<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
- ---------------------------
1999
ANNUAL
REPORT
TO
SHAREHOLDERS
MGIC INVESTMENT CORPORATION
CURT S. CULVER
Chief Executive Officer
March 27, 2000
Dear Shareholder:
On behalf of the Board of Directors of MGIC Investment Corporation, it is
my pleasure to invite you to the Annual Meeting of Shareholders to be held on
Thursday, May 4, 2000, at the Marcus Center for the Performing Arts in
Milwaukee, Wisconsin.
At the meeting, shareholders will be asked to elect four directors and to
ratify the appointment of PricewaterhouseCoopers LLP as the company's
independent accountants for 2000. We will also report on our business.
Your vote is important. Even if you plan to attend, to be sure that your
shares are represented at the meeting, we encourage you to sign the enclosed
card designating the proxies to vote your shares. Please read the Proxy
Statement for more information about the voting process.
Our Annual Report to Shareholders follows the Proxy Statement in this
booklet.
Bill Lacy retired as Chairman of the Board of Directors and Chief Executive
Officer on December 31, 1999. During Bill's tenure, the company went from being
privately-held to being included in the S&P 500. Bill's strategic vision and
thoughtful leadership have been critical elements in our success. All of us at
MGIC express our appreciation to Bill and wish him well. Peter Wallison left the
Board in 1999 after nine years as a director. On behalf of the Board, I would
like to thank Peter for his dedicated service.
Sincerely,
/s/ CURT S. CULVER
Curt S. Culver
Chief Executive Officer
<PAGE> 3
MGIC INVESTMENT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 4, 2000
To the Shareholders of
MGIC Investment Corporation
The Annual Meeting of Shareholders of MGIC Investment 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 4, 2000, at
9:00 a.m., to vote on the following matters:
(1) Election of a class of four directors to serve a three-year term
expiring at the 2003 Annual Meeting;
(2) Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for 2000; and
(3) Any other matters that may be properly brought before the meeting.
The Board of Directors has fixed the close of business on March 10, 2000,
as the record date to determine the shareholders entitled to notice of and to
vote at the meeting.
By Order of the Board of Directors
Jeffrey H. Lane, Secretary
Milwaukee, Wisconsin
March 27, 2000
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 being mailed to
shareholders on or about March 27, 2000, in connection with the solicitation of
proxies on behalf of the Board of Directors of MGIC Investment Corporation (the
"Company"), a Wisconsin corporation, for use at the Annual Meeting of
Shareholders to be held at 9:00 a.m., Thursday, May 4, 2000, in Vogel Hall at
the Marcus Center for the Performing Arts, 123 East State Street, Milwaukee,
Wisconsin.
VOTING MATTERS
RECORD DATE INFORMATION
You are entitled to one vote for each share of Common Stock registered in
your name in the Company's records on March 10, 2000. On that date, 105,746,723
shares of the Company's Common Stock were outstanding and entitled to vote.
VOTING BY PROXIES
The enclosed proxy card is solicited by the Board of Directors of the
Company. Your shares will be voted at the meeting by the named proxies in
accordance with the choices you specify on the proxy card. If you sign and
return a proxy card without giving specific choices, your shares will be voted
as follows:
FOR--Election to the Board of the four individuals nominated by the Board
of Directors;
FOR--Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for the year ending December 31, 2000; and
On such other matters as properly come before the meeting, in the best
judgment of the named proxies.
If your shares are held in the name of a broker, bank or other nominee, you
should be receiving with this Proxy Statement instructions from them on how you
can vote your shares.
HOW TO REVOKE A PROXY
You may revoke your proxy at any time before your shares have been voted by
advising the Secretary of the Company in writing or by signing and delivering a
proxy card with a later date. If you attend the meeting, you may withdraw your
proxy and vote shares registered in your name in person.
HOW VOTES ARE COUNTED
A quorum is necessary to hold the meeting and will exist if a majority of
the outstanding shares of Common Stock entitled to vote are represented at the
meeting. Votes cast by proxy or in person at the meeting will be counted at the
meeting by representatives of Firstar Bank Milwaukee, N.A., the transfer agent
and registrar of the Company's Common Stock, which has been appointed by the
Company to act as inspector of election for the meeting. Abstentions will be
counted for purposes of determining the presence of a quorum, but do not
constitute a vote "for" or "against" any matter and 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 from the
beneficial owner of the shares and has not received such instructions. Broker
non-vote shares will be counted for purposes of determining the presence of a
quorum, but will be disregarded in the calculation of "votes cast."
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the year ended December 31,
1999, follows this Proxy Statement. The Annual Report to Shareholders is a
separate report and should not be considered a part of this Proxy Statement.
<PAGE> 5
STOCK OWNERSHIP
The following table gives information about shareholders who were
beneficial owners of more than 5% of the Common Stock as of December 31, 1999,
based on information filed with the Securities and Exchange Commission. The
table also shows the
Common Stock beneficially owned by each executive officer of the Company named
in the Summary Compensation Table of this Proxy Statement, and by all directors
and executive officers as a group (the "Group") as of January 31, 2000. Unless
otherwise noted, the shareholders have sole voting and investment power over
their 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)............................ 11,985,392 11.3%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 (2)........................... 10,986,540 10.4%
Legg Mason, Inc.
100 Light Street
Baltimore, Maryland 21202 (3)............................. 9,414,890 8.9%
AMVESCAP PLC
1315 Peachtree Street, N.E
Atlanta, Georgia 30309 (4)................................ 8,868,221 8.4%
William H. Lacy (5)......................................... 451,330 *
Curt S. Culver (5).......................................... 276,428 *
J. Michael Lauer (5)........................................ 299,487 *
Lawrence J. Pierzchalski (5)................................ 140,404 *
James S. MacLeod (5)........................................ 163,554 *
All directors and executive officers as a group (20 persons)
(5)(6).................................................... 1,840,929 1.7%
</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 37,000 shares.
