SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
American Annuity Group, Inc.
(Name of Registrant as Specified In Its Charter)
American Annuity Group, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: ftnt. 1
4) Proposed maximum aggregate value of transaction:
1. Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity 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:
AMERICAN ANNUITY GROUP, INC.
250 East Fifth Street
Cincinnati, Ohio 45202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 23, 1996
To Our Stockholders:
You are invited to attend the Annual Meeting of Stockholders of
American Annuity Group, Inc. ("AAG" or the "Company"). The meeting will be
held in the Filson Room of the Cincinnatian Hotel, Sixth and Vine Streets,
Cincinnati, Ohio at 10:00 A.M. on Thursday, May 23, 1996.
The purposes of the meeting are:
1. To elect eight directors; and
2. To transact such other business as may properly be
brought before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 25, 1996 are
entitled to receive notice of and to vote at the meeting or any adjournment
thereof.
You are invited to be present at the meeting so that you can vote in person.
Whether or not you plan to attend the meeting, please date, sign and return
the accompanying proxy form in the enclosed, postage-paid envelope. If you
do attend the meeting, you may either vote by proxy or revoke your proxy and
vote in person. You may also revoke your proxy at any time before the vote
is taken at the meeting by written revocation or by submitting a later-dated
proxy form.
Carl H. Lindner
Chairman of the Board
Dated: March 25, 1996
PROXY STATEMENT
AMERICAN ANNUITY GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 1996
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of AAG for use at the Annual Meeting of
Stockholders to be held at 10:00 A.M. on Thursday, May 23, 1996, and any
adjournment thereof (the "Annual Meeting"). The Company will pay the cost
of soliciting proxies.
The approximate mailing date of this Proxy Statement and the
accompanying proxy form is March 31, 1996.
Outstanding Voting Securities of AAG
Holders of record of the common stock, $1.00 par value per share, of
AAG (the "Common Stock") at the close of business on March 25, 1996 (the
"Record Date") will be entitled to notice of and to vote at the Annual
Meeting and at any adjournments thereof. At the Record Date, 43,074,038
shares of Common Stock were issued and outstanding.
Holders of Common Stock are entitled to one vote per share on each
matter to be voted on at the Annual Meeting.
Principal Stockholders
As of the Record Date, the only person known to the Company to own
beneficially more than 5% of AAG's Common Stock was American Financial
Group, Inc. and its subsidiaries (collectively "AFG"), One East Fourth
Street, Cincinnati, Ohio 45202, which beneficially owned 35,059,995 shares,
or approximately 81.4% of the shares outstanding as of the Record Date.
Carl H. Lindner, Carl H. Lindner III, S. Craig Lindner, Keith E.
Lindner and trusts for their benefit (collectively the "Lindner Family"),
the beneficial owners of approximately 44% of AFG's voting stock, share with
AFG voting and dispositive power with respect to the shares of AAG Common
Stock owned by AFG. AFG and the Lindner Family may be deemed to be
controlling persons of AAG.
Action to be Taken at the Meeting
All shares represented by a properly executed and unrevoked proxy will
be voted at the Annual Meeting or any adjournments thereof in accordance
with the directions on the proxy. Unless a contrary direction is indicated,
such shares will be voted for the nine nominees for director named herein.
Management knows of no other matter to be presented at the Annual
Meeting upon which a vote may be taken, but it is intended that as to any
such other matter the proxy holders will vote in accordance with their
judgment as to the best interest of AAG. Should any of the nominees for
election as a director become unable to stand for election, which is not
anticipated, it is intended that the proxy holders will vote for the
election of such other person as the Board of Directors may recommend.
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees for Director
Directors will be elected to hold office until the next annual meeting
and until their successors are elected and qualified.
The number of directors to be elected at the Annual Meeting is eight.
The eight directors so elected will, upon such election, constitute the
entire Board of Directors.
In accordance with AAG's Certificate of Incorporation ("Certificate"),
the only candidates eligible for election at the Annual Meeting are
candidates nominated by or at the direction of the Board of Directors and
candidates nominated at the meeting by a stockholder who has complied with
the procedures set forth in the Certificate.
The persons nominated by the Board of Directors to serve as directors
for the ensuing year are CARL H. LINDNER, S. CRAIG LINDNER, ROBERT A.
ADAMS, A. LEON FERGENSON, RONALD G. JOSEPH, JOHN T. LAWRENCE III, WILLIAM R.
