<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
Life Re Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:(1)
- --------------------------------------------------------------------------------
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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(1)Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[LIFE RE LOGO]
April 10, 1998
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
LIFE RE CORPORATION
Life Re Corporation's Annual Meeting of Stockholders will be held on May
14, 1998, at 9:30 a.m., at the Stamford Marriott Hotel, Two Stamford Forum,
Stamford, Connecticut 06901, for the following purposes:
(1) To elect the nominees shown in the Proxy Statement as directors to
serve for three year terms or until their successors have been duly
elected and qualified.
(2) To approve and adopt an amendment to the 1992 Life Re Corporation Stock
Option Plan authorizing an increase from 3,000,000 to 4,500,000 in the
number of shares of Life Re Corporation common stock available for
issuance.
(3) To approve and adopt an amendment to the Life Re Corporation Restated
Certificate of Incorporation to increase the authorized number of
shares of common stock from 40,000,000 to 80,000,000.
(4) To ratify the appointment of Ernst & Young LLP as Life Re Corporation's
independent auditors for the year 1998.
(5) To transact such other business as may properly come before the
meeting.
These matters are more fully discussed in the accompanying Proxy Statement.
It is important that your shares be voted at this meeting. Please mark and
sign the proxy card and return it promptly in the enclosed envelope. If you
attend the meeting, you may withdraw your proxy and vote your stock in person.
Only stockholders of record at the close of business on March 26, 1998 are
entitled to vote in person or by proxy at the Annual Meeting of Stockholders or
any adjournment of the meeting.
By Order of the Board of Directors
[/s/ W. Weldon Wilson]
W. WELDON WILSON,
Vice President, General Counsel
and Secretary
<PAGE> 3
LIFE RE CORPORATION
969 HIGH RIDGE ROAD
STAMFORD, CT 06905
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 14, 1998
------------------------
The Annual Meeting of the Stockholders of Life Re Corporation (the
"Company") will be held at the Stamford Marriott Hotel, Two Stamford Forum,
Stamford, Connecticut 06901, at 9:30 a.m. on May 14, 1998. This Proxy Statement
is being sent to each holder of the issued and outstanding shares of common
stock ("Common Shares") of the Company entitled to vote at the meeting in order
to furnish information relating to the business to be transacted at the Annual
Meeting. The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1997, including financial statements, was mailed to stockholders
beginning on or about March 31, 1998. No part of such Annual Report shall be
regarded as proxy-soliciting material or as a communication by means of which
any solicitation is made. This Proxy Statement and the enclosed proxy card are
being mailed to stockholders on or about April 10, 1998.
We hope you will be present at the Annual Meeting. If you cannot attend,
please complete, sign and return the enclosed proxy in the accompanying envelope
so that your Common Shares will be represented. The envelope is addressed to the
Company's transfer agent and requires no postage. You may revoke your proxy at
any time before it is voted at the meeting by delivering written notice of
revocation to the Secretary of the Company, by executing a later dated proxy or
by attending the Annual Meeting and voting in person. Each proxy duly executed
and received prior to the Annual Meeting will be voted according to its terms.
Stockholders who receive more than one proxy card -- due to the existence of
multiple accounts -- should sign and return all proxies received in order to be
sure all Common Shares so owned are in fact voted.
If no direction as to the manner of voting the proxy is made, the proxy
will be voted FOR each of the proposals shown on the cover page of this Proxy
Statement.
The Company will bear the cost of the preparation and solicitation of
proxies, including the reasonable charges and expenses of brokerage firms or
other nominees for forwarding proxy materials to beneficial owners of Common
Shares. In addition to solicitation by mail, proxies may be solicited by
telephone, telegraph, or personally, by certain officers and regular employees
of the Company and its subsidiaries without extra compensation. The Company has
retained Georgeson & Company Inc., 100 Wall Street, New York, New York to aid in
the solicitation of proxies for a fee estimated at $6,000. The enclosed proxy is
solicited by and on behalf of the Board of Directors of the Company.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on March 26, 1998, the record date fixed for
determination of stockholders entitled to vote at the Annual Meeting, there were
17,279,279 Common Shares outstanding, each entitled to one vote.
<PAGE> 4
The following table sets forth, as of March 26, 1998 (except as otherwise
indicated), the number of and percentage of outstanding Common Shares
beneficially owned by each person or entity known by the Company to be a
beneficial owner of 5% or more of the Company's voting securities. Except as
otherwise indicated, the entity listed below has sole voting and dispositive
power with respect to such stockholder's Common Shares:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON SHARES CLASS(1)
------------------------------------ ------------- ----------
<S> <C> <C>
The Equitable Companies Incorporated........................ 2,116,100(2) 12.2%
787 Seventh Avenue
New York, NY 10019
</TABLE>
- ---------------
(1) Based on the number of Common Shares outstanding on March 26, 1998.
Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the
indicated beneficial owner exercises voting and/or investment power.
(2) Based on Amendment Number 5 dated February 10, 1998 to a Schedule 13G filed
by The Equitable Companies Incorporated jointly with four French mutual
insurance companies: AXA Assurances I.A.R.D. Mutuelle; AXA Assurances Vie
Mutuelle; Alpha Assurances Vie Mutuelle; and AXA Courtage Assurance
Mutuelle, as a group, and AXA-UAP and their subsidiaries. Alliance Capital
Management L.P. has sole voting power over 772,600 Common Shares, shared
voting power over 569,000 Common Shares and sole dispositive power over
1,374,600 Common Shares. The Equitable Life Assurance Society of the United
States has sole voting and dispositive power over 741,000 Common Shares.
Donaldson, Lufkin & Jenrette Securities Corporation has shared dispositive
power over 500 Common Shares.
2
<PAGE> 5
The following table sets forth as of March 26, 1998 the number and
percentage of outstanding Common Shares beneficially owned by each director and
executive officer of the Company and by directors and executive officers of the
Company as a group. Except as otherwise indicated, each person listed below has
sole voting and dispositive power with respect to such stockholder's Common
Shares.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME COMMON SHARES CLASS(1)(2)
---- ------------- -----------
<S> <C> <C>
Rodney A. Hawes, Jr....................................... 825,766(2)(3)(4) 4.7%
Douglas M. Schair......................................... 837,866(2)(3)(5) 4.8%
Jacques E. Dubois......................................... 859,168(2)(3) 4.9%
Chris C. Stroup........................................... 38,500(2)(3) *
W. Weldon Wilson.......................................... 121,561(2)(3) *
Carolyn K. McCandless..................................... 7,000(3)(6) *
K. Fred Skousen........................................... 6,700(3)(6) *
T. Bowring Woodbury, II................................... 6,797(3)(6) *
All Directors and Executive Officers as a Group (8
persons)................................................ 2,703,358(3)(4)(5)(6)(7) 14.8%
</TABLE>
- ---------------
* Represents less than 1% of the Common Shares.
(1) Based on the number of Common Shares outstanding on the record date, March
26, 1998. Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the
indicated beneficial owner exercises voting and/or investment power. Shares
of common stock subject to options currently exercisable or exercisable
within 60 days of March 26, 1998 are deemed outstanding for purposes of
computing the percentage ownership of the person holding the options but not
deemed outstanding for purposes of computing the percentage ownership of any
other person.
(2) Common Shares held by Messrs. Hawes, Schair and Dubois include vested
options to acquire (i) 100,000 Common Shares each at $22 per share, (ii)
50,000 Common Shares each at $20.125 per share, (iii) 37,500 Common Shares
each at $19.625 per share, (iv) 50,000 Common Shares each at $25 per share,
and (v) 25,000 Common Shares each at $39.625 per share, all of which may be
purchased within sixty days of March 26, 1998. Common Shares held by Mr.
Stroup include vested options to acquire (i) 25,000 Common Shares at $30.25
per share, and (ii) 12,500 Common Shares at $39.625 per share, all of which
may be purchased within sixty days of March 26, 1998. Common Shares held by
Mr. Wilson include vested options to acquire (i) 40,000 Common Shares at $22
per share, (ii) 20,000 Common Shares at $20.125 per share, (iii) 15,000
Common Shares at $19.625 per share, (iv) 12,500 Common Shares at $25 per
share, and (v) 8,750 Common Shares at $39.625 per share, all of which may be
purchased within sixty days of March 26, 1998.
(3) Excludes unvested options to purchase an aggregate of 916,750 Common Shares
granted to Messrs. Hawes, Schair, Dubois, Stroup and Wilson and unvested
options to purchase an aggregate of 3,000 Common Shares granted to Ms.
McCandless, Dr. Skousen and Mr. Woodbury.
(4) Includes 100,000 Common Shares owned by a trust established by Mr. Hawes for
the benefit of his heirs.
(5) Includes (i) 200,000 Common Shares owned by a trust established by Mr.
Schair, and (ii) 24,200 Common Shares owned by a non-profit organization
qualified under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, for which Mr. Schair shares voting and investment power. Mr. Schair
expressly disclaims beneficial ownership of the 24,200 Common Shares owned
by the non-profit organization.
(6) Includes vested options to acquire (i) 2,500 Common Shares each at $31.50
per share, (ii) 1,000 Common Shares each at $20.125 per share, (iii) 1,000
Common Shares each at $17.375 per share, (iv) 1,000 Common Shares each at
$24.875 per share, and (v) 1,000 Common Shares each at $39.625 per share,
all of which may be purchased within sixty days of March 26, 1998, and
excludes unvested options to purchase an additional 1,000 Common Shares each
granted to Ms. McCandless, Dr. Skousen and Mr. Woodbury.
(7) Includes vested options to purchase 940,750 Common Shares within sixty days
of March 26, 1998 by the directors and executive officers of the Company.
3
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
PROPOSAL ONE
ELECTION OF DIRECTORS
It is intended that the proxies will be voted for the election of the three
nominees named below as Directors to hold office until the regular Annual
Meeting of Stockholders in the year 2001 or until their respective successors
are duly elected and qualified. All of the nominees presently are Directors of
the Company. While management has no reason to believe that any of the nominees
will not be available to serve as a Director, if for any reason any of them
should become unavailable, the proxies will be voted for such substitute
nominee(s) as may be designated by the Board of Directors. The Directors shall
be elected by the affirmative vote of the majority of votes present in person or
represented by proxy at the Annual Meeting. Votes withheld (including shares as
to which a broker indicates that it does not have discretionary authority to
vote, referred to as non-votes) will count toward the establishment of a quorum,
but will not have an effect on the election of Directors or any other matters
submitted herein to the stockholders for approval.
Set forth on the following pages is biographical information concerning
each nominee for election as a Director, including as to each nominee, the
nominee's principal occupation and the period during which the nominee has
served as a Director of the Company. Ages shown are as of December 31, 1997.
NOMINEES FOR DIRECTOR
- --------------------------------------------------------------------------------
RODNEY A. HAWES, JR. (59) DIRECTOR SINCE 1988
Mr. Hawes has served as Chairman of the Board and Chief Executive Officer
of the Company since November 1988 and in the Office of the Chairman since May
1992. Mr. Hawes also has served as Chairman of the Executive Committees of Life
Reassurance Corporation of America ("Life Reassurance") since 1988 and Reassure
America Life Insurance Company ("REALIC") since 1995 and Chairman of the Boards
of Life Reassurance since July 1993, of REALIC since August 1995 and of American
Merchants Life Insurance Company ("AML") since October 1997. Both Life
Reassurance and REALIC are indirect, wholly-owned subsidiaries of the Company
and the Company owns 79% of AML. In addition, Mr. Hawes is associated with
Insurance Investment Associates ("IIA"), which he founded in 1972. IIA provides
investment banking services to the insurance industry.