(2) Includes 10,823,380 shares beneficially owned by Fidelity Management &
Research Company ("Fidelity"), a registered investment adviser and wholly-owned
subsidiary of FMR Corp., 7,696,500 shares of which are owned by Fa Growth
Opportunities Fund, a registered investment company which Fidelity serves as
adviser. Also includes 163,160 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 10,823,380
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 163,160 shares owned by the
institutional accounts managed by Fidelity Trust, sole voting power as to
113,160 of such shares and no voting power as to 50,000 of such shares. FMR
Corp.'s beneficial ownership may include shares beneficially owned through
Strategic Advisers, Inc., a wholly-owned subsidiary of FMR Corp. and a
registered investment adviser, with sole investment power, but no voting power,
over such shares. Mr. Johnson, members of his family and trusts
2
<PAGE> 6
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.
(3) Includes 6,922,251 shares as to which Legg Mason Fund Adviser, Inc., a
registered investment adviser and subsidiary of Legg Mason, Inc., has sole
voting power and shared investment power. Legg Mason, Inc. is the parent holding
company of the following registered investment advisers which have shared voting
and investment powers as follows: Legg Mason Capital Management, Inc.--2,407,414
shares; Legg Mason Wood Walker, Inc.--43,320 shares; Batterymarch Financial
Management, Inc.--33,900 shares; Legg Mason Trust, fsb--7,630 shares; Bartlett &
Co.--275 shares; and Brandywine Asset Management, Inc.--100 shares.
(4) Voting and investment powers as to 8,868,221 shares are shared among INVESCO
Capital Management, Inc., a registered investment adviser, INVESCO Asset
Management Limited, an investment adviser organized in England, 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, INVESCO, Inc., INVESCO North American
Holdings, Inc., and INVESCO (NY) Asset Management, Inc.
(5) Includes shares which the named executive officers had the right to acquire
on, or within 60 days after, January 31, 2000, under stock options granted to
executive officers as follows: Mr. Lacy--313,800; Mr. Culver--252,000; Mr.
Lauer--279,760; Mr. Pierzchalski--137,760; Mr. MacLeod--145,760; and the
Group--1,433,040. Also includes shares held in the Company's Profit Sharing and
Savings Plan and Trust as follows: Mr. Culver--7,953; Mr. Lauer--12,832; Mr.
MacLeod--15,785; and the Group--55,274. Also includes restricted shares listed
in note (3) to the Summary Compensation Table over which the named executive
officer has sole voting power but no investment power. Also includes shares for
which voting and investment power is shared as follows: Mr. Lauer--2,400; and
the Group--25,368. 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--3,900; and the Group--109,900.
(6) Includes an aggregate of 52,108 restricted shares held under the 1993
Restricted Stock Plan for Non-Employee Directors and under the 1991 Stock
Incentive Plan. The beneficial owners have sole voting power but no investment
power over these shares. Excludes 11,985,392 shares held by NML. James D.
Ericson and Edward J. Zore, who are executive officers and trustees of NML and
directors of the Company, have each disclaimed beneficial ownership of such
shares.
- --------------------------------------------------------------------------------
ITEM 1--ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS
The Board of Directors is divided into three classes, with the directors of
each class serving for 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. If a nominee for director is not available
for election, the proxies will vote for another person proposed by the Board of
Directors, or as an alternative, the Board of Directors may reduce the number of
directors to be elected at the Annual Meeting.
Under the Company's Bylaws, written notice of nominations by shareholders
for election to the Board must have been received by the Secretary no later than
February 10, 2000. No notice of any nominations was received. As a result, no
other nominations for election to the Board of Directors may be made by
shareholders at the Annual Meeting.
NOMINEES FOR DIRECTOR
Four incumbent directors have been nominated by the Board of Directors for
re-election to serve a three-year term of office ending at the time of the 2003
Annual Meeting:
Karl E. Case
Curt S. Culver
William A. McIntosh
Leslie M. Muma
The principal occupation, business experience for at least the past five
years, committee assignments and other information about each of the nominees
and the directors continuing in office are described below.
3
<PAGE> 7
SHAREHOLDER VOTE REQUIRED
Each nominee who receives 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 and do not have contrary
voting instructions. Broker non-votes, abstentions and instructions on the 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.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED ABOVE.
PROXIES WILL BE VOTED FOR THE NOMINEES UNLESS A SHAREHOLDER GIVES OTHER
INSTRUCTIONS.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NOMINEES FOR DIRECTOR OWNED(1)
TERM ENDING 2003 ------------
<S> <C> <C>
[Case photo] KARL E. CASE, 53, 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. 4,247(2)(3)
[Culver Photo] CURT S. CULVER, 47, a Director since January 1999, became
Chief Executive Officer of the Company on January 1, 2000.
Mr. Culver has been President of the Company and Chief
Executive Officer of Mortgage Guaranty Insurance Corporation
("MGIC") since January 1999, President of MGIC since May
1996 and held senior executive positions with MGIC for more
than five years before that time. He is a member of the
Executive 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. 276,428(4)
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
[McIntosh Photo] WILLIAM A. MCINTOSH, 60, a Director since 1996, has been
adjunct professor of finance at Howard University,
Washington, D.C. since August 1998. Mr. McIntosh is serving
as an adjunct faculty member of Wellesley College from
January through May 2000. He has 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. Mr.
McIntosh is a Director of Mason Street Funds, Inc. He is
Chairman of the Securities Investment Committee of the Board
of Directors. Mr. McIntosh is a graduate of Xavier
University, Ohio. 5,860(2)(3)
[Muma Photo] LESLIE M. MUMA, 55, a Director since 1995, has been Chief
Executive Officer of Fiserv, Inc., a financial industry
automation products and services firm, since March 1999. Mr.
