<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 (S) 240.14a-11(c) or (S) 240.14a-12
Capital Re Corporation
- --------------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
CAPITAL RE CORPORATION
1325 Avenue of the Americas
New York, New York 10019
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1999 Annual Meeting of Stockholders of Capital Re Corporation will be
held at corporate headquarters, 1325 Avenue of the Americas, New York, New
York 10019, on Thursday, May 20, 1999 at 10:00 a.m. for the following
purposes:
1. To elect a Board of Directors for the ensuing year.
2. To consider and act upon such other business as may properly come
before the meeting.
Whether or not you expect to attend the meeting, you are requested to sign,
date and return the enclosed proxy as promptly as possible in the enclosed
stamped envelope.
By Order of the Board of Directors
/s/ Alan S. Roseman
Alan S. Roseman
Secretary
New York, New York
April 20, 1999
<PAGE>
PROXY STATEMENT
Annual Meeting of Stockholders
May 20, 1999
This Proxy Statement is furnished on or about April 20, 1999 to stockholders
of Capital Re Corporation (the "Corporation"), 1325 Avenue of the Americas,
New York, New York 10019, in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be voted at the Annual Meeting of
Stockholders. The stockholder giving the proxy has the power to revoke the
proxy at any time before it is exercised. This right of revocation is not
limited by or subject to compliance with any formal procedure.
The Corporation will bear the cost of soliciting proxies. Copies of
solicitation material may be furnished to brokers, custodians, nominees and
other fiduciaries for forwarding to beneficial owners of shares of the
Corporation's Common Stock, and normal handling charges may be paid for such
forwarding service. Officers and other management employees of the
Corporation, who will receive no additional compensation for their services,
may solicit proxies by mail, personal interview and telephone.
At the close of business on April 20, 1999, there were 32,045,119 shares of
the Common Stock of the Corporation outstanding and entitled to vote at the
meeting. Only stockholders of record on April 20, 1999 will be entitled to
vote at the meeting, and each share will have one vote. All share amounts and
per share prices set forth in this Proxy Statement, including the share
amounts in the Beneficial Ownership Table, have been restated to reflect the
2-for-1 stock split of the Corporation's Common Stock effected on June 30,
1998.
PROPOSAL 1
Election of Directors
General
Ten directors are to be elected; provided, if the closing under the Stock
Purchase Agreement (as defined below) occurs prior to date of the Annual
Meeting of Stockholders, eleven directors will stand for election. It is
intended that the votes represented by the proxies will be cast for the
election as directors (for a term of one year or until their successors are
chosen and qualified) of each of the first ten persons listed below and, if he
is a director on the date of the Annual Meeting of Stockholders, of the
eleventh person listed below (i.e., Dominic J. Frederico). Each of the
nominees other than Messrs. Respess and Frederico is currently a director of
the Corporation. The Board of Directors believes that the first ten nominees
will stand for election and will serve if elected and that Mr. Frederico, if
he is a director on the date of the Annual Meeting of Stockholders, will stand
for election and will serve if elected. However, if any of the persons
nominated by the Board of Directors fails to stand for election (other than
Mr. Frederico because the closing under the Stock Purchase Agreement has not
occurred prior to the date of the Annual Meeting) or is unable to accept
election, proxies will be voted by the proxy holders for the election of such
other person or persons as the Board of Directors may recommend.
The following table presents information concerning persons nominated for
election as directors of the Corporation, including their current membership
on committees of the Board of Directors, principal occupations or affiliations
during the last five years and certain other directorships held.
Jerome F. Jurschak................. Chairman--Executive Committee and
Member--Investment Committee and
Nominating Committee. Mr. Jurschak, age
51, has been Chief Executive Officer and
Chairman of the Board of the Corporation
since December 1998. From 1988 to
December 1998, Mr. Jurschak served as
Chief Underwriting Officer and an
Executive Vice President of the
Corporation.
1
<PAGE>
Joseph W. Swain III................ Mr. Swain, age 46, has been Chief
Operating Officer and President and a
director of the Corporation since
December 1998. From January 1998 to
December 1998, Mr. Swain served as an
Executive Vice President of the
Corporation, and, from 1988 to January
1998, Mr. Swain served as a Senior Vice
President of the Corporation.
Harrison W. Conrad, Jr. ........... Member--Executive Committee, Compensation
Committee, Investment Committee and
Nominating Committee. Mr. Conrad has been
self-employed as a financial adviser
since September 1995. Prior thereto, Mr.
Conrad was with J.P. Morgan & Company,
Inc. Mr. Conrad, age 64, has been a
director of the Corporation since
December 1996.
Richard L. Huber................... Member--Audit Committee. Chairman of the
Board of Directors of Aetna Inc. since
April 1998 and President and Chief
Executive Officer of Aetna Inc. since
August 1997. Mr. Huber was Vice Chairman
for Strategy and Finance of Aetna Life &
Casualty Co. from February 1995 until
July 1997, Managing Director of Grupo
Wasserstein Perella from August 1994
until February 1995 and Vice Chairman of
Continental Bank Corporation from January
1990 to July 1994. Mr. Huber, age 62, has
been a director of the Corporation since
March 1993 and is also a director of
Aetna Inc.
Steven D. Kesler................... Chairman--Compensation Committee and
Member- Executive Committee, Investment
Committee and Nominating Committee.
President of Constellation Investments,
Inc. ("Constellation"), an indirect
subsidiary of Baltimore Gas and Electric
Company, since 1988 and President of
Constellation Real Estate Group and
Constellation Real Estate, Inc. since
September 1998. From 1985 to 1987, Mr.
Kesler was Treasurer and Assistant
Secretary for Constellation Holdings,
Inc., the parent of Constellation. Mr.
Kesler, age 47, has been a director of
the Corporation since its founding in
1988 and is also a director of Corporate
Office Properties Trust.
J. Randolph Respess................ Director of Tax for Constellation
Enterprises, Inc. since July 1987. Mr.
Respess, age 46, is not currently a
director of the Corporation.
Philip Robinson.................... Member--Audit Committee. Mr. Robinson was
Chairman of Sunbury Investment Co. Ltd.
from 1985 to 1994 and a director of CLF
Municipal Bank from 1993 to 1996. Mr.
Robinson, age 73, has been a director of
the Corporation since March 1993.
2
<PAGE>
Edwin L. Russell................... Member--Compensation Committee, Executive
Committee and Nominating Committee.