MARTIN and RONALD F. WALKER. See "MANAGEMENT" for a description of the
background, securities holdings, remuneration and other information relating
to the nominees. The eight nominees receiving the highest numbers of votes
will be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF THE EIGHT NOMINEES LISTED ABOVE. THE COMPANY HAS BEEN INFORMED
THAT AFG INTENDS TO VOTE ITS SHARES FOR THE ABOVE NOMINEES.
MANAGEMENT
The directors and executive officers of AAG are:
Director or
Name Age* Position Officer Since
Carl H. Lindner 76 Chairman of the Board 1987
and Chief Executive
Officer
S. Craig Lindner 40 Director and President 1993
Robert A. Adams 50 Director, Executive 1992
Vice President and
Chief Operating
Officer
A. Leon Fergenson 83 Director 1987
Ronald G. Joseph 59 Director 1994
John T. Lawrence III 44 Director 1994
William R. Martin 66 Director 1994
Ronald F. Walker 57 Director 1987
John B. Berding 33 Senior Vice President, 1993
President
William J. Maney 46 Senior Vice President, 1993
Treasurer and Chief
Financial Officer
Mark F. Muething 36 Senior Vice President, 1993
General Counsel and
Secretary
Jeffrey S. Tate 39 Senior Vice President 1993
Christopher P. Miliano 37 Vice President and 1993
Controller
* As of March 1, 1996
Carl H. Lindner has been Chairman of the Board since 1987. Mr. Lindner
also serves as Chairman of the Board and Chief Executive Officer of AFG, a
diversified financial services company, and Chairman of the Board of the
following public companies: American Financial Enterprises, Inc. ("AFEI"),
a company whose assets consists primarily of investments in AAG, AFG and
Citicasters; Chiquita Brands International, Inc. ("Chiquita"), a leading
international marketer, processor and producer of quality fresh and
processed food products; and Citicasters Inc. ("Citicasters"), a company
engaged in the ownership and operation of television and radio stations.
AFG owns a substantial beneficial interest (over 20%) in all of these
companies. He also serves as a director of American Financial Corporation
("AFC") and American Premier Underwriters, Inc. ("APZ"), both of which are
wholly-owned subsidiaries of AFG. Carl H. Lindner is the father of S. Craig
Lindner.
S. Craig Lindner was elected President and a director of AAG in March
1993. Mr. Lindner is President and has during the past five years been
Senior Executive Vice President of American Money Management Corporation
("AMM"), a subsidiary of AFG which provides investment services for AFG and
its affiliated companies, including AAG. He is also a director of AFG, AFC,
APZ, Chiquita, and Citicasters.
Robert A. Adams was elected a director of AAG in October 1993. Mr.
Adams was elected Executive Vice President and Chief Operating Officer of
the Company in December 1992. For more than five years prior to election as
an officer of the Company, he was Senior Vice President and a director of
Great American Insurance Company ("GAI"), a wholly-owned subsidiary of AFG
engaged in the property and casualty insurance business. He also served as
Treasurer of GAI until October 1991.
A. Leon Fergenson has been a director of AAG since 1987. During the
past five years, Mr. Fergenson has been a private investor and a director of
various corporations. He is also a director of Sequa Corporation and
several mutual funds managed by Neuberger & Berman, Inc.
Ronald G. Joseph was elected a director of AAG in March 1994. During
the past five years, Mr. Joseph has been Chief Executive Officer and
attorney of various Cincinnati-based automobile dealerships and real estate
holdings.
John T. Lawrence III was elected a director of AAG in March 1994. Mr.
Lawrence has been a Senior Vice President with Paine Webber Incorporated
(formerly Kidder Peabody & Co.), a national investment banking firm, since
January 1993. Prior thereto for more than five years he was a Senior Vice
President with Prudential Securities Inc.
William R. Martin was elected a director of AAG in March 1994.
Although currently retired, during the past five years Mr. Martin was
President of both Tominy, Inc. and M.B. Computing, Inc., which are each
privately held software development companies. Mr. Martin is also a
director of AFG, AFC and APZ.
Ronald F. Walker has been a director of AAG since 1987. He currently
serves as Vice Chairman of GAI. Until April 1995 and for more than five
years prior thereto, Mr. Walker had been President and Chief Operating
Officer and a director of AFC. He was President and Chief Operating Officer
of APZ from March 1987 to February 1992, and a director of APZ from May 1982
to February 1992. In addition, he served as President and Chief Executive
Officer and a director of General Cable from July 1, 1992 to June 1994.
