. Total
compensation, including bonuses, generally exceeded the average total
compensation packages identified in the survey by approximately 10% on a
combined basis which is a reflection of the better than average performance of
the Company in recent years.
In order to meet the objectives described above, the Compensation Committee
has designed the Company's compensation program as follows:
(1)Base salaries, the fixed regular components of pay, are set in
relation to the average level of base salaries identified in the market
survey carried out by the independent compensation consulting firm for
similarly situated executives.
7
<PAGE>
(2)The Executive Bonus Plan operates to reward the executive only for
better than average financial performance by the Company. The Executive
Bonus Plan considers the following factors: (a) growth of operating income
per Common Share; (b) growth of Shareholders' equity plus dividends; (c)
operating income per Common Share compared to a budget adopted by the Board
of Directors; (d) operating expenses compared to budget; (e) the average
market price of the Company's Common Shares compared to its peer group; and
(f) a subjective appraisal of the executive's performance by the
Compensation Committee. More relative weight is given to the first two
factors and these two factors are measured on a cumulative basis over the
previous five years. The maximum bonus which could be earned under the
Company's Executive Bonus Plan is 120% of the executive's base salary.
(3)The awards made to date pursuant to the LTIP have consisted of stock
options. Stock options generally have a five year life and vest in four
equal annual amounts beginning one year after the grant. The option
exercise price has been set at the market value of the shares on the date
of the grant. These stock options are designed to reward executives and
other employees for the long term increase in shareholder value.
Aggregate awards under the Executive Bonus Plan in respect of 1997 earned by
the Company's seven executive officers aggregated $2,129,122. The
corresponding awards in respect of 1996 aggregated $1,599,343. For 1997, the
base salary of Mr. Mulderig, the Company's Chief Executive Officer, increased
9% to $452,350 and he was awarded a bonus of $486,842. The increase in base
salary and bonus paid to Mr. Mulderig reflect the same considerations
applicable to all executive officers. This report has been submitted by the
Compensation Committee:
Arthur E. Engel Beverly H. Patrick Jerry S. Rosenbloom Joseph D. Sargent
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Mulderig, the Company's CEO, is a director and a member of the
compensation committee of Professional Risk Management Services, Inc. and The
Galtney Group, Inc. of which Mr. Galtney is a director and executive officer.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Messrs. Mulderig and Kelly, executives of the Company, filed Form 5 relating
to 1997 late. The late filings related to option exercises in December, 1997.
8
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return on
the Company's Common Shares (assuming dividends are reinvested) since December
1992 with its peer group. Also indicated on the graph is the performance of
the S&P 500 index for comparison with the Company's performance.
CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1992
<TABLE>
<CAPTION>
MRM PEER GROUP S&P 500 INDEX
<S> <C> <C> <C>
Dec 92 100 100 100
Mar 93 95.54 103.93 104.35
June 93 89.22 100.32 104.85
Sept 93 107.98 103.22 107.52
Dec 93 111.3 101.05 110.01
Mar 94 92.01 95.25 105.87
June 94 88.06 93.68 106.33
Sept 94 96.76 97.36 111.53
Dec 94 98.94 99.93 111.51
Mar 95 105.36 103.96 122.33
June 95 126.93 109.88 133.97
Sept 95 149.96 121.2 144.58
Dec 95 174.07 127.95 153.26
Mar 96 157.81 130.1 161.48
June 96 158.14 132.52 168.71
Sept 96 147.16 135.59 173.88
Dec 96 188.21 143.22 188.36
Mar 97 184.85 146.06 193.44
June 97 234.39 170.97 227.14
Sept 97 260.08 188.48 244.13
Dec 97 309.78 189.2 251.12
</TABLE>
(1) The total return on investment (change in the Common Share price plus
reinvested dividends) for each of the periods for Mutual Risk Management
Ltd, the peer group and the S&P 500 index is based on the share price or
index at December 31, 1992.
(2) Companies in the peer group are as follows: American International Group
Inc., AON Corp., Chandler Insurance Co. Ltd., Chubb Corp., Crawford & Co.,
Exel Limited, First Health Group Corp., Arthur J. Gallagher & Co., General
Reinsurance Corp., Hilb Rogal & Hamilton Co., Marsh & McLennan Companies
Inc., Old Republic International Corp., Risk Capital Holdings, Inc., USF&G
Corporation, Willis Corroon Plc and Zenith National Insurance Corp.
9
<PAGE>
CERTAIN TRANSACTIONS
The Company and its subsidiaries provide administrative and accounting
services to a number of unaffiliated insurance and reinsurance companies.
Certain officers, directors and employees of the Company serve as officers and
directors of these companies, generally without remuneration.