Chairman of the Board of Directors,
President and Chief Executive Officer of
Minnesota Power, Inc. ("Minnesota Power")
since 1995. From 1989 to 1995, Mr.
Russell was Group Vice President of J.M.
Huber Corp. Mr. Russell, age 54, has been
a director of the Corporation since
December 1996 and is also a director of
Utech, MN Public Radio and Tennant Co.
Barbara D. Stewart................. Chairman--Audit Committee and Member--
Investment Committee. President of
Stewart Economics, Inc. since 1981. Ms.
Stewart, age 55, has been a director of
the Corporation since December 1996 and
is also a director of Insurance Services
Office, Inc. and National Grange Mutual
Insurance Company.
Jeffrey F. Stuermer................ Chairman--Investment Committee and
Member--Audit Committee. Manager, Tax for
Minnesota Power since January 1992. Mr.
Stuermer was Manager, Investments for
Minnesota Power for at least five years
prior to January 1992. Mr. Stuermer, age
51, has been a director of the
Corporation since its founding in 1988.
Dominic J. Frederico............... President and Chief Executive Officer,
ACE Bermuda Insurance, Ltd. ("ACE") since
July 1997. Mr. Frederico served as
Executive Vice President, Underwriting,
of ACE from December 1996 to July 1997
and as Executive Vice President,
Financial Lines, from January 1995 to
December 1996. Mr. Frederico served in
various capacities at American
International Group ("AIG") in Europe and
the U.S. from 1982 to January 1995, most
recently as Senior Vice President and
Chief Financial Officer of an AIG
subsidiary, with multi-regional general
management responsibilities. Mr.
Frederico, age 46, is not currently a
director of the Corporation.
The Corporation, Mr. Jurschak, and Minnesota Power and Constellation (the
"Institutional Stockholders") are parties to a Stockholders' Agreement dated
as of January 17, 1992, as amended (the "1992 Stockholders' Agreement"). The
1992 Stockholders' Agreement requires each party thereto to vote the shares of
Common Stock it holds at all elections of directors in favor of the person
then serving as Chief Executive Officer, two persons designated by each
Institutional Stockholder holding at least 13% of the outstanding voting stock
of the Corporation, and one person designated by each Institutional
Stockholder holding at least 8% and up to 13% of that stock. Under this
arrangement each of Minnesota Power and Constellation currently has the right
to designate two persons for election to the Board of Directors, and all
parties to the 1992 Stockholders' Agreement, beneficially owning 37.35%* of
the outstanding Common Stock in the aggregate, are obligated to vote their
shares in favor of election of those persons and Mr. Jurschak, who is
currently serving as Chief Executive
- --------
* In the event the closing under the Stock Purchase Agreement occurs, this
percentage will decrease to 32.07% upon the issuance by the Corporation of
4,424,779 shares of its Common Stock to ACE pursuant to the terms of the
Stock Purchase Agreement.
3
<PAGE>
Officer. Stockholders who are not parties to the 1992 Stockholders' Agreement
are not obligated to vote their shares for the persons designated under the
1992 Stockholders' Agreement. The parties to the 1992 Stockholders' Agreement
have also agreed to vote for the removal of a director designated by an
Institutional Shareholder only for cause or if requested by the designating
Institutional Stockholder. Under the 1992 Stockholders' Agreement, Jeffrey F.
Stuermer and Edwin L. Russell are designees of Minnesota Power and Steven D.
Kesler and J. Randolph Respess are designees of Constellation. See "Beneficial
Ownership of Common Stock."
The Corporation and ACE are parties to a Stock Purchase Agreement dated as
of February 19, 1999 (as amended, the "Stock Purchase Agreement"). Pursuant to
the Stock Purchase Agreement, ACE has agreed to
purchase $75 million of the Corporation's Common Stock. ACE will own 12.1% of
the Corporation's outstanding shares of Common Stock upon consummation of the
issuance. As of the date of mailing of this Proxy Statement, the closing under
the Stock Purchase Agreement had not occurred. The Stock Purchase Agreement
contains several conditions that must be satisfied before the closing can
occur; accordingly, it is not certain when or if the closing will take place.
In the event the closing occurs, the Stock Purchase Agreement requires the
Corporation to nominate and recommend as candidates for election to the Board
of Directors two individuals designated by ACE for so long as ACE and/or its
affiliates holds at least 8% of the voting capital stock of the Corporation.
In addition, the Stock Purchase Agreement requires that at least one director
designated by ACE serve as a member of both the Audit Committee and the
Executive Committee. If the closing occurs prior to the date of the Annual
Meeting of Stockholders, the Board of Directors will be expanded to eleven
members and Mr. Frederico will be appointed to serve until the Annual Meeting
of Stockholders, when he will stand for election for the next year. As of the
date of this Proxy Statement, ACE had determined not to exercise its right to
require the Corporation to nominate and recommend a second individual as a
candidate for election to the Board of Directors; however, ACE has reserved
its right to do so in the future.
The 1992 Stockholders' Agreement also grants each Institutional Stockholder
certain registration rights with respect to Common Stock held by it. One or
more holders of at least 10% of the Institutional Stockholders' aggregate
holdings of Common Stock may request the Corporation to register shares of
Common Stock held by them on two occasions. Both Minnesota Power and
Constellation own sufficient shares to exercise such rights individually. In
addition, Institutional Stockholders have limited rights to include shares in
offerings initiated by the Corporation. In the event the closing under the
Stock Purchase Agreement occurs, the Stock Purchase Agreement requires the
Corporation to file a shelf registration statement covering the shares of
Common Stock of the Corporation owned by ACE and maintain the effectiveness of
such registration statement for a period of no greater than three years from
the closing date. The Institutional Stockholders have the right under the 1992
Stockholders' Agreement to include any or all of their shares of Common Stock
in the shelf registration.
Board Committees
The Board of Directors has established an Audit Committee, a Nominating
Committee, a Compensation Committee, an Investment Committee and an Executive
Committee.
The Audit Committee, which in 1998 consisted of Mr. Dan R. Skowronski (who
is not standing for reelection), Messrs. Huber, Robinson and Stuermer and Ms.
Stewart, is responsible for recommending the selection of independent
accountants, reviewing the independent accountants' assessments of the
adequacy of the Corporation's internal control system and of the
appropriateness of accounting principles and financial disclosure practices,
and reviewing the scope and results of the internal and external audit
process. This Committee met four times during 1998.