Mr. Walker is also a director of AFG, AFEI, Chiquita and Tejas Gas
Corporation, a corporation engaged in the production and distribution of
natural gas.
John B. Berding was elected Senior Vice President - Investments of AAG
in March 1993. During the past five years, he has been an investment
analyst with AMM, and since February 1992, a Vice President of that company.
William J. Maney was elected Senior Vice President, Treasurer and Chief
Financial Officer of AAG in February 1993. Prior thereto for more than
five years he was Vice President - Accounting of GAI.
Mark F. Muething was elected Senior Vice President, General Counsel and
Secretary of AAG in October 1993. Prior thereto, he was a partner (from
October 1991 to October 1993) and an associate (from August 1984 to October
1991) with Keating, Muething & Klekamp, a Cincinnati law firm.
Jeffrey S. Tate was elected Senior Vice President of AAG in February
1993. Prior thereto, he served as Vice President (from May 1990 to December
1992) and Assistant Vice President (from February 1988 to May 1990) of GAI.
Christopher P. Miliano was elected Vice President and Controller of AAG
in February 1995. Prior thereto, he served as an Assistant Vice President
of AAG (since June 1993) and as a Director of Accounting and Corporate
Reporting of AFC (from October 1989 to June 1993).
In December 1993, Citicasters completed a comprehensive financial
restructuring that included a prepackaged plan of reorganization filed in
November of that year under Chapter 11 of the Bankruptcy Code. Although not
a director or officer of Citicasters during 1993, Carl H. Lindner had been
Chairman of the Board and Chief Executive Officer of Citicasters prior to
1993 and was again elected Chairman of the Board of Citicasters in January
1994.
Holdings of Management
Information concerning AAG's Common Stock beneficially owned by each
director and executive officer and all directors and executive officers as a
group as of March 1, 1996, is shown in the following table:
Amount and Nature of
Beneficial Percent
Name Ownership(a)(d) of Class
Robert A. Adams 31,848 *
A. Leon Fergenson 3,423 *
Ronald G. Joseph 15,450 *
John T. Lawrence III 2,244 *
Carl H. Lindner 35,059,995 (b) 81.4%
S. Craig Lindner 35,101,303 (b)(c) 81.5
William R. Martin -- --
Ronald F. Walker 16,501 *
John B. Berding 8,192 *
William J. Maney 1,426 *
Mark F. Muething 5,743 *
Jeffrey S. Tate 3,258 *
Christopher P. Miliano 2,918 *
All Directors and
Executive Officers as
a Group (13 persons) 35,192,306 81.7%
* Less than 1%
(a) Unless otherwise indicated, the persons named have sole voting and
dispositive power over the shares listed opposite their names.
(b) Messrs. Carl H. and S. Craig Lindner may be deemed to own
beneficially the shares set forth under "Principal Stockholders" for
AFG, of which Mr. Carl Lindner is Chairman of the Board and Chief
Executive Officer and a principal shareholder and Mr. S. Craig
Lindner is a director, officer and principal shareholder.
(c) Includes 16,100 shares held by his spouse as custodian for their
minor children or as trustee and 8,000 shares which are held in a
trust for the benefit of their minor children for which Keith E.
Lindner acts as trustee with voting and dispositive power.
(d) Messrs. Joseph, Lawrence, Carl H. Lindner, S. Craig Lindner, Martin,
Walker, Berding, Tate and Miliano also beneficially own 16,000,
4,000, 6,793,701, 4,803,585, 6,000, 44,524, 7,034, 200 and 10 shares,
respectively, of common stock of AFG. Mr. Martin also beneficially
owns 38,508 shares of AFC preferred stock.
Committees and Meetings of the Board of Directors
AAG's Board of Directors held five meetings in 1995.
Audit Committee. The Audit Committee consists of three members: William
R. Martin (Chairman), A. Leon Fergenson and John T. Lawrence III, none of
whom is an officer or employee of AAG or any of its subsidiaries. The
Committee's functions include: recommending to the Board of Directors the
firm to be appointed as independent accountants to audit the financial
statements of AAG and its subsidiaries and to provide other audit-related
services and recommending the terms of such firm's engagement; reviewing the
scope and results of the audit with the independent accountants; reviewing
with management and the independent accountants AAG's interim and year-end
operating results; reviewing the adequacy and implementation of the internal
accounting and auditing procedures of AAG; and reviewing the non-audit
services to be performed by the independent accountants and considering the
effect of such performance on the accountants' independence. The Audit
Committee held three meetings in 1995.
