SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(a)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.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] No fee required.
[ ] 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:
4) Proposed maximum aggregate value of transaction:
[ ] 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 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 16, 2000
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. Eastern Time on Tuesday, May 16, 2000.
The purposes of the meeting are:
1. To elect seven directors;
2. To approve an amendment to the Company's Certificate of Incorporation
to change its name to "Great American Financial Resources, Inc."
3. 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 17, 2000 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, stockholders can vote
their shares (i) via a toll free telephone call in the U.S. and Canada, or (ii)
by mailing a signed proxy form, which is the bottom portion of the enclosed
perforated form. 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 using any voting method offered when
casting the proxy being revoked, including written revocation, telephone system
or by submitting a later-dated proxy form.
Carl H. Lindner
Chairman of the Board
Dated: March 17, 2000
PROXY STATEMENT
AMERICAN ANNUITY GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
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 Tuesday, May 16, 2000, 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, 2000.
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 17, 2000 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting and at any
adjournments thereof. At the Record Date, 42,333,949 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 ("AFG"), One East Fourth Street, Cincinnati, Ohio
45202, which beneficially owned 35,059,995 shares, or approximately 82.8% 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 the benefit of them and their families (collectively the "Lindner
Family"), the beneficial owners of approximately 48% of AFG's voting stock,
share voting and dispositive power with AFG 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
(including shares voted by telephone) will be voted at the Annual Meeting or any
adjournments thereof in accordance with the directions of the holder. Unless a
contrary direction is indicated, such shares will be voted for the seven
nominees for director named herein and for Proposal No. 2 to change the
Company's name to Great American Financial Resources, Inc.
Should any of the nominees for election as a director become unable to
stand for election, which is not anticipated, 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 seven. The
seven directors so elected will, upon such election, constitute the entire Board
of Directors.
In accordance with AAG's Certificate of Incorporation, the only candidates
eligible for election at the Annual Meeting are candidates nominated by the
Board of Directors and candidates nominated at the meeting by a stockholder who
has complied with the procedures set forth in the Certificate of Incorporation.
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, RONALD
G. JOSEPH, JOHN T. LAWRENCE III, WILLIAM R. MARTIN and RONALD W. TYSOE. See
"MANAGEMENT" for information relating to the nominees. The seven 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 SEVEN NOMINEES LISTED ABOVE. THE COMPANY HAS BEEN INFORMED THAT AFG
INTENDS TO VOTE ITS SHARES FOR THE ABOVE NOMINEES.
PROPOSAL 2: APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
On February 29, 2000, the Board of Directors unanimously adopted, and
recommended that the stockholders of the Company approve, a proposal to amend
the Company's Certificate of Incorporation to change its name to "Great American
Financial Resources, Inc."
2
The Company initially changed its name to American Annuity Group, Inc. in
December, 1992. At that time, the Company's sole operating subsidiary was Great
American Life Insurance Company which was primarily engaged in the sale of
tax-deferred annuities. Since 1992, the Company has diversified its operations
to include additional complementary lines of business. The Board of Directors
believes that the Company can benefit from a name that reflects the breadth of
the products and services that the Company offers.
The text of the proposed amendment is as follows:
RESOLVED: that Article First of the Company's Certificate of Incorporation
be amended to read, in its entirety, as follows:
FIRST: The name of the corporation shall be "Great American Financial
Resources, Inc."
If the proposed amendment to the Company's Certificate of Incorporation is
approved by the stockholders at the Annual Meeting, the name change will become
effective upon the filing of a certificate of amendment to the Company's
Certificate of Incorporation with the Secretary of State of Delaware.
Approval of this amendment requires the affirmative vote of a majority of
all outstanding shares of the Company's Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY'S NAME
TO "GREAT AMERICAN FINANCIAL RESOURCES, INC." AAG HAS BEEN INFORMED THAT AFG
INTENDS TO VOTE ITS SHARES FOR APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION.