The Nominating Committee, which from January 1998 to December 1998 consisted
of Michael E. Satz (a former director) and Messrs. Conrad, Kesler and Russell
and thereafter consisted of Messrs. Jurschak, Conrad, Kesler and Russell, is
responsible for recommending to the full Board of Directors potential nominees
for directors. This Committee did not meet during 1998. The Nominating
Committee will consider nominees recommended by the stockholders of the
Corporation. Any stockholder wishing to recommend a nominee to the Nominating
Committee should send a letter addressed to Mr. Jurschak, at the Corporation's
address, setting forth the name of the nominee being recommended together with
a description of his or her qualifications.
4
<PAGE>
The Compensation Committee, which in 1998 consisted of Messrs. Conrad,
Kesler and Russell, is responsible for determining the compensation of senior
officers of the Corporation, reviewing the compensation plans and programs of
the Corporation and administering the 1992 Stock Option Plan, the 1997
Employee Stock Option Plan, the Annual Incentive Plan and the Performance
Share Plan. This Committee met eight times during 1998.
The Investment Committee, which from January 1998 to December 1998 consisted
of Messrs. Satz, Conrad, Kesler and Stuermer and Ms. Stewart and thereafter
consisted of Messrs. Jurschak, Conrad, Kesler and Stuermer and Ms. Stewart, is
responsible for approving the Corporation's investment guidelines and policies
and reviewing investment strategy and management. This Committee met four
times during 1998.
The Executive Committee, which was created in December 1998, is empowered to
act in the name of the Board of Directors in all matters except those that are
reserved to the full Board of Directors by Delaware law or the Charter or By-
Laws of the Corporation. The members of the Executive Committee are Messrs.
Kesler, Russell, Conrad and Jurschak. This Committee did not meet during 1998.
Attendance at Meetings
During 1998, the Board of Directors held six meetings. Each director of the
Corporation attended 75% or more of all Board of Director meetings (held
during the period during which he or she was a director) and meetings of each
committee on which he or she served (held during the period during which he or
she served on such committee).
Directors' Fees
The Corporation has adopted a policy of paying fees to non-employee
directors in the amount of $25,000 per year plus $1,000 for each meeting of
the Board attended and $500 (or $1,000 in the case of the Committee Chairman)
for each meeting of each Committee thereof attended. These directors (other
than those designated by the Institutional Stockholders) also participate in
the Directors' Stock Option Plan, under which each receives an option to
purchase 3,000 shares of Common Stock each year during the first three years
beginning with his election to the Board. Mr. Huber and Mr. Robinson each
received options to purchase 3,000 shares in each of 1993, 1994 and 1995; and
Mr. Conrad and Ms. Stewart each received options to purchase 3,000 shares in
each of 1996, 1997 and 1998. In addition, Mr. Robinson received a fee of
(Pounds)2,500 in 1998 for his service as a non-voting member of the board of
directors of one of the Corporation's subsidiaries.
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934 requires the Corporation's directors,
executive officers and 10% stockholders to file reports of beneficial
ownership of equity securities of the Corporation and to furnish copies of
such reports to the Corporation. Based on a review of such reports, the
Corporation believes that, during the fiscal year ended December 31, 1998, all
such filing requirements were met, except that Barbara Stewart and Harrison
Conrad each made a late filing with respect to one grant of stock options in
1998, and Susan Hooker, who became a reporting person in December 1998, made a
late filing with respect to her beneficial ownership of equity securities of
the Corporation. In addition, Alan Roseman made a late filing with respect to
a gift of Common Stock made in 1996 and Richard Huber made a late filing with
respect to a purchase of Common Stock made in 1994.
Beneficial Ownership of Common Stock
The following table sets forth certain information as of February 26, 1999
(unless otherwise specified) with respect to the beneficial ownership of the
Corporation's Common Stock by each person who is known to the Corporation to
beneficially own more than 5% of the outstanding shares of Common Stock, each
director, each Named Officer (as defined below), and all directors and
executive officers as a group. Unless otherwise described below, all shares
are held with sole voting and dispositive power by the parties shown.
5
<PAGE>
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Beneficially of
Name and Address of Beneficial Owner Owned Class
- ------------------------------------ ------------ -------
<S> <C> <C>
Minnesota Power(1)...................................... 6,531,480 20.38%
30 W. Superior Street
Duluth, Minnesota 55802
Constellation Investments, Inc.(1)...................... 4,963,840 15.49%
250 W. Pratt Street, 23rd floor
Baltimore, Maryland 21201
Harrison W. Conrad, Jr. ................................ 9,200(2) *
Richard L. Huber........................................ 10,000(3) *
Steven D. Kesler........................................ -- --
Philip Robinson......................................... 11,000(4) *
Edwin L. Russell........................................ 4,000 *
Dan R. Skowronski....................................... -- --
Barbara D. Stewart...................................... 9,000(5) *
Jeffrey F. Stuermer..................................... -- --
Jerome F. Jurschak (1).................................. 473,700(6) 1.47%
Joseph W. Swain III..................................... 185,300(7) *
David A. Buzen.......................................... 318,750(8) *
Laurence C.D. Donnelly.................................. 323,870(9) 1.00%
Susan Hooker............................................ 40,650(10) *
All Directors and Executive Officers as a group (14 1,668,370(11) 5.00%
persons)................................................
</TABLE>
- --------
* Less than 1%
(1) Parties to the 1992 Stockholders' Agreement. Constellation is an indirect
subsidiary of Baltimore Gas and Electric Company. Under the voting
provisions of the 1992 Stockholders' Agreement, each Institutional
Stockholder party to the 1992 Stockholders' Agreement may be deemed to
have shared voting power with respect to the shares of all parties to the
1992 Stockholders' Agreement and, accordingly, for certain limited
purposes of the Federal securities laws, each Institutional Stockholder
may be deemed to be the beneficial owner of the shares beneficially held
by all parties to the 1992 Stockholders' Agreement.
(2) Includes 9,000 shares Mr. Conrad has the right to acquire within sixty
days through exercise of outstanding options.
(3) Includes 9,000 shares Mr. Huber has the right to acquire within sixty
days through exercise of outstanding options.
(4) Includes 9,000 shares Mr. Robinson has the right to acquire within sixty
days through exercise of outstanding options.
