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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
-------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
1998 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
<PAGE>
March 31, 1998
Dear Shareholder:
I am pleased to invite you to attend the 1998 annual meeting of
shareholders of The Hartford Financial Services Group, Inc. to
be held at 9:00 a.m. on Thursday, May 21, 1998 at the Sheraton
Chicago Hotel & Towers in Chicago, Illinois. We hope that you
will participate in the annual meeting either by attending and
voting in person or by completing and returning the enclosed
proxy as promptly as possible. Your vote is important.
The accompanying notice of annual meeting and proxy statement
provide information about the matters to be acted upon by The
Hartford's shareholders. The proxy statement also contains
information about the role and responsibilities of the Board of
Directors and the committees of the Board and provides
important information about each nominee for election as a
director.
Sincerely yours,
Ramani Ayer
Chairman, President and
Chief Executive Officer
<PAGE>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of the shareholders (the "Annual Meeting") of The
Hartford Financial Services Group, Inc. (the "Company") will be held on
Thursday, May 21, 1998 at 9:00 a.m. at the Sheraton Chicago Hotel & Towers,
301 East North Water Street, Chicago, Illinois, for the following purposes:
1. to elect a Board of Directors;
2. to amend the Company's certificate of incorporation to increase the
number of the Company's authorized shares of common stock.
3. to ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31,
1998; and
4. to act upon such other matters as may properly come before the
Annual Meeting.
Only shareholders of record at the close of business on March 24, 1998 are
entitled to notice of, and to vote at, the Annual Meeting.
Michael O'Halloran
Vice President
and Secretary
March 31, 1998
<PAGE>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
690 ASYLUM AVENUE
HARTFORD, CT 06115
----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1998
----------------
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of The
Hartford Financial Services Group, Inc. (the "Company" or "The Hartford") in
connection with the annual meeting of shareholders of the Company to be held
on Thursday, May 21, 1998 at 9:00 a.m. at the Sheraton Chicago Hotel & Towers,
301 East North Water Street, Chicago, Illinois, and at any adjournment or
postponement thereof (the "Annual Meeting"). This Proxy Statement and the
accompanying proxy card are first being sent to shareholders on or about March
31, 1998.
VOTING RIGHTS
Only shareholders of record on March 24, 1998 (the "Record Date") are
entitled to notice of, and to vote at, the Annual Meeting. As of March 2,
1998, there were 117,836,964 shares of the Company's common stock ("Common
Stock") outstanding. Each shareholder is entitled to one vote for each share
of Common Stock registered in that person's name as of the Record Date.
VOTING BY PROXY
When you return a proxy card that is properly signed, the shares of Common
Stock represented by the proxy will be voted as you specify on the proxy card.
As to the election of directors, by marking the appropriate box you may (a)
vote for all of the director nominees as a group except those nominees whose
names you specify on the card, or (b) withhold your vote from all nominees as
a group. As to each other item, you may vote "for" or "against" the item or
"abstain" from voting by marking the appropriate box.
If you properly sign and return your proxy card but do not specify any
choices you will thereby confer authority upon the persons named as proxies to
vote your shares in their discretion. The proxy also confers discretionary
authority on these individuals to vote your shares of Common Stock on (1) any
matter that was not known on the date of this Proxy Statement but is presented
at the Annual Meeting, including voting on the nomination or election of any
person not identified in this Proxy Statement as a nominee for election as a
director; and (2) any shareholder proposal that has been omitted from this
Proxy Statement pursuant to the proxy regulations of the Securities and
Exchange Commission ("SEC") but is presented at the Annual Meeting.
Your vote is important and the Board of Directors urges you to exercise your
right to vote. Whether or not you plan to attend the Annual Meeting, you can
assure that your shares are voted by properly completing, signing, dating and
returning the enclosed proxy card. You may revoke your proxy at any time
before it is exercised by giving written notice thereof to the Secretary of
the Company, by submitting a subsequently dated and properly signed proxy, or
by attending the Annual Meeting and revoking the proxy. Your attendance at the
Annual Meeting will not by itself revoke your proxy.
Shares of Common Stock held in the Hartford Investment and Savings Plan
("ISP") and in the Company's Deferred Restricted Stock Unit Plan ("Stock Unit
Plan") are held of record and are voted by the trustees of the ISP and the
Stock Unit Plan, respectively. Shares of Common Stock held in the Company's
Employee Stock Purchase Plan ("ESPP") are held of record by the ESPP's
administrator, Dean Witter Trust Company ("Dean Witter"), and are voted by
Dean Witter. Participants in the ISP, the Stock Unit Plan and the ESPP may
direct the trustees and Dean Witter as to how to vote shares allocated to
their ISP, Stock Unit Plan and ESPP accounts by properly signing, completing
and returning the enclosed proxy card. The ISP and Stock Unit Plan trustees
will vote shares as to which they have not received direction in accordance
with the terms of the ISP and the Stock Unit Plan.
1
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ITEM 1
ELECTION OF DIRECTORS
A Board of twelve directors is to be elected at the Annual Meeting to serve
until the next annual meeting and until their successors are elected and
qualified. There are currently thirteen directors serving on the Board, twelve
of whom have been nominated for reelection as directors at the Annual Meeting.
Arthur A. Hartman is retiring from the Board of Directors effective on the
date of the Annual Meeting, and therefore, will not seek reelection. In
addition, Robert W. Selander has also been nominated for reelection to the
Board of Directors at the Annual Meeting. Mr. Selander was elected as a
director by the Board of Directors effective March 1, 1998.
Unless there is a contrary indication, shares of Common Stock represented by
valid proxies will be voted for the election of all nominees. The Board has no
reason to believe that any nominee will be unable to serve as a director. If
for any reason a nominee should become unable to serve, the shares represented
by valid proxies will be voted for the election of such other person as the
Board may recommend, or the Board may reduce the number of directors to
eliminate the vacancy.
Set forth below is certain information about each director and nominee for
election as a director, including information regarding his or her background
for at least the past five years.
DIRECTORS AND NOMINEES
BETTE B. ANDERSON
Mrs. Anderson, 69, has served as a director since 1995. She
joined Kelly, Anderson, Pethick & Associates, Inc., a Washington
based management firm, in 1990 and served as President effective
January 1, 1991 until January 1996, when she became Vice
Chairperson. Mrs. Anderson was formerly a partner in the public
affairs company of Anderson, Benjamin, Read & Haney. She was
Undersecretary of the Treasury from 1977 to 1981. Mrs. Anderson
was affiliated for twenty-seven years with the Citizens and
Southern National Bank of Savannah, having served as a Vice
President until she assumed the Treasury post. Mrs. Anderson is a
director of American Bank Note Corporation, ITT Educational
Services, Inc., United Payors & Providers, the Miller Foundation
at the University of Virginia and a member of the Advisory Council
of Girl Scouts of America. She attended Georgia Southern and
Armstrong State Colleges and is a graduate of the Stonier Graduate
School of Banking at Rutgers University.
[ART]
RAND V. ARASKOG
Mr. Araskog, 66, has been a director since 1985. He served as an
executive officer of ITT Corporation ("ITT") until ITT split into
three separate public companies in a spin-off transaction that
occurred effective December 19, 1995 (the "ITT Spin-Off"). He was
Chief Executive officer of ITT since 1979, Chairman since 1980 and
President since March 1991. After the ITT Spin-Off, Mr. Araskog
became Chairman and Chief Executive of the new ITT Corporation,
formerly an ITT subsidiary called ITT Destinations, Inc., until
his retirement in February 1998. He is a director of ITT
Industries, Inc., Alcatel Alsthom of France, Dow Jones & Company,
Inc., Rayonier, Inc., Shell Oil Company and ITT Educational
Services, Inc. He is a member of The Business Council and the
Business Roundtable. Mr. Araskog is a graduate of the U.S.
Military Academy at West Point and attended the Harvard Graduate
School of Arts and Sciences.
[ART]
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RAMANI AYER
Mr. Ayer, 50, has been a director since 1991, and became
Chairman, President and Chief Executive Officer of the Company on
February 1, 1997. Prior to that, he served as an Executive Vice
President of the Company since the ITT Spin-Off in December 1995.
Mr. Ayer has been President and Chief Operating Officer of
Hartford Fire Insurance Company ("Hartford Fire"), the Company's
principal property and casualty insurance subsidiary, since 1991
and previously served as Executive Vice President of Hartford Fire
from 1990 to April 1991 and Senior Vice President from 1989 to
1990. He is also Chairman of Hartford Life, Inc. ("Hartford
Life"), a public company that is majority-owned by the Company and
operates its life insurance, annuity and related businesses. Mr.
Ayer joined the Company in 1973 as a member of the operations
research department. During his career, he has been Director of
corporate reinsurance, Vice President of HartRe, the Company's
reinsurance subsidiary, and President of Hartford Specialty
Company. He is Vice Chairman of the American Insurance
Association, a member of the Listed Company Advisory Committee to
the New York Stock Exchange Board of Directors, and serves on the
Boards of the American Institute for CPCU/IIA, and the Insurance
Information Institute. Mr. Ayer is a director of Hartford
Hospital, the Greater Hartford Chamber of Commerce, and is a
trustee of the Mark Twain House in Hartford, Connecticut. He is
also a member of the Business Roundtable.
[ART]
ROBERT A. BURNETT
Mr. Burnett, 70, became a director of the Company in 1995. He
served as Chairman of Meredith Corporation from 1988 until his
retirement in 1992, and served as President and Chief Executive
Officer from 1977 and relinquished the latter office in 1989. Mr.
Burnett is a director of ITT Industries, Inc., and Whirlpool
Corporation. He is a member of the Board of Trustees of Grinnell
College, Grinnell, Iowa. He is also a director of the Greater Des
Moines Committee and the Des Moines Art Center. Mr. Burnett has a
B.A. degree in economics from the University of Missouri.