- --------------------------------------------------------------------------------
CHRIS C. STROUP (36) DIRECTOR SINCE 1996
Mr. Stroup has served as Executive Vice President and Chief Financial
Officer and as a Director of the Company since June 1996. Mr. Stroup also has
served as Executive Vice President and Chief Financial Officer of Life
Reassurance and Vice President and Chief Financial Officer of REALIC since
August 1996 and of AML since October 1997. From 1983 to 1996, Mr. Stroup was
associated with the firm of Ernst & Young LLP, where he served as a partner from
1993, providing accounting and consulting services to the insurance industry.
- --------------------------------------------------------------------------------
4
<PAGE> 7
NOMINEES FOR DIRECTOR
- --------------------------------------------------------------------------------
T. BOWRING WOODBURY, II (60) DIRECTOR SINCE 1992
Mr. Woodbury has served as a Director of the Company since November 1992.
He currently serves as President of the Tacoma, Washington Mission of The Church
of Jesus Christ of Latter-day Saints. From June 1989 to April 1995, Mr. Woodbury
served as Senior Vice President and General Counsel of Consolidated Edison,
where he also served as a member of the corporate policy committee, and from May
1995 through June 1996 he served as a consultant to Consolidated Edison. From
1987 to 1989, Mr. Woodbury served as Senior Vice President, General Counsel and
Corporate Secretary of Commercial Union Insurance Company. From 1986 to 1987,
Mr. Woodbury served as Executive Vice President, General Counsel and Corporate
Secretary of The Home Insurance Company.
- --------------------------------------------------------------------------------
The affirmative vote of persons holding at least a majority of the total
number of shares present in person or represented by proxy and entitled to vote
is required for the election of the listed nominees as Directors. The Board of
Directors recommends that stockholders vote FOR the nominees. Proxies solicited
by the Board of Directors will be so voted unless stockholders specify in their
proxies a contrary choice.
- --------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE
- --------------------------------------------------------------------------------
JACQUES E. DUBOIS (48) DIRECTOR SINCE 1988
Mr. Dubois has served as President and Director of the Company since
November 1988 and Chief Operating Officer and in the Office of the Chairman
since May 1992. Mr. Dubois also serves as President and Chief Executive Officer
of Life Reassurance and as Chief Executive Officer of REALIC and of AML. In
addition, Mr. Dubois has been associated with IIA since 1979.
- --------------------------------------------------------------------------------
CAROLYN K. MCCANDLESS (52) DIRECTOR SINCE 1992
Ms. McCandless has served as a Director of the Company since November 1992.
Since April 1990, Ms. McCandless has served as Vice President of Human Resources
and Administration for Time Warner Inc. From 1985 to 1990, Ms. McCandless was
Vice President and Director of Employee Benefits for Time Inc.
- --------------------------------------------------------------------------------
DOUGLAS M. SCHAIR (52) DIRECTOR SINCE 1988
Mr. Schair has served as Vice Chairman of the Board of the Company since
November 1988 and Chief Investment Officer and in the Office of the Chairman
since May 1992. Mr. Schair also has served as Vice Chairman of the Board and
Chief Investment Officer of Life Reassurance since July 1993, of REALIC since
August 1995 and of AML since October 1997. In addition, Mr. Schair has been
associated with IIA since 1975.
- --------------------------------------------------------------------------------
5
<PAGE> 8
DIRECTORS CONTINUING IN OFFICE
- --------------------------------------------------------------------------------
K. FRED SKOUSEN (55) DIRECTOR SINCE 1992
Dr. Skousen has served as a Director of the Company since November 1992.
Since 1989, Dr. Skousen has been the Dean of the Marriott School of Management
at Brigham Young University, Provo, Utah. From 1983 to 1989, Dr. Skousen held
the Peat Marwick Mitchell Professorship and from 1974 to 1983 served as Director
of the School of Accountancy at Brigham Young University. Dr. Skousen is a
certified public accountant. Dr. Skousen also serves on the board of Geneva
Steel Co.
- --------------------------------------------------------------------------------
Samuel V. Filoromo, whose term as a director was to expire as of the Annual
Meeting of Stockholders in 1999, resigned as a director and officer of the
Company effective March 31, 1998 in connection with his retirement.
- --------------------------------------------------------------------------------
EXECUTIVE OFFICER
The following provides the name, principal occupation and other pertinent
information concerning the executive officer of the Company who does not also
serve as a Director. The executive officer is elected by the Board of Directors
annually and serves at the pleasure of the Board. There are no arrangements or
understandings between the executive officer and any other person pursuant to
which the executive officer was selected, other than the employment agreement
more fully described herein. The age shown is as of December 31, 1997.
- --------------------------------------------------------------------------------
W. WELDON WILSON (36)
Mr. Wilson has served as Vice President, General Counsel and Secretary of
the Company since May 1992. Mr. Wilson also has served as Executive Vice
President, General Counsel and Secretary of Life Reassurance since June 1995, as
its Senior Vice President, General Counsel and Secretary since January 1992 and
as its Vice President, General Counsel and Secretary since July 1991. Mr. Wilson
also has served as Vice President, General Counsel and Secretary of REALIC since
August 1995 and of AML since October 1997. Prior to joining Life Reassurance,
from May 1989 to June 1991, Mr. Wilson was associated with the law firm of
Johnson & Gibbs in Dallas, Texas. From September 1986 to May 1989, Mr. Wilson
was associated with the law firm of Moore & Peterson in Dallas, Texas.
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, the Company's directors, executive officers and certain other officers
are required to file reports of ownership and changes in ownership of the
Company's securities with the Securities and Exchange Commission and the New
York Stock Exchange. Copies of such reports also must be provided to the
Company.
Based solely upon a review of the copies of the reports provided to the
Company and written representations from certain persons that no other reports
were required, the Company believes that during the preceding year the
directors, executive officers and certain other officers complied with all
applicable filing requirements.
6
<PAGE> 9
INDEBTEDNESS OF MANAGEMENT
During 1992, the Company issued, subject to restricted stock purchase
agreements, 214,510 Common Shares to certain officers of the Company and its
subsidiaries in exchange for notes in favor of the Company. Certain of the sales
were at prices below fair value at the date of sale, resulting in compensation
expense to the Company in 1992. Listed in the chart below is the aggregate of
the only two remaining loans to an executive officer of the Company to purchase
Common Shares that aggregate in excess of $60,000, including accrued interest,
at December 31, 1997. The loans bear interest at annual rates ranging from 6.01%
to 7.04%, rates not less than those necessary to avoid imputed interest under
the Internal Revenue Code of 1986, as amended (the "Code"). The two aggregated
notes listed in the chart below have been extended and mature during 2001. All
but $32,312.84 of the notes are nonrecourse and are collateralized by all or a
portion of the Common Shares acquired with the proceeds.
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END OF
NAME OF DEBTOR OF 1997 ADDITIONS DEDUCTIONS 1997
- -------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
W. Weldon Wilson...................................... $199,945 $12,798 0 $212,743
</TABLE>
In 1992, the Company also had issued Common Shares subject to a restricted
stock purchase agreement to Mr. Filoromo in exchange for a note in favor of the
Company. During 1997, the Company agreed to extend the term of the note made by
Mr. Filoromo and, subsequent to such extension, Mr. Filoromo tendered to the
Company 7,849 Common Shares having a fair market value of $460,148 ($58.625 per
share) in full satisfaction of the outstanding balance of his note.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has appointed standing committees,
including Audit, Benefits, Compensation, Executive and Investment Committees.
Membership on the Committees is as follows:
<TABLE>
<S> <C>
AUDIT BENEFITS
K. Fred Skousen(1) Carolyn K. McCandless(1)
Carolyn K. McCandless K. Fred Skousen
T. Bowring Woodbury, II T. Bowring Woodbury, II
COMPENSATION EXECUTIVE
T. Bowring Woodbury, II(1) Rodney A. Hawes, Jr.(1)
Carolyn K. McCandless Douglas M. Schair
K. Fred Skousen Jacques E. Dubois
INVESTMENT
Douglas M. Schair(1)
Rodney A. Hawes, Jr.
Jacques E. Dubois
</TABLE>
- ---------------
(1) Chairperson
The Audit Committee provides assistance to the Board of Directors in
discharging its responsibilities in connection with the financial and accounting
practices of the Company and the internal controls related thereto, and
represents the Board of Directors in connection with the services rendered by
the Company's independent auditors. The Audit Committee was formed on November
10, 1992 and met four times during 1997.
The Benefits Committee is responsible for the formation of benefit plans
and packages applicable to all employees of the Company and the operating
subsidiaries of the Company. The Benefits Committee also has general oversight
responsibility with respect to the Company's other employee benefit programs.
The Benefits Committee was formed on November 10, 1992 and met two times during
1997.
7
<PAGE> 10
The Compensation Committee annually reviews and makes recommendations to
the Board of Directors regarding the compensation of the Chairman, Vice
Chairman, Chief Executive Officer, President and Chief Operating Officer of the
Company. The Compensation Committee also reviews, advises and consults with the
President and Chief Executive Officer regarding the compensation of other
officers and key employees and as to the Company's policy on compensation. The
Compensation Committee administers the Company's stock option plan, including
the granting of stock options and interpreting the plan. The Compensation
Committee was formed on November 10, 1992 and met five times during 1997.
When the Board of Directors is not in session, the Executive Committee is
empowered to exercise such powers and authority in the management of the
business and affairs of the Company as would be exercised by the Board of
Directors, subject to certain exceptions. The Executive Committee was formed
prior to 1992 and met four times during 1997.
The Investment Committee has the authority to develop the investment
strategy for the Company. The Investment Committee also reviews the performance
of the investment advisers used by the Company and its subsidiaries. The
Investment Committee was formed prior to 1992, and met four times during 1997.
During 1997, the Board of Directors met ten times. During 1997, no director
attended less than 75% of the aggregate of the total number of meetings of the
Board of Directors and of any committee on which such director served.
DIRECTOR COMPENSATION
Each non-employee director of the Company receives an annual retainer of
$20,000 for services to the Board of Directors. Non-employee directors also
receive a $1,500 fee for each board meeting they attend, plus expenses. Each
non-employee director who serves as a chairperson of a committee is paid an
annual fee of $2,000 for such service. No additional fees are paid for
attendance at committee meetings. Each non-employee director of the Company is
entitled to participate in the Life Re Corporation 1993 Non-Employee Directors
Stock Option Plan, as amended. The non-employee directors each receive an
initial grant of options to purchase 2,500 Common Shares and annual grants of
options to purchase 1,000 Common Shares thereafter. Ms. McCandless, Dr. Skousen
and Mr. Woodbury each received annual grants of options to purchase 1,000 Common
Shares in January 1997 and January 1998 at exercise prices of $39.625 and
$64.9375, respectively.