(5) Includes 9,000 shares Ms. Stewart has the right to acquire within sixty
days through exercise of outstanding options.
6
<PAGE>
(6) Includes 273,700 shares Mr. Jurschak has the right to acquire within
sixty days through exercise of outstanding options.
(7) Includes 183,600 shares Mr. Swain has the right to acquire within sixty
days through exercise of outstanding options.
(8) Includes 257,700 shares Mr. Buzen has the right to acquire within sixty
days through exercise of outstanding options.
(9) Includes 277,700 shares Mr. Donnelly has the right to acquire within
sixty days through exercise of outstanding options.
(10) Includes 40,650 shares Ms. Hooker has the right to acquire within sixty
days through exercise of outstanding options.
(11) Includes an aggregate of 1,311,350 shares that the executive officers and
directors have the right to acquire within sixty days through exercise of
outstanding options.
7
<PAGE>
Compensation
Executive Compensation
The following table sets forth the annual and long-term compensation for
services in all capacities to the Corporation for the fiscal years ended
December 31, 1998, 1997 and 1996 of Mr. Satz, who served as Chief Executive
Officer of the Corporation until December 9, 1998, Mr. Jurschak, who served as
an Executive Vice President of the Corporation until December 9, 1998 and as
Chief Executive Officer of the Corporation since December 9, 1998, and the
other four most highly compensated executive officers of the Corporation as of
December 31, 1998 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
-------------------------------------- ------------------------
Stock
Name and Other Annual Options All Other
Principal Position Year Salary Bonus(1) Compensation(2) (Shares) Compensation(3)
- ------------------ ---- -------- -------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Satz......... 1998 $505,000 $ 0 $12,297 50,000 $501,898
Chairman of the Board, 1997 $488,000 $623,400 $14,328 51,000 $107,353
President and Chief 1996 $463,000 $680,000 $14,087 116,000 $110,518
Executive Officer
Jerome F. Jurschak...... 1998 $355,000 $129,000 $ 4,897 30,000 $ 61,398
Chairman of the Board, 1997 $340,000 $317,900 $ 5,707 36,000 $ 67,352
and Chief Executive 1996 $323,000 $335,000 $ 5,610 53,600 $ 68,089
Officer
David A. Buzen.......... 1998 $310,000 $113,000 $ 3,789 30,000 $ 49,176
Executive Vice 1997 $295,000 $275,800 $ 4,415 36,000 $ 54,456
President 1996 $280,000 $285,000 $ 4,341 53,600 $ 50,132
and Chief Financial
Officer
Laurence C.D. Donnelly.. 1998 $310,000 $113,000 $ 6,486 30,000 $ 52,971
Executive Vice 1997 $295,000 $275,800 $ 7,558 36,000 $ 58,655
President 1996 $280,000 $285,000 $ 7,431 53,600 $ 56,469
Joseph W. Swain III..... 1998 $285,000 $104,000 -- 35,000 $ 44,022
President and 1997 $245,000 $208,300 -- 36,000 $ 43,228
Chief Operating Officer 1996 $229,000 $230,000 -- 43,000 $ 42,584
Susan L. Hooker......... 1998 $240,000 $110,000 $54,574 29,000 $ 37,727
Executive Vice 1997 $225,000 $200,000 -- 30,000 $ 39,920
President 1996 $210,000 $195,000 -- 37,600 $ 38,779
</TABLE>
- --------
(1) See the Compensation Committee Report on Executive Compensation below for
a description of the Incentive Plan.
(2) Represents amounts paid to the Named Officers for taxes attributable to
the forgiveness of interest on the loans described under "Other
Information-Loans to Management-Tax Equalization Loans." In 1998 Ms.
Hooker received a housing allowance of $49,352 and $5,222 in associated
costs while assigned to the Corporation's London office.
(3) "All Other Compensation" for 1998 includes the following: (i)
contributions to the Corporation's 401(k) Plan in the amount of $10,000
for each of the Named Officers; (ii) premiums paid by the Corporation
pursuant to a split-dollar life insurance plan in the amount of $24,880,
$18,664, $11,248, $14,500, $11,828 and $9,440 for Messrs. Satz, Jurschak,
Buzen, Swain, Donnelly and Ms. Hooker, respectively; (iii) contributions
to the Corporation's qualified profit sharing plan in the amount of $6,400
for each of the Named Officers with the exception of Mr. Satz on whose
behalf no contribution was made; (iv) contributions to the Corporation's
non-qualified profit sharing plan in the amount of $20,498, $17,013,
$13,122, $17,013 and $11,887 to Messrs. Jurschak, Buzen, Swain, Donnelly
and Ms. Hooker, respectively; (v) interest forgiven on loans in the amount
of $13,642, $5,836, $4,515, and $7,730 for Messrs. Satz,
8
<PAGE>
Jurschak, Buzen and Donnelly, respectively; and (vi) a payment in the
amount of $453,376 representing the difference between (A) the sale price
of Common Shares acquired upon Mr. Satz's exercise in January 1999 of
certain options and (B) the sale price that would have been obtained by Mr.
Satz had he exercised such options and sold such shares on December 8, 1998
(the date Mr. Satz's employment ended). "All Other Compensation" for 1997
includes the following: (i) contributions to the Corporation's 401(k) Plan
in the amount of $9,500 for each of the Named Officers; (ii) premiums paid
by the Corporation pursuant to a split-dollar life insurance plan in the
amount of $24,000, $17,500, $10,850, $10,000 and $11,400 for Messrs. Satz,
Jurschak, Buzen, Swain and Donnelly, respectively; (iii) contributions to
the Corporation's qualified profit sharing plan in the amount of $8,000 for
each of the Named Officers; (iv) contributions to the Corporation's non-
qualified profit sharing plan in the amount of $50,366, $25,727, $20,980,
$15,728 and $20,980 to Messrs. Satz, Jurschak, Buzen, Swain and Donnelly,
respectively; and (v) interest forgiven on loans in the amount of $15,487,
$6,625, $5,126, and $8,775 for Messrs. Satz, Jurschak, Buzen and Donnelly,
respectively. "All Other Compensation" for 1996 includes the following: (i)
contributions to the Corporation's 401(k) Plan in the amount of $9,000 for
each of the Named Officers; (ii) premiums paid by the Corporation pursuant
to a split-dollar life insurance plan in the amount of $24,000, $17,500,
$10,850, $10,000 and $11,400 for Messrs. Satz, Jurschak, Buzen, Swain and
Donnelly, respectively; (iii) contributions to the Corporation's qualified
profit sharing plan in the amount of $8,250 for each of the Named Officers;
(iv) contributions to the Corporation's non-qualified profit sharing plan
in the amount of $54,042, $26,825, $16,992, $15,334 and $19,192 for Messrs.