[ART]
DONALD R. FRAHM
Mr. Frahm, 66, served as Chairman, President and Chief Executive
Officer of the Company from April 1988 until his retirement on
January 31, 1997 and has been a director since 1985. Mr. Frahm is
a director of Hartford Life, Hartford Hospital, University of
Hartford and the Greater Hartford Chamber of Commerce. He is also
a corporator of Connecticut Children's Medical Center.
[ART]
PAUL G. KIRK, JR.
Mr. Kirk, 60, has served on the Board of Directors since 1995.
He became a partner in the law firm of Sullivan & Worcester in
1977 and is presently of counsel to the firm. Mr. Kirk served as
Chairman of the Democratic Party of the United States from 1985 to
1989 and as Treasurer from 1983 to 1985. Following his resignation
in 1989 as Chairman of the Democratic Party of the United States,
he returned to Sullivan & Worcester as a partner in general
corporate practice at the firm's Boston and Washington offices.
Mr. Kirk is a director of Hartford Life and Kirk & Associates,
Inc., of which he also is Chairman and Treasurer. He is also a
director of Bradley Real Estate, Inc. and Rayonier, Inc. Mr. Kirk
is Co-chairman of the Commission on Presidential Debates, Chairman
of the John F. Kennedy Library Foundation Board of Directors,
Chairman of the Board of Directors of the National Democratic
Institute for International Affairs, and a trustee of Stonehill
College and St. Sebastian's School. He is a graduate of Harvard
College and Harvard Law School.
[ART]
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ROBERT W. SELANDER
Mr. Selander, 47, was elected as a director effective March 1,
1998. Since May 1997, he has served as the President and Chief
Executive Officer of MasterCard International. For three years
prior to this, Mr. Selander was an Executive Vice President of
MasterCard International and President of MasterCard's Europe,
Middle East/Africa and Canada regions. Before joining MasterCard,
he served for over twenty years in positions of increasing
responsibility at Citicorp/Citibank, N.A, including having served
as director of Global Retail Strategy and director of the bank's
Diners Club International credit card business in the United
States, Canada, United Kingdom, Germany and Benelux. Mr. Selander
is a graduate of Cornell University and has a master's degree in
business from Harvard University.
[ART]
LOWNDES A. SMITH
Mr. Smith, 58, has served as a director of the Company since
1991. He became Vice Chairman of the Company on February 1, 1997
and is President and Chief Executive Officer and a director of
Hartford Life. He also served as an Executive Vice President of
the Company since the ITT Spin-Off in December 1995 until his
appointment as Vice Chairman and served as President and Chief
Operating Officer of the Company's life insurance companies since
1989. Prior to that time, he served as Senior Vice President and
Group Controller for all companies owned or operated by the
Company. Mr. Smith joined the Company in 1968 as a member of the
corporate accounting department. In 1972 he was appointed the
Secretary and Director of corporate accounting. He was elected
Assistant Vice President in 1974, and he was named Controller in
1977. Mr. Smith is a director of the Connecticut Children's
Medical Center.
[ART]
H. PATRICK SWYGERT
Mr. Swygert, 55, was elected to the Board of Directors in 1996.
He has been President of Howard University, Washington, D.C.,
since August 1995. Prior to that, he was President of the
University at Albany, State University of New York, since 1990.
Mr. Swygert received his undergraduate and law degrees from Howard
University, has been a visiting professor and lecturer abroad and
is the author of numerous articles and publications on higher
education and the law. He is a member of the Board of Directors of
Hartford Life and The Victory Funds, Cleveland, Ohio. Mr. Swygert
is Chairman of the Washington, D.C. Area Consortium of Colleges
and Universities, a trustee of the Institute of Public
Administration and a member of the Commission on Women in Higher
Education and the Capital District Martin Luther King, Jr.
Commission.
[ART]
DEROY C. THOMAS
Mr. Thomas, 72, has been a director since 1995. He was a partner
of LeBoeuf, Lamb, Greene & MacRae, a law firm in New York, New
York, from 1991 through December 31, 1994. He was President, Chief
Operating Officer and a director of ITT from 1988 to 1991, and
from 1983 to 1988 he was Vice Chairman and Chief Operating
Officer, ITT Diversified Services, and Chairman and Chief
Executive Officer of the Company. He is a director of Hartford
Life, Houghton Mifflin Company, Connecticut Health Services and
MedSpan, Inc. He is also a former trustee of Fordham University,
Wheelock College, University of Hartford, Hartford Hospital and CT
Health System. Mr. Thomas is President of Goodspeed Opera House
and former Chairman of the Old State House Association.
[ART]
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GORDON I. ULMER
Mr. Ulmer, 65, has been a director since 1995. He is former
Chairman and Chief Executive Officer of the former Connecticut
Bank and Trust Company ("CBT") and retired President of the former
Bank of New England Corporation, the former holding company of CBT
("BNEC"). He joined CBT in 1957 and held numerous positions before
being elected President and a director in 1980 and Chairman and
Chief Executive Officer in 1985. In 1988 he was elected President
of BNEC, and retired as President in December 1990. Mr. Ulmer also
serves as a director of Hartford Life, Rayonier, Inc., and the Old
State House Association. He is a graduate of Middlebury College,
the American Institute of Banking and Harvard Business School
Advanced Management Program and attended New York University's
Graduate School of Engineering.
[ART]
DAVID K. ZWIENER
Mr. Zwiener, 43, has been Executive Vice President and Chief
Financial Officer of the Company since August 1995, and was
elected to the Board of Directors in 1997. He previously served as
Executive Vice President and Chief Financial Officer of ITT
Financial Corporation since March 1993. From November 1987 to
February 1993, Mr. Zwiener served as Senior Vice President and
Treasurer, and Executive Vice President--Capital Markets Division,
of Heller International Corporation. He is also a director of
Hartford Life.
[ART]
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for establishing broad corporate
policies and for overseeing the overall performance of the Company. The Board
reviews significant developments affecting the Company and acts on matters
requiring Board approval. During 1997, the Board held eleven meetings. The
standing committees of the Board are the Audit, Compensation and Personnel,
Finance, Legal and Public Affairs, and Nominating committees, each of which is
comprised solely of directors who are not officers of, or otherwise employed
by, the Company or any of its subsidiaries. Set forth below is a description
of the duties of each committee and its members.
The Audit Committee recommends the selection of independent auditors for the
Company, confirms the scope of audits to be performed by such auditors,
reviews audit results and internal accounting and control procedures and
policies, and reviews the fees paid to the Company's independent auditors. The
Committee reviews and recommends approval of the audited financial statements
of the Company and the annual report on Form 10-K that is filed with the SEC.
It also reviews the expense accounts of senior executives. The members of the
Audit Committee are Messrs. Burnett, Kirk (Chairman), Selander, Swygert and
Ulmer. During 1997, the Committee held five meetings.
The Compensation and Personnel Committee evaluates senior management
performance and establishes executive compensation policies. Mrs. Anderson and
Messrs. Burnett, Hartman and Ulmer (Chairman) are the members of the
Committee. The Committee held eight meetings during 1997.
The Finance Committee is responsible for reviewing capital expenditures and
appropriations and maximizing the effective use of the Company's and its
subsidiaries' assets. This includes directing the investment allocation and
risk management policies of the Company. The members of the Committee are Mrs.
Anderson and Messrs. Araskog, Frahm, Selander, Thomas (Chairman) and Ulmer.
During 1997, the Committee held three meetings.
The Legal and Public Affairs Committee reviews and considers major claims
and litigation, and legal, regulatory, patent and related governmental policy
matters affecting the Company and its subsidiaries. The Committee reviews and
approves management policies and programs relating to compliance with legal
and regulatory requirements, business ethics and environmental matters. The
Committee also reviews and defines the
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Company's social responsibilities, including issues of significance to the
Company, its shareholders and employees. The members of the Committee are Mrs.
Anderson and Messrs. Hartman (Chairman), Kirk, Swygert and Thomas. The
Committee held three meetings during 1997.
The Nominating Committee makes recommendations concerning the organization,
size, and composition of the Board and its committees, proposes nominees for
election to the Board and its committees and considers the qualifications,
compensation, and retirement of directors. The Committee's members are Messrs.
Araskog, Burnett (Chairman), Hartman and Kirk. During 1997, the Committee held
four meetings. The Nominating Committee will consider nominations of persons
for election as directors that are submitted by shareholders in writing in
accordance with certain requirements set forth in the Company's bylaws.
In 1997, no director failed to attend at least seventy-five percent of all
meetings of the Board of Directors and of the committees of which he or she
was a member.
DIRECTORS' COMPENSATION
STANDARD FEES. Members of the Board of Directors who are employees of the
Company or its subsidiaries are not compensated for service on the Board or
any of its committees. The current compensation for non-employee directors
consists of an annual retainer fee of $30,000 payable solely in restricted
shares of Common Stock pursuant to The Hartford 1996 Restricted Stock Plan for
Non-Employee Directors (the "Non-Employee Directors Plan") described below, a
$1,000 fee for each meeting of the Board attended and a $1,000 fee for each
committee meeting attended. Beginning immediately after the Annual Meeting,
the annual retainer for non-employee directors will be $40,000, payable in
restricted shares of Common Stock, and the fee for each Board and committee
meeting attended will be $1,500 and $1,200, respectively. Directors are also
reimbursed for travel and related expenses incurred on behalf of the Company.
RESTRICTED STOCK PLAN. Under the Non-Employee Directors Plan, non-employee
directors receive grants of shares of restricted Common Stock as payment for
their annual retainer fee. Restricted stock grants are made automatically on
the date of each annual meeting of shareholders to each non-employee director
elected at, or continuing in office following, the annual meeting. The number
of shares of restricted stock is determined by dividing the annual retainer
for the year of the award by the fair market value of the Common Stock as
reported on the New York Stock Exchange ("NYSE") as of the date of the award.
