<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
MGIC Investment Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
MGIC
INVESTMENT
CORPORATION
- ---------------------------
NOTICE
OF
ANNUAL
MEETING
AND
PROXY
STATEMENT
- ---------------------------
1998
ANNUAL
REPORT
TO
SHAREHOLDERS
MGIC INVESTMENT CORPORATION
WILLIAM H. LACY
Chairman and Chief Executive Officer
March 26, 1999
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of MGIC
Investment Corporation, which will be held in Vogel Hall at the Marcus Center
for the Performing Arts, 123 East State Street, Milwaukee, Wisconsin, on May 6,
1999, at 9:00 a.m. We look forward to greeting as many of our shareholders as
are able to be with us.
As explained in the accompanying Proxy Statement, shareholders are being
asked to elect a class of five directors and to ratify the appointment of
PricewaterhouseCoopers LLC as independent accountants for 1999. Your Board of
Directors unanimously recommends that you vote FOR the nominees for director
identified in the Proxy Statement and FOR the ratification of the appointment of
independent accountants. At the meeting, we will also report on the state of our
business.
Our Annual Report to Shareholders appears immediately after the Proxy
Statement.
WHETHER OR NOT YOU EXPECT TO ATTEND, TO ENSURE YOUR REPRESENTATION AT THE
MEETING AND THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL
PROMPTLY THE ENCLOSED PROXY, for which a return envelope is provided.
Sincerely,
/s/ William H. Lacy
William H. Lacy
Chairman and Chief Executive Officer
<PAGE> 3
MGIC INVESTMENT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 6, 1999
To the Shareholders of
MGIC Investment Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of MGIC
Investment Corporation (the "Corporation"), a Wisconsin corporation, will be
held in Vogel Hall at the Marcus Center for the Performing Arts, 123 East State
Street, Milwaukee, Wisconsin, on May 6, 1999, at 9:00 a.m., for the following
purposes:
(1) To elect a class of five directors of the Corporation to serve for
a term of three years expiring at the 2002 Annual Meeting;
(2) To consider and vote upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants for 1999;
and
(3) To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 10, 1999,
as the record date to determine the shareholders entitled to notice of and to
vote at this meeting.
By Order of the Board of Directors
Jeffrey H. Lane, Secretary
Milwaukee, Wisconsin
March 26, 1999
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
<PAGE> 4
MGIC INVESTMENT CORPORATION P.O. BOX 488, MGIC PLAZA, MILWAUKEE, WI 53201
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are first being mailed on
or about March 26, 1999, in connection with the solicitation of proxies on
behalf of the Board of Directors of MGIC Investment Corporation (the
"Corporation"), a Wisconsin corporation, for use at the Annual Meeting of
Shareholders to be held at 9:00 a.m., Thursday, May 6, 1999, in Vogel Hall at
the Marcus Center for the Performing Arts, 123 East State Street, Milwaukee,
Wisconsin.
The record date for determining shareholders entitled to vote at the
meeting is March 10, 1999. As of that date, 109,002,358 shares of Common Stock
were outstanding and entitled to be voted. For each matter which may come before
the meeting, shareholders will be entitled to one vote for each share of Common
Stock registered in the shareholder's name on the record date.
The enclosed proxy is solicited by the Board of Directors of the
Corporation. If the proxy is properly executed and returned, and choices are
specified, the shares represented thereby will be voted at the meeting in
accordance with those instructions. If no choices are specified, a properly
executed proxy will be voted as follows:
FOR--Election to the Board of the five individuals nominated by the Board
of Directors; and
FOR--Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for the fiscal year ending December 31, 1999.
Proxies are revocable by written notice to the Secretary of the Corporation
at any time prior to their exercise and may also be revoked by signing and
delivering a proxy with a later date. Shareholders present at the meeting may
withdraw their proxies and vote in person.
Votes cast by proxy or in person at the meeting will be counted by
representatives of Firstar Bank Milwaukee, N.A., the transfer agent and
registrar of the Common Stock, which has been appointed by the Corporation to
act as inspector of election for the meeting. The inspector of election will
treat shares represented by proxies that reflect abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions, however, do not constitute a vote "for" or "against" any
matter and thus will be disregarded in the calculation of "votes cast."
A "broker non-vote" occurs when a broker (or other nominee) does not have
authority to vote on a particular matter without instructions and has not
received such instructions. The inspector of election will treat broker non-vote
shares as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. However, for purposes of determining the
outcome of any matter as to which the broker has indicated on the proxy that it
does not have discretionary authority to vote, broker non-vote shares will be
disregarded in the calculation of "votes cast."
The Corporation's Annual Report to Shareholders for the fiscal year ended
December 31, 1998, appears immediately after this Proxy Statement. The Annual
Report to Shareholders is not incorporated by reference into this Proxy
Statement and is not to be deemed a part of this Proxy Statement.
<PAGE> 5
STOCK OWNERSHIP
- --------------------------------------------------------------------------------
The following table sets forth, as of January 31, 1999, unless otherwise
noted, certain stock ownership information regarding all shareholders known by
the Corporation to be the beneficial owners of more than 5% of the Corporation's
Common Stock, each executive officer named in the Summary Compensation Table
herein and all directors and executive officers as a group. Unless otherwise
noted, the owners have sole voting and investment power with respect to such
shares.
<TABLE>
<CAPTION>
SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------ --------
<S> <C> <C>
The Northwestern Mutual Life
Insurance Company ("NML")
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 (1)............................ 11,986,992 11.0%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 (2)(3)........................ 11,532,686 10.6%
AMVESCAP PLC
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309 (2)(4)........................... 9,384,402 8.6%
William H. Lacy (5)......................................... 381,810 *
Curt S. Culver (5).......................................... 181,584 *
J. Michael Lauer (5)........................................ 316,202 *
Lawrence J. Pierzchalski (5)................................ 117,280 *
James S. MacLeod (5)........................................ 151,026 *
All directors and executive officers as a group (20 persons)
(5)(6).................................................... 1,747,622 1.6%
</TABLE>
- ---------------
* Less than 1%
(1) NML has sole voting and investment power as to 11,948,392 shares and shared
voting and investment power as to 38,600 shares.
(2) Ownership information is for shares of Common Stock as of December 31, 1998,
as reported in statements filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
(3) Includes 10,952,700 shares beneficially owned by Fidelity Management &
Research Company ("Fidelity"), a registered investment adviser and wholly-owned
subsidiary of FMR Corp., 6,204,700 shares of which are owned by Fidelity Advisor
Growth Opportunities Fund, a registered investment company which Fidelity serves
as adviser. Also includes 579,986 shares beneficially owned by Fidelity
Management Trust Company ("Fidelity Trust"), a bank and wholly-owned subsidiary
of FMR Corp. Edward C. Johnson 3d, Chairman of FMR Corp., FMR Corp., through its
control of Fidelity, and the investment companies for which Fidelity acts as
investment adviser ("Funds") each has sole investment power as to the 10,952,700
shares owned by the Funds; the Funds' Boards of Trustees have sole voting power
as to such shares. Mr. Johnson and FMR Corp., through its control of Fidelity
Trust, each has sole investment power as to the 579,986 shares owned by the
institutional accounts managed by Fidelity Trust, sole voting power as to
407,386 of such shares and no voting power as to 172,600 of such shares. Mr.
Johnson, members of his family and trusts for their benefit own 49% of the
voting stock of FMR Corp. and through such ownership and a shareholders' voting
agreement may be deemed to form a controlling group with respect to FMR Corp.