Satz, Jurschak, Buzen, Swain and Donnelly, respectively; and (v) interest
forgiven on loans in the amount of $15,226, $6,514, $5,040 and $8,627 for
Messrs. Satz, Jurschak, Buzen and Donnelly, respectively.
Option Grants
Shown below is information on grants to the Named Officers of stock options
pursuant to the Corporation's 1997 Stock Option Plan during the year ended
December 31, 1998.
<TABLE>
<CAPTION>
Percentage of
Number of Total Options
Securities Granted to Exercise or
Underlying Employees in Base Price Expiration Grant Date
Name Options Granted (#) Fiscal Year 1998 ($/Sh)(1) Date Present Value (2)
- ---- ------------------- ---------------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Michael E. Satz......... 50,000(3) 10.92% $30.1563 02/11/08 $628,750
Jerome F. Jurschak...... 30,000 6.55% $30.1563 02/11/08 $377,250
David A. Buzen.......... 30,000 6.55% $30.1563 02/11/08 $377,250
Laurence C.D. Donnelly.. 30,000 6.55% $30.1563 02/11/08 $377,250
Joseph W. Swain III..... 35,000 7.65% $30.1563 02/11/08 $440,125
Susan L. Hooker......... 29,000 6.33% $30.1563 02/11/08 $364,675
</TABLE>
- --------
(1) The exercise price was equal to the closing price of the Corporation's
Common Stock on the date of grant as reported on the New York Stock
Exchange--Composite Transactions. The options vest over a four-year period
commencing February 11, 1998.
(2) Based on the Black-Scholes option pricing model commonly used in valuing
executive stock options. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so that there is a reasonable
likelihood that the value realized by an executive will not be at or near
the value estimated by the Black-Scholes model. The estimated values under
that model are based on arbitrary assumptions as to variables such as
interest rates, stock price volatility and future dividend yield.
(3) At December 31, 1998, all of these options were unvested and lapsed due to
the termination of Mr. Satz's employment in December 1998.
9
<PAGE>
Aggregate Option Exercises In 1998 And Year-End Values
The following table provides information on option exercises in 1998 by the
Named Officers and the value of such officers' unexercised options.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Value Options at 12/31/98 at 12/31/98(1)
Acquired Realized -------------------------- -------------------------
Name on Exercise 1998 Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Satz......... -- -- 128,750(2) 0 $ 774,698 --
Jerome F. Jurschak...... 15,000 $241,875 231,550 96,050 $2,050,283 $216,035
David A. Buzen.......... -- -- 217,550 94,050 $1,919,776 $199,909
Laurence C.D. Donnelly.. -- -- 235,550 96,050 $2,091,910 $216,035
Joseph W. Swain III..... 10,000 $233,750 144,850 93,750 $1,201,990 $176,719
Susan L. Hooker......... 24,250 $487,119 7,500 79,300 -- $154,826
</TABLE>
- --------
(1) Calculated based on the closing price as reported on the New York Stock
Exchange-Composite Transactions of the Corporation's Common Stock on that
date ($20.063), less the aggregate exercise price.
(2) In January 1999, Mr. Satz exercised options for 116,000 shares of the
Corporation's Common Stock. The remainder of Mr. Satz's options lapsed due
to the termination of Mr. Satz's employment in December 1998.
Long-Term Incentive Plans Awards in 1998
The following table provides information on awards in 1998 to the Named
Officers under the Performance Share Plan.
<TABLE>
<CAPTION>
Performance Estimated Future Payouts
or Other in Shares of Common Stock
Period under Non-Stock Price-
Until Based Plans (1)
Maturation -------------------------
Name or Payout Threshold Target Maximum
- ---- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
Michael E. Satz........................... 12/31/2001 32,000 120,000 200,000
Jerome F. Jurschak........................ 12/31/2001 8,640 32,400 54,000
David A. Buzen............................ 12/31/2001 8,640 32,400 54,000
Laurence C.D. Donnelly.................... 12/31/2001 8,640 32,400 54,000
Joseph W. Swain III....................... 12/31/2001 8,640 32,400 54,000
Susan L. Hooker........................... 12/31/2001 2,400 9,000 15,000
</TABLE>
- --------
(1) Payouts of awards are tied to achieving specified levels of return on
equity and total shareholders return. The threshold amount will be earned
if (i) the annual earnings per share growth rate is between 11.5% and
12.49%, (ii) the relative total shareholders return, based on a peer group
index, is in the top 60% and (iii) the total shareholders return is
greater than the five-year Treasury yield. The target amount will be
earned if (i) the annual earnings per share growth rate is between 13.5%
and 14.24%, (ii) the relative total shareholders return, based on a peer
group index, is in the top 40% and (iii) the total shareholders return is
greater than the five-year Treasury yield. The maximum amount will be
earned if (i) the annual earnings per share growth rate is at least 15%,
(ii) the relative total shareholders return, based on a peer group index,
is in the top 20% and (iii) the total shareholders return is greater than
the five-year Treasury yield.
Employment Agreements
In February 1999 the Corporation entered into employment agreements that
contain non-compete and non-solicitation covenants with key members of senior
management: Jerome F. Jurschak, David Buzen, Laurence Donnelly, Joseph Swain
and Alan Roseman. The agreements have two-year terms ending on January 31,
2001. On January 31, 2001, the term of each agreement automatically will be
extended for one additional year unless the executive gives prior written
notice of termination. On January 31, 2002 and each January 31 thereafter, the
term of each agreement automatically will be extended for an additional year
unless prior written notice of termination is given by either party to the
agreement.
10
<PAGE>
As consideration for entering into the employment agreements, a bonus of
$75,000 was paid to each executive officer at the time he signed the
employment agreement. An additional payment of $250,000 will be made to each
executive officer on January 1, 2000, provided certain performance measures
are achieved. An additional payment of $225,000 will be paid to each executive
officer on January 31, 2001. Both additional amounts are predicated on the
executive officer being employed by the Corporation on the dates designated
for payment.