Non-employee directors receiving restricted stock may not sell, assign or
otherwise dispose of the stock until the restriction period ends. The
restriction period ends upon the earliest of: (i) five years after the grant
date, (ii) retirement at age seventy-two, (iii) a "change of control" (as
defined in the plan) of the Company (iv) death, (v) disability, or (vi)
resignation under certain circumstances, as set forth in the plan. If a non-
employee director resigns other than under such circumstances before the
restriction period ends, he or she will forfeit his or her restricted shares.
STOCK OPTIONS. Beginning with the Annual Meeting, each non-employee director
elected at, or continuing in office following, each annual meeting of
shareholders will be granted on the annual meeting date an option to purchase
1,000 shares of Common Stock at an exercise price equal to the closing price
per share of the Common Stock on the NYSE as of the date of grant. Each option
may be exercised to purchase one-third of the shares underlying the option
after two years from the date of grant and will become fully exercisable after
three years from the date of grant. The maximum term of each option will be
ten years and two days from the date of grant and any unexercised portion will
terminate within a certain period of time after a director's termination of
service on the Board, depending upon the reason for the termination.
INSURANCE. The Company provides non-employee directors with $100,000 of
group life insurance coverage and $750,000 of accidental death and
dismemberment and permanent total disability coverage while they are serving
on the Board. Non-employee directors may purchase additional benefits under
these policies.
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REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
This report sets forth the executive compensation policies of the
Compensation and Personnel Committee (the "Committee") of the Company's Board
of Directors and discusses the 1997 compensation of the Company's Chief
Executive Officer and certain other executive officers. Following this report
is a Summary Compensation Table that sets forth all 1997 compensation earned
by, and awarded or paid to, Donald R. Frahm and Ramani Ayer, who each served
as Chief Executive Officer during a portion of 1997, and the other Named
Executives (defined below) included in that table. Other tables following this
report provide information on stock option and other long-term performance
grants, and a performance graph compares the cumulative total return on the
Common Stock to the cumulative total returns of the S&P 500 Index and an index
consisting of peer insurance companies.
COMMITTEE ROLE IN OVERSEEING EXECUTIVE COMPENSATION POLICY
A primary role of the Committee is to determine and oversee the
administration of compensation for the Company's executives, including its
senior executive officers ("Senior Executives"). In this capacity, the
Committee is dedicated to ensuring that the Company's compensation policies
and practices are used effectively to support the achievement of the Company's
short-term and long-term business objectives.
There are several principles that guide the Committee in its decision-making
capacity. The Committee:
. Adheres to a pay-for-performance philosophy, ensuring that aggregate
compensation levels paid to Senior Executives reflect the extent to which
the Company's key operating goals are met.
. Reinforces the central importance of shareholder value creation by relying
heavily on compensation programs that deliver value to Senior Executives
only when shareholders realize corresponding gains.
. Encourages the acquisition of Common Stock by Senior Executives with the
objective of strengthening the common interests of management and
shareholders, thereby promoting the maximization of shareholder value.
. Establishes Senior Executive compensation levels in relation to the pay
rates that are offered at organizations with which the Company competes for
senior management talent.
. Maintains a total compensation perspective on Senior Executive pay in
judging the appropriateness of rewards for the Company's Senior Executives.
DESCRIPTION OF EXECUTIVE COMPENSATION POLICIES
The compensation program of the Company's Senior Executives is characterized
by base salary levels that are targeted somewhat below market rates, a heavy
emphasis on performance-based, variable compensation, which when combined with
base salary, provides above market total compensation for successful
performance, a strong connection between pay and the Company's stock price,
and commitment to promote enhanced share ownership among Senior Executives.
Consistent with the shareholder value orientation of this program, the
Committee has authorized guidelines for Senior Executive share ownership which
should serve to further align the interests of management and investors. The
guidelines provide that within a five-year period from the later of 1996 or
year of hire, Senior Executives should attain an investment position in the
Common Stock that is equal to two or three times their base salary, depending
on the position of the Senior Executive. The Committee believes that this
compensation program will effectively catalyze Senior Executive activities in
support of the Company's goal achievement and appropriately recognize the
contributions of every Senior Executive.
It is the Company's policy to target Senior Executive compensation levels in
relation to pay rates that are typical at organizations with which the Company
competes for senior management talent. For corporate Senior Executives, the
competitive market generally includes other leading insurance companies,
although general industry practices are also considered when reviewing pay for
certain Senior Executives whose functional
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responsibilities are not exclusively insurance related. For line of business
Senior Executives, pay is in line with practices that are common at leading
insurance carriers, as well as other financial institutions that offer
competing insurance products.
Consistent with the Company's pay-for-performance orientation, Senior
Executive base salaries are targeted at levels that represent 90 percent of
prevailing market rates. Total compensation is designed to reach 120 percent
of market norms, but only when the Company's challenging performance goals are
fully achieved. Actual compensation levels may lead or lag these goals, but
the terms of the compensation program ensure such variances depend principally
on the Company's stock price appreciation and demonstrated operating success.
The principal elements of the compensation program are: a base salary tied
to individual value added; an annual incentive opportunity dependent on
operating results and promoting Senior Executive share ownership; and stock
options and long-term compensation tied to earnings growth and stock price
appreciation. Each of these elements is discussed below.
1997 COMPENSATION
1997 BASE SALARY
The Company's compensation policy is generally to pay base salaries for
Senior Executives at levels that represent 90 percent of the median salaries
paid by organizations with which the Company competes for senior executive
talent. Total compensation, comprised of base and variable pay, can achieve
120 percent of the market norm when performance goals are fully met. In
assessing a Senior Executive's salary level each year, the Committee's
principal consideration is the Senior Executive's performance on the job,
including his or her demonstrated contributions to the Company's goal
achievement. In considering salary actions, the Committee also reviews
internal compensation equity and the Senior Executive's level of
responsibility, experience, and expertise.
The Compensation Committee approved salary increases of $175,000, $75,000
and $75,000 for Messrs. Ayer, Smith and Zwiener, respectively effective
February 1, 1997. These increases reflected competing pay practices at other
peer corporations and, with respect to Mr. Ayer, his promotion to the
positions of Chairman, President and Chief Executive Officer. In addition,
Messrs. Ayer, Smith, and Zwiener have employment agreements with the Company
that provide for minimum base salaries of $700,000, $600,000 and $425,000,
respectively, as described below under the heading "Employment Agreements."
The Committee also approved a salary increase of $9,200 for Mr. Gareau and
$15,000 for Mr. Donahue, effective February 1, 1997. These increases were
driven by a combination of the aforementioned policies and considerations.
1997 VARIABLE COMPENSATION
Variable compensation reinforces the Company's pay-for-performance
philosophy and is a key element to the overall compensation program. Variable
compensation includes annual and long-term incentive compensation
opportunities. Annual incentive compensation is designed to deliver about 25
percent of variable compensation, while long-term incentives are designed to
deliver the remaining 75 percent. All variable compensation programs also
facilitate Senior Executives' acquisition of the Company's stock thereby
promoting a coordination of interest between management and shareholders.
ANNUAL INCENTIVES
Each year the Committee reviews management's suggestions for performance
goals, the achievement of which will enhance the Company's value. The
Committee also reviews and approves with respect to each Senior Executive,
annual incentive payment levels payable in the event performance goals are
fully achieved. Actual annual incentive payments vary with performance
relative to such goals. Better performance generates larger awards; lesser
results yield smaller awards.
8
<PAGE>
Ordinarily, corporate or staff Senior Executives earn annual incentives
based on corporate and individual performance. Incentives for line of business
Senior Executives may relate to corporate, line of business, and individual
performance. On occasion, the Committee may approve management's
recommendation for customized annual incentive arrangements where they are
appropriate to address competitive market requirements or business needs.
The amounts of annual incentive awards are based on financial performance
for the year compared to annual performance goals established by the Committee
at the beginning of the year. For 1997, performance was based on core earnings
compared to budget for Messrs. Ayer, Zwiener and Gareau. The performance goals
for Mr. Smith were core earnings compared to budget and return on equity
compared to budget with respect to Hartford Life. The performance goals for
Mr. Donahue were core earnings, growth and return on equity compared to budget
with respect to the Company's reinsurance and international operations.
For 1997, based on these goals, the Committee awarded an annual incentive of
$513,500, $418,400, $282,425, $205,400, and $98,000 for Messrs. Ayer, Smith,
Zwiener, Gareau, and Donahue, respectively.
Consistent with the Company's interest in promoting a strong alignment
between management and shareholder interests, Senior Executives may elect to
forego receiving up to half their annual incentives in exchange for the right
to receive shares of Common Stock of the Company ("Stock Units"). Receipt of
actual shares of stock is deferred during a three-year restriction period
applicable to the Stock Units. Senior Executives who elect to convert a
portion of their annual incentive payments to Stock Units are rewarded with
additional Stock Units equal to ten percent of the amount converted, and
actual shares relating to these incremental Stock Units also will be deferred
as to receipt and restricted for a period of three years.
STOCK OPTIONS
For 1997, the Committee provided eligibility to all executives for grants of
stock options under the terms of The Hartford 1995 Incentive Stock Plan (the
"Incentive Stock Plan"). Stock options provide executives with the opportunity
to acquire an equity interest in the Company and to participate in the
creation of shareholder value as reflected in growth in the price of the
Common Stock. The option exercise price equals 100 percent of the fair market
value of the Common Stock on the date of option grant, thereby ensuring that
plan participants will derive benefits only as shareholders realize
corresponding gains. To ensure a long-term perspective, options have a maximum
ten-year and two day term.
The Committee believes that the practice of granting stock options annually
reinforces the Company's policy of encouraging stock ownership by executives
in support of building shareholder value. Furthermore, options provide value
to Senior Executives only when shareholders realize positive returns on their
investment in the Company. In this way, stock option grants reward Senior
Executives only in conjunction with value creation for shareholders.
