<PAGE> 1
SCHEDULE 14A INFORMATION
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 Rule 14a-11(c) or Rule 14a-12
DELPHI FINANCIAL GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[DELPHI FINANCIAL LOGO]
March 22, 2000
Dear Stockholder,
It is a pleasure to invite you to Delphi Financial Group, Inc.'s 2000 Annual
Meeting of Stockholders, to be held on May 9, 2000 at the University Club, One
West 54th Street, New York, New York, commencing at 10:00 a.m., Eastern Daylight
Time. We hope that you will be able to attend and review the year with us.
Whether or not you plan to attend the meeting, please exercise your right to
vote as an owner of Delphi Financial Group, Inc. We ask that you review the
proxy materials and then mark your votes on the enclosed proxy card and return
it in the envelope provided as soon as possible.
At the meeting the stockholders will be electing directors and voting on a
proposed amendment to the Second Amended and Restated Employee Stock Option
Plan, as described in the enclosed formal Notice of Annual Meeting of
Stockholders and Proxy Statement. We will also report on the progress of Delphi
Financial Group, Inc. and respond to questions posed by stockholders.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Robert Rosenkranz
Chairman of the Board
<PAGE> 3
DELPHI FINANCIAL GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2000
To the Stockholders of Delphi Financial Group, Inc.:
Notice is hereby given that the 2000 Annual Meeting of Stockholders of Delphi
Financial Group, Inc. will be held at the University Club, One West 54th Street,
New York, New York on May 9, 2000, commencing at 10:00 a.m., Eastern Daylight
Time, for the following purposes:
1. To elect seven directors to serve for a term of one year, one of whom
shall be elected by the holders of the Class A Common Stock, voting as
a separate class.
2. To consider and vote on a proposed amendment to the Company's Second
Amended and Restated Employee Stock Option Plan to increase the number
of shares of Class A Common Stock available for options thereunder as
described herein.
3. To transact such other business as properly comes before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 13, 2000 as the
record date for stockholders entitled to notice of and to vote at the meeting or
any adjournment of the meeting. The list of stockholders entitled to vote at the
meeting shall be available at the offices of Delphi Capital Management, Inc.,
153 East 53rd Street, 49th Floor, New York, New York, for a period of ten days
prior to the meeting date.
A copy of Delphi Financial Group, Inc.'s 1999 Annual Report, including its
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, is being
mailed to stockholders together with this notice.
Your attendance at this meeting is very much desired. However, whether or not
you plan to attend the meeting, please sign the enclosed Proxy and return it in
the enclosed envelope. If you attend the meeting, you may revoke the Proxy and
vote in person.
By Order of the Board of Directors,
Robert Rosenkranz
Chairman of the Board
<PAGE> 4
DELPHI FINANCIAL GROUP, INC.
1105 NORTH MARKET STREET, SUITE 1230
WILMINGTON, DE 19899
PROXY STATEMENT
This Proxy Statement is furnished for the solicitation by the Board of Directors
(the "Board of Directors" or the "Board") of Proxies for the Annual Meeting of
Stockholders of Delphi Financial Group, Inc., a Delaware corporation (the
"Company"), scheduled to be held on May 9, 2000 at the University Club, One West
54th Street, New York, New York, commencing at 10:00 a.m., Eastern Daylight
Time. The submission of a signed Proxy will not affect the stockholder's right
to attend the meeting and vote in person. Any person giving a Proxy may revoke
it at any time before it is exercised by the delivery of a later dated signed
Proxy or written revocation sent to the Investor Relations Department of the
Company, or by attending the Annual Meeting and voting in person.
Other than the matters set forth herein, management of the Company is not aware
of any matters that may come before the meeting. If any other business should
properly come before the meeting, the persons named in the enclosed Proxy will
have discretionary authority to vote the shares represented by the effective
Proxies and intend to vote them in accordance with their best judgment in the
interests of the Company.
The Company's 1999 Annual Report, including its Annual Report on Form 10-K for
the fiscal year ended December 31, 1999, is being mailed together with this
Proxy Statement to each stockholder of record as of the close of business on
March 13, 2000.
MAILING AND VOTING OF PROXIES
This Proxy Statement and the enclosed Proxy were first mailed to stockholders on
or about March 22, 2000. Properly executed Proxies, timely returned, will be
voted and, where the person solicited specifies by means of a ballot a choice
with respect to the election of the nominees chosen by the Board, the shares
will be voted as indicated by the stockholder. Each share of the Company's Class
A Common Stock, par value $.01 per share (the "Class A Common Stock"), entitles
the holder thereof to one vote and each share of the Company's Class B Common
Stock, par value $.01 per share (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock"), entitles the holder thereof to a
number of votes per share equal to the lesser of (i) the number of votes such
that the aggregate of all outstanding shares of Class B Common Stock will be
entitled to cast 49.9% of all of the votes represented by the aggregate of all
outstanding shares of Class A Common Stock and Class B Common Stock or (ii) 10
votes. Based on the shares of Common Stock outstanding as of March 13, 2000, the
Class B Common Stock will have the number of votes described in clause (i) of
the preceding sentence. Proposals submitted to a vote of stockholders will be
voted on by holders of Class A Common Stock and Class B Common Stock voting
together as a single class, except that holders of Class A Common Stock will
vote as a separate class to elect one director (the "Class A Director"). If the
person solicited does not specify a choice with respect to the election of any
nominee for director, the shares will be voted "for" such nominee. Proxies
marked as abstaining (including proxies containing broker non-votes) on any
matter to be acted upon by stockholders will be treated as present at the
meeting for purposes of determining a quorum but will not be counted as votes
cast on such matters.
<PAGE> 5
As of March 13, 2000, Mr. Robert Rosenkranz, by means of beneficial ownership of
the corporate general partner of Rosenkranz & Company, an irrevocable proxy and
direct or beneficial ownership, had the power to vote all of the outstanding
shares of Class B Common Stock, which as of such date represented 49.9% of the
voting power of the Common Stock. Mr. Rosenkranz has entered into an agreement
with the Company not to vote or cause to be voted certain shares of Common
Stock, if and to the extent that such shares would cause him and Rosenkranz &
Company, collectively, to have more than 49.9% of the combined voting power of
the Company's stockholders. Rosenkranz & Company and Mr. Rosenkranz have
informed the Company that they intend to vote in favor of the election of all
nominated directors for which they are entitled to vote and in favor of the
proposed amendment to the Second Amended and Restated Employee Stock Option Plan
(the "Employee Option Plan").
SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by the Company. It is expected that
the solicitation of Proxies will be primarily by mail. Proxies may also be
solicited by officers and employees of the Company, at no additional cost to the
Company, in person or by telephone, telegram or other means of communication.
Upon written request, the Company will reimburse custodians, nominees and
fiduciaries holding the Company's Common Stock for their reasonable expenses in
sending proxy materials to beneficial owners and obtaining their Proxies.
STOCKHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING
Holders of record of Common Stock at the close of business on March 13, 2000
will be eligible to vote at the meeting. The Company's stock transfer books will
not be closed. As of the close of business on March 13, 2000, the Company had
outstanding 14,900,149 shares of Class A Common Stock and 5,180,072 shares of
Class B Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock by each of the Company's directors and
executive officers, each person known by the Company to own beneficially more
than five percent of the Common Stock and all directors and officers of the
Company as a group as of March 13, 2000. The information shown assumes the
exercise by each person (or all directors and officers as a group) of the stock
options owned by such person and the exercise by no other person (or group) of
stock options. Unless otherwise indicated, each beneficial owner listed below is
believed by the Company to own the indicated shares directly and have sole
voting and dispositive power with respect thereto.
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<PAGE> 6
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name of Beneficial Owner Ownership of Class
- ------------------------ --------- --------
<S> <C> <C>
Class B Common Stock:
Five or greater percent owner:
Rosenkranz & Company..................... 4,702,920 (1) 79.8%
Directors and Executive Officers:
Robert Rosenkranz........................ 5,895,515 (1) 100.0%
Chad W. Coulter.......................... - -
Edward A. Fox............................ - -
Harold F. Ilg............................ - -
Louis C. Lucido.......................... - -
Charles P. O'Brien....................... - -
Lewis S. Ranieri......................... - -
Thomas L. Rhodes......................... - -
Robert M. Smith, Jr...................... - -
B.K. Werner.............................. - -
Directors and officers as a group
(11 persons).......................... 5,895,515 100.0%
Class A Common Stock:
Five or greater percent owners ............. - -
Directors and Executive Officers:
B.K. Werner.............................. 807,396 (2) 5.2%
Harold F. Ilg............................ 616,212 (3) 4.0%
Robert Rosenkranz........................ 298,140 (1) 1.9%
Robert M. Smith, Jr...................... 173,891 (4) 1.1%
Charles P. O'Brien....................... 139,028 (5) *
Edward A. Fox............................ 40,696 (6) *
Chad W. Coulter.......................... 33,816 (7) *
Louis C. Lucido.......................... 20,207 (8) *
Lewis S. Ranieri......................... 18,569 (8) *
Thomas L. Rhodes......................... 12,211 (8) *
Directors and officers as a group
(11 persons)........................... 2,206,751 (9) 14.2%
</TABLE>
* Amount is less than 1% of Class.
(1) Mr. Rosenkranz, as the beneficial owner of the corporate general partner of
Rosenkranz & Company, has the power to vote the shares of Class B Common
Stock held by Rosenkranz & Company. Accordingly, Mr. Rosenkranz may be
deemed to be the beneficial owner of all of the shares of the Company held
by Rosenkranz & Company. In addition, Mr. Rosenkranz holds an irrevocable
proxy to vote or has direct or beneficial ownership of 477,152 additional
shares of Class B Common Stock and direct or beneficial ownership of 103,855
shares of Class A Common Stock. The remaining indicated shares of Class A
Common Stock and Class B Common Stock, respectively, consist of 194,285
shares of Class A Common Stock and 476,962 shares of Class B Common Stock
which may be acquired pursuant to stock options and 238,481 deferred shares
of Class B Common Stock. With respect to the shares of Class A Common Stock
which may be acquired pursuant to stock options, options relating to 111,864
shares are subject to approval of the amendment to the Employee Option Plan
described elsewhere herein by the stockholders of the Company. The address
of Rosenkranz & Company and Mr. Rosenkranz is 153 East 53rd Street, 49th
Floor, New York, NY 10022.
(2) Each of Mr. Werner and The Werner Partnership, LP, of which Mr. Werner is
the general partner, may be deemed to beneficially own the indicated shares
and have shared voting and dispositive power with respect to such shares.
Mr. Werner's address is c/o Safety National Casualty Corporation, 2043
Woodland Parkway, St. Louis, MO 63146.
(3) Mr. Ilg is a general partner of the Ilg Family L.P. No. 1 and has shared
voting and dispositive power with respect to 458,637 shares of Class A
Common Stock held by the Ilg Family L.P. No. 1. In addition, Mr. Ilg has
direct ownership of 800 shares of Class A Common Stock. The remaining shares
indicated may be acquired pursuant to stock options of Class A Common Stock.
With respect to the shares of Class A Common Stock which may be acquired
pursuant to stock options, options relating to
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<PAGE> 7
52,735 shares are subject to approval of the amendment to the Employee
Option Plan described elsewhere herein by the stockholders of the Company.
Mr. Ilg's address is c/o Safety National Casualty Corporation, 2043 Woodland
Parkway, St. Louis, MO 63146.
(4) Of the indicated shares of Class A Common Stock, 3,319 shares are presently
owned by Mr. Smith. Of the shares presently owned, Mr. Smith has sole voting
and dispositive power with respect to 2,259 shares and shared voting and
dispositive power with respect to 1,060 shares. The remaining shares
indicated may be acquired pursuant to stock options within 60 days. With
respect to the shares of Class A Common Stock which may be acquired pursuant
to stock options, options relating to 50,847 shares are subject to approval
of the amendment to the Employee Option Plan described elsewhere herein by
the stockholders of the Company. Mr. Smith's address is c/o Delphi Capital
Management, Inc., 153 East 53rd Street, 49th Floor, New York, NY 10022.
(5) All of the indicated shares of Class A Common Stock are presently owned. The
address of Mr. O'Brien is c/o Reliance Standard Life Insurance Company, 2501
Parkway, Philadelphia, PA 19130.
(6) Of the indicated shares of Class A Common Stock, 19,872 shares are presently
owned by Mr. Fox. The remaining shares indicated may be acquired pursuant to
stock options within 60 days. Mr. Fox's address is c/o Delphi Capital
Management, Inc., 153 East 53rd Street, 49th Floor, New York, NY 10022.
(7) Of the indicated shares of Class A Common Stock, 1,259 shares are presently
owned by Mr. Coulter. The remaining shares indicated may be acquired
pursuant to stock options within 60 days. With respect to the shares of
Class A Common Stock which may be acquired pursuant to stock options,
options relating to 23,898 shares are subject to approval of the amendment
to the Employee Option Plan described elsewhere herein by the stockholders
of the Company. Mr. Coulter's address is c/o Delphi Capital Management,
Inc., 153 East 53rd Street, 49th Floor, New York, NY 10022.
(8) None of the indicated shares of Class A Common Stock are presently owned,
but they may be acquired pursuant to stock options within 60 days. Mr.
Ranieri's address is c/o Ranieri & Co., Inc., 50 Charles Lindbergh Blvd.,
Suite 500, Uniondale, NY 11553. Mr. Rhodes' address is c/o National Review,
Inc., 215 Lexington Avenue, New York, NY 10016. Mr. Lucido's address is c/o
Delphi Capital Management, Inc., 153 East 53rd Street, 49th Floor, New York,
NY 10022.