Ms. Hooker will receive a retention bonus of $150,000 on January 1, 2000,
provided the same performance measures that are part of the employment
agreements described above are achieved.
Other Information
Loans to Management
Tax Equalization Loans. In order to equalize the after-tax economic benefits
of participation by executives in the Corporation's 1988 Stock Incentive Plan
(the "1988 Plan"), the Corporation made certain loans to employees awarded
shares of restricted stock under the 1988 Plan. Each of these loans bears
interest at the "Applicable Federal Rate" as determined from time to time in
accordance with Section 7872(f)(2) of the Internal Revenue Code of 1986, as
amended. The Corporation has agreed to forgive the interest on these loans and
has granted bonuses to loan recipients to pay their income taxes attributable
to that forgiveness. Each such loan is due and payable on the earlier of three
years after the termination of employment with the Corporation or the
realization by the employee of gain on the sale of restricted Common Stock
granted under the 1988 Plan. The amounts of certain of these loans outstanding
as of December 31, 1998 are as follows: Mr. Jurschak, $112,612; Mr. Buzen,
$87,132; Mr. Donnelly, $119,151; and Mr. Roseman, $61,321. Michael E. Satz,
who until December 1998 was Chief Executive Officer, President and Chairman of
the Board of Directors of the Corporation, repaid his tax equalization loan in
the amount of $263,233.62 on December 31, 1998.
Secured Loan Program. From September 1990 until April 1992, the Company had
in effect the Secured Loan Program under which designated executive officers
(limited to the President and Executive Vice Presidents of the Corporation)
could borrow from the Corporation up to 50% of the book value of the
borrower's then vested shares of restricted Common Stock awarded to the
borrower under the 1988 Plan described above. These loans were in addition to
any loans which eligible borrowers may have had outstanding from time to time
under the Corporation's tax equalization loan program adopted in connection
with the 1988 Plan. Interest on the unpaid principal balance of these loans
accrues at a rate equal to 1% over the rate on five-year U.S. Treasury Notes
as of the date immediately preceding the date of the borrowing, and is payable
annually on March 1 of each year. The loans are due and payable in full no
later than five years from the date of borrowing. To secure the repayment
obligation, the borrowers pledged to the Corporation certain shares of
restricted Common Stock issued to them under the 1988 Plan.
In September 1990, the Corporation made a $750,000 loan to Mr. Satz; in
January 1991, the Company made a $50,000 loan to Mr. Satz; and in May 1991,
the Company made a $200,000 loan to Mr. Satz; each of these loans was made
pursuant to the Secured Loan Program. These loans were consolidated and
refinanced in September 1995 and Mr. Satz executed a new promissory note in
the amount of $1,139,109.42, which provided for interest to accrue on the
unpaid principal balance at the applicable Federal Rate provided under the
Internal Revenue Code and to be paid on March 1 of each year. One hundred
thousand dollars of the principal amount was paid on each of March 1, 1996,
February 22, 1997 and February 20, 1998. The unpaid principal balance plus
accrued interest was paid by Mr. Satz on December 31, 1998.
In October 1998, the Corporation made a demand loan to Mr. Satz in the
amount of $3,539,190.74. This loan, which bore interest at 6.3% per annum and
was secured by a pledge of certain shares of Mr. Satz's Common Stock of the
Corporation, was paid in full (including accrued interest) by Mr. Satz on
December 31, 1998.
11
<PAGE>
Other Loans. Laurence C. D. Donnelly, Executive Vice President of the
Corporation, has an outstanding loan payable to the Corporation in the amount
of $30,000, which bears interest at the "Applicable Federal Rate" determined
from time to time pursuant to the Internal Revenue Code. The Corporation has
agreed to forgive payment of the annual interest. The loan is due and payable
on the earliest to occur of (i) the third anniversary following the
termination of his employment by the Corporation other than termination for
cause, (ii) five days after the termination of his employment by the
Corporation for cause or (iii) the realization of any proceeds on the sale of
the stock securing the loan. The loan is secured by a pledge of certain shares
of Mr. Donnelly's Common Stock of the Corporation obtained under the 1988
Plan. In October 1998, the Corporation made an additional loan to Mr. Donnelly
in the amount of $500,000, which bears interest at 6.3% per annum. Interest on
the loan is payable annually on March 1 of each year, commencing March 1,
1999. The loan is due and payable upon demand for payment by the Corporation.
The loan is secured by a pledge of certain shares of Mr. Donnelly's Common
Stock of the Corporation.
See "Compensation Committee Interlocks and Insider Participation" on page
15.
Compensation Committee Report on Executive Compensation
Decisions on compensation of the Corporation's executive officers generally
are made by the Compensation Committee of the Board of Directors. No member of
the Compensation Committee is an employee of the Corporation. During 1998, the
Committee consisted of Steven D. Kesler (Chairman), Harrison W. Conrad, Jr.,
and Edwin L. Russell. All decisions by the Compensation Committee relating to
the compensation of the Corporation's executive officers are reviewed by its
full Board, except for decisions concerning grants under the Corporation's
1992 Stock Option Plan and 1997 Employee Stock Option Plan.
Compensation Policies Toward Executive Officers.
The Compensation Committee's executive compensation policies are intended to
provide competitive levels of compensation that reflect the Corporation's
annual and long-term performance goals, reward superior corporate performance,
recognize individual initiative and achievements, and assist the Corporation
in attracting and retaining qualified executives. Compensation levels are
based on a number of factors, including a comparison of compensation levels
with other financial services firms and the four publicly traded financial
guaranty insurance companies, adjusted somewhat to reflect relative size and
maturity. These four companies are AMBAC Indemnity Corp., Enhance Financial
Services, Inc., Financial Security Assurance, Inc. and MBIA, Inc. This group
is more limited than the SNL Customer Peer Index peer group utilized in the
performance graph on page 15, which includes a broad group of banking,
insurance and other financial institutions. The Compensation Committee expects
that compensation for the Named Officers will generally fall within the median
to high end of the range for the financial guaranty insurance company
comparison group. In 1998, compensation for the Named Officers was below this
expectation since payments to the Named Officers of annual bonuses were
substantially below target. Compensation for each of the Named Officers, as
well as other senior executives, consists of three basic elements: base
salary, annual incentives and longer-term incentive compensation. The base
salaries are fixed at levels which the Compensation Committee believes are
comparable to those of executives of similar status in the financial guaranty
insurance group. In addition to base salary, each executive officer is
eligible to receive an annual bonus tied to the Corporation's success in
achieving certain annual performance measures, as well as individual
performance. The Board of Directors and the Compensation Committee also
believe that longer-term incentives are appropriate to motivate and retain key
personnel and that stock ownership by management is beneficial in aligning
management's and stockholders' interests in the enhancement of stockholder
value. Accordingly, the Compensation Committee has a policy of considering
annual grants of stock options to executive officers under the 1992 Stock
Option Plan and the 1997 Employee Stock Option Plan (which replaced the 1992
Stock Option Plan).