Muma has been President of Fiserv 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. 12,156(2)(3)
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2001
[Abbott Photo] JAMES A. ABBOTT, 60, a Director since 1989, has been
Chairman and a principal of American Security Mortgage
Corp., a mortgage banking firm, since June 1999. He served
as President and Chief Executive Officer of First Union
Mortgage Company, a mortgage banking company, from January
1980 to 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. 8,255(2)(3)
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
[Ericson Photo] JAMES D. ERICSON, 64, a Director since 1985, was named
Chairman of The Northwestern Mutual Life Insurance Company
effective March 31, 2000. He has been Chief Executive
Officer of NML since October 1993 and previously served as
the President, Chief Operating Officer, and Executive Vice
President-Investments of NML. He is a Trustee of NML,
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 a J.D. degree from State University of Iowa. -0-(5)
[Gross Photo] DANIEL GROSS, 57, 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. 3,285(3)
[Lubar Photo] SHELDON B. LUBAR, 70, 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
C2, Inc., 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. 28,329(2)(3)(6)
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
[Zore Photo] EDWARD J. ZORE, 54, a Director since 1990, was named
President of The Northwestern Mutual Life Insurance Company
effective March 31, 2000. He had served NML as Executive
Vice President since February 1995, and before that as Chief
Financial Officer, Chief Investment Officer, and Senior Vice
President. Mr. Zore is a Trustee of NML and a Director of
Northwestern Investment Management Company and Northwestern
Mutual Investment Services, LLC. He is a member of the
Executive and Securities Investment Committees of the Board
of Directors. Mr. Zore holds a B.S. degree and an M.S.
degree from the University of Wisconsin-Milwaukee. -0-(5)
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2002
[Bush Photo] MARY K. BUSH, 51, 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 RJR Tobacco
Holdings, Inc. and Texaco, Inc., 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)(3)
[Engelman Photo] DAVID S. ENGELMAN, 62, a Director since 1993, is a private
investor. Mr. Engelman was Chairman, President and Chief
Executive Officer of UnionFed Financial Company 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 Fleetwood Enterprises,
Inc., Quaker City Bancorp, Inc. and its banking subsidiary
Quaker City Bank. 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. 7,182(2)(7)
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
[Jastrow Photo] KENNETH M. JASTROW, II, 52, a Director since 1994, became
Chairman and Chief Executive Officer of Temple-Inland Inc.,
a holding company with interests in paper, forest products
and financial services, in January 2000. Mr. Jastrow served
as President and Chief Operating Officer of Temple-Inland
Inc. since 1998 and held senior executive positions with
that company and its subsidiaries for more than five years
before then. He is a member of the Management Development
Committee of the Board of Directors. Mr. Jastrow is a
graduate of the University of Texas. 4,039(2)(3)
[Kearney Photo] DANIEL P. KEARNEY, 60, a Director since May 1999, 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 Fiserv, Inc., Great
Lakes REIT and MBIA, Inc. He is a member of the Audit
Committee of the Board of Directors. Mr. Kearney 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
</TABLE>
- ---------------
(1) Ownership information is for shares of Common Stock as of January 31, 2000.
Unless otherwise noted, all directors have sole voting and investment power with
respect to the shares. Common Stock beneficially owned by each director
represents less than 1% of the total number of shares outstanding.
(2) Includes 2,000 shares held under the Company's 1993 Restricted Stock Plan
for Non-Employee Directors. The directors have sole voting power and no
investment power over these shares.
(3) Includes restricted shares held under the Deposit Share Program for
Non-Employee Directors under the Company's 1991 Stock Incentive Plan as follows:
Mr. Abbott--1,248; Dr. Case--1,244; Mr. Engelman--1,201; Mr. Gross--752; Mr.
Jastrow--1,129; Mr. Lubar--1,285; Mr. McIntosh--1,047; and Mr. Muma--1,191.
Directors have sole voting power and no investment power over these shares.
(4) Includes 252,000 shares subject to stock options which Mr. Culver had the
right to acquire on January 31, 2000, or within 60 days thereafter; 7,953 shares
held in the Company's Profit Sharing and Savings Plan and Trust; and 6,244
restricted shares over which Mr. Culver has sole voting power but no investment
power.
(5) Messrs. Ericson and Zore, as executive officers of NML, may be deemed to
have a beneficial interest in the 11,985,392 shares of Common Stock of the
Company 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. Mr. Lubar disclaims beneficial
ownership of all of these shares.
(7) Includes 1,586 shares for which voting and investment powers are shared by
Mr. Engelman as co-trustee.
8
<PAGE> 12
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met six times during 1999, 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 while he or she was a director. The
committees of the Board of Directors include the Audit Committee and the
Management Development Committee.
AUDIT COMMITTEE
The members of the Audit Committee are Ms. Bush, Mr. Kearney and Mr. Muma.
The Audit Committee held five meetings during 1999. The functions of the Audit
Committee are to review the Company's financial statements and regulatory
examinations, select the Company's independent accountants, and advise
management on the adequacy and effectiveness of the Company's internal
accounting controls, internal audit function and financial policies and
practices.
MANAGEMENT DEVELOPMENT COMMITTEE
The members of the Management Development Committee are Messrs. Gross,
Jastrow and Lubar. The Management Development Committee held six meetings during
1999. This Committee manages the compensation program for the Company's senior
management, administers the Company's stock option plans and recommends
candidates to fill senior management positions and vacancies on the Board of
Directors and committees.
The Management Development Committee will consider nominees to the Board of
Directors who are recommended by shareholders. Recommendations must be submitted
in writing to the Committee, in care of the Secretary of the Company, by
December 1 of the year preceding the applicable Annual Meeting of Shareholders
and must include a description of the proposed nominee's qualifications,
background information and his or her consent to serve as a director.
COMPENSATION OF DIRECTORS
Annual and Meeting Fees: Directors who are employees of the Company or any
of its subsidiaries are not compensated for their service on the Board.
Directors who are not employees of the Company or
of NML receive an annual fee for their services of $24,000, 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 Board committee receives an additional
$2,000 annual fee. Fees that would have been paid to executive officers of NML
for their services as directors are paid to NML. The Company reimburses
directors for travel, lodging and related expenses incurred in connection with
attending Board of Directors and committee meetings.
Deferred Compensation Plan: Under the Company's Deferred Compensation Plan
for Non-Employee Directors, an eligible director may elect to defer payment of
all or part of the annual and meeting fees until the director's death,
disability, termination of service as a director or to another date specified by
the director. A director who participates in this plan may elect to have his
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
Company'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 Company's Common Stock. Messrs. Culver, Ericson, Lacy and Zore
are not eligible to participate in this plan.