(9) Includes 671,112 shares of Class A Common Stock which may be acquired
pursuant to stock options within 60 days. With respect to the shares of
Class A Common Stock which may be acquired pursuant to stock options,
options relating to 259,276 shares are subject to approval of the amendment
to the Employee Option Plan described elsewhere herein by the stockholders
of the Company.
ELECTION OF DIRECTORS
The Board of Directors consists of seven members, each of whom are elected
annually to serve until their successor has been elected and qualified, or they
have resigned or been removed from office. The Company's Restated Certificate of
Incorporation provides that the holders of Class A Common Stock are entitled to
vote as a separate class to elect the Class A Director so long as the
outstanding shares of Class A Common Stock represent at least 10% of the
aggregate number of outstanding shares of the Company's Class A and Class B
Common Stock. As of the date of this Proxy Statement, this condition continues
to be satisfied. Mr. Rhodes was elected by the holders of the Class A Common
Stock in 1999 as the Class A Director, and the Board of Directors has
unanimously recommended Mr. Rhodes for reelection as the Class A Director.
It is intended that the shares of Common Stock represented by Proxies will be
voted "for" the election of all such nominees unless a contrary direction is
indicated on the Proxy. While it is not expected that any of the nominees will
be unable to qualify for or accept office, if for any reason any nominee shall
be unable to do so, Proxies that would otherwise have been voted "for" such
nominee will instead be voted "for" a substitute nominee selected by the Board.
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<PAGE> 8
Nominees for Director
The following sets forth information as to each nominee for election at the 2000
Annual Meeting, including his age, positions with the Company, length of service
as a director of the Company, other directorships currently held, if any,
principal occupations and employment during the past five years and other
business experience.
ROBERT ROSENKRANZ, 57, has served as the President and Chief Executive Officer
of the Company since May 1987 and has served as Chairman of the Board of
Directors of the Company since April 1989. He is also Chairman of the Board of
Reliance Standard Life Insurance Company ("RSLIC"), First Reliance Standard Life
Insurance Company ("FRSLIC") and Reliance Standard Life Insurance Company of
Texas ("RSLIC-Texas") and serves on the Board of Directors of Safety National
Casualty Corporation ("SNCC"). Mr. Rosenkranz has served since October 1978 as
either sole or managing general partner of Rosenkranz & Company or as beneficial
owner of its corporate general partner and since September 1997 as a director of
Delphi International Ltd. ("Delphi International") and Oracle Reinsurance
Company Ltd. ("Oracle Re").
ROBERT M. SMITH, JR., 48, commenced employment with the Company in March 1994
and has served as Executive Vice President of the Company and Delphi Capital
Management, Inc. ("DCM") since November 1999, as Vice President of the Company
and DCM from July 1994 to November 1999, and as a director of the Company since
January 1995. Mr. Smith has also served as a director of RSLIC, FRSLIC and
RSLIC-Texas since July 1994 and as a director of SNCC since March 1996. In
addition, Mr. Smith has served as a director of Delphi International and Oracle
Re since September 1997. Prior to March 1994, Mr. Smith was Director, Investment
Banking for Merrill Lynch & Company in New York, NY.
EDWARD A. FOX, 63, has served as a director of the Company since March 1990. He
has served as Chairman of the Board of SLM Holding Corp. since August 1997 and
is currently a director of New England Life Insurance Company and Greenwich
Capital Management and is Non-Executive Chairman of Eldorado Bancshares, Inc. In
addition, Mr. Fox has served as a director of Delphi International and Oracle Re
since September 1997. From May 1990 until September 1994, Mr. Fox was the Dean
of the Amos Tuck School of Business Administration at Dartmouth College, and
from April 1973 until May 1990, he was President and Chief Executive Officer of
the Student Loan Marketing Association.
CHARLES P. O'BRIEN, 63, has served as a director of the Company since November
1987 and as Chairman Emeritus of RSLIC since April 1999, when he retired as
President and Chief Executive Officer of RSLIC, FRSLIC and RSLIC-Texas, in which
capacities he had served since August 1976. Mr. O'Brien has been Senior Vice
President of Pennsylvania Merchant Group since November 1999. Mr. O'Brien also
serves as a director of RSLIC, FRSLIC and RSLIC-Texas. In addition, Mr. O'Brien
has served as a director of Delphi International and Oracle Re since September
1997.
LEWIS S. RANIERI, 53, has served as a director of the Company since July 1992.
Mr. Ranieri is currently Chairman and Chief Executive Officer of Ranieri & Co.,
Inc. and oversees Hyperion Partners L.P. and Hyperion Partners II L.P.
(collectively "Hyperion"), funds created to invest in the financial services,
housing and real estate industries. As part of his responsibilities with
Hyperion, Mr. Ranieri serves as Vice-Chairman of Hyperion Capital Management,
Inc., a New York-based money management firm specializing in mortgage-backed
securities, as Chairman, Director and/or Trustee of several closed-end
investment
-5-
<PAGE> 9
companies advised by Hyperion Capital Management, Inc., and as Chairman and a
director of Bank United Corp., and a director of Bank United, a Houston-based
savings and loan institution. Mr. Ranieri also serves on the compensation
committee for both Bank United entities. In addition, Mr. Ranieri has served as
a director of Delphi International since September 1997.
B.K. WERNER, 66, has served as a Director of the Company since the acquisition
of SNCC in March 1996 and as Chairman Emeritus of SNCC since January 1999. He
served as Chairman of the Board of SNCC from June 1987 to December 1998 and as
Chief Executive Officer from June 1990 to December 1998. Mr. Werner has served
as a Director of and has been employed in various capacities of SNCC since 1959.
Nominee for Class A Director
THOMAS L. RHODES, 60, has served as a director of the Company since May 1995 and
has served as a director of Delphi International and Oracle Re since 1997. He
has been President of National Review, Inc. since November 30, 1992, where he
has also served as a director since 1988. From 1987 to November 27, 1992, Mr.
Rhodes was a Partner of Goldman, Sachs & Co., New York, NY. Mr. Rhodes is
Vice-Chairman and a Director of Asset Investors Corporation and Vice-Chairman
and a Director of Commercial Assets, Inc. Mr. Rhodes also serves as a director
of Apartment Investment and Management Company and of The Lynde and Harry
Bradley Foundation.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee is responsible for reviewing the activities of the Company's
independent accountants and internal audit department. The committee, whose
membership consists of Messrs. Fox, Ranieri and Rhodes, held eight meetings
during 1999. The Board of Directors does not have a nominating committee.
The Stock Option and Compensation Committee is responsible for reviewing and
approving all grants of stock options to employees and reviewing and approving
compensation arrangements for certain employees of the Company and its
subsidiaries. The committee's membership consists of Messrs. Fox and Rhodes.
DIRECTORS' ATTENDANCE
The Board of Directors held five meetings during 1999. Each incumbent director
attended at least 75% of the aggregate of (i) the total number of meetings held
during the period for which such incumbent was a director, and (ii) the total
number of meetings held by all committees of the Board of Directors on which
such incumbent served.