Effective July 1, 1990, Messrs. Turner, Partridge and Kelly, officers of the
Company, purchased 388,584, 388,584 and 100,000 Common Shares, respectively,
from subsidiaries of the Company. All of these shares were sold at $1.75 per
Common Share and each of the purchasers received a loan from subsidiaries in
the amount of the purchase price. These loans were originally granted for a
period of five years and bore interest at 7.7% per annum. In the third quarter
of 1994, the terms of these loans were extended and the interest rate was
reduced to 5.7%. The interest rate is currently 5.1%. In the event of a change
of control of the Company, these officers have a put option to sell such
shares to the Company at a price of $1.75 per Common Share plus interest paid
on the loans through the date of repayment.
Mutual Finance Ltd, a subsidiary of the Company, has an investment of
approximately $3.9 million in Century Capital Partners L.P. ("Century
Capital"). This investment is made by the Mutual Finance pool which is
principally comprised of assets being invested for the benefit of participants
in the Company's IPC Programs. Century Capital is a limited partnership which
will invest in insurance and other financial services companies. The general
partner of Century Capital is CCP Capital, Inc. and the investment advisor is
Century Capital Management, Inc. Mr. Allan Fulkerson, a director of the
Company, is President and a director of CCP Capital Inc. and Century Capital
Management, Inc.
In connection with the Company's acquisition of The Hemisphere Group Limited
("Hemisphere") in July 1996, the Company acquired a 40% interest in the
Hemisphere Trust Company Limited ("Hemisphere Trust"), a Bermuda "local" trust
company, which had formerly been an wholly owned subsidiary of Hemisphere. As
a "local" Bermuda company, at least 60% of the shares of Hemisphere Trust must
be owned by Bermudians. In compliance with this requirement, Mr. Robert A.
Mulderig, Chairman and CEO of the Company, acquired 60% of Hemisphere Trust
for $.2 million at the time of the Company's acquisition of Hemisphere. The
amount of the purchase price was equal to 60% of the book value of Hemisphere
Trust on the date of acquisition.
The Company and Mr. Mulderig have entered into a Shareholders' Agreement
relating to Hemisphere Trust which provides, amongst other things, that (i)
the Company has the option, subject to regulatory approval to acquire Mr.
Mulderig's interest in Hemisphere Trust at Mr. Mulderig's cost, plus interest
at 6% per annum; (ii) the Company has a pre-emptive right, also subject to
regulatory approval, over the shares held by Mr. Mulderig and (iii) no
dividends or other distributions can be made by Hemisphere Trust without the
prior consent of the Company. The Company will provide management services to
Hemisphere Trust for an annual fee of $.3 million.
Certain significant shareholders and directors of the Company represent or
are employed by entities which have purchased IPC Programs or other services
from the Company and its subsidiaries. These services are provided by the
Company based on arms-length negotiations.
APPOINTMENT OF AUDITORS
(Item 2 of Notice of Meeting)
The Board of Directors recommends that Ernst & Young be appointed as
auditors of the Company to hold office until the next Annual General Meeting
of shareholders. Representatives of Ernst & Young are expected to be present
at the Meeting and will be available to answer appropriate questions. Such
representatives of Ernst & Young will also be given an opportunity to make a
statement to the shareholders if they so wish.
10
<PAGE>
IT IS INTENDED THAT THE COMMON SHARES REPRESENTED BY PROXIES SOLICITED BY OR
ON BEHALF OF THE COMPANY WILL BE VOTED IN FAVOR OF THE APPOINTMENT OF ERNST &
YOUNG AS AUDITORS OF THE COMPANY AND AUTHORIZING THE DIRECTORS TO FIX THEIR
REMUNERATION, UNLESS OTHERWISE INDICATED.
SHAREHOLDER PROPOSALS
Pursuant to the Company's Bye-Laws, resolutions intended to be presented by
shareholders for action at the 1999 Annual General Meeting must comply with
the provisions of the Bermuda Companies Act, 1991 (the "Companies Act") and
the Bye-Laws and be deposited at the Company's head office not later than six
weeks prior to the 1999 Annual General Meeting.
Pursuant to United States securities law regulations, proposals intended to
be presented by shareholders for action at the 1999 Annual Meeting must comply
with such regulations and be received by the Secretary of the Company not
later than November 13, 1998 in order to be considered for inclusion in the
Company's proxy statement relating to such meeting.
COMPANY'S ANNUAL REPORT TO SEC
The Company is required to file with the United States Securities and
Exchange Commission an annual report on Form 10-K containing certain
information with respect to the Company and its business and properties,
including financial statements and related schedules. The Form 10-K also
contains a list of exhibits filed as part of the report and the number of
pages contained in each exhibit.
