Exhibit 99.1
HARLEYSVILLE GROUP ANNOUNCES CHANGES TO EMPLOYEE PENSION AND RETIREMENT PLANS
HARLEYSVILLE, PA-January 26, 2006-Harleysville Group Inc. (NASDAQ: HGIC) today
announced that it is changing its defined benefit pension plan and enhancing
its employee retirement savings program.
The announced changes, which will be fully implemented by April 1, 2006, are
part of the company's continuing efforts to provide comprehensive and
competitive compensation and benefits programs that are closely aligned with
corporate performance, while adding greater predictability to its cost
structure.
The changes include:
- Freezing the company's defined benefit pension plan at current
benefit levels. The accrual of future benefits for eligible employees will
cease on March 31, 2006, and all retirement benefits earned at that time
will be fully preserved. Eligible employees not currently vested in the
plan will become vested if they are employed by the company for a total of
five qualifying years. These changes do not affect the company's current
retirees or former employees with vested benefits.
- Enhancing its 401(k) retirement savings plan. The company is introducing
its new "Harleysville Retirement Savings Plus" plan, which continues to
offer employees the option to defer salary to a 401(k) account on a pre-tax
basis, and will provide employees with a company contribution ranging from
5 percent to 12.5 percent of salary each year, depending on company results
and employee contributions.
The Harleysville Retirement Savings Plus plan features:
- A "company core contribution" equal to 5 percent of salary, which
automatically will be contributed to all eligible employees' accounts on a
bi-weekly basis regardless of the employees' salary deferral amounts;
- The option for employees to make bi-weekly, pre-tax deferrals from 1
percent to 100 percent of salary (subject to annual federal limits);
- A "company guaranteed match" contribution equal to 50 percent of the
first 6 percent of salary deferred by each employee; and
- A "company performance match" contribution that provides employees making
salary deferrals the opportunity to receive an additional company match of
up to 75 percent of the first 6 percent of salary deferred. A company
performance match will be made when the company's operating return on
equity* exceeds 8 percent.
Harleysville Group announces changes to employee pension and retirement plans
Page two
- Ensuring 100 percent employee participation in the retirement savings
plan. A Harleysville Retirement Savings Plus account will be established
for all eligible employees, effective April 1, 2006, to accept the
automatic bi-weekly company contribution of 5 percent of salary. Employees
hired after April 1, 2006, also will be enrolled automatically in the
salary deferral component of the plan at the rate of 3 percent of salary,
unless they opt out.
"These changes reflect Harleysville Group's ongoing efforts to strengthen
the link between the company's compensation programs and its performance-both at
the individual and at the corporate level-while expanding these programs to
ensure that all employees have the opportunity to benefit financially from
strong company performance," commented Michael L. Browne, Harleysville Group's
president and chief executive officer. "We made the decision to shift from a
defined benefit pension plan to the Harleysville Retirement Savings Plus plan to
add more predictability to the cost of our employee retirement program-and
ultimately lower our overall expenses, which is important as we continue to
focus on our long-term growth and profitability."
As a result of these changes, the company expects to reduce annualized operating
expenses by appproximately $5 million.
Harleysville Insurance is a leading regional provider of insurance products and
services for small and mid-sized businesses, as well as for individuals, and
ranks among the top 60 U.S. property/casualty insurance groups based on net
written premiums. Harleysville Mutual Insurance Company owns 56 percent of
Harleysville Group Inc. (NASDAQ: HGIC), a publicly traded holding company for
nine regional property/casualty insurance companies collectively rated A-
(Excellent) by A.M. Best Company. Harleysville Insurance-which distributes its
products exclusively through independent insurance agencies and reflects that
commitment to its agency force by being a Trusted Choice member
company-currently operates in 32 eastern and midwestern states. Further
information can be found on the company's Web site at
www.harleysvillegroup.com.
* Operating return on equity is determined by dividing the after tax operating
income for the taxable year of the company by its average stockholders' equity.
Operating income is a non-GAAP financial measure defined by the company as net
income excluding the after-tax realized gains and losses on investments. The
average stockholders' equity is determined by calculating the average of the
beginning and end of the year stockholders' equity, but excluding unrealized
investment gains.
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Certain of the statements contained herein (other than statements of historical
facts) are forward-looking statements. Such forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty that are, in many instances, beyond the
company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on
Harleysville Group Inc. There can be no assurance that future developments will
be in accordance with management's expectations so that the effect of future
developments on Harleysville Group will be those anticipated by management.
Actual financial results including operating return on equity, premium growth
and underwriting results could differ materially from those anticipated by
Harleysville Group depending on the outcome of certain factors, which may
include changes in property and casualty loss trends and reserves; catastrophe
losses; the insurance product pricing environment; changes in applicable law;
government regulation and changes therein that may impede the ability to charge
adequate rates; changes in accounting principles; performance of the financial
markets; fluctuations in interest rates; availability and price of reinsurance;
and the status of the labor markets in which the company operates.
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