8
<PAGE> 11
LIFE RE CORPORATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
AWARDS
------------ PAYOUTS
ANNUAL COMPENSATION NUMBER OF --------
------------------------------------ SHARES LTIP ALL OTHER
OTHER ANNUAL UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITIONS(1) YEAR SALARY(2) BONUS COMPENSATION OPTIONS/SARS (4) (5)
- ------------------------------- ---- --------- -------- ------------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rodney A. Hawes, Jr. ........... 1997 $726,654 $995,973 $0 100,000 $523,384 $21,156
Chmn of the Board, Chief 1996 $686,659 $607,720 $0 100,000 $657,408 $20,558
Executive Officer and Office 1995 $654,240 $238,000 $0 50,000 $196,195 $13,470
of the Chmn; Life
Reassurance -- Chmn of the
Board and Chmn Executive
Committe
Douglas M. Schair............... 1997 $693,717 $995,973 $0 100,000 $523,384 $18,248
Vice Chmn of the Board, 1996 $655,437 $607,720 $0 100,000 $657,408 $18,467
Chief Investment Officer 1995 $556,693 $238,000 $0 50,000 $196,195 $10,284
and Office of the Chmn; Life
Reassurance -- Vice Chmn of
the Board and Chief Investment
Officer
Jacques E. Dubois............... 1997 $693,717 $995,973 $0 100,000 $523,384 $ 9,585
President, Chief Operating 1996 $655,437 $607,720 $0 100,000 $657,408 $ 9,448
Officer and Office of the 1995 $624,961 $238,000 $0 50,000 $196,195 $ 7,926
Chmn;
Life Reassurance -- President
and Chief Executive Officer
Chris C. Stroup................. 1997 $358,662 $495,817(6) $0 50,000 $ 0 $ 5,968
Executive Vice President and 1996 $195,199 $218,735(6) $0 100,000 $ 0 $ 770
Chief Financial Officer; Life
Reassurance -- Executive Vice
President and Chief Financial
Officer
W. Weldon Wilson (3)............ 1997 $307,690 $449,917(6) $0 35,000 $ 0 $ 5,891
Vice President, General 1996 $251,417 $247,477(6) $0 25,000 $ 0 $ 5,866
Counsel
and Secretary; Life 1995 $175,231 $ 32,000 $0 20,000 $ 0 $ 5,315
Reassurance -- Executive Vice
President, General Counsel and
Secretary
</TABLE>
- ---------------
(1) Positions are at Life Re Corporation unless otherwise noted.
(2) Salaries for the top three named executive officers reflect their similar
levels of responsibility and contribution to the Company as members of the
Office of the Chairman and are set in accordance with their respective
employment agreements. Their respective salary increases in each of 1995,
1996 and 1997 ranged from 4% to 5%. Mr. Schair voluntarily reduced his base
salary from October 1994 through June 1995. The Company anticipates that
competitive increases will occur in 1998 and beyond, based upon executive
performance and competitive wage inflation rates. Mr. Stroup joined the
Company in June 1996 and therefore his salary shown for 1996 only covers the
period June through December 1996.
(3) At December 31, 1997, the value of restricted stock awards held by Mr.
Wilson (26,000 Common Shares) was $1,694,875. Dividends are paid on such
restricted stock. See "Restricted Stock Purchase Agreements" herein for a
description of the terms of such restricted stock.
(4) The 1995, 1996 and 1997 LTIP Payouts for Messrs. Hawes, Schair and Dubois
were determined in accordance with the terms of the Life Re Corporation
Long-Term Incentive Plan. All of the 1995 LTIP Payouts related to the
Company's acquisition of REALIC in July 1995, all of the 1996 LTIP Payouts
related to (i) the acquisition of a block of insurance from United Insurance
Company of America ("United"), (ii) the investment in Resource Financial
Corporation and certain of its affiliates ("RFC") and reinsurance
arrangements with RFC and affiliates of Aon Corporation, (iii) the
acquisitions of Modern American Life Insurance Company ("Modern"), Western
Pioneer Life Insurance Company
9
<PAGE> 12
("Western") and New American Life Insurance Company ("New American") and
(iv) the sale at a gain of the Company's investment in Nacolah Holding
Corporation ("Nacolah"), and all of the 1997 LTIP Payouts related to (i) the
reinsurance of a block of business from a subsidiary of UNUM Corporation
("UNUM"), (ii) the acquisition of 79% of the common stock of AML Acquisition
Corporation, the owner of AML, (iii) the reinsurance of a block of business
from Allianz Life Insurance Company of North America ("Allianz"), and (iv)
reinsurance arrangements with RFC and certain of its affiliates.
(5) Represents Company matching contributions under the 401(k) defined
contribution plan (in 1997: $4,750 each for Messrs. Hawes, Schair, Dubois,
Stroup and Wilson; in 1996: $4,750 each for Messrs. Hawes, Schair, Dubois
and Wilson; and in 1995: $4,620 each for Messrs. Hawes, Schair, Dubois and
Wilson) and life insurance premiums (in 1997: $16,406 for Mr. Hawes, $13,498
for Mr. Schair, $4,835 for Mr. Dubois, $1,218 for Mr. Stroup, and $1,141 for
Mr. Wilson; in 1996: $15,808 for Mr. Hawes, $13,717 for Mr. Schair, $4,698
for Mr. Dubois, $1,116 for Mr. Wilson, and $770 for Mr. Stroup; and in 1995:
$8,850 for Mr. Hawes, $5,664 for Mr. Schair, $3,306 for Mr. Dubois, and $695
for Mr. Wilson).
(6) A portion of the bonuses paid to Messrs. Stroup and Wilson in 1997 in the
amount of $172,717 each, and in 1996 in the amounts of $96,235 and $142,477,
respectively, were special bonuses paid in accordance with their employment
agreements which provide for bonuses upon the completion of the 1997
transactions and certain of the 1996 transactions noted in footnote (4)
above, except Mr. Wilson's 1996 bonus did not include the Nacolah
transaction, and Mr. Stroup's 1996 bonus did not include the Nacolah,
United, Modern and Western transactions.
10
<PAGE> 13
LIFE RE CORPORATION
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE OR GRANT DATE
OPTIONS/SARS GRANTED TO BASE PRICE EXPIRATION PRESENT
NAME AND PRINCIPAL POSITIONS(1) GRANTED(2) EMPLOYEES IN 1997 ($/SHARE) DATE VALUE(3)
- ------------------------------- ------------ ----------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Rodney A. Hawes, Jr............. 100,000 15.69% $39.625 01/02/2007 $1,107,000
Chmn of the Board, Chief
Executive Officer and Office
of the Chmn; Life
Reassurance -- Chmn of the
Board and Chmn Executive
Committee
Douglas M. Schair............... 100,000 15.69% $39.625 01/02/2007 $1,107,000
Vice Chmn of the Board, Chief
Investment Officer, and Office
of the Chmn; Life
Reassurance -- Vice Chmn of
the Board and Chief Investment
Officer
Jacques E. Dubois............... 100,000 15.69% $39.625 01/02/2007 $1,107,000
President, Chief Operating
Officer and Office of the
Chmn; Life
Reassurance -- President and
Chief Executive Officer
Chris C. Stroup................. 50,000 7.84% $39.625 01/02/2007 $ 553,500
Executive Vice President and
Chief Financial Officer; Life
Reassurance -- Executive Vice
President and Chief Financial
Officer
W. Weldon Wilson................ 35,000 5.49% $39.625 01/02/2007 $ 387,450
Vice President, General
Counsel and Secretary; Life
Reassurance -- Executive Vice
President, General Counsel and
Secretary
</TABLE>
- ---------------
(1) Positions are at Life Re Corporation unless otherwise noted.
(2) Only stock options were granted, which vest over four years at a rate of 25%
per year with initial vesting on January 2, 1998.
(3) Option values are determined using the Black-Scholes option pricing model
adapted for use in valuing executive stock options. The values are based on
assumptions regarding a number of variables for the term of an option such
as interest rates, future volatility of the price of Common Shares, and the
Company's future dividend yield. Therefore, there can be no assurance that
the values realized upon exercise of options by the named executive officers
will be at or near the values estimated by the Black-Scholes model.
11
<PAGE> 14
LIFE RE CORPORATION
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED ON VALUE AT YEAR END AT FISCAL YEAR END
NAME AND PRINCIPAL POSITIONS(1) EXERCISE(2) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(3)
- ------------------------------- ----------- -------- -------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rodney A. Hawes, Jr............. 0 $0 E 187,500 E $8,152,344
Chmn of the Board, Chief $0 U 212,500 U $7,272,656
Executive Officer and Office
of the Chmn; Life
Reassurance -- Chmn of the
Board and Chmn Executive
Committee
Douglas M. Schair............... 0 $0 E 187,500 E $8,152,344
Vice Chmn of the Board, Chief $0 U 212,500 U $7,272,656
Investment Officer, and Office
of the Chmn; Life
Reassurance -- Vice Chmn of
the Board and Chief Investment
Officer
Jacques E. Dubois............... 0 $0 E 187,500 E $8,152,344
President, Chief Operating
Officer $0 U 212,500 U $7,272,656
and Office of the Chmn; Life
Reassurance -- President and
Chief Executive Officer
Chris C. Stroup................. 0 $0 E 25,000 E $ 873,438
Executive Vice President and $0 U 125,000 U $3,898,437
Chief Financial Officer; Life
Reassurance -- Executive Vice
President and Chief Financial
Officer
W. Weldon Wilson................ 0 $0 E 71,250 E $3,110,234
Vice President, General
Counsel $0 U 68,750 U $2,329,141
and Secretary; Life
Reassurance -- Executive Vice
President, General Counsel and
Secretary
</TABLE>
- ---------------
(1) Positions are at Life Re Corporation unless otherwise noted.
(2) There were no options exercised by named executive officers during 1997.
(3) The value of unexercised options is based on the product of the number of
Common Shares underlying an option and the difference between the closing
share price of the Company's Common Shares at December 31, 1997 ($65.1875)
and the option exercise price.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The Company has not included a Long-Term Incentive Plan table because the
estimated future payments under the Life Re Corporation Long-Term Incentive Plan
("LTIP") are indeterminable at this time. The Company has therefore provided the
following narrative description of the LTIP:
The top three executive officers in the Office of the Chairman are eligible
to participate in the LTIP. Each such executive officer is granted one unit
under the LTIP. Each unit entitles the holder, upon the attainment of
performance goals as established by the Compensation Committee of the Board of
Directors and the closing of the transaction related to the performance goal, to
receive a portion of the Bonus Pool (as defined in the LTIP) as a cash lump sum
payment. The value of each unit is equal to the total amount allocated to the
Bonus Pool, multiplied by a fraction, the numerator of which is one, and the
denominator of which is the total number of units which were granted with
respect to such Bonus Pool.
12
<PAGE> 15
The Bonus Pool is established upon the closing of a transaction by the
Company and is equal to (i) 2% of the amount involved in connection with any
eligible acquisition or merger with another entity, (ii) 2% of the amount
involved in connection with any eligible acquisition of a block of insurance in
force, and (iii) 5% of the amount involved in connection with a recognition of
capital gains upon the sale of an eligible investment.