3
MANAGEMENT
The directors and executive officers of AAG are:
Director or
Name Age* Position Officer Since
---- ---- -------- -------------
Carl H. Lindner 80 Chairman of the Board 1987
S. Craig Lindner 44 Chief Executive Officer 1993
and President, Director
Robert A. Adams 54 Vice Chairman 1992
Ronald G. Joseph 63 Director 1994
John T. Lawrence III 48 Director 1994
William R. Martin 70 Director 1994
Ronald W. Tysoe 46 Director 1999
Charles R. Scheper 47 Chief Operating Officer 1999
John B. Berding 37 Executive Vice President, 1993
Investments
Keith A. Jensen 48 Executive Vice President 1997
William J. Maney 50 Executive Vice President, 1993
Treasurer and Chief
Financial Officer
Mark F. Muething 40 Executive Vice President, 1993
General Counsel and
Secretary
Jeffrey S. Tate 43 Executive Vice President 1993
Richard L. Magoteaux 39 Vice President 1996
Christopher P. Miliano 41 Vice President, Controller 1993
and Assistant Treasurer
* As of March 1, 2000
4
Carl H. Lindner has been Chairman of the Board since 1987. Until November
1999, Mr. Lindner also served as Chief Executive Officer of the Company. 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 Chiquita
Brands International, Inc., a leading international marketer, producer and
distributor of bananas and other quality fresh and processed food products. AFG
owns a substantial beneficial interest (approximately 36%) in Chiquita. He also
serves as a director of American Financial Corporation ("AFC"), all of the
Common Stock of which is owned by AFG. Carl H. Lindner is the father of S. Craig
Lindner.
S. Craig Lindner was elected Chief Executive Officer of AAG in November
1999. Prior thereto, he served as President and a director of AAG since 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 Co-President and a director of AFG and AFC.
Robert A. Adams was elected Vice Chairman of AAG in November 1999. Prior
thereto, he served as Executive Vice President and Chief Operating Officer of
the Company since December 1992 and a director since 1993.
Ronald G. Joseph has been a director of AAG since March 1994. For more than
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 has been a director of AAG since March 1994. Mr.
Lawrence has been a Senior Vice President with PaineWebber Incorporated, a
national investment banking firm, since January 1993.
William R. Martin has been a director of AAG since March 1994. Although
currently retired, Mr. Martin was previously President of both Tominy, Inc. and
M.B. Computing, Inc., which are privately held software development companies.
Mr. Martin is also a director of AFG and AFC.
Ronald W. Tysoe has been a director of AAG since February 1999. For more
than five years, Mr. Tysoe has been Vice Chairman of Federated Department
Stores, Inc. ("Federated"). From April 1990 until October 1997, Mr. Tysoe also
served as the Chief Financial Officer of Federated. Mr. Tysoe also serves as a
director of E. W. Scripps Company.
5
Charles R. Scheper was elected Chief Operating Officer of AAG in November
1999. In May 1999, Mr. Scheper was elected a Group President of AAG. Beginning
in January 1998, Mr. Scheper was employed by the Company serving in various
capacities. For more than five years prior thereto, Mr. Scheper served as the
President of the Life Division of Pioneer Financial Services, Inc.
John B. Berding was elected Executive Vice President of AAG in May 1999.
Prior thereto, he served as Senior Vice President - Investments of AAG since
March 1993. During the past five years, he has also been a Vice President and
effective January 1996 a Senior Vice President of AMM.
Keith A. Jensen was elected Executive Vice President of AAG in May 1999.
Prior thereto, he served as Senior Vice President of AAG since February 1997.
Prior thereto, for more than five years he was a partner with Deloitte & Touche
LLP, an independent accounting firm.
William J. Maney was elected Executive Vice President, Treasurer and Chief
Financial Officer of AAG in May 1999. Prior thereto, he served as Senior Vice
President, Treasurer and Chief Financial Officer of AAG for over five years.
Mark F. Muething was elected Executive Vice President, General Counsel and
Secretary of AAG in May 1999. Prior thereto, he served as Senior Vice President,
General Counsel and Secretary of AAG for over five years.