2
<PAGE> 6
(4) Voting and investment powers as to all 9,384,402 shares are shared among
INVESCO Capital Management, Inc., a registered investment adviser, and the
following holding companies, all of which are members of a group as to which
AMVESCAP PLC is the parent holding company: AVZ, Inc., AIM Management Group
Inc., AMVESCAP Group Services, Inc, INVESCI, Inc., INVESCO North American
Holdings, Inc., and INVESCO (NY) Asset Management, Inc.
(5) Includes shares which the named executive officers or all directors and
executive officers as a group (the "Group") had the vested right to acquire on
January 31, 1999, or which become vested within sixty days thereafter, under
stock options granted to executive officers as follows: Mr. Lacy--252,360; Mr.
Culver--163,200; Mr. Lauer--299,480; Mr. Pierzchalski--117,280; Mr.
MacLeod--135,280; and the Group--1,372,460. Also includes shares held in the
Corporation's Profit Sharing and Savings Plan and Trust as follows: Mr.
Culver--7,934; Mr. Lauer--12,802; Mr. MacLeod--15,746; and the Group--55,317.
Also includes shares for which voting and investment powers are shared as
follows: Mr. Lauer--2,400; and the Group--24,844. Excludes shares, beneficial
ownership of which is disclaimed, which are held as custodian for children or
owned by spouses or trusts as follows: Mr. Lauer--4,900; and the Group--
111,944.
(6) Includes an aggregate of 28,172 shares held under the Corporation's 1993
Restricted Stock Plan for Non-Employee Directors and under the Deposit Share
Program under the Corporation's 1991 Stock Incentive Plan, as to which shares
the beneficial owners have sole voting power but no investment power. Excludes
11,986,992 shares held by NML. James D. Ericson and Edward J. Zore, who are
executive officers of NML and directors of the Corporation, have each disclaimed
beneficial ownership of such shares.
ELECTION OF DIRECTORS
(ITEM 1)
- --------------------------------------------------------------------------------
NOMINEES FOR ELECTION
The Board of Directors is divided into three classes, with each class
having a term of three years. The term of office of one class of directors
expires each year in rotation so that one class is elected at each Annual
Meeting for a three-year term.
The nominees for election to the Board of Directors to serve a three-year
term of office ending at the time of the 2002 Annual Meeting include four
incumbent directors--Mary K. Bush, David S. Engelman, Kenneth M. Jastrow, II and
William H. Lacy--and Daniel P. Kearney, who is not currently a director. Each
nominee has consented to being named in this Proxy Statement and has indicated a
willingness to serve if elected. However, if at the time of the Annual Meeting
any of the nominees is not available to serve as a director (an event which the
Board of Directors does not now anticipate), the proxies will be voted for the
election as directors of such other person or persons as the Board of Directors
may designate, unless the Board of Directors, in its discretion, reduces the
number of directors.
SHAREHOLDER VOTE REQUIRED
Each nominee receiving a plurality of the votes cast at the meeting will be
elected as a director. Only votes cast for a nominee will be counted. Votes cast
include votes under proxies which are signed, but which do not have contrary
voting instructions. Broker non-votes, abstentions and instructions on the
accompanying proxy card to withhold authority to vote for one or more of the
nominees will be disregarded in the calculation of a plurality of the "votes
cast."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES
NAMED ABOVE, AND UNLESS A SHAREHOLDER GIVES INSTRUCTIONS ON THE PROXY CARD TO
THE CONTRARY, THE PROXY WILL BE VOTED FOR THE NOMINEES.
3
<PAGE> 7
Set forth on the following pages for each nominee and for each director
whose term expires in a subsequent year is certain information, including age,
principal occupation, business experience for at least the past five years, the
year first elected a director of the Corporation, and the committees of the
Board of Directors on which each director serves.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
NOMINATED FOR ELECTION FOR A TERM ENDING 2002 ------------
<S> <C> <C>
Bush photo MARY K. BUSH, 50, a Director since 1991, has been President
of Bush & Company, an international financial advisory firm,
since 1991. Ms. Bush was Managing Director and Chief
Operating Officer of the Federal Housing Finance Board, a
U.S. government agency, from 1989 to 1991, Vice
President-International Finance of the Federal National
Mortgage Association, a secondary mortgage institution, from
1988 to 1989, and served the President of the United States
as a member of the Board of the International Monetary Fund
from 1984 to 1988. She is a Director of Texaco, Inc. and
Building One Services Corporation, a Trustee of Pioneer
Funds and a member of the Advisory Board of Washington
Mutual Investors Fund. Ms. Bush is Chairperson of the Audit
Committee of the Board of Directors. Ms. Bush is a graduate
of Fisk University and holds an MBA degree from the
University of Chicago. 2,000(2)
Engelman photo DAVID S. ENGELMAN, 61, a Director since 1993, is a private
investor. Mr. Engelman was Chairman, President and Chief
Executive Officer of UnionFed Financial Corporation from
1991 until March 1997, and he held the same positions at its
subsidiary, Union Federal Bank, until the Office of Thrift
Supervision appointed a receiver for the bank in August
1996. Mr. Engelman is a Director of Long Beach Financial
Corporation and its mortgage banking subsidiary Long Beach
Mortgage Company. He is a member of the Risk Management and
Securities Investment Committees of the Board of Directors.
Mr. Engelman is a graduate of the University of Arizona. 7,249(2)(3)
Jastrow photo KENNETH M. JASTROW, II, 51, a Director since 1994, has been
President, Chief Operating Officer and a Director of
Temple-Inland Inc., a holding company with interests in
paper, forest products and financial services, since
February 1998. For more than the past five years, Mr.
Jastrow has held senior executive positions with
Temple-Inland Inc. and its subsidiaries. He is a member of
the Management Development Committee of the Board of
Directors. Mr. Jastrow is a graduate of the University of
Texas. 2,944(2)(3)
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
Kearney photo DANIEL P. KEARNEY, 59, who is not currently a member of the
Board, is a business consultant and private investor. He
served as Executive Vice President and Chief Investment
Officer of Aetna, Inc., a provider of health and retirement
benefit plans and financial services, from 1991 to 1998. Mr.
Kearney was President and Chief Executive Officer of the
Resolution Trust Corporation Oversight Board from 1990 to
1991, a principal of Aldrich, Eastman & Waltch, Inc., a
pension fund advisor, from 1988 to 1989, and a managing
director at Salomon Brothers Inc, an investment banking
firm, from 1977 to 1988. Mr. Kearney is a Director of Great
Lakes REIT and MBIA, Inc. He holds a B.A. degree and an M.A.
degree from Michigan State University and a J.D. degree from
the University of Chicago Law School. 3,500
Lacy photo WILLIAM H. LACY, 54, a Director since 1984, has been Chief
Executive Officer of the Corporation since 1987 and became
Chairman of the Board of Directors in January 1999. Mr. Lacy
served as President of the Corporation from 1987 until
January 1999. He is a Director of Firstar Corporation and
Johnson Controls, Inc. He is Chairman of the Executive
Committee of the Board of Directors. Mr. Lacy attended the
United States Air Force Academy and is a graduate of the
University of Wisconsin-Milwaukee. 381,810(4)
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2001
Abbott photo JAMES A. ABBOTT, 59, a Director since 1989, served as
President and Chief Executive Officer of First Union
Mortgage Corporation, a mortgage banking company, from
January 1980 until his retirement in December 1994. Mr.