Deposit Share Program: The Company's 1991 Stock Incentive Plan includes a
Deposit Share Program under which an eligible director may deposit up to 100% of
the annual and meeting fees for the preceding year. The funds are used to
purchase shares of Common Stock at fair market value which are then deposited
with the Company. The Company matches each share deposited with one and one-half
shares of restricted Common Stock ("Restricted Stock"). A director who had
deferred annual and meeting fees during the preceding year into share units (see
"Deferred Compensation Plan" above) may reduce the amount that would otherwise
be required to be deposited to purchase Common Stock by the amount so deferred.
For matching purposes, the amount so deferred is treated as if shares had been
purchased and deposited and one and one-half shares of Restricted Stock are
awarded for each such share.
9
<PAGE> 13
The Restricted Stock vests on the third anniversary of the award and,
except for gifts to family members, may not be transferred prior to vesting. If
the shares of Restricted Stock have not vested when a director's service on the
Board of Directors ends, they will be forfeited unless service as a director
ends on account of the director's death or a Permissible Event or the Management
Development Committee waives the forfeiture. All of the director's shares of
Restricted Stock vest on death. A Permissible Event is termination of service as
a director because either (a) the director has reached the age of 70 and is no
longer eligible for reelection to the Board of Directors under the Company's
retirement policy, or (b) the director has taken a position with or is providing
services to a governmental, charitable or educational institution whose policies
prohibit continued service on the Company's Board of Directors, or (c) 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) the director
enters into a non-competition agreement with the Company on or before the date
that the director retires or resigns, and (ii) the director complies with the
agreement for the balance of the three-year vesting period. The shares of
Restricted Stock will immediately become vested upon a change in control of the
Company, as defined by the agreement relating to the Restricted Stock. Messrs.
Culver, Ericson, Lacy and Zore are not eligible to participate in the Deposit
Share Program.
Former Restricted Stock Plan: Non-employee directors elected to the Board
of Directors before 1997 were each awarded, on a one-time basis, 2,000 shares of
Common Stock under the Company's 1993 Restricted Stock Plan for Non-Employee
Directors. The shares are restricted from transfer until the director ceases to
be a director of the Company by reason of death, disability or retirement, as
defined by the agreement relating to the shares, and are forfeited if the
director leaves the Board for another reason unless the forfeiture is waived by
the plan administrator. In 1997, the Board decided that no new awards of Common
Stock will be made under the plan. Messrs. Ericson, Lacy and Zore were not
eligible to participate in the plan.
REPORT OF THE MANAGEMENT DEVELOPMENT COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Management Development Committee ("Committee") of the Board of Directors,
comprised of the individuals named below. The Committee submits the following
report on the 1999 compensation of the Company's senior management.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program is designed to attract,
retain, motivate and reward high-quality professionals. The Committee's approach
to executive compensation emphasizes pay for performance over fixed salary plus
long-term compensation linked to shareholder value in the form of stock options.
The principal objectives of the program are to:
- link executive compensation to Company performance;
- align the interests of management and shareholders by providing a
substantial portion of an executive's compensation opportunity in the
form of Company stock; and
- maintain competitive pay levels to attract and retain high-quality
executives.
The key components of the Company's executive compensation program are base
salary, annual performance bonus (a portion of which is paid in restricted
stock) and long-term stock options. The Committee reviews compensation levels of
the Company's executives each year, using compensation survey data prepared by
independent consultants. The Committee believes that the Company's peer group
for executive talent is not limited to the companies included in the Standard &
Poor's industry index used for the performance graph comparison of shareholder
return. Therefore, the compensation survey data obtained by the Committee cover
a variety of publicly-traded financial guaranty and insurance companies.
10
<PAGE> 14
BASE SALARY
The Committee reviews the salary ranges and base salaries of the senior
executives each January, comparing the compensation levels of the Company's
executives to comparable positions in the companies represented in the survey
data. Salary ranges of the Company's senior executives are targeted at the
median compensation levels for comparable positions within the comparative group
of companies. The Committee's decision to set salary range midpoints at the 50th
percentile of competitive pay levels reflects the Committee's belief that a
substantial portion of the senior executives' annual pay should be linked to the
achievement of performance goals and increases in shareholder value.
For 1999, the Committee increased the salary range midpoints of senior
executives by 3.5%, representing the average salary range movement reflected in
the compensation survey data, and increased the salaries of executives who were
below their adjusted salary midpoints to approximate the new midpoint for their
respective positions. The salaries shown for the named officers in the Summary
Compensation Table which follows this report 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 1999.
ANNUAL PERFORMANCE BONUS
Annual bonuses are awarded to senior executives based upon achievement of
corporate and individual performance goals. Under the executive compensation
program, the Company's net income must exceed a threshold amount 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 Committee
establishes the net income threshold and net income target in January of each
year based on an assessment of the business environment and the Company's
financial plan for that year. For 1999, the Committee set the target at an
amount equal to the net income projected in the Company's 1999 financial plan
and set as the threshold an amount equal to the Company's actual earnings for
the prior year, exclusive of capital gains.
The compensation survey data revealed that annual performance bonus awards
to the Company's senior executives were significantly below market average.
Based upon the survey results, the Committee increased the maximum bonus levels
for senior executives for 1999. In prior years, the maximum bonus levels ranged
from 40% to 100% of base salary, depending on which of four bonus tiers applied
to the executives, and bonuses were paid entirely in cash. For 1999, the
Committee increased the maximum bonus opportunities in each tier by 50% and
created a fifth bonus tier. The new maximum bonus levels range from 60% to 200%
of base salary in effect at the time of bonus award. However, unlike previous
bonus awards which were paid entirely in cash, two-thirds of each senior
executive's 1999 bonus was paid in cash, and the executive was awarded shares of
restricted Company stock with a market value equivalent to the balance of the
executive's bonus. Ownership of the shares vests one year from the date of
award. The decision to pay a portion of the performance bonus in Company stock
reflects the Committee's belief that executive compensation should be linked to
increases in shareholder value.
