UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(E)(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HARTFORD LIFE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
HARTFORD LIFE, INC.
1999 Notice of Annual Meeting and Proxy Statement
March 31, 1999
Dear Shareholder:
I am pleased to invite you to attend the 1999 annual meeting
of shareholders of Hartford Life, Inc. to be held at 1:00 p.m.
on Thursday, May 20, 1999 at The Wadsworth Atheneum in
Hartford, Connecticut. We hope that you will participate in
the annual meeting either by attending and voting in person or
by voting by proxy as promptly as possible. Your vote is
important.
The accompanying notice of annual meeting and proxy statement
provide information about the matters to be acted upon by
Hartford Life's shareholders. The proxy statement also
contains information about the role and responsibilities of
the Board of Directors and the committees of the Board and
provides important information about each nominee for election
as a director.
Sincerely yours,
/s/ Ramani Ayer
Ramani Ayer
Chairman of the Board
HARTFORD LIFE, INC.
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of the shareholders (the "Annual Meeting") of Hartford
Life, Inc. (the "Company") will be held on Thursday, May 20, 1999 at 1:00 p.m.
at The Wadsworth Atheneum, 600 Main Street, Hartford, Connecticut, for the
following purposes:
1. to elect three nominees to the Board of Directors to hold office until
the 2002 annual meeting of shareholders and until their successors are
elected and qualified;
2. to ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the fiscal year ending December 31, 1999; and
3. to act upon such other matters as may properly come before the Annual
Meeting.
Only shareholders of record at the close of business on March 22, 1999 are
entitled to notice of, and to vote at, the Annual Meeting.
Amy Gallent
/s/ AMY GALLENT
Vice President and Corporate
Secretary
March 31, 1999
HARTFORD LIFE, INC.
200 Hopmeadow Street
Simsbury, CT 06089
----------------
PROXY STATEMENT
Annual Meeting of Shareholders
May 20, 1999
----------------
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Hartford
Life, Inc. (the "Company" or "Hartford Life") in connection with the annual
meeting of shareholders of the Company to be held on Thursday, May 20, 1999 at
1:00 p.m. at The Wadsworth Atheneum, 600 Main Street, Hartford, Connecticut,
and at any adjournment or postponement thereof (the "Annual Meeting"). This
Proxy Statement and the accompanying proxy card are first being sent to
shareholders on or about March 31, 1999.
Voting Rights
Only shareholders of record as of March 22, 1999 (the "Record Date") are
entitled to notice of, and to vote at, the Annual Meeting. As of February 26,
1999, there were 25,928,071 shares of Class A common stock ("Class A Common
Stock") outstanding and 114,000,000 shares of Class B common stock ("Class B
Common Stock") outstanding (the Class A Common Stock and the Class B Common
Stock are collectively referred to as the "Common Stock"). All of the
outstanding shares of Class B Common Stock are held by Hartford Accident &
Indemnity Company ("Hartford A&I"), an indirect wholly-owned subsidiary of The
Hartford Financial Services Group, Inc. ("The Hartford"). Each shareholder of
the Class A Common Stock is entitled to one vote per share, and each
shareholder of the Class B Common Stock is entitled to five votes per share,
on all matters voted upon at the Annual Meeting. Shareholders of the Class A
Common Stock and the Class B Common Stock vote together as a single class on
all matters, except as otherwise required by law.
Voting By Proxy
In General. Subject to the limitations described below, shareholders may
vote by proxy by (i) using the accompanying proxy card, (ii) voting by
telephone, or (iii) voting electronically through the internet. When voting
using any of these methods, as to the election of directors, you may (a) vote
for all of the director nominees as a group except those nominees whose names
you specify, or (b) withhold your vote from all nominees as a group. As to
each other item, you may vote "for" or "against" the item or "abstain" from
voting. If you properly vote by proxy by any of these methods as described
below but do not specify any choices, you will thereby confer authority upon
the persons named as proxies to vote your shares in their discretion. A proxy
also confers discretionary authority on these individuals to vote your shares
of Class A Common Stock on (1) any matter that was not known on the date of
this Proxy Statement but is presented at the Annual Meeting, including voting
on the nomination or election of any person not identified in this Proxy
Statement as a nominee for election as a director; and (2) any shareholder
proposal that has been omitted from this Proxy Statement pursuant to the proxy
regulations of the Securities and Exchange Commission ("SEC") but is presented
at the Annual Meeting.
You may revoke your proxy at any time before it is exercised by giving
written notice thereof to the Secretary of the Company, by submitting a
subsequently dated and properly completed proxy, or by attending the Annual
Meeting and revoking the proxy. Your attendance at the Annual Meeting will
not, by itself, revoke your proxy.
Voting By Proxy Card. Any shareholder, including any employee who owns Class
A Common Stock through Company stock plans, may vote by proxy by using the
accompanying proxy card. When you return a
1
proxy card that is properly signed and completed, the shares of Class A Common
Stock represented by the proxy will be voted as you specify on the proxy card.
Voting By Telephone Or Through The Internet. If you are a registered
shareholder (that is, you own Class A Common Stock in your own name and not
through a broker, nominee or in some other "street name" capacity), or if you
own Class A Common Stock through Company stock plans, you may vote by proxy by
using the telephone or internet method of voting (please see the accompanying
proxy card for instructions on how to access the telephone and internet voting
systems). If you hold shares of Class A Common Stock in "street name," your
broker or other nominee will advise you whether you may vote by telephone or
through the internet.
Voting Shares Held in Company Stock Plans. Shares of Class A Common Stock
held in the Hartford Investment and Savings Plan ("ISP") and in the Company's
Deferred Restricted Stock Unit Plan ("Stock Unit Plan") are held of record and
are voted by the trustees of the ISP and the Stock Unit Plan, respectively.
Shares of Class A Common Stock held in the Company's Employee Stock Purchase
Plan ("ESPP") are held of record by the ESPP's administrator, Dean Witter
Trust Company ("Dean Witter"), and are voted by Dean Witter. Participants in
the ISP, the Stock Unit Plan and the ESPP may direct the trustees and Dean
Witter as to how to vote shares allocated to their ISP, Stock Unit Plan and
ESPP accounts by voting by proxy using any of the three methods described
above. The ISP and Stock Unit Plan trustees will vote shares as to which they
have not received direction in accordance with the terms of the ISP and the
Stock Unit Plan. To the extent that Dean Witter does not receive voting
directions from ESPP participants, it may vote such shares in its capacity as
a broker.
Your vote is important and the Board of Directors urges you to exercise your
right to vote. Whether or not you plan to attend the Annual Meeting, you can
assure that your shares are voted by properly completing, signing, dating and
returning the enclosed proxy card.
ITEM 1
ELECTION OF DIRECTORS
The Company's restated certificate of incorporation provides for a
classified Board of Directors whose members are divided into three classes,
with each class being as nearly equal in number as possible. At each annual
meeting of shareholders, nominees are elected as directors to a class with a
term of office that expires at the annual meeting of shareholders held three
years thereafter, and until their successors are elected and qualified. The
Board of Directors currently consists of eleven members, classified as set
forth below.
The terms of office of Gail Deegan, Lowndes A. Smith and DeRoy C. Thomas
expire at the Annual Meeting. With the exception of DeRoy C. Thomas, who will
retire and will not stand for reelection, each of such persons has been
nominated for reelection as a director to the class whose term of office will
expire at the annual meeting to be held in 2002, and until their successors
are elected and qualified. In addition, Robert W. Selander has been nominated
for election as a director in this class to fill the vacancy created by Mr.
Thomas' retirement. Ramani Ayer, Donald R. Frahm, H. Patrick Swygert and
Robert E. Patricelli are members of the class of directors whose terms will
expire at the annual meeting to be held in 2000, and Paul G. Kirk, Jr., Thomas
M. Marra, Gordon I. Ulmer and David K. Zwiener are members of the class of
directors whose terms expire at the annual meeting to be held in 2001. Thomas
M. Marra was elected a director by the Board of Directors effective December
17, 1998.
Unless there is a contrary indication, shares of Class A Common Stock
represented by valid proxies will be voted for the election of all nominees.
The Board has no reason to believe that any nominee will be unable to serve as
a director. If for any reason a nominee should become unable to serve, the
shares represented by valid proxies will be voted for the election of such
other person as the Board may recommend, or the Board may reduce the number of
directors to eliminate the vacancy.
2
Set forth below is certain information about each director and nominee for
election as a director, including information regarding his or her background
for at least the past five years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR ELECTION AS
DIRECTORS
Nominees For Election At The Annual Meeting
GAIL DEEGAN
Ms. Deegan, 52, has served as a director since 1997. She has
been Executive Vice President and Chief Financial Officer of
Houghton Mifflin Company, a publishing company, since 1996. Prior
to that, Ms. Deegan was Senior Vice President--Regulatory and
Government Affairs of NYNEX. From 1991 to 1994, she was Vice
President and Chief Financial Officer of New England Telephone
Company. From 1978 to 1988, Ms. Deegan held various positions of
increasing responsibility at Eastern Enterprises (formerly Eastern
Gas & Fuel Associates), located in Weston, Massachusetts, where
she served as Senior Vice President, Chief Financial Officer and
Treasurer from 1988 to 1990.
(ART)
LOWNDES A. SMITH
Mr. Smith, 59, became President and Chief Executive Officer of
the Company in connection with the Company's initial public
offering of Class A Common Stock that was completed in May 1997
(the "Hartford Life IPO"), and became Vice Chairman of The
Hartford on February 1, 1997. Effective December 1, 1998, Mr.
Smith also became responsible for the International Operations of
The Hartford. He also served as an Executive Vice President of The
Hartford since the ITT Corporation spin-off in December 1995, a
transaction in which The Hartford became a separate public company
from ITT Corporation (the "ITT Spin-Off"), until his appointment
as Vice Chairman. He has also served as President and Chief
Operating Officer of The Hartford's life insurance companies since
1989. Prior to that time, he served as Senior Vice President and
Group Controller for all companies owned or operated by The
Hartford. Mr. Smith joined The Hartford in 1968 as a member of the
corporate accounting department. In 1972 he was appointed the
Secretary and Director of corporate accounting. He was elected
Assistant Vice President in 1974, and he was named Controller in
1977. Mr. Smith is a director of the Connecticut Children's
Medical Center, the American Council of Life Insurance, and a
director emeritus of the Connecticut Business and Industry
Association.
(ART)
ROBERT W. SELANDER
Mr. Selander, 48, has been nominated for election as a director
at this meeting. Since May 1997, he has served as the President
and Chief Executive Officer of MasterCard International. For the
three year period prior to this, Mr. Selander was an Executive
Vice President of MasterCard International and President of
MasterCard's Europe, Middle East/Africa and Canada regions. Before
joining MasterCard, he served for over twenty years in positions
of increasing responsibility at Citicorp/Citibank, N.A., including
having served as director of Global Retail Strategy and director
of the bank's Diners Club International credit card business in
the United States, Canada, United Kingdom, Germany and Benelux.
Mr. Selander is a member of the Board of Directors of The
Hartford. He is a graduate of Cornell University and has a
master's degree in business from Harvard University.
