<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
IPC HOLDINGS, LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] 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.
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<PAGE> 2
IPC HOLDINGS, LTD.
AMERICAN INTERNATIONAL BUILDING
29 RICHMOND ROAD
PEMBROKE HM 08 BERMUDA
NOTICE OF ANNUAL GENERAL MEETING
TO BE HELD ON JUNE 18, 1999
April 29, 1999
TO OUR SHAREHOLDERS:
The 1999 Annual General Meeting of IPC Holdings, Ltd. (the "Company") will
be held at 9:30 a.m., local time, on Friday, June 18, 1999 at the American
International Building, 29 Richmond Road, Pembroke, Bermuda, for the following
purposes:
To elect seven directors to hold office until the Company's next
Annual General Meeting or until their successors are elected or appointed
or their offices are otherwise vacated;
To consider and approve a proposal to compensate members of the
Executive Committee of the Board of Directors for their service thereon;
To consider and approve an amendment to the IPC Holdings, Ltd. Stock
Option Plan to increase the number of Common Shares subject thereto and to
extend the expiration date of the plan;
To act on a proposal to appoint Arthur Andersen & Co. as the Company's
independent accountants for the fiscal year ending December 31, 1999; and
To transact such other further business, if any, as lawfully may be
brought before the meeting.
Only shareholders of record, as shown by the transfer books of the Company,
at the close of business on April 7, 1999 are entitled to notice of, and to vote
at, the Annual General Meeting.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU
MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. FOR FURTHER
INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, USE OF THE PROXY
AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE PROXY STATEMENT ON THE
FOLLOWING PAGES.
By Order of the Board of Directors,
Dennis J. Higginbottom
Vice President & Secretary
<PAGE> 3
IPC HOLDINGS, LTD.
AMERICAN INTERNATIONAL BUILDING
29 RICHMOND ROAD
PEMBROKE HM 08 BERMUDA
April 29, 1999
PROXY STATEMENT
FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS
JUNE 18, 1999
GENERAL INFORMATION; VOTING AND REVOCATION OF PROXIES
The Board of Directors of IPC Holdings, Ltd. (the "Company") is soliciting
the enclosed proxy to be voted at the 1999 Annual General Meeting of the
Company's shareholders (the "Annual General Meeting") to be held at 9:30 a.m.,
local time, on Friday June 18, 1999 at the American International Building, 29
Richmond Road, Pembroke, Bermuda, and at any adjournments thereof. When the
enclosed proxy card is properly executed and returned, the common shares, par
value $0.01 per share, of the Company ("Common Shares") it represents will be
voted, subject to any direction to the contrary, at the Annual General Meeting
FOR the matters specified in the Notice of Annual General Meeting attached
hereto and described more fully herein.
This Proxy Statement, the attached Notice of Annual General Meeting and the
enclosed proxy card are first being mailed to shareholders on or about April 29,
1999. A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1998 accompanies this Proxy Statement.
Any shareholder giving a proxy may revoke it prior to its exercise by
providing the Secretary of the Company with written notice of revocation, by
voting in person at the Annual General Meeting or by executing a later-dated
proxy; provided, however, that the action is taken in sufficient time to permit
the necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken.
Shareholders of record, as shown by the transfer books of the Company, as
of the close of business on April 7, 1999 will be entitled to vote at the Annual
General Meeting. As of March 31, 1999 there were outstanding 25,033,932 Common
Shares entitled to vote at the Annual General Meeting, with each Common Share
entitling the holder of record on such date to one vote on a poll; provided,
however, if the number of "Controlled Shares" of any holder would constitute 10%
or more of the combined voting power of the issued Common Shares (such holder, a
"10% Shareholder"), such holder will have the voting rights attached to its
Common Shares reduced, in the manner provided in the Company's Bye-Laws (the
"Bye-Laws"), so that it may not exercise more than approximately 9.9% of the
total voting rights attached to the outstanding Common Shares. "Controlled
Shares" of any person refers to all Common Shares owned by such person, whether
(i) directly, (ii) with respect to persons who are United States persons, by
application of the attribution and constructive ownership rules of Section
958(a) and 958(b) of the U.S. Internal Revenue Code (the "Code") or (iii)
beneficially, directly or indirectly, within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder.
As of the date of this Proxy Statement, the Company is aware of only one
shareholder, American International Group, Inc. ("AIG"), which possesses
Controlled Shares requiring a reduction in its voting power to 9.9%; however,
the applicability of such provisions may have the effect of increasing another
shareholder's voting power to over 9.9%, thereby requiring a corresponding
reduction in such other shareholder's voting power. Because the applicability of
the voting power reduction provisions to any particular shareholder depends on
facts and circumstances that may be known only to the shareholder or related
persons, the Company requests that any holder of Common Shares (other than AIG)
with reason to believe that it is a 10% Shareholder within the meaning of the
Bye-Laws please contact the Company promptly so that the Company may determine
whether the voting power of such holder's Common Shares should be reduced. By
<PAGE> 4
submitting a proxy, a holder of Common Shares (other than AIG) will be deemed to
have confirmed that, to its knowledge, it is not, and is not acting on behalf
of, a 10% Shareholder. The directors of the Company are empowered to require any
shareholder to provide information as to that shareholder's beneficial share
ownership, the names of persons having beneficial ownership of the shareholder's
shares, relationships with other shareholders or any other facts the directors
may deem relevant to a determination of the number of Controlled Shares
attributable to any person. The directors may disregard the votes attached to
shares of any holder failing to respond to such a request or submitting
incomplete or untrue information. The directors retain certain discretion to
make such final adjustments as to the aggregate number of votes attaching to the
Common Shares of any shareholder that they consider fair and reasonable in all
the circumstances to ensure that no person will be a 10% Shareholder at any
time.
The quorum required at the Annual General Meeting is two or more persons
present in person and representing in person or by proxy more than 50% of the
outstanding Common Shares (without giving effect to the limitation on voting
rights described above).
At the Annual General Meeting, shareholders will be asked to elect the
seven director nominees set forth herein under the caption "Election of
Directors" to serve as directors of the Company until the Company's next Annual
General Meeting or until their successors are elected and qualified. Your Board
of Directors recommends, and if no instructions are provided in an executed
proxy it will constitute, a vote FOR the election of each such nominee. The
Common Shares are entitled to vote cumulatively in the election of directors
(resulting in each shareholder, including a shareholder holding Controlled
Shares (as defined above), being entitled to the number of votes that equals the
number of votes which (except for this provision as to cumulative voting) such
shareholder would be entitled to cast for the election of directors with respect
to its Common Shares multiplied by the number of directors to be elected, and
all votes entitled to be cast may be cast for one or more of the directors being
elected). Shareholders may (but need not) indicate the distribution of their
votes among the nominees in the space provided on the proxy card. Unless
otherwise indicated on the proxy card, the proxies will cumulate votes
represented by such proxy in their discretion, except to the extent that
authority so to cumulate votes is expressly withheld as to any one or more of
the nominees. Directors will be elected by a plurality vote, and an absolute
majority of the votes cast is not a prerequisite to election.
At the Annual General Meeting, shareholders will be asked to approve a
proposal to compensate members of the Executive Committee of the Board of
Directors. See "Approval of Proposal to Compensate Executive Committee Members".
Your Board of Directors recommends, and if no instructions are provided in an
executed proxy it will constitute, a vote FOR the approval of the proposal to
compensate Executive Committee Members. The approval of such proposal requires
the affirmative vote of a majority of the votes cast at the Annual General
Meeting.