DIRECTORS' COMPENSATION
The Company pays its directors who are not officers or employees of Rosenkranz &
Company, the Company, or any of the Company's affiliates (each, an "outside
director") annual compensation consisting of an option to purchase Class A
Common Stock, as further described below, or cash in the amount of $20,000 (the
"Annual Retainer") and a fee of $750 plus expenses for each Board of Directors
or committee meeting attended.
-6-
<PAGE> 10
In addition, under the Amended and Restated Directors Stock Option Plan (the
"Directors Option Plan"), on the business day following the Company's Annual
Meeting of Stockholders, each outside director then in office is granted an
option to purchase a number of shares of Class A Common Stock determined
pursuant to the following formula: number of option shares equal to 2,650
multiplied by [1 + (.125 multiplied by the number of calendar years of
continuous service of such outside director to that point, including any portion
of a calendar year of service as a full year)]. The price per share upon the
exercise of an option is 100% of the fair market value of the Class A Common
Stock on the date of the grant. For this purpose, the fair market value on any
such date is the closing price per share of the Class A Common Stock, as
reported on the New York Stock Exchange for such date. Options granted become
exercisable in five equal annual installments, commencing on the first
anniversary of the date of the grant, and expire ten years from the date of
grant.
The Directors Option Plan also provides for the Annual Retainer to be paid
through the grant of an option to purchase Class A Common Stock to each outside
director, unless a director makes an election in advance to receive the Annual
Retainer in cash. Options are granted on the first business day following the
date on which each outside director is elected, reelected or appointed. The
number of shares of Class A Common Stock to which each option relates is equal
to (a) three times the amount of the director's Annual Retainer that would
otherwise be payable in cash for the applicable period divided by (b) the fair
market value of a share of Class A Common Stock of the Company on the date of
grant, and the exercise price is 100% of such fair market value on the date of
grant. For this purpose, the fair market value on any such date is the closing
price per share of the Class A Common Stock, as reported on the New York Stock
Exchange for such date. Options granted become exercisable in four equal 90-day
installments and expire ten years from the date of grant.
Under the Directors Option Plan, options to purchase 20,628 shares of Class A
Common Stock, in the aggregate, were granted to outside directors during 1999 at
an exercise price of $35.56 per share. The shares to which such options relate
are included in the "Security Ownership of Certain Beneficial Owners and
Management" table.
PROPOSAL TO AMEND THE EMPLOYEE STOCK OPTION PLAN
The Board of Directors of the Company has unanimously approved an amendment to
the Employee Option Plan to increase the number of shares of Class A Common
Stock available for options thereunder to 3,200,000, subject to the approval of
such amendment by the stockholders of the Company at the 2000 Annual Meeting.
The maximum number of shares of Class A Common Stock as to which options may be
granted under the Employee Option Plan, as further described below under
"Executive Compensation - Employee Stock Option Plan," is presently 2,186,080.
This maximum number is cumulative of all share amounts for which the predecessor
plans to the Employee Option Plan, the first of which was originally adopted in
1987, previously provided, and all options granted since such time which have
previously been exercised or are presently outstanding are taken into account
for purposes of applying this number. For further information concerning the
Employee Option Plan and options previously granted thereunder (including grants
which are subject to the proposed amendment), see "Executive Compensation -
Employee Stock Option Plan."
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<PAGE> 11
As the Company intends to continue its practice of granting stock options to key
employees as a means of incentive compensation, it is desirable to increase the
number of shares of Class A Common Stock available for options under the
Employee Option Plan to 3,200,000 so as to ensure that there will be a
sufficient number of shares available to permit the Company to do so.
It is intended that the shares of Common Stock represented by Proxies will be
voted "for" the proposed amendment to the Employee Option Plan unless a contrary
direction is indicated on the Proxy.
EXECUTIVE COMPENSATION
The following table sets forth aggregate compensation paid by the Company and
its subsidiaries for services rendered in all capacities to the Company and its
subsidiaries during the fiscal years ended December 31, 1999, 1998 and 1997 to
or for the benefit of each of the five most highly compensated executive
officers of the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------------- -----------------------
Securities All Other
Other Annual Restricted Underlying Compen-
Name and Principal Compensation Stock Options sation
Position Year Salary ($) Bonus ($) ($) (1) Award ($) (#)(2) ($) (3)
- --------------------- ------ ----------- --------- ----------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Rosenkranz, 1999 $549,978 $ - $ - $ - 55,932 $ -
President & Chief Executive 1998 549,978 550,000 - 4,000,860 238,481 -
Officer of the Company 1997 549,978 550,000 - 3,110,874 238,481 -
Chad W. Coulter 1999 210,231 - - - 21,386 4,864(4)
Vice President & General 1998 178,365 60,000 - - 21,648 3,877(4)
Counsel of the Company 1997 92,213(5) 37,000 - - - 2,863(4)
Harold F. Ilg 1999 319,000 204,292 - - 329,313 8,800(4)
President and Chief Executive 1998 451,000 18,792 - - - 8,800(4)
Officer of RSLIC and 1997 451,000 18,792 - - - 8,800(4)
Chairman of the Board of
SNCC
Louis C. Lucido, 1999 284,986 150,000 - - 41,212 3,200(4)
Vice President, Investments 1998 284,986 500,000 - - 26,530 3,200(4)
of the Company 1997 121,636(6) 200,000 - - 21,648 1,523(4)
Robert M. Smith, Jr., 1999 288,933 - - - 56,329 3,200(4)
Executive Vice President 1998 279,994 250,000 - - - 3,200(4)
of the Company 1997 274,976 200,000 - - - 4,750(4)
Charles P. O'Brien, 1999 279,994(7) - - - - 5,000(4)
Former President & Chief 1998 279,994 228,690 - - - 5,000(4)
Executive Officer of RSLIC 1997 279,994 230,790 - - - 4,750(4)
</TABLE>
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<PAGE> 12
(1) Personal benefits, which are non-cash compensation, were not disclosed in
the "Other Annual Compensation" column since they did not exceed the lesser
of either $50,000 or 10% of the total of annual salary and bonus for any
named executive officer.
(2) Other than the granting of stock options listed below, no other long-term
compensation was provided to the named executive officers. Such amounts
include, for Messrs. Rosenkranz, Coulter, Ilg and Smith, options
exercisable for 55,932, 11,186, 17,173 and 25,423 shares of Class A Common
Stock, respectively, as to which the grants are subject to the approval by
the stockholders of the Company of the amendment to the Employee Option
Plan described elsewhere herein.
(3) The Company and its subsidiaries paid certain amounts in 1999, 1998 and
1997 to a wholly-owned subsidiary of Rosenkranz & Company pursuant to two
investment consulting agreements. Portions of these amounts were in turn
earned by Mr. Rosenkranz in addition to the amounts set forth above. See
"Certain Relationships and Related Transactions."
(4) These amounts represent the Company's annual contribution on behalf of the
employee to Company-sponsored defined contribution benefit plans.
(5) Represents compensation for the period from January 1, 1997 to August 20,
1997.