(ART)
3
Directors In Classes Continuing In Office
RAMANI AYER
Mr. Ayer, 51, has been Chairman of the Company since 1997, and
became Chairman, President and Chief Executive Officer of The
Hartford on February 1, 1997. Prior to that, he served as an
Executive Vice President of The Hartford from the ITT Spin-Off in
December 1995 until February 1997. Mr. Ayer has been President and
Chief Operating Officer of Hartford Fire Insurance Company
("Hartford Fire"), The Hartford's principal property and casualty
insurance subsidiary, since 1991 and previously served as
Executive Vice President of Hartford Fire from 1990 to April 1991
and Senior Vice President from 1989 to 1990. Mr. Ayer joined The
Hartford in 1973 as a member of the operations research
department. During his career, he has been Director of corporate
reinsurance, Vice President of HartRe, The Hartford's reinsurance
subsidiary, and President of Hartford Specialty Company. He is
Vice Chairman of the American Insurance Association, a member of
the Listed Company Advisory Committee to the New York Stock
Exchange Board of Directors, and serves on the Boards of the
American Institute for CPCU/IIA, and the Insurance Information
Institute. Mr. Ayer is a director of Hartford Hospital, the
Greater Hartford Chamber of Commerce, and is a trustee of the Mark
Twain House in Hartford, Connecticut. He is also a member of the
Business Roundtable.
(ART)
DONALD R. FRAHM
Mr. Frahm, 67, has served as a director of the Company since
1997, and served as Chairman, President and Chief Executive
Officer of The Hartford from April 1988 until his retirement on
January 31, 1997. He has been a director of The Hartford since
1985. Mr. Frahm is a director of Hartford Hospital, the University
of Hartford and the Greater Hartford Chamber of Commerce. He is
also a corporator of Connecticut Children's Medical Center.
(ART)
PAUL G. KIRK, JR.
Mr. Kirk, 61, has served on the Board of Directors since 1997.
He became a partner in the law firm of Sullivan & Worcester in
1977 and is presently of counsel to the firm. Mr. Kirk served as
Chairman of the Democratic Party of the United States from 1985 to
1989 and as Treasurer from 1983 to 1985. Following his resignation
in 1989 as Chairman of the Democratic Party of the United States,
he returned to Sullivan & Worcester as a partner in general
corporate practice at the firm's Boston and Washington offices.
Mr. Kirk is a director of The Hartford and Kirk & Associates, Inc.
of which he also is Chairman and Treasurer. He is also a director
of Bradley Real Estate, Inc. and Rayonier, Inc. Mr. Kirk is Co-
chairman of the Commission on Presidential Debates, Chairman of
the John F. Kennedy Library Foundation Board of Directors,
Chairman of the Board of Directors of the National Democratic
Institute for International Affairs, and a trustee of Stonehill
College and St. Sebastian's School. He is a graduate of Harvard
College and Harvard Law School.
(ART)
THOMAS M. MARRA
Mr. Marra, 40, was elected a director of the Company effective
December 17, 1998. He has been Executive Vice President since
1996, and is currently Director of the Investment Products
Division. He also oversees the Individual Life division. He was
previously Director of the Individual Life and Annuities Division
of the Company. Mr. Marra joined Hartford Life in 1980 as an
associate actuary. He held positions of increasing responsibility
and in 1991 was named Vice President and Director of Individual
Annuities. He was elected Senior Vice President in 1994. He is a
past Chairman of the National Association of Variable Annuities.
He also is a Fellow of the Society of Actuaries.
(ART)
4
ROBERT E. PATRICELLI
Mr. Patricelli, 59, has been a director of the Company since
1997. Since 1997 he has been Chairman and Chief Executive Officer
of Women's Health USA, Inc., a health care services company. Prior
to that, he was the founder and Chairman, President and Chief
Executive Officer of Value Health, Inc., a provider of specialty
managed care and health care information services, from 1987 to
1997. From 1983 to 1987, Mr. Patricelli was Executive Vice
President of Cigna Corp. and President of its affiliated
businesses group. He is a director of Northeast Utilities, Curagen
Corporation, the Connecticut Business and Industry Association,
Wesleyan University and The Bushnell. Mr. Patricelli also held
various positions in the federal government, starting as a White
House Fellow in 1965, and serving as a minority counsel to a U. S.
Senate subcommittee, Deputy Undersecretary of the Department of
Health, Education and Welfare, and Administrator of the Urban Mass
Transportation Administration. He is a graduate of Wesleyan
University and Harvard Law School, and was a Fulbright Scholar at
the University of Paris.
(ART)
H. PATRICK SWYGERT
Mr. Swygert, 56, has been a director since 1997. He has been
President of Howard University, Washington, D.C., since August
1995. Prior to that, he was President of the University at Albany,
State University of New York, since 1990. Mr. Swygert received his
undergraduate and law degrees from Howard University, has been a
visiting professor and lecturer abroad and is the author of
numerous articles and publications on higher education and the
law. He is a member of the Board of Directors of The Hartford and
The Victory Funds, Cleveland, Ohio. Mr. Swygert is immediate past
Chairman of the Washington, D.C. Area Consortium of Colleges and
Universities and currently serves as Chairman of the Community-
Business Partnership of the Greater Washington Board of Trade.
(ART)
GORDON I. ULMER
Mr. Ulmer, 66, has been a director since 1997. He is former
Chairman and Chief Executive Officer of the former Connecticut
Bank and Trust Company ("CBT") and retired President of the former
Bank of New England Corporation, the former holding company of CBT
("BNEC"). He joined CBT in 1957 and held numerous positions before
being elected President and a director in 1980 and Chairman and
Chief Executive Officer in 1985. In 1988 he was elected President
of BNEC, and retired as President in December 1990. Mr. Ulmer also
serves as a director of The Hartford, Rayonier, Inc., and the Old
State House Association. He is a graduate of Middlebury College,
the American Institute of Banking and Harvard Business School
Advanced Management Program and attended New York University's
Graduate School of Engineering.
(ART)
DAVID K. ZWIENER
Mr. Zwiener, 44, has been a director since 1997. He has been
Executive Vice President and Chief Financial Officer of The
Hartford since August 1995, and has also served on The Hartford's
Board of Directors since 1997. He previously served as Executive
Vice President and Chief Financial Officer of ITT Financial
Corporation from March 1993 until February 1995. From November
1987 to February 1993, Mr. Zwiener served as Senior Vice President
and Treasurer, and Executive Vice President--Capital Markets
Division, of Heller International Corporation.
(ART)
5
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for establishing broad corporate
policies and for overseeing the overall performance of the Company. The Board
reviews significant developments affecting the Company and acts on matters
requiring Board approval. During 1998, the Board held five meetings. The
standing committees of the Board are the Audit, Compensation and Personnel,
and Nominating committees. Each committee is comprised solely of directors who
are not officers of, or otherwise employed by, the Company or any of its
subsidiaries, except for the Nominating Committee which is comprised of all
directors. Set forth below is a description of the duties of each committee
and its members.
The Audit Committee recommends the selection of independent auditors for the
Company, confirms the scope of audits to be performed by such auditors,
reviews audit results and internal accounting and control procedures and
policies, and reviews the fees paid to the Company's independent auditors. The
Committee reviews and recommends approval of the audited financial statements
of the Company and the annual report on Form 10-K that is filed with the SEC.
It also reviews the expense accounts of senior executives. The members of the
Audit Committee are Ms. Deegan and Messrs. Kirk, Patricelli and Thomas
(Chairman). During 1998, the Committee held two meetings.
The Compensation and Personnel Committee evaluates senior management
performance and establishes executive compensation policies. Messrs. Frahm,
Swygert and Ulmer (Chairman) are the members of the Committee. The Committee
held four meetings during 1998.
The Nominating Committee makes recommendations concerning the organization,
size and composition of the Board and its committees, proposes nominees for
election to the Board and its committees and considers the qualifications,
compensation and retirement of directors. All members of the Board of
Directors serve on the Nominating Committee. During 1998, the Committee held
one meeting. The Nominating Committee will consider nominations of persons for
election as directors that are submitted by shareholders in writing in
accordance with certain procedural and advance notice requirements set forth
in the Company's bylaws.
In 1998, no director failed to attend at least seventy-five percent of all
meetings of the Board of Directors and of the committees of which he or she
was a member.
Directors' Compensation
Standard Fees. Members of the Board of Directors who are employees of the
Company or its subsidiaries or The Hartford or its subsidiaries are not
compensated for service on the Board or any of its committees. Compensation
for non-employee directors currently consists of an annual retainer fee of
$20,000 payable solely in restricted shares of Class A Common Stock pursuant
to the 1997 Hartford Life Restricted Stock Plan for Non-Employee Directors
(the "Non-Employee Directors Plan") described below, a $1,000 fee for each
meeting of the Board attended and a $1,000 fee for each committee meeting
attended. Directors are also reimbursed for travel and related expenses
incurred on behalf of the Company.
Restricted Stock Plan for Non-Employee Directors. Under the Non-Employee
Directors Plan, non-employee directors receive grants of shares of restricted
Class A Common Stock as payment for their annual retainer fee. Restricted
stock grants are made automatically on the date of each annual meeting of
shareholders to each non-employee director elected at, or continuing in office
following, the annual meeting. The number of shares of restricted stock is
determined by dividing the annual retainer for the year of the award by the
fair market value of the Class A Common Stock as reported on the New York
Stock Exchange (the "NYSE") as of the date of the award.
Non-employee directors receiving restricted stock may not sell, assign or
otherwise dispose of the stock until the restriction period ends. The
restriction period ends upon the earliest to occur of: (i) five years after
the grant date, (ii) retirement at age seventy-two, (iii) a "change of
control" (as defined in the plan) of the Company
6
or The Hartford, (iv) death, (v) disability, or (vi) resignation under certain
circumstances, as set forth in the plan. If a non-employee director resigns
other than under such circumstances before the restriction period ends, he or
she will forfeit his or her restricted shares.
Insurance. The Company provides non-employee directors with $100,000 of
group life insurance coverage and $750,000 of accidental death and
dismemberment and permanent total disability coverage while they are serving
on the Board. Non-employee directors may purchase additional benefits under
these policies.
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
This report sets forth the executive compensation policies of the
Compensation and Personnel Committee (the "Committee") of the Company's Board
of Directors and discusses the 1998 compensation of the Company's Chief
Executive Officer and certain other executive officers. Following this report
is a Summary Compensation Table that sets forth all 1998 compensation earned
by, and awarded or paid to, Lowndes A. Smith, who served as President and
Chief Executive Officer during 1998, and the other Named Executives (defined
below) included in that table. Other tables following this report provide
information on stock option and other long-term performance grants, and a
performance graph compares the cumulative total return on the Class A Common
Stock to the cumulative total returns of the S&P 500 Index and an index
consisting of peer insurance companies.
Committee Role in Overseeing Executive Compensation Policy
A primary role of the Committee is to determine and oversee the
administration of compensation for the Company's executives, including its
senior executive officers ("Senior Executives"). In this capacity, the
Committee is dedicated to ensuring that the Company's compensation policies
and practices are used effectively to support the achievement of the Company's
short-term and long-term business objectives.
There are several principles that guide the Committee in its decision-making
capacity. The Committee:
. Adheres to a pay-for-performance philosophy, ensuring that aggregate
compensation levels paid to Senior Executives reflect the extent to
which the Company's key operating goals are fulfilled.
. Reinforces the central importance of shareholder value creation by
relying heavily on compensation programs that deliver value to Senior
Executives only when shareholders realize corresponding gains.