Abbott is a member of the Risk Management Committee of the
Board of Directors. He is a graduate of the University of
North Carolina. 7,050(2)(3)
Ericson photo JAMES D. ERICSON, 63, a Director since 1985, has been
President and Chief Executive Officer of The Northwestern
Mutual Life Insurance Company since October 1993, and before
that Mr. Ericson served The Northwestern Mutual Life
Insurance Company as President and Chief Operating Officer
from 1990 to 1993 and as Executive Vice
President-Investments from 1987 to 1990. He is a Trustee of
The Northwestern Mutual Life Insurance Company, Chairman of
the Board and Chief Executive Officer of Northwestern
Investment Management Company, and a Director of
Northwestern Mutual Series Fund, Inc., Consolidated Papers,
Inc., Green Bay Packaging Corp., Kohl's Corporation and
Mason Street Funds, Inc. Mr. Ericson holds a B.A. degree and
an L.L.B. degree from State University of Iowa. -0-(5)
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
Gross photo DANIEL GROSS, 56, a Director since 1997, has been President,
Chief Executive Officer and a Director of Enhance Financial
Services Group Inc., a provider of financial guaranty
insurance, reinsurance and other analytical products and
services, since 1995. Mr. Gross, who was a founder of
Enhance Financial Services Group Inc. in 1986, served as
Chief Operating Officer of that company from 1986 to 1994.
He is a member of the Management Development Committee of
the Board of Directors. Mr. Gross holds a B.S. degree from
the Sloan School of Management of Massachusetts Institute of
Technology. 2,190(3)
Lubar photo SHELDON B. LUBAR, 69, a Director since 1991, has been
Chairman of Lubar & Co. Incorporated, a private investment
and management firm, since 1977. Mr. Lubar is a Director of
Ameritech Corporation, Firstar Corporation, Jefferies & Co.,
Massachusetts Mutual Life Insurance Co., and Weatherford
International, Inc. He is Chairman of the Management
Development Committee of the Board of Directors and a member
of the Executive Committee. Mr. Lubar holds a B.B.A. degree
and an L.L.B. degree from the University of
Wisconsin-Madison. 27,124(2)(3)(6)
Zore photo EDWARD J. ZORE, 53, a Director since 1990, has been an
Executive Vice President of The Northwestern Mutual Life
Insurance Company since 1995 and is currently Executive Vice
President (Life and DI Insurance). He served The
Northwestern Mutual Life Insurance Company as Chief
Financial Officer and Chief Investment Officer from 1995 to
1998 and as Senior Vice President and Chief Investment
Officer from 1990 until 1995. Mr. Zore is a Director of
Northwestern Investment Management Company and Northwestern
Mutual Investment Services, LLC, which are subsidiaries of
The Northwestern Mutual Life Insurance Company. He is a
member of the Executive and Securities Investment Committees
of the Board of Directors. Mr. Zore holds a B.A. degree and
an M.S. degree from the University of Wisconsin-Milwaukee. -0-(5)
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2000
<S> <C> <C>
Case photo KARL E. CASE, 52, a Director since 1991, is Professor of
Economics at Wellesley College where he has taught since
1976. Dr. Case has been Visiting Scholar at the Federal
Reserve Bank of Boston since 1985 and a lecturer on
economics and tax policy in the International Tax Program at
the Harvard Law School since 1980. He is a Director of the
New England Economic Project, Inc., Century Bank & Trust and
the Lincoln Institute of Land Policy. Dr. Case is Chairman
of the Risk Management Committee of the Board of Directors.
He is a graduate of Miami University, Oxford, Ohio, and
holds M.A. and Ph.D. degrees from Harvard University. 3,042(2)(3)
Culver photo CURT S. CULVER, 46, was elected a Director and President of
the Corporation and Chief Executive Officer of Mortgage
Guaranty Insurance Corporation ("MGIC") in January 1999. Mr.
Culver has been President of MGIC since May 1996 and has
held senior executive positions with MGIC for more than five
years before that time. He is a member of the Risk
Management Committee of the Board of Directors. Mr. Culver
holds a B.B.A. degree and an M.S. degree from the University
of Wisconsin-Madison. 181,584(4)
McIntosh photo WILLIAM A. MCINTOSH, 59, a Director since 1996, has been
adjunct professor of finance at Howard University,
Washington, D.C. since August 1998. Mr. McIntosh has also
been a financial consultant and was an executive committee
member and a managing director at Salomon Brothers Inc, an
investment banking firm, when he retired in 1995 after 35
years of service. He is Chairman of the Securities
Investment Committee of the Board of Directors. Mr. McIntosh
is a graduate of Xavier University, Ohio. 4,690(2)(3)
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
Muma photo LESLIE M. MUMA, 54, a Director since 1995, has been
President and Chief Operating Officer of Fiserv, Inc., a
financial industry automation products and services firm,
since 1984 and Vice Chairman since 1995. He is a member of
the Audit and Executive Committees of the Board of
Directors. Mr. Muma holds degrees in Theoretical Mathematics
and Business from the University of South Florida. 11,024(2)(3)
Wallison photo PETER J. WALLISON, 57, a Director since 1990, has been a
Resident Fellow at the American Enterprise Institute for
Public Policy Research, a Washington, D.C. policy research
organization since January 1999. He was a partner in the law
firm of Gibson, Dunn & Crutcher LLP from April 1987 to
December 1998, and has been of counsel to that firm since
January 1999. Mr. Wallison was Counsel to the President of
the United States from March 1986 to March 1987. Mr.
Wallison is a member of the Risk Management Committee of the
Board of Directors. He holds a B.A. degree from Harvard
College and an L.L.B. degree from the Harvard Law School. 2,972(2)(3)
</TABLE>
- ---------------
(1) Ownership information is for shares of Common Stock as of January 31, 1999.
Unless otherwise noted, all directors and nominees have sole voting and
investment power with respect to such shares. The shares beneficially owned by
each director or nominee represent less than 1% of the total number of shares
outstanding.
(2) Includes 2,000 shares held under the Corporation's 1993 Restricted Stock
Plan for Non-Employee Directors, as to which shares the directors have sole
voting power and no investment power.
(3) Includes shares held under the Deposit Share Program for Non-Employee
Directors under the Corporation's 1991 Stock Incentive Plan as follows: Mr.
Abbott 1,050; Dr. Case 1,042; Mr. Engelman and a family trust 1,044; Mr. Gross
190; Mr. Jastrow 944; Mr. Lubar 1,124; Mr. McIntosh 690; Mr. Muma 1,024; and Mr.
Wallison 972. Directors have sole voting power as to all shares, sole investment
power as to one half of the shares and no investment power as to the remaining
shares described in this note, except Mr. Engelman, who has sole voting power
for 608 shares, shared voting power for 436 shares, sole investment power for
304 shares, shared investment power for 218 shares and no investment power for
522 shares.
(4) Includes shares which the individuals had the vested right to acquire as of
January 31, 1999, or which become vested within sixty days thereafter pursuant
to options granted under the Corporation's 1989 Stock Option Plan and the
Corporation's 1991 Stock Incentive Plan as follows: Mr. Culver 163,200 shares;
and Mr. Lacy 252,360 shares.
(5) Messrs. Ericson and Zore, as executive officers of NML, may be deemed to
have a beneficial interest in the 11,986,992 shares of Common Stock of the
Corporation beneficially owned by NML; each has disclaimed such beneficial
ownership. See "Stock Ownership" above.
(6) Excludes 4,000 shares owned by a trust of which Mr. Lubar's wife is a
co-trustee; 12,000 shares owned by Mr. Lubar's wife; and an aggregate of 48,000
shares owned by Mr. Lubar's four adult children, as to all of which shares Mr.