Jeffrey S. Tate was elected Executive Vice President of AAG in May 1999.
Prior thereto, he served as Senior Vice President of AAG for over five years.
Richard L. Magoteaux was elected Vice President of AAG in May 1996. Prior
thereto, for more than five years he was a Senior Manager with Ernst & Young
LLP, an independent accounting firm.
Christopher P. Miliano was elected Vice President and Controller of AAG in
February 1995 and Assistant Treasurer in February 1997. 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).
6
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, 2000, is shown in the following table:
Amount and Nature of
Beneficial
Name Ownership(a)(m) Percent of Class
- ------------------------ --------------------- -----------------
Robert A. Adams 416,370 (b) *
Ronald G. Josep 31,573 *
John T. Lawrence III 19,562 *
Carl H. Lindner 35,059,995 (c) 82.8%
S. Craig Lindner 35,158,093 (c)(d) 83.0
William R. Martin 17,080 *
Ronald W. Tysoe 2,774 *
Charles R. Scheper 28,805 (e) *
John B. Berding 101,333 (f) *
Keith A. Jensen 68,228 (g) *
William J. Maney 96,398 (h) *
Mark F. Muething 104,481 (i) *
Jeffrey S. Tate 112,807 (j) *
Richard L. Magoteaux 12,690 (k) *
Christopher P. Miliano 37,063 (l) *
All Directors and
Executive Officers as
a Group (15 persons) 36,207,257 84.1%
* Less than 1%
(a) Unless otherwise indicated, the persons named have sole voting and
dispositive power over the shares listed opposite their names. The amounts
listed include the following number of shares which may be acquired
pursuant to options which are exercisable within 60 days of the date
hereof: Mr. Adams - 253,602, Mr. Joseph - 7,268, Mr. Lawrence - 7,268, Mr.
Martin - 7,268, Mr. Tysoe - 2,200, Mr. Scheper - 19,000, Mr. Berding -
76,980, Mr. Jensen - 64,000, Mr. Maney - 79,287, Mr. Muething - 66,477, Mr.
Tate - 79,287, Mr. Magoteaux - 9,976 and Mr. Miliano - 22,409.
(b) Includes 3,931 shares allocated to Mr. Adams's account in the American
Annuity Group, Inc. Employee Stock Ownership Retirement Plan ("ESORP"),
54,150 share equivalents allocated to Mr. Adams's account in the American
Annuity Group, Inc. Deferred Compensation Plan ("Deferred Compensation
Plan") and 254 shares held by Mr. Adams's minor children.
(c) Messrs. Carl H. Lindner 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.
7
(d) Includes 44,100 shares held by his spouse as custodian or as trustee for
their minor children and 37,330 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.
(e) Includes 9,805 share equivalents allocated to Mr. Scheper's account in the
Deferred Compensation Plan.
(f) Includes 461 share equivalents allocated to Mr. Berding's account in the
Deferred Compensation Plan.
(g) Includes 4,228 share equivalents allocated to Mr. Jensen's account in the
Deferred Compensation Plan.
(h) Includes 3,931 shares allocated to Mr. Maney's account in the ESORP and
9,094 share equivalents allocated to Mr. Maney's account in the Deferred
Compensation Plan.
(i) Includes 2,867 shares allocated to Mr. Muething's account in the ESORP and
12,268 share equivalents allocated to Mr. Muething's account in the
Deferred Compensation Plan.
(j) Includes 3,833 shares allocated to Mr. Tate's account in the ESORP and
5,937 share equivalents allocated to Mr. Tate's account in the Deferred
Compensation Plan.
(k) Includes 773 shares allocated to Mr. Magoteaux's account in the ESORP and
980 share equivalents allocated to Mr. Magoteaux's account in the Deferred
Compensation Plan.
(l) Includes 3,359 shares allocated to Mr. Miliano's account in the ESORP.