. Encourages the acquisition of Class A Common Stock by Senior Executives
with the objective of strengthening the common interests of management
and shareholders, thereby promoting the maximization of shareholder
value.
. Establishes Senior Executive compensation levels in relation to the pay
rates that are offered at companies with which the Company competes for
senior management talent.
. Maintains a total compensation perspective on Senior Executive pay in
judging the appropriateness of rewards for the Company's Senior
Executives.
Description of Executive Compensation Policies
The compensation program of the Company's Senior Executives is characterized
by base salary levels that are targeted somewhat below market rates, a heavy
emphasis on performance-based, variable compensation, which, when combined
with base salary, provides above market total compensation for successful
performance, and commitment to promote enhanced share ownership among Senior
Executives. Consistent with the shareholder value orientation of this program,
the Committee has authorized guidelines for Senior Executive share ownership
which should serve to further align the interests of management and investors.
The guidelines provide that within a five-year period from the year of hire
Senior Executives should attain an investment position in the Company's stock
that is equal to two or three times their base salary, depending on the
position
7
of the Senior Executive. The Committee believes that this compensation program
will effectively catalyze Senior Executive activities in support of the
Company's goal achievement and appropriately recognize the contributions of
every Senior Executive.
It is the Company's policy to target Senior Executive compensation levels in
relation to pay rates that are typical at organizations with which the Company
competes for senior management talent. For corporate Senior Executives, the
competitive market generally includes other leading insurance and financial
services companies, although general industry practices are also considered
when reviewing pay for certain Senior Executives whose functional
responsibilities are not exclusively insurance or financial services related.
For line of business Senior Executives, pay is in line with practices that are
common at leading insurance companies, as well as other financial institutions
that offer competing insurance and financial products.
Consistent with the Company's pay-for-performance orientation, Senior
Executive base salaries are targeted at levels that represent ninety percent
of prevailing market rates. Total compensation is designed to reach 120
percent of market norms, but only when the Company's challenging performance
goals are fully achieved. Actual compensation levels may lead or lag these
goals, but the terms of the compensation program ensure such variances depend
principally on the Company's stock price appreciation and demonstrated
operating success.
The principal elements of the compensation program are: a base salary tied
to individual value added; an annual incentive opportunity dependent on
operating results and promoting Senior Executive share ownership; and stock
options and long-term compensation tied to earnings growth and stock price
appreciation. Each of these elements is discussed below.
1998 Compensation
1998 Base Salary
The Company's compensation policy is to pay base salaries for Senior
Executives at levels that represent ninety percent of the median salaries paid
by organizations with which the Company competes for senior executive talent.
Total compensation, comprised of base and variable pay, can achieve 120
percent of the market norm when performance goals are fully met. In assessing
a Senior Executive's salary level each year, the Committee's principal
consideration is the Senior Executive's performance on the job, including his
or her demonstrated contributions to the Company's goal achievement. In
considering salary actions, the Committee also reviews internal compensation
equity and the Senior Executive's level of responsibility, experience, and
expertise.
Effective February 1, 1998, the Committee approved salary increases of
$100,000, $125,000, $15,000, and $15,000 for Messrs. Smith, Marra,
Znamierowski and Boyko, respectively. These increases reflected competing pay
practices at other peer corporations. In addition, Mr. Smith has an employment
agreement with the Company and The Hartford that provides for an annual base
salary, as described below under the heading "Employment Agreement and
Severance Plans."
1998 Variable Compensation
Variable compensation reinforces the Company's pay-for-performance
philosophy and is a key element to the overall compensation program. Variable
compensation includes annual and long-term incentive compensation
opportunities. Annual incentive compensation is designed to deliver about
twenty-five percent of variable compensation, while long-term incentives are
designed to deliver the remaining seventy-five percent. All variable
compensation programs also facilitate Senior Executives' acquisition of the
Company's stock thereby promoting a coordination of interest between
management and shareholders.
Annual Incentives
Each year, the Committee will review management's suggestions for
performance goals, the achievement of which will enhance the Company's value.
The Committee will also review and approve, with respect to each
8
Senior Executive, annual incentive payment levels payable in the event
performance goals are fully achieved. Actual annual incentive payments vary
with performance relative to such goals. Better performance generates larger
awards; lesser results yield smaller awards.
Ordinarily, corporate or staff Senior Executives earn annual incentives
based on corporate and individual performance. Incentives for line of business
Senior Executives may relate to corporate, line of business and individual
performance. On occasion, the Committee may approve management's
recommendation for customized annual incentive arrangements where they are
appropriate to address competitive market requirements or business needs.
For 1998, the amounts of annual incentive awards were based on financial
performance for the year compared to annual performance goals established by
the Committee at the beginning of the year. For 1998, the performance goals
for Mr. Smith were Hartford Life core earnings growth and Hartford Life return
on equity. The performance goals for Messrs. Marra and Ginnetti included
division net income, operating income, return on equity, market share, and
sales and/or growth compared to budget. The performance goals for Mr.
Znamierowski included operating income, portfolio returns, project execution
and business support. The performance goals for Mr. Boyko included Hartford
Life and Life International net income and return on equity.
For 1998, based on these goals, the Committee awarded an annual incentive of
$946,750, $787,900, $267,225, $211,794 and $145,244 to Messrs. Smith, Marra,
Ginnetti, Znamierowski and Boyko, respectively.
Consistent with the Company's interest in promoting a strong alignment
between management and shareholder interests, Senior Executives may elect to
forego receiving up to half their annual incentives in exchange for the right
to receive shares of Class A Common Stock ("Stock Units") under the 1997
Hartford Life, Inc. Deferred Restricted Stock Unit Plan. Receipt of actual
shares of Class A Common Stock is deferred during a three-year restriction
period applicable to the Stock Units. Senior Executives who elect to convert a
portion of their annual incentive payments to Stock Units are rewarded with
additional Stock Units equal to ten percent of the amount converted, and
actual shares relating to these incremental Stock Units also will be deferred
as to receipt and restricted for a period of three years.
Stock Options
For 1998, the Committee provided eligibility to executives and key employees
for grants of stock options under the 1997 Hartford Life, Inc. Incentive Stock
Plan (the "Incentive Stock Plan"). Stock options provide executives with the
opportunity to acquire an equity interest in the Company and to participate in
the creation of shareholder value as reflected in growth in the price of the
Company's stock. The option exercise price equals 100 percent of the fair
market value of the Class A Common Stock on the date of option grant, thereby
ensuring that plan participants will derive benefits only as shareholders
realize corresponding gains. To ensure a long-term perspective, options have a
maximum term of ten years and two days.
The Committee believes that the practice of granting stock options annually
reinforces the Company's policy of encouraging stock ownership by executives
in support of building shareholder value. Furthermore, options provide value
to Senior Executives only when shareholders realize positive returns on their
investment in the Company. In this way, stock option grants reward Senior
Executives only in conjunction with value creation for shareholders.
On February 19, 1998, options to purchase an aggregate of 138,550 shares of
Class A Common Stock were granted under the Incentive Stock Plan to Messrs.
Smith, Marra, Ginnetti, Znamierowski and Boyko at an exercise price of $43.94
per share (the closing price of a share of Class A Common Stock on the NYSE on
February 19, 1998). The option granted to Mr. Smith represented 60 percent of
the target award value determined appropriate by the Committee. Also on
February 19, 1998, the Compensation and Personnel Committee of The Board of
Directors of The Hartford (the "Hartford Committee") granted to Mr. Smith an
option to purchase 39,000 shares of common stock of The Hartford ("Hartford
Common Stock") under The Hartford 1995
9
Incentive Stock Plan at an exercise price of $46.315 per share, which was the
closing price of a share of Hartford Common Stock on the NYSE on February 19,
1998. (The number of shares granted and the exercise price per share were
adjusted to reflect the two-for-one stock split that occurred with respect to
Hartford Common Stock on July 15, 1998.) This option represented the remaining
40 percent of the target award value determined appropriate for Mr. Smith.
On October 14, 1998, options to purchase an aggregate of 164,358 shares of
Class A Common Stock were granted under the Incentive Stock Plan to Messrs.
Smith, Marra, Znamierowski and Boyko at an exercise price of $41.0625 per
share. The option granted to Mr. Smith represented 60 percent of the target
award value determined appropriate by the Committee. Also on October 14, 1998,
the Hartford Committee granted Mr. Smith an option to purchase 49,574 shares
of Hartford Common Stock under The Hartford 1995 Incentive Stock Plan at an
exercise price of $45.50 per share (the closing price of a share of Hartford
Common Stock on the NYSE on October 14, 1998). This option represented the
remaining 40 percent of the target award value determined appropriate for Mr.
Smith.
To further align the interests of Senior Executives and shareholders, the
options granted to Messrs. Smith, Marra and Ginnetti on February 19, 1998, and
the options granted to Messrs. Smith and Marra on October 14, 1998, included a
performance-based provision that would allow the options to become exercisable
upon the earlier to occur of (i) the closing price of the stock subject to the
option on the NYSE equaling or exceeding 125 percent of the option exercise
price for a period of at least ten consecutive trading days, or (ii) seven
years from the date of option grant. The foregoing options granted on February
19, 1998 became exercisable on July 13, 1998, when the closing price of the
Class A Common Stock on the NYSE remained at or above $54.925 per share (being
125 percent of the $43.94 grant price) for at least ten consecutive trading
days. The foregoing options granted on October 14, 1998 became exercisable on
December 1, 1998, when the closing price of the Class A Common Stock on the
NYSE remained at or above $51.3281 per share (being 125 percent of the
$41.0625 grant price) for at least ten consecutive trading days. The options
to purchase Hartford Common Stock granted to Mr. Smith on February 19, 1998
and October 14, 1998, also included a performance-based provision that allowed
the options to become exercisable on the earlier to occur of (i) the closing
price of Hartford Common Stock equaling or exceeding 125 percent of the
exercise price for a period of at least ten consecutive trading days, or (ii)
seven years from the date of option grant. The foregoing options granted on
February 19, 1998 became exercisable on July 17, 1998, when the closing price
of Hartford Common Stock on the NYSE remained at or above $57.8938 per share
(being 125 percent of the $46.315 grant price) for at least ten consecutive
trading days. All other options, including those granted to other Senior
Executives, become exercisable at the cumulative rate of one-third per year
for the first three years from the date of grant.
Further information regarding option grants for the named Senior Executives
during 1998 is included in the option tables following this report.
1998 Long-Term Performance Program
Senior Executives and other executives received the opportunity to earn
shares of Class A Common Stock contingent on the Company achieving certain
performance objectives over a three-year period. Under the terms of these
awards made in 1998, there are two equally weighted performance objectives
measured over the 1998-2000 period: (i) core earnings per share and (ii) total
shareholder return (stock price appreciation and dividends reinvested)
relative to the returns generated by an index of the Company's competitors.
Target level core earnings per share coupled with a total shareholder return
equal to the average of the peer group will result in the awarding of a target
number of shares. Better performance (up to a maximum of 150 percent of each
of the performance measures) will yield a larger payout, up to a maximum
combined payout of 200 percent; poorer performance (to a minimum of 75 percent
of each of the performance measures) will mean proportionally smaller
payments. If the minimum threshold is not achieved, no shares will ultimately
be awarded.