The maximum bonus level for each senior executive was determined by the
Committee in January 1999, based upon Mr. Lacy's recommendations. Mr. Lacy's
recommendations reflected his subjective judgment as to the ability of each
senior executive to influence the Company's competitiveness and profitability.
Actual bonus amounts paid to the senior executives were decided in January 2000,
when Mr. Culver, who became Chief Executive Officer of the Company on January 1,
2000, recommended bonus awards for the other senior executives based upon, in
general, his subjective evaluation of each executive's performance during the
year, contributions to the Company's success and achievement of personal goals.
The Committee approved the recommended bonus amounts without change. Mr.
Culver's bonus was determined by the Committee based upon its subjective
evaluation of his performance during 1999.
STOCK OPTIONS
The Committee (or a subcommittee of the Committee) awarded stock options to
Mr. Culver in January 1999, in connection with his becoming Chief Executive
Officer of MGIC, and also awarded stock options to the senior executive group in
May 1999. Information on the stock option grants during 1999 to Messrs. Lacy and
Culver and the other named executive officers is set forth in the table under
"Executive Compensation--Option Grants in 1999."
The award of stock options to senior executives is designed to link the
interests of management with the interests of other shareholders in the
Company's long-
11
<PAGE> 15
term success. Under the Company'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 if the price of the Company's common
stock increases in the future, benefiting all shareholders.
The compensation survey data presented to the Committee in January 1999
revealed that the Company's stock option program was not competitive with the
long-term incentive compensation programs of the peer group of companies. After
receiving additional information from the independent compensation consultant,
in May 1999, the Committee decided to award stock options to senior executives
annually, rather than at three-year intervals as in years past. Options awarded
every third year (including 2000) will vest based upon the achievement of
corporate performance goals to be established by the Committee, continuing a
pattern which began in 1994 of granting performance-based stock options to
senior executives on a three-year cycle. In the past, the corporate performance
goal has been a five-year aggregate earnings per share amount. Options awarded
in the other years will vest over a five-year period on the basis of continued
employment. The aggregate number of options awarded over the next three-year
period will be higher than the last option grant to senior executives in 1997,
and about one-half of the options will be awarded in the year in which the
options are subject to the performance-based vesting criteria.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee reviews the salary range, base salary and performance bonus
of the Chief Executive Officer each year in January. For 1999, the Committee
increased Mr. Lacy's salary range midpoint by 3.8%, which was the average salary
range increase for Chief Executive Officers within the comparative group of
companies. Mr. Lacy's base salary of $550,000, which was last adjusted effective
April 1997, was unchanged in 1999 and was equal to his adjusted midpoint.
For 1999, the Committee assigned Mr. Lacy to the bonus tier with the
highest bonus opportunity, 200% of his base salary. The Committee's decision to
assign Mr. Lacy to this bonus category was based on the Committee's subjective
evaluation of his ability to influence the Company's profitability and reflected
the Committee's desire to make Mr. Lacy's performance bonus competitive with
bonus opportunities available to CEOs in the peer group of companies reflected
in the compensation survey data. In January 2000, in recognition of the
Company's results for 1999 (including its net income, return on equity and
growth in primary insurance in force), and based upon the Committee's subjective
evaluation of Mr. Lacy's performance, the Committee awarded Mr. Lacy a
performance bonus of $1,100,000, an amount equal to 200% of his base salary. As
described above, two-thirds of the bonus, or $733,370, was paid in cash and the
balance of the bonus amount was awarded in the form of 8,080 shares of
restricted stock valued at the then current market price ($45.375) per share.
The shares vest in one year.
Mr. Lacy was granted 75,000 stock options in May 1999, under the
Committee's revised plan for stock option grants to senior executives as
described above. The options vest over a five-year period based on continued
employment. (Although Mr. Lacy retired as Chief Executive Officer at the end of
1999, Mr. Lacy will continue employment with the Company in an advisory capacity
under the terms of the employment agreement described under the caption
"Employment Agreement with Mr. Lacy.")
TAX DEDUCTIBILITY LIMIT
Under the Internal Revenue Code, certain compensation in excess of $1
million paid during a year to any of the executive officers named in the Summary
Compensation Table for that year is not deductible. The Committee believes the
effect of such compensation on income tax expense for 1999 will not be material.
The Committee believes it is in the Company's interest to preserve flexibility
to pay compensation that will not qualify for the income tax deduction because
it is based on subjective factors.
MEMBERS OF THE MANAGEMENT DEVELOPMENT COMMITTEE:
Sheldon B. Lubar, Chairman
Daniel Gross
Kenneth M. Jastrow, II
12
<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the last five years with the cumulative total return
on the Standard & Poor's 500 Stock Index and the Standard & Poor's 500 Insurance
(Property-Casualty) Index (the peer group index which has included the Company
since November, 1998). The graph assumes $100 was invested on December 31, 1994,
in each of the Company's Common Stock, the Standard & Poor's 500 Stock Index and
the Standard & Poor's 500 Insurance (Property-Casualty) Index, and that all
dividends were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
S & P 500 INS (PROP-
S&P 500 CASUALTY) MGIC
------- -------------------- ----
<S> <C> <C> <C>
100.00 100.00 100.00
1995 138.00 135.00 164.00
1996 169.00 165.00 231.00
1997 225.00 236.00 405.00
1998 290.00 214.00 243.00
1999 351.00 155.00 368.00
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
S&P 500 $138 $169 $225 $290 $351
- ------------------------------------------------------------------------------------------------
S&P 500 Insurance (Property-Casualty) 135 165 236 214 155
- ------------------------------------------------------------------------------------------------
MGIC Investment Corporation 164 231 405 243 368
- ------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Gross is a member of the Management Development Committee and is the
Chief Executive Officer of Enhance Financial Services Group Inc. ("Enhance").