In 1997, LTIP payments were made as a result of the successful achievement
of performance goals, which resulted in (i) a reinsurance agreement with respect
to Allianz, (ii) a reinsurance agreement with a subsidiary of UNUM, (iii) the
acquisition of 79% of the outstanding stock of AML Acquisition Corporation, and
(iv) the Company's reinsurance agreements with affiliates and subsidiaries of
Aon Corporation and investment in and reinsurance arrangements with RFC and its
affiliates. The 1997 LTIP payments for Messrs. Hawes, Schair, and Dubois were
each in the amount of $523,384. The Company anticipates that quarterly LTIP
payments will be made to these officers with respect to the agreement with RFC
for a five year period which began on July 1, 1996. Other LTIP payments may be
made in the future depending on the achievement of additional performance goals
under the LTIP, which are (i) acquisitions (as more fully described in the LTIP)
valued at or above $5 million, or the merger of the Company with another entity,
(ii) acquisitions (as more fully described in the LTIP) of blocks of insurance
in force with ceding allowances valued at or above $5 million, and (iii) sales
at a gain of investments held prior to the effectiveness of the LTIP or acquired
by the Company as described in clause (i) above.
EMPLOYEE BENEFIT PLANS
Savings Plan. The Life Reassurance Corporation of America and Its
Affiliates Employee Savings Plan (the "Savings Plan") is a defined contribution
plan that is qualified under Sections 401(a) and 401(k) of the Code. Employees
of the Company and its subsidiaries who have completed six consecutive months of
service and attained age twenty-one are eligible to participate in the Savings
Plan. Under the Savings Plan, each participant is eligible to enter into a
written salary reduction agreement with the Company whereby the participant's
salary will be reduced as elected by the participant on a pre-tax basis in
accordance with the rules governing cash or deferred arrangements under Section
401(k) of the Code, with the total reduction not exceeding $9,500 for 1997. The
amount deferred by a participant is contributed to the trust fund for the
Savings Plan and invested in accordance with the election of the participant
from among investment funds established under the trust agreement in accordance
with Section 404(c) of the Code. The Company makes a contribution to the Savings
Plan trust fund equal to 50% of the participant's pre-tax contributions that
equal up to 6% of that participant's base salary. All employee contributions are
100% vested at all times. With respect to matching contributions by the Company,
such contributions are 50% vested after two years of service, 75% vested after
three years of service and 100% vested after four years of service with the
Company. Participants' vested accounts under the Savings Plan are distributable
after termination of employment. During employment, participants may withdraw
funds from their accounts in the event of financial hardship as defined in the
Savings Plan and permitted under the Code. The Code imposes various limits on
the amounts which can be contributed to the Savings Plan by or for any
participant each year. During the year ended December 31, 1997, the following
matching contributions were made on behalf of the individuals named in the
executive compensation table: $4,750 for each of Messrs. Hawes, Schair, Dubois,
Stroup and Wilson; and $23,750 for all named executive officers as a group.
Retirement Plan. The Company maintains the Employees' Retirement Plan of
Life Reassurance Corporation of America and Its Affiliates (the "Retirement
Plan"), which is a defined benefit pension plan qualified under Section 401(a)
of the Code.
13
<PAGE> 16
The table set forth below illustrates the approximate annual retirement
benefits which would be payable at age 65 as a single life annuity, based on the
Average Monthly Compensation and years of credited service indicated, under the
Retirement Plan to participants whose benefits are determined by the Retirement
Plan formula, before any reduction for benefits under any General Reassurance
Corporation plan or for Social Security benefits. The values shown below reflect
the change in tax law effective January 1, 1994 that limits the amount of annual
compensation that may be taken into account under qualified plans, such as the
Retirement Plan, to $150,000, indexed annually. For 1997, the amount of annual
compensation that may be taken into account under qualified plans was $160,000.
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
PARTICIPANTS WHOSE BENEFITS ARE
DETERMINED BY RETIREMENT PLAN
FORMULA
----------------------------------------
YEARS OF CREDITED SERVICE
----------------------------------------
AVERAGE YEARLY COMPENSATION 15 20 25 30
- --------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 50,000............................................ $12,181 $16,242 $20,302 $24,363
$100,000............................................ $25,681 $34,242 $42,802 $51,363
$160,000 and over................................... $41,881 $55,842 $69,802 $83,763
</TABLE>
With respect to each of the individuals named in the executive compensation
table, the estimated credited years of service under the Retirement Plan as of
December 31, 1997 were as follows: Mr. Hawes, nine years; Mr. Schair, nine
years; Mr. Dubois, nine years; Mr. Stroup, one year; Mr. Wilson, seven years;
and all named executive officers as of December 31, 1997 as a group, an average
of seven years.
Benefits are funded through employer contributions to a trust. Employees of
the Company are eligible to participate in the Retirement Plan when they have
completed one year of service and attained age twenty and one-half. Participants
become vested in their benefits under the Retirement Plan as follows: 20% after
three years' service, 40% after four, 60% after five, 80% after six, and 100%
(fully) vested after seven years' service, subject to certain break-in-service
rules. The Retirement Plan provides a benefit upon retirement at the normal
retirement age of 65 which, when expressed as a single life annuity, equals (i)
1.5% of Average Monthly Compensation (as that term is defined in the Retirement
Plan) multiplied by the number of the participant's years of service up to a
maximum of thirty years, plus (ii) 0.3% of Average Monthly Compensation in
excess of Social Security Retirement Benefits covered compensation multiplied by
the participant's years of service up to a maximum of thirty years, less (iii)
the amount of any accrued benefit provided under any defined benefit plan of
General Reassurance Corporation for service prior to January 1, 1989. Average
Monthly Compensation is the participant's average monthly compensation
(excluding overtime pay and bonuses) for the five most highly compensated
consecutive calendar years of service from the participant's date of hire to his
or her date of termination of employment. A participant may elect to commence
receiving benefits under the Retirement Plan when he or she has attained age 55
and completed ten years of service. Benefits under the Retirement Plan are
normally payable in the form of a single life annuity in the case of unmarried
participants and in the form of a joint and survivor annuity in the case of
married participants. If a participant continues employment past Normal
Retirement Age (as that term is defined in the Retirement Plan), his or her
retirement benefit determined at the close of each Plan Year (as that term is
defined in the Retirement Plan) prior to actual retirement is equal to the
greater of (i) the actuarial equivalent of the monthly retirement benefit as of
the close of the prior Plan Year, or (ii) his or her accrued benefit at the
close of the Plan Year. This benefit is offset by any benefit distributions
during the Plan Year. Sections 401(a)(17) and 415 of the Code limit both the
amount of a participant's compensation that may be taken into account for
purposes of calculating Average Monthly Compensation and the amount of benefits
that may be paid from the Retirement Plan.
Supplemental Executive Retirement Plan. With certain exceptions, Section
415 of the Code currently limits pension benefits which may be paid under plans
qualified under the Code to an annual benefit of
14
<PAGE> 17
$120,000, indexed annually. The Tax Reform Act of 1986 limits the amount of
annual compensation which may be considered in determining qualified plan
pensions to $150,000, indexed annually, effective January 1, 1994. Previously,
the limit was $200,000, indexed annually. For 1997, the amount of annual
compensation which could be considered in determining qualified plan pensions
was $160,000. In March 1995 the Board of Directors, upon the recommendation of
the Benefits Committee, established the Life Re Corporation Supplemental
Executive Retirement Plan ("SERP") for certain designated officers of Life Re
Corporation to whom these limits apply, or will apply in the future, so that
these employees will obtain the benefit that would have applied in the absence
of these limits, as well as to provide additional retirement benefits to a
number of key executives whose many years of service in the industry prior to
joining the Company would not be counted as years of service under the
Retirement Plan.
The table set forth below illustrates the approximate annual retirement
benefits which would be payable at age 62 based on the Average Monthly
Compensation and years of credited service indicated under the SERP to
participants whose benefits are determined by the SERP formula.
SUPPLEMENTAL EXECUTIVE RETIREMENT PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
PARTICIPANTS WHOSE BENEFITS ARE
DETERMINED BY SERP FORMULA
-------------------------------
YEARS OF CREDITED SERVICE
--------------------------------------------
AVERAGE YEARLY COMPENSATION 15 20 25 30
--------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$200,000........................................ $ 37,499 $ 49,999 $ 62,499 $ 80,654
$250,000........................................ $ 56,249 $ 74,999 $ 93,749 $118,154
$300,000........................................ $ 74,999 $ 99,999 $124,999 $155,654
$350,000........................................ $ 93,749 $124,999 $156,249 $193,154
$400,000........................................ $112,499 $149,999 $187,499 $230,654
$450,000........................................ $131,249 $174,999 $218,749 $268,154
$500,000........................................ $149,999 $199,999 $249,999 $305,654
$550,000........................................ $168,749 $224,999 $281,249 $343,154
$600,000........................................ $187,499 $249,999 $312,499 $380,654
$650,000........................................ $206,249 $274,999 $343,749 $418,154
$700,000........................................ $224,999 $299,999 $374,999 $455,654
</TABLE>
The SERP provides monthly supplemental benefits upon retirement equal to
2.5% of the participant's Average Monthly Compensation (as defined in the above
described Retirement Plan) multiplied by the number of the participant's Years
of Service (as defined under the Retirement Plan) less (i) 3.33% of Social
Security Retirement Benefits multiplied by Years of Service, and (ii) the amount
of the monthly benefit provided under the Retirement Plan. Upon a Change in
Control, Years of Service will automatically be increased by five years.
The estimated annual benefits payable upon retirement at normal retirement
age for each of the named executive officers under the SERP are $170,000 for Mr.
Hawes, $390,000 for Mr. Schair, $580,000 for Mr. Dubois, $670,000 for Mr. Stroup
and $550,000 for Mr. Wilson.
In connection with the SERP, the Board and the Benefits Committee
authorized the creation of a Rabbi Trust. The Rabbi Trust must be created and
funded by the Company upon a "Change in Control" (which is defined in a manner
substantially equivalent to a Change in Control under the 1992 Life Re
Corporation Stock Option Plan) or a threatened Change in Control. Funding must
be an amount sufficient to provide for the payment of all benefits provided for
under the SERP. The trust assets, as assets of the Company, will be subject to
the claims of the Company's creditors in the event of the Company's bankruptcy
or insolvency.
15
<PAGE> 18
Assuming a Change in Control occurred on December 31, 1998, that all of the
named executive officers were still employed on that date, and that each named
executive officer's employment terminated on that date, the present value
(calculated using a 7.5% interest rate) of the additional payment that would be
required for the extra five years of service upon a Change in Control under
protection implemented by the Company in connection with the SERP to Messrs.
Hawes, Schair, Dubois, Stroup and Wilson would be $720,000, $400,000, $310,000,
$80,000, and $40,000, respectively.
Discretionary Bonus Plan. The Company's Bonus Plan (the "Discretionary
Bonus Plan") provides individual awards based on annual performance goals. The
Executive Committee of the Board of Directors evaluates qualitative performance
and approves the list of participants. Individual awards for performance are
determined by the Executive Committee and are paid during the first quarter
after the close of the fiscal year to which the award pertains. No award is
payable to a participant who terminates employment voluntarily or is terminated
by the Company with or without cause prior to the payment date, except that a
pro-rated award will be paid in the event of termination by reason of
retirement, death or permanent disability. The amounts of awards paid under the
Discretionary Bonus Plan to the Company's five named executive officers with
respect to the 1995 fiscal year are reflected in the Summary Compensation Table.
No awards were paid to the Company's five named Executive Officers under the
Discretionary Bonus Plan for the 1996 or 1997 fiscal years. Award payments are
made in cash solely from general corporate assets. Awards under the
Discretionary Bonus Plan do not meet the criteria for performance-based
compensation, and therefore may not be deductible under the applicable rules and
regulations of Section 162(m) of the Code.