At the Annual General Meeting, shareholders will be asked to approve an
amendment to the IPC Holdings, Ltd. Stock Option Plan. See "Amendment to IPC
Holdings, Ltd. Stock Option Plan". Your Board of Directors recommends, and if no
instructions are provided in an executed proxy it will constitute, a vote FOR
the approval of the amendment to the IPC Holdings, Ltd. Stock Option Plan. The
approval of such amendment requires the affirmative vote of a majority of the
votes cast at the Annual General Meeting.
At the Annual General Meeting, shareholders will be asked to approve the
appointment of Arthur Andersen & Co. as the Company's independent accountants
for the fiscal year ending December 31, 1999. See "Appointment of Independent
Accountants". Your Board of Directors recommends, and if no instructions are
provided in an executed proxy it will constitute, a vote FOR the appointment of
Arthur Andersen & Co. to serve in such capacity. The appointment of Arthur
Andersen & Co. requires the affirmative vote of a majority of the votes cast at
the Annual General Meeting.
Abstentions and "broker non-votes" will be counted toward the presence of a
quorum at, but will not be considered votes cast on any proposal brought before,
the Annual General Meeting. Therefore, abstentions and "broker non-votes" will
have no effect on the outcome of any proposal.
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<PAGE> 5
A vote on a show of hands will be taken in the first instance on all
matters (other than the election of directors) properly brought before the
Annual General Meeting, unless a poll is requested in accordance with the
Bye-Laws. On a vote on a show of hands, every shareholder present in person and
every person holding a valid proxy will be entitled to one vote.
Other than the approval of the minutes of the 1998 Annual General Meeting,
the Company knows of no specific matter to be brought before the Annual General
Meeting which is not referred to in the attached Notice of Annual General
Meeting. If any such matter comes before the meeting, including any shareholder
proposal properly made, the proxies named on the enclosed proxy card will vote
proxies on such matters in their discretion.
ELECTION OF DIRECTORS
(ITEM A ON PROXY CARD)
Seven directors are to be elected at the Annual General Meeting to hold
office until the next Annual General Meeting or until their respective
successors are elected or appointed or their office is otherwise vacated. All of
the nominees are currently members of your Board of Directors. YOUR BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ON THE ENCLOSED
PROXY CARD. It is not expected that any of the nominees will become unavailable
for election as a director but, if any nominee should become unavailable prior
to the meeting, proxies will be voted for such persons as your Board of
Directors shall recommend.
The name, age, principal occupation and certain other information
concerning each nominee is set out below.
JOSEPH C.H. JOHNSON (age 61) has been Chairman of the Board of Directors of
the Company and its wholly-owned subsidiary, IPCRe Limited ("IPCRe" and,
together with the Company, "IPC"), since its inception and has been President
and Chief Executive Officer of American International Company Limited ("AICL")
in Bermuda since 1978. AICL is a wholly-owned subsidiary of AIG. Mr. Johnson is
also an officer and director of various other subsidiaries and affiliates of
AIG.
JOHN P. DOWLING (age 54) has been President and Chief Executive Officer of
the Company and IPCRe since February 1994, and a director of the Company and
IPCRe since February 15, 1996. From December 1990 to February 1994, Mr. Dowling
was a director of Eagle Star Insurance Co. Ltd.
RUSSELL S. FISHER (age 51) has been a director of the Company and IPCRe
since June 1998. Mr. Fisher has been a Senior Vice President and Manager, Treaty
Underwriting of General Reinsurance Corporation ("General Re") since 1985,
having previously held other positions with General Re since 1977.
DR. THE HONOURABLE CLARENCE ELDRIDGE JAMES (age 67) has been a director of
the Company and IPCRe since February 1996. Dr. James has been Chairman,
Government Employees Health Insurance Committee, since 1990 and was Chief of
Staff of the Bermuda Hospitals Board from 1995 until March 1998, when he retired
from that position. From 1984 to 1989, Dr. James served as Minister of Finance
of Bermuda.
FRANK MUTCH (age 62) has been a director of the Company and IPCRe since
February 1996 and, since March 1994, has been a consultant with the law firm of
Conyers, Dill & Pearman. From 1981 to 1994, Mr. Mutch served as a partner of
Conyers, Dill & Pearman.
ANTHONY MACLEOD PILLING (age 60) has been a director of the Company and
IPCRe since June 1998. Mr. Pilling has been President of One North (Bermuda)
Ltd, which provides management and advisory services to companies and
individuals, since 1991. From 1972-1991, Mr. Pilling practiced law with firms in
Toronto, Calgary, and Vancouver, Canada.
JOHN T. SCHMIDT (age 57) has been a director of the Company and IPCRe in
1993, from July 1994 to July 1995 and from February 1996 to the present. Mr.
Schmidt is a former partner of the law firm of Shearman & Sterling in New York,
having retired from the firm in 1993.
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<PAGE> 6
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1998, there were four meetings of your
Board of Directors (including regularly scheduled and special meetings). All
incumbent directors attended at least 75% of the aggregate of such meetings and
of the meetings held by all committees of your Board of Directors of which they
were a member, except Mr. Mutch, who was absent for two of five Executive
Committee meetings held while he was a member.
Your Board of Directors has established five standing committees: the Audit
Committee, the Compensation Committee, the Executive Committee, the Investment
Committee and the Stock Option and Stock Purchase Committee.
AUDIT COMMITTEE. During 1998, the Audit Committee consisted of Messrs.
Johnson, Fisher and Schmidt. The Audit Committee is responsible for meeting with
the Company's independent accountants regarding, among other issues, audits and
adequacy of the Company's accounting and control systems. The Audit Committee
held one meeting during the year ended December 31, 1998.
COMPENSATION COMMITTEE. During 1998, the Compensation Committee consisted
of Messrs. Johnson, James and Mutch. The Compensation Committee has the
authority to establish compensation policies and recommend compensation programs
to the Board of Directors other than those programs that are within the province
of the Stock Option and Stock Purchase Committee. The Compensation Committee
held one meeting during the year ended December 31, 1998.
EXECUTIVE COMMITTEE. During 1998, the Executive Committee consisted of
Messrs. Johnson, Dowling and Mutch. The Executive Committee has the authority to
oversee the general business and affairs of the Company to the fullest extent
permitted by Bermuda law. The Executive Committee held eleven meetings during
the year ended December 31, 1998.
INVESTMENT COMMITTEE. During 1998, the Investment Committee consisted of
Messrs. Johnson, Pilling and Schmidt. The Investment Committee is responsible
for recommending asset allocations to the Board of Directors, approving the
guidelines which provide standards to ensure portfolio liquidity and safety, and
approving investment managers and custodians for portfolio assets. The
Investment Committee held four meetings during the year ended December 31, 1998.
STOCK OPTION AND STOCK PURCHASE COMMITTEE. During 1998, the Stock Option
and Stock Purchase Committee consisted of Messrs. James, Mutch and Schmidt. The
Stock Option and Stock Purchase Committee administers and grants awards under
any stock option plans and incentive compensation plans of the Company. The
Stock Option and Stock Purchase Committee held one meeting during the year ended
December 31, 1998.
DIRECTOR COMPENSATION
During the year ended December 31, 1998, the Company compensated directors
(other than Mr. Fisher and any director who was an employee of the Company or
IPCRe) in the amount of $12,000 per year and an additional $1,000 per meeting of
your Board of Directors or any committee thereof, other than the Executive
Committee, attended by such director. The Company also reimbursed expenses
incurred by directors in connection with their service on your Board of
Directors. Fees otherwise payable to Mr. Fisher were paid to General Re for Mr.