On January 24, 1997, options to purchase an aggregate of 138,994 shares of
Common Stock were granted under the Incentive Stock Plan to Messrs. Ayer,
Smith, Zwiener, Gareau and Donahue at an exercise price of $72.25 per share
(the closing price of a share of the Common Stock on the NYSE on January 24,
1997). After the initial public offering of Hartford Life Class A Common Stock
in May 1997 (the "Hartford Life IPO"), sixty percent of Mr. Smith's options
were converted to options to purchase shares of Hartford Life Class A Common
Stock pursuant to a formula approved by the Committee to preserve the economic
value of Mr. Smith's options to purchase Company Common Stock.
To further align the interests of Senior Executives and shareholders, the
options granted to Messrs. Ayer, Smith and Zwiener included a performance-
based provision that would allow the options to become exercisable upon the
earlier to occur of (i) the closing price of the Common Stock on the NYSE
equaling or exceeding 125 percent of the option exercise price for a period of
at least ten consecutive trading days, or (ii) seven years from the date of
option grant. These options became exercisable on February 20, 1998 when the
closing price of the
9
<PAGE>
Common Stock remained at or above $90.3125 per share (being 125% of the $72.25
grant price) for at least ten consecutive trading days. Options for other
executives become exercisable at the cumulative rate of one-third per year for
the first three years from the date of grant. Further information regarding
option grants for the named Senior Executives during 1997 is included in the
option tables following this report.
1997 LONG-TERM PERFORMANCE PROGRAM
Senior Executives and other executives received the opportunity to earn
shares of Common Stock contingent on the Company achieving certain performance
objectives over a three-year period. Under the terms of these contingent
awards made in 1997, there are two equally weighted performance objectives
measured over the 1997-1999 period: (i) cumulative core earnings per share and
(ii) total shareholder return (stock price appreciation and dividends
reinvested) relative to the returns generated by an index of the Company's
competitors. Target level core earnings per share coupled with a total
shareholder return equal to the average of the peer group will result in the
awarding of a target number of shares. Better performance (up to a maximum of
150 percent) will yield a larger payout; poorer performance (to a minimum of
75 percent) will mean proportionally smaller payments. If the minimum
threshold is not achieved, no shares will ultimately be awarded.
During 1997, Messrs. Ayer, Smith, Zwiener, Gareau, and Donahue were granted
performance share awards of 11,111 shares, 4,444 shares, 4,815 shares, 3,481
shares, and 2,222 shares, respectively. Mr. Smith's 4,444 shares represent
forty percent of his original total award. The balance of his award was
converted after the Hartford Life IPO into a performance share award for
15,411 shares of Hartford Life Class A Common Stock. Additional information
regarding these awards is included below under "1997 Long-Term Incentive Plan
Awards."
SPECIAL RESTRICTED STOCK AND STOCK OPTION GRANTS
In order to provide an additional long-term incentive to Mr. Ayer (in
conjunction with his assumption of the roles of Chairman, President and Chief
Executive Officer), to Mr. Smith and to Mr. Zwiener, the Committee granted
20,000 shares of restricted Common Stock to each of Mr. Ayer and Mr. Smith,
and 15,000 shares to Mr. Zwiener on February 1, 1997. For 10,000 of the shares
granted to Mr. Ayer and 5,000 of the shares granted to Mr. Zwiener, sale or
transfer restrictions lapse four years after the grant date. For the balance
of the shares awarded to Messrs. Ayer and Zwiener, one-third of the restricted
stock may not be sold or otherwise transferred until three years after the
grant date, and two-thirds may not be sold or otherwise transferred until
seven years after the grant date. For the 20,000 shares granted to Mr. Smith,
sale or transfer restrictions lapse three years after the transfer date. After
the Hartford Life IPO, 10,000 of these restricted shares were converted into
restricted shares of Hartford Life Class A Common Stock pursuant to a formula
approved by the Committee to preserve the economic value of the restricted
shares of Company Common Stock.
In order to motivate achievement of aggressive long-term goals, a special
performance-oriented award of stock options was granted to twenty-five key
executives on December 17, 1997. Messrs. Ayer, Smith, Zwiener, Gareau, and
Donahue were each granted an option to purchase 130,000, 100,000, 100,000,
30,000, and 25,000 shares of Common Stock, respectively. As part of this
program, Messrs. Ayer, Smith, and Zwiener were granted 40,000, 10,000, and
10,000 shares of restricted Common Stock, respectively. The stock options were
granted with an exercise price of $88.9375, which was the fair market value on
the date of the grants, and have a maximum ten-year and two-day term. Special
performance and vesting requirements were attached to both the stock options
and restricted stock grants. The options may not be exercised, and the
restrictions on the restricted shares will not lapse, until March 1, 2001. In
addition, in order for fifty percent of each grant to vest, the closing price
of the Common Stock on the NYSE must be $123 per share or more for at least
ten consecutive trading days by March 1, 2001. An additional twenty-five
percent and the remaining twenty-five percent will vest only if the closing
price of the Common Stock on the NYSE is $126 and $130 per share or more,
respectively, for at least ten consecutive trading days by March 1, 2001. If
the price and vesting requirements are met, the options become exercisable and
the restricted stock becomes unrestricted on March 1, 2001. If either the
price or the vesting requirements are not met, the options and the restricted
stock (or the portion thereof) are forfeited.
10
<PAGE>
COMPLIANCE WITH SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a publicly-traded company a Federal income tax deduction for
compensation in excess of $1 million paid to certain of its executive officers
unless the amount of such excess is payable based solely upon the attainment
of objective performance criteria. The Committee believes that tax
deductibility of compensation is an important factor, but not the sole factor,
to be considered in setting executive compensation policy. Accordingly, the
Committee generally intends to take such reasonable steps as are required to
avoid the loss of a tax deduction due to Section 162(m), but reserves the
right to pay amounts which are not deductible in appropriate circumstances.
SUMMARY
The Committee is responsible for reviewing, monitoring, and approving all
compensation decisions affecting Company Senior Executives. The Committee
expects that all compensation paid to Senior Executives will be consistent
with the Company's interest in providing market competitive compensation
opportunities, within the context of a pay-for-performance environment, and in
a manner that is supportive of the Company's business mission. The Committee
will continue to actively monitor the effectiveness of the Company's Senior
Executive compensation plans and assess the appropriateness of Senior
Executive pay levels to assure prudent use of Company resources.
THE COMPENSATION AND PERSONNEL COMMITTEE:
Gordon I. Ulmer, Chairman
Bette B. Anderson
Robert A. Burnett
Arthur A. Hartman
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides information regarding the cash and other
compensation of those persons who, during 1997 (i) served as the Company's
Chief Executive Officer and (ii) were the four other most highly compensated
executive officers (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ----------------------------------
AWARDS PAYOUTS
------------------------- -------
NAME AND RESTRICTED SECURITIES LTIP ALL OTHER
PRINCIPAL STOCK UNDERLYING PAYOUTS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) AWARDS ($) OPTIONS (#) ($)(10) ($)(11)
--------- ---- ---------- --------- ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ramani Ayer............. 1997 685,417 513,500 3,557,500(3) 177,170 -- 30,397
Chairman, President and 1,467,500(4)
Chief Executive 1996 525,000 300,000 -- 37,200 -- 21,956
Officer(1) 1995 428,750 204,800 -- 62,911(8) 375,000 42,214
Donald R. Frahm......... 1997 58,595 -- -- -- -- 63,268
Chairman, President and 1996 700,000 500,000 -- 64,800 -- 38,950
Chief Executive 1995 603,750 263,300 -- 93,109(8) 720,000 54,174
Officer, retired(1)
Lowndes A. Smith........ 1997 593,750 418,400 889,375(3) 118,868 -- 24,505
Vice Chairman; President 733,750(4) 65,675(9)
and Chief Executive 745,461(5)
Officer-- Hartford 15,500(6)
Life(1) 1996 525,000 310,000 -- 37,200 -- 21,260
1995 428,750 229,800 -- 62,911(8) 300,000 38,693
David K. Zwiener........ 1997 418,750 282,425 889,375(3) 120,440 -- 16,594
Executive Vice President 1,100,625(4)
and Chief Financial 12,500(6)
Officer(2) 1996 332,500 250,000 241,250(7) 27,600 -- 13,895
1995 133,333 148,400 -- 42,780(8) -- 14,051
Joseph H. Gareau........ 1997 319,233 205,400 4,000(6) 44,780 -- 17,496
Executive Vice President 1996 310,800 200,000 -- 22,500 -- 14,648
and Chief Investment 1995 300,000 168,200 -- 37,747(8) 150,000 39,268
Officer
John F. Donahue......... 1997 268,750 98,000 -- 34,434 -- 25,629
Senior Vice President 1996 255,000 115,000 -- 13,400 -- 25,359
1995 241,250 60,100 -- 15,099(8) 168,000 38,625
</TABLE>
- - --------
(1) Mr. Frahm served as Chairman, President and Chief Executive Officer until
he retired effective January 31, 1997; therefore, the compensation
reported for Mr. Frahm for 1997 relates only to January 1997. Effective
February 1, 1997, Mr. Ayer succeeded Mr. Frahm as Chairman, President and
Chief Executive Officer, and Mr. Smith became Vice Chairman of the
Company. Mr. Smith also became President and Chief Executive Officer of
Hartford Life in connection with the Hartford Life IPO.
(2) Mr. Zwiener joined the Company in August 1995; therefore, the amounts
above for 1995 represent only that portion of 1995 during which he served.