(6) Represents compensation for the period July 21, 1997, the date Mr. Lucido
commenced employment, to December 31, 1997.
(7) Mr. O'Brien retired from the position of President and Chief Executive
Officer of RSLIC on April 26, 1999.
Incentive Plan. At the 1997 Annual Meeting, the Company's stockholders approved
the Long-Term Performance-Based Incentive Plan (the "Incentive Plan") for Robert
Rosenkranz, the Chairman, President and Chief Executive Officer of the Company.
The purpose of the Incentive Plan is to provide Mr. Rosenkranz with a
compensation arrangement that rewards him for significant gains in shareholders'
wealth as measured by the annual performance of the Company's Class A Common
Stock, so long as such performance surpasses that of the Standard & Poor's
Corporation Insurance Composite Index Total Return to Shareholders (the "S&P
Insurance Index Total Return").
An award under the Incentive Plan is made for a Performance Period (as defined
below) if and only if the Ending Stock Value (as defined therein) of the
Company's Class A Common Stock exceeds the Beginning Stock Price (as defined
therein) by an amount greater than the S&P Insurance Index Total Return over the
comparable period. The award is then determined as 2.5% of the amount by which
the Ending Market Value (as defined therein) exceeds the Beginning Market Value
(as defined therein). Expressed as a formula, the "Award Amount" = (Ending
Market Value minus Beginning Market Value) multiplied by .025. The "Performance
Period" is the calendar year, except that if an award is not made under the plan
for any calendar year, the next Performance Period will include all calendar
years following the last calendar year for which an award was so made.
The Incentive Plan provides that 50% of the Award Amount, if earned, will be
paid in the form of restricted or deferred shares of Class B Common Stock, with
the number of such shares determined by dividing 50% of the Award Amount by the
average closing price of the Class A Common Stock during the twenty trading days
commencing nine trading days prior to the last trading day of the relevant
period (the "Ending Stock Price"). The remainder of the award will be paid in
options to purchase shares of Class B Common Stock (Class A Common Stock in the
case of the 1996 award) having an exercise price equal to 100% of the fair
market value (as defined in the plan) of a share of such stock on the date of
grant. Such options become exercisable in full thirty days following the date of
the grant and have a ten-year term. The number of shares subject to such options
is determined by dividing 50% of the Award Amount by the Ending Stock Price and
multiplying that amount by three. This formula reflects a general standard of
valuation indicating that, across a broad number of companies, stock options
with a ten-year term are worth approximately one-third of the market value of
the underlying stock on the date of grant. However, regardless of the Award
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<PAGE> 13
Amount for any Performance Period, the Incentive Plan limits, as to any calendar
year, the number of restricted or deferred shares of Common Stock which may be
awarded to 79,494, and limits the number of shares of Common Stock as to which
options may be granted to 238,481, plus the "Carryover Amount." The "Carryover
Amount" consists of the cumulative amounts of such restricted or deferred shares
and options which, in each year since the inception of the Incentive Plan, would
have been eligible for award in conformity with such limits, but were not
awarded. Any Award Amounts which do not result in awards of restricted or
deferred shares or options due to the aforementioned limits may be applied to
increase the Award Amount in any subsequent Performance Period in which the
Ending Stock Value exceeds the Beginning Stock Price by an amount greater than
the S&P Insurance Index Total Return for such Performance Period (subject, in
all events, to the per-year share and option award limits referenced above).
If Mr. Rosenkranz's employment terminates during a Performance Period, he will
be entitled to an award under the Incentive Plan based on the performance of the
Company's Class A Common Stock if it surpasses the S&P Insurance Index Total
Return through such date, unless his employment was terminated by the Company
for "Cause" or by Mr. Rosenkranz without "Good Reason," as such terms are
defined in the Incentive Plan.
Restricted or deferred shares of Class B Common Stock awarded under the
Incentive Plan vest upon the termination of Mr. Rosenkranz's employment due to
death, disability or normal retirement or by the Company other than for Cause or
upon a "Change in Ownership," as such term is defined in the Incentive Plan. If
Mr. Rosenkranz's employment is terminated by himself for other than Good Reason
or by the Company for Cause, such restricted or deferred shares are forfeited to
the Company.
Because the Incentive Plan provides for accelerated vesting of restricted or
deferred shares of Class B Common Stock awarded under the Plan upon a Change in
Ownership, it is possible that a twenty percent "golden parachute" excise tax
could be imposed upon Mr. Rosenkranz under the Internal Revenue Code (the
"Code") if such vesting were to occur in such an event. In order to preserve the
benefits intended to be provided under the Incentive Plan, the plan contains a
provision under which payments would be made by the Company to Mr. Rosenkranz in
order to adjust, on an after-tax basis, for the amount of any such tax.
Employee Stock Option Plan. The Employee Option Plan provides for a total of
2,186,080 shares of Class A Common Stock which may be issued upon exercise of
options granted thereunder. Through March 13, 2000, options for 2,893,569 shares
of Class A Common Stock have been granted, of which options for 707,489 shares
are subject to approval of the amendment to the Employee Option Plan described
elsewhere herein by the stockholders of the Company at the 2000 Annual Meeting.
As of March 13, 2000, options covering 1,254,306 shares of Class A Common Stock
have been exercised. These exercises reduced the total number of outstanding
options exercisable for Class A Common Stock to 1,639,263 shares, of which
options for 860,718 shares of Class A Common Stock were vested as of March 13,
2000. Options currently outstanding under the Employee Option Plan expire
between 2002 and 2010. Options granted under the Employee Option Plan have a
maximum term of ten years and become exercisable at such times and in such
amounts as are determined by the Stock Option and Compensation Committee at the
time of grant. The price per share upon the exercise of an option is 100% of the
fair market value of the Class A Common Stock on the date of the grant, which,
under the plan, is equal to the closing price per share of the Class A Common
Stock, as reported on the New York Stock Exchange for such date.
-10-
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
Summarized below in tabular format are options granted to the named executive
officers under the Employee Option Plan with respect to 1999.
<TABLE>
<CAPTION>
% of Total Potential Realizable Value
Number of Options at Assumed Annual Rates of
Securities Granted to Stock Price Appreciation for
Underlying Employees Exercise Option Term
Options in Last Price Expiration ----------------------------
Name Granted Fiscal Year ($/Sh) Date 5% 10%
- -------------------- ----------- ----------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert Rosenkranz 55,932(1) 9% $ 29.5000 01/11/10 $1,037,672 $2,629,665
Chad W. Coulter 10,200(2) 2% 31.2500 09/20/09 200,460 508,005
11,186(1) 2% 29.5000 01/11/10 207,527 525,914
Harold F. Ilg 312,120(3) 50% 32.3193 04/16/09 6,343,974 16,076,877
17,193(1) 3% 29.5000 01/11/10 318,971 808,336
Louis C. Lucido 31,212(4) 5% 48.5390 01/21/09 952,775 2,414,519
10,000(5) 2% 27.8750 12/29/09 175,304 444,256
Robert M. Smith, Jr. 15,606(4) 2% 48.5390 01/21/09 476,387 1,207,259
15,300(2) 2% 31.2500 09/20/09 300,690 762,008
25,423(1) 4% 29.5000 01/11/10 471,657 1,195,273
Charles P. O'Brien - - - - - -
</TABLE>
(1) The options indicated are subject to approval of the amendment to the
Employee Option Plan described elsewhere herein by the stockholders of the
Company, and, upon such approval become exercisable immediately. All are
non-qualified options and become exercisable for Class A Common Stock.