Fisher's services as a director. In addition to the fees otherwise paid under
the Administrative Services Agreement (as defined herein), the Company paid
$50,000 per year to AICL for Mr. Johnson's services as Chairman of your Board of
Directors in 1998.
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<PAGE> 7
APPROVAL OF PROPOSAL TO COMPENSATE EXECUTIVE COMMITTEE MEMBERS
(ITEM B ON PROXY CARD)
Under the Bye-laws, compensation of the members of your Board of Directors
is determined by the Company in general meeting. At the 1996 Annual General
Meeting, the shareholders approved compensation arrangements for your Board of
Directors that did not include additional committee compensation for members of
the Executive Committee, although members of all other committees were
additionally compensated. Prior to July 28, 1998 (when Mr. Mutch was appointed
to the committee), apart from Mr. Johnson, members of the Executive Committee
were either employees of the Company or IPCRe and therefore ineligible for
compensation, or employees who had waived their rights to compensation in favour
of their employers (i.e., Mr. Bouris, who retired from your Board of Directors
on June 12, 1998). Mr. Mutch was nominated to replace Mr. Bouris on the
Executive Committee. Your Board of Directors believes that it is proper to
compensate any member of the Executive Committee who would be eligible for
compensation as a member of any other committee of your Board of Directors. Your
Board of Directors proposes that each director, other than any director who is
an employee of the Company or IPCRe, be compensated in the amount of $500 per
meeting of the Executive Committee attended by such director. Your Board of
Directors believes that the approval of such compensation will be helpful in the
future in securing the agreement of directors to serve on the Executive
Committee. If the proposal is adopted, Mr. Mutch and Mr. Johnson will be
entitled to such compensation.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO
COMPENSATE EXECUTIVE COMMITTEE MEMBERS INDICATED ON THE ENCLOSED PROXY CARD.
APPROVAL OF AMENDMENT TO THE IPC HOLDINGS, LTD. STOCK OPTION PLAN
(ITEM C ON PROXY CARD)
The IPC Holdings, Ltd. Stock Option Plan (the "Plan") was adopted by your
Board of Directors on February 15, 1996 and subsequently approved by the
shareholders of the Company at the 1996 Annual General Meeting of Shareholders
on February 15, 1996. Under the Plan, employees of the Company and its
subsidiaries, including officers (whether or not directors), are eligible for
the grant of options to purchase Common Shares of the Company. Directors who are
not employees of the Company or any subsidiary are not eligible for the grant of
options under the Plan. The Plan is administered and options are awarded by the
Stock Option and Stock Purchase Committee of your Board of Directors (the "Stock
Option Committee"), which has authority under the Plan to determine the timing
of option grants, the number of options to be granted, the duration and vesting
of the options, the exercise price and other terms and conditions of the
options. Options may have a maximum term of ten years from the grant date. In
the event of changes in the Common Shares by reason of capital adjustments, such
as stock splits and recapitalizations, appropriate adjustments will be made in
the exercise price and/or other terms of options. The Board of Directors retains
the right to amend or terminate the Plan. An amendment or termination of the
Plan may not adversely affect a participant's rights with respect to an
outstanding option without such participant's consent. The Company has agreed
that, upon the due and valid exercise of options granted under the Plan, it will
issue the number of Common Shares covered by the exercised options. Unless
sooner terminated by your Board of Directors, the Plan remains in effect until
February 15, 2001.
The Plan currently covers 277,500 Common Shares and, as of March 31, 1999,
options covering 224,295 Common Shares had been granted. Thus, as of that date,
only 53,205 of the Plan's authorised shares remained available for awards. Of
the options already awarded, options to purchase 86,690 Common Shares were
vested as of March 31, 1999. If an award under the Plan expires or is forfeited,
unexercised or unvested Common Shares, whichever is the case, subject to such
award are added to the number of Common Shares available for awards under the
Plan. Your Board of Directors recommends that the Plan be amended (i) to
increase the number of Common Shares covered by the Plan to 577,500 and (ii) to
extend the period during which the Plan will remain in effect, unless sooner
terminated by your Board of Directors, to expire on February 15, 2006 ((i) and
(ii) collectively the "Amendment").
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<PAGE> 8
As stated in the Plan, the purpose of the Plan is to enable the Company to
provide eligible employees with an additional incentive to contribute to the
success of the Company by giving such individuals an opportunity to acquire a
proprietary interest in the Company, as well as to attract persons of training,
experience and ability. Your Board of Directors believes that the Amendment
furthers this purpose by making available sufficient shares to permit future
awards by the Stock Option Committee as a part of the Company's employee
compensation program and believes the Amendment is important to the success of
the Company.
Unless determined otherwise by the Stock Option Committee, the right to
exercise the options generally vests at a rate of 25% on each of the first
through fourth anniversaries of the date of grant. However, all options become
immediately vested in the event of a "Change of Control". Under the Plan, a
"Change of Control" is deemed to occur, in general, if (i) any person or group
of persons (subject to certain limited exceptions) is or becomes the direct or
indirect beneficial owner of 50% or more of the Company's then outstanding
voting securities, (ii) during any two year period the directors at the
beginning of the period (including replacements approved by two-thirds of such
directors) cease to constitute a majority of the Board, (iii) the shareholders
of the Company approve a merger, consolidation or reorganization or a court of
competent jurisdiction approves a scheme of arrangement of the Company, other
than such a transaction pursuant to which the shareholders of the Company retain
at least 50% of the combined voting power of the voting securities of the
Company or the surviving entity, or (iv) the shareholders of the Company approve
a plan of complete liquidation of the Company or the sale or disposition by the
Company of all or substantially all of the Company's assets.
To the extent that a participant is subject to United States income tax, a
participant will not be subject to tax when an option is granted under the Plan.
When such a participant exercises an option, the participant will realize
compensation equal to the amount by which the fair market value of the Common
Shares on the date of the exercise exceeds the option exercise price. Since the
Company does not conduct business within the United States, it does not file
United States income tax returns. If the Company were subject to United States
income tax, the Company would be entitled to a federal income tax deduction
equal to the amount of compensation realized by the participant when the
participant exercises an option granted under the Plan. The foregoing discussion
is intended only as a brief general summary of the relevant federal income tax
consequences.
As a group, all current executive officers of the Company have received
options with respect to 165,061 Common Shares. As a group, all current employees
of the Company and its subsidiaries have received options with respect to
222,561 Common Shares. Mr. Dowling has received options with respect to 55,812
Common Shares under the Plan. Messrs. Bryce, Cozens, Fallon and Higginbottom
have received options with respect to 45,187, 29,687, 7,750 and 14,875 Common
Shares, respectively, under the Plan. The closing price per share of the Common
Shares on the Nasdaq National Market on April 14, 1999 was $19.875.
Subject to exceptions for death, retirement and certain other situations, a
participant under the Plan, whose employment with the Company or its
subsidiaries is terminated, forfeits any unvested options.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE IPC HOLDINGS, LTD. STOCK OPTION PLAN INDICATED ON THE ENCLOSED PROXY CARD.
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<PAGE> 9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following descriptions summarize certain relationships and the terms of
certain agreements of IPC. Such summaries of agreements do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the relevant agreements. A copy of each such
agreement has been previously filed with the Securities and Exchange Commission
(the "Commission") and is listed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, a copy of which will be provided
upon request. See "Additional Information."