Lubar disclaims beneficial ownership.
8
<PAGE> 12
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times during 1998, and each director
attended at least 75% of the meetings of the Board and committees of the Board
on which he or she served that were held during the period in 1998 in which he
or she was a director.
The committees of the Board of Directors include the Audit Committee and
the Management Development Committee.
Currently, the members of the Audit Committee are Ms. Bush and Mr. Muma.
The Audit Committee held six meetings during 1998. The principal functions of
the Audit Committee are to review various matters pertaining to: the
Corporation's financial statements and regulatory examinations; the
Corporation's retention of and relationship with its independent accountants;
the effectiveness of the Corporation's internal accounting controls and internal
audit function; and the adequacy and appropriateness of the Corporation's
accounting and financial policies and practices.
Currently, the members of the Management Development Committee are Messrs.
Lubar, Gross, and Jastrow. The Management Development Committee held three
meetings during 1998. The principal functions of the Management Development
Committee are to: review and approve compensation for the senior management of
the Corporation, including salary changes and bonus awards; administer the
Corporation's 1989 Stock Option Plan and 1991 Stock Incentive Plan; monitor and
evaluate appointments of, and succession planning for, the senior management of
the Corporation; and make recommendations concerning the composition of the
Board of Directors and its committee structure.
The Management Development Committee will consider nominees to the Board of
Directors who are recommended by shareholders, provided that any such
recommendation is submitted in writing by December 1 of the year preceding the
year in which the applicable Annual Meeting of Shareholders occurs, accompanied
by a description of the proposed nominee's qualifications and other relevant
biographical information and the consent of the proposed nominee to serve. The
recommendation should be addressed to the Management Development Committee, in
care of the Secretary of the Corporation.
COMPENSATION OF DIRECTORS
No additional compensation is paid to any director who is an employee of
the Corporation or of any of its subsidiaries. Directors who are not employees
of the Corporation or of NML receive an annual fee for their services of
$20,000, plus $2,000 for each Board of Directors meeting attended, and $1,000
for each committee meeting attended other than in connection with a Board of
Directors meeting. A director who also serves as chairperson of a committee of
the Board receives an additional $2,000 annual fee. Fees that would have been
paid by the Corporation to executive officers of NML for their services as
directors are paid to NML. The Corporation reimburses directors for travel,
lodging and related expenses incurred in connection with attending Board of
Directors and committee meetings.
Under the Corporation's Deferred Compensation Plan for Non-Employee
Directors, each director who is not an employee of the Corporation or of an
affiliate of the Corporation may elect to defer all or any part of his or her
annual retainer and meeting fees for payment on the earlier of his or her death,
disability or termination of service as a director or to a future date specified
by the director. A participating non-employee director may elect to have his or
her deferred compensation account either credited quarterly with interest
accrued at an annual rate equal to the six-month U.S. Treasury Bill rate
determined at the closest preceding January 1 and July 1 of each year or
translated on a quarterly basis into share units. Each share unit is equal in
value to a share of the Corporation's Common Stock and is ultimately distributed
in cash only. If a director defers fees in share units, dividend equivalents in
the form of additional share units are credited to the director's account as of
the date of payment of cash dividends on the Corporation's Common Stock. Messrs.
Culver and Lacy, because of their employment by the Corporation, and Messrs.
Ericson and Zore, because of their employment by NML, are not eligible to
participate in this plan.
The Corporation's 1991 Stock Incentive Plan includes a deposit share
program ("Deposit Share Program") open to each director who is not an employee
of the Corporation or an affiliate and is not a representative of a holder of
the Corporation's securities. Directors eligible to participate in the Deposit
Share Program may elect to purchase at fair market value shares of the
Corporation's Common Stock with a fair market value equal to up to 50% of
9
<PAGE> 13
the compensation of such director for service as a director of the Corporation,
including as a member of a committee of the Board of Directors, during the
preceding calendar year. Shares of Common Stock so purchased are deposited with
the Corporation, and the Corporation matches each share deposited with one and
one-half shares of restricted Common Stock ("Restricted Stock"). The shares of
Restricted Stock awarded vest on the third anniversary date of the award. Awards
of Restricted Stock that have not vested will be forfeited upon the director
ceasing to be a director of the Corporation for any reason, other than by reason
of death or a "Permissible Event," unless otherwise provided by the Management
Development Committee. In the event of the death of a director, all shares of
Restricted Stock will vest. A Permissible Event is termination of service as a
director of the Corporation by reason of (a) the director being ineligible for
continued service as a director of the Corporation under the Corporation's
retirement policy, which currently provides that no director may stand for
election or reelection after attaining age 70, or (b) the director's taking a
position with or providing services to a governmental, charitable or educational
institution whose policies prohibit continued service on the Board of Directors,
or (c) the fact that continued service as a director would be a violation of
law. If a director ceases to be a director by reason of a Permissible Event, the
Restricted Stock will continue to vest during the balance of the three-year
vesting period if (i) on or before the date the director ceases to be a
director, the director enters into an agreement approved by the Management
Development Committee under which the director agrees not to compete with the
Corporation or its subsidiaries during the balance of such vesting period, and
(ii) the director complies with the agreement. In its discretion, the Management
Development Committee may also provide that some or all of the shares of
Restricted Stock will immediately become vested upon a change in control of the
Corporation, as defined by the Committee. Messrs. Culver and Lacy, because of
their employment by the Corporation, and Messrs. Ericson and Zore, because of
their employment by NML, are not eligible to participate in the Deposit Share
Program.
Under the Corporation's 1993 Restricted Stock Plan for Non-Employee
Directors, applicable to directors initially elected prior to 1997, each non-
employee director was awarded 2,000 shares of the Corporation's Common Stock
upon joining the Board of Directors, which shares are restricted until the
director ceases to be a director of the Corporation by reason of death,
disability or retirement. During the restricted period, the director has the
entire beneficial interest in, and all rights and privileges of a shareholder as
to, such shares, including the right to receive dividends and the right to vote
such shares, subject to the following restrictions: (a) none of the restricted
shares of Common Stock may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the restricted period; and (b) all of the
restricted shares of Common Stock will be forfeited and all rights of the
director to such shares will terminate when the director ceases being a director
of the Corporation other than by reason of death, disability or retirement.
For purposes of the 1993 Restricted Stock Plan for Non-Employee Directors,
"retirement" of a director means termination of service as a director of the
Corporation, if (a) the director at the time of termination was ineligible for
continued service as a director under the Corporation's retirement policy for
directors, or (b) the director had served as a director of the Corporation for
at least three years from the date restricted shares of Common Stock were
awarded to such director, and such termination is (i) due to the director's
taking a position with or providing services to a governmental, charitable or
educational institution whose policies prohibit continued service on the
Corporation's Board of Directors, (ii) due to the fact that continued service as
a director would be a violation of law, or (iii) not due to the voluntary
resignation or refusal to stand for reelection by the director.
When a director ceases to be a director by reason of death, disability or
retirement, all restrictions applicable to the shares of Common Stock lapse. Mr.
Lacy, because of his employment by the Corporation, and Messrs. Ericson and
Zore, because of their employment by NML, were not eligible to participate in
this Plan.
The 1993 Restricted Stock Plan for Non-Employee Directors was terminated by
the Board of Directors in 1997 and no new awards of Common Stock will be made
under such Plan. Termination of the Plan does not affect any prior awards of
restricted shares under such Plan.