(2) The options indicated become exercisable in five equal annual installments
beginning with the first such installment occurring on September 20, 2000.
All are non-qualified options and become exercisable for Class A Common
Stock.
(3) Of the indicated options, 104,040 options are currently exercisable. The
remaining options become exercisable in full on March 16, 2009, so long as
Mr. Ilg continues to serve as chief executive officer of RSLIC, or in a
substantially similar position, at such time. All are non-qualified options
and become exercisable for Class A Common Stock.
(4) The options indicated become exercisable in five equal annual installments
beginning with the first such installment occurring on January 21, 2000.
All are non-qualified and become exercisable for Class A Common Stock.
(5) The options indicated become exercisable in five equal annual installments
beginning with the first such installment occurring on December 29, 2000.
All are non-qualified options and become exercisable for Class A Common
Stock.
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<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Summarized below in tabular format are options exercised by the named executive
officers during the fiscal year ended December 31, 1999 and options outstanding
under the Employee Option Plan or Incentive Plan, as applicable, at December 31,
1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End (1)
Acquired Value ----------------------------- --------------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Rosenkranz - $ - 771,375 - $ 177,049 $ -
Chad W. Coulter - - 19,845 23,189 5,593 -
Harold F. Ilg - - 121,233 208,080 8,597 -
Louis C. Lucido - - 20,207 69,183 - 21,250
Robert M. Smith, Jr. - - 145,148 51,193 1,701,343 195,212
Charles P. O'Brien - - - - - -
</TABLE>
(1) Based on a closing price of $30.00 for the Company's Class A Common Stock on
December 31, 1999.
Pension Plans. The Reliance Standard Life Insurance Company Pension Plan (the
"Pension Plan") is a noncontributory, qualified defined benefit pension plan
that provides retirement and, in certain instances, death benefits to employees
of RSLIC, FRSLIC, DCM and other subsidiaries of the Company. Benefits under the
Pension Plan at the employee's normal retirement age, which is 65, are
calculated as the sum of (i) 0.85% of the employee's average compensation for
the five consecutive calendar years in the last ten years of participation prior
to retirement during which the employee was most highly paid ("Average
Compensation") up to and including the employee's Social Security covered
compensation level plus (ii) 1.5% of the employee's Average Compensation in
excess of their Social Security covered compensation level, multiplied by the
employee's years of service up to 35 years; plus 1% of the employee's Average
Compensation multiplied by the employee's years of service in excess of 35.
Average Compensation is subject to the statutory limitation pursuant to the Code
of $170,000 for 2000 (or any limits as required by the Code in the future).
Benefits payable under the Pension Plan are offset by any benefits payable under
the Dresser Industries Inc. Pension Plan, which covered RSLIC and FRSLIC
employees prior to November 6, 1987 (the "Dresser Pension Plan Offset").
Employees are eligible to participate in the Pension Plan following the
completion of one year of service and the attainment of age 21 and continue to
accrue benefits generally until termination of employment, death or retirement.
Benefits vest after five years of service with RSLIC, FRSLIC and/or DCM.
Supplemental Executive Retirement Plan. Effective January 1, 1994, the Company
established the Reliance Standard Life Insurance Company Supplemental Executive
Retirement Plan (the "RSL SERP"). The plan provides certain key employees
(excluding Mr. Rosenkranz) with the opportunity for additional postemployment
income which would otherwise have been limited under the Pension Plan due to the
reduction of the statutory limit on employee's compensation as calculated under
the Pension Plan pursuant to the Code. The RSL SERP is a nonqualified deferred
retirement plan and is unfunded. Retirement
-12-
<PAGE> 16
benefits under the RSL SERP are calculated in a similar manner as those under
the Pension Plan, except that Average Compensation is limited under the plan to
$279,660 for 2000 (adjusted annually by the Social Security Cost of Living
Adjustment). Any benefits payable under the Pension Plan are deducted from the
benefit calculated under the RSL SERP. All other terms and conditions of the RSL
SERP are substantially identical to those contained in the Pension Plan.
DCM Pension Plan. The Delphi Capital Management, Inc. Pension Plan for Robert
Rosenkranz (the "DCM Pension Plan") is a nonqualified, noncontributory defined
benefit pension plan that provides retirement benefits to Robert Rosenkranz and,
in certain instances, death benefits to his beneficiary. Benefits under the DCM
Pension Plan at Mr. Rosenkranz's normal retirement age, which is 65, are
calculated in the same manner as benefits under the Pension Plan. Benefits are
reduced should Mr. Rosenkranz elect an early retirement date. The DCM Pension
Plan is unfunded and assets held by DCM shall not be deemed to be held in trust
for the payment of the pension obligation. The payment is, however,
unconditionally guaranteed by the Company under a guarantee agreement between
the Company and Robert Rosenkranz, and should DCM default, the Company will
discharge the obligation. Mr. Rosenkranz does not participate in either the
Pension Plan or the RSL SERP.
The estimated annual benefits payable at the normal retirement age of 65 are set
forth in the table below for the indicated compensation and years of service
classifications in the form of a straight life annuity. The benefits
calculations show estimated annual payments excluding the effect of any Dresser
Pension Plan Offset and are based upon the Social Security Act in effect for an
employee retiring in 2000.
<TABLE>
<CAPTION>
Years of Service as
Retirement Plan Participant and Estimated Amount of Benefits
Average ---------------------------------------------------------------------------
Compensation 10 15 20 25 30 35
------------ --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 ..... $ 12,719 $ 19,078 $ 25,437 $ 31,796 $ 38,156 $ 44,515
125,000 ..... 16,469 24,703 32,937 41,171 49,406 57,640
150,000 ..... 20,219 30,328 40,437 50,546 60,656 70,765
175,000 ..... 23,969 35,953 47,937 59,921 71,906 83,890
200,000 ..... 27,719 41,578 55,437 69,296 83,156 97,015
225,000 ..... 31,469 47,203 62,937 78,671 94,406 110,140
250,000 ..... 35,219 52,828 70,437 88,046 105,656 123,265
275,000 ..... 38,969 58,453 77,937 97,421 116,906 136,390
300,000 ..... 42,719 64,078 85,437 106,796 128,156 149,515
350,000 ..... 50,219 75,328 100,437 125,546 150,656 175,765
</TABLE>
The following executives named in the Summary Compensation Table shown under
"Executive Compensation" are covered by the Pension Plan, the RSL SERP and/or
the DCM Pension Plan:
<TABLE>
<CAPTION>
Years of Credited Service
Name As of December 31, 1999
----------------- -----------------------
<S> <C>
Robert Rosenkranz....................................... 22
Chad W. Coulter......................................... 9
Louis C. Lucido......................................... 2
Robert M. Smith, Jr..................................... 6
Charles P. O'Brien...................................... 23
</TABLE>
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<PAGE> 17
Employment Contract. The Company has entered into an agreement with Mr. Smith
which provides that if he is terminated without good and reasonable cause he
will be entitled to a severance payment up to a maximum of twelve months of base
salary, plus health benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Fox and Rhodes, the members of the Stock Option and Compensation
Committee during 1999, are not "insiders" within the meaning of the Securities
Act and there were no "interlocks" within the meaning of the Securities Act.