OVERVIEW
IPC commenced operations in July 1993 through the sponsorship of AIG, a
holding company incorporated in Delaware which through its subsidiaries is
primarily engaged in a broad range of insurance and insurance-related activities
and financial services in the United States and abroad. AIG purchased 24.4% of
the initial share capital of the Company and an option (exercisable in specified
circumstances) to obtain up to an additional 10% (on a fully diluted basis,
excluding employee stock options) of the share capital of the Company (the "AIG
Option"). Since IPC's formation, subsidiaries of AIG have provided
administrative, investment management and custodial services to IPC, and certain
of IPC's officers are also officers of subsidiaries and affiliates of AIG. In
addition, the Chairman of your Board of Directors is an officer and director of
several AIG affiliates and subsidiaries. AIG has informed the Company that AIG
presently intends to continue its share ownership in the Company for the
foreseeable future. For a description of AIG's direct Common Share ownership and
of the AIG Option, see "Beneficial Ownership of Common Shares".
CERTAIN BUSINESS RELATIONSHIPS
ADMINISTRATIVE SERVICES. IPC's day-to-day administrative services are
performed by AICL, a wholly-owned subsidiary of AIG, pursuant to an
administrative services agreement (the "Administrative Services Agreement").
Services and facilities provided pursuant to the Administrative Services
Agreement include tax, legal and accounting services, office space in Bermuda,
electronic data services and other services required by IPC in the ordinary
course of business. Fees payable for such administrative services totalled $3.0
million for the year ended December 31, 1998. In addition to such fees, IPC pays
$50,000 per year to AICL for Mr. Johnson's services as Chairman of your Board of
Directors. Mr. Johnson is President and Chief Executive Officer of AICL.
INVESTMENT ADVISORY SERVICES. AIG Global Investment Corp. (Ireland) Ltd.
("AIGIC"), an indirect wholly-owned subsidiary of AIG, provides investment
advisory services to IPC. AIGIC manages IPC's entire investment portfolio,
subject to IPC's investment guidelines, pursuant to an investment advisory
agreement (the "Investment Advisory Agreement"). The advisory fee totalled
$1,075,000 for the year ended December 31, 1998. The performance of AIGIC under
the Investment Advisory Agreement is reviewed periodically by your Board of
Directors. AIGIC has entered into a Sub-Advisory Agreement with AIG Global
Investment Corp. Ltd. (Europe) ("AIGIC (Europe)"), an indirect wholly-owned
subsidiary of AIG, pursuant to which AIGIC (Europe) advises AIGIC on the
management of IPC's investment portfolio.
CUSTODIAL SERVICES. AIG Global Investment Trust Services Limited, an
indirect wholly-owned subsidiary of AIG based in Ireland, provides custodial
services to IPC pursuant to a custodial agreement (the "Custodial Agreement").
Fees incurred under the Custodial Agreement were $347,000 for the year ended
December 31, 1998.
REGISTRATION RIGHTS
Pursuant to an agreement executed prior to the closing of the Company's
initial public offering in March 1996 (the "Offering"), the Company agreed to
provide certain original shareholders and AIG as holder of the AIG Option with
registration rights for Common Shares held by them and certain of their
affiliates at the time of the Offering and not sold pursuant to a registration
statement or Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act") (or obtainable pursuant to the AIG Option). Under this
agreement, AIG has the right to require the Company, on two occasions, to
register Common Shares, including shares
7
<PAGE> 10
obtainable through the AIG Option, under the Securities Act for sale in the
public market, in an underwritten offering, in block trades from time to time or
otherwise; provided, however, that the total number of Common Shares requested
to be registered pursuant to any such demand must equal or exceed 2,500,000 and
certain remaining original shareholders (including General Re Corporation) will
have the right to participate in such registration on a second-priority basis
subject to a customary underwriter's reduction. The Company may include other
Common Shares in any such demand registration on a third-priority basis subject
to a customary underwriter's reduction. If the Company proposes to file a
registration statement covering Common Shares at any time, each of certain
remaining original shareholders will have one right to include Common Shares
held by it (or obtainable pursuant to the AIG Option) in the registration, in
each case on a first-priority basis with any shareholders and on a
second-priority basis with the Company, pro-rata according to the relevant
respective holdings and subject to a customary underwriter's reduction. The
Company has agreed to indemnify each of certain remaining original shareholders
in respect of certain liabilities, including civil liabilities under the
Securities Act, and to pay certain expenses relating to such registrations. The
agreement terminates on June 29, 2003.
TRANSACTIONS IN ORDINARY COURSE OF BUSINESS WITH SHAREHOLDERS
IPC has assumed premiums from, and paid brokerage fees to, companies
affiliated with shareholders of the Company. Premiums assumed from subsidiaries
of AIG and of General Re Corporation were approximately $8.1 million and $1.7
million, respectively, for the year ended December 31, 1998. In addition, during
the same period, the Company paid brokerage fees and commissions to Herbert
Clough, Inc. of approximately $0.6 million. Herbert Clough is a wholly-owned
subsidiary of General Re Corporation (which beneficially owned 1,250,000 Common
Shares during the year ended December 31, 1998). All brokerage transactions are
entered into on an arm's-length basis.
8
<PAGE> 11
BENEFICIAL OWNERSHIP OF COMMON SHARES
The table below sets forth certain information as of April 7, 1999 (unless
otherwise specified) with respect to the beneficial ownership of Common Shares
by each person who is known to the Company to own beneficially more than 5% of
the outstanding Common Shares, each person currently serving as a director of
the Company, each nominee for director, the Chief Executive Officer, each of the
four most highly compensated executive officers of the Company other than the
Chief Executive Officer (the "Named Executive Officers") and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------ ---------- --------
<S> <C> <C>
American International Group, Inc........................... 6,100,000(2) 24.4%
70 Pine Street
New York, New York 10270
FMR Corp.................................................... 2,500,000(3) 9.9%
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company, LLP.......................... 1,981,000(4) 7.9%
75 State Street
Boston, Massachusetts 02109
Vanguard/Windsor Fund, Inc.................................. 1,689,700(5) 6.7%
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
Boston Partners Asset Management, L.P....................... 1,642,900(6) 6.6%
One Financial Center,
43rd Floor
Boston MA 02111
John P. Dowling............................................. 24,429(7) *
Joseph C.H. Johnson......................................... -- *
Russell S. Fisher........................................... --(8) *
Dr. the Honourable Clarence Eldridge James.................. -- *
Frank Mutch................................................. -- *
Anthony MacLeod Pilling..................................... -- *
John T. Schmidt............................................. 1,000 *
James P. Bryce.............................................. 25,370(9) *
Peter J.A. Cozens........................................... 15,133(10) *
Dennis J. Higginbottom...................................... 6,479(11) *
Stephen F. Fallon........................................... 937(12) *
All directors and executive officers as a group............. 78,635 *
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Shares
(1) In accordance with the rules of the Securities and Exchange Commission, a
person is deemed to have "beneficial ownership" of Common Shares which such
person has the rights to acquire within 60 days. For purposes of
calculating percent ownership, each person's holdings have been calculated
assuming full exercise of outstanding options exercisable by such person
within 60 days, but not the exercise of options held by any other person.