Executive Committee. The Executive Committee consists of three members:
S. Craig Lindner (Chairman), Carl H. Lindner and Robert A. Adams. The
Committee is generally authorized to exercise the powers of the Board of
Directors between meetings of the Board of Directors, except that the
Committee's authority does not extend to certain fundamental matters, such
as amending the By-laws of AAG, filling vacancies in the Board of Directors,
declaring a dividend, electing or removing the Company's principal officers,
adopting or approving a plan of merger, consolidation or sale of a
substantial portion of the Company's assets, dissolution or reorganization
of AAG or establishing or designating any class or series of AAG stock (or
fixing or determining the relative rights and preferences thereof). The
Executive Committee did not meet in 1995 but did take action in writing on
one occasion.
Organization and Policy Committee. The Organization and Policy Committee
consists of two members: Ronald F. Walker Chairman) and Ronald G. Joseph,
neither of whom is an officer or employee of AAG or any of its subsidiaries.
The Committee's functions include: reviewing the duties and responsi-
bilities of the Company's principal officers; reviewing and making
recommendations to the Board of Directors with respect to the compensation
of the Company's principal officers; reviewing the Company's compensation
and personnel policies; administering bonus and stock option plans;
reviewing and making recommendations to the Board of Directors with respect
to employee retirement policies; and supervising, reviewing and reporting to
the Board of Directors on the performance of the management committee
responsible for the administration and investment management of the
Company's pension and savings plans. The Committee also reviews and advises
the Board of Directors with respect to the nomination of candidates for
election to the Board of Directors. The Organization and Policy Committee
held one meeting in 1995.
Compensation of Directors
Officers of AAG do not receive any additional compensation for serving as
members of the Board of Directors or any of its committees. Directors who
are not employees of AAG receive an annual fee of $20,000 for Board
membership and an annual fee of $5,000 for serving as Chairman of a Board
Committee. In addition, directors who are not employees of AAG are paid a
fee of $1,500 for attendance at each Board meeting, and $750 for attendance
at each committee meeting. All directors are reimbursed for expenses
incurred in attending board and committee meetings.
Pursuant to the 1994 Directors Stock Appreciation Rights Plan, each non-
employee director was granted 10,000 stock appreciation rights on March 2,
1994 at an exercise price of $9.62. On each March 1 thereafter, each non-
employee director will receive 1,000 stock appreciation rights. The
exercise price of the stock appreciation rights is equal to the average
market price of AAG Common Stock for the ten trading days preceding the
grant date.
Compensation of Executive Officers
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to AAG and its subsidiaries
for the three years ended December 31, 1995 paid to those persons who were,
at December 31, 1995, (i) the chief executive officer, and (ii) the other
four most highly compensated executive officers of AAG.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Other
Name and Annual Securities All Other
Principal Compen- Underlying Compen-
Position Year Salary Bonus sation(e) Options/SARs sation(f)
<S> <C> <C> <C> <C> <C> <C>
Carl H. Lindner 1995 $101,923 -- $ 3,956 -- --
Chairman of the 1994 $101,923 -- -- -- --
Board and Chief 1993 $100,000 -- -- -- --
Executive
Officer (a)
S. Craig Lindner 1995 $318,000 $414,000 $ 1,915 -- --
President (b) 1994 $296,157 $422,400 -- 175,000 --
1993 $193,282 $304,808 $ 53 125,000 --
Robert A. Adams 1995 $479,039 $448,500 $34,527 75,000 $30,000
Executive Vice 1994 $454,808 $450,000 $30,394 175,000 $30,000
President and 1993 $425,000 $428,123 $ 4,160 125,000 $30,000
Chief Operating
Officer
William J. Maney 1995 $176,327 $115,000 $11,769 20,000 $17,480
Senior Vice 1994 $166,252 $120,000 $ 1,602 20,000 $17,175
President, 1993 $125,202 $122,981 $ 4,464 35,000 $14,150
Treasurer and
Chief Financial
Officer (c)
Jeffrey S. Tate 1995 $171,231 $115,000 $ 4,720 20,000 $17,174
Senior Vice 1994 $159,233 $108,000 $ 3,154 20,000 $16,034
President (d) 1993 $113,085 $ 98,693 $ 1,937 35,000 $13,030
<FN>
(a) In his capacity as Chief Executive Officer of AAG, Mr. Lindner is
paid a base annual salary of $100,000. Mr. Lindner did not
participate in any other compensation plans of AAG.