The following describes in more specific terms the three elements of
compensation that implement the Committee's compensation policies, with
specific reference to compensation reported for 1998:
12
<PAGE>
Base Salary. Each year the Chief Executive Officer recommends to the
Committee a base salary level for each of the Named Officers and Senior Vice
Presidents. In formulating such recommendations, the Chief Executive Officer
considers comparison surveys done by the Corporation and outside advisers
regarding the financial guaranty companies mentioned above, other more general
national survey data and performance judgments as to the past and expected
future contributions of the individual senior executives. The Committee then
reviews the recommendations and fixes the base salaries of each of the
executive officers and of the Chief Executive Officer based on such available
competitive compensation data and the Committee's assessment of each officer's
past performance and its expectation as to future contributions.
Annual Bonus Plan. An Annual Incentive Plan for Covered Executives (the
Chief Executive Officer and the four other most highly compensated officers)
was approved by stockholders at the 1997 Annual Meeting of Stockholders.
Awards under the Incentive Plan are intended to qualify as "performance-based
compensation" under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), which allows the Corporation to take a deduction for
income tax purposes for all amounts paid by the Corporation under the
Incentive Plan.
Qualified performance-based compensation must be paid solely on account of
the attainment of one or more objective performance goals established in
writing by the Compensation Committee while the outcome is substantially
uncertain. Performance goals can be based on one or more business criteria
that apply to an individual, a business unit or the corporation as a whole,
but need not be based on an increase or positive result under the business
criterion selected. The Compensation Committee is prohibited from increasing
the amount of compensation payable if the performance goal is met; however,
the Committee is permitted to reduce or eliminate compensation even if the
performance goal is attained. In its discretion, the Committee may award a
bonus amount outside the Incentive Plan.
Corporate performance is measured by reference to factors which reflect
objective performance criteria over which management generally has the ability
to exert some degree of control. These corporate performance factors are (i)
quality of assumed business, (ii) earnings per share, (iii) investment
portfolio performance, (iv) net income, (v) operating ratios, (vi) return on
average equity and (vii) written premium. Performance goals may include
positive results, maintaining the status quo or limiting economic losses. The
maximum annual bonus that can be granted under the Plan to any executive
officer of the Corporation cannot exceed one hundred seventy-five percent
(175%) of the individual's base salary at the commencement of the performance
period.
For 1998, the specific performance annual corporate performance measures
which the Committee believed reflected these factors and which highlighted the
specific performance of departments within the Corporation were (i) combined
ratio, (ii) gross written premium, (iii) investment portfolio, (iv) earnings
per share and (v) return on average equity. In 1998 each of these measures was
assigned a target result. At the end of the year, actual results were compared
to the target, the positive or negative deviation was compared for each
measure and, based on the pre-established weighting of each measure, an
overall Corporate Performance Rating was derived. For 1998, the Committee
determined that the Corporation had not reached the target amount on an
overall basis for the five performance measures and therefore assigned a
Corporate Performance Rating for 1998 that was substantially below the target
rating. Bonuses for 1996, 1997 and 1998 for each of the Named Officers,
computed using the Corporate Performance Rating, appear under the caption
"Bonus" in the Summary Compensation Table on page 8.
Long Term Compensation Through Stock Options. The Corporation has adopted
its 1992 Stock Option Plan (the "1992 Plan") and its 1997 Employee Stock
Option Plan (the "1997 Plan") to provide for discretionary grants of stock
options to employees as a means of achieving the goal of creating long-term
compensation incentives. Option grants are considered annually and are made at
fair market value on the date of grant. All options granted prior to 1999
under the 1992 Plan and the 1997 Plan vest cumulatively to the extent of one-
fourth of the amount granted on each of the first four anniversary dates of
the date of effectiveness of such grants. Individual option grants were made
by the Committee in 1998 based upon recommendations of the Chief Executive
Officer and the Committee's own deliberations as to the individual's
contribution to the Corporation, overall level of compensation and seniority.
In 1998, the Committee determined the total number of options to
13
<PAGE>
be awarded largely based upon the Committee's assessment of the level of
options awarded on a normalized basis in prior years. In addition, the
Committee considered the need for retention incentives after the Company's
former Chief Executive Officer, Michael Satz, resigned in December 1998.
Performance Share Plan. In 1996 the Committee and the Board approved a
Performance Share Plan which was approved by the stockholders at the 1997
Annual Meeting of Stockholders. This plan is intended as a further long-term
compensation arrangement under which awards are made during periodic
eligibility periods based upon achievement of specific performance goals.
These awards will be ultimately paid in a combination of stock and cash if the
performance goals are achieved.
Mr. Satz's 1998 Compensation
Mr. Satz, who was Chief Executive Officer and President of the Corporation
through early December 1998, received a 1998 base salary of $505,000. Mr. Satz
did not receive any bonus for 1998. The Committee is currently formulating a
policy regarding the compensation of Mr. Jurschak, the Corporation's new Chief
Executive Officer.
Deductibility of Compensation
Under Section 162(m) of the Internal Revenue Code, a publicly traded company
is prohibited from receiving a tax deduction for compensation in excess of $1
million paid to the chief executive officer or any of its four other most
highly compensated executive officers for any fiscal year. The prohibition
does not apply to certain performance-based compensation. The Company's 1992
Plan and 1997 Plan have been structured in such a way that the Committee
expects option grants under the plans to be treated as performance-based
compensation which may be excluded from the deductibility limit. The Annual
Incentive Plan for Covered Executives and the Performance Share Plan approved
by the stockholders at the 1997 Annual Meeting of Stockholders also qualify as
performance-based compensation plans under the Internal Revenue Code. The
Corporation's executive officer compensation for 1998, which is subject to the
deductibility limit, did not exceed $1 million with respect to any one
executive.