(m) Messrs. Joseph, Lawrence, Carl H. Lindner, S. Craig Lindner, Martin,
Berding, Tate and Miliano also beneficially own; 51,000; 4,000; 2,511,684;
5,252,812; 42,858; 14,308; 700 and 10 shares, respectively, of common stock
of AFG. Mr. Martin also beneficially owns 40,126 shares of AFC preferred
stock.
Committees and Meetings of the Board of Directors
AAG's Board of Directors held six meetings and took action in writing on
five occasions in 1999.
Audit Committee. The Audit Committee consists of three members: William R.
Martin (Chairman), John T. Lawrence III and Ronald W. Tysoe, none of whom is an
officer or employee of AAG or any of its subsidiaries. Mr. Tysoe became a member
of this Committee in February 1999. 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
8
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 six meetings in 1999.
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 1999.
Organization and Policy Committee. The Organization and Policy Committee
consists of two members: Ronald G. Joseph and John T. Lawrence III, neither of
whom is an officer or employee of AAG or any of its subsidiaries. The
Committee's functions include: reviewing the duties and responsibilities 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 did not meet in 1999 and took action in writing on two
occasions.
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 retainer of $25,000 for Board membership
and an additional annual retainer of $5,000 for serving as Chairman of a Board
Committee. Under AAG's Directors' Compensation Plan, non-employee directors will
receive at least 50% of their retainers in Common Stock. In addition, directors
who are not employees of AAG are paid a fee of $1,500 for attendance at each
Board meeting, and $1,000 for attendance at each committee meeting. All
directors are reimbursed for expenses incurred in attending board and committee
meetings.
9
Pursuant to the Directors' Stock Option Plan, each March 1, each
non-employee director will receive a stock option to purchase 1,000 shares of
AAG Common Stock, with an exercise price based on the average market price of
AAG Common Stock for the ten trading days preceding the grant date. Each new
non-employee director will receive an option to purchase 10,000 shares of AAG
Common Stock, with an exercise price based on the average market price of AAG
Common Stock for the ten trading days preceding the date of election as a
director.
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, 1999 paid to the chief
executive officer and the other four most highly compensated executive officers
of AAG.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation (c) Options Compensation (d)
- --------------------------- ---- -------- --------- ---------------- ----------- ---------------
Carl H. Lindner 1999 $101,923 -- $ 1,661 -- --
Chairman of the Board (a) 1998 $101,923 -- $ 4,061 -- --
1997 $101,959 -- $ 4,061 -- --
S. Craig Lindner 1999 $336,346 $227,550 $ 700 -- --
Chief Executive Officer 1998 $313,846 $275,000 $ 1,197 -- --
and President 1997 $336,346 $277,500 $ 1,245 -- --
Charles R. Scheper 1999 $223,153 $114,000 $ 1,534 50,000 $ 7,321
Chief Operating Officer (b)
Robert A. Adams 1999 $542,000 $331,200 $ 58,912 -- $ 30,000
Vice Chairman 1998 $530,000 $418,000 $ 55,723 40,000 $ 30,000
1997 $514,712 $453,600 $ 57,518 50,000 $ 30,000
William J. Maney 1999 $234,135 $110,700 $ 17,791 -- $ 20,888
Executive Vice President, 1998 $213,654 $114,000 $ 11,995 25,000 $ 20,271
Treasurer and Chief 1997 $193,654 $124,200 $ 10,922 25,000 $ 18,549
Financial Officer
Jeffrey S. Tate 1999 $234,135 $101,500 $ 14,458 -- $ 14,048
Executive Vice President 1998 $213,654 $114,000 $ 28,658 25,000 $ 19,659
1997 $193,654 $124,200 $ 16,515 25,000 $ 26,001
<FN>
(a) Mr. Lindner served as Chief Executive Officer of AAG until November 1999.
In his capacity as Chairman of the Board 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.
10
(b) Mr. Scheper became an Executive Officer in April, 1999. Compensation
amounts for Mr. Scheper reflect amounts for the entire year of 1999.