(b) S. Craig Lindner was elected President of AAG on March 26, 1993.
(c) Mr. Maney was elected Senior Vice President, Treasurer and Chief
Financial Officer of AAG effective on February 15, 1993.
(d) Mr. Tate was elected Senior Vice President of AAG effective on
February 15, 1993.
(e) The amounts listed under "Other Annual Compensation" for 1995 include
the value of automobile and homeowners insurance coverage provided
pursuant to the Executive Insurance Program and the premiums paid for
group life coverage in excess of $50,000 per individual, respective-
ly, for each person as follows: Mr. Adams - $7,776 and $5,118, Mr.
Maney - $9,550 and $1,028, and Mr. Tate - $2,289 and $376. The
amount for 1995 and 1994 for Mr. Adams also includes an auto
allowance of $14,400. The amount for Mr. Lindner reflects premiums
paid for group life coverage in excess of $50,000.
(f) Amounts listed under "All Other Compensation" for each of the named
persons for 1995 and 1994 reflect amounts contributed to the AAG
ESORP and AAG Auxiliary ESORP. For 1993, the amounts reflect
contributions by AAG to the AFC ESORP.
</TABLE>
Stock Appreciation Rights ("SAR") grants for the year ended December 31,
1995 for the Executive Officers named in the Summary Compensation Table are
as follows:
SAR GRANTS IN 1995
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for SAR Term(a)
% of Total
SARs
Granted to
Employees Exercise
SARs in Fiscal or Base Expiration
Name Granted Year Price(b) Date(c) 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Carl H. -- -- -- -- -- -- --
Linder
S. Craig 75,000 21.0% $9.28 2/14/2005 0 -- --
Linder(d)
Robert A. 75,000 21.0% $9.28 2/14/2005 0 $541,500 $1,274,600
Adams
William 20,000 5.6% $9.28 2/14/2005 0 $144,400 $ 339,900
J. Maney
Jeffrey 20,000 5.6% $9.28 2/14/2005 0 $144,400 $ 339,900
S. Tate
<FN>
(a) The Potential Realizable Value is calculated based on a market price
for the AAG Common Stock on February 14, 1995, the date of grant of
the SARs, of $10.13 per share.
(b) The closing price for AAG Common Stock on February 14, 1995, the date
of grant of the SARs, was $10.13 per share.
(c) For each of the named individuals, 20% of the SARs became exercisable
on February 14, 1996 and 20% become exercisable on each anniversary
of the date of grant thereafter.
(d) In May, 1995, Mr. Lindner agreed to cancel these SARs in connection
with the exercise of his vested SARs.
</TABLE>
SARs exercised during the year ended December 31, 1995 from the Executive
Officers named in the Summary Compensation Table are as follows:
AGGREGATED SAR EXERCISES IN 1995
AND SAR VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money SARs at
SARs at Fiscal Year End Fiscal Year End (a)
SARs Value Exercisable/ Exercisable/
Name Exercised Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Carl H. Lindner -- -- -- --
S. Craig Lindner 85,000 $52,675 -- --
Robert A. Adams 0 0 85,000/290,000 $233,300/$762,200
William J. Maney 0 0 18,000/57,000 $51,500/$155,500
Jeffrey S. Tate 0 0 18,000/57,000 $51,500/$155,500
<FN>
(a) The Value of Unexercised In-the-Money SARs at Fiscal Year End is
calculated based on a market price for AAG Common Stock on
December 31, 1995 of $12.00 per share.
</TABLE>
Organization and Policy Committee Report
The Organization and Policy Committee of AAG's Board of Directors consists
of two directors, neither of whom is an employee of AAG or any of its
subsidiaries. The Committee's functions include reviewing and making
recommendations to the Board of Directors with respect to the compensation
of each officer of the Company whose annual base salary exceeds $200,000.