Submitted by the Members of the Compensation Committee:
Steven D. Kesler, Chairman
Harrison W. Conrad, Jr.
Edwin L. Russell
14
<PAGE>
Shareholder Return Performance Presentation
The following graph shows a comparison of cumulative total returns for an
investment in the Common Stock of the Corporation, the S&P 500 Composite Index
and the SNL Customer Peer Index from December 31, 1993 through December 31,
1998. This graph is not deemed to be "soliciting material" or to be "filed"
with the SEC or subject to the SEC's proxy rules or to the liabilities of
Section 18 of the 1934 Act, and the graph shall not be deemed to be
incorporated by reference into any prior or subsequent filing by the
Corporation under the Securities Act of 1933 or the 1934 Act.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SNL
Measurement Period CAPITAL RE S&P CUSTOMER
(Fiscal Year Covered) CORPORATION 500 INDEX PEER INDEX
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-12/31/1993 $100.00 $100.00 $100.00
FYE 12/31/1994 $107.28 $101.32 $ 93.70
FYE 12/31/1995 $121.44 $139.39 $138.63
FYE 12/31/1996 $185.35 $171.26 $176.50
FYE 12/31/1997 $248.08 $228.42 $258.36
FYE 12/31/1998 $161.29 $293.69 $261.51
</TABLE>
SNL Custom Peer Index includes the following companies:
ACE Limited, Alleghany Corporation, Ambac Financial Group,
Inc., Amerin Corporation, CapMAC Holdings Inc., CMAC
Investment Corporation, Enhance Financial Services Group
Inc., Everest Reinsurance Holdings, Inc., XL Capital
Limited, Fidelity National Financial, Inc., Financial
Security Assurance Holdings Ltd., First American Financial
Corporation, Frontier Insurance Group, Inc., HSB Group,
Inc., LandAmerica Financial Group, Inc., Market
Corporation, MBIA Inc, MGIC Investment Corporation, Mid
Ocean Limited, NAC Re Corp., Old Republic International
Corporation, PMI Group, Inc., Stewart Information Services
Corporation, Terra Nova (Bermuda) Holdings, Ltd.,
Transatlantic Holdings, Inc., Trenwick Group Inc., Triad
Guaranty Inc., and W.R. Berkley Corporation.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors consists of Harrison W.
Conrad, Jr., Steven D. Kesler and Edwin L. Russell. Mr. Kesler is an officer
of Constellation, and serves on the Board of Directors as Constellation's
designee pursuant to the 1992 Stockholders' Agreement. Mr. Russell serves on
the Board of Directors as Minnesota Power's designee pursuant to the 1992
Stockholders' Agreement.
15
<PAGE>
Voting Procedures
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend in person, you are encouraged to sign
and return the enclosed proxy card. The representation in person or by proxy
of at least a majority of the outstanding shares entitled to vote is necessary
to provide a quorum at the meeting. Directors are elected by a plurality of
the affirmative votes cast.
Abstentions and "non-votes" are counted as present in determining whether
the quorum requirement is satisfied. Abstentions and "non-votes" are treated
as votes against proposals presented to stockholders other than elections of
directors. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner.
Independent Public Accountants
The accounting firm of Ernst & Young LLP has acted as the Corporation's
independent public accountants for the year ended December 31, 1998.
Representatives of Ernst & Young LLP are expected to be present at the
stockholders meeting and will have an opportunity to make a statement if they
desire and to respond to appropriate questions.
Stockholder Proposals
In order to present a proposal at the 2000 Annual Meeting of Stockholders, a
stockholder must provide written notice of the proposal to the Corporation no
later than March 6, 2000. The Corporation intends to use discretionary voting
authority with respect to any matter that is brought before the 2000 Annual
Meeting of Stockholders of which the Company has not received notice by March
6, 2000. In addition, all stockholder proposals intended to be included in the
proxy statement for the 2000 Annual Meeting of Stockholders must be received
by the Corporation not later than December 21, 1999 and must otherwise comply
with the rules of the Securities and Exchange Commission for inclusion in the
Corporation's proxy statement and form of proxy relating to that meeting.
Other Matters
Management knows of no matters to be presented for action at the meeting
other than those mentioned above. However, if any other matters properly come
before the meeting, it is intended that the persons named in the accompanying
form of proxy will vote on such other matters in accordance with their
judgment of the best interests of the Corporation.
By Order of the Board of Directors
/s/ Alan S. Roseman
Alan S. Roseman
Secretary
16
<PAGE>
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE CAPITAL RE CORPORATION
Proxy Solicited on behalf of the Board of Directors
ANNUAL MEETING OF STOCKHOLDERS - MAY 20, 1999
The undersigned holder of the Common Stock of Capital Re Corporation (the
"Company") acknowledges receipt of the Proxy Statement and Notice of Annual
Meeting of Stockholders, dated April 20, 1999 and hereby constitutes and
appoints Jerome F. Jurschak, Joseph W. Swain and Alan S. Roseman, or any of them
acting singly in the absence of the others, the true and lawful proxy or proxies
for and in the name of the undersigned to vote the shares of Common Stock that
the undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on Thursday, May 20, 1999, and at any adjournments thereof.
(a) Election of Directors With- For All
(except as marked to the contrary below): For hold Except
[_] [_] [_]
Harrison W. Conrad, Jr., Dominic J. Frederico*
Richard L. Huber, Jerome F. Jurschak, Steven D. Kesler,
Philip H. Robinson, Edwin L. Russell, J. Randolph Respess,
Barbara D. Stewart, Jeffrey F. Stuermer, Joseph W. Swain.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee"s name in the space provided below.
- -------------------------------------------------------------------------------
(b) In their discretion on such matters as may properly come before the meeting
or any adjournments thereof.
Shares represented by all properly executed proxies will be voted in
accordance with the instructions appearing on this proxy. In the absence of
specific instructions, proxies will be voted FOR the election of Directors named
above and in the best discretion of the proxy holders as to any other matters.
Execute proxy exactly as your name appears on this form. If stock is
registered in more than one name, each joint owner should sign. When signing as
trustee, executor or other fiduciary, please so indicate.
* will stand for election if he is a member of the Board of Directors on May
20, 1999.
Please be sure to sign and date
this Proxy in the box below. Date____________________________
________________________________________________________________________
Stockholder sign above Co-holder (if any) sign above
+ +
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
CAPITAL RE CORPORATION
- --------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