(2) Reflects information reported in Amendment No. 2 to a Schedule 13D, dated
June 4, 1996, and excludes Common Shares subject to the AIG Option. The AIG
Option entitles AIG to purchase up to 2,775,000 Common Shares at an
exercise price of $12.7746 per share. The option is exercisable once in
whole or in part only on the earlier of (A) on or about June 29, 2003 (as
provided in the next sentence), or any of June 29, 2001, December 29, 2001,
June 29, 2002 or December 29, 2002; provided, however, that the option is
exercisable on any such date only if the book value per share on such date
is at least 175% of the exercise price per share on such date; or (B) (i) a
subsequent registration of Common
9
<PAGE> 12
Shares under the Securities Act in connection with a primary or secondary
distribution (other than at the sole request of AIG) or (ii) an
amalgamation or merger of the Company (in which the Company is not the
surviving entity) or the sale, transfer or lease of substantially all the
assets of the Company (other than in connection with a reincorporation). In
the event the AIG Option is exercised pursuant to clause (A) of the
preceding sentence and the closing of the resale of the Common Shares to be
delivered upon exercise thereof (pursuant to a registration statement
prepared in accordance with the Registration Rights Agreement described
above) is not effected precisely on the applicable date specified in (A)
above, exercise of the AIG Option shall be effective only immediately prior
to, and contingent upon, the closing of the public offering to which the
requested registration relates. If notice of exercise is not made on or
prior to June 29, 2003, the option expires. The option has customary
antidilution provisions. AIG has agreed with the Company that it will
dispose of any shares obtained pursuant to exercise of the AIG Option that
results in AIG becoming a "United States 25% Shareholder" within 29 days of
exercise of the AIG Option. The AIG Option provides that it may be
transferred by AIG (i) in the event of an amalgamation of the Company with
or merger of the Company into another person, or a sale, transfer or lease
of all or substantially all the assets of the Company to another person,
provided, that such transfer is to a person which is a shareholder, partner
or other affiliated person of the person entering into such transaction
with the Company or (ii) at any time on or after March 13, 1998 to up to
three institutional investors, subject to certain conditions set forth
therein. Any Common Shares obtained by AIG pursuant to exercise of the AIG
Option would be subject (like other Common Shares held by AIG) to reduction
of voting power as described under the caption "General Information; Voting
and Revocation of Proxies". Mr. Johnson, the Chairman of the Board of
Directors of the Company and IPCRe, is the President and Chief Executive
Officer of AICL and an officer and director of various other AIG
subsidiaries and affiliates.
(3) Reflects information reported in a Schedule 13G filing dated February 12,
1999.
(4) Reflects information reported in a Schedule 13G filing dated February 10,
1999. Wellington Management Company LLP is an investment adviser; one of
its clients is Vanguard/Windsor Fund, Inc.
(5) Reflects information reported in a Schedule 13G filing dated February 10,
1999.
(6) Reflects information reported in a Schedule 13G filing dated February 12,
1999.
(7) Includes 18,406 Common Shares issuable upon the exercise of options.
(8) Mr. Fisher is a Senior Vice President of General Re. The parent of General
Re, General Re Corporation, owns 1,250,000 Common Shares (5.0%).
(9) Includes 100 Common Shares that are held by the IRA trustee for Mr. Bryce's
wife, for which Mr. Bryce disclaims beneficial ownership, and 8,547 Common
Shares issuable upon the exercise of options.
(10) Includes 5,702 Common Shares issuable upon the exercise of options.
(11) Includes 4,499 Common Shares issuable upon the exercise of options.
(12) Includes 937 Common Shares issuable upon the exercise of options.
EXECUTIVE OFFICERS
The executive officers of the Company and IPCRe are elected by and serve at
the discretion of your Board of Directors. The name, age, principal occupation
and certain other information regarding the executive officers of the Company
and IPCRe as of December 31, 1998 were as follows:
JOHN P. DOWLING (age 54) has been President and Chief Executive Officer of
the Company and IPCRe since February 1994 and a Director of the Company and
IPCRe since February 15, 1996. From December 1990 to February 1994, Mr. Dowling
was a Director of Eagle Star Insurance Co. Ltd. Mr. Dowling has 34 years of
insurance experience in the United Kingdom, the United States and Ireland, with
10 years as chief
10
<PAGE> 13
executive for Eagle Star Reinsurance Company Limited (and predecessor
operations) of the United Kingdom.
JAMES P. BRYCE (age 50) has been Senior Vice President of the Company since
July 1996 and has been Senior Vice President -- Underwriting (Chief Underwriting
Officer) of IPCRe since its inception. Between November 1992 and June 1993, Mr.
Bryce was a Vice President in the Reinsurance Division of AIG Europe (UK)
Limited in London; between December 1990 and November 1992, Mr. Bryce was Far
East Regional Manager for Transatlantic Reinsurance Company (Hong Kong). From
July 1985 to November 1990, Mr. Bryce was Far East Regional Manager for
Transatlantic Reinsurance Company (Tokyo), and from July 1985 to July 1993, Mr.
Bryce served as a Director of AIG Reinsurance Services Limited (Hong Kong).
PETER J.A. COZENS (age 51) has been Vice President -- Underwriting of IPCRe
since March 1995. From June 1993 to March 1995 Mr. Cozens was the London
representative of IPC. Mr. Cozens previously served from September 1981 to May
1993 as Group Non-Marine Underwriter of the English & American Group, and from
August 1963 to August 1981 with the Sir Philip D'Ambrumenil Syndicate at
Lloyd's, where his responsibilities were those of Deputy Treaty Underwriter.
STEPHEN F. FALLON (age 42) has been Vice President -- Underwriting of IPCRe
since October 1997. From June 1996 through October 1997 Mr. Fallon was a Senior
Vice President of Folksamerica Reinsurance Company, and from November 1985 to
June 1996 Mr. Fallon was a Senior Vice President and Director of Christiana
General Insurance Corporation of New York.
DENNIS J. HIGGINBOTTOM (age 50) was appointed Vice President and Secretary
of the Company and IPCRe in December 1995. From October 1983 to December 1990,
Mr. Higginbottom was Vice President and Director of AICL, and from December 1990
to December 1995, Mr. Higginbottom was Senior Vice President and Director of
AICL.
JOHN R. WEALE (age 40) was appointed Vice President and Chief Financial
Officer of the Company and IPCRe in July 1996. Prior to joining IPCRe, Mr. Weale
spent over 13 years with AICL in Bermuda, serving in a variety of positions, the
most recent being Vice President -- Offshore Management Services.
11
<PAGE> 14
EXECUTIVE COMPENSATION
The following table sets forth, in summary form, compensation for all
services rendered in all capacities to the Company and IPCRe for the year ended
December 31, 1998 by the Chief Executive Officer of the Company and IPCRe and by
the Named Executive Officers. Unless otherwise indicated, positions listed in
the table set forth below are held with both the Company and IPCRe.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- --------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
NAMES AND PRINCIPAL POSITION YEAR $ $ $ # $
- ---------------------------- ------ ------- ------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
John P. Dowling....................... 1998 425,000 300,000(2) 79,096 12,000 21,250(3)
President & Chief 1997 375,000 260,000(2) 88,816 10,000 18,750(3)
Executive Officer 1996 325,000 125,000 77,998 20,812 16,250(3)
James P. Bryce........................ 1998 256,800 180,000(2) 142,093 10,000 12,840(4)
Senior Vice President & Senior Vice 1997 240,000 170,000(2) 158,837 8,000 9,500(4)
President -- Underwriting of IPCRe 1996 225,000 75,000 104,022 16,187 9,500(4)
Peter J.A. Cozens..................... 1998 190,800 140,000(2) 143,057 6,250 0
Vice President -- Underwriting of 1997 180,000 120,000(2) 176,295 5,000 0
IPCRe 1996 170,000 45,000 168,820 11,562 0
Stephen F. Fallon(5).................. 1998 160,000 120,000(2) 115,263 3,750 9,200(3)
Vice President -- Underwriting of 1997 29,767 0 17,561 0 0
IPCRe
Dennis J. Higginbottom................ 1998 128,400 70,000(2) 56,774 3,750 0
Vice President & Secretary 1997 120,000 60,000(2) 56,515 2,500 0
1996 113,000 20,000 40,849 4,625 0
</TABLE>
- ---------------
(1) Other annual compensation for the year ended December 31, 1998 includes
amounts in respect of reimbursement for certain travel expenses, property
management, utilities, club dues, cost of living allowances, education
expenses (with respect to Messrs. Cozens and Higginbottom only), and also
includes housing expenses of $36,875, $89,172, $126,000, $82,000 and $24,245
for Messrs. Dowling, Bryce, Cozens, Fallon and Higginbottom, respectively.