Annual Plan. The Life Re Corporation Annual Incentive Plan (the "Annual
Plan") provides annual cash bonuses to officers of the Company. Participants are
the key executives of the Company selected by the Compensation Committee to
participate in the Annual Plan prior to the start of each plan year. The amount
of the awards, if any, are based on the attainment of certain performance
objectives determined by the Compensation Committee including, without
limitation, the future performance of the Company, the participant's level of
responsibilities, performance, salary and other compensation. The performance
objectives applicable to a plan year are set prior to the beginning of that plan
year and are related to measures of the Company's performance such as
profitability and growth. The participants are assigned an impact level
determined in the discretion of the Compensation Committee. The performance
objectives and the benefits may be different between and among impact levels. If
a participant's employment terminates or there is a reduction in duties, title
or position, within twelve months after a Change in Control, the participant
will be entitled to a payment under the Annual Plan equal to the current year's
pro-rata portion of the bonus amount earned in the previous year. The Board may
alter, amend, suspend, or discontinue the Annual Plan, but participants' rights
regarding outstanding awards may not be adversely affected. The Compensation
Committee designated nine officers of the Company as participants in the Annual
Plan for 1998.
The material terms of the performance goals established for the top three
executives in the Office of the Chairman for 1998 are based on after-tax return
on equity levels and the percentage increase in pre-tax operating earnings.
Based upon the results of each, a pool will be created to be divided among the
top executives in the Office of the Chairman. Once the threshold levels are met,
the pool will equal a percentage of pre-tax operating earnings. The maximum pool
would be comprised of 4% of pre-tax operating earnings. The 1998 performance
objectives were set by the Compensation Committee in November 1997. The
Compensation Committee will certify in writing prior to payment that the
performance goals have, in fact, been satisfied.
The 1998 performance objectives for the remaining named executive officers
also were set by the Compensation Committee in November 1997 and are based on
achievement of certain targeted after-tax returns on equity levels and increases
in pre-tax operating earnings. The actual bonus amounts for the remaining named
executive officers listed in the Summary Compensation Table are computed as a
percent of each individual's salary, with a maximum of 90%.
In each case, the Committee has downward discretion on the amount of bonus
to be awarded. To determine whether such downward discretion will be utilized,
the Committee may consider individual and Company performance including return
on equity, increase in book value determined according to generally accepted
accounting principles, revenues, cash flow, net income, and stock price, as well
as other factors.
16
<PAGE> 19
The Compensation Committee intends to administer the Annual Plan in
accordance with the applicable rules and regulations under Section 162(m) of the
Code.
Long-Term Plan. The Life Re Corporation Long-Term Incentive Plan (the
"LTIP") provides cash bonuses to members of the Office of the Chairman of the
Company. Participants are the members of the Office of the Chairman of the
Company selected by the Compensation Committee to participate in the LTIP prior
to the start of each plan year. The amount of the awards, if any, are based on
the attainment of certain performance goals set forth in the LTIP including,
without limitation, acquisitions, mergers, and gains on the sale of certain
investments. The Board may alter, amend, suspend, or discontinue the LTIP, but
participants' rights regarding outstanding awards may not be adversely affected.
The Compensation Committee designated the three individuals in the Office of the
Chairman of the Company as equal participants in the bonus pool under the LTIP
for 1998. The participants and the percentage participation in the pool may
change from year to year in the discretion of the Compensation Committee.
The material terms of the performance goals established for the top three
executives in the Office of the Chairman for 1998 are based upon the results of
certain transactions, including acquisitions of assets, blocks of business, or
other entities, mergers or gains from the disposition of certain investments. A
bonus pool will be created to be divided among the participants according to the
participation units specified by the Compensation Committee. The pool will equal
a percentage of the amount involved in the applicable transaction. The maximum
percentage would be 5% of the amount involved. The performance objectives remain
identical to those approved by stockholders at the Company's 1995 Annual
Meeting. The Compensation Committee will certify in writing prior to payment
that the performance goals have, in fact, been satisfied. The Compensation
Committee has downward discretion on the amount of bonus to be awarded under the
LTIP.
The Compensation Committee intends to administer the LTIP in accordance
with the applicable rules and regulations under Section 162(m) of the Code.
Restricted Stock Purchase Agreements. Since the acquisition of Life
Reassurance in 1988, the Company has sold Common Shares to certain executive,
managerial and professional employees ("key employees") of Life Reassurance
pursuant to substantially similar restricted stock purchase agreements ("Stock
Purchase Agreements") entered into with each key employee. The price paid for
the Common Shares pursuant to the Stock Purchase Agreements was, in certain
instances, less than the fair market value at the time of the purchase.
Compensation expense was recognized in the financial statements.
A key employee will become 20% vested in the Common Shares purchased
pursuant to a Stock Purchase Agreement on the date set forth in such Stock
Purchase Agreement and thereafter will vest annually in an additional 20% of the
Common Shares. In addition, certain Stock Purchase Agreements provide that the
Common Shares become fully vested in the event of a "change in control" of the
Company (as defined in such agreements). Common Shares sold under the Stock
Purchase Agreements are subject to forfeiture to the Company if the key employee
leaves the employment of the Company for any reason at any time prior to
becoming vested in the purchased Common Shares. Such forfeited Common Shares may
be sold to the then current employees of Life Reassurance at a price that may
not be equal to the then current market price.
Upon termination of a key employee's employment for any reason, the Company
may repurchase all or any portion of the key employee's vested Common Shares
obtained under the Stock Purchase Agreements. If the Company does not elect to
repurchase all or any portion of such Common Shares, it has a right of first
refusal with respect to such Common Shares at the price and on the terms and
conditions bid by an independent third party.
As of December 31, 1997, the number of Common Shares vested pursuant to the
Stock Purchase Agreements for any of the individuals named in the Summary
Compensation Table was 26,000, which are held by Mr. Wilson.
17
<PAGE> 20
PROPOSAL TWO
AMENDMENT TO THE 1992 LIFE RE CORPORATION STOCK OPTION PLAN
General. The 1992 Life Re Corporation Stock Option Plan (the "1992 Option
Plan") was adopted by the Board of Directors and the stockholders of the Company
by written consent in 1992. The Compensation Committee and the Board of
Directors have proposed an amendment to the 1992 Option Plan to increase the
number of Common Shares allocated to the 1992 Option Plan by 1,500,000 Common
Shares from 3,000,000 Common Shares to 4,500,000 Common Shares. An amendment to
the 1992 Option Plan to (i) provide a maximum grant to any one participant to
enable the 1992 Option Plan to qualify for the performance-based compensation
exception under Section 162(m) of the Code, and (ii) increase the number of
Common Shares allocated to the 1992 Option Plan by 1,600,000 Common Shares from
1,400,000 Common Shares to 3,000,000 Common Shares was approved and adopted by
the Company's stockholders at the Company's 1995 Annual Meeting of Stockholders.
The purpose of the 1992 Option Plan is to advance the interests of the
Company and its stockholders by strengthening the Company's ability to attract
and retain individuals with training, experience and ability as officers, key
employees, directors and consultants and to furnish additional incentive to such
key individuals to promote the Company's financial success by providing them
with an equity ownership in the Company commensurate with Company performance,
as reflected in increased stockholder value.
In order to ensure that the Company has appropriate long-term incentives
and competitive compensation opportunities for its key officers and employees,
the Board of Directors approved an amendment to the 1992 Option Plan (the
"Amendment") to increase the number of Common Shares allocated to the 1992
Option Plan by 1,500,000 Common Shares from 3,000,000 Common Shares to 4,500,000
Common Shares and directed that the Amendment be submitted to stockholders for
their approval at the 1998 Annual Meeting. The Amendment will be effective as of
the date it is approved by the Company's stockholders. The full text of the
Amendment is set forth in Exhibit A to this Proxy Statement, and the following
discussion of the Amendment is qualified in its entirety by the text of the
Amendment.
Increase in Authorized Common Shares. The 1992 Option Plan currently
authorizes the issuance of up to 3,000,000 Common Shares of the Company, and the
Amendment would authorize for issuance under the 1992 Option Plan an additional
1,500,000 Common Shares. The following table reflects as of February 16, 1998
the number of Common Shares authorized for issuance under the 1992 Option Plan,
the aggregate number of options granted prior to February 16, 1998, the number
of options exercised, the number of Common Shares currently subject to
outstanding options, and the number of Common Shares available for issuance in
connection with the grant of future options to purchase Common Shares under the
1992 Option Plan.
<TABLE>
<CAPTION>
COMMON
COMMON SHARES
OPTIONS SHARES AVAILABLE
COMMON GRANTED SUBJECT TO FOR GRANT
SHARES (NET OF OPTIONS OUTSTANDING OF FUTURE
AUTHORIZED FORFEITURES) EXERCISED OPTIONS OPTIONS
- ---------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
3,000,000 2,833,275 310,725 2,688,775 500
</TABLE>
As of March 26, 1998, 500 Common Shares remained available for issuance
under the 1992 Option Plan and will remain available for issuance in addition to
the 1,500,000 Common Shares that would be available for future issuance upon the
exercise of future option grants if stockholder approval of the Amendment is
obtained. On March 26, 1998, the closing price of the Company's Common Shares
was $73.375 per share.
The proposed Amendment will not result in new benefits accruing to the
named executive officers. In addition, the number of Common Shares underlying
options that could be granted to the named executive officers and other Company
employees if this proposal is approved is indeterminable at this time.
The remaining terms and conditions of the 1992 Option Plan remain unchanged
by the Amendment.
Pursuant to the 1992 Option Plan, certain executive, managerial and
professional employees ("option recipients") of the Company are eligible to
receive awards of stock options. The Company previously reserved
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<PAGE> 21
3,000,000 Common Shares for issuance under the 1992 Option Plan and is proposing
the Amendment for the purpose of reserving an additional 1,500,000 Common Shares
for issuance under the 1992 Option Plan. The Plan is administered by a committee
of the Board of Directors consisting of three directors (the "Stock Option Plan
Committee"), each of whom is a disinterested person with respect to the 1992
Option Plan within the meaning of the applicable regulations under Section 16 of
the Securities Exchange Act of 1934, as amended. Subject to the provisions of
the 1992 Option Plan, the Stock Option Plan Committee has sole discretionary
authority to interpret the 1992 Option Plan and to determine the type of awards
to grant, when and to whom awards are granted, the number of Common Shares
covered by each award and the terms and conditions of each award.
The number of Common Shares that may be issued under the 1992 Option Plan
is subject to adjustment in the event of a stock dividend, stock split or other
change in corporate structure or capitalization affecting the Common Shares or
certain other transactions which, in the determination of the Stock Option Plan
Committee, would affect the Common Shares. In the event that any outstanding
option granted under the 1992 Option Plan for any reason expires or is
terminated without having been exercised in full, or any shares of Restricted
Stock are forfeited, the shares allocable to the unexercised portion of such
option or the forfeited portion of such Restricted Stock shall (unless the 1992
Option Plan shall have been terminated) become available for subsequent grants.
Common Shares issued under the 1992 Option Plan may consist of authorized but
unissued shares or treasury shares.
Options granted under the 1992 Option Plan are "incentive stock options,"
within the meaning of Section 422 of the Code, or nonqualified stock options.