(c) The amounts listed under "Other Annual Compensation" for 1999 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, respectively, for each person
as follows: Mr. Scheper - $0 and $547, Mr. Adams - $6,916 and $4,047, Mr.
Maney - $13,045 and $1,725, and Mr. Tate - $4,231 and $658. The amounts for
1999 also include spousal travel reimbursement of $20,037 for Mr. Adams,
$7,791 for Mr. Tate and $1,783 for Mr. Maney. The amount for Mr Adams also
includes an auto allowance of $14,400. The amounts for Messrs. Carl Lindner
and S. Craig Lindner reflect premiums paid for group life coverage in
excess of $50,000.
(d) Amounts listed under "All Other Compensation" for each of the named persons
reflect amounts contributed to the AAG ESORP and AAG Auxiliary ESORP.
</FN>
On April 27, 1999, Charles R. Scheper was granted options to purchase
50,000 shares of Common Stock at a price of $22.12 per share. No other stock
options were granted in the year ended December 31, 1999, to the Executive
Officers named in the Summary Compensation Table.
The following table contains information on the value of unexercised
options as of December 31, 1999:
AGGREGATED OPTION EXERCISES IN 1999
AND OPTION VALUES AT DECEMBER 31, 1999
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at Fiscal
Fiscal Year End Year End (a)
--------------- -----------------
Options Value Exercisable/ Exercisable/
Name Exercised Realized(b) Unexercisable Unexercisable
- ----------------- --------- ----------- --------------- -----------------
Carl H. Lindner -- -- -- --
S. Craig Lindner -- -- -- --
Charles R. Scheper -- -- 6,000/74,000 --
Robert A. Adams 20,000 $186,200 253,602/232,402 $1,053,610/$797,410
William J. Maney -- -- 79,287/77,858 $297,863/$198,576
Jeffrey S. Tate -- -- 79,287/77,858 $297,863/$198,576
(a) The Value of Unexercised In-the-Money Options at Fiscal Year End is
calculated based on a market price for AAG Common Stock on December 31,
1999 of $18.00 per share. For options on which the exercise price is
greater than $18.00 per share, the value is assumed to be -0-.
(b) The value realized on the exercise of stock options is calculated by
subtracting the exercise price from the market value of AAG Common Stock on
the date of exercise.
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. AAG's
11
cash compensation for executive officers for 1999 was comprised principally of
annual base salaries and payments pursuant to the Corporate Bonus Plan. Stock
options are granted to executive officers to provide long-term incentive based
compensation. Stock options have generally been granted in the fourth quarter of
each year. However, the grant of stock options for 1999 was not made until the
first quarter of 2000. 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.
Corporate Bonus Plan. Each of the named executive officers, other than Carl
H. Lindner, was eligible to participate in the Corporate 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 premium,financial and operational goals for
the Company. Based on the specific responsibilities of the participant, the
Committee allocated a total of 100% among the premium, financial and operational
goals. 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 1999 are amounts awarded to participating
executive officers in the first quarter of 2000.
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 1999, Mr. Lindner did not participate in any other compensation plans or
arrangements of AAG. In November 1999, S. Craig Lindner became Chief Executive
Officer of the Company.
Stock Options. Stock options represent a performance-based portion of the
Company's compensation system. The Committee believes that stockholders'
interests are well served by aligning the interests of the Company's executive
officers with those of stockholders by the grant of stock options. Incentive
stock options are granted with an exercise price equal to the fair market value
of AAG Common Stock on 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.
12
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. Section 162 was not
considered by the Committee in determining 1999 compensation.
Members of the Organization and Policy Committee:
Ronald G. Joseph
John T. Lawrence III
Organization and Policy Committee Interlocks and Insider Participation. The
members of the Organization and Policy Committee are Ronald G. Joseph and John
T. Lawrence III, neither has been an officer or employee of AAG, AFG or any of
their subsidiaries.