10
<PAGE> 14
REPORT OF THE MANAGEMENT DEVELOPMENT COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
This report is submitted by the Management Development Committee of the
Board of Directors ("Committee") with respect to 1998 compensation of senior
executives of the Corporation. The Committee administers the Corporation's
executive compensation program for the five most highly compensated executive
officers named in the tables below and other senior executives of the
Corporation. In addition, among its other responsibilities, the Committee
administers the Corporation's 1989 Stock Option Plan and its 1991 Stock
Incentive Plan.
COMPENSATION PHILOSOPHY
The Corporation's compensation program is designed to motivate and reward
senior executives of the Corporation (including executive officers, as defined
by the rules of the Securities and Exchange Commission) for attaining the
financial and strategic objectives essential to the Corporation's long-term
success and growth in shareholder value. The program is intended to provide a
competitive level of total compensation and to offer incentive and equity
ownership opportunities directly linked to the Corporation's performance and
shareholder return. Key principles underlying the design of the program include
emphasis on cash compensation tied to performance and stock-based incentive
opportunities tied to shareholder value over fixed pay, and a belief in pay
based on performance rather than entitlements tied to one's position.
The objectives of the Committee in structuring and administering the
Corporation's executive compensation program are to:
- maintain a strong and direct link between the Corporation's financial
goals and the executive compensation program;
- motivate executives to achieve key financial goals through emphasis on
performance-based compensation;
- align the interest of executives with those of the Corporation's
shareholders by providing a substantial portion of compensation in the
form of the Corporation's stock; and
- provide competitive total compensation opportunities to attract and
retain high-caliber executives critical to the long-term success of the
Corporation.
COMPETITIVE BENCHMARKS
In its annual review of executive compensation, the Committee is guided by
data derived from compensation surveys prepared by independent consultants. The
surveys provide the Committee with competitive data on overall compensation
levels, changes in pay levels, and the mix of compensation elements for senior
executives in a variety of companies. The Committee believes that the
Corporation's competitors for executive talent are not limited to the companies
in the Standard & Poor's indexes that comprise the peer groups used for the
performance graph comparison of shareholder return. Therefore, the companies
used for comparison purposes in analyzing the Corporation's executive
compensation program represent a broader group of firms than the companies
included in those indexes.
In January 1998, the Committee received survey data from an independent
compensation and benefits consulting firm on executive compensation for a number
of publicly-traded financial guaranty and insurance companies. The Committee
used this information in its consideration of salary range movement and
incentive bonus opportunities for senior executives in 1998.
EXECUTIVE COMPENSATION PROGRAM
The Corporation's executive compensation program consists of an annual cash
component, which includes base salary and a variable performance incentive
bonus, and a long-term incentive component, consisting of periodic stock option
awards.
BASE SALARY
The Committee reviews base salary ranges and salary levels of the
Corporation's senior executives each year, taking into consideration individual
performance, level of responsibility, scope and complexity of the position,
internal equity, comparative compensation data, and, for executives other than
Mr. Lacy, the recommendations of
11
<PAGE> 15
Mr. Lacy. The Committee's review of Mr. Lacy's compensation is discussed below
under "Compensation of the Chief Executive Officer."
In recent years, the Committee has adjusted the salary ranges for the
senior executives of the Corporation to establish as the midpoint for each
position the median compensation level for the comparable position within a
comparative group of companies selected objectively by the consultant on the
basis of similar market capitalization. For 1998, the Committee decided to
maintain the salary range midpoint at the 50th percentile of competitive levels,
consistent with the Committee's belief that a substantial portion of the senior
executives' annual pay should remain "at risk" and linked to the achievement of
corporate objectives and increases in shareholder value. Therefore, in January
1998, the Committee increased the salary range midpoints of the senior
executives by 3.1%, representing the average salary range movement reflected in
the compensation survey data, and increased the salaries of the senior
executives who were below their adjusted salary midpoints to approximate the new
midpoint for their respective positions. The salaries shown in the Summary
Compensation Table for 1998 for the named officers reflect payment for the first
three months of the year at the salary rates in effect prior to the adjustments,
which became effective in April 1998, and one extra pay period for the year due
to the Corporation's election to shorten the final bi-weekly pay period by one
day to end on December 31, 1998.
ANNUAL PERFORMANCE INCENTIVE BONUS
The purpose of the annual variable performance incentive program is to
provide a direct financial incentive in the form of a cash bonus to senior
executives who are viewed as having achieved key objectives during the year.
Under the program, the amount of the Corporation's net income must exceed a
threshold before any cash bonuses can be paid and must equal or exceed a net
income target in order for senior executives to be eligible for maximum bonus
awards. The amounts of the net income threshold and net income target are
determined by the Committee at the beginning of each year based on the
Committee's assessment of the business environment and the Corporation's
financial plan for that year. In recent years, the net income target has been an
amount equal to the net income projected to be earned in the Corporation's
financial plan for the year and the net income threshold has averaged 85% of
that amount. For 1998, the Committee again set the net income target at an
amount equal to the net income projected in the Corporation's 1998 financial
plan. However, the Committee set the net income threshold at an amount equal to
100% of actual earnings for the previous year, rather than tying the threshold
to earnings projected for 1998.
The Committee has established four tiers applicable to senior executives'
bonus opportunities, with maximums ranging from 40% to 100% of base salary in
effect at the time of bonus award. In January 1998, based on Mr. Lacy's
recommendations, the Committee approved placement of the senior executives in
the bonus tiers. Mr. Lacy's recommendation to the Committee regarding placement
of the senior executives in the bonus tiers was based on his subjective judgment
as to the ability of each senior executive to influence the Corporation's
competitiveness and profitability under the existing business climate.
The bonus amounts paid to the senior executives were decided in January
1999, when Mr. Lacy submitted to the Committee for approval his recommendations
as to the bonus awards. Mr. Lacy based his recommendations on a subjective
evaluation of each executive's contribution to the Corporation's competitiveness
in the marketplace, quality of execution of functional duties and
responsibilities, management of expenses, improvement in productivity, and
achievement of other goals. No specific weight was assigned to any of these
factors, nor was any specific weight assigned to any combination of such factors
with the Corporation's performance. The Committee approved the recommended bonus
amounts without change.
STOCK OPTION PROGRAM
The long-term incentive component of the Corporation's executive
compensation program provides for the award of stock options, designed to
promote significant equity interest by the senior executives in the Corporation
with the intent of aligning their interests with those of the other
shareholders. Under the Corporation's stock incentive plan, stock options are
granted at the market value on the date of grant. As a result, senior executives
will realize a gain from the options only to the extent that shareholders are
similarly benefited by future increases in the price of the Corporation's stock.
Vesting of the stock options granted to the Corporation's senior executives
in 1994 and to the date hereof depends upon the achievement of
12
<PAGE> 16
corporate performance goals as measured by earnings per share. Any options which
do not vest by performance within five years of the grant date will vest after
the ninth year. This requirement reflects the Committee's belief in
performance-based pay linked to increases in shareholder value. Prior awards
vested on the basis of continued employment.
Information regarding the stock options held by Mr. Lacy and the four other
highest paid executive officers at December 31, 1998 is set forth in the table
under "Executive Compensation--Aggregated Stock Option Exercises in the Last
Fiscal Year and Option Values at December 31, 1998." No stock options were
awarded to Mr. Lacy or to other executive officers during 1998.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Mr. Lacy, the Corporation's Chief Executive Officer, is
comprised of the same elements as the compensation of other senior executives:
base salary, annual performance incentive bonus and periodic stock option
awards. The Committee reviews Mr. Lacy's total compensation annually and
evaluates adjustments based upon a variety of factors, including the comparative
survey data.