UPON THE WRITTEN REQUEST OF ANY BENEFICIAL OWNER OF THE COMPANY'S COMMON
SHARES, THE COMPANY WILL MAIL TO SUCH OWNER, WITHOUT CHARGE, A COPY OF ITS
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997. In addition, upon
payment to the Company of $0.25 per page, the Company will mail to such owner
a copy of any or all of the exhibits listed in the report. Requests for copies
of the Form 10-K and/or exhibits should be addressed to: The Secretary, Mutual
Risk Management Ltd., 44 Church Street, Hamilton HM 12, Bermuda.
VOTING
Each Common Share is entitled to one vote and, except where a greater
majority is required by the Companies Acts or the Company's Bye-Laws, any
question proposed for consideration at any general meeting will be decided
upon by a simple majority of votes cast. The election of directors will be by
the simple majority of votes cast. At the General Meeting a resolution put to
the vote of the Meeting will be decided on by a show of hands, unless a poll
has been demanded pursuant to the terms of the Company's Bye-Laws. If a poll
has not been demanded, a declaration by the Chairman that a resolution has
passed will be final. If a poll has been demanded, then the result of such
poll shall be final.
Abstentions are counted in determining the quorum of the Meeting. As a
result, on those proposals which require an affirmative vote of the majority
of those shareholders present at the Meeting or of the outstanding Common
Shares, an abstention has the effect of a vote against the proposal.
Similarly, where brokers report a non-vote, the shares are counted in
determining the quorum of the Meeting but they are not counted as having voted
on the proposal. A non-vote, therefore, has the effect of a vote against the
proposal.
The shares represented by the enclosed form of proxy, duly executed and
deposited at the office of the Company's transfer agent, Boston EquiServe
Limited Partnership, in Boston, or with the Secretary of the Company at the
Company's office in Bermuda, prior to 5:00 P.M. Bermuda time on May 20, 1998,
will be voted at the Meeting. All properly executed proxies, not theretofore
revoked, will be voted on any poll taken at the Meeting in accordance with the
instructions contained therein. If no instructions are given with respect to
any particular matter, the proxy authorizes a vote in favor of such matter and
it will be voted accordingly.
11
<PAGE>
The enclosed form of proxy confers discretionary authority with respect to
amendments and variations with respect to the matters identified in the Notice
of Meeting and other matters which may properly come before the Meeting.
Each shareholder has the right to appoint a person, who need not be a
shareholder, other than the persons specified in the enclosed form of proxy to
attend and act for him and on his behalf at the Meeting. Such right may be
exercised by striking out the names of management's nominees in the enclosed
form of proxy and inserting the name of the person to be appointed in the blank
space provided in the form of proxy, signing the form of proxy and returning it
in the reply envelope provided.
By Order of the Board of Directors
/s/ Richard E. O'Brien
Richard E. O'Brien
Secretary
Dated: March 27, 1998
12
<PAGE>
PROXY
MUTUAL RISK MANAGEMENT LTD.
44 CHURCH STREET
HAMILTON HM 12 BERMUDA
This Proxy is Solicited on behalf of the Board of Directors:
The Undersigned hereby appoints R. A. Mulderig, J. Kessock, Jr.,
and Richard E. O'Brien as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all the shares of common stock of Mutual
Risk Management Ltd. held of record by the undersigned on February 27,
1998, at the annual general meeting of shareholders to be held on May 22,
1998 or any adjournment thereof.
----------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE See Reverse Side
----------------
<PAGE>
[X] Please mark
votes as in
this example
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder.
If no direction is made, this proxy will be voted for Proposals 1 and 2.
1. ELECTION OF DIRECTORS 2. PROPOSAL TO APPROVE the
NOMINEES: Richard G. Turner, Allan W. recommendation by the Board of
Fulkerson, William F. Galtney, Jr. Directors that Ernst & Young LLP be
and Jerry S. Rosenbloom. appointed as the Company's
independent auditors for the fiscal
year ended December 31, 1998.
FOR WITHHELD FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_]
MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT [_]
PLEASE MARK, SIGN, DATE AND
[_] ______________________________________ RETURN PROMPTLY USING THE
For all nominees except as noted above ENCLOSED ENVELOPE
Please sign exactly as name
appears hereon. When signing as
attorney, as executor,
administrator, trustee or
guardian, please sign in full
corporate name by President or
other authorized officer. If a
partnership please sign in
partnership name by authorized
person.
Signature:__________________________ Date: ________________________
Signature:__________________________ Date: ________________________