Options will be exercisable for a period of ten years from the date of grant, or
such lesser period as the Stock Option Plan Committee may determine at the time
of grant. The exercise price of the options will be determined by the Stock
Option Plan Committee when the options are granted, but in no event will the
exercise price be less than the Fair Market Value (as defined in the 1992 Option
Plan) of the Common Shares on the date of grant. In the discretion of the Stock
Option Plan Committee, the option exercise price may be paid (i) in cash or in
Common Shares having a fair market value on the date of exercise equal to the
option exercise price, (ii) by the delivery of the option recipient's promissory
note for the amount thereof, or (iii) by delivering to the Company a copy of
irrevocable instructions to a stockbroker to deliver promptly to the Company an
amount of sale or loan proceeds sufficient to pay the exercise price. The terms
of the promissory notes that may be given as payment of the exercise price of
the options pursuant to the terms of the 1992 Option Plan will be determined by
the Stock Option Plan Committee.
The option agreements provide for vesting schedules from four to five years
and will become immediately exercisable upon (i) a change in control (as defined
in the 1992 Option Plan), (ii) death, disability or retirement, (iii)
involuntary termination other than for "cause" (as defined in the option
recipient's option agreement), or (iv) voluntary termination by the option
recipient for "good reason" (as defined in the option recipient's option
agreement).
The Stock Option Plan Committee will determine when, and conditions on
which, each stock option granted will become or remain exercisable during
employment or thereafter, and may provide for acceleration of the exercisability
of any options granted under the 1992 Option Plan.
VOTE REQUIRED TO APPROVE THE AMENDMENT
The affirmative vote of persons holding at least a majority of the
outstanding Common Shares entitled to vote is required for approval of the
Amendment to the 1992 Life Re Corporation Stock Option Plan. The Board of
Directors recommends that stockholders vote FOR approval of the Amendment.
Proxies solicited by the Board of Directors will be so voted unless stockholders
specify in their proxies a contrary choice.
Shares represented by proxies which are marked "for," "against," or
"abstain" will be counted for purposes of determining the vote required to
approve the Amendment, and the total number of votes cast in favor of the
Amendment will determine whether sufficient affirmative votes have been cast. An
abstention from voting on the Amendment will have the same legal effect as a
vote against the Amendment. Shares for which no vote is indicated (including
shares as to which a broker indicates that it does not have discretionary
authority to vote, referred to as non-votes) will count toward the establishment
of a quorum, but will not have an effect on the vote for the Amendment or any
other matters submitted herein for stockholder approval.
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<PAGE> 22
PROPOSAL THREE
AMENDMENT TO THE LIFE RE CORPORATION
RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has unanimously approved and recommends that the
stockholders approve an amendment to the Company's Restated Certificate of
Incorporation ("Certificate") to increase the authorized Common Shares of the
Company from the presently authorized number of 40,000,000 shares to 80,000,000
shares. The Company is not proposing any increase in the number of shares of
authorized preferred stock of which 5,000,000 shares are authorized but have not
been issued. The language in the first paragraph of Article 4 of the existing
Certificate would be amended as follows (new language underscored):
"The total number of shares which the Corporation shall have the authority
to issue is eighty five million (85,000,000) shares, of which eighty
million (80,000,000) shares, $0.001 par value, shall be Common Stock, and
five million (5,000,000) shares, $0.01 par value, shall be Preferred
Stock."
On March 26, 1998, the Company had 17,279,279 Common Shares issued and
outstanding and 2,215,906 Common Shares held in treasury. In addition, also on
March 26, 1998, the Company had 2,581,125 Common Shares reserved for issuance
pursuant to the 1992 Life Re Corporation Stock Option Plan and the Life Re
Corporation 1993 Non-Employee Directors Stock Option Plan and 2,070,000 Common
Shares reserved for issuance upon the settlement of its 6% Adjustable
Conversion-rate Equity Security Units ("ACES"). Accordingly, the number of
authorized but unissued Common Shares currently available to the Company for
future use is limited.
The proposed increase in the number of authorized Common Shares will ensure
that the Common Shares will be available for issuance, if needed, in connection
with stock splits, stock dividends, corporate mergers and acquisitions, employee
benefit plans and other corporate purposes. The Board of Directors believes that
it is in the Company's best interest to have the additional Common Shares
available for issuance in connection with such purposes without delay and
without the necessity of a special shareholders' meeting. The Company has no
immediate plans, arrangements, commitments or understandings with respect to the
issuance of any of the additional Common Shares which would be authorized by the
proposed amendment.
No further actions by the Company's stockholders would be necessary to
issue the additional Common Shares unless required by applicable law or
regulatory agencies or by the rules of any stock exchange on which the Company's
securities may then be listed. The Company's stockholders have no preemptive
rights to acquire newly issued Common Shares. The issuance of additional Common
Shares, other than through a stock split, stock dividend or other pro rata
distribution to stockholders, would reduce existing stockholders' voting power.
In addition, depending on the consideration received for the Common Shares, the
issuance of additional Common Shares could affect the earnings per share and
book value per share of the existing Common Shares. Also, although the increase
in the authorized Common Shares is not intended as an anti-takeover measure, the
additional Common Shares could be used by the Company to make any attempt to
gain control of the Company more difficult. As of this date, the Company is
unaware of any effort to accumulate the Company's Common Shares or to obtain
control of the Company.
VOTE REQUIRED TO APPROVE THE AMENDMENT
The affirmative vote of persons holding at least a majority of the
outstanding Common Shares entitled to vote is required for approval of the
amendment to the Life Re Corporation Restated Certificate of Incorporation. The
Board of Directors recommends that stockholders vote FOR approval of the
amendment. Proxies solicited by the Board of Directors will be so voted unless
stockholders specify in their proxies a contrary choice.
Shares represented by proxies which are marked "for," "against," or
"abstain" will be counted for purposes of determining the vote required to
approve the amendment, and the total number of votes cast in favor of the
amendment will determine whether sufficient affirmative votes have been cast. An
abstention from voting on the amendment will have the same legal effect as a
vote against the amendment. Shares for which no vote is indicated (including
shares as to which a broker indicates that it does not have discretionary
authority to vote, referred to as non-votes) will count toward the establishment
of a quorum, but will not have an effect on the vote for the amendment or any
other matters submitted herein for stockholder approval.
20
<PAGE> 23
EMPLOYMENT AGREEMENTS
The Company entered into substantially similar automatically renewing
employment agreements with Messrs. Hawes, Schair and Dubois in June 1995, which
were amended effective as of September 1996.
Each of the employment agreements, as amended, provides that during its
term the Company will continue to employ the executive in his respective
position, pay the executive a minimum annual salary, consider the executive for
bonuses at such times and in the amounts determined by the Compensation
Committee and continue the executive's participation in all of the Company's
incentive plans and equity compensation plans available to other senior
officers. The minimum annual salary for Mr. Hawes is $660,000 and the minimum
annual salary for each of Messrs. Schair and Dubois is $630,000.
The employment agreements provide that if the Company terminates the
employment of any of the executives without cause or an executive terminates his
employment for good reason, the Company will pay the terminated executive a
severance allowance. The severance allowance includes (i) cash equal to two
times the sum of (a) the executive's annual base salary at the date of
termination and (b) the executive's highest aggregate incentive award paid in
any one year based on the aggregate incentive awards paid during any one of the
three bonus periods immediately preceding termination, (ii) benefits and service
credit for benefits for three years after the date of termination and (iii)
legal fees or other expenses, if any, due under the employment agreements.
Each employment agreement, as amended, provides that upon a change in
control, the executive may elect to either (i) terminate his employment with the
Company or (ii) continue his employment with the Company. If the executive
elects to terminate his employment with the Company following the change in
control, the Company will cause the executive to be paid the amount the
executive would have been paid had his employment with the Company been
terminated, as described in the preceding paragraph. If the executive elects to
continue his employment with the Company, each employment agreement provides
that upon a change in control (i) the salary and bonus of the executive shall
not be reduced because of the change in control, (ii) the regular increases in
salary and bonus shall not be reduced or terminated because of a change in
control, and (iii) grants of options to purchase Common Shares shall be made on
the same terms and conditions as options granted prior to the occurrence of the
change in control and the number of options granted shall not be reduced because
of a change in control.
In June 1996, the Company entered into substantially similar employment
agreements with Messrs. Filoromo, Stroup and Wilson. Each of the employment
agreements provides that during its term the Company will continue to employ the
executive in his respective position, pay the executive a minimum annual salary,
consider the executive for bonuses at such times and in the amounts determined
by the Compensation Committee and, in the case of Messrs. Stroup and Wilson,
consider such executives annually under the Company's Annual Incentive Plan and
award them "LTIP-Type" bonuses in an amount equal to one-third of the amount of
a bonus awarded to a member of the Office of the Chairman under the Company's
LTIP. The minimum annual salary for Mr. Filoromo is $241,500, for Mr. Stroup is
$350,000 and for Mr. Wilson is $300,000.
The employment agreements provide that if the Company terminates the
employment of any of the executives without cause or an executive terminates his
employment for good reason, the Company will pay the terminated executive a
severance allowance in a lump sum amount equal to the sum of (a) the executive's
annual base salary at the date of termination through the termination of the
employment agreement and (b) annual bonus for each year from the date of
termination through the end of the employment agreement in an amount based on
the highest aggregate incentive award paid to the executive during any one of
the two bonus periods immediately preceding termination. Messrs. Stroup's and
Wilson's employment agreements generally provide that upon a change in control,
the executive may choose either (A) to receive a cash severance allowance equal
to the greater of (i) the amount the executive would be paid if he had been
terminated, as described above or (ii) two times the sum of (a) the executive's
annual base salary at the date of termination and (b) the executive's highest
aggregate incentive bonus awarded to the executive during any one of the three
bonus periods immediately preceding termination or (B) to continue employment
with the Company with such executive's current position, duties, salary and
benefits contractually guaranteed until the
21
<PAGE> 24
later of (i) three years from the effective date of the employment agreement and
(ii) two years from the occurrence of the change in control. Mr. Filoromo's
employment agreement provides for change of control provisions similar to those
described below under the caption entitled "Change in Control Agreements".
All of the agreements provide that the executive will refrain from
competing with the Company for one year after the date of termination of such
executive's employment agreement.
CHANGE IN CONTROL AGREEMENTS
The Company has entered into severance agreements with certain of its
officers other than its executive officers. The purpose of these agreements is
to encourage the officers to continue to carry out their responsibilities in the
event of a possible change in control of the Company, which might result in the
termination of their employment. Under the terms of these agreements, upon a
change in control of the Company (as defined in the agreements) the officers may
elect to either (i) terminate their employment and receive a severance allowance
equal to two times (a) the officer's annual base salary at the date of
termination and (b) the highest aggregate incentive award awarded to the officer
during any one of the three bonus periods immediately preceding termination or
(ii) continue employment with the Company with their current position, duties,
salary and benefits contractually guaranteed for a period of two years.
22
<PAGE> 25
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee (the "Committee") are T. Bowring
Woodbury, II, Carolyn K. McCandless and K. Fred Skousen. No member of the
Committee was an officer or an employee of the Company or its subsidiaries
during the year ended December 31, 1997 and none was formerly an officer of the
Company or any of its subsidiaries. In addition, no executive officer of the
Company serves on the board of directors or the compensation committee of
another entity where a Committee member is employed.