(2) 50% of the amount shown is deferred and vests at a rate of 25% on December
31st of each of the first through fourth years following the year of the
grant. Portions of the grant not vested may be subject to forfeiture under
certain conditions.
(3) Represents Company contributions to the IPCRe Defined Contribution
Retirement Plan. See "Executive Compensation -- Pension Benefits".
(4) Represents contributions by the Company pursuant to a deferred compensation
agreement. See "Executive Compensation -- Pension Benefits".
(5) Mr. Fallon joined IPCRe as Vice President -- Underwriting on October 25,
1997. Prior to joining IPCRe, Mr. Fallon was employed by Folksamerica Re,
New York.
12
<PAGE> 15
STOCK OPTION PLAN
The following table sets forth information concerning awards of stock
options under the Company's Stock Option Plan made to the Company's Chief
Executive Officer and to the Named Executive Officers during the year ended
December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATE OF
COMMON PERCENT OF COMMON SHARE PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING AWARDED TO EXERCISE OR TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL 1998 PER SHARE DATE(1) 5% 10%
- ---- ---------- ------------- ----------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John P. Dowling........... 12,000 23.3% $32.1875 January 2, 2008 $242,911 $615,583
James P. Bryce............ 10,000 19.4% $32.1875 January 2, 2008 202,425 512,986
Peter J.A. Cozens......... 6,250 12.1% $32.1875 January 2, 2008 126,516 320,616
Dennis J. Higginbottom.... 3,750 7.3% $32.1875 January 2, 2008 75,910 192,370
Stephen F. Fallon......... 3,750 7.3% $32.1875 January 2, 2008 75,910 192,370
</TABLE>
- ---------------
(1) The options listed above were granted on January 2, 1998. All options vest
at a rate of 25% on each of the first through fourth anniversaries of the
date of grant for as long as the employee remains employed by the Company.
All options become exercisable once vested.
The following table sets forth information concerning the number of
unexpired stock options outstanding at December 31, 1998 and the value of any
unexercised in-the-money stock options at such time held by the Chief Executive
Officer of the Company and by the Named Executive Officers.
OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF
OPTIONS AT FISCAL UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE YEAR-END EXERCISABLE/ OPTIONS AT FISCAL YEAR-END
NAME ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- --------------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
John P. Dowling............. 0 $ 0 7,703/29,906 $33,417/67,615
James P. Bryce.............. 6,047 $74,008 0/24,094 $0/52,645
Peter J.A. Cozens........... 4,141 $51,394 0/15,781 $0/37,433
Stephen Fallon.............. 0 $ 0 0/3,750 $0/0
Dennis J. Higginbottom...... 0 $ 0 1,781/7,938 $7,446/15,094
</TABLE>
- ---------------
(1) Aggregate market value based on the closing sale price of Common Shares of
$22.8125 on December 31, 1998 less the aggregate exercise price.
PENSION BENEFITS
MR. BRYCE. Pursuant to an individual pension arrangement with IPCRe, Mr.
Bryce is entitled to a lifetime annual supplemental benefit, payable monthly,
commencing upon his attaining age 65, equal to 0.925% of covered compensation
plus 1.425% of average final compensation in excess of covered compensation
multiplied by his years of credited service from April 1, 1985 (the date from
which Mr. Bryce's credited service had previously been calculated under the AIG
Retirement Plan in which he participated until December 1, 1995). Covered
compensation is equal to 150% of the average of the Social Security taxable wage
bases in effect for each calendar year during the 35 year period ending with the
last day of the calendar year in which Mr. Bryce will attain Social Security
retirement age (currently age 65). At December 31, 1998, Mr. Bryce's covered
compensation was $68,400. Covered compensation pursuant to Mr. Bryce's pension
arrangement with IPCRe increases each year as Social Security taxable wage bases
increase. Average final compensation is defined as his highest average base pay
for any three consecutive years in the 10 year period prior to his attaining age
65. Mr. Bryce had 13.75 years of credited service at December 31, 1998.
13
<PAGE> 16
The following table shows the estimated annual retirement benefits that
would be payable to Mr. Bryce assuming normal retirement (age 65). Benefits
under this plan will also be reduced by $17,941 of annual benefits Mr. Bryce
will receive under the AIG Retirement Plan referred to above (but not by amounts
received under the deferred compensation arrangement described in the next
paragraph).
BRYCE PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000.......................... $ 21,589 $ 28,785 $ 35,981 $ 43,178 $ 50,374
150,000.......................... 26,933 35,910 44,888 53,865 62,843
175,000.......................... 32,276 43,035 53,794 64,553 75,311
200,000.......................... 37,620 50,160 62,700 75,240 87,780
225,000.......................... 42,964 57,285 71,606 85,928 100,249
250,000.......................... 48,308 64,410 80,513 96,615 112,718
300,000.......................... 58,995 78,660 98,325 117,990 137,655
400,000.......................... 80,370 107,160 133,950 160,740 187,530
450,000.......................... 91,058 121,410 151,763 182,115 212,468
500,000.......................... 101,745 135,660 169,575 203,490 237,405
</TABLE>
Mr. Bryce has also entered into a deferred compensation arrangement with
IPCRe pursuant to which Mr. Bryce may defer a portion of his salary and IPCRe
will contribute a matching amount equal to the lesser of 5% of his salary or the
maximum allowable deferral permitted by Section 402(g) of the Code with respect
to plans established under Section 401(k).
MR. COZENS. Pursuant to an individual pension arrangement with IPCRe, Mr.
Cozens is entitled to a lifetime annual benefit, payable monthly, commencing
upon his attaining age 65. The annual amount of such benefit will equal 1.67% of
Mr. Cozens' base pay for the twelve months prior to his attaining age 65
multiplied by his years of credited service from March 1, 1995. Compensation
under Mr. Cozens' pension arrangement only includes base pay. Mr. Cozens had
3.75 years of credited service at December 31, 1998.
The following table shows the estimated annual retirement benefits that
would be payable to Mr. Cozens assuming normal retirement (age 65). There will
be no offset applied against the benefit amount.
COZENS PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000.......................... $ 31,250 $ 41,667 $ 52,083 $ 62,500 $ 72,917
150,000.......................... 37,500 50,000 62,500 75,000 87,500
175,000.......................... 43,750 58,333 72,917 87,500 102,083
200,000.......................... 50,000 66,667 83,333 100,000 116,667
225,000.......................... 56,250 75,000 93,750 112,500 131,250
250,000.......................... 62,500 83,333 104,167 125,000 145,833
300,000.......................... 75,000 100,000 125,000 150,000 175,000
400,000.......................... 100,000 133,333 166,667 200,000 233,333
450,000.......................... 112,500 150,000 187,500 225,000 262,500
500,000.......................... 125,000 166,667 206,333 250,000 291,667
</TABLE>
MR. HIGGINBOTTOM. Pursuant to an individual pension arrangement with
IPCRe, Mr. Higginbottom is entitled to a lifetime annual supplemental benefit,
payable monthly, commencing upon his attaining age 65, equal to 1.75% of average
base pay (defined as his highest average base pay for any three consecutive
years in the 10 year period prior to his attaining age 65) multiplied by his
years of credited service from April 1, 1980 (the date from which Mr.