Mr. Lacy's salary range midpoint was set by the Committee in 1997 at the
50th percentile of salary levels reported for the highest paid officers in the
comparative group of companies selected by the consultant. For 1998, the
Committee increased the salary range midpoint for Mr. Lacy by 3.0%, slightly
below the average salary range movement reflected by the survey data. Mr. Lacy's
base salary of $550,000, which was last adjusted in 1997, was unchanged for
1998, and is slightly greater than midpoint.
In determining the variable performance incentive bonus to be paid to Mr.
Lacy, the Committee considers the Corporation's net income in relation to the
net income target established by the Committee and the Committee's evaluation of
Mr. Lacy's overall contributions to the Corporation. No specific weight or
ranking is assigned to these factors, however, in the Committee's subjective
determination of the bonus amount to be paid to Mr. Lacy. In January 1998, the
Committee assigned Mr. Lacy to the bonus tier with the highest bonus
opportunity, 100% of base salary. The Committee's decision to assign Mr. Lacy to
this category was based on the Committee's subjective evaluation of his ability
to influence the Corporation's profitability.
In January 1999, the Committee determined that the bonus award to be paid
to Mr. Lacy was $495,000, an amount equal to 90% of his base salary rate then in
effect. That determination was based on the strong performance of the
Corporation and the Committee's subjective assessment of Mr. Lacy's
contributions to the Corporation's profitability.
TAX DEDUCTIBILITY LIMIT
Under Section 162(m) of the Internal Revenue Code, the corporate federal
income tax deduction for compensation paid to any of the five most highly
compensated executive officers of a publicly-held company is limited to $1
million, unless certain requirements are met. The Committee recognizes there has
been some compensation paid in 1998 (and there is expected to be some
compensation paid in 1999) which will not be deductible for federal income tax
purposes. The Committee believes the effect of such compensation on income tax
expense will not be material and that it is in the Corporation's interest to
preserve flexibility to pay compensation that is not based solely on objective
factors.
MEMBERS OF THE MANAGEMENT DEVELOPMENT COMMITTEE:
Sheldon B. Lubar, Chairman (member throughout 1998)
Daniel Gross (member throughout 1998)
Kenneth M. Jastrow, II (member since May 1998)
Leslie M. Muma (member until May 1998)
13
<PAGE> 17
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares the cumulative total stockholder return on the
Corporation's Common Stock for the last five fiscal years with the cumulative
total return on the Standard & Poor's 500 Stock Index, the Standard & Poor's 500
Financial (Diversified) Index (the peer group index which previously included
the Corporation), and the Standard & Poor's 500 Insurance (Property-Casualty)
Index (in which the Corporation has been included since November, 1998). The
graph assumes $100 was invested on December 31, 1993, in each of the
Corporation's Common Stock, the Standard & Poor's 500 Stock Index, the Standard
& Poor's 500 Financial (Diversified) Index, and the Standard & Poor's 500
Insurance (Property-Casualty) Index, and that all dividends were reinvested.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
S&P 500 S&P 500 INSURANCE
MGIC INVESTMENT ------- S&P 500 FINANCIAL (PROPERTY-
CORPORATION (DIVERSIFIED) CASUALTY)
--------------- ----------------- -----------------
<S> <C> <C> <C> <C>
12/31/93 $ 100.00 $ 100.00 $ 100.00 $ 100.00
12/31/94 114.00 101.00 96.00 105.00
12/31/95 187.00 139.00 155.00 142.00
12/31/96 263.00 171.00 202.00 173.00
12/31/97 461.00 228.00 307.00 247.00
12/31/98 276.00 294.00 402.00 225.00
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
MGIC Investment Corporation $100 $114 $187 $263 $461 $276
- --------------------------------------------------------------------------------------------------------------
S&P 500 100 101 139 171 228 294
- --------------------------------------------------------------------------------------------------------------
S&P 500 Financial (Diversified) 100 96 155 202 307 402
- --------------------------------------------------------------------------------------------------------------
S&P 500 Insurance (Property-Casualty) 100 105 142 173 247 225
- --------------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fourth quarter of 1998, MGIC and Enhance Financial Services
Group Inc. ("Enhance") formed Sherman Financial Group LLC ("Sherman"), a joint
venture to engage in the business of purchasing, servicing and securitizing
delinquent consumer accounts receivable. Mr. Gross, a member of the Management
Development Committee, is the Chief Executive Officer of Enhance. During the
fourth quarter of 1998, a provider of marketing, analytics and due diligence
services and a servicing business were acquired for the joint venture from
unrelated parties. MGIC and Enhance have each committed to provide $20.2 million
in equity capital to Sherman, a portion of which has already been funded. MGIC's
commitment is entirely in cash and Enhance's commitment is $8.5 million in cash
with the remainder of Enhance's commitment in the form of approximately 445,000
shares of Enhance common stock issued in the acquisition of the servicing
business. Each of MGIC and Enhance owns a 45.5% interest in Sherman, with the
remaining interest in Sherman owned by the senior management of Sherman. Under
the terms of the instruments
14
<PAGE> 18
governing Sherman, MGIC and Enhance must agree on all important decisions
affecting the Sherman joint venture. Each has (1) a right of first refusal
applicable to proposed transfers of the interests in Sherman owned by the other,
(2) a tag-along right with respect to the interests in Sherman proposed to be
sold by the other and (3) a right to cause Sherman to be sold to a third party.
MGIC and Enhance each own approximately 48% of Credit-Based Asset Servicing
and Securitization LLC and related entities (collectively, "C-BASS"), a joint
venture formed by MGIC and Enhance in 1996 which is engaged in the business of
purchasing, servicing and securitizing delinquent and other residential mortgage
assets. From time to time, MGIC and Enhance explore other joint investment
opportunities.
The foregoing disclosure is made for informational purposes only as Mr.
Gross has advised the Corporation that he does not consider that he has an
indirect material interest in the transactions described above such that the
disclosure of such transactions is required herein under the rules of the
Securities and Exchange Commission.
15
<PAGE> 19
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following tables provide information concerning compensation and stock
options, as well as descriptions of the Corporation's Pension Plan ("Pension
Plan") and Supplemental Executive Retirement Plan ("Supplemental Plan") as they
relate to the Chief Executive Officer and the four other most highly compensated
executive officers of the Corporation.
SUMMARY COMPENSATION TABLE
The following table summarizes information concerning compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of the Corporation or of Mortgage Guaranty Insurance Corporation
("MGIC") for fiscal year 1998 and for the previous two fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION STOCK COMPENSATION
NAME AND CURRENT PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) ($)(2)
- ----------------------------------- ---- --------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
William H. Lacy 1998 571,158 495,000 5,948 -0- 68,018
Chairman and Chief 1997 536,351 550,000 1,524 240,000 68,084
Executive Officer of the 1996 500,000 400,000 1,679 -0- 69,768
Corporation and Chairman
of MGIC
Curt S. Culver 1998 335,165 315,000 2,534 -0- 33,832
President of the Corporation 1997 314,548 320,000 457 200,000 33,853
and Chief Executive Officer 1996 276,740 240,000 335 -0- 40,216
and President of MGIC
J. Michael Lauer 1998 264,462 234,000 1,360 -0- 28,612
Executive Vice President 1997 237,209 240,000 541 80,000 28,732
and Chief Financial 1996 227,308 184,000 737 -0- 28,390
Officer of the
Corporation and MGIC
Lawrence J. Pierzchalski 1998 241,269 211,500 1,321 -0- 43,503
Executive Vice President - 1997 222,269 225,000 253 80,000 20,470
Risk Management of MGIC 1996 203,366 172,000 198 -0- 21,511
James S. MacLeod 1998 255,577 154,000 1,179 -0- 52,800
Executive Vice President - 1997 185,904 171,000 188 80,000 10,787
Field Operations of MGIC 1996 171,468 96,250 147 -0- 9,672
</TABLE>
- ---------------
(1) The amounts shown in this column represent reimbursements for the payment of
taxes related to income imputed in connection with the Supplemental Plan. Other
Annual Compensation for 1998 and for the years 1997 and 1996 does not include
perquisites and other personal benefits because the aggregate amount of such
compensation for each of the named individuals in each year did not exceed the
lesser of (a) $50,000 or (b) 10% of the combined salary and bonus for the named
individual in each year.