(3) Represents the market value of 40,000 shares of restricted Common Stock
granted to Mr. Ayer and 10,000 shares of restricted Common Stock granted
to each of Messrs. Smith and Zwiener on December 17, 1997 based on the
closing price of the Common Stock on the NYSE of $88.9375 per share on
that date. The market value of such shares was $3,742,500, $935,625, and
$935,625 for Messrs. Ayer, Smith, and Zwiener, respectively, on December
31, 1997 based on the NYSE closing price of the Common Stock of $93.5625
12
<PAGE>
per share on that day. Each of the restricted stock grants is subject to
the following performance-based vesting: the restrictions on 50% of the
shares will lapse on March 1, 2001 only if the closing price of the Common
Stock on the NYSE is $123 per share or more for at least ten consecutive
trading days prior to such date; the restrictions on an additional 25% of
such shares will lapse on March 1, 2001 only if the closing price of Common
Stock on the NYSE is $126 per share or more for at least ten consecutive
trading days prior to such date; and the restrictions on the remaining 25%
of such shares will lapse on March 1, 2001 only if the closing price of the
Common Stock on the NYSE is $130 per share or more for at least ten
consecutive trading days prior to such date. Any restricted shares not
vested by March 1, 2001 shall be forfeited. Dividends are paid on the
shares of restricted Common Stock in the same amount and to the same extent
as dividends are paid on shares of Common Stock held by all shareholders.
(4) Represents the market value of 20,000, 10,000, and 15,000 shares of
restricted Common Stock granted to Messrs. Ayer, Smith, and Zwiener,
respectively, on February 1, 1997 based on the closing price of the Common
Stock on the NYSE of $73.375 per share on that date. The market value of
such shares was $1,871,250, $935,625, and $1,403,437 for Messrs. Ayer,
Smith, and Zwiener, respectively, on December 31, 1997 based on the NYSE
closing price of the Common Stock of $93.5625 per share on that day.
Dividends are paid on the shares of restricted Common Stock in the same
amount and to the same extent as dividends are paid on shares of Common
Stock held by all shareholders.
(5) Mr. Smith was granted 20,000 shares of restricted Common Stock on February
1, 1997. On May 22, 1997, after the Hartford Life IPO, 10,000 of these
shares were exchanged for 23,205 shares of restricted Hartford Life Class
A Common Stock based on a formula intended to maintain the economic value
of the shares of restricted Common Stock. The amount set forth in the
table represents the market value of the restricted shares of Hartford
Life Class A Common Stock based on the closing price of Hartford Life
Class A Common Stock on the NYSE of $32.125 per share on such date. The
market value of these shares was $1,051,477 on December 31, 1997 based on
the NYSE closing price of Hartford Life Class A Common Stock of $45.3125
per share on that day. Dividends are paid on the shares of restricted
Hartford Life Class A Common Stock in the same amount and to the same
extent as dividends are paid on shares of Hartford Life Class A Common
Stock held by all shareholders of Hartford Life.
(6) Pursuant to The Hartford 1996 Deferred Restricted Stock Unit Plan, certain
executives of the Company elected to forego a certain percentage of 1996
bonus payments that were ultimately awarded in 1997 in exchange for the
right to receive shares of Common Stock ("Stock Units"). The number of
Stock Units granted to an executive is equal to the amount of the bonus
forgone divided by the closing price of the Common Stock on the NYSE on
the date of grant of the Stock Units. As an incentive for foregoing the
percentage of bonus, participating executives also are granted additional
Stock Units equal to 10% of the Stock Units ("Premium Stock Units").
Shares of Common Stock underlying Stock Units may not be received until
three years from the date of grant but are fully vested, except that
shares of Common Stock underlying Premium Stock Units may be forfeited if
employment with the Company is terminated under certain circumstances
before three years from the date of grant. Dividends are paid (and
automatically reinvested) on the shares underlying the Stock Units and
Premium Stock Units in the same amount and to the same extent as dividends
are paid on shares of Common Stock held by all shareholders. The amounts
identified in this column represent the value of the Premium Stock Units
awarded on March 10, 1997 when the closing price of the Common Stock on
the NYSE was $78.375 per share. On December 31, 1997, the values of such
Premium Stock Units for Messrs. Smith, Zwiener and Gareau were $18,504,
$14,922 and $4,775, respectively, based on the closing price of the Common
Stock on the NYSE of $93.5625 per share on that date.
(7) Represents the market value of 5,000 shares of restricted Common Stock
granted to Mr. Zwiener on January 10, 1996 based on the closing price of
the Common Stock on the NYSE of $48.25 per share on that date. The market
value of such shares was $467,812 on December 31, 1997 based on the NYSE
closing price of $93.5625 per share on that date. Dividends are paid on
the shares of restricted Common Stock in the same amount and to the same
extent as dividends are paid on shares of Common Stock held by all
shareholders.
(8) Each of the Named Executives had been granted options to purchase shares
of ITT common stock. After the ITT Spin-Off, each Named Executive elected
to substitute his ITT options for options to purchase shares of the
Company's Common Stock. The options listed in the table above for 1995 are
the substituted options.
(9) Represents the number of shares of Hartford Life Class A Common Stock
underlying an option granted to Mr. Smith pursuant to the 1997 Hartford
Life, Inc. Incentive Stock Plan (the "Hartford Life Incentive Stock
Plan").
13
<PAGE>
(10) The amounts in this column are payments made by the Company in 1996
pursuant to an ITT long-term performance plan. Under this plan,
contingent cash awards were made to certain executive officers of ITT and
its subsidiaries, including certain of the Named Executives. The awards
were contingent upon ITT achieving certain levels of return on equity for
the three year period from 1992 to 1995. The plan was amended in 1995 to
permit increased or decreased payments based upon events that may have
had a material impact on ITT's performance.
(11) Amounts shown in this column represent company contributions under the
Company's Investment and Savings Plan and the Excess Savings Plan, which
are defined contribution plans. Under these plans, the Company makes a
matching contribution in an amount equal to 50% of an employee's
contribution, such matching contribution not to exceed three percent (3%)
of such employee's salary. The Company also makes a non-matching
contribution equal to one-half of one percent ( 1/2of 1%) of an
employee's salary. Company contributions under these plans for 1997 were
$24,925, $2,042, $21,620, $14,656, $12,024 and $9,406, for Messrs. Ayer,
Frahm, Smith, Zwiener, Gareau and Donahue, respectively. In addition to
ordinary company contributions in 1995, in connection with the ITT Spin-
Off, each participant in the ITT Investment and Savings Plan, including
each Named Executive, received a one-time distribution to his or her
account. This distribution resulted from the termination of the Employee
Stock Ownership portion of the plan, the shares of preferred stock of
which were used to repay a loan and the excess distributed to the
accounts of participants. The Company's flexible benefit programs allow
for the sale back to the Company of up to one week of vacation time
capped at a 1997 limit of $2,885. Amounts of $2,885 are included in this
column for Messrs. Smith and Donahue. For Mr. Frahm, a payment of $59,231
was made to him upon his retirement representing accrued but unused
vacation time. The Company also provides certain group term life
insurance coverage to employees, and employees may purchase additional
amounts of coverage. For federal tax purposes, income will be imputed to
an employee who purchases more than $50,000 of coverage to the extent
that the value of the coverage is greater than the premium paid. For
1997, $5,472, $1,995, $0, $1,938, $5,472 and $13,338 of income was
imputed to Messrs. Ayer, Frahm, Smith, Zwiener, Gareau and Donahue,
respectively, and such amounts are included in this column.
STOCK OPTIONS
Under the Incentive Stock Plan, the Compensation and Personnel Committee of
the Board of Directors selects key employees to receive various awards,
including stock options, stock appreciation rights, shares of restricted
Common Stock and performance shares. The table below provides information
regarding grants of stock options to the Named Executives during 1997.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM($)(7)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED(#) 1997(4) ($/SHARE)(6) DATE 5% 10%
---- ---------- --------------- --------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ramani Ayer............. 47,170(1) 3.03 72.25 01/26/07 2,143,405 5,431,625
130,000(2) 8.35 88.94 12/19/07 7,270,900 18,427,500
Donald R. Frahm......... -- -- -- -- -- --
Lowndes A. Smith........ 18,868(1) 1.21 72.25 01/26/07 857,362 2,172,650
100,000(2) 6.42 88.94 12/19/07 5,593,000 14,175,000
65,675(3) 14.58(5) 31.14 01/26/07 1,285,916 3,259,450
David K. Zwiener........ 20,440(1) 1.31 72.25 01/26/07 928,794 2,353,666
100,000(2) 6.42 88.94 12/19/07 5,593,000 14,175,000
Joseph H. Gareau........ 14,780(1) 0.95 72.25 01/26/07 671,603 1,701,917
30,000(2) 1.93 88.94 12/19/07 1,677,900 4,252,500
John F. Donahue......... 9,434(1) 0.61 72.25 01/26/07 428,681 1,086,325
25,000(2) 1.61 88.94 12/19/07 1,398,250 3,543,750
</TABLE>
14
<PAGE>
- - --------
(1) The options granted to Messrs. Ayer, Smith and Zwiener became fully
exercisable on February 20, 1998, when the closing price of the Common
Stock on the NYSE had been $90.3125 per share or more for at least ten
consecutive trading days. Mr. Gareau's and Mr. Donahue's options are
exercisable in three equal annual installments commencing on the first
anniversary of the date of the grant. The exercisability, payment or
vesting of options shown in the table may be accelerated upon the
occurrence of a change in control (as defined in the Incentive Stock Plan)
of the Company.
(2) Each of these option grants is subject to the following performance based
vesting: 50% of each option becomes exercisable on March 1, 2001 only if
the closing price of the Common Stock on the NYSE is $123 or more per
share for at least ten consecutive trading days prior to such date; an
additional 25% of each option becomes exercisable on March 1, 2001 only if
the closing price of the Common Stock on the NYSE is $126 or more per
share for at least ten consecutive trading days prior to such date; and
the remaining 25% of each option becomes exercisable on March 1, 2001 only
if the closing price of the Common Stock on the NYSE is $130 or more per
share for at least ten consecutive trading days prior to such date. Any
portion of any option that has not vested by March 1, 2001 will be
forfeited.