MGIC and Enhance are the principal owners of two joint ventures--Credit-Based
Asset Servicing and Securitization LLC ("C-BASS") and Sherman Financial Group
LLC. During 1999, MGIC and Enhance contributed capital to each joint venture. In
addition, C-BASS manages various mortgage-related securities beneficially owned
by each of the Company and Enhance that were acquired through C-BASS in 1999 and
the joint ventures sublease space from Enhance. Significant decisions affecting
a joint venture must be jointly agreed to by MGIC and Enhance. In general, each
has a right of first refusal for proposed transfers of the other's interest, a
right to join in a sale of the other's interest, and a right to cause the joint
venture to be sold to a third party if one of them declines to purchase the
other's interest.
The disclosure above is for informational purposes only. Mr. Gross does not
believe that he has an indirect material interest in these matters which would
require disclosure of them under the rules of the Securities and Exchange
Commission.
13
<PAGE> 17
EXECUTIVE COMPENSATION
The following tables provide information concerning compensation, stock
option awards and aggregated stock option exercises as they relate to the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company or of its principal subsidiary, Mortgage Guaranty
Insurance Corporation ("MGIC") in 1999. The Company's retirement benefits are
also described below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- -------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
COMPENSATION AWARDS STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(2) ($)(3) OPTIONS(#) ($)(4)
- --------------------------- ---- --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William H. Lacy 1999 550,004 733,370 2,419 366,630 75,000 67,821
Chairman and Chief 1998 571,158(1) 495,000 5,948 -0- -0- 68,018
Executive Officer of the 1997 536,351 550,000 1,524 -0- 240,000 68,084
Company and Chairman
of MGIC*
Curt S. Culver 1999 419,252 566,678 766 283,322 175,000 62,053
President of the Company 1998 335,165(1) 315,000 2,534 -0- -0- 33,832
and Chief Executive 1997 314,548 320,000 457 -0- 200,000 33,853
Officer
and President of MGIC*
J. Michael Lauer 1999 267,585 270,009 820 135,000 25,000 28,485
Executive Vice President 1998 264,462(1) 234,000 1,360 -0- -0- 28,612
and Chief Financial 1997 237,209 240,000 541 -0- 80,000 28,732
Officer
of the Company and MGIC
Lawrence J. Pierzchalski 1999 238,789 240,029 360 119,971 25,000 33,122
Executive Vice President - 1998 241,269(1) 211,500 1,321 -0- -0- 43,503
Risk Management of MGIC 1997 222,269 225,000 253 -0- 80,000 20,470
James S. MacLeod 1999 276,062 182,442 391 91,158 25,000 52,657
Executive Vice President - 1998 255,577(1) 154,000 1,179 -0- -0- 52,800
Field Operations of MGIC 1997 185,904 171,000 188 -0- 80,000 10,787
</TABLE>
- ---------------
* Mr. Lacy retired as an officer and director of the Company on December 31,
1999, and Mr. Culver became Chief Executive Officer effective January 1, 2000.
(1) Reflects one extra pay period for 1998.
(2) The amounts shown in this column represent reimbursements for the payment of
taxes related to income imputed in connection with the Supplemental Executive
Retirement Plan described below. Other Annual Compensation for the years shown
in the table 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.
(3) The amounts shown in this column are the number of shares awarded multiplied
by $45.375, the New York Stock Exchange closing price on the date of the award.
The shares, which vest on the first anniversary of the award, are as follows:
Mr. Lacy--8,080; Mr. Culver--6,244; Mr. Lauer--2,975; Mr. Pierzchalski--2,644;
and Mr. MacLeod--2,009. Dividends are paid on the restricted shares. None of the
named executive officers held any restricted shares on December 31, 1999.
(4) The 1999 amounts included in All Other Compensation consist of:
14
<PAGE> 18
<TABLE>
<CAPTION>
VALUE OF SPLIT
PROFIT MATCHING DOLLAR
SHARING 401(K) LIFE INSURANCE TOTAL OTHER
NAME CONTRIBUTIONS CONTRIBUTIONS PREMIUMS(A) COMPENSATION(B)
- ---- ------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
William H. Lacy $8,000 $1,600 $52,668 $67,821
Curt S. Culver 8,000 1,600 46,568 62,053
J. Michael Lauer 8,000 1,600 18,885 28,485
Lawrence J. Pierzchalski 8,000 1,600 23,522 33,122
James S. MacLeod 8,000 1,600 43,057 52,657
</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 executive
officers. MGIC will be reimbursed for premiums paid upon the sooner of the
retirement or termination of employment of the named executive officers.
(b) Includes supplemental long term disability insurance premiums paid on behalf
of Mr. Lacy--$5,553 and Mr. Culver--$5,885.
- --------------------------------------------------------------------------------
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE VALUE($)(2)
- ---- ---------- ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
William H. Lacy 75,000 9.47 46.0625 5/5/09 1,349,325
Curt S. Culver 100,000 12.63 33.8125 1/22/07 1,457,500
75,000 9.47 46.0625 5/5/09 1,349,325
J. Michael Lauer 25,000 3.16 46.0625 5/5/09 449,775
Lawrence J. Pierzchalski 25,000 3.16 46.0625 5/5/09 449,775
James S. MacLeod 25,000 3.16 46.0625 5/5/09 449,775
</TABLE>
- ---------------
(1) Mr. Culver's option for 100,000 shares vests on January 22, 2000 and the
next two anniversaries if the Company's earnings per share for the prior year
have increased at least 10%. The rate at which this option vests is the percent
that the Company's earnings per share for the year is of $11.44. Any portion of
the option remaining unvested on January 22, 2002 will become vested on January
22, 2006 if Mr. Culver is then employed by the Company. The other options listed
in the table vest ratably over the next five anniversaries of the May 5, 1999
grant date if the officer is then employed by the Company. All of the options
listed in the table become immediately vested and exercisable upon a change in
control of the Company or the executive officer's death.
(2) Grant date present values were determined under the Black Scholes option
pricing model using the following assumptions: expected stock price volatility
of 0.3438 (0.3120 in the case of Mr. Culver's option for 100,000 shares); all
options are exercised at the end of the fifth year of the option term (the
seventh year in the case of Mr. Culver's option for 100,000 shares); a dividend
yield of 0.16%; and a risk-free rate of return of 5.36% (4.87% in the case of
Mr. Culver's option for 100,000 shares), which was the yield on a U.S.