Performance Graph. 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
Insurance (Life/Health) - 500 Index ("S&P Life") from the end of 1994 to the end
of 1999. The graph assumes $100 invested on December 31, 1994 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
1994 1995 1996 1997 1998 1999
---- ------- ------- ------- ------- -------
AAG $100 $125.89 $149.02 $233.15 $244.81 $192.78
S&P LIFE $100 $143.60 $175.45 $219.40 $231.62 $199.18
S&P 500 $100 $137.58 $169.17 $225.60 $290.08 $351.12
Certain Transactions
AAG 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 AAG's insurance subsidiaries in accordance with guidelines. AAG and
its subsidiaries pay AMM an annual fee of .10% of total invested assets (as
defined), provided that such fee does not exceed the actual cost to AMM of
13
providing such services, and AMM is reimbursed for certain expenses. Investment
expenses charged by AMM to AAG and its subsidiaries were $2.9 million in 1999.
In connection with the purchase of GALIC by AAG, Great American Insurance
Company ("GAI"), the former parent of GALIC and a wholly-owned subsidiary of
AFG, 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. AAG and GAI have agreed that the financial impact of the
actuarial guideline would be offset by reduction of investment management fees.
The amount paid in 1999 reflects this adjustment.
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. 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 1999, AAG and its subsidiaries which are included in the AFC
consolidated tax group incurred income tax expense of $19.1 million. In 1999,
AAG paid AFC $1.5 million in tax allocation payments.
GAI leases office space in a building owned by GALIC in Cincinnati, Ohio,
under a lease which expires in March 2009. GALIC recorded rental income of
approximately $900,000 from GAI in 1999. In 1999, AAG made payments of
approximately $243,000 to Chiquita for the use of cafeteria and other facilities
in Cincinnati, Ohio and for miscellaneous items.
It was determined in 1992 that the agreements governing the Company's 1987
spin-off from American Premier Underwriters, Inc. ("APU") obligate the Company
to reimburse APU 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 $12,000 to APU with respect to this liability during 1999.
In July 1997, AAG and Carl H. Lindner purchased 49% and 51%, respectively,
of the outstanding common stock of a newly incorporated entity formed to acquire
the assets of a company engaged in the production of ethanol. AAG invested $4.9
million and Mr. Lindner invested $5.1 million; the asset purchase was completed
in December 1997. In connection with this investment, AAG and Mr. Lindner
entered into a Shareholders' Agreement which provides, among other things, for
restrictions on the transfer of the shares of the entity and that Mr. Lindner
will have the right to nominate a majority of that company's directors. AAG and
GAI each have a 50% participation interest in a working capital credit facility
14
under which the company may borrow up to $10 million at a rate of prime plus 3%.
There were no borrowings outstanding under this facility in 1999. In September
1998, AAG made a loan in the amount of $4 million to this company. This loan
bears interest at the rate of 14% and matures in September 2008. The proceeds
were used to pay a portion of a $6.3 million capital contribution, including
$3.1 million to AAG and $3.2 million to Mr. Lindner.
GALIC has a line of credit with American Heritage Holding Corporation, a
Florida-based home builder which is 49% owned by AFG and 11% owned by a brother
of Carl H. Lindner. Under this agreement, the company may borrow up to $8
million at 13% per annum, with interest deferred and added to principal. The
highest outstanding balance owed to GALIC during 1999 and the balance at
year-end 1999 was $6.7 million.
AAG purchased various property and casualty insurance from GAI and paid
approximately $149,000 in premiums in 1999.
AAG provided various information technology services to GAI and billed
approximately $281,000 in 1999.
Proxies and Voting Procedures
Voting. Registered stockholders can vote by using a toll-free telephone
number, by completing a proxy form and mailing it to the proxy tabulator or by
attending the Annual Meeting and voting in person. The Telephone voting
facilities will close at 9:00 A.M. Eastern Standard Time on the Meeting date.
The telephone voting procedures are designed to authenticate stockholders by use
of a proxy control number and personal identification number ("PIN") to allow
stockholders to confirm that their instructions have been properly recorded.