Higginbottom's credited service had previously been calculated under the
American International Overseas Pension Plan (the "AIO Plan") in which Mr.
Higginbottom participated until December 31, 1995). Compensation under Mr.
Higginbottom's pension arrangement only includes base pay. Mr. Higginbottom had
18.75 years of credited service at December 31, 1998. The following table shows
the estimated annual retirement benefits that would be payable to Mr.
Higginbottom assuming normal retirement
14
<PAGE> 17
(age 65). There will be no offset applied against the benefit amount unless Mr.
Higginbottom becomes entitled to benefits under a governmental system (which, at
present, he is not), except that benefits under this plan will be reduced by
$22,365 of annual benefits that Mr. Higginbottom will receive under the AIO Plan
referred to above.
HIGGINBOTTOM PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000.......................... $ 32,820 $ 43,760 $ 54,700 $ 65,640 $ 76,580
150,000.......................... 39,375 52,500 65,625 78,750 91,875
175,000.......................... 45,945 61,260 76,575 91,890 107,205
200,000.......................... 52,500 70,000 87,500 105,000 122,500
225,000.......................... 59,070 78,760 98,450 118,140 137,830
250,000.......................... 65,265 87,500 109,375 131,250 153,125
300,000.......................... 78,750 105,000 131,250 157,500 183,750
400,000.......................... 105,000 140,000 175,000 210,000 245,000
450,000.......................... 118,125 157,500 196,875 236,250 275,625
500,000.......................... 131,250 175,000 218,750 262,500 306,250
</TABLE>
DEFINED CONTRIBUTION RETIREMENT PLAN. From December 1, 1995, Mr. Dowling
has been eligible to participate in the IPCRe Defined Contribution Retirement
Plan. Pursuant to this plan, which is not intended to qualify for tax-favored
treatment under the Code, each participant defers 5% of his salary (as
determined each year) and IPCRe contributes a matching amount. Amounts
contributed pursuant to the plan are invested, among the investment options
available thereunder, at the discretion of the employee. Mr. Fallon has been
eligible to participate in this plan since May 1, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of your Board of Directors has responsibility
for determining the compensation of the Company's officers. None of the members
of the Compensation Committee was an employee of the Company. Mr. Johnson is
President and Chief Executive Officer of AICL. Pursuant to the Administrative
Services Agreement, IPC paid fees to AICL of $3.0 million and $2.8 million,
respectively, for the years ended December 31, 1998 and 1997 for administrative
and other services as described herein. In addition to such fees, the Company
pays $50,000 per year to AICL for Mr. Johnson's services as Chairman of your
Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of your Board of Directors is comprised solely
of non-employee directors. The Compensation Committee has responsibility for
developing and implementing the Company's compensation policy for senior
management, and for determining the compensation for the executive officers of
the Company.
The Company's compensation program is structured to support the human
resources requirements of its business. The Company seeks to attract and retain
qualified executives who are creative, motivated and dedicated. With respect to
its executive officers, the Company competes with reinsurance companies world-
wide, although primarily with companies based in North America and the United
Kingdom.
Each executive's total compensation is generally comprised of four
components: base salary, certain expense allowances, annual bonus awards and
stock option awards. The objectives of the Compensation Committee in determining
the amount of cash compensation for each executive officer are to provide a
level of base salary which will allow the Company to attract and retain
experienced and talented personnel, and to align the executive officers'
interest with the success of the Company through the payment of a bonus based on
individual performance and the performance of the Company. The Compensation
Committee also takes into account the awards, if any, made by the Stock Option
and Stock Purchase Committee.
15
<PAGE> 18
The Compensation Committee did not apply any specific formula but
considered generally the compensation practices of other reinsurers through a
review of public information and surveys. The Compensation Committee's
deliberations were made in light of the Company's financial performance, the
maintenance of the A+ (Superior) rating from A.M. Best Company, the maintenance
of the A+ rating from Standard and Poor's, and the level of competitive activity
for the services of experienced and talented people in the reinsurance industry.
The Compensation Committee believes that the continued financial success of
the Company has been largely attributable to the performance and leadership of
senior management. Accordingly, the Company's President and Chief Executive
Officer, John P. Dowling, was granted an increase in base salary from $375,000
in 1997 to $425,000 for 1998, together with a cash bonus for 1998 of $300,000.
In determining Mr. Dowling's total compensation for 1998, including the cash
bonus, the Compensation Committee considered the financial performance of the
Company. Mr. Dowling was also granted options to purchase 12,000 Common Shares
of the Company effective January 2, 1998, 25% of which will become exercisable
on January 2, 1999 and 25% of which will become exercisable on each of January
2, 2000, January 2, 2001 and January 2, 2002.
Joseph C.H. Johnson
Dr. the Honourable Clarence Eldridge James
Frank Mutch
PERFORMANCE GRAPH
The following graph shows the cumulative total return, including
reinvestment of dividends, on the Common Shares compared to such return for
Standard & Poor's Property-Casualty Industry Group Stock Price Index ("S&P
Property and Casualty") and Standard & Poor's 500 Composite Stock Price Index
("S&P 500") for the period beginning on March 8, 1996 (the second day of public
trading for the Common Shares) and ending on December 31, 1998, assuming $100
was invested on March 8, 1996. Each measurement point on the graph represents
the cumulative shareholder return as measured by the last reported sale price at
the end of each quarter during the relevant period.
CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH
<TABLE>
<CAPTION>
IPC HOLDINGS, LTD. S&P PROPERTY AND CASUALTY S&P 500
------------------ ------------------------- -------
<S> <C> <C> <C>
'03/08/96' 100 100 100
'06/30/96' 94.45 104.51 106.57
'12/31/96' 107.97 122.24 118.93
'06/30/97' 138.72 148.55 143.44
'12/31/97' 174.47 174.29 158.63
'06/30/98' 172.14 176.79 186.72
'12/31/98' 135.13 158.44 203.95
</TABLE>
16
<PAGE> 19
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM D ON PROXY CARD)
The appointment of independent accountants is subject to approval annually
by the Company's shareholders. Arthur Andersen & Co. has served as IPC's
accountants since 1993. Representatives of Arthur Andersen & Co. will attend the
Annual General Meeting and will have an opportunity to make a statement if they
wish. They will also be available to answer questions at the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF ARTHUR
ANDERSEN & CO. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL GENERAL MEETING
If you wish to submit a proposal to be considered for inclusion in the
proxy materials for the 2000 Annual General Meeting, please send it to the
Secretary, IPC Holdings, Ltd., American International Building, 29 Richmond
Road, Pembroke HM 08 Bermuda. Under the rules of the Commission, proposals must
be received no later than December 31, 1999 to be eligible for inclusion in the
2000 Annual General Meeting proxy statement. If a shareholder wishes to submit a
proposal to the 2000 Annual General Meeting without including such proposal in
the proxy statement for that meeting, that proposal will be considered untimely,
and the proxies solicited by your Board of Directors will confer discretionary
authority to vote on the proposal as the proxy holders see fit, if the company
is not notified of such proposal by March 15, 2000.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers and
employees, personally or by telephone or telegram. Proxy cards and materials
also will be distributed to beneficial owners of Common Shares through brokers,
custodians, nominees and other parties, and the Company expects to reimburse
such parties for their charges and expenses. W.F. Doring & Co., Inc. has been
retained to assist the Company in the solicitation of proxies at a fee not
expected to exceed $3,000, plus out-of-pocket expenses.