During 1998, Messrs. Smith, Marra, Ginnetti, Znamierowski and Boyko were
granted performance share awards of 14,710, 12,250, 3,980, 3,100, and 2,690,
respectively. The award granted to Mr. Smith represented 60
10
percent of the target award value determined appropriate by the Committee.
Also during 1998, the Hartford Committee granted to Mr. Smith 9,220
performance shares of Hartford Common Stock under The Hartford 1998 Long-Term
Performance Plan. This plan is similar to the 1998 Long-Term Performance Plan
of the Company, but is based on the business performance of The Hartford over
the 1998 through 2000 period. This award represented the remaining 40 percent
of the target award value determined appropriate for Mr. Smith. Additional
information regarding those awards is included below under "1998 Long-Term
Incentive Plan Awards."
On January 26, 1999, the Hartford Committee approved payments under The
Hartford's 1996 Long-Term Performance Plan ("The Hartford 1996 Plan"). In
early 1996, before the Hartford Life IPO certain Senior Executives had been
granted the opportunity to earn shares of Hartford Common Stock under The
Hartford 1996 Plan, which was similar to the 1998 Long-Term Performance Plan
of the Company described above, but was based on business results of The
Hartford over the 1996 through 1998 period. The combined payout approved by
The Hartford Committee under The Hartford 1996 Plan was 162.9 percent of the
aggregate of The Hartford core earnings per share and The Hartford total
shareholder return over that period. Based on this result, the Hartford
Committee approved the distribution of 26,879, 11,729, 8,308, 652 and 1,173
performance shares of Hartford Common Stock to Messrs. Smith Marra, Ginnetti,
Znamierowski and Boyko, respectively. These performance shares were payable 50
percent in Hartford Common Stock and 50 percent in cash. Senior Executives
were permitted to defer receipt of all or a portion of this amount under The
Hartford 1996 Deferred Restricted Stock Unit Plan. This Plan is similar to the
1997 Hartford Life, Inc. Deferred Restricted Stock Unit Plan described above,
except that amounts deferred under the Plan are converted into rights to
receive shares of Hartford Common Stock after a period of time selected by the
executive.
Compliance with Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a publicly-traded company a Federal income tax deduction for
compensation in excess of $1 million paid to certain of its executive officers
unless the amount of such excess is payable based solely upon the attainment
of objective performance criteria. The Committee believes that tax
deductibility of compensation is an important factor, but not the sole factor,
to be considered in setting executive compensation policy. Accordingly, the
Committee generally intends to take such reasonable steps as are required to
avoid the loss of a tax deduction due to Section 162(m), but reserves the
right to pay amounts which are not deductible in appropriate circumstances.
Summary
The Committee is responsible for reviewing, monitoring and approving all
compensation decisions affecting Company Senior Executives. The Committee
expects that all compensation paid to Senior Executives will be consistent
with the Company's interest in providing market competitive compensation
opportunities, within the context of a pay-for-performance environment, and in
a manner that is supportive of the Company's business mission. The Committee
will continue to actively monitor the effectiveness of the Company's Senior
Executive compensation plans and assess the appropriateness of Senior
Executive pay levels to assure prudent use of Company resources.
The Compensation and Personnel Committee:
Gordon I. Ulmer, Chairman
Donald R. Frahm
H. Patrick Swygert
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Donald R. Frahm, a member of the Compensation and Personnel Committee of the
Company's Board of Directors, served as the Chairman, President and Chief
Executive Officer of The Hartford, and was an officer of various subsidiaries
of The Hartford and the Company, until his retirement on January 31, 1997. Mr.
Frahm has abstained from participation in the Compensation and Personnel
Committee's consideration of matters involving Section 162(m).
11
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides information regarding the cash and other
compensation of those persons who, during 1998, (i) served as the Company's
Chief Executive Officer and (ii) were the four other most highly compensated
executive officers (the "Named Executives"):
Summary Compensation Table
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-------------------- ------------------------- ---------
Securities
Restricted Underlying LTIP All Other
Name and Principal Stock Awards Options Payouts Compensation
Position Year Salary ($) Bonus ($) ($)(1) (#)(1) ($)(11) ($)(12)
- ------------------ ---- ---------- --------- ------------ ---------- --------- ------------
Lowndes A. Smith........ 1998 691,667 946,750 -- 129,947(8) 1,423,369 27,285
President and Chief 88,574(9)
Executive Officer 1997 593,750 418,400 745,461(2) 65,675(10) -- 24,505
733,750(3) 237,736(9)
889,375(4)
15,500(5)
1996 525,000 310,000 -- 74,400(9) -- 21,260
Thomas M. Marra......... 1998 489,583 787,900 25,725(6) 115,690(8) 614,274 22,108
Executive Vice
President, 1997 372,917 643,125 1,118,207(2) 29,190(10) -- 16,855
Investment Products and 21,350(5) 75,000(9)
Individual Life
Division 1996 350,000 610,000 -- 32,600(9) -- 16,355
John P. Ginnetti........ 1998 375,000 267,225 15,188(6) 15,130(8) 439,948 16,202
Executive Vice
President, 1997 375,000 303,750 16,750(5) 18,244(10) -- 16,010
Asset Management(7) 60,000(9)
1996 375,000 335,000 -- 23,000(9) -- 16,802
David M. Znamierowski... 1998 233,750 211,794 -- 22,040(8) 34,526 8,423
Vice President, 1997 220,000 238,260 -- 6,036(10) -- 7,904
Investment Strategy 1996 108,830 60,000 -- 1,866(9) -- 88
Gregory A. Boyko........ 1998 243,750 145,244 2,250(6) 20,395(8) 62,116 11,608
Senior Vice President, 1997 222,500 90,000 2,250(5) 13,135(10) -- 10,673
International
Operations(13) 1996 201,000 90,000 -- 3,300(9) -- 9,096
- --------
(1) Except as otherwise noted, the number of shares of Hartford Common Stock
and the related prices per share set forth in the table and in the
footnotes reflect a two-for-one split effected in the form of a 100% stock
dividend on July 15, 1998.
(2) Represents the market value of 23,205 and 34,808 restricted shares of
Class A Common Stock granted to Messrs. Smith and Marra, respectively, on
May 22, 1997 based on the closing price of the Class A Common Stock on the
NYSE of $32.125 per share on that date. The 23,205 restricted shares of
Class A Common Stock were granted to Mr. Smith in replacement of and as
substitutes for 10,000 (pre-split) restricted shares of Hartford Common
Stock that had been granted to Mr. Smith on February 1, 1997. The market
value of such shares was $1,351,691 and $2,027,566 for Messrs. Smith and
Marra, respectively, on December 31, 1998 based on the NYSE closing price
of $58.25 per share on that date. Dividends are paid on the shares of
restricted Class A Common Stock in cash, in the same amount and to the
same extent as dividends are paid on shares of Class A Common Stock held
by all shareholders.
(3) Represents the market value of 20,000 restricted shares of Hartford Common
Stock granted to Mr. Smith on February 1, 1997 based on the closing price
of Hartford Common Stock on the NYSE of $36.6875 per share on Friday,
January 31, 1997. The market value of these shares was $1,097,500 on
December 31, 1998 based on the NYSE closing price of $54.875 per share on
that day. Dividends are paid on the shares of
12
restricted Hartford Common Stock in cash, in the same amount and to the
same extent as dividends are paid on shares of Hartford Common Stock held
by all shareholders of The Hartford.
(4) Represents the market value of 20,000 shares of restricted Hartford Common
Stock granted to Mr. Smith on December 17, 1997 based on the closing price
of Hartford Common Stock on the NYSE of $44.46875 per share on that day.
The market value of these shares was $1,097,500 on December 31, 1998 based
on the NYSE closing price of $54.875 per share on that day. This
restricted stock grant is subject to the following performance-based
vesting: the restrictions on 50% of the shares will lapse on March 1, 2001
only if the closing price of Hartford Common Stock on the NYSE is $61.50
per share or more for at least ten consecutive trading days at any time
prior to such date; the restrictions on an additional 25% of such shares
will lapse on March 1, 2001 only if the closing price of Hartford Common
Stock on the NYSE is $63.00 per share or more for at least ten consecutive
trading days at any time prior to such date; and the restrictions on the
remaining 25% of such shares will lapse on March 1, 2001 only if the
closing price of Hartford Common Stock on the NYSE is $65.00 per share or
more for at least ten consecutive trading days at any time prior to such
date. Any restricted shares not vested by March 1, 2001 shall be
forfeited. Dividends are paid on the restricted shares in cash, in the
same amount and to the same extent as dividends are paid on shares of
Hartford Common Stock held by all shareholders of The Hartford.
(5) Prior to the Hartford Life IPO, certain executives of the Company were
eligible to participate in The Hartford 1996 Deferred Restricted Stock
Unit Plan. Under this plan certain executives of the Company elected to
forego a certain percentage of 1996 bonus payments that were ultimately
awarded in 1997 in exchange for the right to receive shares of Hartford
Common Stock ("Hartford Stock Units"). The number of Hartford Stock Units
granted to an executive was equal to the amount of the bonus forgone
divided by the closing price of Hartford Common Stock on the NYSE on the
date of grant of the Stock Units. As an incentive for foregoing the
percentage of bonus, participating executives were also granted additional
Hartford Stock Units equal to 10% of the Hartford Stock Units ("Hartford
Premium Stock Units"). Shares of Hartford Common Stock underlying Hartford
Stock Units and Hartford Premium Stock Units may not be received until
three years from the date of grant but are fully vested, except that
shares underlying Hartford Premium Stock Units may be forfeited if
employment with The Hartford is terminated under certain circumstances
before three years from the date of grant. Dividends are paid (and
automatically reinvested) on the shares underlying the Hartford Stock
Units and Hartford Premium Stock Units in the same amount and to the same
extent as dividends are paid on shares of Hartford Common Stock held by
all shareholders of The Hartford. The amounts identified in this column
represent the value of the Hartford Premium Stock Units awarded on March
10, 1997 when the closing price of Hartford Common Stock on the NYSE was
$39.1875 per share. On December 31, 1998, the values of such Hartford
Premium Stock Units (including those acquired by dividend reinvestment)
for Messrs. Smith, Marra, Ginnetti, and Boyko were $22,396), $30,849,
$24,202, and $3,251, respectively, based on the closing price of Hartford
Common Stock on the NYSE of $54.875 per share on that date.
(6) Pursuant to The 1997 Hartford Life, Inc. Deferred Restricted Stock Unit
Plan, certain executives of the Company elected to forego a certain
percentage of 1997 bonus payments that were ultimately awarded in 1998 in
exchange for the right to receive shares of Class A Common Stock
("Hartford Life Stock Units"). The number of Hartford Life Stock Units
granted to an executive is equal to the amount of the bonus forgone
divided by the closing price of Class A Common Stock on the NYSE on the
date of grant of the Hartford Life Stock Units. As an incentive for
foregoing the percentage of bonus, participating executives were also
granted additional Hartford Life Stock Units equal to 10% of the Hartford
Life Stock Units ("Hartford Life Premium Stock Units"). Shares of Class A
Common Stock underlying Hartford Life Stock Units and Hartford Life
Premium Stock Units may not be received until three years from the date of
grant but are fully vested, except that shares underlying Hartford Life
Premium Stock Units may be forfeited if employment with the Company is
terminated under certain circumstances before three years from the date of
grant. Dividends are paid (and automatically reinvested) on the shares
underlying the Hartford Life Stock Units and Hartford Life Premium Stock
Units in the same amount and to the same extent as dividends are paid on
shares of Class A Common Stock held by all shareholders of the Company.