Stockholders whose shares are held in the name of a broker, bank or other
nominee should refer to their proxy card or the information forwarded by such
other holder of record to see voting options are available to them.
Proxy Form. To vote by telephone, stockholders should call 1-877-298-0570
or 579-6707 using any touch-tone telephone and have their proxy form ready.
Stockholders will be asked to enter the proxy control number and PIN, then
follow simple recorded instructions.
To vote by mail, stockholders should complete and sign the bottom portion
of the proxy form and return it to the proxy tabulator. If no instructions are
specified on the proxy form, shares represented by the proxy will be voted for
the seven nominees in Proposal No. 1 and for Proposal No. 2 to change the
Company's name.
The telephone voting facilities will close at 9:00 A.M. Eastern Standard
Time on the Meeting date.
15
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 Company's principal
offices or by properly executing and delivering a proxy bearing a later date
(including a telephone vote). 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 and 2. If 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 seven nominees receiving the highest number of votes will be elected as
directors. The affirmative vote of a majority of the stockholders voting at the
meeting are required to approve Proposal No. 2.
Abstentions and broker non-votes will have no effect on any matter
considered at the meeting.
Independent Auditors
The accounting firm of Ernst & Young LLP served as the Company's
independent auditors for the fiscal year ended December 31, 1999. Ernst & Young
LLP also serves as independent auditors for AFG and many of its affiliates.
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.
16
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires AAG's
officers, directors and persons who own more than ten percent of AAG's Common
Stock to file reports of ownership with the Securities and Exchange Commission
and to furnish AAG with copies of these reports. Based solely upon its review of
reports received by it, or upon written representation from certain reporting
persons that no reports were required, AAG believes that during fiscal 1999 all
filing requirements were met.
Nominations and Stockholder Proposals for 2001 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 the Company's 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."
Other than the election of Directors and Proposal No. 2 to change the
Company's name, management knows of no other matters to be presented at the
Annual Meeting upon which a vote may be taken. The Proxy Form used by the
Company for the Annual Meeting typically grants authority to management's
proxies to vote in their discretion on any matters that come before the Meeting
as to which adequate notice has not been received. In order for a notice to be
deemed adequate for the 2001 Annual Meeting, it must be received by February 15,
2001. In order for a proposal to be considered for inclusion in the Company's
proxy statement for that Meeting, it must be received by January 17, 2001.
Annual Report and Form 10-K Report
An annual report for the year ended December 31, 1999 and 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 1999 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, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, P.O.
BOX 120, CINCINNATI, OHIO 45201-0120.
Cincinnati, Ohio
March 17, 2000
17
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 16, 2000 at 10:00 a.m., Eastern Time, and on such other matters as may
properly come before the meeting and any adjournment of such meeting thereof.
To vote by telephone, stockholders should call 1-877-298-0570 or 579-6707 using
any touch-tone telephone and have their proxy card ready. Stockholders will be
asked to enter their proxy control number and personal identification number
("PIN"), and then to follow simple recorded instructions.
To vote by mail, stockholders should complete and sign this proxy form and
return it to the proxy tabulator. If no instructions are specified on the proxy
form, shares represented by the proxy will be voted for the seven nominees in
Proposal No. 1 and for Proposal No. 2 to change the Company's name.
The telephone voting facilities will close at 9:00 a.m. Eastern Standard Time on
the Meeting date.
The Board of Directors recommends a vote FOR the following Proposal:
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 Ronald G. Joseph John T. Lawrence III
Carl H. Lindner S. Craig Lindner William R. Martin
Ronald W. Tysoe
2. Proposal to change the Company's name to Great American Financial
Resources, Inc.
DATE: SIGNATURE:
---------------, 2000 ------------------------------------
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 the Proposals. If any further matters properly come before the meeting, such
shares shall be voted on such matters in accordance with the best judgment of
the proxy holders. This proxy form is designed to enable the shareholder to
detach and mail the vote card without a return envelope. This is intended to
reduce processing costs, to maintain confidentiality and to provide added
shareholder convenience.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.