Until March 1994, the Committee's authority extended to the compensation of
AAG's principal officers and every other officer whose annual base salary
exceeded $125,000. AAG's cash compensation for executive officers in 1995
was comprised principally of annual base salaries and payments pursuant to
the 1995 Corporate Bonus Plan. The grant of stock appreciation rights to
executive officers provided long-term incentive based compensation. In
determining compensation for executive officers, the Committee does not make
comparisons with other companies.
Annual Base Salaries. The Committee approves annual base salaries and
salary increases for executive officers that are appropriate for their
positions and levels of responsibilities. The Committee takes into
consideration the Company's long-term performance in establishing annual
base salaries for executive officers.
1995 Corporate Bonus Plan. Each of the named executive officers, other
than Carl H. Lindner, was eligible to participate in the 1995 Corporate
Bonus Plan (the "Bonus Plan"). The Bonus Plan compensates participants
based on the financial and operational performance of the Company. Under
the Bonus Plan, the Organization and Policy Committee established a target
bonus for each participant based on such person's duties and
responsibilities with the Company and expected contributions during the
year. The Committee also established financial and operational goals for
the Company, with the financial goals accounting for 75% of the bonus
potential and the operational goals accounting for the other 25%. Based on
the attainment of these goals, participants in the Bonus Plan could earn up
to 125% of the target bonus amounts. The bonuses reported in the Summary
Compensation Table for 1995 are amounts awarded to participating executive
officers in December 1995. In most cases, bonuses were paid at the rate of
115% of the target bonus amounts and were based on assessments of the
achievement of the financial and operational goals established by the
Committee. The principal factor in evaluating the Company's operational
goals was significant progress in the areas of service and market
expansion.
Compensation of the Chief Executive Officer. In April 1992, the
Organization and Policy Committee approved an annual base salary of $100,000
for Carl H. Lindner, Chief Executive Officer of the Company. In
establishing this salary, the Committee considered the fact Mr. Lindner
would not be working full-time on AAG related matters as a result of his
numerous management responsibilities with AFG and its affiliates. In
establishing Mr. Lindner's salary, the Committee gave consideration to the
Company's long-term performance. During 1995, Mr. Lindner did not
participate in any other compensation plans or arrangements of AAG.
Stock Appreciation Rights. SARs represent a performance-based portion of
the Company's compensation system. The Committee believes that the
Company's stockholders' interests are well served by aligning the interests
of the Company's executive officers with those of stockholders by the grant
of SARs. SARs are granted at exercise prices equal to the average of the
market price for AAG Common Stock for the ten trading days preceding the
date of grant and become exercisable at the rate of 20% per year. The
Committee believes that these features provide executive officers with
substantial incentives to maximize AAG's long-term success.
Internal Revenue Code Section 162. Provisions of the Internal Revenue
Code provide that compensation in excess of $1 million per year paid to the
Chief Executive Officer as well as other executive officers listed in the
compensation table will not be deductible unless the compensation is
"performance based" and the related compensation is approved by
stockholders. It was not considered by the Committee in determining 1995
compensation.
Members of the Organization and Policy Committee:
Ronald F. Walker (Chairman)
Ronald G. Joseph
Organization and Policy Committee Interlocks and Insider Participation.
The members of the Organization and Policy Committee are Ronald F. Walker
(Chairman) and Ronald G. Joseph, neither of whom was during 1995 or prior
years an officer or employee of AAG or any of its subsidiaries. Until
April, 1995 Mr. Walker was President and Chief Operating Officer of AFC
which owned all of the outstanding capital stock of GALIC prior to the
acquisition of GALIC by AAG on December 31, 1992. As a result of
transactions relating to AAG's acquisition of GALIC, AFG beneficially owns
81.4% of the outstanding shares of AAG Common Stock. See "Certain Transac-
tions" for additional information concerning relationships between AAG and
AFG and their respective subsidiaries.
In addition, Carl H. Lindner, Chairman of the Board and Chief Executive
Officer of AAG, is Chairman of the Board and Chief Executive Officer of AFG.
The Compensation Committee of AFG's Board of Directors sets the compensation
which Mr. Walker receives from AFG.
Performance Graphs. The following graph compares the cumulative total
stockholder return on AAG Common Stock with the cumulative total return of
the Standard & Poor's 500 Stock Index ("S&P 500") and the Standard & Poor's
Life Insurance Industry Index ("S&P Life") from the end of 1990 to the end
of 1995. The graph assumes $100 invested on December 31, 1990 in AAG Common
Stock, the S&P 500 and the S&P Life, including reinvestment of dividends.