The amounts identified in this column represent the value of the Hartford
Life Premium Stock Units awarded on March 13, 1998 when the closing price
of Class A Common Stock on the NYSE was $47.50 per share. On December 31,
13
1998, the values of such Hartford Life Premium Stock Units (including those
acquired by dividend reinvestment) for Messrs. Marra, Ginnetti, and Boyko
were $31,669, $18,697 and $2,770, respectively, based on the closing price
of Class A Common Stock on the NYSE of $58.25 per share on that date.
(7) Mr. Ginnetti served as Executive Vice President, Asset Management until
January 1, 1999. Upon his departure in January 1999 Mr. Ginnetti became
eligible, pursuant to The Hartford's executive compensation plans, to
receive an amount equal to two years of salary.
(8) Represents shares underlying stock options to purchase Class A Common
Stock granted pursuant to the Company's 1997 Incentive Stock Plan.
(9) Represents shares underlying stock options to purchase Hartford Common
Stock granted pursuant to The Hartford 1995 Incentive Stock Plan.
(10) Each of the Named Executives had been granted options to purchase shares
of Hartford Common Stock (the "Hartford Options") prior to the Hartford
Life IPO. After the Hartford Life IPO, each Named Executive elected to
substitute certain of his Hartford Options for options to purchase shares
of the Company's Class A Common Stock (the "Substituted Options"). The
options identified by this footnote in this column are Substituted
Options.
(11) In 1996, each of the Named Executives was granted a certain number of
performance shares relating to Hartford Common Stock. The grants were
contingent upon The Hartford achieving two general performance objectives
over a three-year period that ended on December 31, 1998. The performance
objectives, and the extent to which a Named Executive was entitled to a
payout, are substantially the same as that described below under the
heading "1998 Long-Term Incentive Plan Awards." The amounts in this
column represent the value of payouts made by The Hartford on February
15, 1999 in respect of performance shares awarded in 1996.
(12) Amounts shown in this column represent company contributions under The
Hartford's Investment and Savings Plan and The Hartford's Excess Savings
Plan, which are defined contribution plans. Under these plans, the
Company makes a matching contribution in an amount equal to 50% of an
employee's contribution, such matching contribution not to exceed three
percent (3%) of such employee's salary. The Company also makes a non-
matching contribution equal to one-half of one percent ( 1/2 of 1%) of an
employee's salary. Company contributions under these plans for 1998 were
$24,208, $17,135, $13,125, $8,181 and $8,531 for Messrs. Smith, Marra,
Ginnetti, Znamierowski and Boyko, respectively. The Company's flexible
benefit programs allow for the sale back to the Company of up to one week
of vacation time capped at a 1998 limit of $3,077. Amounts of $3,077 are
included in this column for Messrs. Smith, Marra, Ginnetti and Boyko. The
Company also provides certain group term life insurance coverage to
employees, and employees may purchase additional amounts of coverage. For
federal tax purposes, income will be imputed to an employee who purchases
more than $50,000 of life insurance coverage to the extent that the value
of the coverage is greater than the premium paid. For 1998, income in the
amounts of $1,896 and $242 were imputed to Messrs. Marra and
Znamierowski, respectively, and such amounts are included in this column.
(13) Mr. Boyko's responsibilities also included serving as the Company's Chief
Financial Officer and Treasurer through August of 1998.
14
Stock Options
Under the 1997 Hartford Life, Inc. Incentive Stock Plan (the "Incentive
Stock Plan"), the Compensation and Personnel Committee of the Board of
Directors selects key employees to receive various awards, including stock
options, stock appreciation rights, shares of restricted Class A Common Stock
and performance shares. The table below provides information regarding grants
of stock options to the Named Executives during 1998.
Option Grants In Fiscal Year 1998
Individual Grants
---------------------------------------------------------- Potential Realizable Value at
Number of Assumed Annual Rates of Stock
Securities % of Total Price Appreciation
Underlying Options Granted for Option Term ($)
Options to Employees in Exercise Price Expiration ----------------------------------
Name Granted (#)(1) 1998(8) ($/Share)(9) Date 5% 10%
---- -------------- --------------- -------------- ---------- -------------- ---------------
Lowndes A. Smith........ 55,900(2)(3) 4.06 43.94 02/21/08 1,544,517(10) 3,914,677(10)
74,047(2)(4) 5.37 41.0625 10/16/08 1,912,449(10) 4,846,191(10)
39,000(5)(6) .91 46.315 02/21/08 1,135,875(11) 2,878,785(11)
49,574(5)(7) 1.16 45.50 10/16/08 1,418,312(11) 3,595,106(11)
Thomas M. Marra......... 46,580(2)(3) 3.38 43.94 02/21/08 1,287,005(10) 3,261,997(10)
69,110(2)(4) 5.02 41.0625 10/16/08 1,784,939(10) 4,523,077(10)
John P. Ginnetti........ 15,130(2)(3) 1.10 43.94 02/21/08 418,042(10) 1,059,554(10)
David M. Znamierowski... 10,700 .78 43.94 02/21/08 295,641(10) 749,321(10)
11,340 .82 41.0625 10/16/08 292,884(10) 742,175(10)
Gregory A. Boyko........ 10,240(2)(3) .74 43.94 02/21/08 282,931(10) 717,107(10)
9,861 .72 41.0625 10/16/08 254,685(10) 645,378(10)
294 .02 51.13 04/05/08 9,455(12) 23,958(12)
- --------
(1) The exercisability, payment or vesting of options shown in the table
related to Hartford Common Stock and Class A Common Stock may be
accelerated upon the occurrence of a change of control (as defined in The
Hartford 1995 Incentive Stock Plan or the Company's 1997 Hartford Life
Incentive Stock Plan) of The Hartford or the Company, respectively.
(2) Represents shares of Class A Common Stock underlying stock options granted
pursuant to the Company's 1997 Incentive Stock Plan.
(3) The options granted to Messrs. Smith, Marra, Ginnetti and Boyko on
February 19, 1998 became fully exercisable on July 13, 1998, when the
closing price of Class A Common Stock on the NYSE had been $54.925 per
share or more for at least ten consecutive trading days.
(4) The options granted to Messrs. Smith and Marra on October 14, 1998 became
fully exercisable on December 1, 1998, when the closing price of Class A
Common Stock on the NYSE had been $51.3281 per share or more for at least
ten consecutive trading days.
(5) Represents shares of Hartford Common Stock underlying stock options
granted to Mr. Smith pursuant to The Hartford 1995 Incentive Stock Plan.
(6) The option, granted at an exercise price of $46.315, became fully
exercisable on July 17, 1998, when the closing price of Hartford Common
Stock on the NYSE had been $57.8938 per share or more for at least ten
consecutive trading days.
(7) The options granted to Mr. Smith become exercisable upon the earlier of:
(i) seven years from the date of grant, or (ii) the date on which the
closing price of the Hartford Common Stock on the NYSE is 125% or more of
the option grant price for at least ten consecutive trading days.
(8) For options to purchase shares of Class A Common Stock, percentages
indicated are based on options to purchase a total of 1,377,639 shares of
Class A Common Stock granted to 534 employees of the Company during 1998.
For options to purchase shares of Hartford Common Stock, percentages are
based on options to purchase a total of 4,265,474 shares of Hartford
Common Stock granted to 2,604 employees of The Hartford during 1998.
15
(9) Stock options granted by the Company were granted at exercise prices that
were 100% of the fair market value of the Class A Common Stock on the date
of grant, or as otherwise determined pursuant to the formula applied to
Substituted Options, and stock options granted by The Hartford were
granted at exercise prices that were 100% of the fair market value of
Hartford Common Stock on the date of grant.
(10) At the end of the term of the options granted on February 19, 1998, the
projected price of a share of the Class A Common Stock would be $71.57
and $113.97 at assumed annual appreciation rates of 5% and 10%,
respectively. At the end of the term of the options granted on October
14, 1998, the projected price of a share of the Class A Common Stock
would be $66.89 and $106.51 at assumed annual appreciation rates of 5%
and 10%, respectively.
(11) At the end of the term of the option granted to Mr. Smith on February 19,
1998, the projected price of a share of Hartford Common Stock would be
$75.44 and $120.13 at assumed annual appreciation rates of 5% and 10%,
respectively. At the end of the term of the option granted to Mr. Smith
on October 14, 1998, the projected price of a share of Hartford Common
Stock would be $74.11 and $118.02 at assumed annual appreciation rates of
5% and 10%, respectively.
(12) At the end of the term of the option granted on April 3, 1998 to Mr.
Boyko, the projected price of a share of Class A Common Stock would be
$83.29 and $132.62 at assumed annual appreciation rates of 5% and 10%,
respectively.
1998 Option Exercises and 1998 Year-End Option Values
The following table provides information on stock options that were
exercised, if any, and the value of unexercised stock options held at December
31, 1998 by the Named Executives:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
-------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal In-the-Money Options Held
Acquired Year-End (#) at Fiscal Year-End ($)
on Value -------------------------- ----------------------------
Name Exercise (#) Realized ($)(2) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --------------- ----------- ------------- ----------- -------------
Lowndes A. Smith........ -- -- 195,622(3) -- 3,853,061(4) --
100,000(1) 3,832,095 439,168(1) 249,574(1) 13,568,056(5) 2,545,756(5)
Thomas M. Marra......... -- -- 144,880(3) -- 2,645,729(4) --
-- -- 138,080(1) 85,866(1) 4,843,217(5) 1,094,131(5)
John P. Ginnetti........ -- -- 33,374(3) -- 711,105(4) --
-- -- 109,168(1) 67,666(1) 3,934,273(5) 845,656(5)
David M. Znamierowski... -- -- 2,012(3) 26,064(3) 54,545(4) 457,114(4)
1,244(1) 37,184 -- 622(1) -- 17,766(5)
Gregory A. Boyko........ -- -- 23,375(3) 10,155(3) 439,056(4) 171,579(4)
-- -- 3,300(1) -- 95,288(5) --
- --------
(1) Represents shares of Hartford Common Stock.
(2) Value realized upon the exercise of an option represents the difference
between the fair market value of the stock on the date of exercise and the
exercise price of the option.
(3) Represents shares of Class A Common Stock.
(4) Values are calculated for options "in-the-money" by subtracting the
exercise price per share of the options from the per share NYSE closing
price of $58.25 of the Class A Common Stock on December 31, 1998.
(5) Values of "in-the-money" options to purchase shares of Hartford Common
Stock are calculated by subtracting the exercise price per share of the
options from the per share NYSE closing price of Hartford Common Stock of
$54.875 on December 31, 1998.
16
1998 Long-Term Incentive Plan Awards
On February 19, 1998, the Compensation and Personnel Committee of the Board
made awards of performance shares to certain key employees of the Company,
including the Named Executives. The awards are contingent upon the Company
achieving certain performance objectives described below. To the extent that
the performance objectives are achieved, cash and shares of Class A Common
Stock will be granted to each key employee pursuant to the performance share
provisions of the Incentive Stock Plan. These performance shares awarded to
key employees of the Company will not be subject to cancellation and
substitution, but rather will become payable after the performance period to
the extent described below. In addition, Mr. Smith was awarded performance
shares of Hartford Common Stock as described in note 2 following the table
below.