Government Zero Coupon Bond with a maturity equal to the assumed term of the
option. No adjustments are made for risk of forfeiture or non-transferability.
The actual value realized from the option will be the stock price less the
exercise price on the date the option is exercised and could be more or less
than the Black Scholes value.
15
<PAGE> 19
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1999 AT DECEMBER 31, 1999(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME DURING 1999(#) ($)(1) (#) (#) ($) ($)
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William H. Lacy -0- -0- 252,360 227,160 9,417,623 4,763,175
Curt S. Culver -0- -0- 163,200 301,800 5,870,900 6,708,375
J. Michael Lauer 40,200 1,720,661 259,280 75,720 12,771,400 1,557,725
Lawrence J. Pierzchalski -0- -0- 117,280 75,720 4,831,828 1,557,725
James S. MacLeod 10,000 532,137 125,280 75,720 5,655,340 1,557,725
</TABLE>
- ---------------
(1) Value realized is the market value at the close of business on the date
immediately preceding the date of exercise less the exercise price.
(2) Value is based on the closing price of $60.1875 for the Common Stock on the
New York Stock Exchange on December 31, 1999, less the exercise price.
- --------------------------------------------------------------------------------
PENSION PLAN
The Company maintains a Pension Plan for the benefit of substantially all
employees of the Company. The Pension Plan is a noncontributory defined benefit
pension plan intended to qualify under Section 401(a) of the 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 credit for each year of employment equal to 2% of
the employee's eligible cash compensation for that year, except that, in
accordance with applicable requirements of the Code, compensation in excess of
$160,000 is disregarded in the computation of pension credits.
At retirement, the employee's annual pension credits are added together to
determine the employee's accrued pension benefit. However, the annual pension
credits for service prior to 1998 for each employee with at least five years of
vested service on January 1, 1998 will generally be equal to 2% of the
employee's average eligible compensation for the five years ended December 31,
1997. 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 for 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 1999 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, 1999 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 Company maintains an unfunded, nonqualified Supplemental Plan for
designated employees (including executive officers), under which an eligible
employee, whose benefits from the Pension Plan are limited by the Code, 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
16
<PAGE> 20
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, 1999, Messrs. Lacy,
Culver, Lauer, Pierzchalski and MacLeod would have been entitled to receive
supplementary annual benefits under the Supplemental Plan of $207,969, $72,363,
$38,575, $39,112 and $25,493, respectively.
CHANGE OF CONTROL AGREEMENTS
Each of Messrs. Culver, Lauer, Pierzchalski and MacLeod is a party to a Key
Executive Employment and Severance Agreement with the Company (a "KEESA"). If a
change in control of the Company occurs and the executive's employment is
terminated within three years after the change in control (this three-year
period is referred to as the "employment period"), other than for cause, death
or disability, or if the executive terminates his employment for good reason,
the executive is entitled to a lump sum termination payment equal to twice the
sum of his annual base salary, his maximum bonus award and an amount for pension
accruals and profit sharing and matching contributions. If the employment
termination occurs during the employment period but more than three months after
the change in control, the termination payment is reduced. The executive is also
entitled to certain other benefits and the continuation of medical and other
specified employee benefits during the remainder of the employment period. The
KEESA provides that all unvested stock options and restricted stock become fully
vested at the date of the change in control. If the excise tax under Section
280G of the Internal Revenue Code would apply to the benefits provided under the
KEESA, the executive is entitled to receive a payment so that he is placed in
the same position as if the excise tax did not apply.
While the executive is employed during the employment period, the executive
is entitled to a base salary no less than the base salary in effect prior to the
change in control and to a bonus opportunity of no less than 75% of the maximum
bonus opportunity in effect prior to the change in control. The executive is
also entitled to participate in medical and other specified benefits.
The terms "change in control of the Company," "cause," "disability" and
"good reason" are defined in the KEESA. The Company has entered into the same or
similar agreements with 36 other officers.
EMPLOYMENT AGREEMENT WITH MR. LACY
MGIC entered into an employment agreement with Mr. Lacy effective January
1, 2000. The agreement provides that Mr. Lacy will continue as an MGIC employee,
responsible for providing advice and counsel to senior management regarding the
Company's business on a full-time basis until January 31, 2005. Mr. Lacy will be
paid a base salary at an annual rate of $500,000 and will be eligible to
participate in the Company's group health, dental and long-term disability
insurance plans, the Pension Plan and Supplemental Plan for as long as Mr. Lacy
remains an employee and will be eligible to participate in the Company's profit
sharing plan through 2004. While Mr. Lacy is an employee, MGIC will continue to
pay its portion of the premium for Mr. Lacy's split-dollar life insurance
coverage and supplementary long-term disability insurance coverage through 2004.
The agreement may be terminated by MGIC if Mr. Lacy breaches his obligations or
violates the terms of his non-competition agreements with the Company, and by
Mr. Lacy at any time upon notice to MGIC. Under the non-competition agreements,
Mr. Lacy may not compete with the Company during his employment and for one year
after his employment terminates.
17
<PAGE> 21
OTHER INFORMATION
The Company has an agreement with Northwestern Mutual Investment Services,
LLC, a subsidiary of NML (the "NML subsidiary"), pursuant to which the NML
subsidiary was retained to manage specified accounts in the Company's long-term
investment portfolio, and to provide accounting and reporting services to the
Company. The agreement may be canceled by the Company upon 90 days prior written
notice and by the NML subsidiary upon 180 days prior written notice. The Company
paid the NML subsidiary $1,047,776 in fees during 1999 under the agreement. The
Company believes the terms of the agreement are no less favorable to the Company
than could have been obtained from an unaffiliated third party. It is expected
that the Company will continue to use the services of the NML subsidiary during
2000.
During 1999, MGIC purchased disability coverage for its employees from NML
and MGIC paid NML an aggregate of $282,973 in premiums for such coverage. Also
during 1999, MGIC paid an aggregate of $230,323 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 two
other senior executives pursuant to a split-dollar collateral assignment
program. In each case, the premiums paid were determined by NML's published
rates and the split-dollar life insurance premiums will be repaid to MGIC upon
the sooner of the retirement or termination of employment of each insured
person.