The report of the Compensation Committee and the performance graph that
follow shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates the information by
reference and shall not otherwise be deemed filed under the Securities Act or
Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors of
Life Re Corporation (the "Company") has served since appointment by the
Company's Board of Directors in November 1992. The Committee consists of three
independent, non-employee directors who are responsible for establishing
executive compensation including the determination of base salary and bonuses
for senior executives and administering the Company's long-term incentive stock
programs. All decisions by the Committee are subject to the approval of the
Board of Directors.
The Committee believes that total compensation of executives should be
broad-based and include elements such as base salaries, annual incentive
bonuses, long-term cash incentives, and stock option grants. It is anticipated
that total compensation levels of executives will be positioned close to the
competitive market norms for comparable executive positions within the Company's
selected peer group to attract seasoned executives to the Company who have the
experience and skill necessary to manage the Company's highly technical and
sophisticated business. The selected peer group contains some of the companies
in the Company's Peer Group Index appearing on the Comparison of Five Year
Cumulative Total Return Graph herein as well as companies of comparable scope
appearing in other competitive compensation surveys of life insurance and
reinsurance companies.
The Omnibus Budget Reconciliation Act of 1993 restricts the deductibility,
for federal income tax purposes, of executive compensation above a specified
threshold. While only three of the Company's executives currently receive total
compensation packages that would be above this threshold, the tax law provisions
are complex, and under certain circumstances could restrict the Company's
deduction in a given year. To protect the Company's right to deduct compensation
paid to the extent possible while retaining key executives, the Committee has
taken these tax law provisions into account in structuring the Company's
executive compensation. In November 1994, the Committee recommended two
incentive plans for adoption by the Company's Board of Directors. The Board of
Directors adopted both the Life Re Corporation Annual Incentive Plan and the
Life Re Corporation Long-Term Incentive Plan, and such plans were approved by a
vote of the Company's stockholders. In March 1995, the Committee and the Board
approved an amendment to the 1992 Life Re Corporation Stock Option Plan to
comply with the new tax law provisions and to increase the number of shares
available for grant. The amendment was subsequently approved by the Company's
stockholders at the Company's 1995 Annual Meeting.
SALARY
At the time of the Committee's appointment, salary levels for the Office of
the Chairman were in place pursuant to three year employment agreements. These
salaries reflected the similar levels of responsibility and contribution to the
Company and were set at competitive levels after extensive discussions and
consultation with the Company's investment bankers and underwriters. In June
1995, the members of the Office of the Chairman entered into new automatically
renewing employment agreements (which were amended effective
23
<PAGE> 26
September 1996 to expand the provisions concerning a change in control) and the
base salaries of the top three named executive officers are established pursuant
to such employment agreements. The terms of all of the employment agreements are
consistent with the Company's executive compensation policies. The salary of the
Chief Executive Officer is at the high end of the range for executive officers
in the selected peer group. The base salaries of the top three executives in the
Office of the Chairman as an aggregate and the base salaries of the fourth and
fifth named executive officers are at or above the high end of the range. In
January 1998, the top three named executive officers each received an increase
of 5% of base salary, which was within the range of increases in base salary
received by employees of the major operating subsidiary and in all cases
reflected the attainment of individual and corporate performance measures.
Aggregate compensation, which includes base salary, annual incentive plan
bonuses, long-term cash incentives and grants of stock options, is tied directly
to the Company's financial performance.
Decisions regarding compensation for the senior executives other than the
Office of the Chairman were based on recommendations made by the Office of the
Chairman based on individual performance, salary surveys, and other information
regarding competitive salaries in the industry. The salary and bonus proposals
were then submitted to the Committee for review. Levels of executive
compensation were based on what the Committee believed would be appropriate
levels of compensation for executives in comparable competitive positions taking
into account the executives' skills, performance, and service. In June 1996, Mr.
Stroup joined the Company as Executive Vice President and Chief Financial
Officer. In that connection, the Committee approved the terms and conditions of
employment agreements for both Mr. Stroup and Mr. Wilson, which terms and
conditions were based on the Committee's consideration of the compensation of
such executive officer positions at comparable companies and the experience of,
and responsibilities held by, each of Messrs. Stroup and Wilson.
ANNUAL INCENTIVE PLAN
The Life Re Corporation Annual Incentive Plan (the "Annual Plan") was
approved by the Company's stockholders at the Company's 1995 Annual Meeting.
Annual incentive bonuses are based on both the Company's financial performance
and the executive's individual contribution to the Company's growth and
profitability over the preceding year. In measuring the Company's financial
performance the Committee looks at measures such as the Company's return on
common stockholders' equity, increase in book value, revenues, cash flow, net
income and any other financial measures which the Committee, after discussions
with management and outside consultants, believes reflect the executive's
contribution to the Company's annual operating performance. With respect to the
Annual Plan, the compensation has been designed to meet the criteria of
qualified performance-based compensation. Incentive payments are based solely on
the attainment of one or more preestablished objective performance goals, which
are established by the Committee.
The performance objectives for 1997 were established by the Committee in
November 1996. Annual incentive bonus awards to the named executive officers for
the 1997 fiscal year were based on an evaluation of each executive's individual
performance and the Company's performance. Individual performance ranged from
good to excellent during 1997. The Company's total assets increased to $3.7
billion in 1997 from $2.5 billion in 1996 and common stockholders' equity rose
to $27.42 per share at December 31, 1997 compared to $21.45 per share at
December 31, 1996. In addition, the Committee reviewed the factors enumerated
above including return on equity, change in book value, revenues, cash flow, net
income and stock price, although the ultimate determinations were based on the
mechanical targets formulated for 1997.
The material terms of the performance goals established for the top three
executives in the Office of the Chairman for 1998, which are identical to those
used in 1997, are based on after-tax return on equity levels and the percentage
increase in pre-tax operating earnings. Based upon the results of each, a pool
will be created to be divided equally among the top three executives in the
Office of the Chairman. Once the threshold levels are met the pool will equal a
percentage of the Company's pre-tax operating earnings. The Committee will
certify in writing prior to payment that the performance goals have, in fact,
been satisfied.
24
<PAGE> 27
The performance objectives for the remaining named executive officers also
are based on achievement of certain targeted after-tax returns on equity levels
and increases in pre-tax operating earnings. The actual bonus amounts for such
named executive officers are computed as a percentage of each individual's
salary.
In each case, the Committee has downward discretion on the amount of bonus
to be awarded. To determine whether such downward discretion will be utilized,
the Committee may consider individual and Company performance including return
on equity, change in book value, revenues, cash flow, net income and stock
price, as well as other factors.
For 1997, the Committee designated Messrs. Hawes, Schair, Dubois, Filoromo,
Stroup and Wilson and Theresa L. Rudolph, Vice President, Associate General
Counsel and Associate Secretary, as participants in the Annual Plan, and such
persons, along with Alan D. Head, Vice President and Controller and Bruce I.
Weiser, Vice President -- Investor Relations and Assistant Secretary, were
designated to be the participants for 1998.
DISCRETIONARY BONUS PLAN
The Company's Discretionary Bonus Plan (the "Discretionary Plan") provides
awards based on individual performance that may not be appropriately recognized
under either the Annual Plan or the Life Re Corporation Long-Term Incentive
Plan. Awards under the Discretionary Plan do not meet the criteria for
performance-based compensation, and therefore may not be deductible under the
applicable rules and regulations of Section 162(m) of the Internal Revenue Code
of 1986, as amended.
The Compensation Committee did not award bonuses under the Discretionary
Plan in 1997 or during the beginning of 1998 based on the performance of the
executives during 1997 because the Committee believes the individual performance
of its executives was adequately recognized under the Annual Plan, the Life Re
Corporation Long-Term Incentive Plan or the provision for bonuses set forth in
the employment agreements of certain executives.
LONG-TERM INCENTIVE PLAN
The Committee expects that, above and beyond traditional operating
activities, the executive officers will discover and evaluate strategic,
long-term investment opportunities for the Company that do not necessarily fall
within normal operating activities nor the traditional lines of business.
Because the Annual Plan is not designed to reward the Office of the Chairman for
these types of initiatives, the Committee has established the Life Re
Corporation Long-Term Incentive Plan (the "LTIP"). The LTIP was approved by the
Board of Directors and was subsequently approved by the Company's stockholders
at the Company's 1995 Annual Meeting.
The purpose of the LTIP is to recognize the efforts of the executives in
locating, evaluating, and entering into long-term strategic initiatives that
have a substantial, beneficial financial or strategic impact on the Company, but
that may take a significant period of time to have such an impact. Long-term
strategic initiatives of this type may include strategic investments,
acquisitions of blocks of business or other companies as a whole, or joint
ventures. The Committee believes that (i) strategic investments and diverse
initiatives are important to the strength of the Company and its future and (ii)
the LTIP will serve as an incentive for the executive officers to undertake the
additional responsibilities and time commitments required to complete such
initiatives. Because it is impossible to determine when such initiatives will
occur or when the results of such activities may be optimized, the Committee
believes that payments under the LTIP may not be paid every year.
The amount of any cash award paid under the LTIP is determined by the
members of the Committee, who have downward discretion on the amount of the cash
award, considering the impact the transaction has or may have on the financial
strength or strategic placement of the Company, the efforts expended by the
executives in completing the transaction and the equity value the transaction
adds to the Company. Specific factors involving the financial strength of the
Company that will be considered by the Committee may include: (i) increases in
insurance in force, (ii) increases in policy revenues, (iii) increases in
operating earnings,
25
<PAGE> 28
(iv) increases in assets, (v) increases in investment income, (vi) enhancements
of statutory capital and surplus, (vii) increases in stock price, (viii)
increases in cash flow, and (ix) increases in GAAP book value. The benefit to
the Company resulting from projects on which LTIP cash awards are paid will not
be double counted when the Committee is determining the executive's annual
incentive bonus under the Annual Plan.
The Committee had occasion to award payments for transactions that
qualified under the LTIP to the designated 1997 LTIP participants. The
qualifying transactions were (i) the reinsurance of a block of business
regarding Allianz Life Insurance Company of North America ("Allianz"), (ii) the
reinsurance of a block of business from subsidiaries of UNUM Corporation
("UNUM"), (iii) the acquisition of 79% of the outstanding stock of AML
Acquisition Corporation ("AMLAC"), the owner of American Merchants Life
Insurance Company, and (iv) reinsurance arrangements with a subsidiary of
Resource Financial Corporation ("RFC") and subsidiaries of Aon Corporation
("Aon").
For 1997, the Committee designated Messrs. Hawes, Schair and Dubois as
participants in the LTIP and such persons were similarly designated for
participation in 1998.
In connection with the employment agreements entered into by the Company
and Messrs. Stroup and Wilson, the Company agreed to pay such executive officers
"LTIP-Type" bonuses in an amount equal to one-third of the amount of a bonus
awarded to a member of the Office of the Chairman under the LTIP, in recognition
of such executive officers' additional responsibilities and efforts in achieving
the goals set forth in the LTIP.
STOCK OPTION PLAN
In January 1998, the Committee continued the policy of making annual grants
under the 1992 Life Re Corporation Stock Option Plan (the "Option Plan")
consistent with competitive market practices. The named executive officers were
granted a number of options to purchase the Company's common stock in line with
other comparable insurance company competitors. The stock option grants to the
named executive officers become exercisable in increments of 25% per year over
four years commencing one year from the date of grant. These grants are intended
to reinforce the executives' common interests with stockholders, provide
additional incentive to increase stockholder value and to help retain key
executive talent.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The salary for the Chief Executive Officer was determined by the Committee
after review of his employment agreement, discussions with outside consultants
and review of competitive salary surveys. After year end results were available,
the Committee reviewed the bonus calculations according to a formula adopted for
1997 based on the Annual Plan. Based on the 1997 performance objectives, the
Committee determined the amount of the incentive bonus to be awarded for 1997.