Under the terms of the awards, there are two equally weighted performance
objectives measured over the 1998-2000 three-year performance period: core
earnings per share of the Company ("Core Earnings") and total shareholder
return ("TSR"). Core Earnings is defined as the Company's net income minus:
(i) net realized capital gains or losses, except for items related to certain
discontinued business; (ii) income or losses due to changes in methods of
accounting; (iii) the amount of any individual non-catastrophe loss associated
with any non-recurring charge that exceeds $100 million; and (iv) the income
or loss associated with allocations resulting from the liability sharing
agreement entered into in connection with the ITT Spin-Off. TSR is measured by
the difference between the price of the Class A Common Stock at the beginning
of the 1998-2000 performance period and the price at the end of the
performance period (assuming the reinvestment of dividends paid), compared
with the TSR of the stock of a group of peer insurance companies.
The Compensation and Personnel Committee established a target Core Earnings
and a TSR to be achieved in connection with the awards. If the target is
achieved, a key employee will receive 100% of the performance shares awarded
(payment anticipated to be made one-half in cash and one-half in Class A
Common Stock). The Compensation and Personnel Committee also established a
threshold (minimum) Core Earnings and TSR to be achieved. If the threshold
amounts are not achieved, the key employees will not receive any of the
performance shares awarded. If the Core Earnings and TSR achieved exceeds the
thresholds but falls below the targets, the key employees will receive awards
adjusted downward by interpolation to reflect falling short of the targets. If
the targets are exceeded, the key employees will receive awards adjusted
upward by interpolation subject to a cap established by the Compensation and
Personnel Committee.
The following table provides information on these long-term performance
share awards made to the Named Executives during 1998:
Awards of Performance Estimated Future Payouts
Shares in Last Fiscal Under Non-Stock
Year Price-Based Plans (#)(1)
------------------------- ------------------------------------
Period Until
Name # of Shares Payout(1) Threshold (#) Target (#) Maximum (#)
---- ----------- ------------ ------------- ---------- -----------
Lowndes A. Smith........ 14,710 3 years 7,355 14,710 29,420
9,220(2) 3 years 4,610 9,220 18,440
Thomas M. Marra......... 12,250 3 years 6,125 12,250 24,500
John P. Ginnetti........ 3,980 3 years 1,990 3,980 7,960
David M. Znamierowski... 3,100 3 years 1,550 3,100 6,200
Gregory A. Boyko........ 2,690 3 years 1,345 2,690 5,380
- --------
(1) Each of the Named Executives was granted the number of performance shares
relating to the Class A Common Stock set forth above. The grants are
contingent upon the Company achieving two general performance objectives
over a three-year period ending on December 31, 2000. The performance
objectives and the extent to which a Named Executive may be entitled to a
future payout are described above. The threshold, target and maximum
number of shares that may be awarded as set forth in the table above are
based on the Company equally achieving 75%, 100% and 150% or more,
respectively, of each of the two performance objectives.
(2) Represents a performance share grant to Mr. Smith relating to Hartford
Common Stock pursuant to the performance share provisions of The Hartford
1995 Incentive Stock Plan. The terms of The Hartford performance share
grant are substantially the same as those described above for Company
performance share grants except for certain differences in the Core
Earnings factor and the TSR performance objective.
17
The Hartford Retirement Program
The Hartford Fire Insurance Company Retirement Plan (the "Retirement Plan")
is a defined benefit plan that covers substantially all eligible U.S. salaried
employees of The Hartford and its subsidiaries, including the Company and its
subsidiaries. An employee's annual pension will equal two percent of his or
her average final compensation for each of the first thirty years of benefit
service, reduced by one and two-thirds percent of the employee's primary
Social Security benefit for each year of benefit service to a maximum of
thirty years; provided that no more than one-half of an employee's primary
Social Security benefit is used for such reduction. An employee's average
final compensation is defined under the Retirement Plan as the total of (i) an
employee's average annual base salary for the five calendar years of the last
120 consecutive calendar months of eligibility service affording the highest
such average plus (ii) an employee's average annual compensation not including
base salary for the five calendar years of his or her last 120 consecutive
calendar months of eligibility service affording the highest such average. The
Retirement Plan also provides for undiscounted early retirement pensions for
employees who retire at or after age sixty following completion of fifteen
years of eligibility service. An employee will be vested in benefits accrued
under the Retirement Plan upon completion of five years of eligibility
service.
Applicable Federal law limits the amount of benefits that can be paid and
compensation which may be recognized under a tax-qualified retirement plan.
Therefore, the Hartford Fire Insurance Company has a non-qualified unfunded
retirement plan (the "Hartford Excess Benefit Plan") for payment of those
benefits at retirement that cannot be paid from the qualified Retirement Plan.
Such plan also covers eligible employees of The Hartford and its subsidiaries,
including the Company and its subsidiaries. The practical effect of the
Hartford Excess Benefit Plan is to continue calculation of retirement benefits
to all employees on a uniform basis. Hartford Fire also maintains an excess
plan trust under which excess benefits under the Hartford Excess Benefit Plan
for certain officers of the Company are funded. Any such employee may indicate
a preference, subject to certain conditions, to receive any excess benefit in
the form of a single discounted lump sum payment. Any "excess" benefit accrued
to any such employee will be immediately payable in the form of a single
discounted lump sum payment upon the occurrence of a change in corporate
control (as defined in the Hartford Excess Benefit Plan).
Based on various assumptions as to remuneration and years of service, before
Social Security reductions, the following table illustrates the estimated
annual benefits payable from the Retirement Plan at retirement at age 65 that
are paid for by the Company.
Pension Plan Table
Average Years of service
Final ------------------------------------------------------------
Compensation 5 10 15 20 25 30
- ------------ -------- -------- --------- ---------- ---------- ----------
$ 400,000 $ 40,000 $ 80,000 $ 120,000 $ 160,000 $ 200,000 $ 240,000
500,000 50,000 100,000 150,000 200,000 250,000 300,000
750,000 75,000 150,000 225,000 300,000 375,000 450,000
1,000,000 100,000 200,000 300,000 400,000 500,000 600,000
1,500,000 150,000 300,000 450,000 600,000 750,000 900,000
2,000,000 200,000 400,000 600,000 800,000 1,000,000 1,200,000
2,500,000 250,000 500,000 750,000 1,000,000 1,250,000 1,500,000
3,000,000 300,000 600,000 900,000 1,200,000 1,500,000 1,800,000
The amounts shown under "Salary" and "Bonus" opposite the names of the Named
Executives in the Summary Compensation Table comprise the compensation that is
used for purposes of determining "average final compensation" under the
Retirement Plan. The years of service with the Company of each of the Named
Executives for eligibility and benefits purposes as of December 31, 1998, were
as follows: Lowndes A. Smith, 30.00 years; Thomas M. Marra, 18.58 years; John
P. Ginnetti, 16.50 years; David M. Znamierowski, 2.67 years; and Gregory A.
Boyko, 3.08 years. Although Mr. Smith has 30.75 years of service, a maximum of
30 years of service may be considered when determining benefits under the
Retirement Plan.
18
Employment Agreement and Severance Plans
Lowndes A. Smith has an employment agreement with the Company and The
Hartford pursuant to which he is employed as President and Chief Executive
Officer of the Company and Vice Chairman of The Hartford (the "Employment
Agreement"). The initial term of the Employment Agreement began on July 1,
1997 and continues for three years, unless terminated earlier in accordance
with the agreement. However, when the original term of the Employment
Agreement or any renewal term ends, the Employment Agreement will be
automatically extended for successive one-year periods unless either party
gives the other its written notice of its intention not to renew the
Employment Agreement at least fifteen months prior to any renewal date. In
addition, upon the occurrence of a change of control (as defined in the
Employment Agreement) of the Company, or of The Hartford, the terms of the
Employment Agreement will be automatically extended for three years after the
change of control occurs.
The Employment Agreement provides, among other things, for an annual base
salary for Mr. Smith as determined from time to time by the Board of
Directors, and his participation in the Company's and/or The Hartford's
benefit plans and awards under executive incentive bonus and other programs.
Mr. Smith's current annual base salary is $700,000. In addition, Mr. Smith is
entitled to certain payments and benefits if his employment terminates for
certain reasons, including a termination without "cause" (as defined in the
Employment Agreement). If a termination without cause occurs, Mr. Smith is
entitled to a severance payment equal to two times (a) his base salary, and
(b) a target bonus amount, each for the year in which the termination occurs,
and the vesting of stock options and restricted stock awards. In addition, if
a change in control (as defined in the Employment Agreements) of the Company
or The Hartford occurs and Mr. Smith's employment is terminated for certain
reasons within certain time periods (generally, within three years after a
change of control), then he is entitled to receive certain payments and
benefits. Specifically, if after a change of control, Mr. Smith's employment
is terminated without cause, or he voluntarily terminates his employment for
any reason within six months following a change in control, or voluntarily
terminates his employment for "good reason" (as defined in the Employment
Agreement) within the remaining two years and six months following a change in
control, then he is generally entitled to receive (i) a severance payment
equal to three times the sum of his base salary then in effect and his target
bonus for the year, and (ii) certain other benefits, including those that
would otherwise be payable under the Company's and/or The Hartford's various
employee benefit plans. While Mr. Smith is employed, and for one year after
any voluntary termination of his employment (other than after a change of
control), he is subject to a noncompetition agreement in favor of the Company.
In addition, Thomas M. Marra has an agreement with the Company that entitles
him to certain benefits upon a "change of control" of the Company or The
Hartford (as defined in such agreements). The agreement, dated October 1,
1997, provides, among other things, that the Company shall employ the
executive for three years (the "Employment Period") after a "change of
control" of the Company or The Hartford occurs, if the executive was employed
on the date the change of control occurs. During the Employment Period, the
executive is entitled to (i) a base salary of not less than his base salary in
effect prior to a change of control or potential change of control, and such
salary may be increased from time to time; (ii) an opportunity to earn an
annual bonus in accordance with the Company's bonus policies; and (iii)
participate in Long-Term compensation programs and stock incentive plans, and
to receive the benefits under the Company's and/or The Hartford's various
benefit programs. If the executive's employment terminates during the
Employment Period for certain specified reasons, including termination for
"cause," "without cause," for "good reason," voluntarily or due to retirement,
death or disability (all as defined in such agreement), then the executive is
entitled to certain payments and/or benefits, depending on the reason for
termination. Specifically, if the executive's employment is terminated without
cause, or he terminates his employment for good reason, he is entitled to
receive, among other things, (i) a lump sum severance payment equal to two
times his base salary and target bonus in effect in the year in which his
employment terminated, and (ii) certain other benefits, including those that
would otherwise be payable under the Company's and/or The Hartford's various
benefit plans.
On October 15, 1998 and February 1, 1999, amended and restated versions of
The Hartford's Senior Executive Severance Pay Plan (the "Senior Executive
Plan") and Executive Severance Pay Plan (the "Executive
19
Plan"), respectively, became effective (collectively, the "Severance Plans").