The Company 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 Company 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 Company relating to periods during which
the Company and its subsidiaries were included as part of that consolidated
group. No payment was made by the Company under the tax sharing agreement during
1999.
Pursuant to a Common Stock Purchase Agreement entered into in 1984 between
the Company and NML, NML has the right under certain conditions to require the
Company to file a registration statement under the Securities Act of 1933 for
the sale of its shares of the Company's Common Stock, or to participate in a
registration of Common Stock otherwise initiated by the Company. The Company 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.
The law firm of Gibson, Dunn & Crutcher LLP performs legal services for the
Company. Peter Wallison, who left the Board during 1999, is of counsel to that
firm and previously was a partner in the firm. Restrictions on 2,486 shares of
restricted stock owned by Mr. Wallison were waived in connection with his
leaving the Board.
During 1999, MGIC and other subsidiaries of the Company provided mortgage
insurance and other services to, or received services from, unaffiliated
companies of which certain non-employee directors were executive officers,
directors or 10% or greater equity owners. These transactions were made in the
ordinary course of business and are not considered material to the Company.
Similar transactions are expected in 2000.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's Common Stock, to file reports of their beneficial
ownership of Company stock and changes in stock ownership with the Securities
and Exchange Commission and the New York Stock Exchange. Based upon copies of
the reports furnished to the Company and statements by the executive officers,
directors and greater than ten percent beneficial owners, the Company believes
that all Section 16(a) forms were timely filed in 1999, except for one report
which was inadvertently filed late by the Company on behalf of Mr. Lauer. The
report covered two sales in the same month of 500 shares each on behalf of Mr.
Lauer's two adult children. Both sales were reported by Mr. Lauer to the Company
when they occurred as part of another filing made by him with the Securities and
Exchange Commission and the New York Stock Exchange in connection with the
sales.
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<PAGE> 22
ITEM 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the accounting firm of PricewaterhouseCoopers LLP ("PwC") as
independent accountants of the Company for the fiscal year ending December 31,
2000. The shareholders are being asked to ratify this appointment at the Annual
Meeting. A representative of PwC is expected to attend the meeting, and will be
given an opportunity to make a statement and respond to appropriate questions.
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 PricewaterhouseCoopers LLP
as independent accountants. Abstentions and "broker non-votes" will not be
counted as "votes cast."
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PWC AS INDEPENDENT ACCOUNTANTS. THE SHARES WILL BE VOTED FOR
RATIFICATION, UNLESS INDICATED OTHERWISE ON THE PROXY.
OTHER MATTERS
SHAREHOLDER PROPOSALS
Any shareholder who wants to include a proposal in the proxy material for
the Company's 2001 Annual Meeting must submit the proposal to the Company on or
before November 27, 2000. The rules of the Securities and Exchange Commission
also establish other requirements for shareholder proposals of this type.
Under the Company's Bylaws, a shareholder who wants to bring business
before the Annual Meeting of Shareholders, other than a proposal included in the
Company's proxy material, or who wants to nominate directors at the Annual
Meeting must satisfy the following requirements: (1) be a shareholder of record
entitled to vote at the Annual Meeting and also be a shareholder of record at
the time the following notice is given; and (2) give notice to the Company's
Secretary in writing that is received at the Company's principal offices not
less than 45 days nor more than 70 days before the first anniversary of the date
set forth in the Company's proxy statement for the prior Annual Meeting as the
date on which the Company first mailed such proxy materials to shareholders. For
the 2001 Annual Meeting, the relevant dates are no later than February 10, 2001
and no earlier than January 16, 2001.
In the case of business other than nominations for directors, the notice
must, among other requirements, briefly describe such business, the reasons for
conducting the business and any material interest of the shareholder in such
business. In the case of director nominations, the notice must, among other
requirements, give various information about the nominees, including information
that would be required to be included in a proxy statement of the Company had
each such nominee been proposed for election by the Board of Directors of the
Company.
MANNER AND COST OF PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. In addition to
soliciting proxies by mail, directors, officers and other employees of the
Company may solicit proxies by telephone, telegraph or personal interview. The
Company also has engaged D.F. King & Co., Inc. to provide proxy solicitation
services for a fee of $6,500, plus expenses, including charges by brokers and
other custodians, nominees and fiduciaries to forward proxy soliciting material
to the beneficial owners of the Company's Common Stock.
OTHER BUSINESS
At the date of mailing of this Proxy Statement, the Board of Directors knew
of no other business to be presented at the Annual Meeting. Under the Company's
Bylaws as described under "Other Matters--Shareholder Proposals," because no
notice of any other business was given to the Company, no other business may be
brought before the Annual Meeting by a shareholder.
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<PAGE> 23
MGIC INVESTMENT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 4, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF MGIC INVESTMENT CORPORATION
The undersigned hereby appoints CURT S. CULVER and SHELDON B. LUBAR, and
either on 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 4, 2000, 9:00 a.m. Central Time,
and at any adjournment.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN ACCORDANCE WITH THE
CHOICES SPECIFIED BELOW BY THE UNDERSIGNED SHAREHOLDER. IF NO CHOICES ARE
SPECIFIED, 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 2000 ANNUAL MEETING
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
LISTED IN ITEM 1 AND FOR ITEM 2
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS: 1 - KARL E. CASE 2 - CURT S. CULVER [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
3 - WILLIAM A. MCINTOSH 4 - LESLIE M. MUMA listed to the left to vote for all nominees
(except as specified listed to the left
below).
(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.)
2. Ratify the appointment of PricewaterhouseCoopers LLP as the [ ] FOR [ ] AGAINST [ ] ABSTAIN
independent accountants of the Corporation.
3. In his discretion, each Proxy is authorized to vote upon such other business as may
properly come before the meeting or any adjournment.
CHECK APPROPRIATE BOX Date NO. OF SHARES
INDICATE CHANGES BELOW.
ADDRESS CHANGE? [ ] NAME CHANGE? [ ]
SIGNATURE(S) IN BOX
Note: Please sign exactly as your name appears above. 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.
</TABLE>