(3) Represents the number of shares of Hartford Life Class A Common Stock
underlying an option granted to Mr. Smith by Hartford Life pursuant to the
Hartford Life Incentive Stock Plan.
(4) Percentages are based on options to purchase a total of 1,557,603 shares
of Common Stock granted to 812 employees of the Company during 1997.
(5) Percentage is based on options to purchase a total of 450,377 shares of
Hartford Life Class A Common Stock granted to 153 employees of Hartford
Life during 1997.
(6) All options were granted at exercise prices that were 100% of the fair
market value of the Common Stock (and with respect to one option granted
to Mr. Smith described in note 3 above, the Class A Common Stock of
Hartford Life) on the date of grant.
(7) At the end of the term of the options granted on January 24, 1997, the
projected price of a share of the Common Stock would be $117.69 and
$187.40 at assumed annual appreciation rates of 5% and 10%, respectively.
At the end of the term of the options granted on December 17, 1997, the
projected price of a share of the Common Stock would be $144.87 and
$230.69 at assumed annual appreciation rates of 5% and 10%, respectively.
At the end of the term of the option to purchase shares of Hartford Life
Class A Common Stock granted to Mr. Smith on January 24, 1997 (see note 3
above), the projected price of a share of Hartford Life Class A Common
Stock would be $50.72 and $80.77 at assumed annual appreciation rates of
5% and 10%, respectively.
1997 OPTION EXERCISES AND 1997 YEAR-END OPTION VALUES
The following table provides information on stock options that were
exercised, if any, and the value of unexercised stock options held at December
31, 1997 by the Named Executives:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
-----------------------------------------------------------------------------------
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS HELD
ON YEAR-END (#) AT FISCAL YEAR-END($)(3)
EXERCISE VALUE -------------------------- ----------------------------
NAME (#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ramani Ayer............. -- -- 235,040 177,170 12,920,666 1,606,236
Donald R. Frahm......... 68,770 2,980,665 251,018 -- 12,984,122 --
Lowndes A. Smith........ 10,000 616,025 231,216 118,868 12,762,777 864,374
65,675(2) -- 930,779(4) --
David K. Zwiener........ 22,008 976,125 70,380 120,440 3,292,649 897,878
Joseph H. Gareau........ 9,170 611,593 115,250 72,362 6,492,582 1,710,521
John F. Donahue......... -- -- 53,993 48,401 3,203,695 941,318
</TABLE>
15
<PAGE>
- - --------
(1) Value realized upon the exercise of an option represents the difference
between the fair market value of the Common Stock on the date of exercise
and the exercise price of the option.
(2) Represents shares of Hartford Life Class A Common Stock underlying an
option granted to Mr. Smith by Hartford Life pursuant to the Hartford Life
Incentive Stock Plan.
(3) Values are calculated for options "in-the-money" by subtracting the
exercise price per share of the options from the per share NYSE closing
price of $93.5625 of the Common Stock on December 31, 1997.
(4) The value of the option granted to Mr. Smith to purchase shares of
Hartford Life Class A Common Stock (see note 2 above) was calculated by
subtracting the exercise price per share of the option from the per share
NYSE closing price of $45.3125 of Hartford Life Class A Common Stock on
December 31, 1997.
1997 LONG-TERM INCENTIVE PLAN AWARDS
On January 24, 1997, the Compensation and Personnel Committee of the Board
made awards of performance shares to certain key employees of the Company,
including the Named Executives. The awards are contingent upon the Company
achieving certain performance objectives described below. To the extent that
the performance objectives are achieved, cash and shares of Common Stock will
be granted to each key employee pursuant to the performance share provisions
of the Incentive Stock Plan. These performance shares awarded to key employees
of the Company on January 24, 1997 will not be subject to cancellation and
substitution, but rather will become payable after the performance period to
the extent described below.
Under the terms of the awards, there are two equally weighted performance
objectives measured over the 1997-1999 three-year performance period: core
earnings per share of the Company ("Core Earnings") and total shareholder
return ("TSR"). Core Earnings is defined as the Company's net income minus:
(i) net realized capital gains or losses; (ii) income or losses due to changes
in methods of accounting; (iii) the amount of losses from individual
catastrophes in excess of 1% of worldwide property-casualty earned premium for
the year; (iv) the amount of any individual non-catastrophe loss associated
with any non-recurring charge that exceeds $100 million; and (v) the income or
loss associated with allocations resulting from the liability sharing
agreement entered into in connection with the ITT Spin-Off. TSR is measured by
the difference between the price of the Common Stock at the beginning of the
1997-1999 performance period and the price at the end of the performance
period (assuming the reinvestment of dividends paid), compared with the TSR of
the stock of a group of peer insurance companies.
The Compensation and Personnel Committee established a target Core Earnings
and a TSR to be achieved in connection with the awards. If the target is
achieved, a key employee will receive 100% of the performance shares awarded
(payable one-third in cash and two-thirds in Common Stock). The Compensation
and Personnel Committee also established a threshold (minimum) Core Earnings
and TSR to be achieved. If the threshold amounts are not achieved, the key
employees will not receive any of the performance shares awarded. If the Core
Earnings and TSR achieved exceeds the thresholds but falls below the targets,
the key employees will receive awards adjusted downward by interpolation to
reflect falling short of the targets. If the targets are exceeded, the key
employees will receive awards adjusted upward by interpolation subject to a
cap established by the Compensation and Personnel Committee.
16
<PAGE>
The following table provides information on these long-term performance
share awards made to the Named Executives during 1997:
<TABLE>
<CAPTION>
AWARDS OF PERFORMANCE ESTIMATED FUTURE PAYOUTS
SHARES IN UNDER NON-STOCK
LAST FISCAL YEAR PRICE-BASED PLANS (#)(1)
------------------------- ---------------------------------
PERIOD UNTIL
NAME # OF SHARES PAYOUT(1) THRESHOLD(#) TARGET(#) MAXIMUM(#)
---- ----------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Ramani Ayer......... 11,111 3 years 5,556 11,111 22,222
Donald R. Frahm..... -- -- -- -- --
Lowndes A. Smith.... 4,444 3 years 2,222 4,444 8,888
15,411(2) 3 years 7,706 15,411 30,822
David K. Zwiener.... 4,815 3 years 2,408 4,815 9,630
Joseph H. Gareau.... 3,481 3 years 1,741 3,481 6,962
John F. Donahue..... 2,222 3 years 1,111 2,222 4,444
</TABLE>
- - --------
(1) Each of the Named Executives was granted the number of performance shares
relating to the Common Stock set forth above. The grants are contingent
upon the Company achieving two general performance objectives over a
three-year period ending on December 31, 1999. The performance objectives,
and the extent to which a Named Executive may be entitled to a future
payout, are described above. The threshold, target and maximum number of
shares that may be awarded as set forth in the table above are based on
the Company equally achieving 75%, 100% and 150% or more, respectively, of
each of the two performance objectives.
(2) Represents a performance share grant to Mr. Smith relating to Hartford
Life Class A Common Stock pursuant to the performance share provisions of
the Hartford Life Incentive Stock Plan. The terms of the Hartford Life
performance share grant are substantially the same as those described
above for Company performance share grants except that the Hartford Life
Core Earnings performance objective does not include the Core Earnings
factor (iii) described above, and the TSR performance objective relates to
the comparison of Hartford Life TSR to a different peer group of insurance
companies.
RETIREMENT PROGRAM
The Hartford Fire Insurance Company Retirement Plan (the "Retirement Plan")
is a defined benefit plan that covers substantially all eligible U.S. salaried
employees of the Company and its subsidiaries, including senior executive
officers and other executives. An employee's annual pension will equal two
percent of his or her average final compensation for each of the first thirty
years of benefit service, reduced by one and two-thirds percent of the
employee's primary Social Security benefit for each year of benefit service to
a maximum of thirty years; provided that no more than one-half of an
employee's primary Social Security benefit is used for such reduction. An
employee's average final compensation is defined under the Retirement Plan as
the total of (i) an employee's average annual base salary for the five
calendar years of the last 120 consecutive calendar months of eligibility
service affording the highest such average plus (ii) an employee's average
annual compensation not including base salary for the five calendar years of
the employee's last 120 consecutive calendar months of eligibility service
affording the highest such average. The Retirement Plan also provides for
undiscounted early retirement pensions for employees who retire at or after
age sixty following completion of fifteen years of eligibility service. An
employee will be vested in benefits accrued under the Retirement Plan upon
completion of five years of eligibility service.
Applicable Federal law limits the amount of benefits that can be paid and
compensation which may be recognized under a tax-qualified retirement plan.
Therefore, the Company has a non-qualified unfunded retirement plan (the
"Hartford Excess Benefit Plan") for payment of those benefits at retirement
that cannot be paid from the qualified Retirement Plan. The practical effect
of the Hartford Excess Benefit Plan is to continue calculation of retirement
benefits to all employees on a uniform basis. The Company also maintains an
excess plan trust under which excess benefits under the Hartford Excess
Benefit Plan for certain officers of the Company are funded. Any such employee
may indicate a preference, subject to certain conditions, to receive any
excess
17
<PAGE>
benefit in the form of a single discounted lump sum payment. Any "excess"
benefit accrued to any such employee will be immediately payable in the form
of a single discounted lump sum payment upon the occurrence of a change in
corporate control (as defined in the Hartford Excess Benefit Plan).