The Severance Plans, each of which covers executive employees at certain
levels of The Hartford and the Company, provide generally for the payment of
amounts to such executives upon termination of their employment, unless such
termination is initiated by the executive, is due to certain misconduct or
disciplinary action, is in connection with certain other specified
circumstances, or results from the executive's retirement, death or
disability. The Senior Executive Plan and the Executive Plan provide for
payments of amounts up to a maximum of two years and one year, respectively,
of the qualifying executive's salary depending primarily on such executive's
years of service (as defined in the Severance Plans). While receiving periodic
payments pursuant to these Severance Plans, the executive is generally
eligible to continue participating in certain of the Company's and/or The
Hartford's employee benefit plans, subject, however, to the specific
provisions in the respective benefit plans.
Employees, like Mr. Marra, who are covered by the Senior Executive Plan have
separate agreements that entitle them to certain benefits upon a "change of
control" (see description of such agreements above). The Executive Plan
contains "change of control" provisions that provide for the payment of
incrementally increased amounts to executives covered by such plan if, within
three years following the "change of control," the executive is involuntarily
terminated for reasons other than "cause" or due to death or Disability (all
as defined in such plan). An executive covered by these provisions is
generally entitled to receive a lump sum severance payment in an amount that
depends primarily on the executive's years of service, but is subject to an
aggregate maximum of one and one-half year of such executive's salary. Other
benefits due to the executive in these circumstances are governed by the
Company's and/or The Hartford's various benefit plans. Messrs. Znamierowski
and Boyko are covered by the Executive Plan.
20
PERFORMANCE OF THE CLASS A COMMON STOCK
The graph below compares the yearly percentage change in cumulative
shareholder return on the Class A Common Stock for the period from May 22,
1997 through December 31, 1998 with (i) the cumulative total return of the
Standard & Poor's 500 Index(R) and (ii) the Merrill Lynch Life Index(R). The
figures presented below assume the reinvestment of all dividends into shares
of Class A Common Stock on any given dividend payment date and that $100 was
invested in Class A Common Stock, in the Standard & Poor's 500 Index(R), and
in the Merrill Lynch Life Index(R). Class A Common Stock performance
information is provided only since May 22, 1997, the date the Hartford Life
IPO was completed, the Company became a public company and trading of the
Class A Common Stock on the NYSE began.
[MAC CHART TO APPEAR HERE]
21
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN SHAREHOLDERS
Directors and Executive Officers
The following table sets forth as of February 26, 1999 the number of shares
of Class A Common Stock beneficially owned by each director and nominee for
election as a director, by each of the Named Executives, and by the directors
and all executive officers as a group:
Amount and
Name of Nature of Beneficial
Beneficial Owner Ownership(1)(2)
---------------- --------------------
Ramani Ayer............................................... 10,000
Gregory A. Boyko.......................................... 30,061
Gail Deegan............................................... 1,078
Donald R. Frahm........................................... 7,020
John P. Ginnetti.......................................... 46,087
Paul G. Kirk, Jr. ........................................ 3,053
Thomas M. Marra........................................... 268,998
Robert E. Patricelli...................................... 1,729
Robert W. Selander........................................ 1,000
Lowndes A. Smith.......................................... 271,590
H. Patrick Swygert........................................ 2,031
DeRoy C. Thomas........................................... 11,020
Gordon I. Ulmer........................................... 4,020
David M. Znamierowski..................................... 9,320
David K. Zwiener.......................................... 4,000
All directors and executive officers as a group (20
persons)................................................. 733,988
- --------
(1) All shares of Class A Common Stock are owned directly except as otherwise
indicated below. Pursuant to regulations of the SEC, shares (i) that may
be acquired by directors and executive officers upon exercise of stock
options exercisable within sixty days after February 26, 1999, (ii) that
have been allocated to the accounts of certain directors and executive
officers under The Hartford's Investment and Savings Plan based on a
valuation of plan accounts as of February 26, 1999, (iii) that have been
acquired by directors and executive officers under the Company's Dividend
Reinvestment and Cash Payment Plan through February 26, 1999, (iv) that
are owned by a director's or executive officer's spouse or minor child, or
(v) that have been granted under the Company's Incentive Stock Plan or the
Non-Employee Directors Restricted Stock Plan and are restricted, but as to
which the directors or executive officers have the right to vote, are
deemed to be beneficially owned by such directors and executive officers
as of such date and are included in the number of shares of Class A Common
Stock listed in the table above.
Of the number of shares of Class A Common Stock shown above, the following
represent shares that may be acquired upon exercise of stock options that
are exercisable within sixty days after February 26, 1999 by: Mr. Smith,
241,517 shares; Mr. Marra, 218,822 shares; Mr. Ginnetti, 33,374 shares; Mr.
Znamierowski, 7,591 shares; Mr. Boyko, 23,473 shares; and all present
directors and executive officers as a group, 574,341 shares.
(2) The shares of Class A Common Stock beneficially owned by each person named
above, except Mr. Smith and Mr. Marra and the group of directors and
executive officers as a whole, do not exceed one percent of the
outstanding shares of Class A Common Stock. The shares beneficially owned
by Mr. Smith, Mr. Marra and the group of directors and executive officers
as a whole represent 1.04%, 1.03%, and 2.77%, respectively, of the
outstanding shares of Class A Common Stock.
22
Certain Shareholders
The following table sets forth those persons known to the Company as of
February 26, 1999 to be the beneficial owners of more than five percent of
each class of the Company's Common Stock. In furnishing the information below,
the Company has relied on information filed by the beneficial owners with the
SEC, and in some cases, information provided by such owners.
Amount
and Nature
of Beneficial Percent of
Title of Class Name and Address of Beneficial Owner Ownership Class
-------------- ------------------------------------ ------------- ----------
Class A Common Stock.... John Hancock Mutual Life Insurance Company 1,680,705(1) 6.5%(2)
John Hancock Place
P.O. Box 111
Boston, MA 02117
Class A Common Stock.... Goldman, Sachs & Co. and 1,463,345(3) 5.6%(2)
The Goldman Sachs Group, L.P.
85 Broad Street
New York, NY 10004
Class B Common Stock.... The Hartford Financial Services Group, Inc. 114,000,000(4) 100%
690 Asylum Avenue
Hartford, CT 06115
- --------
(1) Based on Schedule 13G filed with the SEC dated February 8, 1999. The
Schedule 13G reported that (a) John Hancock Mutual Life Insurance Company
owns no shares beneficially of Class A Common Stock except through its
indirect, wholly-owned subsidiaries, Independence Investment Associates,
Inc. and John Hancock Advisers, Inc. and (b) John Hancock Subsidiaries,
Inc. has sole voting and dispositive power with respect to 1,680,705
shares of Class A Common Stock, including 1,394,500 through its direct,
wholly-owned subsidiary, Independence Investment Associates, Inc. and
286,205 through its indirect, wholly-owned subsidiary, John Hancock
Advisers, Inc.
(2) Calculated on the basis of the number of shares of Class A Common Stock
outstanding as of February 26, 1999.
(3) Based on Schedule 13G filed with the SEC dated February 14, 1999. The
Schedule 13G reported that Goldman, Sachs & Co. and The Goldman Sachs
Group, L.P. share voting power with respect to 1,402,345 shares of Class A
Common Stock and share dispositive power with respect to 1,463,345 shares
of Class A Common Stock.
(4) The shares of Class B Common Stock are held of record by Hartford A&I. The
114,000,000 shares of Class B Common Stock represent approximately 95.6%
of the combined voting power of all shares of the Class A Common Stock and
Class B Common Stock outstanding as of February 26, 1999. Each share of
Class B Common Stock may, at the option of the holder thereof, be
converted into one share of Class A Common Stock, subject to certain
limitations set forth in the Company's restated certificate of
incorporation.
23
CERTAIN RELATIONSHIPS WITH THE HARTFORD
Intercompany Arrangements
On May 22, 1997, the Company completed the Hartford Life IPO and became a
public company that is majority-owned by The Hartford. The Hartford owns all
of the outstanding shares of Class B Common Stock of the Company, representing
approximately 81.4% of the total equity interest in the Company, and
approximately 95.6% of the combined voting power of the outstanding Class A
and Class B Common Stock.
In connection with the Hartford Life IPO, The Hartford and the Company
entered into various agreements including a master intercompany agreement, an
investment management agreement, a tax sharing agreement and a sublease, the
general terms of which are summarized below. The agreements are intended to
generally maintain the relationship between The Hartford and the Company in a
manner consistent in all material respects with past practice prior to the
Hartford Life IPO. The descriptions set forth below are intended to be
summaries and are qualified in their entirety by reference to the relevant
agreement or form thereof filed with the SEC in connection with the Hartford
Life IPO.
Master Intercompany Agreement
Services. The Hartford and the Company entered into a master intercompany
agreement (the "Master Intercompany Agreement"), which provides for those
services that The Hartford provides to the Company and that the Company
provides to The Hartford. The costs of such services are allocated according
to established methodologies determined on an annual basis by The Hartford.
These services include, among others, certain corporate relations, executive,
government affairs, human resources, legal, investment, finance, real estate,
information management, internal audit, cash management, tax and treasury
services.
Approval of Corporate Activities. The Master Intercompany Agreement requires
that prior to the date on which The Hartford ceases to beneficially own 50% or
more of the combined voting power of the Company's Class A and Class B common
stock, neither the Company nor any of its subsidiaries may undertake or agree
to undertake certain fundamental corporate actions without the prior written
consent of The Hartford. Such actions include material mergers or
consolidations or other acquisitions, and certain other transactions.
Registration Rights. The Master Intercompany Agreement also provides that,
upon the request of The Hartford, the Company will use its best efforts to
effect the registration for sale under the applicable federal and state
securities laws of any of the shares of the Company's Common Stock
beneficially owned by The Hartford, subject to certain limitations. The
Hartford also has the right, subject to certain limitations, to "piggy back
registration" to include shares of the Company's Common Stock beneficially
owned by The Hartford in certain other registrations of such securities
initiated by the Company on its own behalf or on behalf of its other
stockholders. The Company is, subject to the provisions of the Master
Intercompany Agreement, generally obligated to pay all out-of-pocket costs and
expenses in connection with each such registration that The Hartford requests
or in which The Hartford participates.
Indemnification. The Master Intercompany Agreement further provides for the
assumption of liabilities and cross-indemnities allocating liability in
respect of the Company's businesses to the Company and in respect of The
Hartford's businesses (other than the businesses of the Company and its
subsidiaries) to The Hartford. In addition, for those liabilities not
specifically arising out of or allocable to either of their respective former
or present businesses, the parties will share such liabilities, allocating 30%
of the cost of such liabilities to the Company and 70% of the cost of such
liabilities to The Hartford. In addition, the Company is responsible for 30%
of certain shared liabilities under certain agreements executed in connection
with the ITT Spin-Off and for which The Hartford has responsibility
thereunder, including tax sharing liabilities.
License and Sublicense. Hartford Fire Insurance Company, a principal
subsidiary of The Hartford ("Hartford Fire"), granted to the Company (i) a
license to use the "Hartford" name, the "Stag" logo and certain other
trademarks and service marks, and (ii) a personal, non-transferable sublicense
to use the "ITT"
24
name and marks, including the logo, owned by ITT Sheraton Corporation which
was previously licensed to Hartford Fire under a license agreement entered
into in connection with the ITT Spin-Off, each such license is subject to
customary usage restrictions. Subject to certain limitations, each of the
licenses is perpetual, except that if The Hartford reduces its beneficial
ownership below 50% of the combined voting power of the outstanding voting
stock of the Company, Hartford Fire may revoke its license to the Company upon
the later of the fifth anniversary of the date of consummation of the Hartford
Life IPO or one year after receipt by the Company of written notice of
Hartford Fire's intention to revoke the license.