(2) The 1998 amounts included in "All Other Compensation" consist of:
16
<PAGE> 20
<TABLE>
<CAPTION>
VALUE OF SPLIT
PROFIT MATCHING DOLLAR
SHARING 401(K) LIFE INSURANCE TOTAL OTHER
NAME CONTRIBUTIONS CONTRIBUTIONS PREMIUMS(A) COMPENSATION
- ---- ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
William H. Lacy $8,000 $1,600 $52,735 $68,018(b)
Curt S. Culver 8,000 1,600 24,232 33,832
J. Michael Lauer 8,000 1,600 19,102 28,612
Lawrence J. Pierzchalski 8,000 1,600 33,903 43,503
James S. MacLeod 8,000 1,600 43,200 52,800
</TABLE>
- ---------------
(a) The amount shown represents the full dollar amount paid by or on behalf of
MGIC for the whole life portion of the split-dollar life insurance. The premium
attributed to the term portion of such insurance was paid by the named
individuals. MGIC will be reimbursed for premiums paid upon the sooner of the
retirement or termination of employment of each of the insureds.
(b) Includes $5,683 in supplemental long term disability insurance premium paid
on behalf of Mr. Lacy.
- --------------------------------------------------------------------------------
AGGREGATED STOCK OPTION EXERCISES IN THE LAST FISCAL YEAR AND OPTION VALUES AT
DECEMBER 31, 1998
The following table summarizes information with respect to stock options
held at December 31, 1998, and stock options exercised during 1998 by the Chief
Executive Officer of the Corporation and the four other most highly compensated
executive officers of the Corporation or MGIC.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998 AT DECEMBER 31, 1998
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME DURING 1998(#) ($)(1) (#) (#)(2) ($)(2)(3) ($)(2)(3)
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William H. Lacy 126,000 8,167,496 193,560 210,960 3,862,552 926,775
Curt S. Culver 20,000 1,307,301 119,360 170,640 2,326,145 647,505
J. Michael Lauer -0- -0- 279,880 70,320 8,812,698 308,925
Lawrence J. Pierzchalski 42,200 2,288,221 98,970 69,030 2,335,705 277,723
James S. MacLeod -0- -0- 117,400 68,600 3,370,267 267,322
</TABLE>
- ---------------
(1) Value realized is the difference between the exercise price and the market
value at the close of business on the date immediately preceding the date of
exercise.
(2) The Corporation's stock option agreements for all options granted under the
Corporation's 1989 Stock Option Plan and 1991 Stock Incentive Plan provide that
the options shall become immediately exercisable upon a change in control of the
Corporation or, as and to the extent determined by the Management Development
Committee, upon the occurrence of certain specified corporate transactions
affecting the Corporation.
(3) Value is based on the closing price of $39.8125 for the Corporation's Common
Stock on the New York Stock Exchange on December 31, 1998, less the exercise
price.
- --------------------------------------------------------------------------------
PENSION PLAN
The Corporation maintains a Pension Plan for the benefit of substantially
all employees of the Corporation, including executive officers. The Pension Plan
is a noncontributory defined benefit pension plan intended to qualify under
Section 401(a) of the
17
<PAGE> 21
Internal Revenue Code of 1986, as amended (the "Code"). Under the terms of the
Pension Plan, each eligible employee, including the executive officers named in
the above tables, generally earns annual pension credits for each year of
service equal to 2% of such employee's eligible cash compensation for that year
(the "career average formula"). A one-time adjustment was made in 1998 to the
aggregate pension credits for each employee with at least five years of vested
service so that such credits would be in an amount equal to 2% of such
employee's average annual pay for the five years ending December 31, 1997,
multiplied by the number of years of service with the Corporation since 1985.
All employees will earn pension credits for 1998 and subsequent years calculated
using the career average formula. In accordance with applicable requirements of
the Code, compensation in excess of $160,000 is disregarded for purposes of
computing pension credits. At retirement, the employee's annual pension credits
are added together to determine the employee's accrued pension benefit. Eligible
employees with credited service for employment prior to October 31, 1985 also
receive a "past service benefit," which is generally equal to the difference
between the amount of pension the employee would have been entitled to receive
with respect to service prior to October 31, 1985 under the terms of a prior
plan had such plan continued, and the amount the employee is actually entitled
to receive under an annuity contract purchased when the prior plan was
terminated.
Retirement benefits vest on the basis of a graduated schedule over a
seven-year period of service. Full pension benefits are payable upon retirement
at or after age 65 (age 62 if the employee has completed at least seven years of
service), and reduced benefits are payable beginning at age 55. The Code places
a maximum limitation on the amount of annual benefits that may be paid under the
Pension Plan, which was $130,000 for 1998 for persons born between 1938 and 1954
and retiring at or after age 65, indexed for cost-of-living increases. The
estimated annual benefits payable upon normal retirement to Messrs. Lacy,
Culver, Lauer, Pierzchalski and MacLeod as of December 31, 1998 were $121,333,
$103,578, $68,949, $102,086 and $91,385 respectively, after giving effect to the
limitation imposed by the Code.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Corporation maintains an unfunded, nonqualified Supplemental Plan for
designated employees (including executive officers), under which an eligible
employee, whose benefits from the Pension Plan are affected by the Code's
limitations on annual benefits and compensation that may be considered, is paid
the difference between the amounts the employee would have received from the
Pension Plan in the absence of such limitations and the amounts the employee is
actually entitled to receive from the Pension Plan. Benefits under the
Supplemental Plan are payable in the same manner, at the same time and in the
same form as the benefits paid under the Pension Plan. At December 31, 1998,
Messrs. Lacy, Culver, Lauer, Pierzchalski and MacLeod would have been entitled
to receive supplementary annual benefits under the Supplemental Plan of
$186,223, $60,849, $31,743, $33,306 and $21,091 respectively.
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Corporation has an agreement with Northwestern Mutual Investment
Services, LLC, a subsidiary of NML (the "NML subsidiary"), pursuant to which the
NML subsidiary was retained (i) to manage specified accounts under the
Corporation's long-term investment portfolio, and (ii) to provide investment,
accounting and reporting services to the Corporation. The agreement is
cancelable by the Corporation upon 90 days prior written notice and by the NML
subsidiary upon 180 days prior written notice. The Corporation paid the NML
subsidiary $1,079,190 in fees during 1998 under the agreement. It is expected
that the Corporation will continue to use the services of the NML subsidiary
during 1999.
During 1998, MGIC purchased long-term disability coverage for its employees
from NML, and MGIC paid NML an aggregate of $263,755 in premiums for such
coverage. The premiums paid were based on NML's published rates.