PERFORMANCE GRAPH
In order to further assist stockholders in analyzing disclosure on compensation,
a graph comparing the total return on the Company's Class A Common Stock to the
total return on the common stock of the companies included in the Standard &
Poor's 500 Index ("S&P 500 Index") and the Standard & Poor's Insurance Composite
Index ("S&P Insurance Index") has been provided. The performance graph should be
analyzed in connection with the tables on the preceding pages detailing the
payment of compensation and the granting of employee stock options. The graph
assumes $100 was invested in the Company's Class A Common Stock and the indices
reflected therein on December 31, 1994, and reflects the value of that
investment on various dates through December 31, 1999.
<TABLE>
<CAPTION>
------------------------- ------- --------- --------- --------- --------- ----------
1994 1995 1996 1997 1998 1999
------------------------- ------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Delphi 100 115 191 298 361 215
------------------------- ------- --------- --------- --------- --------- ----------
S&P 500 Index 100 137 169 226 290 351
------------------------- ------- --------- --------- --------- --------- ----------
S&P Insurance Index 100 142 176 258 266 276
------------------------- ------- --------- --------- --------- --------- ----------
</TABLE>
-14-
<PAGE> 18
REPORT ON EXECUTIVE COMPENSATION
Compensation of the Company's executive officers (including the named executive
officers) is supervised by the Stock Option and Compensation Committee of the
Board of Directors. The objective of the Company's compensation program is to
provide a total compensation package that will enable the Company to attract,
motivate and retain outstanding individuals and to reward such individuals for
increasing levels of profit and stockholder value.
In conformance with the above compensation philosophy, the total annual
compensation for senior officers of the Company and its subsidiaries is
determined by one base element, salary, and two incentive elements, annual bonus
and grants of stock options under the Employee Option Plan or, in the case of
Mr. Rosenkranz, the Incentive Plan.
Salary for executive officers of the Company and its subsidiaries is determined
by analysis of three factors, consisting of (i) salary levels for executive
officers at other companies with comparable responsibilities; (ii) evaluation of
the individual executive officer's performance; and (iii) the Company's ability
to pay. While the three factors are not formally weighted, the Company's ability
to pay is a threshold consideration.
The level of base salary paid to an executive officer is determined on the basis
of the individual's overall performance and compensation level at the Company
during the prior year and such other factors as may be appropriately considered
by the Stock Option and Compensation Committee and by management in making its
proposals to the committee. The level of the annual bonus for the executive
officers of the Company is established by the Stock Option and Compensation
Committee according to the operating performance of the Company and the
individual performance of the executive officer during the year, and such other
factors as are deemed appropriate by the committee and by management in making
its proposals to the committee. The primary factor which determines the level of
Mr. Rosenkranz's annual bonus is the extent to which the Company attains a
specified return on equity goal.
The principal method for long-term incentive compensation for executive officers
other than Mr. Rosenkranz (for whom the principal method is the Incentive Plan)
is the Employee Option Plan described above under "Executive Compensation -
Employee Stock Option Plan" and compensation thereunder takes the form of
nonqualified stock option grants. Those grants are designed to promote the
identity of long-term interests between key employees of the Company and its
subsidiaries and the Company's stockholders, since the value of options granted
will increase or decrease with the value of the Company's common stock. In this
manner, key individuals are rewarded in a manner that is commensurate with
increases in stockholder value. The size of a particular option grant is
determined based on the individual's position with and contributions to the
Company (or, in the case of new hires, the individual's current position and
anticipated contributions). These grants also typically include five year
vesting periods to encourage continued employment, but in certain cases may vest
immediately, such as the grants discussed in the following paragraph.
Certain of the executive officers of the Company, including Mr. Rosenkranz, were
granted options under the Employee Option Plan in lieu of receiving cash bonuses
for 1999, in order to further enhance the alignment of such individuals'
interests with the interests of the Company's stockholders. Such grants are
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<PAGE> 19
subject to the approval of the amendment to the Employee Option Plan described
elsewhere herein at the 2000 Annual Meeting by the stockholders of the Company.
Their terms provide for immediate vesting, subject, however, to such stockholder
approval. Such options expire in ten years.
Under the Incentive Plan, as described above under "Executive Compensation -
Incentive Plan," Mr. Rosenkranz is rewarded for the Company's achieving gains in
stockholder wealth that surpass the S&P Insurance Index Total Return, which the
Stock Option and Compensation Committee believes to be a representative index
reflecting the stock performance of the Company's peer group. The ultimate value
of awards under the Incentive Plan will depend on the Company's stockholder
returns, since a portion of such awards will consist of restricted or deferred
shares, the value of which will be subject to market risk so long as Mr.
Rosenkranz remains employed with the Company (and which are forfeitable if such
employment terminates under certain circumstances). In addition, the options
will have value to Mr. Rosenkranz only to the extent that the Company's stock
price appreciates following the grant date.
Section 162(m) of the Code limits deductibility of certain compensation for the
Chief Executive Officer and the additional four highest paid executive officers
in excess of $1 million per year. The Stock Option and Compensation Committee
intends to establish and maintain executive compensation levels and programs
that will be competitive within the industry and will attract and retain highly
talented individuals. Executive compensation will be structured to avoid
limitations on deductibility where this result can be achieved consistent with
the Company's compensation goals.
STOCK OPTION AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Edward A. Fox Thomas L. Rhodes
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to two investment consulting agreements, RSLIC and the Company pay to a
wholly owned subsidiary of Rosenkranz & Company certain fees associated with the
formulation of the business and investment strategies of the Company and its
subsidiaries. These fees amounted to $3.1 million for the year ended December
31, 1999. These fees generally increase at an annual rate of 10.0% and are
expected to be $3.4 million for calendar year 2000. Of the aggregate amounts
paid to such subsidiary for services rendered during the year ended December 31,
1999 pursuant to these investment consulting agreements, $920,026 was earned by
Mr. Rosenkranz due to his indirect and direct financial interests in Rosenkranz
& Company. Management believes that the fees charged under these agreements are
comparable to fees charged by unaffiliated third parties for investment
consulting services of considerably narrower scope than the services provided
thereunder.