Based on various assumptions as to remuneration and years of service, before
Social Security reductions, the following table illustrates the estimated
annual benefits payable from the Retirement Plan at retirement at age 65 that
are paid for by the Company.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
FINAL ------------------------------------------------------------------------------------
CMPENSATIONO 15 20 25 30
- - ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 50,000 $ 15,000 $ 20,000 $ 25,000 $ 30,000
100,000 30,000 40,000 50,000 60,000
300,000 90,000 120,000 150,000 180,000
500,000 150,000 200,000 250,000 300,000
750,000 225,000 300,000 375,000 450,000
1,000,000 300,000 400,000 500,000 600,000
1,500,000 450,000 600,000 750,000 900,000
</TABLE>
The amounts shown under "Salary" and "Bonus" opposite the names of the Named
Executives in the Summary Compensation Table comprise the compensation that is
used for purposes of determining "average final compensation" under the
Retirement Plan. The years of service with the Company of each of the Named
Executives for eligibility and benefits purposes as of December 31, 1997, were
as follows: Ramani Ayer, 24.50 years; Donald R. Frahm, 27.50 years; Lowndes A.
Smith, 29.75 years; David K. Zwiener, 4.75 years; Joseph H. Gareau, 24.42
years; and John F. Donahue, 30.00 years. Mr. Frahm's years of service include
five years that were granted to him by the Company. Mr. Donahue has 43.50
years of service with the Company; however, only a maximum of 30 years of
service may be considered when determining benefits under the Retirement Plan.
EMPLOYMENT AGREEMENTS
Ramani Ayer, Lowndes A. Smith and David K. Zwiener have employment
agreements (the "Employment Agreements") with the Company pursuant to which
Mr. Ayer is employed as Chairman, President and Chief Executive Officer, Mr.
Smith is employed as Vice Chairman of the Company and President and Chief
Executive Officer of Hartford Life, and Mr. Zwiener is employed as Executive
Vice President and Chief Financial Officer. The initial term of each of the
Employment Agreements began on July 1, 1997 and continues for three years,
unless terminated earlier in accordance with the agreements. However, when the
original term of the agreements or any renewal term ends, the agreements are
automatically extended for successive one-year periods unless either party
gives the other its written notice of its intention not to renew the agreement
at least fifteen months prior to any renewal date. In addition, upon the
occurrence of a change-in-control (as defined in the Employment Agreements) of
the Company, the terms of the Employment Agreements are automatically extended
for three years after the change-in-control occurs.
The Employment Agreements provide, among other things, for base salaries for
Messrs. Ayer, Smith and Zwiener of $700,000, $600,000 and $425,000,
respectively, per year which may be increased from time to time by the Board
of Directors, and their participation in the Company's benefit plans and
awards under executive incentive bonus and other programs. In addition, each
executive is entitled to certain payments and benefits if his employment
terminates for certain reasons, including a termination without "cause" (as
defined in the Employment Agreements). If a termination without cause occurs,
the terminated executive is entitled to a severance payment equal to two times
(a) his base salary, and (b) a target bonus amount, each for the year in which
the termination occurs, and the vesting of stock options and restricted stock
awards. In addition, if a change in control (as defined in the Employment
Agreements) of the Company occurs and the executive's
18
<PAGE>
employment is terminated for certain reasons within certain time periods
(generally, within three years after a change-in-control), then the executive
is entitled to receive certain payments and benefits. Specifically, if after a
change-in-control, the executive's employment is terminated without cause, or
the executive voluntarily terminates his employment for any reason within six
months following a change-in-control, or voluntarily terminates his employment
for "good reason" (as defined in the Employment Agreements), within the
remaining two years and six months following a change-in-control, then the
executive is generally entitled to receive (i) a severance payment equal to
three times the sum of his base salary then in effect and his target bonus for
the year, and (ii) certain other benefits, including those that would
otherwise be payable under the Company's various employee benefit plans. While
the executive is employed, and for one year after any voluntary termination of
employment (other than after a change-in-control), the executive is subject to
a noncompetition agreement in favor of the Company.
In addition, Joseph H. Gareau and John F. Donahue have agreements with the
Company that entitle them to certain benefits upon a "change-in-control" of
the Company (as defined in such agreements). The agreements, dated October 1,
1997, provide, among other things, that the Company shall employ each
executive for three years (the "Employment Period") after a "change-in-
control" of the Company occurs, if the executive was employed on the date the
change-in-control occurs. During the Employment Period, each executive is
entitled to (i) a base salary of not less than his base salary in effect prior
to a change-in-control or potential change-in-control, and such salary may be
increased from time to time; (ii) an opportunity to earn an annual bonus in
accordance with the Company's bonus policies; and (iii) participate in long-
term compensation programs and stock incentive plans, and to receive the
benefits under the Company's various benefit programs. If the executive's
employment terminates during the Employment Period for certain specified
reasons, including termination for "cause," "without cause," for "good
reason," voluntarily or due to retirement, death or disability (all as defined
in such agreements), then the executive is entitled to certain payments and/or
benefits, depending on the reason for termination. Specifically, if the
executive's employment is terminated without cause, or he terminates his
employment for good reason, he is entitled to receive, among other things, (i)
a lump sum severance payment equal to two times his base salary and target
bonus in effect in the year in which his employment terminated, and (ii)
certain other benefits, including those that would otherwise be payable under
the Company's various employee benefit plans.
19
<PAGE>
PERFORMANCE OF THE COMPANY'S COMMON STOCK
The graph below compares the yearly percentage change in cumulative
shareholder return on the Common Stock for the two-year period of December 31,
1995 through December 31, 1997 with (i) the cumulative total return of the
Standard & Poors' 500 Index(R) and (ii) the Standard & Poors Insurance
Composite Index(R). The figures presented below assume the reinvestment of all
dividends into shares of Common Stock on any given dividend payment date and
that $100 was invested in Common Stock and in the Standard & Poors 500 Index(R)
and in the Standard & Poors Insurance Composite Index(R). Common stock
performance information is provided only for the past two years as the Company
became a separate public company following the ITT Spin-Off and regular-way
trading of the Common Stock on the NYSE did not begin until December 20, 1995.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning December 31, 1995
[LINE GRAPH APPEARS HERE]
Dec-95 Dec-96 Dec-97
- - ---------------------------------------------------------------------
The Hartford Financial Services Group, Inc. $100 $144 $203
- - ---------------------------------------------------------------------
S&P 500(R) $100 $123 $164
- - ---------------------------------------------------------------------
S&P Insurance Composite Index(R) $100 $125 $185
- - ---------------------------------------------------------------------
20
<PAGE>
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN SHAREHOLDERS
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows as of March 2, 1998 the number of shares of Common
Stock beneficially owned by each director and nominee for election as a
director, by each of the Named Executives, and by the directors and all
executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NAME OF NATURE OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP(1)(2)
- - ---------------- --------------------
<S> <C>
Bette B. Anderson......................................... 2,351
Rand V. Araskog........................................... 373,408
Ramani Ayer............................................... 352,927
Robert A. Burnett......................................... 3,563
John F. Donahue........................................... 73,068
Donald R. Frahm........................................... 311,431
Joseph H. Gareau.......................................... 132,309
Arthur A. Hartman......................................... 1,468
Paul G. Kirk, Jr.......................................... 2,278
Robert W. Selander........................................ 1,090
Lowndes A. Smith.......................................... 274,929
H. Patrick Swygert........................................ 1,020
DeRoy C. Thomas........................................... 27,029
Gordon I. Ulmer........................................... 3,268
David K. Zwiener.......................................... 124,159
All directors and executive officers as a group (19
persons)................................................. 1,830,988
</TABLE>
- - --------
NOTES:
(1) All shares of Common Stock are owned directly except as otherwise
indicated below. Pursuant to regulations of the SEC, shares (i) that may
be acquired by directors and executive officers upon the exercise of stock
options exercisable within sixty days after March 2, 1998, (ii) allocated
to the accounts of certain directors and executive officers under the
Company's Investment and Savings Plan based on a valuation of plan
accounts as of December 31, 1997, (iii) acquired by directors and
executive officers under the Company's Dividend Reinvestment and Cash
Payment Plan through March 2, 1998, (iv) owned by a director's or
executive officer's spouse or minor child, or (v) that have been granted
under the Company's Incentive Stock Plan or the Non-Employee Directors
Restricted Stock Plan and are restricted, but as to which the directors or
executive officers have the right to vote, are deemed to be beneficially
owned by such directors and executive officers as of such date and are
included in the number of shares listed in the table above.
Of the number of shares of Common Stock shown above, the following
represent shares that may be acquired upon exercise of stock options that
are exercisable within sixty days after March 2, 1998 by: Mr. Ayer, 282,210
shares; Mr. Frahm, 251,018 shares; Mr. Smith, 250,084 shares; Mr. Zwiener,
90,820 shares; Mr. Gareau, 127,676; Mr. Donahue, 61,604 shares; and all
present directors and executive officers as a group, 1,192,446 shares.
(2) The shares of Common Stock beneficially owned by each person named above
do not exceed one percent of the outstanding shares of Common Stock. The
shares beneficially owned by the group of directors and executive officers
represent approximately 1.5% of the outstanding shares.
21
<PAGE>
CERTAIN SHAREHOLDERS
The following table shows those persons known to the Company as of March 2,
1998 to be the beneficial owners of more than five percent of the Company's
Common Stock. In furnishing the information below, the Company has relied on
information filed by the beneficial owners with the SEC, and in some cases,
information provided by such owners.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
OWNER OWNERSHIP OF CLASS
- - ---------------- ----------------- --------
<S> <C> <C>
FMR Corp............................................ 10,202,588(1) 8.64%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- - --------
NOTES:
(1) FMR Corp. ("FMR"), Edward C. Johnson, 3d and Abigail P. Johnson filed a
Schedule 13G with the SEC to report that they were the beneficial owners
of 10,202,588 shares of Common Stock as of December 31, 1997, and had sole
power to dispose of such shares. In addition, FMR had sole voting power
for 576,988 shares and shared voting and dispositive power for 3,000
shares, and Edward C. Johnson, 3d had sole power to vote 400 shares and
shared voting and shared dispositive power for 3,000 shares. FMR is the
parent to various subsidiaries that are beneficial owners of Common Stock,
including Fidelity Management & Research Company that serves as an
investment adviser to various investment companies, and to Fidelity
Management Trust Company. Members of the Edward C. Johnson, 3d family and
trusts established for their benefit own approximately 49% of the voting
stock of FMR, Mr. Johnson is Chairman of FMR and Abigail Johnson is a
director of FMR.