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During 1998, MGIC paid an aggregate of $203,366 to NML in split-dollar life
insurance premiums for the whole life portion of the life insurance coverage
issued by NML on Messrs. Lacy, Culver, Lauer, Pierzchalski, MacLeod and another
senior executive pursuant to a split-dollar collateral assignment program. The
premiums paid were determined by NML's published rates and will be repaid to
MGIC upon the sooner of the retirement or termination of employment of each of
the insureds.
The Corporation filed consolidated federal income tax returns with NML and
its subsidiaries from 1986 through August 13, 1991 pursuant to a tax sharing
agreement. While the Corporation is no longer a member of NML's consolidated tax
group, it has a continuing obligation to reimburse NML for the tax effect of any
changes in the taxable income of the Corporation relating to periods during
which the Corporation and its subsidiaries were included as part of that
consolidated group. During 1998, the Corporation made a payment of $1,285,232 to
NML under the tax sharing agreement.
Pursuant to a Common Stock Purchase Agreement entered into in 1984 between
the Corporation and NML, NML has the right under certain conditions to require
the Corporation to file a registration statement under the Securities Act of
1933 for the sale of its shares of the Corporation's Common Stock, or to
participate in a registration of Common Stock otherwise initiated by the
Corporation. The Corporation is generally required to pay all costs associated
with any such registration (other than applicable underwriting commissions and
discounts) and to indemnify NML against certain liabilities under the Securities
Act of 1933.
During 1998, the Corporation and C-BASS made separate purchases of home
price index data and other analytical services from Case Shiller Weiss, Inc.
("CSW") aggregating $110,071. The Corporation expects that it and C-BASS will
continue to make purchases of CSW products in 1999. Dr. Case owns more than 10%
of the stock of CSW. The foregoing disclosure is made for informational purposes
only as the Corporation does not consider C-BASS a subsidiary of the Corporation
for purposes of the regulations of the Securities and Exchange Commission
requiring that certain transactions with subsidiaries of the Corporation be
disclosed.
The law firm of Gibson, Dunn & Crutcher LLP performs legal services for the
Corporation. Mr. Wallison is of counsel to that firm and was a partner in the
firm during 1998.
During 1998, MGIC and other subsidiaries of the Corporation sold mortgage
insurance, paid mortgage insurance claims and provided certain other services to
unaffiliated companies of which certain of the Corporation's non-employee
directors were executive officers or directors. Such transactions were made in
the ordinary course of business and are not considered material to the
Corporation.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and directors, and certain other persons who
beneficially own more than ten percent of the Corporation's Common Stock, to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange. To the
Corporation's knowledge, based solely on a review of copies of such reports
furnished to the Corporation or written representations from the Corporation's
executive officers, directors and such beneficial owners, such persons complied
with all Section 16(a) filing requirements in 1998, except for one report which
was inadvertently filed late by the Corporation on behalf of Mr. Gordon
Steinbach, an executive officer of the Corporation. The report covered two sale
transactions occurring in the same month which were reported on a timely basis
by Mr. Steinbach to the Corporation for filing of the applicable Section 16(a)
form on his behalf.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 2)
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The Board of Directors, upon recommendation of its Audit Committee, has
reappointed the accounting firm of PricewaterhouseCoopers LLP ("PWC") as
independent accountants of the Corporation for the fiscal year ending December
31, 1999. The shareholders are being asked to ratify such appointment at the
Annual Meeting. A representative of PWC is expected to attend the meeting, will
be afforded an opportunity to make a statement if the representative desires to
do so, and will be available to respond to appropriate questions by
shareholders.
SHAREHOLDER VOTE REQUIRED
The affirmative vote of a majority of the votes cast on this matter is
required for the ratification of the appointment of PWC as independent
accountants. Abstentions and "broker non-votes" will not be counted as "votes
cast."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION
OF THE APPOINTMENT OF PWC AS INDEPENDENT ACCOUNTANTS. UNLESS INDICATED OTHERWISE
ON THE PROXY, THE SHARES WILL BE VOTED FOR RATIFICATION.
OTHER MATTERS
- --------------------------------------------------------------------------------
PROPOSALS OF SHAREHOLDERS
The Corporation must receive on or before November 27, 1999, any proposal
from a shareholder that the shareholder desires to submit to the 2000 Annual
Meeting and be included in the Corporation's Proxy Statement and proxy for that
meeting. The rules of the Securities and Exchange Commission also establish
other requirements for shareholder proposals of this type.
The proxy solicited by the Board of Directors for the 2000 Annual Meeting
may authorize the persons named in that proxy to vote in their discretion on a
proposal by a shareholder that is not included in the Corporation's Proxy
Statement for that Annual Meeting without any reference to such proposal in the
Proxy Statement unless the Corporation receives notice of the proposal on or
before February 10, 2000.
MANNER AND COST OF PROXY SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation. In
addition to the solicitation of proxies by use of the mails, officers, directors
and regular employees of the Corporation, acting on its behalf, may solicit
proxies by telephone, telegraph or personal interview. Also, the Corporation has
retained D.F. King & Co., Inc. to aid in the solicitation of proxies for which
the Corporation will pay a fee estimated to be $6,500, plus expenses. The
Corporation will, at its expense, request brokers and other custodians, nominees
and fiduciaries to forward proxy soliciting material to the beneficial owners of
shares held of record by such persons.
OTHER BUSINESS
At the date this Proxy Statement was printed, the Board of Directors knew
of no other business to be presented at the Annual Meeting. If other matters
properly come before the Annual Meeting, it is intended that the persons named
in the proxy will vote on such matters in accordance with their best judgment.
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MGIC INVESTMENT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 6, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MGIC INVESTMENT CORPORATION
The undersigned hereby appoints WILLIAM H. LACY and SHELDON B. LUBAR, and
either one of them, as proxy and attorney-in-fact of the undersigned, with full
power of substitution, to represent and vote, as designated below, all shares of
Common Stock of MGIC Investment Corporation which the undersigned is entitled to
vote at the Annual Meeting of Shareholders of such Corporation to be held in
Vogel Hall, Marcus Center for the Performing Arts, 123 East State Street,
Milwaukee, Wisconsin, on Thursday, May 6, 1999, 9:00 a.m. Central Time, and at
any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEM 2.
The undersigned acknowledges receipt of the Annual Report of the
Corporation and the Notice of the Annual Meeting and accompanying Proxy
Statement of the Corporation.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
MGIC INVESTMENT CORPORATION 1999 ANNUAL MEETING
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED
IN ITEM 1 AND FOR ITEM 2
1. ELECTION OF DIRECTORS: 1 - MARY K. BUSH 2 - DAVID S. ENGELMAN
3 - KENNETH M. JASTROW, II 4 - DANIEL P. KEARNEY
5 - WILLIAM H. LACY
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed to the left (except to vote for all nominees
as specified below). listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right).
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2. Ratify the appointment of PricewaterhouseCoopers LLP as the independent
accountants of the Corporation. / / FOR / / AGAINST / / ABSTAIN
3. In his discretion, each Proxy is authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
CHECK APPROPRIATE BOX Date __________________ NO. OF SHARES
INDICATE CHANGES BELOW:
ADDRESS CHANGE? / / Name Change? / /
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SIGNATURE(S) IN BOX
NOTE: Please sign exactly as your
name appears hereon. Joint owners
should each sign personally. A
corporation should sign full
corporate name by duly authorized
officers and affix corporate seal.
When signing as attorney, executor,
administrator, trustee or guardian,
give full title as such.