Tax Sharing Agreement and Tax Consolidation
The Hartford and the Company entered into a tax sharing agreement (the "Tax
Sharing Agreement") pursuant to which they agreed to allocate federal, state
and local tax liabilities between them. So long as The Hartford continues to
beneficially own, directly or indirectly, at least 80% of the combined voting
power and the value of the outstanding capital stock of the Company, the
Company will be included for federal income tax purposes in the consolidated
group of which The Hartford is the common parent. However, under the Tax
Sharing Agreement, The Hartford and the Company make payments between them
such that, with respect to any period, the amount of taxes to be paid by the
Company, subject to certain adjustments, generally will be determined as
though the Company were to file separate federal, state and local income tax
returns. With respect to certain tax items, however, such as foreign tax
credits, alternative minimum tax credits, net operating losses and net capital
losses, the Company's right to reimbursement will be determined based on the
usage of such credits or losses by the consolidated group.
Investment Management Agreements
The Hartford and the Company also entered into investment management
agreements (the "Investment Management Agreements"). These agreements provide
that the investment staff of The Hartford will implement (e.g., selection,
purchase and sale of securities) the investment strategies determined by the
investment strategy group of the Company and act as advisor to certain of the
Company's non-guaranteed separate accounts and mutual funds. The Investment
Management Agreements also provide that the Company pays a fee designed to
reflect the actual costs of providing such services. The Company paid
$21,251,000 in fees in 1998.
Simsbury Sublease
The Company's headquarters, located in Simsbury, Connecticut, is currently
leased from a third party by Hartford Fire pursuant to a sale-leaseback
arrangement. After the Hartford Life IPO, the Company subleased from Hartford
Fire the right to use the headquarters building pursuant to a sublease
agreement. Hartford Fire retained the right to purchase the facility and the
renewal option in respect of the sale-leaseback arrangement. In addition, a
subsidiary of The Hartford owns the land underlying and surrounding the
headquarters building. The sublease expires on January 1, 2010. Rental
payments are fixed (but not level) over the term of the lease. In 1998, the
Company paid rent of $12 million, and it is anticipated that it will pay rent
of $12 million in 1999, $21 million in each of 2000, 2001 and 2002,
respectively, and $152 million thereafter in the aggregate over the remaining
term of the sublease.
25
ITEM 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
In accordance with the recommendation of the Audit Committee, the Board of
Directors has appointed Arthur Andersen LLP as independent auditors of the
Company for the fiscal year ending December 31, 1999. Although shareholders'
ratification of this appointment is not required, the Board requests
ratification by the shareholders. If the shareholders do not ratify the
appointment of Arthur Andersen LLP, the selection of other independent
auditors will be considered by the Audit Committee and the Board of Directors.
Arthur Andersen LLP has served as independent auditors of The Hartford and
its subsidiaries, including the Company, for many years, and Arthur Andersen
LLP's long-term knowledge of the Company has enabled Arthur Andersen LLP to
carry out its audits with effectiveness and efficiency. Representatives of
Arthur Andersen LLP will attend the Annual Meeting, will have the opportunity
to make a statement if they desire to do so, and will be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
OF THE COMPANY.
REQUIRED VOTES OF SHAREHOLDERS
The presence in person or by proxy of shareholders entitled to cast a
majority of votes will constitute a quorum for the transaction of business at
the Annual Meeting. The nominees for election as directors receiving the
greatest number of votes, up to the number of directors to be elected, shall
be elected directors. Approval of the ratification of the appointment of
Arthur Andersen LLP will require the affirmative vote of the holders of a
majority of the total voting power of shares of Common Stock present in person
or represented by proxy. Abstentions will be included in the computation of
the voting power of shares that are present for purposes of determining the
presence of a quorum but will not be counted as votes cast on items submitted
for a vote of shareholders. Accordingly, abstentions will have the same effect
as a negative vote. If shares are held in "street name" through a broker or
other nominee, the broker or nominee may not be permitted to exercise voting
discretion on certain matters. Thus, if a broker or nominee is not given
specific instructions on those matters, those shares may not be voted on those
matters, will not be counted in determining the number of shares necessary for
approval of such matters, and will have no effect on the outcome of the vote.
Shares represented by such "broker non-votes" will, however, be counted in
determining whether there is a quorum.
One or more persons will be appointed to act as the inspector of election at
the Annual Meeting. The bylaws of the Company provide that shareholders shall
be accorded privacy in voting and that the integrity of the balloting process
shall be assured. Among other duties, the inspector of election will certify
as to compliance with such confidentiality provisions.
Hartford A&I owns all outstanding shares of Class B Common Stock
representing approximately 95.6% of the total voting power of both classes of
Common Stock. As such, the affirmative vote of the shares of Class B Common
Stock held by Hartford A&I is sufficient to elect the nominees named herein to
the Board of Directors and to ratify the appointment of Arthur Andersen LLP as
the Company's independent auditors for the fiscal year ending December 31,
1999. The Company has been advised that Hartford A&I intends to vote all the
shares of Class B Common Stock for the election of the nominees as directors
and for the ratification of Arthur Andersen LLP as independent auditors.
PROPOSALS OF SHAREHOLDERS
Proposals submitted by shareholders for inclusion in next year's Proxy
Statement must be received by the Company no later than the close of business
on December 6, 1999. Any proposal received after that date will
26
not be included in the Company's proxy materials. No proposal may be presented
at the 2000 Annual Meeting unless the Company receives notice of the proposal
by no later than March 10, 2000. Address your proposals to Amy Gallent, Vice
President and Corporate Secretary, 690 Asylum Avenue, Hartford, CT 06115. All
proposals must comply with certain requirements set forth in the Company's
bylaws. A copy of the bylaws may be obtained from the Secretary of the
Company. In addition, proposals for inclusion in the Proxy Statement must
comply with all of the requirements of SEC Rule 14a-8 under the Securities
Exchange Act of 1934.
OTHER INFORMATION
As of the date of this Proxy Statement, the Board of Directors has no
knowledge of any business that will be presented for consideration at the
Annual Meeting other than that described above. As to any other business, if
any, that may properly come before the Annual Meeting, the proxies will vote
in accordance with their judgment.
Present and former officers, directors and other employees of the Company
may solicit proxies by telephone, telegram or mail, or by meetings with
shareholders or their representatives. The Company will reimburse brokers,
banks or other custodians, nominees and fiduciaries for their charges and
expenses in forwarding proxy material to beneficial owners. The Company has
engaged Georgeson & Company, Inc. to solicit proxies for the Annual Meeting
for a fee of $7,500, plus the payment of its out-of-pocket expenses. All
expenses of solicitation of proxies will be borne by the Company.
A copy of the Company's Annual Report to Shareholders for 1998 is either
being sent with this Proxy Statement or was sent previously. If, upon
receiving this Proxy Statement, you have not received the Annual Report to
Shareholders, please write to the Corporate Secretary at the address below to
request a copy. In addition, a copy of the Company's annual report on Form 10-
K (without exhibits) for the fiscal year ended December 31, 1998, as filed
with the SEC, is available without charge upon request to the Company's
Investor Relations Department, P.O. Box 2999, Hartford, CT 06104-2999, or by
calling (888) 322-8454.
By Order of the Board of Directors.
/s/ AMY GALLENT
Amy Gallent
Vice President and Corporate
Secretary
Dated: March 31, 1999
SHAREHOLDERS ARE URGED TO VOTE BY PROXY WHETHER OR NOT THEY EXPECT TO ATTEND
THE MEETING. A SHAREHOLDER MAY NEVERTHELESS REVOKE HIS OR HER PROXY AND VOTE
IN PERSON IF HE OR SHE DOES ATTEND.
27
Hartford Life, Inc.
1999 Annual Meeting of Shareholders
May 20, 1999 at 1:00 p.m.
The Wadsworth Atheneum
600 Main Street
Hartford, Connecticut
________________________________________________________________________________
ITEM 1: Election of Directors
FOR all nominees WITHHOLD AUTHORITY *Exceptions
listed below [_] to vote for all nominees listed below [_] [_]
Director Nominees: Gail Deegan, Lowndes A. Smith, Robert W. Selander.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "EXCEPTIONS" box and write that nominee's name in the space provide below.)
*Exceptions:____________________________________________________________________
ITEM 2. Ratification of the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31, 1999.
FOR [_] AGAINST [_] ABSTAIN [_]
MARK THIS BOX IF YOU PLAN [_]
TO ATTEND THE ANNUAL MEETING
ADDRESS CHANGE AND/OR [_]
COMMENTS MARK HERE
Note: Please add your title if you are
signing for a corporation or other
business entity, or as attorney,
administrator, executor, guardian,
trustee or in any other representative
capacity.
Date:______________________________,1999
___________________________________
Signature
___________________________________
Title
(Unless you are voting by telephone or internet,
please sign, date and return this proxy card in the enclosed envelope.)
Votes MUST be indicated (X) in black or
blue ink.
VOTE BY TELEPHONE AND INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
TELEPHONE
1-800-574-7149
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in
the box below, and then follow the simple directions.
INTERNET
http://proxy.shareholder.com/hli
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the website. You will be prompted to enter your control number, located
in the box below, to create an electronic ballot.
MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned the proxy card.
------------------------------------
If you have submitted your proxy by
telephone or the Internet there is
no need for you to mail back your
proxy.
------------------------------------
------------------------------------
_________________
CONTROL NUMBER
FOR TELEPHONE/INTERNET
VOTING
------------------------------------
CALL TOLL-FREE TO VOTE. IT'S FAST AND CONVENIENT
800-574-7149
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE OR INTERNET
- --------------------------------------------------------------------------------
HARTFORD LIFE, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Amy Gallent, Lynda Godkin, Michael
O'Halloran and Michael S. Wilder, and each of them, as proxies of the
undersigned, each with power to appoint his or her substitute, and hereby
authorizes each or any of them to vote, as designated on the reverse side of
this proxy, all shares of the Class A Common Stock of Hartford Life, Inc. (the
"Company"), including all shares held in the Company's Dividend Reinvestment
and Cash Payment Plan, the Company's Employee Stock Purchase Plan, the
Company's Deferred Restricted Stock Unit Plan, and The Hartford Investment and
Savings Plan which the undersigned is entitled to vote if personally present at
the Annual Meeting of Shareholders of the Company to be held at 1:00 P.M. on May
20, 1999 at The Wadsworth Atheneum, 600 Main Street, Hartford, Connecticut, and
at any adjournments or postponements thereof, and confers discretionary
authority upon each such proxy to vote upon any other matter properly brought
before the meeting.
Please specify your choices by marking the appropriate boxes on the reverse
side of this Proxy. The shares represented by this Proxy will be voted as you
designate on the reverse side. If no designation is made, the shares will be
voted for the election as directors of the nominees named in Item 1 and for
Item 2. The shares of Class A Common Stock represented by this Proxy cannot be
voted unless you sign and return this Proxy or vote by telephone or internet.
(Continued, and to be signed and dated, on the reverse side.)
HARTFORD LIFE, INC.
P.O. BOX 11007
NEW YORK, N.Y. 10203-0123