(The table below contains the data points used in the Performance Graph
which appears in the printed Proxy Statement.)
PERFORMANCE GRAPH INDEX
DECEMBER 31
1990 1991 1992 1993 1994 1995
American Annuity Group, Inc. 100 173 157 253 245 308
S&P LIFE 100 144 193 196 162 233
S&P 500 100 130 140 155 157 215
Certain Transactions
GALIC, a wholly-owned subsidiary of the Company, and AMM, a wholly-owned
subsidiary of AFG, are parties to an Investment Services Agreement pursuant
to which AMM provides investment and custodial services to GALIC with
respect to GALIC's investments in accordance with guidelines approved by
AAG's directors who are not affiliated with AFG. GALIC pays AMM an annual
fee of .10% of total invested assets, provided that such fee shall not
exceed the actual cost to AMM of providing such services, and GALIC
reimburses AMM for certain expenses. Payments made by GALIC to AMM for 1995
totalled $4.7 million. In connection with the purchase of GALIC by AAG, GAI
agreed to neutralize the financial impact on GALIC of the adoption of an
actuarial guideline that was under consideration at the time of the
transaction. This actuarial guideline was subsequently adopted with an
effective date of December 31, 1995. In fulfillment of its commitment, on
December 28, 1995, GAI agreed to purchase up to $57 million of newly issued
shares of Series B Preferred Stock of AAG. On this same date, GAI purchased
$17 million of this Preferred Stock. The balance of the Preferred Stock
will be purchased prior to December 31, 1997. In addition, AMM agreed that,
if necessary, beginning in 1996 it will retroactively reduce its investment
management fee in order to neutralize the income effect of the adoption of
this actuarial guideline and the issuance of the Preferred Stock.
AAG, GALIC and certain of their subsidiaries are members of AFC's
consolidated tax group. AAG and GALIC have separate tax allocation
agreements with AFC which designate how tax payments are shared by members
of the tax group. In general, these companies compute taxes on a separate
return basis. GALIC is obligated to make payments to (or receive benefits
from) AFC based on taxable income without regard to temporary differences.
In accordance with terms of AAG's indentures, AAG receives GALIC's tax
allocation payments for the benefit of AAG's deductions arising from current
operations. If GALIC's taxable income (computed on a statutory accounting
basis) exceeds a current period net operating loss of AAG, the taxes
payable by GALIC associated with the excess are payable to AFC. If the AFC
tax group utilizes any of AAG's net operating losses or deductions that
originated prior to 1993, AFC will pay to AAG an amount equal to the benefit
received.
During 1995, the companies included in the AFC consolidated tax group
incurred income tax expense of $28.6 million, which amount is recorded as a
liability to AFC on AAG's year end balance sheet. AAG paid AFC $15.6
million in tax allocation payments in 1995.
GAI leases office space in a building owned by GALIC in Cincinnati, Ohio
under a lease which expires in March 2009. GALIC recorded rent of
approximately $1 million from GAI in 1995. In 1995, AAG made payments of
$0.9 million to Chiquita for the sublease of certain office space and other
facilities in Cincinnati, Ohio.
It was determined in 1992 that the agreements governing the Company's 1987
spin-off from APZ obligate the Company to reimburse APZ for workers'
compensation claim payments which continue to be required with respect to
the Company's operations from 1978 to 1987. The Company paid approximately
$600,000 to APZ with respect to this liability during 1995.
In connection with the GALIC purchase, GALIC's costs for state guarantee
funds are set at $1 million per year for a five-year period with respect to
insurance companies in receivership, rehabilitation, liquidation or similar
situation at December 31, 1992. For any year from 1993 through 1997 in
which GALIC pays more than $1 million to the various states, GAI will
reimburse GALIC for the excess assessments. For any year in which GALIC
pays less than $1 million, AAG will pay GAI the difference between $1
million and the assessed amounts. GALIC paid $2.2 million in assessments in
1995 and, accordingly, has recorded a receivable from GAI at December 31,
1995 of $1.2 million.
Proxies
Solicitation. Solicitation of proxies is being made by management at the
direction of AAG's Board of Directors, without additional compensation,
through the mail, in person and otherwise. The cost will be borne by AAG.
In addition, AAG will request brokers and other custodians, nominees and
fiduciaries to forward proxy soliciting material to the beneficial owners of
shares held of record by such persons, and AAG will reimburse them for their
expenses in so doing.