Pursuant to a cost-sharing arrangement, a subsidiary of the Company received
reimbursements from a wholly-owned subsidiary of Rosenkranz & Company and Acorn
Partners, a limited partnership in which Mr. Rosenkranz has an indirect
beneficial interest, for expenses associated with the sharing of office space
and office personnel. The total amount of these reimbursements during 1999 was
$1.2 million.
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<PAGE> 20
Pursuant to an investment advisory agreement, a subsidiary of the Company paid
fees to an investment advisor, Hyperion Capital Management, Inc., of which Mr.
Ranieri is the Chairman. Management believes that the fees charged by the
investment advisor under the agreement are comparable to the fees charged by
other unaffiliated investment advisors for investment advisory services. The
Company's subsidiary paid $148,053 under such agreement during 1999.
During 1998 and 1999, the Company entered into various reinsurance agreements
with Oracle Re, a wholly-owned subsidiary of Delphi International, an
independent Bermuda insurance holding company of which Mr. Rosenkranz is the
Chairman of the Board and beneficially owns approximately 26.8% of the common
stock, and of which Messrs. Fox, Ilg, O'Brien, Ranieri, Rhodes and Smith also
serve as directors. Under these agreements, approximately $101.5 million of
group employee benefit reserves ($35 million of long-term disability insurance
reserves and $66.5 million of net excess workers' compensation and casualty
reserves) were ceded to Oracle Re. In May 1999, Oracle Re and the Company
effected the partial recapture of approximately 35%, or $10 million, of the
group long-term disability liabilities ceded to Oracle Re. In January 2000, SNCC
and Oracle Re rescinded a workers' compensation quota share reinsurance contract
with that had been entered into during 1999. Also during 1998, the Company and
certain of its subsidiaries purchased subordinated notes from Delphi
International with a principal amount of $40 million, of which notes with a
principal amount of $10 million were subsequently sold to an unaffiliated
entity. Such notes bear interest at the rate of 9% per annum (which, during any
five years, may be paid in additional notes bearing the same terms in lieu of
cash) and mature in full in January 2028. In January 1998, the Company provided
five year loans to Robert M. Smith, Jr., Executive Vice President of the
Company, and Louis C. Lucido, Vice President, Investments of the Company, in the
amounts of $131,160 and $149,758, respectively, to finance a portion of the
costs of their purchases of common stock of Delphi International. Such loans
bear interest at the rate charged to the Company under its senior bank revolving
credit facility (currently LIBOR plus 0.45%). In both cases, the shares of
Delphi International common stock purchased are pledged to the Company to secure
the loans, and the Company will have recourse only against such common shares.
During 2000, certain subsidiaries of the Company entered into arrangements for
the management of approximately $14 million in assets pursuant to a discrete
investment program with an entity in which Mr. Rosenkranz has a financial
interest. Under such arrangements, asset-based and performance-based fees will
be paid to such entity, which also provides similar services to unaffiliated
third parties on comparable terms. Such fees are comparable to fees charged by
unaffiliated third parties in connection with similar investment programs.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent auditors for
1999 and is expected to so serve in 2000. A representative of Ernst & Young LLP
is expected to be present at the Annual Meeting to respond to appropriate
questions and to make a statement if such representative desires.
FINANCIAL STATEMENTS AVAILABLE
Consolidated financial statements for Delphi Financial Group, Inc. are included
in the Company's 1999 Annual Report on Form 10-K for the year ended December 31,
1999, which is being mailed together with this Proxy Statement. Additional
copies of the Form 10-K and the Annual Report to Stockholders may be obtained
without charge by submitting a written request to the Investor Relations
Department, Delphi Financial Group, Inc., 1105 North Market Street, Suite 1230,
Wilmington, Delaware 19899.
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<PAGE> 21
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on its review of Forms 3, 4 and 5 and
amendments thereto furnished to the Company pursuant to Section 16 of the
Securities Exchange Act of 1934 and written representations that no other
reports were required for such persons, all persons subject to these reporting
requirements filed the required reports on a timely basis, except that Mr.
Rosenkranz's Form 5 for 1999 was filed one day late and that a transfer of
options involving his family trust during 1999 was reported on this Form 5
rather than on Form 4.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2001 Annual Meeting of
Stockholders must be received by the Company at 1105 North Market Street, Suite
1230, Wilmington, Delaware 19899, by December 1, 2000.
By Order of the Board of Directors,
Robert Rosenkranz
Chairman of the Board
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<PAGE> 22
[DELPHI LOGO]
Dear Stockholder,
Please take note of the important information enclosed with this Proxy. Your
vote counts, and you are strongly encouraged to exercise your right to vote your
shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the 2000 Annual Meeting of Stockholders,
scheduled to be held on May 9, 2000.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
[ROBERT ROSENBRANZ SIG]
Robert Rosenkranz
Chairman of the Board
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- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DELPHI FINANCIAL
GROUP, INC. and, 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" all nominees for Director and "FOR" Proposals 2 and 3.
SIGNED:
---------------------------------------
SIGNED:
---------------------------------------
Please sign exactly as your name(s)
appear(s) hereon. Joint owners should
each sign personally. Trustees and
other fiduciaries should indicate the
capacity in which they sign, and where
more than one name appears, a majority
must sign. If a corporation or
partnership, this signature should be
that of an authorized officer who
should state his or her title.
DATED:
---------------------------------------
IMPORTANT: Please mark, sign and date
this proxy and return it
promptly in the enclosed
envelope. No postage is
required if mailed in the
United States.
<PAGE> 23
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- -------------------------------------------------------------------------------
DELPHI FINANCIAL GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DELPHI FINANCIAL
GROUP, INC.
The undersigned stockholder hereby appoints Robert Rosenkranz and Robert M.
Smith, Jr., or either of them, as attorneys or proxies, each with full power of
substitution, and hereby authorizes each of them to represent and vote in the
manner designated below (or, if no designation is made, as provided on the
reverse side of this card), all of the shares of Class A Common Stock of Delphi
Financial Group, Inc. (the "Company") held of record by the undersigned at the
close of business on March 13, 2000 at the Company's 2000 Annual Meeting of
Stockholders scheduled to be held on May 9, 2000 at 10:00 a.m., EDT, or any
adjournments or postponements thereof.
The undersigned acknowledges receipt of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999, Notice of Annual Meeting of
Stockholders and Proxy Statement dated March 22, 2000, and grants authority to
each of said proxies or their substitutes, and ratifies and confirms all that
said proxies may lawfully do in the undersigned's name, place and stead.
1. Election of Directors.
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote for
(except as written in the space provided below) all nominees listed below
Class A Director: Thomas L. Rhodes
Directors: Robert Rosenkranz Robert M. Smith, Jr. Edward A. Fox
Charles P. O'Brien Lewis S. Ranieri B.K. Werner
INSTRUCTION: To withhold authority to vote for any individual nominee listed above, write that
nominee's name in the space provided below.
</TABLE>
2. Approval of the amendment to increase the number of shares of Class A Common
Stock available for options under the Company's Second Amended and Restated
Employee Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as properly comes before the meeting or any
adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