The goal of this process was to attempt to keep the compensation of the
Company's Chief Executive Officer at competitive market levels and to properly
reward performance. In establishing the increase of $36,000 (5.0%) to his 1997
base salary level (which had previously increased under his employment contract
to $728,000) for an aggregate base salary of $764,000, the Committee used a
percentage increase consistent with the aggregate percentage increases of all
employees of the major operating subsidiary. The Committee believes the increase
is well within the bounds of the standard wage increases in the industry.
For 1997, the Committee awarded Mr. Hawes a long-term incentive payment
under the LTIP in connection with the successful completion of (i) the
reinsurance of a block of business regarding Allianz, (ii) the reinsurance of a
block of business from UNUM, (iii) the acquisition of 79% of the outstanding
stock of AMLAC, and (iv) reinsurance arrangements with a subsidiary of RFC and
subsidiaries of Aon.
As part of Mr. Hawes' total compensation package, in January 1998 he
received a grant of stock options to purchase 90,000 shares of the Company's
common stock. The size of the Mr. Hawes's annual stock option grant was
determined by the Committee based on the terms of the Option Plan, the
limitations based on the number of shares available under the Option Plan, and
common practice in the market for public companies of similar size.
26
<PAGE> 29
The Committee reviewed several factors in making the determinations
applicable to Mr. Hawes' compensation, including his management skills, years of
experience within the life insurance industry and compensation paid to chief
executive officers at other life insurance and reinsurance companies.
T. Bowring Woodbury, II, Chairman
Carolyn K. McCandless
K. Fred Skousen
27
<PAGE> 30
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG LIFE RE CORPORATION, THE WILSHIRE 5000 INDEX
AND THE S&P FINANCIAL INDEX
<TABLE>
<CAPTION>
Measurement Period Life Re
(Fiscal Year Covered) Corporation Wilshire 5000 S&P Financial
<S> <C> <C> <C>
Dec-92 100 100 100
Dec-93 71 111 111
Dec-94 62 111 107
Dec-95 90 152 165
Dec-96 140 184 223
Dec-97 239 242 330
</TABLE>
* $100 INVESTED ON 12/31/92 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
28
<PAGE> 31
PROPOSAL FOUR
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company, following the recommendation of the
Audit Committee, has appointed Ernst & Young LLP as the Company's independent
auditors for the year 1998. Ernst & Young LLP was first retained as the
Company's independent auditors in November 1988. Ernst & Young LLP assists the
Company with certain matters under the pension plan and has served as a
consultant to the Company's Compensation Committee during 1993, 1994, 1995 and
1996 and to the Company's Benefits Committee in 1994, 1995 and 1996. In
addition, during 1995 and 1996 Ernst & Young LLP consulted the Company with
respect to certain aspects of its reinsurance administration. No relationship
exists between Ernst & Young LLP and the Company other than the usual
relationship between independent auditors and client.
Although this appointment is not required to be submitted to a vote of the
stockholders, the Board of Directors believes it appropriate as a matter of
policy to request that the stockholders ratify the appointment of the
independent auditors for the year 1998.
The Company anticipates that a representative of Ernst & Young LLP will be
present at the Annual Meeting. Such representative will be given the opportunity
to make a statement if he or she desires to do so, and is expected to be
available to respond to any questions which may be submitted at the Annual
Meeting.
The Board of Directors has proposed that the stockholders adopt the
following resolution:
RESOLVED, that the appointment of Ernst & Young LLP by the Board of
Directors as the Company's independent auditors for the year 1998 is hereby
ratified.
The Board of Directors recommends that stockholders vote FOR the selection
of Ernst & Young LLP as the Company's independent auditors for 1998. Proxies
solicited by the Board of Directors will be so voted unless stockholders specify
in their proxies a contrary choice. In the event a majority of the votes cast at
the meeting are not voted in favor of the above resolution, the adverse vote
will be considered as a direction to the Board of Directors to select another
auditor for the year 1999. Because of the difficulty and expense of making any
substitution of auditors so long after the beginning of the current year, it is
contemplated that the appointment for the year 1998 will be permitted to stand
unless the Board of Directors determines another good reason for making a
change.
1999 PROPOSALS OF STOCKHOLDERS
In order to be considered for inclusion in the proxy statement for the
regular annual meeting of the stockholders of the Company in the year 1999,
stockholder proposals must have been received by the Company not later than
December 11, 1998. Such proposals should be sent to the Corporate Secretary of
the Company at the address listed on page 1 hereof.
AVAILABILITY OF 10-K REPORT
THE COMPANY FILED ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30,
1998. A COPY OF THE FORM 10-K, INCLUDING ANY FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES, AND A LIST DESCRIBING ANY EXHIBITS NOT CONTAINED THEREIN,
MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER. THE EXHIBITS ARE AVAILABLE
UPON PAYMENT OF CHARGES WHICH APPROXIMATE THE COMPANY'S COST OF FURNISHING THE
EXHIBITS. REQUESTS FOR COPIES OF THE FORM 10-K SHOULD BE SENT TO THE CORPORATE
SECRETARY AT THE ADDRESS LISTED ON PAGE 1 HEREOF.
29
<PAGE> 32
OTHER MATTERS
Management is not aware of any business to be acted upon at the Annual
Meeting other than the business described in this Proxy Statement, but in the
event any other business should properly come before the Annual Meeting calling
for a vote of the stockholders, the proxy holders (as indicated on the
accompanying proxy card) will vote the proxies according to their best judgment
in the interests of the Company.
Exercise your right to vote; complete and sign the enclosed proxy card and
return it promptly in the envelope enclosed for your convenience. In the event
that you attend the Annual Meeting, you may revoke your proxy and vote your
shares in person.
By Order of the Board of Directors
[/s/ W. Weldon Wilson]
W. WELDON WILSON,
Vice President, General Counsel
and Secretary
30
<PAGE> 33
EXHIBIT A
AMENDMENT NUMBER THREE
TO THE 1992 LIFE RE CORPORATION
STOCK OPTION PLAN
A-1
<PAGE> 34
AMENDMENT NUMBER THREE
TO THE 1992 LIFE RE CORPORATION
STOCK OPTION PLAN
This Amendment Number Three (this "Amendment") to the 1992 Life Re
Corporation Stock Option Plan is entered into by the Board of Directors (the
"Board") of Life Re Corporation (the "Company") to be effective on the Effective
Date (as hereinafter defined).
WITNESSETH
WHEREAS, the Company maintains a stock option plan, the 1992 Life Re
Corporation Stock Option Plan, as previously amended (the "Plan"), for the
benefit of its "key personnel"; and
WHEREAS, the Board of Directors is empowered to amend the Plan pursuant to
Section 3.1 thereof; and
WHEREAS, the Board of Directors wishes to amend the Plan to increase the
number of shares of Common Stock available for issuance thereunder.
NOW, THEREFORE, the Board of Directors has determined that the Plan shall
be amended, effective as of the date set forth below, as follows:
1. Defined Terms. Terms not defined herein will have the meanings assigned
to such terms under the Plan.
2. Increase of Shares. Section 1.5(b) of the Plan is hereby amended and
restated to read as follows:
"(b) Subject to Section 3.5 (relating to adjustments upon changes in
capitalization), as of any date the total number of shares of Common Stock
with respect to which options may be granted under the Plan shall be equal
to the excess (if any) of (i) 4,500,000 minus (ii) the sum of (A) the
number of shares subject to outstanding options granted under the Plan, and
(B) the number of shares previously transferred pursuant to the exercise of
options granted under the Plan. In accordance with (and without limitation
upon) the preceding sentence, shares of Common Stock covered by options
granted under the Plan which are cancelled, expire or terminate for any
reason whatsoever shall again become available for awards under the Plan."
3. Effective Date. This Amendment shall be effective as of the date it is
approved by the stockholders of the Company.
4. Governing Law. This Amendment shall be governed by the same law as
applies to the interpretation of the Plan.
IN WITNESS WHEREOF, this Amendment is executed on this 12th day of February
1998 to be effective on the Effective Date.
LIFE RE CORPORATION
By: /s/ RODNEY A. HAWES, JR.
--------------------------------------
Name: Rodney A. Hawes, Jr.
Title: Chairman and Chief Executive
Officer
A-2
<PAGE> 35
LIFE RE CORPORATION PROXY/VOTING INSTRUCTION CARD
969 HIGH RIDGE ROAD
STAMFORD, CONNECTICUT 08905
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LIFE RE CORPORATION, FOR THE ANNUAL MEETING OF STOCKHOLDERS
ON MAY 14, 1998.
The undersigned hereby appoints Rodney A. Hawes, Jr., Douglas M. Schair
and Jacques E. Dubois, as proxies, severally and each with full power of
substitution, to vote all shares of Common Stock of Life Re Corporation
standing in the name of the undersigned on its books on March 26, 1998, at the
Annual Meeting of Stockholders to be held on May 14, 1998, at 9:30 a.m. at the
Stamford Marriott Hotel, Two Stamford Forum, Stamford, Connecticut 06901, or at
any adjournments thereof, with all the powers the undersigned would possess if
personally present as follows:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND IF
PROPERLY EXECUTED AND TIMELY DELIVERED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4.
(Continued, and to be dated and signed, on the reverse side)
LIFE RE CORPORATION
P.O. Box 11026
New York, N.Y. 10203-0026
<PAGE> 36
[ ]
1. Election of directors: FOR all nominees [ ]
listed below
AGAINST all nominees [ ]
listed below.
WITHHOLD AUTHORITY
to vote for all nominees [ ]
listed below.
*EXCEPTIONS [ ]
Nominees: Rodney A. Hawes, Jr., Chris C. Stroup and T. Bowring Woodbury, II.
(INSTRUCTIONS: To vote against any individual nominee, or withhold authority to
vote for any individual nominee, mark the "Exceptions" box and write that
nominee's name in the space provided below.)
*Exceptions - Vote Against
------------------------------------------------------
*Exceptions - Withhold Authority
------------------------------------------------
2. To approve and adopt an amendment to the 1992 Life Re Corporation Stock
Option Plan authorizing an increase from 3,000,000 to 4,500,000 in the number
of shares of Life Re Corporation common stock available for issuance.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve and adopt an amendment to the Life Re Corporation Restated
Certificate of Incorporation to increase the authorized number of shares of
common stock from 40,000,000 to 80,000,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To ratify the appointment of Ernst & Young LLP as Life Re Corporation's
independent auditors for 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion the Proxies are authorized to vote upon such matters as may
properly come before the meeting or any adjournment or postponement thereof.
Change of Address and
or Comments Mark Here [ ]
The signature on this Proxy should correspond exactly with the
stockholder's name as printed to the left. In the case of
joint tenancies, co-executors or co-trustees, all should sign.
Persons signing as Attorney, Executor, Administrator, Trustee
or Guardian should give their full title.
Dated: , 1998
--------------------------------------------------
--------------------------------------------------------------
Signature of Stockholder
--------------------------------------------------------------
Signature of Stockholder
Please sign, date and return this Proxy in the enclosed postage prepaid
envelope.
Votes MUST be indicated
(x) in Black or Blue Ink. [ ]