OTHER MATTERS
Other than the approval of the minutes from the 1998 Annual General
Meeting, your Board of Directors of the Company does not know of any matters
which may be presented at the Annual General Meeting other than those
specifically set forth in the Notice of Annual General Meeting attached hereto.
If matters other than those set forth in the Notice of Annual General Meeting
come before the meeting or any adjournment thereof, the persons named in the
accompanying form of proxy and acting thereunder will vote in their discretion
with respect to such matters.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers and directors of the Company are subject to the
reporting requirements of Section 16 of the Exchange Act. Messrs. Bryce, Cozens,
Dowling, Fallon, Higginbottom and Weale each inadvertently filed one late report
with respect to the grant of options to purchase shares by the Company on
January 2, 1998. The Company believes that during 1998 all other filing
requirements applicable to its officers and directors were complied with.
ADDITIONAL INFORMATION
THE COMPANY WILL FURNISH, WITHOUT CHARGE TO ANY SHAREHOLDER, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL SCHEDULES INCORPORATED THEREIN BY REFERENCE TO THE COMPANY'S ANNUAL
REPORT TO SHAREHOLDERS) FOR THE YEAR ENDED DECEMBER 31, 1998, FILED WITH THE
COMMISSION. A COPY OF SUCH REPORT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
COMPANY AT AMERICAN
17
<PAGE> 20
INTERNATIONAL BUILDING, 29 RICHMOND ROAD, PEMBROKE HM 08, BERMUDA, ATTENTION
DENNIS J. HIGGINBOTTOM, SECRETARY. Each such request must include a
representation that, as of April 7, 1999, the person making the request was a
beneficial owner of Common Shares entitled to vote at the Annual General
Meeting. As permitted by the Commission's rules, the Company will not furnish
any exhibits to its Annual Report on Form 10-K without charge, but will provide
with such report a list of such exhibits and information about its charges for
providing them.
18
<PAGE> 21
APPENDIX I TO PROXY STATEMENT
FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS
JUNE 18, 1999
PROXY PROXY
IPC HOLDINGS, LTD.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF IPC HOLDINGS, LTD.
(THE "COMPANY") IN CONNECTION WITH THE COMPANY'S ANNUAL GENERAL MEETING
OF SHAREHOLDERS TO BE HELD ON JUNE 18, 1999 (THE "ANNUAL GENERAL MEETING").
The undersigned shareholder of the Company hereby appoints Joseph C.H.
Johnson or, failing him, John P. Dowling, as proxy, each with the power to
appoint his substitute, and authorizes them to represent and vote as designated
herein, all of the common shares, par value $0.01 per share, of the Company
("Common Shares") held of record on April 7, 1999 by the undersigned shareholder
of the Company at the Annual General Meeting, and at any adjournment or
postponement thereof, with respect to the matters listed on this Proxy. In their
discretion, the proxies are authorized to vote such Common Shares upon such
other business as may properly come before the Annual General Meeting.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
THE SUBMISSION OF THIS PROXY, IF PROPERLY EXECUTED, REVOKES ALL PRIOR PROXIES.
IF THIS PROXY IS EXECUTED AND RETURNED BUT NO INDICATION IS MADE AS TO WHAT
ACTION IS TO BE TAKEN, IT WILL BE DEEMED TO CONSTITUTE A VOTE FOR EACH OF THE
NOMINEES AND EACH OF THE PROPOSALS SET FORTH ON THE REVERSE OF THIS PROXY.
(Continued and to be signed on reverse side.)
-- FOLD AND DETACH HERE --
<PAGE> 22
IPC HOLDINGS, LTD.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE FOR EACH OF THE NOMINEES AND EACH
OF THE PROPOSALS LISTED BELOW
1. Item A - Election of Nominees: to elect Directors of the Company to hold
office until the Company's next Annual General Meeting of Shareholders or until
their successors are elected or appointed or their office is otherwise revoked.
For Withheld For All
All All Except
/ / / / / /
IF YOU DO NOT WISH YOUR SHARES VOTED FOR A PARTICULAR NOMINEE, MARK THE FOR ALL
EXCEPT BOX AND STRIKE A LINE THROUGH THE NOMINEE(S) NAME. Your shares will be
voted for the remaining nominees. Shareholders are entitled to vote cumulatively
in the election of directors and may (but need not) indicate the distribution of
their votes among the nominees in the space below.
Joseph C.H. Johnson John P. Dowling Russell S. Fisher
Dr. the Honourable Clarence Eldridge James Frank Mutch
Anthony MacLeod Pilling John T. Schmidt
2. Item B - Compensation of Executive Committee Members: to approve the
Company's proposal to compensate members of the Executive Committee for their
service thereon.
For Against Abstain
/ / / / / /
3. Item C - Amendment to the Stock Option Plan: to approve the Company's
amendment to the IPC Holdings, Ltd. Stock Option Plan to (i) increase the number
of Common Shares covered by the Plan from 277,500 to 577,500 and (ii) to extend
the period during which the Plan will remain in effect, unless sooner terminated
by the Board of Directors, from its current expiration on February 15, 2001 to
expire on February 15, 2006.
For Against Abstain
/ / / / / /
4. Item D - Appointment of Independent Accountants: to reappoint the firm of
Arthur Andersen & Co. as the Company's independent accountants for the fiscal
year ending December 31, 1999.
For Against Abstain
/ / / / / /
PLEASE VOTE, DATE AND SIGN THIS PROXY BELOW AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Dated:____________________________, 1999
________________________________________
Signature
________________________________________
Signature (if held jointly)
Please sign your name or names exactly as it appears on your share
certificate(s). When signing as attorney, executor, administrator, trustee,
guardian or corporate executor, please give your full title as such. For joint
accounts, all co-owners should sign.
-- FOLD AND DETACH HERE --
<PAGE> 23
APPENDIX II TO PROXY STATEMENT
FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS
JUNE 18, 1999
IPC HOLDINGS, LTD.
[The following information will not be disseminated to holders of
the Company's Common Shares with the foregoing proxy statement.]
<PAGE> 24
APPENDIX II TO PROXY STATEMENT
FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS
JUNE 18, 1999
IPC HOLDINGS, LTD.
Amendment to the IPC Holdings, Ltd.
Stock Option Plan
The IPC Holdings, Ltd. Stock Option Plan (the "Plan") is hereby amended as
follows:
1. Section 5.1 of the Plan is amended to read:
"5.1. Number. The aggregate number of shares of Common Stock that may
be subject to Options granted under the Plan shall not exceed in the
aggregate 11.1 shares of Voting Common Stock (if granted prior to the
Recapitalization) or 577,500 Common Shares (following consummation of
the Recapitalization, inclusive of any Options to purchase voting Common
Stock granted prior to the Recapitalization adjusted to reflect the
Recapitalization in the manner provided in Section 5.2). The shares of
Common Stock obtainable pursuant to Options shall be authorized but
unissued shares. Upon the expiration or termination (in whole or in
part) of unexercised Options, shares of Common Stock subject thereto
shall again be available for option under the Plan."
2. Section 8 of the Plan is amended to read:
"8. Duration. The Plan shall remain in effect for a period of ten years
after the effective date of the Plan, unless sooner terminated by the
Board. Options theretofore granted may extend beyond that date in
accordance with the provisions of the Plan."