Revocation. The execution of a proxy does not affect the right to vote in
person at the meeting, and a proxy may be revoked by the person giving it
prior to the exercise of the powers conferred by it. A stockholder may
revoke a proxy by communicating in writing to the Secretary of AAG at the
address indicated above or by duly executing and delivering a proxy bearing
a later date. In addition, persons attending the meeting in person may
withdraw their proxies. Unless a proxy is revoked or withdrawn, the shares
represented thereby will be voted or the votes withheld at the Annual
Meeting or any adjournments thereof in the manner described in this Proxy
Statement.
Quorum and Vote Required for Approval
The presence at the Annual Meeting, in person or by proxy, of the holders
of at least a majority of the shares of AAG Common Stock outstanding at the
Record Date shall constitute a quorum to consider Proposal 1. In the event
a quorum does not attend the Annual Meeting, those stockholders who attend
in person or by proxy may adjourn the meeting to such time and place as they
may determine.
The eight nominees receiving the highest number of votes will be elected
as directors.
Abstentions and broker non-votes will have no effect on the election of
directors.
Independent Auditors
The accounting firm of Ernst & Young served as the Company's independent
auditors for the fiscal year ended December 31, 1995. Ernst & Young also
serves as independent auditors for AFG and many of its subsidiaries.
Representatives of that firm will attend the annual meeting and will be
given the opportunity to comment, if they so desire, and to respond to
appropriate questions that may be asked by stockholders. No auditor has yet
been selected for the current year since it is generally the practice of AFG
and its subsidiaries not to select independent auditors prior to the annual
stockholders meeting.
Nominations and Stockholder Proposals for 1997 Annual Meeting
The Organization and Policy Committee will consider stockholder
suggestions for nominees for director. Suggestions for director
consideration may be submitted to the Secretary of AAG at its principal
executive offices. Suggestions received by the Secretary's office by
December 31 will be considered by the Committee for nomination at the next
Annual Meeting of Stockholders. Stockholders may also make nominations for
director by complying with the procedures described above under the caption
"Nominees for Director".
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by AAG not later than December 1,
1996 in order to be considered for inclusion in AAG's proxy statement for
that meeting. Any such proposal should be communicated in writing to the
Secretary of AAG at the address indicated above.
Annual Report and Form 10-K Report
An annual report for the year ended December 31, 1995, containing
financial and other information about the Company has previously been
provided or is being concurrently provided to all stockholders.
THE COMPANY WILL SEND, WITHOUT CHARGE, A COPY OF ITS 1995 ANNUAL REPORT ON
FORM 10-K (EXCLUDING EXHIBITS), AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, TO ANY STOCKHOLDER UPON WRITTEN REQUEST. REQUESTS SHOULD BE
SENT TO MARK F. MUETHING, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY, P. O. BOX 120, CINCINNATI, OHIO 45201-0120.
Cincinnati, Ohio
March 25, 1996
ANNEX 1
AMERICAN ANNUITY GROUP, INC.
Proxy for Annual Meeting
Registration Name and Address
The undersigned hereby appoints William J. Maney and Mark F. Muething and
each of them, proxies of the undersigned, each with the power of
substitution, to vote all shares of Common Stock which the undersigned would
be entitled to vote at the Annual Meeting of Shareholders of American
Annuity Group, Inc. to be held on May 23, 1996 at 10:00 a.m., Eastern Time,
and any adjournment of such meeting.
The Board of Directors recommends a vote FOR each of the following
Proposals:
1. Election of Directors
/ / FOR AUTHORITY to elect the / / WITHHOLD AUTHORITY to
nominees listed below (except vote for every nominee
those whose names have been listed below
crossed out)
Robert A. Adams John T. Lawrence William R. Martin
A. Leon Fergenson Carl H. Lindner Alfred W. Martinelli
Ronald G. Joseph S. Craig Lindner Ronald F. Walker
DATE: ___________________, 1996 SIGNATURE:
________________________________________
SIGNATURE:
________________________________________
(if held jointly) Important: Please
sign exactly as name appears hereon
indicating, where proper, official
position or representative capacity. In
case of joint holders, all should sign.
This proxy when properly executed will be voted in the manner dictated
herein by the above signed shareholder. If no direction is made, this proxy
will be voted FOR each Proposal. To vote your shares, please mark, sign,
date and return this proxy form using the enclosed envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