ITEM 2
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to shareholder approval, an
amendment to Article Fourth of the Company's certificate of incorporation to
increase the number of authorized shares of Common Stock of the Company, from
200,000,000 to 400,000,000 (the "Amendment").
The additional shares of Common Stock to be authorized by adoption of the
Amendment would have rights identical to the currently outstanding Common
Stock. Adoption of the proposed Amendment and the issuance of any Common Stock
would not affect the rights of the holders of currently outstanding Common
Stock; however, to the extent that additional shares are actually issued, any
such issuance could have the effect of diluting the earnings per share and
book value per share of outstanding shares of Common Stock. If the Amendment
is adopted, it will become effective upon the filing of a certificate of
amendment to the Company's certificate of incorporation with the Secretary of
State of the State of Delaware.
The Company currently has 200,000,000 authorized shares of Common Stock. As
of March 2, 1998, 117,836,964 shares were outstanding and 3,299,551 shares
were subject to awards under the Company's stock compensation plans leaving
78,863,485 shares available for issuance as of that date.
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of the proposal to authorize additional shares of
Common Stock is to provide the Company with additional financial flexibility
to issue Common Stock for purposes which may be identified in the future,
including, without limitation, to raise equity capital, to adopt additional
equity incentive plans or reserve additional shares for issuance under such
plans, to distribute Common Stock to shareholders pursuant to
22
<PAGE>
stock splits and/or stock dividends, to make acquisitions through the use of
Common Stock, and to effect other general corporate transactions. The
availability of additional shares of Common Stock is particularly important if
the Board of Directors needs to undertake any of the foregoing actions on an
expedited basis and thus to avoid the time (and expense) of seeking
shareholder approval in connection with the contemplated action. If the
Amendment is approved by the shareholders, the Board of Directors does not
intend to solicit further shareholder approval prior to the issuance of any
additional shares of Common Stock, except as may be required by applicable
law, and the holders of Common Stock will continue not to have any preemptive
rights to purchase any shares issued in the future.
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of the Company without further action by the
shareholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by applicable law) be issued in one or more transactions which
could make a change in control of the Company more difficult, and therefore
less likely. The Company is not, however, aware of any pending or proposed
transaction involving a change in control of the Company or any specific
takeover effort.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK.
ITEM 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
In accordance with the recommendation of the Audit Committee, the Board of
Directors has appointed Arthur Andersen LLP as independent auditors of the
Company for the fiscal year ending December 31, 1998. Although shareholders'
ratification of this appointment is not required, the Board requests
ratification by the shareholders. If the shareholders do not ratify the
appointment of Arthur Andersen LLP, the selection of other independent
auditors will be considered by the Audit Committee and the Board of Directors.
Arthur Andersen LLP has served as independent auditors of the former ITT
Corporation and most of its subsidiaries, including the Company, for many
years, and Arthur Andersen LLP's long-term knowledge of the Company has
enabled Arthur Andersen LLP to carry out its audits with effectiveness and
efficiency. Representatives of Arthur Andersen LLP will attend the Annual
Meeting, will have the opportunity to make a statement if they desire to do
so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
OF THE COMPANY.
REQUIRED VOTES OF SHAREHOLDERS
The presence in person or by proxy of shareholders entitled to cast a
majority of shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting. The nominees for election as
directors receiving the greatest number of votes, up to the number of
directors to be elected, shall be elected directors. To be approved, the
amendment of the Company's certificate of incorporation to increase the number
of authorized shares of Common Stock will require the affirmative vote of the
holders of a majority of all outstanding shares of the Common Stock, and the
ratification of the appointment of Arthur Andersen LLP will require the
affirmative vote of the holders of a majority of shares of Common Stock
present in person or represented by proxy. Abstentions and broker non-votes
will be included in the computation of the number of
23
<PAGE>
shares that are present for purposes of determining the presence of a quorum
but will not be counted as votes cast for or against items submitted for a
vote of shareholders. Accordingly, abstentions and broker non-votes will have
the same effect as a vote against such items.
One or more persons will be appointed to act as the inspector of election at
the Annual Meeting. The bylaws of the Company provide that shareholders shall
be accorded privacy in voting and that the integrity of the balloting process
shall be assured. Among other duties, the inspector of election will certify
as to compliance with such confidentiality provisions.
PROPOSALS OF SHAREHOLDERS
Proposals submitted by shareholders for inclusion in next year's Proxy
Statement must be received by the Company no later than the close of business
on December 5, 1998. Address your proposals to Michael O'Halloran, Vice
President and Secretary, The Hartford Financial Services Group, Inc., 690
Asylum Avenue, Hartford, CT 06115. Proposals must comply with all of the
requirements of SEC Rule 14a-8 under the Securities Exchange Act of 1934 and
certain requirements set forth in the Company's bylaws. A copy of the bylaws
may be obtained from the Secretary of the Company.
OTHER INFORMATION
As of the date of this Proxy Statement, the Board of Directors has no
knowledge of any business that will be presented for consideration at the
Annual Meeting other than that described above. As to any other business, if
any, that may properly come before the Annual Meeting, the proxies will vote
in accordance with their judgment.
Present and former officers, directors and other employees of the Company
may solicit proxies by telephone, telegram or mail, or by meetings with
shareholders or their representatives. The Company will reimburse brokers,
banks or other custodians, nominees and fiduciaries for their charges and
expenses in forwarding proxy material to beneficial owners. The Company has
engaged Georgeson & Company, Inc. to solicit proxies for the Annual Meeting
for a fee of $12,500 plus the payment of its out-of-pocket expenses. All
expenses of solicitation of proxies will be borne by the Company.
A copy of the Company's Annual Report to Shareholders for 1997 is either
being sent with this Proxy Statement or was sent previously. If, upon
receiving this Proxy Statement, you have not received the Annual Report to
Shareholders, please write to the Corporate Secretary at the address below to
request a copy. IN ADDITION, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-
K (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, AS FILED
WITH THE SEC, IS AVAILABLE WITHOUT CHARGE UPON REQUEST TO THE COMPANY'S
INVESTOR RELATIONS DEPARTMENT, 690 ASYLUM AVENUE, HARTFORD, CT 06115, OR BY
CALLING (888) 322-8444.
By Order of the Board of Directors.
Michael O'Halloran
Vice President and Secretary
Dated: March 31, 1998
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE SELF-ADDRESSED ENVELOPE WHETHER OR NOT THEY EXPECT TO
ATTEND THE MEETING. A SHAREHOLDER MAY NEVERTHELESS VOTE IN PERSON IF HE OR SHE
DOES ATTEND.
24
<PAGE>
PROXY
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Richard Garrett, Michael O'Halloran and
Michael S. Wilder, and each of them, as proxies of the undersigned, each
with power to appoint his substitute, and hereby authorizes each or any of
them to vote, as designated on the reverse side of this proxy, all shares
of the common stock of The Hartford Financial Services Group, Inc. (the
"Company"), including all shares held in the Company's Dividend
Reinvestment and Cash Payment Plan, the Company's Investment and Savings
Plan, the Company's Deferred Restricted Stock Unit Plan and in the
Company's Employee Stock Purchase Plan, which the undersigned is entitled
to vote if personally present at the Annual Meeting of Shareholders of the
Company to be held at 9:00 A.M. on May 21, 1998 at the Sheraton Chicago
Hotel & Towers, 301 East North Water Street, Chicago, Illinois, and at any
adjournments or postponements thereof, and confers discretionary authority
upon each such proxy to vote upon any other matter properly brought before
the meeting.
Please specify your choices by marking the appropriate boxes on the reverse side
of this Proxy. The shares represented by this Proxy will be voted as you
designate on the reverse side. If no designation is made, the shares will be
voted for the election as directors of the nominees named in Item 1 and for
Items 2 and 3. The shares of common stock represented by this Proxy cannot be
voted unless you sign and return this Proxy.
SEE REVERSE SIDE
<PAGE>
ITEM 1. Election of Directors
FOR all nominees WITHHOLD AUTHORITY *EXCEPTIONS[_]
listed below [_] for all nominees listed below [_]
Director Nominees: Bette B. Anderson, Rand V. Araskog, Ramani Ayer, Robert A.
Burnett, Donald R. Frahm, Paul G. Kirk, Jr., Robert W. Selander, Lowndes A.
Smith, H. Patrick Swygert, DeRoy C. Thomas, Gordon I. Ulmer and David K.
Zwiener.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "EXCEPTIONS" box and write that nominee's name in the space provided below.)
*EXCEPTIONS:
--------------------------------------------------------------------
ITEM 2. Amendment of the Company's certificate of incorporation to increase the
number of the Company's authorized shares of common stock.
FOR [_] AGAINST [_] ABSTAIN [_]
ITEM 3. Ratification of the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998
FOR [_] AGAINST [_] ABSTAIN [_]
MARK THIS BOX IF YOU PLAN TO ATTEND THE ANNUAL MEETING [_]
CHANGE OF ADDRESS OR COMMENTS MARK HERE [_]
- - ------------------------------------------ -----------------------------, 1998
Signature Date
Note: Please add your title if you are signing for a corporation or other
business entity, or as attorney, administrator, executor, guardian, trustee or
in any other representative capacity.
Votes MUST be indicated by (X) in black or blue ink.
